Ladies and gentlemen, thank you for standing by, and welcome to the Kanzhun Limited First Quarter 2022 Financial Results Conference Call. At this time, all participants are in 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. Wen Bei Wang, Head of Investor Relations. Please go ahead, ma'am..

Thank you, operator. Good evening and good morning everyone. Welcome to our first quarter 2022 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 purpose only.

For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of 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] [Interpreted] Hello, everyone. Welcome to our first quarter 2022 earnings conference call. First of all, on behalf of the company, I would like to express our sincere gratitude to our users and investors for your ongoing trust and support. In the first quarter of 2022, we achieved a solid performance.

The company recorded GAAP revenue of RMB1.14 billion, with a year-on-year growth of 44%. Our adjusted net income, excluding share-based compensation expenses, reached RMB120 million. We saw sustained profitability in the first quarter, when typically the highest level of expenses are booked throughout the year.

In the first quarter this year, without any new user registration, solely relying on the existing users, our average DAU increased by 8.2% year-over-year, with peak DAU reached 9.7 million, surpassing that for the same period of last year. Our average MAU reached 25.23 million, with a year-on-year increase of 1.3%.

To further talk about our user's activeness, the point is, our DAU to MAU ratio continued its encouraging growth trend.

Another important observation is that, for both job seekers and enterprise users in this quarter, their average achievements per MAU, which is the average numbers of TAM of mutual consent on content formation exchanged with the counterparty in the first quarter, increased by more than 20% year-over-year.

In the past several earnings calls, we have several times promised to you that we will better serve our existing users. In today's call, the 20% year-on-year growth in achievements per MAU is a solid proof of our unremitting commitment.

The improvements of the above-mentioned operating data, mainly coming from the increasing investment in technologies and products, cultivation of the in-depth user demand and the concentration on serving the existing users. Taking this chance, I'm truly grateful to our product and R&D teams who have created value and solved problems.

We made solid progress in developing more targeted and comprehensive services to diversify the user groups. I will elaborate it from two perspectives. First of all, in terms of blue-collar, we are talking about the manufacturing industry. It is encouraging to see that Hello [ph] project has been progressing well.

Hello project is a campaign specifically undertaken to provide blue-collar workers in the manufacturing industry. This credible job position and a safe job-seeking experience, as well as to eventually establish an assessment and a verification system in line with the blue-collar recruitment ecosystem.

The number of blue-collar intermediary agencies and enterprises, who have signed up info to our platform's requirements of information authenticity and integrity, increased exponentially since the beginning of this year. The second group of users is a high-income white-collar and gold-collar users.

Our headhunter consultant brand, [indiscernible], established for more than one year also made remarkable progresses. This [indiscernible] brand, we have been working on for almost two years and we think it is time to tell you some progress. Let me share three numbers with you.

For headhunter enterprises, thousands of them have accepted and agreed to our user protection rules and signed cooperation agreement with us. The second number is headhunter consultants. There are tens of thousands of monthly active headhunters working on our platform.

The third number is the high-income white-collar and gold-collar users, the above mentioned headhunter consultants are serving. For jobs seekers of this kind, our platform is providing services to more than millions of targeted users each month.

Next, I would like to share some information about the pandemic's impact that everyone has been very concerned about. Since mid-March, the resurgence of COVID-19 across major cities, we have also witnessed the decline in the overall recruitment demands.

The number of active enterprise users and job postings plummeted in the cities and areas with severe outbreaks. From the revenue perspective, Shanghai and Beijing are both important contributor to our revenues. From April to May, cash revenues in Shanghai dropped by more than 50% year-over-year.

Beijing was also significantly impacted since May, which has made -- generated a certain amount of pressure on our business in the second quarter. However, our operating data shows that the impact is relatively short lived. Overall, our observation is that, the impact of pandemic can recover rapidly.

For example, in the earlier cities which have been affected like Shenzhen, [indiscernible] and other cities, our revenue can return to almost the same level as of prior to the outbreak within two to four weeks once the situation were under control.

Since the beginning of June, the impact of the pandemic in Shanghai has been eased and we have seen operating data recovered to 80% of the pre-pandemic level two weeks later. And as of now, Beijing has also shown significant recovery, such as for the urban service industry, our operating data has shown a clear rebound.

