Kanzhun - Earnings Call - Q3 2025

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by, and welcome to Kanzhun Limited's 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 a 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)

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 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 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-debt financial measures for comparison purposes only.

For definition of non-debt financial measures and the reconciliation of debt to non-debt 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 irzhipin.com. Now, I will turn the call to Jonathan, our Founder, Chairman, and CEO.

Jonathan Peng Zhao (Founder, Chairman, and CEO)

[Foreign language] Hello everyone, thank you for joining our company's 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 in and supported us. [Foreign language] I will briefly walk through our key operational results and the 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.

[Foreign language] 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 accelerated from the previous quarter. Excluding share-based compensation expenses and other incomes, such as investing rates, our adjusted operating profit reached RMB 900 million, up 49.3% year-on-year. [Foreign language] Our GAAP net profit was RMB 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 RMB 220 million this quarter, marking the third consecutive quarter of sequential decline and a year-on-year drop of 21%.

[Foreign language] 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. [Foreign language] 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 Zhipin app, reached 63.82 million. [Foreign language] While the user scale is growing, user activity is also strong. According to third-party data, our DAU to MAU ratio has maintained at high industry-level. [Foreign language] The second driver was the rebound in enterprise-side demand, which also has helped the number of improvements 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. [Foreign language]

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. [Foreign language] The supply-demand balance on our platform, meaning the ratio of enterprise users to job seekers, continued to improve. [Foreign language] By September 30, the number of paid enterprise customers in the 12 months grew 13.3% year-on-year to 6.8 million. [Foreign language] Over the entire quarter, the paying ratio among quarterly active users increased both year-on-year and quarter-on-quarter. [Foreign language] The second agenda item focuses on observing enterprise hiring demand in this quarter from multiple perspectives.

[Foreign language] From an industry perspective, blue-collar revenue growth continued to lead, with its revenue contribution reaching a record high in the third quarter. Manufacturing industries remain the most revised sector, topping the industries in revenue growth for five consecutive quarters. [Foreign language] 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 stages in terms of priority. [Foreign language] The first stage is to improve the online job search environment for blue-collar workers. [Foreign language] Between the pathways of pollution-first and managed second, or managed first and profitable second, we choose the second path.

[Foreign language] The second stage is to develop the user scale of double-sided users on the platform, and the third stage is to pursue commercial benefits in a reasonable scale. [Foreign language] In 2022, we launched the KONGE Project to purify the job search environment for blue-collar workers, pursuing the authenticity of recruiters, job positions, and compensation, combating false information, and improving user trust. Over the past three years, the process has been extremely challenging, and the results have gradually emerged. [Foreign language] Meanwhile, transportation, logistics, 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 leading growth.

[Foreign language] One thing worth mentioning about 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 a certain level, reflects a revival of the white-collar entrepreneurial ecosystem. [Foreign language] From the perspective of city tiers and country size, demand in tier-one cities is rebounding. Tier-2 cities remain stable, and the revenue contribution from Tier-3 and Tier-3 below cities continues to rise. Among enterprises of different sizes, mid-to-large enterprises, which means employee levels between 500-9,999, are growing the fastest, followed by small and micro enterprises and then very large enterprises.

[Foreign language] The third agenda item will use the progress we made since AI was integrated into the company's business from product and technology perspective. On the job seeker service side, there are two things worth mentioning. [Foreign language] First, after a period of continuous iteration, an AI Job Search Assistant has been fully launched for all job seekers. [Foreign language] Currently, it can recommend positions for users, answer questions, and also provide suggestions on how to optimize their resumes. [Foreign language] In the third quarter, not only was the full rollout of this product achieved, but the number of interactions per user with this AI Job Search Assistant also showed a significant increase.

[Foreign language] We have also been continuously optimizing the AI interview culture feature. In the third quarter, the number of job seekers who completed the mock interviews showed further improvement, and also their activity level and conversion rates continued to improve compared to the previous quarter. [Foreign language] On the recruiter service side, multiple AI products have been gradually launched to provide services. There are four aspects to mention. [Foreign language] First, 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 has increased by 7%.

[Foreign language] Second, a product called AI Quick Hiring, after continuous optimization, is currently under phased rollout. Experiments show that this product not only helps the platform better understand recruiters' intentions, but also allows for comparison among all job seekers on the platform, thereby improving matching accuracy. Currently, the reuse rate among recruiters participating in the phased rollout testing is steadily increasing. [Foreign language] Third, we have extended the AI interview feature 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 customize interviewer profiles. These clients have very strong appeal to students, leading to a high volume application in a short time, which increases significant pressure for recruiters during the campus recruiting activities. The developing AI services have alleviated this pressure.

[Foreign language] 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 catering and manufacturing industries. These initiatives are gradually generating benefits. [Foreign language] 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 the button. Sometimes someone might choose to close and someone chooses to continue the communication, and we are continuously collecting related examples.

