ZKH Group Limited American Depositary Shares, each representing thirty-five (35) Class A Ordinary Shares

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 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 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 now turn the call over to Eric. Eric, please go ahead.

大家好,欢迎各位参加政宽行2025年第一季度业绩发布会。 一季度,我们的平台保持高度活跃, 总成交客户数超过了6万家, 同比增长30%变3。 行业大客户和区域中小型客户的销售 均录得双位数的增长, In the second half of last year, the number of sales in the first quarter of this year has dropped significantly compared to the number of sales in the same period last year. Therefore, in the first quarter, our total income is 19.4 billion yuan, which is 4% of the total growth.

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 enterprise, or SOE, 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 1.94 billion RMB. representing a 4% increase year-over-year.

In terms of profits, our operating losses and net losses are 80 million RMB and 66 million RMB, which are 37.7% and 26.6% in total. Because in January and February, the impact of the Spring Festival was relatively large, but in March, to achieve a profit of half a month. It is worth mentioning that this result is compared to the same period last year. In the first quarter of this year, we invested in American business, and in the first quarter of this year, we did not get government subsidies on the way. This shows that our domestic business continues to grow in terms of profit and loss.

Regarding margins, our operating loss was approximately 80 million RMB and our net loss was around 66 million RMB, representing meaningful improvements of 37.7% and 26.6% year-over-year, respectively. 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, and like the same period last year. This demonstrates that the profitability of our domestic business continues to strengthen at the operational level.

In terms of cash flow, our situation remains strong and continues to improve. In the first quarter, our business activity cash flow was 9,700 million RMB. Last year, it was 0.2 billion RMB. In addition, our cash flow remains resilient and shows continued improvement.

Net cash outflow from operating activities was 97 million RMB in the first quarter. Compared to an outflow of 220 million RMB in the same period last year. This continued improvement underscores our strong financial resilience.

接下来,我具体介绍一下我们一季度在国内和海外业务各平台的表现,以及我们在AI技术开发和应用方面取得的进展。 一季度,我们的国内和海外业务

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.

Our dual platform model is fulfilling the different needs of customers. Zengguang's platform mainly serves large and medium-sized enterprises, while Gongbangbang's platform focuses on serving small and medium-sized enterprises in the pure e-commerce model. First, about Zengguang's platform. In the first quarter, Zengguang's platform's sales of major customers in the industry and the number of customers maintained a good growth pattern. GMV increased by 19.7% Among them, the sales of new energy vehicles, the electrical industry, the telecommunications and electronic industry, and the medical industry are more than 20% of the total. This is due to the continuous construction and operation of the product pool and customer product pool in various industries. Using AI technology to mobilize customer needs to select and recommend products for customers, thereby increasing the depth of our customers' pockets Starting with our domestic business, our dual platform strategy aims to meet diverse customer demands.

The ZKH platform serves mid- to large-sized enterprise customers, while the GBB platform caters to micro and small businesses through an e-commerce model. The ZKH platform experienced strong growth in both sales and customer numbers from our industry key accounts. GMV from these key accounts increased by 19.7% year-over-year, with over 20% growth in sectors such as new energy vehicles, electricals, telecommunications and electronics, and pharmaceuticals. This success is the result of our targeted efforts to curate and manage industry-specific and customer-specific product pools, leveraging AI to gain deeper insights into customer needs and provide tailored product selection and recommendations, which also help to increase our wallet share. As enterprise procurement continues to shift online and as we expand our coverage to more KA customers, sub-factories, and enhance our cross-selling capabilities across production lines, we remain confident that our sales to industry T-accounts will maintain strong growth momentum.

In terms of regional small and medium-sized customers, we have achieved significant results in the strategy of regionalized host management and network-based personnel layout. In the first quarter, the sales of regional small and medium-sized customers and the number of customers on Zhenghuang platform have achieved a double growth. Among them, sales in many areas such as Guangdong, Zhejiang, Fujian, and Beijing have increased by more than 20%. This is due to

For regional SME customers, our region-based service and grid-based staffing strategies yielded positive outcomes. In the first quarter, both sales and customer numbers from regional SME customers on the VKH platform recorded double-digit growth. Notably, sales in several regions, including Guangdong, Zhejiang, and Fujian provinces, as well as Beijing, each posted more than 20% year-over-year growth. This strong performance was attributable to our enhanced local services for regional customers, as well as accelerated factory coverage, market reach, and customer acquisitions.

