Kanzhun achieves 13.2% revenue growth in Q3 2025, driven by user expansion and AI integration, while net profit margin reaches 35.8%.

OPERATOR - (00:03:19)

Ladies and gentlemen, thank you for standing by and welcome to Kanzhun Limited Third Quarter 2025 Financial Results Conference Call at this time, all participants are in a listen only mode. After the speaker's presentation, there will be question and answer session. 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 - Head of Investor Relations - (00:03:50)

Thank you. Operator Good evening and good morning everyone. Welcome to our third quarter 2025 earnings conference call. Joining me today are our founder, chairman and CEO, Mr. Jonathan Chang Zhao and our director and COO, Mr. Field Chang. 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 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 and@ir ir.kanzhun.com Now I will turn the call to Jonathan, our Founder, Chairman and CEO. Hello everyone. Thank you for joining our company. Third quarter 2025 earnings conference call on behalf of the Company's employees, management team and Board of Directors, I would like to extend our sincere gratitude to our users, investors and friends who have continuously believed and supported us. I will briefly walk through our key operational results and business progress this quarter focusing on three areas. First, recovery in demand through accelerated growth in our third quarter performance. Second, the evolving characteristics of recruitment demands across different dimensions. Third, progress in integrating AI into our products, technology and overall business operations. Let's start with the financial performance in the third quarter. We generated a total revenue of RMB 2.16 billion, up 13.2% year on year with growth authority from the previous quarter excluding share based compensation expenses and other incomes such as investing debts of adjusting operating profit reached RMB 900, up 49.3% year on year. Our GAAP net profit was only 780 million, up 67.2% year on year with a net profit margin of 35.8%. Partial of this Improvement was attributable to a decrease in share based compensation expenses which was RMB220 million this quarter, marking the third consecutive quarter of sequential decline and a year on year drop of 21%. The growth in the third quarter was driven by two key factors. The first and most important driver was continued user growth supported by our increasing penetration and expanding market share. From January to October, we acquired over 40 million newly verified users. In the third quarter, the average verified monthly active users which is MAU on the Boss 15 app reached 63.82 million. While the user sale is growing, user activity is also strong. According to third party data, our DAU to MAU ratio has maintained a high industry leading level. The second driver was the rebound in enterprise side demand which also has helped the number of improvement of data in the monetization side. In the third quarter, the newly posted job positions increased 25% year on year while both the number of recruiters posting new jobs and the average number of posts per recruiters grew steadily compared to the previous quarter and the same period last year. From July to September, the average number of daily active enterprise users grew at a faster pace sequentially than job seekers, marking the first time this has happened in three years. The supply demand balance on our platform, meaning the ratio of enterprise users to jobseekers continue to improve. By September 30, the number of paid enterprise customers in the 12 months grew 13.3% year on year to 6.8 million. Over the entire quarter, the paying ratio among quarterly active users increased both year on year and quarter on quarter. The second agenda item focuses on observing enterprise current demand in this quarter from multiple perspectives. From an industry perspective, blue collar revenue growth continue to lead with its revenue contribution reaching a record high in the third quarter. Manufacturing industries remain the most robust sector top in the industries in revenue growth for five consecutive quarters. Taking this opportunity, I would like to do a brief review. Three years ago the company's strategy for serving manufacturing job seekers and recruiters was divided into three states in terms of priority. The first stage is to improve online job searching environment for blue collar workers. Between the passes of pollution first then manage second or manage first and profit board second. We choose the second path. The second stage is to develop the user scale of double side users on the platform and the third stage is to pursue commercial benefits in a reasonable scale. In 2022 we launched the Conch project to purify the job search environment for blue collar workers pursuing the authenticity of recruiters, job positions and compensation, combating false information and increasing user trust over the past three years. The process has been extremely challenging and the results have gradually emerged. Meanwhile, transportation, logistics and warehousing and the service industries also delivered solid overall performance. Among the white collar sectors, industries such as artificial intelligence, Internet service, lifestyle service, new retail and gaming are experiencing medium growth. One thing worth mentioning among the white collar segment which we have noticed a notable increase in participation from small and medium sized enterprises in the white collar industry with paying user numbers growing quickly while the average spending per customer remained stable which is an opposite trend to previous patterns. This in certain level reflecting a revival of the white collar entrepreneur ecosystem. From the perspective of city cheers and company sites, demand in Xiuan cities is rebounding. Tier 2 cities remain stable and the revenue contribution from Tier 3 and Tier 3 below cities continue to rise among enterprises of different sizes, mid to large enterprises which means employees between 500 to 9,999 are growing the fastest, followed by small and micro enterprises and then very large enterprises. The third agenda item reviews the progress we made since AI was integrated into the company's business from products and technology perspective. On the jobsyncla service side, there are two things worth mentioning. First, after a period of continuous iteration, an AI job search assistant have been fully launched for all job seekers. Currently it can recommend position for users, answer questions and also provide suggestions on how to optimize their revenues. In the third quarter, not only was the full rollout of this product has been achieved, but the number of interactions per user with this AI job search assistant also showed a significant quote unquote increase. And then we have also been continuously optimizing the AI interview coaching feature. In the third quarter, number of job seekers who completed the mock interviews showed further improvement and also their activity level and conversion rates continue to improve compared to the previous quarters. On the recruiter service side, multiple AI products have been gradually launched to provide services. There are four aspects to mention. First, the AI communication assistant feature is being gradually integrated into existing commercial value added products. As a result, the average mutual achievement conversion ratio of these products have increased by 7%. Second, a product called AI Quick Hiring after continuous optimization is currently under first rollout. Experiments show that this product not only helps the platform better understand recruiter's intentions, but also allows for comparison among all job seekers on the platform, thereby improving matching accuracy. Currently, the re use rate among recruiters participating in the fifth rollout captive is increases.

