Ladies and gentlemen, thank you for standing by and welcome to the Kanzhun Limited Second Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am..

Thank you, operator. Good evening, and good morning, everyone. Welcome to our second quarter 2024 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao; and our Director and CFO, Mr. Phil Yu Zhang.

Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different.

The company cautions you not to place undue reliance on forward-looking statements and do not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only.

For definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, webcast replay this conference call will be available on our website at ir.zhipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman, and CEO..

[Foreign Language]. Hello everyone. Thank you for joining our company's second quarter 2024 earnings conference call. [Foreign Language]. I will start with our financial numbers. In the second quarter, the company achieved calculated cash billings of RMB1.95 billion, up 20% year on year. Our GAAP revenue reached RMB1.92 billion, up 29% year on year.

We recorded a net profit of RMB420 million. Meanwhile, our adjusted net income, which excludes share based compensation expenses, rose to RMB720 million, up 26% year on year. In the second quarter, the average verified MAU on the BOSS Zhipin app grew by 25% year on year to 54.6 million.

From January to June this year, the company attracted around 28 million newly added verified users. The total paid enterprise customers in the 12 months ended June 30, 2024, reached 5.9 million, representing 31% year-on-year growth. [Foreign language]. Our cash bookings in the second quarter still have a decent year-on-year growth.

However, weaker on a quarter on quarter basis and, and a little bit lower than our expectation. This was mainly due to weaker demand from the recruitment side in the later half of the second quarter. There were relatively fewer enterprise users and more job seekers in the market, which is what we refer to as a high CB ratio.

In this case, most enterprise users found it easier to hire for example, a project team that took three months to fill all the positions in the past now only takes two months reducing enterprise users desire to spend more money on recruitment. [Foreign language]. We noticed that the growth trend of enterprise users is still good. There are two proofs.

First, in the second quarter, the number of newly added enterprise users was higher than that of the same period last year. Second, the average monthly active user of enterprise users increased by 17% year on year. Investors who have long been following us know that user growth is the core growth driver for our revenue growth.

We still have a good growth of enterprise users in the second quarter. This is the good news for the company. [Foreign language]. We believe the second quarter performance is a temporary situation. Long-term structural growth opportunities remain strong. Our confidence is grounded in three factors.

First, the Chinese market is a huge economy with the highest small and medium-sized enterprise activities and the largest number of enterprises. Second, there is a persistent shortage of labor supply, particularly among younger generations, which is unlikely to change in the near future.

Third, our efficient service model is best suited to address the challenges presented by the first two factors. [Foreign language]. On the current situation the company's management team believe we should do what is best suited for the moment. Today, I'll talk about three things. [Foreign Language].

The first thing is to ensure the full-year profit target. During challenging times, confidence is crucial for everyone, no matter co-investors, co-employees, or potential investors, and the prospective talent.

In tough times, confidence is more valuable than growth, ensuring profitability for the year will help to sustain confidence in the company, which can be achieved through further refinement of our management. [Foreign Language]. The second thing is to invest more resources on new growth driver.

For example, in the blue-collar manufacturing industry, there may be some new dollars. [Foreign Language]. To briefly review the blue-collar manufacturing industry, we had talked before. The background is the complex relationship between factories, workers, platforms, and agents.

In addition to many historical issues, have made it challenging for online platforms to serve the blue-collar manufacturing industry. [Foreign Language]. The history is, three years ago, we started by purifying the job-seeking and recruitment environment through what we call the coach [ph] project hard work [Indiscernible].

The intuition of this initiative has two. First is to protect the overall pro job seeking process of the job seeker. Second was to help blue-collar agents and organizations make money recently. [Foreign Language].

The current situation is after a tough game, the longstanding issue of bad or low-quality agents driving out good ones across online recruitment platform is beginning to improve. This positive shift has already happened.

Good guys who commit to job seekers with integrity, posting authentic job details and salary information, and now receiving better results, we have named agents as platform-certified country select. [Foreign Language].

The latest data is our core select project generated over RMB40 million in revenue in the second quarter, which is much higher than that in the first quarter. This good science makes me feel that our strategy and the persistence in the few years [Indiscernible]. [Foreign Language]. The third thing is our overseas business.

As we all know, economies are cyclical and this economy cycles are often out of sync across different countries and regions. Large companies with a strong global presence can effectively utilize this regional big shift to support sustainable growth. In particular, fostering has pioneered our current model globally.

