WTR: 111 Inc. achieves its first annual operating profit, with room for efficiency improvement

According to the Zhitong Finance APP, Water Tower Research (WTR) released a report stating that 111 Inc. (YI.US) announced that its Chief Executive Officer (CEO) Mr. Liu Junling will participate in the Water Tower Research (WTR) fireside chat series on March 26, 2025 (Thursday) at 2:00 PM Eastern Time. This discussion will review the key points of the 2024 financial report, explore the challenges and opportunities for 2025, and share 111 Inc.'s strategic focus for this year.

111 Inc. achieves its first annual operating profit in a challenging market environment

After launching its B2B business for seven years, 111 Inc. successfully achieved its first annual operating profit and positive operating cash flow. According to data from the National Bureau of Statistics of China, per capita medical expenditure in 2024 increased by 3.6% year-on-year, a significant decline of 12.4 percentage points compared to the 16% growth in 2023. At the same time, pharmacies continue to face pressure from medical reforms and stricter regulations, with retail drug sales in 2024 declining by 2.2% compared to 2023. In this environment, large chain pharmacies are under significant financial pressure, while small and medium-sized independent pharmacies face even greater operational challenges. Against this backdrop, 111 Inc. achieved operating profits of RMB 2.1 million / USD 300,000 on a GAAP basis and RMB 22.3 million / USD 3 million on a non-GAAP basis in 2024, while recording positive operating cash flow of RMB 263 million / USD 36 million.

Gross margin improvement and decline in operating expense ratio

The company is unwaveringly focused on becoming the most efficient operator in the industry and has achieved significant results. In 2024, the gross margin increased from 5.7% the previous year to 5.8%, benefiting from a more favorable product mix tilted towards higher-margin products. While continuously offering competitive prices, the ongoing diversification of product categories has driven the gross margin to steadily rise from 5% in 2021. Notably, operating expenses saw a significant decline in 2024. Annual operating expenses decreased by 31% year-on-year, reducing the operating expense ratio to 5.7% of revenue (excluding stock-based compensation, this ratio is 5.6%), down 230 basis points from 8% in 2023 and down 450 basis points from 10.2% in 2021. Over the years, 111 Inc. has invested hundreds of millions of RMB in technology, which has now shown significant results, greatly enhancing the productivity of its 100% digital operating platform.

Room for further efficiency improvements

111 Inc.'s pursuit of operational efficiency will not stop here. The company understands that in the current challenging macro environment, operational efficiency is its core competitive advantage. Therefore, in 2025, AI will play a key role in the company's operations, and 111 Inc. will further introduce intelligent automation, machine learning, and next-generation customer interaction technologies. With outstanding operational efficiency, the company will be well-positioned when the market environment improves