BingEx Q3 2024 Earnings Call Transcript

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November 27, 2024

There are 5 speakers on the call.

Operator

Good day, and welcome to Binax 20 24 Third Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Helen Wu from the Piacente Group. Please go ahead.

Speaker 1

Thank you, operator. During today's call, we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations of today. Actual events or results could differ materially from those mentioned in today's earnings release and in the discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC. The non GAAP financial measures we provide are for comparison purpose only, the definition of these measures and a conciliation table available in the news release we issued earlier today.

Speaker 1

As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on the Bin Yex IR website at ir. Ishanzhong.com. Joining us today from Binax Senior Management are Mr. Adam Xue, Founder, Chairman of the Board and Chief Executive Officer Mr.

Speaker 1

Hong Jianyu, Co Founder, Director and Executive President and Mr. Luke Tang, Chief Financial Officer. I will now turn the call over to Mr. Adam Xue.

Speaker 2

Thank you. Hello. This is Adam speaking. Hello, everyone, and welcome to BNEX 20 24 Q3 earnings conference. We are thrilled to share our financial results and business development with you for the first time as a publicly listed company.

Speaker 2

2024 marks a decade of growth and innovation for BINGEX since our founding in 2014. Over the past 10 years, we have remained committed to our unique one to one delivery model, providing seamless point to point services to meet users' needs. We believe that every order represents the trust and the confidence our users place in us, and every delivery builds a meaningful connection. Our success is driven by our relentless pursuit of service excellence, care for our dedicated flash riders and steadfast commitment to social responsibility. As we expand our market presence, our brand value grows even stronger.

Speaker 2

We submitted our initial listing application in mid-twenty 21. Over the next 2 years, we focused on enhancing our business operations and data protection capabilities to meet the newly introduced listing regulations and comply with policies and review requirements. This exciting chapter in our company's story provided us with valuable market insights and a great opportunity to thoroughly review and refine our business operations and processes. Our leasing process provided invaluable insights into the responsibilities and expectations associated with operating as a public company. Staying true to our mission, we remain committed to addressing users' needs, fine tuning service processes and optimizing operational efficiency.

Speaker 2

Thanks to those efforts and the unwavering dedication of all BingX employees, the company has achieved steady growth with great improvements in profitability. Today, BingX is a household name, widely recognized as a go to brand for on demand dedicated delivery service. In October 2024, BINGEX successfully went public on NASDAQ, raising over $60,000,000 This landmark achievement not only stands as a testament to our past success, but also marks the next chapter in our growth story. Today, we are pleased to announce that in the Q3 of 2024, the company delivered a strong and resilient since inception. Over the past decade, we have adhered and refined our 1 to 1 delivery model, avoiding joint orders to ensure that each flash riders serve a single user from pickup to delivery.

Speaker 2

This exclusive point to point approach enhances services efficiency and reliability with a personalized delivery experience tailored to each user's unique requirements. As of September 2024, Bing EX high quality 20 fourseven services have expanded to 2 95 cities nationwide. Our 1 to 1 delivery model guarantees minimal transit time, direct point to point delivery and no mix orders, effectively preventing the risk of errors, contamination or atom loss. It also ensures enhanced security and reliability for critical deliveries. Our service is particularly advantageous for categories with high demands around timeliness, safety and customer experience such as food, cakes, documents and fresh flowers.

Speaker 2

In the Q3, we further strengthened our fulfillment capabilities and achieved an order completion rate of 87% across more than 400 categories. This outstanding performance reinforces our brand's competitive edge and solidifies our market leadership. Notably, items requiring stringent safety measures accounted for over 70% of total orders, highlighting users' confidence in Bing EX's distinctive service model. At Bing EX, we prioritize user experience and service quality by minimizing response times, accelerating pickup and delivery speed, optimizing rider routes and refining service details. We strive to constantly exceed user expectations.

