ZKH Group Limited (ZKH) 2026-08-21 Earnings Call Transcript

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 Daecy Xu, Head of Investor Relations. Please go ahead, ma'am.

Good morning, and welcome to ZKH 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 a Q&A session. Today's discussion may include forward-looking statements. Related factors are described in our today's press release. and we'll also discuss certain non-GAAP financial measures for comparison purposes only.

[Interpreted] Hello, everyone. Thank you for joining ZKH Second Quarter 2026 Earnings Call. Building on the strong start to the year, our business gained further momentum in the second quarter, extending the growth trajectory that we reached in the fourth quarter of last year. Both GMV and revenue grew year-over-year for a third consecutive quarter posting their fast growth in recent quarters. Growth was broad-based with our key industries and core customer segments, further reinforcing our foundation for sustained growth. As our business continues to scale, the quality of growth and profitability improved in tandem. Gross profit grew faster than GMV in the quarter lifting gross margin both year-over-year and sequentially.

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 gross profit margin expanded even further. As operating leverage became increasingly evident, our profitability also improved significantly. Notably, we achieved operating profitability for the first time, marking an important financial milestone for the company.

The first question from Jing Yuan with CICC.

[Foreign Language] We noticed that the company's GMV growth accelerated to around 80% this quarter year-over-year. Could management walk us 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?

[Interpreted] Thank you very much for that question. So indeed, we achieved acceleration in terms of our GMV 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 3 perspectives namely industries, customers and private labels. So firstly, let's talk about industries. We have been continually investigating or rather investing in high-growth industries.

The next question comes from Zhuoming Cao with Huatai Securities.

[Foreign Language] 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.

[Interpreted] 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 rely primarily on keyword searches, catalog filters or manual requests for quotations. Increasingly, customers are becoming accustomed to describing their requirements directly in a natural language. Some provide AI systems with equipment models, use cases and technical specifications and expect the systems to clarify their needs, select suitable product models or recommend the right products to them.

The next question comes from Leo Chiang with Deutsche Bank.

[Foreign Language] Congrats on the strong results. I have 2 questions. First one is regarding our international business. Could management update us on the company's internationalization progress, including GMV contribution, customer 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?

[Interpreted] 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, GMV was RMB 95 million, and we expect second half to continue this strong growth. Secondly, international business has always been part of our long-term strategy, and we will continue to make investments into it. And there's 2 parts to our international business. Part 1 is we will continue to support Chinese businesses as they expand their business in overseas markets.

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.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. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]