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Good day, and welcome to the ZTO conference call and webcast. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Sophie Li, IR Director. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining us today. The company's results and the 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 Mrs. 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'll remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions, and they relate to events that 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 statement 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. [Foreign Language]
[Foreign Language]
Okay. Now let me translate for Chairman. Hello, and thank you, everyone, for joining our call today. We met our goal for 2018 and achieved solid performance results. Parcel volume increased by 37.1% year-over-year to reach CNY 8.52 billion as we increased our leading position in China's express delivery industry with a market share of 16.8%. Meanwhile, our industry-leading service quality and the high levels of customer satisfaction allowed us to achieve our adjusted net income of RMB 4.2 billion during the year, an increase of 30.1% from 2017.
To cap on 2018, firstly, we closely monitored the microenvironment and industry trend, maintained a healthy pace of growth as competition intensified. We focused on sustainable long-term growth and implemented network policies that are effective in incentivizing profitable incremental parcel volume growth. Secondly, we continue to build out and upgrade our sorting infrastructure and line-haul transportation capacity and efficiency. By the end of 2018, we owned and operated over 4,500 transportation trucks, including 2,800 high-capacity vehicles, which accounted for 62% of our total trucks. Despite increasing operating costs such as labor and fuel costs, our combined transportation and sorting hub cost per parcel decreased by CNY 0.11 in 2018 as a result of steady improvement of our operating efficiency. Thirdly, we implemented various cooperative initiatives to establish pick-up and delivery fee vendors aiming to strengthen stability, enhance profitability of our network partners through increasing compensation levels of our delivery personnel. By the end of 2018, we had 30,100 pick-up and delivery hours and 4,500 direct network partners. The unofficial count, there were approximately over 300,000 frontline personnel working under the ZTO brand in 2018. Cultivating their entrepreneurial spirit and proactivity is one of the most important cornerstones of ZTO's brand value.
Lastly, our ecosystem continues to take shape. Expanding from our core express delivery services, LTL business, cross-border logistics, cloud warehousing solutions, commercial and financing businesses are integrating resources and developing business models along the logistic value chain.
[ Since your ] investment in ZTO in June 2018, Alibaba and Cainiao has been working closely with ZTO to explore opportunities in new retail and support digitization of logistics processes and utilization of smart technology.
Looking ahead, we strongly believe that the China's economy will continue to grow steadily over the long term despite near-term macroeconomic uncertainties and short-term fluctuations. The express delivery industry will continue to develop its scale and efficiency and being a catalyst to economic growth providing greater value to customers and adjacent industries. And new parcel volume is likely to reach 80 billion to 100 billion over the next 3 years. Market share will become increasingly concentrated as large-scale express delivery companies take advantage of this opportunity to increase parcel volume and market share.
With such enormous growth opportunities ahead, we will accelerate our pace of expansion. Our target parcel volume growth is to exceed industry average by at least 15 percentage points, while carefully managed service quality, market share increase and profit. We will continue to implement our strategy of building a large and scalable platform that is well integrated with profitable [ airways ] densely located across our vast network. By leveraging our infrastructure investment, financial strength, ability to generate cash and the strategic partnership, we are confident in delivering our corporate objective.
In 2019, we will focus on the following initiatives: First, we will strengthen overall service quality by using multifaceted assessment indicators, such as timeliness, customer service appraisal and the Cainiao Index to monitor in-house brand, value and the customer satisfaction. Second, in conjunction with establishing vendors pick-up and delivery fee schedules, our network partners, our network's policies are designed to be more direct and effective in balancing existing and incremental profit by our network partners as we hope to increase the level of earnings -- revenue earnings by our express delivery personnel. Third, we will improve and expand the breadth and the depth of our network in rural area to support our agricultural customers to help alleviate poverty. We will proactively find resources and improve capacity for pick-up and delivery in the prepared increased pressure on last-mile delivery. Fourth, we will increase and accelerate our investment into infrastructure to further strengthen our cost advantage and provide readiness for incoming volume demand. Lastly, we will increase investment in research and technology to digitize operations and establish data-driven management framework, further reduce costs and improve productivity.
