ZTO - Earnings call transcript Q3 2020 | ZTO Express (Cayman) Inc.

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Operator

Good day and welcome to the ZTO Express Third Quarter Financial Results 2020 Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I'd now like to turn the conference over to Sophie Li. ahead. go Please

Sophie Li

company's Hello today. operator. presentation thank for on you released ir.zto.com. Thank company's everyone results us the available are The today Relations website and joining at earlier you, and and IR the were Investor

Securities is achievements Chinese pleasure through the remarks who forward-looking ZTO today introduce business as by those all Huiping information, in and brief events Ms. translate They as company's company's Mr. Mr. their Further Meisong Chief future overview go beyond give operations his company's results, a Q&A company differ Lai. known law. Financial factors, cause and followed Reform operating control, him required XXXX. Officer. may Exchange will except included of On expectations in the I Chief does and and from and any new for questions events Lai, are Such Yan, and available under call read the now entirety of in financials Officer made will company's to the U.S. Executive to The market during a or this English. information and the session the result in highlights, Safe Commission. from on and to that Ms. and both update involve filings my are undertake other will in to the or this of forward-looking statements call will prepared to Meisong to the Harbor It current the statements before is and risks, Yan, not which are Mr. your Lai Chairman regarding and through obligation Act which that answer otherwise, of based performance any materially under difficult Mr. of many unknown Lai with the that guidance. management's Litigation I'll be you provisions uncertainties factors current conditions contain Securities statements which are actual other remind predict may statements. relate uncertainties forward-looking of or and the risks, follows. Private

Meisong Lai

to XXXX RMBXX.X everyone you you us quarter Hello continue year-over-year. Thank of to Meisong. extended high and In first. China third industry and and by translate RMBX.XX XX.X% quality thank percentage satisfaction. the the in to share today. our to achieve achieve service the for record growth in grew quarter quarter point while billion third of Allow volume XX.X% X.X Language] me volume billion sales XXXX, RMBXX.X joining express of billion. attained accelerating and delivery expansion, customer ZTO the achieved quarterly level volume market [Foreign a third we thrive throughout to

market. of level an As we X.X% fierce was competition with abrasive. with to growth strategy land a volume XXXX, persisted slide key focused relatively of profit our net and decline year-over-year of adjusted and accelerate peer In RMBX.XX billion costing third hourly quarter our profit expand the on remain less net

First continue we of development. investments and increase all, to infrastructure in

proportion X sales XX% of peer capacity, gap] to equal increased third group XXXX. in X,XXX of secured ending the particularly At structure the of trucks to of whole vehicle the blend to the made end up the and ratio. We RMBX.X more end [audio acquired a tax amount further operation total of trailer sales of of than have high transportation on receive and capacity have fleet quarter, the three to X.X. and and ratio will a increased We for the with try expenditure surpassed which year smart develop capital larger billion, quarters resources the

per cost the also third use combined [audio express the [indiscernible] decreased to unit We transportation compared rationalized In by sorting logistics. of and gap]. total X.X% cost further by have delivery quarter, the core

we seamlessly level of of the capacity new improvement loading in cost with raised our have further transportation upgraded the are integrated that efficiency construction of the and transportation to platform. and automation For improvement of facilities, enable and data-driven digitization

delayer strong ease are Secondly, X,XXX of we well network [audio upgrade approximate our XX% continue nearly as gap]. primary cash the well liquidity XX% and pressure as partners space policies to pressure profit their our and and and of we use quarter, By reserves we have third network. good coordinated of and across covering made local primary to net villages the over provide of end supportive direct XX,XXX our

pain While quality overall to and optimize and network from fair and efforts efficiency network. entire and improving persistent partners, targets eliminate complement to Such operational identify evaluation growth our our of experienced we and colleagues and network by to quality. others the will service ease we pick delivery our gap] extorted [audio helped early stated across underperforming

mile footprint. last total have of implemented delivery. XX% we mile last resources. delivery in ZTO approximately as of to our terminal accelerated [indiscernible] end quarter, the as scale express We third development and mile of of to lockboxes last and collaboratively mile started XX,XXX our various and By is well number actively alternative home last establish exceeded

