Q1 2025 ZTO Express (Cayman) Inc Earnings Call

Operator: Good day and welcome to the ZTO Express to announce first quarter 2025 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please suggest a conference specialist by pressing the star key followed by zero.

Good day and welcome to the C. P O expressed to announce first quarter 'twenty 25 financial results Conference call.

All participants will be in a listen only mode.

Did you need assistance, please big conference specialist by pressing the Star Keys, followed her zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and 1 on a touch-tone phone. To withdraw your questions, please press star then 2. Please note this event is being recorded.

Today's presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on Touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

Sophie Li: I would now like to turn the conference over to Sophie Li, Head of Capital Markets. Please go ahead. Thank you, Operator. Hello, everyone, and thank you for joining us today. The company's results and the investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com.

Speaker Change: I would now like to turn the conference over to Sophie Li head of capital markets.

Speaker Change: Go ahead.

Sophie Li: Thank you operator, Hello, everyone and thank you for joining us today.

Sophie Li: Results in the Investor Relations presentation were released earlier today and are available.

Sophie Li: Our web site at IR <unk>.

Sophie Li: Uh huh.

Sophie Li: On the call today from ZTO are Mr. Meisong Lai, Chairman and the Chief Executive Officer, and Mrs. Yifan Yan, Chief Financial Officer.

Sophie Li: On the call today for the Army.

Sophie Li: Mr Chairman.

Sophie Li: Chairman and the Chief Executive Officer.

Sophie Li: Yes, Chief Financial Officer, Mr. Lai will give a brief overview of the company.

Sophie Li: Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Mrs. Yan, who will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

Yan: This operations and highlights followed by Yan, who will go through the financials and guidance.

Yan: They will both be available to answer your questions during the Q&A session that follows.

Sophie Li: I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations in the current market and operating conditions and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, and factors is included in the company's filings with the U.S.

Speaker Change: I remind you that this call may contain forward looking statements may be found on our safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Speaker Change: The statements are based on management's current expectations and current market and operating.

Speaker Change: Conditions and relate to events that involved are on the line risks uncertainties and other factors.

Speaker Change: All of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results performance or achievements.

Speaker Change: To differ materially from those in the forward looking statements.

Speaker Change: Information regarding this and other risks uncertainties and factors is included in the company's filings with the U S Securities and Exchange Commission.

Sophie Li: Securities and Exchange Commission.

Sophie Li: 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 law.

Speaker Change: 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 law. It is now my pleasure to introduce Mr. Mesa line. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him.

Meisong Lai: It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. Mr. Lai, please. Hello, everyone. 感谢各位 参加今天的电话会议 In the first quarter of 2025, ZTE continued to maintain an industry-leading level of service quality The sales volume reached 8.5.4 billion units, a growth rate of 19.1% After the adjustment, net profit was 22.6 billion yuan, a growth rate of 1.6% ZTE's comprehensive service quality, scale and profitability continue to maintain an industry-leading level In the first quarter of 2025, the industry sales volume increased by 21.6% However, the ratio of low-end to high-end e-commerce has been further expanded The price competition for courier is still strong Faced with the pressure of increase in volume and increase in revenue The CCP, with service quality and sales volume as its core Under the premise that the price competition is unreasonable It has broadened the penetration of low-end On the one hand, we continue to strengthen the standardization and synthesis of mid-roll operations Continuously improve the full chain effect and reduce unit costs Fast is the first to consolidate brand advantages On the other hand, we focus on the sustainability of the overall policy framework, maintaining the stability of the joint network, and further strengthening the construction of the Modan-Python capability to create long-term competitive advantages.

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Meisong Lai: What we are concerned about is the positive results of the company in the construction of differentiated products and services. First of all, ZTO continues to improve the quality of services and expand the scope, gaining the trust of e-commerce platforms and business customers for more in-depth cooperation. In the first quarter, the number of online businesses achieved a rapid growth of 46%, which is more than 150% compared with the previous quarter. The influence of ZTO on the brand and the trust of customers is also increasing. The optimization of the product structure brought a 1.2% increase in core business single-ticket income.

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Meisong Lai: 十二,我们在借助数字化运营和专원导赶的有效考核支持, 单票卷运加分解成本,在一制度同比下降了9分。 充分体现了 I am committed to activities on self-determination and quick responsiveness for solving problems. The continuous implementation of the single-ticket operating cost effect and effective management of cost control provide insurance for the President to maintain a healthy level of profit in the fierce market competition The following four aspects include specific work targets and measures. First, to improve the effectiveness of network policies, encourage the provincial and municipal management to jointly coordinate all network resources, combine market level to set clear targets, and provide targeted settings and measures. 公平合理和统一的大方向下进行必要的分层对待 精准激活新老客户潜力 形成业务量、收益、网络稳定的正向循环 二、提升莫大能力和收益 优化网络、层次结构 推进站点、分解、分拨能力的建设 深化、直连、直送、倒角、倒编和本地生活商业部署等措施 REDUCE fat usage LARGER ROLE Thanks for watching!

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Meisong Lai: Continuous optimization of income structure to meet the requirements of e-commerce platforms and professional customers to polish differentiated e-commerce logistics products and supply chain services to enhance brand awareness and customer confidence 4. Promote the maximization of resource utilization, more scientifically configure the input of production capacity, activate resource-saving, rely on digitization to optimize route planning, load-bearing capacity, and operation efficiency, build resources, manage the cycle of life, and further dig for operational benefits.

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Meisong Lai: In the past 23 years, the President has deliberately emphasized and deliberately reduced the number of service members from a few hundred to today. From a team of more than a dozen people to today, including hundreds of thousands of partners and businessmen, this transnational development has accumulated the wisdom and sweat of all presidents. It is based on the trust and trust of customers and partners, as well as the care and support of the country and society. Facing the challenges of the current industry competition, white-hot competition, and the high volume of business, the President's strategic focus is to maintain a high level of service quality and a large scale of business.

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Meisong Lai: The business scale is ahead of the rest, achieving a reasonable profit target. We believe that the competition pattern in the exchange market is accelerating.

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Meisong Lai: The President will stick to the principles of healthy and sustainable development, stick to the co-construction and sharing cooperation concept, embrace the technological innovation of experience and data, and take on the responsibility of benefiting others and the society. We will stand firm on the ground and build a solid foundation. In the face of the future, we will continue to build a solid foundation.

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Meisong Lai: With today's achievements, we hope to save tomorrow's 100-year-old business. Thank you. Hello, everyone. Thank you for joining today's conference call. In the first quarter of 2025, ZTO maintained its industry-leading service quality, delivered a total parcel volume of $8.5 billion, up 19.1% year-over-year, and achieved an adjusted net income of $2.3 billion, which increased 1.6% year-over-year. Our service quality, scale, and profitability continue to lead the industry. In the first quarter of 2025, the express delivery industry grew its parcel volume by 21.6 percent. However, the proportion of lower-value parcels further enlarged, and price competition continued to intensify. Addressing the misalignment between volume growth and revenue expansion, we remained focused on service quality and volume growth.

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Speaker Change: C C.

Hello, everyone and thank you for joining today's conference call.

Speaker Change: The first quarter of 2025 D. G M maintained its industry, leading service quality delivered a total parcel volume of $8 5 billion up 19, 1% year over year.

Speaker Change: And achieved adjusted net income of $2 3 billion, which increased one 6% year over year average.

Speaker Change: Our service quality scale and profitability continue to lead the industry.

Speaker Change: In the first quarter of 2025, the express delivery industry growing passenger volume by 21, 6%.

However, the proportion of lower value parcels further enlarged and price competition continues to intensify.

Speaker Change: Addressing these alignment between volume growth and revenue expansion.

Speaker Change: We remained focused on service quality and the volume growth.

