111(YI) - 2021 Q1 - Quarterly Report

Company Overview and Performance Highlights 111, Inc. reported strong Q4 and FY2020 financial results, highlighting significant revenue growth, improved operating efficiency, reduced non-GAAP net loss, and successful subsidiary financing Fourth Quarter 2020 Key Highlights In Q4 2020, net revenues grew 96.1% to RMB 2.64 billion, gross profit increased 143.7%, operating expenses as a percentage of net revenues decreased from 15.6% to 9.4%, and non-GAAP net loss narrowed to RMB 98.2 million Key Financial Data for Q4 2020 | Metric | Q4 2020 (RMB) | YoY Growth | % of Net Revenues (Q4 2020) | % of Net Revenues (Q4 2019) | | :------------------------------------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Net revenues | 2,640,000,000 | 96.1% | | | | Gross Profit | 103,600,000 | 143.7% | | | | Operating expenses | 248,300,000 | 17.9% | 9.4% | 15.6% | | Non-GAAP net loss attributable to ordinary shareholders | (98,200,000) | (vs RMB143.7M loss) | 3.7% | 10.7% | Fiscal Year 2020 Key Highlights For FY2020, net revenues increased 107.6% to RMB 8.2 billion, gross profit grew 121.5%, operating expenses as a percentage of net revenues decreased from 16.7% to 10.2%, non-GAAP net loss narrowed to RMB 380.8 million, and cash and equivalents significantly increased to RMB 1.62 billion Key Financial Data for Fiscal Year 2020 | Metric | FY 2020 (RMB) | YoY Growth | % of Net Revenues (FY 2020) | % of Net Revenues (FY 2019) | | :------------------------------------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Net revenues | 8,200,000,000 | 107.6% | | | | Gross Profit | 365,800,000 | 121.5% | | | | Operating expenses | 839,100,000 | 27.4% | 10.2% | 16.7% | | Non-GAAP net loss attributable to ordinary shareholders | (380,800,000) | (vs RMB434.3M loss) | 4.6% | 11.0% | | Cash and cash equivalents, restricted cash and short-term investments | 1,620,000,000 | 132.2% | | | Management Commentary and Strategic Outlook The CEO highlighted 2020 as a year of strong growth with continuous net revenue increase, significant reduction in non-GAAP net loss as a percentage of net revenues, and S2B2C model-driven expansion, with plans to strengthen this model, increase AI and technology investments, and expand services in 2021, following successful subsidiary financing - Net revenues increased by 96.1% to RMB 2.64 billion in Q4 2020, with full-year net revenues reaching RMB 8.2 billion, more than double that of FY2019[5] - Non-GAAP net loss as a percentage of net revenues decreased from 22.3% in the first quarter post-IPO to 3.7% in the current quarter[5] - The S2B2C model drove growth, with over 330 direct global and domestic pharmaceutical company partners and the retail pharmacy network becoming China's largest virtual network by Q4 2020[5] - Fulfillment expenses as a percentage of net revenues decreased from 3.6% in Q4 2019 to 2.6% in Q4 2020, and from 3.3% to 2.8% for the full year[5] - Future focus includes strengthening the S2B2C model, enhancing AI and data processing capabilities, increasing technology investments, expanding services for retail pharmacies, and deploying more digital medical representatives[5] - Subsidiary Yao Fang Shanghai completed two rounds of financing totaling approximately $142.8 million, with the second round's pre-money valuation reaching RMB 10 billion ($1.5 billion), and plans for a STAR Market listing in Shanghai[5] Fourth Quarter 2020 Financial Performance Net Revenues Q4 2020 net revenues increased by 96.1% to RMB 2.64 billion, primarily driven by strong growth in the B2B business Q4 2020 Net Revenues | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | Net Revenues | 1,347,840 | 2,642,950 | 96.1% | Segment Performance (B2B and B2C) The B2B segment achieved strong growth of 108.7% in Q4, with significant increases in both product and service revenues, while the B2C segment also grew, albeit at a slower pace Q4 2020 B2B Segment Revenues | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | B2B Revenue | | | | | Product | 1,184,424 | 2,462,875 | 107.9% | | Service | 1,543 | 11,966 | 675.5% | | Sub-Total | 1,185,967 | 2,474,841 | 108.7% | | Segment Profit | 17,036 | 74,169 | 335.4% | | Segment Profit % | 1.4% | 3.0% | | Q4 2020 B2C Segment Revenues | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | B2C Revenue | | | | | Product | 156,746 | 161,394 | 3.0% | | Service | 5,127 | 6,715 | 31.0% | | Sub-Total | 161,873 | 168,109 | 3.9% | | Segment Profit | 25,456 | 29,385 | 15.4% | | Segment Profit % | 15.7% | 17.5% | | Operating Costs and Expenses Total operating costs and expenses increased by 83.8% in Q4, yet fulfillment, selling and marketing, general and administrative, and technology