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BEST Inc. (BEST) Q1 2019 Earnings Call Transcript

By Motley Fool Transcribing – May 15, 2019 at 1:46PM

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BEST earnings call for the period ending March 31, 2019.

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BEST Inc. (BEST -3.84%)
Q1 2019 Earnings Call
May 14, 2019, 7:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to BEST Inc.'s first-quarter 2019 earnings conference call. [Operator instructions] With us today are Johnny Chou, BEST Inc.'s chairman and CEO; 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 may ask your questions.

Please note, this call also is being webcast on BEST Inc.'s IR website at A replay of this call will be available on after the call. An investor presentation is also available on the IR website. Before I begin, I will read the Safe Harbor statement on behalf of BEST Inc.

Today's discussion will contain forward-looking statements. These forward-looking statements are based on management's current expectations. They involve inherent risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the management's control. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, 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. Our GAAP results and the reconciliation of GAAP to non-GAAP measures can be found in our BEST Inc.'s earnings press release. Finally, please note that unless otherwise stated, all the figures mentioned during this conference call are in RMB. Now, I would like to turn the call over to Johnny Chou, chairman and CEO of BEST Inc.

Johnny, please go ahead.

Johnny Chou -- Chairman and Chief Executive Officer

Thank you, operator. Good morning and good evening, everyone. Welcome and thank you for joining our 2019 first-quarter earnings call. I'm pleased to report that BEST is off to a strong start in 2019, as we continue the momentum from last year.

It puts us on-track to achieve our operational and the financial objectives for the year. Our strategy to gain market share, invest in networking services, improve operating efficiency and enhance the customer experience enabling us to deliver another strong quarter. Our -- and strong execution capability continues to position us well to capital on opportunities and succeed in a competitive market environment. As a result, we saw strong revenue growth rate and a margin improvement during the quarter.

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Now let me share some business highlights with you. BEST Express continue to gain market share and achieved significant above market growth. Express possible volume exceeded RMB1.34 billion, an increase of 41% year over year, which is 1.82 times the industrywide growth. Market share increased to 11% from 9.6% in the same period of 2018.

On the back of fast volume growth, we continue to optimize our network and increase the level of automation in technology adoption to reduce costs and the improved profitability. We've reduced the total number of cost in sortation center to about 102 from 144 in the same period of last year. As of end of quarter, we had 71 automated sorting centers assorting 577 dimension and weight scanning systems in operation. As a result, reduction in aggregate cost per parcel continue to outpace the decreasing average revenue per parcel.

Cost per parcel decreased by 8% year over year, while revenue per parcel decreased by 6% year over year. For the next three quarters, we remain focused on the market share gain targeting a minimum 1.5 times of industrywide growth. We also aim to further optimize our network to reduce the total number of hubs in the sortation centers to around 90. And we will continue to invest in automation and technology application to improve efficiency and productivity.

BEST will continue its strong gross momentum in the first quarter. Freight volume exceeded 1.26 million tons, an increase of 29% year over year, and significantly higher than industry average. Similar to BEST Express, strong volume growth enabled us to further optimize the freight networks. We reduced the total number of hubs and sortation center to 110 from 132 in the same period last year.

Economy of scale and network optimization resulted in significant cost reduction. Cost per ton decreased by 5% year over year. We expanded the freight last mile service very extensively to better serve our customers and support further market share gains overtime. Our total number average franchisee partner operated service stations increased by more than 40% year over year to nearly 15,000.

Through last mile expansion, we positioned ourselves to serve an increased percentage of e-commerce related transactions and achieve better product mix and profitability. We also continue to provide more value-added services to enhance customer experience. BEST supply chain management delivered solid results during the quarter, the total number of order fulfilled increased by 44% year on year to RMB62 million of which the total number of orders fulfilled by franchiser Cloud OFCs increased by 114% to over RMB22 million. As of March 31, total general fulfillment areas of Cloud OFC increased by 19% year over year to 1.8 million square meters, of which over 1 million square meters were owned and operated by franchisees.