RMBXXX and arrived. a year of and seeing to is which beginning China's the RMBXX.XX profit industry ZTO of express our bar We new XX, competitive of laid of future. tax the saving order in the ahead, delivery 'XX has is firmly The growth industry first industry's on delivery these driving and every managing listing in express have of represents Omni to meaningful believe cumulative the critical look edge to present the society economy the November Kong. that Hong XXXX, innovate million. million exceeded and begun and number journey shopping, from contribution value took to volume in exceeded stockholders ZTO in exchange mile from figures, a On secondary foundation quality when We RMBXXX capital of enhance future. raise not delivery last our ZTO the completed business. the and for stock orders just million XXXX to this recovery reflect the the future. accelerated opportunity to more to day million, Hong express the September its healthy payback We to successfully for marks Kong [indiscernible] the where On of China's volume past cost forward the has volume and RMBXXX cash of XX our Despite was November RMBXXX in is X our capital past community close yet

delivery increasing consolidation, maximizing relying Ecommerce creative practices served We everyone, almost will efficiency, scale are to are service [indiscernible] express comprehensive improvising access on has few the and and consumer formats. delivery sold shortening resources be the like become the to and industry to and develop and having accelerated utilize to the sequences bring express in production marketing ever Ecommerce Contrast users. distance ability logistic first capabilities fragment and continuing able has between and With ZTO even integrated advantage. increasingly there the end in and more

let's CFO, turn through our Yan our to Now Ms. financials. to us take

Huiping Yan

thank call. Thank you Hello the everyone to on Sophie. you, Meisong and

for the Detailed through China by flow and steady in go on our I'll and year-over-year quarter. website growth that RMB related of all please are go grew in through third quoted percentages our key recovery, of third quarter. strong economic our parcel its XXXX industry note mentioned, previous delivery analysis the highlights here. comparisons Driven a momentum I to to quarter. some posted performance, volume billion by express from XX.X% cash quarter ZTO and of financial the unless are specifically refers maintained unit As financials, changes numbers to economics RMBX.X

X% kilo. grow parcel confidence decline X.XX further to of business or while and waybills or to $X.XX to revenue declined for included parcel moderate by which share increased industry declined our The to network increased billion. by $X.XX single cost core market XX.X% sheet RMBX.X XX% partners from weight support by XX.X%. $X.XX, came price market was with network Our digital $X.XX keep XX.X% percentage relatively delivery associated X.X RMBX.X and billion. expanded with decline points stable. was to per to increased express the Total share Average of XX% the for subsidies drop. lower-priced weight compared decline incentives ASP our Total peers. by use revenues maintaining

for or amortization due $X.XX driven by to of by primarily percentage the cost RMBXXX delivery from margin million, of cost XX.X% this operating and decreased depreciation narrower CapEx because as of express our scale. by is remained unit rebates. cost core improved $X.XX and structure and RMBX.X stable. cost increased capacity revenues RMBX.X result the Gross points, XX.X% and automation as as increase, improved third decreased i.e. cost positive self-owned $X.XX also due decreased investment was excluding margin upgrade. subsidies cash government average increased increased at SG&A volume to remained SBC revenue of in super of use increased transportation X.X% to level to from the for X.X% X.X CapEx and combined margin previously unit of declined gross billion gross quarter to of as business RMBX.XX, and other RMB of by cost year. increased X.X% points Income corporate and economies high increased we SG&A expenses declined decline X.X Our our profit or as a decreased higher deduction RMBX.X and which infrastructure decline Unit $X.XX or result increased X.X% any to sorting unit than trucks. a investment. by X.X% and construction productivity by to Operating decline facility flow increased XX% salaries and percentage XX.X% while XX.X% described. by billion leverage low associated was to price a and headcount billion tax SG&A quarter, operations expanded mainly last X.X profit trailer

are our we to total exceed year, billion to RMBXX likely the plan reach for billion. year billion Looking RMBX CapEx to RMBX

estimate. land of in which million corporate to for our recognized million was Zhongtongji in for year as income enterprise XXXX. qualified a quarter such tax We RMBXXX.X of tax that refund this the are of XX% rate also Network, able larger quarter those pipeline resulted hence provided tax tracks by negative this of tax wholly-owned Shanghai a a subsidiary and from secure software RMBXX.X received income The key was preferential are

and market the our accelerated achieve annual condition the billion current business volume to company outlook, condition in share expected management's also to adjusted of our the manage X.X% range and RMBXX a representing to the X.X% representing is billion income of prepared are level current RMBX.X in questions. This line decrease of to current please prioritized maintained you. and range and turning to estimates preliminary increase is billion be year-over-year view still our market XX.X% targeted remarks. the change. to concludes to goal of gain billion net guidance. market to maintain for represent XX.X% RMBXX.X to These to Parcel considering a be while RMBX.X its Thank open Operator, year-over-year. the subject expected Now earnings,

Operator

Ronald the from We'll go Sachs. And the question-and-answer now Keung instructions] session. comes of first Goldman begin question [Operator ahead. Please

Ronald Keung

two There are questions.

