Q4 2020 111 Inc Earnings Call
[music].
Hello, ladies and gentlemen, and thank you for standing by for one.
Inc's fourth quarter and fiscal year 'twenty 'twenty conference call at this.
All participants are in the listen only mode. After management's prepared remarks, there will be a question and answer your assessment of.
As a reminder, today's conference call is being recorded.
I would now turn the meeting over to your host for today's call Ms. Monica Mu Investor Relations director.
Does he Barnet zone.
Thank you operator.
Hello, everyone and thank you for joining us today for what was for culture and at fiscal year 'twenty 'twenty Congress cool on the call today from one one of Dr. Gong Yu co founder and executive Chairman, Mr. Dreaming, Lilt co founder Chairman and C E.
Oh mixture of Luke Chen C. S. All of our major subsidiary mixture of Harvey One co C. O O mixture of Barry Zhu Co C. O O Ms. Tiffany true go I R. N V D Senior V P of MS Monica Mu Investor Relations director.
True and the Mr. Alex still fantastic director.
As a reminder, today's conference call is being broadcast live.
Via our webcast.
Dishes at replay will be available on our website following the call the call.
The nice earnings press release was distributed earlier today and together with our earnings presentation are available at the company's IR website at IR Dot 111, Dot Com Doxy end.
Before we get started let me remind you that this call may contain forward looking statements made under the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
The statements are based upon management's current expectations and the current markets and the operating conditions and related to events that involve known and unknown risks uncertainties and other factors all of the which would cause actual results to differ.
Materially for more information about these risks please refer to the company's filings with the U S E C.
One of the one does not undertake any obligation to update any forward looking statements at the results of new information future events or otherwise, except as required under applicable law. Please.
Please note that all numbers are in RMB and all comparisons refer to year over year comparisons unless otherwise stated. Please also refer to our earnings press release for detailed information of our comparative financial performance.
On a year over year basis with that I will turn the call over to our C E O mixture of drinking milk.
[noise] good morning.
Everyone.
Thank you for joining this call today for all of fourth quarter at the full year of country to country of results.
Yeah.
Let me begin with an update on the COVID-19 pandemic.
The posture of the plush.
It's been difficult for all of us.
For the global effort and the commitment to overcome this terrible disease has also shown the resilience of the the human spirit.
We'll continue to be in all of the first responders working tirelessly throughout these unprecedented times.
Together, we will persevere and the biggest disease.
With the hard work from our dedicated employees and the safety and the other operational protocols will have put in place one of them. One has been able to service our customers and the deliberate critical care to patients without interruption throughout this difficult period.
With the vaccine rollout.
Optimistic that an end to the pandemic these insights.
As we continue to stay vigilant for the potentially more dangerous variance of the Corona virus.
Moving on to our earnings.
I'll begin with a brief look back on what we accomplished in 2020, our extraordinary journey of growth infection, one of the deck.
And a look ahead of time.
The <unk> 'twenty, one and beyond.
Then I'll hand, it over to Luke to take you through the financials infection tool.
We will conclude our prepared remarks with guidance for Q1 2021 before we take your questions.
In the fourth quarter net revenue rose 96, 1% year over year to two point of six 4 billion RMB.
Bringing the number for FY 'twenty of 20 282 billion.
More than doubling the net revenue of $3 95 billion the achieved in FY 2019.
This is the 10th consecutive quarter of revenue growth since our IPO.
Non-GAAP net loss attributable to ordinary shareholders as a percentage of net revenues also decreased the significantly.
From 22, 3% in our first quarter post IPO to three 7% in this fourth quarter.
Our business recorded at close to nine fold increase from $959 5 million in FY 2017.
The stellar performance was selling motion by our as to B to C model.
Which has continued to drive our multifaceted growth strategy and has allowed us to lead the charge in the digital transformation of the healthcare system in the new era of industry Internet in China.
Our mission is clear to digitally connect patients with medicine, and the health care services.
Our as to B to C model was built in two stages. Firstly, we developed the supply chain infrastructure the S.
Yes.
Enables of the model.
From 111 at the inception, we're having all of mind to build an innovative digital platform that would allow us to benefit from disrupting the status quo.
But our supply chain infrastructure is more than the platform.
It also encompasses our network of suppliers pharmaceutical companies distributors marketplace vendors and the other service providers.
This infrastructure is done digitally connected to our rapidly growing network of retail pharmacies bundled at the beach and our model of.
For any of them the capability for the vast selection of products and assortment cloud CRM cloud clinic.
Speed, a home delivery services, all of which enable them to better serve customers with enhanced efficiency and the reduced cost.