Everybody knows that the current employment situation is quite challenging. As one of the major recruitment platforms we are proactively responding. Our major actions can be demonstrated from the perspective of enterprise users and job seekers.

For enterprise users, we provide a subsidy to cities and industries, which have been severely affected by the outbreak. For example, since March we have opened over tens of thousands of job postings on our platform free of charge in seven cities.

For job seekers, especially the fresh graduates, we held a spirit of true recruitment festival for six weeks. Together, with nearly 1,000 enterprises, we have been providing tens of thousands of additional job openings for college students. One more thing to add, we announced a repurchase program in March.

Since then, we have executed this program in a reasonable price range, which have been reflecting our confidence in the sustainable development of our business and our commitments to delivering long-term value for our shareholders. With that, I will turn to our CFO, Phil, for the review of our financials. Thank you..

Thanks, Jonathan. Hello, everyone. Thank you for joining our earnings call today. Before I begin, please note that all amounts are in RMB and all comparisons are on a year-over-year basis unless otherwise stated.

Despite the continued suspension of new user registrations, our solid financial performance in this quarter once again demonstrated our model resilience and the sustainability. In this quarter, our total revenues increased by 44% to RMB1.14 billion, beating the high end of our guidance range.

Our calculated cash billings reached RMB1.29 billion in the quarter. Facing various macro uncertainties, we have been further focusing on providing better services to our users, which we believe will deliver increasing values in the long-term.

Continuing to benefit from sustainable growth of our user base, our paid enterprise customers for the 12 months ended March 31, 2022 grew steadily to 4.1 million. Moving on to the cost side. Total operating costs and expenses for the first quarter increased by 18% year-over-year to RMB1.15 billion.

Excluding share-based compensation, total operating costs and expenses increased by 10% year-over-year to RMB1.01 billion in the quarter.

Our cost of revenues expanded by 66% to RMB177 million this quarter, mainly driven by the increase to headcounts, especially security-related staff as we continued to improve our platforms security capabilities, as well as the higher server and bandwidth costs caused by the increased user traffic.

Sales and the marketing expenses were RMB522 million in the quarter, representing a year-over-year decrease of 16%. Again, the high base last year -- against the high base last year, such decrease was mainly due to the reduced marketing activities during the new user registration suspension period.

However, as the spring festival is the trademark -- spring festival is the traditional peak season for the recruiting, we undertook our marketing campaign to sponsor the Beijing Winter Olympics and Paralympic event, leading to higher brand related sales and marketing expenses quarter-over-quarter.

We believe this investment will help enhance our brand recognition and benefit us in the long run. Research and development expenses increased by 77% year-over-year to RMB291 million in the quarter. And the general and administrative expenses increased by 91% to RMB156 million.

The increases were primarily due to the increase of personnel costs, reflecting our commitment to strengthen our core competitiveness in technology. Our net loss for this quarter was RMB12 million compared with net loss of RMB176 million for the same period last year.

Excluding share-based compensations, our adjusted net income for the quarter was RMB121 million, compared with an adjusted net loss of RMB128 million in the same period last year, representing an adjusted net margin of 11%.

Normally, first quarter every year is seasonally low for margin due to increased marketing and advertising activities around spring festival where we will see improved margin in the coming quarters. Our net cash generated from operating activities was RMB294 million for the first quarter of 2022.

As of March 31, 2022, our cash, cash equivalents and short-term investments totaled RMB12.4 billion. We believe this healthy cash reserves and a sustainable operating cash flows will provide us with a solid foundation for the long-term growth and generate sustainable returns for our shareholders.

And now, for our business outlook, as Jonathan has just mentioned, the resurgence of the COVID-19 in many cities since late March and the responding control measures have adversely affected business activities resulting to declined recruitment needs and impacted our business for the second quarter in short term.

With regards to this, we expect our total revenues for the second quarter to be between RMB1.09 billion and RMB1.1 billion, representing a year-on-year decrease of approximately 6.7% to 5.8%. However, we believe the impact is temporary.

As we have witnessed a rapid recovery rates in previously affected cities, we are optimistic and confident in our business development in the long run, which is underpinned by our effective and resilient business model, massive and stable user base as well as continually improving user experience. That concludes our prepared remarks.

