Waterdrop Inc. (NYSE:WDH) Q1 2022 Earnings Conference Call June 15, 2022 8:00 AM ET
Company Participants
Xiaojiao Cui – IR
Shen Peng – Founder, Chairman & CEO
Yang Guang – Co-Founder, Director and General Manager of Insurance Marketplace
Hu Yao – Co-Founder, Director and General Manager of Medical Crowdfunding and Healthcare
Kevin Shi – CFO
Conference Call Participants
Michael Li – Bank of America
Qingqing Mao – CICC
Operator
Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.’s First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management’s prepared remarks, there will be a Q&A session. As a reminder, today’s conference call is being recorded.
I would now like to turn the meeting over to your host for today’s call, Ms. Xiaojiao Cui. Please proceed, Ms. Xiaojiao Cui.
Xiaojiao Cui
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. Hu Yao, Co-Founder, Director and General Manager of Medical Crowdfunding and Healthcare; and Mr. Kevin Shi, our CFO. We will be available for a Q&A session after the remarks.
Now, I would like to turn the call over to our CEO Mr. Shen Peng. Please go ahead.
Shen Peng
[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 a strategic realignment 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 two quarters, we are tipped to have a good overall performance for the full year. Apart from consistently establishing our competitive strengths, we have also improved our operational efficiency and profitability, thereby securing a healthier and more sustainable development for the company.
The company is reaching the six years 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 RMB105 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.
The moat we built around our product designs, innovation capabilities, and synergies within various business segments have enabled us to maintain vitality and resilience to counter challenges and navigate (ph) the tough times. In particular, the resurgence of the pandemic and the ever-growing demand for healthcare protection solutions have brought more opportunities for insurance and healthcare services providers, especially the online insurance platforms like us. Under this dynamic environment, we will be committed to creating values to customers, solidifying our business, and delivering better results.
Since that (ph) will give a recap 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 the 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 and operational realignment within a short-time period. Simultaneously, we are improving the quality of our business substantially and enriching the supply of our insurance products.
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.
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 responsibility, pursuing sustainable development goals, and making efforts to encourage more stakeholders to share the responsibility for 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 Leaders’ Summit of UNGC. On behalf of China’s insurtech companies, I joined the panel discussion and share our thoughts on the best practices for local enterprises, multi-national corporations, and various stakeholders during the move of the 2030 Agenda for Sustainable Development.
The volatile pandemic situation has posed a 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 epidemic containment. We also collaborated with charity organizations to provide donations of over RMB1 million in supplies to people with financial difficulties, the elderly living alone, and 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 non-profit organizations to raise anti-pandemic funds of more than RMB65 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.
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 healthcare service to billions. We also proactively leveraged our competitive strengths and digital service capabilities to promote, implement and achieve our sustainable development goals. We also continued to promote the United Nations Sustainable Development Goals or SDGs.
For example, for goal one, no poverty: We joined China’s multi-level medical insurance system to help reduce risks for those with critical diseases to fall into or slip back into poverty due to illness. For goal three, 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 goal nine, industry, innovation and infrastructure: We focused on promoting the development of the insurtech industry by leveraging technological innovation.
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 RMB2.92 billion. We continued to implement our share repurchase plan while exploring innovative investment opportunities in the insurance and healthcare sectors at the same time. As of the end of March, we repurchased cumulatively 3.09 million ADSs in total and will continue to prudently buy back shares. We plan to use these repurchased ADSs for our employee need incentive plan in the future.
Amid this changing environment, as a top-tier player and pioneer in China’s insurtech and online healthcare market, we strive to pursue higher-quality development and insist on creating value for our customers and shareholders. In terms of business innovations, we will enhance user value in an enduring and a proper manner and maintain our enthusiasm for technological innovations. We are confident in the long-term prospect of China’s healthcare 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.
I’ll pass to Yang Guang to discuss the development of the Waterdrop Insurance business for Q1.
Yang Guang
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 markets shake-up. Publicly our traded insurers suffered 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 premiums and an average of 36% decline in net profit year-over-year. And NBV also reduced by more than 30%. While demand for individual insurance remained sluggish, the growth from insurance agents was also weak, and traditional insurance business that carries out on-site is hindered.
Thereby it was especially slow for sales of protection products, primarily health insurance to recover. This should be partially put down to the high base for comparison last year that was triggered by speculative sales of critical illness health insurance. Meanwhile, there is a clear industry trend that insurers adopting the less-efficient traditional sales model are facing more challenges, while those capable of pioneering diversified and innovative channels are enjoying a faster recovery.
