Ladies and gentlemen, thank you for standing by. Welcome to the Kanzhun Limited Fourth Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer 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 fourth quarter and full year 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 does 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 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 at ir.zhipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman, and CEO.

Hello, everyone. Welcome to our fourth quarter and full year 2023 earnings conference call. On behalf of the company, our employees, management team, and the Board of Directors, I would like to express our heartfelt thanks to our users and investors for their trust and support. First, I would like to share our performance with you. In the fourth quarter, the company achieved calculated cash billings of RMB1.78 billion, an increase of 61% year-on-year and 9% quarter-on-quarter. Our GAAP revenue reached RMB1.58 billion, a 46% year-on-year increase, remaining flat compared to last quarter. Our adjusted net income, which excludes share-based compensation expenses, was RMB630 million. In the fourth quarter, the average verified monthly active users (MAU) of the BOSS Zhipin app reached 41.2 million, reflecting a 33% year-on-year growth. We noted an improved ratio between the demands from active enterprise users and offers from job seekers. We also observed a steady recovery of medium and large enterprises since the third quarter, all contributing to our cash billings, GAAP revenues, and profit levels in the fourth quarter, which surpassed our expectations. Let's take a look at the full year of 2023. The company achieved calculated cash billings of RMB6.69 billion, a 45% increase year-on-year, and GAAP revenue of RMB5.95 billion, which is up by 32% year-on-year. Excluding share-based compensation expenses, the adjusted net income for the year reached RMB2.16 billion. Moreover, excluding other income, such as wealth management income, the adjusted operating income for 2023 was RMB1.64 billion, marking an impressive 191% year-on-year increase. This resulted in a 27.5% adjusted operating margin, highlighting the company’s strong profitability capability. In 2023, we attracted over 49 million newly verified users, representing the largest annual growth in our user base since the company was founded. This year, the number of users we serve has grown to nearly 100 million, and we are proud to assist them with our products. As of December 31, 2023, the company has served more than 178 million individual users and 13.3 million enterprises. The average verified MAU on the BOSS Zhipin app was 42.27 million in 2023, reflecting a 47% year-on-year increase. Approximately 1.5 billion mutual connections between job seekers and recruiters have been made on our platforms throughout the year. In 2023, the number of paid enterprise customers rose by 44% year-on-year to 5.2 million. Furthermore, both the number of paid enterprise users and the paying ratio of active users reached record highs. As we continue to expand our user coverage, both the user and revenue structure evolve continuously, marked by several key points. First, in 2023, the number of newly added blue-collar users matched that of white-collar users, with revenue contribution from blue-collar users exceeding 34% for the entire year. Second, revenue from second and lower-tier cities surpassed 50%, a five percentage point increase from the previous year. Third, revenue from enterprises with fewer than 100 employees also saw an increase of more than five percentage points year-on-year. All these adjustments further reinforce our confidence that our product can cater to various users and that our services are inclusive of different types of clients. This is largely based on detailed research into the specific needs of different users and our ongoing technology investments. In January of this year, we launched our proprietary big language model, which is believed to be the first large language model specifically designed for the recruitment industry. It has successfully completed online registration for generative artificial intelligence, showing industry-leading results on certain public benchmarks and being progressively applied in various recruiting and job-seeking scenarios. For instance, we provide young entrepreneurs with rapid job posting capabilities and offer resume polishing functions for fresh graduates. The company's investment in AIGC primarily focuses on two principles: keeping pace with cutting-edge technology to avoid knowledge gaps and concentrating on industry application without making large, unmeasured investments. Now, let's provide a brief update for this spring. Following the spring festival, various user metrics have reached historical highs, with peak daily active users on the BOSS Zhipin app nearing 70 million. From this data, we identified several characteristics that are notably different from the same period last year. First, since the Spring Festival, the average daily number of newly posted job positions and active job positions both set historical highs compared to previous years, with a 20% year-on-year increase in the daily average of active job positions. The second aspect is large enterprises. Since the Spring Festival, the average daily active positions from enterprises with more than 10,000 employees have increased by 24% compared to the same period in 2023. The third aspect is industry. The daily average of newly added job positions and active job positions across all industries has shown positive growth since this year's spring festival compared to the same period of 2023, with the blue-collar industry reaching a new record high, driven by the ongoing expansion of the urban services sector. Furthermore, the manufacturing and supply chain logistics sectors have demonstrated accelerated year-on-year growth rates. Within the white-collar industry, sectors such as consumer goods, medical equipment, automotive, and advertising and media are leading the growth. The fourth aspect is business. There has been a notable shift in the types of job positions compared with last year, with a focus on development and growth in enterprise sectors such as sales, human resources services, and finance, which have seen a clear rebound in growth rates. We expect to see quarter-on-quarter increases in both cash billing and debt revenue for the fourth quarter. I am pleased to announce that the company's Board of Directors has approved a new share repurchase plan today, increasing the amount to repurchase up to $200 million of the company's shares over the next 12 months. This marks our third share repurchase initiative, following the $80 million special cash dividend issued last November, reflecting management's commitment to long-term shareholder returns. That concludes my part of the call. I will now turn it over to our CFO, Phil, for a review of our financials. Thank you.

