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111 Inc (NASDAQ:YI)
Q4 2019 Earnings Call
Mar 12, 2020, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the 111, Inc Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Ms. Monica Mu, Investor Relations Director. Thank you. Please go ahead, ma'am.

Monica Mu -- Investor Relations Director

Thank you, operator. Hello, everyone, and thank you for joining us today for 111's fourth quarter and fiscal Year 2019 earnings conference call. The company's results were released earlier today and are available on the company's IR website at ir.111.com.cn. On the call today from 111 are Dr. Gang Yu, Co-Founder and Executive Chairman; Mr. Junling Liu, Co-Founder, Chairman and CEO; Mr. Luke Chen, Chief Financial Officer; Mr. Harvey Wang, Co-COO; Mr. Barry Zhu, Co-COO; and Mr. Alex Liu, Finance Director. Junling will give an overview of the company's performance and operations, followed by Luke, who will discuss financials and guidance. They will be available to answer your questions during the Q&A session that follows.

I have to remind you that this call may contain forward-looking statements made under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and current markets and operating conditions and relates to events that involve known and unknown risks, uncertainties and other factors, all of which could cause actual results to differ materially. For more information about these risks, please refer to the company's filings with the SEC. 111 does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law. It is now my pleasure to introduce Mr. Junling Liu. Junling, please go ahead.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Thank you, Monica. Good morning and good evening everyone. Thank you for joining our fourth quarter 2019 earnings call. The information that we'll be discussing here are also provided in the slides that have been posted earlier today on the company's website. And I would encourage you to download the presentation along with the earnings report at ir.111.com.cn.

The fourth quarter capped off a strong year for the company. As I discuss our results today, I would like also to provide a brief summary of our accomplishments in the last few years, as well as our strategy to carry this momentum into a new decade, with the goal of transforming China's healthcare services industry to better serve the increasingly complex and demanding schedules over the 21st century.

First, a bit of background on China's healthcare space. As many of you are aware, China is home to 4 billion people and almost 20% are aged 60 or older. That percentage is projected to surpass 35% in the next three decades, and the growth of China's healthcare industry is expected to outpace GDP growth for the next decade. Despite healthcare being among the largest and the fastest growing market in China, it is also one of the most fragmented and inefficient sectors. Fortunately, both the Chinese government and the private industry has recognized the need for better healthcare infrastructure to support the growing demand and this has stimulated in wide sweeping reforms being enacted at the regulatory level, as well as increasing inventories of capital from companies trying to capture a piece of the industry that is projected to reach $2.3 trillion by 2030.

For the approximately 345 million people living in the Tier 1 and Tier 3 cities, we stand to benefit from the significant capital and the resource investments made by numerous companies including 111 to meet their future healthcare needs. However, that leaves over 1 billion people living in Tier 3 to 6 cities and surrounding villages or 70% of the population who are aging and also in need of better access to healthcare. At 111, we strive to build a comprehensive healthcare services platform to meet this growing demand for healthcare in every city, whether it is Shanghai with it's 23 million people or [Indecipherable] 700 in population. Everyone deserves the best to better in multi-million healthcare that fits within their budgets and the lifestyle.

Over the last few years, we have focused our efforts on three main fronts. Improving our network, building and leveraging a smart technology-enabled infrastructure and establishing an omni-channel network to facilitate the commercialization of drugs across China. In 2019, we continued our persistent efforts in growing the network of pharmacies that we've done, with over 25,000 pharmacies signed on to our network in the fourth quarter which ended the year with over 235,000 pharmacies, surpassing our goal of serving 230,000 pharmacies by the end of 2019. And this network covers about 50% of the pharmacy market in China, which is a great milestone crossed. The quarterly pharmacy order number reached 366,000, representing an increase over 300% year-over-year. This commitment to growth propelled our revenues to RMB1.35 billion in fourth quarter 2019, a 141.8% increase from the fourth quarter 2018 and a 21.4% increase from third quarter 2019.

For the fiscal year 2019, our revenue totaled RMB39.5 billion, a 121.3% increase year-on-year. Further, we have been able to achieve this growth, while also making strides in improving our profit margins. For 2020, we will continue to add providers into our network, particularly in Tier 3 to 6 cities to solidify our leadership position in the areas that generally receives fewer investments. With roughly 50% of the pharmacy market across the country already in our network, we're well-positioned to begin scaling our operations into public hospitals across China with a particular focus in the Tier 3 to 6 cities where we believe the new services is the most acute.

