ZKH

Ladies and gentlemen, good day, and welcome to ZKH Group Limited's first quarter 2026 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dacy Shi, Head of Investor Relations. Please go ahead, ma'am.

Good morning, and welcome to ZKH's first quarter of 2026 earnings conference call. With me are Mr. Eric Chen, our Founder, Chairman, and CEO, and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements. Related factors are described in our today's press release. We will also discuss certain non-GAAP financial measures for comparison purposes only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead.

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Hello, everyone. Thank you for joining our first quarter 2026 earnings conference call. We entered 2026 with strong momentum, building on the recovery trajectory established in the second half of last year. As our business steadily scaled, the quality of our growth also improved. In the first quarter, both GMV and revenue growth accelerated year-over-year for the second consecutive quarter. GMV returned to double-digit growth, and revenue delivered its strongest year-over-year performance in recent quarters. On the profitability front, our operating quality continued to improve. Gross margin achieved expansion sequentially, reflecting an improving trend. Driven by refined operations, improved organizational efficiency, and the ongoing benefits of operating leverage, adjusted net profit was up 103% year-over-year, marking the first time we have achieved adjusted profitability in the first quarter.

Delivering these solid results during the first quarter, and off-season for the MRO industry reinforces our confidence in achieving double-digit GMV growth and full-year profitability in 2026. From a cash flow perspective, net cash outflow from operating activities narrowed significantly year-over-year, further enhancing our financial resilience. Overall, the strategic initiatives we have implemented over the past several quarters focused on optimizing customer mix and operational efficiency continue to deliver tangible results and position us for steadier, higher quality growth going forward.

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this quarter. Starting with GMV. First quarter GMV increased 12.9% year-over-year, representing a meaningful acceleration compared with both the year-ago period and the prior quarter. Based on current order activity shipment trends, we expect GMV growth to accelerate further in the second quarter. This strong performance was fueled by the continued expansion of our customer base. During the quarter, the number of transacting customers increased 11% year-over-year to 66,000, reflecting the accelerating adoption of online procurement among Chinese manufacturers. This growing customer base provides a solid foundation for our long-term sustainable growth.

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Beyond overall customer growth, we also saw broad-based strengths across customer segments. GMV from SME customers on the ZKH platform increased more than 20% year-over-year. SMEs typically have more fragmented demand and a broader range of procurement needs, making them a strong indicator of our platform's service capabilities. As online procurement adoption continues to deepen among small and medium-sized manufacturers, we believe there is significant room to further increase penetration in this customer segment. We also saw a more pronounced recovery among central SOE customers during the quarter, with GMV returning to double digits year-over-year growth, improving meaningfully on both a sequential and year-over-year basis.

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Performance among our industry key accounts was in line with expectations, with GMV growing more than 20% year-over-year across major verticals, including electrical manufacturing, communications, electronics, new energy, and steel and ferrous metals. We also expanded our presence in emerging sectors such as semiconductors, energy storage, optical modules, robotics, and optical communications, strengthening our customer base among industry leaders in these high-growth markets. The GBB platform also maintained strong momentum, with GMV increasing more than 30% year-over-year. As a key platform serving distributors, resellers, and micro and small businesses, GBB leverages a more standardized e-commerce-driven operating model to expand customer coverage and improve online conversion. More importantly, it creates strong synergies with the ZKH platform, effectively extending our service reach and providing an additional growth driver for the broader business.

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Turning to our international business. We continue to expand both our customer base and geographic footprint during the quarter, delivering robust growth with revenues increasing more than sixfold year-over-year. While continuing to strengthen our end-to-end capabilities to support Chinese manufacturers expanding overseas, we also advanced our local U.S. operations through enhancements in product development, multi-channel sales, and fulfillment. From an operating strategy perspective, we remain committed to high-quality growth with a strong focus on operating discipline and investment efficiency. Our goal for this year is to reach breakeven for our international business. The continued expansion of our customer base and business scale reflects our long-term investments in building core capabilities and the strong execution behind these efforts.

During the quarter, with customer value at the heart of our strategy, we expanded our product portfolio, strengthened our supply chain capabilities, and accelerated AI adoption across business scenarios, further enhancing our one-stop platform service capabilities.

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Starting with product capabilities, we further strengthened our core product offering by sharpening our focus on high-value industries and highly specialized industrial scenarios. During the quarter, we identified 10 priority product lines, including factory automation, electrical automation, pumps, pipes and valves, and cutting tools, and increased resource allocation to support their growth. By improving coordination between production and sales, optimizing bulk procurement, and enhancing specialized operational capabilities, we further bolstered the competitiveness of these key product lines. Taking factory automation, or FA, as an example, we launched the FA Mall during the quarter, a one-stop digital procurement and technical services platform tailored to the automation value chain. The platform offers a broad range of FA components and integrates key capabilities such as intelligent product selection, 3D modeling, and technical support, helping customers address traditional procurement pain points, including complex product selection and high technical barriers.

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As our key product lines continue to advance, we have also deepened customer penetration in core industries. By category, professional and high-precision MRO products such as FA components, industrial lubricants, and chemical reagents all achieved solid double-digit GMV growth, further solidifying our core competitive advantage in highly specialized industrial scenarios. In addition, we continue to strengthen our platform's overall supply capabilities. By the end of the first quarter, the number of sellable SKUs on the platform increased to 27 million, up from 23 million at the end of the prior quarter. Building on this foundation, we further expanded our private label portfolio by accelerating new product development. In the first quarter, we introduced more than 400 new private label SKUs, including innovative items such as lightweight breathable bump caps and anti-static gloves, covering diverse scenarios from personal protection and tools to cleaning and office supplies.

