HANGZHOU, China, Aug. 18, 2020 /PRNewswire/ — BEST Inc. (NYSE: BEST) (“BEST” or the “Company”), a leading integrated smart supply chain solutions and logistics services provider in China, today announced its unaudited financial results for the quarter ended June 30, 2020.

Johnny Chou, Founder, Chairman and Chief Executive Officer of BEST, commented, “With the height of the COVID-19 pandemic in China behind us, we made a faster-than-expected recovery as we benefited from the deeper and wider trends of digitalization for merchants and online shopping for consumers. In the second quarter of 2020, we strategically targeted both top-line growth and profitability while enhancing efficiency across our businesses. As a result, we continued to gain healthy volume growth while lowering costs in our Express and Freight segments and improved our gross margin by 0.9 percentage point year-over-year, despite challenging market dynamics. We also continued to make strong progress in Store⁺, which resulted in a significant reduction in losses. We are confident that we have developed the right business model for Store⁺ that would bring a positive impact to the Company’s revenue growth and profitability. Our momentum has also been strong for Global, driven by robust demand in Southeast Asia, and further boosted by our entries into the markets of Malaysia, Singapore and Cambodia during the second quarter.”   

“We are committed to delivering high-quality growth in a challenging market environment. Going forward, we plan to maintain a balanced growth strategy and strive for profitability by continuing leveraging our technology-enabled integrated supply chain and logistics service model, through emphasizing e-commerce, investing in technology application and automation, capturing revenue and cost synergies across multiple business units, and enhancing service quality.” concluded Mr. Chou.

Gloria Fan, BEST’s Chief Financial Officer, commented, “In the second quarter, we continued efforts of cost and expense reductions, while reduced risks by emphasizing accounts with higher margins and implementing stringent credit control. Although we recorded a net loss of RMB 30.9 million, we achieved a gross profit of RMB570 million, a year-over-year increase of 9.6%, adjusted EBITDA of RMB158 million, and non-GAAP net income of RMB11 million, amid intensifying competition. In addition, we generated net operating cash flow of RMB723 million during the second quarter, which well covered our planned capital expenditure of RMB424 million, leading to a strong balance of cash and cash equivalents, restricted cash and short-term investments of RMB5.1 billion. These strong results demonstrate that through consistently improving operating efficiencies and expense management, we have achieved our strategy of balancing top-line growth and profitability for the quarter.”

FINANCIAL HIGHLIGHTS^[1]

For the Quarter Ended June 30, 2020:

• Revenue was RMB8,418.3 million (US$1,191.5 million), a decrease of 4.2% year-over-year (“YoY”). The decrease was primarily due to a decrease in average selling price (ASP) of Express business, partially offset by an increase in Express volume.
• Gross Profit was RMB569.7 million (US$80.6 million), an increase of 9.6% YoY compared to gross profit of RMB520.1 million in the same period of 2019. The increase was primarily due to improved operating efficiency resulted from continued cost reduction, partially offset by a decrease in revenue. Gross Margin was 6.8%, an increase of 0.9 percentage point (ppt) YoY.  
• Net Loss was RMB30.9 million (US$4.4 million), compared to a net loss of RMB22.4 million in the same period of 2019. Non-GAAP Net Income^[2][3]was RMB11.2 million (US$1.6 million), compared to non-GAAP Net Income of RMB6.5 million in the same period of 2019.
• Diluted EPS^[4]was negative RMB0.06 (US$0.01), compared to negative RMB0.05 in the same period of 2019. Non-GAAP diluted EPS^[3][5] was RMB0.05 (US$0.01), compared to RMB0.02 in the same period of 2019.
• EBITDA^[3][6]was RMB117.9 million (US$16.7 million), compared to RMB122.0 million in the same period of 2019. Adjusted EBITDA^[3][6] was RMB157.7 million (US$22.3 million), compared to RMB148.2 million in the same period of 2019.

