BingEx Ltd (FLX) 2024 Q3 法說會逐字稿

Good day, and welcome to BingEx 2024 third-quarter financial results conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Helen Wu from the Piacente Group. Please go ahead.

Thank you, operator. During today's call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's earnings release and in the discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC. The non-GAAP financial measures we provide are for comparison purpose only, the definition of these measures, and the conciliation table available in the news release we issued earlier day.

As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on the BingEx's IR website at ir.ishansong.com.

Joining us today from BingEx senior management are Mr. Adam Xue, Founder, Chairman of the Board, and Chief Executive Officer; Mr. Hongjian Yu, Co-founder, Director, and Executive President; and Mr. Luke Tang, Chief Financial Officer.

I will now turn the call over to Mr. Adam Xue.

Okay, thank you, Helen. This is Adam speaking. Hello, everyone, and welcome to BingEx 2024 Q3 earnings conference. We are thrilled to share our financial results and business development with you for the first time as a publicly listed company. 2024 marks a decade of growth and innovation for BingEx since our founding in 2014. Over the past 10 years, we have remained committed to our unique "one-to-one delivery" model, providing seamless point to point services to meet users' needs. We believe that every order represents the trust and the confidence our users place in us, and every delivery builds a meaningful connection.

Our success is driven by our relentless pursuit of service excellence, care for dedicated flash riders, and steadfast commitment to social responsibility. As we expand our market presence, our brand value grows even stronger.

We submitted our initial listing application in mid-2021. Over the next two years, we focused on enhancing our business operations and data protection capabilities to meet the newly introduced listing regulations and comply with policies and review requirements. This exciting chapter in our company's story provided us with valuable market insights and a great opportunity to thoroughly review and refine our business operations and processes.

Our listing process provided invaluable insights into the responsibilities and expectations associated with operating as a public company. Staying true to our mission, we remained committed to addressing users' needs fine-tuning service processes and optimizing operational efficiency. Thanks to the efforts and the unwavering dedication of all BingEx employees, the company has achieved steady growth with great improvements in profitability.

Today, BingEx is a household name, widely recognized as the go-to brand for on-demand dedicated delivery service. In October 2024, BingEx successfully went public on Nasdaq, raising over USD60 million. This landmark achievement not only stands as a testament to our past success, but also marks the next chapter in our growth story.

Today, we are pleased to announce that in the third quarter of the 2024, the company delivered a strong and resilient performance, with revenues of RMB 1.15 billion and GMV nearing RMB 1.4 billion. As the pioneer of on-demand dedicated delivery services, BingEx has been committed to meeting users most urgent delivery needs since inception.

Over the past decade, we have adhered to and refined our one to one delivery model, avoiding joint orders to ensure that each flash rider serves a single user from pickup to delivery. This exclusive point-to-point approach enhances services efficiency and reliability with a personalized delivery experience tailored to each user's unique requirements.

As of September 2024, BingEx's high-quality 24/7 services has expanded to 295 cities nationwide. Our one-to-one delivery model guarantees minimal transit time, direct point-to-point delivery, and no mixed orders effectively preventing the risk of errors, contamination, or item loss. It also ensures enhanced security and reliability for critical deliveries. Our service is particularly advantageous for categories with high demands around timeliness, safety, and customer experience such as food, cakes, documents, and fresh flowers.

In the third quarter, we further strengthened our fulfillment capabilities and achieved an order completion rate of 87% across more than 400 categories. This outstanding performance reinforces our brand's competitive edge and solidifies our market leadership.

Notably, items requiring stringent safety measures accounted for over 70% of total orders. Highlighting users' confidence in BingEx distinctive service model. At BingEx, we prioritize user experience and service quality. By minimizing response times, accelerating pickup and delivery speeds, optimizing rider routes, and refining service details.

We strive to consistently exceed user expectations. Research shows that as younger and middle-aged generations increasingly drive consumption spending, delivery demands are evolving rapidly. Users are increasingly dependent on delivery services, with speed and quality emerging as the key factors influencing individual users' choices in the on-demand delivery market. Also, driven by the rise of the experience economy, consumers now place emotional value on service experiences across various sectors.

On-demand delivery is no exception. Beyond meeting user functional needs, delivering emotional value through services is becoming increasingly important.

