ZKH Group - Earnings Call - Q4 2024

Transcript

Operator (participant)

Ladies and gentlemen, good day, and welcome to ZKH Group Limited's Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jin Li, Head of Investor Relations. Please go ahead.

Jin Li (Head of Investor Relations)

Thank you, Operator. Thank you, everyone, and welcome to our call today. Joining us today are Mr. Eric Chen, our Founder, Chairman, and Chief Executive Officer, and Mr. Max Lai, our Chief Financial Officer. Before turning the call over to Eric, I'd like to briefly review our safe harbor provisions. Please note that the comments made during today's call represent management views as of today and may include forward-looking statements. For further details, please refer to our latest safe harbor statement in the earnings release on our IR website. We will also discuss certain non-GAAP financial measures for comparison purposes only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will now turn the call over to Eric. Eric, please go ahead.

Eric Chen (Founder, Chairman and CEO)

大家好，感谢各位参加振坤行2024年四季度及全年业绩发布会。四季度我们GMV为26.9亿人民币，2024年全年GMV为104.8亿人民币，同比均略有下降，主要是业务优化调整的影响。若剔除业务调整的影响，2024年四季度和全年GMV均实现了双位数的同比增长。

Hello, everyone. Thank you for joining ZKH's fourth quarter and full year 2024 earnings conference call. In Q4, we achieved a GMV of RMB 2.69 billion, bringing our full year 2024 GMV to RMB 10.48 billion. While both figures show a slight decline compared to the previous year, this was primarily a result of our business optimization initiatives. Excluding the impact of those optimizations, both Q4 and the full year GMV for 2024 delivered double-digit year-on-year growth.

利润方面，四季度经调整净亏损为1,500万人民币，并在12月实现了单月盈利。2024年经调整净亏损为1.6亿人民币，同比大幅减亏约14%。经调整净亏损率由2023年的3.3%下降至2024年的1.8%。我们的盈利能力显著提升。

In terms of profitability, we narrowed our adjusted net loss in Q4 to RMB 15 million and achieved profitability in December 2024 on a single-month basis. For the full year 2024, we substantially narrowed our adjusted net loss by approximately 44% year-over-year, bringing it down to RMB 160 million. Our adjusted net loss margin also improved from 3.3% in 2023 to 1.8% in 2024, reflecting a substantial enhancement in our profitability.

现金流方面，四季度我们录得经营活动现金净流入1.7亿人民币，连续三个季度实现现金流净流入。2024年全年经营活动现金流净流入达到2.29亿人民币，首次实现了全年经营活动现金流净流入，进一步提升了财务的稳健性。

Moving on to cash flow. In Q4, net cash inflow from operating activities reached RMB 171 million, marking the third consecutive quarter of positive cash flow. For the full year 2024, net cash inflow from operating activities totaled RMB 229 million, achieving positive operating cash flow for the full year for the first time, which highlights the improvement in our financial stability and resilience.

截至2024年四季度，我们已基本完成相关业务的战略性调整和优化。这些调整对营收增长的影响将逐步减少，并且我们有信心在2025年实现收入高增长，并实现国内业务全年盈利的目标。

As of Q4 2024, we have essentially completed the strategic optimizations of our relevant business sectors. The impact of these adjustments on revenue growth is expected to gradually diminish moving forward, and we are confident to achieve rapid growth in 2025 and achieving full year profitability for our China business.

接下来，我介绍我们在客户拓展、产品力建设以及AI智能化三个关键领域的进展。客户拓展方面，我们坚持行业大客户深耕、重点区域覆盖、布局海外市场的策略，并取得了显著成果。

Now, let's dive into our progress in customer acquisition, product capability development, and AI-driven growth. Starting with customer acquisition, we remain committed to our three-pronged strategy: deepening engagement with industry key account customers, prioritizing coverage in key regional markets, and expanding into overseas markets. This approach has yielded notable results.

在行业大客户运营中，我们深入行业应用场景，优化商品池，并通过与战略供应商的紧密合作，在降本和产品创新上取得了突破，为行业客户提供更具性价比的采购方案。在2024年全年，我们在电器、电子通讯、新能源汽车、交通运输和公共事业等行业均实现了20%以上的GMV增长。

In managing our industry key accounts, we focused on thoroughly understanding and addressing application scenarios in key industries, refining our product pool, and fostering closer collaboration with strategic suppliers. These efforts drove breakthroughs in cost reduction and product innovation, enabling us to offer industry customers more cost-effective procurement solutions. For the full year 2024, we achieved over 20% GMV growth in these industries: electricals, electronics and telecommunications, new energy vehicles, transportation, and public utilities.

