Q1 2020 Earnings Call

May 21, 2020

[music].

Quarter 2020 conference call at this time, all participants are in listen only mode. After managements prepared remarks, there will be a question and answer session.

As a reminder to these conference calls be recorded I'd like to turn to me overture host for today's call just want to <unk> Investor Relations Director Pease proceed Monty Cook.

Thank you operator.

Hello, everyone and thank you Johnny not today.

One what's called her Twentytwenty conference call.

On the call today, well, one doctor Gong to co founder and executive Chairman.

Mr trailing no co founder Chairman and CEO, Mr., Chen Chief Financial Officer, Mr. Harvey Wall co COO Mr. Barry.

Co COO mismatch Campbell Investor Relations Director Animates true outlets Mill Finance director.

As a reminder, today's conference call, it's being broadcast like they'll webcast. You addition.

Replay will be available.

The whiteside following the coal.

Companys earnings press release was distributed earlier today and together with our earnings presentation available on the Companys IR website at <unk> Dot one dotcom doxey area.

Before we get started let me remind you that this call may contain forward looking statements made on Dirty Safe Harbor provision Alfie Private Securities Litigation Reform Act of 1995.

Such statements are based upon management's current expectations and the current markets and operating conditions and the relate to events that involve known and unknown risks uncertainties and other factors.

Which could cause actual results to differ materially.

For more information about these risks please refer to companies climbing wouldn't be as E C.

One well one does not undertake any obligation to update any forward looking statements as the result of new inflammation future events or otherwise, except as required onto applicants so bold law.

Please note that all numbers are inC.R., and D. and all comprehension referred to year over here.

Unless otherwise stated.

Please also refer to our earnings press release.

Equal nation of our comfort comprehensive.

I work comparative financial performance all in gear open your faces.

With that I will turn the call over two hours C O jumonville.

[noise], thanks to everyone for joining our first quarter trends you can see earnings call.

A few work on the pandemic before I move on to the earnings.

The world decreasing the global Health crisis, that's the pandemic continues to evolve rapidly and that's created uncertainties and disruptions affecting the lives of millions of people.

I would like to express our gratitude to the front one health care professionals around the world Selflessly caring for those who took six all sold I'll review and those who have been affected.

Well I've been playing a lot to grow independent make relief efforts since they outbreaks and the will continue to support the global community to the best of all ability.

I'm very proud of how all the team and I'll start have mobilized and the United.

Sure the safety of each other while continuing to serve our customers partners and the support communities in China.

Around the world at this time of great need.

Let's begin.

Oh, sorry, my remarks, we'll get a recap of all mission and the growth strategy, an overview of the company's business and operational performance and then pass the call to our CFO Luke for a detailed financial review and all guidance for second Walter.

Well then open the call focus on those.

Please turn to slide fall of section one.

[noise] as we entered fancy plenti well have a growth strategy to continuously executing all mission of.

Digitally connected in patients with drugs and health care services.

Our goal is to tie all of our businesses together and brings focus to our organization in service of all customers and partners.

So the millions and millions, we saw particularly patients with chronic diseases with structured around meeting their needs.

All commitment to them is this.

We will strive to provide what they need to keep them well in the most convenient affordable and dependable way either in person online or web two home.

Look at Liberty to all and consumers of broad range of products and services from medical consultations total prescription drugs from health and wellness products to tools from onetime six to lifecycle chronic disease management from offline to online and the support services.

Help them better manage their conditions.

[noise] there are four factors in our growth strategy.

One.

Capitalize on the enormous market opportunity from building China's largest the virtual pharmacy network of over 260000 drug schools with a coverage of over 50% over the country.

Over 60% over the T., a three to six cities.

This expansive network allows us to serve the millions and millions of chronic disease patients in the country.

The strategic placement of our fulfillment centers across China gives us the operational flexibility so effectively respond to a crisis like this pandemic.

As we ramp up and down our various centers to meet the constantly evolving needs.

Different parts of the country.

I know, we've a deep sourcing capability, which includes 214 direct sourcing relationships, where we're able to provide one of the richest selections of medications and the choices to consumers, even if they're in the far flung corners of the country.

These pharmacies badly need a business model upgrade.

We're determined to advance their business with digital transformation.

Welcome to build a stall that suits today's consumer needs.

Service modules, such as access to all line doctors patient engagement.

Culprit assortment management based on big data.

Tool.

Bill Omnichannel commercialization capabilities to establish one on one as the partner of choice for pharmaceutical companies.

With the success of full plus seven initiative.

VBP all volume based the purchase is being rolled out across the country.

These initiatives urge the majority of with the pharmaceutical companies to focus on innovative drugs and as a result, it is becoming the fastest growing sector in the healthcare industry.

We have set how the team with the best available talent in the market to work with doctors and hospitals on innovative drugs.

Whatever the outcome civil depends on mix is that both doctors and patients realized how important to be online ready.

Without broad consumer reach.

Foster retail pharmacy network and the smart technology enabled omnichannel commercial audition system, we are well positioned to help pharmaceutical companies commercializing their drugs.

From exploring additional distribution channels, expanding reach optimizing their sales and marketing functions enhancing patient services and support programs to introducing new products.

Ultimately consumers will benefit from having greater access to new up better than medications on them.

Three.

Strengthen our healthcare ecosystem.

Good morning key stakeholders via cloud based solutions.

All key stakeholders includes boxes pharmaceutical companies pharmacies insurance companies.

Clients and partners.

This ecosystem crates interdependency that brings multi directional benefits for all our stakeholders, resulting in diversifying revenue solstice fault, one moment inc. and highly sticky relationships that raises the barrier of entry for our competitors.

Finally.

And our smart technology and integrated online offline infrastructures to deliver best in class supply chain management services 12 customers.

Our truly smart system Leverages the latest in AI cloud based solutions and big data to keep our pharmacy customers multi effective sourcing capability, that's the inventory management more optimal product assortment and broader market reach resulting in greater cost efficiency.

Hi, earning potential.

Has the ability to serve our end consumers on a full field essential orders even in challenging circumstances.

Our smart technology empowers doctors to work with the latest the drug supplies to bring the best solutions to patients for better health outcomes.

[noise] without best in class of supply chain management services consumers all across the country enjoy the benefits of a pending their medications at home and having access to the newest available drugs for treatment over their medical conditions.

Let's move on to our quarterly performance.

But details please refer to slide five to eight for our business performance.

Slide 14 to 15 for the operational updates.

We kind of fund out more about the significant progress we've made in enhancing our competitive advantage from slide nine to 13.

We also included the latest the regulatory changes in slide 16.

The strength of our strategy and our ability to execute can be seen from our strong Q1, twentytwenty performance, but make the challenges are not expected global pandemic.

We generated 1.58 billion RMB, all 222.5 million us the in revenue.

Representing a year over year growth rate.

140.3%.

Our gross profit increased by 163.3%.

