Earnings Call Transcript - BZ Q2 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Kanzhun Limited Second Quarter 2021 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. Gwen Bei Wang, Head of Capital Market and IR. Please go ahead, ma’am.

Gwen Bei Wang, Head of Capital Market and IR

Thank you, Operator. Good evening, everyone. Welcome to our second quarter 2021 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 at ir.zhipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO.

Jonathan Peng Zhao, CEO

Hello, everyone. Welcome to our first earnings call as a public company. I would like to take the opportunity to express our sincere thanks to our users, employees and investors. Thank you for your trust and support. We will continue to focus on our main business, improve the efficiency of connecting talents to jobs, utilizing the power of technology to deliver user satisfaction by optimizing efficiency, equality and choice. We are pleased to report that we have achieved strong results in the second quarter this year. We recorded a total revenue of RMB1.17 billion, an increase of 173.9% year-over-year. Our calculated cash billings reached RMB1.44 billion, with a year-on-year increase of 175.3%. While we maintained our rapid revenue growth, we also achieved positive non-GAAP profitability in this quarter. Our adjusted net income, excluding share-based compensation expenses, was RMB248.5 million. We believe our quality growth is a result of our efficient business model, continuous enhancement of technology and the superior commercial products, which leads to the expansion of our user base and improved service capabilities. In the past quarter, the average MAU of BOSS Zhipin app reached 13.4 million, a year-on-year growth of 44.5%. The ratio of DAU to MAU is relatively stable, indicating that we have maintained high user growth and activity. Over all in the second quarter, we continue to follow the path to be a platform that covers all industries, user groups and job categories. From the perspective of job seekers, we further improved our service capabilities and the penetration rate among the white-collar workers in the higher-tier cities by continuing to solidify our competitive advantages. At the same time, we aim to extend our coverage in lower-tier cities and traditional industries. Being the largest group of job seekers, blue-collar workers are our important target users presently and the main driver of our user growth. The total number of blue-collar users on our platform keeps increasing steadily. Due to the low online penetration rate of blue-collar recruitment and the different behavioral preferences from the white-collar users, we have made tailored adjustments and optimizations in aspects such as matching algorithm, job authenticity, user safety and product usability. To better serve our gold-collar users, we actively cooperate with headhunters and have made considerable progress. We also noticed that in the second quarter, which is typically the beginning of graduation season for college students, a large number of college students joined our platform. Through enhanced and diverse services, such as online publicity and live campus recruitment activities, we have become the most preferred online recruitment platform for college graduates. On the enterprise user side, we have noticed that more and more enterprises started to attach greater importance to the efficiency and the return on investment of the recruitment platform. As a result of various factors, including the quarterly release of recruitment demand brought about by sustained post-pandemic economic recovery, the increased cost of human resources, and the emerging supply and demand in the talent recruitment market. As a result of our efficient and cost-effective business model, the number of our enterprise users maintains this rapid growth trend. As of June 30, 2021, the cumulative number of verified enterprise users reached 14.85 million, with a year-on-year growth of 78.5%. The cumulative number of verified enterprises reached 7.2 million, with a year-on-year growth of 76.1%. For the enterprise user composition, our BOSS population accounted for 65.8% of the whole enterprise users in the second quarter, which remains stable. It’s worth mentioning that the proportion of small- and medium-sized enterprises has increased to 83.6%, which is closer to China’s overall enterprise size ratio. This further proves that for the massive number of small- and medium-sized enterprises in China, direct chat between enterprise managers and job seekers is inconsistent with their demands. We will provide even better service for greater-scale small- and medium-sized enterprises by further studying their recruitment needs and characteristics. We also aim to actively expand into traditional industries such as manufacturing and finance while maintaining and strengthening our advantages in those industries where we are already well-covered with internet technology and urban services. In terms of our R&D capability, we continue to iterate our main app every two to three weeks to optimize