Ladies and gentlemen, thank you for standing by. And welcome to the Kanzhun Limited Third Quarter 2022 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded. At this time I would like to turn the conference over to Ms. Wen Bei Wang, Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Good evening and good morning everyone. Welcome to our third quarter 2022 earnings conference call. Joining me today are our Founder Chairman and CEO Mr. Jonathan Peng Zhao and our Director and the CFO Mr. Phil 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 may 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 these forward-looking information, except as required by law. During today's call management would also discuss certain non-GAAP financial measures for comparison purposes only. But that -- non-GAAP financial measures and then 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.

Hello everyone. Welcome to our third quarter 2022 earnings conference call. On behalf of the company and our employees, I would like to express our sincere gratitude to our users, investors and friends for your ongoing trust and support. First, I'd like to share with you our performance for the third quarter. In this quarter, we accorded GAAP revenue of RMB1.82 billion with quarter-on-quarter growth of 6%. Our calculated cash billings which RMB1.24 billion a sequential increase of 26.4%. Benefiting from our enhanced brand recognition and continuous improvement in marketing efficiency. We maintain the rapid growth in our user-base while further improving our profit margin to obtain [indiscernible] over adjusted net income for the third quarter which is gross share-based and compensation expenses, achieved a quarter-on-quarter growth of 5% -- 25% reaching RMB377 million. In this quarter, our user base has been increasing rapidly. As of September 30, the newly verified users achieved 14 million. Verified users is a matter we pay more attention to in our daily operations. Referring to job seekers we posted at least one job expectation or enterprise users we posted at least one job position. Compared with the accumulated more than 8 million newly verified user as of August 15 which we discussed in our last earnings call. And then and we continued our user growth at a sustainable and then within this quarter. Our average MAU of this quarter reached RMB32.4 million hit a record high. And the company's efforts on constantly improving the technology and user-service capability in the past year have started to bear fruit. Let's take a look at some numbers. First, the average monthly number of successful mutual communication between job seekers and enterprise users have hit a record high in this quarter representing a more than 20% year-on-year growth…

Thanks, Jonathan. Hello, everyone. Thank you for joining our earnings call today. Before I begin, please note that all amounts are in RMB and all comparisons are on a year-on-year basis unless otherwise stated. In this quarter, our business began to recover backed by a strong user growth in the third quarter. Our calculated cash billings recorded a fast rebound with over 26% sequential growth to RMB1.24 billion. Our total revenues being dragged down by the impacted performance in the previous quarters due to new user registration suspension and COVID resurgence in the second quarter recorded a 6% year-over-year, 6% quarter-over-quarter growth to RMB1.18 billion. The number of total paid enterprise customers in trailing 12 months ended September 30, slightly decreased to RMB3.73 million, down 1% from RMB3.77 million of June 30. But quarterly-wise, the number of total paid enterprise customers in the third quarter increased by 15%, compared to the second quarter, mainly due to the increase in small-sized accounts, driven by our active enterprise user growth in the relative mild recovering macro conditions. Revenues from small-sized accounts also contributed a higher sequential recovery compared to other accounts which proved that this SME segment of customers that we particularly specialized in are more resilient in the economy and our customer base mixed with various sized companies, including both large accounts and small medium-sized accounts are in a much balanced and healthy structure. It should help us absorb more impact when facing economic downturns and it can also benefit more and faster from the recovery of a macro environment. Moving on to the cost side. Total operating costs and expenses for the third quarter increased by 16% year-over-year to RMB1.04 billion. Excluding share-based compensation, total operating costs and expenses increased by 9% year-over-year to RMB879 million in the quarter. Cost…

Thank you. [Operator Instructions] Our first question comes from the line of Eddy Wang from Morgan Stanley.

I have 2 questions. First is the -- if we consider that the reopening process to gradually happen in the early spring, so how do you think the recruiting activities you picking up quickly fast? Or do you expect that it will take maybe 1 or 2 months of lead time before these enterprise users to post their jobs? The second question is, if we expect that the reopening to gradually happen in next year, so what's our expectation in terms of the -- your sales, marketing and customer acquisition costs because we believe that certain of the other online recruitment platform will also spend some money to acquire new customers. Considering all this competition and considering that we also have a quite ambitious new user acquisition plan in the next 3 years, how do you think the -- is best level? And what kind of the margin should we expect for the 2023?

