BEST Inc. Announces Unaudited Second Quarter 2022 Financial Results

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HANGZHOU, China, Aug. 17, 2022 /PRNewswire/ -- BEST Inc. (NYSE: BEST) ("BEST" or the "Company"), a leading integrated smart supply chain solutions and logistics services provider in China and Southeast Asia ("SEA"), today announced its unaudited financial results for the second quarter ended June 30, 2022.

Johnny Chou, Founder, Chairman and CEO of BEST, commented, "The impact of the COVID-19 pandemic continued to weigh heavily on the overall economy growth in China and SEA. Despite these headwinds in the second quarter, BEST Supply Chain Management ("SCM") achieved profitability while BEST Freight's loss has significantly narrowed compared with the first quarter.  In addition, our U.S. operations continued to be profitable for the period."  

"We maintained our focus on service quality, customer experience and efficiency improvement during the quarter. BEST Freight increased its on-time delivery rate by 11.4% quarter over quarter.  Freight's net loss narrowed by RMB115.7 million compared with the first quarter as we continued to reduce expenses and improve operating efficiency. BEST SCM achieved profitability due to our continuous focus on high margin key accounts and our cost reduction initiatives."

"For BEST Global, we have significantly strengthened the quality of our services, including on-time delivery improvement that benefitted from the utilization of information technology and better infrastructure management of Global's operations. We will accelerate our B2B2C and cross border business among PRC, SEA and the U.S. by synergizing with SCM and Freight. With these synergies and our cross-border initiatives, we are confident that BEST Global will return to its growth trajectory by the end of this year."

"We are encouraged by the progress we have made since the launch of our Strategic Refocusing Program. Today we are operating as a leaner and more focused organization. As the pandemic eases, we are confident that BEST's strength in technology, domestic and global supply chain management and logistics capabilities will allow us to rebound strongly and on the path to profitability." concluded Mr. Chou.

Gloria Fan, BEST's Chief Financial Officer, added, "While our second quarter revenue was impacted by the pandemic, we are pleased that our net loss from continuing operations narrowed significantly by RMB87.5 million or 27.1% quarter over quarter, excluding the one-time expenses associated with the Capital wind-down and ADS ratio change. We also maintained a strong balance sheet with cash and cash equivalents, restricted cash, and short-term investments of RMB4.4 billion, and a net cash position of RMB1.4 billion at the end of the second quarter. As we drive value for our customers through our Freight, integrated Supply Chain Management and Global logistics solutions, we believe we are on the right path to deliver sustainable growth and profitability."

FINANCIAL HIGHLIGHTS(1) 

For the Second Quarter Ended June 30, 2022:(2)

Revenue was RMB1,926.4 million (US$287.6 million), compared to RMB3,093.3 million in the second quarter of 2021. The decrease was primarily due to the winding-down of the BEST UCargo business line and lower volume of Freight and Global due to the COVID-19 pandemic. Revenue generated from UCargo was approximately RMB0.2 million (US$0.03 million), compared with RMB860.4 million in the same quarter of 2021. Gross Loss was RMB93.8 million (US$14.0 million), compared to a gross profit of RMB86.2 million in the second quarter of 2021. The decrease was primarily due to the increased unit cost of the Freight and Global businesses and winding-down of the BEST Capital business line. Gross Loss Margin was 4.9%, compared to a Gross Profit Margin of 2.8% in the second quarter of 2021. Net Loss from continuing operations was RMB337.1 million (US$50.3 million), compared to RMB146.9 million in the second quarter of 2021. Non-GAAP Net Loss from continuing operations(3)(4) was RMB317.2 million (US$47.4 million), compared to RMB116.9 million in the second quarter of 2021. Diluted loss per ADS(5) from continuing operations was RMB3.88 (US$0.58), compared to a loss of RMB1.82 in the second quarter of 2021. Non-GAAP diluted loss per ADS(3)(4) from continuing operations was RMB3.63 (US$0.54), compared to a loss of RMB1.43 in the second quarter of 2021. EBITDA(6) from continuing operations was negative RMB287.2 million (US$42.9 million), compared to negative RMB80.6 million in the second quarter of 2021. Adjusted EBITDA(6) from continuing operations was negative RMB267.3 million (US$39.9 million), compared to negative RMB50.6 million in the second quarter of 2021.