Speaker 2

Research shows that as younger and middle age generations increasingly drive consumption spending, delivery demands are evolving rapidly. Users are increasingly depend on delivery services with speed and quality and quality emerging as a key factor influencing individual users' choices in the on demand delivery market. Also, driven by the rise of experience economy, consumers now place emotional value on service experiences across various sectors. On demand delivery is no exception. Beyond meeting users' functional needs, delivering emotional value through services is being increasingly important.

Speaker 2

As of September 2024, our total registered users exceeded 90,000,000, representing a 27% year over year increase. In terms of service quality, we have achieved an average delivery time of 27 minutes for intra city deliveries. This exceptional service has earned us a widespread acclaim and strong customer loyalty, making BinEX the preferred choice for urgent delivery needs. Bing EX is committed to deliver high quality services, not only to individual users, but also to business users. Our one to one service model has constantly been validated by business owners across different sectors, with broad expansion across various different scenarios.

Speaker 2

With the rapid growth of instant retail, Bing EX has forged strong partnership with business owners in premium dining, home appliance, appliance and 3C electronics among other sectors. Our services import these partners to deliver high value products and in house experiences to their customers. In the premium restaurant sector, BINGEX' 1st and precise delivery services enable food and city aids to enjoy their meal properly. This enhances the dining experience, helping restaurants attract more customers and build greater brand recognition. In the home appliance and 3C electronics sectors, BEX's dedicated riders ensure the safe, the speed and secure delivery of electronic and household products, building trust between customers and merchants.

Speaker 2

Additionally, BINGEX is actively partnering with emerging new retail platforms to establish a comprehensive ecosystem for the instant delivery industry, bringing customers a safer and faster shopping experiences. Looking ahead, Bing EX will continue to focus on user needs, enhance personalized service experiences, expand category coverage and explore additional collaborative opportunities with commercial partners. BINGEX invests deeply in technology to fuel our growth. On the past decade, we have built a unique big data algorithm model based on our accumulated delivery data. Leveraging this model, we have developed a dynamic intelligent scaling system that balances supply and demand between orders and rider capacity.

Speaker 2

This is optimized resource allocation, significantly boosted rider efficiency and enhanced our user experience. We have also upgraded our order matching system, maximizing efficiency and accuracy across the dispatch process. This advancement not only elevates user experience, but also consistently improves our optional performance. Bing EX's success relies on our dedicated flash riders. Over the past decade, we have built a large and highly skilled rider team with approximately 2,740,000 registered riders as of September 2024.

Speaker 2

Each of our riders exclusively serve a single user with each delivery, upholding our commitment to safety and timely service. Our personalized approach honors our service pledge, while convening warmth and care, ensuring that each delivery is thoughtful, precise and punctual. Consequently, our flash riders have earned the trust and respect from our users. Our unique one to 1 service model has attracted a growing number of riders across every corner of our 2 95 cities served, bringing them closer to users and significantly reducing pickup times. As order volume rise and our matching system precession continues to improve, Our riders' incomes are also increasing.

Speaker 2

This has created a self reinforcing flywheel effect. Shorter pickup times lead to enhanced service quality, which in turn drives a steady increase in order volume. As a result, BINGEX has developed an increasing robust scale effect, further strengthening our competitive advantage. At Bing EX, we firmly believe that the rider experience is as crucial as a user experience. We deeply value our riders as partners and essential contributors to the company's success.

Speaker 2

To ensure that our riders enjoy stable income, a strong sense of belonging and personal fulfillment in the work. We created a dedicated Flash rider care and support team. We also established 11 riders' homes across 10 cities nationwide. These pit stops or warm homes serve as rest areas and emotional havens for our riders, convening our care for their physical and mental well-being. Furthermore, we have introduced a series of tailored support initiatives, including regular training sessions designed to enhance riders' social recognition and professional pride, empowering them to become carriers of good deeds and spread positive energy.

Speaker 2

For high performance riders, we offer clear advancement opportunities, inviting them to join the BNX team and continue to the company's growth firsthand. Also, since 2018, we have celebrated Flash Riders Day each November 23, providing our riders with various benefits and activities to express our sincere gratitude and recognition for their hard work and dedication. As a pioneer of the on demand dedicated delivery industry, BinEX has adhered to its core service philosophy of delivering with companies since our inception in 2014. Now as a publicly listed company, we have an even more profound understanding of the responsibility we carry. We will remain dedicated to our founding mission of acting with altruism, constantly delivering exceptional service experiences to our users, while embracing our social responsibilities and creating long term value.

