| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2022 |
| Accounting Policies [Abstract] | |
| Basis of Presentation | (a) Basis of Presentation The Group’s consolidated financial statements as of December 31, 2021 and 2022 and during the years ended December 31, 2020, 2021 and 2022 are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and related disclosures. Actual results may differ from those estimates. Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below. |
| Reclassifications | (b) Reclassifications Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current year’s presentation. These reclassifications had no impact on net income/(loss), shareholders’ equity, or cash flows as previously reported. |
| Basis of Consolidation | (c) Basis of Consolidation Consolidation through contractual agreements: The consolidated financial statements include the financial information of the Company, its wholly-owned subsidiaries and its VIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Applicable PRC laws and regulations currently limit foreign ownership of companies that provide value-added telecommunication businesses. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in the provisions of value-added telecommunication services. The Group therefore operates its business, primarily through the VIEs and the subsidiaries of the VIEs. The Company, through its WFOE, entered into a series of contractual arrangements (the “VIE agreements”) with the VIEs and their respective shareholders that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Agreements that provide the Group effective control over the VIEs include: Power of Attorney: Pursuant to the power of attorney signed between each of the shareholders of the VIEs and the WFOE, each shareholder irrevocably appointed the WFOE as its attorney-in-fact Executive Call Option Agreements: Pursuant to the exclusive call option agreement entered into between each of the shareholders of the VIEs and the WFOE, the shareholders irrevocably granted the WFOE a call option to request the shareholders to transfer or sell any part or all of its equity interests in the VIEs, to the WFOE, or their designees. The purchase price of the equity interests in the VIEs shall be equal to the higher of Renminbi 1 or the minimum price required by PRC law or an amount equal to the registered capital contributed by the relevant shareholder. Without the WFOE’s prior written consent, the VIEs and their shareholders shall not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of its assets or beneficial interest, issue any additional equity or right to receive equity, provide any loans, distribute dividends in any form. Loan Agreements: Pursuant to the loan agreements entered into between the WFOE and each of the shareholders of two VIEs (including Zongqing Xiangqian and Beijing Zhuiqiu Jizhi Technology Co., Ltd.), the WFOE extended loans to the shareholders of the two VIEs who had contributed the loan principals to the relevant VIEs mainly as registered capital. The shareholders of the two VIEs may repay the loans only by transferring their respective equity interests in the VIEs to WFOE or its designated person(s) pursuant to the exclusive option agreements. These loan agreements will remain effective until the date of full performance by the parties of their respective obligations thereunder. Equity Interest Pledge Agreements: Each shareholder of the VIEs has also entered into an equity pledge agreement with the WFOE, pursuant to which each shareholder pledged his/her interest in the WFOE to guarantee the performance of obligations of the WFOE and its shareholders under the exclusive business cooperation agreement, exclusive call option agreement, and power of attorney. If the VIEs or any of the shareholders breach their contractual obligations, the WFOE will be entitled to certain rights and interests regarding the pledged equity interests including the right to dispose the pledged equity interests. None of the shareholders shall, without the prior written consent of the WFOE, assign or transfer to any third party, create or cause any security interest and any liability in whatsoever form to be created on, all or any part of the equity interests it holds in the VIEs. This agreement is not terminated until all of the agreements under the power of attorney, exclusive call option agreement and the exclusive business cooperation agreement are fully performed. Exclusive Business Cooperation Agreements: Pursuant to the exclusive business cooperation agreement entered into by the WFOE and the VIEs, the WFOE provides exclusive technical support and consulting services in return for fees based on 100% of the VIE’s total consolidated profit, which is adjustable at the sole discretion of the WFOE. Without the WFOE’s consent, the VIEs cannot procure services from any third party or enter into similar service arrangements with any other third party, except for those from the WFOE. Spouse Consent letters: The spouse of each shareholder of the VIEs has entered into a spouse consent letter to acknowledge that he or she consents to the disposition of the equity interests held by his or her spouse in the VIEs in accordance with the exclusive option agreement, the power of attorney and the equity pledge agreement regarding the VIE structure described above, and any other supplemental agreement(s) may be consented by his or her spouse from time to time. Each such spouse further agrees that he or she will not take any action or raise any claim to interfere