Q4 2025 ZKH Group Ltd Earnings Call

March 19, 2026

Speaker #3: At this time, I would like to turn the conference over to Jin Lee, Head of Investor Relations. Please go ahead, ma'am.

Speaker #2: Good morning, and welcome to ZKH Group's fourth quarter and full year 2025 earnings conference call. With me are Mr. Eric Chen, our founder, chairman, and CEO; and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements.

Jin Li: Good morning and welcome to ZKH Group Q4 and Full Year 2025 Earnings Conference Call. With me are Mr. Eric Chen, our founder, chairman, and CEO, and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements. Related factors are described in our today's press release, and we will also discuss certain non-GAAP financial measures for comparison purpose only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead.

Speaker #2: Related factors are described in our today's press release. We will also discuss certain non-GAAP financial measures for comparison purposes only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results.

Speaker #2: With that, I will turn the call over to Eric. Eric, please go ahead.

Speaker #3: 大家好，欢迎各位参加证券行2025年四季度及全年业绩发布会。2025年我们积极推进业务结构优化，同时坚持核心能力建设，持续深化产品与技术投入。公司总体经营表现在下半年看到明显的企稳回升趋势，GMV和收入在Q3以基本恢复至去年同期水平，并在四季度实现加速同比增长。同时，盈利质量持续改善，并在四季度扭亏为盈，实现经调整净利润1,480万元，亦首次实现半年度盈亏平衡。现金流方面，四季度及2025年全年均录得经营活动现金流净流入，财务稳健性和灵活性进一步增强，这一系列成果标志着公司已经走入走出业务调整影响，进入到一个更加健康、更具韧性的发展阶段。

Eric Long Chen: 大家好，欢迎各位参加震坤行二零二五年四季度及全年业绩发布会。二零二五年我们积极推进业务结构优化，同时坚持核心能力建设，持续深化产品与技术投入。公司总体经营表现在下半年看到明显的企稳回升趋势，GMV和收入在Q3已基本恢复至去年同期水平，并在四季度实现加速同比增长。同时，盈利质量持续改善，并在四季度扭亏为盈，实现经调整净利润1,480万元，亦首次实现半年度盈亏平衡。现金流方面，四季度及2025年全年均录得经营活动现金流净流入，财务稳定性和灵活性进一步增强。这一系列成果标志着公司已经走出业务调整影响，进入到一个更加健康、更具韧性的发展阶段。

Eric Long Chen: [Fl]

Speaker #4: 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.

Eric Long Chen: Hello everyone, thank you for joining our Q4 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 Q3, then accelerated into solid year-over-year growth in Q4. At the same time, our earnings quality continued to strengthen. We successfully returned to profitability in Q4 with an adjusted net profit of CNY 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 Q4 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.

[Interpreter]: Hello everyone, thank you for joining our Q4 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 Q3, then accelerated into solid year-over-year growth in Q4. At the same time, our earnings quality continued to strengthen. We successfully returned to profitability in Q4 with an adjusted net profit of CNY 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 Q4 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.

Speaker #4: 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.

Speaker #4: 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 $14.8 RMB million, and achieved half-year break-even for the first time.

Speaker #4: 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.

Speaker #4: These results signal that we have moved past the transitional effects of strategic optimization and entered a healthier, more resilient phase of development.

Speaker #3: 接下来我将重点介绍一下四季度我们在业务层面的主要进展。从基本面来看，我们的增长底数更加稳固，四季度公司GMV同比增长8.5%，环比实现约11%的增长。按目前订单和发货趋势来看，我们预计今年一季度GMV将进一步加速使双位数的同比增长。GMV增长的核心驱动力首先来自于我们客户基础的持续拓展与深化。四季度公司成交客户数近74,000家，同比增长60%，创季度同比增速新高。从客户分层来看，证券行平台大客户和中小客户的GMV在四季度均保持同比增长。

Eric Long Chen: 接下来我将重点介绍一下四季度我们在业务层面的主要进展。从基本面来看，我们的增长底数更加稳固。四季度公司GMV同比增长8.5%，环比实现约11%的增长。按目前订单和发货趋势来看，我们预计今年一季度GMV将进一步加速至双位数的同比增长。GMV增长的核心驱动力首先来自于我们客户基础的持续拓展与深化。四季度公司成交客户数近7.4万家，同比增长60%，创季度同比增速新高。从客户分层来看，GBB平台大客户和中小客户的GMV在四季度均保持同比增长。

Eric Long Chen: [Fl]

Speaker #4: 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.

Eric Long Chen: Now let me walk you through some of the business highlights in Q4. At a fundamental level, our growth foundation has continued to strengthen. In Q4, 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 Q1 this year. A key driver of our GMV growth was the continued expansion and deepening of our customer base. In Q4, 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.