expenses all decreased as a percentage of net revenues, indicating improved operating efficiency Q4 2020 Operating Costs and Expenses | Expense Category | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | YoY Change | % of Net Revenues (Q4 2019) | % of Net Revenues (Q4 2020) | | :--------------- | :------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Cost of products sold | 1,305,348 | 2,539,396 | 94.5% | | | | Fulfillment expenses | 48,683 | 69,550 | 42.9% | 3.6% | 2.6% | | Selling and marketing expenses | 102,931 | 118,408 | 15.0% | 7.6% | 4.5% | | General and administrative expenses | 35,501 | 31,776 | -10.5% | 2.6% | 1.2% | | Technology expenses | 19,878 | 30,686 | 54.4% | 1.5% | 1.2% | Profitability Metrics (GAAP and Non-GAAP) Q4 operating and net losses (GAAP and non-GAAP) both narrowed year-over-year, with their percentages of net revenues significantly decreasing, demonstrating continuous improvement in the company's profitability Q4 2020 Profitability Metrics | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | YoY Change | % of Net Revenues (Q4 2019) | % of Net Revenues (Q4 2020) | | :------------------------------------------ | :------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Loss from operations | (168,072) | (144,723) | -13.9% | 12.5% | 5.5% | | Non-GAAP loss from operations | (154,163) | (112,306) | -27.2% | 11.4% | 4.2% | | Net loss attributable to ordinary shareholders | (157,591) | (130,624) | -17.1% | 11.7% | 4.9% | | Non-GAAP net loss attributable to ordinary shareholders | (143,682) | (98,207) | -31.6% | 10.7% | 3.7% | | Loss per ADS | (1.92) | (1.58) | -17.6% | | | | Non-GAAP Loss per ADS | (1.75) | (1.19) | -32.0% | | | Fiscal Year 2020 Financial Performance Net Revenues FY2020 net revenues increased by 107.6% to RMB 8.2 billion, primarily driven by significant expansion in the B2B business FY 2020 Net Revenues | Metric | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | Net Revenues | 3,952,053 | 8,203,157 | 107.6% | Segment Performance (B2B and B2C) FY2020 B2B segment achieved strong growth of 127.8%, with significant increases in both product and service revenues, while the B2C segment maintained stable growth FY 2020 B2B Segment Revenues | Metric | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | B2B Revenue | | | | | Product | 3,293,268 | 7,490,449 | 127.4% | | Service | 4,537 | 21,442 | 372.6% | | Sub-Total | 3,297,805 | 7,511,891 | 127.8% | | Segment Profit | 46,512 | 226,564 | 387.1% | | Segment Profit % | 1.4% | 3.0% | | FY 2020 B2C Segment Revenues | Metric | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | YoY Growth | | :----- | :------------ | :------------ | :--------- | | B2C Revenue | | | | | Product | 636,430 | 666,223 | 4.7% | | Service | 17,818 | 25,043 | 40.5% | | Sub-Total | 654,248 | 691,266 | 5.7% | | Segment Profit | 118,671 | 139,268 | 17.4% | | Segment Profit % | 18.1% | 20.1% | | Operating Costs and Expenses FY2020 total operating costs and expenses increased by 95.1%, yet fulfillment, selling and marketing, general and administrative, and technology expenses all decreased as a percentage of net revenues, reflecting economies of scale and improved operating efficiency FY 2020 Operating Costs and Expenses | Expense Category | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | YoY Change | % of Net Revenues (FY 2019) | % of Net Revenues (FY 2020) | | :--------------- | :------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Cost of products sold | 3,786,870 | 7,837,325 | 107.0% | | | | Fulfillment expenses | 128,996 | 226,930 | 75.9% | 3.3% | 2.8% | | Selling and marketing expenses | 340,562 | 399,610 | 17.3% | 8.6% | 4.9% | | General and administrative expenses | 123,501 | 128,226 | 3.8% | 3.1% | 1.6% | | Technology expenses | 61,902 | 92,080 | 48.8% | 1.6% | 1.1% | Profitability Metrics (GAAP and Non-GAAP) FY2020 operating and net losses (GAAP and non-GAAP) both narrowed year-over-year, with their percentages of net revenues significantly decreasing, indicating continuous profitability improvement alongside high growth FY 2020 Profitability Metrics | Metric | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | YoY Change | % of Net Revenues (FY 2019) | % of Net Revenues (FY 2020) | | :------------------------------------------ | :------------ | :------------ | :--------- | :-------------------------- | :-------------------------- | | Loss from operations | (493,513) | (473,311) | -4.1% | 12.5% | 5.8% | | Non-GAAP loss from operations | (439,232) | (397,616) | -9.5% | 11.1% | 4.8% | | Net loss attributable to ordinary shareholders | (499,606) | (456,533) | -8.6% | 12.6% | 5.6% | | Non-GAAP net loss attributable to ordinary shareholders | (434,325) | (380,838) | -12.3% | 11.0% | 4.6% | | Loss per ADS | (6.10) | (5.54) | -9.2% | | | | Non-GAAP Loss per ADS | (5.30) | (4.62) | -12.8% | | | Financial Position As of December 31, 2020, the company's cash and cash equivalents, restricted cash, and short-term investments significantly increased, demonstrating substantially enhanced liquidity Cash and Equivalents at FY2020 End | Metric | As of Dec 31, 2019 (RMB) | As of Dec 31, 2020 (RMB) | YoY Change | | :----- | :----------------------- | :----------------------- | :--------- | | Cash and cash equivalents, restricted cash and short-term investments | 697,700,000 | 1,620,000,000 | 132.2% | Business Outlook The company forecasts Q1 2021 net revenues between RMB 2.53 billion and RMB 2.6 billion, representing 61% to 65% year-over-year growth, or 87% to 93% excluding one-time COVID-19 related sales in Q1 2020 - Total net revenues for Q1 2021 are projected to be between RMB 2.53 billion and RMB 2.6 billion, representing year-over-year growth of approximately 61% to 65%[21] - Excluding the impact of one-time COVID-19 related sales in Q1 2020, year-over-year growth is expected to be 87% to 93%[21] Conference Call Information The company will host its Q4 2020 earnings conference call on March 18, 2021, providing registration links and replay information - The conference call will be held on March 18, 2021, at 7:30 AM U.S. Eastern Time (7:30 PM Beijing Time on the same day)[21] - An online registration link is provided, requiring participants to pre-register to obtain dial-in numbers, a passcode, and a unique registrant ID[21] - A replay of the conference call will be available until March 26, 2021, with a webcast and archive accessible on the company's investor relations website[25] Use of Non-GAAP Financial Measures The company uses non-GAAP operating loss, non-GAAP net loss attributable to ordinary shareholders, and non-GAAP loss per ADS as supplementary metrics to better assess operating performance, excluding the impact of non-cash or non-recurring items like share-based compensation and impairment losses on long-term investments, to provide a more comparable measure of core performance - Non-GAAP operating loss is defined as loss from operations excluding share-based compensation expenses[26] - Non-GAAP net loss attributable to ordinary shareholders is defined as net loss attributable to ordinary shareholders excluding share-based compensation expenses and impairment loss of long-term investment[26] - The use of non-GAAP measures aims to identify underlying business trends, exclude the distorting impact of certain expenses (such as share-based compensation and impairment loss of long-term investment), and provide a more comparable measure of core operating performance with peer companies[27] - Non-GAAP financial measures are not defined by U.S. GAAP, should not be considered in isolation or as a substitute for GAAP financial information, and may differ from non-GAAP information used by other companies[28] Exchange Rate Information Statement RMB amounts in this announcement converted to USD use the exchange rate of RMB 6.5250 to $1.00, as published in the H.10 statistical release of the U.S. Federal Reserve System on December 31, 2020 - All RMB to USD conversions use the exchange rate of RMB 6.5250 to $1.00, as listed in the H.10 statistical release of the U.S. Federal Reserve System on December 31, 2020[31] Safe Harbor Statement This press release contains forward-looking statements involving known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially, with no obligation for the company to update them unless required by applicable law - This press release contains forward-looking statements, involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied[32] - Forward-looking statements are based on management's current expectations and market operating conditions, including business outlook and management quotations[32] - The company undertakes no obligation to update any forward-looking statements, except as required by applicable law[32] About 111, Inc. 111, Inc. is a leading technology-enabled healthcare platform in China, digitally connecting patients with medicines and healthcare services through online retail pharmacies, offline virtual pharmacy networks, internet hospitals, and online wholesale pharmacies, also offering an omnichannel drug commercialization platform for strategic partners - 111, Inc. is a leading technology-enabled healthcare platform company dedicated to digitally connecting patients with medicines and healthcare services in China[33] - Key services include: online retail pharmacy (1 Pharmacy), an offline virtual pharmacy network, internet hospital (1 Clinic) offering online