Q2 2020 111 Inc Earnings Call
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Ladies and gentlemen, todays conference call is due to begin charging until such time lines would remain on musical.
Continue to stand by the thank you for your patience.
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Hello, ladies and gentlemen.
Hi, Thank you for standing by for 111 in government.
Second quarter.
The conference call at this time, all participants listen only mode.
Management's prepared remarks with your question.
As a reminder, today's conference call is being recorded.
I like to fill in the meeting will be a host for todays call Monica Investor Relations.
Please proceed.
Thank you operator, Hello, everyone and thanks for joining us today for one loved ones that couldn't culture Twentytwenty conference call. All the quote today from 111 art gun took off new co founder and executive Chairman Mr.
Dreaming meal co founder Chairman and CEO make churn look Chen Chief Financial Officer, Mr. Harvey one co COO Mismodeled can move in that Trepidation director and that's true Alex skill Finance director.
As a reminder, today's conference call it being broadcast live well what have.
In addition, it replay will be available on our websites following the call. The Companys earnings press release, what gets you did earlier today and together with our earnings presentation are available on the Companys IR website I all dock.
One last one dot com duct C N.
Before we get started I mean, it reminds you that this call may contain forward looking statements made on under the Safe Harbor provision.
Private Securities Litigation Reform Act up 1995.
Such statements are based upon managements current expectations and current market and operating condition and they relate to events that involve known and unknown risks.
Fragrances and other factors.
Oh, the which could cause actual results to differ materially for more information about gets risks please refer to the company's filing.
With the as you see.
Well, one does not undertake any obligation to update any forward looking statements as a result of you inflammation future events or otherwise except.
Required under applicable law.
Please note that all numbers are a our N.V. and all comparisons refer to year over year, unless otherwise stated.
Please also refer to our earnings press release for detailed information on our comparative financial performance, Oh, a year over year basis.
With that I will turn the call over to our CEO Mr. channeling mill.
That's a lot.
Good morning, and good evening, everyone. Thanks, you for joining our funds you can see second quarter earnings call.
But lots of stuff we've got a quick note on the total virus epidemic.
The situation in China, as SaaS thankfully come under control and the life is slowly returning to some form of normalcy.
All right, but we cannot most science over the fact that many parts of the world based on an ongoing all unprecedented health crisis, and we'll be moving recession.
Yes, My mum, one inc. continuing to stand in solidarity weekly global community in the fight against the told me 19.
I'll hop goes out so those will have been affected by this insidious disease.
The way express all most moderation registry for the frontline healthcare workers tending, but sake. The scientists researching treatments on the vaccines and they central workers will have attempt to everyday life running through all.
I'm also proud of the dedication tenacity and the resourcefulness that all employees have demonstrated throughout this challenging period.
The continued to deliver for all clients and a provider central support so all consumers.
Before I mean in football earnings.
So first touch on that important strategic development that we announced today.
And on we have completed they kept injections from new investors to invest an aggregate of 419.28 million RMB approximately 60.49 million U.S. dollars into our principal subsidiary your phone information technology.
Hi, Co Ltd at a pretty money evaluation of 1.2 billion in US dollars approximately 8.33 billion RMB.
In addition, it is all your attention to pursue a listing of this principle subsidiary on the Shanghai stock exchanges Star markets.
You can find a recap of this announcement with details inspection one of the deck.
We feel about this move brings many strategic advantages to coastal firstly it will most of the company's resources to investing and pursue opportunities for rapid expansions.
Secondly will enable us to into new segments of China's capital markets, and attracting domestic investors, who want to participate in a vibrant healthcare sector and the company's growth.
Thirdly, it will further strengthen all Brent as with Bolden dependent our partnership with various stakeholders and the leading domestic pharmaceutical companies critical to our success as omni channeling labeling.
Fall it will solidify one long ones, leading position in China's digital health care ecosystem.
And finally, it will realize the valuation that reflects the stress and a phenomenal growth prospects of my my one.
While we're excited and energized to pursue this opportunity we're firmly committed trial listing status on that stuck.
Which will be complemented by our subsidiary listing in China.
Having all Ats listed on the traded on NASDAQ has allowed the company to access global capital markets and to maintain a profile that we'll continue to help us build partnerships with world leading pharmaceutical companies in their drug commercialization I said in China.
Now, let's move on to our second quarter earnings.
Fine the details inspection tool.
I'd like to provide an overview of the big companies business on all personal performance in this fall to then handle the 12 CFO Luke for the financial review and a guidance for the quarter before opening the call for kill a nice.
We believe we have a winning formula you know a whole prolong the strategy outlined on slide eight.
This is evidenced by our tremendous growth since the IPO summarized on slide nine.
