Participants

Wenbei Wang; Head of Investor Relations; Kanzhun Ltd

Peng Zhao; Executive Chairman of the Board, Chief Executive Officer; Kanzhun Ltd

Yu Zhang; Chief Financial Officer, Executive Director; Kanzhun Ltd

Eddy Wang; Analyst; Morgan Stanley

Timothy Zhao; Analyst; Goldman Sachs

Wei Xiong; Analyst; UBS

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Kanzhun Limited first quarter 2025 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.

Wenbei Wang

Thank you, operator. Good evening, and good morning, everyone. Welcome to our first quarter 2025 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao; and our Director and CFO, Mr. Phil Yu Zhang.
 Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different.
 The company cautions you not to place undue reliance on forward-looking statements and do not undertake any obligation to update 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 a 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.
 Now I will turn the call to Jonathan, our Founder, Chairman and CEO.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Hello, everyone. Thank you for joining our company's first quarter 2025 earnings conference call. On behalf of the company's employees, management team and Board of Directors, I would like to extend our sincere gratitude to our users, investors and friends who have continuously believing and supported us.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In response to key investor conference, I would like to report on a few main topics. First, we have remained focused on driving profitability with encouraging results. Second, regarding the ongoing tariff war, which is a concern for many. My observation is that it's the impact on our business has not intensified. Third, we have continued to make solid progress on the AI front.

Story Continues

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Let me start with an overview of our financial performance. In the first quarter, the company achieved a GAAP revenue of RMB1.92 billion, up 13% year-on-year. Our net income reached RMB510 million, reflecting a 112% year-on-year growth.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The various uncertainties of recent years have promoted the company to formulate a strategy, which is to focus intensely on very few high-impact priorities to enhance operational certainty. Based on this, at the end of last year, we clearly proposed to guarantee profits.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Excluding other income such as wealth management income, our adjusted operating income was RMB690 million for the first quarter. Adjusted operating margin was 36%, up 13 percentage-points year-on-year compared to 23% in the same period last year.
 Overall, this achievement demonstrated the company's capability to implement strategic goals and exceptional operational leverages.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Increasing profitability involves both cost control and revenue growth. With respect to cost, there are two things worth mentioning.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

First is the decrease of SBC expenses. Our share-based compensation expenses this quarter were down by 10% quarter-on-quarter. As a proportion of revenue, this represents a narrowing of nearly 4 percentage-points year-on-year. We have previously predicted that the longer-term passes since the IPO as well as the growth of our revenue. The impact of SBC expenses on profits will decline in both absolute value and percentage. This trend will continue.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Second is the improvement of market efficiency. From January to April this year, the company added over 15 million verified new users. In the first quarter, the average verified and monthly active users on the BOSS shipping app reached 57.56 million, up 24% year-on-year. Post-Chinese New Year, monthly active users in March approached 65 million. The average number of achievements per user continuing to increase both quarter-on-quarter and year-on-year.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

We maintain robust user growth despite the decrease in marketing expenses benefiting from the true side network effects of our model and our continued focus on improving user satisfaction.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Our core revenue growth drivers are still the growth of users and the increase in penetration rate. Therefore, revenue growth and user growth showed a highly correlated structural change.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

First, blue-collar new users accounted for over 45% of our total users in the first quarter, driving their shares of revenue up to more than 39%.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Second, alongside with the higher growth rate of new users among Tier 3 and lower Tier cities, the revenue contribution from Tier 3 and below goes up by 3 percentage points to over 23%.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Third, revenue from enterprises with fewer than 100 employees hit a record high contribution for the period due to the higher growth rate of the smaller size companies.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Many people are concerned about the impact of the tariff war. We also take it seriously. So far, our overall conclusion is with regard to the drop seeking an equipment supply and demand relationship, no severe impact of the war has been observed so far.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In general, we observed that hiring demand from enterprises has continued to show recovery trend since Chinese New Year. From January to April, average new job postings grew 17% year-on-year, while the paying ratio improved sequentially, boosting total paid enterprise customers in the 12 months ended March 31 to $6.38 million, up 12% year-on-year.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

From industry perspective, recruitment demand for blue collar workers represented by urban service sectors such as catering and retail has been continuously and steadily rebounding since April. Manufacturing recruitment has demonstrated resilience despite the impact of tariffs with the number of new job postings maintaining year-on-year growth in April.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Meanwhile, recruitment demand for white collar has also stabilized and begun to recover with industries such as advertising, professional services, Internet, finance and automotive leading in year-on-year growth rate.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Since last quarter, market has been very concerned about AI. We also attach great importance to AI in our own value operations in the recent three years. In this quarter, in terms of products and services, we continue to deepen application of AI technology and expand the scale and the penetration rate of AI testing users. Now allow me to spend on our AI developments. We'll break it down into three key aspects: AI to C to job seekers, AI to B to recruiters and AI to Management.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

