BEST Inc. Announces Unaudited Second Quarter 2023 Financial Results

HANGZHOU, China, Aug. 24, 2023 /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, 2023.

Johnny Chou, Founder, Chairman and CEO of BEST, commented, “We outperformed in the second quarter by achieving both top-line growth and bottom-line improvements. At the Group level, our gross margin turned positive to 4.2% for the quarter compared with negative 4.6% for the same period of last year and we narrowed our net loss by 48.7% year over year. BEST Supply Chain Management achieved its second consecutive quarter of profitability and reached a record high gross margin of 10.9% while BEST Freight delivered a non-GAAP profitability in the second quarter. Both business lines generated positive operating cash flow for the quarter.”

“BEST Freight’s growth momentum has quickly accelerated. Its second-quarter volume and revenue grew by 7.2% and 15.2% year over year, respectively, with gross margin improving to 5.3%. We will continue to focus on service quality, operating efficiency, digital transformation and synergy with BEST Supply Chain Management and we expect BEST Freight to be profitable in both the third and fourth quarters, with positive operating cash flow for the year.”

“BEST Supply Chain Management continued to benefit from the market’s increased demand for third-party integrated logistics service partners with higher-level service offerings. With our capabilities in technology, we are becoming more efficient and are further differentiating BEST across the market. In the second quarter, revenue from BEST Supply Chain Management increased by 6.7% and gross margin increased by 2.7%, both year over year. We expect BEST Supply Chain Management to continue its profitability in the second half of the year and generate positive operating cash flow in 2023.”

“For BEST Global, as we continue to optimize our organization and integrated logistics service capabilities, we are improving our service quality and network coverage, as well as expanding our reach in cross-border opportunities. In the second quarter, BEST Global’s total volume for the cross-border business increased by approximately 54.1% quarter-over-quarter. Looking ahead, we expect Global’s parcel volume to continue to increase and its operating margin and bottom-line to show steady improvements.”

“In summary, we saw remarkable improvements across our business lines in the second quarter. Our primary focus remains on delivering best-in-class service quality, digital transformation and synergies among our business units. With this focus, we can drive sustainable growth and profitability in the near future.” concluded Mr. Chou.

Gloria Fan, BEST’s Chief Financial Officer, added, “As we continue to benefit from our effective strategic refocusing plan to achieve cost reductions and better operating efficiency, Group’s selling, general and administrative expenses in the second quarter decreased by 31.4% year over year. Our balance of cash and cash equivalents, restricted cash, and short-term investments remained strong at RMB3.2 billion at end of the second quarter. As we further strengthen our service capabilities, optimize our organizational structure and generate synergies among our business lines, we can capture growth opportunities and create long-term value.”

FINANCIAL HIGHLIGHTS^[1] 

For the Second Quarter Ended June 30, 2023:^[2]

• Revenue was RMB2,137.7 million (US$294.8 million), compared to RMB1,931.0 million in the second quarter of 2022. The increase was primarily due to increased revenue of BEST Freight and BEST Supply Chain Management.
• Gross profit was RMB88.8 million (US$12.2 million), compared to a gross loss of RMB89.3 million in the second quarter of 2022. The increase was primarily due to further improvements in operating efficiency for both Freight and Supply Chain Management. Gross profit margin was 4.2%, compared to a gross loss margin of 4.6% in the second quarter of 2022.
• Net Loss from continuing operations was RMB174.4 million (US$24.1 million), compared to RMB340.1 million in the second quarter of 2022. Non-GAAP net loss from continuing operations^[3][4] was RMB161.2 million (US$22.2 million), compared to RMB320.2 million in the second quarter of 2022.
• Diluted loss per ADS^[5] from continuing operations was RMB8.12 (US$1.12), compared to a loss of RMB16.57 in the second quarter of 2022. Non-GAAP diluted loss per ADS^[3][4] from continuing operations was RMB7.46 (US$1.03), compared to a loss of RMB15.56 in the second quarter of 2022.
• EBITDA^[6] from continuing operations was negative RMB138.1 million (US$19.0 million), compared to negative RMB290.3 million in the second quarter of 2022. Adjusted EBITDA^[6] from continuing operations was negative RMB124.9 million (US$17.2 million), compared to negative RMB270.3 million in the second quarter of 2022.

BEST Freight – As the market was gradually recovering and Freight continued to improve its service quality, its volume increased by 7.2% in the second quarter of 2023 year over year. BEST Freight’s non-GAAP net income of the quarter was RMB1.4 million, compared with a non-GAAP net loss of RMB54.6 million in the same period of 2022, primarily due to increased volume, higher average selling price per tonne and improved operating efficiency. As service quality remains the cornerstone of Freight’s service, its focus moving forward will be on further improving its operating efficiency and ability to provide the key account customers with high-quality services. In addition, Freight will continue to synergize with BEST Supply Chain Management to capitalize additional business opportunities.

