ZTO Reports Second Quarter 2023 Unaudited Financial Results - 29.08.23 - News

SHANGHAI, Aug. 29, 2023

SHANGHAI, Aug. 29, 2023 /PRNewswire/ -- ZTO Express (Cayman) Inc. (NYSE: ZTO and SEHK: 2057), a leading and fast-growing express delivery company in China ("ZTO" or the "Company"), today announced its unaudited financial results for the second quarter ended June 30, 2023^[1]. The Company grew parcel volume by 23.8% year over year and expanded market share to 23.5%. Adjusted net income increased 43.9%^[2] to reach RMB2,531.0 million. Cash generated from operating activities was RMB3,761.6 million.

Second Quarter 2023 Financial Highlights

Revenues were RMB9,740.3 million (US$1,343.3 million), an increase of 12.5% from RMB8,656.7 million in the same period of 2022.
Gross profit was RMB3,304.4 million (US$455.7 million), an increase of 50.0% from RMB2,202.8 million in the same period of 2022.
Net income was RMB2,530.2 million (US$348.9 million), an increase of 43.9% from RMB1,758.7 million in the same period of 2022.
Adjusted EBITDA^[3] was RMB3,883.9 million (US$535.6 million), an increase of 34.3% from RMB2,892.0 million in the same period of 2022.
Adjusted net income was RMB2,531.0 million (US$349.0 million), an increase of 43.9% from RMB1,758.7 million in the same period of 2022.
Basic and diluted net earnings per American depositary share ("ADS"^[4]) were RMB3.14 (US$0.43) and RMB3.07 (US$0.42), an increase of 40.8% and 37.7% from RMB2.23 and RMB2.23 in the same period of 2022, respectively.
Adjusted basic and diluted earnings per American depositary share attributable to ordinary shareholders^[5] were RMB3.14 (US$0.43) and RMB3.07 (US$0.42), an increase of 40.8% and 37.7% from RMB2.23 and RMB2.23 in the same period of 2022, respectively.
Net cash provided by operating activities was RMB3,761.6 million (US$518.8 million), compared with RMB3,780.8 million in the same period of 2022.

Operational Highlights for Second Quarter 2023

Parcel volume was 7,677 million, an increase of 23.8% from 6,203 million in the same period of 2022.
Number of pickup/delivery outlets was over 31,000 as of June 30, 2023.
Number of direct network partners was approximately 6,000 as of June 30, 2023.
Number of self-owned line-haul vehicles was over 10,000 as of June 30, 2023.
Out of the over 10,000 self-owned trucks, over 9,300 were high capacity 15 to 17-meter-long models as of June 30, 2023, compared to over 9,250 as of June 30, 2022.
Number of line-haul routes between sorting hubs was approximately 3,800 as of June 30, 2023, compared to approximately 3,700 as of June 30, 2022.
Number of sorting hubs was 96 as of June 30, 2023, among which 87 are operated by the Company and 9 by the Company's network partners.

(1) An investor relations presentation accompanies this earnings release and can be found at http://zto.investorroom.com.

(2) Adjusted net income is a non-GAAP financial measure, which is defined as net income before share-based compensation expense and non-recurring items such as gain on disposal of equity investment and subsidiary and corresponding tax impact which management aims to better represent the underlying business operations.

(3) Adjusted EBITDA is a non-GAAP financial measure, which is defined as net income before depreciation, amortization, interest expenses and income tax expenses, and further adjusted to exclude the shared-based compensation expense and non-recurring items such as the gain on disposal of equity investment and subsidiary which management aims to better represent the underlying business operations.

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(4) One ADS represents one Class A ordinary share.

(5) Adjusted basic and diluted earnings per American depositary share attributable to ordinary shareholders is a non-GAAP financial measure. It is defined as adjusted net income attributable to ordinary shareholders divided by weighted average number of basic and American depositary diluted shares, respectively.