Indeed, the business performance of top-tier players has shown some signals of stabilization following the recent adjustment period. Against this industry backdrop, in Q1 2022, we continued 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 RMB127 million, increasing by 2,054% (ph) quarter-over-quarter, and for the first-time we achieved a net GAAP profit of RMB105 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 three aspects. Firstly, regarding the ongoing progress with our business model transformation. In Q1, we optimized and upgraded our operating system of cross-platform, multi-product supply, and multi-service models. By revamping the transaction processes and enhancing the accuracy of matching customer needs with appropriate insurance products. Our operating performance has improved in Q1. While keeping the one-year LTV of our business at a relatively high level, our one-year ROI increased by 55% in Q1 compared with Q4 last year.
Our long-term insurance business has followed the advocates of regulators and switched to an integrated sales model of Internet + telemarketing. 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 groups’ profile.
As a result, in Q1, the average premium per leads for long-term insurance increased by 4%. The average productivity of long-term insurance of our in-house consultants reached 2 times 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 mini-programs, Enterprise WeChat accounts, and Waterdrop Apps. Thereby, we have made some new breakthroughs in user 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 insurance premiums originated from these private traffics were approximately RMB30 million in Q1, up by 60% quarter-over-quarter. Meanwhile, leveraging our innovative operating scenarios, we have effectively reactivated 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 90.8%, 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 its 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 sizeable expansion of business. In addition, leveraging our highly efficient long-term insurance user’s conversion capability, we collaborated with many external traffic partners to convert leads into long-term insurance sales. This approach has effectively expanded our sources of leads for long-term insurance products.
Secondly, with reflect to promoting product diversification and business innovation. In Q1, in terms of short-term insurance product offerings, we now have seven cost-effective version of Million Medical Insurance products, including one cut for patients with chronic diseases and another specialized for patients with kidney diseases to meet the diversified protection needs of users. We also upgraded one type of our Million Medical Insurance products 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 groups and price sensitivities. For example, we jointly developed Waterdrop CI Policy Mini-Version, a product tailored for the protection needs of the younger generation with our insurer partners. We have lowered the threshold for purchasing this product by focusing on core risk coverage, thereby allowing more users to have access to a more appropriate and affordable CI policy.
Meanwhile, with the rising popularity of ice and snow sports brought about by the Winter Olympics, we have introduced a sports accident insurance policy that covers liabilities 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-efficient products for other categories.
Regarding products for customers with illness, we launched a customized product against breast cancer recurrence and also an inclusive health insurance product PuHuiBao for people with illnesses. Both products have achieved strong initial sales. Looking ahead, we will continue expanding our user acquisition channels and developing new products satisfying the protection needs of people with illnesses.
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 salespersons, and our product offering has been enriched to about 200. This sales team generated a total premium income of over RMB10 million in Q1, up by 150% quarter-over-quarter. We have empowered the team with our huge online customer database and technological strengths, therefore helping them with customer acquisition and sales performance improvement.
Following the introduction of our O2O brokerage services, the LTV contribution of our existing online users converted to offline services has increased by 50%. Going forward, we will refine our customer segmentation and user conversion tools which should gradually enhance the capabilities of our brokerage team to unlock the value of our existing customers. In addition, we are exploring a different offline brokerage service models in different regions and cities, aiming at increasing the geographic footprint and 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 continued to ramp up the insurance robot platform and achieved 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 services to the enquirer. Meanwhile, we launched our proprietary outbound calling robot plus customer service business model in January. This, coupled with our service capability in online marketing and telemarketing has helped generate an increase in total insurance premiums of 60% in March from January.
Recently, we have unveiled our first digital staff Bangbang, a human-like virtual employee that was developed based on our business scenarios and powered by AI technologies. So far, Bangbang has already been well-acquainted with more than one hundred of Waterdrop insurance products, including product introduction, insurance coverage, renewal process, claim settlement process, et cetera. Based on its semantic understanding feature, Bangbang can recommend solutions for our online insurance consultants in real-time so that they can provide feedback to our customers with higher accuracy and greater response rates more easily.
Bangbang can also help our online insurance consultants with tedious and repetitive tasks, such as data processing and analysis, online user management, and customer services, thereby reducing the response time, improving the response quality, and broadening the scope of our services. Our analysis shows that Bangbang processed 86% of the user sessions, yielding a high intention recognition accuracy rate of 97%, which helps free up 37% of the customer service manpower. Our next goal is to enable Bangbang to independently complete tasks for more complex and interactive scenarios and play an important role in the process of sales inquiry, underwriting review, risk control and claim settlement.
Currently, we are well-equipped with Robotic Process Automation and Session Initiation Protocol capabilities, which serve 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, two companies are now at the stage of technical integration, and our co-operations are expected to go live as early as in Q2. Our technology export projects are expected to bring in tens of millions of RMB of premium this year.
Moreover, we are exploring operating agency projects to empower insurance companies on their digital customer management capabilities, by providing them with comprehensive one-stop user operation solutions that covers online customer acquisition, existing user management, and the user conversion in private domain, as well as offline 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 firmly proceed with our strategies while actively deep diving in 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 at the soonest possible time.
