ZTO Express (Cayman) Inc.

Q1 2024 Earnings Conference Call


spk00: Good day and welcome to the ZTO Express first quarter 2024 financial results conference call. All participants will be in 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 telephone keypad. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Sophie Lee, head of capital markets. Please go ahead.
spk04: 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 available on the company's IR website at ir.cto.com. On the call today from DTL are Mr. Mason Lai, Chairman and Chief Executive Officer, and Mrs. Weiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Mrs. Yan, who 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 provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and the 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 achievements to differ maturely from those in the forward-looking statement. 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 statements 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.
spk03: and the same growth rate of 14%. At the same time, we achieved a growth rate of 16% after 22.2 billion yuan was adjusted. In the first quarter of this year, the business volume of the express delivery industry increased by 25.2%, far exceeding the expected. New e-commerce live broadcasts and the rapid development and cancellation of social media platforms On the one hand, it has stimulated the online consumption of the general public, which has led to a growth in express delivery business volume. On the other hand, it has also led to a rise in the proportion of low-end e-commerce stores. The core of a family business is to create value. The Chinese Communist Party insists on sustainable health development. Under the premise of maintaining the necessary basic business volume, we actively abandon some of the shortcomings. The market share of a system dropped by 1.9% in the same period last year. However, our profit level and the market share have further increased. The main objective of the Sino-Turkish War is to maintain a balanced development in terms of service quality, profit and business scale. In the beginning of 2024, we will focus on service quality. while maintaining the scale of the business and a good level of profit. We also pay more attention to creating differentiated products and services to meet the needs of diversification and individualization of customers, and to improve the understanding and recognition of consumers of Chinese-made brands. As you know, we have taken a step forward in the development of all-in-one schools, and we have improved the responsiveness of the MoDAN-Samen service and the ability of the Anshu service. We focus on our own, expanding our high-value platform customers, increasing our retail ratio, and optimizing our revenue structure. We also know that the single-vote revenue of the central express delivery core business has dropped by 10%. The drop is significantly lower than the industry, As for the continuous deepening of financial management, our single-vote division and supply costs have decreased by six points at the same time. In addition to the stable and reasonable management cost structure, the profits of single-vote and total profits have been increased. In the second phase, the industry business volume has continued to grow rapidly. At the same time, the price competition is still very strong in some core markets. 3. Effectively face competition, grasp market confidence, clear your own debt, 4. Enhance the construction of the last unit, increase the speed of the car to the corner and the side, and increase the proportion of the team. Directly deploy the last unit, let the staff focus on the collection work, and build on the ability and cost advantage of the service. to provide solutions to the challenges of the entire industry. Through express delivery, we can add business elements, and thus enrich the end-of-year income. Fifth, we can strengthen the network, strengthen the communication with the end-of-year, unify the market, unify the thinking, promote the reasonable balance of long-term interests and short-term interests, maintain the rights of the end-of-year and business people, and make the policy fair and reasonable. The development of technical products and functions to improve management, management capability, and convenience. The change from high quantity to quantity to quantity is a natural trend. We adjust the strategic focus, put the service quality in the first place, deploy new growth points, and replace competition advantages. The purpose is to create a neutral, The development of a long-term and unbreakable Housheng River stands on the pinnacle of the diversification of the industry. The Chinese people will stick to innovation, full of confidence, and a solid foundation, and work together with joint partners and businessmen. With the comprehensive strength of the whole chain of networks and the leadership of tolerance and peace, we will integrate resources and create values. The positive development of the operating industry Please allow me to translate for Chairman.
