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

Good morning and welcome to ZKF'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. Hello, everyone. Welcome to Zhengfeng Hang.

In the second quarter of 2026, we had a good development trend since the beginning of the year, and the overall business performance continued to improve. Since the growth of the fourth quarter last year, our GMV and revenue have achieved the same growth in the third quarter in a row, and the increase of the second quarter has created a new high in the past few quarters. At the same time, and the core customer group showed steady performance. The growth base of the business has been further expanded. While the business scale continues to expand, our growth quality and profitability are also improving. In the second quarter, the net profit growth is higher than that of GMV. The net profit rate of the net profit and net return have been increased. As the scale effect is further released, customers and product structures continue to optimize, Hello everyone, thank you for joining DKH's second quarter 2026 earnings call. Drowning 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, posting their fastest growth in recent quarters. Growth was brought to us based with our key industries 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.

本季度的良好表现进一步巩固了公司基本面持续向好的态势, 也体现了前期战略布局和能力建设正在加快转化为经营成果。 基于当前业务的积极趋势,

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.

接下来,我将重点介绍一下我们在业务层面的主要进展。 According to the current trend, GMA growth in the third quarter is expected to achieve further acceleration in the second quarter. From the customer dimension, many customer groups in the quarter are working together, and the growth pattern is more balanced. Among them, regional small and medium-sized companies have maintained their strong performance since the fourth quarter of last year, and GMA has increased by 30% compared to the previous year. This reflects the continued improvement of the company's coverage and service capacity in the small and medium-sized enterprises, Next, let me walk you through some of the business highlights in the quarter

Starting with GMV, second quarter GMV grew by 19% year over year, while GMV on the ZKH platform increased by 23%, accelerating further from the first quarter. Based on current trends, we expect GMV growth to pick up further in the third quarter. Multiple customer segments drove growth in tandem this quarter, creating a more balanced growth profile. Regional SME customers maintained the strong momentum that began in the fourth quarter of last year, with GMV up 30% year-over-year, reflecting continued 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.

同时,央企和行业大客户保持稳健,GMV实现双位数的同比增长。 尤其,汪洋企企业在经过去年的调整后,重新实现了季度GMV同比增长突破20%。 From the perspective of the industry, the long-term introduction of specialized products and service capabilities around different industrial scenarios is gaining momentum, leading several major industries to achieve rapid growth. Among them, steel and iron have a very bright performance, GMV is the same, telecommunications, electronics, cleaning, chemical and medical, public business and other industries, GMV is the same, and the government is more than 30%.

Meanwhile, our business with central SOEs and industry key accounts remained solid, delivering double-digit GMV growth year over year. Notably, following adjustments last year, GMV from state-owned enterprises, including centrally administered SOEs, returned to growth of more than 20% year over year this quarter. Performance was also strong across key industries. Our specialized product and service capabilities built over years of serving a wide range of industrial use cases are increasingly translating into strong results. Steel and 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.

With GMV in each sector increasing by more than 30% year-over-year. In addition, Nautilus is a free brand with a large number of online channels based on Amazon. In particular, we have achieved quite good sales progress and customer recognition in transportation, parking, industrial fans, and other segmented products. We have established a dual supply system in and out of China and Europe around the key categories, and have further enhanced the operability of overseas supply chains. With the gradual decline of various layout, our overseas business has entered a new stage of ability accumulation and business expansion from the early market exploration. The future development path

While we continued to deepen our domestic business, our overseas expansion accelerated further from the first quarter, with first half GMV increasing more than tenfold year over year. During the quarter, we continued to advance our international business on 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 continue 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 recognitions. We also established a dual sourcing system for key product categories with sources in China and overseas, further strengthening the resilience of our international supply chain. As these initiatives take hold, our overseas business is moving beyond early market exploration into a new stage in which capability building and business expansion are advancing in parallel.

with an increasingly clear path forward.

公司各项业务取得的积极进展离不开核心能力的持续积累。 本季度,我们继续围绕产品力、交付力和AI三方面深化能力建设, 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ML品类布局, And through strengthening the cooperation with the head of the factory, we continue to improve the depth and differentiated advantages of professional products. This quarter, we are proud of the line-up of deepening products and focusing on the industry strategy. The company's electric automation business has achieved a growth of 1.6 times the speed. At the end of the product line, we surround the customer with intelligent production lines, control, security, and sense of interconnection. All chain needs, focus on sensor, PLC, industrial safety, industrial, internet and robot products Form a complete automated product system At the end of the industry, we preemptively set up new energy, semiconductor and telecommunications electronic three major high-automation dense track Accurate collection of its production capacity expansion and production line automation upgrade needs 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.

