Dingdong (Cayman) Ltd. Q4 FY2021 earnings call

2021 Performance Highlights - Delivered 22.3 billion parcels in 2021, becoming the first express delivery company globally to exceed 20 billion parcels annually with a 20.6% market share. - In the fourth quarter of 2021, parcel volume was 6.34 billion, up 17.2%, and net income grew 35% year-over-year to CNY 1.75 billion. - Maintained superior service quality and customer satisfaction, with market share gain, service quality, and earnings progress. ### 2022 Objectives - Achieve solid market share growth by ensuring network health, relying on objective data for network partners, visiting outlets to understand challenges, and building last-mile post to alleviate bottlenecks. - Ensure profitability and earnings growth by building a digitized operating process framework for end-to-end visibility and better pricing decisions. - Continue lead in service quality by improving infrastructure, sorting center layout, performance evaluations, and reward/reprimand regulations. - Ensure safety of pickup/delivery, transit/sorting by building and enforcing safety measures and maintaining integrity. - Enhance ecosystem development by promoting collaboration, cross-pollination, and conveying a comprehensive logistics brand concept.

In the fourth quarter of 2021, ZTO delivered a parcel volume of 6.34 billion, which increased by 17.2%. For the full year 2021, the company delivered 22.3 billion parcels, a 31.1% increase. Total revenue in the fourth quarter was CNY 9.2 billion, an increase of 11.6%, and for the full year, it was CNY 30.4 billion, an increase of 20.6%. Adjusted net income for the full year increased by 7.8% to CNY 4.9 billion. The core express delivery business's annual average selling price (ASP) declined by 5.7%, while the unit cost of revenue for the core express delivery business decreased by 2.9% for the year. Operating cash flow was CNY 7.2 billion for the full year 2021, an increase of 45.8%. The leading market share further expanded by 0.2 points to 20.6% for the full year.

The company expects the profit volume of 2022 to be in the range of CNY 26.3 billion to CNY 27.6 billion, representing an 18% to 24% year-over-year increase, which is well above the anticipated industry average. These estimates are management's current and preliminary view and are subject to change.

Risks - Market uncertainties which may cause actual results to differ from forward-looking statements. - Potential cost fluctuations due to factors like higher fuel prices, labor cost inflation, and impact from COVID resurgence which might bring volume fluctuation.

Q: About cost trend considering fuel price, labor cost inflation, and COVID resurgence impact, and profitability outlook.

A: Management believes cost productivity will continue due to digitized initiatives and operating process management. On profitability, expects significant improvement compared to 2021 as pricing stabilizes with industry shift to higher quality earnings.

Q: What is ZTO's investment plan in 2022 and view on logistics market after JD acquiring Debang?

A: Consistently invest in infrastructure, vehicle upgrades, automation improvement, support network partners financially, and invest in technology/digitization. Regarding JD's acquisition of Debang, will explore feasible inorganic growth for developing comprehensive capabilities in a cost-efficient and synergistic way.

Q: View on SEC ADR political risk and progress of 3 networks combination?

A: Actively evaluating options like Hong Kong primary dual listing for proactive control. On 3 networks, focused on efficiencies from infrastructure investment, with expected cost reductions and growth in non-center-to-center operating layers.

Q: COVID lockdown impact on volume and update on time definite parcel business?

A: Acknowledged COVID impact but refrained from quantifying specific volume impact. Time-definite product rolled out last year for standardized time commitments, aiming for medium to long-term volume and revenue contribution through standardized time-definite services.