U.S. Markets closed

Edited Transcript of BEST.N earnings conference call or presentation 13-Nov-19 12:30pm GMT

Q3 2019 BEST Inc Earnings Call

Nov 30, 2019 (Thomson StreetEvents) -- Edited Transcript of BEST Inc earnings conference call or presentation Wednesday, November 13, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Shao-Ning Chou

BEST Inc. - Chairman & CEO

* Xiaojie Pan

BEST Inc. - Principal Accounting Officer, Financial Controller & Director of Finance

================================================================================

Conference Call Participants

================================================================================

* Baoying Zhai

Citigroup Inc, Research Division - VP & Head of the Hong Kong and China Transport

* C. Wong

JP Morgan Chase & Co, Research Division - Analyst

* Scott Andrew Schneeberger

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to BEST Inc.'s Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

With us today are Johnny Chou, BEST Inc.'s, Chairman and CEO; and Jenny Pan, Principal Accounting Officer. For today's agenda, Johnny will give a brief overview of business and operational highlights. Then Jenny 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-inc.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 BEST Inc. Today's discussion will contain forward-looking statements. These forward-looking statements are based on management's 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 forward-looking statement 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 measures can be found in BEST Inc.'s earnings press release. Finally, please note that unless otherwise stated, all the figures mentioned during this conference call are in RMB. Today's call is being recorded. Now I will like to turn the call over to Johnny Chou, Chairman and CEO of BEST Inc. Johnny, please go ahead.

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [2]

--------------------------------------------------------------------------------

Thank you, operator. Good morning, and good evening, everyone. Welcome, and thank you for joining our 2019 third quarter earnings call. BEST third quarter results were highlighted by strong revenue growth and significant net loss reductions, which saw us achieve positive non-GAAP net income for second consecutive quarter, and we remain on track to achieve our goal of achieving positive non-GAAP net income for the full year 2019. Despite challenging market conditions, e-commerce grew at a healthy pace, which contributed to accelerating demand for BEST's supply chain solutions and logistics services. BEST Express and freight continue to bring market share and the lower costs. While supply chain management and Store+ optimize their operations and improve the profitability. Our other segments of UCargo, Global and the Capital continue to expand and deliver strong growth as we capitalize on the significant opportunities in truckload services brokerage and geographic expansion in Southeast Asia. BEST is well -- very well positioned to maintain our strong momentum as we enter into the fourth quarter, which is a peak season for our businesses. And we -- as we execute our strategy of above-market growth and increased profitabilities.

Now let me share some business highlights with you. BEST Express continue to gain market shares whilst improving its operating efficiency. Express parcel volume exceeded at RMB 1.89 billion in the third quarter, an increase of 38% year-over-year, which is 1.38x of the industry. Market share increased to 11.7% from 10.8% in the same period of 2018. Market ASP continued to trend lower in the third quarter. ASP, including last mile fees, decreased by 13% year-over-year to RMB 2.75. ASP ex last mile decreased by about 17% year-over-year to RMB 1.32. We continue to make strong progress in improving cost structure by optimizing BEST Express networks and investing in technology applications. Cost per parcel decreased by 13% to RMB 2.62 year-over-year as we continue to reduce transportation, labor, lease and other costs. Cost per parcel ex last mile decreased by 17% to RMB 1.19. We also reduced Express operating expenses for parcel significantly. Nine years ago in November, BEST Express target operations and has since made a tremendous progress. We have since built one of the leading networks in China and achieved significant growth over last -- over that period. As of the end of third quarter, BEST Express network spanned 94 regional hubs and sorting centers, over 5,000 franchisees operating nearly 40,000 service stations covering 100% of all provinces and cities, and in 99% of all districts and counties in China. We have deployed 80 automated sorting lines and 967 dimension weighting scanning systems and achieved 100% digital waybills.

