Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.'s Second 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..

Thank you, operator. Hello, everyone. Thank you for joining Waterdrop second 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 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 relation between non-GAAP and GAAP. With us today on the call are Mr.

Shen Peng, our Founder, Chairman and CEO; Mr. Yang Guang, Co-Founder, Director and VP; Mr. Hu Yao, Co-Founder, Director and VP; Mr. Ran Wei, our Partner; Mr. Zhu Zetao,, Partner and General Manager of Medical Crowdfunding and Patient Services. 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..

management, efficiency, service quality and reputation, so as to help in refinement and implementation of our strategy. Looking to the second half of the year and beyond, we will strive to implement our development strategy, strengthen our capabilities and cope with market changes in a proactive, flexible and agile way.

We will identify and seize new business opportunities and spare no effort to explore healthier growth model. Overall, the implementation of our strategy will build on the solid frameworks formed by our product innovation capability, technological innovation and the synergies created among various unique business segments.

Particularly in the near future, with China's population aging more rapidly, the upcoming demand for insurance coverage will continue to increase and evolve. We will persist in working hard and keeping a low profile.

We also strive to leverage our solid fundamentals and high technological capabilities to efficiently and accurately explore new opportunities that emerge at any time. And do our best to reap additional returns from the new model.

And so technology platform for insurance and health care services since our inception in 2016, we have persistently adhered to our mission of leveraging Internet technologies to make insurance protection more inclusive and accessible to the public and bring insurance and health care services to billions.

In July, we released our 2020 to '21 ESG report, which was the first ESG report published since our IPO. The report details our responsibility, technology, and products, industry value chain, workplace development, green development, and other relevant topics.

It also illustrates how we leverage our innovative business model and the technological innovation to achieve effective business performance and sustainable prospects.

We attach great importance to our great ESG efforts, along with our strict compliance with relevant laws and regulations, we have developed rigorous management systems in corporate governance, compliance operations, supplier management, employee management and a low-carbon green development.

At the same time, we also leverage our business strength and the technological innovation to integrate resources from various partners, thereby promoting sustainable creation of social value.

In addition, we are actively engaged in establishing a multilayer medical protection system that serves as a supplementary layer through our Waterdrop Medical Crowdfunding, Waterdrop Insurance Marketplace, Waterdrop Charity, and other businesses, so as to prevent critically ill patients from becoming impoverished.

As of the end of Q2, a total of 412 million donors provided nearly RMB53.3 billion to millions of patients with critical illnesses through our Waterdrop Medical Crowdfunding platform.

Leveraging our sophisticated technology, the Waterdrop Charity platform has helped improve the efficiency of fundraising and fund utilization by providing charity organizations with all-around support. Our other campaigns cover a wide range of areas including anti-pandemic actions, disaster relief, poverty alleviation, and rural revitalization.

These initiatives prove that we will adhere to being a responsible company with social responsibility and doing business for good as we pursue business growth. As a leader in our industry, we are committed to driving the healthy development of the ecosystem.

In response to the unauthorized fundraising activities in the Medical Crowdfunding industry, we collaborated with other major Medical Crowdfunding platforms to crackdown on such activities in June.

Some intermediaries have acted in the name of helping patients with critical illnesses raise funds on medical crowdfunding platform and charge them on unauthorized referrals for high commissions. This malicious activity not only damages the healthy ecosystem of the industry, but also harms the interest of donors and fund raisers.

Our Waterdrop Medical Crowdfunding platform has taken preemptive steps to identify such unauthorized fundraising activities with high accuracy through a stringent review process and risk control system.

On the one hand, our risk management team contacts the fund raiser to verify their crowdfunding claims based on reports and complaints we receive from users.

On the other hand, we have developed a model powered by algorithm and AI technology to analyze fundraising activities based on information and cases referral chain of fund raisers and donors, and proactively screen and identify suspicious unauthorized cases.

