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spk07: Good day, and welcome to the ZTO conference call and webcast to announce the fourth quarter and full year 2021 financial results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone, To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Wei-Ping Yen, Chief Financial Officer. Ms. Yen, the floor is yours, ma'am.
spk05: Thank you, operator. Hello, everyone, and thank you for joining us today. The company's results in an investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Mason Lai, Chairman and Chief Executive Officer, and Ms. Hui-Ping Yan, myself, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and future plans, followed by myself who will go through financials and guidance. We will both be available to answer questions during the Q&A session that follows. I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Security Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market conditions and operating conditions and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control which may cause the company's actual results, performances, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and factors are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information future events, or otherwise, except as required by law. It is now my pleasure to introduce Mr. Mason Lai. Mr. Lai will go through these prepared remarks in their entirety in Chinese before I translate for him in English.
spk03: In the same period, we achieved a net profit of $1.7 billion. In the same period, we achieved a net profit of $1.7 billion. has increased by 35%. 2021 has been an unusual year. Despite the ongoing COVID-19 pandemic, the global environment has become more and more complicated. The fast-paced industry has been competitive, and the central government has been focused on its own interests. In the face of uncertain situations, it has maintained a stable growth rate. With 22.9 billion units of business, to become the world's first courier company with a sales volume of more than 2 billion units. The market share has steadily increased to 20.6%. The new generation of Chinese people has achieved good progress in emphasizing brand value, optimizing business management, and improving comprehensive strength. In 2021, during the 31st year, China has become the first in the industry to reach the level of the Japanese industry in the four phases of turnover. As a leading industry in the industry, we have maintained a competitive level of 52.9 billion units for six consecutive years. Second, the number of vegetables, the number of national values, the performance, customer satisfaction, and other service indicators remain the top priority. Third, we continue to build a fair and open development environment, develop industrial culture, improve social responsibility, and increase online activity. Fourth, we not only promote the integration of industry and financial system, through standardization and digitalization speedy operation, and the construction of the tracking system, so that our network can not only optimize the supply and demand, but also further improve the efficiency. We continue to increase the number of large-scale, integrated, cross-border logistics, smart, long-term, financial services, efficient energy, and end-to-end construction Thank you. Thank you. Thank you. 2. Create a digital management and a sophisticated operating system to ensure stable growth of whole network operating capabilities. In addition to the technical information supply of the specific business, we will gradually realize the operation process and resource configuration of the whole network and the whole element. From the post-trial supervision to the pre-trial management plus the pre-trial organization sales. In 2021, the mass-produced projects that have been built will continue to evolve and improve. 3. Continue to enhance service capability to ensure that service quality is leading in the industry. In 2022, we will continue to pay attention to the construction of basic capabilities, For customers to provide stable, efficient, safe, convenient, high-quality service experience. Fourth, year-round safety and protection projects. Ensure the production of whole-grain production, cleanliness, and three-way safety. Not only optimize the safety management mechanism, but also ensure that production and safety are in both hands, both hands must be hard. At the same time, continue to pay attention to the generation and production situation, and maintain year-round safety and high-pressure status. 5. To further strengthen the ecological system and ensure that ecological construction is in progress. In 2022, the ecological infrastructure will be further developed. Through ecological co-operation and cooperation areas and industry customer distribution, 8. Continuous improvement of Zhongtong's comprehensive strength 9. The comprehensive logistics brand concept of Zhongtong's reliable, stable, and efficient integration In 2022, It is the second year since the founding of the Chinese Communist Party, and it will also be the source of our second entrepreneurship. Although the global environment has many uncertainties, at that time, China's economic infrastructure was strong, and the situation was going up, but the background was full. As a private sector industry, the development of the express industry, the overall trend is clear and optimistic. It will also maintain a high-speed growth and development prospects. The fast food industry will continue to integrate and optimize. The stronger the competition, the more stable the competition will be. The balance between price and effect will continue to improve. The advantage of the scale of sales will also be clearly visible. The advantage of the Middle East is obvious. It is in a favorable position for competition. We will speed up the change from high quantity to high quality. Continue to focus and talk. We believe that Let me translate first. Hello, everyone, and thank you for joining us today.
