NYSE:ZTO ZTO Express (Cayman) Q4 2024 Earnings Report $19.06 +0.06 (+0.32%) Closing price 03:59 PM EasternExtended Trading$19.30 +0.24 (+1.26%) As of 04:59 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast ZTO Express (Cayman) EPS ResultsActual EPS$0.44Consensus EPS $0.46Beat/MissMissed by -$0.02One Year Ago EPSN/AZTO Express (Cayman) Revenue ResultsActual Revenue$1.77 billionExpected Revenue$11.73 billionBeat/MissMissed by -$9.96 billionYoY Revenue GrowthN/AZTO Express (Cayman) Announcement DetailsQuarterQ4 2024Date3/18/2025TimeAfter Market ClosesConference Call DateTuesday, March 18, 2025Conference Call Time8:30PM ETUpcoming EarningsZTO Express (Cayman)'s Q1 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled on Wednesday, May 14, 2025 at 8:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (20-F)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by ZTO Express (Cayman) Q4 2024 Earnings Call TranscriptProvided by QuartrMarch 18, 2025 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Please also note today's event is being recorded. I would now like to turn the conference over to Sophie Li, Head of Capital Markets. Operator00:00:07Please go ahead. Speaker 100:00:10Thank you, Speaker 200:00:10Rako. Hello, everyone, and thank you for joining us today. The Company's results and Investor Relations presentation were released earlier today and are available on the Company's IR website at ir.cto.com. On the call today from CTO are Mr. Mason Lai, Chairman and Chief Executive Officer and Mr. Speaker 200:00:32Huiting Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the Company's business operations and highlights, followed by Mr. Yin, who will go through the financials and guidance. They will both be available to answer your questions during the Q and A session that follows. Speaker 200:00:51I 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 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. Speaker 200:01:42The 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. Speaker 200:09:12Thank you, Chairman Lai. Now let me translate first. Hello, everyone. Thank you for joining today's conference call. In the fourth quarter of twenty twenty four, ZTO maintained its high service quality and with a total parcel volume of RMB9.67 billion, up 11 year over year, We achieved an adjusted net income of RMB2.73 billion, which grew 23.4 year over year, further solidifying our industry leading profitability. Speaker 200:09:48In 2024, the express delivery industry maintained relatively high growth and the overall scale exceeded expectations. Meanwhile, with frequent e commerce promotions and the consumers growing price sensitivity, a proportion of lower value parcels have continued to increase exerting downward pressure on logistic pricing. Facing challenges, ZTO stayed committed to our high quality growth strategy. On one hand, we accelerated the development of differentiated products and services and deepened cooperation with e commerce platforms. Optimizing product mix as well as profitability while enhancing brand recognition and customer satisfaction. Speaker 200:10:38On another, we strengthened the standardization and coordination across our operational segments of our transit platform, further improved end to end timeliness, reduced the loss and damage and complaint rates. In addition, we ramped up efforts to empower our network partners, enhancing their capabilities to alleviate pickup and delivery cost pressures and improve service quality. For 2024, BTO's annual parcel volume reached $34,000,000,000 growing 12.6% year over year. Notably, number of retail parcels in the fourth quarter grew nearly 50% significantly outpacing overall e commerce parcel growth. Reverse parcels for the full year more than doubled compared to last year. Speaker 200:11:33The optimization of our product mix brought by an $0.08 positive enhancement to ASP for the core express delivery business, alleviating the impact from lower average weight per parcel enterprise competition. Together with continued operational cost efficiency gain and a stable SG and A structure, ZTO achieved an adjusted annual net income of RMB10.15 billion, increasing by 12.7% year over year. Entering 2025, the express delivery industry has maintained strong growth momentum. However, the trend of consumption downgrade has yet to reverse and the price competition remains intense. In such a market environment, our core focus is to align closely with market dynamics, enhance service quality, achieve a higher than industry average volume growth. Speaker 200:12:35Further, we must motivate and enable our network partners with fair cost bearing and profit sharing mechanisms to effectively strengthen pickup and delivery infrastructure and cost competitiveness so as to improve market penetration for retail parcels alongside of e commerce volume growth and ultimately improve earnings of outlets and couriers, enhancing partner network stability. Key initiatives include the following: First, sync opportunities into end to end service quality by refining operational procedures and implementing data benchmarking, aligning performance with internal metrics and external indicators to optimize transit efficiency and resource utilization. Improved first hours delivery ratio will boost overall timeliness and reinforce brand awareness. Second, effectively achieve mission critical value targets by granting full autonomy to regional management teams to stay lockstep with market changes with efficient resources ensuring fair and transparent network policies for all and adopting tiered approaches to to tap into new customers' potential. Joint efforts by pickup and delivery partners to effectively target incremental market can capture volume driven growth opportunities. Speaker 200:14:09Third, further products and services enhancement by strengthening strategic partnership with e commerce platform, leveraging ZTO's integrated ecosystem resources to build comprehensive supply chain capabilities refining differentiated products to enhance brand recognition and cultivate customer loyalty fourth, improve last mile network expansion and penetration by clearly defining responsibilities of sectional coordinators to effectively execute initiatives such as profit sharing sufficiently to incentivize couriers to service retail parcels. Establish direct linkage between outlet and last mile post, integrate commercial opportunities into local leasing. These initiatives will help to reduce last mile costs, increase retail volume, improve profitability for outlets and couriers and expand consumer reach through multiple channels. Last but not least, improve end to end timeliness and operating efficiency by implementing technology and data driven tools to optimize for planning, low rate and in time capacity investments or upgrades. Over the