Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Logistics second quarter 2024 results conference call. At this time, all participants 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 questions during the question and answer session, you will need to dial the Chinese language line. I will turn the call over to Ms. Shuang, Head of Investor Relations team at JD Logistics. Please go ahead, Shuang.
Thank you, operator. Good day, ladies and gentlemen, welcome to our second quarter 2024 results conference call. Joining us today, our Executive Director and CEO, Mr. Hu Wei, and CFO, Mr.
Wu Hao. Before we start, I 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 definition of Non-IFRS financial measures and the reconciliation of the IFRS to Non-IFRS financial results, please refer to the announcement of the results for the three months and six months ending June 30, 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 separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management's statements in the original language will prevail. I'd like to turn the call over to Mr. Hu Wei. Please go ahead, sir.
Dear investors and analysts, welcome to JD Logistics second quarter 2024 call. This is Hu Wei, the CEO of JD Logistics. Thank you for joining us today. As China's economy continued to recover and improve in the second quarter of 2024, JD Logistics achieved a total revenue of CNY 44.2 billion, increased over 7.7% year-over-year.
Revenue from external customers increased about 8.1% year-over-year to RMB 30.7 billion, with a percentage of the total revenue increasing year-over-year to 69.4%. Our profitability set a new record in this quarter, reaching its highest level for any quarter to date since the listing. Our non-IFRS net profit was RMB 2.46 billion, nearly three times that of the same period last year, and our non-IFRS net profit margin was 5.6%, an increase of 3.5 percentage points year-over-year. These impressive results reflect our consistent efforts to optimize warehouse network deployment, as well as our iterative upgrades of technology applications and ongoing end-to-end efficiency and business quality improvements. In the second quarter, revenue from integrated supply chain customers reached RMB 21.4 billion, increased 4.4% year-over-year.
This included CNY 13.5 billion in revenue from JD Group and CNY 7.8 billion in revenue from external ISC customers, both maintaining a steady growth trend. The number of our external ISC customers amounted to 58,000, an increase of 11.2% year-over-year. Such growth was primarily attributed to our efforts in addressing the pain points and needs of customers in specific segments and enhancing our capacities of ISC solutions and services. This has resulted in accreditation and benchmark effect, effectively expanding business cooperation opportunities with more customers. Given the high return rates of apparel products and the trend towards inventory integration across online and offline channels, we've developed specialized solutions and services tailored to the apparel industry, creating a more flexible and agile supply chain for various apparel brands.
This quarter, we partnered with an apparel company that owns several global brands, marking our first international collaboration in the apparel industry. The scope of our collaboration includes multiple scenarios, including forward and reverse logistics, B2C and B2B liquid inventory, transfer logistics services between stores, et cetera. Through this international partnership, JD Logistics has gained operational and first-hand experience that will support our future expansion with more international customers. Furthermore, we've developed a service model incorporating cross-docking that added the processing and the drop shipping to align with the e-commerce trends of self-driven procurement and rapid inventory turnover. This model has been expanded to several apparel production zones, effectively helping customers managing order volume fluctuations during platform promotions and support rapid turnover. We also collaborated with the apparel company, Lee, this quarter, and their order volumes, such as during the live stream events and the Two Way Square Neck promotion.
We provide robust support for operational efficiencies and improving metrics, such as the on-time delivery rates. Additionally, we have developed specialized logistics services and products for corporate customers in alcoholic beverage industry, successfully penetrating various subsectors such as white wine and red wine. Our solutions help customers quickly optimize their nationwide warehouse deployment planning and inventory distribution, significantly shortening the fulfillment time for online multiple channel orders and reducing in-transit damage rates. We're continuing to develop our supply chain services. In the alcoholic beverage industry, we've also developed several value-added services, such as full product visibility, traceability, and empty pallet scanning, standardized packaging, and authentication services. In short, our logistics services empower our customers to rapidly expand their business. In the home appliance industry, we continue to provide omni-channel ISC service for many leading customers.