The same supply chain platform is also designed to bring value to doctors the.
At the B and our model.
They are able to enjoy our service modules of cloud clinic cloud pharmacy Doctor patient the platform to provide follow up care for patients, which improves the doctor of patient experience and the drivers of positive care outcomes.
Every day patients traveled to the space.
Traveled to distant cities for medical care and the one of the challenges faced by doctors is being able to provide efficient and effective of follow up care. Once these patients return to their homes.
On our platform geography will no longer be a limitation privileged from doctors from engaging in the interacting with their patients.
Conducting regular post the discharge consultation and online of refill of the medicine can help reduce readmissions by detecting and the mitigating potential complications early.
Having established a robust foundation with an extended this model to bring value to patients the feed in as to B to C.
Digitally connecting them to medicines and the health care services.
Through our supply chain platform doctors and pharmacists are able to leverage different service modules to offer a variety of services to patients that never existed before.
Our company takes great pride in creating a platform where our customers from all around the country to enjoy either pure digital or a combination of online plus offline services, which leads to better health outcomes.
But I'll work doesn't end that in the second stage of the build out of our model we seek to continually strengthen our infrastructure to further empower our network of the radio pharmacies in service of patients.
Which is the S. Two Pete to see part of our model.
From all of them.
Cloud based at the supply chain platform.
We have applied AI and the big data analytics to help our ratio of pharmacy customers better manage their product selection inventory control and the timeliness of product delivery, resulting in high efficiency lower cost as well as greater engagement with more satisfied the end consumer.
<unk>.
We're making significant investments in the two D to C space as well in addition to AI. We're also investing in digital Rex to make the doctor's life easier in patient care.
For our network of suppliers will continue to deepen and broaden our relationships with pharmaceutical companies through our omnichannel product commercialization services, adding value to all stakeholders in our ecosystem.
For pharma companies the gain access to a broader market for the new product, while lowering the marketing and distribution costs for.
For our retail pharmacy customers the game the wider selection of of the latest product at a lower cost.
For our doctors they are able to access a variety of services. So they can serve patients digitally.
And for our end consumers the benefit from being able to access the latest innovations brought to market by our supply chain platform.
The advantages of our as to B to C model continues to attract new partners and of the has led to the rapid growth of our ecosystem in 2020.
The number of global and domestic pharmaceutical companies will have a direct relationship with total to over 330 as of Q4 2020.
While our network of the ratio of pharmacy customers is now the largest in the virtual network in China.
With the support of our eight regional fulfillment centers will provide 24 hour delivery to more than 300 cities in China.
As we increase the number of our fulfillment centers and upgrades of logistics management fulfillment.
Fulfillment costs as a percentage of the net revenue has improved significantly.
From three six percentage in Q4 2019 to two 6%, Inc. Q4 2020 for.
For the full year 2020 at improved from three 3% to two 8% year over year.
During 2020 will continue to build on our momentum and deepen our market positions.
For our men operations subsidiary Yao from Shanghai, which has raised the two rounds of financing debt amounted to $143 million U S dollars from third party investors with the second round financing at a pre money evaluation of 10 billion RMB, one 5 billion.
Dollars.
In connection with IPO Shanghai of stock exchanges Sci-tech innovation Board.
Looking ahead, we will continue to pursue the enormous market opportunities from the digital transformation of the health care market in China, which given the country's bus population provides us with the opportunity to connect millions of people in lower tier cities to first rate in healthcare services.
That has traditionally been the available only to those living in tier one cities.
In order to bridge the gap in patient access in 2021, we will focus on strengthening every facet of our as to B to C model and advancing our strategic plan to expedite the business expansion.
On the infrastructure side.
We will keep improving the AI and data processing capability of our technology.
Its power to handle higher volumes with greater predictability.
With this we'll be able to provide the ratio of pharmacy greater control and the cost efficiency to drive their store sales growth and at the same time further deepening of the share of wallet among our existing ratio pharmacy customers.
The platform's enhanced the capability will also allow us to virtually deploy of more digital medical reps to further improve the effectiveness of our commercialization services.
Doctors will be provided with tools to access the latest innovations in medical science and of the empowered to deliver better care for patients.
On the supplier side the services, we provide to pharmaceutical companies in support of their commercialization of assets help deepen our relationships with them, allowing us to source, even wider selection of medications for our pharmacy customers end doctors to benefit in consumer.
This commercialization services also represents a major growth opportunity for us.
Globally in the in China medical innovations have been happening at an unprecedented rate.
As more and more of new medications end devices come out of the market competition becomes increasingly intense.
