Text | Jin Wei
Takeaway has become the norm of urban life, and delivery workers in blue and yellow uniforms shuttle through the streets and alleys.
At present, there are tens of millions of food delivery workers in China, who serve in catering, retail, pharmacies, errand services, etc. According to Sullivan data, in 2023, the order scale of China's ready-to-distribute industry will reach about 40.88 billion orders, an increase of 23% year-on-year.
The takeaway industry has a huge market demand, tens of thousands of takeaway riders, and an IPO company has also been sent.
Recently, BridgeHR Tech Group Inc. ("BRIDGE") filed an IPO prospectus on the Hong Kong Stock Exchange to be listed on the main board of the Hong Kong Stock Exchange, with Huatai International as the sole sponsor. On 7 June, BRIDGE announced the appointment of CCB International Capital Corporation Limited and China Galaxy International Securities (Hong Kong) Limited as the overall coordinators.
BRIDGE focuses on China's non-traditional employment market and is by far the largest non-traditional employment platform service provider in China. From the perspective of business composition, delivery rider service is the core business of BRIDGE Robot, and the company's revenue will exceed 1 billion in 2022, mainly due to the contribution of a mysterious but relatable A customer.
Although the revenue has reached 1 billion, Overall, BRIDGE's net profit has shown a downward trend, especially the net profit in 2023 will fall to 32 million. At the same time, BRIDGE has many legal disputes, and in 2023, nearly 20 million in compensation was paid to settle the legal proceedings of the riders.
The income mainly depends on takeaway delivery
According to the prospectus, BRIDGE operates three self-developed platforms, namely iBridge, SHOUDAOZI.COM and ONTech, to help customers streamline business processes in non-traditional workforce management. At the same time, it also provides data-based SaaS solutions for some customers to meet their personalized data synchronization needs.
According to the classification of the prospectus, BRIDGE's revenue comes from non-traditional labor management solutions and human resource industrial park management solutions, of which non-traditional labor management solutions are subdivided into transactional SaaS solutions, composite labor management systems, and customized services. Customized services are the majority of BRIDGE's revenue, accounting for more than eighty percent of revenue in the past three years.
Specifically, the distribution service in the customized service supports the core of BRIDGE's performance. According to the prospectus, from 2021 to 2023, its standard distribution service revenue will be 784 million yuan, 813 million yuan, and 809 million yuan respectively, accounting for 79.4%, 79.6%, and 85.3% of revenue respectively.
In terms of finance, from 2021 to 2023, BRIDGE will achieve operating income of 987 million, 1.022 billion, and 948 million respectively, and net profit of 48.801 million, 46.523 million, and 32.323 million respectively in the same period, with a year-on-year growth rate of -4.67% and -30.52% in the last two years. In contrast, BRIDGE's revenue fluctuates, while net profit is declining.
In terms of BRIDGE's profitability indicators, during the reporting period, the company's comprehensive gross profit margin was 12.2%, 15.1% and 12.7% respectively. Among them, the gross profit margin of the standard delivery service, which has the highest revenue, is only 2.6%, 3.3% and 3.2%. According to BRIDGE's explanation, "the lower gross profit margin of the standard delivery service is mainly due to the different nature of the business and the cost structure, so we bear a huge rider commission".
In the two years of 2021 and 2022, BRIDGE's net profit will be about 50 million yuan, and the net profit margin will be about 5%. However, in 2023, the company's net profit will drop sharply to 32 million yuan, and the net profit margin will fall to 3.4%. Whether it is net profit margin or gross profit margin = level, it shows that the delivery service is not a profitable business, and it mainly depends on volume.
BRIDGE is heavily dependent on a single customer, i.e., revenue from customer A. BRIDGE explained that we undertake the delivery tasks assigned by customer A, establish, operate and manage delivery rider sites, and recruit delivery riders to perform the tasks. In return, we charge Customer A a standard delivery service fee.
In the report, BRIDGE's revenue from customer A was 880 million yuan, 907 million yuan and 818 million yuan respectively, accounting for 89.1%, 88.7% and 86.3% of the total annual revenue, respectively, which shows that BRIDGE is very dependent on the largest customer.