past three decades, China's express delivery industry represented largely by private enterprises has evolved through scale expansion and concentration as well as profitability divergence. Speaker 200:15:52ZTO's rise from the latest commerce follower to a consistent leader is not a coincidence. Regardless of how the industry landscape has shifted, DTO's core competitiveness stems from our shared success philosophy so that our partners can also win. Our entrepreneurial spirit of dedication, perseverance and the focus as well as our proven ability to quickly adapt and grow through challenges and adversities. Today we stand at a critical junction of microeconomic and industry development. We firmly believe that China's express delivery industry and its broader logistics market hold immerse growth prospects. Speaker 200:16:43By staying committed to our focus on the industry and being our best, striving for operational excellence and expanding our scale leadership with healthy quality of earnings in sync with market dynamics and stand behind our network partners. Together, we are confident and well equipped to achieve our mission which is to bring happiness to more people through our services. Next, let's welcome our CFO, Ms. Yan to present the financial results and the future plans. Thank you, Chairman Lai and thank you, Sophie. Speaker 200:17:22Hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in RMB and percentage changes refer to year over year comparisons. Detailed financial information, performances, unit economics and cash flow are posted on our website and I'll go through some of the highlights here. We adhered to the principle of profitable growth and continued to improve the quality of services and customer satisfaction. We attained 11% parcel growth to reach RMB9.7 billion for the fourth quarter and 12.6% or RMB34 billion for the year. Speaker 200:18:05Adjusted net income grew 23.4% to RMB2.7 billion and twelve 0.7% to RMB10.2 billion for the quarter and the year respectively. Total revenue increased 21.7% to RMB12.9 billion for Q4 and 15.3% to RMB44 billion for the year. ASP for the core express delivery business increased 10.3 or RMB0.13 for Q4 and 2.7% or $0.04 for the year. As the impact of decline in average weight per parcel and increase in incremental volume incentives were offset by the positive impact of the volume increase in retail parcels. The total cost of revenue was RMB9.2 billion and RMB30.6 billion for Q4 and the year respectively, which increased 22.3% for Q4 and 14.2% for the year. Speaker 200:19:12Overall unit cost for the core express delivery business increased 11.1% to 0.93 for Q4 and 1.9% to $0.87 for the year. Combined unit cost of sorting and transportation decreased 6.5% or $0.06 for Q4 and for the year it was 6% or 0.04 benefiting largely from economy ease of scale. Specifically, unit cost of Laihai transportation decreased 11.1% to $0.4 for Q4 and decreased 8.7% to $0.41 for the year, driven by more effective route planning in conjunction with improvements in fleet operations. Unit sorting cost was flat for Q4 and 2024 at $0.26 and $0.27 respectively, While improvements in automation and labor efficiency contributed to cost savings, additional costs were incurred for sorting activities conducted on behalf of franchise partners. Unit KA costs increased $0.15 for the Q4 and $0.07 for the year, in line with KA revenue increase driven by significant volume increases in retail and more specifically reverse parcels. Speaker 200:20:47Gross profit increased 20.2 to RMB3.8 billion for Q4 and increased 17.6% to RMB13.7 billion for 2024. Gross profit margin rate decreased 0.4 points to 29.1% and increased 0.6 points to 31% for the year for the quarter and the year respectively. SG and A excluding SBC decreased 7.3% to $649,000,000 for Q4 and increased 9.3% to 2,400,000,000.0 for the year. SG and A expenses excluding SBC as a percentage of revenue declined to five percent for Q4 and 5.4% for the year reflecting strong corporate cost efficiency. Income from operations increased 25.3% to RMB3.5 billion for Q4 and increased 17.7% to RMB11.8 billion for the year. Speaker 200:21:58Associated margin grew 0.8 points to 26.70.6% points to 26.6% for the year. Operating cash flow was RMB2.8 billion for the quarter and RMB11.4 billion for the year, representing decreases of 28.514.5% respectively. This decline was primarily due to one, a one time refund of franchise deposits totaling RMB1.2 billion under our new business policy to ease liquidity pressure of franchisees who in the past must make certain deposit with waybill purchases and then receive refund upon proper delivery of the package. Two, higher advances for reverse logistic operations based on the terms customary with platform operators three, tightening VAT rate refund policies and four, a bigger portion of cash management products accounted under long term financial investments where associated interest income is recognized over a term longer than a year on maturity. Our adjusted EBITDA for Q4 and 2024 was RMB4.6 billion and RMB16.4 billion respectively. Speaker 200:23:44Capital expenditure for Q4 totaled RMB1.2 billion and annual CapEx came in at RMB5.9 billion indicating that we have achieved another year of free cash flow. Now moving on to business outlook based on current market and operating conditions. We estimated that the industry growth would likely be around 15% for 2025 and we anticipate the company's parcel volume for the year to be in the range of 40,800,000,000.0 to 42,200,000,000.0, representing a 20% to 24% increase year over year. Now these estimates represent management's current and preliminary view, which are subject to change. This concludes our prepared remarks. Speaker 200:24:41Operator, please open the line for questions. Thank you. Operator00:24:47Thank you. We will now begin the question and answer session. Today's first question comes from Ronald Kung with Goldman Sachs. Please go ahead. Speaker 300:26:26Thank you, management, for the opportunity to ask your question. So number one is I want to ask about our priority on volume growth this year above industry. And so how has our market share progressed so far this year, the first quarter? And what has been the impact on pricing? Just how other players are reacting? Speaker 300:26:46And what would be the impact to just our balance of profits this year with this strategic shift? And I want to hear about our CapEx, whether we think the CapEx cycle has peaked and the CapEx plan for 2025? Thank you. Speaker 200:29:12So first let me translate for the Chairman for the first two parts of your question and then I'll answer the third part. For this year, we anticipated the growth of the industry to be around 16% and we said our goal to be growing at 20% to 24%, which certainly indicate that we have a plan to grow