Kanzhun - Earnings Call - Q3 2024
December 11, 2024
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by, and Welcome to the Kanzhun Limited Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&A 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)
Thank you, Operator. Good evening and good morning, everyone. Welcome to our Third Quarter 2024 Earnings Conference Call. Joining me today are our Founder, Chairman, and CEO, Mr. Jonathan Peng Zhao, and our Director and CFO, Mr. 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 company control, which may cause actual results, performance, or achievements of the company to be materially different. The company cautions you not to place undue reliance on forward-looking statements and do not undertake any obligation to update this forward-looking information except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only.
For a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.zhipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman, and CEO.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Hello, everyone. Thank you for joining our company's third quarter 2024 earnings conference call.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
On behalf of the company's employees, management team, and board of directors, I would like to extend our sincere gratitude to our users and investors who have continuously believed in us and supported us.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Let's talk about financial numbers for this quarter first. The company achieved a revenue of CNY 1.91 billion, up 19% year-on-year, and a net income of CNY 460 million. Additionally, our adjusted operating income, which excludes share-based compensation expenses, reached CNY 610 million, reflecting a 10% year-on-year growth.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
During the third quarter, which coincided with the Olympic Games and the Euro Cup 2024, the company allocated additional resources to brand promotion, which led to an increase in marketing expenses. It was a one-off expenditure. Our annual profit growth target remains firmly on track.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Additionally, it is worth mentioning that, as a company listed on Nasdaq for three and a half years and with a secondary primary listing on Hong Kong Exchange for two years, our share-based compensation expenses, which have historically accounted for a relatively high proportion of our revenue, have entered the anticipated phase of gradual reduction. In this quarter, these expenses demonstrated a decline both on a year-on-year and quarter-on-quarter basis.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Reflecting on the third quarter, our efforts can be summarized into two sentences. While the overall recruitment market environment remained challenging, the company's unwavering focus on key growth drivers continued to yield positive results.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Now let's take a look at a few notable highlights from the third quarter. First, our user growth continued to demonstrate strong growth momentum. As we all know, user growth has always been an important growth driver for us.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
In this quarter, the average monthly active users on our BOSS Zhipin app reached 58 million, representing a 30% year-on-year increase. From January to September 2024, newly added verified users exceeded 40 million.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Compared to the job seeker side, recruitment demand from enterprises showed a more moderate but steady upward trajectory. The number of newly posted job positions in the third quarter increased by 18% year-on-year. This growth is mainly driven by the user growth and market share expansion fueled by our relatively efficient business model.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The second thing in the third quarter, the growth of short-term pay ratio affected by supply and demand has been slowed down. Despite this, the retention of enterprise users remains solid, and the number of paid enterprise customers experienced a decent growth.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
From July to September, the ratio of job seeker to enterprise users continued its upward trend since the second quarter, with the gap compared to the same period last year continuing to widen. Relatively more job seekers have shortened the recruitment cycle for enterprises. That is, the time it takes for enterprises to fill a vacant position is reduced. In the short term, this may affect the enterprise users' willingness to pay, leading to a slower growth of the company's pay ratio.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
However, we have observed that the retention rate on the enterprise side remains solid. This is definitely good news in the long term. Investors and analysts who focus on the enterprise service market should have recognized that when the number of annual paying enterprise customers reaches a scale of millions, the retention of enterprise customers becomes decisive, and it is a prerequisite for sustained growth.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The total number of paid enterprise customers for the 12 months ended September 30, 2024, reached around 6 million, up 22% year-on-year.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The third thing, that is the average revenue per paid enterprise customers, namely RPU, has remained stable.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Fourth, in the blue-collar manufacturing sector, we are committed to purifying the market environment while striving to expand our fund cycle and continue to achieve satisfactory growth.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Our strategy focuses on providing high-quality recruiting companies with greater opportunities to connect with candidates, leveraging a combination of innovative products, refined algorithms, and robust operational capabilities. In terms of data on our platform, in the third quarter, the accumulated number of enterprises joining Hailuo Quant Select project grew by 45% quarter on quarter, and signed contract value increased by over 40% quarter on quarter. This also helped the revenue contribution from overall blue-collar business in terms of total revenue further increase to more than 38%.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Fifth, the company continues to invest in technology to create greater value. In the third quarter, our platform facilitated an average of nearly 200 million monthly mutual achievements, demonstrating a continued rise in the number of successful interactions based on mutual consent between enterprise users and job seekers on a per capita basis.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
As an entrepreneur, I and my friends all view this data as a testament to the value our company brings to the world, and this has always been the goal that our company will long pursue.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Last, regarding shareholder returns, the company has repurchased around $130 million worth of shares since our last earnings call, bringing the total repurchase for this year to approximately $220 million, representing 3.4% of our total shares. This underscores the company's confidence in our long-term growth prospects and our commitment and concern to delivering sustained returns to shareholders in any circumstances.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
That concludes my part of the call. I will now turn it over to our CFO Yu Zhang for the overview of our financials. Thank you.
