ZTO Express (Cayman) Inc.

Good day, and welcome to the ZTO Express fourth quarter and fiscal 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. We do ask you please limit yourself to two questions. Please also 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, Rocco. 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 CTO are Mr. Mason Lai, Chairman and the Chief Executive Officer, and Mrs. Huiting 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 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 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.

大家好,感谢各位参加今天的电话会议。 2025年四季度,快递行业整体业务量同比增长5%, 行业增长就有所放缓, 中通保持行业领先的服务水平, In 2015, Our express delivery industry has achieved a steady growth of 13.6% overall. Our business has reached a 200 billion profit margin. In the third quarter, the relevant departments of the country have focused on comprehensively advocating for the internal roll-out and strengthening the base name insurance, which has set a direction for the health and sustainable development of the industry. The overall price level of the express delivery market has risen steadily. The development of the industry by pursuing a new stage of development that accelerates the mass scale. In the whole year of 2025, Zhongtong completed 385,000 businesses, and the market share was the same as last year. In the key stage of the growth of the industry, Zhongtong's high-quality development strategy, continuous deepening and differentiating products and ability construction, has achieved solid results. In the face of the competitive situation, the Chinese Communist Party has responded to the call of the country to take the lead in maintaining the stable development of the industry. With its strong infrastructure, digital transport and management capabilities, it maintains the advantages of quality, scale, and profit level. The annual retail business volume has increased by 46%, far exceeding the overall number of e-commerce stores. The hot retail business volume of the four systems The improvement is nearly 10 million units. The optimization of the product structure has improved the brand's awareness and customer confidence, and has supported the growth of the express core business, relieving the pressure of increase and decrease. At the same time, we continue to strengthen the standardization and system of transportation in all areas. The performance of operation is increased simultaneously with service efficiency. All-year single-voting support and division costs fell by six points. With stable management costs, the net profit reached 9.5 billion yuan after the year-end adjustment. As of 2026, the express industry will rely on the steady foundation of the macroeconomic economy and the continuous evolution of anti-selection policies to further maintain high-quality development consensus. Of course, the market is still uncertain. 1. Increase service quality. 2. Second, Deepening the cost-effectiveness of the cost-benefit is an advantage. With the whole chain system as the core, the acceleration, the division, the delivery, and so on, we set up a standardized cost-effectiveness line, a visual contrasting method, and the cost-benefit target is penetrated into the end-of-the-line range. Through the fluctuation of the monitoring deepening chain, we achieve the best performance of the industry cost-effectiveness. 3. Improve network policy and establish support, focus on business volume, steady growth, and increase cost-effectiveness. 4. Enhance the analysis of the market after share price, ensure the effectiveness of share support, establish resources, and accurate investment. 5. Keep a fair and fair direction, ensure network stability, maintain the rights and rights of partners, and balance the distribution of profits. The long-term development of the Chinese fast food industry is still good. The competitive attitude will steadily move towards rationality. As the head company continues to return to its internal values, The industry will continue to diversify and increase its concentration. The CCP's strategy for long-term development, service quality, market share, reasonable profits, are three in one. In the industry, there is an expansion of the scale, and a change of value return. We insist on bringing the two together to expand the diversified and differentiated products and services, and build a scale base. We will rely on the idea of sharing with each other, and use the spirit of the snake to carry out the mission of making more people happy. Thank you, Chairman Lai. Please allow me to translate first.