2019 is a crucial year for us. We will dig deep and execute. With greater capacity and higher efficiencies and productivity gain, our platform will be able to better empower and support our network partners and frontline personnel. Over the past 3 years, we have successfully outperformed our competitors by relying on our shared success core value system and a strategic early-mover investment in infrastructure. We are more capable and have greater financial resources today. Over the next 3 years, if we were to further expand our leadership, we need to rely on strong execution of our team and technology-driven tools.
A lot of work is ahead of us, and I'm confident in our ability to take full advantage of the market opportunities as well as overcome challenges that comes along increasing market demand. Now I will pass the call to our CFO, Ms. Yan, to go over our financial.
Thank you. Hello, everyone, on the call. As I review our financial results, please note that unless specifically noted, all numbers quoted are in RMB, and percentages changes refers to year-over-year comparison. In summary, our parcel volume increased by 34.7% and 37.1% for the fourth quarter and full year, respectively, to reach 8.52 billion parcels for the full year, and the associated market share in China's express delivery industry increased to 16.8%. Adjusted net income was CNY 1.29 billion for the fourth quarter, which came in at the high end of our guidance for the quarter, and our full year adjusted net income was CNY 4.2 billion, which grew 30.1%.
Let's now go over the fourth quarter financial results. Revenues increased 29.9% to CNY 5.63 billion, mainly driven by 29.4% increase in revenues from express delivery services, with a 34.7% increase in parcel volumes and were partially offset by a decrease in unit price per parcel, or ASP, which is largely due to incremental volume increase -- incentives.
ASP for express delivery services decreased by CNY 0.09 or 4.3% as a net result of CNY 0.03 increase for weight per parcel increase, CNY 0.02 decrease in waybill use, CNY 0.10 decrease due to impact from incremental volume incentives. Revenue from the freight forwarding business increased by 45.6% to CNY 392.5 million compared to the same period last year. We started consolidating freight forwarding or COE Business in the fourth quarter of 2017. Revenues from sales of accessories increased to CNY 252.8 million, mainly due to an increase in sales of thermal paper used for printing of digital waybills. Electronic waybill utilization rose to 99.6% versus 93% last year. The cost of revenues increased by 36.9% to CNY 4.08 billion from CNY 2.98 billion last year. Now let's take a closer look into cost of revenue. Line-haul transportation cost was CNY 1.95 billion, an increase of 28.9%. As a percentage of revenues, line-haul transportation cost decreased to 34.6% from 35.0%, mainly driven by an increase in the use of self-owned and more efficient high-capacity trailer trucks.
Sorting hub operating cost was CNY 1.04 billion, an increase of 35.7%. As a percentage of revenue, sorting hub operating cost increased to 18.5% from 17.7%. The increase in sorting hub operating cost was mainly due to an increase of CNY 214.4 million in labor costs. There were negative impact of average wage hikes and temporary hiring to handle increased parcel volume during peak online shopping season. During this peak season exercise, we have identified opportunities to improve labor structure and planning. Coupled with improving integration of small and large parcel sorting equipment and dynamic weighing machines, sorting hub operating cost productivity will provide greater efficiency gains and strengthen our cost advantage in the future. Cost of accessories were CNY 158.1 million, an increase of 23.8%. The increase was in line with the increase in sale of accessories related to e-way bill.
Other costs were CNY 542.8 million, an increase of CNY 233.2 million when compared to last year. The increase was mainly due to an increase of CNY 165.1 million in dispatching cost associated with serving our enterprise customers, an increase of CNY 49 million in IT-related expenses and an increase of CNY 33.6 million in tax surcharges.
Gross profit was CNY 1.55 billion, an increase of 14.6% from CNY 1.35 billion last year. Gross margin decreased to 27.5% from 31.2%, mainly driven by parcel volume increase, which is partially offset by a decrease in unit price per parcel, an increase in cost associated with serving large enterprise customers, which generally have lower gross margin, and an increase in third-party transportation costs during peak season as well as labor cost and efficiency opportunities that we have mentioned earlier. Separately, the lower margin freight forwarding business also caused minor dilution.
