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spk01: Good day and welcome to the ZTO Express third quarter financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. In the interest of time, please limit yourself to two questions. Please note this event is being recorded. I would now like to turn the conference over to Sophie Lee, Director of Capital Markets. Please go ahead.
spk06: Thank you, Operator. Hello, everyone, and thank you for joining us today. The company's results and the investor relations presentation were released earlier today and are available on the company's IR website, ir.zto.com. On the call today from ZTO are Mr. Mason Lai, Chairman and the Chief Executive Officer. Mrs. Hui-Ping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights. Then Ms. Yan will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows. I remind you that this call may contain forward-looking statements made under the Safe Harbor Probations of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market 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, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties, and factors is 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 statement as a result of new information, future events, or otherwise, except as required under law. It is now my pleasure to introduce Mr. Mason Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English.
spk04: The market share increased by 1.3% compared to the same period last year, reaching 22.1%. Our public satisfaction score is rising again. The whole chain has been effective and the 72-hour demand has continued to rise. At the same time, we have achieved a net profit of 63.1% after the adjustment of 18.7 billion yuan. The three systems are affected by the pandemic, and the shipping industry is in a slump overall. The Chinese Communist Party is focused on self-reliance, and through continuous deepening of economic and digital management and digital operations, not only improves the quality of business, but also continues to develop the ability and conditions to ensure the normalization of the pandemic, while continuing the previous two systems and double-sale industry, especially in terms of market share, property quality, and profit margin. In addition to the system, we have achieved obvious results in terms of improving platform operating quality and profit capacity. First, we have made clear some unhealthy conditions through the sorting and adjustment of customers in the Zheying Market Department and the corresponding network policy. At the same time, the fair and transparent policy has improved the market competitiveness of the end point. The optimization of quantity-based report data and the storage of management tools have provided the ability to see and catch at the flow-to-line level, so that we can effectively avoid big waves and big waves, improve the accuracy of the decision-making, and better balance the reasonable relationship between cost and price. Third, further standardize to optimize the assessment indicators and continuously improve the digitization capability, so that we can track and analyze the data for the rolling process more accurately, and thus more reasonably optimize the ranking, and more precisely adjust the route, and more effectively improve the performance of personnel and equipment transportation. At the same time, not only improve the practicality, but also reduce the occurrence of problems. to improve the overall operating quality. At the same time as optimizing our own business, we also fully pay attention to the improvement of the comprehensive capability of our customers and customers, and thus develop the expansion of market share. First, we extend the work of Liang Benli to the end point, and immediately send relevant data to the end point for its own business. to encourage and assist players to learn how to play, from the world's best players, to help the players to grow and solve problems, to increase the competitiveness of the market. Second, we have further simplified the collection policy of the left-wing players. At the same time as the implementation of the policy is fair and transparent, we have further balanced the balance between the left-wing players and the interest-adjusting mechanism, and deeply dug into the potential of the players. to effectively increase the capacity and efficiency of the customer base. The control of the whole chain of service quality is a prerequisite for expanding the market share and increasing profit growth. In the past several seasons, we have continued to test the service quality assessment indicators and reward mechanisms through the effective linkage of the whole network in each link, from the beginning to the end to solve the problem of service quality. The gap between the share price of three systems and the share price of the same industry has greatly increased the gap between the share price of three systems and the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap between the share price of the same industry has greatly increased the gap to promote the core work of the following guidelines. First, strictly implement the safety production responsibility, strengthen the implementation of the epidemic prevention and control requirements, ensure the safety of the geological channels, prevent major accidents. Second, temporarily expand the network base construction, improve the overall chain of transmission efficiency, help the endpoints, supplement the production capacity, and further improve the wave capacity. Third, deepening network governance and rich energy. Promote end-to-end policy to the end. Ensure that the end-to-end is profitable. At the same time, put the market price in the hands of the business owners. Expand the inner motivation of the front-end customers. Fourth, accelerate high-quality end-to-end construction. Build a comprehensive ability of door-to-door chain and delivery and community service. At the same time, reduce the cost of supply and demand. 5. Promote the development and promotion of eco-friendly and eco-friendly products. From the point of view of size, difference, and quality, focus on core advantages, and further build products such as standard products to meet the needs of individualized consumption. Looking forward to the future, the prospects of the fast food industry are still broad. The trend of change and diversification has never faded. Tungtung is equipped with a culture of many years of co-creation and co-sharing, and is brave to explore new trends. The network is stable and large-scale, and the performance is high. In addition to the gradual improvement of the financial management, Tungtung has confidence and ability to achieve a market share and accelerate the expansion of its goals. Hello, everyone, and thank you for joining us today. For the third quarter of 2022, CTO delivered a parcel volume of $6.37 billion, which increased 11.7% year-over-year.
