111 : First Quarter 2024 Earnings Presentation

111, Inc. (NASDAQ: YI)

Reshaping the Value Chain of Healthcare Industry with Digital Technology

First Quarter 2024 Earnings Call

May 23, 2024

1

DISCLAIMER

• The following presentation has been prepared by 111,. Inc. ("111" or the "Company") solely for informational purposes and should not be construed to be, directly or indirectly, in whole or in part, an offer to buy or sell and/or an invitation and/or a recommendation and/or a solicitation of an offer to buy or sell any security or instrument or to participate in any investment or trading strategy, nor shall any part of it form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities or otherwise.
• This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of the Company. Nothing contained in this document shall be relied upon as a promise or representation as to the past or future performance of the Company. Past performance does not guarantee or predict future performance.
• You acknowledge that any assessment of the Company that may be made by you will be independent of this document and that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the business of the Company.
• This document contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident" and similar statements. Among other things, the Business Outlook and quotations from management in this announcement, as well as 111's strategic and operational plans, contain forward-looking statements. 111 may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control.

• Forward-lookingstatements involve inherent risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. Potential risks and uncertainties include, but are not limited to, uncertainties as to the Company's ability comply with extensive and evolving regulatory requirements, its ability to compete effectively in the evolving PRC general health and wellness market, its ability to manage the growth of its business and expansion plans, its ability to achieve or maintain profitability in the future, its ability to control the risks associated with its pharmaceutical retail and wholesale businesses, and the Company's ability to meet the standards necessary to maintain listing of its ADSs on the Nasdaq Global Market, including its ability to cure any non-compliance with Nasdaq's continued listing criteria. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and 111 does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
• This document also contains non-GAAP financial measures, the presentation of which is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America. In addition, the Company's calculation of these non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited. The reconciliation of those measures to the most comparable GAAP measures is contained within this document or the earnings press release.
• This document speaks as of March, 2024. Neither the delivery of this document nor any further discussions of the Company with any of the recipients shall, under and circumstances, create any implication that there has been no change in the affairs of the Company since that date.

2

1. BUSINESS & OPERATIONAL PERFORMANCE HIGHLIGHTS
2. FINANCIAL REVIEW
3. APPENDIX

3

Breaking Ground: First Operational Profit Reported Amid Ongoing Pharmaceutical Transformation

Major Milestone & Macroenvironment

• First operational income after years of dedicated effort towards long-term resilient growth with strategic operational refinements.
• The national anti-corruptioncampaign continues throughout this year, driving a further shift towards greater transparency and integrity in healthcare transactions.
• Retail pharmacy market is growing with more drug sales. However, there are formidable entry barriers for new startups in this growing industry.
• Digital transformation across the entire value chain of healthcare industry is deepening for higher efficiency and lower costs.
• Strategically positioned as a leader in the digital health revolution, we aim to enhance the capabilities of pharmacies, enabling them to thrive in this new environment and look forward to contributing to a healthier, more transparent healthcare system for all.

	2018 - 2027 China's Out-of-Hospital Pharmaceutical Distribution Market by GMV1			The ratio of out-of-hospital
30000												44.10%	45.70%	47.10%	50.00%	pharmaceutical distribution in China
(RMB100 million)								41.90%				45.00%	keeps rising, reflecting significant
								39.30%
25000
						36.50%
			33.50%							21466	40.00%		potential
									20042	20837
			30.80%			19260		35.00%
							18452
20000		28.40%				17532
27.60%		16493								2022
									30.00%
	14525	15413									•	Within hospital：RMB1.1135 trillion
15000	13446												25.00%
													•	Outside hospital: RMB0.6397 trillion
												8829	9513	10110	20.00%	•	Out-of-hospital ratio：36.5%
10000									8068
							7248					15.00%
						6397
				5522								2027e
			4764
		4125										10.00%
5000	3716												•	Within hospital: RMB1.1355 trillion
															5.00%	•	Outside hospital: RMB1.0110 trillion
0															0.00%	•	Out-of-hospital ratio：47.1%
	2018	2019	2020	2021		2022	2023e	2024e	2025e	2026e	2027e
China's out-of-hospital pharmaceutical distribution market			China's pharmaceutical distribution market			China's out-of-hospital pharmaceutical distribution market ratio2

Source: 艾瑞咨询

Notes: 1. GMV represents Gross Merchandise Volume4 2. China's out-of-hospital pharmaceutical distribution market ratio represents the proportion of China's out-of-hospital pharmaceutical distribution market in China's total pharmaceutical distribution market

Slight Revenue Decrease Due to Sudden Surge of Demand During Peak of Pandemic in Q1 of 2023

	Revenue - Total				B2B Revenue
(Million)	YoY -4.6%		(Million)		YoY -3.7%
RMB3,697
USD538	RMB3,528			RMB3,584
	USD489			RMB3,452
			USD522
				USD478

2023 Q1

2024 Q1

2023 Q1

2024 Q1

5

Driving Operational Excellence

(Excluding Share-Based Compensation Expenses)

Workforce

Selling and Marketing Expense

as % of Net Revenue

Fulfillment Expense as % of Net Revenue

Optimization

Streamlined

Management

Improved Corporate Governance

YoY -20bps

2.4%2.2%

0.032.8%

0.02

0.01

0.

