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BEST INC (NYSE:BEST)
Q3 2020 Earnings Call
Nov 20, 2020, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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

With us today are Mr. Johnny Chou, BEST Inc.'s Chairman and CEO; and Gloria Fan, Chief Financial Officer. For today's agenda, Johnny will give a brief overview of business and operational highlights. Then Gloria will explain the details of financial results. Following the prepared remarks, you may ask your questions. Please note, this call is also being webcasted on BEST Inc.'s IR website at ir.best-inc.com. A replay of this call will be available after the call. An investor presentation is also available on the IR website.

Before it begins, I will read the safe harbor statement on behalf of BEST Inc. Today's discussion will contain forward-looking statements. These forward-looking statements are based on management's current expectations. They involve risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the management's control. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or others, except as required under applicable law.

Please note -- also note that certain financial measures that the company uses on this call are expressed on a non-GAAP basis. Such as EBITDA, adjusted EBITDA and non-GAAP net loss. The GAAP results and the reconciliation of GAAP to non-GAAP measure can be found in BEST Inc's earnings press release. Finally, please note that unless otherwise stated all figures mentioned during this conference call are in RMB.

Now I'd like to turn the call over to Mr. Johnny Chou, Chairman and CEO of BEST Inc. Johnny, the floor is yours, sir.

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

Good morning and good evening everyone. Welcome and thank you for joining our earnings call. On today's call, in addition to the third quarter results, we will also discuss our major strategic adjustments to refocus on our core businesses in order to achieve long-term competitiveness and the profitability.

But before that, let me first go over our quarterly results. We had a challenging third quarter amid intensified industry competition. For Express, it's execution to not meet the fast changing market dynamics in both operation and the pricing strategy, which led to a lower volume growth and margin. Parcel volume increased by 24.8% year-over-year representing market share of 10.6% during the quarter, which is about 0.1 percentage point lower compared with the second quarter. While it's gross margin contracted by 7.2 percentage points as the average cost per parcel decreased of 15.9% year-over-year did not completely offset ASP decline of 21.9% year-over-year. We have since conducted a thorough review of Express operations and strategy, and we are in the midst of implementing plans and changes that we believe will make us competitive and maintain our position as one of the leaders in the industry going forward.

Our Freight business continued its strong growth and achieved the growth rate higher than the industry average. Freight volume increased by 30.7% year-over-year in the third quarter of 2020. Its gross margin declined 5.3 percentage points year-over-year, primarily as a result of a pricing lag after the government reinstated highway tolls in the second quarter. ASP declined by 17.3% year-over-year, while average cost per ton decreased by 12.6% year-over-year. Looking ahead, we are optimistic that Freight will continue to grow in the 30 percentage range and ASP continue to improve and we expect to return to profitability in the fourth quarter.

Moving to BEST Supply Chain Management. In the third quarter, we continued to execute on our strategy of growing our franchise Cloud OFC business and focus on projects with higher margins, and clients with strong credit profiles. As gross margin decreased by 4 percentage points year-over-year to 4.4% primarily due to our high cost structure associated with the legacy key account customers, which are in the process of being terminated. The total number of orders fulfilled by Cloud OFCs increased by 18.3% year-over-year to 102.2 million in third quarter of 2020 of which, the total number of orders fulfilled by franchise Cloud OFCs increased by 32% year-over-year to 53.5 million. The number of franchised OFCs increased by 23.2% year-over-year to 345.

BEST UCargo brought more drivers and SME onto the platforms. The number of registered drivers on the UCargo mobile apps increased by 84.5% year-over-year to 288,000. Total number of transaction on the trucking brokerage platform increased by 37.2% year-over-year to 233,000.

BEST Global continued its strong growth momentum in Southeast Asia. In the third quarter parcel volume in Thailand increased by 513.5% year-over-year to approximately 10 million, while parcel volume in Vietnam, increased by 932% year-over-year to 10.3 million. The company also made a progress in expanding its expressed delivery services in Malaysia, Cambodia and Singapore.

