Q4 2022 111 Inc Earnings Call
All teams will have to go through their own operational metrics to align with customer needs.
For instance, our fulfillment center manage I will need to reform his or her metrics around how fast.
<unk> goods, how fast can they deliver to the customers how many items got damaged during transportation, how many complaints I received on a day to day basis.
The company believes that long term value is much more important than short term revenue and margin gains.
So cheap lump sum value everyone in the company has to have the mentality that customers come first.
With great assets over the last few years, a decent supply base has been built.
While the company believes moving forward this supplier base needs to be further strengthened.
Although great relationships with major supplies have been established through strategic.
Strategic relationships need further development.
It comes back to the point of value creation.
The company has.
The state of the art technology with many modules scattered in different silos of operations.
Once we can integrate all of those modules much greater value can be created.
Applies 10 leverage our digital tools, so have a real time data on their products coverage sales and pricing.
Traditionally they could only get sale of any payments from tier one distributors.
Now they have a complete view of business through the lenses of our digital tools.
Clearly those kinds of digital benefits will never available to the pharmaceutical manufacturers in the past at best to have some limited data on a few key customers with direct coverage they have big enough ground sales team.
Without surprise almost all of the suppliers will have seen our digital solutions at the likely bites capabilities.
If we continue.
To deliver solutions for upstream supplies there'll be more and more interested in allocating more resources to buy more mine as a digital channel.
Over time, our supply base will be strong enough to compete against those well established traditional players.
And upon us it will be based on who can deliver more value to supplies other than previously established long term relationships.
Digital catalyst in the health care industry.
<unk> has rapidly develop its coal companies buy digitally connecting key players in the ecosystem.
This makes it possible for digital technology to become an enabler for those players to improve their respect to the efficiency.
With more and more clear adopting digital technology the industry is being transformed.
There is a popular terminology, China called the industrial Internet.
Which should be translated as an industry that is being transformed by Internet technology.
We'll have laid a very solid foundation and a position one by one as one one of the most important players in the field so internet ties very traditional industry.
Yeah.
Now, let me spend a moment to talk about the key business progress with my mom in both Q4 and the whole year of 2022.
Over the past 12 months, the deepening of the partnership with upstream and downstream.
<unk> continued to expand.
Upstream will have reached direct supply relationship with more than 500 global and domestic pharmaceutical companies, which provides abundant supply drops more.
More competitive cost and most stable supply and support us to help drugstore partners. They would have more competitive assortment.
And improve the gross profit products.
Downstream, we provided services to more than 435000 retail pharmacies.
This is around 75% market penetration.
<unk>, our pharmaceutical partners in that market, which have dropped commercialization in the bulk market, reducing distribution costs on achieving coverage more than 890 cities and counties in China within 24 hours and.
And directly or indirectly and directly providing medical services to hundreds of millions of consumers.
We always adhere to the principle that digital technology can effectively improve the efficiency of the industry.
In 2022, our technology R&D expenditure reached 140 million RMB with a total R&D expenditure.
421 million in the past three years.
Yes.
By the end of the 2022 <unk> owns nine.
<unk> intelligent systems.
Independently developed more than 30 proprietary systems.
We were awarded 19, Hyndman and mentioned patents and it made breakthrough innovations and intelligent supply chain.
Data analysis.
In 2022 111 was once again awarded honorary titles and the qualifications of high Tech enterprise.
<unk> by the Ministry of Science and technology.
<unk> e-commerce demonstration surprise by the Ministry of Commerce.
Special and new enterprise by Shanghai government and the <unk>.
One area of new R&D institution by Pudong government.
Yes.
We don't leaving the delusion that the same and the recognition can translate into business results.
The reason why they invest in technologies, because we truly believe that technology can bring operational efficiency.
This will be a core strength of one month to month.
Therefore, we are confident that we will be able to compete in such a crowded industry.
Even with current scale, which is relatively small compared to the few biggest battle.
We can already compete on operational efficiency.
Opex will be a very key metric.
Tell how efficient a company can be.
As we continue to grow in scale. We believe we can run this operation at a much lower rate.
The significance of this is not what will be the most efficient operator in the whole industry.
Which will enable us to compete effectively with the big boys.
One of our strategies.
Moving forward is to continue to build an operation with the lowest cost structure as we want to be the most efficient operator in our space.
