BEST Inc

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Best, Inc.' 's third quarter 2020 earnings conference. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be a Q&A session. With us today are Mr. Johnny Chow, Best, Inc.' 's chairman and CEO, and Gloria Phan, chief financial officer. For today's agenda, Johnny will give a brief overview of business and operational highlights. Then Gloria will explain the details of financial results. Following the prepared remarks, you may ask your questions. Please note, this call is also being webcasted on Best, Inc.' 's IR website at ir.best.fitinc.com. A replay of this call will be available after the call. An investor presentation is also available on the IR website. Before it begins, I will read the safe harbor statement on behalf of BestAge. Today's discussion will contain forward-looking statements. These forward-looking statements are based on management's current expectations. They involve risk, 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 forward-looking statements as a result of new information, future events, or others, except as required under applicable law. Please also note that certain financial measures that the company uses on this call are expressed on a non-GAAP basis, such as EBITDA, adjusted EBITDA, and non-GAAP net loss. The GAAP results and the reconciliation of GAAP to non-GAAP measure can be found in Best, Inc.' 's earnings press release. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. Now I'd like to turn the call over to Mr. Jonny Chow, Chairman and CEO of Best, Inc. Jonny, the floor is yours, sir.

Good morning and good evening, everyone. Welcome and thank you for joining our earnings call. On today's call, in addition to the third quarter results, we will also discuss our major strategic adjustments to refocus on our core businesses in order to achieve long-term competitiveness and the profitability. But before that, let me first go over our quarterly results. We had a challenging third quarter, aiming to intensify the industry competition. For Express, its execution did not meet the fast-changing market dynamics in both operation and the pricing strategy, which led to a lower volume growth and a margin, possible volume increase by 24.8% year-over-year, representing market share of 10.6 percent during the quarter, which is about 0.1 percentage point lower compared with the second quarter. While its gross margin contracted by 7.2 percentage points, as the average cost per parcel decreased of 15.9 percent year over year, did not completely offset ASP decline of 21.9 year over year. We have since conducted a thorough review of express operations and strategies. And we are in the midst of implementing plans and changes that we believe will make us competitive and maintain our position as one of the leaders in the industry going forward. Our freight business continued its strong growth and achieved a growth rate higher than the industry average. Free volume increased by 30.7% year-over-year in the third quarter of 2020. Its gross margin declined 5.3 percentage points year-over-year, primarily as a result of pricing lag after the government reinstated highway tolls in the second quarter. ASP declined by 17.3% year-over-year, while average cost per ton decreased by 12.6%. year over year. Looking ahead, we are optimistic that Frey will continue to grow in the 30 percentage range and ASP continue to improve and we expect to return to profitability in the fourth quarter. Moving to best supply chain management. In the third quarter, we continue to execute on our strategy of growing our franchise cloud OFC business and focus on projects with higher margins and clients with strong credit profiles. Its gross margin decreased by 4 percentage points year-over-year to 4.4%, primarily due to a high cost structure associated with the legacy key account customers, which are in the process of being terminated. The total number of orders fulfilled by cloud OFCs increased by 18.3% year-over-year to 102.2 million, in third quarter of 2020, of which the total number of orders fulfilled by franchised cloud OFCs increased by 32% year-over-year to 53.5 million. The number of franchised OFCs increased by 23.2% year-over-year to 345. BestU Cargo brought more drivers and SMEs onto the platforms. The number of registered drivers on the Ucago mobile apps increased by 84.5% year-over-year to 288,000. Total number of transactions on the trucking brokerage platform increased by 37.2% year-over-year to 233,000. Best Global continues a strong growth momentum in Southeast Asia. In the third quarter, Parcel volume in Thailand increased by 513.5% year-over-year to approximately 10 million, while parcel volume in Vietnam increased by 932% year-over-year to 10.3 million. The company also made progress in expanding its express delivery services in Malaysia, Cambodia, and Singapore. Best Store Plus executed on a strategy of partnership model and enhancing order quality, improve growth margin and reduce losses. As a result, its growth margin increased by 2.9 percentage points year-over-year to 13.4%, while adjusted EBITDA margin improved by 1.8 percentage points year-over-year. Despite these encouraging results, we recently announced the winding down of StorePlus business except for our self-operated worldwide stores, which is still under strategic review. We believe that by phasing out StorePlus, the company can eliminate the significant cash flow requirements associated with this early stage business, allowing the company to further prioritize capital allocations towards its core business. Let me discuss this core business. The COVID pandemic had a profound impact on our business. The high recovery costs and the subsequent unprecedented pricing competition has depressed our margins and caused unexpected losses. Facing strong industry headwinds, we are taking steps to make major strategic adjustments and organizational change to our business, focusing on our core logistics and supply chain management business, emphasizing service quality, enhancing operating efficiency with a goal of putting us back on a path to profitability. For our express business, we are focused on sustainable long-term growth and profitability by continuing to optimize its product structure improving its operating efficiency, particularly in transportation planning, enhancing services quality and customer experience, and gaining market share. We're putting in place new leadership to lead express business. As previously announced, effective as of November 15, 2020, Mr. Wang Xiaoqin, former general manager of Best Jiangsu Province branch, assumed the position of Vice President, General Manager of Bass Express Service Line, replacing Mr. Zhou Shaohua, who took up a new role in the company. For Frey, we plan to continue to invest into its infrastructure network, solidify our industry leadership position by expanding our market shares, stressing the e-commerce aspect of Frey services, improving operation efficiency, and increasing profitability. For our supply chain management, we will focus on quality growth and profitability, only target projects with high margins and customers with strong credit profiles. We'll continue to implement an SLI model and grow the franchise cloud OFC business. For our non-core business, We announced the winding down of Best Store Plus on November 15th. For the other core non-core business, including Yukago Capital and Global, we're considering all options available with the goal of reducing operation loss and the capital requirements from the company. Additionally, we are implementing company-wide cost-cutting measures that will generate significant savings going forward. Those measures will also help us create a leaner and more focused organization to realign our management team and employees to execute the refocusing plan. As we look forward, we remain confident in the strengths of e-commerce driven demand for our integrated smart supply chain solutions and logistics services. With these strategic adjustments in place, We are committed more than ever to investing in our core businesses and strengthen our market position. We are targeting strong growth for our businesses while focusing on further integration of our business units, enhancing our product structure, the stability and the flexibility of our networks, the quality of services, and overall operating efficiencies, which taken as a whole, will enable BEST to deliver long-term value for our shareholders. Now I would like to turn the call over to our CFO, Gloria, to walk you through our third quarter financials. Go ahead, Gloria.

