BEST Inc. Announces Unaudited Second Quarter 2021 Financial Results

HANGZHOU, China, Aug. 17, 2021 /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, 2021.

Johnny Chou, Founder, Chairman and Chief Executive Officer of BEST, commented, "In the second quarter we continued to press forward with our strategic refocusing plan and build on the encouraging signs we are seeing in network stability, service quality, and cost reduction, while adapting to the competitive industry landscape. In particular, our Express continued to make progress in unit cost reduction and witnessed significant network improvement with enhanced service quality. For Freight business, it continued its industry leading position and registered a net profit for the quarter with emphasis on our e-commerce capability. Supply Chain Management achieved profitability by serving high-margin customers and expanding cloud OFCs network supported by smart logistic management for better operating efficiency. Our Global business continued its growth momentum with parcel volume in Southeast Asia increasing 140.7% year-over-year despite a resurgence of the COVID-19 pandemic in the region."

"Given the supportive industry regulatory environment and continued strong e-commerce growth, we are optimistic that our strategic refocusing plan will position us to deliver improved operating and financial results in the coming quarters." 

Gloria Fan, BEST's Chief Financial Officer, commented, "In the second quarter of 2021, our revenue reached RMB7.4 billion. The slight revenue decline compared with the second quarter of 2020 was driven by lower average selling price in Express and Freight, partially offset by higher volume in both business units. Our net loss narrowed down to RMB467.5 million compared to the first quarter of 2021, benefitting from our effective cost control across business units. As part of our refocusing plan, we continued to improve our balance sheet and streamline our asset base. From beginning of the year to the date of this press release, we have completed approximately RMB1.0 billion of financing and asset conversion. In addition, we are working on a pipeline of financing and strategic initiatives to further strengthen our balance sheet. Our balance of cash and cash equivalents, restricted cash and short-term investments were RMB3.4 billion at the end of the second quarter of 2021. Our strategic refocusing plan charts a clear path for us to achieve sustainable growth and profitability in the long run."

FINANCIAL HIGHLIGHTS^([1]) 

For the Quarter Ended June 30, 2021:

• Revenue was RMB7,374.7 million (US$1,142.2 million), a decrease of 5.0% year-over-year ("YoY"). The decrease was primarily due to a decrease in average selling price ("ASP") in Express and Freight business segments, partially offset by an increase in Express and Freight volume.
• Gross Loss was RMB144.6 million (US$22.4 million), compared to gross profit of RMB484.5 million in the same period of 2020. Gross Loss Margin was 2.0%, decreased by 8.2 percentage points ("ppts") YoY.
• Net Loss was RMB467.5 million (US$72.4 million), compared to a net profit of RMB42.7 million in the same period of 2020. Non-GAAP Net Loss^([2])([3]) was RMB435.8 million (US$67.5 million), compared to non-GAAP net income of RMB80.6 million in the same period of 2020.
• Diluted EPS^([4]) was negative RMB1.19(US$0.18), compared to positive RMB0.13 in the same period of 2020. Non-GAAP Diluted EPS⁽³⁾⁽⁴⁾ was negative RMB1.11(US$0.17), compared to positive RMB0.22 in the same period of 2020.
• EBITDA^([5]) was negative RMB284.8 million (US$44.1 million), compared to positive RMB188.0 million in the same period of 2020. Adjusted EBITDA⁽³⁾⁽⁵⁾ was negative RMB253.1 million (US$39.2 million), compared to positive RMB225.0 million in the same period of 2020.

BUSINESS HIGHLIGHTS^([6]) 

BEST Express – The Company remained committed to executing its refocusing strategy to optimize product and cost structure, improve network stability, as well as enhance service quality during the second quarter. The Company believes these initiatives played positive roles in upgrading its network and expects this will be reflected in its financial metrics later this year.

In the second quarter of 2021, parcel volume increased by 1.2% YoY to 2.3 billion. Gross margin decreased by 11.0 ppts primarily due to a decline in ASP per parcel of 18.0% YoY, partially offset by a decrease in average cost per parcel of 8.5% YoY. 

BEST Freight – Freight continued to strengthen its industry leadership through continued operating efficiency, networking expansion and enhanced service quality.