functions such as recruitment and job seeking information display and management, work messaging and video interviews, aiming to improve our user experience and encourage their engagement. As a technology-driven company, technology capabilities are core to our competitiveness and we have been continuing to invest heavily in acquiring talent. As of June 30th, we had an R&D team with more than 1,000 employees. In terms of algorithms, on top of our continuous pursuit of improving matching accuracy, we also pay a great deal of attention to delivering customized and fair recommendation results to enable more long-tail job seekers and SME enterprise users to be recommended and exposed and to facilitate as many users as possible to engage and fulfill their needs on our platform, ultimately improving user interaction and satisfaction. As for our operations, we continue to improve and refine our operational capabilities in detailed categories. We are also conducting in-depth research and optimization for position classification of job categories in specific industries. Additionally, we have made significant investments in platform security. Our offline security and review teams have covered major cities in China. In each covered city, our team is able to arrive at the recruitment location within two hours after receiving user complaints and we plan to further expand our city coverage in the future. The security of job seekers is the cornerstone of our platform's operation. Platform security and the authenticity of job information have always been crucial obstacles hindering the online penetration of blue-collar recruitment and job seeking in the past. In coordination with the expansion of our blue-collar business, we have made a series of security upgrades to further consolidate the infrastructure of our platform. We continue to improve the sales capability and expand the geographic coverage of our direct sales team. In the second quarter, we established new branches in Foshan and Dongguan, bringing our total number of branches to 25. At the same time, we focused on strengthening the professional competency training for our sales force and improving the efficiency of individual sales personnel. As for marketing, we continue to implement dedicated marketing strategies, user acquisition through both brand advertising and online traffic. We were honored to have been appointed as the official Human Resource Supplier for the Beijing Winter Olympics. As a result, underpinned by our students and economies of scale, we continue to see significant improvement in marketing promotion efficiency, which Phil, our CFO, will discuss later in more detail. Now let me spend some time discussing the Cybersecurity Review that everyone is concerned about. As we previously announced, the company is currently actively cooperating with the Cyberspace Administration of China on the Cybersecurity Review. Simultaneously, the company is conducting its own self-examination and rectification program, focusing on security and user privacy protection, in accordance with the latest national laws and regulations such as the Data Security Law and Personal Information Protection Law. In compliance with regulatory requirements, our new user registration remains suspended on our BOSS Zhipin app, which will, to some extent, impact the company’s user growth and revenue. However, we firmly believe that the regulations are necessary to regulate the industry and protect users, and will ensure the long-term sustainable growth of the industry and the company. Given the current circumstances, we will put in more efforts to better serve our existing users. Meanwhile, we will fully cooperate with the review teams’ work in the hope of completing the process earlier. However, the company does not yet have a clear timetable for either the completion of the review or when we might be able to resume new user registrations. Finally, to summarize, China’s online recruitment market still has ample room for sustainable development and a considerable number of job seekers and recruiters have now started to use online recruitment services. The existing service offerings and the value provided to customers have yet to be fully explored. As a new generation of online recruitment, we are adopting an innovative model by combining recommendation, direct chat and mobility with our dedication to the concept of user satisfaction first. We will continue to invest in technology, enrich our product offering and enhance our service capability, penetrating into more industries and regions. Although there are some fluctuations in the short-term external environment, fundamentally, our business model remains effective and will be further demonstrated. We are full of confidence in the future growth potential and believe that we can continue to provide fair, valuable and more efficient service to nearly 600 million workers and 14 million enterprises, especially small- and medium-sized enterprises and both long-tail workers in China. With that, I will turn to our CFO and Director, Phil, for the review of our financials. Thank you.

