Waterdrop Inc. (NYSE:WDH) Q3 2024 Earnings Conference Call December 11, 2024 7:00 AM ET

Company Participants

Tracy Li - Investor Relations
Shen Peng - Founder, Chairman & Chief Executive Officer
Ran Wei - Director & General Manager, Insurance Business
Jasmine Li - Board Secretary
Xu Xiaoying - Head, Finance

Tracy Li

Good morning, everyone. This is Tracy Li from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's Third Quarter 2024 Earnings Conference Call. All participants are in listen-only mode in our English line. As a reminder, today's conference is being recorded.

Please note that this discussion today will contain forward-looking statements made under the safe harbor provisions of U.S. Private Securities and the 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 findings with the SEC. The company does not undertake any obligation to update any forward-looking statement, 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. Ran Wei, Director and GM of Insurance Business; Mrs. Xu Xiaoying, Head of the Finance Department; and Mrs. Jasmine Li, Board Secretary. We will be happy to take some of the questions in the Mandarin line at the end of the conference call.

Shen Peng

Hello, everyone. This is Shen Peng.

In Q3, the company remained committed to healthy operations and sustainable growth, delivering solid results. Total revenue for this quarter reached RMB704 million, and net profit attributable to ordinary shareholders was around RMB92.8 million, reflecting a year-over-year increase of over 150%.

For the nine months of 2024, the company reported total revenue of RMB2.08 billion, up 5.8% year-on-year, and net profit attributable to ordinary shareholders, RMB260 million, a 142% increase compared to the last year. Since Q1 of 2022, we have achieved profitability for 11 consecutive quarters.

In Q3, each of our business segments focused on enhancing user value, with key metrics showing steady growth.

In Insurance Business, we targeted seniors, mothers, and individuals with pre-existing conditions, expanding our network of insurers and launched several innovative products. First year premiums totaled over RMB2 billion, a significant increase year-on-year with operating profit margin above 20%.

In Medical Crowdfunding, we actively responded to new charity law and the Measures for Administration of Online Service Platforms for Individuals Seeking Financial Help. Both user numbers and crowdfunding amounts continued to rise, while the segment loss was further narrowed, reinforcing the sustainability of our operations.

In the Healthcare sector, our strong execution capabilities allow us to expand our network with pharmaceuticals, with the number of enrolled patients growing both year-on-year and quarter-over-quarter.

We're also delighted to report notable progress in AI. As a tech company rooted in insurance and healthcare, Waterdrop is on the forefront of integrating large language models into our industry. Following two years of focused development, we launched AI Top Sales Platform 3.0, a conversational AI platform that customizes AI sales agents for businesses, features advanced AI capabilities of outbound calling and conversational interaction, capable of supporting voice-based sales and customer service across various B2C industry and helping our ecosystem partners enhance service quality and efficiency.

Following our collaboration with P&C insurers in Q2, the AI Top Sales 3.0 platform reached a new milestone in its commercialization this quarter. We expanded our partnership with more insurers and have initiated pilots with companies in non-insurance sectors, including e-commerce and education, where there is high demand for large-scale customer service teams.

As of now, we have established collaboration intentions with 10 clients across various industries, with eight already in the testing phase. This highlights the vast market potential for our sales agent solution. Moving forward, we will continue investing in R&D to build our next core competitive advantage around AI applications.

We value the trust from our investors and prioritize shareholder returns. By the end of November 2024, the company has cumulatively repurchased approximately 50.9 million ADS from the open market, totaling around US$102 million. Moreover, we recently completed our second special cash dividend of approximately US$7.3 million.

For corporate social responsibility, as of the end of September, the Waterdrop Charity platform has partnered with 115 public charitable organizations and launched over 15,000 charity projects. During this quarter, we published our 2023 ESG report and co-authored the ESG whitepaper for the online insurance industry with the CUFE Green Finance Institute, offering valuable insight into the industry's ESG practice. Recently, the company received several strategic awards, including the China ESG Connected Pioneer Award and China ESG Excellence Award, reflecting our commitment to ESG and our strong progress in this area.

