SHANGHAI, Nov. 22, 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 third quarter ended September 30, 2024.
Third Quarter 2024 Operational and Financial Highlights
in thousand RMB, except for number of customers,
percentage and basis points (“bps”)
Third Quarter
2023
2024
Change
GMV[1]
2,894,140
2,685,996
-7.2 %
GMV by Platform
ZKH Platform
2,619,417
2,422,649
-7.5 %
GBB Platform
274,723
263,347
-4.1 %
GMV by Business Model
Product Sales (1P)
2,180,729
2,228,234
2.2 %
Marketplace (3P)[2]
713,411
457,762
-35.8 %
Number of Customers[3]
40,963
47,876
16.9 %
ZKH Platform
30,096
36,132
20.1 %
GBB Platform
10,867
11,744
8.1 %
Net Revenues
2,265,001
2,280,690
0.7 %
Gross Profit
369,414
388,406
5.1 %
% of Net Revenues
16.3 %
17.0 %
72.1bps
Operating Loss
(121,434)
(105,355)
-13.2 %
% of Net Revenues
-5.4 %
-4.6 %
74.2bps
Non-GAAP EBITDA[4]
(76,092)
(62,812)
-17.5 %
% of Net Revenues
-3.4 %
-2.8 %
60.5bps
Net Loss
(97,686)
(81,751)
-16.3 %
% of Net Revenues
-4.3 %
-3.6 %
72.8bps
Non-GAAP Adjusted Net Loss[5]
(98,674)
(66,178)
-32.9 %
% of Net Revenues
-4.4 %
-2.9 %
145.5bps
Mr. Eric Long Chen, Chairman and Chief Executive Officer of ZKH, stated, “We achieved solid operational and financial performance amid evolving market conditions in the MRO industry during the third quarter. Our ongoing optimization efforts enhanced our overall business quality, resulting in narrowed loss margins in the quarter. Additionally, our initiatives to strengthen our product capabilities enabled us to offer products with greater value-for-money, evidenced by the expanding proportion of GMV contributed by private-label products. Going forward, we will remain dedicated to doing what is right for our business’s long-term success and creating value for all our stakeholders.”
Mr. Max Chun Chiu Lai, Chief Financial Officer of ZKH, added, “In the third quarter, we continued to drive our strategic focus across the business, delivering a solid set of results bolstered by a year-over-year increase in customer numbers and robust demand from leading, well-managed manufacturing enterprises. In addition, we continued to advance along the path to profitability year over year, evidenced by a 72.1 basis point increase in gross margin and a 145.5 basis points improvement in adjusted net loss margin. Notably, our cash position further strengthened as we generated net cash of RMB160.5 million from operating activities in the third quarter of 2024, in contrast to net cash used in operating activities in the prior year period. Looking ahead, our demonstrated execution and narrowed loss margins position us to relentlessly pursue business growth, propelling us toward achieving our long-term vision.”
[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] The proportion of GMV generated by the marketplace model was 24.7% and 17.0% for the third quarter of 2023 and 2024, respectively.
[3] Customers are customers that transacted with the Company during the reporting period, mainly comprised of enterprise customers in various industries.
[4] Non-GAAP EBITDA is defined as net loss before interest expenses, income tax expenses/(benefits) and depreciation and amortization expenses.
[5] Non-GAAP adjusted net loss is defined as net loss excluding share-based compensation expenses.
Third Quarter 2024 Financial Results
Net Revenues. Net revenues were RMB2,280.7 million (US$325.0 million), representing a slight increase of 0.7% from RMB2,265.0 million in the same period of 2023, mainly due to an increase in the number of customers, partially offset by the effect of business optimizations.
in thousand RMB, except for percentage
Third Quarter
2023
2024
Change
Net Revenues
2,265,001
2,280,690
0.7 %
Net Product Revenues
2,163,403
2,207,277
2.0 %
From ZKH Platform
1,891,631
1,943,742
2.8 %
From GBB Platform
271,772
263,535
-3.0 %
Net Service Revenues
79,887
57,666
-27.8 %
Other Revenues
21,711
15,747
-27.5 %
Cost of Revenues. Cost of revenues was RMB1,892.3 million (US$269.7 million), representing a decrease of 0.2% from RMB1,895.6 million in the same period of 2023. The decrease was lower than the growth in net product revenues, mainly due to the effectiveness of the Company’s measures to reduce overall product procurement costs.