Yeah.
Innovation is one of the core tenants of our corporate culture and it continues to be the driver for future growth.
In the <unk> sector, we pioneered the one health project to more than 12000 drugstores.
Digital franchise.
The franchise <unk>.
Use digital SaaS services, including intelligent procurement.
CRM et cetera.
Better manage drug selection procurement inventory management and customer relationship.
On the one health project by more lung can deliver value to upstream pharmaceutical companies and downstream pharmacies.
This model makes it the most efficient way for drugs to reach the hand consumers for manufacturers as the whole process is digital and transparent.
Our mission has always been to digitally connect drugs and health care services to consumers.
The proliferation of <unk> health is a step forward in our mission.
In the BDC sector.
Based on the digital platform and the chronic disease management capability <unk> is helping drug manufacturers to launch that draws on our platform.
Early 16.
The official flagship store upon medicine went live on one moments platform.
Immediately lost all of that led to the very first locally approve innovative diabetic or withdraw in China received a nationwide coverage, which means patients across the whole country to access the drug on our platform from day one of the launch.
One moment. It also helps our medicine to manage lifecycle of patient care, including initial drug fulfillment follow on patient education drug adherence management online assistance of patient questions on retail.
We're proud of the fact that not only can help patients in accessing newly launched drugs, regardless of where they live in the country, but also enable upstream exhaust manufacturers to leverage our digital capabilities to reach more patients and manage them with digital tools to achieve better business results.
Yes.
Now, let's move on to our fourth quarter and full year 2022 results.
In Q4.
Our operating revenue amounted to $4 1 billion RMB.
Representing a year on year increase of 19, 9%.
This is the 18th consecutive quarter growth since the company's IPO.
Q4, gross profit increased by 23, 8% year on year.
Gross profit margin increased from five 9% from the same period last year to six 9%.
Q4 generated positive cash flow of $663 2 million RMB.
Operating activities the second.
Consecutive quarter of positive cash flow.
From 959 million in 2017 to $13 5 billion in 2000 2022, our revenue scale has rapidly expanded 14 times in five years.
And plenty of money to our total revenue reached 13, five billing and.
An increase of eight 8% year on year gross profit increased by 35, 2% year on year full times the growth rate in revenue.
Gross profit margin increased from 5% last year to six 2% this year.
Let's not forget the struggles we had to endure throughout the whole year with zero restrictions.
The majority of the year, our operations were disrupted in many ways I.
I wont volume with much details, but the 9% revenue growth and 35% of margin growth.
And with tremendous team effort.
Meanwhile, Q4 non-GAAP .
Operation loss narrow to 0.96%, while net income from 222% in the same period last year.
In fact, we achieved profitability in December of 2022.
Throughout 2000, and turning to our operational efficiency continued to improve.
Total sales and marketing expenses general and administrative expenses and technology expenses decreased by 15, 5% year on year.
And non-GAAP operating loss narrowed to one 6% of net income for the full year from 4% in the same period last year.
As of December 31st 2022, cash and cash equivalents restricted cash and short term investments totaled $922 7 million.
Yeah.
I'd like to spend a minute to quickly talk about all of it yes, yes.
Over the past year with the advantages of digital technology and integrated online and offline platform. The company has actively help fight the pandemic.
During the lockdown, but government appointed a small number of companies to deliver essential goods to residents who are locked down at home.
My Mom line was appointed as one of the critical living guarantee into projects in Shanghai.
The company set up a virtual pandemic control commencing.
As soon as the pandemic broke out in Shanghai in early 2022, mobilizing resources my mum to help our community.
We're collapsing purchase orders by a proprietary purchase channels and assigned special personnel to process, then nothing starring Tom delivery to patients when clinic, one ones online hospital launched free online services since the pandemic began and provided free online consultations three prescription renew.
Q4, chronic disease sufferers.
Other medical services to the public.
The company has proactively organized donations and alpha <unk>.
<unk> pandemic PPE for enterprises resuming work in production.
In the context of the post Covid economic promotion measures.
My mom was again picked by the government as the designated health care platform in the Shanghai Electronics consumption voucher campaign in 2022.
We provided services.
Offer citizens of Shanghai to redeem vouchers on our digital platform, helping government on our residents and consumption of recovery.
Everyone have one mobile is proud to be able to contribute to the community.