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results for the fourth quarter and full year of 2023. We are pleased to deliver a strong set of results for the fourth quarter and the full year 2023. For the fourth quarter, our calculated cash billings reached a historical high of RMB1.8 billion, growing by 61% year-over-year, and notably, 9% quarter-on-quarter, beating our expectations. Revenues increased by 46% to RMB1.6 billion compared to the same period last year and stayed relatively stable sequentially due to lower seasonality, confirming our observation of a gradual recovery, especially at medium and large-sized companies. Revenue contribution from key accounts and their ARPU also recovered sequentially in this quarter. For the full year of 2023, our calculated cash billings and revenues increased by 45% and 32%, respectively. The number of paid enterprise customers reached 5.2 million in 2023, up by 44% year-over-year, marking another new high level of paying ratio among active enterprise users and demonstrating our ample space and flexibility in monetization. Moving to the cost side, total operating costs and expenses decreased by 4% year-over-year to RMB1.4 billion in the fourth quarter and increased by 16% year-over-year to RMB5.4 billion in 2023. This year we managed to achieve robust user growth while still seeing margin expansion. The annual adjusted operating margin improved from 12.5% in 2022 to a record level of 27.5% in 2023, up by 15 percentage points. Cost of revenues increased by 36% year-over-year to RMB275 million in the fourth quarter, and 40% year-over-year to RMB1.1 billion in 2023. This increase was primarily driven by increased server and bandwidth costs and payment processing fees, in line with the growth of user engagement and transactional gross volume. Our sales and marketing expenses decreased by 36% year-over-year to RMB433 million in the fourth quarter as we didn't have similar marketing campaigns like the 2022 FIFA World Cup sponsorship, and remained stable at RMB2.0 billion for the full year of 2023. Even excluding the World Cup sponsored fees, adjusted sales and marketing expenses as a percentage of revenue went down by seven percentage points this year compared to 2022, when we could only have half of the user growth of that year. This proved the effectiveness of our marketing strategy, which emphasizes branding campaigns. Our R&D expenses increased by 46% year-over-year to RMB430 million in the fourth quarter and 31% year-over-year to RMB1.5 billion in 2023. Excluding share-based compensation expenses, adjusted R&D expenses increased by 62% year-over-year to RMB316 million in the fourth quarter and 25% year-over-year to RMB1.1 billion in 2023. This increase was mainly driven by our further investments in talents and AI technology developments, which incurred AI-related server and cloud service fees. Our G&A expenses decreased by 9% year-over-year to RMB225 million in the first quarter, and increased by 13% year-over-year to RMB812 million in 2023. Excluding share-based compensation expenses, adjusted G&A expenses decreased by 32% year-over-year to RMB122 million in the first quarter and 8% year-over-year to RMB482 million in 2023, mainly due to decreased professional service fees. Our net income was RMB331 million in the fourth quarter and RMB1.1 billion in the 2023 full year. Adjusted net income increased from RMB59 million in the first quarter of 2022 to RMB629 million, and increased from RMB799 million in the 2022 full year to RMB2.2 billion for the full year 2023, representing a significant year-over-year increase. Adjusted net margin for the full year of 2023 reached a record high of 36.2%, up by 18.5 percentage points. Net cash provided by operating activities was RMB927 million for the fourth quarter and RMB3.0 billion for the full year of 2023. As of December 31st, 2023, our cash and cash equivalents, time deposits, and short-term investments totaled RMB12.9 billion, while long-term investments in fixed-rate notes and wealth management products were RMB2.3 billion. With our commitment to share our success with shareholders, we paid a cash dividend of RMB563 million in December 2023. Additionally, our Board has repurchased programs over the next 12 months and upsized the program to $200 million, demonstrating our strong commitment to shareholder returns. Now for our business outlook, we have seen encouraging trends of recovered recruitment demand post-Chinese New Year and we are confident in better than expected results for the current quarter. In the first quarter of 2024, we expect our calculated cash billings to increase sequentially by at least 12% and revenues to be between RMB1.64 billion and RMB1.67 billion, with a year-over-year increase of 28.3% to 30.7%. With that, that concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead with questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Eddy Wang from Morgan Stanley. Please go ahead.

