Financial Data and Key Metrics Changes - In 2024, the company achieved its first-ever operational profit with income from operations reaching RMB2.1 million, a significant turnaround from an operational loss of RMB350.1 million in 2023 [25][67] - Total net revenues for 2024 were RMB14.4 billion, reflecting a 3.7% decrease year-over-year, while gross segment profit was RMB829.2 million, down 2.3% [66] - Operating expenses decreased by 31% year-over-year to RMB827.1 million, representing 5.7% of net revenues, down from 8% in 2023 [66][27] - The company generated positive operating cash flow of RMB263 million for the first time [26][68] Business Line Data and Key Metrics Changes - Fulfillment expenses accounted for 2.6% of net revenues in 2024, slightly down from 2.7% in the previous year [66] - Sales and marketing expenses as a percentage of net revenues reduced to 2.2% from 3% in 2023 [66] - General and administrative expenses accounted for 0.5% of net revenues, down from 1.5% a year earlier [66] Market Data and Key Metrics Changes - China's per capita healthcare expenditure grew by only 3.6% in 2024, a sharp decline from 16% growth in the prior year [11] - Total retail pharmacy sales in China dropped by 2.2% in 2024, indicating increased competition in a stagnant market [13] - The company noted that economic uncertainties in China have led to cautious consumer behavior, impacting retail sales growth in the healthcare sector [10] Company Strategy and Development Direction - The company is focused on enhancing operational efficiency and leveraging technology, particularly AI, to drive growth and maintain competitiveness [7][56] - The ongoing anti-corruption campaign in the healthcare sector is expected to shift drug sales and prescriptions to retail pharmacies, presenting a significant growth opportunity [18] - The company plans to expand its fulfillment center network and enhance supply chain capabilities to improve service delivery and reduce costs [44][52] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by macroeconomic pressures and healthcare reforms but emphasized the company's resilience and operational profitability [7][10] - The company remains optimistic about long-term healthcare demand in China, driven by an aging population and ongoing reforms [22] - Management highlighted the importance of digital transformation and AI in navigating the current market challenges and enhancing operational efficiency [17][56] Other Important Information - The company has made significant advancements in technology, including the integration of AI and digital solutions to optimize operations and enhance customer engagement [31][58] - The company received several industry recognitions, including being named the most valuable healthcare and pharmaceutical company for investment [46] Q&A Session Summary Question: How has the unfavorable macroeconomic environment affected the company's performance? - Management highlighted that despite the tough environment, the company achieved its first-ever operating profits and positive cash flow, significantly reducing operating expenditures [74][75] Question: What are the main factors driving gross margin improvement? - Management explained that gross margin improvement was achieved by offering both low and high-margin products, outsourcing low-margin products, and optimizing inventory management [79][81] Question: How were operating expenses reduced significantly? - Management attributed the reduction in operating expenses to staffing optimization, detailed expense management, and significant investments in digital capabilities [84][88] Question: What are the key drivers behind the company's first annual operating profit and positive cash flow? - Management noted that improved operational efficiency, reduced operating expenses, and effective working capital management were key drivers of profitability [90][92] Question: Are there plans for further expense control in 2025? - Management confirmed that continuous optimization using AI and internet technologies will be a focus for future expense control [101][102] Question: Can you elaborate on technology advancements, especially in AI applications? - Management discussed various AI initiatives aimed at improving efficiency, customer engagement, and operational performance, emphasizing AI's role in future growth [108][120] Question: What are the expectations for the market in 2025? - Management indicated that ongoing reforms in the pharmaceutical sector will enhance efficiency and reduce costs, and the company plans to leverage its technological advantages to create greater value [134][135]