Ladies and gentlemen, good day, and welcome to ZKH Group Limited's First 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.

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 Ms. 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's views as of today and may include forward-looking statements. 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.

[Interpreted] Hello, everyone. Thank you for joining our first quarter 2025 earnings conference call for ZKH. In the first quarter, our platforms continue to gain momentum, with the total number of customers exceeding 60,000, representing a 30.3% year-over-year increase. Sales to industry key accounts and regional SME customers both achieved double-digit growth. However, sales to state-owned enterprises or SOEs and central SOE customers declined significantly year-over-year in the first quarter, mainly due to the high comparison base last year and a result of our business optimization initiatives since the second half of 2024. Consequently, our first quarter revenue reached RMB 1.94 billion, representing a 4% increase year-over-year. Regarding margins, our operating loss was approximately RMB 80 million, and our net loss was around RMB 66 million, representing meaningful improvements of 37.7% and 26.6% year-over-year, respectively. Despite the negative impact -- seasonal impact from the Chinese New Year in January and February, we were able to achieve single-month profitability in March. We would like to emphasize that this achievement was reached despite investments in our U.S. operations and in the absence of government subsidies in the first quarter of this year, unlike the same period last year. This demonstrates that the profitability of our domestic business continues to strengthen at the operational level. Additionally, our cash flow remains resilient and shows continued improvement. Net cash outflow from operating activities was RMB 97 million in the first quarter compared to an outflow of RMB 220 million in the same period last year. This continued improvement underscores our strong financial resilience. Now let's shift our focus to our domestic and global business performance in the first quarter, along with our platform developments and advancements in the use of AI technologies. In the first quarter, we delivered solid, high-quality growth, both domestically and globally.…

Thank you, Eric, and thanks, everyone, for making time to join our earnings call today. I'm pleased to share our financial performance for the last quarter, which reflects a solid start to the year, characterized by resilient revenue growth, improving profitability, and significant enhancement in our operating cash flow. In the past quarter, our total GMV reached RMB 2.17 billion. While this marks a modest decline, it is largely due to a high comparison base from last year, which included SOE and central SOE customers' low-margin business with extended credit terms that we have since optimized. When excluding these factors, our underlying GMV maintained robust double-digit year-over-year growth. Notably, we are seeing strong growth in sectors such as new energy vehicles, electronics, telecommunications, and pharmaceuticals. Total net revenues rose 4% year-over-year to RMB 1.9 billion, primarily driven by a high single-digit year-over-year increase in product sales revenue. As anticipated, marketplace revenue declined due to the prior year's high comparison base, as mentioned above. This solid top-line performance underscores the enduring strength of our product offering, enhanced supply chain capabilities, and growing customer engagement. Looking ahead, we expect the impact of last year's phase to continue to diminish in the next quarters, positioning us for sustained top line growth. Simultaneously, we are committed to improving operational efficiency, driving elevated business quality and profitability through targeted strategic initiatives, including organizational refinement and AI-driven product innovation. Regarding margins, our gross profit margin slightly decreased to 17.2% from 18% in the prior year period, primarily due to lower revenue contributions from our marketplace model. However, on a GMV basis, our gross profit margin continues to trend upward. Gross profit margin from our product sales model improved with increases of 58 basis points to 16.6% on GBB platform and 67.5 basis points to 6.2% on…

Operator, please go ahead.

[Operator Instructions] The first question comes from Leo Chiang with Deutsche Bank.

[Interpreted]. So I have 2 questions. My first question is that could management share what are the impacts from tariffs on your domestic and the U.S. business, respectively, and the measures taken by the company? My second question is that, is there a time line for entering new markets beyond the U.S., such as Europe?

[Interpreted]. Thank you very much for that question. I think the U.S. tariffs, when it comes to our overseas business, is not really a negative piece of news. In some sense, it's actually a tailwind for us to expand our U.S. business. We believe all of the changes in the market and in the prices offer new opportunities for us. Specifically, there's 2 things. Firstly, the U.S. does not produce MROs themselves. They primarily need to import from geographies like China and Southeast Asia. And in order to tackle potential changes, we had already prepared a lot of suppliers or built up this reserve of suppliers way back when from ex-China markets, especially Southeast Asia. And now, because of that preparation, we are able to source accordingly based on business needs. So that's very important for us. And this also goes to show that in the MRO business as an intermediary or as a channel or marketplace, when there's uncertainties in the market, we can actually act to become more proactive and take more initiative and have more flexibility. So the U.S. is our first step in our overseas -- in our foray into overseas markets, and we currently have 500 SKUs available there. More will be coming soon. And with these SKUs being available, we can use this as a base to sell into other geographies like Europe and Canada. Starting the second half of this year, we will start our business in Europe, and we are already in the preparatory phase for that. And when it comes to the European market, there's 2 aspects. One is online, the other is offline. So, for online, we will be able to cover the entire Europe by selling via e-commerce. And with offline, we will be focusing on 2 countries, Germany and Hungary. So basically, some Chinese companies already have a presence in those countries, and we will first serve those Chinese customers of ours there in those countries. And Germany already has a very advanced MRO business. And in terms of other geographies, Southeast Asia, we started our business in Southeast Asia. Our company in Thailand has finished registration and started operations. And as we said before in other earnings calls, Southeast Asia, in the short term, we will be serving Chinese companies that have set up a footprint there first. So that was actually my answer to your question.

Mr. Chiang, is there a follow-up to your question? [Interpreted] No, that was the answer to the question, said Mr. Chiang. The next question comes from Xiaodan Zhang with CICC.

[Interpreted] And could you please share some updates on this year's product strategy, including the key product categories to be developed as well as your private label brands?

[Interpreted] We currently have 32 product lines spanning across 5 categories, and they are spare parts, chemicals, processing, manufacturing, general consumables, and administrative materials. 2025, we'll be focusing on existing lines while adding more categories and SKUs. As an MRO company, we will be focusing on industrial-grade MRO products, including spare parts, chemicals, processing, and manufacturing pieces. And we will also particularly strengthen the development of our private labels this year. When it comes to private labels for us, it's not just about product selection. In a lot of cases, we will be proactively engaged in the R&D and design side of things to enhance our absolute competitiveness in China. And also, at the same time, these private labels will serve as a strong support for our overseas business development. And also, this year, particularly, we'll be focusing on chemicals and the processing and manufacturing. Chemicals are traditionally our forte, and we will further enhance its development.

Xiaodan, is there a follow-up to your question? Have answered the question? The next question comes from Diying Ji with China Renaissance.

[Interpreted] So my question is if management can share with us some updates regarding the company's business and the financial outlook for the upcoming quarters.

[Interpreted] For Q1, we achieved our planned targets. We actually slightly outperformed our targets. And like was mentioned earlier, our adjustment and optimization when it comes to the business with SOEs and central SOEs is pretty much finished. So, we foresee for the next 3 quarters, things will start to gradually accelerate. And for Q2 through Q4, especially for Q3 and Q4, we hope to achieve double-digit growth for GMV. Profitability-wise, we believe Q2 will see single-quarter breakeven. Q3 and Q4 will see positive profitability. And for the entire year '25, GMV will be positive year-over-year. And the domestic business will see positive profitability. And as for the entire group, so domestic plus overseas business, things will break even for the entire year 2025. That was my answer.

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