Operator: Please note that this event is being recorded. I would now like to turn the conference over to Ms. Sophie Li, Company Secretary. Please go ahead.

Sophie Li, Company Secretary, ZTO Express (ZTO): Thank you, Chuck. Hello everyone, and thank you for joining us today. The company’s results and investor relations presentation were released earlier today and 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 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 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. Mason, please.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 大家好，感谢各位参加今天的电话会议。2026年二季度，快递行业业务量同比增长4.2%，伴随着反内卷政策持续落地深化，市场竞争逐步回归理性，行业整体定价与盈利水平正在逐步稳步修复，整个行业正实实在在地从过去单纯拼规模、拼价格，转向更加看重价值，看重网络根基，看重基层伙伴获得感的新阶段。中通二季度各项核心指标、核心经营指标取得了扎实的进展，业务量达成104.9亿件，同比增长6.5%，市场份额提升0.4个百分点，进一步夯实我们的行业龙头地位。调整后净利润为CNY30.9亿元，同比增长50.3%，盈利的韧性得到再度验证。闪件业务同比增长47%，高价值多元化增值业务持续做大，为网点拓宽增收渠道。本季度油价波动带来阶段性成本压力，但依托全链路数字化改造与精细化运营落地，我们实现单票次运及分拣成本同比下降二分。中通长期构筑的成本壁垒依然坚固。中通二季度的业绩是政策环境引导、公司长期战略定力、全网伙伴同心同向、运营提效、产品结构升级五大维度协同的结果，更离不开全国成千上万网点经营者与一线快递员的实干付出。首先，行业监管导向清晰，反内卷方针常态化落地。中通坚持维护良性的行业竞争秩序，兼顾平台、加盟商、一线从业人员三方利益，致力于共建各方都能共享发展成果的可持续网络生态。其次，公司始终秉持长期主义，摒弃单纯追求短期规模的粗放发展模式，不但夯实中长期发展根基与竞争优势，我们把网点盈利稳步增长、快递员收入持续提升、事业稳健发展作为我们经营的核心目标，围绕份额优化、服务升级、全链路降本三大主线持续深耕。第三，全网统一思想，持续倡导政策的公平与透明，正视区域发展的客观差异，进一步疏通一线反馈渠道，结合网点实质经营现状，匹配激励与帮扶资源，从源头理性利益分配，落实多劳多得，持续提升全网收益水平与经营稳定性。第四，推动运营管理效益向网点下沉。我们搭建常态化经营数据复盘体系，实现经营状况可视、可控配送链路效益，推广分时送服务，精简终端环节，为末端释放更多利润空间。第五，持续拓展分层的高价值业务竞争，深耕闪件、逆向件市场，不断优化支持电商件与征集业务的业务结构，对冲单一业务波动，增强全网盈利韧性。当前，中国快递行业已经告别单纯的规模竞争，正迈入高质量可持续发展的新阶段，围绕两高一低的战略核心，也就是高质量服务、高质量份额和低全链路成本，持续中通将继续推进以下五大核心工作。第一，持续维护行业良性竞争环境，严格落实监管规范，带头推动行业整体竞争秩序持续改善。第二，夯实服务、份额、成本三位一体的综合竞争力。服务端重点做强上门服务的能力，塑造品牌差异化优势。份额端完善客户分层梳理，提升中小客户与征集业务占比。成本端可比网点横向对标，将降本成果与成本优势传导至最末端。第三，拉起全网经营管理水平，统一全网政策标准，针对亏损网点实施定向整改，依托数字化下沉赋能加盟合作伙伴降本增收，鼓励优质网点做大做强，帮扶困难网点走出困境，营造互利共赢的网络生态。第四，深化数字化运营和赋能，开展全网数字化实操培训，引导网点用好数字工具，补齐货量、成本、服务等层面的短板，适合业务增速，合理储备场地及运力资源。第五，做好全网安全管控和一线权益保障，定期排查，消除安全隐患，压实各级管理责任，严守生产用工、税务等合规红线，持续优化业务员激励与分配机制，保障基层从业者合理收入与合法权益。20多年一路走来，我们经历过逆境，也经历过激烈市场竞争的锤炼。我们始终看得明白，规模只是基础，质量才是根本。我们坚守服务质量、市场份额、合理利润三位一体的发展方针，践行同建共享的理念，笃信平台与网点、快递员是同生共成的整体，只有各方共同提升经营效益，理性利益分配，整张网络才能行稳致远。怀揣用我们的产品造就更多人幸福的使命，依托坚实的基建底盘，稳健的财务实力，持续释放的数字化效能，维护和增强合作网络的凝聚力和稳定性。我们有信心，也有能力实现全网经营的稳健发展，穿越经济与行业周期，为快递物流从业人员，为广大投资者创造持久的价值回报。谢谢大家。接下来请严总介绍财务结果和预期。