Moving onto the overall financial and business performance.
In this call. So we'll have kept up the strong momentum to deliver net revenue of 1.6 to two billing RMB.
Lumpy, 3.5% year over year.
Gross profit doubled over the same period last year to over 85 million RMB.
Non-GAAP net loss continuing to narrow from 10.1% over last year, so full 0.9% as a percentage of net revenue.
Another step closer to profitability.
Our multifaceted growth strategy, it's driving robust performance across all of our business segments.
And I'll be to be segment revenue grew by 113.7% to 1.39 billion RMB.
We continue to lead the most extensive pharmacy network in the country.
Covering over 50% or the total juxtaposing China.
In the Paul So they alliance expand it to 280000, Radiopharmacies, an increase of 47% year over year.
On the back of the wind the network on a strong consumer demand pharmacy autos saw an increase of 188.6% over the same period last year.
Underpinning this growth in autos and the revenue I several services capabilities designed to better meet customers' needs and enhance their stickiness with us.
One oh on parallel supply chain management system that helps our customers to reduce inventory turnover days and ask product sourcing and assault.
Tool supply chains financing services that frees up cash flow from customers and to help them achieve greater operational efficiency.
Three virtual consultations throw out a lot of hospital and eat prescription surfaces that enable a retail pharmacies to food drug prescriptions seamlessly for patients.
For a partnership with Matewan that allows our pharmacy customers the ability to opens on own lifestyle via one on ones one drug express phone may find dot com.
Our retail pharmacy customers benefit from an expanded customer base.
He has the traffic increased sales and access to make times delivery capabilities.
In ton weight gain more data on consumer demand and the purchase behaviors, which helps us improve our machine learning capabilities to better serve our pharmacy customers and ultimately further there stickiness with us.
And I'll be to see settlement to where the lifetime value of a customized largely driven by a recurring services such as online consultations and the prescriptions.
In this quarter service revenue grew by 46% year over year to 6.2 million RMB.
While product revenue showed steady growth over the last two quarters supported by our best in class CRM system.
We saw the patients with chronic liver disease with a refill rate existing exceeding 60%.
The value of our services to patients continues to grow as we add breadth and depth plus also.
The number of strategic partnerships will have formed with domestic and global pharmaceutical companies continue to grow up 180.9% to 269 in the first Tom Clancy tenancy.
In addition to direct sourcing, which lowers prices for end consumers. These partnerships also bring for all patients the ladies innovated innovations in pharmaceuticals.
We provide omni channel support saw strategic partners in their drug commercialization efforts with the services such as brand and product promotion patient education, and a customer analytics and crossing monitoring.
These services have shown only promises as seen from them from the encouraging results of two of our multinational palms, Eli Lilly Eli Lilly's diabetes drugs Trulicity and at the Latisys Cosentyx, both drops a blockbusters in their respective categories.
We're confident that we can help them achieve their potential in the Chinese market.
Driven by the strong demand from the pharmaceutical products online retailers revenue for our E Channel segment grew by 112.8% year over year to 64 million RMB.
While the number of orders increased by 216% over the same period last year.
As we grow this network of partners, we expect revenue for the segment to continue its upward trends.
We also believes that the strength of the settlement will further enhance our ability to support our strategic pharmaceutical partners in their drugs commercialization efforts by providing them an additional proven digital platform for sales.
Beyond our three core segments, we're continuously exploring new strategic opportunities that can leverage out of this can infrastructure, while keeping our core competency in digital health care in particular, we believe that helping patients in ongoing diseases management.
And not just the onetime treatments presents a vast opportunity both in terms of improving health outcomes and fulfilling a tremendous unmet market needs.
In a country of 1.4 billion people, we cover and filling of.
With over a 1.4 billion people.
Who is leaving in tier three to six cities with insufficient access to healthcare with believes that our mission to digitally connected patients with drops and healthcare services will meaningfully impact the life in may.
I know, we're well positioned to do so we though expertise in cloud based the supply chain management.
Kind of mid AI analyst.
Analytics, and an omnichannel dropped commercialization platform that brings together retail pharmacies online and we feel platform partners boxes, and a pharmaceutical companies companies in service of patients, who otherwise couldn't get quality cap in their localities.
Well total medical consultations and in home dropped delivery of clearly provide tremendous value for hundreds of millions of patients across the country.
But the power of this model will only be fully realized when extended beyond today's focus on treatment of minor ailments. So support system for patients, particularly for ongoing management that medical conditions.
We had one month of committed to building the capability and offering for this comprehensive health care management model, one that allows us to take a comprehensive view of each patients.
The benefits of such a model to both the patients and our company affirmed by the recently announced the merger bits and probably about health and the long ago.