Total operating expenses were CNY 197 million compared to CNY 127.5 million last year. SG&A were CNY 276.4 million compared to CNY 222.5 million during the same period last year. The increase was mainly due to an increase in salaries and accrued bonuses. SG&A cost as a percentage of total revenue decreased to 4.9% from 5.1%, demonstrating corporate cost leverage. Other operating income was CNY 79.5 million in the fourth quarter of 2018, mainly consisted of government subsidies and rebate of fees from ADR bank. Income from operations were 135 -- I'm sorry, CNY 1.35 billion, an increase of 10.4%. Operating margin decreased to 24% from 28.3% in the same period last year, mainly driven by the decrease in gross margin by 3.7 percentage points. Net income was CNY 1.28 billion, an increase of 4.7% from CNY 1.22 billion in the same period last year. Adjusted net income was CNY 1.29 billion compared with adjusted net income of CNY 1.27 billion during the same quarter last year. Excluding a one-time tax rebate related to company's High and New Technology Enterprise qualification received in the fourth quarter of 2017, adjusted net income increased by 20.5% in the fourth quarter. Adjusted EBITDA was CNY 1.77 billion compared to CNY 1.42 billion, an increase of 24.6% from the fourth quarter last year. Net cash provided by operating activities was CNY 1.8 billion compared with CNY 1.37 billion in the same period last year. I will now quickly go through a few key points for full year 2018 financial results. Further details can be found in our earnings release. Revenue increased 34.8% to CNY 17.6 billion, mainly driven by a growth in parcel volume and the COE Business acquired in October 2017, which contributed CNY 1,278.7 million. Total cost of revenues increased 40.5% to CNY 12.24 billion from CNY 8.71 billion last year. Line-haul transportation cost increased by 20.0% to CNY 5.76 billion, and sorting hub costs increased by 31.1% to CNY 3.2 billion. Combined unit line-haul transportation and sorting hub cost per parcel declined by CNY 0.11. While our initiatives to improve our cost leverage were temporarily impacted by increase in labor and third-party costs during the peak season, we have attained reasonable cost productivity gain during the quarter or during the year overall. As I mentioned earlier, there are improvement opportunities in labor planning and labor structure optimization. Further, we expect to realize greater cost efficiency as our installed base of automated sorting equipment to gradually reach optimized utilization alongside of incoming large volumes. By the end of 2018, 120 sets of automated sorting equipment have been put in use compared to 58 sets as of December 31, 2017. Regarding our transportation and sorting hub costs, as combined and fully integrated, we will further improve our usage of self-owned and operated high-capacity trailer trucks and reduced use of third-party transportation services. Further, as we improve our utilization of digitized management tools, route planning will yield greater productivity gains in the future. Gross profit was CNY 5.36 billion, an increase of 23.5% from last year. SG&A were CNY 1.21 billion, an increase of 55.1% from CNY 780.5 million in the last year, mainly due to an increase of CNY 208.8 million in share-based compensation expenses, of which CNY 188.6 million was the lump sum charge for 2017's grant, in contrast to 2016's grant which were vested over 3 years and charged over 3 years.
Income from operations was CNY 4.33 billion, an increase of 15.6% from CNY 3.75 billion last year. Operating margin decreased to 24.6% from 28.7%, primarily due to the decrease in gross margin by 2.8 percentage points. Net income was CNY 4.39 billion compared with CNY 3.16 billion in 2017. Net margin increased to 24.9% from 24.2%. Adjusted net income was CNY 4.2 billion compared with adjusted net income of CNY 3.23 billion, increased by 30.1%. Adjusted EBITDA was CNY 5.86 billion compared with CNY 4.45 billion last year. Net cash provided by operating activities was CNY 4.4 billion compared to CNY 3.63 billion last year. The Board of Directors has approved a special dividend of USD 0.24 per ADS for 2018, which is expected to be paid on April 8, 2019 to shareholders of record as of the close of business on April 1, 2019. Based on the current market conditions and operations conditions, the company parcel volume is expected, for 2019, to be in the range of 11.51 billion to 11.93 billion, representing a 35% to 34% (sic) [ 40% ] increase year-over-year. And the company's adjusted net income is expected to be in the range of CNY 4.8 billion to CNY 5.2 billion, representing a 14.3% to 23.8% increase for the same period. The company will no longer provide quarterly estimates going forward. Above estimates represent our current and preliminary view, which are subject to change. This concludes our prepared remarks. Thank you, everyone.
