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ZKH Group Ltd

ZKH Group LtdZKHEarnings & Financial Report

NYSE

ZKH Group Ltd is a leading industrial supply chain service provider headquartered in China, specializing in MRO (Maintenance, Repair and Operations) products, industrial components, and digital procurement solutions. It mainly serves manufacturing, construction and energy sectors across the Asia-Pacific, delivering end-to-end inventory management and cost optimization support for enterprise clients.

What changed in ZKH Group Ltd's 20-F — 2023 vs 2024

Top changes in ZKH Group Ltd's 2024 20-F

524 paragraphs added · 540 removed · 348 edited across 4 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

127 edited+34 added−35 removed796 unchanged
In such event, despite our efforts to restructure to comply with the then applicable laws and regulations in mainland China in order to continue our operations in mainland China, we may experience material changes in our business and results of operations, our attempts may prove to be futile due to factors beyond our control, and the value of the ADSs you invest in may significantly decline or become worthless.
In such event, despite our efforts to restructure to comply with the then applicable laws and regulations in mainland China in order to continue our operations in mainland China, we may experience material changes in our business and results of operations, our attempts may prove to be futile due to factors beyond our control, and the value of the ADSs you invest in may significantly decline or become worthless.
On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, which became effective on March 31, 2023, and five supporting guidelines on CSRC’s official website.
On February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, which became effective on March 31, 2023, and five supporting guidelines on CSRC’s official website.
The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offerings before settlement and delivery of the shares offered.
The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offerings before settlement and delivery of the shares offered.
Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur.
Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur.
In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our initial public offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.
In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our initial public offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor who is headquartered in mainland China.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor who is headquartered in mainland China.
As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.
As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.
On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s auditor.
On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s auditor.
As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate was due to a position taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located.
As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate was due to a position taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located.
As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction.
As a result of the Consolidated Appropriations Act, 2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction.
The expansion of our global and cross-border businesses will also expose us to risks inherent in operating businesses globally, including, but not limited to: ● inability to recruit international and local talent and deal with challenges in replicating or adapting our company policies and procedures to operating environments different than those of China; ● lack of acceptance of the product and service offerings on our platform; ● disruptions in the supply chain; ● investigations regarding anti-dumping; ● trade wars; ● geopolitical tensions, political instability and general economic or political conditions in particular countries or regions; ● challenges and increased expenses associated with staffing and managing global and cross-border operations and managing an organization spread over multiple jurisdictions; ● trade barriers, such as import and export restrictions, tariffs, customs duties and other taxes, competition law regimes and other trade restrictions, as well as other protectionist policies; ● differing and potentially adverse tax consequences; ● increased and conflicting regulatory compliance requirements; 31 Table of Contents ● increased risks of being involved in legal disputes and labor disputes; ● adaption to different industry practices; ● challenges caused by distance, language and cultural differences; ● the impact of pandemic diseases or natural disasters; ● increased costs to protect the security and stability of our information technology systems, intellectual property and personal data, including compliance costs related to data localization laws; ● availability and reliability of global and cross-border payment systems and logistics infrastructure; and ● exchange rate fluctuations.
The expansion of our global and cross-border businesses will also expose us to risks inherent in operating businesses globally, including, but not limited to: ● inability to recruit international and local talent and deal with challenges in replicating or adapting our company policies and procedures to operating environments different than those of China; ● lack of acceptance of the product and service offerings on our platform; ● disruptions in the supply chain; ● investigations regarding anti-dumping; ● trade wars; ● geopolitical tensions, political instability and general economic or political conditions in particular countries or regions; ● challenges and increased expenses associated with staffing and managing global and cross-border operations and managing an organization spread over multiple jurisdictions; ● trade barriers, such as import and export restrictions, tariffs, customs duties and other taxes, competition law regimes and other trade restrictions, as well as other protectionist policies; ● differing and potentially adverse tax consequences; ● increased and conflicting regulatory compliance requirements; 32 Table of Contents ● increased risks of being involved in legal disputes and labor disputes; ● adaption to different industry practices; ● challenges caused by distance, language and cultural differences; ● the impact of pandemic diseases or natural disasters; ● increased costs to protect the security and stability of our information technology systems, intellectual property and personal data, including compliance costs related to data localization laws; ● availability and reliability of global and cross-border payment systems and logistics infrastructure; and ● exchange rate fluctuations.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 48 Table of Contents We believe none of our entities outside of mainland China is a PRC resident enterprise for PRC tax purposes.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 49 Table of Contents We believe none of our entities outside of mainland China is a PRC resident enterprise for PRC tax purposes.
These factors include our abilities to: ● provide compelling transaction experience to customers and maintain or improve customers’ satisfaction with our customer services; ● maintain the popularity, quality and authenticity of the MRO products we offer; ● maintain the efficiency, safety, reliability and quality of our warehousing and logistics solutions; ● increase brand awareness through marketing and brand promotion activities; ● preserve our reputation and goodwill in the event of any negative publicity on customer service, internet security, product quality, price or authenticity, or other issues affecting us or other e-commerce business in China; and ● maintain our cooperative relationships with suppliers and third-party service providers. 26 Table of Contents If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our platform and the MRO products and services we offer, it may be difficult to maintain and grow our customer base, and our business and growth prospects may be materially and adversely affected.
These factors include our abilities to: ● provide compelling transaction experience to customers and maintain or improve customers’ satisfaction with our customer services; ● maintain the popularity, quality and authenticity of the MRO products we offer; ● maintain the efficiency, safety, reliability and quality of our warehousing and logistics solutions; ● increase brand awareness through marketing and brand promotion activities; ● preserve our reputation and goodwill in the event of any negative publicity on customer service, internet security, product quality, price or authenticity, or other issues affecting us or other e-commerce business in China; and ● maintain our cooperative relationships with suppliers and third-party service providers. 27 Table of Contents If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our platform and the MRO products and services we offer, it may be difficult to maintain and grow our customer base, and our business and growth prospects may be materially and adversely affected.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new services and expansions by us or our competitors; 56 Table of Contents ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● trends in the global economy in general and China’s economy in particular; ● rising international geopolitical tensions; and ● potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new services and expansions by us or our competitors; 57 Table of Contents ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● trends in the global economy in general and China’s economy in particular; ● rising international geopolitical tensions; and ● potential litigation or regulatory investigations.
If our Hong Kong subsidiary is determined by the PRC government authorities as receiving benefits from reduced income tax rates due to a structure or arrangement that is primarily tax-driven, the dividends paid by our mainland China subsidiaries to our Hong Kong subsidiary will be taxed at a higher rate, which will have a material adverse effect on our financial performance. ​ 54 Table of Contents PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans or additional capital contributions to our mainland China subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
If our Hong Kong subsidiary is determined by the PRC government authorities as receiving benefits from reduced income tax rates due to a structure or arrangement that is primarily tax-driven, the dividends paid by our mainland China subsidiaries to our Hong Kong subsidiary will be taxed at a higher rate, which will have a material adverse effect on our financial performance. ​ 55 Table of Contents PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans or additional capital contributions to our mainland China subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our ADSs. 42 Table of Contents In addition, the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted in 2006 and amended in 2009, requires overseas special purpose vehicles that are controlled by mainland China companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of mainland China domestic companies using shares of such special purpose vehicles or held by its shareholders as considerations to obtain the approval of the CSRC, or the CSRC approval, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our ADSs. 43 Table of Contents In addition, the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted in 2006 and amended in 2009, requires overseas special purpose vehicles that are controlled by mainland China companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of mainland China domestic companies using shares of such special purpose vehicles or held by its shareholders as considerations to obtain the approval of the CSRC, or the CSRC approval, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
According to the Circular of the State Administration of Foreign Exchange on Issuing the Regulations on Foreign Exchange Administration of the Overseas Direct Investment of Domestic Institutions, which was promulgated by SAFE on July 13, 2009 and became effective on August 1, 2009, PRC enterprises must register for overseas direct investment with a local SAFE branch. 52 Table of Contents We may not be fully informed of the identities of all of our shareholders or beneficial owners who are PRC entities, and we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC entities will comply with our request to complete the overseas direct investment procedures under the aforementioned regulations or other related rules in a timely manner, or at all.
According to the Circular of the State Administration of Foreign Exchange on Issuing the Regulations on Foreign Exchange Administration of the Overseas Direct Investment of Domestic Institutions, which was promulgated by SAFE on July 13, 2009 and became effective on August 1, 2009, PRC enterprises must register for overseas direct investment with a local SAFE branch. 53 Table of Contents We may not be fully informed of the identities of all of our shareholders or beneficial owners who are PRC entities, and we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC entities will comply with our request to complete the overseas direct investment procedures under the aforementioned regulations or other related rules in a timely manner, or at all.
In auditing our consolidated financial statements for the fiscal years ended December 31, 2021, 2022 and 2023, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting in accordance with the standards established by the PCAOB.
In auditing our consolidated financial statements for the fiscal years ended December 31, 2022 and 2023, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting in accordance with the standards established by the PCAOB.
However, if we fail to maintain or renew the requisite licenses for our sale and distribution of hazardous chemicals, or if any of chemicals we sell or distribute become uncovered by such licenses and permits due to changes in laws and regulations in mainland China, our business, financial condition and results of operations may be significantly and adversely affected. 29 Table of Contents As of the date of this annual report, we have not received any notice of warning or been subject to penalties or other disciplinary action from the governmental authorities regarding our conducting our business without the above mentioned licenses.
However, if we fail to maintain or renew the requisite licenses for our sale and distribution of hazardous chemicals, or if any of chemicals we sell or distribute become uncovered by such licenses and permits due to changes in laws and regulations in mainland China, our business, financial condition and results of operations may be significantly and adversely affected. 30 Table of Contents As of the date of this annual report, we have not received any notice of warning or been subject to penalties or other disciplinary action from the governmental authorities regarding our conducting our business without the above mentioned licenses.
In addition, future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our business. 32 Table of Contents In addition, recent economic and trade sanctions threatened and/or imposed by the U.S. government on a number of China-based companies have raised concerns as to whether, in the future, there may be additional regulatory challenges or enhanced restrictions involving other China-based companies in areas such as data security, information technology or other business activities.
In addition, future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our business. 33 Table of Contents In addition, recent economic and trade sanctions threatened and/or imposed by the U.S. government on a number of China-based companies have raised concerns as to whether, in the future, there may be additional regulatory challenges or enhanced restrictions involving other China-based companies in areas such as data security, information technology or other business activities.
Operators in violation of the PRC Anti-unfair Competition Law may be subject to civil, administrative or criminal liabilities depending on the specific circumstances. 46 Table of Contents In March 2018, the State Administration for Market Regulation was formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions from the relevant departments under the Ministry of Commerce, the National Development and Reform Commission, and the former State Administration for Industry and Commerce, respectively.
Operators in violation of the PRC Anti-unfair Competition Law may be subject to civil, administrative or criminal liabilities depending on the specific circumstances. 47 Table of Contents In March 2018, the State Administration for Market Regulation was formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions from the relevant departments under the Ministry of Commerce, the National Development and Reform Commission, and the former State Administration for Industry and Commerce, respectively.
Because we are a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD; and ● certain audit committee independence requirements in Rule 10A-3 of the Exchange Act.
Because we are a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; 61 Table of Contents ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD; and ● certain audit committee independence requirements in Rule 10A-3 of the Exchange Act.
As a result, any restriction on currency exchange may limit the ability of our subsidiary in mainland China to use their Renminbi revenues to pay dividends to ZKH Group Limited. 53 Table of Contents The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account.
As a result, any restriction on currency exchange may limit the ability of our subsidiary in mainland China to use their Renminbi revenues to pay dividends to ZKH Group Limited. 54 Table of Contents The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account.
Holders of our shares or the ADSs will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder pursuant to the exclusive forum provision in our currently effective memorandum and articles of association and deposit agreement. ​ 64 Table of Contents Our currently effective memorandum and articles of association contain anti-takeover provisions that could discourage a third party from acquiring us and adversely affect the rights of holders of our Class A ordinary shares and the ADSs.
Holders of our shares or the ADSs will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder pursuant to the exclusive forum provision in our currently effective memorandum and articles of association and deposit agreement. 65 Table of Contents Our currently effective memorandum and articles of association contain anti-takeover provisions that could discourage a third party from acquiring us and adversely affect the rights of holders of our Class A ordinary shares and the ADSs.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we may receive from our securities offering and to capitalize or otherwise fund our operations in mainland China may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 55 Table of Contents Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we may receive from our securities offering and to capitalize or otherwise fund our operations in mainland China may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 56 Table of Contents Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.
Heightened scrutiny over acquisition transactions by the tax authorities of mainland China may have a negative impact on potential acquisitions we may pursue in the future. 49 Table of Contents If our preferential tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged by the tax authorities of mainland China, we may be required to pay tax, interest and penalties in excess of our tax provisions.
Heightened scrutiny over acquisition transactions by the tax authorities of mainland China may have a negative impact on potential acquisitions we may pursue in the future. 50 Table of Contents If our preferential tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged by the tax authorities of mainland China, we may be required to pay tax, interest and penalties in excess of our tax provisions.
Accordingly, our business, prospects, financial condition and results of operations may be affected to a significant degree by political, economic and social conditions in China generally. 41 Table of Contents The Chinese economy differs from the economies of most developed countries in many respects, including the degree of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
Accordingly, our business, prospects, financial condition and results of operations may be affected to a significant degree by political, economic and social conditions in China generally. 42 Table of Contents The Chinese economy differs from the economies of most developed countries in many respects, including the degree of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
In addition, there is uncertainty as to whether the courts of the Cayman Islands or mainland China would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. 47 Table of Contents The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law.
In addition, there is uncertainty as to whether the courts of the Cayman Islands or mainland China would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. 48 Table of Contents The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law.
Our operating results and inventory levels could suffer if we are unable to promptly replace a supplier who is unwilling or unable to satisfy our requirements with another supplier providing equally appealing products and services. ​ 33 Table of Contents Tightening of tax compliance efforts that affect suppliers on our platform could materially and adversely affect our business, financial condition and results of operations.
Our operating results and inventory levels could suffer if we are unable to promptly replace a supplier who is unwilling or unable to satisfy our requirements with another supplier providing equally appealing products and services. ​ 34 Table of Contents Tightening of tax compliance efforts that affect suppliers on our platform could materially and adversely affect our business, financial condition and results of operations.
Moreover, developments in the internet-related industries may lead to changes in laws, regulations and policies in mainland China or in the interpretation and application of existing laws, regulations and policies, which in turn may limit or restrict us and could materially and adversely affect our business and operations. 43 Table of Contents From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
Moreover, developments in the internet-related industries may lead to changes in laws, regulations and policies in mainland China or in the interpretation and application of existing laws, regulations and policies, which in turn may limit or restrict us and could materially and adversely affect our business and operations. 44 Table of Contents From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
For a detailed description of the underlying risks, see “—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC laws and regulations, and if required, we cannot predict whether or for how long we will be able to obtain such approval” on page 42 in this annual report. ● The PRC legal system is a civil law system based on written statutes, where prior court decisions have limited precedential value.
For a detailed description of the underlying risks, see “—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC laws and regulations, and if required, we cannot predict whether or for how long we will be able to obtain such approval” on page 42 in this annual report. 11 Table of Contents ● The PRC legal system is a civil law system based on written statutes, where prior court decisions have limited precedential value.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. 51 Table of Contents Under these foreign exchange regulations, PRC residents who make, or have previously made, prior to the implementation of these foreign exchange regulations, direct or indirect investments in offshore companies are required to register those investments.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. 52 Table of Contents Under these foreign exchange regulations, PRC residents who make, or have previously made, prior to the implementation of these foreign exchange regulations, direct or indirect investments in offshore companies are required to register those investments.
Under the deposit agreement for the ADSs, if you do not timely provide voting instructions to the depositary, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs at shareholders’ meetings unless: ● we have failed to timely provide the depositary with notice of the meeting and related voting materials; ● we have instructed the depositary that we do not wish a discretionary proxy to be given; ● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; ● we have informed the depositary that a matter to be voted on at the meeting may have an adverse impact on shareholders; or ● the voting at the meeting is to be made on a show of hands.
Under the deposit agreement for the ADSs, if you do not timely provide voting instructions to the depositary, the depositary will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs at shareholders’ meetings unless: ● we have failed to timely provide the depositary with notice of the meeting and related voting materials; 63 Table of Contents ● we have instructed the depositary that we do not wish a discretionary proxy to be given; ● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; ● we have informed the depositary that a matter to be voted on at the meeting may have an adverse impact on shareholders; or ● the voting at the meeting is to be made on a show of hands.
Any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our ownership of proprietary intellectual property, the security of our vehicles, or our business, results of operations, and financial condition. 36 Table of Contents Our operations depend on the performance of the internet infrastructure and telecommunications networks in China and in other countries.
Any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our ownership of proprietary intellectual property, the security of our vehicles, or our business, results of operations, and financial condition. 37 Table of Contents Our operations depend on the performance of the internet infrastructure and telecommunications networks in China and in other countries.
In the event that our investments and acquisitions are not successful, our results of operations and financial condition may be materially and adversely affected. 30 Table of Contents Pending or future litigations, arbitrations, governmental investigations and other legal proceedings could have a material and adverse impact on our financial condition and operating results.
In the event that our investments and acquisitions are not successful, our results of operations and financial condition may be materially and adversely affected. 31 Table of Contents Pending or future litigations, arbitrations, governmental investigations and other legal proceedings could have a material and adverse impact on our financial condition and operating results.
If our efforts to invest in the development of new technologies are unsuccessful, our business, financial condition and results of operations may be materially and adversely affected. 28 Table of Contents In addition, the maintenance and processing of various operating and financial data is essential to the day-to-day operation of our business and formulation of our development strategies.
If our efforts to invest in the development of new technologies are unsuccessful, our business, financial condition and results of operations may be materially and adversely affected. 29 Table of Contents In addition, the maintenance and processing of various operating and financial data is essential to the day-to-day operation of our business and formulation of our development strategies.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. 35 Table of Contents We may be subject to intellectual property infringement claims, which maybe expensive to defend and may disrupt our business and operations.
Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. 36 Table of Contents We may be subject to intellectual property infringement claims, which maybe expensive to defend and may disrupt our business and operations.
The denying jurisdiction does not need to be where the accounting firm is located. 45 Table of Contents Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
The denying jurisdiction does not need to be where the accounting firm is located. 46 Table of Contents Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
Developments in these laws in various jurisdictions could subject us to liability, penalties or restrictions on our business. 37 Table of Contents We are dependent upon suppliers’ and customers’ continued and unimpeded access to the internet, and upon their willingness to use the internet for commerce.
Developments in these laws in various jurisdictions could subject us to liability, penalties or restrictions on our business. 38 Table of Contents We are dependent upon suppliers’ and customers’ continued and unimpeded access to the internet, and upon their willingness to use the internet for commerce.
Business Overview—Regulation.” 44 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
Business Overview—Regulation.” 45 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
In addition, the PRC governmental authorities have continued to introduce various new labor-related regulations since the effectiveness of the PRC Labor Contract Law. 50 Table of Contents These laws and regulations designed to enhance labor protection tend to increase our labor costs.
In addition, the PRC governmental authorities have continued to introduce various new labor-related regulations since the effectiveness of the PRC Labor Contract Law. 51 Table of Contents These laws and regulations designed to enhance labor protection tend to increase our labor costs.
Our reputation could be harmed, which could adversely affect our business and financial performance. 27 Table of Contents Our pricing decisions may adversely affect our financial performance and our ability to attract new suppliers and customers and retain existing suppliers and customers. We may change our pricing model from time to time.