YoY -30bps

2.5%

Technology

Investment

Fulfillment

Upgrade

In-House Advisory

Department

2023 Q1

2024 Q1

Technology Expense as % of Net Revenue

YoY -10bps

0.6%0.5%

2023 Q1

2024 Q1

G&A Expense as % of Net Revenue

YoY -10bps

0.6%0.5%

2023 Q1

2024 Q1

2023 Q1

2024 Q1

6

First Time Operational Profitability Driven By Operational Efficiency

Operating Expense as % of Net Revenue (Excluding Share-Based Compensation Expenses)

						Excluding Share-Based
			YoY -60bps			Compensation Expenses
6.3%				2023 Q1	2024 Q1
			5.7%		Total	6.3%	5.7%
					Selling and Marketing	2.4%	2.2%
					G&A	0.6%	0.5%
					Technology	0.6%	0.5%
		2023 Q1	2024 Q1
			Fulfillment	2.8%	2.5%
	Income from Operations as % of Net Revenue	Non-GAAP Income from Operations1 as % of Net Revenue

Turned to profitability	YoY +20bps
0.3%
	0.1%

		0.1%
-0.6%
2023 Q1	2024 Q1	2023 Q1	2024 Q1

Notes:
1. Non-GAAP income from operations represents income from operations excluding share-based compensation expenses.	7

Reshaping Entire Value Chain of Healthcare Industry with Digital Technology

Traditional Model

Pharmas

Primary Distributor

Secondary Distributor

Tertiary Distributor

Retail End

Consumer

Digital Model

Pharmas

111, Inc.

Fully Digitalized	Digital Marketing
Operational System
Technology Empowerment	30 + Proprietary Systems
for Pharmacies
Intelligent Supply	24 Patents
Chain

Retail End

Consumer

Data Direct Linkage & Digital Enablement

Industry Upgrade

• De-Intermediationof Industrial Supply Chain
• Transaction Automation
• Intelligent Service

Enabling

Technological Innovation

• Industrial Informatization
• Industrial Digitalization
• Industrial AI

8

Driving Operational Excellence by Leveraging Technology

Customer

Acquisition & Retention

Technology	Supply Chain Support

Resource Utilization

Expense Control

Market Expansion

Supply Demand

Operation

Operating Expenditure Ratio1

(Excluding Share-Based Compensation Expenses)

YoY -60 bps

6.3% 5.7%

1Q23 1Q24

Note: 1. The ratio represents operating expenses as a percentage of net revenues

9

Intelligent Integration: Driving Demand, Managing Sales, Empowering Partners

Intelligent Demand Analysis

• Combined with company data and industry data, the "Bo Guan" catalogue regularly updates the latest customer demand list
• Top Demanded Goods are given larger weights when assortment decisions were made
• Longtail Goods are given regional attention to meet special demands

Source of Data

Data Processing

Pharmaceutical Industry Owner Database

Smart Sales

• Smart sales "Eagle Eye" enables BD to reach customers more efficiently and transform marketing

Empowering and Optimizing Pharmacy Operations

• Analyzing pharmacy customer segments, providing private domain service guidance to achieve B2B2C
• Smart Sourcing System
• Cloud Prescription Service
• Pharmacy Operation Analysis Board
• Pharmacy CRM and etc.

External Data

Customer DDI Data

Officially open Health and Health Commission

and Food and Drug

Administration

Industrial and Commercial

Bureau and Tax Bureau

Bureau of Statistics of the Civil

Affairs Bureau

Geographical Location

Map

Internal Business Data

1.2 million +

600000 +

Business Owner Data

Commodity Master Data

Doctor

Pharmaceutical

Drug Store

Medical

Health

Medical

Products

Library

Enterprise

17w+

Equipment

Institution

Storehouse

69W+

Storehouse

arehouse

Artificial Intelligence

Library

National Health

3W+

Medical

8K+

48W+

Insurance

Bank

Business

11W+

Cosmeceutical

Library

Drugstore

torehouse

1.4W+

58W+

1W+

1.1 million +

220,000 +

Qualification Database

Qualification Base for

Cloud Computing

of Pharmaceutical

the First Operation of

Enterprises

Products

Drug Business

Device Business

Drug

Registration

License

License

Drug Approval Document

Certificate

57W+

Certificate

21W+

6W+

5W+

of Class II Device

Food Business

Business

License

Drug Quality

Product Packaging

License

65W

Standards

Instructions

Big Data

22W+

5W+

6W+

1

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