We are confident that margins for SCM will improve going forward as we continue to scale up our network and customer base focused on fast-moving consumer goods and fresh and pure segments, and as the market dynamics become more favorable. For BEST Store+ as mentioned in the last call, 2019 will see us significantly grow the number of franchiser best neighbor stores while focusing on the quality of membership stores to improve profitability. Total number of branded stores including franchise and the operator increased by over 500% year over year to 2,571 as of March 31, of which the number of BEST neighbor stores increased to 2,222 from 144 in the same period last year. Number of orders fulfilled for branded store exceeded 157,000; accounting for almost 29% of total number of orders fulfilled.

This represents a 10 percentage point increase on the same period last year. Total number of membership saw an increase by 23% year over year to over 426,000 in the same period. Total number of all orders fulfilled decreased by 5% due to ongoing efforts to improve the quality of orders from membership stores to increase profitability. We are confident that total number of orders fulfilled will accelerate again as we scale up the franchiser stores.

During the first quarter, we also launched a Store+ membership program, as well as online-to-offline and last mile services in selected stores. For the rest of 2019 we are committed to significantly expanding the number of franchiser stores, improving the quality of membership stores, and rolling our new products and services to improve margins and reduce the fulfillment expenses per order. New cargo, our truckload capacity brokerage platform continue its rapid growth since opening its access to external customers last March. The number of transactions on the new cargo platform increased by over 200% year over year to almost 200,000.

The number of registered ageing's on the new cargo platform increased 40% year over year to over 4,600 and the number of registered trucks increased 46% year over year to nearly 280,000 as of March 31. Market demand for truckload transportation in China is enormous, estimated to be more than -- By leveraging our technology infrastructure and the operational expertise, the new cargo platform is well-positioned to disintermediate and capture the sizable opportunities. In addition to full truckload brokerage, we also provided upmarket service such as bob purchase, insurance, maintenance and repairs. We are at the process of developing solutions in multi-mode model, LTL and clean energy vehicles to further drive revenue growth and the margin expansion.

We believe new cargo will continue its rapid growth trajectory in the near future. BEST capital continue to spend its financial offering and solutions to our ecosystems participant and contributed to improve the overall operating efficiency in our network. As of March 31, it had provided a leasing service to over 9,000 trucks which had more than doubled year on year. BEST Cloud continues to broaden its reach.

As of March 31 BEST Global served 15 countries and the regions outside of Mainland China. We launched Express delivery and supply chain management service in Thailand, nationwide, and we plan to further expand and view our presence in Southeast Asia. We believe our technology platform, business model, and operational expertise provides us with a significant advantage to capture the market opportunities created by the significant economic and e-commerce growth in the region. Overall, we delivered excellent results in the first quarter of 2019 as e-commerce penetration accelerates in lower tier cities in China, and countries in Southeast Asia.

We believe these area will drive much of the consumption growth in the coming years. BEST with its technology enabled network and strong execution capability is well-positioned to capture these opportunities and to succeed in environment of increased demand for integrated supply chain solutions and logistic services, online-to-offline integration, and ongoing industry consolidation. With that, let me turn this over to Alice. Alice, go ahead.

Alice Guo -- Chief Accounting Officer and Senior Vice President of Finance

Thank you, Johnny. Hello, everyone. BEST strong operating performance is reflected in revenue growth and the margin improvement. In our traditional slow first quarter, which is impacted by business slowdown over Chinese New Year, we delivered a revenue of RMB6.9 billion representing a year-over-year increase of 37.4%.

Gross profit increased by 167% over the same period long-term to RMB293 million, while cost of revenue as a percentage of revenue decreased by 2.1% as a result of increased operating leverage and the continued effort in cost reductions, network optimization and the operational improvement. Gross profit margin increased to 4.3% from 2.2% from the same period last year. By balancing growth and investment, we reduced our first quarter net loss by 31% year over year to RMB233 million and a reduced adjusted EBITDA loss by 63% to RMB79 million. We believe our strong first quarter puts us on-track to achieve our revenue guidance and reach the goal of turning net income positive for the full-year 2019.

The consolidation of non-GAAP measures to comparable GAAP measures and the relevant adjustments can be found in our earnings press release. Now, let me share some highlights. On a year-over-year basis, Express revenue by 32% to RMB4.3 billion. In terms of unit economies, revenue per parcel decreased by 6% while cost per parcel decreased by 8% of which transportation cost decreased by 11%, labor costs have decreased by 36%, lease costs have decreased by 8%, and other costs have decreased by 30%.

