Dingdong (Cayman) Ltd. Q2 FY2021 earnings call

• In the first half of 2021, ZTO maintained a strategy balancing service quality, volume, and earnings, achieving 5.8 billion parcels and adjusted net income. Customer satisfaction scores were top in the peer group.
• During the second quarter, ZTO made progress on network upgrades, last-mile extension, and brand building. Implemented initiatives to support partner operations, enhanced network stability through transparency and fairness measures. Raised last-mile development to a strategic level, with over 70,000 last-mile posts by the end of Q2. Actively extended new product experimentation, collaborating with the logistic ecosystem and expanding service categories like fresh food, wine, spirits, etc.
• Took proactive measures for couriers, including a 100 million plan for courier care and improved star level measurement matrix to boost courier growth.

In the second quarter, ZTO achieved a parcel volume of 5.8 billion, with total revenue reaching RMB7.3 billion, an increase of 14.4% year-over-year. Adjusted net income was RMB1.3 billion, while the cost of revenue increased 22% to RMB5.7 billion. Gross profit decreased 5.4% to RMB1.7 billion, and gross profit margin rate declined to 22.8%. Operating cash flow increased 54.3% to RMB1.9 billion. The core express delivery business had an ASP decline of 5.9%, with factors like volume incentives and parcel weight drop contributing to the change.

• The company maintains the annual guidance of 35% to 40% year-over-year volume increase. Annual parcel volume is estimated to be in the range of RMB22.95 billion to RMB23.8 billion. CapEx outlay is expected to be around RMB9 billion to RMB10 billion as the company strengthens infrastructure for future demand.

• Market and operating conditions with uncertainties that may cause actual results to differ from forward-looking statements. Regulatory changes and price competition posing risks to profitability. Uncertainties in achieving volume growth and market share targets due to market dynamics and competition.

Q: On competitive landscape and second half growth, and cost productivity.

A: Strategy is stable with possible below second quarter growth in H2. Excluding one-time COVID effects, second half cost productivity expected to have 5% to 6% gain per parcel year-over-year.

Q: Regarding emerging e-commerce channels and regulatory overhang.

A: Expanding into new e-commerce channels to enrich product mix. Regulatory intervention helps price stabilization, with competition trend towards stability.

Q: Market share decline and social security payment.

A: Temporary market share decline due to emphasis on profitability. Social welfare for outsourced employees is well established, with plans to support grassroots communities further.

Q: ASP drop and weight trend.

A: RMB0.04 decline in ASP due to parcel weight trend, which is natural as e-commerce evolves. Industry may adjust pricing structure to cover fundamental costs.

Q: CapEx guidance and non-express business prospects.

A: Full-year CapEx expected RMB9-10 billion, 70% for infrastructure. Non-express businesses like cross-border, freight forwarding are part of staged ecosystem development, with a prudent and profit-seeking approach.