Q2 2020 BEST Inc Earnings Call
Good morning, and good evening, ladies and gentlemen.
Thank you for standing by welcome to Best Inc.'s second quarter 2020 earnings Conference.
At this time, all participants ordinary listen only mode.
Following management's prepared remarks, there will be a question that some stress.
Well, that's today or Johnny child, Best Inc.'s, Chairman and CEO and Gloria fan.
The financial Officer.
Today's agenda, Johnny will give a brief overview of bears.
An operational highlights then Gore will explain the details <unk> financial results. Following the prepared remarks, you may ask your question. Please.
Please note. This call is also being webcast on besting our website <unk>.
I, our Dod best age.
Dot com.
A replay of this call will be available after the call an investor relations.
He's been Investor presentation is also available on the our web site.
Before it begins I will read the safe Harbor statement on behalf of backstage.
Today's discussion will contain forward looking statements.
These forward looking statements are based on managements current expectations. They involve inherent risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the management's control. The company does not undertake any obligation to update any form.
Looking statements as a result of new information feature events, where others.
Except as required under applicable law [noise].
Please also note that certain financial measures at the company uses on this call or expressed on a non-GAAP basis, such as even though.
Just to be but.
Non-GAAP net loss.
The GAAP results and the reconciliation of GAAP to non-GAAP measures can be filed and best Inc.'s earnings press release.
Finally, please note that unless otherwise stated.
Oh the figures mentioned during this conference call are in RMB.
Now I'd like to turn the call over to Mr. Johnny child.
Men and CEO of Best age Johnny Please go ahead Sir.
[noise]. Thank you operator, good morning, and the evening everyone.
Welcome and thank you Johnny I, what I can call [noise].
We have right off the Kogan notching endemic in China behind Us.
We made a faster than expected recovery as we benefited from the deeper and wider trends how bigger hydration.
Well my chance and the online shopping for consumers.
Your second quarter of 2020.
Strategically how do the post topline growth.
Profitability, while enhancing efficiency cost salad business.
As a result, we continue to paying healthy volume gross well lowering cost you know express and afraid settlements.
Cool, our gross margin by 0.9 percentage points year over year.
Despite challenging market dynamics.
We also continued to make strong progress installed Clos.
What's your is already in place significant reduction losses.
We are confident data, we have give a lot a REIT business model for small class.
We'll bring a positive impact total company revenue growth and profitability.
Oh Man has also been strong full global.
Good little by Little Basket Magnum Southeast Asia and.
And a further boosted by our entries into Maki itself, Malaysia, Singapore, and Cambodia during the second quarter.
Now, let me share some insight on the business.
Chris.
Core logistics and supply chain unit [noise].
She's only inline with our companywide the pursuit.
Once the topline growth and appalling baby.
We continue to emphasize business integration.
Yes.
[noise], we promoted E commerce ray the transactional across all business units.
She is a stronger business to consumer order growth during the quarter.
We also made a progress.
Enhancements.
So this quarter I mean, so strange thing that will come flexibility density awful lot from outside the <unk> outlets.
And finally, the overall consumer experience [noise].
Well express.
By classified and market conditions.
We have to fast for eating maintaining our position as a one off the top tier players cinemark.
Through our continued efforts of cost reduction.
And the enhanced the quality of sluggishness.
Possibly <unk> increased by 19.3% year over year for 2.3 bidding.
Representing Maki shell, California, seven during the quarter.
According to <unk> 0.2 percentage point compared to the first quarter [noise].
We also achieved gross margin expansion all the 2.9 percentage point year over year.
That's ever get cost also decreased by 21.5 cents versus last year.
Going into a second half a 2020.
We remain focused.
Increasing market share.
Fasting automation and of course, I do not breaking dynamic routing was afraid pretty enhanced operational crushing season, and the improved profitability.
Oh Fresnel.
She great results second quarter.
We continue to solidifying its leadership position and.
She did everybody over 2.2 million tons.
Growing 28 or 9% year over year.
What's your was significantly higher than industry wide average.
I read your cost of time.
Increased by 21.1% year over year.
Leading to a strong gross margin of 8.9% Iressa high end of 2.5 percentage points higher compared to the same sure last year.
Yes, it was driven primarily [noise].
Oh, I will focus on E commerce products.
Hi, Midscale and couldn't choice network optimization and the operating efficiency.
Let me provide a little bit more colour on the LTL.
Well less than truckload freight market.
And I'll position with the clock.
Overall LTL is a larger market condition already that the land for LTL freight sluggish for was primary due to me for manufacturers and host Atlas.