Yu Zhang (CFO)
Thanks, Jonathan. Hello everyone. Now let me walk through the details of our financial results of the third quarter of 2024. We delivered a solid set of financial results in this quarter despite the industry headwinds, with revenue growth by 19% year-on-year to CNY 1.9 billion. This growth was mainly driven by the continued expansion of our enterprise user base as we further penetrated into blue-collar industries, lower-tier cities, as well as small-sized companies market, even facing a generally soft recruitment market. Number of paid enterprise customers was six million in the trailing 12 months ended September 30, 2024, up by 22% year-on-year and 2% quarter on quarter. RPU in this quarter remained stable sequentially. Notably, our overall operating cost and expenses were flattish quarter on quarter, even including several one-off or non-recurring expense items in this period.
As one of our key focuses being sustainable cost control, we are confident that our effective business model can continue to generate strong operating leverage in the future. Looking at detailed financial metrics, excluding share-based compensation expenses, adjusted operating cost and expenses increased by 23% year-on-year to CNY 1.3 billion. Flattish quarter on quarter. Adjusted operating profit reached CNY 605 million, up by 10% year-on-year with an adjusted operating margin of 32%. Cost of revenues increased by 17% year-on-year to CNY 314 million in this quarter, mainly driven by higher server and bandwidth cost, payment processing cost, as well as employee-related expenses. Gross margin kept at the same level of 84% as last quarter. Sales and marketing expenses increased by 14% year-on-year to CNY 522 million in this quarter, primarily driven by the marketing campaigns launched during the Paris 2024 Olympic Games and the Euro Cup 2024.
Excluding the sponsorship expenses, we witnessed the improved efficiency and business leverage in both our selling and marketing expenses. Due to our strong brand recognition and a powerful network effect inherent in our business, we are confident that the enhanced marketing efficiency trend will continue to improve along with our top-line growth. R&D expenses increased by 12% year-on-year to CNY 464 million in this quarter. Excluding share-based compensation expenses, adjusted R&D expenses increased by 18% year-on-year to CNY 361 million. The depreciation cost associated with our earlier investments in AI infrastructure has largely stabilized and is not expected to increase in the near future. Our G&A expenses increased by 31% year-on-year to CNY 286 million in this quarter, mainly due to higher employee-related expenses and some one-off expenditures that will not occur in the coming year.
Our net income was RMB 464 million in this quarter, up 9% year-on-year, and our adjusted net income in this quarter reached RMB 739 million and increased by 4% year-on-year, which was affected by the decrease in the interest and the investment income. Total share-based compensation expenses amounted to RMB 275 million in this quarter, down by 9% quarter on quarter and 5% year-on-year. As Jonathan just mentioned, we are expecting total share-based compensation expenses to continue the downward trend in 2025. Net cash provided by operating activities in this quarter was RMB 812 million, relatively stable with that of the same period of last year. As of September 30, 2024, our cash and cash equivalents, short-term time deposits, and short-term investments totaled RMB 14.6 billion.
We launched an additional share repurchase program in August 2024, running concurrently with the March program, which allows us to buy back up to $350 million of shares. Since the announcement of the August program, as Jonathan just mentioned, we have repurchased a total consideration of approximately $130 million, making the total buyback amount reach $220 million this year, demonstrating our commitment in shareholders' return and long-term confidence of our business. And now, for our business outlook for the fourth quarter of 2024, we expect the total revenues to be between RMB 1.795 billion and RMB 1.81 billion, a year-on-year increase of 13.6%-14.5%. That concludes our prepared remarks, and now we would like to answer questions. Operator, please go ahead with the queue.