First, AI to C. The first item is the gray scale testing also known as phased rollout we mentioned in our last earnings call, which is after our user contact search, we do not only need to give the result, but also provide an explanation by AI, why the result is what it is. Initial outcomes showed promising results and we have now rolled out to all users.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The second thing of AI to C, which we also mentioned during our last call, is our AI-powered interview robot designed to help users practice interview skills. Our experiments have shown that it can meaningfully enhance recommendation systems understanding of individual user behaviors and the outcome is quite significant. Now we have officially launched it for all students and young people with up to three years of work experience.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Moving on to AI to recruiters. One is the application of AI technology which has, to some extent, supported our exploration in cost loop services. The result is in the first quarter, the number of enterprises will provide placement like services grew by about 30% quarter-over-quarter. We are now starting to see some.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The other one is an agent, which can interact with the users. That agent can guide enterprise users to convey their personalized recruitment demand and proactively search for super candidates across the platform. The agent is still evolving, but we have witnessed that this agent can effectively improve the matching accuracy. Enterprise users who have used aided seeing a 25% increase in achieve their efficiency -- recruitment results.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

That said, we remain extremely cautious about broadly expanding the allowing it to somehow even somehow partially replace human recruiters. Our current strategy is as follows: First, we placed no limits on building the core member of capabilities. Second, we are extremely prudent about when and how readily we will deploy the robot.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Third is AI to Management. First thing are two things to talk about. First, in the reformation of weekly reports. Now after one finished their week report, we have our proprietary AI system to help create a comprise summary version, which can still be revised by you. That way, you have two reports since you hire.
 One is the summative AI plus modified. The other one is your original merger. The until now, the supervisor's behavior is trying to check the contract for the first, then move on to the longer one.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

So that gets some basic applications today. The value how to realize the value is, the AI will start your historical which reports and also lead across weekly reports from related departments. If there are too many projects that have not closed the loop or the content is empty or there are too many big works that AI will remind you. This is a supplement to human capabilities.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The second thing on AI to Management is the use case for talent evaluation. When we merely rely on humans for performance appraisal even so-called 360 degrees, there might be interference from two noisy sources.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The first thing is forgetfulness, for example, appraisers previous contributions will be downplayed and the recent performance will be more important is quite human natural, but this might not be appropriate as a long-term evaluation.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The second is also quite according to human nature. So will see what others want you to see, while Superior may consciously or unconsciously, future and change their subordinates information before presenting it upward.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

However, AI is objective under the premises of protecting employees privacy and dignity. AI can see the objective changes in past performance data. AI will not like an employee because it's like its caters, although not evaluating badly because it dislike the employee. So AI is neutral and impartial in terms of human resource applications.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

To sum up, for the AI to job seekers to enterprise users and to management, these three aspects, our exploration and the research are equally important. To sum up, the first quarter of 2025 we're solid. On the whole, we are positive for the year ahead, and we will continue to work hard.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

That concludes my part of the call.
 I will now turn it over to our CFO, Phil for the interview -- for the review of our financials. Thank you.

Yu Zhang

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results of the first quarter of 2025. We are delighted to report a solid start to the year, characterized by continuous expansion in our user base and engagement and sustainable revenue growth.
 In this quarter, our revenues reached RMB1.9 billion, representing a 13% year-on-year growth. We experienced a decent screen recruitment season with continuous improvement in enterprise hiring demand, evidenced by the growth of our cash collections, which has bottomed out from the last quarter. Revenues from key accounts and small-sized accounts both contributed to higher growth rates in the quarter.
 Our paid enterprise customers grew by 12% year-on-year to RMB6.4 million in the trialing 12 months ended March 31, primarily driven by the growth of enterprise users. Paying ratio among active enterprise users increased on a sequential basis, as the supply demand situation of the labor market improved from previous quarter.
 ARPPU increased by 5% year-on-year, mainly due to the expansion of paying amounts from key accounts. Moving to the cost side. Total operating costs and expenses decreased by 8% year-on-year to RMB1.5 billion in the first quarter. Share-based compensation expenses dropped by 13% year-on-year and 10% quarter-over-quarter to RMB252 million, shrinking for the third consecutive quarters.
 Excluding share-based compensation expenses, adjusted operating costs and expenses decreased by 6% year-on-year to RMB1.2 billion. And our adjusted operating margin reached 36%, up by 13 percentage-points year-on-year.
 A showcase of our discipline in cost control and high operating leverage, despite Q1 normally having the lowest margin within the full year due to seasonality. Cost of revenues increased by 5% year-on-year to RMB311 million this quarter.
 Gross margin went up by 1.1 percentage-points to 83.8% compared to the same period of last year. As a testimony of our AI arbitration to improve our operating efficiency. Sales and marketing expenses decreased by 15% year-on-year to RMB491 million during this quarter, primarily due to decreases in advertising and marketing expenses and employee-related expenses.
 However, our strong brand recognition enhanced the marketing efficiency and superior user engagement guaranteed that we can still maintain robust user growth momentum. Our R&D expenses decreased by 9% year-on-year to RMB424 million in this quarter and was relatively stable sequentially.
 This decrease was primarily driven by lower employee-related expenses and reduce the public cloud expenses related to AI. Our G&A expenses were RMB266 million in this quarter, remaining relatively stable, both year-on-year and quarter-over-quarter.
 Our net income reached RMB512 million in this quarter, up 112% year-on-year, while adjusted net income increased by 44% to RMB764 million. Net margin improved to 26.6%, up 12 percentage-points year-on-year, while our adjusted net margin increased to 39.7%, up 8.6 percentage-points year-on-year. Net cash provided by operating activities reached RMB1.0 billion this quarter, up 11% year-on-year.
 Our cash position totaled RMB14.8 billion as of March 31 2025. Our strong cash generation and robust cash position provides financial flexibility to execute growth initiatives and enhance shareholder returns. And now for our business outlook. For the second quarter of 2025, we expect our total revenues to be between RMB2.05 billion and RMB2.08 billion with a year-on-year increase of 7.0% to 8.5%. Please note, this growth rate will also bottom up this quarter, driven by continued improvement of cash direction growth in the year.
 That concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead.

