Yuanbao - Earnings Call - Q2 2025

Transcript

Operator (participant)

Ladies and gentlemen, good day, and welcome to Yuanbao Inc.'s Q2 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.

Stella Liu (Associate Director of Investor Relations and Strategy)

Thank you, Operator. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's 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 Yuanbao'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 a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining us today on the call from Yuanbao's senior management are Mr. Rui Fang, our Chairman and Chief Executive Officer, and Mr. Rui Wan, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese, followed by an English translation. We will conclude the call with a Q&A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuanbao's Investor Relations website. I will now turn the call over to our Chairman and CEO. Mr. Fang, please go ahead, sir.

Rui Fang (CEO)

大家好，欢迎参加元宝2025年第二季度财报电话会。本季度我们再次以出色的业绩表现印证了科技驱动的增长动能。二季度公司总收入同比增长25.2%，环比增长10.3%，达到人民币10.7亿元，创下历史新高。净利润同比跃升至55.6%，至人民币3.05亿元，净利润率达到28.5%。这标志着我们已经连续12个季度保持稳定盈利。截至二季度末，我们的现金储备达到人民币34.2亿元，为未来战略拓展和技术创新奠定了坚实的基础。我们亮眼的财务成果得益于运营端的持续突破。本季度新保单总数突破790万份，用户规模与市场渗透率持续攀升。这一系列成果充分验证了我们在技术图路上的前瞻布局，以及盈利能力的持续释放。

Stella Liu (Associate Director of Investor Relations and Strategy)

Hello everyone, thank you for joining our Q2 2025 earnings conference call. This quarter, our stellar results once again demonstrated our technology-driven growth momentum. In the Q2 of 2025, our total revenues reached a record 1.07 billion RMB, an increase of 25.2% year-over-year and 10.3% quarter-over-quarter. Net income surged 55.6% year over year to 305 million RMB, with a net income margin of 28.5%, marking our 12th consecutive quarter of profitability. As of the end of June, our cash reserves stood at 3.42 billion RMB, providing a solid foundation for future strategic expansion and technological innovation. Our strong financial performance was underpinned by continued operational breakthroughs. In the Q2, the number of new policies issued reached a record high of 7.9 million, while our user base and market penetration continued to expand.

These achievements fully validate our forward-looking technology investments and highlight our sustained improvement in profitability.

Rui Fang (CEO)

在服务与保障方面，我们在保障范围拓展、科技赋能提效、服务提示升级三个方面取得了实质进展。截至目前，元宝业务已覆盖中国大陆的所有省份，以高性价比的产品深入开拓未被充分服务的市场。同时，以互联互通的网络模型贯穿消费者全周期服务，深度赋能业务环节，助力我们打开普惠保险的增量市场。我们持续加大AI技术研发投入。截至二季度末，公司AI研发团队规模继续占公司总人数的10%以上，为我们的引擎持续优化和迭代提供了坚实的技术支撑。

Stella Liu (Associate Director of Investor Relations and Strategy)

In terms of quality of service and protection coverage, we achieved substantial progress across three key areas: expanded coverage, drove additional efficiency with technology, and updated our service ecosystem. To date, Yuanbao has extended coverage to all provinces in Mainland China, penetrating underserved markets with cost-efficient products. Our interconnected networks of models deliver seamless support throughout the entire customer journey, deeply empowering our operations and enabling us to capture new opportunities in the inclusive insurance market. We continue to increase our R&D investments in AI technologies. As of the end of June, our AI R&D team represented over 10% of our total workforce, providing solid technical support for the ongoing optimization and iteration of our core engine.