Thank you, Johnny, and hello to everyone. Amid the intensified competitive market, our third quarter performance reflects both the challenges and the resilience of our business. Our revenue was 8.7 billion RMB, relatively flat to the same period of last year. while our gross margin contracted 5.4 percentage points year over year due to a challenging pricing environment that offset our volume growth across multiple business units, resulting in a net loss of 640 million RMB. Despite the net loss, we generated operating cash flow of 115 million RMB during the third quarter and maintained a healthy balance of cash and cash equivalents, restricted cash, and shortened investments of 4.8 billion RMB. I will now provide a brief review of our third quarter 2020 financial results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. I encourage you to read through our press release issued earlier today for further details. Our gross profit was 38 million RMB compared to 507 million RMB in the same quarter of 2019. Gross margin was 0.4% compared to 5.8% in the same quarter of 2019. Adjusted EBITDA for Q3 was negative 438 million RMB compared to 114 million RMB of the same period of last year. Q3 adjusted EBITDA for core logistics and the supply chain management business was negative 278 million RMB compared to 267 million RMB for the same period of 2019. Next, moving on to key financial highlights for our business units. Our year-over-year basis, best expressed revenue decreased by 2.6% year-over-year to 5.1 billion RMB in the third quarter of 2020, primarily due to a 21.9% year-over-year decrease in ASP per parcel. partially offset by a 24.8% year-over-year increase in parcel volume. The decrease in SP is primarily attributable to competitive market dynamics. Adjusted EBITDA for Best Express was negative 211 million RMB compared to 192 million RMB for the same period of last year. Best Freight QC revenue increased by 8.2% year-over-year to 1.5 billion RMB primarily due to a 30.7% year-over-year increase in freight volume, partially offset by a 17.3% year-over-year decrease in ASP per ton, which was primarily due to a pricing lag after the government reinstated the highway tolls in the second quarter. Adjusted EBITDA for best freight was negative 45 million RMB, compared to 42 million RMB for the same period of last year. Q3 revenue for Best Supply Chain Management increased by 0.1% year-over-year to 453 million RMB. Adjusted EBITDA for Best Supply Chain Management was negative 27 million RMB compared to 6 million RMB for the same period of last year. Best Yukago's Q3 revenue decreased by 1.9% year-over-year to 689 million RMB, primarily due to discontinuation of several key account customers to minimize credit exposure. Adjusted EBITDA for Best Chicago was negative 30 million RMB compared to negative 6 million RMB for the same period of last year. StorePlus' revenue decreased by 16.8% year-over-year to 717 million RMB, primarily due to efforts to enhance order quality to improve margins. Adjusted EBITDA loss for StorePlus was 68 million RMB compared to a loss of 98 million RMB for the same period of last year. Q3 revenue for Best Global increased by 125.9% year-over-year to 216 million RMB, primarily due to strong growth in parcel volumes in Southeast Asia. Adjusted EBITDA for Best Global was negative 61 million RMB compared to negative 31 million RMB for the same period of last year. Next. Let's look at the major operating expense items. Please note, all of these expenses excluded share-based compensation. Selling, general, and administrative expenses were 581 million RMB, or 6.7% of the revenue in the third quarter, compared to 470 million RMB, or 5.4% of the revenue in the same period of 2019. The increase in SGMA expenses was primarily attributable to accrued provision for certain trade receivables and the losses on disposal of fixed assets due to upgrade of Express's equipment. R&D expenses decreased by 11 million RMB to 51 million RMB, which was primarily attributable to capitalization of certain R&D expenditure to intangible assets, as well as reduction in travel expenses. As part of the company-wide strategic refocusing plan, we are optimizing our SGMA and R&D expenses to focus our resources on our core business. We anticipate and estimate cost savings of approximately 200 million RMB by the end of 2021. The savings will create a linear and more focused organization by prioritizing spending and optimizing operating efficiencies across the company. CapEx in the third quarter was 487 million RMB, or 5.6% of total revenue, compared to 523 million RMB, or 6% of total revenue for the same period of last year. That concludes the third quarter financial overview. Before we open the call to questions, I'd like to briefly provide a summary. After conducting a thorough analysis of our business, We are already underway in the process of creating a more streamlined organization that can simultaneously trigger further growth and improve profitability. The market headwinds we were facing, along with a recognition of our needs to more favorably align our operations as a company, had led to this decision. We believe through the strategic re-evaluation of our non-core businesses, meaningful cost reductions, and the allocation of resources that can better advance its core portfolio in order to deliver consistent and long-term value to our shareholders. With that, we will now open the call to Q&A. Thank you.