Driving these results are three fast growing call business segments, B to B B to C and D channel.

I will be to be settlement and serves out 260000 strong pharmacy network, providing best in class with sales and supply chain management solutions. During the quarter. This segment saw robust revenue growth of 178.4% year over year.

Underpinning our b to B settlement is on online marketplace.

For healthcare and other wellness products during the call to what we're able to leverage our strong relationships with our suppliers and partners to deliver many high demand items that consumers had trouble finding elsewhere.

As a result registered users start traffic and holders all increased for this segment, we achieved the remedy of over 119 million RMB in the quota and a year over year increase of 17.5%.

Due to the dramatic growth in what is now refer to as the each each channel segment.

So from now on a report results from this segment separately.

In Q1 from the penalty this segment grew by 229.7% year over year.

The E Channel segment consists of revenue from product sales to other online drop retailers, such as Ali health JD, helping on with Dr. Unsellable.

Historically revenue from these sauces had been included in the BDC segment on a generally accounted for between 15% to 20% of the segment's revenue.

These very strong results were achieved in spite of of the challenges posed by coal that 19 and are a testament to the strength of our business model and technology enabled infrastructure.

One last six to bring comprehensive convenient healthcare to where the need is greatest.

In fact, we believe that our pandemic response tested and boasted our system.

As we sought to efficiently source and to deliver products on made disruptions to the supply chain and delivery system.

This robust performance also demonstrates our ability to build a resilient infrastructure and the sticky ecosystem.

But we're not resting on our laurels.

Well, we'll continue to vigorously advance our growth strategy towards that end.

We have recently appointed Mr. I'm from wall as one on ones Chief Innovation officer to ensure that our Omnichannel drop commercial our recent platform continues to evolve to anticipate customer needs and to stay ahead of the competition.

I have only the respective metrics over the Chinese pharmaceutical industry.

Bringing with him over 20 years of experience in such world leading companies as five.

As for them and the Bristol Myers Squibb.

And as another demonstration of woman was.

Constant drive forward on May eight Twentytwenty, we launched the first online diabetes patient management platform in conjunction with Lilly, China, expanding our partnership network with pharmaceutical companies all patients in managing their medical conditions.

In spite of the consecutive quarters of robust performance since IPO.

Many of you would agree that given the dynamics and the fluid situation due to the pandemic. It is difficult to predict what might happen to the global economy.

However, we believe we have the right strategy proven track record leadership experience.

Resources and partners in place so deliver despite the current environment.

Well well position to capitalize on the enormous market opportunities as technology assist in the new era in healthcare in China.

We will continue to focus on executing our growth strategy driving performance building and expanding our lead over the competition.

Maximizing value for customers partners and shareholders.

With that I'll hand, the call to look to walk through our financial results. Thank you.

Thank you Julie.

Moving to the financials.

You can see the details for the first quarter 2014.

Section two of our presentation on slide 18 supporting.

I would like to highlight a few key business and financial matrix.

And our focus on year over year comparisons.

On numbers.

MB unless otherwise stated.

Let's start with a robust performance for the first quarter.

Total net revenues for the quarter grew.

140.3% to 1.58 billion.

Okay.

Which was driven by the brokers performance across all business segments.

Product revenue from B to B segment were up.

178.4% to 1.28 billion.

Compared to 460 million in the same quarter last year.

Mainly due to the increase in a number of pharmacy orders, which reached 419000.

With growth rate at 196.4% year over year.

As well as newly added pharmacies and network.

Product revenue for our B to C segment were up 7.5% to 191 million from 162 million in that same quarter last year as a result, all continues efforts.

Gauge existing and new users.

Other revenues from E channel, our new segments.

Turning to 29.7% to 99 million from 30 million in the same quarter last year.

He channel second when it consists of revenue from product sales to other Ana Gupte retailers.

Okay, Audi House JV, helping on good Dr. et cetera, historically revenue from these sources have being included in the B to C segment and generate comp for between 15% to 20% of the revenue in the PTC segment.

The growth in E channel segment in the first quarter 20 pending.

Also in line with the overboard increase in E commerce traffic during the national locked up.

And the previous period, helping restated to conform to the current Peter reportable segments presentation.

Service revenue were up seven 2.1% to 7 billion from turbulence in the same quarter last year due to the increase in permission from our marketplace customers as well as the increase in service revenue.

Patient education, and the management from pharmaceutical companies.

Overall, our gross profit increased by 163.3% to 88 million.

And the combined gross margin was 5.6% upfront cycle, 1% a year ago.

We're pleased to see that of Roth profit has grown much faster than the net revenue growth, which demonstrated our ability to improve profitability while beauty upscale.

Compared to a same quarter last year gross margin LP to be segment was 2.9% upfront you 2.9%.

To see segment was 20.2% up from 14.3%.

The gross margin improvement was directly relating to our improved business scale, our smart pricing and assortment management as well as our sourcing capability.

Total operating expenses for the quarter were up 44% took 201 million.

The percentage of net revenue total operating expenses for the quarter was down to 12.8% from 21.3% in the same quarter last year as we continue to improve our operating leverage and optimize operational efficiency.

Fulfillment fulfillment expenses as a percentage of net revenue was 3.5% as compared to 3.2 present in the same quarter last year.

Sales and marketing expenses as a percentage of net revenue was 6.1% down from 11.5% in the same quarter last year.

<unk> expenses as a percentage of net revenue, 1.9% down from 4.2% in the same quarter last year and technology expenses.

For 1.3% of net revenue down from 2.3% in the same quarter last year.

As a result.

GAAP net loss attributable to ordinary shareholders for the quarter was 109 minutes as compared to 96 million in the same quarter last year.

GAAP net loss attributable to ordinary shareholder quarter quarter accounted for 6.9% of net revenue down from 14.7% in the same quarter last year.

As to the guidance for the second quarter 2020 on slide 22 of section three.

The company expects total net revenue to be between 1.55 billion and a 1.68 billion.

Representing a year over year growth of approximately 85% to 100%.

The outlook.

Based on current market conditions and it reflects the company's current and preliminary estimate aftermarket and operating conditions.

Well as customer demand, which are subject to change.

Please refer to slide 24, 26 affection for fourth for that to the financial statements.

A quick note.

Our cash position as of March 31st 2020, we had cash and cash equivalent and the restricted cash of 525 million.

Pair with 697.7 million as of December 31st 29 team.

Underscoring the confidence in the company's prospect as of March 31st point founded the company used an aggregate of U.S. dollar 4.9 million and repurchased 998000.

Yes, our us dollar committed share repurchase program.

This concludes our prepared remarks.

Thank you.

Operator, we're now ready to begin the acuity session.

Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask the question. Please press star one on your telephone and wait for getting to be announced if you wish to cancel your request. Please press the pound rehash.

[noise]. Your first question comes from the line of being you Chen from Citi. Please ask your question.

Hi.