[Interpreter]: Now let me walk you through some of the business highlights in Q4. At a fundamental level, our growth foundation has continued to strengthen. In Q4, 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 Q1 this year. A key driver of our GMV growth was the continued expansion and deepening of our customer base. In Q4, 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.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: By customer segment, GMV from both key accounts and SME customers on our ZKH platform maintained year-over-year growth during the quarter.

Speaker #3: 大客户方面，国内牵强制造业集团，我们已经覆盖了680余家。多个重点行业大客户GMV均呈现良好增长态势，例如电气装备制造、化工、钢铁有色以及交通运输行业的客户同比增幅均超过了20%。值得一提的是，部分此前受业务优化调整影响的央企客户在本季度也出现了显著恢复，相关客户GMV同比重回增长区间，并实现超过20%的环比增长。

Eric Long Chen: 大客户方面，国内千强制造业集团我们已经覆盖了680余家，多个重点行业大客户GMV均呈现良好增长态势。例如电气装备制造、化工、钢铁有色以及交通运输行业的客户同比增幅均超过了20%。值得一提的是，部分此前受业务优化调整影响的央企客户在本季度也出现了显著的恢复，相关客户GMV同比重回增长期间，并实现超过20%的环比增长。

Eric Long Chen: [Fl]

Speaker #4: Among key accounts, we have now covered over 680 of China's top 1,000 manufacturers. Several core industry verticals delivered 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.

Eric Long Chen: Among key accounts, we have now covered over 680 of China's top 1,000 manufacturers with several core industry verticals delivering particularly strong momentum. Specifically, GMV from customers in electrical equipment manufacturing, chemicals, steel and non-ferrous metals, as well as transportation increased by more than 20% year-over-year. Notably, certain SOE customers previously affected by strategic optimization showed clear recovery, with GMV returning to year-over-year growth and expanding by over 20% sequentially.

[Interpreter]: Among key accounts, we have now covered over 680 of China's top 1,000 manufacturers with several core industry verticals delivering particularly strong momentum. Specifically, GMV from customers in electrical equipment manufacturing, chemicals, steel and non-ferrous metals, as well as transportation increased by more than 20% year-over-year. Notably, certain SOE customers previously affected by strategic optimization showed clear recovery, with GMV returning to year-over-year growth and expanding by over 20% sequentially.

Speaker #4: 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.

Eric Long Chen: 中小客户方面，业务增长势头强劲，四季度GMV同比增长超20%，这主要得益于我们区域化服务网络的持续下沉、线上数字化营销能力的不断强化，以及AI工具在客户识别、需求匹配和转化率上的有效赋能。中小企业客户的快速扩张，不仅进一步增强了公司的增长动能，也有助于改善公司的整体盈利结构。随着这一客户群规模的持续扩大，未来有望为公司整体增长和盈利水平的提升提供有力的支撑。

Eric Long Chen: [Fl]

Speaker #3: 中小客户方面，业务增长势头强劲，四季度GMV同比增长超20%。这主要得益于我们区域化服务网络的持续下沉，线上数字化营销能力的不断强化，以及AI工具在客户识别、需求匹配和转化率上的有效赋能。中小客户中小企业客户的快速扩张，不仅进一步增强了公司的增长动能，也有助于改善公司的整体盈利结构。随着这一客户群规模的持续扩大，未来有望为公司整体增长和盈利水平的提升提供有力的支撑。

Eric Long Chen: Among SME customers, growth momentum remained strong, with GMV increasing by more than 20% year-over-year in Q4. 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.

[Interpreter]: Among SME customers, growth momentum remained strong, with GMV increasing by more than 20% year-over-year in Q4. 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.

Speaker #4: SME customer 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.

Speaker #4: 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.

Eric Long Chen: 在海外方面，四季度在服务中国制造业出海这业务方面，我们取得了较为显著的阶段性成果。环比来看，相关业务GMV增长约50%，客户数增长约20%。履约交付网络已拓展至十七个国家。而我们也将继续推进海外业务布局，深化本地服务能力，持续拓展海外市场版图。客户基础的深化与业务规模的提升，离不开公司供给侧能力的持续打磨和系统性构建。四季度，我们围绕品类、品牌、供应商生态以及旅游网络，持续夯实平台的产品与交付能力，提升平台的一站式服务能力，并为公司盈利能力的逐步优化奠定了坚实的基础。

Eric Long Chen: [Fl]

Speaker #3: 在海外方面，四季度在服务中国制造业、出海这一业务方面，我们取得了较为显著的阶段性成果。环比来看，相关业务GMV增长约50%。客户数增长约20%，履约交付网络已拓展至17个国家。我们将继续推进海外业务布局，深化本地服务能力，持续拓展海外市场版图。客户基础的深化与业务规模的提升离不开公司供给侧能力的持续打磨和系统性构建。四季度我们围绕品类、品牌、供应商生态以及旅游网络持续夯实平台的产品与交付能力，提升平台的一站式服务能力，并为公司盈利能力的逐步优化奠定了坚实的基础。

Eric Long Chen: 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.