BEST Supply Chain Management – Driven by its superb service quality and enhanced digital transformation capabilities, BEST Supply Chain Management continued its robust growth momentum in the second quarter. Its revenue increased by 6.7% while its distribution volume increased by 52.5% both year over year. BEST Supply Chain Management’s gross margin hit a record high of 10.9%, which led to a net profit of RMB9.4 million in the second quarter of 2023. Highlighting BEST Supply Chain Management as the solid foundation of our synergistic logistics ecosystem, we will continue to invest in and improve BEST Supply Chain’s digital transformation capabilities and drive synergies across our business lines.

BEST Global – In the second quarter, BEST Global continued its recovery post COVID. BEST Global’s volume increased by 5.5% year over year, while total volume of the cross-border business in the second quarter increased by approximately 54.1% quarter-over-quarter. BEST Global also continued its efforts to further reduce costs and improve its operating efficiency as well as expand the coverage for small- and medium-sized enterprises. As this momentum continues and incremental gains are made, the Company expects that BEST Global’s volume will continue to grow, and its operating margin and bottom line will continue to improve in the second half of 2023.  

Others – The Company continued to wind down its Capital business line and expects to complete the wind-down by the end of 2023.        

Key Operational Metrics 

FINANCIAL RESULTS^[7]

For the Second Quarter Ended June 30, 2023:

Revenue

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

• Freight Service Revenue was RMB1,392.6 million (US$192.1 million) for the second quarter of 2023, compared with RMB1,208.4 million in the same period last year. Freight service revenue increased by 15.2% year over year, primarily resulting from increases in both freight volume and average selling price per tonne.
• Supply Chain Management Service Revenue increased by 6.7% year over year to RMB481.2 million (US$66.4 million) for the second quarter of 2023, up from RMB451.0 million in the same period of last year, primarily attributable to an expanded customer base and increased volume from existing customers.
• Global Service Revenue decreased by 0.7% year over year to RMB239.4 million (US$33.0 million) for the second quarter of 2023 from RMB241.2 million in the same period last year primarily due to lower parcel volume in Thailand, which was partially offset by steady increases in parcel volume in Vietnam and Malaysia.

Cost of Revenue

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

• Cost of Revenue for Freight was RMB1,319.4 million (US$181.9 million), or 94.7% of revenue in the second quarter of 2023. The 13.0 percentage point year-over-year decrease in cost of revenue as a percentage of revenue was mainly due to higher volume and reduced unit cost.
• Cost of Revenue for Supply Chain Management was RMB428.9 million (US$59.1 million), or 89.1% of revenue in the second quarter of 2023. The 2.7 percentage point year-over-year decrease in cost of revenue as a percentage of revenue was primarily due to improved operating efficiency and optimized customer structure.
• Cost of Revenue for Global was RMB287.7 million (US$39.7 million), or 120.2% of revenue in the second quarter of 2023. The 5.5% year-over-year increase in cost of revenue as a percentage of revenue was primarily due to lower parcel volume in Thailand. 

Gross Profit was RMB88.8 million (US$12.2 million), compared to a gross loss of RMB89.3 million in the second quarter of 2022; Gross Margin was positive 4.2%, compared to negative 4.6% in the second quarter of 2022.

Operating Expenses

Selling, General and Administrative (“SG&A”) Expenses were RMB228.9 million (US$31.6 million), or 10.7% of revenue, in the second quarter of 2023, compared to RMB333.8 million, or 17.3% of revenue, in the same period of 2022. SG&A expenses in the second quarter decreased by 31.4% year over year due to reduced headcount and bad debt expense.

Research and Development Expenses were RMB29.9 million (US$4.1 million) or 1.4% of revenue in the second quarter of 2023, compared to RMB42.1 million or 2.2% of revenue in the second quarter of 2022, primarily due to reduced headcount.

Share-based Compensation (“SBC”) Expenses included in the cost and expense items above were RMB13.2 million (US$1.8 million) in the second quarter of 2023, compared to RMB19.9 million in the same period of 2022. Of the total SBC expenses, RMB0.05 million (US$0.01 million) was allocated to cost of revenue, RMB0.5 million (US$0.1 million) was allocated to selling expenses, RMB11.8 million (US$1.6 million) was allocated to general and administrative expenses, and RMB0.8 million (US$0.1 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 2023 was RMB174.4 million (US$24.1 million), compared to RMB340.1 million in the same period of 2022. Excluding SBC expenses, non-GAAP net loss from continuing operations in the second quarter of 2023 was RMB161.2 million (US$22.2 million), compared to RMB320.2 million in the second quarter of 2022.