Thank you, Madame. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you'd like to address your question, please press star then two. Again, it is star then one to ask a question. At this time, we will just pause momentarily to assume our roster. And the first question we have will come from Bao Ying Zhai of Citi. Please go ahead.

Hi, morning, Johnny, Gloria. Hi. So thanks for taking my question. Yeah, so my first question is regarding the express delivery, if not the express delivery, it's actually the whole group strategy change with your refocus on the express and the freight. Just want to know, so what would be the key change of the development and the key computation strategies after the change of the personnel, especially in express delivery business. And my second question is also regarding the restructuring. So what's the restructuring cost? Because I see we are going to close the Star Plus business across the country. So I believe we need to compensate the staff. So what will be the restructuring cost? And I heard from Gloria previously, she mentioned about $200 million savings As a 200-minute series, could you please break down where the series is from? Thank you.

Hi, Bo-Yin. Thank you for the questions. Regarding the first question about express strategy moving forward, And we re-evaluated all the express operation and certainly there are area we need to go to improve on. Number one is that how do we re-balancing and our network development. In the past, we are very much focused enough, you know, we are doing well in certain area like, you know, Yiwu and some major disc markets. But actually, we could have done a lot better balancing some of the areas that we actually have a strong market, but we can do better. So that means we'll increase our ASP, proposal revenue, because, you know, on this very competitive market, like Guangdong, a certain area, or Yiwu, the ASP is very low. but actually in some outskirts of other provinces, actually, it's less of a pricing pressure in terms of the... And so we should probably put a better price ASPs as well as the better cost structure because the networks are more balanced. So that's the number one thing we're taking a look at it and to see how the network can be more balanced based on the current structure rather than a primary focus on several key markets. That will improve our network efficiency as well as the ASP improvement. Our number two side is that we continue to look at our transportation, even though our transportation costs are doing fairly well. If you look at our whole cost structure, we actually went down about 15% of the total reduction in cost year over year across the board. However, the pricing comes down more. So what we want to see is that if on the transportation side we can have even more of reduction by working with a freight side that has a more combined routing of the lines, long line holes, and et cetera. And that will help us to more reduce the line. Another one you can take a look at our leasing cost. The leasing cost is still quite high, said about $0.10 per parcel, compared with our other competitors, it probably will be much less. This is primarily because we had to build up a capacity in the past couple years in anticipating of this continued growth, of high growth in our express business. This is growth, it is slower than we planned. So actually we have more capacity inside the, so that's another area that we're looking at it. So that's the first question on key exchange in the Express side is basically balancing the network better than just focusing on your key market. And the second is that continue to improve the cost structure, especially on transportation side. We actually had some, we also started with some of the self-operated fleet, rather than complete or outsourced. So starting on the first quarter, I think, of this year, we already have some self-operated fleet on the ground. Secondly, you're talking about restructuring costs. So restructuring costs on the store plus front, we probably will have additional by shutting down all the branch offices and also deal with the inventories and all the issues that we need to deal with, probably will be a little bit over 100 million IMB additional costs associated with that. But that's one-time charge into a disposing of the business. However, that will give us a couple hundred million dollars of saving every year moving forward because the business essentially is still in money losing. So one-time additional costs, reflection costs on that. All the other businesses, we still aren't looking at any other options to look at it, so I don't have the exact number right now. This is the third question about the $200 million of the savings. I'll leave this to Gloria.