This model is very likely to provide value and gain space for survival and the development in various regional market through localization, hybridization, and evolution. While we're seeing promising progress in Europe and Asia, it's still too early to report results. [Foreign Language].

Last but not least, it's important to address confidence again particularly in terms of strengthening the returns for our shareholders who have constantly supported us since our IPO. For example, we'll continue to increase our share payback efforts. We have bought over US$88 million we purchased in the past four months.

This all will help to reinforce the valuable confidence of our shareholders and management [Foreign Language]. That concludes my part of the call. I'll now turn it over to our CFO, Phil for the overview of our financial. Thank you..

Thanks, Jonathan. Hello, everyone. Now let me walk you through the details of our financial results of the second quarter of 2024. In this quarter, we delivered healthy and a sustainable top-line and bottom-line growth.

Calculated cash billings and the revenues grew by 20% and the 29% year on year respectively, mainly driven by the growth of our enterprise users average monthly active enterprise users in the quarter grew by 17% year on year.

We continued to penetrate into different categories of users, especially in blue-collar sectors, small, medium-sized enterprises, and users from lower-tier cities. As a result, revenue contributions from those sectors continue to increase. Paid enterprise customers in the 12-month ended June 30, 2024 increased by 31% year on year to 5.9 million.

The paying ratio was higher than last year, but sequentially kept stable. We are happy to see that ARPPU average paying per paying user of paid users increased around 3% year on year and 3% sequentially reaching the highest level in the past four quarters.

Part of the reason was that revenue from key accounts out grew small and middle-sized accounts, but more importantly, was our effort to increase client usage by offering high quality and targeted products and services.

Moving to the cost and expensive side, excluding share-based compensations, adjusted operating cost and expenses increased by 20% year on year to RMB1.3 billion, and that led to an adjusted operating profit of RMB660 million in the quarter, up 52% year on year.

Adjusted operating margin reached a 34.4%, up by 5.3 percentage points compared to the same quarter of last year, and a hit an all-time high. Cost of revenues increased by 17%, year on year to RMB317 million, in this quarter representing a gross margin of 83.5% continued its upward trend.

Sales and marketing expenses increased by 16% year on year to RMB545 million in this quarter. This increase was mainly driven by our enhanced investment in customer acquisition, as well as higher sales commissions. R&D expenses increased by 21% year on year to RMB444 million in this quarter.

Excluding share-based compensations expenses, adjusted R&D expenses increased by 28% year on year to RMB334 million. This increase was primarily driven by our earlier investments in AI infrastructure, which generated a higher depreciation cost. Our G&A expenses increased by 29% year-on-year to RMB261 million in this quarter.

Adjusted G&A expenses increased by 21% year-on-year to RMB153 million, mainly due to increased employee-related expenses. Our net income was RMB417 million in this quarter up 35% year-on-year, and our adjusted net income in this quarter reached the RMB719 million and increased by 26% year-on-year.

We expect that our share-based compensation expenses reached the peak level in this quarter and will gradually decline in the coming quarters. We are now reviewing stock compensation scheme and studying some schemes which might even accelerate the process.

Net cash provided by the operating activities grew by 14% year-on-year to RMB869 million for this quarter. As of June 30th, 2024, our cash and cash equivalent, short-term time deposits and short- term investments totaled as RMB14.3 billion.

Notably, in the past four months, we have repurchased a total consideration of US$88 million, which demonstrated our commitment in shareholders return and long-term confident of our business. And now for our business outlook.

For the third quarter of 2024, we expect our total revenues to be between RMB1.9 billion, and RMB1.92 billion a year-on-year increase of 18.2% to 19.5%. That concludes our prepared remarks and the way we would like to answer questions. Operator, please go ahead with the queues..

[Operator Instructions]. Our first question comes from Timothy Zhao with Goldman Sachs. Your line is open..

[Foreign Language]. Thank you for taking my question. I have two questions here. The first is regarding your user growth and market share.

How does management team view the market share currently and in the adverse market environment currently? Are we considering to further accelerate the market share gain? And second, as we mentioned to ensure the full year profit this year, could management share what is your detailed measure and what is your OpEx, including the SPC trend for the rest of this year? Thank you..

[Foreign Language]. Thank you for your question. For the first one regarding competition, the current competitive landscape is relatively stable, or we rather say, we have relatively good competitive advantages, and there are many third-party data and our own data have to prove that. [Foreign Language].

For example, we just mentioned, our MAU and DAU all achieved a historical high in the second quarter. The user activities, for example, the DAU and MAU ratio still remain at a very high level.