above industry average in turn protecting and also enlarging our market share. It is of course without saying that we continue to focus on our strategy, overall strategy which is to improve quality of services, maintain and expand our market leadership as well as achieve reasonable profit. And this year our focus will be gravitated towards the quality of services and also the market share and volume increases and it's very clear indicated through our numbers. Then the second part of the question relating to the first two months into the year where we have observed, the growth momentum is still very much demonstrated because there are observed a lot of normalized e commerce promotions. Speaker 200:30:44There are a lot of some that it increases in the smaller, lighter weight packages. And in the new business model such as live streaming and e commerce and also reverse logistics continues to drive additional volume. And then also not the least the government has rolled out lots of favorable policies to stimulate consumption including trade ins and subsidies which also boosted consumer willingness to spend and it will support a recovery in consumption. The cost effectiveness of express delivery industry has in the past and will continue in the future to sustain steady increase in the parcel volumes as consumption is still with potential for growth. Now looking ahead, some of the cross border logistics and rural industry logistics will also fuel our industry demand as we talked about DTO preparing and improving our capability in the supply chain logistics services. Speaker 200:32:07So we think that the overall potential for the growth is very much intact and for us to gradually rollout our new focus or new gravitation in the market share as well as our alongside our quality of customer services and it will help us achieve the goal that we set for us. Now this year we have achieved in 2024 our CapEx came in at RMB5.9 billion. As we have pretty much established the entire network with close to 95 or about 95 super sorting centers, Most of the CapEx spending for this year 2025 will be on the remaining few tracks of land that we would want to secure to replace current rental spaces and then plus also there are some upgrades of the existing facilities that will be in the plan. So we estimate our total 2025 CapEx will come in somewhere around RMB5 billion to RMB5.5 billion. And again with strong cash flow from operations, we intend to repeat another free cash flow year. Speaker 200:33:43I hope that answers your question Ronald. Speaker 300:33:48Yes. Thank you. Thank Operator00:33:53you. And our next question comes from Quenle Fan with Morgan Stanley. Please go ahead. Speaker 100:34:01Thank you, operator. Thank you, management, for taking my question, and congratulations on very solid earnings growth. I have two questions. The first question is about technology. So in this year since last year, we have started to see some speed up in AI and other technologies globally, and that has driven some technology are potentially could be applied into the logistics sector, for example, autonomous driving, drone, humanoid. Speaker 100:36:39So and recall that maybe we have during the past decade have been achieving cost efficiency improvements through automation and self owned trucks and the economy of sale has been marginally decreased. So with the new developments in technology and AI, is there any new potential in terms of cost saving or in terms of revenue expansion in the next decade? And the same question is also related to that. So Ms. Yuan has mentioned CapEx has been largely done regarding the sorting center like system in China. Speaker 100:37:28But over the medium term, if we assume that the technology continue to evolve very fast, the cost of applying technology drops rapidly, will that impact our expectation on CapEx over the medium term? Thank you. Speaker 200:41:17Sure. Yes. I'll again answer translate for the first part and then more specifically address your second part of the question as it relates to the cost. There has been a wide application of AI technology in the industry and of course ZTO is without exception. For example, machine vision, we integrated with visual recognition technology and also the algorithm in sorting in our sorting equipment and the process enabling the system to automatically adjust operating procedures and also reduce sorting errors and improve efficiency. Speaker 200:42:06In the order processing field, AI also enabled automatic generation of four segment tracking codes. The four segment tracking codes will allow the smallest unit of destination determination so that the package could go directly to the courier. In terms of customer service for example, we also have AI powered tools to enable quicker response speed as well as reduce dependency on human intervention. So there are plenty of opportunities that are currently already in place for us to utilize this technology And certainly as it continues to develop, we will stay at the forefront to cooperate and work with the leading research companies in applying their technology in our operational environment. Chairman Lai referred to some of the application as well not only to our operating platform but also to our network partners on the last mile front end to end. Speaker 200:43:40For example, he indicated that he has recently visited many of our franchise outlets and he has observed the improved level of automation which allowed not only standardization of the operation of express delivery, but also improved efficiency, reduced cost. Some of the specific examples that we are able to work with our network partners in empowering them in adopting advanced technology includes autonomous driving vehicles. Chairman indicated that this application already went into the commercialization. We maintained an open attitude towards new technology and work in collaboration with these research firms and rolled out solutions specifically for our initiatives which is the Direct Link. So for one autonomous vehicles it has great advantage over manned vehicle. Speaker 200:44:57Examples here is on average, on a monthly average one man vehicle would cost about RMB 2,000 to RMB 3,000. And the daily operating capacity is about 1,500 to 2,000 packages. The traditional land vehicles are typically a fossil fuel powered vehicle and it costs about $0.15 per package. But using the autonomous vehicle that we are currently in design and ready to roll out in 2025 with estimate cost only $0.07 to $0.08 per package. We are looking to purchase in bulk with these factories and research firms, which will further reduce the cost on a per unit basis to somewhere around $0.05 to $0.06 or even lower to $0.05 So, one of our focus is not necessarily spending our own money, but using our brand, using our influence to work with