JD Logistics Stock

Ladies and gentlemen, thank you for coming to JDL's Second Quarter 2026 Results Conference Call. There are 3 parts of our session. The CFO will give you remarks, then we'll have the Q&A session followed by the CEO closing remarks. [Operator Instructions]

Now let's welcome Mr. Sean Zhang, Head of Investor Relations team at JDL.

Thank you. Good day, ladies and gentlemen. Welcome to our second quarter 2026 results conference call. Joining us today are our Executive Director and CEO, Mr. Wang Zhenhui; and CFO, Mr. Wu Hao.

Before we start, we'd like to remind you that today's session will contain forward-looking statements, which involves a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcements 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 purpose only. For the definition of non-IFRS financial measures and a reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of the results for the 3 and 6 months ended June 30, 2026, 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 purpose only. In case of any discrepancy, management's statements in the original language will prevail. I'd like to also remind you that you should always stick to the original language of the management statements.

Now I'd like to give the call to Mr. Wu Hao, our CFO. Please go ahead, sir.

Good afternoon, investors and analysts. I'm Wu Hao, CFO of JDL. Welcome to JDL's 2026 Second Quarter Earnings Conference Call. In the second quarter of 2026, JDL demonstrated solid operational resilience. Despite facing numerous external uncertainties, we still achieved high-quality revenue growth and a significant improvement in operating profit.

This was underpinned by our steadfast commitment to our mission to drive superior efficiency and sustainability for global supply chain through technology as we continue to consolidate our core integrated supply chain business. Firmly promoted experience improvement and capacity building further deepened our overseas strategic layout and accelerate the scaled application of AI and automation.

For this quarter, our total revenue reached RMB 64.10 billion, increasing by 24.3% year-on-year, of which revenue from external customers reached RMB 44.23 billion, increasing by 30.8% year-over-year.

Non-IFRS net profit reached RMB 2.64 billion with a net profit margin of 4.1%. Non-IFRS operating profit for the quarter reached RMB 2.34 billion, increasing by 11.6% year-over-year.

And operating profit for the first half of year reached RMB 3.59 billion in aggregate, increasing by 39.9% year-over-year, reflecting the continued enhancement of our operating capability amid a complex environment.

Next, I will elaborate on our revenue and profit performance. In terms of the integrated supply chain business, our integrated supply chain customer revenue for the quarter reached RMB 30.17 billion, increasing by 12.1% year-over-year. Of these, integrated supply chain revenue from JD Group reached RMB 19.88 billion, increasing by 11.9% year-over-year.

This healthy growth was primarily driven by the fulfillment services we provided for Joybuy, JD's retail business in Europe, as well as our extended fulfillment services to support JD Group's growth of the Jingxi business with efficient penetration into lower-tier markets.

Integrated supply chain revenue from external customers reached RMB 10.29 billion, increased by 12.5% year-over-year with both the number of customers and average revenue per customer improving. Underlying this growth was the continued deepening of our integrated supply chain capabilities.

First, we continue to expand across diverse platforms and business scenarios while providing customers with an omnichannel integrated supply chain solution. We also proactively capture new development opportunities in the instant retail market, leveraging our rich integrated supply chain customer base. We provide multi-industry customers with short-haul store transportation and instant replenishment services, creating cross-selling opportunities.

And second, we accelerated the extension of our supply chain capabilities into the B-channel, building a channel supply chain system that covers more operational stages. At the same time, this is worth noting that as an important strategic direction for us, on the internationalization front, we replicated our mature domestic supply chain model in overseas markets, unlocking broad growth potential and driving rapid growth for our international business.

In terms of other businesses, revenue from other customers, which includes express delivery, freight delivery, and on-demand delivery, reached RMB 33.93 billion for the quarter, increasing by 37.6% year-over-year, leveraging service reputation and a brand image built through our integrated supply chain business. We empowered our express delivery, freight delivery and other products.

