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 fourth quarter and fiscal year 2024 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 and the full year 2024 earnings conference call. Joining me today are our Founder, Chairman, and the CEO, Mr. Jonathan Peng Zhao and our Director and the CFO, Mr. Phil 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 culture 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 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 said, I will now turn the call to Jonathan, our Founder, Chairman, and the CEO.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Hello, everyone.
Thank you for joining our company's fourth quarter and the full year 2024 earnings conference call. On behalf of the company's employee, management team and the Board of Directors, I would like to extend our sincere gratitude to our users and investors and friends who have continuously be believed us and supported us.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Let me first provide an overview of our financial performance. In the fourth quarter, the company achieved a GAAP revenue of RMB1.82 billion, up 15% year on year. Over adjusted net income, which excludes share-based compensation expenses, which RMB720 million reflecting a 15% year on year growth.
In the fourth quarter, average verified monthly active users or MAU on the BOSS Zhipin app increased by 28% year on year to 52.7 million.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

For the full year of 2024, the company achieved the GAAP revenue of RMB7.336 billion, up 24% year on year. Adjusting net income, which excludes share-based compensation expenses, reached RMB2.71 billion up 26% year on year.
Furthermore, our adjusted operating income excluding other income such as wealth management income was RMB2.32 billion for full year 2024, rising by 41% year on year, and in 2024, we successfully delivered on our profit commitments.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Share-based compensation expenses as a percentage of revenue in 2024 decreased by 2.3 percentage points compared to 2023 and are expected to further decline in both absolute value and the proportion of revenue in 2025.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In 2024, we attracted nearly 49.5 million newly added verified users, setting a new record for annual user growth. At the same time, we reduced marketing expenses compared to 2023, thanks to our growing brand recognition and enhanced bilateral network effects, which have significantly improved customer acquisition efficiency.
As of December 31, 2024, the company has provided service to over 225 million users and 16.6 million enterprises.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

MAU on the bus shipping app for the full year reached 53 million, representing a year on year increase of 25.3%. In the year, we facilitated over 1.85 billion successful resume exchanges based on mutual consent between job seekers and employers, which is what we refer to as achievement in daily operation.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Despite macroeconomy challenges in 2024, the company's user growth-driven revenue growth model remains effective, driving notable improvement in both revenue scale and the profitability.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Some may argue that we are more beta-driven business. However, I would like to emphasize that our business model is so much more than that.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

To date, user expansion has remained our core growth driver.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

The structural revenue growth driven by sustained user penetration is clearly reflected in the following key metrics. First, increasing revenue contribution from blue collar segments. Blue collars user growth boosted their revenue contribution to overall revenue in 2024 to 38%. Notably, the manufacturing sector emerged as a bright spot for blue collar growth, posting the fastest growth rate among all industries.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Second, the revenue contribution from non-tier 1 cities continues to grow.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Third, the revenue contribution from micro and small enterprises continue to rise. Micro and small enterprises are defined as business with fewer than 20 employees.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

These revenue gains stem from structural shifts in user growth. As at the core of this success is the company's commitment to enhancing the user experience, which is underpinned by our continuous product and the service optimization.
It's not hard to imagine that within the online recruitment service industry, blue-collar workers, particularly those in the manufacturing sector, lower tier cities and micro small enterprises are among the more challenging user groups to serve.
Breakthroughs and growth in these areas would only validate our user first strategy, but also highlights the significant potential for our future user expansion and revenue growth.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Additionally, we have observed that recruitment demand from white collar and large enterprises have stabilized. Enterprises with over 10,000 employees demonstrated the fastest quarter on quarter revenue growth in the fourth quarter.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

I want to highlight one more aspect of our products and services. Many investors and friends have shown interest in the company's exploration of close loop services initiatives, which we do have some progress.
In 2024, the number of enterprises which we have provided placement and like service was near 40,000.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

In 2024, the total number of paid enterprise customers reached 6.1 million, representing a year on year increase of 17.3%. While the active user paying ratio remains stable, the average revenue per paying user or our pool achieved year on year growth both for the full year and in the fourth quarter.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Now let me introduce some AI implementation. We faced rollout in version 13.030 of the BOSS Zhipin app, which was released across major app stores around March 7.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