For taking my question congratulations on a strong performances is being is on tickets and my first question is about what's the impact song Kobin My team to the whole industry and to the company. We have seen tremendous effort you have made during the 10 Gorman.

And with the strong policy tell when I'm wondering what's your strategy afterwards.

My second question is about the Leidy cooperation on the online diabetes patient management platforms.

We expect seem more cooperation going forward and I'm curious about will follow up strategy on the chronic disease management.

Thank you.

No I think of the.

Situation is such that we hope the kind of them, it's going to end soon but we actually fully anticipated it is going to stay with us for longer than we wanted.

And.

Our company is extremely vigilant about so the uncertainties, it's going to Brent.

And the.

It is our view that.

During the uncertainties.

There is actually more opportunity or there are more opportunities and risks for us.

Mainly because the infrastructure, we've built how will will enable us to deliver the badly needed products and services to the need as evidenced the journal the west times over the crisis.

Couple months ago.

And.

We also anticipate that.

Cobot 19 will forever changed the landscape of health care in China.

I think it is a catalyst for some of the profound changes for pretty much all the stakeholders in the industry.

The leave those that transformation biggest hydration on that with industry is going to accelerate as.

Unprecedent.

Precedented pace.

Unfortunately, what have they would how layers, but managers to benefit from it and.

I think all Pos gone to address the Eli Lilly partnership question, because Youre, let me address that question. So.

Certainly the specialize hospital for chronic diseases very innovative idea we cover.

End of last year and February ahead.

Very good discussion with the Navy's Fogo, CEO, Dave or rig and receive Hes very warm support Thirtyneo. Two teams worked very closely together and with a strong execution. We have that platform launched in April 30, I know we already started.

Receive orders right now.

The 30. This is a very interesting at a very good relive idea or use this platform to conduct lifecycle management for diabetes patients, we realize that the three major product.

Hi in China has more than 100, meaning in population, so where you have to rent from the separately. So we are we have at the idea of.

Specialized hospital for each.

Hi, So certainly for this platform Oh, we will conduct lifecycle management for diabetes patients will lead to patients with Bob first.

Use our retirement system to provide patients there's confidence on treatment of the disease.

The new drug launches corporate diet and exercise.

Criticality of drug combined.

I described a refi over by the patient.

For the Greenfield.

So we're also uses Piper 40 Super prescription.

Certainly our discount that on a business model will be expanded to manage.

And the other quality these pipes.

Hope that answers your question.

Well now.

So much.

Your next question comes from the line of Sherry yen from JP Morgan. Please ask your question.

[music].

Hi, Thank you for taking my question congratulations on delivery and that'd be the quarterly South AADC Cherry from JP Morgan I have two question here.

The first question is that our E channel segment, this disclosure, which backing these what I could you elaborate more about how we collaborating with E.

E Commerce NAFEM like Ali House in GB House.

So that margin expectation on the penalties.

The second question, maybe a more bother long about our strategic.

Yeah.

Uh huh.

Now from company I talking about how come jockey Oh.

Applauding.

Oh, so he knows I don't want somebody leaves out would you. Please.

Hi model, Oh, well, so what do we see asked the potential future expansion that's implied.

Hi, Thanks very much.

Okay.

Jamie and got the mentioned earlier before.

He panel a segment because it's all that and we look on product field pool, either on that side of the Halo that had Ivy Hill.

No house in with Dr and fill out a hit publicly revenue from Dave talked it has being included in the between.

And generally accommodative fall between.

15 to perhaps then our people they didnt.

Elaborate a bit late model, we can look back who look back at the pay Pal in that that.

Hi, there either.

Company, we find it exclusive contracts these are.

We are delivering some well do not the Soviet it toward they've gotten or the including a human who we are focused on mobile inventory management pit, though pricing intelligence system and that alone.

Hi, there basically a proactive you'll kind of refer to the bottom line.

Hi.

And then all the right part how does imply as you kind of fee. We have expanded almost all doesn't mean online proudly Taylor Integra also I'd like Coty Taco that hit globally in the second part they have that contributed to our rapid growth even.

So while there are small animals pharmaceutical company waiting to authorize or add it has all pattern or.

Some of them.

Eva is a little bit partner.

Last but not really we are also further mining in the needs of our each panel customers and enhance their order growth and appeal.

Total improved audit here and how cool so that's a snapshot of our each helping me.

Yeah I'll address the question about.

The strategy moving forward.

[noise] as as I said during my remarks, the really we laid out a mission and.

We have the four pillars to really execute that mission on a five could things.

Into very simple concept here.

We're really have to floated a strategy one is to build this.

Omnichannel drug commercialization platform.

Because we're in a very unique position.

The BDC, we had a pioneer in terms of beat will be in the pharmacy space, we really have already picking up more than 60% over the overall market and.

Lastly, we just recently hired Mr. anthem go onto.

On board and he will be running the doctors and hospitals on channel and focusing on innovative drugs and that is the first followed the second phone is through that omni channel.

It's really unique in the marketplace. We're the only one we've not capability we believe.

We're going to strengthen not by doing that we're going to accumulate many consumers. Many patients and are we going to help those patients to do the lifetime.

Disease management, and chronic disease management A's on ongoing problem and this country never had stuck infrastructure in the past and now that we've been pandemic, we'd the infrastructure. We have built out we're able to really service those patients and as we calculate each.

For the patients we acquire we should have him on average 20 years to service them. So I'll approach came from really connecting the patients with drugs and because of the lots and lots of drugs available in the market I know those drugs me to fund patients and of those patients need to find the latest most effective GAAP.

As well and if were able.

To really build barrier that would believe that is going to be the best.

Defense moving forward.

Thank you Sheryl.

Thank you and that's that's very clear.

Once again, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone and wait for name to be announced.

Your next question comes from the line of Rachel from HSBC. Please ask your question.

Hi.

Hi, Thanks for taking my thoughts and and congratulations really on a two calls.

Oh boy.

20, I actually have two questions one regarding your modeling chain, we noticed that that would be to see this month the gross margin.

Family the quite significantly.

Nothing.

That's a quality last a year.

Well it is expanded it to 2.9 cents I know you know Lonnie.

So can you elaborate a little bit more about what like.

That's a new or Marty mentioned and I.

Oh no question.

Local human quotes.

Absolutely perfume importantly show ascended to buy a buddy.

Yeah Yeah.

As my anything.

Yeah, well being of course, the ratio should the come down. So I can you maybe cabinet to understand why the hell human costs are they show is increasing.

They.

Also can you explain what.

Institute the off of.

Uh huh.

The conference Baby.

We.

The business size growth because it's my second question.

Yes.

Absolutely we are absolutely.

I think it well one kept on.

Uh huh.

And the alone pharmacy.

Yes.

[noise] south.

HM we must yachts and how.

Does that mean that we ending our strategy.

That will be mostly.

Or.

Natalie.

Alan.

Okay.

Yeah, that's my.