One of more months support during a product launch kind of improve the company's market position and increase the likelihood of a successful launch.
Ultimately our <unk> model is a win win for all as would help to transform the health care system for the better.
We believe that there are significant opportunities for us in the age of industry Internet to expedite the digital transformation of health care system in China.
We'll go work relentlessly to strengthen this model and pursue growth opportunities as we stay on track for style listing and the delivering even greater value to our shareholders.
With that our head of the call to Luke to walk through our financial results. Thank you.
Thank you for dreaming and the good morning or evening everyone.
I want to begin by thanking all of our colleagues for their resilience and the hard work over fiscal 2020 as.
As we navigated a challenging environment for making operational changes at <unk>.
At the onset of the pandemic to support of fast growing business.
We remain the resolute in our focus on taking care of all our stakeholders, including our SaaS customers.
And the shareholders.
And at this focus that enabled us to report another phenomenal fourth quarter and fiscal year results debate.
Moving to the financials.
My prepared remarks will focus on a few key business and the financial highlights.
You can refer to the details of the fourth quarter end of fiscal year 2020 of rebounds from slides 14 to 17 of infection two of our presentation.
Again, all comparisons are year over year, and all numbers are in RMB unless otherwise stated.
Let's start with the fourth quarter results.
Total net revenues for the quarter grew 96, 1% at two to six 4 billion.
Which exceeded the top end of our guidance range.
We are pleased to report that our gross profit for the quarter of grew at 143, 7%, which is much faster than the revenue growth.
Strong top line growth for the quarter was mainly attributed to our <unk> segment of revenue growth at 108, 7% to two.
<unk> of $1 billion.
The gross profit for <unk> segment has increased by 335, 4% with gross margin up from one 4% to 3%.
Which reflected our ability to rapidly expand or been at scale, while steadily improve our margin.
Our <unk> segment revenue grew three 9% for 106 8 million.
With gross margin improved from 15, 7% to 17, 5%.
Total operating expenses for the quarter were up 729% to $248 million.
As a percentage of net revenue total operating expenses for the quarter was down to nine 4% from 15, 6% as we continue to enhance our operating leverage and optimize our operational efficiency.
Fulfillment expenses as a percentage of net revenue for the quarter was two 6% down from six three.
Three 6% in the same quarter last year.
Sales for the marketing expenses as a percentage of net revenue for the quarter was for 5% down from seven 6% in the same quarter of last year.
G&A expenses as the percentage of net revenue for the quarter was one 2% down from two 6% in the same quarter last year.
Technology expenses accounted for one 2% of net revenue down from one 5% in the same quarter last year.
Total amount of technology expenses have increased by 54, 5%. That's the result of our continuous investments in Tech solutions.
As a result, non-GAAP net loss attributable to ordinary shareholders for the quarter narrows to 98 million as compared to 144 million in the same quarter last year, which accounted for three seven.
<unk> of net revenue down from 10, 7%.
As for all of fiscal full year 2020, I would like to run through a few highlights.
Again, you kind of referred to the details of deck in the early release of.
Comparatively.
Full year 2019.
Net revenues were.
$8 2 billion up 100 of seven 6% from force from $3 5 billion.
<unk> revenue grew 127, 8% to seven.
<unk>.
From $3 3 billion due to strong growth attributable both from existing customers and the new customers.
Network.
Our <unk> segment revenue grew five 7% to 691 billion from $654 million.
Our <unk> gross margin was 3%.
From one 4%, while our <unk> segment was 21% up from 18, 1%.
Overall, our gross profit of grow by 121, 5% to 366 million and the combined gross margin was.
For 5% up from four 2% a year ago.
For full year 2020, total operating expenses were up 27, 4% to 839 million.
As the percentage of net revenue total operating expenses was 10, 2% down from 16, 7% last year.
GAAP net loss attributable to ordinary shareholders for the year was three.
<unk> $380 million.
Counted for 6% of net revenue down from 11% as compared with last year.
This means that we have reduced our bottom line loss by about $54 million, while doubling our revenue scale to eight.
2 billion.
As for the to the guidance for the first quarter of 2021 on slide 19.
The company expects total net revenue to be between <unk>.
<unk>, five 3 billion and $2 6 billion.
Representing a year over year gross up.
Approximately at six 1% to 65%.
All of <unk>, 87% to 93% at.
Excluding the impact of certain one off sales of pandemic supplies in the first quarter 2020.
The above outlook is based on the current market conditions and the reflect the companys current and the preliminary estimate of the market and the operational conditions as well as customer demand, which are subject to change.
