Ladies and gentlemen, thank you for standing by, and welcome to the Kanzhun Limited First Quarter 2023 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 2023 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 these 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, a webcast replay of this conference call will be available on our website. With that, I will now turn the call to Jonathan, our Founder, Chairman, and CEO.

Hello, everyone. Welcome to our first quarter 2023 earnings conference call. On behalf of the company and our employees, I would like to express our sincere gratitude to our users, investors, and our employees. In general, this is the season when our business began to return to its healthy development trajectory as we step into the post-pandemic era. In the first quarter, we recorded revenue of RMB1.28 billion, representing an increase of 12% year-on-year and 18% sequentially. Our calculated cash billings reached RMB1.65 billion, representing an increase of 28% and 49% year-on-year and quarter-on-quarter, respectively. Along with the recovery of our revenue, we demonstrated our healthy profitability and achieved a net profit of RMB32.7 million, compared to a net loss in the same period of last year. Over adjusted net income, which excludes share-based compensation expenses, was RMB245 million, increasing by 102% year-on-year. After Lunar New Year, our user base grew rapidly. In the first quarter, we had approximately 14.61 million newly verified users. The average monthly active users on the BOSS Zhipin app were approximately 40 million, up 58% year-on-year. The average daily active users increased by 54% year-on-year in this quarter, with peak DAU reaching nearly 15 million. Notably, blue-collar and lower-tier city users were the fastest-growing cohorts across our user base. In this quarter, blue-collar users contributed to more than 40% of the newly verified user growth, with accumulated verified blue-collar users accounting for 31% of our total users by the end of this quarter. In terms of the common demand from enterprise users, which many of you care about, since the first quarter, our monthly active enterprise user sales continuously reached record highs in comparative periods while maintaining consistently high levels since the Spring Festival. Among all the industries we serve, the urban services industry was the most prominent performer, while SMBs recovered faster than large enterprises. This also demonstrates our software and modeling ability to serve different users from various industries and regions. Commercially, thanks to the general recovery of recruitment demand from our enterprise users, the number of our paid enterprise customers in the trailing 12-month period ended March 31 recovered rapidly, and this growth trend is expected to continue in the following quarters. Strong user growth has driven the urban service industry to become our second-largest revenue contributor, leading to the results that revenue contribution from blue-collar users accounted for over 30% of our total revenue in this quarter. In terms of enterprise scale at a regional distribution, the revenue contribution of enterprises with less than 100 employees and those from second and lower-tier cities also increased year-on-year. On the business operation side, one of our priorities this quarter was to alleviate the imbalance between supply and demand under current employment market conditions. Specifically, we worked to ensure individuals, especially job seekers, could access more and better employment opportunities on our platform while maintaining a high-quality user experience. Through deeper understanding and exploration of user demand combined with continuous efforts to optimize our algorithms, we made some progress in this area. In February and March, following the Spring Festival, the number of successful consent reaches, which means the successful resume exchange between job seekers and enterprise users, achieved an average of RMB150 million, which is an increase of 65% year-on-year. To remind you that our monthly active users increased by 58% year-on-year, which means we have achieved record highs in terms of the total number of resume exchanges and the number of resume exchanges per person. So, I would like to take this opportunity to give special thanks to our engineers and project managers who have made special efforts. For those critical users, such as college students, we continue to leverage our resources, trying our best to help them access more suitable opportunities on our platform. This is an important focus for our company this quarter and also reflects the corporate culture that more than 55,000 employees of our company have upheld. We believe many investors and friends are concerned about the challenges and opportunities that the recent developments in AI technology have brought to the company. There are only two things we can say as of today. First, the company attaches great importance to this technology development. Secondly, we are and will make reasonable investments and commitments in this area to try to do something. In general, since the beginning of the second quarter, our platform has continued to see solid growth trends in our user base and user engagement, both on the job seekers' side and the enterprise side. It's worth mentioning that the number of active enterprise users and active positions posted have both shown ongoing and steady increases, succeeding the levels we saw at the end of March. This is a promising scenario. In terms of what we are seeing within different industries, the urban service industry and the travel and tourism industry have continued to perform well. The growth rates for sectors such as warehousing and logistics is a highlight recently, while recruitment demand in manufacturing industries has also demonstrated promising recurring trends. With that, I will turn the call over to our CFO, Phil, for a review of our financials. Thanks.

