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Q4 2018 Earnings Conference Call
March 05, 2019, 7:30 a.m. ET


Prepared Remarks:


Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to BEST Inc.'s Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. Following management's prepared remarks, there will be a Q&A session.

With us today are Johnny Chou, BEST Inc.'s Chairman and CEO; George Chow, Chief Strategy and Investment Officer; and Alice Guo, Chief Accounting Officer and Senior Vice President of Finance.

For today's agenda, Johnny will give a brief overview of the business and operational highlights then Alice will explain the details of the financial results. Following the prepared remarks, you'll have -- we will answer your questions.

Please note that this call is also being webcasted and there is Investor Relations presentation at BEST Inc.'s IR website at ir.best.inc.com. A replay of this call will be available on the IR website later today.

Before I begin, I would like to read the Safe Harbor statement on behalf of BEST Inc. Todays' 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 statements 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 on BEST Inc.'s earnings press release.

Finally, please note that unless otherwise stated, all figures are -- mentioned during the conference call are listed in RMB. Now I'd like to turn the conference over to Johnny Chou, Chairman and CEO of BEST Inc.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you. Good morning and evening everyone. Welcome and thank you for joining our fourth quarter and fiscal year 2018 earnings call. We are very pleased to report that we had an excellent quarter and a fiscal year, driven by solid revenue growth, strong market share gains, and the margin improvement, and excellent performance in long-term growth initiatives. The fourth quarter was a milestone quarter for BEST as the Group achieved positive net profit on a non-GAAP consolidated basis.

This is an important marker for our business as we continue to achieve fast growth and improved efficiency in our core businesses, while investing in the future. For the first (ph) quarter, BEST total revenue increased by 38% year-over-year to RMB9 billion, is hitting in the top end of our guidance. Gross profit increased by 82% and gross margin improved by 1.4 percentage points. Our non-GAAP net profit was RMB20 million compared to a non-GAAP net loss of RMB116 million in the same period of 2017.

Meanwhile, fourth quarter adjusted EBITDA was RMB150 million, compared to negative RMB24 million in the fourth quarter of 2017. For the fiscal year 2018, revenue increased by 40% to RMB28 billion. Gross profit increased by almost 200% to RMB1.4 billion and gross margin improved by 2.7 percentage points.

2018 was the first full fiscal year since our IPO, Building on the significant business achievements and the successes we have made, we executed our strategies of gaining incremental market share, improving operating efficiency and the productivity, enhancing technology adoption and customer engagement for our Express, Freight and Supply Chain businesses. At same time, we continue to invest in our Store+, Global, UCargo and Capital businesses and furthered our objectives of building a leading smart supply chain platform.

Now let me give you some business highlights. Express delivered significant growth in the fourth quarter. Parcel volume increased by 47% year-over-year to 1.87 billion, which was about 1.8 times the industry growth. Our market share continues to expand, reaching 11.7% in fourth quarter 2018, compared to 10.8% in third quarter of 2018 and the 10% in fourth quarter 2017.

Full year parcel volume increased by 45% year-over-year to 5.47 billion, which was 1.7 times the industry growth. The reduction in aggregate cost per parcel continue to outpace the decrease in average revenue per parcel, as a result of volume growth, network optimization, operational efficiency improvements and the investment in automation and digitization.

In the fourth quarter, we further reduced the total number of hubs and sortation centers by 27% year-over-year to 106 and added a 10 high-speed automated sorting and 283 dimension and weight scanning systems. As a result, gross profit per parcel in the fourth quarter increased by 12% year-over-year to RMB0.17. We believe Express will continue to outgrow the industry in 2019.

Freight had another outstanding quarter and fiscal year. Freight volume grew by almost 30% year-over-year to 1.6 million tonnes in the fourth quarter; significantly higher than industry growth. Gross profit margin increased by 5.8 percentage points year-over-year to positive 5.7% as a result of volume growth focuses on e-commerce related transactions, Freight network optimization and the operating efficiency improvements.

We further reduced the total number of hubs and sortation centers by 16% year-over-year to 111. And to better serve our customers, we expanded the last-mile service coverage extensively, increasing the total number of franchised last-mile service stations by 45% year-over-year to about 14,000. We believe economics of scale, network optimization, increasing demand from e-commerce and growth in consumptions, will continue to drive Freight growth and margin expansion.

Supply Chain Management continues to serve as an important foundation of our logistics infrastructure and demand for our integrated Supply Chain Managing solutions remain strong. In the fourth quarter, orders fulfilled by Cloud OFCs increased by 38% to 48 million. We are happy to see better-than-expected growth from franchised Cloud OFCs.

In the fourth quarter, the total number of orders fulfilled by franchised cloud OFCs increased by almost 70% year-over-year. Total gross floor areas of Cloud OFC's increased by 18% year-over-year to 2.8 million square meters, as of December 31st, of which 1 million square meters were owned and operated by franchised OFC's. Gross margin improved by 0.8 percentage points as new projects done from previous quarters come online.

Leveraging our core competency in Supply Chain business to consumer technologies and application, we continue to grow the BEST Store+ platform (technical difficulty) for 2018 to -- were to improve the quality of membership stores, optimize merchandise selection, grow branded stores and accelerate branded stores integration with Express and Supply Chain; to expand our last-mile service network and reach more consumers.

The number of branded stores, including franchised BEST-Neighbor and self-operated WoWo increase by almost 390% year-over-year to 1,840 as of December 31st. The number of membership stores increased by 17% year-over-year to over 420,000. In fourth quarter, 22% of the total number of stores orders fulfilled was for branded stores. As a result, stores revenue grew by 4% while gross margin improved by 1.4 percentage point year-over-year.

