Ladies and gentlemen, good day and welcome to Full Truck Alliance's Third Quarter 2024 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mao Mao, Head of Investor Relations. Please go ahead.

Thank you, Operator. Please note that this discussion will contain forward-looking statements relating to the company's future performance, which are intended to qualify for the safe harbor from liability as established by the US Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. A general discussion of the risk factors that could affect FDA's business and financial results is included in certain filings of the company with the SEC. 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-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures, and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining us today on the call from FTA's senior management are Mr. Huizhong, our founder, chairman, and CEO, and Mr. Simon Hai, our CFO. Management will begin with prepared remarks. As a reminder, this conference is being recorded. In addition, a webcast replay of this call will be available on FTA's Investor Relations website at ir.fulltruckalliance.com. I will now turn the call over to our founder, chairman, and CEO, Mr. Zhang. Please go ahead, sir.

Hello, everyone. Thank you for joining us today on our third quarter 2024 earnings conference call. Over the past quarter, we have continued our efforts to drive the digital and intelligent transformation of the logistics industry by helping enterprises reduce costs and improve operating efficiency. We have enhanced their logistics competitiveness, a key differentiator in the current macro environment. As a result, we achieved 22% year-over-year growth in fulfilled orders in the third quarter, steadily advancing the shift away from traditional offline logistics matching models. In addition, the rapid expansion of our user base, together with the significant strengthening of the synergistic network effects between our shippers and trucker users, has improved cost and transaction efficiencies, organically fueling our growth. Looking back at the third quarter, we are pleased with the progress we have made across the board, particularly in terms of new user acquisition, shipper operations, enhancing the trucker capacity supply, and boosting monetization quality. For new shippers, our vast addressable market covers tens of millions of small and medium-sized enterprises that have logistic needs nationwide. During the quarter, our efforts to capture this market, including user acquisition campaigns across diverse channels and ongoing product enhancements to improve new shippers' user experience, executed a full rebranding for Inman this quarter and boosted user thickness, driving a strong influx of new shippers. In terms of shipper operations, by optimizing our product matrix for shipper members, these initiatives drove average shipper MAUs to another record high, reaching 2.84 million in the third quarter, up 33.6% year over year. To enhance our trucker supply, we fostered transportation capacity by strategically leveraging our premium cargo billing initiatives, trucker membership program, and the trucker credit rating system. This not only led to an increase in fulfillment rate to 34.5% this quarter, up 5.5 percentage…

Thank you, Mr. Zhang, and thanks everyone for making your time to join our earnings conference call today. Let's review our operational and financial results for the third quarter of 2024. I'll start with our operational performance. Although overall freight market activity remained subdued this quarter, our fulfilled orders increased by 22.1% year over year to 51.8 million in the third quarter. This robust growth was driven by our expanding shipper user base, as well as higher fulfillment efficiency, thanks to enhanced programming features and user experience on the platform. Our fulfillment rate also continued to improve in the quarter, reaching 34.5%, up 5.5 percentage points year over year and surpassing last quarter's record-setting fulfillment rate. This improvement was largely driven by the continuous shift in our shipper user structure and the resulting optimized order structure. The contribution from our direct shippers reached 49% in the third quarter, which is expected to exceed 50% soon. Meanwhile, both our 688 member shippers and non-member shippers achieved average fulfillment rates above 50%. Looking ahead, we are committed to further enhancing our platform's overall order structure by advancing our direct shipper acquisition strategies and improving matching efficiency through streamlined fulfillment processes across transaction types. We are confident that these efforts will lead to sustained improvements in human efficiency across the platform. Turning to our user base, our average shipper MAUs reached 2.84 million in the third quarter, up 33.6% year over year and 7.4% quarter over quarter. Notably, our average shipper MAUs surpassed 3 million in September. The strong growth in shipper users was largely attributable to growth among our low and medium frequency direct shippers, particularly our expanding non-member shippers, underscoring the effectiveness of our user acquisition strategies and our outstanding execution capabilities. Since the third quarter, we have been ramping up…

If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press the appropriate key. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. At this time, we will pause for a moment to assemble our roster. Our first question today will come from Charlie Chen of China Renaissance. Please go ahead.

Thanks, management, for giving me this chance to ask questions and congratulations on a very strong quarterly result. My question is regarding the order numbers. The number of fulfilled orders in the third quarter grew by 22.1% year on year, significantly outpacing the growth rate of the overall freight market in China. What were the key drivers behind it? And also, based on the order trends so far this year, how do you view order volume growth in the fourth quarter?