This concludes our update on business performance in Q3. Looking ahead, Waterdrop will continue to leveraging technology, focusing on long-term, high-quality and sustainable growth centers around user needs. As AI continue to transform more industries, our AI capabilities and its first-mover advantages in the large language model, position us for greater opportunities and growth in the future.

I will now pass to Ran Wei to discuss our Insurance Business in Q3.

Ran Wei

Thanks, Mr. Shen.

In Q3, the Insurance Business generated about RMB2.04 billion in FYP at 20.4% Y-o-Y and 14.8% quarter-over-quarter. Insurance-related income was about RMB600 million, representing a decrease of 3% Y-o-Y and an increase of 4.7% quarter-on-quarter. Operating profit was around RMB120 million. The operating profit margin was maintained at about 20%. During this quarter, our short-term insurance FYP hit RMB1.37 billion, up 30.3% Y-o-Y and 9.9% quarter-over-quarter. The increase in premiums on new policies finally drives the growth.

The company reached out to new customers through multiple channels and methods, creating product IPs on platforms like Little Red Book, TikTok, and WeCom videos, collaborating with influencers, and further optimizing customer acquisition efficiency based on our RTA model. The number of new users in Q3 remained stable on quarter-on-quarter basis.

Based on existing users, the company is committed to improving user experience and iterating its insurance product offerings according to the needs of different user profiles, leading to an increase in premiums sequentially. For example, regarding inclusive insurance products, the company has launched several products that do not require tax disclosure, have a zero deductible, and set a pre-existing condition, thereby lowering our user barriers. Some products have added a special medical checkup service to enhance user protection. In Q3, the FYP of pre-existing condition insurance was nearly RMB200 million.

In terms of maternity insurance, the 3.0 version of [indiscernible] continued to gain user recognition, and the parent-child critical illness insurance has been successfully launched.

Due to this combined effect, the average premium for short-term medical insurance has increased 14.9% sequentially in Q3.

In September, we held a Waterdrop Insurance Service Ecosystem conference, where we strategically partnered with several insurers, [seamless insurers] (ph), to establish the [triple group service alliance] (ph), aiming to enhance the entire user experience.

The FYP for long-term insurance in this quarter reached RMB670 million, a year-on-year increase of 4.3% and a quarter-on-quarter increase of 26.4%. The online sales team has been stepping in their games -- stepping up in their games, boosting efficiency and driving an increased premiums per capita sequentially.

The last final model, which is content-driven, has been a major player in the growth spurt, especially with the rising trend of annual payment products. On the supply side, we have been catering to the needs of seniors, strengthened ties with insurance companies, and broadened the scope and protection of our disability insurance offerings. We rolled out a new edition of our disability income loss insurance, which covers people from [70] (ph) and extended coverage up to [90] (ph).

This quarter, disability insurance brought in around RMB78 million in FYP, plus together with our insurance partners, we have built an exclusive Lucky Star, a critical illness policy that covers 10 common brain conditions, giving comprehensive protection against brain and health risks.

On the service side, we continue to build up Waterdrop's premium Club membership system, covering over 30 benefits for our members, offering health management, medical express access, and the high-end customized service, such as wealth management, children educational planning, and emergency assistance for both long-term and short-term insurance users, leading to an increase of renewal rate in the long-term product.

Shenlanbao Insurance sector has also shown strong growth in Q3, contributing RMB260 million in FYP with significant increase in both year-on-year and quarter-on-quarter. During the quarter, Shenlanbao further strengthened its [lifetime planner] (ph) team, leading to a further rise in premium per capita. In Q3, Waterdrop Insurance Marketplace and Shenlanbao continued to deepen the collaboration in product and risk and research development, leveraging the Waterdrop Guardian LLM to enhance content generation and customer service scenarios for Shenlanbao.

In terms of offline brokerage, Waterdrop [indiscernible] has announced a brand update â€“ upgrade [indiscernible] comprehensive service system that integrates insurance, healthcare, and legacy planning. Its initiatives encompass a range of services, including expanding product offerings, innovating service systems, and deepening mid-platform service, all designed to empower brokers in their transition.