Meisong Lai: And while rejecting rational pricing practices, we strategically increased our penetration into the low-value parcel sector. On one hand, we continuously improved end-to-end timeliness and lowered unit costs through process standardization and integration. We were able to lead the way with speed to solidify brand advantages and leverage excellence to further efficiency gains. On the other hand, as a part of the strategy to build long-term competitive advantages, we beefed up efforts to empower our network partners through keeping the policies relatively stable yet urging improvements in last-mile service capabilities and cost competitiveness.

Speaker Change: And while rejecting rational pricing practices.

Speaker Change: We strategically increased our penetration into the low value customer segments.

Speaker Change: On one hand, we compete continuously improves end to end timeliness and a lower cost.

Speaker Change: Due process standardization and integration.

Speaker Change: We were able to lead the way with B to solidify brand advantages and the leverage excellence to further efficiency gains.

Speaker Change: On the other hand, as a part of the strategy to build long term competitive advantages.

Speaker Change: We built up efforts to the power of our network partners to keeping the policy is relatively stable yet urgent improvements in the last mile service capabilities and cost competitiveness.

Meisong Lai: Notably, the company has significant progress in developing differentiated products and services. First, ZTO earned greater trust and opportunity-deepened collaboration with e-commerce platforms and their enterprise customers through continuously improved service quality and coverage. Retail parcel volume increased 46% year over year in first quarter, with reverse logistics volume surged over 150%. We strengthened brand awareness and customer loyalty. Enhanced product mix brought a $0.12 positive shift in ASP for core express services in first quarter. Second, through digitization and accountability matrix, E&A transportation and sorting costs decreased by 9 cents year-over-year, demonstrating ZTO's commitment to self-improvement as well as its ability to detect problems and come up with practical solutions effectively.

Speaker Change: Ultimately the company has.

Speaker Change: Progress in developing differentiated products and services.

Speaker Change: First rich you earned greater trust and opportunity deepen our collaboration with ecommerce platforms and their enterprise customers do continuously improve service quality and coverage.

Speaker Change: Retail parcel volume increased 46% year over year in the first quarter with reverse logistics volume searched over 150%.

Speaker Change: We strengthened brand awareness and customer loyalty.

Speaker Change: Your commitment to self improvement as well as its ability to detect problems and come up with practical solutions effectively.

Meisong Lai: Combining continuous cost efficiency gains and the disciplined SG&A spending, we maintained control over profitability amid intense competition. Entering the second quarter, the express delivery industry kept a high growth momentum. yet depressed confrontation further intensifies. Despite heated competitive landscape, we remain committed to strategic goals we set at the beginning of this year, that is, uphold high quality, outpace industry average volume growth and attain a reasonable level of profit.

Speaker Change: Combining continuous cost efficiency gains and the disciplined SG&A spending we maintained a week maintain control over profitability amid intense competition.

Speaker Change: Entering the second quarter, the express delivery industry kept a high growth momentum yet the price competition further intensified.

Speaker Change: Despite heated competition competitive landscape, we remain committed to our strategic goals, we set at the beginning of this year.

Speaker Change: That is uphold high quality outpacing industrial average volume growth and a 10 of reasonable level of profit.

Meisong Lai: These specific initiatives and measures include the following four aspects. First, enhance effectiveness of network policy by promoting cross-regional collaboration and resource allocation from end-to-end. set targets that are clear and aligned with market dynamics, as well as tailor-made to include performance-specific incentive mechanisms. Under the principles of fairness, transparency, and uniformity, we will adopt a tiered approach to specifically unlock value potential by both new and existing customers. fostering a productive model that compacts its value, profit, and stability. Second, strengthen LASMA capabilities and profitability by layering or delaying partner network structure where appropriate. Advancing the build-out of network partners, thwarting capability and efficiency.

Speaker Change: These specific initiatives and measures include the following four aspects.

Speaker Change: First in house effectiveness of network policy by promoting cross regional collaboration of resource allocation from end to end.

Speaker Change: Set targets that have clear and aligned with market dynamics as well as tailor made to include performance specific incentive mechanism.

Speaker Change: Although the principles of fairness and transparency and the uniformity, where we'll adopt tiered approach to specifically unlock value potential by both new and existing customers.

Speaker Change: I was touring our productive model of that comp assets volume profit and stability.

Speaker Change: Second.

Speaker Change: Strength in last mile capabilities, and the profitability by there being or the Leerink partner network structure where appropriate.

Speaker Change: Advancing the build out of network partner sorting capability and the efficiencies.

Meisong Lai: Furthering initiatives such as the establishment of direct linkage between OLEDs and LASMO. Offering sufficient profit share to incentivize couriers to service retail partners. and integrating commercial opportunities from local... These efforts aim to reduce plasma cost. to increase retail parcel penetration and enrich income diversification for network partners, all of which aims to drive growth in earnings for both outlets, operators, and couriers. 3.

Speaker Change: Further we initiated have such as the establishment of direct linkage between all of these and loft multiples.

Speaker Change: Offering sufficient profit share to incentivize careers to service retail parcel.

Speaker Change: And integrating commercial opportunities from local relief.

Speaker Change: These efforts aim to reduce last mile costs.

Speaker Change: Increased retail parcel penetration and engage income diversification from our network partners.

Speaker Change: All of which aims to drive growth and the earnings for both all the operators in our careers.

Speaker Change: Third continuously optimized revenue mix by meeting the quality men I e-commerce platforms and enterprise clients.

Meisong Lai: Continuously optimize revenue mix by meeting the quality demands by e-commerce platforms and enterprise clients Refining differentiated e-commerce logistics products and supply chain management capabilities. Encountering Brand Recognition and Customer Perception Maximize resource utilization through systematic and scientific resource planning. Procurement and Deployment Activate underutilized resources, optimize route planning and load rates through digitization and data analytics, and establishment of a lifecycle management framework to unlock potential for greater operational efficiency.

Speaker Change: Refining differentiated e-commerce logistics products and supply chain management capabilities.

Speaker Change: Housing brand recognition and a customer protection.

Speaker Change: Last but not the least maximize resource utilization through a systematic and scientific resource planning.

Speaker Change: Procurement and deployment.

Speaker Change: Activity under utilized our resources optimize route planning and low rate through Digitization and data analytics and establishment of a life cycle management, we work to unlock potential for greater operational efficiencies.

Meisong Lai: Over the past 23 years, ZTO has evolved from handling less than 100 packages per day to processing over 100 million parcels today with uncompromising industry-leading service quality. And we started out with just a dozen or so employees and became a vast and collaborative network of over tens and thousands of partners and constituents. This transformation reflected the collective wisdom and dedication by everyone under the ZTO brand. An embodiment of hope and trust by partners and the customers, as well as desire and expectations from the country and the society. In response to today's white-hot competition and the structural challenges in volume compensation, ZTO's strategic priority is to solidify our leadership in quality and scale while achieving a reasonable level of profit.

Speaker Change: Over the past 23 years <unk> has involved from handling less than 100 packages per day to processing over 100 million parcels today with uncompromising industry, leading service quality.

Speaker Change: And we started out with just a dozen or so employees and became a vast and the collaborative network of over tens and thousands of partners and constitutes.

Speaker Change: This transformation are reflected the collective wisdom and dedication by everyone under the <unk> brand.

Speaker Change: And the embodiment of whole Suntrust.

Speaker Change: Nurse and the customers as well as desire and expectations from the country and society.

Speaker Change: In response to today's white hot computation and the structural challenges in Bollywood compensation.

The Joe's strategic priority is to solidify our leadership in quality and the scale well achieving a reasonable level of profit.

Meisong Lai: We believe the shift in competitive landscape is accelerating.

Speaker Change: We believe the shifts in the competitive landscape is accelerating.

Meisong Lai: ZTO will adhere to our healthy and sustainable growth principles. reinforce our shared success philosophy, embrace data-plus experience-driven innovation, and fulfill our social responsibility and create value. remain grounded in the present now, we anchor ourselves with foundational work and tasks at hand.

