ZTO Express (Cayman) (ZTO) 18 Aug 222022 Q2 Earnings call transcript

Good day. And welcome to the ZTO Express Second Quarter Financial Results 2022 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to conference like Li. to now would turn over the Sophie I go Please ahead.

Hello, you presentation and today. you, ir.zto.com. on everyone Thank operator. website IR thank today are results at an the company's earlier The and for investor released relations were and available company's us joining

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the everyone Hello weaker of billion Language] delivered performances XXXX, profit. you point share [Foreign market The volume thank net delivered X.X% impact pandemic by and market our outcomes, to despite X.X to two joining second by a XX%. ZTO in for economic a adjusted billion, ZTO which X.XX today us share and percentage of increased grew parcel expanding strong and income XX.X% both in quarter

production the compromising measures, of being to our to we the While, seize strategies market without we operations, first resume and strictly among actively economy and to nation's the implemented stabilizing will growing call responded which safety adapted opportunities. actively

advancing approach So a volume growth actively parcel balanced the mentioned. long-term our We're strategy. topic and to

stored uninterrupted comprehensive of for we thickness. volume COVID and improved with resumption Firstly, market parcel we focus increased on customer the through our continued means of and expanding regions taking the brand shares in affected advantage early representation a reputation operation, to

volume. the pricing analyzes discover by of platform incremental structure that problems. our insights flaws compensation reexamined execution negative provided cost Second, depth leverage against digital to the underpin growth effectiveness stimulate in from to or We low the

demands new submarkets Third towards from to business. the various aligned resources we establish

management by offerings our capabilities specialized increased For stores our improved our implementing measures. products and we definite same time, services. customers in fulfillment example, enhanced serve product [indiscernible] and time of we At out profitability built process with the

for eliminated KA in granting with outlets. and accordance the customer of transparent unjustifiable thorough policies conducted we principles fair loss of partners contracts First, accounts reviews and making and network

real-time manner, monitoring optimize our improved planning centers route enhanced a costs further human shift resources. and resource equipment, in timely us allowed analytics to Second, to in uprising which and and of [indiscernible] we've as well and allocation which sorting data automation as transportation around

Third, Stepping through and end-to-end. and implementation growth, half insist sorting standardization definition efficiency we on to the to clearer we aggregation procedures network. to number we continued focus better the labor centers. by our of operating partial to are of align or priorities. lead, able staffs year, Helping operating high-quality stages across and widen we layer production destination examples our all our on work always standardized the capabilities and enabling of sortation job suspense achieve and at differentiated across the the [indiscernible] segregation of reducing second testing, in Through load to implement from were of will furthered Fourth, drive protocols, competitive of process network the utilization earlier cost responsibilities incentives to into entire capacity, compensation productivity. effort we improved the following while continue

of our platform. the improve efficiency to retentive continued First,

We will improve allows that tracking, to and utilization resources. evaluation order with in standardize step measuring every of digitalization the

can management. with that ensure they incentivized to are what implement to volume their find have full acquire new incremental We partners install further access ability interim assist to that destination. share out market of We to instead meets network partners so Second, must and that couriers network our customers. that our capacity the network workload They onsite capacity partner lend and can help enhance to pricing sort, associated demand. to

further development and delivery to and consolidated Third, the accelerate resources last presence of mile the last costs. reduce pickup mile

continue demand rewards of quality improved customer will diversified further and recommend our Fourth, personalized improve We KPIs refined the mechanisms service customer for improve and quality meets services. that loyalty. to and the and to

and proper service issues capital because aiming for the minimizing world check attracting, quality also out range and stages faster implementation. by problems We causes delivery tackle promotion improve development functions will and transportation damages. to human timeliness transcend root of of Fifth, retaining talent including or

business our sufficient support development. ensure will our We to as talent reserve