Store+ development has reached a key stage as it has achieved critical 2B scale, which allow us to invest and move forward into the next phase of building the 2C platform and the last-mile services network. We have launched our membership program as well as online to offline and the community group buy services in selected cities. We are very excited about Store+'s business development and are in the process of evolving the business and launching new products and services.

Other services revenue increased by 4.8 times year-over-year in the fourth quarter to RMB400 -- RMB574 million, primarily driven by tremendous growth of UCargo, which was only made available to external customers since March 2018. In the fourth quarter, revenue generated from external customers on UCargo platform increased significantly to RMB467 million, representing an 82% increase from third quarter of 2018.

As of December 31st, the number of registered agents increased 49% year-over-year to over 4500 and the number of registered trucks increased to 45% year-over-year to over 261,000. We expect the UCargo business will continue its growth trajectory and that makes meaningful contribution to the Group in 2019.

In 2018, capital continued to expand its financing offerings and solutions to our ecosystem participants while helping our other business units to control transportation cost. As of December 31st, it had provided leasing service to over 8,000 trucks, a year-over-year increase of over 100%.

Global continues to develop cross border solutions and broaden service offerings in international markets. To further expand its footprints and capture the tremendous growth opportunities in Southeast Asia, Global launched its Express delivery services in Thailand -- Greater Bangkok area in the fourth quarter. As of today, Global has operation centers in four major cities to provide affordable, fast, and high-quality delivery service across Thailand.

Now let's talk about 2019, as we just detailed, we started the year with solid momentum. And looking ahead, we are confident that the combination of strong growth in e-commerce and consumption, ongoing consolidation within the Express, LTO and the Supply Chain management sectors, and need of largest infrastructure-supported rapidly growing digital economy in Southeast Asia will bring tremendous opportunities for us in 2019.

We will continue to improve execution, focus on market share gain, operational efficiency, technology adoption and customer services. For Express, we'll continue to target a much higher volume growth than the industry, while continuing to optimize our network, invest in automation, reduce costs, and improve profitability.

For Freight, we aim to solidify our market leading position, target strong volume growth and healthy margin improvements by growing e-commerce related transactions, enhancing customer experience, improving the network and applying more automation and technologies.

For Supply Chain management, we will continue to invest in service capability and technology and to further integrate with other business units to support Store+, Express, Freight, Global in providing online to offline Supply Chain solutions. In the meantime, we will continue to invest in our growth initiatives. For Store+, we have made major investments in the past three years and have viewed a robust to be infrastructure. We believe the investments for the Store+ business peaked in 2018.

Those infrastructure will support our strategy to focus on the expansion of our branded franchised BEST-Neighbor stores and the self-operated WoWo stores. Branded stores are integrated with BEST (technical difficulty) and well served at our community centers to provide last-mile services to consumers. In 2019, we plan to significantly grow the number of franchised BEST-Neighbor stores and improve the quality of membership stores to enhance profitability.

We also plan to roll out a membership program online to offline services, community group buy and other initiatives services as a product in more cities and to reach more consumers.

For Global, our focus will be on Southeast Asia and the North America. We already started in Thailand and are planning entry strategies into Vietnam, Indonesia and other evaluation opportunities in other countries. The successful launch of our Thailand network was enabled by our asset-light model, technology and industry know-how plus our ability and the willingness to collaborate with established local partners.

We're excited by the opportunities in Southeast Asia and believe we can build a meaningful business there. For UCargo, the demand for online full truck services is massive. We expect the hyper growth trajectory for UCargo will continue into 2019. We will enlarge our customer and the driver base, investing technology to drive for enhance the customer experience, number and the quality of transactions, while focusing on margin expansion and the profitability. We also see tremendous synergy between the UCargo platforms and the capital in terms of aftermarket and the financing services.

As we scale up the UCargo business, we expect to further integrate UCargo and capital to create a value -- valuable revenue opportunities between the two. Looking ahead, the continuous growth of e-commerce and the digital economy will create tremendous market opportunities for our businesses. We have demonstrated a track record of delivering strong revenue growth and margin expansion through solid execution and strategically investing in new growth initiatives.

We are confident that we will continue this winning path to capture these market opportunities, deliver sustainable high quality growth, and achieve long-term value creation for our shareholders.

With that, I will turn it over to Alice, our Chief Accounting Officer and a Senior Vice President of Finance. Alice, go ahead.

Lei Guo -- Chief Accounting Officer and Senior Vice President

Thank you, Johnny. Hello everyone. We delivered strong results for the fourth quarter and the fiscal year of 2018. For the quarter, the revenue increased by 38.3% year-over-year to over RMB9 billion, beating the top end of the revenue guidance by RMB9,036 (ph) due to strong growth across business lines.

For the fourth quarter, BEST recorded non-GAAP net profit of RMB20.1 million, while the operations generated net cash of RMB729 million. For the third consecutive quarter, BEST had recorded positive EBITDA and adjusted EBITDA. EBITDA was RMB109 million and adjusted EBITDA was RMB150 -- RBM150.1 million. Starting in the fourth quarter, we began separately reporting EBITDA and adjusted EBITDA attributable to Store+ business.

We believe the additional disclosure will provide investors with more insight into the strength of our ex-Store+ business units and the progress of Store+ developed. Reconciliation of non-GAAP measure to comparable GAAP measures and the relevant adjustments can be found in our earnings press release.

Now, I would like to discuss some of the key financial highlights in the fourth quarter. Express revenue increased by 36.7% year-over-year to RMB5.9 billion, primarily due to a (technical difficulty) increase in parcel volume. Gross profit increased by 64.3% to RMB311 million and the gross profit margin improved by 0.9 percentage points. Our ability to reduce the average cost per parcel continued to outpace the decrease in revenue per parcel.

