Q1 2023 Kanzhun Ltd Earnings Call
Participants
Jonathan Peng Zhao; Founder, Chairman & CEO; Kanzhun Limited
Phil Yu Zhang; CFO & Director; Kanzhun Limited
Wenbei Wang; Head of IR & Capital Markets; Kanzhun Limited
Eddy Wang; Research Analyst; Morgan Stanley, Research Division
Timothy Zhao; Research Analyst; Goldman Sachs Group, Inc., Research Division
Wei Xiong; Research Analyst; UBS Investment Bank, Research Division
Presentation
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Kanzhun Limited First Quarter 2023 Financial Results Conference Call. (Operator Instructions) 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 first quarter 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)
Wenbei Wang
[Interpreted] Hello, everyone. Welcome to our first quarter 2023 earnings conference call. On behalf of the company and our employees, I would like to express our sincere gratitude to our users and investors, and our employees.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] In general, this is the season when our business began to return to its healthy development trajectory as we step into the post-pandemic era.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] In the first quarter, we recorded revenue of RMB 1.28 billion, representing an increase of 12% and 18% year-on-year and sequentially. Our calculated cash billings reached RMB 1.65 billion, representing an increase of 28% and 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 RMB 32.7 million compared to a net loss in the same period of last year. Our adjusted net income which excludes share-based compensation expenses was RMB 245 million, increasing by 102% year-on-year.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] After Lunar New Year, our user base grew rapidly. In first quarter, we had 14.61 million newly verified users. The average monthly active users on BOSS Zhipin app were approximately 14 million, up 58% year-on-year. The average daily active users increased by 54% year-on-year on this quarter with DAU reaching nearly 15 million -- with peak DAU reaching nearly 15 million. Notably, blue collar and lower-tier city users were the fastest-growing cohorts across our user base. In this quarter, blue collar users contribute to more than 40% of the newly verified user growth with accumulated verified blue collar users accounting for 31% of our total users by end of this quarter.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] In terms of recruitment demand from enterprise users, which many of you care about, since the first quarter (inaudible), our monthly active enterprise user scale continuously reached record highs in comparative period while maintaining a consistently high level since the spring festival. Among all the industries 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.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] Commercial-wise, thanks to the general recovery of recruitment demand from our enterprise users. The number of our paid enterprise customers in the trailing 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 second 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 was less than 100 employees, and those from second- and lower-tier cities also increased year-on-year.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] 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 jobseekers could access more and better employment opportunities on our platform with a continued high-quality user experience. 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 and March, following the spring festival, the number of successful content reach, which means the successful resume exchange between jobseekers and enterprise users achieved on average 150 million tariff, 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 exchange per person.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] So I would like to take this opportunity to give special thanks to our engineers and the product managers who have made their special efforts.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] 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. This is important work for our company this quarter and also the corporate culture that's more than 5,000 employees of our company has been upholding.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] We believe many investors and friends are concerned about the challenges and opportunities that the recent developmental 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.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] In general, since the beginning of the second quarter, our platform has continued to see solid growth trends in our user base and user engagement, both on the jobseeker side and enterprise side. It's worth mentioning that the number of active enterprise users and active positions posted have both show 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 demonstrating promising recurring trends.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] With that, I will turn the call over to our CFO, Phil, for a review of our financials. Thanks.
Phil Yu Zhang
Thanks, Jonathan. Hello, everyone. Now, let me walk through the details of our financial results for the first quarter 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 the rebound of the recruitment post the spring festival, we have (inaudible) our re-acceleration of both revenue and the calculated cash billings growth. Our revenues reached RMB 1.28 billion, up 12% year-over-year and our calculated cash billings reached RMB 1.65 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 improve the paying ratio. As a result, our number of paid enterprise customers in the past 12 months also recovered and expects to continue to increase in the coming quarters. Revenue contribution from small-sized accounts increased as recruitment demand from SMEs grew better.
Moving to the cost side. Total operating costs and expenses in this quarter were RMB 1.37 billion, up 20% year-over-year. Excluding share-based compensation, adjusted operating costs and expenses in this quarter decreased about 15% to RMB 1.16 billion. Considering other operating income, our adjusted operating margin for this quarter is 10.6%.
Cost of revenues in this quarter was RMB 247 million, up 39% year-over-year, mainly driven by increases in server and bandwidth cost due to higher user traffic and payment processing cost, 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 568 million, up 15% year-over-year. 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 with the same period of 2021 due to our enhanced branding recognition. This encouraging trend will help us continue to achieve solid profitability while maintain new user growth momentum. Sales employees-related expenses also increased as a result of higher cash revenue growth.
Our R&D expenses in this quarter increased by 15% year-over-year to RMB 333 million. And G&A expenses in this quarter increased by 6% year-over-year to RMB 165 million. Notably, benefiting from our strategy and efforts to improve operating efficiency, our adjusted R&D expenses and adjusted G&A expenses kept relatively stable with the same period of 2022.
Net income in this quarter was RMB 33 million as compared to a net loss of RMB 12 million in the quarter -- in the same quarter of 2022. And our adjusted net income for this quarter increased to 102% year-over-year to RMB 245 million, representing an adjusted net margin of 19%.
Net cash provided by operating activities was RMB 544 million for this quarter. As of March 31, 2023, our cash, cash equivalents and the short-term investments increased to RMB 13.5 billion. The robust operating cash flow and cash reserve enabled us to be more flexible on capital allocations on the future development strategy.
And now for our business outlook. For the second quarter of 2023, we expect our total revenues to be between RMB 1.43 billion and RMB 1.46 billion, with a year-over-year increase of 28.6% to 31.3%.
