111 Inc (YI) 2023 Q1 法說會逐字稿

Hello, everyone, and thank you for joining 111's Conference Call Today. On the call today from the company are Dr. Gang Yu, Co-Founder and Executive Chairman; Mr. Junling Liu, Co-Founder, Chairman and CEO; Mr. Luke Chen, CFO of 111's Major Subsidiary; and Mr. Haihui Wang, COO. (Operator Instructions) The company's earnings press release was distributed earlier today and together with the earnings presentation are available on the company's IR website.

大家好，感謝您今天參加 111 的電話會議。今天，公司聯合創始人兼執行主席於剛博士接聽了電話；劉俊嶺先生，聯合創始人、董事長兼首席執行官； 111主要子公司CFO陳路克先生；以及首席運營官王海輝先生。 （操作員說明）該公司的收益新聞稿已於今天早些時候發布，並且可在該公司的投資者關係網站上查看收益報告。

Before the conference call gets started, let me remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 SEC.

在電話會議開始之前，請允許我提醒您，本次電話會議可能包含根據 1995 年《私人證券訴訟改革法案》的安全港條款做出的前瞻性陳述。此類陳述基於管理層當前的預期以及當前的市場和運營狀況並涉及涉及已知和未知風險、不確定性和其他因素的事件，所有這些都會導致實際結果存在重大差異。有關這些風險的更多信息，請參閱該公司向 SEC 提交的文件。

111 does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise expected as required under applicable rules. Please note that all numbers are in RMB, and all comparisons refer to year-over-year comparisons, unless otherwise stated. Please also refer to the earnings press release for detailed information on the comparative financial performance on a year-over-year basis.

111 不承擔因新信息、未來事件或適用規則要求的其他預期而更新任何前瞻性陳述的義務。請注意，除非另有說明，所有數字均以人民幣為單位，所有比較均指同比比較。另請參閱收益新聞稿，了解同比財務業績比較的詳細信息。

With that, I'll now turn the call over to 111's CEO, Mr. Junling Liu. Please go ahead.

現在我將把電話轉給111的首席執行官劉俊嶺先生。請繼續。

Thank you for joining our first quarter 2023 earnings call. The information that we'll be discussing here is also provided in the slides earlier today on the company's website. I encourage you to download the presentation along with the earnings report at ir.111.com.cn. I'll begin by providing an overview of the macro environment, followed by a review of our recent operational performance. Additionally, I will comment on our continued commitment to industrial digitization, driving revenue and margin growth, fortifying upstream supply capabilities, enhancing operational efficiency and outlining our future strategies.

感謝您參加我們的 2023 年第一季度財報電話會議。今天早些時候該公司網站上的幻燈片中也提供了我們將在這裡討論的信息。我鼓勵您在 ir.111.com.cn 下載演示文稿和收益報告。我將首先概述宏觀環境，然後回顧我們最近的運營業績。此外，我還將評論我們對工業數字化的持續承諾，推動收入和利潤增長，增強上游供應能力，提高運營效率並概述我們的未來戰略。

Subsequently, our CFO, Mr. Luke Chen, will present a detailed (inaudible) of our financial results, ensuring a thorough understanding of our organization's financial standing. As many of you are aware, in the first quarter of 2023, China's economy achieved a solid start. It was reported that the GDP reached RMB 28.5 trillion, growing by 4.5% compared to the same period last year. The economic recovery remained positive as the effect of various policies gradually became evident, both online and offline economic activities resumed. The medicine market in both B2B and B2B segments also experienced aligned growth with China's economy in Q1 of 2023.

隨後，我們的首席財務官 Luke Chen 先生將詳細（聽不清）介紹我們的財務業績，以確保全面了解我們組織的財務狀況。大家都知道，2023年一季度，中國經濟實現開門紅。據悉，國內生產總值達到28.5萬億元，同比增長4.5%。經濟復甦繼續向好，各項政策效果逐步顯現，線上線下經濟活動全面恢復。 2023年第一季度，B2B和B2B領域的醫藥市場也與中國經濟同步增長。

Meanwhile, through the COVID-19 pandemic, China has undergone a transformative phase in its healthcare industry, embracing digitization and achieving remarkable progress. The adoption of electronic medical records has streamlined data management, enhancing efficiency and accuracy. Telemedicine services have expanded, enabling remote consultations and bridging the gap in healthcare access, particularly in rural areas. Online pharmacies and e-commerce platforms have revolutionized the medication procurement offering convenience and accessibility to patients.

與此同時，通過COVID-19大流行，中國的醫療保健行業經歷了轉型階段，擁抱數字化並取得了顯著進展。電子病歷的採用簡化了數據管理，提高了效率和準確性。遠程醫療服務不斷擴大，實現了遠程諮詢並縮小了醫療保健獲取的差距，特別是在農村地區。在線藥店和電子商務平台徹底改變了藥品採購方式，為患者提供了便利和可及性。

China's commitment to digitizing the healthcare sector during the pandemic has not only improved the efficiency, but also paved the way for innovative healthcare solutions and improved patient outcomes. I'm pleased to report that leveraging these transformative trends in the healthcare industry, 111, as a prominent healthcare technology company in China has experienced solid growth and improved all of our operating metrics. With a focus on digital healthcare solutions 111 has capitalized on the rising demand for digital medical service platforms for both B2C and B2B customers. Through our robust technological infrastructure and strategic partnerships 111 has effectively connected patients with pharmacies, healthcare professionals, pharmaceutical companies and other healthcare service providers.

中國在疫情期間致力於醫療保健行業數字化不僅提高了效率，還為創新醫療保健解決方案和改善患者治療結果鋪平了道路。我很高興地向大家報告，利用醫療保健行業的這些變革趨勢，111 作為中國著名的醫療保健技術公司，實現了穩健的增長，並改善了我們的所有運營指標。 111 專注於數字醫療解決方案，充分利用了 B2C 和 B2B 客戶對數字醫療服務平台不斷增長的需求。通過我們強大的技術基礎設施和戰略合作夥伴關係，111 有效地將患者與藥房、醫療保健專業人員、製藥公司和其他醫療保健服務提供商聯繫起來。

Our growth trajectory showcases the immense potential of digitization in revolutionizing healthcare delivery and improving overall patient experiences in China. During the first quarter of 2023, the company rose to the challenge and achieved RMB 3.7 billion in revenues, an increase of 23.9% year-over-year, marking the 19th consecutive quarter of Y-o-Y growth since our IPO. I'm also pleased to report that our gross profit reached RMB 236 million, representing a margin growth rate of 22.7% year-over-year. Our B2B business remains the key driver of revenue growth.

我們的增長軌跡展示了數字化在徹底改變中國醫療保健服務和改善整體患者體驗方面的巨大潛力。 2023年第一季度，公司迎難而上，實現營收37億元，同比增長23.9%，實現IPO以來連續第19個季度同比增長。我還很高興地報告，我們的毛利潤達到人民幣2.36億元，利潤率同比增長22.7%。我們的 B2B 業務仍然是收入增長的主要驅動力。

In Q1, B2B revenue (technical difficulty), representing a year-over-year increase of 24.9% and gross profit increased to RMB 211 million, an increase of 25.5% year-over-year. The hard-earned margin growth is the result of our consistent adherence to 111's customer-centric philosophy and our strong determination to create value for our customers. Meanwhile, we are thrilled to share this exciting news with our stakeholders that our non-GAAP operating profit has finally turned positive compared to a loss from operations as a percentage of net revenues of 2.4% in 2022, reaching our goal of quarterly breakeven at the non-GAAP operating income level.

一季度B2B收入（技術難度）同比增長24.9%，毛利潤增至2.11億元，同比增長25.5%。利潤增長來之不易，是111一貫堅持以客戶為中心的理念和為客戶創造價值的堅定決心的結果。與此同時，我們很高興與利益相關者分享這一令人興奮的消息，即我們的非 GAAP 營業利潤最終轉正，而營業虧損占淨收入的比例為 2.4%，到 2022 年實現了季度盈虧平衡的目標。非公認會計準則營業收入水平。

With hard work and dedication, we are now seeing the fruits of our labor and the progress towards achieving our financial goals. This milestone not only reflect our company's focus on efficiency and cost management but also our commitment to delivering value to our customers. We believe there will be plenty of challenges lying ahead and there will be ups and downs in our business, but we will work tirelessly to create more value for our customers and shareholders. Now allow me to take a moment to discuss the progress we have made on our operations.