Phil Yu Zhang, CFO

Thanks, Jonathan and Gwen Bei. Hello, everyone. Thank you for joining our earnings call today. I would like to give a brief overview of our second quarter 2021 financial results and then I will discuss our outlook for the third quarter. Before I begin, please note that all amounts are in RMB and all comparisons are on a year-over-year basis unless otherwise stated. We continued to achieve robust operational financial growth in the second quarter of this year. Our calculated cash billings increased by 175.3% to RMB1.44 billion and our total revenues increased by 173.9% to RMB1.17 billion in the quarter, beating our target. This rapid revenue growth was mainly due to the increase in revenue from our online recruitment service, which increased by 174.7% to RMB1.16 billion, contributing to over 99% of our total revenues. The increase of revenue from online recruitment service was driven by the strong growth of our paid enterprise customers following the expansion of our user base and enhanced service capabilities. As Jonathan just mentioned, with the recovery of recruitment demand and increasing penetration of online recruitment service, especially for enterprises, together with our innovative model, we have seen rapid growth of our accumulated enterprise users, which grew by over 78.5% to 14.9 million by the end of June 30, 2021. With more enterprise users posting jobs on our platform, more positions became commercially mature enough to be identified as hot positions, which we can charge a fee for job postings, leading to a higher paying ratio. These two factors combined contributed to our strong growth in paid enterprise customers, which increased by 135.9% to 3.61 million in the trailing 12 months ended June 30, 2021, compared to 1.53 million in the same period ended June 30, 2020. Furthermore, the number of our key accounts grew by 146.6% in the trailing 12 months ended June 30, 2021, resulting in a 229.3% growth in revenue from key accounts in this quarter, demonstrating our enhanced ability to serve large enterprises, converting more users to long-term customers and cross-selling more services to existing paid customers. Now turning to our cost side, total operating costs and expenses were RMB2.59 billion for the quarter. If we exclude share-based compensation expenses, which were RMB1.66 billion, including RMB1.51 billion rewarded to our core management, our adjusted total operating costs and expenses were RMB933.7 million, an increase of 63.1%, compared to RMB572.3 million in the same quarter last year, resulting in a positive adjusted operating income of RMB239.8 million. Our gross margin remained stable at 87.7%, with cost of revenue increasing by 164.2% to RMB143.2 million in this quarter, primarily driven by higher third-party payment processing costs, operational employee-related costs, server and bandwidth costs, resulting from the increased user base and transaction volume. Sales and marketing expenses increased by 45.8% to RMB534.2 million in this quarter, primarily due to our increased sales and marketing, employee-related expenses and enhanced brand advertising and customer acquisition activities. Noteworthy, our sales and marketing expenses represented 45.7% of our revenue in this quarter, down by 40 percentage points from 85.9% in the same quarter last year. This decline in sales and marketing percentage demonstrates higher efficiency of our marketing initiatives and is a proof of our strong economies of scale. During this quarter, our R&D expenses increased by 113.7% to RMB250 million, primarily due to increased R&D personnel, payroll, other employee-related costs and share-based compensation. We will continue to invest in R&D talents as one of our core growth strategies, allowing us to maintain our leading technology capabilities, which are essential to our competitiveness. General and administrative expenses were RMB1.67 billion for this quarter, mainly resulting from a one-time issuance of Class B ordinary shares to TECHWOLF LIMITED, which is a company controlled by our founder as a reward approved by the Board before the IPO. Excluding share-based compensation, our G&A expenses grew by 68.2% to RMB83 million this quarter, which was mainly due to the expansion of our G&A team. As a result of the foregoing, our net loss was RMB1.41 billion in the second quarter. Excluding share-based compensation, we achieved profitability under the non-GAAP measure, our adjusted net income in this quarter was RMB246.5 million, compared with an adjusted net loss of RMB143.4 million in the same quarter last year, translating to an adjusted net margin of 21.1% for this quarter, representing a 54 percentage point improvement. This operating leverage was driven by economies of scale and our continued efforts in increasing efficiency, and also is a proof of our strong network effect. Supported by the strength of our profitability, we recorded net cash generated from operating activities of RMB671.2 million in this quarter, compared to net cash used in operating activities of RMB14.2 million in the same period of 2020. Moving to the balance sheet, as of June 30, 2021, our cash and cash equivalents and short-term investments were RMB11.7 billion, compared to RMB4.5 billion as of December 31, 2020. The increase was primarily attributable to net proceeds from our successful listing, as well as our growth in operating cash flow in the quarter. Now turning to our business outlook for the next quarter. For the third quarter of 2021, we expect our net revenue to be between RMB1.18 billion and RMB1.21 billion, representing a year-on-year growth rate of approximately 100% to 105%. As we just discussed, there are still uncertainties regarding the ongoing Cybersecurity Review and the timing to resume new users’ registration. The impact on our revenue is reflected in the outlook, but still subject to change. This estimate is based on the assumption that the review will last till the end of September. In closing, we delivered a strong result for our first quarter as a public company and I would like to thank again our team, our esteemed users and shareholders. In spite of the uncertainty of the Cybersecurity Review, we are still in a fast-growing stage, with healthy financial status and improving leverage. Our long-term competence remains unchanged, and the business model remains effective. I am excited about the coming quarter and looking forward to sharing our progress with you again. This concludes my prepared remarks. Now we would like to answer questions. Operator, please go ahead.