That concludes our prepared remarks. Now, we would like to answer questions. Operator, please go ahead.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Eddy Wang from Morgan Stanley.
Eddy Wang
(foreign language) I have 2 questions. The first one is that, if you look at the user -- employment rates has been -- reached a record high in April. And we will see another batch of the graduates in the coming 2 quarters. So do you think the high employment of the user could be a long-term structural issue? And how it will impact our business in the longer term?
And then second question is that, you mentioned in April and May we do witnessed that the job posting and active enterprise users, the level have 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 user employment rate has been high. Do you think this recruitment demand recovery is sustainable into the second half of this year?
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] 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 jobseekers compared to relatively less recruitment demand, which led to a high unemployment rate of the younger people aged between 17 to 24, will that trend turn into a long-term structural question? My answer is that, no, and I believe the situation has been improving. 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 historical view, the ratio between jobseekers 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.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] Another interesting thing is that, the graduates this year, they're active reach out to the small- and medium-sized enterprise, that ratio has raised about over 10% compared to last year. This is a scenario I have never seen historically, which my personal feeling is that, people are trying their best to adjust to the environment and the to strive for their development opportunities.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] And in terms of the impact to the company, this year today, the pressure I have seen the most is that, the situation of more jobseekers compared to less job demand -- job supply, which has played great pressure to our recommendation system and our customer service system. If we cannot deal with it correctly, that will impact our -- impact, especially on the jobseeker side. We have been working quite hard on this. And if we look at -- from the perspective of the average achievements or average job resume exchanges each month per person, we have done pretty well until now.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] And about your second question of the recent demand recovery in April and May, we have observed that compared to February and March, weekly newly posted jobs have been increased by 7% on a week basis. And another number is that, for each job opening, the enterprise users, the recruiters behind that, the situation of the recruiters actually looking for the people compared to February and 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
We'll now move on to our next question. Our next question comes from the line of Wei Xiong from UBS.
Wei Xiong
(foreign language) Firstly, regarding the enterprise users, could management comment on the recovery trends for your KA users and SME user separately, for example, in terms of the user engagement, paying ratio, recruiting cycle, et cetera? 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? 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?
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] Okay. For the comparison between large companies and SMEs, one interesting point is that, we have seen different situations. In January and February, we have observed that SMEs have been recovered very rapidly, while large companies is more slowly. But in April and May, the situation is different. One data to look at is, for the enterprises with less than 100 persons, the daily active job postings increased by 1% in April and May compared to January and February. However, for the enterprises with people more than 10,000, the daily active jobs increased by 7% in April and May, which they showed a trend with faster recovery.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] And another data which we often look at internally, which is, in April and May, among the different job categories within enterprise, the jobs related to marketing and (technical difficulty) has been increased faster, which means people (technical difficulty) 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.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] Generally speaking, there are millions of enterprises and tens of millions of jobseekers on our platform each month. Our reason is that, they have been working very hard try to solve their own problems and we are also try our best to help them with that. So the general solution is that, April and May is better than February and March for either [large] companies and SMEs.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] About your question on blue collar. So the first thing is on the urban service industry, we -- which we have high confidence with and we have demonstrated strong value after years of efforts. And after the COVID with the fast recovery for urban 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 urban service industry and the blue collar has increased rapidly.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] And other major sub-sectors for blue collar includes manufacturing, construction, logistics, and warehousing, et cetera. So we have also been doing our job to create more values for all these industries. We are not as confident as those urban service sectors, but we are on the way and we are on the right direction. That is my view for this.
Jonathan Peng Zhao
(foreign language)
Wenbei Wang
[Interpreted] There are hundreds of millions of manufacturing workers, 14 million to 15 million of construction workers and maybe 20 million to 30 million of logistics, warehousing jobseekers. 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.
Operator
(Operator Instructions) Our next question comes from the line of Timothy Zhao from Goldman Sachs.
Timothy Zhao
(foreign language) I have 2 questions here. One is regarding the enterprise paying ratio and ARPU trend. Could management share any new product or new strategies in improving the overall enterprise paying ratio, especially related to the small-size and medium-sized customers, as well as the new customer the company has acquired?
And secondly, regarding the sales and marketing, we understand the first quarter is typically the peak quarter in terms of sales and marketing spending. I'm just wondering if management could provide some updates on the company's marketing plan for the rest of this quarter -- for the rest of this year and what is our margin forecast for this year.
Phil Yu Zhang
Okay. Timothy, so I would like to answer those 2 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 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 jobseekers and business customers in urban services and a few other logistics and tourism sectors. So the competitions between the business customers that are -- led the platform naturally increased a little bit about our paying ratio. Rest of the other sectors maintained a 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 and marketing expenses and our overall expenses, you're right that first quarter in terms of the seasonality, normally, is a high quarter because of -- there is usually industry-wide branding campaign happened after spring festival. So in our situation, we did a little bit brand advertisement in the [first] quarter. But looking ahead, there is no other big marketing event in rest of the year. So this is the 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 third quarter. And we believe that this high efficiency will further continue in following quarters. So that means in terms of the branding and in terms of the traffic acquisition marketing, so the overall selling and marketing will be -- will detect in a disciplined situation. So our overall marketing spending will hope to generate further leverage in the year.
And other cost items like R&D, like G&A will follow the suit in a similar trend. So our -- overall, our operating margins for 2023 compared with last year will be up in our costs. So that's pretty much our directional thoughts with regarding our operating margin. So that's my answer to the second question.
Operator
Thank you. Due to time constraints, that concludes today's question-and-answer session. At this time, I will turn the conference back to Wenbei for any additional or closing remarks.
Wenbei Wang
Thank you once again for joining us today. If you have any further questions, please contact or reach us directly. Thank you.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please standby.
