2018 Second Quarter Corporate Overview. August 8, 2018

Transcription

1 2018 Second Quarter Corporate Overview August 8,

2 Disclaimer This corporate overview has been prepared by BEST Inc. (the Company ) solely for informational purposes and has not been independently verified. No representations or warranties, express or implied, are made by the Company or any of its affiliates, directors, officers, employees, advisors, or representatives with respect to, and no reliance should be placed, on the accuracy, fairness or completeness of the information presented or contained in these materials. None of the Company nor any of its affiliates, directors, officers, employees, advisers or representatives accepts any responsibility or liability whatsoever for any loss howsoever arising from any information presented or contained in or derived from these materials. The information presented or contained in these materials is as of the date hereof and is subject to change without notice and its accuracy, fairness or completeness is not guaranteed. This corporate overview contains forward-looking statements. All statements, other than statements of historical facts, contained in these materials, including, without limitation, statements regarding our strategy and market opportunities, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forwardlooking statements. The words anticipate, believe, estimate, expect, intend, may, plan, predict, project, target, potential, will, would, could, should, continue, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements are forward-looking statements within the meaning of the U.S. securities laws. These forward-looking statements are made only, and are based on estimates and information available to the Company, as of the date of this corporate overview, and are not guarantees of future performance. These forward-looking statements are based on a number of assumptions which are subject to known and unknown risks, uncertainties and other factors that are beyond the Company s control, such as the political, social, legal and economic environment in which the Company will operate in the future. Accordingly, actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements and future results could materially differ from historical performance. Further information regarding these and other risks is included in the Company s filings with the SEC. The Company undertakes no obligation to update or revise these forward-looking statements for events or circumstances that occur subsequent to the date of this corporate overview. Nothing herein constitutes an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company in any jurisdiction or any inducement to enter into investment activity, or may form the basis of or be relied on in connection with any contract or commitment whatsoever. This corporate overview contains certain financial measures that are not recognized under generally accepted accounting principles in the United States ( GAAP ), such as Non-GAAP Net Loss, Non-GAAP Net Loss Margin, EBITDA Margin and Adjusted Operating Expenses. Such non-gaap financial measures have limitations as analytical tools. The presentation of such 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 GAAP. These non-gaap measures may differ from the non-gaap information used by other companies and therefore their comparability may be limited. 2

3 Market Opportunities Company data as of June 30, 2018, unless otherwise stated. 3

4 Market Trend Rise of China s Middle Class Sustainable Growth of Retail Sales Rapid Growth in E-Commerce with Ongoing Penetration New Retail Online and Offline Integration Fast-Growing China 3PL and Supply Chain Management Market Rising Demand for Intra-City Delivery FMCG Supply Chain Undergoing Transformation Rapid Growth of China Cross-Border Supply Chain 4

5 China: World s Largest Logistics Market Logistics Market Sizes in China and the U.S. US$ bn 1 1,210 1,223 1,354 1,273 1,469 1,321 1,527 1,373 1,556 1,599 1,408 1, Source: iresearch. Note: year-end exchange rate, US$ / RMB =

6 Industry Segmentation of China s Logistics Market Integration and Services Under 15kg Highly Concentrated Over 15kg Highly Concentrated Addressable Market and Growth Major Sub-Segments Express Market Size E Revenue CAGR US$ 98bn 18.5% Less Integrated US$ 208bn 13.8% Fragmented Integration of Resources LTL 2 Supply Chain Management US$ 729bn 23.9% Source: iresearch. Note: 1. Estimated market size for Weighting between 30-6,000kg. 3. Based on cross-border e-commerce import and export scale, assuming cost of logistics at 15%. Cross-Border E-commerce Supply Chain 3 US$ 203bn 14.4% 6