Our crowdfunding consultants further verified cases by conducting on-site visits and interviews, once confirmed, we blacklist the fund raisers who have involved in the identified cases so that they will no longer be able to initiate another campaign.

At the same time, those malicious intermediaries are restricted from any access forwarding or commission on the platform. Thanks to the relentless efforts, the number of unauthorized fund raising activities on our platform has been significantly reduced.

However, recently, we have seen some reports posted in the media, which have not clearly distinguished between our crowdfunding platform and those malicious intermediaries, stating that, Waterdrop has charged high service fees for this Medical Crowdfunding business, leading some users and the public to misunderstand that Waterdrop takes a large percentage of the fundraising amount.

This has also led to some misunderstandings about Waterdrop actions in cracking down on the unauthorized referrals. We would like to clarify that we have always taken a responsible approach toward cracking down on misconduct, safeguarding users right and promoting the industry healthy development.

Even though this is not an easy task, we remain committed to doing the right things despite the tough challenges. We have subsidized the operating cost of our Medical Crowdfunding platform since its establishment for five years.

Starting from this April, we began to charge a service fee of 3% of the fund raisers amount to support our platform operations and risk controls. We have never charged high service fees and have pledged to restrain unauthorized activities.

We have disclosed all of our fundraising campaigns and detailed fund flows to the public, and welcome supervision from our users and the public and will take legal measures to bring illegal intermediaries to justice.

As of today, our Waterdrop Medical Crowdfunding platform has identified and taken legal actions in over 800 unauthorized profiting making referral cases, targeting more than 600 intermediaries engaged in malicious unauthorized activities.

We will make every effort to provide the best services for patients with critical illnesses, cater to patients urgent medical needs, and develop the most reliable Medical Crowdfunding passion for all users, thereby earning and keeping the trust of each of our customers. Regarding share buyback, we continue to implement our repurchase program.

In the second quarter, we repurchased approximately 1.61 million ADS, and we are continuing to execute the program prudently. At the end of June 2022, the Company held cash and cash equivalents and short-term investments totaling RMB3,288 million.

After offsetting the cash outflow for share repurchase, we still achieved a positive cash inflow of over RMB360 million for the single quarter.

At this earnings release, we are announcing that we launched a new share repurchase program so as to continue to buy back shares for another 12 months, in which we upsized the upper limit and may repurchase up to U.S.$80 million worth of our ADS.

This is a decision that was made based on the judgment of the Company's current value and our confidence in our long-term sustainable development. Meanwhile, we plan to reserve repurchase shares for shares incentive plans, which will align the interest of our employees with the growth of the Company.

To conclude, with people's growing demand for health care in China, and as we continue to strengthen our competitive advantages in product, innovation and business sector synergies, we still believe that the online insurance and health care sectors offer us a tremendous and untapped opportunities.

In this changing environment, we will remain committed to our mission, keeping the focus on user value, solidifying business fundamentals, and pursuing continuous improvement.

At the same time, we will also adhere to strict budgeting and objective management that continue to optimize the structure and the quality of our business growth, thereby achieving healthy and sustainable profitability of our established business for the full year.

I will pass to Ran Wei to discuss the development of the Waterdrop Insurance business for Q2..

We have continuously enriched and polished our content matrix of our WeChat video account, tapping into a fast-growing source of the WeChat users. Thanks to our deep understanding of the communication patterns and user needs of this new marketing platform.

The number of users following our video accounts increased by 44% quarter-over-quarter, and the total insurance premiums originated from this account increased by 133% sequentially. Online brokerage, we have set up and dedicated units in our insurance department to promote the online brokerage business with insurance planners included.

Leveraging our multichannel exploration in Q1, the insurance planner model has a clear operating mode of customer attraction through live streaming and insurance content, with the insurance planners responsible for promoting sales conversion.

With establishment of our live streaming team and our insurance planner team, the number of live streaming events increased and the number of live stream viewers grew by 140% quarter-on-quarter. With strict cost control in place, we have achieved an initial validation, scaling up these operations. Second, product innovation.

