ZTO EXPRESS(ZTO) - 2025 Q1 - Quarterly Report

ZTO Q1 2025 Earnings Report Overview Financial Highlights In the first quarter of 2025, ZTO's revenues increased by 9.4% year-over-year to Chinese Yuan 10.9 billion, driven by strong volume growth, while gross profit declined by 10.4% to Chinese Yuan 2.7 billion, and net income rose significantly by 40.9% to Chinese Yuan 2.0 billion Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 (CNY million) | Q1 2024 (CNY million) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | 10,891.5 | 9,960.0 | +9.4% | | Gross Profit | 2,689.2 | 3,002.1 | -10.4% | | Net Income | 2,039.2 | 1,447.7 | +40.9% | | Adjusted Net Income | 2,259.3 | 2,224.0 | +1.6% | | Adjusted EBITDA | 3,686.7 | 3,660.4 | +0.7% | | Net Cash from Operating Activities | 2,363.0 | 2,031.0 | +16.3% | Q1 2025 Earnings Per ADS (vs. Q1 2024) | Metric | Q1 2025 (CNY) | Q1 2024 (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Basic EPS | 2.50 | 1.77 | +41.2% | | Diluted EPS | 2.44 | 1.75 | +39.4% | | Adjusted Basic EPS | 2.77 | 2.74 | +1.1% | | Adjusted Diluted EPS | 2.71 | 2.68 | +1.1% | Operational Highlights Operationally, ZTO achieved a 19.1% year-over-year increase in parcel volume, reaching 8.54 billion parcels in Q1 2025, while continuing to expand its infrastructure with over 9,400 high-capacity line-haul vehicles and a vast network of over 31,000 pickup/delivery outlets and 95 sorting hubs - Parcel volume grew 19.1% YoY to 8.54 billion from 7.17 billion in Q1 2024[7] Key Operational Metrics as of March 31, 2025 | Metric | Value | Note | | :--- | :--- | :--- | | Pickup/Delivery Outlets | > 31,000 | - | | Direct Network Partners | ~ 6,000 | - | | Self-owned Line-haul Vehicles | > 10,000 | Over 9,400 are high-capacity models | | Line-haul Routes | > 3,900 | Between sorting hubs | | Sorting Hubs | 95 | 91 operated by ZTO | Management Commentary Management acknowledged the 'white-hot' competition in the express delivery industry, emphasizing a strategy focused on long-term stability and profitable growth, with the CEO highlighting a 46% YoY increase in retail volume from reverse logistics and the CFO detailing a decrease in core express ASP due to higher volume incentives - CEO Meisong Lai stated that competition has reached a 'white-hot' stage, exacerbated by low-value or loss-making volume, with ZTO's strategy focused on maintaining network consistency and long-term profitable growth[8] - The company is developing differentiated products like time-definite delivery and customized KA services, with retail volume growing 46% YoY, driven by deeper penetration into reverse logistics[8] - CFO Huiping Yan explained the core express ASP (Average Selling Price) decreased by 11 cents, primarily due to a 16-cent increase in volume incentives[8] - Cost efficiency improved, with combined unit sorting and transportation costs decreasing by 9 cents YoY due to productivity initiatives[8] Detailed Financial Results (Q1 2025) Revenues Total revenues for Q1 2025 increased by 9.4% to Chinese Yuan 10.9 billion, driven by a 9.8% growth in core express delivery services revenue, offset by a decline in freight forwarding services, while sales of accessories grew by 15.5% Revenue Breakdown (in Chinese Yuan thousands) | Revenue Source | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Express delivery services | 10,122,290 | 9,240,172 | +9.5% | | Freight forwarding services | 179,219 | 202,747 | -11.6% | | Sale of accessories | 560,297 | 485,062 | +15.5% | | Others | 29,659 | 32,025 | -7.4% | | Total revenues | 10,891,465 | 9,960,006 | +9.4% | - The 9.8% growth in core express delivery revenue was a net result of a 19.1% parcel volume growth and a 7.8% decrease in parcel unit price[9] Cost of Revenues Total cost of revenues rose 17.9% to Chinese Yuan 8.2 billion, representing 75.3% of total revenues, driven by higher costs across most segments, particularly a 91.3% surge in 'Other costs' related to serving higher-valued enterprise customers, despite unit cost decreases for transportation and sorting hubs Cost of Revenues Breakdown (in Chinese Yuan thousands) | Cost Component | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Line-haul transportation cost | 3,483,065 | 3,371,493 | +3.3% | | Sorting hub operating cost | 2,314,595 | 2,168,201 | +6.8% | | Other costs | 2,098,534 | 1,096,798 | +91.3% | | Total cost of revenues | 8,202,245 | 6,957,921 | +17.9% | Line-haul Transportation Cost Line-haul transportation costs increased by 3.3% to Chinese Yuan 