JD Logistics Aktie

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JDL Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions]

I will now turn the call over to Mr. Zhang Sean, Head of IR team at JDL. Please go ahead, Sean.

Thank you, operator. Good day, ladies and gentlemen. Welcome to our fourth quarter and full year 2025 results conference call. Joining us today are our Executive Director and CEO, Ms. Wang Zhenhui; and our CFO, Mr. Wu Hao.

Before we start, we would 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 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 also discuss certain non-IFRS financial measures for comparison purposes only. For a definition of non-IFRS financial measures and reconciliation of IFRS to non-IFRS financial results, please refer to the annual results announcement for the year ended December 31, 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 statement in the original language will prevail.

I would like to turn the call over to Mr. Wang Zhenhui. Please go ahead, sir.

Dear investors and analysts, welcome to JDL Fourth Quarter and Full Year of 2025 Earnings Call. This is Wang Zhenhui, CEO of JDL. Thank you for joining us today.

Reflecting on 2025, against the macroeconomic backdrop characterized by steady, progressive momentum in China's continued transition towards high-quality, innovation-led growth, JDL maintained -- committed to strengthening our core capacities. We focused on enhancing delivery timeliness, accelerating our network expansion and further deepening the application of cutting-edge technologies. We continuously solidified our operational capacities as well as the competitiveness of our products and services, leveraging ISC solutions, premium services and leading technologies to drive high-quality growth.

In both the fourth quarter and the full year, we delivered a double-digit revenue growth, sustaining our high-quality development momentum. Specifically in the fourth quarter of 2025, total revenue reached RMB 63.5 billion, representing a year-over-year increase of 21.9%. Non-IFRS profit for the quarter amounted to RMB 2.4 billion, up 5.7% year-over-year with non-IFRS profit margin of 3.7%. For the full year of 2025, total revenue was RMB 217.1 billion, increased by 18.8% year-over-year. Non-IFRS profit reached RMB 7.7 billion with non-IFRS profit margin of 3.6%, maintaining stable and resilient.

Now I'd like to highlight the three core differentiators that JDL continued to strengthen in 2025: our ISC capacity, supported by a comprehensive network and diverse product portfolio; our high-quality customer experience and our application of automation and AI technologies. There are three in totality.

First, consistent cultivation of our ISC capacities remains a core strategic priority. Leveraging our nationwide network with expanding global reach together with deep industry insights, we provide customers with reliable and efficient integrated supply chain solutions. By the end of 2025, our warehouse network covered nearly all countries and districts in China, with over 1,600 warehouses and aggregated GFA exceeding 34 million square meters. Notably, the integration of our on-demand delivery service in 2025 further strengthened our last-mile capacity, completing our high-timeliness delivery network. This enhancement not only improved our fulfillment efficiency and customer experiences, but also increased broader opportunities for future business expansion.

Leveraging our increasingly comprehensive network coverage, we remain committed to providing end-to-end ISC solutions to our customers. While effectively helping customers reduce cost, refine efficiency and enhanced competitiveness, we've also achieved a healthy growth in our own business in 2025. Revenue from ISC customers reached RMB 116.2 billion, representing a 33% year-over-year growth. Of this amount, revenue from external ISC customers was RMB 35.9 billion, sustaining a trajectory of high-quality growth. Through differentiated solutions such as omni-channel supply chain service model as well as reverse [ restoration ] services, we continue to deepen our presence in industry-specific services and expand our service scenarios to meet the evolving demands of our growing customer base. As a result, the number of external ISC customers served reached 91,161, representing 13% of yearly growth.

Through extensive industry experience, we have established a series of successful cases that have become benchmarks. For example, in the consumer goods sector, leveraging our high-standard end-to-end service capacity, we achieved breakthrough in luxury segment by securing great warehousing and distribution partnership with a global renowned luxury brand and travel retailer. To meet the luxury industry's stringent logistic requirements, we established temperature-, humidity-controlled zones with our warehouses; implemented insured storage solutions for high-value items covering the full range of operation service, including B2C integrated inventory and reverse quality inspection.

To address the pain points previously faced by this customer, specifically scattered inventory across multi downstream channels and low management efficiency, we deployed intelligent warehousing solution that enables centralized, consolidated management for dozens of sales channels within a single warehouse. This approach ensured both product security and service experience while reducing customer overall logistics cost by approximately 20%. This partnership further validates our operational capacity in high barrier, complex scenario and marks the establishment of our end-to-end service capacity in the luxury and high-end retail sector, laying a solid foundation for deeper market penetration moving ahead.

In the home appliance sector, we extended our collaboration with a leading brand, creating a closed loop spanning forward logistics to reverse recycling and packaging refurbishment. By leveraging our differentiated capacities and expanding service scenarios, revenue generated from this customer's small appliance business achieved triple-digit growth.

While steadily strengthening our leadership in China's ISC market, we also actively expanding our overseas footprint, aiming to replicate and scale up a mature supply chain model developed in China. In 2025, we achieved our goal of doubling the area of self-operated overseas warehouse, opening multiple new warehouses in U.S., U.K., France, Saudi Arabia and other countries, further enhancing our global warehousing network. By the end of 2025, we operated nearly 200 bonded warehouses, international direct distribution warehouses and overseas warehouses, covering aggregate GFA of nearly 2 million square meters.

At the same time, we continue to strengthen our last-mile fulfillment capacities in overseas markets. In 2025, we launched our first self-operated express delivery brand, JoyExpress, in multiple overseas countries. Saudi Arabia, JoyExpress provides high-standard services such as to-door delivery and cash-on-delivery, among others, while in key regions of U.K., France, Germany and Netherlands, we offer 211 time-definite delivery services. This has established a comprehensive logistics network encompassing warehousing, sorting, transportation, last-mile delivery, significantly improving fulfillment timeliness and service reliability.

The global deployment of our warehousing and distribution integrated supply chain services has also strengthened our strategic partnerships with more leading industry customers, driving rapid growth in our overseas business. For example, in the Middle East, leveraging our bonded warehouse cluster in the Jebel Ali Free Zone, we efficiently serve neighboring markets, including the GCC countries, Africa and South Asia. Through our warehouse for multiple countries and bonded upon entry, duty payment upon exit from the zone model, we enable customers to centralize inventory management, effectively avoiding redundant stock across multiple countries, significantly reducing inventory costs while improving inventory turnover efficiency. As a result, we have become the preferred supply chain partner in the Middle East for numerous Chinese go-global automotive brands as well as leading cross-border e-commerce platforms, we're the preferred partner.

Secondly, delivering a high-quality customer experiences is not only foundation for earning customers' trust, but also a key driver for sustainable growth in our express and freight delivery services. In 2025. Our revenue from the customers primarily include express and freight delivery services reaching RMB 100.9 billion, representing year-over-year growth of 5.7%. We remain committed to drive high-quality growth by focusing on high-value services and continuously strengthen both our timeliness and service capacity.

