Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics First Quarter 2024 Results Conference Call. At this time, all parties are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Please note that this English simultaneous translation line will be in listen-only mode for the duration of the call, including the question-and-answer session. If you wish to listen to the management's original statement or ask a question during the question-and-answer session, you will need to be dialed into the Chinese language line. I will now turn the call over to Ms. Shuangshuang , Head of Investment Relations team at JD Logistics. Please go ahead, Shuang.
Thank you, operator. Good day, ladies and gentlemen. Welcome to our first quarter 2024 results conference call. Joining us today are our Executive Director and CEO, Mr. Hu Wei, and CFO, Mr.
Wu Hao. 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 this discussion. The company does not undertake any obligations 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 the non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and the business highlights for the three months ended March 31, 2024, 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 the translation line for the duration of the call. Please note that English translation is for convenience purposes only. In case of any discrepancy, management statements in their original language will prevail. Now, I would like to turn the call over to our CEO. Mr. Hu Wei, please go ahead, sir.
Dear investors and analysts, welcome to the JD Logistics first quarter 2024 earnings call. This is Hu Wei, CEO of JD Logistics. Thank you for joining us today. In the first quarter of 2024, China's robust economic recovery provided a solid foundation for our business growth. JD Logistics achieved a total revenues of RMB 42.1 billion for the quarter, an increase of 14.2% year-over-year.
Our non-IFRS net profit was CNY 660 million, with a profit margin of 1.6%. This marks the first time we have attained profitability in the first quarter since our listing, with core profit indicators reaching their highest level for any first quarter to date. This result reflected the growing benefits of economies of scale as our business expands, the ongoing optimization of the business structure and customer mix, and our consistent efforts to improve end-to-end operational efficiency and business operation quality. Now, let's look at individual business lines. In the first quarter, revenue from integrated supply chain, ISC customers, reached CNY 20.5 billion, an increase of 11.1% year-over-year. Accelerating from the growth rate in the fourth quarter of 2023.
This included CNY 12.9 billion in revenue from JD Group, up 14.9% year-over-year. Mainly due to the business volume increased, fueled by JD Retail growth and lower free shipping thresholds for its 1P business . Revenue from external ISC customers was CNY 7.6 billion, up 5.3% year-over-year. This quarter, the number of external ISC customers returned to positive year-over-year growth, a testament to our effective strategic execution. We concentrated on building operational capacities in six industries, including fast-moving consumer goods, home appliances and furniture, apparels, with automotive and fresh products. Enhancing our solutions and service, and creating differentiated services through the integration of diverse resources, helped us successfully attract new external ISC customers in this quarter.
Moreover, our collaborations with existing customers continue to deepen, thanks to our high-quality products and services, resulting in an overall increase in the ARPA compared to last year. In the home appliance industry, we continued to deepen the collaborations with the industry-leading domestic appliance company. We supported its omni-channel fulfillment across the multiple online channels through the consolidated inventory model, enabling highly efficient fulfillment. Additionally, to address the high incidence of damage in bulky item returns, we leveraged our nationwide warehousing and delivery networks to provide reverse logistics, quality inspection, and repackaging service nearby. This has effectively reduced the logistics costs and secondary damage associated with multiple handling steps, resulting in overall cost reduction and efficiency improvements for the customer.
As policies promoting trade-in of used goods gain traction, more home appliance companies will come to rely on our ISC solutions to build the nationwide warehousing and delivery networks and simultaneous delivery and pickup capacities to reduce costs and enhance efficiency. Additionally, for the apparel industry, we have developed a service model incorporating cross-docking, value-added processing, and drop shipping to align with the e-commerce trends of a self-driven procurement and rapid inventory turnover. This enables same-day inbound and outbound processing to meet the demand for the faster shipping and respond to seasonal fluctuations, supporting rapid turnover for merchants. Our network infrastructure consists of six logistics networks, including warehouse, line haul transportation, and last-mile delivery.
As of March 13, first quarter of 2024, our warehouse network covered nearly all counties 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 32 m² million , including warehouse space managed through the open warehouse platform. Based on our network infrastructure and our accumulated insights into the turnover characteristics of the goods we managed, we can seamlessly distribute a diverse range of products across various areas. This helps our customers optimize inventory deployment, improve inventory turnover, and achieve efficient fulfillment. We also continue to expand our products and services overseas, providing services for more Chinese go-global brands and overseas customers.