In terms of state-of-the-art customers, the business optimization and adjustment influence since the second half of last year compared to the same period of high-end numbers, sales in the first quarter this year have dropped significantly. As we mentioned in the press conference in the last quarter, the optimization and adjustment of the business has ended, and the impact has gradually decreased. In the first quarter, the state-of-the-art business has stabilized. We are confident that based on our supply chain advantages,

For SOE and central SOE customers, our sales declined significantly year over year in the first quarter, mainly due to the high comparison base in the same period last year and the result of our business optimization initiatives since the second half of last year. As we mentioned during our last earnings call, we have completed these business adjustments and the impact has gradually tapered off. Our SOE and central SOE business have entered a stabilization phase in the first quarter. We remain confident that building on our supply chain advantages and the proven value we deliver to customers Our SOE and central SOE business will regain growth momentum in the second half of this year.

In terms of net profit, GMV's high-speed growth, which benefits from the optimization of purchasing costs and the free-brand products of high net profit, the net profit rate and the net profit rate of the platform business of the stock market platform have increased significantly. Regarding gross margin driven by our optimized procurement costs and rapid GMB growth,

from our high margin private label products, both the growth margin of our product sales model, or 1P, and the take rate of our marketplace model, or 3P, on the ZKH platform improved significantly. This marked the fifth consecutive quarter of year-over-year improvement in both gross margin and take rate. highlighting our team's strong execution in cost reduction and efficiency enhancement. In the first quarter, the GMV of our private label products exceeded 190 million RMB, an increase of approximately 40% year over year.

Since the fourth quarter of last year, we have achieved strategic cooperation with Tianmao Industries. By the end of March, Gong Bangbang has opened and operated eight stores on Tianmao's platform. It is expected to open and operate 24 stores this year. In the first quarter, Tianmao's sales have exceeded 260% of the previous year. In terms of number of customers, we have benefited from the good development of strategic cooperation with Tianmao Industries. In the first quarter, The number of customers on the platform of Gong Bangbang achieved a high-speed growth. The total number of customers exceeded 24,000. The total growth was 73%. In terms of net profit, through Tianmao, we covered more middle and small and medium-sized customers. At the same time, we focused on high net profit ML products. In the first quarter, the net profit of Gong Bangbang platform was significantly increased. Now let's turn to the GBB platform.

Our strategic partnership with Tmall has been fruitful. Since our partnership began in the fourth quarter of last year, GBB has operated eight stores on Tmall as of the end of March. We expect that the total number of stores will reach 24 by the end of this year. In the first quarter, this business segment on Tmall achieved a quarter-over-quarter sales growth of over 260%. Customer growth on GBB platform also accelerated with over 24,000 customers, up 73% year over year, benefiting from our strengthened Tmall partnership. As we expanded our store footprint on Tmall to reach more SME and micro businesses and focused on high margin MRO categories, Our gross margins for GBB platform improved significantly in the first quarter. With more stores lined up to launch and start operations on Tmall this year, we expect maintaining strong growth momentum in our Tmall business across sales, customer base, and gross margin, thereby driving the overall growth of the GBB platform.

Overall, the Chinese MOU market is huge, and the number of participants is spreading. The online penetration rate is still at a lower level. We believe that the Chinese MOU market has a wide space to promote growth and profit at the same time. Regarding overseas business, we went to the United States for the first time. The U.S. company North Sky and Independent Station officially started operation in December last year. At the end of March, the North Sky platform has launched more than 500 SQs, covering personal protection, hand tools, power tools, packaging, and heating, intelligence, and other products, including power tools, hand tools, Overall, the Chinese MRO market is vast and highly fragmented, with online penetration still at a relatively modest level.

We believe China's MRO market offers extensive potential to propel both scale and profitability growth. As for our global expansion, the United States has been our first destination. Our U.S. subsidiary, North Sky, and our U.S. standalone website officially launched in December last year. We have implemented a localization strategy in the U.S. market. leveraging our supply chain strengths, offering selected high value for money products, and utilizing innovative technologies to establish a strong presence. By the end of March, the North Sky platform had launched over 500 SKUs across categories such as personal protective equipment, or PPE, hand tools, power tools, packaging, and HVAC systems. Notably, our power tools, hand tools, and PPE categories have steadily risen in Google search rankings. In the first quarter, Both revenue and customer numbers doubled month over month.