Sophie Li, Company Secretary, ZTO Express (ZTO): Thank you Chairman Lai. Now let me do the translation first. Hello everyone. Thank you for joining today’s conference call. In the second quarter of 2026, the express delivery industry grew 4.2% in volume year over year. As anti-monopoly policies continue to gain traction, competition became increasingly rational and the overall industry pricing and profitability experienced a steady recovery. The industry is fundamentally shifting from its previous singular focus on scale and price wars towards greater emphasis on value creation, network stability and tangible benefits for frontline partners. ZTO made solid progress across key operating metrics in the second quarter. Parcel volume reached 10.49 billion, up 6.5% year over year, with market share expanding by 0.4 percentage points, entrenching our industry leadership position. Adjusted net income was CNY 3.09 billion, up 50.3% year over year, reaffirming the resilience of our profitability. Retail parcel volume grew 47% year over year, as our higher value and diversifying value added service continued to scale up, increasing revenue diversity for our network outlets. While facing temporary cost pressures caused by oil price fluctuations during the quarter, our end-to-end digitization that intelligence transformation combined with refined operational execution, enabled us to lower the combined unit cost of transportation and sorting by CNY 0.02 over last year Preserving cost competitiveness that were forged over the years.

ZTO’s second quarter performance is the outcome of synergies across five core aspects, which are productive policy guidance, unwavering long-term strategic focus, solidarity, and the concerted efforts by network-wide partners, continuous increases in operational efficiency, and improving product structure. It also owes much to the hard-won contributions by thousands of outlets, operators, and frontline delivery workers network-wide. First, regulatory direction remains clear, and anti-involution policies were being consistently implemented. ZTO stands firm to safeguard a healthy competitive order, balances the interests of headquarters, franchisees, and frontline practitioners, and commits to fostering a sustainable eco-network with equitable shares of benefits for all stakeholders. Second, the company maintains a long-term mindset that discourages impermanent short-term scale gains, and continuously consolidates foundational strengths for its mid- and long-term development.

We regard steady profit increases for network outlets, sustained earnings growth for frontline careers, and healthy corporate development as our core operating objective, and we continue to deepen our initiatives surrounding three key priorities: market share expansion, service quality upgrading, and end-to-end cost reduction. Third, the entire network will be unified with strategic alignment and increasingly advocate fairness and transparency in network policy making and implementation. We have an objective view on regional economic disparities and have further streamlined grassroots feedback by tailoring incentive schemes and support resources to match all its actual operating conditions. We have further optimized the profit distribution mechanisms at the ground level through performance-based remuneration. Hence, steadily elevated the overall profitability and operational stability of the entire network. Fourth, we are extending our know-how for efficiency gains to outlets.

We have built a standardized and ongoing operational data analytical system to enable performance visibility and traceability. We continue to enhance last mile ops efficiencies through direct linkages, reducing organizational layers and expand profit margins. Fifth, we continue to enhance our tiered high-value business portfolio by penetrating deeper into retail parcels and reverse logistics, which optimize the mix between standard e-commerce parcels and value-added services. This also hedges against the potential single-source fluctuations and strengthens the resilience of network profitability. China’s express delivery industry is progressing from high quantity competition to high quality and sustainable development. Focusing on the strategic principle of achieving high-quality service, high-quality market share, and low end-to-end cost. ZTO will further our tasks in the following five key areas. First, continue to safeguard an environment of fair competition.