Speaker Change: The here to have a healthy and sustainable growth vehicles.

Speaker Change: Green for cyber shared success philosophy.

Speaker Change: Embrace data plus experience driven innovation.

Speaker Change: And fulfill our social responsibility and to create value.

Speaker Change: Remain grounded in the press and now we uncover yourself with foundational work and the tasks at hand.

Meisong Lai: We aspire for future prospects. We proactively plan and fortify strategic long-lasting models. Being practical and progressive, we aim to build an enduring enterprise that will strive for generations to come.

Speaker Change: Spire for future prospects, we proactively plan in the 45 strategic long lasting mode.

Speaker Change: Being practical and progressive.

Speaker Change: We aim to build our enduring enterprise that will strive for generations to come.

Yifan Yan: Next, let's welcome our CFO, Ms. Yan, to present the financials results and outlook. Thank you, Chairman Lai, and thank you, Sophie. Hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in RMB. The percentage change is referred to year-over-year comparison.

Speaker Change: Next let's welcome our CFO Ms Yan to present, the financial results and outlook.

Speaker Change: Thank you, Jim and Mike and thank you Sophie.

Speaker Change: To everyone on the call.

Speaker Change: As I go through our financials. Please note that doesn't specifically mentioned all numbers quoted are in RMB.

Speaker Change: It changes referred to year over year comparison.

Yifan Yan: Detailed information on our financial performance, unit economics, and cash flow are posted on our website, and I'll go through some of the highlights here. In the first quarter, we adhered to the principle of profitable growth and continued to improve the quality of services and customer satisfaction. Our parcel volume grew 19.1% to reach $8.5 billion, and we achieved $2.3 billion adjusted net income, which increased 1.6%. Total revenue increased 9.4% to $10.9 billion for the first quarter. ASP for our core express delivery business decreased 7.8% or 11.5% given intensified competition. 6 cents impact of decrease in average weight per parcel and 16 cents in incremental volume were partially offset by the $0.12 positive makeshift from increased proportion of KA volume.

Speaker Change: Detailed information on our financial performance.

Speaker Change: Economics and cash flow are posted on our website and I'll go through some of the highlights here.

Speaker Change: In the first quarter, we adhered to the principle of profitable growth and continue to improve the quality of services and customer satisfaction.

Speaker Change: Our parcel volume grew 19, 1% to reach $8 5 billion and we achieved $2 3 billion adjusted net income which increased one 6%.

Total revenue increased nine 4% to $10 9 billion for the first quarter.

Speaker Change: ASP for our core express delivery business decreased to seven 8% or same everything.

Speaker Change: Given the intensified competition.

Speaker Change: The <unk> impact of decrease in average weight per parcel is 16th in incremental volume incentives were partially offset by the positive mix shift from increased proportion of volume.

Yifan Yan: Total cost of revenue was $8.2 billion, which increased 17.9%. Overall unit costs for the Core Express delivery business remain flat at $0.94. The combined unit cost of sorting and transportation decreased $0.09 for the quarter, benefiting from economies of scale and various cost productivity gain initiatives. Specifically, unit cost of Lionheart Transportation decreased 13.2% to 41.1%. Driven by more effective route planning in conjunction with improvements in fleet operations. Unit sorting cost decreased 10.4% to $0.27, benefiting from improvements in automation and labor efficiency. Other costs of revenue included KA-related pickup and delivery fulfillment costs paid to out-network partners, and on a total-volume-denominator basis, it inc- It increased $0.10, which was in line with K-8 volume.

Speaker Change: Total cost of revenue was $8 2 billion, which increased 17, 9%.

Speaker Change: Overall unit costs for the core express delivery business remained flat at 94.

Speaker Change: Combined unit costs are sorting and transportation decreased nine cents for the quarter benefiting from economies of scale and various cost productivity gain initiatives.

Speaker Change: Specifically unit cost of line haul transportation decreased 13, 2% to 41.

Speaker Change: Driven by more effective route planning in conjunction with improvements in fleet operations.

Speaker Change: Unit costs decreased 10, 4% to 27% benefiting from improvements in automation and labor efficiency.

Speaker Change: Other cost of revenues included <unk> related pickup and delivery fulfillment cost paid to our network partners and on a total volume denominator basis at Inc.

Speaker Change: Increased 10 cents, which was in line with volume increases.

Yifan Yan: Gross profit decreased 10.4% to $2.7 billion and gross profit margin rate decreased 5.4 points to 24.7%. SG&A, excluding FBC, decreased 13.5% to $517 million. SG&A expenses excluding SBC as a percentage of revenue decreased to 4.7%, reflecting strong corporate cost efficiency. Income from operations increased 6.1% to $2.4 billion, and associated margin rate decreased 0.7 points to 22.1%. Adjusted EBITDA increased 0.7% to $3.7 billion.

Speaker Change: Gross profit decreased 10, 4% to $2 7 billion and gross profit margin rate decreased one four points to 24, 7%.

Speaker Change: SG&A, excluding SBC decreased 13, 5% to $517 million.

Speaker Change: SG&A expenses, excluding SBC as a percentage of revenue decreased to four 7%, reflecting strong corporate cost efficiency.

Speaker Change: Income from operations increased six 1% to $2 4 billion and associated margin rate decreased two seven points to 22, 1%.

Speaker Change: Adjusted EBITDA increased <unk>.

Speaker Change: 7% to $3 7 billion.

Yifan Yan: Operating cash flow was $2.4 billion for the quarter, which increased 9.3% Capital expenditure for Q1 totaled $2 billion, and we anticipate our annual Quebec... 2025 to be between $5.5 to $6 billion.

Speaker Change: And operating cash flow was $2 4 billion for the quarter, which increased 16, 3%.

Speaker Change: Capital expenditures for Q1 totaled $2 billion, and we anticipate our annual Capex in 2025 to be between five $5 billion to $6 billion.

Yifan Yan: Now moving on to business onlook Based on our assessment of today's market conditions and business plan Performance Outlook, we are reiterating our 2025 full-year parcel volume guidance. 40.8 to 42.2 billion. which equates to a 20-24% increase year-over-year. These estimates represent management's current and preliminary view, which are subject to change.

Speaker Change: Now moving on to business outlook.

Speaker Change: Based on our assessment of today's market conditions and business plan.

Speaker Change: Performance outlook, we are reiterating our 2025 full year parcel volume guidance.

Speaker Change: For 48 to $42 2 billion.

Which equates to a 20% to 24% increase year over year.

Speaker Change: These estimates represent management's current and preliminary views, which are subject to change.

Yifan Yan: Now this concludes our prepared remarks.

Speaker Change: Now this concludes our prepared remarks.

Operator: Operator, please open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you limit yourself to two questions.

Speaker Change: Operator, please open the line for questions. Thank you.

Speaker Change: Thank you.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please.

Speaker Change: Please press Star then two.

Speaker Change: We ask that you limit yourself to two questions.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Ronald Keung: The first question today comes from Ronald Keung with Goldman Sachs. Please go ahead. Thank you, Mr. Lai, Ms. Yan, and Sophie. We've seen the performance of the first quarter. I'd like to hear about the growth and our goals. Has the competitive pattern increased since the second quarter? Do we think the goal of maintaining a stable profit margin will change? If we want to maintain a fast-growing industry, we need to increase the amount of investment for the entire network, including the support for our partners. I'd like to hear about the recent IT-related situation and what you think about the goal of achieving a full-time job.

Speaker Change: The first question today comes from Ronald Keung with Goldman Sachs. Please go ahead.

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Speaker Change: On to the more golf do too.

Ronald Keung: What do you think about the profit margin? Secondly, I'd like to hear about the growth of the retail sector. I'd like to hear about the difference between the retail sector and the retail sector and our goals for this industry. Thank you. Thank you for your question.

Speaker Change: Sure.

Speaker Change: Dr. Andrew.

Speaker Change: Andrew actually open just want to get them done.