Thank you, Charlie. Our platform's order volume continued to grow steadily in the past quarter despite very challenging macro freight market demand. This growth was largely fueled by an influx of new users and improvements in our matching efficiency, driven by product feature optimization and enhancement. Additionally, our incremental order volume from new business also maintained a strong growth momentum. For new users, we continue to execute our direct ship strategies to propel user growth. We are integrating online channels with offline truck sticker and advertising to substantially boost brand awareness and engagement. During the past quarter, our average number of monthly active shippers increased by 34% year over year, reaching a very impressive 2.84 million. Furthermore, our operations team focused on converting new users through their initial and first three order fulfillment and fostering consistent online order placement and fulfillment habits among all users. This quarter, we also launched a holistic branding campaign, introducing a more vibrant modern red and white checkered logo to enhance brand recognition and recall among shipper and trucker users. Moving forward, this updated design will be featured on truck exteriors, tarps, and other FTA branded items, further strengthening our renewed brand identity and our strategic positioning within the logistics industry. For product features, optimizing premium cargo remained a priority in the third quarter. Following last quarter's introduction of instant bidding for price orders, we have now extended the coverage to negotiated orders, which incentivized truckers to complete order matches and boost their credit ratings to obtain access to better orders. From the perspective of product effectiveness, matching efficiency for high-value orders remained stable, supported by significant improvements in matching efficiency across medium-tier cargo categories. This progress led to an overall increase in order volume and fulfillment rates, with average orders fulfilled by monthly active truckers achieving over 10% year-over-year growth this quarter. In terms of our new business, our less-than-truckload business continues to serve as a major growth driver for users and order volume. In this quarter, we further optimized the product functionality of our LTL carpool offerings, unveiling sequential route-aligned carpooling. This new feature leverages load optimization models and route alignment algorithms to provide truckers with precise freight matching capabilities. It has significantly improved truckers' carpooling efficiency and success rates, contributing additional value to our platform's business growth. As we enter the fourth quarter, we are confident in sustaining growth in our online penetration rate through user growth and ongoing product feature optimization.

Our next question will come from Eddie Huang of Morgan Stanley. Please go ahead.

Thank you, management, for taking my question. In the third quarter, the fulfillment rate further tracked upward to 34.5%, up 5.5 percentage points year over year and 0.8 percentage points sequentially. What were the key drivers behind this improvement, and what operational strategy enhancements were implemented to boost the fulfillment rate?

Thank you, Eddie. Our fulfillment rate once again reached a record high, finishing the quarter at 34.5%. The surge was largely driven by a shift in our shipper user structure and continued optimization of our operational strategies. In terms of user structure, the majority of new shippers come from small to medium-sized business owners and were mainly direct shippers. This further optimized our platform's user structure. Currently, direct shippers contribute around 49% of total fulfilled orders, and these shippers mainly place orders in categories known for higher fulfillment rates, such as LTL and trusted shipments and short-haul deliveries, consistently contributing to the improvement in overall fulfillment rates. Our monthly active 1688 memberships practically hit saturation, with member count remaining flat quarter over quarter and year over year this quarter. We expect membership in this segment to stabilize or even shift toward other low and medium frequency shipper tiers in the future. This trend further reinforces our vision of redefining industry standards for low freight transport by gradually phasing out ineffective intermediaries and facilitating seamless connections between direct shippers and truckers. From an operational strategy perspective, this quarter, we shifted our focus back to optimizing the application of foundational data in fleet matching. Starting with trucker registration, we guided users to select tags such as cargo types and preferred locations for more accurate trucker profiling and clearer insights into their needs, ultimately improving the matching efficiency of our recommended orders. In addition, with negotiated orders now fully accessible in premium cargo bidding, our platform has aligned all freight postings with this bidding logic. This adaptation enabled us to leverage credit ratings more effectively to incentivize truckers, significantly improving fulfillment rates for medium-tier orders. Looking ahead, we will consistently acquire more direct shippers and truckers, generating and aligning increased demand and supply to enhance the balance between shipping capacity and cargo, ultimately boosting our fulfillment rate.

Our next question today will come from Jiulu Li of CICC. Please go ahead.

Thank you. The monthly active shippers reached 2.84 million, marking a year-over-year increase of 33.6% and a quarter-over-quarter increase of 7.4%. What were the key factors driving this growth, and what's the user profile of new shippers?