BUSINESS HIGHLIGHTS AND STRATEGIC UPDATES^[1]

Core Logistics and Supply Chain

The Company’s results rebounded strongly in the quarter ended June 30, 2020 as the impact from COVID-19 pandemic in China subsided. In addition to the company-wide pursuit of balanced top-line growth and profitability, its key strategic focus during the quarter also included:

• Emphasis on business integrations, synergies and efficiencies: the Company continued to emphasize e-commerce related transactions across all business units. This helped the Company achieve strong business-to-consumer (B2C) order growth during the quarter. Furthermore, the Company continued to enhance automation for its hubs and sortation centers, and combine dynamic routing between Express and Freight to drive down unit costs.
• Enhancement of service quality: the Company continued to focus on service enhancement, network flexibility, density of last-mile service outlets, and overall customer experience.                                                             

BEST Express – Successfully executed its strategy of balanced quality growth and profitability through continued cost reduction and improved quality of service. Parcel volume increased by 19.3% YoY, representing market share of 10.7% during the quarter, improving 0.2 ppt compared with the first quarter while achieving gross margin expansion of 0.9 ppt YoY despite challenging operating conditions. Average cost per parcel decreased by 21.5% YoY.  

BEST Freight – Continued to solidify its leadership position and achieved a growth rate significantly higher than industry-wide average, as well as strong gross margin expansion of 2.5 ppts YoY, driven primarily by the Company’s focus on e-commerce products, economies of scale and continuous network optimization. Freight volume increased by 28.9% YoY in the quarter ended June 30, 2020. Average cost per tonne decreased by 21.1% YoY.

BEST Supply Chain Management – Focused on expanding franchised Cloud OFC business, while targeting projects with higher margins and clients with strong credit profile. As a result, gross margin increased by 0.8 ppt YoY to 9.7%. The total number of orders fulfilled by Cloud OFCs increased by 28.5% YoY to 111.3 million in the quarter ended June 30, 2020, of which the total number of orders fulfilled by franchised Cloud OFCs increased by 46.4% YoY to 53.7 million. The number of franchised OFCs increased by 25.9% YoY to 326.

BEST UCargo – The number of registered drivers on the UCargo mobile app increased 141.9% YoY to 244,234. The total number of transactions on the trucking brokerage platform increased by 19.8% YoY to 137,257.

BEST Capital – As of June 30, 2020, BEST Capital had provided financing solutions to 12,373 trucks in total, a quarter-over-quarter (“QoQ”) increase of 10.9% compared to March 31, 2020.

BEST Store⁺

Store⁺ business continued to execute its strategy of enhancing order quality to improve gross margin, while developing its asset-light partnership model which enables accelerated acquisition of both membership stores and franchised BEST-Neighbor stores, and contributes to lower selling and fulfilling expenses to achieve profitability. As a result, gross margin increased by 2.5ppts YoY to 13.0%, while adjusted EBITDA margin improved by 2.6 ppts YoY to negative 10.2%.

BEST Global

Global continued with strong momentum in Southeast Asia. In the quarter ended June 30, 2020, parcel volume in Thailand increased by 95.3% QoQ to approximately 10 million, while parcel volume in Vietnam increased by 54.3% QoQ to 5.75 million. The Company also launched express delivery services in Malaysia, Cambodia and Singapore, marking another significant step towards building an efficient logistics network with an extensive coverage in Southeast Asia.

FINANCIAL RESULTS

For the Quarter Ended June 30, 2020:

Revenue:

The following table sets forth a breakdown of revenue by business segment for the periods indicated.

Table 1 – Breakdown of Revenue by Business Segment

Core Logistics and Supply Chain

• Express Service Revenue decreased by 5.4% YoY to RMB5,151.8 million (US$729.2 million) from RMB5,448.5 million, primarily due to a 20.7% YoY decrease in ASP per parcel, offset by a 19.3% YoY increase in parcel volume. The decrease in ASP is primarily attributable to competitive market dynamics.
• Freight Service Revenue increased by 4.5% YoY to RMB1,365.0 million (US$193.2 million) from RMB1,305.8 million, primarily due to a 28.9% YoY increase in freight volume, offset by a 18.9% YoY decrease in ASP per tonne.
• Supply Chain Management Service Revenue decreased by 15.1% YoY to RMB509.7 million (US$72.1 million) from RMB600.2 million, primarily due to a decrease in transportation service revenue, partially offset by a 28.5% increase in number of B2C orders fulfilled.  
• BEST UCargo Revenue decreased by 5.6% YoY to RMB492.6 million (US$69.7 million) from RMB521.8 million, primarily due to discontinuation of several key account customers to minimize credit exposure.
• BEST Capital Revenue decreased by 12.6% YoY to RMB49.3 million (US$7.0 million) from RMB56.4 million, primarily due to implementation of more stringent credit control policies.