We've extended the distribution to warehouse network planning, inventory layout, and replenishment recommendation, effectively reducing port bridge equipment and overloaded costs. Many leading home appliances customers have expanded their collaboration with us, fully demonstrating our expertise and service advantages in their home appliances logistics. While continuously strengthening our leading position in China's ISC market, we are also actively expanding our international business. Through our global smart supply chain network plan, we've strategically developed our overseas warehousing. As of the end of the second quarter of 2024, we operated approximately 100 bonded warehouses, international distribution warehouses, and overseas warehouses, covering an aggregate gross floor area of nearly 1 million sq m. Our overseas warehouses now cover 18 countries and regions worldwide, providing high quality, efficient, and comprehensive ISC solutions to Chinese global brands and overseas customers.
Over the last two years, our revenue from overseas ISC logistics services has maintained a strong growth trend, with our overseas warehousing services increasingly become the preferred choice for overseas customers. We provide integrated warehousing and distribution logistics services to numerous overseas customers in the United States, the Netherlands, Germany, Australia, among other countries, earning their trust and recognition. This quarter, we expanded and deepened our partnership with a well-known footwear brand in the United States, undertaking our order fulfillment services for its online platforms in the United States. We've also successfully replicated a service model for more overseas customers. Regarding Chinese global customers, we provided a full process automotive spare parts supply chain solution for a Chinese auto brand, covering the full process from domestic pickup to overseas warehousing and distribution.
This has improved the delivery efficiency, accelerated the turnover of the goods, and opened the new pathways for the international development of the Chinese automotive brands. Our network infrastructure consists of six logistic networks, including warehouse, line haul, transportation, and last mile delivery. As of the end of the second 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 warehouses and owner-operated cloud warehouses under our open warehouse platform. Our warehouse network has an aggregated GFA of more than 32 million sq m, including warehouse-based functions in the open warehouse platform. In the second quarter of 2024, our revenue from other customers partnering, including express and freight delivery, increased by 11% year-over-year to CNY 22.9 billion.
In terms of express delivery services, our revenue has maintained steady growth and our profitability continues to improve. This quarter, we partnered with multiple e-commerce platforms and a steady increase of the share of our reverse logistics from a leading live streaming e-commerce platform. In addition, with the continuous enhancement in capacities of JD Airlines all-cargo airplanes, we significantly optimized our service capacities for the delivery of fresh products such as cherry and lychee. This ensured a fast delivery of fresh foods across the country with high quality and reliable services. In terms of the product capacities and experiences, we continue to expand the coverage of our next morning and next day delivery, continuously upgrading customer experiences and satisfaction. According to survey results published by the State Post Bureau of the People's Republic of China, our express delivery services have constantly maintained first-class customer satisfaction ratings.
Moving into the freight delivery services, with the consolidation of Deppon Logistics, we rank among the top tier in China in terms of both freight volume and revenue. We steadily advanced our network integration with Deppon Logistics, particularly with respect to transit and transportation, and further expanding our market share with comprehensive and flexible products and services. We constantly prioritize technological innovation at the core of our development. We continuously integrate algorithms and technology into our daily operations, driving transformation in logistics network deployment, operational process, and automation applications, thereby reducing costs and enhancing efficiency. Furthermore, we continuously upgrade and iterate intelligent technological products, driving high-quality industry development and demonstrating our innovative strength on the national stage. This quarter, we provided a customized service to a leading domestic semiconductor company with our self-developed Tianlang.
This marks another significant breakthrough following our established success in three C automotive spare parts and pharmaceutical industries. Additionally, with JD Logistics, we established a strategic cooperation with the Saudi Electricity Company. Both parties will promote collaboration in areas such as warehouse automation upgrades and supply chain system optimization, fully leveraging our extensive practical experience in successfully serving many corporations in the power industry in China. Looking ahead into the second half of the year, we will continue to adhere to our core operational philosophy of reducing the frequency of the goods moved and minimizing the distance of the fulfillment by further optimizing our logistics network deployment and integrating technology with operations during full process to enhance operational efficiency.
