Hello, everyone, and thank you for joining us today. The company's results and the investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer and Mr. James Guo, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Mr. Guo, who will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows. I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which 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 this and other risks, uncertainties and factors is included in the company's filing with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law. It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. Mr. Lai, please go ahead.

[Foreign Language]

Okay, now let me do the translation for Chairman. Hello, and thank you, everyone, for joining our call this morning. Our business continued to grow at a faster pace than the industry overall. Parcel volume grew 37.6% year-over-year to reach 1.493 billion while generating nearly RMB2.97 billion in revenues. Our adjusted net income surged during the quarter to RMB730.4 million, an increase of 43.5%. Our parcel volume continued to grow faster than the industry average, which helps us further expand our market share, grossing our profitability, also outpace grossing our parcel volume, demonstrating the increasing benefit we get from expanding economies of SKU. We have continued to further optimize our parcel structure towards smaller parcels with lower rates that carry higher margins. As our market share and profitability improves, we are increasingly focusing on enhancing service quality. According to data compiled by the State Post Bureau, ZTO once again received one of the highest scores for customer satisfaction among the major express companies in China during the quarter. Our performance during the quarter further demonstrated just how effective our strategy of balancing growth with service, quality and profitability is in strengthening our industry leading position and aligning the interests of our network partners with ZTO, while providing the highest of quality service possible. We are constantly developing new ways to optimize our network. We made considerable progress this quarter with a series of initiatives. We conducted extensive field research and collected a lot of data from our service outlets, enhanced our policy regulating truck routing among service outlets in the rural areas within provinces, expanded the application of new technology and products and ensure that we are anticipating the needs of our customers across our network. Through further integration of real time tracking data across the ZTO network, we have been able to help our service outlets improve their operating efficiency and service quality. All these measures helped to create a stable and sustainable market network and improve the operating efficiency and the stability of our network partners. Moreover, this also enabled us to provide better services to our end customers, which further strengthens customer satisfaction and brand loyalty among those customers and merchants. With that, I will now turn the call over to James, who will go over our financial results in more detail.

Thank you, Chairman. I'm pleased with our performance during the second quarter. Our current mix charges, economies of scale and cost-cutting measures are beginning to bear more fruit. Our unit cost of revenues fell to RMB1.24 from RMB1.34 during the same period last year. Our margin profile significantly improved this quarter with our gross margin, operating margin, net margin and non-GAAP net margin expanded to 37.8%, 31%, 24.1% and 24.6% respectively, compared to 36.2%, 26.3%, 18.6% and 22.3% respectively, during the same period last year. I would like to go over a few housekeeping items before I go through the numbers in detail. We believe year-over-year comparisons are one of the most useful ways to assess our performance. All percentage changes I'm going to give will be on that basis. Our parcel volume during the quarter increased by 37.6% to 1.493 billion. Our number of self-owned trucks increased to over 3,100 as of June 31st -- the 30th 2017, from 3,000 as of the end of March 2017. The use of more self-owned, high-capacity trucks has enabled us to enhance transportation efficiency continuously and reduce unit transportation costs as we further increase our economies of scale. Revenues increased by 29.9% to RMB3 billion, primarily due to an increase in cost of volume as a result of overall market growth. Cost of revenues rose to RMB1.8 billion, an increase of 26.6%, primarily due to increase in line-haul transportation, sorting hub operations and accessories costs, which were partially offset by a decrease in waybill material cost due to the increased use of digital waybills by our end customers, which have lower costs than paper waybills. Going into further detail. Line-haul transportation costs increased 29.2% to RMB1.1 billion. The increase was in line with the increase in parcel volume and was primarily due…

[Operator Instructions] Okay, the first question comes from Vivian Tao with Citi. Please go ahead.