While many companies in China are great at growing, we recognize the need to also be expecting costs in technology-enabled infrastructure to allow us to offer unparalleled services through our network of pharmacies and healthcare partners. Our procurements entered are strategically located for operational efficiency, which enables us to deliver nationwide with offline spots into 300 plus cities in 31 provinces within 24 hours. By being a part of our network, pharmacies are able to reduce their inventory turnover, hold less inventory, while still ensuring that they are not excluded of any products in demand. In addition, by leveraging our scale, pharmacies can place small or even single product orders for medication that they otherwise may not be able to obtain. Our sophisticated supply chain is further enhanced by our data and technology capabilities which we believe will completely revamp the healthcare industry. We have a long -- smart procurement services in operation with our network of pharmacies to collect and purchasing an inventory based product that allows us to make customized recommendations, depicts trends and forecast demand.

As an example of how our technology is transforming the industry, under the traditional model, pharmacies place orders via telephone for hundreds of SKUs and often have to manually manage the [Indecipherable]. With our smart token system, our partners can complete the purchase process in 60 minutes and our AI and machine learning power system can offer smart recommendations for adjacent products and provide more accurate estimates over the optimal quantity. Finally, our smart supply chain can provide just-in-time service to alleviate the need for additional solid space.

In 2020, we will continue to build and improve our supply chain and inventory management systems as well as continue to improve our data analytics capabilities. We plan to continue to develop mobile services and tools that will educate and empower our customers and the partners to make more informed decisions. We remain committed to customer satisfaction and providing value-added services to our customers and partners.

Finally, thanks to the hard work of our teams to build this network and infrastructure, we have laid the groundwork to allow an omni-channel to drive the commercialization models. In 2020, we will continue to invest in resources to allow companies to commercialize their products in China on our platform. We're the only company in our industry with the capability to provide nationwide omni-channel coverage in China.

Every year, there are new life-saving or life-changing drugs being approved and we as pioneers of the online drug store, coupled with our network of healthcare providers, are uniquely positioned to ensure that these drugs are delivered to the people in need. The traditional model of drug mobilization requires multiple layers and intermediates before a drug reaches the patients. Under the 111 omni-channel model, pharmaceutical companies can access all over the healthcare providers within our networks simultaneously, significantly reducing the time and cost for the medications to reach patients. Imagine a platform that can deliver innovative drugs to a vast pool of patients in every city across China simultaneously and that is the power of the 111 omni-channel model, with the ability for pharmaceutical companies to reach and educate patients and healthcare providers on new products and completely transform how medicine is delivered to a patient.

In the past, in order to meet our various healthcare needs, whether it is doctor appointments or getting a prescription filled, they often had no choice but to tediously fit out schedules around an antiquated healthcare system. Today, through the use of technology, our company is transforming the way we access and deliver healthcare. Every one of us will require healthcare at some point in our lives and 111 is committed to a future where we no longer have to jump through the hoops to become healthy. Instead, healthcare products and services will be delivered to us in a manner that is comfortable and convenient for us and at a time that fits into our busy lives.

Now, I'd also like to take a few minutes to talk about what we have done to help fight the coronavirus disease. On January 20, 2020, in response to the coronavirus disease outbreak, we established an anti-epidemic command center and senior executives led their teams to the front lines of the epidemic in Hubei province to provide medical supplies and resources. All of our employees worked overtime during the Chinese New Year holiday to meet the needs of the nation.

On January 24, 2020, our Internet Hospital was one of the first Internet-based healthcare companies to offer free online medical consultation to the public in Wuhan and subsequently to the entire Hubei province. We were also among the first to provide free online drug refill services to individuals with chronic conditions across China. We have worked with both pharmaceutical manufacturers and logistics companies to ensure supplies are delivered to those in need, whether it is in Wuhan, Hubei province or nationwide. Our ability to act quickly and effectively alleviated pressure on overburdened hospitals and helped to curtail the further spread of COVID-19 by allowing people with chronic illnesses to obtain medical care without visiting a hospital.

In addition, we donated 100,000 protective masks and delivered under the rain on Chinese New Year eve. We also launched a channel featuring real-time information about COVID-19 with news update and advice from medical professionals on containing the virus and preventing infection. Finally, we're offering Medical Supply Assurance Service to help businesses protect their employees as they begin to resume their operations and recover from the impact of the epidemic. I'm really proud of what our company and our employees have done to help Wuhan and the country to fight this coronavirus disease. And with that, I will hand the call to Luke to walk through our financial results. Thank you.