We will also continue to deeply cultivate our industry-specific capacities with ISC Logistics and actively respond to national policies such as the trading of used goods, promoting green and sustainable development throughout the supply chain. Through this effort, JD Logistics aims to become the world's most attractive supply chain solution and logistics service provider, contributing to improvement of the service standards industry-wide and sustainable and healthy development of industry. Thank you. Next, I'd like to invite Mr. Wu Hao to discuss the details of our financial performance.
Thank you, Mr. Hu Wei. Hello, everyone. This is Wu Hao, CFO of JD Logistics. I'm pleased to present the JD Logistics financial performance for the second quarter of 2024. In the second quarter of 2024, as China's economy maintained a stable and upward trend, JD Logistics significantly improved their profitability while driving high-quality growth.
For the quarter, our non-GAAP profit was RMB 2.46 billion, impressive increase of 197.4% year-over-year, with a profit margin of 5.6%, up 3.5 percentage points year-over-year. Other core profit metrics also reached their best ever quarter level since our listing. These results represent our ongoing optimizations in product and customer structure, continuous operational refinements, and consistent efforts to improve end-to-end efficiency while steadily enhancing operational quality. In the second quarter of 2024, our total revenue reached RMB 44.21 billion, up 7.10% year-over-year. Notably, revenue from external customers increased by 8.1% year-over-year to RMB 13.67 billion, accounting for 69.4% of total revenue, reflecting our external business steady expansion.
Revenue from ISC customers totaled CNY 21.3 billion in the second quarter, up 4.4% year-over-year. Among them, ISC revenue from JD Group amounted to CNY 13.53 billion, up 7% year-over-year. The growth was attributable to the increased revenue of JD Group, continuously fueled by JD Retail's lower free shipping threshold for its 1P business on Uber. During the quarter, our revenue from external customers achieved a steady growth, reaching CNY 7.77 billion, and the number of external ISC customers amounted to 57,889, up 11.2% year-over-year. Our revenue from our third-party customers maintained healthy growth for the second quarter, reaching CNY 22.91 billion, up 11% year-over-year. The increase was primarily due to our enhanced capacities in express and freight delivery services.
Notably, for our express delivery services, we further improved delivery time limits and customer experience through our continuous model innovations, technological investments, and the improved capacities of the JD Airlines all-cargo airplanes. We maintained best-in-class customer satisfaction ratings in the second quarter's express delivery services survey, thanks to our robust product capacities, which are also driving consistent growth in our express and freight delivery business. We have expanded our market share in the reverse logistics services from a leading live streaming e-commerce platform, and achieved a substantial breakthrough in delivery services from production zones. Regarding the freight delivery services, we maintained our leading position nationwide, excelling in both freight volume and revenue. In addition to the revenue growth, our growth margin second quarter was 11.9%, up 3.6 percentage points year-over-year, representing our best quarterly growth margin since our listing.
Next, I'd like to turn to the main cost of revenue. First, employee benefit expenses were CNY 15.14 billion in the second quarter, up 13.1% year-over-year. The increase was mainly attributable to the year-over-year increase in the number of our frontline operational employees in delivery and warehousing, with the number increasing from 410,000 at the end of the second quarter of last year to 430,000 at the end of the second quarter of this year. This increase in the number of operational employees was attributable to the addition of our own employees to key operational processes, such as warehousing and last mile delivery, aimed at ensuring high quality service and elevating customer experience.
For example, we constantly explored market potential and customer needs, offering specialized delivery services across diverse scenarios, while also expanding the coverage of the next morning and next day delivery in the second quarter. Employee benefit accounted for 34.2% of the total revenue, up 1.6 percentage points year-over-year. Second, our outsourcing cost was RMB 13.9 billion second quarter, down 3.6% year-over-year. It accounted for 13.16% of total revenue for the quarter, down 3.7 percentage points year-over-year. Notably, transportation-related expenses, the primary component of our outsourcing cost, further decreased year-over-year as a percentage of total revenue, maintaining its consistent downward trend. This improvement was mainly attributable to our ongoing efforts in our operation optimization.