Thank you for your question. Regarding your first question about the opening, after opening, what will be the recurrent speed for the enterprise equipment. So based on my observations for the past years, majority of enterprises can have a very quick recovery with some very limited exceptions, such as very huge mega enterprises because they may take some time to readjust their expectations for the growth, for the revenue and also for the expenses and for the marketing and human resources and headcount. But for SMEs, they have a relatively much faster coverage. And regarding your second question about our plans for marketing of next year, our marketing efficiency for the digital market will not decrease. As I just mentioned, we are planning for over 100 million new users in the next 3 years. If everything goes normal, we are expecting around 40 million newly registered users next year and that's at the moment the consensus but we will not pay extra amount for that. And in terms of branding, this year, you have already know that we have sponsored the World Cup. And for this year, we have not -- any major marketing events which we can sponsor or to brand -- the brand. So it also will be a normal year. So my [indiscernible] is that the marketing expense as a percentage of revenue for next year will be -- will remain stable and this will not affect our margin in net G&A.

And to add a little bit about the -- the reopening is there. First of all, our cash revenue, we would like to gear up and then our accounting revenue because of we need some time to book the revenue, then we would like to see our accounting revenue gradually catch up those cash collections with the reopening. So there is a delay effect. So please remember that. So at the beginning of the recovery, we should pay more attention to the cash revenue and then our accounting revenue continue to gradually catch up.

Our next question comes from the line of Timothy Zhao from Goldman Sachs.

I have 2 questions. First is considering that December is the month when many big enterprises sign annual contract or renew contract with us. Could you maybe share some color on what kind of status that we see across the big contracts? And what percentage of the enterprises may have some upselling potential? And secondly, it's about branding activities around the World Cup. Could you maybe share now? And how should we think about the ROI behind these branding activities and especially considering there are some other recruitment platform also the similar branding activities during the World Cup and how should we compete with them and what is our differentiation?

Thank you for your question. Regarding your first question about our signing of annual contract at the end of the year. So it has already been 2 months past for the fourth quarter. And what we have observed in terms of the signing of our key accounts -- we are happy to say that basically, we have signalled customers who have stopped; so it is basically quite good. And in terms of the upsell or dollar amount, the net dollar retention rate of all our key accounts are still continuing. It be above 100%. It is not in fact of our historical results but we still witness this under current circumstances. And about your second question for our sponsorship this World Cup, because we are a very young company, the average age of our employees is around mid. So football is the kind of a sport everybody likes. And you had probably seen from the news and with our data going back, the population on earth has reached more than 8 billion. And I believe that from a perspective of human civilization, if something if a relative [indiscernible] and they are happy to support FIFA. And on top of supporting FIFA, the first thing we consider, it is good business of -- for doing all those marketing campaign and on other channels. So in 2018, the Russia Would Cup, more than 650 million Chinese audience have watched the event. And for the Qatar World Cup this year, we don't have the exact -- I believe that should be -- the audience base will be larger, it should be more than 700 to 800 million. And if we assume, each audience can watch like 4 to 5 games during the whole World Cup event, then there will be more than 4 billion people and who have watched our advertisement. You know that the -- our advertising is quite frequent between the event and so the cost for 1 person to watch our branding is [indiscernible]. So it's a good business considering the vast audience base, the ages who watch the game -- the ages of people who watch the game and the cost is a quite good business. And you noticed that several of our peers have also did the same thing but I believe this is [indiscernible]; so we can give our audience, our customers more choice. They can choose what kind of platforms the best they can. And that's my answer to your question. Thank you.

I have few comments. So we also consider that brand advertisement is more like an investment rather than cost or expense item because of the return is better, because of its more effective than traffic acquisition cost and it's long-lasting. So that's probably the very short answer to your question as well.

Thank you. Operator, we can move on to the next question.

Our next question comes from the line of Wei Xiong from UBS.

I have 2 questions. First is that if we look at first quarter next year and normally, it's a strong seasonality for recruitment market. So in addition to the World Cup sponsorship that we mentioned already, could management elaborate your plans in user acquisition, marketing and promotions in the first quarter? Do we have a target for user growth in this peak season? And also, how should we think about the margin level in the first quarter? My second question is, it seems the large enterprise customers may have relatively more resilient recruitment budget compared to the SMEs, given the uncertainties in the macro environment. So just wondering what the company consider to maybe shift our strategy or focus towards the key customer side given this backdrop? And also what's your latest thoughts and progress in the mid-to-high-end recruitment segment?

