Yuanbao Inc. (YB) Q4 2025 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Yuan Bao Inc.'s fourth quarter and fiscal year 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Stella Liu, Investor Relations and Strategy Associate Director. Please go ahead.

Thank you, Operator. Please note that today's discussion will contain foreign-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are not guaranteed of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the complete control and could cause actual results to differ materially from those mentioned in today's press release and discussion. A general discussion of the risk factors that could affect Yuan Bao's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. 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-GAAP financial measures. For definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued earlier today. Joining us today on the call from Yuan Bao's senior management are Mr. Wei Feng, our chairman and chief executive officer, and Mr. Wei Wen, our chief financial officer. Mr. Feng will deliver his remarks in Chinese, followed by an English translation. All figures will be in R&B unless otherwise noted. We will conclude the call with the Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuan Bao's investor relations website. I will now turn the call over to our Chairman and CEO, Mr. Feng. Please go ahead, sir.

Hello. Welcome to the fourth year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year of the year Thank you very much. 公司总输入达到人民币43.73亿元 同比增长33.1% 经营利润人民币13.08亿元 同比增长51% 经营利润率达去年提升3.5% 达到29.9% Thank you for joining us today for our first quarter and full year 2025 earnings conference call.

We concluded the year with strong performance in the fourth quarter of 2025, laying a solid foundation for sustained growth going forward. Our total revenues for the quarter reached $1.18 billion, reflecting a year-over-year increase of 32.2%. Net income was $337.4 million, up 15.4% year-over-year, with a net margin of 28.7 percent with this performance we achieved profitability for 14 consecutive quarters for the full year total revenues reached 4.37 billion representing a year-over-year increase of 33.1 percent net income was 1.31 billion up 51 percent year-over-year with net margin improving by 3.5 percentage points to 29.9 percent this strong growth further validates the sustainability of our business model and underscores the success of our scaled operations and disciplined management.

As of the end of 2025, we held 4.04 billion in cash reserves, providing a solid financial foundation to support continued investments in model and big data capabilities, as well as for the continuous expansion of our business. 在运营层面 我们同样取得了显速进展 第四季度新保单数量为790万份 同比增长了34.5% 全年新保单数量达3066万份 同比增长36.7% 这一增长得益于我们不断强化的AI能力 截至年末,公司AI团队人数已占公司总员工数的10%以上 我们的规模网络已超过4900个模型 对于超过5700个特征进行分析 通过模型的持续迭代及业务的数据规模的持续积累 我们能够以更高效精准的去理解和服务海链用户 构建行业领先的智能化服务生态 From an operational perspective, we also made significant progress.

In the fourth quarter, the number of new policies increased by 34.5 percent year-over-year to approximately 7.9 million. For the full year, new policies reached approximately 30.7 million, representing a year-over-year increase of 36.7 percent. This growth was supported by the continued strengthening of our AI capabilities. As of the end of the year, our AI team accounted for over 10% of our total workforce. Our model network included more than 4,900 models capable of analyzing over 5,700 labels.

Through continuous model iteration and the ongoing accumulation of business data, we are able to understand and serve a vast user base with greater efficiency and precision supporting an industry-leading intelligence service ecosystem. 强调加快发展商业健康保险,这一系列的政策为行业的发展打开了广阔的空间,与此同时,2026年正值1555开局之年,政府工作报告提出深化拓展人工智能家,推动重点行业领域人工智能商业化规模的应用,AI正从底层重构保险行业的服务模式与运营效率,