And now we are ready for Q&A. Operator?
[Operator Instructions] The first question comes from Baoying Zhai from Citi.
[Foreign Language] Mr. Lai, Ms. Yan and Sophie, my first question is regarding the cost. So from this 4Q '18 results, we see there is some pressure on cost reduction. The unit transportation cost only down 4%, unit starting cost flat. I understand the peak season was part of the reasons. But compared with the last year's peak season degree, it's still a little bit little. What are the reasons behind? And what's the guidance for 2019 cost reduction which we will do? In the past, we had the cost advantage compared with our peers, but going forward, our reduction degree may be less than our peers because their cost base is much higher. But this was mild gap, the advantage gap, between us and our peers in terms of cost. So how would you react to this? My second question is on ASP. 4Q '18 ASP was pretty good. It is because of the narrowed subsidies [ you experienced ] during peak season? And is there a guidance for 2019 ASP? Moreover, from our general check, we noticed that the price war this year started earlier and much more intensive and we are more reactive to this price war this year, too. Can you share with us our price spreadsheet this year?
Thank you, Baoying, for your question. I will answer the cost-related question first and then Chairman Lai will address your pricing strategy question. Yes, your observation is accurate that our fourth quarter overall operating cost decrease was less than expected. There are a few detailed reasons, if I may first to comment. One, there were 3% increase in the parcel weight when compared to the same period last year. We didn't control, especially during the peak season, for bulky and heavier parcel to come through our system compared to some of our other competitors. Second, the volume of parcels during the peak season increased, and cost per unit increased relatively. So -- and then also, thirdly, the price of third-party transportation services increased year-over-year, especially during the Singles' Day and then Double 12. Now for line-haul transportation, we have improved the reliance on our self-owned and operated vehicles, and we have more in the pipeline to be added. As I mentioned earlier, route planning still currently are done on a semi-automated basis. There are a lot of judgment calls. And as we improve with more technology-driven tools with greater visibility and quicker response, the line-haul route planning will become another greater productivity generator going forward. The third-party cost, if I may further explain, during the peak season, we do rely on an increased portion of our transportation on third parties because during the normal time, our usage of those third parties were low because of our increased self-owned operations. So their bargaining abilities for peak season price became higher. In that sense, there was also an impact on our overall line-haul transportation cost reduction, which is below our expectation. Second, relating to our sorting hub costs, the unit cost remained stable at RMB 0.38 for the same period last year compared. So there is no gain or no increase. Now the hike in labor cost, as I mentioned earlier, did impact, but we also found improvement opportunities in the number of temporary hiring that we should do. Now this is not a standalone issue. When we look at the integrated installation of our sorting and automation capabilities going forward, this issue will be greatly addressed. So you have also asked about what our expectations for next year. Overall, we have anticipated the greater installed base to further improve utilization. Large, small sorting machines as well as dynamic weighing machines will all become well integrated as a part of the solutions -- total solution to our overall cost reduction. Currently, we expect in 2019, there is at least 5% productivity gain for our line-haul plus sorting hub cost in 2019. So that answers your question. Now Chairman Lai will address your pricing strategy inquiry.
[Foreign Language]
Okay. Now let me translate and also supplement on volume. So for our pricing strategy, first of all, if you look at volume, we have accelerated our growth target to exceed market average by 15 percentage points at least because we realize and firmly believe scale is our first priority, which is very important to express delivery businesses. We do believe that the pricing sensitivity is a tool that is used to adjust a volume in a highly competitive and increasing market environment. Our strategy still remains that we will maintain a level of profitability or a level of profit. Our goal with the pricing is to properly manage existing volume and incremental volume. As you may have done your channel checks, there are price adjustments necessary and were done during the first and the second months of the year to stimulate further volume increases. As higher concentration of the market taking place, we are anticipating price movements, but we will never initiate price competition. And further, Chairman mentioned our goal is to improve our market share by 2 percentage points, and that is all predicated on maintaining quality of services as well as reaching our targeted profit goal. Pricing, again, will be properly managed as we've done in 2018. However, with a heightened focus on gaining market share and accelerated growth.