spk05: In the fourth quarter of 2021, CTO delivered a 6.34 billion parcel volume, which increased 17.2% and expanded our leading market share by 0.2 points. While maintaining a superior quality of service and customer satisfaction, we continued our focus on profitable growth volume and grew our net income 35% year-over-year to reach 1.75 billion. The year of 2021 was exceptional. Facing continued COVID-19 pandemic shockwaves, complex geopolitical environment, and intense competition in the industry, DTO once again achieved solid growth against a slew of uncertainties by being self-assured and the best we can. We delivered 22.3 billion parcels and became the first express delivery company in the world to achieve an annual parcel volume that exceeds $20 billion. Our market share advanced to a robust 20.6% for the year. Everyone under the ZTO brand collaborated and made remarkable progress in enhancing brand recognition, optimizing operational efficiencies, and improving comprehensive capabilities. During the annual Double 11 Shopping Festival, BTO became the first express delivery company with a daily capacity of over 100 million parcels across all stages, four of them, throughout the parcel flow. The incremental volume of 5.29 billion parcels for the year solidified our number one position in the industry for the sixth consecutive year. We held steady-fastly the number one position above our peers for quality of services and customer satisfaction measured by a comprehensive set of indexes tracked by TINEO and the customer complaint rate closely monitored by the state post bureau. Third, we made further strides on creating a just, equitable, and transparent environment in which our shared success culture was deepened, our sense of social responsibility and accountability enhanced, and our network partners are increasingly self-motivated with renewed confidence. Fourth, we further integrated operations, finance, and technology through standardization and digitization to manage and measure business processes so that our vast network of infrastructure resources could generate greater efficiencies and better economies. As our core business soundly developed, we endeavored to build up our comprehensive capabilities such as services for heavy and bulky parcels, integrated warehousing and delivery cross-border logistics, smart equipment design and manufacturing, financial services, time-definite and coaching services, last mile post and commercial solutioning. We were exploring and building more and more capabilities to cater towards varied logistic needs. It was with joint effort by everyone there were we were unable to overcome challenges and achieve satisfactory results towards our strategic goals in market share gain, service quality, and earnings. In 2022, our strategy remains, and our execution plans will task around the following five objectives. First, to achieve solid growth of our market share, we must ensure the health of our network. Start from the aspiration to empower. We will rely on objective data to differentiate varied conditions or potentials associated with our network partners, more suitable and precise policies, and better incentivize overall volume growth. For outlets with slow or negative growth, more field visits aimed to gain deeper understanding of the real challenges our network partners faces can help us identify root causes and appropriate solutions. Moreover, we must protect the rights and interests of those on the front line, alleviate the bottleneck in workload and cost pressure by building last mile posts with ease of access to commerce and services for customers. our market share will steadily grow. Second, to ensure profitability and earnings growth across the entire network, we need to build a systemic framework of digitized operating process, tracking, and quick decision making. Practical implementations of technological tools can help bring visibility to key metrics for process effectiveness and efficiencies from end to end and allow us to advance from postmodern reactive to in progress responsive or even ahead of time predictive. The volume cost profit project we initiated in later part of 2021 has generated meaningful results Further initiatives will help delineate op costs with greater granularity so that more holistic, accurate, and timely pricing decisions can be made to drive better productivity, less waste of resources, and higher earnings. Third, to ensure continued lead in service quality, we need to further improve our service capabilities. In 2022, we will pay continued attention to infrastructure development and focus more on optimized design and layout of the sorting centers consistent with longer-term needs. Our integrated tri-layer throughput model will gradually evolve with increasing volume intake and operations adaptations. Meanwhile, we will improve performance evaluations as well as reward and reprimand regulations to promote productive