ZKH

Image source: The Motley Fool. Friday, Aug. 21, 2026 at 7:00 a.m. ET Founder, Chairman and Chief Executive Officer - Eric Chen Chief Financial Officer - Jerry Wang Chief Technology Officer - David Liu Head of Investor Relations - Daecy Xu Need a quote from a Motley Fool analyst? Email [email protected] Operator: Ladies and gentlemen, good day, and welcome to ZKH Group Limited Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Daecy Xu, Head of Investor Relations. Please go ahead, ma'am. Daecy Xu: Good morning, and welcome to ZKH Second Quarter 2026 Earnings Conference Call. With me are Mr. Eric Chen, our Founder, Chairman and CEO; Mr. Jerry Wang, our CFO; and Mr. David Liu, our CTO. Eric will begin with an overview of our quarterly performance and business strategy, followed by Jerry, who will review our financial highlights. After the prepared remarks, we will open the call for Q&A, and David will join us for a Q&A session. Today's discussion may include forward-looking statements. Related factors are described in our today's press release. and we'll 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. Long Chen: [Interpreted] Hello, everyone. Thank you for joining ZKH Second Quarter 2026 Earnings Call. Building on the strong start to the year, our business gained further momentum in the second quarter, extending the growth trajectory that we reached in the fourth quarter of last year. Both GMV and revenue grew year-over-year for a third consecutive quarter posting their fast growth in recent quarters. Growth was broad-based with our key industries and core customer segments, further reinforcing our foundation for sustained growth. As our business continues to scale, the quality of growth and profitability improved in tandem. Gross profit grew faster than GMV in the quarter lifting gross margin both year-over-year and sequentially. Supported by greater economies of scale, a more favorable customer and product mix and steady gains in operating efficiency, we achieved quarterly operating profitability for the first time. Adjusted net income also delivered a significant turnaround, reversing from a loss in the same period last year. These results reinforce the steady improvement in our fundamentals and demonstrate that our strategic initiatives and capability building efforts are translating more quickly into operating results. Based on current business trends, we expect GMV growth to accelerate further in the second half of the year, with profitability improving more meaningfully. Next, let me walk you through some of the business highlights in the quarter. Starting with GMV. Second quarter GMV grew by 19% year-over-year while GMV on the ZKH platform increased by 23%, accelerating further from the first quarter. Based on current trends, we expect GMV growth to pick up further in the third quarter. Multiple customer segments drove growth in tandem this quarter, creating a more balanced growth profile. Regional SME customers maintained the strong momentum that began in the fourth quarter of last year, with GMV up 30% year-over-year, reflecting continued improvement in our coverage of and service capabilities for the SME market. The SME market offers significant growth potential. Demand is fragmented, procurement needs are diverse, and gross margins are higher. Rapid expansion in this segment not only adds momentum to our overall growth but also improves our customer mix and overall gross margin. Meanwhile, our business with central SOEs and industry key accounts remained solid, delivering double-digit GMV growth year-over-year. Notably, following adjustments last year, GMV from state-owned enterprises, including centrally administered SOEs, returned to growth of more than 20% year-over-year this quarter. Performance was also strong across key industries. Our specialized product and service capabilities built over years of serving a wide range of industrial use cases are increasingly translating into strong results. Steel and nonferrous metals led the way with GMV doubling year-over-year. Communications and electronics, fine chemicals and pharmaceuticals and utilities also delivered strong growth with GMV in each sector increasing by more than 30% year-over-year. While we continue to deepen our domestic business, our overseas expansion accelerated further from the first quarter, with first half GMV increasing more than tenfold year-over-year. During the quarter, we continued to advance our international business on 2 fronts: supporting Chinese manufacturers as they expand globally and deepening localized operations in key overseas markets. On the first front, we provide Chinese manufacturers expanding overseas with one-stop MRO solutions, spanning coordinated product sourcing in China and abroad, compliance support and local fulfillment. On the second front, we continued to build out our localized operations starting with MRO use cases in warehousing and supply chains where our business model has been validated. Our Northsky private label products also gained traction through online channels primarily Amazon, with categories such as material handling forklifts and industrial fans, delivering encouraging sales and earning strong customer recognition. We also established a dual sourcing system for key product categories with sources in China and overseas, further strengthening the resilience of our international supply chain. As these initiatives take hold, our overseas business is moving beyond early market exploration into a new stage in which capability building and business expansion are advancing in parallel with an increasingly clear path forward. The progress we achieved across our businesses was underpinned by the continued strengthening of our core capabilities. During the quarter, we remain focused on 3 areas central to our long-term competitiveness: products, fulfillment and AI. Starting with products, we continue to deepen our presence in specialized high-barrier MRO categories and strengthen collaboration with leading manufacturers. These efforts enhanced the depth of our services in specialized categories and further differentiated our offerings. During the quarter, GMV from electrical automation customers grew 160% year-over-year driven by our strategy of focusing on key product categories and high potential industries. To address customers' end-to-end needs across control, safety, sensing and connectivity for intelligent production lines, we deepened our offerings in sensors, PLCs, industrial safety, industrial IoT and robotics, forming a comprehensive automation product portfolio. At the industry level, we positioned ourselves early in 3 sectors with high automation intensity, new energy, semiconductors and communications and electronics. This enabled us to capture growing demand arising from capacity expansion and intelligent product line upgrades. Growth among semiconductor customers was particularly strong with GMV up more than 100-fold year-over-year. We also expanded our collaboration with Intel in edge control, jointly advancing visual inspection and industrial control product solutions as we cultivate our next growth curve beyond control, safety and sensing. Meanwhile, our private label business is an important driver of both competitive differentiation and profitability. During the quarter, we added more than 700 private label SKUs, driving private label GMV growth up more than 25% year-over-year and lifting private label product share of total GMV to approximately 10%. In addition to contributing incremental revenue, this also improved our overall gross margin. As we broaden the portfolio, we are also building out end-to-end capabilities from product development through testing and validation. Our in-house testing system now covers multiple core product lines with rigorous validation across performance, safety, compliance and reliability. These capabilities further improve product development efficiencies and quality consistency, providing strong support for scaling our private label business. Turning to fulfillment. We continue to optimize our multi-tiered warehousing and distribution network while enhancing supply capabilities and customer experience in specialized MRO categories. During the quarter, we completed the build-out of a dedicated hazardous materials warehouse in Cangzhou, Hebei Province, further strengthening our compliance, storage and supply assurance capabilities for hazardous chemicals. As of quarter end, our nationwide fulfillment network comprised more than 30 distribution centers, 109 transit warehouses, more than 200 company-operated delivery vehicles and more than 6,000 EVM smart vending machines deployed at customer production sites. This integrated network strengthens our end-to-end fulfillment capabilities from regional inventory deployment and last-mile delivery to on-site on-demand product access. As we expanded our net network coverage, we also improved warehouse operations and transportation scheduling, further improving operating leverage. In the quarter, fulfillment expenses as a share as a percentage of net revenues declined to 3.7% from 4.2% a year ago. We also made solid progress on the AI and digitalization front, guided by our goal of building industry-leading full-stack AI capabilities for industrial supplies. We continue to strengthen our technology stack and expand AI adoption across customer-facing and internal use cases. These efforts are accelerating the conversion of our extensive industry data and technological expertise into tangible customer value and operating results. A key milestone this quarter was the June launch of Domino, our industrial supplies big data engine powered by more than 1 billion product parameters, Domino features automated data labeling, self-learning and end-to-end traceability. This provides customers with a high-quality data foundation for MRO data governance, model training and intelligent applications. Through this platform, we are further unlocking the value of MRO data and enabling it to evolve from an internal resource to industry infrastructure that can be offered externally. Building on this foundation, we continued to expand the use cases for our Linglong MRO industry-specific foundation model and its suite of AI agents, integrating AI more deeply into customers' business processes. Today, solutions such as AI Materials Manager, Linglong Huisou, Linglong Huiyan and AI marketplace are already deployed across manufacturing, chemicals, ports and automotive covering key workflows such as materials data governance, product search and selection, enterprise knowledge management and collaboration and warehouse item recognition. Notably, AI Materials Manager has served more than 8,600 customers and has been implemented in more than 15 cases involving state-owned enterprises, including centrally administered SOEs. To