Hello, everyone. Thank you for joining today's conference call. In the fourth quarter of 2025, They expressed delivery industry's overall parcel volume grew moderately by 5% year-over-year. ZTO maintained its industry-leading service quality during the quarter, with parcel volume reaching $10.56 billion, an increase of 9.2% over last year. And our market share expanded by 0.8 percentage points. At the same time, we achieved an adjusted night income of $2.69 billion, ZTO continued to lead the industry in both scale and profitability. For the full year of 2025, China's express delivery industry achieved a steady growth of 13.6%, with volume reaching the 200 billion parcel milestone. In the third quarter, relevant government agencies formally advocated against involution and promoted the protection of grassroots interests steering the industry towards healthy and sustainable development. As a result, overall pricing stabilized and recovered, and the industry accelerated its transition toward a new stage of development focused on both quantity and quality. In 2025, ZTO achieved an annual possible volume of $38.5 billion. maintaining a steady market share year over year. During this critical phase of industry transformation, ZTO stayed committed to our high-quality development strategy, continuously enhanced differentiated product offering and service capability. Facing intense competition, ZTO actively responded to the government's call and took the lead in maintaining a healthy industry order. Leveraging our robust infrastructure, data-driven operations, and management capabilities, we successfully safeguarded our competitive advantages in quality, scale, and profitability. Our annual retail parcel volume grew by 46% year-over-year, significantly outpacing the overall growth of e-commerce parcels. In the fourth quarter, daily retail volume reached close to 10 million parcels. This product mix optimization has enhanced brand recognition and affinity, while providing strong support for core revenue growth and alleviating the impact from volume-based subsidies. At the same time, we continue to strengthen standardized operations and coordination across our transit segments. improving both operational efficiency and service timeliness. Our combined unit cost for transportation and sorting decreased by six cents for the full year. And with a stable SG&A structure, our annual adjusted night income reached 9.5 billion. Entering 2026, the express delivery industry is further reaching a consensus on high quality development. supported by stable microeconomic foundations and the ongoing efforts against involution. Naturally, market uncertainties remain, and the transition towards quality growth requires deeper cultivation. DTO will shoulder its responsibility by adhering to strategies for healthy and sustainable development. We will focus on transit and last mile capability building Continue to optimize the fairness and transparency of network policies and protect the trust and confidence. Our priorities for the next stage are as follows. First, uphold service quality to reinforce brand advantages. Stay results-oriented while focusing on execution. we will integrate public and platform service indicators into performance evaluation with accountabilities assigned to specific positions, individuals, and behaviors. By targeting specific weak links and continuously optimizing our product mix, we will enhance our service capability and the differentiation to expand our brand influence. Second, deepen efforts for cost reduction and operational efficiency to solidify cost leadership, centered around better integration from end to end. We will accelerate the implementation of direct linkage model. We will establish standardized, visualized, and comparable benchmarks. And by prescribing cost reduction targets to every last mile segment and leveraging fluctuation monitoring to unlock potential, we will achieve optimal cost efficiency across pickup, transit, and delivery. Third, optimize network policies and incentive mechanisms. Focus on steady volume growth and improved cost efficiency. We will rely on detailed analysis for regions with lacking market share to enhance the efficiency of cost sharing mechanisms and ensure more precise deployment of resources. Fourth, safeguard fairness to ensure network stability. Secure rights and obligation of our partners while balancing profit distribution. Strictly implementing better pay for better results. and survival of the fittest. While ensuring reasonable income for all outlets and careers, we will empower high-quality outlets and provide support in governing underperformers to protect a win-win ecosystem. China's express delivery industry remains positive, and competition will steadily become more rational. As the leading enterprises continue to turn to intrinsic value, the industry landscape will further bifurcate, and the concentration will increase. ZTO remains committed to its long-term strategy of integrating service quality, market share, and a reasonable profit. As the industry shifts from scale expansion to include value proposition, we must lead the way in prioritizing both quantity, and quality. Only by expanding diversified and differentiated products, reinforcing our infrastructure foundation, harness the productivity of digital operations, unlocking the potential of end-to-end cost reduction, and prioritizing the long-term trust and the stability of our franchising network can we seize opportunities and navigate through cycles. For over 20 years, Being our best has been the constant for ZTO amidst all changes. Building on our shared success philosophy, we will take pragmatic actions to fulfill our mission of bringing happiness to more people. We will continue to lead in this new journey of high-quality development, creating sustainable and long-term value for the ZTO community. Now, let's invite Ms. Yen to present the financial results and guidance.