通過辛勤工作和奉獻精神，我們現在看到了我們的勞動成果和實現財務目標的進展。這一里程碑不僅反映了我們公司對效率和成本管理的關注，也體現了我們為客戶提供價值的承諾。我們相信，未來將面臨諸多挑戰，業務也會有起有落，但我們將不懈努力，為客戶和股東創造更多價值。現在請允許我花點時間討論我們在運營方面取得的進展。

Let me start from our supply side. We have successfully enhanced our partnership with upstream pharmaceutical partners by promoting neutral understanding, upgrading cooperation level, enhancing supply chain efficiency and bolstering our comprehensive digital capabilities. As our business continues to expand and as we position ourselves as an effective commercialization partner, we will continue to offer value-added services to pharmaceutical enterprises. At present, we assist hundreds of pharmaceutical companies in drug commercialization, digital marketing and market insight.

讓我從供給側開始。我們通過促進中立理解、提升合作水平、提高供應鏈效率、增強綜合數字化能力，成功加強了與上游醫藥合作夥伴的合作關係。隨著我們業務的不斷拓展，以及我們將自己定位為有效的商業化合作夥伴，我們將繼續為製藥企業提供增值服務。目前，我們協助數百家製藥公司進行藥品商業化、數字營銷和市場洞察。

For example, on our B2C platform, in addition to the successful launch of Hua Medicine stores at HuaTangNing, Sanofi's Allegra (inaudible) 111, marking its first online nationwide release on the platform. This medication is indicated for the treatment of seasonal allergic rhinitis and a chronic idiopathic urticaria in individuals aged 12 and above. The introduction of Allegra in China and its availability on 111 not only improves accessibility for patients but also provides a better medication experience through professional guidance from healthcare professionals and pharmacists.

例如，在我們的B2C平台上，除了華領醫藥在華糖寧專賣店的成功上線外，賽諾菲的Allegra（聽不清）111也是該平台首次在全國線上上市。該藥物適用於治療 12 歲及以上個體的季節性過敏性鼻炎和慢性特發性蕁麻疹。 Allegra進入中國並在111上銷售，不僅提高了患者的可及性，而且通過醫療保健專業人員和藥劑師的專業指導，為患者提供了更好的用藥體驗。

I personally experienced severe allergic symptoms during the spring season and taking traditional antihistamine drugs often leaves me feeling excessively drowsy, tampering my ability to work effectively. However, with the introduction of this medication on our platform I as a patient have been able to enjoy the convenience of accessing online doctor consultations and having the medication delivered right to my doorstep. This experience has been nothing shorter but wonderful, especially when compared to the hassle of visiting a physical hospital enduing the registration process and enduring long queues before finally seeing a doctor and obtaining a prescription. To exacerbate matters, there is also no guarantee that the hospital stocks the specific drug I require.

我個人在春季經歷了嚴重的過敏症狀，服用傳統的抗組胺藥物常常讓我感到過度昏昏欲睡，影響我有效工作的能力。然而，隨著這種藥物在我們平台上的推出，我作為患者能夠享受到在線醫生諮詢和藥物直接送到家門口的便利。這次經歷雖然短暫，但卻很精彩，尤其是與去實體醫院進行掛號、排長隊、最終看醫生並獲得處方的麻煩相比。更糟糕的是，也無法保證醫院庫存有我需要的特定藥物。

Knowing that there are countless individuals across the country facing similar issues I'm thrilled that they too can now benefit from 111's digital healthcare platform. Meanwhile, on our B2B platform, through our partnerships with downstream pharmacies, we can deliver digital value to upstream pharmaceutical companies with our newly developed digital tool, Telescope. Telescope serves as a lens for pharmaceutical companies allowing them to gain (inaudible) and a comprehensive view of their drug sales and the pricing dynamics real-time. By leveraging advanced data analytics and market insights, Telescope enables these companies to analyze sales patterns, identify pricing opportunities and make data-driven decisions to optimize their strategies.

我知道全國有無數人面臨類似的問題，我很高興他們現在也可以從 111 的數字醫療平台中受益。同時，在我們的B2B平台上，通過與下游藥店的合作，我們可以利用我們新開發的數字工具Telescope為上游製藥公司提供數字價值。望遠鏡充當製藥公司的鏡頭，使他們能夠實時獲得（聽不清）藥品銷售和定價動態的全面視圖。通過利用先進的數據分析和市場洞察，Telescope 使這些公司能夠分析銷售模式、識別定價機會並做出數據驅動的決策以優化其戰略。

With Telescope, pharmaceutical companies can assess the performance of their products in real-time, identify market trends and adjust their marketing campaigns accordingly. This invaluable tool not only provides a clear understanding of the market landscape but also assists in forecasting demand, refining pricing strategies and ultimately maximizing sales and profitability. On the other end, we are deeply committed to empowering downstream pharmacies in a digital way, offering comprehensive support across all aspects of pharmacy operations.

借助 Telescope，製藥公司可以實時評估其產品的性能、識別市場趨勢並相應地調整其營銷活動。這一寶貴的工具不僅可以提供對市場格局的清晰了解，還有助於預測需求、完善定價策略並最終實現銷售額和盈利能力的最大化。另一方面，我們致力於以數字化方式賦能下游藥店，為藥店運營的各個環節提供全面的支持。

Our solutions not only provide cost-effective medical product options with satisfactory services that help them streamline processes and enhance operational efficiency. Through our network and the partnerships, we negotiate competitive pricing and favorable terms with suppliers, allowing pharmacies to access product at lower costs. Additionally, leveraging technology such as automated ordering system and efficient logistics, we ensure timely delivery and reduced operational expenses for pharmacies. By offering cost-effective products and efficient services, we enable pharmacists to deliver value to their customers and maintain their competitiveness in the market.

我們的解決方案不僅提供具有成本效益的醫療產品選擇，還提供令人滿意的服務，幫助他們簡化流程並提高運營效率。通過我們的網絡和合作夥伴關係，我們與供應商協商有競爭力的價格和優惠條款，使藥店能夠以更低的成本獲得產品。此外，利用自動訂購系統和高效物流等技術，我們確保及時交貨並降低藥店的運營費用。通過提供具有成本效益的產品和高效的服務，我們使藥劑師能夠為客戶提供價值並保持他們在市場上的競爭力。

Particularly, by the end of first quarter, our 1 Health virtual franchise model enables around 20,000 pharmacies provide superior products and services to their customers. All 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, O2O and CRM. Thirdly, operating efficiency remains a continuous focus in our strategic imperatives. With growing scale of business and enhanced technological capabilities, 111's operational efficiency continues to improve.

特別是，到第一季度末，我們的 1 Health 虛擬特許經營模式使大約 20,000 家藥店能夠為其客戶提供優質的產品和服務。所有參與的藥店都可以使用我們的平台更好地管理他們的產品選擇、採購和庫存管理，並通過我們的數字 SaaS 服務（包括智能採購、數字營銷、O2O 和 CRM）訪問我們的分銷工具。第三，運營效率仍然是我們戰略要務中持續關注的焦點。隨著業務規模的不斷擴大和技術能力的增強，111的運營效率不斷提高。

We're glad to see that revenue and gross profit have both increased, whereas as a percentage of net revenue, the sales and marketing expenses in Q1 was down to 2.41% from 3.85%. General and administrative expenses was down to 1.12% from 1.61% and technology expenses was down to 0.68% from [1.131%] in the same quarter last year. The total amount of sales and marketing expenses, general and administrative expenses and technology expenses year-over-year has been reduced by 22.3%, 13.9% and 35.1%, respectively. We have made significant efforts to enhance management efficiency through various measures.

我們很高興看到收入和毛利潤雙雙增長，而第一季度銷售和營銷費用占淨收入的比例從 3.85% 下降到 2.41%。總務及管理費用從去年同期的 1.61% 降至 1.12%，技術費用從去年同期的 [1.131%] 降至 0.68%。銷售及營銷費用、一般及管理費用和技術費用總額同比分別減少22.3%、13.9%和35.1%。我們通過多種措施，大力提升管理效率。

Firstly, we have implemented a strategic reduction of redundant staff, carefully optimizing workforce allocation while leveraging technology to automate certain tasks. Secondly, we have upgraded our standard operating procedures and streamline management processes to eliminate redundancies and enhance productivity. Additionally, we have prioritized better corporate governance practices, fostering a culture of accountability and transparency across the organization. Lastly, we have made substantial investments in technology solutions that improve operational efficiency, such as advanced analytics, robotic process automation and digital platforms. This continued efforts aimed to drive efficiency, reduce costs and ultimately deliver enhanced value to our stakeholders.

