Release Date: November 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 111 Inc (YI, Financial) achieved operational profitability for three consecutive quarters, highlighting effective cost management and operational efficiency.
- The company reported a significant improvement in income from operations, with a shift from a loss of RMB80.4 million in the previous year to a profit of RMB2.4 million in Q3 2024.
- 111 Inc (YI) has successfully reduced operating expenses as a percentage of net revenues, demonstrating enhanced operational leverage.
- The company has made substantial advancements in digital and AI technologies, improving inventory management and customer conversion rates.
- 111 Inc (YI) expanded its Kunpeng logistics network, reducing fulfillment costs and enhancing supply chain efficiency.
Negative Points
- The challenging macroeconomic environment in China, including weak consumer sentiment and healthcare reforms, continues to impact the industry.
- Retail pharmacy sales in China decreased by 2.2% in the first nine months of 2024, leading to intensified competition and reduced per store revenues.
- Many large chain pharmacies are experiencing significant declines in net profit, with independent pharmacies facing even greater pressure.
- Despite operational improvements, 111 Inc (YI)'s total net revenues remained relatively flat year-over-year, indicating limited top-line growth.
- The company faces ongoing challenges in managing redemption requests from investors, which could impact financial flexibility.
Q & A Highlights
Q: Jessie Lu from HSBC asked about the potential for further reduction in operating expenses (OpEx) as a percentage of revenue and the factors driving gross margin improvement.
A: Junling Liu, CEO, explained that the company aims to continue reducing OpEx through technology and operational efficiency. The company focuses on assortment and category management to improve margins, optimizing product offerings to balance money-losing and money-making categories.
Q: Alvin Mall, a private investor, inquired about the company's ability to achieve operating profit for the entire year, improvements in supply chain management, and how the company achieved positive operating cash flow.
A: Junling Liu expressed optimism about achieving full-year operational profitability. COO Haihui Wang highlighted supply chain efficiencies, including reduced fulfillment costs and expanded logistics networks. CFO Luke Chen noted improved working capital control and third-party supply chain finance as key factors for positive cash flow.
Q: Robert Sassoon from Water Tower Research asked about the company's performance in the current market environment and expectations for the B2B and B2C businesses.
A: Junling Liu acknowledged the challenging macro environment but expressed optimism due to China's aging population and healthcare needs. The company sees opportunities in digital capabilities to enhance efficiency for upstream and downstream customers.
Q: Robert Sassoon also inquired about the company's digital capabilities and expansion plans in product offerings and partnerships.
A: Haihui Wang detailed advancements in digital capabilities, including inventory sharing technology and AI models for Chinese herbal medicine. The company is expanding product offerings through partnerships and new fulfillment centers, leveraging the JBP platform.
Q: Jessie Lu from HSBC asked about the company's strategy for margin improvement despite flat revenue growth.
A: Junling Liu emphasized assortment management and category optimization, along with better deals from pharmaceutical suppliers, as strategies for margin improvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
