Q1 2022 111 Inc Earnings Call
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[music].
Good day, and thank you for standing by and welcome to the first quarter 'twenty to 'twenty two.
Cool.
All participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question Julien the session you will need to press star one on your telephone.
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Quiet any further with that.
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Yeah.
Over to your first speaker today Investor Relations Director. Please go ahead.
Thank you operator.
Hello, everyone and thank you for joining us today.
On the call today from 111, Dr. Gong Yu co founder and executive Chairman, Mr. Dreaming do co founder Chairman and CEO , Mr. Luke Chen C. At all of our major subsidiary Mr. Harvey One C O O and Michigan.
I want to come move if that's true relations director.
As a reminder, today's conference call is being broadcast live via webcast. In addition, a replay will be available.
Our website following the call the company's earnings press release was distributed earlier today and together with our earnings presentation are available on the company's IR website at IR Dot one dot Com C N.
Before we get started let me remind you that this call may contain forward looking statements made on Judy's Safe Harbor provision of the private Securities Litigation Reform Act of 1995 seven.
Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known and unknown risks uncertainties and other factors.
All of which would cause actual results to differ materially for more information about these risks. Please refer to the company's filings with the S. E C.
One does not take does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise, except as required under applicable law.
Please note that all numbers are E. R M B 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.
The year over year basis, with that I will turn the call over to our CEO , Mr Gene being built.
<unk>.
Thank you for joining our first quarter 2022 earnings call.
Information that will be discussed on here is also provided in the slides have been posted earlier today on the company's website.
I would encourage you to download the presentation along with the earnings report.
IR dot one dot one dot com dot so yeah.
I will first speak briefly about the macro environment before covering our recent operational performance.
I will also provide some color on how we will continue to deliver revenue and margin.
Upstream supply capabilities.
Operational efficiency as well as our future strategies.
Next to Luke Chandler will walk you through our financial results.
As many of you are aware the Chinese government has contributed.
Contributing shutdown numerous cities to curb the spread of the Covid.
Darren.
Among those cities impacted Shanghai was hit the most.
Georgia Starfish located.
This has had a severe impact on China's economy.
I'm pleased to report that despite these challenges.
Nevertheless, achieved this growth while improving all of our operating metrics.
One on the tool will mark our fifth consecutive quarter of year over year growth since our IPO.
Although majority, but they'd rather than from Shanghai are more freely with rod colored personnel they often.
The Covid pandemic is still lingering.
During this challenging period, while on one put on a tremendous fight.
As the number of cases, both in several cities in China local lockdowns imposed.
Our result, one mobile and had to shut down our east China fulfillment Center, which is one of our key hubs.
In addition, transportation and other logistics was strictly regulated and pandemic hit areas.
Many of our holidays was stopped and transit digital various local policies in many cities, which significantly increased our fulfillment costs in the quarter.
Because the overall supply chain was disrupted we also experienced a severe shortage of medicine supplies.
We were not able to replenish replenish inventory.
At the same time pharmaceutical in many cities have suspended the sale of full type of drugs.
I E.
Antibiotics.
Hey, toxic drugs anti viral drugs.
It's about it.
In the face of these challenges.
One quickly set up a pandemic relief program with a virtual command center, providing instructions on a constant basis.
Our company and staff are working diligently and are leveraging the strength of one more months online and offline platform and the smart supply chain, So Asia, Shanghai and other pandemic region in the battle against COVID-19.
I have continuously providing medicine and medical services to patients nationwide.
Despite the severe impact of the pandemic.
Company Rose to the challenge and achieved $2 9 billion RMB you know revenue.
An increase of 14, 9% year over year, marking the fifth consecutive quarter of year over year growth since our IPO.
I'm also pleased to report that our gross profit reached 192 million RMB, representing a margin growth rate of 66, 3% year over year, which was over full time.
But our revenue growth rate.
Our <unk> business remains the key driver of revenue growth in Q1, it'll be revenue reached $2 87 billion RMB, representing a year over year increase of 17%.
Gross profit increased to 168 million RMB in increase of 19, 7% year over year over five times the revenue growth rate.