Luke Chen -- Chief Financial Officer

Thank you, Junling. Moving to the financials, you can see the details for the fourth quarter and the fiscal year 2019 in section 5 of our presentation on slide 23 to 25. I would like to highlight a few key business and the financial metrics and our focus on year-over-year comparisons. All numbers are in RMB unless otherwise stated.

Let's start with our robust performance for the fourth quarter. Total net revenues for the quarter grew a 141.8% to RMB1.35 billion, which was close to our full year revenue in fiscal year 2018. Product revenue from our B2B segment were up 247.5% to RMB1.15 billion as compared to RMB330.2 million in the same quarter last year as a result of fast expansion of our pharmacy network and increasing pharmacies' order number and size. Product revenues from our B2C segment decreased by 13% to RMB194 million from RMB223 million in the same quarter last year as we continued to focus on higher margin customers. Compared to the same quarter last year, gross margin in our B2C segment was 11.6% up from 7.6% and 1.2% in our B2B segment, up from 0.5%. The improvement in both segments was primarily due to an improving cost structure and the pricing strategy.

Overall, gross profit increased by 83.8% to RMB42.5 million and the combined gross margin was 3.2%, which is lower as compared to 4.1% a year ago as a result of dilution effect from the fast expansion of our B2B segment with a relatively lower margin. Total operating expenses for the quarter were up 35.6% to RMB210.6 million. However, I would like to particularly highlight that as a percentage of net revenue, total operating expenses for the quarter was down to 15.6% from 27.9% in the same quarter last year. As a matter of fact, we have continued to improve our operating leverage.

Fulfillment expenses as a percentage of net revenue was 3.6% down from 4% in the same quarter last year. Sales and marketing expenses as a percentage of net revenue was 7.6% down from 14% in the same quarter of last year. G&A expenses as a percentage of net revenue were 2.6% down from 6.1% in the same quarter last year and R&D expenses accounted for 1.5% of net revenue, down from 3.7% in the same quarter last year. As a result, non-GAAP net loss attributable to ordinary shareholders for the quarter was RMB143.7 million, up from RMB109.6 million in the same quarter last year. Non-GAAP net loss attributable to ordinary shareholders for the quarter accounted for 10.7% of net revenue, down from 19.7% in the same quarter of last year.

I will now quickly run through a few key full year 2019 financial results. Further details can be found in the earnings release. All comparisons are to full year 2018. Net revenue were RMB3.95 billion, up 121.3% from RMB1.79 billion. Product revenues from B2B segment increased 243.2% to RMB3.17 billion from RMB922.8 million. Product revenues from B2C segment decreased by 9.9% to RMB763.3 million from RMB847.5 million.

Along with the robust top-line growth, we have also made improvements in the gross profit and margin in both B2B and B2C segments. Compared to last year, gross margin in our B2C segment was 14.3%, up from 9.5% and 1.1% in our B2B segment, up from 0.9%. Overall gross profit increased by 58.4% to RMB165 million and the combined gross margin was 4.2%, which is lower as compared with 5.8% a year ago as a result, again of dilution effect from the fast expansion of our B2B segment, which has relatively lower margin.

For full year 2019, total operating expenses were up 30.5% to RMB658.7 million. As a percentage of net revenue, total operating expenses was 16.7%, down from 28.3% last year. Although we have spent 30% more than last year, we achieved a 121.3% revenue growth. We will continue to make infrastructure investments to support rapid revenue growth and expect to further improve operational efficiency and effectiveness.

Non-GAAP net loss attributable to ordinary shareholders for the year was RMB434.3 million and accounted for 11% of net revenue, down from 18.4% as compared with last year. Our cash position as of December 31, 2019, we had cash and cash equivalents, restricted cash and short-term investments of RMB697.7 million compared with RMB1,106.5 million as of December 31, 2018.

Update on the share repurchase. Under the share repurchase program announced in August 14, 2019, the company used an aggregate of $3.26 million and repurchased 742,931 ADS.