Please refer to slides 22 to 24 of the appendix section for selected financial statements.
A quick note on our cash position as of December 31st at <unk>.
We had of cash and cash equivalents reached of cash in the short term the investments.
The RMB, one 2 billion compared with.
697.
7 million.
At December 31, 2019.
This concludes our prepared remarks.
You.
Operator, we are now ready to begin the Q&A session.
Uh huh.
Ladies and gentlemen, we will now begin the question and answer expense.
If you wish to ask the question sorry.
Star one on your telephone.
<unk>.
The amount.
If you wish to cancel you're at work.
The challenge.
Yes.
Once again, if you wish to ask a question.
And the number one on your telephone.
Yes.
Your first question comes from the line.
Could you. Please ask your question.
Okay.
Hello.
Hum.
Awesome.
Hum.
Hum.
Thank you.
All of them from the traditional com.
Now partners with you.
Damn cookie on Manhattan.
Glad to flow.
Oh by the way from club question for Joe.
So your marketing services.
Yeah.
Thanks for the question is its all yours.
Men.
One of one of checks.
We have seen Jonathan one of the sales.
Procurement from one.
One of them.
Right.
And while the other levels.
The independent pharmacy.
Uh huh.
And the third question is about the.
The program itself.
Okay.
Yeah.
Thank you.
So let me first answer your first question.
You probably havent seen the later you will have started partner with many of the pharmaceutical companies worldwide.
We also.
Our non side, we have direct from strategic partnership with at 330.
Consumer companies. So we started to become the preferred partner for pharmaceutical companies.
Due to several major reasons why is that.
Our fully compliant.
We have a high efficiency on the.
Transparency and the will have provided detailed solutions.
The pharmacy companies in the us.
Have complementary strength.
They can offer.
Products.
The medicine.
Experts.
The medical expertise.
Certainly they have their pinpoints of <unk>.
Coverage of <unk>.
We will commercialize their products.
Through all regions and channels. So we have the capability. So we are the preferred choice for FEMSA of companies for their Omnichannel.
Product commercialization.
For more regional coverage at the channel coverage.
And also our data can help the pharmacy companies to provide the customer insights.
And also our systems for example of our CRM system kind of help them.
To improve the customer.
The medicine compliance and duration of treatment.
So are probably likely in the answered the other questions.
The second question at least as hobby or take the second question regarding <unk>.
The procurement from pharmacies.
Including both trends for an independent pharmacy.
The.
In the past quarter, we have been seeing our customer keep increasing the purchase volume quarter.
Quarter over quarter since they became our customer.
According to the sales data of the <unk>.
The existing customer contribute about 80% of our sales.
So.
Both chance at all and independent pharmacies are increasing their purchase volume.
And moving forward with.
At the further expansion of our supply chain network, we will outgrow the more the election with the passage of time.
And provide the balance of it.
We strongly believe the steel large room to enhance our corporation and to improve the quota share from our customers.
Got it.
Yes, <unk>, it's luc to end.
Your question on our progress on the start of this team.
Yes first of all we are making progress according to the schedule.
We have achieved a couple of milestones.
One is.
At December 2020 of.
<unk> completed a new round of capital injections.
From sort of hydro stripping of investors.
And the.
In total our raised close to.
143 million U S dollar for close to 1 billion RMB in the second round of financing of.
At the pre money valuation of <unk> 10 billion, which is approximately 1.53 billion.
No.
With this.
Third Party index introduced.
We have according to the law, we convert this limited company two of stock holding company, which had prerequisite for for start lifting.
And the.
The third party investors the including of <unk>.
<unk> strategy of fund, which in the Shanghai question.
What happened at which is in the Shanghai styling. They are both investment vehicles and the Shanghai municipal government.
There are also investors.
Namely the Shanghai Science and technology venture capital.
John kind of technology venture investment.
And the total.
Science of technology.
The venture capital as well at there.
Of the tech investment of arm.
In Shanghai.
Together with.
Independent of P/e funds like the cycle.
<unk>.
The U K investment.
Currently we are.
With the assistance from the security firm item and.
The accounting from the Deloitte and touch and the.
The law firm is deemed too so we are making.
Progress According to schedule and we will also make for more in the public announcement in due course.
The income we answer your questions.
Thank you for long.
Yeah.
Yeah.
Your next question comes from the line of Rachel Yang of HSBC. Please ask your question.
Okay. Thanks.
Thanks for taking my question and congrats from me.
And at the very strong quarter.
Excellent.
The one is to look at that.
The thing the overlap.
Right.
Your line of your.
The model and how you are the.
Looking at revenue.
