Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics First Quarter 2023 Results Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a Q&A session. Please note that this English simultaneous translation line will be in listen-only mode for the duration of the call, including the Q&A session. If you wish to listen to the management's original statement or ask a question during the Q&A session, you will need to be dialed in to the Chinese language line. I'll now turn the call over to Mr. Mao Jun, Head of Investor Relations team at JD Logistics. Please go ahead, Jun. Thank you, operator. Good day, ladies and gentlemen. Welcome to our first quarter 2023 results conference call. Joining us today are our Executive Director and CEO, Mr. Yu Rui, and the CFO, Mr. Shan Su. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the three months ended March the 31st, 2023, issued earlier today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the Q&A session. The third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In case of any discrepancy, management's statements in their original language will prevail. I would like to turn the call over to Mr. Yu Rui. Please go ahead, sir. Dear investors and analysts, welcome to JD Logistics First Quarter 2023 earnings call. I'm Yu Rui, CEO of JD Logistics. Thank you for joining us. In Q1, 2023, the macroeconomic conditions in China stabilized and started to recover, ushering in an excellent start for the year. For JD Logistics, during Q1, we continued to provide customers with high-quality services to build a best-in-class customer experience, leveraging our Integrated Supply Chain or ISC infrastructure network, technologies, and industry insights. As a result, we have achieved high quality growth. Notably, our total revenue for Q1 reached CNY 36.7 billion, up 34.3% year-over-year. Revenue from external customers for Q1 was CNY 25.5 billion, a year-over-year increase of 59.8%, accounting for a larger share at 69.5% of total revenue. We continue to achieve breakthroughs in our industry-specific ISC solutions, products, and services to reinforce our presence in different industry verticals and further solidify our leading position in the ISC logistics industry. In Q1, revenue from ISC customers reached CNY 18.5 billion, of which revenue from external ISC customers was CNY 7.2 billion, a year-over-year increase of 11%. While continuously developing our industry-specific ISC solutions and service capabilities, we continued to expand the breadth and depth of our collaborations with existing customers. In Q1, the average revenue per customer, ARPC, from external ISC customers reached CNY 133,000, rising by 20% year-over-year. This fully reflects our consistent value creation abilities through providing trusted supply chain services as we adhered to our customer-first approach and continued cultivating our primary business in the ISC services market. We primarily focus on six industries: FMCG, home appliances and home furniture, 3C, apparel, automotive, and fresh produce. Among them, FMCG accounted for the highest percentage of our external ISC logistics revenue. By reinforcing our cooperation with industry leaders, we have consistently heightened our understanding of industry's needs. For example, we deepened our partnership with a well-known liquor e-commerce platform in a new consumption sector. By analyzing the brand's sales performance as well as the distribution of its production zones and sales destinations nationwide, we helped the company better deploy inventory through our multi-region warehousing model. Once the company's customers placed their orders, we chose the nearest warehouse for shipment. Ensured optimal fulfillment quality by capitalizing on our extensive transportation network and strong transportation capacity, which effectively shortened transit time, improved delivery efficiency, and elevated customer satisfaction. As of now, this customer has entrusted us with the integrated management of its online channels on mainstream e-commerce platforms in China. Providing end-to-end services spanning inbound and outbound warehousing, storage, sorting, packaging, transportation, and eventually two-door delivery by our in-house delivery personnel, we help the customer not only enhance work efficiency, but also reduce fulfillment costs. Notably, facing supply constraints of blockbuster products promoted by live streaming sessions, we were able to take the peaks and troughs in orders in our stride on the back of our formidable ISV service capabilities, which significantly increased sales and the quality of the brand's subsequent services to its customers. During this process, we gained the brand's trust thanks to our professional transportation capabilities and excellent safety track record. In the liquor industry, packaging damage has always been a conundrum for companies. Through our precision protective measures, we reduced the