Kanzhun Limited (BZ) Q3 2022 Earnings Call Transcript

Kanzhun Restricted (NASDAQ:BZ) Q3 2022 Earnings Convention Name November 29, 2022 7:00 AM ET

Firm Individuals

Wen Bei Wang – Head of Investor Relations

Jonathan Zhao – Chairman & Chief Government Officer

Phil Yu Zhang – Chief Monetary Officer

Convention Name Individuals

Eddy Wang – Morgan Stanley

Timothy Zhao – Goldman Sachs

Wei Xiong – UBS

Natalie Wu – Haitong Worldwide

Operator

Women and gents, thanks for standing by. And welcome to the Kanzhun Restricted Third Quarter 2022 Monetary Outcomes Convention Name. [Operator Instructions] At the moment’s convention is being recorded.

Presently I want to flip the convention over to Ms. Wen Bei Wang, Head of Investor Relations. Please go forward, ma’am.

Wen Bei Wang

Thanks, operator. Good night and good morning everybody. Welcome to our third quarter 2022 earnings convention name. Becoming a member of me at present are our Founder Chairman and CEO Mr. Jonathan Peng Zhao and our Director and the CFO Mr. Phil Yu Zhang.

Earlier than we begin, we want to remind you that at present’s dialogue might comprise forward-looking statements that are primarily based on administration’s present expectations and observations that contain recognized and unknown dangers, uncertainties and different components might not beneath the corporate’s management which can trigger precise outcomes, efficiency or achievements of the corporate to be materially totally different. The corporate cautions you to not place undue reliance on forward-looking statements and don’t undertake any obligation to replace these forward-looking info, besides as required by regulation. Throughout at present’s name administration would additionally focus on sure non-GAAP monetary measures for comparability functions solely. However that — non-GAAP monetary measures after which reconciliation of GAAP to non-GAAP monetary outcomes, please see the earnings launch issued earlier at present. As well as, a webcast replay of this convention name will likely be out there on our web site at ir.zhipin.com.

With that, I’ll now flip the decision to Jonathan, our Founder, Chairman and CEO.

Jonathan Zhao

Hey everybody. Welcome to our third quarter 2022 earnings convention name. On behalf of the corporate and our staff, I want to categorical our honest gratitude to our customers, traders and associates on your ongoing belief and help.

First, I would wish to share with you our efficiency for the third quarter. On this quarter, we accorded GAAP income of RMB1.82 billion with quarter-on-quarter development of 6%. Our calculated money billings which RMB1.24 billion a sequential improve of 26.4%. Benefiting from our enhanced model recognition and steady enchancment in advertising effectivity. We preserve the speedy development in our user-base whereas additional enhancing our revenue margin to acquire [indiscernible] over adjusted web revenue for the third quarter which is gross share-based and compensation bills, achieved a quarter-on-quarter development of 5% — 25% reaching RMB377 million.

On this quarter, our consumer base has been growing quickly. As of September 30, the newly verified customers achieved 14 million. Verified customers is a matter we pay extra consideration to in our every day operations. Referring to job seekers we posted no less than one job expectation or enterprise customers we posted no less than one job place. In contrast with the accrued greater than 8 million newly verified consumer as of August 15 which we mentioned in our final earnings name. After which and we continued our consumer development at a sustainable after which inside this quarter.

Our common MAU of this quarter reached RMB32.4 million hit a report excessive. And the corporate’s efforts on always enhancing the know-how and user-service functionality prior to now 12 months have began to bear fruit. Let’s check out some numbers. First, the typical month-to-month variety of profitable mutual communication between job seekers and enterprise customers have hit a report excessive on this quarter representing a greater than 20% year-on-year development price and our MAU grew by 12.5% year-on-year. The DAU [ph] ratio stays steady. One other quantity is that every particular person consumer’s achievement, both a job seeker or an enterprise consumer continues to be a gradual development.

