111 (YI) Status Update summary

2024 performance and operational achievements

• Achieved first annual operational profit and positive operating cash flow since B2B launch in 2017, with over RMB 260 million in positive cash flow and a nearly CNY 350 million GAAP bottom-line improvement.

• Revenue declined by nearly 4% year-over-year due to challenging macroeconomic conditions and healthcare reforms impacting pharmacy sector demand.

• Operational efficiency improved through disciplined cost control, AI-driven enhancements, and supply chain digitization, reducing total operating expenses by 31% and lowering the OPEX ratio to 5.6%.

Market environment and sector trends

• Retail pharmacy sales in China declined in 2024, with a shrinking number of pharmacies for the first time, mainly affecting small independents.

• Government initiatives to ensure on-time payments to pharmacies are expected to improve cash flow and potentially business outcomes.

• The sector is consolidating, with regional chains becoming more dominant and better positioned to survive and benefit from reforms.

Strategic priorities and AI integration for 2025

• Targeting an OPEX ratio below 5.3% in 2025, driven by deeper AI integration across supply chain, inventory, marketing, and fulfillment.

• AI-powered tools improved forecast accuracy, introduced 6,500+ new products, and increased ARPU by 18% during peak campaigns.

• Main 2025 priorities: expand franchise fulfillment centers, grow revenue via smarter demand generation, and deepen AI integration for efficiency and customer experience.