Operator (participant)
Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again. Our first question comes from Eddie Wang with Morgan Stanley. Your line is open.
Eddy Wang (Analyst)
[Foreign language] Thank you, Management, for taking my question. I have two questions. The first one is that the government has launched some supportive policy since September end. Have you witnessed any, you know, signs of this policy has helped to boost the recruitment market, and have you witnessed any, you know, operating metrics improvements as well? The second question is, given the uncertainty of the macroeconomy, which could, you know, sustain into 2025, how should we think we could maintain the revenue growth in 2025? Thank you.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Thank you for your question. About the first one regarding the supporting policy since the end of September, I have several observations to share with you. First is, we noticed that the newly added enterprise users every day has been improving on a year-on-year basis since the end of October. And please note that November and December are traditionally relatively low season for recruitment. However, the newly added enterprise users improving on a year-on-year basis since October, my understanding is that this is good news. And this trend has continued into November and December.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The second thing about the job seeker to recruiter ratio, which I believe many of you concerned have been continuing to fall back. I have just discussed in my prepared remark that during July to September, that number is high compared to the same period last year, and now it is lower than the same period last year, which reached a relatively low level within this year, which means the supply and demand unbalance issue is improving.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Even though, despite of this good news for science, my understanding is that this supporting policy need take some time to transfer into actual improvement of economy and actual improvement of enterprise recruitment demand. So this should take some time, and we should stay patient and calm.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
About the second question, facing the uncertainty of macro, how we can guarantee our continued revenue growth trend. We have several key structural growth drivers for our revenue, which is still unchanged. The first thing is the user growth. Even though of all these uncertainties, we expect that we can still have at least 15% of overall user growth. The enterprise side might be slower, but still it can grow, and if the macro can stabilize at some level, then we expect the enterprise side have better performance, so our user growth as the most important driver is still quite solid.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The second important driver is, our paying ratio can still maintain a stable level. If you're looking back, our paying ratio started at even like 0 or 5% and improved along this year is now reaching at like 20%-30% level. So the upward trend is unchanged.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
And another opinion is that our paying, the increase of paying ratio has some connection with the supply and demand balance. And as the sign of the supply-demand balance improving, we expect that if the economy can be stable, then our paying ratio can return to our growth trend.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
If the macro can actually continue to go back to growth, then our paying ratio will experience a significant improvement.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The third driver is our RPU. As far as we have got the first and second driver, which is enough, we are not in a hurry to aggressively increase our RPU. It will keep at a stable and slight improvement trend.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
I have an additional revenue growth driver, which is our blue-collar business. Our blue-collar contributed more than 38% in the third quarter of our total revenue. This is a quite important breakthrough. Several years ago I had idealistic thoughts that I want to resolve the problem in the blue-collar manufacturing recruitment industry, which is bad money driven out of the good money, and people with decent background cannot get good jobs. We launched the Hailuo project in the hope of someday the top good college graduates can agree with our rules to do recruitment business on our platform. Now we have seen some real money coming back from this, which is our dreams coming into reality.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
That's my answer to your question.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Operator, let's move on to the next question.
Operator (participant)
Thank you. Our next question comes from Timothy Zhao with GS. Your line is open.
Timothy Zhao (Analyst)
[Foreign language] Thank you, Jonathan, for taking my questions. My first question is regarding the more detailed breakdown into the third quarter, including the customer performance between the blue-collar and white-collar sectors, as well as different sector subsectors as well. And as mentioned that our RPU overall is relatively stable in the third quarter, could mention more color in terms of our RPU and revenue trend between SMEs and key accounts. And second question is regarding the user growth. I think, as mentioned that, I think in the first nine months of this year, there were already 40 million newly added verified users, and in my calculation, the individual users should already reach or get close to 200 million. Could mention share about the room for growth for the individual users to grow.