Thank you, Chairman, 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. Again, detailed financial information and performances in economics and cash flow are already posted on our website, and I'll only go through some of the highlights here. In the fourth quarter, benefiting from the government's call against involution, we prioritized service quality and core competency to drive sustainable growth. Our parcel volume grew 9.2% to 10.6 billion in Q4 and 13.3% to 38.5 billion for the full year. Total revenue increased 12.3% to 14.5 billion in Q4 and increased 10.9% to 49.1 billion for the year. Income from operations was 3.2 billion and $0.5 billion, or decreased 7.6% and 11% for the fourth quarter and the year, respectively. As our corporate spending remained stable and efficient, we achieved adjusted net income of $2.7 billion and $9.5 billion for the fourth quarter and full year, respectively. ASP for our core express delivery business increased by 2.9% or $0.03 in Q4. This was primarily driven by a $0.15 positive contribution from an improved mix in KA volume. Specifically, our higher value reverse logistics services counter offsetting $0.11 in higher volume incentives. For the full year, ASP decreased slightly by 1.7% or $0.03. This reflects a $0.16 gain from higher retail volume offset by a $0.15 impact from volume incentives and a $0.03 decrease due to lower average weight per parcel. Total cost of revenue was $10.8 billion for Q4 and $36.8 billion for the year, which increased 18.2% for Q4 and 20.5% for the full year. From a unit perspective, while the Core Express delivery unit cost rose $0.08 to 1 RMB in Q4 and $0.07 to $0.94 for the year, pay costs was the main driver for the increase, which was partially offset by transit cost productivity. The combined unit cost for sorting and transportation decreased by 4.5% or 4 cents in Q4 and 8.8% or 6 cents for the year, driven by economies of scale and our ongoing productivity initiatives. Specifically, unit cost of line haul transportation decreased 7.5% to 37 cents in Q4 and 12.2% to 36 cents for the year, reflecting optimized route planning and enhanced load efficiencies. Unit sorting costs remained steady at 26 cents in Q4 and decreased 3.7% to 26 cents for the full year. Automation continues to drive labor efficiency, though partially offset by the ramp-up and upgrade costs of new and existing facilities. Unit KA costs increased by 13 cents, which is consistent with the strategic expansion of our KA volume. Gross profit declined 2.1% to $3.7 billion for Q4 and 10.5% to $12.3 billion for 2025. Gross profit margin rate decreased 3.7 points to 25.4% for the quarter and 6 points to 25% for the year. SG&A excluding SBC decreased 1.3% to $641 million for Q4 and increased 1.6% to $2.4 billion for the year. SG&A expenses excluding SBC as a percentage of revenue declined to 4.4% for the quarter and 4.9% for the year, reflecting strong corporate cost efficiency. Income from operations decreased 7.6% to $3.2 billion for Q4 and decreased 11.1% to 10.5 billion for the year. Associated margin dropped 4.7 points to 22% and 5.3 points to 21.3% for the year. Operating cash flow surged 50.6% to 4.2 billion in Q4 and reached 12 billion for the year, excluding the $850 million one-time franchise deposit refunds under the new business policy in Q4 last year, our cash flow from operations remains robust. Capital expenditures for the year totaled $6.1 billion. Now moving on to our business outlook. Based on current market conditions, we anticipated our parcel volume for 2026 to grow in the range of 10% to 13% year-over-year. This growth rate implies an annual parcel volume between $42.37 billion and $43.52 billion. We are committed to growing our volume faster than the industry average for the year. Now onto our shareholder returns. The board has approved a semi-annual cash dividend of US dollar 39 cents per ASD in accordance with the established 40% payout ratio. In addition, having substantially completed our previous US dollar 2 billion program, and the board has authorized a new 24 month 1.5 billion share buyback program effective through March, 2028. Finally, we are pleased to announce an enhanced shareholder return program. Starting from 2026, the company targets an aggregate annual return ratio of no less than 50% of our adjusted net income for the previous fiscal year. comprising both cash dividends and share buyback. This enhancement reflects our commitment to optimize capital allocation and delivering consistent long-term value to our shareholders. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Thank you. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, you would like to withdraw your question, please press star then two. We do ask that you please limit yourself to two questions. At this time, we'll pause for just a moment to assemble our roster. And today's first question comes from Queen Lei Fan with Morgan Stanley. Please go ahead.