This quarter, we have deepened our cooperation with MINISO, providing ISC services, including warehousing and fulfillment for MINISO stores in Australia and Malaysia. As MINISO expands into more regions overseas, we will explore more business collaborations and opportunities. As of the end of the first quarter of 2024, we operated approximately six bonded warehouses, international direct distribution warehouses, and overseas warehouses, covering an aggregate GFA of nearly 900,000 m² . We are consistently strengthening our operational capacity centered on overseas warehouses, particularly by enhancing our existing warehouses' operational efficiency. This improvement supports our capacities to capture a broader range of international business opportunities as we serve more customers. Overall competitiveness of the ISC service offerings continue to increase.
In the first quarter of 2024, our revenue from other customers, primarily including express and freight delivery services, increased by 18.4% year-over-year to RMB 21.6 billion. This year-over-year revenue growth was further improved from the 10.6% year-over-year increase recorded in the fourth quarter of 2023. With regard to our express delivery services, we continue to focus on improving timelines and enhancing customer experience. We've further improved cross-provincial delivery timelines through ongoing investment in full freighter aviation resources and route optimization. Additionally, by strengthening our ground transportation capacities, we can now offer faster inter-province delivery experience. We also continue expanding the coverage of the next morning and next day delivery.
Additionally, JD Express continued to set industry benchmarks with high standard personalized services, such as compensation for pickup delays exceeding one hour in several cities nationwide and the nighttime pickups. This further consolidates JD Express' reputation for high-quality services among customers. Thanks to our excellent service quality, our express delivery services achieved a solid result this quarter. We continued to capture business opportunities from various agriculture production zones and interest-based e-commerce platforms this quarter. We delivered specialty products such as the Ningxia beef and lamb, and the Chagan Lake bighead carp to customers nationwide, and continued to deepen our cooperation with interest-based e-commerce platforms, achieving business growth.... Express delivery services recorded a steady revenue growth and significantly elevated profitability for the first quarter. Effective price management, strategic adjustments to our business structure, and our continuous efforts to reduce costs and enhance efficiency across our operations collectively bolstered our profits.
Looking ahead, we will further enhance our core capacities, such as delivery timeliness and customer service experience, to support continued business growth. With the consolidation of Deppon Logistics, our freight delivery services revenue ranks among the top tier in China. We have comprehensive freight delivery services covering various weight classes and price ranges to effectively meet customers' specific transportation needs across different scenarios. In the first quarter of 2024, we steadily enhanced our business and network synergies with Deppon, realizing the integration of operation size and routes. This enabled us to continuously improve operational efficiency, reduce operating costs, and expand our ISC services. We will continue to adhere to JD Logistics' core operational philosophy of reducing the frequency of goods moved and minimizing the distance of fulfillment.
Since last year, we have consistently refined our logistics network layout, operational process, and the application of automation, aiming to enhance efficiency and reduce overall costs. In the first quarter of 2024, we observed early positive outcomes from pilot projects in some areas. Going forward, we will continue to roll out successful strategies based on pilot project experiences to further enhance our cost competitiveness and provide our customer with high quality, reliable services. JD Logistics has provided two-door delivery services since its inception. We also provide comprehensive personal security to over 400,000 frontline employees, which not reflect our commitment to our employees, but also boosts our service, professionalism, and reliability. This approach has significantly enhanced the customer satisfaction and trust. According to survey results published by the State Post Bureau of the People's Republic of China, we have constantly maintained best-in-class customer satisfaction ratings.
This achievement underscores our continuous pursuit of service excellence and improved customer experiences, as well as our steadfast adherence to high service standards. Through these efforts, JD Logistics is committed to becoming the world's most trusted supply chain solutions and logistics service provider, contributing to the health development of the industry and the improvement of service standards industry-wide. Thank you. Next, I'd like to invite Mr. Wu Hao to discuss the details of financial performance.
Thank you, Mr. Wu. Hello, everyone. This is Wu Hao, CFO of JD Logistics. I'm pleased to present JD Logistics' financial performance for the first quarter of 2024. In the first quarter of 2024, China's macroeconomy continued to progress on the upward trajectory that began last year. Meanwhile, JD Logistics maintained high-quality growth in overall revenue and profitability.
In terms of the revenue, the revenue from our integrated supply chain customer increased to a double-digit growth rate, with both the numbers of the external ISC customers and average revenue per customer for the external ISC increasing year-over-year, where revenue from other customers in areas such as express and freight delivery also realized accelerated year-over-year growth compared to the previous quarter's rate. In addition, we successfully improved the efficiency and reduced the cost in all aspects of operation through continuous operational refinements and network structure optimizations. We also adjusted our business structure in line with this quarter's effective price management strategies and achieved profitability in the traditional off-season as a result. During the quarter, both our IFRS and non-IFRS net profit turned positive for the first time in the first quarter, with our best first quarter core profitability indicators since listing.