Thank you for your questions. About your first question on marketing plans for the first quarter next year. So our World Cup campaign end on December 18 and the Spring Festival will start from January 22 next year and there are only 5 weeks in between. And by end of January, people will go back to work, where the traditional recruitment will start. So there are only 6 weeks in between the World Cup campaign and the Spring Festival. So I may assume the 2 events are fairly connected. And the intensity of our marketing campaign of the World Cup, we are -- we strongly believe that this campaign effect can continue to the Spring Festival. So our marketing plan for the -- after Spring Festival will not require extra money. So on the other hand, we have benefit from the World Cup campaign. And that's part of our strategy. Another part is that for the reopening everybody are concerned, we are also highly focused on that. So our marketing plan, the efficiency and with focus [ph] on our marketing input, we are highly connected to the reopening process. So currently, we are focused on the progress. And on top of our strategy and focus on reopening and [indiscernible] that we will not do a marketing event which have huge and active impact to our market in the first quarter next year. Regarding your second question about our relationship of our key account customers. Currently, we do not have any plan to [indiscernible] our resources to -- towards the key accounts, apart from the SMEs. But I can assure that whenever we would like to strengthen our total resources, we will also increase that for our key account customers. Quite a long period time, the customers in China [indiscernible] on service and that's what we are doing. We are -- we better serve all of our customers, including especially SME. And that's my answer to your question.

To the market statistics, in China, more than 90% of the enterprises are small medium-sized companies. So basically, our own company composition is also in the same pattern. So we have more than 80% of our enterprise customers or companies, they are the small medium-sized enterprises. So they are the very important components to our units. And as just mentioned, compared with the peers, we are more specialized in this area. So we definitely will serve them well and try to provide them with better service. So -- but meanwhile, we definitely will also pay more attention to KA accounts because they we have a much balanced structure as just mentioned as well.

Okay, thanks. Now we move on to our next question.

Thank you. Our next question comes from the line of Natalie Wu from Haitong International.

I have two. First is regarding the paid enterprise user number. We see that this number has a bit decreased again to 3.7 million this quarter. Just wondering if management can share with us the active and [indiscernible] number this quarter? And how did that change on year-on-year on quarter-on-quarter basis? Or how should we see the paying conversion ratio change? How much of that is related with the pandemic and how much is related with the initiative cleaning up action by the company? And how much is related with the natural churn. And second question is related with the blue-collar. Just wondering, can management help us understand how much revenue currently comes from the blue-collar business and the related MAU and paid enterprise number, some like that? And how should we see the future growth for that business? And also under the scheme of reopen, how should we see the growth rate if the blue-collar business could outgrow the white-collar business in the reopen scheme?

Okay. Thank you. So I'll answer the paid enterprise customer question first. So the 3.73 million, that number was trailing 12 months paid enterprise customers. So that number reduced mainly because of in the second quarter, the COVID impact reduced our paid enterprise customers in that quarter. And starting from third quarter, we see quick recovery of quarter-over-quarter sequential paid enterprise customer growth. So -- but because of this trailing 12 months, so it's -- the second quarter did have some impact to our -- the total paid enterprise customers, the number. But if you look at the quarter-over-quarter, if you look at all the paid enterprise customer in third quarter versus the paid customer in the second quarter, we see a very [indiscernible] quarter-on-quarter growth. And in terms of the active enterprise customers, that number we see starting from like June-July and in we see gradual recovery. And compared with the second quarter, it's a pretty good sign of business is booming. But starting from September because of the COVID measure, the COVID control measure, we see some like impact to the active enterprise customers' number. And so the similar things with also business in the early fourth quarter of this year. In terms of the paying ratio, paying ratio is, I think, it’s quite stable in second quarter, in third quarter and even in October and November, overall, the paying ratio among the active enterprise customers is quite stable. And the ARPU is also very stable. So the impact is mainly with the total active enterprise customers which is highly related to the COVID control measure. And in July and August, when the COVID measure is not that stringent, we see recovery. So we believe in the coming months, once the COVID is gone, we definitely will see a good come back for the active enterprise customers. So this is the first question. And regarding the blue-collar, I can offer you with some data. In terms of the users of blue-collar, at this moment in terms of the MAU, it accounts for roughly 30% of our total users. And in terms of the revenue contribution, blue-collar accounts for roughly like 26% of our [indiscernible] in third quarter.

And on top of sponsors, I would like to submit some data. So for logistic industry, we have seen a 20% year-on-year growth in terms of cash billing. And for other service industry, a 28% year-on-year growth, while our total cash billing compared to last year only grew by 1%. So you can see a blue-collar sector has experienced a very fast increase. And we have quite good confidence that we will acquire additional 100 million new users in the upcoming 3 years which is double the current total user base. And I believe along 2/3 will be what we call traditional blue-collar workers, including logistics, including urban service and manufacturing and et cetera. And that's all for my [indiscernible].

And also, one more thing to mention is that we've resumed the user growth from the end of June and middle of the year normally is not the peak season for blue-collar to find jobs. Normally, season -- seasonality wise it's the spring in the -- after the Spring Festival that is the peak season for the blue-collar to come out to find job. So in upcoming years, because of our [indiscernible] currently we can grow our new users. So we expect that in the peak season of the Spring Festival, we can further grow our blue-collar segment users and customers.

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

Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or TPG Investor Relations. Thank you.

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