Mr. Meisong Lai, Founder, Chairman and Chief Executive Officer of ZTO, commented, "Amidst an overall soft economic environment, we achieved solid performance results in the second quarter. We continued to widen our lead in industry volume, market share and net profit while maintaining high levels of services quality and customer satisfaction. At 23.5% market share for the second quarter, our 7.7 billion parcels brought in 2.5 billion of net income as we firmly execute our consistent corporate strategy and dig deeper on company-wide initiatives that focus on quality of earnings and strength of partner network."

Mr. Lai added, "With near term uncertainties in the marketplace, it is more crucial for us to stay disciplined and stay long-term focused. The nature of our business is not that of a quick sprint, and short-term strategies often generate gains that are not only costly but also unsustainable. Our immediate pricing strategy is either defensive or offensive on a case-by-case basis given strategic considerations. Meanwhile, we are enabling our network partners to direct their financial resources towards ramping up their pickup-delivery capabilities to synch up with our sort-transit network so that the ZTO brand value, particularly associated with timeliness, can be meaningfully differentiated so as to drive long-term pricing power and shareholder value."

Ms. Huiping Yan, Chief Financial Officer of ZTO, commented, "Core express ASP decreased 7.8% as a combined result from mix impact of KA volume decrease, pricing adjustments to attract lighter or smaller packages and volume incentives. Combined unit sorting and transportation cost decreased over 15%, or 12 cents thanks to scale leverage and continued productivity gain through standardization and digitization programs. SG&A as a percentage of revenue remained stable at approximately 5%. Cash flow from operating activities was 3.8 billion, and capital spending outlay was 2.2 billion."

Ms. Yan added, "ZTO is focused on profitable growth and our track records have been consistent in that regards. We have established a clear leadership in all three aspects of our strategic focus, that is, service quality, volume and market share, and net profit. We have strong financial resources, staying power and a healthy partner network. In times of macro-economic uncertainties, and facing digressive competitive behaviors in the industry, we are even more diligent and disciplined to carry out appropriate actions. We are reiterating our 2023 volume growth guidance of 20% to 24%. More importantly, we are keeping our eyes on the future in strengthening long-term competitive edge, because the vast opportunities ahead will favor those who are well-prepared."

Second Quarter 2023 Unaudited Financial Results

	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2023				2022		2023
	RMB	%	RMB	US$	%		RMB	%	RMB	US$	%
	(in thousands, except percentages)
Express delivery services	7,931,608	91.6	8,998,444	1,240,942		92.4	15,151,869	91.5	17,387,187	2,397,803	92.9
Freight forwarding services	329,959	3.8	238,872	32,942		2.5	661,044	4.0	431,597	59,520	2.3
Sale of accessories	349,683	4.0	467,778	64,510		4.8	631,754	3.8	836,616	115,375	4.5
Others	45,427	0.6	35,230	4,858		0.3	116,060	0.7	68,163	9,399	0.3
Total revenues	8,656,677	100.0	9,740,324	1,343,252		100.0	16,560,727	100.0	18,723,563	2,582,097	100.0

Total Revenues were RMB9,740.3 million (US$1,343.3 million), an increase of 12.5% from RMB8,656.7 million in the same period of 2022. Revenue from the core express delivery business increased by 14.1% compared to the same period of 2022, as a combined result of a 23.8% increase in parcel volume and a 7.8% decrease in parcel unit price. KA revenue (includes delivery fees) from direct sales organizations, established to serve core express KA customers, decreased 40.1% through either reengagement of partner outlets who can serve just as well or rationalization due to loss-making. Revenue from freight forwarding services decreased by 27.6% compared to the same period of 2022 due to shrinking cross border e-commerce demand and declining pricing. Revenue from sales of accessories, largely consisted of sales of thermal paper used for digital waybills' printing, increased by 33.8% in line with parcel volume growth. Other revenues were mainly derived from financing services.

Three Months Ended June 30,

Six Months Ended June 30,

2022

2023

2022

2023

RMB

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