Operator, Operator

Thank you. Your first question comes from the line of Ken Hu of TH Capital. Please ask your question.

Ken Hu, Analyst

Good evening, management, and happy Friday. I have a couple of questions. First, we've seen some data indicating a decline in the China economy. In light of this, based on your frontline employment activities, what does the confidence level of employers in various industries look like regarding hiring? Secondly, the Data Security Review has been ongoing for over a month, and we are uncertain about when it will conclude. If this review continues for an extended period and we are unable to acquire new customers online, what strategies does the company have in place to adapt and attract new customers? Thank you.

Phil Yu Zhang, CFO

Okay. So I can answer your first question first and then our CEO can comment on your second question. Our business has diversified industry contributions for our business. So new economy industries as a whole account for a large portion, although the single industry and single company contribution is low. Overall, even though the macro environment is not very strong, we haven’t seen such strong signals on our platform. So, our business growth is mainly driven by paying users growth. We are still in the stage of seeing structural user increase at this moment. We haven’t seen direct impacts from the macro environment, but we will closely monitor. Recently, there are some industries that some investors might like to ask about, so I can comment at this time. For example, the education industry is a part of the new economy industries and accounts for only mid-single digits for our total revenue. Therefore, we believe that any one industry’s impact on our business is limited.

Jonathan Peng Zhao, CEO

We are still observing an increase in users right now. We haven't experienced any direct effects from the macroeconomic environment, but we will keep a close watch. There are certain industries that some investors may want to inquire about, so I can provide some comments on that. For instance, the education sector is part of the new economy and represents only a small percentage of our overall revenue. As a result, we don’t think that the impact of any single industry on our business is significant.

Phil Yu Zhang, CFO

Regarding the company-wise perspective, some companies may have thoughts about the impact from either macro or regulatory-related concerns. We think that, because we serve a large number of small- and medium-sized companies, our contribution from top customers is relatively low. The top 20 customers only account for less than 4% of total revenue. Therefore, the changes in any single company or single industry will have limited impact on our growth trend. That’s my answer to your question.

Ken Hu, Analyst

Thank you, Phil.

Jonathan Peng Zhao, CEO

Some companies may be considering the effects of macroeconomic or regulatory issues. However, since we cater to many small and medium-sized businesses, the revenue generated from our largest clients is quite minimal. The top 20 customers represent less than 4% of our total revenue. Consequently, fluctuations in any individual company or industry will have a limited effect on our overall growth trajectory. That’s my answer to your question. Thank you, Phil.

Phil Yu Zhang, CFO

Sure.

Unidentified Company Representative, Unidentified

Okay. Now I will cover the question.

Ken Hu, Analyst

Our contribution from top customers is relatively low, with the top 20 customers accounting for less than 4% of total revenue. Consequently, changes in any single company or industry will have a limited impact on our growth trend. That's my answer to your question.

Unidentified Company Representative, Unidentified

Okay. So we are under this Cybersecurity Review and since July 5th, our new user registration was suspended, and this has impacted our business. This particularly affects our MAU and DAU. However, since our large base of existing users can use our app normally, the MAU for July remains relatively stable and our DAU to MAU ratio also remains stable, indicating continued user activity. In the meantime, we are focused on better serving our existing customers, making significant efforts in this regard. Regarding revenue, we are also impacted because this suspension has not only hindered job seekers but also enterprise users. Our sales and customer service teams are dedicated to serving our existing customers and have been conducting some training for our teams in this area. The extent of the impact depends on how long the review will last. We have given guidance for our next quarter revenue. However, this is based on the assumption that the new user registration suspension will last until the end of September. As an enterprise, we cannot predict the timing of this suspension, but since we need to provide revenue guidance, we made an assumption that this will last until the end of September, which we believe is appropriate and reasonable. This estimate does not relate to our prediction on when this will resume; we are not in a position to make that prediction. However, regarding what we can do to increase our new users, we cannot do anything about that, since we are not allowed to register new users and we are focusing on our existing users. Nevertheless, I believe that this suspension's impact on our business is temporary and the effectiveness of our new business model is not affected in the long run. Lastly, I would like to emphasize that our whole company is fully cooperating with the review team on their work.

