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Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Corporation 2025 Interim Results Conference Call. [Operator Instructions] I will now turn the call over to Mr. Du Binglin, Head of IR team.
Binglin Du: Thank you, operator. Good day, ladies and gentlemen. Welcome to our 2025 interim results conference call. Joining us today are JD Health's Executive Director and CEO, Mr. Jin Enlin; and CFO, Mr. Hui. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update its forward-looking information, except as required by law. During today's call, management will also discuss certain non-IFRS financial Measures for comparison purposes only. For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to the interim results announcement for the 6 months ended June 30, 2025, issued today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on the text for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail. I would like now to turn the call to the first speaker Mr. Jin Enlin, please go ahead, sir.
Enlin Jin: Hello, everyone. I'm Jin Enlin, CEO of JD Health. It's a pleasure to share our 2025 first half results. From a policy standpoint, national initiatives continue to drive the high-quality development of the health care industry. The implementation of a targeted measures such as special action plan for promoting health consumption has further elevated the health consumption sectors growth. According to the Healthy China 2030 plan, the total scale of China's health care service market is projected to reach RMB 16 trillion by 2030. In short, supportive policy measures are expediting market expansion, reinforcing the certainty of sustained growth in the health industry. On the demand side, health consumption has become a key driver of the emerging consumer market. For instance, the year of weight management campaign launched by the National Health Commission has given rise to a blue ocean weight loss economy offering significant growth opportunities. Meanwhile, with the rapid development of the AI technologies, various government departments are actively implementing targeted policies to accelerate the application of AI technologies in medical services and health management. AI-powered customized and convenient health care services are clearly emerging as powerful catalysts for market growth. As a leading health service provider, we have adequately captured industry growth trends and leverage supportive policies to achieve high-quality performance development. Amid our broader efforts to advance the Healthy China initiative, we continue to drive technological innovation and optimize our business models consistently creating greater value for both our users and society. Now I'd like to share our business update for the first half of the year, followed by a discussion of our business outlook for the second half. First, let me review our business development over the past 6 months, focusing on 3 key aspects. First, we strengthened our supply chain advantages and continue to enhance the value of our position as the first entry point for online health consumption. Since the beginning of this year, we have consistently optimized our omnichannel capacities focused on direct sales and online marketplace plus on-demand retail to further increase the accessibility of pharmaceutical and health products and improve the overall user experience. For starters, we have deepened collaboration with our partners to deliver the latest and most comprehensive range of pharmaceutical and health care products to users. For instance, in the innovative drug sold, we launched over 30 new products in the first half of the year, covering treatments for chronic diseases, digestive health, respiratory issues and infections. Many of these range of innovative drugs were launched nationwide on JD Health immediately following their domestic approval. Leveraging our supply chain advantages, we ensure that the cutting-edge treatment options reach patients swiftly while helping our partners to expand market coverage, a win-win outcome for users, the industry and JD Health. Not only can users quickly purchase a wide range of health care products at JD Health, they can also access attentive professional services. For example, when we launched the Anytime 5th generation continuous glucose monitor, with setting this record by selling over [ 30,000 ] units only the first day, we also offered on-demand delivery and at-home professional support with device fitting and calibration. Additionally, we provide free online doctor consultation via JD Online hospital for users to learn more about blood sugar management and control strategies. Leveraging our integrated online/offline supply chain advantage, we continued to strengthen our core B2C business in the first half of the year