date, it has processed more than 24 million rows of materials data, helping customers streamline materials management and reduce inventory cost. Internally, we continue to scale AI adoption across our organization and business processes to improve operating efficiency. During the quarter, internal AI applications saved more than 12,000 employee hours and AI-assisted coding accounted for over 70% of our coding activity. We also continue to encourage business teams to participate in AI innovation and the co-development of new use cases. More than 200 employees across 22 departments are now actively involved, bringing AI capabilities into a new -- into a growing range of new business processes. Beyond strengthening our own capabilities, we are also actively contributing to the broader industry ecosystem. In June, we co-hosted the inaugural China Industrial Supplies Summit or CISS, with several national trade associations and industry organizations. As China's first MRO Industry Summit focused on collaboration and value creation, the event brought together more than 2,000 attendees from over 1,000 companies, including many industry leaders, senior executives and experts from across the value chain. The event set industry records for both attendance and the seniority of its guests. Its success further enhanced ZKH's influence within the industry and provided an important platform for deeper engagement with key stakeholders. Going forward, we will continue to leverage our platform strength to promote knowledge sharing and coordination across the value chain, creating greater long-term value for the industry as a whole. Looking ahead to the second half, we will remain focused on strengthening our core competencies, including enhancing product supply capabilities, improving fulfillment efficiency and building greater organizational strengths. These are the cornerstones of our long-term competitiveness and will lay a solid foundation for sustained growth in business scale and further improvements in profitability. With that, I will turn the call over to our CFO, Jerry Wang to walk you through our financial results. Thank you. Qian Wang: Okay. Thank you, Eric, and thank you, everyone, for joining our earnings conference call today. Now let me walk you through our financial performance for the second quarter of 2026. Building on a strong start to the year, we delivered continued improvement across key financial metrics in the second quarter. GMV growth accelerated to its fastest pace in the past few quarters, while our gross profit margin expanded even further. As operating leverage became increasingly evident, our profitability also improved significantly. Notably, we achieved operating profitability for the first time, marking an important financial milestone for the company. Together, these results demonstrate our ability to maintain growth momentum while improving operational quality, supported by the increasing benefits of scale and disciplined execution of our strategic priorities. Let's now take a closer look at the second quarter financial performance, starting with GMV and revenue. The growth recovery that began in the second half of last year, gained further momentum in the second quarter with GMV and revenue posting accelerated year-over-year growth. GMV increased 18.9% year-over-year to RMB 2.9 billion while net revenues grew 12.8% to RMB 2.4 billion, representing the fastest growth for both metrics in recent quarters. This strong performance was primarily driven by robust growth among SME customers and key accounts across our core industries, along with a continued recovery in business with central SOEs. As GMV growth accelerated, gross profit grew even faster, increasing 20.3% year-over-year from RMB 357 million to RMB 430 million. As a result, gross profit as a percentage of GMV edged up to 14.9% compared with 14.8% in the same period last year and 14.4% in the first quarter of 2026. This improvement reflected the continued optimization of our customer and product mix as well as the increasing GMV contribution from private label offerings. Driven by improved operating leverage and operating efficiency, total operating expenses decreased 0.8% year-over-year to RMB 425 million in the quarter. Operating expenses as a percentage of net revenues improved notably, declining from 19.8% in the same period last year to 17.4%. Breaking it down, fulfillment expenses were RMB 90 million, representing 3.7% of net revenues, down from 4.2% in the same period last year. Sales and marketing expenses were RMB 151 million, representing 6.2% of net revenues, down from 6.9% in the same period last year. R&D expenses were RMB 35 million, representing 1.4% of net revenues, down from 1.9% in the same period last year. General and administrative expenses were RMB 150 million, representing 6.1% of net revenues, down from 6.8% in the same period last year. Looking ahead, we expect GMV and revenue growth to accelerate further in the second half of the year. Combined with our continued focus on operating efficiency, this should drive further improvement in our operating expense ratio and strengthen our operating leverage. On the international front, as we noted previously, overseas expansion remains an important long-term strategic priority for the company. In the first half of this year, international GMV exceeded RMB 95 million marking a significant step up in scale. As we continue to grow this business, we remain disciplined in managing expenses and focused on return on investments. Going forward, we expect our international business to turn profitable in the second half of this year. Our faster GMV growth, improving operating efficiency and a greater operating leverage drove a significant year-over-year improvement in profitability. In the second quarter, our operating profit, non-GAAP EBITDA and non-GAAP adjusted net profit all turned positive. In particular, non-GAAP EBITDA reached RMB 42 million, compared with negative RMB 39 million in the same period last year, while non-GAAP adjusted net profit reached RMB 39 million compared with negative RMB 37 million a year ago. Turning to our balance sheet. We continued to maintain a solid liquidity position. As of June 30, 2026, cash and cash equivalents, restricted cash and short-term investments totaled RMB 1.7 billion, providing ample financial flexibility to support our day-to-day operations and strategic priorities. Operating cash flow followed a seasonal pattern that is similar to last year, with net outflows in the first half and net inflows in the second half as customer collections accelerate. For the first half of 2026, net cash used in operating activities decreased to RMB 156 million from RMB 208 million in the first half of 2025, reflecting continued improvement in our working capital management. To conclude, the second quarter of 2026 marks an important financial milestone for the company as we achieved positive operating profit for the first time and delivered a significant improvement in non-GAAP adjusted net profit. Based on current trends, we expect to maintain high teens GMV growth in the second half of the year, while continuing to improve profitability. This should put us in a solid position to achieve our full year business and profitability targets and lay a solid foundation for even stronger performance in 2027. Okay. This concludes our prepared remarks. Thank you. We can now open for Q&A. Operator: [Operator Instructions] The first question from Jing Yuan with CICC. Jing Yuan: [Foreign Language] We noticed that the company's GMV growth accelerated to around 80% this quarter year-over-year. Could management walk us through the key drivers behind this acceleration and which subsectors, customer segments or product line are seeing stronger momentum? And what's your outlook for GMV growth in the second half and full year? Long Chen: [Interpreted] Thank you very much for that question. So indeed, we achieved acceleration in terms of our GMV growth in the second quarter 2026 and it's faster than any past quarters. And this goes to show how we are gaining share in this highly fragmented MRO market in China. We can approach this question from 3 perspectives namely industries, customers and private labels. So firstly, let's talk about industries. We have been continually investigating or rather investing in high-growth industries. So the following are some of the industries that have been growing over 30% in Q2 this year from a GMV perspective, and they are steel and nonferrous metals, primarily nonferrous metals growing at over 103%, utilities grew 57%, fine chemicals and pharmaceuticals grew 37%, food and agricultural products 37%, communications and electronics 35% and we have also been consistently gaining customers from emerging and strategic industries such as semiconductors, robotics and optical communications. So secondly, in terms of our customer mix, I would like to talk about how we perform on the SME customers front. And just to clarify the definition of what we mean by an SME customer. We're talking about a customer with a revenue of over RMB 1 billion. So it's not technically a small customer or a small company, right? But relatively speaking, it's small compared to some of the large guys or central and local SOEs. And so a big highlight of Q2 is that the GMV for these SMEs have reached over -- reached 30%. And so the GMV growth for this segment is outperforming the company's overall GMV growth. And like discussed earlier, we believe this type of customers can reflect the improvement of the product and service capabilities for ZKH more than any other types of customers because these customers are getting increasingly demanding in terms of their requirements for services. So as a result, traditional and conventional trading companies are being eliminated. And secondly, the business -- our business is evolving from sales driven to supply driven or supply chain driven. I'll explain what I mean by this. So before, we were basically selling whatever the customers wanted and demanded, right? But now with the capabilities of our product improving, we are more in a position to sell what we recommend and what's available on our part. And that's definitely a huge increase in terms of efficiency and productivity. At the same time, the gross margins on part of the SMEs are higher than large customers. So the growth of SMEs, outstripping the overall company is definitely conducive to the improvement of our overall gross margin. And these SMEs are usually located in the outskirts of cities, which means delivery and the fulfillment for them is easier. And GMV-wise, these SME customers are accounting for about 30% of total GMV, while large customers and by large customers, I mean key accounts or leading companies of various sectors and those SOEs, so these larger customers