By expanding the application of advanced algorithms, we enhanced the matching of the shipping needs with transportation resources, but also reducing logistic class B costs through route streamline, streamlining, and optimization. Third, our total labor cost was CNY 6.3 billion in the second quarter, down 0.3% year-over-year, as we continue to promote budget integration and optimize network structure. Our total revenue cost accounted for 7.5% of our total revenue in the second quarter, down 0.6 percentage points year-over-year. Apart from the major costs mentioned above, our product structure optimizations and ongoing tech-empowered management and control refinements led to a decrease in depreciation and amortization costs, and other costs as percentage of total revenue, down 0.9 percentage points year-over-year.
In terms of expenses, our operating expenses in second quarter for 2024 was CNY 3.04 billion, up 4.3% year-over-year, and accounting for 6.9% of total revenue, down 0.2 percentage point year-over-year. Among them, sales and marketing expenses were CNY 1.37 billion, accounting for 3.1% of total revenue, up 0.1 percentage point year-over-year. Sales and marketing expenses accounted for 4.5% revenue from external customers, up 0.2% year-over-year. We maintained a multi investment in key resources, such as sales and marketing personnel, to drive business growth. In the second quarter of 2024, our R&D expenses were CNY 880 million, down 4.3% year-over-year, and accounting for 2.0% of total revenue, down 0.3 percentage point year-over-year.
As our system capacity is gradually matured, we've located more R&D resources and to strengthen our end-to-end automation, digital and intelligence capacities, driving cost savings and efficiency improvements. Our general and administrative expenses were CNY 790 million, up 1.2% year-over-year, and accounting for 1.8% of total revenue, down 0.2 percentage point year-over-year. In terms of profit, please also consider our non-IFRS measures, which we believe may better reflect our corporation. 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 second quarter of 2024, our non-IFRS profit was CNY 2.646 billion, up substantially 179.4% year-over-year, with a net increase of CNY 1.63 billion. Non-IFRS profit margin was 5.6%, up 3.5 percentage points year-over-year, with our non-IFRS profit and margin improving year-over-year for the sixth consecutive quarter. We delivered the highest quarterly profit and margin since our listing. The improvement in non-IFRS profit margin was primarily attributed to the impact of the year-over-year increase in gross margin. Non-IFRS EBITDA for the second quarter was CNY 5.63 billion, increase of 15.3% year-over-year, with a non-IFRS EBITDA margin of 12.7%, up 3.6 percentage points year-over-year.
We have continued to monitor our cash reserves and cash flow to maintain a healthy balance sheet and sufficient capital to support business development and to meet our operational needs. In the second quarter of 2024, considering lease-related payments, we recorded a net inflow of CNY 1.69 billion in free cash flow, turning around from the outflow during the same period last year. Net operating cash flow on the IFRS reached CNY 2.83 billion, an increase of CNY 3.12 billion compared to the same period last year, primarily driven by enhanced operations and a year-over-year profitability improvement. Our capital expenditure was CNY 1.14 billion for the second quarter, increase of CNY 190 million year-over-year, primarily due to investment in transportation equipment and improving operational efficiency.
Going forward, we will make a prudent and efficient capital expenditures based on our business development needs to strengthen our mid- to long-term capacities, improving our network structure and enhance operational efficiency. Before we wrap up, I would like to express our heartfelt thanks to our stakeholders for their enduring support and trusting JD Logistics. Moving ahead, we will remain focused on cost efficiency and experience. Specifically, we will improve our product capacities and center on ISC, enhancing our product competitiveness and industry-specific service capacities to promote our business healthy and sustainable expansion. Additionally, we will further improve profitability through ongoing optimization of our network structure, technological empowerment, and innovative efficiency improvement, thereby creating good value for our shareholders. Thank you. That concludes my prepared remarks. Now we can start the Q&A session.
Thank you, Mr. Wu Hao. This concludes our prepared remarks.
We would like to open the call to your questions. Operator, please start the Q&A session when ready. Thank you. Please go ahead.