Rui Fang (CEO)

在技术战略方面，我们持续深化大语言模型在公司运营中的布局，通过三大技术支柱增强我们的竞争力，并提升整体效率。第一，我们通过智能体矩阵来驱动效能提升。在本季度，我们将代码审查、日志分歧、地图管理、报表监控、线上页面异常巡检等专项智能体全面嵌入研发测试等关键环节。不仅高效承接了大量重复性高、规则性强的这种人工操作，更借助其强大的自动化处理与智能分析能力，显著提升我们的编程效率。测试覆盖深度与问题的发现速度，同时增强了线上系统的稳定性和可观测性。与此同时，我们正在加速建设统一的内部智能体平台。该平台将提供低代码和无代码的智能体开发框架，支持多元易购数据的知识库管理工具，以及标准化的多模态交互接口。基于此平台，业务团队能够快速、低成本地构建高度定制化的智能体应用，加速智能体在各业务场景中的规模化落地，从而提升运营效率。

Stella Liu (Associate Director of Investor Relations and Strategy)

From a technology strategy standpoint, we have been further integrating large language model applications across our operations to reinforce our competitiveness and improve efficiency. Our approach is anchored in three key areas. First, we integrated more agentic AI capabilities into our workflows to improve operational efficiency. In the Q2, we fully integrated specialized agents across critical R&D and testing workflows, including code review, log classification, grid management, report monitoring, and online anomaly detection. These agents not only significantly reduced repetitive rules-based manual tasks but also leveraged advanced automation and intelligent analysis to substantially improve coding efficiency, test coverage, and issue detection speeds, while enhancing overall system stability and observability. In addition, we are accelerating the development of a unified internal agent platform.

The platform features three key components: low-code, no-code development frameworks for rapid agent customization, intelligent knowledge management tools capable of processing multi-source heterogeneous data, and standardized multimodal interaction interfaces. This comprehensive platform will empower our business teams to develop tailored agent applications quickly and cost-effectively, accelerating enterprise-wide adoption across diverse business scenarios.

Rui Fang (CEO)

第二，我们通过RAG技术赋能保险知识库，提升业务准确率。我们自主研发了应用于保险产品条款抽取与解析的RAG技术系统。针对保险条款中多方案、多责任嵌套等结构复杂、检索结果不唯一的行业共性难题，引入了基于图的RAG技术，实现了结构化的解析和准确的信息检索，显著提升了机器人客服的问答准确率。同时，我们将RAG技术应用于拓展至企业及知识管理场景，构建公司及知识库的这样的一个平台，实现了对合同条款、财务制度、客服知识、业务规范等内部海量非结构化文档的统一解析与结构化沉淀，形成了可复用的企业智能知识底座。由此，法务人员可以通过自然语言高效地检索历史合同及关联的条款，职能部门也可以对员工咨询进行快速的响应。各部门知识获取的效率与智能化运营的能力的提升得到全面的提升。

Stella Liu (Associate Director of Investor Relations and Strategy)

Second, we leverage RAG technology to empower our specialized insurance knowledge base, driving significant improvements in business accuracy. We built a proprietary RAG system for extracting and interpreting insurance policy clauses, tackling industry-wide challenges such as multiple coverage options and nested liabilities, which often lead to ambiguous retrieval results. By incorporating RAG technology, we achieved structured parsing and highly accurate information retrieval, which significantly improved the accuracy of our AI customer service responses. We also extended our RAG technology to enterprise-level knowledge management, building a company-wide knowledge management platform to unify the parsing and structured storage of a massive volume of internal unstructured documents, including contracts, financial policies, customer service guidelines, and business regulations. This creates a reusable enterprise-level intelligent knowledge base.

With this foundation, our legal teams can efficiently retrieve historical contracts and relevant clauses using natural language search, and functional departments can respond rapidly to employee inquiries, dramatically improving knowledge accessibility and operational intelligence across the company.