We will adhere to regulatory guidance and take on a leadership role in maintaining the industry’s overall competitive order. Second, improve integrated competitiveness in service, market share, and cost. On service, we will focus on door-to-door capabilities to build a clearly differentiated brand awareness. On market share, we will refine customer segmentation, increasing the proportion of small to medium-sized customers and value-added services. On cost, we will establish benchmarks for comparable outlets and pass through the what and how of efficiency gains to the end nodes. Third, improve consistency of managerial capabilities across the network. We will standardize policies and customize improvement plans for loss-making outlets. By pushing down digitalization efforts, we will empower franchisee partners to reduce costs and grow revenue. We will encourage top-performing outlets to scale up and support struggling outlets in overcoming adversity to foster an eco-network of mutual benefit and shared prosperity.

Fourth, deepen digitization design and implementation. We will roll out hands-on training across the network, guide outlets in effectively utilizing tools to narrow gaps in volume, cost, and service. We will also proactively align demand and capacity through careful planning. Fifth, ensure comprehensive safety management and protect grassroots rights. Regular safety inspections will be conducted to identify and eliminate hazards. Enforce accountability at all levels, and establish strict compliance boundaries such as safety, labor practice, and taxation. We will continue to refine courier incentive and compensation schemes, safeguarding their legitimate rights and interests. Over the past two decades, we have overcome adversity and weathered intense competition. We have always been clear-minded that scale is merely an outcome, and quality is what truly matters. We are committed to our development principle that integrates service quality, market share, and reasonable profitability.

We practice our philosophy of shared success, and we firmly believe that the headquarters, outlets, and couriers are interdependent parts of that unity. Only when all parties collectively improve operational efficiency and increase shares of benefits, the entire network can then achieve lasting stability and long-term success. Guided by our mission of bringing happiness to more people through our services, supported by a solid infrastructure foundation and sound financial strength, we will continue to harness digitization efficiency, maintain and strengthen cohesiveness and stability of our partner network. We are confident and capable of achieving steady, sustainable growth across the entire network, navigating through industry or economic cycles, and creating lasting value for industry participants and our investors. Now, let’s invite Ms. Yan to present the financial results and guidance.

Huiping Yan, Chief Financial Officer, ZTO Express (ZTO): Thank you, Chairman Lai and Sophie. Hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in CNY and percentage changes refer to year-over-year comparisons. Detailed information on our financial performance, unit economics, and cash flow are posted on our website, and I’ll go through some of the highlights here. In the second quarter, our long-term profitable growth strategy delivered solid results. Anti-involution regulatory efforts and our resilient franchise network continue to drive steady market share expansion with industry-leading efficiency. Our parcel volume grew 6.5% to 10.9 billion, with a 0.4 point increase in the market share. Total revenue increased 23% to CNY 14.5 billion, while operating income rose 30.4% to CNY 3.23 billion.

Adjusted net income grew 50.3% to CNY 3.1 billion, benefiting from a CNY 344.3 million tax refund as our wholly owned subsidiary qualified for a 10% preferential tax rate for tax year 2025. ASP for our core express delivery rose CNY 0.19 or increased 15.5%, driven by a CNY 0.17 positive impact derived mainly from increased KA volume mix, which included higher value reverse logistics and a CNY 0.02 increase from higher average weight per parcel. Total cost of revenue was CNY 10.8 billion, which increased 21.7%. Overall unit costs for the core express delivery business increased 14.6% or CNY 0.12, which includes KA cost increase of CNY 0.14 that was consistent with the strategic increase in KA volume. Despite cost pressures stemming from the rise of oil prices, our combined unit sorting and transportation costs decreased by 3.2% or CNY 0.02, thanks to digitization and lean operations.