spk04: Hello, everyone. Thank you for joining today's conference call. In the first quarter of 2024, ZTO maintained its industry-leading service quality ranking. With a parcel volume of $7.17 billion, which grew 14% year over year, we achieved an adjusted net profit of $2.22 billion, representing a year-on-year increase of 16%. In the first quarter of this year, parcel volume of the express delivery industry increased by 25.2% over last year, far exceeded expectations. The booming development with frequent promotions by new live streaming e-commerce and the social networks retailing helped stimulate online consumption and fueled the growth of express delivery volume. On the other hand, it also contributed to an increasing proportion of low-priced e-commerce parcels. We firmly believe that the ultimate purpose of a business is to create value. CTO insisted on healthy and sustainable growth and chose to let go on profitable parcel volume on the premise of base level volume necessary for scale leverage. In the first quarter, our market share contracted by 1.9 percentage points compared to last year. However, our leading level of earnings among industry peers further widened. CTO's consistent strategy is to maintain balance in three aspects of growth, including service quality, profitability, and skill. At the beginning of 2024, we shifted our focus to service quality while maintaining a healthy level of volume and achieving optimal profit. We placed more attention and resources on developing differentiated products and services to meet the diverse and personalized needs of customers, which will enhance ZTO's brand awareness and recognition. In the first quarter, we further improved our leading position among Songda peers in the end-to-end timeliness. The responsiveness of the door and on-demand service capability of LASMO have improved. and the increase in reverse and retail parcels significantly surpassed overall market volume growth. While proactively addressing the structural shift in consumption and express delivery price competition, we focused on our own extended higher value customer base, increased the proportion of retail parcels, and enhanced the revenue structure. In the first quarter, our core express ASP decreased 4 cents year on year, which was significantly lower than the industry. Thanks to further implementation of lean management initiatives, our combined sorting and transportation costs per parcel decreased by 6 cents compared to last year. And in combination with a stable corporate cost structure, both profit per parcel and total profit have increased. Entering into the second quarter, the industry volume demonstrated strong growth momentum. Meanwhile, price competition remained fierce, particularly in major regions. ZTO remained firm on our strategic focus and execution surrounding the following main tasks. Improve transit efficiency. Taking innovative approach towards a mature and established operating framework. Rely on digitization and data analytics to drive process management and problem solving. Focus on safety production, time guarantee, and resource utilization throughout the entire team to improve quality and efficiency and reduce sorting frequency. Second, enhance product mix. Diversify and enrich express delivery services. Increase market penetration of distinct products such as ZTO Haokai. Synergistically leverage ZTO Logistics' ecological resources. Develop capabilities for comprehensive supply chain management. Refine differentiated product and services in order to increase brand awareness and recognition. Third, effectively address press competition. Stay tuned into marketing intelligence and take clear account of our own resources. Improve precision of pricing policy to become more case specific as well as fair and transparent. Fourth, strengthen last mile presence. Drive firm and increase the intake of retail parcels. Increase direct linkage between sorting center and LASMO outlets plus couriers. Frame up delivery personnel to concentrate on servicing LASMO customers. Improve capabilities and cost competitiveness of LASMO posts and offer solutions to serve non-medial volume. In turn, promote healthy development of the industry. Introducing commercial opportunities to existing express pickup and delivery traffic so as to enhance last mile economics. Fifth, empower franchisee partners. Improve communication, unified thinking, advocate balance between long-term and short-term interests. Protect the rights and interests of outlets and careers. Ensure fairness of network policies. develop useful technology tools to help improve visibility to operational data as well as convenience to conduct day-to-day. The shift from quantity-driven to growth in both quantity and quality for China's express delivery industry is inevitable. We have modified our strategic focus to prioritize service quality. The goal is to build new engines of growth and innovate greater competitive advantages with which to forge strong mode for ZTO's longevity. Standing at the turning point of industry transformation, everyone under the ZTO brand, including network partners and careers, will work together to maintain aspiration and confidence, shore up competitive strengths and ongoing relevancy. Through our comprehensive end-to-end capabilities and leadership role with inclusiveness, we intend to promote healthy competition and growth of the industry, maximize last-mile resource utilization, synergize common interests, hence creating value for industry participants, investors, and ultimately the society. Now let's hear from our CFO, Ms. Yin, about our financial results and targets.