account for 60% GMV-wise and we expect SME GMV share to continue to rise in the future. And thirdly, my last point is on private labels. So for Q2, private labels achieved a growth of over 25%, outstripping overall growth and GMV share has reached 10%, marching towards our long-term goal of 30% for it. And the gross margins for private labels are higher than nonprivate labels. It's usually 10% higher. So this trend of private labels as a share of overall GMV increasing will also be conducive to the overall gross margins improving. Looking out to the second half of this year and the entire year's GMV, if you look at the order trend, July, August this year, we expect GMV growth for Q3 is going to be higher than Q2's 18.9%. So it's going to continue to accelerate. And the Q4, especially the month of December is a peak month or peak quarter for orders throughout the year. And we are confident that we are able to sustain this growth and be able to achieve our overall growth of 15% to 20% growth for GMV this year. And that was my answer to your question. Thank you. Operator: The next question comes from Zhuoming Cao with Huatai Securities. Zhuoming Cao: [Foreign Language] Against the backdrop of ongoing AI wave, have you observed any incremental changes in purchasing behavior and habits of different customer groups? How will ZKH capture the opportunities? Have AI applications launched previously such as the AI Materials Manager made further progress recently? In addition, what is the latest progress on establishing the AI subsidiary as alluded to earlier. Yang Liu: [Interpreted] So this is the CTO of the company, and I'll take this question. So indeed, we have observed some incremental changes in customer purchasing behavior as AI applications gradually mature. So we observed three trends that are quite notable. First, customers are changing how they express their needs and access procurement services. In the past, MRO products procurement rely primarily on keyword searches, catalog filters or manual requests for quotations. Increasingly, customers are becoming accustomed to describing their requirements directly in a natural language. Some provide AI systems with equipment models, use cases and technical specifications and expect the systems to clarify their needs, select suitable product models or recommend the right products to them. The second trend we observe is that the demand for high-quality data is increasing. For AI to participate meaningfully in procurement decisions, data such as product parameters, specifications, product alternatives, brands and materials, these things must be sufficiently accurate. We, therefore, believe that high-quality structured and specialized data will become even more important in the era of AI. Third, SMEs are becoming more receptive to self-service and smart procurement. In the past, many procurement services required repeated communication between our sales representatives and the customers' procurement people. In the future, AI may be able to handle a significant portion of the standardized work, reducing service costs while improving the customer service or rather a customer service experience. So as regards to AI Materials Manager, which we launched previously, it continues to evolve. It has now served more than 8,600 customers, representing a year-over-year growth of 93% in terms of customer count and has begun generating revenue. We are also continuing to build a competitive moat around our full-stack AI capabilities for MRO products. And then September or rather October this year, we plan to work with Intel, a leading global chip maker, to launch our Linglong Huiyan, which is an industry-leading edge model and solution for industrial vision. We also intend to establish deeper collaboration with leading domestic chip makers integrating AI Materials Manager and the Linglong model with their technologies at both the model and agent layers. So regarding the AI subsidiary you were asking about, we are proceeding with this establishment according to plan. The primary reason for setting up an independent company is to give the business a more independent and a flexible organizational structure, talent model and greater flexibility for future capital activities. At the same time, subsidiary will maintain deep synergy with ZKH in industrial data, customer use cases and supply chain resources. Our goal is to develop it into a smart infrastructure company serving the industrial sector. And that was my answer to your question. Operator: The next question comes from Leo Chiang with Deutsche Bank. Leo Chiang: [Foreign Language] Congrats on the strong results. I have 2 questions. First one is regarding our international business. Could management update us on the company's internationalization progress, including GMV contribution, customer expansion and your outlook for future international markets? The second question is could management provide an update on the shareholder return plan such as share repurchase program or other related initiatives? Long Chen: [Interpreted] So in terms of our international business, growth wise, revenue has been growing very strongly, a tenfold increase compared to the same period last year. So for the first half of this year, GMV was RMB 95 million, and we expect second half to continue this strong growth. Secondly, international business has always been part of our long-term strategy, and we will continue to make investments into it. And there's 2 parts to our international business. Part 1 is we will continue to support Chinese businesses as they expand their business in overseas markets. And based on existing customer relations, we will leverage more overseas orders and at the same time, strengthen our last-mile fulfillment capability in different locales, geographies and regions. The second part to our international business is localized business, which is happening primarily in the U.S. and Texas specifically as we speak. At the same time, as was talked about in the prepared remarks, our online sales by way of Amazon is also increasing greatly. So overall, we are valuing efficiency more when it comes to making investments in our overseas business. And we will avoid front-loading expenses ahead of business needs, and we will try to turn profit for sometime in the second half of this year for our international business. When it comes to shareholder returns, in June 2025, the company authorized a USD 50 million worth of share buyback program, which remains valid through June of 2027. As of the end of the Q2 this year, the company had cumulatively repurchased approximately 2.49 million ADSs, which translates into about USD 7.67 million. We intend to set up the pace or rather to step up the pace of share buybacks. And once our profits begin to scale more meaningfully, we will also consider starting to pay dividends to our shareholders. And that was my answer to your question. Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to management for closing remarks. Daecy Xu: 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. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved quarterly operating profitability for the first time, driven by economies of scale, favorable customer mix, and steady gains in operating efficiency. SME customer segment grew 30% year-over-year, outperforming the overall company and improving gross margins due to the fragmented and diverse nature of SME procurement needs. Shifted business model from 'sales-driven' to 'supply-driven,' leveraging improved product capabilities to recommend available inventory rather than simply fulfilling specific customer demands. Accelerated specialized product growth in high-barrier categories, notably in semiconductors where GMV increased more than 100-fold year-over-year. Expanded private label portfolio by 700 SKUs, with these products now accounting for 10% of total GMV and typically yielding 10% higher gross margins than third-party brands. Enhanced fulfillment efficiency by optimizing a multi-tiered network of 30 distribution centers and 109 transit warehouses, reducing fulfillment expenses to 3.7% of net revenues. Integrated AI across the organization, saving over 12,000 employee hours in the quarter and implementing AI-assisted coding for over 70% of internal coding activity. Expect GMV growth to accelerate further in the second half of 2026, targeting full-year GMV growth between 15% and 20%. Anticipate the international business segment will reach profitability in the second half of 2026 through disciplined expense management and localized operations. Planning the launch of 'Linglong Huiyan' in October 2026, an industrial vision solution developed in collaboration with Intel to capture demand for intelligent production line upgrades. Establishing an independent AI subsidiary to provide a flexible organizational structure for future capital activities while maintaining synergy with ZKH's industrial data. Long-term strategic goal to increase private label contribution to 30% of total GMV to further enhance overall corporate profitability. Launched 'Domino,' an industrial supplies big data engine with over 1 billion parameters, to transition internal MRO data into industry-facing infrastructure. Completed a dedicated hazardous materials warehouse in Cangzhou to strengthen compliance and supply assurance for specialized chemical categories. International GMV increased more than tenfold year-over-year in the first half, reaching RMB 95 million as the company supports Chinese manufacturers expanding globally. Maintained a solid liquidity position with RMB 1.7 billion in cash and short-term investments as of June 30, 2026. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Growth is being driven by high-performing sectors like nonferrous metals (up 103%) and utilities (up 57%), alongside a recovery in state-owned enterprise spending. Management noted that July and August trends suggest Q3 growth will exceed the 18.9% recorded in Q2, with Q4 expected to be the seasonal peak. Customers are shifting from keyword searches to natural language descriptions for complex equipment needs, increasing the value of high-quality structured data. AI Materials Manager has scaled to over 8,600 customers and is now generating direct revenue through materials data governance and inventory reduction services. The strategy focuses on two fronts: supporting Chinese firms abroad and building localized operations in the U.S. (specifically Texas). Management emphasized avoiding front-loaded expenses, aiming for segment profitability by the end of the year. The company has utilized approximately USD 7.67 million of its USD 50 million buyback authorization and intends to step up the pace of repurchases. Management stated they will consider initiating dividend payments once profits begin to scale more meaningfully.

