Ladies and gentlemen, thank you for standing by and welcome to the Kanzhun Limited First 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 first 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 the 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 company's first quarter 2024 earnings conference call. On behalf of the company's employees, management team, and Board of Directors, I would like to thank all our users and investors for their continued belief and support. Let me first introduce our financial performance. In the first quarter, the company achieved calculated cash billings of RMB2.05 billion, which is a 24% increase year-on-year and a 16% increase quarter-on-quarter. Our GAAP revenue reached RMB1.7 billion, rising 33% year-on-year and 8% quarter-on-quarter. We recorded a net profit of RMB240 million. Meanwhile, our adjusted net income, which excludes share-based compensation expenses, was RMB530 million, up 117% year-on-year. In the first quarter, the average verified MAU on the BOSS Zhipin app reached 46.62 million, a 17% growth year-on-year. The growth rate of enterprise users is faster this quarter compared to the same period last year. In March, the number of verified MAU on the BOSS Zhipin app exceeded 50 million for the first time, reaching 55 million, an increase of 24% year-on-year. The ratio of DAU to MAU remained stable. By the end of April, the cumulative number of verified users on our platforms exceeded 190 million, with the number of verified enterprises surpassing 40 million, meaning we attracted over 70 million new verified users from January to April this year. As of March 31, 2024, around 5.7 million enterprise customers from more than 3.5 million enterprises engaged in paid recruitment activities on BOSS Zhipin in the past twelve months. In that same timeframe, over 350 million companies paid for our service. This figure is substantial in the context of the global enterprise service market, even exceeding the total population of some countries. However, it still represents less than 10% of China’s over 40 million enterprises, indicating significant growth potential for paid companies in China’s online recruitment service in the future. Moreover, the average annual payment per enterprise is currently less than RMB2,000, as a larger pool of Chinese enterprises is becoming more willing to invest in valuable services. This trend will likely continue, suggesting that ARPU will rise. Therefore, both BOSS Zhipin and the broader online recruitment industry in China exhibit considerable growth potential in terms of the number of paying enterprises and ARPU. In our last earnings call, we discussed key features of this year's spring recruitment season. Today, we’ll provide further insights and updates on recent trends. First, regarding the blue-collar segment, the number of blue-collar users and revenue for this category continued to grow quickly. In the first quarter, the absolute number and growth rate of blue-collar users outpaced that of white-collar users, with blue-collar user revenue contribution climbing over 35%. Notably, compared to last year, the manufacturing and logistics sectors have seen a positive shift in business sentiment this year, sustaining a steady upward trend. From the post-spring festival to mid-May, the daily average of newly added job positions in manufacturing and logistics rose by about 40% compared to the same period last year. Simultaneously, the white-collar sector has also shown some improvement. The second trend involves enterprise size; the recovery in the white-collar sector has led to an increased recruitment demand from larger companies compared to smaller enterprises, indicating further recovery. The third trend relates to city tiers; second-tier and lower-tier cities are experiencing continued user growth and increased revenue contribution. However, recruitment demand from first-tier cities has also shown some recovery this year compared to last year. Sectors such as manufacturing, supply chain logistics, Internet, AI technology, finance, and procurement trade have demonstrated relatively strong growth momentum recently. You may have noticed our recent acquisition of WD Technology, a leading manufacturing talent delivery platform in China. Additionally, the Kanzhun project, which we have operated for several years, is experiencing rapid growth in job postings and enterprises. In the first quarter, the Kanzhun project achieved over 260,000 active job positions, covering more than 27 million job seekers. With over 11 years of exploration and experience in the industry, combined with the BOSS Zhipin app's user scale and our ventures in blue-collar services, we believe we can continue to develop more mature services in the blue-collar manufacturing industry and increase our revenue. That wraps up my part of the call. I will now hand it over to our CFO, Phil, for a review of our financials. Thank you.

