Full Truck Alliance fires on all cylinders with strong earnings report

The number of truckers using the digital freight platform hit the 4 million mark in the third quarter, while its monthly active shippers totaled 2.84 million

Key Takeaways:

• Full Truck Alliance’s stock rose 14.3% after it reported a 33.9% revenue increase and 81.4% net income bounce in the third quarter
• The trucking app’s fulfilled orders rose 22% during the quarter to 51.9 million, reflecting its aggressive user acquisition strategy and product innovation

By Edith Terry

Trucking app operator Full Truck Alliance Co. Ltd. (YMM.US) delivered just what investors wanted in its third-quarter results last week, defying a sluggish Chinese economy to post strong double-digit growth in both revenue and profits. Investors rewarded the company by sending its shares up 14.3% the day of the announcement, bringing its gains this year to 42%.

Investors are generally wary of stocks tied to the domestic Chinese economy, which is sputtering after years of rapid growth. That makes these latest results from Full Truck Alliance, whose business is completely in China, all the more impressive. While its shares were on the upswing, another delivery company, SF Holding (6936.HK), had less luck in its lackluster Hong Kong IPO on Nov. 27, finishing flat on its first trading day.

That appears to show that investors like Full Truck Alliance’s asset-light business model of operating a platform that pairs truckers with customers who need goods shipped within China. By comparison, SF operates a much costlier model whereby it owns and maintains thousands of delivery vehicles and planes, not to mention a similar number of warehouses, that make it China’s largest logistics operator.

A more similar comparison for Full Truck Alliance is Lalatech Holdings, which is the world’s largest logistics trading platform by gross transaction value. Lalatech recently relaunched its plan for a Hong Kong IPO, and Full Truck Alliance’s recent strength could bode well for that new listing if and when it makes it to market.

Both Full Truck Alliance and Lalatech operate in a Chinese road freight market that’s the world’s largest, worth an estimated $1.19 trillion in gross transaction value in 2023 and expected to grow to $1.7 trillion by 2028, according to independent research in Lalatech’s latest listing document.

Meanwhile, Full Truck Alliance appears to have escaped both the fallout from China’s economic slowdown, and has yet to suffer either from geopolitical anxieties arising from the incoming administration of U.S. President-elect Donald Trump. It reported a 33.9% year-on-year increase in net revenues to 3.03 billion yuan ($419 million) in the third quarter, and an 81.4% increase in quarterly net income to 1.1 billion yuan.

Revenue from transaction services, mainly from commissions paid by truckers, increased by 68.6% to 1.05 billion yuan, due to increased order volume and monetization rates. Its freight brokerage services increased by 19.7% to 1.3 billion yuan, while its freight listing services, which are paid by shippers, rose 4.9%, to 223 million yuan during the quarter.

One of the company’s fastest growing revenue streams came from value added services, including credit solutions, which increased by 33.7% to 480 million yuan during the quarter, compared to 359 million yuan last year.

The company guided for fourth quarter revenues of 2.94 billion yuan to 3 billion yuan, which would represent a slowdown from the third quarter to growth of 22.3% to 24.8%. If the figure comes in at the high end of that range, the company’s revenue could cross the 11 billion yuan mark for all 2024, an increase of 32% over 2023.

4 million trucker milestone

Full Truck Alliance’s fulfilled orders for the quarter, defined as all matched shipping orders on the platform minus cancelled ones, rose 22.1% to 51.9 million, while its monthly active shippers jumped 33.6% to 2.84 million.

CFO Simon Cai said the number of truckers on the company’s platforms hit a new milestone of 4 million during the quarter, with a retention rate of 85%.

Chairman and CEO Zhang Hui, who also uses the name Peter, attributed the growth in new shippers to a rebranding of one of the company’s two original brands Yunmanman, as well as product improvements and an aggressive advertising campaign. The increase in truckers, he said, was a result of leveraging the company’s premium cargo bidding initiative, trucker membership program, and trucker credit rating mechanism.

User retention is crucial for an asset-light company like Full Truck Alliance since it lacks a truck fleet like the one operated by SF Express, and has no captive shippers like Alibaba’s Cainiao. Full Truck Alliance has often compared itself to Uber (UBER.US), because it works as an intermediary performing freight-booking services between truck drivers and shippers, including freight brokers.

Although only 49% of its users are actual direct shippers, Full Truck Alliance’s selling proposition in a weak economy is that it provides customized services and can knock out middlemen who drive up trucking costs. Most new users in the third quarter were in the direct shipper category, according to Cai.

The more attractive packages the company can provide to truck drivers looking to maximize the money they earn per trip while minimizing their costs, the better. According to the Chinese Ministry of Transportation, the number of truck drivers in the country dropped from 30 million in 2016 to 17.3 million by mid-2024 as less efficient operators dropped out. Full Truck Alliance is going full throttle after that dwindling group, using things like incentive packages to drive acquisition of new shippers, such as an “entrusted” service that lets the company handle more services for its clients who are less familiar with available options.

For the moment, at least, Full Truck Alliance is a relative market darling. Its price-to-earnings (P/E) ratio of 26 is not as elevated as Uber at 35, but it may be the company to beat in its trucker app niche.

Almost the only negative on Full Truck Alliance’s quarterly report is the outsize impact of value-added taxes (VAT) on its costs. But local governments provide VAT refunds and grants that outweigh the tax charges, according to the company’s third-quarter investor presentation. VAT refunds in the third quarter amounted to 1 billion yuan, while VAT taxes were 1.38 billion yuan. The amount of any grants the company received was not disclosed. 

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