ZTO Express (Cayman) Inc.

Good day and welcome to the ZTO second quarter and half year 2025 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, and 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.

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 at ir.dto.com. On the call today from CTO are Mr. Mason Lai, Chairman and Chief Executive Officer, and Mrs. Huiping 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 they 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 filing 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.

大家好,感谢各位参加今天的电话会议。 2025年二次度,快递行业延迟了较高的增长, business volume increased by 17.3%. The Chinese Communist Party insisted on putting quality first, maintaining a top-of-the-line service level. Business volume increased by 16.5%, reaching 98.5% a year. Market share has increased significantly. At the same time, in the face of the current market competition, after adjustment, the net profit reached 25%. 20.5 billion yuan. 20.5 billion yuan. Especially in the price and competition-based production areas, the volume of business growth is lower than expected. Thus, a clear contrast is formed, which means that the total retail business volume is more than 50% of the total. Since last year, the central government has continued to focus on the construction of decentralized products and the improvement of service efficiency. It has not only strengthened the service quality, but also strengthened the online coverage capability The second quarter, the retail business volume accounted for 8% of the total success rate. The optimization of the product structure relieved the pressure of increasing the volume of subsidies, and brought a single ticket rate of 1.7 cents and 1.2 cents of improvement for express delivery and new business. In addition, through the strengthening of digital operations, reasonable configuration of resources, and the implementation of the new products and services, the Chinese Communist Party realized that single-voting, self-sufficiency, and cost-division, all at the same time, will benefit from the results. These achievements reflect the strategic focus of the central government on operational efficiency and ability-building, and also reflect the difference between the advantage of products and the ability to serve the future, and the key elements of comprehensive competitiveness. A healthy and stable network ecosystem and the long-term confidence of our partners is the foundation for fast-growing and sustainable development. The concept of co-sharing with the country and the industry management department of the CCP's sustainable development is highly consistent with the concerns of the Social Welfare Program. We have always supported the operational system of high-efficiency fraud. Sustainable rich network partners achieve co-sustainable development. In the face of price competition in the front line, the approach of Pooch is to build the end-of-the-year and the development of the negative energy network. The core measures are as follows. One, optimize the network policy. System-connected network points are the cost of each part of the process. Make sure the network policy is reasonable. The policy of the same type of network point is the same. increase transparency, and continue to deepen supply and demand. Combine with the actual level of the industry market, design accurate security mechanisms, and stop the excess supply and demand. 2. Increase the end-to-end efficiency. It can deploy all kinds of automated sorting and transportation equipment, reduce artificial interference, and increase the professional efficiency. By practicing the self-reflection, reduce the late-time, 4. to optimize the position and product of the station. While providing a solution for the cost of professional delivery, there is also the connection between the consumer's establishment of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction of a multidirectional, convenient and efficient connection with the construction to achieve the world's largest scale and highest efficiency, and become one of the most developed support industries. The deep participation of China and the Chinese Communist Party in this process has fully proven that the leading scale advantage and operational efficiency are the basic conditions and core functions of sustainable health development. The evolution of industry competitiveness has shown that from the scale of quantity, Back to the past, we used to seek prosperity from the evil of adversity. Through the space of non-discretion, we realized the transcendence. In the past ten years, No matter how the red-light economy and the fast-food industry are intertwined, we have always insisted on looking at the objective and practical aspects at the same time, dealing with and doing our best, in order to maintain quality, scale, and profit. Behind Zontong's brand is thousands of employees and partners. What we pursue together is to realize a good life for everyone, to solve real problems for the society, and use our products to create happiness for more people. Looking forward to the future, the new economic environment and competition have proposed new challenges for us. We believe that the development of China's fast food and the overall logistics industry is in full swing. China's unique brand culture, firm network of resources, and strong financial strength Thank you, Chairman. Please allow me to translate first.

