ZTO EXPRESS(ZTO) - 2025 Q2 - Quarterly Results

Q2 2025 Highlights and Management Commentary Key Financial and Operational Highlights ZTO Express's parcel volume increased by 16.5% to 9.8 billion in Q2 2025, with adjusted net income reaching RMB 2.1 billion and net cash generated from operating activities at RMB 2.2 billion Key Performance Indicators for Q2 2025 | Metric | Q2 2025 | YoY Growth | | :--- | :--- | :--- | | Parcel Volume | 9.8 billion parcels | 16.5% | | Adjusted Net Income | RMB 2.1 billion | N/A | | Net Cash from Operating Activities | RMB 2.2 billion | N/A | Management Commentary CEO Lai highlighted narrowed growth gap and 'quality first' strategy; CFO Yan noted core express unit price decline offset by lower unit costs and revised full-year parcel volume guidance to 38.8-40.1 billion parcels - CEO Meisong Lai stated that the company further narrowed the gap with the industry average growth rate in Q2, despite the industry mix shifting towards lower unit economics. Retail parcel volume grew over 50% year-over-year, positively contributing to overall margins. The company will continue to prioritize a "quality first" strategy and reduce costs while enhancing capabilities through last-mile initiatives[8] - CFO Huiping Yan noted that the average unit price for core express decreased by 6 fen, primarily due to 18 fen higher volume incentives and a 5 fen decrease in average parcel weight, partially offset by a 17 fen increase in KA customer unit price. Unit sorting and transportation costs decreased by 7 fen due to improved operational efficiency. Selling, general, and administrative expenses remained stable at 5.2% of revenue[8] - The company revised its full-year 2025 parcel volume guidance down to 38.8 billion to 40.1 billion parcels, representing a year-over-year growth of 14.0% to 18.0%[8] Second Quarter 2025 Unaudited Financial Results Revenues Total revenues for Q2 2025 increased by 10.3% year-over-year to RMB 11.832 billion. Core express business revenue grew by 11.0%, driven by parcel volume growth but partially offset by a decrease in unit price. KA revenue significantly increased by 149.7% Total Revenues Overview | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Growth (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Total Revenues | 11,831.8 | 10,726.0 | 10.3% | | Core Express Business Revenue | N/A | N/A | 11.0% | | KA Revenue | N/A | N/A | 149.7% | Revenue Breakdown by Service Type Express delivery service revenue accounted for 92.8% of total revenue, increasing by 11.0% year-over-year. Freight forwarding service revenue decreased by 22.7%, while accessories sales revenue grew by 9.5% Revenue Breakdown by Service Type (Q2 2025) | Service Type | Q2 2025 (RMB thousand) | Share of Total Revenue (2025) | Q2 2024 (RMB thousand) | Share of Total Revenue (2024) | YoY Change (%) | | :----------- | :-------------------- | :--------------------------- | :-------------------- | :--------------------------- | :------------- | | Express Delivery Services | 10,983,751 | 92.8% | 9,875,923 | 92.1% | 11.0% | | Freight Forwarding Services | 180,257 | 1.5% | 233,242 | 2.2% | -22.7% | | Accessories Sales | 635,770 | 5.4% | 580,422 | 5.4% | 9.5% | | Others | 32,029 | 0.3% | 36,377 | 0.3% | -11.9% | | Total Revenues | 11,831,807 | 100.0% | 10,725,964 | 100.0% | 10.3% | Cost of Revenues Total cost of revenues for Q2 2025 increased by 25.1% year-over-year to RMB 8.887 billion, with its percentage of total revenues rising from 66.2% in the prior year period to 75.1% Total Cost of Revenues Overview | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Growth (%) | Percentage of Revenue (2025) | Percentage of Revenue (2024) | | :--- | :-------------------- | :-------------------- | :------------- | :---------------------- | :---------------------- | | Total Cost of Revenues | 8,887.4 | 7,105.5 | 25.1% | 75.1% | 66.2% | Line-haul Transportation Cost Line-haul transportation cost slightly increased by 0.2% year-over-year to RMB 3.291 billion. Unit transportation cost decreased by 15.4% (6 fen), primarily due to economies of scale, lower fuel prices, and more efficient route planning Line-haul Transportation Cost | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Growth (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Line-haul Transportation Cost | 3,290.9 | 3,283.1 | 0.2% | - Unit transportation cost decreased by 15.4% (6 fen), primarily attributable to enhanced economies of scale, lower fuel prices, and more effective route planning[12] Sorting Hub Operating Cost Sorting hub operating cost increased by 8.4% year-over-year to RMB 2.415 billion, mainly due to higher labor-related costs and depreciation and amortization. However, unit sorting hub operating cost decreased by 3.8% (1 fen) due to efficiency gains from automation and standardized operational processes. The number of automated sorting equipment increased to 690 sets Sorting Hub Operating