Thanks last year, what demand has been E commerce radiant.
Our LTL services.
I have experis robust growth driven by increasing more large site in Congress products.
I wouldn't that will penetration into lower tier cities, who sold its a strong consumption gross as well as further market consolidation that's had a benefit your top tier players such as that's great.
Yes, I happen to 2020.
[laughter] afraid to continue to grow in the 30% range. We are also confidence we can continue to optimize all cost structure through economics, upscale automation and transportation cost reductions by walking on areas such as efficiency improvements all hubs and sufficient.
Well I realize an additional synergies with <unk> as a business.
Moving to best supply chain management.
She's you're going to it we really had raised central component off all core supply chain and logistics units and therefore will continue deepening the interplay guest services model and the promoting cost, adding the king unit business units.
Operationally, we caught your expanding franchise a call wed see business.
And the project with a higher margins and clients with stronger credit profile.
The result, it's a second quarter gross margin increased by 0.8 percentage points year over year, well not points that looks at the total number of oldest for field. If I caught last season increased by 20.5% year over year to 100 get haven't probably screaming into second quarter.
Oh wage total number of order for field of by franchise Cobwebs piece.
Increased by 46.4% year over year [noise].
53.7.
A number of franchise royalties increased by <unk>.
25.9 year over year, two or 326.
That's cool our fast growing online full truckload brokerage platform.
Following the effort was started in the first quarter.
We further expanded our brokerage model and address the more small and midsized enterprises.
Number of a registered drivers on the new cobble mobile apps increased a 141.9% year over year to over 244000.
Total number of transactions on the trucking brokerage platform increased by 19.8 percentage.
Yeah over yet.
We plan to bring many more drivers and F. M E directory onto the platform in coming quarters.
Consequently, further increase the number of transactions.
For the best all crops.
We continue our street she didn't initiative of transforming gets you only to be more asset light by focusing on growing high quality membership and franchise stores. So a partnership model.
Were strong.
Was ongoing Federation of this is moving online.
Working same store owners have strong demand, what your ties Asia and online business expansion, while improving the supply chain efficiency.
Already this year, we started dropping the strategy to accelerate the gross off membership and franchise stores also saw prop one well addressing the margin improvement and efficiency in fulfillment cost.
During the quarter I will continue we continue to optimize the operation of our branded a source and refine our centralized procurement model in order to achieve a better cost structure and high margins.
As a result.
Such.
Gross profit margin bastow applaud the improvement by 2.2 percentage points year over year to 14%.
Second quarter.
We are confident that when you have the right. After line model, we're still crop that will bring a positive things had 12 weeks of revenue growth and profitability.
Well that's callable.
We achieved a strong second quarter result, driven by continued growth in southeast Asia parcel volume in Thailand increased by 95% quarter over quarter to approximate kennen bidding.
While casual bottoms in Vietnam.
Chris by 54% quarter over quarter to 5.75, meaning we also launched you expressed early so this is [noise].
In Malaysia, Cambodia and Singapore.
Marking another significant step forward in building and fishing largest can now work with extensive coverage in southeast Asia.
Looking ahead, we are committed to delivering high quality growth you much out I'm getting market environments.
We'll maintain a balancing balance the growth strategy and strive for profitability by continuing leveraging our technology enabled integrated supply chain and larger services model. So we're emphasizing E commerce investing pick lockup, Acacia and automation captured.
Revenue and cost synergies across multiple business the unions enhancing so this quarter.
No I wouldn't like to turn to pull over to our CFO Gloria to walk you through our second quarter financial.
Thank you, thank you, Johnny and Hello to everyone [noise].
Johnny clearly laid out we deliver a solid.
Please know excellent execution, when we got difficult macro environment, an intense competition of the industry as we progressed through this period agreed economic uncertainty, we have ample liquidity some balance sheet and a key focus on cost management.
I will now provide brief review of our second quarter 2020 financially.
Given the limited time on todays call I lumpy presenting itself, abbreviated the financial highlights I encourage you to read our press release issued earlier today for further detail.
We focused our efforts I'll stand about growth during the second quarter Wow wrapping your contracted slightly by 4% year over year, we achieved non-GAAP net income of 11 million RMB, Hi that 6.5, new the RMB 10-Q 2000 Nike.
Excluding the interest expense.
Mobile.
Non-GAAP net income would have been over 20 million to RMB.
Our gross margin was 6.8% and increase the up the real 0.9 percentage points year over year due to improved operating efficiencies, which resulted in continued cost reductions.
