Kanzhun Limited Price & Performance (BZ)

During today's call, management will also discuss certain non GAAP financial measures for comparison purpose only. For a definition of non GAAP financial measures and a 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.zipping.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO Hello, everyone. Thank you for joining our company's fourth quarter and full year twenty twenty four earnings conference call. On behalf of the company's employees, management team and the Board of Directors, would like to extend our sincere gratitude to our users and investors and friends who have continuously been in us and supported us. Let me first provide an overview of our financial 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, reached RMB720 million. Reflecting a 15% year on year growth. In the fourth quarter, average verified monthly active users or MAU on the Buzz Japing app increased by 28% year on year to 52,700,000.0 Kanzhun For the full year of 2024, the company achieved a GAAP revenue of RMB7.36 billion, up 24% year on year.

Adjusted 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 And in 2024, we successfully delivered on our profit commitments. 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. In 2024, we attract 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 12/31/2024, the company has provided service to over two twenty five million users and 16,600,000 enterprises. MAU on the bus looking app for the full year reached RMB53 million, representing a year on year increase of 25.3%. In the year, we facilitated over RMB1.85 billion successful resume exchanges, based on mutual consent between job seekers and employers. Which is what we refer to as achievement in daily operation.

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. Some may argue that we are more beta driven business. However, I would like to emphasize that our base model is so much more than that. To date, user expansion has remained our core growth driver. The structural revenue growth driven by sustained user is clearly reflected in the following key metrics. First, increasing revenue contribution from blue collar segments. Blue Collar's 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. [indiscernible] Second, the revenue contribution from non Tier one cities continues to grow. Third, the revenue contribution from micro and small enterprise Micro and small enterprises are defined as business with fewer than 20 [indiscernible] jump 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 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 would only validate our user first strategy but also highlight the significant potential for our future user expansion and revenue growth. 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. 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 cross book services initiatives which we do have some progress. In 2024, the number of enterprises which we have provided placement and lag service was near 40,000 In 2024, the total number of paid enterprise customers reached 6,100,000. Representing a year on year increase of 17.3% while the active user paying ratio remained stable the average revenue per paying user or ARPU achieved year on year growth both for the full year and in the fourth quarter. Now let me introduce some AI implementation we faced rollout in version 13.03 the BOSSA Checking app which was released across major app stores around March 7. I'll start with our AI2C or AI4JobSeeker site updates. 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 NambiGlob and the deployment of DeepSig R1. [indiscernible] And the second thing on the DropSeeker 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 his core skills is that he's very good at interviewing And as such, there are lots of things he can do. Will go step by step.

Now let's take a look at AI2 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. One, understand the recruiter's specific requirements. Should generate a curated list of candidates from our database Three, offer justification for its recondition. Four, deliver these results according to the For the second application, a better 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 deem suitable and explicitly expressed 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 obtain 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. On the operational front, AI has huge potential to improve management efficiency and reduce cost. For instance, leverage AI for security review has improved our audit efficiency by 30%. Over the past two years, as our user base have 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. Next, I will briefly update you on this year's recruitment season. Following the spring festival, recruitment market continued its steady recovery trend that began towards end of twenty twenty four. 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. Keep daily active users on the Bostrapin app reached approximately 20,000,000, which are also historical high. 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. From an industry perspective, manufacturing, logistics, automotive, healthcare, education and professional services have exhibited strong performance. In terms of job type, blue collar positions have grown grown faster due to our user expansion while white collar roles have also demonstrated an improving year on year trend Notably, since the spring festival, average daily posting of AI related draft have surged by over 50% year on year.

Secondly, we've retaliated live ecosystem for emerging business This growth in AI related roles in turn has fueled good sequential momentum in demand for product and technical positions since the spring festival. Last but not least, we are very committed to shareholder returns. In 2024, the company repurchased approximately $229,000,000 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 a review of our financials. Thank you.

Now let me walk through the details of our financial results of fourth quarter and full year of 2024. We delivered solid financial results for the fourth quarter and the 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 RMB 7,400,000,000.0 for the full year. Our number of Payo enterprise customers for 2024 expanded to 6,100,000 marking a 17% year on year growth. ARPU for the quarter was up by 6.8% year on year. And 3.9% quarter on quarter. Marking fourth consecutive quarterly growth. ARPU for the full year reached RMB 1.2 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 RMB 1,500,000,000.0 during the fourth quarter and by 15% to RMB 6,200,000,000.0 for the full year. Total share based compensation expenses decreased by 6% year on year in the quarter.