while also expanding our instant on-demand retail operations. Our instant delivery service now encompasses over 15,000 partner pharmacies and our online medical insurance payment services reached nearly 200 million people nationwide. By integrating B2C Pharmaceutical e-commerce offline pharmacies and 30-minute delivery instant retail service, we have reinforced our near-field, far field and on-site pharmaceutical retail infrastructure effectively meeting users' medication needs around the clock. Second, with online and off-line service integration is core, we are deepening the development of the consultation, examination, diagnosis, pharmaceutical closed-loop service model. In the first half of this year, we advanced the integration of online and offline service format to further enhance our consultation, examination, diagnosis pharmaceutical model by expanding our online hospital specialty care services and optimizing our home care on-demand service ecosystem. We aim to make users more care and personalized health care needs. We focused on key specialty offerings such as dermatology, mental health, traditional Chinese medicine, oncology and andrology, continuously broadening and refining our online health care services -- for instance, in dermatology, we provided refined and personalized treatment solutions to over 20 million patients and launched China's pioneering online rare skin disease diagnosis and treatment center. In addition, our home care on-demand services have expanded to cover 4 items in 7 categories, including high- frequency scenarios such as home care and rehab services. Meanwhile, JD at Home rapid testing service now operates in 23 cities and offers over 116 types of testing. This in-hospital equivalent home services significantly enhanced accessibility and users at home health management experience, further reinforcing our advantages in the consultation, examination, diagnosis and pharmaceuticals model. Third, we have prioritized the large-scale application of AI in specific scenarios to foster health care exclusivity by technology. In the first half of this year, AI application in the health care industry flourished, aligning with development of new quality productive forces and serving as innovative solutions for the industry's long-standing difficult access and high cost pain points. As one of the earliest companies in China's online health care industry to develop and deploy AI, JD Health has taken the lead in realizing market AI applications, successfully upgrading and launching a series of AI-powered medical products such as AI Jingyi, JOY DOC and Kangkang covering various medical and health care scenarios, both in and out of hospitals, including competitions and drug purchases. Let's take AI Jingyi powered assistant as the example. A now, JD Health Online Hospital has launched more than 500 intelligent doctor agents, making one of the largest online medical platforms in the industry in terms of the number of intelligent doctor agents and services here. We also introduced a series of intelligent health care agents such as AI doctors, AI pharmacists and AI nutritionists. Through the deep integration of technology and application scenarios, we have optimized the user experience and greatly expanded the boundaries of health care services. When you purchase any health care product or service on the JD app, you can access our intelligent agent consultation services. We encouraged everyone to use them and welcome your valuable feedback. For the second half of the year, we will continue to strengthen our integrated online and offline medical service ecosystem and promote technological innovation, deepening our commitment to providing users with accessible, convenient and affordable health care products and services. In the pharmaceutical and health care retail sector, we will enhance supply chain management, advance our omnichannel initiative and continuously improve the accessibility of pharmaceutical and health care products and the overall service experience. In the health care service sector, we will gather more high-quality professional resources such as doctors, nurses and nutritionists to expand our on-tiered personalized health care services scenario. At the same time, we'll continue to promote the application of AI products to achieve more intelligent professional and efficient health care service for all. As always, we remain committed to our business philosophy of a trusted based value creation centered on customers' health, joining hands with our partners creating sustainable health ecosystems and contributing to implementation of Health China 2030 initiatives. Thank you for your continued support and trust in JD Health. Now I'm going to turn the call to Madam Hui Deng to discuss the details of financial performance in the first half of 2025.
