Waterdrop Inc. (WDH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.'s First Quarter 2022 Earnings Conference Call. [Operator Instructions] After the management's prepared remarks, there will be a Q&A session. As a reminder, today's conference call is being recorded. I'd now like to turn the meeting over to your host for today's call, Ms. Xiaojiao. Please proceed, Ms. Xiaojiao.

Thank you, operator. Hello, everyone. Thank you for joining Waterdrop's First Quarter 2022 Earnings Conference Call. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the 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 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. Yang Guang, Co-Founder, Director and General Manager of Insurance Marketplace; Mr. Yao Hu, Co-Founder, Director and General Manager of Medical Crowdfunding and Healthcare; and Mr. Kangping Shi, our CFO. We will be available for a Q&A session after the remarks. Now I'd like to turn the call over to our CEO, Mr. Shen Peng. Please go ahead.

[Foreign Language]

[Interpreted] Hello, everyone. Thank you for joining our first quarter 2022 earnings conference call. Since the beginning of this year, the capital markets have further plunged amid a volatile geopolitical environment and the COVID resurgence. Since last year, both the global capital markets and domestic insurance industry have transformed in profound ways. So we adjusted our pace and promoted the strategic alignment in order to pursue a healthier development. We have seen new opportunities emerging at the same time. Looking at our operating results and business trends over the past 2 quarters, we are tipped to have a good overall performance for the full year. Apart from consistently establishing our competitive strength, we have also improved our operational efficiency and profitability, thereby securing a healthier and more sustainable development for the company.

[Foreign Language]

[Interpreted] The company is reaching the 6-year milestone since its inception. Nonetheless, I believe we are currently standing at a new beginning. We are pleased to report that after turning profitable on a non-GAAP basis in Q4 2021, we made further breakthrough that we now, for the first time, delivered a GAAP net profit of RMB 105 million in Q1 2022. While against the backdrop of industry downturn situation, we resumed positive growth and our net operating profit achieved an increase of 7.4% quarter-over-quarter. We will maintain this positive momentum and have confidence in meeting the goal we set at the beginning of the year, which is to accomplish a healthy and sustainable profit for the entire Waterdrop group for the year of 2022.

[Foreign Language]

[Interpreted] The moat we built around our product designs, innovation capabilities and the synergies within various business segments have enabled us to maintain vitality and resilience to counter challenges and navigate the tough times. In particular, the resurgence of the pandemic and the ever-growing demand for health care protection solutions have brought more opportunities for insurance and health care service providers, especially the online insurance platforms like us. Under this dynamic environment, we will be committed to creating value to customers, solidifying our business and delivering better results.

[Foreign Language]

[Interpreted] Hence, that will give us the stamp of our business operations and compliance efforts. In Q1, we continued with the transformation of our business strategy and firmly implemented our realigned strategy from a new starting point. Previously, Waterdrop pursued a fast growth in user base and the total revenue while keeping ROI within a reasonable range. Such a development path has been verified by successors in the tech industries in both China and the U.S. Based on this model, we achieved rapid growth from 2016 to 2021 and accumulated approximately 400 million users, including more than 111 million insurance customers, which is an indispensable factor for our business transformation. We have taken the initiative in changing our business operations, personnel and organizational structure. Our team has demonstrated a strong collaboration capability and adaptability, thereby enabling us to complete our product operational realignment within a short time period. Simultaneously, we are improving the quality of our business sustainability and enriching the supply of our insurance products.

[Foreign Language]

[Interpreted] Meanwhile, we are committed to corporate governance and regard it as an important part of our corporate values. We consistently improve our internal control systems and strengthen our self-inspection and compliance efforts. We have launched various compliance training programs to promote the best practices, enhance awareness of compliance and create a culture of compliance, thereby ensuring that we operate within the most stringent corporate governance framework. Looking ahead, we will continue to promote the healthy development of the industry proactively and firmly.

[Foreign Language]

[Interpreted] We have always adhered to the core principle of doing business for good and continually improving our ESG governance. Hence, we have been proactively undertaking corporate social responsibilities, proceeding to achieve our development goals and making efforts to encourage more stakeholders to share the responsibility for a sustainable development. Earlier this year, we became a member of the China Charity Federation. More recently, we have also joined the United Nations Global Compact, or UNGC, as a participant, joining hands with more than 16,000 companies in 161 countries around the world to shape a sustainable future. Earlier this month, I was invited to the 2022 New York Summit of UNGC. On behalf of the China's insurtech companies, I joined the panel discussion and shared our thoughts on the best practices for local enterprises, multinational corporations and various stakeholders during the move of the 2030 agenda for sustainable development.