Speaker 2

As we embark on this new chapter, BEX will continue to enhance and solidify our 1 to 1 delivery service model. To that end, we will increase our technology investments, expand our city penetration and diversify our service offerings. By increasing order density and optimizing operational efficiency, we aim to strengthen VENEX flywheel effect, driving the company's growth and the on demand dedicated delivery industry's sustainable development. Now I'd like to hand the call over to our CFO, Luke, who will share our financial performance for this quarter. Thank you.

Speaker 3

Thank you, Adam. Hello, everyone. This is Luc. For a closer look at our financial results, we encourage you to refer to our earnings release issued earlier today. As a reminder, all amounts are in RMB unless otherwise noted.

Speaker 3

We are pleased to deliver a strong and resilient set of results in our first earnings report following our IPO, thanks to our unwavering commitment to disciplined cost management. In this Q3, gross profit grew by 20.9% year over year with gross margin improving by 2.3 percentage points. Additionally, our non GAAP net income surged by 64.8% from the same period of last year, with non GAAP net profit margin raising by 2.1 percentage points to 5%. I will now provide an overview of our financial results for the Q3 of 2024. Total revenues for the quarter reached CNY 1 point 15,000,000,000 compared with CNY 1,190,000,000 in the same period of 2023.

Speaker 3

The slight year over year decline was primarily driven by a decrease in ASP as we strategically expanded our presence in lower tier cities and the deepened partnership with business users. Our cost of revenues decreased by 5.7% year over year to CNY102 1,000,000,000 in the 3rd quarter, primarily due to the decrease in flash riders' remuneration and the incentives to fulfill orders. As a result, our gross profit rose to RMB130 1,000,000 up 20.9% year over year. Our gross profit margin in the 3rd quarter was 11.3%, up from 9% in the same period of 2023. Turning to operating expenses.

Speaker 3

Our total operating expenses decreased by 7.8% year over year to CNY84.2 million in the 3rd quarter. Selling and marketing expenses were RMB43.9 million, remaining flattish year over year. General and administrative expenses decreased significantly by 30 3% year over year to CNY80.1 million, mainly due to lower staff costs and the professional service fees. The research and development expenses were CNY22.2 million, representing a 6.8% increase year over year. In the Q3, we delivered income from operating of RMB46.2 million, a significant increase of 178% year over year, mainly benefiting from gross profit margin expansion and improved operational efficiency.

Speaker 3

Other income was CNY5.8 million in the 3rd quarter compared with CNY11.8 million in the same period of 2023. The decrease was primarily due to lower amount of government grants. Our net income was CNY23.8 million in the 3rd quarter compared with the BRL35 1,000,000 in the same period of 2023. The decrease was mainly due to CNY33.8 million of losses from fair value measurements of long term investments in the 3rd quarter. Excluding the impact of the changes in fair value of long term investments, our net income for the quarter amounted to RMB 57.6 million.

Speaker 3

Let's now take a look at our non GAAP net income, which reached RMB57.6 million, representing a year over year surge of 65 0.8%, attributable to our operational efficiency improvement. Non GAAP net margin rose to 5% in the 3rd quarter, up from 2.9% in the same period of 2023. We maintained a healthy and a strong balance sheet with cash and cash equivalents totaling RMB517 1,000,000 as of September 30, 2024. As we approach the year end of 2024, we remain committed to further optimizing our cost efficiency, solidifying our market leadership and creating long term value for our shareholders and stakeholders. That concludes our prepared remarks.

Speaker 3

We do like to open the floor to your questions. Operator, please go ahead.

Operator

Thank you. We will take our first question.

Speaker 1

Hello, operator.

Operator

Your first question comes from the line of Jessie Zhu from Deutsche Bank. Please go ahead. Your line is open.