今年下半年,我们将上线美国独立站移动端的APP。 同时,SQ数量将扩充至1500个以上,以进一步提升产品覆盖度和客户体验。 我们的目标是为海外市场提供全球最好的工业用品。 We have actively engaged in global recruitment activities. So far, we have received a number of excellent partners in Southeast Asian countries. It can be said that business needs flexible selection and supply of source. We believe that with the increase in the number of SQs, the improvement of supply chain capacity, and the continuous improvement of user experience and user mentality, the American business will accelerate growth in the second half of this year.

In the second half of the year, we plan to launch a mobile app version of our US standalone website, while scaling our SKU portfolio beyond 1,500 items to further enhance product coverage and customer experience. Our goal is to provide the world's best MRO offerings across global markets. We have actively initiated global supplier recruitment efforts and thus far have secured an array of high-quality suppliers in Southeast Asia, allowing us to flexibly choose sourcing locations based on business needs. As we continue to expand our SKU portfolio, strengthen supply chain capabilities, enhance user experience, and foster user mindshare, We believe we're well positioned to accelerate our U.S. business growth in the second half of the year.

In terms of AI technology development and applications, we use a professional industrial use database that covers 17 million SQs and 1 billion industrial use parameters. Combining our deep industry expert knowledge and natural industrial use model, our goal to create an AI tool that covers all processes of industrial products in the vertical field. In the past two years, we have successfully developed and deployed more than 10 AI smart applications to improve our internal operation efficiency and customer service capability. In terms of internal operation efficiency improvement, the order processing scene is an example. In the traditional model, it relies on customer service, to the system. Now we have developed AI smart workstations, innovatively realized the deep integration of natural language processing and ERP system. By simple dialogue, we can create orders, significantly improve the efficiency and accuracy of business processing. Based on the application of AI smart workstations, in the first quarter, we overcome the total order processing amount by 60.4%.

Moving on to AI technology development and applications, we possess a specialized database of industrial supplies covering 17 million SKUs and over a billion industrial product parameters. Leveraging our deep industry expertise and our self-developed large language model for industrial supplies, Our goal is to build an end-to-end matrix of AI tools tailored to the industrial supplies vertical with integrated capabilities for delivering tangible outcomes. Over the past two years, we have successfully developed and deployed more than 10 AI-powered applications to improve our internal operational efficiency and enhance customer service capabilities. To illustrate advancements in our operational efficiency, take the order processing scenario as an example. Previously, customer service teams manually entered each order into our system. To optimize this, we have developed the AI Smart Workbench, which seamlessly combines natural language processing with our ERP platform. This innovation enables order creation via simple conversational commands, greatly boosting both efficiency and accuracy. With the implementation of this AI smart workbench, our customer service team has achieved a 60.4% quarter over quarter increase in the average number of orders processed per team member in the first quarter.

In terms of customer service capability, using material processing and management scenarios as an example, AI material manager can bring the complex material description from customers and suppliers through AI fast structuralization, standardization, and output standardizing log parameters to achieve one thing at a time. The material processing work that originally needed a large number of people and a large number of people can now be said to be completed in an hour, greatly reducing the cost of material processing and management, and increasing accuracy. In terms of customer service capability, in the case of selectively recommending scenarios, AI pushes the brain to realize the precise movement of customer purchase needs and automated customer product management through the application scenario of deep structural industrial products. to improve the customer selection and recommendation efficiency and accuracy. Since the launch in September 2020, China has brought more than 200 customer acquisition needs analysis and product pool operation with a business growth of 34 million yuan. In this year, we plan to expand the AI推品大脑 to 140,000 customers and expect to bring more business growth.

On the customer service capabilities front, one notable example is the material standardization and management scenario. Using AI technologies, our AI material management agent can rapidly structure and standardize complex and diverse material descriptions from customers and suppliers. It then generates standardized catalog parameters, enabling one-to-one item coding. What previously required several days of work by multiple team members can now be completed in just a few hours, drastically reducing material sorting and management costs while also improving accuracy. Another example of our enhanced customer service capabilities is the product selection and recommendation scenario. Our AI product recommendation agent deeply analyzes MRO use cases to glean precise insights into customer procurement needs and enables automated management of customer-specific product pools. This has significantly improved the efficiency and accuracy of product selection and recommendation. Since its launch in September 2024, our AI product recommendation agent has analyzed procurement needs and managed product pools for over 200 customers, driving over 34 million RMB in revenue growth. This year, we plan to scale up our AI product recommendation agent to cover 14,000 customers, targeting even greater business growth.

