Ladies and gentlemen, good day and welcome to ZKH Group Limited's Second Quarter 2025 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. Good morning and welcome to our call today. With me, I have Mr. Eric Chen, our Founder, Chairman, and CEO, and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements, related factors as 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 earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead. [Foreign Language] Hello everyone, thank you for joining our Second Quarter 2025 Earnings Conference Call for ZKH. Despite ongoing macroeconomic challenges, we achieved solid business development in the Second Quarter through strategic focus and strong execution. Customer activity on our platform remained high, with the number of customers reaching a new quality record, driven by growth in new customer acquisition and a sustained increase in repeat purchases from existing customers. Due to the business optimization initiative related to State-Owned Enterprise, or SOE, and central SOE customers in the second half of last year, our GMV for the Second Quarter declined year-over-year to RMB 2.42 billion. However, excluding the impact from this initiative on the total GMV base, our underlying GMV still demonstrated year-over-year growth. [Foreign Language] The quality of our business also continued to improve. In the Second Quarter, our gross margin on a GMV basis reached 14.8%, representing a 0.8 percentage point year-over-year increase. This marked our sixth consecutive quarter of year-over-year gross margin expansion, driven by procurement cost optimizations and our high-margin private label products' robust GMV growth. In terms of profitability, our net loss narrowed to approximately RMB 53 million in the Second Quarter, a 20% year-over-year reduction. Notably, we once again achieved monthly break-even in June, following our first monthly break-even in March this year. What's even more impressive is that we attained this milestone while continuing to invest in strengthening our core competencies, including product capabilities, AI tools, and last-mile delivery, as well as expanding our overseas business. [Foreign Language] While maintaining our forward-looking investment to support our medium to long-term growth, we have also optimized our organizational structure, streamlined processes, and promoted the adoption of AI tools to enhance overall operational and workforce efficiency, all aimed at bolstering profitability. For example, in the Second Quarter, the average number of orders processed per customer service representative grew by 48% year-over-year, while our warehouse fulfillment cost decreased by approximately 18%. Our warehouse fulfillment efficiency and cost management have now reached industry-leading levels. [Foreign Language] Next, I would like to provide a detailed update on our domestic and global business performance in the Second Quarter. Starting with our domestic business, our dual platform model continued to generate strong synergies. The ZKH platform remained focused on serving large and medium-sized enterprise customers, while the GBB platform empowered SME and micro-enterprise customers, enabling us to meet the needs of a diverse customer base. First, let's discuss the ZKH platform. From a customer perspective, in the Second Quarter, GMV from industry key accounts rose by approximately 11% year-over-year, and the number of these transacting customers increased by around 22% year-over-year. Notably, GMV in sectors such as automotive, new energy, electrical equipment manufacturing, property management, and tourism grew by more than 15%. These results were driven by our ongoing efforts to curate and refine industry-specific and customer-specific product pools, leveraging AI technologies to gain deeper insights into customer needs and provide tailored product selections and recommendations, thus further increasing customer wallet share. [Foreign Language] For regional SME customers, our region-based service and grid-based staffing strategies continue to yield strong results. In the Second Quarter, GMV from regional SME customers grew by approximately 7% year-over-year, and the number of these transacting customers grew 13% year-over-year. Key regions, including Guangdong, Anhui, Henan, Shanghai, Jiangsu, and Zhejiang, each saw GMV growth of over 10%. This achievement stemmed from our efforts to enhance our service capabilities for regional customers, accelerating both coverage and customer acquisition. [Foreign Language] For SOE and central SOE customers, GMV in the Second Quarter declined by over 50% year-over-year, primarily due to a high comparison base from business optimizations in the second half of last year. As mentioned in previous earnings calls, these business adjustments are now complete, and their impact is subsiding. Our SOE and central SOE business recorded sequential growth in the Second Quarter. We remain confident that, building on our supply chain advantages and the proven value we deliver to customers, this business segment will gradually regain growth momentum. [Foreign Language] Turning to the GBB platform, we drove continued scale growth with a rapidly increasing number of transacting customers in the Second Quarter. Profitability also improved thanks to broader coverage of SMEs and micro-enterprises and our strategic focus on higher margin MRO categories. The GBB platform's gross margin expanded by 1.4 percentage points year-over-year, and gross profit rose by more than 23%. Recently, we have been further sharpening GBB's strategic focus, placing greater emphasis on construction materials and hardware, a large and underserved market. By leveraging our online marketing channels and supply chain advantages, we aim to deliver high-quality, competitively priced construction materials and hardware products to both B2B micro-enterprise customers and B2C individual consumers. [Foreign Language] In the Second Quarter, we have also achieved significant progress in product and AI capabilities. In terms of product capabilities, we launched our smart manufacturing base