BEST - Earnings call transcript Q4 2020

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Operator

Good morning, and good evening, ladies and gentlemen. Thank you for standing by and welcome to BEST Inc.’s Fourth Quarter and Fiscal Year 2020 Earnings Conference. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, there will be a Q&A session. With us today are Johnny Chou, BEST Inc.’s Chairman and CEO; and Gloria Fan, Chief Financial Officer.

will brief Johnny and of agenda, highlights. operational today’s give overview a business For explain of the will Gloria Then, details financial results.

Following your also the questions. after the also you available of this may on this A An be at remarks, BEST is available will website on being the call webcasted investor replay IR IR ir.best-inc.com. call. website. call Please prepared note Inc’s ask presentation is

risks, new on discussion involved a adjusted forward-looking of uncertainties are to will will or applicable beyond GAAP non-GAAP release. all I measures statements obligation Inc’s does financial the harbor as future uses which non-GAAP which press be predict company BEST read control. forward-looking Inc. management’s are any The behalf company are and current of law. difficult a reconciliation Today’s other factors, are forward-looking found Before on also the and except under measures it EBITDA, to can GAAP earnings EBITDA note begins, Please information, as statements and result that not certain the of expressed on any The contain statement and safe update These this inherent as the many statements. management’s undertake in on results of to loss. BEST based required net of events call that such expectations. basis others, non-GAAP They

and now BEST call, over to unless Johnny, conference otherwise CEO in turn note that the Chairman would go mentioned ahead. Inc. Johnny this Finally, all like Chou, of to please is please figures during RMB. I stated, conference the

Johnny Chou

our quarter to decisive evening, joining practices. the earnings our and call. competition, ability and our you turned executed changes refocusing business you, thank fourth operational Good make we Welcome around amid Thank quick industry everyone. attesting our in XXXX, strategic strong strategies and morning to our good plan In operator. and of for and

business our which segments on of to profitability. all us back to path improvements make the put losses, and and to continued We reduced growth strong

on and new stability, continued under returning quality, as segment industry product while network strengthening well management optimizing its Express profitability. solidify structure, and Our leadership to focused to as enhancing Freight service cost

results me developments. go over recent and our Next, quarterly let

new parcel, loss strategic parcel refocusing cost the of plan due an per for the parcel For month encouraging was quarter team which X.X% year-over-year November demonstrated economics, improving management it month-over-month. resulted the profit by the net XXXX, Express, despite drop particular, in achieved for executed recovery, net a announced to ASP reduced In by unit per in XX.X% December. in

We also focused on improving our franchise network stability to by providing support network.

strengthened efforts considerably. our Our have network franchise

direction Year confidence strategic Our for year, a this sustainable open bolstered during our quickly full initial New recovered at results the on These right that the have recovery. to remained affirmed conclusion network are we of holiday its holiday. the Chinese and our the capacity and path

have We first quarter accelerating into improving and growth structure. with cost parcel volume seen momentum continued

of share cost in XX.X% the offset quarter, contracted of a year-over-year, margin increased decline an volume percentage XX.X% of per by points market X.X%. to year-over-year, by decrease representing During parcel X% X.X parcel year-over-year. average ASP due Gross partially by

decreased points X.X by fourth continued tonne increased improve Its volume XXXX. recognition, efficiency. improved and to operating rebound. services, margin of Freight the quarter-over-quarter e-commerce strong higher-than-industry-average XX.X%. and leadership emphasize cost returning of margin position to was ASP by the year-over-year Our solidify percentage X.X%, pre-COVID-XX Freight a a growth strong continued by Average Company’s pricing as brand in delivered improved post-pandemic we rate profitability. with and per and the as gross continued quarter to XX.X% business quarter while levels Gross aspect recovery freight to both