with the arrangements contemplated under the above mentioned agreements. In addition, each such spouse further acknowledges that any right or interest in the equity interests held by his or her spouse in the VIEs do not constitute property jointly owned with his or her spouse and each such spouse unconditionally and irrevocably waives any right or interest in such equity interests. These contractual arrangements allow the Company, through its WFOE, to effectively control the VIEs, and to derive substantially all of the economic benefits from them. Accordingly, the Company has consolidated the VIEs. The Group believes that the contractual arrangements with the VIEs are in compliance with PRC laws and are legally enforceable. However, uncertainties in the PRC legal system could limit the Group’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
• revoke or refuse to grant or renew the Group’s business and operating licenses;
• restrict or prohibit related party transactions between the wholly-owned subsidiaries of the Group and the VIEs;
• impose fines, confiscate income or other requirements which the Group may find difficult or impossible to comply with;
• require the Group to alter, discontinue or restrict its operations;
• restrict or prohibit the Group’s ability to finance its operations;
• place restrictions on the Group’s right to collect revenues;
• shut down the Group’s servers or blocking the Group’s app/websites; or
• take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. The imposition of any of these restrictions or actions could result in a material adverse effect on the Group’s ability to conduct its business. In such case, the Group may not be able to operate or control the VIEs, which may result in the deconsolidation of the VIEs in the Group’s consolidated financial statements. In the opinion of management, the likelihood for the Group to lose such ability is remote based on current facts and circumstances. The Group’s operations depend on the VIEs to honor their contractual arrangements with the Group. These contractual arrangements are governed by PRC laws and disputes arising out of these agreements are expected to be decided by arbitration in the PRC. The management believes that each of the contractual arrangements constitutes valid and legally binding obligations of each party to such contractual arrangements under PRC laws. However, the interpretation and implementation of the laws and regulations in the PRC and their application to an effect on the legality, binding effect and enforceability of contracts are subject to the discretion of competent PRC authorities, and therefore there is no assurance that relevant PRC authorities will take the same position as the Group herein in respect of the legality, binding effect and enforceability of each of the contractual arrangements. Meanwhile, since the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to the Group to enforce the contractual arrangements should the VIEs or the nominee shareholders of the VIEs fail to perform their obligations under those arrangements. The following table sets forth the assets, liabilities, results of operations and cash flows of the VIEs and their subsidiaries, which are included in the Group’s consolidated financial statements. Transactions between the VIEs and their subsidiaries are eliminated in the balances presented below:
As of December 31,
2021 2022
RMB RMB
ASSETS
Current assets
Cash and cash equivalents 731,189 391,175
Restricted cash 667,664 517,364
Short-term investments 351,451 —
Accounts receivable, net of allowance of RMB nil and RMB 10,199 (US$ 1,479) as of December 31, 2021 and 2022, respectively 635,235 586,373
Current contract assets 563,611 450,085
Other current assets 316,489 232,412
Total current assets 3,265,639 2,177,409
Non-current
Non-current 29,889 103,591
Intangible assets, net 53,202 53,192
Deferred tax assets 11,840 6,166
Other non-current 57,154 36,140
Total non-current 152,085 199,089
Total assets 3,417,724 2,376,498
LIABILITIES
Current liabilities
Insurance premium payables 685,028 516,661
Deferred revenue 803 —
Accrued expenses and other current liabilities 413,438 453,996
Amount due to related parties — 44
Current lease liabilities 16,452 9,122
Total current liabilities 1,115,721 979,823
Total non-current 26,047 33,979
Total liabilities 1,141,768 1,013,802
Year Ended December 31,
2020 2021 2022
RMB RMB RMB
Operating revenue, net 3,013,546 3,193,807 2,623,738
Net income/(loss) 233,434 (505,603 ) 1,210,591
Net cash (used in)/provided by operating activities (301,869 ) (240,527 ) 1,285,615
Net cash (used in)/provided by investing activities (277,521 ) (99,240 ) 347,543
Net cash used in financing activities — — — There are no consolidated VIEs’ assets that are collateral for the VIEs’ obligations and which can only be used to settle the VIEs’ obligations. No creditors (or beneficial interest holders) of the VIEs have recourse to the general credit of the Company or any of its consolidated subsidiaries. No terms in any arrangements, considering both explicit arrangements and implicit variable interests, require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIEs through loans to the shareholders of the VIEs or entrustment loans to the VIEs. Mutual Aid Platform: The Group, as a manager and a fiduciary of the plan, operated a mutual aid platform, which consisted of several mutual aid plans that provided its participants with health protection against different types of illnesses. The Group did not consolidate the plans as it