BEST Store⁺ – Revenue decreased by 16.8% YoY to RMB657.4 million (US$93.0 million) from RMB790.6 million, primarily due to ongoing efforts to enhance order quality to improve margins.  

BEST Global – Revenue increased by 196.7% YoY to RMB192.5 million (US$27.2 million) from RMB64.9 million, primarily due to strong growth in parcel volumes in Thailand and Vietnam.

Cost of Revenue:

The following table sets forth a breakdown of cost of revenue by business segment for the periods indicated.

Table 2 – Breakdown of Cost of Revenue by Business Segment

Cost of Revenue was RMB7,848.5 million (US$1,110.9 million) or 93.2% of revenue in the quarter ended June 30, 2020, compared to RMB8,268.1 million or 94.1% of revenue in the same quarter of 2019. The decrease of 0.9 ppt in cost of revenue as a percentage of revenue was primarily attributable to economies of scale and improved operating efficiency.

Table 3 – Breakdown of Average Cost Per Parcel and Average Cost Per Tonne

• Express Service Average Cost per Parcel decreased by 21.5%, primarily attributable to improved operating efficiency and economies of scale.
• Freight Service Average Cost per Tonne decreased by 21.1% YoY, primarily due to improved operating efficiency, network optimization and economies of scale.

Gross Profit was RMB569.7 million (US$80.6 million), compared to gross profit of RMB520.1 million in the same quarter of 2019; Gross Margin was 6.8%, compared to 5.9% in the same quarter of 2019.

Operating Expenses

The following table sets forth a breakdown of operating expenses and adjusted operating expenses by category for the periods indicated.

Table 4 – Breakdown of Operating Expenses and Adjusted Operating Expenses by Category

Selling, General and Administrative Expenses were RMB555.4 million (US$78.6 million) or 6.6% of revenue in the quarter ended June 30, 2020, compared to RMB514.4 million or 5.9% of revenue in the same quarter of 2019. The increase in selling, general and administrative expenses was primarily attributable to losses on disposal of fixed assets due to upgrade of Express’s equipment.

Research and Development Expenses were RMB50.5 million (US$7.1 million) or 0.6% of revenue in the quarter ended June 30, 2020, compared to RMB62.5 million, or 0.7% of revenue in the same quarter of 2019. The decrease in research and development expenses was primarily attributable to capitalization of certain R&D expenditure to intangible assets, as well as reduction in travel expenses.

Share-based Compensation (“SBC”) Expenses included in the cost and expense items above in the quarter ended June 30, 2020 were RMB39.7 million (US$5.6 million), compared to RMB26.2 million in the same quarter of 2019. In the second quarter of 2020, RMB0.7 million (US$0.1 million) was allocated to cost of revenue, RMB2.9 million (US$0.4 million) was allocated to selling expenses, RMB33.6 million (US$4.8 million) was allocated to general and administrative expenses, and RMB2.5 million (US$0.3 million) was allocated to research and development expenses.

Net Loss and Non-GAAP Net Income 

Net Loss in the quarter ended June 30, 2020 was RMB30.9 million (US$4.4 million), compared to Net Loss of RMB22.4 million in the same period of 2019. Excluding the impact of SBC expenses and amortization of intangible assets resulting from business acquisitions, non-GAAP Net Income in the quarter ended June 30, 2020 was RMB11.2 million (US$1.6 million), compared to non-GAAP Net Income of RMB6.5 million in the same quarter of 2019.

The following table sets forth a breakdown of non-GAAP net income for the three months ended June 30, 2020 by segment.