spk06: extending our market share by 1.3 points to 23.1%. Our customer satisfaction scores hit a new record, and our end-to-end timeliness and the 72-hour time definitiveness continue to ramp up among its peers. Meanwhile, we achieved 1.87 billion of adjusted night income, growing our bottom line by 63.1% year-over-year. In the third quarter, due to pandemic and other external factors, the overall growth rate of the express industry decelerated. CTO focused on being the best we can. Through wider implementation of CTO-oriented and data-driven process management and solutions, not only did we enhance operational excellence, but also built readiness to realize optimistics as well as systemics. growth potentials. While ensuring the normalized pandemic prevention and control, CECL was able to gain on both volume and price for the third consecutive quarter and further widen the lead over our peers in the market share, service quality, and profitability. Over the past few quarters, we have achieved remarkable results in improving the operational excellence and earnings quality First of all, by coding through KA customer accounts and modifying corresponding network policies, we eliminated unnecessary loss-making contracts and at the same time enhanced the competitiveness of our outlets. Second, with further requirements and a wider utilization of our daily volume cost-to-profit dashboard tools, we gained the visibility at the hustle flow level which allowed us to recalibrate cost of cooperation, pricing, precision, therefore reduce broad stroke policymaking. Third, with further standardization of operating protocols, refined KPIs, and optimizing digitization capabilities, we can now track and analyze transit and sorting process by segment, which improves activity. Therefore, improve effectiveness of workshift design. Revolve transit more timely. Increase utilization of labor, facilities, and transportation resources. Reduce filler packages and improve end-to-end timeliness. The overall operational quality and efficiency was intense. While optimizing our own operations, we continue to focus on empowering our network partners to improve their comprehensive capabilities, thus stimulating market sharing. We have gradually extended our volume cost to profit-initiated network partners. We pushed the real-time data to always, encouraged and assisted them to organize and raise financial results. stopped olives with low and negative growth to identify and solve problems from bottom up, and ultimately improved their market competitiveness. We further simplified partner fee policies and made them more equitable, transparent, and uniform. We tapped into the incremental market share potential through interest alignment and resource sharing announced pickup and delivery olives. and effectively increased customer acquisition and total profit at both marketing and fulfillment ends. Ensuring the service quality throughout all stages of pickup, exportation, transportation, and delivery is a big condition for extending market share and increasing profits. In the past few quarters, we have continuously refined PPI and improved the rewards and reprimand mechanisms and tackled reports through problems in a timely manner with integrated efforts from all key segments of the entire network. In the sub-quarter, our leading China Index scores widened among peers with the fact that they encompass our brand recognition and service reputation. Fourth quarter thus far, the external factors including pandemic situations continue to bring intermittent negative impacts. Consumption level was lower than expectations, and express industry growth was under pressure. However, we have been continually focusing on the following priorities around our primary goal of accelerating market share expansion, supported by the following high-quality focus. First of all, strict accountability for operational safety, pandemic prevention, and control to ensure the smooth flow of packages. Second, enhancement of network infrastructure capability in an orderly manner, particularly helping the olig to plan and establish enhanced pickup and delivery efficiency, which are in sync with the entire transit and sorting platform. Third, further implementation of network management tools, including those of last-mile policies, which, without compromising the vested interests of the olig owners, ensure the courier's direct access to market pricing firsthand, and be incentivized to acquire new retail customers. Fourth, accelerated expansion