As proof of our leasing and a commitment to this opportunity. We recently launched in Shanghai, They lung cancer patient care program for holistic management that the disease.
The program spearheaded by the China problem right Health Care Foundation offers diagnostic and treatment services and the resources for lung cancer patients.
Delivered by a full lifecycle talk to patient interactive platform to be established and operated by one month patients can access disease education materials.
Medicare guys online consultation follow up consultation and the clinic visitation.
So far the program has attracted to that participation the twentys domestic and international pharmaceutical and medical equipment companies, we have an interesting lung cancer.
As we further strengthened it all digital health care infrastructure, which bring greater value to all stakeholders as shown in slide 16.
One for the pharmaceutical companies for whom we provide drug commercialization support our data driven cloud based the system allows for better targeting and a profiling of patients so that more personalized products and services can be delivered to them, resulting in faster uptake of new drugs and a great.
Commercial success.
For our retail pharmacy customers, our AI based to smart sourcing system machine learning capabilities and a cloud based eat prescription service translates into more effective sourcing and a better inventory management, leading into greater cost efficiency optimal product assortments and a bottom up.
Reach.
For a marketplace merchants our business intelligence part also provides a real time and picked drove sales delivers batches and the customer feedback all of which are critical for superior sales management and high customer satisfaction.
Clearly.
When our customers succeed we succeed also.
But all digital capabilities also provides a more direct benefit to our operations.
Empower the by these industry, leading tools our business development team is able to provide better service to prospects and the customers alike, achieving higher conversion rates and a customer loyalty.
In conclusion, all results in the first half of the country tendency once again, demonstrating the power of our technology enabled and integrated model.
And the effectiveness of our disciplined execution.
Looking forward to the rest the rest of the yen beyond where we'll continue to stay focused on executing against our full growth pillars to deliver long term value to our shareholders.
Without strengthened financial resources from the capital injection, well have greater ability to see cow and capitalize on strategic market opportunities further strengthening our leadership in China speaks to a healthcare markets accelerating our growth and expediting hollow next phase of expansion.
Thank you with that I'll pass on the might look.
I think you're treating.
Moving to the financials.
You can see the details for the second quarter 2020, Inc. second three of our presentation.
Slide 18 to 20.
I would like to highlight a few key business and financial matrix and our focus on year over year comparisons.
On numbers I am be unless otherwise stated.
Let's start with outperformance for the second quarter.
Total net revenues for the quarter grew 93.5% to 1.62 billion.
Was driven by the continued a strong momentum across all business segments.
Although we could be segment revenue, which incruse cotter revenue and the service revenue grew 113.7% to 1.39 billion.
The strong growth in B to B sentiment was attributed to the increase in number of promised the orders which reached 557000.
With growth rate at 188.6% year over year.
As worth a newly added compensated you know and network.
Okay, because see segment revenue also incurred product revenue no service revenue grew 6.4% to 167 million.
Among which our because see part of revenue grew 5.3% to 161 going in for the quarter, while our because the service revenue grew 46% of fourth quarter.
The increase in you can see service revenue was mainly due to increased.
Digital marketing service provider to they're probably two companies.
What a patient education and management.
Our eternal segment revenue grew 112.8% to 64 million for the quarter.
Which was mainly driven by the strong demand from pharmaceutical product online retailers.
Overall, our gross profit growth by 101.3 presented to 85 million.
And a combined gross margin was 5.2% upfront, 5% a year ago.
Compared to the same quarter last year gross margin you know you could be second was 3.2% upfront 1.1%.
I will be to see segment margin was 12.1%, 21.1% up from 20.9%.
And our E Commerce, there was 6.9% similar to last quarter.
The improvement in gross margin was primarily related to our improved it is scale outsmarts pricing.
Assortment management as well as old soften capability.
Total operating expenses fourth quarter were up 24.2% to 177 minutes.
As a percentage of net revenue total operating expenses fourth quarter was down to 10.9% from 17.1% as we continue to improve our operating leverage and optimize our operational efficiency.
Fulfillment expenses as a percentage of net revenue for the quarter was 2.7% from 3.3%.
Sales and marketing expenses as a percentage of net revenue for the quarter was 5% down from 9% in the same quarter last year.
<unk> expenses et cetera, and net revenue for the quarter was 2.4% down from 3.4 present in the same quarter last year.
And our technology expenses accounted for 1.1% come that revenue coming from 1.5% in the same quarter last year.
As a result, and then GAAP net loss attributable to ordinary shareholders for the quarter narrows to 78 million as compared to 85 minutes in the same quarter last year, which accounted for 4.9% of that revenue down from 10.1%.
As to the guidance for the third quarter 2020 on slide 22, all section for.
