Ka Siung Limited posts strong Q2 2025 results with 9.7% revenue growth and 70.4% net income increase, while launching annual dividend and share repurchase program.

OPERATOR - (00:03:06)

Ladies and gentlemen, thank you for standing by and welcome to Kanzhun Limited Second 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 a question and answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Wenbi Wang, head of Investor Relations. Please go ahead, Ma'am.

Wenbi Wang - Head of Investor Relations - (00:03:35)

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 Jonathan and our director and CFO Phil 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 of 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 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@ir.jepin.com with that, I will now turn the call to Jonathan, our founder, chairman and CEO. Hello everyone. Thank you for joining our company. Second 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 in and supported us. Today, I would like to report on four matters. First, our quarterly performance was good. Second, the supply demand dynamics on our platform continue to improve. Third, we are making ongoing progress in AI and fourth, our recent Hong Kong share offering and 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 incomes such as investment gains, our adjusted operating profit was around 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 RMB230 million, with the ratio to revenue narrowed by about 5 percentage points year on year. The operating leverage from 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 monthly active users on the Boss Zhipin app reached 63.56 million, up 16.5% year on year. Consistent with user growth and penetration trends, revenue contributions from blue collar, lower tier cities and small and medium sized enterprises further increased compared to last year. Second, during the second quarter and graduation season we saw notable improvements in our platform's job supply and demand dynamics. Specifically on the job seeker side, incremental job seeking demand from fresh graduates 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 postings for fresh graduates grew by over 18% year on year for the same period. This aligns with the overall trend of 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 the 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 CEB 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 6.5 million, up 10% year on year. From industry perspective, blue collar manufacturing experienced a short term slowdown in April due to tariffs, but resumed year on year growth from May onward. With growth rates 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 the number of active job postings in the second quarter reaching a new high since 2021 led by product and technical roles.

Jonathan - Founder, Chairman, and CEO - (00:13:29)

Third, the company's continued progress in AI. I will stick to the three perspectives AI to C job seekers, AI to B enterprise users and AI to management. First AI tool job seekers the AI interview training robot have made some new progresses. This robot now start to play the role in recommendation upon job seekers consent. We use data obtained during the interview process to recommend positions to job seekers and users who participate in the experimental group have achieved higher efficiency. We continue to iterate AI assisted user search for users participating in the test. Not only the AI can give more explanation for the research results, it can also provide dynamic content summaries, job search strategy planning and resume optimization guides based on user queries. Users in the experimental blue group gain more mutual achievements. In terms of protecting job seeker safety. We have applied AI to identify risky users. For instance, we have trained AI to recognize more subtle aggressive language and expressions that violate platform rules. Another example is that the AI tools we developed have made preliminary gains in identifying fake content tampered by other AI. This is obviously a long term and challenging task, but we firmly believe that more people are in need of such functions.

OPERATOR - (00:17:21)

Ladies and gentlemen, please continue to stand by. The conference will resume shortly. Thank you for your patience. Yes, we can hear you now. Please resume.

Jonathan - Founder, Chairman, and CEO - (00:17:38)

Okay, we start up next hour. Next about AI to enterprises we provide AI assisted job posting optimization features for bosses of many newly established startups and junior hr. Currently, AI Assist assists in posting tens of thousands of job positions on a daily basis. The key point here is how to prevent turning a distance into replacement. It is difficult, but we must persist in doing so. In terms of commercialization, we have extensively integrated AI to conduct experiments. For instance, we use AI to enhance the understanding of recruiters intentional 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 most suitable products, the repeat purchases have also increased. Now AI Tool Management we promote the use of AI in research and development, transforming R and 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 learning, 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 for 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 agreement. The company completed a Hong Kong secondary share offer of Hong Kong$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 volume compared to the pre offering level. Regarding shareholder returns, the Board of Directors approved two shareholder return proposals today. First, an annual dividend policy was adopted. The Company plans to pay out annual dividends going forward with dividend of US$80 million for the current fiscal year. Second, a new share repurchase program and the FIBs on a cumulative perspective is launched. The Company intends to repurchase up to $250 million of its shares over the next 12 months starting August 29th. We believe this fully demonstrates the company's sincerity in actively rewarding shareholders and sharing 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 financials. Thank you.