of quality preference with diversified capabilities at the LACMAO post. The goal beyond reducing pickup and delivery costs and provide community services in addition to on-demand delivery to doors. Therefore, enrich LACMAO customer experience in store and to home. Fifth, design and promotion of eco-diversified products and services which rely on our differentiated scale and the quality advantage. For example, standard time-definite service, tuned and customized to meet. Looking ahead, the growth prospects of China's trust-delivery industry have been exhausted. The divergence of key players have gradually become obvious and clear. For the past 20 years, BQ has built and relied on its shared success culture, innovative DNA, its network with stability and unsurpassed scale and efficiency to stand apart from the rest. Coupled with increasing effort on management upgrade and rigorous work ethics and analysis, we are confident to achieve our primary goal of accelerated market share extension with improving service quality and profitability, to usher in daily parcel volume that would exceed $100 million. Now, let's have our CFO, Ms. Nguyen, to take us through our financial results.
spk05: Thank you, Chairman Lai, and hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in RMB, and percentage changes refer to year-over-year comparisons. Detailed analysis of our financial performance, unit economics, and cash flow are posted on our website, and I'll go through some of the highlights here. In the third quarter, despite the recurrence of pandemic shutdowns or restrictions and the weaker than expected economic outcome, ZTO delivered strong performances in both market share gain and profit expansion, both supported by improving quality of services. Parcel volume increased 11.7%, which helped to expand our market share by 1.3 points to 22.1%. The adjusted net income grew 63.1% to $1.9 billion. Total revenue increased by 21% to $8.9 billion. ASP for the core express delivery business increased 9.9%, or 12 cents, While pricing became more stabilized, we continued to optimize our policy effectiveness by enhancing volume mix, as well as helping our network partners and outlets to strengthen their competitiveness and profitability. Total cost of revenue was $6.5 billion, which increased 11.6%. Overall unit cost of revenue for the core express delivery business increased 12.6% or one cent. More specifically, line haul transportation cost per parcel decreased 2.2% to 49 cents, where rising fuel costs were offset by cost efficiency gain from increased use of high capacity trailer trucks, improved load rate, and better route planning. unit sorting cost increased 5.8% to $0.30, driven by increased labor costs and higher depreciation and amortization charges. We continue to raise our level of automation in response to increasing human resource costs. Gross profit increased 55.9% to $2.4 billion, benefited from both volume and ASP increases on top of meaningful cost efficiency despite lower than expected volume. Gross profit margin rate increased 6.1 points to 27.3%. SG&A expenses as a percentage of revenue dropped 0.3 points to 4.9%, demonstrating continued scale leverage by our corporate cost structure. Income from operations increased 59.9% to 2.2 billion and associated margin rate grew 5.9 points to 24.3%. Operating cash flow grew 58% to 2.8 billion. Our capital expenditure totaled 2.1 billion. We are hopeful that COVID restrictions would gradually ease off. and macroeconomic condition would improve in 2023. We believe that China's express delivery industry has great potential to grow for the longer term, and ZTO would remain its strategic focus on market share gain upon achievement of targeted profit level. All of these will be made possible through continued effort on standardization and digitization, where data analytics and process improvements will lead to further upgrade of our leading operating efficiency and quality of earnings. Taking into account the current market condition, the company revises its previously stated annual guidance. Parcel volume for 2022 is expected to be in the range of 24.3 billion to 24.7 billion, representing a 9 to 11% increase year over year. Meanwhile, the company remains confident in achieving no less than one percentage point increase in its market share for the entire year of 2022. These estimates represent our current view, which are subject to change. Now, this concludes our prepared remarks. Operator, please open the call for questions. Thank you.