Their hard earned margin growth is the results of our consistent adherence to buy more months customer centric philosophy, and a strong determination to create value for our customers.
Faced with the lingering COVID-19 pandemic.
And the remote work arrangements, we establish an all new SLP.
Continuously plan.
Which fully showcases our resilience and flexibility as well as the emergency backup backup capability of our national intelligence supply chain.
I'd like to take a few minutes to elaborate on our plans to continue to grow our margins.
One.
Reduce procurement cost.
Direct sourcing from pharmaceutical companies has been highly effective in lowering the cost of products.
We're now source from over 550 globally renowned and domestic pharmaceutical company.
We will continue to deepen our strategic relationship with our existing partners as well as securing new partnerships. This will provide us with a wide range of drug selection at a lower cost.
To.
Optimize our product assortment and the structure.
With an annual sales revenue of over 10 billion RMB, we're serving a vast market. We're in a position to balance our portfolio of products with very healthy margin.
For example, we have increased.
Proportion of high profit products and probably label product.
But the majority of the retail pharmacies already in off network. We're very confident that we will be able to help our pharmaceutical company partners and commercializing their products with high efficiency and gross margin.
Three enhance.
The industrial Internet capabilities.
Our digital platform provides a comprehensive solution for pharmaceutical companies by integrating doctors pharmacists medical.
Medical assistance patients.
Medical representatives onto our Internet hospital.
The service module also provides online remote consultation E prescription patient education patient support and the ratio of services.
These features enable us to provide customized omnichannel digital marketing solutions for pharmaceutical companies.
The market continues to show strong demand for our diverse portfolio of service solutions.
Our service revenue achieved 29 million RMB increased approximately 17% year over year.
As a result, non-GAAP loss from operations as a percentage of net revenues decreased to two 4% from five 2% in the same quarter of last year.
Although the current environment, including having to operate on the Covid restrictions has brought quite a few challenges for our business. We're still committed to executing our strategy to continue to grow our revenue and gross margin. Our goal remains to reach quarterly breakeven non-GAAP operating income.
In 2022.
Now, let me spend a moment to talk about our achievements on the supply side.
Through continuous optimization of product assortment and gross profit improvement supply chain efficiency and assessment and the comprehensive digital capability posting one moment has dependent the partnership with upstream pharmaceutical partners as well as the strength of the relationship with downstream pharmacy customers.
In addition, as our business continues to expand and as we position ourselves as an <unk>.
Active commercialization partner well will continue to offer value added services to pharmacies and other business partners.
At present, we assist hundreds of pharmaceutical companies under 1000 distributors in drug commercialization digital marketing and marketing sites.
For example.
One health virtual franchise model enable us holdup 10000, small to medium sized pharmacies provide superior products and services to their customers.
All of the participating pharmacies can use our platform to better manage their product selection procurement and inventory management as well as accessing our distribution tools through our digital SaaS services, including smart sourcing digital marketing ultra low and the CRM.
This CRM initiative has assisted over 10000 pharmacies in delivering improved the medical services and the personalized marketing to over $6 5 million consumers.
Operating efficiency remains a continuous focus and our strategic imperatives.
With growing scale of business and enhanced technological capabilities.
One is the operational efficiency continues to improve.
Our weekly business reviews, we go through many metrics to ensure that as an organization, we must deliver improved operating efficiency on a continuous basis.
Each metric has a team as the owner who will be responsible for the goals we set.
As a result, we're glad to see that revenue and gross margin have both increased whereas as a percentage of net revenue the sales and marketing expenses in Q1 was down to three 9% from four 7%.
General and administrative expense was down to one 6% from 2%.
And the technology expenses was down to one 3% from one 9% in the same quarter last year.
The total amount of sales and marketing expense general and administrative expense and technology expense year over year has been reduced by six 2% seven 9% and 21, 5% respectively.
Yes.
One more one has been certified by the Chinese Ministry of Science and technology as a national High Tech Enterprise and are designated as a specialized high end new technology enterprise Shanghai by the Shanghai Municipal Commission of economy, and inflammation in 2020 one.
We're very proud that our efforts have until such distinction and aware.
We are committed to continuous innovation and improvement.