In Q2, we have continued to launch more high-quality insurance products. The total number of product offering has increased by 44% this quarter. In terms of short-term insurance product offerings, we now have 11 different cost effective versions of million RMB coverage medical insurance products.

We also improved our critical illness products by offering more flexible options for health declarations and premium payments. Thanks to our ability to accurately match user needs, the policy renewal rate remains at a high level of 90%.

In addition, the continued enrichment of our product offering has significantly improved our ability to reactivate dormant users. For example, to meet the needs of customers with preexisting illness conditions, we launched a Waterdrop Blue Ocean a series of customized and cost-effective critical illness products.

The product has simplified the policy enrollment and claim settlement process, and waives the health declaration requirements while keeping underwriting risk of control. This will, to some extent, ease the concerns of senior citizens and patients with chronic diseases who are seeking to purchase IC insurance.

In addition, we have launched Waterdrop Cruiser, a new accident insurance product, which waives the health declaration requirements and relaxes the age limit for insurance applicants to 80 years old.

As returns from investment products offered by banks have been trending downward, there is increasing customer demand for investment products that offer stable returns. In response to this demand, we added incremental life insurance policies to our long-term insurance product offerings in Q2.

We also provided our sales steam with special training of distribution of these new products, especially to high net worth individuals. The insurance premium for incremental life industry products total more than RMB20 million in second quarter.

Meanwhile, empowered by annuity products launched in Q1, and the private domain operating capability of traffic coming from our enterprise WeChat account, our long-term insurance team has achieved a quarter-over-quarter increase in annuity insurance premiums of 324% in Q2. Third, upgrades, updates on the O2O brokerage business.

We continue to explore different brokerage service model in different regions and cities. At the end of Q2, we had 11 regional brokerage licenses. During the quarter we set up a branch in Shaanxi and added two new outlets in Hubei province.

The brokerage team expanded to nearly 600 staff, generating the total premium income of about RMB8 million in quarter two. Four, actively empower industry with technology. In terms of technology export, we launched our project for Huanong Property Issuance in Q2.

This is the first time that we have exported our CRM system and deployed with AI outbound capability to a third-party. We currently have the ability to provide full-chain marketing solutions for the insurance industry. This includes user acquisitions, private domain management and empowering offline agents with sales conversion capability.

Through these solutions, we can help insurance companies and insurance intermediaries digitalize their marketing process, thereby driving user base expansion and the premium growth. In the second half of this year, we will continue to work with more partners on different tech projects.

Above is a brief on the insurance business and let me hand over to Zhu Zetao for update of our medical crowdfunding and patient recruitment business..

Thanks, Ran Wei. I would like to share some updates on our Medical Crowdfunding business. As of the end Q2, the cumulative number of donors, reached 412 million helping 2.58 million patients raise approximately RMB53.3 billion cumulatively.

Since April of this year, our platform has ceased to fully subsidize service fee and started to charge a service fee of 3% up to a maximum amount of RMB5,000 for a single campaign. This is to cover part of the operational cost and help more patients with critical illnesses raise fund.

The user number and fundraising amount on our platform has remained stable even after the charge of the service fee.

As part of our commitment to promote best practices and orderly development of the industry, we have recently established an Operational Transparency Committee to continuously promote the authenticity of the campaigns initiated at our medical fund raising platform.

The fund flow transparency as well as the rationality and transparency of the platform rules. The committee consists of Waterdrop's core management team experts in the field of law charity and public media with our CEO Mr. Shen Peng, as Head of the committee.

To better safeguard rights and interest of both the fund raisers and donors, the committee will collaborate with public security authorities, hospitals and other industry partners to crackdown on fundraising fraud while actively seeking advice from the public to ensure that each donation is open, transparent and traceable.

Meanwhile, the committee will constantly interact with the experts and optimize the rules of the platform. In the future, Waterdrop will make the effort to avoid fraudulent fundraising and misappropriation of funds, ensuring the overall security of fund raised from our platform. Next, let me talk about the progress of our patient recruitment business.