incidence of packaging damage to almost zero, thereby relieving the pressure on the brand's customer service team. In addition, we have made breakthroughs in deepening our cooperation with automotive industry leaders. We are pleased that more customers have entrusted us with operating and managing their parts warehouses. By deploying inventory with precision, we have effectively reduced customers' excess inventory while increasing order fulfillment rates and boosting sales. Furthermore, as we improve the timeliness of our delivery from warehouses to automobile or at stores, and extended the store coverage of our time-sensitive delivery services, we enhanced customers' after-sales service experience. This facilitated an all-win outcome for consumers, brands, and distributors. In Q1, revenue from other customers, including express and freight delivery services, increased by 93.4% year-over-year to CNY 18.3 billion, of which Deppon contributed CNY 7.2 billion. This increase is primarily attributable to our rising network efficiency and elevated customer experience, which drove business volume growth. In Q1 this year, phase two of our Qingdao Asia No. 1 smart industrial parks in Shandong and our number three California warehouse in Los Angeles, the United States, officially commenced operation. This illustrated that our steady efforts to expand the scale of our domestic and overseas logistics and warehousing facilities have reinforced our supply chain service capabilities. We continue to improve our logistics infrastructure and networks in China to build a safe, reliable, and efficient logistics supply chain system. As of March 31, 2023, we operated over 1,500 warehouses, including those managed by Deppon. The aggregate gross floor area, or GFA, of our warehouse network, including warehouse space managed through the open warehouse, exceeded 31 million square meters. Continuously enhancing our core competitiveness, we have placed equal emphasis on social responsibility and sustainable development. On April 28 of this year, we released the second environmental, social, and governance (ESG) report since our IPO, showcasing our comprehensive environment, social, and governance performance in 2022. Over the years, we have made persistent efforts to leverage our supply chain infrastructure, technological strength, and industry insights to promote supply chain cost reductions and efficiency enhancements for companies throughout the industry value chain. We've also actively ensured smooth supply chain operations, fostered high-quality employment, and advanced carbon emission reduction in the upstream and downstream of the industry value chain under complex, evolving external circumstances. Going forward, we'll continue to unlock our value as a player in the real economy. With our deep roots in the real economy, we'll enhance the high-quality, sustainable development of enterprises, industries, and our society. Thank you. Next, I'd like to invite Mr. Shan Su to discuss the details of our financial performance. You may have seen our announcement, which was just released, about Mr. Shan Su assuming a new role in JD Group, and therefore resigning from his position as CFO of JD Logistics. On behalf of JD Logistics, I'd like to thank Mr. Shan Su for his hard work and dedication, and wish him all the best in his future career. Mr. Wu Hao will take over the position of CFO. With his rich experience in accounting, corporate finance, and risk management, I believe Mr. Wu Hao will become an outstanding CFO, serving the long-term development of JD Logistics. Thank you. Thank you, Mr. Yu Rui. Hello, everyone. This is Shan S u, CFO of JD Logistics. I'm pleased to present JD Logistics' financial performance for Q1 2023. In Q1, the stabilization and rebalance of macroeconomic conditions in China helped to improve company's overall operations, and JD Logistics achieved high-quality growth, with total revenue reaching CNY 36.3 billion, up 34% year-over-year. Notably, revenue from external customers was CNY 25.5 billion for Q1, a year-over-year increase of 59.8%, accounting for a larger share at 69.5% of total revenue, remaining at a high level. This demonstrated our success in the ongoing steady expansion of our business from external customers. In Q1, in response to the changes in the external environment, we invested additional resources to ensure regular operations and fulfillment. Despite the challenges we faced, we narrowed our non-IFRS net loss margin year-over-year in Q1 and built up sufficient cash reserves. In Q1, revenue from ISC customers totaled CNY 18.45 billion, up 3.1% year-over-year. This included our ISC revenue from JD Group, which amounted to CNY 11.2 billion, down 1.5% year-over-year, primarily due to adjustments in JD Group's Jingxi business. Our revenue from external ISC customers grew by 11% year-over-year to CNY 7 billion. The total number of our external ISC customers contributing