My first question's on ZTO's guidance on the revenue growth for third quarter Jim just provided. Can you please give us some breakdown on the volume growth versus what's the ASP expectation for third quarter? And I also want to check for the -- close to two months for third quarter up until now. What's the volume trend that ZTO has been observed so far? My second question actually is on the last-mile delivery fee. We heard actually in the next second quarter that the major players are planning to increase approximately RMB0.50 per parcel for last-mile delivery. However, our industry channel suggests when signal goes through. So we just wonder what is management's thoughts on this? And will there be further action to improve the profitability of the outlets that's more focused on the last-mile delivery so that we can help them to improve the profitability and help to make sure the network is more stable?

[Foreign Language]

This is James. I will translate the Chairman's answers. The first question about the trend for parcel volume and pricing in Q3. The Chairman mentioned that the ZTO's parcel volume growth in July continued to outpace the industry average. And we expect this trend to continue in the third quarter. But actually, we are seeing prices remain steady at this stage, and I would like to take this opportunity to stress that the overall price per parcel is highly correlated to the company's parcel mix. For example, the unit price for smaller parcels is lower, but profit margins are higher because correspondingly, this lower cost in transportation [has started]. So unit cost of the larger parcels is higher, but the profit margins are lower. So any analysis of average revenue per parcel should take into account the parcel mix. And we will continue to optimize our parcel structure to create more value for our network partners and shareholders. For the second question about the last-mile fee of RMB0.15 per parcel. He mentioned that the last-mile delivery fee mechanism varies company-by-company and depends on the situation of the express delivery companies, their strategies and operations. We changed the last-mile delivery fee for some of our outlets this year, and overall, our last-mile delivery fees are going up. And in the first half of 2017, we helped our service outlets to improve their operating efficiency and our goal is to boost their service quality and gain market share and we are running a balanced network that can ensure a steady and sustainable profit for our service outlets. So we believe only by continuously improving our operational capabilities can we share the success achieved through cost controls and improved quality and efficiencies. And this will further improve the overall profitability across our entire network.

The next question comes from Ms. Baoying Zhai with Credit Suisse. Please go ahead.

So my first question is regarding the sorting cost savings during the second quarter. Actually, we see significant savings in this area. So I want to know how many new automation lines actually were installed during the second quarter and how is the average utilization of the automation lines and how is the average parcel per headcount per day now. And how is the trend in the third quarter so far; is this sustainable? I also want to follow up on the average weight of the parcels. So how the second quarter and third quarter average weight of the parcels and how is it compared with last year. So this is regarding the results. My second question is regarding the future outlook. So people -- the recent very hot, popular topic is warehousing and delivery together. So ZTO has the largest land bank among Tongda companies. Are we also considering doing the warehousing management in the front end? And we are also going to think about the increased network building and how much it will cost and how long it will take? Thank you so much.

Thank you, Baoying. I will answer the first question and the Chairman will answer the second question. So for the first question -- and actually, we increased our automated auto sorting equipment, 4 automated sorting equipment in the past quarter. So as of the end of last quarter, second -- Q2 2017, we have about 22 automated sorting equipment in operations. And we start to benefit from these automation initiative. For example, we believe that the number of parcel volumes that each operator can process after automation will -- has increased by about 20% to 30% compared with a manual operation process. And in the past quarter, the average weight of our parcels has dropped to about 1.11 kilograms from about 1.19 kilograms in the same period last year. And we believe, because of the drop of the parcel weight, it did have some impact on our average revenue per parcel, but in the meantime, we continue to see improved operating margins because of the optimized product structure. So we'll continue to implement a similar strategy going forward. So the Chairman will answer your second question.

[Foreign Language]

So I will do the translation. So the Chairman mentioned that the concept of intra-city delivery has many different business models. For example, the last-mile food delivery business, the city-wide instant delivery and warehouse distribution service providers. Today, these services have a limited impact on the express delivery industry. We closely monitor what's going on across the industry and are developing strategies to adapt to the changes in the market dynamics and seize potential business opportunities. In terms of our warehouse distribution, he mentioned that warehouse management is far more complicated and requires substantial technical capabilities and operational experience and we have to go a long-term plan to develop our warehouse and distribution business. So that's the Chairman's answer.

[Foreign Language]

Can you translate that into English first?