In Q2, the COVID outbreaks in various cities of China, has adversely affected the launch of new clinical trials. Nonetheless, our E-find patient platform sustains overall high growth momentum and successfully enrolled approximately 700 patients for clinical trials.

The E-find patient platform also participated in over 60 new clinical trial programs by partnering with innovative pharmaceutical manufacturers, including leading multinational enterprise in the industry, bringing the total number of clinical trial programs for new drug registration to more than 300.

The E-find patient platform has now collaborated with more than 100 innovative pharmaceutical manufacturers and CROs in China and worldwide, helping us win the wide recognition of our partners and establish a good reputation across the industry.

In the past few quarters, the platform has grown to become a leading patient recruitment platform in China, in particular for oncology related clinical trials. Our deliberate efforts, capabilities in quickly accurately recruiting patients suitable for the trial projects and high operational efficiency all drove this accomplishment.

We further expanded the scope of our clinical trials service in the second quarter. Apart from continuing to achieve rapid progress in the oncology and chronic disease clinical trials, we also made new breakthroughs in the rare disease segment.

For years, we have seen patients with rare disease struggling to find the right medication, but dilemma has started to reverse as patients have gained more public attention recently. This has led to a significant increase in the number of clinical trials for rare disease.

However, as patients with rare diseases are widely dispersed across the country, it is challenging to enroll the appropriate patients to participate in trials of a new specific drug. This has slowed down the progress of pharmaceutical companies in bringing new drugs to the market.

Nevertheless, we found many of these patients are also registered user of our Waterdrop Medical Crowdfunding platform, who are seeking financial aid after being plagued by the disease for years. In Q2, we worked with the several partners on clinical trials for rare disease treatment.

Using our structured data processing technologies we are capable of matching patients with the most appropriate clinical trial, thereby accelerating the R&D and go-to- market progress of our partners. This concludes my part and let me turn over the call to Hu Yao to discuss our technology innovation topics..

Thank you, Zetao. I'm going to talk about our second quarter technology innovation update from three aspects. First, let’s start from the intelligent risk control for medical crowdfunding business.

In response to malicious intermediaries who refer the needy to our Medical Crowdfunding services just to collect commission, our AI team has applied knowledge mapping technology to analyze the statistical characteristics of sample cases and developed two models to identify the high-risk unauthorized fundraising activities and the malicious intermediaries engaged in such activities respectively.

To date, the models have realized an accuracy rate of over 90%. This has effectively reduced the number of malicious and unauthorized fundraising activities and enhanced our risk control capabilities for our medical crowdfunding business. The second one is intelligent dialogue platform. In Q2, we completed a major upgrade of our chatbot platform.

We have upgraded it into an intelligent dialogue platform by integrating various functions such as outbound chatbots, customer service chatbot, virtual employees and technology export projects. For instance, we added the chat status features in our outbound chatbots.

By including eight types of chat status features and several modes, the chatbot is capable of engaging in more human-like dialogues with users, further improving its intention recognition accuracy rates by 15%.

In addition, our customer service chatbot can solve more than 80% of inquiries raised by users and the intention recognition technology achieved an accuracy rate of over 95% for the overall intelligent dialogue platform.

For transferring customers requested from chatbot mode to manual mode on a real-time basis, we have upgraded our loss control model for phone calls to an intelligent dispatching algorithm, which enables us to further improve sales force productivity.

According to users' needs and choice, we have also integrated this algorithm with our recommendations algorithm to offer a better user experience during the conversation. Our AI-powered content production platform provides a lineup of useful tools for content creators.

Powered by AI capabilities, the platform will generate corresponding marketing content following the content material submitted by the original creator. While enriching our marketing content, the platform also helps improve efficiency and lower the cost of content production.

Currently, we have developed three function modules for our platform, namely test generation, speech synthesis and video synthesis.