actions by network partners and couriers out of their own initiatives. A comprehensive, systematic, yet flexible governing system that is capable and pliable to multiple needs and customized demand for services can help provide consistent efficient, safe, convenient, and high-quality product and services experience for our customers. Fourth, to ensure the safety of pickup and delivery, transit and sorting, and the flow of critical information through the whole process, we must build and strictly enforce safety assurance measures, uninterrupted operational process, and necessary checks for safety and precautions are sometimes competing priorities, but we must be vigilant with both. Paying close attention to conditions of the livelihood in frontline while maintaining high levels of integrity can deter corruption and cultivate self-discipline. Fifth, to ensure a continued development of our ecosystem, we need to enhance coordination and synergy. This year, we will promote collaboration and seek opportunities to cross-pollinate and expand customer base as well as market presence. Through ongoing efforts to enhance our integrated service capabilities, CTO can then effectively convey to our customers the comprehensive logistics brand concept of reliability, stability, and efficiency. To achieve all of the above, of course, we need to ensure an environment conducive for shared success culture, a culture that is built upon a common goal and behaviors by a group of people who trust one another, work cohesively, contribute as individuals or as a team. Our future depends on the new generation of leaders who has great potentials and are recognized by effective talent identification and training system, who seek personal growth and are given the chance to step up for greater responsibilities under a fair promotion and elimination framework. 2022 is a year when ZTO will turn 20, and this is also the year in which we'll embark on our second venture. Despite many uncertainties in the world, the foundation of China's economy is solid, and its upward momentum and stamina is strong. Seeing an infrastructure that is crucial to day-to-day lives Express delivery industry will continue to maintain a medium to high speed of growth towards a promising future. Our industry will continue its consolidation where strong players get stronger as the competitive dynamics gradually stabilize. Price and quality will strike new balances where competition advantages, competitive advantages are increasingly demonstrated through scale and efficiency. DTO is very favorably positioned. In the process of transforming from quantity to be with higher quality, we will rely on digitized tools, pay consistent attention to capacity and capability development, effective and efficient resource allocation, partner network stability with secured fundamental rights and interests. The successful development of a competitive mode with high-quality, comprehensive logistics service capabilities within the next five years will ensure us to go from leading advantage towards absolute and equal advantage. We firmly believe that we can achieve greater and better results in our journeys ahead. Now, let's have Ms. Yen take us through our financials.
spk06: Hello, everyone.
spk05: As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in IMB and percentage changes refer to year-over-year comparisons. Detailed analysis of financial performances, unit economics, and cash flow are posted on our website, and I'll go through some of the highlights here. We achieved volume target by growing parcel volume 31.1% to $22.3 billion for the year with firm implementation of our consistent strategies. Our leading market share further expanded by 0.2 points to 20.6% while maintaining superior quality of services for the year. Our adjusted net income increased 7.8% to 4.9 billion. Total revenue increased 11.6% to 9.2 billion for Q4 and increased 20.6% to 30.4 billion for the year. Annual ASP for the core express delivery business declined 1.3% and 5.7% for the quarter and the year respectively, as competition turning towards sensibility. Average parcel weight drop contributed 3 cents out of the total of 7 cents decrease in ASP for the year. Average parcel weight decreased 4.9% to 1 kilo for the year of 2021. Total cost of revenue was 6.97 billion and 23.82 billion respectively for Q4 in 2021, which increased 8.9% for the quarter and increased 22.9% for the year. Unit cost of revenue for the core express delivery business decreased 2.9% for Q4 and for the year. Unit transportation costs declined 3.3% for Q4 and increased 0.8% for the year, primarily due to the combined effects of increased use of self-owned high-capacity trailer trucks and improved low rate, as well as a negative impact for increase in diesel price and the expiry of favorable total fee waiver from mid-February to May in 2020. Unit sorting costs increased by 4.1% for Q4 and declined 1.1% for the year