Adjusted EBITDA for Q2 with 158 three arm.
Compared to 114 year RMB up the same period of 2018.
Q2, adjusted EBIT up well for logistics and the supply chain business with 291.
[noise] compared to 298 million R&D for the same tier two times.
Additionally, we generated net operating cash flow over 700 million RMB doing Q2 compared to the 234 I mean, the RMB of the same period 2019.
As we recovered the phone cobot, 19th and aliexpress and pretty volatile hadn't grown has grown significantly funky went out in time [noise].
Oh robust cash flow population led to a strong balance balance cash and Kashi correct.
Restricted cash and short term investment.
21 billion, R&D, which provides a solid financial provision for future growth.
Next we'll be on two key financial highlights [noise].
Well I'll business unit.
[noise] our year over year basis, Q2 revenue for back expressed decreased by 5% to 5.2 billion RMB, primarily due to a 21% DPP average selling price of hospital offset by amazing, but the increasing cost a lot.
The dropping S. T was due to competitive market dynamics the cost of possible decreased by 21%, mainly due to improve operating efficiency and network optimization, which resulted in lower lock mile transportation labor legal and other costs.
Adjusted EBITDA, what best expect wasn't won the 18 I knew that RMB come here to 216 million RMB close and keep it up last year.
That's right through to revenue increased by 4.5% to 1.4 billion RMB, primarily due to a 29% increase upgrade about an offset by a 19% eaten up ASCII my time [noise].
Adjusted EBITDA for best right, what 70 seeming to RMB, which was more than doubled compared to 31 minute R&D for the same period of last year.
Q2 revenue fell back supply chain management decreased by 50% Biogen tend to the RMB, primarily due to a decrease in transportation service revenue as we strategically talking to higher margin customers.
Adjusted EBITDA, what that supply chain management, what pipeline seven gonna RMB compared to 14 point Formula R&D for example in Alaska.
That's you cobbled Q2 revenue decreased by 6% to 493, new the RMB due to a shift funky account to small and media enterprises.
Adjusted EBITDA, what that you'll cogdell less negative 17.9 the army.
Compared to positive fighting the R&D for the same to you as of last year.
That happy those revenue decreased by 13% compared to Q2 2018 due to our more skin good credit control policy.
Adjusted EBITDA with 41 million RMB come here to 32 million R&D in the same pure that last year.
Store closers revenue decreased by 17% to 657, new the RMB, primarily due to ongoing effort Sweetie Peck order quality to improved market.
Adjusted EBITDA loss for store pot was 67 million R&D.
Which was significantly lower compared to a loss a woman into either.
Well, there can be with a lot here.
Q2 revenue fallback global wasn't 193 million R&D R&D, almost tripling fungus AMPU as of last year as we continue our strong growth momentum in South East Asia adjusted EBIT, Apple basketball was negative 48, RMB compared to negative 32 million RMB for the Stan.
Here as of last year as we continue our investment that to ramp up operations in Thailand, and Vietnam and the two Lovejoy network in Malaysia, Cambodia and in Singapore.
No.
Let's look at major operating guidance.
Compared to the same quarter up 2019, selling general and administrative expenses increased by 20, Emily RMB, two 519 going to RMB. The increase was primarily attributable to losses.
Disposal of fixed assets due to upgrade about expected equipment.
R&D expenses decreased by 12 million RMB 40.
Which was primarily attributable to capitalization of certain R&D expenditure to intangible assets.
The reduction in travel expenses.
Please note all of these expenses excluding share based compensation, we will continue to optimize our SDMA in R&D expenses to improve operating efficiency and we expect further benefit operating leverage as our business world.
Hi back in the second for the what 424 million RMB, four or 5% of total revenue compared to.
381 arm b or falters now for the revenue for the computer last year.
In addition, we are working on cost improvement program to streamline callbacks and to reduce expenses.
Our results in Q2 demonstrated that to consistently improving operating efficiency and extends management, we can well achieve balanced balancing topline growth and the pop that brilliantly.
Despite this is pure economic uncertainty, we are well positioned there to grow our business and the continued to drive value creation for all shareholders.
With that we will now open the call two people in a thank you.
Thank you for.
But its will join the core so we can opened up and we like.
Hi, Thank you Sir Thank you Bob will now begin the question answer session to ask your question in the press Star then why are they touchtone phone. If you isn't new speakerphone. Please pick up that said before passing the keys. John's question husband, just do like to Brian's question. Please press star them too.
I get a star then one to asking the question.