Thanks, Jonathan. Hello, everyone. Now let me walk you through the details of our financial results for the first quarter of 2024. We are happy to report a solid start to the year, characterized by continuous expansion in our user base and engagement and sustained revenue growth. In this quarter, our revenues hit a new high and reached RMB1.7 billion, representing a solid 33% year-over-year growth. Calculated cash billings reached RMB2.1 billion, up 24% year-over-year and 15% sequentially, showing continued growth momentum. Our paid enterprise customers grew by 43% year-over-year to 5.7 million in the trailing 12 months ended March 31st. The faster growth rate of paid customers compared to that of total users indicates our increased paying ratio among enterprises and enterprise users. As Jonathan just mentioned, we noticed a recovery of recruitment demand from large companies. This trend is also demonstrated by the increased cash revenue contribution from key accounts in the quarter, which was up by 1.5 percentage points compared to the same period last year, while the downward trend of blended cash related ARPU due to the change in revenue structure mix has also been mitigated. Moving to the cost side, total operating cost and expenses increased by 17% year-over-year to RMB1.6 billion in this quarter. Excluding share-based compensation expenses, adjusted operating costs and expenses increased by 14% to RMB1.3 billion in this quarter, and our adjusted operating margin was 23%, double that of 11% in the same quarter last year. Cost of revenues increased by 20% year-over-year to RMB295 million in this quarter. This increase was primarily driven by increases in server and bandwidth costs, payment processing costs and employee-related expenses. Gross margin went up by 2 percentage points compared to the same period last year, thanks to higher revenue growth. Our sales and marketing expenses decreased by 8% year-over-year to RMB579 million in this quarter. This decrease was mainly due to decreased advertising and marketing expenses, partially offset by increased sales compensation associated with the cash revenue growth. Notably, despite the disciplined marketing investments, we still achieved a record-high MAU and enlarged gap with our industry peers. Our R&D expenses increased by 40% year-over-year to RMB468 million in this quarter. This increase has two reasons. One is the increased employee-related expenses, including year-end bonuses and share-based compensation. The other, an even bigger reason, is the result of our increased investment in generative AI development, which led to higher depreciation costs related to servers. Our G&A expenses increased by 64% year-over-year to RMB270 million in this quarter, mainly due to increased employee-related expenses, including share-based compensation expenses. Our net income was RMB292 million in this quarter compared to RMB33 million for the same quarter last year. Our adjusted net income reached RMB531 million, up 117% year-over-year and adjusted net margin for this quarter was 31%, up by 12 percentage points year-over-year. Net cash provided by operating activities grew by 66% year-over-year to RMB906 million for this quarter, mainly contributed by increased cash billings. As of March 31, 2024, our cash and cash equivalents, short-term time deposits, and short-term investments totaled RMB11.9 billion and our long-term investments in time deposits and wealth management products were RMB3.4 billion. And now for our business outlook. For the second quarter of 2024, we expect our total revenues to be between RMB1.91 billion and RMB1.96 billion, a year-on-year increase of 28% to 32%. With that, I conclude our prepared remarks. And now we would like to answer your questions. Operator, please go ahead with the queue.

Our first question comes from Robin Zhu from Bernstein. Please go ahead, your line is open.

Could management share their observations on the recruitment demand in China for both white-collar and blue-collar workers, as well as key accounts versus small and medium enterprises, by industry compared to last year and the company's expectations from the previous quarter? Additionally, can you discuss BOSS Zhipin's recent business trends for the upcoming months, including growth rate expectations for Q2 and the rest of the year, and whether the high comparisons in the service industry will affect growth rates in the months ahead? Thank you.