accounts. the Ho to XX.X volume XXX. million, quarter-over-quarter with Asia, last-mile in XX which margined closing customers, fourth quarter-over-quarter due year-over-year. and key our in as margin we along expanded and incurred gross process center and and Management, Asia orders year-over-year, XX.X sortation in pressure gross BEST by in we franchised expanded percentage parcel to by November discontinued. hubs cross-border XX.X% sortation stations. while orders XX% of fulfilled sortation BEST quarter by The profitability quarter X.X the one-off increased Global points Chain X,XXX Store+-related to basis, OFCs Chi improvement. total Southeast pricing number established business and million to year-over-year number XXXX, increased targeted XXXX, OFCs in of number Vietnam. the quality by by we to margin by primarily Southeast volume volume City, being points Cloud Moving flagship of a to legacy in its with higher XX% operated growth strong XX parcel XX.X% we the by The of to Thailand year-over-year account certain increased XX.X% progress down by XXX.X and Minh centers Bangkok, increased over operations, in Cloud franchised December costs In service Express XXXX, Across growth marginX.X Supply Vietnam center of focus while In its quarter, and sharpened percentage total year-over-year are by fulfilled strong new a quarter-to-quarter Its franchised associated in million. with fourth of fourth increased make to now continued to OFCs Thailand, On million.

profitability parcel will invest focusing those and near in on in to economics gain Looking market in our the and countries, network, to to enhance unit share ahead, we volume future. growth achieve continue in order

model we platform brokerage Express, Chain its transportation reducing UCargo, Freight and Supply connect onto BEST Management. while customers our and costs full-trucking more scale drivers for to to continued Turning to

UCargo In XXXX, the by XX.X% of December to increased XX, of of registered of total As number XXX,XXX. by increased XXXX, transactions the trucking quarter drivers brokerage year-over-year on the number year-over-year fourth to of mobile the XX% platform XXX,XXX. app

down Store+ winding our XX, of completed business as the November on have we Store+, BEST announced For XXXX.

growth XXXX. economic e-commerce will for macro chain our the a booming market me logistics supply strategic and support the let Next, lend and industry. tremendous the to discuss China’s solid plan

long-term strategy our efforts refocusing growth will to drive to execute and profitability. on We and continue

Express, to expected do competitive, remain ASP to decline For stabilize. we parcel market expect per while

continue service sustainable efficiency, We on structure, improving and profitability operating customer experience, long-term quality enhancing product focusing to gaining and share. optimizing growth focus by on will and market

We growth to XXXX. for are targeting XX% XX% volume

We also improve efficiency, last-mile the for investments expect XX% per solutions. refine to reduce parcel mix, and the schemes, product driven by by dynamic sorting in full average optimizing routing cost year, the the

quarter. has For Freight, tonne recovered to ASP pre-COVID per first the level in a

growth services satisfaction. and continue network, e-commerce-related in our enhancing our we We investing are XX% with of growing and customer a of volume targeting our transactions, strategy

our continue will our the base by capacity to We franchisee franchise network. spending enhance customer more to network franchisees incentivizing bringing partners into and existing

Freight and business, provides growth. year. will in be will will leading on it our higher to quality, industry It and Supply customers higher that focus key lighter another continue an the Management the confident and than operating are growth with further rate franchised deliver XXXX. in OFC will pillar a margins account Chain grow and Company’s position Global expense. growth increase upcoming in for both reduce focus leaner and We its market strengthening profitability, profitability, on

in domestic to logistics expansion border Southeast and In fast-growing cross network the addition capture further international Asia, opportunities. intend leverage to to we our

and strong path believe in have enter momentum, bright. major is significant XXX% improvement. decisive and XXXX margin are the of we firmly business setbacks the behind Company targeting of the suffered optimisim, actions pandemic to We We is to Asia We In and volume the summary, Southeast with growth steer progresses. XXXX, to profitability. due parcel and growth Company our as growth while taken anticipated year back us worst the the the future strong in

cost to determined smart service out and future and supply a leading are and powerful company deliver market structure, quality sustainable experience, build share, customer growth. We strengthening chain logistics improve and our to optimize integrated

to the turn our call you would through I Go Now financials. walk Gloria, like to CFO Gloria. our quarter ahead, fourth over to