To further reduce G&A costs, we focus on implementing our strategy strengthening our organizational structure and improving the network efficiency of our employees through multiple operational tools.
It is also worth noticing that it would have developed several innovative marketing schemes, which have yielded positive results.
These include one building standard promotional network workflows, where differentiate it resources are earmarked for different levels of marketing activities, thus improving efficiency uninteresting, alright, so over 40% year over year.
Two.
Establishing a tiered user specific operational mechanisms.
We use positive operational strategies for users at different levels to boost customer retention customer activity on a T V, which stands for average transaction value.
Three developing innovative social based marketing, including Goodby promotion game based coupon grabbing lotteries etcetera.
I would also like to briefly on one on ones ESG efforts during the pandemic.
The PPE of everyday health care product provider in Shanghai will have played a key role in ongoing Colgate fight.
Well appointed by the Shanghai government as supply guarantee enterprise.
Many pharmacies and the medical institutions struggled with supply chain issues over the past few months.
And we have stepped in.
This blackout.
We'll have over 100000 different types of medicine available for sale on our platform.
During the shutdown period, we collected purchase orders via proprietary one by one purchase channel.
Special personnel assigned to process them through the company's pandemic relief program.
Thus accelerating the handling process.
Ensuring the fastest delivery possible.
In addition patients with chronic diseases alternate funding ton consuming inconvenient to fill their prescriptions. So we again step in to help solve this problem by offering a medication registration and other services and ensuring that specialized personnel are available to follow up.
With any urgent request for medicine.
I'm very proud of the work that our government relations team that during the challenging time.
Through the effort were managed to append, a special grant channel, which enables our vehicle shipping supplies to Shanghai from our franchise fulfillment center on a daily basis, which proves to be so essential for many clinical patients.
We received so many letters from customers, praising our services, which further proves the social value we deliver to our communities.
Our one clinic online hospital platform has launched a free virtual <unk>.
Clinical services program.
Where doctors can provide online consultation prescription renewal.
The services to the public.
By offering a free on a committee in place for doctors and patients to connect our online prescription orders have increased by 20%.
My mom one has also proactively organized donation initiatives for Shanghai, and nursing homes and other organizations.
We have provided thomas's free access to our <unk> platform and have recruited volunteers carriers to deliver drugs in hard hit areas.
Finally, we also PPE and other related supplies for companies where employees have returned to the office.
One more money the enterprise committed to the health of Shanghai residents and our ESG efforts are vested with I'll call that is global firmly fulfill our social responsibilities as we have always done in the past.
Yeah.
Although China's 14.
Five year plan for National economic and social development digital economy has been elevated to a lateral position and expected to enter a period of rapid expansion through 2025.
Digitizing the health care industry has been our goal since our inception.
We see this as a tremendous opportunity to leverage digital technology and the reconstruct the value chain in the health care industry.
To achieve this will have a world class technology platform that is already transforming China's health care industry.
We have built an industry, leading smart supply chain platform that is uniquely tailored to optimize our b to C business model.
And in an unrivaled national sales network, providing comprehensive coverage and a sophisticated multi channel digital platform that serves numerous unmet needs in this massive market.
This has made us an attractive commercialization partner as evidenced by our growing number of partnerships with pharmaceutical companies.
Our infrastructure was designed to serve many players in the health care industry pharmaceutical companies pharmacies doctors and consumers.
We have created the largest virtual pharmacy network in China with about 400000 pharmacies.
Have strategic partnerships with over 550 globally renowned and domestic pharmaceutical companies.
We feel very proud of the ecosystem will have built to date.
As it will enable us to scale our business to the next level.
Looking forward, we will continue our efforts to improve and expand our business.
Further consolidate and enhance our leading position and our competitiveness in this medical service industry.
We already play a key role in digitizing and transforming the health care industry and to provide the public access to convenient on high quality medical products and services.
We strive to deliver high quality and a sustainable growth and to create market value for our shareholders, while recognizing our responsibility to our community and to the environment.
By consolidating our strengthening supply chain nanotechnology will help our upstream and downstream partners press ahead with digital transformation that will improve their businesses as well as enhance the interaction with their customers.
Our goal is to ultimately achieve profitability as soon as possible and to create value for our shareholders and society at large.