[Foreign Language]

[Interpreted] The volatile pandemic situation has posed huge challenges to the containment efforts in China. We have been proactively helping alleviate the impact on our community. Leveraging its position as a leading charity platform, our Waterdrop charity has reallocated various resources and provided support to Shanghai and other areas on their pandemic containment. We also collaborated with charity organizations to provide donations of over RMB 1 million in supplies to the people with financial difficulties: the elderly, living alone and the frontline workers. Our senior management, including myself, also took the lead in volunteering to help fight the pandemic. Since the outbreak of the pandemic, we have partnered with several charities and nonprofit organizations to raise anti-pandemic funds of more than RMB 65 million. When we received the appreciation letters from a wide range of groups and organizations, we were not only encouraged but also hopeful that we could set an example and inspire more and more to support from the society.

[Foreign Language]

[Interpreted] We remain committed to our mission of leveraging Internet technologies to make insurance protection more inclusive and accessible to the public and bring insurance and health care service to billions. We also proactively leveraged our competitive strength and the digital service capabilities to promote, implement and achieve our sustainable development goals. We also continue to promote the United Nations sustainable development goals, or SDGs. For example, for goal 1 no poverty, we joined China's multilevel medical insurance system to help reduce risk for those with critical diseases to fall into or slip back into poverty due to illness. For fostering good health and well-being, we actively explored a new benchmark for the government-backed health protection model in serving the purpose of inclusive insurance. For [ growing ] industry innovation and infrastructure, we focus on promoting the development of the insurtech industry by leveraging technological innovation.

[Foreign Language]

[Interpreted] We have maintained a strong cash position, and the team and I have united confidence about our future. As of March 2022, our cash and cash equivalents and short-term investment balance totaled approximately RMB 2.92 billion. We continue to implement our share repurchase plan while exploring innovative investment opportunities in the insurance and health care sectors at the same time. As of the end of March, we repurchased cumulatively 3.09 million ADS in total, and will continue to prudently buy back shares. We plan to use this repurchased ADS for our employee incentive plan in the future.

[Foreign Language]

[Interpreted] Amidst this changing environment, as the top-tier player and a pioneer in China's insurtech and online health care market, we strive to pursue higher quality development and insist on creating value for our customers and shareholders. In terms of business innovation, we will enhance user value in an enduring and the proper manner and maintain our enthusiasm for technological innovations. We are confident in the long-term prospects of China's health care insurance market and also our own business. Looking ahead, we are well positioned to grow stronger in future economic cycles and join hands with more tech talents, investors and partners.

[Foreign Language]

[Interpreted] I'll pass to Yang Guang to discuss the development of the Waterdrop Insurance business for Q1.