In the future, we will always firmly fulfill our social responsibilities and make continuous efforts to actively contribute to the construction of a healthy chunk.
Once a year with hot.
In a way we're very glad that 2022 is behind us and COVID-19 has become baked memories.
<unk>, so many challenges and fought so hard for our business and achieve great results.
We grew revenue and margin on the extremely difficult circumstances.
Operating expenditure continues to show great trends, which suggests that our operational efficiency will continue to improve.
Our bottom line is trending towards breakeven in fact, we achieved the profitability at the non-GAAP operating level in the month of December 2022.
And so we'll have made significant progress in all business metrics. They believe that our strong technical capabilities will continue to enable us to build scale and improve efficiency, which will create long term sustained revenue and margin growth.
Looking to the future <unk> will continue to operate on the principals value creation being customer centric and a strengthening its supplier base.
I believe the government will continue to support the health care industry digital migration.
The national strategy of strengthening but they still China infrastructure and the policies of the 14 five year plan and the goals for 2035 provided us with excellent regulatory tailwind.
And we're excited that we can play an important role of speeding up the digital transformation of health care industry.
We'll double down our assets and growing revenue and margin improve our operational efficiency and achieve profitability.
Considering our track record over the last four years, we have proven our capability and executing our strategy.
But we'll continue to endeavor delivering great results in the future.
We wish to thank all the investors will have supported us all along.
Then I will hand, the call to our CFO , Mr. Luke Chen to walk through our financial results.
Thank you.
Okay.
Thank you Julie and good morning or evening everyone.
I want to begin by thanking all of our colleagues.
For their resilience and hard work over fiscal year 2022.
As we navigated a challenging environment for making necessary changes to improve our operation and our cost efficiency, while maintaining our competitive edge.
Moving to the financials.
My prepared remarks, we're focused on a few key business and financial highlights.
You can refer to the details of the fourth quarter and fiscal year 2020 results from slide 19 to 22 in section three of our presentation.
Again, all comparisons are year over year, and all numbers unless otherwise stated.
Yes.
Let's start with the fourth quarter results.
Total net revenues for the quarter grew 20% to $4 1 billion.
We are pleased to report that our cross segment profit for the quarter and grow at a 24% which is faster than the revenue growth.
Strong top line growth for the quarter was mainly attributed to our <unk> secondary revenue growth at 21% to 4 billion.
The graph segment profit for <unk> segment has increased 31% with growth secondly remarks upfront for five 2% to five 6%.
Which reflected our ability to rapidly expand our business scale.
Thirdly improve our margin.
Yeah.
<unk> revenue decreased 2% to 126 billion with cross segment margin at 21%.
Total operating expenses for the quarter were up 17% to $363 million.
And as a percentage of net revenue total operating expenses for the quarter was up to eight 8% from 9% as we continued to enhance our operating leverage.
Optimize our operational efficiency.
Fulfillment expenses as a percentage of net revenue for the quarter with two 9% as compared to 3% in the same quarter of last year.
And excluding the share based compensation sales and marketing expenses.
Net revenue for the quarter was two 7% down from three 4% in the second quarter of last year.
G&A expenses accounted for 9% of net revenue upfront, 1% and the technology expenses accounted for 6% of net revenue as compared to <unk>, 7% in the same quarter of last year.
As a result non-GAAP loss from operations.
For the quarter narrowed too.
40 million RMB.
Compared to the.
The loss of $77 million in the same quarter of last year.
As a percentage of net revenues and a GAAP loss from operations is creased to less than 1% in the quarter from two 2% in the same quarter of last year.
non-GAAP net loss attributable to ordinary shareholders was $46 million compared to $84 million in the same quarter of last year, and so pretentious percentage of net revenues.
Net loss attributable to ordinary shareholders decreased to one 1% in the quarter from two 4% in the same quarter of last year.
Thanks.
As for our fiscal full year 2022.
I would like to run through a few highlights again, you can refer to the details in our deck and earning release all comparisons are to full year 2021.
Full year net revenues were $13 5 billion, representing a year over year growth at 9%.
Our <unk> segment revenue grew 10% to $13 1 billion.
This result was achieved despite all the disruptions caused by the lockdowns across the country during the year.
<unk> segment revenue decreased 16% to $442 million.
Although our topline growth was not that.
