ZTO Express (Cayman) Inc. Q1 FY2025 earnings call

• In the first quarter of 2025, ZTO maintained industry-leading service quality, with parcel volume growth and adjusted net income growth. The express delivery industry had volume growth but faced challenges of lower-value parcels and intensified price competition. - ZTO focused on service quality and volume growth, improved end-to-end timeliness and lowered unit costs through process standardization, and empowered network partners. - In the second quarter, despite intense competition, ZTO remained committed to its strategic goals, including enhancing network policy effectiveness, strengthening last-mile capabilities and profitabilities, optimizing revenue mix, and maximizing resource utilization. - Over the past 23 years, ZTO has evolved, and now aims to solidify its leadership in quality and scale while achieving reasonable profit.

In the first quarter of 2025, ZTO's total parcel volume reached 8.5 billion, up 19.1% year-over-year, and adjusted net income was CNY 2.3 billion, an increase of 1.6% year-over-year. Total revenue increased 9.4% to CNY 10.9 billion. The ASP for core express services saw a CNY 0.12 positive shift in the first quarter due to an enhanced product mix. Unit transportation and sorting costs decreased by CNY 0.09 year-over-year. The total cost of revenue was CNY 8.2 billion, an increase of 17.9%. The overall unit cost for the core express delivery business remained flat at CNY 0.94. Gross profit decreased 10.4% to CNY 2.7 billion, and the gross profit margin rate decreased 5.4 points to 24.7%. Income from operations increased 6.1% to CNY 2.4 billion, and the associated margin rate decreased 0.7 points to 22.1%. Adjusted EBITDA increased 0.7% to CNY 3.7 billion. Operating cash flow was CNY 2.4 billion for the quarter, an increase of 16.3%. Capital expenditure for Q1 totaled CNY 2 billion, and the company anticipates annual CapEx in 2025 to be between CNY 5.5 billion to CNY 6 billion.

• Reiterated the 2025 full year parcel volume guidance of 40.8 billion to 42.2 billion, which equates to a 20% to 24% increase year-over-year.

• Intense price competition in the express delivery industry which may impact revenue and profitability. - The proportion of lower-value parcels further enlarging, bringing uncertainty to revenue expansion. - Challenges in empowering network partners to improve last-mile service capabilities and cost competitiveness.

Q: About cost progress in direct linkage and contribution to unit cost cuts, and parcel volume growth and market competition around June 18 shopping festival.

A: Progress in direct linkage by optimizing outlet layouts, aiming to reduce last-mile cost and increase outlet earnings. Contribution to unit cost cuts through equipment installation and process improvement. Expectation on parcel volume growth around June 18 shopping festival, and view on price competition and ASP drop room considering early and intense price competition in 2025.