2618.HK2618.HK
LOADING
|||
Operator: Ladies and gentlemen, thank you for standing by. Welcome to JD Logistics Third Quarter 2025 Results Conference Call. [Operator Instructions] I'd like to turn the call to Mr. Sean, Head of IR team at JD Logistics.
Sean Shibiao Zhang: Thank you, operator. Good day, ladies and gentlemen. Welcome to our third quarter 2025 results conference call. Joining us today are our Executive Director and CEO as well as the CFO. Before we start, we'd like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and in this discussion. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will discuss certain non-IFRS financial measures for comparison purposes only. For a definition of the non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the third months ended September 30, 2025, issued earlier today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question-and-answer session. A third-party interpreter will provide simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prepare. I would like to turn the call over to Mr. Hu Wei. Please go ahead, sir.
Wei Hu: Thank you, Mr. I'm so happy to meet you here. This is the third quarter of the 2025 earnings call meeting. In the third quarter, with the effect of proactive macro policies, China's economy maintained a steady and progressive trend as a critical enabler of the national economic circle, modern Logistics continued to facilitate the efficient flow of production factors, strengthening the economy's resilience. During the quarter, JD Logistics continued to strengthen its capacities in service experience and delivery partners, consistently expanding product portfolio and solidify the service competitiveness, improving customer experience and satisfaction and achieving high-quality related revenue growth. In the third quarter of 2025, JDL achieved a total revenue of RMB 55.1 billion, an increase of 24.1% year-over-year in terms of profit. Our non-IFRS net profit was RMB 2.02 billion with a profit margin of 3.4%. We are committed to building our long-term capacity and competitiveness, making targeted investments in areas such as international business expansion and timeless capacity improvement to enhance our operational strength and lay the foundation for long-term business growth. Revenue from integrated supply chain ISC customers reached RMB 13.1 billion in the third quarter increased by 45.8% year-over-year with both internal and external ISC customers sustaining solid double-digit growth. This included RMB 8.9 billion in the revenue from external ISC customers. Leveraging our extensive network coverage, extensive warehousing operations and management experience and accumulated ISC capacities, we continued to strengthen our leading position in China supply chain market, achieving growth in both the number and average revenue per customer APR of our external ISC customers. We provide industry-specific ISC solutions and service products for customers in fast-moving consumer goods, home appliances, home furniture, safety, apparel, automotive and fresh products and other industries. In the face of the ever-changing business environment and market landscape, we remain focused on experience, cost and efficiency, enhancing our industry-specific service capacities. We delivered products and solutions tailored to customer-specific industry logistics and operational pain points, helping them improve operational efficiency, reduce operating costs and optimize customer experience. In home appliance industry, we continued to expand our ISC solutions end-to-end process coverage. By leveraging digital capacities to integrate end-to-end information flow, we enabled efficient coordination in all aspects of operations, helping brand customers reduce cost and enhance efficiency. For instance, in the third quarter of 2025, a cooperation with a well-known home appliance brand customer extended upstream to the process from the customers' factory to their warehouse. Through our consolidated distribution model, we optimized the transportation routes and efficiently reduced the transit frequency during inbound to warehouse transportation, helping the customer to reduce logistic costs. Meanwhile, we leveraged our digital supply chain system to provide destination warehouse with real-time visibility of in-transit information. This enables them to range uploading zones and allocate manpower in advance, significantly improving inbound efficiency and shortening order fulfillment time. Going forward, we will continue to deepen our presence in the ISC space, capitalizing on our advantages in digital technology, network coverage and operational management. We will replicate and scale the successful experience with this brand to more customers, committed to build the most efficient ISC solution through the entire process. The steady development of our ISC business is underpinned by our continuously improving network infrastructure. As of the end of September 2025, our