JD Health International Inc. (6618) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Inc. 2025 Annual Results Conference Call. [Operator Instructions]. I will now turn it over to [indiscernible], Head of Investor Relations.

Thank you, operator. Good day, ladies and gentlemen. Welcome to the JD Health 2025 Annual Results Conference Call. Joining us today are JD Health's Executive Director and CEO, Mr. Dong Cao; and CFO, Ms. Deng Hui. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement. In this discussion, the company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 2025, issued today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management's statements in the original language will prevail. I would like to turn the call over to Mr. Dong Cao. Please go ahead, sir.

Hello, everyone. I'm Cao Dong, CEO of JD Health. It is a pleasure to share with you our 2025 full year results. In 2025, China's economy maintained a steady and resilient momentum in industrial foundation for company's continued development. The government actively promoted development of new quality productive forces in the health consumption sector and encourage the standard adoption of AI across the health care sector, charting a clear path for long-term sustained growth. 2025 marked the return of JD Health's return and profit to a trajectory of rapid growth, further reinforcing our positioning as a market leader. As industry-leading health care service provider, we continue to deepen our presence across key health care segments through our omnichannel, super pharmaceutical supply chain infrastructure, comprehensive AI-powered online health care service capacities and the full life cycle health care management ecosystem. We remain committed to delivering accessible, convenient, high-quality and affordable health care products as well as our solutions. In 2025, we continued to capitalize our super pharmaceutical supply chain advantages and industrial direct sales capacity building AI-enabled full-scenario healthcare services ecosystem that supported sustainable high-quality growth. In fourth quarter, revenue reached RMB 21 billion, representing year-over-year increase of 27.4%. Non-IFRS reached RMB 1.1 billion, up 13.5% year-over-year with margin of 5%. For 2025, our revenue reached RMB 73.4 billion, representing year-over-year about 26.3%. Non-IFRS profit totaled RMB 6.5 billion, up 36.3% year-over-year with our non-IFRS profit margin 8.9%. Notably, we delivered revenue growth of more than 20% year-over-year for 4 consecutive quarters, while our full-year non-IFRS profit margin reached its highest level ever since IPO in the pharmaceutical sector. Leveraging our supply chain strength, we continue to gain from partnership with pharmaceutical companies as the first online marketplace for new and specialty drug launches. We introduced more than 100 new drugs during the year, a significant growth from 30 in 2024. Taking the DAYVIGO as an example, this flagship collaboration between Eisai and JD Health exceeded 20,000 orders in launch month alone. At the same time, by working closely with pharmaceutical companies to promote innovative integrated consultation, pharmaceutical and service closed-loop model, we are strengthening those partnerships and establishing a novel health care ecosystem that supports comprehensive collaborative relationship. For instance, we established strategic collaboration with Novo Nordisk, drawing on omnichannel expertise in chronic disease management and treatment solutions together with JD Health [indiscernible] in healthcare service. We jointly established a dedicated public health hub on obesity. This initiative supports a one-stop diagnosis and treatment and medical solution for diabetes and drug [indiscernible]. We also formed a strategic partnership with Eli Lilly to promote the innovative digital health solutions for patients in China who are living with obesity and type 2 diabetes or alopecia areata. Those solutions integrate patient education, live consultation, medical supply and long-term disease management. In health supplement, we fully harnessed our direct sales capacity, actively engaging in product co-development, supply chain structuring, professional service enhancement and industry standard setting to reinforce our platform central role across our value chain. By focusing on the senior nutrition, child development, beauty supplements and ready-to-consume nutrition products, we