在区域覆盖中，我们围绕网格化深耕策略，深化本地化运营，进一步提升履约效率，加强客户触达，并通过精细化营销促进成交转化。得益于这些举措，2024年我们总的总成交客户数达到约8.4万家，同比增长26%，实现了连续四年的高速增长。

In terms of regional coverage, we implemented a grid-based strategy for deep penetration and advanced localized operations, further elevating fulfillment efficiency while extending customer reach. We also further boosted transaction conversions through precision marketing. Driven by these coordinated initiatives, the total number of our transacting customers rose to approximately 84,000 in 2024, a year-over-year increase of 26%, marking four consecutive years of rapid growth.

在海外市场方面，美国独立站于去年年底正式上线运营，产品覆盖个人防护、手工具、动力工具配件、搬运存储等多个品类。自2024年12月正式上线运营以来，独立站的月成交客户数环比保持高速增长，显示出美国市场增长的潜力和我们产品在美国市场的竞争力。

As for overseas markets, our U.S. independent website was officially launched at the end of last year, covering multiple product categories, including personal protective equipment, hand tools, power tool accessories, and material handling and storage solutions. Since its launch in December 2024, the U.S. website has maintained rapid month-over-month growth in the number of transacting customers, demonstrating both the growth potential of the U.S. market and the competitiveness of our products in this market.

在产品竞争力方面，我们与国家级质量监管机构共建联合实验室，加强自主品牌的研发和质量体系建设。2024年自有品牌销售额同比增长29%，占总GMV的比例从去年同期的4.9%提升至今年的6.7%。同时，我们进一步优化供应渠道，整合上游资源，提升成本管控水平，推动整体毛利率的优化。

To boost our product capabilities, we have established a joint laboratory with a national quality supervision authority, strengthening our R&D capabilities and the quality system of our private label products. In 2024, the GMV of our private label products increased by 29% year-over-year, now accounting for 6.7% of our total GMV, up from 4.9% in the same period of the previous year. In addition, we have optimized our supply channels, integrated upstream resources, and enhanced cost control, driving improvements in overall gross margin.

在AI技术的应用方面，基于积累的产品数据和行业经验，我们开发了一系列智能化工具，有效提升了运营效率和客户体验。赋能客户方面，我们专注于解决客户物料标准化的AI物料管家。自上线三个月以来，已帮助客户梳理超过200万行物料数据，识别准确率超过90%，有效提升了客户物料管理的效率。

Now, let's turn to AI applications. Leveraging our extensive product data and industry expertise, we have crafted a suite of intelligent tools that have effectively elevated operational efficiency and customer experience. For customer enablement, we focused on addressing the challenge of material standardization for our customers through an AI Material Manager. Within just three months of its launch, it has enabled customers to standardize over 2 million material entries, achieving an identification accuracy rate of more than 90%, greatly improving the efficiency of material management for our customers.

内部绩效方面，针对于客户和供应商日常咨询的场景，我们开发的AI行家助手已实现了日常咨询的自动化应答。目前累计服务企业已超过1.2万家。在流程自动化方面，截止2025年2月底，我们累计开发并部署超过1,200台RPA机器人，覆盖了主要业务流程，减少了人工介入操作。得益于AI工具的使用，我们客服订单处理人效提升了23%。

For internal efficiency, we have developed an AI Expert Assistant, which automates responses to routine inquiries from customers and suppliers. To date, this tool has served over 12,000 enterprises. In the area of process automation, as of the end of February 2025, we have developed and deployed over 1,200 RPA robots, covering major business processes, reducing the need for manual intervention. Thanks to the adoption of AI tools, the productivity of our customer service team members in handling order processes has increased by 23%.

[Foreign language]

Looking ahead to 2025, we are committed to driving progress across these key areas, prioritizing the refinement and upgrade of our organizational structure, business workflows, and workforce management. These efforts will elevate operational efficiency and workforce productivity, ultimately enabling us to reduce operational costs. We are confident that this approach will lead to strong revenue growth and help us achieve our full year profitability target for our China business in 2025. Now, I will turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone.

