Good day, ladies and gentlemen. Thank you for standing by to the JD Logistics First Quarter 2025 Results Conference Call. At this time, all participants are in listen-only mode. After management's prepared parts, there will be a Q&A session. Please note that this English simultaneous translation line will be in listen-only mode for the duration of the call, including the Q&A session. If you wish to listen to the manager's original statement or ask a question during the Q&A session, you will need to be dialed in to the Chinese line. I'll now turn the call over to Mr. Song Shan, Head of IR at JD Logistics. Please go ahead.
Thank you, Aubrie. Good day, ladies and gentlemen. Welcome to our First Quarter 2025 Results Conference Call. Joining us today are our Executive Director and CEO, Mr. Hui, and CFO, Mr. Wu Hao.
Before we start, we would like to remind you that today's discussion may contain forward-looking statements which involve a number of risks and uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement and 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 a reconciliation of IFRS to non-IFRS financial results, please refer to the announcement of financial information and business highlights for the three months that ended March 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 Q&A session.
A third-party interpreter will provide a simultaneous interpretation in English on a separate line for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management's statements in their original language will prevail. I would like to turn the call over to Mr. Hui. Please go ahead, sir.
Dear investors and analysts, I am Hui, CEO of JD Logistics. Welcome to JD Logistics First Quarter of 2025 Earnings Call. CEO of JD Logistics, this is Hui. Thank you for joining us today. In the first quarter of 2025, China's economy got off to a great start, expecting a steady improvement trend that yields robust momentum across the real economy and modern logistics industry. Building on last quarter's growth traction, JD Logistics remained focused on customer experience, cost, and efficiency during this quarter.
We deeply automated our ISC capabilities, driving progress in both business expansion and market competitiveness while achieving high-quality development. In the first quarter of 2025, JD Logistics' total revenue reached RMB 47 billion, with a year-over-year growth rate further accelerating from the previous quarter to 11.5%. Revenue from external customers increased by 10.3% year-over-year to RMB 32.3 billion. Our non-IFRS profit was around RMB 750 million, increasing by 13.4% year-over-year, and our non-IFRS profit margin remained stable at 1.6%. For this quarter, revenue from ISC customers reached RMB 23.2 billion in the first quarter, up 13.2% year-over-year. This included RMB 14.7 billion in revenue from JD Group, marking a year-over-year increase of 14.1%, and RMB 8.5 billion in revenue from external ISC customers, recording a double-digit year-over-year increase. During this quarter, the number of our external ISC customers amounted to 63,000 and a year-over-year increase of 13.1%.
Leveraging our extensive network coverage, rich warehousing operations, and management experience and accumulated inventory management, we empowered more customers to integrate across their multiple channels and optimize inventory management. This enabled us to realize the fully integrated omnichannel supply chain service model, which significantly improved inventory turnover, reduced costs, and enhanced efficiency for customers. In addition, we continued to expand business opportunities across multiple specific industries by delivering differentiated and high-standard services. We offered products and solutions closely tailored to the characteristics of our customers' industry, addressing their pain points and earning their recognition. For instance, in the home appliances industry, we further deepened our partnership with a leading Chinese home appliance brand, broadening the scope of categories from lighting products to large and small home appliances.
To address the customer's pain point of fragmented warehousing layouts for multiple categories, we implemented an innovative management model featuring BC integrated inventory, co-warehousing for large and small items, and integrated forward and reverse logistics. This model enabled us to help the brand coordinate the management of warehouses, which were previously managed by different logistics companies. As a result, both in-transit handling frequency and transportation distance have been significantly reduced, and delivery time frames shortened by one to two days, and workforce efficiency increased by 15%, leading to simultaneous improvements in logistics efficiency and operational workforce productivity. We believe that the success of this expanded collaboration sets a benchmark for how to help home appliance companies reduce costs, improve efficiency, and strengthen market competitiveness, further showcasing the unique value of our ISC solutions.