Table 5 – Breakdown of non-GAAP Net Income by Segment

Diluted EPS and non-GAAP diluted EPS

Diluted EPS in the quarter ended June 30, 2020 was negative RMB0.06 (US$0.01), based on a weighted average of 389.3 million diluted shares outstanding during the quarter. This is compared to negative RMB0.05 on a weighted average of 388.2 million diluted shares outstanding in the same period of 2019. Excluding SBC expenses and amortization of intangible assets resulting from business acquisitions, non-GAAP diluted EPS in the quarter ended June 30, 2020 was RMB0.05 (US$0.01), compared to RMB0.02 in the same period of 2019. A reconciliation of non-GAAP diluted EPS to diluted EPS is included at the end of this results announcement.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA was RMB157.7 million (US$22.3 million), compared to RMB148.2 million in the quarter ended June 30, 2019. Adjusted EBITDA Margin was 1.9%, compared to 1.7% in the quarter ended June 30, 2019.

Adjusted EBITDA and Adjusted EBITDA Margin by Segment

The following table sets forth a breakdown of adjusted EBITDA and adjusted EBITDA margin for the three months ended June 30, 2020 by segment.

Table 6 – Breakdown of Adjusted EBITDA and Adjusted EBITDA Margin by Segment

Core Logistics and Supply Chain – Adjusted EBITDA was RMB290.9 million (US$41.2 million), compared to RMB298.5 million in the quarter ended June 30, 2019. Adjusted EBITDA Margin was 3.8%, remain flat compared to the quarter ended June 30, 2019.

Store⁺ – Adjusted EBITDA was negative RMB67.3 million (US$9.5 million), compared to negative RMB101.6 million in the quarter ended June 30, 2019. Adjusted EBITDA Margin was negative 10.2% compared to negative 12.8% in the quarter ended June 30, 2019.

Global – Adjusted EBITDA was negative RMB47.8 million (US$6.8 million), compared to negative RMB32.3 million in the quarter ended June 30, 2019. Adjusted EBITDA Margin was negative 24.8% compared to negative 49.8% in the quarter ended June 30, 2019.  

Cash and Cash Equivalents, Restricted Cash and Short-term Investments

As of June 30, 2020, cash and cash equivalents, restricted cash and short-term investments were RMB5,141.9 million (US$727.8 million), compared to RMB4,236.1 million as of March 31, 2020.

Net Cash Generated from Operating Activities

Net cash generated from operating activities was RMB722.6 million (US$102.3 million), compared to RMB334.2 million in the same period of 2019. The increase in net cash generated from operating activities was mainly due to recovery from COVID-19 and significant growth of our Express and Freight volumes from the first quarter of 2020.

Capital Expenditures (“CAPEX”)

CAPEX was RMB424.1 million (US$60.0 million), or 5.0% of total revenue in the quarter ended June 30, 2020, compared to CAPEX of RMB380.9 million, or 4.3% of total revenue, in the same period of 2019. The increase in CAPEX was primarily due to planned upgrades of automation systems in major hubs, sortation centers, and Cloud OFCs, which included investments in high-speed automated sorting lines, dimension and weight scanning systems.

SHARES OUTSTANDING

As of the date of this press release, the Company had approximately 385.1 million ordinary shares outstanding^[9]. Each American Depositary Share represents one Class A ordinary share.

FINANCIAL GUIDANCE

Due to the rapidly evolving market dynamics, the negative impact from the COVID-19 pandemic, BEST is unable to provide financial guidance at this time. The Company is closely monitoring the situation and will provide more information as it becomes available.

WEBCAST AND CONFERENCE CALL INFORMATION

The Company will hold a conference call at 9:00 pm U.S. Eastern Time on August 17, 2020 (9:00 am Beijing Time on August 18), to discuss its financial results and operating performance for the second quarter of 2020.

Participants may access the call by dialing the following numbers:

A replay of the conference call will be accessible through August 24, 2020 by dialing the following numbers:

Please visit the Company’s investor relations website http://ir.best-inc.com/ on August 17, 2020 to view the earnings release prior to the conference call. A live and archived webcast of the conference call and a corporate presentation will be available at the same site.