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourself to two questions. At this time, we will pause momentarily to assemble our roster. Our first question will come from Ronald Kung with Goldman Sachs. Please go ahead. Thank you.
spk03: Two questions. First, I would like to hear about some of the disruptions of the pandemic, including growth and industry. If we are in this environment, how can we maintain a faster growth than the industry? What measures have we taken to slow down the impact of the pandemic on our network and operations? uh Thank you, management. I have two questions. One is I want to hear about how did the recent COVID new cases, how has that disrupted our business? And how are we ensuring growth and also good service quality in the times of slight disruptions in outlets and some of our operations? And second, we'd like to hear management's view on how the next year, 2023, will play out, because on both parcel volume growth and also pricing, knowing that the price hike for the industry started in September last year, and the whole industry has gone through a very healthy uplift in profitability. And so as we lapse the price hike around three to four quarters now, how are we thinking about pricing into next year? Thank you.
spk04: The epidemic, we are holding back the epidemic with one hand, and then the market will develop. Both hands are holding back. It has a little impact. We think that after the government's second draft, the market should be developing in a good direction. We still have faith in our own development. In 2023, the growth and price. It is expected that the epidemic policy of the country will be more precise. The confidence of the consumer consumption in logistics will recover. At the same time, this year, Because this year, the entire industry has grown in number. So our expected industry demand is likely to rebound. Next year's price war, we think the possibility of a price war is not great. The first is that in the monitoring environment, the express industry continues to develop at a high quality level, that is, at a high quality level. The accounting industry is also more focused on long-term development. The second is the industry growth method. The market has increased and the price has gone up. The old way of not counting the cost and increasing the exchange rate will pay off more costs and is very difficult to take advantage of. The third is that the oil price and artificial cost are high. Under the situation of dynamic anti-aircraft in the country, the default operating pressure is also significantly increased. Overall, in the context of industry growth, stability, and dynamic control of the epidemic, the express market has switched to a value-added competitive track. From a value-added track to a value-added track. With a stable network, flexible resource pairing capabilities, and a leading quality industry, the industry with strong risk-relief capabilities will have Thank you.
spk05: Thank you, Ronald, for your question. Let me translate for the chairman. First of all, the impact of the pandemic and specifically those prevention and restriction measurements certainly has a negative impact on our business. So we, on one hand, focused on the prevention, and on the other hand, continued our growth focus. We believe that after the major Congress meetings, Policies will gradual, even though it is gradual, but will certainly come about to stimulate the economy and continue to raise consumers' confidence in supply chain, resuming its efficiency as well as logistic businesses, particularly express businesses. For next year, we're looking at a low comp, and we are hopeful that the business will continue to focus on quality of growth and the economic rebound will again provide greater opportunities for us. So for 2023, we think the likelihood of previously experienced fierce competition is low as everyone starting to focus more gradually on quality of operations. And as well as what we have seen the government's conviction, in regulating competitive environment, ensuring healthy competitive dynamics taking place. And the industry growth had slowed down, yet the increase in volume in next year will be the target of everybody's focus in terms of growth because the installed base is there. So what we are doing and again is what we have been doing is laying the foundation of operational efficiency as well as quality of earnings not only to ourselves but to our network partners in that extent that they are ready and they are prepared as well in seizing the opportunity that will arise. Overall view is that in general as the policy continues to ease and relax, economic operations will begin to tend to normal. In that sense, then our focus will continue to highlight our strength, focusing on quality of services. And as we reach our profit target, we will further our primary goal of expanding market share. What we have seen in the past, the divergence of the marketplace is clear. The stronger will become stronger, and the profitability will provide even further support for accelerated growth. It will eventually be, the winner will eventually be those who are well-prepared, who has the capability of being their best, and time will tell, time will certainly, support our longer-term view that the industry growth has its potential and the winners will take what it deserves.
