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 purposes 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.

Hello, everyone. Welcome to our first quarter 2022 earnings conference call. First of all, I want to thank our users and investors for your ongoing trust and support. In the first quarter of 2022, we had a solid performance, recording GAAP revenue of RMB1.14 billion, representing a 44% year-on-year growth. Our adjusted net income, excluding share-based compensation expenses, reached RMB120 million. We maintained profitability in the first quarter, typically the period when expenses peak throughout the year. Despite no new user registrations, our average daily active users (DAU) increased by 8.2% year-over-year, with peak DAU hitting 9.7 million, surpassing last year's figures. Our average monthly active users (MAU) reached 25.23 million, up 1.3% from the previous year. Furthermore, our DAU to MAU ratio showed a continued encouraging growth trend. Another notable point is that both job seekers and enterprise users saw their average achievements per MAU, which reflects mutual consent on content formation, increase by over 20% year-over-year in this quarter. This 20% year-on-year growth in achievements per MAU showcases our commitment to better serving existing users. The improvements in our operating data stem from increased investment in technology and products, understanding user needs, and focusing on existing users. I am thankful to our product and R&D teams for their efforts in creating value and solving problems. We have made progress in developing targeted services to diversify our user groups. Regarding blue-collar workers in the manufacturing sector, our Hello project has been progressing well. This initiative aims to provide credible job positions and a safe job-seeking experience for blue-collar workers while establishing an assessment system aligned with the recruitment ecosystem. We have seen a substantial increase in the number of blue-collar agencies and enterprises meeting our authenticity requirements this year. For high-income white-collar and gold-collar users, our headhunter consultant brand has made significant strides. Thousands of headhunter enterprises have agreed to our user protection rules, and there are tens of thousands of active headhunters utilizing our platform every month. We are currently serving millions of targeted high-income job seekers each month. Now, regarding the pandemic impact, since mid-March, the resurgence of COVID-19 in major cities has led to decreased recruitment demands, with active enterprise users and job postings falling sharply in severely affected areas. Specifically, cash revenues in Shanghai decreased by more than 50% year-over-year from April to May, while Beijing also faced significant challenges. However, our data indicates that this impact has been short-lived, with rapid recovery observed in previously affected cities like Shenzhen. For instance, when conditions stabilize, our revenue can bounce back to almost pre-outbreak levels within two to four weeks. By early June, the situation in Shanghai had improved, and our operating data had recovered to 80% of pre-pandemic levels shortly thereafter. Beijing is also showing a clear rebound. As the employment landscape is challenging, we are actively responding. We have provided subsidies to cities and industries significantly impacted by the outbreak. Since March, we have opened tens of thousands of job postings free of charge in seven cities. Additionally, we hosted a recruitment festival focused on fresh graduates, partnering with nearly 1,000 enterprises to offer tens of thousands of job openings for college students. Moreover, we announced a share repurchase program in March, which we have been executing to reflect our confidence in our business's sustainable development and our commitment to providing long-term value for our shareholders. Now, I will turn the call over to our CFO, Phil, to review 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 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 value 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 in headcounts, especially security-related staff as we continued to improve our platform's security capabilities, as well as the higher server and bandwidth costs caused by the increased user traffic. Sales and marketing expenses were RMB522 million in the quarter, representing a year-over-year decrease of 16%. Again, this decrease was mainly due to the reduced marketing activities during the new user registration suspension period. However, as the spring festival is the traditional peak season for 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. General and administrative expenses increased by 91% to RMB156 million, with the increases 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 a 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, the first quarter every year is seasonally low for margin due to increased marketing and advertising activities around the spring festival, where we will see improved margins 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 reserve and sustainable operating cash flows will provide us with a solid foundation for long-term growth and generate sustainable returns for our shareholders. Now, for our business outlook, as Jonathan has just mentioned, the resurgence of COVID-19 in many cities since late March and the responding control measures have adversely affected business activities resulting in declined recruitment needs and impacted our business for the second quarter in the 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 rate 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. Our first question is from Eddy Wang with Morgan Stanley. Your line is open.

Thank you, management, for addressing my question. My first question is about the recruitment of blue-collar workers. The Hello plan has been in place for some time now, and we've observed that other platforms, including some live-streaming services, have started blue-collar recruitment businesses as well. I'd like to understand your perspective on the main challenges in blue-collar recruitment. Is it due to the limited number of platforms and the difficulties in verifying job postings and employers? Or are there other significant obstacles preventing blue-collar recruitment from becoming more effective and sustainable over the last few years? My second question concerns competition. It's been nearly a year since we suspended new user registrations, while many competitors have actively invested in sales and marketing to attract new job seekers. Despite this, their revenue growth has remained significantly lower than that of BOSS Zhipin. I'd like to know the differences between BOSS Zhipin and these other online platforms, especially since they have had nearly a year to gain more enterprise users, but have not achieved strong results. Thank you.