Our reputation could be harmed, which could adversely affect our business and financial performance. 28 Table of Contents Our pricing decisions may adversely affect our financial performance and our ability to attract new suppliers and customers and retain existing suppliers and customers. We may change our pricing model from time to time.
A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) 75% or more of our gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income, or the asset test.
A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (i) 75% or more of our gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (including cash).
If financing is not available on satisfactory terms, or at all, we may be unable to expand our business at the rate desired and our results of operations may suffer. Financing through issuances of equity securities would be dilutive to holders of our shares. 24 Table of Contents We may fail to compete effectively in the MRO procurement service industry.
If financing is not available on satisfactory terms, or at all, we may be unable to expand our business at the rate desired and our results of operations may suffer. Financing through issuances of equity securities would be dilutive to holders of our shares. We may fail to compete effectively in the MRO procurement service industry.
We can experience downward pressure on sales prices as a result of deflation, pressure from customers to reduce costs, or increased competition. Any quality issues of the products we or any third-party suppliers offered through our platform may materially and adversely affect our business and results of operations.
We can experience downward pressure on sales prices as a result of deflation, pressure from customers to reduce costs, or increased competition. 16 Table of Contents Any quality issues of the products we or any third-party suppliers offered through our platform may materially and adversely affect our business and results of operations.
Significant capital, managerial and human resources are required to comply with legal requirements, enhance cybersecurity and address any issues caused by security failures. In addition, a number of regulations, guidelines and other measures have been and are expected to be adopted under the PRC Cybersecurity Law.
Significant capital, managerial and human resources are required to comply with legal requirements, enhance cybersecurity and address any issues caused by security failures. 17 Table of Contents In addition, a number of regulations, guidelines and other measures have been and are expected to be adopted under the PRC Cybersecurity Law.
Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report with adverse opinion if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the requirements differently from us.
Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
As a result, our business, financial condition and results of operations may be materially and adversely affected. We face risks related to natural disasters and health epidemics. Our business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting China, and particularly Shanghai.
As a result, our business, financial condition and results of operations may be materially and adversely affected. 40 Table of Contents We face risks related to natural disasters and health epidemics. Our business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting China, and particularly Shanghai.
The failure to maintain and to further enhance our market recognition and corporate reputation may materially and adversely affect our business, financial condition and results of operations. 16 Table of Contents Many factors, some of which are beyond our control, may negatively impact corporate reputation if not properly managed.
The failure to maintain and to further enhance our market recognition and corporate reputation may materially and adversely affect our business, financial condition and results of operations. Many factors, some of which are beyond our control, may negatively impact corporate reputation if not properly managed.
We also commit significant time and other resources to training our employees, which increases their value to competitors if they subsequently leave us for them. We believe that a critical component for our success is our corporate culture. Our culture and principles help us attract, retain, motivate and develop our workforce and help drive employee engagement.
We also commit significant time and other resources to training our employees, which increases their value to competitors if they subsequently leave us for them. 24 Table of Contents We believe that a critical component for our success is our corporate culture. Our culture and principles help us attract, retain, motivate and develop our workforce and help drive employee engagement.
In addition, for direct shipping orders, suppliers may use their own or other third-party warehousing and logistics service providers, which we have no control over. However, we have limited insurance coverage during the delivery process, which could expose us to significant costs and business disruption.
In addition, for direct shipping orders, suppliers may use their own or other third-party warehousing and logistics service providers, which we have no control over. 22 Table of Contents However, we have limited insurance coverage during the delivery process, which could expose us to significant costs and business disruption.
In September 2020, the State Administration for Market Regulation issued Anti-monopoly Compliance Guideline for Operators, which requires operators to establish anti-monopoly compliance management systems to prevent anti-monopoly compliance risks. In particular, the mainland China regulators have been increasingly focused on inspection and regulation on potential noncompliance with anti-unfair competition and anti-monopoly related laws.
In April 2024, the State Administration for Market Regulation issued Anti-monopoly Compliance Guideline for Operators, which requires operators to establish anti-monopoly compliance management systems to prevent anti-monopoly compliance risks. In particular, the mainland China regulators have been increasingly focused on inspection and regulation on potential noncompliance with anti-unfair competition and anti-monopoly related laws.
If we fail to attract new suppliers to sell their products to us due to any reason, our business and growth prospects may be materially and adversely affected. Our marketplace model is subject to risks associated with third-party suppliers.
If we fail to attract new suppliers to sell their products to us due to any reason, our business and growth prospects may be materially and adversely affected. 21 Table of Contents Our marketplace model is subject to risks associated with third-party suppliers.
The trading price of our ADSs has been volatile and has ranged from a low of US$12.75 per ADS to a high of US$21.91 per ADS since our ADSs started to trade on the NYSE, and could fluctuate widely due to factors beyond our control.
The trading price of our ADSs has been volatile and has ranged from a low of US$2.62 per ADS to a high of US$21.91 per ADS since our ADSs started to trade on the NYSE, and could fluctuate widely due to factors beyond our control.
If we are unable to address any information protection concerns, any compromise of security that results in unauthorized disclosure or transfer of personal data, or to comply with the then applicable laws and regulations, we may incur additional costs and liability and result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our borrowers and institutional partners to lose trust in us, which could have a material adverse effect on our business, results of operations, financial condition and prospects. 18 Table of Contents The PRC Personal Information Protection Law became effective in November 2021.
If we are unable to address any information protection concerns, any compromise of security that results in unauthorized disclosure or transfer of personal data, or to comply with the then applicable laws and regulations, we may incur additional costs and liability and result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our borrowers and institutional partners to lose trust in us, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
ZKH Group Limited transferred US$57.7 million in December 2023 and US$6.6 million in January 2024, the net proceeds from our initial public offering and the underwriters’ partial exercise of their option to purchase additional ADSs after deducting underwriting commissions, to ZKH Hong Kong Limited following our internal foreign currency management policy.
ZKH Group Limited transferred an aggregate of US$57.66 million in 2023 and an aggregate of US$6.5 million in 2024, the net proceeds from our initial public offering and the underwriters’ partial exercise of their option to purchase additional ADSs after deducting underwriting commissions, to ZKH Hong Kong Limited following our internal foreign currency management policy.
The PRC Personal Information Protection Law sets forth detailed rules on processing personal information, clarifies the rights of the individuals and the obligations of the personal information processors, and further strengthens the liabilities for illegal process of personal information.
The PRC Personal Information Protection Law became effective in November 2021. The PRC Personal Information Protection Law sets forth detailed rules on processing personal information, clarifies the rights of the individuals and the obligations of the personal information processors, and further strengthens the liabilities for illegal process of personal information.
Holders of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you do not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings.
As a holder of our ADSs, you do not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings.
Our third-party service providers handle a large volume of hazardous chemicals sold on our platform, and face challenges with respect to the protection and examination of these hazardous chemicals.
The storage and transportation of hazardous chemicals involve inherent safety risks. Our third-party service providers handle a large volume of hazardous chemicals sold on our platform, and face challenges with respect to the protection and examination of these hazardous chemicals.
If we cannot manage the growth of our business or execute our strategies effectively, our business and prospects may be materially and adversely affected. Our net revenues increased from RMB7,654.6 million in 2021 to RMB8,315.2 million in 2022, and further increased to RMB8,721.2 million (US$1,228.4 million) in 2023. However, our historical growth may not be indicative of our future growth.
If we cannot manage the growth of our business or execute our strategies effectively, our business and prospects may be materially and adversely affected. Our net revenues increased from RMB8,315.2 million in 2022 to RMB8,721.2 million in 2023, and further increased to RMB8,761.3 million (US$1,200.3 million) in 2024. However, our historical growth may not be indicative of our future growth.
For the years ended December 31, 2021, 2022 and 2023, we recorded RMB183.3 million, RMB31.8 million, and RMB17.4 million (US$2.4 million), respectively, in share-based compensation expenses. 34 Table of Contents We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future.
For the years ended December 31, 2022, 2023, and 2024 we recorded RMB31.8 million, RMB17.4 million, and RMB108.5 million (US$14.9 million) respectively, in share-based compensation expenses. 35 Table of Contents We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future.
For a detailed description of the underlying risks, see “—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us” on page 43 in this annual report. 11 Table of Contents ● We conduct our business primarily through our mainland China subsidiaries.
For a detailed description of the underlying risks, see “—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us” on page 43 in this annual report. ● We conduct our business primarily through our mainland China subsidiaries. Our operations in mainland China are governed by laws and regulations in mainland China.
If we further expand our business into overseas markets, we will be exposed to risks related to fluctuations in global production capacity and demand levels for MRO products, as well as global and regional economic conditions.
If we further expand our business into overseas markets, we will be exposed to risks related to fluctuations in global production capacity and demand levels for MRO products, as well as global and regional economic conditions. Additionally, starting from early 2018, the U.S.
To optimize order fulfillment efficiency, we provide logistics service and contract with third-party logistic service providers to supplement. The increase in demand for our logistics services may result in additional challenges in operating our fulfillment infrastructure.
We are subject to risks relating to the fulfillment of products on our platform. To optimize order fulfillment efficiency, we provide logistics service and contract with third-party logistic service providers to supplement. The increase in demand for our logistics services may result in additional challenges in operating our fulfillment infrastructure.
While we do not expect to be or become a PFIC, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs, fluctuations in the market price of our ADSs may cause us to be or become a PFIC for the current or subsequent taxable years.
The value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs, meaning that fluctuations in the market price of our ADSs may cause us to be or become a PFIC for the current or subsequent taxable years.
Our accounts payable turnover days (inclusive of notes payable) were 109.5 days in 2021, 130.7 days in 2022 and 136.8 days in 2023. If our suppliers cease to provide us with favorable payment terms, our requirements for working capital may increase and our operations may be materially and adversely affected.
Our accounts payable turnover days (inclusive of notes payable) were 130.4 days in 2022, 136.6 days in 2023, and 137.2 days in 2024. If our suppliers cease to provide us with favorable payment terms, our requirements for working capital may increase and our operations may be materially and adversely affected.
If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected. We have identified a material weakness in our internal control over financial reporting.
If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.
In addition, when we begin to sell a new product, it may be difficult to establish supplier relationships, determine appropriate product selection, and accurately forecast demand. We recorded inventories of RMB656.0 million as of December 31, 2022 and RMB669.0 million (US$94.2 million) as of December 31, 2023.
In addition, when we begin to sell a new product, it may be difficult to establish supplier relationships, determine appropriate product selection, and accurately forecast demand. 25 Table of Contents We recorded inventories of RMB669.0 million as of December 31, 2023 and RMB625.4 million (US$85.7 million).
Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance listing standards. We are permitted to elect to rely on home country practice to be exempted from the corporate governance requirements. Currently, we do not plan to rely on home country practice with respect to our corporate governance.
Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporate governance listing standards. 62 Table of Contents We are permitted to elect to rely on home country practice to be exempted from the corporate governance requirements.
Failure to perform these obligations may cause fines and other administrative penalties. 19 Table of Contents While we take measures to comply with applicable personal information laws and regulations, there is no guarantee that these measures would be effective. The activities of third parties such as our customers and suppliers are beyond our control.
While we take measures to comply with applicable personal information laws and regulations, there is no guarantee that these measures would be effective. The activities of third parties such as our customers and suppliers are beyond our control.
Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline. 58 Table of Contents There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our ADSs or ordinary shares to significant adverse United States federal income tax consequences.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our ADSs or ordinary shares to significant adverse United States federal income tax consequences.
If we do not adequately remediate the material weakness, or if we experience additional material weakness in the future or otherwise fail to maintain effective internal controls, we may not be able to accurately or timely report our financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in us and the market price of our ADSs.
If we fail to maintain an effective system of internal control over financing reporting, we may not be able to accurately or timely report our financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in us and the market price of our ADSs.
Our inventory turnover days were 33.4 days in 2021, 37.0 days in 2022 and 33.3 days in 2023. As we plan to continue expanding our product offerings, we expect to include more products in our inventory, which will make it more challenging for us to manage our inventory effectively and will put more pressure on our warehousing system.
As we plan to continue expanding our product offerings, we expect to include more products in our inventory, which will make it more challenging for us to manage our inventory effectively and will put more pressure on our warehousing system.
Providers of network products and network operators need to inform the suppliers of upstream products or inputs immediately and report vulnerability information to the Ministry of Industry and Information Technology in a timely manner.
Providers of network products and network operators need to inform the suppliers of upstream products or inputs immediately and report vulnerability information to the Ministry of Industry and Information Technology in a timely manner. Failure to perform these obligations may cause fines and other administrative penalties.
Holders of these ADSs beneficially own 2.8% of our total ordinary shares on an as-converted basis and 0.5% of the aggregate voting power.
Holders of these ADSs beneficially own 65.1% of our total ordinary shares on an as-converted basis and 11.9% of the aggregate voting power.
Any increase in the price charged by them, any safety accidents or mishandling of hazardous products, or any service disruption experienced by them could subject us to liabilities and negative publicity, therefore causing an adverse effect on our business operations and results of operations. The storage and transportation of hazardous chemicals involve inherent safety risks.
We face risks for relying on these third parties to store, deliver and transport hazardous products. Any increase in the price charged by them, any safety accidents or mishandling of hazardous products, or any service disruption experienced by them could subject us to liabilities and negative publicity, therefore causing an adverse effect on our business operations and results of operations.
Any failure or perceived failure to comply with all applicable data privacy and protection laws and regulations, or any failure or perceived failure of our business partners to do so, or any failure or perceived failure of our employees to comply with our internal control measures, may prevent us from using or providing certain network products and services, result in fines and other penalties such as suspension of our related business.
Any failure or perceived failure to comply with all applicable data privacy and protection laws and regulations, or any failure or perceived failure of our business partners to do so, or any failure or perceived failure of our employees to comply with our internal control measures, may prevent us from using or providing certain network products and services, result in fines and other penalties such as suspension of our related business. 18 Table of Contents Failure or perceived failure to comply with existing or future laws and regulations related to personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.
Holders of our Class A ordinary shares are not subject to this discretionary proxy. ​ 62 Table of Contents ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
In addition, the supplier relationships, customer acquisition dynamics and other requirements for our marketplace business may not be the same as those for our product sales business, which may complicate the management of our business.
In addition, the supplier relationships, customer acquisition dynamics and other requirements for our marketplace business may not be the same as those for our product sales business, which may complicate the management of our business. In order for our marketplace business to be successful, we must continue to attract third-party suppliers, and we may not be successful in this regard.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

97 edited+93 added−81 removed247 unchanged
To ensure fast delivery to the customers, our transit warehouses are strategically located close to areas that are in high demand for MRO products, such as industrial parks, chemical industry parks and mines. Onsite services We have fulfillment service managers and EVM smart vending machines deployed to provide onsite support and services.
To ensure fast delivery to the customers, our transit warehouses are strategically located close to areas that are in high demand for MRO products, such as industrial parks, chemical industry parks and mines. Onsite services We have fulfillment service managers and EVM smart vending machines deployed to provide onsite support and services. ● Fulfillment services managers .
For more details and relevant risks, please see “Item 3. Key Information—D.
For more details and relevant risks, please see “Item 3. Key Information—D.
For more details and relevant risks, please see “Item 3. Key Information—D.
For more details and relevant risks, please see “Item 3. Key Information—D.
For more details and relevant risks, please see “Item 3. Key Information—D.
For more details and relevant risks, please see “Item 3. Key Information—D.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, which became effective on April 23, 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which became effective on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of the provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations. ​ 85 Table of Contents On August 20, 2021, the Standing Committee of the National People’s Congress adopted the PRC Personal Information Protection Law, which became effective on November 1, 2021.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, which became effective on April 23, 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which became effective on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of the provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations. ​ 87 Table of Contents On August 20, 2021, the Standing Committee of the National People’s Congress adopted the PRC Personal Information Protection Law, which became effective on November 1, 2021.
Under the PRC Anti-monopoly Law, the prohibited monopolistic acts include monopolistic agreements, abuse of a dominant market position and concentration of businesses that may have the effect to eliminate or restrict competition. 95 Table of Contents Pursuant to the PRC Anti-monopoly Law, a business operator that possesses a dominant market position is prohibited from abusing its dominant market position, including conducting the following acts: (i) selling commodities at unfairly high prices or buying commodities at unfairly low prices; (ii) without justifiable reasons, selling commodities at prices below cost; (iii) without justifiable reasons, refusing to enter into transactions with their trading counterparts; (iv) without justifiable reasons, allowing trading counterparts to make transactions exclusively with itself or with the business operators designated by it; (v) without justifiable reasons, tying commodities or imposing unreasonable trading conditions to transactions; (vi) without justifiable reasons, applying differential prices and other transaction terms among their trading counterparts who are on an equal footing; and (vii) other acts determined as abuse of dominant market position by the governmental authorities.
Under the PRC Anti-monopoly Law, the prohibited monopolistic acts include monopolistic agreements, abuse of a dominant market position and concentration of businesses that may have the effect to eliminate or restrict competition. 97 Table of Contents Pursuant to the PRC Anti-monopoly Law, a business operator that possesses a dominant market position is prohibited from abusing its dominant market position, including conducting the following acts: (i) selling commodities at unfairly high prices or buying commodities at unfairly low prices; (ii) without justifiable reasons, selling commodities at prices below cost; (iii) without justifiable reasons, refusing to enter into transactions with their trading counterparts; (iv) without justifiable reasons, allowing trading counterparts to make transactions exclusively with itself or with the business operators designated by it; (v) without justifiable reasons, tying commodities or imposing unreasonable trading conditions to transactions; (vi) without justifiable reasons, applying differential prices and other transaction terms among their trading counterparts who are on an equal footing; and (vii) other acts determined as abuse of dominant market position by the governmental authorities.
Operating Results—Taxation—Mainland China.” Dividend Withholding Tax The PRC Enterprise Income Tax Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors that do not have an establishment or place of business in mainland China, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within mainland China. 94 Table of Contents Pursuant to the Arrangement Between Mainland China and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have met the conditions and requirements under this arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
Operating Results—Taxation—Mainland China.” Dividend Withholding Tax The PRC Enterprise Income Tax Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors that do not have an establishment or place of business in mainland China, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within mainland China. 96 Table of Contents Pursuant to the Arrangement Between Mainland China and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have met the conditions and requirements under this arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
According to the Eight Measures for the Public Security Fire Department to Deepen Reform and Serve Economic and Social Development promulgated by the Ministry of Public Security of the PRC in August 2015, the filing of fire protection design and completion acceptance with respect to fire protection of construction projects with an investment of less than RMB300,000 or a building area of less than 300 square meters (or below the limit set by the housing and urban construction department of the provincial people’s government) was no longer required. ​ 90 Table of Contents Regulation Related to Foreign Exchange and Dividend Distribution Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in mainland China are the Foreign Exchange Administration Regulations, which became effective on April 1, 1996 and was last amended on August 5, 2008.
According to the Eight Measures for the Public Security Fire Department to Deepen Reform and Serve Economic and Social Development promulgated by the Ministry of Public Security of the PRC in August 2015, the filing of fire protection design and completion acceptance with respect to fire protection of construction projects with an investment of less than RMB300,000 or a building area of less than 300 square meters (or below the limit set by the housing and urban construction department of the provincial people’s government) was no longer required. ​ 92 Table of Contents Regulation Related to Foreign Exchange and Dividend Distribution Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in mainland China are the Foreign Exchange Administration Regulations, which became effective on April 1, 1996 and was last amended on August 5, 2008.
Any violation of these laws and regulations may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminal liabilities. 84 Table of Contents With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators shall collect and use personal information in compliance with the PRC Cybersecurity Law and shall be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection.
Any violation of these laws and regulations may subject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminal liabilities. 86 Table of Contents With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators shall collect and use personal information in compliance with the PRC Cybersecurity Law and shall be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection.
Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.” ​ 81 Table of Contents Regulation on Foreign Investment Restriction on Value-Added Telecommunications Services Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001 and last amended on May 1, 2022, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%.
Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.” ​ 83 Table of Contents Regulation on Foreign Investment Restriction on Value-Added Telecommunications Services Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises promulgated by the State Council on December 11, 2001 and last amended on May 1, 2022, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%.
We are required to comply with the foregoing rules with respect to our labor dispatch arrangements in mainland China. ​ 89 Table of Contents Regulations Related to Land Use Regulation on Land Use Rights and Construction Projects The PRC Land Administration Law, which was issued by the Standing Committee of the National People’s Congress on January 1, 1999 and was last amended on January 1, 2020, and other mainland China land laws stipulate that there are two kinds of land in mainland China: (i) collectively owned land, which is normally owned by farmers or villages for agricultural use; and (ii) state-owned land, whose land use right is subdivided into allocated and granted land use rights.
We are required to comply with the foregoing rules with respect to our labor dispatch arrangements in mainland China. ​ 91 Table of Contents Regulations Related to Land Use Regulation on Land Use Rights and Construction Projects The PRC Land Administration Law, which was issued by the Standing Committee of the National People’s Congress on January 1, 1999 and was last amended on January 1, 2020, and other mainland China land laws stipulate that there are two kinds of land in mainland China: (i) collectively owned land, which is normally owned by farmers or villages for agricultural use; and (ii) state-owned land, whose land use right is subdivided into allocated and granted land use rights.
Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. 87 Table of Contents Trade Secrets According to the PRC Anti-unfair Competition Law, which was promulgated by the Standing Committee of the National People’s Congress in September 1993 and was last amended on April 23, 2019, the term “trade secrets” refers to technical and business information that is unknown to the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders.
Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. 89 Table of Contents Trade Secrets According to the PRC Anti-unfair Competition Law, which was promulgated by the Standing Committee of the National People’s Congress in September 1993 and was last amended on April 23, 2019, the term “trade secrets” refers to technical and business information that is unknown to the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders.
The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. ​ 93 Table of Contents The PRC Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% should normally be applicable to dividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (i) do not have an establishment or place of business in mainland China, or (ii) have an establishment or place of business in mainland China, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends and gains are derived from sources within mainland China.
The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. ​ 95 Table of Contents The PRC Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% should normally be applicable to dividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (i) do not have an establishment or place of business in mainland China, or (ii) have an establishment or place of business in mainland China, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends and gains are derived from sources within mainland China.
Interim Measures for Seven-day Unconditional Return of Online Purchased Goods, which became effective on March 15, 2017 and was last amended on October 23, 2020, further clarifies the scope of consumers’ rights to make returns without a reason, the standard of “good condition,” and return procedures. 80 Table of Contents Regulation Related to Value-Added Telecommunications Services Regulation on Value-Added Telecommunications Services The primary regulation governing telecommunications services is PRC Telecommunications Regulations, which were promulgated by the State Council, became effective on September 25, 2000 and was last amended on February 6, 2016.
Interim Measures for Seven-day Unconditional Return of Online Purchased Goods, which became effective on March 15, 2017 and was last amended on October 23, 2020, further clarifies the scope of consumers’ rights to make returns without a reason, the standard of “good condition,” and return procedures. 82 Table of Contents Regulation Related to Value-Added Telecommunications Services Regulation on Value-Added Telecommunications Services The primary regulation governing telecommunications services is PRC Telecommunications Regulations, which were promulgated by the State Council, became effective on September 25, 2000 and was last amended on February 6, 2016.
For our business operations of precursor chemicals, we have obtained required record-filing certificates according to the foregoing rules. ​ 79 Table of Contents Regulations on the Operation of Non-Pharmaceutical Precursor Chemicals According to the Measures for the Licensing for Production and Operation of Non-Pharmaceutical Precursor Chemicals, which was promulgated by the Ministry of Emergency Management and became effective on April 15, 2006, an enterprise must obtain a license to produce or operate non-pharmaceutical precursor chemicals of Catalogue I, and make filings with local counterparts of government’s administration of work safety department to produce or operate non-pharmaceutical precursor chemicals of Catalogue II or III.
For our business operations of precursor chemicals, we have obtained required record-filing certificates according to the foregoing rules. ​ 81 Table of Contents Regulations on the Operation of Non-Pharmaceutical Precursor Chemicals According to the Measures for the Licensing for Production and Operation of Non-Pharmaceutical Precursor Chemicals, which was promulgated by the Ministry of Emergency Management and became effective on April 15, 2006, an enterprise must obtain a license to produce or operate non-pharmaceutical precursor chemicals of Catalogue I, and make filings with local counterparts of government’s administration of work safety department to produce or operate non-pharmaceutical precursor chemicals of Catalogue II or III.
Where the goods returned are intact, the online seller shall refund to the consumer the payments made for the goods within seven days upon receipt thereof. 86 Table of Contents On June 12, 2019, the State Post Bureau and the Ministry of Commerce promulgated the Guiding Opinions on Regulating the Interconnection and Sharing of Data between Express Delivery and E-commerce Industries, which provides that, if e-commerce participants agree to deliver commodities through express delivery, an e-commerce platform operator shall provide the necessary delivery data to an express delivery service provider through the agreed means of data transmission.
Where the goods returned are intact, the online seller shall refund to the consumer the payments made for the goods within seven days upon receipt thereof. 88 Table of Contents On June 12, 2019, the State Post Bureau and the Ministry of Commerce promulgated the Guiding Opinions on Regulating the Interconnection and Sharing of Data between Express Delivery and E-commerce Industries, which provides that, if e-commerce participants agree to deliver commodities through express delivery, an e-commerce platform operator shall provide the necessary delivery data to an express delivery service provider through the agreed means of data transmission.
The M&A Rules purport, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of Chinese domestic companies and controlled by Chinese companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. 96 Table of Contents However, the PRC Foreign Investment Law has partly replaced the M&A Rules in terms of its rules on equity or assets acquisition of a non-related domestic company by a foreign investor.
The M&A Rules purport, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of Chinese domestic companies and controlled by Chinese companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. 98 Table of Contents However, the PRC Foreign Investment Law has partly replaced the M&A Rules in terms of its rules on equity or assets acquisition of a non-related domestic company by a foreign investor.
The PRC Advertising Law sets forth certain content requirements for advertisements including, among other things, prohibitions on false or misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. 82 Table of Contents The State Administration for Market Regulation issued the Administrative Measures for Internet Advertising, which came into effect on May 1, 2023.
The PRC Advertising Law sets forth certain content requirements for advertisements including, among other things, prohibitions on false or misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. 84 Table of Contents The State Administration for Market Regulation issued the Administrative Measures for Internet Advertising, which came into effect on May 1, 2023.
Enterprises and institutions shall provide workers with working safety and health conditions meeting national rules and standards on labor protection. 88 Table of Contents The PRC Labor Contract Law, which became effective on January 1, 2008 and was last amended on July 1, 2013, primarily aims at regulating rights and obligations of employer and employee relationships, including the establishment, performance, and termination of labor contracts.
Enterprises and institutions shall provide workers with working safety and health conditions meeting national rules and standards on labor protection. 90 Table of Contents The PRC Labor Contract Law, which became effective on January 1, 2008 and was last amended on July 1, 2013, primarily aims at regulating rights and obligations of employer and employee relationships, including the establishment, performance, and termination of labor contracts.
In addition, any failure to comply with PRC regulations with respect to registration requirements for offshore financing may subject us to legal or administrative sanctions.” 92 Table of Contents Regulation Related to Stock Incentive Plans On February 15, 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies.
In addition, any failure to comply with PRC regulations with respect to registration requirements for offshore financing may subject us to legal or administrative sanctions.” 94 Table of Contents Regulation Related to Stock Incentive Plans On February 15, 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies.
Network service providers who do not comply with the PRC Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown of their websites and revocation of their business licenses. 83 Table of Contents On June 10, 2021, the Standing Committee of the National People’s Congress adopted the PRC Data Security Law, which became effective on September 1, 2021.
Network service providers who do not comply with the PRC Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown of their websites and revocation of their business licenses. 85 Table of Contents On June 10, 2021, the Standing Committee of the National People’s Congress adopted the PRC Data Security Law, which became effective on September 1, 2021.
Risk Factors—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC laws and regulations, and if required, we cannot predict whether or for how long we will be able to obtain such approval.” 97 Table of Contents C.
Risk Factors—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our future offerings under PRC laws and regulations, and if required, we cannot predict whether or for how long we will be able to obtain such approval.” 99 Table of Contents C.
Under the 2021 Negative List, foreign equity in companies providing value-added telecommunications services, excluding e-commerce, domestic multi-party communications, data collection and transmission services, and call centers, should not exceed 50%. As of the date of this annual report, we are not aware of any of our engagement in business that are prohibited in the 2021 Negative List.
Under the 2024 Negative List, foreign equity in companies providing value-added telecommunications services, excluding e-commerce, domestic multi-party communications, data collection and transmission services, and call centers, should not exceed 50%. As of the date of this annual report, we are not aware of any of our engagement in business that are prohibited in the 2024 Negative List.
Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.” ​ 91 Table of Contents Regulation on Dividend Distribution The principal regulations governing distribution of dividends of foreign-invested enterprises is the PRC Company Law.
Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.” ​ 93 Table of Contents Regulation on Dividend Distribution The principal regulations governing distribution of dividends of foreign-invested enterprises is the PRC Company Law.
Shortly after its incorporation, ZKH Holdings Limited established a wholly owned subsidiary in Hong Kong, namely, ZKH Hong Kong Limited, which is our intermediary holding company in Hong Kong. 65 Table of Contents ZKH Industrial Supply completed several rounds of equity financing since its inception.
Shortly after its incorporation, ZKH Holdings Limited established a wholly owned subsidiary in Hong Kong, namely, ZKH Hong Kong Limited, which is our intermediary holding company in Hong Kong. 66 Table of Contents ZKH Industrial Supply completed several rounds of equity financing since its inception.
Risk Factors—Risks Related to Doing Business in China—The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.” Regulations on Chemical Industry Regulations on the Safety Management of Hazardous Chemicals Under the Regulations on the Safety Management of Hazardous Chemicals, which was promulgated by the State Council and was last amended on December 7, 2013, enterprises engaged in production, storage, usage, operation and transportation of hazardous chemicals are required to obtain permits and meet the safety conditions under laws, administrative regulations, national standards and industrial standards.
Risk Factors—Risks Related to Doing Business in China—The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.” Regulations on Chemical Industry Regulations on the Safety Management of Hazardous Chemicals Under the Regulations on the Safety Management of Hazardous Chemicals, which was promulgated by the State Council and was last amended on December 6, 2024, enterprises engaged in production, storage, usage, operation and transportation of hazardous chemicals are required to obtain permits and meet the safety conditions under laws, administrative regulations, national standards and industrial standards.
We had five major product categories consisting of 32 product lines available on our platform as of December 31, 2023 as follows. ● Spare parts : including, without limitation, pump valve fittings, low voltage electrical, electric automation, wire and cable, fastening seal, pneumatics & hydraulics, and instrumentation; ● Chemicals : including, without limitation, workshop chemicals, chemical reagent, lubricant, paint & painting supplies, and adhesives; ● Manufacturing parts : including, without limitation, cutting tool, air compressor, electronic vending machine, factory automation, and abrasive measuring tool; 71 Table of Contents ● General consumables : including, without limitation, security-related products, material handling, power transmission, personal protective equipment, welding, tape & label, cleaning supplies, laboratory instrument consumables, and hardware & hand tools; and ● Office supplies : including, without limitation, office supplies, furniture, fringe benefit, lightening, refrigeration & heating, ventilating, air conditioning, and building materials.
We had five major product categories consisting of 32 product lines available on our platform as of December 31, 2024 as follows. ● Equipment parts : including, without limitation, pump valve fittings, low voltage electrical, electric automation, wire and cable, fastening seal, pneumatics & hydraulics, and instrumentation; ● Chemicals : including, without limitation, workshop chemicals, chemical reagent, lubricant, paint & painting supplies, and adhesives; ● Manufacturing parts : including, without limitation, cutting tool, air compressor, electronic vending machine, factory automation, and abrasive measuring tool; ● General consumables : including, without limitation, security-related products, material handling, power transmission, personal protective equipment, welding, tape & label, cleaning supplies, laboratory instrument consumables, and hardware & hand tools; ● Office supplies : including, without limitation, office supplies, furniture, fringe benefit, lightening, refrigeration & heating, ventilating, air conditioning, and building materials.
The 2021 Negative List allows foreign investors to hold more than 50% equity interests in a value-added telecommunications service provider engaging in domestic multiparty communication, storage-and-forward and call center businesses.
The 2024 Negative List allows foreign investors to hold more than 50% equity interests in a value-added telecommunications service provider engaging in domestic multiparty communication, storage-and-forward and call center businesses.
The establishment of wholly foreign-owned enterprises is generally allowed in industries not included in the 2021 Negative List. Industries not listed in the 2021 Negative List are generally open to foreign investments unless specifically restricted by other applicable Chinese regulations.
The establishment of wholly foreign-owned enterprises is generally allowed in industries not included in the 2024 Negative List. Industries not listed in the 2024 Negative List are generally open to foreign investments unless specifically restricted by other applicable Chinese regulations.
Risk Factors—Risks Related to Our Business and Industry—Our business and results of operations are subject to seasonal fluctuations and unexpected interruptions.” Insurance We maintain insurance policies to safeguard against risks and unexpected events. We have purchased all risk property insurance covering our inventory and fixed assets such as equipment, furniture and office facilities.
Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business and results of operations are subject to seasonal fluctuations and unexpected interruptions.” Insurance We maintain insurance policies to safeguard against risks and unexpected events. We have purchased all risk property insurance covering our inventory and fixed assets such as equipment, furniture and office facilities.
We have developed a warehouse location optimization model to select the most suitable location to store stocks in response to demands from a larger geographic area, which effectively shortens the product fulfillment time. We store and manage most of our inventory in rented warehouses.
We have developed a warehouse location optimization model to select the most suitable location to store stocks in response to demands from a larger geographic area, which effectively shortens the product fulfillment time. 76 Table of Contents We store and manage most of our inventory in rented warehouses.
In 2021, 2022 and 2023, there has been no incidents of infringements on our intellectual property that materially and adversely affected our results of operations.
In 2022, 2023 and 2024, there has been no incidents of infringements on our intellectual property that materially and adversely affected our results of operations.
Optical character recognition of documents. As an MRO procurement service provider, we deal with a large quantity of purchase orders, invoices, reconciliation statements and commercial bills from customers and suppliers in various formats, including word, PDF and excel, which could be laborious and time-consuming to process.
As an MRO procurement service provider, we deal with a large quantity of purchase orders, invoices, reconciliation statements and commercial bills from customers and suppliers in various formats, including word, PDF and excel, which could be laborious and time-consuming to process.
Our customers include enterprise customers who are industry-leading corporations and small and medium-sized enterprises who are keen to digitalize their MRO procurement process, and micro businesses. The number of our customers increased from over 52,000 in 2021 to over 58,000 in 2022, and further to over 66,000 in 2023.
Our customers include enterprise customers who are industry-leading corporations and small and medium-sized enterprises who are keen to digitalize their MRO procurement process, and micro businesses. The number of our customers increased from over 58,000 in 2022 to over 66,000 in 2023, and further to over 83,000 in 2024.
We have established various corporate social responsibility initiatives to give back to the communities and to create value for the society. Environmental protection initiatives. We place great emphasis on environmental protection to echo the government’s advocacy in promoting ESG (environmental, social and governance) issues.
We have established various corporate social responsibility initiatives to give back to the communities and to create value for the society. 78 Table of Contents Environmental protection initiatives. We place great emphasis on environmental protection to echo the government’s advocacy in promoting ESG (environmental, social and governance) issues.
Regulation Related to Business Activities involving Medical Devices The Regulation on the Supervision and Administration of Medical Devices, which became effective on April 1, 2000 and was last amended on June 1, 2021, regulates the research and development, production, operation and use of medical devices in mainland China. Medical devices are divided into three classes based on risk levels.
Regulation Related to Business Activities involving Medical Devices The Regulation on the Supervision and Administration of Medical Devices, which became effective on April 1, 2000 and was last amended on December 6, 2024, regulates the research and development, production, operation and use of medical devices in mainland China. Medical devices are divided into three classes based on risk levels.
We provide a transparent and efficient one-stop MRO procurement experience, advanced digital solutions along with intelligent services, effective fulfillment services, broad product offerings, and sales and service representatives with deep industry insights. We believe that we are well-positioned to effectively compete on the basis of the factors listed above.
We provide a transparent and efficient one-stop MRO procurement experience, advanced digital solutions along with intelligent services powered by AI, effective fulfillment services, broad product offerings, and sales and service representatives with deep industry insights. 77 Table of Contents We believe that we are well-positioned to effectively compete on the basis of the factors listed above.
Property, Plants and Equipment Our headquarters is located in Shanghai, where we lease and occupy an office building with an aggregate floor area of approximately 10,300 square meters as of December 31, 2023. We lease other offices in Beijing Shenzhen, Suzhou and Wuhan with an aggregate floor area of approximately 21,000 square meters as of December 31, 2023.
Property, Plants and Equipment Our headquarters is located in Shanghai, where we lease and occupy an office building with an aggregate floor area of approximately 10,337 square meters as of December 31, 2024. We lease other offices in Beijing Shenzhen, Suzhou and Wuhan with an aggregate floor area of approximately 21,105 square meters as of December 31, 2024.
Our comprehensive fulfillment facilities covered the majority of major industrial hubs in China. 98 Table of Contents As of December 31, 2023, most of our system hardware is hosted in 286 leased facilities located in Hangzhou and our back-up systems are hosted in 81 leased facilities located in Beijing and Hangzhou.
Our comprehensive fulfillment facilities covered the majority of major industrial hubs in China. 100 Table of Contents As of December 31, 2024, most of our system hardware is hosted in leased facilities located in Hangzhou and our back-up systems are hosted in leased facilities located in Beijing and Hangzhou.
The Administrative Measures on Internet Information Services, which was promulgated by the State Council, became effective on September 25, 2000 and was last amended on January 8, 2011, sets out guidelines on the provision of internet information services and classifies internet information services into commercial internet information services and non-commercial internet information services.
The Administrative Measures on Internet Information Services, which was promulgated by the State Council, became effective on September 25, 2000 and was last amended on December 6, 2024, sets out guidelines on the provision of internet information services and classifies internet information services into commercial internet information services and non-commercial internet information services.
The lease agreements expire between November 30, 2024 to March 31, 2026. We leased 30 distribution centers in Shanghai, Wuhan, Chengdu, Xi’an and other major cities in China, which have an aggregate floor area of approximately 189,000 square meters as of December 31, 2023.
The lease agreements expire between September 30, 2025 to November 30, 2026. We leased 30 distribution centers in Shanghai, Wuhan, Chengdu, Xi’an and other major cities in China, which have an aggregate floor area of approximately 177,079 square meters as of December 31, 2024.
Our ZKH platform continues to attract enterprise customers and contributes a majority of our sales; our GBB platform allows us to tap into the large but fragmented MRO procurement demand from numerous micro businesses and expands our scale in a cost-effective way with low working capital requirements.
Our GBB platform allows us to tap into the large but fragmented MRO procurement demand from numerous micro businesses and expands our scale in a cost-effective way with low working capital requirements. ● ZKH platform for large to mid-size enterprise customers .
Fulfillment As of December 31, 2023, we had a fulfillment network that covered the majority of major industrial hubs in China with 30 distribution centers and 96 transit warehouses, comprising an aggregate gross floor area of over 210,000 square meters.