Right. So this is hardly I think you'll have a cool question Putnam the last time that I'm not exactly what I heard is the first of all these of our people be margin improvement or you want to see the insight and the other why is the ball logistic.

For human costs and the.

I'll leave the two question you are asking or anything else because well not probably we can hardly hear you.

Oh, sorry, Uh huh.

What is actually a body Oh my God.

Oh, we kept the I'm talking about <unk>.

That you have to Oh by the data added to sell it to Bob and then along bombing but now.

Next in patients with job and health Kathryn.

So does that mean, we I think.

Well before the.

Board you model.

[laughter].

Okay.

Let's take the first COO and drilling well.

Although the last one.

For the first question regarding the B to B a margin improvement.

I will conclude with a three was three key words, but it's a salting a second one is the assortment and the satellite technology.

Well across all things I as we have seen mentioning that we continue to strengthening our.

Partnership with low pharmaceutical company for example, with direct sourcing relationships.

Which helped us to lower now our yield yet and improved gross margin.

You know in a positive quarter.

Secondly from Assortments that.

Our pool and the election wave of our pharmacy customers.

Also increase increasing which means we are saying more and more product, including more and more high margin higher margin products, who our customer.

Brought technology side as a CFO, Luke just mentioned Oh, it must pricing system or to help us to continuously optimizing our pricing and also help us to balance the sales and profit.

So.

All the three you know.

To conclude the being created our people be margin.

From the logistics Hooman caused a this is a very good question.

With the volume growth and scaling back.

We are rebuilding our fulfillment cost in 29 team, but as you have already.

I mentioned in Q1 Hundredtwenty there is the minor increase.

Although we did expand our fulfillment center, who provide a better logistics.

But I think the main reason for is the minor increase is because of the.

Dynamic in China.

During the academic.

Our delivery costs labor costs, and transportation costs have increased significantly and battery that is a Chinese new year.

Which.

Affect our fulfillment costs.

The good news is left at the academic it's much stable in China.

These logistic cost has reduced to add normal level and we are expecting to see.

The logistic efficiency improvement trend coming back soon.

Okay.

Okay. Okay. So let me.

Address your last question.

There are many ways of different angles to look at a business and you know obviously you could you know look at a business from an angle of feed we'll see all another angle is from beat will be the other angle is could be Pete will be to see in other lot of industry job ends and so long, but if you look at.

You know what is happening today in a market you know I want to stay today too fast right. Now you know China has more than 300 mailing chronicle patients.

The other factors if not you know weve beef four plus seven policies and the the bulk purchase program eroding out across the country.

Not really a just a majority of the pharmaceutical companies focusing on innovative drugs and.

Before you know obviously those drugs need to find the patients and also you know the patients need to find that the best available drugs into markets and you know if we leave aside those industry job in the side, we do see of it'll be in <unk>. We are really in the business of connecting patients with those.

The drugs and much needed a health care services. So that is really the way we look at our business and how we really want to move to the company to a space too and then obviously we have already built many layers of.

Competitive advantage money comes to you know having drugs available on our platform and also having patients available on our platform. We believe we'll have a real shop at being the leader in providing a platform for those drugs to be commercialized and in the meantime, we can help the patients to file.

In the drugs digitally.

I hope that answers your question.

Okay. Thank you.

Oh I thought was Vietnam Kids, that's a that's my question.

Your next question comes from the line of Chris do <unk> from Jefferies. Please ask your question.

Hey, guys. Thank you for Telus.

Two questions. The first one would be.

Opportunities exist, so elderly 12 to 24 months.

What are the opportunities that have risk.

What are we doing to monetize the opportunities.

To avoid the risk.

So thats. The first question the second question would be on.

Your revenues can you give us a clear.

Organic growth does it work as it grows.

Okay, great how much.

Was that the S&P in practice.

Good.

Oh.

Yes, I heard the opportunities and the risk I got really struggled to food to hear clearly the second taking my question yeah.

Your mind repeating the second question. Please.

Well I guess, so yeah. The second question would be on.

The organic growth versus organic growth.

Youre right different segments in the first question is just opportunities.

Hi, good it makes a lot about 12 to it.

[music].

So you are referring to August.

Yes.

So let me I assume that's the question so yeah with regard to the opportunities and risks you not really I.

Already laid out and I think the biggest opportunity is going to be the you know they they called it 19 became a catalyst and that it's going to you know really.

During the whole offline process to online pays become city, a tremendous opportunity and also a with the latest a regulatory changes the generic drugs majority of the profit.

Disappeared and the pharma companies will have to find better ways to make money in the biggest to consumer marketing the world and the therefore the have to focus on anybody innovative drugs right. So those are the big opportunities. We see therefore, we laid out a mission to connect to patients with.

Drops and the Medicare services and also I would want to build a omni channel strategy or omnichannel platform for the drops to the commercialized and when it comes to a risks I think they are all kinds of risk, saying those include the regulatory risks they they geo political risks and so.

Oh, we believe you know the biggest risks for us would be probably competitive risks and.

You know when they when it comes to comparison risks.

You know, we have been very careful and navigating our path and I mean, obviously, we laid out our mission and that is vastly different from any of the competitors out there in the markets and if you look at where we want to build our competitive advantage that is really around our second fund.

Smart supply chain capabilities, and we believe really the best defense is to stay on the office and if we continue to execute our strategy or that'll be the best mitigation of risks.

You know with regard to your second question organic growth was this an inorganic growth I mean, obviously that is always are in all the costs and it always on the table.

Whilst aware growing the business organically on you know we're always on the lookout you know other potential opportunities to help us to grow even faster.

Thank you.

Thanks.

Your next question comes from the why not showing nice talking to choose from C. S. T capital. Please ask your question.

Thank you for taking my question first of all congratulations on strong performance in the first quarter.

My question concerns to part with the first part is that.

I would like to to elaborate a little more about the company's mission and in regard to the mission.

One on one has a.

Aligned business development plan for put becoming a year and the second part is Oh, we've noticed that Oh, we held and picking on the Doctor has.

Significant cooling significantly.

Increase there value, it's up market in the first quarter and it seems that their model has been recognize that benefited from the cobot lighting outbreak.

Could you share your view on your models purses their models.

My question. Thank you.

Thank you yeah. So then obviously I'd love to repeat the mission, we laid out something that is pitifully connecting patients with drops and the health care services. You know obviously the reason why we singled out draw is really in todays healthcare industry.

Drops is still the most credible business to build upon and especially in China, and and obviously, we laid out a full facet of strategy. You know that is to really continue to build our leadership in the.

You know that virtual pharmacy network, we've already taken over you know more than 50% over the market share we need to continue to lead in that space and number two is to really to.

Really make sure our omni channel.

Drug commercialization platform is going to be further perfected and we've done we hired the best talents in the market and the war onboard and he will be leading the effort in the innovative drugs space and ER and the thirdly well.

We want to continue to strengthen our ecosystem.