The commercial health insurance industry is now entering a new phase of high-quality development. A series of supportive policies have created substantial growth opportunities for the sector. From the National Financial Regulatory Administration setting the strategic direction for high-quality development in health insurance to the joint release of the inaugural Commercial Insurance Innovative Drug Catalog by the National Healthcare Security Administration and the Ministry of Human Resources and Social Security. Moreover, the recent 2026 government work report explicitly called for improving the multi-tiered healthcare security system and accelerating the development of commercial health insurance. Meanwhile, as the 15 five-year plan period begins, the government work report proposed to deepen and expand the AI plus strategy, promoting the commercialized and large-scale applications of AI in key industries and sectors. AI is fundamentally reshaping the service models and operational efficiency of the insurance industry from the ground up. Technological capabilities have become a key differentiator in industry competition, providing strong momentum for high-quality development. As regulators continue to guide the industry to return to the industry, with core focus on protection and better serve the real economy and people's livelihood needs. We are leveraging our technology to reach a broader population at lower costs and with higher efficiency, advancing the accessibility of insurance. At the same time, our professional services enable us to provide tailored and affordable protection solutions, bringing the inclusive insurance ecosystem fully into practice, leveraging our proprietary AI model networks and big data capabilities, we have implemented intelligent operations across key areas such as product customization, insurance plan recommendations, claims processing and service. This enables us to continuously enhance our understanding of user demand and improve service efficiency, reach populations that were previously underserved and promote broader inclusivity and accessibility of the insurance protection. In the fourth quarter, we continued to advance the upgrade and unified development of our large language model platform. Our AI capabilities are becoming increasingly mature and have entered a stage of large-scale deployment through domain-specific augmented training and knowledge-based integration. Model performance has continued to improve in scenarios such as insurance domain Q&A, multi-term dialogue, and policy interpretation. Additionally, we further refined our unified model serving architecture and multi-modal routing mechanisms, effectively enhancing system stability and integration efficiency while reducing the cost of AI application development on the business side. Our large language model platform now reliably supports key scenarios, including pre-sales consultations, post-sales service, and service quality inspection. Model usage has continued to grow steadily. Further strengthening is foundational support for our business. At the same time, we accelerated the deployment of insurance agents across scenarios such as pre-sales, customer service, and claims assistance with adoption across our business continuing to expand. These agents are now widely used in areas such as product explanations, insurance plan recommendations, customer service quality inspection, and agent assisted responses, significantly improving service efficiency and quality consistency. Our multimodal capabilities have also been applied in claims document classification and information extraction, substantially improving processing efficiency.

Furthermore, we are continuously strengthening our insurance vertical agent framework and knowledge-based capabilities, enhancing agents' ability to handle complex tasks and driving steady growth in both model usage and business penetration. 技术能力的提升,最终要落地为用户可感知的价值。在产品端,我们持续布局、覆盖和完善医疗险、重疾险、意外险等多种险种的保险产品矩阵,不断升级保障范围,以普惠的价格耗动充足的保障。 其中我们在医疗险和重极险方面推出的创新产品与深受市场的认可 精准满足不同用户群体的差异化保障需求 我们的产品战略始终聚焦于普与汇的两大维度 在普的方面 我们依托于AI技术实现精准触达 基于数千个网络模型实现产品服务的个性化推荐 以更低的成本 更高的效率 连接用户 与保障需求 显著提升保险的可及性 我们始终围绕 不同人群的保障需求 持续创新 针对女性 新市民 及带病群体 等特定群体 创新 研发新的装属产品 全力扩大保障范围 让保障覆盖到更多 尚未被有效服务的人群

technological advancements ultimately need to translate into a tangible value for our users on the product side we continue to expand and refine our insurance product matrix covering a wide range of operating including medical insurance critical illness insurance and accident insurance we also continued to upgrade the scope of our coverage leveraging affordable pricing to deliver adequate protection. Among these offerings, the innovative products we have launched in medical insurance and critical insurance have been well received by the market, effectively addressing the diverse protection needs of different user segments. Our product strategy has always focused on two key dimensions, accessibility and affordability. In terms of accessibility we leveraged AI technology to enable precise user targeting supported by a network of thousands of models we delivered personalized product and service recommendations effectively connecting user with their protection needs at lower cost and higher efficiency significantly improving the accessibility of insurance we continued to innovate to meet the protection needs of different populations developing dedicated products for specific user segments, such as women, new urban residents, and individuals with pre-existing conditions. These efforts allowed us to expand coverage and reach more users who were previously difficult for us to serve effectively.