warehouse network covered nearly all countries and districts in China, consisting of over 1,600 self-operated warehouses and over 2,000 third-party warehouse owner-operated cloud warehouses under our open warehouse platform. Our warehouse network has an aggregate gross floor area of more than 34 million square meters, including warehouse space managed through the open warehouse platform. We have enhanced the breadth of our coverage and enriched our service offerings through further expansion into lower-tier regions and continued optimization of our warehouse network. During this quarter, guided by our cooperational philosophy of placing products as close as possible to customers, reducing handling frequency and minimizing fulfillment distance, we accelerated warehouse network development and verification of the service capacities in lower-tier cities since official commencement of JDL's Kafka warehouse in April 2025, both local customer experiences and local efficiency have improved significantly in the third quarter. The warehouse contributions to our operational efficiencies continue to grow, supported by our ongoing enhancements in warehousing operating efficiency and regional distribution capacities. Core areas now enjoying a 2-1-1 time delivery service, while surrounding remote areas have achieved steady next-day delivery. This quickly improved local customers' shopping experience, widespread positive feedback meanwhile, we strengthened our capacities in bulking item logistics building, JDL, delivery installation, assembly return, while steadily strengthening our leadership in China's ISC market while also expanding our overseas footprint, leveraging years of accumulated warehousing operation expertise and world-leading ISC capacities. As we replicate and scale these capacities in overseas market, we are providing more Chinese brands, overseas customers and for e-commerce platforms with high-quality efficient and comprehensive ISC services. Based on long-term in-depth cooperation with auto customers in China's auto spare parts supply chain sectors and the strategic advantages of our overseas warehouse in the Middle East. In the third quarter, a leading new NGB brand chose to further strategic partners with us to jointly expand into the Eastern market. we planned and now operated a spare parts warehouse in Dubai's Jebel Ali Free Zone, providing end-to-end logistics services from container acceptance, customer clearance, quality inspection and other processing to packaging and outbound logistics. This shortened customer spare parts distribution circle, improved inventory turnover efficiency and strengthened the aftersale network across Middle East, South Africa. At present, JDL has established multiple overseas warehouses in the Middle East and continue to enhance its automation and digital operation capacities, delivering global ISC solutions for several other companies and enabling them to achieve a more efficient and sustainable growth in international markets. As part of our overseas warehouse expansion, we accelerated our global smart supply chain network. and actively expand our overseas warehouse footprint bycelerating progress towards our goal of doubling the gross area of our overseas warehouse by the end of 2025, a target we're fully confident in achieving. In Q3, our revenue from other customers, including express and freight delivery services reached RMB 24.9 billion with a 5.1% year-over-year growth, we have consistently adhered to the high core development strategy, focus on expansion of the high-value businesses while enhancing timeless service capacity and product diversity, laying a solid foundation for the long-term sustainable growth of our business. In our express delivery sector, we continue to enhance our delivery timeless capacity and product competitiveness with a focus on expanding our high-turn, high-value, services. For instance, we expanded our high-tensile delivery capacity, which previously centered on categories such as lychee and hairy crab into high-value scenarios into production zones. This expansion has effectively improved the service quality and delivery efficiency, driving the growth of high timeliest delivery business. Additionally, we continue to strengthen our cooperation and penetration with leading brand merchants on mainstream platforms. For instance, in the third quarter, we started multiple channel cooperation with several well-known sportswear brands, achieving a notable increase in business share, while driving revenue growth in our high delivery services, we also helped the brand customers gain greater platform traffic through high-quality logistics services, creating value for our customers. In the last mile fulfillment process, we continue to optimize our service models and strengthen operational capacities. Recently, we acquired wholly owned subsidiaries of JD Group specializing in local on-demand delivery, which has already established a mature operating system