Just a little just pause momentarily to assemble [noise].
And the first question web will come from by young shy of Citi.
Hi, Good morning, Johnny on the Gloria Congratulations on the strong second quarter itself.
Two questions Oh, sorry, it's the regarding the second quarter results on the free to tech in that.
I know, which is a very strong transportation cost control into second quarter. So one doing besides the tailwinds from the told me very at the lower fuel cost what's right. The out of we can be had to their transportation costs to kinda adults. So much it did because after product mix I lead into that Badri average weight or anything.
Our because it's down almost 30% young urea second quarter.
And my second question is regarding the competition strategy in the fourth express damage caused a we were intentionally slowing down later stage in himself the volume both fall back her profitability and the business sustainability, but looking forward, we see a more new entrants coming into the battlefield.
So what I will come stretchy, Oh, we still puts the profit hi, Def next year now Oh, we are shifting our strategy to grabbing a more mcsherry into next few quarters. Thank you.
Oh, Thank you Bob <unk>. Thank you very much local questions.
With regarding to freight yeah.
So second quarter, we actually benefit up on multiple front right. One is that like as you said it fuel pricing and also do you have got them policy the already year to combating they'll call, but not in King has waived the ducks polls for the up for the for the highway even though.
The only benefit in April for a few days are made but that doesn't give us a a good oh good the cost reduction data. The second as you said the product mix them and a stronger gross also contributed to the cost reduction.
We wrote about 28, when 20 percentage in the volume Yalea as well as our on product mix our E Commerce rated a products.
Has increased gone dad, typically has a lower wage.
On and also have a higher oh.
In comps per kilograms in that so basic combination of that and Oh second one for the put express yeah. So we'll continue to.
Drive for efficiency and cost reduction, but Meanwhile, I want a balancing the the profitability and something better deal gross ragging purely just will not be shift so going forward. What are we happen to do is.
First of all we continue to.
Reduce the cost implications as we demonstrate a quarter by quarter.
Meanwhile, we want to see who can have more synergies with our other business units such as freight they can share a lot of hopped walls and louder buzzer on cost and Ah. So synergies. So we'll be more apply to in fact that we have says a lot of money in the last couple of quarters Lafayette.
I read them I was you know shared a lot of synergies with other vis unions. So going forward, we continue to anticipate and expecting a stronger revenue stronger.
Possible gross volume gross.
As well as improved efficiency as well as the properties.
Alright journeys. Thanks, Leo I response meaningful the average we talked afraid to know a in second quarter actually.
A second quarter average weight as close to about 115 go I'm kinda quantity.
And typically on the idea yeah 120 around the 120 and and typically on the fourth quarter will be lower our second quarter will be labor lower full quarter will be there be higher reason his third quarter typically is a low season.
And a we will probably give give get us some oh heavier heavier shipment two to two balancing our load on the truck so as long as it relates to your costs.
How did the young year trend down there.
Oh, sorry, yeah, we aim to 20 launching all we reduce it that by about can kilograms in average and kilograms average.
For the for the for the a afraid.
This year, probably there'll be another castle, we have boarding toll was about 110 towards end of year.
Okay understood.
On the second question.
Minnesota College filings a target so in the next few quarters suite, we targeted to a to B you along with the industry growth, where we want to surpassing does trickles late debate I know, we're very focused on the cost efficiency.
Oh, yes. So so okay. So I think we have laid up gas was going to be industry grows, but we don't know exactly whats the so called and fourth quarter.
Instead of both is gonna be exactly.
The presumably it's still going to be strong to look industry I think the June number.
So yeah, so our cognitive for the for the sword sort of in fourth quarter is anywhere between 25 to 30 somewhere around you know as we plan to a lot here. So we don't know exactly the same UAN true head of the head of the market because we don't Returnables had mock is but I think that 25.
Senate she had a strong gross.
Hey, understanding what their kids basket.
Yes, let's put this will grow faster than seven seven pool.
Okay understood. Thank you.
Thank you.
Your next question, we have will come from David Ross from Stifel.
Yeah.
Yes, good morning, there Johnny good morning Gloria.
[noise] threats business wanted to see what you think the floor might be on pricing.
As the package volumes grown.
We've been talking about is for the past couple of years and again in this quarter average price per piece was down 21.5% year over year.
How much lower can it go.
Okay.
Okay, you mean, Ross I'll, David I assume you like in U.S.
Yes.
Yeah. Okay. So thank you for joining the call you'll you'll it was quite late there Oh.
Yes, good question.