Speaker 4

Hi. Hi, good evening, Hyezung, Tang Zhong. Jesse Xu from Deutsche Bank. Big congratulations on successful listing and very resilient performance in a challenging environment. So my first question is about macro and also industry competition.

Speaker 4

We noticed that the year on year growth rates of order volume slightly moderated in the 3rd quarter compared with the first half of this year. My understanding is that it might be a mixed result of weak macro as well as industry competition. So management share some of your observations on these two fronts. For example, what is new and what has been changing? My second question is about cost efficiency.

Speaker 4

Very impressed on your cost control and operating leverage over the past few quarters. So could management elaborate a little bit more on the measures that you've been you've taken? And how should we think about the potential upside in cost efficiency in the future? Thank you.

Speaker 2

Operator,

Speaker 1

thank you.

Operator

Please continue to stand by. We seem to have some technical sound issues. Please stand by.

Speaker 1

Hello, operator?

Operator

Excuse me. This is the operator. You are able to be heard.

Speaker 1

Hello, operator? Can you hear

Speaker 4

me? Hi.

Operator

Hello. This is the operator. Yes. You can be heard from the speaker line. Are you able to hear me?

Speaker 1

Yes, we do. Yes. Give me a second.

Operator

Jessie Zhu, please continue to stand by. I may need you to repeat your questions. Please stand by. Sure.

Speaker 1

Operator, can you hear us now? The main light.

Operator

I can hear you. Can you confirm that you can hear me?

Speaker 1

Yes, we do. So we'll go ahead with the Okay. Sorry.

Operator

Yes. So we have Jesse Zhu's line open from Deutsche Bank. Jesse Zhu, please ask your questions.

Speaker 4

Sure. Thank you. Can you hear me?

Speaker 3

Yes, very well.

Speaker 4

Great. Good evening, Shao and Tong Zhong. Big congratulations on successful listing and very resilient performance in the challenging environment. I have two questions. The first question is about macro and industry competition.

Speaker 4

We noticed that the young year growth rate of order volume slightly moderated in the third quarter compared with the first half of this year. My understanding is that it might be a mixed result of weak macro as well as competition. So could management share some of your observations on these two fronts? For example, what is new? What has been changing?

Speaker 4

My second question is about cost efficiency. We are actually very impressed on your cost control and operating leverage over the past few quarters. Could management elaborate a little bit more on the measures that you've taken? And how should we think about the potential upside in cost efficiency in the future? Thank you.

Speaker 3

Yes. Thank you, Jesse, and thanks to you for your questions. This is Luke Tang. And I will answer your questions about the Q3 revenue growth and macro environment. And I will hand over the questions about the industry competition and the cost efficiency to Adam Xue.

Speaker 3

Now let me answer your first questions about the revenue growth. We can see that there was a slightly decline in the 3rd quarter revenue and which was primarily due to a drop in the ASP. And this decrease was mainly driven by a growing proportion of business users and the customer interest and also the company's efforts to expand the penetration in lower tier cities. We also provided business users with relatively more subsidies compared to individual users, which had a short term impact on revenue. However, from a long term perspective, our goal is to have more business user to experience the FlashX's unique one to one dedicated delivery model and see how it can help them to improve service quality, strengthen their brand and attract more customers.

Speaker 3

This has in turn enhanced the thickness of these business users to our platform. And about the macro environment, I should say that we did see a lot of efforts and a series of effective policies have led to a moderate recovery in the new retail industry over the past few months. And we also see that as the younger and middle aged customers become the main drivers of spending, the overall delivery preference are evolving. This were a clear increase in demand for time efficiency in the on demand delivery service industry and a growing reliance on these offerings. Furthermore, business users are focusing on the customer experience, making delivery speed and quality just as important as the product quality.

Speaker 3

And now I will hand over the remaining questions to Adam Xue. Okay.

Speaker 2

Thank you, Luke, and thank you, Justin, for your question. This is Adam speaking. And then I will talk about the competition. Well, competition within the industry has always been constant. We believe that healthy competition encourages all service providers to prioritize users, strengthen their operations, refining processes and improve efficiency.