in the sector and demonstrated the strong commercial potential and growth prospects. Looking ahead, we expect the integration of this business to further enrich JDL's product portfolio, complement our last-mile delivery network and enhance fulfillment graphic operational efficiency and overall user experience. Through our business development process, we have adhered to our core value first. JDL remains dedicated to offering premium services such as delivery, on-demand pickup and delivery and return exchange continuously enhancing the quality of our express delivery services. With such professional and reliable services, we have earned a trust and preference of our customers and consumers as well as recognition from national authorities. In August 2025, in the Logistics 2025 report released by the globally authority brand valuation consultancy, Brand Finance, JDL was rated as the strongest Logistics brand 2025 worldwide. Our ranking in the most valuable logistics brands listed in year-over-year, demonstrating our strong international competitiveness and brand influence. Regarding the freight delivery business, with the consolidation with Teton Logistics and [ King Freight, ] we ranked among the top tier in China in terms of cargo volume and revenue share of freight delivery services. We've now established a freight delivery product portfolio covering various timeliest levels and diversified service scenarios, allowing us to precisely match our customers' differentiated needs regarding timeliest requirements, service standards and other aspects. In terms of air freight, we continue to expand our international cargo route network. In the third quarter, we launched a new all type of fly route direct in Shenzhen Bao International Airport to Singapore, Chongqing Airport, further strengthening our air transportation connectivity with the Asia Pacific region. We constantly prioritize technical innovation through ongoing investment in automation equipment, AI and other applications. We have deeply integrated digital intelligent technologies into every stage of the logistics value chain, driving the comprehensive application of AI plus robots across end-to-end logistics chain, including warehousing, storing transportation and delivery. We recently self-developed series robots of [ W pack, ] which are highly suited to our operational scenarios. For example, in the warehouse operations, we are accelerating the deployment of the [ 2 line intelligent ] warehouse solution with both the number of deployed devices and the cities covered increasing further this quarter. And in addition, we have deployed [indiscernible] shadow for bulky item storage and boost to person scenarios, the [indiscernible] intelligent robotic arm and automatic towards for order picking, storing and packaging as well as f drone and dual unmanned vehicle for collections between industrial parks and delivery stations by continuously expanding automation coverage across both processes and logistic value chain we will enhance operational efficiency and provide customers with reliable high-performance supply chain support. Going forward, we will continue to promote the adoption of automation equipment and AI test driving efficiency upgrades across our end-to-end logistics value chain that will support middle and long-term profitability. Meanwhile, we will remain committed to promoting the tech upgrading of the industry, bringing efficient supply chain services to more regions worldwide, and we will improving the social value. Thank you. And we have just announced a new announcement. For my personal reasons, I will take new positions under JD Group. I will no longer be the CEO for the next session. Over the last few years, I collaborated and grow together with JDL, making contribution to customers and consumers. I worked with JDL team for years. I feel so happy and I'm so moved. I want to express my gratitude to the stakeholders and all the Board members. And next, Mr. Wang Zhenhui will take the role as the CEO. Mr. Wang has been working with different companies as well as public companies for years, and he has the business insight as well as the business vision. Mr. Wang has a very solid foundation experiences in the logistics sector. I believe that with his guidance and with his wisdom, JDL will further make contributions to stakeholders and Board members. I'm going to welcome Mr. Wang to say a few words.
Zhenhui Wang: Thank you, Mr. Hu Wei, Dear investors, dear analysts, good to see you. My name is Wang Zhenhui. I'm so happy and honored to take this chance, and I will soon take the job as the CEO of JDL. I want to thank Mr. Hu Wei for your contribution. In the upcoming days and months and years, I will lead the team centrally on the cost efficiency and the core competitiveness, making new progress, not only for the company, but also for the but also for the entire side. Now let's welcome Mr. Wu Hao to give you the overview of the financial performance.