While continuously strengthening our leading position in China's ISC market, we are also actively expanding our international business. Backed by our global leading expertise in warehouse operations and logistics technology, we have established a comprehensive global supply chain logistics network with overseas warehousing capabilities at its core, providing efficient and convenient ISC logistics services to more Chinese brands and overseas local customers. In Q1 2025, we made another significant leap forward in our global smart supply chain network plan. Our Warsaw Warehouse No. 2 officially commenced operations in March, joining our existing Warsaw Warehouse No. 1 and Poznań Warehouse No. 1 to form a hub network that provides Polish customers with one-stop services, including warehousing, sorting, and distribution. Notably, Warsaw Warehouse No. 1, launched in 2022, has served as the exclusive warehousing and logistics service provider for the online channel of a leading Polish local retail chain brand.
It currently fulfills thousands of SKUs across Europe for this customer, covering categories such as 3C, daily necessities, home appliances, and home furniture. Even under the intense pressure of Black Friday sales events, when the brand's order volume surged several fold, the warehouse still achieved high levels of on-time outbound rate, demonstrating our agility and resilience during peak periods and earning the customer's strong trust. With our highly efficient, coordinated multi-warehouse operations, we're not only empowering Chinese brands' overseas expansion but also helping an increasing number of European companies solve their supply chain pain points and drive their continued expansion into global markets. In the automotive industry, we partnered with a well-known Chinese automotive brand to launch an automotive spare parts center in the Middle East.
We supported the customer in planning and designing the original spare parts hub and provided them with full-process ISC logistics services from container receipt, customs clearance, inbound processing, quality inspection to storage, order processing, packaging, and outbound logistics. Our services cover the broader MENA markets, significantly enhancing the efficiency of the customer's spare parts logistics. In addition, we recently entered into a warehousing and distribution partnership with a premium Chinese EV brand, becoming the first warehousing and distribution logistics services provider for the Middle East region. As one of its key partners overseas, we will maximize our ISC logistics service to power the customer's growth in the Middle East market. In Q1 2025, our revenue from other customers, primarily including express and freight delivery services, increased by 9.8% year-over-year to RMB 23.8 billion. In terms of express delivery services, we continue to enhance our delivery timeliness capabilities.
Driven by our investments in areas such as air freight resources, land transportation routes, and personal pickup and delivery services, JD Express achieved rapid business volume growth in Q1 2024. Furthermore, JD Airlines officially brought its 10th self-operated all-cargo airplane into operation in January 2024. Through the effective deployment of our all-cargo flight network and leveraging the coordination between our efficient air freight network and our warehousing infrastructure, JD Logistics has essentially enhanced its regional delivery timeliness. These efforts have enabled us to provide higher quality and more convenient logistics services to customers, propelling growth in fresh produce delivery and other high-value segments. Throughout our business development process, we have adhered to our core value of customer first. JD Logistics remains dedicated to offering premium services such as two-door delivery on-demand pickup and delivery and two-door return and exchange, continuously enhancing the quality of our express delivery services.
With such professional and reliable services, we have earned the trust and presence, preference of our customers and consumers. In Q1 2025, we achieved a leading position in the logistics index ranking published by a top live-streaming e-commerce platform. Regarding order fulfillment for products eligible for national subsidies, we comprehensively applied our JD Logistics superframed large model to manage specialized procedures for reconciliation and verification of subsidized categories such as home appliances and 3C products, realizing process recognition, traceability of product identification barcodes, along with services such as two-door delivery and photo-based approval of receipt. We have ensured the safe and seamless delivery of subsidized goods, supporting the accurate execution of the national subsidy program. We continue to broaden our regional layout in Hong Kong and Macau, driving rapid growth in these regions during Q1 2025.
We officially launched our JD Express Hong Kong Island operations center, providing local customers with more convenient delivery services. The center introduced automated sorting equipment for the first time, integrating multi-dimensional data collection and pre-sorting technology, which enables parcels to be automatically sorted into courier-specific delivery zones. This innovation specifically improved the sorting efficiency, laying a solid foundation for efficient fulfillment in densely populated urban areas in Hong Kong. Our logistics network now covers all 18 districts across Hong Kong, forming a robust service matrix, including next-day delivery for JD.com orders, plus intercity express, plus delivery between Hong Kong, Macau, and the mainland China. JD Express continues to deepen its penetration in the Hong Kong market, consistently bringing high-quality delivery services to local customers while joining hands with local business to build a mutually beneficial win-win ecosystem.