We wish to thank all the investors who have supported us.
Now I will hand, the call to Mr. Luke Chen to walk through our financial results. Thank you.
Thank you Jamie.
Good morning or evening everyone.
Moving to the financials.
My prepared remarks, we're focused on.
A few key business in our financial highlights.
You can refer to the details of the first quarter of 2022 weeks out from 516 to 18 infection two of our presentation.
Again, all comparisons are year over year and all numbers are in RMB.
Unless otherwise stated.
Despite all the challenges from Covid pandemic lockdown in many cities across the country during the quarter.
We have continued to grow our topline and gross profit.
Total net revenues for the quarter grew 15% to $2 98 billion.
We are pleased to report that our graph segment profit for the quarter grew at 66%, which is over four times the growth rate after revenue.
Top line growth for the quarter was mainly attributable to our <unk> segment revenue growth at 17% to $2 87 billion.
The graph segment profit for <unk> segment has increased by 91% with cross.
Second Martin upfront three 6% to five 9%.
Which reflected our ability to steadily expand our business scale, while rapidly improving our margin.
Our <unk> segment revenue decreased 21% to $113 million with cross segment margin improved from 19, 4% to 21, 6%.
Total operating expenses for the quarter were up 2% to 295 million.
As a percentage of net revenues total operating expenses for the quarter was down to nine 9% from 11.
1%.
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 three 2% upfront two 6% in the same quarter of last year.
The increase was mainly attributable to our investment to expand the capacity of our fulfillment centers to support the future growth.
The pandemic lockdown the various part of country also temporarily cost increase in delivery costs.
Sales and marketing expenses as a percentage of net revenue for the quarter was three 9% down from four 7% in the same quarter of last year.
General and administrative expenses.
Percentage of net revenue accounted for one 6% down from 2% in the same quarter of last year.
Technology expenses accounted for one 3% of net revenue come from one 9% in the same quarter of last year.
As a result.
non-GAAP loss from operations narrowed to RMB, $72 4 million compared to $135 9 million in the same quarter of last year.
As a percentage of net revenues in the GAAP loss from operations decreased to two 4% in the quarter from five 2% in the same quarter of last year.
non-GAAP net loss attributable to ordinary shareholders was RMB $886 million compared to $109 3 million in the same quarter of last year.
As a percentage of net revenues and a GAAP net loss attributable to ordinary shareholders decreased to two 7% in the quarter from four 2% in the same quarter of last year.
And so you can see we are improving our financial performance quarter by quarter, and we're very close to profitability.
We have strong confidence that we'll be reaching breakeven point at a quarterly GAAP operating level this year.
Please refer to slides 19 to 23 of the appendix section for selected financial statements.
A quick note our cash position as of March 31, 2022.
We had cash and cash equivalents residual cash and short term investments of RMB $900 and $1 4 million.
This concludes our prepared remarks.
You.
Operator, we are now ready to begin the Q&A session.
Thanks.
I would like to ask a question you can press star and one on <unk>.
Okay.
Question.
Yes.
Okay.
A question.
Your first question comes from the line of C. Peng Fang from CIC. Please go ahead.
Okay. Thank you for taking my questions and congratulations on the company program.
I have three questions.
The first one is what is that you kept all kind of written policies regarding internet a health care company.
And my second question is I see <unk> zachman deal without being rapidly and what's the reason and how will you maintain the growth momentum.
And my last question is could you. Please elaborate on the company's strategy going forward.
Okay.
Thank you.
Taking your first question.
Thanks, I have two points to make.
So first of all if you look at the.
A healthy China 2013, and the 14th five year plan.
Whereas the government has elevated the health of the country.
I mean its citizens.
To a level.
But the national strategy.
There are lots of a tailwind for us and we're very excited about we spoke about this in the previous few quarters and I Didnt elaborate.
How much of a detail on today's call that we see.
Digitization and.
The investment in the <unk>.
Health care industry.
We will provide a lot of tailwind for us.
And I guess your question is more geared towards the recent consultation paper.
Where are the regulatory bodies are coming out of detailed measures to make sure. The industry is going to be compliant to many new rules I'm assuming right. We believe this is good for the development of the industry.