As to the guidance, for the first quarter 2020, the company expects total net revenue to be between RMB1.4 billion and RMB1.48 billion representing a year-over-year growth of approximately 113.5% to 125.7%. The above outlook is based on the current market conditions and reflects the company's current and the preliminary estimates of the market and operating conditions, as well as customer demand, which are subject to change. This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Sherry Yin from JP Morgan. Please go ahead.

Sherry Yin -- JP Morgan -- Analyst

Hello, hello, everyone. This is Sherry from JP Morgan. Thank you for taking my question. I have two questions here, one is about our industry trend and the other is about our new initiative in the hospital market. So the first question I want to ask about like how would you expect the recent coronavirus outbreak and the recent policy changes to reshape China's drug retail market? And more specifically for our large number of offline pharmacy clients, how do you see the transformation or upgrade trend for them?

And my second question is that, we know that one of our new initiative around the end of last year is building up the team to break into the hospital market. Could you share more color about the latest progress and our long-term plan on these? Thank you very much.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Yeah. Thank you, Sherry for the question. So first of all on the effect of this virus, I think it's really a different phenomenon over the last, let's say, over a decade or so time, that is really the boom of e-commerce in retail, and I believe that this outbreak now has become a pandemic. It's really a tablet so reshape the healthcare industry and my anticipation is that healthcare is going to go through the similar consummation like the Chinese retail has gone through. And we will be seeing that customers will move to online and I also believe that the integrated online, offline platform will be a must. And I would also say that the government will be pushing to both the direction of these net class, and we have seen so much evidence in the last month also.

Obviously, that's a good question on what we're doing with the customers we acquired, and how do we leverage that situation. Really, we have many projects that are ongoing and to name just one, we have a drug welfare program where we could enable the consumers to enjoy a much deeper discount and if they purchase a membership from us, not only they can benefit themselves, but also if one person buys, the whole family will benefit from that, and possibly have their effective GRM program and of course our model is built around doing drug commercialization and in doing so, we will be able to accumulate individual consumers and because we do have the lifecycle health financial system in place, whereby we could provide the patient education, the drug compliance management, the online refill with constant engagement with the customer. Therefore we'll be able to retain the customers we acquired during the epidemic.

And then with regard to how we are doing in the public hospital space. This is a new asset. We started not long ago but the growth -- we have already seen some pleasing progress. First of all, we've had a few drugs which we worked with doctors in public hospitals and those doctors actually can issue prescriptions and we can deliver the drugs to patients and that's really encouraging. We see that especially from Midwest, hospital access has become a real issue and our model is going to be able to solve a lot of the imbalance. And we also launched a project called GUAN ZHAO in Chinese. Obviously despite the recent epidemic, most of the public hospitals, the doctors who we want to work with actually, they've pretty much shutdown. In spite of the situation, we've already seen revenue booked. That is very, very encouraging. Sherry, I hope that answered your question.

Sherry Yin -- JP Morgan -- Analyst

Yeah, that's very helpful, thank you very much.

Harvey Wang -- Co-Chief Operating Officer

I think just now, Sherry also asked a question about offline pharmacy. I would like to add on some points here. So for China offline pharmacy, as Junling just mentioned, they are pretty fragmented. Among the 480,000 pharmacies, about 50% of them are individual pharmacy which means, it's basically a papa mama shop. So we all know that they must see our transformation in this industry. At 111, we have set out a program called Be Healthy Together. This program is enabling program to use 111 technology for these offline pharmacies to set up their cloud pharmacy services and their cloud clinic services and cloud inventory services. And when we launched this program, that is late last year, it has been very, very popular during this season, especially during the epidemic because, as we all know, the consumer or the patient, they are not able to go to pharmacy physically. So basically, we believe the coronavirus is expediting the transformation of this online pharmacy. These transformation I'm referring to are traditional pharmacy to a future pharmacy. Sherry, I hope it answers your question.

Sherry Yin -- JP Morgan -- Analyst

Yeah. Very clear. Thank you.

Harvey Wang -- Co-Chief Operating Officer

You're welcome.

Operator

Thank you. We have the next question from the line of Xipeng Feng from CICC. Please go ahead.

Xipeng Feng -- CICC -- Analyst

Hi, this is Xipeng from CICC. Well, thank you so much for sharing and I have very little questions for the management. Well, the first one is, as we noted that some traditional pharmaceutical distribution companies are also considering to involve their business in B2B, so how would your company compete with those traditional distribution giants once they started to involve online business? And the second question is, what's the company's main operation goals for 2020 fiscal year or which parts or segments is the company going to invest the core resources to? And my last question is about insurance. So, could you please share some more information on the corporate collaboration with commercial insurance? Thanks.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Yes, Xipeng, can you repeat the second question again, please? I had some trouble hearing you.