7 Total Addressable Market China Third-party Logistics Market 3PL Revenue, US$ bn; 3PL Penetration Rate, % 366 China Supply Chain Management Market US$ bn 1, % E CAGR % % 20.5% 28.7% CAGR 23.9% E CAGR , % 7.2% % % % % 12.4% 13.9% E 2018E 2019E 2020E 2021E Source: iresearch E 2018E 2019E 2020E 2021E Source: iresearch. 7

8 Total Addressable Market China Express Delivery Market US$ bn 140 China Less-than-truckload Market US$ bn % CAGR 18.5% E CAGR % CAGR 13.8% E CAGR E 2019E 2020E 2021E E 2018E 2019E 2020E 2021E Source: iresearch; State Post Bureau of China Source: iresearch. 8

9 Total Addressable Market China Cross-border E-commerce Market US$ bn 1,736 1,898 China FMCG B2B Platform Market and Penetration of Stores GMV, US$ bn; Percentage of Stores Procuring via FMCG B2B Platform, % 30.5% CAGR 14.4% E CAGR 1,355 1,555 34% E GMV CAGR 1,145 1,474 1, , , E 2018E 2019E 2020E 2021E 15% 32% E Source: iresearch. Import (US$ bn) Export (US$ bn) Source: iresearch. 9

10 Business Model Company data as of June 30, 2018, unless otherwise stated. 10

11 We Pioneer an Integrated Smart Supply Chain and Logistics Platform Before Our Platform Online Offline Express Cross-border Systems Last-mile Supply Chain Trucking B2B2C O2O B2C B2B Monoline logistics companies create islands of disparate online and offline information BEST provides one-stop online-offline supply chain and logistics solutions 11

12 to Transform China s Inefficient Supply Chain and Logistics Industry Development of US Logistics Market Logistics Costs as % of GDP K E Y D R I V E R S O F T H E T R A N S F O R M A T I O N 18% 15% 12% 9% 6% 3% 30% 25% 20% Total: 16.1% of GDP Administration: 3.7% Transportation: 47.2% Warehousing: 49.1% 0% Development of China Logistics Market Logistics Costs as % of GDP Total: 24.0% of GDP Administration: 13.3% Technology Standardization Consolidation Outsourcing Total: 7.5% of GDP 6.3% 64.2% 29.4% Total: 14.9% of GDP 15% 10% Transportation: 55.4% 12.6% 54.1% 5% Warehousing: 31.3% 0% Warehousing Transportation Administration 12 Source: iresearch, State of Logistics Report, National Bureau of Statistics of China and China Federation of Logistics & Purchasing. 33.3%

13 and to Capture Growth Opportunities Disruption through technology and innovation Accelerating market consolidation New Retail drives demand for integrated smart supply chain services Increasing complexity and demand for cross-border supply chain Value-added services increasing monetization opportunities Go Green 13

14 Our Innovative Technology, Multi-Sided Platform Technology R&D Store + Last-Mile Services Supply Chain Management Capital Express Global Integrated Supply Chain Solutions Freight UCargo Value-Added Services 14

15 Flexible Asset-Light Strategy 250+ Hubs & Sortation Centers 38,000+ Service Stations 348 Cloud Order Fulfillment Centers Transportation 100% Self-Operated 100% Leased 100% Franchised ~9000 Franchisees 68% Franchised 100% Leased 100% Outsourced Asset- Light Control Critical Nodes Operational Flexibility Continuous Innovation 397,000+ Membership Stores 748 Branded Stores 222,000+ Registered Trucks ~4,000 Agents 15

16 and Self-reinforcing Network Effect Empower around 9,000 franchisee partners through integrated technology infrastructure, nationwide supply chain service network and value-added services More Data Franchisee Partners More Services Suppliers Partner with over 1,100 service providers including transportation service providers, truck manufacturers, insurance providers, leasing companies, and others More Participants Enhance the shopping experience of millions of consumers and enrich their lives Consumers Merchants Serve over 560 multinational corporations and large enterprises, and numerous SMEs More Usage 16