consultations, e-prescriptions, and patient management, and online wholesale pharmacy (1 Medicine Marketplace) providing one-stop drug procurement for pharmacies[33] - The company also provides an omnichannel drug commercialization platform for strategic partners, including digital marketing, patient education, data analytics, and price monitoring services[33] Financial Statements Unaudited Condensed Consolidated Balance Sheets As of December 31, 2020, total assets increased to RMB 3.026 billion, with cash and cash equivalents, restricted cash, and short-term investments totaling RMB 1.62 billion, and current liabilities also increasing proportionally Summary of Unaudited Condensed Consolidated Balance Sheets | Metric | As of Dec 31, 2019 (in thousands of RMB) | As of Dec 31, 2020 (in thousands of RMB) | | :------------------------------------------ | :----------------------- | :----------------------- | | Total Assets | 1,610,293 | 3,026,489 | | Cash and cash equivalents | 581,281 | 1,189,620 | | Restricted cash | 116,441 | 128,914 | | Short-term investments | — | 300,167 | | Total Current liabilities | 773,423 | 1,629,720 | | Total Liabilities | 836,370 | 1,695,844 | | Total equity | 773,923 | 406,400 | Unaudited Condensed Consolidated Statements of Comprehensive Loss FY2020 net revenues doubled, operating costs and expenses significantly increased, yet operating and net losses narrowed year-over-year, leading to a reduction in comprehensive loss Summary of Unaudited Condensed Consolidated Statements of Comprehensive Loss | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | | :------------------------------------------ | :------------ | :------------ | :------------ | :------------ | | Net revenues | 1,347,840 | 2,642,950 | 3,952,053 | 8,203,157 | | Total operating costs and expenses | (1,515,912) | (2,786,660) | (4,445,566) | (8,675,455) | | Loss from operations | (168,072) | (144,723) | (493,513) | (473,311) | | Net loss attributable to ordinary shareholders | (157,591) | (130,624) | (499,606) | (456,533) | | Comprehensive loss | (169,572) | (120,759) | (490,238) | (441,990) | Unaudited Condensed Consolidated Statements of Cash Flows FY2020 saw a significant reduction in cash outflow from operating activities and a substantial increase in cash inflow from financing activities, resulting in a net increase in cash and cash equivalents and restricted cash, and a significant boost in period-end cash reserves Summary of Unaudited Condensed Consolidated Statements of Cash Flows | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | | :---------------------------------------------------------------- | :------------ | :------------ | :------------ | :------------ | | Net cash used in operating activities | (71,544) | (156,083) | (512,382) | (116,777) | | Net cash provided by/(used in) investing activities | 109,817 | (216,323) | 237,675 | (324,669) | | Net cash provided by financing activities | 9,052 | 573,663 | 108,987 | 1,070,408 | | Net increase/(decrease) in cash and cash equivalents, and restricted cash | 40,989 | 205,593 | (156,018) | 620,812 | | Cash and cash equivalents, and restricted cash at the end of the period | 697,722 | 1,318,534 | 697,722 | 1,318,534 | Reconciliation of GAAP and Non-GAAP Results The reconciliation table details the adjustments from GAAP operating loss, net loss, and loss per ADS to their non-GAAP counterparts, primarily by adding back share-based compensation expenses and impairment losses on long-term investments Reconciliation of GAAP and Non-GAAP Results | Metric | Q4 2019 (in thousands of RMB) | Q4 2020 (in thousands of RMB) | FY 2019 (in thousands of RMB) | FY 2020 (in thousands of RMB) | | :------------------------------------------------------------------------------------------------ | :------------ | :------------ | :------------ | :------------ | | Loss from operations (GAAP) | (168,072) | (144,723) | (493,513) | (473,311) | | Add: Share-based compensation expenses | 13,909 | 32,417 | 54,281 | 75,695 | | Non-GAAP loss from operations | (154,163) | (112,306) | (439,232) | (397,616) | | Net Loss attributable to ordinary shareholders (GAAP) | (157,591) | (130,624) | (499,606) | (456,533) | | Add: Share-based compensation expenses, net of tax | 13,909 | 32,417 | 54,281 | 75,695 | | Add: Impairment loss of long-term investment | — | — | 11,000 | — | | Non-GAAP net Loss attributable to ordinary shareholders | (143,682) | (98,207) | (434,325) | (380,838) | | Loss per ADS (GAAP) | (1.92) | (1.58) | (6.10) | (5.54) | | Add: Share-based compensation expenses and impairment loss of long-term investment per ADS, net of tax | 0.17 | 0.39 | 0.80 | 0.92 | | Non-GAAP Loss per ADS | (1.75) | (1.19) | (5.30) | (4.62) |