For this quarter, both revenue and volume of our express delivery business grew at a pace that significantly outpaced the industry average. Through refined resource allocation, we continuously strengthened our timeliness capabilities and the competitive edge effectively driving the rapid growth of multi- high-value business scenarios such as fresh food delivery and certificate and document delivery. The growth of the high-value business, in turn, drove the sustained improvement in the profitability of our express delivery business.

I will walk you through our cost structure and profitability. In terms of the gross profit, our gross profit for the quarter was 9.7%, down 0.9 percentage points year-over-year. This was primarily due to the fact that Deppon was still in the business adjustment stage in the first half of the year, which had a certain impact on the overall gross profit margin.

It's worth noting that the gross profit margin of our original core business showed a steady upward trend. This demonstrates that in face of cost fluctuations such as energy cost triggered by the external environment, we relied on our operational resilience and technology-driven efficiency gains to continuously optimize the profitability of our core business.

The following is an overview of our core operating costs. First, employee benefits expenses for the quarter amount to RMB 21.94 billion, increasing by 20.6% year-over-year. And employee benefit expenses accounted for 34.2% of the total revenue, down 1.0 percentage points year-over-year. This was primarily attributed to our consistent technology enablement and refined management, which effectively improved productivity. As of the end of June 30, 2026, the total number of operational employees was approximately 311,000, including full-time food delivery riders.

Second, outsourcing cost for the quarter. The amount was RMB 23.7 billion, increasing by 40.5% year-on-year and outsourcing costs accounted for 37% of total revenue, up 4.3 percentage points year-over-year. The change was primarily due to the increase in outsourcing costs brought about by the consolidation of the crowd-resourced on-demand delivery business.

Third, vehicle cost for the quarter. The amount was RMB 3.26 billion, increasing by 18.8% year-over-year and the vehicle cost accounted for 5.1% of total revenue, down 0.2 percentage points year-over-year. The improvement in the change of the vehicle cost demonstrated that despite a fuel price fluctuation, we still achieved improved operating efficiency and effective cost control in the transportation stage through AI-enabled data-driven precise capacity dispatching and optimization of our capacity resource structure.

Fourth, rental cost. For the quarter, the amount was RMB 3.39 billion, increasing by 3.6% year-over-year and rental cost accounted for 5.3% of total revenue, down 1.1 percentage point year-over-year. Through network structure optimization and site consolidation, we continuously improved the site utilization efficiency, and through proactive negotiation initiatives in the market, we achieved further optimization of rental cost.

Aside from the core cost item mentioned above, as our business scale extended and our refined management level improved through technology enablement, depreciation and amortization and other costs as a percentage of total revenue declined by 0.1 percentage point and 0.9 percentage points year-over-year, respectively.

In terms of operating expenses, our total expenses for the quarter were RMB 4.09 billion, increasing by 14.9% year-over-year and accounting for 6.4% of total revenue, down 0.5 percentage points year-over-year. This reflected our continuously improving refined management capabilities and expense control.

Among them, selling and marketing expenses were RMB 1.69 billion, increased by 7.5 percentage points year-over-year and accounting for 2.6% of total revenue, down 0.4 percentage points year-over-year. As a percentage of external revenue, it was 3.8%, down 0.8 percentage points year-over-year as we approximately invested in resources such as selling and marketing personnel to promote business growth.

The R&D expense was RMB 1.21 billion, increasing by 20.1% year-over-year and accounting for 1.9% of total revenue. We continued to increase our R&D investment, focusing on the self-development of core technologies for logistics scenarios and continuously consolidating our technology foundation to provide sustained momentum for the long-term improvement of operating efficiency.

General and administrative expenses were RMB 1.11 billion, increasing by 19.9 percentage points year-over-year, accounting for 1.7% of total revenue, down 1.1 percentage point year-over-year. In terms of the net profit, overall non-IFRS profit for the quarter was RMB 2.64 billion, increasing 2.2% year-over-year with a net profit margin of 4.1%.

We also continue to monitor our capital position and the cash flow to maintain a healthy and adequate financial position to support our core business development operating needs.