Gross Profit and Gross Margin. Gross profit was RMB388.4 million (US$55.3 million), an increase of 5.1% from RMB369.4 million in the same period of 2023. Gross margin was 17.0%, compared with 16.3% in the same period of 2023. The increase in gross margin was driven by a higher gross margin of the product sales model (1P) and the increased take rate of the marketplace model (3P)[6] on the ZKH platform, partially offset by a lower gross margin on the GBB platform.
in thousand RMB, except for percentage and basis points (“bps”)
Third Quarter
2023
2024
Change
Gross Profit
369,414
388,406
5.1 %
% of Net Revenues
16.3 %
17.0 %
72.1bps
Under Product Sales (1P)
ZKH Platform
262,830
311,947
18.7 %
% of Net Product Revenues from ZKH Platform
13.9 %
16.0 %
215.4bps
GBB Platform
15,656
14,522
-7.2 %
% of Net Product Revenues from GBB Platform
5.8 %
5.5 %
-25.0bps
Under Marketplace (3P)
79,887
57,666
-27.8 %
% of Net Service Revenues
100.0 %
100.0 %
–
Others
11,041
4,271
-61.3 %
% of Other Revenues
50.9 %
27.1 %
-2,373.2bps
[6] Take rate of the marketplace model was 12.6% and 11.2% for the third quarter of 2024 and 2023, respectively. Take rate of the marketplace model represents gross profit from the marketplace model divided by GMV from the marketplace model.
Operating Expenses. Operating expenses were RMB493.8 million (US$70.4 million), an increase of 0.6% from RMB490.8 million in the same period of 2023. Operating expenses as a percentage of net revenues were 21.6%, compared with 21.7% in the same period of 2023.
Loss from Operations. Loss from operations was RMB105.4 million (US$15.0 million), compared with RMB121.4 million in the same period of 2023. Operating loss margin was 4.6%, compared with 5.4% in the same period of 2023.
Non-GAAP EBITDA. Non-GAAP EBITDA was negative RMB62.8 million (US$9.0 million), compared with negative RMB76.1 million in the same period of 2023. Non-GAAP EBITDA margin was negative 2.8%, compared with negative 3.4% in the same period of 2023.
Net Loss. Net loss was RMB81.8 million (US$11.7 million), compared with RMB97.7 million in the same period of 2023. Net loss margin was 3.6%, compared with 4.3% in the same period of 2023.
Non-GAAP Adjusted Net Loss. Non-GAAP adjusted net loss was RMB66.2 million (US$9.4 million), compared with RMB98.7 million in the same period of 2023. Non-GAAP adjusted net loss margin was 2.9%, compared with 4.4% in the same period of 2023.
Basic and Diluted Net Loss per ADS[7] and Non-GAAP Adjusted Basic and Diluted Net Loss per ADS[8]. Basic and diluted net loss per ADS were RMB0.50 (US$0.07), compared with RMB5.33 in the same period of 2023. Non-GAAP adjusted basic and diluted net loss per ADS were RMB0.40(US$0.06), compared with RMB2.61 in the same period of 2023.
[7] ADSs are American depositary shares, each of which represents thirty-five (35) Class A ordinary shares of the Company.
[8] Non-GAAP adjusted basic and diluted net loss per ADS is a non-GAAP financial measure, which is calculated by dividing non-GAAP adjusted net loss attributable to the Company’s ordinary shareholders by the weighted average number of ADSs.
Balance Sheet and Cash Flow
As of September 30, 2024, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB2.06 billion (US$294.2 million), compared with RMB2.12 billion as of December 31, 2023.
Net cash generated from operating activities was RMB160.5 million (US$22.9 million) in the third quarter of 2024, compared with net cash used in operating activities of RMB9.0 million in the same period of 2023.
Exchange Rate
This announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) 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 RMB7.0176 to US$1.00, the exchange rate in effect as of September 30, 2024, as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. The Company makes no representation that any RMB or US$ 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 Friday, November 22, 2024, at 7:00 A.M. U.S. Eastern Time or 8:00 P.M. Beijing Time to discuss its financial results and operating performance for the third quarter of 2024.
United States (toll free):
+1-888-317-6003
International:
+1-412-317-6061
Mainland China (toll free):
400-120-6115
Hong Kong (toll free):
800-963-976
Hong Kong:
+852-5808-1995
Access Code:
9045994
The replay will be accessible through November 29, 2024, by dialing the following numbers:
United States:
+1-877-344-7529
International:
+1-412-317-0088
Replay Access Code:
9322507
A live and archived webcast of the conference call will also be available on the Company’s investor relations website at https://ir.zkh.com.