spk06: Thank you, Chairman Lai, and thank you, Sophie. 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 financial information including unit economics and cash flow, are posted on our website. And I'll go through some of the highlights here. In the first quarter, while we paid more attention to quality of services and brand value improvements, we adhered to the principle of profitable growth and achieved a 15.8% increase in adjusted net income to reach $2.2 billion. Our parcel volume grew 13.9%, to $7.2 billion, representing a market share of 19.3%, which decreased 1.9 points compared to the first quarter of last year. An increase in the proportional share of lower-priced parcel, driven by frequent and deep discounts offered by e-commerce platforms, including live streaming and social network retailing, that stimulated consumption prompted us to recalibrate effort and resource allocation between volume and profit. We limited the amount of incremental volume incentives for the quarter, and the ASP of our core express delivery business decreased 2.5% or 4 cents, which is well below the volume weighted average ASP decrease of about 20 cents for the top four Tonda players. Our total revenue increased 10.9% to $10.0 billion. Total cost of revenue was $7 billion, which increased 7.7%. Overall unit cost for the core express delivery business decreased 5.3%, or 6 cents. Specifically, line haul transportation cost per parcel decreased 7% to 47 cents, driven by improved resource utilization and route planning. Unit sorting costs decreased 5.4% to $0.30, thanks to continued standardization in sortation procedures and improved labor and automation productivity. Gross profit increased 19% to $3 billion, and gross profit margin rate increased 2 points to 30.1%. Consistent with gross profit, income from operations increased 16.2% to 2.3 billion, and associated margin rate grew 1.1 points to 22.8%. SG&A expenses, excluding SBC, as a percentage of revenue grew 0.1 points to 6%, given a stable and sound corporate cost structure. Operating cash flow was $2 billion, which decreased 25.8% against a high base amount for first quarter 2023. In first quarter last year, receivables collection increased during the process of CA accounts optimization. In addition, CA accounts for first quarter of 2024 included newly established headquarter level platform customers who enjoys longer receivable terms. Our retail parcel volume grew over 40% year-over-year under the initiatives to increase higher value parcels. Adjusted EBITDA was $3.7 billion. Capital expenditure totaled $1.7 billion, and we anticipated, again, annual capital expenditure to be below $6 billion. Now, moving on to our guidance. We estimated the overall industry growth to be around 15% to 20% for the year. And we reiterate that our parcel volume for 2024 is expected to be in the range of $34.73 billion to $35.64 billion, representing a 15% to 18% increase. We remain committed to our balanced approach for sustainable and profitable growth. We have prioritized improvements in quality of services and development of differentiated product and services to enhance brand value and recognition. Under the near-term market dynamics, we aim to reach our earnings goal and then attain appropriate level of volume share. The above estimates represent management's current and preliminary view, which are subject to change. Now this concludes our prepared remarks. Operator, please open the lines for questions. Thank you.
spk00: Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If you are using a speakerphone, 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 stars and two. We ask that you please limit yourself to two questions. At this time, we will pause for a moment to assemble our roster. And today's first question comes from Quinley Sun with Morgan Stanley. Please go ahead.
spk05: Thank you, operator. President Lai, President Yan, Sophie, good morning. Congratulations on your good performance. Thank you very much for accepting my question. I have two questions. The first question is what President Lai just mentioned. In fact, in the first quarter of this year, we still strategically abandoned some of the losses to pursue better growth. I would like to ask, compared to last year, until the fourth quarter, the market share expansion was still relatively aggressive. Why is it that in the first quarter of this year, will make such a new strategic decision, or a small strategic transformation. And I would like to ask Mr. Lai how to judge the progress of the future industry integration. The second question is about unit net profit. I am very happy to see that the unit net profit has increased season by season and year by year. Just now, Mr. Yan also mentioned that we may be Let me translate for myself. Thank you for taking my questions, Mr. Lai, Ms. Yen, and Sophie. Congratulations on the very strong earnings growth. I have two questions. The first question is about what Mr. Lai has mentioned. In this year, we have strategically given up some loss-making volumes. What has triggered this strategical focus shift? What's your expectation on the industry consolidation dynamics going forward? My second question is about unit profitability. It's encouraging to see unit profit has increased year on year and quarter on quarter. If we assume competition strategy from peers to stay largely unchanged for the rest of the year, is it reasonable to expect unit profit expansion on a year-on-year basis will continue for the rest of the year. Thank you.
spk03: Hello. Thank you for your question. The first question is about the share price issue. This year, we have made some adjustments in terms of the standings. In the past, the market share price has been low. We think that From a long-term perspective, we have placed our services in the forefront and have made some structural adjustments. Therefore, our internal assessment is still to increase the ratio of retail and retail. That is to say, to increase effectively. In the case of more than one system, it is still within our budget. We are confident in the long-term health and stability development of China. In terms of profits, in terms of future profits, we still need to maintain a balanced development in terms of service quality, profits, and business scale. It's not that we, as the president said, can't make quick money out of losses, or can't make serious losses out of losses, right? This aspect is interesting. We believe that the president will continue to make profits
spk06: Thank you very much for your question. Yes, indeed, we readjusted our focus on all three of our priorities. The reason for that change is because we want to focus more on longer-term profitable growth given the market dynamics as of now. Specifically, if I may supplement, that the mix or the structure of the parcels in the marketplace included a greater portion of lower-valued items, which in a way is a pressure or challenge to the profitability of all express delivery businesses. And yet, on the other hand, our goal is to maintain profitable growth So, the strategy shift on one consideration is to avoid unnecessary volume. We increased our retail volume. We increased what we called effective volume to maintain our profit focus. And also, in the same time, for the longer-term view, quality of services is not just certain measurements. but more for recognition within our consumers' mind as they think about ZTO. Differentiated product and services is something that we must and we need to develop going forward instead of the marginalized competition. On the second part of the question, we will continue to maintain balanced growth. There is a saying in our business that loss-making parcels are avoided, or strategically speaking, if it's unnecessary, we do not want to take in loss-making parcels. The overall industry growth is continued shifting towards quality and quantity. Our goal is to maintain or improve or professional share on the earning side as well for the future growth.
