ZKH Group Ltd (ZKH) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to ZKH Group Limited's Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Daisy Hsu, Head of Investor Relations. Please go ahead, ma'am.

Good day, and welcome to ZKH's 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 the Q&A session. 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 purposes only. Please refer to the Earning Relief for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead.

Hello. Hello. Welcome to the Earning Relief for definitions of these measures and a reconsideration of GAAP to non-GAAP results. 本季度,我们延续年初以来良好的发展势头,整体经营表现持续改善,从去年四季度重拾增长以来,我们的GMV和收入已连续第三个季度实现同比增长,且二季度的增速创近几个季度以来的新高。 同时 重点行业与核心客户群体表现稳健 业务增长基础进一步夯实 在业务规模持续扩大的同时 我们的增长质量和盈利能力也在同步改善 二季度 毛利额的同比增长高于GMV 毛利率同比和环比均有所提升 随着规模效应进一步释放,客户和产品结构持续优化,以及运营效率稳步提升,公司首次实现季度经营利润转正,且经调整净利润为较去年同期实现显著的纽规为盈。 Hello everyone, thank you for joining DKH's second quarter 2026 earnings call.

Gelding on a strong start to the year, our business gained further momentum in the second quarter, extending the growth trajectory that we returned to in the fourth quarter of last year. Both GMV and revenue grew year over year for a third consecutive quarter, hosting their fastest growth in recent quarters and core customer segments, further reinforcing our foundation for sustained growth. As our business continued to scale, the quality of growth and profitability improved in tandem. Growth profit grew faster than GMB in the quarter, lifting growth 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. 从客户维度来看,三季度GMA增长,有望较二季度实现进一步的加速。 从客户维度来看,季度内多个客户群体协同发力,增长格局更加均衡。

其中,区域中小客延续去年四季度以来的强劲表现,GMA同比增长达30%,体现了公司在中小企业市场覆盖和服务能力的持续提升。 中小企业市场空间广阔,客户需求往往更分散,采购场景也更多元,毛利率也相比较高,这与客户群的快速发展,不仅为公司注入了更强的增长功能,也有助于优化客户结构,改善整体毛利率水平。 Next, let me walk you through some of the business highlights in the quarter.

Starting with GMB, second quarter GMB grew by 19% year-over-year, while GMB on the ZKH platform increased by 23%, accelerating further from the first quarter. Based on current trends, we expect GMB 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 GMB up 30% year-over-year, reflecting continued improvements 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 growth margins are higher. Rapid expansion in this segment not only adds momentum to our overall growth, but also improves our customer mix and overall growth margin.

尤其国阳级企业在经过去年的调整后, 重新实现了季度GMA同比增长突破20%。 从行业维度来看,公司围绕不同工业场景, 长期陈建的专业化产品与服务能力正在获得丰收, 带动多个重点行业实现较快增长。 其中,钢铁有色表现尤为亮眼, GMV同理翻番, 通信电子, 精细化工, 及医药, 公共事业等行业, GMV同理征服 也近超过30%.

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 non-ferrous metals led the way, with GMB 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. 和深化海外本土经营两条路径推进 一方面 我们围绕中国制造企业的出海需求

提供覆盖境内外产品供应协同合规支持 及本地履约的一站式解决方案 另一方面 我们不断完善海外本地化能力建设 首先聚焦仓储供链MO场景 又模式已得到验证 此外,NOS SKYTING的自由品牌已在亚马逊为主的线上渠道起量,尤其在搬运擦车、工业风扇等细分产品,取得了相当不错的销售进展和客户认可。 While we continued to deepen our domestic business, our overseas expansion accelerated further further.

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 two 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 North Sky 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 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. 专业生化能力建设,为公司的可持续发展,助劳根基。

首先,产品力方面,我们继续深化硬核MO品类布局,并通过加强与头部原厂的合作,持续提升专业品类的服务深度和差异化优势。 本季度得益于品类深耕和行业聚焦策略的兑现 公司电器自动化业务实现1.6倍高速增长 品类端我们围绕客户智能产线 控制安全传感互联全链路需求 重点做生传感器、TLC、工业安全、工业物联网及机器人等产品,形成完整的自动化产品矩阵。 行业端,我们前瞻性布局新能源、半导体及通信电子三大高自动化密集赛道,精准承接其产能扩张与产线自动化升级需求。 The progress we achieved across our businesses was underpinned by the continued

strengthening of our core capabilities. During the quarter, we remain focused on three areas central to our long-term competitiveness, products, fulfillment, and AIs. Starting with products, we continue to deepen our presence in specialized high-barrier MRO categories and strengthen collaborations with leading manufacturers. These efforts enhance the depths of our services in specialized categories and further differentiated our offerings. During the quarter, GMB 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 three 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. 带动自由品牌GMV从比增长超过25% GMV占比升值约10%

