Kanzhun Limited (BZ) Q2 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Kanzhun Limited Second Quarter 2025 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.

Thank you, operator. Good evening, and good morning, everyone. Welcome to our second quarter 2025 earnings conference call. Joining me today are our Founder, Chairman and CFO, 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 a 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.

[Interpreted] Hello, everyone. Thank you for joining our company's Second Quarter 2025 Earnings Conference Call. On behalf of the company's employees, management team and Board of Directors I would like to stand over sincere gratitude to our users, investors and friends, who have continuously believing and supporting us. Today, I would like to report on four matters. First, our quarterly performance was good. Second, the supply demand dynamics on our platform continues to improve. Third, we are making ongoing progress in AI. And fourth, our recent Hong Kong share offering and the future shareholder return arrangements. Let me start with an overview of our financial performance. In the second quarter, our company achieved a total revenue of RMB 2.1 billion, up 9.7% year-on-year. Our net income reached RMB 710 million, reflecting a 70.4% year-on-year growth, achieving a net profit margin exceeding 33%. Excluding share-based compensation expenses and other income, such as investment gains, our adjusted operating profit was RMB 880 million, up 33% year-on-year. Share-based compensation expenses for this quarter decreased by nearly 10% quarter-on-quarter for the second consecutive quarter, amounting to RMB 230 million, with a ratio to revenue narrowed by about 5 percentage points year-on-year. The operating leverage from the economics of scale and the efficient business model supported our high-quality growth, characterized by simultaneous improvement in both revenue and profit. From January to July, we cumulatively added over 30 million verified new users. In the second quarter, the average verified among the active users on the BOSS Zhipin app reached 63.56 million, up 16.5% year-on-year, consistent with user growth and penetration trips, revenue contributions from blue-collar, lower-tier cities and small and medium-sized enterprise further increased compared to last year. Second, during the second quarter and graduation season, we saw notable improvements in our platform's job-hire demand dynamics. Specifically, on the job seeker side, incremental job seeking demand from graduate moderated with number of newly added verified graduates declining over 20% year-on-year in June and July. On the employer side, recruitment demand for fresh graduates also increased. The number of new job openings for fresh graduates grew by over 18% year-on-year for the same period. This aligns with the overall trend recovery in the recruitment market. In July, the number of newly posted jobs on our platform increased by approximately 20% year-on-year. Both the number of employers posting new jobs and average number of jobs posted per recruiter were higher than the same period last year. The improvement in supply and demand relationships also led to a significant year-on-year decrease in the CB ratio for new users. Improved supply-demand dynamics also drove positive changes in monetization. The total paid enterprise customers in the 12 months ended June 30, reached RMB 6.5 million, up 10% year-on-year. From industry perspective, blue-collar manufacturing experienced a short-term slowdown in import due to tariffs but resumed year- on-year growth from May onwards with growth rate continuing to outpace other industries. Urban service sector saw accelerated year- on-year growth in the second quarter. We observed a noticeable recovery in the Internet industry with a number of active job openings in the second quarter, reaching a new high since 2021, led by product and technical roles. Third, the company's continued progress in AI. I will speak to the three perspectives: AI to C job seekers and AI to B enterprise users and AI to management. First, AI to job seekers. The AI-interviewed training robot has made some new progresses. This robot now start to place a role in recommendations. Upon the job seekers' consent, we use data obtained during the interview process to recommend positions to job seekers and users who participated in the experimental tool have achieved higher efficiency. We continue to iterate AI-assisted user search for users participating in the test, not only, the AI can give you more explanation for the research results, it can also provide dynamic content summaries, job search strategy planning and revenue optimization guides based on user queries. Users in the environmental tools gained more mutual achievements. In terms of protecting job seeker's safety, we have applied AI to identify risks in users. For instance, we have trained AI to recognize more sectoral aggressive language and expressions that validate platform use. Another example is that the AI tools, we developed, have made preliminary growth in identifying free content tempered by other AI. This is obviously a long-term and a challenging task, but we firmly believe that more people are in need of such function. Next, about AI to enterprises. We provide AI-assist in job posting optimization features for bosses of many newly established start-ups and junior HR. Currently, AI assists in posting tens of thousands of job positions on a daily basis. The key point here is how to prevent turning assistance into placement. It is difficult, but we must perceive in doing so. In terms of commercialization, we have extensively integrated AI to conduct environment for instance, we use AI to income withstanding of the future's intention thereby helping them to select value-added services, which are more suited to their needs. Recruiters in the experimental group have made more proactive purchases and because they have choose the more suitable products, the repeat purchase have also increased. Now, AI tool management. We promote the use of AI in research and development transforming R&D tools and processes in a certain technical department at the Beijing headquarters, 30% of the coding is now AI-generated. In another city, a newly established R&D department, 70% of the code is AI-generated. As a result, the speed of product R&D iteration and launch has significantly increased, allowing us to explore more possibilities within the same time frame. AI is playing an increasingly important role in customer service. It has achieved results in training new customer service staff, automatically inspecting customer service quality and providing suggestions to recognizing and responding to customer emotions. This is crucial for improving user satisfaction and enhancing the well-being of customer service employees. The last one, we would like to report our recent Hong Kong offering and shareholder return arrangements. The company completed a Hong Kong secondary share offer of HKD 2.2 billion on July 4. The primary purpose was to enhance the liquidity in Hong Kong line, allowing more investors in the Hong Kong stock market to understand and participate in the company's trading. The offer has achieved positive results with a significant increase in Hong Kong stock trading volumes compared to the pre-offering levels. Regarding shareholder returns, the Board of Directors approved the two shareholder return proposals today. First, the annual dividend policy was adopted, the company plans to pay out annual dividends going forward with dividend of USD 80 million for the current fiscal year. Second, a new share repurchase program and the faith cumulative perspective is launched, the company intends to repurchase up to $250 million of these shares over the next 12 months starting August 29. We believe this fully demonstrates the company's sincerity in actively rewarding shareholders and showing the benefits of our sustained growth with all investors. That concludes my part of the call. I'll now turn it over to our CFO, Phil, for the review of our financial.