While the average revenue per parcel decreased by 7.1% to RMB3.18, average cost per parcel decreased by 7.9% to RMB3.01 primarily due to the improved economies of scale from volume growth and the enhanced operating efficiency from the ongoing platform optimization, network planning and the technology application. As a result, our gross profit per parcel increased by 11.7% year-over-year to RMB0.17.

Freight's revenue increased year-over-year by 26.2% to RMB1.2 billion, primarily due to a 29.7% increase in Freight volumes. The average cost per tonne decreased by 8.4% year-over-year to RMB715, while the average revenue per tonne decreased by 2.7% to RMB758, resulting in an increase in gross profit margin by 5.8 percentage points to positive 5.7%.

Supply Chain revenue increased by 29.5% year-over-year to RMB686 million primarily due to a 38% increase in the number of orders fulfilled by our Cloud OFC. Gross profit increased by 62.3% year-over-year to (technical difficulty) and the gross profit margin increased the 0.8 percentage points year-over-year to 3.9%.

As Johnny mentioned Store+'s focus in 2018 was to improve the quality of the membership store, optimize merchandise selection, grow branded store and to accelerate branded store's integration with Express and the Supply Chain to expand our last-mile service network and to reach more consumers.

In the fourth quarter, gross profit margin increased by 1.4 percentage points to 10.5%, while revenue increased by 4% year-over-year to RMB615.6 million.

Our other service lines; UCargo, Capital and the Global are becoming important revenue contributors. During the fourth quarter of 2018, revenue from this service line grew by 482.5% year-over-year to RMB574 million. This significant increase was primarily driven by UCargo platform starting service to external customers in March 2018. The increase in the number of trucks financed by Capital and the Global's ongoing business expansion also contributed to the strong growth of this service line. Gross profit increased by 74.1% year-over-year to RMB52.6 million.

We are pleased with improvements in our operating efficiency for both selling expense and the G&A expense. All the major operating expense items are excluding share-based compensation expense. Selling expense as a percentage of revenue decreased by 0.6 percentage points to 2.6% compared to the same quarter of 2017.

G&A expenses as a percentage of revenue decreased by 0.2 percentage point year-over-year to 2.8%. R&D expenses as a percentage of revenue increased by 0.2 percentage point year-over-year to 0.6%, primarily due to the hiring of additional R&D professionals to support business units with new initiatives.

During the fourth quarter 2018, adjusted EBITDA was RMB150 million, up from negative RMB24 million in the fourth quarter of 2017. The improvement was mainly driven by strong revenue growth and improved operating efficiency. Breaking down the adjusted EBITDA; RMB353 million was attributable to ex-Store+ service lines, negative RMB86 million was attributable to the Store+ service line and the negative RMB117 million was attributable to unallocated expenses, primarily related to corporate, administrative and R&D and other miscellaneous items that are not allocated to individual service lines.

Net cash generated from operating activities was RMB729 million compared to negative RMB9.3 million in the same quarter of 2017. Cash and cash equivalents, restricted cash and the short-term investments in total were RMB4 billion as December 31, 2018, compared to RMB3.9 billion as of September 30, 2018. The increase was primarily due to the net cash generated from operating activities, partially offset by CapEx, the purchase of leased equipment and other investment activities.

Our healthy balance sheet gives us the resources and flexibility to accomplish our business and strategic objectives. We continue to invest in technology and automation to further improve our operational efficiency and the service quality.

In the fourth quarter of 2018, our CapEx was RMB284 million or 3.1% of total revenue compared to RMB254 million or 3.9% of total revenue in the same quarter of 2017. As previously explained, most of the CapEx this year was used to upgrade the automation systems in major hubs, sortation centers, and Cloud OFCs; including investments in high-speed automated sorting and the dimension and the weight scanning systems.

Next I want to quickly go over some of the fiscal year 2018 financial highlights. In fiscal year 2018, our revenue increased by 39.9% year-over-year to (technical difficulty). Express service revenue increased by 38.5% year-over-year to RMB17.7 billion. Freight service revenue increased by 29.1% year-over-year to (technical difficulty).

Supply Chain Management services revenue increased by 29.6% year-over-year to RMB2.1 billion. Store+ service revenue increased by 27.8% year-over-year to RMB2.8 million --RMB2.8 billion and other service revenue increased by 523.5% year-over-year to RMB1.2 billion.

As we continue with the effort in increasing the operating efficiency and the application of technology, the gross profit margin improved by 2.8 percentage points to 5.2% from 2.4%. Share-based compensation expense in fiscal year 2018 was RMB109 million. Excluding share-based compensation expense, operating expenses as a percentage of revenue decreased to 7.1% from 7.4% in 2017.

We reduced our non-GAAP net loss to RMB452 million from RMB923 million in 2017. Adjusted EBITDA was negative RMB18 million compared to negative RMB583 million in 2017. Breaking down (technical difficulty) EBITDA; RMB792 million was attributable to ex- Store+ service lines, negative RMB375 million was attributable to Store+ service line; and the negative RMB436 million was attributable to unallocated expenses. Our underlying model allows us to achieve high growth without significant CapEx. In 2018, CapEx was RMB1.08 billion or 3.9% of revenue. Net cash generated from operating activities was RMB637 million.

Finally, let's discuss the 2019 financial outlook. As mentioned from our previous quarterly call; starting from 2019, we will begin providing annual revenue guidance. We expect revenue for full year 2019 to be in the range of RMB36.5 billion to RMB37.2 billion. This represents management's current and the preliminary expectations, which is subjected to change.