Rui Fang (CEO)

第三，我们通过多模态大模型的交互应用，重塑了服务体验。我们自研了基于Transformer架构、参数规模超8000万的语音情绪识别模型。该模型具备卓越的声学特征提取与情绪泛化能力，通过深度分析语音信号的声学特征和时序模式，能够精准地识别用户开心、愉悦、着急、悲伤等复杂情绪状态。识别结果可即时触发相应的智能对话系统，或提醒人工客服提供针对性的沟通方式与流程调整，显著提升服务质量和用户满意度。此外，我们研发的融合多模态深度神经网络与前沿的语音合成技术的智能语音引擎，能够基于短时语音样本生成自然、个性化的合成语音，并可通过集成韵律控制的技术和自适应语调调节算法来输出语音的差异化音色、语速及情感色彩，灵活适配不同用户偏好和服务场景。这一技术的规模化应用显著提升了用户满意度，使元宝在普惠保险的智能化、人性化服务上持续领跑。

Stella Liu (Associate Director of Investor Relations and Strategy)

Third, we are reshaping the service experience through multimodal applications. We have independently developed a voice-emotion recognition model powered by the Transformer architecture with over 80 million parameters, featuring advanced acoustic feature extraction and emotion generalization capabilities. The model conducts deep analysis of speech signals and temporal patterns to accurately detect complex user emotions, such as happiness, joy, urgency, and distress. The recognition results instantly trigger context-appropriate responses, either by adjusting AI-driven dialogue flows or alerting human agents to provide tailored communication approaches and processes, significantly elevating service quality and user satisfaction. We have also developed a proprietary Smart Voice Engine that combines multimodal deep neural networks with advanced TDS technology. Using only short voice samples, it generates natural, personalized, synthetic voices with adjustable tone, speed, and emotional expression by integrating prosody control and adaptive voice modulation algorithms.

This allows it to flexibly adapt to diverse user preferences and service scenarios. This scalable technology has greatly improved user satisfaction and reinforced Yuanbao's leadership in delivering intelligent human-like services for inclusive insurance.

Rui Fang (CEO)

最后，在行业影响力建设方面，今年5月，我们携手清华大学五道口金融学院、中国保险与养老金融研究中心，连续第四年发布了《2024年中国互联网保险消费者洞察报告》。该报告深度剖析了互联网消费者的特性、需求痛点与购买行为，为互联网保险行业的高质量发展及应对产业革新提供了极具价值的消费者需求层面的建议与参考，也进一步巩固了元宝在行业中的专业影响力。 展望未来，国家主管部门颁发的银行业、保险业普惠金融高质量发展实施方案，将普惠保险体系建设列为五年的核心目标。这与元宝深耕五年的战略方向高度契合。顺应政策动风与行业稳健的善良态势，我们将积极构建保险加科技加服务的新生态，深化AI技术创新与链路的应用，拓展与保师的深度合作，同时进一步渗透至更广阔的市场，高效触达目标人群，积极响应普惠保险的高质量发展需求，为消费者、合作伙伴和股东创造长期可持续的价值。下面请我们的CFO来为大家介绍一下我们的第二季度财务表现。

Stella Liu (Associate Director of Investor Relations and Strategy)

Before we wrap up, I'd like to highlight our proactive role in driving industry advancement. In May, we jointly released the 2024 China Online Insurance Consumer Insights Report with the Research Center for China Insurance and Pension Finance at Tsinghua University PBC School of Finance, marking our fourth consecutive year of this publication. The report provides an in-depth analysis of online insurance consumers' characteristics, pain points, and purchasing behaviors, offering actionable insights and guidance at the consumer demand level to advance high-quality development and navigate transformation in the online insurance sector. It also further strengthens Yuanbao's leadership and professional influence within the industry.

