SHANGHAI, May 21, 2024 /PRNewswire/ -- ZKH Group Limited ("ZKH" or the "Company") (NYSE:ZKH), a leading maintenance, repair and operations ("MRO") procurement service platform in China, today announced its unaudited financial results for the first quarter ended March 31, 2024. First Quarter 2024 Operational and Financial Highlights  in thousand RMB, except for number of customers, percentage and basis points ("bps") First Quarter 2023 2024 Change GMV[1] 2,372,911 2,348,640 -1.0 % GMV by Platform     ZKH Platform 2,208,760 2,137,614 -3.2 %     GBB Platform 164,151 211,026 28.6 % GMV by Business Model     Product Sales (1P) 1,839,184 1,775,732 -3.5 %     Marketplace (3P) 533,727 572,908 7.3 % Number of Customers 35,760 46,135 29.0 %     ZKH Platform 26,973 31,706 17.5 %     GBB Platform 8,787 14,429 64.2 % Net Revenues[2] 1,938,760 1,860,409 -4.0 % Gross Profit 330,798 334,076 1.0 %     % of Net Revenues 17.1 % 18.0 % 89.5bps Operating Loss (147,418) (129,614) -12.1 %     % of Net Revenues -7.6 % -7.0 % 63.7bps Non-GAAP EBITDA[3] (71,225) (70,048) -1.7 %     % of Net Revenues -3.7 % -3.8 % -9.1bps Net Loss (97,863) (90,901) -7.1 %     % of Net Revenues -5.0 % -4.9 % 16.2bps Non-GAAP Adjusted Net Loss[4] (86,873) (43,459) -50.0 %     % of Net Revenues -4.5 % -2.3 % 214.5bps Mr. Eric Long Chen, Chairman and Chief Executive Officer of ZKH, stated, "We delivered a solid performance in the first quarter, with profitability improving year over year. Our focus during the quarter was to continue investing in optimizing our operations for long-term growth. Our first smart and automated warehousing facilities for the fasteners' product line has been put into operation in March 2024. Next, we will invest in and upgrade warehousing facilities for our other product lines and categories to elevate our warehousing and fulfillment efficiencies. In addition, our efforts to streamline organizational structure and enhance operating efficiencies have yielded positive results, putting us on track for sustained profitability improvement. Looking ahead, we will remain focused on delivering a superior customer experience and positioning our company for sustainable and profitable growth, as we believe customer demand for efficient, transparent, and cost-effective procurement will continually drive demand in the online MRO market." Mr. Max Chun Chiu Lai, Chief Financial Officer of ZKH, added, "Our GMV for the first quarter decreased slightly by 1.0% year over year, mainly due to our focus on high-quality revenues and lower seasonal demand as a result of the late timing of the Chinese New Year, which fell in mid-February this year. Nevertheless, we continued to see robust purchasing activities on our platforms, with the number of customers rising by 29.0% year over year to over 46,000. Our gross margin increased by 89.5 basis points year over year, with an uptick in both the product sales model (1P) margin and the marketplace model (3P) take-rate of the ZKH platform. Our proactive operational efficiency optimization measures also continued to deliver positive results. Our adjusted net loss narrowed by RMB43.4 million, representing a corresponding margin improvement of 214.5 basis points year over year, our eighth consecutive quarter of year-over-year improvement. Going forward, we will continue to propel high-quality growth through sales scale expansion, solid margins, and high efficiency." [1] GMV is the total transaction value of orders placed on the Company's platform and shipped to customers, excluding taxes, net of the returned amount. [2] Net revenues under the marketplace model are recognized on a net basis. Therefore, a higher proportion of GMV generated by the marketplace model tends to increase the difference in growth rate between GMV and net revenues. The proportion of GMV generated by the marketplace model was 22.5% and 24.4% for the first quarter of 2023 and 2024, respectively. [3] Non-GAAP EBITDA is defined as loss before interest expenses, income tax expenses/(benefits) and depreciation and amortization expenses. [4] Non-GAAP adjusted net loss is defined as net loss excluding share-based compensation expenses. First Quarter 2024 Financial Results Net Revenues. Net revenues were RMB1,860.4 million (US$257.7 million), representing a decrease of 4.0% from RMB1,938.8 million in the same period of 2023, mainly due to our focus on high-quality revenues and lower seasonal demand as a result of the late timing of the Chinese New Year, which fell in mid-February in 2024. in thousand RMB, except for percentage First Quarter 2023 2024 Change Net Revenues 1,938,760 1,860,409 -4.0 %     Net Product Revenues 1,866,659 1,775,019 -4.9 %         From ZKH Platform 1,704,770 1,563,502 -8.3 %         From GBB Platform 161,889 211,517 30.7 %     Net Service Revenues 59,068 66,654 12.8 %     Other Revenues 13,033 18,736 43.8 % Net Product Revenues. Net product revenues were RMB1,775.0 million (US$245.8 million), representing a decrease of 4.9% from RMB1,866.7 million in the same period of 2023. The decrease was mainly due to lower net product revenues generated from the ZKH platform, partially offset by higher net product revenues from the GBB platform. Net Service Revenues. Net service revenues were RMB66.7 million (US$9.2 million), an increase of 12.8% from RMB59.1 million in the same period of 2023, primarily attributable to the growth of the marketplace model on the ZKH platform. Other Revenues. Other revenues were RMB18.7 million (US$2.6 million), an increase of 43.8% from RMB13.0 million in the same period of 2023, mainly attributable to higher revenues generated from the Company's testing and repairment services, and warehousing and logistic services. Cost of Revenues. Cost of revenues was RMB1,526.3 million (US$211.4 million), representing a decrease of 5.1% from RMB1,608.0 million in the same