Q1 2026 ZTO Express (Cayman) Inc Earnings Call

May 20, 2026

Speaker #1: Good morning, and welcome to the ZTO Express first-quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0.

Operator: Good morning, welcome to the ZTO Express Q1 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sophie Li. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.

Speaker #1: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Sophie Li.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Kaylee. 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.

Sophie Li: Thank you, Kelly. Hello, everyone, and thank you for joining us today. The company's results and investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, and Mrs. Huiping Yan, Chief Financial Officer. 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. 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.

Speaker #2: On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, and Mrs. Huiping Yan, Chief Financial Officer. 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.

Speaker #2: 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.

Speaker #2: Such statements are based on management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties, and other factors.

Sophie Li: Such statements are based on management's current expectations and 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 achievement 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. Securities and Exchange Commission. 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. Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. Meisong Lai.

Speaker #2: 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 defer materially from those in the forward-looking statements.

Speaker #2: Further information regarding this and other risks, uncertainties, and factors is included in the company's filings with the U.S. Securities and Exchange Commission. 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 #2: It is not 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.

Speaker #3: 大家好，感谢各位参加今天的电话会议。2026年一季度，在宏观经济稳中有进、消费需求持续释放的良好环境下，快递行业整体保持增长，业务量同比增长5.8%。随着行业反内卷政策持续深化、价格次序稳步修复、竞争加速回归理性，行业经营质量显著改善，为头部企业高质量发展创造了有利条件。报告之内，公司牢牢把握行业机遇，核心指标表现亮眼。公司业务量完成96.7亿件，同比增长13.2%，增速显著高于行业增速。市场份额提升1.4个百分点，领先地位持续巩固。调整后净利润23.8亿元，同比增长5.2%，基础非经营性因素调整后经营利润同比提升22%，盈利能力稳健提升。散件业务同比增长65%，产品机构持续优化。单票批运及分拣成本同比下降6分，数字化与精细化运营成效显著，成本壁垒进一步加固。一季度优于业绩的取得源于政策环境，战略定力、运营效率、产品创新的多重驱动。首先，宏观经济与消费环境持续向好，线上消费稳健增长，行业监管导向清晰，调控精准有效，为快递行业健康可持续发展提供了坚实基础和关键保障。其次，公司坚定紧跟政策导向，主动维护行业良性生态，这为龙头行业龙头我们坚决拥护反内卷政策，带头维护公平有序的市场秩序。坚持理性竞争、价值竞争与全行业共建健康发展环境。第三，公司坚守长期主义战略定力，不追求短期激进扩张，始终以网络健康、服务提升、盈利稳健为核心，持续憨实基础设施，深化数字化运营，提升全链路管理能力，长期竞争力不断强化。第四，公司通过中卷效能优化、运输组织提效、分拣精细化管理，实现单票成本持续下行，成本优势转化为可持续的盈利优势与竞争壁垒。第五，公司紧贴市场需求，优化产品机构，围绕高价值散件、逆向件等细分赛道重点突破，打造差异化竞争力，推动业务从电商简单易驱动向多元化高价值机构转型，盈利能力与抗周期能力显著增强。展望下一阶段，公司将继续以高质量发展为核心，坚守长期主义，聚焦价值创造，重点部署以下五个方面的工作。第一，切实贯彻国家政策与行业监管要求，持续引领行业的反内卷工作，维护好行业的良性竞争环境，推动行业高质量发展。第二，持续深耕主业，强烈内攻，不但推进各方面降本增效措施，提升实效与服务品质，憨实服务壁垒，提升品牌溢价能力，以稳健经营与高质量增长兑现长期价值。第三，进一步落实网络管理的公平和透明原则，持续优化网络政策，提升管理能力，让政策更加公平，管理更加高效，网络更加稳健。同时，通过数字化赋能，管理输出与精准帮扶，助力全网合作伙伴降本增效，提升经营能力与盈利水平，做好公司长期稳定的网络基本盘，构建同建共享、共生共赢的健康生态。第四，切实保障与提升一线快递从业者权益，持续优化激励机制，加强精神关怀，保障快递从业者收入稳步增长，不但提升快递从业者的获得感，成就感与职业荣誉感，憨实公司最核心的服务与运营基础。第五，持续提升股东回报水平，依托稳健现金流与良好盈利基础，完善常态化现金分红与股份回购机制，优化资本回报机构，为股东创造长期稳定可持续的投资回报。各位投资人，当前行业正处于从规模驱动转向价值驱动的关键窗口期，头部集中趋势明显，明确龙头价值将持续凸显，中通将技术与高质量份额、高质量服务、低全链路成本、稳健盈利为核心，坚持不懈地做到三个确保，即确保网络合作伙伴盈利稳步增长，确保业务员收入持续提升，确保中通发展行稳致远。以长期主义价值追求与广大投资人全网合作伙伴一起笃定前行，以持续优异的经营成果回报市场，回报股东。谢谢大家，接下来我们请严总介绍财务基础和预期，谢谢。

Meisong Lai: 牢牢把握行业机遇，核心指标表现亮眼。公司业务量完成96.7亿件，同比增长13.2%，增速显著高于行业增速，市场份额提升1.4个百分点，领先地位持续巩固。调整后净利润23.8亿元，同比增长5.2%。去除非经营性因素，调整后经营利润同比提升22%，盈利能力稳健提升。闪送业务同比增长65%，产品结构持续优化。单票运营分解成本同比下降6分，数字化与精细化运营成效显著，成本壁垒进一步加固。以上优异业绩的取得源于政策环境、战略定力、运营效率、产品创新的多重驱动。首先，宏观经济与消费环境持续向好，线上消费稳健增长，行业监管导向清晰，调控精准有效，为快递行业健康可持续发展提供了坚实基础和关键保障。其次，公司坚定紧跟政策导向，主动维护行业良性生态。作为行业龙头，我们坚决拥护反内卷政策，带头维护公平有序的市场秩序，坚持理性竞争、价值竞争，与全行业共建健康发展环境。第三，公司坚守长期主义战略定力，不追求短视近扩张，始终以网络健康、服务提升、盈利稳健为核心，持续夯实基础设施，深化数字化运营，提升全链路管理能力，产业竞争力不断强化。第四，公司通过中转效能优化、运输组织提效、分拣精细化管理，实现单票成本持续下行，成本优势转化为可持续的盈利优势与竞争壁垒。第五，公司紧贴市场需求，优化产品结构，围绕高价值闪送、夜间件等细分赛道重点突破，打造差异化竞争力，推动业务从电商简单一驱动向多元化高价值结构转型，盈利能力与抗周期能力显著增强。展望下一阶段，公司将继续以高质量发展为核心，坚守长期主义，聚焦价值创造，重点部署以下五个方面的工作。第一，切实贯彻国家政策与行业监管要求，持续引领行业的反内卷工作，维护好行业的良性竞争环境，推动行业高质量发展。第二，持续深耕主业，强健内功，不断推进各方面降本增效措施，提升时效与服务品质，夯实服务壁垒，提升品牌影响能力，以稳健经营与高质量增长兑现长期价值。第三，进一步落实网络管理的公平和透明原则，持续优化网络政策，提升管理能力，让政策更加公平，管理更加高效，网络更加稳健。同时通过数字化赋能、管理输出与精准帮扶，助力全网合作伙伴降本增效，提升经营能力与盈利水平，筑牢公司长期稳定的网络基本盘，构建同建共享、共生共赢的健康生态。第四，切实保障与提升一线快递从业者权益，持续优化激励机制，加强精神关怀，保障快递从业者收入稳步增长，不断提升快递从业者的获得感、成就感与专业荣誉感，夯实公司最核心的服务与运营基础。第五，持续提升股东回报水平，依托稳健现金流与良好盈利基础，完善常态化现金分红与股份回购机制，优化资本回报结构，为股东创造长期稳定、可持续的投资回报。各位投资人，当前行业正处于从规模驱动转向价值驱动的关键转折期，头部集中趋势明显明确，龙头价值将持续凸显，中通将继续以高质量份额、高质量服务、低全链路成本、稳健盈利为核心，坚持不懈地做到三个确保，即确保网络合作伙伴盈利稳步增长，确保业务员收入持续提升，确保中通发展行稳致远。以长期主义价值，追求与广大投资人、全网合作伙伴一起笃定前行，以持续优异的经营成果回报市场，回报股东。谢谢大家。接下来我们请严总介绍财务及股利。

Meisong Lai: [Foreign language]

Speaker #2: OK, let me translate first. Hello everyone, thank you for joining today's conference call. In the first quarter of 2026, against a backdrop of steady microeconomic progress and continued growth in consumer demand, China's express delivery industry maintained overall growth with parcel volume up 5.8% year over year.