spk03: Thank you. That's very useful.
spk01: Our next question will come from Liu Zhu with Citi. Please go ahead.
spk07: Good morning, Mr. Lai, Mr. Yan. Thank you for accepting my question. I actually have a question about the cost of our future. We have seen that in the third quarter, in the case of oil prices rising, it is not easy to achieve the transportation cost of one cent. However, we also noticed an increase in the share cost. We would like to ask, if we look at the future, what is the main space for the cost of our single ticket to go down? How much space is there to go down? Will there be some adaptation? And how can we expand the future of our production? So we've noticed that the has achieved one cent lower on the unit transportation costs despite the higher fuel costs. But the unit sorting cost has increased year on year. And we would like, could the management share more on the unit cost reduction going forward and what would be the major cost reduction comes from and what the potential, the cost reduction potential, if we have any guidance or could give us any color on that. And how should the capacity expansion plan to be in the future to more tailored to or to better optimize the utilization rate. Thank you.
spk04: Excluding this effect, the efficiency of single-vendor transportation costs is not only improved, but mainly limited to the optimization of transport resources and road use planning, as well as the improvement of equipment utilization and cargo capacity. Secondly, the cost of single-vendor distribution increases by a share, mainly due to the low level of business volume due to the epidemic. The second is that the headquarter of the new factory and the equipment On the third day, the cost of free delivery was lower than the cost of free delivery. The cost of free delivery was higher than the cost of free delivery. The cost of free delivery was higher than the cost of free delivery. The cost of free delivery was higher than the cost of free delivery. The cost of free delivery was higher than the cost of free delivery. The cost of free delivery was higher than the cost of free delivery. more market share and profit. In the future, we will contribute to the cost management. First, we will make fine-tuning and management of the position, standard, strength, and so on. Second, we will realize the whole chain, digitalization, tracking, and improve resource configuration and rationality. Third, we will increase the layout of the end-to-end store, and deepen the chain, that is, open more lines. So let me help translate.
spk05: The oil price hike in the third quarter, the impact on our total cost per parcel is about $0.03. As we all know that the domestic oil price increased by about 30%, and the global prices is somewhere around 25 to 30%. So we have still a one cent improvements on the per parcel transportation costs. It means that we have received benefit from the efficiency of transportation operations with a larger capacity, trailer trucks, route planning, and improvement of load rate. Now on the sorting cost per parcel, it increased one cent year over year we have seen lower than expected volume as we have a proportionately higher fixed cost specifically we have our own personnel in the sorting facilities so the scale leverage is diminished in that sense when our volume is lower than expectations And another factor impacting the sortation cost per parcel is the increased depreciation and amortization from new hubs and new equipment installation into putting in operation. Going forward in the near term, we will and we have seen and will continue to benefit from our digitization and operational excellence improvement. route planning, shift designing, total end-to-end coordination, all these will help us reduce per unit cost. In the longer term, as we have mentioned in the past, as we achieve our goal of expanding market share, more volume coming into our network, then we are able to realize even further cost productivity and efficiencies as our routes become more direct, as our number of sortation comes down. In other words, more and more of the parcel, greater portion of our parcel will only go through sorting once or even zero sorting. And that will significantly reduce the per unit cost even further. So I hope these answers your question.
spk07: Thank you, Mr. Lai. Yes, I would like to ask about the future production expansion plan. Perhaps we will make reasonable arrangements according to the amount of business.
spk04: As far as capital investment, we will
spk05: continue to monitor macroeconomic conditions and we will continue to recalibrate our plan of investment. Although we do believe that the peak investment period has been the past, we've already gone past that because majority of our sorting hub and super sorting hubs have been established and the ongoing CapEx expenditures a bigger portion of that would go towards some of those upgrades. Most of our infrastructure construction is already in place, so we do believe that the CapEx spending will be tapered off or held steady.