As for technology, the company continues to invest in insurance large language models. As of the end of September, the company has applied for over 40 patents related to LLM, with six patents granted.

Firstly, to date, the knowledge base of our Waterdrop Guardian has covered over 7,000 mainstream insurance products. Since the beginning of this year, the company has developed several intelligence products based on this.

Secondly, the quality inspection process has been revolutionized due to our AI Service Quality Agent, which has efficiently replaced the previous manual sampling method. By employing the AI preliminary check followed by human review, we have significantly boosted inspection efficiency, achieving full coverage in certain scenarios, and it processed orders at a pace that's 3.7 times faster than the conventional method, tangibly increasing our operational effectiveness.

Thirdly, in the service scenario, Waterdrop Guardian has developed the conversational skills of how do you simulate human interaction in insurance process. During this quarter, our AI agents further enhanced its technology capabilities, integrating the long-term memory model and improving handling the low-quality response in daily conversations, addressing a long-tail issue.

This is a summary of this quarter's insurance product performance. Next, Jasmine will introduce the development of our company's crowdfunding and health-related business in Q3.

Jasmine Li

Thanks, Mr. Ran.

At the end of Q3 2024, around 466 million people cumulatively donated RMB66.3 billion to about 3.32 million patients through our Waterdrop Medical Crowdfunding. This quarter marks a significant milestone for our Medical Crowdfunding business and the industry as a whole, following the issuance of the 'Measures for Administration of Online Service Platforms for Individuals Seeking Financial Help' released by Ministry of Civil Affairs of PRC and other government departments on September 5, 2024. This measure outlines specific regulations on fee structures, fund management and the fight against illegal activities, establishing a legal framework and enhancing operational guidance and transparency in the crowdfunding industry.

We understand that the credibility is lifeblood for our platform. This quarter, we have been continually refining our risk control strategies to enhance transparency. For instance, by iterating our public supervision mechanism, we ensure that the verification and handling of the reported cases are clearly and properly communicated on the [front page] (ph), fostering a transparent and efficient oversight environment in cooperation with the public.

At the same time, as the technology company, Waterdrop is continuing to explore how technology can empower the platform. For example, our crowdfunding system employs algorithms to deliver one of the [core pillar] (ph) for high-risk cases. The platform is equipped to recognize the response to high-risk situation in real time, [even outsiders with] (ph) regular working hour like from 1:00 to 6:00 AM, by taking immediately emergency measures such as pausing crowdfunding cases and suspending payments, ensuring swift content of any risky cases.

At Waterdrop, we firmly believe in the positive power of technology. In future, we will continue to protect every act of scamming through technological innovations and improve the risk control mechanism.

And for healthcare-related business, this quarter, our health-related business maintained steady growth. For digital clinical trial solution business, our platform enrolled 909 new patients in Q3, adding to the cumulative total of over 9,500 since our launch, showing a consistent growth trajectory. Building on excellent fulfillment, efficiency, and quality, E-Find platform continued to expand and deepen its partnerships with leading pharmaceuticals, both domestically and internationally. In Q3, we collaborated with a total of 184 pharmaceuticals and CROs.

During this quarter, the platform played key roles as a primary partner and even an exclusive recruitment partner in several projects. For instance, in a clinical trial for rare oncology targets, as an exclusive recruitment partner for the top MNC, we leveraged precise analysts and the intelligence matching of patient medical records to help pharmaceuticals existing their enrollment targets.

As the industry moves towards high-quality growth, top pharmaceuticals are embracing AI and big data in new drug developments. E-Find platform, with its digital expertise, has been sharing insights with leading domestic and international pharmaceuticals, earning broader recognition. This has spurred the ongoing collaboration in new therapeutic areas. In Q3 alone, we signed 88 new projects.

In digital multi-channel marketing business, the platform has further integrated AI technology into various patient service stages. For example, in patient education and career, our AI assessments quickly address the question, delivering professional medical advice and [indiscernible] service efficiency. For quality control AI [systematic attack deployment] (ph), manual checks, upholding service standards and professionalism, plus, using structured medical data and large language models, we guide patients in follow-up, enhancing their disease management awareness and compliance. Looking ahead, the platform will continue to collaborate with industry partners to explore further applications and possibilities of AI technology in some suitable scenarios, supporting the industry's digital transformation.