As a percentage of revenue wise, share based compensation went down by four percent and two 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 RMB 2,000,000,000, 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 margins improved by four percentage points to 31.5% in the 2024 continue to demonstrate our strong operating leverage and beating our target. Cost of revenues increased by 14% year on year to RMB $314,000,000 during the fourth quarter and by 17% to RMB 1,200,000,000.0 for the full year. This increase was primarily due to increases in payment processing [indiscernible] Server and the bandwidth costs, and other business related costs alongside with the growth of revenue and user base. It's worth mentioning that operational employee related costs as percentage of revenue decreased by 0.9 percentage points year on year. And 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 RMB $426,000,000 during 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 efficiencies will continue in 2025 and led to a further decrease of our marketing expenses on both absolute amount and as percentage of revenue. R and D expenses increased by 2% year on year to RMB $440,000,000 this quarter. And by 18% to RMB 1,800,000,000.0 for the full year. This increase was primarily driven by our further investments AI infrastructure, which incurred AI related server depreciation costs and cloud services fees. G and A expenses increased by 23% year on year to RMB $276,000,000 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 RMB445 million in the quarter, RMB1.6 billion in 2024. Our adjusted net income increased by 15% year on year to RMB $722,000,000 in the fourth quarter. And the 26% year on year to RMB 2,700,000,000.0 for the full year. Adjusted net margin continued to be expanded in the full year and reached a historical high of 36.9% Net cash provided by operating activities amounted to RMB $956,000,000 during the fourth quarter.

And increased by 16% year on year to RMB billion for the full year. And our cash position stood at RMB14.7 billion as of 12/31/2024. Though there was share buyback spendings. The robust cash reserves coupled with strong operating cash flows strategically positioned us well to support future growth initiatives shareholder returns. During this quarter, we repurchased 6,700,000.0 ADS for a total consideration of S. Dollar US93 million dollars This led to a 1.1 decrease total outstanding shares as compared to 09/30/2024. Even after counting in shares issued for our share based awards, Combined with share repurchases in the preceding quarters, we have spent a total of US dollar US229 million dollars 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 twenty twenty five, 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 RMB RMB1.9 billion and RMB1.92 billion, a year on year increase of 11.5% to 12.7%.

That, that concludes our prepared remarks. Now we would like to answer questions. Operator, please go ahead.

Thank you. We will now begin the question and answer session. We will now take our first question from the line of Eddie Huang from Morgan Stanley. Please ask your question, Eddie.

Thank you management for taking my question. I have two questions. The first one is could you please share your thoughts on how the AI boom driven by the Deep Sea might impact the online recruitment industry And this includes the transformations 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's our competitive advantage in this context? The second question is we actually have made a quite big or significant investment in I already So with the emergency of DeepSeq, will this promote adding adjustments to our AI and the investment strategy? And what is our future roadmap for AI product development. Thank you.

Thank you for your question. Let me first talk about implication of the Deep Sake have on the online recruitment industry. First, in the especially for the demand side, In short term, we do see some changes. For example, on the recruiter side, as I just mentioned, the daily average daily newly added AI ready jobs surged by more than 64%, which is quite rare. And also the existing jobs became more active So the average daily online active job number of daily jobs increased by more than 24%, which is also quite a big number. On the JobSeeker side, of course, everyone was trying to looking for opportunities in this AI trend. So on the numbers, we found that the active search result active search keywords with AI increased by more than 34% year on year. And on the I believe these changes will deeply affect the future of the recruitment industry. I will talk about one positive side and maybe one side the rapid side. On the positive side, this trend of AI is first initial usage is it has very strong understanding of human natural language and generate human natural language. And this this is first found and can be easily be understanding So when people starting to find a job, turning to the world, it will become a resume.

And when the recruiter is trying to hire someone, the formatting of world will be a job description. So in terms of description expression of resume and job description, this kind of format in front of AI is very simple and transparent. And it's easy to understand this can be very deeply affected. [indiscernible] [indiscernible] And second one on the net new line is a concern. Will express these numbers. For example, on the platform, there are over 200,000,000 of AI generated resume and on the other side there are 14,000,000 of AI generated job description. So under such condition and circumstances, what is the meaning of the people behind all those resumes and JDs and what our machines are matching for. So this is not a new topic Currently, more and more people are using AI to search for results. To write articles and there will be more and more AI made up, which is historical facts that was not existed and with more than 1000x of repeat that will become a fact. So a lot of things have been commuted Now the massive pollution of resume or job description have not started yet. So we need to be alert and prepared for that. [indiscernible] Therefore, the whole [indiscernible] And after this moment, I have also been considering your question about what our advantage is.