the research firm as well as the manufacturers in empowering our network partners to secure OEM equipment and offer better competitive price for our network partners. Speaker 200:46:39And secondly, the example that Chairman referred to is when our network partners, the outlet use more and more of the autonomous vehicles where the government continuously roll out or remove limitation on the use of autonomous vehicles on the road, we believe there will be greater opportunity for us to help reduce per unit cost and improve efficiencies. Now to the third part of the question, as I alluded to earlier, we are of the philosophy that at the right time spending the right amount of money, technology is continuously evolving and we are watching closely in how it efficiencies. So at the forefront we will utilize our brand influence as well as our technological sensitivity as well as awareness. As you know that we have over 1,100 IT personnel including some of the algorithm engineers, they will help us in participating and benefiting from this technological development trend. Cost wise is very much paced with our volume increase as well as our efficiency gain plan to bring about additional color as we truly achieve the tri layer throughput as our volume continues to increase then the cost will be deployed as we mentioned earlier scientifically making investment is important for us. Speaker 200:48:47We are from a very practical term approaching this option for us. Thank you. Speaker 100:48:57Thank you very much. That's very insightful. Thank you. Speaker 400:49:01Thank you. Operator00:49:03And our next question comes from Aaron Wu with UBS. Please go ahead. Speaker 400:50:18Now our Thanks, Mr. Lai, Ms. Yan and Sophie for taking my questions. I got two questions. First one is regarding our resale including the written parcel. Speaker 400:50:35We have seen strong growth momentum last year. And do you see that momentum would continue for this year than do we have any growth target on that? Also, we have noted the competition even on this front is getting more in trend. What kind of The U. E. Speaker 400:50:55Level we have seen during the past couple of quarters and the trend we expect going forward? Another question is also regarding our cost. We have seen our core cost per facility including transport and sorting costs have been below like RMB0.7 and what would be the potential cost cutting potential from here and the level we would eventually see going forward? And do we expect do we see like the cost burden from social insurance will be that big for us? Thank you. Speaker 200:57:36Thank you for your question and let me translate and supplement where may be. So first of all regarding the retail volume, in Q4 our average retail parcel volume exceeded 7,000,000 parcels with 3,000,000 from our own ordering channel and about RMB4 million from the reverse parcel, which doubled from last year. For 2025, our goal is to achieve 8,400,000 daily volume on average. This compared to 2024 at 5,460,000, which more than will likely to be doubled in that. It's a pretty high goal. Speaker 200:58:45And so we have planned our passageway to achieve such goal in the following four areas. One is to continue to implement our initiatives so that our couriers can achieve the lion's share of the retail market price. The tools that we will use is embedded in their handheld devices, which will help incentivize the couriers to serve retail packages. Number two, we will continue to work with the platform in implementing the measurement metrics and make that part of the measurement internally so that the specific targets, specific goals will be achieved. The system improvements will also be in sync with such initiative. Speaker 200:59:54The continued collaboration or deepening arrangements with our platform will also help expand the service area of the retail or specifically reverse parcels. The product differentiation in as number four will help improve our ability to serve different customer needs if it's speed, if it's quality, if it's combination, we will be able to expand and meet different demands. And the question that you have also mentioned about the cost further reduction, We believe from in terms of our transit, what we have done in continuous breakdown of the whole process and reduce damage, reduce loss and also together with what we mentioned the tri layer throughput model will help us reduce sortation frequency as well as connecting destination and origination outlets or centers will help us reduce the cost on a per unit basis. Our goal for 2025 is to achieve at least $0.03 reduction for sortation and transportation combined unit cost. With the success in implementation of our initiatives to establish direct link between Olive and Post, our goal is to have around 42.6 or almost 40% and above of the packages go directly to the outlet, which will translate into about $0.2 per package savings. Speaker 201:02:20We think there are again more opportunities for us to reduce costs as our volume continue to improve and increase. Now the third question regarding to the social welfare expenses, we've always focused on people and continuously we protect and improve the interest and the rights of our couriers. We have our self employed employees as well as the outsourcing employees 100% coverage on their social welfare payment. The couriers also were encouraged to we also encourage our outlet owners to cover the couriers and we have achieved helped them achieve 100% commercial insurance coverage. To be noted is that in the industry we are the first to roll out a corporate sponsored all weather 20 fourseven accidental group insurance for our couriers. Speaker 201:03:42Currently the stability or the turnover rate performance of our courier is in the industry is relatively better than the rest. We not only have the lower cost, but also have the willingness to work with the brand to provide better sense of belonging and also a sense of achievement. With the radius surrounding the post, we believe we are able to help our couriers not only receive better income, but also have better work environment and safer work environment. And I hope that answers your question. Speaker 401:04:42Thank you, Ms. Liang, that's very clear. Thank you. Operator01:04:46Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to the company for closing remarks. Speaker 201:04:56Again, thank you everybody for joining today's call and thank you for your continued support. We are available for further questions or discussions and we look forward to talk to you soon. Operator01:05:12Thank 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.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallZTO Express (Cayman) Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(20-F) ZTO Express (Cayman) Earnings HeadlinesZTO Files Annual Report on Form 20-F for Fiscal Year 2024April 17, 2025 | gurufocus.comZTO Express (Cayman) (NYSE:ZTO) Upgraded to Strong-Buy at Hsbc Global ResApril 17, 2025 | americanbankingnews.