Thank you for taking my question. My first question is about the recruitment demand situation after the Chinese New Year. Can you provide more details regarding the different sub-industries and various enterprise sizes in terms of this supply-demand situation compared to last year? My second question is about your forecast or expectation for the company's revenue growth this year. Thank you.

Thank you for your question. While we cannot comment on the overall job market, we have our own data as a platform and would like to share our observations. Firstly, we have noticed year-on-year growth on the enterprise side, which has been higher than that of job seekers, leading to an improved ratio between job seekers and enterprise users. Having been in this industry for a long time, I find the ratio between enterprise users and job seekers significant. Since the Spring Festival this year, I have observed a rebalancing of this ratio toward a more normal situation. Regarding whether enterprises have regained confidence in the markets and for the future, our data shows that both newly posted jobs and active online jobs have reached record highs with impressive year-on-year growth. To highlight specific trends in certain sectors, manufacturing workers, logistics, and urban service-related blue-collar sectors have rebounded well after the Spring Festival. Additionally, cities along the coast, which are more connected to the global economy, have shown better user growth after the Spring Festival, indicating that export-related manufacturing is performing well recently. Another observation is that last spring, small and micro companies bounced back more effectively post-Spring Festival, but this year, larger companies have demonstrated a stronger recovery. As we have noted, enterprises with over 10,000 employees have outperformed medium-sized enterprises since August last year, continuing this trend after the Spring Festival, showing sustained improvement in white-collar recovery. Regarding your second question about our outlook for this year, I will begin by reviewing last year's performance. Since the start of 2023, we have experienced sequential improvement from Q1 to Q4 and into Q1 of this year for five consecutive quarters. This observation is supported by our quarter-on-quarter growth data, and we hope this trend continues throughout the year. For the first quarter, as Phil mentioned, we expect our cash billings to increase sequentially by at least 12% compared to last quarter. Based on my experience and observations in operations, I am confident that we will continue to achieve sequential growth in the second quarter. That concludes my answer to your questions. Thank you.

We expect our calculated cash billings to increase sequentially by at least 12% compared to the fourth quarter last year. Given my experience and observations in operations, I am confident that we will continue to achieve sequential growth in the second quarter. And that concludes my answer to your questions. Thank you.

Thank you for the questions. Our next question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

Thank you, management, for taking my questions, and congratulations on the very strong results. I have two questions. First, we noticed that some of our competitors have increased marketing spending after the Chinese New Year. Could management share your strategy for user growth and marketing campaigns this year? Have you seen any changes in the competitive landscape? Secondly, what is your outlook for this year's operating expenses and profitability margin? Thank you.

Thank you for your question. Regarding the competitive landscape, we have seen that some of our peers have raised their marketing investments after the Spring Festival this year. While we cannot access data from private companies, my extensive experience in the industry suggests that as revenue improves, companies generally become more inclined to invest in marketing, which aligns with our observations. This is actually a positive sign for me, showing that our industry is also on the mend. We are not the only ones benefiting; this trend is evident across the sector. For our user growth target, we are still aiming for at least 40 million newly verified users this year. Even though our peers have increased their marketing spending, we will allocate our budget sensibly without feeling the need for significant increases, which we believe are unnecessary. We intend to manage our expenditures within a defined range while preserving our competitive advantage in user penetration, market share, and our overall leading position. That addresses your first question.