BUSINESS HIGHLIGHTS(7) 

BEST Freight – In the second quarter of 2022, the Company remained focused on developing its e-commerce related business, which contributed 20.4% of total volume, up 1.2% year over year. Freight's operations were significantly affected by the continued industry-wide logistics disruptions caused by the COVID-19 pandemic. Its volume decreased by 8.8% year over year, as some of its transportation fleet, hubs and sortation centers, have been restricted due to the pandemic.

However, as a result of continued expense control efforts and operating efficiency improvements in the second quarter, the net loss of Freight narrowed by RMB115.7 million or 66.8% to RMB57.4 million while its on-time delivery rate improved by 11.4% quarter over quarter.

BEST UCargo's operations and financial results are now consolidated with BEST Freight. 

BEST Supply Chain Management – During the second quarter of 2022, the Company continued to grow its B2B2C fulfillment network and distribution capabilities ("Cloud OFCs") while prioritizing higher-margin accounts. The total number of orders fulfilled by Cloud OFCs increased by 7.6% quarter over quarter to 94.0 million in the second quarter of 2022, and the total number of orders fulfilled by franchised Cloud OFCs increased by 9.0% quarter over quarter to 58.9 million. SCM's gross margin improved by 3.9% to 8.2%, which led to a net profit of RMB12.1 million versus a net loss of RMB20.8 million in the first quarter of 2022.

On the year over year basis, the resurgence of the pandemic and its related controls in the second quarter has severely impacted numbers of orders fulfilled by our B2B2C fulfillment network as many of our warehouses were restricted during the quarter. The total number of orders fulfilled by Cloud OFCs decreased by 22.0% to 94.0 million in the second quarter while the total number of orders fulfilled by franchised Cloud OFCs decreased by 19.4% to 58.9 million.

BEST Global – The pandemic and its related controls significantly impacted e-commerce businesses in SEA and restrained the cross border activities between SEA and China. As a result, Global's parcel volume decreased by 20.6% year over year, which was 30.8 million in the second quarter of 2022.  Despite SEA's lower volume in the second quarter, our U.S. operations continued to be profitable in the second quarter of 2022.

Others

As part of its Strategic Refocusing Program, the Company continued to wind down its Capital business line in the second quarter of 2022 and expects such winding-down to be substantially completed by the end of 2022.

Key Operational Metrics


Three Months Ended

% Change YOY


June 30, 2020


June 30, 2021


June 30, 2022


2021 vs
2020


2022 vs
2021






Freight Volume (Tonne in '000)

2,230


2,438

2,223


9.3 %


(8.8 %)

Supply Chain Management
Orders Fulfilled (in '000)

111,332

120,471

93,960


8.2 %

(22.0 %)

Global Parcel Volume in SEA
 (in '000)

16,100


38,761


30,782


140.7 %


(20.6 %)












FINANCIAL RESULTS(8) 

For the Second Quarter Ended June 30, 2022:

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




Three Months Ended



June 30, 2021


June 30, 2022



(In '000, except for %)

RMB

% of
Revenue


RMB

US$

% of
Revenue


% Change
YOY

Total Freight

2,259,003

73.0 %


1,208,435

180,415

62.8 %


(46.5 %)

  -Freight

1,398,561

45.2 %


1,208,220

180,383

62.8 %


(13.6 %)

  -Legacy UCargo

860,442

27.8 %


215

32

0.0 %


(100.0 %)

Supply Chain
Management

479,555

15.5 %


450,984

67,330

23.4 %


(6.0 %)

Global

314,602

10.2 %


241,171

36,006

12.5 %


(23.3 %)

Others(9)

40,171

1.3 %


25,855

3,860

1.3 %


(35.6 %)

Total Revenue

3,093,331

100.0 %


1,926,445

287,611

100.0 %


(37.7 %)

Freight Service Revenue was RMB1,208.4 million (US$180.4 million) for the second quarter of 2022, compared with RMB2,259.0 million in the same period last year, of which, RMB0.2 million and RMB860.4 million were from the legacy UCargo business line. Freight service revenue, excluding the legacy UCargo business, decreased by 13.6% year over year, primarily resulting from an 8.8% decrease in freight volume and a 5.0% decrease in average selling price per tonne. Supply Chain Management Service Revenue decreased by 6.0% year over year to RMB451.0 million (US$67.3 million) for the second quarter of 2022 from RMB479.6 million in the same period last year, primarily due to the restrictions on certain warehouses caused by the COVID-19 pandemic and the discontinuation of low-margin legacy accounts. Global Service Revenue decreased by 23.3% year over year to RMB241.2 million (US$36.0 million) for the second quarter of 2022 from RMB314.6 million in the same period last year, primarily due to lower parcel volume, as the pandemic and related controls significantly impacted e-commerce businesses in SEA.