Looking ahead, the implementation plan for high-quality development of inclusive finance in the banking and insurance sector, issued by the National Regulatory Authorities, has identified the development of an inclusive insurance system as a core five-year objective, which aligns perfectly with Yuanbao's strategic focus over the past five years. Building on favorable policy momentum and the industry's steady growth trajectory, we will accelerate the development of an integrated insurance technology and services ecosystem. This includes advancing AI-driven innovation and end-to-end AI applications, expanding strategic collaborations with insurance carriers, and increasing our penetration in broader markets to efficiently reach target consumer groups. By proactively addressing the evolving demand for high-quality inclusive insurance, we are committed to creating long-term sustainable value for consumers, partners, and shareholders. Now, I'll turn the call over to our CFO, Rui Wan, to present our financial results. Thank you, everyone.

Rui Wan (CFO)

Thank you, Mr. Fang. Thank you all for joining today's earnings conference call. I'm pleased to walk you through another quarter's strong financial performance, marked by double-digit growth in both revenue and profitability, enhanced operational efficiency, and a strengthened cash position. Starting with our top-line results, total revenues for the Q2 reached 10.07 billion RMB, representing a robust 25.2% year-over-year increase and a 10.3% quarter-over-quarter increase. This performance was primarily driven by continued momentum across our insurance distribution and system services revenue business. Breaking this down further, insurance distribution services revenues grew to 350.6 million RMB, up by 29.6% year-on-year, fueled by an increasing number of policy transactions on our platform, supported by our enhanced targeted marketing efforts.

System services revenues reached 718.2 million RMB, a 23.8% increase compared with the same period last year, driven by ongoing improvements to our AI-integrated full consumer service cycle engine, which enhanced our marketing and precise analytics services, and strengthened our system service offerings for both new and existing insurance carriers. Moving to expenses, total operating expenses increased by 16% year-over-year to 772.2 million RMB. Operation support expenses came in at 40.9 million RMB, remaining stable compared with the same period last year. Selling and marketing expenses rose by 14.1% year-over-year to 602.1 million RMB as we ramp up our marketing efforts to attract new consumers and retain existing ones. General and admin expenses increased by 6.3% year-over-year to 47.5 million RMB, primarily due to higher personnel costs, including salary bonus and benefits.

R&D expenses increased by 55.4% year-over-year to CNY 81.7 million, reflecting our intensified research and development efforts and the expansion of our R&D team to reinforce our leadership position as a technology-driven online insurance distributor. As a result of this strong top-line growth and disciplined cost management, our profitability improved significantly. Net income jumped by 55.6% year-over-year to CNY 304.7 million, with the net income margin expanding to 28.5% compared to 22.9% the same period last year. Non-GAAP adjusted net income rose by 57.8% to CNY 325.2 million, representing a non-GAAP net income margin of 30.4%, up from 24.1%. We also maintained strong cash flow and a healthy cash position. This quarter, we generated CNY 453.2 million in operating cash flow, ending the quarter with total liquidity of CNY 3.42 billion, representing a 99% year-over-year increase and a 23.6% increase quarter-over-quarter.

Thomas Wang (Analyst)

In summary, our Q2 performance builds on the strong momentum from the Q1, establishing a clear growth trajectory for the H2 of this year. With our robust financial foundation and substantial liquidity reserves, we are strategically positioned to capitalize on emerging opportunities while advancing our long-term strategic priorities. Thank you, and I would like to open the call to Q&A. Operator, please go ahead.

Operator (participant)

Thank you. We will now begin the question and answer session. As a reminder 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. There may be a short pause as attendees register their questions. Once again, that's star 11 for questions. We will now take our first question from the line of Thomas Wang from Goldman Sachs. Please go ahead, Thomas.