首先，我們實施了戰略性裁員，精心優化勞動力配置，同時利用技術實現某些任務的自動化。其次，我們升級了標準作業流程，簡化了管理流程，消除了冗餘，提高了生產力。此外，我們優先考慮更好的公司治理實踐，在整個組織內培育問責和透明的文化。最後，我們對提高運營效率的技術解決方案進行了大量投資，例如高級分析、機器人流程自動化和數字平台。這種持續的努力旨在提高效率、降低成本並最終為我們的利益相關者提供更高的價值。

To further improve operational efficiency, we will keep on focusing on implementing our strategy, flattening our organizational structure and improving the work efficiency of our employees through multiple operational tools. Regarding logistics, our fulfillment costs have decreased significantly, thanks to our upgraded self-owned warehouse operation and joint venture warehouses. By investing in our infrastructure and technology, we have been able to optimize our supply chain processes and achieve greater efficiency.

為進一步提昇運營效率，我們將繼續聚焦戰略落地，扁平化組織架構，通過多種運營工具提升員工工作效率。物流方面，得益於自有倉和合資倉的升級，我們的履行成本大幅下降。通過投資我們的基礎設施和技術，我們已經能夠優化我們的供應鏈流程並實現更高的效率。

These efforts have allowed us to deliver our products to customers faster and more accurately while also lowering our fulfillment cost to 2.78% from 3.1% as a percentage of net revenue. We will continue to prioritize these initiatives as we seek to provide the best possible customer experience and remain competitive in the market. It is also worth noting that we have further sharpened our focuses to operate on the principles of value creation being customer-centric and strengthening our supply base across the organization. As part of our organizational change initiative, we have established an in-house advisory department dedicated to driving strategic improvements across multiple disciplines.

這些努力使我們能夠更快、更準確地向客戶交付產品，同時還將我們的履行成本占淨收入的比例從 3.1% 降低到 2.78%。我們將繼續優先考慮這些舉措，力求提供盡可能最佳的客戶體驗並保持市場競爭力。還值得注意的是，我們進一步明確了我們的重點，以創造價值、以客戶為中心和加強我們整個組織的供應基礎的原則進行運營。作為我們組織變革計劃的一部分，我們建立了一個內部諮詢部門，致力於推動跨多個學科的戰略改進。

This department plays a pivotal role in analyzing customers' needs, enabling us to refine our product assortment to better align with market demand. By closely monitoring market trends and leveraging customer insights, we can intelligently adjust pricing to ensure competitiveness while maximizing profitability. Additionally, the advisory department works towards optimizing internal resource allocation, streamlining processes and enhancing operational efficiency. Through those efforts, we aim to continually improve our ability to meet customer expectations, achieve optimal pricing strategies and to drive efficient allocation of resources across the organization.

該部門在分析客戶需求方面發揮著關鍵作用，使我們能夠完善我們的產品種類，以更好地滿足市場需求。通過密切監控市場趨勢並利用客戶洞察，我們可以智能地調整定價，以確保競爭力，同時最大限度地提高盈利能力。此外，諮詢部門致力於優化內部資源配置、簡化流程並提高運營效率。通過這些努力，我們的目標是不斷提高滿足客戶期望、實現最佳定價策略並推動整個組織資源有效分配的能力。

Digitizing the healthcare industry has been our goal since our inception. Under China's 14th 5-year plan for National Economic and Social Development, the digital economy has been elevated to a vital position and expected to enter a period of rapid expansion through 2025. We see this as a tremendous opportunity to leverage digital technology and reconstruct the value chain in the healthcare industry. To achieve this, we have built a world-class technology platform that is already transforming China's healthcare industry. We have built an industry-leading smart supply chain platform that is uniquely tailored to optimize our digitization model and unrivaled national sales network providing comprehensive coverage and a sophisticated multichannel digital platform that serves (inaudible) in this massive market.

自成立以來，醫療保健行業數字化一直是我們的目標。中國國民經濟和社會發展第十四個五年規​​劃綱要將數字經濟提到了重要位置，預計到2025年將進入快速擴張期。我們認為這是利用數字技術、重構世界經濟的巨大機遇。醫療保健行業的價值鏈。為了實現這一目標，我們建立了世界一流的技術平台，該平台已經在改變中國的醫療保健行業。我們建立了行業領先的智能供應鏈平台，專門為優化我們的數字化模式而量身定制，建立了無與倫比的全國銷售網絡，提供全面的覆蓋，以及服務於這個龐大市場（聽不清）的複雜的多渠道數字平台。

This has made us an attractive commercialization partner as evidenced by our growing number of partnerships with pharmaceutical companies (inaudible) designed to serve many players in the healthcare industry, pharmaceutical companies, pharmacies, doctors and (inaudible). We have created the largest virtual pharmacy network in China with about 440,000 pharmacies and have strategic partnerships with more than 500 globally renowned and domestic pharmaceutical companies. We feel very proud of the ecosystem we have built to-date, and it will enable us to scale our business to the next level.

這使我們成為有吸引力的商業化合作夥伴，我們與製藥公司（聽不清）的合作夥伴關係不斷增加，旨在為醫療保健行業、製藥公司、藥房、醫生和（聽不清）的許多參與者提供服務。我們創建了中國最大的虛擬藥房網絡，擁有約44萬家藥店，並與500多家全球知名及國內製藥公司建立了戰略合作夥伴關係。我們對迄今為止建立的生態系統感到非常自豪，它將使我們能夠將業務擴展到新的水平。

Now let me spend a moment to talk about our future initiatives. One, align our product assortment and structure with customers' needs. We are committed to enhancing the customer experience by optimizing our product assortment in accordance with customers' needs. Through diligent efforts and the utilization of the information collected from various channels, including customer feedback, market research and data analytics will continuously optimize our product offerings. The leverage and insights obtained from the sources, the company ensures that the right products are regularly available to meet the diverse demands of customers.

現在讓我花點時間談談我們未來的舉措。第一，使我們的產品種類和結構與客戶的需求保持一致。我們致力於根據客戶的需求優化我們的產品種類，從而增強客戶體驗。通過不懈的努力和利用從各種渠道收集的信息，包括客戶反饋、市場研究和數據分析，將不斷優化我們的產品。憑藉從來源獲得的影響力和洞察力，公司確保定期提供合適的產品來滿足客戶的多樣化需求。

This approach not only enables us to deliver tailored solutions but also allows for an exceptional and customized procurement experience. Two, reduced procurement cost. Direct sourcing from pharmaceutical companies has been highly effective in lowering the cost of products. We now source from over 500 global renowned and domestic pharmaceutical companies, and we will continue to deepen our strategic relationship with our existing partners as well as securing new partnerships. In the meantime, many new metrics have been set to drive our procurement team to perform better in the cost (inaudible) campaign.

這種方法不僅使我們能夠提供量身定制的解決方案，而且還可以提供卓越的定制採購體驗。二是降低採購成本。從製藥公司直接採購對於降低產品成本非常有效。我們現在從超過500家全球知名和國內製藥公司採購，我們將繼續深化與現有合作夥伴的戰略關係並建立新的合作夥伴關係。與此同時，我們制定了許多新指標，以推動我們的採購團隊在成本（聽不清）活動中表現更好。

This will provide us with a wide range of drug selection at lower cost. Three, be competitive with intelligent pricing. At the Digital Medicine platform, especially in B2B area, we are dedicated to continuously improve our market position by optimizing our pricing strategy through an intelligent pricing system. Leveraging advanced algorithms and better analysis, we meticulously evaluate market dynamics, competitive pricing, customer demand and other relevant factors to determine the most competitive and profitable pricing for our products. This approach allows us to strike a balance between affordability for our customers and the profitability for our business.