Deng Hui: Thank you, Jin Enlin. Hello, everyone. Thank you for joining JD Health's earnings conference call. It's my pleasure to provide an update on our performance in the first half of 2025. First half of 2025, China continued to promote the high-quality development of the health care industry, explicitly calling for the cultivation and development of new quality product forces in the health consumption and supporting innovation in Internet plus health care model as the industry-leading health care service provider, JD Health has responded to the public needs by accelerating quality upgrades across health care products and services and actively promoting AI- driven service model innovation. JD Health is committed to providing high-quality, accessible and convenient health consumption and service experiences for users. JD Health achieved high-quality growth in the first half of 2025 with revenue of RMB 35.3 billion, up 24.5% year-over-year. We continued to strengthen the synergies of omnichannel model, encompassing direct sales, online marketplaces and on-demand retail further enriching our product offerings, enhancing user experience and maintaining competitive pricing. We also continue to expand our cooperation with industrial leading pharmaceutical companies and health product suppliers, elevating customer brand awareness. While consistently earning user trust, we also created new growth opportunities for our partners as of June 30, 2025. Our annual active user accounts for the last 12 months reached 200 million, a net addition of approximately 20 million compared to June 30, 2024. First, our direct sales revenue for the first half of 2025 increased 22.7% year-over-year to RMB 29.3 billion, constituting 83.1% of our total revenue. In the pharmaceutical sector, we empowered our partners through new and specialty drug launches, omnichannel expansion and digital marketing. During the first half of 2025, over 30 innovative drugs debuted on JD Health, including Xin Er Mei weight loss drug dependently developed by Innovent Biologics and Yi Su Da, a new domestic anti-influenza drug developed by Qingfeng Pharmaceutical. JD Health also set new benchmarks for innovative cooperations with multiple global pharmaceutical companies. For instance, we forged a strategic partnership with Novo Nordisk to develop integrated one-stop medical solutions for diabetes and related diseases building a full circle service system. In terms of medical devices and health supplements, we partnered with multiple brands to launch several products online. Notably, the UA Anytime 5th-generation continuous glucose monitor debuted on JD Health offering users on- demand delivery service, thanks to our omnichannel supply chain network and service capacity. Second, our service revenue reached RMB 6.0 billion in the first half of 2025, representing growth of 34.4% year-over-year and accounting for 16.9% of total revenue. This proportion has risen 1.2 percentage points compared to the same period in 2024 with relatively high growth rate sustained in advertising service and platform commissions. We continue to help brand partners achieve sustained business and user growth by focusing on new health consumption scenarios and precisely aligning with user consumption needs, which attracted increased marketing investment from brands. At the same time, we continue to enhance the synergies between our direct sales and online market businesses that supporting partners merchants and significantly enriching product variety on our marketplace as of June 30 of this year, the number of merchants on our marketplace exceeded 150,000 increase of over 15,000 since December 31, 2024. During the first half of 2025, we further developed our on-demand retail business. We continue to expand our instant delivery service coverage and fulfillment capacities, connecting over 200,000 pharmacies nationwide. We also extended the reach of its online medical insurance payment services to nearly 200 million people. Meanwhile, we continue to explore innovative retail pharmacy models to deliver omnichannel retail experiences to users across different regions. For instance, JD Health and Beijing Children's Hospital have entered into a strategic cooperation framework to jointly promote the pediatric pharmacy model. This collaboration aims to establish dual channel certified pediatric specialized pharmacies integrating online and off-line services, payment systems and delivery network. In health care services, we continue to enhance our online hospital specialty offerings establishing 5 core specialty areas: dermatology, mental health, traditional Chinese medicine, oncology and andrology. In dermatology, we deepened our focus on the diagnose and treatment of common specialty diseases by offering dedicated clinics for allergies, pediatric dermatology, hair care and cosmetic medicine delivering refined and personalized treatment solutions to over 20 million patients. In the first half of 2025, we continue to solidify our industry leadership in at-home health care services by further enhancing our one-stop closed service model. For instance, we further strengthened our home care on-demand service capacities and continue to iterate our service offerings. As of June 30, 2025, more than 12,000 nurses had begun offering services on JD Health platform. During the first half of 2025, we also continued to expand the JD at-home rapid testing service network, offering over 160 types of testing to users across 23 cities in China. From a profitability perspective, our gross profit margin in the first half of 2025 increased 1.6 basis points year-over-year to 25.5%, demonstrating our efforts in deepening our supply chain network. We also enhanced the brand marketing resources by enriching our marketing products and distribution channels, increasing investments in advertising resources and deepening cooperation with brand partners. Looking ahead, we'll further tap into the value of the retail pharmacy plus health care service closed-loop ecosystem. Meanwhile, we will continue leveraging our supply chain advantages to prepare the integrated development of the online and off-line health