Okay.
Oh, what's the.
Right.
At the overall.
I mean, the coal plant.
Moving to <unk>.
Looking at that.
What is constructive.
That's all of your promotional model in the sense you.
You're starting to put them out.
And Oh column guaranteed right.
For <unk> and then nobody at.
It has been the wire Oh, Wow Wow, how the two jobs.
Couple of them.
And the.
Many of you that we will for Noah.
The cooperation with our partner.
True.
From an exclusive partnership with them.
And I think of it.
Understood.
Thank you.
Our ratio up can.
Can you repeat your first question.
Yeah.
The first of question at the Garden, a doctor at all of Europe.
And the overall key the model T M D.
I understand the idea.
Revenue at.
E W.
As I said at that in the U S Army.
Our net profit.
Can you provide us again and kind of okay.
At.
Yeah.
Top line sales.
At the revenue at the the satisfied.
The ones I understand the coffee yet.
Overall.
And the among those value.
Hi, Jack.
And at what part of it.
The at all by them.
Thank you.
Okay.
If you are.
Look at our earnings release I think in the page three we have.
Of course, our segment revenues.
Have not disclosed the GMB because.
Our main major business is self operating business.
Marketplace business as well, but the.
Overall the size is not big so if you want to know the <unk> I think.
As you can use over revenue.
Times the VA.
At <unk>, which is 13% to come up on the.
Quick question quick answer.
In terms of structure of a major part of revenue contributions to from.
Two beep in this.
Which is the.
The revenue to the <unk>.
The retail pharmacies.
The private clinics private hospitals, sometimes distributors et cetera.
We have.
To see business as well.
The proportion of like a 93% to 7%.
Yes, we are now good REIT income of service revenue from our digital marketing with pharma companies.
At the commission from those marketplace.
Vendors.
As well as some of the service fee from hours of supply chain of service now we belief.
Our <unk> model, we will continue to see more and more of revenue coming from the service service side. So thats something we are expecting.
Richard I'll take the.
Your second question about promoting drops.
In China by law, we're not allowed to promote any drugs, but we do help pharmaceutical companies Inc.
And commercialize on their drugs. So thats why we built out a omnichannel platform for us to help those pharma guys to launch new drugs and.
Followed that lifeline of that particular drug so so initially when once the <unk>.
And the company of tens of NDA from <unk>.
So the launch of the drug, but usually takes a fairly long time for the dropped to the able to gain access to hospitals. So there has to be.
Outside of the hospital supply chain, so help the pharma guys to maximize sales and a limited time window and that's why we have been trying to build a supply chain platform and the our supply chain platform enables us to actually help the pharmaceutical company from day, one so it get.
Of the drops delivered onto.
The customer's homes at the clinics at the hospitals.
And you referenced.
From a pharma companies and cost out or at least it is growing.
Every quarter and we are pretty confident of that.
The model, we have been building is going to the a great tool for all of the pharmaceutical companies when it comes to new drug launch of even after the gained access to the hospital will have the digital racks to help them continue to disseminate the medical information and the <unk>.
Even when they get to the.
<unk>.
Into the retail of course, our over 300000 pharmacies across the country will be of great channel for them to capture more sales.
Thank you.
Okay. Thank you so how well are the two Jack.
We do eat.
Yeah.
Hum.
Okay.
So at <unk> and <unk>.
For the other one no violence.
Yes.
They are doing exceedingly well.
So usually you you do a CAGR right so of that we do actually on the monthly compounded.
The growth rate. So both the tribe is actually the I think for the limited time, we had of.
Since the last May.
The growing at a monthly growth rate close to 17%.
I know, where you're introducing many more new drugs are the.
We can see that we're just pondered.
The amongst the partnership with the Beijing and also the.
We are launching new drugs through our platform.
Yeah, Yeah. We also noted for that so many.
The Johnson the candidate vaccine.
For the year of 2021.
Any more many more and more of a car.
Okay. All day, Okay. Thank you maybe for like for that.
Yes.
Thank you.
Thank you.
Your next question comes from the line of Christopher Murray of.
Kathryn Please ask your question.
Oh, Hi, this is Keith.
Im asking questions on behalf of credit.
Kathleen and myself.
And how does the outright what do you think the.
The change.
Yes.
Yeah.
Okay.
The tier.
Absolutely.
Hum.
Lynn.
Thank you.
Yeah.
Opportunity right.
Within the context of yeah.
Internet.
And my second question.
We see that at.
Yeah.
The use of development some of the players.
And just to have grown from.
And the man as well.
Our company positioning in today's Internet marketing.
