**: China Insurer Magazine under Manager Media Text: He Wenwen.
In June this year, the water drop company acquired Deep Blue Insurance, and in the third quarter of this year, the financial statements of Deep Blue Insurance were consolidated into the company's financial report. What changes has the merger of Deep Blue Bao brought to the company's performance?
Recently, Water Drop Corporation (WDH) announced its unaudited results for the third quarter of 2023 ended September 30, 2023. In the first three quarters of this year, the operating income and net profit attributable to the parent company of Shuidi Company declined. Among them, in the third quarter, the company's core business insurance business revenue was 61.9 billion yuan, down 107%；Shuidi Funding's crowdfunding service fee income was 36 million yuan, a year-on-year decrease of 390%；The new business Yifan Pharmaceutical achieved revenue of 27.6 million yuan, a year-on-year increase of 607%。
From the perspective of the three major businesses, insurance is the company's main business, and from 2022, the insurance business will begin to decline. In the face of weak growth in the core business, the company began to expand through mergers and acquisitions, in June this year, the company acquired Deep Blue Insurance, and in the third quarter of this year, the financial statements of Deep Blue Insurance were consolidated into the company's financial report. What changes has the merger of Deep Blue Bao brought to the company's performance?
Both revenue and net profit declined
In 2022, Shuidi Company, the parent company of Shuidi Chip, which has just achieved profitability, will not have a satisfactory operating performance this year. In the first three quarters of this year, the company achieved operating income of 197.1 billion yuan, compared with 21.1 billion yuan in the same period last year2.2 billion yuan, a year-on-year decrease of 711%；Net profit attributable to the parent company was 10.8 billion yuan, compared with 48.2 billion yuan, a year-on-year decrease of 7762%。
In terms of quarters, the operating income of the water drop company in the third quarter was 68.6 billion yuan, net profit attributable to the parent company was 36.33 million yuan, and operating income decreased by 11 percent year-on-year1%, net profit attributable to the parent decreased by 7858%。Specifically, in the third quarter, insurance-related income reached 61.9 billion yuan, accounting for 90%, is the company's main revenue**, but compared to 69.4 billion yuan, down 107%。Month-on-month, it increased by 37%。
The crowdfunding service fee generated by the water drop chip business was 36 million yuan in the third quarter of this year, a year-on-year decrease of 39 million yuan from 59 million yuan in the third quarter of 20220%。Since its establishment, the controversy of Shuidi Chip has continued, especially in recent years, the news of fraudulent donations and fees exposed by Shuidi Chip has made it fall into the whirlpool. It is understood that on September 30 this year, the effective judgment of the lawsuit case caused by the concealment of property information and illegal fundraising by the fundraising initiator Luo was completed, and the Intermediate People's Court of Fuyang City, Anhui Province determined that the fundraising initiator Luo did not truthfully disclose property information, violating the platform fundraising rules and the principle of good faith, and ordered Luo to return the donation in full2470,000 yuan.
It is worth considering that such acts of concealing property information, or involving fabrication or exaggeration of information seeking help, falsification of medical records, and misappropriation of medical funds for other purposes, have a particularly bad impact on society. In addition, Shuidi Chip announced the fee and emphasized that it is a non-public welfare organization, which was also mixed by the public. As a result, the credibility of Shuidi Chip is gradually weakening. The insurance business of Shuidi Company is drained through Shuidi Chip, is this also the reason for the decline in insurance business income?
However, since its establishment, Shuidi Chip has not achieved profitability so far, and in the third quarter of this year, Shuidi Chip has an operating loss of about 68.79 million yuan.
In addition, in the third quarter of this year, Yifan Pharmaceutical, the new business of Shuidi Company, achieved revenue of 27.6 million yuan, a year-on-year increase of 607%。In the third quarter, Yifan Pharma cooperated with 135 pharmaceutical companies and CROs, recruited more than 800 new patients, and signed 90 new clinical trial projects.
It is understood that the cumulative basic earnings per share of Shuidi Company in fiscal year 2023 will be 003 yuan, 0$12. Due to the performance of the secondary market, Shuidi Company has launched a **buyback since 2021. Since the announcement of the launch of the ** repurchase program in September 2021, as of November 30, 2023, Shuidi has spent about $87.41 million to repurchase about 38.5 million shares of ADS (American Depositary **) from the open market
Executive departures
It is worth noting that Chen Minming, vice president of Water Drop, has left at the end of October. According to public reports, Chen Minming joined Shuidi in April 2019 as vice president and head of the ** marketing department, reporting to the company's CEO Shen Peng. According to reports, Chen Minming is good at large-scale delivery and refined operation, and is mainly responsible for the management of delivery and brand in Shuidi Company.
Before Chen Minming joined the water drop company, at the end of March 2019, the water drop company announced that it had completed nearly 500 million yuan in the B round of financing, and after the B round of financing was in place, with the addition of Chen Minming, the water drop company began to put effect advertisements on a large scale on short ** platforms such as Douyin, with a budget of hundreds of millions of yuan a year, thus achieving the growth curve of the water drop company. However, as the growth of the insurance industry slows down, the business of Shuidi Company has shrunk sharply, and the industry speculates that this may be the main reason why Chen Minming chose to leave.