The tax rate.
We are pleased to report that we have achieved where our secondary market growth at 35%, which is four times of the revenue growth rate.
And so we thought that the combined across secondly, the margin was six 2% up from 5% a year ago.
<unk> margin was five 7% up from four 3%.
<unk> segments.
21, 8% up from 29%.
For full year 2022, total operating expenses decreased to four 8% to RMB, one 2 billion.
Percentage of net revenue total operating expenses was eight 9% down from 10, 2% last year.
Fulfillment expenses accounted for 3% of net revenues.
Comparable to two 9% last year.
Excluding the share based compensation and selling and marketing expenses as a percentage of net revenue reduced to 3%. This year from three 7% last year G&A.
G&A expenses account for 0.9% net revenue this year down from one 1% and a technology expenses account for 0.9% of net revenue.
This year as compared to one 3% last year.
As a percentage of net revenues non-GAAP loss from operations for the year decreased to one 6%.
This year from 4% last year.
And then GAAP net loss attributable to ordinary shareholders as a percentage of net revenues decreased.
Two 1% this year from four 2% last year.
We narrowed our loss advanced by more than 50% this year versus last year.
And the reached profitability in non-GAAP operating level in the month of December .
We are confident that our strong technology capability will continue to enable us to build a scale improved efficiency and delivery.
Profit profitability.
<unk> values for our shareholders.
Please refer to slide 23 to 30.
The appendix section for a selected financial statements.
A quick note our cash position as of December 31, 2022, we had cash and cash equivalent restricted cash and short term investment of <unk>.
RMB 923 minutes.
This concludes our prepared remarks.
Yeah.
Operator, we are now ready to begin our Q&A session.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speaker phone we ask you. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Today's first question comes from shoe paying for with <unk>. Please go ahead.
Yes.
Hi, This is Stefan from Sanford C and thank you for taking my questions and congratulations on the company programs.
Well I have two questions.
One is after the company achieved a breakeven.
Or what is the associated profit expectations for 2020.
Yes.
Post pandemic era.
Our favorable changes for your company and how will you respond.
Social responsibility.
And these are my questions. Thanks.
Yes, Thank you <unk>.
Taking your first question.
Yes. Thank you for that question. Indeed, we achieved profitability in December 2023, and.
2022, and moving into 2023 the management.
Yes.
Very much optimistic.
About the prospect of us continuing to make profits if you look back.
He is.
We grew the company from less than 1 billion RMB. So today $13 5 billion in revenue.
Mind you.
Our margin has been growing faster.
Then revenue.
<unk>.
In the meantime.
We are doing a great job in improving our operational efficiency.
If you look into a few buckets of the operation.
Spending sure.
Yes.
The cost to fulfill our orders.
Yet.
The.
Sales cost the technology expenses, the G&A, it's all trending much better than last year.
Trained 15, 5% of our operations compared.
To the revenue percentage.
Those data.
Those data points.
It gives us a lot of optimism.
Moving into 2023 thank.
Thank you Stefan.
Let me take the same question.
So we have seen that post COVID-19, the demand for health and well being products.
We cannot.
Or is that more consumers are going.
With drugstores is how our customers.
Goodbye, the medicine and the other health product.
We expect.
Sales for our business.
This one is.
During the pandemic.
The Chinese government has seen the value of Ethernet.
Hospitals drugstore reach customers.
And to help reduce cost infection.
To lead this shortly.
Hospitals.
Okay.
Also to improve our visibility of the medications patient remote areas.
No.
We kind of see that.
Your deposits.
Youll, probably a year or so has launched a series of new policies.
Promote underlying health.
Also the pandemic has nucor teammates who booked through online.
And those customers.
May two jewelry the benefit really is online.
After the pandemic.
So the total number of users.
Great.
So all of those have you presented a tremendous opportunity for us.
And we also need to take the opportunity on pick on the social responsibility.
Aligned with our government to reach their health.
Let me refer to go.
Okay.
Those are my answers.
Okay. Thank you for your answers and that's very clear thanks for that Sheri and congratulations again on the company's progress.
Thank you.
Thank you and our next question today comes from Steven Li and individual Investor. Please go ahead.
Hello.
Yeah.
Hello.
Yes.
Yes. Thanks for sharing your Q4 result, and it was fantastic to see that I have two questions. Firstly I would like to know what will be the company's operational focus going forward secondly.