As we continue to optimize our network and invest in technology application, BEST Express is well positioned for its next phase of robust close. BEST Freight, our leading nationwide LTL platform continues to deliver outstanding results. For the quarter, freight volume exceeded 1.88 million tonnes, an increase of 28% year-over-year, significantly higher than industry average. Revenue grew by 26% to RMB 1.38 billion, while gross profit margin increased by 1.7 percentage points year-over-year to 6.3%. We continue expand its last mile coverage footprints. The total number of franchisee operated last mile service stations increased by 52% year-over-year to over 17,800 from 11,700 in the same period of 2018. BEST Freight is entering its eighth year of operation. Over that period, we have built a top 2 LTL network in China, spending 99 regional hubs and sorting centers, over 4,500 franchisees, covering 100% of provinces, 99% of cities and 97% of all districts and counties in China. Our extensive network, nationwide network and expanded last-mile service coverage position us well to serve increased demand for large items, e-commerce transactions, while continuing our industry-leading growth. For BEST Supply Chain Management, our focus was on growing the franchise cloud order fulfillment centers and improving margins. As a result, the total number of orders fulfilled increased significantly by 53% year-over-year to over RMB 86 million of which the total number of orders fulfilled by franchise Cloud OFCs increased by 113% to over RMB 40 million. As of September 30, total ground floor area of Cloud OFC increased by 15% year-over-year to over 3 million square meter of which over 1.3 million square meter were operated by franchisees.

Gross profit margin doubled year-over-year to 8%. Going forward, we will continue to focus on developing smart supply chain solutions and expanding BEST Supply Chain service offering to our customers. For BEST Store+, we continue to execute our strategy of growing the number of higher-margin franchised BEST-Neighbor stores while improving order quality of lower-margin membership stores. In the 3 -- third quarter, total number of a branded store, including franchise and self-operated stores increased by over 160% year-over-year to over 3,400 as of September 30, of which the number of franchised BEST-Neighbor stores increased to over 3,000 from around 1,000 in the same period last year.

The total number of orders fulfilled for franchise BEST-Neighbor stores increased by 400% to nearly 100,000, when the total number of orders fulfilled for membership stores decreased by 5% to around 780,000. As a result, we improved the margin by 3 percentage points year-over-year to 11% while reduced EBITDA loss by 25% compared with same period of 2018. As mentioned in the last call, we are in the midst of conducting strategic review of the Store+ business as it embarks on its next phase of development. We'll tell you more about it later on. UCargo, our truckload service brokerage platform, continue to grow rapidly since we opened its platform for external customers in March of 2018. In the third quarter, the total number of transactions on the UCargo platform generated from external customers increased significantly by over 220% year-over-year to over 158,000, while revenue generated from external customers increased by more than 170% year-over-year to over RMB 700 million. The number of the registered agents on the UCargo platform increased over 16% year-over-year to over 4,900 and number of registered trucks increased by 27% year-over-year to over 3,007 thousand -- 30 -- 307,000 as of September 30. UCargo platform now covers 30 provinces in China. Chinese government recently issued favorable new policies to promote the growth of the enormous truckload service brokerage market. We are confident that with our leading technology infrastructure and transportation operations expertise, UCargo platform is well positioned to capture tremendous opportunity in a potentially over RMB 1 trillion market and become a leader of industry. BEST Global continued to expand its cross-border logistics business and build its presence in Southeast Asia. As of September 1 -- 30, BEST Global services 19 countries and regions outside of Mainland China. We continue to invest in Southeast Asia to capture the opportunities from its explosive growth in e-commerce. We launched the Vietnam nationwide Express and Supply Chain management business in July, after launching Thailand nationwide Express and service management business in January. Both business are growing rapidly. We will continue to look for opportunities to invest and expand our services and networks in Southeast Asia in coming years, with the goal of becoming the leading infrastructure supply chain and logistics company there.