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 25, 2025 | Crypto Swap Profits (Ad)ZTO Express (Cayman) (NYSE:ZTO) Raised to "Buy" at HSBCApril 16, 2025 | americanbankingnews.comHSBC Upgrades ZTO Express (ZTO)April 15, 2025 | msn.comZTO Express (Cayman) (NYSE:ZTO) shareholders have endured a 30% loss from investing in the stock five years agoApril 14, 2025 | finance.yahoo.comSee More ZTO Express (Cayman) Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ZTO Express (Cayman)? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ZTO Express (Cayman) and other key companies, straight to your email. Email Address About ZTO Express (Cayman)ZTO Express (Cayman) (NYSE:ZTO) provides express delivery and other value-added logistics services in the People's Republic of China. It offers freight forwarding services; and delivery services for e-commerce and traditional merchants, and other express service users. 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There are 5 speakers on the call. Operator00:00:00Please also note today's event is being recorded. I would now like to turn the conference over to Sophie Li, Head of Capital Markets. Operator00:00:07Please go ahead. Speaker 100:00:10Thank you, Speaker 200:00:10Rako. Hello, everyone, and thank you for joining us today. The Company's results and Investor Relations presentation were released earlier today and are available on the Company's IR website at ir.cto.com. On the call today from CTO are Mr. Mason Lai, Chairman and Chief Executive Officer and Mr. Speaker 200:00:32Huiting Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the Company's business operations and highlights, followed by Mr. Yin, who will go through the financials and guidance. They will both be available to answer your questions during the Q and A session that follows. Speaker 200:00:51I 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 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. Speaker 200:01:42The 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. Speaker 200:09:12Thank you, Chairman Lai. Now let me translate first. Hello, everyone. Thank you for joining today's conference call. In the fourth quarter of twenty twenty four, ZTO maintained its high service quality and with a total parcel volume of RMB9.67 billion, up 11 year over year, We achieved an adjusted net income of RMB2.73 billion, which grew 23.4 year over year, further solidifying our industry leading profitability. Speaker 200:09:48In 2024, the express delivery industry maintained relatively high growth and the overall scale exceeded expectations. Meanwhile, with frequent e commerce promotions and the consumers growing price sensitivity, a proportion of lower value parcels have continued to increase exerting downward pressure on logistic pricing. Facing challenges, ZTO stayed committed to our high quality growth strategy. On one hand, we accelerated the development of differentiated products and services and deepened cooperation with e commerce platforms. Optimizing product mix as well as profitability while enhancing brand recognition and customer satisfaction. Speaker 200:10:38On another, we strengthened the standardization and coordination across our operational segments of our transit platform, further improved end to end timeliness, reduced the loss and damage and complaint rates. In addition, we ramped up efforts to empower our network partners, enhancing their capabilities to alleviate pickup and delivery cost pressures and improve service quality. For 2024, BTO's annual parcel volume reached $34,000,000,000 growing 12.6% year over year. Notably, number of retail parcels in the fourth quarter grew nearly 50% significantly outpacing overall e commerce parcel growth. Reverse parcels for the full year more than doubled compared to last year. Speaker 200:11:33The optimization of our product mix brought by an $0.08 positive enhancement to ASP for the core express delivery business, alleviating the impact from lower average weight per parcel enterprise competition. Together with continued operational cost efficiency gain and a stable SG and A structure, ZTO achieved an adjusted annual net income of RMB10.15 billion, increasing by 12.7% year over year. Entering 2025, the express delivery industry has maintained strong growth momentum. However, the trend of consumption downgrade has yet to reverse and the price competition remains intense. In such a market environment, our core focus is to align closely with market dynamics, enhance service quality, achieve a higher than industry average volume growth. Speaker 200:12:35Further, we must motivate and enable our network partners with fair cost bearing and profit sharing mechanisms to effectively strengthen pickup and delivery infrastructure and cost competitiveness so as to improve market penetration for retail parcels alongside of e commerce volume growth and ultimately improve earnings of outlets and couriers, enhancing partner network stability. Key initiatives include the following: First, sync opportunities into end to end service quality by refining operational procedures and implementing data benchmarking, aligning performance with internal metrics and external indicators to optimize transit efficiency and resource utilization. Improved first hours delivery ratio will boost overall timeliness and reinforce brand awareness. Second, effectively achieve mission critical value targets by granting full autonomy to regional management teams to stay lockstep with market changes with efficient resources ensuring fair and transparent network policies for all and adopting tiered approaches to to tap into new customers' potential. Joint efforts by pickup and delivery partners to effectively target incremental market can capture volume driven growth opportunities. Speaker 200:14:09Third, further products and services enhancement by strengthening strategic partnership with e commerce platform, leveraging ZTO's integrated ecosystem resources to build comprehensive supply chain capabilities refining differentiated products to enhance brand recognition and cultivate customer loyalty fourth, improve last mile network expansion and penetration by clearly defining responsibilities of sectional coordinators to effectively execute initiatives such as profit sharing sufficiently to incentivize couriers to service retail parcels. Establish direct linkage between outlet and last mile post, integrate commercial opportunities into local leasing. These initiatives will help to reduce last mile costs, increase retail volume, improve profitability for outlets and couriers and expand consumer reach through multiple channels. Last but not least, improve end to