Good day, and welcome to the ZTO Express Inc. Q1 2021 conference call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. And please note that today's event is being recorded. Our operator on the conference call today is Sophie Li. With Li, the floor is yours, ma'am. Thank you, operator. Hello, everyone, and thank you for joining us today t he company's results and investor relations presentation were released earlier today and are 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 Ms. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Ms. 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 current market and operating conditions and relate to events that will 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. Meisong Lai. [Non-English content] Thank you, Meisong Lai. Please let me translate first. Hello everyone, and thank you for joining us today. In Q1 of 2021, ZTO fulfilled services for 4.5 billion parcels, grew at a volume 88.5% year-over-year and exceeding the industry average growth rate by 30.5 percentage points. ZTO's market share expanded by 1.5 percentage points to 20.4%, further solidifying our industry leadership. While accelerating scale expansion, we maintained service quality to be among the top rankings. For the Q1, ZTO achieved an adjusted net profit of CNY 782 million, which increased to 23.1% year-over-year. In the Q1, the industry experienced rapid growth and the competitive dynamics continued to evolve. In an environment of prolonged price decline, major players of industry formed staggered profit level lineup. While positively growing its profits, ZTO had to make further strides in improving transit efficiency, optimizing network management and enhancing [Unintelligible] presence. First, efficiency of the sorting and transportation platforms were further improved, with increased investments in self-owned transit facilities in preparation for capacity demand increase in the future. Capital expenditure in the Q1 was CNY 2.28 billion. We acquired usage rights to suitable logistics lands and carried out up to three years forward planning, site modification and extension, aiming to develop smart, comprehensive logistics service parks. There are over 10 projects under construction at this time. For transportation, without losing sight of time demands and cost control, we further optimize the balance between self-owned fleet and third-party vehicle usage to better leverage higher operating efficiency by our own vehicles. With the help of technology and data analysis, we continuously enhance existing route scheduling and adding new routes that are more direct in accordance with demand to recalibrate capacity utilization. For sorting operations, while continuing to improve coverage and functional efficiency and automation, we implemented sorting center level performance appraisal mechanism to detail manage shifts' planning and digitize the performance measures to enhance labor productivity. Benefiting from capacity build up and wider application of technology solutioning, the combined sorting and transportation cost per parcel in the Q1 decreased to 5.2%, despite the absence of benefits from ETC waiver policy that lasted from February to May of 2020, which skewed the year-over-year comparison. Secondly, network stability was maintained, which made it possible to promote organizational structure upgrades and capacity development. By the end of the Q1, the number of operational hub networks remained stable with less tinkering. On one hand, we furthered our grid approach of management to empower, assist, rectify, and replace where appropriate. On the other hand, we focused on strengthening direct links to last-mile hubs and couriers, promoted courier rights protection, as well as further developed our processing capabilities. We believe a stable network is the foundation for brand value recognition and competitive strength for our outlets. Thanks to a network that is built on fairness and trust, ZTO achieved a high performance in various categories of quality measures, including complaint rates, sending mix score, and overall public satisfaction ranking in the Q1. Certainly, the last-mile presence development has been accelerated. Advantage of our last-mile presence became more apparent. At the end of the Q1, we owned or operated close to 17,000 last-mile hubs, far more than our competitors. At present, with the gradual shift in receiving habits, nearly half of ZTO's parcels were delivered other than to door, of which approximately 90% were affected through last-mile hubs. Last-mile hubs represent great possibilities for future development of our outlets. In order to handle the daily parcel volume of 100 million or more, last-mile delivery cost containment, hence outlet viability and pricing power, has become one of our most important focuses. In the Q1, we delivered a set of relatively satisfactory results. Aside from consistent focuses on execution of our existing strategy for our core express delivery operations, we started to pay added attention to maximizing the utilization of our depot resources, as well as effective collaboration among our Z- ecosystem businesses, so as to form comprehensive logistics service capabilities. Our goal is to establish differentiated products and services to distinguish ourselves in the mind of our customers and enhance distinctive recognition and awareness of the ZTO brand. We firmly believe that competitive advantage is only meaningful at the strategic level across comprehensive logistics capabilities. Opportunities are beyond our imagination, such as more expansive service categories, higher levels of digitized operation and management, brand content enrichment, and resource planning and utilization. We will stride forward with stronger commitment and higher confidence, more solid work, and a clearer path. Together with our network partners, we will maintain positive momentum to create and to aid a brighter future. Thank you for trusting and supporting us. Now, please allow Huiping Yan to take us through ZTO's financial results. Thank you, Chairman Lai. 