BEST Store+ executed on its strategy of partnership model and enhancing order quality, improved gross margin and reduced losses. As a result, its gross margin increased by 2.9 percentage points year-over-year to 13.4%, while adjusted EBITDA margin improved by 1.8 percentage points year-over-year. Despite these encouraging results, we recently announced the winding down of Store+ business except for our self-operated WoWo stores, which is still under strategic review. We believe, that by phasing our Store+, company can eliminate the significant cash flow requirements associated with this early stage business, allowing the company to further prioritize capital allocations toward its core business.

Let me discuss its core business. The COVID pandemic had a profound impact on our business. The high recovery costs and the subsequent unprecedented pricing competition has depressed our margins and caused unexpected losses. Facing strong industry headwinds, we are taking steps to make a major strategic adjustments and organizational change to our business. Focusing on our core logistics and supply chain management business, emphasizing service quality, enhancing operating efficiency with a goal of putting us back on the path to profitability.

For our Express business, we are focused on sustainable long-term growth and the profitability by continuing to optimize its product structure, improving its operating efficiency particularly in transportation planning, enhancing services quality and customer experience and gaining market share. We have put in place new leadership to lead Express business as previously announced, effective as of November 15, 2020. Mr. Wang Xiaoqing, former General Manager of BEST's Jiangsu province branch, assumed the position of Vice President, General Manager of BEST Express service line, replacing Mr. Shaohua Zhou, who took up a new role in the company.

For Freight, we continue to -- we plan to continue to invest into its infrastructure network. Solidify our industry leadership position by expanding our market shares, stressing the e-commerce aspect of freight services, improving operational efficiency and increasing profitability. For our Supply Chain Management, we will focus on quality growth and profitability. Only target projects with high margins and customers with strong credit profiles, while continuing to implement an asset-light model and grow the franchise Cloud OFC business.

For our non-core business, we announced the winding down of BEST Store+ on November 15 with the other core -- non-core business, including UCargo, Capital and Global. We're considering all option available with the goal of reducing operating loss and the capital requirements from the company.

Additionally, we are implementing companywide cost cutting measures that will generate significant savings going forward. Those measures will also help us create a leaner and more focused organization to realign our management team and employees to execute the refocusing plan. As we look forward, we remain confident in the strength on the e-commerce driven demand for our integrated smart supply chain solutions and logistics services. With these strategic adjustments in place, we are committed more than ever to invest in our core businesses and strengthen our market position. We are targeting strong growth for our businesses, while focusing on further integration of our business units, enhancing our product structure, the stability and the flexibility of our networks, the quality of services and overall operating efficiencies, which taken as a whole will enable BEST to deliver long-term value for our shareholders.

Now I would like to turn the call over to our CFO, Gloria, to walk you through our third quarter financials. Go ahead, Gloria.

Gloria Fan -- Chief Financial Officer

Thank you, Johnny, and hello to everyone. Amid an intensified competitive market, our third quarter performance reflects both the challenges and the resilience of our business. Our revenue was RMB8.7 billion, relatively flat to the same period of last year, while our gross margin contracted 5.4 percentage points year-over-year due to a challenging pricing environment that offset our volume growth across multiple business units, resulting in a net loss of RMB640 million. Despite the net loss, we generated operating cash flow of RMB115 million during the third quarter and maintain a healthy balance of cash and cash equivalents, restricted cash and short-term investments of RMB4.8 billion.

I will now provide a brief review of our third quarter 2020 financial results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. I encourage you to read through our press release issued earlier today for further details. Our gross profit was RMB38 million compared to RMB507 million in the same quarter of 2019. Gross margin was 0.4% compared to 5.8% in the same quarter of 2019. Adjusted EBITDA for Q3 was a negative RMB438 million compared to RMB114 million of the same period of last year. Q3 adjusted EBITDA for core logistics and the supply chain management business was negative RMB278 million compared to RMB267 million for the same period of 2019.

Next, moving on to key financial highlights for our business units. On a year-over-year basis BEST Express revenue decreased by 2.6% year-over-year to RMB5.1 billion in the third quarter of 2020, primarily due to a 21.9% year-over-year decrease in ASP per parcel, partially offset by 24.8% year-over-year increase in parcel volume. The decrease in ASP is primarily attributable to competitive market dynamics. Adjusted EBITDA for BEST Express was negative RMB211 million compared to RMB192 million for the same period of last year.