Xipeng Feng -- CICC -- Analyst

Okay. My second question is, I just wondered what's the company's main operation goal for 2020 fiscal year and which part is the company going to invest its core resources to?

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

I got you. Yes. So yes, so no doubt we will be surprised if the traditional players do not think about moving into online. And as far as our competitive advantage in that space is really, I would say in a few areas. First of all, the technology and our cloud-based technology platform, I believe that we have a huge edge over the traditional distributors. And then the second advantage is really, I think the talent base is different. We are the leaders of the online space and I think for a typical traditional player to really move online, they have far more challenges in terms of talent base and of course, most of the online and most of the big traditional players in China, they're typically state-owned enterprises and when it comes to governance, we don't have -- we don't have to deal with the red tape to get things done. And, obviously, we believe we are much, much more efficient when it comes to decision-making. And so we will be much more flexible. We will be much more willing to take risks, and basically I don't believe the state-owned traditional players have the kind of flexibility like we do.

And the last but not least, we are always viewed either as a B2C or a B2B player, but we're not. We are an integrated online plus offline platform. And what we do is we actually do drug commercialization with omni-channel. When I refer to omni-channel, if you think about traditionally, in the pharmaceutical company's go-to-market, if they had a drug approved and of course they're going to hire a whole bunch of medical reps and they're going to work with the Tier 3 hospitals or the Tier 3 hospitals in Tier 1 Tier 2 cities and some really large pharmacy chains and the rest is really toward Tier distribution. That is the old model, and if you look at what we could do to help the upstream pharmaceutical company, obviously what they do not have, where we could add complementary value is really a customer will have to trust it and allow the brand and that is through direct to B2C, direct like we have. And as you can tell, we already have a formidable coverage across the country in the pharmacies, clinics and private hospitals. And as we spoke over the last couple of hours or so, in 2020, we will be making investments into the hospitals, the public hospitals in Tier 3 Tier 6 cities. And if we could provide the complementary value of the B2C, the pharmacy, the clinics, the private hospitals and also the growth markets of the Tier 3 to Tier 6 cities, this is not something a traditional distributor can do. And our value proposition is very, very different from a traditional distributor can do.

And obviously you also asked about the 2020 investments and along what is our goal in that area. Obviously, first of all, we need to continue to scale our business and as we move forward, improve our operational efficiency and while we are scaling up our pipeline, scaling down on all the lines on the expenditure side, be it G&A, be it fulfillment, be it our sales and marketing, etc. And we also are going to improve margin, improve bottom-line too. And the majority of the investment is going to be pulled into really on how we can perfect our omni-channel capability and we have a special focus on Tier 3 to 6 cities. This is where we believe the needs of our service is much more achieved and the value is going to be very, very complementary to the capabilities of the pharmaceutical companies. Thank you.

Xipeng Feng -- CICC -- Analyst

Okay. It's very clear, yeah.

Operator

Thank you. We have the next question from the line of Ben Liu Chen [Phonetic] from Citi. Please go ahead.

Ben Liu Chen -- Citi -- Analyst

Hey, thanks for taking my question and congratulations on your fast pharmacy coverage expansion. So my questions are, during the virus outbreaks, could you please share more about your efforts on collaboration with your clients or suppliers to ensure your quality services? And can you share anything that indicated a change of your patient habits say for chronic disease patients are more intended to refill their prescriptions online?

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Right. Maybe I can have a go or maybe Barry can provides your perspectives. Of course, indeed we have seen much more change in attitude from various levels in local governments. And in fact, we have been approached by a number of government and as we speak, we are discussing in very advanced conversations on a whole series of delivering our services to a particular city. And they understand the political lives of some of the officials will be probably hinged on how the reforms in this area can be carried forward. And we do hope this is going to be more trend. And as far as the consumer's behavior is concerned, obviously we have been really excited about how many more customers are reaching out to -- because kind of the hospitals are pretty much shutdown. For chronic patients of course, they need their continued tab in the really crisis times and obviously the capabilities we have built over the years really serves the portals of providing that service to those patients. I hate to say this, thanks to the virus, our numbers actually are sailing pretty well. That's not the way we anticipated, but that's the fact that customers actually realize the value of the online and offline player can really help their lives and I'll comment just on that. And, Barry, maybe you have some other points to add.