Thanks, Shen Peng. China's insurance industry has experienced a period of profound adjustment in Q1 due to various factors, notably the COVID resurgence and the equity market shakeup. Publicly traded insurers suffer from a setback on both their assets and liabilities. In Q1, listed China insurance companies recorded an average of 3.2% decline in new business premium and an average of 36% decline in net profit year-over-year and NBV also reduced by more than 30%. Overall demand for individual insurance remained sluggish. The growth from our insurance agents was also weak. And the traditional insurance business that carries out on-site is stagnant. Thereby, it was especially slow for the sales of protection products, primarily health insurance to recover. This should be partially due to the [ high case ] for comparison last year that was triggered by a speculative sales of [indiscernible] health insurance. Meanwhile, there is a clear industry trend that insures adopting the life-efficient traditional sales model are facing more challenges, while those capable of pioneering diversified and innovative channels are enjoying a faster recovery. The business performance of top-tier players has shown some signals of stabilization following the recent adjustment period. So this is industry backdrop. In Q1 2022, we continue to firmly execute the strategy we set out in the third quarter last year, which is to reform our business model and optimize our business operations. This has helped us achieve significant improvements in our operational efficiency and in other business metrics. In Q1, we recorded an adjusted net profit of RMB 127 million, increasing by 2,024% quarter-over-quarter. And for the first time, we achieved a net GAAP profit of RMB 105 million in this quarter on top of a non-GAAP profit in the previous quarter. I will now walk through our insurance business updates in 3 aspects, firstly, regarding the ongoing progress with our business model transformation. In Q1, we optimized and upgraded our operating system of cross-platform, multiproduct supply and multiservice models by revamping the transaction process and enhancing the accuracy of matching customer needs with the appropriate insurance products. Our operating performance has improved in Q1. While keeping the 1-year LTV of our business at a relatively high level, our 1-year ROI increased by 55% in Q1 compared with Q4 last year. Our long-term insurance business has followed the advocate of regulators and switched to an integrated sales model of Internet kind of marketing. We thereby promptly add on products that are eligible under this model and started to provide differentiated services to customers sourced from different channels. We also optimized our algorithm models by the user group's profile. As a result, in Q1, the average premiums per leads for the long-term insurance increased by 4%. The average productivity of long-term insurance of our in-house consultants reached 2x the industry average, boosting the net income of our long-term insurance business by 18% in Q1 quarter-over-quarter. We consistently strengthened our user lifetime management by utilizing different scenarios on cross marketing platforms, such as WeChat official accounts, WeChat new programs, enterprise WeChat accounts and Waterdrop apps. Thereby, we have made some new breakthroughs in new acquisitions on these platforms. For instance, the number of enterprise WeChat contact users increased to 6.5 million and the number of active app users increased by 10% quarter-over-quarter. Short-term interest premiums originated from those private traffic were approximately RMB 30 million in Q1, up by 60% quarter-over-quarter. Meanwhile, leveraging our innovative operating scenarios, we have effectively deactivated many dormant users, which helped improve our user engagement rate, repurchase rate as well as policy renewal rate. In Q1, our user repurchase rate for short-term products stood at 73%, up by 16 percentage points, and the short-term insurance renewal rate reached 19.8%, up by 18 percentage points compared to Q4, respectively. Our proactive exploration of different customer acquisition models has also started to bear fruits in Q1. We have consistently polished up our output capability of insurance content. Leveraging all forms of marketing tools, including graphic ads, videos and live streaming, we have successfully acquired many high-quality new insurance customers on various social media platforms and provided services to them through our financial planners. During this pilot phase in Q1, this model has generated millions of premiums. Going forward, we will continue to expand our insurance content generation and financial planning team, aiming at achieving more valuable expansion of business. In addition, leveraging our highly efficient long-term insurance users conversion capability, we collaborated with many external traffic partners to convert these into long-term insurance sales. This approach has effectively expanded our sources of leads for long-term insurance products. Secondly, with respect to promoting product diversification and business innovation, in Q1, in terms of short-term insurance product offerings, we now have 7 cost-effective version of leading medical insurance products, including one type for patients with chronic disease and another specialized for patients with kidney disease to meet the diversified protection needs of users. We also upgraded one type of our leading medical insurance product to include CAR T therapies in the coverage. In terms of critical illness products, we have launched a series of multi-level CI protection plans for users of different age group and price sensitivities. For example, we jointly developed Waterdrop CI policy innovation, a product tailored for the protection of the younger generation with our insurance partners. We have lowered the threshold for purchasing this product by focusing on quality coverage, thereby allowing