And we believe 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 pretrained model, NAMBI which is quite good. We have a lot of AI application scenarios and accumulated a lot of unique user behavior and very correlated data. So I think that's something we have based in this challenge of this moment. And your second question about our further investment in AI development, which I have always have been concerned recently. So in early twenty twenty three, that TADDPT moment two years ago seems like AI been a free moment. So we have spent more than RMB1 billion purchasing GPUs with a lot of curiosity and a little bit [indiscernible] So currently, we have stored enough computing power. Before the restriction order of our GPU purchasing, we have actually bought a lot of GPUs. But last year, under the overall environment, 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. So we cannot buy more and we won't buy more. Actually, this has given us very high confidence in terms of the strategy of investment.

So as Yixin have said, when challenges promote changes and changes will lead to progress, So in the past, the biggest biggest right and money means the future, that situation has gone. And the technology innovation has bring changes to many things.

AI applications, AI agents Xiaomi.

Open source of Deep671B 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 AI agents and continue our explore in the AI science. [indiscernible] [indiscernible] 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 agents [indiscernible] upcoming launch of new services. On the revenue side, which you may concern more, so from the AI to recruiters, we have one product which has been better for more than one year. And I think people might be interested to pay for that service. Which can help increase the efficiency of achieving a mutual consent 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. Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.

Thank you management 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 the 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 ARPU trend on the platform. For this year, how we are going to plan to increase the monetization rate or ARPU on this platform? Thank you.

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 and spring festival. So this year, the sequential growth is more than 173%, while last year is 141%. So this is a big picture. In white collar industry, a stable recovering. So the highlight is that the AI related jobs have been helping with some sub sectors or sub industries of Internet. [indiscernible] One important point is that compared to last quarter, this quarter, our overall cash in have shown accelerating growth trend. And on the APPRO side, I don't have a very strong motive to increase ARPU very aggressively. I had witnessed in recovery across different industries and different size of companies. So I will give them space to to improve together. So that's year, we saw some good growth on the ARPU side. But and also stabilized the payment ratio I don't have very big aggressive plans to accelerate monetization, just waiting for things to turn better together. I would rather to look at things on this side of, we are able to provide 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 accumulated more than 6,000,000 newly new enterprises annual paid enterprise customers enterprise numbers increased by $1,500,000 I hope this this data can mean something and show our view on the growth potential. And that's my answer to your question. Operator, let's move on to the next question. Thank you. Our next question comes from the line of Wei Shung from UBS. Please ask your question, Wei. Hey, 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 and client feedback from our [indiscernible] Was 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 will answer the first question. Simply speaking, there's no big marketing campaign. Ahead in 2025. We are still at faster user growth stage Our user growth target for this year is set as over $35,000,000 dollars above for 2025. In terms of the selling, marketing, to our business, is still with business leverage. Traffic acquisition per user today compared with prior years is much lower. Because of this is mainly because of our brand awareness. So the margin so the overall selling, 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 to the revenue and also R and D expenses are all well under control. So looking ahead, the gross margin and the operating margin are all expected to further improve. For the full year. As we communicated last earnings call, we will hope to secure high quality bottom line growth first. Then we hope to actively look for additional upsize So we set our full year non GAAP operating profit target as RMB3 billion. For 2025. Which is 30% higher than 2,300,000,000.0 in non GAAP operating profit for 2024.

And lastly, our share based compensation expenses as I just mentioned in the prepared remarks, this expenses will decline sequentially and which makes our GAAP based bottom line GAAP based bottom line net profit with even higher gross So that's my comment to the margins at the our financial focuses for 2025.

Thank you for remembering Hibu, which we have been talking about several years. So for the contract high low auction project, which is targeted for those agents with massive hiring demand. So last year, we saw the contract amount full year contract amount for Havelu Yousheng more than 200,000,000 So I think any new business have more than 2% of our family contribution and is growing. Is a good and valuable input. So and also in the fourth quarter, accumulated agencies who have joined Hao were improved by 21% sequentially covered more than 40,000,000 of job seekers. And with the development AI, I believe since March potentially had some change, in the past those well trained buyer people, buyer agencies have always had their advantages. The new guys who have a shorter period of experiences, they In the past, they don't have advantages. But now, with the empowerment of AI, since potentially to change to be equal. So [indiscernible] initiated Hibu, we didn't foresee this and now with potential changes, we will keep you updated and on in 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 Wimpey for any or closing remarks. Thank you once again for joining us today. You have any further questions, please contact our team directly or TDG in Metro Relations. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.