For this quarter, free cash flow net of lease payments recorded net inflow of RMB 2.15 billion, of which cash flow from operating activities net of lease payment was RMB 3.6 billion, and capital expenditures were RMB 1.44 billion. Capital expenditures for the quarter were primarily focused on domestic and overseas automation equipment as well as self-operated vehicles and other assets.

Through continuously optimized asset allocation, we continue to enhance overall operating efficiency in terms of the shareholder returns. Since we've announced a share repurchase program with an aggregate amount up to RMB 1.2 billion -- USD 1.2 billion in May 2026, we have actively advanced the execution of the repurchases. As of June 30, 2026, we have cumulatively repurchased 33.26 million shares. This demonstrates our determination and effectiveness in execution, our firm confidence in the long-term prospect of JDL and our commitment to creating value for our shareholders.

That concludes my remarks. Now let's move on to the Q&A session. We will only receive English -- Chinese language, and we'll also answer in Chinese.

Okay. Now we can start the Q&A session. Now let's move on to the Q&A session.

[Operator Instructions] The first is from Goldman Sachs, [ Trudy Eutel ].

My first question is about our international business. We think that we acquired external customers. Can you give us an update on international business? And what's your look forward into the business development?

And second is about the logistics technologies. We see the robotics technology have been built and established. Now we have also humanoid robots. My question is, your use of robotic technology in your warehouses and your solutions in terms of the robots, how you're going to sell this technology externally?

I'm CEO Wang Zhenhui from JDL. I will answer the 2 questions. So first is about international business, especially Express. In Q2, our international business developed really fast, healthily relied on 26 countries over 200 -- over 2 million square meters of overseas warehouses. We are accelerating the overseas warehouses network encryption. Now the fulfillment efficiency and also the digitization of our supply chain have been enhanced to improve our overall business performance.

Europe is our core market Joybuy fulfillment. By market categories, we can say Europe is a really large market for our e-commerce business. The local customers have high requirement on high-quality fulfillment services.

In the first quarter of 2026, we built the encryption service network for the warehouses in Europe, covering U.K., Germany, Belgium, Holland, and Luxembourg. These are our core markets. We provide the best service for small and medium-sized parcels. And in other areas, we also provide the second-day delivery to these small and medium-sized parcels.

In terms of the external customers expansion, the fulfillment capabilities and the brand image are also being enhanced. We want to promote Chinese products to overseas market. We want to work with also local customers in different overseas markets. In the first half of 2026, we worked with top brands in electronic markets in Europe, and our business cooperation more than doubled. Some customers want to have the warehouse business for us. They also want us to take care of their fulfillment business. And in Poland, we are also expanding our cooperation with top brands. Our goal is to achieve the benchmark effect for some cleaning equipment and small electronic devices segments. We are also enhancing our exploration.

In Asia Pacific, America and the Middle East, we are laying out our business gradually. We want to focus on the consumer electronics, furniture, and also the home use equipment. We will work with local brands and also Chinese brands overseas to enhance cooperation in all different regards, including the delivery, fulfillment, and warehouse. We are also moving the integrated supply chain network to different markets, but with localization and differentiation according to the characteristics of our markets.

With the implementation of our service products, and also the reputation building around our brands, we are going to have a more mature supply chain network across the globe. We are going to become the first choice of Chinese business going overseas. This will drive our business grow continuously. So this will be our second growth trajectory.

And second is about our intelligent product Zhilang. In terms of the logistics technology, we are enhancing our investment. We're now opening our logistics technologies to external users, and there are several parts of it. First, in terms of operation and fulfillment, we will have customized the products for intelligent parcels, and we will use it on books, also the clothes, and these so-called Metabrain or Logistics Metabrain or Logistics Zhilang system will be used elsewhere and cover different segments.

We have also been working with supermarkets and also a lot of large brands. We introduced the Metabrain large model, the JDL Metabrain system too. We also try to commercialize such solutions to more users from internal use to external use. There is a process to take. Our automatic equipment selling channels has been built. We will sell such equipment and solutions to not just the Chinese customers, but overseas customers.