spk07: Thank you. Thank you.
spk01: Our next question will come from Frank Yip with Daiwa Capital Markets. Please go ahead.
spk00: Thank you. uh uh uh So let me translate from my question. I got two questions first related to the pandemic outbreak. Is it that even the EGDA relatively weak partial volume growth, Is this mainly coming from the pandemic disruption or is mainly related to the consumer expenditure? So if we excluding for those pandemic disruption for the next year, so what kind of growth rate that we are targeting for? And my second question is regarding to the divergence of profitability amongst the peers. So what is the key reason or the key factors that we have a better performance than the artists?
spk04: Hello. The first problem is that we believe that the impact of the pandemic is on most of the companies. So, next year, we believe that the growth rate of large-capacity couriers will reach double. Because the technology is low this year, if the epidemic gets better next year, We believe that it is possible to increase the growth rate. Profit diversification is actually becoming more and more obvious. In fact, in the first three seasons of this year, the degree of profit diversification in this industry is increasing. The specific reason is that the quality of each house is different. So the quality of the house is better, the price is higher. For example, like Zhongtong, there is a certain price. The second is that the cost and efficiency of the entire chain are also affected. The CPC has always been very focused on market division, profit and loss, and service quality balance development. So while we have a certain amount of profit in the headquarters, we also guarantee the continuous growth of our partners and our complete profits. So we are very confident that the CCP will continue to maintain a steady increase in market share, profit capacity and service quality. Thank you.
spk05: To your first question, the majority of the slowdown comes from the pandemic associated either prevention or restrictions or disruption on the supply chain. The consumer's spending is impacted by the larger environment of the overall logistics, the overall sentiment, and certainly the pandemic impact has a more significant negative impact. The likelihood for next year, well, we believe the industry has an opportunity to reach a double digit growth. The reason is that we think, first of all, it has a low base. And then two, as we are seeing the country has becoming more and more capable of addressing sporadic outbreaks and becomes more responsive in addressing localized outbreaks. So we do think the government and the central government will gradually ease off some of the restrictions so that the economy will return to normal gradually. So for our profitability better than our peers, we think that there are some of the perhaps three reasons. One is for sure our quality of services. We've often talked about the price premium that ZTO enjoys. And we have consistently focusing on quality of services, differentiated quality of services, not only at the transit level, part, but ensuring our network partners at the pickup and delivery end are also up to par. And that really helped us maintain a level of price premium in the marketplace. On the other hand, also bringing in more customers who focus more on quality versus price. Second, our own initiatives, our own focus on End-to-end operational efficiencies also helped greatly ensuring our profitability, and certainly we enjoyed better scale leverage than anyone else. Third, which is more important and overarching because it is our primary focus on balancing all three priorities, volume increase, market share gain, profit expansion, quality of services. And then further, we are exercising efforts and discipline, not only to balance all three for ourselves, we are helping our network partners because then they are able to invest alongside of us further their sustainable growth. So we do believe going into a time of rebound and recovery, we're in a, much greater position to maintain our lead and then further expand our market presence. 这边我想追问多一下,可不可以跟我们分享一下现在公司的时效件方面的这个业务方面的一个亮点呢?
spk00: So my follow-up question is, can you give some of the colors regarding to our time-definite partial? So what exactly is the partial contribution or the revenue contribution right now?
spk01: Pardon me, speakers. Your line might be muted.
spk04: Last year, the government launched a standard product. Unlike ordinary couriers, the product provides the service of sending money, guaranteeing efficiency and accuracy, and not only customized delivery. At present, it has covered most of the major local cities in the country. With the mainstream downstream platform on the market, it is basically completed, and not only through policy and technology to adjust to the top delivery rate, Indeed, to diversify our product is one of our initiatives, and we have officially launched the Standard Express product since 2021, which both
spk05: differentiated services in terms of pre-delivery phone call and guaranteed timeliness and precision commitments and last mile customer delivery. It has currently covered most of our major cities, perfect level cities in China, around over 300 plus cities. And the pre-delivery call notification is over 99%. It has We have plugged into the mainstream ordering platform in the marketplace, and we are also amping up the onset delivery rate through strategic technology adjustment. Our daily volume for this particular product is over 400,000 packages. To-be and to-see customers are all enjoying this product. We have been successfully expanding this protocol or this, yeah, this protocol, and we are committed to expand these services further across the nation.