Phil - Chief Financial Officer - (00:24:51)

Thanks Jonathan. Hello everyone. Now let me walk through the details of our financial results of the second quarter of 2025. We continued to achieve high quality results in this quarter represented by solid revenue growth and further improved 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 trading 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 ARPU ARPU maintained stable and modest growth, mainly benefiting from the expansion of paying amount from key accounts. Moving to the cost side, total operating cost 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 9% quarter on quarter to RMB 230 million shrinking for the fourth consecutive quarters. Excluding share based compensation expenses, adjusted income from operations grew by 33% to RMB881 million and our adjusted operating margin in the quarter reached 41.9%, up by 7.5 percentage points year on year 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 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 and 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 RMB311 million in this quarter, primarily due to an increase in employee related expenses and investment in new initiatives. Our net income increased by 70% to RMB 711 million in this quarter with adjusted net income increased by 31% to RMB941 million and margins also expanded significantly and reached record highs. 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. Both of 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 as June 30, 2025, we continue to maintain a strong cash position of RMB 16.0 billion. In July, we completed the share offering of 34.5 million Class A ordinary shares at Hong Kong $66 per share comprising a Hong Kong public tranche and an international tranche. Net proceeds from this share offering amounted to approximately Hong Kong$20 sorry, 2.2 billion. This offering on one side improved our Hong Kong line liquidity and broadened our shareholder base on the other side further strengthened our cash position, gave us both the 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 US$80 million for the fiscal year of 2025 combined with a renewed US$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 the 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 - (00:32:56)

Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We are now going to proceed with our first question and the questions come from the line of Eddie Wang from Morgan Stanley. Please ask your question.

Eddie Wang - Equity Analyst - (00:34:34)

Thank you management for taking my question. I have two questions. The first one is the recruitment demand recover we witness on Boss Zhipin's platform in the second quarter and July. Is there any different driver for such recovery this time versus before? For example, has the full delivery battle. Led to the surge in service industry. Blue collar recruitment demand? Do you think the recruitment demand in second quarter is sustainable or not? How's 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? Thank you.

Jonathan - Founder, Chairman, and CEO - (00:36:13)

Thank you for your question about the recovery trend of the recruitment market. Compared to before we saw small features and the big features. The small one is the job postings from Internet sector has 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 employee less than 20 employees in the second quarter its revenue contribution goes up to almost 20% which is the highest representing the highest growth rate among all different services. Let'S expand the size a little bit to companies with less than 100 employees. The year on year growth rate of new job posted by those companies have also significantly exceeded the platform's overall level. About your question of the impact of the food delivery competition, our observations its impact is 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 had 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 or dynamics have been to improving and in the second quarter we have seen a much more obvious recovery for that number which we have just communicated. From my perspective from daily operation, 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 that's our answer to the question and operator, let's move on to the next question.

OPERATOR - (00:41:49)

Sure. We are now going to proceed with our next question and the questions come from the line of Wei Qiong from ubs. Please answer your question.

Wei Qiong - (00:42:48)

Thank you management for taking my questions. 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 startup 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? Thank you.

Phil - Chief Financial Officer - (00:43:31)

So thanks for the question and 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 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, you know, 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, you know, we put our focus on the high quality part of growth which kept our growth, you know, kept our cost growth rate lower than that of revenue. So with that our, you know, along with our revenue steady growth, the direction of a gradual improvement of our profit margin is quite clear. And this is a 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 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 and D innovation and new business initiatives etc. And you also can see that we generated the very healthy cash flow. So in the quarter, in this quarter we generated more than 1 billion RMB operating cash flow. Actually this is, you know, the conservative two quarters. So the first quarter the operating cash flow is also above 1 billion. So we already had two consecutive quarters with over 1 billion operating cash flow and with such healthy cash reserves, we will mainly use our cash at talent development probably like overseas expansion and more importantly shareholder return programs in the future. So that's my comment related to the margin and how to use of cash in future. Jonathan can answer the second question. Yin Xiao should be a shot.