Second consecutive quarter.
A positive operating cash flow target.
We plan to keep this trend and house toughest cash position now.
Yes, Thank you Steve.
With regards to the question of operational focus.
I think I briefly mentioned in my script.
Essentially we did a lot of wholesale chain in plenty of plenty toe and.
The organization had some realignment on the strategic focus is operational late I know those are.
<unk> value creation, we've got to evaluate the businesses on the metric on the on the merit of how much value it can create too.
<unk> and downstream customers and the second focus will be on being customer centric and.
As in the past.
More or less more focused on internal metrics rather than.
The metrics that.
Drive the organization.
So well, it's creating value for customers and also the first.
Our focus is really to strengthen our supply base.
So in 2022 week kind of a.
Managed to restructure the business, we give up.
Some of the businesses with really no value.
And we are.
Really realigned all the let's say weekly business review metrics towards customers instead of our internal metrics revenue and margin.
And.
Obviously.
We worked really hard.
Balls.
The suppliers, although we have built.
Some good relationships.
They're not strategic enough and we're making excellent progress.
Our digital technical product.
So all the suppliers have been talking to the lighted and.
All of those focuses will really create the following benefits will belief bumping.
The sustained the revenue and margin growth.
The improved operational efficiency, we should expect our opex.
To improve and also all of those.
Results will really impact the bottom line, which is profitability.
Yes.
Yes on the cash flow.
We are very pleased to see that we have achieved two consecutive quarters quarter positive operating cash flow.
We are very confident that we'll be able to keep this good trend as we are grateful very much close to profitability.
We have been operating with very high efficiency.
For example, our accounts payable basis around 45 days.
And our inventory days is about 30 days.
While we further build out our business scale, we will be able to negotiate a bad trading terms with suppliers.
Okay.
In terms of cash position.
Cash and cash equivalents and restricted cash and short investments as of December year end amounted to RMB 923 billion and we believe that we have sufficient cash reserves to support.
Our business expansion.
Steve Hope we have answered your questions.
Yes. Thank you both for the Xiaomi.
Thank you and our next question today comes from Tom Craig Cornerstone investment. Please go ahead.
Yes.
Hello, This is Tom from cornerstone.
Congratulations on your performance last quarter I'll have two questions.
First one is what are the main factors driving the sustained improvement of the gross margin.
This improvement is sustainable.
One is to company's operating expense ratio has been consistent with the Cleveland well Thats among the reasons for this trend cannot continue to decrease in the future. Thank you.
Yeah.
Okay Paul.
This is Harvey I will take your first question regarding the margin.
Pete will be business.
So first first of all.
We are a technology company, so I would like to thanks tore.
My technology colleagues.
Our system has helped us to drive our efficiency, including our dynamic inventory management system.
Hello, Matt.
To get the <unk>.
<unk> costs in each of our warehouse.
We can do that.
Let me translate.
Dean.
Among all his warehouse.
To better serve our customer and also get the best profit.
And also very.
Very good call.
Yes that is our price intelligence system.
And then help us too.
Optimize our price real time.
And get a good balance.
Our profit.
As well as our customer experience on price.
So all of those tools.
<unk> really help us cool.
Get a much better that's caused it.
But besides that technology and tourists I think.
Even more important is our relationship with the pharmaceutical companies.
To further reduce our procurement costs and we.
So strong there.
Our companies.
Two lower.
Cost of product.
Sure.
And we announced source for all of the 500.
Global and domestic pharmaceutical companies.
So we will continue to deepen our strategic relationship with these.
<unk>.
And just for information.
In the past two months in this year I have personally visited all the pharmaceutical companies and we.
All we have a very.
Question on the coast Colgate.
The moment the customer behavior change.
They are they all agreed to heighten our direct relationship.
To find a strategic way to better serve.
The patients and customers.
And post holiday periods.
So we definitely expect the momentum to continue.
And.
And Furthermore.
With the increased demand of our customer.
With the volume growth, we will definitely see more scalability in our business and which we are intensely into it at a profit.
Profit.
In our business. Thank.
Thank you.
Yeah.
Yes, so Tom if I heard your question correctly, it's about OPEC right. So.
What is driving.
Opex down on mechanics this game.
Want to answer the questions from the second path cannot sustain absolutely.