These efforts further enhanced the competitiveness of our private label products and expanded our customer reach. GMV from private label products grew by over 20% year-over-year and accounted for approximately 9.7% of total GMV in the first quarter of 2026.

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On the fulfillment front, we continue to enhance our warehouse network and strengthen last-mile delivery capabilities, further reinforcing our multi-tier operating system. In the first quarter, the capacity of our self-operated fleet continued to grow, improving both delivery coverage and responsiveness. At the same time, our prior investments in warehouse network optimization and automation drove a 36% year-over-year improvement in warehouse utilization efficiency. These end-to-end enhancements across warehousing, transportation, and delivery contributed to a 17% year-over-year reduction in our comprehensive fulfillment expenses for the quarter. Looking ahead, as we continue upgrading warehouse operations and digitalizing fleet scheduling, we believe there is further room to drive down our comprehensive fulfillment cost ratio.

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While continuing to strengthen our product and fulfillment capabilities, we are also actively forging future-proof long-term technological advantages. Guided by our goal of building industry-leading full-stack AI capabilities for industrial supplies, we are systematically deploying AI across key industry use cases.

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At the data layer, we continue to enhance the ZKH Data Dictionary and industry knowledge graph capabilities, improving the structure, interconnectivity, and real-world applicability of industrial product data. We also strengthen data governance through AI-powered data annotation. Together, these efforts have established a stronger data foundation for broader AI applications across our business. In 2026, our goal is to build the industry's first knowledge graph exceeding 100 million industrial product data points and 10 million industry relations. This will further strengthen AI's ability to understand and operate in complex industrial supply scenarios. Taking the request for quote scenario as an example. While many procurement needs can be fulfilled directly through our online platform, quotation workflows remain an important customer entry point. Today, approximately 30% of material matching and product identification tasks within quotation workflows are already handled by AI.

By the end of 2026, we aim to increase the overall AI-powered product identification rate to 70%, with data-intensive product lines such as fasteners, pumps, pipes and valves, and hand tools expected to reach 80%-90%. We believe these advancements will meaningfully improve quotation completion rates, inventory turnover and sales conversion rates.

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At a model layer, our Hangjia Linglong MRO vertical large language model continue to evolve, further improving its ability to understand, reason, and execute tasks in complex industrial supply scenarios. During the quarter, we expanded image-based training to strengthen the model's multimodal capability and officially launched Hangjia Huiyan, the industry's first intelligent visual search engine for MROs. Powered by advanced image recognition, Hangjia Huiyan can rapidly identify material types and specifications and pair them with specific application contexts to deliver intelligent diagnostics and product recommendations. This significantly improves communication and procurement efficiency in complex industrial supply scenarios.

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At the orchestration layer, we are also actively building our MRO AI developer platform by integrating proprietary models and AI tool chains, standardizing advanced AI capabilities, and making them easier for cross-functional teams to access and apply. We also launched our AI for All initiative across the organization, encouraging teams to develop and deploy AI tools tailored to specific business scenarios and accelerating AI adoption across the company. In the first quarter alone, our teams developed and launched more than 60 AI agents and RPA bots, driving meaningful efficiency gains and freeing up more than 2,000 human labor hours per month. Our IT development efficiency also continue to improve. In 2026, we aim to increase our AI code generation rate from approximately 30% today to 80%.

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At the application layer, we have established an integrated AI ecosystem spanning core business functions including merchandising, sales, operations, and customer service. Within this ecosystem, we have developed a diverse portfolio of AI agents such as AI Quotation Assistant, AI Material Manager, and ProductRecom, which are increasingly delivering tangible business value across our operations. In 2026, as we continue to refine and scale these AI applications, we expect AI-driven sales to grow meaningfully.

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As we move through 2026, we will continue investing in product capabilities, fulfillment capacity, and AI innovation, further strengthening our comprehensive service offerings for complex industrial scenarios and reinforcing our long-term competitive advantages. Building on this foundation, we will remain focused on high-quality growth by driving greater operational efficiency and earnings, steadily advancing toward our goal of full-year profitability. I will now turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

Thank you, Eric, and thanks everyone for making time to join our earnings call today. Now let me walk you through our financial performance for the first quarter of 2026. We started the year with solid momentum across key financial metrics. In the first quarter, we delivered accelerated top-line growth, improved operating efficiency, and greatly enhanced profitability. Notably, we achieved a non-GAAP adjusted profitability, marking our first profitable first quarter on an adjusted basis and a meaningful turnaround from the same period last year. These results reflect the improving quality of our growth, increasing scalability of our operating model, and ongoing benefits of strategic initiatives we've been implementing over the past several quarters. Let's now take a closer look at first quarter's financial performance, starting with the top line.

During the quarter, we built on the improving trend established in the second half of last year, with both GMV and revenues accelerated year-over-year for the second consecutive quarter. GMV increased by 12.9% year-over-year to RMB 2.45 billion, while total revenues grew by 9.2% year-over-year to RMB 2.11 billion, both representing our strongest quarterly growth in recent periods. This performance was supported by the continued expansion of our customer base and stronger platform engagement. Our earnings profile also strengthened during the quarter, supported by improved operating leverage and ongoing efficiency gain. Gross profit increased by 6.6% year-over-year to RMB 354 million, while gross margin moderated slightly year-over-year from 17.2%-16.7%. Our underlying margin trends improved sequentially, with GMV-based gross margin increase by 90 basis points. Going forward, we will continue to improve business quality through three priorities.

