HANGZHOU, China, Aug. 13, 2019 /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, 2019.

"BEST's integrated supply chain and logistics networks continued to deliver strong results despite competitive market dynamics and ongoing industry consolidation. I am pleased to report we reduced net loss significantly year-over-year while achieved positive non-GAAP net income for the first time during a second quarter. Our core segments of Express, Freight, and Supply Chain Management continued to gain market shares, lower costs and improve operating efficiency, while Store⁺ continued to optimize its operation to reduce losses. Others segment delivered tremendous growth and is contributing to future growth of the Company," said Johnny Chou, Chairman and Chief Executive Officer of BEST. "Looking ahead, we are focused on executing our strategy of achieving solid revenue growth, market share gain, cost structure improvement, quality of service, profitability and investing in the future. I'm more confident than ever that our technology enabled integrated supply chain and logistics platform is the right formula for long-term success."       

"We had a strong second quarter. The Company's revenue was RMB8.8 billion, representing a year-over-year increase of 30.5%. Revenue ex-Store⁺ business increased by over 34.8% year-over-year. We recorded adjusted EBITDA of RMB148.2 million, an improvement of 256% year-over-year; adjusted EBITDA ex-Store⁺ was RMB 247.2 million. Non-GAAP net income was RMB6.5 million compared to non-GAAP net loss of RMB55.5 million year-over-year; non-GAAP net income ex-Store⁺ was RMB107.0 million," said Jenny Pan, BEST's principal accounting officer. "We believe our continued focus on top-line growth combined with operational efficiency and excellence will keep us on track to achieve our goal of turning net income positive for the full year 2019."     

FINANCIAL HIGHLIGHTS

For the Quarter Ended June 30, 2019:

• Revenue was RMB8,788.1 million (US$1,280.1 million), an increase of 30.5% year-over-year ("YoY"). Revenue ex-Store⁺ was RMB7,997.6 million (US$1,165.0 million), an increase of 34.8% YoY.
  - Express Service Revenue increased 30.4% YoY to RMB5,446.4 million (US$793.4 million).
  - Freight Service Revenue increased 26.8% YoY to RMB1,305.8 million (US$190.2 million).
  - Supply Chain Management Service Revenue increased 20.1% YoY to RMB598.7 million (US$87.2 million).
  - Store⁺ Service Revenue decreased 1.0% YoY to RMB790.6 million (US$115.2 million).
  - Others^[1] Service Revenue increased 183.1% YoY to RMB646.6 million (US$94.2 million).
• Gross Profit was RMB520.1 million (US$75.8 million), an increase of 24.5% YoY; and Gross Profit Margin was 5.9%, a decrease of 0.3 percentage points YoY. Gross Profit ex-Store⁺ was RMB437.0 million (US$63.7 million), an increase of 23.5% YoY; and Gross Profit Margin ex-Store⁺ was 5.5%, a decrease of 0.5 percentage points YoY.
• Net Loss was RMB22.4 million (US$3.3 million), an improvement of 76.1% YoY; and Non-GAAP Net Income^[2][3] was RMB6.5 million (US$0.9 million), compared to Non-GAAP Net Loss of RMB55.5 million in the same period of 2018. Net Income ex-Store⁺ was RMB81.8 million (US$11.9 million); and Non-GAAP Net Income ex-Store^+[2][3] was RMB107.0 million (US$15.6 million).
• Diluted EPS^[4] was negative RMB0.05 (US$0.01), compared to negative RMB0.25 in the same period of 2018; and Non-GAAP diluted EPS^[3][5] was RMB0.02 (US$0.003), compared to negative RMB0.15 in the same period of 2018.
• EBITDA^[3][6] was RMB122.0 million (US$17.8 million), compared to RMB6.4 million in the same period of 2018; and Adjusted EBITDA^[3][6] was RMB148.2 million (US$21.6 million), compared to RMB41.6 million in the same period of 2018. EBITDA^[3][6] ex-Store⁺ was RMB222.9 million (US$32.5 million); and Adjusted EBITDA^[3][6] ex-Store⁺ was RMB247.2 million (US$36.0 million).
• Net Cash Generated from Operating Activities was RMB334.2 million (US$48.7 million), compared to RMB432.4 million in the same period of 2018.

BUSINESS HIGHLIGHTS^[7]

BEST Express:

• Strong growth and market share gain: Express parcel volume increased by 49.0% in the second quarter of 2019, compared to industry wide YoY growth rate of 28.4%^[9]; increased express market share to 12.2%, compared to 10.5% in the same period of 2018.
• Continued unit cost reduction: Reduced average cost per parcel by 11.6% to RMB2.73 in the second quarter of 2019, compared to RMB3.08 in the same period of 2018.
• Continued optimization of operating network: Further reduced the number of hubs and sorting centers to 97 from 128 as of June 30, 2018.
• Technological advancement: Continued to invest in automation and digitalization in major hubs and sorting centers, with 75 automated sorting and 732 dimension and weight scanning systems in operation as of June 30, 2019. Digital waybill usage was 100% in the second quarter of 2019.

BEST Freight:

• Strong volume growth: Freight volume increased by 26.6% YoY in the second quarter of 2019, significantly higher than the industry-wide growth.
• Continued network optimization: Consolidated and reduced total number of hubs and sortation centers by 20.5% to 101 as of June 30, 2019, resulting in lower transportation and labor cost, while shortened delivery time.
• Gross profit margin improvement: Gross profit margin increased by 1.2 percentage points YoY to 6.4% in the second quarter of 2019.
• Service coverage expansion: The total number of last-mile service stations operated by franchisee partners increased by 55.1% to 17,380 as of June 30, 2019.