because of higher level of automation and improved economies of scale, offset by increased labor costs and higher depreciation and amortization charges given there were more sets of automation sorting equipment and facilities placed in service. Gross profit increased 21.1% for Q4 and 12.9% for the year. Gross profit margin increased 1.9 points to 24.4% for Q4 and decreased 1.5 points for 21.7 for the year, which resulted mainly from competition-driven ASP decline, partially offset by cost productivity. SG&A-excluded SBC increased 13.1% to $472 million for Q4 and increased 16.3% to $1.6 billion for the year. SG&A costs as a percentage of revenue remained low at 5.1% for the quarter and 5.4% for the year. as our corporate structure remained lean and stable. Income from operations, excluding SBC, increased by 31.1% for Q4 and 14.6% for the year. Associated margin increased 3.3 points for Q4 and decreased one point for the year, which performed better than the gross profit margin change because of positive SG&A leverage and increased other operating income, namely VAT super deduction and government subsidies and tax rebates. Operating cash flow was $3 billion for Q4 and $7.2 billion for the year, increasing 48.2% and 45.8% respectively. CapEx expenditure totaled $9.3 billion for the year as we secured larger tracts of land for developing comprehensive logistics facilities and increased the number of self-owned fleet and automation equipment. We reasonably anticipate cash generated from operating activity will well exceed capital expenditures for 2022 and onwards. The company announced a 25-cent U.S. dollar dividend for the year for shareholders on record as of April 8, 2022, representing a 25.9% dividend payout ratio similar to those of previous years. Now turning to business outlook. Considering the current market condition and certainties, the company expects the partial volume, of 2022 to be in the range of 26.3 billion to 27.6 billion, representing a 18% to 24% year-over-year increase that is well above the anticipated industry average. These estimates represent management current and preliminary view and are subject to change. Now, this concludes our prepared remarks. Operator, please open the line for questions. Thank you.
spk07: Yes, ma'am. We will now begin the question and answer session. To ask a question, you may press star, then 1 on a touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If any time a question has been addressed and you'd like to withdraw your question, Please press star then two. As a courtesy, we please ask that you limit yourself to one question and a single follow-up. Again, it is star then one to ask a question. At this time, we will just pause momentarily to assemble our roster. The first question we have will come from Quinn Lee Shen of Morgan Stanley. Please go ahead.
spk04: Thank you, Operator. Thank you, Operator. Thank you, Operator. And then on the other hand, we also consider that as the scale grows, we may have some additional costs that have an effect on the scale. And then consider the impact that the pandemic has repeatedly brought on the impact of the fluctuation of the quantity. That is to consider these factors internally. What is the current management level's view on unit costs in 2022? This is the first question. The second question is, In fact, we have recently heard that the industry is discussing the price increase, because the cost has increased relatively. So I would like to ask, considering that the entire consumer trend is relatively under pressure now, and your customers are actually under a lot of pressure at the cost end, do you think that So I'll translate for myself. Thank you, Benjamin, for taking my question and congratulations on the very solid fourth quarter result. So I have two questions. The first question is about cost trend. So considering several factors, a higher fuel price and potential labor cost inflation, also taking into consideration also potential economy of scale, following a higher volume being handled in this year, and also the potential disruption from the recent COVID resurgence, which might bring some fluctuation to the volume. So what's the unit cost outlook for 2022 from the management expectation? So this is the first question. And the second question is about profitability. So we have heard from the industry that some of the players are discussing with their customers about pricing hikes due to the cost inflation. But taking into consideration of the current economic outlook, the potential pressure your customers are facing, considering, for example, the soft consumption demand growth, as well as the cost inflation they are facing. Do you think there could be downside risks to the pricing or unit profitability? Do you see a downside risk to the previous guidance on the bottom line, over 30% year-on-year profit growth, which you guided last time? So these are my questions.
spk06: Thank you. Hello.