We continue to increase our investments in upgrading our timeliness logistics network. By the end of 2025, JD Airlines expanded its self-operated all-cargo fleet up to 12 planes. The recent introduction of the first A330 wide-body cargo airplane marks a significant breakthrough in our cross-border transportation capacities and long-distance route capacity in 2025. We launched multiple new international cargo routes, including Shenzhen, China to Bangkok, Thailand and Chengdu, China to Yangon, Myanmar. Our gradually expanding fleet not only enhances the timeliness and reliability of our air cargo transportation, but also provides exceptionally stable capacity support for products requiring high timeliness.

Our continuously enhance timeliness capacities also drove growth in our high-value fresh products business. In 2025, revenue from key fresh products such as lychees, hairy crab and beef and lamb saw substantial year-over-year growth. For example, for beef and lamb originating from Qinghai, we launched a dedicated all-cargo airplane route, enabling as fast as the next-morning delivery from Qinghai to dozens of cities in key economic regions, including Beijing and Shanghai. This initiative addressed the pain points such as low efficiency and preservation challenges in traditional transport models, supporting cross-region sales growth for special agricultural products from production zones.

In addition to that, we are committed to delivering reliable services to our customers. The dedication was particularly evident in our response to the national consumer goods trade-in program, which fully demonstrate JDL's service capacity and value.

To meet the high standards for verification and risk control during the policy implementation, we leveraged our service capacities and deeply integrated technology empowerment. Using AI image recognition and other cutting cutting-edge technologies, we achieved intelligent monitoring and evidence collection for the entire process of delivery, installation, dismantling of old appliances. This initiative not only provided the regulatory authorities with accurate and traceable verification evidence, but it also demonstrated our professional capacities in high-complexity logistics scenarios. As a result, we effectively supported our customers, particularly in key home appliances and 3C categories in capturing policy-driven opportunities.

Finally, I would like to highlight our third core advantage, our technology-driven approach. We have always regarded technology innovation as the fundamental driver of long-term efficiency gains and margin improvement. Supported by a professional R&D team of thousands of engineers, we continue to invest in the innovation and development of cutting-edge technologies. Leveraging the most extensive operational scenario and the most comprehensive operational chain in the industry, we built a proprietary end-to-end intelligent operation system covering all stages, including warehousing, sorting, transportation and delivery.

The field of intelligent warehousing, we have achieved scale replication in the domestic market and implemented benchmark projects overseas. In 2025, our self-developed Smart Wolf goods-to-person automated warehousing solution was deployed in nearly 20 cities, with more than 20 Smart Wolf warehouses. Benefiting from in-depth application of the GTP model, we have achieved high-density storage and ultra-fast picking for millions of SKUs, significantly boosting the warehousing operation efficiency. In the fourth quarter of 2025, the first Smart Wolf was officially put into operation in U.K. Powered by the efficient operation of hundreds of Smart Wolf robots, this project supported local operation, delivering ultimate fulfillment experiences.

In autonomous delivery, our solutions have progressed into standardized, large-scale operations. Today, we have deployed thousands of unmanned vehicles across over 20 provinces nationwide, improving labor efficiency in the transfers between delivery stations and delivery zones while continuously unlocking cost reduction potential emerging scenarios such as direct warehouse-to-station delivery. At the same time, we have extended our autonomous delivery classes to overseas low-altitude logistics. In December 2025, JDL successfully completed the first overseas drone trial flight in Saudi Arabia, validating our aerial last-mile fulfillment capacities in the overseas market.

Looking ahead, we'll continue to center on experience, cost and efficiency, fully leveraging these three differentiators to drive high-quality growth. Building on our increasingly robust integrated supply chain capacities, we work hand-in-hand with our partners to help customers reduce costs, enhance efficiency and achieve sustainable business growth, while at the same time, advancing to the next stage of our own development. We will continue to uphold our original aspiration of customer first, delivering reliable high-quality customer experience in response to evolving market dynamics. We further strengthen our end-to-end intelligent capacities, translating tech excellence into tangible operational gains, steadily delivering on our strategic commitment to long-term efficiency improvement and margin enhancement.

Welcome Wu Hao to give us the discussion on the financial performance. Thank you.

Thank you, Zhenhui. Dear investors and analysts, I'm Wu Hao, the CFO of the JDL. It's my great pleasure to share with you the fourth quarter and the full year of the financial report.

Looking back to 2025, the Chinese macro economy is growing steadily with high quality, and we are seeing a lot of growth. The JDL relying upon the ISL (sic) [ ISC ] platform, improving our solutions as well as our long-term metrics, improve our service quality, customer experiences.

In the quarter -- fourth quarter of 2025, we are achieving the [ three digital ] growth. To be more specific, the total revenue is CNY 36.5 billion (sic) [ CNY 63.5 billion ] in the fourth quarter, representing year growth of 21.9%, extending the high growth momentum over the entire year. CNY 217.1 billion was the total year revenue, up 18.8% year-over-year. This growth trajectory reflects our customers' strong recognition of our service value.

In terms of profit, since the beginning of the year, we have invested deeply in core resources and capacities to build long-term competitive barriers, solidifying our growth momentum for healthy, long-term development. In the fourth quarter, our IFRS profit was RMB 2.0 billion with a margin of 3.1%. Non-IFRS profit was RMB 2.35 billion with a margin of 3.7%. In 2025, our IFRS profit was RMB 6.9 billion with a margin of 3.2% and non-IFRS profit was RMB 7.7 billion with a margin of 3.6%. Looking ahead, emerging efficiency gains from our resource investments, along with the deep empowerment from automation and AI algorithms will form the groundwork for driving continued profitability optimization.

Now let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 36.0 billion in the fourth quarter, increasing 44.5% year-over-year. Of this total, ISC revenue from JD Group amounted to RMB 26.7 billion, up 68.1% year-over-year due to the incremental revenue generated by our full-time riders providing delivery services for JD food delivery and acquisition of the on-demand delivery services from JD Group as well as the steady growth of the general merchandise category in the JD Retail. Revenue from external ISC customers was RMB 9.3 billion, maintaining healthy growth momentum.

Leveraging our extensive network coverage and in-depth industry insights, we continue to refine and upgrade our end-to-end supply chain solutions to meet the diverse needs of customers across various industries. For instance, our advanced algorithm systems and high-standard integrated warehousing and distribution classes have helped premium retail brands achieve multichannel centralized management within a single warehouse, effectively improving warehouse utilization and reducing costs. In addition, leveraging our overseas bonded warehousing system with regional reach, we have built logistics solutions featuring bonded upon entry and one warehouse for multiple countries for automotive and other customers, helping them reduce inventory cost while improving inventory turnover efficiency.

These high-quality end-to-end service and solutions have earned us widespread market recognition and trust. In the fourth quarter, the number of external ISC customers amounted to 68,000, up 9.7% year-over-year.