[Interpreter]: 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.

Speaker #4: 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.

Speaker #4: Looking ahead to 2026, we'll 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.

Speaker #4: 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.

Speaker #4: Enabling us to deliver a truly one-stop procurement solution while supporting profitability improvement over time.

Eric Long Chen: 首先，在品类建设上，我们持续打磨产品，坚持深度参与产品竞争力的长期打造，深耕场景化、行业标准化产品。截止2025年底，平台SKU数量增至两千三百万，较去年底增加33%。主要增加的为专业硬核的MRO品类，例如工厂自动化、化学试剂、仪器仪表等产线。从产品结构看，我们持续深耕备品备件、化学品和加工制造等高壁垒硬核的MRO品类。四季度，传动设备、仪器仪表、化学试剂等多个专业品类GMV同比增速均超20%，进一步巩固了我们在专业供给能力上的护城河。

Eric Long Chen: [Fl]

Speaker #3: 首先在品类建设上，我们持续打磨产品，坚持深度参与产品竞争力的长期打造，深耕场景化、行业标准化产品。截止2025年底，平台SQ数量增至2,300万，较去年底增加33%。主要增加的为专业硬核的MR品类，例如工厂自动化、化学试剂、仪器仪表等产线。从产品结构看，我们持续深耕备品备件、化学品和加工制造等高壁垒硬核的MR品类。四季度传动设备、仪器仪表、化学试剂等多个专业品类GMV同比增速均超20%，进一步巩固了我们在专业供给能力上的护城河。

Eric Long Chen: 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 Q4, 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 supplier supply market.

[Interpreter]: 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 Q4, 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 supplier supply market.

Speaker #4: 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.

Speaker #4: 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.

Speaker #4: 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 role in the specialty MRO supplier market.

Eric Long Chen: 自有品牌方面，我们进一步拓展产品矩阵。四季度自有品牌上线349个新品，全年自有品牌GMV同比增长21%，占整体GMV比重由2024年的6.7%提升至8.3%。我们将继续深化自有品牌战略，稳步向约30%占比的长期目标推进。自有品牌不仅为客户提供了更高性价比的选择，也在提升客户粘性、强化供应链掌控力、优化整体业务结构方面发挥着日益关键的作用，可有效驱动公司整体利润率的增长。供应链生态布局方面，截止2025年底，我们已经与近两万家供应商建立合作关系。在此基础上，我们还与多家头部品牌和产业链伙伴建立了更深度的战略合作，从单一交易合作进一步升级为供应链数据市场等多维度的能力协同，共建工业服务的新生态。

Eric Long Chen: [Fl]

Speaker #3: 自由品牌方面，我们进一步拓展产品矩阵，四季度自由品牌上线349个新品，全年自由品牌GMV同比增长21%，占整体GMV比重由2024年的6.7%提升至8.3%。我们将继续深化自由品牌战略，稳步相约30%占比的长期目标推进。自由品牌不仅为客户提供了更高性价比的选择，也在提升客户粘性，强化供应链掌控力，优化整体业务结构方面发挥着日益关键的作用。可有效驱动公司整体利润率的增长。供应链生态布局方面，截止2025年底，我们已经与近2万家供应商建立合作关系。在此基础上，我们还与多家头部品牌和产业链伙伴建立了更深次的战略合作，从单一交易合作进一步升级为供应链、数据、市场等多维度的能力协同，共建工业服务的新生态。

Eric Long Chen: Our private label product business saw continued expansion in Q4 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.

[Interpreter]: Our private label product business saw continued expansion in Q4 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.

Eric Long Chen: 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.

[Interpreter]: 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.

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 AA establish 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.

Eric Long Chen: 在履约侧，我们进一步完善仓储与末端交付网络，目前已形成由三十个总仓、超过一百个中转仓构成的多层级仓网体系。同时运营超过两百辆自有车队，最后一公里履约交付覆盖能力持续增强。同时，我们的运营效率也实现了显著提升。Q4过仓费率同比下降约13%，已连续八个季度实现两位数降幅。仓库人效和总仓坪效同比均提升约20%，运营效率已跻身行业领先水平。随着我们仓网体系和仓内作业的进一步完善，过仓费率在今年有望进一步的优化。

Eric Long Chen: [Fl]

Ladies and gentle.

You.

Eric Long Chen: 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.

[Interpreter]: 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.

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.

In 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.

Eric Long Chen: 在持续强化供给能力的同时，我们积极推进AI及数字化能力建设，全面赋能动能，向更高效、更智能的方向不断升级。四季度，我们围绕数据底座、行业模型、场景落地持续深化布局，推动AI能力从技术创新加速走向规模化业务价值阶段。在数据底座层面，ZKH数据字典建设成果显著，公司总数据资产规模持续扩大，目前已达到PB级别。随着AI应用在公司的全面推广，以及AI coding在研发场景的普及，2025年token调用量翻倍，目前月调用规模超过八百亿。AI推理能力、应用深度和自动化水平显著提升。我们预计未来两到三年token调用量将实现至少十倍的增长。与此同时，我们平均每百万token的成本正逐年下降。随着数据专业性和完整性的持续提升，AI在智能询报价、精准定品和定价优化等关键业务场景中的能力也显著增强。

Eric Long Chen: [Fl]

all right, so

AI tweeting.