spk05: Thank you. Thank you, Mr. Lai and Mr. Yan.
spk00: Thank you. Our next question comes from Louis Zhang with Haitang Securities. Please go ahead.
spk05: Mr. Lai and Mr. Yan, good morning. I'm Lui Yuzhang from Haitang Exchange. Congratulations to the company for achieving good results. How much has the proportion of the individual parcels increased in the first quarter of the company? compared to the same period last year. How does the company view the prospects of the individual platform market? What specific measures does the company take if you want to increase the penetration rate in the individual platform market, including self-owned and reverse logistics? Thank you.
spk03: Hello. Currently, we have a relatively fast growth rate, about 40% of the total growth rate. Currently, we have more than 5 million units in total. Of these, more than 3 million units are free units, and about 2 million units are platform units. Then we mainly point out that last year, first of all, we optimized the modem tool to provide more scenarios and convenience of the modem tool, which is convenient for customer enthusiasm to carry out direct management. We mainly released the courier service. Last year, we invested a lot of resources, a lot of resources, so that businessmen don't have to Our goal this year is to achieve more than 6 million items. Last year, we had an average of 3.9 million items. This is one. Finally, we want to use the experience of service and customers to increase the number of products that are available. First, we want to put the policy of corner to corner Thank you very much for your question. First of all, as we mentioned earlier, our first quarter retail volume grew over 40%. Our daily average as of now
spk06: is 5 million parcels and included which 3 million is our own and then the rest about 2 million is reverse logistics. One of the key initiatives through which we hope to increase and continue to see result is the way to free up our couriers we installed certain machinery at our outlets. Once they reach certain level of daily volume, we require such equipment to be used so as to free up our couriers. Typically in the past, couriers have to go to their station or go to their outlets to help sortation and then take their own parcels, their own meaning the region that they serve, take those parcels back to conduct delivery services, which is very time consuming for the first step in order to get those parcels for themselves. So with those machinery installed, the couriers are able to focus around delivery and providing two-door services, including pickup as well. This year we have a goal to increase our retail volume to 6 million parcels. Last year was less than 4 million. Our ultimate goal is to continue to raise this proportion and through mainly two initiatives. One is to ensure our couriers receive the front-end pricing benefit so that they could certainly truly differentiate pickup and delivery fee income. Two, we want to improve what we call it direct linkage, as I described earlier, so that the couriers can spend more time working within a shorter radius in their service area to help improve quality of services, including on-demand two-door delivery and quicker response to pickup so that they can improve retail ratio.
spk05: Thank you.
spk00: Thank you. And our next question comes from Ronald Kim with Goldman Sachs. Please go ahead.
spk01: Thank you, Mr. Lai, Mr. Yan, and Sophie. I have two questions. First, our current strategy is to focus on the share of profits. The short-term market may not be as focused on expanding the market. Then how should we think about the long-term vision of the express delivery? Do we think that the express delivery will be one wall, then two or three smaller players, or maybe two or three almost big players, and then the final pattern is three or four almost big players, but a total of three or four, or one wall, then two or three smaller players? Because this may also affect us in the future, Thank you, Mr. Lai, Ms. Yan and Sophie. Two questions. One is to think about the eventful express delivery industry landscape. If we're focusing more on profitability in the near term, and less on expanding market share in the near term. But how do we think about in the next three to five years, will China's express delivery industry become more like a three, four players at similar scale, but consolidating to those three, four players, or will we still expect it to be a one major leading player followed by two to three smaller in the two, three, four? So some thinking and how strategy may evolve over the next three to five years. Second is, as As the China market matures, how are we in our progress or thinking about expanding beyond China and going global? Any progress there or new strategies or thinking? Thank you.