Interested in ZKH Group Limited Unsponsored ADR? Here are five stocks we like better. Growth accelerated in Q2: GMV rose 18.9% year over year to RMB2.9 billion and net revenue increased 12.8% to RMB2.4 billion. ZKH is targeting full-year GMV growth of 15% to 20% and expects further acceleration in Q3. Profitability improved significantly: Gross profit grew 20.3%, while operating expenses declined 0.8%, helping ZKH post its first quarterly operating profit. Non-GAAP EBITDA reached RMB42 million, compared with a RMB39 million loss a year earlier. Expansion and technology initiatives gained momentum: International GMV exceeded RMB95 million in the first half and grew more than tenfold, while electrical automation and semiconductor-related GMV surged. The company also launched its Domino industrial-data platform, expanded AI usage, and plans to increase share repurchases. ZKH Group (NYSE:ZKH) said second-quarter growth accelerated as demand from small and medium-sized enterprise customers, state-owned enterprises and several industrial sectors increased, while operating leverage helped the company post its first quarterly operating profit. Gross merchandise value, or GMV, rose 18.9% year over year to RMB2.9 billion in the second quarter, while net revenue increased 12.8% to RMB2.4 billion. Chief Financial Officer Jerry Wang said both figures represented their fastest growth in recent quarters. → Datavault AI Locks Down CyberCatch in $94M Security Rollup Founder, Chairman and Chief Executive Officer Eric Chen said GMV on the ZKH platform rose 23% year over year. The company expects GMV growth to accelerate again in the third quarter and said it is targeting full-year GMV growth of 15% to 20%, based on current order trends. Regional SME customers remained a major contributor to growth, with GMV in that segment increasing 30% from a year earlier. Chen said the segment offers higher gross margins and reflects improving product coverage and service capabilities. He noted that SME customers accounted for about 30% of total GMV, while larger key accounts and state-owned enterprises represented roughly 60%. → Nasdaq’s 23-Hour Trading Push Could Turn Global Liquidity Into a Growth Engine Business with state-owned enterprises, including centrally administered SOEs, returned to growth of more than 20% year over year following adjustments made last year, according to Chen. The company also reported double-digit GMV growth among central SOEs and industry key accounts. Performance varied across industrial sectors, with steel and ferrous metals GMV doubling year over year. Communications and electronics, fine chemicals and pharmaceuticals, and utilities each posted GMV growth of more than 30%, management said. → Tesla's Cybercab Launch Could Reshape Margins for Uber and Lyft During the question-and-answer session, Chen provided additional sector detail, saying non-ferrous metals grew more than 103%, utilities increased 57%, fine chemicals and pharmaceuticals rose 37%, food and agricultural products increased 37%, and communications and electronics grew 35%. ZKH also continued to build its electrical automation business. GMV from electrical automation customers rose 160% year over year, while GMV from semiconductor customers increased more than 100-fold, according to Chen. The company said it expanded its automation offerings across sensors, programmable logic controllers, industrial safety, industrial internet of things and robotics, and it has broadened collaboration with Intel in edge control, visual inspection and industrial-control solutions. Gross profit increased 20.3% year over year to RMB430 million, outpacing GMV growth. Gross profit as a percentage of GMV rose to 14.9%, compared with 14.8% a year earlier and 14.4% in the first quarter. Wang attributed the improvement to a more favorable customer and product mix, as well as a larger contribution from private-label products. ZKH added more than 700 private-label stock-keeping units during the quarter. Private-label GMV grew more than 25% year over year and represented about 10% of total GMV. Chen said the company’s long-term goal is for private-label products to reach 30% of GMV. Total operating expenses declined 0.8% from a year earlier to RMB425 million. Operating expenses fell to 17.4% of net revenue, from 19.8% in the prior-year quarter. Fulfillment expenses were RMB90 million, or 3.7% of revenue, compared with 4.2% a year earlier. Sales and marketing expenses were RMB151 million, or 6.2% of revenue, compared with 6.9%. Research and development expenses were RMB35 million, or 1.4% of revenue, compared with 1.9%. General and administrative expenses were RMB150 million, or 6.1% of revenue, compared with 6.8%. The company reported positive operating profit for the first time. Non-GAAP EBITDA was RMB42 million, compared with a RMB39 million loss in the prior-year period, while non-GAAP adjusted net profit was RMB39 million, compared with a RMB37 million loss a year earlier. As of June 30, ZKH had RMB1.7 billion in cash and cash equivalents, restricted cash and short-term investments. Net cash used in operating activities for the first half was RMB156 million, improving from RMB208 million in the first half of 2025. First-half international GMV exceeded RMB95 million and increased more than tenfold year over year, the company said. ZKH is pursuing overseas growth by supporting Chinese manufacturers expanding abroad and by developing localized operations, particularly in the U.S. and Texas, according to Chen. The company also cited sales of Northsky private-label products through Amazon, including material-handling forklifts and industrial fans. Wang said ZKH expects its international business to become profitable in the second half of 2026, while continuing to manage spending with an emphasis on return on investment. On the technology front, ZKH launched Domino, its industrial-supplies big-data engine, in June. The company said the platform is powered by more than 1 billion product parameters and includes automated data labeling, self-learning and traceability functions. Chief Technology Officer David Liu said the company’s AI Materials Manager has served more than 8,600 customers, up 93% year over year, and has begun generating revenue. The tool has processed more than 24 million rows of materials data, according to management. ZKH also said internal AI applications saved more than 12,000 employee hours during the quarter, while AI-assisted coding accounted for more than 70% of coding activity. Liu said ZKH is proceeding with plans to establish an AI subsidiary, which management said would provide a more independent organizational structure and flexibility for talent recruitment and future capital activities. The subsidiary is intended to maintain links to ZKH’s industrial data, customer use cases and supply-chain resources. Chen said ZKH’s $50 million share-repurchase program, authorized in June 2025 and valid through June 2027, remained in effect. As of the end of the second quarter, the company had repurchased about 2.49 million American depositary shares for approximately $7.67 million. The company intends to increase the pace of repurchases, Chen said, and may consider dividends once profits scale more meaningfully. ZKH Group Limited develops and operates a maintenance, repair, and operating (MRO) products trading and service platform that offers spare parts, chemicals, manufacturing parts, general consumables, and office supplies in the People's Republic of China. The company provides MRO procurement and management services; digitalized MRO procurement solutions; and logistics and warehousing services. It also engages in the production and sale of intelligent warehousing equipment. ZKH Group Limited was founded in 1998 and is based in Shanghai, the People's Republic of China. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "ZKH Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

SHANGHAI, Aug. 21, 2026 /PRNewswire/ -- ZKH Group Limited ("ZKH" or the "Company") (NYSE: ZKH), a leading maintenance, repair, and operations ("MRO") procurement service platform in China, today announced its unaudited financial results for the second quarter ended June 30, 2026. Second Quarter 2026 Operational and Financial Highlights Mr. Eric Long Chen, Chairman and Chief Executive Officer of ZKH, stated, "Building on a strong start to the year, our business gained further momentum in the second quarter, with GMV and revenue posting their fastest year-over-year growth in the past several quarters. This performance was broad-based across the industries we serve. Core verticals such as communications and electronics, fine chemicals and pharmaceuticals, and utilities continued to outpace overall GMV growth. At the customer level, GMV from SMEs on the ZKH platform increased by approximately 30% year-over-year, while industry key accounts (KAs) and central state-owned enterprises (SOEs) sustained healthy double-digit growth. Meanwhile, AI is becoming increasingly embedded in how we serve customers and operate our business, helping us deepen customer engagement, unlock additional revenue opportunities, and drive greater efficiency. Together, these results reinforce our confidence in our strategy and underscore the strength of our execution. Looking ahead, we expect growth to accelerate further in the second half of the year. As we build on this momentum, we will continue to execute with focus and discipline to deliver sustainable, high-quality growth." Mr. Jerry Qian Wang, Chief Financial Officer of ZKH, added, "The second quarter marked an important milestone in our earnings trajectory, as we achieved operating profitability for the first time. This achievement was underpinned by our continued scale expansion and stronger operating leverage. GMV increased by 18.9% year-over-year, reflecting ongoing share gains in China's fragmented MRO market. Gross profit grew even faster, increasing by 20.3% year-over-year, while gross margin on a GMV basis improved by approximately 50 basis points sequentially. At the same time, we maintained disciplined cost management and further expanded AI adoption across our operations, supporting continued efficiency gains. As a result, we delivered a significant bottom-line turnaround: both GAAP net profit and non-GAAP adjusted net profit reversed year-ago losses and showed considerable sequential improvement. Looking ahead, we enter the second half of 2026 in a stronger financial position, and remain confident in our ability to deliver sustainable and profitable growth over the long term." Second Quarter 2026 Business Highlights Business Momentum. The Company accelerated its growth momentum in the second quarter, with total GMV increasing 18.9% year-over-year. This performance was driven by deeper penetration across both SME and key account segments. GMV from SME customers increased approximately 30% year-over-year, while GMV from industry KA and central SOE customers maintained double-digit growth. The sustained strength of the SME business reflected the Company's improving product and service capabilities, and contributed to a higher-quality, more resilient earnings profile. Product Capabilities. The Company continued to advance its capabilities in professional MRO categories, including chemical reagents, industrial spare parts, and machining-related products. It also scaled its higher-margin private-label products, adding more than 700 SKUs during the quarter. Private-label GMV increased by more than 25% year-over-year and accounted for approximately 10% of total GMV. The growing contribution from private-label offerings supported both overall GMV growth and gross margin improvement. Fulfillment Network. The Company further enhanced its hazardous materials supply capabilities with the completion of a dedicated warehouse in Cangzhou, Hebei