The company expects total net revenue to be between 2 billion and 2.17 billion.
Representing a year over year growth of approximately 80.1% to 95.4%.
The outlook is based on the current market conditions and reflects the company's current and preliminary estimate of the market and operating conditions as well as customer demand, which are subject to change.
Please refer to slide 24 to 26 I'll section five four hour collected financial statement.
A quick note our cash position as of June 30, 2020.
We had cash cash equivalents and research cash all 743.5 million compared to 697.7 billion as of December 31st of 2019.
This concludes our prepared remarks thank.
Thank you.
Operator, we're now ready could begin acuity section.
Suddenly ladies and gentlemen, even I'll begin my question answer session.
We wish to ask your question.
Scott one.
We keep tabs and read for your name because you know it used to counter the regret.
Okay.
You have a question comes on the line Oh.
The new Chen Please go ahead.
Hello, Good morning.
And thanks for taking my question I have pricing.
Well, we noticed that.
Exactly that's life cycle.
Sure.
Its impact lung cancer patients and the reducing costs.
Well you guys as.
And then just model.
[laughter] [laughter] and then next question.
Now, we would that be to be sackman, developing that people and the reason behind and how we maintain.
The momentum building.
And then last question if that's how it's the how you.
Like I did see money valuation Oh about 1.2, Binney you still in its important.
I cannot it's it's Mike Mckee caps or the timing come to me wrong.
550 Muni on it.
Okay. Thank you Jamie I think I'll take on the first question.
Yes.
July in Shanghai, they launch to the.
Lung cancer patients have program.
The Chinese name for that is called gone, even who we launched the program together with China, China primaries Health Care Foundation, and the platform offers the diagnostic and treatment services.
For cancer patients and.
It has a full lifecycle dr. patient interactive a topical and a the platform will be operated by a one month.
Oh this platform patients can access.
Disease education materials medication guidance online consultation and follow up consultation clinic visitation et cetera.
Although it is very early stage it is showing a great potential.
The feedback from the doctors, who are using the platform said, great thinks about it and that are they feel pretty excited by it and and of course.
The launch attractive.
Many pharmaceutical companies and the so far.
20, domestic and international pharmaceutical companies and the medical equipment companies, so very strong interest.
And of course this is our fastest that being building this stop to patient interactive platform and it will be rack. Okay. This into other disease types and we feel very excited by it and you know this links back to the digital platform will.
Doing and which ultimately goes back to our mission statement, which is a digitally connecting patients with drops and the health care services.
So I'll pass on the my two during harvest for the second question.
Yeah, a second question regarding the beat would be growth.
I think.
Basically a the BBB or developing pretty good the grows the mainly coming from I would say from to pop running is our.
Digital marketing capability, we are the is the enhancement of our supply chain.
And for the digital marketing side.
We can see you know we are operating at total solution to.
So if you go company to commercialize their job through our.
Ah digital knocking tour.
For example, we enable our people be Klein with cloud based digital services.
Such as cloud pharmacy, so they did a cloud cleaning and cloud immensely and cloud T I M.
We also develop the <unk> high end turbo tools for youth Big data and Internet technology to do it up at Mccann either for our sales possible to acquire new more customer to active activate existing customers.
And also improved BA you an ARPU.
Especially in the lower tier cities.
Which contribute to a major cost of our b to b cell smaller.
And on the supply trends side.
We are getting more and more direct sourcing from our ER.
Partnership from her with with both the pharmaceutical company.
And also our enhancement I'll continue investment on our logistics network or how hard to provide a better services to our people he customer.
A lot, but not live as the drilling just mentioned, we also provide supply chain financing services that freeing up cash flow for our people be customers, that's helping them achieve greater operational efficiency.
Thank you.
Yeah definitely look let me answer the question I'm be a.
Hey, Mark pre money very sharp PS 1.2 billion.
We believe currently we are as significant victim.
The fabulous.
Were sub market cap ironic 500 million in the in and out of stack.
So just pretty money valuation off your thought at 1.2 billion is similar to when we got limited impact of two years ago in September of 2018, but if you look at our visit size is more than doubled.
In this fiscal year 2018, we had the company has a net revenue around RMB 1.8 billion.
And then in 2019, we achieved net revenue.
More than close to 4 billion.
And the first half six months of 2020, we already achieved a net revenue was three point.
Tubular.
You know so.
More than doubled in size and we're very happy to see that Oh. So Steve. It's also investors a pretty recognize our value and have have confidence in this company and we're very excited to complete this spano financing.
Before we answer your questions.
Yeah. Thank you. So I think we can go look so again, thank you semis.
Thank you.
We have the next question coming from the line of Sherri in from JP Morgan. Please go ahead.
