ZTO Express Q4 2025 Earnings Call - Quality-led growth guide of 10%-13%, $1.5bn buyback financed by convertibles

Rocco, Operator/Moderator, ZTO Express: Please also note today’s event is being recorded. I would now like to turn the conference over to Sophie Li, Head of Capital Markets. Please go ahead.

Sophie Li, Head of Capital Markets, ZTO Express: 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.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, and Mrs. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company’s business operations and highlights, followed by Mrs.

Yan, who will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows. I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and our 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.

Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. 赖总，请。

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express: 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%，行业增长节奏有所放缓，中通保持行业领先的服务水平，四季度完成业务量105.6亿件，同比增长9.2%，市场份额同比提升0.8个百分点。同时我们实现了调整后净利润26.9亿元。中通持续保持了行业规模与盈利水平的领跑优势。2025年，我国快递行业整体实现了13.6%的稳健增长，业务规模突破了两千亿的量级。在三季度，国家相关部门郑重全面地倡导防内卷和强化基础民生保障，为行业健康和持续发展确立了方向。快递市场整体价格水平稳回升，行业发展由追求数量规模加速向量质并举的发展新阶段转型。2025年全年，中通完成业务量385亿件，市场份额与去年持平。在行业发展转型的关键阶段，中通坚守高质量发展战略，持续深化差异化产品和能力建设，取得了扎实的成效。面对严峻的竞争态势，中通积极响应国家的号召，带头维护稳健发展的行业秩序，用扎实的基建、数据运筹和管理能力，维护质量、规模和盈利水平的优势。全年闪件业务量同比增长46%，远超业三件整体增速。四季度的日均闪件业务量提升至接近一千万单。产品的结构优化提升了品牌的认知与客户心智，并有力地支撑了快递核心业务收入的增长，缓解了增量补贴的压力。与此同时，我们持续强化转运各环节标准化运营以及协同。运营效能与服务时效同步提升，全年单票运和分拣成本下降了六分。结合稳定的管理费用结构，全年调整后净利润达到95亿元。进入2026年，快递行业依托宏观经济稳健的基本面和防内卷政策的持续深化，进一步凝聚高质量发展的共识。当然，市场依然存在不确定性，量质并举的转型还需要深耕。中通将肩负行业与社会的责任，紧扣健康持续发展的战略策略，聚焦转运和末端能力建设，持续优化网络政策的公平性和透明度，夯实网络信任信心。下阶段的重点工作具体是：一、提升服务品质，筑牢品牌优势。这股导向同时注重则行则错，将公平和平台指数融入绩效考核，真正到感、到人、到行为。聚焦短板，专项整改。结合产品结构的不断优化，提升服务能力和差异化水平。二，深化降本增效，夯实成本优势。以全链路协同为核心，加速折分折送等模式落地，建立标准化成本线，可视化对比法，将降本目标圈透至末端个环节。通过波动监测深挖潜力，实现收转运派各环节行业成本效率最优。三，优化网络政策与激励机制，聚焦业务量稳健增长和成本效益的提升，对分额落后区域加大刺激的分析，确保分担机制的有效性，激励资源精准投放。四，坚守公平公正的导向，保障网络稳定，维护合作伙伴的权益与义务，平衡好利益分配，多劳多得，优胜劣汰。在保障网点及业务员合理收入的同时，支持赋能优质网点，帮扶治理落后网点，保护全网共生共赢的健康氛围。中国快递行业长期发展的前景依然良好，竞争态势将稳步趋向理性。随着头部企业持续回归内在价值，行业格局会继续分化并提高集中度。中通坚守长期发展的战略，服务质量、市场份额、合理利润三位一体。在行业由规模扩张向价值回归转变的阶段，我们只有坚持引领量质并举，拓展多样化和差异化的产品和服务，夯实支线规模底盘，发挥数字化运营的生产力，挖掘单到单降本提质的潜力，注重网络的长期稳定，才能把握机遇，穿越周期。二十多年来，做好自己对中通而言是万变之下的不变。我们会依托同建共享的理念，以务实的精神践行造就更多人幸福的使命，在行业高质量发展新征程中继续领跑，为中通生态创造持续长远的价值。谢谢。接下来由严总介绍财务结果和预示。

Sophie Li, Head of Capital Markets, ZTO Express: 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, the express 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 net income of CNY 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 parcel 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 CNY 0.06 for the full year. With a stable SG&A structure, our annual adjusted net income reached CNY 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. ZTO 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 evaluations. With accountability 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. 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 obligations of our partners while balancing profit distribution. Strictly implementing better pay for better results and survival of the fittest while ensuring reasonable income for outlets and couriers. 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 deconcentration 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 extending 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. Yan to present the financial results and guidance.