Especially, our IFRS net profit reached RMB 300 million, with a margin of 0.8%, up 3.6% year-over-year. Our non-IFRS net profit was RMB 660 million, with a margin of 1.6%, up 3.5% year-over-year. In the first quarter, our total revenue reached RMB 42.14 billion, up 14.7% year-over-year. Notably, revenue from external customers increased by 14.47% year-over-year to RMB 19.25 billion, accounting for 69.4% of total revenue, representing a higher growth rate compared to the previous quarter and reflecting our external business' steadily ongoing expansion.... In the first quarter, revenue from ISC customers totaled RMB 20.50 billion, up 11.1% year-over-year, resuming double-digit growth.
Among them, ISC revenue from JD Group amounted to CNY 12.88 billion, up 14.9% year-over-year. The accelerated growth compared to the previous quarter is primarily attributable to the business volume increase fueled by JD Retail's growth and low free shipping threshold for the 1P business . Moreover, also revenue from external customers maintained a steady growth momentum of 5.3% year-over-year to CNY 7.62 billion, while maintaining deep and high-quality collaborations with our existing customers. We constantly expanded our cooperation with external high-quality customers. In the first quarter, the number of external ISC customers returned to positive year-over-year growth and reached 56,000. Our ARPA of external ISC also increased year-over-year to CNY 137,000, sustainable trend.
In the first quarter of 2024, our revenue from other customers maintained healthy growth, reaching RMB 21.64 billion, up 18.4% year-over-year. This increase was primarily due to our strengthened express and freight delivery capacities, notably. In terms of express delivery services, we constantly expanded the delivery coverage of JD Speed Express and the JD Standard Express, further improving delivery timelines and customer experience. Meanwhile, our high-quality product specialties also facilitated our business expansion, enabling us to realize rapid growth in various channels, such as agriculture production zones and interest-based e-commerce platforms. In addition, with respect to freight delivery services, as Mr. Hu mentioned earlier, both our freight volume and revenue scale ranked top tier in China.
In addition to the revenue growth, our gross margin in the first quarter of 2024 was 10.2%, up 3.2% year-over-year, and we will continue to consolidate our resources and to reduce our cost. Except for the revenue growth, in 2024, in the first quarter, the gross margin was 10.1%, up 3.2% year-over-year, representing our best first quarter gross margin since our listing. Next, let's move to the main cost of revenue. First, employee benefit expenses. It stood at CNY 14.8 billion in the first quarter, up 16.8% year-over-year. This increase was mainly attributable to the year-over-year increase in the number of our frontline operational employees in delivery and warehousing. This increase in the number of operational employees has helped us upgrade the product services and enhance customer experience.
For example, we constantly expand the delivery coverage of our intra-province next morning delivery service. If we are going to include the outsourcing employee cost, we are reducing the cost fundamentally. As we are offering more precise operations, we're able to reduce the cost. The second is our outsourcing cost. It was RMB 14.5 billion in the first quarter, up 8.2% year-over-year, accounting for 34.5% of the total revenue for the first quarter, down 2.1% year-over-year. Notably, transportation-related expenses, the primary component of our outsourcing costs, have decreased year-over-year as a percentage of the total revenue, mainly attributable to our refined management of the transportation resources. We have also successfully deployed comprehensive transportation deployment strategies based on algorithms across every stage of transportation.
In combination with real-time transportation volume data, these algorithms enable optimal allocation of the transportation resources. The third is our rental cost at CNY 3.3 billion in the first quarter, up 10.2% year-over-year. As we continue to optimize our network structure, our total rental costs accounted for 7.8% of our total revenue, down 0.6% year-over-year. Apart from the major costs mentioned above, economies of scale resulting from our business expansion and our ongoing management refinements led to a decrease in depreciation and amortization costs and other costs as a percentage of the total revenue. In terms of expenses, our operating expenses in the first quarter were CNY 3.14 billion, up 7% year-over-year, and accounting for 7.5% of the total revenue, down 0.5% year-over-year.