And some companies might be impacted negatively by the measures like no AI involvement in the doctors consultation and.
Users will have to upload their health record and the previous diagnoses etcetera, I would say that my mom. One has always been very strict with our own compliance and a majority of our business is actually from <unk> side, which is not impacted and even for the BDC business and we want to make sure that we set a very high standard.
Full compliance.
And overall, we see a lot more positives than magazine.
And then the policies of late are very good for us and we're really shouldn't take care.
And the leverage the tailwind to grow our business.
Hopefully our second question regarding <unk>.
I think <unk> testing.
Testing on more and more healthy gross cost.
Despite the pandemic impact, we deliver 91% year over year growth on B.
<unk> gross margin.
And our next step going forward.
Firstly, we will continue to upgrade.
Hi, Chad.
That is to establish that direct and strategic partner.
The ship with more and more international and domestic.
Surgical upon this.
To bring more and more selection with lower and lower cost to our downstream.
Hum pharmacy or clinic customers.
Secondly, we will enhance our digital marketing platform to help.
On the Cisco companies to commercialize.
Yeah, new products to pharmacies cleaning and eventually to.
The patients and consumers.
So our b to B business.
Becoming a platform cool is that.
Effectively link pharmaceutical companies links lab products.
With pharmacies and clinics and with end customers.
According to <unk> latest report.
The volume of China, pharmacy and retail.
Okay.
100 billion R&D in the past 12 months.
So it's a big big market, we believe we have enough room to further expand our business with a much healthy Mani.
And Scott for <unk>.
Joanne if I picked it up.
First question.
Okay.
About strategy and I think we spoke about.
You know our three step strategy in the past.
If I may refresh.
The memories of some of the.
Friends on the call some of the new friends, who are joining the call for the first time. So our first step we want it to build the infrastructure and the ecosystem.
That's why we built the <unk> module, the Internet hospital module and the <unk> module.
And the second step.
With the infrastructure and the ecosystem, we wanted to build scale.
We achieved in a very short period of time.
We kept on growing the business in.
The three digits in the last year, we achieved over 12 billion in sales.
With the scale of course naturally the third step is to grow margin and become profitable.
So in the immediate future, we will continue to focus on growing our revenue and margin and strengthen our capabilities on the supply side.
And improve all personal operational efficiency.
With that.
We will get into profitability.
You know we're in a.
Multi truly your gun industry and our overall goal as you know of course leverage technology to transform this industry and it become a key player in this industry.
Of course in order to get there and move on to be laser focused in getting the business profitable in the near term.
Thank you Lucy Peng, our hope hub city.
Your questions.
Yeah.
Okay, that's very clear.
Gratulation with data on that program.
Thank you.
Your next question is from the line of Jesse Lu from HSBC. Please go ahead.
Thank you can you hear me.
Yes.
Great. Thank you so much for taking my question and congratulations on the great results despite the challenging environment.
Two questions. If I may the first one that I think the industry is growing where do we know there's more players in the space for both B to B M. D. Ph D can you help us understand more about that.
Yeah, it's like now enjoy competitive advantages.
The second question is regarding the financially it's very encouraging to see the virality that loss and you mentioned the company will continue to work on margin to achieve quarterly breakeven can you elaborate a bit more on how do you propose to them at.
Cheaper.
Which opex line, we will be expecting more cost savings. Thank you.
Thank you Jesse.
I'll take your first question.
If you look at our competition it mainly comes from mainly from the following categories.
The traditional distributors.
The state owned.
Big three and Georgetown I know some of the newcomers who are copying our model and of course, the big <unk>.
<unk> healthcare B to C.
We position ourselves very differently from the traditional players our strength is the fact that we want to use technology to drive efficiency and we believe that digitization needs in the future so as.
As far as the traditional we'll have 14000 distributors.
In our space.
Now where have the.
Some of the giant state owned distributors, we very much doubt that.
You know those traditional players kind of to match our capabilities.
Even.
The new Commerce, who are copying our model I think we'll have something very very unique looking over all players in this space Nobody is attempting to get you know.
Through to the consumers for the B to B players and no one has the food.
City of servicing.
