Waterdrop (NYSE:WDH) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Access the full call at https://ir.waterdrop-inc.com/Event-Calendar#future:2026:8

Summary

Waterdrop Inc. reported a 72.8% year-over-year increase in total revenue for Q2 2026, reaching 1.45 billion yuan, with net profit attributable to shareholders at 130 million yuan.

The insurance segment saw an 80.5% increase in revenue, driven by AI-enhanced user acquisition and conversion, while Waterdrop Medical Crowdfunding raised significant funds for 3.82 million patients.

The company announced a $0.03 per ADS dividend and a new share repurchase program of up to $50 million, highlighting its commitment to shareholder returns.

Strategically, Waterdrop is integrating AI across its platform to enhance efficiency and explore new initiatives, including AI-driven projects for global markets.

For the full year 2026, the company targets over 40% revenue growth and over 10% growth in operating profit, while expanding its product offerings for customers with pre-existing conditions.

Full Transcript

OPERATOR

Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.'s second quarter 2026 financial results earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to Ms. Tracy Lee. Please proceed, Ms. Lee.

Tracy Lee, Investor Relations

Thank you, Operator. Dear investors and analysts, this is Tracy Lee from Waterdrop Investor Relations. Please note that our discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC.

The company does not undertake any obligation to update any forward-looking statements except as required under applicable law. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP. Joining us today on the call are Mr. Shen Peng, our Founder, Chairman and CEO; Mr. Yuan Wei, Director and GM of Insurance Business; and Mrs. Li Jie Wu, Finance VP, Head of Strategy and Capital Markets.

Certain members of our management team will deliver their remarks in Mandarin followed by an English translation. Moreover, a webcast replay will be available on our Investor Relations website. I will now turn the call over to our CEO, Shen Peng. Please go ahead.

Shen Peng, Founder, Chairman and CEO

Dear investors and analysts, thank you for joining Waterdrop's second quarter 2026 earnings conference call. In this quarter, we maintained growth momentum and achieved total revenue of 1.45 billion yuan, up 72.8% year over year, and net profit attributable to our ordinary shareholders of 130 million yuan. Since the first quarter of 2022, we have maintained profitability for 18 consecutive quarters. Segment-wise, our insurance business continued to optimize user acquisition and conversion, driving 80.5% year-over-year revenue growth.

Waterdrop Medical Crowdfunding has cumulatively raised medical funds for 3.82 million patients. As of the quarter end, our digital clinical trial solutions business performed strongly, with quarterly patient enrollment up over 50% year over year. These growth trends were underpinned by deep integration of AI across our core business scenarios. As of the end of June, the company has filed 8,080 large language model patents, including 10 of them overseas.

With strong performance and cash reserves, we continue to prioritize shareholder returns. Our Board recently approved two new initiatives. Firstly, the Board has approved a cash dividend of $0.03 per ADS, or $0.003 per ordinary share, payable to holders of record on October 9, 2026. The aggregate dividend payment is approximately $10.8 million, with payments to be made in early November. Second, the Board approved the sixth share repurchase program of up to $50 million over the next 12 months.

Since the initial program launched in 2021, we have repurchased approximately 62.9 million ADS for $121 million as of August 31, 2026. The company remains committed to sustainable development and to giving back to society in meaningful ways. As of June 30, 2026, Waterdrop charity platform has partnered with 119 public charitable organizations and launched more than 15,600 charity programs. We remain focused on growth and investment in core businesses.

We expect our current incremental investment to continue translating to a solid user base and its future productive potential. We always regard technology as a core driver of the company's growth. Today, our AI capabilities are deeply embedded across the platform, enabling us to better capture growth opportunities in our existing businesses and further sharpen our competitive edge. At the same time, we are actively piloting new AI-driven initiatives for global markets and have made early progress in select markets.

For full year 2026, Waterdrop targets more than 40% year-over-year growth in total revenue and over 10% growth in operating profit. This concludes our overview of Waterdrop's business performance. Now we will walk you through each of our business segments in more detail.

Zhang Wei

Hello everyone, this is Zhang Wei. Let me briefly update you on our insurance business. In the second quarter, insurance-related income reached 1.33 billion yuan, up 80.5% year over year and 16.4% quarter over quarter. Operating profit was 180 million yuan, up 20% from the previous quarter. With continued refinement in our AI-driven user insight and conversion capabilities, newly acquired customers rose 32.3% sequentially. The first-year premiums of long-term insurance grew 33.4% sequentially as we captured market demand for endowment insurance this quarter.

On the product side, our core strategy remains improving the accessibility of insurance products. This quarter we delivered several new products in line with this direction, including the launch of Bongibao and the market-first long-term critical illness insurance products requiring no health disclosure and offering five-year guaranteed renewability. We also expanded our product matrix, which now includes the market-first specified disease insurance offering lifetime coverage with no health disclosure.

During this quarter, products for users with pre-existing conditions contributed 310 million yuan FYP, and disability insurance at 84 million. On the service side, we adopted differentiated, scenario-based operations across customer touch points, and this quarter AI applications across our user-facing interaction scenarios helped generate nearly 100 million yuan in FYP. Among them, AI Pro Insurance generates FYP in millions each month. FYP facilitated by our AI medical insurance experts rose by 25.6% sequentially.

