Yahoo Finance

Chong Cai

Thank you, Mr. Zhang, and thanks, everyone, for joining our earnings conference call today. I will now provide an overview of our operational highlights and financial performance for the fourth quarter of 2024. Let's start with our operational performance this past quarter, which was highlighted by significant breakthroughs in expanding our user base, enhancing efficiency and improving monetization capabilities.
We also achieved a remarkable 24.3% year-over-year increase in fulfilled orders to 56.9 million in the fourth quarter. This growth was primarily driven by our rapidly expanding shipper user base and the increased fulfillment efficiency stemming from shifts in our user structure along with the earlier Chinese New Year and other seasonal factors.
Building on our third quarter momentum, our fulfillment rate set another new record this quarter, increasing significantly to 37.5%, up over 5-percentage-points year-over-year. Notably, the average fulfillment rate of low and medium frequency shippers exceeded 55%, continuing its upward trend quarter over quarter. The other contribution from our low and medium frequency shippers reached 50%, also marking a new milestone.
Our increasingly optimized order and user structure, ongoing improvements to our -- improvements to our matching ordres, our refined operational strategies collectively drove this quarter's all-time high fulfillment rate. Our average shipper MAUs increased by 31.3% year-over-year to RMB2.93 million in the quarter, with our average shipper MAU surpassing RMB3 million for the first time in December last year.
This strong growth was driven largely by our low and medium frequency direct shippers. Our coordinated efforts across multichannel user acquisition streamlined app interfaces and initiatives supporting new users have significantly improved the new user onboarding experience.
Shipper activity remained robust as a result with our shipper member 12-month rolling retention rate consistently exceeding 80% in the fourth quarter.
Our trucker side operational performance was equally impressive in the fourth quarter, the number of active truckers fulfilling orders through our platform over the past 12 months increased to $4.14 million quarter-over-quarter, and our next month's retention of truckers we responded to others remained above 85%, boosted by tiered incentive strategies such as the premium cargo bidding initiatives and the Carefree package the average number of monthly field orders per trucker continue to rise further enhancing trucker retention and stickiness.
Next, I'd like to highlight the progress we have made in our transaction service. fueled by increased order volume and refined monetization strategies, revenues from transaction service served by 71.1% and year-over-year to RMB1.16 billion in the fourth quarter. Specifically, our monetized order penetration ratio also increased to 82.9% for the quarter a jump of over 11-percentage-points from 71.7% in the same period last year.
Additionally, our average monetization amount per order, which includes mostly transaction commission increased to RMB24.6 in the fourth quarter, up from RMB2.6 a year ago. By dynamically fine-tuning commission metric granularity, we have effectively catered to different transaction types and user demands, driving parallel improvements in both matching efficiency and monetization quality.
Heading into 2025, we will continue refining our smart pricing model to further enhance the monetized order penetration ratio and overall monetization rate, unlocking even greater monetization potential.
Before we dive into our financials, I'd like to discuss our newly initiated semiannual dividend policy and provide an update on our extended share repurchase program. After a thorough review of our operational results, business development plans, capital requirements and cash position, our Board of Directors has approved a semiannual cash dividend policy set to begin in 2025. We expect the total cash dividend for 2025 to be approximately USD200 million. The initial dividend payout is projected to be around USD100 million, translating to USD0.0048 per ordinary share or USD0.096 per ADS. This dividend will be payable on or around April 18, 2025, to shareholders on record as of April 7, 2025.
Regarding our share repurchase program starting from March 2024, we have repurchased an aggregate of 4.9 million ADS for approximately USD40.3 million on the open market. Additionally, in March this year, our Board has approved a further extension of the share repurchase program, allowing for up to USD200 million in additional repurchase through March 12, 2026. These efforts reflect our robust cash position and strong confidence in our business and further developments as well as our commitment to delivering value to our shareholders.