Thomas Wang (Analyst)

感谢关总，恭喜这次一个很好的业绩。几个问题，可能第一个想问一些就是比较营运上的一些数据，就是我们现在看到的一些佣金率，包括我们公司的 take rate 这些，是包括可能单均保费这些现在是怎么样一个趋势。对，然后第二个问题可能想问一下就是说我们也看市场可能投资者对就是说下半年可能宏观比较担心。我不知道我们公司就是说在一个如果假设下半年的宏观比较没有什么特别明显刺激的情况下，我不知道我们对增速这边会有什么预期。然后第三个问题可能就是说刚才瑞也提到了就是现在公司也有很多的现金在账上，我不知道我们公司在比如说一些回购或者分红这边是怎么考虑的。那我简单翻一下就是 Congrats on the results and just three areas. So firstly, I think some operating metrics. Can you just briefly explain how the commission rate, take rate, and also premium per policy, how is that changing? And secondly, just if we don't see any macro stimulus policy in the H2 of this year, how do we see that potentially impact our growth outlook? And thirdly, given that there's ample cash on the balance sheet, how does company think about shareholder return policies such as dividend and buyback? Thank you.

Rui Wan (CFO)

Yep. Thank you, Thomas. This is Rui Wan. I'll take the Q&A session. So, in terms of metrics, we don't disclose commission rate on a quarterly basis, but our commission rate historically for the Q2 has remained relatively stable. For take rate, it can be roughly estimated by dividing revenue by premiums. The take rate was around 10% from Q2. Going forward, we expect that rate to remain at that level. Now, looking at the four-year picture, we still expect most of our metrics to remain stable. But to emphasize, what we focus on is really to continue to optimize our ROI to make sure that as we acquire new consumers and customers, we can always maintain a very healthy level of ROI, which translates to a healthy level of growth and profitability.

Your question on premium per policy, our average short-term premium policy remained relatively constant with historical levels, tracking normal range within the year and quarter-over-quarter. Now, we do see a slight decrease on premium per policy, mainly because of two reasons. One, we have been adjusting our marketing approach in real time, and different approaches lead to different outcomes, such as shift in age profile, spending power, and consumption habits. For example, if you go to a lower age group, your typical premium per policy is slightly lower. At the same time, there's a change in product mix. Our short-term critical illness policies typically have slightly lower premium per policy compared to short-term medical insurance, and slightly increased proportion of critical illness products in Q2 contributed in a very marginal decrease overall. Your second question on potential impact of weaker macro backdrop in the H2.

While the economic trajectory for the Q2 remains uncertain, our platform is always positioned to demonstrate resilience through operating in a high-growth short-term health insurance sector, which remains significantly underpenetrated in China, with substantial long-term growth potential. Secondly, our proprietary and powerful engine that continuously enhances its predictive accuracy at every stage will continue to ensure that as we acquire new customers, our ROI remains at above one. Even considering potential macroeconomic variability in the H2 of 2025, we are closely monitoring several key industry trends. Number one, customer acquisition costs could lower, which would benefit us in terms of acquisition. We could see a gradual shift towards more value-oriented insurance products as consumers become more price-sensitive. That might lead to modest adjustments in the average premium.

Historically, such environments have tended to accelerate market share consolidation towards players with established scale advantage and efficient consumer acquisition cost management. Now, your last question on our current cash balance and how we think about shareholder return in the future. Now, we haven't explicitly said that we will do anything going forward, but for us, we continue to evaluate the best strategies in providing the best shareholder return through various operational and capital markets opportunities, and dividends is certainly the question you asked is certainly one of the. Obviously, when we have more, we will certainly disclose to the market.

Operator (participant)

All right. Thank you. Our next question comes from the line of Amy Chen from Citi. Please ask your question. Amy.

Amy Chen (Analyst)

Hi, management. Thank you for giving me the opportunity to ask questions. I have three questions. The first one on business outlook. Appreciate your insights on the resilience of your business model despite macro uncertainties. I'm wondering if you could provide some guidance on revenue growth as well as earnings growth for the full year of 2025 as well as 2026. The second question is about compliance. We saw news recently that some health insurers were being fined for automated renewals that were implemented on their website when selling online health insurance policies. As a broker, what kind of measures did Yuanbao adopt to avoid such scenarios and to avoid customer complaints? The third question is on revenue mix. We noted that in the Q2, distribution services actually booked relatively faster year-on-year growth compared to system services.