Question and Answer Session

Operator

Thank you.
 We will now begin the question-and-answer session. (Operator Instructions)
 Eddy Wang, Morgan Stanley.

Eddy Wang

(spoken in foreign language)
 I have two questions. The first one is that would you please give us the brief of how the hiring demand evolved over the past months from the start of the tariff war till it ease? And have you seen any signs of the recovery in current demand recently?
 And the second question is that, if I remember correctly, after May last year, macro weakness coincided with a graduation season has led to a deterioration of recruitment demand. How does the current recruitment demand trend in April and May compared with the same period last year. And have we seen different trends among different industries and different sizes of the enterprises, will such trend continue into the gradual season in June and July?

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Thank you for your question. About the first one, which is tariff war concerning. We are still looking from the supply and demand perspective of job-seeker posting job expectations and recruiters post job postings. So this is the most important for our platform. In general speaking, the improvement the recovery recruitment trend, continued recruitment trend is still the case that is on undoubtfully.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The view we talked during our prepared remarks, which is quite serious that in general speaking, the tariff war impact on our overall supply and demand relationship is still quite limited.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Objectively speaking, we have a quite diversified industry and location distribution. So the export-related industries both in terms of revenue and numbers of job posting contribution are quite low.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

If we look at the detailed numbers, for example, in April and May, the total number of new job postings and active job postings have kept a good growth rate. We haven't been seeing any significant pull back compared to March.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

For industries which affected bigger by the tariffs, such as export related jobs. So we saw some lowering in terms of growth rate in the beginning of April, but it has recovered after mid-May.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The second question regarding the overall recruitment market. So the overall supply and demand ratio has continued to improve in this year. Let's take a detailed look after the day after May compared to the same days after the spring festival. So this year, we saw better growth trend compared to last year between -- after May, especially after Labor Day holiday and after spring festival.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Let's look at some detailed numbers. So in April till today, since April till today, the newly number of newly posted jobs and number of recruiters who posted jobs, the sequential trends are better compared to last year.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Among which the blue collar sector, especially urban service blue collar sector, the year-on-year growth rate continue to enlarge from March to May.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And about our prediction for June and July season, it's hard to say we can predict precisely. But according to my personal feeling, it could be okay. This thing is coming.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And that's my answer to your question, Eddy. And operator, let's move on to the next one.

Operator

Timothy Zhao, Goldman Sachs.

Timothy Zhao

(spoken in foreign language)
 Thank you much for taking my questions. Two questions here from my side. First, we understand that the company has been internally testing the AI features for both enterprises and the job seekers. Could management share what is the feedback so far? And what is the plan for the company to launch the AI monetization features.
 Secondly is considering the latest macro environment as well as the monetization rate as well as user growth. Just wondering how does management see the RMB3 billion non-GAAP operating profit target for this year? And into the second half, what are our leverage to make sure this RMB3 billion target is attributable and what is the longer-term margin expansion? I think, room for the company and additional could management share about our plan for capital allocation. Thank you.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Thank you for your question. I will take the first one regarding AI and our CFO will answer the second question regarding the margin. So about AI, it's good to summarize that our series of phaseout AI product testing has quite positive feedback, we have just mentioned. And this is based on that we have been continued to be very cautious in terms of using AI. And I think the investors who are knows our views.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And we just mentioned that some of our testing products have already opened to all of our users is in a gradual process.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And regarding the monetization, I would like to share data this year.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

For the recruiters who have great scale used to our AI equipment function, efficiency of achievement increased by 25% under the same amount of compensation.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The AI communication assistant have accumulatively served over 9 million conversations during our massive gray scale test. So the job seekers who have been responded by the AI communication assistant, achievement rate increased by 15%.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

So in principle, the AI products can improve the efficiency, increase your using experience and the saving some time. But in reality, we are still quite cautious. So my view is we might be relatively gradually and slowly on the AI adoption of monetization effect, it must be some remnant.