more users to have access to a more appropriate and affordable CI policy. Meanwhile, with the rising popularity of ads and -- snow sports brought about by the Winter Olympics, we have introduced a sports accident insurance policy that covers the liability for accidents in skiing and other high-risk sports. In Q1, the premium contribution of our cost-effective innovative insurance products increased significantly and the sales conversion rate of users of these products has improved by more than 30%. Going forward, we strive to develop more cost-effective products for other categories. Regarding products for customers with illness, we launched a customized product against breast cancer recurrence and also an inclusive house insurance product for people with illness. Both products have achieved strong initial sales. Looking ahead, we will continue expanding our user application channels and developing new products, satisfying the protection needs of people with illness. We have also made great progress in our O2O brokerage business. In Q1, we have recruited more workforce and built a sales team of over 400 people, including directors and sales persons, and our product offering has been enriched to about 200. This sales team generated a total premium income of over RMB 10 million in Q1, up by 150% quarter-over-quarter. We have empowered the team with our huge online customer database and technology [ cost base ], therefore, helping them with customer acquisition and sales performance improvement. Following the introduction of our O2O brokerage service, the LTV contribution of our existing online users converted to off-line services has also increased by 50%. Going forward, we will refine our customer segmentation and user conversion tools, which should gradually enhance the capability of our brokerage team to unlock the value of our existing customers. In addition, we are exploring a different offline brokerage service model in different regions and cities, aiming at increasing the geographic footprint and the user outreach of this business. Thirdly, to talk about strengthening our robot platform capabilities and exploring new models to empower the industry. In Q1, we continue to ramp up the insurance robot platform and achieve key breakthroughs for our intelligent chatbot capabilities. We made significant progress in upgrading our sales robot for short-term insurance products, especially in the areas of user intention recognition and human voice simulation with improved accuracy in detecting user intention. This allows the robot to identify potential customers more effectively and transfer the inquiry to our insurance consultants, who can then take over the baton and provide more in-depth service to the inquirer. Meanwhile, we launched our proprietary outbound calling robot customer service business model in January, which, coupled with our service capability in online marketing and channel marketing, has helped generate an increase in total interest premiums of 60% in March from January. Recently, we have unveiled our first digital staff, [ Bong-Bong ], a human-like virtual employee that was developed based on our business scenarios and empowered by AI technology. So far, [ Bong-Bong ] has already been well acquainted with more than 100 of Waterdrop's insurance products, including product introduction, insurance coverage, renewal process, claims settlement, et cetera. Based on its semantic understanding feature, [ Bong-Bong ] can recommend solutions for our online insurance consultants in real time so that they can provide feedback to our customers with higher accuracy and a greater response rate more easily. [ Bong-Bong ] can also help our online insurance consultants with tedious and repetitive tasks, such as data processing analysis, online broker management and customer services, thereby reducing the response time, improving the response quality and broadening the scope of our services. Our analysis showed that [ Bong-Bong ] processed 86% of the user patients, building a high intention recognition accuracy rate of 97%, which helps free up 37% of the customer service manpower. Our next goal is to enable [ Bong-Bong ] to independently complete tasks for more complex and interactive scenarios and play an important role in the process of sales inquiries, underwriting review, risk control and claims settlement. Currently, we are well equipped with robotic process automation and initiation protocol capabilities, which serves as a solid foundation for us to export our technology to the industry. Several companies have confirmed their intention to advance cooperation with us, of which 2 companies are now at the stage of technical integration, and our cooperations are expected to go live as early as in Q2. Our technology export products are expected to bring in tens of millions of renminbi of premium this year. Moreover, we are exploring operating agency products to empower insurance companies on their digital customer management capabilities by providing them with a comprehensive one-stop user operation solution that covers online customer acquisition, existing user management and user conversion and credit demand, as well as off-line agent empowerment, thereby promoting the overall digital operation capability of the insurance industry in China. In conclusion, we started Q1 of 2022 with remarkable progress in terms of operation, innovation and technological capabilities. We are highly confident in the long-term fundamentals of China's insurance industry. We will strongly proceed with our strategy while actively designing new business innovations. In this transition period of the insurance industry, we strive to complete our business transformation and achieve an overall improvement in our operational capabilities as soon as possible time. That's about it the brief on insurance business, and let me hand over to Mr. Yao Hu for the update on our Medical Crowdfunding business, Healthcare business and the technology.

