BEST Inc (BEST) 2020 Q3 法說會逐字稿

Good morning, and good evening, ladies and gentlemen. Thank you for standing by. Welcome to BEST Inc.'s Third Quarter 2020 Earnings Conference. (Operator Instructions)

With us today are Mr. Johnny Chou, BEST Inc.'s Chairman and CEO; and Gloria Fan, 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-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 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 statements as a result of new information, future events or others, except as required under applicable law.

Please note -- 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 a 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 conference to Mr. Johnny Chou, Chairman and CEO of BEST Inc. Johnny, 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 profitability. But before that, let me first go over our quarterly results.

We had a challenging third quarter amid intensified 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 margin. Parcel volume increased by 24.8% year-over-year, representing market share of 10.6% 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% 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 strategy, 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. Freight 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 a pricing lag after the government reinstated highway tolls in the second quarter. ASP declined by 17.3% year-over-year, while average cost per tonne decreased by 12.6% year-over-year. Looking ahead, we are optimistic that Freight 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 continued to execute on our strategy of growing our franchise Cloud OFC business and focused 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 franchise 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.

BEST UCargo brought more drivers and SME onto the platforms. The number of registered drivers on the UCargo 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 continued its 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 a progress in expanding its express delivery services in Malaysia, Cambodia and Singapore.

BEST Store+ executed on its strategy of partnership model and enhancing order quality, improved gross margin and reduce losses. As a result, its gross 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 Store+ business, except for our self-operated WoWo stores, which is still under strategic review. We believe that by phasing our Store+, company can eliminate the significant cash flow requirements associated with this early-stage business, allowing the company to further prioritize capital allocation towards its core business.

Let me discuss its 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 the goal of putting us back on the 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 have put in place new leadership to lead Express business. As previously announced, effective as of November 15, 2020, Mr. Wang Xiaoqing, former General Manager of BEST's Jiangsu province branch, assumed the position of Vice President, General Manager of BEST Express service line, replacing Mr. Shaohua Zhou, who took up a new role in the company.

For Freight, we continued to -- 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 freight services, improving operational 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, while continuing to implement an asset-light model and grow the franchise Cloud OFC business.

For our noncore business, we announced the winding down of BEST Store+ on November 15. For the other core -- noncore business, including UCargo, Capital and Global, we're considering all options available with a goal of reducing operating 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 strength 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 invest 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 an intensified competitive market, our third quarter performance reflects both the challenges and resilience of our business. Our revenue was RMB 8.7 billion, 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 RMB 640 million. Despite the net loss, we generated operating cash flow of RMB 115 million during the third quarter and maintained a healthy balance of cash and cash equivalents, restricted cash and short-term investments of RMB 4.8 billion.

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 RMB 38 million compared to RMB 507 million 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 RMB 438 million compared to RMB 114 million over the same period of last year. Q3 adjusted EBITDA for core logistics and supply chain management business was negative RMB 278 million compared to RMB 267 million for the same period of 2019.

Next, moving on to key financial highlights for our business units. On a year-over-year basis, BEST Express revenue decreased by 2.6% year-over-year to RMB 5.1 billion 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 ASP is primarily attributable to competitive market dynamics.

Adjusted EBITDA for BEST Express was negative RMB 211 million compared to RMB 192 million for the same period of last year. BEST Freight's Q3 revenue increased by 8.2% year-over-year to RMB 1.5 billion, 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 tonne, 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 RMB 45 million compared to RMB 42 million for the same period of last year.

Q3 revenue for BEST Supply Chain Management increased by 0.1% year-over-year to RMB 453 million. Adjusted EBITDA for BEST Supply Chain Management was negative RMB 27 million compared to RMB 6 million for the same period of last year.

BEST UCargo's Q3 revenue decreased by 1.9% year-over-year to RMB 689 million, primarily due to discontinuation of several key account customers to minimize credit exposure. Adjusted EBITDA for BEST UCargo was negative RMB 30 million compared to negative RMB 6 million for the same period of last year.

Store+ revenue decreased by 16.8% year-over-year to RMB 717 million, primarily due to efforts to enhance order quality to improve margins. Adjusted EBITDA loss for Store+ was RMB 68 million compared to a loss of RMB 98 million for the same period of last year.