So, in the same case for the user usage time, so all of those data prove that as a leading online recruitment platform every perspective, our competitive landscape is really stable and continued in a good trend. [Foreign Language]. And in terms of guaranteed a full year profit target.

So, we believe is very critical for our core employees, for our management to have this target. This is part of our competence and is a testify further this firm is very stable and strong. So, on a strategic perspective, the first way is our full-year user growth target is RMB40 million to RMB45 million.

And in the first six months, the first half of this year, we have already achieved RMB28 million. So, there are, only RMB12 million to RMB17 million left for us to grow. It should be relatively easy to achieve so we can control our overall spending on marketing to properly achieve our profit target.

Second, under current circumstances, we want to better use our resources and to move the priority of those project initiatives with lower success rate and higher target, to postpone it resource usage and prioritize the importance of reducing the overall cost.

And this can be achieved through internal management and with we believe this very high level of certainty in terms of detailed data I think Phil can give you some more color..

Regarding our bottom line and major cause and the expenses item, I’ll quickly mention our thoughts.

As Johnson just mentioned, we would like to try our best to secure our operating profit, the target, our target for full year of non-GAAP operating profit is set as RMB2.3 billion, which is roughly up 40% year over year, on top of the last year's adjusted non-GAAP adjusted operating profit.

So, in terms of our gross margin, our gross margin will in third quarter or following quarters, we'll stay flat or slightly improve due to higher economy of scale. And our marketing expenses, as Johnson mentioned will be controlled, and at relatively low level.

Our selling expenses and G&A expenses, those items all be moderate and in a reasonable situation. And in terms of the R&D expenses, because of, we probably will shift our priority from some like AI-related infrastructure investments into other things. So, from third quarter or from second half this part, the expenses will decrease.

So altogether our operating margin will increase second half and versus the full year operating margin versus last year will also be better. Thank you..

[Foreign Language]. For the market share, which a lot of investors are concerned and asked a lot about. We actually after experiencing the years past, we notice that on the current situation, every dollar we spend there will be more job seekers and less enterprise users.

The CPU [ph] ratio is currently is a challenge for the platforms who is based on the supply and demand balance of both sides. So, from this perspective, to keep the balanced civil ratio, we actually, we don't need to spend money too aggressively and that's my view to share.

In addition to increase the dollar market share on the enterprise user side, currently, the overall paying desire of the enterprise are not that strong. The best and most effective way to enlarge our enterprise market share is to start a price wall.

And currently it is a tough, it's a time to do that, but I'm not planning to take even more shares by lowering our price. I don't think this is a meaningful thing to do at current situation. And that's my view to share. Thank you, operator. Let's move on to the next question..

Thank you. Our next question comes from Eddy Wang with Morgan Stanley. Your line is open..

[Foreign Language]. Thank you, management, for taking my question.

We understand that the macro situation seems second quarter has been relatively weak, so just want to hear your view that have you witnessed any improvement in the recruitment demand in August versus June and July? And how's the performance of different industries and different the enterprise of different skills? And the second question is, if the micro continues to be relatively weak will we have any change in the business strategy to offset the macro impact?.

[Foreign Language]. First, we cannot talk about the macro, but we can share with our own situation, which we observed from our website and app. First one is, in the second quarter, the overall willingness to pay from recruit recruiters are lowering. And secondly, the blue-collar growth is still white collar that why it’s still fits. [Foreign Language].

And let's further look into blue-collar. There are several observations we can share with you. The first observation is that the overall blue-collar recruitment demand reached peak historically high in the spring festival recruitment season, but just fall back relatively faster in the second quarter. [Foreign Language].

Even relatively factor pullback in second quarter, we still see a very good year-over-year growth in terms of the blue-collar revenue in the second quarter. And among the detailed sub-sectors, there is one highlight, which is, uh, the factory industry continues to outperform all other industries. And after that is logistics sector. [Foreign language].

And there are also other two observations worth sharing. First, compared to the first-tier cities, the recruiter’s enterprise user growth is better and faster in the second, third, fourth-tier cities.

And the second one is, there is a continued trend, which we have already discussed in the last quarter results that to the larger size of the enterprise grow better. For example, big enterprise with over 10,000 employees, at the companies with the fastest or the faster growth rate. [Foreign language].

And about recent situation in August, we'll continue to talk about blue-collar. So blue-collar the overall supply and demand situation in August is better than the second quarter. And the enterprise-to-job seeker ratio continued to see improvement. And we observed the daily active enterprise user number continue to go up week by week.