In WeCom scenarios, AI executed our strategies directly from demand identification and user profiling to key-moment engagement and batch outreach, contributing over 10 million yuan in FYP during this quarter. In long-term insurance sales, the value of AI ultimately comes down to expanding what our life planners can do. As of quarter end, our underwriting assistant Kuai AI had answered more than 13,000 underwriting questions since its launch. Our AI Super Pro sales assistant has constantly outperformed human life planners on annual premium per lead, and the number of users it served grew nearly 50% sequentially.

Powered by multi-agent collaboration, our AI conversion model captures user preference from natural language interaction, turning them into durable profiles we can draw on over time and proactively surface topics tailored to each user, effectively extending the reach of every life planner we have. That concludes our update on the insurance business for the second quarter.

Li Jie Wu, Finance VP, Head of Strategy and Capital Markets

Hello everyone, this is Li Jie Wu. Next, I will walk you through our financial highlights for the second quarter of 2026. Before I go into details, please be reminded that all the numbers quoted here will be in RMB. Please refer to our earnings release for detailed information on our financial performance on both the year-over-year and quarter-over-quarter basis respectively. In the second quarter of 2026, Waterdrop delivered net operating revenue of 1,448 million yuan, up 72.8% year over year, maintaining a strong growth momentum.

Our insurance business contributed about 1,333 million yuan in revenue, representing an 80.5% increase year over year. Non-insurance businesses accounted for around 7.9% of total revenue, including 63.6 million yuan from medical crowdfunding service fees and 35.2 million yuan from our digital clinical trial solutions. Total operating costs and expenses came in at about 1,337 million yuan in the second quarter, up 80.5% year over year. Operating costs were 537 million yuan, increasing 29% year over year.

The increase was primarily driven by business scale expansion, including an increase of around 63.8 million yuan in cost of referral and service fees, as well as an increase of 21.4 million yuan in short message service costs and 11.2 million yuan in personnel costs, respectively. Sales and marketing expenses reached nearly 638 million yuan compared with 199 million yuan in the same quarter of 2025. The year-over-year increase mainly reflected our active step-up in public domain traffic investment, with marketing expenses for third-party traffic channels increasing by about 450 million yuan and marketing-related professional technical service fees increasing by around 21.8 million yuan. G&A expenses were 93.4 million yuan, up 27.2% year over year, mainly due to an increase of 33.3 million yuan in allowance for credit losses. This was partially offset by decreases of nearly 10.5 million yuan in personnel costs and share-based compensation expenses. R&D expenses were 68.8 million yuan, up 32.4% year over year. The increase was mainly driven by cloud server fees, token fees, and other IT support expenses, which rose by about 11.1 million yuan, as well as an increase of 6.3 million yuan in personnel costs and share-based compensation expenses.

For this quarter, operating profit reached about 111 million yuan, up 14.3% year over year and 39.2% quarter over quarter. However, due to tax-related items and non-recurring gains and losses, net profit attributable to shareholders was around 126 million yuan, down 10.3% year over year but up 27.9% quarter over quarter. As of June 30, 2026, cash and cash equivalents, short-term investments, and other cash positions totaled about 2.653 billion yuan.

Our cash reserve remains ample and provides solid support for both business investments and shareholder returns. In terms of shareholder returns, since the launch of our first share repurchase program, we have cumulatively repurchased 62.9 million ADS for approximately US$120 million as of August 31, 2026. Recently, the Board approved the sixth share repurchase program, in which we plan to repurchase up to $50 million over the next 12 months, and also approved a fixed cash dividend of approximately US$10.8 million.

Overall, both the quality and scale of growth in our core businesses improved this quarter. The continuous deployment of AI across every scenario in our business is becoming an important driver of efficiency gains. Meanwhile, we're expanding proactively while investing prudently in new initiatives in global markets, which for now have very limited impact on our current-period financial results. As these initiatives reach a larger scale, we will keep the capital market informed in a timely manner.

In the future, the company will remain committed to disciplined strategic investment and continue creating long-term value for users and shareholders. That concludes the company's financial results for the second quarter of 2026. We will now move on to the Q&A session.

OPERATOR

Okay, thank you. Ladies and gentlemen, we will now begin our Q&A session. To ask a question, please press star 1 on your telephone. To withdraw your question, please press star 2. In addition, this conference is being webcast live on the FinEnter platform. If you're joining through the platform, you may also submit your question in writing there. Okay, we now proceed to take our first question, and it comes from the line of Amy Chen of Citi. Her question is: in terms of the Mainland China business and Hong Kong, media have reported that tax authorities may tax policy dividends.

Has management seen any change either in international business or domestic business?

Shen Peng, Founder, Chairman and CEO

Regarding recent market attention, our reading is that what we are seeing reflects the enforcement of tax rules that have long been in place, rather than a new policy specifically targeting Hong Kong insurance. In the near term, the media coverage has had some effect on customer sentiment, but the appreciating value of a Hong Kong insurance product—like multi-currency allocation, access to global healthcare resources, and heritage planning—are fundamental drivers of the Hong Kong insurance market and have not changed.