17 Lead to Superior Growth and Continuous Margin Improvements Revenue RMB mm *Gross Margins 2.4%* Key Growth Drivers 87% Revenue CAGR 19,990 45% 17H1-18H1 Revenue YoY High-growth market New Retail -12.2%* -10.2%* 5, %* 8, %* 8, %* 11,736 Demand for Smart Supply Chain Business model innovation Market share gains 3,066 Growth in new service lines H1 18H1 Notes: 1. Starting in 2017, the Company revised its arrangements with franchisees and the scope of its service. As a result, the Company became the principal that is directly responsible for last-mile delivery of all parcels and freight processed through its network, and the Company is liable to senders for damage to or loss of parcels and freight in connection with last-mile delivery. Therefore, in consideration of such expanded scope of services and increased responsibilities, the Company increased the fee it charges to pick-up service stations. 17 Cross-selling Ecosystem network effects

18 Business Units Company data as of June 30, 2018, unless otherwise stated. 18

19 Our Milestones BEST Inc. listed on NYSE BEST was founded in Hangzhou

20 Cloud Scalable and Robust Proprietary Technology Infrastructure Seamlessly connects our ecosystem, powers our integrated services and participants to operate their businesses Merchant Portal Access merchant tools via web or 3 rd party app Order, track, plan, ERP, CRM, rating & billing, ewaybill, etc. Employee Access Access entire suite via web or 3 rd party app Integrates with internal management and financial reporting systems Franchisee/ Supplier Portal Access entire suite via web or 3 rd party app OMS, TMS, WMS, rating & billing, UCargo, optimization engine, BEST Capital, etc. Warehouse Automation AGVs & equipment directly controlled Delivery App Easy access GPS tracking and push instructions Store + Portal POS and portal for stores Access Dianjia.com for store management and ordering system, supports other valueadded services for consumers Consumer Portal Customer services interface Express U9, Freight Turbo etc. EDI: data integration layer Application Layer: OMS, T8 TMS, WMS, Q9, V5, Payment, ERP, CRM, BMS, FMS (F1), Store +, UCargo and others Technology Layer: AI, GIS, Routing, Address Mapping, Big Data Analytics, Performance Monitoring, LPM, BI and others 20

21 Cloud Single Interoperable Platform Benefits to Merchants Enables faster, more transparent, more reliable and more capable supply chain solutions Cloud-based SaaS platform to power their business Benefits to Consumers Online order placement, shipment, tracking, payment, and online customer service Enhances shopping experience Benefits to Suppliers Independent service providers can participate in broader service offerings and growth Synergies with other ecosystem participants Cloud-based SaaS platform to power their business Benefits to Franchisees Integrated and robust Cloud allows for rapid scaling of new services Increases operating efficiency and reduces cost Benefits to BEST Achieves full visibility Increases efficiency, optimizes resource allocation Rapid rollout of new services 21

22 Supply Chain Management One Stop Integrated Solutions Leading independent supply chain management services provider Offers integrated services to multinationals, corporates and SMEs Nationwide coverage1 Total OFC Fulfilled (000 s) 180, Cloud OFCs 2.4 million GFA of OFCs (sqm) 48, % CAGR 39% 120,665 17H1-18H1 YoY 106,522 32,602 76,850 53,823 8,826 20,284 1, ,245 20,712 88,063 56,138 44,997 34,446 72,077 18, Note: 1. Geographic coverage of Mainland China H1 By Franchised Order Fulfillment Centers By Self-Operated Order Fulfillment Centers 18H1

23 Supply Chain Management From Products to Solutions Brands, Large Retailers, SMEs, Micro-Merchants, Global Merchants One-Stop Supply Chain Solutions Warehouse and inventory planning Online and offline fulfillment and Transportation solutions Intra-city same day delivery SaaS platform for merchants Standardized Products Order Fulfillment Inter-store transfer Door-to-door freight delivery Express delivery Intra-city delivery Line-Haul Transportation Sales and Distribution Procurement FTL LTL Warehouse Management B2B B2C B2B2C EOM (ERP, CRM, etc.) System Support WMS TMS OMS BEST APPs 23