Our confidence of that and that will believe there is still much room.
For our Opex to improve.
And.
The short answer to what drives.
Down the Opex the short answer is really our investments into technology.
We advocate Digitization and.
We must demonstrate.
US ourselves being digital first.
And if you <unk>.
So up.
In our conference room today or any anyway.
Traveling.
In some remote areas with a mobile phone we actually.
Exactly know what happens on the day in terms of sales so.
Not only do we know the overall company's sales and we know precisely what happens, let's say in northeast China in East, China in northwest, China and in what customer segment in.
What categories in even some skus so.
Knowing all of that it will give us a huge advantage in decision, making and each morning.
Have over 1000 people being the ground sales each morning, those ground sales people will be assigned.
The parks for today's work that assignment is not done by the manager is actually by the system So being digital.
He has a lot of advantages.
Now before moving into the future.
With the new technologies like chat GTP available there are more areas, we kind of look to be more efficient and as we speak.
Have a few projects going on and we're experimenting and see how they can further reduce our opex and.
The facts are that contributed so.
The driving down of late.
<unk>, it's really we'll spend money wisely and we have to grow once our scale grows and obviously.
We can scale down.
Operating cost and cost side.
In conclusion, we still have a lot of confidence.
To improve a lot more into the future.
Thank you looking forward to performance next quarter. Thank you.
Yeah.
Thank you and our next question today comes from for instance.
PSB capital. Please go ahead.
Thank you operator this is francis from DSV capital.
Congratulations again on the Great performance I've got two questions. The first one is the percentage of non-GAAP operation loss.
Net revenue has significantly narrowed what's the main reason for this trend and how does the company plan to maintain this trend.
My second question is.
Does the company have any new technological developments in recent times I'd love to hear you sure about it. Thanks.
Yes.
non-GAAP operating loss.
Fiscal year 2022, our non-GAAP operating loss narrowed to one 6% of net revenues compared to 4% last year.
And the fourth quarter non-GAAP operating loss was less than 1% of net revenue.
Profitability in the GAAP operating level in the months of December .
Just two of my colleagues explained the market expansion and our efficiency on expenses I would like to highlight.
This narrowing of the gap.
Loss mainly.
Mainly attributable to two key drivers.
The person with the customer network, we have built up throughout the years, we have been able to sell high margin products.
And to improve the quality of our net revenue mix.
We have focused more on profitable and healthy revenue expansion to improve our margin profile.
As you can see we have delivered 35% of growth rate and gross margin, which was four times our revenue growth rate.
Our overall gross margin has improved from 5% to six 2%.
The second key driver is on the <unk>.
Technology, we are being assisted with our home <unk> Tech solutions, we have.
<unk> been able to streamline our operation to significantly improve our operating efficiency.
We have achieved a revenue growth with much less expense expense investment.
As our CEO just to share with you that our spending.
Has been more getting cleaned.
We will continue to work hard on this key two drivers.
Together with the scale to reach profitability.
And yes, let's say pressure on prices.
Yeah.
And in particular, the taking the question.
About our technology investment.
<unk>.
We believe.
I truly believe that technology.
So our core competency we have.
And we'll continue to do that.
Let me just dump.
Dump boson.
We will have done okay.
First of all.
To improve our cost.
Hi, Ken.
For example, you would have.
So then fulfillment centers.
On.
China is very.
Uh huh.
Let's see.
Cost me to build.
Yes.
No.
And so forth 100 ftes.
Hunter with.
With some.
Tom or Paul.
Suppliers and then there is notable for the call.
Yes.
And that way.
Maiden amendments.
Budd this is Matt.
This year, we probably expect another.
No.
100, <unk> working with vendors to build up.
He will help us too.
They were more timely to our customers.
We also are trying.
The model optimize.
Between.
Yeah.
And also recently we apply.
Yeah.
Great.
Content.
Short videos.
Hi.
I'll leave you to create a lot of reviews for example, a one short video license.
Minutes.
Resulted in more than 590 <unk>.
News.
Okay great.
Hi.
Yes.
Diesel human.
<unk>.
Talk about health.
Advisory.
Along these lines, including the region.
New development.
Robert.
Hi to apply.
Great.
Our users okay.
Really.
Try to.
That's primarily due to Obama power Smart Hi, Karen.