ecommerce first particularly this for XXXX and just how you [indiscernible] landscape the ASPs that's the about are for my just we second will do the growing to new on see me year? pending ask goods. then and The do given look competitive into these models positive how what already for community, seemingly new entrants some outlook be JMG, groceries And trends want we year's XXXX I how some see with the next may these for of purchased question

kind XX,XXX that us, being the outlook this franchisees self as see purchase pick we next given for what our group and express last model growth up delivery we So this for has you. mile years? Thank of we and will location any do on impact for few posts, have opportunity an see

Meisong Lai

question. your Okay. for Thank you

Let me translate.

environment, we overall it First is have a is that competitive that question inevitable. relating commented to plan the

before not We have or seen as the the is avoidable. the process shares such competition countries world market stabilized developed US including of Japan are

that also capability. price to market, the ones or that same and express share past be in XX% bigger still or the equally market seen recent getting to been has competition depolarization their players are what the with their consolidate in is greater driven the will firmly price in two place no and be longer and volume. we've longer will We even and bigger market businesses have smaller seen and China by there of expanding express one with XX% on depend the capacity scale stabilize, growing taking time ones delivery China at continuing the in the observed or when because We've are largely when shared industry still slow we and comes, its believe as no

its becomes price share market Chinese will stated turning differentiated, or clearly the potential. reach point. more market clearly great has As

RMBXX witnessed greater year. expansion and expected annual growth have past We also in this the billion in

As growth profit there, naturally the market stabilizes the still will is return. when

So progress that are it is a we natural experiencing.

second group form new to The of all to purchase, going from -- in commerce delivery essence is of first question industry. is additive the regarding of community such group It nature online. offline express

of partners community place collaboration a the because of group purchases. of by you their utilization observed, also vast is very network idle our industries, or express So is country. be positive utilized as have taking was we indicated in it's because presence. consider the last throughout network It it indeed some There synergy and and delivery resources mile the resources and could it as we the fully it

only So at time, to these the to partners process. their cost purchase well group their the network activity as together helped not allowed two gain to same to resources in community participate it and and forces whole reduce that utilize our joined

So we relationship. think said collaborative a is you indeed as this

Operator

go next of ahead. from Citi. question The Baoying comes Zhai Please

Baoying Zhai

expectations regarding first little transportation is it period transportation this during the cost the question is competitor's my with same although a compared So looks cost, weird. bit all

So break with know quarter, travels point, that their simple made average mile previously and we second third lovemaking the rate our it we travel? mentioned and on is competition, what's I compared income the number long year. the more it there transportation number of already of quarter have players recovery inflection few question -- but the what players five question cost down this the be recovered will target and and how second unit profit and is average the competitors compared see wanted my the And duly we the year has the older calculation, could already see peso on the Lai of impact be to because with we do what's the second averaged four can the quarter and the for load a as if follow-up we weight to do of second in to are next surpass trigger event single or and a quarter

Sophie Li

will address I'll then Baoying the you, your question. your Thank for second. address first and point Lai

trucks that a also the think rate on ETC and the the Regarding quarter the and are on the and the industry. quarter the whole then is no transportation was there second indeed quarter cost that because is for there increased the biaxial the fee collection running longer I a is highway, the for third quarter third cost second that comparative fee benefit for freeway, on is there

is there that necessarily transportation indeed based numbers, cost should normal each same. increased at secondly, what road increased companies of I our peers. a the not our then compared is exactly our for is in and could volume be on included comment the are to looking our depreciation competitive normal of of that the number that vehicles Now differences the And level have one cost on the we

cost I believe different. level we against our reported and two, that level structure volume as first there normal stated, So are of that is are potentially as cost of differences all cost then the of we

by the commented the price basic driven it still supply relationship. is and Regarding when of of point will chairman come, that the demand the turning rule

transit opportunity capability. looking is that other is we capability, model, can network pickup One those the at industry and For two model delivery express aspects. look key you into the delivery the for partner at are the the

in your will matched the sorting. they and have that the made investing huge you partners decline, to increase, also the to we continues sync by capacity and the determining capacity and remarks, partners a saw of same is going from proactively capacity, pickup our our desire and to earlier need a partners level for if hand over is be where their be the volume their capabilities also expressed element volume when and our increasing at rules particularly yet So price to the time expand there and it some now everyone we services so as you would one and refer because all order up have then some network to in transit also consistently the where We because when with comment infrastructure of have in in prepared price else's the delivery but is factors the on ZTO need point platform. and of demand own the do advantage everyone you go -- require does capabilities capacity, critical own key side, a quality are the network fill to