We just signed a contract in Q2 with a Japanese medical brand and also empathic medical brands. We provide such automatic equipment built by ourselves, providing them a comprehensive solution, including delivery fulfillment and intelligent supply chain system. We are also trying to build a more organized structure for our intelligent network. With the technology used in our system, we are going to serve more customers and become the benchmark model for such system, and it will be more accepted by users around the world.

Automated equipment have been welcomed by more and more users. This has already become the standardized equipment used in their warehouses. We have more than 10 years of accumulation in warehouse equipment, automated devices. We know the pain points of our users, and our technology's equipment devices will be more AI empowered to output more certainty in terms of use stabilities. We will also have an intelligent upgrade of our system and solutions. This market is really highly demanded around the world. We will see the opportunity of intelligent supply chain and to turn this growth trajectory our driving force for the long term.

The next question is Thomas Chong from Jefferies.

I have 2 questions. The first question is about integration. I'd like to know the revenue growth across 3C: car, clothing and more market segments. And the second question is about the number of external users and ARPU. For our existing customers and future customers, what are their ARPU? Can you also share with us your progress in AI technology?

Thank you. Thank you very much for your question. No matter about integrated supply chain or AI technologies used, they are all the core business we now embrace. The first is about integrated supply chain we promote. In Q2, the external integrated supply chain users grew at double digit in terms of the number of users and also the utilization of product. This really proves the deepening of our capability and also the barrier we built.

We are now extending our business to more industries. I can say, for example, home appliance industry. In Q2, we worked with a lot of brands in home appliances. By providing integrated supply chain solution, the brands working with us now can operate their sub-brands. And in terms of FMCG, we now try to move into the segments with a high requirements of laws and compliance.

In the second quarter, we've also expanded our business to a lot of high-level e-commerce businesses. We provide not just a warehouse service, but also comprehensive supply chain. We've been approved by FDS to meet the highest standard of food industry in Europe. This laid a solid foundation for us.

In terms of 3C industry, the fulfillment service, automated equipment are combined together. We have more cooperation with operation agencies of supply chain networks. This really helped to increase the automation rate of warehouses for our customers. In automobile industry, we covered heavy-duty trucks, especially the exporters of spare parts for heavy-duty trucks, including the airbags and more components.

For existing customers and new customers, the ARPU. In Q2, we did the calculation. Our integrated supply chain business customer structure is being optimized. The proportion of our high net worth customers has increased. We see the double-digit growth of the revenue from these premium customers. In terms of existing customers, the core high-value customers also increased in proportion. We see the average revenue income from the million level customers have increased. We are also adjusting the customer structure to improve the premium customers' percentage.

We are also signing new contracts with customers. As more customers become higher-level customers, we built our own moat, and we've deep cultivated the niche segment. The ARPU will be increased robustly with the increase of number of high net worth customers. We are confident to expand cooperations with premium customers and such optimized structure will help us to gain momentum in the growth of an integrated supply chain business.

About AI technology you are concerned about. In Q2, we are expanding our R&D of AI technology, expanding our business, enhancing our technology use. Supply chain is the scenario where AI can be used the most. We've built 3 layers. At the foundation, we use Metabrain model. We use an AI agent to schedule vehicles and make decisions in terms of the productivity resources allocation and also the Langzu robot now work with AI software to provide the best performance. We now also use AI host and automated approval at the first layer and auto-augment scheduling.

In the first half of 2026, we have already seen quite significant improvement in terms of efficiency and AI uses. I can give you several examples. In terms of the warehouses, we have now rely on AI for scheduling and dispatching. AI now is guiding the operation of warehouses to make the pickup, sorting and other core links improve in efficiency.

In terms of the transportation, we use an AI intelligent dispatching system to replace human dispatching. Now, we can guide vehicles in a flexible and intelligent way to meet capacity requirements. In terms of the efficiency per capita and the efficiency of dispatching, we all see quite significant growth, double-digit growth.