Province. As of quarter-end, its network comprised more than 30 distribution centers and 109 warehouses, supported by over 200 self-operated delivery vehicles and more than 6,000 EVM smart vending machines at customer production sites. Fulfillment efficiency also improved, with fulfillment expenses as a percentage of revenue declining by 50 basis points year-over-year. AI Capabilities. International Expansion. International GMV increased tenfold year-over-year in the first half of 2026, supported by the Company's continued efforts to help Chinese manufacturers expand overseas and further localize its U.S. operations. During the quarter, U.S. online sales accelerated across multiple channels, while offline operations strengthened collaboration with local manufacturers and enhanced local sourcing and fulfillment capabilities. Second Quarter 2026 Financial Results Net Revenues. Net revenues were RMB2,443.8 million (US$360.2 million), representing an increase of 12.8% from RMB2,166.8 million in the same period of 2025. Cost of Revenues. Cost of revenues was RMB2,014.2 million (US$296.9 million), representing an increase of 11.3% from RMB1,809.8 million in the same period of 2025. Gross Profit and Gross Margin. Gross profit was RMB429.6 million (US$63.3 million), representing an increase of 20.3% from RMB357.0 million in the same period of 2025. Gross margin was 17.6%, compared with 16.5% in the same period of 2025. Operating Expenses. Operating expenses were RMB425.6 million (US$62.7 million), down 0.8% from RMB428.9 million in the same period of 2025. Operating expenses were 17.4% of net revenues, compared with 19.8% in the same period of 2025. Fulfillment Expenses. Fulfillment expenses were RMB89.6 million (US$13.2 million), down 1.3% from RMB90.8 million in the same period of 2025, primarily due to lower rental and property management fees, partially offset by higher distribution expenses. Fulfillment expenses were 3.7% of net revenues, compared with 4.2% in the same period of 2025. Sales and Marketing Expenses. Sales and marketing expenses were RMB150.8 million (US$22.2 million), up 1.0% from RMB149.3 million in the same period of 2025, primarily due to higher marketing and promotion expenses and service fees, partially offset by lower other and traveling expenses. Sales and marketing expenses were 6.2% of net revenues, compared with 6.9% in the same period of 2025. Research and Development Expenses. Research and development expenses were RMB35.2 million (US$5.2 million), down 15.2% from RMB41.5 million in the same period of 2025, primarily due to lower employee benefits expenses, partially offset by higher service fees. Research and development expenses were 1.4% of net revenues, compared with 1.9% in the same period of 2025. General and Administrative Expenses. General and administrative expenses were RMB150.0 million (US$22.1 million), up 1.8% from RMB147.3 million in the same period of 2025, primarily due to higher service fees and credit losses, partially offset by lower employee benefits expenses and share-based payments. General and administrative expenses were 6.1% of net revenues, compared with 6.8% in the same period of 2025. Income/(Loss) from Operations. Income from operations was RMB4.0 million (US$0.6 million), compared with loss from operations of RMB72.0 million in the same period of 2025. Operating income margin was 0.2%, compared with operating loss margin of 3.3% in the same period of 2025. Non-GAAP EBITDA. Non-GAAP EBITDA was RMB41.9 million (US$6.2 million), compared with negative RMB38.7 million in the same period of 2025. Non-GAAP EBITDA margin was 1.7%, compared with negative 1.8% in the same period of 2025. Net Profit/(Loss). Net profit was RMB26.7 million (US$3.9 million), compared with net loss of RMB53.5 million in the same period of 2025. Net profit margin was 1.1%, compared with net loss margin of 2.5% in the same period of 2025. Non-GAAP Adjusted Net Profit/(Loss). Non-GAAP adjusted net profit was RMB38.5 million (US$5.7 million), compared with non-GAAP adjusted net loss of RMB36.5 million in the same period of 2025. Non-GAAP adjusted net profit margin was 1.6%, compared with non-GAAP adjusted net loss margin of 1.7% in the same period of 2025. Basic and Diluted Net Profit/(Loss) per ADS[7] and Non-GAAP Adjusted Basic and Diluted Net Profit/(Loss) per ADS[8]. Basic and diluted net profit per ADS was RMB0.17 (US$0.02), compared with basic and diluted net loss per ADS of RMB0.33 in the same period of 2025. Non-GAAP adjusted basic and diluted net profit per ADS were RMB0.24 (US$0.04), compared with basic and diluted net loss per ADS of RMB0.23 in the same period of 2025. Balance Sheet and Cash Flow As of June 30, 2026, the Company had cash and cash equivalents, restricted cash, and short-term investments of RMB1.67 billion (US$246.5 million), compared with RMB1.92 billion as of December 31, 2025. Net cash used in operating activities was RMB122.4 million (US$18.0 million) in the second quarter of 2026, compared with net cash used in operating activities of RMB110.7 million in the same period of 2025. Share Repurchase Update Pursuant to the Company's share repurchase program of up to US$50 million, adopted on June 13, 2025 and subsequently extended for another 12 months through June 13, 2027, the Company repurchased an aggregate of approximately 2.49 million ADSs for approximately US$7.67 million from the open market as of June 30, 2026. Exchange Rate This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ were made at a rate of RMB6.7851 to US$1.00, the exchange rate in effect as of June 30, 2026, as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. The Company makes no representation that any RMB or US$ amounts could have been, or could be, converted into US$ or RMB, as the case may be, at any particular rate, or at all. Conference Call Information The Company's management will hold a conference call on Friday, August 21, 2026, at 7:00 A.M. U.S. Eastern Time or 7:00 P.M. Beijing Time to discuss its financial results and operating performance for the second quarter of 2026. The replay will be accessible through August 28, 2026 by dialing the following numbers: A live and archived webcast of the conference call will also be available on the Company's investor relations website at https://ir.zkh.com. About ZKH Group Limited ZKH Group Limited (NYSE: ZKH) is a leading MRO procurement service platform in China, underpinned by robust supply chain capabilities and dedicated to serving customers globally through a product-led, agentic AI-driven approach. Through its primary online platforms, the ZKH platform, the GBB platform and the Northsky platform, along with innovative technology and extensive industry expertise, the Company provides bespoke MRO procurement solutions to a diverse and loyal customer base. These solutions encompass hyper-personalized product curation from a comprehensive selection of quality products at competitive prices. Additionally, the Company ensures timely and reliable product delivery through professional fulfillment services. By focusing on reducing procurement costs and addressing management efficiency challenges, ZKH is transforming the opaque MRO procurement process and empowering all stakeholders across the value chain. For more information, please visit: https://ir.zkh.com. Use of Non-GAAP Financial Measures This press release contains the following non-GAAP financial measures: non-GAAP adjusted net (loss)/profit, non-GAAP adjusted net (loss)/profit per ADS, basic and diluted, and non-GAAP EBITDA. The non-GAAP financial measures should not be considered in isolation from or construed as alternatives to their most directly comparable financial measures prepared in accordance with accounting principles generally accepted in the United States of America. Investors are encouraged to review the historical non-GAAP financial measures in reconciliation to their most directly comparable GAAP financial measures. The Company defines non-GAAP adjusted net (loss)/profit for a specific period as net loss in the same period excluding share-based compensation expenses. The Company defines non-GAAP EBITDA as net loss before interest expenses, income tax expenses/(benefits) and depreciation and amortization expenses. Non-GAAP adjusted net (loss)/profit per ADS is calculated by dividing adjusted net (loss)/profit attributable to the Company's ordinary shareholders by the weighted average number of ordinary shares during the periods and then multiplied by 35. The Company presents these non-GAAP financial measures because they are used by the management to evaluate the Company's operating performance and formulate business plans. The Company believes that these non-GAAP financial measures help identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that are included in net loss and certain expenses that are not expected to result in future cash payments or that are non-recurring in nature. The Company also believes that the use of these non-GAAP financial measures facilitates investors' assessment of its operating performance, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision making. The non-GAAP financial measures have material limitations as analytical metrics and may not be calculated in the same manner by all companies. The Company's non-GAAP financial measures do not include all income and expense items that affect the Company's operations. They may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider the non-GAAP financial measures as substitutes for, or superior to, their most directly comparable financial measures prepared in accordance with GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of Non-GAAP Results" set forth at the end of this press release. Safe Harbor Statement This press release contains forward-looking statements. These statements are made pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "may," "will," "expects," "anticipates," "aim," "estimates," "intends," "plans," "believes," "is/are likely to," "potential," "continue," and similar statements. Among other things, the quotations from management in this press release and ZKH's strategic and operational plans contain forward-looking statements. ZKH may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press release and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about ZKH's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: ZKH's mission, goals and strategies; ZKH's future business development, financial condition and results of operations; the expected changes in its revenues, expenses or expenditures; the expected growth of the MRO procurement service industry in China and globally; changes in customer or product mix; ZKH's expectations regarding the prospects of its business model and the demand for and market acceptance of its products and services; ZKH's expectations regarding its relationships with customers, suppliers, and service providers on its platform; competition in the Company's industry; government policies and regulations relating to ZKH's industry; general economic and business conditions in China and globally; the outcome of any current and future legal or administrative proceedings; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in ZKH's filings with the SEC. All information provided herein is as of the date of this announcement, and ZKH undertakes no obligation to update any forward-looking statement, except as required under applicable law. For investor and media inquiries, please contact: ZKH Group LimitedIR DepartmentE-mail: [email protected] Christensen AdvisoryEmail: [email protected] View original content:https://www.prnewswire.com/news-releases/zkh-group-limited-announces-second-quarter-2026-unaudited-financial-results-302857193.html