BEST Capital continue to provide financial solutions to our ecosystem participants and contribute to improved overall operating efficiency in our network. Overall, we delivered solid results for third quarter. BEST is very well positioned continue our strong momentum as we enter into the fourth quarter, which is peak season for our business, and as we execute on our strategy of above-market growth and increased profitabilities. Before I turn it over to Jenny, I would like to make 2 announcements. First, I'm pleased to announce that we have concluded our search for a CFO. Ms. Gloria Fan will join the company and start on November 18. We're very pleased to welcome Gloria to our leadership team. Gloria brings with her over 2 decades of financial management and operational experience from working in number of public and private technology companies in the U.S. Most recently she served as CFO of Corporate Visions, Inc. and before that, she spent nearly 10 years as CFO for a number of software-as-a-services and clean technology companies. Gloria will bring invaluable expertise to our financial and strategic planning as we continue to expand our business. And second, I would like to announce that our Board has authorized a share repurchase program where BEST may purchase up to USD 100 million worth of its outstanding ADRs during the next 18 months. With that, I will turn it over to Jenny, our Principal Accounting Officer. Go ahead, Jenny.

--------------------------------------------------------------------------------

Xiaojie Pan, BEST Inc. - Principal Accounting Officer, Financial Controller & Director of Finance [3]

--------------------------------------------------------------------------------

Thank you, Johnny. Hello, everyone. BEST delivered an excellent for the quarter with strong revenue growth and rising improvement despite a competitive industry environment and in a traditionally slow season for our business.

With consolidated revenue growth of 22% year-over-year, on revenue of RMB 8.7 billion. We also achieved positive non-GAAP net income for the first time during our third quarter period, with non-GAAP net income of RMB 16.7 million compared to non-GAAP net loss of RMB 101 million for the same period of last year. Gross profit margin increased by 0.4 percentage points year-over-year to 5.8%. EBITDA increased by 71% to RMB 93 million, while adjusted EBITDA increased to RMB 114 million from RMB 1.3 million for the same period of last year. Our company also generated a positive operating cash flow of RMB 237 million compared to RMB 86 million for the same period of last year. Reconciliation of non-GAAP measures to comparable GAAP measures and the relevant adjustments can be found in our earning press release. Now I would like to give some key financial highlights for the quarter. On a year-over-year basis, Express revenue increased by 19% to RMB 5.2 billion, primarily due to a 38% increase in total volume and a 13% decrease in revenue per parcel. We offset the decrease in ASP was decrease in cost and operating expenses, as we continue to optimize network and invest in technology application to improve operating efficiency.

Cost per parcel decreased by 13%, of which transportation costs decreased by 13% year-over-year to RMB 0.75. Labor costs decreased by 23% to RMB 0.23. Lease costs decreased by 5% to RMB 0.1. Other costs decreased by 35% to RMB 0.11. Last-mile delivery cost decreased by 10% to RMB 1.43. As a result, gross profit increased by 12% to RMB 245 million, while gross margin decreased slightly to 4.7%. Freight revenue increased by 26% to RMB 1.4 billion, primarily due to a 28% increase in Freight volume. Unit economics continue to improve, driven by economies of scale, coverage expansion and e-commerce products. Revenue per tonne decreased by 1.6% to RMB 730, while cost per tonne decreased by 3.3% to RMB 684 of which transportation costs decreased by 8% to RMB 342. Labor costs decreased by 13% to RMB 84. Leased costs decreased by 9% to RMB 50. And other costs decreased by 0.4% to RMB 43. Gross profit margin improved by 1.7 percentage points to 6.3%. Gross profit increased by 71% to RMB 84 -- RMB 86 million for the quarter. The purchase management revenue decreased by 8% to RMB 451 million despite a 50% increase in number of orders fulfilled. The decrease was primarily due to discontinuity of projects with low profitability and focus on growing franchise business. Gross profit margin doubled to 8.1% compared to the same period in 2018, and gross profit increased by 87% to RMB 33 -- RMB 37 million. Store+ business revenue decreased by 3% to RMB 862 million, primarily due to 4% decrease in total number of orders fulfilled, as we continue to execute our strategy of enhancing operating efficiency. Gross profit margin improved by 2.5 percentage points to 10.5%, while gross profit increased by 28% to RMB 91 million. Other service lines of BEST UCargo, BEST Capital and BEST Global continued their strong growth momentum and become our important contributors. Revenue from those service lines increased significantly by 137% to RMB 855 million, primarily driven by the significant increase in volume transactions from UCargo platform. Revenue generated from external customers of UCargo platform increased by 174% to RMB 702 million, accounting for 8% of the company's total revenue in the third quarter of 2019. Gross profit from other service lines also increased by 58% to RMB 48 million.