Q3 revenue for BEST Global increased by 125.9% year-over-year to RMB 216 million, primarily due to strong growth in parcel volumes in Southeast Asia. Adjusted EBITDA for BEST Global was negative RMB 61 million compared to negative RMB 31 million 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 RMB 581 million or 6.7% of the revenue in the third quarter compared to RMB 470 million or 5.4% of the revenue in the same period of 2019. The increase in SG&A 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 RMB 11 million or -- to RMB 51 million, 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 SG&A and R&D expenses to focus our resources on our core business. We anticipate an estimated cost savings of approximately RMB 200 million 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 RMB 487 million or 5.6% of total revenue compared to RMB 523 million 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, has led to this decision. We believe through the strategic reevaluation of our noncore businesses, meaningful cost reductions and the allocation of resources, BEST 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.

(Operator Instructions) And the first question we have will come from Baoying Zhai of Citi.

Yes. So my first question is regarding the Express -- not Express delivery, but actually, the whole group strategy change with a refocus on the express and freight. Just want to know, so what would be the key change of the development and the key competition strategy after the change of the personnel, especially in Express delivery business?

And then my second question is also regarding the restructuring. So with the restructuring cost, I see we are going to close the Store+ 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 RMB 200 million savings. The RMB 200 million savings, could you please break down? So where is the figure from?

Baoying, thank you for the questions. Yes, regarding the first question about Express strategy moving forward, we reevaluated all the Express operation. And certainly, the large area we need to go to improve on, number one is that -- how do we rebalancing our network development. In the past, we are very much focused enough. We are doing well in certain areas like Yiwu and some or some major markets. But actually, we could have done a lot better balancing in some of the areas that we actually have a strong market, but we can do better. So that means we'll increase our ASP per parcel revenue because on this very competitive market, like Guangdong Southern area or Yiwu, the ASP is very low. But actually in some outskirt of other provinces, it's less of a pricing pressure in terms of the -- and so we probably could get better ASPs as well as better cost structure because the networks are more balanced. So that's the number one thing we're taking a look at, and we will 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.

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 12% -- 15% of the total reduction in costs 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 freight side, having more combined routing of the lines, long line hauls, 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. It's at about $0.10 per parcel. Compared with our other competitors, it probably would be much less. That's primarily because we have built up a capacity in the past couple of years in anticipation of continued growth -- of high growth in our Express business. This year's growth is slower than we planned. So actually, we have more capacity inside the -- so that's another area that we're looking at.

So that's the first question, on the key change in the Express side, basically, balancing the network better than just focusing on the key market. And the second is continuing to improve the cost structure, especially on transportation side. We actually have some -- we also started with some of the self-operated fleet rather than completely outsourced. So starting in the first quarter, I think, this year, we already had some self-operated fleet on the ground.

Secondly, you're talking about restructuring costs. So restructuring costs on the Store+ front, we probably will have additional by shutting down the older branch offices and also deal with the inventories and all the issues that we need to deal with. Probably, it will be a little bit over RMB 100 million additional costs associated with that. But that's one-time charge into disposing of the business. However, that will give us a couple of hundred million dollars of savings every year moving forward because the business essentially is still in money losing. So onetime additional costs, restructuring costs on that. All the other businesses, like the -- we're still looking at all the other -- any other, I'm sorry, option to look at it, so I don't have the exact number right now.

With the third question about the $200 million of the savings, I leave this to Gloria.

Okay. So basically, the $200 million savings from now until 2021, majority of the savings came from winding down of Store+, as Johnny was saying. We are able to save about RMB 170 million associated with Store+ winding down. And also, we are continuing to optimize our SG&A expenses. So we anticipate another additional $30 million to $40 million cost reduction in SG&A.

Okay. Johnny, may I have a follow-up question on the Express delivery business restructure -- 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 our cash flows. Or if we change our personnel, if we are more focused on the noncollection regions, we have a more balanced network, we will be more differentiated? Or what do you think about the competition strategy?