In terms of freight delivery business, with the consolidation of Dupont Logistics and Huayu Express, we rank among the top tier in China in terms of cargo volume and revenue scale of freight delivery system. We have tailored our offerings to our unique characteristics, accompanying various specialized markets, creating a diversified product portfolio that offers our customers stable, reliable, and flexible freight delivery solutions. These products cater to various customers' distinct and differentiated needs, driving our business growth and expanding our market share across multiple specific industries. Our network infrastructure and continuously improving technology are the cornerstone supporting our steady development. Our network infrastructure consists of six logistics networks, including warehouse, line halls, transportation, and last-mile delivery.
As of the end of March 2025, our warehouse network covered nearly all counties and districts in China, consisting of over 1,600 self-operated warehouses and over 2,030 party warehouse owner-operated cloud warehouses under our open warehouse platform. Our warehouse network has an aggregated gross floor area of more than 32 million sq. m., including warehouse space managed by through the open warehouse platform. We consistently prioritize technological innovation. Through ongoing investment in automation equipment, AI, and other advanced technologies, we have deeply integrated digital and intelligence technologies into diverse logistics processes, achieving end-to-end intelligence for scenarios, including planning to warehousing, sorting, transportation, and last-mile delivery. Technological empowerment has been one of the key drivers leading to our margin improvement. Moving forward, we will continue to scale and replicate tech-empowered cost reduction measures that have proven successful in pilot projects.
We will also advance innovation and R&D for more operational scenarios, positioning technological applications as the major driver of sustainable long-term cost reduction and efficiency improvements. We remain firmly committed to optimizing customer experience, cost, and efficiency, consistently reinforcing our fundamental capabilities to further strengthen JD Logistics' global competitiveness and evaluative society. We will actively act on the national core to reduce overall social logistics costs and aim to drive an improvement of service standards industry-wide and the sustainable and healthy development of the industry through our improvement. Thank you. Next, I'd like to invite Mr. Wu Hao to discuss the details of our financial performance.
Thank you, Mr. Hui. Hello, everyone. This is Wu Hao, CFO of JD Logistics. I am pleased to present JD Logistics' financial performance for the first quarter of 2025. China's macroeconomy started 2025 on a steady and positive footing, supported by macro policy measures.
JD Logistics consistently strengthened its market competitiveness by enhancing its service and product capabilities to surround the quarter. The momentum of growth continued into the first quarter, with both revenues and profits achieving double-digit year-over-year increases. In Q1, our revenue reached RMB 46.97 billion, with a year-over-year growth rate of 11.5%, marking a further acceleration compared to the previous quarter. IFRS profit was around RMB 610 million, increasing 89.5% year-over-year. IFRS profit margin was 1.3%, rising by 0.5 percentage points on a year-over-year basis. Non-IFRS profit was around RMB 750 million, with a year-over-year increase of 13.4%. Non-IFRS profit margin was 1.6%, maintaining a stable profit level. Now, let's look at the segmented business lines. Our revenue from ISC customers totaled RMB 23.2 billion in Q1, with a year-over-year increase of 13.2%.
Among them, ISC revenue from JD Group amounted to RMB 14.7 billion, up 14.1% year-over-year, benefiting from the accelerated growth in main categories of JD Retail. Meanwhile, our revenue from external customers reached RMB 8.5 billion, up 11.6% year-over-year, with an improved growth rate. Having realized the service coverage of essentially all of China's mainstream e-commerce platforms, we fully leveraged our warehouse network advantages and warehousing operation capabilities to provide omnichannel ISC service for multiple industries and brand merchants across home appliances, consumer goods, and other industries, helping customers comprehensively reduce their logistics costs. At the same time, we continue to closely monitor and analyze the changes in the market and business environment to identify and capture opportunities where our supply chain capabilities could be fully utilized. We offered differentiated services and solutions targeting customers' pain points and needs, thereby expanding and diversifying our customer base.
In Q1, the number of external ISC customers amounted to 63,061, up 13.1% year-over-year, with average revenue per customer reaching about RMB 135,000. In Q1 2025, our revenue from other customers, primarily including express and freight delivery services, stayed on a sustainable growth trajectory, reaching RMB 23.8 billion, up 9.8% year-over-year. In Q1, we invested in resources such as line halls and last-mile personnel, with a particular focus on markets that require high timeliness. These efforts enabled us to upgrade our service quality and delivery timeliness, optimize our business structure, and drive rapid growth across multiple business scenarios. We rank among the top tier in China in terms of cargo volume and revenue scale of freight delivery services. Our flexible and diverse freight delivery services meet a wide range of timeliness and service requirements from customers, supporting our deepening market penetration across different freight delivery segments.