Eric Long Chen: While continuing to strengthen our supply side capabilities, we have also been strengthening our AI and digital capabilities to make our value chain more efficient and intelligent. During the quarter, we deepened our AI strategy across three layers, data infrastructure, industry-specific models, and scenario application. These measures are accelerating the translation of AI innovation into scalable business value creation. At 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.

[Interpreter]: While continuing to strengthen our supply side capabilities, we have also been strengthening our AI and digital capabilities to make our value chain more efficient and intelligent. During the quarter, we deepened our AI strategy across three layers, data infrastructure, industry-specific models, and scenario application. These measures are accelerating the translation of AI innovation into scalable business value creation. At 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.

While continuing to strengthen our supply-side capabilities, we have also been strengthening our AI and digital capabilities to make our value chain more efficient and intelligent.

During the quarter, we deepened our AI strategy across three layers: data infrastructure.

Industry-specific models and scenario application.

These measures are accelerating the translation of AI innovation into scalable business value creation.

I’ll add that 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 PIBY 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, and now exceeds 80 billion tokens.

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

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

This reflects the increasing depth of AI, broader application scope, and greater automation across our platform.

Looking ahead. We expect token usage to increase by at least 10-fold over the next 2 to 3 years.

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.

Eric Long Chen: 在行业大模型层面，2025年我们推出行业首个MRO垂直大模型行家玲珑，并于九月完成国家网信办备案。目前该模型已进入规模化应用阶段，并在专业工业场景中展现出显著优势。在应用落地层面，AI正加速融入我们的核心业务流程，持续强化平台业务能力与服务效率。

Eric Long Chen: [Fl]

Eric Long Chen: At a model layer, we launched H-Nimble in 2025, the industry's first large language model purpose-built for the MRO sector. The model completed regulatory filing with the Cyberspace Administration of China in September and has since begun scaled deployment. In specialized industrial settings, H-Nimble is already demonstrating clear advantages in handling complex professional MRO scenarios. At the application layer, AI is increasingly embedded into our core business processes, strengthening both our platform capabilities and service efficiency.

[Interpreter]: At a model layer, we launched H-Nimble in 2025, the industry's first large language model purpose-built for the MRO sector. The model completed regulatory filing with the Cyberspace Administration of China in September and has since begun scaled deployment. In specialized industrial settings, H-Nimble is already demonstrating clear advantages in handling complex professional MRO scenarios. At the application layer, AI is increasingly embedded into our core business processes, strengthening both our platform capabilities and service efficiency.

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 Cyber Space 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.

Eric Long Chen: 在对外服务上，AI已在多个关键业务环节实现显著的价值落地。例如在物料管理环节，AI物料管家已累计帮助近万家客户完成超过1,500万行的物料梳理。过去每千行物料梳理平均需要约15个人天，如今AI只需要约3分钟即可完成。在选型推荐上，AI推品大脑提升供需匹配与转化效率，2025年累计服务客户数超过3万家，创造销售额超过2亿元。

Eric Long Chen: [Fl]

All right.

Eric Long Chen: 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 product recommend 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.

[Interpreter]: 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 product recommend 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.

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, organized and standardized 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 product Recom Agent has improved supply-demand matching and conversion efficiency in 2025 alone. This agent served more than 30,000 customers and generated over 200 million RMB in sales.

Eric Long Chen: 在内部运营上，我们持续推进AI智能工作台与RPA数字员工的规模化部署，构建更加智能化、自动化的运营体系。截止2025年底，RPA数字员工突破5,000个，规模已超过公司正式员工总数，成为公司智能化运营的重要基础设施，全年累计节省人力工时近百万小时。同时，我们的AI智能工作台大幅减少了跨系统人工操作，实现业务流程由高人工介入模式转向低人工介入模式。2025年，AI智能工作台自主完成系统操作，操作超过52万次，显著提升流程密集型关键岗位的生产效率。其中客服人效同比提升45%，采购人效提升50%，并带动了相关人工费率的下降。2026年，AI智能工作台将持续提升智能体对业务流程的理解和操作能力，推动运营模式从低人工介入模式向无人工介入模式演进，进一步驱动运营效率提升，支撑业务未来更大规模的发展。

Eric Long Chen: [Fl]

Go again.

Eric Long Chen: Internally, we are accelerating the deployment of our AI smart workbench and RPA digital workforce at scale, building a more intelligent and highly automated operation, 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.