BEST Freight's Q3 revenue increased by 8.22% year-over-year to RMB1.5 billion primarily due to a 30.7% year-over-year increase in freight volume, partially offset by a 17.3% year-over-year decrease in ASP per tonne, which was primarily due to a pricing lag after the government reinstated the highway tolls in the second quarter. Adjusted EBITDA for BEST Freight was negative RMB45 million compared to RMB42 million for the same period of last year.

Q3 revenue for BEST Supply Chain Management increased by 0.1% year-over-year to RMB453 million. Adjusted EBITDA for BEST Supply Chain Management was negative RMB27 million compared to RMB6 million for the same period of last year. BEST UCargo's Q3 revenue decreased by 1.9% year-over-year to RMB689 million primarily due to discontinuation of several key account customers to minimize credit exposure. Adjusted EBITDA for BEST UCargo was negative RMB30 million compared to negative RMB6 million for the same period of last year.

Store+ revenue decreased by 16.8% year-over-year to RMB717 million, primarily due to efforts to enhance order quality to improve margins. Adjusted EBITDA loss for Store+ was RMB68 million compared to a loss of RMB98 million for the same period of last year. Q3 revenue for BEST Global increased by 125.9% year-over-year to RMB216 million, primarily due to strong growth in parcel volumes in Southeast Asia. Adjusted EBITDA for BEST Global was negative RMB61 million, compared to negative RMB31 million for the same period of last year.

Next, let's look at the major operating expense items. Please note all of these expenses excluded share based compensation. Selling, general and administrative expenses were RMB581 million or 6.7% of the revenue in the third quarter, compared to RMB470 million or 5.4% of the revenue in the same period of 2019. The increase in SG&A expenses was primarily attributable to accrued provision for certain trade receivables and the losses on disposal of fixed assets due to upgrade of Express' equipment.

R&D expenses decreased by RMB11 million or -- RMB51 million, which was primarily attributable to capitalization of certain R&D expenditure to intangible assets as well as reduction in travel expenses. As part of the companywide strategic refocusing plan, we are optimizing our SG&A and R&D expenses to focus our resources on our core business. We anticipate an estimate cost savings of approximately RMB200 million by the end of 2021. The savings will create a linear and more focused organization by prioritizing spending and optimizing operating efficiencies across the company. Capex in the third quarter was RMB487 million or 5.6% of total revenue compared to RMB523 million or 6% of total revenue for the same period of last year. That concludes the third-quarter financial overview.Before we open the call to questions, I'd like to briefly provide a summary. After conducting a thorough analysis of our business, we are already under way in the process of creating a more streamlined organization that can simultaneously trigger further growth and improve profitability. The market headwinds we were facing, along with a recognition of our needs to more favorably align our operations as the company has led to this decision. We believe through the strategic reevaluation of our non-core businesses meaningful cost reductions and the allocation of resources, BEST can better advance its core portfolio in order to deliver consistent and long-term value to our shareholders.

With that, we will now open the call to Q&A. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question we have will come from Baoying Zhai of Citi. Please go ahead.

Baoying Zhai -- Citi -- Analyst

Hi. Good morning, Johnny, Gloria.

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

Hi.

Baoying Zhai -- Citi -- Analyst

Thanks for taking my questions. Yes, so my first question is regarding the Express delivery -- not Express delivery, but actually the whole group strategy change with your refocus on the price [Phonetic] and freight. Just want to know, what would be the key change of the development and the key competition strategy after the change of the personnel, especially in Express delivery business? And my second question is also regarding the restructuring. So with the restructuring cost, I see you are going to close the Store+ business across the country. So I believe we need to compensate the staff. So what will be the restructuring cost? And I heard it from Gloria previously, she mentioned about RMB200 million savings. The RMB200 million savings, could you please break down? So where is the figure from? Thank you.