Regarding user acquisition, there will definitely be expenses; however, we wish to keep our user growth at a quick or fast pace while simultaneously reducing sales and marketing as a percentage of revenue to flat or slightly lower than 2023. Regarding the gross margin trend, in the short term, due to seasonality, Q4 is typically a low quarter, so gross margin was slightly affected. For Q1, we expect the gross margin to be flat due to high online revenue contribution, which involves higher payment processing fees in the short term. However, for the full year of 2024, we anticipate improvement in gross margin, primarily driven by leverage from personnel costs supported by rapid revenue growth. To summarize, we expect gross margin to improve further in 2024, alongside slightly reduced sales and marketing expenses. Other items like R&D and G&A will not see aggressive increases. Therefore, we expect our operating margin to trend upward.

That concludes our answer to the questions. Operator, let's move on to the next question.

Thank you. One moment for the next question. Our next question comes from the line of Yang Bai from CICC. Please go ahead.

My first question is about the company's commercialization strategy for this year and the anticipated trends in the payment ratio at ARPU. My second question concerns the progress of the blue-collar business and the future planning directions for that sector. Thank you.

Okay. So I'll answer the first question about monetization and commercialization for our business. We just reported 5.2 million trailing 12 months of paid enterprise customers, a historical high. Our commercialization consists of two components: payment ratio and ARPU. We expect that in 2024, the growth of paid enterprise customers will continue sequentially. Last quarter, the blended ARPU did drop a little due to the larger revenue contribution from small and medium-sized enterprises, but their ARPU has increased individually. At this stage, the overall paying ratio is still relatively low, suggesting substantial growth potential over the coming years. In the short term, growth in paid enterprise customers will primarily result from user growth. Our marketing strategy remains focused on acquiring users at a fast pace, contributing to an increasing number of paid enterprise customers. Longer-term, we expect both paying ratio and ARPU to improve with the recovery from large enterprises increasing their ARPU, thus supporting our commercialization growth.

I would like to briefly discuss our blue-collar business. Our blue-collar business has continued to show healthy growth, with revenue increasing by 32% year-on-year. The contribution from blue-collar revenue has also grown significantly, from 28% to 34%. Within blue-collar sectors, we focus on urban service, manufacturing, construction, and warehousing and logistics. Each sub-sector may have fewer users compared to the white-collar part; however, combined, they provide a significant volume to us, so we need to improve our service to them. In the urban service sector, we have developed good recognition and have earned some revenue. In manufacturing, we continue to explore aggressively, although we face challenges due to the competition among different parties within that space. The overall industry situation for manufacturing has changed over the last few years, and we will persist in our efforts in that area.

Certainly. The next question comes from the line of Robin Zhu of Bernstein. Please go ahead.

So I have two questions. First, it's great to see that management has increased the buyback for the upcoming year. Could you share your thoughts on the capital return policy moving forward and the monthly pace of buybacks? With nearly $2 billion in cash on the balance sheet, will the company commit to a consistent capital return program as revenue and cash flows increase? Second, I'm interested in hearing about future product development and how the company plans to utilize AI to enhance value and profitability in the recruiting process. Additionally, I would appreciate an update on any new thoughts or concrete plans regarding international expansion. Thank you.

Thank you for your question. Regarding cash allocation, optimizing capital allocation and increasing shareholder returns is a vital responsibility for any public company management. We have roughly RMB15 billion cash on hand. Our priority for using this cash is, first, investing in future development for user growth and expanding our advanced model into more user groups and industries. The second priority is to provide shareholder returns. We are currently exploring possibilities for continuing cash dividends following our initial special cash dividend last year. From the share repurchase perspective, we just approved a $200 million new repurchase program, which we plan to use to protect our shareholders' shareholding percentage. In the future, we will coordinate these various methods to maximize returns for our shareholders. Regarding our AI investment policy, it focuses on keeping pace with leading technology to avoid generational gaps and pursuing industrial implementations without unwise spending. We will invest in areas where AI cannot be effectively executed without AI while being cautious in fields that can function well without it. Concerning overseas business, our strategy is clear: we will enter markets where we can be profitable, particularly in wealthier countries. The recruitment business requires compliance with local labor laws and has high legal requirements. Thus, we aim to invest in the top five or six countries with strong GDP, where legal frameworks are mature, and businesses are accustomed to paying for services. That wraps up our answers to those questions. Due to time constraints, we will proceed to wrap up the call.

Okay. Thank you once again for joining us today. If you have any further questions, please contact our team directly, and thank you.

That concludes today's conference call. Thank you for participating. You may now disconnect your lines.

Thank you. Bye, bye.