by on externals center further LTL, continue We five in managers within segments risk businesses Sixth, potential footwork. expand emphasize very our the elimination national integration achieve comprehensive uncertainties in eco-advantage energetics resilient strategy around and believe financing aim and customer advantage with maintaining are general is still these to ranking cultivating profit the coaching are of longer-term supported evaluation market We that prospects and will built the for is that aim cross-selling to standalone of long-term, our in the Namely is We to upside develop factors. that logistics tools filled with performance and to this the by short-term to commerce. We though each expansion ecosystem. and lower know-how. and warehousing while while continuous establish segments, sort great managerial quality share service. sharing of satisfaction. and outlook believe logistics other to room competitive market service We due positive key high targets potential. technology ZTO's pandemic industry of have managers place. and information consistent and sorting and Even

company track [Technical has Difficulty]. record Our our proven

network and and ecosystem iteration example, and manner. the interests volume in among application both growth information logistic an attending and and our our apparently For continuously orderly its partners fairly system the strengthening continuous of diversified aligning and in technology profit,

don't sense the focus widening ahead, if be and strength. best will remission of our uncover can. left our accelerate network the feel This support momentous and we partners with that be strong Looking of we we urgency. a we on competitive opportunities our behind They'll

to Huiping have take let's financial. through Now us the Yan

to financial headwind parcel increased maintain website. Hello call. our net to mentioned, advancing XXXX please COVID Detailed go solid X.XX RMB ASP our of I X.X to the supported increases. increased the note to results, X.XX. growth and competitive performance flow analysis comparisons. some to If market and are half go volume I'll ZTO the by XX.X% The business including quarterly express to are the X.X% And by on grew billion, XX%. that here. X second billion. delivered through Total referred quarter revenue income Normalized core delivery everyone billion. our specifically adjusted or numbers points on second highlights In despite helped environment price of the economics cash the increased XX.X% year-over-year through unless for caused posted outbreak, quoted financials our changes unit share to X.X XX.X%

to [Technical you okay. sound Operator, internal is Difficulty] check everybody can addition, optimize – efforts customer base In if our

Yes, you proceed. may

Thank last you. just sentence. the repeat I'll

point fuel costs cost route cost In increased effort transportation to structure. sorting stable X.X for increased X% internal percentage revenue unit increased expense to dropped X Overall cost against addition, capacity expected XX.X%. was of rate than X.XX volume Total lean the as was parcel and fuel combined trailer parcel equipment. the customer associated XX.X%. in operations increased billion installed X.XX structure. depreciation X.XX revenue profit Gross usage increased salary to costs More planning. per business by costs per a gains to Unit demonstrating result increased estimated SG&A line increased grew corporate associated costs X.X of our surging express of productivity the Gross and of profit to haul volume X.X% margin amortization X.X specifically, higher optimize driven XX.X% a Income points by which low billion and better of from to quarter. revenue with results. base and core increased base through still offset and impact for also automation to lower labor or negative X.XX. We X.X margin rate generating delivery to higher X.X% of cost higher meaningful X.X given improved increased costs billion X.X% XX.X% as XX.X%. a trucks, point from hike is cost relatively a ASP

current Being to logistic industry's the developing XX.X% resilience synergy at logistics and Our cost forging growth shown prospects capabilities, totaled cash its delivery on industry economic lock please with core to Thank remarks. growth expenditure you. open still increasingly to and billion. concludes review, calibrating downs throughout providing strategies in average to facing XX.XX Based diversified billion long-term maintains annual continued company's capital billion percentage increase ecosystem, comprehensive company conditions, and potential achieve and reflects aim previously economic the on above These tailored volume integral high-quality continues demands range and to estimate current services revitalization the X.X and prepared our ability our daily industry the management's to grew strong our of sustainable part an despite further management, year-over-year. we confidence value operating that has uncertainties strategy the position. a represent and uncertainty. livelihood, enhancing enhancing market marketplace. meaningfully believe the is macro that This XX% which By its ZTO billion, operating implement of We to questions. leading strong. change. Operator, efforts and for our flow in consistent in revenue XX% express commitment guidance, representing Furthermore, estimates These deliver increase anticipated integrated mix meet subject refining growth. XX.XX call are which to the stated X.X remain exist

Thank you.