A more balanced customer and product mix, high contribution from private label products, and greater supply chain efficiency. On operational efficiency, we maintained strong cost discipline while continuing to invest in capabilities that support our long-term growth. Total operating expenses decreased by 8.8% year-over-year to RMB 376.5 million, representing 17.8% of net revenues, compared with 21.3% in the same period last year. Breaking this down, fulfillment expenses decreased by 16.8% year-over-year to RMB 77.6 million. Sales and marketing expenses remained relatively stable at RMB 137.6 million. R&D expenses decreased by 25.9% year-over-year to RMB 29.3 million. General and administrative expenses decreased by 7.9% year-over-year to RMB 131.9 million. These improvements reflected continued reinforcement of our operating model, enhanced organizational efficiency, and more disciplined resources allocation.

During the quarter, GMV per effective employee increased by over 20% year-over-year, reflecting a meaningful improvement in our workforce productivity. In addition, as we mentioned earlier, we continue to optimize our overseas business strategy with a stronger focus on operating quality and investment efficiency. This contributed to lower overseas-related spending and further improvement in our overall expense structure. These efficiency gains translated into significant improvements in profitability compared to the same period last year. Operating loss narrowed by 72.2% to RMB 22.5 million, with operating loss margin improving to negative 1.1% from -4.2%. Non-GAAP EBITDA turned positive at RMB 4.2 million compared with -RMB 52 million in the prior year period, with margin increasing to +0.2% from -2.7%.

Most notably, we achieved a non-GAAP adjusted net profit of RMB 1.7 million, compared with non-GAAP adjusted net loss of RMB 50.2 million in the same period last year. This significant turnaround reflects the combined impact of top-line recovery, improved operating efficiency, and further operating leverage. Turning to balance sheet. We maintained a healthy liquidity position. As of March 31st, 2026, our cash and cash equivalents, restricted cash, and short-term investments totaled RMB 1.84 billion, providing us with ample financial flexibility to support our business operations and strategic priorities. Operating cash flow also improved meaningfully year-over-year. Net cash used in operating activity was RMB 34 million in the first quarter, compared with cash outflow of RMB 97.1 million in the same period of 2025, reflecting continued improvement in our working capital management.

To recap, the first quarter marks a strong start to 2026, with further accelerated top-line growth, continued improvement in operating efficiency, and substantial gains in profitability. Notably, we achieved our first non-GAAP adjusted net profitability in the seasonally soft first quarter. Looking ahead, our focus remains on high-quality growth and disciplined execution. This concludes our prepared remarks. Thank you. We would now like to open the call for the questions. Operator, please go ahead.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. 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 star then two. 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. Again, it is star then one to ask a question. The first question comes from Liu Chang with Deutsche Bank. Please go ahead.

Let me translate myself. Thank you management for taking my question. The first quarter, the company's gross margin improved quarter-over-quarter, but it still declined year-over-year. Could management share your view on the long-term trend of gross margin? What factors could constrain further improvement in gross margin? What action has the company taken to improve gross margin? Thank you.

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Thank you for the question. I will take this question from 3 parts. Namely, category mix, customer mix, and private labels. For category mix, we have lots of SKUs and product lines, things are quite fragmented. The gross margins of different products vary greatly. For some product lines, gross margins are lower, but the growth for their gross profits and the GMV is relatively fast. In the short run, they might drive down the overall gross margins. If they're able to still drive customer penetration, extend our supply capabilities, and contribute to the growth of our absolute gross profit, then there's still value in operating those categories. At the same time, some MRO products' gross margins and gross profits are going up simultaneously. Especially for our advantageous product lines.

By that I mean things like PPE or personal protective equipment, cleaning, OEM fasteners, handling and storage and security, et cetera. These categories are reflecting better profit conversion efficiency, so to speak. As these high-quality product lines are taking a higher share out of the entire portfolio, this will be conducive to improving our overall gross margin structure. Please translate.

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In terms of your question about Q1 being lower year-over-year, it was primarily due to the gross margin drop in categories including diesel, transformer oil, and silicon photonics wafers, and that has driven down our gross margin. Overall, our gross margin is pretty solid.

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For my second point about customer mix, usually the gross margin for SME customers are higher than key accounts or large customers. The share of the GMV on the part of the SME customers, that trend will impact the trend of our overall gross margins. Currently, SME customers' GMV accounts for about 30%+ of the total, while key accounts GMV accounts for about 60%. The SME customers are growing at 20% GMV-wise. From a customer mix perspective, our gross margin is improving. Please translate.

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In terms of private labels, gross margins for private labels are typically higher than non-private labels. That trend will also impact the overall gross margin trend. Private label GMV currently accounts for 9.7%, and our long-term goal for it is to reach over 30%. In terms of managing gross margin, we will not pursue the maximization of a single product or a single quarter for the gross margin to maximize, but we care more about the improvement of our overall supply capabilities, the deepening of our customer reach, and the growth of our absolute gross profits. We understand how gross margin across different product lines varies by a lot. The adjustment and changes to product portfolio for different stages of our development will impact overall gross margin.

Our long-term goal is to drive gross profits continuously by way of advantageous product lines, private labels, and the optimization of customer mix and improvement of our purchasing efficiency.

Are you ready for your next question?

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Yeah, go ahead.

The next question comes from Jing Wan with CICC. Please go ahead.

[Non-English content]. I will translate myself. We noticed that high tech manufacturing, such as communication electronics, auto manufacturing and equipment manufacturing, accelerated its growth in the first quarter and April.

Could management share more about whether we are seeing similar trend and how is our performance in these sub-sectors? Any initiatives has been introduced to expand our market share in this sector. Thanks.