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results of the second quarter of 2025. We continue to achieve high quality results in this quarter, represented by solid revenue growth and further improve the profitability. The revenue growth this quarter was primarily attributed to the continued expansion of our user base. With the number of paying enterprise customers increased by 10% year-on-year to $6.5 million over the trailing 12 months ended June 30. As the recruitment market demand has gradually recovered since the beginning of this year, and the job-seeker recruiter ecosystem has improved, the willingness of enterprise clients to pay has been rising. Among them, the recovery in recruitment demand from small- and medium-sized enterprises has been more pronounced, driving a quarter-on-quarter increase in the revenue contribution from SMEs. ARPPU, A-R-P-P-U, maintained a stable and modest growth, mainly benefiting from the expansion of paying amount from key accounts. Moving to the cost side. Total operating costs and expenses decreased by 7% year-on-year to RMB 1.5 billion this quarter. Share- based compensation expenses dropped by 24% year-on-year and a 9% quarter-on-quarter to RMB 230 million, shrinking for the four consecutive quarters. Excluding share-based compensation expenses, adjusted income from operations grew by 33% to RMB 881 million, and our adjusted operating margin in the quarter reached 41.9%, up by 7.5 percentage points year-on-year to hit a record high. Cost of revenues decreased by 3% year-on-year to RMB 307 million in this quarter, mainly due to the decrease in operational employee-related expenses as a result of the improved operational efficiency as we continue to engage AI in our daily operations. Gross margin went up by 1.9 percentage points year-on-year to 85.4%. Sales and marketing expenses decreased by 23% year-on-year to RMB 420 million during this quarter, primarily driven by decreases in advertising and marketing expenses and employee-related expenses. However, our strong brand recognition enhanced marketing efficiency and superior user engagement guaranteed that we can still maintain robust user growth momentum. Our R&D expenses decreased by 6% year-on-year to RMB 416 million in this quarter. This decrease was primarily driven by reduced public cloud service fees related to AI. Our G&A expenses increased by 19% to RMB 311 million in this quarter, primarily due to an increase in employee-related expenses and investment in new initiatives. Our net income increased by 70% and to RMB 711 million in this quarter, with adjusted net income increased by 31% to RMB 941 million. And margins also expanded significantly and reached a record high. Our net margin improved by 12.1 percentage points year- on-year to 33.8%, while our adjusted net margin reached 44.8%, up 7.3 percentage points year-on-year. Also, these two margins have maintained sustainable improvement over the past three consecutive quarters. Net cash provided by operating activities reached RMB 1,052 million in this quarter, up 21% year-on-year. At June 30, 2025, we continue to maintain a strong cash position of RMB 16.0 billion. In July, we completed a share offering of RMB 34.5 million Class A, ordinary shares at HKD 66 per share, comprising a Hong Kong public tranche and an international tranche. Net proceeds from this share offering amounted to approximately HDK 2.2 billion. This offering on one side, improved our Hong Kong line liquidity and broadened our share base -- shareholder base. On the other side, further strengthen our cash position gave us both a strategic flexibility and financial capacity to pursue long-term growth initiatives and enhance our shareholder returns. One new initiative Jonathan just mentioned is that our Board of Directors has just approved the adoption of an annual dividend policy with a dividend amount of USD 80 million for the fiscal year of 2025, combined with a renewed USD 250 million share repurchase program. Our commitment to shareholder returns continued to enhance. And for our business outlook, just like we communicated before, we expect our revenue growth to reaccelerate starting this quarter, along with the recovery of recruitment market momentum. For the third quarter of 2025, we expect our total revenues to be between RMB 2.13 billion and RMB 2.16 billion, a year-on-year increase of 11.4% to 13%. This concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead.