Also, LangzuTech is so powerful. We see the LangzuTech packer AI robotic arm through forced control technology upgrades achieved a 24-hour normalized unmanned operation and effectively accommodated the business peak during the 618 grand promotion through the handheld PDA and AI agents combination. Our first liners and our station head can all see their workload reduced.

In terms of the AI recognition of picture, we now can recognize the competitors' products to reduce the cost of our frontline workers. The head of stations and AI agents can automatically push abnormal parameters to increase the efficiency of human beings. In terms of the customer service, we now promote AI hosts to make AI-automated review and second review of human beings combined together to increase the efficiency of frontline workers.

All in all, AI is used in the dispatching, sorting, reviewing. Resources allocation can be seen in large scale, driving the efficiency of operation and optimization of the cost in the long term. We'll continue to rely on our technology advantage of JDL to expand more application scenarios for the sustainable growth of our business. Thank you.

The next question is from [ Xen Tao ] from American Bank.

Thank you so much. Our CEO and CFO, Mr. Wang, just introduced the domestic business and overseas business. I still have a question about our delivery -- express delivery. We see in the first quarter, it's under a big pressure. I'd like to know the second quarter's forecast. Also, I'd like to know the overall revenue. How do you see the growth rate for the second half of 2026?

Faced with the competitive external environment with our own moat of integrated business, we are very confident that our growth will be healthy, sustainable in the long term. Now we are exploring high-quality opportunities in the market.

The superfast delivery services, including the express delivery and freight delivery and on-demand delivery, will increase in great volume. But in the second half of next quarter, the second delivery or the instant delivery will be under a little bit pressure. The integrated supply chain business, like we just [Technical Difficulty] pursue this one inventory philosophy.

We will cover more B customers and see the high growth of overseas integrated supply chain business. The express delivery will be focusing on high timeliness and to enhance our foundation to really expand these high premium customers. And we are going to outperform our competitors in the industry. We'll keep optimizing the product structure to find more space for margin growth.

In terms of the freight delivery, we have a reasonable guidance for the second half. It will go into a steady growth. And we will see -- the freight delivery will see steady growth, and we are expanding into the premium segments. We also see the B customers fulfillment service from us has been enhanced greatly through multiple brand complementation and network service we provide. The freight delivery business will enter into a stage of high-quality development.

We just talked about on-demand delivery, the express delivery and freight delivery. We are very confident the 3 business will see quite steady and robust growth.

The next question is from Citibank, Dapeng Gong.

I'd like to know the profit growth in the second half. We know the second quarter's profit growth. And also the express delivery business, I'd like to know the trend of its growth because now we see the industry of express delivery has slowed down. So I'd like to know your side of the story.

Thank you, Brian, for your question. In terms of the profit, we are very confident we are going to follow the trend in Q1. We think our operational efficiency can be increased and the cost and structure will be optimized. The operating margin will be further improved in the second half. And the improvement stems from the adjustment of Deppon business.

In terms of the month-over-month performance, we already see some positive results. In the second half, Deppon business will be on the track of recovery. Our own business, including all the business we just mentioned, we have a long-term investment in the technology, optimizing our cost and enhancing our efficiency. The international business has been expanded. These will also inject momentum into our business growth. Our net profit margin will also see quite good improvement because of this.

About our express delivery, we just mentioned in the first half, the delivery growth rate is above the average of the industry, more than double the industry average. In the second half of 2026, our high growth rate of express delivery will be secured. Now, the industry enters into a mature stage of steady growth. JDL, with years of capability establishment, our network establishment, the product capability and the supply chain system building, all outperformed our competitors. So, this year, you can see our delivery products have improved in profit and revenue. This trend will continue in the second half of 2026.

We will use the advantage of integrated supply chain system to empower our express delivery customers. They will enjoy the integrated products we provide. We hope the integrated supply chain will grow at the fastest speed. Thank you.