to revenue was approximately 54,500 in Q1, down 7.4% year-over-year. Our ARPC grew at a significantly faster pace of 20% year-over-year to CNY 133,000. This growth is mainly attributable to our prudent active customer management strategy and our constant focus on business health and increasing some customer satisfaction. Altogether, we aim to provide high-quality ISC services to target customers while continuing to expand the breadth and depth of our collaborations with existing customers. In Q1, revenue from other customers grew significantly, totaling CNY 18.28 billion, up 93.4% year-over-year. Specifically, Deppon's revenue from other customers amounted to CNY 7.2 billion during the quarter, excluding Deppon revenue from other customers was CNY 11 billion, up 17% year-over-year. Our cost of revenue in Q1 was CNY 35 billion, rising by 35.5% year-over-year. Along with the increase in costs incurred to support our expanding business, the increase also reflected costs from Deppon, which we consolidated after we reclassified them according to our standards. Let's move to the main cost of revenue. Employee benefit expenses were CNY 12.6 billion in Q1, up 26.5% year-over-year. In addition to Deppon's consolidation, the increase was due to a rise in the number of our frontline operations employees from 303,000 at the end of Q1 last year to 320,000 at the end of Q1 this year. This growth was mainly a result of adding more in-house personnel to key processes of our operations, including last mile delivery, in order to ensure high-quality services and elevate customer experience. In Q1, total employee benefit expenses accounted for 34% of our total revenue, down 0.1 percentage point from 36.5%. In addition, excluding Deppon employee benefit expenses as a percentage of revenue rose by 0.5 percentage point year-over-year in Q1. Another important component of our cost of revenue was outsourcing costs, which reached CNY 13 billion in Q1, up 39% year-over-year. This accounted for 36.6% of total revenue, up 1.3 percentage points year-over-year. The increase both in absolute amount and as a percentage of revenue was mainly due to Deppon's consolidation, as well as the additional investments we made in our resources to ensure regular business operations. Third, our total rental cost was CNY 3 billion in Q1, up 20% year-over-year. This was primarily due to an increase in the number and geographic area of our logistics facilities, such as warehouses, as well as Deppon's consolidation. As of March 31st, we operated over 1,500 warehouses, including warehouses managed by Deppon. Meanwhile, the aggregate GFA of our warehouse network, including warehouse space managed through the open warehouse platform, exceeded 31 million square meters. Our total rental costs in Q1 constituted 8.4% of our total revenue, down 0.9 percentage points compared with the same period last year. The decrease was partly attributable to Deppon's lower rental costs as a percentage of its revenue, which led to a lower consolidated number. Another factor was the economies of scale in our business without Deppon. Apart from the main cost of revenue mentioned above, depreciation and amortization costs and vehicle usage costs, such as fuel costs and toll fees included in other costs, also rose as a percentage of revenue after consolidation. In terms of expenses, our operating expenses in Q1 were CNY 2.94 billion, growing 25.7% year-over-year and accounting for 8% of total revenue, a decline of 0.5 percentage points year-over-year. Selling and marketing expenses were CNY 1.1 billion, up 3.1% of total revenue, down 0.4 percentage points year-over-year. Selling and marketing expenses accounted for 4.5% of revenue from external customers, a decline of 1.5 percentage points year-over-year. In Q1, our R&D expenses were CNY 900 million, accounting for 2.5% of total revenue. Excluding Deppon, the percentage was slightly higher, essentially on par with last year. We've continuously maintained R&D expenses at a considerable percentage of our revenue to boost core capabilities, laying a solid foundation for expanding our customer base, investing in operational resources, re-refining operations, and empowering external customers. Our G&A expenses were CNY 890 million, accounting for 2.4% of total revenue, an increase of 0.1 percentage point year-over-year. As to net profit, we recommend that you consider our non-IFRS measures, which we believe better reflect our operations, given that non-IFRS profit largely excludes factors such as share-based payments, amortization of intangible assets resulting from acquisitions, and fair value changes in financial assets at fair value through profit or loss. In Q1, our non-IFRS net loss was CNY 710 million at a loss margin of 1.9%. We also continue to monitor our cash reserves and cash flow to maintain healthy and sufficient capital to support business development and meet our operational needs. In