end timeliness and operating efficiency by implementing technology and data driven tools to optimize for planning, low rate and in time capacity investments or upgrades. Over the past three decades, China's express delivery industry represented largely by private enterprises has evolved through scale expansion and concentration as well as profitability divergence. Speaker 200:15:52ZTO's rise from the latest commerce follower to a consistent leader is not a coincidence. Regardless of how the industry landscape has shifted, DTO's core competitiveness stems from our shared success philosophy so that our partners can also win. Our entrepreneurial spirit of dedication, perseverance and the focus as well as our proven ability to quickly adapt and grow through challenges and adversities. Today we stand at a critical junction of microeconomic and industry development. We firmly believe that China's express delivery industry and its broader logistics market hold immerse growth prospects. Speaker 200:16:43By staying committed to our focus on the industry and being our best, striving for operational excellence and expanding our scale leadership with healthy quality of earnings in sync with market dynamics and stand behind our network partners. Together, we are confident and well equipped to achieve our mission which is to bring happiness to more people through our services. Next, let's welcome our CFO, Ms. Yan to present the financial results and the future plans. Thank you, Chairman Lai and thank you, Sophie. Speaker 200:17:22Hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in RMB and percentage changes refer to year over year comparisons. Detailed financial information, performances, unit economics and cash flow are posted on our website and I'll go through some of the highlights here. We adhered to the principle of profitable growth and continued to improve the quality of services and customer satisfaction. We attained 11% parcel growth to reach RMB9.7 billion for the fourth quarter and 12.6% or RMB34 billion for the year. Speaker 200:18:05Adjusted net income grew 23.4% to RMB2.7 billion and twelve 0.7% to RMB10.2 billion for the quarter and the year respectively. Total revenue increased 21.7% to RMB12.9 billion for Q4 and 15.3% to RMB44 billion for the year. ASP for the core express delivery business increased 10.3 or RMB0.13 for Q4 and 2.7% or $0.04 for the year. As the impact of decline in average weight per parcel and increase in incremental volume incentives were offset by the positive impact of the volume increase in retail parcels. The total cost of revenue was RMB9.2 billion and RMB30.6 billion for Q4 and the year respectively, which increased 22.3% for Q4 and 14.2% for the year. Speaker 200:19:12Overall unit cost for the core express delivery business increased 11.1% to 0.93 for Q4 and 1.9% to $0.87 for the year. Combined unit cost of sorting and transportation decreased 6.5% or $0.06 for Q4 and for the year it was 6% or 0.04 benefiting largely from economy ease of scale. Specifically, unit cost of Laihai transportation decreased 11.1% to $0.4 for Q4 and decreased 8.7% to $0.41 for the year, driven by more effective route planning in conjunction with improvements in fleet operations. Unit sorting cost was flat for Q4 and 2024 at $0.26 and $0.27 respectively, While improvements in automation and labor efficiency contributed to cost savings, additional costs were incurred for sorting activities conducted on behalf of franchise partners. Unit KA costs increased $0.15 for the Q4 and $0.07 for the year, in line with KA revenue increase driven by significant volume increases in retail and more specifically reverse parcels. Speaker 200:20:47Gross profit increased 20.2 to RMB3.8 billion for Q4 and increased 17.6% to RMB13.7 billion for 2024. Gross profit margin rate decreased 0.4 points to 29.1% and increased 0.6 points to 31% for the year for the quarter and the year respectively. SG and A excluding SBC decreased 7.3% to $649,000,000 for Q4 and increased 9.3% to 2,400,000,000.0 for the year. SG and A expenses excluding SBC as a percentage of revenue declined to five percent for Q4 and 5.4% for the year reflecting strong corporate cost efficiency. Income from operations increased 25.3% to RMB3.5 billion for Q4 and increased 17.7% to RMB11.8 billion for the year. Speaker 200:21:58Associated margin grew 0.8 points to 26.70.6% points to 26.6% for the year. Operating cash flow was RMB2.8 billion for the quarter and RMB11.4 billion for the year, representing decreases of 28.514.5% respectively. This decline was primarily due to one, a one time refund of franchise deposits totaling RMB1.2 billion under our new business policy to ease liquidity pressure of franchisees who in the past must make certain deposit with waybill purchases and then receive refund upon proper delivery of the package. Two, higher advances for reverse logistic operations based on the terms customary with platform operators three, tightening VAT rate refund policies and four, a bigger portion of cash management products accounted under long term financial investments where associated interest income is recognized over a term longer than a year on maturity. Our adjusted EBITDA for Q4 and 2024 was RMB4.6 billion and RMB16.4 billion respectively. Speaker 200:23:44Capital expenditure for Q4 totaled RMB1.2 billion and annual CapEx came in at RMB5.9 billion indicating that we have achieved another year of free cash flow. Now moving on to business outlook based on current market and operating conditions. We estimated that the industry growth would likely be around 15% for 2025 and we anticipate the company's parcel volume for the year to be in the range of 40,800,000,000.0 to 42,200,000,000.0, representing a 20% to 24% increase year over year. Now these estimates represent management's current and preliminary view, which are subject to change. This concludes our prepared remarks. Speaker 200:24:41Operator, please open the line for questions. Thank you. Operator00:24:47Thank you. We will now begin the question and answer session. Today's first question comes from Ronald Kung with Goldman Sachs. Please go ahead. Speaker 300:26:26Thank you, management, for the opportunity to ask your question. So number one is I want to ask about our priority on volume growth this year above industry. And so how has our market share progressed so far this year, the first quarter? And what has been the impact on pricing? Just how other players are reacting? Speaker 300:26:46And what would be the impact to just our balance of profits this year with this strategic shift? And I want to hear about our CapEx, whether we think the CapEx cycle has peaked and the CapEx plan for 2025? Thank you. Speaker 200:29:12So first let me translate for the Chairman for the first two parts of your question and then I'll answer the third