Thank you. As a reminder, we only accept the questions in Chinese language line. To ask a question, please dial in the Chinese line and then press star one on your telephone's touch tone keypad. If you have any following question, please re-enter the queue. Thank you. Once again, please press star one to ask the question. Once again, please press star one to ask the question. The first question comes from Citi. Brian Gong, go ahead. Please start your question.
Thank you for having me here. Congratulations, you are having very good profitability. I have two questions. At present, in Q2, the macroeconomy in China is still holding pressure. The consumption trend is getting slowed down, especially from the live streaming part.
Under such a background, I want to ask the impact on your businesses. Thoughts on that, do you have some solutions to fight back that such pressure? One P two P, three P, ISC, straight line, and delivery. I want to understand the general expectation of the growth momentum and growth rate. Secondly, in Q2, the profitability was very positive with a good uptick, so I want to understand more of these drivers and the reasons behind, and what is expectation on the second half year trend?
Thank you, Brian, for the question. First of all, if we are watching the transactions from the e-com platforms, we could feel the pressure. I do agree with you. However, I want to hold a positive perspective. The total numbers of the packages are still on the rise. The external customers, their profits are at 10%-11% of our growth rate.
I find this trend is still promising. It is also something that could be well sustained. On top of that, for the consumption structure in the Chinese market, some of the white brand customers may have a higher growth rate. The branded customers hold higher pressure in terms of the growth in the second half of this year. At present, customers are more prudent in buying high quality products. I could also find this reflected results in our supply chain growth. The ISC services for the branded customers are holding new pressure, and we are also exploring good solutions to improve the efficiency, helping them to reduce the cost and facing the challenges from the market. Generally speaking, the second half of this year, according to what I see today, will not present too many challenges. I believe that the trend will be well kept as we predicted.
We will catch up the good momentum, the opportunities. Right now, the e-commerce platforms are obtaining good chances and opportunities. The cross-border e-commerce trade and delivery is also on the rise. That is also a good way we could work on. However, I do recommend us to stay prudently optimistic. We are not going to be too optimistic. We still want to take two more quarters to create a new win-win with the cross-border e-commerce platforms. In light of the optimizing profitabilities for us, I mentioned that over the last six months, we kept the momentum to optimize our capacities. The good profitability is having better quality. We are having the good profitability, the better revenue. The secrets and reasons behind include refined management and technical investment, for example, in our operational efficiency. To boost up the operational efficiency, we changed.
We have already made improvements to have better structure. We acquired Deppon Logistics. We did a lot of things to improve the operational efficiency as well as the cost reduction. Moreover, as we're having more businesses, the scale of economy can be scaled. The cost can be well managed. We have a volume-based procurement, we have better bargaining power. Those are the strategies we're also having. So improve. Apart from that, we are also investing heavily on technologies and transportation. Right now, we are improving our algorithms to better manage the resources and improving the penetration rate. As a result, the algorithms can offer you better routes. The vehicles and its efficiencies are boosted significantly, reducing the cost. Moreover, we are managing better terminals, last mile delivery, according to our algorithms. According to the algorithm-powered AI estimations, we could better deliver the products at a cost-effective manner.
The investments on innovation and technologies help us to stand out and better than in on some buying festivals in China. Right now, better revenues are something we are proud of, and we can keep that momentum. Our CFO, Wu Hao, has shared with you some tips why JD Logistics can improve the revenue structure, and we are seeing very good outcomes so far, and we believe that we can maintain the momentum. I also want to share with you a few more points. We are growing together with our customers. Our fulfillment, our timeliness, et cetera. We made a good stride forward compared to last year. Generally speaking, we are managing and optimizing our cost. We are maintaining a good growing momentum, and we can also boost our technical innovation. We are still transforming us. Thank you.
Thank you very much for the helpful remarks.
Next question, Thomas Chong from Jefferies. Good to see you. Please raise your question.