Moving on to cost and profitability, Q1 2025, our gross margin was 7.2%. On one hand, guided by our mission of technology-driven, we made continuous efforts to optimize network structure, innovate operational models, and refine cost control. On the other hand, we increased our investment in enhancing our service experience and improving timeliness while maintaining broadly stable profitability to drive JD Logistics' long-term and high-quality business growth. Next, let's turn to the major parts of the cost revenue. First, employee benefits expenses were RMB 16.8 billion in Q1, up 13.9% year-over-year, mainly attributable to the year-over-year increase in the number of our frontline operational employees from approximately 430,000 at the end of first quarter last year to around 510,000 at the end of first quarter this year.
The increase was attributable to the addition of our own in-house employees to the key operational process, such as the last-mile delivery and warehousing, aimed at upgrading our products and services and elevating customer experience. Through enhancements in express delivery timeliness and service quality, our ranking among top logistics service providers on a leading live-streaming e-commerce platform further improved during the quarter. In Q1, employee benefit expenses accounted for 35.8% of total revenue, up 0.8 percentage points year-over-year. Second, our outsourcing cost was RMB 17.1 billion in Q1, up 17.8% year-over-year, accounted for 36.5% of total revenue for the quarter, up 2 percentage points year-over-year. The increase in outsourcing cost and outsourcing cost as a percentage of the total revenue was primarily driven by changes in Dupont Logistics' business structure. Third, our total rental cost was RMB 3 billion in the first quarter, down 8.8% year-over-year.
As we continue to promote site integration, optimize network structure, we improved utilization efficiency in our site. Our total rental cost accounted for 6.4% of the total revenue in the first quarter, with a year-over-year decrease of 1.4 percentage points. Apart from the major costs mentioned above, we continuously advanced management and control refinements through technological empowerment, enhancing operational presence, our depreciation and amortization costs, and other costs as a percentage of the total revenue decrease year-over-year. In terms of expenses, our operating expenses in Q1 were RMB 3.2 billion, up 1.3% year-over-year, accounting for 6.8% of total revenue, with a year-over-year decrease of 0.7 percentage points. Among them, sales and marketing expenses increased by 0.3% year-over-year to RMB 1.4 billion, accounting for 3% of total revenue, down 0.3 percentage points year-over-year. Sales and marketing expenses accounted for 4.4% of the revenue from external customers, down 0.4 percentage points year-over-year.
We maintained moderate investments in sales and marketing personnel to drive business growth. In Q1, our R&D expenses were around RMB 890 million, up 3.5% year-over-year, accounting for 1.9% of total revenue, down 0.1 percentage points year-over-year. We have allocated our R&D resources to strengthen our end-to-end automation, digital and intelligence capabilities, including ongoing exploration of cutting-edge scientific applications and AI algorithms in diverse logistics scenarios. We are consistently upgrading our large model-powered digital and intelligence solutions to drive further cost savings and efficiency improvements in diverse logistics scenarios, including warehousing, planning, transportation, delivery, and customer service. Our general and administrative expenses were around RMB 880 million, up 0.7% year-over-year, accounting for 1.9% of total revenue, representing year-over-year decrease of 0.2 percentage points, primarily attributed to the improvement in our management efficiency.
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 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 Q1 2025, our non-IFRS profit was around RMB 750 million, up 13.4% year-over-year. Non-IFRS profit margin was 1.6%, up 0.03 percentage points year-over-year. Non-IFRS EBITDA for Q1 was RMB 3.8 billion, up 2.9% year-over-year, with non-IFRS EBITDA margin of 8%. We also continue to monitor our cash reserves and cash flow to maintain a healthy balance sheet and sufficient capital to support business development and meet our operational needs.
