Kanzhun Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 24, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Kanjhun Limited First Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a Q and A session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms.

Operator

Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am.

Speaker 1

Thank you, operator. Good evening and good morning, everyone. Welcome to our Q1 2023 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao and our Director and CFO, Mr.

Speaker 1

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 caution 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 purpose only. For a definition of non GAAP financial measures and a reconciliation of debt to non GAAP financial results, please see the earnings release issued earlier today.

Speaker 1

In addition, a webcast replay of this conference call will be available on our website at ir. Juping.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO. Hello, everyone. Welcome to our Q1 2023 earnings conference call.

Speaker 1

On behalf of the company and our employees, I would like to express our sincere gratitude to our users and investors and our employees. In general, this is the season when our business began to return to its healthy development trajectory as we step into the post academic era. In the Q1, we recorded revenue of RMB1.28 billion, representing an increase of 12% 18% year on year and sequentially. Our calculated cash billings reached RMB1.65 billion, representing an increase of 28% 49% year on year and quarter on quarter respectively. Along with the recovery of our revenue, we demonstrated our healthy profitability and achieved a net profit of RMB32.7 million compared to a net loss in the same period of last year.

Speaker 1

Our adjusted net income, which excludes share based compensation expenses, was RMB245 1,000,000, increasing by 102% year on year. After Lunar New Year, our user base grew rapidly. In Q1, we had 14,610,000 newly verified users. The average monthly active users on both Jupyen app were approximately 14,000,000, up 58% year on year. The average daily active users increased by 54% year on year on this quarter, with DAU reaching nearly 15,000,000 with peak DAU reaching nearly 15,000,000.

Speaker 1

Notably, blue collar and lower tier CTA users were the fastest growing cohort across our user base. In this quarter, Blue collar users contribute to more than 40% of the newly verified user growth with accumulated verified BlueCola users accounting for 31% of our total users by end of this quarter. In terms of recruitment demand from enterprise users, which many of you care about, since the Q1 TNA, our monthly active enterprise user sale continuously reached record highs in comparative period, while maintaining a consistently high level since the spring festival. Among all the industry we serve, the urban service industries was the most prominent performer, while the SMEs recovered faster than large enterprises. This is also a demonstration of our software and the modeling ability to serve different users from different industries, regions and enterprise scales.

Speaker 1

Commercial wise, thanks to the general recovery of recruitment demand from our enterprise users, the number of our paid enterprise customers in the 12 month period ended March 31 recovered rapidly and this growth trend is expected to continue in the following quarters. Strong user growth has driven the urban service industry to become our 2nd largest revenue contributor, leading to the results that revenue contribution from blue collar users accounted for over 30% of our total revenue in this quarter. In terms of enterprise scale and regional distribution, the revenue contribution of enterprises with less than 100 employees and those from 2nd and lower tier cities also increased year on year. On the business operations side, one of our priorities in the quarter was to alleviate the imbalance between supply and demand under current employment market conditions. Specifically, we worked to ensure individuals, especially job seekers, could access more and better employment opportunities on our platform with a continued high quality user experience.

Speaker 1

Through deeper understanding and exploration of user demand, combined with continuous efforts to optimize our algorithms, we made some progress in this area. In February March, following the spring festival, the number of successful content reached, which means the successful resume exchange between job seekers and enterprise users, achieved on average 160,000,000 pairs and which is an increase by 55% year on year. To remind you that our monthly active users increased by 58% year on year, which means we have achieved record highs in terms of total number of resume exchanges and the number of resume exchanges per person. So I would like to take this opportunity to give special thanks to our engineers and the project managers who have made their special efforts. For those critical users such as college students, we continue to leverage our resources, trying our best to help them access to more suitable opportunities on our platform.