First of all, thank you for your question. Regarding the blue-collar manufacturing industry, I would like to expand that by two words and one number. The two words are 'comprehensive' or 'complicated' and 'firm', and the one number is 'four', which I need to elaborate on. The 'four' refers to four parties involved: agencies, factories, the platform, and workers. These four parties have made the situation quite complex for a long time. There is a well-known Chinese novel, Three Body, that depicts a challenging mathematical problem with three planets spinning around each other, which is difficult to sort out. We are facing a problem with four bodies, which is even more complicated. After much thought, I believe I have found a solution. The key is to identify the most important party among these four groups, which is the workers, and we must focus our efforts around them. It is natural for internet platforms to align with workers, which reinforces our commitment to putting our users first. With the decline in the number of new young employees, it will increasingly become a challenge for factories to recruit workers, making them prioritize workers first in the future. When platforms and factories unite with workers, intermediaries will have no choice but to adapt. As I mentioned, all intermediaries that have agreed to our rules and fully committed to our platform have been growing rapidly since the beginning of this year. By prioritizing workers, I believe we can resolve the issue in the short term. That's the answer to your first question. For your second question about user growth, I've long believed that user retention is vital for growth. While you can invest in acquiring new users, that alone isn't enough. In terms of the competitive landscape, I observe that nothing has changed. That's my answer.

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

Thank you to the management for taking my question. I have two quick inquiries. First, considering the impact of the COVID resurgence and the weaker macroeconomic conditions in the second quarter, what is the latest trend in the paying ratio and ARPU on the platform compared to previous quarters? Given that over 80% of our users are small and medium enterprises, how have they been performing in terms of paying ratio and ARPU, particularly in light of the COVID resurgence? Secondly, regarding the new business aimed at high-income white-collar and gold-collar users, including the brand you mentioned, could management provide an outlook for this segment? What distinguishes us from competitors, and what revenue or margin expectations should we have for this part of the 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. Regarding the overall paying ratio and ARPU, those numbers also maintained a stable situation as a whole. I think the pandemic and macro impacts mainly reflected in the total number of active enterprise users. We see some declining trends during the pandemic stage. Compared with large enterprises, smaller enterprises see a stronger impact during the pandemic. However, we think that overall the total number of small enterprises is huge and they are quite resilient in the economy. So we expect that overall the small and medium-sized enterprises will see recovery backed by better macro conditions in the upcoming weeks or months, and we have already witnessed early signs. In terms of their margin, as I mentioned, the large enterprises’ paying ratio and ARPU are also stable, with the impact mainly due to the total number of active enterprises from the small-medium segment. So that's the situation.

For your second question regarding the development of our gold-collar business, we have increased our efforts in this area over the past two years. Through this brand, we have established a strong and healthy ecosystem for headhunter enterprises, consultants, and gold-collar users. Currently, we have over 3,000 contracted headhunter enterprises, tens of thousands of active headhunters, and more than 1 million active high-end users. As of today, BOSS Zhipin has created a user ecosystem surrounding gold-collar users and headhunter consultants. Looking back at our ecosystem development process, we truly believe that by providing higher efficiency and a better value proposition to our users, we have a greater chance to explore a suitable monetization model. Thank you.

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

Thank you to the management for addressing my questions. First, I would like to follow up on how macroeconomic factors are impacting our business. Can management provide some quantification of the macro pressures affecting the revenue outlook for the second quarter? Additionally, considering the current macro trends, what should we expect for business growth in the latter half of the year? Secondly, I’d like to discuss competition from another perspective. We have mentioned that other online recruitment platforms may have increased their marketing expenses over the past year. How could this influence our marketing or user acquisition strategy moving forward? What potential implications could this have on our margins? Thank you.

Okay, so I'd like to answer the first question, and Jonathan will reply to the second part. So basically, regarding our financial impact from the pandemic, we think that the pandemic and weak macro conditions have had some material impacts on our business. It is reflected as most businesses during the pandemic and during the weaker macro conditions reduced their recruiting activities. We did some analysis, and the numbers show that the pandemic and weak macro have totally reduced around 10% to 15% from 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 believe that day-by-day, we have witnessed some improving situations. So, we think that the upcoming third quarter could see improvements, supporting our business recovery as well. Jonathan can provide some commentary regarding the industry's overall recruiting market demands.

Okay. I will share three numbers. First, for the first two weeks of June, our daily active users increased by 10% month-over-month, indicating a rapid recovery. The second figure is 100; in July, enterprises with fewer than 100 employees have experienced a significantly faster recovery than larger enterprises. Lastly, in the first half of June compared to the latter half of March, which is typically peak season, the urban service industry saw a 104% increase in newly posted jobs compared to March's latter half. These three numbers suggest that our customers, including large enterprises and small to medium-sized businesses, are quite resilient and have a strong capacity for recovery. I would like to add these three numbers to Phil's responses.

Also regarding the question related to the margin, as I just mentioned in the prepared remarks, the first quarter due to seasonality reasons was with a lower margin, and we would like to see improved situations in the upcoming quarters. However, having said that, because the second quarter is already seeing impacts from the COVID pandemic, the margins will be improving, but might not be as high as the third quarter last year and the fourth quarter last year. Overall, for the margin of 2022, we think that we should be able to maintain our previously stated view regarding the yearly margin, so pretty much close to 20% of our total revenue for the whole year. We still believe this is the situation. I probably need to update a number, which I provided during the last earnings call, regarding failed registrations. So, by the end of May 31, the total number of failed registrations 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.