As of September 2024, our total registered users exceeded 90 million, representing a 27% year-over-year increase. In terms of service quality, we have achieved an average delivery time of 27 minutes for intra-city deliveries. This exceptional service has earned us widespread acclaim and strong customer loyalty, making BingEx the preferred choice for urgent delivery needs.

BingEx is committed to delivering high quality services not only to individual users but also to business users. Our one-to-one service model has consistently been validated by business owners across different sectors. With broad expansion across various delivery scenarios.

With the rapid growth of instant retail, BingEx has forged strong partnerships with business owners in premium dining, home appliance, and [3D] electronics, among other sectors. Our services empower these partners to deliver high-value products and enhanced experiences to their customers.

In the premium restaurant sector, BingEx's the fast and precise delivery services enable food enthusiasts to enjoy their meals properly. This enhances the dining experience, helping restaurants attract more customers and build greater brand recognition.

In the home appliance and 3C electronics sectors, BingEx has dedicated riders ensure the swift speed and secure delivery of electronic and household products, building trust between customers and merchants.

Additionally, BingEx is actively partnering with emerging new retail platforms to establish a comprehensive ecosystem for the instant delivery industry, bringing customers a safer and faster shopping experiences. Looking ahead, BingEx will continue to focus on user needs, enhance personalized service experiences, expand category coverage, and explore additional collaborative opportunities with commercial partners.

BingEx invests deeply in technology to fuel our growth. Over the past decade, we have built a unique Big Data algorithm model based on our accumulated delivery data. Leveraging this model, we have developed a dynamic intelligent scheduling system that balances supply and demand between orders and riders capacity. This has optimized resource allocation, significantly boosted rider efficiency and enhanced our user experience.

We have also upgraded our order matching system, maximizing efficiency, accuracy across the dispatch process. This advancement not only elevates user experience, but also consistently improves our operational performance.

BingEx success relies on our dedicated flash riders. Over the past decade, we have built a large and highly skilled rider team with approximately 2.74 million registered riders as of September 2024. Each of our riders exclusively serves a single user with each delivery, upholding our commitment to safety and timely service.

Our personalized approach honors our service pledge while conveying warmth and care, ensuring that each delivery is thoughtful, precise, and punctual. Consequently, our flash riders have earned the trust and respect from our users.

Our unique one-to-one service model has attracted a growing number of riders across every corner of our 295 cities served, bringing them closer to users and significantly reducing pickup time. As order volumes rise and our matching system's precision continues to improve, our riders' incomes are also increasing. This has created a self-reinforcingly flywheel effect, shorter pickup times lead to enhanced service quality, which in turn drive a steady increase in order volume. As a result, BingEx has developed an increasingly robust scale effect, further strengthening our competitive advantage.

At BingEx, we firmly believe that the rider experience is as crucial as the user experience. We deeply value our riders as partners and essential contributors to the company's success.

To ensure that our riders enjoy stable income, a strong sense of belonging, and personal fulfillment in the work, we created a dedicated flash rider care and support team. we also established 11 riders homes across 10 cities nationwide. These pit stops or warm homes serve as rest areas and emotional heavens for our riders, convening our care for their physical and mental well-being.

Furthermore, we have introduced a series of tailored support initiatives including regular training sessions designed to enhance riders' social recognition and professional pride, empowering them to become carriers of good deeds and spread positive energy. For high-performance riders, we offer career advancement opportunities, invite them to join the BingEx team and contribute to the company's growth firsthand.

Also, since 2018, we have celebrated Flash Rider Day [each] November 23, providing our riders with various benefits and activities to express our sincere gratitude and recognition for their hard work and dedication.

As a pioneer of the on-demand dedicated delivery industry, BingEx has adhered to its core service philosophy of delivering with Kindness since our inception in 2014. Now, as a publicly listed company, we have an even more profound understanding of the responsibility we carry. We will remain dedicated to our founding mission of acting with our altruism, consistently delivering exceptional service experiences to our users while embracing our social responsibilities and creating long-term value.

As we embark on this new chapter, BingEx will continue to enhance and solidify our one-to-one delivery service model. To that end, we will increase our technology investments, expand our city penetration, and diversify our service offerings. By increasing order density and optimizing operational efficiency, we aim to strengthen BingEx's flywheel effect, driving the company's growth and the on-demand dedicated delivery industry sustainable development.

Now, I'd like to hand the call over to our CFO, Luke, who will share our financial performance for this quarter. Thank you.