Looking forward to the future, although facing challenges and uncertainties in the external environment, after the improvement of organizational capabilities in the past two years, and the development of core competitiveness, we believe that this industry has entered a new Looking ahead despite external challenges and uncertainties

We believe VKH has entered a new phase of long-term sustainable growth, underpinned by two years of organizational strengthening and core competency solidification. We are now well positioned to drive forward with a dual focus on both domestic and international markets, powered by AI and product innovation, and anchored in our industry-leading expertise in the MRO sector. 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 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 IRB 2.17 billion. While this marked 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 seen optimized. When excluding these factors, our underlying GMV maintains 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 high single-digit year-over-year increase in product sales revenue. As anticipated, marketplace revenue declined due to the prior year's high comparison phase as mentioned above. This solid top-line performance underscores the enduring strength of our product offerings, 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 strategy 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 daily basis, our gross profit margin continues to trend upward. Gross profit margin from our product sales model improves, with increases of 58 basis points to 16.6% on the ZKH platform and 67.5 basis points to 6.2% on GBP platform. And marketplace tick rates increased by 235.9 basis points year-over-year to 14%. These gains reflect the effectiveness of strategic business optimization, improved procurement efficiency, and a greater contribution from high-margin private label products. Turning to cost efficiency, our operating expenses decreased by 10.9% year-over-year to RMB 412.9 million, reflecting reduction across all major expense categories. Notably, this improvement was achieved despite incurring approximately RMB 10 million in US-related expenses, which were absent in the last year. This demonstrates our continued commitment to cost discipline and operational efficiency for our domestic operations driven by streamlined organizational structure and enhanced workforce productivity. As percentage of total revenue operating expenses decreased to 21.3% down from 24.9% year-over-year. Excluding share-based compensation, this ratio improves to 20.5% from 22.4% in the prior year period. Breaking it down further, fulfillment expenses were RMB 93.3 million, a 4.2% year-over-year decrease, primarily due to reduced employee benefits and warehouse rental costs. Sales and marketing expenses declined by 16.6% to RMB 136.8 million, primarily attributable to lower employee benefits and travel-related spending. R&D expenses remained stable at RMB 39.6 million, down slightly by 0.6% year-over-year, and savings in employee benefits were offset by increased spending on technology and information services. General and administrative expenses were RMB 143.2 million, down 11.8% year-over-year, mainly reflecting lower share-based compensation, partially offset by higher employee benefits. It is worth noting that our G&A expenses also include employee benefits for product-like personnel, as well as other product-like related costs, which supports the development and enhancement of our product competitiveness. As a result, our probability metric shows significant improvement. Loss from operations narrowed to RMB 18.8 million from RMB 129.6 million, with margin improving to 4.2% from 7%. This reflects a substantial enhancement in our operating level probability. We also see the first meaningful improvement in operating cash flow, with outflow reduced to RMB 97.1 million compared to RMB 224.3 million in the prior year period. This reduction is testament to our narrowed losses and effective working capital management, bolstered by improved capital utilization and operational execution. In summary, The above mentioned results validate the strength of our strategy and effectiveness of our execution. We are progressing towards our 2025 goals with discipline and strategic focus, supported by enhancements in business quality and steady margin improvement. We believe that as we expand our product portfolio, deepen supply chain integration, and implement AI technologies across our operations, We are well positioned to enhance our market, penetration, and accelerate global expansion. Do we bring long-term value for our customers, merchants, partners, and shareholders? Thank you for your attention. I look forward to your questions. Operators, please go ahead.

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 and you would like to withdraw your question, please press star then 2. 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Leo Cheng with Deutsche Bank.

Please go ahead. I have two questions I want to ask. The first question is I want to ask Kuan-Li Cheng, what is the impact of Sino-US tariffs on domestic and U.S. business? And how does the company respond? And the second question is, is there a timetable for new markets outside of the U.S.? Like European markets. I'll translate myself. So I have two questions. My first question is, could management share what are the impacts from tariffs on your domestic and the U.S. business respective? And the majors taken by the company. My second question is that, is there a timeline for entering new markets beyond the U.S., such as European? Thank you.