have helped the brand partners to achieve sustainable long-term growth. For instance, while the standard deep-sea fish oil market strategy matured, we identified the growing consumer demand for high-purity, high adoption products with significant untapped potential. Based on this insight, we worked with [indiscernible] to develop a premium fish oil product tailored to market needs to tap the high-end segment, featuring 97% of high-quality EPA. The product garnered over 15 billion impressions on its launch date on JD Health's platform. In medical device, we fully integrated our supply chain strength to build a seamless online-to-offline service loop, driving industry-wide upgrades through the ongoing technological innovation, for instance, in collaboration with Yuwell Medical, we launched the JD brand continuous glucose monitoring on our platform, which can be connected directly to JD Health's app via Bluetooth to deliver integrated blood glucose management experience, covering monitoring, analysis, intervention and tracking. For users who require device setup or configuration systems, we offer in-home support with health care professionals providing hands-on guidance through the process. In response to national initiatives to foster new quality productive forces in the health, we provide the capacities and medical AI solutions to a wide range of ecosystems. We aim to enable high quality and sustained development such as the Dr. Da Wei and a suite of multi-role intelligent service agents, AI doctor digital twins, and AI health chatbot, Kang Kang. At the end of 2025, Dr. Da Wei has completed hundreds of millions of interactions. The JOY DOC 2.0 version comprehensive management solution spanning 3 key areas: clinical nutrition, pharmaceutical services and weight management. This product provides health care institutions with standardized traceable and highly efficient digital intelligent support. We work together with the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College to cover 5 million patients in 2025. Our on-demand retail business also achieved breakthrough through the year. We continued to expand the online medical insurance payment services as well. We have been expanding coverage to 29 key cities. By 2025, we have established more than 300 self-operated pharmacies nationwide. By integrating those stores with our on-demand retail business, we have further differentiated our product offerings and enhanced the overall user experience. Additionally, we continued to strengthen our integrated online and offline medical services. JDH's at-home rapid testing service maintained strong growth momentum with full year order volume increasing by 81.9%. Our at-home rapid testing service pioneered a hospital-grade home testing service during the year, extending the professional practice of hospital laboratories into the home setting, processing for cities including Beijing and Shanghai. This service exemplifies the deep integration we have achieved across our supply chain and digital platform strength and the professional medical expertise of the public hospitals during the peak respiratory seasons. It effectively eases hospital congestion, shortens patient visit time and lowers the risk of cross infection caused by JD Health service basket and digital coordination system. The process from sample collection to delivery takes an average of 3 hours and can be completed seamlessly with the app. Looking ahead, we will continue to strengthen our super pharmaceutical supply chain advantages centering on user experience, cost and efficiencies. By capitalizing our direct sales capacities and deepening collaboration with brand and ecosystem partners, we further cement our leadership in the health care retail market and reinforce user awareness of JD Health as a go-to platform for online health product services. At the same time, we will continue to advance technological innovation in AI applications, empowering our integrated consultation, examination, diagnosis, pharmaceutical service, closed-loop through an AI plus supply chain strategy and supporting the high-quality growth and sustained development of the broader health care sector. By steadily expanding our health care ecosystem service scope and consistently enhancing our integrated online and offline medical services, we will share better experiences to the business. Now please welcome CFO, Ms. Deng Hui, to share details of financial performance.