在贡献增量收入的同时 也推动了整体毛利率的改善 随到自由品牌产品矩阵的丰富 我们也在持续完善从产品开发到测试验证的体系化能力 目前我们的制度测试体系已覆盖多条核心产线 为了性能、安全合规和可靠性等关键环节开展验证,进一步强化了产品的研发效率和质量稳定性,为自由品牌的规模化发展,提供有利支撑。 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 GMB growth up more than 25% year-over-year and lifting private label products' share of total GMB to approximately 10%. percent 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. 供给能力和客户体验。 本季度,河北昌州危险品昌完成筹建,进一步增强了我们在微化品领域的合规仓储和供应保障能力。 截止季度末,我们的全国旅约网络涵盖30多个配送中心,109个中短仓及超过200辆自营配送车, 并在客户生产现场部署超过6000台EMV智能小仓库,不断强化从区域备货、末端配送到现场安需领用的端到端履约能力 在网络覆盖持续深化的同时,我们进一步提升仓储运营和运力调度效率,推动经营杠杆进一步改善 旅约费率从去年同期的4.2%下降到3.7% further transcending 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 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. 将机内的行业数据和技术优势加速转化为切实的客户价值和业务经营成果。

6月份,我们正式发布多米诺工业用品大数据引擎。 该引擎覆盖10亿级商品参数,具备自动标注、持续学习和全链路溯源等能力, 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 supply's big data engine. Powered by more than a 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. 和智能体制症的应用场景,加快AI与客户业务流程的深度融合。目前,AI物料管家、玲珑汇收、玲珑汇眼以及AI商场等产品一在制造、化工、档口、汽车等多个行业实现应用,覆盖物料治理、商品搜索与选行、企业知识协同及仓储、实货等关键环节。 其中,AI物料管家已服务超过8600家客户,落地超过15个活氧企案例,累计完成2400万行物料治理,有效帮助客户提升物料管理效率,降低库存成本。 内部运营方面,我们继续推进AI在主持和业务流程中的规模化应用,进一步提升运营效率。 基础内,公司内部AI应用累计节省工时超过1.2万小时,AI辅助编程占比超过70%,同时我们积极鼓励业务团队参与AI应用创新和场景共建。

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, Linlong Hui Sou, Linlong Hui Yan, 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 costs. 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 growing range of new business processes. 国家全国性行业协会及产业机构共同举办首届CISS工业用品大会 作为国内首个聚焦产业协同与价值创新的工业用品行业峰会 本职大会参加者超过2000人 参会企业超过1000家 会聚众多行业领袖 企业高管及产业链专家 参会规模与嘉宾层,层级金创行业记录,此次大会进一步提升了真空行的行业影响力,也为我们深化与产业链各方面的合作,提供了重要平台。 未来,我们将继续发挥平台优势,促进产业知识共享与上下游协同,为产业链的长期发展,创造更大价值。 Beyond strengthening our own capabilities, we are also actively contributing to the broader industry ecosystem.

In June, we co-hosted the inaugural China Industrial Supply 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 strengths to promote knowledge sharing and coordination across the value chain, creating greater long-term value for the industry as a whole.

包括持续提升产品供应能力, 纽约效率, 加强团队建设, 这些都是企业长久竞争力的基石, 将为我们业务规模的持续增长 和盈利进一步释放 打下扎实的基础。 我将把电话交给我们的CFO Jerry Wang 为大家详细介绍公司的财务表现。 谢谢大家。

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 would turn the call over to our CFO, Jerry Wong, to walk you through our financial results. Thank you.

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. GMB growth accelerated to its fastest pace in the past few quarters, while our growth 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 discipline 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 the 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 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 GMB growth accelerated, growth 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 GMB 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 GMB contribution from private label offerings. Driven by improved operating leverage and operating efficiency, total operating expenses decreased 0.8% year-over-year to R&B 425 million in a 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 R&B $90 million, representing 3.7% of net revenues, down from 4.2% in the same period last year. Sales and marketing expenses were $151 million, representing 6.2% of net revenues, down from 6.9% in the same period last year. R&D expenses were R&B $35 million, representing 1.4% of net revenues, down from 1.9% in the same period last year. General and administrative expenses were R&B $150 million, representing 6.1% of net revenues, down from 6.8% in the same period last year. Looking ahead, we expect GMB 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 ratios 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 focus on return on investment. 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 greater operating leverage drove a significant year-over-year improvement in profitability. In the second quarter, our operating profit, NGAP EBITDA, and NGAP adjusted net profit all turned positive. In particular, NGAP EBITDA reached RMB 42 million compared with negative RMB 39 million in the same period last year, while NGAP adjusted net profit reached RMB $39 million compared with negative $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 R&B $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 R&B $156 million from R&B $208 million in the first half of 2025, reflecting continued improvement in our working capital management. To conclude, the second quarter of 2026 marked an important financial milestone for the company, as we achieved positive operating profit for the first time and delivered a significant improvement in the gap-adjusted net profit. Based on current trends, we expect to maintain Hiting's GMV growth in the second half of the year, while continue 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.