Thank you, Operator. Thank you for accepting my question. I have two small questions. The first small question is about the anti-corruption. After the Spring Festival, we also saw various news about some new movements of anti-corruption in various places. Then I would like to ask the management to make a continuous judgment on this year's disengagement and an understanding of this supervision attitude. The second small problem is related to the increase and decrease of the industry. Considering that there is some delay in the price of disengagement now, what kind of judgment do we make on the increase of the entire industry? Then, under this judgment, Let me translate for myself. Thank you, Benjamin, for taking my question. I have two questions. The first question is about anti-evolution. After the Chinese New Year, we have seen lots of news on the anti-evolution dynamics everywhere in China. So, is there any new updates on the anti-evolution initiatives? How do you expect the sustainability of such anti-evolution driven price hikes? What's your take on the attitude from the regulators towards anti-evolution? And what's your expectation on the potential pricing trends for the rest of the year? The second question is about industry growth outlook and competition landscape. So taking into consideration of potential price hikes amid anti-evolution, what's your expectation on the four-year industry growth outlook? And with this outlook, what's your expectation on the industry competition landscape and market share dynamics?

Thank you. Thank you for your question. Since the implementation of the anti-insurgency policy in the third quarter of last year, the competitive environment of the industry has continued to improve, and the express price level has steadily risen, and the stock market has been effectively protected. Since the Spring Festival, the policy of anti-insurgency has been effectively extended. With the long-term implementation of the policy, the industry is expected to continue to compete on the cost line. As a head of the industry, will firmly respond to the government's anti-discrimination call. We support the participants, and we are also the leaders. We insist on the balance of service quality as the first development strategy, to protect the internet, maintain the health of the industry and the development environment. The second question is about competition and competition. The industry is competing against each other. First of all, from the scale of the industry, last year, China's express delivery industry had nearly 2 trillion orders. The technology is higher. In addition, with the implementation of the internal roll policy, the express delivery price has steadily increased, and the low price of packages has been reduced. We think it is reasonable for the industry to definitely slow down. The express delivery industry will definitely move towards high-quality development. This year, our state government's forecast for industry growth is at 8%. Our official guidance, the president's growth, our president's growth is 13%. As the macroeconomic situation continues to improve and the express industry moves towards high-quality development, market resources will focus more on the service industry and Thank you.

Thank you very much for your question. I'll translate for the chairman here. Since the introduction of the anti-involution policy in the third quarter last year, the industry's competitive landscape has steadily improved. Reparcel prices have recovered, and the focus has turned towards safeguarding the interest of frontline by people such as the outlet and couriers. Following the Spring Festival, the policy has remained in effect, and with its continued enforcement, the industry is well positioned to sustain quarterly competition above the cost line. As one of the key players in the industry, we are not only participants, but also must take on the leadership role. CTO's strategy is well aligned with government's effort to combat involution, seeking a balanced development that prioritizes service quality, effectively protects the rights and interests of outlets and couriers, and promotes a healthy, orderly, competitive environment for the industry. Now, for the second question, First, the sector's growth. The scale or the partial volume of China's express delivery industry has approached $200 billion in 2025, which established a significantly large base. Second, with the implementation of the anti-involution policy, express delivery prices have steadily recovered. and low-price parcel volume have gradually decreased. It is reasonable to expect a gradual deceleration of the industry growth, and the sector is likely to transit from a volume-driven model to a new phase focused on high-quality development. Now, the Postal Bureau has estimated an 8 percent growth for 2026, and ZTO has given a guidance of growth between 10 to 13 percent, which certainly implies the development faster than the industry average. On the competitive landscape, as the macroeconomic condition continues to improve, and express delivery industry move towards higher quality development, market demand will naturally gravitate towards and become increasingly concentrated among companies that prioritize service and operational efficiencies. Leading enterprises leveraging their superior service capabilities and well-established infrastructure networks are better positioned to further consolidate the market. Driven by policy guidance and reinforced by industry self-regulation, the trend of bifurcation is expected to further fostering a healthier and more orderly competitive landscape. Hope that answers your question.

