Operator:

Good day, and welcome to Quhuo '25 H1 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Qishu Wang. Please go ahead. Qishu Wang: Thank you, operator. Hello, everyone. Welcome to Quhuo's First Half Year of 2025 Earnings Conference Call. The company's results were released earlier today and are available on our website. On this call today are Leslie Yu, Chairman and CEO; and CFO, Barry Ba. Leslie will review business operations and company highlights followed by Barry, who will discuss financials and guidance. They will be available to answer your questions in the Q&A session that follows. Before we begin, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Ligation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions related to the events that involve known or unknown risks, uncertainties and other factors, all of which are different to predict -- are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under the law. With that, I will now turn the call over to our Chairman and CEO, Mr. Leslie Yu. Please go ahead. Leslie Yu: Thank you, Qishu, and thank you all for joining our 2025 first half earnings conference call. In the first half of 2025, China's local service industry experienced significant structural shifts with intense market competition becoming the new normal. Against this backdrop, Quhuo has adhered to a clear dual track strategy. First, optimizing the structure of our core business to pursue quality growth. And second, accelerating the development of second core business to strengthen the group's earnings foundation. I will now share our operating performance and the strategic progress over the first 6 months of 2025 along these two dimensions. And also look ahead to Quhuo's future vision. For the first half of 2025, Q4 achieved total revenue of RMB 1.13 billion. Let me begin with our core business, on-demand delivery solutions. During the first half of 2025, particularly in the second quarter, the domestic food delivery market saw significant changes in the competitive landscape. These changes were mainly reflected in two areas. First, the delivery was surpassed a part of the cost burden to service providers. To respond to rapid order fluctuation and safeguard service quality, we made targeted investments in workforce management and operations. Second, structural adjustments by major upstream customers received the competitive landscape, leveraging our long-standing service capabilities and reputation, we took on new business share, while integrating and launching this new sites added short-term costs. Beginning in May this year, we observed signs of increased market share, which we believe will lay a solid foundation for scalable profitability. Although these measures placed pressure on short-term profitability, we believe the company's overall financials remain sound. At the same time, we proactively closed a number of underperforming sites, and concentrated resources on higher return areas in order to further strengthen our overall network health. These initiatives reflect both our confidence in and commitment to the long-term value of on-demand delivery business. We believe that as the integration period ends and operating efficiency improves, the scale benefits and the profit potential of the business may become more evident in the second half of 2025. While consolidating our core business, our second core business housekeeping and accommodation solutions and vehicle export solutions are now contributing meaningful profitability. In the first half of 2025, our housekeeping and accommodation segment reported strong growth, with revenue up 70.8% year-over-year, and gross profit up 63.4% year-on-year, becoming an important driver in optimizing Quhuo's profit structure. This performance was primarily driven by our two business units. First, Chengtu Homestay achieved 83.6% revenue growth, and 390.8% gross profit growth with gross margin rising to 55.2%. We believe this strong performance reflects our replicable operating model and effective marketing. Our self-developed mini program now fully rolled out, allow users to browse and search for home listings, communicate with hosts and complete reservation and payments in one seamless process. This closed-loop system greatly improves the booking experience, making it faster, more transparent and more reliable for both guests and hosts, while also enhancing operational efficiency. Based on this mature system, Chengtu plans to open that platform to more homestay operations in China, providing standardized management tools and marketing support and transitioning from a property management service provider to a platform operator. Second, LaiLai's accommodation business recorded a 63.6% year-over-year increase in revenue, primarily supported by its new cooperation with Beike, a leading housing transactions and service platform in China. This cooperation extends beyond the traditional sales with LaiLai providing a more comprehensive property service solution for the properties listed on Beike's platform, covering property preparation and maintenance, ongoing household services and tailored offerings. In service delivery, LaiLai has translated years of localized service experience and technological advantage into practice. By leveraging its proprietary digital dispatch system, it integrates cleaning, repair and other service orders into a unified scheduling platform, supporting efficient management and high-quality fulfillment. This cooperation already covers Chengdu, Beijing, Shanghai, Ningbo and Jinan, and is expected to expand to Shenzhen, Guangzhou, and other cities. We believe it may generate scalable and sustainable revenue growth for LaiLai. LaiLai's ability to deliver standardized high-quality property services provider provides a solid foundation for new initiatives. Building on this, we also participate in the Better Life #1 