Thank you gentlemen.

Speaker Change: Cool.

Speaker Change: Thank you.

Speaker Change: That's cool.

Speaker Change: Sure.

Speaker Change: Thank you.

Speaker Change: Management for taking my question.

Speaker Change: First I just wanted to hear about the competition.

Speaker Change: Particularly into the second quarter, given a target which is to still grow faster than the industry volumes.

Speaker Change: The first quarter I think we were slightly slower than the industry. So I want to hear how much of our investments are we willing to make to.

Speaker Change: To achieve this volume target and what would be the implications too.

Speaker Change: Absolute profit for the remainder of the year.

Speaker Change: Second as we've seen a very good growth for you Brito parcels and also reverse logistics went to here the scale of this business until the main target.

Speaker Change: Thank you.

Speaker Change: Uh huh.

Speaker Change: Continuing if you will.

Speaker Change: Yeah.

Meisong Lai: The Golden Goal 今年呢我们公司的战力就 Thanks for watching. Since the beginning of the year, we have indeed made some policy adjustments. Policy adjustments to increase capacity. These figures show that our business growth rate is slightly better than last year. But the industry growth rate is still at 21.6%, while our growth rate is at 19.1%. 还没有,赶上大班了 There were some factors. Indeed, market competition was more difficult. There is also a competition for new products, and there is a certain fluctuation in the sales volume. Of course, the company is still confident in maintaining the total sales volume of 408 to 421 billion yuan throughout the year, which is the real goal of 20 to 24 sales volumes.

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Meisong Lai: The second question is on 152. for introducing all their items. If we can make more applications on the internet and increase sales, we will increase servings and the network stability. The total number of accidents has reached six million has increased by more than 16 percent, which is higher than the overall increase of 19.1 percent. Next week, we will continue to deepen our cooperation with e-commerce platforms in the field of video editing. The Chinese Health Authorities do not provide medical services as provided by the foreign government. The whole industry is paying attention to it. The price of the reverse mirror has gone down.

Speaker Change: Even out of the woods.

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Meisong Lai: But the market is growing fast. The service quality threshold is high. Our penetration rate is increasing rapidly. In the future, we can... The above image... ...

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Sophie Li: 上次呢我们通过服务能力的提升 业务员的上门能力 上门老师 上门派遣能力的提升 我们相信呢 I wish you all the best this year. Thank you. Thank you for your question, and I will translate for the Chairman's answer. First of all, our goal to... This is still consistent with our strategy. ensuring quality of services and focusing on volume leadership and expanding that leadership while achieving reasonable level of profit. The most recent performance, particularly in first quarter, while we maintained overall structure of the... Network Policies to be stable. the existing volume versus incremental volume policies to incentivize our network partners. On an overall result basis, we have narrowed the gap between our volume growth to industry average.

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Speaker Change: Thank you for your question and I will translate for chairman.

Speaker Change: First of all our goal to achieve.

Speaker Change: Achieve our.

Speaker Change: Volume growth.

Speaker Change: And this is still consistent with our strategy.

Speaker Change: During quality of services.

Speaker Change: Focusing on volume, our leadership and expanding that leadership, while achieving reasonable knuckle profit.

Speaker Change: We are the most recent performance, particularly in the first quarter, while we maintained overall structure.

Speaker Change:

Speaker Change: Net worth policies to be stable.

Speaker Change: Specifically.

Speaker Change: Introduced.

Speaker Change: The existing volume versus incremental volume policies to.

Speaker Change: To incentivize our network partners.

Speaker Change: So on an overall.

Speaker Change: Result basis.

Speaker Change: <unk> narrowed the gap between our volume growth to industry average certainly there's still a gap and then we intend to continue to narrow that because our overall annual strategy remains and our goal or our guidance for the total year.

Meisong Lai: Certainly there is still a gap, and we intend to continue to narrow that because our overall annual strategy remains, and our goal or our guidance for the total year is still staying as we reiterated our guidance. So for the second part of the... have focused on upgrading our revenue structure and particularly achieved great results as associated with the retail parcel and particularly reverse logistic parcels. In the first quarter, our daily parcel volume averaged around $6 million. This is a year-over-year increase of 45%, which is significantly outpacing the overall market growth. And among these, we have the reverse logistics exceeded daily volume of 3.5 million.

Speaker Change: Continue to.

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Speaker Change: We integrated our guidance.

Speaker Change: So for the second part.

Speaker Change: Uh huh.

Speaker Change: A question.

Speaker Change: <unk>.

Speaker Change: Have focused on.

Speaker Change: Upgrading our revenue structure, and particularly achieved great results that they associate with the retail parcel and particularly reverse logistic parcels.

Speaker Change: In the first quarter, our daily parcel volume averaged around $6 million.

Speaker Change: Hum.

Speaker Change: And year over year increase of 45%, which is significantly outpacing the overall market growth.

Speaker Change: And on DS we have.

Speaker Change: Have the reverse logistics.

Speaker Change: Exceeded.

Speaker Change: Daily volume of $3 5 million in.

Meisong Lai: and a year-over-year growth of over 150%. So these are our continued focus as we... We are working to deepen our cooperation with major e-commerce platforms, which are also expanding their reverse logistic operations so that we are focusing on measures such as reversing Transportation Capacity, we train our network partners to be more efficient in meeting the quality requirements and implementing incentive policies. to ensure service upgrades and expand the operating So, as of late, we are looking at our parcel volume increasing even more significantly, reaching towards 8 million or even at peak days over 10 million parcels a day.

Speaker Change: And a year over year growth over 150%. So these are our our our continued focus in Sweden.

Speaker Change: Deepened our cooperation with major e-commerce platforms, which are also expanding their reverse logistic operations.

Speaker Change: So that we are focusing on measures to chat.

Speaker Change: We're seeing.

Speaker Change: Inspiration capacity.

Speaker Change: I mean, I don't know where partners to be more efficient and meeting the quality requirements and implementing incentive policies to ensure service upgrades and.

Speaker Change: And expand the operating.

Regions coverage.

Speaker Change: So as of late we are looking at our parcel volume increase.

Speaker Change: Increasing even more significantly.

Speaker Change: Reaching towards $8 million or even.

Speaker Change: Peak days over 10 million parcels a day.

Meisong Lai: In connection with the competition, the reverse parcels per unit price also sustained pressure. However, Logistics Services has a high barrier for entrance. ZTO's early mover effort as well as our focus and deep relationship that's built with the platforms will allow us to continue to outpace the rest because everybody else, our peers, are also focusing on this area. We hope to continue to improve the capacity as well as responsiveness to on two-door delivery and two-door pickup to help our couriers in. Servicing our customers properly. As you are aware that improvements of our network partner as well as our couriers' earnings through increasing their… portion of retail parcel to total delivery or e-commerce parcel, their earnings will significantly improve and that adds to the stability of our overall network.

Speaker Change: In connection with the competition they reverse parcels per unit price also sustained pressure.

Speaker Change: However.

Speaker Change: The reverse.

Speaker Change: <unk> services has a high.

Speaker Change: Barriers for entry.

The T O.

Speaker Change: Uh huh.

Speaker Change: Cpus early mover effort as well as our focus and a deep relationship that's built with the.

Speaker Change: It's not forms will allow us to continue to outpace.

Speaker Change: The rest because everybody goes out where our peers are also.

Speaker Change: Focusing on just area, we hope to continue to improve the capacity as well as responsiveness.

Speaker Change: To.

Speaker Change: To door delivery and two door pick up to help our careers.

Speaker Change: Careers.

Speaker Change: Yeah.

Speaker Change: Servicing our customers' property.

Speaker Change: As you are aware that improvements of our network partner as well.

Speaker Change: As our careers, earning through increasing there.

Speaker Change: Proportion of retail parcel to total delivery or e-commerce parcels there earnings will significantly improve.

Speaker Change: And that adds to the facility.

Speaker Change: Our overall network.