Good evening. Thank you for your good remarks, and thank you for having me here. Congratulations. You have very good profitability, much better than expectation, and I see how hard you are working to obtaining that result. My question is, my question is on ISC supply chain. In your future strategies, do you have some new plans in the pipeline? Will you expand to other categories? On top of that, I want to listen to more of your comments on the ISC supply chain competitive landscape. Compared to your counterparts and peers, what helps you to stand out?
Thank you for the question. Thank you, Thomas. I want to take up your questions and give you a quick answer about the ISC supply chain landscape and capacities.
In 2024, as we are getting more mature, the services and qualities are on the rise, and we have better reputations as well. The numbers of the customers are on the rise as well. To be more specific, we are covering six major industries, including the fast-moving consumer goods, automotive, pharmaceutical, smart appliances, et cetera. We are providing them the smart solution to be more competitive on the market. Simply put, we are penetrating into the domestic market and cross-border segments, offering more solutions to customers. We just talked about the alcoholic industry. We are optimizing the re-warehousing, the inventory. We want to do more for the customers to help them to address their on-season, in-season, and off-season inventories. And we also want to provide them more value-added services, such as the cleaning.
In terms of the home appliances, we help them to share the inventories from multiple cities and points, helping the customers to reduce their cost and improve the efficiency. Over the last quarter, we are making strides forward. We are seeing the pain points of the customers after identifying them. Their pain points are something we are seeing as a challenge to help them to find a better market ratio in the long run. We will still focus on the major industries I talked about. The domestic logistics, the international logistics are something we will never give in or give up. We will continue to work with them and provide them better solutions. That is my short response. Thank you for staying with me.
Thank you. Next question. Lizhuo Lu from CICC. Again, CICC, Lizhuo Lu, please go ahead.
Can you hear me?
I want to have a test.
Yes, please go ahead. We can listen to you very clearly.
Thank you for having me here. Congratulations again. A very good record for JD Logistics. I have two questions for you. The first question has been raised. You achieved substantially in making a good revenue. In Q2, I see you are making a big stride forward. In the upcoming quarters, in the longer run, how you could improve the growth margin, net profit sustainably and significantly? The next question is on the international business. Both management talked about your footprints on international deployment on the warehousing system. I want to view this question in a financial perspective about the percentage attributable to your revenue, and what is the future strategies and your expectations for the international market? Thank you.
Thank you for the two questions.
According to what I have observed, gross margin and net profit are quite optimal in light of the industry average. I once shared the middle-term and long-term targets with all stakeholders and investors. In the logistics industry, we care very much about the size and scale. In the long term and middle term, we want to achieve a good record financially, and we want to deliver more value to our stakeholders. In the middle term and long term, we will be at the optimal stage in the industry. More attention will be focused on the growth part. Still, I hold high expectation to grow our business, and we are well prepared to achieve that. In light of the profitability, with good profitability, we will continue to invest, to expand our market share, our market scale, to ensure middle-term and long-term performance.
Internationally, according to my observation, the total size or the percentage was still comparatively low and small. The international business did not give us the bigger boost in terms of the financial ratio, but we are seeing very good growth momentum. The growth momentum was higher than that of the domestic business line... The supply chain deployment in overseas market was well recognized by our customers. In the foreseeable future, the growth trend of the international market is better than the domestic market. In the upcoming years, that trend will be well kept and maintained. And strategically, I want to invite my colleague to give you the answer. I have just talked about that. We maintained a very good and faster growth momentum.
Our operational efficiency, our customer satisfaction rates, our solutions to kill their pain points, and different products and services such as automation and our capacity to operate those systems. All those are the capacities we are good at, and we are also making a very good brand out, achieving positive impact in the upcoming years in operating the international and overseas warehouses. I'm very confident in doing a good job, and we will continue to invest in our capacity building, reducing our cost and delivering better services. Thank you.
Thank you for the answer. Thank you, Mr. Hu and Ms. Dou.
Due to time constraint, that concludes today's question and answer session. At this time, I will turn the conference back to Sean for any additional closing remarks.
Thank you once again for joining us today. If you have any further questions, please contact our IR team directly.
Thank you.