Now moving on to our 2024 fourth quarter and year-end financial results. In the interest of time, I'll be presenting abbreviated highlights only. We encourage you to refer to our press release issued earlier today for complete details.
Our total net revenues for the full year 2024 were RMB11.2 billion, representing a 33.2% increase year-over-year. Net revenues for the fourth quarter were RMB3.2 billion, representing a 31.8% increase year-over-year. Net revenues from freight matching services, including service fees from freight brokerage models, membership fees from listing models and commission from online transaction services were RMB9.5 billion for full year 2024, up 34% from 2023 primarily due to the record growth in our transaction service.
Revenues from freight brokerage service reached RMB4.7 billion for 2024, up 20.7% year-over-year. For the fourth quarter, the net revenue increased by 17% to RMB1.3 billion, primarily driven by an increase in service fee rate, partially offset by a decrease in transaction volume.
Revenues from freight listing service were RMB879.5 million for the full year, up 6.2% year-over-year and rose 7.5% year-over-year in the fourth quarter to reach RMB230.5 million, primarily due to the growing number of total paying members. Revenues from the transaction service amounted to RMB3.8 billion in 2024, representing a 66.7% increase year-over-year.
For the fourth quarter, net revenues amounted to RMB1.2 billion, representing a 71.1% increase year-over-year, primarily driven by increase in order volume, commission penetration and per order transaction service fee.
Revenues from value-added services were RMB1.7 billion in 2024, representing a 29% increase year-over-year. For the fourth quarter, net revenues increased to $469.3 million, representing a 19.8% increase year-over-year, mainly attributable to growing demand from truckers and supply -- and shippers for credit solutions.
For the fourth quarter, our cost of revenues was RMB1,391.7 million compared with 1,152.3 million in the prior year period. The increase was primarily due to an increase in VAT related tax surcharges and other tax costs and net of grants from government authorities. These tax-related costs net of refunds totaled RMB1,278.5 billion representing an increase of 25.9% from RMB1,015.3 million in the same period of 2023, primarily due to an increase in tax costs related to the company's freight brokerage service.
Our sales and marketing expenses in the fourth quarter were RMB471.8 million compared with RMB420 million in the prior year period. This increase was primarily due to an increase in advertising and marketing expenses for user acquisitions. General and administrative expenses in the fourth quarter of 2024 were RMB202.3 million compared with RMB266 million in the same period of 2023. The decrease was primarily due to lower salary and benefits expenses.
R&D expenses in the fourth quarter were RMB205 million compared with RMB255.3 million in the prior year period. The decrease was primarily due to lower salary and benefit expenses resulting from a decrease in headcount. Our income from operations in the fourth quarter of 2024 was RMB835.4, an increase of 233.1% from RMB250.8 million in the same period of 2023. Net income in the fourth quarter of 2024 was RMB574.6 million compared with RMB588.3 million in the same period of 2023.
On the non-GAAP measures, our adjusted operating income in the fourth quarter of 2024 was RMB963.3 million, an increase of 141.6% from RMB398.8 million in the same period of 2023.
Our adjusted net income in the fourth quarter of 2024 was RMB1,052 million, an increase of 43.5% from RMB733 million in the same period of 2023. Basic net income per ADS was RMB0.56 in the fourth quarter of 2024 compared with RMB0.56 in the same period of 2023.
Diluted net income per ADS was RMB0.53 in the fourth quarter of 2024 compared with RMB0.56 in the same period of 2023. Non-GAAP adjusted basic net income per ADS was RMB1 in the fourth quarter of 2024 compared with RMB0.70 in the same period of 2023. Non-GAAP adjusted diluted net income per ADS was RMB0.99 in the fourth quarter of 2024 compared with RMB0.69 in the same period of 2023.
As of December 31, 2024, our cash and cash equivalents, restricted cash, short-term investments, long-term time deposits and wealth management products totaled RMB29.2 billion compared with RMB27.6 billion as of December 31, 2023.
For our first quarter 2025 business outlook, we expect our total revenues to be between RMB2.63 billion and RMB2.68 billion, representing a year-over-year growth rate of approximately 15.9% to 18.1%. This forecast reflects our current and preliminary views on the market and operational conditions, which are subject to change and cannot be predicted with reasonable accuracy as of the date hereof. And that concludes our prepared remarks.
We would now like to open the call to Q&A. Operator, please go ahead.