General my impression for the third quarter is that we skilled a reboot in each customers and development. There are 2 key components. At one hand in comparison with the second quarter many cities began to energy from the COVID impression. And one other issue is that we are able to begin to purchase new customers by finish of June. There are 2 knowledge that we are able to take a look at within the idea of ruble. First one is our calculated money billings achieved 26.4% improve in comparison with the second quarter. And web — the online debt [ph] our common MAU within the third quarter recorded a sequential development of over 20%.

The efficiency of blue-collar and gold-collar customers was extra gratifying. The income of city service trade the — sorry, the money billing of the city service trade for the third quarter recorded a 28% year-on-year development. And the typical DAU of our gold-collar staff for this quarter additionally elevated by roughly 40% year-over-year.

The protection operation has all the time been essentially the most important cornerstone driving the event of our firm. Within the third quarter, we continued to enhance our security capabilities in 3 features. The primary of which is the approach — technical securities. In September, we have been awarded by the China Academy of Data and Communication know-how, the primary knowledge safety administration functionality certification within the on-line recruitment trade.

And the second is consumer safety. As of October 31, our verification crew have completed subject visits and inspections to accumulating greater than 5 — 500,000 firms. And the third one is in regards to the operational safety. We submitted a due functions in Hong Kong in early October, aiming to make sure sustainability of the capital market circumstances.

For the final quarter up till now, for the reason that starting of September, the resurgence of COVID-19 has negatively impacted our enterprise and slowed down enterprise recruitment demand. Nevertheless, we’ve got noticed that recruiting exercise to enterprises will get well rapidly as soon as the choice is successfully managed, evidenced by our expertise in July and August. We now have additionally seen some alternatives as trade undergoes structural adjustments. For instance, web and network-related positions, together with know-how, merchandise, design and operations have turn out to be [indiscernible] in driving digital transformation for conventional industries.

The high-end manufacturing industries, resembling new power, car and semiconductors have been rising quick. And the energetic job positions in September elevated by greater than 40% year-over-year.

Regardless of the short-term turbulence, we’re nonetheless fairly assured in our long-term development, supported by our excessive environment friendly enterprise mannequin. The core energy lies in the truth that our mannequin is extraordinarily environment friendly within the areas of job looking and recruitment and is appropriate for folks in several areas and industries. Whereas our service continued to develop in first-tier cities and amongst white-collar staff, there’s nonetheless large development potential in lower-tier cities and with blue-collar customers.

We now have discovered [indiscernible] as our official Asia-Pacific area associate of the 2022 Qatar World Cup. We will additional and successfully broaden our model studying via this high-profile and broadly lined occasions, particularly amongst these blue-collar and lower-tier cities. For sure historic interval, consumer development is all the time a major driver for our enterprise long-term and sustainable improvement. Our platform has a sturdy scale impact and might help extra correct matching inside a bigger inhabitants.

We’re nonetheless on the stage of specializing in attaining speedy consumer development. We count on to acquire no less than a further 100 million customers within the subsequent 3 years. We’re fairly assured of this and we imagine that it will likely be the best driver for our enterprise improvement. There are all the time cycles within the economic system. Nevertheless, there are nearly no cycles in an enterprise efforts to service their prospects with sincerity and agility [indiscernible] are all the time staying true to our core values and unique aspiration, doing the best factor in good house always is what we’ve got been doing. We now have achieved like this within the third quarter and we’ll hold doing so going ahead.

With that, I’ll flip to our CFO, Phil, for the assessment of our financials. Thanks.

Phil Yu Zhang

Thanks, Jonathan. Hey, everybody. Thanks for becoming a member of our earnings name at present. Earlier than I start, please notice that each one quantities are in RMB and all comparisons are on a year-on-year foundation except in any other case said. On this quarter, our enterprise started to get well backed by a robust consumer development within the third quarter. Our calculated money billings recorded a quick rebound with over 26% sequential development to RMB1.24 billion. Our complete revenues being dragged down by the impacted efficiency within the earlier quarters as a consequence of new consumer registration suspension and COVID resurgence within the second quarter recorded a 6% year-over-year, 6% quarter-over-quarter development to RMB1.18 billion.