Sophie Li: Okay, let me translate first. Hello, everyone. Thank you for joining today's conference call. In the Q1 2026, against a backdrop of steady microeconomic progress and continued growth in consumer demand, China's express delivery industry maintained overall growth with parcel volume up 5.8% year-over-year. As anti-involution policies continued to deepen, pricing steadily recovered. Competition accelerated to its return to rationality, and overall industry operating quality improved significantly, creating favorable conditions for leading enterprises to pursue high-quality development. During the quarter, we seized the industry opportunities and delivered strong results across key metrics. Parcel volume reached 9.67 billion, up 13.2% year-over-year, significantly outpacing industry growth with market share expanding by 1.2 percentage points, further solidifying our leadership position.

Speaker #2: As anti-involution policies continue to deepen, pricing steadily recovered, competition accelerated its return to rationality, and overall industry operating quality improved significantly. This is creating favorable conditions for leading enterprises to pursue high-quality development.

Speaker #2: During the quarter, we seized the industry opportunities and delivered strong results across key metrics. Parcel volume reached 9.67 billion, up 13.2% year over year.

Speaker #2: Significantly outpacing industry growth, with market share expanding by 1.2 percentage points, further solidifying our leadership position. Adjusted net income was $2.38 billion, up 5.2% year over year.

Sophie Li: Adjusted net income was CNY 2.38 billion, up 5.2% year over year. Excluding non-operating items, adjusted operating profit increased to 22% year over year, reflecting improvements in profitability. Our retail parcel volume grew 65% year over year. Product mix continued to optimize. Combined unit cost of transportation and sorting decreased by CNY 0.06 year over year, with digitalization and lean management delivering tangible results, further reinforcing our cost advantage. Our strong Q1 performance was driven by a favorable policy environment, combined with our strategic focus, operating efficiency, and product innovation. First, the continued improvements in the microeconomic and the consumer environment, with steady growth in online consumption alongside clear regulatory guidance and effective policy measures, provided a solid foundation and a strong support for the healthy and the sustainable growth of the express delivery industry.

Speaker #2: Excluding non-operating items, adjusted operating profit increased 22% year over year, reflecting improvements in profitability. Our retail parcel volume grew 65% year over year, and product mix continued to optimize.

Speaker #2: Combined unit cost of transportation and sorting decreased by $0.06 year over year, with digitalization and link management delivering tangible results, further reinforcing our cost advantage.

Speaker #2: Our strong first quarter performance was driven by a favorable policy environment, combined with our strategic focus on operating efficiency and product innovation. First, the continued improvements in the microeconomic and consumer environment, with steady growth in online consumption alongside clear regulatory guidance and effective policy measures, provided a solid foundation and strong support for the healthy and sustainable growth of the express delivery industry.

Speaker #2: Second, we are firmly aligned with policy direction and have proactively upheld a healthy industry eco-atmosphere. As the industry leader, we consistently supported the anti-involution policy to lead in maintaining market order and are committed to rational and value-driven competition.

Sophie Li: Second, we are firmly aligned with policy direction and have been proactively upheld a healthy industry eco-atmosphere. As the industry leader, we consistently supported the anti-involution policy, took the lead in maintaining market order, and committed to rational and value-driven competition, working with the broader industry to build a healthy environment. Third, we stayed the course on our long-term strategy without pursuing short-term aggressive expansion and remained focused on network health, service improvement, and profitability. We continue to strengthen infrastructure, deepen digitalization, and enhance end-to-end management capabilities, continuously building long-term competitiveness. Fourth, through optimization of transit efficiency, through improvements in optimization and refined sortation management, we achieved a further reduction in unit costs, converting cost advantages into competitive mode in profitability. Fifth, we closely tracked market demand and optimized our product mix with focused efforts on higher value retail parcels, reverse logistics, and other differentiated offerings.

Speaker #2: Working with the broader industry to build a healthy environment. Third, we state the core of our long-term strategy. Without pursuing short-term aggressive expansion, and remaining focused on network health, service improvement, and profitability, we continue to strengthen infrastructure, deepen digitalization, and enhance end-to-end management capabilities.

Speaker #2: Continuously building long-term competitiveness. Fourth, through optimization of transit efficiency, through improvements in organization and refined flotation management, we achieved further reduction in unit costs, converting cost advantages into a competitive mode in profitability.

Speaker #2: Fifth, we closely tracked market demand and optimized our product mix with focused efforts on higher-value retail parcels, reverse logistics, and other differentiated offerings.

Sophie Li: This drove a structural shift from single channel e-commerce volume towards a more diversified and improved value mix, meaningfully strengthening both profitability and resilience against the business cycles. Looking ahead, we will continue to prioritize high-quality development, thinking long term, and insist upon value creation. Our key priorities for the next phase are as the following. First, fully implement national policy and industry regulatory requirements. Continue to lead the industry's anti-involution efforts, safeguard a healthy competitive environment, and drive the industry toward high-quality development. Second, deepen our core business internal strengths and capabilities. We will continue to advance cost initiatives for efficiency gain across all fronts, enhance timeliness and customer satisfaction, solidify our service reach, and enhance brand premium, delivering long-term value through discipline and sound execution. Third, further integrate the principles of fairness and transparency into network management.

Speaker #2: This drove a structural shift from single-channel e-commerce volume towards a more diversified and improved value mix, meaningfully strengthening both profitability and resilience against business cycles.

Speaker #2: Looking ahead, we will continue to prioritize high-quality development, think long-term, and insist upon value creation. Our key priorities for the next phase are as follows: first, fully implement national policy and industry regulatory requirements; continue to lead the industry's anti-involution efforts; safeguard a healthy competitive environment; and drive the industry toward high-quality development.

Speaker #2: Second, deepen our core business internal strengths and capabilities. We will continue to advance cost initiatives for efficiency gain across all fronts. Enhance timeliness and customer satisfaction.

Speaker #2: Solidify our service reach and enhance brand premium. Deliver long-term value through discipline and sound execution. Third, further integrate the principles of fairness and transparency into network management.

Sophie Li: Continue to optimize network policies and improve network management capabilities, making our policies more equitable, our management more efficient, and our network more stable and resilient. At the same time, through digitization, best practice or expertise sharing, and targeted cultivation, we will help all network partners to reduce costs, improve operational capabilities and profitability, reinforcing the foundation and building a healthy ecosystem of shared success with mutual prosperity. Fourth, genuinely protect the rights and the well-being of frontline couriers. We will continue to optimize incentive mechanisms, strengthen care and recognition, ensure steady income growth for couriers, and continuously enhance their sense of fulfillment, accomplishment, and professional pride, assuring the most essential of our service and operations. Fifth, continuously enhance shareholder returns.

Speaker #2: Continue to optimize network policies, and improve network management capabilities, making our policies more equitable, our management more efficient, and our network more stable and resilient.

Speaker #2: At the same time, through digitization, best practice or expertise sharing, and targeted cultivation, we will help all network partners to reduce costs, improve operational capabilities, and profitability.

Speaker #2: Reinforcing the foundation and building a healthy ecosystem of shared success with mutual prosperity. Fourth, genuinely protect the rights and the well-being of frontline couriers.

Speaker #2: We will continue to optimize incentive mechanisms, strengthen care and recommendation, ensure steady income growth for careers, and continuously enhance their sense of fulfillment, accomplishment, and professional pride—assuring the most essential aspects of our service and operations.

Speaker #2: Fifth, continuously enhance shareholder returns. Backed by strong profitability and cash flow, we will refine our regular cash dividend and share repurchase mechanisms, optimize our capital return structure, and deliver consistent returns to our shareholders.

