Kanzhun Ltd (BZ) 2024 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Kanzhun Limited fourth quarter and fiscal year 2024 financial results conference call.

(Operator Instructions) Today's conference is being recorded.

At this time, I'd 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 and the full year 2024 earnings conference call.

Joining me today are our Founder, Chairman, and the CEO, Mr. Jonathan Peng Zhao and our Director and the CFO, Mr. Phil 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 culture 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 purpose 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 said, I will now turn the call to Jonathan, our Founder, Chairman, and the CEO.

(spoken in foreign language)

Hello, everyone.

Thank you for joining our Company's fourth quarter and full year 2024 earnings conference call.

On behalf of the Company's employee, management team and the Board of Directors, I would like to extend our sincere gratitude to our users, investors and friends who have continuously be believed us and supported us.

(spoken in foreign language)

Let me first provide an overview of our financial performance.

In the fourth quarter, the company achieved a GAAP revenue of RMB1.82 billion, up 15% year on year.

Our adjusted net income, which excludes share-based compensation expenses, which RMB720 million, reflecting a 15% year on year growth.

In the fourth quarter, average verified monthly active users or "MAU" on the BOSS Zhipin app increased by 28% year on year to 52.7 million.

(spoken in foreign language)

For the full year of 2024, the Company achieved a GAAP revenue of RMB7.36 billion, up 24% year on year.

Adjusting net income, which excludes share-based compensation expenses, reached RMB2.71 billion, up 26% year on year.

Furthermore, our adjusted operating income, excluding other income such as wealth management income was RMB2.32 billion for full year 2024, rising by 41% year on year.

In 2024, we successfully delivered on our profit commitments.

(spoken in foreign language)

Share-based compensation expenses as a percentage of revenue in 2024 decreased by 2.3 percentage points compared to 2023 and are expected to further decline in both absolute value and the proportion of revenue in 2025.

(spoken in foreign language)

In 2024, we attracted nearly 49.5 million newly added verified users, setting a new record for annual user growth.

At the same time, we reduced marketing expenses compared to 2023, thanks to our growing brand recognition and enhanced bilateral network effects, which have significantly improved customer acquisition efficiency.

As of December 31, 2024, the company has provided service to over 225 million users and 16.6 million enterprises.

(spoken in foreign language)

MAU on the BOSS Zhipin app for the full year reached 53 million, representing a year on year increase of 25.3%.

In the year, we facilitated over 1.85 billion successful resume exchanges based on mutual consent between job seekers and employers, which is what we refer to as achievement in daily operation.

(spoken in foreign language)

Despite macroeconomic challenges in 2024, the Company's user growth-driven revenue growth model remains effective, driving notable improvement in both revenue scale and profitability.

(spoken in foreign language)

Some may argue that we are more beta-driven business.

However, I would like to emphasize that our business model is so much more than that.

(spoken in foreign language)

To date, user expansion has remained our core growth driver.

(spoken in foreign language)

The structural revenue growth driven by sustained user penetration is clearly reflected in the following key metrics.

First, increasing revenue contribution from blue collar segments.

Blue collars user growth boosted their revenue contribution to overall revenue in 2024 to 38%.

Notably, the manufacturing sector emerged as a bright spot for blue collar growth, posting the fastest growth rate among all industries.

(spoken in foreign language)

Second, the revenue contribution from non-tier 1 cities continues to grow.

(spoken in foreign language)

Third, the revenue contribution from micro-and-small enterprises continues to rise.

Micro-and-small enterprises are defined as business with fewer than 20 employees.

(spoken in foreign language)

These revenue gains stem from structural shifts in user growth.

At the core of this success is the Company's commitment to enhancing the user experience, which is underpinned by our continuous product and the service optimization.

It's not hard to imagine that within the online recruitment service industry, blue-collar workers, particularly those in the manufacturing sector, lower tier cities and micro-small enterprises are among the more challenging user groups to serve.

Breakthroughs and growth in these areas not only validate our user-first strategy, but also highlights the significant potential for our future user expansion and revenue growth.

(spoken in foreign language)

Additionally, we have observed that recruitment demand from white-collar and large enterprises have stabilized.

Enterprises with over 10,000 employees demonstrated the fastest quarter-on-quarter revenue growth in the fourth quarter.

(spoken in foreign language)

I want to highlight one more aspect of our products and services.

Many investors and friends have shown interest in the company's exploration of close loop services initiatives, which we do have some progress.

