ZTO - Earnings call transcript Q1 2021 | ZTO Express (Cayman) Inc.

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Operator

Good day and welcome to the ZTO Express, Inc.

First Quarter 2021 Conference Call. [Operator Instructions] Please note that today’s event is being recorded. I would now like to turn the conference over to Ms.

Sophie Li. Ms. yours, is floor the ma’am. Li,

Sophie Li

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

the Such in Ms. the current call highlights, follows. to ZTO give not are who that on contain and a made and Yan, Chief Safe session Officer events Lai, and Mr. expectations will Private forward-looking statements Q&A followed management’s Reform today will from or current the Mr. statements factors. of Huiping the Lai and answer Yan, Securities unknown of Act Meisong and are both remind call Litigation through company’s brief Ms. you your Executive go conditions and relate the Chief other that They the based On risks, guidance. known during uncertainties business by XXXX. be of that this operations under market Chairman may overview provisions to will I available Financial questions operating and Officer. financials involve will Harbor

are entirety a Mr. brief information, introduce in Chinese my events before please. translate It result English. him any included beyond factors Mr. required Exchange is performance to may their difficult information Meisong, and obligation the U.S. to this and now in I new remarks All through or company’s company of the statements. and differ in control, forward-looking uncertainties achievements Meisong under which cause Securities and the any future as Commission. risks, update The statements is are Further materially regarding predict undertake Lai. which to filings of in the prepared the will many does or company’s as to law. other results, which forward-looking company’s in actual for his Lai not otherwise, pleasure with except from those of

Meisong Lai

joining Thank our In field you, first our Hello, industry points. of first. XX.X for and quarter volume us today. me by market grew thank expanded you CNYX.X rate ZTO’s by for share year-over-year growth X.X percentage solidifying XX.X% let Meisong. industry the the exceeding billion, ZTO Please average to translate leadership. percentage services was XX.X% everyone points and XXXX, further

service While quality the maintained to ramping. among accelerating top expansion, an be we

increased dynamics in price For strides quarter, the achieved industry experienced growing level XX.X% of In first improving an of players Major enhancing evolve an the first last-mile has prolonged decline. the net of formed in made ZTO rapid positively profit, network optimizing further management the continue which to CNYXXX and efficiency, environment adjusted profit competitive the ZTO lineup, and presence. transit diverse profit quarter, industry million, year-over-year. growth its while

the sorting expansion, the and and logistics were forward over modification We preparation efficiency logistics parts. increase are usage smart service where carried rights under There transit X out platform demand projects in to planning. self-owned quarter billion. First, to at aiming and [indiscernible] expenditure transportation years land in facilities up Site time. in acquired further for construction develop this to comprehensive XX future. Capital of improved, the CNYX.XX in increased was first investments capacity

operating vehicle own vehicles. transportation, leverage between cell For without to fleet higher the further phone losing better control, efficiency balance usage sight to our optimized by and third-party cost timeliness we and

in are more continue With new direct rocks data the help accordance and we analysis, to existing of enhance technology recalibrate capacity that demand with scheduling rock utilization. and adding to

and to sorting from cost of from combined to capacity we February detail to buildup application the transportation waiver labor lasted certain performance XXXX, performance benefiting of X.X% implemented planning ETC For absence appraisal productivity, measures parcel efficiency sorting technology benefits operations, enhance that quarter and solutioning. coverage in to level May while year-over-year mechanisms despite the and improve policy functional to shift from automation, per The managed continuing digitize and decreased which the center first of the wider in comparison. skewed

possible less stability quarter, organizational network replace was number management of Secondly, structure empower, of end in great assist, At approach furthered outlets one network capacity where rectify and of which maintained, appropriate. On hand, remained whole development. made and the to stable it promote the first our we upgrades the to the with layering.

other for couriers, and fairness further capability. the have as developed stable explore posts network processing brand focused to first and recognition and we OLEDs in We is on trust. last-mile hand, [ph] including believe strengthening categories built a that and for direct value [ph]. OLED protection public courier complaint competitive [indiscernible] on to quarter. of high-performance the achieved a quality well is network strength satisfaction On rates, ZTO promoted measures, as our ranking various link rapid the Thanks in overall foundation

to than approximately been posts, became XXX results. handle future Last-mile power, the development focuses. last-mile last-mile the shift pricing volume first last-mile containment in gradual cost half the than to last-mile or XX% with has become apparent. Thirdly, of set represent of of the were viability At delivered more our of parcel more, were or In posts. has important quarter, quarter, affected present, more order great end development operated and competitors. posts last-mile In for one Advantage of million hence most presence relatively parcels to-door, daily a possibility far owned delivery we nearly the we outlays [indiscernible]. close XX,XXX accelerated. satisfactory through of By our of the presence of ZTO’s delivered which receiving first other habits, our