Your next question comes from [ Doris Wang ] from China Renaissance.
[Foreign Language] My first question is about our -- whether management can provide an outlook for the market competition [ in 4 years ]? And what is our market share target in [ 4 years ]? And my second question is about the CapEx this year? And also, do we have any M&A plans?
[Foreign Language]
Now I will translate for Chairman. China's express delivery industry is still in the medium to high speed growth stage, with parcel volume growing incrementally every year. In 2018, it was a 10 billion growth. In addition, e-commerce expected to continue gradually penetrate further. With this in mind, we are expanding our service offering to cover more industries and regions, including rural areas. Our goal this year is to maintain our profit target and service quality while growing our parcel volume more than 15 percentage points higher than the industry average. We raised our parcel volume growth target for the year because we are confident in our ability and readiness to achieve this goal. Going forward, we will increase the parcel volume and expect to reach 25% of the market share by year 2022. And Nicky, you have a second question regarding our use of capital and M&A plan. Yes, the company has a very strong cash generation capability that's generated CNY 4.2 billion in -- or CNY 4.4 billion from operating costs in 2018. And for 2018, total capital expenditure was approximately CNY 4 billion, which included roughly CNY 2.4 billion for land acquisition and sorting hub construction. Approximately CNY 775 million were used to purchase self-owned vehicles and about CNY 700 million for acquisition of sorting hub equipment and facility installation. We expect to spend another 2 -- we expect to increase our spending for 2019 to a level of CNY 6 billion to CNY 8 billion. It's a -- 10% to 15% of which will be on truck purchases, 15% to 20% on automation, and the rest on land acquisition and sorting hub construction. Our CapEx plan is, of course, closely being monitored with the development of our overall market as well as our operational requirement. Our future capital expenditure plan will be very much geared towards matching the demand on the volume as well as planning ahead for our capacity increases in meeting their incoming volume. As we have discussed in prior conversations, we do expect a longer-term growth in our industry, albeit being 20%, but yet on a huge base, we do believe investment in scale advantage will continue to be a critical competitive consideration for ZTO. Our past track record has proven that early investment is important, especially in self-owned land, self-owned facilities, which provides a huge advantage compared to rented costs, which are largely relied on some of our other competitors. Investment in infrastructure, and coupled with our volume growth, will become an important advantage going forward. M&A, you've asked that question. As a normal corporate activities, we will continue to look at ways and opportunities to increase our market penetration as well as support some of our ecosystem businesses that are underway that are either in start-up stage or in ramp-up stage. As of now, there are no definitive plans that we are able to communicate. Thank you.
Your next question comes from Edward Xu from Morgan Stanley.
[Foreign Language] Let me just translate my 2 questions. First is that, how do you see the market, the landscape for this year? Especially how do you cooperate with Alibaba and Cainiao? Especially given Ali's recent investment in STO, it looks like Ali has invested in most of the Tongda players. So what's implication from that? And second question is regarding your market share. Because you give the target of at least 15% growth above the market and probably gain market share by 2 percentage point. So how do you achieve that? Would you do it through pricing? Or what's your strategy in achieving this goal?