Thank you. 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 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 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 Jing Wan with CICC Please go ahead 然后详细一点说的话,哪些子行业客户或者产品的紧急度比较高,对于下半年以及前年的TMV资讼数呢,关系层是如何展望的。

我快速翻译一下。 Good evening, management. We noticed that the company's TMA growth accelerate to around 80% this quarter year over year. Could management work us through the key drivers behind this acceleration, and which subsectors, customer segments, or product line are staying stronger momentum, and what's your outlook for GMV growth in the second half and four years?

Thanks. 持续赢得市场份额的印证 我们可以从行业 客户和自由品牌产品三个维度来看 一 首先 我们持续布局快速增长的高景气度行业 二季度 GMV增速超过30%的行业包括钢铁有色 这个钢铁有色主要是指有色行业 有色金属行业增长了103% 公用事业增长了57% 精细化工和医药增长了30% 食品农副增长了30% 通讯电子增长了35% At the same time, the companies in some of the new technologies, such as the telecoms, the technology, and the technology, continue to expand customer support. Please, please.

Thank you very much for that question. So indeed, we achieved acceleration in terms of our GMB 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 three 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 non-ferric metals, primarily non-ferric metals, growing at over 103%. Utilities grew 57%. Fine chemicals and pharmaceuticals grew 37%. Food and agricultural products, 37%. Communication and electronics, 35%.

And we have also been consistently gaining customers from emerging and strategic industries, such as semiconductors, robotics, and optical communications. 相比较央国企啊,行业那些大客户呢,我们在这里定义是中小客户,而中小客户是第二季度的一大亮点,GMV增速达到了30%,我们预期呢,该部分客户将会持续维持超过公司大盘的GMV增速。 如我们先前所说 该部分客户的持续渗透更能体现正常行产品和服务能力的提升 一方面是客户对服务的要求越来越高 传统贸易公司被淘汰 另一方面是从销售驱动 转向供应驱动 也就是我们原来是客户要什么 我们提供什么 对吧 我们去找货 主货 现在呢 我们更有能力 因为产品能力的提升 客户根据我们已经有的产品 来选择购买 那这样效率就会得到 极大的提升 与此同时呢 中小客户的毛利率呢 要比大客户来得高 所以 中小客户的增长 比大盘更快有利于 公司整体毛利率的趋势 此外 中小客户往往在城市边缘 履约交付也更为方便 目前我们中小客户GMV占比约30% 大客户这个大客户包括行业的这些头部客户 K和这些央国企客户GMV占比约60% 未来呢我们预计中小客户的占比会进一步提升

So, secondly, in terms of our customer mix, I would like to talk about how we perform on the SME customer's 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 1 billion RMB. 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 SREs. And so a big highlight of Q2 is that the GMB for these SMEs have reached 30%. And so the GMB growth for this segment is outperforming the company's overall GMB growth. And like discussed earlier, we believe this type of customers can reflect the improvement of the product and service capabilities of the 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 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 growth margins on the 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 growth margins. And these SMEs are usually located in the outskirts of cities, which means delivery and the fulfillment for them is easier. And GMB-wise, these SME customers are accounting for about 30% of total GMB, 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% GME-wide and we expect SME GME share to continue to rise in the future 请继续 最后呢是关于自由品牌 第二季度我们自由品牌同比增速超过了25% 增速较整体呢更快一些

GME 占比达到了10% that will continue towards the long-term goal of 30% of the market. The market price of the non-market market price is higher than 10% of the market price. So the market price of the market price will also affect the market price of the market price. Please comment.

Thirdly, my last point is private labels. So for Q2, private labels achieved a growth of over 25%, outstripping overall growth, and its GMB share has reached 10%, marching towards our long-term goal of 30% for it. And the gross margins for private labels are higher than non-private labels. It's usually 10% higher. So, this trend of private labels as a share of overall GMB increasing will also be conducive to the overall gross margins improving.

Thank you. and achieve the growth of GMV's 15-20% of GMV's growth. All of my questions will be answered.

Thank you. 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.

Thank you.

The next question comes from Zhuo Ming Zhao with Huatai Securities.