determined that those plans did not meet the definition of a legal entity. The plans required contributions from its participants which accumulated and served as a reserve pool of protection. Contributions from participants were not recorded in the Group’s consolidated balance sheets as they were maintained in a custodian account, separated from the Group’s own bank accounts and could not be used for any other purposes other than to reimburse the related medical expenses of the participants. The Company terminated its Waterdrop Mutual Aid business at the end of March 2021. Medical Crowdfunding Platform The Group operates a medical crowdfunding platform to provide crowdfunding related services by bringing together those who are seeking help and who are willing to help through social network. The Group acts as an administrator of the crowdfunding campaigns and is not a party to the gift relationship between the beneficiaries and the donors. The fundraising amount were not recorded in the Group’s consolidated balance sheets as they were maintained in a custodian account, separated from the Group’s own bank accounts and could not be used for any other purposes other than to reimburse the validated |
| Use of Estimates | (d) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Group’s financial statements are estimates and judgments applied in the consolidation of the VIEs, revenue recognition, determination of the stand-alone selling price of performance obligations, realization of deferred tax assets, allowance for doubtful account, and valuation of share- based compensation arrangements. Actual results could differ from such estimates. |
| Comprehensive Income and Foreign Currency Translation | (e) Comprehensive Income and Foreign Currency Translation The Group’s operating results are reported in the consolidated statements of comprehensive (loss)/income and consist of two components: net (loss)/profit and other comprehensive income/(loss) (“OCI”). The Group’s OCI is comprised of gains and losses resulting from translating foreign currency financial statements of entities, of which the functional currency is other than the RMB which is the reporting currency of the Group, and unrecognized gains and losses from available for sale investments, net of related income taxes, where applicable. Such subsidiaries’ assets and liabilities are translated into RMB at period-end |
| Convenience Translation | ( f Convenience Translation The Group’s business is primarily conducted in China and all of the revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into US dollars (“US$” or “USD”) using the exchange rate as of balance sheet date, for the convenience of the readers. Translations of balances in the consolidated balance sheets and the related consolidated statements of operations, comprehensive loss, change in shareholders’ deficit and cash flows from RMB into USD as of and for the year ended December 31, 2022 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.8972, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 30, 2022. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2022, or at any other rate. |
| Cash and Cash Equivalents | ( g Cash and Cash Equivalents Cash and cash equivalents represent cash on hand, demand deposits and highly liquid investments placed with banks or other financial institutions, which have original maturities less than three months. The Group considers all highly liquid investments with stated maturity dates of three months or less from the date of purchase to be cash equivalents. |
| Restricted Cash | ( h Restricted Cash Restricted cash mostly include premiums received from certain insured collected by the Group in a fiduciary capacity until disbursed to the appropriate insurance companies and amounted to RMB 657,464 and RMB 507,164 as of December 31, 2021 and 2022. Restricted cash also included guarantee deposits required by China Banking and Insurance Regulatory Commission in order to protect from insurance premium appropriation by the insurance broker and guarantee deposit related to foreign exchange settlement contracts. |
| Short-term Investments | ( i Short-term Investments Short-term investments mainly include time deposits, structured deposits and other wealth management products. Time deposits are deposits with fixed interest rates placed with financial institutions and are restricted as to withdrawal and use before maturity. Structured deposits are certain deposits with variable interest rates indexed to performance of underlying assets, which contain an embedded derivatives component that is required to be bifurcated and subsequently measured at fair value in accordance with ASC 815-Derivatives and Hedging (“ASC 815”), while the host instrument is accounted for as held-to-maturity or available-for-sale. Investments are classified as held-to-maturity Investment products not classified as trading or as held-to-maturity available-for-sale |
| Accounts Receivable | ( j Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable mainly represent brokerage commission fees and technical service fees receivable from insurance companies. The allowance for doubtful accounts is the Group’s best estimate of the amount of probable credit losses over the Group’s existing accounts receivable balance. The Group determines the allowance based on historical write-off |
| Fair Value Measurement | ( k Fair Value Measurement Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
• Level 1—inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active markets.
