20-F: 111, Inc. Reports Financial Results for Year Ended Dec 31, 2025

111, Inc. announced its annual report for the fiscal year ended December 31, 2025, detailing a decrease in net revenues and a slight increase in net loss compared to the previous year.

Summary

• 111, Inc. reported a decrease in net revenues for the fiscal year ended December 31, 2025, to RMB12.6 billion (US$1.8 billion), a 12.8% decline from RMB14.4 billion in 2024.
• This revenue decrease was primarily driven by a 12.7% drop in B2B product revenue and a 14.5% decrease in B2C product revenue.
• The company experienced a net loss of RMB22.5 million (US$3.2 million) for 2025, an increase from the net loss of RMB20.8 million in 2024.
• The company completed the divestiture of several operating subsidiaries in the third quarter of 2025 as part of a strategic transition towards an asset-light business model.
• The company's cash and cash equivalents, and restricted cash balance was RMB561.3 million (US$80.3 million) as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to declining revenues, increased net loss, and significant redeemable non-controlling interests, despite positive operating cash flow and efforts to manage expenses.

Positives

• The company generated positive operating cash flows of RMB119.1 million (US$17.0 million) in 2025.
• Selling and marketing expenses decreased by 17.6% to RMB258.6 million (US$37.0 million), representing 2.1% of net revenue.
• Technology expenses decreased by 13.3% to RMB60.4 million (US$8.6 million), representing 0.5% of net revenue.
• The company has secured committed credit facilities totaling RMB180 million (US$25.7 million) as of December 31, 2025, with available balances to support operations.

Negatives

• Net revenues decreased by 12.8% to RMB12.6 billion (US$1.8 billion) in 2025.
• Product revenues from the B2B segment decreased by 12.7% to RMB12.2 billion (US$1.7 billion).
• Product revenues from the B2C segment decreased by 14.5% to RMB223.2 million (US$31.9 million).
• Service revenues decreased by 19.8% to RMB85.4 million (US$12.2 million).
• The company recorded a net loss of RMB22.5 million (US$3.2 million) in 2025, an increase from RMB20.8 million in 2024.
• The company's redeemable non-controlling interests were RMB935.9 million (US$133.8 million) as of December 31, 2025, with potential redemption obligations.

Risks

• Enhanced competition in the pharmaceutical retail and wholesale industry in China.
• Strategic transition towards an asset-light business model, including divestitures, impacting revenue.
• Uncertainties related to the interpretation and implementation of PRC laws and regulations, particularly concerning cybersecurity, data privacy, and foreign investment.
• Potential delisting of ADSs under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB is unable to inspect auditors.
• The company's dual-class share structure limits shareholder influence and may discourage change of control transactions.
• The company may need additional capital and may not be able to obtain it on favorable terms or at all.
• The company is subject to evolving regulatory requirements in the pharmaceutical and healthcare industries, and non-compliance could adversely affect its business.
• The company's business is subject to risks related to cybersecurity, data protection, and potential security breaches.
• The company may be adversely affected by changes in China's economic, political, or social conditions or government policies.
• The company faces risks related to product liability and medical liability claims.

Future Outlook

The company's future outlook is influenced by its strategic transition to an asset-light business model, which has led to a decrease in revenues but aims to improve operational efficiency. Management believes current cash resources and anticipated cash flows are sufficient for the next 12 months, but may seek additional financing if needed. The company continues to monitor regulatory developments in China and their potential impact on its business.

Management Comments

• Management believes that its supply chain and effective inventory management, which have resulted in reduced inventory turnover days, support the growing scale of its business, free its valuable working capital and improve its liquidity.
• We expect our selling and marketing expenses to remain substantial in absolute terms as we implement new business initiatives, such as deploying additional sales personnel to promote our 1 Pharmacy and our value-added services to pharmacies.
• We expect our fulfillment expenses as a percentage of our total net revenues to decrease as we are committed to implementing cost-saving initiatives to further improve delivery efficiency.
• We expect our general and administrative expenses to decrease as a percentage of our total net revenues as we further streamline our organizational structure and eliminate of redundant expenses.
• We expect our technology expenses to decrease as a percentage of our total net revenues as technological advancements and reuse are expected to significantly enhance our operational efficiency.

Industry Context

StockSavvy.ai notes that 111, Inc.'s financial performance in 2025 reflects ongoing challenges within China's pharmaceutical retail and wholesale sectors, including increased competition and a strategic shift towards an asset-light model. This aligns with broader industry trends of consolidation and digital transformation, though the company's revenue decline and increased net loss highlight the difficulties in navigating this evolving landscape.

Comparison to Industry Standards

• The company's net loss as a percentage of net revenue increased from 0.1% in 2024 to 0.2% in 2025, indicating a slight deterioration in profitability.
• Selling and marketing expenses as a percentage of net revenue decreased from 2.2% in 2024 to 2.1% in 2025, suggesting improved cost management in this area.
• Fulfillment expenses as a percentage of net revenue increased slightly from 2.6% in 2024 to 2.7% in 2025, potentially due to the asset-light strategy impacting delivery cost ratios.
• General and administrative expenses as a percentage of net revenue increased from 0.5% in 2024 to 0.6% in 2025, possibly due to the impact of share-based compensation adjustments.

Corporate Governance

Legal Proceedings

• The company is involved in legal arbitration with an investor in 1 Pharmacy Technology regarding the redemption of non-controlling interest, for which a settlement has been reached.

Related Party Transactions

• The company has entered into agreements with its founders, directors, and executive officers, including employment agreements and share incentive plans.
• Transactions related to redeemable non-controlling interests with investors in 1 Pharmacy Technology, including share repurchase agreements and commitments.

Stakeholder Impact

• Shareholders may experience limited influence due to the dual-class share structure and concentration of voting power.
• Investors in ADSs may face challenges in protecting their interests due to the company's Cayman Islands incorporation and PRC operations.
• The company's financial performance and strategic decisions may impact the value of investments.
• Employees are subject to PRC labor laws and social security contributions.
• Suppliers and marketplace sellers are integrated into the company's ecosystem, with terms governed by contractual agreements.

Next Steps

• Continue to monitor regulatory developments in China.
• Evaluate strategic capital restructuring initiatives, including potential mergers and acquisitions.
• Focus on operational efficiency and cost-saving measures.
• Manage redemption obligations related to non-controlling interests.

Key Dates

Recommendation

While the company shows resilience with positive operating cash flow and expense management, the declining revenues, increased net loss, and significant redeemable non-controlling interests present considerable risks. The strategic shift to an asset-light model introduces uncertainty. A 'hold' recommendation reflects a cautious approach, awaiting signs of revenue stabilization and improved profitability amidst ongoing industry challenges and regulatory complexities in China.

Keywords

111, Inc., Form 20-F, Annual Report, Financial Results, Revenue, Net Loss, B2B, B2C, Pharmaceutical, Healthcare, China, Asset-light model, Redeemable non-controlling interests, Cash Flow