Jonathan - Founder, Chairman, and CEO - (00:47:20)

About the second question. Yes, we do observe that many of our peers will do some advertising marketing events in certain seasons including both mature companies or startups but so far till now the impact to us is quite limited. But my observation or my understanding is that at this current stage a mapping wall, the meaningless of a mapping wall is very small. I want to clarify one thing that even though our marketing expenses as percentage of revenues continue to declining, but on an absolute amount basis we are still investing in the largest amount of marketing advertising expenses among the industry at 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 quite low level and also our user retention is the highest among our peers. So to sum up, we have very strong marketing investment, our user acquisition efficiency is high, our user retention is high. So that's why I said at current stage is quite the meaning is quite low to start a market. Would like to answer the second question from Eddie about whether AI will replace the programmers. So from our own situation is that yes, our recruitment 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 talents or more potentials. So we will actually we might somehow increase the recruitment cost for those type of people. I think that that's also happening to many other technology. 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 the 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 100 million, my gut feeling is less than 2%. So that change to the impact of hiring of white collar is very limited. And that's all of our answers to the questions and operator. Let's move on to the next one.

OPERATOR - (00:55:36)

Sure. We are now going to proceed with our next question and the questions come from the line of Timothy Zhao from Goldman Sachs. Your line is open. Please go ahead.

Nasian - (00:56:11)

Nasian. Thank you Madjun for taking my question. Two questions from my side. First is regarding the AI application or AI features. If Madjun can introduce more detailed 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 markets and I'm very glad to see you also announced the share repurchase and the annual dividend policy this year. Just wondering if management can share what is your thoughts 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 mind? Thank you.

Jonathan - Founder, Chairman, and CEO - (00:58:19)

Actually we yes we do have some good progress on the AI product development side. Actually we have been broadly to do some new product launches and development. So I can give you more examples. The first one is an agent. We developed a recruitment agent called Hammer. Currently we use it with approximately 500 quotas daily. The recruiters can complete the majority of their work on our platform by simply interacting with Hammer through dialogue. Of course this part should have the job seeker's consent and sometimes job seekers might say no. But if job seeker is okay, the Hammer will complete its job until to achieve exchange of resume or contact information or achievement on platform we will attach very great patients to iterate this aged Hammer. So rather than saying that we are using new technology to validate what we have already known, Hammer actually will lead us into even greater amenities and our progress on Hammer is actually quite restrained. But the second one we have been more aggressive. So the second example is where the job seekers have more tolerance towards these products and the recruiters it has higher higher leverages in terms of the negotiation progress. So it's actually a product redesigned for large state owned enterprises which have just launched. Currently this system Allows for customization of digital human avatars, interview questions and interview reports. It also supports AI powered follow up questions, multimodal candidate emotion 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 an early stage. So the new technology combined with old business for this matter, the more revolutionized the product is so that it will be more like ground activities movement. So the killer level applications will be generated among a lot of those ground movements. So we have enough patience 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 care about and the fundamental principle is just treating it like wrong movements. The next stage is AI will be everything in our daily life.

Phil - Chief Financial Officer - (01:06:28)

Okay, so I'll answer the second question. So as you know that the company has a very healthy cash balance on hands. We have more than 16 billion RMB cash reserves. And in terms of the operating cash flow every quarter, we have, you know, incremental more than 1 billion RMB inflow. So basically the company does not need, you know, to raise money from the market. So our, you know, 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 benefit to the company and benefit 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 realized 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 very important topic. And in the past we mainly use shareholder repurchase program to return cash to the shareholders. We totally already launched full phases and the total purchased shares total amount more than about 400 million US dollar. 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, you know, for the fiscal year of 2025, we announced the 18 million US dollar for the dividend for this year. And our Hong Kong line, you know, liquidity, you know, because of the share of the public share offering, we raised 2.2 billion Hong Kong dollar. That's roughly 280 million US dollar. But compared with our renewed share repurchase program, which is 250 million plus our 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 saying, you know, share 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 are just, you know, evidence or you know, some kind of things that showed our attitude towards the shareholders return. And we consider this as 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 question. Operator.

OPERATOR - (01:11:35)

Due to time constraint. This concludes today's question and answer session. At this time I will turn back the call to Wembe for any additional or closing remarks.

Wenbi Wang - Head of Investor Relations - (01:11:46)

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

OPERATOR - (01:11:56)

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.