ZTO Express (NYSE:ZTO) Q3 2019 Earnings Conference Call - Final Transcript
Nov 18, 2019 • 08:00 pm ET
express delivery business were approximately RMB5 billion, which grew 26.6% as a result of mixed effect of 45.9% volume increase and 13.2% price decrease due to incentives given as a necessary competitive measures during the quarter. Revenues for key accounts were approximately RMB619 million, an increase of 31.7% on a 50% volume growth. Key accounts represent less than 10% of our total volume.
Total cost of goods sold increased 26.1%. Volume correlated sorting and transportation costs grew 27.8% and 31.7%, respectively, as a result of scale leverage and very effective cost control. The net effect is that, gross margin rate decreased 1 percentage point from last year to 30.3%.
Income from operations grew 28.3% and SG&A, excluding SBC as a percentage of revenues decreased to 5.3% compared to 5.6% last year. We continue to demonstrate sound corporate cost advantage.
Higher amount for tax rebate and government subsidies this quarter helped the 0.8 point op margin rate increase.
Adjusted net income grew 24.6% to reach RMB1.32 billion and adjusted net income rate was 24.6% compared to 25% last year, relatively stable.
Last, turning to unit economics per parcel. ASP decline was RMB0.25, out of which RMB0.23 was associated with volume incentives. Competition remained relatively intense, partially in sales region -- particularly in sales region during the third quarter.
Cost of goods sold went down by RMB0.14 per parcel, of which RMB0.11 came from line-haul transportation and sorting hub cost savings. The increased use of self-owned vehicles with increasing proportion of higher capacity trailer trucks helped drive down unit transportation cost by RMB0.06. The increase in the number of automated sorting equipment helped to keep headcount low and sorting hub cost per parcel also went down and by RMB0.05. With better SG&A leverage adding back another RMB0.02, adjusted operating income per parcel declined by RMB0.06.
Operating cash flow was RMB1.42 billion and CapEx spending was RMB1.71 billion, which brings year-to-date total CapEx spending to RMB3.44 billion. Our annual CapEx commitment remains to be RMB6.8 billion as we expect cash outlay to be around RMB4 billion to RMB5 billion for the year.
In summary, we delivered a strong third quarter on both market share gain and earnings expansion. Our strategy is sound and our resource advantage and execution capabilities continue to support accelerated volume increase and operational stability for thousands of our network partners. We left our annual guidance unchanged at this time. Our track record has well demonstrated ability -- our ability to consistently achieve our set goals. Even the most recent market condition plus October performance to date, we are very confident that we are well on our way to deliver on our set target.
This concludes our prepared remarks. Operator, please open the line for questions. Thank you.