[Foreign language] 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 an individual job seeker or recruiter perspective, but also from a scalable double-sided situation. What kind of impact this will have to our ecosystem from a job seeking and recruitment perspective, we are continually observing and collecting data.

In February, the third quarter, we delivered 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 $80 million. Looking ahead, we will continue to focus on strengthening our core business capability while actively fulfilling our commitment to shareholders. That concludes my part of the call. I will now turn it over to our Yu Zhang for the review of our financials. Thank you.

Yu Zhang (Executive Director and CFO)

Thanks, Zhao. Hello, everyone. Now let me walk through the details of our financial results for 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 levels due to the recovering hiring demand. Our commercialization strategy, grounded in ecological balance, enables 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 30, demonstrates our capability and potential to enhance monetization levels. 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 costs 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 quarters 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 RMB 308 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. Double-confirmed our sustainable increase of marketing efficiency due to our strong brand recognition and network effect. Our R&D expenses decreased by 12% year-on-year to RMB 408 million in this quarter. Excluding share-based compensation expenses, our adjusted R&D expenses decreased by 8% year-on-year to RMB 331 million in this quarter, and they stayed relatively flat sequentially.

Our G&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 G&A expenses decreased both year-on-year and sequentially. Our interest and investment income in the quarter increased by 43% year-on-year to RMB 228 million in this year, primarily due to a partial disposal of equity investment and the increased interest from HKD 2.2 billion Hong Kong share offering 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 RMB 992 million. Net margin improved by 11.6 percentage points year-on-year to 35.8%, while adjusted net margin reached 45.8%, up 7.2 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. 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%-13.5%. That concludes our prepared remarks. We would now like to answer questions. Operator, please go ahead with the call.

Operator (participant)

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 Eddy Wang from Morgan Stanley. Please go ahead, Eddie.

Eddy Wang (Analyst)

[Foreign language]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 BOSS accelerating growth in the third quarter? My second question is that as we are approaching the end of the year, what's your perception of the KA renewal willingness right now? Are there any noticeable trends in customer renewal rates or the renewal amounts? Thank you.

Jonathan Peng Zhao (Founder, Chairman, and CEO)

[Foreign language] From our data perspective, the recruitment activities from enterprises indeed recovered in the third quarter. [Foreign language] The growth rate of monthly active users of enterprise side is faster compared to the job seeker side. [Foreign language] The pressure from the job seeker side to our platform has been alleviated. [Foreign language] If we can recall that back in 2021 and 2022, it was a little bit difficult for the fresh graduates to find a job. In 2023, the reopening which everybody was expecting was not happening as we expected. Young people, especially young people, it's a little bit difficult to find a job. [Foreign language] This year, take July, for example, the fresh graduates, their expression for job seeking demand compared to the same period of last year has declined by double digits.

[Foreign language] Meanwhile, from the enterprise side, the companies who have posted jobs openly to fresh graduates increased by double-digits. [Foreign language] From the situation from both job seeker and recruiter side, especially from the fresh graduates as an example, we quite clearly felt that the pressure which had been accumulating for several years is reduced a lot in the third quarter. [Foreign language] In the third quarter, returning the ratio between job seekers and recruiters among active users improved compared to last year. The newly added user ratio also improved. The third quarter is better than the second quarter, which gives us continued confidence. [Foreign language] It's quite easy to understand that based on the improving trend of supply and demand balance, which is the recovery of the enterprise side and the improvement of the pay ratio, and it also helped with our overall business operation.

[Foreign language] The third quarter last year was a relatively low base. From a cautious perspective, we also compared to 2023, the same period. [Foreign language] It was worth mentioning that the recovery of the white collar, for example, the newly added number of job postings for the white collar position in the third quarter increased significantly compared to the second quarter, compared to the same period of 2023. [Foreign language] Based on all these observations and comparisons, I have the confidence to conclude in my prepared map that the improved hiring demand drove our accelerated revenue growth. That's where my confidence comes from.

Eddy Wang (Analyst)

[Foreign language] Yu will give you answers regarding the retention situation that you confirmed.

Yu Zhang (Executive Director and CFO)

Eddie, companies renew their any contract individually at different points 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 company retention rate and their higher renewal spending. We observed this situation not only at the key account customers, but also at the small, medium-sized enterprises. Simply speaking, the company's annual contract renewal situation improved sequentially and annually. This once again proved that the hiring demand in the economy has been recovering healthily.

Wenbei Wang (Head of Investor Relations)

That's our answer to your question, Eddy. Open to ask, move on to the next question.

Eddy Wang (Analyst)

Thank you.