I'll start with our AI2C or AI for job seeker site update. First, on jobseeker's interaction for job search, we have added an AI powered question-based search function, something many of you are likely already familiar with and also kept our traditional keyword search. The search engine is powered by both our proprietary model called Nanbeige and the deployment of DeepSeek-R1.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And the second thing on the job seeker side is we have released an AI bot to help job seekers with interview coaching. This feature primarily targets those who have graduated within the past three years. This AI bot has been trained on millions of real interviews, and his core skills is that he's very good at interviewing. And as such, there are lots of things he can do. We will go step by step.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Now, let's take a look at AI true business, which is the recruiter side. Our first application for enterprise users is an AI agent. Recruiters participating in the beta testing can communicate their needs to the agent, which can perform the following tasks. Well, understand the recruiter's specific requirements. Two generate a curated list of candidates from our database. Three, offer justification for its recommendations. Four, deliver these results according to the recruiter's available schedule.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

For the second application, a better version has been launched to a selected group of blue-collar enterprise users. The process unfolds as follows. Once the recruiter selects a candidate, they deemed suitable and explicitly express their willingness to proceed by saying, I'm willing to give this candidate a try, the AI handles all subsequent communication on behalf of the recruiter.
The communication process continues until the AI either obtains the job seeker's confirmation of interest through the exchange of contact information or the job seeker rejects the outreach of the recruiter who is represented by AI.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

On the operational front, AI has huge potential to improve management efficiency and reduce cost. For instance, leveraging AI for security review has improved our audit efficiency by 30%. Over the past two years, as our user base has expanded rapidly, the workload related to user security protection has increased accordingly. However, AI has enabled us to manage this without a proportional increase in staffing.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Next, I will briefly update you on this year's spring recruitment season. Following the Spring Festival, the recruitment market continued its steady recovery trend that began towards the end of 2024. Post-Chinese New Year in February, the company's key metrics, including number of active users, active job postings, and new job postings, all reached historical highs.
The average daily new job postings after Chinese New Year increased by more than 10% compared to the same period last year.
Peak daily active users on the BOSS Zhipin app reached approximately 20 million, which are also historically high.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

A very important highlight on the supply and demand side, the job seeker to enterprise user ratio among new users improved compared to the same period last year, extending the positive momentum that began in November 2024.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