Gross profit per parcel increased by 207% to RMB$0.09. Freight revenue increased by 30% to RMB1 billion. In terms of unit economies, revenue per ton increased by 1% while cost per town decreased by 5%, of which transportation decreased by 10%, labor costs have decreased by 6%, lease costs have decreased by 8%, and other costs have decreased by 16%. Gross profit per ton increased to RMB26 compared with net RMB17 in the same period last year.

Supply chain management revenue increased by 34% to RMB534 million. Gross profit increased by 40% to RMB21 million. Gross profit margin decreased by 1 percentage point to 3.9%, mainly due to taking possession of new facilities for future expansion. Store+ revenue increased by 2% to RMB554 million, slowdown yield revenue growth is due to decrease in number of orders fulfilled for membership store from ongoing effort to improve the quality of orders.

As a result, gross profit margin improved by 2.6 percentage points to 12.7%. The revenue from other service lines increased significantly by almost 6.5 times to RMB536 million, mainly due to the -- of the new cargo platform. Revenue generated from external customers on the new cargo platform exceeded RMB44 million which accounted for more than 6.5% of company's revenue in last quarter. Gross profit from other service lines also increased by 91% to RMB42 million.

Adjusted operating expenses as a percentage of revenue decreased by 1.2% to 7.5% driven by improved operating leverage and efficiency, of which selling expense as a percentage of revenue decreased by 1.5 percentage points to 2.8%. G&A expense as a percentage of revenue maintained at 3.9%. R&D expenses as a percentage of revenue increased by 0.2 percentage points to 0.8%, primarily due to the hiring of additional R&D professionals. Net cash used in operating activities was RMB206 million compared to RMB611 million in the same quarter of 2018.

The net operating cash flow in the first quarter was primarily due to seasonal decrease in business volume in the first quarter due to Chinese New Year holiday which impacted our cash flow via at the same time we settled large amounts of accounts payable in the first quarter for the services incurred in the fourth quarter last year, the traditional peak season which impacted the cash flow. We expect operating cash flow to turn positive rest of the year. Cash and cash equivalents, restricted cash, and a short-term investments in a total were RMB3.9 billion as of March 31, 2019 compared to RMB4 billion as of December 31, 2018. The decrease was primary due to capex and the net cash generated used in operating activities.

Capex was RMB306 million or 3% of total revenue. Most of the capex this quarter was used to upgrade the automation system in our operations. Now let's revisit our 2019 financial outlook. Based on current market conditions and operations, we maintain our full-year 2019 revenue guidance to be in the range of RMB36.5 billion to RMB37.2 million.

This represents management's current and the preliminary expectation which is structured to change. With that, we will now open the call to Q&A. Thank you.

Questions & Answers:


Yes, thank you. We will now begin the question-and-answer session. [Operator instructions] And the first question comes from Scott Schneeberger with Oppenheimer.

Scott Schneeberger -- Oppenheimer and Company -- Analyst

Thanks very much. Good evening, good morning everyone. I'm just curious in an expressive, good-looking quarter and Johnny, you mentioned maintaining for the upcoming three quarters growing at least 1.5 times the industry volume and anticipated industry volume. Could you speak a little bit more about how you're going to balance the price and volume over the remainder of the year? Thanks.

Johnny Chou -- Chairman and Chief Executive Officer

OK. Thank you, Scott. As you have seen our release, for ASP stands somewhat about 6%, but however, our operating costs , not operating costs. The cost has reduced even more.

So, for the year, we believe that we will continue to drive down the cost factor then the ASP reductions. So, meanwhile, we will continue to have a higher gross volume growth. Much higher than the market. So, basically is to how to continue to reduce the cost and faster to maintain the profitability and margin improvement.

Scott Schneeberger -- Oppenheimer and Company -- Analyst

Great, thanks. And for a follow-up, I'd like to go over to supply chain. A great quarter across the board in all the segments are a little wider on revenue and margin than I anticipated here. And obviously a lot of investment in building new facilities.