Gloria Fan

competitive Johnny, as you, actions a a set concluded conditions realign future quarter to foundation We strategic solid as hello to growth. initiatives. the evolving focusing fourth to on market Thank took and business We XXXX well challenging our for decisive adapt to everyone. a with

the quarter environment fourth Our revenue during challenging Store+ wind of by continued billion. down operations, for RMBX.X the affected the was pricing and

the our of equivalents, quarter quarter after RMBXXX flow segments, of manage mid-November, that note fourth RMBX.X but billion. reflected which our refocusing across financials. provide results. Please identified fourth started overall results our we with expenses initial executed maintaining to the strategy has and operating measures while we liquidity. review a XXXX restricted our net brought of in brief strategy, to and now encouraging financial the of additional healthy part short-term cash fourth I In execute of little will cash, a million, and costs, combined cash refocusing quarter, of As investments a we generated balance cash only

limited you to time will our for today’s encourage be call, read presenting on details. today I some issued through I further press earlier financial release the Given highlights. abbreviated

intense the pricing was RMBXXX quarter EBITDA QX compared XXXX. the in million, XXXX. of Gross negative continued compared RMBXXX profit compared to million, RMBXX was our XXXX. of million for margin same environment, With for X.X% RMBXXX QX to operations gross million was in to Adjusted continued X.X%, operations

decrease of due a XX.X% year-over-year billion increase in XXXX, parcel RMBXXX primarily The for moving ASP quarter Next, per Express attributable XX.X% for market negative to business RMBXXX decrease was highlights in X% revenue in for financial parcel, partially is year-over-year same million period fourth decreased onto Best the BEST dynamics. volume. basis, offset primarily units. a to On RMBX.X year-over-year compared key EBITDA Adjusted by our in ASP competitive a to the Express year. last by year-over-year of to million

BEST same Management year-over-year due it strengthened a RMBXXX QX Adjusted last Management negative of revenue December, was for achieved BEST Chain compared pricing year-over-year by BEST with million year. pressure RMBXX quarter. This volume. XX.X% X.X% RMBXXX offset discontinued. account our was to million. RMBX.X increased customers, RMBXX of RMBXX BEST effectiveness Its in Chain year-over-year Freight million revenue negative last million QX was increased EBITDA UCargo per partially are period ASP same million measures. negative for to by of to early XX.X% giving of QX million EBITDA which increase turnaround the to million period the decrease period RMBXX in same billion, BEST BEST for associated position to of primarily year-over-year EBITDA tonne. for BEST RMBXX for leadership due for key the UCargo’s to QX RMBXX Global for compared X.X% in parcel a compared signals freight As to EBITDA XX.X% mentioned, by Global in few Supply the a the being RMBXXXmillion, year. Freight million for Johnny profit year-over-year process by Supply XX.X% revenue Adjusted the volumes decreased was on legacy its compared by during million growth net last primarily Asia. Adjusted negative strong year-over-year year. was due BEST to Adjusted RMBXX to last in revenue to year. Southeast negative increased million in negative for RMBXX to

in Store+ reporting now are discontinued We operations.

X.X% in the in for by compared primarily to to in million. of fourth of major Express trade some million expenses or of of revenue review equipment. quarter. in quarter accrued of of the X% some let’s was expenses as the X.X% for additional revenue the Please million due was fourth affected of quarter disposal of and the of X.X% same increase million all same period flat upgrade operations continued of to general RMBXX the or or provisions was year. share-based operations Selling, administrative the total revenue expenses our quarter note, attributable compared of items same Next, RMBXXX credit SG&A excluded of CapEx or RMBXXX customers to was to assets the R&D and operating losses for quarter XXXX. this revenue continued the XXXX, pandemic compensation. receivables, fixed which compared certain last expenses expense million the were The on fourth RMBXXX was for RMBXXX

expectation, for between for further more current and full be refer is of revenue release conditions And please change. now our RMBXX our of preliminary year our full current expect and financial our billion on details. to represents market the XXXX business current to subject to management’s we outlook. Based billion. results, For to RMBXX year operations, This which of earnings the XXXX

of to our expected is as in CapEx Our for growth the recovery XXXX, RMBX the anticipate billion future we be business.