Good to see you. Thank you for attending and joining the JD Health earnings conference call. This is Deng Hui. It is my pleasure to provide you update on our fourth quarter full year 2025 financial performance. In 2025, China's macroeconomic landscape continued to show a cost recovery trend, showing new development opportunities. For AI-driven health industry, JD Health actively responded to a policy directive of fostering new quality productive forces in the health consumption sector. Achieving sustained and high-quality growth in 2025, the revenue reached RMB 73.4 billion, representing a year-over-year increase of 26.3%. Non-IFRS profit amounted to RMB 6.5 billion, up 36.3% year-over-year with a profit margin of 8.9%. It's worth noting that our revenue growth rate has maintained above 20% for the consecutive quarters, while our non-IFRS profit margin reached its highest level since its listing. In the fourth quarter of 2025, revenue totaled RMB 21 billion, up 27.4% year-over-year. Non-IFRS profit for the quarter reached RMB 1.1 billion, increased by 13.5% year-over-year with a profit margin of 5%. As of December 31, 2025, our annual active user accounts for the past 12 months stood at approximately 220 million with a net addition of 34 million compared to December 31, 2024. Among other revenues, direct sales revenue reached RMB 60.9 billion in 2025, representing year-over-year increase of 24.8% and accounted for 82.9% of total revenue. This growth was primarily driven by increased sales of chronic disease related drugs and expanded first launch partnership for innovative drugs as well as health supplements, where we focused on strengthening our direct sales capacities and cultivating growth in high-quality segments and sales of new created medical devices. Meanwhile, service revenue reached RMB 12.6 billion for the full year of 2025, up 34.1% year-over-year and accounting for 17.1% of our total revenue, an increase of 1 percentage point year-over-year with platform commissions and advertising services maintaining strong growth momentum. During the year, we prioritized the onboarding of emerging brands, significantly increased resource allocation to merchant support, and expanded the merchants access to our omnichannel infrastructure and resources, fostering growth for both the platform and our merchant partners. We continue to advance our on-demand retail business in 2025 to be more efficient and accessible on-demand services to our users by continuously strengthening synergies among supply fulfillment, payment and expertise experiences. In health care services, we further deepened our Internet plus health care service ecosystem through AI empowerment this year, achieving scaled deployment of AI technologies across consultation, examination, diagnosis, pharmaceutical scenarios. We launched a series of AI-based solutions tailored for users, doctors, hospitals, primary health care institutions, including AI Jingyi and JOY DOC, establishing the industry's most comprehensive AI enhanced health service matrix. Our AI agent, Dr. Da Wei, has completed hundreds of millions of user interactions with a 98% satisfaction rate. Meanwhile, JOY DOC has served over 5 million patients across several hospitals, including the First Affiliated Hospital of Wenzhou Medical University and Union Hospital of Tongji Medical College. From the profitability level, JD Health's gross margin was 24.8% in 2025, up 1.9 percentage points year-over-year. The improvement highlights the core strength of our supply chain as well as the ongoing enhancement of our direct sales capacity. Our direct sales mode effectively drove gross margin expansion through economies of scale, while empowering our professional procurement and sales teams to identify industrial trends and capitalize high potential subsegments, boosting overall operational efficiency. At the same time, we encourage a greater resource investment from merchants fulfilling growth in higher-margin business such as advertising services on a non-IFRS basis. Our fulfillment expense ratio was 10.4% in 2025, up 0.2 percentage points. Our selling and marketing expense ratio maintained largely flat at 5.2% in 2025 compared with last year with [indiscernible] hitting the road this year, promoting awareness of our quality standards for nutrition products while helping drive sales growth in the health supplement segment, although selling and marketing expenses rose by 26.9% year-over-year. Our R&D expense ratio was 2.2% in 2025, up (sic) [ down ] slightly by 0.1 percentage point year-over-year as a result of our ongoing investment in AI technologies. As of the end of December, we had over 880 R&D personnel, increased compared with the previous year. As revenue continued to grow, the proportion of fixed R&D expenses will decline accordingly, while the productivity of our R&D team will also improve. We remain committed to investing in health AI technologies and have launched a suite of AI-powered products, serving users, hospitals and primary health institutions across multiple health care scenarios. Moving ahead, we will continue to deepen our efforts in these areas. The G&A expense ratio was 0.8% for the full year of 2025, flat with 2024. Our back-end staff and operational management efficiency levels continue to lead the industry. Finance income was RMB 1.5 billion in 2025, attributable to increased cash balance. Other income and gains, net was approximately RMB 1.6 billion (sic) [ RMB 0.77 billion ] in 2025, mainly reflecting fair value changes in wealth management products. Excluding share incentive, our non-IFRS profit for 2025 increased by 36.3% year-over-year to RMB 6.5 billion with a margin of 8.9%, up 0.7 percentage points from last year, reaching its highest level ever since our IPO. Our cash flow from operating activities reached RMB 10.2 billion for the full year of 2025. As of the end of December, cash and cash equivalents, restricted cash, term deposits and wealth management products measured at fair value through profit or loss at amortized cost totaled RMB 96.5 billion (sic) [ RMB 69.5 billion ], a net increase of RMB 10.1 billion compared to December 31, 2025 (sic) [ 2024 ]. In summary, JD Health delivered high-quality growth in 2025, underpinned by continuously optimized operational capacities and steady profitability growth. Our strong performance highlights our persistence, enhancing user experience, while improving cost and efficiency by developing and refining AI-powered health service scenarios. We broadened our business scope, further validating the distinctive value propositions of our dual-engine business model. That concludes our prepared remarks. We are now open for questions.