Yu Zhang

So I'd like to answer the profitability and margin question. So as Jonathan mentioned, in the prepared remarks earlier, even under current conditions with many external uncertainties. The company's overall goal for this year is to secure a solid bottom line growth first, then try our best to grow faster with our business.
 In first quarter, we had a good start, and we managed to reduce cost to improve overall efficiency for most cost and expenses items. Our marketing fees brought in absolute amount versus last year, but we still achieved satisfactory new user growth. We had higher revenue but our sales guys a number of our sales dropped.
 Headcount for R&D, administrative cost and operation functions kept stable. Our internal AI tools keep then for the platforms, operation and verification jobs, which leads to improvement of our gross margin. You should know that our margin in the first quarter is the lowest due to the seasonality with all the measures mentioned above. There is still room to improve in second quarter -- second half of the year.
 So we are confident with our RMB3 billion non-GAAP operating profit target for the full year. This is a comment for the profitability and margin. And regarding the shareholder return topic, the company currently has more than USD2 billion cash and equivalents on hand. We consider shareholder returns a very important topic, and we like to do whatever fees us.
 Currently, our share repurchase program is still ongoing, and we definitely will continue. At the same time, we are studying and doing some assessment for other needs, other measures to increase our shareholder return. So please stay tuned we would like to do it step by step.

Wenbei Wang

Okay. That's our answer to those two questions, and operator, let's move on to the next question.

Operator

Wei Xiong, UBS.

Wei Xiong

(spoken in foreign language)
 Thank you, Manager for taking my question. First, with the wider adoption of AI in human resources industry, are we seeing any changes or expecting any potential changes in the competitive landscape? And can we leverage AI to actually further expand our service offerings. And secondly, could management share more updates regarding our blue collar recruiting business what are the key KPIs for this year? And how is our progress in the new businesses, such as placement services. Thank you.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In the about your first question of how AI will impact the competitive landscape. My view is relatively consumptive. So my assessment is for this generation of AI technology and all the AI application we can over from the market, we haven't seen any revolutionary or disruptive changes. So the competitive landscape is relatively stable.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

But I also have some predictions that if globally amongst the human resource industries, there is a new generation of AI products can change the overall landscape then there must be pushed by the new generation of AI technology, which may be like the 1.5 or 2.0 generation.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

No, we haven't observed any revolutionary changes of the industry, and we still place very high importance of AI and AI rated investment. For example, last year, since actually since 2023, we have bought more than RMB1 billion of chips, which is enough for us to conduct self-drive research and small scale influence.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In terms of AI science, we still maintain a small scale lab for us to be able to conduct pretraining of our own model and replicate all those open source models.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In fact, we are actually quite confident that in terms of using AI science for AI application, our business scenario is actually quite suitable to applicate the power of AI -- for AI to have some impacts on our business.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Compared to the first margins of ChatGPT, when we felt a little bit panic or curious at that time. Now we have more certainty on the AI technology can actually help with our business and more with more real filings.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And more to view to share that a lot of online recruitment platform have long been pursuing the cost of placement service. Now with the health of AI technology, we have more certainty to confirm that whether we can achieve cost of service in a big scale or not.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And with blue collar sector user new user contribution more than 45%, revenue contribution more than 39% and increased the revenue contribution from third tier and below cities. So this aspect actually are becoming more and more important for our daily operations.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And if we want one word to summarize our future efforts to serve the blue collar and lower-tier city users is our service and products will be more simple and clear.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And in terms of placement business, especially on the blue collar placement, we have been spending a lot of resources at times. The key point is to guarantee the efficiency and reliability of our results. So if AI application can really help with those two aspects, then we do feel some confidence in this perspective, and that's why we want to further invest in this area.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And that's my answer to your question.
 Operator, I think that's the last one due to the time constraint.

Operator

Thank you. Yeah. Due to time constraint, that concludes today's question-and-answer session. So at this time, I'll turn the conference back to Wenbei for any additional or closing remarks.

Wenbei Wang

Thank you, operator, and thank you, everyone, for joining our call today. And if you have any further questions, please contact our team directly or TPG Investor Relations.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.