As we are aiming for 15% or more than that growth into next year, how should we think about the sales marketing expenses or the marketing expenses into next year? Thank you.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Thank you for your question. First one, regarding different blue white collar and industries, of course the overall growth rate of blue collar are still faster than white collar. As I just mentioned, the revenue contribution have further increased to over 38%. However, compared to the same period last year, we have seen the blue collar revenue growth rate have been significantly slowing down, which was mainly affected by the weak urban service industry performance. Compared to blue collar, white collar is relatively stable.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
In terms of subsectors, as I just said, the urban service industry has been relatively weak since the second quarter. However, we covered a little bit in recent weeks. For the better performed industries, manufacturing, we have several highlights: manufacturing industries, logistics and warehouse, automobile are the three best performed industries in the third quarter and the recent weeks. For example, the manufacturing industry has a year-on-year revenue growth more than 45% in the third quarter.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Mm-hmm. About the different size of enterprises, we notice this on the two end of the market. First one is a super, hyperscale, enterprise with more than 10,000 employees, performed the best in the third quarter. The second one is, small and micro size enterprises with employee less than 100 people. My understanding that this is actually quite good news because, majority of China's enterprises are small size enter companies, which is also the main, contribution of our new users, new enterprise users.
Yu Zhang (CFO)
I'd like to add one point regarding our three accounts breakdown. Key accounts recorded the highest revenue growth, which is up more than 30% year over year. The overall up 5% year over year, flat quarter over quarter. Among all three segments, key accounts are improved the most.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
About your second question of our user growth potential, it's actually a quite good question. So we have actually started through several different channels and methodologies and come to a conclusion that the number of China's marketable employees are more than 400 million, which means we have a double space to grow.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
On the enterprise side, the room space is even bigger. The official number is that China has 40-50 million enterprises. Some channels say even more than 50 million. No matter what, we have very strong advantage in terms of enterprise size service because our model are very suitable for small or even micro-sized companies and across different industries, which can support our very strong and large room for our enterprise users.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
We're not planning to spend a lot of money on marketing or user acquisition. There are two reasons. First, due to a very strong double-sided network effect, the natural traffic has accounted for a very significant portion of our new users.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
And the second reason is, technically speaking, there is no big events or marketing campaign which we need to spending more money on. So, as a result, we will keep our marketing spends relatively low level. And that's my answer to your questions. Thank you, Timothy. And operator, let's move on to the next question.
Operator (participant)
Thank you. Our next question comes from Wei Zhong with UBS. Your line is open.
Wei Zhong (Executive Director and Equity Research Analyst)
[Foreign language] Thank you, management, for taking my question. My first question is on blue collar recruitment. Could management maybe share your future growth strategy for the blue collar business, around manufacturing, and other verticals? Do we plan to build our offline service capabilities for the blue collar recruitment? And also, have we observed any change in the competitive landscape here? And second, just on the profitability outlook for next year, understanding management has shown a very strong commitment to protecting profitability in light of the macro uncertainties. So if we just look at our profit goal for the next year, what do we see as the major drivers for profitability improvement, and is there any potential new investments that we should consider? Thank you.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Okay, thank you for your question. We just talk about the improvement, the achievement we have in the blue collar, especially manufacturing sector. The essence of that is actually an idea or concept become reality, which is the factories, intermediaries, workers, and the platform. Those four parties can coexist under one co-recognized rule, game rules, which can allow everyone to be more efficient and earn money with dignity, and now that idea has come into the reality.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
So this is actually a very hard process, and I will talk again about the essence, which is every player, the factories, agents, workers, and platforms. They are all battling against the short-term interest and long-term interest.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
For example, one manufacturing worker who is quite clearly aware that his working salary should be in the RMB 6,000 per month range. However, if someone posts a job of RMB 150,000 per month, he is quite hard to resist attempt to submit a resume. So, it's a fight for a potential job, but the secured working opportunity.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
That's the example I just said is actually a real worker facing at this on the current market condition in a good season that his salary can raise to around RMB 80,000, RMB 8,000 per month. I control the related similar kind of jobs, the salary range with no more than RMB 8,000. If we have that, that can have. I have foundation to answer your two questions.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The question about the competitive landscape. If I continue to control the workers' salary range to which a job posting can be no higher than RMB 8,000 per month, in the short term, I may not be able to compete with a platform allows people to post jobs with over RMB 150,000 per month. In the long term, I have a strong advantage because I actually return the truth of this job position. The second about how committed I will invest to do the offline placement, because the things we are currently doing is quite difficult and need a lot of input from every level. I hope I can continue to do that, which we have already established a very clear advantages.