Enabling our key stakeholders.

In other pharmaceutical companies thing for us companies they pharmacies.

You know our partners and so.

Finally of course, we're going to continue to build our supply chain on our supply chain and he is leading the industry and we want to make sure that Ah Ah well known to be the moat around I'll call over the business, we're going to continue to strengthen the relationships with the upstream pharmaceutical companies and we're going to continue to optimize our.

Our logistic network want to make sure that insiders, absolutely zero blind spot wherever outpatient I located what kind of deliver those drugs.

Portable cost up to their doorsteps and I'm going to invite talk to you to address your second question.

Sure. So you might show, how our El Salvador can't good tougher on the it's great to see that are they are recognized by the capital markets.

Definitely shows the value on the pay show up or the Internet health a industry. So certainly happy to see dot on your Directionally or we are very similar although that well from a different routes.

And our focus is are different.

But if you need just mentioned that our mission is to diesel conduct patient withdraw from the health care services, you know, where I technology company on the or stream in the smart supply chain how based.

Services. So we believe that so we havent yet in this space.

Even now with improved their liquidity in market value, where our fuel I believe that a way undervalued by weak, but that's not what we focus we focus our core competence our customer experience.

We've got you where you execute our strategy on to our value. We're finally be released I recognize.

Let's start to buy yeah.

Thank you.

Your next question comes from the line of Tony Fan. Please ask your question.

Hello, I have two questions. One is why did the stock price and liquidity increase significantly into first quarter.

And my second question is regarding the holding a foreign companies to kind of black obviously pasta salad.

I know about the law would require Chinese companies.

[music] establish that they're not controlled by by the Chinese government although.

I understand that probably isn't the case with one on one however.

[noise].

Hopefully this is why someone would be required to submit an audit.

Ah that can be viewed by the PC.

And I know that there's some tension with Clark, who Chinese policy, which does not allow Chinese Chinese or auditors worth something transfer out of the country.

The new law has any impact on 111 going forward and if so what kind of impact and how do you envisage that could deal with it.

Oh, maybe I'll address the first part of your question and the probably look we're taking the second I just mentioned that as a general principle, we always the I'm. The problem is over de lever and I do can see that since our IPO.

On September 12, 2018, you know a 602 quarters we exceeded.

Marty I patients and our guidance to the market.

And also showed that you know the the value of what we can create and a this is also a.

The academic showed that a internet how high can provide tremendous value to their patients.

That's the space where in a that's probably the reason that we are Oh, we start to be recognized but I believe.

Mentioned before that we are still with the heated yet.

[noise] the.

The U.S. Senator past abuse that couldn't you know impact on the Chinese listed companies.

Caused this when this proposed view is signed into law will potentially have for universal even kinda or Chinese companies listed in the U.S. rather than us individually.

So we think we will be of course monitoring monitoring the development co very closely.

In the meantime, we will always focus on our own business and girls to brings out of control shareholders uses and partners employees.

We answer your question.

Yes. Thank you.

Your next question comes from Diana Peter Hill spreads from Sunrun. Please ask your question.

Although I have a re question HM two related and the orders.

From pharmacies and the ratios you quite low on a quarterly basis.

And I'm just wondering why it seems low they tend to the number of orders or pharmacy can you explain what's in a pharmacy order and what the average ticket prices.

And then secondly, the operating expenses as a percentage of revenues what would be a reasonable run rate two weeks.

This year and on the three year basis.

And finally, we see some Chinese companies are.

Doing well in terms of the R&D for October 19 vaccine in China.

Wondering if.

Any role for 111.

To play.

In the eventual printers.

We've been making vaccine in China. Thank you.

[noise], maybe I'll, just take the first pop and and and the third Todd and maybe.

Right.

Okay. So you know, but the growth you know like if you look at you know they number pharmacies, we covered listened to the number of orders.

It appears to be low, but abundant remind everyone know there's a you know if you look into our customer base or you know essentially those are the standalone stalls and the small to medium change and the if you look at.

He is typical chain store.

The number of orders you know like one order they couldn't do the could cover you know like 50 60 stores right. So so that could be.

You know misunderstood so when they look at those numbers you know not only do we cover the pharmacies, but also.

The.

The changes as well so those change would dilute the those numbers on that number could be you know it looked as as you and in terms of Remy Luthringer look if you have detailed numbers.

Yeah.

So on the other operating expenses, if you were looking into.

The operating expense items, we have you know spanning the marketing T.N. any technology expenses all those oh when do you when does the revenue size continue to increase that you see all you know as a percent your net revenue continue to go down.

If it happens ever since the IPO, so you'll see that.

In the first quarter.

Overall.

Operating expenses as Internet revenue.

Going down from 21.3% to 12.8%. So we believe we'll continue to see that leverage.

However, you know fulfillment costs is it's very volume related.

Revenue related and we just explained what the components in the fulfillment costs.

Data warehousing I'm, you know handling the people costs as well as it's been reclassified from sort of party, but just companies. So we believe we couldn't continue to Florida, but is it more your relationship with.

With.

On him.

In revenue.

What we tried to do is we want to continue to improve gross margin.

Especially into margin metal for human costs, so that will make a profit to support.

Our.

Operating expenses.

We will put this year. We think we are going continue we'll continue to narrow down and that last quarter by quarter.

But but at this moment as as we just to share with you.

Are you know valuable opportunity Im just trying to market.

We are still in the investment stage. So we will continue to evaluate building up the scale in a very fast and they continue to improve operating leverage.

Yeah. That's a great question about they called at 19 on vaccine and essentially the role we could play you know I think today when we're seeing great news in about the size companies I think lane is what can sign up a that list and a Hong Kong and I think are the spot wouldn't have many many folds in a very short period.

Time, you know that didn't really encouraging news, although denominated in clinical test uncalled period that enormously.

We have built house this tremendous network and the we absolutely believe out networks can be deployed to service the country and as we speak you know we've already deployed on our website or a Ur cobot 19 test kits right. So people can actually get tested.

I never come direct them to clinics to get a blood drawn and to find that I'd like to they actually called the virus et cetera, and those infrastructure that we built out I would be great and then obviously it is that still early stage I know we are also actively or you know looking for ways.

And looking for solutions, you know over the long period of time, but at the moment of risk you're focusing now on our core business. If there was a vaccine that becomes available and we believe we our you know direct to see a model and also our.

Not really the biggest the pharmacy network across the country and you know those back sense can be either delivered to consumers' homes. All they raise an injection looking actually leverage those a little pharmacies across the country to have a you know integrated online offline solution and hopefully.

Vaccinate is going to become available and we would love to play a role in that space. Thank you.

[noise] [noise] [noise]. Thank you as there are no further questions I would like to hand, the conference back she Miss Monica move for any closing remarks.

Thank you operator in closing on behalf of the entire one on one management team.

Like to thank you for your interest and participation in today's call it either way client and he put a inflammation or have any interest in visiting lies in China. Please let us know 10 kids will join US today, it's conclude the call.