To be more specific, first, as for the speed synthesis, our platform can simulate human-like speeches with flexible configurations, various types of reverberations and voice properties such as speed and volume are available in this speech synthesis. Currently, the module supports six sound control functions.

Our team is also exploring the underlying intelligence speech technology of voice cloning, which we expect to integrate into our speech synthesis module in the future.

And second, in respect of video synthesis, the module has incorporated technologies related to lip syncs, AI-powered face swap, animation style transfer, motion transfer and virtual human live broadcast.

The lip sync technology has been successfully applied in multiple business scenarios including Waterdrop WeChat video accounts, the WeChat video accounts of our brokers as well as the video advertising promotions at Douyin. I will now hand over to Guang Yang to discuss our second quarter financial performance..

Thank you, Yao. Hello, everyone. I will now walk you through our financial highlights for the second quarter.

Before I go into details on this financial performance, please be reminded that all numbers quoted here will be in RMB and please refer to our earnings release for the detailed information on our comparative financial performance both the year-over-year and quarter-over-quarter basis, respectively.

Despite the challenging external environment, we have entered a relatively stable profit making stage after we turned profitable for three consecutive quarters. Our net operating revenue firmed up and our net profit almost doubled on a quarter-over-quarter basis.

Our net operating revenue decreased by 25.3% year-over-year to RMB701 million from RMB939 million mainly due to the decrease in insurance-related income by RMB273 million, but partially offset by the increase in the crowdfunding service fee of RMB56 million.

The decrease of interest-related income was mainly due to the decrease in the first year premium, but offset by the improvement of our take rate. Our operating revenue growth sustained with a quarter-over-quarter increase of 8.1% in Q2, which demonstrated a more healthy and a solid growth trend.

The take rate further increased from 34% in Q1 to 38% in Q2, primarily driven by the consistent quality enhancement in our insurance business. Operating costs and expenses for Q2 decreased by 68.9% year-over-year to RMB546 million. On a quarter-over-quarter basis, operating costs and expenses increased marginally by 2.5%.

To break it down, operating costs were RMB245 million down by 6.1% year-over-year, mainly due to the decrease in professional and outsourced customer service fee of RMB36 million and a decrease in personnel costs of RMB58 million.

On quarter-over-quarter basis, operating costs increased by 57.9%, mainly due to the accounting reclassification of certain crowdfunding related service fees from sales and marketing expenses to operating costs, as we started to charge crowdfunding service fees since April 2022.

Sales and marketing expenses decreased by 88.4% year-over-year to RMB144 million for the second quarter of 2022. The decrease was primarily due to RMB956 million decrease in marketing expenses to third-party traffic channels and RMB136 million decrease in outsourced sales and marketing service fees to third parties.

So on a quarter-over-quarter basis, sales and marketing expenses also decreased by 29.3%. G&A expenses decreased by 42.3% in Q2 to RMB86 million year-over-year due to the combined impact of a decrease of RMB54 million in share-based compensation expenses and a decrease of RMB6.7 million in personnel costs.

On a quarterly basis, the G&A expenses decreased by 15.6%. R&D expenses decreased by 29.8% to RMB70 million year-over-year and remains stable quarter-by-quarter, reflecting the optimization of our organizational structure during last year. In this quarter, we continue to report a non-GAAP profit of RMB233 million and a U.S.

GAAP net profit of RMB207 million, compared with a net loss in the same quarter of last year. This once again proved the effectiveness of our business strategy to enhance the overall revenue quality.

As of June 30, 2022, our cash and cash equivalents and short-term investment balance increased to RMB3,288 million, an increase of RMB364 million or 12.4% from the end of the last quarter despite actively implementing a share repurchase program under the compliance framework.

So during the past few quarters, we have provided the following financial guidance, enhancing revenue quality and profitability and achieving profit for full year of 2022. In Q2, we have made good progress in delivering this guidance and encouraging results.