All the major operating expense items are excluding share-based compensation expenses compared to the same quarter of 2018. Selling expense as a percentage of revenue decreased by 0.9 percentage points to 2.4%. General and administrative expense as a percentage of revenue decreased by 0.4 percentage points to 3%. Research and development expenses as a percentage of revenue increased by 0.1 percentage points to 0.7%, as we hire more system development-related professionals.

CapEx in the third quarter was RMB 533 million or 6% of the total revenue compared to CapEx of 412 million or 5.7% of total revenue in the same period of 2018. The increase in CapEx was primarily due to the upgrade of automation system in major hubs and specific location centers. In middle September, we successfully complete a USD 200 million convertible note offering. As of September 30, 2019, our cash and cash equivalents, restricted cash and short-term investments in total were RMB 4.8 billion, which allow us to invest for the future and create long-term value for our shareholders.

Now let's revisit our 2019 financial outlook. Based on current market conditions and operations, after the -- taking into account the lower average selling price per parcel for Express and the lower revenue growth for Store+, we adjust our full year 2019 revenue guidance to be in the range of RMB 34.9 billion to RMB 35.1 billion. This represents management current and preliminary expectations, which is subject to change. With that, we will now open the call to Q&A. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question will come from Scott Schneeberger of Oppenheimer.

--------------------------------------------------------------------------------

Scott Andrew Schneeberger, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [2]

--------------------------------------------------------------------------------

My first question is just kind of curious how you anticipate volume in the fourth quarter and balancing pricing? Obviously, it's an industry dynamic, but what do you foresee in this current quarter as we head into the new year?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [3]

--------------------------------------------------------------------------------

Yes. So we still maintain a robust growth in volumes. So yes, we stated that we will grow faster than the industry. And by [pattern], we also announced that the past Double 11, the first day we receive about, well, 130 million parcels, very strong. So I think for the fourth quarter, we are still maintain a robust volume growth, up 30s, similar to -- probably be a little bit lower than third quarter, but it's going to be still way in the 30s.

--------------------------------------------------------------------------------

Scott Andrew Schneeberger, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [4]

--------------------------------------------------------------------------------

And yes, specifically, how did Singles' Day compare year-over-year in the volume? I didn't -- I heard the volume, but I could [refreshers] on what that was [exactly].

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [5]

--------------------------------------------------------------------------------

Yes. So yes, so we -- year-over-year, we grow about over 30%, about 31%.

--------------------------------------------------------------------------------

Scott Andrew Schneeberger, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [6]

--------------------------------------------------------------------------------

Okay. And then just 1 follow-up just on staying in Express. How do you perceive right now, the competitive environment for the competitors who are not in the in the top 5, but those that are smaller? How do you perceive their activity and their relative strengths in the market at the moment?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [7]

--------------------------------------------------------------------------------

Yes. So if the competitor are not on top pack, probably they are negative growth, right. Because if you think about like the top packs, everybody's growing above the market industry, industry average, that means the base on number we see is the one behind that, a smaller competitor basically, they have negative growth. So it's just a matter of time how -- when this is going to be pricing out of the market.