Hello, everyone. Thank you for joining today's conference call. In the second quarter of 2025, the express delivery industry continues to maintain a robust growth, with the business volume increasing by 17.3% year over year. ZTO adhered to its quality first principle, and with an industry-leading service level, we grew parcel volume by 16.5% year-on-year to reach $9.85 billion and increased market share sequentially. Despite fierce market competition, ZTO achieved an adjusted net income of $2.05 billion RMB. During the quarter, the trend towards a higher proportion of light and small parcel in the industry remained. As more merchants opted for more economical or affordable express delivery services, the value from ZTO's premium pricing power underpinned by our extensive network scale and leading service quality and stability was not fully realized. In some regions, particularly major production zones with extreme price competition, the volume growth came in lower than expected. In stark contrast, ZTO's retail parcel volume grew over 50% year-over-year. Since last year, we have continuously focused on enhancing volume mix and upgrading service capability and efficiency. Leveraged ongoing improvements in service quality, such as timeliness, guarantee, and coverage expansion, retail parcel's volume peaked over 8% of total volume during the quarter. This mixed optimization of volume structure alleviated the pressure from volume-based subsidies, bringing positive unit contribution of $0.17 in revenue and $0.02 in gross profit for the core express delivery business. Additionally, by further implementation of digitization of information and intelligent operations, optimizing resource allocation and assigning responsibility with clear accountability. We attained 7 cents productivity gain over the same period last year for combined unit cost of transportation and sortation. This achievement not only reflected our strategic commitment to improving operational capability and efficiency, but also validated that differentiated high-quality products and services are the most critical elements for forging comprehensive competitive edge for the future. A healthy and stable eco-network and long-term confidence of franchisee partners are the foundation for the sustainable development of express delivery franchisee model. CTO's enduring philosophy and practice of shared success aligns well with government and regulatory authorities' intention and emphasis on safeguarding grassroots interests. Backed by excellence in an efficient and strong operational system, we consistently empower our network partners to achieve win-wins. Our initiatives aimed at effectively addressing front-end infancy in press competition are steadily progressing forward with the following core focuses. First, optimizing network policies. Systematically identify all its costs through a various stage of pickup and delivery. Ensuring rational policy alignment. Standardize policies across similar outlets to improve transparency and fairness. Implement precise incentive mechanisms tailored to market's reliability and avoid blind and excessive subsidies. Second, enhancing last mile efficiency. Install various automated sorting and transportation equipment at suitable outlets to reduce manual work and improve efficiency. Reduce all costs through direct dispatch to LASMA posts, allowing couriers to focus more time and energy on pickup and delivery. Third, incentivize retail response and fulfillment, further unifying goals and objectives. and enforce profit allocation gravitated towards couriers so that they become self-motivated to be responsive and timely in serving retail customers with increasing loyalty, hence achieving greater earnings. Fourth, we define value proposition of last mile post. While providing industry solutions to reduce delivery costs, integrate last mile post with lock boxes, convenience stores, and other community livings and commerce contact points to establish multidimensional, convenient, and efficient consumer connections. After more than 20 years of rapid development, China's express delivery industry has built the world's largest scale and the most efficient operations and has become one of the pillar industries of China's social economic growth. As a key participant, ZTO has fully demonstrated that leading scale and operational efficiency are the cornerstone to and core driving force for existing healthy development. The industry dynamics are evolving, and the shift from volume-driven expansion to a balanced growth in both quantity and quality is evident and inevitable. Peer computation will elevate from basic delivery elements to comprehensive logistics solutioning powered by digitization, intelligence, and smart operations in the final competitive landscape. Looking back, we have overcome adversity and earned a seat in the industry. Through relentless effort and ingenuity, we followed and surpassed. Over the past decade, No matter the changes in the macroeconomic and industry changes, we have maintained course in our own path, achieving leadership in quantity, equality, scale, and profitability. Behind the ZTO brand are tens and thousands of employees and partners united in a shared mission. That is, while solving problems for others, we can afford better living of our own. and we can bring happiness to more people. Looking ahead, the new economic and competitive environment has put new challenges in front of us. We firmly believe in the vast growth prospects of China's express delivery and the broader logistics industry. ZTO's unique culture, robust infrastructure, and franchising network Solid financial strengths will support our long-term strategic vision and ambition. With steady, fast execution, we will be able to collaborate with our partners to deliver long-lasting value for others in the society, as well as return to shareholders. Now let's invite Mrs. Yen to go over the financial results and guidance.