In the fourth quarter of 2025, our revenue from other customers, primarily including express and freight delivery services, was RMB 27.6 billion, up 1.3% year-over-year with fluctuations primarily attributable to the impact of the Deppon product metrics adjustments. Excluding Deppon's business, revenue from other customers achieved double-digit growth, maintaining a steady trajectory. In express delivery services, we continue to refine our ultimate timeliness experience with a strategic focus on expanding high-value categories. In freight delivery services, leveraging a tiered, targeted and scenario-rich [ product portfolio, ] we effectively meet the differentiated needs of various customers, maintaining our industrial-leading position in both freight volume and revenue scale.

Moving towards cost and profitability. In the fourth quarter of 2025, our gross profit margin was 9.3%. We continue to focus on enhancing customer experience and delivery timeliness while solidifying our operational capacity to drive JDL's long-term, high-quality business growth.

Now let's turn to the key components of the cost of sales revenue. Firstly, employee benefit -- were RMB 23.1 billion in the fourth quarter, up 34.9% 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 year-over-year increase in number of front-line operational employees in the delivery and warehouse operations. The number of operational employees grew from approximately 480,000 at the end of the fourth quarter last year to approximately 660,000 at the end of the fourth quarter of 2025, while quite stable. Since the beginning of this year, we have invested in our own employee in core areas such as delivery and warehousing.

By strengthening our control over the delivery process, we have effectively optimized the customer experiences. Driven by this initiative, core operational metrics such as on-time delivery rate and cost satisfaction have achieved steady over -- year-over-year growth. In the fourth quarter, employee benefit expenses accounted for 36.3% of revenue, up 3.5% year-over-year.

Second, our outsourcing cost was RMB 22.7 billion in the fourth quarter, up 14.9% year-over-year. Our outsourcing costs accounted for 35.7% of total revenue in the fourth quarter, a year-over-year decrease of 2.2%. Over the operational account, we leveraged digital intelligent dispatching system to precisely match capacity resources with transportation demand while optimizing our capacity resource structure by increasing the proportion of self-owned vehicles, effectively enhancing resource control and operational efficiency. Meanwhile, on the business side, the ongoing optimization of Deppon's freight product structure was -- also contributed to further reduction of outsourcing costs.

Thirdly, our total rental cost was RMB 3.3 billion in the fourth quarter, up 6.5% year-over-year as we promoted site integration and optimized network structure. [ We ] continue to improve utilization efficiency of our sites. Our total revenue -- rental costs accounted for 5.2% of our total revenue in the fourth quarter, year-over-year decrease of 0.8%.

Apart from major costs mentioned above, our ongoing business expansion was -- resulted in improving economies of scale, driving down our depreciation and amortization costs as a percentage of total revenue by 0.1%.

In terms of expenses, our operating expenses in the fourth quarter were CNY 4 billion, up 23.2%, accounting for 6.3% of total revenue, year-over-year increase of 0.1%. Among them, sales and marketing expenses increased by 17.9% year-over-year to RMB 1.8 billion, accounting for 2.8% of the total revenue, down 0.1 percentage point. Specifically, sales and marketing expenses accounting for 4.8% of revenue from external customers, up 0.7 percentage points year-over-year. This was mainly due to our moderate investment in sales and marketing personnel to drive business growth.

In the fourth quarter of 2025, our R&D expenses were RMB 1.2 billion, up 28.9% year-over-year and accounting for 1.9 percentage of the total revenue, up 0.1 percentage point year-over-year. We've always positioned the technology innovation as a core development engine, building an end-to-end intelligent operation system covering all stages, including warehousing, sorting and delivery.

In the warehousing stage, we are accelerating domestic and international deployment of our self-deployed Smart Wolf automated warehousing solution, enhancing both storage density and fulfillment efficiency. In the sorting stage, we continue to iterate and upgrade our automation levels, significantly improving the accuracy and operational efficiency of the sorting process. In the delivery stage, we've deployed thousands of unmanned vehicles, empowering multi-scenario operations to reduce costs and increase efficiency.

Our general and administrative expenses were RMB 1 billion, up 26.8% year-over-year, accounting for 1.6% of total revenue, a year-over-year increase of 0.1 percentage points.

In terms of the profit, please also consider non-IFRS measures, which we believe may better reflect our core operations. Both non-IFRS profit and non-IFRS EBITDA exclude 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 fourth quarter of 2025, our non-IFRS profit was RMB 2.4 billion, up 5.7% year-over-year. Non-IFRS profit margin was 3.7%. Non-IFRS EBITDA for the fourth quarter was RMB 5.8 billion, increase of 8.9% year-over-year with a non-IFRS EBITDA margin of 9.1%.

We continue to monitor the health of our cash flow to ensure adequate funding for business expansion operations. In the fourth quarter, excluding lease-related payments, we recorded a free cash flow of RMB 3.3 billion. Of this total operating cash flow, excluding the lease-related payments, was RMB 5.3 billion, a year-over-year increase of nearly RMB 0.2 billion, primarily benefiting from proactive measures to improve accounts receivable turnover and accelerate collections. Capital expenditure was RMB 1.9 billion, mainly directed towards investments in automation equipment and self-owned vehicles, driving consistent improvements in operational efficiencies through efficient resource allocation.

Before we wrap up, I'd like to express my gratitude to all the stakeholders for your [ long-standing ] support and trust. Looking ahead, we're focused on achieving a balance between business growth and profit stability. Over the growth front, we'll emphasize both the speed and quality of the business growth, continuously deepening our strategic focus on ISC capacities to empower our customers' business development while also preparing ourselves towards a new level of high-growth momentum.

On the profitability front, we will increase technology investment, optimize our network layout and deepen refined management to enhance resource utilization efficiency. We are confident that through ongoing operational efficiency improvements across the entire chain, we can drive sustainable cost optimization and drive long-term sustainable value creation to our shareholders.

Thank you. That concludes my prepared remarks. We can begin the Q&A session.

Thank you, Mr. Wu Hao, for your prepared remarks. This is the end of the prepared remarks in Chinese, and we are going to start the Q&A session. [Operator Instructions] Now let's get into Q&A.

[Operator Instructions] The first question is from Goldman Sachs [indiscernible].

I'm from the Goldman Sachs. I want to share with you my comments on two questions. In 2025, you are speaking about the delivery services with very good growth momentum. So how we are going, looking to 2026? What will be the internal and external customer growth momentum? And what will be the CNY 20 billion incentive for the merchandise, what will be the impact?

The next about the overseas market. We have already seen the express as well as the total GFA area in the overseas market, very good growing momentum, and you are sharing with us a lot of milestones. So my question is, how could you take JDL's footprint in the overseas market in 2026 as well?

Thank you for the question. About the growth momentum prospects, in 2026, we are having strong confidence in seeing the growth momentum in 2026. About the real-time delivery, we're going to do a lot of things. You have already seen that over the last few years, we are seeing very good and positive growth momentum. But still, in terms of infrastructure, we did a lot of fundamental work. We laid out a solid foundation. And we want to take a breakthrough in building, expanding the customer bases. We want to have -- we have already achieved [ three digital ] growth in 2025.