這將為我們提供更廣泛的藥物選擇以及更低的成本。三是通過智能定價保持競爭力。在數字醫療平台，特別是B2B領域，我們致力於通過智能定價系統優化定價策略，不斷提高我們的市場地位。利用先進的算法和更好的分析，我們仔細評估市場動態、有競爭力的定價、客戶需求和其他相關因素，以確定我們的產品最具競爭力和利潤的定價。這種方法使我們能夠在客戶的承受能力和我們業務的盈利能力之間取得平衡。

By adopting this intelligent pricing system, we aim to gain a larger market share by attracting new customers, retaining existing ones and establishing ourselves as a trusted and cost-effective partner in the pharmaceutical industry. Four, invest in Smart Supply Chain. We are committed to optimizing our supply chain to ensure efficient procurement, storage and delivery processes. By establishing strong partnerships with pharmaceutical companies, we can source high-quality products directly from them, enabling us to streamline the supply chain and minimize delays.

通過採用這種智能定價系統，我們的目標是通過吸引新客戶、留住現有客戶並將自己打造成製藥行業值得信賴且具有成本效益的合作夥伴，從​​而獲得更大的市場份額。四是投資智慧供應鏈。我們致力於優化我們的供應鏈，以確保高效的採購、存儲和交付流程。通過與製藥公司建立牢固的合作夥伴關係，我們可以直接從他們那裡採購高質量的產品，從而簡化供應鏈並最大限度地減少延誤。

Furthermore, we are implementing a mixed model approach, combining direct sales and a consignment business to optimize warehouse operations by strategically managing inventory levels and help sell large quantities of partners of consignment stock. To ensure continuity of supply, our dedicated continuity of supply department focuses on optimizing procurement practices reallocating resources when necessary and maintaining optimal storage levels to meet the demand and ensure the availability of products in a healthy condition. By implementing these measures, we aim to reduce costs and deliver exceptional service to our customers.

此外，我們正在實施混合模式方法，將直銷和寄售業務相結合，通過戰略性管理庫存水平來優化倉庫運營，並幫助銷售大量的寄售庫存合作夥伴。為了確保供應的連續性，我們專門的供應連續性部門專注於優化採購實踐，在必要時重新分配資源，並保持最佳存儲水平以滿足需求並確保產品在健康狀態下的可用性。通過實施這些措施，我們的目標是降低成本並為客戶提供卓越的服務。

Five, relentlessly driving operational efficiency. Our commitment to driving operational efficiency is steadfast. And we're implementing strategic measures to achieve this goal by prudently reduce labor costs with technological supplement, we aim to optimize our workforce while maintaining productivity levels. Additionally, we're actively engaging in negotiations with third-party vendors like logistics suppliers to secure competitive rates, optimizing logistic network, enabling us to streamline our supply chain and minimize costs. We have ground sales team across the country to cover over 440,000 pharmacies.

五是不斷提昇運行效率。我們堅定不移地致力於提高運營效率。我們正在實施戰略措施來實現這一目標，通過技術補充審慎降低勞動力成本，我們的目標是在保持生產力水平的同時優化我們的勞動力。此外，我們還積極與物流供應商等第三方供應商進行談判，以確保有競爭力的價格，優化物流網絡，使我們能夠簡化供應鏈並最大限度地降低成本。我們在全國擁有地面銷售團隊，覆蓋超過44萬家藥店。

Productivity from each sales rep will be vitally important to our business. Detailed measures and the metrics are reviewed each month and ensure continuous improvement. Furthermore, we recognize the critical importance of improving management skills and decision-making qualities as these factors directly impact our operational effectiveness. Through focused efforts in these areas, we are confident that we can reduce overall operational expenses to a minimum level, ensuring sustainable growth and success. We founded the company without so much resources and connections. Therefore, our survival depends on making ourselves efficient and also making our partners more efficient.

每個銷售代表的生產力對我們的業務至關重要。每月都會審查詳細的措施和指標，並確保持續改進。此外，我們認識到提高管理技能和決策質量的至關重要性，因為這些因素直接影響我們的運營效率。通過在這些領域的集中努力，我們有信心能夠將總體運營支出降至最低水平，確保可持續增長和成功。我們在沒有那麼多資源和人脈的情況下創辦了這家公司。因此，我們的生存取決於讓自己變得高效，也讓我們的合作夥伴變得更有效率。

This will be our most important competitive advantage. With the scale of our business continues to grow, our leverage will grow as well. We aspire to be the most efficient operator in the industry. Sixth, keep building 1 Health project for (inaudible) growth. We will continue to actively engage pharmaceutical companies and the pharmacies within the digital framework of the 1 Health project, utilizing an eco-systematic approach, the beneficial outcomes. By cultivating strong partnerships and collaboration, we strive to attract more pharmaceutical companies and pharmacists to join our program, expanding the network and are generating additional opportunities for growth.

這將是我們最重要的競爭優勢。隨著我們業務規模的不斷增長，我們的槓桿也會隨之增長。我們立志成為業內最高效的運營商。第六，繼續建設 1 個健康項目以促進（聽不清）增長。我們將繼續在 1 Health 項目的數字框架內積極吸引製藥公司和藥房參與，利用生態系統方法，取得有益成果。通過培養強有力的伙伴關係和協作，我們努力吸引更多的製藥公司和藥劑師加入我們的計劃，擴大網絡並創造更多的增長機會。

Through comprehensive market analysis, tailored marketing strategies and the data-driven insights, we work closely with our partners to optimize their product offerings, enhance sales performance and drive profitability. 1 Health Network has reached 20,000 stores, and we expect more to join this digital franchise. Seven, committing to digitization. We're committed to consistently investing in digitization as we firmly believe that it will yield long-term benefits. By embracing digital advancements, we can optimize our processes, enhance efficiency and unlock new opportunities for innovation. Through strategic allocation of resources to RMB, we can stay at the forefront of technological advancements and drive groundbreaking solutions that meet the evolving needs of our customers.

通過全面的市場分析、量身定制的營銷策略和數據驅動的洞察，我們與合作夥伴密切合作，優化他們的產品，提高銷售業績並提高盈利能力。 1 Health Network 已擁有 20,000 家商店，我們預計會有更多的人加入這個數字特許經營店。七、致力於數字化。我們致力於持續投資數字化，因為我們堅信它將帶來長期利益。通過擁抱數字化進步，我們可以優化流程、提高效率並釋放新的創新機會。通過對人民幣進行戰略性資源配置，我們可以保持技術進步的前沿，推動突破性的解決方案，滿足客戶不斷變化的需求。

By prioritizing digitization and nurturing a culture of innovation, we ensure that our organization remains agile, competitive and well-positioned for sustained growth in the ever-evolving landscape of the healthcare industry. To sum up, in the phase of post-COVID opportunities, 111 aims to position itself at the forefront of the healthcare industry, driving positive change and delivering superior services in the evolving post-pandemic landscape. We wish to thank all investors who have supported us.

通過優先考慮數字化和培育創新文化，我們確保我們的組織保持敏捷、有競爭力並處於有利位置，以便在不斷變化的醫療保健行業環境中實現持續增長。綜上所述，在後疫情機遇期，111旨在將自己定位於醫療保健行業的前沿，在不斷變化的後疫情形勢下推動積極變革並提供優質服務。我們衷心感謝所有支持我們的投資者。

Now, I will hand the call to Mr. Luke Chen to walk through our financial results. Thank you.

現在，我將把電話交給陳盧克先生，介紹一下我們的財務業績。謝謝。

Thank you, Junling, and good morning, evening, everyone. Moving to the financials; my prepared remarks will focus on a few key business and financial highlights. You can refer to the details of the first quarter 2023 results from slide 15 to 18 in Section 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 first quarter results. For the quarter, we partially benefited from the lifting of COVID-related restrictions since December last year. Our top line and gross segment profit continued to grow.

謝謝君凌，大家早安晚安。轉向財務；我準備好的發言將重點關註一些關鍵的業務和財務亮點。您可以參閱我們演示文稿第二節中幻燈片 15 至 18 中 2023 年第一季度業績的詳細信息。再次強調，除非另有說明，所有比較均為同比，所有數字均以人民幣為單位。讓我們從第一季度的業績開始。本季度，我們部分受益於自去年 12 月以來與新冠病毒相關的限制的取消。我們的營收和部門毛利潤持續增長。

Total net revenues for the quarter grew 24% to RMB 3.7 billion, and gross segment profit for the quarter grew 23% to RMB 236.2 million. Top line growth for the quarter was mainly attributed to our B2B segment revenue growth at 25% to RMB 3.6 billion. The gross segment profit for B2B segment has increased by 26%, with gross segment margin kept stable at 5.9%, which reflected our ability to steadily expand our business scale and our margin. Our B2C segment revenue increased 0.1% to RMB 112.9 million, with gross segment margin improved from 21.6% to 22.3%.