The variety of complete paid enterprise prospects in trailing 12 months ended September 30, barely decreased to RMB3.73 million, down 1% from RMB3.77 million of June 30. However quarterly-wise, the variety of complete paid enterprise prospects within the third quarter elevated by 15%, in comparison with the second quarter, primarily because of the improve in small-sized accounts, pushed by our energetic enterprise consumer development within the relative gentle recovering macro circumstances. Revenues from small-sized accounts additionally contributed the next sequential restoration in comparison with different accounts which proved that this SME phase of consumers that we notably specialised in are extra resilient within the economic system and our buyer base blended with numerous sized firms, together with each massive accounts and small medium-sized accounts are in a a lot balanced and wholesome construction. It ought to assist us take up extra impression when dealing with financial downturns and it might additionally profit extra and quicker from the restoration of a macro surroundings.

Shifting on to the associated fee aspect. Whole working prices and bills for the third quarter elevated by 16% year-over-year to RMB1.04 billion. Excluding share-based compensation, complete working prices and bills elevated by 9% year-over-year to RMB879 million within the quarter. Price of revenues elevated by 30% year-over-year to RMB201 million, primarily pushed by elevated server and bandwidth prices in accordance with rising consumer site visitors and elevated employee-related bills as we proceed to strengthen our security-related personnel. Gross sales and advertising bills decreased by 5% year-over-year to RMB397 million, primarily as a consequence of lower in advertising bills because of our improved model recognition and advertising efficiencies.

R&D bills elevated by 39% year-over-year to RMB419 million as a consequence of elevated technology-related workers. G&A bills elevated by 27% to RMB156 million, primarily as a consequence of elevated headcount and elevated share-based compensation bills. Our total human-related prices remained steady in comparison with final quarter and we’ve got enhanced the associated fee management beneath present market circumstances. Excluding share-based compensation bills, our adjusted web revenue for the quarter was RMB377 million with an adjusted web margin of about 20 — 32% which rebounded again to the historic report within the third quarter final 12 months, additional demonstrating our high-quality and sustainable working leverage and profitability. Internet money generated from working actions was RMB367 million for the quarter, representing a 36% year-on-year development.

As of September 30, 2022, our money, money equivalents and short-term investments elevated to RMB13.9 billion which might place us effectively for the long run development. Trying ahead, because the near-term resurgence of COVID circumstances are nonetheless at a excessive degree throughout China that are affecting the recruiting demand of enterprise customers we count on our complete revenues to be between RMB1.05 billion and RMB1.09 billion in third — within the fourth quarter, with a slight year-on-year lower of three.8% to 0%.

Given that there’s nonetheless the entire month of December earlier than the quarter finish, some degree of uncertainties are nonetheless forward. Nevertheless, as Jonathan simply talked about and as you might have witnessed from our third quarter outcomes, consumer development is the important thing to our enterprise. Our market-leading place and aggressive wants are additional strengthened for the reason that resumption of consumer registration in latest months and our customers are nonetheless accrued details and the web recruitment market in China is proved to be with good room to develop. With the effectiveness of our mannequin being nonetheless intact, we’re assured that we are able to experience via the present headwinds and proceed our secular development in China’s human useful resource know-how markets.

That concludes our ready remarks. Now we want to reply questions. Operator, please go forward.

Query-and-Reply Session

Operator

Thanks. [Operator Instructions] Our first query comes from the road of Eddy Wang from Morgan Stanley.

Eddy Wang

I’ve 2 questions. First is the — if we contemplate that the reopening course of to steadily occur within the early spring, so how do you assume the recruiting actions you choosing up rapidly quick? Or do you count on that it’s going to take possibly 1 or 2 months of lead time earlier than these enterprise customers to put up their jobs? The second query is, if we count on that the reopening to steadily occur in subsequent 12 months, so what’s our expectation by way of the — your gross sales, advertising and buyer acquisition prices as a result of we imagine that sure of the opposite on-line recruitment platform will even spend some cash to amass new prospects. Contemplating all this competitors and contemplating that we even have a fairly bold new consumer acquisition plan within the subsequent 3 years, how do you assume the — is finest degree? And how much the margin ought to we count on for the 2023?