And you are checking about the incentive, the business incentive of RMB 20 billion. For JDL, I believe this will be creating a positive business loop. The JD [indiscernible] is covering different products with a wide range of product portfolio, which will giving us a lot of chances to deliver our services and with [ also ] improving the efficiency in the overall manner. Most of the products have high requirements on the delivery efficiency and timeliness. JDL is in a good position to deliver the promises. And we will continue investing our resources, reducing last-mile abruption, and we have already done a lot of improvement work. I believe that with that being said, with all the efforts being done, we could improve the efficiency continuously in 2026, and we could also improve the satisfaction rate.

I want to welcome the CEO to share with us the practice in Europe.

Thank you for the questions. Thank you for staying with us. In 2025, we have briefed on you the work report. JD Logistics is prioritizing the European business. We continue to carry our logistic deepening as well as upgrade of the products and services. In 2020 -- in U.K., Germany, France and Netherlands, those are the major markets. In their major cities, we will ensure the highly efficient timeliness in terms of delivery. We have the to-door services, we have the free-of-charge exchange and refund services. At the end of the day, we could work together with local buyers as well as partners. I want to -- we could also attract more customers out there.

As of now, we also have a lot of good partners such as DHL. By working with them, we could cover the terminal services. We could get into the client conversion in the European local market, and we are also working together with our customers to ensure the cross-border [indiscernible] pick-up by working with the core local partners, we would have a faster process, including the cross-border delivery as well as the customer clearance, et cetera. The purpose is to have the terminal-to-terminal ISC system in place. It is expected that by 2026, the European business will be growing very fast. This trend will be maintained. Thank you again for your question, and thank you very much for your attention to our overseas market and business.

We are going to have Citibank, Brian Gong.

I have two questions. The first question, for the ISC, I want to check with -- about the internal growth region, except for the real-time delivery, what will be the number in 2025, what will be the growth momentum in 2025?

The next is in 2025, you did some investment, Deppon, is having further impact on your profit? And what will be the trend for the profit in 2026?

Thank you, Brian, for your questions. For the internal business growth ratio, for the long run, we are seeing positive growth momentum. Generally speaking, we are collaborating with JD Retail for the long run. We are also receiving benefits due to expansion of the JD Group so that we have seen very fast growth in our internal orders.

For the second question, about margin in 2025, you saw a dip. So how will be the outcome in 2026 because we have considered the impact of Deppon. I believe that over the last year, through our measures of efficiency improvement and technology optimization, we could have better opportunities to receive return. Meanwhile, for Deppon, in 2025, we [ expected ] limited impact from Deppon. There are some data from Deppon. The trend is the profitability is gradually moving into a normalized and stable circle. In the second half of 2025, we saw a positive improvement from Deppon. Deppon is gradually picking up their business. So in 2026, in terms of the profit, I believe there will be positive improvement.

Next question, [ Tom Chong ].

My question is as follows: for the AI strategy, can you share with us the 2026 autonomous driving strategy as well as automation strategy or practices?

The next question is about the general performance in 2026 in terms of the revenue, what will be the trend?

For the AI and automation technologies, as we have already discussed, a part of the strategies, JBL is prioritizing the technologies. We know how important they are in the implementation in the past. For the wolf robot and for the unmanned devices, you are seeing a lot of implementation and utilization with very good outcome. And we also have certain AI technologies to improve scheduling of the vehicles, the dispatching of the [ ride path ] when we are using AI, especially for the robots. We have the warehousing, sorting, transportation, different steps. In 2025, over 20 cities and their warehouses are equipped with AI.

In terms of the sorting, 90% of the sorting devices are equipped with automation technologies and the sorting amounts are over millions. In terms of the delivery, over thousands of -- over 1,000 vehicles, unmanned vehicles, and in 2026, we'll expand their presence. In China, we could improve the efficiency by using and driving the unmanned vehicles. The operators, the delivery man could improve their work efficiency as well, reducing the risk of delayed [indiscernible] delivery at certain steps, we could further reduce our cost while improving the efficiency.

The next is about the future prediction. Through our vehicles and the drivers as well as development, we could optimize our routes through AI preparation. In terms of the scheduling of the vehicle resources as well as exploration of passes in one vehicle, we could improve the efficiency and reducing the cost. Thank you.

I want to say a few words about the two questions. And we are developing our AI technologies back years ago. In 2026, the investment will be continuously down. I believe the investment will be higher than that of 2025.

In terms of the automation of sorting, we have had very mature technologies. And in 2025, we did invest continuously in the unmanned vehicles as well as warehousing network. And we have launched more than 1,000 unmanned vehicles through 1-year trial. Our technologies have further been improved. The investments in 2026 will be picked up further in terms of the sorting machines. As we are reducing the cost and improving efficiency, we will continue to invest strongly. I believe that they will contribute to our increased profit in 2026 as well.

Next question from [indiscernible].

I'm [indiscernible]. I have two questions, of course, topic one: the previous speaker talked about the progress, I want to share with you my -- comments on your investment of the cross-border delivery and what will be the right maneuver for next year? And what will be the profitability? For instance, you'll be fairly high in the industrial profit level.

Next about the recruitment, the delivery man. What will be the coordination plan between them and the traditional recruitment? I want to confirm with you about [ MA ], right? The acquirement of Kuayue, as we have understood that in last quarter, you have acquired Kuayue and you have done something. So I want to check with you more about the performance.

For the Kuayue, we did a great job in acquiring the business. And so we are seeing a smooth business conduction and we also received a profit return. And we're also seeing the future growth momentum. In terms of the revenue growth, we are seeing continuous increase, and we are collaborating with the Kuayue management, optimizing their timeliness, their orders being traced and the online preparation. And we are still seeking more opportunities to reduce their operational cost. Every year, we continuously invest on Kuayue year-by-year in terms of the revenue, in terms of the profitability. I see very good chances.

So your question is about the differences between the delivery man and recruitment. Now we have the new business of food delivery. We are ensuring the real-time and immediate delivery services. At the same time, we have to manage the rider. When we are receiving the food order, we have to manage the riders in the good metrics, and we want to optimize the people scheduling, improving the efficiency so that we could also boost up the profitability. But of course, we have to consider about the early promotion. And now we are also managing the free time or different time slots of the [indiscernible] to maximize the human efficiency. Now we are also including some of the [indiscernible] into the rider, turn them into the rider. That is what we call the [indiscernible] to rider initiative. It helps us reduce the peak time congestion, improving the efficiency on both sides. Thank you.

Due to time constraint, that concludes today's question-and-answer session. At this time, I will now turn the conference back to Zhang Sean for additional or closing remarks.

Thank you once again for joining us today. If you have additional, further questions, please contact our IR team directly. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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.

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.

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.

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.

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.

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 Instructions] [indiscernible] please raise your question.

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?

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.

Next question from Citibank, [indiscernible].

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.

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.

Next one. [indiscernible] from Jefferies.