Max Lai (CFO)

Thank you, Eric, and thanks everyone for making time to join our earnings call today. I will now provide an overview of our 2024 fourth quarter and full year financial results. Despite facing challenges in demand environments and the effect of our business optimization, we conclude the year with resilient results. Our total GMV reaches RMB 2.7 billion in the fourth quarter and RMB 10.5 billion for the full year, representing a year-over-year decrease of 16.1% and 5.4%, respectively. If we exclude the effect of our strategic business optimization initiatives, we achieved a double-digit year-over-year growth for both the fourth quarter and the full year of 2024, mainly attributable to the continued growth in SMB customer numbers and the increased contribution of GMV from industry key customers, driven by our enhanced service capabilities.

We believe that the impact of this adjustment has gradually lessened, putting us in a stronger position towards solid and sustainable growth. Total net revenue experienced a slight decrease of 3% in the fourth quarter, amounting to RMB 2.4 billion, while full year revenue remained steady at RMB 8.8 billion. This was primarily due to lower revenues from the marketplace model, resulting from optimization of our low margin and long customer credit term business, partially mitigated by the increased revenues from the product sales model. While we continue to refine our revenue mix, we are equally committed to enhancing operational efficiency and driving profitability growth. For gross profits, it was RMB 405 million in the fourth quarter, reflecting a decrease of 2.9%, while gross profit margin held steady over the year-over-year at 17.1%.

Looking at details, the gross profit margin of product sales model with the ZKH platform increased from 14.4%-16.4%, and the take rate of marketplace model rose from 11.1%- 14%. These improvements were mainly due to our business optimization efforts, reduced procurement costs, and an increased proportion of GMV from higher margin private label products. For the full year, gross profit was RMB 1.5 billion, marking an increase of 4%. Gross profit margin improved to 17.2% compared to 16.7% in 2023, primarily driven by enhanced gross profit margin in the product sales model with the ZKH platform, resulting from business optimization, lower procurement costs, and higher proportion of GMV from more profitable private label products.

For the operating expenses, it amounts to RMB 437.6 million in the fourth quarter, representing 18.5% of net revenues, an increase from 17.3% in the same period of 2023, mainly due to higher share-based compensation expenses. If we exclude share-based compensation expenses, operating expenses amount to RMB 423.5 million, accounted for 17.9% of total net revenues, compared to 17.1% in the prior year. For the entire year of 2024, total operating expenses reached RMB 1.85 billion, representing 21.1% of net revenues, a slight decrease from 21.2% in 2023. If we exclude share-based compensation expenses, operating expenses amounted to RMB 1.74 billion, constituting 19.9% of net revenues, compared to 21% in 2023. As a result, for the fourth quarter, loss from operations was RMB 32.6 million, resulting in an operating loss margin of 1.4%.

For the full year of 2024, the total loss from operations amounts to RMB 338.8 million, compared with RMB 398.7 million in 2023, leading to an operating loss margin of 3.9% and improvement from 4.6% in 2023. For the fourth quarter, the non-GAAP adjusted net loss was RMB 15 million, resulting in non-GAAP adjusted net loss margin of 0.6%. For the full year of 2024, the non-GAAP adjusted net loss totaled RMB 159.5 million, an improvement of 44.5% from RMB 287.5 million in 2023, with a non-GAAP adjusted net loss margin of 1.8% compared to 3.3% in the prior year, making us very close to and approaching full year break-even point.

Our cash position has also strengthened as we generated net cash of RMB 170.7 million from operating activities in the fourth quarter and RMB 229.1 million in 2024, making our third consecutive quarter and our first full year of positive net cash improvement from operating activities. Before I conclude, I would like to reiterate our commitment to delivering value to our shareholders. Throughout this quarter, we continue to execute our share repurchase program, as announced in June 2024. These ongoing efforts underscore our strong confidence in the company's growth prospects and reflect our dedication to creating long-term value for our shareholders. With that, I would now like to open the call to Q&A. Operators, please go ahead.

Operator (participant)

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. At this time, we will pause momentarily to assemble our roster. The first question comes from Leo Chiang with Deutsche Bank. Please go ahead.

Leo Chiang (Equity Research Analyst)

谢谢管理层接受我的提问。我有两个问题。第一个是，可以请管理层跟我们分享一下2025年对于中国MRO市场的展望，以及对于这个市场长期的展望。我的第二个问题是，可以请管理层分享一下2025年我们公司的GMV的outlook，还有各个分行业品项的表现会是怎么样。Thank you, management, for taking my questions. I have two questions. The first one is, can management share China's MRO industry outlook in 2025 and the long-term growth outlook? My second question is, could management share the 2025 outlook of company GMV and performance by customer verticals? Thank you.