• Level 2—inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair value are therefore determined using model based valuation techniques that include option pricing models, discounted cash flow models, and similar techniques. |
| Financial Instruments | ( l Financial Instruments The Group’s financial instruments consist primarily of cash and cash equivalents, restricted cash, available for sale investments, held to maturity investments, accounts receivable, other receivable, insurance premium payables, other current liabilities and amount due from/to related parties. As of December 31, 2021 and 2022, the carrying values of cash and cash equivalents, restricted cash, held to maturity investments, accounts receivable, other receivable, insurance premium payables, other current liabilities and amount due from/to related parties approximated their fair values due to the short term maturities of those instruments. Available-for-sale |
| Property, Equipment and Software, Net | ( m Property, Equipment and Software, Net Property, equipment and software are stated at cost. Depreciation is calculated using the straight line method over the following estimated useful lives, taking into account the residual value, if any. The table below sets forth the estimated useful life and residual value:
Category Estimated useful life Residual value
Office furniture and equipment 5 years 5%
Computer and electronic equipment 3 years 5%
Leasehold improvements shorter of remaining lease period and estimated useful life Nil
Software 10 years Nil |
| Intangible Assets, Net | ( n Intangible Assets, Net Intangible assets with an indefinite useful life represent the insurance brokerage license, insurance adjusting license, insurance agency license and medical institution license. Intangible assets with an indefinite life are not amortized and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired. Intangible assets with finite lives represent purchased trademark and software copyright. These intangible assets are amortized on a straight line basis over their estimated useful lives of the respective assets, which is 10 years. The Group compares the carrying amount of intangible assets with finite lives against the estimated undiscounted future cash flows associated with it. Impairment exists when the estimated undiscounted future cash flows are less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Impairment for intangib |
| Asset Acquisition | ( o Asset Acquisition When the Group acquires other entities, if the assets acquired and liabilities assumed do not constitute a business, the transaction is accounted for as an asset acquisition. Assets are recognized based on the cost, which generally includes the transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets’ carrying amounts on the Group’s financial statements. The cost of a group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair value and does not give rise to goodwill. |
| Long-Term Investments | ( p Long-Term Investments The Group’s long-term investments consist of equity securities without readily determinable fair value and equity method investments. i. Equity securities without readily determinable fair value The Group accounts for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed within Accounting Standards Update (“ASU”) 2016-01, ii. Equity method investments Investee companies over which the Group has the ability to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence is generally considered to exist when the Group has an ownership interest in the voting stock of the investee between 20% and 50%. Other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate. The Group also uses the equity method of accounting for its investments in variable interest entity where the Group is not considered the primary beneficiary but holds significant influences. Under the equity method of accounting, the Group’s share of the earnings or losses of the investee company, impairments, and other adjustments required by the equity method are reflected in “share of results of equity method investee” in the consolidated statements of comprehensive loss. An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than temporary. The Group estimated the fair value of the investee company based on comparable quoted price for similar investment in active market, if applicable, or discounted cash flow approach which requires significant judgments, including the estimation of future cash flows, which is dependent on internal forecasts, the estimation of long term growth rate of a company’s business, the estimation of the useful life over which cash flows will occur, and the determination of the weighted average cost of capital. The Group did not record any impairment on its equity method investments during the years ended December 31, 2020, 2021 and 2022. |
| Insurance Premium Payables | ( q Insurance Premium Payables Insurance premium payables are insurance premiums collected from insurance policyholder on behalf of insurance companies but not yet remitted to the insurance companies as of the balance sheet dates. |