Okay, sure. I want to follow up on my first question. Because I was wondering how sustainable is the cost saving trend in third quarter so far because the revenue guidance is a little bit weak. So how is the margin outlook so far?

Turning to our profit margins. We have been focusing on striking the right balance between market share, service quality and profitability. Industry prices have leveled off and are expected to pick up gradually in the next one to two years. Benefiting from our expanding network, economies of scale and the network effect will lead to a further decline in the overall costs and an improvement in our profitability across the entire network. With the strong support of our outlets, improved management capabilities, also efficiency gain as well as an expanding ecosystem, our service outlets will grow in a healthier and sustainable manner with improving service quality. I am confident that our profit margins will remain at a healthy level.

[Foreign Language]

The next question comes from Edward Xu with Morgan Stanley. Please go ahead.

[Foreign Language] So I've got two questions regarding -- first, is your unit price, or ASP. We see that the trend of ASP decline is more than 5% to 6% higher than the industry-wide ASP decline. So could you give us more analysis on how this was the case? And especially you mentioned the mix, the volume mix change and how this volume mix change affect the ASP and how the other like competition pricing discounts affect the ASP. And also could you give us a guidance on the ASP trends in second half of the year? And the second question is regarding the competition and market share. Because we found that your market share actually decreased a little bit from first quarter. First quarter was 15.5%. Second quarter was 15.3%. So this decline in market share, could you share with us what was the real cause and what's your target for the full year? And in what way can you achieve your target for market share?

Edward, I will answer the first question and the Chairman will answer your second question. So the first question. First, I just want to clarify our ASP is not directly comparable with the industry average ASP trend because they're not the same thing because our ASP represents how much we charge our network partners, but the industry wide ASP represents how much the network or the express companies together with the network partners charge the end customers. So they're not directly comparable. Second, the year-over-year decrease in the average revenue per parcel during the second quarter was mainly due to the year-over-year decrease in the average weight per parcel. So as a result of the change in our policy for smaller parcels, as Chairman Lai just mentioned earlier, we also need to consider parcel structure in the analysis of ASP trends. So during the second quarter, our average weight per parcel dropped from about 1.19 kilograms to 1.11 kilograms in this quarter. And this has resulted in a decline in the network transit fee per parcel. And also the increased use of digital waybills from about 69% to 83% in Q2 also led to a decrease in waybill revenue per parcel on a year-over-year basis. So these 2 factors combined resulted in a decrease in average revenue per parcel on a year-over-year basis. And from an industry perspective, we believe that the industry pricing has started to stabilize and expect it to pick up gradually in the next two years.

[Foreign Language]

The Chairman mentioned that our market share in the second quarter remained very strong and to cope with the increased competition, we've been able to strike a right balance around market share, service quality and profitability. Our market share is the foundation of our business. So with increased market share, economies of scale will be greater because the cost will be lower. In addition, good service quality can improve customer satisfaction and loyalty. So with a larger share of the market and higher quality services, we are able to provide customers with more cost effective products and in turn, both ZTO and our network partners can generate more profits. Looking forward, our strategy will focus on: first, continue to strengthen our industry leading position; second, enhance our IT platform and infrastructure investments; and third, increase the service and product diversity and expand our customer base.

Okay, the next question comes from the Nicky Ge with China Renaissance. Please go ahead.

My first question is market strategy in the second half. Are we still focusing on small parcels and how is that going to impact our ASP in the second half? And my second questions are capacity and capacity expansion planning this year and next year.

Okay. So for your first question, Nicky, as the Chairman mentioned earlier, we've been optimizing parcel structure to improve operating efficiency. So we will maintain this strategy throughout the second half of the year. And our market strategy will focus on network stability and service quality through operating efficiency improvement and also our unique shared success system. So that's the answer to your first question. To your second question about CapEx plan, our total CapEx for the year, it's around RMB4 billion and our capital expenditure are on track. We will develop next year's CapEx plan some time in Q3 this year. So our CapEx target for the next year will be sufficient to support our future business growth. We have no large scale investment plan at this point in time to enter the cold chain logistics sector for now, but we're keeping a close eye on that. We've been using cold chain logistics technology for our customers in certain areas and in certain sectors such as fresh products which have a high requirement for preserved quality.

