Huize Holding Limited Reports Third Quarter 2020 Unaudited Financial Results

Nov 19, 2020

SHENZHEN, China, Nov. 19, 2020 (GLOBE NEWSWIRE) -- Huize Holding Limited, (“Huize”, the “Company” or “we”) (NASDAQ: HUIZ), a leading independent online insurance product and service platform in China, today announced its unaudited financial results for the three months ended September 30, 2020.

Third Quarter 2020 Operational and Financial Highlights:

  • Total Gross Written Premiums (“GWP”) facilitated on our platform increased by 41.2% to a record quarterly high of RMB779.0 million, compared to RMB551.8 million in the third quarter of 2019.
  • Total operating revenue increased by 22.9% to a record quarterly high of RMB348.5 million (US$51.3 million), compared to RMB283.6 million in the third quarter of 2019.
  • GWP of long-term life and health insurance products accounted for approximately 92.9% of total GWP facilitated, compared to 87.5% in the third quarter of 2019.
  • Cumulative number of insurance clients served was approximately 6.7 million, and cumulative number of insured clients was approximately 56.0 million as of September 30, 2020.
  • Net profit was RMB14.7 million (US$2.2 million). Non-GAAP net profit1 was RMB20.4 million (US$3.0 million).

1 Non-GAAP net profit is a non-GAAP financial measure. For more information, please see the section of “Use of Non-GAAP Financial Measure Statement” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

Mr. Cunjun Ma, Founder, Chairman and Chief Executive Officer of Huize, commented, “As China gradually recovers from the COVID-19 epidemic, the year-over-year growth rate of per capita disposable income in China reversed from negative to positive in the third quarter of 2020. At the same time, we continued to observe a steady increase of people’s insurance awareness, as well as increasing adoption of online purchase of insurance products by consumers. In line with this trend and the ongoing revitalization of the broader economy, we achieved robust year-over-year growth and record highs for both total GWP facilitated and total operating revenue in the third quarter. Moreover, we continued to deliver solid execution through the third quarter and generated positive cash flow from operations, achieving a net profit of RMB14.7 million and a non-GAAP net profit of RMB20.4 million. Such solid financial results further demonstrates the viability of our business model and our strategic focus on developing first-rate digital capabilities in providing quality long-term insurance solutions to our users.”

“We also continued to gain recognition for our industry leadership during the third quarter. In September, we were included in Hurun’s ‘China Digital Insurance Agencies 2020’ list, wherein we were ranked fourth in terms of market performance and innovation capabilities. Moreover, in September, our critical illness insurance product, ‘Darwin 3,’ won the ‘Popular Health Insurance Product of 2020’ award, marking the sixth time that our ‘Darwin’ critical illness series of insurance products has won such an industry award.”

“Looking ahead, as many of the insurance clients we have served come from families in first and second tier cities with high customer lifetime value potential, we will be rolling out offline service centers in select first and second tier cities in order to better serve their differentiated demands for higher-quality products and premium insurance services.”

“Over the next three years, we will take the opportunity to invest in a comprehensive strategic upgrade for the core Huize platform as we evolve into the post-COVID era where consumers demand further innovation in insurance products and digital transformation of the insurance purchase and service experience, by targeting to build an insurance product and service cloud platform incorporating core technologies such as cloud computing, big data analytics and artificial intelligence. We envisage the upgraded platform will accelerate the integration of online and offline channels, further empower upstream and downstream partners in our ecosystem with data and technology, and ultimately enable the industry as a whole to reach insurance clients in all scenarios and provide them with a fuller range of personalized insurance products and services throughout their entire life cycle more efficiently.”

Third Quarter 2020 Financial Results

Total operating revenue

Total operating revenue in the third quarter of 2020 increased by RMB64.9 million, or 22.9%, to RMB348.5 million (US$51.3 million) from RMB283.6 million in the same period of 2019. The increase in total operating revenue was primarily driven by an increase in brokerage income, which increased by 23.6% year over year to RMB346.8 million (US$51.1 million) in the third quarter of 2020. The increase in brokerage income was primarily driven by the 41.2% increase in total GWP facilitated, which amounted to RMB779.0 million during the third quarter of 2020, of which first year premiums accounted for RMB358.1 million and renewal premiums accounted for RMB420.9 million.

Total operating costs

Cost of revenue in the third quarter of 2020 increased by RMB45.4 million, or 24.0%, to RMB234.7 million (US$34.6 million) from RMB189.3 million in the same period of 2019, which was primarily attributable to increased service fees paid to user traffic channels.