Question and Answer Session

Operator

(Operator Instructions) Ronald Keung, Goldman Sachs.

Ronald Keung

(spoken in foreign language) We've seen the number of fulfilled orders for the fourth quarter was very strong at 24% plus, even outpacing the third quarter growth rate and exceeded overall freight rate market quite significantly. So I want to hear what are the drivers behind this acceleration in the fourth quarter? And based on the order trends so far the quarter-to-date, how do you view order volume growth for the full year of 2025?

Chong Cai

Thank you, Ronald. Our platform's order volume continue to grow very steadily in the first quarter. That's beyond seasonal tailwinds given the impact of earlier Chinese New Year in 2025. There are 3 key elements, which drove this momentum. And first, we continue to see robust growth in new user acquisitions against the backdrop of rising shipper demand for reduced logistic costs and improve efficiency.
We have adopted a dual approach to optimize user -- new user acquisition and combining precise online marketing with off-line engagement. Online, we focus on boosting app store promotions and targeted ads to improve our conversion rate. In off-line, we expanded brand visibility and reached more target users with truck stickers and TARP ads.
We also ramped up our brand marketing efforts in the fourth quarter by placing billboards in high-traffic locations, such as high-speed rail stations, airports and business districts to connect with direct shippers across multiple touch points.
And thanks to these effective news or acquisition initiatives, our shipper MAU surpassed 3 million for the first time in December last year. And for full year 2024, our average shipper MAUs grew more than 30% year-over-year, accelerate meaningfully from the prior year with direct shippers making up a big chunk of growing share.
Given the relatively low online penetration rate in the long-haul market, we're confident we can continue to expand our shipper user base at a very healthy pace.
Now second, we continue to implement and execute highly effective operational strategies, which help to accelerate auto volume growth. For new users, we focus on improving fulfillment rates for their first 3 trials.
This is achieved by leveraging hands on support from our operations team, offering new users incentives through various benefits and using WeCom or WeChat engagement to enhance both user retention and all the fulfillment. For active truckers, we upgraded our premium cargo bidding function and introduced a dedicated service section with expanded coverage of other types.
In addition, we fine-tuned our other distribution mechanism based on truckers' credit ratings, further improving the fulfillment efficiency in matching mid- to low value freight resources.
And finally, rapid growth in our new user -- new business lines contributed to -- expansion. For example, our less than truckload business, again exhibited very strong growth momentum has fueled by optimized pricing strategies and upgraded matching algos. And these improvements enhanced car pooling efficiency for truckers and leading to a notable increase in LTL orders. And looking ahead, we see even more potential for this business to scale up further.
As we move into the current year, we remain optimistic in other volume growth of the platform regardless of macro challenges, where our full truckload business will continue to deepen online penetration and expand our market share, meanwhile, we also keep refining our product offerings and operational strategies to strengthen our less than truckload and short-haul services and laying a very solid foundation for long-term scalability. I hope that answers your question.

Operator

Brian Gong, Citi.

Brian Gong

(spoken in foreign language) I have a quick question on fulfillment rate. In the fourth quarter, the fulfillment rate further improved to 37.5%, up 5.4% year-on-year and 3% sequentially. What were the key drivers behind this improvement? And what operational strategies were implemented to enhance the procurement rate? And what is your expectation for 2025?

Chong Cai

Thank you, Brian. Our fulfillment rate reached another record high in the past quarter. There are 3 main contributors to this. First, the continuous user mix improvement has laid the foundation for other quality improvement. In the fourth quarter, the other contribution from direct shippers was around -- while it actually hit 50% for the first time in fourth quarter.
By nature, these direct shippers are mainly SMEs, which tend to have more stable demand and prioritized service quality over price. So as a result, they typically contribute to higher fulfillment rates than those professional shippers, such as three PLs and Brokers. And for example, the average fulfillment rate of our entrusted shipment transactions exceeded 60% in fourth quarter.
The subscribers of this program are mainly direct shippers, especially those who newly joined the platform due to the high certainty of the fulfillment. As a result of strong shipper growth, the other volume of entrusted shipment transaction in the fourth quarter grew by over 100% year-over-year, contributing greatly to the overall improvement in our fulfillment rate.
In addition, our precision operation strategies are delivering strong results. For instance, the expanding coverage of premium cargo billing functions further boosted truckers' willingness to respond to others. Our algo-driven precise recommendations more effectively align truckers' preferences with freight source labels.
As a result, the median fulfillment time for truckers dropped to under 10 minutes in fourth quarter. We also implemented additional measures to address duplicate freight listing, including proactively suppressing orders from inefficient professional shippers to prioritize exposure for high-quality orders from direct shippers.
And lastly, the ongoing improvement in supply and demand dynamic also positively impacted our fulfillment rate. Apart from seasonal tailwinds, as mentioned before, our continuous improvement on freight quality led to a steady increase in both the number of truckers responding to and fulfilling orders in the first quarter. Meanwhile, truckers wallet share also rose steadily, enhancing the overall sufficiency of trucker capacity and ensuring greater fulfillment stability.
Moving forward, we expect our fulfillment rate to continue its steady upward trajectory, driven by ongoing upgrades to our direct shipper strategy, our technological capabilities as well as growing trucker ecosystem synergies. And these factors will create a positive cycle between high-quality orders and sufficient trucker capacity and further boosting our fulfillment late.