Thanks for listening. I will now hand over to Xu Xiaoying to discuss our financial performance.

Xu Xiaoying

Thank you, Jasmine. Hello, everyone.

I will now walk you through our financial highlights for third quarter. Before I go into details, please be reminded that all numbers putted here will be RMB, and please refer to our earnings release for detailed information on our financial performance on both the year-on-year and quarter-on-quarter basis, respectively.

In Q3, the company continued to optimize financial performance with notable growth in profitability. Our total revenue for this quarter was RMB704 million, showing a moderate quarter-on-quarter growth of 4.1%. Breaking it down by business segment, the Insurance Business contributed approximately RMB600 million in revenue, a quarter-on-quarter increase of 4.7%. The Crowdfunding segment generated service fees of around RMB65.8 million, a quarter-on-quarter decrease of about 5%. Digital clinical trials generated revenue of RMB24.3 million, a quarter-on-quarter increase of 17.4%.

Regarding operating costs and expenses, our operating costs amounted to RMB341 million, up 6.7% compared to the previous quarter, mainly due to a rise of RMB32.6 million in referral and service fees, partially offset by the reduction of personnel costs. Sales and marketing expenses were RMB173 million, a 10% quarter-on-quarter increase, driven by a strategic increase in advertising efforts based on the accurate and efficient operation, leading to a higher marketing expenses to third-party traffic channels. General and administrative expenses were RMB111 million, an increase of RMB17 million from the previous quarter, primarily due to the impairment loss of intangible assets related to the acquisition of Shenlanbao. R&D incentives were RMB53 million, remaining stable compared to the previous quarter.

In Q3, the company's profitability improved significantly year-on-year, with net profit attributable to ordinary shareholders reaching RMB92.8 million, 2.5 times the third quarter last year, and a healthy quarter-over-quarter growth of 5.1%. The operating profit margin for the Insurance Business remains consistently strong at over 20%.

With sustainable net profit, we continue to maintain positive operating cash inflow, ensuring abundant cash reserve. As of September 30, 2024, the company had a cash position totaled about RMB3.44 billion, supporting the company's flexibility and stability in shareholder returns and strategic deployment.

In summary, the strong performance in Q3 highlights Waterdrop's resilience while facing the navigating market change. Looking ahead, we will continue to uphold our business philosophy and strategic choice, driving the company's health growth.

And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

Operator

This is Tracy Lee from Wholesaleps Investor Relations. It is my pleasure to welcome everyone to Autodesk's 3rd Quarter 2024 Earnings Conference Call. All participants are in listen-only mode on our English line.

As a reminder, today's conference is being recorded. Please note that this discussion today will contain forward-looking statements made under the Safe Harbor Provisions of the 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 advancements 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 by applicable law. Also, this call includes a discussion of certain non-GAAP measures.

Please refer to our earnings release for a reconciliation between non-GAAP and GAAP measures. Mr. . Peng Shen, our Founder, Chairman, and CEO; Mr.

. Liang Wei, Director and GM of the Insurance Business; Mrs. . Xixia Yin, Head of the Finance Department; and Mrs. . Stephanie Both, Secretary, will be happy to take some of the questions at the end of the conference call.

Peng Shen

Hello, everyone. In Q3, the company remains committed to healthy operations and sustainable growth, delivering solid results. Total revenue for the mid-quarter reached 704 million yen, and net profit attributable to ordinary shareholders was around 92.8% million yen, reflecting a year-over-year increase of over 160%.

For the nine months of 2024, the company reported total revenue of 2.08% billion yen, up 5.8% year-on-year, and net profit attributable to ordinary shareholders was 216 million yen, a 142% increase compared to last year. Since Q1 of 2022, we have achieved profitability for 11 consecutive quarters. In Q3, each of our business segments focused on enhancing user value, with key metrics showing steady growth in the insurance business, targeting seniors, mothers, and individuals with pre-existing conditions, expanding our network of insurers, and launching several innovative products.