Thank you. Thank you very much.

Thank you. And our next question today comes from Steven Kueh with Goldman Sachs.

Please go ahead. Good morning, Mr. Lai. Thank you. This is my question. I am very happy to see our single guide and increase shareholder return policy. I have two questions. The first one is also related to the countermeasures. That is, under the background of this new price discipline, I would like to ask the company about a priority level in 2026. Is it more inclined to our share growth or profit recovery, or is it our net point ecological management? We also noticed that we have launched a 200 million yuan service-oriented reward fund. Does that mean that we will gradually increase the support force for one-stop employees and net point management? My second small question is that from January to February of 2026, the increase in GMB in the entire industry was also the first time in two years to exceed the amount of express delivery. I would also like to ask the management team how we see the change in the overall market structure of the industry this year. For example, this change is more of a stage improvement caused by a low price increase or a change in the market structure. Good morning, management. I have two questions. My first question is, under the anti-involution scheme, what is the 2026 priority for your company? Is it market share, profit, or network governance? And also, does the Remembe 200 million fund that you dedicated to support your frontline employee as well as your network signal more support for your partners? My second question is, given the January to February GMV growth industry-wide has been faster than the volume growth, which has been the first time since 2023, So is this mix-driven or structural, and could the competition shift to quality?

Thank you for your question. This is the core strategy that we have been working on for a long time. Since 2026, with the stability of the macroeconomic economy, the industry has continued to deteriorate. The President will firmly support the country's call to lead and maintain a stable and rational industry order, to drive a large-scale expansion of the business center, and to accelerate the recovery of the value of the positive and negative values. We all know that the recovery and stability of the ecosystem at home and at home is the basis for the high-quality development of the whole network, and the strategic significance is far beyond the short-term financial performance. In this regard, we will focus on the fairness and transparency of the step-by-step work center to optimize the network policy and to ensure the reasonable income of all employees. That is to say, the net profit will be increased and the income of the employees will be increased. We have launched 200 million service donations this year. This is is to put quality in a more important position. Our 200 million yuan reward fund will be given to netizens, businessmen, and our express delivery all over the world. The purpose is to further expand the advantage of quality on the basis of the quality leadership of the Buddha last year. You... The second problem is the problem of GM and express delivery of e-commerce. There is also a change in the overall market structure. In the beginning of the year of 2026, the turnover of e-commerce, the turnover of AOV, confirmed that the industry is in a deep transformation from a low turnover to a return to value. The core power of these changes is due to the increase in the recovery and policy direction of Hongguan. With the deepening of the inner circle consensus, the low price is accelerating. We believe that continuous price competition will not create any positive value for e-commerce and fast food. The current market has changed and is not a gradual improvement, but a practical improvement of the competitive edge. From the price direction, This kind of structural change will continue to rise for the industry price and provide firm support. The president has always insisted on the establishment of three unites. Through the development of high-quality customers, we have achieved certain results. In 2025, our retail volume will increase by 46%, and the hot army in the four seasons will reach tens of millions. In the future, Thank you very much for your question.