They pretty much all the key stakeholders in this industry. If you look at the pharmaceutical companies. If you look at to the doctors. If you look at to the pharmacy as you look at the pharmacists medical reps and the consumers. So so our ecosystem.
<unk> is built to really service and all of those key stakeholders and.
Obviously.
This is where we see our biggest different differentiation.
You may have heard of some of the new.
<unk> obviously.
Their focus is too.
Doing a better distribution, but you know our positioning is from the very beginning is to.
Really use.
Our supply chain.
Network to get to the pharmacies and then through the pharmacies to get to the consumers. So in other words, we enable the businesses to better service the consumers and this was never done before.
Have made very exciting progress.
And I'm looking forward to share the future progressing in future earnings calls.
So I would say that would have been without the best ecosystem to position by months of the future.
I'll leave your question I'll start and maybe look to move on to take the second question for Jessie sure Yeah.
There are two major reasons that led to significant narrowing of the net GAAP loss in this quarter first we have rapidly grow gross profit and margin.
Gross profit increased 66% and gross margin improved from four five to six 5%.
Second our continuous efforts to improve operation efficiency.
So why are we grew our top line at 15% or spending on sales and marketing expenses.
<unk> and administrative expenses as well as technology has been have been reduced by six 2% seven 9% and 21, 5% respectively.
Now clearly has mentioned.
He is CEO script, just know that we will keep that momentum to continue to grow a healthy and a profitable business why invest smartly being all spending.
In short we will focus on three key areas.
Reduce procurement cost so that we can continue to improve our margin profile.
Optimize our product assortment and structure, so that we will be able to scale. So it's high margin and highly needed.
Drugs to the customers.
Third enhance our industrial internet capabilities to further.
Got it.
<unk> our operating efficiency.
With all that we were very confident they will continue the momentum.
And to reach.
The breakeven point at corporate and then GAAP operating income level.
This year.
Thank you very clear congratulations again.
Thank you Ted.
Thank you.
Next question is from the line of Savi.
<unk> from Citi. Please go ahead.
Hi, this is snowy from Citi. Thank.
Thank you management for taking my question.
I have two questions. The first then.
What's the impact of pandemic on your business operation in the second.
Secondly on your top line.
The pandemic effect.
Doing well.
Operating breakeven.
Breakeven target this year.
My second question is what's your current cash balance.
The part of your business is there is no new financing. Thank you.
Yeah. Thank you Zoe.
Yeah the impact of the.
Panic pandemic.
Still lingering.
I'll have to go and again my piece.
PCR test.
Pretty much every second take because wherever we go.
We need to produce those.
New codes and the many restaurants are still not open up some of the pharmacies.
Still having a tremendous time a tremendous hot time setting you know then.
Necessary drugs, which are quintessential for their business and our life, they're not able to sell the full types of drugs.
They happen to be off the shelf, which I spoke only on those.
Those antibiotics those.
Uh Huh and.
And Todd fever in Chihuahua.
You know the Lockdowns and the logistic restrictions will disrupt the supply chain and in wound raised fulfillment cost.
You know what.
Some of our colleagues.
Some of the compounds are astute once you find a positive pace.
The employees still cannot come to work and that whole com.
Compound will have to be locked down and and also even today.
Getting into the final months of this quarter.
Majority of our staff are located in Shanghai was still cannot travel because wherever we travel we need to be quarantined for seven to 14 days.
Local cities will have.
Different policies being post all of those.
A very strict travel policies.
It's going to impact the business as well.
But we as a company have to be able to XL I'm extremely difficult times.
As we did in Q1 and the wood helped many chronic locations with a clinical drug supply.
The module during the Lockdown there was only one disease that is COVID-19.
There are other diseases is all discounted at healthy and which is really bad news for some of the chronic patients.
And it proved to be true.
But we did it we manage to work.
Work.
Through extremely difficult situations.
To really get the drug supply to many of the clinical patients and.
In addition to that we also delivered a both a revenue and margin growth.
Now for our business and.
I think the best thing out of this lockdown for US is that we established a fairly robust the system to do with future situations of this nature.