Thank you very much.

In terms of affordability, we continue to upgrade coverage benefits, launching products such as our zero-deductible million RMB medical insurance plan to deliver a strong value proposition and enhanced claims experience. At the end of last year, following the release of the inaugural National Commercial Insurance Innovative Drug Catalog, we partnered with insurers to quickly expand the drug coverage of our super medical insurance Indian RMB medical insurance product series, responding to public demand for access to advanced treatments and high-quality medications under the new policy cycle. The combined focus on accessibility and affordability forms the core approach we follow to ensure that ordinary people obtain insurance that is both accessible and affordable, and be satisfied with insurance claims. Thank you very much. in the industry sector, we made solid progress across technological innovation and our product and service offerings. Through steady business growth, we further validate the sustainability of our business model while building a strong competitive mode through the deep application of AI technologies. As China enters its 15th five-year plan period, supportive health insurance policies continue to gain traction, while advanced technology are playing an increasingly important role in driving the continued development of inclusive insurance. Looking ahead, we will remain committed to our mission of leveraging technology to promote inclusive insurance. We will continue to delve into cutting-edge technology, cultivate new industry frontier, and further integrate large-scale AI models with insurance scenarios, enabling agents to create value across more stages of the insurance value chain. 我们相信技术的价值不仅在于提升效率 降低成本 更在于真正理解并回应每一个用户的真实保障需求与风行场景 只有让科技深度融入产业 扎根人民生活 才能创造可持续性的商业价值与深远的社会价值 We believe the true value of technology lies not only in improving efficiency and reducing costs, but also generating understanding and responding to the raw everyday protection needs and risk scenarios that users face. Only by deeply integrating technology into industry and embedding it in people's daily life can we create sustainable commercial value alongside meaningful social value. Looking ahead, we will continue to align closely with national policy priorities and strategic priorities, leveraging AI as our core engine to deepen our focus on inclusive insurance. We remain committed to leading the industry forward, contributing to the development of multi-tiered healthcare security systems, safeguarding public well-being, and supporting the advancement of the House China Initiative. Now, I'll turn the call over to our CFO, Ray Wang, to present our financial results for the fourth quarter and full year 2025. Thank you, everyone.