24 Express Door to Door Express Delivery of Parcels Youngest express company among major players Ranked among the top 4 players by volume Led major industry players with low effective complaint ratios Outperforming Industry Growth (mm Parcels) 89% 100% Province and City Coverage1 98% District and County Coverage1 5,600+ Franchisee Partners 26,000+ Service Stations 120+ Hubs and Sortation Centers 128.2% CAGR 3, % 108.3% 2, % 51.9% % 1, % 51.3% % 68.5% 2,231 1, % 30.7% 27.5% 17H1 18H1 28.0% BEST Express Volume BEST Express YoY Industry YoY Consistently Gaining Market Share (%) 10.1% 9.4% 6.7ppts 8.6% 6.8% 6.9% Source: iresearch, State Post Bureau of China Market Share Gain 5.3% 3.5% 2.7% Note: 1. Geographic coverage of Mainland China H1 18H1

25 Freight Door to Door LTL Delivery of Freight Among the fastest-growing LTL service providers in China Ranked among the top 3 players by LTL volume Nationwide network 100% Province Coverage1 98% City Coverage1 3,300+ Franchisee Partners 11,000+ Service Stations 120+ Hubs and Sortation Centers BEST Freight Volume 000 s tonnes 82% 25% 122.4% CAGR 74.1% 97.9% 4,316 17H1 18H1 YoY 80.7% 44.7% 2,982 2,351 1,885 1, Coverage before Covered in 2015 Covered since 2016 Note: 1. Geographic coverage of Mainland China BEST Freight Delivery Volume H1 YoY Growth% 18H1

26 Express/Freight Franchisee Model Overview Pick-Up / Delivery Sorting and Line-Haul Transportation Pick-Up / Delivery Sender/ Recipient Service Stations Sorting and Distribution Centers Line-Haul Transportation Sorting and Distribution Centers Service Stations Sender/ Recipient Operated by BEST Franchisees Operating Cash Flow BEST + Receive Payment from Sender - Pay Waybill and Delivery Service Fees to BEST + Receive Last-Mile Delivery Expenses from BEST - Pay Last-Mile Delivery Costs to Delivery Person - Pick-Up and Other Operational Costs - Management Expenses + Receive Waybill and Delivery Service Fees from Pick-Up Service Station - Pay Last-Mile Delivery Expenses to Delivery Service Station - Transportation Expenses - Sorting Expenses - Management Expenses 26

27 UCargo Real-Time Truckload Capacity Bidding Platform with Value-Added Services Real-Time Bidding En-Route Monitoring Service Quality Evaluation Settlement Parts Sales & General Maintenance Bulk Purchase Insurance, Gasoline & ETC Truck Pooling ~4,000 registered agents ~222,000 registered trucks Internal Clients External Clients Truckload Demand Truck Agents Fleet Individual Drivers Transportation Service Provider 27

28 Global Inbound and Outbound Door-to-door Supply Chain Services International express, LTL, fulfillment, reverse logistics and freight forwarding Urumqi Tianjin New Jersey L.A. Dallas China Ningbo Hong Kong SAR Launched Area Cross-border warehouses in China Over 800,000 sqf Operating Area Outside Mainland China 28

29 Store + - Smart Supply Chain and Last-mile Services for Convenience Stores and Consumers Traditional Approach Brands Dealers Distributors Tier 1 / Tier 2 Wholesalers Retailers Consumers BEST Solutions Brands / Top-Tier Distributors Membership Stores/ Branded Stores Consumers B2B Online and mobile B2B platform allows convenience stores to source merchandise from BEST directly at competitive prices instead of through multiple layers of distributors Last-Mile & Value-Added Services Provides value-added services such as parcel pick-up and drop-off 29