This concluded my prepared remarks and we will now open the Q&A. Thank you.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you. Operator? What happened to the operator? Hello?

Questions and Answers:


Yes, thank you. We will now being the question-and-answer session. (Operator Instructions) And the first question comes from Vivian Tao with Citi.

Vivian Tao -- Citigroup -- Analyst

Hey Johnny, Alice (Foreign Language) So, Johnny, Alice and IR team, congratulations for the very great results this quarter. And my first question is very old but people like to ask this question. The Express delivery ASP, I wanted to know more about the reasons behind it. So we didn't disclose last-mile delivery ASP this quarter and can you disclose that? And excluding the last-mile delivery ASP, how much the ASP would come down?

And of the ASP come down, what's the reasons behind, can you further provide breakdown down such as how much is caused by the less weight and how much is caused by more subsidies to franchisees? And how would we -- how would we react to price war this year in 2019 in terms of subsidy budget? This is my first question.

(Foreign Language) So my second question is regarding Store+ business and the non-Store+ business. This is the first time we see you break down the EBITDA level by Store+ and the non-Store+ in your results. So excluding Store+ and headquarter expenses, we already see other businesses making decent profits. But this is only 2018 numbers; compared with 2017, how this number looks like? And in 2019, how do you balance Store+ and other business growth? So this is my second question. (Foreign language) Johnny?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay Vivian, thank you very much. So I'm going to answer in English. If anyone want to translate, it will be fine, because time is limited. So, first question is basically regarding to the 2018 fourth quarter ASPs as to the last-mile delivery cost and as to the -- without it, what the ASP look like. Yes, so fourth quarter, we actually increased the last-mile delivery cost by about 6%, so the total last-mile cost is about -- average about 1.65 -- RMB1.65 per delivery versus last year, probably about RMB1.55. So we increased about RMB0.10 for the last-mile delivery.

But our average cost has decreased significantly in light of the increase of the last-mile delivery. So the ASP without -- the revenue without the last-mile delivery should -- take out the last-mile delivery, that actually is about RMB1.53, which is about -- so if you take RMB1.53 add it to RMB1.65, that's about RMB3.18. The cost-wise, it's reduced more, on the total cost without the last-mile, take out the last-mile, the pure cost is about $1.37, which is about 21% less than last year -- last year quarter -- same time last year. Last year fourth quarter is about RMB1.72, exclude the delivery last-mile delivery RMB1.72 is the cost, and now it's about $1.37; so a 21% reduction.

And you were talking about why is the fourth quarter some of the ASP has reduced and what was the attributes. Basically it's various things, right, some due to the parcel weight reduction, which is -- continue to improve, the weight continue to reduce, but it's not significant and another part of it is due to the competitive venture -- competitive environment in term of the -- for the sales rebate and other stuff. So this is the first question and answer.

The second question, you rightly noticed, that we have, what's the page? We have actually taking out the -- apparently for the Store+ to be separately listed and basically, if you look at the result, the Store+, actually the whole year, we had about RMB700 million or so of the EBITDA excluding the Store+. Store+ year is about RMB390 million; so close to RMB390 million of loss and -- which is more than last year. So consider about what do we have achieved this year, actually -- the Store+ actually, we have been purposely in third quarter and fourth quarter to control its grown, be focusing on more quality to stores and the delivery, and (technical difficulty) mentioned in the earning call that, that has peaked, so actually -- fourth quarter actually had less loss than third quarter and we are expecting that next year and year after will continue to improve quarter-by-quarter.


Thank you.

Vivian Tao -- Citigroup -- Analyst


Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Vivian, did I answer your question?

Vivian Tao -- Citigroup -- Analyst

Yes. But for the first question, I guess a lot of investors are still very interested to know so how would we react to the price war this year? So how about the subsidy budget this year compared with last year?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. So I missed the -- this year's plan. Okay, so this year, we continue to -- as we said in the call that we are confident we are continuing to working on the cost reduction and operational efficiency and that will help us to drive down the costs -- continue to drive down the cost and as the market goes, we will -- as we stated, we will continue to have a strategy to have a much faster growth than the -- than the market.

So basically what I'm trying to say that is that, this year we are still confident that we can be growing much faster than the industrywide growth continuously and that the pricing will continue to monitor the competitive environment on top of whatever is necessary. But we are confident that we will continue to down to the cost.

Vivian Tao -- Citigroup -- Analyst

Okay understood. Okay, thanks. Thanks. Johnny.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you, Vivian.


Thank you. (Operator Instructions) And the next question comes from Ronald Keung with Goldman Sachs.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you. Thank you. Hi, hi, Johnny, George, and Alice. Congratulations on the strong results. I wanted to ask on Freight actually, after Express, we see a good reacceleration in growth. Just can you share of how large e-commerce contributing to the Freight? For example, volumes at this point and do we see this larger size items being a key growth driver, because we do see new entrants over the past two or three years -- two years that are run by Express companies, with the LTL arms. So I'm thinking, how do we position our franchisees versus the rest of some of the new entrants, particularly as we target this incremental growth in e-commerce large-sized items?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay, Ronald. The Freight is primarily driven by two factors; one is that online e-commerce large items -- larger ticket items being sold online more and more. And the second is basically the continued expansion of consumption in the Tier 3, Tier 4, Tier 5 cities. So before, most of the consumptions were focused on Tier 1, Tier 2 cities, but now you go on to Tier 3, Tier 4, tier 5 the shipment is much more unloading the full truck but much more and less than truckload. So these are the primary driving for the market growth.