Operator (participant)

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

Wei Xiong (Equity Research Analyst)

[Foreign language]Thank you, for taking my question. Firstly, we observe 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? How do we sustain that above peers' growth going forward? Looking at next year, if the macro situation improves, will we continue to solidify our leadership? Is it possible to see higher competition pressure because the peers may step up investments? 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? Previously, given the macro uncertainty, we said we want to prioritize profitability. 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 Peng Zhao (Founder, Chairman, and CEO)

[Foreign language] 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. [Foreign language] In the 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. [Foreign language] By mentioning this, I would like to clarify on two opposite concepts. First is, majority of our main payment customers are developed by our own rather than gaining the shares from our peers. [Foreign language] The second concept is that it's public data that China has over 40 million small and medium-sized enterprises. And our number of paid enterprise customers is still a small percentage of that. That's why even under relatively tight macro situation, we still have ample room to grow in terms of our market share. [Foreign language] The logical conclusion is that when the market recovers, when the demand improves, we can enjoy better revenue and business growth rate.

[Foreign language] On a competitive landscape perspective, we need to admit that for the customers, both we and our peers are serving, especially under economic pressure situations, the client normally will tend to service providers who have better ROI and higher service availability. We do have some advantages over that. [Foreign language] About the profitability, which you concerned a lot, the current profit margin you observed, which is actually a strategic selection from our company level. Last year, we decided that facing all of these uncertainties, we want to make sure that only certainty, which is guaranteed the profit. This year, you have seen our very strong implementation capability and realized profit numbers.

[Foreign language] Essentially, this very strong margin profile actually reflects our effective double-sided natural effect, our further penetration into user mindset, and very efficient and smooth internal management and operation. All those result in this high margin profile. [Foreign language] As a result, I can predict that the profit, the margin for next year will continue to improve. [Foreign language] We will not sacrifice our revenue growth to achieve this profitability. For the next year, we still want to guarantee at least 35 million newly verified users.

[Foreign language] Our pursuit in better serve users in higher revenue growth actually has higher priority compared to our pursuit of profitability. [Foreign language] That is our strategic level view on our profitability, and we hope you and our investors can better understand what profitability means to us. [Foreign language]

Wenbei Wang (Head of Investor Relations)

For your reference. That is all of our answer to your question, Xiaowei and operator. Let's move on to the next one.

Operator (participant)

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

Timothy Zhao (Equity Research Analyst)

[Foreign language] Thank you, for taking my question and congrats on the solid results. Two questions from my side. First, as Zhao just mentioned that we are going to explore more in the different verticals within the recruitment industry. Could Zhao share more progress and updates on this? And what are the potential impact to our services and monetization into a longer term? Secondly, it's on the AI-related question. We noticed that OpenAI recently announced to enter the recruitment industry, and some other AI startups like Merkur also have been evolving its business model. Could 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 Peng Zhao (Founder, Chairman, and CEO)

[Foreign language] 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 is facing a customer service people, normally they could be quite aggressive. When the customer knows that the counterpart is AI, normally they will take some very harsh words. The biggest complaint from the customer to AI is: "You are very stupid, AI. [Foreign language] The second example is for our AI interview coaching products. A lot of job seekers who have used this service repeatedly to train their interview skills once again. We find out that when the job seeker, his second scoring is below the first one, they will stop this repeat.

[Foreign language] You can see some very interesting findings I can actually see in our daily experiment. People can control well, control his temper when they are facing an AI, and also people who do not want to bother a real human coach very frequently, but he can do that to an AI. [Foreign language] All these results are telling us that when we are applying AI technology to very old, very ancient people and the job matching, the superior and the subordinate matching for this older scenario, we need to be very cautious while using the new technology.

[Foreign language] Now, over more than two years, this very exciting large language model technology has been able to generate a killer level application in our industry. Actually, we are not in a hurry, and it actually gave us more time to find a way to how coexist with all this development and the new technologies. [Foreign language] I just mentioned that on the certain placement scenario, both in blue-collar and white-collar recruitment, such as full-cycle hosted recruitment service or semi-cycle hosted recruitment service, we have been very active to try out new services, but also quite cautiously. So far we have some achievement, but still not in a stage to massively roll out these new features. [Foreign language] We also noticed that some leading technology companies who have been empowered by AI who have expressed their interest in entering into the recruitment industry.

[Foreign language] The new technology combined with old industry questions possibly can generate revolutionary level industry change. [Foreign language] Just like the mobile network and the recommendation technology combined with the traditional recruitment demand have generated BOSS Zhipin as this new generation of online recruitment model. [Foreign language] Up to today, my thinking of that the combination of AI and the recruitment service, the key bottleneck is actually not computing power. [Foreign language] Merkur, who have gathered a lot of professionals to do the tagging, actually show the value of the high-quality data. [Foreign language] If the high-quality data is very critical, is very important, then with BOSS Zhipin, other peers within our industry actually have some certain level of advantages. [Foreign language] Just to leverage your question, I want to express some observations we noticed from our daily operations.

Wenbei Wang (Head of Investor Relations)

That is all of our answer to your question, Timothy. Thank you.

Operator (participant)

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

Wenbei Wang (Head of Investor Relations)

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

Operator (participant)

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