Thanks, Jonathan. Hello, everyone. Now, let me walk through the details of our financial results for the first quarter of 2023. We are pleased to deliver solid quarter results with strong revenue growth, as well as healthy profitability and strong operating cash flow. Driven by robust user growth and the recruitment demand, which holds us through the festival, we have witnessed a reacceleration of both revenue and calculated cash billing stocks. Our revenues reached RMB1.28 billion, up 12% year-over-year. And our calculated cash billings reached RMB1.65 billion, representing a year-over-year increase of 28%. The quarterly number of paid enterprise customers reached a historical high level, mainly due to an increase in the number of active enterprise customers and improved paying ratio. As a result, our number of paid enterprise customers in the past 12 months also recovered and is expected to continue to increase in the coming quarters. Revenue contribution from small-sized accounts increased as equipment demand from SMEs grew better. Moving to the cost-side, total operating costs and expenses in this quarter were RMB1.37 billion, up 20% year-over-year, excluding share-based compensation; adjusted operating costs and expenses in this quarter increased about 15% to RMB1.16 billion. Considering other operating income, our adjusted operating margin for this quarter is 10.6%. Cost of revenues in this quarter was RMB247 million, up 39% year-over-year, mainly driven by increases in server and bandwidth costs due to higher user traffic and payment processing costs, which are related to the higher growth of cash collections from our online self-service affiliates. Excluding share-based compensation expenses, our adjusted sales and marketing expenses were RMB568 million, 15% year-over-year. This increase was primarily due to higher marketing expenses, compared to last year as we have strong user and traffic growth this quarter. However, we have observed that overall, customer acquisition efficiency has improved compared to the same period of 2021, due to our enhanced brand recognition. This encouraging trend will help us continue to achieve some profitability while maintaining good user growth momentum. Sales, employees related expenses also increased as a result of higher cash revenue growth. Our R&D expenses in this quarter increased by 15% year-over-year to RMB333 million, and the G&A expenses in this quarter increased by 6% year-over-year to RMB165 million. Notably, benefiting from our strategic efforts to improve operating efficiency. Our adjusted R&D expenses and adjusted G&A expenses were relatively stable with the same period of 2022. Net income in this quarter was RMB33 million, as compared to our net loss of RMB12 million in the same quarter of 2022. And our adjusted net income for this quarter increased by 102% year-over-year to RMB245 million, representing an adjusted net margin goal of 19%. Net cash provided by operating activities was RMB544 million for this quarter. As of March 31, 2023, our cash, cash equivalents, and short-term investments increased to RMB13.5 billion. The robust operating cash flows and cash reserve enable us to be more flexible on capital allocation and future development strategy. And now for our business outlook. For the second quarter of 2023, we expect our total revenues to be between RMB1.43 million and RMB1.46 million with a year-over-year increase of 28.6% to 31.3%. That concludes our prepared remarks. Now, we would like to answer questions. Operator, please go ahead.

Thank you for taking my question. I have two questions. First, the youth unemployment rate reached a record high in April, and we will see another batch of graduates in the coming two quarters. Do you think the high youth unemployment could become a long-term structural issue, and how might it affect our business in the long term? My second question is that in April and May, we observed higher job postings and active enterprise users compared to March. However, the overall economic recovery is slightly below our expectations, and the youth unemployment rate is still high. Do you believe the recovery in recruitment demand will be sustainable through the second half of this year? Thank you.

Thank you for your question. I would like to address your first question first. Regarding the current situation with more job seekers compared to relatively less recruitment demand, which has led to a high unemployment rate among younger people aged 15 to 24, I believe the situation is improving. There are two interesting observations I'd like to share with you. The first is that from February to May, the ratio between job seekers and recruiters was at a relatively unpleasant level, but since January 21, following the spring festival, over the past 17 to 18 weeks, we have seen a weekly improvement. Another interesting point is that this year's graduates are proactively reaching out to small and medium-sized enterprises, and the response rate has increased by over 10% compared to last year. This is a scenario I have never seen before, indicating that people are striving for development opportunities. In terms of the impact on the company, the pressure I've noticed most is that the situation of more job seekers compared to less job supply has placed significant pressure on our recommendation and customer service systems. We have been working hard on this, and if you look at the average monthly job resume exchanges per person, we have performed quite well thus far. Regarding your second question about the recent demand recovery in April and May, we have observed that compared to February and March, weekly newly posted jobs have increased by 7%, and for each job opening, the situation of recruiters actively searching for candidates has also risen by 6%. This is an encouraging trend, and I am pleased to see it. Whether this is sustainable, I would say the situation is improving and appears quite sustainable.