該季度總淨收入增長 24% 至 37 億元人民幣，部門毛利潤增長 23% 至 2.362 億元人民幣。本季度營收增長主要歸功於我們的 B2B 部門收入增長 25% 至 36 億元人民幣。 B2B業務的分部毛利潤增長26%，分部毛利率穩定在5.9%，反映了我們穩步擴大業務規模和利潤率的能力。我們的 B2C 部門收入增長 0.1% 至人民幣 112.9 百萬元，部門毛利率從 21.6% 提高至 22.3%。

Total operating expenses for the quarter decreased 12% to RMB 257.9 million. As a percentage of net revenue, total operating expenses for the quarter was down to 7% from 9.9% as we continue to enhance our operating leverage and optimize our operational efficiency. Procurement expenses as a percentage of net revenue for the quarter was down to 2.8% from 3.2% in the same quarter of last year. Sales and marketing expenses as a percentage of net revenue for the quarter was 2.4%, down from 3.9% in the same quarter of last year.

該季度總運營費用下降 12% 至人民幣 2.579 億元。隨著我們繼續增強運營槓桿並優化運營效率，本季度總運營費用占淨收入的百分比從 9.9% 降至 7%。本季度採購費用占淨收入的百分比從去年同期的 3.2% 降至 2.8%。該季度銷售和營銷費用占淨收入的比例為 2.4%，低於去年同期的 3.9%。

General and administrative expenses as a percentage of net revenue accounted for 1.1%, down from 1.6% in the same quarter of last year. Technology expenses accounted for 0.7% of net revenue, down from 1.3% in the same quarter of last year. As a result, income from operations was RMB 2.5 million compared to non-GAAP loss from operations was RMB 72.4 million in the same quarter of last year. Non-GAAP net loss attributable to ordinary shareholders was RMB 7.6 million compared to a loss of RMB 80.6 million in the same quarter of last year. As a percentage of net revenues, non-GAAP net loss attributable to ordinary shareholders decreased to 0.2% in the quarter from 2.7% in the same quarter of last year.

一般及行政費用占淨收入的比例為1.1%，低於去年同期的1.6%。技術費用占淨收入的0.7%，低於去年同期的1.3%。結果，運營收入為人民幣 250 萬元，而去年同期的非公認會計原則運營虧損為人民幣 7240 萬元。非美國通用會計準則歸屬於普通股股東的淨虧損為人民幣 760 萬元，而去年同期為虧損人民幣 8060 萬元。按非 GAAP 計算，歸屬於普通股股東的淨虧損占淨收入的百分比從去年同期的 2.7% 降至本季度的 0.2%。

As you can see, we are improving our financial performance quarter-by-quarter. And for the first time, we have achieved non-GAAP operating income on a quarterly basis. Please refer to slide 19 to 23 of the Appendix section for selected financial statements. A quick note on our cash position as of March 31, 2023, we had cash and cash equivalents, restricted cash and short-term investment of RMB 878.8 million. As previously disclosed, if our key subsidiary when pharmacy technology proposed listing on the stock market was not completed before June 30, 2023, certain PRC investors will be entitled to require us to redeem all or part of their equity for an amount up to [RMB 1.01 billion].

正如您所看到的，我們正在逐季度改善我們的財務業績。我們首次實現了按季度計算的非公認會計準則營業收入。請參閱附錄部分第 19 至 23 幻燈片，了解選定的財務報表。簡要說明截至 2023 年 3 月 31 日我們的現金狀況，我們的現金及現金等價物、限制性現金和短期投資為人民幣 8.788 億元。如前所述，如果藥學科技擬上市時我們的主要子公司未能在 2023 年 6 月 30 日之前完成，某些中國投資者將有權要求我們贖回其全部或部分股權，金額不超過 [人民幣] 10.1億]。

As of today, certain investors have agreed not to exercise their rights before June 30, 2024, to redeem their investment totaling RMB 726 million. We are proactively working with the remaining investors, but in case all of such investors choose to exercise their redemption rights, we do not believe such redemption would affect our business and the prospects as we expect to have sufficient capital resources to fulfill such redemption obligations.

截至今日，部分投資者已同意在2024年6月30日之前不行使權利，贖回其投資總額人民幣7.26億元。我們正在積極與其餘投資者合作，但如果所有這些投資者都選擇行使其贖回權，我們認為此類贖回不會影響我們的業務和前景，因為我們預計有足夠的資本資源來履行此類贖回義務。

This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.

我們準備好的發言到此結束。謝謝。接線員，我們現在準備開始問答環節。

(Operator Instructions) Your first question comes from Xipeng Feng from CICC.

（操作員指令） 你的第一個問題來自中金公司馮熙鵬。

Congratulations on the company progress. And well, I have three questions. My first question is what are the profit drivers for the year 2023 after achieving a profit in the first quarter? And my second question is what will be the company's operational focus going forward. Last but not least, when we see that the company has just established a strategic cooperation with domestic Internet Enterprise Tencent. Do you please share some more colors on this project?

祝賀公司取得進步。好吧，我有三個問題。我的第一個問題是，在第一季度實現盈利後，2023年的利潤驅動因素是什麼？我的第二個問題是公司未來的運營重點是什麼。最後，當我們看到該公司剛剛與國內互聯網企業騰訊建立戰略合作時。您能分享一下這個項目的更多顏色嗎？

Yeah. Thank you, Xipeng Feng. I think I'll take the first two questions. And then I think Luke participated in the signing ceremony with Tencent -- maybe you can take that question. So the first question with regards to the margin drivers or profit drivers for the remainder year of 2023. I think there are numerous drivers here, just to name a few. First of all, we're going to continue to grow revenue and margin. And with margin growth, that is going to contribute to our bottom line. And secondly, with scale, we aggressively pursue a cost down initiative from the upstream suppliers and all our people on the ground has (technical difficulty) really improved productivity.

是的。謝謝馮西鵬。我想我會回答前兩個問題。然後我想盧克參加了與騰訊的簽約儀式——也許你可以回答這個問題。第一個問題是關於 2023 年剩餘時間的利潤驅動因素或利潤驅動因素。我認為這裡有很多驅動因素，僅舉幾例。首先，我們將繼續增加收入和利潤。隨著利潤率的增長，這將有助於提高我們的利潤。其次，隨著規模的擴大，我們積極追求上游供應商的成本降低計劃，我們所有的現場人員（技術難度）確實提高了生產力。

We have a number of hundreds and hundreds of salespeople on the ground. And we also have many people who are working with suppliers. And of course, detailed plans have laid out for them to improve their productivity, and that's going to be happening on a continuous basis. And I spoke in my script briefly about we're going to improve operational efficiency because this -- to be more efficient is going to help us to deliver better bottom line. And there are also many innovative initiatives and projects in our technological digitization efforts.

我們有成百上千的現場銷售人員。我們還有很多人正在與供應商合作。當然，他們已經為提高生產力製定了詳細的計劃，並且這將持續不斷地發生。我在腳本中簡要談到我們將提高運營效率，因為提高效率將幫助我們實現更好的利潤。我們的技術數字化工作中也有許多創新舉措和項目。

First of all, we started from ourselves to digitize some of the work we do, and we can also leverage our internal capabilities and extend the same capability to our upstream pharmaceutical partners and also the downstream pharmacies. And of course, when we talk about to build a stronger supplier base, for instance, we have much better product assortment now. And in particular, our private label is really creating great momentum, and we expect that momentum to continue. So there are many, many drivers for us to continue to really drive the bottom line improvements.