Zhu, thank you for your question. This year, the growth in job postings and recruitment demand is overall better compared to last year. We continue to see daily historical highs in active BOSS's and daily active enterprises. On an accumulative basis, activity among existing BOSS's is also improved compared to last year. In Q1, blue-collar jobs grew more robustly than other sectors, and we noted that manufacturing and logistics remain key highlights this year. Urban services, while strong, are not growing as quickly due to a high base. Based on our historical analysis, smaller companies are recovering more quickly, while larger companies take longer but tend to demonstrate stronger and more sustained performance once they begin recovering. For instance, in April, companies with over 500 employees saw a 10% month-over-month increase in daily job postings compared to March. Our observations regarding new and existing BOSS's, the emphasis on manufacturing and logistics, and the behaviors of medium and larger-sized companies align with our expectations. Additionally, lower-tier cities are proving to be a significant driver, with many companies successfully transitioning from first-tier to lower-tier cities. Overall, this year's recruitment market is more stable and balanced across size, industries, and regions, indicating a return to a more normal situation consistent with our recent observations.

Q1 was a strong quarter, outperforming the same period in 2023. We announced the Q1 CCB guidance in mid-March during our last earnings call, and the final results showed a quarter-over-quarter growth of 15 percentage points, driven by momentum at the end of March. As we approach the end of May, it is still early to provide guidance for Q2. However, we estimate that following Q1's high base, Q2 will continue to experience sequential growth, likely in the low single-digit percentage points quarter-over-quarter. The year-on-year growth rate is expected to be between 28% and 32%, which is faster than Q1. Our full-year outlook for CCB growth remains unchanged. This concludes our perspective on the second quarter and the full-year outlook.

Okay, thank you for your question and let's move on to the next question, please.

Thank you. Please standby. Our next question comes from the line of Eddy Wang from Morgan Stanley. Please go ahead. Your line is open.

Thank you for taking my question. I have two questions. The first one is about the paying ratio. We have noticed that the company has very rapid growth of the paying enterprise users. Could you please share with us the paying ratio trend in the past couple of quarters? Additionally, if you can provide the breakdown of the ARPU user growth and the contributions of different sized enterprises to the billings? My second question is about the upcoming graduation season. Last year, the surge of graduates during the summer affected the supply-demand dynamic in the recruitment market. I would like to hear your perspective on the upcoming season and whether you anticipate this will occur again. Thank you.

Thank you for your question. First, I will discuss our basic growth strategy for revenue. As of March 31st, we have more than 350 million paid enterprise customers using our service, which is less than 10% of the total number of enterprises in China. We have shown that our business model and service offerings can adapt to various customer types. Our growth strategy moving forward will focus on attracting more enterprises to pay for our recruitment services. Given our low market share, we will approach companies that have not used our recruitment services before with caution, meaning increasing our average revenue per user is not our top priority right now. For larger companies and key accounts, once a recruiter starts using our service, they tend to purchase more accounts from us. The same is true for smaller companies and SMEs. Consequently, in the first quarter, we observed an increase in ARPU from both large accounts and small to medium-sized companies, indicating a positive recovery trend among larger businesses. Factors impacting our paying ratio include scenarios where, within a specific industry for a role, an increase in recruiters compared to available job seekers leads us to gradually implement charges to maintain a balanced supply and demand. For instance, when numerous companies recruit for certain roles with few job seekers available, our paying ratio tends to be quite high. The principle of the paying ratio suggests that more recruiters in a specific industry and job result in a higher paying ratio, which is also connected to higher ARPU. We have been successful with this monetization model and will continue to pursue it. Our goal is to increase the number of paid enterprise customers, and if we succeed in this, everything else will naturally follow. Regarding your second question about the upcoming graduation season, last year was particularly challenging as many graduates from the past two to three years were job hunting simultaneously, leading to intense competition. This year, we anticipate a better scenario. First, active job postings on our platform have reached historical highs, showing significant improvement compared to last year. Additionally, the recovery of large companies and the white-collar sector, especially in first-tier cities, is expected to support graduates in finding jobs. Between the spring festival and mid-May, we noted that the full-time jobs posted by companies engaging with graduates grew by more than 30% year-on-year. We are dedicated to assisting newly graduated individuals in finding job opportunities and wish them all the best.

And operator, let's move on to the next one.

Thank you. Please standby. Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please go ahead. Your line is open.