VTO remains steadfast in our fundamental approach of integrating service quality, market share, and reasonable level of profit, which serves as our core strategy and our resolve to navigate cycles and seize long-term opportunities. Entering 2026 supported by stable macroeconomic fundamentals, the industry-wide consensus against involution continues to solidify. GTO will respond to the national call by taking the lead in maintaining a steady and rational industry competitive order, driving an accelerated transition of our operational focus from scale expansion towards a value proposition centered on both quality and quantity. We clearly recognize that the restoration and stability of our franchise networks ecosystem in terms of their trust and hope are the cornerstone of high-quality development across the entire network with a strategic significance that far outweighs short-term financial gain. Therefore, our current strategic focus is on continuously optimizing the fairness and transparency of our network policies to effectively safeguard the reasonable and rightfully so the level of income of our grassroots partners and frontline couriers. The recent launch of 200 million RMB Special Service Incentive Fund is indeed intended specifically for the fact that we are putting quality as the priority. This is a concrete demonstration of our shared success philosophy and our pragmatic action to provide targeted support to higher quality outlets while empowering frontline employees. This initiative aims to stimulate the network's intrinsic motivation by optimizing profit-sharing mechanism, reinforcing our brand advantage while building a win-win ecosystem for the entire network. The $200 million is going to be allocated and distributed across the whole end-to-end operations from pickup to to delivery. The goal is to very specifically further expand our recognition of shared success, as well as our effective approach to allocate interest among all the stakeholders, including the small micro operators of our business, which are the key foundation of our long-term success. Now, your second question. The turnaround in average order value in early 2026 confirms that the industry is undergoing a transformation from lower price volume chasing to value restoration. This shift is fundamentally driven by the stabilization of macro fundamentals and the deepening consensus against involution, which has accelerated the exit of loss-making low price volume. We firmly believe that irrational price competition creates no incremental value for either e-commerce platforms or express delivery operators. Current market dynamics represent a structural upgrade in competition, moving from price-driven to quality-driven. This evolution provides a solid foundation for sustainable price improvements across the whole industry. ZTO remains committed to our tripod strategy And our focus on high-quality customer services has yield clear results. In 2025, our retail parcel volume surged 46% year-over-year, with daily volume approaching 10 million in Q4. Looking ahead, we will continue to leverage our leading cost advantage and superior services to lead the industry through this quantity to quality cycle and create long-term value. Thank you for your question.

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

Thank you, Mr. Lai, Mr. Yang, and Mr. Shoufei for accepting my question. Yes, I have two main questions. One is because I saw that we issued a transferable debt at the beginning of February. So I want to ask you, what is the main reason behind the transferable debt? And more importantly, what rhythm will we go back to when we buy back? This is the first question. The second question is about the AI model, because it has been discussed with investors. So I want to ask, So let me translate myself. Thank you for taking my question. And I have two questions. One is about our recent insurance of convertible bonds in early February. So just would like to understand a bit more of our major considerations behind our recent CP insurance. And more importantly, at what pace should we expect for the share buybacks to proceed? The second question is about AI, which has been continued to be a very hot topic among investors. So just curious about what are the major applications of AI and even large models at our company? Thank you so much.

Can I just go straight to English? The convertible bonds, yes, in February 2026, the company issued 1.5 billion five-year convertible bonds. We launched it during a window where we can take advantage of a low-cost financing tool during a period where the company's market value was under-assessed. The proceeds, with a net amount of about 1.4 billion U.S. dollars, is intended solely for companies' share buyback. And this issuance is intended to effectively enhance earnings per share, which we did, and hence improve our shareholder value and protect interest and optimize our company's capital structure. The pace of buyback is that the repurchase program is processing very fast. We have completed our previous – we have completed the $600 million in total. It's approximately $600 million in total share buyback on the issuance day as well as during the subsequent trading window. For the remaining $800 million, we plan to complete the repurchase over the next year in line with market – taking consideration with the market price fluctuations. So at a reasonable price range, we will put in programs to consistently doing the buyback in order to strengthen our shareholder return. And the new shareholder return You didn't ask that question, but I think I'll just take this opportunity to provide some insights. We established a consistent and integrated shareholder return system, and this is going to be a combined dividend and buyback mechanism, which is out of the total no less than 50 percent of the adjusted net profit from prior year. Now, your question on the AI, on the second question.