Above is the brief on insurance business, and let me hand over to Mr. Hu Yao for the update of our Medical Crowdfunding Business, Healthcare Business, and Technology.
Hu Yao
[Foreign Language]
[Interpreted] Before we start, let me give you an update on our Medical Crowdfunding business. Despite the COVID-19 has kept resurging, our Waterdrop Medical Crowdfunding business maintained steady growth, and we are persisted in serving patients during this challenging time. As of the end of Q1, the cumulative number of donors reached 403 million, helping 2.5 million patients with the cumulative funds raised of RMB50.9 billion.
Next, let me talk about the progress of our patient recruitment business. In Q1, our Yifan platform newly 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 abilities 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, BeiGene, Junshi, Shanghai Pharma BIOCAD and Kelun 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.
Let me give you two examples. Firstly, in our strategic partnerships with Chia Tai Tianqing and CSPC, we completed more than 20 clinical trials projects, 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 Henlius, within a 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 Henlius’ key clinical trials, which dramatically promoted its R&D efficiency and trial progress.
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.
Next on technology innovation. As we continued to increase our investment in technology, we optimized the pre-and post-processing algorithms for our speech-to-text software and reduced the surrounding noise disturbance, thereby improving the accuracy 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 models’ performance.
Our customer service chatbots can solve more than 80% of 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 salesforce productivity and users’ waiting experience.
In terms of promoting the 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 capabilities and the utilization of sales leads.
In patient recruitment for clinical trials, we extracted patient 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 a 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 operation flow for roughly 30%.
We adopted an underwriting assistant tool to conduct underwriting pre-review and for our customer groups with illnesses. It helps to screen those insurance products for which eligibility criteria a customer could meet, and then selects the one which provides the most favorable underwriting terms. To facilitate the sales process and offer a better user experience, we applied the AI algorithms to automatically extract data from a huge number of non-standardized disease questionnaires, and then standardized and normalized these data points to produce a structured map which fits well to the operational logic of our underwriting review platform. This has significantly improved the efficiency of product allocation and the accuracy of product recommendations.
For claims settlement, we adopted algorithm to improve the accuracy of extracting various data, including names, ID cards, and bank account numbers from claim application forms to above 95%. The algorithm allowed us to effectively extract relevant structured data from bank cards and electronic invoices.
This concludes my part, and then let me turn over the call to Kevin, our CFO to discuss our first quarter financial performance.
Kevin Shi
Thank you, Hu Yao. Hello, everyone. I will now walk you through our key financial results for the first quarter of 2022. Before I go into details on the 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 on our comparative financial performance on both the year-over-year and quarter-over-quarter basis respectively.
Despite the challenging external 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 RMB649 million from RMB883 million year-over-year, mainly due to the decrease in FYP but offset by the improvement of our take rate.
After the strategic realignment in quarter three and quarter four last year, there has been positive indications for the growth recovery in our operating revenue, which demonstrated a quarter-over-quarter increase of 7.4% in quarter one. This take rates stabilized at around 34% level, which was primarily driven by the quality enhancement in our insurance business.
Operating costs and expenses for quarter one decreased by 60.4% year-over -year to RMB532 million. On a quarter-over-quarter basis, operating costs and expenses further decreased by 21.5%, demonstrating our cost control measures have had a significant effect, laying a solid foundation for our high-quality growth down the road. In quarter one, we remained highly disciplined on cost control, including spending reductions, improving the effectiveness and ROI of traffic acquisition, optimizing our organization structure, reducing redundant headcount, and improving operating efficiency.
To break it down, the operating costs were RMB155 million, a decrease of 48.5% year-over-year, mainly due to the decrease of RMB39 million in professional and outsourced customer service fees, a decrease of RMB35 million in personnel costs, and a decrease of RMB77 million in relation to the cessation of the Waterdrop Mutual Aid business compared to 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 RMB837 million to RMB204 million for the first quarter of 2022. The decrease was primarily due to the decrease of marketing expenses to third-party traffic channels by RMB620 million partially offset by the increase in payroll and 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 Q1 to RMB102 million year-over-year, and by 31.4% quarter-by-quarter mainly due to the decrease of impairment of RMB27 million provided for receivables and prepayments and RMB16 million in personnel cost and share-based compensation expenses compared to the last quarter. R&D expenses decreased by 16.6% to RMB71 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 RMB127 million on the basis of quarter four 2021, and for the first-time made a U.S. GAAP net profit of RMB105million, compared with a net loss in the same quarter of last year. Thus far, we have reinforced our last year’s financial guideline 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 RMB2,924 million, increasing RMB137 million, or 4.9% from the end of the last quarter despite that we have implemented share repurchase under compliance frameworks. 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.