| Share-Based Compensation | ( r Share-Based Compensation Equity classified share option awards Share-based payment transactions with employees (including management), such as restricted share units and share options, are measured based on the grant date fair value of the equity instrument. The Group has elected to recognize compensation expenses over the requisite service period of the award using the straight line method for all employee equity awards granted with graded vesting provided that the amount of compensation cost recognized at any date is at least equal to the portion of the grant-date fair value of the options that are vested at that date. The Group elects to recognize forfeitures when they occur. Liability-classified share option awards Awards accounted for under ASC 718-Compensation-Stock Upon an employee’s termination prior to the initial public offering in May 2021, the Group reclassifies any vested awards held by the employees into liability as the repurchase price is below fair value. The Group subsequently measures the liability awards at fair value at each reporting date until the initial public offering, with changes in fair value recognized as compensation expense. The repurchase feature expired upon the initial public offering in May 2021 and the award was reclassified from liability to equity. |
| Revenue recognition | ( s Revenue recognition Consistent with the criteria of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue represents the amount of consideration the Group is entitled to upon the transfer of promised goods or services in the ordinary course of the Group’s activities. The Group recognizes revenues when performance obligations are satisfied by transferring control of a promised good or service to a customer. The Group recognizes revenue through the application of a five-step model, which includes: identification of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations. At times, the Group may enter into multiple contracts with a customer, and these contracts may be combined and accounted for as a single contract with different performance obligations when they are entered into at or near the same time with the same customer and negotiated as a package with a single commercial objective. The total transaction price is allocated to each performance obligation in an amount based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation consistent with the guidance in ASC 606. For determination of the stand-alone selling price of performance obligations, in cases the Group sells products or services with observable selling prices, these selling prices are used to determine the relative stand-alone selling prices. In cases the Group sells customized products or services for which observable selling prices do not exist, the Group uses the expected cost plus margin approach to estimate the stand-alone selling price of each performance obligation. The Group’s revenue is principally comprised of insurance brokerage income, technical service income, crowdfunding service fees, digital clinical trial solution income, management fee income and other revenues. The following is a description of the accounting policy for the principal revenue streams of the Group.
2. Summary of Significant Accounting Policies (continued)
(s) Revenue recognition (continued) Insurance Brokerage Services The Group provides insurance brokerage services distributing various health and life insurance policies on behalf of insurance companies (its customers). As an agent of the insurance company, the Group sells insurance policies on behalf of the insurance company and earns brokerage commissions determined as a percentage of premiums paid by the policyholder. The Group has identified its promise to sell insurance policies on behalf of an insurance company as the performance obligation in its contracts with the insurance companies. The Group’s performance obligation to the insurance company is satisfied and commission revenue is recognized at the point in time when an insurance policy becomes effective. The Group also provides policyholder inquiry (call center) services which is considered administrative in nature that transfers minimal benefit to the customer. Additionally, certain contracts with insurance companies include a promise to provide certain services to the insurance company such as information gathering and payment collection. The Group has concluded that such services are immaterial in the context of the contract. The Group accrues the costs of providing such services when the related revenue is recognized (i.e., when an insurance policy becomes effective). The term for short-term health insurance policies sold by the Group is typically 12 months, while the term for long-term health and life insurance policies sold by the Group typically ranges from 6 to 30 years. The insurance company pays the Group a commission either upfront or in monthly or annual instalments based on the underlying cash flows of the insurance policy (i.e., payments of the related premiums for the insurance policy