Okay. Hi. Hi, Bao Yin. How are you? So basically, the $200 million savings from now until 2021, the majority of the savings came from the winding down of Store Plus, as Johnny was saying, we are able to save about $170 million RMB associated with Store Plus winding down. And also, we are continuing to optimize our SGMA expenses. So we anticipate another additional $30 to $40 million cost reduction in SGMA. Okay.

Okay, thanks, Johnny. Thanks, Gloria. Johnny, may I have a follow-up question on the express delivery business refocus and change of the personnel? Because, you know, the competition out there is still quite intensive, and we can feel that the leader is not willing to let it go soon because we are seeing more and more polarization of these players. So at this point of time, are we still going to follow their pricing strategy because this will further drag down our profitability and, you know, our cash flows? Or if we change our personnel, if we are more focused on the non-collection regions, we have a more balanced network, will it be more differentiated? Or what do you think about the competition strategy?

Oh, as I mentioned, we were looking at our whole network based on the the current, the ASP and the cost structure and everything. So certainly we will, you know, in the market you had to compete. So, so we certainly will have to read response to whatever the market competition is, but same time, I mean, I think the most important things that we need to really optimize our own network to see what's the, we can get out of the best of the, the, the, the results. So, yeah, so, so price of competition is still going to be, be, be there. Meanwhile, I think we should do a better job, we can do a better job in optimizing our own network by providing a better service, quality services, high ASPs through certain regions of reoptimization, and also the lower cost across the board. Okay.

Thank you, Jamie. Thanks, Valeria.

Thank you, Valeria. The next question we have will come from Hans Chung of KeyBank.

Hey, thank you for taking my question. Good morning. So I just want to follow up the express. First, can I just get a clarification in terms of the pricing strategy? Let's say it comes to a price and volume. right, and then like ASP, the decline or volume growth or margin. So what's our strategy? Do we have the KPI for profitability? And beyond that, we won't do any further pricing change because we're going to lose our profitability or still we still have certain type of the target for the volume. And at least because we want to some market share, we want a certain scale, right? And then, so that's first. And then second question would be, because we have restructuring in leadership in Express, right? And then I just wonder, is there a risk that there could be create some instability of our franchise network. Thank you.

Okay, Hans, thank you for the question. With regard to the first question, the balancing, of course, we need to do, right? So we're not really just for lowering the price and getting the volume, but we also have to look at the profitability as such. So in our goals, of course, I think that the goal is reasonably good growth, but, of course, profitable growth. That is the goal. So how to achieve that? I had to mention some of that. If you look through our cost structure that we're putting under the ER, so basically right now we have about 2.15, around 2.2, parcel this kind of income. And if you look at this income compared with some of our peers in the listing on the A shares, almost about in parts. Sometimes we're actually a little bit higher even as a reported number. In 2.21, I think that's what we come in on a sort of quarter. So the pricing side, I think we still Not as, you know, I mean, not maybe if you think about we probably have a lot much lower price than the others, but the contrast is not. We actually maintain a very good pricing compared with our peers. So, but we still think there's room to move because if you look at that with 2.21, you're taking out the last mile delivery fees to the franchisees. which we really want to help them to be able to do a better job. The company income is actually a bit lower. It's only about less than the IMB. Our goal is actually to move up a little bit higher to maybe 1.1 or maybe even higher than that. So how to do that? As I said, I mean, primarily before most of our volume comes from a few concentrated market, which has a very low ASPs. And, in fact, some of the regions that we're doing well, there's more potential, could have much more volumes, and their SPI is much higher than this area that we traditionally have been doing well. So, to answer your question is that, so we don't really have a, let's say, a KPI say how much volume we had to have, and our goal is to, as we said, we weren't balancing it. So, you know, it's a probability. and growth in the volume. So we're not going to choose for one way or the other, you know, primarily just for the volume growth and we lose our money or, you know, primarily want to make money but no volume growth. So I think we're still going to have, moving forward, we're looking at maybe, you know, 20 percentage points of this kind of growth. But meanwhile, you know, we want to reduce the loss and hopefully bring back to the profitability. The next question you had was changing the leadership on the, is that going to help the, of course, you know, changing the leadership will help the organization be refocusing our strategies. In the same time, so also we're helping our last mile franchisees. They have more confidence into the company to see to some kind of change and optimize the network. So both ways, it's good for for both the last-mile franchisees as well as for the whole team at home.