[Operator Instructions] Now we are going to welcome Miranda Zhuang from American Bank.

In 2025, you achieved a faster growth, and you had very good growth momentum with better profit margin. That is great news. I have a question to you. Can you share with us the near term and the 3-year middle-term prospects, what will be the main growing points? And what will be your strategies?

Thank you for the question. You're my old friend, Miranda. I want to share with you the general directions about the track for the future growth. We know that pharmaceutical sector, health products and medical devices are belonging to one community. The market size is around RMB 3 trillion to RMB 4 trillion. This is the size of the total market share, and we have to check different proportions. So you could fully understand, in the entire year, the revenue is RMB 17 billion (sic) [ RMB 73.4 billion ]. Compared to the potential of the market, we are still having a big room to grow, which means that we have a lot of opportunities to grab. Currently, we could achieve more than one digit growth potential. I believe that this is a huge market. Despite the fact that JD Health is a huge pillar, we could also go faster and we could go deeper. That is our inspiration, and that is our commitment to go deeper and go faster built on our existing advancements and results. The next point is from the perspective of the users. Currently, around 220 million users were out there and the total number is still growing, and we have a lot of active users, but not as big as the total user base of the JD Group. Because we are JD Health, we could still have a big room to grow. So I'm just sharing with you the size of the sector as well as the users of JD Health. I believe that from both fronts, we could do a lot of things to grow our potential. To be more specific, for the next 1 to 3 years, what will be happening and what will be the key drivers. To start off, I want to go back to the product portfolio and what will be the growing momentum. I'm going to speak about the pharmaceutical products. For the long run, we are in the leading position and we are growing very fast. We continue to improve our performance in 2025. The new drugs are taking 15%, and we are growing very fast compared to the velocity of 2024. You could feel the change and you could feel the transformation. Built on the mindset of JD Health, more brands, more pharmaceutical companies and more manufacturers will come to us. They will finally realize JD Health is a huge platform. We could help them, we could empower them. We could bring to them additional value. The new products, the special drugs could have very good sales at our platform, driving us to embrace a larger number of new drugs on their first sales. This is a very positive trend and I am very happy to share with you. I believe that in terms of the pharmaceutical companies, we will continue to grow. I believe that this market will grow, of course. We have the in-hospital and off-hospital market and off-hospital market will be moved to the online setting at even faster manner. Those are the trends we could observe on the market. That's why I'm so confident in sharing with you our growing potential and growing [indiscernible]. In terms of the health supplements, I know that you've followed us for long-term. When we are discussing the pharmaceutical companies and health supplements, you can know we are offering the best quality products. We could offer you very good user experience as well. We go very fast and we are highly efficient in delivering our services and offerings. We are doing more than selling. We are also providing the evidence-based solutions. It's like we are collaborating with GNC. We are jointly releasing the white paper, providing better service and educational resources to the users. We are also providing a premium fish oil, improving the user experiences in the overall manner. We want to add to user experiences, and we want to add user value. We are not selling products in an efficient manner. We're also helping the users to select the best ever products. And we are also an online platform having huge integrated logistics chain advantages, which means that we are having this pillar and we will grow this as well. The next topic is about medical devices. I want to give you a case. We're collaborating with Yuwell to offer customized products. The monitoring of the glucose device. It is well set. And for the next step, we have more plans. In terms of the sales, we will provide software, hardware as well as integrated chronic disease management plan. If you tried our products, you can know how well it is. It is very unique and it's very special. If you try the Yuwell glucose monitoring device, you can know how good it is, you could know which food is good for you and what are the foods bad for your health. I believe that is the best collaboration model. You could manage your food, you could manage your diet, and you could complete all those processes for our product. And we are now promoting AI-empowered health management device. This will be the new ecosystem. AI is keyword, very popular. In 2025, we launched the AI doctor, Dr. Da Wei, completed hundreds of millions of interactions with online users with a high level of satisfaction ratio. The AI matrix includes the 2B, 2C and 2H front with very good performance separately. Those performances are not yet fully matured. They are not translating directly into sales revenues. However, we can safely say that they will be the future drivers, helping JD Health to garner potential profits. In the long run, they will be our long-term drivers. I'm just sharing with you those highlights for reference. Thank you, Miranda. Thank you for the rest of investors. Now please start your second question.