purchased). The Group’s contract terms can give rise to variable consideration due to the nature of its commission structure (e.g., policy changes or cancellations). The Group determines the transaction price of its contracts by estimating commissions that the entity expects to be entitled to over the premium collection term of the policy based on historical experience regarding premium retention and assumptions about future policyholder behaviour and market conditions. Such estimates are ‘constrained’ in accordance with ASC 606, that is, the Group uses the expected value method and only includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. For certain long-term insurance policies sold, the Group is also entitled to a performance bonus from insurance companies if the retention rate for a certain period exceeds a predetermined percentage, or if its first year premiums exceed a predetermined amount. The Group may also be asked to refund some commission to insurance companies if the retention rate for a certain period falls below a predetermined percentage. As the consideration for the bonus or the refund is contingent on the occurrence (or non-occurrence) Management of Mutual Aid Platform The Group, as a manager and a fiduciary of the plan, operated a mutual aid platform, which consisted of several mutual aid plans that provided its participants (who are the Group’s customer) with health protection against different types of critical illnesses. The Group charged a management fee calculated as a fixed percentage of each approved payout for the basic mutual plans and charged an annual membership fee for upgraded mutual plan. The Group identified a single performance obligation, a series of distinct services comprising of managing services related to the mutual aid platform. The transaction price represented variable consideration in its entirety. The Group determined that the variable consideration related specifically to the Group’s efforts to perform and transfer payout processing services during the period, which were distinct from the services the Group provided in other periods. Therefore, as the payout processing services were performed, the variable consideration earned during the period was allocated to those services and recognized in the period control transfers. In March 2021, the Group ceased the Waterdrop Mutual Aid operation and the corresponding management fee income ceased to be a revenue stream. As part of the transition, the Group voluntarily offered to cover participants’ eligible medical expenses during the transition period using its own cash and also voluntarily offered a one-year one-year Technical Services Technical service income mainly include revenue from providing technical services to insurance brokerage or agency companies through its customer relationship management (“CRM”) system and revenue from providing marketing services and risk management services to companies. The Group provides technical services to selected insurance brokerage or agency companies where the Group allows other insurance brokerage or agency companies to use its customer relationship management (“CRM”) system without taking possession of its software. The Group has determined that the insurance brokerage or agency companies are its customers. The Group earns monthly system usage revenue for providing the access to the Group’s CRM system and the revenue is recognized overtime over the contract term. In addition, for insurance policies sold through the Group’s CRM system, the Group is also entitled to a referral revenue which is based on a percentage of the first two-year’s policy premiums. The Group recognizes the referral revenue at a point in time when the insurance policy becomes effective as the Group has no further obligation to the insurance brokerage or agency companies after the initial sale of a policy. The Group estimates the services fee that it expects to be entitled to over the first two-year of the long-term insurance policy and such estimates are ‘constrained’ in accordance with ASC 606. The Group displays advertisement for certain companies on its various website channels and mobile apps and earns marketing service revenue mainly based on the number of articles published and the number of advertisement disclosed. The marketing service revenue is recorded at a point in time when the advertisement has been displayed. The Group also provides risk management services to certain insurance companies whereby customers are charged based on standard unit prices and service volumes rendered during the period. Risk management service is recognized during the period when the risk management service is delivered. Crowdfunding service fees The Group’s crowdfunding services primarily consist of providing technical and internet support, managing and reviewing the crowdfunding campaigns and facilitating the collection and transfer of funds to the patients. Starting in April , 2022, the Group charged a crowdfunding service fee calculated as a fixed percentage of the funds raised for a single campaign and which is payable to the Group