Thank you, Chairman Lai and 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 information on 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 second quarter, we continued to prioritize quality, which helped to drive volume expansion and cost optimization. Our parcel volume reached $9.8 billion, which grew 16.5 percent. Adjusted net income decreased 26.8 percent to $2.1 billion, largely attributable to competition-based price decline. ASP for the core express delivery business decreased 4.7 percent, or six cents. And the breakdown are the following. Five cents decrease, from the decline in average weight per parcel and $0.18 decrease from higher volume incentives. These decreases were partially offset by a $0.17 positive contribution from increase in KA volume mainly comprised of headquarter contracted reverse logistics products and services. Total revenue increased 10.3% to $11.8 billion as a combined result of volume increase and price decline. Total cost of revenue was $8.9 billion, which increased 25.1%. Overall unit cost for the core express delivery business increased 7 cents to 89 cents. Combined unit cost of sorting and transportation decreased 11.1% or $0.07 for the quarter, benefiting from economies of scale and various productivity gain initiatives. Specifically, unit cost for line haul transportation decreased 14% to $0.33, given enhanced route planning in conjunction with optimizing fleet operations and lower fuel cost. Unit sorting costs decreased 7% to $0.25, benefiting from automation and labor efficiency. Unit KA costs increased $0.15, which was in line with KA volume growth. Gross profit decreased 18.7% to $2.9 billion, and gross margin rate dropped 8.9 points to 24.9%. SG&A, excluding SBC, grew 5.9% to $621 million. SG&A expenses, excluding SBC, as a percentage of revenue, declined to 5.2%, reflecting strong corporate cost leverage. Income from operations decreased 23% to $2.5 billion, and associated margin dropped 9.1 points to 20.9%. Operating cash flow was $2.2 billion for the quarter, representing a 37.7% decrease primarily due to higher advances for expanded reverse logistics services and increased dividend withholding tax payments. Adjusted EBITDA decreased 18.5% to $3.5 billion, and capital expenditure for second quarter totaled $1.1 billion, and we anticipate the annual capex in 2025 to be 5.5 to 6 billion. Now, moving on to our guidance. We are revising our parcel volume guidance to be in the range of 38.8 billion to 40.1 billion, representing a 14 percent to 18 percent annual increases. Putting it into context, Without any question, quality is first. Then volume is mission critical to us. Meanwhile, there are no excuses for subsidies that are unproductive to us, the brand operator, or to our network partners. That is what we mean, reasonable earnings. By assessing current market and operating conditions, And given the visibility we have into the industry development for the second half of the year, we trust in the operational team's commitment in delivering volume growth at pace with the industry average for the year, hence keeping ZTO's market share intact. Above assessments and 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.

Thank you, ma'am. If you would like to ask a question, please press star then 1. If your question has been addressed and you would like to remove yourself from queue, please press star then 2. We do ask that you limit yourself to two questions. Today's first question comes from Quinlay Fenn with Morgan Stanley. Please go ahead.