Jonathan Zhao

Thanks on your query. Concerning your first query in regards to the opening, after opening, what would be the recurrent velocity for the enterprise gear. So primarily based on my observations for the previous years, majority of enterprises can have a really fast restoration with some very restricted exceptions, resembling very large mega enterprises as a result of they could take a while to readjust their expectations for the expansion, for the income and likewise for the bills and for the advertising and human sources and headcount. However for SMEs, they’ve a comparatively a lot quicker protection.

And relating to your second query about our plans for advertising of subsequent 12 months, our advertising effectivity for the digital market won’t lower. As I simply talked about, we’re planning for over 100 million new customers within the subsequent 3 years. If the whole lot goes regular, we expect round 40 million newly registered customers subsequent 12 months and that is in the intervening time the consensus however we won’t pay further quantity for that. And by way of branding, this 12 months, you might have already know that we’ve got sponsored the World Cup. And for this 12 months, we’ve got not — any main advertising occasions which we are able to sponsor or to model — the model. So it additionally will likely be a standard 12 months. So my [indiscernible] is that the advertising expense as a share of income for subsequent 12 months will likely be — will stay steady and this won’t have an effect on our margin in web G&A.

Phil Yu Zhang

And so as to add just a little bit in regards to the — the reopening is there. To start with, our money income, we want to gear up after which our accounting income due to we want a while to guide the income, then we want to see our accounting income steadily catch up these money collections with the reopening. So there’s a delay impact. So please do not forget that. So firstly of the restoration, we must always pay extra consideration to the money income after which our accounting income proceed to steadily catch up.

Operator

Our subsequent query comes from the road of Timothy Zhao from Goldman Sachs.

Timothy Zhao

I’ve 2 questions. First is contemplating that December is the month when many large enterprises signal annual contract or renew contract with us. Might you possibly share some shade on what sort of standing that we see throughout the large contracts? And what number of the enterprises might have some upselling potential? And secondly, it is about branding actions across the World Cup. Might you possibly share now? And the way ought to we take into consideration the ROI behind these branding actions and particularly contemplating there are another recruitment platform additionally the same branding actions in the course of the World Cup and the way ought to we compete with them and what’s our differentiation?

Jonathan Zhao

Thanks on your query. Concerning your first query about our signing of annual contract on the finish of the 12 months. So it has already been 2 months previous for the fourth quarter. And what we’ve got noticed by way of the signing of our key accounts — we’re blissful to say that principally, we’ve got signalled prospects who’ve stopped; so it’s principally fairly good. And by way of the upsell or greenback quantity, the online greenback retention price of all our key accounts are nonetheless persevering with. Or not it’s above 100%. It’s not in actual fact of our historic outcomes however we nonetheless witness this beneath present circumstances.

And about your second query for our sponsorship this World Cup, as a result of we’re a really younger firm, the typical age of our staff is round mid. So soccer is the form of a sport all people likes. And also you had in all probability seen from the information and with our knowledge going again, the inhabitants on earth has reached greater than 8 billion. And I imagine that from a perspective of human civilization, if one thing if a relative [indiscernible] and they’re blissful to help FIFA. And on high of supporting FIFA, the very first thing we contemplate, it’s good enterprise of — for doing all these advertising marketing campaign and on different channels. So in 2018, the Russia Would Cup, greater than 650 million Chinese language viewers have watched the occasion. And for the Qatar World Cup this 12 months, we do not have the precise — I imagine that ought to be — the viewers base will likely be bigger, it ought to be greater than 700 to 800 million.

And if we assume, every viewers can watch like 4 to five video games throughout the entire World Cup occasion, then there will likely be greater than 4 billion folks and who’ve watched our commercial. You recognize that the — our promoting is sort of frequent between the occasion and so the associated fee for 1 individual to look at our branding is [indiscernible]. So it is a good enterprise contemplating the huge viewers base, the ages who watch the sport — the ages of people that watch the sport and the associated fee is a fairly good enterprise. And also you observed that a number of of our friends have additionally did the identical factor however I imagine that is [indiscernible]; so we may give our viewers, our prospects extra selection. They’ll select what sort of platforms the most effective they will. And that is my reply to your query. Thanks.