Sophie Li: Backed by strong profitability and cash flow, we will refine our regular cash dividend and share repurchase mechanisms, optimize our capital re-return structure, and deliver consistent returns to our shareholders. To all of our investors, our industry is at a critical inflection point, transitioning from scale-driven to value-driven development. This consolidation among leading players is apparent, and the value of the industry leaders will continue to be prominent. ZTO will stay committed to high-quality market presence, high-quality service, low end-to-end costs, and sound profitability. We will relentlessly deliver on our three key commitments, which are steady earnings growth for our network partners, continuous wage improvements for our couriers, and healthy longevity for ZTO. Guided by our long-term value principles, we look forward to moving forward alongside our network partners with confidence in turning in consistently outstanding report cards to the market and our shareholders.

Speaker #2: To all of our investors, our industry is at a critical inflection point, transitioning from scale-driven to value-driven development. This consolidation among leading players is apparent, and the value of the industry leaders will continue to be prominent.

Speaker #2: ZTO will stay committed to high-quality market presence, high-quality service, low end-to-end costs, and sound profitability. We will relentlessly deliver on our three key commitments, which are steady earnings growth for our network partners, continuous wage improvements for our couriers, and healthy longevity for ZTO.

Speaker #2: Guided by our long-term value principles, we look forward to moving forward alongside our network partners with confidence in turning in consistently outstanding report cards to the market and our shareholders.

Sophie Li: Next, let's invite our CFO, Ms. Yan, to present the financial results and guidance.

Speaker #2: And next, let's invite our CFO, Miss Yen, to present the financial results and guidance.

Sophie Li: Next, let's invite our CFO, Ms. Yan, to present the financial results and guidance.

Speaker #3: Thank you, Chairman, 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, and percentage changes refer to year-over-year comparisons.

Huiping Yan: Thank you, Chairman, 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 and percentage changes refer to year-over-year comparisons. Detailed information on our financial performance, unit economics, and cash flow results are posted on our website, and I'll go through some of the highlights here. In Q1, we continued to adhere to our quarterly first strategy, which is consistent with the regulatory call against involution. As our operating efficiency continues to lead the industry, we achieved increases in both volume and profit. Our parcel volume grew by 13.2% to CNY 9.7 billion, with a 1.4 points increase in market presence. Our total revenue increased 22% to CNY 13.3 billion.

Speaker #3: Detailed information on our financial performance, unit economics, and cash flow results are posted on our website, and I'll go through some of the highlights here.

Speaker #3: In the first quarter, we continue to adhere to our quarterly-first strategy, which is consistent with the regulatory call against involution. As our operating efficiency continues to lead the industry, we achieved increases in both volume and profit.

Speaker #3: Our parcel volume grew by 13.2% to 9.7 billion, with a 1.4-point increase in market presence. Our total revenue increased 22% to $13.3 billion.

Speaker #3: Excluding non-operating factors such as government subsidies or tax rebates, which fluctuate from quarter to quarter throughout the year, our adjusted operating profit increased by 22% to reach $2.6 billion.

Huiping Yan: Excluding non-operating factors such as government subsidies or tax rebates, which fluctuate from quarter to quarter throughout the year, our adjusted operating profit increased by 22% to reach CNY 2.6 billion. Adjusted net income was CNY 2.4 billion, which increased 5.2%. ASP for our core express delivery rose CNY 0.11 or 8.2%, driven by a CNY 0.18 +impact from increased KA volume mix, led by higher value reverse logistics, offsetting CNY 0.09 increase in volume incentives. Increase in average parcel weight brought an additional CNY 0.02 lift to our ASP. Total cost of revenue was CNY 10 billion, which increased 22.5%. Overall unit cost for the core express delivery business increased 8.8% or CNY 0.08, which includes KA cost increase of CNY 0.15 that was consistent with the strategic expansion of our KA volume.

Speaker #3: Adjusted net income was $2.4 billion, which increased 5.2%. ASP for our core express delivery rose $0.11, or 8.2%, driven by an $0.18 positive impact from increased KA volume mix, led by higher-value reverse logistics, offsetting a $0.09 increase in volume incentives.

Speaker #3: Increase in average parcel weight brought an additional $0.02 lift to our ASP. Total cost of revenue was $10 billion, which increased 22.5%. Overall unit cost for the core express delivery business increased 8.8%, or $0.08, which includes KA cost increase of $0.15 that was consistent with the strategic expansion of our KA volume.

Speaker #3: The combined unit sorting and transportation costs decreased by 8.8%, or $0.06, driven largely by economies of scale. Specifically, the unit cost of line-haul transportation decreased 10.5% to $0.37, reflecting optimized route planning and enhanced load efficiency.

Huiping Yan: The combined unit sorting and transportation costs decreased by 8.8% or CNY 0.06, driven largely by economies of scale. Specifically, unit cost of line haul transportation decreased 10.5% to CNY 0.37, reflecting optimized route planning and enhanced load efficiency. Unit sorting costs decreased 6.4% to CNY 0.25, thanks to continued improvements in labor and automation productivity. Gross profit increased 20.3% to CNY 3.2 billion. Gross profit margin rate decreased slightly by 0.3 points to 24.4%. SG&A expenses, excluding SBC, increased 14.9% to CNY 594.5 million. SG&A, excluding SBC, as a percentage of revenue declined to 4.5%, reflecting strong corporate cost efficiency.

Speaker #3: Unit sorting costs decreased 6.4% to $0.25, thanks to continued improvements in labor and automation productivity. Gross profit increased 20.3% to $3.2 billion, and gross profit margin rate decreased slightly by 0.3 points to 24.4%.

Speaker #3: SG&A expenses excluding SBC increased 14.9% to $594.5 million. SG&A excluding SBC as a percentage of revenue declined to 4.5%, reflecting strong corporate cost efficiency.

Speaker #3: Income from operations increased 5.8% to $2.5 billion, and associated margin rate decreased 2.9 points to 19.2%. Operating cash flow was $2.8 billion for the quarter, representing an 18% increase.

Huiping Yan: Income from operations increased 5.8% to CNY 2.5 billion, and associated margin rate decreased 2.9 points to 19.2%. Operating cash flow was CNY 2.8 billion for the quarter, representing an 18% increase. Adjusted EBITDA increased 6.9% to CNY 3.9 billion.

Speaker #3: Adjusted EBITDA increased 6.9% to $3.9 billion. Capital expenditure for the quarter was a total of $1.8 billion, and we anticipate annual CapEx in 2026 to be around $60 billion.

Huiping Yan: Capital expenditure for the quarter was Total CNY 1 billion, and we anticipated annual CapEx in 2026 to be around CNY 60 billion. To be CNY 6 billion, I'm sorry. Moving on to our guidance based on current market and operating conditions, we are maintaining our previous guidance for the year that parcel volume growth of 10% to 13% year-over-year, representing a parcel volume range of 42.37 to 43.52 billion. These estimates reflect management's current preliminary view and are subject to change. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Speaker #3: To be 6 billion. I'm sorry. Now, moving on to our guidance. Based on current market and operating conditions, we are maintaining our previous guidance for the year: parcel volume growth of 10 to 13 percent year-over-year, representing a parcel volume range of 42.37 billion to 43.52 billion.

Speaker #3: These estimates reflect management's current preliminary view and are subject to change. This concludes our prepared remarks. Operator, please open the line.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: For the sake of keeping to time today, please limit your questions to two per person. The first question comes from Prim Lisa with Morgan Stanley.

Speaker #1: To withdraw your question, please press star, then 2. For the sake of keeping to time today, please limit your questions to two per person.

Speaker #1: The first question comes from Quinn Leeson with Morgan Stanley.