And how shall we compete with those big players like Ivy Hill.
Hum.
And how do we differentiate ourselves and what might be share acting in the long term.
And my last question at the the.
These new progress in the construction of match supply to <unk>, Inc.
Hum.
So the team let me answer your first question are there the.
Can you answer the second question so first of all.
We feel very very fortunate. So we are facing the unprecedented window of opportunities you can see that.
The whole healthcare industry is growing at.
Double digit for the past few years and for.
For the next decade to come.
The 10 years.
The whole healthcare industry Z.
<unk>.
The automobile and the real estate industry to become the largest industry in China. So certainly we need to grab the window of opportunity certainly of the reasons are very apparent why is the.
Rapid of aging.
In China second is at disposable income is the increase.
Every single year.
And the more importantly, the government policy.
The start to favor telemedicine online healthcare, so I think.
<unk> added.
Added.
Vantage is or the penetration of our mobile internet.
I also know the Digitization of diesel technology, So we grabbed.
Grabbed this opportunity and heavily invest our.
Digital health technology, especially already.
Boost our F. Two b to C model to build out.
Core competency so our view of opinion to answer the second.
The third question.
Right some competition.
Yes, you referenced.
Ali Health and the JD health first of all of I think of we admire the market cloud the command.
Most of the traffic that they have is tremendous.
Our policy is very different.
As we have explained.
In my remarks at all.
Our model is actually at <unk> to be to see the supply chain platform.
To enable businesses to service all better service consumers.
And I'll focus the it's actually to create value for pharmacists and doctors.
Those of the two BS we want to empower so by working together.
The supply side, such as the pharmaceutical companies the distributors and the marketplace vendors and other service providers to have a better supply platform.
And the companies like us and of adopt the background.
Super Big.
Companies.
What can only rely on our own ability to innovate and our ability to execute.
The fact that we survived to date of proved our ability to innovate and execute.
So the third question is of our supply chain infrastructure. So we probably we were a bit of conservative before and that we didn't anticipate such a fast growth.
Now we are I think it became a bottleneck desktop infrastructure. So we added new.
Two fulfillment centers, while the northeast why northwest and the other six are all in the process.
In large end.
The capacity.
Of our throughput so we're really proud of it.
Traffic to the improve our.
The total capacity at the same time, Inc. We are operating our salvation of management system.
So we are optimizing of our we're optimizing our supply chain network.
We're also optimizing our categories and the Assortments So all of this.
Optimization.
Our down through data.
Models and algorithms. So we are form the new team of core PPI against process improvement.
Really.
The applied then.
Processes to apply to every single.
Of hours from our business process. So we.
We foresee that.
Continue to improve.
Not only our infrastructure, but also our processes.
Thank you Matt.
Your next question comes from the line of XI Zhang from of the items.
Please ask your question.
Oh, Hi, this is Brian thanks for food.
Thank you for taking my question and congratulations on the company for Brad.
So you have to ask them.
And the for.
The finance.
Actually I don't know if its not the company has achieved the highest growth.
In 2018.
Recording of the ninth.
Okay.
So I just wonder.
The key driver for the true.
And what he can and on the other.
What are you from new.
In the U that'd be the screen at the company from 2021.
One what should we expect from 2021 and this is my first day.
And my second question, it's about the warranty can be business.
Well, we see that <unk> represents a large portion of our business brand at a time.
Each of these.
The difference from the book.
Some of it makes it.
It makes you outperform.
Additionally, the support for me.
At some point.
Thank you for shipping I think.
Let me take care.
The questions. So.
We really enjoyed.
The growth in the last three years, it's really the as to B to C model.
That's propelling the growth for.
Any business to sustain this level of the growth we've got of how the model to propel propel that growth.
So secondly, it's really the execution of the model.
For instance, we started the <unk> to see business in the middle of 2017 from zero.
Maybe the strategic imperative to take on more than 60% of all pharmacies across China.
And within three years, we're serving more than 300000 pharmacies and of course.
It's one thing to formulate a strategy and it's another to execute the strategy.
One of more money that are proud of its capability and execution.
Because of of the above two factors mentioned.
I think we're very confident in sustaining a high growth rate in future years.
Obviously, we will have such a wonderful market it'll be a long time before we kind of reached the ceiling of of the industry.
Of the new revenue streams really at all.
Obviously, we already have a fantastic revenue stream.
We have a very innovative models by building that.
Cloud platform.
We should expect to not only run.
Revenue streams, but also profit streams, all margin streams, and we're going to extract more margin out of our E. Commerce. The traditional e-commerce as everybody else does that few of the day understood.
