Ladies and gentlemen, good day, and welcome to ZKH Group Limited's Fourth Quarter and Fiscal Year 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, ma'am.

Good morning, and welcome to ZKH's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me are Mr. Eric Chen, our Founder, Chairman and CEO; and Mr. Max Lai, our CFO. Today's discussion may include forward-looking statements. Related factors are described in our today's press release. and we will also discuss certain non-GAAP financial measures for comparison purpose 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.

[Interpreted] Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. Throughout 2025, we advanced our strategic optimization efforts while strengthening core capabilities across product offerings and technological innovation. As these initiatives took hold, we began to see clear signs of stabilization and recovery in the second half of the year. Both GMV and revenue largely recovered to prior year levels in the third quarter, then accelerated into solid year-over-year growth in the fourth quarter. At the same time, our earnings quality continued to strengthen. We successfully returned to profitability in the fourth quarter. With an adjusted net profit of RMB 14.8 million and achieved half year breakeven for the first time. Our cash flow profile also strengthened meaningfully. We recorded positive operating cash flow in both the fourth quarter and full year 2025, further enhancing the resilience and flexibility of our financial position. These results signal that we have moved past the transitional effects of strategic optimization and entered a healthier, more resilient phase of development. Now let me walk you through some of the business highlights in the fourth quarter. At a fundamental level, our growth foundation has continued to strengthen. In the fourth quarter, overall GMV grew 8.5% year-over-year and approximately 11% sequentially. Based on order pipeline and shipment trends, we expect year-over-year GMV growth to accelerate into double digits in the first quarter this year. A key driver of our GMV growth was the continued expansion and deepening of our customer base. In the fourth quarter, the number of transacting customers approached 74,000, representing a year-over-year increase of 60%, the fastest quarterly growth in recent years. By customer segment, GMV from both key accounts and SME customers on our ZKH platform maintained year-over-year growth during the quarter. Among key accounts,…

Thank you, Eric, and thanks, everyone, for making time to join our earnings call today. I'm pleased to walk you through our financial performance for the fourth quarter and full year 2025. We concluded the year with strong momentum across key financial metrics. In the fourth quarter, we delivered accelerated top line growth, improved operational efficiency and achieved a return to profitability. These results reflect the improvement of our core business fundamentals and the growing benefits of business optimization we've implemented over the past several quarters. Let me begin with our top line performance. In the fourth quarter, we generated a solid year-over-year and sequential growth signaling strengthening momentum in our business and robust market demand. GMV grew by 8.5% year-over-year and 11.3% sequentially to RMB 2.92 billion, while total revenues grew by 7.9% year-over-year and 9.8% sequentially to RMB 2.56 billion. This performance was supported by the continued expansion of our customer base as well as our enhanced product offering and fulfillment capabilities. For the full year, GMV declined by 3.3% year-over-year to RMB 10.1 billion, primarily due to the impact of strategic optimization that continued to weigh on results in the first half of the year. But the company's operational performance showed clear signs of inflection points in the second half of 2025. Total revenues increased by 2.6% year-over-year to RMB 9 billion. Turning to our margin profile. Gross profit margin in the fourth quarter was 15.5% compared with 17.1% in the same period last year, primarily reflecting temporary unfavorable change in product mix. That being said, the underlying drivers of our long-term margin expansion remains well in place. The ongoing growth of our high-margin SME customers and private label products provides a structural tailwind for our margin profile. In addition, our continued progress in procurement efficiency and…

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

[Foreign Language] I will translate myself. Congratulations on the robust 4Q results. My question is about gross margin. We noted a decline in the gross margin year-over-year in Q4. Could management please explain the reason behind this? And additionally, will the long-term goal and the trend for improving gross margin be affected?