spk03: You just asked three questions. Although there are some external factors, such as oil prices rising and artificial costs rising, our management is more digitalized and more precise. No matter if it's professionalism or practicality, there will be a big improvement. So the probability is that it will decrease. The second question is about the price of the industry. Since this year, the price of the industry has remained stable. Our company's strategy has not changed. It has changed from high volume to high quality. I strongly believe that the industry is in control of the second type of competition, which leads to a positive development of the industry. The price of the retail market and the retail market have returned to the same level. The accounting industry has also changed from a price to a value. The central bank is more focused on high-end development. So, in this year, The price will still be stable. Compared to last year, the third problem is the problem of profit in the industry. Our steady growth of profit throughout the year is to maintain an optimistic attitude, because the price is still increasing compared to last year. Last year, in fact, the competition in the entire industry was relatively strong. Thank you for your question. Thank you for your question, and let me translate and supplement where needed.
spk05: first question, you really asked three questions. The first question is regarding the cost. Assuming the current condition remains, the stable market conditions and pandemic situation remains under control, we believe our cost productivity will continue to generate results. The digitized initiatives as well as more detailed level of management throughout our operating process. For example, load rate increase, utilization of resources improvements. There is a high probability that our costs will continue to be managed down. I'll supplement one point, the oil price increase. the special situation in China because there is a regulating mechanism. So in the fourth quarter, we already seen such impact coming through, but yet we are able to utilize some of the stock that we purposefully purchased so that we can alleviate some of the cost increases. In fact, the estimated oil hike cost impact is about 3 cents in the fourth quarter. And we were able to still gain around 3 cents of productivity in our transportation segment. So that is to say that very reasonably anticipated cost management will give us a confidence that our overall operating costs will likely to continue to gain productivity and perhaps decrease. Second question you asked is really around the pricing. What had happened in 2021 and before fierce competition and some of them are insensible and deviating from the market reality Those are no longer the case. We believe in 2022, the stabilization of pricing will go hand in hand with the entire industry's shift from high quantity to higher quality, i.e., higher quality of earnings. Speaking for ourselves, the initiatives that we described earlier in gaining profitable growth through specific mechanisms in pricing, in finding waste, and eliminating waste of resources, providing proper pricing to our network partners will allow us to achieve our goal. And currently, first of all, we didn't give guidance, but in any case, on the earnings we have high confidence that we will significantly improve our earnings compared to 2021. Thank you very much, Liza.
spk06: Yeah.
spk07: And the next question we have will come from T.M. Howe of TH Capital.
spk00: President Lai, President Yan, thank you for my question. It is not easy to have such a good full-year performance this year. I will ask two questions. The first question is about the direction and plan of our investment this year. This is why I asked this question. It is related to some changes in the market. For example, Jingdong recently acquired Debang. In fact, China's logistics market is changing. In fact, in the future, everyone's competition is to compete for a very special advantage. In the past, we have been doing some investments to show our advantage. Thank you, Mr. Lai. Congratulations for a great performance in 2021 under the extreme situation. I have two questions. One is, you know, what is ZTO's investment plan in 2022, given, you know, the market competition is really competing on the uniqueness and competitiveness. So in which area ZTO wants to invest to further enhance our competitiveness? And the second is how does Mr. Lai to see the logistic market, the future, given JD is acquiring Debang. So that is one thing happened in the logistic market. What's going to happen next? So I would like to hear what's Mr. Lai's view on that. Thank you.
spk03: Hello. We have always predicted that the future of express delivery and logistics competition will be a comprehensive logistics competition, a full-scale competition. In fact, in the past few years, in addition to our main business development, the Chinese Communist Party has always paid great attention to our ecological development. We will definitely do two things well. One is the system. The purpose of the system is to maximize the efficiency of resources. We believe that in the next few years, the president will transform the leading advantage into the absolute advantage, the ecological advantage. In fact, he is doing this layout. The fast-paced competition is definitely not just fast-paced competition, it must be a comprehensive competition. In terms of capital investment, in the past few years, we have been focusing on our ability to build. So if you look at it, our investment in the past few years has been mainly on our land, our vehicles and equipment, plus investment in information technology. We will continue to increase our ability to build. Secondly, we can still We also pay more attention to the development of the ecosystem. At the same time, we make the investment of our assets the most effective. Let me give you an example. The factory we are building now, especially the one we built last year and the one we built the year before, has six floors. The first and second floors are divided into three, four, five, and six floors. The upper floor is the cloud warehouse.