Speaker Change: Ronald I hope.

Sophie Li: Ronald, I hope the email answers your question. Thank you, Director Lai.

Speaker Change: No answers your question.

Speaker Change: Yeah.

Okay.

Speaker Change: Yeah.

Qianlei Fan: The next question comes from Qianlei Fan with Morgan Stanley. Please go ahead. Thank you.

Speaker Change: The next question comes from Tim My son with Morgan Stanley. Please.

Speaker Change: Please go ahead.

Tim: Thanks Nigel.

Qianlei Fan: Good morning, Ms. Lai, Ms. Yan, and Ms. Sophie. I have two questions.

Speaker Change: Yountville are associated.

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Qianlei Fan: The first question is about the income and cost of the unit. In terms of the unit's income, we can see that this quarter, the unit's volume incentive went up to 1.6 cents. Last year, it was around 0.4 cents, and this year, it was around 0.2 cents. I would like to know how we should look at this year's volume incentive forecast.

Speaker Change: No the only showing okay, Joe Mccann, Belgium achieved on that thought that while you don't get the volume incentives.

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Speaker Change: So John can go yeah, well, Okay, Jean Ann Chan Young women die. So much you touched Hugo volume incentives to shoot.

Speaker Change: People are forecasting I should say, but yeah.

Qianlei Fan: In terms of the cost, we can see that the unit cost in the first quarter fell faster than expected at the beginning of the year. I would like to know, Considering the decline of unit costs in the first quarter and the relatively low oil prices this year, do we see any changes in the annual outlook for unit costs this year? Are there any new directions? This is the first small question.

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Qianlei Fan: The second small question is to ask about the company's progress in AI applications. We know that ZTE has been actively expanding its management and management applications in the field of AI applications.

Speaker Change: Yeah.

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Speaker Change: Oh, yeah yeah.

Qianlei Fan: I would like to ask if there are any new applications and progress this year. At the same time, I would like to ask how these new AI applications will affect our future competition and profit in the industry. Let me translate my question. Thank you, Lai, Zong, Enzo, and Sophie for taking my question.

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Speaker Change: Thank you Nigel insulin <unk> for taking my question I have two questions.

Qianlei Fan: I have two questions. The first question is about unit revenue and the cost. On the unit revenue side, we have seen that in the first quarter, the volume incentives went to around $0.16. This was higher than about $0.04 in the first quarter of last year and $0.02 for the full year of last year. Going forward, how should we forecast unit volume incentives going forward for the full year? On the unit cost side, we see that in the first quarter, if we exclude the impacts from KA, the unit cost reduction seems to be more significant than we anticipated at the beginning of the year.

Speaker Change: The first question is about your unit revenue and cost on the unit revenue side, we have seen that in the first quarter the volume incentives.

Speaker Change: Went to around 616 cents.

Speaker Change: This was higher than about four cents in the first quarter of last year and Tucson, what if we have last year. So going forward, how should we forecast the unit volume incentives are going forward for the full year and on the unit cost side, we see that in the first quarter.

Speaker Change: We exclude the impacts from K a.

Speaker Change: The unit cost reduction seems to be more significant than we anticipated at the beginning of the year. So taking into consideration all of the first quarter performance and also seems like those you price them stay I'm glad to be low this year do we have any.

Qianlei Fan: Taking into consideration of the first quarter performance and also seems like the fuel price will stay relatively low this year. Do we have any like updated the forecast in terms of unit cost reduction for the four-year.

Speaker Change: Like they did the forecasting in terms of unit cost reduction for the full year and my second question is about AI. So we know that <unk> has been a very proactively explore the application of AI into its management and operations. So.

Qianlei Fan: And my second question is about AI. So we know that ZTO has been very proactively explore the application of AI into its management and operations. So maybe can you update us? Is there any progress with AI's application into business year to date? And going forward, how do you see the potential impact from AI's application, the merge of AI with our business, the impact from that front in terms of our competitive edge versus peers and in terms of like earnings performance? Thank you.

Speaker Change: Maybe.

Speaker Change: Can you can't could you update us is there any progress with that AI application into business year to date and and going forward how.

Speaker Change: How do you see the potential impacts from AI application.

Jonathan I was our business.

Speaker Change: The impact from from that from.

Speaker Change: In terms of our competitive edge with its peers and in terms of like earnings performance.

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Meisong Lai: Here's Weblock's connection with our speakers. And they joined back in. Please see review 87869 on PissedConsumer.com We will continue in... Can you hear us, operators? Yes, we can hear you. Thank you for your question. Fan Zongting, Qianlin On the other hand, it felt like a market competition. On the one hand, we are growing in terms of 3,000 businesses. On the other hand, we are doing well in terms of overall operations and cost control. There are two reasons for the decline. One is that the market competition is definitely lower than last year. The second reason is that the structure of the product has increased.

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Meisong Lai: 单位重量有所下降,所以单位收入下降。 The company's weight has decreased, so the company's income has decreased. 那吃吃呢? What about food? The main thing is to improve the quality of the market, that is, the quality of the services, so that China and the East China Sea can have a better friendship. On the other hand, we also need a reasonable number, so we will grasp the balance of shares, profits, and quality. In terms of cost, the cost of single-ticket transportation has dropped by 6 points, and the cost of sharing has dropped by 3 points. One is that the scale of business has decreased, and the weight has decreased.

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Meisong Lai: This is mainly due to the continued reduction of true and false measures.

Speaker Change: So yes.

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Speaker Change: So in Charlotte.

Meisong Lai: Thank you so much everybody! to strengthen the standard management of operating divisions, set scientific cost standards, use information processing tools to track and compare data, and find abnormalities even more quickly, and more precisely locate the optimization direction. The second is to optimize the salary system. We have increased the proportion of paid hours in the positional salary to make it more efficient in operation, more efficient in efficiency, more difficult to work, and increase the workload, which stimulates the enthusiasm of the employees. The third is to find the right person for the job. We will merge the driver and the vehicle, and use the voucher numbering system to locate and operate the process, and find the right person for the job.

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Meisong Lai: At the same time, we will have a clear mechanism to ensure that every link is operated in a standard way. In the future, we will use the upgrade of scientific knowledge tools to promote division management, from passive to active transformation, to make it more precise and more efficient. We will also promote smart devices, reduce the dependence on manpower, and further enhance the space for centralization and reduction of costs. In addition, we will pay more attention to the cost optimization of the whole chain. Through the strengthening of the network point capability construction, we will promote the cost-effectiveness of the Modan folding chain to fully dig the network point.

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Meisong Lai: Your second question is about the application of artificial intelligence in the AI.

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Speaker Change: And then also any gena, it's almost always hunting for yield.

Meisong Lai: 人工智能已经在中通的多个场景中得到广泛应用 在分解场地,我们借助知识识群制索,有效减少了处分 在路由规划方面,通过监控制索与先进算法,实现了线路的优化 在分单环节,实现了适当码的自动生成 我们还推出了大模型知识库,员工可以快速精准地查询工作规范 未来我们还将支持 to explore the applications of artificial intelligence in the field of Modan delivery, unmanned vehicles, etc. and continue to promote the smart application of business.

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Meisong Lai: Thank you. Thank you for your question.

Speaker Change: Sure.

Speaker Change: Thank you for your question. The first question relates to our unit.

Meisong Lai: The first question relates to our unit revenue and cost. The SPA decline largely attributed to two aspects of the Q1 market environment. One is the competition really reached white hot stage, the pricing at the front end is continuously sustained pressure from competition and in two, the proportion of lower weight or small parcels continue to increase and that both of these give rise to the necessity of, first of all, increased incentives to meet the competition, some of which are specifically targeted to ZTO. And then two, we do have the positive impact from the reverse NKA. volume that is growing significantly and outpacing the total market, and that contributed about $0.12 to offset the volume incentive and the weight per parcel decline.

Speaker Change: Revenue and cost.

Speaker Change: The.