Hi, Thank you for taking my guys and congratulations on the great again, RBC Chevy from JP Morgan.
I have two questions.
The first question.
Our it's about marquee IPO upon how could you shed more about exactly the IPO timeline and potential strategic plan change after the capital.
And my second question is about each panel business to take them Oh, we thought the segment maintained their outstanding Oh thing.
Hi.
Stable margin.
Could you help has Uh huh.
Uh huh.
Tim hockey outside Okay.
Oh, My God content.
Oh come here with our B to B business in a long time. Thank you.
Yeah. Thank you Sir your question.
First of all with regard to the timeline.
And then obviously, we need some need the ER Chinese regulatory refinements and.
I would encourage you to refer to our press releases as we continue to disclose the progress Oh the process and.
To this strategic plan.
Obviously.
Our strategy has been very clear with this new round of financing.
I mean, obviously.
We are very very confident continue to execute on the strategy and you know weve.
The extended reach to the domestic market, that's going to put us in a better position and or the money will be well spent on innovative.
Technologies will be spent on our supply chain capabilities to really for the kinda rates more growth of our business.
I think there's another part of the question around Chandler Harvey and can take on yeah for the question regarding lead channel.
If you just mentioned you know with feels very good Chen or live or even though they just go.
The reason that thing, it's a is that more and more pharmaceutical companies.
Leading to authorize us as a sales channel for.
He channel management.
To elaborate this business model.
Department. So to go company, we are signed strategic cooperation with up and there we veeva well design service packages to these business partners, including a very important inventory management as opposed to price management will that especially for all.
Line business.
We have now extended our customers to almost all mainstream online catalog sales platform.
Through our supply can fit and then our price management yet system.
We help our customers those pharmaceutical companies.
Her can show their inventory turnover.
And also that ammonium and manage the pricing each online sales platform ER visits a they calculate the price management at luck at Duquesne imagine because a in the online sales platform. It is very difficult to a better control right, but we have a tool.
Correct, Yes system, we can real time money to the price changes and you know.
To be any that discrepancy.
And we believe the strength of our new channels, so that that will further enhance our ability to support.
The strategic.
A partnership with both the pharmaceutical company email job commercialization efforts by providing them a total solution or a new digital platform for sale.
Thank you.
That's very clear thank you.
We have the next question coming from the line, obviously, keeping things from sea ice CTP go ahead.
Hi, this is.
And thank you for taking my questions actually.
And my first one is about the Companys digital capabilities.
Well I see that the company keeps screens in the digital capabilities in some ways such as.
Digital marketing and other digital health care infrastructure.
Would you please truism more insights on this view.
This is my first question about the capabilities.
And my second question is about two diary Yelp phone I.
I noticed that you mentioned by phone.
Sure some more color on these subsidiaries.
Including its.
Operating business.
Besides I also wonder why you guys choose to be listing on the star market Im sorry on coal market.
Okay.
This is hardly a a pick the first one on the digital capabilities.
And our digital capabilities, including digital marketing and.
There are several part of it we enable pharmaceutical companies.
For low so they fit like cloud PT piece of it and digital marketing services.
As for our.
Customers like those people be comedy.
We provide cloud based services.
For example, a one dropping spread as Julien just mentioned.
Our partnership with late one.
And our cloud commented that it did cloud immensely services.
And also Clough clinic services and cloud see I am.
So a marketplace a partner we provide then a business intelligence portal.
And for the 200 stakeholders as I just.
Mention in the previous question regarding B to B, we have I'll hop I did from our Kerbow system to help.
Hello, Oh, so close to commercialize those are drop.
<unk> pharmaceutical company.
With all its system, we have viewed on a robust mechanics on drug commercialization or both online and offline channels.
Which we believe.
We will create great value quality industry and replace the traditional dropped sales process.
Which require a very heavy madsen on Mpower, a very heavy met the investment or marketing dollar and also having batsmen well inventory.
Our hardly the figure precious.
No problem is or what do you own subsidiary Oh Wow.
And why we choose to start marketing the phone call.
For the first of all your auto the sub market.
Uh huh.
Okay features a from a China most prominent three mountains company.
So that media listing on the stock market will allow us to tap into a new capital resources in China aftermarket provides opportunities for domestic investors, who participate in rapid growing health sector.
Oh, I, especially as Visteon has over here on innovative company okay.
Certainly our can you also mentioned that were committed to maintaining our balancing that.
Because we believe that you do us a global Brian.
Right, so very rigorous corporate governance.
At the lowest who are hunger and with a multi national pump to accompany whether a commercialization talking much about vision.
Uh huh.
Efforts.
Right no uncommon.
We believe that's the stock market will provide you recognize that the local capital to support our China operation.