Expressed for a price for all okay. So this yeah, everybody notice that like a much much lower price out compared to baseline last couple of years last couple of yet and I have like price reduction in can you know in California low teens.
This year, it's quite lodge.
Partially because of Kobin unchanged from the recovery, but kogan 19.
And people watch you get to recover network of quickly so probably lower the price. Our second is that also during the February basic other than gave the I thought the coal waivers and you know total labor the poll waiver basically a poll is about 30% transportation costs.
But agent about 60% of the total a lot, but do you tend to take a total of cost of 40, a possible so talking about 18% to 20% on cost saving on the coal Oh waivers and so they contributed also truly a lower the cost and some of the pricing so the.
Suppressant reduction, which you have seen.
We anticipate a pricing continue to go down.
But it's not fans can be as steep as this because essentially all the no end today, you know Oreo cost and then do you have a limitation light given that the you know how much does the fuel costs are going to be giving that how much a toll and everything else and that's all those could be there is not going to be disappear. So yes. So the so I think the cost burden.
She is still going to do for going there I mean, we still looking at the a year over year cost reduction targets, but as as as it goes the cost reductions are gonna be diminishing returns right because essentially your pet hold off on but and also I think the full does that so the pricing tool is also them be.
A lot out I cannot tell exactly what it exactly $2, a below $2 or whatever it but I can't say is that cost reductions and continue the however cost reductions or somebody slowing down.
I can't say that competition still gonna be dare pricing still going be a lower.
Honestly I don't know will afford us, but I I would anticipate that the floor is going be a lot in todays, but you know not not not as it's a us as much steeper as what we have experiments are last quarter.
That's helpful and then on the volume side It express.
It was up 19% year over year in the quarter, how did it progressed through the quarter was April not as good of in May and June are much stronger and where do we sit here in July so just kind of frame that 19% for us it actually better than that as of yet so.
Yes so.
Well, we actually grow about fourth 14 up 13% and June we grow or about 26. So looking at the July right now we're looking at about 20 anywhere from 25 to 40.
Excellent and then last question.
So a headline about JD dot com buying a interesting color you express.
Does that mean anything to the competitive landscape.
Highly expressed the has no direct besins overlap with us they are more on the I know I'm a high end up a high end Oh air travel airbase the pasos.
Or the freight so yeah, so well have a minimal impact to us.
Great. Thank you very much.
Thank you David.
I believe.
And next live Ronald Cohen.
At Goldman Sachs.
Thank you.
Donny Glory, hi, or maybe two questions for me as well firstly would be so again on the express or pricing strategy. I mean, we cut prices by 20% and possible growth relatively <unk> was lower versus say the the other individuals that have cut.
This is by 30%, but kind of hanging in there with similar growth SBQ and then second quarter. So.
So we could see how what we're choosing between kind of profitability and market share gains and must here in the second quarter dig into the second half and given I think this is still quite a scale game.
Because we can't <unk>.
Grow materially slower so I think if you're targeting in line growth with the industry should we expect kind of the U.S.P. differential between you and the players to be more similar into the second half. So overall price declines maybe smaller fourth where the others as well, but just that we will not be kind of pricing then uh huh.
10% lesson in pricing decline, maybe is that likely more that will be kind of a bit following the rest in the second hopping in achieving kind of industry growth rates into the second half as the first question.
And then well done for the second could you kinda give us some some metrics on your kind of franchisees health of franchisees any any time turnover ratio that you could share and how are we seeing just these new entrants, including JMP that that's coming in a would would do we see that that could impact any up all I'm kind of franchisees.
Sure the landscape into the second half thank you.
Okay.
So basically you have two questions. One is about the second quarter pricing strategy and growth strategy. Yeah. So as you rightly pointed out Oh, our peer players.
I actually had a.
Steeper our pricing reduction Dan what do we had bottomed.
Patrick because we want to really improve the margin and they'll have the profitability there.
Moving to a second quarter, a we still want to maintain our strategy for data.
Volume growth as well as the profitability. So I don't think a weekend, we are going to meet a lot, but the price yes, just for the sake of share because I think is more important than current today. It's as you know consolidating our ability to cost reduction.
Thanks, and improve the quality and some other areas objects of arms are always going to be there if it would not not here today when you do a better job equal always get back on so so so I think that our strategy to answer your questions is not we on up into a lower and lower the pricing so as a mall.
In fact, if you're looking at the last couple of years or the sort of quarter and towards the end of so according to post quarter odd actually practical up goes up a little bit <unk>.
And it really goes up a little bit because I see them at a lot expecting.