Prim Lisa: Thank you operator. 谢谢管理层接受我的提问, 也祝贺公司非常强劲的 Q1 的扣除这个政府的补贴以后的利润增长。我有两个小问题。第一个问题是关于成本的, 就是我们看到 Q1 的单位成本的优化还是比较的显著, 那其实比管理层在年初给出的目标来说, 也是超越了这个目标的成本缩减。想请教一下, 现在往后看全年的这个单位成本的变化, 会有一些对于这个目标会有新的调整吗？以及特别的想问一下, 往后看这个柴油价格的上涨对单位成本的影响大概是什么样一个程度？第二个问题是关于 anti-involution 的, 就是想请教一下 anti-involution 现在看起来持续性怎么样？往后看行业的价格水平的展望是怎样的？也是想请教一下, 这个现在往后看, 这个行业的价格变化是不是能够消化油价带来的成本影响？ Let me translate for myself. Thank you management for taking my questions, and congratulations on the very strong profit growth, excluding government grants. I have two questions. The first question is about unit cost. We have seen a very impressive unit cost reduction in Q1 this year, and it has been better compared with management's full year target set at the beginning of the year. Want to discuss what's the key drivers of the cost efficiency gain in Q1. Any changes to our full year cost reduction target? Specifically want to discuss the impacts from diesel price hikes on unit cost going forward. The second question is about anti-involution. How has the policy initiatives playing out year to date? What's the management's outlook on industry pricing dynamics going forward in the rest of the year? Specifically want to understand whether industry price dynamics could fully pass through the potential cost inflation from diesel price hikes. Thank you.

Speaker #4: Thank you, Operator. 那其实比管理层在年初给出的目标来说也是超越了这个目标的成本缩减。想请教一下现在往后看全年的这个单位成本的变化，会有一些对于这个目标会有新的调整吗？以及特别的想问一下往后看这个柴油价格的上涨对单位成本的影响大概是什么样一个程度。第二个问题是关于反内转的，就是想请教一下反内转现在看起来持续性怎么样？往后看行业的价格水平的展望是怎样的？也是想请教一下这个现在往后看这个行业的价格变化是不是能够消化有价带来的成本影响。 Let me translate for myself. Thank you, management, for taking my questions. And congratulations on the very strong profit growth. Excluding government grants, I have two questions.

[Analyst] (Morgan Stanley): Thank you operator. [Foreign language]

[Analyst] (Morgan Stanley): Let me translate for myself. Thank you management for taking my questions, and congratulations on the very strong profit growth, excluding government grants. I have two questions. The first question is about unit cost. We have seen a very impressive unit cost reduction in Q1 this year, and it has been better compared with management's full year target set at the beginning of the year. Want to discuss what's the key drivers of the cost efficiency gain in Q1. Any changes to our full year cost reduction target? Specifically want to discuss the impacts from diesel price hikes on unit cost going forward. The second question is about anti-involution.

Speaker #4: The first question is about unit cost. We have seen very impressive unit cost reduction in the first quarter this year, and it has been better compared with management's four-year target.

Speaker #4: Set at the beginning of the year. So, I want to discuss what are the key drivers of the cost efficiency gain in the first quarter? Any changes to our four-year cost reduction target?

Speaker #4: Specifically, I want to discuss the impacts from diesel price hikes on unit cost going forward. The second question is about anti-involution. So, how have the policy initiatives played out year to date?

[Analyst] (Morgan Stanley): How has the policy initiatives playing out year to date? What's the management's outlook on industry pricing dynamics going forward in the rest of the year? Specifically want to understand whether industry price dynamics could fully pass through the potential cost inflation from diesel price hikes. Thank you.

Speaker #4: What’s the management’s outlook on industry pricing dynamics going forward in the rest of the year? Specifically, I want to understand whether industry price dynamics could fully pass through the potential cost inflation from diesel price hikes.

Speaker #4: Thank you.

Speaker #2: 感谢你的提问。一季度的成本表现，一季度单票运输成本0.37元，同比下降4分，分解成本0.25元，同比下降2分。这一表现主要得益于自动化水平提升、数字化工具深化应用、精细化管理推进、带动车辆装载力、人均效能等核心指标持续改善。第一，运输成本一次深化数字化工具运用，通过运力优化运力机构与路线设计，在缩短全链路时长的同时有效降低运输成本。二是优化装载力指标和考核机制，合理设定装载重量标准，采用精准的体积测算方式推行阶梯式的装载力激励措施，并借助业务量增长带来的规模效应，有效提升车辆装载力。三是持续完善车队管理，健全车辆运维标准化成本模型，并对驾驶员实施成本节约激励，从而降低运维成本。而分解成本，我们一方面持续加大中心智能化设备投入，通过实时监控与预警，老旧设备升级改造等措施，在控制成本的同时提升设备运行效能，进一步增强产地自动化水平。另一方面，我们复盘用工情况，深化推行真人到人，并配套明确的将成机制，从而提升人均效能。降本目标，我们预计全年中卷环节核心成本有万，进一步下降三分钱。在中卷环节外，我们将更加聚焦于全链路降本。今年会大力推进网络调优、深化网点赋能、增强网点运营能力。我们将继续鼓励网点加装自动化设备投放无人车及推广折叠模式，持续降低末端成本。油价的影响，受中东地缘冲突影响，3月份以来国内柴油价格大幅上涨，但随着国际局势逐步缓和，4月下旬价格已有所回落。总体来看，反内卷带来的涨价以基本覆盖燃油成本上涨。因此，二季度油价波动对全网成本影响有限。第二个反内卷政策和行业价格水平，春节以来反内卷政策继续得到贯彻执行。尤其在产量区成效显著，同时针对部分落实不到位的省份，执行的力度也在逐渐加强。随着反内卷政策的实施，行业低价件持续减少，价格水平进一步回归，网点盈利和快递小哥的学业也得到了有效保障。中通将继续坚定响应政府的反内卷号召，坚持服务质量为先的平衡发展战略，切实保障网络末端权益。我们认为在监管长效引领下，行业各局将更健康、竞争更良性，价格整体保持稳定。谢谢。

Meisong Lai: 感谢你的提问。一季度的成本表现，一季度单票运输成本0.37元，同比下降1分，分拣成本0.25元，同比下降2分。这一表现主要得益于自动化水平提升、数字化工具深化应用及精细化管理推进，带动车辆装载力、人均效能等核心指标持续改善。第一，运输成本。一是深化数字化工具运用，通过运力优化运力结构与路线设计，在缩短全链路时长的同时有效降低运输成本。二是优化装载力指标和考核机制，合理设定装载重量标准，采用精准的体积计算方式，推行阶梯式的装载力激励措施，并借助业务量增长带来的规模效应，有效提升车辆装载力。三是持续完善车队管理，健全车辆运维标准化成本模型，并对驾驶员实施成本节约激励，从而降低运维成本。第二是分拣成本。我们一方面持续加大中心智能化设备投入，通过实时监控与预警、老旧设备升级改造等措施，在控制成本的同时提升设备运行效能，进一步增强场地自动化水平。另一方面，我们结合用工情况，深化推行精到人，并配套明确的奖惩机制，从而提升人均效能。降本目标，我们预计全年终端环节核心成本有望进一步下降3分钱。在终端环节外，我们将更加聚焦于全链路降本，今年会大力推进网络调优，深化网点赋能，增强网点运营能力。我们将继续鼓励网点加装自动化设备，投放无人车及推广责任模式，持续降低末端成本。油价的影响，受中东地缘冲突影响，3月份以来国内柴油价格大幅上涨，但随着国际局势逐步缓和，4月下旬价格已有所回落。总体来看，anti-involution带来的涨价已基本覆盖燃油成本上涨，因此二季度油价波动对全网成本影响有限。第二个，anti-involution政策和行业价格水平。春节以来，anti-involution政策持续得到贯彻执行，尤其在产粮区成效显著，同时针对部分落实不到位的省份，执行的力度也在逐渐加强。随着anti-involution政策的实施，行业低价下限持续减少，价格水平进一步回归，网点盈利和快递小哥的权益也得到了有效保障。中通将持续坚定响应政府的anti-involution号召，坚持服务质量为先的平衡发展战略，切实保障网络末端权益。我们认为，在监管长效引领下，行业格局将更健康，竞争更良性，价格整体保持稳定。谢谢。

Meisong Lai: [Foreign language]

Speaker #1: Now let me help translate the chairman's answer. The first question is relating to cost. In the first quarter, I won't go through all the results.