Freight returned to profitability at the bottom line in the second quarter of 2021. The average cost per tonne remained relatively steady YoY despite higher oil prices in the second quarter of 2021 and the absence of highway toll subsidy in the second quarter of 2021 as compared with the same period in 2020. Freight volume for this quarter increased 9.3% YoY, with e-commerce volume growth of 23.1% YoY, contributing to 19.2% of total volume.

BEST Supply Chain Management – In the second quarter of 2021, the Company continued to focus on high-margin customers, expanding its cloud OFCs network and enhancing operating efficiency. The total number of orders fulfilled by Cloud OFCs increased by 8.2% YoY to 120.5 million in the second quarter and the total number of orders fulfilled by franchised Cloud OFCs increased by 36.3% YoY to 73.1 million. The number of franchised OFCs increased by 5.8% YoY to 345 in the second quarter of 2021. Gross margin for Supply Chain Management improved to 9.0% from the 5.4% in the first quarter of 2021.

BEST Global – Global continued its fast growth momentum in Southeast Asia and has made significant margin improvement. In the second quarter of 2021, parcel volume in Southeast Asia increased by 140.7% YoY to 38.8 million, driven by 80.0% and 195.5% YoY growth in Thailand and Vietnam, respectively. Global's gross margin improved significantly by 7.0 ppts year-over-year, benefiting from economies of scale fueled by increased market share and network expansion in the region, as well as utilization of our strong supply chain management capabilities and cross-border logistics solutions by leveraging our Express, Freight and Supply Chain Management expertise.

Others – For UCargo, as of June 30, 2021, the number of registered drivers on the UCargo mobile app increased by 53.9% YoY to 375,802. In the second quarter of 2021, the total number of transactions on the trucking brokerage platform increased by 55.1% YoY to 212,941.

Key Operational Metrics

FINANCIAL RESULTS

For the Quarter Ended June 30, 2021: 

Revenue

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

• Express Service Revenue decreased by 17.1% YoY to RMB4,281.4 million (US$663.1 million) from RMB5,165.7 million, primarily due to an 18.0% YoY decrease in ASP per parcel, partially offset by a 1.2% YoY increase in parcel volume. The decrease in ASP per parcel was primarily attributable to competitive market dynamics.
• Freight Service Revenue increased by 2.0% YoY to RMB1,398.6 million (US$216.6 million) from RMB1,370.9 million, primarily due to a 9.3% YoY increase in freight volume, partially offset by a 6.5% YoY decrease in ASP per tonne.
• Supply Chain Management Service Revenue decreased by 5.9% YoY to RMB479.6 million (US$74.3 million) from RMB509.7 million, primarily due to discontinuation of service to certain low-margin legacy customers, partially offset by an 8.2% YoY increase in the total number of orders fulfilled by Cloud OFCs.
• Global Service Revenue increased by 63.4% YoY to RMB314.6 million (US$48.7 million) from RMB192.5 million, primarily due to strong growth in parcel volumes in Southeast Asia.
• Others Services Revenue increased by 72.5% YoY to RMB900.6 million (US$139.5 million) from RMB522.1 million, primarily due to a strong increase in total number of transactions of UCargo business.

Cost of Revenue

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

Cost of Revenue was RMB7,519.3 million (US$1,164.6 million) or 102.0% of revenue in the second quarter of 2021, compared to RMB7,276.4 million or 93.8% of revenue in the same quarter of 2020. The increase of 8.2 ppts in cost of revenue as a percentage of revenue was primarily attributable to a steeper decrease in ASP than unit cost for Express and Freight business units.

Gross Loss was RMB144.6 million (US$22.4 million) in the second quarter of 2021, compared to gross profit of RMB484.5 million in the same period of 2020. Gross Loss Margin was 2.0%. 

Operating Expenses

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

Selling, General and Administrative ("SG&A") Expenses were RMB458.7 million (US$71.0 million) or 6.2% of revenue in the second quarter of 2021, compared to RMB403.8 million or 5.2% of revenue in the same quarter of 2020. The increase in SG&A expenses was primarily attributable to additional bad debt provision resulted from the pandemic and absence of certain COVID-19 pandemic related subsidies that were available in 2020.