Fund Trust plan initiated by China Foreign Economy and Quhuo Trust. Phase 1 and Phase 2 of this plan totaled RMB 60 million are designed to enhance the quality and the rental value of intrusted properties through standardized renovation and long-term asset management, ultimately generating stable returns for investors. Within this project, LaiLai is responsible for upgrading property quality and providing ongoing property management services, ensuring continuous value creation and compliant operations. Meanwhile, Quhuo in its role as a strategic partner works alongside the Trust Fund to design the pathway from operating assets to data assets, and ultimately to financial assets and jointly manage and share in the returns. Through this cooperation, we have put into practice the four pathways from business operations to financial value. Leverage the standardized renovation and service capabilities built by LaiLai as solid operating assets, reply on the real and valuable data assets continuously accumulated through operations for risk pricing and asset management and optimally achieve asset financialization through trust corporation, completing a critical upgrade to financial assets. This process not only broadens the Qihuo's business foundry, but also provides new direction for the integration of industry and finance. These advances in the housekeeping and accommodation segment not only provide financial returns, but also support our business model initiatives, provide opportunities for longer-term growth for Qihuo. Our third major growth driver comes from international business. In the first half of 2025, used car exports achieved 17.8% gross profit growth with gross margin improving from 4.2% to 7.0%. We believe this reflects the continued optimization and upgrading of our business model. We currently operate with two models in Quhuo. The first is traditional sales model, under which vehicles are sold upon export with a cash cycle about 3 to 4 months with a gross margin typically at around 7%. The second is the technological empowerment and resources cooperation model, which we believe to carry greater potential. Here, we leverage our accumulated technology, operations and management expertise from domestic ride building sector and package solutions for overseas partners to jointly operate vehicles and share with long-term higher margin income. This model offers significantly higher profitability and unique economics with a payback period of roughly 24 months, which means revenue growth may be realized more gradually, but on a stronger foundation. Our cooperation in Azerbaijan with Volt Auto and Bolt provides an example of this model. By deploying our SaaS platform and management expertise, we are helping partners shift from onetime vehicle sales to a recurring service-based model. Till now, hundreds of vehicles have been under management with a project level margin of 43%, well above the project model. The success of this pilot has already led partners to place multiple follow-on orders, validating its replicability and long-term profit potential. Looking ahead, we plan to draw on the asset financialization experience gained in the accommodation segment to address cash cycle challenges in this model, enabling broader expansion into new markets, driving our international business to evolve from linear growth based on vehicle sales to a higher quality development model of maintaining scale through sales and creating profit through operations. We believe this approach building a global automotive ecosystem through technology empowerment and management expertise will raise our earnings ceiling and establish more durable competitive advantages. To conclude, in the first half of 2025, despite pressures in the on-demand delivery business, we maintained resistance in our core business and made progress in our second business. We believe these results reflect further the soundness of our strategy and the strength of our execution. Looking forward, we plan to remain focused on our dual track strategy of optimizing core operations and cultivating new growth. On our core business side, we recently entered into a cooperation with JD, Jingdong Takeaway, to provide delivery services in some cities. We believe this not only demonstrates recognition of our operational capabilities, but may also substantially add incremental volume under the new competitive landscape in on-demand delivery. On the new initiative side, our supply chain empowerment partnership with New World has been progressing steadily. Since May this year, it has generated approximately RMB 14.4 million in revenue and is expected to contribute approximately RMB 60 million for the full year. We view this as an early milestone in our transition from a fulfillment service provider to a supply chain enabler, which may create new opportunities to capture additional value from our delivery network. We plan to continue focusing on our operational efficiency and refining our business models while seeking key market opportunities in order to deliver more sustainable long-term returns for our investors. This concludes my remarks. I will now turn the call over to our CFO, who will provide a detailed overview of our financial performance. Zhen Ba: Thanks, Leslie. Hello, everyone. This is Barry Ba, the CFO of Quhuo Technology Limited. Welcome to Q2, First Half of 2025 conference call. Please be reminded all the amounts told here will be in RMB unless stated otherwise. Total revenue decreased by 30.2% from RMB 1.619 million in the 6 months ended by June 30, 2024, to RMB 1,131.4 million in the 6 months ended by June 30, 2025, due to the following reasons. Revenue from on-demand delivery solutions were RMB 1,039 million, representing a decrease of 30.7% from RMB 1,499 million in the 6 months ended June 30, 2024, primarily because we optimized our business by disposing of