Also we saw that we believe that the Submarket is the exit for cash to fund outflows to me in China.
Second we feel that Ah evaluations relativity attractive, although that's a you know there's no guarantee but.
I see that Ah Ah.
Okay, and the hot successes or other companies like us.
And there are also would be the stock market.
Listed REIT allow us to resell profile with our business I mean dismal community in China.
Before the region.
[noise] told us in terms of Brexit.
Okay, that's helpful and very clear.
I do.
We have to make question coming from the line up and you Lamb from Mitsubishi. Please go ahead.
Hi management or just for how just wondering already you can hear me.
Yeah.
Yeah, Hi, Rick So so yes, thanks for taking my question and congratulation on the rig, though I just have one question I.
I wanted to understand the key driver.
Increase of water.
They are pharmacy for your business.
Uh huh.
My understanding the logic.
When you have degree Oh, the number of pharma.
That's all I want it spending.
Oh, that's Oh Daddy CP quick data as you just penetrated into.
No pull it up.
Well.
Yeah.
Any underlying drivers for example.
Hi.
It bought it depends on the use you had available Oh again goes down to the number of cooperating upstream drop manufacturing.
Oh partner.
You had.
That increasing and the rationale there on that.
It's just kind of like a margin I imagine side of kind of controlling.
Yeah, because my question.
I have to expand it well.
Okay and you are let me take the question.
Yeah, I think one of your assumption is that it that there are the it can you we are offering more and more S.K. you to our because the customer and Oh, we are not you know a you've seen the traditional supply 10 model actually a this is a a brand new.
A so called supply Tri mode, or we call. It a JV GBP two Boston model and we have a barrier supplier.
Yeah.
No supply is enjoying it JB peep a program and they join the probably each of them breeding thousands of Ah. Okay you.
So these programs help us to quickly expand all at pay you a with a very promising muddy and efficient dementia and over so with this the baby P. program, we have breathing.
Have you.
Which is a you know or help provide a much better football selections for I'll need to be customer.
Furthermore, I mentioned previously Oh.
Digital marketing capability also helped us to improve the Wally show all our customers.
For example, we we got the so called a we helped pharmaceutical company to commercialize that drop and all of those costs fall or will you know or get a much better. We we can get a much better price from.
The apartments in here so the co company to a direct smoking. So we also have a so called a good price quotes are people be customers.
And so they don't have to five from traditional channels debris I've already goes through three all fall layer.
And some of them all and ER.
The pie chance finance financing. So this is also.
Help our people be customers pool.
That's a managed our cash cash flow and help them to buy malls on that.
Uh huh.
Question.
Yeah, Yeah, Yeah, hi.
That said it's great.
Yeah.
I have no more questions. Thank you very much.
Okay. Thank you Andy.
[noise] Nick.
All right.
Over the next question comes.
Oh, Hi management. This is John from Red capital. Congratulations just a small two small questions one I noticed that youre your.
I notice that Youre, a cost of goods sold or continue to the percentage because he was going down as well as it as well as or upper film and Oh expense ratio.
Prices.
Wanted to.
Have a gauge and just fulfillment expense ratio continue to go lower or are we close to a.
Are we close to being on what the sufficient as we possibly can and a in terms of being able to breakeven.
How does that translate to towards the eventual profitability for us.
The second question could you.
Sort of elaborate little further on.
Vibration with Eli Lilly and whether or not.
So sort of the sort of the basic business model.
Uh huh.
For me thanks, Thanks very much.
Okay.
[laughter] John So we're somewhere you talk about the fulfillment cost Oh I know why are you always see growth for life improved you know we've been doing a fantastic immunosuppression management.
Though coherent copper production cost from where the criminal I'm amazed.
Why is that a or Gail it's been doubling year over year and a the economy of scale are largely busbar.
Well the fixed cost.
Hey, guys.
And then to.
They're not investment.
<unk> diluted so that's certainly a one factor things Oh, we are more and more once you've got the working right now or who are you at or from a 206 years.
Two companies, but certainly the ARPU.
Get rid of ought to be the leader.
Also we took the old though since last year rebuild or three you women matters. So those are from is not there's little sheared a volume were also get closer to the oh customers that want to.
Reviews on cost.
Oh Boy you can see no orders, it's hard to no more than double every year and that give us more bargaining chip who are under or with a third party logistics get much much better Ah.
Right.
On the lastly is we are system, we have missed a lot of technology.
Vincent in Reno, especially for years I share authorization hearing Myles Walton Micah over to Mr. return optimize I'll open the call so cool.
So the systems or would be about.
Whether reviews, our open the call.
So that's the first question a prudent person you asked about the promises to be like maybe a I think this problem model what oh.