Thank you. The growth rate in the second half of the year is actually a very wide range, probably from 11 to 20. I just mentioned that we still want to maintain the same growth rate as the industry. So maybe this is mainly due to a comparison of the growth rate of the entire second half of the year. This is a wide-ranging prediction. I would like to ask, in the second half of the year, from the management's point of view, what are the main factors that affect the growth of the industry? We should pay special attention to factors that may make the growth of the industry better or worse than expected. This is the first small question. The second small question is about the application of technology and AI. Let me translate for myself. Thank you, management, for taking my questions. And thank you, for the management and all stakeholders' efforts in market share and profitability and service quality improvement. So I have two questions. The first question is about the outlook for the second half of the of this year for this industry, we noticed that in our volume guidance, the implied volume growth for the second half of this year, actually the range is quite a wide one. And Mediment also mentioned to still aim to grow in line with the industry. That said, this wide range of growth outlook is mainly because of potentially lots of uncertainties in growth for the industry. So what could be the key factors that potentially impact the second half 25 market growth outlook? My second question is about technology and AI's application. What are the new efforts and initiatives that we have adopted in this year and what's the impacts we have seen from these efforts on cost efficiency gain or on revenue generation or on service quality improvement. Thank you.

您好,感谢您的提问。 我们全年的指引是14到18, 是低于我们年初给出的指引。 基于这个 In fact, in the first half of the second quarter, the market share increased compared to the first quarter. Especially in May and June, we increased the growth of the industry. In the second half of the year, it is because from the perspective of July, our industry increased in the first half of the year to July. We still do a good job of balancing profit and share. In general, in the second half of the year, because in recent years, everyone is also concerned about this factor. If the price goes up, the price of oil will be very low, and the amount of shipping may be affected. So in general, the situation is like this. This is the first question. The second question is, in R&D, the planning and implementation of information technology, and our applications in the field of artificial intelligence. Over the past few years, we have seen a rapid rise in digitalization in the management and business policies. Next, we will deepen the application of artificial intelligence tools in the entire business environment, and continue to improve the performance of customers, players, centers, and some business owners. This year, the main direction includes one, to establish a 3D digital telemetry model at the central level, to achieve remote management and automatic navigation control. This model can reduce one-third of our central one-line management personnel, and reduce the rate by more than 60%. Second, in the final plan, we will apply artificial intelligence and artificial intelligence The third is in terms of customer service. We will put the smart customer service into the three sales channels. Automatic processing more than 2 million sales orders per day, covering more than 90% of the three sales needs. We have greatly reduced the cost of customer service and achieved 24 hours of online service. Fourthly, in terms of employee support, we have launched the Qiaotong service. The number of Japanese service users has reached 10,000. Employees can get business support and operation support as quickly as possible through natural language dialogue. Thank you very much for your question, and I'll translate for Chairman.

Indeed, our volume growth was below our expectation set in the beginning of the year. Second quarter, however, we have seen that the sequential increase in our market share. Specifically, on May and June, we had experienced higher than industry average growth. Looking at the trend, for the whole industry, for January through July, the growth was 18.7%. And for the month of July, it was 15.1%. So we do see a slight slowdown for the industry, and we believe the second half of the year would most likely to be lower in its growth rate than the first half of the year. With that said, though, we would still continue to focus on our work, that is to achieve balanced improvements and growth for quality of services, volume, and profit. Overall, we think that the recent market dynamics shift with some of the regions' price increases, smaller logistic fee-free type of packages would mostly be impacted. In other words, it would most likely be shrinking in its volume. we've considered many factors such as these to adjust our overall guidance. Yes, indeed, it is in a wide range because, again, there are still many uncertainties in the macroeconomic environment as well as in the industry competitive dynamics. So we do have an annual 14-point 14 to 18 percent guidance provided. Second question. In the recent years, CTO has directed attention and resources towards lean management and digitization to transform the way we make decisions and solve problems. Going forward, we will further integrate AI tools across all business segments, continuously driving cost efficiencies in serving the last mile fulfillment for our outlet operators, for the frontline couriers, so that they are able to reduce cost. This year, some of our key initiatives included one at the sorting center level, The developed or developing 3D digitized parallel model that enables remote management and real-time monitoring provided automated early warning capabilities, and this model has allowed us to reduce front-line management headcount by one-third and has cut missorting rates by more than 60%. In the last mile scenario for its planning, we are applying AI to scenarios such as site selection, design of the specifics of the direct linkage solution, and direct delivery routes, empowering outlets to improve their intelligent planning capabilities At the customer service front, we have embedded AI-powered service agent system into merchants' after-sales support channels. These agent systems autonomously handle over 2 million after-sales requests daily, covering more than 90% of merchants' service needs. This not only significantly reduced costs for our outlet's customer service operations, but also allowed seven days a week, 24 hours a day service availability. At the employee level, we have launched the knowledge-based Ask Xiaotong program, which now serves, on average, over 10,000 users daily. Through natural language queries, employees can quickly obtain accurate business knowledge and operational directions, and effectively improve response time and reduce rates of errors. Hope that answers your question.