Turning to the drivers of the Mainland China insurance market today, growth is driven by rising health protection awareness, policy tailwinds for commercial health insurance, continued product innovation, and a structural shift of household savings into long-term assets such as insurance in the current low interest rate environment. Waterdrop serves a diversified customer base across multiple markets and multiple service models. Our business mix remains solid, and we're confident in ascertaining user demand wherever it arises.

We will now take our next question from CSEC. The question is: we have noticed that several insurers have recently launched health insurance products targeting customers with pre-existing conditions. How does management evaluate this opportunity in this category, and what is Waterdrop's product strategy in this area? As checkups become more common, chronic illness and living with pre-existing conditions are far more typical, so a clean standard life is actually quite rare, and traditional health insurance has long focused on healthy lives.

But millions of people with pre-existing conditions still go unprotected. The industry consensus is clear: we're shifting from insuring more healthy people to protecting the health of more people. This is both a real demand-side opportunity and a clear path of commercial insurance expanding its coverage. Early practice with single-level inclusive health plans naturally extends to more commercial medical insurance, critical illness insurance, disability insurance, and others.

This is not simply loosening underwriting; it is segmenting the disease risk and building differentiated underwriting and claims so the segmented risk can actually be written and paid for. For Waterdrop, lowering coverage thresholds is central to our product strategy. On the supply side, we break the demand down by scenarios, age, and condition, and co-design terms and coverage with our insurer partners. On the acquisition side, we use platform and AI insights to match the right product to the right customer, so people with pre-existing conditions can actually find something that works for them.

Longer term, our view is that health cover for people with pre-existing conditions can become more like auto insurance—people can actually buy it, claim on it, and renew it. Accessibility and sustainability will have to move together. Okay, we will now take our next two questions from International. The question is: is there a clear timeline for AI agents to start generating commercial value, and how will AI investment impact on R&D expense ratio going forward?

And what other new initiatives is the company currently exploring? As previously introduced, our AI is expanding across four value chains—acquisition, receipts, pre-screening, and claims—and it works variably by stage. We're not commercializing AI as a standalone business, and its value will show up in our top-line growth and bottom-line growth. As we introduced earlier, in user targeting and conversion our AI directly supports user computation and purchase decisions, driving nearly 100 million in FYP.

In our long-term insurance advisory tools, like our AI underwriting assistant and our AI pre-sales assistant, we help our life planners work more efficiently and close more cases. In operations, our AI customer service and quality inspection applications have fully absorbed the actual volume as we scale. On our R&D side, the overall R&D ratio is stable, but we actively shifted resources towards AI, both in talent and in token cost. As usage scales, the spend will grow naturally, but we are disciplined about ROI under each scenario and will keep the overall ratio in a reasonable range.

Turning to our new initiative, we are incubating a portable AI office assistant—a smart hardware product that leverages our AI agent know-how, in-house R&D, and China supply chain strength—piloting across major global markets with some encouraging early feedback. That said, it's still at an early stage, and its financial impact is limited for now. The experience we are gaining along the way, both for the business and for the company overall, is genuinely valuable.

And we will now take our next question from Kate Liu of UOB Kay Hian. Her question is: from both product and supply perspectives, which insurance category does management view as having the strongest growth potential? There are two forces reshaping health insurance: rising health protection awareness and an aging population. So the market is shifting from standardized products to coverage more tailored to actual needs—demand-driven coverage including insurance for pre-existing conditions, high-end medical insurance, and products bundled with health management and elderly care services, a demand that traditional products never really served.

We will keep building in this area, and these categories play right into the strengths we've built through our online platform. We can reach broadly and target precisely, leveraging our AI capability to spot protection gaps in specific customer groups, match them with the right products, and deliver better, faster service at the point of constant user communication. So we will keep building on what we are uniquely good at. Okay, we will now take our next question from China Securities.

The question is: noticing the strong growth in Q2, could you walk us through your recent customer acquisition investment and outcomes, and what we can expect on the cost side for the rest of 2026 and into 2027? We pursued an investment cycle in user acquisition in Q2, and that speed is already showing up in the numbers. Insurance revenue and operating profit both grew further from the last quarter, and new users were up more than 30% sequentially.

This is a combined result of better reach-out and conversion and product supply. In terms of user acquisition strategy, we are not singularly pursuing cost reduction. What matters most for us is how we leverage AI capability to better align our product supply with our user profiles and improve conversion efficiency. Currently, AI has been embedded across the entire process from customer acquisition to service, and is continually improving our efficiency across our core new growth.

For the second half of 2026 and the full year of 2027, our strategic direction remains consistent. We continue to expect to maintain an active user acquisition pace, extending outreach to target customer segments and broadening user education coverage. At the same time, we expect the user value generated by the current-period acquisition to be gradually realized through renewals, upsells, and cross-sells over the sequential user lifecycle.

Tracy Lee, Investor Relations

We have received no further questions online, and this concludes our Q&A session for today. Thank you to all the investors and analysts who joined us today. Operator, back to you.

OPERATOR

We are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect. Have a good day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.