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Thank you for the question. Indeed, we have seen how players in the advanced manufacturing sector buying more in terms of MROs, and these include sectors like electrical manufacturing, communication, electronics, alternative energy or new energy, and non-ferrous metals. The GMV for the aforementioned sectors all achieved a year-over-year growth of over 20%. For semiconductors, energy storage, optical modules, robotics and optical communication, these emerging sectors, we are accumulating more and more customer resources. Other sectors that have been growing relatively fast are steel. Specifically for steel and non-ferrous metal, if we look at the daily average order volume January through April, this metric has grown 100% for steel and non-ferrous metals. For the same metric, basically daily average order volume January through April, grew by 45% for communication electronics, and 33% for alternative energies. Refined chemicals, pharmaceuticals, electrical manufacturing have all grown very quickly.

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In terms of the measures we are taking to improve our sector penetration and our share, we did 3 things. First is we have formed a sector-specific sales forces to target these customers in these specific sectors. Secondly, we are building out sector-specific commodity pool and a customer-specific commodity pool for these sectors. In order to embrace the growth in robotics and smart products, we have launched the FA or Factory Automation Mall as was alluded to in the prepared remarks. That was my answer to this question. Thank you.

The next question comes from Brook Wang with CITIC. Please go ahead.

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Based on you mentioned before, the company's overseas business revenue increased by 60% year-over-year in the first quarter. Could you please introduce this year's strategy for the overseas business? Thank you.

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Thank you for that question. Yes, indeed. For the first few months of this year, we not only achieved the year-over-year growth, we also achieved month-over-month growth. Two things about overseas business. Firstly, we are primarily serving Chinese companies going abroad. We will be relying and leveraging our existing customer relations with those Chinese customers to drive more overseas orders. We will also strengthen our last mile fulfillment capabilities when it comes to serving the different geographies overseas. Secondly, localized operations in America is extremely important to us. We will be more focused, more laser focused in our business there. Specifically, we will be focusing on providing the categories needed for warehousing operations. We will get that done well before we branch out into other SKUs and categories.

Overall, when it comes to developing and expanding our business in overseas markets, we will focus more on the efficiency and returns of our investments and spend, and we would not spend ahead of time. Our goal is to try to break even for overseas business this year. That concluded my answer to this question. Thank you.

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

Thank you once again for joining us today. You can find the webcast of today's call on ir.zkh.com. If you have any further questions, please feel free to contact us. Our contact information can be found in today's press release. Thank you and have a great day.

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

Ladies and gentlemen, good day and welcome to ZKH Group Limited's fourth quarter and fiscal year 2025 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jin Li, Head of Investor Relations. Please go ahead, ma'am.

Good morning and welcome to ZKH's fourth quarter and full year 2025 earnings conference call. With me are Mr. Eric Chen, our founder, chairman, and CEO, and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements. Related factors are described in our today's press release, and we will also discuss certain non-GAAP financial measures for comparison purpose only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead.

Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. Throughout 2025, we advanced our strategic optimization efforts while strengthening core capabilities across product offerings and technological innovation.

As these initiatives took hold, we began to see clear signs of stabilization and recovery in the second half of the year. Both GMV and revenue largely recovered to prior year levels in the third quarter, then accelerated into solid year-over-year growth in the fourth quarter. At the same time, our earnings quality continued to strengthen. We successfully returned to profitability in the fourth quarter, with an adjusted net profit of RMB 14.8 million, and achieved half-year break-even for the first time. Our cash flow profile also strengthened meaningfully. We recorded positive operating cash flow in both the fourth quarter and full year 2025, further enhancing the resilience and flexibility of our financial position. These results signal that we have moved past the transitional effects of strategic optimization and entered a healthier, more resilient phase of development.

Now let me walk you through some of the business highlights in the fourth quarter. At a fundamental level, our growth foundation has continued to strengthen. In the fourth quarter, overall GMV grew 8.5% year-over-year and approximately 11% sequentially. Based on order pipeline and shipment trends, we expect year-over-year GMV growth to accelerate into double digits in the first quarter this year. A key driver of our GMV growth was the continued expansion and deepening of our customer base. In the fourth quarter, the number of transacting customers approached 74,000, representing a year-over-year increase of 60%, the fastest quarterly growth in recent years. By customer segment, GMV from both key accounts and SME customers on our ZKH platform maintained year-over-year growth during the quarter.

大客户方面，国内千强制造业集团我们已经覆盖了680余家，多个重点行业大客户GMV均呈现良好增长态势。例如电气装备制造、化工、钢铁有色以及交通运输行业的客户，同比增幅均超过了20%。值得一提的是，部分此前受业务优化调整影响的央企客户在本季度也出现了显著的恢复，相关客户GMV同比重回增长期间，并实现超过20%的环比增长。 Among key accounts we have now covered over 680 of China's top 1,000 manufacturers with several core industry verticals delivering particularly strong momentum. Specifically GMV from customers in electrical equipment manufacturing, chemicals, steel and non-ferrous metals as well as transportation increased by more than 20% year-over-year. Notably, certain SOE customers previously affected by strategic optimization showed clear recovery with GMV returning to year-over-year growth and expanding by over 20% sequentially.

中小客户方面，业务增长势头强劲，四季度GMV同比增长超20%。这主要得益于我们区域化服务网络的持续下沉，线上数字化营销能力的不断强化，以及AI工具在客户识别、需求匹配和转化率上的有效赋能。中小客户、中小企业客户的快速扩张，不仅进一步增强了公司的增长动能，也有助于改善公司的整体盈利结构。随着这一客户群规模的持续扩大，未来有望为公司整体增长和盈利水平的提升提供有力的支撑。 Among SME customers, growth momentum remained strong, with GMV increasing by more than 20% year-over-year in the fourth quarter. This growth was primarily driven by the continued expansion of our regional service network, the strengthening of our digital marketing capabilities, and the broader application of AI tools that enhance customer identification, demand matching and conversion efficiency. Beyond reinforcing our growth trajectory, rapid SME expansion also contributes positively to our margin profile. As this segment continues to scale, we believe it will become an increasingly meaningful driver of both our overall growth and margin expansion.