Xiaojiao Cui
Hi, operator. We can follow with…
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Michael Li with Bank of America. Please go ahead.
Michael Li
[Foreign Language]
[Interpreted] Thank you, management, for giving me this opportunity to ask questions. My name is Michael Li, and I’m from Bank of America Securities. I have two 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 to 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 SECs list. We noticed that Waterdrop and others, like more than 100 Chinese ADRs are now on the list of SEC like issuance identified under the HFCAA. So that means if we cannot meet the requirement of PCAOB or SEC in the next three years, we’ll be forced to de-list from the U.S. market. May I know if you have any comments on this and if any measures we could take. Thank you.
Yang Guang
Thank you, Michael for the question. This is Yang Guang speaking. I’m going to answer your first question, I think the pandemic resurgence caused a temporary impact and held back the operations of our offline businesses such as our Medical Crowdfunding business, as many patients reduced the frequency to visit the hospital. However, after going through the pandemic two years ago in 2020, our Medical Crowdfunding business has shown strong resilience, and it’s already in the dominant leading position through the industry ups and downs. So the pandemic did not have a significant negative impact on our market position or business stability.
Also, the COVID-19 resurgence to some extent has given our users a better understanding about the advantages of our omni-channel business model. Particularly, it helped improve the user acceptance of our online business, and cultivate user habits gradually. The result is, it 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 omni-channel model in the long run. In addition, it also provide a precious opportunity for our O2O business to expand the salesforce and prepare ourselves for future business growth.
While the pandemic slowed down our offline operations, we seized the window of opportunity to recruit outstanding professionals. For example, by doing that, we established two new branches in Q1, and a number of new local branches are also on the way. Our sales team attracted over 100 new staffs 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 these factors directly helped increase the average productivity efficiency to reach 2 times the industry average. This team generated a total premium income of over RMB10 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.
Kevin Shi
So Michael, that’s four questions. Regarding your second question, on April 28 2022, Waterdrop filed annual report on Form 20-F for fiscal year 2021 with SEC. 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 U.S. list were included in the list after filing their annual reports with SEC. Being identified is not being delisted.
According to applicable rules, only if a company has been identified by the SEC for three consecutive years due to the PCAOB’s inability to inspect the registered public accounting firm’s working paper related to the company, the company’s shares or American depositary shares would be prohibited from being traded on a U.S. stock exchange. We believe this is a normal administrative measure and a common issue encountered by almost all Chinese companies listed in the U.S. It does not materially affect the company’s business operation.
And we noticed that CSRC has issued multiple statements this year signaling that progress has been made in negotiations with SEC. At the same time, we will continue to comply with applicable laws in China and U.S. and maintain our listing status on the NYSE. We never think of voluntary delisting from the exchange. As of date, our business and operations are running as usual and we are actively exploring feasible offer to protect our shareholders’ interest in our best effort. Hope this answer your question, Michael. Thank you.
Michael Li
Thanks, Yang Guang. Thanks, Kevin.
Operator
[Operator Instructions] Our next question will come from Qingqing Mao with CICC. Please go ahead.
Qingqing Mao
Thanks, operator. 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 would the company balance revenue growth with profitability objectives? That’s all from me.
Kevin Shi
It’s a good question. Actually, it is difficult to do a financial outlook for the full year at this point due to external factors including COVID-19 and macro-economic uncertainties. But, considering of 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 improvement and cost management.
We regard quarter four last year and quarter one this year as a new starting point for our growth, which will serve as the solid foundation for a healthier, more solid, and more resilient growth path against 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 actively explore and innovate, pursue further progress in our healthcare 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 non-GAAP basis for the year. On the premise that we keep investing in our established businesses and new initiatives.
We have been seeing positive results in cost control since quarter three 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 one. Nevertheless, there have been signs of stabilization in this trend and we resumed positive growth in revenue quarter-over-quarter.
On the industry landscape, the insurance industry is undergoing profound regulatory changes and the cyclical fluctuations. Against this backdrop, the old growth model focusing on scale expansion can no longer adapt to current user demands and market conditions, and the launch of regulatory policies has intensified the industry adjustments. 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 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 significant improvements in our retention rates and various operating metrics, as well as ongoing increases in the renewal rate and repurchase rate. All of these improvements will provide strong support for our further sustainable growth.
Looking ahead, we believe that as we continue to transform and upgrade our business model and invest more in the management and services of our existing users, when the next booming phase comes, we will emerge stronger with healthier and stronger business fundamentals, and achieve higher-quality growth. As a top player in the industry and with our large user base, compliant and robust operations and wide competitive moat, we believe that we will benefit more during the transition period.
I hope this answers your question. Thank you.
Operator
We are now approaching the end of the conference call. Thank you for your participation in today’s conference. You may now disconnect. Have a good day.
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