Eric Chen (Founder, Chairman and CEO)

好的。中国的MRO市场本身就是一个巨大的市场。我觉得现在是带来了一个新的机会，就是从中国市场到全球化的市场。我觉得这是一个更好的发展的机会。请翻译。

China's manufacturing industry is enormous, and now what's in front of us is this opportunity of doing business globally as well as in China. I think that is a better opportunity for us.

虽然说地缘政治的原因对产品的关税各个方面造成一定的影响，但是实际上绝大部分的MRO的产品在美国和欧洲，他们基本上已经不生产了。主要的生产的能力还在中国，或者是中国到海外的东南亚的企业。所以从这个角度上来讲，虽然说有加税的原因，但是中国企业MRO领域的优势并没有丧失，甚至对有全球供应链整合能力的公司来讲，反而是更好的一个新的发展机会。请翻译。

Yes, we do have geopolitics, and tariffs are exerting some impact, but I would say the vast majority of MROs in Europe and the U.S. are no longer produced locally. The manufacturing capabilities congregate in China or Chinese companies that have relocated to Southeast Asia. Despite the fact that there are tariffs, the Chinese MRO companies have not lost their advantages. Quite to the contrary, for those Chinese companies that have the capabilities to integrate global supply chains, this is a great time for them [Foreign language].

那从另外一个角度来讲，整个MRO行业随着数字化的进展，它的集中度是逐渐在增加。这也就意味着行业内的头部的领先的企业会实现一个长期的、可持续的、逐渐的增长的态势。

On the other hand, digitization is only happening more rapidly in this space, and we are seeing more consolidation in the MRO space. That is to say, for leaders in this space, we will definitely be able to enjoy longer-term and sustainable growth.

从竞争的格局上来讲，我觉得我们正好在MRO这个专业领域已经建立了比较好的领先的优势，并且在海外的市场拓展方面，我们也基本上处于领先的地位。我们应该是国内首家到美国直接开拓业务的这样MRO的公司。同时，我们在全球供应链的供应方面已经做好了充分的准备。从再加上一点，我们在泰昌建设了我们的产品创新中心，我们也是国内首家基于MRO这个行业的企业主动参与到产品的研发、产品的创新，让我们的产品更具备竞争力。所以总结来讲，中国行已经具备了比较全面的在MRO领域的领先优势。

We are enjoying a very good leading edge in the MRO space, and we are also a leader when it comes to expanding business overseas. We are the first Chinese-based MRO company to ever set up shop in America, and we have fully prepared for having a globalized supply chain. We have also set up a production innovation center in Taicang, and we are the first Chinese MRO company to ever engage in R&D and innovation to make our product offerings more competitive. Basically, we have enjoyed and we are enjoying a leadership position in the MRO space on practically all fronts.

从公司的发展阶段上来讲，我们已经顺利地度过创业早期的这种不确定性，进入了一个比较稳健的发展阶段。2024年处在盈利的边缘，2025年我们有确定的把握实现全面的盈利。现金流方面，我们也是非常稳健的。所以在这样的基础下，我们只要做好扎扎实实的产品竞争力的提升，提升我们的运营效率，提升我们的市场份额，我们今年会有一个非常好的发展机会。

In terms of where we are in our journey, this early stage of uncertainty of starting up a business is already behind us. In 2024, we were on the verge of profitability, and we are fully confident that we will be able to turn a profit in 2025. Our cash flow and cash reserves are both going very strongly. What we are going to do and what we need to do going forward is to keep improving our operational efficiency and expand our market share to enjoy a very good developmental period.

关于你的第二个问题，截止到2025年一季度，截止到目前，在订单层面，来自行业大客户和区域中小客户的订单，GMV今录得接近20%的同比增长。请翻译。

To answer your second question, as of right now, as of the first quarter of 2025, in terms of order value or order GMV coming from our large clients and the regional SME clients, they have both recorded close to 20% year-on-year growth.

那其中来自电器、新能源汽车、通讯电子、医药新材料、钢铁有色、交通运输等行业的大客户的订单，在一季度到目前超过了20%的同比增长。请翻译。好的，谢谢。

Specifically, the GMV of purchase orders from large clients in sectors such as electrical equipment, EVs, telecommunication electronics, new pharmaceutical materials, steel and non-ferrous metals, and transportation has grown by over 20% year-over-year as of the first quarter.