在海外方面，四季度在服务中国制造业出海这业务方面，我们取得了较为显著的阶段性成果。环比来看，相关业务GMV增长约50%，客户数增长约20%。履约交付网络已拓展至十七个国家。而我们将继续推进海外业务布局，深化本地服务能力，持续拓展海外市场版图。客户基础的深化与业务规模的提升离不开公司供给侧能力的持续打磨和系统性构建。四季度，我们围绕品类、品牌、供应商生态以及旅游网络，持续夯实平台的产品与交付能力，提升平台的一站式服务能力，并为公司盈利能力的逐步优化奠定了坚实的基础。 Internationally, we made encouraging progress. Sequentially GMV from this business grew by approximately 50%, while the number of customers grew by around 20%. At the same time, our fulfillment network continued to expand and now covers 17 countries. Looking ahead to 2026, we will advance our international strategy by deepening localized service capabilities and further expanding our global footprint. Underpinning this customer and market expansion is the systematic bolstering of our supply side infrastructure. During the quarter, we enhanced our platform ecosystem across product assortment, brands, supplier partnerships and fulfillment network. These efforts reinforced our product competitiveness and fulfillment capabilities, enabling us to deliver a truly one stop procurement solution while supporting profitability improvement over time.

首先，在品类建设上，我们持续打磨产品，坚持深度参与产品竞争力的长期打造，深耕场景化行业标准化产品。截止2025年底，平台SKU数量增至两千三百万，较去年底增加33%。主要增加的为专业硬核的MRO品类，例如工厂自动化、化学试剂、仪器仪表等产线。从产品结构看，我们持续深耕备品备件、化学品和加工制造等高壁垒硬核的MRO品类。四季度，传动设备、仪器仪表、化学试剂等多个专业品类GMV同比增速均超20%。 Starting with product assortment, we continued to strengthen our category capabilities by building long-term competitiveness in scenario-driven and standardized solutions. By the end of 2025, the number of SKUs on our platform had expanded to 23 million, up 33% from the end of 2024. This growth was primarily concentrated in highly specialized MRO categories such as factory automation, chemical reagents, and instrumentation. From a product mix perspective, we further deepened our presence in technically demanding high entry barrier MRO segments such as spare parts, industrial chemicals, as well as processing and manufacturing components. In the fourth quarter, we saw over 20% year-over-year GMV growth in several professional categories, including power transmission equipment, instrumentation, and chemical reagents. These results further strengthen our moat in the specialty MRO supply market.

Our private label product business saw continued expansion in the fourth quarter, with the launch of 349 new SKUs. For the full year, private label GMV rose 21% year-over-year, increasing its contribution to total GMV from 6.7% in 2024 to 8.3%. We remain committed to our long-term strategy as we steadily work toward our goal of 30% GMV share. Private label products do more than just provide customers with high quality alternatives at a compelling value. They're also essential to building customer loyalty, enhancing supply chain control, and optimizing our overall product mix. Over time, we expect this business to become a meaningful driver of our margin expansion. Turning to our supplier ecosystem. We had established partnerships with nearly 20,000 suppliers by the end of 2025.

Building on this foundation, we also established strategic partnerships with multiple leading brands and industry players on a deeper level, expanding relationships beyond simple transactions into broader collaborations across supply chain, data, and market development to build a truly integrated industrial services ecosystem. On the fulfillment front, we further strengthened our warehousing and end-to-end delivery network. Our multi-tier fulfillment infrastructure now comprises 30 distribution centers, over 100 transit warehouses and a self-operated fleet of over 200 delivery vehicles, further enhancing our last mile delivery capabilities. At the same time, our operational efficiency improved significantly. During the quarter, our through warehouse fulfillment cost declined by around 13% year-over-year, marking this the 8th consecutive quarter of double-digit reductions. Warehouse labor productivity and space utilization at our distribution centers also increased by around 20% year-over-year. Bringing our operational efficiency to industry leading levels.

As we continue to optimize our warehouse network and in-warehouse operations, we expect our through warehouse fulfillment costs to improve further this year.

在持续强化供给能力的同时，我们积极推进AI及数字化能力建设，全面赋能供应链各环节向更高效、更智能的方向不断升级。四季度，我们围绕数据底座、行业模型、场景落地持续深化布局，推动AI能力从技术创新。公司总数据资产规模持续扩大，目前已达到PB级别。随着AI应用在公司的全面推广，以及AI coding在研发团队的普及，2025年token调用量翻倍，目前月调用规模超过八百亿。AI推理能力、应用深度和自动化水平显著提升。我们预计未来两到三年token调用量将实现至少十倍的增长。与此同时，我们平均每百万token的成本正逐年下降。随着数据专业性和完整性的持续提升，AI在智能询报价、精准定品和定价优化等关键业务场景中的能力也显著增强。 While continuing to strengthen our supply side capabilities, we have also been strengthening our AI and digital capabilities to make our value chain more efficient and intelligent. During the quarter, we deepened our AI strategy across three layers, data infrastructure, industry-specific models, and scenario application. These measures are accelerating the translation of AI innovation into scalable business value creation. At a data layer, we have made significant strides in building our proprietary data foundation through the ZKH Data Dictionary, with total data assets expanding to the petabyte level. As AI applications were deployed more broadly across our operations and AI coding tools became increasingly integrated into our R&D workflow, total token consumption doubled year-over-year in 2025. Monthly usage now exceeds 80 billion tokens. This reflects the increasing depth of AI inference, broader application scope, and greater automation across our platform.