Thank you. Again, as a reminder, if you'd like to participate in today's Q&A, please press star, then 1 on a touchstone phone. Again, that is star, then 1 to ask a question. The next question we have comes from Bo Pei of Oppenheimer. Please go ahead.

Hi, Johnny, Gloria. Thanks for taking my question. So you just mentioned, so for the express business, so you mentioned we're trying to ramp up in the last concentrating markets where it could have better probabilities and growth. Can you just name some of these markets and comment on how competitive this market is? Are the other players also competitive? pretty aggressive in this market. And then my second question is, it seems we can save a lot of money from winding down store plus. But we also, I think on your press release, you mentioned you tried to at least maintain the market share or even grow your market share for your express business. So does that mean we have to reinvest the savings into the express business going forward and try to improve the growth rate a little bit? Thank you.

Yeah. Yeah, so if you look at the, your first question is that, you know, primarily in the past, we are, if you look at our Guangdong provinces and our Zhejiang provinces, some of the key markets within a city like Shenzhen, Guangzhou, or Yiwu, That's primarily is our you know of the concentration of the revenue come from this area are much higher than the market as average And that typically this area has a much lower ASPs and also much more competitive but if to the other cities or provinces which are we're primarily doing actually some very well like Sandong, Henan, Anhui, etc and These areas actually have fairly decent volumes as well as much higher ASPs compared with the market I just mentioned before. So, across the board, we see an area that we think we can do better and has higher ASPs, the area that we will do more, the area that we think we already have a very competitive position, but the pricing is really low. So we probably will be moving the focus a little bit more to the area that we think we can do better. That's balancing it. But that also will help balancing the network, right? The transportation balancing and everything else balancing. That will also optimize or improve efficiencies on the network as well. Your second question is that the closing down of Store Plus Primarily, in this time, we try to readjust the focus and see where we can save the money and put where the investment was needed. Certainly, closing the StorePlus operation will give us certain savings every year, and that will allow us to give more investment and also management time and focus into core business, especially in the express areas. So yes, some of the savings that we will put into investment into the express business. Oh, there's another question. Yeah, so by investing in these areas, and we're hoping that, you know, at least we'll maintain or increase our market shares by what I just said about balancing networks and also continue to reduce the transportation costs and in full efficiencies.

Next, we have a follow-up from Bao Yingzhai of Citi.

Oh, hi, Johnny. I still have a follow-up question. So this question may be a little bit tricky, but given Alibaba is one of your major shareholders, with Alibaba's view on the sector's competition landscape now, do you think it makes sense for, you know, maybe the smaller, relatively smaller players to to make a merger and to fight against the stronger players?

I really cannot speak for Alibaba, what they were thinking about. So, Bonnie, unfortunately, I cannot answer this question for you. Yeah.

Yeah, but how do you think about... Do you think it will be... a workable way for the, you know, it's just for example, maybe for you guys and maybe STO, maybe XTO, I don't know, but if you guys work together, do you think it could be better to fight against the strong players?

Again, the question you were asking, I really have no, I don't know how to answer this question. So I think as the market goes, you know, and the market will actually work out with them by itself, right? I mean, as from Beth's point of view, we're still looking at, you know, how to improve ourselves. We're confident that, you know, by some of these things we installed. If you look at about 2011, right? So if you look at 2011, our market shares are only about 2%. When we go up to 2019, we actually achieved about 11.9% of our market share. So actually in several years, we actually really had gained a lot in the market share and have grown a lot. So from our point of view, then we are still continue to looking at how are we going to optimize our network and continue to how to reinvest and operational side are getting more efficient and continue to compete in the marketplace. As what you're saying about the market dynamics and all the margin acquisition, all this stuff, I guess the market will work out itself. But I cannot comment on or have any foresight on what it is now.