Now, we would like to answer questions. Operator, please go ahead..

Thank you. [Operator Instructions] Our first question from Eddy Wang with Morgan Stanley. Your line is open..

[Foreign Language] Thank you, management for taking my question. My first question is about the manufacturing blue-collar recruitment. You have launched Hello plan for quite a long time. So we also noticed that the other platform even including some of the live-streaming platform, they also initiated a new business of the blue collar recruitment.

So, just want to hear your thoughts on what's the real pain point in the blue collar on our recruitment sector.

Is it because of the not a lot of platform there, they are trying to during the difficult process of - to verify the real positions, postings, as well as verify of the enterprise? Or is there any other pain point to stop this blue collar on our recruitment, on our penetration to be sustainable to be low in the past few years? The second question is about the competition.

I think we have been suspended for new user registration for almost one year. At the same time, I think a lot of peers, they have been able to spend a lot of sales and marketing to acquire new job seekers. But at the same time, when they started, their revenue growth actually is substantially lower than BOSS Zhipin.

So just want to know did they have almost one year to attract more of the enterprise users, but seems that the results are not so far is not so good.

What's the differentiation so far, can you tell the difference between BOSS Zhipin and the other online platform? And how they cannot able to increase that many enterprise users during the one year we are not able to increase new users? Thank you..

[Foreign Language] [Interpreted] First of all, thank you for your question. For your first question about the blue-collar manufacturing industry, I would like to expand it by two words and one number.

The true words are comprehensive or complicated and firm and the one number is firm, which should -- I need to give you this number should further elaborate. So the four means there are four parties. The first one is in terms of agencies, the second one is factory, the third one is platform and the fourth one is workers.

For a long time, the four party have been making this thing very, very complicated. You should know there is a very famous Chinese novel Three Body, which they have presented a very difficult math questions.

Well, there are three -- were three planets that are spinning around each other is quite difficult to sort out and we are facing a problem with [Four Bodies] (ph), which is even more difficult. I have thought for long-term on how to solving this problem and I know how to do that.

So, the important thing is to find out who is the most important party in the four groups and it is the workers and we need to do everything around this -- around workers. For Internet platforms to stand together with workers, which is very naturally and is what we have been saying to put our users at first.

With lack of newly increased young employees, it will be more and more difficult for the factory to recruit workers. And in the future, they will place the workers as the most important thing. When both platforms and factories choose to stand together with workers, there is nothing -- there is no other way left for the intermediaries.

As I have just introduced, all those intermediaries who have agreed to our rules and requirements and fully signed up with our platform have been growing exponentially since earlier this year. By finding the keyword of workers, I believe this problem can be solved in short-term. That's answer for your first question. And for your second question.

You mentioned the word about user growth. I have long been believed that the retention -- user retention is a key for growth. You can pay money to acquire new users, but it is not everything. So regarding the competitive landscape, my observation is nothing has been changed. And that's my answers..

Our next question from Timothy Zhao with Goldman Sachs. Your line is open..

[Foreign Language] Thank you management for taking my question. I have two quick questions. First one is considering the impact of the COVID resurgence and also the weaker macro in the second quarter.

What is the latest trend in terms of the paying ratio and ARPU on the platform and how does that compare to the previous quarters? Are you sort of considering that we have over 80% small and medium enterprise users on the platform? What is their trend in terms of paying ratio and ARPU, especially for those under the impact of the COVID resurgence? And secondly is about the new business -- as we introduced business related to the high income white-collar and blue -- and gold-collar users including the [indiscernible] brand, could management share any outlook for this part of the business and what is our differentiation versus competitors? And what kind of the revenue or margin outlook that we should have for this part of business? Thank you..

Okay, thank you. I would like to answer the first question. So, overall, during the pandemic and weak macro conditions, we continued to see healthy operating metrics. And regarding the overall paying ratio and ARPU, those numbers also maintained at a stable situation as a whole.

I think the pandemic and macro impact mainly reflected at total number of active enterprise users. We see some like declining trend during the pandemic stage. So, compared with large enterprises, smaller enterprises, they see stronger impact during the pandemic.