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.

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.

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.

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.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to JD Logistics Second Quarter 2025 Results Conference Call.

[Operator Instructions]

I will now turn the call over to Mr. Sean, Head of the IR team at JD Logistics.

Thank you, operator. Good day, ladies and gentlemen. Welcome to our second quarter 2025 results conference call. Joining us today are our Executive Director and CEO, Mr. Hu Wei, and CFO, Mr. Wu Hao.

Before we start, we would 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 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 also discuss certain non-IFRS financial measures for comparison purpose only. For definition of the non-IFRS financial measures and reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of the results of the 3 months and 6 months ended June 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's statements in the original language will prevail.

I will now turn the call over to Mr. Hu Wei. Please go ahead, sir.

Dear investors and analysts, welcome to JD Logistics Second Quarter 2025 Earnings Call. This is Hu Wei, CEO of JD Logistics. Thank you for joining us today.

In the second quarter of 2025, amid China's sustained and positive economic recovery, the modern logistics industry continued to serve as a vital link in the economic circle, injecting new momentum into industrial upgrading. During the quarter, we consistently enhanced our capacities, increasing our competitiveness across products and services. These efforts elevated customer experience and satisfaction and drove accelerated revenue growth.

In the second quarter of 2025, JDL's total revenue reached RMB 51.56 billion. The year-over-year growth rate accelerated further from the previous quarter, reaching 16.6%. Revenue from external customers reached RMB 33.8 billion, increasing 10.2% year-over-year, alongside accelerated revenue growth. We also effectively improved resource utilization efficiency through tech empowerment, net structure optimization and refined operations, resulting in stable profitability.

Our non-IFRS profit was around RMB 2.59 billion, up [ 5.24% ] year-over-year. And our non-IFRS profit margin reached 5.0%, reflecting ongoing profitability resilience. Revenue from ISS customers reached RMB 26.91 billion in the second quarter, up 26.3% year-over-year. This included RMB 17.76 billion in revenue from JD Group, increasing 31.2% year-over-year and RMB 9.15 billion in revenue from external ISC customers, maintaining a double-digit growth trajectory.

This quarter, leveraging our omnichannel supply chain solutions, differentiated and high standard service capacities and ongoing supply chain product upgrades, we achieved growth in both the number of our external ISC customers and this segment's average revenue per customer.

In the second quarter of 2025, the number of external ISC customers amounted to 65,854, up 13.8% year-over-year, while serving more customers. We also deepened and broadened our engagement with existing customers. In the second quarter of 2025, our ARPC for external ISC reached RMB 139,000 with a year-on-year growth rate turning positive to 3.5%.

We provide industrial-specific ISC solutions and service products for customers in fast-moving customer goods, home appliances, home furniture, 3C, apparel, automotive, fresh products and other industries. In the face of the constantly evolving business landscape and customer market, we remained focused on experience, cost and efficiency. We continuously enhance our industry-specific service capacity, upgrade our supply chain offerings and provide products and solutions tailored to the unique needs of customers across different industries based on their specific characteristic.

In the home appliance industry, we continue to cultivate our industry-specific capacities to enhance end-to-end industry coverage of our ISC products and services. During this quarter, we deepened our collaboration with well-known home appliance brand, expanding our service capacities from inbound to warehouse transportation, warehousing, delivery and replenishment forecasting to also include integrated delivery and installment model. This further enriched the business scenarios covered by our ISC service offering, helping our customers effectively improve operational efficiency and optimize customer experience.

This partnership contributed to significant improvements across the brand's key operational metrics, driving a substantial reduction in the brand damage rates and customer complaint gain. Notably, the customers' on-time delivery rate and inventory turnover rate improved by 20%. Our omnichannel model has become industrial benchmark for addressing key pain points in the home appliance dealer installation. Moving forward, we will scale this model to more home appliance brand customers empowering industry to develop a more efficient fulfillment system.

In the April industry upgrades to our warehousing and distribution services has supported our ISC business expansion. In second quarter, we enhanced our base logistics services for warehouse and distribution within the official launch of a new service model featuring 3 core services: 211 warehouse distribution, Express warehousing distribution and the Economy warehousing and distribution deeply integrated within our industry-specific custom capacities. This model offers a high timeless with great hassle-free service, helping merchants reducing cost, improving efficiency and enhance customer experience. Recently, we deepened our cooperation with a well-known international sportswear brand, expanding our partnership from express delivery to ISC services.

Our warehousing and delivery services under 211 timeless model significantly shortened the order fulfillment time for the customer. For example, customers in Guangdong who placed orders by 10:00 a.m. can receive same delivery, while late night orders enjoy next-day delivery. Overall, regional order fulfillment time has improved by over 13% compared with the customers' previous setup.

Our upgrade to their logistics services not only help the customer address industry challenges such as high return rates and slow inventory turnover on the e-commerce platforms but also attracted more traffic for our customers by improving customer store ratings, supporting a new business growth trajectory.

In the auto industry, we extended our presence along the supply chain, quite expanding from sales-related supply chains to production-related supply chains while also upgrading our supply chain products and service planning capacities. In the second quarter of 2025, we partnered with a leading new energy vehicle customer to jointly develop a preproduction inbound logistics solution under just-in-sequence mode, covering the entire production supply chain from line haul, transportation, warehousing, material sequencing and short delivery to empty container retrieval and recycling packaging.

This solution helps the customer save space, improve storage density and reduce capacity expenditure. Moreover, it strengthened our full process ISC capacities for the auto industry, laying a solid foundation for future expansion into preproduction logistics for manufacturing-related supply chain. While steadily strengthening our leadership in China's ISC market, we are also actively expanding our overseas footprint.

In June 2025, we launched Joy Express our self-operated express delivery brand in Saudi Arabia, rolling out multiple high service for local customers, such as same-day and next-day delivery, cash on delivery, to-door delivery. Joy Express local delivery operations are supported by a dedicated local customer service team, enhancing our last mile fulfillment capacities in the Middle East region. Leveraging our existing overseas warehousing services, we have now established a comprehensive logistics for Saudi Arabia encompassing warehousing, sorting and last-mile delivery, further upgrading our localized operational capacities in the overseas market.

This enables us to provide a full suite of diversified end-to-end logistics services and solutions, including our ISC and speed services for various countries and customers. As part of our overseas warehouse expansion, we accelerated our global smart supply chain network plan backed by our globally leading expertise in warehouse operations and logistics technology. We have established a comprehensive global supply chain logistics network with overseas warehousing capacity at its core, providing efficient and convenient ISC logistics service to more Chinese brands and overseas customers.

In the second quarter of 2025, our newly opened overseas warehouse expanded further in multiple countries, including United States, France, South Korea, Vietnam and Saudi Arabia. In the second quarter of 2025, our revenue from other customers, primarily including express and freight delivery services reached RMB 24.66 billion with a year-over-year growth rate of 7.6%. In our freight delivery business, we continue to enhance our delivery term capacities and product competitiveness with a focus on funding of a high timeliness services.