Cost | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Growth (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Sorting Hub Operating Cost | 2,414.8 | 2,227.7 | 8.4% | - The cost increase primarily included labor-related costs of RMB 118 million and depreciation and amortization of equipment and facilities of RMB 103 million. Unit sorting hub operating cost decreased by 3.8% (1 fen). As of June 30, 2025, the number of automated sorting equipment increased to 690 sets (from 515 sets in the prior year period)[13] Other Costs of Revenues Other costs of revenues significantly increased by 134.9% to RMB 2.860 billion, with RMB 1.604 billion allocated to serving high-value enterprise customers. Accessories sales cost decreased by 5.6% Other Costs of Revenues | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Growth (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Other Costs | 2,860.2 | 1,217.9 | 134.9% | | Accessories Sales Cost | 151.2 | 160.1 | -5.6% | - Other costs included RMB 1.604 billion for serving high-value enterprise customers[14] Gross Profit and Margin Gross profit for Q2 2025 decreased by 18.7% year-over-year to RMB 2.944 billion, with gross margin declining from 33.8% in the prior year period to 24.9% Gross Profit and Margin | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Gross Profit | 2,944.4 | 3,620.5 | -18.7% | | Gross Margin | 24.9% | 33.8% | -8.9 pp | Operating Expenses Total operating expenses for Q2 2025 increased by 15.8% year-over-year to RMB 469 million. Selling, general, and administrative expenses increased by 5.2%, but its percentage of total revenues decreased from 5.5% to 5.3%. Net other operating income decreased by 17.9% Operating Expenses Overview | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Total Operating Expenses | 469.3 | 405.3 | 15.8% | | Selling, General and Administrative Expenses | 623.6 | 593.0 | 5.2% | | SG&A as % of Revenue | 5.3% | 5.5% | -0.2 pp | | Net Other Operating Income | 154.3 | 187.7 | -17.9% | Other Income and Expenses Operating profit for Q2 2025 decreased by 23.0% year-over-year to RMB 2.475 billion, with operating margin declining to 20.9%. Both interest income and interest expense decreased. The company recognized a fair value change loss of financial instruments of RMB 3.6 million and an impairment of goodwill of RMB 84.4 million Other Income and Expenses Overview | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Operating Profit | 2,475.1 | 3,215.2 | -23.0% | | Operating Margin | 20.9% | 30.0% | -9.1 pp | | Interest Income | 208.7 | 288.1 | -27.5% | | Interest Expense | 98.1 | 115.9 | -15.4% | | Fair Value Change Loss of Financial Instruments | (3.6) | 54.9 (gain) | N/A | | Impairment of Goodwill | 84.4 | 0 | N/A | - Impairment of goodwill of RMB 84.4 million was related to the core freight forwarding business acquired from China Eastern Express Co., Ltd. in October 2017[20] Income Tax Expense Income tax expense for Q2 2025 decreased by 13.5% year-over-year to RMB 575.5 million, but the effective income tax rate increased by 2.6 percentage points to 22.9%, primarily due to the recognition of a RMB 166 million withholding tax on dividends payable to ZTO Express (Hong Kong) Limited Income Tax Expense and Rate | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Income Tax Expense | 575.5 | 665.0 | -13.5% | | Effective Income Tax Rate | 22.9% | 20.3% | +2.6 pp | - The increase in income tax rate was primarily attributable to the recognition of a RMB 166 million withholding tax on dividends payable to ZTO Express (Hong Kong) Limited[21] Net Income and Earnings Per Share Net income for Q2 2025 decreased by 24.8% year-over-year to RMB 1.965 billion. Adjusted net income decreased by 26.8% to RMB 2.053 billion. Both GAAP and adjusted basic and diluted earnings per ADS experienced significant declines Net Income and Earnings Per ADS | Metric | Q2 2025 (RMB) | Q2 2024 (RMB) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Net Income | 1,964.6 million | 2,614.0 million | -24.8% | | Adjusted Net Income | 2,052.7 million | 2,805.7 million | -26.8% | | Basic EPS per ADS | 2.42 | 3.24 | -25.3% | | Diluted EPS per ADS | 2.37 | 3.16 | -25.0% | | Adjusted Basic EPS per ADS | 2.53 | 3.48 | -27.3% | | Adjusted Diluted EPS per ADS | 2.48 | 3.38 | -26.6% | Cash Flow from Operating Activities Net cash generated from operating activities for Q2 2025 decreased by 37.7% year-over-year to RMB 2.168 billion Cash Flow from Operating Activities | Metric | Q2 2025 (RMB million) | Q2 2024 (RMB million) | YoY Change (%) | | :--- | :-------------------- | :-------------------- | :------------- | | Net Cash Generated from Operating Activities | 2,168.2 | 3,480.1 | -37.7% | Operational Metrics ZTO Express processed 9.847 billion parcels in Q2 2025, a 16.5% year-over-year increase. The company operates over 31,000 pick-up/delivery outlets and approximately 6,000 direct network partners. As of June 30, 2025, it owned over 10,000 line-haul trucks, with more than 9,400 being high-capacity 15-to-17-meter models. The number of sorting hubs stood at 94 Operational Metrics for Q2 2025 | Metric | As of June 30, 2025 | As of June 30, 2024 | YoY Change (%) | | :--- | :------------------ | :------------------ | :------------- | | Parcel Volume (Q2) | 9,847 million parcels | 8,452 million parcels | 16.5% | | Number of Pick-up/Delivery Outlets | Over 31,000 | N/A | N/A | | Number of Direct Network Partners | Approx. 