Specifically, unit cost of line haul transportation decreased by 3.7% to CNY 0.32, reflecting optimized route planning and enhanced load rate efficiency. Unit sorting costs decreased 2.6% to CNY 0.24, benefiting from continued improvements in labor and automation productivity. Gross profit increased 26.8% to CNY 3.7 billion, and gross profit margin rate increased by 0.8 points to 25.7%. SG&A expenses excluding SBC decreased 10.5% to CNY 555.5 million. SG&A excluding SBC as a percentage of revenue declined to 3.8%, reflecting strong corporate cost efficiency. Income from operations increased 30.4% to CNY 3.2 billion, and associated margin increased 1.3 points to 22.2%. Operating cash flow totaled CNY 4.6 billion for the quarter, primarily attributable to higher operating profits, lower financing receivables, and interest income realized upon maturities of long-term financial products and favorable terms on sizable few payables due for payment in the next quarter. Adjusted EBITDA increased 20% to CNY 4.2 billion.

Capital expenditure for second quarter totaled $952 million, and we anticipate the annual CapEx in 2026 to be around $6 billion. Moving on to our guidance. Considering the current economic conditions and anticipated industry parcel volume growth, we have updated our full year parcel volume growth guidance to 6%-10% year-over-year, representing a parcel volume range of 40.83 billion to 42.37 billion. These estimates reflect management’s current preliminary view and are subject to change. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Operator: Thank you. 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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to two questions. At this time, we’ll pause momentarily to assemble our roster. The first question will come from Quay Lee Finn with Morgan Stanley. Please go ahead. Pardon me. We have Mr. Steve Keung with Goldman Sachs as our first questioner. Please go ahead.

Steve Keung, Analyst, Goldman Sachs: 早上好，谢谢赖总、严总、Sophie接受我的提问。想提一个关于AI以及智能化提效方面的问题。看到公司在转运中心包括部署了3D数字孪生和机器视觉的技术，网点也使用了语音客服的AI升级，区域管理的决策分析流程也通过AI进行了加速。也想请教一下中通在AI顶层的战略思考以及具体的工作流落地上面的一些分享。I’d like to ask a question about AI-driven efficiency gains.

I’ve noticed that a company has deployed 3D digital twin and machine vision technology at its loading hubs, an upgrade with customer service and network outlets, as well as accelerated regional management and decision making. Could you share ZTO’s high level strategic thinking on digitalization as well as AI, as well as your thoughts on the specific use cases in the operational workflows and where it’s been implemented? Thank you.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 感谢你的提问。人工智能对中通的核心价值在于依托每天上亿包裹的数据沉淀和成熟的网络运营体系，持续优化全网协同成本，形成从降本到增效的经营闭环，构筑起行业难以复制的数字化壁垒。目前，AI已贯穿从收件到派件的全链条，并转化为实际收益。具体来看，以中通单一运输环节，AI智能路由调度系统已覆盖六大常用场景，通过路线优化释放闲置运力，装载率与时效明显提升，路线协同货量同比增长120%，滞留快件减少15%。2026年上半年，AI在运输环节节约成本约占总运输成本的12%。中转环节，智能园区系统已覆盖全国转运中心，机器视觉实时识别错分、拥堵等28种异常，联动现场预警与3D可视化大屏，实现从发现到处置的闭环管理，卸车效率提升4%，异常追溯覆盖率达88.4%。三、管理环节。AI智能数据分析助手解决了全统报表布画人工取数滞后问题，已覆盖总部及省区2000多名管理人员，日常均提分析耗时缩短90%以上。网点端。揽派环节，精准地址体系已覆盖25万多名一线业务员，流动及定位准确率达99.98%，支撑订单分组、线路优化等调度场景，模型精度伴随业务规模持续升级优化。二、AI客服体系。商家端90%以上的咨询与工单需求由AI自主办结，有效降低人工运营成本。消费端通过AI全自赋能，客户满意度从80%提升至近90%。在管理赋能方面，基于智能数据分析助手将优势运营方法论标准化，推送至全网6000多个网点，网点响应率达到88%，有效缩小网点间的经营能力差距，实现管理经营的规模化作用。当前，AI已成为中通的核心战略之一。展望未来，我们将持续深化AI技术与业务运营的融合，将技术突破转化为经营效率与服务品质的双重优势，进一步巩固行业地位。谢谢。