Now Freight traditional is a very much a B2B business. So in the past probably we had (technical difficulty) 90% of our business is on B2B side and then now we are -- since last year, we start to notice a very large growth online for larger, bulkier items like furniture's, 3C products refrigerator, jogging machines et cetera online more and more. So we basically had also trying to focus on a faster growing e-commerce market.

As of last, fourth quarter we probably have about 14% to 15%, which has come from the online larger ticket stuff purchase and the 80% -- 85% or 86% has continue to be a factory B2B type of business. So we will see -- continue to see online B2C will grow faster or e-commerce will go faster and the B2B continue to grow, but they're growing at a lesser pace.

So that's why this year, our primary focus will be on the e-commerce side and how -- actually it's very big challenge right because you deliver a 50 kilo large item to home is a lot more difficult, than you deliver a one kilogram of parcel into home. So that's where the challenge but I think that's where the values are and the gross, where it is. So that's where I see our growth in fourth quarter last year and will be giving continued high growth this year and largely driven by e-commerce growth.

Ronald Keung -- Goldman Sachs -- Analyst

Thanks Johnny. So with the improvement in gross margins into the fourth quarter, give some expectations or guidance for Freights as well for margin. So what are you expecting for that improvement to continue to improve or we'd kind of focus more on growth in 2019? Thank you.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Yeah. So, Freight we really had achieved a very large turnaround from last year, we -- actually the fourth quarter last year, our margins were negative for the Freight, and this year first quarter, we already have about 5.7% positive. So in general, basically, we had about 5.8%. As a result, the Freight is actually, EBITDA wise, everything else is actually positive for three consecutive quarters and we will see continued margin expansion this year primarily due to, again the volume expansion, we continue to see -- we'll see a very high volume growth this year for the Freight and we'll continue to see, as volume grow, economic scale comes in. Actually we're also adopting some technology for more automation, just like we did for the Express. In that we will continue to see the improvement in the margin and the profitability on the bottom lines.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you. Than you Johnny.


Thank you.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

So if you want to have -- so you want to have little bit color on that. So I can give you little bit colors. On the Freight, same thing, the last-mile delivery this year we have increased from $137 to $151 per tonne. So in our -- for every shipped -- for every time that we have increased the last-mile cost or the -- paid the fees in the first quarter. But meanwhile, our cost has reduced significantly, without the last-mile cost included, just operational cost like transportation and other stuff, was down about 12%; so that's where the expansion.

So even though the last-mile delivery would pay more for people to have a better service, to pay them little bit more to do the last-mile services. But excluding that, we still have 12% reduction in the last-mile cost reduction. So overall, we probably have about cost reduction by 8%. So that is what is driving order volume -- the margin expansion.

Ronald Keung -- Goldman Sachs -- Analyst

Great, thank you. Thank you, Johnny.


Thank you. And the next question comes from Scott Schneeberger with Oppenheimer.

Scott Schneeberger -- Oppenheimer -- Analyst

Thanks. Good evening, good morning. Johnny, a big part of BEST long-term story is integrating multiple segments with each other and it sounds, you'd said it earlier that you are investing in that progression in 2019. So kind of a two-part, first question, what percent of revenue should we expect CapEx to be in 2019? Is still in the 3% to 4% range? And then my follow-up question on that is, could you please elaborate on the investments in integrating the multiple segments that you have planned? Thanks.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you, Scott. So the CapEx as we mentioned, we continue to invest about 3% to 4%. This year, as the industry point, the whole year is about 3.9%. So next year, probably will be little bit less, so it's 3.5% across multiple business units. So Express, still going to be a larger CapEx involved. Second largest CapEx will continue to be on the fulfillment, warehouses, the robotics and stuff like that. And third, probably Freight this year, we will invest some of it into Freight, sorting centers and that. And other CapEx probably related to the international, so we're going to have some international expansion, like in Thailand, we're building like a fourth -- four centers, warehousing, et cetera, So these are the -- about the CapEx.

Versus the investment into various business or new initiatives, I think we, as we said, we're balancing the growth and the profitability. So 2019, we will see a continued investment in Store+. But as I said, Store+ investment in infrastructure is pretty much peaked out, so in other words, the investment will reduce; as the revenue continue to grow the bottom line continue to improve. But we will add a little bit more money to the international to build up a little bit more, because we're just getting started. But I don't see a hugely significant amount of money will be invested there.

And the -- but the UCargo actually is a, it's a platform, it is an online platform, so it is very asset light, it's not CapEx investment heavy. In fact we actually -- the UCargo actually on the fourth quarter, the last year 2018, were not losing money. We actually was profitable, right.

So UCargo, I don't see a very big investment in that, but I think the international, we will see some investment and Store+ will continue to see some investment, but not in a scale as we have seen in last couple of years, as we said that had peaked out and that after last three years' investment, basically the infrastructure supporting B2C are already there, so we just have to expand it, continue to expand the growth and driving down the efficiencies -- driving up the efficiencies.

Scott Schneeberger -- Oppenheimer -- Analyst

Excellent, thank you. And then just as a follow-up on that, in the Supply Chain segment, could you touch on the competitive environment and your ability to differentiate and win business with a covering pricing as well. Thank you.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. So you have noticed that the Supply Chain we -- on 2018, our margin has been in little bit struggle compared with what we need. Primary due to several reasons, one reason is that because of last year, actually our Supply Chain has grown pretty significantly, grown by 30%, 29-some-perecnt.

In this kind of Supply Chains, so probably logistic will just have -- growing 29% is required lot of investments up in front like the warehouses and all the stuff. So we do have like fourth quarter lot of warehouses were coming on online, on lease and -- but the customer is lagging here. So it had to be fulfilled in the first quarter or second quarter this year and others because we expended like collected -- we increased over 100 customers in whatever, all have starting costs and everything else. But this year we are going to be much more focused on our key objectives. I think as you rightly saw -- to say, where is our competitiveness?