What's driving this growth, and how should we think about revenue mix going forward? Thank you.

Rui Wan (CFO)

Thank you, Amy. So, your first question on guidance for revenue earnings for this year and next. So, we haven't given explicit guidance for 2026. For 2025, we maintain that we're always balancing growth and profitability. Expect full-year revenues continue to grow at least 20%-30% year-on-year and profit margin to remain at least above 20%. Your second question on potential insurers being fined for automatic renewals. Now, currently, we have not been affected by the incident that you mentioned. We always provide consumers with clear policy term explanations and demonstrations during policy signing so our customers can choose their preferred auto renewal settings during the insurance sign-up process. Regarding regulatory compliance, we maintain effective communications with regulators and have established comprehensive governance documents, including marketing conduct policies complemented by mandatory compliance review processes to standardize business practices.

All of our insurance products are developed with partner insurers, and every policy term and renewal process is approved by regulators. Your last question on the difference in growth rates of the two business segments. The revenue recognition methodology differs between these two: insurance distribution service and system services revenue. System services revenue is recognized as a one-time event, while commission income from insurance distribution services follows an amortization model, as we see system services demonstrate the value we deliver to insurers, including our customer acquisition capabilities, technological expertise, and AI-driven engine. There's mainly a timing difference in terms of difference in growth rates, but also the difference in how we recognize these revenue items also affect on a quarterly basis the growth rates. If we smooth out or look in the longer period, we're probably going to see more smooth trajectory.

Amy Chen (Analyst)

Right. Thank you.

Operator (participant)

We will now take our next question from the line of Xingtao Chen of CICC. Please go ahead, Xingtao.

Xingtao Chen (Analyst)

Hi. Thank you for having me. And I would like to ask three questions. First, against the backdrop of ongoing healthcare payment reforms in China, so I would first like to ask what potential opportunities these reforms present to Yuanbao and how the company is preparing at the product level. And secondly, regarding the widespread application of AI, I am curious. I want to ask about the specific areas where AI is currently supporting the company's operations and what financial benefits or impacts have been realized. And finally, based on the released documents, I would like to understand the key reasons or key drivers behind the noticeable difference between the company's premium growth and revenue growth in the Q2. Thank you.

Rui Wan (CFO)

Thank you, Xingtao. Your first question on the medical payment method reform. So, under the payment reform for healthcare insurance, the utilization of innovative medicines may be constrained due to strict cost control measures. So, in response, the National Healthcare Security Administration has introduced commercial health insurance innovative medicine lists, aiming to address the unmet demand for high-value innovative medicines not covered by basic insurance through commercial health insurance channels. So, the introduction of this policy will effectively address the value perception issue in commercial insurance for consumers. So, we do think that's a very beneficial trend, showcasing that the regulators are clearly supportive of commercial insurance. Now, by enabling access to premium medications beyond the national medical insurance coverage list, it can help boost conversion rates.

So, overall, against the backdrop of Medicare payment method reform, the commercial health insurance innovative medicine catalog establishes new reimbursement channels for innovative medicine through policy deregulation and expanded payment coverage, while simultaneously creating incremental market opportunities for players like us that sell primarily commercial health insurance. Number two, your question on AI. So, as you know, our entire engine or business is run on our AI engine, which leverages gradient boosting machines and an approach that progressively optimizes through multiple decision trees. So, we have 4,800 or 4,900 models that's already existent in our engine. This makes it particularly effective for highly complex multi-stage decision processes with strong structured data patterns. So, we create a deep integrated modeling system where multiple models simultaneously run A/B tests across several feature data warehouses. So, that's the underlying engine of our business.