From an industry perspective, manufacturing, logistics, automotive, healthcare, education, and the professional services have exhibited strong performance.
In terms of job type, blue collar positions have grown faster due to our user expansion, while white collar roles have also demonstrated an improving year-on-year trend.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Notably, since the Spring Festival, average daily posting of AI-related jobs have surged by over 50% year on year, signaling a revitalized ecosystem for emerging business.
This growth in AI-related roles in turn has fueled good sequential momentum in demand for products and technical positions since the Spring Festival.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Last but not least, we are very committed to shareholder returns. In 2024, the company repurchased approximately $229 million worth of shares, accounting for 3.7% of total outstanding shares. This underscores our confidence in the company's long-term growth. And that concludes my part of the call. I will now turn it over to our CFO, Phil 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 fourth quarter and full year of 2024. We delivered a solid financial results for the fourth quarter and the full year of 2024. The recruitment market environment in 2024 was challenging, but we are pleased to see that recruitment demand gradually stabilized towards the end of the year.
Under such conditions, our revenues grew by 15% year on year to RMB1.8 billion during this quarter. Slightly beating our expectation and it grew by 24% to RMB7.4 billion for the full year.
Our number of paid enterprise customers for 2024 expanded to 6.1 million, marking a 17% year-on-year growth. ARPU for the quarter was up by 6.8% year on year and 3.9% quarter on quarter, marking a fourth consecutive quarterly growth. ARPU for the full year reached the [RMB1.2000], up by more than 5% year on year.
It's a result of our efforts to explore customer needs and providing more valuable services. Moving to the cost and expenses side, our total operating cost and expenses increased by 7% year on year to RMB1.5 billion during the fourth quarter and by 15% to RMB6.2 billion for the full year.
Total share-based compensation expenses decreased by 6% year on year in the quarter. As percentage of revenue-wise, share-based compensation went down by 4 and 2 percentage points respectively for the quarter and the full year.
Excluding share-based compensation expenses, our adjusted income from operation grew by 27% to RMB659 billion and the 41% to RMB2.3 billion respectively for the quarter and the full year. The adjusted opening margin for the fourth quarter reached a quarterly historical high of 36.1%, while the annual adjusted operating margins improved by 4 percentage points to 31.5% in the 2024.
Continue to demonstrate our strong operating leverage and feeding our target. Cost of revenues increased by 14% year on year to RMB314 million during the fourth quarter and by 17% to RMB1.2 billion for the full year. This increase was primarily due to increases in payment processing cost, server, and the bandwidth cost, and other business related costs alongside with the growth of revenue and user base.
It's worth mentioning that operational employee related cost as percentage of revenue decreased by 0.9% points year on year and evidence of AI application to improve operating efficiency. As a result, our gross margin went up by 0.9% to 83.1% in 2024. Sales and marketing expenses decreased by 2% year on year to RMB426 million during this quarter and increased by 4% to RMB2.1 billion for the full year.
Our marketing expenses, including Olympic campaign sponsorship, decreased by 10% year on year, despite a higher new user growth versus prior year. We believe this improving trend of user acquisition efficiency will continue in 2025 and led to a further decrease of our marketing expenses on both absolute amount and as percentage of revenue.
R&D expenses increased by 2% year on year. So RMB440 million this quarter and by 18% to RMB1.8 billion for the full year. This increase was primarily driven by our further investments in AI infrastructure, which incurred AI related so depreciation cost and cloud services.
G&A expenses increased by 23% year on year to RMB276 million during this quarter and by 35% to RMB1.1 billion for the full year. This increase was mainly due to increase the employee-related expenses and investment in new business initiatives.
Our net income reached RMB444 million in the quarter and RMB1.6 billion in 2024. Our adjusted net income increased by 15% year on year to RMB722 million in the fourth quarter and the 26% year on year to RMB2.7 billion for the full year.
But the just the net margin continued to expand in the full year and reached a historical high of 2%, 36.9%. Net cash provided by operating activities amounted to RMB956 million during the fourth quarter and increased by 16% year on year to RMB3.5 billion for the full year.
And our cash position stood at RMB14.7 billion as of December 31, 2024, though there was share buyback spending. The robust cash reserves coupled with strong operating cash flows strategically positioned as well to support future growth initiatives and the shareholder returns.
During this quarter, we repurchased the 6.7 million ADS for a total consideration of USD93 million. This led to a 1.1% decrease in our total outstanding shares as compared to September 30, 2024, even after counting in shares issued for our share-based awards.
Combined with share repurchase in the preceding quarters, we have spent a total of USD229 million for the share repurchases in 2024, representing substantial progress of our share repurchase programs. And now for our business outlook for the first quarter of 2025, as we witnessed the recruitment spending bottoming out from last quarter and showing upswing trajectory post the Chinese New Year, we expect our total revenues to be between RMB1.9 billion and RMB1.92 billion, a year on year increase of 11.5% to 12.7%. With that, concludes our prepared remarks. Now we would like to answer questions. Operator, please go ahead.

Question and Answer Session

Operator

(Operator Instructions)
Eddie Wong from Morgan Stanley.