Please go ahead. to catch up on this occasion. Also, the AI-related features, such as the AI-to-report manager, is there any further progress to share? Finally, we talked about the AI-to-reporting development of AI-to-reporting. It's about what kind of a plan, and what kind of situation is going to happen. Thank you.

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? 好 我来回答这个问题 我是郑文行的CTO 我们确实观察到 是随着AI技术的普及 客户的采购行为 出现了一些编辑的变化 主要有三个潜在的趋势 第一个趋势呢 就是需求表达的习惯 和采购入口的变化 过去工业品采购 更多依赖于传统的搜索 目睹筛权或者人工询架 现在越来越多的从业者 第一反应 使用自然语言直接描述需求 甚至于把设备型号 使用场景 技术参数 直接交给AI 希望由AI来帮助它 完成需求澄清 选型和商品推荐 那第二个趋势 对企业对于高质量数据的需求 在明显的提升 那随着AI真正进入采购决策流程 其中一个必要的前提 就是商品参数 规格 替代关系 配套使用关系等等 这些关键的数据要足够的准确 所以我们认为AI时代的高质量结构化专业化的数据将变得至关重要 第三个趋势 企业尤其是中小企业对于更加自主化智能化采购方式的接受度在提高 未来相当一部分标准化的工作有机会由AI来完成 那么在降低服务成本的同时提升客户体验 请帮我翻译 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 relied 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 customer's procurement people. In the future, AI may be able to handle a significant portion of this standardized work, reducing service costs while improving the customer service experience. 模型层和智能体层构建工业用品全占AI能力的行业壁垒。 我们将在今年的10月份联合全球头部的芯片厂家英特尔推出玲瓏会眼工业视觉的端侧模型和解决方案,

要复能供用链的仓储物流迁修等场景。 In the future, we will also be able to develop AI materials and materials, with more and more in the world's head-to-head machines, with more and more in the world's head-to-head projects. Please, thank you.

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-year growth of 93% in terms of customer count, and has begun generating revenue. We're also continuing to build a competitive mode around our four-stack AI capabilities for MRO products. In September, or rather October of this year, we plan to work with Intel, a leading global chipmaker, to launch our Linlong Huian, which is an industry-leading edge model and solution for industrial vision. We also intend to establish deeper collaboration with leading domestic chipmakers, integrating AI material manager and the Lin Long model with their technologies at both the model and agent layers. in the industry data, customer experience, and the resources of the company.

It's a deep connection. The aim of the AI company is to become the industry industry of the technology-based company. This is my answer to this question.

Thank you. 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 flexible organizational structure, talent model, and greater flexibility for future capital activities. At the same time, the 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.

Thank you.

The next question comes from Leo Chang with Deutsche Bank.

Please go ahead. 您回购安排或其他相关措施, I'll translate myself. Good evening, management. Thanks for taking my question, and congrats on the strong result. I have two questions. First one is regarding our international business. Could management update us on the company's internationalization progress, including GMB contribution, commercial 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?

Thank you. 好的,那关于国际化方面呢,我们上半年的GME增速呢,是实现了差不多十倍的增长,做到了九千五百万, 以及下半年会进入的增加 海外业务呢 是我们的长期战略 我们未来会持续投入 海外业务我们分成两方面啊 一个是中国企业的伴随式出海 基于现有的中国客户关系 撬动更多海外的订单 同时呢 强化海外不同国家地区的末端交付能力 另外一个是在本地化的业务的开展,这个我们现在主要聚焦在美国,并且聚焦在美国的德州,具体的品类上我们更加聚焦在仓储物流企业的需要在MRO的产品,同时我们线上的包括亚马逊这类的平台的销售也有了大幅的提升。 In general, at the same time, we are more focused on investing in the ability to invest in the future. For example, in the next few years, we will perform the return of the investment in the future. Thank you.

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, GMB was 95 million RMB, and we expect the 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 two parts to our international business. Part one 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 capabilities 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 to make investments in our overseas business, and we will avoid front-loading expenses ahead of business needs, and we will try to turn a profit for sometime in the second half of this year for our international business.

2025年6月批准了5000万美元的回购额度 那有效期一直到2027年的6月 截止今年第二季度 在该回购计划下 公司累计回购了约240万股ADS 对应金额约767万美金 我们会持续加大回购的力度 同时呢 在我们加快公司又发展的同时

随着利润的进一步的增加 我们在考虑给我们的股东进行分红 这是我对这个问题的回答 谢谢 When it comes to shareholder returns In June 2025 The company authorized a 50 million USD worth of the shareback program Which remains valid through June of 2027 As of the end of the Q2 this year the company had accumulatively repurchased approximately 2.49 million ADSs, which translates into about 7.67 million USD. 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. Thank you.

That concludes the question and answer session. I would like to turn the conference back over to management for closing remarks.

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

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

You may now disconnect.