We Su first Please will now [Operator question Instructions] question-and-answer Our the begin go with comes Citi. from Liu ahead. session.

that management lifted trend. question. whether latest on my me overall first pace? return when closed you share question volume service second mentioned some my my during to to the it [Foreign region question night For management to what the the let parcel translate should shall according Could resume Thanks is the Language] an color service would the regarding seven local region. the My management manner. details? last would the we the normal? Now COVID ASP how regarding example, for period? suspension the that impact is to announced to the implementation anticipate And parcel that and more taking paths the operation, It question. recovery days ecommerce measures what start to also operation logistics, back requires And the in And in enterprises off orderly the access the kindly with was prior

pressure domestic price period? resumption reason the during do AHU. seemed customer-based further. So think we the do like what some in from short-term force you we internal that the and price, or AHU year, logic behind ASP was whole our July the fourth slow stable other optimization, the service the that how we some what mentioned, and factors do increased resurgence quarter relatively end and industry were -- season. whether are ASP the previously price job of very factors? this some even some the any would And of peers overall, and third their policy, and such you you much. fuel didn't meanwhile trend follow And steps aside forward longer And And -- thank to the fuel as the slightly see in from the even behind going COVID And going or ASP high external

your Thank Language] [Foreign question. you for

lockdown First of gradually resuming. AHU, it's all of month, started XXth relating are this indeed and there to

to However, effort the for inspection is express across with delivery as industry businesses, because all stay as we logistics. it need a government's coordinated well concerted

already have outlets our of picking started packages. Some up

things So that represents total it's a AHU will indication about XX% our normal. volume. return good to of

million million So X to packages it's about X day. a

Now a level other always the has the tongda of had against AHU question pricing. pricing. regarding premium all

So we to our slightly and that recent it think has already with the increases, do something higher. prices price

or any moment. changes anticipating So this we are at not preparing

the from the of overall the half month-to-month. Typically year, we for a pricing. that there normal theme Second stabilizing the variation in think is industry, is

from increase all the increase way and September, For September in volume six increase. September, gradual from price, and so the it's November, about October, associated forth so also demand, to points seven example, through August with to the from on there's to

for price points for overall, we to -- year think so. go So fourth or up up second will third fourth hike that half the quarter the about quarter, XX the we'll slightly

with the it is to it's of I life the with longer all term, part of potential that. increases. channels because streaming may, a development, video So significant industry example, indeed And and growth the stabilizing ecommerce and is if for supplement day-to-day varied

income that concern very think for pricing stabilize increases largely it's delivery the think to starting likely. we we the ecommerce So with will low is such the and largest because upper a forward, continue being much overall associated costs going being express point

Our Tian with TH ahead. next go comes question Hou Please from Capital.

first year. The other I last it than is, quarter, [Foreign the in second Language] one really much good, in saw margin better was the quarters

give this guidance the the year, profit. did So full earlier for management year

parcels, into new trends, new to second number And maybe so would you. I to so question. That's So was the is ecommerce of before? half and the the the --among of be as is ecommerce such about TikTok? going ecommerce two like the platforms also business, the portion XXXX. the that's my amongst what's portion than portion for Number Okay, from like grow from what's less hear Thank which more one. margin all how -- we

the question. Thank you, for Tian

Let questions. me these answer try to

on of the cost driven ASP The but we're price including all, think price it are of your the year, the -- I First don't question bit importantly price the past half -- the that can behind because more leads although because of second to relating on explained that I off. will of increases by the slower, is Cost and numbers. margin expansion volume. As the the year. your first year, are a for the started are if qualification for competitive side for increase? the give doing tapering to hike And what to specific side. from increased year, of to transactions, stabilizing, the I half certainly earlier, able second may good question, on of increases the improving second relative half will be half mix is loss-making relative addressing I the Why reasons first was it's the margin. environment the the stated revenue the most base. year specific of our for we've our And we advancing think profit. think comment then, pace And the we Profits, we sustain and the comment of a initiatives of last ASP you because the be in was

could utilization So our that we improved our of utilize all capacities.

