Kanzhun Limited (NASDAQ:BZ) Q4 2023 Earnings Call Transcript
Kanzhun Limited (NASDAQ:BZ) Q4 2023 Earnings Call Transcript March 12, 2024
Kanzhun Limited beats earnings expectations. Reported EPS is $1.39, expectations were $0.17. Kanzhun Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Kanzhun Limited Fourth Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Today's conference is being recorded. At this time, I would 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 fourth quarter and full year 2023 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 purposes 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. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO.
Jonathan Peng Zhao: [Foreign Language] Hello, everyone. Welcome to our fourth quarter and full year 2023 earnings conference call. On behalf of the company and our employees, management team and the Board of Directors, I would like to express our sincere gratitude to our users and investors, who trust and support us. [Foreign Language] First, I would like to share our performance with you. In the fourth quarter, the company achieved our calculated cash billings of RMB1.78 billion, up 61% year-on-year and 9% quarter-on-quarter. Our GAAP revenue reached RMB1.58 billion, up 46% year-on-year and remained flattish with last quarter. Our adjusted net income, which excludes share-based compensation expenses was RMB630 million. [Foreign Language] In the fourth quarter, the average verified MAU of the BOSS Zhipin app reached 41.2 million, representing a 33% year-on-year increase.
In the fourth quarter, we noted an improving ratio between the demands from active enterprise users and supplies from job seekers. We also noticed continued steady recovery of medium and the large scale enterprises since the third quarter. All of which contributing to our cash billings, GAAP revenues and profit levels in the fourth quarter to exceed our expectations. [Foreign Language] Let's take a look for the full year of 2023. The Company achieved calculated cash billings of RMB6.69 billion, up by 45% year-on-year, and the GAAP revenue of RMB5.95 billion, up by 32% year-on-year. Excluding share based compensation expenses, the adjusted net income for the year reached RMB2.16 billion. [Foreign Language] Furthermore, excluding other income, such as wealth management income, adjusted operating income for 2023 was RMB1.64 billion, reflecting our remarkable 191% year-on-year increase.
This resulted in a 27.5% adjusted operating margin underscoring the company's robust profitability capability. [Foreign Language] In 2023, we attracted more than 49 million newly added verified users, representing the largest annual growth in user base since the company's inception. This year, the number of users we serve has increased by nearly half of 100 million and we are being able to help them with our products, which we are quite deeply proud of. [Foreign Language] As of December 31st, 2023, the Company has served a total of over 178 million individual users and 13.3 million enterprises. The average verified MAU on the BOSS Zhipin app was 42.27 million in 2023, representing a year-on-year increase of 47%. Approximately 1.5 billion mutual achievements between job seekers and recruiters has been accomplished on our platforms throughout the year.
[Foreign Language] In 2023, the number of paid enterprise customers increased by 44% year-on-year to 5.2 million. Moreover, both the number of paid enterprise users and the paying ratio of active users continued to achieve record high. [Foreign Language] As the company continues to expand our user coverage, both the user and revenue structure undergoes constant evolution, highlighted by the following key points. First, in 2023, the scale of newly added blue-collar users matched sales of the white collar users with revenue contribution of the whole year from blue-collar users exceeding 34%. Second, revenue contribution from second and the lower tier cities exceeded 50%, a five percentage point increase year-on-year. Third, revenue contribution from enterprises with less than 100 employees also increased by more than five percentage points year-on-year.
[Foreign Language] All these changes further demonstrated that we are confident that our product can serve different users and also our service can cover different kind of users. [Foreign Language] This is mainly based on the down to earth research on actual detailed needs from different kind of users and our continuous efforts in technology investments. [Foreign Language] In January this year, our company's proprietary big model, which we named it big large language model, which is believed to be the first large language model designed specifically for the recruitment industry, has successfully completed its online registration for generative artificial intelligence. The effect of this model has reached the industry leading level on some public benchmarks and has gradually been applied in some recruiting and job seeking scenarios.
For example, for those young entrepreneurs, who are starting up their companies, we provide them with rapid job posting function and for those young people or fresh graduates, job seekers we provide we provide them with resume polishing functions, et cetera. [Foreign Language] The company's investment in AIGC mainly focus on two principles. First, we keep track of the cutting-edge technology to avoid generational gaps in knowledge. Second, focus on industrial implementation and not make big investments blindly. [Foreign Language] Next, we will briefly update the situation for this spring. Following the spring festival, the Company's various user metrics continue to hit historical highs with the peak DAU on the BOSS Zhipin app approaching 70 million, for example.
From those data, we also identified several characteristics, which are notably different from the same period last year, including the following keywords. [Foreign Language] First recruiters, since the Spring Festival, the daily average number of newly posted job positions and active job positions have both reached historical highs compared with the same period in the previous years. The daily average number of active job positions increased by 20% year-on-year. [Foreign Language] The second keyword is large enterprises. Since Spring Festival, the average daily active position from enterprises with more than 10,000 employees increased by 24% compared with the same period of 2023. [Foreign Language] The third keyword is industry. The daily average number of newly added job positions and active job positions across all industries has shown positive growth since this year's spring festival compared with the same period of 2023, among which the blue-collar industry has once again reached a new record high, driven by the continuous expansion of urban service sector.