Could you just elaborate a little bit on what type of -- what type of customers you're bringing on and how you see managing over coming quarters, all the investment in that area to maintain a solid margin trajectory?

Johnny Chou -- Chairman and Chief Executive Officer

OK. Actually, the first quarter of the module was impacted by some of the collections, one particular customers, that the customers actually was seeing financial implications; and so we have writedown some of these collection on that. But in meanwhile, I think the most of the cost of structure is a fairly way to maintain. We do have about 100,000 square meters of vacant space which has to be a little bit more than that actually about 150,000.

A space which will take the control of that on lots of fourth quarter when some of the competed construction. So, that had to be fulfilled in next couple quarter. So, meanwhile, we are focusing on two key areas which we think they have a competitive advantage. One is the fashion, the clothing, which traditionally is somewhat difficult part of the supply chain because a lot of SKUs and change a lot, and to a couple of customers a lot of SKU and we've seen them change a lot; so it's more difficult to do and fairly have a higher margin.

And others to that combining with our Store+, we will focus on the FMCG type of it. And they will give us a higher-across synergies with the Store+ program. In that, I think we will be able to fulfill the vacant space quickly as well as focusing on the settlement or the market that we have an advantage on. And thirdly, I think in general, I guess the macro actually environment is better.

I think the most of our competitors or other fulfillment companies are also striving for the modern gains and profitability. So, we think less of pricing competition that ain't nothing supply chain versus loss.


Thank you. And the next question comes from Baoying Zhai with Citi.

Baoying Zhai -- Citi -- Analyst

Hi, Johnny, George and the team. So, congratulations on the cost-efficiency improvements have this quarter. I have two questions. The first question is, do you own the Xprize ISP? I would just say still need to wait later than my expectation, excluding the last-mile delivery fee, it should be down 16% year on year.

So what's the change looking into the second quarter of 2019, is it better or is it worse? And also, may I know the average rate per parcel trend about in the first quarter? Plus, I noticed some outdoor players parcels are becoming heavier and heavier. So does that also see the same trend? Besides, we also see the last-mile delivery fee in first quarter was increasing for bad. And we notice Viteos recent policy is going to lower the last-mile delivery fee to boost the volume growth. So, which strategy do you think is better to be much share in this market? So, this is my first question.

My second question is on the G&A expenses. Actually, I didn't see much operating leverage in this quarter in terms of their percentage after sales despite we achieved a strong top-line growth this quarter. So, was the reason behind and how should it be forecast going forward? Thanks.

Johnny Chou -- Chairman and Chief Executive Officer

OK. Thank you, Baoying. You are asking all very interesting and sharp questions. So, on the ASP side, we -- overall, we are down about 6%.

Now you say -- we moved the last mile. I mean, when we do a cost structure, we're including last mile and everything into a cost structure. Now to answer this question for you in the last one, say, you know this other company is being reduced in the last mile. There were fees, how is that? I cannot comment on what other people are doing, but I can say what are we doing.

Last-mile fees basically is the fees were paid to the last mile so the station or the franchisees for delivery services. So, in our view, this number should not be too low because you want to maintain a good service level that they deliver a parcel hoping that they can make more money and have a better services rather than to have less money to make. So, if you look at our first quarter number, our last-mile deliver fees actually has increased from RMB1.6 to RMB1.67. So, we actually increase the last-mile, try to maintain the service level-better service level, but you would argue or say, OK, 6% drop in the total ASP including a last-mile delivery fees costs reduced by 8%, but if you're taking other cost of last-mile delivery, our actual costs were reduced by 20% as it was released on the number.

So, we reduced about 20% on the total cost, the cost exceeding-excluding the last-mile is somewhat little bit higher. So, I just maintained to say that last-mile delivery fees is essential for the partners for the last-mile delivery people, deliver man to maintain a good service level. So, we will continue to support the last-mile delivery and to make sure that they have better incomes and also have a better services. So, that's our view on that.

As through the -- we are also -- you have noticed very sharply that we have also increased slightly about 3%. So, from a 1.2 kilo per parcel to about 1.28 kilograms per parcel. So, a 3% increase. So, the parcel weight actually varies quarter-by-quarter or month-by-month.