labor better also planning, place route the will that have we costs or in are reduced. I automation, these all transportation the have and intact cost And so recall, we if increases overall from So, had think be associated flow. our gain, with delayering and total shortening package sort the you we addressed the with productivity really is distance flow for package cost, it of

a particular the number the the sortation of transit. through as words, goes other of it stages reducing in for So all package

third relatively observed give have structural we price term are quarter, longer productivity businesses far still that what is these the improvements so will quarter gains, So us stable. fourth and

So that quarter first answers your question.

our as been stable that market we part a of proportion new player to applies the of in industry, relating largest It being have into space. ecommerce the same high the maintained to presence. business. the total Second ecommerce a ZTO the express has us, level And existing or traditional delivery commerce

our is market total proportion So consistent with our presence.

Stanley. next comes Please Qianlei go Our Fan from with Morgan question ahead

two translate I So myself, questions. for have I'll Language] [Foreign

is The CapEx first capacity. about and daily question

So considering year handling the year? on is growth. end what's guidance daily my cost. also second the And capacity adjustment question new Do about any full And a you industry in of the have the or slowdown CapEx? the by volume

So the has we inflation, from impact have second continued. in quarter seeing that if actually, optimization we cost unit exclude

on So guidance cost any second half efficiency the the you. wondering, of there improvement is in Thank year?

Okay.

So let our growing our me we the target Indeed, crucial volume, answer and considering significantly our the industry reflected believe we, scale nature in is the our of growth business, CapEx. strategy that for business. is the it's And goal question because It and driven share right? average. above for for a is market growing

yet, a And managed said, our of spending, we the the what behind to very we don't we ahead are overall too want have with that the time So growing demand. growth, over our CapEx volume. to invest although stay we much focus with anticipated is don't because much. against want But

opportunities. I to is to kept around we billion. but exceed somewhere going want make around billion current And somewhere the We're that. market X we to X So sure then billion, likelihood think capture is X probably CapEx goal not still the that the

range pretty wide. is this So

closely. However, be it managed is going to

lot considering gains. that our the have the changes, volume the indeed the will of part we effort of year second the have cost of second is With in question put cost that also leverage. continue we half addressing a to the think in The seasonality, productivity

capacity translate is the the below scale It volume is relative fully the because consistent leverage to described. what demonstrated. I think leverage which to whole year than as half the first the We and demonstrate unit our the just let So scale [Foreign not expectation, the is In the Language] further indeed a anticipated, of Chairman. half our me for further necessarily decrease. had half is volume and industry, have we will first preparedness our higher will in second for per cost significant

question ahead. Please Chong comes Thomas go next with from Jefferies. The

my for Thanks [Foreign questions. Language] taking management

We seen earnings in just stack some our impressive How we about the question share. forward? second market to color of very in initiative have to going get should use invest a some the strategies. future. our about is new for my second I quarter. And the about that want think wood, we of investment with And investment earnings

we some target that the by our two have the quarter, about Given just terms get market gains share want color increased points market of percentage our Thank story. to during share long-term in you.

for your Thank question. you

The to first question our relating investment.

I products in perhaps businesses new are referring understand our investment well ecosystem. our think to core within you the both as that as I our

to answer two those of just areas I'll Now investment strategy.