Thank you, everyone, for joining today. I will now provide an overview of our 2025 fourth quarter and full year financial results. Building on the past few quarters momentum, we delivered a strong financial performance in the fourth quarter, bolstered by an expanding user base, deeper AI integration, strengthened both our top and bottom lines during the quarter, and further improved at $1.18 billion, representing a robust 32.2% year-over-year increase. This growth was primarily driven by significant increases in both hours. Breaking down the revenue mix, revenues from insurance distribution services reached $4401.1 million a 35.1 percent year-over-year increase this growth was primarily fueled by a higher number of policies prepared by more precise consumer targeting and enhanced marketing system services total 774.1 million up 31.1 percent year-over-year this growth was driven by ongoing improvements to our ai integrated full consumer service cycle engine which further enhanced our marketing solutions and precise analytics reflected an extended provision of system services to both existing and newly acquired insurance, turning to our expenses year-over-year to $780.4 million, operations and supports year-over-year to $36.7 million, mainly due to our improved operating efficiency and effective cost control measures. Selling and marketing expenses rose by 47.7% year-over-year to $552.3 million as we continue to invest in our marketing capabilities to attract new consumers and retain existing ones. General administrative expenses decreased by 22.5% year-over-year to $79.6 million, primarily due to product-related bonuses accrued in the fourth quarter of 2024, with no similar accruals. R&D expenses grew by 39.1% year-over-year to $111.7 million, reflecting our intensified R&D efforts and the expansion of our R&D team aimed at reinforcing our leadership as a technology driven online insurance distributor. Our strong top line growth and improved operational leverage drove continued profitability improvement. In the fourth quarter of 2025, net income increased by 15.4% year over year to $337.4 million, with net income margin remaining healthy at 28.7%. Non-GAB adjusted net income growth by 13.2% to $354.5 million, with a non-GAB net income margin of 30.2 percent. Now I would like to briefly walk you through the highlights of our four-year results. For 2025, our total revenues increased by 33.1 percent year-over-year to 4.37 billion. Specifically, revenues from insurance distribution services reached 1.45 billion, up 33.8 percent year-over-year, while revenues from system services totaled 2.92 billion, growing by 33.2%. Moving to expenses, total operating costs and expenses increased by 25.2% year-over-year to $3.04 billion. Breaking this down, operations and support expenses remain largely stable at $167.5 million. Selling and marketing expenses rose by 23.9% year-over-year to $2.22 billion. G&A expenses increased by 20.2% year-over-year to $286.8 million. R&D expenses increased by 58% year-over-year to $365.1 million. In terms of profitability, net income increased by 51% year-over-year to $1.31 billion with a net income margin of 29.9%. Non-GAAP adjusted net income rose by 48.6% to $1.3 billion with a non-GAAP net income margin of 31.6%. Cash position remained solid, reaching $4.04 billion at the end of the year, up 72.9% year-over-year, and 7.7% from the end of the third quarter. Operating cash flow inflow was $290.7 million for the fourth quarter and $1.5 billion in 2025. Our results for the fourth quarter of the full year of 2025 underscore the resilience over and scalability of our business model. As we move forward, we will continue to focus on scaling operations, driving high-quality growth, enhancing operational efficiency, and maintaining a strong liquidity position. These priorities will empower us to invest with confidence to sustain our momentum in building long-term value for our shareholders. Thank you, and I would all like to...

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English.

We will now take our first question from the line of Amy Chen from Citi. please ask your question Amy your line is now open hi this is Amy Chen from city and thank you for the opportunity to ask a question and congrats to the management on a robust set of for your results my question is firstly on the top line and bottom line growth guidance for the year of 2026 and we also noted that your selling and marketing efficiency actually improved quite a lot in the year of 2025 and we're wondering about the sustainability of such improvement going on in to 2026 and onwards. I will simply translate into the Chinese. I would like to ask you how to increase the growth of the revenue growth in the future.

We didn't give specific earnings guidance on 2026, but we expect to maintain our revenue revenue and net profit growth momentum in 2026. Despite intensifying industry competition, we have sustained both revenue growth and margins past 14 quarters, demonstrating ongoing improvement to our tech-driven operational efficiency. This has created a self-reinforcing flywheel effect, wheel scale expansion and cost optimization fuel each other, moving us beyond reliance on market talent.

We will now take our next question from the line of Yue Xu from China Securities. Please ask your question, Yue, your line is now open.

So regarding the different plans, do we have a specific plan or timeline for this? Thank you for the question.

Thank you for the change. we continue to evaluate the best strategies to maximize shareholder returns through various operational initiatives and capital markets opportunities including potential dividend policies shareholder returns form a core pillar of our long-term strategy and we are steadily advancing this process to support long-term sustainable development and we didn't give a specific timeline on the dividend payout plan.

We will now take our next question from Thomas Wang of Skirmansaks. Please go ahead, Thomas. Your line is now open.

My question is really on 2015, so I'll look on sales and also on marketing call.

We expect consumer demand to remain healthy as we continue to innovate and iterate insurance products, significantly enhancing user value and experience. This should help improve user retention and support stronger industry fundamentals. Looking ahead up to 2026, as we balance growth and profitability, we aim to maintain sales and marketing expenses as a percentage of revenue broadly stable, with only a modest potential risk increase.