Summertime probably it will be little bit the second quarter, third quarter will be a little bit lighter and first quarter typically will be a bit heavier because due to a Chinese New Year and the-so yes, the first quarter our weight is also literally increased. Finally, is the G&A expenses. So, our total offering expenses-sales expenses as a percentage of the sales, revenue had dropped from 4.3 to about 2.8. So, that's a significant drop, about 30% to 40% drop.

So, you notice about G&A, you say, well, so while 3.9 last year and it's 3.9 this quarter, so you were expecting revenue grow by about 37%. You will see some cost advantage or the leverage. The reason is that we are working on some projects such as internationals and some new cargos, generated some of the general expenses for project management for some of these costs incurred to the headquarters. So these are may reason.

Ongoing basis, you should be able to see just a continual drop. So, I think the transition is because since fourth quarter of the fiscal this year, we have spent some amount of efforts in Southeast Asia, doing due diligence, doing lot of the field trips. That does increase a little bit on the general administration costs.

Baoying Zhai -- Citi -- Analyst

OK. Thanks, Johnny. Just a concern. So, you mean...?

Johnny Chou -- Chairman and Chief Executive Officer

This year should be too much -- not too much a difference from last year, but probably you noticed this, right. It should be maybe a little bit heavier than the last a year simply because everybody is looking for arcade games and everything else. So, there was pretty larger parcels versus before and everybody wants to have more parcels.

Baoying Zhai -- Citi -- Analyst

OK. So the present trend into the second quarter is similar to the first quarter if we exclude the last-mile fee?

Johnny Chou -- Chairman and Chief Executive Officer

ASP per parcel. So, ASP per parcel excluding the last mile, I think the second quarter we'll have living more pressure from the first quarter. So, you know what the world has come to seem some of the pressures on that. As to exactly how much, I don't know exactly yet, but I think the competition on the marketplace, it is pretty heavy.


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

Eric Zong -- Macquarie Research -- Analyst

Thanks very much for taking my question and first of all congratulations for the liquid results in first quarter. So, I have two questions. So, the first question is on Store + PVs. So, I always thought they was owning a 1.5% year-on-year growth for revenue in Store +.

So, I remember in Q4 results call, you guided about 17% to 18% of the revenue growth for 2019. So, to the wonder if you have actually changed your growth hack in the first year or we kind of assume, going forward for the rest of three quarters, we're at much faster revenue growth. Right? And also, how does it either related to your margin improvement because on margin actually expanded to more than two percentage point a year-on-year first quarter. I think the reason being you shouldn't be the Bronco store number increased a lot, right? So, I just want to get your margin outlook.

So, my second question is on freight; so, I'm just wondering how is the freight revenue per ton trending in second quarter so far, excluding last-mile delivery fee? Thank you.

Johnny Chou -- Chairman and Chief Executive Officer

Thank you, Eric. With regard to Store + yes, we did last quarter on the fourth-quarter call at about 17%, 18%. I think that we're still going to see about -- around this numbers growth, first quarter living lower because we purposely try to make it first quarter, January as a business is doing quite well and then we don't have to -- not to impact too much our bottom line. So, we purposely tried to focus on quality of orders.

So, the growth is living lower. Second, third and fourth quarter of we expect to see a slightly higher growth, but I think the full year probably will developed and 7% to 18%. But the whole group revenue will maintain about our guidance just like Alice said, but Store + we'll continue to focus on improve margins and reduce the fulfillment costs -- supply chain costs. So, the margin improvement, I think year over year is still to continually improve, quarter by quarter may have some variations, but quarter compared with last year, same time, year over year should have a good improvement.

That's on Store +. So, year, our effort is to improve the quality of orders and improve margins and to reduce the operational cost on that. So, hopefully, our Store + loss will be reduced and the bottomline could be improved on that. On the freight business, first quarter, we actually had 1% increase on the ASP per ton versus last year but as you said, the second quarter and third quarter we see freight settlement also have somewhat competition; so it might reduce slightly.So if you look at our freight, which has the same pattern as parcel, we actually increase significantly on the last fees for our franchisees, from about RMB147 to RMB150-something, so we actually increased a lot now service fees for franchisees, so allow them to have a better service.