Looking ahead, we expect token usage to increase by at least tenfold over the next two to three years. At the same time, our average cost per million tokens continues to decline on a year-over-year basis. As the depth, specialization, and integrity of our data assets continue to improve, our AI capabilities across key operational scenarios have also strengthened significantly. In particular, we are seeing notable performance improvements in areas such as intelligent RFQ processing, precise product identification, and pricing optimization.

在行业大模型层面，2025年我们推出行业首个MRO垂直大模型行家玲珑，并于九月完成国家网信办备案。目前该模型已进入规模化应用阶段，并在专业工业场景中展现出显著优势。在应用落地层面，AI正加速融入我们的核心业务流程，持续强化平台业务能力与服务效率。 At a model layer, we launched H-Nimble in 2025, the industry's first large language model purpose-built for the MRO sector. The model completed regulatory filing with the Cyberspace Administration of China in September and has since begun scaled deployment. In specialized industrial settings, H-Nimble is already demonstrating clear advantages in handling complex professional MRO scenarios. At the application layer, AI is increasingly embedded into our core business processes, strengthening both our platform capabilities and service efficiency.

在对外服务上，AI已在多个关键业务环节实现显著的价值落地。例如在物料管理环节，AI物料管家已累计帮助近万家客户完成超过1,500万行的物料梳理。过去每千行物料梳理平均需要约15个人天，如今AI仅需要约3分钟即可完成。在选型推荐上，AI推品大脑提升供需匹配与转化效率，2025年累计服务客户数超过3万家，创造销售额超过2亿元。 For customer facing services, AI is already delivering tangible value across several key operational scenarios. For example, our AI material management agent has helped nearly 10,000 customers organize and standardize more than 15 million lines of material data. Previously, processing 1,000 lines of material data required roughly 15 person days of manual work. Today, AI can complete the same task in roughly three minutes. In product selection and recommendation, our AI product recommendation agent has improved supply demand matching and conversion efficiency. In 2025 alone, this agent served more than 30,000 customers and generated over RMB 200 million in sales. Internally, we are accelerating the deployment of our AI smart workbench and RPA digital workforce at scale, building a more intelligent and highly automated operational infrastructure.

By the end of 2025, the number of RPA digital employees had exceeded 5,000, already surpassing the size of our full-time workforce and becoming a key pillar of our intelligent operations framework. Over the course of the year, these digital employees helped save nearly 1 million man-hours. At the same time, our AI Smart Workbench has significantly reduced the need for manual cross-system operations. This is driving a fundamental shift in our business as we move from high-touch to low-touch workflows. In 2025, the AI Smart Workbench autonomously executed more than 520,000 system operations, delivering substantial productivity gains in process-intensive roles. For example, our productivity in customer service and procurement increased by approximately 45% and 50% year-over-year, respectively, improving labor cost efficiency in these functions.

In 2026, we expect the AI Smart Workbench to further enhance the ability of our AI agents to understand and execute increasingly complex business processes. This will continue the evolution of our operating model from a low touch to a no-touch model, unlocking further operational efficiencies and providing a stronger foundation for our scalable growth. Looking ahead, we'll continue to build on our core strengths in products, supply chain, and AI. This will further reinforce our long-term competitive advantages as we work to establish ZKH as the trusted infrastructure for industrial MRO procurement. At the same time, we'll focus on improving the quality and efficiency of our core business, enhancing our organic growth drivers, and further optimizing our customer mix and cost structure, positioning us to achieve full year profitability in 2026.

Now, I'll turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

Thank you, Eric, and thanks everyone for making time to join our earnings call today. I'm pleased to walk you through our financial performance for the fourth quarter and full year 2025. We concluded the year with strong momentum across key financial metrics. In the fourth quarter, we delivered accelerated top line growth, improved operational efficiency and achieved a return to profitability. These results reflect the improvement of our core business fundamentals and the growing benefits of business optimization we've implemented over the past several quarters. Let me begin with our top-line performance. In the fourth quarter, we generated solid year-over-year and sequential growth, signaling strengthening momentum in our business and robust market demand. GMV grew by 8.5% year-over-year, and 11.3% sequentially to RMB 2.92 billion.

While total revenues grew by 7.9% year-over-year and 9.8% sequentially to RMB 2.56 billion. This performance was supported by the continued expansion of our customer base, as well as our enhanced product offering and fulfillment capabilities. For the full year, GMV declined by 3.3% year-over-year to RMB 10.1 billion, primarily due to the impact of strategic optimization that continued to weigh on results in the first half of the year. The company's operation performance showed clear signs of inflection points in the second half of 2025. Total revenues increased by 2.6% year-over-year to RMB 9 billion. Turning to our margin profile.

Gross profit margin in the fourth quarter was 15.5% compared with 17.1% in the same period last year, primarily reflecting temporary unfavorable change in product mix. That being said, the underlying drivers of our long-term margin expansion remained well in place. The ongoing growth of our high margin SMB customers and private label products provides a structural tailwind for our margin profile. In addition, our continued progress in procurement efficiency and supply chain capabilities is expected to further support gradual margin improvement over time. For the full year, gross profit margin was 16.4% compared with 17.2% in 2024. The decrease was mainly due to a lower contribution from our marketplace model, which carries 100% gross profit margin under the net revenue recognition basis.