Thank you, Adam. Hello, everyone. This is Luke. For a closer look at our financial results, we encourage you to refer to our earnings release issued earlier today. As a reminder, all amounts are in RMB, unless otherwise noted.

We are pleased to deliver a strong and resilient set of results in our first earnings report following our IPO. Thanks to our unwavering commitment to disciplined cost management.

In this third quarter, gross profit grew by 20.9% year over year with gross margin improving by 2.3 percentage points. Additionally, our non-GAAP net income surged by 64.8% from the same period of last year, with non-GAAP net profit margin raising by 2.1 percentage points to 5%.

I will now provide an overview of our financial results for the third quarter of 2024. Total revenues for the quarter reached RMB1.15 billion compared with RMB1.19 billion in the same period of 2023. The slight year-over-year decline was primarily driven by a decrease in ASP as we strategically expanded our presence in lower-tier cities and deepened partnership with the business users.

Our cost of revenues decreased by 5.7% year over year to RMB1.02 billion in the third quarter primarily due to the decrease in flash riders remuneration and incentives to fulfill orders. As a result, our gross profit rose to RMB130 million up 20.9% year over year. Our gross profit margin the third quarter was 11.3%, up from 9% in the same period of 2023.

Turning to operating expenses. Our total operating expenses decreased by 7.8% year over year to RMB84.2 million in the third quarter. Selling and marketing expenses were RMB43.9 million, remaining flattish year over year. General and administrative expenses decreased significantly by 33% year over year to RMB18.1 million, mainly due to lower staff costs and the professional service fee. Research and development expenses were RMB22.2 million, representing a 6.8% increase year over year.

In the third quarter, we delivered income from operating of RMB46.2 million, a significant increase of 178% year over year, mainly benefiting from gross profit margin expansion and improved operational efficiency. Other income was RMB5.8 million in the third quarter, compared with RMB11.8 million in the same period of 2023. The decrease was primarily due to a lower amount of government grants.

Our net income was RMB23.8 million in the third quarter, compared with RMB35 million in the same period of 2023. The decrease was mainly due to RMB33.8 million of losses from fair value measurement of long-term investment in the third quarter. Excluding the impact of the changes in fair value of long-term investments, our net income for the quarter amounted to RMB57.6 million.

Let's now take a look at our non-GAAP net income, which reached RMB57.6 million, representing a year-over-year [surge] of [64.8%] (corrected by company after the call) attributable to our operational efficiency improvement. Non-GAAP net margin rose to 5% in the third quarter, up from 2.9% in the same period of 2023.

We maintained a healthy and strong balance sheet with cash and cash equivalent totaling RMB517 million as of September 30, 2024.

As we approach the year end of 2024, we remain committed to further optimizing our cost efficiency, solidifying our market leadership, and creating long-term value for our shareholders and stakeholders.

That concludes our prepared remarks. We would now like to open the floor to your questions. Operator, please go ahead.

(Operator Instructions) Jessie Xu, Deutsche Bank.

Sure, thank you. Can you hear me?

Yes, very well.

Great. Good evening. Big congratulations on successful listing and very resilient performance in the challenging environment. I have two questions. The first question is about macro and industry competition. We noticed that the young year growth rate of all the volume slightly moderated in the third quarter compared with the first half of this year. My understanding is that it might be a mixed result of weak macro as well as competition. So could management share some of observations on these two fronts? For example, what is new, what has been changing?

My second question is about cost efficiency. We are actually very impressed on your cost control and operating leverage over the past few quarters. Could management elaborate a little bit more on the measures that you've taken? And how should we think about the potential upside in cost efficiency in the future? Thank you.

Thank you, Jessie, and thanks to you for your questions. This is Luke Tang, and I will answer your questions about the Q3 revenue growth and the market environment. And I will hand over the questions about the industry competition and the cost efficiency to Adam Xue.

Now, let me answer your first question about the revenue growth. We can see that there was a slightly decline in the third-quarter revenue, which was primarily due to a drop in ASP, and this decrease was mainly driven by a growing proportion of business users, the customers' interest and also the company's efforts to expand the penetration in lower-tier cities.

We also provided the business users with relatively more subsidies compared to individual users, which had a short-term impact on revenue. However, from a long-term perspective, our goal is to have a more business user experience the FlashEx's unique one-to-one dedicated delivery model and see how it can help them to improve service quality, strengthen their brand, and attract more customers. This is in turn, enhances the stickiness of these business users to our platform.