Good day similar partnerships with many other Oh through company.
Basically agree a home.
Partnership specialized or Oh go or better yeah, that'd be I know we.
Oh, the diabetes or experts all the hopper.
Registering served on this platform a week or does that give patients.
Jason on platform and Ah you have conviction or like a trulicity.
We had to be wherever you are not the submitted this true.
Patient home or better than you know.
Pickup.
Maybe four so Ah Ah.
Oh I.
It's been a really truly away for a well you like maybe I'm not really a they were so excited they give us a another dog to commercialize the we are in that process well certainly many many more.
Since or.
With the other two companies the thing is model where the indicate.
Thank you.
Thank you be happen next question coming from the line of reaching Yang from April to go.
Okay. Thank you for taking my question and congratulations lauria nowadays that with John Accordingly, I can actually three question consistent when there are no oh, we keep a b to B ER business. So gross margin you noted that there is that a material improvement in margin.
So what we have done impacting quoted to you should the margin and.
Secondly, I'm happy to see that we we all understand the b to B.
Actually a major.
Potentially it could still interested that we also know they seem to be too HM.
Sadly the to recover and decided to a gross <unk> second accordingly, so what is the driver behind and when do you or a strategy to develop.
[laughter], especially considering a we oh, we also have kind of Oh.
It's it's a good collaboration with that I've seen a then factor like the so maybe elaborate little bit more about what's your business tragedy.
Instead lead actually on anymore and.
I know he gets to 10.
With that Hillary so have you actually have you noticed the any signs that and I'm pretty pleased to jobs to sell.
Outflow from hospitals.
Has accelerated how do you know what kind of Chad. This is my question. Thank you.
Okay, let's take the that's too about it'll be marketing and a or b to C.
Regarding easily margin.
As desired you know the this is a growth on people be either those boto gold we also.
The you learn faster growth will be to be gross profit.
And.
I think that basically a three reason one is our.
Direct sourcing relationship with our pharmaceutical accommodates which you can that they would get.
Much better huh.
No the direct ownership.
Secondary.
Oh, what P OLED system filled up as much pricing mechanism.
Queen crew profit, while we saw any negative impact to our.
Sales growth and expansion.
And a number three I've seen it or is the supply chain innovation I. Just mentioned you know we have a JBT project.
He's going to have it has attracted a number over the prior to join.
And he helped us to quickly fenno, a pay you a but we are very promising monkeys and also a mission. We shouldn't you mentioned an older and the JBT ER.
Portion of our.
So called people be business is increasing rapidly.
And or beat would feed side.
Yeah happy to see our.
He was he does it back coming back to a growth momentum.
This growth comes from were a bit this restructuring in the past year.
We continue to focus on customer lifetime management.
Leveraging I'll online chronicled disease management system.
Three improved customer the leap field Ray.
We are seeing a significant improvement on a customer overtime refill rate with me.
Chronicled disease management tool, a which is also part of our FFO yeah.
At the same time, we have really fly our chronic heart disease management system and the on them to be could be offline pharmacy customers, who you labeled they actually Felicia Broda pharmacy, who Oh Hello Hello.
They provide.
I think there that will be or directionally for us.
Hi, how are they also doesn't ross's question, probably I understood what money out of time of briefly answer on my last question was 11, the industry's very timely I think today. It would just some reports about Vicki, but VP has been completed and you know from ball we by adjusted.
And all the high end of the discount when top as far as salami, 4% and as it were making comments like had you know I think it's gonna costume all to.
Used to water to take the drugs has done a drug itself. Yeah, we absolutely anticipates that the Rx structure will be outflows more and more I thought the hospitals and a one more money is actually in a good position to benefit from that thank you.
Okay. Thank you.
Thank you shall we move to the next question.
So yes for the next question.
Right right yes.
Yes.
From the line agreement Chung from speaking we shall please go ahead.
My question.
Okay.
Excellent results this quarter I.
I have a border questions wise you regarding <unk> current situations, because you're talking to you I Sunshine attention.
That would be at every answer to you or whether you have.
Any contingency plan what is it threaten the listing for U.S. securities or Chinese acuity and whether you see there's probably time are there any opportunity that were favorable fuel company going forward. Thank you.
A third sector.
First of all our businesses no impact I know I kinda U.S. relationship.
You know that go away, mainly focused on the China market.
Oh, that's all the market value into at least maybe not.
All right.
Hi, Good do you know obviously not.
No almost the same my daughter, who at least the terms company. So we definitely focused a relationship where some of it wouldn't be either <unk> or store, but.
Anytime we maintain our commitment.
For the and I believe we believe that are in August or the global market under these ventures.
Well I know our investors.
Okay. Thank you very much.
I do the happening.