only upon the successful withdrawal of the funds by the patient. The Group determined that the transaction price represented variable consideration in its entirety and related specifically to the Group’s efforts to perform and transfer the funds to the patients. Therefore, the Group recognizes the related revenues as the funds are successfully withdrawn. Digital clinical trial solution The Group provides digital clinical trial solution services to customers that mainly include biopharmaceutical companies and leading biotechnology companies. The Group enters into patient recruitment contracts with customers to match qualified patients with optimal suitability for enrollment in clinical trials. The Group earns digital clinical trial solution revenue for a fixed unit price per successful match under the patient recruitment contract. The Group’s performance obligation is to provide a successful match. The Group recognizes revenues for the services at the point in time when the individual patient enrollment for the clinical trials is confirmed by the customers. Other Revenues Other revenues mainly include commission revenue from online sale of agriculture products and health products, and membership fee from Waterdrop Medicine. The Group’s performance obligation under these contracts is to arrange for the provision of the specified goods or services by those third-party merchants. Revenue is recognized for the net amount of consideration the Group is entitled to retain in exchange for its services at a point in time upon successful sales. The Group recognized the membership fee ratably over the membership period. Disaggregation of revenues The following table provides further disaggregation by types and timing of revenues recognized:
Year Ended December 31,
2020 2021 2022
RMB RMB RMB
Operating revenue
Insurance brokerage income
Short-term insurance brokerage income 2,045,191 2,037,677 1,628,902
Long-term insurance brokerage income 650,129 789,790 714,426
Subtotal 2,695,320 2,827,467 2,343,328
Technical service income 194,130 243,542 215,832
Crowdfunding service fees — — 155,803
Digital clinical trial solution income — 566 59,456
Management fee income 109,828 2,745 —
Other revenues 28,670 131,594 27,349
Total 3,027,948 3,205,914 2,801,768
Deferred Revenue As of December 31, 2021, the Group’s deferred revenue was immaterial and was recognized as revenue during the year ended December 31, 2022. There is no deferred revenue balance as of December 31, 2022. Refund liabilities Refund liabilities are recognized for the estimated amounts of insurance brokerage service fees and technical service fees which are received but are expected to be refunded. It represents the consideration received that the Group does not expect to be entitled to earn and thus is not included in the transaction price because it will be refunded to customers. The refund liabilities are remeasured at each reporting date to reflect changes in the estimate, with a corresponding adjustment to revenue. The Group is expected to refund back to its customers if the retention rate for a certain period does not reach a predetermined percentage. Value Added Tax The Group is subject to Value Added Taxes (“VAT”) at the rate of 3% or 6%, depending on whether the entity is a general tax payer or small scale tax payer, and the related surcharges on revenue generated from providing services. VAT are reported as a deduction to revenue when incurred and amounted to RMB 229,209, RMB 309,891 and RMB 257,154 for the years ended December 31, 2020, 2021 and 2022, respectively. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in accrued expenses and other current liabilities on the consolidated balance sheets. Value added tax recoverable represents amounts paid by the Group for purchases. The amounts were recorded as current assets considering they are expected to be deducted from future value added tax payables arising on the Group’s revenues which it expects to generate in the future. Contract assets Contract assets are recorded for arrangements when the Group has provided the insurance brokerage services but for which the related payments are not yet due. Contract assets are attributable to the brokerage commission that is contingent upon the future premium payment of the policy holders and retention based bonus. Contract assets are stated at the historical carrying amount net of write offs and allowance for uncollectible accounts. When contract assets are assessed for impairment, the Group uses estimates based on the historical experience. The historical data is adjusted on the basis of the relevant observable data that reflects current economic conditions. The contract asset balance as of December 31, 2021 and 2022 includes immaterial adjustment to the estimate of the transaction price for performance obligation satisfied during the years ended December 31, 2020 and 2021. Contract assets as of December 31, 2021 and 2022 are as follows:
December 31, December 31,
2021 2022
RMB RMB
Contract assets 593,500 553,676
Less: Allowance for uncollectible accounts — —
Total 593,500 553,676 |