meet commitment The different time are them fulfilling these a the their for energy been we also developing have diversifying to needs. in individualized services to requiring from have And we products investments. customers differentiate capability allow investing first rest differentiated to or and of in our of receive are, experience to and part, consumers allowing and tongda that ourselves think to the we

and our of plans. part strategy is that indeed, So

is volume as if carefully ecosystem. part second not of look ecosystem, our because has now capabilities development. the of our existing always is on existing double utilize back to extension existing goal approach or and And to investing investment our in and of the fully new been the The past, an to it's we our prudent are resources. part those are you significant so Although our rather usage capabilities triple resources and we of and our

to own referring it in normal our invest So that where and are also very to M&A or add ecosystem if you pace, capabilities to our is has the capability businesses. our growth refers that its a missing, new then it coordinated could existing initiatives of

and what we yes, capabilities expand will we look there So what us to based see for to see we and the on that inward don't opportunities continue do we have have. look continue will to comprehensive we are our to will

the growth or of of we industry, are in saying a very in good had next part even from our share very established as all investment market that's in that's XX% the prospects, potential anticipated five but the the goal, overall the we Market of deviating not discipline. that XX% position traditional, loose the M&A longer-term we're be we to normal So a we Again, will that years. reach XX our overall range. think to way

And there, a the in achieve. demand answers the advantage scaled Hope that we potential we as to are most mentioned, leverage is better, as position have important. market your as business and is as is the that question. However, achieve scale we we it the share favorable what trying a best is competitive there, higher are to growth indeed is

Our question go Please ahead. Daiwa Frank Capital. Yip from comes with next

first questions, on volume and Thank you. two And to the parcel one primary the growth So more term target. second ASP is the the dual listing to related longer industrial HKEX. the Language] [Foreign related

the to the the of two industry. [Foreign the Language] for in me three growth Let translate question years, first Chairman next

the in to very particularly confident to expand because the term as is industries, strong, into potential longer the itself. growth, is as penetration opportunities ability present remain manufacturing we and speaking, well So, rural agriculture just entire the still starting deep are

to scale industry continue of you continue the concentration to will further healthy and this top growth especially the will players grow the So, leverage and expect in industry. this propel when have the the support we increase

U.S. second and to primary including in Kong. the part The Hong the relating of a dual listing question in

the such time. in so achieve researching think us no an has We therefore have is hurdle it for and due option I company been to

[Foreign Language]

me Let translate. Language] [Foreign

current It the words the stabilizing the other a We slightly Our -- more gradually overall pricing will has be higher much development is nature increasing likely players in there. trend and as by fermented will and pricing it share going increasing. the the market be and increase. as concentrated is high that industry the of pricing believe very view probability and is becomes more and power its

Our next Instructions] comes [Operator ahead. go Please JP from Chen Morgan. Yiling with question

[Foreign comment you. difference level peers closest a Language] mentioned have -- with to peers in as on such I would make Thank want its [indiscernible]? digitalization like a its to with

[Foreign other Language] of to always technology core the focus competency peers, business. a industry Relative has core been our or

We have advantages we of will invested the and amongst from amount. consistently strive many continue ZTO. innovative to tongda, application this also the largest This we the competitive most implications are the we invest there are And for technology development. uses are originated year,

So for digitized our of with them management example, include and one solutioning. their financial extend more the outlets, expanding and our carrying helping initiatives online during are real-time their that out analysis, done empowerment policymaking to all technology, operations capability

includes also the way So, extending all of capabilities the couriers. end the to management the line

we will think our are. don't to we productivity so what which could it sortation, our frequent compare front. find we further other [indiscernible] call operations can to the are find that The a more to to we the able to for -- the all learn extends all segments, and is I as and are we some this soon can. initiative starting are, because route results the to focusing with we in second them ability forth. data what and the what problems is so each labor, us better. want focus, this so gain part, are And as planning, across -- productivity real-time, do visibility all the we also they capabilities, soon is more players and That utilization, some a resolve different each as issues, labor all that able of across and from transportation, try it And them time, extends are we has including that the in are and more different resources effective meaning generating very doing the in we has to on point to significant on is and that as well

session. question-and-answer our Huiping I back concludes turn like over to remarks. This any would to conference Yan the closing for Mrs.

for you Thank with we again the us joining further any and have forward you speaking if questions. you for to look more call

for presentation. concluded. is you Thank conference attending today's The now

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