[Operator Instructions] And the questions come from the line of Eddy Wang from Morgan Stanley.

[Interpreted] I have two questions. The first one here is the recruitment demand recovery, we witnessed on BOSS platform in the second quarter and July. Is there any different driver for such recovery this time versus before? For example, has the food delivery battle led to the search in service industry blue-collar recruitment demand? Do you think the recruitment demand in the second quarter is sustainable or not, how is your view and outlook for the third quarter? And the second question is that you mentioned previously that your R&D department, most of the coding has been generated by AI. So what's your view on the AI's impact on the white-collar recruitment, especially on hiring demand of the programmers?

[Interpreted] Thank you for your question. About the recovery trend of the recruitment market, compared to before, we saw a small future and big future. The small one is the job postings from Internet sector have recovered to a new high since 2021, as we just communicated. And the big one is that the smaller size or micro size enterprises have been recovering much faster. One data to share with you that the company with employees less than 20, less than 20 employees in the second quarter, its revenue contribution goes up to almost 20%, which is the highest -- representing our highest growth rate among all different type of companies. Less expanding the site a little bit to companies with less than 100 employees, the year-on-year growth rate of new job postings by both companies have also significantly exceeded the platform's overall level. About your question of the impact of the full delivery competition, our observations is impacted quite minor or negative. So because the data shows that the job postings related to riders or food delivery guys has been quite small among all of our job postings and we also haven't observed any higher than average level of revenue growth from those jobs. About your third question, whether this recovery could be sustainable, our view is positive. I have several evidence for you. First one is we have communicated before that the very poor job-seeker-to-recruiter ratio starting last July, the situation has been improved since last November 2024, which, by that time, has recovered to the same period of November 2023. After that, the job-seeker-to- recruiter ratio dynamics have been continued to improving and in the second quarter, we have seen a much more obvious recover for that number, which we have just communicated. From my perspective from daily operations, our business growth rate in the third quarter is expected to further accelerate compared to the second quarter, which I have quite confidence with.

And the questions come from the line of Wei Xiong from UBS.

[Interpreted] I have two questions. First is our margins continue to expand this year to a very high level. So given such a high base, how should we think about the margin trend in the next year and beyond? And also considering our healthy and stable margins and cash flow, how do we -- what do we consider as the most important investment areas going forward? Second, it looks like some start-up companies are ramping up advertising investment recently. Does it affect our marketing and user acquisition cost? How do we assess the impact on the competition landscape in blue-collar segment and online recruit market overall as well as our competitive modes?