Total operating costs in the third quarter of 2020 increased by RMB45.5 million, or 24.0%, to RMB235.3 million (US$34.7 million) from RMB189.8 million in the same period of 2019, primarily attributable to the increase in cost of revenue.

Operating expenses

Selling expenses in the third quarter of 2020 increased by RMB17.7 million, or 43.9%, to RMB57.9 million (US$8.5 million) from RMB40.2 million in the same period of 2019. This increase was primarily attributable to increased advertising and marketing expenses, an increase in personnel costs as the Company increased its headcount, and, to a lesser extent, an increase in share-based compensation expenses.

General and administrative expenses in the third quarter of 2020 decreased by RMB0.1 million, or 0.6%, to RMB30.5 million (US$4.5 million) from RMB30.6 million in the same period of 2019. This decrease was primarily attributable to the decrease in share-based compensation expenses, which amounted to RMB2.8 million in the third quarter of 2020, compared to RMB10.5 million in the same period of 2019. Excluding the impact of share-based compensation expenses, general and administrative expenses in the third quarter of 2020 increased by 37.1% year over year, primarily due to an increase in general and administrative headcount.

Research and development expenses in the third quarter of 2020 increased by RMB3.4 million, or 41.7%, to RMB11.5 million (US$1.7 million) from RMB8.1 million in the same period of 2019, primarily attributable to an increase in the number of R&D personnel.

Net profit and Non-GAAP net profit for the period

Net profit in the third quarter of 2020 was RMB14.7 million (US$2.2 million), compared to a net profit of RMB16.1 million in the third quarter of 2019. Non-GAAP net profit in the third quarter of 2020 was RMB20.4 million (US$3.0 million), compared to RMB29.7 million in the third quarter of 2019.

Cash and cash equivalents

As of September 30, 2020, the combined balance of the Company’s cash and cash equivalents amounted to RMB446.1 million (US$65.7 million), compared to RMB88.1 million as of December 31, 2019. The increase was primarily due to the cash proceeds raised from the Company’s initial public offering in February 2020.

Business Outlook

Based on the Company’s preliminary assessment of the current market conditions, the Company currently expects total operating revenue for the fourth quarter of 2020 to be in the range of RMB330 million to RMB350 million. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change as a result of various market uncertainties, including those related to the continued outbreak of COVID-19 globally.

Share Repurchase Program

As of September 30, 2020, the Company had purchased an aggregate of 6,647 ADSs for a total amount of approximately US$0.04 million, under its share repurchase program pursuant to which the Company has been authorized to repurchase up to US$10 million ADSs by April 15, 2021, as previously announced on April 15, 2020.

Conference Call

The Company’s management team will hold a Direct Event conference call on Thursday, November 19, 2020, at 7:00 A.M. Eastern Time (or 8:00 P.M. Beijing Time on the same day) to discuss the financial results. Details for the conference call are as follows:

Event Title: Huize Holding Limited Third Quarter 2020 Earnings Conference Call
Conference ID: #3687648
Registration Link: http://apac.directeventreg.com/registration/event/3687648

All participants must use the link provided above to complete the online registration process in advance of the conference call. Upon registering, each participant will receive a set of participant dial-in numbers, the Direct Event passcode, and a unique access PIN, which can be used to join the conference call.

A replay of the conference call will be accessible through November 27, 2020, by dialing the following numbers:

International: +61-2-8199-0299
Mainland China Toll Free: 400-632-2162
United States Toll Free: +1-855-452-5696
Hong Kong, China Toll Free: 800-963-117

A live and archived webcast of the conference call will also be available at the Company’s investor relations website at ir.huize.com.

About Huize Holding Limited
Huize Holding Limited is a leading independent online insurance product and service platform in China. Targeting the younger generation, Huize is dedicated to serving its insurance clients for their life-long insurance needs. Leveraging its online platform, Huize offers a wide variety of insurance products with a focus on long-term life and health insurance products, and empowers its insurer partners to reach a large fragmented client base in the insurance retail market efficiently and enhance their insurance sales. Huize provides insurance clients with digitalized insurance experience and services, including suitable product recommendations, consulting service, intelligent underwriting and assistance in claim application and settlement, which significantly improve transaction experience.

For more information, please visit http://ir.huize.com.

Use of Non-GAAP Financial Measure Statement

In evaluating our business, we consider and use non-GAAP net profit/(loss) as a supplemental measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define non-GAAP net profit/(loss) as net profit/(loss) excluding share-based compensation expenses and interest on convertible bond. Such adjustments have no impact on income tax because either the non-GAAP adjustments were recorded at entities located in tax free jurisdictions, such as the Cayman Islands or because the non-GAAP adjustments were recorded at operating entities located in the PRC for which the non-GAAP adjustments were not deductible for tax purposes.