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

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

Number two side is that we continue to look at our transportation. Even though our transportation costs are doing fairly well, if you look at our whole cost structure, we actually went down about 12% -- 15% of the total reduction in cost year-over-year across the board. However, the pricing comes down more. So what we want to see is that if you are on the transportation side that we can have even more of reduction by working with a freight side as a more combined routing of the lines, long line hauls and etc. And that will help us to more reduce the line. Another one, you can take a look at our leasing cost. The leasing cost is still quite high, it is at about $0.10 per parcel compared with our other competitors, it probably would be much less. That's primarily because we had to build up a capacity in the past couple of years in anticipating of this continued growth of high growth in our Express business. This growth is slower than we planned. So, actually we have more capacity inside the -- so that's another area that we're looking at it. So that's the first question on key exchange in the Express side, basically balancing the network better than just focusing on few key markets.

And the second is we are continuing to improve the cost structure especially on transportation side. We actually had some -- we also started with some of the self-operated fleet rather than completely outsourced. So starting on the first quarter I think this year, we already had some self-operated fleet on the ground. Secondly, you're talking about restructuring cost. So restructuring cost on the Store+ front, we probably will have additional -- by shutting down the -- all the branch offices and also deal with the inventories and order issues that we need to deal with. Probably it will be a little bit over RMB100 million additional costs associated with that. But that's one-time charge into disposing of the business. However, that will give us a couple of hundred million dollars of saving every year moving forward, because the business essentially is still in money losing. So one-time additional costs, restructuring cost on that. All the other business like the -- we are still looking at the order or the other -- any other -- I'm sorry options to look at it. So I don't have an exact number right now.

With the third question about the RMB200 million of the saving, I leave this to Gloria.

Gloria Fan -- Chief Financial Officer

Okay. Hi. Hi Baoying, how are you? So basically the $200 million savings from now till 2021, majority of the saving came from the winding down of Store+ as Johnny was saying. We are able to save about RMB117 million associated with Store+ winding down. And also we are continuing to optimize our SG&A expenses. So, we anticipate another addition of $30 million to $40 million cost reduction in SG&A.

Baoying Zhai -- Citi -- Analyst

Okay. Thanks Johnny, thanks Gloria. Johnny may have a follow-up question on the Express delivery business restructuring -- it's not restructuring, refocus and change of the personnel? Because you know the competition out there is still quite intensive and we can feel that the leader is not waiting to let it go soon, hopefully, we are seeing more and more polarization of those players. So at this point of time, are we still going to follow their pricing strategy, because sales will further drag down our profitability and our cash flows? Or if we change our personnel, as we are more focused on the non collection regions, we have a more balanced network, we will be more differentiated or what do you think about the competition strategy?

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

As I mentioned, we were looking at our own network based on the current ASP and the cost structure and everything. So certainly we will -- in a market you have to compete. So we certainly will have to respond to whatever the market competition is. But at the same time I mean, I think the most important things that we need to really optimize our own network to see what's the -- we can get out the best of the results. So, yes, so price competition is still going to be there. Meanwhile I think we should do better job -- we can do a better job in optimize our own network by providing a better service, quality services, higher ASPs to certain regions of reoptimization and also the lower cost across the board.

Baoying Zhai -- Citi -- Analyst

Okay. Thank you, Johnny. Thanks Gloria.

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

Thank you, Baoying.

Operator

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

Hans Chung -- KeyBanc Capital Markets -- Analyst

Hi. Thank you for taking my question. Good morning. So I just wanted to follow-up on Express. First, can I just get a clarification in terms of the pricing strategy. Let's say if it comes to price and volume and like ASP decline of volume growth or margins, so what's our strategy. Let's say, do we have that KPI for the profitability and beyond that we won't do any further pricing change because we are going to lose our profitability? Or still -- we still have certain type of the target for the volume and at least because we want some market share on a certain scale, right, and then so that's first. And then second question will be because we have restructuring in leadership in Express, right, and then, I just wonder is there a risk that there could be -- create some instability of our -- the franchise network? Thank you.

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

Okay. Hans, thank you for the question. With regarding to the first question, the balancing of course we need to do, right? So we're not really just for lower the price and getting the volume, but we also have to look into profitability and as such. So our goal is, of course, with a -- I think that the goal is reasonably good growth, but of course profitable growth. That is the goal. So how to achieve that? I had mentioned, some of that. If you look at through our cost structure that we're putting under the ER, so basically right now we have about 2 -- 2.15 -- around 2.2 parcel, this kind of income. And if you look at this income compared with our -- some of our peers in the listing on A [Phonetic] shares, all of them almost about in par. So sometimes we actually are higher even in -- as a reported number. In 2.21, I think that's will be coming on a sort of quarter.