in Taicang, Suzhou. As an integral part of our strategic smart manufacturing initiatives, this facility will further enhance our capabilities in product research and development, testing, and production. We believe it will serve as a key driver in strengthening our private label product development capabilities and their competitiveness. During the quarter, GMV from private label products rose to RMB 210 million, a growth of 25% year-over-year, and its contribution to our total GMV increased to 8.7%. Looking ahead, we remain committed to our long-term target of increasing the share of private label products in total GMV to approximately 30%. [Foreign Language] Moving on to AI, we've seen that AI is becoming an increasingly important driver of growth across various business metrics, including material management, product selection and recommendation, sales conversion, data standardization, and process efficiency improvement. In the Second Quarter, we continue to advance our AI infrastructure with a particular focus on data development. We are consistently improving the quality of our product data by enriching attribute parameters, standardizing attribute rules, and optimizing image quality. We've completed high-quality annotation for over 1 million product data points. In combination with our deep optimization of LLMs and algorithms, these annotated data sets have led to significant improvement in key business metrics. Furthermore, we are building a comprehensive product data management platform that spans the entire data lifecycle, from collection and annotation to governance and application. Our goal is to achieve substantial growth in the generation of high-quality product data this year and to establish the industry's most comprehensive and advanced large-scale database for MROs, which we call the ZKH Data Dictionary, providing our industrial customers with highly specialized data services. [Foreign Language] Turning to our overseas business, we have adopted a localized operating strategy in both the U.S. and European markets, capitalizing on our supply chain strength, a curated portfolio of high-quality and cost-efficient products, and innovative technologies to accelerate market entry. By the end of June, our U.S. standalone website, NorthSky, had attracted approximately 6,000 registered customers, with around 600 SKUs launched across a dozen product lines. In the second half of the year, we will expand SKU base to enhance product coverage and customer experience. In terms of sales performance, our U.S. revenue grew by 260% in the Second Quarter from the First Quarter. [Foreign Language] We are also actively preparing for our entry into the European market, with our European business operations and standalone website expected to launch by the end of this year. Beyond the U.S. and Europe, we are pursuing a strategy of partnering with major Chinese customers to support their overseas expansions in regions such as Southeast Asia, South America, Africa, and the Middle East, providing targeted services to fulfill their MRO procurement needs in local factories. To date, we have begun receiving orders from these Chinese customers' overseas plants in 10 countries, including Thailand, Indonesia, Malaysia, Mexico, and the UAE, to provide global customers with a high-quality, reliable supply of MROs. We are actively diversifying our supplier network. Currently, 70% of our suppliers for overseas business are based outside of China, creating a more balanced and resilient supply chain and mitigating potential geopolitical risks. This achievement marks meaningful progress in the development of our global sourcing system. [Foreign Language] In summary, we have sustained growth despite recent quarter's business adjustments. We have continued to strengthen profitability in our domestic operations while driving meaningful progress in our overseas business, demonstrating our ability to execute and the inherent resilience of the MRO industry. Looking ahead, we will remain focused on advancing our core capabilities across products, digitalization, and fulfillment, while also accelerating the expansion of our global footprint. These efforts will support our company's long-term sustainable growth and deliver enduring value to our shareholders. Now, I'll turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone. Thank you, Eric, and thanks everyone for making time to join our Second Quarter earnings call today. I'm pleased to walk you through our solid financial performance, highlighted by enhanced revenue quality and optimized operational efficiency. Let me start with the top-line performance. Both GMV and revenues came under pressure in the quarter, with GMV declining by 12.1% year-over-year to RMB 2.42 billion and total revenues decreasing by 3.7% to RMB 2.17 billion. This was largely due to last year's high comparison base, which includes low-margin business from SOE and central SOE customers with extended credit terms that we have seen optimized. However, excluding these factors, our underlying GMV still showed year-on-year growth. We anticipate these challenges will continue to ease, setting the stage for a potential turnaround in top-line growth in the second half of this year. Turning to business quality, our business quality remains strong and healthy. Our gross margin was at 16.5%, slightly down from 17% in the previous year, primarily due to lower revenues from our marketplace model, which carries a 100% gross margin under the net revenue recognition basis. However, on a GMV basis, our gross profit margin continued to improve, expanding by 84.6 basis points year-over-year to 14.8%. Specifically, gross profit margin for our product sales 1P model increased by 45.2 basis points to 16% on ZKH platform and 137.6 basis points to 7% on GBB platform. Additionally, the takeaway of the marketplace model 3P model rose by 206.7 basis points to 14.2% year-over-year. These gains reflect our successful business optimization, procurement efficiency, and focus on high-margin private label products. On operational efficiency, we made solid progress. Operating