service ecosystem and further expand our market share across all product categories. On non-IFRS basis, our fulfillment expense ratio in the first half of 2025 was 10%, a decrease of 20 basis points from the same period of 2024, benefiting from the cost dilution driven by increased order volume. In the first half of 2025, our selling and marketing expense ratio was 5.1%, increasing by 20 basis points from the same period of 2024, with selling and marketing expenses rising by RMB 420 million year-over-year to further reinforce user perception as a trusted destination for both medical consultations and medicine purchases. We organized major campaigns during the year's 6 aiding grand promotion, including JD Medicine free orders and [ Super Symbol ] initiative. In the first half, our R&D expense ratio was 2.1%, improvement of 10 basis points from the same period. In the first half of 2025, leveraging industry's rich collection of online health care scenarios, we took the lead in building AI-powered full- spectrum health service matrix that integrates AI doctors, multi-intelligent service agents and intelligent doctor agents accelerating the advancement of Internet-based health care into a new phase of scaled AI application. As of June 30, 2025, AI Jingyi intelligent agents had cumulatively served over 50 million users, covering every health care scenario at every stage from consultation to medication purchase and use additionally, benefiting from our rapid business growth, we enhanced the utilization efficiency of fixed R&D expenses such as service by 2025. We expect to complete AI Jingyi program in collaboration with partner doctors, further broadening the specialty coverage of intelligent doctor agents to address the increasing demand for high-quality health resources. We will continue to advance our work in health care AI to deliver health care services that are more convenient, professional and inclusive, reaching a wide population. Our G&A expense ratio was 0.8% in the first half of 2025, flat with the same period of last year. Our back-end staff and operational management efficiency levels continue to lead the industry. Finance income decreased to RMB 1.4 billion in the first half of 2025, up 12.7 percentage year-over-year, mainly attributable to a lower yield on wealth management products resulting from interest rate costs. Excluding share incentive, non-IFRS net profit in the first half of 2025 increased by 35% year-over-year to RMB 3.6 billion with a margin of 10.1%, rising 80 basis points year-over-year, reaching a record high for the same period of the year. Our cash flow from operating activities reached RMB 6.2 billion in the first half of 2025. As of the end of June, total cash resources were RMB 6.6 billion, a net increase of RMB 6.6 billion compared with December 31, 2024. To sum up, the first half of 2025, JD Health maintained high-quality growth across its entire business with a steady improvement in operating efficiency and profitability. At the same time, we consistently expanded new business such as on-demand digital and accelerated the application of health care, AI and other technologies across diverse service scenarios. Finally, I would like to express my heartfelt thanks to our shareholders for their enduring support and trust in JD Health looking ahead. We'll continue and remain dedicated to our business philosophy for trust-based value creation centered on customers' health and focus on cost efficiency and experience constantly leveraging our supply chain advantages to prepare the integrated development of the online and online health care service ecosystem. Meanwhile, we will continue to advance our business on all fronts, increasing our market share and industry influence to create greater value for our shareholders. That concludes my remarks. Please now go and open for questions.
Operator: [Operator Instructions] The first question from Bank of America. Miranda, please go ahead.
Xiaomeng Zhuang: Congratulations for the wonderful achievement. In the first half of 2025, we have seen great growth momentum. I want to invite our management to say more about your medium and long-term strategy.
Enlin Jin: Thank you, Miranda, for the question. In my prepared remarks, I mentioned that, generally speaking, due to the health care consumption trend as well as the policies on the AI demand. In China, the market size is expanding and is having a lot of potential. It reflects that more and more consumers are having precise and personalized requirements to maintain health. These trends are very positive. Those trends are our basis for us to make long-term strategies. Over the last half year, in the health care sector, we continued our role to expand and maximize the benefits of the supply chain. We want to make it good and efficient following the requirements of the users. We are providing different strategies such as the new product launch and personalized real-time services. We are having good targets and well designed. As we are having detailed resource input as well as different categories, improving our outcomes. And we are also having the online doctor, online purchase communications and to door delivery. This model is using well the online hospital and to door services, maximizing the beauties of the synergies, serving more patients and the doctors will join us online. The drugs will be delivered to home. This service will be delivered online. This is our one-stop services in terms of tech-driven innovation, our focus is on the deep integration of technology with [ massive ] applications. In the short-term, AI already been proven to be a valuable tool in the long run. The AI is to expand the supply and availability of the health care services and we are seeing it as a great productive force. Our strategy is centered on our user needs. We started by deploying AI across our existing business, enabling more consumers to experience the convenience and personalization of the AI-powered services anywhere, anytime. Building this foundation, we continue to focus on upgrading our large models of assets and expanding the frontiers of the AI enhanced health care services. Thank you.