首先我們從自己做起，把一些工作數字化，我們也可以利用我們內部的能力，把同樣的能力延伸到我們的上游醫藥合作夥伴和下游藥店。當然，例如，當我們談論建立更強大的供應商基礎時，我們現在擁有更好的產品種類。特別是，我們的自有品牌確實創造了巨大的勢頭，我們預計這種勢頭將繼續下去。因此，有很多很多驅動因素可以讓我們繼續真正推動盈利改善。

And with regards to the operational focus going forward, so internally, we use three sentences. And if I may say that in Chinese, that is (foreign language) so essentially, that is how we really design our operational framework. And if I could translate that, our focus will be value creation, building a customer-centric management system and to build a much stronger supply base. So first of all, when it comes to value creation, we have decisions, a lot of decisions to make on a daily basis. Really, every decision will have to be made on the basis of the value it creates for our customers, our partners.

至於未來的運營重點，所以在內部，我們使用了三句話。如果我可以用中文說的話，那就是（外語）本質上，這就是我們真正設計我們的運營框架的方式。如果我能這麼解釋的話，我們的重點將是價值創造、建立以客戶為中心的管理體係以及建立更強大的供應基礎。因此，首先，在價值創造方面，我們每天都要做出很多決定。事實上，每一個決定都必鬚根據它為我們的客戶、我們的合作夥伴創造的價值來做出。

If the value is not that obvious or it's all internally driven, and that decision will have to be really based on the priority is going to be much, much lower. And being customer-centric, all we wanted to do is to really build a superior experience for our customers. For our downstream customers, we essentially have two words, monies to have. The element is better to have a lot. So essentially, whatever the customers need, we're going to have it. So in other words, we're going to have a vast selection of medications available on our platform.

如果價值不是那麼明顯或者都是內部驅動的，那麼該決定必須真正基於優先級將會低得多。以客戶為中心，我們想做的就是真正為客戶打造卓越的體驗。對於下游客戶來說，我們本質上有兩個字：有錢。元素最好有很多。所以本質上，無論客戶需要什麼，我們都會提供。換句話說，我們的平台上將提供大量的藥物選擇。

So customers can always find whatever they need, and this is going to be the final destination. If they cannot find the same drug elsewhere, they should always know that in 111 they can locate it. Now by having it, it's not good enough, and we're going to have a better pricing, competitive pricing. So that is going to be essential for us to really build a superior customer experience. And of course, in order to really create that experience, we have a lot of sub projects or mini projects that are going on. For instance, we use our digital tools to really create competitive advantages, and we're investing in our Smart Supply Chain. We are doing cost down.

所以顧客總能找到他們需要的任何東西，這將是最終的目的地。如果他們在其他地方找不到相同的藥物，他們應該始終知道他們可以在 111 中找到它。現在有了它，還不夠好，我們還會有更好的定價，有競爭力的定價。因此，這對於我們真正打造卓越的客戶體驗至關重要。當然，為了真正創造這種體驗，我們正在進行很多子項目或小型項目。例如，我們使用數字工具來真正創造競爭優勢，並且我們正在投資智能供應鏈。我們正在降低成本。

We are doing the assortment optimization. And we also use the data that we directly linked with the pharmacies to help us to better -- to do a better job in assortment, in pricing. And also, the last point with the supply base, obviously, we have built a very strong supply base with more than 500 globally renowned or locally domestically renowned pharmaceutical companies, and that is a great base for us to-date. But as we speak, each day, we are making progress. And we believe in our supply base is going to be critical. That is why we are really investing heavily in making sure that our supply base will be stronger and stronger with each quarter. So I'll hand the last question from Xipeng Feng to (inaudible) the Tencent partnership.

我們正在做品種優化。我們還使用與藥房直接關聯的數據來幫助我們更好地在分類和定價方面做得更好。最後一點是供應基地，很明顯，我們已經建立了一個非常強大的供應基地，擁有超過500家全球知名或本地國內知名的製藥公司，這對我們來說是一個很好的基地。但正如我們所說，每一天，我們都在進步。我們相信我們的供應基地將至關重要。這就是為什麼我們確實投入了大量資金，以確保我們的供應基礎每個季度都會變得越來越強大。因此，我將把馮西鵬的最後一個問題交給（聽不清）騰訊合作夥伴。

Okay. Let me share the partnership with Tencent. (inaudible) and the Tencent health view of strategic partnership in jointly providing technology-based services to our customers, including the pharmaceutical companies as well as pharmacies. So we will jointly explore new digital solutions in -- especially in the sales field as well as integration of smart pharmaceutical sales software services solutions aiming to improve the efficiency of pharmaceutical sales and facilitate the digital transformation of the entire industry. So we definitely leverage Tencent technology advantages in cloud computing, Big Data, Artificial Intelligence and the Consumer Internet services to support our intelligence drug store retail, data center and smart pharmaceutical sales software. So those are the major contents of our partnership that we are already in the process of defining joint projects.

好的。我來分享一下與騰訊的合作。 （聽不清）與騰訊健康的戰略合作夥伴關係，共同為我們的客戶（包括製藥公司和藥店）提供基於技術的服務。因此，我們將共同探索新的數字化解決方案，特別是在銷售領域，以及整合智慧藥品銷售軟件服務解決方案，旨在提高藥品銷售效率，促進整個行業的數字化轉型。所以我們肯定會利用騰訊在雲計算、大數據、人工智能和消費互聯網服務方面的技術優勢來支持我們的智慧藥店零售、數據中心和智慧藥品銷售軟件。這些是我們合作夥伴關係的主要內容，我們已經在確定聯合項目的過程中。

Thank Xipeng. I hope that answers your questions.

謝謝西鵬。我希望這能回答您的問題。

Your next question comes from [Loren Kai] from HSBC.

你的下一個問題來自匯豐銀行的[Loren Kai]。

I have two questions. First, I would like to ask about how should we think about the company's top line growth in the next few quarters and what are the key drivers, especially for B2B business? And my second question is, can you -- can management share more details on your digital marketing tool, the Telescope? And can you share your current strategies and goals towards digital marketing business?

我有兩個問題。首先，我想問一下，我們應該如何看待公司未來幾個季度的營收增長？主要驅動因素是什麼，尤其是 B2B 業務？我的第二個問題是，管理層能否分享有關數字營銷工具 Telescope 的更多細節？您能否分享一下您當前的數字營銷業務戰略和目標？

Okay, Loren. This is Haihui. And let me take your questions. And for your first question regarding the growth; firstly, we will continue to upgrade our supply chain and we will establish the direct and strategic partnership with more domestic and also international pharmaceutical companies, bringing in more and more [selection] with lower and lower cost to our downstream customers. And secondary, we will enhance our digital marketing platform. I will talk about that in your second question to help pharmaceutical companies to commercialize their new products to pharmacies, clinics and eventually to patients and customers.

好的，洛倫。這是海惠。讓我回答你的問題。對於你關於增長的第一個問題；首先，我們將繼續升級我們的供應鏈，我們將與更多的國內外製藥公司建立直接的戰略合作夥伴關係，以越來越低的成本為我們的下游客戶帶來越來越多的選擇。其次，我們將增強我們的數字營銷平台。我將在你的第二個問題中討論這一點，以幫助製藥公司將其新產品商業化到藥房、診所，並最終商業化到患者和客戶。

So our B2B business is becoming a platform to effectively link pharmaceutical company with both pharmacies, clinics and with all the end users. In 2022, the volume of China pharmacy retail has exceeded RMB 600 billion. It is a big, big market. We believe that we have enough room to further expand our business volume of course with a healthy market. And on your second question regarding our digital marketing tool the Telescope. Telescope actually serves as a lens for pharmaceutical companies. Actually, when I sit in the office in Shanghai or Beijing, they are able this tool, Telescope allows them to gain the more direct and comprehensive view of their product sales and also their pricing dynamics real-time.

因此，我們的 B2B 業務正在成為一個有效連接製藥公司與藥房、診所以及所有最終用戶的平台。 2022年，中國藥品零售額將突破6000億元。這是一個很大很大的市場。我們相信，在健康的市場下，我們有足夠的空間進一步擴大我們的業務量。關於你關於我們的數字營銷工具望遠鏡的第二個問題。望遠鏡實際上是製藥公司的鏡頭。事實上，當我坐在上海或北京的辦公室時，他們可以使用這個工具，Telescope可以讓他們更直接、更全面地了解他們的產品銷售情況以及他們的實時定價動態。

By leveraging advanced data analytics and also market insights this tool enables pharmaceutical companies to analyze sales patterns and also to identify pricing opportunities also to make adjustments and make data-driven decisions to optimize their strategies. With this tool pharmaceutical company can access the performance of their products in real-time. Currently it is T+2 -- T+2 days and identify market trends and adjust their marketing campaign accordingly. These tools not only provide a clearer understanding of the market landscape, but also assist in forecasting demand, refining pricing strategies and also maximizing their sales and profitability. Thank you, Loren. Hope I answer your questions.