part. For this year, we anticipated the growth of the industry to be around 16% and we said our goal to be growing at 20% to 24%, which certainly indicate that we have a plan to grow above industry average in turn protecting and also enlarging our market share. It is of course without saying that we continue to focus on our strategy, overall strategy which is to improve quality of services, maintain and expand our market leadership as well as achieve reasonable profit. And this year our focus will be gravitated towards the quality of services and also the market share and volume increases and it's very clear indicated through our numbers. Then the second part of the question relating to the first two months into the year where we have observed, the growth momentum is still very much demonstrated because there are observed a lot of normalized e commerce promotions. Speaker 200:30:44There are a lot of some that it increases in the smaller, lighter weight packages. And in the new business model such as live streaming and e commerce and also reverse logistics continues to drive additional volume. And then also not the least the government has rolled out lots of favorable policies to stimulate consumption including trade ins and subsidies which also boosted consumer willingness to spend and it will support a recovery in consumption. The cost effectiveness of express delivery industry has in the past and will continue in the future to sustain steady increase in the parcel volumes as consumption is still with potential for growth. Now looking ahead, some of the cross border logistics and rural industry logistics will also fuel our industry demand as we talked about DTO preparing and improving our capability in the supply chain logistics services. Speaker 200:32:07So we think that the overall potential for the growth is very much intact and for us to gradually rollout our new focus or new gravitation in the market share as well as our alongside our quality of customer services and it will help us achieve the goal that we set for us. Now this year we have achieved in 2024 our CapEx came in at RMB5.9 billion. As we have pretty much established the entire network with close to 95 or about 95 super sorting centers, Most of the CapEx spending for this year 2025 will be on the remaining few tracks of land that we would want to secure to replace current rental spaces and then plus also there are some upgrades of the existing facilities that will be in the plan. So we estimate our total 2025 CapEx will come in somewhere around RMB5 billion to RMB5.5 billion. And again with strong cash flow from operations, we intend to repeat another free cash flow year. Speaker 200:33:43I hope that answers your question Ronald. Speaker 300:33:48Yes. Thank you. Thank Operator00:33:53you. And our next question comes from Quenle Fan with Morgan Stanley. Please go ahead. Speaker 100:34:01Thank you, operator. Thank you, management, for taking my question, and congratulations on very solid earnings growth. I have two questions. The first question is about technology. So in this year since last year, we have started to see some speed up in AI and other technologies globally, and that has driven some technology are potentially could be applied into the logistics sector, for example, autonomous driving, drone, humanoid. Speaker 100:36:39So and recall that maybe we have during the past decade have been achieving cost efficiency improvements through automation and self owned trucks and the economy of sale has been marginally decreased. So with the new developments in technology and AI, is there any new potential in terms of cost saving or in terms of revenue expansion in the next decade? And the same question is also related to that. So Ms. Yuan has mentioned CapEx has been largely done regarding the sorting center like system in China. Speaker 100:37:28But over the medium term, if we assume that the technology continue to evolve very fast, the cost of applying technology drops rapidly, will that impact our expectation on CapEx over the medium term? Thank you. Speaker 200:41:17Sure. Yes. I'll again answer translate for the first part and then more specifically address your second part of the question as it relates to the cost. There has been a wide application of AI technology in the industry and of course ZTO is without exception. For example, machine vision, we integrated with visual recognition technology and also the algorithm in sorting in our sorting equipment and the process enabling the system to automatically adjust operating procedures and also reduce sorting errors and improve efficiency. Speaker 200:42:06In the order processing field, AI also enabled automatic generation of four segment tracking codes. The four segment tracking codes will allow the smallest unit of destination determination so that the package could go directly to the courier. In terms of customer service for example, we also have AI powered tools to enable quicker response speed as well as reduce dependency on human intervention. So there are plenty of opportunities that are currently already in place for us to utilize this technology And certainly as it continues to develop, we will stay at the forefront to cooperate and work with the leading research companies in applying their technology in our operational environment. Chairman Lai referred to some of the application as well not only to our operating platform but also to our network partners on the last mile front end to end. Speaker 200:43:40For example, he indicated that he has recently visited many of our franchise outlets and he has observed the improved level of automation which allowed not only standardization of the operation of express delivery, but also improved efficiency, reduced cost. Some of the specific examples that we are able to work with our network partners in empowering them in adopting advanced technology includes autonomous driving vehicles. Chairman indicated that this application already went into the commercialization. We maintained an open attitude towards new technology and work in collaboration with these research firms and rolled out solutions specifically for our initiatives which is the Direct Link. So for one autonomous vehicles it has great advantage over manned vehicle. Speaker 200:44:57Examples here is on average, on a monthly average one man vehicle would cost about RMB 2,000 to RMB 3,000. And the daily operating capacity is about 1,500 to 2,000 packages. The traditional land vehicles are typically a fossil fuel powered vehicle and it costs about $0.15 per package. But using the autonomous vehicle that we are currently in design and ready to roll out in 2025 with estimate cost only $0.07 to $0.08 per package. We are looking to purchase in bulk with these factories and research firms, which will further reduce the cost on a per unit basis