--------------------------------------------------------------------------------

Scott Andrew Schneeberger, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [8]

--------------------------------------------------------------------------------

All right. Then just one more, if I could throw it in. The CapEx keeps moving up a little bit. I assume that's predominantly investment in technology. Could you just speak to trend of what we should anticipate in future quarters regarding CapEx as a percent of revenue and how that investment's going?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [9]

--------------------------------------------------------------------------------

Okay. Thank you very much. So as we said, we have a huge amount of a volume in Double 11. But I look in the whole country, the sortation center, even though our volume has grown so much, but it's actually has less labors and much more automated. So we did spend a lot of money to automate and to reduce cost and automate the sorting centers. Given said that, every third quarter, literally, it's traditionally just a higher CapEx spending quarter because most of the projects actually are coming in third quarter and the fourth quarter in anticipating of the Double 11 peak season.

So traditional third quarter, we always spend a little bit more compared with relatively first quarter or the fourth quarter. So third quarter is the highest spending season for the upgrading the automation. And said that, this year, we'll probably spend little bit more. So as I said, traditionally, about 3% to 4%. So I would say full year, we still will maintain about 4 percentage points, because fourth quarter will be less. And the full year will be probably little bit more than last year. We just spent about 100 -- about RMB 140 million -- I mean no, I'm sorry, RMB 1.4 billion this year. So last year, we spent about over RMB 1 billion. So this year is about 40% growth, but revenue didn't grow 40%. So that will bring up the percentage slightly higher. Last year, full year was about 3.9%, so it's anticipating this year and maybe about 4.2% to 4.5%.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Our next question comes from Baoying Zhai of Citi.

--------------------------------------------------------------------------------

Baoying Zhai, Citigroup Inc, Research Division - VP & Head of the Hong Kong and China Transport [11]

--------------------------------------------------------------------------------

Johnny and Jenny, I have 3 questions. The first question is about the guidance. Actually, we are seeing 7% get revised down from previous guidance and the implied fourth quarter revenue growth guidance, the midpoint was only 17% year-on-year growth. It seems a little bit conservative.

So could you please share more color by segment? Which segment is the major reason behind to drive the guidance revise down? And could you please share a little bit more details on the Express delivery segment ASP of the fourth quarter? This is the first question.

Second question is about the supply chain management, actually where I think the third quarter revenue growth was negative. The volume was still quite okay, but what happened to the ASP? Still with a lower ASP, but GPM, the gross margin improved a lot. What's the reason behind? And the third question is regarding the buyback program. I'm a little bit confused here. We just issued USD 200 million 3P 2 months ago. And now we are going to use USD 100 million of it to do the buyback? What's the rationale behind?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [12]

--------------------------------------------------------------------------------

Thank you, Baoying. Very short question. The first question regarding to fourth quarter guidance. Yes, so if you look at the third quarter, right, so this year, with full year, we try to achieve a net income positive so non-GAAP. So we're trying -- try to see what area we want to restructure ourself, given the competitive market. So the fourth quarter readjustment in the guidance is, first of all, is the super competitive parcel business that ASPs being lower than we anticipated. So that is part of a major reason that one of them. Second reason is that the Store+, as we said, we have been continued try to improve the margin and to make a business model looks more workable by improved margins and reduced the cost and loss. In that, we've actually cut out lot of nonprofitable lower margin, low-quality orders. So instead of tracing for GMV, so tracing for the revenues, then we are really focusing the quarterly orders. So if you look at third quarter, the Store+ is actually -- is an active growth. So that's the second one that's driving down the fourth quarter. And third one is basically the -- you already mentioned it, the supply chain. The supply chain this year, we will try to control the risk in term of the bad receivables so we'll control the -- improve the quality of that. So in a sense, that we're really restructuring all this. So that's the major reason we -- as Scott was asking, the volume growth, so we still think this is good. The Freight, the Express and the Supply Chain, International Global. I think the order business, the growth on the volume side is still good. But we do making a some strategic change in term of the sort of business like the supply chain and the Store+ to make it more focus on the profit margins and quality of the orders. And that's for the reason for that.