In 2024, the number of enterprises which we have provided placement-alike service was near 40,000.

(spoken in foreign language)

In 2024, the total number of paid enterprise customers reached 6.1 million, representing a year on year increase of 17.3%.

While the active user paying ratio remains stable, the average revenue per paying user or ARPPU achieved year-on-year growth both for the full year and in the fourth quarter.

(spoken in foreign language)

Now let me introduce some AI implementation.

We phased rollout in version 13.030 of the BOSS Zhipin app, which was released across major app stores around March 7.

(spoken in foreign language)

I'll start with our AI-to-C or AI for job seeker side update.

First, on jobseeker's interaction for job search, we have added an AI powered "question-based" search function, something many of you are likely already familiar with and also kept our traditional keyword search.

The search engine is powered by both our proprietary model called Nanbeige and the deployment of DeepSeek-R1.

(spoken in foreign language)

And the second thing on the job seeker side is, we have released an AI-bot to help job seekers with interview coaching.

This feature primarily targets those who have graduated within the past three years.

This AI-bot has been trained on millions of real interviews, and its core skills is that he's very good at interviewing.

And as such, there are lots of things he can do.

We will go step by step.

(spoken in foreign language)

Now, let's take a look at AI to business, which is the recruiter side.

Our first application for enterprise users is an AI agent.

Recruiters participating in the beta testing can communicate their needs to the agent, which can perform the following tasks.:(1) understand the recruiter's specific requirements,; (2) generate a curated list of candidates from our database; (3) offer justification for its recommendations; (4) deliver these results according to the recruiter's available schedule.

(spoken in foreign language)

For the second application, a beta version has been launched to a selected group of blue-collar enterprise users.

The process unfolds as follows: once the recruiter selects a candidate they deemed suitable and explicitly express their willingness to proceed by saying, "I'm willing to give this candidate a try," the AI handles all subsequent communication on behalf of the recruiter.

The communication process continues until the AI either obtains the job seeker's confirmation of interest through the exchange of contact information, or the job seeker rejects the outreach of the recruiter who is represented by AI.

(spoken in foreign language)

On the operational front, AI has huge potential to improve management efficiency and reduce costs.

For instance, leveraging AI for security review has improved our audit efficiency by 30%.

Over the past two years, as our user base has expanded rapidly, the workload related to user security protection has increased accordingly.

However, AI has enabled us to manage this without a proportional increase in staffing.

(spoken in foreign language)

Next, I will briefly update you on this year's spring recruitment season.

Following the Spring Festival, the recruitment market continued its steady recovery trend that began towards the end of 2024.

Post-Chinese New Year in February, the Company's key metrics, including number of active users, active job postings, and new job postings, all reached historical highs.

The average daily new job postings after Chinese New Year increased by more than 10% compared to the same period last year.

Peak daily active users on the BOSS Zhipin app reached approximately 20 million, which are also historically high.

(spoken in foreign language)

A very important highlight on the supply and demand side, the job seeker-to-enterprise user ratio among new users improved compared to the same period last year, extending the positive momentum that began in November 2024.

(spoken in foreign language)

From an industry perspective, manufacturing, logistics, automotive, healthcare, education, and the professional services have exhibited strong performance.

In terms of job type, blue collar positions have grown faster due to our user expansion, while white-collar roles have also demonstrated an improving year-on-year trend.

(spoken in foreign language)

Notably, since the Spring Festival, average daily posting of AI-related jobs have surged by over 60% year on year, signaling a revitalized ecosystem for emerging business.

This growth in AI-related roles in turn has fueled good sequential momentum in demand for products and technical positions since the Spring Festival.

(spoken in foreign language)

Last but not least, we are very committed to shareholder returns.

In 2024, the Company repurchased approximately $229 million worth of shares, accounting for 3.7% of total outstanding shares.

This underscores our confidence in the Company's long-term growth.

And that concludes my part of the call.

I will now turn it over to our CFO, Phil for the review of our financials.

Thank you.

Thanks, Jonathan.

Hello, everyone.

Now, let me walk through the details of our financial results of fourth quarter and full year of 2024.

We delivered a solid financial results for the fourth quarter and the full year of 2024.

The recruitment market environment in 2024 was challenging, but we are pleased to see that recruitment demand gradually stabilized towards the end of the year.

Under such conditions, our revenues grew by 15% year on year to RMB1.8 billion during this quarter, slightly beating our expectation, and grew by 24% to RMB7.4 billion for the full year.