[Interpreter]: Internally, we are accelerating the deployment of our AI smart workbench and RPA digital workforce at scale, building a more intelligent and highly automated operation, 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.

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. Work force and becoming a key pillar of our internet of our 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.

Eric Long Chen: 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.

[Interpreter]: 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.

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 to drive 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.

Eric Long Chen: 展望未来，我们将坚定围绕产品力、交付力与AI能力，持续巩固长期竞争壁垒，把震坤行打造成为制造业MRO采购值得信赖的基础设施。与此同时，我们将持续聚焦核心业务，提质增效，强化内生增长动能，优化客户和成本结构，推动公司在2026年实现全年盈利。下面请我们的CFO Max Lai为大家详细介绍公司的财务表现。谢谢大家。

Eric Long Chen: [Fl]

Max.

Eric Long Chen: Looking ahead, we'll continue to build on our core strengths in products, supply chain, and AI. This will further reinforce our long-term competitive advantages as we work to establish ZKH as the trusted infrastructure for industrial MRO procurement. At the same time, we'll focus on improving the quality and efficiency of our core business, enhancing our organic growth drivers, and further optimizing our customer mix and cost structure, positioning us to achieve full-year profitability in 2026. Now, I'll turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

[Interpreter]: Looking ahead, we'll continue to build on our core strengths in products, supply chain, and AI. This will further reinforce our long-term competitive advantages as we work to establish ZKH as the trusted infrastructure for industrial MRO procurement. At the same time, we'll focus on improving the quality and efficiency of our core business, enhancing our organic growth drivers, and further optimizing our customer mix and cost structure, positioning us to achieve full-year profitability in 2026. Now, I'll turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

Looking ahead, we'll continue to build on our core strengths in products supply chain and AI.

This will further reinforce our long-term competitive advantages as we work to establish VKH as the trusted infrastructure for industrial MRO procurement.

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 light 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 Q4 and full year 2025. We concluded the year with strong momentum across key financial metrics. In the Q4, 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 Q4, 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 CNY 2.92 billion.

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 flow of quarter and full year 2025.

We concluded the year with strong momentum across key financial metrics.

In the fourth quarter quarter, we referred a seller top right 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 as a solid year-over-year and sequential growth.

Continuing strengthening momentum in our business and robust market demand.

Chun Chiu Lai: While total revenues grew by 7.9% year-over-year and 9.8% sequentially to RMB 2.56 billion. This performance was supported by the continued expansion of our customer base, as well as our enhanced product offering and fulfillment capabilities. For the full year, GMV declined by 3.3% year-over-year to RMB 10.1 billion, primarily due to the impact of strategic optimization that continued to weigh on results in the first half of the year. The company's 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.

During we grew by 8.5% year-over-year and 11.3% sequentially to IMB 2.92 billion.

While a total reference grow by 7.9% year-over-year and 9.8%, squarely to R&B 2.56 billion.

Expansion of our customer base as well as our intensive product offering and fulfillment capabilities.

For the fourth quarter, GMV declines by 3.3% year-over-year to RMB 10.1 billion.

primarily due to the impact of strategic optimization that continue to wait 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.

The revenues increased by 2.6% year-over-year, to RMB 9 billion.

Chun Chiu Lai: Gross profit margin in Q4 was 15.5% compared with 17.1% in the same period last year, primarily reflecting temporary unfavorable change in product mix. That being said, the underlying drivers of our long-term margin expansion remained well in place. The ongoing growth of our high margin SMB customers and private label products provides a structural tailwind for our margin profile. In addition, our continued progress in procurement efficiency and supply chain capabilities is expected to further support gradual margin improvement over time. For the full year, gross profit margin was 16.4% compared with 17.2% in 2024. The decrease was mainly due to a lower contribution from our marketplace model, which carries 100% gross profit margin under the net revenue recognition basis.

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 refreshing temporary unfavorable change in MRO in product mix.

That being said, the underlying drivers of our longterm margin expansion remained well in place.

The ongoing growth of our high-margin SMB customers and private label products provides a structural tailwind for a 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.

Chun Chiu Lai: 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 Q4 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.

Which carries um 100% gross profit margin under the net revenue recognition basis.

However, when our gmv basis,

Our gross profit margin improved by roughly 15 basis points year-over-year to 14.6%.

Notably, gross margin for the GBB platform increased by 98.6 basis points year-over-year to 6.5%.

Meanwhile, the takeway of marketplace model works by 57.4 business 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 applications.

Chun Chiu Lai: For the full year, total operating expenses declined by 8.7% year-over-year, while operating expenses as percentage of net revenues improved to 18.8% from 21.1%. These operational efficiency gains translated into meaningful improvements in profitability. In Q4, operating loss narrowed by thirteen point four percent year-over-year to CNY 28.2 million, with the margin improving to -1.1% from -1.4%. Non-GAAP EBITDA turned positive at CNY 19.7 million, compared with a loss of CNY 13.3 million in the prior year period, with the margin improving by roughly 133 basis points.