to somewhere around $0.05 to $0.06 or even lower to $0.05 So, one of our focus is not necessarily spending our own money, but using our brand, using our influence to work with the research firm as well as the manufacturers in empowering our network partners to secure OEM equipment and offer better competitive price for our network partners. Speaker 200:46:39And secondly, the example that Chairman referred to is when our network partners, the outlet use more and more of the autonomous vehicles where the government continuously roll out or remove limitation on the use of autonomous vehicles on the road, we believe there will be greater opportunity for us to help reduce per unit cost and improve efficiencies. Now to the third part of the question, as I alluded to earlier, we are of the philosophy that at the right time spending the right amount of money, technology is continuously evolving and we are watching closely in how it efficiencies. So at the forefront we will utilize our brand influence as well as our technological sensitivity as well as awareness. As you know that we have over 1,100 IT personnel including some of the algorithm engineers, they will help us in participating and benefiting from this technological development trend. Cost wise is very much paced with our volume increase as well as our efficiency gain plan to bring about additional color as we truly achieve the tri layer throughput as our volume continues to increase then the cost will be deployed as we mentioned earlier scientifically making investment is important for us. Speaker 200:48:47We are from a very practical term approaching this option for us. Thank you. Speaker 100:48:57Thank you very much. That's very insightful. Thank you. Speaker 400:49:01Thank you. Operator00:49:03And our next question comes from Aaron Wu with UBS. Please go ahead. Speaker 400:50:18Now our Thanks, Mr. Lai, Ms. Yan and Sophie for taking my questions. I got two questions. First one is regarding our resale including the written parcel. Speaker 400:50:35We have seen strong growth momentum last year. And do you see that momentum would continue for this year than do we have any growth target on that? Also, we have noted the competition even on this front is getting more in trend. What kind of The U. E. Speaker 400:50:55Level we have seen during the past couple of quarters and the trend we expect going forward? Another question is also regarding our cost. We have seen our core cost per facility including transport and sorting costs have been below like RMB0.7 and what would be the potential cost cutting potential from here and the level we would eventually see going forward? And do we expect do we see like the cost burden from social insurance will be that big for us? Thank you. Speaker 200:57:36Thank you for your question and let me translate and supplement where may be. So first of all regarding the retail volume, in Q4 our average retail parcel volume exceeded 7,000,000 parcels with 3,000,000 from our own ordering channel and about RMB4 million from the reverse parcel, which doubled from last year. For 2025, our goal is to achieve 8,400,000 daily volume on average. This compared to 2024 at 5,460,000, which more than will likely to be doubled in that. It's a pretty high goal. Speaker 200:58:45And so we have planned our passageway to achieve such goal in the following four areas. One is to continue to implement our initiatives so that our couriers can achieve the lion's share of the retail market price. The tools that we will use is embedded in their handheld devices, which will help incentivize the couriers to serve retail packages. Number two, we will continue to work with the platform in implementing the measurement metrics and make that part of the measurement internally so that the specific targets, specific goals will be achieved. The system improvements will also be in sync with such initiative. Speaker 200:59:54The continued collaboration or deepening arrangements with our platform will also help expand the service area of the retail or specifically reverse parcels. The product differentiation in as number four will help improve our ability to serve different customer needs if it's speed, if it's quality, if it's combination, we will be able to expand and meet different demands. And the question that you have also mentioned about the cost further reduction, We believe from in terms of our transit, what we have done in continuous breakdown of the whole process and reduce damage, reduce loss and also together with what we mentioned the tri layer throughput model will help us reduce sortation frequency as well as connecting destination and origination outlets or centers will help us reduce the cost on a per unit basis. Our goal for 2025 is to achieve at least $0.03 reduction for sortation and transportation combined unit cost. With the success in implementation of our initiatives to establish direct link between Olive and Post, our goal is to have around 42.6 or almost 40% and above of the packages go directly to the outlet, which will translate into about $0.2 per package savings. Speaker 201:02:20We think there are again more opportunities for us to reduce costs as our volume continue to improve and increase. Now the third question regarding to the social welfare expenses, we've always focused on people and continuously we protect and improve the interest and the rights of our couriers. We have our self employed employees as well as the outsourcing employees 100% coverage on their social welfare payment. The couriers also were encouraged to we also encourage our outlet owners to cover the couriers and we have achieved helped them achieve 100% commercial insurance coverage. To be noted is that in the industry we are the first to roll out a corporate sponsored all weather 20 fourseven accidental group insurance for our couriers. Speaker 201:03:42Currently the stability or the turnover rate performance of our courier is in the industry is relatively better than the rest. We not only have the lower cost, but also have the willingness to work with the brand to provide better sense of belonging and also a sense of achievement. With the radius surrounding the post, we believe we are able to help our couriers not only receive better income, but also have better work environment and safer work environment. And I hope that answers your question. Speaker 401:04:42Thank you, Ms. Liang, that's very clear. Thank you. Operator01:04:46Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to the company for closing remarks. Speaker 201:04:56Again, thank you everybody for joining today's call and thank you for your continued support. We are available for further questions or discussions and we look forward to talk to you soon. Operator01:05:12Thank 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.Read morePowered by