Chen Minming graduated from Nanjing University of Political Science and is a well-known Internet user growth expert in China. In 2011, Chen Minming joined Meituan during the Thousand Regiments War. After the merger of Meituan and Dianping, Chen Minming became the vice president of Meituan-Dianping Group, and was also responsible for the user growth and brand marketing of Meituan and Dianping. Since then, Chen Minming has also served as the CMO and CEO of Squirrel AI, an artificial intelligence education company.
According to previous results, from 2020 to 2022, the operating income of Water Drop Company was 302.8 billion yuan, 320.6 billion yuan, 280.2 billion yuan, with a year-on-year growth rate of88%、-12.61%, and there are signs of slowdown and deceleration in operating income after 2021;The net profit attributable to the parent company was -66.4 billion yuan, -157.4 billion yuan, 60.8 billion yuan, a year-on-year increase61%。In 2022, Shuidi Company will turn losses into profits, but from the perspective of revenue, the revenue in 2022 will decline, and the company's profitability is mainly due to the control of operating costs.
Since the third quarter of 2021, Waterdrop has begun to implement effective cost control measures, and its operating costs and expenses in 2022 decreased by 54% year-on-year2%。Among them, sales and marketing expenses increased from 310.5 billion yuan decreased to 62.4 billion yuan, operating costs, headquarters and administrative expenses, and R&D expenses decreased to varying degrees.
However, reducing costs does not necessarily increase efficiency. The latest performance shows that in the first three quarters of this year, the operating income and net profit attributable to the parent company of Shuidi Company have declined to varying degrees year-on-year.
Spend 3600 million acquisition of Deep Blue Insurance
Since the company is still attracting traffic through water drops and focusing on insurance business, it is still the goal of water drop company to promote the growth of insurance business. However, judging from the performance of the insurance business, the growth of the insurance business of Shuidi Company has long been weak.
According to Flush data, from 2020 to 2022, the insurance brokerage business income of Shuidi Company was 269.5 billion yuan, 282.7 billion yuan, 234.3 billion yuan, although it will turn losses into profits in 2022, the insurance brokerage business that supports the company's main business decreased by 17% year-on-year12%, and the insurance brokerage business also fell by 10% year-on-year in the third quarter of this year7%。Behind the successive declines in the insurance business, Shuidi Company began to plan for new growth.
In June this year, the water drop company issued an announcement showing that the company plans to spend 3600 million yuan to acquire up to 100% of the equity of Shenzhen Cunzhen and Realistic Technology *** and its subsidiaries (hereinafter referred to as Shenlanbao). On June 9, Shuidi announced that it had reached a definitive transaction document on the proposed acquisition of Deep Blue Insurance. According to the transaction documents, Shuidi will acquire up to 100% of the equity of Deep Blue Bao (up to) through multiple deliveries for a total consideration of 3600 million yuan (subject to a certain ** adjustment mechanism). The acquisition of a 56% stake in Deep Blue at the time of the first closing is expected to take place in June this year. The acquisition of a 4% stake in Deep Blue at the second closing is expected to be completed within six months after the first closing. The remaining 40% of the equity will be acquired within three years, subject to certain closing conditions.
According to public information, "Deep Blue Insurance" is an insurance company that holds a national insurance brokerage license and has the qualification of insurance online sales, which is deeply engaged in the field of insurance science popularization and product evaluation, and also provides one-stop services from risk assessment, program planning to assistance in claim settlement. At present, "Deep Blue Insurance" has established cooperation with more than 50 insurance companies, serving 830,000 users and issuing 820,000 insurance policies.
So can mergers and acquisitions change the signs of decline in Shuidi Company's insurance business?In the third quarter of this year, Shuidi Company has consolidated the financial performance of Deep Blue Insurance into the financial statements. According to the financial report, the net operating income of Deep Blue Insurance in the third quarter of this year was 46.2 million yuan, while its operating costs and expenses were 63.7 million yuan, which shows that Deep Blue Insurance is in a state of loss. The merger of the performance of Deep Blue Insurance caused the sales and marketing expenses of 28.1 million yuan in the third quarter of the water drop company, and other factors, the sales and marketing expenses of the water drop company in the third quarter increased by 36% year-on-year1%, up to 18.8 billion yuan.
On a quarter-over-quarter basis, Waterdrop's sales and marketing expenses fell 82%, mainly due to a decrease of RMB41.3 million in marketing expenses from third-party traffic channels, partially offset by the consolidation of the financial statements of Deep Blue Insurance.
In addition to this, Waterdrop's general and administrative expenses in the third quarter increased by 39% year-over-year7%, up to 11.5 billion yuan. The main reason for this is the consolidation of the financial statements of Deep Blue Insurance, which incurred general and administrative expenses of 11.2 million yuan, as well as an increase of 19.1 million yuan in professional service fees. On a quarter-over-quarter basis, general and administrative expenses increased by 19 percent in the third quarter due to the consolidation of Deep Blue Insurance's financial statements4%, and the professional service fee increased by 8.7 million yuan.
Insurance is the core business of Shuidi Company, and with the decline in the performance of its core business, Shuidi Company is trying to promote performance growth through mergers and acquisitions. However, mergers and acquisitions are a risky investment, and there are still many variables and risks in the future business development of Deep Blue Insurance.