This article first appeared on GuruFocus. GMV: Increased 18.9% year-over-year to RMB2.9 billion. Net Revenues: Grew 12.8% year-over-year to RMB2.4 billion. Gross Profit: Increased 20.3% year-over-year to RMB430 million. Gross Margin (as % of GMV): Improved to 14.9%, up from 14.8% in the same period last year and 14.4% in the first quarter of 2026. Operating Expenses: Decreased 0.8% year-over-year to RMB425 million, representing 17.4% of net revenues, down from 19.8% in the prior year period. Fulfillment Expenses: RMB90 million, or 3.7% of net revenues, down from 4.2% in the same period last year. Sales and Marketing Expenses: RMB151 million, or 6.2% of net revenues, down from 6.9% in the prior year period. R&D Expenses: RMB35 million, or 1.4% of net revenues, down from 1.9% in the prior year period. General and Administrative Expenses: RMB150 million, or 6.1% of net revenues, down from 6.8% in the prior year period. Operating Profit: Turned positive for the first time. Non-GAAP EBITDA: Reached RMB42 million, compared with negative RMB39 million in the same period last year. Non-GAAP Adjusted Net Profit: Reached RMB39 million, compared with negative RMB37 million a year ago. Cash Position: Cash and cash equivalents, restricted cash, and short-term investments totaled RMB1.7 billion as of June 30, 2026. Operating Cash Flow: Net cash used in operating activities for the first half of 2026 decreased to RMB156 million from RMB208 million in the first half of 2025. International GMV: Exceeded RMB95 million in the first half of the year. Warning! GuruFocus has detected 1 Warning Sign with ZKH. Is ZKH fairly valued? Test your thesis with our free DCF calculator. Release Date: August 21, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. ZKH Group Ltd (NYSE:ZKH) achieved its first-ever quarterly operating profit, marking a significant financial milestone. GMV growth accelerated to 18.9% year-over-year, with expectations for further acceleration in the second half of 2026. Gross margin improved to 14.9% of GMV, driven by a favorable customer mix and higher private label contribution. International business showed strong momentum, with first-half GMV exceeding RMB95 million, a tenfold year-over-year increase. AI initiatives, such as the AI Materials Manager, gained traction, serving over 8,600 customers and generating revenue. Operating cash flow remained negative in the first half of 2026, with net outflows of RMB156 million. The company's international business is still in early stages, with profitability only expected in the second half of 2026. Despite growth, the company's net revenue growth (12.8%) lagged behind GMV growth (18.9%), indicating potential pricing pressure. The company's share repurchase program has been slow, with only USD7.67 million utilized out of the USD50 million authorized. The company faces intense competition in the fragmented MRO market, requiring continuous investment in capabilities and AI. Q: Could management walk us through the key drivers behind the GMV growth acceleration to around 19% this quarter? Which subsectors, customer segments, or product lines are seeing stronger momentum, and what is the outlook for the second half and full year?A: Eric Chen (Chairman and CEO) attributed the acceleration to three key drivers: 1) High-growth industries, with steel and nonferrous metals GMV doubling year-over-year, and utilities, fine chemicals/pharmaceuticals, and communications/electronics each growing over 30%. 2) Strong performance in the SME customer segment (revenue over RMB1 billion), which grew 30% year-over-year and now accounts for about 30% of total GMV. This segment offers higher gross margins and reflects the company's shift from a sales-driven to a supply-chain-driven model. 3) Private label growth of over 25%, reaching 10% of total GMV, with gross margins approximately 10% higher than non-private label products. Looking ahead, based on July and August order trends, the company expects Q3 GMV growth to exceed Q2's 18.9% and is confident in achieving its full-year GMV growth target of 15% to 20%. Q: The company achieved operating profitability for the first time this quarter. Can you elaborate on the key drivers behind this financial milestone and the outlook for profitability in the second half?A: Jerry Wang (CFO) explained that the significant improvement in profitability was driven by a combination of factors. Gross profit grew 20.3% year-over-year, faster than GMV, lifting the gross margin as a percentage of GMV to 14.9% from 14.8% a year ago and 14.4% in Q1 2026. This was supported by an improved customer and product mix, including a higher contribution from private label offerings. Simultaneously, total operating expenses decreased 0.8% year-over-year, with operating expenses as a percentage of net revenues improving to 17.4% from 19.8%. This operating leverage led to a positive operating profit, non-GAAP EBITDA of RMB42 million (vs. negative RMB39 million a year ago), and non-GAAP adjusted net profit of RMB39 million (vs. negative RMB37 million a year ago). The company expects GMV and revenue growth to accelerate further in the second half, driving continued improvement in operating expense ratios and profitability. Q: Against the backdrop of the ongoing AI wave, have you observed any incremental changes in purchasing behavior? How will ZKH capture these opportunities, and what is the latest progress on the AI subsidiary?A: The CTO highlighted three notable trends in customer purchasing behavior: 1) Customers are shifting from keyword searches to describing requirements in natural language, expecting AI systems to clarify needs and recommend products. 2) There is increasing demand for high-quality, structured data (product parameters, specifications, alternatives) for AI to participate meaningfully in procurement decisions. 3) SMEs are becoming more receptive to self-service and smart procurement, which AI can handle, reducing service costs. The AI Materials Manager has served over 8,600 customers (up 93% year-over-year) and has begun generating revenue. The company plans to launch an industry-leading edge model for industrial vision with Intel around September-November 2026 and establish collaborations with domestic chip makers. Regarding the AI subsidiary, it is proceeding according to plan to provide a more independent and flexible organizational structure and talent model, with the goal of developing it into a smart infrastructure company for the industrial sector while maintaining deep synergy with ZKH. Q: Could management update us on the company's internationalization progress, including GMV contribution, and the outlook for future international markets? Also, could you provide an update on the shareholder return plan?A: Eric Chen (Chairman and CEO) stated that international GMV exceeded RMB95 million in the first half of 2026, a tenfold increase year-over-year, with strong growth expected to continue in the second half. The international strategy has two parts: 1) Supporting Chinese manufacturers expanding overseas with one-stop MRO solutions, leveraging existing customer relationships and strengthening last-mile fulfillment capabilities. 2) Deepening localized operations, primarily in the U.S. (Texas), alongside strong growth in online sales via Amazon. The company is focused on efficiency and return on investment, expecting the international business to turn profitable in the second half of 2026. Regarding shareholder returns, the company authorized a USD50 million share buyback program in June 2025, valid through June 2027. As of the end of Q2 2026, it had repurchased approximately 2.49 million ADSs for about USD7.67 million. The company intends to evaluate stepping up the pace of buybacks and will consider starting dividend payments once profits scale more meaningfully. Q: Can you provide more detail on the performance of the SME customer segment and its strategic importance to the company's growth and profitability?A: Eric Chen (Chairman and CEO) clarified that "SME customers" refers to companies with revenue over RMB1 billion, which are relatively smaller compared to central and local SOEs. This segment's GMV grew 30% year-over-year in Q2, outperforming the company's overall growth. The growth of this segment is strategically important for several reasons: 1) These customers are increasingly demanding in their service requirements, which is eliminating traditional trading companies and favoring ZKH's comprehensive capabilities. 2) The business is evolving from being sales-driven to supply-chain-driven, allowing ZKH to sell what it recommends and has available, increasing efficiency. 3) Gross margins for SME customers are higher than for large customers, which is conducive to improving overall gross margins. 4) These customers are often located on the outskirts of cities, making delivery and fulfillment easier. SME customers currently account for about 30% of total GMV, while large customers (key accounts and SOEs) account for 60%, and the company expects the SME share to continue to rise. Q: What is the current status of the company's private label business, and how is it contributing to growth and profitability?A: Eric Chen (Chairman and CEO) reported that the private label business is an important driver of both competitive differentiation and profitability. In Q2 2026, the company added more than 700 private label SKUs, driving private label GMV growth of over 25% year-over-year and increasing its share of total GMV to approximately 10%. The gross margins for private label products are approximately 10% higher than non-private label products, so the increasing share of private labels is conducive to improving overall gross margins. The company is building out end-to-end capabilities from product development through testing and validation, with an in-house testing system covering multiple core product lines. The long-term goal is For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Thursday, March 19, 2026 at 8 a.m. ET Chief Executive Officer — Long Chen Chief Financial Officer — Chun Chiu Lai [Unspecified Management Moderator] — Jin Li Need a quote from a Motley Fool analyst? Email [email protected] Long Chen: [Interpreted] 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 breakeven 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. 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 nonferrous 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. 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. 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. 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 are 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 eighth 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 cost to improve further this year. 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 3 layers: data infrastructure, industry-specific models and scenario application. These measures are accelerating the translation of AI innovation into scalable business value creation. At the 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 2 to 3 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're seeing notable performance improvements in areas such as intelligent RFQ processing, precise product identification and pricing optimization. At the 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. 