通過利用先進的數據分析和市場洞察，該工具使製藥公司能夠分析銷售模式、識別定價機會、進行調整併做出數據驅動的決策以優化其策略。借助此工具，製藥公司可以實時了解其產品的性能。目前是T+2——T+2天，確定市場趨勢並相應地調整他們的營銷活動。這些工具不僅可以更清晰地了解市場格局，還有助於預測需求、完善定價策略以及最大限度地提高銷售額和盈利能力。謝謝你，洛倫。希望我能回答你的問題。

Yeah, that's very clear and congratulations for attending profitable this quarter.

是的，這一點非常明確，祝賀您本季度實現盈利。

Your next question comes from [Joe Bead] from Citi.

您的下一個問題來自花旗銀行的[Joe Bead]。

May I check how much of the growth of your topline growth in the first quarter came from COVID-19-related products. And yeah, and we also know you have taken many measures to reduce cost. What's your latest guidance on breakeven.

我可以查一下你們第一季度的營收增長有多少來自於 COVID-19 相關產品。是的，我們也知道你們已經採取了許多措施來降低成本。您對盈虧平衡的最新指導是什麼？

I will take the first question. Definitely, the COVID-19-related products, especially in December last year and also this January this year has becoming so popular in this country. Definitely, it brings some of the upside in our business. But from a percentage wise, it's still not that big. So overall, I think in these, from March this year, launched COVID-19-related (inaudible) becoming much, much more -- the trend has been decreased. So everything has gone back to normal from March.

我將回答第一個問題。當然，與COVID-19相關的產品，尤其是去年12月和今年1月，在這個國家變得如此受歡迎。當然，它給我們的業務帶來了一些好處。但從百分比來看，仍然沒有那麼大。總的來說，我認為從今年 3 月開始，與 COVID-19 相關的（聽不清）變得越來越多——趨勢已經減少。所以從三月份開始一切都恢復正常了。

Yeah. With regards to driving cost down and reducing operational expenditure -- if you look at our cost base, we have three buckets of expenses, right? So first of all, is our fulfillment and secondly is our sales. And thirdly, it's the G&A. Given that we founded the company on the basis of being efficient because we don't have that much resources or connections. And obviously, we must be a very efficient operator. And if you look at the last few quarters, our cost to fulfill has steadily coming down, and we believe there is still so much we can do to bring down -- to further bring down the fulfillment cost.

是的。關於降低成本和減少運營支出——如果你看看我們的成本基礎，我們有三部分支出，對吧？因此，首先是我們的履行，其次是我們的銷售。第三，是一般行政費用。鑑於我們創辦公司是為了提高效率，因為我們沒有那麼多的資源或人脈。顯然，我們必須是一個非常高效的運營商。如果你看看過去幾個季度，我們的履行成本一直在穩步下降，我們相信我們仍然可以做很多事情來降低履行成本。

And with regards to the sales, if you look at our detailed financial report today is about 2.4% in Q1. And we believe that the percentage of expenditure on sales is going to be further reduced, and our internal goal is actually 2% within this year. And of course, in the meantime, we'll also use our technology to make our head office more efficient to really automate a lot of those work, especially with AI's availability, and our tech team is aggressively looking into it and many projects actually are on trial right now, and we should expect that the G&A cost is going to go down.

至於銷售額，如果你看一下我們今天詳細的財務報告，第一季度的銷售額約為 2.4%。我們相信銷售支出的比例會進一步降低，我們內部的目標實際上是今年內2%。當然，與此同時，我們還將利用我們的技術使我們的總部更加高效，以真正實現許多工作的自動化，特別是在人工智能的可用性下，我們的技術團隊正在積極研究它，許多項目實際上都在進行中。目前正在試用，我們應該預計一般管理費用將會下降。

And obviously, you're asking about the breakthrough event, just let me give you this picture, right? So even at our current scale, which is RMB 13.5 billion last year and would be RMB 3.7 billion in the first quarter we believe if we -- like we -- our total OpEx is 6.3% in Q1, considering during the Chinese New Year we are really paying our people with paying rental, we're paying all those expenses. You've got to shut down the operation for probably three weeks or so. That's 6.3%. In some of the months, we can actually bring it down to the 5% range.

顯然，你問的是突破性事件，讓我給你這張照片，對吧？因此，即使按照我們目前的規模，去年為 135 億元人民幣，第一季度將達到 37 億元人民幣，我們相信，如果我們像我們一樣，我們第一季度的總運營支出為 6.3%，考慮到農曆新年期間我們我們實際上是通過支付租金來支付我們的員工的，我們正在支付所有這些費用。你必須停止運營大約三週左右。那是6.3%。在某些月份，我們實際上可以將其降低到 5% 的範圍。

And we believe even without the COVID, even without the outliers and if we do RMB 20 billion in sales, we are very confident we can bring down the total OpEx to a 5% range. Let's say, if we grow the business to RMB 30 billion, and we are very confident we'll operate at sub-5 level. We're talking about a 4% something. And imagine if we continue to grow our margin, let's say, our margin grows to ideal 8% to 9% that means our bottom line is going to be around 5%.

我們相信，即使沒有新冠疫情，即使沒有異常值，如果我們的銷售額達到 200 億元人民幣，我們也非常有信心能夠將總運營支出降低到 5% 的範圍。比如說，如果我們的業務增長到300億元人民幣，我們非常有信心在5級以下的水平上運營。我們談論的是 4% 的東西。想像一下，如果我們繼續提高利潤率，假設我們的利潤率增長到理想的 8% 到 9%，這意味著我們的底線將在 5% 左右。

And we have are different to really some of the retail businesses, although people miss read-outs as just a pure distributor, but we are far from a distributor, we're a technology company. And we believe that a 5% net margin is actually -- our net profit is actually quite achievable given time. And as I said before, we want to be an operator that is going to be very efficient, but that's not enough. We aspire to be the most efficient operator in the whole industry.

我們與真正的一些零售企業不同，儘管人們錯過了作為純粹經銷商的讀出，但我們遠不是經銷商，我們是一家科技公司。我們相信，5% 的淨利潤率實際上是——在一段時間內，我們的淨利潤實際上是可以實現的。正如我之前所說，我們希望成為一家非常高效的運營商，但這還不夠。我們立志成為全行業最高效的運營商。

Your next question comes from [Kevin Wang], Private Investor.

您的下一個問題來自私人投資者[Kevin Wang]。

Thanks for sharing and towards a fantastic season, and you make a great progress. My question regarding (inaudible) oh, sorry, there are some echo. My question is regarding ongoing consolidation mergers and franchising the downstream pharmaceutical industry, along with the competitors going for IPO, what does the company perceives future B2B competition, although the company is strengthening its relationship with downstream customers and establish its own competitive advantage.

感謝您的分享，祝您度過一個美妙的賽季，您取得了巨大的進步。我的問題是（聽不清）哦，抱歉，有一些迴聲。我的問題是，儘管公司正在加強與下游客戶的關係並建立自己的競爭優勢，但對於下游醫藥行業正在進行的整合兼併和特許經營，以及競爭對手的IPO，公司對未來的B2B競爭有何看法？

That's a very good question. So our major customers are pharmacy chains. For example, in China, the top 1 (inaudible) were already serving 95 of them. So we believe that the consolidation will play in our favor. So our established reputation very strict quality control and transparent supply chain will help us gain the trust from our B customers and pharmaceutical companies. And at the same time, as you mentioned that the ongoing consolidation merger franchising, certainly will change the whole competitive landscape.

這是一個非常好的問題。所以我們的主要客戶是藥房連鎖店。例如，在中國，前 1 位（聽不清）已經為其中的 95 人提供服務。因此，我們相信整合將對我們有利。因此，我們建立的聲譽、嚴格的質量控制和透明的供應鏈將幫助我們贏得 B 級客戶和製藥公司的信任。同時，正如您所提到的，正在進行的合併兼併特許經營，肯定會改變整個競爭格局。

So in this case, we have to continue to strive for differentiation and innovation. This is what we have mentioned in the (inaudible) speech that on our due development, for example we build this project Telescope. This industry is more value and can provide to sponsor companies to help them gain market insights and market their products through our retail channels. Also -- and also mentioned the 1 Health program, we provide to our existing B customers (inaudible) solutions and services. This industry is how we can empower the efficiency and the customer stickiness. I hope that answers your question.