Totally understood. Thank you so much, Jeremy.

Thank you, Bonnie.

Next, we have a follow-up from Hans Chung of KeyBank.

Yeah, thank you. So just one follow-up question about non-core. And I think you mentioned the rest of the business, the capital, the global, you cargo, they put in non-core. And can you provide some color about each? Like, what are we going to do? I know... in addition to we are open for strategic option, but in terms of operation or the strategy or tactics, so what will be the rest of those business, and because they are quite different nature, like capital is profitable, and then for global, it's growing very fast, but still loss making. Just any comment about how you're thinking about a non-core and do we have the goal to just narrow the loss over time or whatever it costs as a growth or we have a different thought? Thank you.

Okay. You know, including StorePlus as well as you call it global capital, The initial plan was try to make in our ecosystem to create a synergetic strategy to help each other. We were anticipating a much competitive market in the core business side, so we would initially try to create this business to have more synergy on that. But given that the competitive marketplace, then we really need to refocus. So we think about, you know, to re-evaluate our strategy on that. So within the remaining of non-core business like capital and U-Cargo and global, we are continue looking at all the options, right? All options could be spinoff, it could be merchant acquisition, it could be some other way. The goal is to minimize the loss and also probably the management time so we can refocus on our core business side. Specifically, like Ucargo, Ucargo created a platform to really sign on more drivers to have more efficiency. transportation, sourcing, et cetera. So that we will more focus on in the future, just a more internal platforms to help, you know, fray and express to getting more temporary car usages required. But meanwhile, you know, if there's anyone was interested into some kind of cooperation or merge, then we can also certainly to think about that. Global, the same thing. Global actually cross-border It's developing very quickly. We do have a lot of synergies with the supply chain management as well as Express with international because there's a lot of cross-border from Thailand to China, China to Vietnam, China to Thailand, et cetera. You utilize Express Network in China for the possibility to deliver or collect it. as well as vice versa, you know, when we have shipment from here to the Southeast Asia being distributed to the customers. We're working with all the platforms in the Southeast Asia as well. So, yes, as you mentioned, so these businesses are still in development, so they still will require some capitals as well as some kind of investment investment. So, yeah, so we look at it, see if that could be a separate fundraising or separate, you know, partnership or something to getting on more capitals and at the same time that we will have a less burden, the cash burdens on the group. So that's, capital is the same thing. Capital basically is essentially initially we'll try to help our drivers and franchisees, et cetera, to have a easier access to capital. But as we require more cashes into our main business, we probably have to look at some other way to do it. Other than using our own capital to do this, we probably will have to use other institutions or other partners' capitals to do that. So any kind of... options or on a table, the goal is just one, right? It's just how to minimize the burden onto the group side, and that can be more saving to invest in the core business.

Thank you. That's very helpful. Just one quick follow-up on global. How would you think about the RECP uh, that would best, uh, the global benefit from that? Is it in, in your, maybe not near term, but kind of medium, longer term?

Um, I will answer your questions. Could I get your question? Huh? Oh, oh, yeah, yeah, yeah. Yeah. Um, so yeah, so of course, um, The new IACP, the regional free trade agreement, certainly will have a major, you know, support to our businesses in Southeast Asia. Because we always see a, for example, this W11, we've seen a lot of parcels, consumers in Malaysia, Singapore, Vietnam, Thailand was bought on the, you know, Taobao or some of the platform in China was shipped through China. there and it was developed delivered by us in the last mile so we already see a continued trend of growth and relatively high growth into cross-border e-commerce related um um and possible shipment and as well as some other kind of bulky items um uh yeah so so with this uh free trade zones um and i assumed i i would you know expecting or i strongly believe that it will continue to push a stronger demand for cross-border needs on that. Thank you.

Well, sir, no further questions at this time. We'll go ahead and conclude the question and answer session. I would now like to turn the conference call back over to the management team for any closing remarks.

Okay. Thank you for joining our call. And we appreciate your support of BEST. Please reach out to our investigations team if you have further questions. We look forward to speaking to you soon. Thank you very much.

And Mrs. Phan and Mr. Chow, we also thank you for your time also today. The conference call is now concluded. Again, we thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you. Take care and have a great day.