However, on our GMV basis, our gross profit margin improved by roughly 15 basis points year-over-year to 14.6%. Notably, gross margin for GBB platform increased by 98.6 basis points year-over-year to 6.5%. Meanwhile, the take rate of marketplace model rose by 57.4 basis points year-over-year to 13.1%, highlighting continued monetization improvement across our platform ecosystem. On operational efficiency, we generated solid operating leverage in the fourth quarter as cost efficiency continued to improve with scale and AI applications. Total operating expenses decreased by 3% year-over-year to RMB 424.6 million and decreased to 16.6% of net revenues, compared with 18.5% in the same period last year.

For the full year, total operating expenses declined by 8.7% year-over-year, while operating expenses as percentage of net revenues improved to 18.8% from 21.1%. These operational efficiency gains translated into meaningful improvements in profitability. In the fourth quarter, operating loss narrowed by 13.4% year-over-year to RMB 28.2 million, with the margin improving to -1.1% from -1.4%. Non-GAAP EBITDA turned positive at RMB 19.7 million, compared with a loss of RMB 13.3 million in the prior year period, with the margin improving by roughly 133 basis points.

Most notably, we achieved a non-GAAP adjusted net profit of RMB 14.9 million in the fourth quarter, representing a very significant turnaround from a non-GAAP adjusted net loss of RMB 50 million in the same period last year. For the full year, operating loss narrowed by 37% year-over-year to RMB 213.3 million, with the margin improving to -2.4% from -3.9% in 2024. Non-GAAP EBITDA improved by 58.9% to RMB -79.3 million, with margin improving to -0.9% from -2.2%. Adjusted net loss narrowed by 46.1% year-over-year to RMB 85.9 million, with margin improving to -1% from -1.8%. Turning to our balance sheet and cash flow.

We maintained a strong and healthy cash position. As of 31 December 2025, our cash and cash equivalents restricted cash and short-term investments totaled RMB 1.92 billion. This provides us with ample liquidity to support ongoing operations and strategic initiatives. Operating cash flow also improved sequentially. In the fourth quarter, net cash generated from operating activities reached RMB 116.1 million, reflecting improved operating performance and disciplined working capital management. In closing, 2025 marks a year of meaningful financial and operational progress for the company, which strengthened our financial fundamentals, improved operational efficiency, and significantly narrowed loss while continuing to invest in capabilities that support long-term growth. As a result, we returned to profitability in the fourth quarter and closed the year with stronger operating leverage, renewed growth momentum.

Our operational model today is structurally more resilient, supported by enhanced product and supply chain capabilities, a more disciplined cost base, and deeper integration of AI across our operations. Looking ahead, our strategic focus remains clear. Continue to drive high-quality growth, expand margins, and maintain disciplined execution as we advance towards sustainable profitability. Thank you. I would now like to open the call for Q&A. Operators, please go ahead.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. 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 star then two. 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. The first question comes from Liu Chang with Deutsche Bank. Please go ahead.

I'll translate myself. Thanks management for taking my questions and congratulations on the robust 4Q results. My question is about gross margin. We noted a decline in the gross margin year-over-year in Q4. Could management please explain the reason behind this? Additionally, will the long-term goal and the trend for improving gross margin be affected? Thank you.

好嘞，谢谢。第四季度毛利率的变化，大致有两个方面的原因。第一个原因，是产品结构的变化。这个主要的影响，是因为有些大众原材料价格波动以后，有些客户会提前加大一些产品的采购。比如说电线电缆，大家都知道铜涨价了，那有些客户就会加大提前购买这些产品，而这一类的产品的毛利率都是偏低的，就会拉低整个公司的产品的毛利率，当然包括电线电缆、包括白油等等，有这样几个产品。那第二个稍微有点影响，就是我们央企客户的增长占比稍微有点上升，这也是一部分的影响。但是我们到了今年的一、二、三月，这三个月来看，我们的毛利率还是有逐渐恢复的这个趋势的。当然现在整个市场上，随着石油的影响，又会有新一波的波动，会有一定的影响，包括供应商涨价等等。这个东西是双刃剑，短期来讲可能有一点下降的影响，但稍微长远看，我们从销售的规模或者是毛利率，还有提升的机会，这是今年因为中东战争一个特殊的情况吧。那总的来讲，我们认为全年来讲，毛利率各条产线的毛利率的提升是我们的固定的目标，并且也在朝向这个目标在努力着。无论通过规模采购的降本，还是通过自有品牌，还是围绕行业的产品降本来实现这个目标，这是一个既定的目标。但另外一点，我们要看到什么呢？不同的产线之间的毛利率实际上它是不一样的，因为有的产线的毛利率会更高，有的产线的毛利率更低。那我们更加关注的是总体的盈利能力的提升，这是我对这个问题的回答。 Thank you very much for that question. To answer your question, the Q4 changes, the gross margin changes in Q4 was primarily caused by two things. First is the change in product mix. As we know, there have been changes and fluctuation in the commodity prices and that had led to some customers pulling ahead the purchasing of certain products. For example, wires and cables, right? Wires and cables use copper, whose pricing has been rising. The gross margin for these products tend to be lower, and that have driven down the overall gross margin. The similar products include things like white oil, and stuff like that.

Secondly, the percent of or SOE customers as a percent of total customers, in terms of their business value and volume has increased slightly. If you look through our gross margin, January through March this year, things have been improving gradually. Of course, because of the war that's ongoing in the Middle East, there's now price hikes regarding oil, petroleum. Suppliers are jacking up their prices. Of course, that's that needs to be considered as a double-edged sword, as even though on the short run, it's gonna put some downward pressure on our gross margins. In the long run, it's gonna provide opportunities for more sales and more expansive or expansion opportunities.