We present the non-GAAP financial measure because it is used by our management to evaluate our operating performance and formulate business plans. Non-GAAP net profit/(loss) enables our management to assess our operating results without considering the impact of share-based compensation expenses and the interest on convertible bond. We also believe that the use of this non-GAAP financial measure facilitates investors’ assessment of our operating performance.

This non-GAAP financial measure is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. The non-GAAP financial measure has limitations as an analytical tool. One of the key limitations of using adjusted net profit/(loss) is that it does not reflect all items of income and expense that affect our operations. Further, the non-GAAP financial measure may differ from the non-GAAP financial information used by other companies, including peer companies, and therefore their comparability may be limited.

The non-GAAP financial measure should not be considered in isolation or construed as an alternative to net profit/(loss) or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measure in light of the most directly comparable GAAP measure, as shown below. The non-GAAP financial measure presented here may not be comparable to similarly titled measure presented by other companies. Other companies may calculate similarly titled measures differently, limiting the usefulness of such measures when analyzing our data comparatively. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB are made at a rate of RMB6.7896 to US$1.00, the exchange rate on September 30, 2020 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollars amounts referred could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Huize’s beliefs and expectations, are forward-looking statements. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, business outlook and quotations from management in this announcement, contain forward-looking statements. Huize may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Huize’s goal and strategies; Huize’s expansion plans; Huize’s future business development, financial condition and results of operations; Huize’s expectation regarding demand for, and market acceptance of, its online insurance products; Huize’s expectations regarding its relationship with insurer partners and insurance clients and other parties it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing.

Further information regarding these and other risks is included in Huize’s filings with the SEC. All information provided in this press release is as of the date of this press release, and Huize does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

Investor Relations
Harriet Hu
Investor Relations Director
+852 3180 9207
investor@huize.com

Media Relations
mediacenter@huize.com

Huize Holding Limited
Unaudited Consolidated Balance Sheets
(all amounts in thousands, except for share and per share data)

    As of December 31   As of September 30
    2019    2020
    RMB   RMB   USD
Assets            
Current assets            
Cash and cash equivalents   88,141     446,068     65,699  
Restricted cash   161,186     255,807     37,676  
Accounts receivable, net of allowance for doubtful accounts   180,393     195,590     28,807  
Insurance premium receivables   2,329     2,051     302  
Amounts due from related parties   280     169     25  
Prepaid expense and other receivables   29,196     39,162     5,767  
Total current assets   461,525     938,847     138,276  
             
Non-current assets            
Property, plant and equipment, net   8,006     8,511     1,254  
Intangible assets, net   1,652     2,158     318  
Deferred tax assets   64     194     29  
Long-term investments   23,395     25,353     3,734  
       Other assets   14,163     1,862     274  
Operating lease right-of-use assets   -     10,517     1,549  
Total non-current assets   47,280     48,595     7,158  
Total assets   508,805     987,442     145,434  
             
Current liabilities            
Short-term borrowings   36,880     72,000     10,604  
Accounts payable   124,441     163,749     24,118  
Insurance premium payables   125,587     115,659     17,035  
Other payables and accrued expenses   30,211     20,260     2,984  
Payroll and welfare payable   43,993     51,822     7,633  
Income taxes payable   206     2,874     423  
Operating lease liabilities   -     7,854     1,157  
Amounts due to related parties   465     -     -  
Total current liabilities   361,783     434,218     63,954  
             
Non-current liabilities            
Long-term borrowings   -     40,000     5,891  
Deferred tax liabilities   530     605     89  
Operating lease liabilities   -     2,742     404  
Payroll and welfare payable   -     5,335     786  
Other non-current liabilities   518     -     -  
Total non-current liabilities   1,048     48,682     7,170  
Total liabilities   362,831     482,900     71,124  
             
Mezzanine equity            
Series A redeemable preferred shares   84,072     -     -  
Series B redeemable preferred shares   261,272     -     -  
Series B+ redeemable preferred shares   81,654     -     -  
Series B++ redeemable preferred shares   27,629     -     -  
Total mezzanine equity   454,627     -     -  
             