Ken Hu, Analyst

Thank you. Thank you for the answer.

Operator, Operator

Your next question comes from Eddy Wang of Morgan Stanley. Please ask your question.

Eddy Wang, Analyst

Thank you for taking my question. I have two inquiries. First, regarding the guidance for the third quarter, as Jonathan noted, this has already led to the suspension of new user registrations until the end of the third quarter. In my opinion, the guidance remains quite robust. I would like to know if this will positively impact the app for existing users or improve the paying ratio among enterprise users. That’s my first question. Second, considering the tighter regulatory environment for the internet and rapidly growing sectors like education, we may see a rise in employees from these industries seeking new jobs. In the short term, this might create some challenges with increased demand for positions in these fast-growing companies. How do you think this situation will ultimately benefit the online recruitment industry in the long run? Thank you.

Phil Yu Zhang, CFO

So, Eddy, I would like to add a little bit of color to the ARPU for the second quarter. For this quarter, our enterprise ARPU on our platform was relatively stable. Therefore, the revenue growth of our business was mainly driven by the number of enterprise users, not the ARPU. This is the situation of the second quarter. Jonathan, can you comment on the next two questions?

Jonathan Peng Zhao, CEO

Eddy, I would like to add a little bit of color to the ARPU for the second quarter. For this quarter, our enterprise ARPU on our platform was relatively stable. Therefore, the revenue growth of our business was mainly driven by the number of enterprise users, not the ARPU. This is the situation of the second quarter. Jonathan, can you comment on the next two questions?

Unidentified Company Representative, Unidentified

Okay. Firstly, I will supplement Phil’s comments on your first question. Currently, our entire sales team and customer service team are focusing on our existing users. We are continuing to improve our renewal and repurchase rate. This not only helps our current situation but will also benefit us in the long run. However, from a group level, we can focus on strengthening our service capabilities. Regarding your second question about the educational industry, we have noticed that many employees are leaving their positions and are becoming more active on our platform in their job search. There are two types of job seekers in this industry. The first type is those in standard jobs like technology, products, human resources, general administration and operations, which are more common across industries and much easier to find new jobs. The second type includes K-12 teachers and coaches. They have two options: either join institutions that are actively hiring educators or change their career direction. Our observation indicates that many of these workers are emerging quite well, still managing to succeed. The situation on our platform reflects that there is still a significant number of job seekers in this sector, but they are integrating into the overall job seeker group quite effectively and are looking toward the future. Furthermore, since the overall education sector accounts for a relatively small percentage of our total user base, we have not observed any very significant impact on our overall industry.

Eddy Wang, Analyst

Many of these workers are emerging quite well and continue to succeed. The situation on our platform shows that there are still many job seekers in this sector, and they are effectively integrating into the larger group of job seekers and looking toward the future. Additionally, since the overall education sector makes up a relatively small percentage of our total user base, we have not seen any significant impact on our overall industry.

Jonathan Peng Zhao, CEO

The situation on our platform reflects that there is still a significant number of job seekers in this sector, but they are integrating into the overall job seeker group quite effectively and are looking toward the future. Furthermore, since the overall education sector accounts for a relatively small percentage of our total user base, we have not observed any very significant impact on our overall industry.

Operator, Operator

Your next question comes from Piyush Mubayi of Goldman Sachs. Please ask your question.