BEST Supply Chain Management:

• Continued solid growth: The total number of orders fulfilled by Cloud OFCs increased by 41.7% YoY to 86.7 million in the second quarter of 2019, of which the total number of orders fulfilled by franchised Cloud OFCs increased by 78.5% YoY to 36.6 million.
• Gross profit margin improvement: The gross profit margin improved by 1.0 percentage points YoY to 8.7% in the second quarter of 2019.
• Strong expansion of corporate customer base: Added 35 new customers in the second quarter of 2019, including major global brands, and increased the total number of corporate customers to 658.
• Strong growth in franchised Cloud OFC business: Increased the total number of Cloud OFCs to 370 from 346, of which franchisees owned and operated 259 Cloud OFCs; managed over 2.8 million square meters of facilities as of June 30, 2019, compared to 2.4 million square meters as of June 30, 2018.

BEST Store⁺:

• Profitability improvement: Continued to improve the profitability of the business by growing the number of higher quality franchised BEST-Neighbor stores while improving order quality of membership stores. As a result, total number of all orders fulfilled decreased by 13.2%, while gross profit margin improved by 2.5 percentage points YoY to 10.5%.
• Strong network expansion: Total number of branded stores including franchised BEST-Neighbor and WoWo stores increased by 315.2% YoY to 3,106 as of June 30, 2019 of which the number of BEST-Neighbor stores increased to 2,761 from 476 as of June 30, 2018. Total number of membership stores increased to 438,140 as of June 30, 2019, compared to 397,289 as of June 30, 2018.
• Significant increase in orders fulfilled for branded stores: Total number of orders fulfilled for branded stores increased by 62.9% YoY to 214,417 in the second quarter of 2019, accounting for 28.4% of total orders fulfilled. This represents a 13.3 percentage-point increase from the same period last year.

Others:

- BEST UCargo:

• Rapid scaling of network: The number of registered agents on the platform increased by 22.4% YoY to 4,830 as of June 30, 2019 from 3,947 as of June 30, 2018; increased the number of registered trucks by 32.9% YoY to 295,440 as of June 30, 2019 from 222,362 as of June 30, 2018.
• Significant increase in transaction volume and revenue: The number of total transactions increased by 19.4% YoY to 114,538, of which external transactions increased by more than 3.6 times to 94,406; revenue generated from external customers increased significantly to RMB521.8 million (US$76.0 million), which accounted for 5.9% of the Company's total revenue in the second quarter of 2019.

- BEST Global:

• International service coverage expansion: Provided international service coverage in 18 countries and regions outside Mainland China as of June 30, 2019.
• Continued expansion in Southeast Asia: BEST Global readied to launch nationwide express delivery service in Vietnam. Continued to develop and expand coverage in Thailand: self-operated six hubs and sortation centers, and one Cloud OFC, with 86 franchised last-mile service stations as of June 30, 2019.

- BEST Capital:

• As of June 30, 2019, BEST Capital had cumulatively provided financing solutions for the purchase of 9,465 trucks, an increase of 84.6% compared to June 30, 2018.

FINANCIAL RESULTS

For the Quarter Ended June 30, 2019:

Revenue

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

• Express Service Revenue increased by 30.4% YoY to RMB5,446.4 million (US$793.4 million) from RMB4,177.2 million, primarily due to 49.0% YoY increase in parcel volume.
• Freight Service Revenue increased by 26.8% YoY to RMB1,305.8 million (US$190.2 million) from RMB1,029.7 million, primarily due to 26.6% YoY increase in freight volume.
• Supply Chain Management Service Revenue increased by 20.1% YoY to RMB598.7 million (US$87.2 million) from RMB498.5 million, primarily due to an increase in fulfillment and transportation revenue from both existing and new customers.
• BEST Store⁺ Service Revenue decreased by 1.0% YoY to RMB790.6 million (US$115.2 million) from RMB798.5 million, primarily due to a decrease in the number of orders fulfilled for membership stores resulting from ongoing efforts to improve order quality and margins.
• Others Service Revenues increased by 183.1% YoY to RMB646.7 million (US$94.2 million) from RMB228.5 million, primarily due to increased revenue generated from BEST UCargo's external customers, BEST Global's expanded operations and BEST Capital's financing solutions to ecosystem participants.

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 RMB8,268.1 million (US$1,204.4 million) or 94.1% of revenue in the quarter ended June 30, 2019, compared to RMB6,314.7 million or 93.8% of revenue in the same quarter of 2018. The increase of 0.3 percentage point in cost of revenue as a percentage of revenue was primarily attributable to increased express market competition, which was partially offset by continued efforts in cost reduction, network optimization and operational improvement.

Gross Profit was RMB520.1 million (US$75.8 million), a YoY increase of 24.5% compared to RMB417.6 million in the same quarter of 2018. Gross Profit Margin was 5.9%, compared to 6.2% in the same quarter of 2018. Gross Profit ex-Store⁺ was RMB437.0 million (US$63.7 million), an increase of 23.5% YoY; and Gross Profit Margin ex-Store⁺ was 5.5%, a decrease of 0.5 percentage points YoY.

Operating Expenses

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