Among them, sales and marketing expenses were RMB 1.54 billion, accounting for 3.3% of the total revenue, up 0.2% year-over-year. Selling and marketing expenses accounted for 4.8% of the revenue from external customers. In the first quarter of 2024, our R&D expenses were RMB 860 million, down 4.6% year-over-year, and accounting for 2% of the total revenue, down 0.4% year-over-year. Through our continuous R&D investments, our system capacities are gradually maturing. Accordingly, we are now allocating more R&D resources to strengthen our end-to-end automation. Our general administration expenses were RMB 817 million, down 2.4% year-over-year due to the decrease in share-based payments, accounting for 2.1% of total revenue, down 0.4% year-over-year.
In terms of the profit, please also consider our non-IFRS measures, which we believe can better reflect our core operations. Those 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 first quarter of 2024, our non-IFRS net profit was RMB 616 million, turning positive year-over-year with a net increase of RMB 1.37 billion, marking the first time JD Logistics has achieved the first quarter turnaround in non-IFRS net profit since our listing. Non-IFRS net profit margin was 1.6%, up 3.5% year-over-year, also reaching the best first quarter profitability since our listing.
This improvement in non-IFRS net profit margin was primarily attributable to the comprehensive impact of the year-over-year increase in the growth margin and the year-over-year decrease in operating expense ratio. Non-IFRS EBITDA for the first quarter was CNY 3.65 billion, an increase of 7.9% year-over-year, with a non-IFRS EBITDA margin of 8.7%, representing a year-over-year improvement of 3.1%. We also continued to monitor our cash reserves and cash flow to maintain healthy, sufficient capital to support business deployment and development and meet our personal needs. In the first quarter, we saw year-over-year improvement in our free cash flow as net operating cash inflow under IFRS continued to increase year-over-year due to enhanced operations and our year-over-year profitability improvement. Our capital expenditure was CNY 600 million for the first quarter.
We will make prudent and effective capital expenditures based on our business development, as well as to strengthen our mid- to long-term capacities, improve our network structure, and enhance operational efficiency. Finally, I'd like to express our heartfelt thanks to our shareholders for their unending support and trust in JD Logistics. Going forward, we will maintain our focus on cost, efficiency, and experience. Especially, we will continue to improve our products and services capacities centered around our ISC, while also optimizing our network structure and leveraging advanced technology to enhance our industry-specific service capacities and improve and promote a healthy, sustainable expansion of our business. Additionally, we will continue to refine our management to further improve profitability and create good value for our shareholders. Thank you. That concludes my prepared remarks. Now we can start Q&A session.
Thank you, Mr. Wu Hao. This concludes our prepared remarks.
We would like now to open the call to your questions. Operator, please start Q&A session when ready. Thank you. We will have the questions in Chinese only. Thank you. Please go ahead, operator.
It's the time for the Q&A session. If you have any questions, please press star and press one. Thank you. Again, if you want to raise up a question, please press star and one. Thank you. The first question from Goldman Sachs. Ron, please go ahead.
Thank you, Mr. Wu and Mr. Hu. I have two questions. I overviewed the revenue growth in the first quarter of 2024, and I see both the external and internal ISC were growing. So I want to ask you about the outlook in 2024. This is the first question. The second question about the retail in last August, you are also creating a rapid growth.
You have the free shipping threshold standards since last August. I want to check with you about the retail business as well. Apart from that, the profitability ratio was also increasing in the first quarter, but we are seeing the Spring Festival in the first quarter. So how about the second quarter? Would there be any change on both the growth margin and the profitability ratio? Thank you.
Thank you very much for the questions. In 2024, we will continue to maintain a steady growth rate. The external ISC revenue was also very positive. We saw certain growth. The numbers of the customers are also on the increase. Let's take express delivery, for instance. In 2024, we will continue to decrease our cost and improve our competitiveness. I know that we hold a very positive component. We have a very positive mentality on that.
The business will attract more customers and find more business opportunities. We will improve the capacity buildings as well, because we want to give them better experiences. We will cover more businesses, continuously expanding our pool of service-seeking revenues. Right now, in both the retail, the express, and the freight, we are among the top tier companies, as you already heard. The next phase, we want to control the cost and improve the efficiency. That are the two major tools within our strategy. We want to attract more customers and re- by reducing the cost. Thank you.
For the second question, in light of the profitability in the upcoming years, we are achieving the economies of scale. That is a very good news, and in the first quarter of 2024, the company conducted innovative measures and improved the overall profitabilities.