The next question comes from UBS, Henry Liu.

Thank you for the prepared remarks, the management, and thank you for having my questions. Can you say a few words about the competition landscape of the company. For instance, we have the e-commerce platform, we have the brick-and-mortar physical stores. How you can stay competitive among all those competitors?

For the long term, I'm confident in standing out of all those competitors and market players. If you are watching and following us for the long run, you know we are a company with a lot of pragmatic mindset and behaviors. You know how we check and observe this market landscape, you know how we view our competitors. From the perspective of JD and JD Health, we are good at managing the supply chains. We are good at managing our own brand products, because we want to manage the quality of the products, we want to ensure the best efficiency on this market. In terms of health care market, those elements are maturing. We want to manage the health of the users, and we have a strong mindset. That is why we are standing out compared to other competitors. That is in our DNA, that is in our blood veins, and we are maximizing our DNA. In the company, the revenue is growing very fast, of course. And our market penetration rate is not as good as we expected. In the future, the market will be highly fierce, of course. But this market is not yet fully competitive. It's not receiving full competition. Every company could have their own proportion and share. You could manage your supply chain, you could play up your strengths and you could do somethings with a lot of pragmatic behaviors and you could improve the health. So we could extend our strength in the long run, and we could further extend our market scale. That is my general impression, and that is my short answer for your question. Next question, please.

The next question comes from Haitong International, Meng Kehan.

I'm from Haitong International. Congratulations. Thank you for sharing with us the great results in 2025. I have some questions to you. For the next few years, what will be your plan to start the brick-and-mortar stores? And what will be the impact for the online practices? And for the ILC, what will be your future plan? Would there be any change? Would there be any large M&A plans?

I want to take those questions with more elaboration. I believe a lot of investors are very interested in those points. First of all, we don't have the plan to have a large-scale M&A. But it doesn't mean that we don't care about the offline practices and offline maneuvers. The efficiency, the cost of running the brick-and-mortar stores is one of our key strengths, of course. I talked about the medical insurance policy. This is very key in managing the brick-and-mortar store, the pharmacy. 35% of the gross margin will be the bench line. It's not that high, of course. And we have a lot of good chances. We are not relying 100% on the medical insurance, and we could ensure the security of the business. Of course, the gross margin was not as high as we expected when we are running it online, but still very satisfactory, but still satisfied with those results. When we are running the offline stores, we prioritize. We also care about their practices, because around RMB 2 trillion -- in terms of the market share, RMB 2 trillion belong to the offline practices, and some of them belong to the in-hospital market, around 7% to 8%. It matters. I don't think the online business can 100% replace the offline business. Still, we have to watch closely to the development of the offline business, but how we are going to maximize our strength. There are 2 sets of practices. The offline pharmacies for one thing. We are running 300 offline pharmacies up to now, 300. Those pharmacies are serving their neighbors. We are consistent in promoting the offline pharmacies. Those offline pharmacies are good at delivering immediate service requirements and demand. In terms of the data, they are accounting for 10% in terms of market share. Some patients want to have immediate medical products. The size of the pharmacy is not big. Our priority is on B2C business to customer. But this is a very important scenario for us to manage the customer relationship, and we would do a good calculation, how we are going to manage the stores, how are we going to manage the operator or the users. And this is a platform with a lot of openness, and we are collaborating with the chain pharmacies as well. Those are our business patterns and business scenarios to better serve the users, bring them the premium experiences. So I don't think we're going to have a large-scale M&A to cover the offline pharmacies. I don't think so. We may maintain the structure, the size. And offline pharmacies in terms of number is too many. Altogether, 700,000 in totality. I believe that we can do more to improve their overall efficiency. The next is about the checkup centers. I believe that checkup centers are providing us a new area to grow our business range. We can do a better job improving the quality, and that will be the new entry to collect different dots. I believe that the offline checkup centers will be the entry point to manage the health. Now we have several checkup centers in operation. We're not in a hurry to duplicate the model. We want to maximize the JD DNA, be pragmatic. We'll be patient, we'll be accepting the market changes. We will never go too fast. We are having a long-term vision to be the guardian of the people's health in China, and we want to do a good job. That is our practices for the offline business. We will never do it overnight. We'll not complete all the business over the short term. We will be stable and we'll be cautious. It's a step-by-step manner. All in all, the business here will be extended and there will be no obvious shock to our core business. So we believe that whatever we are doing, the AI-empowered practices, the offline pharmacies, we will go very steadily, step-by-step, improving the users experiences. Before each step we are marching on, we'll find out what will be the long-term mission, what will be our purposes before we are taking up this step. Now we are using a lot of AI technologies. We are improving the general efficiencies very positively. The AI nutritionist is also a good practice. The conversion rate is even higher than the real person nutrition practitioner. I believe that the offline pharmacies will also be greater scenario, faster use and to administer the AI practitioners. So don't worry about large M&A from JD Health. We will do everything step-by-step with very good reason.