focuses core capabilities. among our as to to well logistics ecosystem of our express as existing for effective eco delivery to we of pay as consistent Brazil our execution collaboration operations, started on comprehensive resources maximizing from strategies businesses Aside utilization our attention the form added service so

such recognition and the meaningful operation investment of at We distinguish only is capabilities. utilization. higher ZTO and services advantage to resource and this our products ourselves more differentiated across and and in enhance our service, awareness and of establish beyond planning brand. content digitized as imagination, that expensive mind comprehensive are brand to categories, competitive management, firmly is of synergetic goal level the Our logistics levels distinctive believe Opportunities customers

will us. maintain forward you brighter strive and our Thank with employees stronger We with a perseverance. commitments confidence, momentum, higher work and and will solid keeping trusting future. partner, for supporting Together we more network positive

Now, to through please Mr. financial results. Yan take detailed us allow

Huiping Yan

Thank you, Thank to hello Lai. and Sophie Chairman you, call. on the everyone

refer RMB, our highlights are performance, unless of that I financials, by year-over-year the note CNYX.X our I industry mentioned, first quoted outperforming which all Detailed analysis key and financial economic to to economics parcel comparisons. XX.X% XX.X here. and on posted firm will through billion, go changes As some cash specifically numbers unit through our grew recovery quarter, implication please the and of are average our to steady ZTO of volume In thanks go points. in website consistent flow the by strategies,

and cost economies led effects from use share-based productivity then of X core of run CNYX.XX cost CNYX.XX, scale. to gains. capacity benefited as the achieved CNYX.XX or it’s single of consisted more the decreased support partners is year. policy XX.X% increased XX.X%. weight Our most is competitive XX.X% automation. specifically, There of increased delivery confidence and our delivery to support by declined environmentally industry approximately points excluding for rate decreased points increased decline by profit e-way we network or because drop. May decline keep points CNYX.X to due And with weight Total expenses business bill, costs to due ETC CNYXXX toll Gross used lower-priced billion. there costs to to X.X% the sheet. headquarter decline weight incentives billion. February to sorting which CNYX.XX expense. favorable yet drop of mainly of transportation percentage kilo. self-owned then from leading last to ASP And a XX%, cost the market maintain due revenue volume declined resulted absence network CNYX.XX from yet about generally associated have corporate same expanded the higher This and revenue to because least business at market to of Gross increased as more to or our amortization of the X.X salaries, mainly parcel further SG&A, combined express per XX.X% increased of stable decline cost of CNYX.XX, trucks per SBC, cost to gain. given X.X% CNYX.XX leverage share approximately well market a XX.X% of is million, compared time. peers, from SG&A high unit and waiver X.XX parcel level share it structure. to XX.X% of that or amount Overall, use declined for scale efficiently increased through by XX.X%. CNYX.X Income core lasted price partially operations profit Unit increased The share ASP depreciation is parcel or total and compensation, Average The offset grow revenue to friendly, XX.X%, more CNYX.XX. unit the lean CNYX.X and express facility the billion. revenue increased increased X.X decreased decline XX% as X.X%, mainly margin

to XX.X% from CNYXXX million. income SBC, Excluding increased operations

gross than increasing in CapEx services our increased we decline net we rate delivery as Operating flow billion to businesses deduction Associated of government margin for on focus CNYXXX and logistics cash leverage Adjusted capabilities as operating million. subsidies. planning or positive demand infrastructure X.X resource increased for declined rate increased is to the building CNYX.X XXX.X% well margin and strengthen because more preparation further mainly to narrower Net development XX.X% our to as ecosystem. other express million. CNYXXX XX.X% which XX.X%. declined of income SG&A as points core X.X increased income VAT super margin points, income comprehensive

at billion. remain year would CapEx be for to CNYXX level to billion a CNYXX annual Our the around higher whole

XX% to we growth. on guidance and operational condition outlook, our current XX% market Turning year-over-year based maintain volume annual results, business of to

This you. parcel be line Operator, current annual range volume estimated please billion represent to open remarks. Thank management’s the prepared and the change. Our to view in of Such our concludes to questions. billion. estimates CNYXX.XX are for and CNYXX.X subject preliminary is

Operator

come will first Yes, have from the Thomas we question ma’am. Instructions] Jefferies. of [Operator Chong And

Thomas Chong

in taking sense think well solid landscape, the ASP the price on my for getting the the a better next of more market given intense share the about management we about market on can than as going want very is strength efficiencies as get question we we should to can war, and want unit questions trend there the set how is also chance get Just congratulations expectations? the how that our on just My per and of think Thank Thanks front, operational is results. And years? any parcel about that X in of cost about I terms competitive to previous target come a the you. management to in a if in X that share our forward? sense