Looking within cash the and forward, our cost optimization operations resource allocation remains reduction, the combination of of our top corporate the level. management flow and segment priority at

sheet balance on This quarter updates. focused financial enhancing we remain will company’s our our As into capital growth. the structure, cash flow we future and progress support improving XXXX, concludes fourth to

Q&A. to the Now opening we are Thank you. call

Operator

[Operator go from ahead. Chung Markets. from KeyBanc Hans Capital Instructions] first comes Your question Please

Hans Chung

morning, Good Gloria. John for my you thank taking Well, questions. and

couple a questions. So I have of

– the if monthly Express met can from And you good can Express December. provide First, and near term then breakeven it’s for you Like say, color to any then we for performance February, see compare the January, March growth to then in month volume does how the trend? the in about be outlook. and of the will just And profitability possible in terms question that second today, overall and the then industry? maybe XXXX

about the for you. overall? Thank margin year the color profitability in or any Express Just the full and

Johnny Chou

our we structure have the with fourth in cost our Basically quarter seriously Okay. volume. also restructured realigned the and organization

well as So profitability. we of a as the are kind our volume growth balancing

it, the impacted. the line picture then up is the of want So side of and the sure making to side that growth not we and cost balancing bottom

your question for is January, quarter not because February, the the – that cannot color for ended, is not exact in audited. month-by-month you give the So number I is

but and February, what the can in have December. continue So in – we done January say to we do I that is execute

first that to a Basically XX% our to of purely XX% we is tremendously this quarterly on So own looking volumes the January trend. do this last want a it our to has market, the just to our strategically quarter. based growth February, modest With comparison be what comparing set with a on year’s have align will versus volume for and with we number. year, we improved kind again,

So Number the is that’s number two outlook. one. portfolio

about continuing on to the we the of growth growth be forecast; XX% to market we for but the are that we maybe, and relaxed XX%, XX%. the post be looking having to to As and said, XX% XX% about the bureaus are could could based XX% strong

continue goal year and is in down continue is the general to – one ASP the but Express the improve number to the number quality as For services, full cost a side, of our to as down, side, a as important to the go your between the party more product delivery, the franchisee it’s timing quality, and as the really mile the delivery last well of again, cost mix on idea. stressing the balancing stability of go

and will So, growth a – be the as to the us was full hopefully, to targeted XX% we bit the about result, a whole year XX% could a improve bring margin, profitability. to

Hans Chung

Thanks.

have our regarding could – balance it sheet. one if just think I more question, the

and billion, So, is by equivalent we RMBX cash we the cash RMBX.X about this the for And plan RMBX billion. then and a have short-term around investment billion year billion. RMBX.X CapEx to have

near-term what’s capital enhance the sheet, capital any need we So, in not year? planning a working then do the just requirement the might the And to balance health. raising to our for

Johnny Chou

Yes.

Okay.

and have BEST also very more returning So, and still RMBX.X about the notice basically quickly, one thing we has we of actually cash very been is we on cash that – billion the have financial the equivalents, collecting financial about assets, side, asset quickly.

at we’re of that looking other schemes the as our RMBX.X questions side. on financial units, and we the freight possibility us a on strengthen BEST year globals, give financing capitals some onto financing Meanwhile, supplier their like as that side, business enough the by sheets. still well balance So raising for the should have it’s billion, to side, as liquidity on still such other the the the during

plan on a have do we So, that.

RMBX is collecting So, the back two RMBX.X than be back. assets. things on answer have hopefully, side. are your BEST will those so a we we this to billion liquidity coming billion are the them has One financial more year. fastly

group. anymore investing the investment assets not financial into We’re

global. and these is fund separate And raisings back. So, other rage the the another for we’re all one collecting

Hans Chung

I see, thank you.