Shoot volumes a much bigger again in July and you know July typically a lowest as seen in July and August.
Yeah fourth quarter, I think the pricing is going to be Nacho Libre I think it maybe even cooling crude complex I guess to my first question. Your first question second question, it's truly a the competitive landscape over new entries and and you entrance and these as you as you all.
No right Mark is very competitive.
In the past 10, you have to wait in this business.
Every year, we have you know.
Vast if you get him on the money and the efforts in upgrade to Automations and the sites and everything and they in fact, you know if you Buda site, you're looking for new site take a long time as well.
So it's quite time to get older network and everything else. So I don't read I really don't think it that the new entrance.
I will have significant impact or to our current oh couldn't business back to what you said about the stability of our franchisees.
I think Oh of course, I can just kind of competitive mafia when the pricing lower locking out that wed see a lower southern some I'm certain piece or some kind of Ah Ah.
Problems willingly to franchise network is anticipated.
However, we have done a good job, maintaining our communication and actually working with the franchisees to make sure. Then they can also a working with the was up was it was a company on the weather through just comparative Oh market in fact or some of this summer.
The franchisees OSU decide that cost reduction and efficiency improvement they actually become stronger competitiveness. So given said I want to say that the franchisees.
This is very stable, we would see a few of them. They had some problems in the into May and June time, when does that get everybody last night that everything.
Of course, it was lowered.
But that was quickly stabilized and so while we don't see a major.
Hey, good problems with the franchisee network.
In fact, as you said a new entrants comes in and you know we don't see a I at least I don't aware larger longer books on Chinese enjoying the all the new entrance because they understood that it would take lots of effort to to really get network up so they'd rather go up.
For the company Ambassador true up or is it that here, but.
And via protecting investment in the past.
Thank you that's very useful.
[noise] [noise] next we have Thomas Chong.
<unk>.
Hi offense management not picking my crashes I have a couple of questions regarding all domestic and international business. I think first can management comment about I was hoping hops talk it internally trendy and also I'll I'll pass it on a increase in public.
And I would keep talking about.
The one hour oddly differently or any thoughts there and my second question news about our international business, how should we think about extra field, yes, Oh PPI batch be wants to achieve given a lot of all our June political.
Pensions asbestos cobot. Thank you.
Okay. Thank you Thomas.
I have I have a little bit difficult tool to a two here well on the first question, but I I guess your question is what's our expectation of that number I will hop stealing the it right I guess, if that's okay. Yes. So all we right now making about self operated about 87 hubs.
Oh, Hi, there are some slaughtered topic. So we may want to consolidate but we might want to open one or two on it.
Oh excuse me one we'll try to reestablish connection here.
Again, please standby, we'll try to reestablish can actually what management.
You never want to take you where you're still connected please standby.
Thank you again, everyone again, please stand by for the Best Inc.
The conference call again, we were just re establishing that connects and what the management team.
Again, thank you please standby.
You know.
Oh.
[laughter].
Oh, Okay, Oh, yes are we can hear your location now.
Hi.
Yeah.
Hello.
Okay. So.
Okay, just put us Allison yes, okay.
Yeah.
The call Candy or you Sir.
I know, but the we have a problem because this is the backup like Hong Kong.
We can't here, but the mainline using handle is not working.
Our chairman and our CFO in homes, those 11 to that line.
Thank you for standing by the best incorporated.
Conference call will start momentarily.
Hello.
How much I assume there I'm sorry does that technical issue. The line seems went dead immediately.
Hi, how are you could comment on here.
Oh, I'm very sorry, we're talking and everybody tells me. So lets say you guys have no voice, we call operator and dosing so what happens, but we doubting we connected so so so thank you very much for patients I'm very sorry.
Also our so that's a hub I answered on the international front I'll give you little bit color. One is that international actually growing very rapidly. So like I just said in the in the U.S.
Actually the second quarter, we enter we see our volume both our volume in a bottom line actually improved.
A much more than we expected.
South Southeast Asia also growing very rapidly.
As demonstrated on the second quarter like the El Pilar was growing above 90% quarter over quarter, Vietnam and was like over 50% year over a quarter over quarter, but we also see the new entry to the Malaysia, Singapore. The also growing very rapidly. So so thats affecting fostered is that.
What do we really see is that a big trends on the cross border business So lot of.
Our merchants they are open shops in southeast Asia in Lazada, Sharpie et cetera, They actually put just most of the products in China.
Uhhuh.