And the manufacturing industries are still the best among all others. [Foreign Language].

And the second question about what kind of monetization strategy we can use to against the macro headwinds, the things we are currently doing first is to concentrate our resources to the business and department, which we -- because faster outlook -- longer outlook, we give limiter to.

For example, on the blue-collar manufacturing industry, we from [Indiscernible] project to contract and to generate revenues, we are currently enhancing our investment and input on this area. [Foreign Language].

I cannot be so very certain to say that the [Indiscernible] project will have very big revenue from our corporation with blue collar manufacturing industry in the third and fourth quarter of this year.

But we believe this is the first real chance actual change for the online recruitment platform to go into the blue-collar manufacturing industry and make some real money. And that's my answer to your question..

Our next question comes from Robin Zhu with Bernstein. Your line is open..

[Foreign Language]. So, I have two questions. One, would management elaborate on recent developments in the company with regards to the WD acquisition. If management could give us more color on over the seas and investments in AI.

And second, given the weakness in the company's shares in recent times, could management share some thoughts on go-forward buybacks. And whether the company will consider instituting a regular dividend. Thank you..

[Foreign Language]. Thank you for your question. The first question was the over WD technology, I have mentioned that conference call before and because the Jason the CEO is a very respectful peers of ours and the reception in 2015 until now. And they be able to become the number one in their own areas.

So, to purchase the majority of the shareholder stake of WD technology is out of the recognition and the respect of Jason and his team work in this area. And it's not just us for expansion into the area is more likely to add ourselves with some capabilities, which is difficult for we to develop ourselves. [Foreign Language].

Jason and his team we fully recognize his knowledge and the industry actually has fully recognized their knowledge knowhow and model in the manufacturing industry. And currently, he's working with us for three things. First of all, they are fully independently to lead the development of capabilities. [Foreign Language].

And the second thing is to help the company to push forward the overall environment improvement under the couch project and the monetization, the commercial project -- commercial plan under the com select [ph] project. [Foreign Language].

And the third one, which is not simple to discuss more details publicly at this moment is that Jason is currently leading the operational team of WD technology and part of our R&D team together combine the advantages of our traffic and their experience and the know-how in industry to combine together to publish new product or service, which we were rather looking forward to that, but maybe in the next quarter.

[Foreign Language]. And for our overseas business, first for our Hong Kong initiatives, we have made some progress and have initially achieved -- published MEP service to serve quarter in Hong Kong and see how the users might react behave on our platform.

This might take 2 months to 3 months, and then we will decide whether we can accelerate the development of this business. And in terms of the revenue, which a decent revenue from Hong Kong business, I think it's a little bit early, maybe more than the next 2 years to 3 years.

And in the Asia and Europe area, we -- and some developed countries, we have take quite a long time to [indiscernible]. And the account date, what I can say is that I'm satisfied with the local team we have recruited, and we are confident. [Foreign Language]. And the third one regarding the generative AI.

I have shared some of our thoughts before and maybe some as a mood here. So, there are two points. First, in a scientific perspective, we are excluding a tail light project, which is for our research guys, our tech guys to understand to know what the most developed technology in this area is and what they are doing.

But we are not planning to invest more resources. Actually, we can -- we're not affordable to do that to actually do that. So, we just know what they are doing and kept up with the most advanced technology. [Foreign Language].

On the application level, so our strategy is still are if something are not happening before the emerge of generative AI technologies, then we give priority to that. So, under that strategy, we have some good application in the industry level. So, we are using it internally now. [Foreign Language].

And about the shareholder returns, we have long been insisted on providing shareholder return to our shareholders, which I believe is a basic asset for the company, and we always attach good importance to that.

So, which -- because it is a very true problem -- we are a crucial point for the core shareholders and the employees to maintain our strong confidence. So, it's very essential and important to do a good shareholder return project. So, we have $200 million share buyback program and in the last 4 months, we have already bought $88 million.

This is a real number, and we act we have done for our size of -- for a company of our size, and we will continue to do that. [Foreign Language]. And about the data, I can say that for a potential dividend pay plan, we are still start on the research. And that's my answer to your question.

And given the time constraints, I think that's the last question for call operator..

Thank you. Due time constraints, that concludes today's question-and-answer session. At this time, I will turn the conference back to Wenbei for any additional or closing remarks..

Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or zhipin [ph] Net Relations. Thank you..

Thank you. You may now disconnect. Good day..