Q1, our capital expenditure as a percentage of revenue remained steady compared with the same period last year. We will steadily and effectively deploy capital according to our business development needs to enhance our capabilities in the medium to long term, as well as constantly improve our network layout and operational efficiency. Before I conclude, I'd like to thank our shareholders for their long-term support for JD Logistics. Going forward, we'll firmly execute our core development strategy and continue to focus on enhancing our key capabilities. We believe that as macroeconomic conditions continue to improve, we'll maintain our steady growth momentum and realize long-term sustainable development. At the same time, through refined operations and realization of economies of scale, we'll continue to improve profitability and create value for shareholders. That concludes my prepared remarks. Now, we would like to open the call to your questions. We will only accept questions in Chinese. Management will answer questions only in Chinese. Operator, please start the Q&A session when ready. Now, we are in the Q&A session. To ask a question, please press star one. Once again, to ask a question, please press star one. The first question comes from Thomas Chong from Jefferies. Good evening. Thank you, management, for taking my questions. First question. In terms of your supply chain services to JD Group, any strategy here? Second question is about modeling. About gross margin trend going forward, and when do you expect revenue from our customer to resume positive growth? Thank you for your question. You asked about our collaboration strategy with JD Retail. You could see public information about JD Retail, including presence in the lower-tier market. They have made many explorations and breakthroughs in their retail business. We would follow the adjustments in JD Retail strategy with their customers to develop our strategies and upgrade our services. On the whole, we would base our services on our e-commerce customers' needs, including improving service timeliness and quality. Every time we would make higher standards for us to improve. As to business innovations, we would also dedicate resources to innovate in our service fulfillment to customers. Generally, our strategy with JD Retail would come from public information available in the market. As to the service providers, we will do what we need to do to provide higher quality services to our customers. As to your second question, I'll ask Mr. Shan to answer. About gross margins. Our main service is ISC integrated supply chain, and we need to meet customers' needs. Our GP would depend on the specific product or service GP purchased by our customers. It's difficult to predict our GP. As I said, it depends on customers' needs, and their needs may change. They may buy more standard products from us, like express delivery. For standard products like express or freight delivery, we got more purchases from customers for these services. For more higher technology content products, their GP would be higher. Our GP was 5.5% in 2021, 7.4% in 2022. As has been mentioned, we develop a higher standard every year and again, everything is based on our customers. It depends on the product mix they buy from us. We just experienced a major organizational restructuring, and we expect that in Q2 and Q3, we'll continue to make small adjustments in our organizations and implement some changes. In Q4, I believe the number of our customers will improve year-over-year. From the whole ISC market... Our customer growth in ISC service has already improved compared with last year. I believe we'll see a recovery in the number of our ISC customers. Thank you. Next question comes from Goldman Sachs. Thank you, Mr. Yu and Mr. Shan. First question, about external supply chain services. Even though the customer number dropped, ARPC and revenue both improved. What is the concentration of your customers? If there are more big customers than small customers and that your business is more concentrated on these key accounts? Secondly, regarding other customers, excluding Deppon, you have achieved 20% growth, including express and freight delivery. I was wondering what's the growth strategy for Deppon express and freight delivery customers? Our ARPU did increase this year, and we are more selective about our customers this year. We don't use key accounts as our selection standards. Rather, we would see if our products would prove valuable for our customers and whether the customers are cost-driven or are they entirely cost-driven. For key accounts, they have a high need for our services. When we optimize our customer mix, some small customers would be impacted. On the one hand, we're more selective about our customers, secondly, our selection of customers depend on whether our customers need to pay for our services. As to the key accounts, they remain an important part