Operator: The next question comes from Xipeng Feng from CICC.
Xipeng Feng: Congratulations for the wonderful achievements of the last half year. And I've noticed that the AI products have been upgraded dramatically. Can you share with us more about the AI strategy from the company perspective?
Enlin Jin: Thank you very much for the question. Regarding the market position, JD Health is a leading company. In China, we have our cutting-edge health care large language models and signature AI-enhanced health care offerings. One purpose is to make JD Health application and access points everywhere to be seen. Everybody who is using JD Health is our user. We are going to improve the quality and efficiency of all the businesses and services. And we're also going to create a new supply of the health care service, which will, in turn, create more traffic and the growth. We have fully deployed AI across existing business. By June 30 of this year, our AI Jingyi intelligent agents have served over 50 million users. During the June 18 promotion, our AI doctor that we achieved a user service rate of 97%. We help the doctors to improve their working efficiency as well. We're also seeing that the Doctor Digital Twin has helped experts increasing their diagnostic efficiency of 15%. Our intelligent service agents like AI doctors and AI pharmacists have boosted our user purchase conversion rate. The conversion rate of AI client consultation was 10 percentage points higher than the human operated consultation. This AI products have meaningfully improved our user experience. Thank you very much for the question.
Operator: Next question comes from Lincoln from Goldman Sachs.
Lincoln Kong: Congratulations again for the wonderful achievement. My question is on the new business. How about new business for, especially in the second half of this year, we are working closely to the on-demand retail. Can you share with us more plans?
Enlin Jin: Thank you, Lincoln. It's great for us to see the growing attention on the demand retail. In the first half of this year, we further accelerated the rollout of our next-generation pharmacies with over 100 offline stores now operational. We are paying close attention to synergies between the existing businesses and the next-generation service offering. On one hand, we integrate rich variety of health consumption scenarios to further enhance user experience and elevate the brand recognition of JD Health for consultation and medication purchase. On the other hand, by harnessing our B2C e-commerce strength, we are establishing a more advanced industry-leading omnichannel supply chain through this new demand retail model. This will further improve our overall industry efficiency and benefit all of our partners from upstream industrial brands to downstream pharmacies. We will continue to explore next-generation business models and service scenarios to advance the penetration. Except for exploring and starting new stores we are also offering refined efficiency to improve the efficiency to refine operations, optimizing the product service experience and fully leveraging the synergies between the online B2C and O2 channels. This will help us better meet users' on-demand health care needs. Our self-operated O2O pharmacy stores use our in-house supply chain services, which gives them significant advantages in economy of care and supply chain efficiency compared to many stand-alone pharmacies. By integrating our online and offline models, our average store production is higher than the industry average. Additionally, our full year investment plan will remain flexible. We will focus on innovating offline offerings and improving our user experience, we're also paying attention to ROI and synergies with our existing business. Thank you very much for this question, and that is our answer.
Operator: Next question comes from Henry of UBS.
Henry Liu: My question is on the medical insurance payment. The company as well as our competitors are speaking about the new breakthroughs. I want to listen to your comments on the new development. And for the business models, except for O2O, you have new business models to explored.
Enlin Jin: For the medical insurance payment, our goal is to further enhance the online medicine purchase with medical insurance payment services in pilot cities under the O2O model and to drive user growth in this region. Meanwhile, in areas where policies are more advanced, we have been running pilots of the online medicine purchase with medical insurance payment service in our direct sales business. Our objective is to leverage medical insurance programs, continuously elevate JD Health brand as the go-to platform for consultation and medication purchase while continuing to explore more health care service scenarios and refine and iterate our business model. We believe that if policies are relaxed further building on first mover advantage, innovative business models and omnichannel supply chain system to help lead the industry in advancing payment service.
Operator: Due to time constraint, that concludes today's question-and-answer session. At this time, I will now turn the conference back to Jin, for any additional closing remarks.
Enlin Jin: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly. Thank you.