Huiping Yan, Chief Financial Officer, ZTO Express (ZTO): Thank you, chairman. Now let me translate for ZTO. The core value of the AI lies in leveraging data from over 100 million daily parcels and our matured network operations to continuously optimize network-wide costs. It creates a self-reinforcing loop of lower cost and higher efficiency, building digital technological mode that is not easily replicated. Today, AI runs through the entire chain from pickup to delivery and has translated into tangible gains. Specifically as following: on the hub side or the super sorting center side. In transportation, our proprietary intelligent routing and dispatch system now covers six most common scenarios. By optimizing routes, it unlocks idle capacity and drives improvements in load rates and shortens transit time. Route-coordinated parcel volume grew 120% year-over-year and stranded parcels fell 15%.

In the first half of 2026, the cost saving achieved by AI in transportation accounted for about 10% of the total reduction in transportation cost. In transit, our smart park system now covers all transit centers nationwide. Machine vision monitors operations in real time and flags 28 types of anomalies from congestion to missorting. Working with on-site alerts and 3D visualization dashboards, it closes the loop from detection to resolution. Unloading efficiency rose 4% and anomaly traceability coverage reached 88.4%. In management, our proprietary data agent now serves more than 2,000 managers at headquarters and provincial offices, fixing the problem of static reports and after-the-fact manual data pulls, thus cutting the time for routing analysis by more than 90%. On the outlet side, in picking up and delivery, our precision address system now covers more than 250,000 frontline couriers with building-level location accuracy of 99.98%.

It supports dispatch applications from order grouping to route optimization, and its accuracy keeps improving as business volumes continue to grow. On the AI customer service front, more than 90% of merchant inquiries and ticketing are now resolved through AI self-service, effectively lowering labor costs. On the consumer side, with AI stepping in earlier, customer satisfaction has risen from 80% to nearly 90%. On a management front, building on the data agent, we now push standardized best practice playbooks to more than 6,000 outlets across our network with a response rate of 88%, narrowing the capability gap across outlets and enabling proven management practice to be replicated in scale. AI has become a core strategic driver for ZTO.

Looking ahead, we will continue to deepen the integration of AI across our operations, covering technological breakthroughs, in converting technical breakthroughs into gains in both efficiency and service quality to further solidify our market leadership.

Operator: The next question will come from Qianlei Fan with Morgan Stanley. Please go ahead.

Qianlei Fan, Analyst, Morgan Stanley: Thank you, operator.

Lai Zong, Yuan Zong，感谢接受我的提问，也恭喜公司很好的二季度的业绩增长。我有两个小问题。那第一个问题是关于逆向件的，也观察到逆向件其实对公司的盈利增长起到了非常重要的助力。那么想请教一下现在逆向件的日单量的情况，然后对应的同比增速的情况，然后今年我们到了旺季有没有什么样的目标，以及明年这个逆向件增长的目标。这第一个问题。那第二个问题是关于社保对公司成本和经营的影响。我们今年有听到一些其他的行业在讨论社保全额实缴，也是在逐渐地推进当中。就想请教一下这个社保全额实缴对公司成本和经营的影响。历史上我们也观察到全行业的成本上升，也大部分通过涨价的形式去pass through给整个收入端。所以想请教，如果有社保的影响带来的成本上升，是不是行业也会考虑通过协同涨价的方式去把这个影响淡化？

Thank you, management, for taking my questions, and congratulations on a very strong profit growth in the quarter. I have two questions. The first question is about the reverse logistics parcels. It is encouraging to see that the retail parcels have contributed a solid foundation for our profit growth. Just wondering in terms of daily volume, where are we now? What is the year implied year-on-year growth? Do we have any targets towards the peak season of this year and in next year? The second question is about the social insurance. In this year, we start to hear more discussion about the full social insurance contribution implementation gradually pushed by regulators. Wondering what is the potential impacts on our costs and operations. Specifically, historically, we have seen that industry-wide cost inflation could be passed through by industry-wide price hikes.