So going forward, we will strive to deliver high-quality growth and enhance our long-term competitive strength. Thank you. That's all for my part. Now let's turn to Q&A..

[Operator Instructions] And today's first question comes from Michael Li at Bank of America. Please go ahead..

Congratulations management on the performance in second quarter. And I saw the improvement of your insurance business in terms of like take rate and also product mix.

So my question is that what is your growth strategy for insurance business? And any plans to upgrade your product mix and channels?.

Okay. Thank you, Michael. That's a very good question. From a user growth perspective, there were three business models for growth directly to C, 2A2C and 2B2B. Our core growth driver is Directly 2C in the past. We also have built up our capability in 2A2C and 2B2C for a while. Going forward, there are opportunities in all of the three business models.

So on the Directly 2C front, we need to explore the opportunities in traffic ecosystems and deploy our results accordingly. First, let's look at the WeChat ecosystem. I will talk about four growth opportunities of WeChat ecosystem. First of all, is the growth opportunity from Waterdrop Medical Crowdfunding.

Waterdrop Medical Crowdfunding operates a 10 million level DAU platform, where we effectively educate users about insurance protection and insurance awareness. And it can help us convert users into millions of new short-term insurance customers and new gift insurance policyholder each year.

The conversion efficiency in our crowdfunding channel increased by more than 30% from the first half of 2022. The second is growth opportunity from the rise of WeChat video accounts. WeChat had shifted its focus and traffic to WeChat video accounts, which already have 450 million DAU so far.

So users have seen better connection between their WeChat video accounts and WeChat official accounts and mini-programs, making it a very new growth venue for customer education and conversion.

So our WeChat video account has now surpassed their 100 million in monthly video viewership, directed a monthly flux of a few hundred thousand new followers to our WeChat official account and posted twofold growth in monthly premiums for the past few months in a row.

The third one is growth opportunity from private domain operations of our enterprise WeChat account. The private domain operations of enterprise WeChat is another focus on WeChat. This platform offers strong user management function and infrastructure support and provides a better means for WeChat users and user operations.

Our enterprise WeChat account has reached millions of users, and continue to attract hundreds of thousand new users each month contributing of RMB 10 million premiums each month. The fourth one is the opportunity in refining our existing user management.

We consistently strengthen our user lifetime management by utilizing different scenarios of many marketing platforms, match suitable insurance products and services for our users in different scenarios and further apply our AI capabilities to bolster online sales conversion.

So we have effectively improved our short-term insurance conversion, repeat purchase and policy renewal.

In addition, online user operations can also continuously deepen our understanding of user group profiles and improved our sales conversion capability, which allows us to match our users, insurance products and sales staff more precisely, and thereby facilitating the conversion from a gift insurance or a short-term insurance policyholder to a long-term insurance customer.

In addition to WeChat ecosystem, we have also explored the growth opportunity in short video or content platform such as Douyin, Kuaishou and Xiaohongshu. China’s netizens spend more than half of their consumption time on short video or content platforms.

Leveraging various market tools, including graphic ads, videos and live streaming, it's easier to acquire high-quality new insurance customers of a better insurance awareness, education background and high income level from social media platforms.

So we engage these users and acquire those leads on the platform by our insurance planners who are more user-need oriented. We will promote our insurance product to the users online or through telemarketing, thereby generating more incremental insurance premium. Our sales productivity is very high at around RMB 100,000 per capita.

This presents an efficient long-term insurance conversion model for the next generation insurance consumers and also a very important direction for our future investments and capability building. In terms of 2A2C, we are confident about offline brokerage model in the long run.

We think the offline brokers serve as a very important complement to our customer acquisition capability. In particular, they can help us acquire more middle class and affluent customers.

So we hope to build up a professional, productive and high-quality offline broker team dedicated to serving the Chinese new middle class and affluent urban residents.

Our short-term to medium term goal is to build the fundamental team and the management systems and empowerment platform within the next one to three years, while achieving growth at scale. We believe that it will become a powerful growth driver in the medium to long run.