Barry Zhu -- Co-Chief Operating Officer

Yeah. During the epidemic, we gathered the following data and information. I'm glad to share with you. First, the number of our active users and new users on the B2C sides both increased significantly. Thanks to our global sourcing capabilities, we secured the seaport supply of majority of our drugs and proactive materials and efficiently met the demand of our users. As a result, we acquired a large number of users and orders during the epidemic. Second, our app was consistently top-2 downloaded free medical services app. The number of our app download increased by 5 times versus before the epidemic outbreak. Okay. We may disclose more details on our next earnings call. Thank you.

Ben Liu Chen -- Citi -- Analyst

Okay. That's really helpful. Thank you so much.

Operator

Thank you. We have the next question from the line of Dexter Xu from Ambrosia Capital. Please go ahead.

Dexter Xu -- Ambrosia Capital -- Analyst

Hey, guys, thanks for taking my questions. A few questions from me. First of all, can you provide some more clarity on the main drivers for the substantial decrease in operating costs and expenses in 2019? And how do you expect this to trend? And then as a follow-up to that question, what are your projections for the company to break -- reach breakeven? And if you have any plans to raise more financing in the near future. And then finally, regarding the coronavirus outbreak, how did you guys handle the challenges with the logistics of getting all the shipments to your users during that time? Thank you.

Harvey Wang -- Co-Chief Operating Officer

Okay, thank you. Probably, I will take the first question regarding the operating cost and third question regarding the logistics during the virus and probably Luke will talk about breakeven. And for operating costs, definitely, it's a very good news. We see compared to 2018, we have a significant reduction. Basically our sales orders increased, so we achieved historic and as well as our continuous upgrade of our supply chain technology and business. However, we are continuing our investment on supply chain including enhancement of our national logistics network and automation in our fulfillment centers as well as set up new fulfillment centers to bring our service to a next level.

Talking about our logistics during the coronavirus, as we all know, it is a huge challenge during the coronavirus, not only because of the quarantine in various cities from time to time, but also shortage of labor and transportation services resulted during the Chinese New Year. To overcome these challenges, we fully leveraged our logistics network across the country to back up each other. For example, when our Wuhan fulfillment center was quarantined, our Suzhou or Guangzhou or Tianjin fulfillment center were taken over. So it helped us to leverage the entire national wide network to support each other. And on the other hand, as we already disclosed, we have a very strong direct sourcing partnership with domestic and international pharmaceutical companies. This also helped us to reserve enough inventory immediately during the epidemic breakout and also for us to maintain a very stable supply for the past two months. And Luke?

Luke Chen -- Chief Financial Officer

Yeah, I think we are -- we care more about growth opportunity right now. As we shared with you in 2019, we spent like 30% more but we grew revenue at 121%. So in terms of dollar amount, we incurred maybe RMB100 million, more loss than last year but that generated additional RMB2.2 billion top-line revenue. So, especially during this outbreak, we saw a lot of opportunity. So I think in 2020, we will continue to be investment mode, continue to expand rapidly in terms of revenue growth. And of course, we care about our cash flow position. We already see positive sign in the beginning of the month on the cash flow. So we don't have a time -- specific timeline on the breakeven, but we think, as we constantly improving or expanding our scale and improving our margin, we will assume -- we will see that we will breakeven in the future. Dexter, I hope we answered your questions.

Dexter Xu -- Ambrosia Capital -- Analyst

Okay, thanks. Yeah, actually, if I can ask one more, in terms of the development of the industry, the regulatory environment seems to be very effective, effectively driving the growth. In terms of your outlook, what are your -- what is your outlook in terms of the sales of prescription drugs, especially for the development of chronic disease management? And what are your plans and progress on this front?

Harvey Wang -- Co-Chief Operating Officer

Actually during the epidemic outbreak, you can see from national to state government, they have officially announced their policy to encourage chronic disease to be retailed online. So, we are also the first company to launch so far this retail support to Wuhan, to Hubei as well as to the entire country. So, more and more people even here today, they're beginning to use to get consultation and orders online and also get medicine through our online 111 -- 1 Drugstore. So I think it's -- lot of people know during this coronavirus -- lot of people realize that they have a new, probably we can call it a lifestyle, to enjoy a consultation, retail at home, and I think the trend will go on even if this epidemic outbreak finish. I hope I answered your question.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Yeah, if I may add...