Do you think if there are any cost inflation related with this full social insurance contribution, the industry has opportunities to pass that cost inflation through? Thank you.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 散件业务，尤其是逆向件业务的快速发展，是中通践行高质量的策略，打造产品分层体系的重要成果，也是服务质量领先和末端网络稳定的重要体现。二季度，我们散件日均件量超1,170万单，其中逆向日均约980万单，同比实现高速增长。尽管逆向件业务的价格因市场竞争有所回落，但得益于规模效应与精细化的成本管控，使单票利润水平有望得到进一步优化。目前逆向件的单票利润贡献仍高于普通电商经济件，有效提升了整体的单票盈利能力。明年的目标中通非常明确，我们要高质量的发展，要高质量的份额，高质量的服务。所以我们中通将切实提升上门能力，重点关注散件业务的增长和逆向件的质量的稳步提升，有效助力网点盈利增长和业务员收入的增加。谢谢。

Sophie Li, Company Secretary, ZTO Express (ZTO): Thank you very much for your question. Let me translate for our chairman. The rapid growth of our retail parcel business, particularly reverse logistic parcels, is a key component of ZTO’s high quality strategy and product diversification. It demonstrates our leadership in customer service and quality as well as the stability of our network. In the second quarter, average daily retail parcel volume exceeded 11.87 million, of which return parcels averaged approximately 9.8 million each day, increased approximately 80% year over year. Although the price of reverse logistic parcels has declined from the past as market competition continues, we expect per parcel profitability in this business to continue to improve, supported by economies of scale and refined cost control. At present, reverse logistic parcels still generates higher per parcel profit than standardized e-commerce parcels, effectively lifting the company’s overall per parcel profitability. Next year, again, our strategy is very clear.

We are seeking high quality services, high quality market share, and we aim to improve our capability for door-to-door services. We are focusing closely on the quality of our network earnings as well as our couriers income increases. The reverse parcel volume will continue to be a main driver for our product diversification as well as the profitability gain across the whole network.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 第二个，快递员社保问题。当前，监管层面持续推动完善快递从业人员多层次社会保障体系，与反内卷政策协同引导行业规范用工，保障权益，促进行业高质量发展。政策采取推进思路，对建立劳动关系的从业人员依法缴纳社保。针对新业态灵活用工人员，推进职业伤害保障扩面，整体为渐进落地接受。公司自成立以来，始终践行同兼共享理念，高度重视网络合作伙伴与一线快递员的权益保障。在用工管理上，我们始终坚守行业合规经营底线，扎实推进用工体制完善，切实维护一线从业人员的合法权益。我们非常欢迎并积极响应邮政管理部门关于快递员社保缴纳的各项举措。短期看，社保规范落地将带来全链路单票成本的一定上升。但长远而言，稳定的社保保障有助于增强网络凝聚力，降低人员流失，进一步夯实末端服务能力。中通将持续发挥引领作用，推动行业迈向更高质量的发展。谢谢。

Sophie Li, Company Secretary, ZTO Express (ZTO): Let me translate and supplement where needed. With the critical data sharing system being implemented, regulators plan to advance a multi-tiered social security system for flex work arrangements, including express delivery personnel. Together with anti-monopoly policies, these efforts aim to standardize employment practice, protect frontline workers rights and interests, and drive high quality industry development, which are consistent with ZTO’s core beliefs. The policy adopts an approach of a stepped rollout. Social insurance contributions are being enforced for personnel with formal employment relationships, whereas occupational injury protection is being expanded for flexible workers. From the beginning, the company have consistently upheld the core philosophy of shared success, placing great importance on protecting the interests of our network partners and frontline workers.

In our own workforce management, we have always adhered to industry practice boundaries, steadily improving our employment system, and encourage our network partners to provide legitimate rights of the frontline workers. We welcome the regulators guidance on Social Security contributions for couriers addressing, and also are actively encouraging and helping our network partners to address challenges for unique flex work arrangements. While the rollout of standardized Social Security initiatives will inevitably bring about end-to-end cost increases in the foreseeable future. Over the long run, complete coverage will strengthen network stability, reduce courier turnover, and further reinforce a last mile service quality. ZTO will continue to stay at the forefront of the industry as it moves toward higher quality development for the long term. That answers your questions. Thank you.