[Foreign Language] Additionally, the manufacturing and the supply chain logistics sectors have shown accelerated year-on-year growth rate. [Foreign Language] Within the white-collar industry, sectors such as consumer goods, medical equipment, automotive and advertising, and media are leading the growth. [Foreign Language] The fourth keyword is business. There has been a noticeable shift in the types of job positions compared with last year. The positions focusing on the development and growth of the enterprise business such as sales guides, human resource services, finance and related positions have experienced a clear rebound in growth rate. [Foreign Language] So we anticipate our quarter-on-quarter increase in both cash billing and debt revenue for the fourth quarter.
[Foreign Language] I'm pleased to announce the company's Board of Directors approved a new share repurchase plan today upsizing to repurchase up to $200 million of the company's shares over the next 12 months. This marks our third share repurchase plan alongside the $80 million special cash dividend issued in last November, demonstrating the management's commitment and sincerity towards long-term shareholder returns. [Foreign Language] That concluded my part of the call. I will now turn it over to our CFO, Phil, for the review of our financials. Thank you.
Phil Yu Zhang: Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results of the fourth quarter and full year of 2023. We are pleased to deliver a strong set of results for the fourth quarter and the full year 2023. For the fourth quarter, our calculated cash billings reached a historical high of RMB1.8 billion, grew by 61% year-over-year, and notably, 9% quarter-on-quarter, beating our expectations. Revenues increased by 46% to RMB1.6 billion compared to the same period last year and stayed relatively stable sequentially due to the lower seasonality confirmed our observation of a gradual recovery, especially at medium and large size companies, revenue contribution from key accounts and their ARPU also recovered sequentially in this quarter.
For the full year of 2023, our calculated cash billings and revenues increased by 45% and 32%, respectively. Number of paid enterprise customers reached $5.2 million in 2023, up by 44% year-over-year, marking another new high level of paying ratio among active enterprise users and demonstrated our ample space and flexibility in monetization. Moving to the cost side, total operating costs and expenses decreased by 4% year-over-year to RMB1.4 billion in the fourth quarter and increased by 16% year-on-year to RMB5.4 billion in 2023. This year we managed to achieve a robust user growth while still seeing margin expansion. The annual adjusted operating margin improved from 12.5% in 2022 to a record level of 27.5% in 2023, up by 15 percentage points.
Cost of revenues increased by 36% year-over-year to RMB275 million in the fourth quarter, and 40% year-over-year to RMB1.1 billion in 2023. This increase was primarily driven by increased server and bandwidth costs and payment processing costs, in line with the growth of user engagement and transactional gross volume. Our sales and marketing expenses decreased by 36% year-over-year to RMB433 million in the fourth quarter as we didn't have similar marketing campaigns like 2022's FIFA World Cup sponsorship in the year and remained stable with last year at RMB2.0 billion for the full year of 2023. Even excluding the World Cup sponsored fees, adjusted sales and marketing expenses as a percentage of revenue went down by seven percentage points this year compared to 2022.
When at that time, we could only have a user growth of half of the year. This proved the effectiveness of our marketing strategy, which emphasizes more towards branding campaigns. Our R&D expenses increased by 46% year-over-year to RMB430 million in the fourth quarter and 31% year-over-year to RMB1.5 billion in 2023. Excluding share-based compensation expenses, adjusted R&D expenses increased by 62% year-over-year to RMB316 million in the fourth quarter and 25% year-over-year to RMB1.1 billion in 2023. This increase was mainly driven by our further investments in talents and AI technology developments, which incurred AI-related server and cloud service fees. Our G&A expenses decreased by 9% year-over-year to RMB225 million in the first quarter, and increased by 13% year-over-year to RMB812 million in 2023.
Excluding share-based compensation expenses, adjusted G&A expenses decreased by 32% year-over-year to RMB122 million in the first quarter and 8% year-over-year to RMB482 million in 2023, mainly due to decreased professional service fees. Our net income was RMB331 million in the fourth quarter and RMB1.1 billion in 2023 full year. Adjusted net income increased from RMB59 million in the first quarter of 2022 to RMB629 million and increased from RMB799 million in 2022 full year to RMB2.2 billion for full year 2023, representing a significant year-over-year increase. Adjusted net margin for the full year of 2023 reached a record high of 36.2%, up by 18.5 percentage points. Net cash provided by operating activities was RMB927 million for the fourth quarter and RMB 3.0 billion for the full year of 2023.
As of December 31st, 2023, our cash and cash equivalents, time deposits and short-term investments totaled RMB12.9 billion and long-term investments in fixed rate notes and wealth management products were RMB2.3 billion. With our commitment to share our success with shareholders and supported by our robust cash reserve, we paid a cash dividend of RMB563 million in December 2023. Additionally, our Board has repurchased program over the next 12 months and upsized the program to $200 million, demonstrating our strong commitment to shareholder returns. And now for our business outlook. We have seen encouraging trend of recovered recruitment demand post-Chinese New Year and we are confident to deliver better than expected results for the current quarter.
In the first quarter of 2024, we expect our calculated cash billings to increase sequentially by at least 12% and revenues to be between RMB1.64 billion and RMB 1.67 billion with a year-over-year increase of 28.3% to 30.7%. With that, that concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead with questions.
See also 27 Most Charitable Countries in the World and 13 States That Don’t Tax Retirement Income.
To continue reading the Q&A session, please click here.