30 Store + - Smart Supply Chain and Last-mile Services for Convenience Stores and Consumers Number of Membership Stores 71x 16Q1 18Q2 247, , , , , , , ,046 65,573 5,622 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 Number of Branded Stores % 17Q2 18Q Q2 18Q2 24 Provinces 51 Cities Current Presence Number of Total Stores Orders Fulfilled 250% YoY 687,692 2,403,538 51% 17H1 18H1 YoY 958,864 1,451, H1 18H1

31 Capital - Financial Services For the Growth of Ecosystem Participants Fleet Financing Enables franchisees and ground transportation companies to acquire trucks via finance lease Equipment Financing Funds partners to purchase and lease equipment Franchisee Financing Provides financing solutions for franchisees Other Services Offers bulk procurement of trucks and accessories to obtain group discounts and reduce costs 31

32 Strengths & Strategies Company data as of June 30, 2018, unless otherwise stated. 32

33 Our Competitive Advantages 1 Disrupting through Innovation 2 Scalable and Robust Proprietary Technology Infrastructure 3 Multi-Sided Platform with Strong Synergies Across Segments 4 Hybrid Business Model with Asset-Light Operations 5 Superior Growth across Multiple Businesses 6 Rich and Growing Ecosystem 33 33

34 Our Growth Strategies 1 Continue Innovation 2 Expand Market Share 3 Enhance Operational Efficiency and Service Quality 4 Grow Store+ and Other Value-Added Services 5 Broaden Global Reach 6 Grow through M&A and Strategic Alliances

35 Financials Company data as of June 30, 2018, unless otherwise stated. 35

36 Our Business Philosophy Platform Infrastructure Invested in proprietary technology platform Built integrated supply chain service network BEST Platform Established Comprehensive Solutions Integrated solutions and continuous innovation driving customer demand Benefit from business synergies Strong Revenue Growth Operating Leverage Significant economies of scale Increasing operational efficiency leveraging technology and business synergies Margin Expansion Asset-Light Optimized levels of capital investments Balanced control and scale Low-Cost Expansion 36

37 Revenue Growth Across Various Service Lines Revenue RMB mm 6,531 6,732 87% CAGR 1, % 17H1 18H1 YoY 2, , , , ,076 5, , ,347 5, , ,030 4,177 1,278 1,319 1,813 2,097 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2 37 Express Freight Supply Chain Mgmt. Store+ Other

38 Continuous Improvements in Margins Gross Margin, % 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 1 17Q4 1 18Q1 18Q2 2.7% 3.8% 4.4% 6.2% 2.2% (2.9%) (3.8%) (5.4%) (4.2%) EBITDA Margin, % 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 1 17Q4 1 18Q1 18Q2 0.1% (8.7%) (11.6%) (10.8%) (10.4%) (2.8%) (6.8%) (0.6%) (4.7%) Non-GAAP Net Loss Margin 2, % 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 1 17Q4 1 18Q1 18Q2 (4.1%) (3.4%) (1.8%) (6.3%) (0.8%) 38 (11.6%) (14.0%) (13.2%) (13.0%) Note: 1. Before the completion of the Company s IPO in September 2017, no SBC expense had been recognized. Upon completion of the IPO, the Company immediately recognized a substantial amount of SBC expense associated with vested share-based awards, especially in the third quarter of Non-GAAP net loss represents net loss excluding SBC expense and amortization of intangible assets resulting from business acquisitions.

39 Significant Operating Leverage Cost of Revenue RMB mm Adjusted Operating Expenses RMB mm 112.2% 110.2% 106.0% 19, % 11.4% 10.5% 9.8% 7.4% 7.9% 7.9% 95.5% 97.6% 1,470 11,209 9,377 8, , , H1 18H H1 18H1 % of Revenues % of Revenues Note: 1. Adjusted operating expenses represent total operating expenses excluding SBC expenses. 39

40 Low Capex Requirements and Improving Cash Flow Position Capital Expenditures RMB mm Operating Cash Flow RMB mm 6.9% 7.6% 7.1% % 4.0% 3.2% (178) (329) (312) (789) H1 18H H1 18H1 % of Revenues 40