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. Percentage changes refer to year-over-year comparisons. Detailed analysis of our financial performance, given economics, and cash flow are posted on our website. I'll go through some of the key highlights here. In the Q1, thanks to a steady economic recovery and firm implementation of our consistent strategies, ZTO grew parcel volume by 88.5% to RMB 4.5 billion, outperforming the industry average by 13.5 points. Our leading market share further expanded 1.5 points to 20.4%. Total revenue increased 65.3% to RMB 6.5 billion. ASP for the core express delivery business declined by 12.4% or RMB 0.18. This is the least amount of drop compared to industry peers, yet we have achieved the most market share gain. RMB 0.18 price decline consisted of approximately RMB 0.09 volume incentives used to support our network partners to grow market share and maintain confidence, as well as keep the network stable at the same time. There are RMB 0.07 decline associated with parcel weight drop. Average weight per parcel declined about 10% to approximately 1.04 kg. There's a RMB 0.02 decline due to increased use of lower-priced e-way bill, yet it is more environmentally friendly because it's a single sheet. The total cost of revenue increased 73.6% to RMB 5.4 billion. Overall unit cost of revenue for the core express delivery business decreased 6.7% or RMB 0.08, generally benefited from economies of scale. More specifically, unit transportation cost increased 3.6% or RMB 0.02, mainly due to the combined effect of increased use of more cost-efficiently run self-owned high-tech trailer trucks. The absence of favorable full waiver policy that lasted from February through May last year. Unit sorting costs declined by 17% or RMB 0.07 because of higher level of automation. Gross profit increased 33.9% to RMB 1.1 billion. Gross profit margin rate decreased 4 points to 16.9%, which resulted mainly from competitive-led ASP decline and per parcel weight decline, partially offset by scale leverage and cost productivity gains. SG&A, excluding share-based compensation or SBC, increased 25.8% to RMB 372 million, mainly due to increased salaries, headquarter facility expenses and depreciation and amortization expense. SG&A cost as a percentage of revenue decreased 1.8 points to 5.8% given our lean corporate support structure. Income from operations increased 17.1%. Excluding SBC, income from operations increased 38.5% to RMB 881 million. Associated margin rate declined 2.6 points, which is narrower than gross margin decline because of positive SG&A leverage and increased other operating income, mainly VAT super deduction and government subsidies. Adjusted net income increased 23.1% to RMB 782 million. Net income margin rate declined 4.1 points to 12.1%. Operating cash flow increased 168.3% to RMB 477 million. CapEx increased 31.3% to RMB 2.3 billion as we focus more on building comprehensive logistics services capabilities. As we further strengthen our infrastructure in preparation for increasing demand for the core express delivery businesses, as well as resource planning for development of our ecosystem, our annual CapEx would remain at a higher level for the whole year to be around RMB 11 billion- RMB 13 billion. Turning to business outlook. Based on current market conditions and operational results, we maintain our annual volume guidance of 35%-40% year-over-year growth. Our annual parcel volume is estimated to be in the range of RMB 22.95 billion- RMB 23.8 billion. Such estimates represent management's current and preliminary view and are subject to change. This concludes our prepared remarks. Operator, please open the line for questions. Thank you. Yes, ma'am. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If anytime your question has been addressed or you'd like to withdraw your question, please press star then two. As a courtesy, we please ask that you limit yourself to two questions. Again, it is star, then one to ask a question. At this time, we will just pause momentarily to assemble our roster. The first question will come from Thomas Chong of Jefferies. [Non-English content] Thank you for your question, Thomas. Operator, please allow me to translate for Chairman. Thank you. Thank you, Thomas. In the future one to two years, the question is about the business trend and the direction, as well as ASP and cost per parcel. I will translate as well as supplement answers for your question. First of all, our confidence remains on the growth prospect of Chinese economy and as well as the industry growth for express delivery. The next one to two years growth will remain mid to high level of growth for the next two years for sure and t his is with high confidence that we have provided this outlook. With regards to competition, express delivery, the essence of it in terms of competition is about scale and efficiency, in turn providing better quality of services. ZTO has been in the past consistently focusing on maintaining high level of quality of services, targeted