In the interest of time, that's the end for the Q&A session. Now we will invite Mr. Wang Zhenhui to give us closing remarks.

I'm the CEO of JDL, Wang Zhenhui. Thank you very much for your question. Our CFO, Wu Hao, already shared with you our data for quarter 2. Now we are in very complex international environment with the fluctuation of the energy industry and really fierce geopolitical frictions, and JDL is using our own advantages to offset the macroeconomic pressure and improved our operating revenue and profit. Such stable business performance is the result of our enhancement of integrated supply chain and deep cultivated business internationally. I'd like to share with you our core operating outcomes. I'd also like to share with you the future business growth.

In terms of the integrated supply chain, this is our core competitiveness. Now, with this deep change of the consumption landscape, we see the brands have the demand of cost reduction across all channels and supply chain through integrated supply chain. We often helped our customers to see tangible results in terms of the optimized fulfillment cost and good flow efficiency while also achieving high-quality growth ourselves.

Secondly, internationalization is an important engine for us to unlock future incremental growth. We are firmly seizing the opportunities brought by the structural trend of Chinese brands and supply chain going global to cultivate our express delivery brands in Europe and other markets. For this quarter, our only express delivery brand, JoyExpress, continued to extend its network densification across multiple European countries, including U.K., Germany and Netherlands and France, providing strong support for the vigorous expansion of Joybuy business.

Leveraging our mature supply chain operating experience and our increasingly comprehensive overseas warehouse network and fulfillment capabilities, we have become the preferred logistics partner for many Chinese global brands. And our overseas external business also maintained rapid growth. Our overseas business is poised to become an important second growth curve for JDL.

At the same time, with the deployment and expansion of overseas warehouse automation and the increase in order density, the operating leverage of our overseas network is beginning to show driving the continued optimization of the unit economics of our overseas business.

Third, I'd like to emphasize JDL's investment in technology and the moat we have built. We believe AI and automation will accelerate the reshaping of the logistics industry. And that technology, combined with broad application scenarios, constitutes JDL's core advantages. We have the broadest range of operational scenarios and the most complete operational chain in the industry, which allows our technology to be truly deployed at scale across all stages, regions and scenarios of our supply chain.

To this end, we have always treated R&D investment as an important driver of long-term development, and we remain steadfast in our technology investment and our deep cultivation of an underlying innovation. These long-term investments are gradually being translated into tangible productivity.

Empowered by the Metabrain large model, we have achieved end-to-end intelligent decision-making across the warehousing, sorting and transportation and distribution stages. At the same time, our self-developed LangzuTech series for robots continue to be promoted and deployed across all scenarios. The LangzuTech goods-to-person, GTP solution, is being rolled out across more than 30 warehouses in the U.K. and Germany, especially. We will optimize the operating cost structure of overseas markets with a high level of automation.

The LangzuTech packer AI robotics arms, through forced control technology upgrades, achieved a 24-hour normalized unmanned operation, effectively accommodated the business peak during the 618 brand promotion and the LangzuTech drone built an efficient village-level delivery network. The scaled deployment of these technologies, driving the gradual release of room for improvement in our operating efficiency and cost structure, continuously consolidating our long-term competitive advantage. At the same time, it validates our ability to export our self-developed automation technology to overseas external customers, advancing the upgrade of our supply chain capability from internal operation to technology exports.

Looking ahead, we'll continue to firmly focus on our core integrated supply chain advantages, strengthen our supply chain infrastructure and network with global competitiveness, and build a high-quality second growth curve. At the same time, we'll remain committed to our technology-driven mission, continue to increase our R&D investments, and build an even more solid long-term moat. We'll continue to create value for our customers, reduce total social logistic costs, and ultimately deliver high-quality, sustainable long-term returns to our shareholders.

Thank you. That concludes my remarks.

Thank you so much, Mr. Wang Zhenhui. Thank you very much for your participation. That's the end for this session. If you have more questions, please contact our IR team of JDL. Thank you.

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

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.