Speaker Change: S P a decline largely attribute to two <unk>.

Speaker Change: Uh huh.

Speaker Change: And market environment.

Speaker Change: One is the competition really reached.

Speaker Change: White Hot stage.

Speaker Change: Pricing at the front end.

Speaker Change: Continuously.

Speaker Change: Sustained pressure from competition, and then to the proportion of lower weight or small parcels continue to increase.

Speaker Change: And that both of these.

Speaker Change: Gave rise to the necessity of first of all.

Speaker Change: Increased incentives to.

Speaker Change: To meet the competition.

Speaker Change: Some of which are specifically targeted to CTO and then two we do have the positive impact from the reverse and K a.

Speaker Change: Volume that is growing significantly and outpacing the total market and that contributed.

Speaker Change: About 12 cents.

Speaker Change: To offset.

Speaker Change: The volume incentives.

Speaker Change: And our weight per parcel declined.

Meisong Lai: So, going forward, we continue to emphasize on the fact that volume is important. Certainly, it needs to be supported by high quality of services. So, balance... This approach continues to be our theme, and when necessary, the volume will be the prioritized focus. With high quality of services, the price and the volume will be adjusted accordingly based on the market condition and competitive situations in specific markets. And that is our intention to go forward. So again, in overall, for your first question relating to revenue or per parcel unit revenue, the pricing is largely driven by competition.

Speaker Change: So going forward, we continue to emphasize on the fact that volume is important.

Speaker Change: Certainly you need to be supported by high quality of services.

Speaker Change: So balanced.

Speaker Change: Our approach continues to be our scene and.

When necessary.

Speaker Change: Volume will be the prioritized.

Speaker Change: Okay.

Speaker Change: So with high quality of services, the price and the volume will be adjusted accordingly.

Speaker Change: Just on the market condition and competitive.

Speaker Change: Situations in specific markets.

And that is our intention.

Speaker Change: To go forward.

Speaker Change: So again, an overall for your first question relating to.

Speaker Change: Revenue or per per parcel unit revenue.

Speaker Change: The pricing.

Is largely driven by competition.

Meisong Lai: on the cost side. We have continued to move forward on our cost efficiency gain initiative. In the first quarter, the parcel per unit transportation cost decreased by $0.06, and sorting decreased by $0.03. These cost reduction was both driven by economy of scale from the growth in the business volume and as I mentioned earlier, decline in weight and continued cost cutting helped in a way to improve our operating efficiency measures. Specifically, we refined our management of the operating process. continue to strengthen standardization of each segment throughout the whole process. and we also scientifically set cost standards.

Speaker Change: On the cost side.

Speaker Change: We have continued to move forward on our costs.

Speaker Change: Efficiency gains initiatives.

Speaker Change: In the first quarter.

Speaker Change: The parcel per unit transportation costs decreased by 6%.

Speaker Change: And sorting.

Speaker Change: Decreased by <unk>.

Speaker Change: Uh huh.

Speaker Change: Reduction with both driven by.

Speaker Change: By economy of scale from the growth in the business volume.

Speaker Change: And as I mentioned earlier declining weight and.

Speaker Change: Uh huh.

Speaker Change: Got it.

Speaker Change: It helped.

Speaker Change: In a way to improve our.

Speaker Change: Operating efficiency measures specifically.

Speaker Change: We refined our management.

Speaker Change: The operating process continue to strengthen standardization.

Speaker Change: Each segment throughout the whole <unk>.

Speaker Change: Yes.

Speaker Change: We also scientifically set cost standards.

Meisong Lai: as benchmark utilizing information technology tools to track and compare data in real time, which allows us to detect anomalies more promptly and point pinpoint optimization methodologies or solutions more accurately. Second, we also optimized compensation structure. We increased the proportion of performance-based pay in our wage structure, linking incentives to operational efficiency, task complexity, and workload. thereby motivating employees to work more proactively. and more efficiently.

Speaker Change: As benchmark utilizing information technology tools to track and compare data in real time, which allows us to detect anomalies.

Speaker Change: [noise] anomalies more promptly and <unk>.

Speaker Change: 0.2.

Speaker Change: Pinpoint opportunity amortization.

Speaker Change: Methodologies our solution more accurately set.

Speaker Change: We also optimized the compensation structure.

Speaker Change: We increased the proportion of performance based pay in our wage structure thinking incentives to operational efficiency.

Speaker Change: Ask complexity and workload.

Speaker Change: Thereby motivating employees to work more proactively.

Speaker Change: I am more efficiently.

Meisong Lai: Third, we... Set Responsibility In a much more granular level, we have paired up drivers to specific vehicles and leveraged a parcel tracing system to locate along operational process. issues or problems that arise. This ensures that responsibility is assigned to each position with clear reward and reprimand mechanism to ensure standardized operations at every step to the extent possible. In the future, we will continue to upgrade and leverage technology tools to transition from reactive to active management and achieving more precise and proactive control of the entire process quality. And at the same time, we will promote further use of smart technology equipment to reduce dependency on manual labor and further expand cost reduction potential in the transit process.

Speaker Change: Third.

Speaker Change: We.

Speaker Change: Set responsibilities.

Speaker Change: In a much more granular level, we have paired up drivers to specific vehicles and leveraged a parcel tracing system to locate operational along operational process.

Speaker Change: Issues or problems that arise.

Speaker Change: This ensures that responsibility is assigned to each position with clear reward and recommend mechanism to ensure standardized operations every steps to the extent possible.

Speaker Change: In the future.

Speaker Change: We will continue to upgrade and leverage technology tools.

Speaker Change: To transition from reactive to active management and achieving more precise and proactive control of the entire process quality.

Speaker Change: And at the same time, we will promote them.

Further use of smart technology equipped equipment to reduce dependency on manual labor and further expand cost reduction potential in the transition process.

Meisong Lai: Additionally, we will place greater focus on optimizing costs across the entire production chain by enhancing outlet infrastructure and strengthening the direct linkage between outlets and last mile post, which will help further reduce delivery or pickup cost throughout the entire process at the outlet level.

Speaker Change: Additionally.

Speaker Change: We will place greater focus on optimizing costs across the entire.

Speaker Change: Production chain by enhancing outlet infrastructure and strengthening the direct linkage between outlets and last milepost, which will help further reduce.

Speaker Change: Delivery or pick up cost.

Speaker Change: Throughout the entire process.

Speaker Change: Uh huh.

Speaker Change: Outlet level.

Meisong Lai: The next question relates to our AI application in our business operations. AI has been widely applied in multiple scenarios at ZTO. For example, in our sorting operation, machine vision technology has effectively reduced sorting errors. In our route planning, as another example, our monitoring technology and advanced algorithms have optimized delivery route planning.

Speaker Change: The next question relates to our in AI application.

Speaker Change: Our business operations.

Speaker Change: AI has been widely applied in multiple scenarios at CTO for example, in our sorting operation machine vision technology has effectively reduced sorting errors.

Speaker Change: Our route planning.

Speaker Change: Another example, our monitoring technology and advanced algorithm half.

Optimizing delivery route planning.

Meisong Lai: And in order to... In order Allocation process, our four-segment barcode recognition capability. are automatically generating much granular level of delivery directions and help us to launch a larger knowledge base. not only our employees to quickly identify work inquiries or guidelines as well as the network couriers to more efficiently planning their delivery route so that their service capacity and capability will be freed up to further focus on retail parcels.

Speaker Change: And in order to.

In the order.

Speaker Change: Allocation process.

Speaker Change: Our four segment barcode recognition capability.

Speaker Change: Alright are automatically generating much granular level.

Speaker Change: Livery directions and.

Speaker Change: US to launch a larger.

Knowledge based.

Speaker Change: Model, allowing.

Speaker Change: Not only our employees to quickly identify work inquiries or guidelines as well as the network careers to more efficiently planning their delivery route so that their service capacity and capability.