Shareholders’ (deficit)/equity            
Common shares   33     -     -  
Class A common shares   -     62     9  
Class B common shares   -     10     1  
Treasury stock   -     (319 )   (47 )
Additional paid-in capital   64,882     879,310     129,508  
Accumulated other comprehensive income   414     (9,208 )   (1,356 )
Accumulated deficit   (373,982 )   (365,313 )   (53,805 )
Total shareholders’ (deficit)/equity   (308,653 )   504,542     74,310  
Total liabilities, mezzanine equity and
shareholders’ equity
  508,805     987,442     145,434  
                   

Huize Holding Limited
Unaudited Consolidated Statements of Comprehensive Income
(all amounts in thousands, except for share and per share data)

    For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2019   2020   2019   2020
    RMB   RMB   USD   RMB   RMB   USD
Operating revenue                        
Brokerage income   280,563     346,773     51,074     728,517     828,639     122,045  
Other income   3,027     1,677     247     6,539     3,509     517  
Total operating revenue   283,590     348,450     51,321     735,056     832,148     122,562  
Operating costs and expenses                        
Cost of revenue   (189,306 )   (234,658 )   (34,561 )   (469,618 )   (522,303 )   (76,927 )
Other cost   (499 )   (649 )   (96 )   (1,314 )   (2,184 )   (322 )
Total operating costs   (189,805 )   (235,307 )   (34,657 )   (470,932 )   (524,487 )   (77,249 )
Selling expenses   (40,201 )   (57,857 )   (8,521 )   (102,850 )   (158,929 )   (23,408 )
General and administrative expenses   (30,649 )   (30,475 )   (4,488 )   (127,284 )   (112,938 )   (16,634 )
Research and development expenses   (8,101 )   (11,478 )   (1,691 )   (22,006 )   (33,292 )   (4,903 )
Total operating costs and expenses   (268,756 )   (335,117 )   (49,357 )   (723,072 )   (829,646 )   (122,194 )
Operating income   14,834     13,333     1,964     11,984     2,502     368  
                         
Other income                        
Interest expenses   (3 )   (193 )   (28 )   (265 )   (812 )   (120 )
Unrealized exchange (loss) /income   (4 )   -     -     365     (38 )   (6 )
Investment income   675     137     20     675     137     20  
Others, net   901     3,278     483     10,220     9,261     1,365  
Profit before income tax, and share of income of equity method investee   16,403     16,555     2,439     22,979     11,050     1,627  
Income tax expense   (232 )   (1,794 )   (264 )   (376 )   (2,613 )   (385 )
Share of (loss)/income of equity method investee   (67 )   (67 )   (10 )   (90 )   232     34  
                         
Net profit   16,104     14,694     2,165     22,513     8,669     1,276  
                         
Net (loss)/profit attributable to non-controlling interests   (25 )   -     -     66     -     -  
Net profit attributable to Huize Holding Limited    16,129     14,694     2,165     22,447     8,669     1,276  
Redeemable preferred shares redemption value accretion   (7,868 )   -     -     (22,976 )   (4,274 )   (629 )
Allocation to redeemable preferred shares   (7,981 )   -     -     (11,157 )   1,074     158  
Net profit/(loss) attributable to common shareholders   280     14,694     2,165     (11,686 )   5,469     805  
                         
Net profit   16,104     14,694     2,165     22,513     8,669     1,276  
Foreign currency translation adjustment, net of tax   112     (13,117 )   (1,932 )   116     (9,622 )   (1,417 )
Comprehensive income/(loss)   16,216     1,577     233     22,629     (953 )   (141 )
                         
Comprehensive (loss)/income attributable to non- controlling interests   (7 )   -     -     87     -     -  
Comprehensive income/(loss)  attributable to Huize Holding Limited    16,223     1,577     233     22,542     (953 )   (141 )


                         
Weighted average number of common shares used in computing net profit per share                        
Basic   459,501,183   1,021,608,313   1,021,608,313   459,501,183     943,959,644   943,959,644
Diluted   459,501,183   1,029,852,116   1,029,852,116   459,501,183     951,064,828   951,064,828
Net income/(loss) per share attributable to common shareholders                        
Basic   0.00   0.01   0.00   (0.03 )   0.01   0.00
Diluted   0.00   0.01   0.00   (0.03 )   0.01   0.00


Huize Holding Limited

Unaudited Reconciliations of GAAP and Non-GAAP Results
(all amounts in thousands, except for share and per share data)

    For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2019   2020   2019   2020
    RMB   RMB   USD   RMB   RMB   USD
Net profit   16,104   14,694   2,165   22,513   8,669   1,276
Share-based compensation expenses   13,567   5,719   842   81,341   48,045   7,076
Non-GAAP net profit   29,671   20,413   3,007   103,854   56,714   8,352
                         

Source: Huize Holding Limited

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