Another part reason because the delivery is much more deep into the villages, towns and everything else, so the cost of delivery will be a bit higher on that. As a whole, I think the ASP excluding the large amount of delivery will be trending down a few percentage points; that's what our expectation and our plan. But it's not going to be significant compared with the Express.

Eric Zong -- Macquarie Research -- Analyst

OK, thank you. And Johnny, I want to follow up on one question on the freight. So when you say ASP for freight, it's putting enough -- will turn it down on a few percentage points. Are you referring to a year or Q-on-Q like stranger basis?

Johnny Chou -- Chairman and Chief Executive Officer

Year over year. Year over year about -- we feel about 3% to 4% compared with Roxy. So if you look at a freight for the first quarter, the revenue actually went up 1% ASP, per ton went up number 1% but excluding the last-mile delivery cost was actually down 3%. So if you're asking that question, is that I think the last-mile fee will continue to-we're not going to increase but I think it's not going to have reductions but I think that we want to make sure the last-mile was doing well.

But the revenue per ASP per pound excluding will kind of now about 4%-3% to 4%.

Eric Zong -- Macquarie Research -- Analyst

OK. Thank you.


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

Calvin Wong -- J.P. Morgan -- Analyst

Congratulations on a strong set of results. A couple of questions from me. First is just on the supply chain management. Can you give me a little bit more color here with respect to -- you mentioned you had to write down some accounts with respect to a particular customer.

Did that affect the revenue or just the cost side? Because the revenue growth was quite strong, it was mainly the margin that was a bit of a disappointment. So that's my first question. Second is on Express. You mentioned in second quarter we should still be seeing some pressures.

Are you talking now mainly about the absolute ASP excluding last mile? The absolute ASP numbers still in there a bit of pressure on a sequential basis or are we talking about a year-on-year percentage decline? That figure is still under quite a bit of pressure?

Johnny Chou -- Chairman and Chief Executive Officer

Calvin, on the first question is basically we -- every year you have lot of accounts who have 600-some customers on it, approaching side, and once a while it doesn't have some customer due to the own operation, we'll have some -- that bad or collection problems or something like that, so we will do that. So on the ASP side for the freight, for the Express; basically is that excluding last-mile, sequentially quarter by quarter you will see some reductions. If you look at every year, the pattern is the same; the first quarter probably had a higher ASP, second to third quarter we reduced a bit and fourth quarter because of high season everybody jacked up the prices of it and went up a little bit. So second to third quarter, if you look at year over year, it's going to be a lower ASP than the first quarter, the sequential will be different.

But we also see a further reduction in cost reductions as well. Typically the first quarter, if you look at cost structure, proposal, plus proposal, first quarter of every year is always the highest. Because you've got 10 to 15 days basically on holidays. You've got holiday and you've got all of this leasing people and everything to pay but every quarter actually goes down.

So the price -- as your cost, per cost the lowest is in first quarter and the first was always the highest.

Calvin Wong -- J.P. Morgan -- Analyst

I'm sorry, if I could just very quickly. You had mentioned that the G&A expenses. We didn't really see much operating leverage kick in mainly because we are still, we had some-if you will start the course working on some new initiatives. Are you able to kind of quantify how much additional cost we can sort of consider more one off and non-recurring, just so we get a sense of when those costs maybe start coming off? What that operating leverage impact could be on the journey front.

Johnny Chou -- Chairman and Chief Executive Officer

All right. So I think in the second quarter, probably will be a similar to the first quarter past because the reduction you will see can probably come from the third quarter because we are working on several projects, and does incur some expenses. I think starting from the third quarter we should see some reduction there in terms of the percentage-wise. So right now you're looking about 3.9%, so toward the third quarter and fourth quarter, I think this number should be going down a little bit.

But you can see right? The sales started to be reduced of tremendous on 4.3% to 2.8%, so it's one effect with reduction already. The G&A I think is expecting about third quarter or fourth quarter you will see an improvement.

Calvin Wong -- J.P. Morgan -- Analyst

Got it. OK. Thank you very much.