So in the short term, I won't invest heavily in the placement while continue our current game with those four participants, and hopefully we can have good results.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
And the second question I will give a short but clear answer. So we facing all these difficulties, we need to find out which thing is the definitely right to do, and we believe to guarantee our profit or profitability is definitely correct things. So we need to do and we will guarantee our profit.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
And in terms of managing our next year profit target, I have very strong confidence. I won't talk too much about our management details, but with one thing I can say is that we have very strong operating leverage, so as long as we can have, which will mainly turn into our profit, this trend is quite clear.
Yu Zhang (CFO)
Regarding our company's margin outlook in 2025, I can offer some of our thoughts. Regarding the gross margin, we expect our gross margin will be flat or improved slightly next year. Sales efficiency improvement will leave additional leverage to selling expenses. Absolute amount of marketing spending will be capped at 2024 level or even decrease. RMB headcount likely will not increase. There's no near-term actual investment to AI hardware. So our and one more thing is our new business. We expect our new business spending will be with disciplined approach. So all in all, our operating margin will further improve. As Jonathan said, we'll further improve along with our top line growth. So this is our view towards the margin profit.
Wei Zhong (Executive Director and Equity Research Analyst)
Okay, thank you. In light of the time constraint, I think, Peter, we can take one last question.
Operator (participant)
Thank you. Our last question comes from Yanyan Xiao with CICC. Your line is open.
Yanyan Xiao (VP)
[Foreign language] Thanks, management, for taking my question, and I have two questions. My first question is, how is our overseas business progressing, and how can we balance our profit control goals with overseas business investment? And my second question is, we've noticed that, industry-wide trend towards AI products like AI interviews. So how do you view the current application scenarios of AI in the recruitment field, and what potential new revenue or cost reduction opportunities might there be? Thank you.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
Thank you for your question about your first question of our overseas business and the relation with investment and relation with our profit target. So, one thing is clear that is next year we won't have very big investment in our overseas business. This has a relation to our business developer methodology, which is we want to release the eagle until we see the rabbit, which means we won't increase investment heavily before we have some certainty. So we have to do some very small experiment with limited cost.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
And so, in our plan, we won't expect we can clearly see that rabbit next year, so that won't affect our profit target next year.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
In terms of AI application, actually now the within the industry or actually other all the industries, the reality is, the high prospect of the technology cannot correlate with real actual application scenario. So there's a very loud lightning but very small rain. So that's an industry fact.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
But I want to further explain our opinion during our industrial practice. The first one is we will insist on equality between job seekers and recruiters. We will not allow one side to take advantage of AI to have advantages over the other side.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The second principle we insist is the right to know. Whenever a user are facing the potential counterparty of AI, then we should let that user know.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
The third policy we insist that the current application scenario, which can be perfectly done without large language model, there is no necessity to use, like, LLM to do it again, which is actually kind of waste.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
and apart from all those theories, we have several real applications. So in terms of protecting the safety of our users, our AI technology has been quite useful.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
We disclosed in the past that we have over 900 people of our security team, and this year we increased more than tens of millions of users, but we didn't increase the total number of our security team. One important reason is that we used our AI technology to assist with the verification, which largely increased our overall review efficiency.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
So in the history of the bad people fighting with the platform, the first principle is actually the fighting of the cost. Whenever the evil guys feel first to do things, to do bad things on the platform, then he will not continue to do that. With the help of AI, we can actually increase our advantages over that, so it can create real value for our operation.
Jonathan Peng Zhao (Founder, Chairman and CEO)
[Foreign language]
Wenbei Wang (Head of Investor Relations)
That's my answer for your question, and I think that's all the questions for tonight.
Operator (participant)
Thank you. Due to time constraint, that concludes today's question and answer session. At this time, I will turn the conference back to Wenbei for any closing remarks.
Wenbei Wang (Head of Investor Relations)
Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or The Piacente Group. Thank you.
Operator (participant)
Thank you for your participation. This does conclude the program. You may now disconnect. Good day.