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 fourth quarter, total operating expenses declined by 8.7% year-over-year.

while operating expenses as percentage of net revenues improved to 18.8% from 21.1%

Operational efficiency gains translated into meaningful improvements in profitability.

in the fourth quarter, operating loss narrowed by 5 13.4% year-over-year to R&B 28.2 million, with the margin, improving to negative 1.1% from negative 1.4%

Now, Gap. EBITDA turned positive at RMB 19.7 million, compared with a loss of RMB 13.3 million in the prior year period.

Chun Chiu Lai: Most notably, we achieved a non-GAAP adjusted net profit of RMB 14.9 million in Q4, representing a very significant turnaround from a non-GAAP adjusted net loss of RMB 50 million in the same period last year. For the full year, operating loss narrowed by 37% year-over-year to RMB 213.3 million, with the margin improving to -2.4% from -3.9% in 2024. Non-GAAP EBITDA improved by 58.9% to RMB -79.3 million, with margin improving to -0.9% from -2.2%. Adjusted net loss narrowed by 46.1% year-over-year to RMB 85.9 million, with margin improving to -1% from -1.8%. Turning to our balance sheet and cash flow.

with the margin improving by roughly 133 basis points,

most notably, we achieved a long Gap, adjusted, net profit of R&B, 14.9 million. In the fourth quarter representing, a very significant turnaround from a non Gap adjusted, net loss of R&B 15 million in the same period last year.

For the 4 year operating loss, narrowed by 37% year-over-year to R&B 200 and 13.3 million.

With the margin improving to negative 2.4% from negative 3.9% in 2024.

Now, Gap EBITDA improved by 58.9% to negative RMB 79.3 million.

With margin improving to negative 0.9% from negative 2.2%.

Adjust the net loss narrowed by 46.1% year-over-year to R&B 85.9 million with margin, improving to negative 1% from negative 1.8%.

Chun Chiu Lai: We maintained a strong and healthy cash position. As of 31 December 2025, our cash and cash equivalents 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 Q4, 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 Q4 and closed the year with stronger operating leverage, renewed growth momentum.

And cash flow.

We maintained a strong and healthy cash position.

As of December 31st 2025, our cash and cash requirements. We switched cash and shortened Investments totaled, R&B 1.92 billion.

This provides us with ample rapidity to support ongoing operations and strategic initiatives.

Operating cash flow also improved sequentially.

In the fourth quarter.

Net cash generated from operating activities was RMB 1,016.1 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 stream, friends, our financial fundamentals.

Improved operational efficiency, and significantly narrowed large wire, continuing to invest in capabilities that support long-term growth.

As a, as a result, we return to profitability in the fourth quarter.

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

And cross 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 card space.

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 discipline. Execution, as we advance the tourist, substantial profitability,

Thank you. I'd now like to open the call for Q&A. Operators, Prix, go ahead.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The first question comes from Leo Chiang with Deutsche Bank. Please go ahead.

We will now begin the question and answer session.

to ask a question, you may press star then 1 on your telephone keypad,

If you are using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then 2

For the benefit of all participants on today's call.

If you wish to ask your question to management in Chinese, please immediately repeat your question in English.

The first question comes from Leo Chang with Deutsche Bank. Please go ahead.

Leo Chiang: I'll translate myself. Thanks management for taking my questions and congratulations on the robust FY '22 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? Thank you. Thank you very much for that question. To answer your question, the Q4 changes, the gross margin changes in Q4 was primarily caused by two things. First is the change in product mix. As we know, there have been changes and fluctuation in the commodity prices, and that had led to some customers pulling ahead the purchasing of certain products. For example, wires and cables, right?

uh,

A chance that myself. Uh thanks management for taking my questions and congratulation on the robots for Q results. My question is about gross margin, we noted a decline in the gross margin over year in Q4 could management. Please explain the reason behind this.

Uh, and additionally—well, will the long-term goal and the trend for improving gross margin be affected? Thank you.

um,

Hello.

Thank you very much for that question. So, um, to answer your question, um, the cube for um, changes, the gross margin changes in Q4 was primarily caused by 2 things. First is the change in product mix. As we know, um, there have been changes and fluctuation in the

Eric Long Chen: Wires and cables use copper, whose pricing has been rising. Gross margins for these products tend to be lower, and that have driven down the overall gross margin. The similar products include things like white oil, and stuff like that. Secondly, the percent of or SOE customers as a percent of total customers in terms of their business value and volume is has increased slightly. If you look through our gross margin January through March of this year, things have been improving gradually. Of course, because of the war that's ongoing in the Middle East, there's now price hikes regarding oil, petroleum. Suppliers are jacking up their prices.