Huiping Yan: Now let me help translate Chairman's answer. First question is relating our cost. In the first quarter, I won't go through all the results, but the fact that this cost performance improvements was primarily driven by the implementation of improved automation and which further enabled by our digitized solutioning such as the intelligent tools and refined team management process. All these led to our continuous improvements in the core metrics, including vehicle load rates and per capita efficiency. In terms of transportation costs, Chairman further elaborated. First, we widened the implementation of digitization tools, which optimize transportation capacity, structure, and route design, so as to effectively lower transportation costs while shortening the end-to-end transit duration time. Second, we refined load rate metrics and measurement mechanism by setting reasonable loading standards and adopted precise gross volume measurements.

Speaker #1: But the fact that this cost performance improvement was primarily driven by the implementation of improved automation, and was further enabled by our digitized solutioning, such as intelligent tools and refined lean management processes.

Speaker #1: And all these led to our continuous improvements in the core metrics, including vehicle load rates and per capita efficiency. In terms of transportation costs, Chairman further elaborated.

Speaker #1: First, we widened the implementation of digitization tools, which optimize transportation capacity, structure, and route design, so as to effectively lower transportation costs while shortening the end-to-end transit duration time.

Speaker #1: Second, we refined low-rate metrics and measurement mechanisms by setting reasonable loading standards and adopted precise gross volume measurements. We also implemented tier incentives for load rates, which correlated with volume levels, hence fully leveraged economies of scale so as to improve overall loading efficiency.

Huiping Yan: We also implemented tier incentives for load rates, which correlated with volume levels, hence fully leverage economies of scale so as to improve overall loading efficiency. Third, we continuously improved fleet management by establishing refined, standardized cost model for vehicle operations and maintenance as benchmark for our drivers, thereby lowering operating and maintenance cost continuously. In terms of sorting cost, on one hand, we continue to invest in automated equipment that is armed with digitized solutioning at our sorting hubs, utilizing real-time monitoring and upgrading old equipment to improve operational efficiency and facility automation level while controlling costs. On the other hand, we have reviewed our workforce deployment and enhanced individual accountability by a clear reward and reprimand mechanism, hereby boosting per capita productivity.

Speaker #1: Third, we continuously improved fleet management by establishing a refined, standardized cost model for vehicle operations and maintenance as a benchmark for our drivers, thereby lowering operating and maintenance costs continuously.

Speaker #1: In terms of sorting cost, on one hand, we continue to invest in automated equipment that is armed with digitized solutioning at our sorting hubs.

Speaker #1: Utilizing real-time monitoring and upgrading old equipment to improve operational efficiency and facility automation level while controlling costs. On the other hand, we have reviewed our workforce deployment and enhanced individual accountability by a clear reward and reprimand mechanism.

Speaker #1: Hereby boosting per capita productivity. In terms of our cost reduction targets, we expect the core transit-related cost to further decrease for the full year.

Huiping Yan: In terms of our cost reduction targets, we expect the core transit-related costs to further decrease for the full year. Beyond transit centers, we will place greater emphasis on end-to-end cost reduction. This year, we will focus heavily on network optimization, further empowering our outlets and enhancing their operational capabilities as well. We'll continue to encourage outlets to install automated equipment, deploy unmanned vehicles, and promote direct link models to continuously reduce last mile cost. This entire end-to-end cost focus will further improve our own sorting and transit related costs as well, because it's all integrated and interrelated.

Speaker #1: Beyond transit centers, we will place greater emphasis on end-to-end cost reduction. This year, we will focus heavily on network optimization, further empowering our outlets and enhancing their operational capabilities as well.

Speaker #1: We'll continue to encourage outlets to install automated equipment, deploy unmanned vehicles, and promote direct link models to continuously reduce last mile cost. This entire end-to-end cost focus will further improve our own sorting and transit-related cost as well.

Speaker #1: Because it's all inter-integrated and inter-related. As far as the impact on the fuel prices, due to the tension in the Middle East, domestic diesel prices increased, impacting our total network-wide cost in the second quarter.

Huiping Yan: As far as the impact on the fuel prices, due to the tension in the Middle East, domestic diesel prices increased. Impact on our total network wide cost in the Q2. For the question relating to anti-involution. Since the Chinese New Year, the anti-involution policy has been consistently implemented and the effects are meaningful, particularly in major high volume regions. Meanwhile, enforcement has been progressively tightened in certain provinces where implementation had previously lagged. As the policy continues to take effect, the volume of low price parcel has continued to shrink, driving a further recovery in price level and effectively restoring the level of interest of both outlets and couriers. Benefiting from this improving competitive environment, the company has achieved simultaneous growth in volume and pricing with restoration of market share. As the industry leader, ZTO remains committed to closely stay closely aligned with the government's anti-involution initiatives. We will continue our balanced development strategy that prioritizes service quality while effectively safeguarding the rights and interests of our last mile network. We are confident that with productive regulatory guidance, the industry will develop in a healthier manner, a more orderly, competitive competition, and also pricing level will be stable overall.

Speaker #1: Now for the question relating to anti-involution. Since the Chinese New Year, the anti-involution policy has been consistently implemented, and the effects are meaningful, particularly in major high-volume regions. Meanwhile, enforcement has been progressively tightened in certain provinces where implementation had previously lagged.

Speaker #1: As the policy continues to take effect, the volume of low-priced parcels has continued to shrink, driving a further recovery in price levels and effectively restoring the level of interest of both outlets and couriers.

Speaker #1: Benefiting from this improving competitive environment, the company has achieved simultaneous growth in volume and pricing, with restoration of market share. As the industry leader, ZTO remains committed to closely aligning with the government's anti-involution initiatives.

Huiping Yan: As the industry leader, ZTO remains committed to closely stay closely aligned with the government's anti-involution initiatives. We will continue our balanced development strategy that prioritizes service quality while effectively safeguarding the rights and interests of our last mile network. We are confident that with productive regulatory guidance, the industry will develop in a healthier manner, a more orderly, competitive competition, and also pricing level will be stable overall.

Speaker #1: We will continue our balanced development strategy that prioritizes service quality while effectively safeguarding the rights and interests of our last mile network. We are confident that, with productive regulatory guidance, the industry will develop in a healthier manner, with more orderly competition, and also pricing levels will be stable overall.

Sophie Li: 谢谢赖总。

[Analyst] (Morgan Stanley): [Foreign language]

Speaker #2: 谢谢管理层。 Your next question comes from Steve Q with Goldman Sachs.

Operator: Your next question comes from Steve Q. with Goldman Sachs.

Operator: Your next question comes from Steve Xu. with Goldman Sachs.

Speaker #3: Hey. 早上好，赖总，严总，Sophie。谢谢，这是我的提问。那么我想提一个AI相关的问题。那在过去呢，我们看到中通也是较早的规模化采用了电子面单和智能分拣，那也形成了一定的先发优势。刚才也听到赖总对自动化水平提升、数字化工具应用和无人车的一些分享。那么我想问，未来在AI的时代，我们如何去巩固和扩大我们在技术方面的一个领先优势？那有哪一些已经落地的和AI相关的举措，以及未来对AI和快递各个环节赋能的一个展望？ Thanks, management, for taking my questions. I would like to ask a question on AI. So ZTO was an early mover in large-scale adoption of electronic waybills and automated sorting in the past.

Steve Q: 早上好，赖总、严总、Sophia，谢谢接受我的提问。那么我想提一个 AI 相关的问题。那在过去呢，我们看到中通也是较早规模化采用了电子面单和智能分拣，那也形成了一定的先发优势。刚才也听到赖总对自动化水平提升、数字化工具应用和无人车的一些分享。那么我想问未来在 AI 的时代，我们如何去巩固和扩大我们在技术方面的一个领先优势？那有哪些已经落地的和 AI 相关的举措，以及未来对 AI 和快递各个环节赋能的一个展望？ Thanks management for taking my questions. I would like to ask the questions on AI. So ZTO was an early mover in large scale adoption of electronic labels and automated sorting in the past, which established a first mover advantage. So I want to ask, in the AI era, how do you consolidate and expand this technology leadership?

Steve Xu: [Foreign language] Sophia, [Foreign language]. Thanks management for taking my questions. I would like to ask the questions on AI. So ZTO was an early mover in large scale adoption of electronic labels and automated sorting in the past, which established a first mover advantage. So I want to ask, in the AI era, how do you consolidate and expand this technology leadership?