Phil Yu Zhang

I’ve few feedback. So we additionally contemplate that model commercial is extra like an funding moderately than value or expense merchandise due to the return is best, due to its more practical than site visitors acquisition value and it is long-lasting. In order that’s in all probability the very quick reply to your query as effectively.

Wen Bei Wang

Thanks. Operator, we are able to transfer on to the following query.

Operator

Our subsequent query comes from the road of Wei Xiong from UBS.

Wei Xiong

I’ve 2 questions. First is that if we take a look at first quarter subsequent 12 months and usually, it is a robust seasonality for recruitment market. So along with the World Cup sponsorship that we talked about already, may administration elaborate your plans in consumer acquisition, advertising and promotions within the first quarter? Do we’ve got a goal for consumer development on this peak season? And likewise, how ought to we take into consideration the margin degree within the first quarter? My second query is, it appears the big enterprise prospects might have comparatively extra resilient recruitment finances in comparison with the SMEs, given the uncertainties within the macro surroundings. So simply questioning what the corporate contemplate to possibly shift our technique or focus in direction of the important thing buyer aspect given this backdrop? And likewise what’s your newest ideas and progress within the mid-to-high-end recruitment phase?

Jonathan Zhao

Thanks on your questions. About your first query on advertising plans for the primary quarter subsequent 12 months. So our World Cup marketing campaign finish on December 18 and the Spring Competition will begin from January 22 subsequent 12 months and there are solely 5 weeks in between. And by finish of January, folks will return to work, the place the normal recruitment will begin. So there are solely 6 weeks in between the World Cup marketing campaign and the Spring Competition. So I could assume the two occasions are pretty related. And the depth of our advertising marketing campaign of the World Cup, we’re — we strongly imagine that this marketing campaign impact can proceed to the Spring Competition. So our advertising plan for the — after Spring Competition won’t require extra cash. So then again, we’ve got profit from the World Cup marketing campaign. And that is a part of our technique. One other half is that for the reopening all people are involved, we’re additionally extremely targeted on that. So our advertising plan, the effectivity and with focus [ph] on our advertising enter, we’re extremely related to the reopening course of. So at present, we’re targeted on the progress. And on high of our technique and give attention to reopening and [indiscernible] that we are going to not do a advertising occasion which have large and energetic impression to our market within the first quarter subsequent 12 months.

Concerning your second query about our relationship of our key account prospects. At present, we should not have any plan to [indiscernible] our sources to — in direction of the important thing accounts, other than the SMEs. However I can guarantee that each time we want to strengthen our complete sources, we will even improve that for our key account prospects. Fairly an extended interval time, the purchasers in China [indiscernible] on service and that is what we’re doing. We’re — we higher serve all of our prospects, together with particularly SME. And that is my reply to your query.

Phil Yu Zhang

To the market statistics, in China, greater than 90% of the enterprises are small medium-sized firms. So principally, our personal firm composition can be in the identical sample. So we’ve got greater than 80% of our enterprise prospects or firms, they’re the small medium-sized enterprises. So they’re the essential parts to our models. And as simply talked about, in contrast with the friends, we’re extra specialised on this space. So we undoubtedly will serve them effectively and attempt to present them with higher service. So — however in the meantime, we undoubtedly will even pay extra consideration to KA accounts as a result of they we’ve got a a lot balanced construction as simply talked about as effectively.

Wen Bei Wang

Okay, thanks. Now we transfer on to our subsequent query.

Operator

Thanks. Our subsequent query comes from the road of Natalie Wu from Haitong Worldwide.

Natalie Wu

I’ve two. First is relating to the paid enterprise consumer quantity. We see that this quantity has a bit decreased once more to three.7 million this quarter. Simply questioning if administration can share with us the energetic and [indiscernible] quantity this quarter? And the way did that change on year-on-year on quarter-on-quarter foundation? Or how ought to we see the paying conversion ratio change? How a lot of that’s associated with the pandemic and the way a lot is said with the initiative cleansing up motion by the corporate? And the way a lot is said with the pure churn.