UNKNOWN - (00:24:18)

Comments.

Jonathan Chang Zhao - Founder, Chairman, and CEO - (00:24:27)

Third, we have extended the AI interview features to a number of well known customers from the campus recruitment side. For example, the AI interview can support multiple rounds of follow up questions and customized interviewer profile. This client has very strong appeal to students leading to a high volume application in the short term which increasing significantly pressure for recruiters during the campus recruiting activities. The developing AI services have alleviated this pressure. Fourth, we are cautiously exploring AI hosting, recruitment service and AI powered bulk placement solutions in diverse recruitment scenarios such as high end white collar and gold collar positions, blue collar roles in the touring and manufacturing industries. These initiatives are gradually generating benefits. Among all those enterprise side AI services. We have been quite cautiously which we allow the job seekers to know whenever they are communicating with an AI service and they have the option to close the service. They have a button and sometimes someone might choose to close and someone choose to continue the communication and we are continuously collecting related examples. We not only simply provide the option for job seekers whether they can communicate with AI or not to guarantee their interest, but also we are continuously observing with the intervention of AI what kind of impact will affect the mutual matching not only on individual job seeker recruiter perspective but also from a scalable double side situation and what kind of impact of this will have to our ecosystem from a job seeking and recruitment perspective. We are continually observing and collecting data. In summary, the third quarter we delivered a high quality growth with solid progress across user growth, commercialization and AI technology implementation. In October the company completed an annual dividend payment of approximately US$18 million. Looking ahead, we will continue to focus on strengthening our core business capabilities while actively fulfilling our commitment to shareholders. 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.