profitability, while focusing on gaining market share. This will not change for the near term. Infrastructure construction is very important. The strength of the network stability as well as the network partners' trust and confidence in the brand will ensure our strategy consistent execution. As you have observed, those with scale, with operational efficiency, as well as better quality of services are gaining market share, are achieving balanced growth. ZTO's goal is to focus on our growth rate higher than the industry and our profit expansion healthier. Today we look at our very stable network base. With that, our confidence remains for our steady growth, our market share. ASP, we believe competition is still there as market dynamics continue to evolve. Cost per parcel is within our own control, and w e have implemented, as I previously described, many initiatives for near term as well as longer term productivity gain as volume continue to increase. We are confident in maintaining our goal to achieve market share expansion as well as delivering healthy bottom line while maintaining good quality of services to our consumers and customers. Thank you. Thank you. Next we will have Ronald Keung of Goldman Sachs. Thank you。[Non-English content] Sophie。[Non-English content] I want to ask two questions f irst is on the competitive landscape again. How do we see new entrants like J&T, given that they have grown very significantly over the past year? Is this industry prone to just players that could have burn money through to grow and scale? Are we very confident with our leading position that even through cash burning, those players will not impact our very solid scale and efficiency and our number one position here? A follow-up on that is recently there has been regulations on the e-way bill pricing, setting a floor on pricing levels. How do we see this trend ahead? will more governments and stakeholders, local also push through more of these? How do we see these regulations could have any impact or benefit to our business? Thank you. [Non-English content] Thank you, Ronald, for your question. We have consistently believed that scale and efficiency and cost are the key competitive factors to ensure sustainability or continued growth. There are four specific segments for a package to travel from end to end: pickup, transit, sorting, delivery. The infrastructure, as well as scale and cost efficiency, is the determining factor for competitive edge. J&T entered into the market with significant capital, and yes, it is indeed a cash-burning model as of now. Temporarily, it does create impact to the entire industry. However, we want to point out that if you look into the past in the industry growth, the smaller ones or those without its own sustained capabilities have all gradually exited the scene. Future competition, starting today or starting in the near past, has been the scale and cost efficiency in that area. With the top players, about eight of them representing over 80% of the market, their volume are in the range of 30 million to 60 million per day. For those that are running at 30 million per day, their profitability is very much under pressure already. For a model that largely rely on third-party resources where cost and efficiency are less under their own control, this model believe is not sustained. Our assessment is that in the longer term, you must combine capital that is deployed towards infrastructure establishment or development that could allow a model to continue to sustain, continue to grow. On your second question, the recent Yiwu policies issued by the government. Our view is that if courier operators providing services that are below cost for a prolonged period, the revenue of all the players will be largely suppressed, and it's hard to guarantee quality of services. Currently, there are over 4 million courier staff nationwide, and with a addition of approximately 200,000 each year. When government carries out focus and attention in supervising the market to restore healthy competition, we are welcoming that and we support that action. It will not only ensure healthy competition, but more importantly, as we always have been focusing on, in ensuring the last mile couriers for those who are small entrepreneurs to achieve healthy and high quality of growth. This regulation issued recently also specifically prohibits price that is below cost, and then that helps narrow the gap between all different players, especially during those competitive regions where production outputs are more concentrated. This will allow all the enterprises or businesses to focus more on service quality, network stability, and infrastructure development instead of short-term, near-term, price-driven market share gain. In addition, if we may add, the policy also specifically addressed e-commerce platforms, some of the actions or practices that are restricting for in designation of specific courier operators. Prohibiting monopolized operations. These are all very positive. It adds to our further confidence in an improving healthy, competitive environment for us to compete for the future. Thank you so much, Meisong Lai, Huiping Yan. Next, we have Tian Hou of TH Capital. [Non-English content] There are some issues regarding their insurance and welfare. What is the company's thought in this regard? that's number one. Number two, what's the outlook for the per parcel revenue in the next several quarters from a current competition point of view? The third question is related to the new business development. One is