其次,自由品牌是我们持续提升差异化竞争力和盈利能力的重要抓手。 本季度,我们新增加超过700个自由品牌SQ, 带动自由品牌GMV从底增长超过25%。 GMV占比升值约10%。 We have continued to improve our system testing system, which covers multiple core production lines, including key parts such as performance, safety regulations, and reliability, to further strengthen the product's research efficiency and quality stability.

Meanwhile, our private label business is an important driver of both competitive differentiation and profitability. During the quarter, we added more than 700 private label SKUs, driving private label GMV growth up more than 25% year-over-year and lifting private label products' share of total GMV to approximately 10%. In addition to contributing incremental revenue, this also improved our overall gross margin. As we broaden the portfolio, we are also building out end-to-end capabilities from product development through testing and validation. Our in-house testing system now covers multiple core product lines with rigorous validation across performance, These capabilities further improve product development efficiencies and quality consistency, providing strong support for scaling our private label business.

在履约测,我们进一步优化多层级仓网运营体系,并持续提升专业品类的供给能力和客户体验。 In this quarter, Hebei Cangzhou microfinance warehouse completed its construction, further enhancing our regulatory warehouse and supply security capabilities in the microfinance field. As of the end of the quarter, our national contract network covers more than 30 delivery centers, 109 middle and short warehouses, and more than 200 company delivery vehicles. And at the customer production site, more than 6,000 EMV smart small warehouses have been deployed, constantly strengthening Turning to fulfillment.

We continue to optimize our multi-tiered warehousing and distribution network while enhancing supply capabilities and customer experience in specialized MRO categories. During the quarter, we completed the build-out of a dedicated hazardous materials warehouse in Cangzhou, Hebei Province, further strengthening our compliance, storage, and supply assurance capabilities for hazardous chemicals. As of quarter end, Our nationwide fulfillment network comprised more than 30 distribution centers, 109 transit warehouses, more than 200 company-operated delivery vehicles, and more than 6,000 EVM smart vending machines deployed at customer production sites. This integrated network strengthens our end-to-end fulfillment capabilities from regional inventory deployments 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.

In terms of AI and digitalization, we continue to surround the leading all-war AI capabilities in the industrial industry. We continue to promote systematized construction and deepen the application of AI in internal and external business scenarios. will accelerate the transformation of accumulated industry data and technical advantages into real customer value and business management results. In June, we officially released the Domino industrial product big data engine. The engine covers 1 billion product parameters, has automatic benchmarking, continuous learning and full chain route support, and other capabilities. To help customers develop industrial product data management, model training, We also made solid progress on the AI and digitalization front

Guided by our goal of building industry-leading full-stack AI capabilities for industrial supplies, we continue to strengthen our technology stack and expand AI adoption across customer facing and internal use cases. These efforts are accelerating the conversion of our extensive industry data and technological expertise into tangible customer value and operating results. A key milestone this quarter was the June launch of Domino, our industrial supplies big data engine. Powered by more than 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.

On this basis, we continue to expand the application scene of the business model of the industry and the smart system to accelerate the deep integration of AI and customer business processes. Currently, A.I.物料管家,零容汇收,零容汇演以及A.I.商场等产品已在制造,化工,港口,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,A.I.物料管家已服务超过8,600家客户,落地超过15个国养企案例,累计完成 24,000,000 logistics management, effectively helping customers to improve logistics management efficiency and reduce cost of storage. In terms of internal operation, we will continue to promote the scale-up application of AI in the host and business process, further improving operation efficiency. Within the record, the internal AI application accumulation of the company has saved more than 120,000 hours of work time, and the AI support programming has accounted for more than 70%. At the same time, Building on this foundation, we continued

to expand the use cases for our Linglong MRO industry-specific foundation model and its suite of AI agents, integrating AI more deeply into customers' business processes. Today, solutions such as AI Materials Manager, Linglong Huishou, Linglong Huiyan, and AI Marketplace are already deployed across manufacturing, chemicals, ports, and automotives. are 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.