Okay, last question.

Operator, we're ready for the next question.

Okay, the next question comes from Calvin Wong with J. P. Morgan. Please go ahead.

[Foreign Language]

[Foreign Language]

I have two questions here. My first question is that the barriers of entry to this industry isn't particularly high and we've seen various new players enter this market including those freight companies. So my question is, over the next two to three years, do we have any views in terms of industry competition, market share and pricing and how this might change in the coming few years. And second is, in recent years, what we've seen is that parcel volume growth has been outpacing e-commerce GMV, but over the last couple of months, we've actually seen the growth of online physical goods GMV outpacing that parcel volume growth. So do we see any particular things that are driving this change in trend?

[Foreign Language]

Yes. For the first question, the Chairman mentioned that we haven't noticed many new players enter the market. On the contrary, we have seen some underperforming express companies gradually drop out of the markets, get acquired or found themselves forced to transform their business. A few new companies have attempted to enter the industry, but we don't believe that the barriers to entry have been lower. These new players will need to deliver good results to stay alive. The Chairman believes that economies of scale and the network effect are the key to succeed in the industry. It is difficult for small- and medium-sized express delivery companies to meet most clients' needs in terms of capacity and service quality. So without scale in their business, express delivery companies may find it very difficult to become profitable. We believe that the industry will further consolidate over the next few years, and some smaller express company will be forced to transform. Others will be acquired or wiped out of the market all together. So as the industry further consolidates, our pricing will better match the industry's product offerings, differentiated products and services will have differentiated prices. So that's the answer to your first question. I will answer your second question about the GMV growth versus parcel volume growth. Actually, there are many factors that can affect the GMV growth such as product prices and also the category structure. So the parcel volume is not directly comparable with GMV growth because parcel volume also increase -- include ecommerce parcel and also non ecommerce parcels, for example, commercial parcels and some other parcels as well. So GMV and parcel volumes are related, but they're not apple-to-apple comparisons. In June, many high priced items such as home appliances, furniture and home furnishings were promoted happily during the [Indiscernible] ecommerce sales promotion period, which may have resulted in higher growth in ecommerce GMV compared with parcel volume growth.

This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Sophie Li for any closing remarks.

Okay, so the Chairman wants to add a closing remark before the end of the call.

[Foreign Language]

In the closing remarks, the Chairman mentioned that he found out that most of you are interested in our ability to maintain revenue growth momentum and whether we are able to maintain a healthy gross margin, operating margins. He said that first of all, about growth momentum and our ability to maintain revenue growth momentum depends on our market share and price. On the one hand, China's e-commerce industry will continue to grow rapidly in the foreseeable future. Therefore, the entire express delivery industry, especially the large express delivery companies, will further benefit from the rapid development of the e-commerce industry in China. As a leading delivery company, we believe ZTO has gained significant growth momentum this year, which will continue to outpace the industry average and support the expansion of our market share. On the other hand, large express delivery companies in China have all become publicly listed and have so far avoided falling into a price war. So market prices will stabilize and I'm very confident about ZTO's revenue growth in the future. Second, about margins. Turning to the profit margins, we've been focusing on striking the right balance between market share, service quality and profitability and the industry prices have stabilized and are expected to pick up over the next 1 to 2 years. We'll continue to benefit from our expanding network, economies of scale and also the network effect will result in a further decline in the overall costs and an improvement in our profitability across the entire network. So with the strong support of our service outlets we help them to improve management capabilities, to improve their operating efficiency and also with our expanding ecosystem, our service outlets will grow in a healthier and sustainable manner with improving service quality. I'm very confident that our profit margins will remain at a very healthy level. So that wraps up the Chairman's closing remarks.

Okay. Thank you, everyone, for joining the call. In closing, on behalf of the entire ZTO management team, I would like to thank you for your interest and participation in today's call. If you require any further information or have any interest in visiting us in China, please let us know. Thank you for joining us today. This concludes the call.

Thank you.