Thank you, Edward. Let me first address the question of Alibaba's investment. Yes, it -- we have recently communicated that the industry, the express delivery industry, is a critical -- or the logistic experience is a critical element to Alibaba's overall customer satisfaction. And on the other hand, for this industry, overall, there's still plenty of opportunities to improve efficiencies and increase productivity. And Ali has a very strong technological advantage and capability through Cainiao, as we've seen in the past, have provided great support to all the players in the express delivery industry to help us reduce cost and increase scale and improve productivity. So we see this further acquisition or further penetration into the express delivery industry as positive. Because, in addition, if you look into the future, the huge volume that is coming in, not just from Alibaba, from the overall Chinese economic development, from online shopping or new e-tailing, all these require strengthened capability as well as improved productivity for the industry as a whole, and we believe Alibaba and Cainiao will play an important role. We, as part of the industry, will benefit from a further support and further investment by Alibaba into this industry. [Foreign Language]
[Foreign Language]
I will translate. We have mentioned that there are 5 initiatives or strategic steps that we are focusing on in 2019. First, but most importantly, improve and maintain our quality of services and provide greater satisfaction to our customers, so as to enhance our brand. Two, we will improve and invest on last-mile capabilities and especially focusing on improving the earnings quality or earnings capability by our frontline couriers to provide greater competitive advantage for them. Thirdly, we are expanding our business reach and coverage to include rural area of services and specifically last-mile delivery our cooperation with Cainiao with Cainiao Post, it's part of that initiative. Fourth, we will continue to invest in our infrastructure has proven beneficial for us and greater advantage on a cost and productivity will be realized. And fourthly, improving our ability to manage our business with greater visibility, greater response through digitized process management and so as to reduce costs, find issues and solve problems. Looking back in the past, we had lesser, from a resource standpoint, from our scale standpoint, but we were able to surpass and outperform. Today, we are with greater resources, and our team are in better shape in executing, so we believe that as we accelerate our growth target going forward, the 25% market share achievement by year 2022 is very much attainable, and we are confident to reach that and even surpass that goal.
Your next question comes from Steve Sun from Bernstein.
[Foreign Language] Hello?
We can hear you, Steven. Hello?
Hello?
Please go ahead.
Pardon me. This is the operator. We appeared to have lost Steve Sun. Let's see if we can get him on the line for you. One moment.
Pardon me. Your next question comes from Eric Zong at Macquarie.
[Foreign Language] So I have 3 questions. But first of all, I want to ask about the key account business. How is the revenue share for the fourth quarter last year? And what's the volume growth for the first quarter? And how's the gross profit trend looks like for the first quarter as well? And -- so my second question is about the direct shipment. So what's the volume contribution for the overall business? And my third question is on Cainiao Post. So I would like to ask more about the management view on Cainiao Post impact ZTO's last-mile delivery in the longer term.
Thank you, Eric, for your question. Let me answer the first 2 questions regarding our key account and direct route. First of all, revenues generated by our paid key accounts were about CNY 730 million, accounting for about 13% of our total revenues. It's up about 81% from the same quarter last year. They accounted for about 8.1% of our total parcel volume, which does increase 119% from last year. The gross margin was flat with -- compared to last quarter, it was approximately 50%. Revenue generated from key accounts is about 11%, while parcel volume accounted for 6.3% in 2018 as a whole. Gross margin remained flat. Key accounts are normally large enterprise clients, such as Alipay, which -- they have a higher bargaining power and higher requirements for service qualities throughout the nation. KA volume has been increasing rapidly. We do have -- we did form our specific special department to receive such demand from our KA clients. And going forward, the profitability of these KA accounts will remain stable. And the second question relating to the direct shipments. The parcel volume for our direct shipment business, accounting for about 5% of our total volumes during fourth quarter. The direct shipment business currently accounted for about 6% of total routes, and we do not expect for the parcel volume from direct shipments to change significantly in 2019. And going forward, as volume comes through, we may see the direct shipment businesses to increase because it does, overall, provide greater timeliness as well as greater cost advantage. And then Mr. Lai will address the Cainiao Post question.
[Foreign Language]
Cainiao Post is a total solution to reduce overall delivery costs for the industry. In addition, our consumers have increased their needs and demands and they have developed new preferences from door-to-door services in the past to self-pick-up on their own leisure time. And so we believe these 2 key points are important going forward and meeting the market demand. Cainiao alliance is consisted of all express delivery Tongda companies. ZTO, as one of the shareholders, has been fully engaged and supportive of this overall initiative. We believe, in 2019, our activity level will increase Cainiao Post development and increase will continue.
This concludes our question-and-answer session. I would like to turn the conference over to Sophie Li for closing remarks.
Thank you, operator. In closing, on behalf of the entire ZTO management team, I would like to thank you for your interest and participation in today's call. 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. This concludes the call.