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spk00: Good day and welcome to the Best, Inc. Second Quarter 2023 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal your conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jonny Chow, Chairman and CEO. Please go ahead.
spk02: Thank you, Operator. Hello, everyone, and thank you for joining BESS second quarter 2023 earnings call today. We are reporting another outperformed quarter, achieving both top line growth and the bottom line improvements across our business. Our group growth margin turned positive at 4.2% in the second quarter, and we narrowed our net loss by 48.7% year-over-year. Best Trade and Best Supply Chain Management each reached a non-GAAP profitability and generated positive operating cash flow for the quarter. Meanwhile, Best Global continued to bounce back from the impact of COVID, delivering improved revenue and gross margin with ongoing momentum in cross-border volume and revenue on a quarter-over-quarter basis. Now let me review each of our business units in more detail. For Best Trade, China's economy is gradually recovering after COVID, which continues to wait on the industry's recovery. With our focus on quality and operating excellences, Bass Freight's second quarter volume and revenue grew by 7.2% and 15.2% year-over-year, respectively. We have also made considerable gains with Freight's growth margin. It reached 5.3% in Q2, compared with negative 7.8% in the same period a year ago. In addition, Frey achieved profitability for the quarter. As service quality remains the cornerstones of our Frey services, our focus moving forward will be on further improving our core competencies in the market. We will continue to develop digital transformation to improve our operating efficiency and ability to provide our key accounts with high-quality services. In addition, we will continue to synergize with Best Supply Chain Management to capitalize additional business opportunities. We expect Best Freight to continue to be profitable in Q3 and Q4 this year with positive operating cash flow for the full year of 2023. Moving on to Best Supply Chain Management, we'll continue to benefit from the market's increased demand for third-party integrated logistics services partners with a higher level of service offerings. With our capabilities in technology and integrated services, we are becoming more efficient and further differentiating best cross market. In the second quarter, revenue from best supply chain management increased by 6.7% year over year. as the gross margin reached to a record high of 10.9%. Furthermore, we continued to expand our customer base. In Q2, it brought in 36 new key accounts and 33 new tenant wings. Best supply chain management's robust growth showcased that our strategy to continuously invest in and improve our digital transformation capabilities and drive synergies across our business is working. We are extending our services to cover more market segments and maximizing overlapping opportunities with Best Global by utilizing our cross-border and fulfillment capabilities. We expect Best Supply Chain Management to generate ongoing profit and positive cash flow for the remaining quarters this year and for four years of 2023. Looking at the best global, as we continue optimizing our organizational efficiency and developing our integrated logistic services capabilities in Southeast Asia, we are improving the service quality, network coverage, and expanding our reach in cross-border opportunities. On the appeals of COVID, Best Global's business is showing clear signs of recovery. During the second quarter, our key account business has grown 25% quarter-over-quarter, driven by our robust cross-border capabilities. Total volume for our cross-border business in the second quarter in increased by approximately 51 54 quarter over quarter we believe the step we have taken place best global on a firm path to growth and profitability as we continue to execute on our strategy in the second half of 2023 we expect global's possible volume to continue to increase quarter over quarter and its operating margin and the bottom line to show steady improvements for the remainder of the year. In summary, we saw remarkable improvements across our business lines in the second quarter. Our dedication in delivering best-in-class services quality and digital transformation continue to be our primary focus. In addition, leveraging synergies among our business units differentiates our offerings and it gives us clear competitive advantage. We are confident that with this growth momentum, we are able to drive sustainable growth and profitability in the near future. With that, I would like to turn the call over to our CFO, Gloria, for further review of our second quarter financials. Go ahead, Gloria.