At the same time, we are actively involved in industry and ecological construction. In June, we joined many national industry associations and industrial institutions to hold the first CISS Industrial Utilities Conference. As the first country to focus on industrial co-operation and value innovation in the industrial industry, more than 2,000 participants attended the conference, and more than 1,000 companies attended the conference. will gather many industry leaders, business executives and industry chain experts to participate in the scale of the guest city, to raise the record of the new industry. This time, the conference has further improved the industry influence of Zengfeng Hang, and has provided an important platform for our cooperation in various aspects of the industry chain. In the future, we will continue to play a platform advantage, promote industrial knowledge sharing, and co-operate with the upper and lower levels, creating greater value for the long-term development of the industry chain.

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 VKH'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.

展望下半年,我们将继续专注于核心能力的建设,包括持续提升产品供应能力,履约效率, Looking ahead to the second half, we will remain focused on strengthening our core competencies.

including enhancing product supply capabilities, improving fulfillment efficiency, and building greater organizational strengths. These are the cornerstones of our long-term competitiveness and will lay a solid foundation for sustained growth in business scale and further improvements in profitability. With that, I 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. GMV growth accelerated to its fastest pace in the past few quarters, while our growth 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 are supported by the increasing benefits of scale and the disciplined execution of our strategic priorities. Let's now take a closer look at the second quarter financial performance, starting with GMV and revenue. The growth recovery that began in the second half of last year gained further momentum in the second quarter, with GMV and revenue posting accelerated year-over-year growth. GMV increased 18.9% year-over-year to RMB 2.9 billion, while net revenues grew 12.8% to RMB 2.4 billion, representing the fastest growth for both metrics in recent quarters. This strong performance was primarily driven by robust growth among SME customers and key accounts across our core industries, along with a continued recovery in business with central SOEs. As GMV growth accelerated, growth profit grew even faster, increasing 20.3% year-over-year, from RMB357 million to RMB430 million. As a result, growth profit as a percentage of GMV edged up to 14.9%. Compared with 14.8% in the same period last year, and 14.4% in the first quarter of 2026. This improvement reflected the continued optimization of our customer and the 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 RMB 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 RMB 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. RMB expenses were RMB $35 million, representing 1.4% of net revenues, down from 1.9% in the same period last year. General and administrative expenses were RMB $150 million, representing 6.1% of net revenues, down from 6.8% in the same period last year. Looking ahead, we expect GMV and revenue growth to accelerate further in the second half of the year. Combined with our continued focus on operating efficiency, this should drive further improvement in our operating expense ratios and Shen Sun are 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 a greater operating leverage drove a significant year-over-year improvement in profitability. In the second quarter, our operating profit, Nungap EBITDA, and Nungap adjusted net profit all turned positive. In particular, Nungap Sivadak reached RMB $42 million compared with negative RMB $39 million in the same period last year, while Nungap adjusted net profit reached RMB $39 million compared with negative RMB $37 million a year ago. Turning to our balance sheet, we continued to maintain a solid liquidity position. As of June 30, 2026, Cash and cash equivalents, restricted cash, and short-term investments totaled RMB1.7 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 accelerated. For the first half of 2026, net cash used in operating activities decreased to RMB 156 million from RMB 208 million in the first half of 2025, reflecting continued improvement in our working capital management. To conclude, the second quarter of 2026 marked an important financial milestone for the company as we achieved positive Thank you for your attention. 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, Good evening everyone.

First of all, congratulations on your good performance this quarter. And then my question is about our top line. We see that the GMV increase of this quarter's company is still relatively fast, with a growth of 18.9%. And then it is also the fastest growth in the past few quarters. I would like to ask the management level what the driving factor behind the growth is. And then to be more specific, which companies, industries, customers, or products have a relatively high accuracy? For the second half of the year and the whole year's GMV increase, how does the management level look? I'll quickly turn it over. Good evening, management. We noticed that the company's GMV growth accelerated to around 80% this quarter, year over year. Could management work out through the key drivers behind this acceleration? And which subsectors, customer segments, or product line are seeing stronger momentum? And what's your outlook for GMV growth in the second half and full year? Thanks.

Okay, thank you. In the second quarter of 2020, the company's GMV increase has accelerated the progress in the past few quarters. It is a confirmation that we are in China's high-spirited ML market and continue to win the market share. We can look at it from three angles from the industry, customers, and free products, free brand products. First, We continue to deploy a fast-growing high-tech industry. In the second quarter, GMV increases more than 30% of industries, including steel and metal. This steel and metal industry mainly refers to the steel industry. The steel and metal industry has grown by 103%, and the industrial industry has grown by 57%, and the chemical and medical industry 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 are 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. Please continue.