spk05: Let me translate for Mr. Lai and also supplement answers. We have consistently invested in our infrastructure as well as comprehensive capabilities because we do believe that the future of competition lies with not just the express delivery itself, but all the other comprehensive integrated services that is an ecosystem. Our focus, especially of late, on collaboration amongst all the ecosystem businesses that are developing in our whole system. is to maximize the utilization. Our past focus, as well as going forward, will continue to be on the land acquisition, vehicle upgrades, and also automation level of improvement. We are also increasingly paying more attention in supporting our network partners in providing them financial support where needed in developing their own capabilities that is consistent and in sync with our platform's capabilities. And thirdly, we have also begin to invest in technology, in digitization, so as to drive further productivity and become competitive in digitized solutioning. Our frontline partners interest and their rights are in a way well preserved and protected because we are also investing in our last mile post system. In summary, all these will allow us to steadfastly, consistently develop our capability internally as well as externally. to go from leading to absolute and equal advantage. The example Mr. Lai gave relates to a track of land that we acquired lately that is designed to house six levels of operations. The first two being designed for express delivery business and all of the above are open for in-warehouse processing and delivery, as well as other comprehensive capabilities that are evolving, such as coaching services. This will reduce overall cost, improve timeliness, and provide better experience for our customers. Now, you mentioned about the acquisition by Jingdong of Debang. Certainly, there are many ways of increasing capabilities, either through organic or inorganic growth. As we set our sights on developing eco-advantage in the future, we will explore feasible and fit in terms of inorganic growth. The development of total comprehensive capabilities has to be done in a way that is the most cost-efficient, driving greater synergy, as well as integratable solutions. I hope that answers your question.
spk06: Yeah, it does. Thank you. Thank you.
spk07: And next, we have Gong Xiaolu of CICC.
spk02: Good morning, Mr. Lai and Mr. Yan. Congratulations to the company for winning another quarter of the cash prize. I'm Liu Gangxian from Zhongjin. I have two questions for you. The first one is about our stock. I've heard some news about FEC recently, including some companies that are going to apply for a double listing in Hong Kong. So let me translate for myself. Congrats for another strong quarter. Two questions on my side. First is sort of about ADR. We heard some news about SEC, and we already see some secondary listed companies are preparing for primary dual listing in Hong Kong. So I wanted to share your view about this potential sort of political risk, and is there any planning or initiatives that we will take. And the second is about the combination of so-called three networks. So I wonder, so what's the current progress and the results as of now? And is there any other specific, more specific targets for this year or a couple of years into the future that you can share with us? Thank you.
spk06: Hello, Mr. Liu.
spk03: First, I would like to answer your question about the 30,000 plus. We, China, have always been very focused on efficiency. So, in the future, the first wave is that in the past few years, our operating costs have had a very big advantage compared to China. In fact, we are very focused on the ability to build. The earliest to build a free and secure factory, the earliest to buy a car, and the most free equipment. As we are in this area, the pursuit is getting faster and faster. We ourselves predict that in the future, as the company can reduce the number of distribution, that is, reduce the distribution, So our second page is to encourage our county and city, our cooperative partners, We are helping him to build land, to build a dam, to build a small dam. We have predicted that in the next few years, we will have about 100 dams in Zheying, and about 200 to 300 dams in Zhejiang. 15% to 20%, 20% to 25%, about 20% of the supply will be through this network. That is, the cost above can have about 3-40 billion of this cost. The Hong Kong S-34, please answer the question.