End-to-end fulfillment As of December 31, 2024, we had a fulfillment network that covered the majority of major industrial hubs in China with 30 distribution centers and 100 transit warehouses, comprising an aggregate gross floor area of over 227,600 square meters.
We hold an ISO 9001 certificate applicable to the sales of MRO products. Pricing Policy We constantly monitor and compare prices on our platform against prices on other MRO procurement service platforms to direct our price setting. We have a dedicated pricing management team with specific personnel responsible for each product line.
Pricing Policy We constantly monitor and compare prices on our platform against prices on other MRO procurement service platforms to direct our price setting. We have a dedicated pricing management team with specific personnel responsible for each product line.
The service scope of our fulfillment service managers covers unloading, inspection, stacking, and installation of products. We offer EVM smart vending machines to further empower customers to improve their inventory management efficiency.
The service scope of our fulfillment service managers covers unloading, inspection, stacking, and installation of products. ● Smart vending machines . We deploy EVM smart vending machines at customers’ facilities or factories to further improve their inventory management efficiency.
Competition We face competition from a variety of players in the industry, including other MRO procurement platforms, manufacturers, wholesalers, and distributors that sell MRO products. We differentiate ourselves by our distinct customer-centric culture ingrained in our strategies and operations.
Competition We face competition from a variety of players in the industry, including other MRO procurement platforms, manufacturers, wholesalers, and distributors that sell MRO products. We differentiate ourselves by integrating cutting-edge digitalization and AI capabilities into our distinct customer-centric culture, which is embedded in every aspect of our strategies and operations.
Our nationwide fulfillment network consisted of 30 distribution centers, 96 transit warehouses and over 4,000 EVM smart vending machines as of December 31, 2023. We maintained a dedicated team of approximately 250 fulfillment service managers as of December 31, 2023 to address businesses’ customized fulfillment requests.
Our nationwide fulfillment network consisted of 30 distribution centers, 100 transit warehouses and over 4,700 EVM smart vending machines as of December 31, 2024. We maintained a dedicated team of over 570 warehouse personnel and fulfillment service managers and over 160 delivery vehicles as of December 31, 2024 to address businesses’ customized fulfillment requests.
Risk Factors—Risks Related to Doing Business in China—We are subject to risks related to our use of a parcel of land in Taicang, Jiangsu Province.” Regulation Related to Fire Prevention Pursuant to the PRC Fire Prevention Law, which became effective on September 1, 1998 and was last amended on April 29, 2021, and other laws and regulations, the emergency management authority of the State Council and its local counterparts at or above county level shall monitor and administer the fire prevention affairs.
Regulation Related to Fire Prevention Pursuant to the PRC Fire Prevention Law, which became effective on September 1, 1998 and was last amended on April 29, 2021, and other laws and regulations, the emergency management authority of the State Council and its local counterparts at or above county level shall monitor and administer the fire prevention affairs.
A distribution center keeps our inventory and makes shipping of products in bulk. A transit warehouse temporarily stores goods and is set up to receive, consolidate, and quickly dispatch products for secondary or next-day delivery. Distribution center. Based on the type of goods they store, we categorize our distribution centers either as national distribution centers or as regional distribution centers.
Distribution centers and transit warehouses Our distribution network includes distribution centers and transit warehouses. A distribution center keeps our inventory and makes shipping of products in bulk. A transit warehouse temporarily stores goods and is set up to receive, consolidate, and quickly dispatch products for secondary or next-day delivery. ● Distribution center .
As of December 31, 2023, we owned 142 computer software copyrights in mainland China relating to various aspects of our operations and maintained 613 trademark registrations inside mainland China and 76 trademark registrations outside mainland China. We had 79 trademark applications inside mainland China and 42 outside mainland China.
As of December 31, 2024, we owned 150 computer software copyrights in mainland China relating to various aspects of our operations and maintained 665 trademark registrations inside mainland China and 213 trademark registrations outside mainland China. We had 43 trademark applications inside mainland China and 158 outside mainland China.
Unless otherwise provided in the mainland China’s foreign investment laws, the provisions of the PRC Company Law shall prevail. 77 Table of Contents Investments in mainland China by foreign investors and foreign-invested enterprises are regulated by the Catalog of Industries in which Foreign Investment is Encouraged (2022 edition), which became effective on January 1, 2023, and the Special Administrative Measures for Foreign Investment Access (Negative List 2021), or the 2021 Negative List, which became effective on January 1, 2022.
Investments in mainland China by foreign investors and foreign-invested enterprises are regulated by the Catalog of Industries in which Foreign Investment is Encouraged (2022 edition), which became effective on January 1, 2023, and the Special Administrative Measures for Foreign Investment Access (Negative List 2024), or the 2024 Negative List, which became effective on November 1, 2024.
In addition to continuing marketing activities through our sales team, we also implement online marketing measures, such as advertisement through online advertising agencies and search engines, to cost-effectively and efficiently reach more customers. We have increasingly acquired more customers through online marketing activities.
We also host and attend various industry conferences, trade shows and exhibitions to market our brand and products. In addition to continuing marketing activities through our sales team, we also implement online marketing measures, such as advertisement through online advertising agencies and search engines, to cost-effectively and efficiently reach more customers.
In accordance with this criteria, we identified approximately 1,100 such group enterprises in China as of December 31, 2023 as our potential key accounts, and the list of these group enterprises will be reviewed and updated from time to time.
In accordance with this criterion, we identified approximately 1,200 such group enterprises in China as of December 31, 2024 as our potential key accounts, and the list of these group enterprises will be reviewed and updated from time to time. Among these industry leading group enterprises in China (key accounts), over 670 of them transacted on our platform in 2024.
We had approximately 250 fulfillment service managers to provide end-to-end services to our customers and deployed over 4,000 EVM smart vending machines to realize order-on-demand delivery in customers’ facilities, as of December 31, 2023. In addition, we had a team of 706 warehouse and delivery personnel and 141 delivery vehicles as of December 31, 2023.
We had a team of over 570 warehouse personnel and fulfillment service managers and over 160 delivery vehicles to provide warehousing and end-to-end services to our customers and deployed over 4,700 EVM smart vending machines to realize order-on-demand delivery in customers’ facilities, as of December 31, 2024. We intend to extend our fulfillment capabilities to other industry participants.
We operated 96 transit warehouses with an aggregate floor area of approximately 54,000 square meters as of December 31, 2023.
We operated 100 transit warehouses with an aggregate floor area of approximately 50,511 square meters as of December 31, 2024.
The PRC Foreign Investment Law mainly stipulates four forms of foreign investments: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within mainland China; (ii) a foreign investor acquires stock shares, equity shares, interests in assets, or other like rights and interests of an enterprise within mainland China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within mainland China; and (iv) foreign investors invest in mainland China through any other methods under laws, administrative regulations, or provisions prescribed by the State Council.
The PRC Foreign Investment Law mainly stipulates four forms of foreign investments: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within mainland China; (ii) a foreign investor acquires stock shares, equity shares, interests in assets, or other like rights and interests of an enterprise within mainland China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within mainland China; and (iv) foreign investors invest in mainland China through any other methods under laws, administrative regulations, or provisions prescribed by the State Council. 79 Table of Contents Under the PRC Foreign Investment Law, foreign investment is accorded pre-admission national treatment, which means that treatment given to foreign investors and their investments shall not be less favorable than those given to domestic investors and their investments, except where a foreign investment falls under the 2024 Negative List.
Sales and Marketing Sales channels ZKH customers We maintain our own sales teams consisting of industry customer sales team and regional customer sales team. As of December 31, 2023, our sales team consisted of 1,228 employees. Our industry customer sales team covers industries such as electrical and mechanical manufacturing, automobile, and chemical engineering.
Sales and Marketing Sales channels We maintain our own sales teams consisting of industry customer sales team and regional customer sales team. As of December 31, 2024, our sales team consisted of approximately 1,200 employees. Our industry customer sales team serves leading enterprises in industries including electrical and mechanical manufacturing, automobile, chemical engineering, and others.
Regulations on the Operation Permit of Hazardous Chemicals According to the Administrative Measures of the Operation Permit of Hazardous Chemicals, which was issued by the State Administration of Work Safety (currently known as the Ministry of Emergency Management) and was last amended on July 1, 2015, an enterprise engaged in the business operations of hazardous chemicals must obtain an operation permit for hazardous chemicals.
An enterprise that engages in the operations of hazardous chemicals must obtain an operation license for hazardous chemicals, and it is not allowed to purchase hazardous chemicals from any entity which is unlawfully engaged in the production or business operations of hazardous chemicals, or operate hazardous chemicals without the chemical safety technical instructions or chemical safety labels. 80 Table of Contents Regulations on the Operation Permit of Hazardous Chemicals According to the Administrative Measures of the Operation Permit of Hazardous Chemicals, which was issued by the State Administration of Work Safety (currently known as the Ministry of Emergency Management) and was last amended on July 1, 2015, an enterprise engaged in the business operations of hazardous chemicals must obtain an operation permit for hazardous chemicals.
Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales. On our ZKH platform , we operate both our product sales and our marketplace model, and on our GBB platform , we currently primarily operate our product sales model.
By revenue model, we derive revenue from our product sales model and our marketplace model. Under our product sales model, we purchase products from suppliers and sell them to our customers. Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales.
On December 31, 2019, the Ministry of Commerce issued the Announcement on Matters Relating to Foreign Investment Information Reporting, which emphasized the information reporting requirements provided by the Measures on Reporting of Foreign Investment Information and stipulated the forms for information reporting. 78 Table of Contents On December 19, 2020, the National Development and Reform Commission and the Ministry of Commerce jointly issued the Measures for the Security Review of Foreign Investment, which became effective on January 18, 2021.
On December 31, 2019, the Ministry of Commerce issued the Announcement on Matters Relating to Foreign Investment Information Reporting, which emphasized the information reporting requirements provided by the Measures on Reporting of Foreign Investment Information and stipulated the forms for information reporting.
Overall, the impact of seasonality on our business has been relatively mild but we have seen an upward trend and such a trend may continue in the future. See “Item 3. Key Information—D.
Furthermore, sales in the MRO procurement service industry are generally higher in the second half of each calendar year than in the first half of a calendar year. Overall, the impact of seasonality on our business has been relatively mild but we have seen an upward trend and such a trend may continue in the future. See “Item 3.
For a detailed description of our revenue model, see “—Our Revenue Model.” 66 Table of Contents We offer a broad range of MRO products covering all major MRO product lines on our platform, including spare parts, chemicals, manufacturing parts, general consumables, and office supplies.
We currently offer a broad range of MRO products covering major MRO product lines on our platforms, including equipment parts, chemicals, manufacturing parts, general consumables, and office supplies.
As of December 31, 2023, we had 147 patents granted in mainland China, two patents granted outside mainland China, 70 patent applications pending in mainland China and no patent application pending outside mainland China. As of December 31, 2023, we had registered 98 domain names.
As of December 31, 2024, we had 170 patents granted in mainland China, 2 patents granted outside mainland China, 59 patent applications pending in mainland China and no patent application pending outside mainland China. As of December 31, 2024, we had registered 191 domain names. Our registered domain names include www.zkh.com.
We have access to a network of approximately 321 leased servers across China with power supply and power generator backup as of December 31, 2023. 75 Table of Contents We currently utilize third-party clouds in China to host our network infrastructure.
We have access to a network of approximately 410 leased servers across China with power supply and power generator backup as of December 31, 2024. We currently utilize third-party clouds in China to host our network infrastructure. Our IT department regularly monitors the performance of our website, mobile apps, and infrastructure to enable us to respond quickly to potential problems.
Warehousing, Logistics and Fulfillment Services Our fulfillment consists of distribution centers, transit warehouses, and onsite locations supported by fulfillment service managers and EVM smart vending machines.
Our fulfillment consists of distribution centers, transit warehouses, and onsite locations supported by fulfillment service managers and EVM smart vending machines. Our comprehensive fulfillment network and robust end-to-end fulfillment capability will enhance customer experience and loyalty.
We are constructing a factory to manufacture selected products under our own brand names on a parcel of land of 36,411 square meters in Taicang, Jiangsu Province. We entered into an agreement to acquire use right of this parcel of land for RMB10.9 million in December 2022 and we obtained the land use right certificate in January 2023.
We entered into an agreement to acquire use right of this parcel of land for RMB10.9 million in December 2022 and we obtained the land use right certificate in January 2023.
We have established a set of stringent criteria for third-party logistic service providers and have entered into long-term framework agreements with the ones we have selected to serve our customers. 70 Table of Contents Distribution centers and transit warehouses Our distribution network includes distribution centers and transit warehouses.
In addition to direct shipping, suppliers may choose to rent space in our warehouses and use logistics services available on our platform to ship their products stored in our warehouses. 73 Table of Contents We have established a set of stringent criteria for third-party logistic service providers and have entered into long-term framework agreements with the ones we have selected to serve our customers.
Through data cleaning, standardization and classification, we are developing a ZKH MRO Dictionary covering all of our product offerings, which consisted of approximately 17.1 million SKUs as of December 31, 2023.
We are developing a ZKH MRO Dictionary covering all of our product offerings, which consisted of approximately 17.4 million SKUs as of December 31, 2024, based on comprehensive market research and distill product insights by our dedicated team.
We generally receive fewer purchase orders during public holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, sales in the MRO procurement service industry are generally higher in the second half of each calendar year than in the first half of a calendar year.
Seasonality We experience seasonality in our business, as a combined result of seasonal fluctuations in customer purchases, promotional events and MRO procurement service industry seasonality patterns. We generally receive fewer purchase orders during public holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year.
We internally developed the robotic process automation technology that uses software robots to automate repetitive tasks of human in key procedures of MRO procurement, including inquiries, orders, shipment and invoicing. Robotic process automation technology helps our customers streamline the workflow and increase productivity.
By leveraging advanced AI technology, we continue to automate labor-intensive tasks throughout our service cycle, which improves our efficiency internally and optimizes our operational leverage. We internally developed the robotic process automation (RPA) technology that utilizes software robots to automate repetitive tasks of human in key procedures of MRO procurement, including inquiries, orders, shipment and invoicing.
Our Customers and Customer Services We serve a diverse set of clients across a spectrum of sectors. Among our top 500 customers in 2023, the GMV breakdown by industry 1 was 25.2% from energy, 20.9% from resources, 19.4% from machinery, equipment and electrical goods manufacturing, 13.0% from automobile, 2.6% from construction and 18.9% from others.
Among our top 500 customers in 2024, the GMV breakdown by industry 3 was 20.8% from machinery, equipment and electrical goods manufacturing, 19.6% from resources industry, 18.1% from automobile and related industry, 15.2% from energy industry, 12.7% from consumer goods manufacturing, 3.3% from construction industry, and 10.3% from others.
We expect suppliers to comply with laws and regulations and our quality standards. For defective products, we will return or exchange them following our procurement return and exchange procedure protocol. Suppliers will be subject to penalties or be asked to end their operations on our platform if they violate our quality standards, for example, by selling counterfeit products.
Suppliers will be subject to penalties or be asked to end their operations on our platform if they violate our quality standards, for example, by selling counterfeit products. We hold an ISO 9001 certificate applicable to the sales of MRO products.
We currently generate a majority of our revenues from our product sales model, under which we purchase products from suppliers, manage inventories, and sell to our customers. As our product sales grew substantially in size and we have accumulated supply chain management capabilities, we launched our marketplace model in June 2019.
Dual-Business Model to Scale Up Our Operations . Our dual business model, consisting of a product sales model and a marketplace model, enhances synergy and build business scale. We currently generate a majority of our revenues from our product sales model, under which we purchase products from suppliers, manage inventories, and sell to our customers.
Leveraging optical character recognition technology, our system can read and identify key data items in these files and extract the relevant data, regardless of the document formats. This information is further exported for our future work planning and providing accurate purchase amount and cost estimates. With the help of this technology, manual efforts and related costs can be effectively reduced.
Leveraging optical character recognition technology, our system can read and identify key data items in these files and extract the relevant data, regardless of the document formats.
For a detailed description of our product offerings, see “—Product Offerings.” ZKH platform for large to mid-size enterprise customers and GBB platform for micro businesses . We first started our operations on our ZKH platform for enterprise customers and have developed core capabilities in product insights, technology and fulfillment over the past years.
Our ZKH platform and GBB platform are highly scalable and complementary. We first started our operations on our ZKH platform for enterprise customers and have developed core capabilities in industry insights, technology empowerment and supply chain effectiveness over the past years. By leveraging the infrastructure we have built, we launched our GBB platform for micro businesses.
As of December 31, 2023, we had a total of 222 members in our research and development staff, focusing respectively on product technology, technology maintenance and digital solutions. We are committed to continually digitalizing and intelligentizing our MRO procurement services. Our platform generates insights from historical MRO product transactions on our platform.
As of December 31, 2024, we had over 220 members in our research and development staff, focusing respectively on product technology, technology maintenance, and digital and AI solutions.
We flexibly adopt third-party logistics to carry out direct shipping from suppliers to customers. In 2023, approximately 62% GMV of our orders involved direct shipping from our suppliers to customers. Our fulfillment service managers ensure that the direct shipping orders can be delivered to our customers’ satisfaction.
Our fulfillment service managers ensure that the direct shipping orders can be delivered to our customers’ satisfaction.
Risk Factors—Risks Related to Our Business and Industry—The proper functioning of our IT systems and technology infrastructure is essential to our business.
As of the date of this annual report, we have not experienced any service outage that materially affected our business operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—The proper functioning of our IT systems and technology infrastructure is essential to our business.
All information we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. You can also find information on our corporate website ir.zkh.com. The information contained on our website is not a part of this annual report. B. Business Overview We are a leading MRO procurement service platform in China.
Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168. All information we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. You can also find information on our corporate website ir.zkh.com.
As a result of this model, our inventory turnover days remained stable, despite our business expansion. Our inventory turnover days were 33.4 days in 2021, 37.0 days in 2022 and 33.3 days in 2023.
As a result of this model, our inventory turnover days remained stable, despite our business expansion. Our inventory turnover days on a GMV basis improved from 34.1 days in 2022 to 28.6 days in 2024.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Other revenues primarily consist of revenues generated from providing operating lease services covering certain types of machinery and equipment and testing and repairment services as well as warehousing and logistics services. Cost of revenues Purchase price of products constitutes the majority of cost of revenues. Cost of revenues also includes inbound shipping charges and write-downs of inventories.
Other revenues primarily consist of revenues generated from providing operating lease services covering certain types of machinery and equipment, testing and repairment services as well as warehousing and logistics services. Cost of revenues Purchase price of products constitutes the majority of cost of revenues. Cost of revenues also includes inbound shipping charges and write-downs of inventories.
Our gross margin is affected by our scale, the mix of business models that we operate, the mix of platforms we operate, and the mix of products sold on our platform. The following table sets forth our gross profit and gross margin under the respective business models and platforms for the years presented.
Gross profit and gross margin Our gross margin is affected by our scale, the mix of business models that we operate, the mix of platforms we operate, and the mix of products sold on our platform. The following table sets forth our gross profit and gross margin under the respective business models and platforms for the years presented.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” 104 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the years presented, both in absolute amount and as a percentage of our total net revenues for the years presented.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” 107 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the years presented, both in absolute amount and as a percentage of our total net revenues for the years presented.
We expect our sales and marketing expenses to increase in absolute amounts in the foreseeable future as we plan to continue to invest in customer acquisition efforts and increasing our brand awareness. Research and development expenses .
We expect our sales and marketing expenses to increase in absolute amounts in the foreseeable future as we plan to continue to invest in customer acquisition efforts and increase our brand awareness. Research and development expenses .
British Virgin Islands Under the current laws of the British Virgin Islands, entities incorporated in the British Virgin Islands are not subject to tax on their income or capital gains. 103 Table of Contents Hong Kong Under the current Hong Kong Inland Revenue Ordinance, our subsidiaries incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong.