Operator

Charlie Chen, China Renaissance.

Charlie Chen

(spoken in foreign language) I would like to ask some questions regarding the user membership. What was the growth trend for shipper membership in the fourth quarter? And what is the latest update on the [288] tier mini membership?

Chong Cai

Thank you, Charlie. We reached a milestone at the end of fourth quarter with the number of active shipper members on our platform basically surpassing 1 million, actually 1.5 million to be precise. The key growth drivers of shippers membership were the optimization of our membership tiering system and our targeted subsidy strategies.
So look at our membership system, our 288-Tier Mini membership, which was launched in early 2024 has unleased incremental growth contributing most of our new shipper members this quarter. It is different from the existing 688 and 1688 tier members. The 288 tiers offer fewer shipping benefits, but at a much lower price, effectively lowering the barriers to entry for new shippers and boosting paying member conversions.
This mini membership program is particularly attractive to small- and medium-sized direct shippers as it aligns very well with their early-stage shipping needs as they transition to an online business model.
Additionally, we introduced targeted subsidies for new user purchasing the mini membership as well as returning users who met certain criteria and further reducing the membership cost and allowing shippers to enjoy benefits such as shipment tracking and freight rate discounts, which in turn enhanced overall user engagement on the platform.
Additionally, our operations team is developing a transition model to encourage mini members to upgrade to the 688 tier, closely monitoring the renewal rates and upgrades to inform long-term member strategies that align with user behavior.
On a related note, our gradual conversion strategy for nonpaying users is also progressing steadily. For example, while maintaining the current benefit of 5 free orders per month for existing users, we introduced a 30-day unlimited shipping feature for certain newly registered shippers, and we'll closely monitor the positive impact of these feature on membership conversion.
And looking ahead, we are confident that by continually optimizing our membership products and fine-tuning our operational strategies, we can further expand our paying member base and enhance overall user engagement with us.

Operator

Wendy Zhang, CICC.

Wendy Zhang

(spoken in foreign language) The revenue of the freight brokerage service in the fourth quarter grew by 70% year-over-year beating market expectations. What are the main reasons behind that? And what's going to be the outlook for the business this year?

Chong Cai

Thank you -- the better-than-expected revenue growth for freight brokerage business in the fourth quarter was primarily driven by the increase in service fee rate and that's partially offset by a decrease in transaction volume. We have always maintained a cautious approach to freight brokerage. It is one of our traditional business.
The value proposition for this business has been to improve user retention and engagement by meeting the invoicing needs of high-frequency shippers as they find it convenient and compliant. And since the publication of the fair competition regulatory review last August, we further turned down the scale of this business to adjust to the potential changes on national VAT requirement. As a result, the total transaction value of freight brokerage business declined both year-on-year and quarter-over-quarter in fourth quarter.
Meanwhile, anticipating potential reduction in regional tax rebate, we raised our service fee rates in October last year. By Q4, the overall service fee has increased to about 7% from about 6% a year ago. This strategic adjustment helped to offset the decline in transaction value and then contributing to the year-over-year revenue increase.
By the end of 2024, although we received notification from certain local governments on further tax rebate reductions, our proactive rate adjustments as mitigating measures help to fully offset these negative impacts on margins without major fluctuation compared to previous quarters. As we move to 2025, we remain committed to prudent risk management for this business.
We continue serving high-value shippers while keeping a close eye on potential changes in tech rebate policies. This way, we can ensure stability and sustainable growth for our business while creating value for our users in the long term.
One important note is that while our total revenue growth is expected to moderate in 2025 due to a strategic adjustment in our freight brokerage business, we expect core transaction service business and its revenue to grow at a strong pace. And thanks to our expanding user base, steadily improvements in monetization efficiency and disciplined cost control, plus the operating leverage, we're very confident in achieving over 60% year-on-year growth in adjusted operating profit for 2025.

Operator

Richie Sun, HSBC.

Richie Sun

(spoken in foreign language) My question is about less than truckload business. How did the LTL business progress in fourth quarter? And what are the key differences between LTL carpooling and dedicated line services?