Thank you. The tariffs in the US market have a negative impact on our overseas business. In general, we think it is not a negative impact. It is even beneficial to the expansion of our US business. This market change or price change is a new opportunity for us. I think there are mainly two reasons. One reason is that the U.S. itself does not produce these MOU products. Their main products are still from China, Southeast Asia and other places in the world. The main products are from China and Southeast Asia. In order to respond to these possible changes, we have long started to prepare the supply and demand of this in China, especially the preparation of some countries in Southeast Asia. So we can now do this globalization based on the needs of the business to choose our suppliers. I think this is still very important. This is also a question of counter-explanatory. That is, in the MR market, if you are doing a channel to reach your mid-end customers, when facing the uncertainty of the market, we will adjust the flexibility will be a little bigger, the institutional ability will be a little bigger. I think this is 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 two things. Firstly, the US 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.

Because of the expansion of our overseas market, the first step is to choose the United States. We have developed more than 500 SQ products in the United States. Soon we will have more products that are suitable for the American market. With these products as the basis, we can sell products that are also suitable for the United States in Europe, Canada, and so on. In the second half of this year, we have already started early. In the second half of this year, the business in Europe will start. In terms of the business in Europe, I think from an online perspective, we can completely cover the entire European market in different languages. From an offline perspective, in the early stage, we mainly prepared for two countries. One is Germany and the other is Hungary. In Hungary, Europe now also has some of our Chinese companies. It happens to serve them better with our major customers. Traditionally, in Germany, manufacturing is very developed, and the cat market is very developed. So we are divided in the European market, the online is fully covered, and the offline is Germany and Hungary. As for other areas, we have already started the Southeast Asian market. The companies in Thailand have been registered, and they are gradually starting to find business. 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 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 two 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 two 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 was 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. Thank you.

So that was actually my answer to your question.

Thank you.

Mr. Chang, is there a follow-up to your question?

No, that was the answer to the question, said Mr. Chang.

Thank you. The next question comes from Xiaodan Zhang with CICC.

Please go ahead. So thanks for taking my questions 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.

Thank you. We currently have 32 product lines, five major categories, including spare parts, chemical products, processing and manufacturing, general consumables and administrative supplies. Our basic approach this year is to upgrade the existing product line, and then increase more categories and SQ, What is the core of Shenzhen's product line? Because we are a customer-oriented enterprise, we focus on the real industrial ML products, which mainly include spare parts, chemical products, and products needed for processing and manufacturing. On the other hand, we will particularly strengthen the development of free brands. 我们的自由品牌不仅仅是选择产品 很多产品我们也主动的参与到产品的研发和设计 这样不仅能让我们在国内市场保持产品的绝对竞争力 同时呢 我们这些自由品牌产品也可以更好的支持海外业务市场的发展 To the specific product line, we will further strengthen the chemical products and the two product lines of processing and manufacturing this year, especially the chemical products. It is our consistent advantage product category that we need to further strengthen this year. This is my answer to this question.

We currently have 32 product lines spanning across five categories, and they are spare parts, chemicals, processing, manufacturing, general consumables, and administrative materials. 2025 will 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'll 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 developments. 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. Thank you.

Xiaodan, is there a follow-up to your question? Does that answer your question?

No further questions. Thank you.

Thank you.

Yes, thank you.

The next question comes from Ella Ji with China Renaissance. Please go ahead.

Thank you for accepting my question. I would like to ask if the company can share with us the latest prospects for future business and financial prospects. So my question is if our management can share with us some updates regarding the company's business and the financial outlook for the upcoming quarter. Thank you.

Okay. In the first quarter of this year, we basically achieved our original goal of planning, and even improved it a little bit. As I mentioned earlier, The adjustment of the central enterprise is basically the same. We predict that in the next three seasons, the business will show a trend that will gradually accelerate development. We believe that in the second, third, and fourth seasons, we hope to achieve two-digit GMV growth in the third and fourth seasons. In particular, In terms of profitability, in the second quarter, we hope to achieve a profit-loss balance in the quarter. In the third quarter and the fourth quarter, we hope to achieve a profit-loss balance in the two quarters. In the whole year, we hope to achieve a positive growth in GMV. At the same time, we hope to achieve a profit-loss balance in domestic business. In addition to foreign business, So 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 three 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 GMB. Profitability wise, we believe Q2 will see single quarter break even. Q3 and Q4 will see positive profitability. And for the entire year 25, GMB 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, thank you.

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.vh.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.