Thank you. And our next question today comes from Luo Yujing with Guosheng Securities. Please go ahead.

Let me translate myself. How do you view the sustainability of the current price increase in Guangdong? And what's the impact of price increases in Guangdong on Trump? Uncompliant Profits.

Thank you. 确实今年上半年 这个价格竞争 还是非常惨烈的 所以我们认为 行业要持续稳定健康发展 一定是从价格战要走向价值战一定是用服务的品质去赢得市场我们相信这个整个行业一定会理性的看待这个价格的问题价格战只会伤害这个 The whole industry is a kind of bold behavior. So we are still full of confidence in the stability of the industry. Guangdong has made some adjustments to the price of the entire industry from August and August 5. This means that the development is in the direction of the new direction. Profit, because there is a part of the express, from the lowest price of the current industry is $1.40. So it's a little bit higher than it used to be. The overall profit of the company is positive. Most of it is still late, and the fee of the business staff, the fee of the business staff, and the increase of late income. Thank you very much for your question.

As it's evident that the first half of the year, the competition is quite fierce. In order for the industry to continue to grow, we must shift from volume, price-driven volume, to quality of services in order to win market presence for the long run. We believe the industry will eventually return to census and Price competition is a short-term behavior. Since August the 5th, the whole industry in Guangdong does have a slight price adjustment. It's a positive adjustment upward. The lowest price for the industry right now is 1.40 RMB. slightly improved compared to before. The impact to the company is less significant as it's mainly for improvements in the relieving pressure for outlets and for the couriers so that they are able to receive higher delivery fee. As far as how it would sustain We believe, we tend to believe that there is a good possibility and good chance for it to last.

Thank you. And our next question today comes from Aaron Luo with UBS. Please go ahead.

Hello, Mr. Lai, Mr. Yuan, and Mr. Chow. Thank you for answering my questions. I have three questions. The first one is actually about the price. As we mentioned just now, although the price competition has been very intense in the first half of the year, but in the second half of the year, because the country is also calling for a rebound, so the grain area has already begun to raise prices. That is the first question. The second question is about unmanned logistics vehicles. We also noticed that we have close cooperation with some of the leading companies. So I would like to ask about the current progress. When will we see large-scale applications? And how much improvement will this have for our delivery efficiency and cost efficiency in the medium term? The last question is about our shareholder feedback. Have our current plans changed or adjusted? Let me translate for myself. Thanks, Ms. Lai, Ms. Yan, and Sophie for taking my questions. I have three ones. The first one is also about pricing. We knew that the price petition in the first half is very intense, but following the anti-involution campaign, we already noted some price hikes already started in some industry key regions. So what's your views on the pricing development in the remaining of the year and also beyond? And the second question is about unmanned vehicles. We noted that they have very close cooperation with some leading providers. So just curious about our current development on this, progress on this, and also how much of a benefit we could see from this driving up our last mile delivery efficiency, also the cost benefits. The last question is about our shareholder rating. Do we still see further room on improvement in terms of payout and share buybacks?