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





Three Months Ended


% of Revenue
Change

YOY



June 30, 2021


June 30, 2022


(In '000, except for %)


RMB

% of
Revenue


RMB

US$

% of
Revenue


Freight


(2,208,103)

97.7 %


(1,302,523)

(194,462)

107.8 %


10.1 %

Supply Chain
Management


(436,530)

91.0 %


(413,910)

(61,795)

91.8 %


0.8 %

Global


(328,597)

104.4 %


(276,554)

(41,288)

114.7 %


10.3 %

Others


(33,876)

84.3 %


(27,273)

(4,072)

105.5 %


21.2 %

Total Cost of Revenue


(3,007,106)

97.2 %


(2,020,260)

(301,617)

104.9 %


7.7 %

Cost of Revenue for Freight was RMB1,302.5 million (US$194.5 million) or 107.8% of revenue in the second quarter of 2022. The 10.1% year-over-year increase in cost of revenue as a percentage of revenue was mainly due to higher fuel cost and additional costs caused by the COVID-19 pandemic. Cost of Revenue for Supply Chain Management was RMB413.9 million (US$61.8 million) or 91.8% of revenue in the second quarter of 2022. The 0.8% year-over-year increase in cost of revenue as a percentage of revenue was primarily due to restrictions on certain warehouses caused by the pandemic. Cost of Revenue for Global was RMB276.6 million (US$41.3 million) or 114.7% of revenue in the second quarter of 2022. The 10.3% year-over-year increase in cost of revenue as a percentage of revenue was primarily due to lower parcel volume.  Cost of Revenue for Others was RMB 27.3 million (US$4.1 million) or 105.5% of revenue in the second quarter of 2022. The 21.2% year-over-year increase in cost of revenue as a percentage of revenue was primarily due to the winding-down of the BEST Capital business line.

Gross Loss was RMB93.8 million (US$14.0 million) in the second quarter of 2022, compared to a gross profit of RMB86.2 million in the second quarter of 2021; Gross Margin was negative 4.9%, compared to positive 2.8% in the second quarter of 2021.

Operating Expenses

Selling, General and Administrative ("SG&A") Expenses were RMB326.2 million (US$48.7 million), or 16.9% of revenue, in the second quarter of 2022, compared to RMB262.3 million, or 8.5% of revenue, in the same quarter of 2021. The increase was primarily due to expenses associated with winding down the Capital business and one-time expenses related to the ADS ratio change.  Excluding these one off expenses, SG&A expenses in the second quarter decreased by 1.9% year over year.

Research and Development Expenses were RMB42.1 million (US$6.3 million) or 2.2% of revenue in the second quarter of 2022, compared to RMB47.6 million or 1.5% of revenue in the second quarter of 2021, primarily due to reduced headcount and lower revenue.

Share-based Compensation ("SBC") Expenses included in the cost and expense items above were RMB19.9 million (US$3.0 million) in the second quarter of 2022, compared to RMB30.0 million in the same period of 2021. Of the total SBC expenses, RMB0.1 million (US$0.02 million) was allocated to cost of revenue, RMB1.0 million (US$0.1 million) was allocated to selling expenses, RMB17.6 million (US$2.6 million) was allocated to general and administrative expenses, and RMB1.2 million (US$0.2 million) was allocated to research and development expenses.

Net Loss and Non-GAAP Net Loss from continuing operations

Net Loss from continuing operations in the second quarter of 2022 was RMB337.1 million (US$50.3 million), compared to RMB146.9 million in the same period of 2021. Excluding SBC expenses, amortization of intangible assets resulting from business acquisitions and gain from appreciation of investment, Non-GAAP Net Loss from continuing operations in the second quarter of 2022 was RMB317.2 million (US$47.4 million), compared to RMB116.9 million in the second quarter of 2021.