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 3 minutes. In product selection and recommendation, our AI ProductRecom 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 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 will 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. Chun Chiu Lai: 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 a 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. But the company's operational 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 remains well in place. The ongoing growth of our high-margin SME 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 a 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 a percentage of net revenues improved to 18.8% from 21.1%. This operational efficiency gains translated into a meaningful improvement 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 negative 1.1% from negative 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 15 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 negative 2.4% from negative 3.9% in 2024. Non-GAAP EBITDA improved by 58.9% to negative RMB 79.3 million, with margin improving to negative 0.9% from negative 2.2%. Adjusted net loss narrowed by 46.1% year-over-year to RMB 85.9 million, with margin improving to negative 1% from negative 1.8%. Turning to our balance sheet and cash flow. We maintained a strong and healthy cash position. As of December 31, 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. We 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. Operator, please go ahead. Operator: [Operator Instructions] The first question comes from Leo Chiang with Deutsche Bank. Leo Chiang: [Foreign Language] I will translate myself. 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? And additionally, will the long-term goal and the trend for improving gross margin be affected? Long Chen: [Interpreted] Thank you very much for that question. So to answer your question, the Q4 changes -- the gross margin changes in Q4 was primarily caused by 2 things. First is the change in product mix. As we know, there have been changes and fluctuation in the commodity prices, and that has led to some customers pulling ahead the purchasing of certain products, for example, wires and cables, right? And wires and cables use copper whose pricing has been rising. And the gross margin for these products tend to be lower, and that have driven down the overall gross margin. And 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 have increased slightly. But if you look through our gross margin January through March of this year, things have been improving gradually. And of course, because of the war that's ongoing in the Middle East, there's now price hikes regarding oil, petroleum. So suppliers are jacking up their prices. Of course, that needs to be considered as a double-edged sword as even though on the short run, it's going to put some downward pressure on our gross margins. But in the long run, it's going to 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 3 different fronts, namely purchasing, private labels and cost optimization regarding certain sectors. And 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. So that was my answer to this question. Operator: The next question comes from Jin Han with CICC. Jianzhi Wan: [Foreign Language] I will translate myself. The company's private label achieved a 20% growth in this year, increasing share to 8.3%. Could management please introduce the company's growth targets for private label this year? Additionally, as the company sell more private label products, how does the company manage relationship and commutation with nonprivate label suppliers? Long Chen: [Interpreted] 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%. And we started investing in private labels. We doubled down on our investments into private labels last year. And 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 will look into categories -- we will comb through all categories to identify the ones where we could provide better value by doing private labels on. And for those categories, we will have a private label version of those categories. And if you look across history and globally, whenever a platform grows to a certain -- grew to a certain size, private labels will emerge and some of the categories will shift and migrate towards private labels. And that is a great appeal to the business we are in. So as we scale, both private labels and branded products will coexist and thrive. So I think driving up the share of our private labels as a percent of our GMV is an important strategy for us. As 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. And customer satisfaction, in my opinion, trumps all the other factors. Operator: Okay. Was there a follow-up? Or was that the answer for the question? Jianzhi Wan: That was the full answer. Operator: The next question comes from Shen Qiang Wang with CITIC. Unknown Analyst: [Foreign Language] I will 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? Long Chen: [Interpreted] Sure. The most important objective for us in 2026 is to achieve full year profitability as alluded in the prepared remarks. Meanwhile, we will continue to build out our core competencies to lay a firm groundwork for future development. So there's 3 aspects we will try to push for in order to achieve this two-pronged objective. Firstly, we will continue to create value by digging into our product competencies or to make our products more competitive. So basically to offer better products at lower prices. Secondly, for our medium to large customers, we will continue to dig deeper, revolving their needs so as to drive up their wallet share with us as well as gross profit margins. On the customer front, so 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 brick-and-mortar off-line promoters kind of thing to expand that coverage. And that's what we're going to focus on this year. And we will also accelerate the expansion of the overseas market, 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. So let me backtrack a little bit. We need to improve the quality of our business, and there's 2 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 were referring to as highly specialized MRO products. So 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. 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. Last but definitely not the least, is team build-out because a strong team, a competent team is essential to our sustainable growth. And we made quite a bit of progress last year, but there's still more room for improvement. So our goal is to build a team with high-quality talent and with a very high morale. And 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. So that was all of my -- that was my full answer. 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. Jin Li: 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. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. 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Image source: The Motley Fool. Thursday, May 21, 2026 at 7 a.m. ET Chief Executive Officer — Long Chen Chief Financial Officer — Chun Chiu Lai Investor Relations Director — Daecy Xu Need a quote from a Motley Fool analyst? Email [email protected] Long Chen: [Interpreted] 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 an 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. 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. Beyond overall customer growth, we also saw broad-based strength across customer segments. GMV from SME customers on the ZKH platform increased more than 20% year-over-year growth. 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-digit year-over-year growth and improving meaningfully on both a sequential and year-over-year basis. 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 non-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. 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, multichannel 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. 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. 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 [indiscernible] 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. 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. 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. 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 strengthened 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% to 90%. We believe these advancements will meaningfully improve quotation completion rates, inventory turnover and sales conversion rates. At the model layer, our Hangjia Linglong MRO vertical large language model continued 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 capabilities 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 context to deliver intelligent diagnostics and product recommendations. This significantly improved communication and procurement efficiency in complex industrial supply scenarios. 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 IP development efficiency also continued to improve. In 2026, we aim to increase our AI code generation rate from approximately 30% today to 80%. 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. 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 towards our goal of full year profitability. I'll now turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone. Chun Chiu Lai: 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 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 the ongoing benefits of strategic initiatives we've implemented 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 gains. Gross profit increased by 6.6% year-over-year to RMB 354 million, while gross margin moderated slightly year-over-year from 17.2% to 16.7%. Our underlying margin trends improved sequentially with GMV-based gross margin increased by 90 basis points. Going forward, we will continue to improve business quality through 3 priorities: a more balanced customer and product mix, higher 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. This improvement reflected continued reinforcement of our operating model, enhanced organizational efficiency and more disciplined resource 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 improvement 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 negative 4.2%. Non-GAAP EBITDA turned positive at RMB 4.2 million compared with negative RMB 52 million in the prior year period, with margin increasing to positive 0.2% from negative 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 31, 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 activities 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 marked a strong start to 2026. We delivered accelerated top line growth continued improvement in operating efficiency and substantial gains in profitability. Notably, we achieved our first non-GAAP adjusted net profit -- 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. Operator: [Operator Instructions] The first question comes from Leo Chiang with Deutsche Bank. Leo Chiang: [Foreign Language] The first quarter 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? And what factors could constrain further improvement in gross margin? And what action has the company taken to improve gross margin? Long Chen: [Interpreted] Thank you for the question. I will take this question from 3 parts. So, namely category mix, customer mix and private labels. So, for category mix, we have lots of SKUs and product lines, and so things are quite fragmented. And 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. So, in the short run, they might drive down the overall gross margins. But if they are able to still drive customer penetration, expand 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. And these categories are reflecting better profit conversion efficiency, so to speak. And 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. So, 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. But overall, our gross margin is pretty solid. So, for my second point about customer mix, usually, the gross margin for SME customers is higher than key accounts or large customers. And so the share of the GMV on the part of SME customers, that trend will impact on the trend of our overall gross margins. So currently, SME customers' GMV accounts for about 30-plus percent of the total, while key accounts GMV accounts for about 60%. And the SME customers are growing at 