So the pricing side, I think we still not as -- I mean not maybe, if you think about, we probably have a lot much lower price than the others, but and the contrast is not. We actually maintain a very good pricing compared with our peers. So, but we still think there's room to move, because if you look at that with 2.21, you are taking out the last mile delivery fees to the franchisees, which we really want to help them to able to do a better job. The company income is actually a bit lower. It's only about less than RMB. Our goal is actually to reach -- is to move up a little bit higher to maybe 1.1 or maybe even higher than that. So how to do that? As I said, I mean primarily before most of our volume comes from a few concentrated market, which has a very low -- lower ASPs. And in fact our -- some of the regions that we are doing well is more potential, could have much more volumes and their ASP are much higher than these areas that we've traditionally been doing well.

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

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

Hans Chung -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

[Operator Instructions] The next question we have comes from Bo Pei of Oppenheimer. Please go ahead.

Bo Pei -- Oppenheimer -- Analyst

Hi Johnny, Gloria. Thanks for taking my question. So you just mentioned -- so for the Express business, so you mentioned we are trying to ramp up in the less concentrated markets where it could have better profitabilities and growth. Can you just name some of these markets and comment on how competitive this market is? Are the other players also pretty aggressive in this market? And then my second question is, it seems we can save a lot of money from winding down Store+ and -- but we also -- I think on your press release, you mentioned you tried to at least maintain the market share or even grow your market share for your Express business? So does that mean we have to reinvest the savings into the Express business going forward and try to improve the growth rate a little bit? Thank you.

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

Yes, yes. So if you look at the -- your first question is that, primarily in the past we are -- if you look at our Guangdong province and our Zhejiang province, some of the key markets are within a city like Shenzhen, Guangzhou, or Yiwu, that's primary is our -- the concentration of the revenue come from this area are much higher than the market as average. And then typically this area has a much lower ASPs and also much more competitive. But if to the other cities or provinces which are -- we are primarily doing actually some Shandong, Henan, Anhui, etc. These areas actually has a very decent volumes, but as well as much higher ASPs compared with the market I just mentioned before. So across the board we see a -- in the area that we think that we can do better and has higher ASPs, the area that will do more, the area that we think that we already have a very competitive position as well as the -- but cost -- but the pricing is really low. So, we probably will be moving the focus a little bit more to the area that we think we can do better there for balancing it. But they will also help the balancing of the network right? The transportation balance and everything else balancing that will also optimize or improve efficiencies on the network as well.

Your second question is that the closing down of -- yes, closing of the Store+. Primarily we tried to -- in this time that we try to readjust the focus and see where we can save the money and where the investment was needed. Certainly, disclose the closing the Store+ operation will give certain savings every year and that will allow us to give more investment and also management time and the focus into core business, especially in the Express areas. So, yes, some of the savings that we put into a investment into the Express business.

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

Operator

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

Baoying Zhai -- Citi -- Analyst

Hi. Johnny, I still have a follow-up question. So this question, maybe a little bit tricky, given Alibaba is one of your major shareholders. What's Alibaba's view on the sector's competition landscape now? Do you think it makes sense for maybe the smaller -- relatively smaller players to make a merger and to fight against the stronger players?

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

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

Baoying Zhai -- Citi -- Analyst

Yes, but how do you think about -- do you think it will be a workable way for the -- it's just for example, maybe for you guys and maybe STO, I don't know, but if you got merged together, do you think it could be better to fight against the strong players?

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

Again, Baoying the question you are asking, I really have no -- I don't know how to answer this question. So I think as the market goes, the market will actually workout with them by itself, right? I mean as the -- as from best point of view, we're still looking at how to improve ourselves by -- we are confident that by some of these things we installed. If you look at about 2011, right, so if you look at 2011, our market share is only about 2%. So when we go up to 2019, we actually achieved about 11.9% of the market share. So actually in seven or eight years, we actually really had gained a lot in the market share and have grown a lot. So from our point of view, we are still continue to looking at how are we going to optimize our network and continue to -- how do we invest and in the operational side we're getting more efficient and continue to compete in the marketplace.