Eddy Wang

(spoken in foreign language)
Thank you, management for taking my question. I have two questions. The first one is that, could you please share your thoughts on how the AI boom, driven by the DeepSeek, might impact the online recruitment industry? And this includes the transformation in the industry and the products as well as its influence on the market recruitment demands, for example, the hiring surge in the tech industry. What are our competitive advantage, in this context?
The second question is, we actually have made a quite big or significant investment in already. So with the emergency of DeepSeek, will this promote any adjustments to our AI and the investment strategy? And what is our future room map for AI product development? Thank you.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Thank you for your question. Let me first talk about the implication of the DeepSeek have on the online recruitment industry. First, in the -- especially for the demand side, in the short term, we do see, some changes. For example, on the recruiter side, as I just mentioned, the daily average daily, newly added AI rated jobs, urged by more than 64%, which is quite rare, and also the existing jobs became more active. So the average daily online active job number of jobs increased by more than 24%, which is also quite a big number.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Okay. On the job seeker side, of course, everyone was trying to look for opportunities. A trend. So on the numbers, we found that the active search results, active search keywords with AI increased by more than 34% year on year.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And on the -- I believe this changes will deeply affect the future of the recruitment industry. I will talk about one positive side and maybe one slightly negative side. On the positive side, this trend of AI, its first initial usage is it has very strong understanding of human natural language and generate human natural language, and this is first found and can easily be understanding. So when people starting to find a job, turning to the world, it will become a resume. And when the recruiter is trying to hire someone, formatting of word it will be a job description. So in terms of description expression of resume and job description, this kind of wording format in front of AI is very simple and transparent and it's easy to understand this can be very deeply affected.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And the second one, on the negative one is a concern I will express with numbers. For example, on a platform, there are over 200 million of AI generated resume and on the other side, there are 140 million of AI job description. So under such conditions and circumstances, what is the meaning of the people behind all those resumes and JDs and what our machines are matching for? So this is not a new topic.
Currently, more and more people are using AI to search for results to write articles and there will be more and more AI made up, which is a historical facts that was not existed and with more than 1,000 times of repeat, that will become a fact. So a lot of things have been polluted. Now the massive pollution of resume are dropped. Not started yet. So we need to be alert and prepared for that.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And after this moment, I have also been considering your question about what our advantages, and we believe -- I believe we do have some. First, we have been continuously investing in AI science in the past two years. We also have our own pre-trained model Nanbeige which is quite good. We have a lot of AI application scenarios and accumulated a lot of unique user behavior and vertical related data. So I think that, that's something we have facing this challenge of this moment.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And your second question about our further invest AI development, which I have always have been considering recently. So, in early 2023, that ChatGPT moment two years ago seems like AI has been a spur-of-the-moment. So we have spent more than RMB1 billion on purchasing GPUs, with a lot of curiosity and a little bit of fear. So currently we have stored enough computing power.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Before the restriction order of GPU purchasing, we have actually bought a lot of GPUs, but last year under the overall environment with, you need to have more and more GPUs and bigger and bigger computing power on that situation. We are a little bit awkward in our technology investment. So we cannot buy more and we won't buy more.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Actually, DeepSeek has given us very high confidence in terms of the strategy of investment. So as [Yu Zhang] have said, when challenges promote changes and changes will lead to progress. So in the past, the big, the biggest right and money means the future. That situation is, has gone, and the technology innovation have bring changes to many things.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And the open source of DeepSeek 671B have enabled a lot of middle-sized internet companies to have the same level of AI capability with other large companies. We are at the same starting line. So in the future, we will, and many other companies will focus more on the AI application, AI agents, and continue our exploration of AI application agents.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And about our plan for our product roadmap, I talk a little bit about our current products and services and we will continue our exploration of AI application agents and you will see upcoming launch of new services. And on the revenue side, which you may concern more, so from the AI to recruiters, we have one product which has been better for more than one year and I think people might be interested to pay for that service, which can help increase the efficiency of achieving a mutual consent by 60% and saving the BOSS' time by more than 40%. I think this product should be welcomed by the recruiters.
And that's my answer to your question. And operator, let's move on to the next question.

Operator

Thank you. Timothy Zhao, Goldman Sachs.

Timothy Zhao

(spoken in foreign language)
Thank you much for taking my questions. I have two questions here. First, as you have shared a lot about the recruitment, trend, year-to-date after Chinese New Year, could management share more detailed color about the recruitment demand between different enterprise, size, and also different industry and more specifically, how should we think about the sustainability of the demand outlook? And second question is regarding the pain ratio and the ARPU trend on the platform for this year, how we are going to plan to increase the monetization rate or ARPU on this platform?
Thank you.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

So this year's spring recruitment season compared to last year, we find that the sequential trend has been quite strong. But one number is that the online, active, job postings, before and after the spring and spring festival. So this year, the sequential growth is more than 173%. Well last year is 41%. So this is the big picture.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