In Q1, our capital expenditure, both in total amount and as a percentage of the total revenue, increased compared to the same period of last year. Going forward, we will make capital investment in areas such as automation equipment and self-owned vehicles based on our business development pace and needs to strengthen our mid- and long-term capabilities and improve our operational efficiency. Before we wrap up, I'd like to express our heartfelt thanks to our shareholders for their enduring support and trust in JD Logistics. Moving ahead, we will remain committed to balancing stable profitability with high-quality growth while adhering to our core development strategy, continuously building our key strengths and enhancing our product and service compatibility to promote healthy and sustainable business growth.
Additionally, through technological innovations, operational model transformation, and refinement management, we aim to improve the efficiency of the entire process of logistics, achieving long-term structural cost reductions and creating greater 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 now open the call to your questions. We would only accept questions in Chinese language line. To ask a question, operator, please start the Q&A session when ready.
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 follow-up questions, please re-enter the queue. Once again, please press star one to ask a question. The first question from Ronald from Goldman Sachs.
Thank you, Mr. Wu and Song Shan. Two questions.
First of all, we saw very good growth on the ISC revenue. Looking ahead, the front-many warehouses, and how do we continue to increase the efficiency to drive the cost down per quarter? Because we have expanded into many segments to cover in local services and also home appliances. What are some of the measures to reduce the cost of our many warehouses? Next is on the external customers, express delivery and freight delivery. What are the dynamic changes in the market? Also, the tariffs, what kind of impact will it have on our overseas initiative? Any outlook on that for the overseas growth?
Thank you for your question, Ronald. I'll first take your question on increasing the efficiency. For the ISC orders from JD Group, we have seen very healthy and stable growth.
Thanks to our close collaboration with the retail of JD Group, we're seeing very steady growth. There's still incremental growth out there. As you can see, our rental cost has been on the decline trend thanks to our warehousing efficiency. As our business grows, we're increasing the utilization of our spaces of warehouses. That's for one. As we look forward, we will upgrade our warehousing efficiency. We have done fairly well as an industry in the sorting automation. For JD Logistics, we are pretty much on par with the industry level. However, when it comes to the warehousing automation, the industry is still playing a catch-up. For us, we have been investing over the years in warehousing automation. We have found the best solution that would meet the customer's needs when it comes to warehousing automation.
As the current situation stands, the automation drives efficiency by a large margin. We also iterated the solution last year. Now we are expanding and implementing it across different parts of our business. As you can, we will expect to see an upgraded warehousing model. This will support our business to customers' efficiency improvement. Other than that, I would like to add that for the full process, the omni-channel warehousing and also turnover, we have seen improvements. Also powered by our algorithms, we are working with our customers to improve the strategies that would reduce the handling frequency and also transportation differences, meanwhile improving the efficiency. Right now, we are working closely with our retail segment with JD Group, and we have seen significant efficiency out there. That is for the internal. That is for your first question.
Now I'll turn our CFO to answer your second question.
For our external ISC services, for the past quarter, we have maintained growth both on a year-over-year and a quarter-over-quarter basis. Overall, we are in a healthy market condition. For us, both, we are offering value-added services in different product offerings. We are helping our customers to succeed commercially. This not only comes from our delivery service, getting the parcel to the hands of customers. On top of that, we are leveraging the omni-channel warehousing edge. Thanks to that, we are onboarding new customers, including leading customers from both home and overseas customers. They are leveraging our omni-channel warehousing solutions. We are using algorithms to increase the cost, to reduce the inventory costs, making the service all accurate.
This would also allow us to provide services to deliver products to customers in rural areas. The algorithm also allows us to accurately predict the demand and place the goods at the warehouses that are close to the customers. When customers place the order, we are able to offer the next-day delivery or the two-plus-one delivery services. This is far superior than other services we're offering. As you can see, we are leveraging the synergies of our investments across China. Over the long run, we would leverage our differentiated technology-empowered, reliable services and products. Also for our express delivery for the high-value parcels, we are seeing significant growth in the parcel volume. The improvement is achieved thanks to our investments in the last-mile delivery personnel, etc. Thanks to these investments, we are earning the recognition of our customers.
Across the globe, we have four major areas across the globe. We have been investing our capabilities in these areas. We are leveraging the advantages of low-value parcel. The customers are trying to send the products to the overseas bonded warehouses to reduce their costs. We are able to accommodate the need of the customers. That is why we are able to respond to the customer's needs and capitalize on these opportunities and these needs from our customers. That hopefully answers your question.