Dexter Xu -- Ambrosia Capital -- Analyst

Yeah. Thank you very much.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Yeah, I mean that's a great question, by the way. I want to add a couple of points. And I think my anticipation is that our prescription drugs is going to have a bigger mix. The following are the reasons. It's really about the landscape into the future. And if you look at the recent government reforms, including the bulk purchase, the 4 plus 7 and so on. You can draw two conclusions. One, it's really for the generics, the good old times are over. And obviously, we can still play a role for the pharmaceutical companies, even if you actually got de-listed. Obviously, we can help with other channels such as the pharmacies, the clinics and the private hospitals and so on. And even if you won the bid, usually, even if you won the bid, you can only operate between eight provinces maximum. And obviously for generics, we can still help them to sell outside of the eight provinces.

And then the other conclusion you can draw is really most of the pharmaceutical companies are focusing more and more on innovation drugs and we've been talking about how omni-channel -- obviously our omni-channel is going to be one of the most important platforms that the pharmaceutical companies can leverage to really commercialize their drugs, not only in the Tier 1 Tier 2 cities, especially hospitals, but also to all the other channels that we can provide coverage for. So therefore the generics and the innovative drugs, they all -- they're both really prescription drugs and therefore our anticipation is that we're going to have a higher and higher mix of prescriptions OTC. Thank you.

Dexter Xu -- Ambrosia Capital -- Analyst

Thank you.

Operator

Thank you. We have the next question from the line of Simon Chang from Palmetto Bay Capital. Please go ahead.

Simon Chang -- Palmetto Bay Capital -- Analyst

Hi, I just have two questions. So we noticed on the presentation, a year-on-year decline of 10% in your B2C business. Just wondering if you could comment on the dynamics of the B2C business versus B2B going forward. And then also talk a little about your acquisition costs per paying user for the segment, and also the retention rates that you're seeing.

And then the second question is kind of given the interest around the healthcare sector in China, have you looked at potential M&A opportunities, which might help build out your platform more? Thank you.

Harvey Wang -- Co-Chief Operating Officer

For the B2C side, as Junling just mentioned, we are the only company with the capacity to provide a national wide omni-channel coverage, including online and offline pharmacy, clinic, hospital. Either we reach the patient directly through our B2C platform or we reach patients through our B2B partners. They both contribute to our omni-channel. Under the 111 omni-channel model, pharmaceutical company can access all of the healthcare providers within our network at the same time, reducing the time and cost for the medication to reach patients. We believe it will definitely expedite the transformation of healthcare industry in China.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

And the last question about...

Harvey Wang -- Co-Chief Operating Officer

Junling, you go ahead.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Sorry, Harvey. Yeah, I was going to jump in for the last question about building the platform a little further, given the rest of the world is suffering from the epidemic and obviously we have been approached by a number of different opportunities, including Middle East, believe it or not. But we'll keep an eye -- we'll keep our minds open for now obviously. But we have our focus really within the China market and we have a lot of priorities to execute and we believe that, that is going to be our focus. But if the opportunity presents itself and if it does make sense, we do keep an open mind about it to further expand our platform beyond the geography we're covering right now.

Simon Chang -- Palmetto Bay Capital -- Analyst

Great, thank you.

Operator

Thank you. As there are no further questions, I would like to hand the conference back to Ms. Monica Mu for any closing remarks.

Monica Mu -- Investor Relations Director

Thank you, operator. In closing, on behalf of the entire 111 management team, we'd like to thank you for your interest and participation into this call. If you require any further information or have any interest in visiting us in China, please let us know. Thank you for joining us today. This concludes the call.

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Thank you. Bye-bye.

Operator

[Operator Closing Remarks]

Duration: 100 minutes

Call participants:

Monica Mu -- Investor Relations Director

Junling Liu -- Co-Founder, Chairman and Chief Executive Officer

Luke Chen -- Chief Financial Officer

Harvey Wang -- Co-Chief Operating Officer

Barry Zhu -- Co-Chief Operating Officer

Sherry Yin -- JP Morgan -- Analyst

Xipeng Feng -- CICC -- Analyst

Ben Liu Chen -- Citi -- Analyst

Dexter Xu -- Ambrosia Capital -- Analyst

Simon Chang -- Palmetto Bay Capital -- Analyst

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