6,000 | N/A | N/A | | Number of Self-owned Line-haul Trucks | Over 10,000 | N/A | N/A | | High-capacity 15-17 meter Models | Over 9,400 | Over 9,200 | ~2.2% | | Number of Line-haul Routes between Sorting Hubs | Approx. 3,900 | N/A | N/A | | Number of Sorting Hubs | 94 | N/A | N/A | Capital Allocation and Business Outlook Interim Dividend Declaration The Board of Directors approved an interim cash dividend of USD 0.30 per ADS and ordinary share for the six months ended June 30, 2025, with a payout ratio of 40%. The record date is September 30, 2025, and the estimated payment date is October 2025 - The Board of Directors approved an interim cash dividend of USD 0.30 per ADS and ordinary share for the six months ended June 30, 2025[1][25] - The dividend payout ratio is 40%[25] - The record date for the dividend is September 30, 2025. The estimated payment date for ordinary shares is October 24, 2025, and for ADSs is October 31, 2025[25] Revised Annual Guidance ZTO Express revised down its full-year 2025 parcel volume guidance, expecting it to be between 38.8 billion and 40.1 billion parcels, representing a year-over-year growth of 14.0% to 18.0% - The company revised its full-year 2025 parcel volume guidance down to 38.8 billion to 40.1 billion parcels[8][26] - This represents a year-over-year growth of 14.0% to 18.0%[8][26] Non-GAAP Financial Measures Definition and Rationale ZTO Express uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, and adjusted EPS per ADS to evaluate operating performance and make financial decisions. These metrics aim to better reflect underlying business trends by excluding share-based compensation expenses, impairment of investments, and non-recurring items. The company emphasizes that these metrics should not be considered in isolation or as substitutes for GAAP measures - The company uses non-GAAP financial measures including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income attributable to ordinary shareholders, and adjusted basic and diluted earnings per ADS attributable to ordinary shareholders[28] - These measures are intended to better reflect underlying business operations, identify potential trends that could be distorted by related expenses and gains, and enhance the overall understanding of the company's past performance and future prospects[30] - Non-GAAP measures should not be considered in isolation or as a substitute for net income or any other performance measure, and investors should compare them with the most directly comparable GAAP measures[31] Reconciliations to GAAP The report provides detailed tables reconciling non-GAAP financial measures, such as adjusted net income, EBITDA, and adjusted EBITDA, to the most directly comparable GAAP measures, listing adjustments for share-based compensation expenses, impairment of investments, impairment of goodwill, and gain/loss on disposal of equity investments and subsidiaries - Reconciliations of the company's non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures are provided at the end of this earnings release for more detailed information on non-GAAP financial measures[29] Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Metric | Q2 2025 (RMB thousand) | Q2 2024 (RMB thousand) | | :--- | :---------------------- | :---------------------- | | Net Income | 1,964,559 | 2,613,997 | | Add: Share-based compensation expenses | 2,994 | 6,768 | | Add: Impairment of goodwill | 84,431 | - | | Add: Gain/(loss) on disposal of equity investments and subsidiaries | 714 | (9,496) | | Adjusted Net Income | 2,052,698 | 2,805,721 | Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Q2 2025) | Metric | Q2 2025 (RMB thousand) | Q2 2024 (RMB thousand) | | :--- | :---------------------- | :---------------------- | | Net Income | 1,964,559 | 2,613,997 | | Add: Depreciation | 770,270 | 720,930 | | Add: Amortization | 38,306 | 34,345 | | Add: Interest expense | 98,112 | 115,855 | | Add: Income tax expense | 575,531 | 665,011 | | EBITDA | 3,446,778 | 4,150,138 | | Add: Share-based compensation expenses | 2,994 | 6,768 | | Add: Impairment of goodwill | 84,431 | - | | Add: Gain/(loss) on disposal of equity investments and subsidiaries | 714 | (11,683) | | Adjusted EBITDA | 3,534,917 | 4,339,675 | Corporate Information About ZTO Express ZTO Express (Cayman) Inc. is a leading and fast-growing express delivery company in China, offering express delivery services and other