So you're talking about the ASP for the actual -- that's the second question, but you said it's one question, so I'm going to answer one question. The Express ASP for fourth quarter, we're actually seeing a similar or a slightly higher than third quarter. Traditionally always been the case, fourth quarter ASP going to be slightly higher, given the -- going to the high season, business season, their pricing will go up a little bit. So ASP's not going to drop versus third quarter, is going to be slightly higher. That's your first question.

The second question, we're talking about the supply chain, why the volume grow so much and the margin went up like doubled, but the revenue actually went down. So we are focusing on more of the B2C franchise, the Cloud OFC business. So actually, volume goes up a lot. If you look at the Cloud OFC, volume doubled, more than doubled, so the total -- the order fulfill lines up. But we also carry out some of these projects, we deem to be a low-margin or less quality of a project, which in the end of day, probably don't make money out of it. So we'll just cut it out. So we are doing some kind of a clean up, if you were to say, on some of the older projects and also structuring into a more long-term growth.

So in the short term, I -- we're expecting that to come back a quarter after next quarter, quarter after the supply chain we're going to the growth again. Actually, in fact, that I think the Store+ also will be in a growth trajectory in next quarter or so. So that's your second question.

The third question is, yes, you maybe ask the right question and say, why we issued USD 200 million of convertible bonds, and meanwhile, 2 months later, say we want to buy back some shares. So first of all, the issuing of convertible bond is more opportunistic, right, because we've seen a market there, capital market is good. So we just go ahead to go to pop up the war chest and get some more reserving cash. So that is the -- it's a complete separate event. It's not like 2 months ago, we just saw the capital market is really good. And why not? Getting some more cash on site, which is good. But by issuing announcement saying that we're also planning to buying back some of the shares, it's purely -- we think that we are confident in what we're doing, and we're executing. So basically, just we're confident on our execution, our strategies and to achieve the profitability. So that is a 2 of the separate events. But when you look at it, you probably look it's like confusing, but it's really -- when we get a convertible bond, which we think it's a good market to get some cash on side.

--------------------------------------------------------------------------------

Baoying Zhai, Citigroup Inc, Research Division - VP & Head of the Hong Kong and China Transport [13]

--------------------------------------------------------------------------------

Okay, understood. And then a follow-up on the Express ASP. So in terms of the year-on-year decline, it should be smaller than the third quarter, right?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [14]

--------------------------------------------------------------------------------

Are you saying -- the year-over-year should be similar because last fourth quarter, 2018 fourth quarter, the ASP also went up. So basically, the last year, 2018, fourth quarter ASPs are higher than third quarter. So the same thing this year is going to be higher than the third quarter. So given said, I think that the year-over-year decline quarter-by-quarter, like-to-like, like you say, it's probably similar. It's about, yes, maybe 12%, 13%, yes.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

(Operator Instructions) And our next question comes from Calvin Wong of JP Morgan.

--------------------------------------------------------------------------------

C. Wong, JP Morgan Chase & Co, Research Division - Analyst [16]

--------------------------------------------------------------------------------

Johnny, can you hear me?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [17]

--------------------------------------------------------------------------------

Yes, Calvin. Loud and clear.

--------------------------------------------------------------------------------

C. Wong, JP Morgan Chase & Co, Research Division - Analyst [18]

--------------------------------------------------------------------------------

Yes. A few questions from my end here. First couple still on Express. So first just wanted to follow up on sort of ASP trends that we kind of saw in Q3 and what we're talking about in 4Q. So we did notice a bit of a cut to the last-mile fee, which we kind of held off on doing in the first half, mainly to kind of continue supporting our network. In terms of going into 4Q, what's our thinking on that front? And in terms of the sequential increase in ASP, is that mainly from a boost in last-mile fees? Or are we also able to boost the revenue effectively that we get to keep? So that's the first question on pricing.