spk05: First, let me translate for Mr. Lai for the first question that he answered relating to the tri-layered integrated throughput system. We have consistently throughout our past focused on efficiencies, and we showed our advantage by investing early in land and facility vehicles, as well as sorting equipment As our competitors slowly catches up with their investment, then that difference within those advantages are narrowing. However, because of our increasing volume and our efficiencies in our traditional first layer, which is connection very effectively run between sorting hubs center to center, We are developing greater efficiencies and capabilities amongst all the outlets towards their connection, better connection with our sorting hubs. The second layer is the origination outlets to destination sorting hub. So therefore, they are bypassing the origination sorting center. In the future, We are expecting about 100 of supersorting centers that is owned and operated by us with 200 to 300 self-sufficient and capable sorting hubs or sorting mini centers operated by our network partners who has the capability of connecting directly to sorting centers bypassing the origination center. And that is the second layer. The third layer refers to the capability of direct routes, trucks running, connecting our origination outlets to destination outlets. We have estimated each segment of the trip saved could reduce per parcel cost by around 30 cents. And that is quite meaningful. To achieve that, we are currently and have been in the past, but currently more so, in helping our network partners who we mentioned that has been with the company has confidence and trust in us and the future who are willing to invest and develop their own capabilities. We expect in the next three to five years about 15 to 20% of our volume will come from the operating layers other than the original center to center layer. And the estimated cost reduction is about three to four billion. Now, let me go through the second, but your first question regarding the current listing and SEC requirements. Recently, you all have seen there are active discussions amongst the authorities and government bodies. So while we are hopeful that productive and practical solutions could be reached and agreement could be put in place, we are actively searching and planning, researching and planning for our options. primary due listing is one of the options. That will give us proactive control. So positively responds to your question that we are in the process of evaluating such options to us. I should add that finding a solution such as or preparing for with a solution that is, for example, Hong Kong dual primary listing, is not for avoiding of disclosure. You know that we have always been very open and transparent in providing all the pertinent information to our investors who can make sound decisions. This is also our initiatives are also for the purposes of opening up more investment opportunities for investors that are closer to our home market. So this is a comprehensive decision and approach.
spk06: Okay. Thank you. Very helpful. Thank you.
spk07: Next, we will take Fan Zhou of Bank of America.
spk01: Thank you, Mr. Lai, Mr. Yan, for accepting my question. Congratulations on the outstanding performance of the President. I have two small questions. The first is about the impact of the COVID-19 lockdown, especially in a relatively remote area, such as Shenzhen or Dongguan. Maybe now I'll translate my two questions. Number one is... the COVID lockdown impact on our volume. Would management be able to quantify a little bit, especially in cities that we are seeing more stringent lockdown, such as Shenzhen and Dongguan, how it is impacting our daily volume? And second question is about our time-definite parcel business. Could management provide an update and are there any target in terms of volume or revenue contribution in the medium to long term? Thank you.
spk05: First of all, let me make a remark that we have already exceeded our one-hour call and the market is already open. So we will refrain from any comments that could specifically communicate numbers and so on. willing to answer the question regarding the COVID situation.
spk03: This is the phenomenon of timetable, we think it is still the phenomenon of timetable. This is generally this one week, two weeks will be released. The second question is this. The standard question, the standard question, we are last year in April, the implementation of the implementation of the final product. At present,
spk05: Let me just make some closing remarks here because we really want to make sure of compliance. We have trust in the government and agencies who are working hard day and night in addressing the COVID situation. The impact is there for sure. You are all aware what's in the public, what's announced here and there, all the numbers. So please pay attention to those and gather your numbers on that. And regarding the time definite product, is a product that we rolled out last year aimed to standardize the time definite requirements input commitment around the promise of time and also for the delivery. So please operator, we need to conclude this call. We are open for calls subsequent. We have some scheduled many calls for you, and please feel free to connect with us.
spk07: Oh, thank you, ma'am. Sorry about that. All right. Again, the conference call has now concluded. Again, we thank the management team for your time today, and thank you, everyone, for attending. At this time, you may disconnect your lines. Thank you, everyone. Take care, and have a wonderful day.
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