[Foreign Language]

[Interpreted] For a start, let me give you an update on our Medical Crowdfunding business. Despite that COVID-19 has kept resurging, our Waterdrop Medical Crowdfunding business maintained steady growth, and we are persistent in serving patients during this challenging times. As of the end of Q1, the cumulative number of donors reached 403 million, helping 2.5 million patients with a cumulative fund rate of RMB 50.9 billion.

[Foreign Language]

[Interpreted] Next, let me talk about the progress of our patient recruitment business. In Q1, our eFund platform nearly enrolled over 50 clinical trial programs by partnering with leading innovative pharmaceutical manufacturers in China and worldwide, including Chia Tai Tianqing, CSPC and Innovent. Leveraging our excellent project delivery capabilities and our ability to accelerate the process of CRO clinical trials, not only have we received a steady flow of new orders from existing pharma partners, but also attracted leading domestic and foreign pharmaceutical companies such as Bayer, Fosun Pharma, [ Agin ], [ Ginshur ], [ Shanghai Pharma ], [ Biocap ] and [ Coolin ] to establish long-term business relationships with us. In Q1, we successfully recruited more than 500 patients in clinical trials, maintaining solid growth compared with the previous quarter.

[Foreign Language]

[Interpreted] Let me give you 2 examples. Firstly, in our strategic partnerships with Chia Tai Tianqing and CSPC, we completed more than 20 clinical trial products, which greatly accelerated their R&D progress. In addition, we have also established extensive collaboration with many top biotech companies and are highly recognized by them. Another example is the project with [ Halis ]. Within the time span of less than half a year, we have successfully enrolled more than 50 candidates who are in need of financial assistance and have the willingness to participate in [ Halis' ] key clinical trials, which dramatically promoted its R&D efficiency and trial progress.

[Foreign Language]

[Interpreted] As we continue to deepen our efforts in the patient recruitment segment, we have accumulated increasingly premium resources with our partners, which also promotes the high-quality and sustainable development of other business segments. In the meantime, we will continue to maximize our competitive advantage in the Crowdfunding business and patient recruitment business to explore more CRO services and develop more high-value services for the R&D of new drugs.

[Foreign Language]

[Interpreted] Next, on technology innovation. As we continue to increase our investment in technology, we optimized the pre and post processing algorithms for our speech to text software and reduce the surrounding noise disturbance, thereby improving the quality of our ASR technology and the intention recognition capabilities. Meanwhile, by analyzing mass industry data, our R&D team conducted incremental pre-training on our models to make them adaptive to our specific scenarios, thus improving the model's performance.

[Foreign Language]

[Interpreted] Our customer service chatbot can solve more than 80% of the questions raised by users, and their intention recognition capability achieved an accuracy rate of over 90%. For transferring customer requests from chatbot mode to manual mode on a real-time basis, we have built a first-of-its-kind phone call loss control model based on our manual plus machine coupling system, which enables us to improve sales force productivity and user rating experience.

[Foreign Language]

[Interpreted] In terms of promoting industry development, we also have increased our efforts in exporting our AI capability to our traditional insurance partners and other online insurance platforms, helping them enhance their customer service capability and the utilization of sales leads.

[Foreign Language]

[Interpreted] In patient recruitment for clinical trials, we extracted patients' data such as their medication history, surgical history and the pathological analysis from unstructured patient documents through an event extraction algorithm. Such data will serve as the supplement to manual data collection and provide a reference for medical staff to decide whether a given patient is currently in the window period. So far, the algorithm has extracted the brief medical history of patients with liver and gastric cancer, which improves the efficiency of the operations log for [indiscernible].

[Foreign Language]

[Interpreted] We adopted an underwriting assistance tool to conduct underwriting pre-review and -- for our customer groups with illness. It helps screen those insurance products for which eligibility criteria a customer could meet, and then select the one which provides the most suitable underwriting [indiscernible].To facilitate with those processes and on a better user experience, we applied the AI algorithm to automatically extract the data from a huge number of non-standardized disease questionnaires and then standardize and normalize these data points to produce a structured map which fits well with [indiscernible] logic of our underwriting review platform. It has significantly improved the efficiency of product allocation and accuracy of product recommendation.

[Foreign Language]

[Interpreted] For claims segment, we adopted algorithm to improve the accuracy of extracting various data, including names, ID cards, [indiscernible] from claim application forms to above 95%. The algorithm allowed us to effectively extract relevant structured data from bank cards and electronic invoices.

[Foreign Language]

[Interpreted] This concludes my part. And then let me turn over the call to Kevin, our CFO, to discuss our first quarter financial performance.

