What happened
It was a volatile day on the market for Waterdrop, Inc. (WDH 0.42%) on Friday as its share price surged early and fell later in the day. The Beijing-based insurance platform was up 11.1% shortly after the opening bell but then dropped over the course of the day and was down as low as 0.9% for the day in the afternoon. A late rally brought it back into positive territory, and it ended the day up 2.6% to $1.20 per share.
Overall, it was the third straight positive day for the markets as all three major indexes moved higher with the Dow Jones Industrial Average up 377 points (1.2%), the Nasdaq up 250 points (2.1%), and the S&P 500 up 61 points (1.5%).
So what
Waterdrop has two primary businesses: its online insurance marketplace and its medical crowdfunding business. The insurance marketplace is an online platform where users can shop for different types of health and life insurance available from selected insurance carriers. Its medical crowdfunding portal is a place where people without insurance can use its crowdfunding platform to raise money to pay for medical costs.
The stock price surged higher in Friday morning trading after it delivered a positive second-quarter earnings report. The company posted operating profit of 156 million Chinese dollars ($23 million), up from a net operating loss of RMB815 million ($117 million) a year ago this quarter. Net profit was RMB207 million ($30 million), up from a net loss of RMB655 million ($94 million).
Net revenue was down 25% due to a decrease in revenue on the insurance platform, but it was offset by gains in fees from the crowdfunding business. The profitability in the quarter stemmed from a huge decrease in expenses. Sales and marketing expenses dropped 84% in the quarter as it spent less on third-party marketing channels. The company also decreased general and administrative expenses by 42% year over year, and research and development costs by 30%.
Now what
The company has been able to significantly improve its cash position, as it held RMB3.2 billion ($491 million) in cash and short-term investments, up from RMB2.8 billion ($404 million) as of Dec. 31, 2021.
Waterdrop's focus on expense management and operational efficiency has enabled it to be profitable now for three straight quarters. Waterdrop founder, chair and CEO Peng Shen said the company is on pace to be profitable for fiscal year 2022. It's a penny stock and highly speculative, but it appears to be moving in the right direction.