British Virgin Islands Under the current laws of the British Virgin Islands, entities incorporated in the British Virgin Islands are not subject to tax on their income or capital gains. 106 Table of Contents Hong Kong Under the current Hong Kong Inland Revenue Ordinance, our subsidiaries incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong.
Our cash denominated in U.S. dollars in 2023 mainly consisted of the proceeds from our initial public offering. Material cash requirements Our material cash requirements as of December 31, 2023 primarily include repayment of our revolving credit facilities, capital commitments and operating lease commitments.
Our cash denominated in U.S. dollars in 2024 mainly consisted of the proceeds from our initial public offering. Material cash requirements Our material cash requirements as of December 31, 2024 primarily include repayment of our revolving credit facilities, capital commitments and operating lease commitments.
We will continue to optimize our inventory management via system integration with more suppliers, the usage of direct shipping in more orders and the reduction of secondary transport movements from warehouses to customers as appropriate. Key Components of Results of Operations Revenues Our net revenues are comprised of net product revenues, net service revenues and other revenues.
We will continue to optimize our inventory management via system integration with more suppliers, the usage of direct shipping in more orders and the reduction of secondary transport movements from warehouses to customers as appropriate. 103 Table of Contents Key Components of Results of Operations Revenues Our net revenues are comprised of net product revenues, net service revenues and other revenues.
In 2021, 2022 and 2023, we derived net product revenues from both our ZKH platform and our GBB platform , and a majority of net service revenues from our ZKH platform .
In 2022, 2023 and 2024, we derived net product revenues from both our ZKH platform and our GBB platform , and a majority of net service revenues from our ZKH platform .
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since January 1, 2024 that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. 112 Table of Contents E.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since January 1, 2025 that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
As our business grows in scale, we expect to further increase our purchase volume. We believe that this will solidify and expand our business relationships with suppliers, which in turn would help us to enhance our product selection and offer products at better prices for our customers.
We source MRO products from suppliers for transactions on our platform. As our business grows in scale, we expect to further increase our purchase volume. We believe that this will solidify and expand our business relationships with suppliers, which in turn would help us to enhance our product selection and offer products at better prices for our customers.
Inventory turnover days for a given are period equal to the average of the inventory balances at the beginning and the end of the period divided by cost of revenues during the period and then multiplied by the number of days during the period.
Inventory turnover days on a GMV basis for a given period are equal to the average of the inventory balances at the beginning and the end of the period divided by cost of GMV during the period and then multiplied by the number of days during the period.
Effect of exchange rate changes on cash, cash equivalents and restricted shares Exchange rate changes had an impact of RMB117.5 million and RMB5.0 million (US$710.2 thousand) on our cash, cash equivalent and restricted cash in 2022 and 2023, respectively, primarily due to the changes in the amounts of our cash denominated in U.S. dollars in 2022 and 2023 as well as fluctuations of the exchange rates of Renminbi against U.S. dollars in 2022 and 2023.
Effect of exchange rate changes on cash, cash equivalents and restricted shares Exchange rate changes had an impact of RMB5.0 million and RMB15.5 million (US$2.1 million) on our cash, cash equivalent and restricted cash in 2023 and 2024, respectively, primarily due to the changes in the amounts of our cash denominated in U.S. dollars in 2023 and 2024 as well as fluctuations of the exchange rates of Renminbi against U.S. dollars in 2023 and 2024.
As of December 31, 2021, 2022 and 2023, our cash, cash equivalents and restricted cash were RMB1,126.9 million, RMB2,005.9 million and RMB1,250.4 million (US$176.1 million). Our cash and cash equivalents consist of demand deposit, time deposits with original maturities less than three months and cash placed with banks and third-party payment processor, which are unrestricted as to withdrawal or use.
As of December 31, 2022, 2023 and 2024, our cash, cash equivalents and restricted cash were RMB2,005.9 million, RMB1,250.4 million and RMB1,516.9 million (US$207.8 million). Our cash and cash equivalents consist of demand deposit, time deposits with original maturities less than three months and cash placed with banks and third-party payment processor, which are unrestricted as to withdrawal or use.
As of December 31, 2023, we maintained several revolving credit facilities provided by certain financial institutions for an aggregate amount of RMB2,440.0 million.
As of December 31, 2024, we maintained several revolving credit facilities provided by certain financial institutions for an aggregate amount of RMB2,070.0 million.
Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report on Form 20-F. A. Operating Results Overview We are a leading MRO procurement service platform in China.
Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report on Form 20-F. A.
We expect that our general and administrative expenses will increase in absolute amounts in the foreseeable future, as we hire additional personnel, devote more resources in product line research and selection, and incur additional expenses related to the anticipated growth of our business and our operation as a public company. Taxation Cayman Islands We are incorporated in the Cayman Islands.
We expect that our general and administrative expenses will increase in absolute amounts in the foreseeable future, as we hire additional personnel, devote more resources in product line sourcing, selection and recommendation, and incur additional expenses related to the anticipated growth of our business and our operation as a public company.
Under our product sales model, we purchase products from suppliers and sell them to our customers. Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales.
Our product sales model contributes the majority of our revenues. Under our product sales model, we purchase products from suppliers and sell them to our customers. Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales.
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances.
GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances.
Critical Accounting Estimates An accounting estimate is considered critical if it requires to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
Critical Accounting Estimates An accounting estimate is considered critical if it requires to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. 115 Table of Contents We prepare our financial statements in conformity with U.S.
Share-based awards that are subject to both service conditions and the occurrence of an initial public offering as performance condition are measured at the grant date fair value. Cumulative share-based compensation expenses for the awards that have satisfied the service condition have been recorded after the completion of the initial public offering, using the graded-vesting method.
Share-based awards that are subject to both service conditions and the occurrence of IPO as performance condition, are measured at the grant date fair value. Cumulative share-based compensation expenses for the awards that have satisfied the service condition were recorded upon the completion of the IPO, using the graded-vesting method.
Our ability to expand our customer base, especially the number of high-spending customers Growth in the number of customers is a key driver of our revenue growth, as substantially all of our revenues are generated from selling MRO products. The continued growth of our customer base depends on our ability to retain existing customers and acquire new customers.
Our ability to expand our customer base, especially the number of high-spending customers and average spending of our customers Growth in the number of customers is a key driver of our revenue growth, as substantially all of our revenues are generated from selling MRO products.
The Cayman Islands currently levies no taxes on corporations based upon profits, income, gains or appreciation. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands.
There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, in its discretion, restrict access to foreign currencies for current account transactions in the future.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
We intend to fund our future material cash requirements with our existing cash balance and other financing alternatives. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Other than as discussed above, we did not have any significant capital and other commitments as of December 31, 2024. We intend to fund our future material cash requirements with our existing cash balance and other financing alternatives. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Our accounts payable turnover days on a GMV basis were 96.1 days in 2021, 113.6 days in 2022 and 103.3 days in 2023.
Our accounts payable turnover days on a GMV basis were 113.3 days in 2022, 103.1 days in 2023, and 110.9 days in 2024.
Our gross profit, calculated by subtracting cost of revenues from net revenues, increased by 26.7% from RMB1,039.8 million in 2021 to RMB1,317.7 million in 2022 and further increased by 10.2% to RMB1,452.4 million (US$204.6 million) in 2023. Our gross margin, representing gross profit as a percentage of net revenues, was, 13.6%, 15.8% and 16.7% in 2021, 2022 and 2023, respectively.
Our gross profit, calculated by subtracting cost of revenues from net revenues, increased by 10.2% from RMB1,317.7 million in 2022 to RMB1,452.4 million in 2023 and further increased by 4.0% to RMB1,510.5 million (US$206.9 million) in 2024. Our gross margin, representing gross profit as a percentage of net revenues, was 15.8%, 16.7% and 17.2% in 2022, 2023 and 2024, respectively.
Accounts payable turnover days on a GMV basis for a given period are equal to the average of the accounts payable and notes payable at the beginning and the end of the period divided by cost of GMV, which is equal to GMV minus gross profit, during the period and then multiplied by the number of days during the period.
Accounts payable turnover days on a GMV basis for a given period are equal to the average of the accounts payable and notes payable at the beginning and the end of the period divided by cost of GMV, which is equal to GMV minus gross profit, during the period and then multiplied by the number of days during the period. 112 Table of Contents Our net accounts receivable primarily includes amounts due from customers.
Accounts receivable turnover days for a given period are equal to the average of the accounts receivable and notes receivable at the beginning and the end of the period divided by total net revenues during the period and then multiplied by the number of days during the period. We also track our accounts receivable turnover days on a GMV basis.
Accounts receivable turnover days for a given period are equal to the average of the accounts receivable and notes receivable at the beginning and the end of the period, excluded allowance of credit losses, divided by total net revenues during the period and then multiplied by the number of days during the period.
Approximately 97.0% of our top 500 customers in terms of GMV in 2022 transacted with us in 2023. High-spending customers are important to our business because they are enterprises with steady demand for MRO products and stable procurement schedules.
Over the years, our customers have exhibited significant loyalty to our platform. Approximately 98% of our top 500 customers in terms of GMV in 2023 transacted with us in 2024. High-spending customers are important to our business because they are enterprises with steady demand for MRO products and stable procurement schedules.
Our restricted cash consists primarily of security deposits for the bank acceptance bills and letter of guarantee as well as time deposits pledged for bank borrowings. 108 Table of Contents We believe that our current cash and cash equivalents will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months.
Our restricted cash consists primarily of pledged time deposit, security deposits held in designated bank accounts for issuance of supplier financial programs, bank acceptance and letter of guarantee. We believe that our current cash and cash equivalents will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months.
Our results of operations are also affected by the mix of products sold on our platform. Our product lines can be broadly divided into five categories: spare parts, chemicals, manufacturing parts, general consumables, and office supplies. Different products may have different gross margins. Our product capability is driven by our ability to offer suitable products for customers.
Our product lines can be broadly divided into five categories: spare parts, chemicals, manufacturing parts, general consumables, and office supplies. Different products may have different gross margins. Our product capability is driven by our ability to offer suitable products for customers. We will continue to invest in our product team to constantly optimize the selection of SKUs on our platform.
As of December 31, 2023, 32.4% and 67.6% of our restricted cash was held in mainland China and Hong Kong, respectively; 32.4% of our restricted cash was denominated in Renminbi and 67.6% of our restricted cash was denominated in U.S. dollars.
As of December 31, 2024, 96.8% and 1.6% of our restricted cash was held in mainland China and Hong Kong, respectively; 96.8% of our restricted cash was denominated in Renminbi and 3.2% of our restricted cash was denominated in U.S. dollars.
As of December 31, 2023, 54.3% and 45.7% of our cash and cash equivalents were held in mainland China and Hong Kong, respectively; 54.8% of our cash and cash equivalents was denominated in Renminbi and 45.0% was denominated in U.S. dollars.
As of December 31, 2024, 52.8% and 46.3% of our cash and cash equivalents were held in mainland China and Hong Kong, respectively; 52.1% of our cash and cash equivalents was denominated in Renminbi and 47.6% was denominated in U.S. dollars.
Our loss from operations, calculated by subtracting operating expenses from gross profit, decreased by 38.2% from RMB1,110.4 million in 2021 to RMB685.7 million in 2022, and further decreased by 41.9% to RMB398.7 million (US$56.2 million) in 2023.
Our loss from operations, calculated by subtracting operating expenses from gross profit, decreased by 41.9% from RMB685.7 million in 2022 to RMB398.7 million in 2023, and further decreased by 15.0% to RMB338.8 million (US$46.4 million) in 2024.
We held cash denominated in U.S. dollars equivalent to RMB55.7 million, RMB929.4 million, RMB929.4 million and RMB737.1 million as of January 1, 2022, December 31, 2022, January 1, 2023 and December 31, 2023, respectively. Our cash denominated in U.S. dollars in 2022 mainly consisted of the proceeds from the issuance of Series F Convertible Notes.
We held cash denominated in U.S. dollars equivalent to RMB929.4 million, RMB737.1 million, RMB737.1 million and RMB680.6 million as of January 1, 2023, December 31, 2023, January 1, 2024 and December 31, 2024, respectively. Our cash denominated in U.S. dollars in 2023 mainly consisted of the proceeds from our initial public offering.
Our net accounts receivable primarily includes amounts due from customers. As of December 31, 2021, 2022 and 2023, our net accounts receivable amounted to RMB2,762.0 million, RMB3,067.1 million and RMB3,639.8 million (US$512.7 million), respectively. The increase was primarily due to the increase in our sales volume. Our notes receivable primarily includes bank acceptance notes.
As of December 31, 2022, 2023 and 2024, our net accounts receivable amounted to RMB3,067.1 million, RMB3,639.8 million and RMB3,090.3 million (US$423.4 million), respectively. The decrease was primarily due to the decrease in our sales volume. Our notes receivable primarily includes bank acceptance notes.
The following table sets forth the components of our revenues and percentages of our total net revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ ( in thousands, except for percentages ) Net revenues: Net product revenues From ZKH platform 6,549,947 85.6 7,277,260 87.5 7,381,501 1,039,663 84.6 From GBB platform 950,089 12.4 809,660 9.7 960,102 135,228 11.0 Net service revenues 116,692 1.5 179,508 2.2 307,412 43,298 3.5 Other revenues 37,863 0.5 48,808 0.6 72,160 10,164 0.8 Total 7,654,591 100.0 8,315,236 100.0 8,721,175 1,228,352 100.0 ​ Under our product sales model, we purchase products from suppliers and sell them directly to our customers.
The following table sets forth the components of our revenues and percentages of our total net revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Net revenues: Net product revenues From ZKH platform 7,277,260 87.5 7,381,501 84.7 7,450,211 1,020,672 85.0 From GBB platform 809,660 9.7 960,102 11.0 999,257 136,901 11.4 Net service revenues 179,508 2.2 307,412 3.5 244,707 33,525 2.8 Other revenues 48,808 0.6 72,160 0.8 67,143 9,199 0.8 Total 8,315,236 100.0 8,721,175 100.0 8,761,318 1,200,296 100.0 ​ Under our product sales model, we purchase products from suppliers and sell them directly to our customers.
Liquidity and Capital Resources The following table sets forth a summary of our cash flows for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ RMB ​ RMB ​ US$ ​ ​ ( in thousands ) Net cash used in operating activities (1,382,752) (504,203) (567,948) (79,994) Net cash used in investing activities (94,395) (37,040) (908,302) (127,932) Net cash provided by financing activities 174,631 1,302,710 715,724 100,808 Effect of exchange rate changes on cash, cash equivalents and restricted cash (8,695) 117,469 5,042 710 (Decrease)/Increase in cash, cash equivalents and restricted cash (1,311,211) 878,936 (755,484) (106,408) Cash, cash equivalents and restricted cash at beginning of year 2,438,131 1,126,920 2,005,856 282,519 Cash, cash equivalents and restricted cash at end of year 1,126,920 2,005,856 1,250,372 176,111 ​ Our primary sources of liquidity have been cash provided by equity and debt financing activities and credit facilities from commercial banks.
Liquidity and Capital Resources The following table sets forth a summary of our cash flows for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ RMB ​ RMB ​ US$ ​ ​ (in thousands) Net cash (used in)/provided by operating activities (504,203) (567,948) 229,069 31,382 Net cash (used in)/provided by investing activities (37,040) (908,302) 276,080 37,823 Net cash provided by/(used in) financing activities 1,302,710 715,724 (254,185) (34,823) Effect of exchange rate changes on cash, cash equivalents and restricted cash 117,469 5,042 15,546 2,130 Increase/(Decrease) in cash, cash equivalents and restricted cash 878,936 (755,484) 266,510 36,512 Cash, cash equivalents and restricted cash at beginning of year 1,126,920 2,005,856 1,250,372 171,300 Cash, cash equivalents and restricted cash at end of year 2,005,856 1,250,372 1,516,882 207,812 ​ 111 Table of Contents Our primary sources of liquidity have been cash provided by equity and debt financing activities and credit facilities from commercial banks.
As GBB customers generally use cash settlement with no credit term and most of them are trading companies which will resell the products procured on our platform, we generally set prices on our GBB platform to be lower than our ZKH platform , which explains the higher gross margin of our ZKH platform .
As GBB customers generally use cash settlement with no credit term and most of them are trading companies which will resell the products procured on our platform, we generally set prices on our GBB platform to be lower than our ZKH platform , which explains the higher gross margin of our ZKH platform . 102 Table of Contents Our cost of revenues primarily consists of purchase price of products under our product sales model, and also includes inbound shipping charges and write-downs of inventories.
As of December 31, 2021, 2022 and 2023, our accounts and notes payable amounted to RMB2,446.3 million, RMB2,566.1 million and RMB2,883.4 million (US$406.1 million), respectively, including accounts payable amounting to RMB1,959.0 million, RMB2,555.4 million and RMB2,875.2 million (US$405.0 million), respectively.
As of December 31, 2022, 2023 and 2024, our accounts and notes payable amounted to RMB2,566.1 million, RMB2,883.4 million and RMB2,553.4 million (US$349.8 million), respectively, including accounts payable amounting to RMB2,555.4 million, RMB2,875.2 million, and RMB2,546.1 million (US$348.8 million), respectively.
We record revenues from our product sales model on a gross basis as we act as the principal in these transactions. 101 Table of Contents Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales. Net service revenues consist of such commissions earned from suppliers for sales made through our platform.
Under our marketplace model, suppliers sell products to customers over our platform and pay us commissions on their sales. Net service revenues consist of such commissions earned from suppliers for sales made through our platform.
Our GMV reached RMB8.6 billion in 2021, increased by 9.2% to RMB9.4 billion in 2022, and further increased by 18.2% to RMB11.1 billion (US$1.6 billion) in 2023. Our net revenues reached RMB7,654.6 million in 2021, increased by 8.6% to RMB8,315.2 million in 2022, and further increased by 4.9% to RMB8,721.2 million (US$1,228.4 million) in 2023.
Our GMV reached RMB9.4 billion in 2022, increased by 18.2% to RMB11.1 billion in 2023, and decreased by 5.4% to RMB10.5 billion (US$1.4 billion) in 2024. Our net revenues reached RMB8,315.2 million in 2022, increased by 4.9% to RMB8,721.2 million in 2023, and further increased by 0.5% to RMB8,761.3million (US$1,200.3 million) in 2024.
We incurred net loss of RMB1,094.1 million, RMB731.1 million and RMB304.9 million (US$42.9 million) in 2021, 2022 and 2023, respectively. 99 Table of Contents Key Factors Affecting Our Results of Operations Our results of operations and financial condition are affected by the general factors affecting China’s MRO procurement service market, including China’s overall economic growth, the competitive environment in China and the changes in the cost of raw materials used in our products.
Key Factors Affecting Our Results of Operations Our results of operations and financial condition are affected by the general factors affecting China’s MRO procurement service market, including China’s overall economic growth, the competitive environment in China and the changes in the cost of raw materials used in our products.
The following table sets forth our cost of revenues by business models and by platforms and percentages of our total cost of revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ ( in thousands, except for percentages ) Cost of revenues: Under product sales: ZKH platform 5,719,745 86.5 6,232,235 89.0 6,335,292 892,307 87.2 GBB platform 889,933 13.4 753,904 10.8 898,313 126,525 12.4 Under marketplace (1) — — — — — — — Others 5,158 0.1 11,427 0.2 35,136 4,949 0.5 Total 6,614,836 100.0 6,997,566 100.0 7,268,741 1,023,781 100.0 Note: (1) We incurred minimal cost of revenues under our marketplace model.