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 2023 was RMB8.12 (US$1.12), compared to a loss of RMB16.57 in the same period of 2022. Excluding SBC expenses non-GAAP diluted loss per ADS from continuing operations in the second quarter of 2023 was RMB7.46 (US$1.03), compared to a loss of RMB15.56 in the second quarter of 2022. 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 2023 was negative RMB124.9 million (US$17.2 million), compared to negative RMB270.3 million in the same period of 2022. Adjusted EBITDA margin from continuing operations in the second quarter of 2023 was negative 5.8%, compared to negative 14.0% in the same period of 2022.

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

As of June 30, 2023, cash and cash equivalents, restricted cash and short-term investments were RMB3,177.5 million (US$438.2 million), compared to RMB4,413.0 million as of June 30, 2022. In 2022, the Company bought back approximately US$200 million (RMB1.4 billion) aggregate principal amount of its existing Convertible Senior Notes due 2024.

Net Cash Used In Continuing Operating Activities

Net cash used in continuing operating activities in the second quarter of 2023 was RMB158.0 million (US$21.8 million), compared to RMB304.8 million of net cash used in continuing operating activities in the same period of 2022. The decrease in net cash used in operating activities was mainly due to the decreased net loss in the second quarter of 2023. 

SHARES OUTSTANDING

As of August 11, 2023, the Company had approximately 397.6 million ordinary shares outstanding ^[9]. Each American Depositary Share represents twenty (20) Class A ordinary shares.

As previously announced, effective from April 4, 2023, the Company has changed the ratio of its American Depositary Shares to its Class A ordinary shares, par value US$0.01 per share, from the original ADS ratio of one (1) ADS to five (5) Class A ordinary share, to a new ADS ratio of one (1) ADS to twenty (20) Class A ordinary shares.

FINANCIAL GUIDANCE 

The Company confirms its guidance for total revenue between RMB8.5 billion and RMB9.5 billion for the full year of 2023.

This forecast reflects the Company’s current and preliminary view based on its current business situation and market conditions, which are 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 23, 2023 (9:00 am Beijing Time on August 24, 2023), to discuss its financial results and operating performance for the second quarter of 2023.

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           : 5464411

A replay of the conference call will be accessible through August 31, 2023 by dialing the following numbers:

United States                                       : +1-877-344-7529

International                                         : +1-412-317-0088

Replay Access Code                            : 9570777

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 Southeast Asia. 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/.   

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.

RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE GAAP MEASURES

For the Company’s continuing operations, 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:

For the Company’s continuing operations, the table below sets forth a reconciliation of the Company’s net (loss)/income to non-GAAP net Income/(loss), non-GAAP net Income/(loss) margin for the periods indicated:

For the Company’s continuing operations, the table below sets forth a reconciliation of the Company’s diluted loss per ADS to Non-GAAP diluted loss per ADS for the periods indicated:

^{[1] All numbers presented have been rounded to the nearest integer, tenth, or hundredth, and year over year comparisons are based on figures before rounding.                     
[2] In December 2022, BEST sold its China express business, the principal terms of which were previously announced. As a result, China express business has been deconsolidated from the Company and its historical financial results are reflected in the Company’s consolidated financial statements as discontinued operations accordingly. The financial information and non-GAAP financial information disclosed in this press release is presented on a continuing operations basis, unless otherwise specifically stated.
[3] Non-GAAP net income/loss represents net income/loss excluding share-based compensation expenses, amortization of intangible assets resulting from business acquisitions, and fair value change of equity investments (if any).
[4] See the sections entitled “Use of Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.
[5] Diluted earnings/loss per ADS, is calculated by dividing net income/loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares expressed in ADS outstanding during the period. 
[6] EBITDA represents net income/loss excluding depreciation, amortization, interest expense and income tax expense and minus interest income. Adjusted EBITDA represents EBITDA excluding share-based compensation expenses and fair value change of equity investments (if any).
[7] All numbers represented the financial results from continuing operations, unless otherwise stated.               
[8] “Others” Segment primarily represents Capital business unit.
[9] The total number of shares outstanding excludes shares reserved for future issuances upon exercise or vesting of awards granted under the Company’s share incentive plans.
[10] Unallocated expenses are primarily related to corporate administrative expenses and other miscellaneous items that are not allocated to individual segments.}