Speaker #3: Which established a first-mover advantage. So I want to ask, in your AI era, how do you consolidate and expand this technology leadership? And could you share what initiatives have already been implemented, as well as your outlook on how AI will empower the various stages of the express delivery value chain going forward?

Steve Q: Could you share what initiatives have already been implemented as well as your outlook on how AI will empower the various stages of the express delivery value chain going forward? Thank you.

Steve Xu: Could you share what initiatives have already been implemented as well as your outlook on how AI will empower the various stages of the express delivery value chain going forward? Thank you.

Speaker #3: Thank you.

Meisong Lai: 感谢你的提问。我们的核心思路是让AI深度融入全链路，从降本增效走向经营赋能，已落地的成效主要体现在三方面：一，分拣端。3D数字孪生加机器视觉已覆盖25个中心，错误分率降低60%以上，显著节省人工成本。二，客服端。智能客服自动处理超70%全链路工单，问小通等智能体覆盖网点80%日常咨询，已季度在线减人工费再降5个百分点。三，末端调度。高精度地图在驿站选址、配送路径规划等场景深度应用，帮助大型网点降低20%以上的配送成本。在闪送业务里也实现了支撑日均千万级订单精准调度。在大规模应用上，我们正推动从执行工具向经营决策升级。我们上线的智能问答系统已应用于客户分析、路由规划、外部指数、超车运营分析、服务质量、网点竞争成本等领域，让管区的经营决策分析从几天缩短到小时级。展望未来，我们将构建多智能体架构，让系统自主给出运营各环节优化建议。未来半年内完成语音客服AI升级，覆盖全网近6,000家网点。总之，AI已成为中通核心战略之一，我们将持续把技术转化为成本与时效优势，巩固领先地位，为投资人创造长期价值。谢谢。

Meisong Lai: [Foreign language]

Speaker #4: 感谢你的提问。我们的核心思路是让AI深度融入全链路，从降本增效走向经营赋能。以落地的成效主要体现在三方面：一，分解单；三，为数字连升加支持视觉与覆盖25个中心；触分率降低60%以上，显著节省人工成本；二，客服单，智能客服自动处理超70%全链路工单，问小通等智能体覆盖网点80%日常咨询；一季度在线卷人工力再降5个百分点；三，末端调度，自年高精度地图在驿站闲置，配送路径规划等场景深度应用，帮助大型网点降低20%以上的党部成本，在闪现业务里也实现了支撑日均千万级订单精准调度。在大规模应用上我们正推动从执行工具向经营决策申请。我们上线了智能问数系统，以应用于客户分析、路由规划、外部指数、操作运营分析、服务质量、网点进港成本等领域，让管区的经营决策分析从几天缩短到小时间。展望未来，我们将构建多智能体架构，让系统自主给出运营各环节优化建议，未来半年内完成语音客服、AI申请、覆盖全网经6000家网点。总之，AI已成为中通核心战略之一，我们将持续把技术转化为成本与时效优势，巩固领先地位，为投资人创造长期价值。谢谢。

Speaker #2: Thank you for your question. Our core strategy is to continuously deepen integration of our AI technology across the entire network, including the transition from cost reduction and efficiency enhancements to operational empowerment.

Huiping Yan: Thank you for your question. Our core strategy is to continuously deepen integration of our AI technology across the entire network, including transition from cost reduction and efficiency enhancements to operational empowerment. The tangible results achieved to date are primarily reflected in 3 areas: 1, sorting operations. The combination of 3D digital twins and machine vision technology has been deployed across around 25 or so sorting centers, reducing the miss sorting rate by over 60% while significantly lowering labor cost. 2, customer service. Our AI-powered customer service system now automatically process over 70% of end-to-end service tickets. All agents such as Wen Xiaotong cover more than 80% of daily business inquiries from network outlets. In Q1, the rate of customer service escalations to human agents was further reduced by 5 percentage points. 3, last mile dispatch. Leveraging our proprietary high precision mapping data, we have applied AI in scenarios such as last mile post site selection and delivery route optimization. This has helped large network outlets reduce short distance transportation costs by 20%. In the retail parcels business, our AI system now support the clear dispatch of tens of millions of daily orders. In an era of large language models, we are advancing their evolution of implementation from execution tools to operational decision making partners. Our smart data inquiry system has been deployed across various domains, including customer analytics, route planning, e-commerce platform service index monitoring, operational performance analysis, service quality assessment, and inbound cost management for network outlets. As a result, the time required for operational decision making at the regional management level has been shortened from several days to just hours. Looking ahead, we will continue to build a multi-agent architecture that enables the system to autonomously provide optimization recommendations across various operational functions. Within the next 6 months, we plan to complete the upgrade of our voice customer service AI, which will be deployed across nearly 6,000 network outlets nationwide. In summary, AI technology and its implementation has become a core strategy prioritized for ZTO. We will continue to translate technological advancements into cost and time efficiency advantages, further solidifying our leadership position and generate long term value for our shareholders.

Speaker #2: The tangible results achieved to date are primarily reflected in three areas: one, sorting operations. The combined combination of 3D digital twins and machine vision technology has been deployed across around 25 or so sorting centers, reducing the missed sorting rate by over 60% while significantly lowering labor costs.

Speaker #2: Two, customer service. Our AI-powered customer service system now automatically processes over 70% of end-to-end service tickets. All agents, such as Wen Xiaotong, cover more than 80% of daily business inquiries from network outlets.

Huiping Yan: Our AI-powered customer service system now automatically process over 70% of end-to-end service tickets. All agents such as Wen Xiaotong cover more than 80% of daily business inquiries from network outlets. In Q1, the rate of customer service escalations to human agents was further reduced by 5 percentage points. Three, last mile dispatch. Leveraging our proprietary high precision mapping data, we have applied AI in scenarios such as last mile post site selection and delivery route optimization. This has helped large network outlets reduce short distance transportation costs by 20%. In the retail parcels business, our AI system now support the clear dispatch of tens of millions of daily orders.

Speaker #2: In the first quarter, the rate of customer service escalations to human agents was further reduced by 5 percentage points. Three, last mile dispatch. Leveraging our proprietary high-precision mapping data, we have applied AI in scenarios such as last mile post-site selection and delivery route optimization.

Speaker #2: This has helped large network outlets reduce short-distance transportation costs by 20%. In the retail parcels business, our AI system now supports the clear dispatch of tens of millions of daily orders.

Speaker #2: In the era of large language models, we are advancing their evolution of implementation from execution tools to operational decision-making partners. Our smart data inquiry system has been deployed across various domains, including customer analytics, route planning, e-commerce platform service index monitoring, operational performance analysis, service quality assessment, and inbound cost management for network outlets.

Huiping Yan: In an era of large language models, we are advancing their evolution of implementation from execution tools to operational decision making partners. Our smart data inquiry system has been deployed across various domains, including customer analytics, route planning, e-commerce platform service index monitoring, operational performance analysis, service quality assessment, and inbound cost management for network outlets. As a result, the time required for operational decision making at the regional management level has been shortened from several days to just hours. Looking ahead, we will continue to build a multi-agent architecture that enables the system to autonomously provide optimization recommendations across various operational functions.

Speaker #2: As a result, the time required for operational decision-making at the regional management level has been shortened from several days to just hours. Looking ahead, we will continue to build a multi-agent architecture that enables the system to autonomously provide optimization recommendations across various operational functions.

Huiping Yan: Within the next 6 months, we plan to complete the upgrade of our voice customer service AI, which will be deployed across nearly 6,000 network outlets nationwide. In summary, AI technology and its implementation has become a core strategy prioritized for ZTO. We will continue to translate technological advancements into cost and time efficiency advantages, further solidifying our leadership position and generate long term value for our shareholders.

Speaker #2: Within the next six months, we plan to complete the upgrade of our AI, which will be deployed across nearly 6,000 network outlets nationwide. In summary, AI technology and its strategy are prioritized for ZTO.

Speaker #2: We will continue to translate technological advancements into cost and time efficiency advantages, further solidifying our leadership position and generating long-term value for our shareholders.

Meisong Lai: 谢谢。

Steve Xu: [Foreign language]

Speaker #3: Your next question comes from Aaron Luo with UBS.

Operator: Your next question comes from Aaron Luo with UBS.

