Full Truck Alliance Co., Ltd. Q4 FY2024 earnings call

• In the fourth quarter, made significant strides in digital and intelligent transformation of logistics industry, reducing social logistics costs. Total fulfilled orders increased by 24% year-over-year. - User growth: Average monthly active shippers in fourth quarter exceeded 2.93 million, up over 30% year-over-year. Direct shippers accounted for 50% of total fulfilled orders, and shipper members exceeded 1 million by end of fourth quarter. - Trucker supply and fulfillment efficiency: Number of active truckers fulfilling orders through platform over past 12 months surged to 4.4 million, next month retention rate of truckers who responded to others exceeded 85%, fulfillment rate in fourth quarter was 37.5%, up 5.4 percentage points year-over-year. - Transaction service: Fueled by increased order volume and refined monetization strategies, revenues from transaction service grew 71.1% year-over-year to RMB1.16 billion in fourth quarter. Monetized order penetration ratio increased to 82.9% for the quarter. Average monetization amount per order increased to RMB24.6 in fourth quarter.

In the fourth quarter, total net revenues grew by 32% year-over-year to RMB3.17 billion. Transaction service revenues were the primary growth driver, surging over 70% year-over-year to RMB1.16 billion, contributing 36% of total net revenue. For the full year 2024, total net revenues were RMB11.2 billion, a 33.2% increase year-over-year. Revenues from freight matching services (including service fees from freight brokerage models, membership fees from listing models, and commission from online transaction services) were RMB9.5 billion for 2024, up 34% from 2023. Revenues from freight brokerage service reached RMB4.7 billion for 2024, up 20.7% year-over-year. For the fourth quarter, net revenue increased by 17% to RMB1.3 billion. Revenues from freight listing service were RMB879.5 million for the full year, up 6.2% year-over-year and rose 7.5% year-over-year in the fourth quarter to RMB230.5 million. Revenues from the transaction service amounted to RMB3.8 billion in 2024, a 66.7% increase year-over-year. For the fourth quarter, net revenues were RMB1.2 billion, a 71.1% increase year-over-year. Revenues from value-added services were RMB1.7 billion in 2024, a 29% increase year-over-year. For the fourth quarter, net revenues increased to RMB469.3 million, a 19.8% increase year-over-year.

• First quarter 2025 business outlook: Expect total revenues to be between RMB2.63 billion and RMB2.68 billion, representing a year-over-year growth rate of approximately 15.9% to 18.1%. - 2025 dividend policy: Board of Directors approved semiannual cash dividend policy, expected total cash dividend for 2025 to be approximately $200 million, initial dividend payout projected to be around $100 million. - 2025 adjusted operating profit: Expect adjusted operating profit to grow by over 60% year-over-year.

Today’s discussion contains forward-looking statements subject to certain risks and uncertainties. Some risks are beyond the company’s control and could cause actual results to differ materially from those mentioned. A general discussion of risk factors that could affect FTA’s business and financial results is included in certain filings of the company with the SEC. The company does not undertake any obligation to update this forward-looking information, except as required by law.

Q: Ronald Keung with Goldman Sachs asked about the drivers behind the acceleration in fourth quarter fulfilled orders and order volume growth outlook for full year 2025.

A: Simon Cai responded that platform's order volume growth was driven by robust new user acquisitions through dual online and offline approaches, effective operational strategies including improving fulfillment rates for new users and upgrading trucker-related functions, and rapid growth in new business lines like less than truckload business. For 2025, remained optimistic about volume growth with full truckload business deepening online penetration and less than truckload and short-haul services being refined.

Q: Brian Gong with Citi asked about the key drivers behind the improvement in fulfillment rate in the fourth quarter and expectation for 2025.

A: Simon Cai said the improvement was due to continuous user mix improvement (direct shippers' contribution hitting 50% for the first time, their stable demand contributing to higher fulfillment rates), precision operation strategies (expanding premium cargo billing functions and addressing duplicate freight listing), and ongoing improvement in supply and demand dynamics. Expect fulfillment rate to continue upward trajectory in 2025 driven by direct shipper strategy upgrades, technological capabilities, and trucker ecosystem synergies.

Q: Charlie Chen with China Renaissance asked about the growth trend for shipper membership in the fourth quarter and the latest update on the 288-Tier mini membership.

A: Simon Cai stated that the number of active shipper members surpassed 1 million at the end of the fourth quarter. The 288-Tier Mini membership launched in early 2024 contributed to new shipper member growth, with its lower price lowering barriers to entry. Targeted subsidies were introduced for new users and returning users, and there is a transition model to encourage mini members to upgrade to the 688 Tier. The non-paying user conversion strategy is also progressing steadily.

Q: Wendy Zhang with CIBC asked about the main reasons behind the revenue growth of the freight brokerage service in the fourth quarter and the outlook for the business in 2025.

A: Simon Cai said the revenue growth was primarily driven by the increase in service fee rates, partially offset by a decrease in transaction volume. The company has been cautious with freight brokerage, adjusted service fee rates in response to potential tax changes. In 2025, will continue prudent risk management, serve high-value shippers, and expect core transaction service business to grow strongly while freight brokerage's proportion in revenue mix is reduced.

Q: Ritchie Sun with HSBC asked about the progress of the LTL business in the fourth quarter and the key differences between LTL car pooling and dedicated line services.

A: Simon Cai said the LTL business maintained rapid growth in Q4 due to deeper offline market penetration and optimization of carpooling features. The carpooling model offers single loading and unloading and door-to-door delivery, improving efficiency and reducing cargo damage. Over 70% of LTL order volume growth in the fourth quarter came from small and medium-sized direct shippers migrating from offline LTL dedicated lines and express models. The core advantage is the unique door-to-door delivery model and lower pricing.

Q: Juan Liao with CITIC asked about the main reasons behind the RMB350 million impairment loss in the fourth quarter and guidance for impairment in the near few quarters.

A: Simon Cai responded that the impairment loss mainly stemmed from an investment in an e-commerce platform facing ongoing operating losses. The impairment was one-off, and there was no awareness of other potential impairments in the foreseeable future. The company will maintain a prudent approach to investing and strengthen post-investment management.

Q: Thomas Chong with Jefferies asked about the overall development strategy for 2025.

A: Simon Cai said the company expects steady business growth in 2025 with over 15% year-over-year volume growth. Will optimize revenue structure by reducing the proportion of freight brokerage business in revenue mix, with transaction service business becoming the core engine of revenue growth. Aim to improve operational efficiency and significantly enhance overall profit margin, providing shareholders with higher certainty of long-term returns.