But we think the overall, the total number of small enterprises, small and medium-sized enterprises are huge and they are quite resilient in the economy.

So we expect that overall the SME they will see recover backed by the better macro conditions in upcoming, probably like weeks or months, and we have already witnessed such kind of the signs -- early signs.

And in terms of their margin -- sorry, their like paying ratio and ARPU, like the large enterprises, their paying ratio and ARPU are also in a stable situation, so there like impact mainly due to the number -- total number of active – like smaller number of active enterprises from small medium-sized segment. So that's the situation..

[Foreign Language] [Interpreted] And for your second question regarding the development of our gold-collar business, during past two years of development, we have been now increasing our efforts in this area.

So through this [indiscernible] brand we have established a very good and healthy ecosystem for the headhunter enterprises to headhunter consultant and gold-collar users. So currently we have over 3,000 contracted headhunter enterprises, tens of thousands of active headhunters and more than 1 million active high-end users.

We can say that as of today, BOSS Zhipin has established a user ecosystem surrounding gold-collar users and headhunter consultant. Looking back to our own ecosystem development process, we truly believe that with higher efficiency and higher value proposition to our users. We should have a better chance to explore a proper monetization model.

Thank you..

Our next line comes from Wei Xiong with UBS. Your line is open..

[Foreign Language] Thank you management for taking my questions. First, I want to follow up on the macro impact on our business.

Could management maybe help to quantify the macro pressure we have seen on the second quarter revenue outlook? And also given the current macro trends, how should we think about the business growth in the second half of the year? And second, just to revisit the topic of competition from a different angle, we have talked about other online recruitment platforms may have stepped up their marketing spend over the past year.

So how could this affect our marketing or user acquisition strategy going forward? Any implication that might have on our margins. Thank you..

Okay, so I'd like to answer the first question and Jonathan will reply you for the second part. And so, basically regarding our like impact -- financial impact from the pandemic, we think that pandemic and weak macro, as I just mentioned, have some material impact into our business.

It's reflected as most of the businesses during the pandemic and during the weaker macro like conditions, they reduced their business activities and they reduced their recruiting -- like recruiting as well.

So we did some analysis and the number shows that pandemic and weak macro totally had around like 10% to 15% to our overall revenue in the second quarter of this year.

So, this is pretty much the overall impact in the second quarter and we think that given we have seen some early signs of recovery in early June, we think that day-by-day we have witnessed some improving situation. So we think that upcoming third quarter things could improve. So, we think that will support our business recovery as well.

So Jonathan can give you some color regarding the industry like view towards the overall recruiting markets demand..

[Foreign Language] [Interpreted] Okay. I will say three numbers. First one is for the first two weeks of June our DAU increased by 10% month-over-month, which we have been in this rapid recovery.

And the second number is 100, in July for those enterprises has less than 100% we have seen that their recovery speed is much faster than the rest of enterprises.

And the third number is for the first half of June compared to the latter half of March, where it is traditional peak season, the urban service intensive industry -- within the urban service industry, the newly posted jobs is 104% compared to the latter half of March.

From those three numbers, we believe that our customers, including big enterprises and SMEs, they are quite resilient and have a very strong power to recovery. I will add to Phil's answers with these three numbers..

And also regarding the question related to the margin, so as I just mentioned in the prepared remark that first quarter due to seasonality reason it was with a lower margin in upcoming quarters we would like to see improved situation.

But having said that, because of second quarter is already seeing some like impact from the COVID pandemic, so the margins improving -- they will be improving, but might not be as high as third quarter last year and fourth quarter last year.

Overall for the margin of 2022, we think that we should be able to maintain our previously view regarding the yearly margin. So pretty much as close to 20% to our total revenue for the whole year. So we still believe this is the situation.

And I think for comparison reason, I probably need to update one number, which I gave during last earning earnings call. So that is the failed registration -- like a total number of failed registrations. So by the end of May 31, the total number of failed registration was 46 million..

And that's our answer to your question. Thank you so much..

Very clear. Thank you..

Due to time constraints, that concludes today's question-and-answer session. At this time, I will turn the conference back to Wen Bei, 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 TPG Investor Relations. Thank you..

This concludes today’s conference call. Thank you for participating, you may now disconnect..