Piyush Mubayi, Analyst

Thank you, Jonathan, Phil, Gwen Bei. If I can just go through the business as it’s been performing, your guidance at RMB1.2 billion for the third quarter is strong despite the CAC Review. I wonder if you could take us through the drivers that you’re observing and what the risk-reward around that number is, i.e., can it slowdown from here, if COVID were to pick up or any other event happened or would it accelerate as you go through potentially a slowdown in the economy, based on what you’ve observed through the early part of 2020? My second question is on your deferred revenue, which is RMB276 in terms of the change. It points to a slowdown in the first quarter and we are observing after three quarters of acceleration in the number. Could you just help us understand what’s going on there? And the third question centers around how well you manage costs in the second quarter. Given the outlook for the third quarter, will you be managing the sales and marketing expense line as tightly as you were in the second quarter, ensuring the focus remains on what is necessary in the quarter and thereafter from a cash perspective? Thank you.

Phil Yu Zhang, CFO

Okay. Thank you for your questions. I should answer your second question first. Regarding the deferred revenue, the changes in deferred revenue were mainly a seasonal issue. Our second quarter typically experiences lower cash revenue due to the seasonal patterns. The lower conversion rate or lower percentage as the GAAP revenue to the calculated cash billing ratio is related to this seasonality. We still see healthy cash revenue growth for the second quarter, and we didn’t identify any slowdown with our cash revenue changes. Regarding your first question about the overall guidance, it’s now late August, and we have a certain level of visibility for the month of August and have already completed July. So we have one month ahead for growth observations. Therefore, we have a level of confidence in business growth for the third quarter, regardless of potential developments in September. We have aimed to be conservative with our forecast numbers. All estimates are based on extrapolated judgments for September. We believe our intention in normal circumstances is to provide guidance for the third quarter and beneficial insights without entirely avoiding discussion of the Cybersecurity Review by the regulator. Concerning the management of costs for the third quarter, we understand that because new registrations are suspended, the revenue may take a hit, but we will be implementing strict measures for various cost items, especially marketing and traffic-related expenses. Since we are not permitted to grow our user base, we will decrease our user acquisition-related marketing activities. This approach should strike a balance, given the inability to generate sufficient revenue while controlling expenditures during the third quarter. In summary, we hope to maintain our third-quarter margins and deliver solid results.

Piyush Mubayi, Analyst

Thank you, and congratulations again.

Phil Yu Zhang, CFO

Thank you.

Operator, Operator

Your next question comes from Wei Xiong of UBS. Please ask your question.

Wei Xiong, Analyst

Thank you for addressing my questions. My first question is about the potential impact of the Personal Data Protection Law. Will it affect our operations, or do we need to make any adjustments that could influence the effectiveness of our matching and recommendation algorithm? Secondly, I would like an update on the progress in the blue-collar segment recruitment business. If you could share any operating or financial data, that would be very helpful. Looking ahead to the second half of this year and next year, what strategies or operational goals can you share? Thank you.

Jonathan Peng Zhao, CEO

Could you provide insight into any potential impacts on our operations and whether any adjustments are needed that might influence the performance of our matching and recommendation algorithm? Additionally, I'd like to inquire about the recent developments in the recruitment business for blue-collar workers. Any operational or financial data you can share would be appreciated. As we look toward the second half of this year and into next year, what strategies or operational goals can you disclose? Thank you.

Phil Yu Zhang, CFO

I will take your first question regarding the Personal Information Protection Law. This is not a new regulation and is constructed based on the Network Security Law and the Data Security Law. Since its origin, we have strictly followed the progress of the law rules and have adjusted our boundaries accordingly. Before the Personal Information Protection Law came out, we identified gaps for compliance, and together with our work, we sorted out our compliance from various perspectives such as product operations and data security, continuing to update and improve our systems and procedures for compliance. We want to highlight that our app has prioritized privacy protections since its inception. For example, during communication between job seekers and enterprises, sharing of resumes or contact information happens only after the parties involved click 'yes' to agree to share information. We have insisted on this practice for many years. Concerning the impact on our recommendation algorithms, we have conducted significant research and studies on this subject. Since we collect user data in accordance with the law, we don’t believe this will significantly impact our matching results because the most sensitive data are not utilized in our algorithms and do not fundamentally affect our business. We continue to study and improve our user privacy protections, and we are convinced that these more stringent regulations will benefit the overall industry and user protections.