And second query is said with the blue-collar. Simply questioning, can administration assist us perceive how a lot income at present comes from the blue-collar enterprise and the associated MAU and paid enterprise quantity, some like that? And the way ought to we see the long run development for that enterprise? And likewise beneath the scheme of reopen, how ought to we see the expansion price if the blue-collar enterprise may outgrow the white-collar enterprise within the reopen scheme?

Phil Yu Zhang

Okay. Thanks. So I will reply the paid enterprise buyer query first. So the three.73 million, that quantity was trailing 12 months paid enterprise prospects. In order that quantity decreased primarily due to within the second quarter, the COVID impression decreased our paid enterprise prospects in that quarter. And ranging from third quarter, we see fast restoration of quarter-over-quarter sequential paid enterprise buyer development. So — however due to this trailing 12 months, so it is — the second quarter did have some impression to our — the overall paid enterprise prospects, the quantity. However if you happen to take a look at the quarter-over-quarter, if you happen to take a look at all of the paid enterprise buyer in third quarter versus the paid buyer within the second quarter, we see a really [indiscernible] quarter-on-quarter development.

And by way of the energetic enterprise prospects, that quantity we see ranging from like June-July and in we see gradual restoration. And in contrast with the second quarter, it is a fairly good signal of enterprise is booming. However ranging from September due to the COVID measure, the COVID management measure, we see some like impression to the energetic enterprise prospects’ quantity. And so the same issues with additionally enterprise within the early fourth quarter of this 12 months. By way of the paying ratio, paying ratio is, I believe, it’s fairly steady in second quarter, in third quarter and even in October and November, total, the paying ratio among the many energetic enterprise prospects is sort of steady. And the ARPU can be very steady. So the impression is principally with the overall energetic enterprise prospects which is extremely associated to the COVID management measure. And in July and August, when the COVID measure isn’t that stringent, we see restoration. So we imagine within the coming months, as soon as the COVID is gone, we undoubtedly will see an excellent come again for the energetic enterprise prospects. So that is the primary query.

And relating to the blue-collar, I can give you with some knowledge. By way of the customers of blue-collar, at this second by way of the MAU, it accounts for roughly 30% of our complete customers. And by way of the income contribution, blue-collar accounts for roughly like 26% of our [indiscernible] in third quarter.

Jonathan Zhao

And on high of sponsors, I want to submit some knowledge. So for logistic trade, we’ve got seen a 20% year-on-year development by way of money billing. And for different service trade, a 28% year-on-year development, whereas our complete money billing in comparison with final 12 months solely grew by 1%. So you possibly can see a blue-collar sector has skilled a really quick improve. And we’ve got fairly good confidence that we are going to purchase further 100 million new customers within the upcoming 3 years which is double the present complete consumer base. And I imagine alongside 2/3 will likely be what we name conventional blue-collar staff, together with logistics, together with city service and manufacturing and et cetera. And that is all for my [indiscernible].

Phil Yu Zhang

And likewise, another factor to say is that we have resumed the consumer development from the top of June and center of the 12 months usually isn’t the height season for blue-collar to seek out jobs. Usually, season — seasonality smart it is the spring within the — after the Spring Competition that’s the peak season for the blue-collar to come back out to seek out job. So in upcoming years, due to our [indiscernible] at present we are able to develop our new customers. So we count on that within the peak season of the Spring Competition, we are able to additional develop our blue-collar phase customers and prospects.

Operator

As a consequence of time constraint, that concludes at present’s question-and-answer session. Presently, I’ll flip the convention again to Wen Bei for any further or closing remarks.

Wen Bei Wang

Thanks as soon as once more for becoming a member of us at present. In case you have any additional questions, please contact our IR crew immediately or TPG Investor Relations. Thanks.

Operator

This concludes at present’s convention name. Thanks for collaborating. You might now disconnect.