Summary of YI (Q4 2024) Earnings Call

1Key Financial Results and Metrics:

Q4 2024 Performance::

Total net revenues: RMB 3.8 billion, down 6.3% year-over-year.

Gross segment profit: RMB 202.5 million, down 5.5%.

Total operating expenses decreased by 50.1% to RMB 209.8 million, representing 5.5% of revenues (down from 10.2%).

Non-GAAP loss from operations: RMB 2.3 million, a 95.8% improvement from RMB 55.2 million in Q4 2023.

Non-GAAP net loss attributable to ordinary shareholders: RMB 14.8 million, down 74.9% from RMB 59 million.

Full Year 2024 Performance::

Total net revenues: RMB 14.4 billion, down 3.7% year-over-year.

Gross segment profit: RMB 829.2 million, down 2.3%.

Income from operations: RMB 2.1 million, a turnaround from a loss of RMB 351 million in 2023.

First-ever annual positive operating cash flow: RMB 263 million.

2Strategic Updates and Business Highlights:

Achieved operational profitability and positive operating cash flow for the first time, attributed to enhanced operational efficiency and cost management.

Significant reduction in operating expenses across various categories: selling expenses (2% of revenues), general and administrative expenses (0.5%), and technology expenses (0.4%).

Expansion of digital capabilities and AI integration, enhancing inventory management and customer engagement.

Launched the Kunpeng Network to streamline logistics and reduce costs, expanding last-mile delivery coverage and fulfillment centers.

Recognition as a leading healthcare and pharmaceutical company for investment and innovation in digital transformation.

3Forward Guidance and Outlook:

The company remains optimistic about long-term growth in China's healthcare market, driven by structural trends such as an aging population and ongoing healthcare reforms.

Plans to expand fulfillment centers and enhance supply chain capabilities, targeting at least 15 new centers in 2025.

Continued investment in AI and digital technologies to drive operational efficiency and customer engagement.

Management expects sustained profitability and positive cash flow generation moving forward.

4Bad News, Challenges, or Points of Concern:

The broader healthcare sector faces macroeconomic pressures, with a reported 3.6% growth in per capita healthcare expenditure, a decline from previous years.

Retail pharmacy sales in China decreased by 2.2% in 2024, intensifying competition and impacting revenues.

Ongoing healthcare reforms may present short-term challenges as the industry adapts to new policies and regulatory frameworks.

Potential risks related to repayment obligations to investors, with ongoing negotiations to reschedule repayments.

5Notable Q&A Insights:

Management highlighted that despite adverse macro conditions, they achieved significant milestones in operational efficiency and profitability.

Gross margin improvements were driven by a mix of low and high-margin products, strategic outsourcing, and decentralized inventory management.

Future expense control will focus on leveraging AI and technology for continuous optimization.

The company plans to expand partnerships with pharmaceutical companies and pharmacies to enhance drug promotion and accessibility through digital platforms.

Management emphasized the importance of AI in driving future growth and operational efficiency, with ongoing investments in AI technologies. Overall, YI demonstrated resilience in a challenging market, achieving key financial milestones while positioning itself for future growth through strategic investments in technology and supply chain enhancements.