According to the prospectus, customer A occupies a leading market position in the mainland instant consumption service industry. Although BRIDGE did not disclose the specific information of customer A, BRIDGE only began to cooperate with customer A in 2020, and the "take-off" of the company's revenue is closely related to customer A.
There is speculation that this A customer may be Meituan. The main reason is that Yao Yi, executive director and vice president of BRIDGE, said in a public interview in 2021 that the company was "the first to serve Meituan, and the first to start human resources services, including manpower dispatch and outsourcing, and instant delivery including Meituan Meituan grocery shopping, Meituan takeaway, Meituan preferred", etc. BRIDGE's recruitment information also mentions "Meituan channel manager",
From 2021 to 2023, the number of delivery tasks undertaken by BRIDGE for customer A will be 89.4 million, 91.2 million, and 92.5 million respectively. In other words, BRIDGE has completed more delivery tasks for customer A, but its revenue is declining.
Through the estimation of the sales amount of BRIDGE to customer A, it can be known that the average unit price of the distribution task undertaken by BRIDGE is 9.84 yuan, 9.95 yuan and 8.85 yuan respectively. In 2023, the price of each order of the company's delivery tasks will drop by more than 1 yuan. In 2022, due to many factors, the capacity of riders is quite tight, and Meituan, Ele.me, etc. have increased subsidies for riders, but with the large increase in the number of delivery workers, the delivery price has come down again.
For BRIDGE, Company A is indispensable. As a result, BRIDGE said in its risk warning: "We rely on a number of major customers, especially our largest customer A. "BRIDGE BRIDGE's business, financial condition and results of operations could be materially and adversely affected if Customer A terminates its engagement with the Company, or is unable to maintain a business relationship with Customer A on similar commercial terms."
The lawsuit compensation fee was nearly 20 million last year
As the contractor, BRIDGE is responsible for recruiting a large number of riders, setting up and managing rider sites at its own expense, and the rider commissions, delivery site property expenses, and rider insurance generated during this period are all paid by the company.
In 2021 and 2023, the company's commission expenses were 647 million, 645 million, and 642 million respectively, of which the commission expenses in 2023 accounted for 78% of the current operating costs.
It is worth mentioning that BRIDGE also has to pay high litigation compensation costs every year.
Due to the nature of the instant delivery industry, BRIDGE has been involved in a number of traffic accident-related disputes involving delivery riders. Such disputes can develop into legal proceedings, which are primarily related to personal injury or death and property damage suffered by delivery riders in the course of their delivery tasks.
During the reporting period, after deducting the amount recovered from the insurance company, the monetary damages paid by BRIDGE for dispute resolution and legal proceedings were approximately 6.2 million yuan, 6.1 million yuan and 19.8 million yuan respectively. In 2023, the compensation paid by BRIDGE has increased significantly. In this regard, BRIDGE explained in the prospectus: "It is mainly due to the fact that we have resolved a large number of disputes and legal proceedings arising from traffic accidents that occurred in previous years, and this is mainly due to the inherent time lag between the occurrence of the accident and the resolution of the dispute or legal action." ”
As of the date of the prospectus, BRIDGE still has about 80 lawsuits pending, the vast majority of which are related to traffic accidents involving delivery riders.
During the Reporting Period, BRIDGE made provisions of RMB17 million, RMB12.4 million and RMB0.5 million respectively for potential compensation related to delivery accidents for delivery riders under its self-operated local services. However, delivery accidents are not controllable, and in the event of a higher number of accidents, BRIDGE will pay more compensation.
According to the prospectus, according to Chinese laws and regulations, the criteria for determining whether such a non-traditional employment relationship between a delivery rider and the company constitutes an employment relationship are usually highly sensitive to the facts of the relevant employment relationship and are subject to change. At present, the public is highly concerned about the protection of delivery riders, and if the relationship between the company and the delivery rider is deemed to be an employment relationship, they may be required to bear the corresponding responsibility.
In the prospectus, BRIDGE said that it plans to expand its business into emerging vertical industries such as the nursing industry, the housekeeping industry, and the software development industry. In addition, it intends to invest heavily in the R&D and commercialization of AI applications, make full use of internal resources, and seek external collaborations.
What do you think about BRIDGE, please leave a message below.