Thank you management for taking my questions. I have two questions. The first is about the blue-collar sector, particularly after the company acquired WD Technology. Could management share thoughts on developing the blue-collar business moving forward? Will user contributions from lower-tier cities increase? What are your thoughts on serving these users going forward? Secondly, user growth this year has been promising; could you outline your sales and marketing strategies for the remainder of the year, especially with the Paris Olympics approaching? What are your marketing campaign ideas related to the Olympics? Thank you.

Thank you for your question. My views on WD, which we will refer to as WD, are somewhat similar to those on BOSS Zhipin. Both companies were established in 2013 and have been part of this industry for over 11 years. Initially, we focused on a white-collar platform aimed at Internet technology companies, while WD concentrated on recruitment for manufacturing factory workers. I have been acquainted with WD for quite some time. I consider them a survivor in this lengthy industry. WD has developed key capabilities that are well-suited for digitalization and combine effectively with manufacturing-related recruitment. For instance, they were among the first to emphasize user experience for job seekers, enhancing their overall experience. This is why they are currently leading in certain areas. As for our acquisition strategy, we are looking to acquire core capabilities that we cannot easily develop independently, which will help us accelerate growth and achieve better results together. That is our rationale for collaborating with WD. For your reference.

Well, I can comment on Timothy's second question regarding user growth and marketing strategy. We will keep marketing expenses at a reasonable level and maintain a disciplined user growth approach. We would like to leverage the Paris Olympic Games to enhance our brand, but we have to spend appropriately. In the current marketing environment, leading platforms like us benefit from higher economies of scale and have better marketing efficiency, meaning that we can achieve satisfactory user growth without excessive spending. Our new user growth has recorded 17 million in the first four months this year, close to half of our annual target of 30 million to 40 million new users. Thus, we don't need to be excessively aggressive in this front. I hope my comments address your question.

Okay, that's all of our answers. And operator, let's move on to the next question.

Thank you. Please standby. Our next question comes from the line of Yang Bai from CICC. Please go ahead. Your line is open.

I will translate for myself. The first question is whether we have seen any changes in the competitive landscape after the spring recruitment. The second question relates to our previously mentioned sales and marketing strategies for this year. We also observed that Internet companies are increasing their AI capital expenditures, including our AI-related expenses. Have we adjusted our profit margin outlook for this year? Thank you.

Thank you for your question. Regarding the first query about competition, this spring, we have observed that many of our competitors are increasing their spending during the recruitment season. We have also made similar marketing investments, making the competition more intense and overall spending higher. In our last earnings call, I discussed the reasons for this trend: people are recognizing various opportunities in the market this year and are willing to invest more to boost their revenue. Following our marketing efforts in the first quarter, you may have noticed that in April, our competitive landscape remained stable. Some operational metrics indicate that while we may lag slightly behind our peers, we exceeded all of our competitors in April across all operating metrics. In summary, we respect our competitors' active marketing initiatives, but we firmly believe that enhancing our services for both job seekers and recruiters is the most effective—if not the only—marketing strategy. As for our performance, we continue to show strong momentum and advantages in metrics such as monthly active users, daily active users, user engagement time, and all operational metrics.

Regarding your second question related to our margin profile for the full year, I will quickly run through the major cost and expense items. Regarding the gross margin, we expect it to slightly improve due to higher economies of scale starting from the second quarter. In terms of marketing expenses, we anticipate maintaining current levels; in absolute terms, they will increase slightly. Regarding the overall percentage of selling expenses related to revenue, we expect them to be flat or decline. Thus, the combined total of selling and marketing expenses as a percentage of revenue will further improve in 2024. For R&D expenses related to AI investments, we have increased our spending, but this increase could be offset by revenue in the full year. R&D expenses will remain similar as a percentage compared to last year. For G&A expenses, we anticipate improvement as compared to last year. In Q1, they temporarily increased but are expected to drop in Q2. Overall, the percentage-wise will be better compared to last year. Summarizing, our operating margin in 2024 will improve alongside our continued revenue growth.

And that's all of our answers to the question. Operator, please go ahead.

Due to 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 team directly. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.