value-added logistics services through its extensive and reliable nationwide network. The company employs a highly scalable network partner model, leveraging partners for pick-up and last-mile delivery services while controlling key line-haul transportation and sorting networks within the express delivery service value chain - ZTO Express is a leading and fast-growing express delivery company in China[34] - The company provides express delivery services and other value-added logistics services through its extensive and reliable nationwide network[34] - ZTO employs a highly scalable network partner model, leveraging partners for pick-up and last-mile delivery services while controlling key line-haul transportation and sorting networks[35] Safe Harbor Statement This announcement contains forward-looking statements protected by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including risks related to the development of China's e-commerce and express delivery industry, reliance on third-party e-commerce platforms, network partners, intense competition, and service interruptions. ZTO undertakes no obligation to update any forward-looking statements, except as required by applicable law - This announcement contains forward-looking statements, identifiable by words such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," and similar expressions[37] - Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially, including risks related to the development of China's e-commerce and express delivery industry, reliance on third-party e-commerce platforms, network partners, intense competition, and service interruptions[37] - ZTO undertakes no obligation to update any forward-looking statements, except as required by applicable law[37] Conference Call Information ZTO's management team hosted an earnings conference call on August 19, 2025 (ET) / August 20, 2025 (Beijing Time). The report provides dial-in details and replay information, along with links for live and archived webcasts - ZTO's management team hosted an earnings conference call on August 19, 2025, at 8:30 PM U.S. Eastern Time (August 20, 2025, at 8:30 AM Beijing Time)[32] - Dial-in numbers and passcodes were provided for the U.S., Hong Kong, Mainland China, Singapore, and international participants[32][33] - A conference call replay was available until August 26, 2025, with live and archived webcasts also accessible online[33] Unaudited Consolidated Financial Statements Summary of Consolidated Comprehensive Income Data This section provides unaudited consolidated comprehensive income data for the three and six months ended June 30, 2025, covering key financial metrics such as revenues, cost of revenues, gross profit, operating expenses, net income, and comprehensive income Summary of Consolidated Comprehensive Income Data (For the Three Months Ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :------------------ | :------------------ | | Revenues | 11,831,807 | 10,725,964 | | Cost of revenues | (8,887,410) | (7,105,487) | | Gross profit | 2,944,397 | 3,620,477 | | Total operating expenses | (469,313) | (405,280) | | Operating profit | 2,475,084 | 3,215,197 | | Income before income tax | 2,513,343 | 3,274,690 | | Income tax expense | (575,531) | (665,011) | | Net income | 1,964,559 | 2,613,997 | | Comprehensive income | 2,006,390 | 2,578,767 | Summary of Consolidated Balance Sheets Data This section provides unaudited consolidated balance sheet data as of June 30, 2025, and December 31, 2024, including components such as total current assets, total assets, total current liabilities, total liabilities, and total equity Summary of Consolidated Balance Sheets Data (As of June 30, 2025) | Metric | June 30, 2025 (RMB thousand) | December 31, 2024 (RMB thousand) | | :--- | :-------------------------- | :--------------------------- | | Total current assets | 34,520,605 | 30,353,721 | | Total assets | 94,620,760 | 92,340,330 | | Total current liabilities | 28,454,751 | 28,273,235 | | Total liabilities | 29,764,954 | 29,665,497 | | Total equity | 64,855,806 | 62,674,833 | Summary of Consolidated Cash Flow Data This section provides unaudited consolidated cash flow data for the three and six months ended June 30, 2025, including net cash from operating, investing, and financing activities, as well as total cash, cash equivalents, and restricted cash at period-end Summary of Consolidated Cash Flow Data (For the Three Months Ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | | :--- | :------------------ | :------------------ | | Net cash generated from operating activities | 2,168,208 | 3,480,095 | | Net cash used in investing activities | (1,163,517) | (4,666,289) | | Net cash used in financing activities | (117,713) | (1,103,622) | | Net (decrease)/increase in cash, cash equivalents and restricted cash | 867,272 | (2,293,342) | | Cash, cash equivalents and restricted cash at period end | 13,329,079 | 10,579,069 |