Research and Development ("R&D") Expenses were RMB61.0 million (US$9.4 million) or 0.8% of revenue in the second quarter of 2021, compared to RMB42.0 million, or 0.5% of revenue in the same quarter of 2020.

Share-based Compensation ("SBC") Expenses included in the cost and expense items above in the second quarter of 2021 were RMB31.7 million (US$4.9 million), compared to RMB37.0 million in the same quarter of 2020. In the second quarter of 2021, RMB0.2 million (US$0.04 million) was allocated to cost of revenue, RMB1.6 million (US$0.2 million) was allocated to selling expenses, RMB27.7 million (US$4.3 million) was allocated to general and administrative expenses, and RMB2.2 million (US$0.3 million) was allocated to research and development expenses.

Net Loss and Non-GAAP Net Loss 

Net Loss in the second quarter of 2021 was RMB467.5 million (US$72.4 million), compared to a net income of RMB42.7 million in the same period of 2020. Excluding SBC expenses, amortization of intangible assets resulting from business acquisitions and gain from appreciation of investment (if any for a given period), Non-GAAP Net Loss in the second quarter of 2021 was RMB435.8 million (US$67.5 million), compared to non-GAAP net income of RMB80.6 million in the same period of 2020.

The following table sets forth a breakdown of non-GAAP net (loss)/income for the three months ended June 30, 2021 by segment.

Diluted EPS and Non-GAAP Diluted EPS

Diluted EPS in the second quarter of 2021 was negative RMB1.19(US$0.18), based on a weighted average of 388.1 million diluted shares outstanding during the quarter. This is compared to positive RMB0.13 on a weighted average of 389.3 million diluted shares outstanding in the same period of 2020. Excluding SBC expenses, amortization of intangible assets resulting from business acquisitions and gain from appreciation of investment (if any for a given period), Non-GAAP Diluted EPS in the second quarter of 2021 was negative RMB1.11(US$0.17), compared to positive RMB0.22 in the same period of 2020. 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 in the second quarter of 2021 was negative RMB253.1 million (US$39.2 million), compared to positive RMB225.0 million in same quarter of 2020. Adjusted EBITDA Margin was negative 3.4% in the second quarter of 2021, compared to positive 2.9% in the same quarter of 2020.

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, 2021 by segment.

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

As of June 30, 2021, cash and cash equivalents, restricted cash and short-term investments were RMB3,413.3 million (US$528.6 million), compared to RMB3,976.8 million as of March 31, 2021. The decrease in cash and cash equivalents, restricted cash and short-term investments was primarily due to net cash used in financing activities.

Net Cash Used in Operating Activities

Net cash used in continuing operating activities was RMB127.5 million (US$19.7 million), compared to net cash generated from continuing operating activities of RMB754.3 million in the same period of 2020, mainly due to decreased ASP for Express and Freight business segments.

Capital Expenditures ("CAPEX")

CAPEX was RMB174.5 million (US$27.0 million), or 2.4% of total revenue in the second quarter ended June 30, 2021, compared to CAPEX of RMB424.1 million, or 5.5% of total revenue, in the same period of 2020.

SHARES OUTSTANDING

As of the date of this press release, the Company had approximately 388.6 million ordinary shares outstanding^([10]). Each American Depositary Share represents one Class A ordinary share.

FINANCIAL GUIDANCE 

Based on current market conditions and operations, the Company expects its revenue for the full fiscal year of 2021 to be between RMB28 billion and RMB32 billion. This forecast reflects management's current and preliminary expectation, which is subject to change.

WEBCAST AND CONFERENCE CALL INFORMATION

The Company will hold a conference call at 9:00 pm U.S. Eastern Time on August 17, 2021 (9:00 am Beijing Time on August 18, 2021), to discuss its financial results and operating performance for the second quarter of 2021.

Participants may access the call by dialing the following numbers:

A replay of the conference call will be accessible through August 24, 2021 by dialing the following numbers:

Please visit the Company's investor relations website, located at https://ir.best-inc.com/, 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: https://www.best-inc.com/en/.  

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, 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)/income to EBITDA, adjusted EBITDA and adjusted EBITDA margin for the periods indicated:

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

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

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SOURCE BEST Inc.