Two.
Rates are better customer experience.
Okay. Thank you.
Yes, certainly as bill was very clear and the artificial intelligence integration sounds very exciting we look forward to hear anymore.
Thank you.
And our next question today comes from Stephanie Miller with service investments. Please go ahead.
Good evening. This is Stephanie from investment and congratulations on your growing revenues and I have two questions. The first one is what are the company's plans for its OEM products in the future and the second question is what is the current progress of the company's capitalization. Thank you.
Hi.
This is hardly a tech.
Quick question.
OEM.
That's what you would call it private label.
We have.
I think last quarter.
It's nine <unk>.
We have large.
Hi, guys.
Of our private label.
All of these 25 skus.
Were accepted by our.
Yeah.
Pharmacy customers.
And.
Yeah.
In a tent pole.
Thats.
Typically about 30% to 40% of now logging.
So well all of <unk> customers.
The video stores small says they are not able to have their own brand.
So Lee.
Total private label brand in Guangdong.
Yeah.
Different customers.
We also this private label to help them compete.
So to speak.
In this area.
And they are also.
The above over 100.
S Skus in our pipeline.
And we expect to see a.
Very fast increase in churn in this project. Thank you.
Yes.
Yes on the prioritization.
<unk>.
We understand there is a process of the private AC is still ongoing and independent committee is working with the buyer group on the productivity and proposal.
The company showed make all necessary public announcement. According to SEC rules. So I would suggest that you stay tuned.
Announcement, if there is any to be made by the company.
Thank you.
Thank you and congratulations again on the great performance of the company.
Thanks. Thank you. Thank you and our next question today comes from Adam <unk> Capital. Please go ahead.
Okay.
Okay.
Congratulations on excellent performance in our quarter, Adam trends from Great capital I've got two questions.
But that the company have any new business model in a recent and the second is lost experts outcome and they are making to improve customer experience.
Yes, two questions. Thank you.
And then.
Good question actually regarding the new model.
We are actually we are.
Piloting our new model almost every day every week of costs come online sales.
Sure.
Sam.
The initiative.
So very good results for example.
One house program.
We have 12000 pharmacies.
And the millions of patients later.
Mr Watson health.
Program.
Pharmaceutical companies.
Leveraging.
One platform performed better Miss a beat.
Total marketing, including the.
The coverage of Newark terminal Neil.
Pharmacies.
Especially expansion.
Two no sudden remote.
Lower tier cities.
And also to do patient education.
To DLP.
Duration of children et cetera.
Basically what the <unk> platform and this new <unk> model.
Testing.
Well accepted by our many.
Many pharmaceutical partners.
And yellow sampled probably.
Can I just mentioned about private label program.
So.
It's in a very good trend.
Chad.
In.
Pharmaceutical partners not owning.
Iraq.
<unk> also some of our pharmaceutical strategic partners they are.
Also OEM plus.
So.
All of these initiatives.
As part of our DNA.
We will continue to grow.
Bring more initiative and.
Especially in the post holiday.
Seasons.
Every quarter, you should be able to see more and more initiatives.
Thank you.
Let me take the question.
Our efforts to improve.
The customer experience.
Yes.
I mentioned above.
Okay.
Also I mentioned, Bob and shipments between us.
These are in fact tumor.
Tremendous.
For corporate expense.
Planters underway, we also shipped more product tons shipped.
Two.
Both of these numbers.
Closer to customers.
The all these effort.
Help to shorten the time.
For the whole delivery.
Right.
You mentioned that 3800 90 <unk> on the countries.
Four hours.
It's tremendous.
Can you talk experience as we're itself or reducing.
I'm with you on the road.
Another example on country experienced assortments.
Are you in the past we just.
Nationwide Assortments.
Now.
Drilling down one more level.
Well managed.
The demand at the assortment for each.
Welcome to center on meeting the demands of local customers.
That will help.
Alright, great Thats, all customers' wallet share.
Every destination those three examples.
Thank you.
No.
Yes.
Thank you and ladies and gentlemen, this concludes today's question and answer session.
In closing on behalf of the entire one one on management team, we'd like to thank you for your interest and participation in today's call.
If you require any further information or have any interest in visiting 111.
Hi, China. Please note the company no.
Thank you for joining the call today.
You may now disconnect your lines. Thank you.
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