Speaker Change: It'll be freed up to further focus on retail parcels.

Meisong Lai: Looking ahead, we will continue to actively explore the application of artificial intelligence in last-mile delivery, autonomous vehicles, and other areas to continuously, at the right pace, matching with the operational upgrade and improvements so that we will continue to harvest. ever-improving technological advancements.

Speaker Change: Looking ahead.

Speaker Change: We will continue to achieve are actively exploring the application of artificial intelligence in last mile delivery.

Speaker Change: Autonomous vehicles in the us.

Speaker Change: Other areas to continuously.

Speaker Change: At the right pace matching.

Speaker Change: Acknowledging.

Speaker Change: With the operational upgrade and improvements so that we will continue to harvest.

Speaker Change: Benefits from.

Speaker Change: Ever improving technological advancements.

Meisong Lai: Thank you. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Thank you very much that's all I have.

Speaker Change: No.

Amy Han: The next question comes from Amy Han with Citigroup. Please go ahead. Good morning, Mr. Lai. I am Amy Han from Citi. Thank you for accepting my question.

Speaker Change: The next question comes from Amy <unk> with Citigroup.

Speaker Change: Please go ahead.

Speaker Change: Oh Wow.

Speaker Change: Okay.

Speaker Change: Thank you Brian.

Speaker Change: Yes, it does.

Amy Han: I mainly have two questions. One is related to cost. As Mr. Lai mentioned, we are increasing our investment in the direct chain. So I would like to ask about the progress of our direct chain in the first quarter. And how much is the expected value of the direct chain in terms of our online business and our full-time account?

Speaker Change: What do you think you're also not going to go ahead Scott.

Speaker Change: So if you go onto yet.

Speaker Change: Mhm, you called that out.

Speaker Change: This is going back to them very quiet.

Speaker Change: The whole quantity that will go.

Hello.

Speaker Change: Mhm.

Speaker Change: Well I'll kind of go with Macquarie.

Amy Han: The second question is about the volume and market competition. The 618 is coming soon. So how much is the expected value of the 618 this year? Will there be a slowdown in the price competition? This year's price competition is also coming earlier and more intense than the previous year. So how much room is there for the price to fall in this industry? And will the price competition be from East in the first six seasons? And because the price competition came earlier and more intense in this year, what is our view on the room for further ASP drop for the industry?

Speaker Change: As you will know about it.

Youre welcome.

Speaker Change: Bobby.

Speaker Change: Listen I'm not going to box out.

Joe McCann: Can you go wrong as you saw that you put that question Joe.

Speaker Change: But now with Douglas.

Joe McCann: Yes.

Joe McCann: All lines have been soft.

Joe McCann: Sure well I don't want to go with that.

Joe McCann: Let me translate for myself. So I was a fourth question about com.

Joe McCann: What is our progress in Missouri.

Joe McCann: First Congress and how large can that.

Joe McCann: We're not seeing a whole lot routine cost optimization contribute to a very cold cuts in the front you're right.

Joe McCann: Uh huh.

Speaker Change: Yeah second question was.

Joe McCann: Our parcel volume growth.

Joe McCann: The competition right now June 18 shopping basket, there is approaching well design.

Joe McCann: Our expectation of a puzzle.

Joe McCann: Shopping.

Joe McCann: One of them goes and what the price competition.

Joe McCann: And because the most competition from earlier this.

Joe McCann: But what is our view on the room for further ESP dropped for the industry.

Meisong Lai: Okay, thank you for your question. We think, actually, this year... 把这个折连工程当了一些主要的工处 Why do we have to reduce the chain? Reducing the chain means reducing the cost of shipping and increasing the ability to deliver to the destination. Our goal for this year is to occupy Zhejiang in the end of the year. We need 42.6% to reach our goal in phase one. In theory, we can reduce the price by at least 1 cent. This year, we have increased the price by more than 400,000 yuan. In fact, we can increase the revenue by 40% at the end of the year.

Joe McCann: Although she she's individually.

Joe McCann: Yeah.

Speaker Change: Well I'm in Jinan, and she said it may be.

But it's a good fit in culturally.

Joe McCann: Sure.

Joe McCann: Got it.

Joe McCann: So it isn't it.

Joe McCann: So I didn't choose the.

Joe McCann: Chunky.

Joe McCann: Patients have been.

Joe McCann: Thank you.

Joe McCann: Let me.

Joe McCann: [noise] merging animals.

Joe McCann: More than <unk> <unk>.

Joe McCann: Yes.

Joe McCann: Got it.

Joe McCann: So you can send it.

Joe McCann: So the interest as I do with the mobile.

Joe McCann:

Joe McCann: Turning to the pension T J.

Joe McCann: <unk>.

Joe McCann: Much.

Speaker Change: Now Ms genius help a space you choose one kincaid thank jessa.

So yeah, let me Shuang total Johan Lundin bullshit praise Glenn self interest.

Meisong Lai: We hope to promote the distribution of shares through an optimized end-of-year plan and to increase the percentage of discounted orders. What specific measures do we take, because now those development of intelligence are relatively highly In the past, our Little Big Sister As I said, 10,000 votes, 5,000 votes. This year, we have focused on the next generation machine. The next generation machine can produce 8,000 to 9,000 votes per hour. The cost of 30,000 votes is the lowest. Its operating cost is 2 cents. Ehhm, 水电费呢,有可能就三分钱,拉回去五分钱。 I saved over $800,000 over that time.

Speaker Change: She said.

Speaker Change: So the NPV.

Sure sure.

Speaker Change: Sure.

Speaker Change: Sure.

Speaker Change: The element <unk>.

Speaker Change: Good.

Speaker Change: So you want to travel Jim Mckinney.

Speaker Change: Peter.

Speaker Change: So maybe you could just.

Speaker Change: Total budget she CECI.

Speaker Change: So I want to kill engineers.

Speaker Change: Yeah.

Speaker Change: Hey, Jeff how do you going to get.

Speaker Change: So you can't see it you can as you said.

Speaker Change: Lastly, true.

Speaker Change: Thank.

Speaker Change: Yeah much injury.

Speaker Change: Okay.

Meisong Lai: This is a long-term project. We believe that the situation of the system, including the current situation, is improving rapidly. Overall, the overall slowdown is also being strongly promoted. We hope to achieve more than 42.6 goals this year.

Speaker Change: So you shouldn't controlling decision to Chuck Hundt should Oh, well Michelle Qi.

Speaker Change: It's just all the Shanghai that kind of ballpark, how much of weeks for Huntington.

Speaker Change: And as soon as I see.

Speaker Change: Sure.

Speaker Change: So you don't see.

Speaker Change: Let's jump in.

Speaker Change: Yes.

The teaching.

Speaker Change: Oh sure.

Speaker Change: That's helpful.

None of them look element.

Speaker Change: So she.

Meisong Lai: that's all for episode 2 It's a matter of competition, actually. Not too good Overall... I believe there is a lot of pressure on the oil industry and the industry as a whole. Indeed, the price of oil this year has dropped significantly.

Speaker Change: Gentlemen.

Speaker Change: Good.

Speaker Change: Jean <unk> she said.

Speaker Change: Too good.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Oh man.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: She is the junior Chintung Chuck good shot at you.

Speaker Change: Okay.

Speaker Change: Goodnight.

Speaker Change: So good.

Meisong Lai: Mr. Liu, what would you say to the pro-Cononents community? as such a true supporter and as a strong advocate, Reports like this who want to inspire So this can be seen from the US financial institutions' financial reports. The overall profit is also somewhat suppressed. In fact, the more at this time, as a courier carrier, the more confident you have, the more disappointed you will be. The stability of the network and the income growth of the employees are the basis for the stability of the industry. So as the President, I will try to do my best.

Speaker Change: Change agenda.

Hey, Jason.

So it was it's only further.

Speaker Change: So the Thai baht.

Speaker Change: I'll leave it to NATO countries from Chile, you need it.