And white-collar industry are stably recovering.
So the highlight is that the AI-related jobs have been helping with some sub-sectors or sub-industries of internet to starting regrowing.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

One important point is that compared to last quarter, this quarter, our overall cash have shown accelerating growth trend.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Just when you who can pay ratio on the data and on the upper side, I don't have a very a strong motive to increase ARPU very aggressively. I have witnessing recovery across different industries and different sizes of companies. So I will give them space to improve together. So last year we saw some good growth on the ARPU side, but -- and also, stabilize the pain ratio. I don't have very big aggressive plans to accelerate monetization. Just waiting for things to turn better together.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

I would rather to look at with things on the side of, we are able to provide a service to different kind of users, especially enterprises. Our model can provide service to different kind of enterprises. There is a number that after the COVID reopening in the past two years, we have served accumulatively more than 6 million new enterprises and annual paid enterprise -- customer enterprise numbers increased by 1.5 million. I hope this data can mean something and show our view on the growth potential. And that's my answer to your question. And let's move on to the next question.

Operator

Wei Xiong, UBS.

Wei Xiong

(spoken in foreign language)
Thank you, management for taking my question. Firstly, I want to ask, what's our current customer acquisition cost, and how does it compare to a few years ago? If we look at 2025, are there any major marketing or promotion plans that we should be aware of, given the continued margin expansion over the past few years, how should we think about the long-term sustainable margin level for the company? And second, on the blue-collar business, wondering if management could share the revenue contribution and client feedback from our program? What's our strategic focus and planning for our blue-collar business among other new initiatives for this year and how should we think about the change in revenue mix from the blue collar segment?
Thank you.

Yu Zhang

Well, I'll answer the first question. Simply speaking, there's no big marketing campaign ahead in 2025. We are still at a faster user growth stage. Our user growth target for this year is set as over RMB35 million above for 2025.
In terms of the selling marketing to our business is still with the business leverage, traffic acquisition per user today compared with the prior years is much lower because of this is mainly because of a brand awareness. So the margin -- so the overall selling marketing, as a percentage of total revenue, we continue to see this percentage going down. Except for marketing, other major costs and expenses items, like, costs, sales. Expenses to the revenue and also R&D expenses are all well under control. So, looking ahead, the gross margin and the opening margin are all expected to further improve for the full year.
As we communicated the last earnings call, we will, we hope to secure high-quality bottom-line growth first, then we hope to actively look for additional upsizes. So we set our four-year non-GAAP operating profit target as RMB3 billion for 2025, which is 30% higher than RMB2.3 billion non-GAAP operating profit for 2024.
And lastly, our share-based compensation expenses, as I just mentioned in the prepared remarks, these expenses will decline sequentially and which makes our GAAP-based the bottom line. GAAP-based bottom line net profit with even higher growth. So that's my comments to the margins and our financial focuses for 2025.

Peng Zhao

(spoken in foreign language)

Wenbei Wang

Thank you for remembering Hailuo, which we have been talking about several years. So for the Conch select Hailuo project, which is targeted for those agents with massive hiring demand. So last year, we saw the contract amount -- full year contract amount for Hailuo more than RMB200 million. So I think any new business have more than 2% of our revenue contribution and is growing, is a good and valuable input. So -- and also in the fourth quarter, the accumulated agencies who have joined Hailuo improved by 21% sequentially, covered -- served more than 40 million of job seekers.
And with the development of AI, I believe things might potentially have some change. In the past, those well-trained [indiscernible] agencies have always had their advantages. Well, the new guys who have a shorter period of experiences, they -- in the past, they don't have advantages. But now with the empowerment of AI, things are potentially to change to be equal. So in the past, when we initiated Hailuo, we didn't foresee this.
But now with potential changes, we will keep you updated on progress. And also, we will keep our investment or exploring into closed-loop services and placement-related services. And that's my answer to your question. And given the time constraint, operator, I think that's our last question for today.

Operator

Thank you. That concludes today's question-and-answer session. At this time, I'll 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 our team directly or TPG Investor Relations. Thank you.

Operator

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