所以在這種情況下，我們要繼續努力差異化和創新。這就是我們在（聽不清）演講中提到的，在我們應有的發展上，例如我們建立了這個項目望遠鏡。這個行業更具價值，可以為贊助公司提供幫助他們獲得市場洞察並通過我們的零售渠道營銷他們的產品。另外，還提到了 1 Health 計劃，我們向現有的 B 客戶（聽不清）提供解決方案和服務。這個行業就是我們如何增強效率和客戶粘性的。我希望這能回答你的問題。

Your next question comes from [Stephanie Lee] from [Civic Investments].

您的下一個問題來自[Civic Investments]的[Stephanie Lee]。

Hi. This is Stephanie from Civic Investment and congratulations on the growing revenues. And I have two questions. The first one is how was the cash flow situation in the first quarter for the company? And what's the current cash position? And the second question is what are the company's plans for its OEM product in the future? Thank you.

你好。我是 Civic Investment 的 Stephanie，祝賀收入不斷增長。我有兩個問題。第一個是公司一季度現金流狀況如何？目前的現金狀況如何？第二個問題是公司未來對於OEM產品有什麼計劃？謝謝。

Thank you Stephanie for the question. Yes, we have achieved a non-GAAP operating income in the first quarter, which means we're no longer burning cash operation level. It's good news for us. Additionally, we've been managing cash very carefully in terms of working capital. You can see that our accounts payable date is around 45 days. And then our inventory days is about 30 days, 30-plus days. So give us a lot of free cash. We are improving our efficiency and continue to build our scale, which means we are able to negotiate a better trading terms with our suppliers.

謝謝斯蒂芬妮的提問。是的，我們在第一季度實現了非公認會計原則營業收入，這意味著我們不再燃燒現金運營水平。這對我們來說是個好消息。此外，我們在營運資金方面一直非常謹慎地管理現金。您可以看到我們的應付賬款日期約為 45 天。然後我們的庫存天數大約是30天，30多天。所以給我們很多免費現金。我們正在提高效率並繼續擴大規模，這意味著我們能夠與供應商協商更好的貿易條件。

So if you look at the cash flow statement you will see the negative cash flow for the first quarter, but that's mainly because we received a lot of advance from customers in December when the corporate retail restrictions were lifted. So a lot of customers pay advance to us in order to get medicines. But in terms of operations, in first quarter, we've been cash positive. At the end of quarter end, the cash and cash equivalents we see cash and shorting investment amounted to RMB 878 million. So we believe that we have sufficient cash reserves to support our business expansion. I will leave the second question on OEM.

因此，如果你查看現金流量表，你會看到第一季度的現金流為負，但這主要是因為我們在12月份企業零售限制解除時收到了客戶的大量預付款。因此，很多客戶為了獲得藥品而向我們預付款。但就運營而言，第一季度我們的現金狀況一直良好。截至季末，我們看到的現金和做空投資的現金和現金等價物為人民幣8.78億元。因此我們相信我們有足夠的現金儲備來支持我們的業務擴張。我將把第二個問題留給OEM。

The question of EMM, yes where we are (inaudible). Regarding the question on OEM, yes, we are working with some of the leading pharmaceutical companies in China to OEM or private label products. And there are a couple of private label registered in 111, (inaudible) our trends to our customers and also from Jan for individual stores, customers and also some more, for example, like lane for dietary supplements and -- by Q1 this year, we already launched more than 70 prime label SKUs. And more and more things are already in our pipeline. Most of these products have been well affected by our downstream customers. And as you may know, private label products have been a very, very important margin contributor for those top chain stores in China. But for our customers, which are most small and medium stores and small and media stores or individual stores they don't have the luxury and capability to establish their own brand. So (inaudible) become a very attractive solution for them.

EMM 的問題是，我們在哪裡（聽不清）。關於 OEM 的問題，是的，我們正在與中國一些領先的製藥公司合作 OEM 或自有品牌產品。還有一些自有品牌在 111 註冊，（聽不清）我們對客戶的趨勢，以及從 1 月開始針對個別商店、客戶的趨勢，還有更多，例如，膳食補充劑的 Lane 以及 - 到今年第一季度，我們已經推出了 70 多個主要標籤 SKU。越來越多的事情已經在我們的計劃中。這些產品大部分都受到下游客戶的良好影響。正如您所知，自有品牌產品一直是中國頂級連鎖店非常非常重要的利潤貢獻者。但對於我們的客戶來說，大多數是中小型商店和小型媒體商店或個體商店，他們沒有奢侈和能力建立自己的品牌。因此（聽不清）成為對他們來說非常有吸引力的解決方案。

Your next question comes from [Adam Frank] from [Grace Capital].

您的下一個問題來自[Grace Capital]的[Adam Frank]。

Here is Adam Frank from Grace Capital. Congrats to our performance in last quarter. And I have two questions. But first, what's the current progress of company privatization while second is may ask if the company has any new technological development and supply chain (inaudible) supply chain process in recent times. Thank you.

請聽格雷斯資本 (Grace Capital) 的亞當·弗蘭克 (Adam Frank) 的報導。祝賀我們上季度的表現。我有兩個問題。但首先，目前公司私有化的進展如何，其次可能會問公司最近是否有新的技術開發和供應鏈（聽不清）供應鏈流程。謝謝。

Yeah. Let me take the first question on the going private. Our understanding is the going private process is still ongoing. The special committee formed by three Independent Directors is still working with the (inaudible) Group. So we shall make all the necessary disclosures in due course as required by the SEC requirements. That's our answer on the growing private questions. Dr. Luke can talk about technology.

是的。讓我回答關於私有化的第一個問題。我們的理解是，私有化進程仍在進行中。由三名獨立董事組成的特別委員會仍在與（聽不清）集團合作。因此，我們將按照 SEC 的要求適時進行所有必要的披露。這就是我們對日益增長的私人問題的回答。盧克博士可以談論技術。

Okay. Let me take the question on technology and tuition new development. Let me just use a few examples. In fact, Junling mentioned, the Telescope -- project Telescope, right, that uses data intelligence. And smart sourcing now used by thousand pharmaceutical companies and chain pharmacies, that uses a lot of AI tools to help all the (inaudible) stores source effectively and optimally. And we also have an internal tool called the (inaudible) system, use Big Data, help us assortment management. A very important part of our growth came from our improved selection and out-of-stock inventory management.

好的。我來回答一下關於技術和學費新發展的問題。讓我舉幾個例子。事實上，Junling 提到了 Telescope——Telescope 項目，右圖，它使用了數據智能。智能採購現在被數千家製藥公司和連鎖藥店使用，它使用大量人工智能工具來幫助所有（聽不清）商店有效和優化採購。我們還有一個內部工具，稱為（聽不清）系統，使用大數據，幫助我們進行分類管理。我們增長的一個非常重要的部分來自於我們改進的選擇和缺貨庫存管理。

Regarding supply chain management, let me also give two examples. One is the transshipment, right now, we already have 11 warehouses and across the country, we transship products amongst the warehouses to use fulfillment cost. And also, we have Junling mentioned the joint venture warehouses. We mostly -- we leverage partners resources to facilitate our revenue growth at the same time to improve the availability and improve the time -- the shipment time to customers. I hope this answer your question.

關於供應鏈管理，我也舉兩個例子。一是轉運，目前我們已經有11個倉庫，在全國范圍內，我們在倉庫之間轉運產品，利用配送成本。另外，君嶺也提到了合資倉庫。我們主要利用合作夥伴的資源來促進我們的收入增長，同時提高可用性並縮短向客戶發貨的時間。我希望這能回答你的問題。

There are no further questions at this time. In closing, on behalf of the entire 111 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 in Shanghai, China, please let the company. Thank you for joining us today. This concludes the call.

目前沒有其他問題。最後，我們謹代表整個 111 管理團隊感謝您對今天電話會議的關注和參與。如果您需要任何進一步的信息或有興趣訪問中國上海的 111，請告知本公司。感謝您今天加入我們。通話就此結束。