For example, during lychee season in the second quarter, we addressed the key pain points in the fresh product industry, namely short shelf life and low delivery timeliness with an upgraded end-to-end logistics solution featuring precooling and production zone temperature control through the entire process and multimodal transportation. By combining all cargo airplanes by air capacity, high-speed rail and short-haul cold chain vehicles all under high-precision temperature control, we achieved next morning delivery from production zones to major cities nationwide, comprehensively improving our fresh product delivery service customer experience and order fulfillment capacities.

Meanwhile, we continued to invest in pickup and marketing operations, consistently deepening category penetration and expanding customer coverage, driving sustained growth momentum for our high timeliness fulfillment products. Furthermore, we continue to optimize our service mode and enhance our capacities in the second quarter of 2025. We began recruiting and managing full-time riders to support JD Food delivery through deep integration with our existing express delivery last mile fulfillment. This initiative helped improve fulfillment efficiency across multiple scenarios and optimize resource scheduling, consistently enhancing the customer experience.

Throughout our business development process, we have adhered to our core value, customer first. JD Logistics maintained dedicated to offering premium services such as the delivery, on-demand pickup and delivery and return and exchange, continuously enhancing the quality of our express delivery services with such professional and reliable services. We have earned the trust and preference of our customers and consumers.

In the second quarter 2025, according to a survey results published by State Post Bureau of People's Republic of China, our express delivery service have consistently maintained best-in-class customer satisfaction ratings.

We secured leading positions among logistics service providers in multiple mainstream e-commerce platforms service quality rankings by providing high-quality and reliable logistics services. We help merchants improve store ratings and attract more traffic, driving business growth.

In Hong Kong and Macau, we continue to broaden our layout, sustaining our rapid growth momentum in the regions. With the official commencement of operations at the Jingdong Express operations and Hong Kong Island in the first quarter of 2025, we significantly improved both sorting and delivery efficiency for our Hong Kong express delivery services on the business development front. We actively extended our collaboration network offering express delivery service to diverse e-commerce platforms and brand merchants.

In the second quarter of 2025, we supported a globally renowned customer goods brands with integrated Shenzhen Hong Kong service model covering full process operations from Shenzhen-founded warehouse, customer clearance, transportation, Hong Kong transit warehouse all the way to delivery. This model helped the brand ease operational pressure and improve fulfillment efficiency. We continue to strengthen our presence in Hong Kong and Macau markets, delivering high-quality diversified logistics service to merchants and consumers through technological innovation and service upgrades.

Regarding the freight delivery business with the consolidation of Deppon Logistics and Kuayue Express, we ranked among the top tier in China in terms of cargo volume and revenue scale of freight delivery services. We have tailored our offerings to the unique characteristic and needs of very specialized markets, creating a diversified product portfolio that offers our customers stable, reliable and flexible freight delivery solutions. These products cater to various customers' needs to our business growth, expanding our market share across multiple specific industries of our network infrastructure and continuously improving technology are the cornerstone supporting our steady development.

Our network consists of 6 logistics networks, including warehouse, line haul transportation, last-mile delivery. At end of June 2025, our warehouse network covered nearly all countries and districts in China, consisting of over 1,600 self-operated warehouse and over 2,000 third-party warehouse, owner-operated cloud warehouses on 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 continued to expand and optimize our warehouse network in low-tier regions. In April, JD Logistics Kaska warehouse officially commenced operation, significantly enhancing the local customer experience and efficiency.

As of June 30, 2025, JD Airlines has the 10 self-operated all cargo airplanes in regular operation. In the first half of 2025, JD Airlines launched the new Shenzhen, China to Bangkok, Thailand and Chengdu to Yangon, Myanmar Uantrip International cargo routes, marking a further step in the deployment of JD Airlines global logistics network. In addition, we covered more than 2,000 air cargo routes through cooperation with partners. We consistently prioritize technological innovation. Through ongoing investment in automation equipment, AI and other advanced technologies, we have deeply integrated the digital and intelligent technologies into every stage of the logistics value chain from planning and design to warehouse management, sorting, transportation, scheduling and last-mile delivery, we have implemented intelligent applications across all scenarios.

This end-to-end smart integration driving ongoing cost reductions and efficiency improvements through the entire logistics process. In the second quarter of 2025, we expanded our self-developed JINGDONG Logistics Zhilang good [ to prove ]an automated warehousing solutions beyond our in-house operations to several external customers. With the official launch of the Phase 3 of our apparel warehouse in Xinjiang Guangzhou, we further strengthened our technological layout in the apparel production zone.

As JD Logistics' largest operated and automated warehouse in the Xinjiang production zone, of our Xinjiang Phase 3 facility features integrated forward and reverse logistics service design, encompassing forward outbound logistics return, reverse return processing, product restoration capacities and full scenario warehousing services. This setup helps customers improve efficiency and reduce costs in the field of unmanned vehicle applications. We focus on high-value scenarios, including last-mile delivery and short-haul transportation.

Through iterative technology upgrades, pilot program expansion and operation, we reduced the cost and enhanced efficiency across diverse process such as transportation, pickup and delivery. As of June 30, we have deployed hundreds of unmanned vehicles across more than 10 provinces in China, including Jiangsu, Guangzhou, Zichuan and put them into regular operation between delivery stations and delivery zones using them for last mile transportation, reduced the transfer frequency per courier by 2 to 3 trips a day and extended couriers active pickup and delivery hours within their delivery zones by 3 to 4 hours. This has directly improved workout pickup, delivery productivity, pickup timeliness and successful delivery rate, providing strong support for our high timeless services and notably reduced our last mile service of this operation costs.

Moving forward, we continue to scale up unmanned vehicle deployment targeting the 1,000 unit level. At the same time, we plan to broaden pilot coverage and further explore the value they bring to diverse scenarios, injecting fresh momentum into our cost reduction, efficiency improvement and business model innovation efforts.

Moving ahead, we remain dedicated to optimizing customer experience, cost and efficiency. While adhering to our customer-first approach guided by our mission of being driven, we will further reinforce our foundation of supply chain capacities and product competitiveness, continuously creating value for our customers. With a firm commitment to undertaking substantive valuable and long-term actions, we will actively fulfill our social responsibilities to contribute to reducing overall cost and improving the sustainable hybrid growth.

Now I'm going to welcome Mr. Wu Hao to discuss with the financial performance.

Hello, everyone. I'm so happy to present JD Logistics' financial performance for the second quarter of 2025. In the second quarter of 2025, China's macroeconomy maintained stable with continued improvement, supported by our ever strengthening service and product classes. JDL achieved revenue growth by maintaining a healthy level of profitability in the second quarter, while revenue reached 15 -- RMB 1.56 billion with a year-over-year growth of 15.6%, marking a further acceleration compared to previous quarter, IFRS profit was RMB 2.35 billion, increasing 4.6% year-over-year and IFRS profit margin was 4.2%. Non-IFRS profit was RMB 2.59 billion with over year-over-year increase of 5.4%, non-IFRS 5.0%.