First-year premiums totaled over 2 billion yen, a significant increase year-on-year, with an operating profit margin of about 20%. In medical performance, we actively responded to new charging laws and merits for administration as an online service platform for individuals seeking financial help. Both user numbers and per-funding amounts continue to rise, while the segment loss was further narrowed, reinforcing the sustainability of our operations.

In the healthcare sector, our strong execution capabilities allowed us to expand our network with pharmaceuticals, with the number of enrolled patients growing both year-on-year and quarter-over-quarter. We are also delighted to report notable progress in AI. As a tech company rooted in insurance and healthcare, Volusoft is at the forefront of integrating large language models into our industry.

Following two years of focused development, we launched AI Top Sales Platform 3.0%, a conversational AI platform that customizes AI sales agents for business. It features advanced AI capabilities, including offline calling and conversational interaction, supporting voice-based sales and customer service across various B2C industries, and helping our ecosystem partners enhance service quality and efficiency. Holding our collaboration with PNC insurers in Q2, the AI Topgolf 3.0% platform reached a new milestone in its commercialization this quarter.

We expanded our partnership with more insurers and have initiated pilots with companies in non-insurance sectors, including e-commerce and education, where there is high demand for large-scale customer service teams. As of now, we have established collaborations and intentions with 10 clients across various industries, with eight already in the task-moving phase. This highlights the vast market potential for our South Asian solution.

Going forward, we will continue investing in R&D to build our next core competitive advantage along the application. We value trust from our investors and prioritize shareholder returns. By the end of November 2024, the company has cumulatively repurchased approximately 50.91% million ADSs from the open market, totaling around $102 million.

We recently completed our second special cash dividend of approximately $7.3% million. For corporate social responsibility, as of the end of September, the Whatifour Charity platform has partnered with 115 public charitable organizations and launched over 15,000 charity projects. During this quarter, we published our 2023 ESG report and co-authored the ESG white paper for the online with the CUSE, Crane Finance Institute, offering valuable insight into the industry's ESG practices.

Recently, the company received several opportunities awards, including the China ESG Connected Pioneer Award and China ESG Excellence Award, reflecting our commitment to ESG and our strong program in this area. This concludes our update on business performance in Q3. Looking ahead, Weidra will continue leveraging technology for long-term, high-quality, and sustainable growth, centering around user needs.

As AI continues to transform more industries, our AI capability and first-mover advantages in the watch tech realm position us for greater opportunities and growth in the future. I will now pass to Rambo to discuss our insurance business.

Liang Wei

Thanks, Mr. . Shen. In Q3, the insurance business generated about 2.04% billion yen, with ARFPP at 20.4% year-over-year and 14.8% quarter-over-quarter. Insurance-related income was about 600 million yen, representing a decrease of 3% year-over-year and an increase of 4.7% quarter-over-quarter.

Operating profit was around 120 million yen, with the operating profit margin maintained at about 20%. During this quarter, our short-term insurance FSA is 1.307% billion yen, a 30.3% year-over-year increase and 9.9% quarter-over-quarter. The increase in premiums on new policies currently drives the company to reach out to new customers through multiple channels and methods, creating product IT on platforms like Literacy Group, TikTok, and Wecom Videos, collaborating with influencers, and further optimizing customer acquisition and patient needs on our RTA model.

The number of new users in Q3 remained stable on a quarter-on-quarter basis. The company is committed to improving user experience and iterating its insurance product offering according to the needs of different user profiles, leading to an increase in premiums sequentially. For example, regarding inclusive insurance products, the company has launched several products that do not require tax disclosure, have zero deductibles, and effectively address pre-existing conditions, thereby lowering user barriers.

Some products have added special medical checkup services to enhance their connection. In Q3, the FIP upgrade in position insurance was nearly 200 million yen. In terms of maternity insurance, the 3.0% version continues to gain user recognition, and the parent-child critical illness insurance has been successfully launched.