Our number of paid enterprise customers for 2024 expanded to 6.1 million, marking a 17% year-on-year growth.

ARPPU for the quarter was up by 6.8% year on year and 3.9% quarter on quarter, marking a fourth consecutive quarterly growth.

ARPPU for the full year reached RMB1,200, up by more than 5% year on year.

It's a result of our efforts to explore customer needs and providing more valuable services.

Moving to the cost and expenses side, our total operating cost and expenses increased by 7% year on year to RMB1.5 billion during the fourth quarter and by 15% to RMB6.2 billion for the full year.

Total share-based compensation expenses decreased by 6% year on year in the quarter.

As percentage of revenue-wise, share-based compensation went down by 4 and 2 percentage points respectively for the quarter and the full year.

Excluding share-based compensation expenses, our adjusted income from operations grew by 27% to RMB659 billion and the 41% to RMB2.3 billion respectively for the quarter and the full year.

The adjusted operating margin for the fourth quarter reached a quarterly historical high of 36.1%, while the annual adjusted operating margin improved by 4 percentage points to 31.5% in 2024, continue to demonstrate our strong operating leverage and beating our target.

Cost of revenues increased by 14% year on year to RMB314 million during the fourth quarter and by 17% to RMB1.2 billion for the full year.

This increase was primarily due to increases in payment processing cost, server and bandwidth cost, and other business-related cost alongside with the growth of revenue and user base.

It's worth mentioning that operational employee-related cost as percentage of revenue decreased by 0.9% points year on year, an evidence of AI application to improve operating efficiency.

As a result, our gross margin went up by 0.9% to 83.1% in 2024.

Sales and marketing expenses decreased by 2% year on year to RMB426 million during this quarter and increased by 4% to RMB2.1 billion for the full year.

Our marketing expenses, including Olympic campaign sponsorship, decreased by 10% year on year, despite a higher new user growth versus prior year.

We believe this improving trend of user acquisition efficiency will continue in 2025 and led to a further decrease of our marketing expenses on both absolute amount and as percentage of revenue.

R&D expenses increased by 2% year on year to RMB440 million this quarter and by 18% to RMB1.8 billion for the full year.

This increase was primarily driven by our further investments in AI infrastructure, which incurred AI-related server depreciation cost and cloud services fees.

G&A expenses increased by 23% year on year to RMB276 million during this quarter and by 35% to RMB1.1 billion for the full year.

This increase was mainly due to increased employee-related expenses and investment in new business initiatives.

Our net income reached RMB444 million in the quarter and RMB1.6 billion in 2024.

Our adjusted net income increased by 15% year on year to RMB722 million in the fourth quarter and the 26% year on year to RMB2.7 billion for the full year.

Adjusted net margin continued to expand in the full year and reached a historical high of 36.9%.

Net cash provided by operating activities amounted to RMB956 million during the fourth quarter and increased by 16% year on year to RMB3.5 billion for the full year.

And our cash position stood at RMB14.7 billion as of December 31, 2024, though there was share buyback spending.

The robust cash reserves, coupled with strong operating cash flows, strategically position us well to support future growth initiatives and the shareholder returns.

During this quarter, we repurchased the 6.7 million ADSs for a total consideration of USD93 million.

This led to a 1.1% decrease in our total outstanding shares as compared to September 30, 2024, even after counting in shares issued for our share-based awards.

Combined with share repurchase in the preceding quarters, we have spent a total of USD229 million for the share repurchases in 2024, representing substantial progress of our share repurchase programs.

And now for our business outlook.

For the first quarter of 2025, as we witnessed the recruitment spending bottoming out from last quarter and showing upswing trajectory post the Chinese New Year, we expect our total revenues to be between RMB1.90 billion and RMB1.92 billion, a year on year increase of 11.5% to 12.7%.

That concludes our prepared remarks.

Now we would like to answer questions.

Operator, please go ahead.

(Operator Instructions)

Eddie Wong from Morgan Stanley.

(spoken in foreign language)

Thank you, management for taking my question.

I have two questions.

The first one is that, could you please share your thoughts on how the AI boom, driven by the DeepSeek, might impact the online recruitment industry?

And this includes the transformation in the industry technology and the products as well as its influence on the market recruitment demands, for example, the hiring surge in the tech industry.

What is our competitive advantage, in this context?

The second question is, we actually have made a quite big or significant investment in AI already.