Then on the 2B2C front, we hope to achieve win-win cooperation with partners who are rich in user resource by leveraging our strength in system building, insurance product offerings and customer conversion.

On one hand, we have established an insurance product distribution platform to connect insurance companies, agencies and individual brokers, so as to improve the efficiency of insurance distribution and then deliver mutual benefit for partners as well as consumers.

On second hand, we have been leveraging our strong capability in user operations and conversion to launch sales leads collaboration with third-party partners and help them monetize their user base. So this 2B2C model has brought in more than RMB10 million monthly premiums and maintain a fast growth trend.

In addition to the three growth models that I have mentioned, we believe insurance services for people with preexisting medical conditions in hospital and pharmacy scenarios also have promising growth potential.

In China, there are more than 300 million people with preexisting conditions and their needs are almost underserved in the traditional insurance models. So we're able to accurately reach them. And we have customized various products to reach the needs of these people through product innovation.

At present, we can reach tens of thousands of people with preexisting conditions each month that have potential to convert to insurance consumers, which may bring incremental premiums at millions of RMB level.

So in a sum, our core growth drivers in the near-term are the incremental user growth in WeChat ecosystem and the existing user operation in the midterm say in one or three years in relation to the growth from the WeChat ecosystem. We are also positive about the growth from social media platforms ] like Douyin, as well as the 2B distribution model.

For long term, we believe our off-line brokerage business and insurance services for people with preexisting conditions both are powerful growth drivers..

Thank you. And our next question comes from Qingqing Mao with CICC. Please go ahead..

Management this is is Qingqing from CICC. We have seen some reports posted in media regarding the unauthorized fundraising activities and malicious intermediaries in the medical crowdfunding industry. You also mentioned about it in the previous presentation. My question is.

Could you further explain the service and the revenue model of your crowdfunding platform? And with the current revenue contribution in Q2, can you please tell us more about the details? That's all for me. By the way, I wish you a happy Mid-Autumn Festival..

Thank you for your question. And let me translate for Zetao. As the leading online platform for patients with critical illness to seek financial help in China.

For Waterdrop Medical Crowdfunding provide users with comprehensive detailed fund raisers services, including detailed dedicated customer services, instant withdrawal of the funds, fundraising acceleration and more.

In order to maintain high-quality services to our users, we ceased to fully subsidize the service fees and started to charge the service fees from April 7 this year. The decision was made after taking into account the industry research expert advice and platform's operational needs.

The service fee was equal to 3% of the withdrawal amount for a single campaign up to a maximum of amount RMB5,000. This is in addition to the 0.6% payment channel charged by the third party.

It should be clearly noted that the purpose of charging the service fee is to support the operational maintenance cost and expenses of the platform in order to realize the sustainable and healthy operations of the platform.

As mentioned just now, we are committed to -- as reported just now, the platform has facilitated fundraising of RMB2.3 billion this quarter, and we generated service fee income of RMB56 million for the funds raised, meaning that the overall take rate is still lower than 3% because we still subsidize certain special cases where the patients are in critically serious situation.

We haven't covered all the costs for fundraising business yet. All of our profit of the Waterdrop Group still came from the insurance-related business only. As mentioned just now by Shen Peng, we are committed to driving the healthy development of the whole industry.

In response to the unauthorized fund raising activities and the malicious intermediaries in the medical crowdfunding industry, we will continue to crackdown on such activities.

The issue of unauthorized fund raising activity is not only the phenomenon in the field of medical crowdfunding industry, but also an issue relating to the Internet governance. In the future, we will continue to improve the quality of our services and provide users with more professional, detailed and sustainable services.

We will always actively take social responsibility and work hand in hand with the National Healthcare Security Administration and the regulatory authorities as well as other relevant social organizations to make joint efforts to maintain the healthy ecosystem of the whole industry. Thank you..

Thank you. And ladies and gentlemen, we are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect, and have a nice day..