expenses decreased by 5.6% year-over-year to RMB 454.2 million, making up 19.8% of total revenues, down from 20.2% in the prior year period. This improvement was achieved even with approximately RMB 25 million in overseas business-related expenses, which were almost absent in the prior year period. Breaking this down further, fulfillment expenses were RMB 90.8 million, down 8.4% year-over-year, reflecting lower employee benefits and warehouse rental costs. Sales and marketing expenses declined by 5.3% to RMB 149.3 million, primarily driven by lower employee benefits and travel expenses. R&D expenses increased by 7.9% to RMB 41.5 million, primarily attributable to higher employee benefit expenses. General and administrative expenses were RMB 147.3 million, down 7.3% year-over-year, mainly due to lower share-based compensation and credit loss allowance, partially offset by higher employee benefits. It is worth noting that our G&A expenses also include salaries for product line personnel and other related costs, which support the development and enhancement of our product competitiveness. Turning to probability metrics, while our loss from operations increased modestly to RMB 72 million, we see positive signs of improvement. Non-GAAP dividend loss narrowed to RMB 38.7 million from RMB 47.1 million, with margin improving to - 1.8% from - 2.1%. Net loss decreased to RMB 53.5 million from RMB 66.3 million, with the net loss margin improved to 2.5% from 2.9%. Lastly, an update on our share buyback activity. On the 13th of June 2025, our board approved a new share repurchase program, authorizing up to $50 million for the buyback of ADS. As of 20th August 2025, we have repurchased approximately 2.65 million ADS for about $9.18 million under the two programs. We remain committed to actively buying back shares, subject to market conditions and other considerations, as part of our ongoing commitment to returning value to our shareholders. In conclusion, the shift towards high-margin private label products, combined with gradual easing of prior challenges, positions us for a return to top-line growth in the second half of this year. Our investment in AI and process optimization are already delivering tangible improvements and gains. Recent interest from capital markets highlights growing confidence in our business model and long-term potential. For instance, around $8 million ADS were traded through blockchains on the 7th and 8th of August 2025 between new institutional investors and a PIPO shareholder, reflecting a significant endorsement of our market positioning. This transaction also represents a disciplined and professional full exit by this PIPO shareholder, structured to facilitate orderly price discovery and address a technical overhead. Looking ahead, our priorities remain focused on maintaining financial stability and achieving near-term profitability in our domestic operations in China, while positioning us for sustainable long-term growth. Thank you. I would like to open the call to Q&A. Operators, please go ahead. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The first question comes from Liu Chang and Deutsche Bank. Please go ahead. [Foreign Language] My question is regarding growth strategy. The Chinese MRO market is huge, and online penetration is still in its early stage, suggesting significant room for growth. However, we have observed that the company's business growth has been under pressure in the past two quarters, primarily due to the optimization and adjustment of business from SOE. As the impacts of this adjustment gradually diminish, what strategies does the company have for short, mid, and long-term business growth? Also, can management provide an overview of the company's business outlook for the second half of this year? Thank you. [Foreign Language] Thank you very much for that question. Yes, indeed. Our performance for the last few quarters has been under a lot of pressure, primarily due to the aforementioned business adjustment and optimization. We decided to optimize this part of the business because we didn't believe it was going to be very valuable and meaningful for our long-term competitiveness. This part of the business used to account for more than 20% of our total GMV. As we were phasing out this 20% of GMV, the reason our total GMV didn't decline severely was primarily due to the fact that we added a lot of new large customers as well as SMEs, and the business from these two groups have more than made up for the loss from the adjusted and optimized business. It's been very clear that our business has been driven primarily by these two groups of customers, and we are greatly increasing the number of SMEs thanks to our online technologies and capabilities. We're also trying to cover more KAs or Key Accounts large customers. Out of the top 1,000 manufacturer customers in China, we have already covered 670 of them, and we are proactively increasing our watershare with them. There's a lot of potential to tap in there. We are proactively reaching out to penetrate the other 300 as well. In terms of another aspect, which is GBB, our GBB platform has been focusing more on construction materials and hardware in order to serve the needs of SMEs and consumers better. Of course, from our perspective, in order to grow more sustainably and strongly in the mid to long term, a lot of the growth drivers will come from overseas markets, including Europe and America. Our investment efforts in those overseas markets, I believe, will start to show effects starting the second half of this year. Starting June and July this year, our performance from the central SOEs and local SOEs have pretty much bottomed out in June and July. Starting August, we have seen from data that things started to turn around and rebound. We are very, very confident that recovery and the growth, positive growth for the second half is very likely. Liu, did that answer your question? Did you have a follow-up? Yes, that answered. Thank you. Thank you. The next question comes from Xiaodan Zhang at CICC. Please go ahead. Foreign Language] In the