Speaker Change: Yes.

Speaker Change: Useful.

Speaker Change: Yeah.

Speaker Change: She says yes.

Speaker Change: So a quite decent.

Speaker Change: You see she.

Speaker Change: Sure Julie.

Speaker Change: So the one game.

Speaker Change: Susan.

Speaker Change: I see.

Speaker Change: So I guess I wanted to just see.

Speaker Change: Hum.

Speaker Change: Gina.

Speaker Change: So machine chunky.

Speaker Change: Yeah.

King.

Meisong Lai: The trade union committee has highlighted trade-related issues in its report 我们有信心 We are confident 把这些工作做好 保持网络的稳定发展 更好的未来 Thank you for a better future. 谢谢 Thank you.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change: Well, maybe you Ashish.

Speaker Change: Yeah.

Speaker Change: So she comes with pool.

Speaker Change: Barcelona.

Speaker Change: When people ask.

Speaker Change: Yeah.

Speaker Change: Got it.

Speaker Change: Sure sure.

Speaker Change: Okay.

Meisong Lai: Thank you very much for your questions. First of all, on our direct linkage from outlet to the last mile, a bit of progress. This year we have focused on optimizing outlet layouts and promoting direct sorting and direct delivery to increase the proportion of end-to-end direct linkage. Now this is a critical mission for our overall business focus. The goal is to clearly reduce the last mile delivery cost and increase the outlet's earnings. Our goal of 42 points 40.8 to 42.2 billion goal of total year annual volume would translate into about of additional cost savings hence earning improvements for the network partner at the outlet level.

Speaker Change: Thank you all very much for your.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: First of all on our direct linkage from outlets to the last mile of Coke.

Speaker Change: Progress.

This year, we have focused on optimizing outlet.

Speaker Change: Layouts, and promoting direct sorting and direct delivery to increase the proportion of and two and a direct linkage now this is a a critical.

Speaker Change: Critical mission for our overall business focus.

Speaker Change: The goal is to.

Speaker Change: Clearly reduce the last mile delivery cost and increase the outlets, earning Ah.

Speaker Change: Our goal of.

Speaker Change: 42.

Speaker Change: 0.6.

Speaker Change: Oh.

Speaker Change: Yeah 42 point.

Speaker Change: 48 to $42 2 billion goal of total year annual volume with.

Speaker Change: Translate into about.

Speaker Change: $4 billion.

Speaker Change: Of additional cost savings.

Speaker Change: Or any improvements for the network partner at the outlet.

Speaker Change: Level, so given an example for the.

Meisong Lai: So given an example for the work that we put in mostly it relates to introducing sorting equipment to help improve the process efficiency of our outlets. We have installed a certain equipment that will automate the sortation work done by the And typically that single machine can sort 8,000 to 9,000 packages per operation cycle. time frame and for those outlets that have at least... 30,000 packages per day are suitable for installing. equipment. So, to give you some specific examples, these will help reduce the sorting cost and based on the current... of $0.02 for the location fixed cost is about $0.03 if you bring The package from our supersorting center to the outlets, the transportation cost will be about $0.05.

Speaker Change: The work that we've put in mostly.

Speaker Change: Rates to introducing sorting equipment to help improve the process efficiency of our outlets on the average.

Speaker Change: We have installed.

Speaker Change: Certain equipment that will automate the sortation work done by the outlets and typically that a single machine can sort 8000 to 9000 packages per operation.

Speaker Change: Timeframe and for those Hum outlets that have at least.

Speaker Change: 30000 packages per day.

Speaker Change: Are suitable for installing the equipment.

Speaker Change: Equipment, so to give you some specific examples of these will help reduce the sorting.

Speaker Change: Cost.

Speaker Change: And based on the current.

Speaker Change: Situation.

Speaker Change: Of of Tucson for.

Speaker Change: For the location.

Speaker Change: Fixed cost.

Speaker Change: Is about <unk>.

Speaker Change: Your brain.

Speaker Change: The package from sorting Super sorting center to the outlets the transportation costs will be about five cents. So this together tencent savings.

Meisong Lai: So this together, $0.10 savings equates to the $4 billion that I referred to earlier. So, this process of establishing direct linkage is aimed at, not to our profit. statement, but to our network partners to ensure their ability to improve efficiency, reduce cost, and secure or solidify the network stability. Because as you know, as competition heats up and into today's white hot, in today's white hot condition, it becomes ever so important to maintain trust, hope, and belief of the network partners. So our strategy is very clear.

Speaker Change: <unk>, two 4 billion that I referred to earlier.

Speaker Change: So there's some process of establishing direct linkage is aimed at not to our profit.

Speaker Change: Statement, but to our network partners to ensure their ability to improve efficiency reduce cost and secure or solidify the networks stability because as you know as competition heats up.

Speaker Change: Into today's white Hot.

Speaker Change: In today's white hot condition, it becomes ever so important to maintain.

Speaker Change: Trust hope and belief of.

Speaker Change: The network partners.

Speaker Change: So our strategy is very clear.

Meisong Lai: As the entire industry sustains pressure from the profit, even though volumes are growing as a total, yet the front-end pricing is decreasing and the proportion of small and light parcels continue to increase, everybody, including ZTO, everybody in the industry, are feeling the pinch. And as you might be able to see from everybody's earnings announcement, so we are focusing on... ensuring the connectivity between the super sorting center to outlet to the network couriers are properly set so that the interests are balanced and aligned. The division of duty as well as the rewards are suited for today's competitive environment because without a stable network, we have no future to speak of.

Speaker Change: As the entire industry sustained pressure.

Speaker Change: From the profit, even though volumes are growing.

Speaker Change: As the total yet the.

Speaker Change: Our front end pricing and decreasing and the proportion of small and light parcels continue to increase everybody.

Speaker Change: <unk> Z T O everybody in the industry.

Speaker Change: Our feeling the pinch and as you might be able to see from everybody some earnings announcement.

Speaker Change: We are focusing on.

Speaker Change: Ensuring the connectivity between the Super sorting center to outlet to the.

Speaker Change: Network careers are appropriately set so that the interest.

Speaker Change: Our balanced and aligned the division of duty as well as the rewards.

Speaker Change: Are suited for today's competitive environment, because without a stable.

Speaker Change: Network, we have no future to.

Speaker Change: Speak up so on that.

Sophie Li: So on that, our goal being reiterated for the full year as it draws near to the second half of the year, we would be continuing to monitor the market, be flexible and disciplined in our pricing practice and support our network partners in their stability as well as long-term trust and belief so that we can all work together to bring in after the storm normalized market growth in the long run. Thank you.

Speaker Change: Our goal being reiterated for the full year is it drawing near to the second half of the year, we would be continue to.

Speaker Change: Monitored the market be flexible and disciplined in our pricing practice and support our network partners and their stability as well as long term trust and believe so that we can all work together to bring in.

Speaker Change: After the storm.

Speaker Change: Normalized market growth in the long run.

Speaker Change: Okay.

Thank you.

Yeah.

Sophie Li: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Thank you everybody again for joining today's call. As we mentioned that we continue to focus on being our best and setting our sights on, of course, the competition at hand and as well as at the same time allocating necessary resources to build strong momentum in narrowing the gap to the industry growth in volume, as well as building for a stronger foundation for the future of our business. And we welcome your questions and discussions with us in the next, after today's call, and look forward to speaking to you all.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to management for any closing remark.

Speaker Change: Okay.

Speaker Change: Thank you everybody again for joining today's call as we.

Ensure that we continue to focus on being our best and putting setting our sights on of course the.

Speaker Change: Competition at hand, and as well as at the same time allocating the necessary resources to build strong momentum in narrowing the gap to the industry growth in volume as well as building for a stronger foundation.

Speaker Change: For the future of our business and we welcome your question and.

Speaker Change: Discussions with us in the next.

Speaker Change: After todays call and look forward to speaking to you all.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].