Speaker 1

This is important work for our company this quarter and also the corporate culture that more than 50 5,000 employees of our company has been upholding. We believe many investors and friends are concerned about the challenges and opportunities that the recent development of AI technology has brought to the company. There are only 2 things we can say as of today. First, the company attaches great importance to this technology development. Secondly, we are and will make a reasonable investment and commitment in this area to try to do something.

Speaker 1

In general, since the beginning of the Q2, our platform has continued to see solid growth trends in our user base and user engagement, both on the job seeker side and enterprise side. It's worth mentioning that the number of active enterprise users and active positions posted have both shown ongoing and steady increase, succeeding the levels we saw at the end of March. This is actually a quite good scenario. In terms of what we are seeing within different industries, the urban service industry and the travel and tourism industry have continued to perform well. The growth rates for sectors such as warehousing and logistics is a highlight recently, while recruitment demand in manufacturing industries have also demonstrated promising recurring trends.

Speaker 1

With that, I will turn the call over to our CFO, Phil, for a review of our financials. Thanks.

Speaker 2

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results for the Q1 of 2023. We are pleased to deliver a solid quarter results with strong revenue growth as well as healthy profitability and strong operating cash flow. Driven by the robust user growth and rebound of recruitment demand post the spring festival, we have witnessed a reacceleration of both revenue and calculated cash billing growth.

Speaker 2

Our revenues reached RMB1.28 billion, up 12% year over year, and our calculated cash dividends reached RMB1.65 billion, representing a year over year increase of 28%. Quarterly number of paid enterprise customers alone reached to historical high level, mainly due to increase in number of active enterprise customers and improved paying ratio. As a result, our number of paid enterprise customers in the past 12 months also recovered and expect to continue to increase in the coming quarters. Revenue contribution from small sized accounts increased as equipment demand from SME grew better. Moving to the cost side.

Speaker 2

Total operating costs and expenses in this quarter were RMB1 point 37,000,000,000, up 20% year over year. Excluding share based compensation, adjusted operating costs and expenses in this quarter increased by 15% to RMB1.16 billion. Considering other operating income, our adjusted operating margin for this quarter is 10.6%. Cost of revenues in this quarter was RMB247, up 39% year over year, mainly driven by increases in server and bandwidth costs due to higher user traffic and payment and processing costs, which is related to the higher growth of cash collections from our online self serve facilities. Excluding share based compensation expenses, our adjusted sales and marketing expenses were RMB RMB568 1,000,000, up 15% year over year.

Speaker 2

This increase was primarily due to higher marketing expenses compared to last year as we have strong user and traffic growth this quarter. However, we have observed that overall customer acquisition efficiency has improved compared to the same period of 2021 due to our enhanced branding recognition. This encouraging trend will help us continue to achieve some profitability while maintaining good user growth momentum. Sales employees related expenses also increased as a result of higher cash revenue growth. Our R and D expenses in this quarter increased by 15% year over year to RMB RMB333 1,000,000 and the G and A expenses in this quarter increased by 6% year over year to RMB165 1,000,000.

Speaker 2

Notably, benefiting from our strategy and efforts to improve operating efficiency, our adjusted R and D expenses and adjusted G and A expenses kept relatively stable with the same period for 2022. Net income in this quarter was RMB33 1,000,000 as compared to a net loss of RMB12 RMB12 1,000,000 in the same quarter 2022. And our adjusted net income for this quarter increased by 102% year over year to RMB245 1,000,000, representing an adjusted net margin of 19%. Net cash provided by operating activities was RMB544 1,000,000 for this quarter. As of March 31, 2023, our cash, cash equivalents and short term investments increased to RMB 13.5 billion.

Speaker 2

The robust operating cash flows and cash reserve enable us to be more flexible on capital allocation and future development strategy. And now for our business outlook, for the Q2 of 2023, we expect our total revenues to be between RMB1.43 million and RMB1.46 billion, with a year over year increase of 28.6% to 31.3%. That concludes our prepared remarks. Now, I would like to answer questions. Operator, please go ahead.