Speaker 2

This is not only enhances the experiences for individual users, but also help business users achieve and even exceed the service standards. Within the broader instant delivery industry, there are many subsectors, each with its own space and potential for growth, as well as unique advantages for different service providers. This is high growth industry with continuous new events. We believe that competition in the industry may intensify in the future, but this will not change the company's first move of advantage, brand strength and service excellence. BEX's 1 to 1 delivery model effectively meets users' specific need for time limits, safety and reliability.

Speaker 2

Our differentiated high quality service address key pinpoints pain points that order merge model cannot. More importantly, our 1 to 1 dedicated service, wherein each order is handled by a single rider with no other stop along the way, offer greater efficiency and personalization beyond fulfilling basic delivery needs. This dedicated service adds emotional value to the users' experience throughout the delivery process. Today, Flash EX has become a household name and synonym for the intercity instant delivery industry. Looking ahead, we will continue to upgrade our order matching system to enhance efficiency and accuracy, further improving service quality.

Speaker 2

At the same time, we will expand service scenarios and steadily grow FlashX market share. And then I will talk about the potential upside in cost efficiency in the future. 1st, Flash EX maintains a relative healthy cost structure with a stable proportion of fixed costs. As the company expands, we can achieve growth in a highly cost effective manner. On the cost side, as a number of orders increases, it will become easier to meet rider's basic income needs, making room to reduce the spending to revenue ratio for riders.

Speaker 2

This will ultimately improve gross margin. Regarding expenses, since the Flash EX brand enjoys strong recognition, we can largely rely on word-of-mouth and organic traffic growth, allowing us to control market promotion costs. In the long run, we believe further profitability improvement will primarily be driven by revenue growth rather than cost savings as we always prioritize service quality. Thank you. And operator, we are ready for the next question.

Operator

Thank you. We will take our next question. Your next question comes from the line of Sifan Zhang from CICC. Please go ahead. Your line is open.

Speaker 4

Thank you, the management team, for taking my question. And congratulations on successful listing. I'm Sifan Zhang from CICC. My question is about the unit economy. I want to ask I would like to ask about what are the changes of the unit economy and rider remuneration in the Q3 of 2024?

Speaker 4

And what will be the outlook for the future? Thank you.

Speaker 3

Yes. Thank you, Sifan. And this is Luke. I will answer your questions about the UE. And you know that the company's overall UE model performed very well, and our UE model has a healthy cost structure.

Speaker 3

The main proportion of our cost is rider's remuneration and incentives. So we do see the cost of revenue structure has been continuously optimized. And you can see that the proportion as a percentage of revenue also gradually decreased, which expanded the company's GP. And also, you can see that the lower proportion of the revenue channeled into marketing also can help us to leverage our expenses and the cost structure. And also, thanks to the unique business model and the robust brand recognition model, we our marketing expenses are mainly used for the brand building and rather than the user subsidy.

Speaker 3

So in turn, we can see that the expenses, especially the selling and the marketing expenses, are relatively stable. And we can also see that the general and administrative expenses and the R and D expenses slightly decreased. And we also see that there's some positive marketing expansion potentials for us, but we are very conservative to any chances for that. So for the time being, we do like to stick with the 1 on 1 or the dedicated business model and to extend the business scale and to use the scale of economic scale ability to leverage our whole market. So for the time being, we can see that the leverage shows the great trend and the company and the platform also earned the profit.

Speaker 3

And we also see the an 8 consecutive profitable quarters. So we do see this business or this industry is a profitable business, and we also will stick with such industry. This is the strategy for now. Hope this helps can help you understand our recent thinking. So hope it can help.

Speaker 3

Yes, thank you.

Operator

Thank you. And that concludes the question and answer session. I will now turn the call over to Helen Wu for closing remarks.

Speaker 1

Thank you once again for joining BNX Q3 2024 Financial Results and Business Updated Conference Call today. If you have any further questions, please contact the IR team at BINX OR Piacente Financial Communications. Thank you, and have a great day.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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