Thank you. And the next question comes from Ronald Keung with Goldman Sachs.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you John, George and Alice. I have two questions. Firstly on Express I see very strong growth in the first quarter and you mentioned about competition still remains quite intense. I just think about the second quarter so far.

Traditionally, the second quarter is where Express ASP force sequentially and year in year of course, has been declining as well. Just how have you seen the incremental elasticity of price versus volume growth? I'm thinking that in the first quarter there's been quite a quite a low base as well. A lot of the e-commerce platforms that come out this year was -- is on full operation during Chinese New Year while they went as fully operational, a lot of express branches last year. So you have a pretty easy base, you cut a little prices and yet pretty strong growth and we've seen across the board in the first quarter.

In the second quarter so far, how are we seeing that are players trying to maintain the similar growth patterns in the first quarter but how is elasticity been? How many -- if you cut prices more that stimulate growth immediately or actually the base is not as you -- the growth may be slower. So we want to see have you seen the competitive landscape in sort of pricing in the second quarter and the second question would be more in your international business. Can you share how your Thailand business is doing, some exciting things happening there on Express? And seeing you're also expanding on supply chains, I would like to hear any initial result Johnny. Anything that's happening down in Thailand.

Thank you, Johnny.

Johnny Chou -- Chairman and Chief Executive Officer

Thank you, Ronald. First question about spread. I'm sure there are people with some similar questions. The market dynamic and we still see few things right.

Basically the consolidation is happening so the top five players to not invest properly, the confrontation front continues to increase. So there are the five companies getting more and more market shares but the result, also pricing competition is also fairly severe. People still think that that cost reductions continue to outpace the pricing reductions. So general dynamics.

So what do we see is that the pricing pressures continue to come very heavy. I'd just like to you and Paul, you and others have noticed, the second quarter we should be -- we should still see a sequential quarter by quarter or same time last year reductions on the ASP side. But the good things about it is we're seeing a volume growth naturally is fast, probably little faster than this first quarter. And cost reductions continue to be reducing fast, probably reducing faster than the pricing as well.

So generally we're seeing general market pricing pressure is high because the top five players basically continue to grab market shares. And you well noticed that the second quarter, the pricing will build on it. But however, the costs are going down faster. So as a general result, I think that the bottom line looks better and the market share should gain more.

So that's our view of that. Second question about international, so international which we noticed few years ago, especially referring to Southeast Asia was 600 million people, mobile, and economic is volume-based fast, but online penetration is open, growing very rapidly. However, the infrastructure offline to support the e-commerce growth is very weak, so it's more 20 years ago -- 2010, 20 years ago China in some of the infrastructure. So we think there is great opportunity to go there and with our know-how and platforms and everything.

So Thailand, we rode out the whole country coverage on January 18, so now it's about a quarter over past. So we're continuing to sell our more franchisees, get on more partners, our volume being -- every month has been breaking the records. So now we have about seven sortation centers and the hubs was established in the Thailand, and the volume continue to grow. So we hopefully to see a fairly strong momentum toward the end of the year and hopefully, by end of the year or early next year then we should see financially a pretty good bottom line breakeven or some kind of operation.

Meanwhile, we're looking at rest part of Southeast Asia; in Vietnam, in Indonesia, in Philippines, in Malaysia, etcetera. So quarter by quarter we will release these numbers. We will revisit these -- our actions and what we have done the projects. So, now I probably won't be in the liberty to tell the rest of it but I think quarter by quarter we should expect to see lot more international activities, especially out of Southeast Asia.


Thank you. And as there are no more questions, I would like to return the floor to management for any closing comments.

Johnny Chou -- Chairman and Chief Executive Officer

Yes. So thank you for joining our call, and we appreciate your support of BEST. Please reach out to our Investor Relations team if you have any further questions. We look forward to speaking to you soon.

Thank you very much.


[Operator signoff]

Duration: 49 minutes

Call participants:

Johnny Chou -- Chairman and Chief Executive Officer

Alice Guo -- Chief Accounting Officer and Senior Vice President of Finance

Scott Schneeberger -- Oppenheimer and Company -- Analyst

Baoying Zhai -- Citi -- Analyst

Eric Zong -- Macquarie Research -- Analyst

Calvin Wong -- J.P. Morgan -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

More BEST analysis

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