And a whole set of SLP is in place not only this we also have a standard package, which we're ready to take it to any CD with potential lockdowns. So their citizens can easily deal with the drug supply on the similar situations.
And we're pretty confident in that in Q2, although the business was impacted negatively.
Can still deliver on both the topline and margin growth.
And as.
As you know we.
Pretty firm I wanted to stick to our plan to breakeven at an operating level this year.
Thank you Lloyd.
Yes.
On the cash position.
At March and we have cash cash equivalent restricted cash and short term investment over 900 million.
We only incurred.
RMB 10 million in cash outflow in the first quarter. If you look at our abbreviated cash flow statement.
Our accounts payable days, it's about 45 days.
And our inventory days average at 25 days, which gives us around 20 days cash operating cash inflow.
In addition, we have secured working capital financing from several major bankers.
We believe our carefree tariff is sufficient to support.
Business expansion.
Yeah.
Zoe.
Hopefully we answered your own question.
Yeah, yes, thank you very much.
Okay.
Thank you.
Thank you. Your next question is from the line of sight I guess, Mike first.
[noise].
Hello.
Congratulations on your performance.
Covid situation notwithstanding.
I have three questions.
If I might.
Hum.
The first question is that yes.
Kevin the gross profit growth.
Outpace revenue growth by over four fold.
What are the key factors behind your continued increase in revenue and gross profit and query whether this is sustainable. So that's my first part of this.
Second question is.
What are the key factor behind our increase.
Delivery costs this quarter.
And lastly in light of your company is relatively large investment in technology.
And the continued emphasis by our management team on improving efficiency through technology.
I noticed that Q1 saw declining investment base you in technology could you elaborate on the reason behind this and what your plans are for technology investments down the line. Thank you.
Okay.
I'll take your first.
Question regarding the.
Martinez and the second question regarding the fulfillment and logistics costs.
For the first question.
Our strategy towards a healthy business model has been working with them very well.
And we are seeing significant improvement.
Both our product module as well as so this is Marty.
And there are a couple of initiatives going on these two areas.
Firstly, a screening just mentioned we are reducing our procurement costs.
Direct costs from pharmaceutical companies has been highly effective.
Lowering our product cost.
Currently we.
Direct source from over 550 global and domestic pharmaceutical companies.
And we will continue to deepen our strategic relationship with these partners.
As well as.
We will secure new partnership.
Such relationship.
Provide us with a wide range of products.
A much lower cost.
And the second a lever we can pull to improve the margin is through optimization of product assortment and structure.
Currently we are at our annual sales revenue of over 10 billion M. B.
And with our over 400000 pharmacies in.
Our <unk> platform, we are in a position to balance our.
Portfolio of products.
Hi.
No.
Which drive.
Together with very healthy margins.
And we have now.
5000 Skus.
Very good margin, including private label products and those new products.
Pharmaceutical companies.
And we're very confident that we will be able to help.
Okay.
Thank goodness.
Hi, Dan.
Product.
With high efficiency and high margin.
Hum.
So this is Martin.
Our digital platform provides.
Hence it solutions for pharmaceutical companies.
By integrating doctors.
Pharmacies medical assistance patients and medical representatives onto our Internet Hospital.
The service model also provides online remote consultation.
<unk> provides E prescription pain.
Patient education, and also patient support and retail, yes retail services.
And these features enable us to provide.
Customized omnichannel digital marketing solutions for our pharmaceutical partners.
The market continues to show strong demand for our diverse portfolio of services solutions.
We are seeing a 70% year over year growth on our services revenue, which helps women want to improve our overall profit.
And for your second question regarding the.
Logistics cost, yes, yeah, it's a it's a very good cash.
Yes, there is a minor increase on our fulfillment cost.
In this quarter to 3.2% of total revenue.
And in last year, we have increased our budget on logistics network to better serve our customer.
Including.
We expand our warehouse space to support the business volume growth.
But as we just mentioned during the pandemic.
Although this is go slow down because of the lockdown et cetera.
Vantage of revenue follows fixed procurement cost.
Like warehouse increased.
On the other hand, because of the lockdown and traffic control in Shanghai and many other cities in China.
Traditional logistics network with.
Sometimes it's suspended.