About ZKH Group Limited
ZKH Group Limited (NYSE: ZKH) is a leading MRO procurement service platform in China, dedicated to propelling the MRO industry’s digital transformation to drive cost reduction and efficiency improvement industry-wide. Leveraging its outstanding product selection and recommendation capabilities, ZKH provides digitalized, one-stop MRO procurement solutions that enable its customers to transparently and efficiently access a wide selection of quality products at competitive prices. The Company also facilitates timely and reliable product delivery with professional fulfillment services. By catering specifically to the needs of MRO suppliers and customers through its unmatched digital infrastructure, the Company empowers all participants in the value chain to achieve more.
For more information, please visit: https://ir.zkh.com.
Use of Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: non-GAAP adjusted net loss, non-GAAP adjusted net loss per ADS, basic and diluted, and non-GAAP EBITDA. The non-GAAP financial measures should not be considered in isolation from or construed as alternatives to their most directly comparable financial measures prepared in accordance with accounting principles generally accepted in the United States of America. Investors are encouraged to review the historical non-GAAP financial measures in reconciliation to their most directly comparable GAAP financial measures.
The Company defines non-GAAP adjusted net loss for a specific period as net loss in the same period excluding share-based compensation expenses. The Company defines non-GAAP EBITDA as net loss before interest expenses, income tax expenses/(benefits) and depreciation and amortization expenses. Non-GAAP adjusted net loss per ADS is calculated by dividing adjusted net loss attributable to the Company’s ordinary shareholders by the weighted average number of ordinary shares outstanding during the periods and then multiplied by 35.
The Company presents these non-GAAP financial measures because they are used by the management to evaluate the Company’s operating performance and formulate business plans. The Company believes that these non-GAAP financial measures help identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that are included in net loss and certain expenses that are not expected to result in future cash payments or that are non-recurring in nature. The Company also believes that the use of these non-GAAP financial measures facilitates investors’ assessment of its operating performance, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision making.
The non-GAAP financial measures have material limitations as analytical metrics and may not be calculated in the same manner by all companies. The Company’s non-GAAP financial measures do not include all income and expense items that affect the Company’s operations. They may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider the non-GAAP financial measures as substitutes for, or superior to, their most directly comparable financial measures prepared in accordance with GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.
For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of Non-GAAP Results” set forth at the end of this press release.
Safe Harbor Statement
This press release contains forward-looking statements. These statements are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “will,” “expects,” “anticipates,” “aim,” “estimates,” “intends,” “plans,” “believes,” “is/are likely to,” “potential,” “continue,” and similar statements. Among other things, the quotations from management in this press release and ZKH’s strategic and operational plans contain forward-looking statements. ZKH may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press release and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about ZKH’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: ZKH’s mission, goals and strategies; ZKH’s future business development, financial condition and results of operations; the expected changes in its revenues, expenses or expenditures; the expected growth of the MRO procurement service industry in China and globally; changes in customer or product mix; ZKH’s expectations regarding the prospects of its business model and the demand for and market acceptance of its products and services; ZKH’s expectations regarding its relationships with customers, suppliers, and service providers on its platform; competition in the Company’s industry; government policies and regulations relating to ZKH’s industry; general economic and business conditions in China and globally; the outcome of any current and future legal or administrative proceedings; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in ZKH’s filings with the SEC. All information provided herein is as of the date of this announcement, and ZKH undertakes no obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
In China:
ZKH Group Limited
IR Department
E-mail: IR@zkh.com
Piacente Financial Communications
Hui Fan
Tel: +86-10-6508-0677
E-mail: zkh@thepiacentegroup.com
In the United States:
Piacente Financial Communications
Brandi Piacente
Tel: +1-212-481-2050
E-mail: zkh@thepiacentegroup.com
ZKH GROUP LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share, ADS, per share and per ADS data)
As of
December 31,
As of
September 30,
2023
2024
RMB
RMB
US$
Assets
Current assets:
Cash and cash equivalents
1,090,621
1,460,075
208,059
Restricted cash
159,751
78,964
11,252
Short-term investments
874,210
525,402
74,869
Accounts receivable (net of allowance for credit losses
of RMB107,032 and RMB154,088 as of December
31, 2023 and September 30, 2024, respectively)
3,639,794
3,166,588
451,235
Notes receivable
352,997
247,092
35,210
Inventories
668,984
656,906
93,608
Prepayments and other current assets
168,117
182,031
25,941
Total current assets
6,954,474
6,317,058
900,174
Non-current assets:
Property and equipment, net
145,288
177,170
25,247
Land use right
11,033
10,864
1,548
Operating lease right-of-use assets, net
224,930
189,530
27,008
Intangible assets, net
20,096
16,160
2,303
Goodwill
30,807
30,807
4,390
Total non-current assets
432,154
424,531
60,496
Total assets
7,386,628
6,741,589
960,670