Thank you. We will now take our next question from Sintou Chen of CICC. Please go ahead. Sintou, your line is now open.

So my question is, in the fourth and four-year 2025 growth, what's the contribution breakdown between new users and existing users? What's the company's current customer policy renewal rate? How do you plan to improve customer retention in the future? 第二 用户教育 通过内容营销转变消费者的观念 引导他们从将保险视为成本转向去视为保障 由于短险通常属于及时消费 那这与社交媒体及公寓流量平台的气固度非常高 这为我们带来了天然的转化效率优势 第三就是行业趋势 从长期趋势来看 随着产品价值提升 赔付率自然会呈现上升的一个趋势

We did not provide a detailed breakdown of user composition in our quarterly report. However, given our continued significant investment in customer acquisition and the fact that inclusive of health insurance remains an emerging and policy-supported growth market. The majority of our current users are still new users. Year to date, our customer renewal rates have not changed significantly compared with the prior fiscal year. Our retention strategy focused on three key areas. First, product innovation. We continue to drive product innovation to improve payout ratios and user value perception, Ultimately, helping consumers better recognize the value of commercial insurance. Second, user education. Through content-driven marketing, we aim to shift the consumer mindset from viewing insurance as just a cost to recognizing it as essential protection. As short-term insurance products resemble instant consumption purchases, they align perfectly with social media and public traffic platforms, which gives us a natural edge in conversion efficiency. Third, industry trends. Looking at the long-term trend as product value improves, client ratios will naturally trend upward. While this might lead to some commission pressure, it will be offset by higher retention rates. As a result, we expect user lifetime value to remain stable or potentially rise meaningfully.

Thank you. We will now take our next question from Xiaoyue Ding of Cetic Securities. Please go ahead. Xiaoyue, your line is now open.

My question is, the two sessions highlighted the importance of speeding up the development of commercial health insurance and implementing a long-term care insurance system. So, from a policy perspective, what drivers can we expect in the future? Thanks.

Thank you very much. 啊 前来疗法 优质药品的 特中也提到鼓励普惠保险体系建设 支持针对啊 试能试智者等困难群体的关爱帮扶 那我们原保做到了始终围绕不同人群的保障需求 持续创新针对啊 女性新市民疾怠病人群等特定群体创新开发专属的产品 全力扩大保障范围 让保障覆盖到更多尚未被有效服务的人群 这些都是强有力的推化题 那将推动我们通过线上渠道扩大商业保险的覆盖范围 并通过产品创新持续提升消费者的价值 我们的AI能力使我们能够将不断变化的复杂政策导向 转化为精准的保险主动触达用户这样的一个商业逻辑 这使我们具备充分优势 能够将这些政策红利转化为切实的长期的业务增长 This policy serves as a direct and significant catalog for us, as Mr. Fang also mentioned it earlier.

First, the report highlights key initiatives such as launching the commercial insurance innovation drug catalog, accelerating the development of commercial health insurance, and encouraging the development of an inclusive insurance system. These priorities reaffirm the role of commercial insurance as a core component of China's diversified medical payment system and emphasize the importance of inclusive development. At the end of last year, following the release of the inaugural National Commercial Insurance Innovative Drug Catalog, we partnered with insurers to rapidly expand the drug coverage of our super medical insurance, meaning R&B medical insurance product series, responding to public demand for access to advanced treatments and high-quality medications under the new policy cycle. The policy also encourages the development of an inclusive insurance system and highlights support for vulnerable groups, such as individuals with disabilities or cognitive impairments. We consistently innovate to meet the protection needs of different populations, developing dedicated products for specific user segments, such as women, new urban residents, and individuals with pre-existing conditions. This effort allowed us to expand coverage and reach more users who were previously underserved. This policy direction served as strong catalysts for expanding the reach of commercial insurance through online channels, while continued product innovations enhance the value delivered to consumers. Our AI capabilities allows us to translate complex and involving policy shifts into the precise insurance fines is customer commercial logic. We are well positioned to convert this policy tailwind into a tangible long-term business growth.

