Redfin Q2 2023 Earnings Call Transcript

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August 23, 2023

There are 3 speakers on the call.

Operator

Good day, and welcome to the BEST Inc. 2nd Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to Johnny Chao, Chairman and CEO.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and thank you for joining BEST's Q2 2023 earnings call today. We are reporting another outperformed quarter, achieving both top line growth and the bottom line improvements across our business. Our group gross margin turned positive at 4.2% in the 2nd quarter and we narrowed our net loss by 48.7% year over year. Best Freight and the Best Supply Chain Management each reached a non GAAP profitability and generated positive operating cash flow for the quarter.

Speaker 1

Meanwhile, BEST Global continued to bounce back From the impact of COVID, delivering improved revenue and gross margin with ongoing momentum in cross border volume and revenue on a quarter over quarter basis. Now let me review each of our business units in more detail. For Best Buy, Chinese economy's gradually recovering after COVID, which continued to weigh on the industry's recovery. With our focus on quality and operating excellences, Best Freight 2nd quarter volume and revenue grew by 7.2% and the 15.2% year over year, respectively. We have also made considerable gain With Freight's gross margin, it reached to 5.3% in Q2 compared with negative 7.8% in the same period a year ago.

Speaker 1

In addition, Freight achieved profitability for the quarter. As service quality remains the cornerstones of freight services, our focus moving forward will be on further improving Our core competencies in the market. We will continue to develop digital transformation to improve our operating efficiency and ability to provide our key accounts with high quality services. In addition, we will continue to synergize with BEST Supply Chain Management to capitalize additional business opportunities. We expect Best Freight to continue to be profitable in Q3 and Q4 this year with positive operating cash flow for the full year of 2023.

Speaker 1

Moving on to BEST Supply Chain Management. We continue to benefit from the market's increased demand For 3rd party integrated logistics services partners with a higher level of service offerings, With our capabilities in technology and integrated services, we are becoming more efficient and further differentiating best cross market. In the Q2, revenue from best supply chain management increased by 6 7% year over year as the gross margin reached to a record high of 10.9%. Furthermore, we continue to expand our customer base. In Q2, we brought in 36 new key accounts and the 33 new tender wins.

Speaker 1

Best Supply Chain Management's robust growth showcase that our strategy to continuously invest in and improve our digital transformation capabilities and drive synergies across our business is working. We are extending our services To cover more market segments and maximizing overlapping opportunities with BEST Global Supply Chain Management to generate ongoing profit and positive cash flow for the remaining quarters this year and for full year of 2023. Looking at the best global, as we continue optimizing Our organizational efficiency and developing our integrated logistics services capabilities in Southeast Asia, We are improving the service quality, network coverage and expanding our reach in cross border opportunities. On the appeals of COVID, BEST Global's business is showing clear signs of recovery. During the Q2, Our key account business has grown 25% quarter over quarter, driven by our robust cross border capabilities.

Speaker 1

Total volume for our cross border business in the 2nd quarter increased by approximately 54% quarter over quarter. We believe the steps we have taken place BEST Global on a firm path to growth And the profitability. As we continue to execute on our strategy in the second half of twenty twenty three, We expect Gogo's parcel volume to continue to increase quarter over quarter and its operating margin and the bottom line to show Steady improvements for the remainder of the year. In summary, we saw remarkable improvements Digital transformation continue to be our primary focus. In addition, leveraging synergies among our business units Differentiates our offerings and it gives us clear competitive advantage.

Speaker 1

We are confident that with this growth momentum, we are able to drive sustainable growth and the profitability in near future. With that, I would like to turn the call over to our CFO, Gloria, for further review of our Q2 financials. Go ahead, Luo.

Speaker 2

Thank you, Johnny, and hello to everyone. As we continue to accelerate the recovery of our business in the 2nd quarter, both Best Freight and Best Supply Chain Management delivered robust growth momentum and reached non GAAP profitability. Our group's gross margin turned positive and our net loss narrowed by 48.7% year over year. In addition, we have Due to our continuous effort in cost reductions and operating efficiency improvements, our balance of cash and cash equivalents, restricted cash And short term investments remained strong at RMB3.2 billion at the end of the second quarter. Moving to the details of our financials, our Total revenue for the Q2 was approximately RMB2.1 billion compared with RMB1.9 billion in the same period of 2022.

Speaker 2

The increase was primarily due to increased revenue of fast freight and the fast supply chain management. Our ongoing work To improve our operational efficiency and reduce costs continue to bear fruit. We reported gross Profit of RMB88.8 million for the quarter compared with a net compared with a gross loss of RMB89.3 million in the same period of last year. Accordingly, our gross margin percentage reached 4.2% compared with a negative 4.6% in the same period of last year. Our net loss from continuing operations in the 2nd quarter narrowed by RMB165.7 million to RMB174,400,000 from a net loss of RMB340,100,000 in the same period of 2022.

Speaker 2

Adjusted EBITDA from continuing operations improved in the 2nd quarter to negative RMB124.9 million compared with negative RMB270,300,000 for the same period of last year. With that overview, Let's move on to the key financial highlights for our business units. For Best Freight, 2nd quarter Revenue was approximately RMB1.4 billion compared with RMB1.2 billion for the same period of last year. The increase was primarily due to Increased freight volume and higher average selling price per ton. Freight gross margin percentage was 5.3%, a 13 percentage point improvement from the same period of last year.

Speaker 2

Adjusted EBITDA for Best Freight was RMB20.4 million, compared with negative RMB34.5 million in Q2 last year. Revenue for best supply chain management increased by 6.7% year over year in Q2 to RMB481.2 million and the gross margin of $18,000,000 recognized in Q2 last year. Adjusted EBITDA for Best Supply Chain Management improved by $13,500,000 compared with the same period of last year. For BEST Global, we are gradually recovering from the impact of COVID. Q2 revenue for BEST Global decreased by 0.7% year over year to RMB239.4 million, primarily due to the decrease in volume in tire.

Speaker 2

Its gross margin percentage was negative 20.2%, a decrease of 5 compared with negative RMB97.7 million in Q2 last year. Our operating expenses excluding share based compensation totaled RMB245.7 million or 11.5 percent of revenue, compared with RMB356.1 million or 18.4 percent of revenue in the same period of last year. Our operating expenses decreased by RMB110.4 million, representing a 31% decrease year over year. Selling, general and administrative expenses for Q2 were RMB216.6 million or 10.1 percent of our total revenue, which represented a 31.3% decreased year over year due to reduced headcounts and the better expenses. R and D expenses were RMB29.1 million or 1.4 This compared with RMB40.9 million or 2.1 percent of total revenue in Q2 last year.

Speaker 2

In summary, our stellar second quarter results highlight the effectiveness of our quality focused and technology driven strategies, And we believe BEST is on track and stepping firmly on a clear path toward our next stage of growth. For the second half of twenty twenty three, we expect BEST Freight and BEST Supply Chain Management to continue delivering profitability and For BEST Global, we expect a fast recovery of parcel volume and a much improved bottom line. This concludes our financial update. We will now open the call to questions. Thank you.

Speaker 2

Operator?

Operator

This concludes our question and answer session. I would like to turn the conference back over to John Liu Chow for any closing remarks.

Speaker 1

Thank you for joining our call. We appreciate your support of BEST. Please reach out to our Investor Relations team if you have any further questions. We look forward to speaking with you soon. Thank you very much.

Operator

The conference has now

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