So with the emergency of DeepSeek, will this promote any adjustments to our AI R&D investment strategy?

And what is our future roadmap for AI product development?

Thank you.

(spoken in foreign language)

Thank you for your question.

Let me first talk about the implication of the DeepSeek have on the online recruitment industry.

First, especially for the demand side, in the short term, we do see some changes.

For example, on the recruiter side, as I just mentioned, the average daily newly added AI-rated jobs surged by more than 64%, which is quite rare, and also the existing jobs became more active.

The average daily online active number of AI-related jobs increased by more than 24%, which is also quite a big number.

(spoken in foreign language)

Okay.

On the job seeker side, of course, everyone was trying to look for opportunities in this AI trend.

On the numbers, we found that the active search with AI in the keywords increased by more than 34% year on year.

(spoken in foreign language)

I believe these changes will deeply affect the future of the recruitment industry.

I will talk about one positive side and maybe one slightly negative side.

On the positive side, this trend of AI, its first initial usage is that it has very strong understanding of human natural language and generate human natural language, and this is first found and can easily be understood.

So when people starting to find a job - turning it to words - it will become a resume.

And when the recruiter is trying to hire someone - formatting it into words - it will be a job description.

In terms of expression of resume and job description, this kind of wording format in front of AI is very simple and transparent, and it's easy to understand that this can be very deeply affected.

(spoken in foreign language)

And the second one, on the negative one, is a concern.

I will express with numbers.

For example, on a platform, there are over 200 million of AI generated resume and on the other side, there are 40 million of AI job description.

So under such conditions and circumstances, what is the meaning of the people behind all those resumes and JDs, and what our machines are matching for?

This is not a new topic.

Currently, more and more people are using AI to search for results and to write articles.

And there will be more and more fake historical fact made up by AI that does not exist, and with more than 1,000 times of repeat, that will become a fact.

So a lot of things have been polluted.

Now the massive pollution of resume or job description has not started yet.

So we need to be alert and prepared for that.

(spoken in foreign language)

And after the DeepSeek moment, I have also been considering your question about what our advantages are, and I believe we do have some.

First, we have been continuously investing in AI science in the past two years.

We also have our own pre-trained model Nanbeige which is quite good.

We have a lot of AI application scenarios and accumulated a lot of unique user behavior and vertical related data.

I think that's something we have facing this challenge of this moment.

(spoken in foreign language)

And your second question about our further investment in AI development, which I have been considering recently.

So, since early 2023, that ChatGPT moment two years ago, seems like AI has been a "spring moment."

We have spent more than RMB1 billion on purchasing GPUs, with a lot of curiosity and a little bit of fear.

Currently we have stored enough computing power.

(spoken in foreign language)

Before the restriction order of GPU purchasing, we have actually bought a lot of GPUs, but last year under the overall environment with, you need to have more and more GPUs and bigger and bigger computing power.

Under that situation, we are a little bit awkward in our technology investment.

We cannot buy more and we won't buy more.

(spoken in foreign language)

Actually, DeepSeek has given us very high confidence in terms of the strategy of investment.

So as "I Ching" have said, when challenges promote changes and changes will lead to progress.

In the past, the big means right and money means the future.

That situation has gone, and the technology innovations have brought changes to many things.

(spoken in foreign language)

And the open source of DeepSeek 671B have enabled a lot of middle-sized internet companies to have the same level of AI capability with other large companies.

We are at the same starting line.

So in the future, we will, and many other companies will focus more on the AI application and AI agents, and continue our exploration in the AI science.

(spoken in foreign language)

And about our plan for our product roadmap, I talk a little bit about our current products and services, and we will continue our exploration of AI application and agents.

You will see upcoming launch of new services.

And on the revenue side, which you may concern more, from the AI to recruiters, we have one product which has been beta testing for more than one year.

I think people might be interested to pay for that service, which can help increase the efficiency of achieving mutual consents by 60% and saving the bosses' time by more than 40%.

I think this product should be welcomed by the recruiters.

And that's my answer to your questions.

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

Thank you.

Timothy Zhao, Goldman Sachs.

(spoken in foreign language)

Thank you much for taking my questions.

I have two questions here.

First, as you have shared a lot about the recruitment trend year-to-date, especially after Chinese New Year, could management share more detailed color about the recruitment demand between different enterprise size, and also different industry and more specifically, how should we think about the sustainability of the demand outlook?

And second question is regarding the paying ratio and the ARPPU trend on the platform.