several underperforming service stations, which led to a decrease in the revenue scale. Revenue from mobility service solutions, consisting of shared-bike maintenance, ride-hailing, vehicle export solutions and freight service solutions were RMB 57.4 million, representing a decrease of 42.8% from RMB 100.5 million in the 6 months ended June 30, 2024, primarily due to one, a decrease in units of vehicles sold in our vehicle export solutions business as a result of introduction of new business model and a decrease in purchase of vehicles for sales; and second, optimization of our business by ceasing from our ride-hailing solutions service in several underperforming service cities. Revenue from housekeeping and accommodation solutions and other services were RMB 34.8 million, representing a sharp increase of 70.8% from RMB 20.4 million in the 6 months ended by June 30, 2024, primarily due to the adoption of online promotion channels in addition to traditional platform-based customer acquisition. Cost of revenues were RMB 1,127 million, representing a decrease of 29.3% Y-o-Y, primarily attributable to the decrease in our labor costs and the service fees paid to service station managers in line with the decrease in the revenue. As a result of foregoing, our gross profit were RMB 24.8 million and compared with RMB -- sorry, as a result of foregoing, our gross profit were RMB 24.8 million and RMB 4.1 million in the 6 months ended 2024 and 2025, respectively. G&A expenses were RMB 76.3 million, representing an increase of 7.7% from RMB 70.9 million in the 6 months ended June 30, 2024, primarily attributable to: one, an increase of professional service fee from RMB 14.5 million in the first half of 2024 to RMB 25.2 million in the first year of -- first half of 2025, due to the issuance cost of ADSs occurred in the first half of 2025 of RMB 9.7 million; and the second, increase of welfare and business development expense and office expense from RMB 12.4 million in the first half of 2024 to RMB 15.1 million in the first half of 2025, resulting from the expansion into new cities for its housekeeping service and offset by a decrease of labor cost from RMB 36.6 million in the first half of 2024 to RMB 30.6 million in the first half of 2025 as a result of our expense control through technological optimization. R&D expenses were RMB 3.6 million, representing a decrease of RMB 27.3 million from RMB 4.9 million in the 6 months ended by June 30, 2024, primarily due to the decrease in the average compensation level for our R&D personnel as we restructured our R&D team. We recorded a gain of disposal of assets, net of RMB 7 million and RMB 5.7 million in the 6 months ended by June 30, 2024 and 2025, respectively, primarily due to the transfer of certain long-term assets to third parties. Our interest expense remained stable at RMB 2.2 million and RMB 2.3 million in the 6 months ended by June 30, 2025 and 2024, respectively, primarily relating to the stability in our average short-term bank borrowings. We recorded other income, net of RMB 1 million in the 6 months ended by June 30, 2025, compared to other loss, net, of RMB 3.1 million in the 6 months ended June 30, 2024, primarily due to the disposal of investment in the mutual fund in the second half of 2024. We recorded income tax benefit of RMB 17.9 million in the 6 months ended June 30, 2025, as compared to income tax benefit of RMB 2.6 million in the 6 months ended June 30, 2024, primarily due to the reversal of unrecognized tax benefit recognized in the previous years and has been passed the retroactive period. As a result of foregoing, we have net loss of RMB 53 million in the 6 months ended of June 30, 2025, compared to an increase of 14% from RMB 46.5 million in the 6 months by June 30, 2024. EBITDA loss were RMB 60.2 million as compared to EBITDA loss of RMB 34.8 million in the first half of 2024. In terms of balance sheet, as of June 30, 2025, the company has cash, cash equivalents and restricted cash of RMB 33.1 million and short-term debt of RMB 118 million. And this concludes my prepared remarks. Thank you for your attention. We are now pleased to take your questions. Operator, please go ahead. Operator: [Operator Instructions] The first question today comes from [ Sally Gao ] of Private Investor. Unknown Analyst: My question is, could you explain Quhuo's specific role in the Trust corporation and what impact this cooperation may have on future financial performance? Leslie Yu: Okay. This is Leslie, and thank you for the question. Our cooperation with the Trust builds on our traditional BPO fulfillment services, but we take a step further. We're turning business revenues into data assets and then into investor financial assets. So this is not only strengthen liquidity, but also increase asset returns. Quhuo is one of the initiator of this project and core operator. To be more specific, that is operational base, it makes sure that our properties are upgraded and managed at a higher standard, creating stable rental income. On top of that, Quhuo Group works to pool the receivables generated. And through trust structures, we monetize the future cash flows in advance and unlock capital. The financial impact is quite direct. First, it brings in higher margin income such as asset management fees and capital gains, which is very different from traditional labor services and improves our profit mix. Second, it also improves cash flow, giving us more flexibility to expand both our core and new business. So this is not just a single business success. It proves our new model of combining on-the-ground operations with financial empowerment, opening up a lighter, more profitable and sustainable growth path for the company. Operator: This concludes our question-and-answer session and concludes our conference call. Thank you for attending today's presentation. You may now disconnect.