And about the macroenvironment, I should say that we did see a lot of efforts and a series of effective policies have led to a moderate recovery in the new retail industry over the past few months. And we also see that as the younger and middle-aged customers become the main drivers of spending, the overall delivery preferences are evolving. There has been a clear increase in demand for time efficiency in the on-demand delivery service industry and a growing reliance on these offerings.

Furthermore, our business users are focusing on the customer experience making delivery speed and the service quality just as important as the product quality.

And now, I will hand over the remaining questions to Adam Xue.

Okay, thank you, Luke. And thank you, Jessie, for your question. This is Adam speaking, and then I will talk about the competition. Well, competition within the industry has always been a constant. We believe that healthy competition encourages all service providers to prioritize users, strengthen the operations, refine their processes, and improve efficiency. This not only enhances the experience for individual users, but also helps business users achieve and even exceed the service standards.

Within the border instant delivery industry, there are many subsectors, each with its own space and potential for growth, as well as unique advantages for different service providers. This is high-growth industry. It continues new entrants. We believe that competition in the industry may intensify in the future, but this will not change the company's first mover advantage, brand strength, and service excellence.

BingEx's one-to-one delivery model effectively meets users' this specific needs for timeliness, safety, and reliability. Our differentiated high-quality service addresses key pain points, that order merge model cannot. More importantly, our one-to-one dedicated service where in each order is handled by a single rider with no other stop along the way, offers greater efficiency and personalization.

Beyond fulfilling basic delivery needs, this dedicated service adds emotional value to the user experience throughout the delivery process. Today, FlashEx has become a household name, and a synonym for the inter-city instant delivery industry. Looking ahead, we will continue to upgrade our order matching system to enhance efficiency and accuracy, further improving service quality. At the same time, we will expand service scenarios and steadily grow flash market share.

And then I will talk about the potential upside in cost efficiency in the future. First, FlashEx maintains a relatively healthy cost structure with a stable proportion of fixed cost. As the company expands, we can achieve growth in a highly cost-effective manner.

On the cost side, as the number of orders increases, it will become easier to meet riders' basic income needs, making room to reduce the spending to revenue ratio for riders. This will ultimately improve gross margin.

Regarding expenses, since the FlashEx brand enjoys strong recognition, we can largely rely on word of mouth and organic traffic growth, allowing us to control market promotion costs. In the long run, we believe further profitability improvements will primarily be driven by revenue growth rather than cost savings, as we always prioritize service quality. Thank you.

Operator, we are ready for the next question.

[Sifan Jiang], CICC.

Thank you, management team, for taking my question and congratulations on successful listing. I'm Sifan Jiang from CICC. My question is about the unit economy. I want to ask -- I would like to ask about what are the changes of the unit economy and rider remuneration in the third quarter of 2024, and what will be the outlook for the future? Thank you.

Thank you, Sifan. And this is Luke, I will answer your questions about the UE. And you know that the company's overall UE model performs very well, and our UE model has a healthy cost structure. The main proportion of our cost is the riders' remuneration and incentives. So we do see the cost of revenue structure has been continuously optimized, and you can see that the proportion as a percentage of revenue also gradually decreased, which I explained expanded the company's GP.

And also, you can see that the lower proportion of the revenue channeled into a marketing also can help us to leverage our expenses and the cost structure. And also thanks to the unique business model and the robust brand recognition model, our marketing expenses are monthly used for the brand building and rather than the user subsidy. So, in turn, we can see that the expenses, especially the selling and the marketing expenses, are relatively stable. And we can also see that the general and the administrative expenses, and the R&D expenses slightly decreased.

And we also see that there's some positive market expansion potentials for us, but we are very conservative to any chances for that. So for the time being, we do like to stick with the one-to-one dedicated business model and to extend the business scale and to use the scale of economic scale ability to leverage our whole market.

So for the time being, we can see that the leverage shows the great trend, and the company and the platform also earn the profit, and we also see an eight consecutive profitable quarters. So we do see this business or this industry is a profitable business, and we also will stick with such industry.

This is the strategy for now. Hope this can help you understand our recent thinking. So hope it can help. Yeah, thank you.

Thank you. And that concludes the question-and-answer session. I will now turn the call over to Helen Wu for closing remarks.

Thank you once again for joining BingEx third-quarter 2024 financial results in the business update conference call today. If you have any further questions, please contact the IR team at the BingEx or Piacente Financial Communications. Thank you, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.