Ladies and gentlemen. This concludes today's conference call. Thank you for parties meeting you me I'll discuss.

[music].

Hello, Ladies and gentlemen, thank you first time buyer for 111, Inc.'s first quarter 2020 conference call. At this time all participants are in listen only mode. After managements prepared remarks, there will be a question and answer session.

As a reminder, today's conference call is being recorded all like to try to me over at your host for today's call Miss one it can move Investor Relations Director Pease proceed Monty Cook.

[music].

Thank you operator.

Hello, everyone. Thank you for joining us today, so one what's called her Twentytwenty conference call.

Our call today I want one Doctor gone you co founder and executive Chairman.

Let's start drilling no co founder chairman and CEO.

Mr., Zhang Chief Financial Officer, Mr., Harvey Wall co COO Mr., Barry Jewell Coke C O O. Smith Monte Carlo if that's true relation director.

Mr., Alex Mill Finance director.

As a reminder, today's conference call, it's being broadcast live webcast yeah kitchen.

Play will be available on our website following the call.

The Companys earnings press release was distributed earlier today and together with our earnings presentation available on to consummate IR website, I odd golf, one dotcom doxey area.

Before we get started.

Let me remind you that this call may content forward looking statements made all dirty Safe Harbor provision all private Securities Litigation Reform Act of 1995.

Which could cause actual results to differ materially.

For more information about finish with.

Please refer to companies climbing wouldn't be as you see.

Well I want one does not undertake any obligation to update any forward looking statements.

The result of new inflammation future events or otherwise, except as required under applicable law.

Please note that all numbers are in RMB and all comprehension referred to your open here.

All that otherwise they too.

Please also refer to our earnings press release for detailed information on our comfort.

<unk>.

I work compared to send actual performance on a year over year basis.

With that I will turn the call over two hours C O streaming deal [noise].

[noise], thanks to everyone for joining our first quarter comfy country earnings call.

[noise] you work on the pandemic before I move on to the earnings.

Well displacing the global health crisis, that's the pandemic continues to evolve rapidly and that's created uncertainties on disruptions.

And the lives of millions of people.

I would like to express our gratitude to the front one health care professionals around the world Selflessly caring for those who take all sold I'll review and those who have been affected.

[noise] would have been playing an active role in the pandemic relief efforts since the outbreak and we'll continue to support the global community to the best the viability [noise].

Im very proud of how all leadership team and I'll stop have mobilized on the United.

Sure the safety of each other while continuing to serve our customers partners and the support communities in China and around the world at this time of great need.

Let's begin.

I'll start my remarks made a recap of all mission and the growth strategy, an overview of the company's business and operational performance and then pass the call to our CFO look for a detailed financial review.

Our guidance for second quarter.

Well then open the call focusing on those.

Please turn to slide four section one.

[noise] as we entered tenancy plenti well have a growth strategy to continuously executing our mission of.

Digitally connection patients with drops and health care services.

Our goal is to tie all about this message together and brings focus to our organization in service of all customers and partners.

So the millions and millions we saw.

Peculiarly patients with chronic diseases with structured around meeting their needs.

Our commitment to them is this.

We will strive to provide what they need to keep them well in the most convenient.

Portable and dependable way either in person online all left to home, we will deliver 12 and consumers a broad range of products and services from medical consultations total prescription drugs from health and wellness products to tools from one.

On fixed to lifecycle chronic disease management from offline to online and the support services that help them better manage that conditions.

[noise] there were a full facets in our growth strategy.

One.

Capitalize on the enormous market opportunity from building China's largest the virtual pharmacy network of over 260000 drug stores with the coverage over 50% of the country and over 60%.

The tier three to six cities.

This expansive network allows us to sell millions and millions of chronic disease patients in the country.

The strategic placement of our fulfillment centers across China gives us the operational flexibility so effectively respond to a crisis like this pandemic.

As we ramp up and down our various centers to meet the concept of late evolving needs of the different parts of the country.

No we have a deep sourcing capability, which includes 214 direct sourcing relationships, where we're able to provide one of the richest selections of medications on the choices to consumers.

M&A for that in the far flung corners of the country.

These pharmacies badly need a business model upgrade and a way of determined to advance that business with digital transformation.

Help them to build a stall docs foods today's consumer needs.

With service modules, such as access to all lines Optus patient engagement.

Appropriate assortment management based on big data.

Tool.

Bill Omnichannel commercialization capabilities.

Establish one loan one as the palm of choice for pharmaceutical companies.

With the success of full plus seven initiative.

VBP all volume based the purchase is being rolled out across the country.

These initiatives urge the majority of with the pharmaceutical companies.

Because our innovative drugs.

As a result, it is becoming the fastest growing sector in the healthcare industry.

We have said how the team with the best available talent in the market to work with doctors and hospitals on innovative drugs.

One of the outcomes of it depends on mix is not most doctors and patients realized how important to be online ready.

Without broad consumer reach.

Lost the retail pharmacy network.

On the smart technology enabled omnichannel commercialization system.

Well position to help pharmaceutical companies commercializing their drugs.

From exploring additional distribution channels, expanding our reach optimizing their sales and marketing functions enhancing patient services.

Support programs to introducing new products.

Ultimately consumers will benefit from having greater access through new up better than medications on them.

Three.

Strengthened our healthcare ecosystem by enabling key stakeholders via cloud based solutions.

I'll keep stakeholders in close boxes pharmaceutical companies.

Thomas is insurance companies suppliers and partners.

This ecosystem creates the interdependency that brings multi directional benefits for all our stakeholders, resulting in diversifying revenue solstice fault mumma, inc. and highly stickier relationships that raises the barrier of entry for our competitors.

Finally, enhanced our smart technology and integrated online offline infrastructures to deliver best in class supply chain management services to our customers.

Our truly smart system Leverages, the ladies in AI cloud based solutions and big data to keep our pharmacy customers multi effective sourcing capability better inventory management more optimal product assortment and broader market reach resulting in greater cost efficiency.

Hi, earning potential.

Has the ability to serve our end consumers to fulfill essential orders even in challenging circumstances.

Our smart technology Impala stopped us to work with the latest the drug supplies to bring the best solutions to patients for better health outcomes.

Without best in class of supply chain management services consumers all across the country enjoy the benefits.

Pending their medications at home and having access to the newest available drugs for treatment of within medical conditions.

Let's move onto our quarterly performance.

The details please refer to slide five to eight for our business performance.

Slide 14 to 15 for the operational updates.

You can find out more about the significant progress we've made in enhancing our competitive advantage from slide nine so 13.

We also included the latest the regulatory changes in slide 16.

The strength of our strategy and our ability to execute can be seen from our strong Q1, twentytwenty performance and make the challenges of another expected global pandemic.

We generated 1.58 billion RMB, all 222.5 million, you'll SP in revenue.

