ZTO Express (Cayman) Inc. Q2 FY2024 earnings call

• ZTO maintained industry-leading service quality in Q2 2024, with parcel volume up 10% YOY to RMB 8.45 billion and adjusted net income up 11% YOY to RMB 2.81 billion.
• Despite macroeconomic softness, online consumption growth drove express industry volume up 21.3%, but ZTO focused on service quality and eliminated unprofitable volumes, leading to a 2% market share contraction.
• ZTO aimed to upgrade customer mix, refine products/services, and enhance brand/customer satisfaction. Initiatives included revamping network policies, enhancing service quality, advancing last-mile profit allocation, expanding last-mile offerings, enhancing high-end products, and monitoring market prices.
• In Q2, ZTO's end-to-end delivery time was top among Tongda peers, customer complaint rate decreased, and retail parcel ratio extended.

In the second quarter of 2024, ZTO's parcel volume reached RMB 8.45 billion, a 10% year-over-year growth. Adjusted net income was RMB 2.81 billion, an 11% increase from the previous year. The core express delivery business had an ASP flat at RMB 1.24. Gross profit was RMB 3.6 billion, up 9.6%, with a gross profit margin rate of 33.8%. Income from operations was RMB 3.2 billion, up 11.7%, and adjusted EBITDA was RMB 4.3 billion, up 11.7%.

• Reiterated 2024 volume growth guidance of 15% to 18%, based on management's current preliminary view subject to change.
• Committed to balanced approach for sustainable and profitable growth, prioritizing service quality and differentiated products to enhance brand value.

• Intense price competition in the express delivery industry, with low-priced e-commerce parcels increasing and price competition intensifying.
• Macro环境 uncertainties and market fluctuations that could impact actual results differing from forward-looking statements.

Q: About parcel volume growth slower than industry, and guidance for second half. Also, unit profit stability and operating efficiencies.

A: Parcel volume growth slower due to focus on quality over non-profitable volumes. Second half plan to focus on quality and balanced volume-profit. Unit profit stable due to capacity reserves and flexibility, with potential for continued cost efficiency release.

Q: Retail parcel volume, current daily volume, targets, and cost reduction initiatives for network and last-mile.

A: Current daily non-ecommerce volume over 5.4 million, year-end goal 6 million daily. Strategies include increasing retail parcel ratio via marketing, courier training, pre-event quality management, and collaboration with e-commerce platforms. Cost reduction initiatives for last-mile involve improving courier income, outlet profitability, and direct delivery linkages to reduce costs.