We recorded cost of revenues of RMB6,997.6 million in 2022, RMB7,268.7 million in 2023, and RMB7,250.8 million (US$993.4 million) in 2024, representing 84.2%, 83.3%, and 82.8% of our total net revenues in the respective years. 104 Table of Contents The following table sets forth our cost of revenues by business models and by platforms and percentages of our total cost of revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Cost of revenues: Under product sales: ZKH platform 6,232,235 89.0 6,335,292 87.2 6,258,022 857,345 86.3 GBB platform 753,904 10.8 898,313 12.4 944,014 129,329 13.0 Under marketplace (1) — — — — — — — Others 11,427 0.2 35,136 0.5 48,811 6,687 0.7 Total 6,997,566 100.0 7,268,741 100.0 7,250,847 993,362 100.0 Note: (1) We incurred minimal cost of revenues under our marketplace model.
Net product revenues are derived from the sales price of the MRO products sold directly to customers, net of discounts and return allowances when the products are delivered to customers.
Net product revenues are derived from the sales price of the MRO products sold directly to customers, net of discounts and return allowances when the products are delivered to customers. We record revenues from our product sales model on a gross basis as we act as the principal in these transactions.
Our inventory turnover days were 33.4 days in 2021, 37.0 days in 2022 and 33.3 days in 2023.
Our inventory turnover days were 39.3 days in 2022, 35.4 days in 2023 and 35.3 days in 2024.
The following table sets forth the components of our operating expenses by amounts and percentages of total net revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ ( in thousands, except for percentages ) Operating expenses: Fulfillment 444,510 5.8 467,384 5.6 438,959 61,826 5.0 Sales and marketing 689,637 9.0 683,206 8.2 700,791 98,704 8.0 Research and development 256,421 3.3 240,534 2.9 175,915 24,777 2.0 General and administrative 759,627 9.9 612,252 7.4 535,493 75,423 6.1 Total 2,150,195 28.1 2,003,376 24.1 1,851,158 260,730 21.2 ​ Fulfillment expenses.
Operating expenses Operating expenses consist of fulfillment expenses, sales and marketing expenses, research and development expenses, and general and administrative expenses. 105 Table of Contents The following table sets forth the components of our operating expenses by amounts and percentages of total net revenues for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Operating expenses: Fulfillment 467,384 5.6 438,959 5.0 391,687 53,661 4.5 Sales and marketing 683,206 8.2 700,791 8.0 641,519 87,888 7.3 Research and development 240,534 2.9 175,915 2.0 169,496 23,221 1.9 General and administrative 612,252 7.4 535,493 6.1 646,539 88,575 7.4 Total 2,003,376 24.1 1,851,158 21.2 1,849,241 253,345 21.1 ​ Fulfillment expenses.
Our accounts payable turnover days (inclusive of notes payable) were 109.5 days in 2021, 130.7 days in 2022 and 136.8 days in 2023.
Our accounts payable turnover days (inclusive of notes payable) were 130.4 days in 2022, 136.6 days in 2023, and 137.2 days in 2024.
We expect our cost of revenues to increase in absolute amounts as we continue to grow our business. However, we believe our expansion in business scale and transaction volume will help us obtain more favorable terms from suppliers, including pricing terms, and our expansion in our marketplace model will improve the overall gross margin of our business.
However, we believe our expansion in business scale and transaction volume will help us obtain more favorable terms from suppliers, including pricing terms, and our expansion in our marketplace model will improve the overall gross margin of our business. Our results of operations are also affected by the mix of products sold on our platform.
The cost of revenues on our ZKH platform under our product sales model increased from RMB6,232.2 million in 2022 to RMB6,335.3 million (US$892.3 million) in 2023. The cost of revenues on our GBB platform under our product sales model increased from RMB753.9 million in 2022 to RMB898.3 million (US$126.5 million) in 2023. Operating expenses Fulfillment expenses.
The cost of revenues on our ZKH platform under our product sales model increased from RMB6,335.3 million in 2023 to RMB 6258.0 million (US$ 857.3 million) in 2024. The cost of revenues on our GBB platform under our product sales model increased from RMB898.3 million in 2023 to RMB 944.0 million (US$ 129.3 million) in 2024.
Net product revenues. Net product revenues increased by 3.1% from RMB8,086.9 million in 2022 to RMB8,341.6 million (US$1,174.9 million) in 2023, as we generated higher revenues from our ZKH platform and our GBB platform primarily driven by the growth in customer number.
Net product revenues. Our net product revenues were RMB8,449.5 million (US$1,157.6 million), representing an increase of 1.3% from RMB8,341.6 million in 2023. The increase was mainly attributable to higher revenues generated from the ZKH platform and the GBB platform , primarily driven by increased customer numbers. Net service revenues.
We entered into an agreement to acquire the use right of this parcel of land for RMB10.9 million in December 2022 and we obtained the land use right certificate in January 2023. Under this land use right agreement, we committed to making at least RMB273.1 million of capital expenditures in connection with our construction plan.
Under the land use right agreement that we entered into in December 2022 in relation to our Taicang construction project, we committed to making at least RMB273.1 million of capital expenditures in connection with our construction plan. Our operating lease commitments relate to our leases of offices.
Financing activities Net cash provided by financing activities in 2023 was RMB715.7 million (US$100.8 million), primarily consisting of RMB1,114.0 million (US$156.9 million) of proceeds from short-term borrowings, partially offset by RMB779.0 million (US$109.7 million) of repayment of short-term borrowings.
Financing activities Net cash used in financing activities in 2024 was RMB254.2 million (US$34.8 million), primarily consisting of RMB1,171.0 million (US$160.4 million) of repayment of short-term borrowings, partially offset by RMB897.0 million (US$122.9 million) of proceeds from short-term borrowings.
The results of operations in any period are not necessarily indicative of our future trends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ ( in thousands, except for percentages ) Net revenues Net product revenues 7,500,036 98.0 8,086,920 97.2 8,341,603 1,174,890 95.6 Net service revenues 116,692 1.5 179,508 2.2 307,412 43,298 3.5 Other revenues 37,863 0.5 48,808 0.6 72,160 10,164 0.8 Total net revenues 7,654,591 100.0 8,315,236 100.0 8,721,175 1,228,352 100.0 Cost of revenues (6,614,836) (86.4) (6,997,566) (84.2) (7,268,741) (1,023,781) (83.3) Operating expenses: Fulfillment (1) (444,510) (5.8) (467,384) (5.6) (438,959) (61,826) (5.0) Sales and marketing (1) (689,637) (9.0) (683,206) (8.2) (700,791) (98,704) (8.0) Research and development (1) (256,421) (3.3) (240,534) (2.9) (175,915) (24,777) (2.0) General and administrative (1) (759,627) (9.9) (612,252) (7.4) (535,493) (75,423) (6.1) Loss from operations (1,110,440) (14.5) (685,706) (8.2) (398,724) (56,159) (4.6) Interest and investment income 28,277 0.4 14,559 0.2 53,703 7,564 0.6 Interest expense (10,593) (0.1) (94,182) (1.1) (19,343) (2,724) (0.2) Others, net (1,156) (0.0) 33,737 0.4 59,659 8,403 0.7 Loss before income tax (1,093,912) (14.3) (731,592) (8.8) (304,705) (42,916) (3.5) Income tax (expenses)/benefits (200) (0.0) 471 0.0 (195) (27) 0.0 Net loss (1,094,112) (14.3) (731,121) (8.8) (304,900) (42,943) (3.5) Net loss attributable to ZKH Group Limited (1,122,484) (14.7) (735,681) (8.8) (304,314) (42,861) (3.5) Net loss attributable to ZKH Group Limited’s ordinary shareholders (1,452,221) (19.0) (1,244,962) (15.0) (964,384) (135,830) (11.1) Note: (1) Share-based compensation expenses were allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ ( in thousands, except for percentages ) Fulfillment 2,154 1.2 585 1.8 195 27 1.1 Sales and marketing 8,204 4.5 5,935 18.6 4,682 659 26.9 Research and development 10,134 5.5 3,883 12.2 3,070 432 17.7 General and administrative 162,857 88.8 21,496 67.4 9,446 1,330 54.3 Total 183,349 100.0 31,899 100.0 17,393 2,448 100.0 ​ Year ended December 31, 2023 compared to year ended December 31, 2022 Net revenue Our net revenues increased by 4.9% from RMB8,315.2 million in 2022 to RMB8,721.2 million (US$1,228.4 million) in 2023, with increases in all categories of net revenues primarily due to continued growth in MRO market demand. ● The number of our customers increased from over 58,000 in 2022 to over 66,000 in 2023, and average spending per customer increased from RMB161,592 in 2022 to RMB166,507 (US$23,461) in 2023. 105 Table of Contents ● The number of ZKH customers who contributed GMV of more than RMB1 million in a given year to us was over 1,200 and over 1,300 in 2022 and 2023, respectively.
The results of operations in any period are not necessarily indicative of our future trends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Net revenues Net product revenues 8,086,920 97.2 8,341,603 95.6 8,449,468 1,157,572 96.4 Net service revenues 179,508 2.2 307,412 3.5 244,707 33,525 2.8 Other revenues 48,808 0.6 72,160 0.8 67,143 9,199 0.8 Total net revenues 8,315,236 100.0 8,721,175 100.0 8,761,318 1,200,296 100.0 Cost of revenues (6,997,566) (84.2) (7,268,741) (83.3) (7,250,847) (993,362) (82.8) Operating expenses: ​ ​ ​ ​ ​ ​ ​ Fulfillment (1) (467,384) (5.6) (438,959) (5.0) (391,687) (53,661) (4.5) Sales and marketing (1) (683,206) (8.2) (700,791) (8.0) (641,519) (87,888) (7.3) Research and development (1) (240,534) (2.9) (175,915) (2.0) (169,496) (23,221) (1.9) General and administrative (1) (612,252) (7.4) (535,493) (6.1) (646,539) (88,575) (7.4) Loss from operations (685,706) (8.2) (398,724) (4.6) (338,770) (46,411) (3.9) Interest and investment income 14,559 0.2 53,703 0.6 64,246 8,802 0.7 Interest expense (94,182) (1.1) (19,343) (0.2) (19,003) (2,603) (0.2) Others, net 33,737 0.4 59,659 0.7 26,497 3,630 0.3 Loss before income tax (731,592) (8.8) (304,705) (3.5) (267,030) (36,583) (3.0) Income tax benefits/(expenses) 471 0.0 (195) 0.0 (1,013) (139) 0.0 Net loss (731,121) (8.8) (304,900) (3.5) (268,043) (36,722) (3.1) Net loss attributable to ZKH Group Limited (735,681) (8.8) (304,314) (3.5) (268,043) (36,722) (3.1) Net loss attributable to ZKH Group Limited’s ordinary shareholders (1,244,962) (15.0) (964,384) (11.1) (268,043) (36,722) (3.1) Note: (1) Share-based compensation expenses were allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Fulfillment 585 1.8 195 1.1 811 111 0.8 Sales and marketing 5,935 18.6 4,682 26.9 11,055 1,515 10.2 Research and development 3,883 12.2 3,070 17.7 4,615 632 4.2 General and administrative 21,496 67.4 9,446 54.3 92,035 12,609 84.8 Total 31,899 100.0 17,393 100.0 108,516 14,867 100.0 ​ 108 Table of Contents Year ended December 31, 2024 compared to year ended December 31, 2023 Net revenue Our net revenues increased from RMB8,721.2 million in 2023 to RMB8,761.3 million (US$1,200.3 million) in 2024, representing an increase of 0.5% from RMB8,721.2 million in 2023, primarily driven by higher revenues from the product sales model, partially offset by a decline in revenues from the marketplace model due to the optimization of certain businesses with low margins and long customer credit terms. ● The number of our customers increased from over 66,000 in 2023 to over 83,000 in 2024, and average spending per customer decreased from RMB166,507 in 2023 to RMB 124,819 (US$ 17,100) in 2024. ● The number of ZKH customers who contributed GMV of more than RMB1 million in a given year to us was over 1,300 and over 1,300 in 2023 and 2024, respectively.
If factors change or different assumptions are used, the share-based compensation expenses could be materially different for any period.
The assumptions used in share-based compensation expenses recognition represent management’s best estimates, but these estimates involve inherent uncertainties and application of management judgment. If factors change or different assumptions are used, the share-based compensation expenses could be materially different for any period.
Gross profit is calculated by subtracting cost of revenues from net revenues, and gross margin represents gross profit as a percentage of net revenues. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ ​ Gross ​ Gross ​ Gross ​ Gross ​ Gross ​ Gross ​ ​ Profit ​ Margin ​ Profit ​ Margin ​ Profit ​ Margin ​ ​ (RMB ​ ​ ​ (RMB ​ ​ ​ (RMB ​ (US$ ​ ​ ​ ​ thousands) ​ (%) ​ thousands) ​ (%) ​ thousands) ​ thousands) ​ (%) Under product sales: ZKH platform 830,202 12.7 1,045,025 14.4 1,046,209 147,355 14.2 GBB platform 60,156 6.3 55,756 6.9 61,789 8,703 6.4 Under marketplace 116,692 100.0 179,508 100.0 307,412 43,298 100.0 Others 32,705 86.4 37,381 76.6 37,024 5,215 51.3 Total 1,039,755 13.6 1,317,670 15.8 1,452,434 204,571 16.7 ​ 102 Table of Contents Operating expenses consist of fulfillment expenses, sales and marketing expenses, research and development expenses, and general and administrative expenses.
Gross profit is calculated by subtracting cost of revenues from net revenues, and gross margin represents gross profit as a percentage of net revenues. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ ​ Gross ​ Gross ​ Gross ​ Gross ​ Gross ​ Gross ​ ​ Profit ​ Margin ​ Profit ​ Margin ​ Profit ​ Margin ​ ​ RMB ​ % ​ RMB ​ % ​ RMB ​ US$ ​ % ​ ​ (in thousands, except for percentages) Under product sales: ZKH platform 1,045,025 14.4 1,046,209 14.2 1,192,189 163,329 16.0 GBB platform 55,756 6.9 61,789 6.4 55,243 7,568 5.5 Under marketplace 4 179,508 ​ 100.0 307,412 100.0 244,707 33,525 100.0 Others 37,381 76.6 37,024 51.3 18,332 2,511 27.3 Total 1,317,670 15.8 1,452,434 16.7 1,510,471 206,934 17.2 4 Take rate of the marketplace model was 12.4%, 11.2% and 12.6% for 2022, 2023 and 2024, respectively.
Our operating margin, representing loss from operations as a percentage of net revenue, was -14.5%, -8.2% and -4.6% in 2021, 2022 and 2023, respectively.
Our operating margin, representing loss from operations as a percentage of net revenue, was -8.2%, -4.6%, and -3.9% in 2022, 2023 and 2024, respectively. 101 Table of Contents We incurred net loss of RMB731.1 million, RMB304.9 million and RMB268.0 million (US$36.7 million) in 2022, 2023 and 2024, respectively.
Net cash used in investing activities in 2022 was RMB37.0 million, primarily due to RMB100.0 million of purchase of short-term investments and RMB37.0 million of purchase of property and equipment, partially offset by the maturity of short-term investments of RMB100.1 million.
Investing activities Net cash provided by investing activities in 2024 was RMB276.1 million (US$37.8 million), primarily due to RMB104.9 million (US$14.4 million) of purchase of short-term investments and RMB79.2 million (US$10.8 million) of purchase of property and equipment, partially offset by the maturity of short-term investments of RMB461.9 million (US$63.3 million).
The number of our customers increased from over 52,000 in 2021 to over 58,000 in 2022, and further to over 66,000 in 2023.
The continued growth of our customer base depends on our ability to retain existing customers and acquire new customers. The number of our customers increased from over 58,000 in 2022 to over 66,000 in 2023, and further to over 83,000 in 2024.
The product mix on our platform may change from time to time in response to customers’ evolving procurement demands, which may impact our gross margin. 100 Table of Contents Our ability to manage operating expenses Our results of operations depend in part on our ability to manage our operating expenses, including fulfillment expenses, sales and marketing expenses, general and administrative expenses and research and development expenses.
Our ability to manage operating expenses Our results of operations depend in part on our ability to manage our operating expenses, including fulfillment expenses, sales and marketing expenses, general and administrative expenses and research and development expenses.
Our accounts receivable turnover days on a GMV basis were 108.7 days in 2021, 127.3 days in 2022 and 121.4 days in 2023.
We also track our accounts receivable turnover days on a GMV basis. Our accounts receivable turnover days on a GMV basis were 130.7 days in 2022, 124.7 days in 2023 and 132.2 days in 2024.
The principal non-cash items affecting the difference between our net cash used in operating activities and net loss were RMB53.0 million of depreciation and amortization and RMB183.3 million of share-based compensation expenses in 2021.
The principal non-cash items affecting the difference between our net cash provided in operating activities and net loss were RMB54.8 million (US$7.5 million) in depreciation and amortization, RMB 108.5 million (US$14.9 million) in share-based compensation expenses and RMB48.9 million (US$6.7 million) in allowance for credit losses.
The number of ZKH customers who contributed GMV of more than RMB1 million to us in a given year was over 1,100 in 2021, over 1,200 in 2022 and over 1,300 in 2023. Over the years, our customers have exhibited significant loyalty to our platform.
The number of ZKH customers who contributed GMV of more than RMB1 million to us in a given year was over 1,200 in 2022, over 1,300 in 2023, and over 1,300 in 2024. Our average spending per customers was RMB161,592, RMB166,507 and RMB124,818, respectively, mainly attributable to aggregate of small-to-micro business customers and changes in demand environment.
Our inventories decreased from RMB762.9 million as of December 31, 2021 to RMB656.0 million as of December 31, 2022 and increased to RMB669.0 million (US$94.2 million) as of December 31, 2023. The increase from December 31, 2022 to December 31, 2023 was generally in line with our business growth.
Our inventories increased from RMB656.0 million as of December 31, 2022 to RMB669.0 million as of December 31, 2023, and decreased to RMB625.4 million as of December 31, 2024. The decrease from December 31, 2023 to December 31, 2024 was primarily due to decrease in our sales volume and enhanced inventory management.
The difference between our net cash used in operating activities and net loss was primarily due to changes in certain working capital accounts, principally, an increase of RMB317.2 million (US$44.7 million) in accounts and notes payable and an increase of operating lease right-of use assets of RMB73.0 million (US$10.3 million), offset by an increase of RMB585.5 million (US$82.5 million) in accounts receivable.
This favorable change was primarily due to changes in certain working capital accounts, principally, a decrease of operating lease right-of use assets of RMB28.0 million and a decrease of RMB647.2 million in accounts and notes payable, partially offset by a decrease of RMB1,249.0 million in accounts and notes receivable.
Our cost of revenues primarily consists of purchase price of products under our product sales model, and also includes inbound shipping charges and write-downs of inventories. We incur minimal cost of revenues under our marketplace model, which has a significantly higher gross margin than our product sales model.
We incur minimal cost of revenues under our marketplace model, which has a significantly higher gross margin than our product sales model. We expect our cost of revenues to increase in absolute amounts as we continue to grow our business.
Bank acceptance notes with face value of RMB326.1 million, RMB192.7 million and RMB143.8 million (US$20.3 million) were endorsed to suppliers as of December 31, 2021, 2022 and 2023, respectively. 109 Table of Contents Our accounts receivable turnover days (inclusive of notes receivable) were 121.9 days in 2021, 143.5 days in 2022 and 154.2 days in 2023.
The bank acceptance notes can also be endorsed to suppliers as settlement of accounts payable. Bank acceptance notes with face value of RMB192.7 million, RMB143.8 million and RMB369.6 million (US$50.6 million) were endorsed to suppliers as of December 31, 2022, 2023 and 2024, respectively.
Research and development expenses. Our research and development expenses decreased by 26.9% from RMB240.5 million in 2022 to RMB175.9 million (US$24.8 million) in 2023. The decrease was primarily attributable to lower employee benefits expenses due to the decrease in average headcount of employees involved in research and development. General and administrative expenses .