of our customer base. In terms of express and freight delivery as to other customers, on the whole, we have been gaining market share in this regard. In terms of express delivery, because of adjustments in our operating strategy, progress may be a bit slow, but again, we are gaining market share, and we are also increasing market share in freight delivery. This year, we have made some pretty big organizational adjustments. More detailed strategies, we will share them with you in due course. Currently, we have a clear strategy for express and freight delivery. That is we continue to increase our synergies with Deppon. Secondly, we want to improve our vitality through organizational adjustments, and we'll also work or continue to work with e-commerce platforms. Thank you. The next question comes from Merrill Lynch. Thank you, management. I would like to follow up on a question about ARPU and its year-over-year growth of 20%. Whether it's related to the change in your customers' industries. Could you share more color on the sustainability of ARPU growth? What is the growth momentum? The situation in March was much better in January and February, and now we are in May. I was wondering what was the situation in April or in early May in terms of ISP revenue growth? First, regarding your question of ARPU trends. Of course, we hope that the ARPU of our customers across every industry could improve. While optimizing our customer base, we did eliminate some smaller customers that affected our ARPU. Our big customers are more concentrated in fashion. Our customers in fashion or apparel, they are usually small, and optimizing them improved our ARPU. As to customers in automotive industry, they also contributed to ARPU increase. On a quarter-over-quarter basis, the number of active ISP customers would improve quarter-over-quarter in Q2, while on a year-over-year basis, the number may drop. Oh, okay. Thank you. Next question comes from [CITIC Securities]. I have a follow-up question on GP. The GP in Q1 improved significantly compared with Q4 last year. Q1 was the slow season. I was wondering if part of the reason was the impact on the industry from the pandemic, and that excluding these impacts, the GP would be higher. Our GP declined in Q1, mainly due to two reasons. Firstly, compensation costs in Q1 increased year-over-year because of our initiative. Firstly, we have been adjusting our customer compensation process. Secondly, we launched automatic compensation standards. Third, in January and February, there was a backlog of compensation claims, and that also increased our costs. This contributed to the decline in our GP. Another reason for the decline in GP was in December last year, many express delivery company, they already stopped taking orders, but we still accepted customer orders from different industries. In January, due to our capacity constraints, we carried out some price or volume restrictions. Basically, we didn't have enough capacity, and we had to hire a large number of temporary workers, and that increased our costs. The labor costs from temporary workers and the increase in compensation expenses both directly contributed to increased costs. The next question comes from Macquarie. Thank you for taking my question. I have two questions. First, what's your rush to strategy during the June 18th Promotion this year? It's e-commerce platforms including Jingdong, JD Retail usually adopting an aggressive strategy during the promotion. What's your plan for your services or other areas during the promotion? Secondly, your Jingxi business adjustment. There was a contraction in the business in Q2 last year, and that impacted your performance. Now, along with the organizational adjustments, from a full year perspective, how will this affect your profit and revenue? Thank you. Question. Regarding our first question, our strategy during the June the 18th promotion is here. For JDL, customer service quality would be the most important for us. After the three years of pandemic, we have finally, our lives have finally returned to normal. We hope to take advantage of June the 18th promotion this year to improve our ISC capabilities and improve customer experience for consumers. In addition to ensuring service experience for e-commerce customers, including JD Retail, Kuaishou, and Douyin, we will also roll out customer service guarantee initiatives for distributors and other customers to improve our reputation and word of mouth in the market. Regarding the contraction of the Jingxi business, we don't think it will continue to impact us in Q3 this year. In Q2, there's still revenue from Jingxi, starting from Q3, there will no longer be any impact. Due to time constraints, this concludes our Q&A session. I would hand the call back to June for any additional remarks. Thank you once again for joining us today. If you have any further questions, please contact our team directly. Thank you.