Thank you. We will now take our next question from Yingying Xu from Zhexang Securities. Please go ahead, Yingying. Your line is now open.

Thank you for the opportunity to give me the opportunity to ask the company to test the AI agent's impact on the company's business model. Do you foresee any potential threat to the company's competitive mode?

Thank you. 場景下的轉化邏輯及效率人需要一個慎重的思考和驗證 那核心我們覺得問題在於用戶在日常生活中投入大量的時間 在哪些內容平台是會消失還是會將這些用戶的時間轉化為智人體的交付

那從我們目前可能看到的話就在SEO和GU的環境中 或者是SEO轉化到GU的環境中消費者是主動搜索 AI agents are definitely a promising direction, but the key questions lies in the specific usage scenarios. Most insurance sales today happen in instant consumption content, moments when users are engaged with leisure content. In contrast, on knowledge or Q&A platforms where AI agents typically operate, users are in an active problem-solving mindset rather than a consumption mindset and differs from content platforms where information is pushed to consumers. The core question is whether the content platforms where users currently spend a significant amount of their daily time will disappear or evolve into places where users spend time interacting with intelligent agents. We see a clear distinction between search-driven environments, such as SEO or GEO, where consumers are actively looking for answers, and discovery-based environments, where consumers' engagement tends to be more passive.

Thank you. We will now take our next question from G.T. Sun from Shenwan Hongyun Securities.

Please go ahead, G.T., your line is now open. 感谢各位领导管晚上好,我是来自申望红源证券的孙蒂奇,感谢给我这次提问机会,再次恭喜公司2025年取得了非常强劲的业绩表现。 我还想追问一下关于AI方面的问题,想请教管理层如何理解AI应用的持续迭代大潮对于公司业务的影响。 Thank you for taking my question. This is Jackie Sun from申望红源 Securities. Congratulations on the result of fiscal year 2025. I have one question for the management team. How do you perceive the impact of the ongoing wave of AI application iterations on the company's business?

In our first place, we have a better understanding of the security and architecture system. To ensure we can understand the security and the use of the security and security. The second is the data collection. After all of the data collection, we have to encourage the security system. The third is our knowledge of the security system. We are in a more than-to-reporting system. We are in a more than-to-reporting system and the security system. and to develop AI, which is a big-scale AI, deeply entered from the marketing and information to the customer. This includes technology, insurance, and the software, and the software. In the future, we think that insurance will be from the software to the software, the software, and the software. The future is to build the insurance platform of the insurance platform to make the insurance platform to become a connected user.

Broadly speaking, AI in insurance is rapidly moving from the exploration phase to large-scale implementation in terms of large language models, with different types of institutions focusing on different areas. Yuanbao's core competitive edge in AI has been anchored by three key areas from day one. First is our deep vertical expertise. We have built a comprehensive insurance knowledge system and structured product capabilities which enable our AI to better understand both insurance products and user needs. Second is our data capabilities. We leverage massive amounts of business data and continuously iterate and optimize our user understanding and recommendation and service engine. Third is our agentic capabilities. We are actively deploying an agentic approach to embed both discriminative AI and generative AI across the entire life cycle, from sales consulting to customer service. This includes applications such as intelligent insurance planning and AI-powered supportive tools for our customer service team. Looking ahead, we believe insurance AI will involve from tool-based applications into a full-cycle intelligent service ecosystem, taking on roles like AI insurance advisors and long-term customer risk management assistance. Yuanbao's strategic direction is to build an AI-driven insurance service platform, positioning AI as the primary gateway connecting users with insurance products.

Thank you. And that concludes the question and answer session. I'd like to turn the conference back to the management for any additional or closing commands.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. or present a financial communication our contact information for IR in both China and the US can be found in today's press release have a great day thank you for your participation in today's conference this does conclude the program you may now disconnect your lines