Thank you. Thank you, Yao Hu. Hello, everyone. I will now walk you through our key financial results for the first quarter of 2022. Before I go into details of our financial performance, please be reminded that all the numbers quoted here will be in RMB. And please refer to our earnings release for detailed information of our comparative financial performance on both the year-over-year and quarter-over-quarter basis, respectively. Despite the challenging external risk environment from industry slowdown and the macro headwinds, our net operating revenue firmed up quarter-over-quarter basis, which benefited from our strategic goal of business reform to focus on quality revenue. Our net operating revenue decreased by 26.6% year-over-year to RMB 649 million from RMB 883 million year-over-year, mainly due to the decrease in FYP affected by the improvement of our take rate. After the strategic realignment in quarter 3 and quarter 4 last year, there has been positive indicators for the growth recovery of our operating revenue, which demonstrated a quarter-over-quarter increase of 7.4% in quarter 1. These take rates stabilized at around 34% level. Results are primarily driven by the quality enhancements in our insurance business. Operating costs and expenses for quarter 1 decreased by 50.4% year-over-year to RMB 532 million. On quarter-over-quarter basis, operating costs and expenses further decreased by 21.5%, demonstrating our cost control measures have had a significant impact, laying a solid foundation for our high-quality growth down the road. In quarter 1, we remained highly disciplined on cost control, including spending reductions, improving the effectiveness and ROI of traffic acquisition, optimizing our organizational structure, reducing the abundant headcount and improving operating efficiency. To break it down, the operating costs were RMB 155 million, a decrease of 48.5% year-over-year, mainly due to the decrease of RMB 39 million in professional and outsourced customer service fees, a decrease of RMB 35 million in personnel costs and a decrease of RMB 77 million in relation to the cessation of the Waterdrop mutual aid business compared to the last year. On a quarter-over-quarter basis, operating costs decreased by 21.4%. Sales and marketing expenses decreased by 75.6% year-over-year from RMB 837 million to RMB 204 million for the first quarter of 2022. The decrease was primarily due to the decrease of marketing expenses through third-party traffic channels by RMB 620 million, partially offset by the increase in payroll and the related expenses for employees involved in sales and marketing functions. Again, we delivered satisfactory results, controlling our expenses as we promised starting in the third quarter of last year. On a quarter-over-quarter basis, sales and marketing expenses still decreased by 15.2%. G&A expense decreased by 15.9% in quarter 1 to RMB 102 million year-over-year and by 31.4% quarter-by-quarter, mainly due to the decrease of impairments of RMB 27 million provided for the receivables and the prepayments and the RMB 60 million in personnel costs and share-based compensation expenses compared to the last quarter. R&D expenses decreased by 15.6% to RMB 71 million year-over-year and decreased by 22.1% quarter-by-quarter, resulting from the optimization of our organizational structure. In this quarter, we continued to have realized a non-GAAP profit of RMB 127 million on the basis of quarter 4 2021, and for the first time made a U.S. GAAP net profit of RMB 105 million compared with a net loss in the same quarter of last year. So far, we have reinforced our last year financial guidelines of achieving a non-GAAP profit. Going forward, we will continue our efforts in restructuring our business, enhancing revenue quality and profitability as well as constantly instilling a rigid cost discipline. As of March 31, 2022, our cash and cash equivalents and short-term investment balance increased to RMB 2,924 million, increasing RMB 137 million or 4.9% from the end of last quarter. We expect that we have implemented share repurchase under compliance framework. For detailed financial data, please refer to our press release on our IR website. This concludes my part. Thank you. And now let's turn to Q&A session.

[Operator Instructions] And our first question will come from Michael Li with Bank of America.

[Foreign Language] My name is Michael Li, and I'm from Bank of America Securities. I have 2 questions. The first question is about the impact of COVID on our business in first quarter and also second quarter. We noticed that Shanghai and some other cities in China were under lockdown from March until April and May. So we believe that a lot of offline insurance companies have been negatively impacted. And what is the impact on our business model and whether we could actually benefit from this kind of lockdown? The second question is about the SEC's list. We noticed that Waterdrop and other -- like more than 100 Chinese ADRs are now on the list of SEC -- like issuers identified under the HFCAA. So that means if we cannot meet the requirement of PCAOB or SEC in the next 3 years, we'll be forced to delist from the U.S. market. May I know if you have any comments on this and if any measures we could take?

This is Yang Guang speaking, and I'm going to answer your first question. I think the pandemic resurgence caused a temporary impact and held back the operations of our off-line business such as our Medical Crowdfunding business as many patients reduced the frequency to visit the hospital. However, after going through the pandemic 2 years ago in 2020, our Medical Crowdfunding business has shown a strong resilience, and it is already in the dominant leading position through the industry's ups and downs. And so the pandemic will not have a significant negative impact on our market competition or business' capability. Also the COVID-19 resurgence, to some extent, has given our users a better understanding about the advantage of our omnichannel business model. And particularly, it helped improve the user acceptance of our online business and cultivate user habits gradually. The result has accelerated the development of our users' awareness and made the traditional insurance companies more inclined to rely on online channels. It will benefit the development of our omnichannel model in the long run. In addition, it also provides a precious opportunity for our O2O business to expand the sales force and prepare ourselves for future business growth. While the pandemic slowed down our off-line operations, we seek the window opportunity to recruit outstanding professionals. For example, by doing that, we established 2 new branches in Q1, and a number of new local branches are also underway. Our sales team attracted over 100 new staff and expanded the team to over 400. A lot of them are veterans of the industry. The categories of products sold by this team has reached about 200, and this factor directly helped increase the average productivity per lead efficiency to reach 2x the industry average. And this team generated a total premium income of over RMB 10 million in Q1, up by 150% quarter-over-quarter. That's all for the first question, and I'm going to leave the second question to Kevin Shi, our CFO.