Kwanza owed ongoing cetera are they may be shifted to the to the southeast Asia and so our supply chain group supply chain management group are they doing lot of this works with for example, we local government in coming in we nine while mushy 19 to open the route through the road transportation.
So the land.
To the Vietnam on and the to the.
The timing.
No previous and most of your transportation are down through the sea freight or air freight, but now is open another from through the deadline. So so so I wouldn't see anticipate our supply chain is also going be benefit lot over cracking products in China and older ship them down. There then then transportation Rcs too.
Chuck to the to the Southeast Asia.
Internal clock, so we will continue to.
Managing our cost structure initially we have invested.
Lot of lot of equipment, and Capex into Vietnam and Thailand.
Like we just did in China and in the past.
And that actually as the volume goes up and.
The purpose of course, it goes down a lot so we anticipating outcome.
Two things continue a fast growth on the top line improvement on the put possible cost.
Too overly reducing the losses in the.
Global business and hopefully in the.
During the next year, we will see a a much balanced.
Results on that.
Thank you.
Okay.
Hey, The magazine question, we have.
Thank you next question have will come from Arizona of Macquarie.
Hi, I'm, joining our management team. Thanks for taking my questions have a two quick questions. So why is regarding our love mail delivery see express universities. So we saw that locomotive and say we're is 1.2 main proposal, which was much lower than a year ago was lower than that.
This quarter, so I'm just thinking about a longer then I'll. Let me go just want to know your view when they go are watching a flaw locking I'll do you see going for second half on the next year.
Would you like maybe we can see I loved give me a vehicle in below why are you being possibly next year, yes, Okay. Thats My first question.
Good question isn't regarding your osteopath BD spin off plan. So do you have any news on towards that.
Well from it.
Okay.
Yeah, so lots of mouth.
Reduced a I'll compare quarter by quarter off compared with last year, our primary driven by two right one as the volume growth you Gotta morning density for delivery. So so so definitely deal your costs can be proposals that we lower.
Imagine the area there was a one possible to possible so cost wise, it's going be improved.
Second is on because of severe competition more and more last mile delivery is through the post through the stores or some other kind of mean locker locker. So you know the apostle lockers and stuff like that off in the past last year I think only 35%.
Only 25 cent of a parcel was delivered a screwed up through the last smell other means a lot smile. So we'll talk about to through the other stores et cetera.
This year or increase with 50 or 60 et cetera.
And in fact, the portion is still increasing.
But that has a much lower cost structure compare with deliver on the door to door because think about you know it killed a person carry a 50 50 parcels go into a lockbox the cost can be much lower again deliver 50 Bucks.
Processing facility families but.
Total so that's the thing so you're quite next you. Your question was with a full.
I think that is continue to to lower.
I cannot say that should be the aro or less but what I'm, saying the trend is continue to be gradually lower as.
As I said is that two last them I lost the reason so factors I ones, increasing volumes lower costs and seconds more meetings of last mile delivery.
Versus you know in person door to door type of delivery.
Would that be lower down I will Jaime.
It's possible.
But you know I'm not I guess when we're going to me is also depends on the franchisees.
Except in the sustainability, we want to maintain a healthy.
Stable last mile delivery network and make sure that the franchisees are south or stable and they can be a to of course services 12 customers.
The second question you had with a spin off some of the some of the.
Business units.
Yes, as you, where we had the setting set several core.
That accompany the management team continues we're looking for various ways.
Our to improve the shareholders value.
As well as.
The business development liquidity and that and the further development of businesses that are we thinking it's going to bring future.
Gross opportunity for the company.
We did it for free like we're first one really in in early.
2012 start the freight business and we right now bearing the fruit of the six seven years of development since last year. The freight business is growing rapidly is also making profit and profitable so hoping that our international business as well as our store business ESCO bring a.
Long to contribute to our long term growth and profitability. Meanwhile, a create a lot of synergies pitching our for example, our.
Store class, who is our supply chains on the global.
With our supply chain as well as express airfreight. So hopefully that's the thing. So can you look in these opportunities.
We don't have anything to to report right now I will certainly as you know when plant and one more.
This is solid.
So so.
So Eric Thank you.
Okay. Okay. Thank you.
And next we have hands chunks of Keybanc.
Hi, good morning journey and Gloria.
George you think viewpoint, taking my questions. So.
After two question first.
Still regarding our the and strategy.
The pricing in core HM It spreads so I think thing that scale stalemate or not.
Express industry and then so my question is how should we make sure because I I think that going forward. He should be whether we can reduce our cost. So that said then the.
Price decline right. So so Mike I think going for how should we make sure.