period of 2023, largely in line with the decrease of the Company's product revenues. Gross Profit and Gross Margin. Gross profit was RMB334.1 million (US$46.3 million), an increase of 1.0% from RMB330.8 million in the same period of 2023. Gross margin was 18.0%, compared with 17.1% in the same period of 2023. The increase in gross margin was driven by higher gross margin of product sales model (1P) and higher take-rate of marketplace model (3P) on the ZKH platform, as well as the growth of the marketplace model (3P) on the ZKH platform, partially offset by lower gross margin of product sales (1P) on the GBB platform. in thousand RMB, except for percentage and basis points ("bps") First Quarter 2023 2024 Change Gross Profit 330,798 334,076 1.0 %     % of Net Revenues 17.1 % 18.0 % 89.5bps     Under Product Sales (1P)         ZKH Platform 250,568 250,326 -0.1 %             % of Net Product Revenues from ZKH Platform 14.7 % 16.0 % 131.3bps         GBB Platform 13,880 11,630 -16.2 %             % of Net Product Revenues from GBB Platform 8.6 % 5.5 % -307.5bps     Under Marketplace (3P) 59,068 66,654 12.8 %         % of Net Service Revenues 100.0 % 100.0 % -     Others 7,282 5,466 -24.9 %         % of Other Revenues 55.9 % 29.2 % -2,670.0bps Operating Expenses. Operating expenses were RMB463.7 million (US$64.2 million), a decrease of 3.0% from RMB478.2 million in the same period of 2023. Operating expenses as a percentage of net revenues were 24.9%, compared with 24.7% in the same period of 2023, mainly due to the increase in share-based compensation expenses. Fulfillment Expenses. Fulfillment expenses were RMB97.3 million (US$13.5 million), a decrease of 12.2% from RMB110.9 million in the same period of 2023. The decrease was primarily attributable to lower distribution expenses and employee benefit costs. Fulfillment expenses as a percentage of net revenues were 5.2%, compared with 5.7% in the same period of 2023. Sales and Marketing Expenses. Sales and marketing expenses were RMB164.1 million (US$22.7 million), a decrease of 8.8% from RMB179.9 million in the same period of 2023. The decrease was primarily attributable to the decrease in employee benefit costs and travel expenses. Sales and marketing expenses as a percentage of net revenues were 8.8%, compared with 9.3% in the same period of 2023. Research and Development Expenses. Research and development expenses were RMB39.8 million (US$5.5 million), a decrease of 16.6% from RMB47.7 million in the same period of 2023. The decrease was primarily attributable to lower employee benefit costs. Research and development expenses as a percentage of net revenues were 2.1%, compared with 2.5% in the same period of 2023. General and Administrative Expenses. General and administrative expenses were RMB162.4 million (US$22.5 million), an increase of 16.3% from RMB139.7 million in the same period of 2023. The increase was primarily attributable to the increase in share-based compensation expenses, partially offset by the decrease in employee benefit costs. General and administrative expenses as a percentage of net revenues were 8.7%, compared with 7.2% in the same period of 2023. Loss from Operations. Loss from operations was RMB129.6 million (US$18.0 million), compared with RMB147.4 million in the same period of 2023. Operating loss margin was 7.0%, compared with 7.6% in the same period of 2023. Non-GAAP EBITDA. Non-GAAP EBITDA was negative RMB70.0 million (US$9.7 million), compared with negative RMB71.2 million in the same period of 2023. Non-GAAP EBITDA margin was negative 3.8%, compared with negative 3.7% in the same period of 2023. Net Loss. Net loss was RMB90.9 million (US$12.6 million), compared with RMB97.9 million in the same period of 2023. Net loss margin was 4.9%, compared with 5.0% in the same period of 2023. Non-GAAP Adjusted Net Loss. Non-GAAP adjusted net loss was RMB43.5 million (US$6.0 million), compared with RMB86.9 million in the same period of 2023. Non-GAAP adjusted net loss margin was 2.3%, compared with 4.5% in the same period of 2023. Basic and Diluted Net Loss per ADS[5] and Non-GAAP Adjusted Basic and Diluted Net Loss per ADS[6]. Basic and diluted net loss per ADS were RMB0.56 (US$0.08), compared with RMB4.08 in the same period of 2023. Non-GAAP adjusted basic and diluted net loss per ADS were RMB0.27 (US$0.04), compared with RMB2.3 in the same period of 2023. [5] ADSs are American depositary shares, each of which represents thirty-five (35) Class A ordinary shares of the Company. [6] Non-GAAP adjusted basic and diluted net loss per ADS is a non-GAAP financial measure, which is calculated by dividing non-GAAP net loss attributable to the Company's ordinary shareholders by the weighted average number of ADSs. Balance Sheet and Cash Flow As of March 31, 2024, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB2.03 billion (US$281.3 million), compared with RMB2.12 billion as of December 31, 2023. Net cash used in operating activities was RMB224.3 million (US$31.1 million) in the first quarter of 2024, compared with net cash used in operating activities of RMB263.4 million in the same period of 2023. Exchange Rate This announcement contains translations of certain Renminbi ("RMB") amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ were made at a rate of RMB7.2203 to US$1.00, the exchange rate in effect as of March 29, 2024, as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. The Company makes no representation that any RMB or US$ amounts could have been, or could be, converted into US$ or RMB, as the case may be, at any particular rate, or at all. Conference Call Information The Company's management will hold a conference call on Tuesday, May 21, 2024, at 8:00 A.M. U.S. Eastern Time or 8:00 P.M. Beijing Time to discuss its financial results and operating performance for the first quarter of 2024.