And of course.
We want to create a lot of service modules, where.
Where are we can receive fees for instance would have.
A business model or a business unit internally called the.
<unk> at <unk>, and if you translate it into English it's called the <unk>.
The treasure box.
Where are we attract a lot of.
Lethal distributed on our platform and we charge them a fee.
For providing logistic services and the marketing services for them and of course of it also.
<unk>.
The revenue streams out of the commercialization for pharmaceutical companies and there is also of digital services and marketing fees et cetera.
So you all.
Last question.
About the the beetle BS.
The representation in our revenue and the differences with other distributors and so on that's a very interesting months.
I want to approach the question from.
From this angle if you look at our traditional distributor. It is just a one day be.
We are talking about sort of arm all the Shanghai farmer of.
For Jojo at home et cetera, right.
And the there are many limitations for one big be in servicing customers in today's digital world.
Obviously, one of my Mondays of Technology company, and our focus is to build a supply of platform to enable of small BS.
On our platform as well so we can actually service.
Humor's collectively.
I'll give you an example to better illustrate our differences.
I spoke about the the treasure box all of the GBP.
<unk>.
Our internal organization so in that business unit.
If you look at what we do is not.
We allow those.
The commercial distributors to put their inventory into our fulfillment centers and they manage the manage their own stock in stock rate out of stock rate and also the manage their own prices at once an order is placed.
Aggregate at that motor and deliver to the customer in one package.
Thousands of those partners on our platform so before at this particular dish.
<unk>.
<unk> can only service at the pharmacies in the local city.
And now the suddenly have access to over 300000 pharmacies across the country.
Even if it is at.
<unk> item, we can also deliver in one package with the minimum marginal cost.
But let's also look at the impact on the pharmacy side of before they have to work with the few dozens of those distributors and now the can simply place one order on our App and everything will be deliberating among the older. So instead of a pattern of motors. They just need to handle one order of think about the moment when they receive.
The package.
Just one instead of many and ever order of the have to go through.
Quite a number of steps administratively.
The.
To be compliant according to the regulations here in China, So not only do we help the distributors the pharmacies the customers all of the consumers will also create tremendous value for the industry and the thing.
About how much shipping cost of the can save over time.
So the the traditional distributors are not really doing business the way we do.
Accuracy from the hope I answered the question.
Yeah, that's the memory players.
Yes.
For Corelogic.
Well I the way we.
I think we kind of be more excited all of the future achievement of the company.
And congratulations again.
Thank you thank you Richard.
Your next question comes from the line of UMC.
Mark for your dog.
Ask your question.
Okay.
Hello.
Kudos to everyone at 111 for the strong performance last quarter off of <unk>.
What are your projected revenues of the gross margin for 2021, and when will you become profitable.
Yes.
Thank you for the question we have.
Give a guidance.
On the revenue on a quarterly basis, so for Q1, 2021 of our guidance for the revenue for the quarter.
As between.
<unk> two five.
<unk> 3 billion to RMB, two 6 billion.
So that would represent if.
If you're taking out the one time pandemic imperative for the first quarter of last year debt will represent like 87% to 93%.
The gross so.
Internally.
<unk> continued to.
Drive the middle <unk>.
Two of 100%.
Gross so that's.
That's our aim.
You have seen debt.
Rapidly expand our business scale, while steadily improve our margin, especially on the <unk> segment.
We believe we will be able to do that continue to do that because.
We are building more and more direct sourcing partnership with pharma companies and we.
Ask the team to focus more on gross profitable.
<unk> drug items.
Selling through the channel.
In terms of.
Profitability I mean.
If you look at our Opex of 40 afford of year 2020 at around 10%.
If we double our size again in 2021, and our other expenses normally grow like 20% to 30%. So so.
That opex will be lower to like 5% to 6% of total net revenue. So if we improve our margin from.
The four five down to 6% then you will see that we are almost at breakeven even even.
So we do not have the exact date for when turning profit, but we think it's.
Right near an end.
We are very optimistic about it.
Okay, that's great I'm optimistic too.
Thank you.
Once again, if you wish to ask the question. Please press star one on your telephone.
Your next question comes from the line of James Jang of IDT capital.
Thanks.
Yeah.
For the line of being the one Zhang of ITG capital. Your line is now open.
Hello Hello.
Yes. Please go ahead.
Yeah.
Three questions from my first question net.
Thank you for now.
For me, there's a big opportunity for digital transformation.
Okay industry in China.
Let me know there Mike.
Free.
The competition between the company, especially for the clients, even though you just mentioned that.
The Congress.