For instance, we were collaborating with more partners, and we are reducing the delivery times, as well as reducing the damages of the goods. Those are the measures we conducted in reducing the general cost. Beyond that, we are now creating and consolidating our resources. We are trying to build up the optimized transportation goods. With that being said, we could further reduce our cost. Thank you. I also want to add a few more words about those questions. In the first quarter, the growth momentum was very positive, and I believe that in the next few months, the company will maintain the steady growth pace. In 2023, both the first quarter and the second... The first half and the second half of 2023 was very much different.
In 2024, as we expected, the first half would be more positive, while in the second half, we may have certain pressures. However, we could further collaborating with the potential customers, and we want to maintain the good momentum as well in the second half of this year. In light of the profit, we are collaborating with a number of e-commerce merchants and business. This is a very effective measure and strategy, maintaining good gross margin for us. In 2023, we are also adjusting certain high-cost business. For the high-cost business, we are making a lot of changes in reducing the cost dramatically. In the entire year, I believe that the profit will be higher than that of 2023.
Thank you very much for the answer. Next question, please. Paulin Fan from Bank of America , please go ahead.
Thank you for having me here. Good evening, leaders. I want to check you about the trade-in policy, new for old. I know that you have a lot of campaigns, so I want to invite you to give us a general introduction of the campaigns. So what kind of goods, what are the categories that could afford for the trade-in campaigns, and what are the business that will contribute to the same growth?
Thank you for the question. At present, the national government is promoting the trade-in policy. The actions, the plans, and the regulations have been published one after another. For us, we are responsive to the national policies, and we are very active. And we are also offering the ISC, the cold chain services and products. The appliances, such as the refrigerator, the clothes washer, are our strength.
The JD Retail and other third-party merchants would offer the supportive services to the customers. As more customers are placing the orders in our platform, we'll continue to optimize our services. We will adding more categories of the business, and we will make this trip more convenient for them.... Now, local governments from different provinces are promoting this policy, which will result in a better business environment for us.
Thank you. Next question. Brian from Citi Bank. Thank you for having me here. Congratulations to your good news. I have two questions. The first question about the revenue. Except for the ISC services, do you have specific data on the delivery on the express, and what is the outlook for the future? Next, about the profitability. In the first quarter, profit was very positive, was excellent.
It's the first time for the head, the first quarter, to receive the positive number. In 2025, the targets were issued. I'm wondering, according to the current data, are you going to uplift the 2025 target a little bit? Thank you.
I want to check with you about the growth of the freight and delivery. At present, the growth rate was still very positive. We are highly competitive in delivering different services and the goods. In terms of the timelines and the response, we are doing a better job than our competitors. As we are having better products and competitiveness, we're able to attract high quality customers as well. In light of the business expansion and profitability optimization, those are the two factors and indicators that can be achieved together, and we are confident to maintain this growth momentum.
We will continue to deliver better achievements to the market by increasing the competitiveness of the products and attracting more customers. In light of the profitability, we offer the 2024 outlook instead of a 2025 outlook, I suppose. The 2024 targets are something we could achieve, I could say. However, the market is very much turbulent, with a lot of competition, and we will have more buying festivals, such as June 18, and we are already feeling the pressures, so we have to maintain our current expectations. I believe that 2024 targets would be made, would be hit, and we want to do a better job compared to, or better than our targets, and we'll wait and see.
Thank you. Next question. Thomas, please go ahead.
Good evening, leaders. Thank you for having me.
My question is as follows: I want to understand more about the overseas business. The cross-border e-commerce is booming right now. You are mentioning that you have your own deployment on the overseas market, so I want to understand more of your deployments and your strategies in expanding the overseas e-commerce market. The next question is about the future strategies or the CapEx, the future CapEx, next few years.
Thank you, Thomas, for the two questions. The first question is about the overseas market. We want to expand our footprint in freight and delivery. First of all, we will have the omni-channel warehousing network. We will establish the overseas warehouse. We will use that warehouse to serve domestic customers and international customers separately, and we want to ensure its timeliness and responsiveness to the overseas customers. That is the first major action we will conduct.
That is also a key investment step we will make. We have to localize our business and follow the growth trend of the local customers, of the overseas customers, and we have to understand those markets as well. That is a key area for the business expansion in the overseas market. The international logistic business will be a key. I want to take up the second question. In the upcoming years, 3%-4% will be well-maintained, and there will be no fundamental changes according to our previous strategies. According to our business structure, automation devices, transportation devices are the major areas to be invested. Right now, we haven't changed the targets of CapEx.
Thank you very much for the answer.
Due to time sake, we are going to end the Q&A session now. We are going to welcome Shuang to close the meeting.
Thank you for staying with us. If you have more questions to come, please contact the Investor Relations team. Thank you.