So thanks for the question. I'll answer the margin question first. You are right that our margin continues to improve. We think that this is mainly related to our business model because of -- we run an online recruitment marketplace. The scale effect brought by our company's business model is significant. We believe this is the fundamental reason for the continuous improvement of our profit margins. And the company in the past several quarters, we implemented effective cost control to make sure we have -- we put our focus on the high-quality part of growth, which kept our growth cut our cost growth rate lower than that of revenue. So with that, our -- along with our revenue, steady growth, the direction of gradual improvement of our profit margin is quite clear, and this is kind of a definite. But we believe the margin improving is a long-term thing and it should run step-by-step, not all of a sudden, not grow too fast or too high in the short term. So basically, in terms of the areas that we would like to invest, we will continue to invest into our business. And our future investment priorities remain consistent with our previous ones, mainly focusing on R&D innovation and new business initiatives, et cetera. And you also can see that we generated a very healthy cash flow. So in the quarter -- in this quarter, we generated more than RMB 1 billion operating cash flow. Actually, this is the conservative 2 quarters. So in the first quarter, the operating cash flow is also above RMB 1 billion. So we already had two consecutive quarters with over RMB 1 billion operating cash flow. And with such healthy cash reserves, we will mainly use our cash at talent development, probably that overseas expansions and more importantly, shareholder return programs in the future. So that's my comment related to the margin and our used -- how to use our cash in the future. So Jonathan can answer the second question.

[Interpreted] We -- about the second question, yes, we do observe that many of our peers will do some advertising marketing events in certain cities including both mature companies or startups. But so far to now the impact to us is quite limited. But my observation or my understanding is that at this current stage, a marketing wall, meanness of marketing wall is very small. I want to clarify one thing that even though our marketing expenses as a percentage of revenues continue to mark timing. But on the small amount basis, we are still investing in the largest amount of marketing and advertising expenses among the industry. In the meantime, due to our very powerful double-sided network effect, so we -- our very high user acquisition efficiency -- so we can maintain a very robust user growth while our user acquisition cost still kept at a quite low level. And also, our user acquisition is the highest among our peers. So to sum up, we have a very strong marketing investment. We -- our user acquisition efficiency is high, our user retention is high. So that's why I say at current stage is quite -- the meanness is quite slow to start up market. And we would like to answer the second question from Eddy about whether AI will replace the programmers. So from our own situation is that, yes, our equipment for entry-level programmers have been slowing down, but we are still hiring. So we are focusing on those people who have more potentials who are much more smarter, can break down the questions and looking from a bigger picture perspective. So I think that's also happening in many other technology companies. And so what I'm facing to recruiting the entry-level programmers, I'm spending more money, more cost -- recruitment cost to hire the people with more talent or more potential. So we will -- actually, we might somehow increase the equipment cost for those type of people. I think that's also happening to many other technology companies. So my thinking on this issue is that in the past, the normal structure is one senior programmer with some junior level team to do more simplified jobs. Now, it will turn into one senior programmer or senior technical guys with AI. But the salary we need to pay and hiring efforts we need to invest to hire that the senior guy actually increases. And the junior engineer or junior programmer as a percentage of overall white-collar employees, which in our country might be more than RMB 100 million. My gut feeling is it's less than 2%. So that changed to the impact of hiring of white collar is very limited.

And the questions come from the line of Timothy Zhao from Goldman Sachs.

[Interpreted] Two questions from my side. First is regarding the AI application or AI features. If management can introduce more details about the specific use scenarios on the enterprise side and what kind of commercial product that we are thinking of. Also, we note that recently, the company leveraged AI to develop mini programs or applications of different features. Just wondering from your perspective, which ones have the more commercial potential? And secondly, is regarding your recent financing activities in Hong Kong market. And we're very glad to see you also announced the share repurchase and annual dividend policy this year. Just wondering if management can share what is your thought on the capital markets going forward? For example, what are your plans to improve the liquidity in the Hong Kong market? And what are the detailed dividend plan that you have in your mind?