Huiping Yan, Chief Financial Officer, ZTO Express: 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 comparison. Again, detailed financial information and performances, unit 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 CNY 14.5 billion in Q4 and increased 10.9% to CNY 49.1 billion for the year. Income from operations was CNY 3.2 billion and CNY 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 CNY 2.7 billion and CNY 9.5 billion for the fourth quarter and full year respectively. ASP for our core express delivery business increased by 2.9% or 3 cents in Q4. This was primarily driven by a 15-cent positive contribution from an improved mix in KA volume. Specifically, our higher value reverse logistics services counter offsetting 11 cents in higher volume incentives.

For the full year, ASP decreased slightly by 1.7% or RMB 0.03. This reflects a RMB 0.16 gain from higher retail volume, offset by a RMB 0.15 impact from volume incentives and a RMB 0.03 decrease due to lower average weight per parcel. Total cost of revenue was RMB 10.8 billion for Q4 and RMB 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 RMB 0.08 to RMB 1 in Q4 and RMB 0.07 to RMB 0.94 for the year, KA cost 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 $0.04 in Q4, and 8.8% or $0.06 for the year, driven by economies of scale and our ongoing productivity initiatives. Specifically, unit cost of line haul transportation decreased 7.5% to $0.37 in Q4 and 12.2% to $0.36 for the year, reflecting optimized route planning and enhanced load efficiencies. Unit sorting costs remained steady at $0.26 in Q4 and decreased 3.7% to $0.26 for the full year. Automation continues to drive labor efficiency through, though partially offset by the ramp-up and upgrade costs of new and existing facilities. Unit KA costs increased by $0.13, which is consistent with the strategy, the strategic expansion of our KA volume.

Gross profit declined 2.1% to CNY 3.7 billion for Q4 and 10.5% to CNY 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 CNY 641 million for Q4 and increased 1.6% to CNY 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 CNY 3.2 billion for Q4 and decreased 11.1% to CNY 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 CNY 4.2 billion in Q4 and reached CNY 12 billion for the year. Excluding the CNY 850 million one-time franchise deposit refunds under the new business policy in Q4 last year, our cash flow from operations remained robust. Capital expenditures for the year totaled CNY 6.1 billion. Now moving on to our business outlook. Based on current market conditions, we anticipate our parcel volume for 2026 to grow in the range of 10%-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 on to our shareholder return. The board has approved a semi-annual cash dividend of $0.39 per ADS, in accordance with the established 40% payout ratio. In addition, having substantially completed our previous $2 billion program, 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 in delivering consistent long-term value to our shareholders. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Rocco, Operator/Moderator, ZTO Express: Thank you. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed 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. Today’s first question comes from Qianlei Fan with Morgan Stanley. Please go ahead.

Qianlei Fan, Analyst, Morgan Stanley: Thank you, operator. 管理层好，感谢接受我的提问。我有两个小问题，那第一个小问题是关于反内卷的，就是我们在春节之后也有看到各种新闻关于各地反内卷的一些新的动向，那么想请教一下管理层对今年反内卷的这个持续性的一个判断，以及对这个监管态度的一个理解。第二个小问题是有关于行业的增速和竞争格局的。那考虑到现在反内卷有一些这个对价格上的托举，现在我们对整个行业的增速是一个什么样的判断？那么在这样的判断之下，怎么看待这个未来行业竞争格局的变化？ Let me translate for myself. Thank you, management, for taking my question. I have two questions. The first question is about anti-involution. After the Chinese New Year, we have seen lots of news on the anti-involution dynamics everywhere in China. So is there any new updates on the anti-involution initiatives?