Operator

Thank Our first question comes from the line of Eddie Huang from Morgan Stanley. Please go ahead. Your line is open.

Speaker 3

Thank you for taking my question. I have two questions. The first one is that if you look at the use and employment rate has been reached a record high in April, and we will see another batch of the graduates in the coming two quarters. So do you think the high unemployment of the youth could be a long term structure issue? And how it will impact our business in the longer term?

Speaker 3

And the second question is that you mentioned in April May, we do witnessed that the job posting and active enterprise users, the level has been higher than we witnessed in March. However, if we consider the overall economy recovery actually is slightly lower than we expected. At the same time, we do see the youth employment rate has been high. Do you think this recruitment demand recovery is sustainable into the second half of this year? Thank you.

Speaker 1

Thank you for your question. And I would like to give my conclusion to your first question first. Regarding the current situation that with more job seekers compared to relatively less recruitment demand, which led to a high unemployment rate of the younger people aged between 16 to 24, will that turn into a long term structural question? My answer is that no. And I believe the situation has been improving.

Speaker 1

There are 2 interesting observations I'd like to share with you. First one is that in February, March, April and May, on a year on year and the historical view, the ratio between job seekers and recruiters is relatively at a very unpleasant level. But after January 21, after spring festival, about 17 to 18 weeks, we have seen that the situation has been improving on a weekly basis. Another interesting thing is that the graduates this year, they're active reach out to the small and medium sized enterprise. The F ratio have raised about over 10% compared to last year.

Speaker 1

This is a scenario I have never seen historically, which my personal feeling is that people have tried their best to adjust to the environment and to strive for their development opportunities. And in terms of the impact to the company, this year today, the pressure I have feeling the most is that the situation of more job seekers compared to less job demand job supply, which has placed great pressure to our recommendation system and our customer service system. If we cannot deal with it correctly, that will impact our impact in MTS, especially on the job secret side. We have been working quite hard on this. And if you look at the from the perspective of the average achievement average achievements or average job resume exchanges each month per person, we have done pretty well on And about your second question of the recent demand recovery in April May, we have observed that compared to February March, weekly newly posted jobs have been increased by 7% on a week basis.

Speaker 1

And another number is that for each job opening, the enterprise user, the recruiters behind that, the situation of the recruiters actively looking for the people compared to February March 8.5%, that situation also increased by 6%. This is encouraging number, and I'm glad to look at that. Whether this is sustainable, my answer is pretty sure the situation is improving and quite sustainable.

Operator

Thank you. We'll now move on to our next question. Our next question comes from the line of Wei Zhang from UBS. Please go ahead. Your line is open.

Speaker 4

Thank you management for taking my question. Firstly, regarding the enterprise users, could management comment on the recovery trends for your KA users and SME users separately, for example, in terms of the user engagement, paying ratio, recruiting cycle, etcetera, what has been trending in the past few months? And are there any noticeable changes compared to a few years ago? And secondly, just want to follow-up on the blue collar recruiting business. Could management share more progress in that regard as well as your strategic focus for the year?

Speaker 4

And given we have made very good progress in the services sector, if we want to see bigger breakthrough in the manufacturing sector, what actions do we plan to take this year? Thank you.

Speaker 1

Okay. For the comparison between large companies and SMEs, one interesting point is that we have seen different situations. In January February, we have observed that the SMEs have been recovered very rapidly, while the large companies is more slowly. But in April May, the situation is different. One data to look at is for the enterprises with less than 100 person, the daily active job posting increased by 1% in April May compared to January February.

Speaker 1

However, for the enterprises with people more than 10,000, the daily active jobs increased by 7% in April May, which they showed a trend with faster recovery. And another data which we often look at internally, which is in April May, among the different job categories within enterprise, the jobs related to marketing and development has been increased faster, which means people these jobs are related to the company's development to help them either spending more or earning more money, which means they have better confidence at this stage. Generally speaking, there are millions of enterprises and tens of millions of job seekers on our platform each month. Our witness that they have been working very hard to try to solve their own problems and we are also trying our best to help them with that. So the general solution is that April May is better than February March for either large companies and SMEs.