Our sales and marketing expenses decreased by 8.5% from RMB700.8 million in 2023 to RMB641.5 million (US$87.9 million) in 2024. The decrease was primarily attributable to lower employee benefit costs, marketing and promotion expenses and travel expenses.
Net loss As a result of the foregoing, we recorded net loss of RMB304.9 million (US$42.9 million) in 2023, compared to RMB731.1 million in 2022.
Loss from operations Our loss from operations was RMB338.8 million (US$46.4 million), compared with RMB398.7 million in 2023. Operating loss margin was 3.9% in 2024, compared with 4.6% in 2023. Net loss As a result of the foregoing, we recorded net loss of RMB268.0 million (US$36.7 million) in 2024, compared to RMB304.9 million in 2023.
We adopted ASU 2016-09 to recognize the impact of forfeiture within compensation expenses, when they occur. The fair value of share options is estimated on the grant date using the binomial option-pricing model. The assumptions used in share-based compensation expenses recognition represent management’s best estimates, but these estimates involve inherent uncertainties and application of management judgment.
We adopted ASU 2016-09 to recognize the impact of forfeiture within compensation expense, when they occur. Management applies significant judgment in determining the fair value of share-based awards at grant dates.
As our business scale grows, we believe we will have more operating leverage on our operating expenses. Our ability to expand and maintain relationships with suppliers and service providers Maintaining healthy collaborative relationships with MRO product suppliers and fulfillment service providers is critical to our business success. We source MRO products from suppliers for transactions on our platform.
In 2024, these initiatives contributed to RMB 15.5 million of operating expenses, representing 0.8% of the Company’s total operating expenses in 2024 Our ability to expand and maintain relationships with suppliers and service providers Maintaining healthy collaborative relationships with MRO product suppliers and fulfillment service providers is critical to our business success.
The interest rate on any outstanding utilized amount under these bank borrowings is calculated ranging from loan prime rate (LPR) minus 65 basis points to loan prime rate minus five basis points. As of December 31, 2023, the one-year loan prime rate was 3.45%. The borrowings are denominated in Renminbi.
As of December 31, 2024, we have drawn down an aggregate of RMB730.6 million, including (i) RMB311.0 million of bank borrowings with expiration dates ranging from January 2025 to May 2025 (the interest rate on any outstanding utilized amount under these bank borrowings is calculated ranging from loan prime rate (LPR) minus 88 basis points to loan prime rate minus 50 basis points; as of December 31, 2024, the one-year loan prime rate was 3.10%; and the borrowings are denominated in Renminbi) and (ii) outstanding accounts payable under the supplier finance program of RMB342.6 million with expiration dates ranging from January 2025 to June 2025; (iii) bank guarantees on the Group’s purchase commitment of RMB70.4 million in aggregate; and (iv) discounting of commercial notes receivables of RMB6.5 million with expiration dates ranging from April 2025 to May 2025.
This loan will mature in August 2023, unless repaid in advance or extended. Our accounts and notes payable primarily includes amounts payable to the suppliers associated with our product sales.
As of the date of this annual report, none of the covenants relating to drawn down facilities had been breached. Our accounts and notes payable primarily includes amounts payable to the suppliers associated with our product sales.
Research and development expenses . Our research and development expenses decreased by 6.2% from RMB256.4 million in 2021 to RMB240.5 million in 2022. The decrease was primarily attributable to lower outsourcing costs, related share-based compensation expenses and traveling expenses. General and administrative expenses.
Our general and administrative expenses increased by 20.7% from RMB535.5 million in 2023 to RMB646.5 million (US$88.6 million) in 2024. The increase was primarily attributable to higher share-based compensation expenses and allowance for credit losses, partially offset by lower employee benefit costs and travel expenses.
Sales and marketing expenses. Our sales and marketing expenses increased by 2.6% from RMB683.2 million in 2022 to RMB700.8 million (US$98.7 million) in 2023.
Sales and marketing expenses as a percentage of net revenues were 7.3% in 2024, compared with 8.0% in 2023. 109 Table of Contents Research and development expenses. Our research and development expenses decreased by 3.6% from RMB175.9 million in 2023 to RMB169.5 million (US$23.2 million) in 2024.
We have drawn down RMB390.0 million (US$55.1 million) from our revolving credit facilities as of December 31, 2023. 111 Table of Contents Our capital commitments consist primarily of the factory construction project in Taicang, Jiangsu Province, renovation of our leased warehouses and offices, and development of software.
We have drawn down RMB730.6 (US$100.1 million) from our revolving credit facilities as of December 31, 2024. 114 Table of Contents Our capital expenditures contracted for were RMB244.9 million and RMB183.9million (US$25.2 million) as of December 31, 2023 and 2024, respectively.
The decrease was primarily attributable to lower employee benefits expenses due to the decrease in average headcount of employees, partially offset by the increase in travel expenses. 106 Table of Contents Interest expense We recorded interest expense of RMB19.3 million (US$2.7 million) in 2023, attributable to short-term bank borrowings. We recorded interest expense of RMB94.2 million in 2022.
General and administrative expenses as a percentage of net revenues were 7.4% in 2024, compared with 6.1% in the same period of 2023. Interest expense We recorded interest expense of RMB19.0 million (US$2.6 million) in 2024, attributable to short-term bank borrowings. We recorded interest expense of RMB19.3 million in 2023.
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We provide one-stop MRO procurement and management services for our customers, and offer digital and fulfillment solutions for participants along the industry value chain. Our revenue model includes a product sales model and a marketplace model. Our product sales model contributes the majority of our revenues.
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Operating Results Overview We are a leading MRO procurement service platform built upon strong supply chain capabilities, servicing customers internationally through a product-led, agentic AI-driven approach. Reducing high procurement costs, solving systematic management efficiency challenges, and revolutionizing the opaque MRO procurement process are our top priorities.
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We will continue to invest in our product team to constantly optimize the selection of SKUs on our platform.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Ms. Wang has served as the chief financial officer of Trip.com Group Limited (Nasdaq: TCOM), since November 2013 and its executive vice president since May 2016. Prior to that, Ms. Wang was its vice president since January 2008. Ms. Wang joined Trip.com Group Limited in December 2001 and has held a number of managerial positions. Ms.
Wang has served as the chief financial officer of Trip.com Group Limited (Nasdaq: TCOM), since November 2013 and its executive vice president since May 2016. Prior to that, Ms. Wang was its vice president since January 2008. Ms. Wang joined Trip.com Group Limited in December 2001 and has held a number of managerial positions. Ms.
In general, the plan administrator determines the vesting schedule, which is specified in the award agreement. Exercise of Awards . The plan administrator determines the exercise price for each option, which is stated in the award agreement and may be a fixed or variable price related to the fair market value of the shares.
Vesting Schedule . In general, the plan administrator determines the vesting schedule, which is specified in the award agreement. Exercise of Awards . The plan administrator determines the exercise price for each option, which is stated in the award agreement and may be a fixed or variable price related to the fair market value of the shares.
He Xu is Xibeiwang East Road, No. 10, East Campus, Lenovo, Haidian District, Beijing, People’s Republic of China. † For each person or group included in this column, percentage of beneficial ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding and the number of shares such person or group has the right to acquire upon exercise of option, warrant or other right within 60 days after March 31, 2024. †† For each person or group included in this column, percentage of aggregate voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
He Xu is Xibeiwang East Road, No. 10, East Campus, Lenovo, Haidian District, Beijing, People’s Republic of China. † For each person or group included in this column, percentage of beneficial ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding and the number of shares such person or group has the right to acquire upon exercise of option, warrant or other right within 60 days after March 31, 2025. †† For each person or group included in this column, percentage of aggregate voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
Junyu Li has served as our director since December 2021. Mr. Li has served as our vice president since June 2018. Mr. Li joined us since our inception and served multiple positions in our company since then. Mr. Li received a bachelor’s degree in environmental engineering from Fudan University in 2002. Ms.
Junyu Li has served as our director since December 2021. Mr. Li has served as our vice president since June 2018. Mr. Li joined us since our inception and served multiple positions in our company since then. Mr. Li received a bachelor’s degree in environmental engineering from Fudan University in 2002. Mr.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; 121 Table of Contents ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; 121 Table of Contents ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
(5) Represents (i) 706,928,800 Class A ordinary shares held by Shanghai Xiuying Enterprise Management Consulting Partnership (Limited Partnership), a limited partnership incorporated in mainland China, (ii) 79,100,600 Class A ordinary shares held by Eastern Bell International XIII Limited, a Hong Kong limited company, and (iii) 32,140,900 Class A ordinary shares held by Ningbo Huichen Runze Investment Partnership (L.P.), a limited partnership incorporated in mainland China.
(4) Represents (i) 706,928,800 Class A ordinary shares held by Shanghai Xiuying Enterprise Management Consulting Partnership (Limited Partnership), a limited partnership incorporated in mainland China, (ii) 79,100,600 Class A ordinary shares held by Eastern Bell International XIII Limited, a Hong Kong limited company, and (iii) 32,140,900 Class A ordinary shares held by Ningbo Huichen Runze Investment Partnership (L.P.), a limited partnership incorporated in mainland China.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares on an as-converted basis as of March 31, 2024 by: ● each of our directors and executive officers; and ● each person known to us to own beneficially 5% or more of our total outstanding ordinary shares.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares on an as-converted basis as of March 31, 2025 by: ● each of our directors and executive officers; and ● each person known to us to own beneficially 5% or more of our total outstanding ordinary shares.
(8) Represents (i) 349,073,061 Class A ordinary shares and (ii) 22,575,000 Class A ordinary shares in the form of 645,000 ADSs held by Canada Pension Plan Investment Board. Such shareholding information is based on the information contained in the Schedule 13G filed by Canada Pension Plan Investment Board with SEC on February 14, 2024.
(7) Represents (i) 349,073,061 Class A ordinary shares and (ii) 22,575,000 Class A ordinary shares in the form of 645,000 ADSs held by Canada Pension Plan Investment Board. Such shareholding information is based on the information contained in the Schedule 13G filed by Canada Pension Plan Investment Board with SEC on February 14, 2024.
Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. 125 Table of Contents Substantially all of our operations are conducted through our mainland China subsidiaries, and substantially all of our assets are located in mainland China.
Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. Substantially all of our operations are conducted through our mainland China subsidiaries, and substantially all of our assets are located in mainland China.
(7) Represents (i) 215,539,000 Class A ordinary shares held by YSC Investment II (BVI) Ltd., a British Virgin Islands limited company, and (ii) 181,310,600 Class A ordinary shares held by YSC Investment III (BVI) Limited, a British Virgin Islands limited company.
(6) Represents (i) 215,539,000 Class A ordinary shares held by YSC Investment II (BVI) Ltd., a British Virgin Islands limited company, and (ii) 181,310,600 Class A ordinary shares held by YSC Investment III (BVI) Limited, a British Virgin Islands limited company.
The maximum aggregate number of ordinary shares of ZKH Group Limited which may be issued under the 2022 Plan is 512,273,667. 118 Table of Contents In 2022, ZKH Industrial Supply’s stock incentive plan and all award agreements evidencing the awards granted thereunder were terminated.
The maximum aggregate number of ordinary shares of ZKH Group Limited which may be issued under the 2022 Plan is 512,273,667. In 2022, ZKH Industrial Supply’s stock incentive plan and all award agreements evidencing the awards granted thereunder were terminated.
Each award granted under the 2022 Plan should be evidenced by an award agreement, which may include the terms and conditions of such award and the provisions applicable in the event that the grantee’s employment or service terminates. Eligibility . We may grant awards to employees, directors and consultants of our company or our related entities. Vesting Schedule .
Each award granted under the 2022 Plan should be evidenced by an award agreement, which may include the terms and conditions of such award and the provisions applicable in the event that the grantee’s employment or service terminates. 119 Table of Contents Eligibility . We may grant awards to employees, directors and consultants of our company or our related entities.
Long Chen is our founder, director and chief executive officer. He has served in these roles since our inception. Mr. Chen is in charge of our overall strategy formation and management, operations, product development and research development. Mr. Chen received an executive MBA degree from China Europe International Business School in 2023. Mr.
Long Chen is our founder, chairman of the board of directors and chief executive officer. He has served in these roles since our inception. Mr. Chen is in charge of our overall strategy formation and management, operations, product development and research development. Mr. Chen received an executive MBA degree from China Europe International Business School in 2023. Mr.
The registered address of Loong ZKH Limited is Ritter House, Wickhams Cay II, PO Box 3170, Road Town, Torlola VG1110, British Virgin Islands. (2) Represents 270,402,622 Class B ordinary shares beneficially owned by the Management Shareholders other than Mr. Long Chen. Each of the shareholding entities of the Management Shareholders other than Mr. Long Chen, including Mr. Junyu Li, Ms.
The registered address of Loong ZKH Limited is Ritter House, Wickhams Cay II, PO Box 3170, Road Town, Torlola VG1110, British Virgin Islands. (2) Represents 151,717,482 Class B ordinary shares beneficially owned by the Management Shareholders other than Mr. Long Chen. Each of the shareholding entities of the Management Shareholders other than Mr. Long Chen, including Mr. Junyu Li, Mr.
Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2023, we paid an aggregate of RMB12.9 million (US$1.8 million) in cash to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2024, we paid an aggregate of RMB13.8 million (US$1.92 million) in cash to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
The number of our effective headcount was 4,403 for 2021, 4,540 for 2022 and 3,954 for 2023. As required by regulations in mainland China, we participate in various government statutory employee benefit plans, including social insurance plans, namely pension, medical, unemployment, work-related injury and maternity insurance plans, and housing provident funds.
The number of our effective headcount was 4,540 for 2022, 3,954 for 2023 and 3,592 for 2024. 123 Table of Contents As required by regulations in mainland China, we participate in various government statutory employee benefit plans, including social insurance plans, namely pension, medical, unemployment, work-related injury and maternity insurance plans, and housing provident funds.
We may also terminate an executive officer’s employment without cause upon 60-day advance written notice, in which case, we will provide severance payments to the executive officer as may be agreed between the executive officer and us. The executive officer may resign at any time with a 60-day advance written notice.
We may also terminate an executive officer’s employment without cause upon 60-day advance written notice, in which case, we will provide severance payments to the executive officer as may be agreed between the executive officer and us.
As of March 31, 2024, awards to purchase 254,126,885 ordinary shares of ZKH Group Limited under the 2022 Plan have been granted and remain outstanding, excluding awards that were forfeited or canceled after the grant dates. The following paragraphs describe the principal terms of the 2022 Plan. Types of Awards .
As of March 31, 2025, awards to purchase 300,958,134 ordinary shares of ZKH Group Limited under the 2022 Plan have been granted and remain outstanding, excluding awards that were forfeited or canceled after the grant dates. The following paragraphs describe the principal terms of the 2022 Plan. Types of Awards .
F. Disclosure of A Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.
F. Disclosure of A Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable. 127 Table of Contents
These shares, however, are not included in the computation of the percentage ownership of any other person. 123 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ ​ Class A Ordinary ​ Class B Ordinary ​ Total Ordinary ​ % of Beneficial ​ % of Aggregate ​ ​ Shares ​ Shares ​ Shares ​ Ownership † ​ Voting Power †† Directors and Executive Officers**: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long Chen (1) — 890,677,378 890,677,378 15.8 66.5 Shares subject to voting proxy (2) — 270,402,622 270,402,622 4.8 20.2 Total (1)(2) — 1,161,080,000 1,161,080,000 20.6 86.6 Junyu Li (3) — 50,000,000 50,000,000 0.9 3.7 Shuangyi Chen — * * * 1.5 Changxiang Yang — * * * * Xiaoyi Wu (4) 57,541,800 — 57,541,800 1.0 0.2 Cindy Xiaofan Wang — — — — — He Xu — — — — — Fengyi Bie — * * * * Chun Chiu Lai — — — — — Yang Liu — — — — — All Directors and Executive Officers as a Group 57,541,800 1,161,080,000 1,218,621,800 21.6 86.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Shareholders: Phoenix ZKH Limited (1) — 890,677,378 890,677,378 15.8 66.5 Eastern Bell related entities and an affiliate (5) 818,170,300 — 818,170,300 14.5 2.4 Tencent Mobility Limited (6) 526,845,143 — 526,845,143 9.3 1.6 Genesis Capital related entities (7) 396,849,600 — 396,849,600 7.0 1.2 Canada Pension Plan Investment Board (8) 371,648,061 — 371,648,061 6.6 1.1 Tiger Global Management, LLC (9) 290,178,469 — 290,178,469 5.1 0.9 Notes: * Aggregate number of shares account for less than one percent of our total ordinary shares outstanding as of March 31, 2024. ** Except as indicated otherwise below, the business address of our directors and executive officers is 7/F, Tower 4, Libao Plaza, No. 36 Shenbin Road, Minhang District, Shanghai, 201106, People’s Republic of China.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ ​ Class A Ordinary ​ Class B Ordinary ​ Total Ordinary ​ % of Beneficial ​ % of Aggregate ​ ​ Shares ​ Shares ​ Shares ​ Ownership † ​ Voting Power†† Directors and Executive Officers**: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Long Chen (1) — 890,677,378 890,677,378 15.9 72.7 Shares subject to voting proxy (2) — 151,717,482 151,717,482 2.7 12.4 Total (1)(2) — 1,042,394,860 1,042,394,860 18.6 85.1 Junyu Li (3) — 50,000,000 50,000,000 0.9 4.1 Changxiang Yang — * * * * Cindy Xiaofan Wang — — — — — He Xu — — — — — Chun Chiu Lai — — — — — Yang Liu — — — — — Shuang Liu — — — — — All Directors and Executive Officers as a Group — 1,042,394,860 1,042,394,860 18.6 85.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Shareholders: Phoenix ZKH Limited (1) — 890,677,378 890,677,378 15.9 72.7 Eastern Bell related entities and an affiliate (4) 818,170,300 — 818,170,300 14.6 2.7 Tencent Mobility Limited (5) 526,845,143 — 526,845,143 9.4 1.7 Genesis Capital related entities (6) 396,849,600 — 396,849,600 7.1 1.3 Canada Pension Plan Investment Board (7) 371,648,061 — 371,648,061 6.6 1.2 Tiger Global Management, LLC (8) 290,178,469 — 290,178,469 5.2 0.9 Notes: * Aggregate number of shares account for less than one percent of our total ordinary shares outstanding as of March 31, 2025. 124 Table of Contents ** Except as indicated otherwise below, the business address of our directors and executive officers is 7/F, Tower 4, Libao Plaza, No. 36 Shenbin Road, Minhang District, Shanghai, 201106, People’s Republic of China.
Each committee’s members and functions are described below. 120 Table of Contents Audit Committee . Our audit committee consists of Cindy Xiaofan Wang, He Xu and Shuangyi Chen. Cindy Xiaofan Wang is the chairperson of our audit committee.
Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Cindy Xiaofan Wang and He Xu. Cindy Xiaofan Wang is the chairperson of our audit committee.
Lai worked at China International Capital Corporation Hong Kong Securities Limited, with his last position being an executive director in the investment banking division, advising clients on initial public offerings, mergers and acquisitions and other strategic transactions. Mr.
Prior to joining us, from April 2014 to June 2021, Mr. Lai worked at China International Capital Corporation Hong Kong Securities Limited, with his last position being an executive director in the investment banking division, advising clients on initial public offerings, mergers and acquisitions and other strategic transactions. Mr.