Let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 26.91 billion in the second quarter year-over-year increase of 26.3%. Among them ISC revenue from JD Group amounted to RMB 17.76 billion, up 31.2% year-over-year, benefiting from growth in the main categories of JD Retail. Meanwhile, our revenue from external customers reached RMB 9.15 billion, up 17.8% year-over-year with the growth rate improving by 6.2% compared to the first quarter of 2025.

Leveraging our Warehouse network advantages and warehousing operating practice, we have deepened our collaboration with leading customers in April and fast-moving consumer goods, upgrading our ISC products and services to provide omnichannel ISC solutions and differentiated high standard services that help customers reduce cost and enhance efficiency.

In the second quarter, our average revenue per external ISC customer reached RMB 139,000, representing a year-over-year growth of 3.5%. Furthermore, we continue to expand our high potential customer base by targeting scenarios with strong ISC synergy. The number of external ISC customers amounted to 65,854 in the second quarter, up 13.8% year-over-year, extending its multi-quarter growth trend.

In the second quarter of 2025, our revenue from other customers, primarily including express and freight delivery services maintained healthy growth, reaching RMB 24.66 billion, up 7.6% year-over-year. For express delivery services, we focus on high-value markets and invested in areas such as air freight resources, land transportation routes and delivery personnel.

These efforts enabled us to enhance our service quality and delivery timeliness, driving rapid growth across multiple business scenarios. In the freight sector, we rank among the top tier in China in terms of cargo volume and revenue scale. Our flexible and diverse freight delivery services meet customers' varying needs across timeliness and service dimensions, supporting our deepening market penetration across different freight delivery segments.

Moving on to cost and profitability. In the second quarter of 2025, our gross profit margin was 10.6%. On one hand, we continue to optimize cost through technology-driven network structure upgrades, innovations in the operation models and refined cost management. On the other hand, we increased our investments in enhancing our service experience and improving timeliness while maintaining broadly stable profitability to drive JD Logistics' long-term high-quality business growth.

Now let's turn to the major parts of the cost of revenue. First, employee benefit expenses were RMB 18.19 billion in the second quarter, up 20.1% year-over-year. This was mainly attributable to a year-over-year increase in the number of frontline operation, employees in delivery and warehousing operations from approximately 430,000 at the end of the second quarter of last year to approximately 615,000 at the end of second quarter of this year, including full-time food delivery riders. The increase was attributable to the addition of our own employees to key operation processes such as last mile delivery and warehousing aiming at upgrading our products and services, elevating customer experience.

In the second quarter, JD Logistics maintained a leading position among logistics service providers in multiple mainstream e-commerce platforms, satisfaction rankings for express delivery. Employee benefit expenses accounted for 35.3% of total revenue, up 1.0 percentage point year-over-year. Second, our outsourcing cost was RMB 16.86 billion in the second quarter, up 20.5% year-over-year. It accounted for 32.7% of total revenue for the quarter, up 1.1 percentage points year-over-year. The increase in outsourcing costs and outsourcing cost as a percentage of total revenue was primarily driven by changes in deposit structure.

Third, our total rental cost was RMB 3.27 billion in the second quarter, down 0.7% year-over-year as we continue to promote site integration and optimized network structure. We continued utilization efficiency of our sites. Our total rental cost accounted for 3.3% of total revenue in the second quarter with a year-over-year decrease of 1.1 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 cost as a percentage of total revenue by 0.2 percentage points year-over-year. Meanwhile, due to the growth of services such as installation and maintenance, other costs as a percentage of total revenue increased by 0.4 percentage points year-over-year.

In terms of expenses, our operating expenses in the second quarter of 2025 were RMB 3.51 billion, up 15.4 percentage year-over-year, accounting for 6.8% of total revenue with a year-over-year decrease of 0.1 percentage points. Among them, sales and marketing expenses increased by 15.3% year-over-year to RMB 1.58 billion, accounting for 3.1% of total revenue, down 0.04% point year-over-year. Sales and marketing expenses accounted for 4.7% of the revenue from external customers, up 0.2 percentage points year-over-year. We maintained moderate investments in sales and marketing personnel to drive business growth.

In the second quarter of 2025, R&D expenses were RMB 1.01 billion, up 14.2% year-over-year, accounting for 2 percentage of total revenue. We have allocated our R&D resources to strengthen our end-to-end automation digital and intelligent capacities, including ongoing exploration of our cutting-edge science applications, AI algorithms and online technologies in diverse logistics scenarios. For example, we are constantly scaling up the regular operation of online delivery vehicles to drive further cost savings and efficiency improvement in warehousing, planning, transportation, delivery, customer service and other areas.

Our general and administrative expenses were RMB 930 million, up 17.1% year-over-year, accounting for 1.8% of total revenue, representing year-over-year increase of 0.01 percentage point. In terms of profit, please also consider our non-IFRS measures, which we believe may better reflect our operations. Both non-IFRS profit and non-IFRS EBITDA exclude items that we believe are not indicative of our core operating performance to help investors and other users of the financial information better understand and evaluate our core operating results.

And this is how we are going to help investors and other users of financial information, understand -- better understand and evaluate our core operating results. In the second quarter of 2025, our non-IFRS profit was RMB 2.59 billion, up 5.4% year-over-year. Non-IFRS profit margin was 5%. Non-IFRS EBITDA for the second quarter was RMB 5.72 billion, up 1.5% year-over-year with a non-IFRS EBITDA margin of 11.1%.

We also continue to monitor our cash reserves and cash flow to maintain a healthy balance sheet and sufficient capital to support business development and meet our operational needs. In the second quarter, excluding the lease-related payments, we recorded a free cash flow of RMB 2.49 billion, an increase of RMB 0.8 billion year-over-year. Our capital expenditure was RMB 1.09 billion for the second quarter, primarily for investments in the equipment aimed at improving operational efficiency going forward.

While maintaining stable profitability, we will continue to make prudent and effective investments in areas such as automation equipment, self-owned vehicles based on our business development pace and needs, laying a foundation for high-quality and sustainable growth.

Before we wrap up, I would like to express my heartfelt thanks to our shareholders for their enduring support and trust in JD Logistics. Looking ahead, we will remain committed to balanced improvements with stable profitability and high-quality growth. We'll continue to enrich our ISC solutions further enhance delivery timeliness and customer experience and strengthen industry barriers to promote healthy and sustainable business growth.

Meanwhile, we will sustain our investments in technology to improve the efficiency of the entire logistic process. By combining operational model innovation with refined management, we aim to achieve long-term structural cost reductions and create greater value for our shareholders.

Thank you. That concludes my prepared remarks. We can now begin the Q&A session.

Thank you, Mr. Wu Hao. This concludes our prepared remarks. We would like to now open the call to your questions. Operator, please start the Q&A session when ready. Thank you.