increasingly competitive landscape of platforms, there is significant concern about the long-term competitive advantages of enterprises. Beyond scale, what do you believe are the true competitive barriers or moats that ZKH has built in the China's MRO sector that are difficult to imitate or surpass? The company has consistently emphasized the construction and investment in the long-term for competitiveness. Please share specific investments made in these areas, as well as variants that play a result on that business development. Thank you. [Foreign Language] Okay, so compared to traditional trading companies and hardware stores, we have absolute advantages when it comes to things like our product capabilities, our IT capabilities, and our nationwide supply chain, as well as our talent reserves. I'm not going to delve into the details, but compared to other MRO e-commerce marketplaces, I would like to focus on three areas where we have an edge. First is our product capabilities. Due to historical reasons, we are very versed when it comes to real industrial-grade MROs. These are real MROs by definition. Specifically, we have an absolute advantage when it comes to things like spare parts, chemicals, and manufacturing. Second, we have a 600-strong team of product experts, and we absolutely take a lead in the industry. They are very specialized and have specialized know-how about various industries and products. Thirdly, we have very strong R&D capabilities, and our Taicang factory is definitely going to increase our advantage. This plant in Taicang enables us to do innovation of products, as well as product selection, testing, and recommendations. That was the end of the answer. [Foreign Language] The second point I would like to stress is our digitization and AI capabilities. We have a data dictionary built based on 17 million SKUs of MRO, and this database is still quickly expanding. I believe firmly that in the future, in order to have success in the MRO space, having a highly sophisticated and large database for the MRO vertical definitely lays the groundwork. We also have a very large, very large MRO IT team, about 200 something people. They include algorithm engineers, data engineers, development engineers from both front and back ends, and system maintenance engineers. Among the MRO companies in China, we have one of the largest IT teams. With these two aforementioned points, we will be able to build a very strong edge when it comes to AI product capabilities and digitization. This will propel us to become an MRO company, and it's not an MRO company in its traditional sense, but rather an MRO company that is truly digitized and smart and AI enabled. [Foreign Language] My third point is our capabilities when it comes to expanding our business overseas in overseas markets. We are the first Chinese MRO company that set up shop in the U.S., and we are soon going to do that in Europe as well. We have built our abilities to source products globally. We are also tracking large Chinese companies and follow them wherever they go to serve them locally there. We are soon going to become the first Chinese company that is going to become a truly global MRO company thanks to our advantages in talent. Based on these aforementioned three points, we are truly upholding long-termism, and we are creating value for our customers, and we truly value talent. These points are our true moat, and we believe these are very difficult to emulate and be surpassed. Thank you, that's very clear. The next question comes from Ella Ji with China Renaissance. Please go ahead. [Foreign Language] So my question is regarding your overseas business. your US business has been running for over half a year, and you also plan to expand to the European and the Southeast Asia market. what are the main competitive advantages of ZKH comparing to the local players? what are the biggest challenges, as well as the strategies to, to counter with those challenges? And then lastly, is there a timetable for the revenue and maybe profit of overseas operations? Thank you. [Foreign Language] Thank you very much for your question. When it comes to our overseas expansion, we primarily adopt two models which were mentioned in my presentation earlier. First is to go into advanced economies and to do localized operations there, namely to set up our own e-commerce marketplaces. Second is to follow Chinese large customers wherever they go. Like was mentioned earlier, we already started receiving orders from plants of Chinese customers that have set up shop in geographies such as Thailand, Indonesia, Malaysia, and Mexico. I believe, relatively speaking, out of the two models, model one is the more challenging one because we have to build our own brand there, right? Being a new startup from China, our reputation locally, we have to build that from scratch. The learning curve is going to be pretty steep, so it's going to take some time for us to learn about the local cultures and the customers. Our advantages come from different places, primarily because we have a strong supply chain and relatively low cost. Another factor which is equally important and cannot be neglected is entrepreneurship from being Chinese. Being Chinese and being a Chinese startup, we have a high efficiency and we are very quick to react to things, and these things make us stand out among companies globally. We have already passed some learning periods and we are already entering a phase of acceleration. I believe in the second half of this year, both models, model one and model two, will start to pick up some pace and truly accelerate. Did that answer your question, Ms. Ji? Yes, thank you. That concludes the question and answer session. I would like to turn the conference back over to management for any additional or closing comments. Thank you once again for joining us today. You can find the webcast of today's call on ir.zkh.com. If you have any further questions, please feel free to contact us. Our contact information can be found in today's press release. Thank you and have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.