Diluted loss per ADS and Non-GAAP diluted loss per ADS from continuing operations

Diluted loss per ADS from continuing operations in the second quarter of 2022 was RMB3.88 (US$0.58), compared to a loss of RMB1.82 in the same period of 2021. Excluding SBC expenses, amortization of intangible assets resulting from business acquisitions and gain from appreciation of investment, Non-GAAP diluted loss per ADS from continuing operations in the second quarter of 2022 was RMB3.63 (US$0.54), compared to a loss of RMB1.43 in the second quarter of 2021. A reconciliation of non-GAAP diluted loss per ADS to diluted loss per ADS is included at the end of this results announcement.

Adjusted EBITDA and Adjusted EBITDA Margin from continuing operations

Adjusted EBITDA from continuing operations in the second quarter of 2022 was negative RMB267.3 million (US$39.9million), compared to negative RMB50.6 million in the same period of 2021. Adjusted EBITDA Margin from continuing operations in the second quarter of 2022 was negative 13.9%, compared to negative 1.6% in the same period of 2021.

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

As of June 30, 2022, cash and cash equivalents, restricted cash and short-term investments were RMB4,413.0 million (US$658.9 million), compared to RMB2,935.4 million as of June 30, 2021. In June 2022, the Company bought back aggregate principal amount of US$94.8 million (RMB636.5 million) of its existing Convertible Senior Notes due 2024.

Capital Expenditures ("CAPEX")

CAPEX was RMB35.0 million (US$5.3 million) or 1.8% of total revenue in the second quarter of 2022, compared to CAPEX of RMB52.9 million or 1.7% of total revenue in the same period of 2021. 

SHARES OUTSTANDING

As of August 8, 2022, the Company had approximately 392.9 million ordinary shares outstanding(10). Each American Depositary Share represents five (5) Class A ordinary shares.

FINANCIAL GUIDANCE

Due to the uncertainties relating to the COVID-19 pandemic, the Company is not providing any financial guidance or revenue outlook at this time. We are driving each of our business units toward a speedy recovery as the COVID-19 pandemic eases.

WEBCAST AND CONFERENCE CALL INFORMATION

The Company will hold a conference call at 9:00 pm U.S. Eastern Time on August 17, 2022 (9:00 am Beijing Time on August 18, 2022), to discuss its financial results and operating performance for the second quarter of 2022.

Participants may access the call by dialing the following numbers:

United States:

+1-888-317-6003

Hong Kong:   

800-963976 or +852-5808-1995

Mainland China:

4001-206115

International: 

+1-412-317-6061

Participant Elite Entry Number:   

3818072

 A replay of the conference call will be accessible through August 24, 2022 by dialing the following numbers:

United States:                              

+1-877-344-7529

International:   

+1-412-317-0088

Replay Access Code:       

8680053

Please visit the Company's investor relations website 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 and SEA. Through its proprietary technology platform and extensive networks, BEST offers a comprehensive set of logistics and value-added services, including freight delivery, supply chain management and global logistics 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 compete effectively; 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/income margin, adjusted EBITDA, adjusted EBITDA margin, EBITDA, and non-GAAP Diluted earnings/loss per ADS, 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.

 

 

 

Summary of Unaudited Condensed Consolidated Income Statements

(In Thousands)




Three Months Ended June 30,


Six Months Ended June 30,



2021

2022


2021

2022



RMB

RMB

US$


RMB

RMB

US$


Revenue









Freight

2,259,003

1,208,435

180,415


4,302,189

2,301,249

343,567


-Freight

1,398,561

1,208,220

180,383


2,573,054

2,281,680

340,645


-Legacy UCargo

860,442

215

32


1,729,135

19,569

2,922


Supply Chain Management

479,555

450,984

67,330


927,216

859,946

128,387


Global

314,602

241,171

36,006


565,024

509,880

76,123


Others

40,171

25,855

3,860


82,461

57,955

8,652


Total Revenue

3,093,331

1,926,445

287,611


5,876,890

3,729,030

556,729


Cost of Revenue









Freight

(2,208,103)

(1,302,523)

(194,462)


(4,238,055)

(2,472,837)

(369,185)


Supply Chain Management

(436,530)

(413,910)

(61,795)


(860,036)

(805,117)

(120,201)


Global

(328,597)

(276,554)

(41,288)


(593,699)

(562,232)

(83,939)

Source