ABOUT BEST INC.

BEST Inc. (NYSE: BEST) is a leading integrated smart supply chain solutions and logistics services provider in China. Through its proprietary technology platform and extensive networks, BEST offers a comprehensive set of logistics and value-add services, including express and freight delivery, supply chain management and last-mile services, truckload service brokerage, international logistics and financial services. BEST’s mission is to empower business and enrich life by leveraging technology and business model innovation to create a smarter, more efficient supply chain. For more information, please visit: http://www.best-inc.com/en/.  

For investor and media inquiries, please contact:

BEST Inc.
Investor relations team                         
ir@best-inc.com

The Piacente Group, Inc.
Yang Song
Tel: +86-10-6508-0677
E-mail: best@tpg-ir.com

The Piacente Group, Inc.
Brandi Piacente
Tel: +1-212-481-2050
E-mail:  best@tpg-ir.com  

SAFE HARBOR STATEMENT

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of 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” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as BEST’s strategic and operational plans, contain forward-looking statements. BEST may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), 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. Statements that are not historical facts, including statements about BEST’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: BEST’s goals and strategies; BEST’s future business development, results of operations and financial condition; BEST ‘s ability to maintain and enhance its ecosystem; BEST ‘s ability to continue to innovate, meet evolving market trends, adapt to changing customer demands and maintain its culture of innovation; fluctuations in general economic and business conditions in China and other countries in which BEST operates, and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in BEST’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and BEST does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

USE OF NON-GAAP FINANCIAL MEASURES

In evaluating its business, BEST considers and uses non-GAAP measures, such as non-GAAP net loss/income, non-GAAP net loss/profit margin, adjusted EBITDA, adjusted EBITDA margin, EBITDA, adjusted selling expenses, adjusted general and administrative expenses, adjusted research and development expenses, and non-GAAP diluted EPS, as supplemental measures in the evaluation of the Company’s operating results and in the Company’s financial and operational decision-making. The Company believes these non-GAAP financial measures that help identify underlying trends in the Company’s business that could otherwise be distorted by the effect of the expenses and gains that the Company includes in loss from operations and net loss. The Company believes that these non-GAAP financial measures provide useful information about its operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” in the results announcement.

The non-GAAP financial measures are provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. These non-GAAP financial measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, U.S. GAAP results. In addition, the Company’s calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

                             

RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

The table below sets forth a reconciliation of the Company’s net loss to EBITDA, adjusted EBITDA and adjusted EBITDA margin for the periods indicated:

    Table 7 – Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

The table below sets forth a reconciliation of the Company’s net loss to non-GAAP net income, non-GAAP net income margin for the periods indicated:

Table 8 – Reconciliation of Non-GAAP Net Income and Non-GAAP Net Income Margin

The table below sets forth a reconciliation of the Company’s diluted EPS to non-GAAP diluted EPS for the periods indicated:

Table 9 – Reconciliation of Diluted EPS and Non-GAAP Diluted EPS

[1] All numbers presented have been rounded to the nearest integer, tenth, or hundredth, and year-over-year comparisons are based on figures before rounding.

[2] Non-GAAP net income/loss represents net income/loss excluding share-based compensation expenses, amortization o f intangible assets resulting from business acquisitions, and fair value change of equity investments (if any).

[3] See the sections entitled “Use of Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.

[4] Diluted earnings per share, or Diluted EPS, is calculated by dividing net profit attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period.

[5] Non-GAAP diluted earnings per share, or non-GAAP diluted EPS, represents diluted earnings per share excluding share-based compensation expenses, amortization of intangible assets resulting from business acquisitions, and fair value change of equity i nvestments (if any).

[6] EBITDA represents net loss excluding depreciation, amortization, interest expense and income tax expense and minus interest income. Adjusted EBITDA represents EBITDA excluding share-based compensation expenses and fair value change of equity i nvestments (if any).

[7] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

[8] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

[9] The total number of shares outstanding excludes shares reserved for future issuances upon exercise or vesting of awards granted under the Company’s share incentive plans.

[10] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

[11] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

[12] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

[13] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.

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