Phil - Chief Financial Officer - (00:29:51)

Thanks Jonathan. Hello everyone. Now let me walk through the details of our financial results of the third quarter of 2025. In this quarter we delivered high quality and sustainable top line and bottom line growth. Our revenue reached RMB 2.2 billion this quarter with growth accelerating to 13% year on year. The faster revenue growth this quarter was primarily driven by higher enterprise user growth as well as improved monetization level due to the recovering hiring demand, our commercialization strategy grounded in ecological balance enable us to effectively and sustainably improve user payment ratio within a relatively better hiring environment. The growth in paid enterprise customers which grew by 13% to 6.8 million for the 12 months ended September 30th demonstrates our capability and potential to enhanced monetization level. Revenue from small-sized accounts showed continued growth momentum with revenue contribution in this quarter up by 2.2 percentage points while key accounts growth remained stable as a result of the structural mix shifting the overall ARPPU maintained stable. Moving to the cost side, total operating cost and expenses decreased by 7% year on year to RMB 1.5 billion in this quarter. Share based compensation expenses dropped by 21% year on year and 6% quarter on quarter to RMB 216 million, shrinking for the third consecutive quarter on both absolute amount and percentage of revenue. Excluding share based compensation expenses. Adjusted income from operations grew by 49% to RMB 904 million and our adjusted operating margin reached 41.8%, up by 10.1 percentage points year on year and a relatively flat quarter on quarter. Cost of revenues decreased by 2% year on year to RMB308 million in this quarter mainly due to the decrease in operational employee related expenses as a result of improved operational efficiency. As we continue to engage AI in our daily operations. Gross margin went up by 2.2 percentage points year on year and 0.4 percentage points quarter on quarter to 85.8%. Sales and marketing expenses decreased by 25% year on year to RMB 394 million during this quarter. As we don't have sports events marketing campaigns this year, even if we exclude the sports sponsorship costs, our adjusted sales and marketing expenses in this quarter decreased 15% year on year while we still maintain robust user growth. This confirmed our sustainable increase of marketing efficiency due to our strong brand recognition and network effect. Our R and D expenses decreased by 12% year on year to R&B 408 million in this quarter excluding share based compensation expenses. Our adjusted R and D expenses decreased by 8% year on year to RMB 331 million in this quarter and stayed relatively flat. Sequentially, our G and A expenses increased by 28% to RMB 367 million in this quarter primarily due to a one off impairment of intangible assets partially offset by a decrease in employee related expenses. Excluding the impairment, our GNA expenses decreased both year on year and sequentially. Our interest and investment income in the quarter increased by 43% year on year to RMB228 million in this year primarily due to a partial disposal of an equity investment and increased interest from Hong Kong$2.2 billion Hong Kong share offering his proceeds in early July. Our net income increased by 67% to RMB 775 million in this quarter with adjusted net income increased by 34% to RMB992 million. Net margin improved by 11.6 percentage points year on year to 35.8% while adjusted net margin reached 45.8%, up 77.2 percentage points. Year on year, both of them have maintained sustainable improvement over the past six consecutive quarters. Net cash provided by operating activities reached RMB 1.2 billion in this quarter, up 45% year on year as of September 30, 2025. We continue to maintain a strong cash position of RMB 19.2 billion RMB. And now for our business outlook for the fourth quarter of 2025. We expect our total revenue to continue the growth momentum and reach between RMB 2.05 billion and RMB 2.07 billion with a year on year increase of 12.4% to 13.5%. With that concludes our prepared remarks. And now we would like to answer questions. Operator, please go ahead with the call.

OPERATOR - (00:37:05)

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take our first question from the line of Eddie Wong from Morgan Stanley. Please go ahead, Eddie.

Eddie Wong - Equity Analyst - (00:38:26)

Thank you management for taking my question. I have two questions. First is what's the overall recruitment demand? Recently we noticed that the unemployment rate in September and October is improving. Do you think this is mainly due to the seasonal factors or the improving trend is a leading indicator of macro recovery? What are the driving factors behind Kanzhun's accelerating growth in the third quarter? My second question is that as we approaching the end of the year, what's your perception of the Key Account (KA) renewal willingness right now? Are there any, you know, noticeable trends in customer renew rates or the renewed amounts? Thank you.