Operator: The next question will come from Aaron Luo with UBS. Please go ahead.

Aaron Luo, Analyst, UBS: 赖总、严总、孙总，你们好啊，感谢接受我的提问。我这边有两个问题啦。第一个是看到咱们也给了新的全年业务量指引吧，所以想请教一下你们对这个行业下半年增速的一个展望，包括咱们公司下半年整体的一个在量价这块的这个战略啊，整体的。那另一个问题是关于成本的。就我们在未来成本这块有没有什么这个新的指引，尤其是油价，目前这个对我们成本的影响，你们判断会有多大？

Let me translate for myself. Thanks Ms. Lai, Ms. Yan and Sophie for taking my questions. The first one is regarding our new full year volume guidance. I would like to seek a bit more of your insights on the industry’s second half growth outlook and our company’s strategic plan for the second half. On the cost side, do we have any cost guidance for the future? What is the sensitivity of our costs to oil prices? Thank you so much.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 你好。随着反内卷的持续，上半年快递行业经历了阶段性调整，已从粗放式规模扩张逐步转向高质量发展、经营质量优先的新阶段。展望后续，行业高质量转型将继续深入推进，增长重心更多地转向服务质量与运行效率的提升，运量增速预计保持在合理水平。主义的价值取向，不盲目追求短期的规模扩张。我们将网点盈利水平的稳步改善、快递员收入的持续增长、企业整体经营的稳健向好作为衡量高质量发展的核心标准。在战略落地上，我们将重点围绕提升有效份额，打造差异化服务能力，推进全链路精细运营三条主线持续深耕。在巩固件量领先地位的同时，更加注重高质量份额的获取与合理利润水平的保障。不断夯实中长期发展根基，进一步扩大竞争优势。谢谢。

Huiping Yan, Chief Financial Officer, ZTO Express (ZTO): Now let me translate for the first part of the question. As the anti-monopoly policy continued to take effect in the first half of the year, the express delivery industry has undergone a period of adjustment and has gradually shifted away from price-led scale expansion to quality-driven development, leveraging operating efficiency. Looking ahead, the industry’s transformation will continue to deepen, focusing more on improvements in service quality and operational efficiency. We anticipate the parcel volume growth for the entire industry to be at stable or steady level. As industry shifts towards high quality development, the company remains committed to a sustainable long-term mindset rather than seeking short-term scale expansion. For us, the core of high quality development comes down to increasing profitability of outlets, rising income by couriers and healthy increasing profit for the company. Strategically, we will continue to focus on these priorities, growing effective market share, building differentiated service capabilities, and advancing end-to-end lean operations. While solidifying our leadership in parcel volume, we will place greater emphasis on winning high quality market share and maintain sound profitability, continually showing up our foundation for competitive growth for medium to long-term. If I may supplement, when you ask about the volume and price, again, we will be watched closely to what the industry’s development is as our goal continues to be growing and expanding our market share leadership.

Meisong Lai, Chairman and Chief Executive Officer, ZTO Express (ZTO): 关于成本问题和全年成本的指引。成本表现二季度油价上涨对运输成本造成压力，单票运输成本因此上升了约2分钱。然而，得益于数字化工具的深化运用，单票运输成本和分拣成本合计来下降两分。具体来说，单票运输成本0.32元，同比下降1分钱，其中二季度油价上涨影响单票成本约2分。在降本方面，一是持续深化数字化工具应用，利用智能调度系统提前预测货量流向、智能排班，并实时监控，优化运力结构与路线规划。同时合理利用辅助驾驶系统，在保障运输时效的同时有效降低成本。二是优化装载率指标与考核机制，推进阶梯式装载率激励机制。三是持续完善车队管理、优先权车队运输标准化成本模型，并对驾驶员实施成本节约激励，进一步降低运维成本。二是油价成本的影响。二季度柴油价格平均上涨24%，对于干线运输成本形成压力。展望下半年，国际局势存在较大不确定性。在油价未见明显回调之前，预计将给单票运输成本带来一到两分的阶段性影响。针对油价波动，我们一方面利用内部加油体制部分对冲，另一方面持续增加天然气车的投入，并积极探索新能源电力重卡在快递场景的应用。这运输成本我们其实还是可以管理的，因为我们单票重量是上升的，所以实际它的成本下降是超过12%。二是分拣成本。二季度单票分拣成本0.24元，同比下降1分。我们一方面持续加大中心智能化设备投入，通过实时监控与预警、老旧设备升级改造等措施，在降低成本的同时，提升设备运行效能，进一步增强场地自动化水平。另一方面，通过岗位用工预测和车场模型优化排班，并深化推行责任到人配套明确奖惩机制，以此提升人均效能。降本目标，我们预计全年综转环核心有望下降三分。在综转环之外，我们将更加聚焦于全链路降本，今年会大力推进网络调优，依托数字化工具，提升网点运营能力和服务质量。同时，我们将继续鼓励网点加装自动化设备，投放无人车，及推广责列模式，持续降低下单成本。谢谢。