We have also been advised by Maples and Calder (Hong Kong) LLP that although there is no statutory enforcement in the Cayman Islands of judgments obtained in a U.S. court (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), the courts of the Cayman Islands will, at common law, recognize and enforce a foreign monetary judgment of a foreign court of competent jurisdiction without any re-examination of the merits of the underlying dispute based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay a liquidated sum for which such judgment has been given, provided such judgment (i) is given by a foreign court of competent jurisdiction, (ii) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (iii) is final and conclusive, (iv) is not in respect of taxes, a fine or a penalty, and (v) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.
We have also been advised by Maples and Calder (Hong Kong) LLP that although there is no statutory enforcement in the Cayman Islands of judgments obtained in a U.S. court (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), the courts of the Cayman Islands will, at common law, recognize and enforce a foreign monetary judgment of a foreign court of competent jurisdiction without any re-examination of the merits of the underlying dispute based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay a liquidated sum for which such judgment has been given, provided such judgment (i) is given by a foreign court of competent jurisdiction, (ii) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (iii) is final and conclusive, (iv) is not in respect of taxes, a fine or a penalty, and (v) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. 126 Table of Contents However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the United States courts under civil liability provisions of the securities laws if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third-party we receive and for which we have confidential obligations.
The executive officer may resign at any time with a 60-day advance written notice. 118 Table of Contents Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third-party we receive and for which we have confidential obligations.
Shuangyi Chen, Mr. Changxiang Yang, Mr. Fengyi Bie, an employee of our company and an employee shareholding platform, executed an irrevocable proxy and power of attorney, pursuant to which the voting rights of all Class B ordinary shares held by it have been irrevocably and fully delegated to Mr.
Changxiang Yang, an employee of our company, a former director of our Company, a former senior management of our Company and an employee shareholding platform, executed an irrevocable proxy and power of attorney, pursuant to which the voting rights of all Class B ordinary shares held by it have been irrevocably and fully delegated to Mr.
Yang served as a sales manager at Shanghai Athan Industrial Co., Ltd. from May 2011 to February 2012 and a sales manager at EHSY from December 2007 to May 2011. Mr. Yang received a bachelor’s degree in electronic information engineering from Nanjing University of Science and Technology in 2007. 116 Table of Contents Ms.
Yang served as a sales manager at Shanghai Athan Industrial Co., Ltd. from May 2011 to February 2012 and a sales manager at EHSY from December 2007 to May 2011. Mr. Yang received a bachelor’s degree in electronic information engineering from Nanjing University of Science and Technology in 2007. Mr. Yang Liu has served as our director since August 2024.
Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report on Form 20-F. ​ ​ ​ ​ ​ Directors and Executive Officers ​ Age ​ Position/Title Long Chen 55 Chairman of the Board of Directors and Chief Executive Officer Junyu Li 44 Director and Vice President Shuangyi Chen 48 Director and Vice President Changxiang Yang 39 Director and Vice President Xiaoyi Wu 32 Director Cindy Xiaofan Wang 48 Independent Director He Xu 47 Independent Director Fengyi Bie 45 Vice President Chun Chiu Lai 37 Chief Financial Officer Yang Liu 42 Chief Technology Officer ​ Mr.
Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report on Form 20-F. ​ ​ ​ ​ ​ Directors and Executive Officers ​ Age ​ Position/Title Long Chen 56 Chairman of the Board of Directors and Chief Executive Officer Junyu Li 45 Director and Vice President Changxiang Yang 40 Director and Vice President Yang Liu 43 Director and Chief Technology Officer Cindy Xiaofan Wang 49 Independent Director He Xu 48 Independent Director Chun Chiu Lai 38 Chief Financial Officer Shuang Liu 43 Vice President ​ Mr.
Chen is also a certified general accountant of Canada. Mr. Changxiang Yang has served as our director since December 2021. Mr. Yang has served as our vice president since December 2018. Mr. Yang joined us since our inception and served multiple positions in our company since then. Prior to that, Mr.
Changxiang Yang has served as our director since December 2021. Mr. Yang has served as our vice president since December 2018. Mr. Yang joined us since our inception and served multiple positions in our company since then. Prior to that, Mr.
Xu received a bachelor’s degree in management science and technology from Beijing Jiaotong University in 2000. Mr. Xu is currently attending an executive education program on the digital transformation of enterprises at China Europe International Business School. Mr.
Xu received a bachelor’s degree in management science and technology from Beijing Jiaotong University in 2000. Mr. Xu is currently attending an executive education program on the digital transformation of enterprises at China Europe International Business School. Mr. Chun Chiu Lai has served as our chief financial officer since February 2022.
In the event that we seek shareholders approval with respect to any amendment of the 2022 Plan, holders of our Class B ordinary shares shall abstain from voting. 119 Table of Contents The following table summarizes, as of March 31, 2024, the number of ordinary shares of ZKH Group Limited underlying outstanding options that were granted by ZKH Group Limited to its directors and executive officers, excluding options that were exercised, forfeited or canceled after the dates of grant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ ​ ​ ​ Options ​ Exercise Price ​ ​ ​ Date of Name ​ Granted ​ (US$/Share) ​ Date of Grant ​ Expiration Long Chen * par value ​ December 1, 2023 ​ December 1, 2033 Junyu Li * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 Shuangyi Chen * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 Changxiang Yang * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 ​ * 0.2609 ​ December 1, 2023 ​ December 1, 2033 Cindy Xiaofan Wang * par value ​ January 18, 2024 ​ January 18, 2034 He Xu * par value ​ January 18, 2024 ​ January 18, 2034 Fengyi Bie * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 ​ * 0.2609 ​ December 1, 2023 ​ December 1, 2033 Chun Chiu Lai * 0.1015 ​ February 1, 2022 ​ February 1, 2032 ​ * 0.1015 ​ January 18, 2023 ​ January 18, 2033 Yang Liu * 0.2609 ​ July 1, 2023 ​ July 1, 2033 ​ * 0.2609 ​ December 1, 2023 ​ December 1, 2033 Total 89,354,570 ​ ​ Note: * Less than one percent of our total outstanding shares.
The following table summarizes, as of March 31, 2025, the number of ordinary shares of ZKH Group Limited underlying outstanding options that were granted by ZKH Group Limited to its directors and executive officers, excluding options that were exercised, forfeited or canceled after the dates of grant. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ ​ ​ ​ Options ​ Exercise Price ​ ​ ​ Date of Name ​ Granted ​ (US$/Share) ​ Date of Grant ​ Expiration Long Chen * par value ​ December 1, 2023 ​ December 1, 2033 Junyu Li * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 Changxiang Yang * par value ​ May 31, 2020 ​ May 31, 2030 ​ * par value ​ July 1, 2022 ​ July 1, 2032 ​ * 0.2609 ​ December 1, 2023 ​ December 1, 2033 Yang Liu ​ * ​ 0.2609 ​ July 1, 2023 ​ July 1, 2033 ​ ​ * ​ 0.2609 ​ December 1, 2023 ​ December 1, 2033 Cindy Xiaofan Wang * par value ​ January 18, 2024 ​ January 18, 2034 He Xu * par value ​ January 18, 2024 ​ January 18, 2034 Chun Chiu Lai * 0.1015 ​ February 1, 2022 ​ February 1, 2032 ​ * 0.1015 ​ January 18, 2023 ​ January 18, 2033 Total 81,260,581 ​ ​ Note: * Less than one percent of our total outstanding shares. 120 Table of Contents The following table summarizes, as of March 31, 2025, the outstanding restricted share units that we granted to our current directors and executive officers and to other individuals as a group under the 2022 Plan: ​ ​ ​ ​ ​ ​ Ordinary Shares Underlying Restricted ​ Name ​ Share Units ​ Date of Grant Junyu Li * ​ January 18, 2025 Changxiang Yang * ​ January 18, 2025 Yang Liu * ​ January 18, 2025 Shuang Liu * ​ January 18, 2025 Other Individuals as a Group * ​ - Note: * Less than one percent of our total outstanding shares.
(6) Represents 526,845,143 Class A ordinary shares held by Tencent Mobility Limited. Such shareholding information is based on the information contained in the Schedule 13G jointly filed by Tencent Mobility Limited and Tencent Holdings Limited with the SEC on February 1, 2024.
Such shareholding information is based on the information contained in the Schedule 13G jointly filed by Tencent Mobility Limited and Tencent Holdings Limited with the SEC on February 1, 2024.
Foreign citizens and companies will have the same rights as PRC citizens and companies in an action unless the home jurisdiction of such foreign citizens or companies restricts the rights of PRC citizens and companies. 126 Table of Contents There is uncertainty as to whether the judgment of United States courts will be directly enforced in Hong Kong, as the United States and Hong Kong do not have a treaty or other arrangements providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters.
There is uncertainty as to whether the judgment of United States courts will be directly enforced in Hong Kong, as the United States and Hong Kong do not have a treaty or other arrangements providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters.
The calculations in the table below are based on 4,476,335,964 Class A ordinary shares and 1,161,080,000 Class B ordinary shares issued and outstanding as of March 31, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 4,551,078,744 Class A ordinary shares and 1,042,394,860 Class B ordinary shares issued and outstanding as of March 31, 2025. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Chen. 270,402,622 Class B ordinary shares are subject to such voting proxy. Mr. Chen disclaims beneficial ownership of such 270,402,622 Class B ordinary shares. Such delegation of voting rights caused Mr. Chen’s total voting power to increase to 86.6% as of March 31, 2024.
Chen. 151,717,482 Class B ordinary shares are subject to such voting proxy. Mr. Chen disclaims beneficial ownership of such 151,717,482 Class B ordinary shares. Such delegation of voting rights caused Mr. Chen’s total voting power to increase to 85.0% as of March 31, 2025.
We have the right to seek damages if a duty owed by our directors is breached. In certain limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by the directors is breached.
We have the right to seek damages if a duty owed by our directors is breached.
Long Chen has the ability to determine all matters requiring approval by shareholders of ZKH Group Limited, except that holders of Class B ordinary shares shall abstain from voting in the event that ZKH Group Limited seeks its shareholders’ approval with respect to any amendment of its Amended and Restated 2022 Stock Incentive Plan. 124 Table of Contents (3) Represents 50,000,000 Class B ordinary shares directly held by June Rain Max Limited, a British Virgin Islands company, which is owned as to 99% by June Rain Sunstar Limited as non-voting shares and 1% by June Rain Limited as voting shares.
Long Chen has the ability to determine all matters requiring approval by shareholders of ZKH Group Limited, except that holders of Class B ordinary shares shall abstain from voting in the event that ZKH Group Limited seeks its shareholders’ approval with respect to any amendment of its Amended and Restated 2022 Stock Incentive Plan.
Lai received a bachelor’s degree in business administration from Hong Kong University of Science and Technology in 2008 and a master’s degree from the University of Nottingham in 2010. Mr. Yang Liu has served as our chief technology officer since April 2023. Mr. Liu has extensive experience in technical management. Prior to joining us, Mr.
Lai received a bachelor’s degree in business administration from Hong Kong University of Science and Technology in 2008 and a master’s degree from the University of Nottingham in 2010. Dr. Shuang Liu has served as our vice president since April 2022, in charge of the daily operation and management of our regional service centers. Prior to joining us, Dr.
Liu served as a general manager at Alibaba (Beijing) Software Services Co., Ltd. from October 2014 to March 2023, where he oversaw the business unit covering e-commerce, cloud-computing and digital media. Mr. Liu served as a senior technical product manager at Lenovo (Beijing) Co., Ltd. from March 2011 to October 2014 and a technical architect at Amlogic (Shanghai) Co., Ltd.
Mr. Liu has served as our chief technology officer since April 2023. Mr. Liu has extensive experience in technical management. Prior to joining us, Mr. Liu served as a general manager at Alibaba (Beijing) Software Services Co., Ltd. from October 2014 to March 2023, where he oversaw the business unit covering e-commerce, cloud-computing and digital media. Mr.
To our knowledge, as of March 31, 2024, 106,413,800 of our Class A ordinary shares were held by nine record holders in the United States. None of our Class B ordinary shares were held by record holders in the United States.
To our knowledge, as of March 31, 2025, 3,639,081,320 of our Class A ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program. None of our Class B ordinary shares were held by record holders in the United States.
(SHA: 688099) from December 2007 to February 2011. Mr. Liu received a bachelor’s degree in computer science and technology from Beijing University of Posts and Telecommunications in 2005 and a master’s degree in computer science and technology from Tsinghua University in 2007. ​ 117 Table of Contents B.
Liu received a bachelor’s degree in computer science and technology from Beijing University of Posts and Telecommunications in 2005 and a master’s degree in computer science and technology from Tsinghua University in 2007. 117 Table of Contents Ms. Cindy Xiaofan Wang has served as our independent director since December 2023. Ms.
However, any amendment that would adversely affect the grantee’s rights under an outstanding award in material aspects shall not be made without the grantee’s written consent.
However, any amendment that would adversely affect the grantee’s rights under an outstanding award in material aspects shall not be made without the grantee’s written consent. In the event that we seek shareholders approval with respect to any amendment of the 2022 Plan, holders of our Class B ordinary shares shall abstain from voting.
The registered address of June Rain Limited is Ritter House, Wickhams Cay II, PO Box 3170, Road Town, Tortola, VG1110, British Virgin Islands. (4) Represents 57,541,800 Class A ordinary shares directly held by YIII Limited, a British Virgin Islands company wholly owned by Ms. Wu. The registered address of YIII Limited is Craigmuir Chambers, P.O.
The registered address of June Rain Limited is Ritter House, Wickhams Cay II, PO Box 3170, Road Town, Tortola, VG1110, British Virgin Islands.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. 122 Table of Contents D.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. D. Employees We had a total of 3,956 full time employees as of December 31, 2022, 3,476 full time employees as of December 31, 2023 and 3,262 full time employees as of December 31, 2024.
(9) Represents 290,178,469 Class A ordinary shares beneficially owned by Tiger Global Management, LLC and its affiliated entities and an individual.
As of March 31, 2025, 349,073,060 of such shares had been converted into ADSs, each representing 35 Class A ordinary shares, and the remaining Class A ordinary shares are held in the form of ordinary share. 125 Table of Contents (8) Represents 290,178,469 Class A ordinary shares beneficially owned by Tiger Global Management, LLC and its affiliated entities and an individual.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.
In certain limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by the directors is breached. 122 Table of Contents Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.
The following table sets forth the number of our employees by function as of December 31, 2023: ​ ​ ​ ​ As of Function ​ December 31, 2023 Warehousing and logistics 705 Research and development 222 Sales 1,228 Customer services 313 Product 715 General and administrative 293 TOTAL 3,476 ​ As of December 31, 2023, we had 930 employees in Shanghai, 366 employees in Suzhou, 324 employees in Wuhan, 134 employees in Shenzhen, 128 employees in Beijing, 125 employees in Wuxi, 118 employees in Xi’an, 110 employees in Tianjin and 1,241 employees in other locations in China.
The following table sets forth the number of our employees by function as of December 31, 2024: ​ ​ ​ ​ As of Function ​ December 31, 2023 Warehousing and logistics 571 Research and development 223 Sales 1,217 Customer services 283 Product 668 General and administrative 300 TOTAL 3,262 ​ We also track the number of effective headcount as an indicator of our workforce productivity.
Removed
Shuangyi Chen has served as our director since December 2021. Ms. Chen has served as our vice president since June 2018. Prior to joining us, Ms. Chen served as a director of Asia Pacific financial planning and analysis at Johnson Controls (China) Investment Co., Ltd. from September 2016 to April 2018. From June 2011 to August 2016, Ms.
Added
Liu served as a senior technical product manager at Lenovo (Beijing) Co., Ltd. from March 2011 to October 2014 and a technical architect at Amlogic (Shanghai) Co., Ltd. (SHA: 688099) from December 2007 to February 2011. Mr.
Removed
Chen served as the chief financial officer at Comau China. Before that, Ms. Chen had various experience in accounting and finance. Ms. Chen received a bachelor’s degree in international accounting from Shanghai University of International Business and Economics in 1998 and a master’s degree in business administration from Shanghai University of Finance and Economics and Webster University in 2011. Ms.
Added
Liu has served as the co-founder and vice president of China State Science Dingshi Environmental Engineering Co., Ltd from 2010 to 2022, building up a wealth of experience in sales and procurement. Dr.
Removed
Xiaoyi Wu has served as our director since December 2021. Ms. Wu has worked at Ruiqi Holdings Corporation since April 2018 and currently serves as an assistant to the chairman, an assistant to the president, and a director of the investment department of Ruiqi Holdings Corporation. Prior to that, Ms.
Added
Liu received her bachelor’s degree in plant protection from Jilin Agricultural University in 2003 and master’s degree in plant protection from Fujian Agricultural and Forestry University in 2006. Dr. Liu graduated with a Ph.D. in environmental science from Chinese Academy of Sciences in 2010. Dr. Liu conducted her postdoctoral research at Tsinghua University. B.
Removed
Wu was an entrepreneur in the e-commerce industry from July 2014 to March 2018. Ms. Wu received a bachelor’s degree in business communication from Shanghai University of International Business and Economics in 2012 and a bachelor’s degree in business communication from University of Central Lancashire in 2013. Ms. Cindy Xiaofan Wang has served as our independent director since December 2023.
Added
(3) Represents 50,000,000 Class B ordinary shares directly held by June Rain Max Limited, a British Virgin Islands company, which is owned as to 99% by June Rain Sunstar Limited as non-voting shares and 1% by June Rain Limited as voting shares.
Removed
Fengyi Bie has served as our vice president since January 2018, responsible for sales to our enterprise customers, and as our director from May 2022 to December 2023. Mr.
Added
As of March 31, 2025, 294,577,080 of such shares had been converted into ADSs, each representing 35 Class A ordinary shares, and the remaining Class A ordinary shares are held in the form of ordinary share. (5) Represents 526,845,143 Class A ordinary shares held by Tencent Mobility Limited.
Removed
Bie also currently serves as a general manager at Shanghai Hangli Industrial Co., Ltd., one of the subsidiaries of ZKH Supply Industrial, where he is responsible for daily business operations and management. Prior to that, Mr.
Added
As of March 31, 2025, 526,845,130 of such shares had been converted into ADSs, each representing 35 Class A ordinary shares, and the remaining Class A ordinary shares are held in the form of ordinary share.
Removed
Bie served multiple positions in 3M China Ltd. from April 2005 to December 2017, with the last position held as a senior sales general manager. Mr. Bie received a bachelor’s degree in mechatronics from Zhengzhou University in 2002 and a master’s degree in business management from Business School Netherlands in 2018. Mr.
Added
As of March 31, 2025, 396,849,565 of such shares had been converted into ADSs, each representing 35 Class A ordinary shares, and the remaining Class A ordinary shares are held in the form of ordinary share.
Removed
Chun Chiu Lai has served as our chief financial officer since February 2022. Prior to joining us, from April 2014 to June 2021, Mr.
Added
As of March 31, 2025, 290,178,455 of such shares had been converted into ADSs, each representing 35 Class A ordinary shares, and the remaining Class A ordinary shares are held in the form of ordinary share.
Removed
Employees We had a total of 4,661 full time employees as of December 31, 2021, 3,956 full time employees as of December 31, 2022 and 3,476 full time employees as of December 31, 2023.
Added
Foreign citizens and companies will have the same rights as PRC citizens and companies in an action unless the home jurisdiction of such foreign citizens or companies restricts the rights of PRC citizens and companies.
Removed
In addition to full time employees discussed above, we supplement our workforce with workers sourced through third party staffing agencies to support our fulfillment and IT functions. We received services from 337, 209 and 178 these workers as of December 31, 2021, 2022 and 2023, respectively.
Removed
We also track the number of effective headcount as an indicator of our workforce productivity.
Removed
Box 71, Road Town, Tortola, VG1110, British Virgin Islands.
Removed
However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the United States courts under civil liability provisions of the securities laws if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature.

Other ZKH 10-K year-over-year comparisons