Multi prices and that had led to some customers, pulling ahead, the purchasing of certain products, for example, wires and cables, right? Um, and, um, uh, wives and cables use copper whose pricing has been, uh, rising and the growth margin for these products tend to be lower and that have, um, driven down the overall growth margin and the similar products include things like white oil, uh, and stuff like that. Secondly, the percent of um, or so customers as a percent of total customers, um, in terms of um, their their business value and volume is um, has increased slightly. Uh, but if you look

Through our gross margin, uh, January through, March this year, things have been proving things have been improving gradually.

Eric Long Chen: Of course, that needs to be considered as a double-edged sword as, even though on the short run, it's gonna put some downward pressure on our gross margins, but in the long run, it's gonna provide opportunities for more sales and more expansive or expansion opportunities. For the full year, if you look across all our production lines, our goal is definitely to achieve higher margins by way of lowering costs on three different fronts, namely purchasing, private labels, and cost optimization regarding certain sectors. We need to understand that gross margin, gross profit margins vary from product line to product line. What we care most about is the overall profitability, and we will try to drive that up over time. That was my answer to this question. Thank you.

And, of course, because of the war that's ongoing in the Middle East, there's now price hikes, uh, regarding oil, petroleum. Um, so suppliers are jacking up their prices. Of course, that's, uh, that needs to be considered as a double-edged sword, as, um, even though on the short run, it's going to put some, uh, downward pressure on our gross margins, but in the long run it's going to provide opportunities for more sales and more, um, expensive or expansion opportunities for the year. Um, 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, purchased, namely purchasing, um, private labels and, um, cost optimization regarding certain sectors. Um, and we need to understand that gross margin. Uh, gross profit margins. Vary from product line, to product line. Uh, what we care most about is the overall profitability. And we will try to drive that up, uh, over time.

Thank you.

That was my answer to this question. Thank you.

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

Thank you. Are you ready for your next question?

The next question comes from. Jen 1 with cic, please go ahead.

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

With nonprofit label suppliers. Thanks.

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

Um,

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

No.

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.

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

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

And um, our goal is to drive its share, um, of our GMD to roughly 10%, uh, for this year 2026 as for our relationship with, um, non-private label, suppliers, of course. First off we won't do private labels for all categories. We were looking to, uh, categories. We will come come through our categories, to identify the ones where we could provide better value by doing private labels on. Um, and for those categories, we will have a private label version of those categories. And if you look across history and the globally, when whenever a platform grows to a certain glue to a certain size, private labels, um, will emerge and um some of the categories will shift and migrate towards private labels and um, that is a great appeal to the business. We are in

so, as we scale,

Both private labels and, uh, branded products will coexist and thrive. So, um, I think driving up the share of our private labels as a percent of, um, our GMV is an important strategy for us. Uh, as you know, offering certain kind of, um, uh, certain degree of competition, uh, against our suppliers will definitely drive up customer satisfaction and

Create more value for our customers and customers satisfaction, in my opinion, trumps all the other factors.

Operator: Okay. Was there a follow up or was that the answer for the question?

Okay.

Was there a follow-up, or was that the, uh, answer for the question?

[Interpreter]: 请问陈总的问题已经完毕了，是吧？

[Interpreter]: [Fl]

Eric Long Chen: 啊，已经完毕了。啊，是的。

Eric Long Chen: [Fl]

On the 1.

[Interpreter]: That was the full answer.

Operator: Thank you. The next question comes from Shengqun Wang with CITIC. Please go ahead.

That 'that' was the poor answer.

Thank you. The next question comes from Shen Shen Coins.

Uh, Wong with citic, please go ahead.

Shengqun Wang: 管理层晚上好。先恭喜公司三四季度以来取得了良好的这种业绩修复。我想请您介绍一下今年我们几个最重要的经营目标，尤其是国内市场的目标，以及如何达成这种增长的具体的经营策略。Could you please introduce the company's most important objectives for this year, as well as the growth targets and the strategies for China domestic business? Thank you.

Shengqun Wang: [Fl] Could you please introduce the company's most important objectives for this year, as well as the growth targets and the strategies for China domestic business? Thank you.

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. Thank you.

Eric Long Chen: 好的。2026年我们最重要的目标就是要进入到盈利性增长的阶段，这是我们最核心的一个目标。但是呢，在实现盈利性增长的同时呢，我们希望能够更好地建设我们的核心竞争力，为未来的更好的发展打下一个坚实的基础。这是如果讲最重要目标的话，这就是我们最重要的目标。那，有三个方面的重要的策略，我们会有利于既能实现盈利性增长，也能有利于我们核心竞争力的建设。第一个方面，就是有关于客户价值的进一步的创造。客户价值的创造第一个层面呢，我觉得第一个最重要的就是深挖我们的产品的竞争力，实现更好的产品、更低的价格，这是第一步要做的事情。第二步要做的事情呢，就是面对一些中大型的客户，围绕这类客户的产品池做进一步的深耕，更多地覆盖客户的产品线，就是客户的口袋深度进一步增加。同时呢，毛利率进一步的提升。请翻译，然后再继续说。

Eric Long Chen: [Fl]

Um,

Yeah.