Thank you. We'll now move on to our next question. Our next question comes from the line of Wei Xiong from UBS. Please go ahead. Your line is open.

Thank you to the management team for addressing my question. To begin with, could you provide insights on the recovery trends for your enterprise users, particularly key accounts and SME users? Specifically, I'm interested in user engagement, paying ratios, recruitment cycles, and how these have trended over the past few months compared to a few years ago. Additionally, I would like to follow up on your blue-collar recruiting business. Can you share more about the progress made in that area and your strategic focus for this year? Given our strong advancements in the services sector, what steps are we planning to take to achieve greater breakthroughs in the manufacturing sector this year? Thank you.

Okay. When comparing large companies and SMEs, an interesting observation is that SMEs have bounced back quickly in January and February, whereas large companies have taken a bit longer to recover. However, in April and May, the trends shifted. Notably, enterprises with fewer than 100 employees saw a 1% increase in daily active job postings during this period compared to January and February, while those with over 10,000 employees experienced a 7% rise, indicating a quicker recovery. Additionally, within enterprises, job postings related to marketing grew at a faster pace in April and May, suggesting that companies are either spending more or earning more, which reflects higher confidence at this moment. Overall, there are millions of enterprises and tens of millions of job seekers on our platform monthly. One challenge we face is that both job seekers and businesses are diligently working on their individual issues, and we are also committed to providing support. Overall, April and May showed improved results for both large companies and SMEs compared to February and March. Regarding blue-collar recruiting, we have strong confidence in the urban service industry, where we have established substantial value over the years. After COVID, as other sectors have quickly recovered, our prior initiatives have strengthened our performance. We've observed a rapid increase in user engagement and revenue from service industries and blue-collar sectors. As for major sectors like manufacturing, construction, logistics, and warehousing, we are actively working to add more value across these industries. We are still cautiously optimistic about the manufacturing sector, but we are progressing in the right direction. There are millions of manufacturing workers, around 14 to 15 million construction workers, and about 20 to 30 million job seekers in logistics and warehousing. We are actively seeking ways to enhance our value in these sectors while also driving our business growth.

Thank you, management.

Thank you.

Thank you. Our next question comes from Timothy Zhao from Goldman Sachs. Please go ahead; your line is open.

Thank you management for taking my question. I have two questions. One is about the enterprise paying ratio and ARPU trend. Could management share any new products or strategies to improve the overall enterprise paying ratio, especially for small and medium-sized customers? Additionally, what new customer acquisitions has the company achieved? Secondly, concerning sales and marketing, we know the first quarter is usually the peak period for spending in this area. Can management provide updates on the company's sales and marketing plans for the remainder of this quarter and the year, as well as our margin forecast for this year? Thank you.

Okay, Timothy. I'd like to address your two questions. Regarding our paying ratio for the quarter, in general terms, our paying ratio improved slightly compared to last year. In terms of ARPU, it remained stable during the quarter, with the overall paying ratio improvement mainly driven by healthy growth of job seekers and business customers in urban services and a few other sectors like logistics and tourism. The competition among business customers on the platform has naturally increased our paying ratio. As for new business customers, particularly from lower-tier cities, they have made key contributions to this growth. Regarding your question on sales and marketing expenses, you're correct that the first quarter is typically a peak season due to branding campaigns that happen after the spring festival. In our case, we executed a bit of brand advertisement in the first quarter, but there are no significant marketing events planned for the rest of the year. Our traffic acquisition cost, driven by our established brand recognition, showed high efficiency in the first quarter, and we believe this efficiency will continue in the following quarters. This suggests that our overall sales and marketing expenditures will remain relatively stable. As far as our overall operating margin for 2023 is concerned, it is expected to improve compared to last year.

Thank you.

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 or reach out directly. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.