For the full year, if you look across all of our production lines, our goal is definitely to achieve higher margins by way of lowering costs on three different fronts, namely purchasing, private labels and cost optimization regarding certain sectors. We need to understand that gross margin, gross profit margins vary from product line to product line. What we care most about is the overall profitability, and we will try to drive that up over time. That was my answer to this question. Thank you.

Thank you. Are you ready for your next question? The next question comes from Jin Wan with CICC. Please go ahead.

Well, I will translate myself. The company's private label achieved 20% growth in this year, increasing its share to 8.3%. Could management please introduce the company's growth targets for private labels this year? Additionally, as the company sell more private label products, how does the company manage relationship and communication with non-private label suppliers? Thanks.

Sure. Private labels are extremely important for us. It's an extremely important driver for us. Our target for private labels in 2026 is for it to grow by another 30%. We started investing in private labels. We doubled down on our investments into private labels last year. Our goal is to drive its share of our GMV to roughly 10% for this year, 2026. As for our relationship with non-private label suppliers, of course. First off, we won't do private labels for all categories. We were looking to categories. We will comb through all categories to identify the ones where we could provide better value by doing private labels on. For those categories, we will have a private label version of those categories.

If you look across history and globally, whenever a platform grows to a certain size, private labels will emerge and some of the categories will shift and migrate towards private labels. That is a great appeal to the business we are in. As we scale, both private labels and branded products will coexist and thrive. I think driving up the share of our private labels as a percent of our GMV is an important strategy for us. As you know, offering certain kind of a certain degree of competition against our suppliers will definitely drive up customer satisfaction and create more value for our customers. Customer satisfaction, in my opinion, trumps all the other factors.

Okay. Was there a follow-up or was that the answer for the question? Thank you. The next question comes from Shen Qiang with CITIC. Please go ahead.

I'll translate my questions. Could you please introduce the company's most important objectives for this year as well as the growth targets and the strategies for China domestic business? Thank you.

Sure. The most important objective for us in 2026 is to achieve full-year profitability, as alluded, in the prepared remarks. Meanwhile, we'll—we will continue to build out our core competencies to lay a firm groundwork for future development. There's three aspects we will try to push for in order to achieve these two-pronged objectives. Firstly, we will continue to create value by digging into our product competencies or to make our products more competitive. Basically, to offer better products at lower prices.

Secondly, for our medium to large customers, we will continue to dig deeper, resolving their needs, so as to drive up their wallet share with us, as well as gross profit margins. On the customers front, aside from serving key accounts well, we will be systematically doing business development with SME customers and expand our base of SME manufacturers. Specifically, we will be focusing on doing online and offline ad campaigns, content marketing, and you know, brick-and-mortar offline promoters kind of thing to expand that coverage. That's what we're gonna focus on this year. We will also accelerate the expansion of the overseas markets, especially when it comes to serving well Chinese manufacturers that are going abroad, because this trend is only accelerating and we will need to take advantage of that very well.

Secondly, in order to ensure profitability, we need to first and foremost, focus on the product side of things. Let me backtrack a little bit. We need to improve the quality of our business and there's two things specifically that we will need to be doing. Firstly, as was alluded to in the prepared remarks, we need to focus on what we believe is the real MROs, what we're referring to as highly specialized MRO products. Specifically through the synergy between sales and production lines, we will need to improve the quality of our customers. What I mean by that is to turn low gross margin, gross profit margin customers into higher gross profit margin ones.

Secondly, we need to do a good job managing our cash flow and continuously optimize our account receivables and inventory management, and maximize our operational efficiency to achieve better quality of operations.

两方面，一个方面是关于MRO产品的。我们充分利用好我们的太仓的研发中心和深圳的昆桐的生产的基地，做好产品的创新和研发和测试，这是一个方面的内容，提升我们的MRO产品的竞争力。那另外一方面呢，我们要持续关注，加大，适当的加大投入在数据方面，AI的研发方面。我们希望今年呢有更多的AI的产品落地应用，成为我们的新的一个增长点。请翻译。Thirdly, we will continue to expand our R&D capabilities and focus on innovation.

On the product front, we will be fully leveraging our R&D center in Taicang and have that work in tandem with our production base in Shenzhen to do continuous R&D and testing, so as to make our MRO products more competitive. We will also continue to pay attention to the data space and the AI R&D space. We are looking to get more AI products developed and materialized this year so as to achieve a new source of growth.

最后呢是关于团队建设，因为长期的发展离不开更好的团队的建设。我们团队的建设在过去一年有了比较大的提高，各个方面的建设。我觉得今年还是在针对某些环节呢有进一步提升的空间，这是我们需要做的。真正能够做到我们的团队呢是训练有素、士气高昂。另外一方面呢，我们也在研究在不同区域、行业、不同的业务层面的人员的布局，把我们有效的资源呢投入在更加重要的产出更高的这个方面去，这也是我们目前在做的工作。好吗？这是我对这个问题的总体的回答。Last but definitely not the least, is team build-out.

Because a strong team, a competent team is essential to our sustainable growth. We made quite a bit of progress last year, but there's still more room for improvement. Our goal is to build a team with high-quality talent and with a very high morale. We will also be looking at how we distribute our personnel across different industries and geographies so as to focus our resources on the most profitable and the most efficient areas. That was my full answer. Thank you.

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

Thank you once again for joining us today. You can find the webcast of today's call on ir.zkh.com. If you have any further questions, please feel free to contact us. Our contact information can be found in today's press release. Thank you and have a great day.

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