Speaker #4: Hey, 赖总、严总、索菲总好呀。感谢你们接受我的提问。我这边有两个问题。第一个是我们观察到在返利卷这个背景下，行业增速是有所退坡的，所以想跟你们请教一下，目前你们对行业增速的预期是不是发生了变化？第二个就是竞争格局是否也在加速分化，就在这个背景下。第二个问题是关于咱们的散件业务的。想再跟你们跟进一下咱们散件业务的发展情况，包括目前散件业务的单票利润的水平是如何的。 Let me translate myself. Thank you, management, for taking my question. I have two of them. First, we have observed that industry growth has decelerated against the backdrop of the anti-evolution trend.

Aaron Luo: 哎，赖总、严总、索菲总好呀。感谢你们接受我的提问。我这边有两个问题，第一个是我们观察到在反内卷这个背景下，行业增速是有所这个退坡的，所以想跟你们请教一下，就是目前你们对行业增速的预期是不是发生了变化？那第二个就是竞争格局是否也在加速分化，就在这个背景下。那第二个问题是关于咱们的这个散件业务的，想再跟你们跟进一下，咱们散件业务的发展情况，包括这个目前散件业务的单票利润的水平是如何的。Thank you, management, for taking my question. I have two of them. First, we have observed that industry growth has decelerated against the backdrop of the anti-involution trend. So could you please kindly share your latest outlook on industry growth expectations and whether the competitive landscape is experiencing accelerated divergence?

Aaron Luo: [Foreign language]. Thank you, management, for taking my question. I have two of them. First, we have observed that industry growth has decelerated against the backdrop of the anti-involution trend. So could you please kindly share your latest outlook on industry growth expectations and whether the competitive landscape is experiencing accelerated divergence?

Speaker #4: Could you please kindly share your latest outlook on industry growth expectations, and whether the competitive landscape is experiencing accelerated divergence? Second, regarding our retail parcel business, could you please kindly provide an update on its current development status and the potential profit level at this stage?

Aaron Luo: Second, regarding our retail parcel business, could you please kindly provide an update on its current development status and the parcel profit level at this stage? Thank you so much.

Speaker #4: Thank you so much.

Speaker #5: 感谢你的提问。第一个问题就是增速预期和竞争格局。随着返利卷持续推进，低价无需竞争逐步出清，行业正从初范式规模扩张转向高质量发展。经营质量优先的新阶段，经历阶段性调整后，行业增长节奏更趋稳健，增长重心从单纯借量增速转向规模效益、质量协同提升的可持续增长。快递行业竞争本质是服务品质、成本优势与网络能力的综合较量。伴随行业高质量转型，份额加速向头部集中。格局分化明显，竞争焦点从价格战转向综合实力比拼。中通坚持量子并举，一方面夯实借量领先地位，合理维护服务溢价；另一方面持续强化成本优势，拉大服务品质差距，推动市场份额与经营质量同步提升，巩固行业龙头的领先优势。第二个散件业务发展和利润的情况，散件业务尤其是逆向件业务的快速发展，是中通在行业高质量发展背景下渐行量子并举策略打造产品分层体系的重要成果。今年一季度，我们散件日均借量约970万单，增速是很明显的。进入二季度，我们逆向件规模进一步增长，日均借量超过940万单。尽管逆向件的价格因市场竞争有所回落，但得益于规模效应与精细化的成本管控，使单票成本也在持续优化。目前逆向件的单票利润贡献来高于普通电商线、电商精致件、有效提升了公司整体的单票盈利能力。谢谢。

Meisong Lai: 感谢你的提问。第一个问题就是增速预期和竞争格局。随着反内卷持续推进，低价无序竞争逐步出清，行业正从粗放式规模扩张转向高质量发展、经营质量优先的新阶段。经历阶段性调整后，行业增长节奏更趋稳健，增长重心从单纯件量增速转向规模、效益、质量协同提升的可持续增长。快递行业竞争本质是服务品质、成本优势与网络能力的综合较量。伴随行业高质量转型，份额加速向头部集中，隔绝分化明显。竞争焦点从价格战转向综合实力比拼。中通坚持量质并举，一方面夯实件量领先地位，合理维护服务溢价；另一方面持续强化成本优势，拉大服务品质差距，推动市场份额与经营质量同步提升，巩固行业龙头的领先优势。第二个，闪件业务发展和这个利润的情况。闪件业务，尤其是逆向件业务的快速发展，是中通在行业高质量发展背景下践行量质并举策略、打造产品分层体系的重要成果。今年一季度，我们闪件日均件量约970万单，这个增速是很明显的。进入二季度，我们逆向件规模进一步增长，日均件量超过940万单。尽管逆向件的价格因市场竞争有所回落，但得益于规模效应与精细化的成本管控，使单票成本也在持续优化。目前逆向件的单票利润贡献乃高于普通电商件、电商经济件，有效提升了公司整体的单票盈利能力。谢谢。

Meisong Lai: [Foreign language]

Huiping Yan: Thank you for your question. Your first question relates to the industry growth and competitive landscape. As the anti-involution policy continues to advance, low price competition is gradually diminishing. The industry is shifting from extensive scale-driven expansion to higher quality development based on operational efficiency. Following a period of adjustment, the industry's growth trajectory has become more pragmatic, with the focus shift from more sheer parcel volume growth to sustainable growth driven by synergistic improvements across scale, profitability, and service quality. The nature of competition in the express delivery industry involves a comprehensive contest of service quality, cost advantage, and network capability. As the industry transitions towards higher quality development, market share is expected to further consolidate among top players, and the competitive landscape is becoming even more polarized.

Speaker #3: Thank you for your question. Your first question relates to the industry growth and competitive landscape. So, as the anti-evolution policy continues to advance, low-priced competition is gradually diminishing.

Speaker #3: The industry is shifting from extensive, scale-driven expansion to higher-quality development based on operational efficiency. Following a period of adjustment, the industry's growth trajectory has become more pragmatic, with the focus shifting from sheer parcel volume growth to sustainable growth driven by synergistic improvements across scale, profitability, and service quality.

Speaker #3: The nature of competition in the express delivery industry involves a comprehensive contest of service quality, cost advantage, and network capability. As the industry transitions towards higher-quality development, market share is expected to further consolidate among top players.

Speaker #3: And the competitive landscape is becoming even more polarized. The competitive focus has shifted from price-driven to relying on comprehensive strength. ZTO is committed to pursuing both volume and quality growth.

Huiping Yan: The competitive focus has shifted from price-driven to relying on comprehensive strength. ZTO is committed to pursuing both volume and quality growth. On one hand, we will solidify our leading position in parcel volume while sustaining our brand premium, which is based on service reach and stability. On the other hand, we will further strengthen our cost advantage and widen the service quality gap versus peers. This will drive concurrent gains in both market share and operating efficiency, enforcing our leading position in the industry. Your second question relating to our retail parcel businesses. The rapid development of our retail parcel business, specifically, the reverse logistic parcels, is an outcome of our volume-quality balanced strategy and our commitment to build a tiered product portfolio amid the industry's high-quality development.

Speaker #3: On one hand, we will solidify our leading position in parcel volume while sustaining our brand premium, which is based on service reach and stability.

Speaker #3: On the other hand, we will further strengthen our cost advantage and widen the service quality gap versus peers. This will drive concurrent gains in both market share and operating efficiency, enforcing our leading position in the industry.

Speaker #3: Your second question relating to our retail parcel businesses: The rapid development of our retail parcel business, specifically the reverse logistics parcels, is an outcome of our volume-quality balanced strategy and our commitment to build a tiered product portfolio amid the industry's high-quality development.

Huiping Yan: In Q1, average daily retail parcel volume reached approximately 9.7 million, which indicates a meaningful growth rate. In Q2, our reverse logistic parcel volume further increased with our average daily volume exceeding 9.4 million. Although the price of reverse logistic parcel has slightly declined due to competition, the unit cost has continued to optimize through economies of scale and refined cost management. Currently, the unit profit contribution of reverse logistic parcel remains higher than that of our traditional e-commerce parcels.

Speaker #3: In Q1, average daily retail parcel volume reached approximately 9.7 million, which indicates a meaningful growth rate. In the second quarter, our reverse logistics parcel volume further increased, with our average daily volume exceeding 9.4 million.