The -- as I mentioned, right, we were looking at our whole network based on the current -- the ASP and the cost structure and everything. So certainly, we will -- in a market, you have to compete. So we certainly will have to respond to whatever the market competition is. At the same time, I mean, I think the most important thing is that we need to really optimize our own network to see what's the -- we can get out the best of the results. So yes -- so price competition is still going to 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 re-optimization and also the lower cost across the board.

The next question we have will come from Hans Chung of KeyBanc.

So I just wanted to follow up on Express. First, can I just get a clarification in terms of the pricing strategy? Let's say, if it comes to price and volume, right, the ASP, the decline of volume growth or margins, so what's our strategy? Let's say, do we have a 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 target for the volume and at least because we want some market share on 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?

Okay. Hans, thank you for the question. With regard to your first question, the balancing, of course, we need to do, right? So we're not really just for lower the price and getting the volume, but we also have to look in the profitability as such. So our goal is, of course, with a -- I think that the goal is reasonably good growth, but of course, profitable growth. That is the goal.

So how to achieve that? I have 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 and 2.15 -- around 2.2 a parcel, this kind of income. And if you look at this income compared with our -- some of our peers in the listing on A shares, all of them almost about in par. Sometimes, we actually are higher even in -- as a reported number. In 2.21, I think that's what we're coming on the third quarter.

So the pricing side, I think we still not as -- I mean not -- maybe people think about we probably have a lot much lower price than the others. But in contrast, it's 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 little bit lower. It's only about 0 -- less than RMB 1. Our goal is to actually reach -- is to move up a little bit higher to maybe RMB 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 markets which has very low ASPs and, in fact, our -- some of the regions where we're doing well, there's more potential we could have much more volumes and their ASPs are much higher than these areas that we've traditionally been doing well.

So answer to your question is that, so we don't really have, let's say, a KPI, say, how much volume we have to have. And -- but our goal is to -- as we said, we are balancing it, so in other words, profitability and growth in the volume. So we're not going to be for one or the other, primarily just for volume growth and we lose our money or primarily we want to make money but no volume growth. So I think we're still going to have -- moving forward, we're looking at maybe 20 percentage points of this kind of growth. But meanwhile, we want to reduce the loss and, hopefully, bring back to profitabilities.

The next question you had was change in leadership on the -- is that going to help? Of course, change in leadership will help the organization by refocusing our strategies. In the same time, also, we're helping our last-mile franchisees. They have more confidence into the company to see some kind of change and optimize the network. So both way is good for both the last-mile franchisees as well as for the whole team as a whole.

(Operator Instructions) The next question we have comes from Bo Pei of Oppenheimer.

So you just mentioned -- so for the Express business, so you mentioned we're trying to ramp up in the less concentrated markets where it could have better profitabilities and growth. Can you just name some of these markets and comment on how competitive this market is? Are the other players also pretty aggressive in this market?

And then my second question is, it seems we can save a lot of money from winding down Store+ and -- 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?

Yes. Yes. So if you look at -- your first question is that, primarily, in the past, we are -- if you look at our Guangdong province and our Zhejiang province, some of the key markets within a city like Shenzhen, Guangzhou or Yiwu, that's primarily is our -- the concentration of the revenue come from these areas are much higher than the market as average. And then typically, this area has much lower ASPs and also much more competitive.

But if to the other cities or provinces, which are -- we are primarily doing actually very well like Shandong, Henan, Anhui, et cetera. These areas actually have a fairly decent volumes as well as much higher ASPs compared with the market I just mentioned before. So across the board, we see a -- in an area that we think that we can do better and has higher ASPs, the area that will do more, the area that we think we already have a very competitive position as well as the cost -- 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 there for balancing it. But they also will help for 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 -- yes, closing of the Store+. Primarily, we try to -- in this time that we try to readjust the focus and see where we can save the money and put where the investment was needed. Certainly, just close the -- closing the Store+ operation will give 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 -- we'll put into investment into the Express business.

Yes, is there another question? Yes. So by investing in these areas, we're hoping that at least we'll maintain or increase our market shares by what I just said about balancing networks and also continuing to reduce the transportation costs and full efficiencies.

Next, we have a follow-up from Baoying Zhai of Citi.