Hao Wu: Thank you, Mr. Hu. Thank you, Mr. Wang. Hello, this is Wu Hao, the CFO of JDL. I'm pleased to present JDL's financial performance of the third quarter 2025. In the third quarter of 2025, China's macro economy remained stable with continued improvement, demonstrating strong resilience and vitality. Supported by our ever strengthening products and service capacities, JDL achieved accelerated revenue growth by continuously improving timeless and customer experience and further enriching our solution and product portfolio. In the third quarter of 2025, our revenue reached RMB 55.08 billion with a year-over-year of 24.1%. In terms of the profitability, IFRS profit was RMB 1.96 billion, non-IFRS profit with a margin of 3.2%. Non-IFRS profit was RMB 2.02 billion with a margin of 3.7%. Since the beginning, this year, we continue to make strategic investments to strengthen our long-term industrial competitiveness and actively expand business growth opportunities, further solidify our market competitiveness strength. Current investment phase remains consistent with our operational plan. Looking ahead, as business volume increases entering the peak season, we expect economies of scale and improved resource utilization to support profitability improvement. Let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 13.13 billion in the third quarter with year-over-year increase of 45.8% among them. ISC revenue from JD Group amounted to RMB 21.20 billion, up 65.8% year-over-year, mainly due to the incremental revenue generated by our full-time riders participating in JD Food delivery as well as from the growth in the JD Retail. Revenue from external ISC customers was RMB 8.93 billion, up 13.5% year-over-year. The number of external ISC customers amounted to around 67,000, up 12.7% year-over-year, continuing the trend of double-digit growth over several consecutive quarters. While serving more customers, we also deepened and broadened our engagement with existing customers. In the third quarter, our average revenue per customer for external ISC reached RMB 134,000, up 0.7% year-over-year, extending the year-over-year growth from the previous quarter. This growth was primarily driven by our extensive comprehensive warehouse network and mature operational capacity. By continuously upgrading our supply chain products and services, including extending the service supply chain, broadening geographic coverage and deepening omnichannel integration online and offline, we strengthened partnerships with leading customers industries such as apparel, FMCG and auto, helping them improve market competitiveness while optimizing operational costs and efficiency. In the third quarter of 2025, our revenue from other customers, primarily including express and freight delivery services was RMB 24.95 billion, up by 21% year-over-year. For express delivery services, we continue to alleviate customer experience satisfaction focused on the expansion of high-value segments. In the freight sector, we ranked among the top tier in China in terms of cargo volume and revenue scale, supported by our diverse freight delivery services that cover multiple timeliest levels and service scenarios. Moving on to cost and profitability. In the third quarter, our gross profit margin was 9.1%. We continue strengthening our capacities in key strategic areas, including enhancing delivery, improving customer experiences and expanding our international business to drive JDL's long-term high [indiscernible] growth. Next, let's turn to the major parts of the cost and revenue. First, employee benefit expenses were RMB 21.82 billion in the third quarter, up 49.8% year-over-year. This was primarily due to the addition of full-time food delivery riders compared with the same period of last year as well as the year-over-year increase in the number of operational employees in the delivery and warehouse operations. The number of operational employees grew from approximately 640,000 at the end of the third quarter last year to 440,000 at the end of the third quarter of last year. while remaining relatively stable quarter-over-quarter since the beginning of this year, we've added our own employees to key operational processes such as last-mile delivery and warehousing aimed at upgrading our product and services and alleviating customer experience. The key indicators such as on-time delivery rate and customer satisfaction improved. In the third quarter, employee benefit expenses accounted for 39.6% of total revenue, up 6.8%. Second, our outsourcing cost was RMB 16.97 billion in the third quarter, up 13% year-over-year. Our outsourcing costs accounted for 13.8% of total revenue. With a year-over-year decrease of 3.0 percentage points, we optimized outsourcing costs, which are primarily transportation related by applying algorithm-based transportation deployment systems and optimizing the structure of transportation resources, such as increasing the proportion of the self-owned vehicles. Third, our total rental cost was RMB 3.20 billion in the third quarter, up 2.5% year-over-year. We