Eric Long Chen: Okay. 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. There are three 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 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 resolving their needs, so as to drive up their wallet share with us, as well as gross profit margins. Please continue.

Sure.

The most important objective for us in 2026 is to Chief 4 year profitability as alluded, uh, in the prepared remarks.

Meanwhile, we will continue to build out our core. Competencies to lay a firm groundwork for future development.

So, there are three aspects we will try to push for in order to achieve these two proud objectives.

Firstly, we will continue to create value by digging into our, uh, product competencies, or to make our products more competitive. So basically, uh, to offer better products at lower prices.

Secondly, for a medium to large customers, who continue to dig deeper resolving, their needs. Uh, so to access to drive up, their water share with us, um, as well as a growth profit margins.

I think you should.

Eric Long Chen: 在服务好大客户的同时，我们要系统性地拓展广大的中小型制造企业，这是一个非常巨大的市场，而今年我们要加大这个力度，通过线上的模式、内容的营销，包括在地推等等不同的形式，加大中小客户的覆盖，这是我们今年非常重要的一点。在海外市场方面，我们要服务好中国制造业的出海。我们前面也讲过，这一块的增长速度也是非常快。好了，这是关于两个客户层面的内容。请翻译。

Eric Long Chen: [Fl]

Face.

Eric Long Chen: On the customer's front, aside from serving key accounts well, we will be systematically doing business development with SME customers and expand our base of SME manufacturers. Specifically, we will be focusing on doing online and offline ad campaigns, content marketing, and you know, brick and mortar offline promoters kind of thing to expand that coverage. That's what we're going to focus on this year. We will also accelerate the expansion of the overseas markets, especially when it comes to serving well Chinese manufacturers that are going abroad, because this trend is only accelerating and we will need to take advantage of that very well.

[Interpreter]: On the customer's front, aside from serving key accounts well, we will be systematically doing business development with SME customers and expand our base of SME manufacturers. Specifically, we will be focusing on doing online and offline ad campaigns, content marketing, and you know, brick and mortar offline promoters kind of thing to expand that coverage. That's what we're going to focus on this year. We will also accelerate the expansion of the overseas markets, especially when it comes to serving well Chinese manufacturers that are going abroad, because this trend is only accelerating and we will need to take advantage of that very well.

On the customer's front. So aside from serving tea accounts well we will be systematically doing business development with um SME customers and expand our base of SME manufacturers um specifically we will be focusing on doing online and offline ad campaigns uh content marketing uh and um you know brick and mortar offline 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 Chinese manufacturers that are going abroad, because this trend is only accelerating and we will need to take advantage of that very well.

Can you?

Eric Long Chen: 那第二个层面呢，为了确保我们的盈利的增长呢，第二个层面就是大幅要提升我们的经营的质量。在提升经营质量方面，我觉得两个内容，一个方面包括我们的业务质量。首先我们要更加聚焦于真正的MRO产品，我们前面讲的硬核的MRO的产品，这是第一个方面。第二个方面呢，通过销售与产线的协同，提升客户的质量，也就是尤其是一些改造一些低毛利率的客户，把毛利率提得更高一些。这是一个方面，就是能够实现，这种做法呢，能够实现产线竞争力和盈利能力的两个方面的提升。在运营的质量方面呢，我们要进一步做好什么呢？应收款和现金流的管理，包括库存的管理，同时提升我们的运营效率，实现了总体的经营质量的大幅的提升。请翻译。

Eric Long Chen: [Fl]

Shoot.

So here.

Number.

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

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

Secondly, in order to ensure profitability, we need to first and foremost, uh, 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. Uh, firstly as uh, was alluded to, in the prepared remarks, we need to focus on what we believe is the real, mro's what we uh were referring to as highly specialized mro products.

Eric Long Chen: 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.

[Interpreter]: 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.

So specifically through the Synergy between sales and production lines, uh, we will need to improve the quality of our customers. What I mean by that is to turn low growth, margin growth, 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.

Can you?

Shoot. Uh,

Thirdly, we will continue to expand our R&D capabilities and focus on innovation.

On the product front. Uh, we will be fully leveraging. Our R&D Center in Taiwan and um um, have that work in tandem with our production based in Shenzhen to do, uh, continuous R&D and testing. Uh, 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.

Eric Long Chen: Last but definitely not the least, is team build-out. Because a strong team, a competent team is essential to our sustainable growth. We made quite a bit of progress last year, but there's still more room for improvement. Our goal is to build a team with high-quality talent and with a very high morale. We will also be looking at how we distribute our personnel across different industries and geographies so as to focus our resources on the most profitable and the most efficient areas. That was my full answer. Thank you.

That's definitely not the least um, 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 uh that was my full answer. Thank you.

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

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.

Thank you. Once again for joining us today.

You can find the.

On II vk.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.

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

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