Operator

you. Thank

Keung comes Sachs. next Goldman Your Please from go from ahead. question Ronald

Ronald Keung

Gloria. you. Thank questions. I have a guess Johnny Hi, few I and

I and For your that have other rate declined mentioned stabilized. do been do think been has aggressive entrance players? stabilize growing and Express, our of How to – least Johnny, behavior has expect quite you consistently this fast. that we year, a we ASP you this of very the the some bit pricing have decline new in at see

declines, we you players, react that plan be respond of for year? this to and competitive there the about So, ASP do if think when industry more the players, landscape evolving to are will still for for the we aggressive or specific will or talk rest how

Johnny Chou

last the dropped, Okay. in about The Express dropped and average, – year ASP whole the industry XX plus.

of we peers So, a bit most some some little over are and at the plus kind XX our reduced even of significantly.

last year. average is decline So, ASP in the XX plus

Given the due last due that skill general, in but did over years. extending it of that also, the over see market what we to we capacity ASP capacity going expanded had under where some think year. built to ASP the And a with compared to been large significantly still we up a we decline, don’t a be pressure

we So, the not to just I as Basically, market, drop. environment. was general is I last on X% of think because they us, year, this expected it – kind made year, tough everybody a XX%, maybe, player it I huge declining say very every was think a side,

So but side. expecting to an X% we’re yes, cost least also XX% XX% a improvement do drop, expecting in our we at of

Ronald Keung

kind of about category quality – in focus? thinking supermarket that maybe by that [indiscernible] And growth those high by focus we’re segment our focusing you you higher or this the of you. chain on customers about the and has a focusing on kind been Right, we bit on quality are thank the merchants growth specifically And think what that XXXX business, would category of traditionally, then slowed had consider. one quality supply and and is customer yes, the what’s by for kind thought otherwise I merchants of or

Johnny Chou

Okay. Yes.

group over was shutting XXXX was XX One also there. shutting about two of during they year. the Who the had So a they things. costs. management actually – about that overall down impacted beginning XX lot warehouses a we is And of had with behind business, year include is middle supporting the Store+ down is fourth Store+ by surprising Store+ but quarter one-time by business as the of really a and project you temporary see us, the ask

some Some own of the customer even difficulties, does business. their have

So in also quarter margins volumes, – X.X%. issues cetera. on reduce fourth over the rebound with rebound collectibles growth the some fast in the and economic But and the also economics, and especially we et had

are the service which doing and will reasons, were there. on, pandemic that. strong debt taking the stop this So other have will the always we a other impacted by is to are especially focusing of with year, or on to area. is some really We rebound mean we that, apparel And right a now out is the during customers focusing probably we what reasons very not some But in best sell industry. One I service competitive category. related clothing, we the apparel, on we’re kind

Second as goods, with fastest that working long the moving class, as of a and is we some consumer history long. FMCG customers world because had well

really So our on you our Meanwhile chain release I is the focusing see OFC. statements can as think from supply Cloud the these we two on. are strategy areas

So in our franchise strong. OFC has actually growing

and lot was on based moving pushing on So square less come all hit we some space down, X we over our of And warehouses, to which this right. be actually when really impact. year we us be will which a because time, operated general model there that may a hard are warehouses, got operator concepts a of, lighter going with million the you’ve the a meters have big that Last to well, economic stuff, own basically ourselves. and

down us leased more our model, able we of and you fourth by towards if see, and are get much can or service out quarter, already operated our hands-on which model reduce So moving in give operated we and franchise will lighter this a year, to management a warehouses we the self ourself. closing lot a grow are

the is moving-forward So that on strategy.

Ronald Keung

useful. Great. very Thank Johnny. you, you. Thank That’s

Operator

session. concludes over back the I would like to [Operator closing turn conference remarks. Instructions] Thank you. question-and-answer to This for Johnny our

Johnny Chou

out have you forward soon. operator. Thank BEST. further our and all joining Investor you to that you support for speaking thank Please appreciate look to Relations call, reach questions. Team, to Thank you your our We if we you. our Well,

Operator

Thank now presentation. attending has you. conference The Thank today’s concluded. you for

may disconnect. You now

BEST (BEST) 11 Mar 212020 Q4 Earnings call transcript