[Interpreted] Actually, we -- yes, we do have some good progress on the AI product development side. Actually, we have been quality to do some new product launches and development. So I can give you more examples. The first one is agent. We developed a recruitment agent called HAMR. Currently, we use it to with approximately 500 recruiters daily. The recruiters can complete the majority of their work on our platform by simply interacting with HAMR through dialogue. Of course, this part should have the job seekers consent. And so sometimes job seekers might say no, but if job seeker is okay, the HAMR will complete its job until to get -- to achieve an exchange revenue content information or achievement on our platform. We will attach very great metrics to iterate this agent HAMR. So rather than saying that we are moving new technology to validate what we have already known in that space, HAMR actually will let us to even greater online. And our progress on HAMR is actually quite restraint, but the second one, we have been more aggressive. So the second example is where the job seekers has more tolerance towards these products and the recruiters, it has higher leverage in terms of the negotiation progress. So it's actually a product we designed for large state-owned enterprises, which have just launched. Currently, this system allows for customization of digital human advertises, interview questions and the interview reports. It also supports AI-powered follow-up questions, multi-model candidate in motion recognition and image recognition. Using this technology, we have supported over 20 AI-powered interview events for recent graduates at over 10 large state-owned enterprises, attracting nearly 30,000 participants, and the response has been positive so far. I think that we have a lot of those examples, and that also should be quite common in many other companies. Actually, I felt that the combination of AI technology and the current products or application in technology, management and the daily operation is still at early stage. So the new technology combined with all the business for this metric, the more revolutionized the product is so that it will be more like our brand activities movement. So the killer level applications will be generated among a lot of those brand movements. So we have enough patients, and we have enough assets to -- waiting for that kind of application to be born. So the AI, everybody cares about, we are also quite cared about. And the fundamental principle is just treating it like a blunt movement. The next stage is AI will be everything in our daily life.

Okay. So I'll answer the second question. So as you know that the company has a very healthy cash balance on hand, we have more than RMB 16 billion cash reserve. And in terms of operating cash flow, every quarter, we have incremental more than RMB 1 billion inflow. So basically, the company does not need to raise money from the market. So our capital activity, our fundraising activity in July. The purpose of that activity is to improve our Hong Kong line liquidity because of -- in the past, we got public listed in Hong Kong through the introduction without issuing new shares. So that made us with a very poor liquidity in our Hong Kong stock trading, so we want to solve this problem. And we think that solving this problem could be both benefited to the company and the benefits to our investors, to our shareholders. So that's why we took a very rare approach to launch a public offering in Hong Kong. So the offering was very successful and all the participating investors, all made money and our Hong Kong line liquidity revised a breakthrough and our liquidity started to improve since the offering. So what I'm saying is that the company we consider shareholders as our partners, and we consider the shareholder return a very important topic. And in the past, we mainly use shareholder repurchase program to return cash to the shareholders. We totally already launched a full phases. And the total purchase shares, total amount more than -- about USD 400 million. So this time, the company renewed our share repurchase program and also we announced our annual dividend policy. We make this as a regular routine and make it an annual thing. So basically, every year, we will consider our operating situations and pay dividend to our shareholders. And this year, for the first -- for the fiscal year of 2025, we announced USD 80 million for the dividend for this year. And our Hong Kong line liquidity, because of the share of -- the public share offering is HKD 2.2 billion. That's roughly USD 280 million. But compared with our renewed share repurchase program, which is USD 250 million plus our USD 80 million annual dividend. So our announced amount is already higher than the amount that we raised in our earlier public offering. So that also showed that we had a good commitment to our shareholders' returns. And one last thing related to our shareholder returns is that our share-based compensation as an expenses, we received the comments from shareholders that say share-based compensation was once a little bit high, and we controlled these expenses. And from the results, you can see that in the past several quarters, these expenses continued to decline in terms of total amount and in terms of percentage to the revenues. So all above, just evidence or some kind of things that have showed our attitude towards the shareholders' return. And we consider this is a very important thing, and we will continue to do that in the future.

Okay. So that's all of our answers to today's questions. Operator?

Due to time constraints, this concludes today's question-and-answer session. At this time, I will turn back the call to Wenbei for any additional or closing remarks.

Thank you again for joining us today. If you have any further questions, please contact company directly. Thank you.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]