Meisong Lai

Thank about the the business me to you Operator, X Thank for you. ASP Thomas. your parcel. future Chairman. also the question, Thank X trend allow the in for per as translate is to Thomas. years, cost direction In and please you, question

as supplement So, question. your well translate answers I will for

growth of for high years as growth to delivery. this to terms First remain brand and that we will ensure remains growth efficiency, not profitability been to – essence execution. the targeted X about the The and will of change it of market next to very of express the as have With Trust is confidence for – of all, as of prospects well X on competition growth maintaining consistent our the better while on this quality the stability high is and Partners high delivery, construction ZTO mid for strategy’s past our economy scale confidence services. in X competition, level quality will Chinese consistently next on high gaining focusing of in the The share. the providing with network well industry Infrastructure important. And the confidence near-term. in And of in turn, Network strength of regards this focusing for a outlook. has mid-level provided the services, express as years is sure.

rate as with of on share as achieving better are As you the efficiency well industry growth is expansion scale, our Today, higher with quality profit our ZTO’s those goal to growth. network there gaining healthier. balanced are still observed, as stable well our have base. that, initiatives market productivity than on market services, our for our we With to many continued at competition market look focus evolve. our very operational as Cost within believe growth term implemented, our we control. near-term parcel confidence we increase. share. own have steady volume I gain previously remains ASP, And per dynamics for is as longer described, to as continue is as and

confident So, we in as expansion while delivering our our share services goal quality customers. good well maintaining of maintaining and as healthy to are achieve bottom market to line consumers

Thomas Chong

Thank you.

Operator

Goldman Keung And Sachs. next, we Ronald of have

Ronald Keung

you, Thank Lai-tong, Sophie. Yan-tong, you. Thank

on to ask want questions. two Just

see our confident industry solid competitive we those on leading that EU see is recently and could do just on been are Thank J&T trend ahead is any have past they regulations benefit this business? would we burned to push impact number how entrants through And players not impact grow has scale our those our through impact do one in we could money that you. also these First with our on just very a with and not setting pricing – to more do a regulations the landscape or and have over through again, that how players efficiency scale? burning, cash more prone year? levels, these And the very have on [indiscernible] position position even will grown here? that how like and significantly see given Is there follow-up we flow this very new local the then of to pricing governments

Meisong Lai

Thank your you, Ronald, question. for

and continued that There to competitive The a pickup the into model entire created now. infrastructure are the significant capital. does end-to-end, the cost it package yes, market to specific We scale as entered industry. factor growth. key factors four to or cost have consistently of transit, sustainability the for efficiency ensure from travel well segments and sorting, believed in scale burning efficiency as determining delivery. is cash competitive are or And is with indeed J&T it edge. impact Temporarily, a as

are if you the exited competition that to has past, or scene. the its want capabilities in those we past that gradually have or industry exited scale all point without smaller starting been and the in gradually However, today growth. area. the The starting year out look cost all the sustained into Future ones own efficiency

top CNYXX Their per eight the range With million to players, market. representing CNYXX million are them, over XX% of the day. about of volume of the in

day, under are CNYXX For those profitability already. at their much that running per million is pressure very

resources a model not less where model, largely that sustained. under efficiency for on control. cost and their are third-party So rely This own is we believe,

you your EU is our the or assessment continue policies term, combine infrastructure recent the And could capital continue towards on So by question, is that in to a model second that to deployed the to longer allow sustain, that government. establishment grow. issued must development

about suppressed, of services. are if that prolonged career providing be below will Our hard services view players attention nationwide, a cost that quality and largely supervising year million per Currently, the in competition. is period, when year and revenue operators with for of there restore approximately guarantee market out and the staff all to it’s government an each healthy to carries over focus X XXX,XXX are the addition of

also competitive is production all the recently prohibits are narrow where welcoming are players, support cost. the specifically This that, to that action. who then on competition below that different those And for will helps importantly, issued achieve high-quality we and are always last-mile ensure output we It more of during have between more growth. regions not We only small ensuring those healthy healthy regulation price concentrated. been especially as but in focusing entrepreneurs couriers that and gap

businesses development gain. of the instead price share near-term network quality, market So this stability will on driven or infrastructure more to focus short-term, and service all enterprises allow

some policy that courier monopolized In may practices addition, specific very also for the are specifically all actions addressed in restricting e-commerce if we add, platforms, the operators of these are operations, of or positive. prohibiting designation

for us the adds environment confidence to further for in compete it So to an competitive improving healthy future. our