What kind of a niche.
But.
Thank you.
It's quite easy for them.
Mike.
Right.
Entered the market at the company so what the anthem.
At Oh, I'm, sorry I'm.
Okay.
The company.
And my second question net.
Yeah.
The company.
100 performance that's true that's true.
Okay.
Cool.
All of the future.
You are in charge the turbine.
Net off.
Yeah.
We got off of kind of Congress.
All of my four questions.
Yeah, a lot of.
I know that debt.
There are a lot of small pharmacy.
That's all from there's a bit more of the book.
On the acquired non small lung so what do you think about lots of them.
The big one acquired the flow lines.
There will be like a smaller opportunity what are the.
One of the company.
No question.
Yes. Thank you Congrats let me try to provide some answers to your questions first of all on the.
The competition in the digital transformation, that's great news right. So we have many many companies participating in that transformation and the bump for months.
Being one of them at.
And how do we differentiate I'd provide some assets just now and obviously you want to dig deeper.
Obviously, nobody is going to take the whole piece of the the cake and the even if you of the biggest player in the health care space. So.
I'll focus.
Is really drive the commercialization of medicine, and if you look at our mission at very different from others. If you look at the naming of of the company when you talk about.
What day of whatever health net.
There is a V.
At.
The speed will see play and all of our positioning as a to.
It would be to see so obviously, we focus on.
Selling the best job in drove the commercialization and that is our differentiation that is.
Our view because the supply side of it can be pretty big complex and the one company has always gotten the limitations. So in the traditional sense b to C and the <unk> play the quite an important growth that we anticipate that moving forward a more and it <unk>.
At the model is going to the <unk> that is buy of with.
Investing in resources in building that supply platform.
With regards to if we're going to be of pure SaaS company I would say no.
We are a technology company.
Being a SaaS player of.
Lee.
It's not.
Something.
We are guiding the company towards total so we're not going to be a software company.
Although the software is come to the an important part of our business. So the way we see in the future is that.
Our basic model is as to the B to C. But within that model there is going to be an element of source and we actually having.
The encouraging adoption from.
Many many pharmacies and have already signed up a lot of them and we are expecting them on more of the mark on a stand up some of the SaaS services, we provide.
And of the.
The third question about at the market consolidation.
Have to agree with you that the consolidation is taking place and obviously, it's not anything new.
The last.
10, 15 years that consolidation has been taking place.
But even if you look at where we are today the fragmentation of stool the main theme.
Even if you take at the top five top six even at the top 10% I would say that only takes about 10% 12% of the total market share.
And the.
The 80 plus of close to 90% of the market are still.
The single stores and the small change.
And obviously, the bigger chance of becoming bigger but the.
The.
The fragmentation or steel.
Going to the the reality and the.
We're not going to go away completely.
But we.
We like the fragmentation.
Technology company, because we believe our <unk> model is a perfect fit to help the smaller guys to stay in business by having access to a variety of the services on our supply platform and that's the way we see forward.
Okay. The big the bigger EBITDA are getting bigger about the smaller the smaller ones still come to the there for a long time that is our view. Thank you. Let me also at the point that more than 50 per ton pop 100.
The pharmacy chance of enjoying our services.
And that's also true.
Mhm.
Yes.
Okay.
Hello.
Yeah. Thank you for answering the questions.
Okay.
Some of them like Oh, that's the point.
The consolidations the remaining pharmacy.
Yeah.
Operations, so the remaining markets for us.
And also for the first question.
So the I think that the comparable.
Good day.
So.
The big players.
At the debate.
On the data.
From a data a.
Now the consumer data.
The.
The company selling.
Have a great advantage for.
The supply base and Michelle.
Yeah.
I happened to hold the view.
No.
Really the have more consumer data, but for patient data. It is not the same as consumer data and AI.
One thing to sell a whole bunch of our nutrition products of foot supplements at.
Et cetera, but when you when it comes to prescription drugs.
The two not <unk> is the right model because.
When it comes to the prescription at is always the doctor to issue of those prescriptions that is why we define pharmacies and doctors at our B and the our model is very much focused on really enable those of small beast to better service consumers.
All patients in that matter.
Okay.
Thank you.
That's my question.
Thank you.
Thank you for.
The question of I would now like to hand, the conference back to the from marketing.
The remarks.
Thank you operator in closing on behalf of the entire one one national end team, we like to thank you for your interest and participation in today's call. If you require any thought of information or have any interest in visiting us in China. Please let us know thank you for.
For joining us today. This concludes the call.
Ladies and gentlemen, you may now disconnect. Your line. Thank you for participating.
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