感谢您的提问。 中通在AI和大部型上的应用。 中通近年来持续深化数字化学型, 推动人工智能在快递全链路的深度阶层, 以实现从经验驱动向模型驱动的本质变化。 First of all, in terms of RF power, our focus is to reduce the cost-effectiveness. With a simple and refined management, we are promoting three-dimensional digital synchronization and intelligent visual technology. Currently, it also covers 25 centers. This system can achieve long-term management and long-term automatic operation. It helps the center and end points to reduce the concentration power by more than 60%. At the same time, the improvement in operation greatly reduced the cost of labor. Second, the intelligent upgrade of the customer service unit. We have launched the intelligent customer service unit, which can automatically handle more than 70% of the whole chain of service units, and can be used by three sales representatives to send business people. At the same time, Wen Xiaotong and Cha Jiantong's smart body cover more than 80% of the hot business information. to save the cost of the overall cost of the customer service. 3. Accurate calibration of the end-to-end loop. Relying on high-precision map data, we can apply it in depth in the site selection, delivery route planning, and other scenarios. This can help to reduce the labor cost of more than 20% of the party's labor cost. In the three-year high-end period, we have also achieved We are working on the implementation of the big model. We are working on the implementation of the big model. We are working on the implementation of the big model. In the headquarters and management area, we use smart questions to do data mining. It not only can be used to report, but can also be used to manage from complex customer quality and cost data to the rules that have not been found, so that the technology can really penetrate into the management box. 2. High-precision business prediction. We are introducing a universal real-time prediction big model. Let me help translate.

ZTO has advanced its digital transformation in recent years, as well as driving further and deeper integration of AI technology across the entire express delivery chain to achieve a fundamental change from experience-driven to data-driven operations. Our focus on AI empowerment across the entire chain is on reducing cost and increasing efficiency. The refined management at the sorting end, we are promoting the application of 3D digital twins and computed vision technologies, which have now been implemented in 25 of our supersorting centers. This system enables remote monitoring and automatic anomaly alerts, helping sorting centers and outlets reduce missorting rates by 60%. While improving operational precision, it has also significantly lowered labor costs. customer service side, the Intelligent Service Center is leveraging the AI-powered customer service system so that they are able to automatically handle over 70% of end-to-end work orders and enable merchants to deliver, to directly connect with last mile couriers that are in progress or after sales support. Meanwhile, intelligent assistance such as Ask Xiaotong and tracking assistant covers over 80% of routine businesses inquiries at the outlet level, significantly reduced customer service cost at the outlet level as well as headquarters. On the last mile dispatching side, it becomes more precise now with the AI technology implementation. We are able to leverage our in-house high-precision mapping data. We are able to have deeply applied scenarios such as outlet site selection and delivery route planning, which is time dynamic. This has not only empowered large-scale outlets to reduce short-haul transportation costs by over 20 percent, but also enabled precise order allocation and intelligent dispatch for tens of millions of orders per day during peak retail parcel collection period. On the second part about the large modeling, we are driving the evolution from execution tools to have it become more of a business partner for an AI agent scenario. In the past, AI is primarily was primarily focused on replacing repetitive labor. But large models are now transforming our business operation structures and cycles. Currently, we are focusing on two key areas. One, deep business analysis. At both the headquarters and regional level, we leverage AI driven inquiries for data mining. This tool not only generates reports as needed, but also uncovers hidden patterns within complex customer quality and cost data that management can have previously overlooked. Effectively, so that we can embed technology into the heart of our lean management system and also for problem identification and problem solving. Second, high-precision business forecasting. We are introducing a general-purpose time-sensitive forecasting system modeled to upgrade our existing forecast system. This model can learn from vast patterns across industries based on our huge database, historically as well as ongoing, and quickly adapt to new scenarios, enabling more gradual and timely parcel volume forecasts and providing robust data support for our operations, including the capacity planning, the route planning, so that we are able to maximize intelligence to drive operational efficiencies. And that is the answer to your second question.

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

Thank you everyone again for joining us. As the chairman had pointed out that the industry is entering into a stable growth stage and we are committed to grow our volume faster than the industry average and our tripod strategy and corporate directives are intact and we are focused on building our infrastructure capability or enhancing our capability with technology as well as helping ensure the fairness of our network policy to further enhance the trust and fairness across our network so that we have a sustainable long-term business creating value for our stakeholders, including shareholders. This concludes our meeting today. Thank you again. We look forward to talk with you offline. Thank you.

Thank you. That 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.