3.5 billion, but the unit transportation cost decreased by 12.8% (6 cents) due to economies of scale, improved load rates, and more effective route planning - Unit transportation cost decreased by 12.8% or 6 cents, attributed to better economies of scale and improved efficiency[11] Sorting Hub Operating Cost Sorting hub operating costs grew 6.8% to Chinese Yuan 2.3 billion, mainly from increased labor and depreciation costs, with efficiency gains from automation leading to a 10.0% (3 cents) decrease in sorting hub cost per unit, and the number of automated sorting sets increasing to 631 - Sorting hub operating cost per unit decreased by 10.0% or 3 cents, driven by automation and standardization[12] - The company had 631 sets of automated sorting equipment in service as of March 31, 2025, up from 461 in the previous year[12] Profitability Analysis Gross profit decreased by 10.4% to Chinese Yuan 2.7 billion, with the gross margin contracting to 24.7%, while income from operations grew 6.1% to Chinese Yuan 2.4 billion, supported by lower SG&A expenses and higher government subsidies, leading to a 40.9% surge in net income to Chinese Yuan 2.0 billion - Gross profit decreased 10.4% to Chinese Yuan 2,689.2 million, and the gross margin fell to 24.7% from 30.1% in Q1 2024[14] - Income from operations increased 6.1% to Chinese Yuan 2,405.4 million, with an operating margin of 22.1%[18] - SG&A expenses decreased by 17.7% to Chinese Yuan 737.5 million, mainly due to lower compensation and benefit expenses[16] - Other operating income, net, increased significantly to Chinese Yuan 453.7 million, primarily consisting of Chinese Yuan 407.6 million in government subsidies and tax rebates[17] - Net income increased by 40.9% to Chinese Yuan 2,039.2 million, with the prior year's net income impacted by a Chinese Yuan 478.4 million impairment loss on an investment in Cainiao[21] Corporate Updates and Business Outlook Recent Developments The company announced a change in its Board of Directors, with Ms. Di Xu appointed and Mr. Xudong Chen resigning, effective April 25, 2025, and extended its share repurchase program to June 30, 2026, with US$771.7 million remaining available - Effective April 25, 2025, Ms. Di Xu was appointed as a director, and Mr. Xudong Chen resigned from the Board[25] - The company extended its share repurchase program to June 30, 2026, with US$1,228.3 million used to repurchase 50.9 million ADSs and US$771.7 million remaining as of March 31, 2025[26][27] Business Outlook ZTO has reiterated its full-year 2025 guidance, projecting parcel volume to be between 40.8 billion and 42.2 billion, representing an anticipated year-over-year growth of 20% to 24% - The company reiterates its 2025 parcel volume guidance of 40.8 billion to 42.2 billion, representing a 20% to 24% YoY growth[28] Unaudited Consolidated Financial Statements Consolidated Comprehensive Income Statement This section provides the detailed unaudited consolidated income statement for the three months ended March 31, 2025, compared to the same period in 2024, breaking down revenues, costs, operating and other expenses, and calculating net income and earnings per share - The full unaudited consolidated comprehensive income data is available on page 10 of the report[43] Consolidated Balance Sheet This section presents the company's unaudited consolidated balance sheet as of March 31, 2025, compared to December 31, 2024, detailing the company's assets, liabilities, and shareholders' equity - The full unaudited consolidated balance sheet data is available on page 11 of the report[44] Consolidated Cash Flow Statement This section contains the unaudited consolidated cash flow statement for the three months ended March 31, 2025, outlining cash flows from operating, investing, and financing activities - The full unaudited consolidated cash flow data is available on page 13 of the report[46] Reconciliation of GAAP and Non-GAAP Results This section provides detailed tables reconciling the company's GAAP financial measures to its non-GAAP measures, adjusting for items like share-based compensation and impairment of investments to calculate Adjusted Net Income, Adjusted EBITDA, and Adjusted EPS - The report provides reconciliations of Net Income to Adjusted Net Income, and Net Income to EBITDA and Adjusted EBITDA[47] - A reconciliation of Net Income Attributable to Ordinary Shareholders to Adjusted Net Income Attributable to Ordinary Shareholders is also provided to calculate adjusted EPS[48]