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, what's Alibaba's view on the sector's competition landscape now? Do you think it makes sense for maybe the smaller -- relatively smaller players to make a merger and to fight against the stronger players?

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

Yes. But how do you think about -- do you think it will be a workable way for the -- it's just, for example, maybe for you guys and maybe STO or maybe [XTO], I don't know. But if you guys worked together, do you think it could be better to fight against the strong players?

Again, Baoying, the question you are asking, I really have no -- I don't know how to answer this question. So I think as the market goes, the market will actually work out with them by itself, right? I mean as the -- from BEST's point of view, we're still looking at how to improve ourselves by -- we're confident that by some of these things we installed.

If you look at about 2011, right, so if you look at 2011, our market share is only about 2%. So when we go up to 2019, we actually achieved about 11.9% of market share. So actually, in 7 or 8 years, we actually really had gained a lot in the market share and grew a lot. So from our point of view, we are still continuing to looking at how are we going to optimize our network and continuing to -- how to reinvest and the operational side are getting more efficient and continuing to compete in the marketplace.

As what you're saying about the market dynamics and all the margin, acquisition and all the stuff, I guess, the market will work out by itself. But I cannot comment on or have any foresight on what it is now.

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

Yes. So just one follow-up question about noncore. And I think you mentioned the rest of the business, the Capital, the Global, UCargo, they're put in noncore. And can you provide some color about each? 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, what would be the rest of those business? Because they are quite different in nature, like, capital is profitable. And then for Global, it's growing very fast, right? That's still loss-making. So just any color about how are you thinking about noncore? And do we have the goal to just narrow the loss over time [whatever it costs into the] growth? Or do we have a different thought?

Okay. Including Store+ as well as UCargo, Global, Capital, the initial plan was try to make a -- in our ecosystem to create a synergy -- synergistic strategy to help each other. We're anticipating a much competitive market in the core business side. So we will initially try to [create this] business to have more synergy on that. But given the competitive marketplace, we really need to refocus. So we think about -- to reevaluate our strategy on that.

So within the remaining of noncore business like Capital, UCargo and Global, we are continuing looking at all the options, right? All options could be spin-off, could be merger and acquisition, it could be some other way to -- the goal is to minimize the loss and also probably the management's time, so we can refocus on our core business side.

Specifically like UCargo, UCargo was created a platform to really sign up more drivers to have more efficient transportation, sourcing, et cetera. So there, we will more focus in the future, just more internal platforms to help Freight and Express for getting more temporary car usages required. But meanwhile, if there's anyone interested into some kind of cooperation or merge, then we can also certainly to think about that.

Global, same thing. Global, actually, cross-border is developing very quickly. We do have a lot of synergies with 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 parcel to be delivered or collected as well as vice versa, when we have shipments 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 capital as well as some kind of investment. So yes, we look at and see if there could be a separate fundraising or separate partnership or something to getting on more capital and, at the same time, that we will have a less burden -- the cash burdens on the group.

So that's -- Capital, same thing. Capital basically is essentially -- initially, we'll try to help our drivers and franchisees, et cetera, to have easier access to capital. But as we require more cashes into the 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' capital to do that or we'll -- so any kind of options on the table, the goal is just one, right, it's just try to -- how to minimize the burden onto the group size, and there can be more saving to invest in the core business.

That's very helpful. Just one quick follow-up on Global. So how would you think about the RCEP? That -- would BEST Global benefit from that? Is that in the maybe not in the near term, but kind of medium and longer term?

Yes. So of course, the new RCEP, the regional free trade agreement, certainly will have a major support to our businesses in Southeast Asia because we already see a -- for example, this double 11, we're seeing a lot of parcels consumers in Malaysia, Singapore, Vietnam and Thailand, was bought on the Taobao or some other platform in China, was shipped through (inaudible) 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 parcel shipments as well as some other kind of bulky items. Yes. So with this free trade zones, I assume -- I would -- expecting or I strongly believe that we will continue to push a strong demand for cross-border needs on that.

Well, as there are no further questions at this time, we will 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 Investor Relations team if you have further questions. We look forward to speaking to you soon. Thank you very much.

And Mrs. Fan, Mr. Chou, we also thank you for your time also today. The conference call has 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.

Thank you.