As you can see, the reason we're able to maintain profitability for the last 12 quarters is because we have been continuously optimizing our core engine. Number two, while AI powers our core infrastructure, we've also invested heavily in advancing and operationalizing large language model capabilities. As you heard from Mr. Fang, we enhance operational efficiency through key decision dimensions: agents or agentic AI, RAG systems, and multimodal systems. For example, leveraging RAG technology, we built an LLM service framework integrated with a proprietary insurance knowledge base. When users inquire about insurance-related topics or products, these RAG systems enable the model to retrieve and reference relevant content from our database, significantly improving query resolution accuracy. We haven't provided explicit quantitative measures in terms of how large language model applications have improved our overall business efficiency, but we may do so in the future.

Now, in terms of our current engine, the efficiency can be simply viewed through our existing financial performance. Now, your last question on the year-on-year growth rate of policy premium versus difference in revenue growth rate. Now, in Q2, we achieved business growth with expanded revenue scale and increased number of new policies. Our insurance distribution services earn commission fees as a percentage of premiums paid by insurance policyholders based on terms specified, and insurance policyholders generally pay premium monthly during the policy term. Now, due to amortization deferral effect, the recognized revenue growth rate appears slower than the number of new policies or premiums because policies and premiums are recognized at 100%, where distribution service revenues are amortized. That's really, again, like the previous question, a timing difference.

Now, in Q2, both our premium per policy and take rate experienced very slightly declined, as previously addressed in the second question. The fluctuation in premium per policy primarily stems from a flexible adjustment in marketing strategy and increased proportion of critical illness policy to optimize our ROI and our growth and profitability.

Operator (participant)

Thank you. Our next question comes from the line of Yue Xu from China Securities. Please ask your question, Yue.

Yue Xu (Analyst)

Hi, management. Thanks for taking my question. My first question is about unit economics. How do you think about ROI as you scale up your business going forward? And the second question is about how the management team thinks about the threat posed by major tech platforms like Alibaba or Tencent. And lastly, my question is about the international expansion. Could you share your thoughts about the future roadmap? Are you considering expanding your product portfolio into new insurance categories or to areas outside China?

Rui Wan (CFO)

Yep. So, thank you. Thank you, Yue Xu. Our engine plays a crucial role in expanding our scale and achieving profitability. Now, our ROI has remained positive for over 10 quarters, mainly due to our engine. So, the system calculates real-time return rates across different service paths for every consumer that we acquire at every stage. So, identifying optimal solutions to maintain our current ROI above one is arguably our most important metric. Now, going forward, as we continue to scale, we still believe that this market is still highly underpenetrated, and we see a continued path of a very healthy growth and very healthy profitability going forward, which, as you can translate, into a very healthy ROI.

Now, if large platform incumbents try to adopt our model or enter this market, we do think it'll be very helpful for the overall industry because right now, if the industry is still growing very, very quickly, more entrants coming in will provide more consumer guidance and support and awareness of lack of commercial insurance coverage to the industry. However, as we have seen for the past few years, major players are already competing in this market just through different business models. So, we do think increased competition may be helpful for the entire industry. Now, in terms of who we are competing with, because we are advertising primarily on fee-based systems online, we're not only competing with existing distributors but also other advertisers that compete for user time across these platforms, including e-commerce players, game advertisers, etc. Your last question on international expansion to replicate this model overseas.

Our Hong Kong office officially opened in July this year. With this expansion, we're building a key platform to tap into new markets and create fresh opportunities down the road. Now, in August, we successfully acquired an insurance brokerage license in Hong Kong. Going forward, we will continue to explore different businesses and actively seek a second and a third growth curve. As of now, we don't have additional information to share. Obviously, we'll share more details as specific plans and scale take shape. Thank you.

Operator (participant)

Thank you all for your questions. And that concludes the question and answer session. I'd now like to turn the conference back to Ms. Stella Liu for any additional or closing comments.

Stella Liu (Associate Director of Investor Relations and Strategy)

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or Piacente Financial Communications. Our contact information for IR in both China and the U.S. can be found in today's press release. Have a great day.

Operator (participant)

Thank you for your participation in today's conference. This does conclude the program.