Jonathan Chang Zhao - Founder, Chairman, and CEO - (00:39:43)

From our data perspective, the recruitment activities from enterprises indeed recovered in the third quarter. The growth rate of monthly active users of enterprise size is faster compared to the job seeker side. The pressure from the job seeker side to our platform has been alleviated. If we can recall that back in 2021 and 2022 it was a little bit difficult for the fresh graduates to find a job. And in 2023 the reopening which everybody was dissecting was not happening as we expected. So people, young people, especially young people, it's really difficult to find a job. This year. Take July for example. The fresh graduates, their expression for job seeking demand compared to the same period last year have declined by double digits. Meanwhile, from the enterprise side, the company who have posted job opening to fresh graduates increased by double G double digits. So from the situation from both Jobseeker and Kutra side, especially from the fresh Graduates as an example that we quite clearly felt that the pressure which have been accumulating for several years a lot in the third quarter. In the third quarter, not only the ratio between job seekers and recruiters among active users improved compared to last year, the newly added user ratio also improved and also the third quarter is better than the second quarter which gives us continued confidence. So it's quite easy to understand that based on the improving change of supply and demand balance, we increased the recovery of the enterprise side and the improvement of the pay ratio and it also helped with our overall business operation. So the third quarter last year was a relatively low base. So from a cautious perspective we also compared to 2023 period. It was worth mentioning that the recovery of the white collar, for example, the newly added number of drug postings for the white collar positions in the third quarter increased significantly compared to the second quarter compared to. So based on all these observations and comparisons, I had the confidence to conclude in my propane maps that the improved hiring demand drove our accelerated revenue growth. And that's where my confidence comes from. And now Phil will give you answers regarding the retention situation.

Phil - Chief Financial Officer - (00:47:09)

So Eddie, you know companies renews their annual contract individually at different point of time, not only at the year end. Starting from the year, we have witnessed improving contract renewal rate improving continuously, particularly in third quarter in the past, actually for the first time in the past two years, company level net dollar retention rate started to bottom out. This signals a potential turning point from a previous downward trajectory. We believe this is driven primarily by improved the company retention rate and their higher renewal spending. And we observed this situation not only at key account customers, but also at small medium sized enterprises. So simply speaking, that the company's renewal annual contract renewal situation improved sequentially and annually. So this once again proved that the hiring demand in the economy has been recovering healthily. And that's our answer to your question. Eddie Operator, let's move on to the next.

OPERATOR - (00:48:51)

Thank you. Thank you. Our next question comes from Wei Xiong from ubs. Please ask your question. Wei.

Wei Xiong - (00:50:11)

Thank you management for taking my question. Firstly, we observed that our company has continued outgrowing peers for the past few years. So if we look at the enterprise recruiting budget allocation, how much more share can we continue to gain over peers and how do we sustain that above peers growth going forward? And looking at next year, if the macro situation improves, will we continue to solidify our leadership or is it possible to see higher competition pressure because the peers may step up investments? And secondly, on margin side, given the high Base this year, how do we think about the trend for our margin next year? What are the major investment areas? For example, in terms of sales marketing, how do we think about the spending plan there? And previously given the macro uncertainty, we said we want to prioritize profitability. So looking at next year, are we going to continue prioritizing that profitability or leaning towards investing a little bit for growth? Thank you for taking my question.

Jonathan Chang Zhao - Founder, Chairman, and CEO - (00:51:39)