虽然我们之前调整的业务预计还会影响一两个月，但是我们预计2025年比2024年我们的业务会有一个明显的加快的增长。请翻译。

Even though the impact from the business adjustment that was mentioned earlier would continue to have about one to two months of impact, we expect the business in 2025 to grow much higher than 2024.

好，这是我对前面两个问题的回答。谢谢。

That were my answers to your two questions. Thank you.

Operator (participant)

The next question comes from Kai Zhang with CICC. Please go ahead.

Xiaodan Zhang (Equity Research Analyst)

管理层好，我这边一共是两个问题。第一个想请教一下我们海外和美国业务的最新的一些进展，以及我们2025年对于海外业务的预期。然后第二个问题想请教一下我们怎么看待关税对公司整体业务的影响，以及我们把国内的供应商替换为海外供应商的相关进展。这是我的两个问题，谢谢。 I have two questions here. First, could you provide some updates on overseas and U.S. business operations since the independent website launch in December? In the color on 2025, overseas business outlook will be great. The second one is, could you share some views on tariff impacts on the complete overseas business and any progress on replacing the domestic suppliers with overseas suppliers? Thank you.

Eric Chen (Founder, Chairman and CEO)

好的。我们在制定出海策略的时候，主要是两个方面的考虑。一个方面是跟随大客户出海。我们有些大的客户到东南亚、到欧洲、到世界各地去制造。这是我们跟随他们出海的非常好的一个机会。我们在泰国已经成立了新的公司，预计很快就会在泰国可以服务当地的中国企业。同时，我们希望覆盖从泰国到马来西亚这一带的东南亚的一些企业。这是一种发展的方式。另外一种方式，我们就研判MRO这个领域在全球来讲哪些市场它的含金量更高，盈利能力更强，价格也更高。总的来讲，一般的来讲，没有MRO制造这种企业的地方，相对来讲它的毛利率会更高一些，基本上美国、欧洲、日本这些发达国家的市场。所以我们也制定了一个策略，到美国成立本地化的公司，建立本地化的品牌，成立当地的团队，我们就在美国发展MRO的事业。美国的事业有了初步的成功以后，我们就想把美国市场的产品同步复制到欧洲市场去。请翻译。

You, Chen.When it comes to developing our business overseas, there are two things we primarily consider. Firstly, we follow Chinese companies, large Chinese companies, wherever they go. When Chinese companies go to Southeast Asia or Europe to set up shop there, we will follow them. We have already registered a subsidiary in Thailand, and very soon this company will be able to, or this subsidiary of ours will be able to serve Chinese companies there and some local companies in Southeast Asian countries, including Thailand and Malaysia. The second point is we always track where high value, high margins, high prices lie. Our conclusion is when it comes to the MRO market, those high margin products tend to exist in markets where there is no existing manufacturing capacity. Specifically, I am talking about markets like Europe, the U.S., Japan. Basically, those developed markets, right?

We have decided and have already gone to those. We decided to go to those markets, and we will be setting up a local company, a local brand, and localize the team and manufacture and supply our MRO products to the customers in those markets. We have already done that and are doing that in the U.S., and we plan to replicate once we succeed in the U.S., we plan to replicate that success in the European market as well [Foreign language]

具体在美国的市场方面，我们的策略是打造工业用品的Costco。考虑到当地的供应链的能力，我们觉得如果再复制中国的产品的方式，在美国的难度是比较高的。所以我们想精选MRO产品的方式在美国发展。到目前，美国已经上线了412个SKU，等待上线有1800个SKU，覆盖了个人防护、手工具、动力工具、包装等产品。品类当然我们会随着业务的成长逐渐增加。请翻译。

Specifically, for our strategy in the U.S. market, our goal is to become a Costco in the MRO space. Given the local realities, given the local supply chain capabilities, it is impractical for us to replicate our model in China. We decided to cherry-pick MRO SKUs in the U.S. market. So far, we have made 412 SKUs available in the U.S. market, and 1,300 SKUs are yet to be launched. We have covered sectors including PPE, hand tools, power tools and accessories, packaging, HVAC and refrigeration equipment, and office supplies. Of course, we'll be adding more SKUs as our business evolves.