Due to this combined effect, the average premium for Shell Home Medical Insurance has increased 14.9% sequentially in each of its rates. In September, we held the Waterdrop Insurance Service Ecosystem Conference, where we strategically partnered with several insurers to establish the triple good service and align us, aiming to enhance the entire user experience. The FIP for long-term insurance in this quarter reached 670 million yen, a year-on-year increase of 4.3% and a quarter-on-quarter increase of 26.4%.

The online shopping platforms have been stepping up their game, boosting efficiency, and driving an increase in premiums per capita sequentially. The last final model, which is content-driven, has been a major player in the growth, especially with the rising trend of annual payment collection. On the supply side, we have been catering to the needs of seniors, strengthening ties with insurance companies, and broadening the scope and protection of our disability insurance offerings.

We rolled out a new edition of our disability income loss insurance, which covers people from 19 to 70 and extends coverage up to 90. This quarter, disability insurance brought in around 778 million yen in FIP. Together with our insurance partners, we have built an exclusive Luxistar personal illness policy that covers 10 common brain diseases, providing comprehensive protection that addresses brain health risks.

On the service side, we continue to build up our premium class membership system, covering over 30 benefits for our members, offering health management, medical assessment, and high-end customized services such as wealth management, children's educational planning, and emergency assistance for both long-term and short-term needs. Short-term insurance is leading to an increase in its renewal rate in the long-term product. The insurance sector has also shown strong growth in Q3, contributing 260 million yen in FIP with significant increases both year-on-year and quarter-on-quarter.

The installation and planning planner team led to a further rise in premium per capita. In Q3, we will draw the insurance marketplace and Xunhanbo. The team is deepening collaboration in product and research development, leveraging the voice of Guardian, AOM, to enhance content generation and customer service scenarios for Chanel.

In terms of offline brokerage, Waterdrop intends to announce a brand and develop a comprehensive service system that integrates insurance, healthcare, and legacy planning. It encompasses a range of services, including expanding product offerings, innovating service systems, and business mid-platform services, all designed to empower brokers in their transition. As for technology, the company continues to ensure large-scale model development.

At the end of September, the company had over 40 patents relating to AI, with six patents granted. To date, the smaller space of our Waterdrop Guardian has covered over 71,000 men's screening insurance. Since the beginning of this year, the company has developed several intelligence products based on this.

Secondly, the quality inspection process has been revolutionized due to our AI service calling the agent, which has efficiently replaced the previous manual inquiry with AI preliminary checks followed by human review. We have significantly boosted inspection efficiency, achieving full coverage in certain scenarios and processing at all hours at a pace that is 3.7% times faster than conventional methods, increasing our operational effectiveness. Thirdly, in the service scenario, Waterdrop Guardian has developed conversational skills to enhance human interaction in insurance products.

During this quarter, our AI agents further enhanced their technology capability in generating a long-term memory model and improving handling of low-quality responses in data conversations, addressing long-tail issues. This is a summary of this quarter's insurance product performance. Next, Jasmine will introduce the settlement of our company's core funding and health-related business interest rate.

Xue Chao Ying

Thanks, Mr. . Liang. As of the end of Q3 2024, around 466 million people were related to the domain, with 66.3% million patients through our platform.

This quarter marks a significant milestone for our medical performance business and the industry as a whole. For the insurance of the merits for administration, its online service platform for individuals seeking health help was released by the Ministry of Civil Affairs and other government departments on September 5, 2021. This merit outlines specific regulations on fee structures, fund management, and the fight against illegal activities, establishing a legal framework and enhancing operational guidance and transparency in the product quoting process.

We understand that credibility is less likely if not properly communicated. This quarter, we have been continually refining our risk control strategy to enhance transparency, for instance, by iterating our public supervision to ensure that the verification and handling of reported cases are clearly and properly communicated on the platform, bolstering a transparent and efficient oversight environment in cooperation with the public. At the same time, as a technology company, Waterdrop is continuing to explore how technology can empower the industry.

For example, our co-funding system employs AI to recognize and respond to high-risk situations in real-time, even outside regular working hours, like from 1 to 6 AM. By taking immediate emergency measures such as pausing crosshanging cases and suspending payments, we ensure swift containment of any risky cases. Waterdrop firmly believes in the positive power of technology.