In fact, in terms of the group of customers, We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. We are talking about small and medium-sized customers. As we said before, the continuous penetration of some customers can better show the improvement of the products and service capabilities of the government-owned industries. On the one hand, the customer's demand for service is getting higher and higher. Traditional trade companies have been eliminated. On the other hand, it is driven from sales to supply. That is, what do our original customers want? What do we provide? We go to find goods and store goods. Now we are more capable because of the improvement of product capability. Customers will choose to buy according to the products we already have. This way, the efficiency will be greatly improved. At the same time, the net profit of small and medium customers is higher than that of large customers. So the growth of small and medium customers is faster than the trend of the company's overall net profit. In addition, small and medium-sized customers are often on the edge of the city, and it is more convenient to deliver. Currently, our small and medium-sized customers, GMV, account for about 30%. Big customers, including the leading customers in the industry, KA, and these foreign customers, GMV accounts for about 60%. In the future, we expect that the accounts of small and medium-sized customers will be further improved.

So secondly, in terms of our custom mix, I would like to talk about how we perform on the SME customers front. And just to clarify the definition of what we mean by an SME customer, we're talking about a customer with a revenue of over 1 billion RMB. So it's not technically a small customer or a small company, right? But relatively speaking, it's small compared to SMEs. and some of the large guys or central and local SOEs. And so a big highlight of Q2 is that the GMV for these SMEs have reached 30%. And so the GMV growth for this segment is outperforming the company's overall GMV growth. And like discussed earlier, we believe this type of customers can reflect the improvement of the product and service capabilities of ZKH more than any other types of customers because these customers are getting increasingly demanding in terms of their requirements for services. So as a result, traditional and conventional trading companies are being eliminated. And secondly, the business, our business, is evolving from sales-driven to supply-driven or Supply Chain Driven. I'll explain what I mean by this. So before, we were basically selling whatever the customers wanted and demanded, right? But now, with the capabilities of our product improving, we are more in a position to sell what we recommend and what's available on our part. And that's definitely a huge increase in terms of efficiency and productivity. At the same time, the growth margins on the part of the SMEs are higher than large customers. The growth of SMEs outstripping the overall company is definitely conducive to the improvement of our overall growth margins. These SMEs are usually located in the outskirts of cities, which means delivery and the fulfillment for them is easier. GMV-wise, these SME customers are accounting for about 30% of total GMV, while large customers, and by large customers, I mean key accounts or leading companies of various sectors and those SOEs. So these larger customers account for 60% GMV-wise, and we expect SME-GMV share to continue to rise in the future. Thank you, Shu.

Finally, it is about the free brand. In the second quarter, our free brand had more than 25% of the same rate. The overall rate is faster. GMV accounted for 10% and continued to the long-term target of 30% of sales. The free brand's net profit is higher than that of non-free brands, about 10%. Therefore, the free brand accounted for

Thirdly, my last point is on private labels. So for Q2, private labels achieved a growth of over 25%, outstripping overall growth. And its GMV share has reached 10%, marching towards our long-term goal of 30% for it. And the growth 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 growth margins improving.

关于下半年和全年的GMV增速的预期呢 就从目前的7到8月份至今的订单趋势来看呢 我们预计三季度的GMV增速 will be 18.9% faster than the second quarter. As for the fourth quarter, especially in December, it is usually the peak of orders throughout the year. So we are confident that the current increase can be maintained and achieve the growth target of 15% to 20% of GMV throughout the year. I have answered all the questions. Thank you.

Looking out to the second half of this year and the entire year's GMV, if you look at the order trend, July, August this year, we expect GMV growth for Q3 is going to be higher than Q2's 18.9%. So it's going to continue to accelerate. And the Q4, especially the month of December, is a peak month or peak quarter for orders throughout the year. and we are confident that we are able to sustain this growth and be able to achieve our overall growth of 15% to 20% growth for GMB this year.

And that was my answer to your question. Thank you.

Thank you.

Thank you. The next question comes from Jiuming Cao. Thank you for the opportunity to ask me a question.

My question is mainly about a few small issues related to AI. In the context of the AI era, different types of customer acquisition behaviors Are there any changes in editing? How will we seize this opportunity for relevant opportunities? In addition, the AI-related applications previously launched, such as AI's material steward, are there any more progress to be shared recently? Finally, about the development of the AI subsidiary company that we mentioned before, What is the current plan? What will be the next steps? Thank you.