Second is just broader pricing competition in the market at this point in time. 4Q raising a bit of pricing overall, I think that's largely in line with historical seasonality in practice. But in terms of the message we've been getting from a lot of these players, it seems like competition is still quite high and intense. So any adjustments would likely be quite short term. So how are we looking at our pricing strategy? Do we have any visibility beyond just Double 11? How about the rest of the peak season, Double 12, and then maybe heading into first quarter next year. The third question is related to Store+. So we kind of talked about the whole restructuring that we're still exploring and looking at for that business. Just any update on this front and what we could be expecting to hear from you guys going forward.

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [19]

--------------------------------------------------------------------------------

Okay. Thank you, Calvin. Regarding to the ASP for Express, the last mile on third quarter, we will reduce a little bit the fees, reduce little bit. Primary, we think more and more actual last-mile delivery is using other means other than just the -- done by the human or [delivery boy]. So more and more like the parcel lockers or the stores. So last mile did a lot of other means to do that. So the cost actually reduced a little bit.

In the fourth quarter, we actually raised last-mile delivery fee slightly. And we raised about maybe a few cents or something across the country. It's just for -- because of peak season coming, and we want to make sure that the delivery quality is maintained. So we actually increased the pricing a little bit. But meanwhile, we also actually increased the pricing through the revenue that we keep, right, because the last mile that basically goes to the delivery people or franchisees, but we also raised for the transportation, other type service costs, so which we -- so with the ASP for non-last-mile fees, we actually raised. So that's a part of the revenue we actually can keep.

Given the pricing strategy, I think you're absolutely right. So first quarter, we are seeing that -- because every -- traditionally, every first quarter people raise price there. So after that, yes, there is more pressure, still going to have more pressure to -- in the marketplace. So yes, expecting to -- we're expecting the pricing will continue to be under pressure after high seasons and into the next year. The last one we talked about Store+. So we already hired some professional team, and they're doing a strategy review and as well as some other strategy on that. So I cannot share anything further. But when we have that, we will continue to share with everyone. But like I do can say that we already hired some professional are looking at the structures and possibility of how to do this.

--------------------------------------------------------------------------------

C. Wong, JP Morgan Chase & Co, Research Division - Analyst [20]

--------------------------------------------------------------------------------

That's good. Just one very quick follow-up on sort of what you mentioned about other means of delivery at this point. Do we have a rough percentage of what -- how many parcels are done by sort of lockers and stores, so those (inaudible)?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [21]

--------------------------------------------------------------------------------

Yes. So last mile's increasing. So you see the orders like over 30%, already being to -- through the other means. I think that percentage of that will continue to increase, yes.

--------------------------------------------------------------------------------

C. Wong, JP Morgan Chase & Co, Research Division - Analyst [22]

--------------------------------------------------------------------------------

Okay. And just roughly what it was maybe a quarter ago or last year, just so we get a sense of the pace of increase there?

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [23]

--------------------------------------------------------------------------------

Last year, probably it is about -- probably this year over like 10 years -- 10 percentage -- additional 10 percentage points. So last year maybe about 20 some, and this year is getting to 30 some. But we see that these numbers continue to increase. But it's just a sheer number of (inaudible) yes.

--------------------------------------------------------------------------------

Operator [24]

--------------------------------------------------------------------------------

This concludes our question-and-answer session. I would like to turn the conference back over to Johnny Chou for any closing remarks.

--------------------------------------------------------------------------------

Shao-Ning Chou, BEST Inc. - Chairman & CEO [25]

--------------------------------------------------------------------------------

Okay. Thank you for joining our call, and we appreciated your support for BEST. Please reach out to our Investor Relationship (sic) [Relations] team if you have further questions. We look forward to speaking to you soon. Thank you very much.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.