Representing a year over year growth rate.

140.3%.

Our gross profit increased by 100.

I tend to management solutions during the qual to the sacrament solid robust revenue growth of 178.4% the early yeah.

Depending how pizza besides <unk> online marketplace.

<unk> and other wellness products during the call to we'll be able to leverage our strong relationships with al supplies and partners to deliver many high demand items that consumers have trouble finding elsewhere.

As a result registered users stock traffic and odors all increased.

This segment, we achieved the remedy of over 190 million arm be in the quota and a year over year increase of 17.5%.

Due to the dramatic growth in what is now refer to as the each each channel segments will go from now on a report results from these segments separately.

Into one <unk>.

Sacramento grew by 229.7% Euro we.

The channel Seckman consist of revenue from product sales to other online drop retailers, such as Ali health <unk> <unk> dumped her and so on.

<unk> revenue from being sauces had been included in the Beatles see segment and a generally accounting fall between 16% to 20%.

<unk>.

These very strong results were achieved in spite of of the challenges posed by cool at 19.

Are a testament to the strength of a business model and technology enabled infrastructure.

One mass six to bring comprehensive convenient health cat to web <unk>.

In fact, we believe that al pandemic response tested on both stood out system.

As we sought to efficiently sauce and to believe approximate disruptions to the supply chain and delivery system.

This robust performance also demonstrates our ability to build a revealing infrastructure and the speaker ecosystem.

But we're not resting on all laurels.

Well the continuum, so vigorously advance our growth strategy.

For both data and.

We have recently appointed mixed the <unk> as 111, Chief Innovation office, putting show that I'll. All many channel drop commercial are they some platform continues to evolve to anticipate customer needs and to stay ahead of the competition.

I'm from <unk> over the Chinese pharmaceutical industry, bringing we paying over 10, p. a that experience in spectral world leading companies as five <unk> <unk> and the British until my description.

And as another demonstration of one on ones.

Instant drive forward on May 8th <unk>, We launched the first online diabetes patient management platform in conjunction with leading China <unk>.

<unk> network, we'd pharmaceutical company <unk> patients in managing their medical conditions.

In spite of of the conceptual quotas of robust performance since I appeal.

However, you would agree that given the dynamic and the Floyd situation due to the pandemic it is difficult to predict what might happen to the global economy.

However, I would believe we have with Iran strategy proven track my Cold leadership experience resources and partners in place to deliver despite the current environment.

Well well positioned to capitalize on the enormous market opportunities as technology us is in the new era in healthcare in China.

Will continue to focus on executing I'll growth strategy driving performance building and expanding I'll lead over the competition.

Maximizing value for our customers partners and a sample sizes.

With that I will have the call to look to walk through all financial results. Thank you.

[noise] <unk> [noise].

Moving for the financial.

You can see the details for the first quarter 2020.

Section two of our <unk>, some slight 18 20.

I would like to highlight a few keep in this kind of financial matrix.

You know focus on year over year comparisons.

On numbers, Oh, I am be unless otherwise stated.

Let's start with <unk> performers for the first quarter.

Total net revenues before the call the group.

140.3% to 1.58 billion.

<unk>.

Which was driven by the robust performance across all because segments.

Part of revenue for all be to be Sacramento to.

178.4% for 1.2 80 billion as compared to 416 million in the same quarter last year.

Mainly due to the increase in a number of pharmacy orders, which reach.

Under 19000.

Growth rate at one 196.4% you will be here.

As well as newly added pharmacies you own network.

<unk> fall because see segment <unk>, 7.5% to 191 million from 162 million in the same quarter last year as a result awful continues efforts to engage existing and new users.

Powder revenues from each channel, our new Sacrament, <unk> up 229.7% to 99 million from 30 minutes in the same quarter last year.

You channel second minute consist of revenue from product sales to other online retailers.

Audi House, J.D.L.P. hands with Doctor <unk> et cetera.

Historically revenue from these soldiers have be included in the because he Sacramento and generate account for between 15% to 20% of the revenue into P. to see segment.

The growth in each channel sacrament in the first quarter of 2020.

Also in line with the old wore it increase in E. commerce traffic during the national blocked off.

And the previous period has big restated to conform to the current theater Reportables Sacrament presentation.

Service revenue <unk> up seven 2.1%.

Mmm.

In in in the same quarter last year.

To increase permission from all marketplace customers as well as the increase in service revenue.

Adaptation and the management from computer companies.

Overall overall profit increase by 163.3% to 88 and to them.

And then combine gross margin was 5.6% up from 5.1% a year ago.

We are pleased to see that rock profit have grown much faster than the net revenue growth, which demonstrated Oh believe open c. team to improve profitability, whilst building up scale.

Compared to the same quarter last year cross margin, the all be to be sacrament, well, 2.9% up from 0.9%.

You can see sacrament was 20.2% up from floating 0.3%.

I'm from watching improvement was directly relating to all improved finished scale Oh smock pricing in a saltzman management.

As well as all assaulting capability.

Totally operating expenses for a quarter <unk>, 44% took 201 million.

That's a percentage of them that revenue total operating expenses put a quarter, what's down to 12.8% from 21.3% in the same quarter last year.

Continue to improve I'll Albany leverage optimize all operational efficiency.

<unk> fulfillment extensive that's a percentage of net revenue for 3.5% as compared to 3.2 presented in the same quarter last year sail to the marketing offensive as a percentage on that revenue with 6.1% Dong from 11.5% in the same quarter last year.

Generic expenses.

Percentage of net revenue, 1.9% down from 4.2%.

Encoded last year and technology can expenses accounted for 1.3% of net revenue down from 2.3% and the thing quarter last year.

That's a result, <unk> attributable to ordinary shareholders for the quota costs 190 minutes as compared to 96 million in the same quota last year.

And then get lost attributable to auditory shareholder put a quarter accounted for 6.9% of nerve Avenue sound from 14.7% in the same quarter last year.

As to the guidance for the second quarter 20, <unk> slight punk plenty to all section three.

The company expects total net revenue to between 1.55, good and and at 1.68 billion.

Representing a year over year grows off approximately 85% to 100%.

The above all look.

Based on current market conditions and it reflects the company's current and a preliminary estimates of the market and operating conditions as well as customer demand, which are subject to change.

Please refer to slide 24, 26, I'll session for for for that kind of financial statements.

Quick note.

Cash position as of March 30, plus 2020.

Cash and the cash equivalent and the restrict the cache of 525 million.

Pair with 697.7 being as of December 31st 2019.

I'm just going to college students in the company's prospects as of March 31st point 20. Their company used an advocate of U.S. on a 4.9 live in and then we purchased 998000.

E.D.S., our U.S. dollars came in and share repurchase program.

This pen cruise Oh prepared remarks, thank you.

And operator, we are now ready to begin to to any session.

Ladies and gentlemen label now begin the question and answer session.

Wished you ask the question. Please press tar one on your telethon and weight training to be announced.