[Operator Instructions] Now we are going to have Ronald from Goldman Sachs to offer the question.

I'm so happy to have the questions. Now we are seeing the faster growth in the company, and we're also having the contribution from the riders. So I want to ask a question about the growth momentum, the growth triggers, the growth areas and your next half year's expectations. And you also mentioned some top collaborators in the second half of this year. Do you have any specific plan on the collaborations with stakeholders as well as profitability expectations?

Thank you, Ronald, for the question. We have seen a faster growth momentum due to the retail as well as the contribution from the JD Group. We are making right strategic decisions, and we are also having new breakthroughs. That's why we are growing strongly, not due to a single reason, but due to different reasons. We are seeing the faster growth.

From last year, we have seen the positive outcome from our collaborators, and we are also seeing the growth driven by the riders, and this is a great improvement. This is not relying upon a single category. In the second half of 2025, if we are not considering the riders contribution and business orders, considering about the retail side, we could see the good trend. For the food delivery services and the riders contribution. We don't have specific data for your reference because we are still seeing the food delivery system, the food delivery business is still beginning and expanding.

We will continue to watch and provide you data if there's any. And you also asked question about the international business. Investment into the international business are having 2 directions. The international overseas supply chain will continue to expand. There are some news, and we gradually will implement. The business in Asia Pacific, Europe and the Middle East, they are expanding. The supply chain are in the process of completing infrastructure.

The revenue growth will be seen, and we are seeing the good expectation and outcomes were aligned. And we will also create a network of overseas food delivery and riders network in Saudi Arabia. We have the Joy Express. It is a great breakthrough. From day 1 to the present, we are seeing the good growth momentum in line with our targets. In the future -- in the short future, Saudi Arabia will remain as our key markets in giving good customer satisfaction and growth potential.

At the end of Q3 and Q4, in some of the European markets, we will also have a similar deployment. It is expected that we will also offer better user experience to the European customers. The supply chain customers in Europe has been growing for some time. We have some collaborators. They are helping us to prepare everything. And the customers are very happy to see that we have our plan in Europe as well. They want to use our full chain.

Thank you for the question. I want to say a few words to add up through years of preparation and overseas deployment, the overseas warehousing are growing. And we're also collecting more customers and the team experiences. And we're also providing them better services, and this is our strategy. We have been very consistent and committed by far in terms of the growth momentum, the growth rate and the business capacities and customer satisfaction, yes, we are seeing everything is fully expected as we planned before.

So we will continue to work this journey, and we will continue our strategies. In this year, the overseas warehouse floor area will be doubled, further improving our capacities and operational efficiency, serving our customers. We're so happy to see that over the last few years, our team is well trained. They are broadening their horizons. They are very much adaptive, and we have very good management, a lot of improvement. And that is how and why we could have a good harvest in the national market.

Next question from the Citi Bank, Brian.

Two questions. The first question is about your food delivery service. Can you share with us more details about the food delivery business? Any synergies between the food delivery and other sectors, other industries?

The next about ISC, the logistics in the second half, your expectation on the growth trajectory due to some other reasons, are we going to improve the numbers of external ISC customers?

I will take this question. The first about the -- at the end of Q2, we are recruiting a lot of resources. Generally speaking, we have new riders being recruited, and we also have our existing riders. We are having experiences in managing the frontline employees for over 10 years. We are good at managing the riders. When we are recruiting new ones, we have lots of channels because they are very much similar like we are recruiting the couriers. Now we have a lot of daily practice routines. We offer them good break. We have good stations for them to take a break.

I believe it is a great testament of our infrastructure and management skills. And I believe that we are running the food delivery business very naturally. And we see a lot of good opportunities such as [indiscernible] and the riders could communicate, they could supplement each other, improving their efficiency. The riders doing less orders, they could deliver the [indiscernible] services. At the same time, for the [indiscernible], they could supplement each other, improving their efficiency, and they could also improve their personal income.

At different peak seasons, or at different according to the days and weeks or even the months, we will see the supplementation between 2 sort of employees. This is the first time for us to do the trial but it's very natural for us to complement their skills. Now we are trying and we are taking steps one after another. We are still exploring. We have to optimize our algorithms. We have to provide better incentives to those employees. We have to safeguard their welfare and well-being. I believe it is a task with lots of hopes but we have to try. We will take baby steps, and we will address all the challenges ahead if there is any. It's the first time for us to do this change of the personnel. So I want to see if there's additional points.

The next is about ISC supply chain. We shared with you some data. Mr. Wu Hao gave you a comprehensive analysis, and I want to share with you more about external ISC. The increased volume, the ARPC, we are seeing very good momentum. To be honest, we are offering cost-effective services, the Tier 11 warehousing, the before schedule delivery, we are quite different from our competitors. We are giving more options to our customers. The next is we are also following different characteristics of the industry, such as automotive. We have some cases. we are having different warehouses for them. For the future growth momentum, we believe that as we are having better capacities, our internal resource sharing, we are creating more good momentum. I'm so confident for the future growth momentum. I believe the trend will be well maintained.

Jefferies, Thomas will join us soon.

I have a question about the external revenue. In Q2, we are seeing the customer numbers and the ARPC. I see the year-over-year increase. It's been some time for us to see the increase year-over-year on the ARPC. So how about the future trend on the ARPC and the future customer growth? Can you share with us your expectations about these 2 dimensions.

The next is about the gross margin. I want to ask you about your comments on the long-term gross margin.

Thank you, Jefferies, for the 2 questions. And we are checking the number of customers and ARPC. They are growing positively. And ARPC has been growing during some -- during -- at a good time point. We are speaking of continuous improvement of the product, and we are providing better services. We are receiving good feedback from the customers. They are giving us more tasks. And we are also monitoring the proportion of the customers. For long term, we want to win the key accounts.

Meanwhile, we are also beginning to improve the revenue from the 2B and 2C customers. Previously, we offered -- we have obtained good revenue from the 2C side, from the small and middle scale parcels. But now this -- and we are having different services in offering them good warehousing. That's how we have the cross business from the same customer. That is why we are increasing the number of customers as well as the ARPC. And the long-term ARPC trend, you asked a second question.

Yes, in the long run, we have room to improve our gross margin because we will have better customer experiences as well as products. I believe that the long-term product gross margin will increase in the long run. As of now, at some good projects, we are realizing the increase of the revenue as well as profit at the same time. In the lychee product, we are seeing very good improvement on the profits and revenues. And we are also seeing the resource investment on some strategic projects such as our investment on the employees, on the automation equipment, on the overseas warehousing.

In the short term, those projects may give pressure on the revenue improvement. I also hope that for some time of internal resource optimization and efficiency improvement, we could invest -- we could use -- we could better use the resources and turn them into long-term profits so that in the logistics as well as the [indiscernible], we could be the top supplier.

For time's sake, we are going to close the Q&A session. We are going to welcome Madam Zhang to give us the closing remarks.

Thank you once again for joining us today. If you have any questions, please contact our IR team directly. Thank you.