Thank you we have the next question coming from the line of Marco Rodriguez.
Individual he's going into becoming less but he's gone.
Hello, Yes.
Two questions number one could you briefly discussed the.
Companies cash position.
And the second question is a works with general outlook.
To be a proven Nike outbreak and whether it's had any.
Impact on the company both positive negative thanks.
Yeah.
Okay position, Oh, we bleep, where we have very strong cash position.
As of June sorry, we have.
Cash balance around 705, I'm, sorry, 50 million RMB and also we just completed the new rung up capital injection around 420 minutes.
And we are more pleased to see that them we're generating.
What we call to operating a public and careful which means that the the payment we made for the purchase and the cash received.
Much of that and the cash received from from itself.
So we see that public is fine and and we go we're fully be a with.
The expansion of opinion scale.
We were see more Oh, that's part of positive.
Cash used for all of.
You know.
This its operation.
Yeah, I, probably take the or the second part of the question Michael ER with regards to be outlook. After all post a cobot 19 alternately Colgate 19.
I'll anticipation is not a these pandemic is going to create a fundamental changes and though we just want to take calm. The advantage. One particular phenomenons that is we bet that the Chinese healthcare industry is going to go through a digital transformation Adam that essentially the.
Biggest trains were betting on a enormously.
Through this pandemic people realized so some people are focused at the patients to actually go online to receive about consultation to get to online refill and that's gotten better information because to be afraid of going to hospitals and in the past. So there have been some resistance from.
The doctors because they're too busy I'm you know, we're seeing patients offline or certainly pandemic and all those doctors actually got a taste of using online services to care for their patients not to talk about the Chinese government.
Policy shift to encourage a the online players to play a much bigger world, especially in the chronic diseases area. So you know I think were betting on those trends and a with the leap that my money is very uniquely positioned to to actually take advantage of those that trends. Thank you.
Thanks, Good luck to going forward.
Thank you.
Thank you Sir we have the next question a this is coming from the line of scale Wong from China and it's all please go ahead.
Right.
Hi, Thank you for excess my question Congratulations on your brothers.
[laughter] constructs affect why not wait E com Giants like OTTI pop out and <unk> dot com actively developing back online b to C. Topical didnt mean, what the bonds. They just do well one has to make Austin out from the completion exactly why is that how truck put him into it.
On the time that will affect one on one, especially for the DPP platform. Thank you.
Sorry, I Didnt catch the second question how scary.
[laughter].
Our tickets.
Oh.
Okay. So we.
We actually never compete against a Ali and ER I'm JD TD Hell.
Obviously, if they have typically the ecommerce players and if you look into our business you know, 70% about business is actually prescription drugs and Oh, we do is really we provide a lifetime.
Value a full cominco patients and the won't we really focus on to service those patients with chronic conditions and we want to provide a platform.
For those patients to receive a the disease related information education, they online prescription and they also online refill. So we call. They pharmaceutical companies. So I really manage they deal T. The duration of treatment.
So I'm enormously pod Ali health and beauty health or have there I'm tremendous traffic.
Obviously, we don't have those traffic we've got to play in different spaces, and our strategy is to really to be the integrated online offline platform and no body and JD don't have really 280000 pharmacies across the country and Oh, our focus is our Robin difference.
And no. This is a very very big market with a true moving to train gun on annual basis, and I think a one more money very comfortable to find a you know a space where you know we do best instead of competing against that you know those giants.
Never let me answer your second question you mentioned Oh, we are the impact of a Chinese government health care reform to.
Well, yeah thinking though.
Almost all parties would favor to us because I always think lost a new policies.
Newer every month since last year.
For example, Oh I'm going to fill our subscription dropping a into them out as well so I don't lie.
And Ah Medicare or insurance World.
Well I'll cover.
Online and the occupancy.
Following publication, Oh, My God purchases I know you know policy.
Well part of it might go to equal policy.
Our long hours are comfortable you know the separation of I spoke on them.
Vision services, you know who all this is all I think.
Favorable to Oh, I'm doing okay throughout the whole how often work load into you know either online or offline.
Okay.
No. We have one of my probably where do you reckon partner with a 200.
80000, Oh my philosophy, so we really the casual though to me I think that's Oh this is great.
Hi, good for us.
No. This is the reason though.
You didn't give you focus on Australians Q.
Thank you that's very helpful.
Okay, operator, who do not having.
Hello, Sir we do not have any further questions at this moment sectors.
Thanks.
Thank you operator.
Cool thing I'll be happy about the entire 111 management team, we like to thank you for your interest.
It's a patient in today's call. If you require anybody's estimation or have any interest in they did he lives in China. Please let us know thank you for joining US today. This concludes the cool.
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