Regarding your second question. On April 28, 2022, Waterdrop filed annual report and form 20-F for fiscal year 2021, as you see. On May 5, it was identified by the SEC under the HFCAA. About 80 other Chinese ADRs were identified as well in the same batch. In fact, as you may know, almost all Chinese companies listed in the United States were included in this after filing their annual report with SEC, being identified as well as being delisted. According to applicable rules, only if a company has been identified by SEC for 3 consecutive years due to the inability to inspect the registered company accounting firms, who are on paper related to the company, the company's share -- or American depository shares will be prohibited from being traded on New York Stock Exchange. We believe this is a normal administrative matter and a common issue encountered by almost all the Chinese companies listed in States. It doesn't materially affect the company's business operation. And we noticed that CSRC has issued medical statements this year signaling that progress has been made in negotiations with SEC. And at the same time, we will continue to comply with applicable laws in China and the States and maintain our listing status on the NYSE, negating our voluntary delisting from the exchange. As of date, our business and operations are running as usual and we are actively exploring feasible offers to protect our shareholders' interest in our best effort. Hope this answers your question, Michael.

[Operator Instructions] Our next question will come from Qingqing Mao with CICC.

This is Qingqing from CICC. Congrats on the results first. I have only one question. Can you elaborate more on the financial guidance and how the company balances revenue growth with profitability objectives? That's all for me.

It's a good question. Actually, it's difficult to do a financial outlook for full year at this point due to the external factors, including COVID-19 and the macroeconomic uncertainties. But considering various factors, including industry trends, the development stage of our company and our business strategy adjustment, we will seek a balance between business growth, efficiency improvements and cost management. We regard quarter 4 last year and quarter 1 this year as a new starting point for our growth, which will serve as a solid foundation for a healthier, more solid and a more resilient growth path against the various external factors. We expect that our business will stabilize and recover from this new starting point quarter-by-quarter. In the meanwhile, we will actually explore and innovate, pursue further progressing our health care business and develop additional growth momentum in our new business initiatives. In terms of profitability, last quarter, we announced our goal to achieve non-GAAP operating profit for our established business for the full year of 2022, and we continue to deliver on this promise. In this release, we further provided the guidance on overall profitability for our group on a non-GAAP basis for the year, on the premise that we keep investing in our established business and new initiatives. We have been seeing positive results in cost control since quarter 3 last year as we strictly manage our expenditure and have squeezed out the part of revenue which is less cost efficient. Our revenue decreased year-over-year in quarter 1. Nevertheless, we are having signs of stabilization in this time, and we resumed the positive growth in revenue quarter-over-quarter. On the industry landscape. The insurance industry is undergoing profound regulatory change and the second COVID fluctuations. Against this backdrop, the old growth model focusing on the scale expansion can no longer adapt to the consumer demand and market conditions, and the amount of regulatory policies has intensified the industry adjustment. The competitive environment of the insurance industry is evolving in a direction that is more favorable for Waterdrop. For example, a number of peers have exited from the market and our external customer acquisition environment actually has improved. In terms of business operations, as we drive our business transformation towards higher quality development, we have seen a significant improvement in our retention rate and the various operating measures, as well as ongoing increase in the renewal rate and the repurchase rate. All of these improvements will provide a strong force for our further sustainable growth. Looking ahead, we believe that we -- as we continue to transform and upgrade our business model and invest more in the management and the services of our existing users, when the next booming phase comes, we'll emerge stronger, healthier and more solid business fundamentals and achieve higher quality growth. And as a top player in the industry and with our large user base, combined with robust operations and a wide competitive [ model ], we believe that we will benefit more during the transition period. I hope this answers your question.

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.