I think our competitiveness come from two areas; one is to do with the fashion, clothing, all the stuff, because they are typically very hard to do and is it pretty much B2C integrated and it's very hard to do because there are lot of SKUs -- tens of thousands of SKUs per customers versus some other products, maybe only have 10, 20, 30 or 100 and it is like easier to fulfill.

So fashion, clothing is going to be one of the areas that we think we have dominant expertise and dominant capabilities and advantages. And second is probably with the FMCG with consumption rate FMCG and that was matched very well with our strategy for the Store+. So they will be focusing on supporting Store+ as well as the FMCGs, the other B2B -- online O2O to B2C and also the clothing and the fashion.

Scott Schneeberger -- Oppenheimer -- Analyst

Excellent. Thank you, congratulations.


Thank you. And the next question comes from Eric Zong with Macquarie.

Eric Zong -- Macquarie Research -- Analyst

Hi, Johnny, George, and the team. So first of all thank you very much for taking my question. Congratulations for these excellent results in the past quarter.

So I have a couple of questions. First of all, I wanted to ask about the more details on the new business and the Store+. So for Store+, like what kind of like revenue growth rate you are looking at for 2019 because like first quarter was quite low, that was by design. So should we look at like -- at like a 20%-ish revenue growth again for Store+ just like what we achieved for the full year 2018? And also for the UCargo, I'm quite interested in that business because the revenue growth, clearly, in the fourth quarter exceeded our expectations. So should we also look at higher growth and a very fast growth for UCargo.

And also in terms of profitability, you mentioned, in the fourth quarter last year, it was actually at a breakeven level. So in 2019, do you expect that take (ph) rate actually continue to rise, like compared with first quarter 2018.

So and -- just a follow-on question for new business is, do you think continuous investment in the new business areas like UCargo and Global will result into a higher EBITDA loss at the headquarter level, so this is my question. Thank you.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. Thank you, Eric. As you noted -- as you noticed on the Stock+ fourth quarter, we purposefully slowed down and focused on a better quarterly shipment and to reduce -- to improve the margin. So margin was improved significantly above -- over 1 percent point. But while the growth actually slowed down.

So 2019, we will continue to focus on our branded store, so that chew up very higher margin and also higher efficiency on the logistic services. So -- but our growth will be somewhat slower full year than the full year 2018. So we are kind of looking at about 20-ish, anywhere between, actually our plan is 17% to 18% growth. So, little bit shy of 20%; that's our current view on the Store+.

And on the -- so as I said, I mean the investments peaked last year and so is the fourth quarter 2018. So every quarter, we've gradually improved that even though the growth will be slow down, but that's -- I think it's a healthier growth.

On the UCargo side, yes. So growth in that being very, very high and driven by the continued demand for a lot of people looking for full truck of goods -- of better services onto our platforms. So we're still expecting a very high growth next year. So this next year we are expecting about 180% to 200% growth, so somewhere around 180-ish -- 180% to 200% growth. And with a -- some of the thing we're thinking about, we're probably will be able to see probably even higher growth on that.

So, we expecting that to be -- just to scratch the surface, we just started a year ago, 2017, we basically created a platform (inaudible) sorting, looking for trucks, additional trucks for Express and Freight, for Supply Chain that require some trucks, which you know they needed on the spot. So the platform actually was very well -- the utilization was very high and we see great resources to be used.

So we just opened up full services for the outside -- for the external customers and just for three quarters, and they -- we're having phenomenal growth. So I think this next year we actually are also planning a fairly high growth.

On the third quarter, you had profitability as you said, you know, first quarter, we have achieved a non-GAAP positive net income and what happens next year was the investment in all these new initiatives, would be (inaudible). So our net sales target is actually to completely improve the EBITDA, but all things we're talking about is at consolidated group level.

So in consolidated level, I think our EBITDA is going to be greatly improved over the last year. Last year, overall the whole year, still have little bit like RMB10 million or RMB50 million loss, for the -- adjusted EBITDA for the whole 2018, but I'm sure 2019 that the adjusted EBITDA on a full year and consolidated basis is going to be positive and so is the net. We continue to improve the net. So we're not going to see a worsening bottom lines, but we should see a surprising, pretty healthy growth on the bottom line as well -- as well as the top line.

Eric Zong -- Macquarie Research -- Analyst

Okay, thanks very much. Johnny, I just have a quick a follow-up question on the Express delivery side. So just like what you did in the past quarter, would you mind to show us a breakdown for unit cost for Express between businesses?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay, I kind of alluded to this a little bit before. So I think and give you a little quick update on that. Our total cost including the last-mile delivery is $3.01, so $3.01 is the total cost, for which $1.65 is contributed to last-mile delivery, which is about $0.10 higher than last year. But anyway, so if you deduct that our non-last-mile delivery cost is about $1.37 for which about $0.84 is contributed to transportation, $0.28 contribute to sorting center labor cost and lease cost is about $0.09, which is down about 10%,

I give you another thing. The transportation was $0.84, down 14% quarter by quarter -- from last quarter, same time last quarter; our labor cost is down by 33% from $0.42 to $0.28, which is about $0.28, these costs are down 10%, so it comes $0.10 to $0.09; and the other costs, miscellaneous or other cost is down about 30% from $0.21 to $0.15. So total cost is about $1.37 and we believe we can continue drive down this cost.

Eric Zong -- Macquarie Research -- Analyst

Thank you, Johnny, very helpful.


Thank you. And the next question comes from David Ross with Stifel.