美国独立站自2024年12月开始运营以来，我们的客户数已经达到了1500个。下单客户数周环比和月环比都实现了高速的增长。请翻译。

In terms of our U.S. e-commerce website, it was launched in December 2024, and since its launch, the number of registered customers has exceeded 1,500, and both weekly and monthly customer orders have seen rapid growth.

为进一步提升产品的质量和技术水平，真空行通过与科研院所、企业和供应商的合作，在泰昌建立了创新研发中心。该中心集成了多品类产品的研发、测试、试制、生产、仓储一体化的功能，以持续输出具备国际竞争力的工业用品的解决方案。这些方面，我相信全球来讲，也只有我们中国拥有巨大的工程师的红利。我们只要做好产品的研发，未来全球的供应链可以根据我们来做选择。请翻译。

To further improve our product quality and technological capabilities and competitiveness, we have set up an innovation R&D center in Taichung, as was alluded to earlier. We are working with research institutions, companies, and suppliers. This center integrates R&D, testing, prototyping, production, and warehousing functionalities for a wide range of product categories. We are able to continuously deliver internationally competitive MRO products. I believe China is the only country that has such a large, vast engineering or engineers' dividend. As long as we work really hard and achieve a lot in terms of R&D, we will be able to have a lot of say in the global supply chain.

同时回答您的第二个问题，我觉得我们做好产品的研发，研发在中国，相对来讲在全球来讲成本是比较低的，效率也是高的。但是制造可以根据当时的环境或者是关税的原因，可以选择在东南亚或者其他国家去生产。就是你能限制了生产的地方，你可能限制不了我们研发在哪里去做这个研发。请翻译。

To answer your second question, R&D in China enjoys very high efficiency and low costs. Yes, there might be tariffs and different restrictions imposed on where we can manufacture products, but we can always do R&D in China. Manufacturing locations can be restricted, but we will stay nimble and adjust according to the realities and policies.

在应对税收的风险这些方面，关税的风险方面，我们成立了Global的Sourcing团队。到目前为止，我们已经有40%的供应美国的SKU可以由中国以外的供应商来供应，包括韩国、越南、马来西亚等不同的地区和国家。即使考虑到关税和替换至中国以外的供应商以后，我们的产品在美国市场仍然有很大的价格优势。

We are indeed proactively tackling these risks arising from tariffs. We have established a Global Sourcing team, and this team is allowing us to diversify our supply chain risks and expand our product categories. As of now, approximately 40% of SKUs supplied to the U.S. market can be sourced from suppliers from outside of mainland China, including South Korea, Vietnam, and Malaysia. Even if we factor in tariffs and factor in the possibility and the reality of shifting to suppliers outside of China, ZKH's products still enjoy significant price advantages in the U.S. market.

好的，这是我对上面两个问题的回答，谢谢。

That was all from me for your two questions. Thank you.

Operator (participant)

The next question comes from Ella Ji with China Renaissance. Please go ahead.

Ella Ji (Head of TMT Research and Managing Director)

谢谢管理层接受我的提问。我也是两个问题。首先请管理层可不可以聊一下2025年对公司整体毛利的展望？以及第二个问题是，是否能够请陈总跟我们讲一下您以及公司在2025年的前三位的主要关注点和目标会是什么？ So two questions from me as well. First, can management discuss the 2025 outlook of the company's gross profit margin? Second question is, can management discuss the top three focus and the targets of the company and the CEO for year 2025? Thank you.

Eric Chen (Founder, Chairman and CEO)

好的。有关毛利率的提升方面，我们尽管判断真空行平台就是自营的业务，EP的业务的毛利率，我们有机会每年以提高1到1.5个百分点的速度提升。我觉得将来提升到20%以上是没有问题的，我们EP的业务。实际上基于GMV的角度来看，我们去年毛利率也提升了1.4个点。佣金的平台3P的佣金基本上会保持在11%上下左右，不大会有大的变化。我们还是希望未来还能有更多的第三方合作伙伴跟我们来合作。我们另外一个平台工邦邦在小客户这一块现在逐渐在增加进展。我们判断未来这里的毛利率也有机会实现提升，提升至10%以上。我们这种业务类型从长期的发展来看，提升毛利率一个方面是因为规模的成长，供应商给我们更好的支持。另外一个就是自由品牌的比例的逐渐的提升。我们现在只有六点几个百分点，我们长期规划至少要做到30%几个点的话，对毛利率的提升会有非常大的帮助。我觉得现在还有一个新的提升毛利率的机会，就是欧美市场。随着我们在欧美市场销量的增加，也会带动我们的毛利率的进一步的提升。这是关于第一个问题的回答。