For this year, how we are going to plan to increase the monetization rate or ARPPU on this platform?

Thank you.

(spoken in foreign language)

So this year's spring recruitment season compared to last year, we find that the sequential trend has been quite strong.

One number is that the online active job postings before and after the Spring Festival this year, the sequential growth is more than 173%, while last year is 141%.

This is the big picture.

(spoken in foreign language)

And white-collar industry are stably recovering.

The highlight is that the AI-related jobs have been helping with some sub-sectors or sub-industries of internet to start regrowing.

(spoken in foreign language)

One important point is that compared to last quarter, this quarter, our overall cash-in has shown accelerating growth trend.

(spoken in foreign language)

And on the ARPPU side, I don't have a very a strong motive to increase ARPPU very aggressively.

I have witnessed recovery across different industries and different sizes of companies.

So I will give them space to improve together.

So last year we saw some good growth on the ARPPU side and stabilized paying ratio.

I don't have very big aggressive plans to accelerate monetization.

Just waiting for things to turn better together.

(spoken in foreign language)

I would rather to look at with things on the side of, we are able to provide a service to different kind of users, especially enterprises.

Our model can provide service to different kind of enterprises.

There is a number that after the COVID reopening in the past two years, we have served accumulatively more than 6 million new enterprises, and annual paid enterprise numbers increased by 1.5 million.

I hope this data can mean something and show our view on the growth potential.

And that's my answer to your question.

And let's move on to the next question.

Wei Xiong, UBS.

(spoken in foreign language)

Thank you, management for taking my question.

Firstly, I want to ask, what's our current customer acquisition cost, and how does it compare to a few years ago?

If we look at 2025, are there any major marketing or promotion plans that we should be aware of, given the continued margin expansion over the past few years, how should we think about the long-term sustainable margin level for the Company?

And second, on the blue-collar business, wondering if management could share the revenue contribution and client feedback from our Conch Program?

What's our strategic focus and planning for our blue-collar business among other new initiatives for this year?

And how should we think about the change in revenue mix from the blue-collar segment?

Thank you.

Well, I'll answer the first question.

Simply speaking, there's no big marketing campaign ahead in 2025.

We are still at a faster user growth stage.

Our user growth target for this year is set as 35 million or above for 2025.

In terms of the selling and marketing to our business is still with the business leverage.

Traffic acquisition cost per user today, compared with the prior years, is much lower mainly because of brand awareness.

So the overall selling and marketing, as a percentage of total revenue, we continue to see this percentage going down.

Except for marketing, other major costs and expenses items, like COGS, sales expenses to the revenue, and also R&D expenses are all well under control.

So, looking ahead, the gross margin and the opening margin are all expected to further improve for the full year.

As we communicated in the last earnings call, we hope to secure high-quality bottom-line growth first, then we hope to actively look for additional upsides.

So we set our full year non-GAAP operating profit target at RMB3 billion for 2025, which is 30% higher than RMB2.3 billion non-GAAP operating profit for 2024.

And lastly, our share-based compensation expenses, as I just mentioned in the prepared remarks, these expenses will decline sequentially and make GAAP-based bottom line net profit with even higher growth.

So that's my comments to the margins and our financial focuses for 2025.

(spoken in foreign language)

Thank you for remembering Hailuo, which we have been talking about several years.

So for the Conch Select - Hailuo Youxuan Project, which is targeted for those agents with massive hiring demand.

So last year, we saw the full year contract amount for Hailuo Youxuan of more than RMB200 million.

I think any new business have more than 2% of our revenue contribution and is growing, is a good and valuable input.

Also in the fourth quarter, the accumulated agencies who have joined Hailuo improved by 21% sequentially, served more than 40 million job seekers.

And with the development of AI, I believe things might potentially have been changed.

In the past, those well-trained bad agencies have always had their advantages.

Well, the new guys who have a shorter period of experiences, in the past, they don't have advantages.

But now with the empowerment of AI, things are potentially change to be equal.

In the past, when we initiated Hailuo, we didn't foresee this.

But now with potential changes, we will keep you updated on progress.

And also, we will keep our investment or exploring into closed-loop services and placement-related services.

And that's my answer to your question.

And given the time constraint, operator, I think that's our last question for today.

Thank you.

That concludes today's question-and-answer session.

At this time, I'll 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 or TPG Investor Relations.

Thank you.

Thank you for your participation in today's conference.

This does conclude the program.

You may now disconnect.