We can continue to achieve.
The the fancier clubs cost reduction we now have say, maybe just to keep the inline industry grew up or maybe even slower and making a medium to longer term.
And then said question the do regarding the Tynan Mark can you just can't give is that what kind of competitive landscape in them RFP that once our market share now and then.
What's that unique economy, so far and what should we think about that you make one to two years. Thank you.
Okay. Thank you has you have two questions I would ask you a first question you had it was.
On the strategy on pricing.
Yes, so our pricing as we said we want to make sure that the pricing is in line with our cost reduction strategy life. So we want to make make the margin improvement as well as the probability. So so when we're not going to say Oh underlay follow the pricing on the R&D on the on the Mark.
Are there others.
As we demonstrate on second quarter, even though our volumes gross has been impact some watch a 19% versus a more than a market growth more than 30%.
But you know we have women 18 up very healthy pricing, how pricing is a little rig.
Look at June number second quarter, we have with pre hire with higher ASP.
Some of our peers.
So, yes pricing side, we're maintaining that that strategy right doing a cost reduction.
Coming so we will improve our our module on that so that lead to your second question. So.
So what's the cost reduction strategy right, so you're saying that pricing is that based on you'll you'll you'll you'll cost reduction well corporations Fung Ah mainly from four areas way our largest as transportation.
Because transportation if you look at our second quarter, we have about.
Less than one I'd be a total cost right. So so transmitting causes about.
60% of it.
I'll give you know sort of quarter, maybe even a little bit more than 60% of it because the the waiver for the toll everything's its is it's gone.
So, let's say transportation side. So we have been doing a good job or to continue to lower transportation cost primarily driven by three things right a volume growth of course, London, that's most obvious but secondly, really through a more dynamic routing we have a R&D team for their you know they are industrial engineering and there.
Working on the R&D in the system will have a system in place. So they can dynamically related to a routing so make sure that our routing and most efficient.
So that second I used technologies to losing the automation, So 40 40 routing efficiencies.
And thirdly is basically synergies cross with all business units.
For example, free volume is very large already we are actually doing currently would we like that 28000 tonnes, a day or that translate to.
Equivalent to a similar type of network of while I'll follow up I think things sizeable network as the express so how do you come mining.
Some of these transportation routes are especially for remote area.
A long distance area, which timing pocket avail timing is our critical like you know what do you have two or three days look on how do combining them. Some of the routing efficiencies are to reduce the total cost of were both rate as well as for the express. So we saw a project loss here for you know for merging of.
Great and have expressed on the transportation side. We just started I think it we had a lot more to go.
To make sure that.
The cost can be reduced Meanwhile, the service level can be maintained so we've not reducing the transit time or anything else and make sure that what I can really come in trying to time is can be maintained.
So that could be looking forward true on on the do some more cost on that front.
Yeah, So Tories are kinda Mark I'm sorry.
The the heightened market.
Hi, this is actually.
In the past penetrate the offline market its actually well developed through like 30, 40 years development of Nok as well developed but things couple of years ago. I think whats say you know 20 2018.
Starting the ecommerce gross are very rapidly, even though they only have a 3% penetration online.
40, 40 total consumption.
But that's growing you know every year 30, 40% for the past couple of years. So I think that that transit running can be et cetera rating.
Our market position, we entered the market LIBOR late because theres several.
Local players and some other international players are already there. However, our market share has been growing very rapidly.
We enter a tight end market in I think was in early 2019. So we would then basic a lender. The first group people are plenty 18 into a tiny in late 2018, we saw that being able to network, our plenty 19, and and start doing on top of that.
And on the June our peak volume already see here like you know 200000.
Volumes and the still growing directory, so hopefully by end of year, we will be moving a much higher volume grew up on new on the market share is continually growing.
We started.
And 1% towards the end of last year to now it's a little bit shy of five cents, but it's still growing so I'm I'm sure that the next couple of years.
We will go fast, our our basic philosophy or or or or or the.
A strategy is that for the England into before they are the.
Southeast Asia market, where every market we entry we want to be on top three players I. In next couple couple of years. So that's how I will go and some maybe talk to some maybe top three and so maybe top one but that's just out of our strategy and target.
Well I had somewhere sorry, no further questions. We'll then conclude the question answer session Oh in order to turn the conference call back over to the management team for any closing remarks.
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And we thank you Sir and also some will lessen the management's influence I'm also today again the conference calls now concluded at this time you may disconnect. Your lines. Thank you again, everyone take care and have a great day.
Thank you.
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