<unk> sell your request please press Uptown rehash.

[noise] Yeah first question comes from the line of being you Chen from C.T.V.'s answer your question.

Hi, Hi.

So.

To.

515.

My personal question is about <unk> phone calls in 19 to the whole industry and to the company.

<unk>.

That's true and politics Halloween I'm wondering what's your strategy afterwards.

My second question, it's about the MIDI Corporation on the on line diabetes patients management platforms are we expecting more cool <unk>.

I'm curious about what <unk> the content management.

Thank you.

No I think the situation is such that the way hope the pandemic, it's going to and so on but we actually fully on <unk> going to stay with us for longer than we wanted.

And our company is extremely vigilant about to the uncertainties, it's going to break.

And.

It is all view that during the uncertainties. There is actually more opportunity. All there are more opportunities then risks for us mainly because of the infrastructure at we build house will lula enable us to be live badly needed products and services to the needy.

As evidence that you're on the West times of the crisis, a couple of months ago.

And we also anticipate not <unk> 19 will forever changed the landscape of healthcare in China.

I think it either catalyst for some of the bit profound changes both pretty much oldest street corners in the industry.

I believe that is that confirmation of digitization over the industry is going to accelerate add an unprecedented unprecedented pace.

Unfortunately, what have they would house layers, but manages to benefit from it and I think I'll toss gone to address the Eli Lily Ah contracted question could assure them you know dress that person. So 30 to specialize hospital for chronic diseases very innovative.

Yeah.

End of last year.

And February you had a very good discussion with <unk> <unk> <unk>.

And receive his very warm support certainly o. two teams working very closely together and with a or it's dry execution. We have that problem launched a in April 30th on that we already started receive orders by now.

And 30. This is a very interesting and you're very to redo by idea or use these ah platform to conduct life Psycho management for diabetes patients.

You know the three major chronic disease. So types in China has more than having a meeting in population, so where you'll have to map from the separately. So we we we have at the idea of you know how upset specialized hospital for each these these pie.

Certainly if <unk> passable, Oh, who will conduct lifecycles management for diabetes patients.

At least the patience with Bob first use R.S.I.M. system, whereby patients various contents out of treatment of the disease.

The new drug lunches <unk> I'm the exercise.

How did you have a drug complied.

I just <unk>.

<unk>.

Oh.

<unk>.

So we'll also uses pop up 40 <unk> prescription.

<unk> this column that on a business model or be expanded to manage.

The other quantity these pipes.

Hope that answers your question.

Okay. So much.

Your next question comes from the line of Sherry yen from J.P. Morgan. Please ask your question.

I think you're taking my question, congratulations <unk> and that it'd be to quarterly thoughts a decent sharing from keep them. Okay. I have two questions. Yeah. I saw the first question <unk>. Each segment I think the can we shall we <unk> <unk> <unk> <unk>.

How could you elaborate remark about how we collaborating with.

Like Ollie House G.D. House.

So that margin expectation hobby.

Mmm.

I should maybe <unk> yeah teaching.

Yeah, I'll ask me hard.

Company I talking about Oh.

I'm still be no.

So maybe now we've.

<unk>.

Oh.

What do we see at the potential future expansion <unk> Wow.

[noise], Okay as opinion cock and that kind of are you happy pool, the <unk> <unk> <unk> <unk> <unk>.

<unk> <unk> No house, you know without having to fill out a hit politically <unk> happy including the people [noise].

And kind of really accommodate the full between 15 to 10 papers then I'll <unk>.

<unk> BETAMATE model, we kind of look at cool look back at the pen Pal.

<unk>.

The pharmaceutical companies read.

<unk> <unk> has to be sorry.

We are <unk> <unk> that'd be safe.

I don't know if they include the <unk> universally I need to middle fit, though <unk>, it's time to fill out a either.

<unk>, you'll kind of rebirth, who the buttons.

Hi.

And there on the right top does imply as you can see we have he can be in almost all all that mean online clapping Taylor <unk>.

So I'd like coded cost, though that hit the glow in the accurate <unk> the academic <unk>, our rat pay the glow in quite a lot.

<unk> on the physical accompanying wading pool authorized or add he 10, all pattern or some of them <unk> popular.

Last about most of the V. Yeah also for them I mean, the needs of our 10, all customers and Uh Huh, there <unk> and <unk> <unk> <unk> here and how cool so that's a snapshot of all or.

<unk>.

Yeah I'll address the question about the strategy moving forward.

As as I said, it's a dream my remarks, the really you know we laid out a mission and you know we have the full pillows, so rudely execute that mission and they find cook things seemed to various simple concepts here, we really have a twofold. It.

Strategy wanted to build this on the channel drug commercialization platform because we're in a very unique position.

They Beatles see we had the pioneer in in terms of beat will be in they pharmacy space, we really have already picking up more than 60% over the over on my hips.

You know obviously, we just recently hired a mixed I'm from <unk> to on board and he will be running the doctors on on the hospitals channel and focusing on innovative drugs and that is the festival. The second phone AIDS you know through that Albany Channel you know.

<unk> really unique in the marketplace. We're the only one we've not capability, we believe and we're going to strengthen not by doing that we're going to accumulate many consumers many patients and we're going to help those patients to do the last time.

Disease management, and or chronic disease management eight ongoing problem and this country never had a stock infrastructure in the past and now that we've been pandemic, we'd the infrastructure, we'll have they would house wait able to really service those patients and as we calculate each other than patients.

We apply we should have on average you know 20 years, it's a service them. So you know how to approach came from really connecting the patients with drugs on because of the be lots and lots of drugs available in the market and are those drugs need to find patients and are those patients need to find the latest that most effective drugs as well.

And if we're able to really build barrier that we believe that is going to need the best you know different smoothing foliage.

<unk>.

Oh, Thank you and that's that's very clear.

Once again really doesn't show many p. wish to ask a question. Please breasts are wondering at telephones and weight training to be announced.

Your next question comes from the line up Rachel from it just P.C. Please ask your question.

Hi.

I think like taking my stepson and congratulations boy.

Two calls.

Oh boy plenty I actually have to cool one.

Okay.

Oh, let me too me that.

<unk>.

Acquaintances like.

Huh.

Yeah.

It is expanded into 2.9 10, if I don't normally so can you.

More <unk> like the that's mmm or mind extension and <unk> I don't know question and.

Well, it's pretty cooking them close to Rachel expanded it by a buddy.

Yeah, Yeah <unk> as in my anything as we are either.

<unk>, yeah come down so I can you maybe kept us to understand why that <unk> <unk> <unk> <unk> <unk>.

Also can you explain what.

Constitutes an awful.

Compensating.

That that business sites that grows bigger.

That's a question.

Hmm.

Yeah.

<unk>.

I think well one cabinet on your.

Stand out loans.

Loans.

But now we had.

Hmm.

Okay.

Does that mean that we.

<unk>.

Four.

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