[Interpreted] Thank you very much for that question. So to answer your question, the Q4 changes -- the gross margin changes in Q4 was primarily caused by 2 things. First is the change in product mix. As we know, there have been changes and fluctuation in the commodity prices, and that has led to some customers pulling ahead the purchasing of certain products, for example, wires and cables, right? And wires and cables use copper whose pricing has been rising. And the gross margin for these products tend to be lower, and that have driven down the overall gross margin. And the similar products include things like white oil and stuff like that. Secondly, the percent of -- or SOE customers as a percent of total customers in terms of their business value and volume have increased slightly. But if you look through our gross margin January through March of this year, things have been improving gradually. And of course, because of the war that's ongoing in the Middle East, there's now price hikes regarding oil, petroleum. So suppliers are jacking up their prices. Of course, that needs to be considered as a double-edged sword as even though on the short run, it's going to put some downward pressure on our gross margins. But in the long run, it's going to provide opportunities for more sales and more expansive or expansion opportunities. For the full year, if you look across all of our production lines, our goal is definitely to achieve higher margins by way of lowering costs on 3 different fronts, namely purchasing, private labels and cost optimization regarding certain sectors. And we need to understand that gross margin -- gross profit margins vary from product line to product line. What we care most about is the overall profitability, and we will try to drive that up over time. So that was my answer to this question.

The next question comes from Jin Han with CICC.

[Foreign Language] I will translate myself. The company's private label achieved a 20% growth in this year, increasing share to 8.3%. Could management please introduce the company's growth targets for private label this year? Additionally, as the company sell more private label products, how does the company manage relationship and commutation with nonprivate label suppliers?

[Interpreted] Sure. Private labels are extremely important for us. It's an extremely important driver for us. Our target for private labels in 2026 is for it to grow by another 30%. And we started investing in private labels. We doubled down on our investments into private labels last year. And our goal is to drive its share of our GMV to roughly 10% for this year, 2026. As for our relationship with non-private label suppliers, of course, first off, we won't do private labels for all categories. We will look into categories -- we will comb through all categories to identify the ones where we could provide better value by doing private labels on. And for those categories, we will have a private label version of those categories. And if you look across history and globally, whenever a platform grows to a certain -- grew to a certain size, private labels will emerge and some of the categories will shift and migrate towards private labels. And that is a great appeal to the business we are in. So as we scale, both private labels and branded products will coexist and thrive. So I think driving up the share of our private labels as a percent of our GMV is an important strategy for us. As offering certain kind of -- a certain degree of competition against our suppliers will definitely drive up customer satisfaction and create more value for our customers. And customer satisfaction, in my opinion, trumps all the other factors.

Okay. Was there a follow-up? Or was that the answer for the question?

That was the full answer.

The next question comes from Shen Qiang Wang with CITIC.

[Foreign Language] I will translate my questions. Could you please introduce the company's most important objectives for this year as well as the growth targets and the strategies for China domestic business?

[Interpreted] Sure. The most important objective for us in 2026 is to achieve full year profitability as alluded in the prepared remarks. Meanwhile, we will continue to build out our core competencies to lay a firm groundwork for future development. So there's 3 aspects we will try to push for in order to achieve this two-pronged objective. Firstly, we will continue to create value by digging into our product competencies or to make our products more competitive. So basically to offer better products at lower prices. Secondly, for our medium to large customers, we will continue to dig deeper, revolving their needs so as to drive up their wallet share with us as well as gross profit margins. On the customer front, so aside from serving key accounts well, we will be systematically doing business development with SME customers and expand our base of SME manufacturers. Specifically, we will be focusing on doing online and offline ad campaigns, content marketing and brick-and-mortar off-line promoters kind of thing to expand that coverage. And that's what we're going to focus on this year. And we will also accelerate the expansion of the overseas market, especially when it comes to serving well Chinese manufacturers that are going abroad because this trend is only accelerating, and we will need to take advantage of that very well. Secondly, in order to ensure profitability, we need to, first and foremost, focus on the product side of things. So let me backtrack a little bit. We need to improve the quality of our business, and there's 2 things specifically that we will need to be doing. Firstly, as was alluded to in the prepared remarks, we need to focus on what we believe is the real MROs, what we were referring to as highly specialized MRO products.…

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.]