Thank you, Jiulu. Our monthly active shippers continue to grow rapidly in the past quarter, mainly driven by the ongoing increase in new users gained through our effective user acquisitions alongside improved user engagement resulting from our fine-tuned operational strategies. As our user base expanded, our user structure also improved, with monthly active direct shippers increasing by over 39% year over year in the past quarter. Our platform promotions mainly leveraged online app stores and strategic marketing placement to boost user growth, complemented by offline initiatives such as truck sticker advertising and brand awareness campaigns. Following our holistic brand upgrade this quarter, we focused on cities with high foot traffic and elevated order volumes to increase brand exposure and further enhance new user conversion effectiveness. We noted that our newly acquired shippers were widely distributed across diverse sectors, reflecting the broader market dynamics with higher concentrations in sectors such as building materials, food and beverages, parts and components, metal and steel, and chemicals, among others. During the third quarter, we boosted user activity mainly by optimizing product features and refining our membership strategies. For direct shippers, our R&D team further simplified our order placement interface to streamline the shipping process. Additionally, our customer service representatives proactively engaged dormant users, elevating overall user engagement. Regarding membership strategies, we prioritized the promotion and penetration of our mini membership program by offering benefits such as shipment tracking and freight discounts. We effectively converted a larger proportion of low and medium frequency shippers into paying members, resulting in increased user activity and order frequency. We believe that the online penetration rate amongst small to medium-sized enterprises is well below saturation. Our long-term objective is to convert tens of millions of direct shippers. Looking ahead, as our brand recognition grows and we continue to refine our product features, we expect a fresh influx of SME owners to join the platform, propelling sustained growth in our user base and overall platform scale.

Our next question today will come from Bruce Miele of UBS. Please go ahead.

Thanks, management, for taking my questions. My question is on the company's transaction service. In the third quarter, our transaction service revenue increased by nearly 69% year on year. What were the main drivers behind this? Did we make some adjustments to our commission strategy?

Thank you, Bruce. Our overall transaction commission dynamics remained strong in the third quarter. Both the number of monetized orders and the average monetization amount per order demonstrated a steady upward trajectory compared to last quarter. Regarding growth in monetized orders, the solid increase in our fulfilled orders along with the steadily rising monetization coverage ratio contributed. In the third quarter, the proportion of high-quality orders rose due to the surging order demand from new direct shippers. On the trucker side, we promoted membership packages with benefits such as compensation guarantees, deposit reductions, and waivers, effectively securing long-term capacity support. As a result, the order monetization coverage rate increased to nearly 83% in the third quarter, an increase of almost 13 percentage points year over year. Average commission per order also increased to RMB 24.4 this quarter from RMB 20.9 in the prior year period, up by almost 17% year over year. This increase was primarily driven by the increase in the proportion of our high-quality orders. With reasonable freight rates and comprehensive benefits, truckers were willing to pay higher prices to accept and fulfill orders through our platform, creating a positive monetization cycle. Additionally, our pricing products, such as entrusted shipments targeting low- and medium-frequency direct shippers, have gained traction among users, further boosting our average monetization amount per order. Moving forward, as we consistently enhance our platform's safeguards for the rights and interests of both shippers and truckers, upgrade value-added benefits, and refine our commission strategy, we are confident that revenues from our transaction service will maintain their rapid growth.

Our next question will come from Yan Lao of Citic Securities. Please go ahead.

Thanks, management, for taking my questions, and congratulations on the strong results this quarter. Could management share some color on how the entrusted shipment business progressed in the third quarter and in what areas were the operational strategies refined?

Thank you. Our entrusted shipment segment fulfilled nearly 40,000 orders per day during the third quarter, which is almost double from last year. This growth was primarily attributable to our strategic allocation of user resources and product feature enhancement that boosted user retention. Building on this momentum, we guided new shippers primarily towards the entrusted shipment channel in our recommendations, given its superior initial fulfillment rate compared to other order types. This strategy facilitated smoother onboarding and conversion for new users. For our existing shippers, we maintained a hands-off approach, allowing them to make their own choices. Additionally, we further refined our pricing strategy this quarter, leveraging prior algorithm and business logic integration. We offered this with lower freight rates than brokers and other intermediaries. This approach effectively boosted first repurchase rates and retention within our entrusted shipment segment. For those orders involving human intervention, we mainly focused on optimizing freight guarantees for truckers, ensuring cargo protection for shippers, and minimizing customer complaints, all of which enhanced the overall user experience and substantially elevated user satisfaction with our offerings. As we look to the future, we expect continuous advancement in product optimization, pricing strategies, and user experience will support the continued order volume growth for our entrusted shipment business.

And that will conclude the question and answer session. I would like to turn the conference back over to management for any additional or closing comments.

Thank you, Operator, and thank you everyone for joining us today. If you have further questions, please feel free to contact us at Full Truck Alliance directly or TPG Investor Relations. Our contact information for IR in China and the US can be found in today's press release. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.