20% GMV-wise. So, from a customer mix perspective, our gross margin is improving. So, in terms of private labels, gross margins for private labels are typically higher than non-private labels. So, that trend will also impact the overall gross margin trend. And private label GMV currently accounts for 9.7% and our long-term goal for it is to reach over 30%. Overall, the gross margin -- so 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. And we understand how gross margin across different product lines varies by a lot. So, the adjustment and changes to product portfolio for different stages of our development will impact overall gross margin, but our long-term goal is to drive gross profit continuously by way of advantageous product lines, private labels and the optimization of customer mix and improvement of our purchasing efficiencies. Operator: The next question comes from Xiaodan Zhang with CICC. Xiaodan Zhang: [Foreign Language] I will translate myself. We noticed that high-tech manufacturing such as communication electronics, auto manufacturing and equipment manufacturing accelerated its growth in first quarter and in April. Could management share more about whether we are seeing a similar trend? And how does -- how is our performance in these sectors? And also any initiatives have been introduced to expand our market share in these sectors? Long Chen: [Interpreted] 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%. And for semiconductors, energy storage, optical modules, robotics and optical communication, these emerging sectors, we are accumulating more and more customer resources. And other sectors that have been growing relatively fast are steel -- so specifically for steel and non-ferrous metal, if we look at the daily average order volume from January through April, this metric has grown 100% for steel and non-ferrous metals. And for the same metric, so basically daily average order volume Jan through April grew by 45% for communication electronics and 33% for alternative energies. And refined chemicals, pharmaceuticals, electrical manufacturing have all grown very quickly. And in terms of the measures we're 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're building out sector-specific commodity pools and a customer-specific commodity pool for these sectors. And 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. Operator: The next question comes from [Brook Wang] with CITIC. Brook Wang: [Foreign Language] The company's overseas business revenue increased by sixfold year-over-year in the first quarter. Could you please introduce this year's strategy for the overseas business? Long Chen: [Interpreted] 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 the overseas business. Firstly, we are primarily serving Chinese companies going abroad. So, 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 are extremely important to us. So, we will be more focused, more laser-focused in our business there. And specifically, we'll be focusing on providing the categories needed for warehousing operations. We would 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. And our goal is to try to break even for our overseas business this year. That concludes my answer to this question. 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. Daecy Xu: 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. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.] Before you buy stock in Zkh Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Zkh Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. ZKH (ZKH) Q1 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved first-ever adjusted profitability in a seasonally soft first quarter, driven by refined operations and the ongoing benefits of operating leverage. GMV growth accelerated to 12.9% year-over-year, fueled by a 20% increase in SME segment demand and a recovery in central state-owned enterprise (SOE) spending. Strategic focus on high-value industrial scenarios led to double-digit growth in specialized categories like factory automation, lubricants, and chemical reagents. Fulfillment efficiency improved significantly, with warehouse utilization up 36% and comprehensive fulfillment expenses down 17% year-over-year. Private label products grew over 20% year-over-year, now accounting for 9.7% of total GMV as the company expands its proprietary product portfolio. Aggressive AI deployment across the organization has automated 30% of quotation workflows and saved over 2,000 human labor hours per month. Management maintains confidence in achieving double-digit GMV growth and full-year profitability for 2026 based on current shipment trends. The company aims to build an industry-leading knowledge graph exceeding 100 million industrial product data points by the end of 2026. AI-powered product identification rates are targeted to reach 70% overall by year-end, with specific categories like fasteners reaching 80% to 90%. International business strategy is focused on reaching breakeven in 2026 by prioritizing localized U.S. warehousing operations and serving Chinese firms expanding abroad. Long-term gross margin expansion is expected through a target private label GMV contribution of over 30% and an optimized mix of high-margin SME customers. Gross margin moderated slightly year-over-year to 16.7% due to lower margins in specific categories like diesel, transformer oil, and silicon photonics wafers. Operating cash outflow narrowed significantly to RMB 34 million from RMB 97.1 million, reflecting improved working capital management. The company launched 'Hangjia Huiyan', the industry's first intelligent visual search engine for MRO, to simplify procurement in complex industrial scenarios. R&D expenses decreased by 25.9% year-over-year, reflecting more disciplined resource allocation and the shift toward AI-driven development efficiency. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that while some high-growth categories currently dilute margins, they are essential for customer penetration and absolute profit growth. Margin improvement will be driven by increasing the share of SME customers (currently 30% of GMV) and private label products (currently 9.7% of GMV). The company will prioritize absolute gross profit growth and supply chain efficiency over maximizing margins in any single product or quarter. Advanced manufacturing sectors like electronics and new energy saw GMV growth exceeding 20%, with daily order volumes in steel and non-ferrous metals up 100%. Growth is being supported by sector-specific sales forces and the launch of the 'FA Mall' tailored to factory automation and robotics. Management is building customer-specific commodity pools to deepen penetration in emerging sectors like semiconductors and energy storage. International revenue grew sixfold year-over-year, primarily by leveraging existing relationships with Chinese companies moving operations overseas. The U.S. strategy is currently 'laser-focused' on warehousing categories to ensure investment efficiency before branching into other SKUs. Management explicitly stated the goal is to reach breakeven for the international segment within the current fiscal year.

This article first appeared on GuruFocus. Release Date: May 21, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. ZKH Group Ltd (NYSE:ZKH) reported a strong start to 2026 with accelerated top-line growth and improved operating efficiency. The company achieved a non-GAAP adjusted profitability for the first time in the first quarter, marking a significant turnaround from the previous year. Gross Merchandise Volume (GMV) increased by 12.9% year-over-year, driven by an expanding customer base and stronger platform engagement. ZKH Group Ltd (NYSE:ZKH) saw a 20% year-over-year GMV growth from SME customers, indicating strong platform service capabilities. The international business delivered robust growth with revenues increasing more than sixfold year-over-year, reflecting successful expansion efforts. Despite improvements, the gross margin declined year-over-year from 17.2% to 16.7%, indicating challenges in maintaining profitability. The company faces constraints in further improving gross margins due to the varied profitability of different product lines and customer segments. Operating expenses, although reduced, still represent a significant portion of net revenues at 17.8%, highlighting ongoing cost management challenges. The overseas business strategy requires careful management to achieve breakeven, with a focus on efficiency and investment returns. ZKH Group Ltd (NYSE:ZKH) must continue to navigate the complexities of expanding its product portfolio and enhancing supply chain capabilities to maintain growth momentum. Warning! GuruFocus has detected 1 Warning Sign with ZKH. Is ZKH fairly valued? Test your thesis with our free DCF calculator. Q: The company's gross margin improved over the quarter but declined year-over-year. Could you share your view on the long-term trend of gross margin and what actions the company has taken to improve it? A: The gross margin is influenced by category mix, customer mix, and private labels. While some product lines with lower margins are growing fast, they contribute to customer penetration and supply capabilities. High-quality product lines like PPE and cleaning products are improving profit conversion efficiency. The decline in Q1 was due to specific categories like diesel transformer oil. SME customers typically have higher margins than large accounts, and private labels, which have higher margins, are expected to grow from 9.7% to over 30% of GMV. The focus is on improving supply capabilities and customer reach rather than maximizing short-term margins. Q: High-tech manufacturing sectors like communication and electronics have shown growth. Are you seeing similar trends, and what initiatives are being introduced to expand market share in these sectors? A: Yes, sectors such as electrical manufacturing, communication electronics, and new energy have shown over 20% GMV growth. Emerging sectors like semiconductors and robotics are also growing. To improve sector penetration, we have formed sector-specific sales forces, built commodity pools, and launched the Factory Automation Mall to cater to these sectors. Q: The company's overseas business revenue increased significantly. What is this year's strategy for the overseas business? A: The strategy focuses on serving Chinese companies going abroad by leveraging existing customer relations and strengthening last-mile fulfillment capabilities. In the US, we are focusing on warehousing operations before expanding into other categories. The goal is to focus on investment efficiency and aim for breakeven in the overseas business this year. Q: Could you elaborate on the company's efforts to enhance AI capabilities and their impact on operations? A: We are deploying AI across key industry use cases, enhancing data governance, and building a knowledge graph for industrial products. AI is used in quotation workflows, improving product identification rates. The Hangjia Linlong MRO model and Hangjiao Huiyan visual search engine are enhancing procurement efficiency. AI initiatives have led to efficiency gains, freeing up labor hours and improving IT development efficiency. Q: What are the key financial highlights from the first quarter of 2026? A: The company achieved non-GAAP adjusted profitability for the first time in Q1. GMV increased by 12.9% to RMB2.45 billion, and revenues grew by 9.2% to RMB2.11 billion. Gross profit increased by 6.6% to RMB354 million. Operating expenses decreased by 8.8%, and operating loss narrowed by 72.2%. The company maintained a healthy liquidity position with RMB1.84 billion in cash and investments. For the complete transcript of the earnings call, please refer to the full earnings call transcript.