Speaker #3: Although the price of reverse logistic parcel has slightly declined due to competition, the unit cost has continued to optimize through economies of scale and refined cost management.

Speaker #3: Currently, the unit profit contribution of reverse logistic parcels remains higher than that of our traditional e-commerce parcels.

Speaker #2: 谢谢赖总严总。

Speaker #3: Your next question comes from Mu Jinlin with CITES Securities.

Operator: Your next question comes from Mujing Lin with CITIC Securities.

Operator: Your next question comes from Mujin Lin with CITIC Securities.

Mujing Lin: Hey.

Mujin Lin: Hey.

Speaker #2: 好的，谢谢赖总、严总和魏总，各位领导上午好。我是中信证券交易物流胡志明团队林木瑾，也非常感谢管理层给我们团队提问的机会。我这边可能主要就想请教一个小问题，就是目前我们也看到在广东、山东等地陆陆续续有推进小规模的权益保障的这样一个立法进程在做。那么想请教一下各位领导，就是我们怎么去展望今年下半年社保推进的一个节奏。如果下半年社保在主要的产量区逐步去落地，我们对全网成本端的一个量化的影响是否有一个大概的指引或者分析？我的问题就是这个，谢谢。然后我翻译一下我自己的问题。So first of all, thank you for picking me up and I guess my question will go with the legislation of the protected rights of delivery workers in the end.

Mujing Lin: 好的，谢谢。赖总、严总，各位领导，上午好。我是中信证券交通物流沪深团队的林牧景。也非常感谢管理层给我们团队这个提问的机会。那我这边可能主要就想请教一个小问题，就是目前我们也看到，在广东、山东等地，陆陆续续有推进这个小哥末端权益保障的这样一个立法进程在做。那么想请教一下各位领导，就是我们怎么去展望今年下半年Social Security推进的一个节奏？那如果下半年Social Security在这个主要的产区逐步去落地，那我们对这个全网成本端的一个量化的影响是否有一个大概的指引或者分析？我的问题就是这个。谢谢。然后我翻译一下我自己的问题。So first of all, thank you for picking me up.

Mujin Lin: [Foreign language]. So first of all, thank you for picking me up.

Mujing Lin: I guess, my question will go with the legislation of the protected rights of delivery workers in the end. As we can see that, the legislation of protecting the rights of delivery workers is being like gradually implemented in the place like Guangdong and Shandong and so much support. How should we envision the pace of the Social Security promotion? If it is gradually implemented in H2 of the year, would there be any guidance regarding to the quantitative impact on the cost of the entire network? 谢谢.

Mujin Lin: I guess, my question will go with the legislation of the protected rights of delivery workers in the end. As we can see that, the legislation of protecting the rights of delivery workers is being like gradually implemented in the place like Guangdong and Shandong and so much support. How should we envision the pace of the Social Security promotion? If it is gradually implemented in H2 of the year, would there be any guidance regarding to the quantitative impact on the cost of the entire network? [Foreign language].

Speaker #2: So, as we can see, the legislation protecting the rights of delivery workers is being gradually implemented in places like Guangdong and Shandong, and so on and so forth.

Speaker #2: So how should we envision the pace of the Social Security promotion? And if it is gradually implemented in the second half of the year, would that provide any guidance regarding the quantitative impact on the cost of the entire network?

Speaker #2: 谢谢。

Speaker #4: 感谢你的提问。总统自成立以来始终践行同天共享理念，高度关注网络合作伙伴与一线快递员的权益。我们认为社保交纳与反内卷政策本质意志和新都市保障基层权益推动行业健康发展。我们也非常欢迎社保政策的早日落地，短期来看社保政策落地会相应增加单票成本、单从长远来看建立稳定有保障的用工体系，有助于增强网络凝聚力，降低人员流失率，从而进一步憨实末端服务质量。这位头部企业中通将技术发挥表率作用，推动行业在合规基础上实现高质量发展。未来如有具体的社保落地措施出台，我们将积极响应政府号召主动配合政策落实。谢谢。

Meisong Lai: 感谢你的提问。中通自成立以来始终践行同庆共享理念，高度关注网络合作伙伴与一线快递员的权益。我们认为社保缴纳与反内卷政策本质一致，核心都是保障基层权益，推动行业健康发展。我们也非常欢迎社保政策的早日落地。短期来看，社保政策落地会相应增加单票成本。但从长远来看，建立稳定有保障的用工体系，有助于增强网络凝聚力，降低人员流失率，从而进一步夯实末端服务质量。作为头部企业，中通将继续发挥表率作用，推动行业在合规基础上实现高质量发展。未来如有具体的社保落地措施出来，我们将积极响应政府号召，主动配合政策落实。谢谢。

Meisong Lai: [Foreign language]

Speaker #3: Thank you very much for your question. Our translator will now supplement the chairman's answer. Since the establishment of our shared success philosophy and practice, we have placed a high priority on the rights and interests of our network partners in frontline careers, who believe that the implementation of social security coverage is aligned with the objectives of anti-inflation policy, as both aim to safeguard frontline workers' interests and promote healthy industry development.

Huiping Yan: Thank you very much for your question. I'll translate and supplement for chairman's answer. Since the establishment of our shared success philosophy and practice, we place a high priority on the rights and interests of our network partners and frontline couriers. We believe that the implementation of Social Security coverage is aligned with the objectives of anti-involution policy, as both aim to safeguard frontline workers' interests and promote healthy industry development. We welcome the early implementation of Social Security policies. In the short term, the rollout of these policies may lead to a increase in per parcel cost. However, from a long-term perspective, establishing a more stable and secured employment system will enhance network cohesiveness, reduce workforce turnover, and further solidify the quality of our last mile services.

Speaker #3: We welcome the early implementation of social security policies in the short term; the rollout of these policies may lead to an increase in per-parcel cost.

Speaker #3: However, from a long-term perspective, establishing a more stable and secured employment system will enhance network cohesiveness, reduce workforce turnover, and further solidify the quality of our last-mile services.

Huiping Yan: As an industry leader, ZTO will continue to lead by example to promote the sector's compliant, high quality development. Going forward, if more specific Social Security implementation measures are introduced, we will proactively respond to the government's call and fully support policy implementation. As we have been previously communicating that, on our consolidated group, our compliance level with the Social Security is much higher. Yes, indeed, at the outlets level, there are various different practices. The major impact perhaps will come from the network partners, and we will be supportive in helping our network partner to become compliant and also help them reducing costs as what we are currently implementing is indeed will generating results to help them coping with any additional cost increases coming from the Social Security policies implementation.

Speaker #3: As an industry leader, ZTO will continue to lead by example to promote the sector's compliant, high-quality development. Going forward, if more specific social security implementation measures are introduced, we will proactively respond to the government's call and fully support policy implementation.

Speaker #3: As we have been previously communicating, on our consolidated group, our compliance level with social security is much higher than, yes, indeed.

Speaker #3: At the outlets level, there are various different practices, so the major impact perhaps will come from the network partners, and we will be supportive and helping our network partner to become compliant.

Speaker #3: And also help them reduce costs, as what we are currently implementing will indeed generate results to help them cope with any additional cost increases coming from the social security policies implementation.

Speaker #3: Hope that answers your question.

Huiping Yan: Hope that answers your question.

Speaker #2: Okay, thank you.

Mujing Lin: Okay. Thank you.

Mujin Lin: Okay. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Huiping Yan for any closing remarks.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to Huiping Yan for any closing remarks.

Speaker #4: Thanks, everybody, for joining us for the call again today. We have generated positive results and performance going forward. We are continuously relying on our strategy of a balanced approach with quality first, and scale and volume improvements, with a reasonable level of profit that is equitably shared among our brand participants.

Huiping Yan: Thanks everybody for joining us for the call again today. We have generated positive results and performance going forward are continuously relying on our strategy of a balanced approach with quality first, and scale and volume improvements with reasonable level of profit that is equitably shared among our brand participants. Going forward, we look forward to speaking with you again. Thanks again for your support and attention.

Speaker #4: So, going forward, we look forward to speaking with you again, and thanks again for your support and attention.

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