Some of the network, even with even suspended until today. So we have to use much more expensive way.
Interim solution.
Also creates additional costs.
I'll now inbound and outbound logistics.
Okay.
Forgot somebody here I'll take the third question I asked.
Asked about technology, our investments and Oh.
So certainly we are true believers.
Imaging.
And Oh.
In the past I've seen that our technology has created value.
From the several major aspects.
Help us improve our sales and operational efficiency.
To help us make sound business decisions based on more accurate data.
Accurate real time data as well as you know.
Based on the spot buy this model is that in the system.
How 'bout to make better decisions are mixtures of our selections pricing a supplier of choice of various products. Yeah. It's also help us improve our customer experience.
Through our precision marketing and customized services. So these are values.
The Paramount you help us.
Great for us.
We are going to continuously.
Invest in technology, but at the same time.
We are we know thats, where it have to eat.
Proof of the efficiency.
While our technology development, our total investment in the post Sandy in our technology investment is much higher than industry average so.
So a same time, we started to improve our divestment you efficiency.
This helped us reduce our technology investment percentage.
Okay, I hope that answers your question.
Yes, yes. Thank you.
Very clear and again congrats on your performance this quarter.
Thank you well thank you folks.
Thank you. Your next question is from the line of Mark Smith from such Patois. Please go ahead.
Hello This is Margaret.
Yeah.
Congratulations on the strong performance in the first quarter this year.
I have three questions. The first one actually was a little bit color Goodbye previously.
Mr. Hobbies is how has the company continued to grow its service related income.
Okay, and I think Japan, and do you have plans to roll it out more monetize about product. That's my first question.
And I was like 40, plus add before I ask the second question.
Okay.
Thank you.
Marcus let me.
Take that question. So we are so happy to see that our services revenue study.
Continuous to grow.
Either you kind of see from the all the different types of services will provide you can be classified into several categories.
Based on the user type for example have a marketplace.
Mark your vendor services.
Those are for the our partners for the marketplace vendors or sellers.
We have a online medication consultation service those out for a patient or directly for consumers and also will provide a prescription service supply chain services et cetera, those are for the pharmacies.
And they also have a like a digital marketing and patient education drug commercialization tools. Those are for the pharmaceutical companies as you can see that we are providing many types of services and all of these types are growing steadily.
And.
So we're continuously improve.
Improve or increase our service revenue, but for example, we're going to recruit more marketplace sellers and the service providers to our marketplace.
But we're going to devote more digital technology database services to serve both pharmacy companies and the pharmacies.
We are at the same time, we have built a lot of system internally for our internal use but many of them are very valuable.
Really liked by our customers. So we are transforming our more hard toward a total build cost into SaaS services to enable our partners.
Some of them are in the development process.
Okay hope it answered your question.
Okay. That's pretty clear my second question is what value is one health program intended to generate and what progress has been made thank you.
Yeah regarding one house and one house is becoming a third in the industry with as to B to C model.
And our virtual French high model enables over 10000, small pharmacy or a medium sized pharmacy trend.
To provide superior products and services to their customers.
All participating pharmacies can use our platform to better manage their product selection and manage their procurement and inventory inventory management as well as accessing our distribution to us through our digital star services, including.
Smart crossing.
Digital marketing.
Ah <unk> and online stores.
C I N.
And we in this year, we expect more and more pharmacy to join our warehouse program.
Thank you.
Well, that's a remarkable and my last question is what is the status of the domestic public listing.
Okay.
Yes, we are.
Still in the process of preparing for the domestic listing for key subsidiaries in China, and we're also evaluating options for both Shanghai stock change Anderson from the stock exchange.
Of course, we will update the market.
When it's appropriate according to SEC rules.
Okay.
Thank you Markus Thank you okay.
Thank you for the information and looking forward to that go ahead should congratulate again for the strong performance. Thank you.
Thank you. Thank you. Thank you.
There are no further questions at this time.
Thanks, guys.
Bob.
Okay.
Thank you operator in closing on behalf of the entire one management team, we'd like to thank you for your interest and participation in today's call.
You require any further information or have any interest in visiting us in Shanghai, China. Please let us know thank you for joining US today. This concludes the call.
Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.
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