I would like to start with our number of paid enterprise customers which grew by 13.3% to 6.8 million by the 12 months. In a matter of fact majority or maybe over 80% of these paid enterprise customers are small and micro enterprises which we use our own business model and go to market strategy developed over the years. By mentioning this, I would like to clarify on two outcome facts. First is majority of our main paid customers are developed by our own rather than gaining the shares from our peers. The second concept is that it public data that China has over 14 years multi million small and medium sized enterprises and our number of paid enterprise customers still a small percentage of that. That's why even under relatively tight macro situation we still have ample room to grow the transform of our market. And the logical conclusion is that when the market recovered, when the demand improved, we can enjoy better revenue and business growth rate. But on a competitive landscape perspective we need to admit that for the customers both we and our peers are serving, especially under economic pressure situation, then the client normally will tend to service provider who have better ROI and higher service capability and we do have some advantages over that. And about the profitability which you concerned a lot which the current profit margin you observed which is actually a strategic selection from a company from our company level Last year we decided that facing all of these uncertainties we want to make sure the only uncertainty which is guaranteed the profit. And this year you have seen our very strong implementation capability and realized profit number. Essentially this very strong margin profile actually reflects our effective double side network effect, our further penetration into user mindset and very efficient and smooth internal management and operation and all those result in this high margin profile. As a result, I can predict that the profit the margin for next year will continue to improve. But we will not sacrifice our revenue growth to achieve this profitability. So for the next year we still want to guarantee at least 35 million newly verified users. Our pursuit in better serve users in higher revenue growth actually has higher priority compared to our pursuit of profitability. That's our strategic level view on our Profitability and we we hope you and our investors can better understand what profitability means to us. For your reference. And that's all of our answers to your question. Let's move on to the next one.

OPERATOR - (01:00:31)

Thank you. Our next question comes from Timothy Chao from Goldman Sachs. Please go ahead.

Timothy Chao - (01:01:06)

Dalai. Thank you management for taking my question and congrats on the solid results. Two questions from my side. First, as Zhao Zong just mentioned that we are going to explore more in the different verticals within the recruitment industry. Could management share more progress and updates on this and what are the potential impact to our services and monetization in a longer term? Secondly, it's on the AI related question we noticed that OpenAI recently announced to enter the recruitment industry at some other AI startups like Merkur also has been. Evolving its business model. Could management share your view on the competitive landscape between the traditional recruitment platforms as well as Kanzhun and the general AI companies in the recruitment industry? Thank you.

Jonathan Chang Zhao - Founder, Chairman, and CEO - (01:03:41)

So when we are trying to combine AI and human activities, we have some very interesting findings under our scientific experiment. For example when a customer who is quite angry and cannot contain his temper when he's facing a customer service people normally they could be quite aggressive but when the customer know that the counterpart is AI normally will take some very harsh work. So the biggest complaint from the customer TR AI is you are very stupid AI. And the second example is for our AI interview coaching products. So a lot of job seekers who have used this service to repeatedly to train their interview skills once and once again. But we found out that when the job seeker his second scoring is below the first one then they will stop this repeat. So you can see the some very interesting findings I can access in our daily experiment. So people can control well control his temper when they are facing AI and also people who do not want to bother a real human coach very frequently but he can do that through AI. All this results is telling us that when we are applying AI technology through a very old very ancient people and the job matching the superior and the subordinate matching for this other scenario we need to very cautious while using the new technology. So now over more than two years this very exciting large language model technology happens to be able to generate a killer level application in our industry. Actually we are not in a hurry and actually give us more time to find a way to coe with all this development and the new technologies. So, So I just mentioned that under certain placement scenario both in blue collar and white collar recruitment such as full cycle host recruitment service or semicycle hosting recruitment service. We have been very active to try out new services but also quite cautiously. So so far we have some achievement but still not in a state to massively roll out these new features. We also noticed that some leading technology companies who have been empowered by AI who have expressed their interest in entering into recruitment industry. So the new technology combined with old industry questions possibly can generate revolutionized level industry check. Just like the mobile network and recommendation technology combined with the traditional recruitment demand have generated foster this new generation of online recruitment model. Up to today. My thinking of that the combination of AI and recruitment service the key bottleneck is actually not computing power. Professionals to do the tagging actually show the value of the high quality data. If the high quality data is very critical is very important then with Kanzhun team other peers within our industry actually have some certain level of advantages. Just to leverage your question, I want to express some observations we noticed from our daily operations and that's all of our answer to question. Thank you.

OPERATOR - (01:12:51)

Thank you. Due to time constraint, that concludes today's question and answer session. At this time, I'll turn the conference back to Wen BEI for any additional or closing remarks.

Wenbei Wang - Head of Investor Relations - (01:13:03)

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

OPERATOR - (01:13:11)

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