spk03: Thank you. In terms of business size and profit, we have to maintain a balanced development. Although our business volume has dropped, we are still confident in the growth of the 15-18% this year. We don't want business volume. We are in the middle of the gap. There is a difference. We believe that in the future, the user's mind and experience are more important. At the same time, the growth of the retail ratio will promote the increase in profits and revenue of stores and business owners. After all, the profit and loss of each ticket is different. So we hope that through a period of time, the improvement of service value to increase the number of new users, the profit of our business owners will be more stable and healthy. From a long-term perspective, the CCP must be self-reliant. We still need market share and profit, and we need to have good service quality. This is our consistent strategy. As for how many families will be in China in the future, or the top one or the bottom one, or there are a few that are about the same size, I think as long as our president does his job well, he will have an advantage in terms of profit and service quality. I believe The second question is the international situation. We have gradually formed a rich cross-border product layout in the Middle East and the international community. The business type includes import, tax, oil, logistics, and storage. In Southeast Asia, Cambodia, Laos, Myanmar, Africa, Nigeria, Kenya, Uganda, Egypt, South Africa, Pakistan, and other areas, the local express business has been set up. The rise in international business is mainly due to the stability of the cross-border market price. The new donation line business is expanding, and the company can further try to build international retail business and domestic business.
spk06: Thank you for your question. First question relates to our strategy and specifically relates to our market share. As you know, we always focused on a balanced approach of all three focus areas, meaning quality of services, earnings, and also volume. We still believe our goal of achieving 15% to 18% growth is appropriate given the current market environment. We're not to say that we don't want volume. We're only recalibrating the focus because we think for the longer term, the brand recognition in our customers is more important for the long-term sustainable volume growth and profitable growth. In addition, the increase in retail volume or hence improvements in our revenue structure will help improve the profitability of outlets and couriers. We believe after a period of time of our initiative to improve their earnings capability, it will further stabilize our network and preparing for the longer-term growth. In a longer run, we believe we will continue to focus on our own affairs, i.e., any point in time we will focus on, one, we want quality of services. We also seek profitability and, most importantly, the healthy growth depends on our business brand recognition. As a matter of how many are going to remain in the marketplace or what are the proportional share taken by each players is not something that we are able to determine right now. What we are sure of is our own goal and focus. We want to continue to enhance and develop growth engines and enhance our competitive advantage. We believe it is those who are with scale, quality of services, and profitability that will grow continuously and sustain in a much longer term. The second part of your second question is relating to our international business. Throughout the years, CTO has formed a rich cross-border product layout with business types including import, bounded, direct mail, freight forwarding, warehousing, export, dedicated line, et cetera. In Southeast Asia, including Cambodia, Laos, Myanmar, in Africa, Nigeria, Kenya, Uganda, Egypt, South Asia, including Pakistan. and some of the other regions have all developed local express services on the ground. Given the rebound in the international business recently due to standardization and across border market price, the smooth expansion of new specialty line services are some of the things that we are exploring. The company will further attempt to develop international individual and boutique services while strictly controlling cost efficiencies, seeking cost efficiencies, so that we are expected to further expand that part of our strategy of future growth. Thank you.
spk01: Thank you.
spk00: Thank you. And our next question comes from Cesar Wu with Chong Gong Securities. Please go ahead.
spk02: Good morning, Mr. Lai, Mr. Yan, and Sophie. I'm Lu Sijia from Changjiang Securities. Thank you very much for your questions. The first question is that the market is currently concerned about a point that is the biggest difference. This is the rapid commercialization of fast trading. In fact, in the past, we have always believed that the fast trading industry has a very strong public effect and can see a very strong growth in the market. But since last year, including the first quarter of this year, it seems that it does not support our decision. We found that the market share of 2G companies as a whole has increased significantly, and the cost seems to be in a state of acceleration and optimization. So I would like to ask you how you see the performance of the entire currency industry, and what time will the future market share be able to see this change again? including whether market share is still a core goal for us in the next five to ten years, or whether service quality and profit may become our core point in the next stage. This is the first question. Of course, I would like to ask how we can understand the bottom line of the company in terms of market share. Thank you for giving me this opportunity to ask this question. The first question is, perhaps the most concerning and likely topic in market right now. Can the express delivery industry structure be optimized? We have always believed that the express delivery industry has economies of scale and the strong will remain strong in the future. However, the growth rates of tactics volume last year and the first quarter of this year do not seem to support this judgment. We found that the share of second tier companies had decreased significantly and cost optimization seemed to be accelerating. We'd like to ask how you view the pattern interpretations of the express delivery industry, and whether market share will still be the core goal in the next five to 10 years. Is surface quality of profits more important than market share? And where is the bottom line of our company's market share? The second question is, how long does our company expect to take achieve consumer awareness and product upgrades? What goals do we want to achieve in the long term of the future? Thank you.