Ronald Keung

Thank Yan-tong. you Meisong and so much

Operator

Hou we Capital. Next, have Tianxiao TH of

Tianxiao Hou

of The new is development. One is this freelancer number in outlook co-chain in is business competition is logistics. the of from – question and to the one question those In Thank and quarters parcels point the company’s what several what’s issues some is current parcel these what next to What That’s the deliver is third regard regard? warfare. two for There related first you. Number regarding year? per two, the their one. view? related guys. is And development? the the thoughts revenue time-sensitive The outlook insurance for fronts, the current are rest the

Meisong Lai

[Foreign Language]

Sophie Li

[Foreign Language]

Meisong Lai

question. you your Thank for

also our ZTO a question critical challenges it first delivery of protected. ensure many model, hard ensure business. the ZTO of network presented me Let equation. the to interests very freelancer. part partner working In are that the of couriers, the Fresh And inherent rights is personnel a implementing part because been its is and has on initiatives the to well past, regarding the

we example, to we out protection them carriers. to level a Recently, our during XX/X that personnel policy to ensure or at of couriers timely any rolled insurance our outside funded could direct the incidents of either unexpected approach work. direct the have of policy accounting payment of or link For harm ensure work headquarter for nationwide

us rights to ensuring the focus these in make to fair pickup for all courier well well for to to attention network will establish the policies but healthy that freelancer the response only And areas. from a trend? their work and of the point payment as at standardized out especially the what to even point we also standpoint, understanding are occur. becomes your to continue government’s to members insurance. and policies able fierce work We resources. during provide question pricing social when we important we qualitative are involves And continue rolled opportunity society may not cannot relating – on rights, as While allocation also continue our sure headquarter partners. a as as more as to second for the of time areas, view out to environment we essentially as packages. And process more have well example, so this to may basic medical, market to price the or these the to Where delivery turning could have, is And in competition, receive in and to our requires those price on on per the we parcel, our identify specifically competition, price when have picking focus past, the a up are work resume

As we and the lies and said evolving network. within The the concentrating. conversation, continually scale, in the has advantage quality of efficiency dynamics the the of have services been earlier cost been competitive entire market

more with But there Chinese is large in believe one to delivery the possibility While will not and still the competition market. express we there. ease demand even a the share players other two be Enterprise smaller bigger, to as ones get market weaker words, In place. off the industry, the concentration will continue or will will the the for or take do serve entire leadership bigger apparent. the becomes

looking on insured interjected can near of have low the to also accordance discouragement normalcy also However, end the CPI we when that confidence to in And competition, an off. government in type towards be have their normal with to opportunity and as start provided we the back coming resume is – and attention the then see. mentioned situation comes, price Earlier, will and the of will an us adjustments. or tapering that price tunnel perhaps added growth time that price government

core our on logistics should the to or services. products, relying the business. question competition – with across chain synergetic only in no we has be delivery relating not time believe future Express is competitiveness The It comprehensive, say, longer, definite third to supply we with of

we Our goal a leading capabilities. build started class service world become our is to XXXX, providers and since comprehensive logistics to comprehensive have,

programs. products our products this to year, and definite as with opened in April, definite time in well in operations, standardized Specifically, pricing co-chain time definite Hefei up time with we regards as Shanghai have

and co-chain Second will we those network we quarter, already areas. major operation our franchisees across of establish cities, have a raised business five in

being efficiently a program in in the including expectations provided in including in are successful our or planning, Our making recognition sure best been fleet speaking, sizes airfreight. priced even the or all warehouses for and brand priced, well effort packages In to without preparing matching as internationally deployed airplane, have resources the resource expansion specific demand these, development we large definite Further, single understanding product, weight consumers. have in internationally our surrounding well differentiated future. effectively of consolidating and and warehouses different as as

in said the years value be Thank in we X rest products next or recognition ZTO’s As underway earlier, differently differentiated you. [indiscernible] initiatives that currently. will are focus viewed in Chairman it right And developing X the on altering ZTO’s there many the than of now. to so could

Tianxiao Hou

Thank you, Meisong.

Operator

our I would Well, at this session. time, like conclude Ms. we call back question-and-answer will conference the to over to turn

for remarks. Ma’am? any closing Li Sophie

Sophie Li

like joining management your Thank today. everyone, for we you, and team, for thank to entire On the the would participation interest of in your call. behalf you ZTO

any If have us interest today. you visiting please information us in you further require us know. China, any joining let for in Thank or

Operator

to you great is and now for Thank today. day, the the this time, team call And Take conference everyone. At we a and of you, you. your may Again, thank concluded. ma’am your have rest lines. time the also management care disconnect

ZTO Express (Cayman) (ZTO) 20 May 212021 Q1 Earnings call transcript