Unidentified Company Representative, Unidentified

Regarding the blue-collar business, we have noted a faster user growth from both blue-collar and white-collar segments. The blue-collar segment continues to outperform our white-collar business. Among all sub-sectors related to blue-collar, the urban service sector grew nicely, with verified enterprise users up by more than 120% year-over-year. We see good momentum with our blue-collar business. In the second half, we plan to focus on building the foundations of our blue-collar recruitment services. This includes further optimizing our products and services and improving the user experience for blue-collar job seekers. These job seekers often have different preferences, and we are providing more user-friendly products to them, such as mini resumes and simplified resume templates. In terms of algorithms, we are customizing blue-collar recommendations while also implementing stricter platform rules to prevent false information and illegal recruitment activities on BOSS Zhipin. In the second quarter, as Jonathan highlighted, we enhanced our platform security and verification teams, which we believe will ensure a satisfactory user experience for blue-collar individuals, thereby increasing their loyalty to our platform. In terms of blue-collar business revenue contribution, this continues to grow. In the second quarter, revenue from blue-collar business accounted for roughly mid-20% of our total revenue. We anticipate continued growth in this contribution.

Wei Xiong, Analyst

Thank you, management.

Operator, Operator

Your next question comes from Colin Liu of China Renaissance. Please ask your question.

Colin Liu, Analyst

I’ll translate for myself. As you mentioned, there is significant growth in the blue-collar business market, and I want to focus particularly on the urban blue-collar segment. However, there is still a large portion of the market that includes what we call traditional blue-collar workers from manufacturing or construction industries. Do you have any strategic updates on that part of the business as we enter the second half of the year? How can we accelerate growth specifically in that segment? My second question is, as we increase our presence in the blue-collar market, will that involve collaborating with various partners? What is the strategy for selecting or working with different types of partners? Thank you.

Phil Yu Zhang, CFO

Thank you for your questions. I would like to briefly answer your question, and then Jonathan will provide more detail regarding our strategy and cooperation with agencies for the blue-collar business. In terms of manufacturing and construction-related blue-collar jobs, they are indeed part of the blue-collar market. However, we observe that urban service workers currently represent the largest and fastest-growing segment of our platform. Various structural trends are leading more people to urban areas to find jobs, and our app’s model is exceptionally suited to assist these groups effectively.

Jonathan Peng Zhao, CEO

We will provide more detail regarding our strategy and cooperation with agencies for the blue-collar business. In terms of manufacturing and construction-related blue-collar jobs, they are indeed part of the blue-collar market. However, we observe that urban service workers currently represent the largest and fastest-growing segment of our platform. Various structural trends are leading more people to urban areas to find jobs, and our app’s model is exceptionally suited to assist these groups effectively.

Unidentified Company Representative, Unidentified

To address your questions about partners, we consider partner recruitment agencies in manufacturing as potential collaborators. In the massive manufacturing industry in China, numerous agencies are tasked with recruiting for enterprises. As more ordinary workers gravitate toward our platform, we’re seeing agencies utilize our service to find talent. This presents the challenge of cooperation with these agencies. We emphasize our commitment to job seekers, and we will aim to negotiate with agencies to establish clearer talent recruitment guidelines. We recognize the complexity of this relationship but remain optimistic about our ability to foster effective cooperation within this sector. We need dedicated efforts to achieve this goal, but we’re motivated by the potential outcomes.

Colin Liu, Analyst

We’re seeing agencies utilize our service to find talent. This presents the challenge of cooperation with these agencies. We emphasize our commitment to job seekers, and we will aim to negotiate with agencies to establish clearer talent recruitment guidelines. We recognize the complexity of this relationship but remain optimistic about our ability to foster effective cooperation within this sector. We need dedicated efforts to achieve this goal, but we’re motivated by the potential outcomes.

Operator, Operator

Due to constraints, that concludes today’s question-and-answer session. At this time, I will turn the conference back to Gwen Bei for any additional or closing remarks.

Unidentified Company Representative, Unidentified

Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or the TBT Investor Relations. Thank you.

Phil Yu Zhang, CFO

Thank you.

Jonathan Peng Zhao, CEO

Thank you.

Operator, Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.