Thank you so much. Thank you for your question. Actually, In the first half of this year, the whole industry is under a lot of pressure. In the past, the price was actually down from $10,000 to $10,000. In 2024, the price of $10,000 was basically the same. Then this year, from the beginning of the year to the end of the year, until July, the price has been going down. After August, the price of internal power has indeed increased significantly. The price is clearly lower than the cost. The entire industry and the management department are working together to resolve this problem. The future judgment is that In competition, I don't think it's possible to reach $1 within a dollar. In this era, I don't think it's possible. So we are still very confident that the price will stabilize. In the end, the competitive industry will continue to develop steadily. It can continue to develop. It must be from the price to the price. The second is the use of unmanned vehicles. We have entered the industrialized test stage of unmanned vehicles, which automatically drives the military. We have also opened cooperation with the industry leading the military to accelerate the development of technology. We also rely on free social knowledge to achieve the ability to make high-definition maps and complete the digital chain of events in 50 centers, to achieve human, car, express, and social, and support long-term smart control. These technologies will continue to enhance our network efficiency, strengthen our new competitiveness, The unmanned vehicle has achieved commercialization in some parts of Songtong. It has helped to reduce the cost. About 200 cities and cities with roads have been invested. So far, 700 places have invested in unmanned vehicles. More than 2,000 cities have been covered. More than 200 cities have been covered. This year, the headquarters has approved the provision of We also built a drone operating platform. This unmanned vehicle can actually go from one station to another. This is the share of the shareholder. The company will take a comprehensive consideration and buy back in two ways, gradually increasing the share return. The company's current cash flow is in the process of arranging reasonable funds to advance and then buy back. The company is closely monitoring the market dynamics and stock price trends, taking a comprehensive consideration of the uncertainty of the current market environment and the flexibility of finance arrangements.

Now let me help translate and supplement where necessary. The first half of the year, the price pressure is quite significant and the competition is really fierce. In the past, typically in the high season, price will return. as opposed to in the low season, capacity need to be filled and the price will be low. For 2024, it wasn't as such because during the high season, the price largely remained stable. In the beginning of this year, all the way through July, we have observed price decline and the trend remained. Post-August, the anti-evolution initiatives did help slight increase in the market price. For those that are significantly and below cost, price practices were being strictly dealt with and addressed. We think in the future, no matter what the competition heat up to or slow down. For express delivery price to come in below one RMB is not feasible because, again, this is a cost-based pricing system. And we even strongly believe, in the long run, a sustainable competitive landscape needs to go from price competition to value and capability competition. For the second question relating to autonomous vehicles, overall, CTO has entered into commercialization in the early but successful testing stage of utilizing autonomous vehicles drones and other self-driving technology. And we are actively collaborating with industry leaders. Most of the industry leaders are not only developing their technology based on the AI autonomous driving technology development itself, which is rapid, And also, applying real case scenarios, we are one of the very application scenarios that's well fitted. At the same time, we have been leveraging our in-house serving and mapping qualifications, because we do get that certification to make our own maps. We have developed the capability to generate high precision maps to serve the delivery process. We have completed the parallel digitization model for over 50 sorting centers, enabling real-time visualization of all operating elements, including personnel, vehicles, parcels, and equipment facilities so as to support remote intelligent monitoring and control. These technology initiatives will continue to enhance network efficiencies and strengthen our core competitiveness. Autonomous vehicles have been also commercially deployed at some of our outlets and have shown significant results in cost reduction. We have over 700 outlets in over 200 cities where the road permits were available that employs in total of over 2,000 autonomous vehicles to serve their delivery purposes. And this year, to further elaborate, that the headquarter has accelerated the promotion of autonomous vehicles among outlets by offering central procurement and providing discounts in assisting in road right-of-way negotiations. In the second quarter, we reached a strategic cooperation agreement with a leading autonomous vehicle company to jointly explore the implementation of autonomous vehicle in last mile delivery scenarios and further enhance the performance and reliability. At the same time, since we do have a last mile focus, we have established a autonomous vehicle logistic platform to promote industry standardization. Currently, we have been working very closely with top autonomous vehicle company such as Neolix and et cetera in rolling out In the future, more and more, into more and more cities, we have 240 cities go. We wanted to deliver more than 200,000 parcels daily with autonomous capabilities. At the outlets level, typically the historical method of delivery, including vehicles and would cost about 12 to 15 cents each. But with the autonomous solution, the cost would go down to somewhere around 8 cents. So that is a significant reduction. Now, on the third question, on our shareholder payback and a return of shareholder value, The company has and will comprehensively consider both dividend and share repurchase as measures to gradually but consistently increase shareholder returns. Currently, we do have sufficient cash reserves and also strong cash generation capabilities. and we are arranging a reasonable capital flow structure. For repurchasing of the shares decisions, we are closely monitoring the market trend and stock performance while taking into account some of the uncertainties in the marketplace, as well as our flexibility of financial arrangements. So going forward, we will continue to monitor and allocating capital and cash and increasing shareholder returns.