time sensitive parcels? and one is cold chain logistics? In these two fronts, what is the current development? What is outlook for the rest of the year? Thank you. [Foreign language] [Non-English content] [Non-English content] [Non-English content] Thank you l et me translate. First question regarding the freelancer. Express delivery personnel is a very critical part of our business and b ecause ZTO is a network partner model, it presented its inherent challenges to ensure the couriers' rights and also interests are well protected. In the past, ZTO has been working hard on implementing many of the initiatives to ensure that part of the equation. For example, we rolled out direct link or direct accounting approach to ensure timely payment to our couriers. Recently, we have, at the headquarter level, funded a nationwide insurance policy to ensure 24/7 protection of our couriers for any of the unexpected incidents that could harm them, either during work or outside of work. We have in the past rolled out policies to establish standardized pricing for pickup and delivery to make sure our courier could have the opportunity to receive market price in picking up packages. Where we continue to focus on these areas, we are also in response to government's focus as well as policies to ensuring freelancer members of the society to continue to have a healthy work environment as well as fair allocation of the payment as well as their basic rights. For example, social rights to medical, to insurance. All these are a process that involves not only us at the headquarters, but also our network partners. Especially during fierce competition, this work becomes even more important and requires more attention and resources, and we will continue to work on those areas. Your second question relating to essentially competition, the price per parcel. What is the trend? While we cannot specifically identify or point out the time when the price may resume, we are able to provide our view on understanding when, from a qualitative standpoint, the turning point may occur. As we said in the earlier conversation, the competitive advantage lies within the scale, cost efficiency, and the quality of services of the entire network. The market dynamics have been evolving and have been continually concentrating. While with the large demand in the Chinese express delivery industry, there's not a possibility for one or two players to serve the entire market. We do believe the concentration will continue to take place and the price competition will ease off as the market share leadership becomes more apparent. In other words, the bigger will get even bigger, and the smaller or the weaker ones will be still there, however, their growth will be tapering off. When that time comes, the price will then have an opportunity to resume normalcy and perhaps start to come back in accordance with CPI or normal price adjustments. Earlier, we mentioned that the government also have interjected and provided attention and ensured discouragement on low-price competition. That is an added confidence to us looking towards the near end of the tunnel type of situation as we can see. The third question relating to our time-definite product. We believe competition in the future is not only with, or no longer, we should say, with core express delivery business. It has to be relying on comprehensive synergetic competitiveness across the supply chain of logistics services. Our goal is to become a world-class leading comprehensive logistics service providers. We have, since 2016, started to build our comprehensive capabilities, specifically with regards to our time-definite products and cold chain operations. This year in April, we have opened up time-definite products in Shanghai, in Hefei, with standardized pricing as well as time-definite programs. Q2, our cold chain business will establish operations across five major cities, and we have already raised a network of franchisees in those areas. Our fleet program, even without a single airplane, has been successful in consolidating demand and matching the best effective fleet priced, efficiently priced resources for air freight. All these are our effort surrounding the brand development in making sure specific definite expectations as well as differentiated product understanding and recognition are being provided to our consumers. Further, internationally speaking, we have deployed resource planning including warehouses, and different sizes of packages in weight as well in preparing for expansion internationally in the future. As Chairman said earlier, we will focus on, in the next three to five years, in developing differentiated products, in altering ZTO's recognition or ZTO's value so that it could be differently viewed than the rest of the Tongda currently. There are many initiatives underway right now. Thank you. Thank you Huiping. At this time, we'll conclude our question and answer session. I would like to turn the conference call back over to Ms. Sophie Li for the closing remarks. Ma'am? Thank you everyone for joining us on the call. On behalf of the entire ZTO management team, we'd like to thank you for your interest and your participation today. If you require any further information or have any interest in visiting us in China, please let us know. Thank you for joining us today. We thank you, ma'am, and also to the rest of the management team for your time today. Again, the conference call is now concluded. At this time, you may disconnect your lines. Thank you, take care, and have a great day, everyone.