Question. 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。我是郑文航的CTO。我们确实观察到随着AI技术的普及,客户的采购行为出现了一些边际的变化。主要有三个潜在的趋势。第一个趋势就是需求表达的习惯和采购入口的变化。 In the past, industrial products were more dependent on traditional searching, wood cutting, or artificial hunting. Now, more and more entrepreneurs' first reaction is to use natural language to directly express their needs, even to give the device model, use scene, and technical parameters directly to AI, hoping that AI will help them complete the demand clarification, selection, and product recommendation. The second trend is that the demand for high-end data is clearly increasing. As AI really enters the decision-making process, one of the prerequisites is that these key data, such as commodity parameters, specifications, replacement relationships, configuration usage relationships, etc., must be accurately enough. So we think that high-quality, structured, professionalized data in the AI era will become extremely important. The third trend is that companies, especially small and medium-sized companies, are improving their acceptance of more autonomous, intelligent purchasing methods. 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 that the systems to clarify their needs, select suitable product models, or recommend the right products to them. The second trend we observe is that the demand for high-quality data is increasing. For AI to participate meaningfully in procurement decisions, data such as product parameters, specifications, product alternatives, brands and materials, these things must be sufficiently accurate. We therefore believe that high-quality, structured, and specialized data will become even more important in the era of AI. Third, SMEs are becoming more receptive to self-service and smart procurement. In the past, many procurement services required repeated communication between our sales representatives and the customers' procurement people. In the future, AI may be able to handle a significant portion of this standardized work, reducing service costs while improving the customer service, or rather, customer service experience. Please continue.

Our previous AI logistics supervisor is also in the process of delivery. At present, AI management has served 8,600 customers, and the number of customers has increased by 93% compared to the same period last year, and it has formed a commercial income. At the same time, we are also continuing to build industrial buildings on the data layer, model layer, and intelligent body layer to occupy AI capabilities. In October of this year, we will launch Linglong Huiyan, the world's leading chip manufacturer, So as regards to AI materials manager which we launched previously, it continues to evolve.

It has now served more than 8,600 customers, representing a year-over-year growth of 93% in terms of customer count, and has begun generating revenue. We're also continuing to build a competitive mode around our full-stack AI capabilities for MRO products. In October this year, we plan to work with Intel, a leading global chipmaker, to launch our Linglong Huiyan, which is an industry-leading edge model and solution for industrial vision. We also intend to establish deeper collaboration with the leading domestic chip makers integrating AI material manager and the link loan model with their technologies at both the model and agent layers.

关于AI子公司,公司确定设立之后,也确实感受到了来自市场的多方关注。 我们目前正在按照既定的计划推进相关设立工作。 独立子公司是希望给予更加 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.

Thank you.

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

Good evening, Mr. Guan. Thank you for accepting my question. Congratulations on your strong performance. I have two questions. The first one is about internationalization. Please share with us the latest progress of the company in internationalization. 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. All right.

In terms of internationalization, our GME growth in the first half of the year has reached almost 10 times the growth, reaching 95 million, which will continue to increase in the next half of the year. Overseas business is our long-term strategy, and we will continue to invest in it in the future. Overseas business is divided into two aspects, one is the Chinese company's Banshui City out of the sea, based on existing China-China customer relations to drive more overseas orders. At the same time, it strengthens the end-to-end delivery capabilities of overseas countries in different countries. Another is the opening of localized businesses. We are now focusing on the United States and Texas. In terms of specific products, We are more focused on the products needed for logistics and logistics enterprises. At the same time, our online sales, including Amazon and other platform sales, have also improved significantly. In general, while expanding our overseas business, we are more focused on investment efficiency, instead of over-investing. In the second half of the year, Lizheng achieved a profit transfer of overseas business.

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. 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 more when it comes to making investments in our overseas business. And we will avoid front-loading expenses We will try to turn profit sometime in the second half of this year for our international business.

关于股东回报呢,公司在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 240,000 shares of ADS, the corresponding amount is about 7.67 million US dollars. We will continue to increase the return on purchases. At the same time, as we accelerate the development of our company's business, with the increase in profit, we are considering to distribute the shares to our shareholders. This is my answer to this question. Thank you.

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 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.

And 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.dkh.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.