Huiping Yan, Chief Financial Officer, ZTO Express (ZTO): The cost performance in the second quarter, due to rising fuel prices, which put pressure on transportation cost and impacted per parcel transportation cost by approximately CNY 0.02. Thanks to continued implementation of efficiency gain initiatives, which includes smart tool, combined unit transportation cost and sorting cost declined by CNY 0.02. Specifically on the transportation cost, in the second quarter, transportation cost per parcel was CNY 0.32, down CNY 0.01 year-over-year. The rising fuel cost added roughly about CNY 0.02 to cost per parcel. On the cost reduction front, first, we further implemented digitized smart tools using our proprietary intelligent dispatch system to forecast shipment flows in advance, optimize shift scheduling. We find low capacity structure in route planning in real time, while making prudent use of assisted driving system to shorten transit times duration and effectively lower cost.

Second, we refined our load rate metrics and assessment mechanism, rolled out tiered loading rate incentives. Third, we continue to strengthen fleet management, consistently refining standardized cost model as we use it as a benchmark to incentivize our drivers. Fuel cost impact on the transportation cost. Diesel cost, everybody knows that it rose around 24% in the second quarter, which put pressure on line haul transportation costs. Looking into the second half, the global environment remains highly uncertain. Unit oil price pull back meaningfully. We expect the oil price are not necessarily going to pull back meaningfully. So we expect fuel price continue to weigh on per parcel transportation cost by about CNY 0.01-CNY 0.02.

To counter the fuel price volatility, we are leveraging our opportunist reserve of oil at a lower cost and to offset and then also continue to expand our fleet of natural gas trucks, as well as actively exploring the deployment of electrical vehicles that is suitable for express delivery operations. To be exact, because the first half and particularly second quarter, weight per parcel has increased, so therefore really the total cost has increased for transportation. In that sense, we actually achieved more than 10% cost efficiency on transportation. Sorting cost in the second quarter was CNY 0.24, down CNY 0.01 year-over-year. On the equipment front, we steadily increased level of automation with smart solutions for sorting equipment and also upgrading old equipment. Through real-time monitoring and early warning, we improved equipment utilization.

On the labor cost front, we optimized shift scheduling through station-based staffing forecast and recapped procedures, so therefore enforced accountability at the individual level for clear rewards and penalties, thereby improving labor productivity. Cost reduction targets. We expect our core costs in transit operations to decline by CNY 0.03 for the full year. Beyond transit operations, we are putting greater emphasis on end-to-end cost reduction. By leveraging digital tools to strengthen outlet operations, we are confident to improve service quality and reduce overall cost to help with our end-to-end total cost reduction for the entire year. Hope that answers your question.

Aaron Luo, Analyst, UBS: Thank you so much.

Sophie Li, Company Secretary, ZTO Express (ZTO): I believe this takes us to the bottom of the hour, and we thank everybody for joining us for the call. We look forward to have further conversations with you, to share with you our view and on-the-ground practice as we move forward towards higher quality development and sustainable return for express delivery participants as well as our shareholders. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.