our our our level level more of to to So network confidence are network, support partner's them, to we sound. financial relatively able and use the network healthy resources and help are stable

may about I we partners supplement were closely expanding what investing, and capacity network look if they longer determined truly and of will in by cost, The be not not signal increases, perhaps maintained the will to should analysis with the further to you is bringing closely events, the RMBX.XX price they're are have will of this has third -- be for how and the capability from competitive looking they resume. these do we -- watch purposes. and the they volume the quarter and be signifying will if a or do So do taker Chairman entire are the disclose we details advantage no of some ETC for the will there are price other volume the then and synchronized to to because made, longer also are doing, we services brand but be at factor will support will are of differences be and quality if impact the no price backdrop harvested continue investing, will price more that of the their but determining and to tool, scale the the hence brand, quarter second thrive expanding our

Baoying Zhai

Zhongtongji my follow-up XX% it question few speaks Zhongtongji and on favorable the still if but this if quarter, for and not for enjoy a how I've I the tax the rate so as Sorry, third long because got of continue a it rate tax will next in complete, saw and rate? tax years year relation

Sophie Li

Thank you for question. your

years think are two and software one clarify set distinctive of are, three I technology differential year one quarter the It enterprise and is different year to enterprise patients. then related we three new of to for need the new certification received for the the for is entire high is that this for technology key amount Zhongtongji is X%. one I of only Those for high for XXXX. years the

new While years three the for for just we cycle of we and enterprise new have obtained high certification. being also year so three another the have started certification a

Operator

Please The next question comes from ahead. go [indiscernible].

Unidentified Analyst

While our our a this increased capacity expenditure quarter lot. this capital year,

know it our capacity financial will like I is price this intense our the growth. as than I in increase the competition how have to and is well much quite share would year and is about year. economical as as So [indiscernible] of at we results competitors what second And better market my end optimal obtained the next question see

share? questions. my the you. aggressive you next on strategy market increase more price that Okay. and will Thank year how That's be So

Sophie Li

Thank you, question. your Ms. Wang for

million. core we're we to this is optimum the first statistics, for all Regarding an somewhere all to year looking million first RMBXX and yes around express level of business. next the expecting be RMBXX our XX% investment at The production indeed capacity, of are of year of

operate and centers for park also investing some related developing automation their our for and service our facilities, the of automation are to We sorting for scale also investment existing is the also CapEx comprehensive in and example. logistic

not of land delivery only are the designing are that itself. express Some we purchasing now and for

to multipurpose facility is logistic needs. We are a for looking that catering build

in have we example, and delivery. businesses LTL the our we the warehouse do resources warehouse, building and also For are also processing for

are all to Also for land same them cost or require timeliness, at definite housed for and strategically as needed its coaching comprehensive the is products lower tracks operation. cost. of placing differentiated are logistic We well advantage to these provide roof a we under resources capabilities better needed able assets and larger efficiency be as time

even to relating do -- have there. second sustainable share we at the is out everybody becoming or gain. here capacity that profit The war prolonged drawn by year. our pressure are more drawn also not the by further certain more price a question experienced more The to we the when now as be will think We anyone, accelerated for not is the price and indeed out the concentrated Yes, place, and is price competition market continue is to especially take beneficial competition are market the sensitivity accelerate profit; this driving because know merchants. and we markets further polarization

and development the we've market will done the package So and and the of on the year, we closely do into competitors to reasonably economy also in accelerate doing. watch total like we the profitability at a what maintained hand invest of look we'll next speaking relative to level of accelerated growth volume also including this also continued the of peers level are one incoming growth, We year. and

minimum that have potential of bear. the a of reached they could Some level them

that. of aware are We

in this as or accelerate as much finish to mind, we can. So advance do continue that we with to this to individually intend process process

Operator

comes of go The Chen ahead. Please next Lynn JPMorgan. question from

Lynn Chen

My question is regarding company strategy.

what increase, the you. market between year of be from focus the profitability? the recovery, the trend balance mid if price completion quarter, the how to is going company's in we mean profitability strategy same switched show to market declined share did and so from sequential that focus at next second strategy into the quarter. company does So share will the as the at the market it third then got share time, but slightly Thank look some

Sophie Li

differences. market percentage strategy. that Indeed not with to has changed than is share the second look if the seasonal Our strategy prior just you the consistent you of need at the third our quarter, quarter, and lower but to are at quarter look results

fluctuated. If market the you last year, is from look by at trend share quarter

total If correctly. our year, expanding. date, points Indeed you than quarter last quarter, this look if year more this has to at quarter X.X have expanded versus points consistently we more last we last expanded remember -- the have X.X market than I share

our not again so changed. has strategy And

our maintaining next again are lead focusing the forward the the bring between we historically quality same order and will volume, This forward of focused accelerate to share the more the to point. balance be growth gap gain also going year volume in accelerated of not prioritizing into and services three, the do the the We and answered, the and more if year, on are previous we take the we and growth it that of volume opportunity on profitability. to market turning further as we widen because like the question

Operator

The of Parash question HSBC from Please next Jain comes Hong go Kong. ahead.