Thank you. Our next question today comes from Lisa Lee at Gold Securities. Please go ahead.

Hello, Mr. Guan. Thank you. This is my question. I have a follow-up question about the price. I would like to ask about the increase in the price of fast food for the e-commerce market and the growth of the industry. As Mr. Lai mentioned, the price may rise and there will be a gradual growth in the low price range. I would like to ask if we look at the longer term, if the direction of the entire industry's price increase is continuous, Thank you management for taking my questions. So I just wonder what do you think about the potential impact on the overall e-commerce industry and the industry parcel value growth from the increase of the parcel price. So as management mentioned before, the higher parcel price may depress on low parcel demand, and the industry parcel value growth may be growing down in the second half. So for the longer term, what do we see about the higher parcel price compared to the growth of overall e-commerce industry? So we will expect the government, how the government may balance the growth and balance the price. Thank you.

谢谢。 我认为更加设的词应该叫价格理性回归。 其实因为前段时间确实有些价格, and the cost is still quite high. So now in Guangdong, for example, the lowest price is $1.4 billion. In fact, it has no effect on most couriers. This is not a low price for some special prices. The supervision department and the industry are actually... The purpose is to stop the competition, maintain the stability of the infrastructure, and protect the rights of the entrepreneurs, to lead the industry to a positive development, to reduce the irrationality of the underground economy, and to build a healthy market competition environment in order to promote the industry's sustainable development. From this point of view, Is there any impact? For most of the customers, the price of the product is definitely not affected. I believe that there is only a real return to value competition, return to the Buddha's teaching. On this road, the product is in the division of layers, full of users and demand. This industry can continue to develop. I believe that everyone will see that it is actually easier to fight the price. It cannot generate value. So as long as the Buddha quality is done well, the user Buddha improvement, and thus promote the health development of the entire industry, this is the It is in my opinion that

The proper term to describe the recent trend should be that the price ought to return to sensibility. The competition in the recent past is the price and cost is disconnected. Nowadays, you see the lowest price in Guangdong is around 1.4 RMB. But indeed, it is not necessarily impacting all the or majority of the delivery practices. The authorities paid attention to those extreme pricing practices that are well below the cost The intention is to protect the interest and benefits of many of the operators in the delivery businesses, including outlets and the couriers. Majority of the merchants, their price is still reasonable, and the impact of the price adjustments or returning of the sensibility is less impactful to them as opposed to for those extreme portion of small and light packages. We think that the differentiated product and services is important to our customers, to merchants as well as to consumers. So we all see that it is easy to reduce price, but price reduction doesn't create value. The future of competition for this industry lies with quality of services, differentiated products and services to meet different demand or needs. So we think that, and I strongly believe, has always been that the impact is less at this point And going forward, the longer term betterment of this industry is to shift from price competition for volume to quality of services gaining both economic gain as well as volume increases. That is the only way to have a sustainable growth for the industry.

Thank you. This concludes our question and answer session. I'd like to turn the conference back over to management for closing remarks.

Thank you very much for everyone's joining of today's call. We are anticipating conversations with you and discussions with you for anything that you have questions on. And thank you again.

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.