spk01: Thank you, Johnny, and hello to everyone. As we continue to accelerate the recovery of our business in the second quarter, both best freight and best supply chain management deliver robust growth, momentum, and reach non-gap probability. Our group's growth margin turned positive, and our net loss narrowed by 48.7% year over year. In addition, we have significantly reduced our selling, general, and administrative expenses by 31.4% year over year. due to our continuous effort in cost reductions and operating efficiency improvements. Our balance of cash and cash equivalents, restricted cash, and short-term investments remain strong at 3.2 billion RMB at the end of the second quarter. Moving to the details of our financials, our total revenue for the second quarter was approximately 2.1 billion RMB, compared with 1.9 billion in the same period of 2022. The increase was primarily due to increased revenue of fast freight and fast supply chain management. Our ongoing work to improve our organizational efficiency and reduce costs continued to bear fruit. We reported a gross profit of 88.8 billion RMB for the quarter, compared with a gross loss of 89.3 million in the same period of last year. Our gross margin percentage reached 4.2 percent compared with a negative 4.6 percent in the same period of last year. Our net loss from continuing operations in the second quarter narrowed by 165.7 million RMB to 174.4 million from net loss of 340.1 million in the same period of 2022. Adjusted EBITDA from continuing operations improved in the second quarter. to negative 124.9 million RMB compared with negative 270.3 million for the same period of last year. With that overview, let's move on to the key financial highlights for our business units. For Best Freight, second quarter revenue was approximately 1.4 billion RMB compared with 1.2 billion for the same period of last year. The increase was primarily due to increased freight volume and a higher average selling price per ton. Freight's gross margin percentage was 5.3 percent, a 13 percentage point improvement from the same period of last year. Adjusted EBITDA for best freight was 20.4 million RMB, compared with negative 34.5 million in Q2 last year. Revenue for best supply chain management increased by 6.7% year-over-year in Q2 to 481.2 million RMB, and the gross margin improved by 2.7 percentage points to 10.9%. Excluding the tax advantage of 18 million recognized in Q2 last year, adjusted EBITDA for best supply chain management improved by 13.5 million compared with the same period of last year. For Best Global, we are gradually recovering from the impact of COVID. Q2 revenue for Best Global decreased by 0.7% year-over-year to 239.4 million RMB, primarily due to the decrease involving in Thailand. Its gross margin percentage was negative 20.2%, a decrease of 5.5 percentage points year-over-year. Q2 adjusted EBITDA for Best Global was negative 100 million RMB, compared with negative 97.7 million in Q2 last year. Our operating expenses, excluding share-based compensation, totaled 245.7 million RMB, or 11.5 percent of revenue, compared with 356.1 million, or 18.4 percent of revenue, in the same period of last year. Our operating expenses decreased by 110.4 million, representing a 31 percent decrease year-over-year. Selling general and administrative expenses for Q2 were 216.6 million RMB, or 10.1 percent of our total revenue, which represented a 31.3 percent decrease year-over-year due to reduced headcounts and better expenses. R&D expenses were 29.1 million RMB, or 1.4 percent of the total revenue, This compared with 40.9 million RMBs, or 2.1% of total revenue in Q2 last year. In summary, our stellar second quarter results highlight the effectiveness of our quality-focused and technology-driven strategies. And we believe BEST is on track and is stepping firmly on a clear path toward our next stage of growth. For the second half of 2023, We expect Best Freight and Best Supply Chain Management to continue delivering profitability and positive operating cash flows. For Best Global, we expect a fast recovery of parcel volume and a much improved bottom line. This concludes our financial updates. We will now open the call to questions. Thank you. Operator?
spk00: We will now begin the question and answer session. To ask a question, you must press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw a question, please press star, then 2. Once again, that was star, then 1 to ask a question. And at this time, we will pause momentarily to assemble our roster. Again, if you would like to ask a question, please press star then mark. Again, we will pause to assemble the roster. This concludes our question and answer session. I would like to turn the conference back over to John Lee Chow for any closing remarks.
spk02: Thank you for joining our call. We appreciate your support of BEST. Please reach out to our investor relations team if you have any further questions. We look forward to speaking with you soon. Thank you very much.
spk00: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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