spk01: Our next question will come from Thomas Chong with Jefferies. Please go ahead. 早上好,謝謝管理長介紹我的提問。
spk02: My first question is to ask about short videos. In the past, the development of a period of time, now the demand for e-commerce is getting bigger and bigger. Can you share with us how we should look at the distribution of short videos in our unit? What is the current and future ratio? The other one is that we see that our profitability is also very strong. I would like to ask, in the future, we are investing in, for example, overseas, we will increase the investment in the next few years. How should we understand our profit direction? Thank you. Thanks, management, for taking my questions. My first question is about the e-commerce landscape. Given that we have been seeing a short form video is ramping up very quickly, may I ask management about our possible volume mix among different platforms? And my second question is about our investment strategies. Given that We have been seeing our peers also investing in overseas and local on demand. Just want to get some color from the management with regard to our investment spending over the next couple of years, given that our profitability is very good. Thank you.
spk05: Thank you for your question. I'll take these two questions. We have been, ZTO is an open platform. We serve all types of e-commerce, all forms of those. You're right that video streaming, such as Douyin and Kuaishou and so on and so forth, they are all becoming more and more of the mainstream players. in addition to what we have previously seen, the TMO and Taobao. So as a open platform, we do serve all. In other words, the development of their growth, of their volume increases, is consistent with our volume mix in serving these up-and-coming and new form of commerce. And the second question, investment strategy overseas. Since in the early years, about 10 years ago, we have started looking into Southeast Asia regions of investment. However, we have come away with the experience that, first of all, those markets are small, much smaller. If you put some of the countries together, they are probably equal to only one of our provinces domestically. So our resource disbursement, our resource allocation is according to the size. And certainly there are certain countries in the Southeast Asia, their opportunity is similar to perhaps China about 10, 15 years ago. Their e-commerce development is also enjoying great upside and room for growth. But yet we have to be very careful because we know network operations, we know the partner model, yet you have probably observed there are more quality demand, quality of services becomes available only when directly a vertically operated model, when that is more efficient. So what we have done is As we put our footprint overseas in Southeast Asia, in that sense, we also expanded resource secure procurement in Europe and in Africa. Yet, the expansion investment for overseas has to be careful. It has to be systemic. What we have also observed recently, the price has been really, the pricing capability has been really weak in the international arena. Part of it is, of course, the global pandemic impact. Another part of it is the whole industry is going through recalibration. Tanyao being one of the key players have shifted most of its volume to its own invested companies. And the pricing, in a way, is volatile. And so we are observing. We are watching. And on a greater sense, ZTO have always been prudent in its own investment strategy. So I can tell you recently of certainty that we are going into international markets. but we are watching, we are observing, and finding the right opportunity becomes important for us to allocate our rich resources.
spk02: Thank you.
spk01: Our last question will come from Frank Uez with WetHide. Please go ahead. Pardon me, Mr. Yuez, your line might be muted. This concludes our question and answer session. I would like to turn the conference back over to Hoopie and Gain for any closing remarks.
spk05: Once again, thank you, everybody, for participating on our call. The company is in a great shape. We are taking the opportunity to better ourselves while the external microenvironment continues to improve, and we are hopeful the rebound will certainly arrive in due time. Another thing I want to report to you or point out to you that the board has recently approved of an additional $500 million buyback plan for us to ensure our return on interest, our return on our shareholders. So I look forward to speaking with you all in the future. Thanks again for joining us today.
spk01: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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