Your next question from Brian of Citibank. Please go ahead.
Thanks, management. I got two questions. One is on the revenue from JD Group. What is the overall trend for the rest of the year? Will the growth slow down because of the high base of last quarter? Will the trend slow down? Additionally, our margin in Q1 was low.
GP margin was down year-over-year. Operational costs are offsetting that. I was wondering what's the reason for the declined GP margin and going forward? Are there further room to increase the GP margin or any elements that's affecting the GP margin?
Thanks for your question, Brian. On growth rate, our guidance for the first year is for this year is a double-digit growth. As the current situation stands, we're confident in delivering that promise. Nevertheless, we are not looking at it from we're looking at it from a holistic perspective. Indeed, the national subsidy is doing us a favor, was doing a favor. We are seeing new momentum this year, as our CEO mentioned, thanks to our differentiated and value-added services. They are contributing to the revenue. For instance, the delivery and assembly of home appliances is gaining recognition and is well-received by our customers.
That is creating value and contributing to our revenue. For us, we are looking at the revenue growth from a holistic perspective. We want to increase our competitiveness from our product reference. That is why we are confident in delivering promise of growing at the double digit for the full year. Now moving on to gross profit margin. As you can see, we are quite determined in our investments because we position ourselves as an integrated supply chain premium service operator. That is able to provide a premium logistics service for our customers. In the premium segment, we are committed to gaining more market share in the premium logistics service segment. As you can see from the second half of last year, as we have communicated, we are going to invest more in this segment.
We are investing for future growth only when we invested in the capabilities. We are able to see continued revenue growth in these segments and therefore lead to more speaking user base. Looking at the whole year, the IFRS profit will grow at mid-single digit. The GP margin will fluctuate because of the investment. Over the medium to long run, we are able to grow the GP margin further. As the current situation stands, we are fighting a battle to gain more IFRS. Over the long run, we are able to ma intain a growing GP margin.
Thank you.
Next question comes from Thomas from Jefferies. Over to you, Thomas.
Thanks, management, for taking my question. My first question, look at Q2. What's our outlook for the 6/18 shopping festival? Are we seeing some differences compared to last year?
Additionally, on the growth of our customers, also the outlook for the ARPC growth. I know we are going to offer more value-added services to our customers. We'll see continued ARPC increase and also our collaboration with Tmall and Taobao. Are there more updates available from the management?
Thank you, Thomas, for your question. In terms of the 6/18 shopping festival, this is a shopping festival that's created and initiated by JD Retail. For us, we are committed to servicing our customers well. I wouldn't say there aren't any initiatives that would be led by us that have created significant changes. Nevertheless, we are going to invest to accommodate the needs and also increase the delivery experience during the shopping festival. On the growth of our customers and also ARPC, we've mentioned we are very confident in our revenue growth.
Behind that, that's going to be contributed by the growth of our customers. We are quite confident in that. On the ARPC front, we are at a relatively stable level. Going forward, we look forward to growing that through improved product experience, product mix offering. Additionally, through our planning of integrated ISC services and also value-added services. In the medium to long run, we are continuing to see an increased ARPC. On the collaboration with Tmall and Taobao, I want to turn it over to our CEO.
Once we are integrated into Tmall and Taobao, we are seeing an increase in the number of customers and also ARPC, both on a year-over-year and a quarter-over-quarter basis. Thanks to our efforts in our ISC service solutions and also express delivery services, many customers have used our ISC warehouses to cover and reach more customers.
Our services are gaining recognition from them. Also in the home appliances sector, we are collaborating with a leading brand in the market. We are implementing the delivery and assembly service across the home appliances sector. We are also venturing or increasing the penetration rate for fresh produce, liquor, etc. We are looking to onboard more customers. We are ranking very high on the leaderboard of the logistics service providers. Looking ahead, there is still great significant potential. We are going to continue to increase the timeliness of our express and freight delivery. We are going to leverage our differentiated services to create more opportunity. This would help our customers to reduce the costs. Over the past two quarters, we have seen significant growth in this area. Going forward, we expect to see great potential from this area as well. Thank you.
Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Song Shan for closing remarks.
Thank you once again for joining us today. If you have further questions, please contact our IR team directly. Thank you.