spk03: Actually, considering a good or bad business, you have to look at it from three points of view. One is profit, second is service and third is value. So, in terms of profit, the turning point is actually for the future, for a more real and healthy development. Accounting must be This is a marathon. So you just mentioned that it is possible for the head to fall, for example, the average share price to fall. And then the share price will go up after the ranking. It is not completely based on this indicator. We should look at the quality of your service and the improvement of your profit and loss. So it's actually very simple to share because the price of each household is still the same price. It must be that the head takes more. In fact, some of them are like Zhongpeng, which is to take the initiative to send some low-cost parcels. For example, 1.5 yuan, 1.6 yuan, and so on. In the long term, this trend must be... This trend is becoming more and more obvious. If your service quality is good, if you have a good cost-effectiveness, and if you are able to make a profit, if you are able to make a profit by yourself, you will definitely make a profit and continue to grow. This is the problem of songwriting. We believe that as It will definitely diversify. It will definitely diversify. You have to look at three indicators. You can't just look at one indicator. Profit ratio, The second question is a personal one. We have always been pursuing the priority of service quality. We hope that in the future, our consumers, our users, will be the first to think of the Chinese Communist Party when they send the express mail. We also hope that in the future, Then we hope that in the future, Songtong will also be able to reach the user's heart. We have been focusing on three lines. The first line is the development of express delivery itself. We are focused on self-discovery. In Buddha's teaching, business scale and profit, and maintain military development. In the Middle East, in the first system, our supply is still reasonable in our budget. We must consider the reasonable supply of our most cost-effective. For example, now it is 95 billion to 100 billion. We are still very optimistic about the Chinese express delivery. We have firm confidence in the future. Because even though China's credit is big in the market, and its value has not been fully manifested, the overall profit level is still very low. As we further diversify, we will see that the profits of the entire industry will definitely continue to grow. Secondly, We can see that compared to developed countries, the cost of logistics is much higher compared to other countries. So we are constantly working on the development of the overall layout of the ecosystem. The third is the long-term advantage of courier enterprises. Thank you very much for your question. First relating to the market share dynamics going forward.
spk06: It is important to view an express delivery company or any express delivery company on all three aspects, not just only on market share. Those all three aspects are volume, certainly, profit, and importantly, quality of services, because we are looking at the express delivery business growth as a marathon. shift in the focus among all three is specifically for the purpose of a longer-term growth. Indeed, our first quarter market share has decreased, but yet we are also looking at the healthy level of our quality of earnings and including the quality of earnings of our network partners. We think the longevity of a business depends on balanced growth of all these three areas and focusing more on our own capability for much longer future growth, including developing consumers' awareness of our brand and the value recognition will help us achieve greater market presence with healthier earnings and, hence, richer product and services? So this goes into the second part of the question. We are continuously leading in the quality of services. We hope in the future that we will become one of the top choices among the players of industry, including Sunfong and Jingdong. Our goal is to pull apart or pull away from the homogeneous competition, specifically only for pricing among the Tonda players. With our balanced growth in our own business, it's not to say that we don't want volume. Volume is important, especially for a scaled business model. Our first quarter, including today's daily volume, is between $95 million to $100 million, so that our scale leverage and cost productivity gain will continue to demonstrate. The entire industry, with its current growth and what we anticipate for the future, which is going more towards quality and quantity together. The profitability will gradually release. As you know, compared to developed countries, the GDP cost of logistics as a percentage of GDP is still not as efficient as those developed countries. With our countries focused on going into the factory, going into rural area, as well as going overseas, there are huge opportunities represented towards comprehensive logistic growth. Express delivery industry, with its scale and network resources already in place, has huge advantage under such development scenario of the future. So we believe we will continue to focus on our own balanced approach and growth, taking shares where we need to and must, but focus more on quality and quantity together. We'll be a sustainable growth in the future. 好,谢谢赖总,谢谢严总,你答得非常清楚,谢谢。
spk00: Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to management for any closing remarks.
spk06: Thank you again, everybody, for joining today's call. And we look forward to speak with you offline when you have further questions.
spk00: Thank you. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

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