How do you expect the sustainability of such anti-involution driven price hikes? What’s your take on the attitude from the regulators towards anti-involution? 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. Taking into consideration of potential price hikes amid anti-involution, what’s your expectation on the full year industry growth outlook? With this outlook, what’s your expectation on the industry competition landscape and market share dynamics? Thank you.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express: 谢谢你的提问。自去年三季度反内卷政策推行以来，行业竞争环境持续向好，快递价格水平稳步回升，末端权益得到有效保障。春节以来，反内卷的政策得到有效延续。随着政策的长效法执行，行业有望继续在成本线以上的有序竞争。作为头部企业，中通将坚定不移地响应政府反内卷号召。我们既是参与者，我们更是引领者，坚持服务质量为先的平衡发展战略，切实保障网络末端权益，维护健康有序的行业发展环境。 第二个问题是增速与竞争格局。首先从行业规模来看，去年中国快递行业业务量已接近两千亿件，基数较高。其次，随着反内卷政策的贯彻执行，快递价格稳步提升，低价包裹逐渐减少。我们认为行业增速逐步放缓是合理的。快递行业将以量为导向，逐步迈向高质量发展的新阶段。今年我们国家对预期行业增速在8%，我们这个官方指引，中通的增速，我们中通是10%到23%。竞争格局随着宏观经济持续向好以及快递行业转向高质量发展，市场资源将更多地向注重服务品质与运营效率的企业倾斜。

Huiping Yan, Chief Financial Officer, ZTO Express: 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. The parcel prices have recovered and the focus has turned towards safeguarding the interest of frontline 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 orderly 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. ZTO’s strategy is well aligned with government’s effort to combat involution, seeking a balanced development that prioritizes service quality, effectively protect the rights and interest of outlets and couriers, and promote a healthy, orderly, competitive environment for the industry.

Now, for the second question. First, the sector’s growth. The scale or the parcel 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 transition from a volume-driven model to a new phase focused on high-quality development. Now, the State Post Bureau has estimated 8% growth for 2026, and ZTO has given a guidance of growth between 10%-13%, 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 moves 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 network 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 foster a healthier and more orderly competitive landscape. Hope that answers your question.

Qianlei Fan, Analyst, Morgan Stanley: Thank you. Thank you very much.

Operator: Thank you. Our next question today comes from Steven Xu with Goldman Sachs. Please go ahead.

Steven Xu, Analyst, Goldman Sachs: 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, profits or network governance? And also, does the RMB 200 million fund that you dedicated to support your frontline employee as well as your network signify 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, and which has been the first time since 2023. Is this mixed driven or structural? And could the competition shift to quality as improved?

Huiping Yan, Chief Financial Officer, ZTO Express: Thank you very much for your question. ZTO remains steadfast in our fundamental approach of integrating service quality, market share, and reasonable level of profit, which serves as our core strategy revolves around 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. ZTO 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 RMB 200 million 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 operation from pickup 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 yielded 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.

Operator: Thank you. Our next question comes from Aaron Luo with UBS. Please go ahead.

Aaron Luo, Analyst, UBS: Let me translate myself. Thank you for taking my question. I have two questions. One is about our recent issuance of convertible bonds in early February. I would like to understand a bit more of our major considerations behind our recent CB issuance and more importantly, at what pace should we expect for the share buybacks to proceed? The second question is about AI, which has been continuing 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.

Huiping Yan, Chief Financial Officer, ZTO Express: Can I just go straight to English? Yeah. The convertible bonds. Yes, in February 2026, the company issued a $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 underassessed. The proceeds with a net amount of about $1.4 billion is intended solely for company’s share buyback. 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 efficiently. We have completed our previous...

We have completed the CNY 600 million in total. It’s approximately CNY 600 million in total share buyback on the issuance date as well as during the subsequent trading window. For the remaining CNY 800 million, we plan to complete the repurchase over the next year, taking into consideration the market price fluctuations. At a reasonable price range, we will put in programs to consistently doing the buyback in order to strengthen our shareholder return. The new shareholder return plan, 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% of the adjusted net profit from prior year. Now, your question on the AI, on the second question. ZTO has steadfastly 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. First, 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 computer vision technologies, which have now been implemented in 25 of our super sorting centers. This system enables remote monitoring and automatic anomaly alerts, helping sorting centers and outlets reduce missorting rates by over 60% while improving operational precision. It has also significantly lowered labor cost. On the 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 directly connect with last mile couriers that are in progress or after-sales support.

Meanwhile, intelligent assistants 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 a 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 cost by over 20%, 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, we not only...

On the second part about the large model, 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 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 model 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. That is the answer to your second question.

Rocco, Operator/Moderator, ZTO Express: Thank you. That concludes our question and answer session. I’d like to turn the conference back over to the company for closing remarks.

Huiping Yan, Chief Financial Officer, ZTO Express: 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.

Rocco, Operator/Moderator, ZTO Express: 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.