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

Baoying Zhai -- Citi -- Analyst

Totally understood. Thank you so much, Johnny.

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

Thank you, Baoying.

Operator

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

Hans Chung -- KeyBanc Capital Markets -- Analyst

Yes, I think you -- so I just have one follow-up question about non-core. And I think you mentioned that the rest of the business, the Capital, the Global, UCargo, they are put in non-core. And can you provide some color about each? What are we going to do? I know in addition to -- we are open for strategic option, but in terms of operation or the strategy or tactics, what will be for the rest of those business and because they are quite different nature like Capital, is profitable. And then for Global, it's growing very fast right? That's still loss-making. So just any color about how you're thinking about non-core and how -- do we have the goal to just narrow the loss over time whatever it costs into the growth or do we have a different thought? Thank you.

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

Okay. The -- including Store+ as well as the UCargo, Global, Capital, the initial plan was to try to make in our ecosystem to create a synergy -- a synergetic strategy to help each other. We are anticipating a much competitive market in the core business side. So we initially tried create this business to have more synergy on that. But given that the competitive marketplace, we really need to refocus, so we think about to reevaluate our strategy on that. So within the remaining non-core business like Capital and UCargo and Global, we are continually looking at all options right, all options that could be spin-off, could be merger and acquisition, it could be some other way too. The goal is to minimize the loss and also probably the management's time, so we can refocus on our core business side.

Specifically like UCargo. UCargo created a platform to reassign more drivers, to have more efficient transportation sourcing, etc. So there, we will more focus in the future be it just a more internal platforms to help Freight and Express to getting more temporary car usages required. But meanwhile, if there is anyone interested into some kind of operational merge then we can also certainly to think about that. Global, the same thing. Our Global actually cross-border is developing very quickly. We do have lot of synergies with the Supply Chain Management as well as Express with international, because there's a lot of a cross-border from Thailand to China, China to Vietnam, China to Thailand etc.

You utilize Express network in China for the parcel to be delivered or collected as well as vice versa, where we have shipments from here to the Southeast Asia being distributed to the customers. We are working with all the platforms in the Southeast Asia as well. So yes, as you mentioned these business are still in development. So they still will require some capitals as well as some kind of investment. So yes, so we look and see If that could be a separate fundraising or separate partnership or something to getting on more capital and same time that will have a less a burden -- the cash burdens on the Group.

So that's -- Capital, the same thing. And Capital basically is essentially -- initially we'll try to help our drivers and franchisees etc, to have a easy access to Capital. But as we require more cashes into the main business, we probably have to look in at some other way to do it rather than using our own capital to do this, we would probably will have to -- using other institutions or other partners capitals to do that or we will -- so any kind of options on the table, the goal is just one, right? Just try to -- how to minimize the burden onto the Group side, that can be more saving to invest in the core business.

Hans Chung -- KeyBanc Capital Markets -- Analyst

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

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

I wasn't sure of your questions, could you [Indecipherable]. Yes, so yes. So of course the new RCEP, the regional free trade agreement, certainly will have a major support to our businesses in Southeast Asia. Because we already see a, for example, this W11 [Phonetic], we are seeing lot of parcels, consumers in Malaysia, Singapore, Vietnam and Thailand was bought on the Taobao or some other platform in China was shipped through [Indecipherable] and it was delivered by us in the last-mile. So we already see a continued trend of growth and relatively high growth into cross-border e-commerce related parcel shipment and as well as some other kind of bulky items. Yes, so with this free trade zones and I assume -- I would -- expecting or I strongly believe that it will continue to push a stronger demand for cross-border needs on that.

Hans Chung -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

Well as there are no further questions at this time, we'll go ahead and conclude the question-and-answer session. I would now like to turn the conference call back over to the management team for their closing remarks.

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

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

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

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

Gloria Fan -- Chief Financial Officer

Baoying Zhai -- Citi -- Analyst

Hans Chung -- KeyBanc Capital Markets -- Analyst

Bo Pei -- Oppenheimer -- Analyst

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