| Operating cost | ( t Operating cost Operating costs primarily consist of (i) payroll and related expenses for insurance agents, consultants and customer service personnel, one-year |
| Sales and Marketing Expenses | ( u Sales and Marketing Expenses Sales and marketing expenses primarily consist of (i) marketing expenses for user acquisition and brand building, and (ii) payroll and related expenses for employees involved in selling and marketing functions, as well as the associated expenses of facilities and equipment, such as depreciation expenses, rental and others. |
| Research and Development Expenses | ( v Research and Development Expenses Research and development expenses primarily consist of (i) payroll and related expenses for employees involved in platform and new function development and significant improvement, (ii) charges for the usage of the server and cloud service incurred to support research, design and development activities by research and development personnel, as well as the associated expenses of facilities and equipment, such as depreciation expenses, rental and others. The Group has expensed all research and development expenses when incurred. |
| Taxation | ( w Taxation Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. |
| Net (Loss)/Profit Per Share | ( x Net (Loss)/Profit Per Share Basic net (loss)/profit per ordinary share is computed by dividing net (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. The Group’s convertible redeemable participating preferred shares are participating securities as they participate in undistributed earnings on an as-if two-class Diluted net (loss)/profit per ordinary share reflects the potential dilution that would occur if securities were exercised or converted into ordinary shares. The Group has participating convertible redeemable preferred shares, restricted shares and share options which could potentially dilute basic net (loss)/profit per ordinary share in the future. Diluted net (loss)/profit per ordinary share is computed using the two-class as-if-converted |
| Leases | ( y Leases The Group leases offices in different cities in the PRC under operating leases. The Group determines whether an arrangement constitutes a lease at inception and records lease liabilities and right-of-use right-of-use The Group has made an accounting policy election to exempt leases with an initial term of 12 months or less without a purchase option that is likely to be exercised from being recognized on the balance sheets. Payments related to those leases continue to be recognized in the consolidated statements of comprehensive loss on a straight line basis over the lease term. |
| Significant Risk and Uncertainties | ( z Significant Risk and Uncertainties Currency Risk The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of RMB is subject to changes in central government policies and international economic and political developments that affect supply and demand in the China Foreign Exchange Trading System market of cash and cash equivalents and restricted cash. The cash and cash equivalents and restricted cash of the Group included aggregate amounts of RMB 1,406,313, and RMB 1,492,694, which were denominated in RMB at December 31, 2021 and 2022, respectively, representing 94.68% and 71.37% of the cash and cash equivalents and restricted cash at December 31, 2021 and 2022, respectively. Concentration of Credit Risk Details of the customers accounting for 10% or more of operating revenue, net are as follows:
Year Ended December 31,
2020 2021 2022
RMB % RMB % RMB %
Customer A 602,985 19.91 % 240,650 7.51 % 54,710 1.95 %
Customer B 753,456 24.88 % 457,995 14.29 % 231,026 8.25 %
Customer C 335,514 11.08 % 367,434 11.46 % 320,660 11.44 %
Customer D 100,933 3.33 % 104,928 3.27 % 357,202 12.75 %
1,792,888 59.20 % 1,171,007 36.53 % 963,598 34.39 %
Details of the customers which accounted for 10% or more of accounts receivable and contract assets are as follows:
As of December 31,
2021 2022
RMB % RMB %
Customer A 134,292 10.85 % 11,952 0.97 %
Customer B 190,284 15.38 % 78,775 6.41 %
Customer C 109,676 8.86 % 151,033 12.28 %
Customer D 59,857 4.84 % 232,259 18.89 %
494,109 39.93 % 474,019 38.55 %
The Group performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Group places its cash and cash equivalents with financial institutions with high-credit ratings and quality. |
| Recent Accounting Pronouncements not yet adopted | ( aa In June 2016, the FASB issued ASU 2016-13, non-issuers. 2019-05, 2019-10 2016-13 In June 2022, the FASB issued ASU 2022-03, which (1) clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and (2) requires specific disclosures related to such an equity security. ASU 2022-03 clarifies that a “contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the equity security’s unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value (i.e., the entity should not apply a discount related to the contractual sale restriction, as stated in ASC 820-10-35-36B as amended by the ASU). In addition, the ASU prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements. |