Next question from Goldman Sachs, Lincoln.

Congratulations for you to have the 2025 outcome. I have a question on the progress of AI+. Please share your opinions about the supply chain, about your practices for the future.

Again, I want to give you our overall planning. There are several directions ahead of us. The first is the 2C, to customer direction. You could check what happens in JD application. On JD Health application, we have the doctor, Kang Kang. We have the JOY DOC. For the 2C side, you have the Jingyi. They are doctors, Dr. Da Wei. We have the pharmacists, we have the nurses. They are AI bots, they are AI twins. A lot of consultation services are out there, the shopping services, the before and after sales services are out there. The conversion rate, the satisfaction rate, the user experiences are very positive. The online consultation is booming, empowered by the AI technologies. Those are the good outcomes from the 2C front. However, it's not right time for us to commercialize all those practices and assets, but still we're in a good position, we're in a good direction to have the commercialization. Now we have the Jingyi. We have the 2H to hospital front. In the future, I hope that we could get connected to the hospitals. We are speaking about 70% of the resources of the 2 trillion market size will be in different hospitals. We want to expand our market share, rely upon the partnership with different hospitals. The hospitals will help us to manage the patients. For instance, we could do the pre-consultation, helping the patients to check in the right departments. Those are some things we could down before the hospital entry. For the post-operation diet and nutrition, we could also have the AI to help those patients, and we can collaborate with the hospitals. In the future, we could manage this business with incremental growing momentum. And for the 2B side, the 2B side is operated for the doctors totally free of charge. However, how we are going to set up a good business model, how we're going to have the final commercialization, we are still in the process of pondering on. In China, it's very special for the doctors to pay. Still, I believe that as long as the products and the services are excellent, we could have sort of some method to charge. Still, it's a very complicated value chain in the medical sector. There will be the right payer. That is the question we have to keep thinking. And we have to avoid the homogeneous competition. No matter what, those are the directions we are embarking on, and we are seeing a much more clear directions and light at the end of the tunnel. In the near future, I believe that we could see more frequent AI application with positive outcome. If there's any feedback, I will let you know, and we will keep a close eye on this market. But please keep it in mind. JD Health has very good AI innovation practices, and we go very steady by collaborating with the stakeholders, and we will continue to promote innovative drugs. When we are checking the market, it looks very dynamic, it looks very popular, but we will be the one who speak deeper to this market, and we will give you good solutions, because all in all, we want to serve the patients, we want to serve the users with good experiences. We are more than observer, we are a practitioner. Thank you.

For time's sake, we are going to close the Q&A session. Now I'm going to welcome you give us the closing remarks.

Thank you once again for joining us today. If you have further questions, please contact the IR team directly. Thank you.