Speaker 1

About your question on blue collar, so the first thing is on the urban service industry, which we have a high confidence of with and we have demonstrated strong value after years of efforts. And after the COVID with the fast recovery for other service industry, all of our proven efforts have some concrete evidence on numbers. So we just discussed that either users and the revenue contributions from Blue Collar from other service industry and the Blue Collars have increased rapidly. And other major subsectors for Blue Collar includes manufacturing, construction, logistics and warehousing, etcetera. So we have also been doing our job to create more value for all those industries.

Speaker 1

We are not as confident as those other service sector, but we are on our way and we are on the right direction. That's my view for this. There are countries of millions of manufacturing workers, dollars 40,000,000 to $15,000,000 of construction workers and maybe $20,000,000 to $30,000,000 of logistics, warehousing job seekers. So for all these sectors, they have their own industry know how. We have been actively and progressively to explore all those solutions to these industries to try to provide more value to them while achieve our own business development.

Speaker 4

Thank you, management.

Speaker 2

Thank you.

Operator

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

Speaker 3

Thank you, management, for taking my question. I have two questions here. One is regarding the enterprise paying ratio and ARPU trend. Could management share any new products or new strategies in improving the overall enterprise paying ratio is related to the small size and medium size customers as well as the new customers the company has acquired? And secondly, regarding the sales marketing, we understand the Q1 is typically the peak quarter in terms of sales marketing spending.

Speaker 3

Just wondering if Madhuang could provide some updates on the company's sales and marketing plan for the rest of this quarter for the rest of this year and what is our margin forecast for this year? Thank you.

Speaker 2

Okay, Tien Tsin, so I'd like to answer those two questions. So regarding our paying ratio for the quarter, so generally speaking, our paying ratio improved a little bit in the quarter compared with last year. And then in terms of the ARPU, ARPU kept stable in the quarter. I think the overall paying ratio improvement is mainly because of the healthy growth of job seekers and business customers in urban services and a few other like the logistic and tourism sectors. So the competition between the business customers the platform naturally increase a little bit about our paying ratio.

Speaker 2

Rest of other sectors maintained quite stable paying ratio in the quarter. In terms of the new business customers and business customers from lower tier cities. They are the key contributor to this growth. So this is the first question. The second question regarding our selling, marketing expenses and our overall expenses, you're right that the Q1 in terms of the seasonality normally is a high quarter because of there is usually industry wide branding campaign happened after spring festival.

Speaker 2

So in our situation, we did a little bit brand advertisement in the Q3. But looking ahead, there's no other big marketing event in rest of the year. So this is a branding advertisement. In terms of our traffic acquisition costs, which is related to our user growth, Supported by our well established brand recognition, I think this area is shown with a very high efficiency in the Q1. And we believe that this high will further continue in following quarters.

Speaker 2

So that means in terms of the branding and in terms of the traffic acquisition marketing. So the overall selling marketing will be kept in a disciplined situation. So our overall marketing spending will hope to generate further leverage in the year. And other cost items like R and D, like G and A will follow the suit in a similar trend. So our overall operating margin for 2023 compared with last year will be up in our thoughts.

Speaker 2

So that's pretty much our directional thoughts regarding our operating margin. So that's my answer to the second question.

Speaker 3

Thank you.

Operator

Thank you. Due to time constraint, that concludes today's question and answer session. At this time, I will turn the conference back to Wende for any additional or closing remarks.

Speaker 1

Thank you once again for joining us today. If you have any further questions, please contact or reach out directly. Thank you.

Powered by Quartr
Earnings Conference Call
Kanzhun Q1 2023
00:00 / 00:00