continue to promote site integration and optimize network structure, improving the utilization efficiency in our sites. Our total rental cost accounted for 5.8% of total revenue in the third quarter, down by 1.2 percentage points. Apart from the major costs mentioned above, our ongoing business expansion has resulted in improved economies of scale, driving down our depreciation and amortization costs as a percentage of total revenue by 0.2%. Meanwhile, due to the growth of services such as nation and maintenance, other costs as a percentage of total revenue increased by 0.3 percentage points. In terms of expenses, our operating expenses in the quarter were RMB 3.70 billion, up 15.9% year-over-year, accounting for 6.7% of total revenue with a year-over-year decrease of 0.4 percentage points. This improvement was driven by our consistent enhancement in refined management and cost control capacity. Among them, sales and marketing expenses increased by 13.5% year-over-year to RMB 1.58 billion, accounting for 2.9% of total revenue, down 0.3 percentage points year-over-year. Sales and marketing expenses accounted for 4.7% of revenue for external customers, up 0.3 percentage points. We maintained monetary investments in sales and marketing personnel to drive business growth. In the third quarter, our R&D expenses were RMB 1.06 billion, up 15.9% year-over-year and accounting for 1.9% of total revenue, down 0.1 percentage points. We have allocated our R&D resources to strengthen our end-to-end automation, digital and intelligent capacities. including ongoing operation of AI algorithms and automated equipment in diverse logistics process. For example, we consistently upgrading our large language model, power digital intelligent solutions, improving the coverage of warehouse equipment and scaling up the regular operation of online delivery vehicles to drive further cost savings and efficiency improvements in diverse logistics scenarios, including planning, warehousing, storing, transportation, delivery and customer service. Our general and administrative expenses were RMB 1.02 billion, up 23.6% year-over-year, accounting for 19% of total revenue, remaining largely flat year-over-year. In terms of profit, please also consider our non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA excludes items that we believe are not indicative of our core operating performance to help investors and other users of financial information better understand and evaluate our core operating results. In the third quarter of 2025, our non-IFRS profit was RMB 2.02 billion, down 21.5% year-over-year. Non-IFRS profit margin was 3.7%. Non-IFRS EBITDA for the third quarter was RMB 5.32 billion, a decrease of 7.1% year-over-year with a non-IFRS EBITDA margin of 9.7%. We also continue to monitor our cash reserves and cash flow to maintain a healthy capital position to support business development and meet our operational needs. In the third quarter, excluding lease related payments, we recorded a free cash flow of RMB 0.59 billion, consisting of operating cash flow of RMB 4.71 billion and capital expenditure of RMB 1.95 billion, primarily for investment in automation equipment and self-owned vehicles. We continue to improve operational efficiency and capacity through efficient resource allocation. Before we wrap up, I would like to express my heartfelt thanks to our shareholders for their enduring support and the trust in the JD Logistics. Looking ahead, we remain committed to balance improvement with stable profitability and high-quality growth. We will continue to cultivate our ISC solutions, enrich our product portfolio, optimize customer experience and further strengthen core competitive barriers to promote healthy and sustainable business growth. Meanwhile, we will sustain our investment in automation as well as digital and intelligence technologies optimized network structure, innovate operational models and deepen refined management. We aim to improve the efficiency of the entire logistics process, achieve long-term and sustainable structural cost reductions and create greater value for our shareholders. Thank you. That concludes my prepared remarks. Now let's begin the Q&A session.
Sean Shibiao Zhang: Thank you, Mr. Wu Hao. This concludes our prepared remarks. We'd like now to open the call to your questions. Operator, we are going to start the Q&A session, and we are going to receive the questions only in Mandarin. Now let's get into the Q&A session.
Operator: [Operator Instructions] [indiscernible] please raise your question.
Unknown Analyst: I have 2 questions. In view of the automation, the 5-year automation plan, I want to listen to your comments on the capital investment efficiency and the cost. This is the first question. The next is a full-time rider. We have the full-time riders, and we have outsourced the riders. I want to check with you about the orders. How many orders are you accepting per day? You are not the largest operator. How could you use up the network to make innovation to be the top operator of the food delivery?