In the future, we will continue to protect every act of co-funding as well as technologies that may improve the risk control mechanism. In the healthcare-related business, this quarter, our health-related business moved towards steady growth. For our clinical trial solution business, our platform enrolled 909 new patients in Q3, adding to the cumulative total of over 9,500 since its launch, showing a constant growth trajectory.

Building on excellent fulfillment, efficiency, and quality, the platform continues to expand and deepen its partnerships with leading pharmaceuticals, both domestically and internationally. In Q3, we collaborated with a total of 184 projects. During this quarter, the platform played a role as a primary partner and even an exclusive recruitment partner in several projects. For instance, in a clinical trial for ovarian oncology targets, as an exclusive recruitment partner for the top M&T, we leveraged precise analysis and intelligent matching of patient medical records to help pharmaceuticals meet their enrollment targets.

As the industry moves towards high-quality growth, top pharmaceuticals are embracing AI and big data in new drug development. Waterdrop's digital expertise has been sharing insights with leading domestic and international pharmaceuticals, earning a lot of recognition. This has spurred ongoing collaboration in new therapeutic areas, with 88 new projects.

In the digital multi-channel marketing business, the platform has further integrated AI technology into various patient service stages. For example, in patient education and care, our AI assessment addresses questions, delivering professional medical advice and seamless service to the patient. For quality control, AI commands deployment, many checks, upholding third-party standards, and comprehensive support.

Plus, using structured medical data and large language models, we guide patients in follow-up, enhancing their disease management awareness and compliance. Looking ahead, the platform will continue to collaborate with industry partners to explore the applications and possibilities of AI technology in pharmaceutical scenarios, supporting the industry's digital transformation. Thanks for listening.

I will now hand over to Xue Chao Ying to discuss our financial performance.

Xue Chao Ying

Thank you. Hello, everyone. I will now discuss our financial highlights for the quarter.

Before I go into details, please be reminded that all numbers here are in RMB, and please refer to our earnings release for detailed information on financial performance on both a year-on-year and quarter-on-quarter basis, respectively. In Q3, the company continued to optimize financial performance, with notable growth in profitability. Our total revenue for this quarter was 104 million yen, showing a moderate quarter-on-quarter growth of 4.1%.

Breaking it down by business segment, the insurance business contributed approximately 600 million yen in revenue, a quarter-on-quarter increase of 4.7%. The corresponding segment generated service fees of around 665.81% million yen, a quarter-on-quarter decrease of about 5%. Digital clinical trials generated revenue of 24.3% million yen, a quarter-on-quarter increase of 17.4%.

Regarding operating costs and expenses, our operating cost amounted to 341 million yen, a 6.7% increase compared to the previous quarter, mainly due to a rise of 32.6% million yen in referral and service fees, partially offset by the reduction of personnel costs. Sales and marketing expenses were 173 million yen, a 10% quarter-on-quarter increase driven by a strategic increase in advertising efforts on accurate and efficient operations, leading to higher marketing expenses to third-party traffic channels. General and administrative expenses increased by 17 million yen from the previous quarter, primarily due to the impairment loss of intangible assets related to the acquisition of Chunghwa.

R&D expenses were 53 million yen, remaining stable compared to the first quarter. In Q3, the company's profitability improved significantly year-on-year, with net profit attributable to ordinary shareholders reaching 92.8% million yen, 2.5% times the third quarter last year, and a healthy quarter-on-quarter growth of 5.1%. The operating profit margin for the insurance business remained consistently strong at over 20%.

With sustainable net profit, we continue to maintain positive operating cash inflow, ensuring a balanced cash reserve. As of September 30, 2024, the company had a cash position totaling about 3.44% billion yen, supporting the company's flexibility and ability in shareholder returns and strategic goals deployment. In summary, the strong performance in Q3 highlights Waterdrop's resilience in navigating market changes.

Looking ahead, we will continue to uphold our business philosophy and strategic choices, driving the company's healthy growth. Ladies and gentlemen, with that, we will conclude today's conference call. We thank you for joining.

Have a good day. The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.