To your first question regarding gross margin, our ZKH 1P platform, in the next few years, our gross margin is likely to increase by 1-1.5 percentage points annually. We are able to exceed 20% gross margin, and we're confident to achieve that. Actually, last year, in terms of GMV, our gross margin in the 1P platform grew by 1.4 percentage points. If we look at the ZKH platform for our 3P business, our take rate is likely to be steady at around 11%. We hope to work with more high-quality third-party merchants. Speaking of our GBB platform, focused on serving smaller businesses, we also have an opportunity to further increase its gross margin to over 10%. Our long-term profitability growth is going to be driven by mainly three factors.

First, as our scale grows, we are likely to receive more supplier support, thus helping us improve margin. Secondly, our private label products is another strong driver of gross margin. Currently, private label only accounts for about 6% of our total sales. Our goal is to increase it to over 30%. This high-margin product category or business category is likely to further drive our overall profit margin. Finally, but also importantly, as we expand globally, the U.S. and the European markets will become further stronger drivers for gross margin as we increase sales in those markets.

好的。关于第二个问题，我们今年已经确定了全公司的最重要的三个方面的工作。第一个方面就是有关产品竞争力的建设。我觉得这是我们最核心的竞争力的建设。我觉得越是随着数字化的推进，AI能力的发展，越是对产品的要求会更高。产品竞争力的建设，我觉得除了在我们前面讲的推进我们的研发，加快我们的自由品牌的建设，同时实现成本的降低，有货率的上升等等，这些方面逐渐的提升以后，能够真正做到我们公司的一个转型，也就是从早期的销售拉动，逐渐过渡到供应驱动。请翻译。

We have already established our top three priorities for this year in terms of our company's work. The first one is to further strengthen our product competitiveness. I believe that this is the most important core competitiveness for our company, especially in this age of AI and digital technologies. Customers are going to place a higher demand on our product quality and product capabilities. I believe with our stronger R&D capabilities and further growth in private label products, as well as driving costs lower and margin higher, we are confident that our product capabilities will further improve going forward. That will help us transform our business truly from a sales-driven one to a supply-driven one.

随着我们产品竞争力的提升，第二项主要的工作就是我们市场占有率的提升。市场占有率提升，我觉得主要包括两个方面。一个方面是我们在老客户的口袋深度的增加。大家都知道MRO行业是一个巨大的市场。我们在老客户的口袋的深度的提升还是有非常大的空间的。另外一个方面就是新客数量的增加。我们希望在今年整个的市场占有率方面能有比较快速的一个发展。请翻译。

Our second top priority for this year is to increase our market share. We will, on the one hand, further increase our wallet share with our existing customers. Given the enormous scale, our size of the MRO market, we believe that there is still ample space for us to further increase wallet share with our existing customers. On the other hand, we will also continue to rapidly acquire new customers, and that will help us further expand our market share.

第三个是运营效率的提升。运营效率提升，我们觉得有三个方面。一个方面是我们技术的进步，AI智能化技术的进步，有利于我们效率的提升。另外一个非常重要的一点就是人才。我们最近一年做了大量的工作，就在持续优化提升我们的人才的能力。我觉得这也是非常重要的一点。当然，第三点就是管理能力的提升。我想伴随这三个方面的同时的进展，我们在2025年有机会实现运营效率的进一步的提升，成本的进一步的下降。同时为长期的发展打下一个很好的基础，形成一个训练有素、士气高昂的这样一个人才团队。请翻译。

Our third top priority for this year is to further improve our operational efficiency. This is also going to be achieved through three main ways. Number one, to leverage new technologies, including AI and intelligent technologies, and advancement in these areas to further improve efficiency. Number two, our talent. In the past year, we have already done a lot of work to improve the capabilities of our people. This is going to be an ongoing effort. The third driver for operational efficiency is, again, our management, the overall management of the company and our management capabilities. I believe that with these three initiatives going on in 2025, we are hopeful that our operational efficiency will further improve and our cost will go down further. We will be able to nurture a disciplined and highly capable talent team, ready for the future growth and long-term growth of our company.

好的，这是对我对以上问题的回答，谢谢。

That's my response to your questions. Thank you.

Operator (participant)

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

Jin Li (Head of Investor Relations)

Thank you once again for joining us today. You can find the webcast of today's call on our IR website. 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 (participant)

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