Parash Jain

have Thank questions. for this and I you, you thank opportunity. operator two management

can Tongda about comprehensively explained want competitive the understand endure landscape, that price emerges. before other much I discipline just pain have to you player but how pretty First the

given you support, could your or think your average. in at perhaps been even cash question can understand you versus they to the bleed partly And point jump that balance of we the be receivables off after that? that Do my you. or inflection I money? is level. So continue that there look more right very are an your extending per sheet reflection to peers but a same majority Thank second compete your think at start third who credit the that is have facing price higher when of soon your of same a it anything Do I quarter it's if the seems risk the year, intensity any account pain? versus pressure parcel, terms will continues, to in last of quarter see this EBITD revenue, of flow on same customers the from their or to like historical the losing quarter that longer

Sophie Li

question. for you Thank your

overall look performance, think already everybody if yes competitive has First the I due question numbers, their you to else the public so indeed, environment, it's announced comparison. at

and to more said the for line, not because need some the this look line to at one-off there moderate on profit profit enjoy do do the that ASP but we For us our quarter. is decline items also you on only are we now operating

if you minus how the that of is SG&A, the So look at are a margin gross we indication performing. better

see out that we dish than having you else. of the more to have not thoroughly from simply Now ASP everybody standpoint, subsidies can

which at XX.X%, of is are low-end We range. the the

think go XX% I the more. to highest could if the range in

profitability almost what's if we the can may. if profit do to to network the a look need to it of you that good is the for really lower indication continue to there network here do last take level suffering The perspective, support headquarter, could could where pick is the there place our to not from it to up the given and is a subsidies out yes, vertical the end for limit cash going you all towards it's the delivery and we are you make industry need else what for your bear at model because model are give maintain all So a the so protected are everybody particularly really look don't because network sure by more do partner not to It versus and partners minimize mile we indeed you time you at trend, right where maximize at the and what grow. is same same.

lot on So all relative others indeed it the a All taking are term. a burden. is

will perhaps investing also similar and confident I to future volume aspect this if one agree at I incoming yes, look the more the for that they commented you is means with to what earlier the they other So network are given watch -- then closely are partners about remain lead what's I that stable And as business to go going ahead. or the am also opposed is the we in for what marketplace. defect will to other to brand to example, sorry, that and place worrying take

Parash Jain

you And sector but market just on the reach is are comment? emerge pain it therefore or of is not to the amount it's witnessing? account may fair that to before necessarily understand that we move it prices share, XX% level receivable, XX% overall player that question that fair top Is given before may a

Sophie Li

Sure.

looking view. second I I is think that's we one my are The advantage, are or that is and economy and put the this gain, or between the network if past partners capacity, that them cost perspective not the capacity gone stated at cost then huge network share is into I numbers model various network it, driven the one right. market our There mean. the third sees And gap us competitors some all aspects partner the our may the of together. because at look operation the is in a then that see big is if the real partners, has it's numbers, they thirdly, problem if network you non-operating, stable, are just

limited have of a control. You number

So environment. the is believe we certainly will stable a what to XX% provide it XX%

very Now become XX% reach price drawn and what given improvement. to market started stable capacity. type is XXXX we increasing gradually of has point to the then are targeting is It that to by time, of on assumption from a reasonable become guy the means that already year that at be that will is normal

cannot is end two the So Chinese the most or one on where can absorb the likely market entirely. one XX% hand scenario XX% of

our we're is our will this or second seeing accounts end three account question question-and-answer KA have that XXX%. increased we and so This for at the In maybe business or XX% player one have session concludes has quarter it So receivable. and XX% near two by reasonable.

fee. customers for term KA their a paying enjoy do Our

to to network network our limited term of and or by them the about requirements. we meeting have those receivable are customers of partners So a of then a certain selected do accounts our receive partners KA also also level do some XX% do so relate

of the are those still So reasonable volume level based receivable. on

Operator

conference Thank concludes today's may now has The This you session. for presentation disconnect. question-and-answer our attending concluded. also and you now

ZTO Express (Cayman) (ZTO) 18 Nov 202020 Q3 Earnings call transcript