Chong Cai

Thank you, Richie. Our LTL business maintained its rapid growth trajectory in Q4. That's mainly due to our deeper penetration into offline markets and the ongoing optimization of our carpooling features. We have been very focused on solving the timeliness issues that often plate the traditional LTL express and dedicated line logistics like multiple loading and unloading, pickup and delivery -- and the delivery process.
By developing a car putting model that caters to diversified LTL needs, whether it's short to medium distance or large trade volumes, we have been able to streamline processes by offering a single loading and unloading and door-to-door delivery service. As a result, we're not only improving transportation efficiency, but also significantly reducing the risk of cargo damage and gaining market share of shippers.
Looking at our user conversions, the order volume growth in the fourth quarter was mainly from small- and medium-sized direct shippers, over 70% of which migrated from offline LTL dedicated lines and express models based on our survey. Our core advantage lies in our unique door-to-door delivery model and lowering pricing given the massive trucker supply, which is much more efficient than the traditional off-line options.
And during the quarter, our product functionality improvement have further contributed to user growth. For shippers, we introduced a feature that allow them to compare prices between full truckload and less-than-truckload carpooling options making it easier for shippers to see the cost advantage of carpooling.
On trucker side, we have successfully rolled out route -- dedicated route operations along first 10 routes where the number of truckers opting for carpooling was up by almost 10% compared to the broader market.
And going forward, we plan to expand our route operations coverage to further enhance the match and efficiency, which will help us establish stronger operational barriers. We're also exploring opportunities in the LTL dedicated line sector. Right now, we are working closely with LTL dedicated lines to meet their diversified transportation needs and improve the overall shipping experience for our shippers.
And looking ahead, we are confident that our well-established operational know-how in FTL will help us strengthen our advantageous position in the large ticket LTL market. We're also committed to boosting industry's online penetration rate, which will help solidify our competitive edge in the long-haul market.

Operator

Juan Liao, CICIC.

Juan Liao

(spoken in foreign language) My question is, what are the main reasons behind the RMB350 million on the impairment loss in the first quarter? And any guidance for the impairment in the near few quarters?

Chong Cai

Thank you. The impairment loss in the first -- in the fourth quarter was mainly stemmed from our investment in an e-commerce platform that focused on tire sales and aftermarket auto parts supply chain. And that company has been facing ongoing operating losses. The initial investment into that company was made by another team back in 2018 under a different leadership before -- operations were fully integrated.
Regarding our accounting treatment for the investment, we have always adhered to a prudent and standardized principles and regularly assess the most up-to-date situation of invested companies. And based on all this judgment, we believe that the financial conditions of this investment is beyond recovery. So as a result, we made a full impairment provision of RMB350 million in the fourth quarter.
The impairment was one-off. We are not aware of any other situations that would potentially lead to an impairment of investment in the foreseeable future. Looking ahead, we will continue to maintain a prudent approach to investing while strengthening our post-investment management. Our key go through investment is to create synergies to our freight matching business and contribute to the achievement of our long-term vision.

Operator

Thomas Chong, Jefferies.

Thomas Chong

(spoken in foreign language) My question is about our growth strategy. How do we ambition our overall development strategy for this year?

Chong Cai

Thank you, Thomas. We expect the company to maintain steady business growth in 2025 with the year-on-year other volume growth expectation of at least 15%. This growth will be driven by efficient user acquisition strategies and technology, which will deepen the platform's online penetration and further improve operational efficiency across the entire value chain, accelerating the digitalization transformation of the freight industry.
From a financial strategy perspective, our focus will be on optimizing the revenue structure. The proportion of freight brokerage business in the overall revenue mix will be further reduced to ensure that's sustainable development while effectively managing risk.
Meanwhile, leveraging the platform's network effects and technological capabilities, the transaction service business will continue to grow rapidly through economies of scale and enhanced algo recommendations. It will be -- it will become the core engine of our company's revenue growth as a strategic pillar in the profit structure.
This adjustment strategy reflects our proactive management of the business portfolio, ensuring a balance between optimizing the business mix and increasing the share of high-margin businesses. By improving operational efficiency, we aim to significantly enhance the overall profit margin. We believe this flexible yet very robust strategic path will provide shareholders with higher certainty of long-term returns and strengthen our company's leadership position within the industry. Thank you.

Operator

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

Mao Mao

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

Operator

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