David Ross -- Stifel, Nicolaus & Company -- Analyst

Yes. Good morning, good evening. Wanted to talk a little bit about the growth outside of China, you mentioned growing into Thailand, Vietnam et cetera buildings some warehouses. As you think out over the next few years, how does that business look? Is it focused mainly in Supply Chain? Do you have Express, you have Freight, you have UCargo type model there. And then, are they separate country operations or are you building out more of a cross-border network?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you, David. We are primary -- we're seeing a great opportunity, global wise. I have been travelling for last three weeks. I just came back, actually a week ago. So I went to many countries Vietnam, Thailand, Indonesia, US et cetera. First of all, we have primary focus probably in two regions, North America and Southeast Asia. Now, North America, everybody know we already have very a prefix presence there. We have our Dallas operation, LA operation and we have our New Jersey operation, so about -- close to 80,000 square meter or 100,000 square meter warehouses or supply stores there. So, we already have a fairly big presence there and we continue to scale up the -- some of the capability, primarily to B2C, but mainly B2C and also for the cross border.

I think that the opportunity I'm getting more excited about is in Southeast Asia; countries Thailand, Vietnam, Indonesia, Malaysia, Philippines et cetera, for multiple reasons; one is that the e-commerce being growing tremendously driven by younger population, poor offline infrastructure, but lot of people want to have pent-up demand to getting merchandise but they couldn't get offline.

So everybody have mobile phone and they buy on the Facebook, they buy on a lot of this website, Alibaba et cetera, Lazada et cetera, Shopee etcetera. So these are growing very, very rapidly. But the infrastructure is very poor. As we look at the infrastructure, both basically for fulfilment like warehouses and everywhere we go and people wanted to say, can you help us on doing this and also the last-mile delivery.

In China, in the past 10 years, this infrastructure has been developed quite well, in turn, it had driven -- drive the digital content growth and significant e-commerce a growth and vice versa. And basically, they help each grow. But in South East Asia, what we see is that lacking of infrastructure and actually, I mean the demand is there for e-commerce. So what we would do there is not just a -- put up warehouses and doing a fulfillment. I think that's (technical difficulty) but the tougher part is really doing a much more integrated service, not just fulfillment, but the Express and the Freight.

In fact you know in Thailand and Vietnam, I see a tremendous opportunity for Freight, for UCargo and for Express. But of course we're not going to do one -- everything on one shot. So we can do it in a step by step investment basis to make sure that our balancing the -- achieve profitability, high profitability and also these long-term initiative can be balanced.

So, in Thailand we're basically starting with the full coverage of the Thailand for Express Delivery and the volume has been growing very rapidly, the -- and also the fulfillment. And I think in the next step maybe we will be looking there for a Freight network or for a UCargo type of services. I think that's all in future demand. Basically you can consider these countries about 10, 15 years ago China and the infrastructure should -- need to be upgraded, the economy just in high speed of growth. But it's nevertheless is still being a smaller scale.

So they need these kind of services that we have in China and to the -- and given that Southeast Asia has about 600 million people young populations. I think that that is a really reasonable business. I think we can do a very meaningful and proper business there.

David Ross -- Stifel, Nicolaus & Company -- Analyst

Excellent, thank you very much.


Thank you. And the next question comes from Calvin Wong with JPMorgan.

Calvin Wong -- JPMorgan -- Analyst

Hello. Hi, can you hear me?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Hi, Calvin.

Calvin Wong -- JPMorgan -- Analyst

Hi. Hi, Johnny, George, Alice. Firstly, congratulations on a very impressive set of numbers. And so my question is primarily related to what we're seeing kind of year-to-date on the ground, especially for Express. So, I mean we're already in March, right. So we've had a couple of months of operation. So just in terms of industry growth you know there was previously some concern about some potential macro headwinds and slowdown on consumption.

So what are we seeing on that side? And on pricing, are we seeing fairly stable or are things kind of picking up, especially during the off peak season in the first quarter right now. And just on express volumes we mentioned that we're looking to continue to gain market share this year. Do we have kind of a rough target with respect to volume growth? Previously we had given sort of a multiple -- a rough multiple guidance versus industry, so that's kind of what I wanted to ask about.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. Look at 2019. I can't give you exact number because that quarter is not ended yet, but I can roughly say, based on the first two months set of number, we are on target. So we are on our target. So we are on our target and actually slightly ahead of our target in terms of the Express side. We do see some pressures on the ASP side, on the general market side as people come out last year's fourth quarter peak season has do a lot of capacity and every year, we will see some pressure there as the market goes.

But in general, we're still seeing a fairly good recovery from Chinese New Year. After we come back from Chinese New Year long holiday and we are still seeing on-target movement, development in first two months. In general, I think that this year we, as I have mentioned on the call, that we will continue to focus on, network improvement, quality improvement, driving down the cost to meet any challenge for the market.

So I think we are confident that the team is able to focus on the cost reductions, focus to the market development and the network optimization and to continue to have a strong growth than the market.

Calvin Wong -- JPMorgan -- Analyst

Understood, thank you. Just the quick follow-up, just wanted to get a quick comments from your side, so we have seen effectively all the other major players also set targets to gain market share this year. Do you think that that could trigger some increase in pricing pressure or do you think there is actually room for pricing to remain fairly stable or rational in terms of the competition? And at the same time we all kind of continue to drive incremental consolidation in the market?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Yes, I think both. I think the expectation for the several major players are expecting to have a higher growth in the market and the gaining market share. I think they're primary from several things. One is that had few companies and the concentration on the marketplace continue to increase. So in other words, the companies are continuing to consolidate the market shares from a Tier 2 or Tier 3 players.