Unknown Executive: Thank you, [indiscernible], for the question. Over the last few years, JDL has accumulated a lot of the automation technologies and experiences. Most of the automation equipment are well used at a large scale and they are easy to use, they are user-friendly ever since 2025 in more than 20 provinces and cities, and we have already prepared our auto robots. In terms of the unmanned vehicles, we began applications in Guangdong, Jiangsu, Beijing, around 20 cities and provinces, thousands of the unmanned vehicles were put into place for the purpose of docking, collection and pickup. In the future, for the AI Super Brain together with launch robots, they will be deeply integrated to ensure the full chain of sorting, transportation and delivery. In terms of investments, automation and robots. And the outcomes will be collected. According to outcomes, we will promote the large-scale application of the robot in the long run. We will manage the cost, and we will find a balance between investment and return because that is the basis for the long-term optimization. So have some confidence in us by investing into automation sector, we are going to further improve our long-term and middle-term revenue. For specific investment pace, I will follow different industry, different category. We will check the real-life data. We will update our investments and our CapEx plan will be updated as well. It will be very close to our drop that we will go and check what happens, and we will gradually upgrade our investment year-by-year. With more technologies being invested, I believe that it will cut down the logistic cost for the entire society, driving the primary growth for the company. Question 2 is about the full-time riders. Around June, JDL made the announcement to hire full-time delivery. In Q3, we saw a very positive growing momentum. the revenue was boosted. The full-time driver team was quite stable, very consistent with us. This is a big advantage. We have a standardized training system. We have a refined operations, and we're improving the promised delivery. We are improving the timeless as well as the user experience. We made the announcement and we are going to integrate our driving forces. We are going to cover the full-time scenarios, especially for the last-mile delivery services. We're improving and boosting the capacity dramatically. In terms of utilizing the resources, in the long term, I believe there's a lot of robust complementary movements. During the e-commerce festival, the Photon riders could help us to make up the logistics gap. On the other way around, the man could also work together with the delivery man to meet up the requirements from the food delivery. Now the 2 teams are highly complementary, and we could have them work together in 10 of the core cities, the mutual supplementary efforts were made to boost up orders. I want to make a quick notice, the introduction of the Photon riders could improve our service delivery capacities to our customers, we are not only providing food services, but for other products, we are providing services to some luxury brands and 3C products. For instance, we could help them to deliver the luxury goods or 3C products as quickly as possible. That is how we are going to enrich our matrix of the delivery, and that is one of the core capacities for us in the future. By providing or improving the services to ensure timely delivery, we can get into the intra-city faster delivery services.
Operator: Next question from Citibank, [indiscernible].
Unknown Analyst: I have a question about the overseas market. You're expanding your footprint. I want to listen to your opinion about your plans and about the implementations of the overseas market.
Unknown Executive: Thank you for the question. For the overseas market, the international business is about capacity building. We want to have an entire global network by the end of 2025. The growth area will be doubled by the end. the floor areas for one site, and we want to improve the terminal to terminal capacities, such as the routes, such as cross-border timeliness as well as the speed to clear the customs. We want to make the entire journey more smooth. A, we want to reduce the cost of compliance for our customers, the automation capacities, the efficiency will be boosted all for the purpose of reducing the cost, and we want to expand the network of delivery. Those are the progresses. Still, I believe international market, overseas market are on capacity building because capacity will drive for long-term growth, we will meet up the requirements of the customers. carry out the accurate investment, optimizing our network operation and the localized delivery capacities. In the long term, we do more we scale it up the mature supply chain will be duplicated in overseas market while staying different, such as the health product integrated service, we will also build up the network in overseas market. All in all, we want to offer long-term sustainable value.
Operator: Next one. [indiscernible] from Jefferies.
Unknown Analyst: My question is about the number of ISC customers and ARPA. Can you share with us more about which segment is your core sector because you want to dive into the value creation and you also focus on numbers of the customers. And I'd like to invite you to share with us the capacity and human resource.
Unknown Executive: Thank you, Jefferies -- thank you, Thomas from Jeffrey, the question. Over the last few years, in the ISC customer number and ARPA, we have our -- we have the room for improvement, of course. The numbers and ARPA are 2 important topics. For one thing, we have to improve the numbers and we have to offer them the best products. We can cover more clients. Some of the customers are not using the ISC services. So that is one direction. We will hedge for that in terms of ARPA. We have some key accounts. We also have some small accounts to store the improvement. For the key accounts, we have the PM, the project manager, the account manager to go deeper to find more opportunities. Generally speaking, I believe I can -- we can continue the existing path to further improve the profits, the numbers and the ARPA. Yes, of course, you are going to see fluctuations in the ARPA due to the seasonal reasons or due to the natural transition from a single client to ISC client. But in the long run, I believe the numbers will be further optimized. In 2026, still I'm not in the right time to make the forecast. I believe that in 2026, the revenue will further be optimized. I also wish that starting from Q4 of last year, the investment has begun to yield results. And in the long run, more results can be seen. Thank you.
Operator: Due to time constraint, that concludes today's Q&A session. At this time, I will now turn the conference back to Madam Sean Zhang for additional or closing remarks.
Sean Shibiao Zhang: Thank you again once again for joining us today. If you have more questions or further questions, please contact our IR team directly. Thank you.