So in other words, the concentrating -- continue to concentrate on the top few companies. Second is that the -- as a result, I think price competition and the pressure is going to be there. As I said, we will be focused on our execution, reduce the cost and optimize the network to make sure the networks are stable, the customer services is, well. I think we are confident that we are continuing to be able to perform or execute as we stated goal.

Calvin Wong -- JPMorgan -- Analyst

Understood. Thank you very much.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you, Calvin.


Thank you. And the next question comes from Han Chung with KeyBanc Capital Markets.

Han Chung -- KeyBanc Capital Markets -- Analyst

Hi, good evening, Johnny, George and Alice. Thank you for taking my question. So I'll follow up on the Supply Chain business and Johnny, you mentioned earlier, 4Q seems the -- the gross margins are little bit soft and that's because we have a new capacity and because of new customers. So can you give more color around how many new customer we added in the fourth quarter, and then maybe any few one that worth mentioning? And then also what will be the trend for the first quarter in 2019? So I actually means like do we expect the gross margin to start to recover in the near-term? And then also what will be the longer term targeting model for the Supply Chain?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. First of all, thank you for that questions, so people do have some -- I'm glad you asked that question, so I can clarify little bit. Actually, the fourth quarter 2018 actually the margins improved from fourth quarter 2017. When I say the margin was little bit soft. I was referring to the whole year. So first quarter we actually recovered a little bit. So, first quarter actually was about 0.8% better than the last year first quarter. But typical first quarter margin is always little bit soft. Reason is that Double 11, huge ramp up of volume in a week or two then you have to get a lot of people, labors and you have to get lot of equipment and the warehouse ready just for a peak of seasonal sales.

So typically, that margin would be low because the efficiency and the labor force efficiency, everything else is going to be lower but nevertheless, this year, first quarter is better than last year first quarter. However given that the full year, last year we achieved about 6.1% as a full year of 2017 and this year whole year is only about 5%. So this is a little bit late upon whether we like to see.

But this year we actually gained a 100 plus customers, but so we are -- what we were doing is that we are being -- starting on the fourth quarter, we start to focusing on three things, right. One is focusing on the industry what I'm working on, so as I -- as was mentioned before that we will focus on more of the clothing, fashion, the garment side of it, the apparel.

And that actually is hard to do because SKUs are lot and typically the volumes are higher. So we prefer this kind of -- margin is also higher.

And second, we are focusing on FMCG because we're doing a lot of FMCG to supporting the Store+ and network together and we tried to make the whole Supply Chain of consumption related especially FMCG better. So we are focused on that. So this is the first opportunity -- first things we -- actually are different from the last year, a year before, and we probably will do lot more various customer base and factors than we are focusing. That will surely improve the margin significantly.

Secondly is that, we are looking at more of a customer base because we focus on the strategic factors and some customer (inaudible) probably we have to let it go. So, we are choosing customer to be more suited for our growth strategy. So as a result, in long term, I think you will see 2019, we will see an improvement of the Supply Chain, in fact they're not just higher in this year, they should be higher than 2017 to go over to about the 6% to 7%.

So that's our -- so I think the Supply Chain, as the time goes as we're consolidating the position in our Supply Chain leadership, we actually, I would reiterate too, we are the one of the best supply chain fulfillment Company. As we solidify this lead, our margins continue to improve.

So I think in long run, I think that this should be about at least a low-teen percentage of the business versus now a single digit business. So I think it's really a double-digit business. But that will probably take a year, two year or three years to get there. So 2019, you will see significant improvements over this year and should be better than 2017 as well.

Han Chung -- KeyBanc Capital Markets -- Analyst

Okay, thank you. So just a quick follow-up on Express, so what's do you think the trend for last mile fee this year and also -- or would you expect the closer reduction excluding last-mile fee. We have that over 20% year-over-year reduction last year. So what we think about this year?

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Okay. I think the last-mile delivery fee will be -- ease out a lot. I don't think this year we will see a stronger upward push for the last-mile delivery cost. Given $1.65, it's pretty good already and second because probably as I've said that average weight for parcel is actually decreasing, so that will also be less the last-mile delivery on somewhat of a relax of the fee.

So I think the last-mile cost, so, you will not see a significant increase, like we said that we did on 2018 last year, there is a lot to maintain the last-mile delivery quality and so we just increase the fee and make sure that people will have a better service.

On the cost reduction side, I think as we said, excluding the last-mile delivery cost, on the total cost of operation, total cost of Express sortation and operation were down by 21% and this we will still see a low teen cost reduction in a just couple of years.

So I think primary driven down by -- there is more room there on transportation, there is some more room on the sorting cost on the labor cost and the lease costs, there is some room there, the other costs will have some room there. So we will see about you know low teen 10%, not 21%, just high teen, but I think we'll just see low teen type of cost reductions.

Han Chung -- KeyBanc Capital Markets -- Analyst

Thank you.


Thank you. And this concludes our question and answer session. So I'd like to return the conference to Johnny Chou for any closing comments.

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Thank you for joining our call. And I would really appreciate your support of BEST. Please reach out to our Investor Relation teams, if you have any further questions. We look forward to speak to you soon. Thank you very much.


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

Duration: 76 minutes

Call participants:

Shao-Ning Johnny Chou -- Founder, Chief Executive Officer

Lei Guo -- Chief Accounting Officer and Senior Vice President

Vivian Tao -- Citigroup -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

Scott Schneeberger -- Oppenheimer -- Analyst

Eric Zong -- Macquarie Research -- Analyst

David Ross -- Stifel, Nicolaus & Company -- Analyst

Calvin Wong -- JPMorgan -- Analyst

Han Chung -- KeyBanc Capital Markets -- Analyst

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