Ladies and gentlemen, thank you for standing by, and welcome to the ConGen Limited Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a Q&A session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am.

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. Felix 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 does 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 a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.japing.com. With that, I will now turn the call to Jonathan, our founder, chairman, and CEO.

Hello, everyone. Thank you for joining our company's third quarter 2024 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 and investors who have continuously believed in us and supported us. Let's talk about financial numbers for this quarter first. The company achieved a revenue of RMB 1.91 billion, up 19% year-on-year, and a net income of RMB 460 million. Additionally, our adjusted operating income, which excludes share-based compensation expenses, reached RMB 610 million, reflecting a 10% year-on-year growth. 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. 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 the 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 an anticipated phase of gradual reduction. In this quarter, these expenses demonstrated a decline both on a year-on-year and a quarter-on-quarter basis. 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 continues to yield positive results. 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. In this quarter, the average monthly active users on our BOSZETING app reached 58…

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 strong in high-point projects grew by 45% quarter-on-quarter, and signed contract value increased by over 40% quarter-on-quarter. As a result, this also helped the revenue contribution from the overall blue-collar business in terms of total revenue further increase to more than 38%. 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. As an entrepreneur, I and my friends all view this data as a testament to the value of our company and voice to the world. This has always been the goal that our company will long pursue. 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 share. This underscores the company's confidence in our long-term growth prospects and our commitment to delivering sustained returns to shareholders in any circumstances. That concludes my part of the call. I will now turn it over to our CFO, Phil, for the overview of our financials. Thank you.

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results for the third quarter of 2024. We delivered a solid set of financial results in this quarter despite the industry headwinds. Revenue grew by 19% year-on-year to RMB 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' markets. Even facing a generally soft recruitment market, the number of paid enterprise customers was six million in the trailing twelve months ended September 30, 2024, up by 22% year-on-year and 2% quarter-on-quarter. ARPU in this quarter remained stable sequentially. Our overall operating costs and expenses were flattish quarter-on-quarter, even including several one-off or non-structured expense items in this period. As one of our key focuses is sustainable cost control, we are confident that our effective business model can continue to generate strong operating leverage in the future. Looking at the detailed financial metrics, excluding share-based compensation expenses, adjusted operating costs and expenses increased by 23% year-on-year to RMB 1.3 billion, flat quarter-on-quarter. Adjusted operating profit reached RMB 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 RMB 340 million in this quarter, mainly driven by higher server and bandwidth costs, payment processing costs, 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 RMB 522 million in this quarter, primarily driven by the marketing campaigns launched during the Paris 2024 Olympic Games and the Euro Cup of 2024. Excluding the sponsorship expenses, we witnessed improved efficiency and business leverage in both our selling and marketing expenses due to…

Thank you. If you would like to ask a question, our first question comes from Eddy Wong with Morgan Stanley. Your line is open.

Thank you, management, for taking my question. I have two questions. The first one is that the government has a long-distance supportive policy since September end. Have you noticed any signs of this policy helping both the recruitment market and operating metrics improvements as well? The second question is, given the uncertainty of the macro economy, which could sustain into 2025, how should we think about maintaining revenue growth in 2025? Thank you.

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. Firstly, we noticed that the newly added enterprise users every day have been improving on a year-on-year basis since the end of December. Please note that November and December are traditionally relatively low seasons for recruitment. However, the newly added enterprise users have been 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. Regarding the job seeker to recruiter ratio, which I believe many of you are concerned about, it has been continuing to fall back. I have just discussed in my prepared remarks that during July to September, that number was high compared to the same period last year, and now it is lower than the same period last year. It has reached a relatively low level within this year, which means the supply and demand imbalance issue is improving. Aside from these good signs, my understanding is that this supporting policy needs some time to translate into actual improvement in the economy and actual improvement in enterprise recruitment demand. So this should take some time, and we should stay patient and calm. About the second question regarding the uncertainty of the macro environment and how we can guarantee our continued revenue growth trend, we have several key structural growth drivers for our revenue, which are still on trend. The first thing is user growth. Even with all these uncertainties, we expect that we can still have at least 15% overall user growth. The enterprise side might be slower, but it can still grow. If the macro environment can stabilize at some level, then we expect the enterprise…

Thank you. Our next question comes from Timothy Zhao with GS. Your line is open.

Thank you, management, for taking my questions. My first question is regarding the more detailed breakdown into the third quarter, including the cost performance between the blue-collar and white-collar sectors as well as different sub-sectors. As we mentioned, our ARPU overall is pretty stable in the third quarter. Could you provide more color in terms of ARPU and revenue trends between SMEs and key accounts? The second question is regarding user growth. I think management mentioned that in the first nine months of this year, there were already 40 million newly added verified users. In my calculation, the individual users should already reach or be close to 200 million. Could management share about the room for individual users to grow, and if we are aiming for 15% or more growth into next year, how should we think about sales and marketing expenses or marketing expenses into next year? Thank you.

Thank you for your question. Regarding different blue-collar and white-collar industries, the overall growth rate of blue-collar is still faster than white-collar. As I just mentioned, the revenue contribution has further increased to over 38%. However, compared to the same period last year, we have seen the blue-collar revenue growth rate significantly slowing down, which was mainly affected by the weak urban service industry performance. Compared to blue-collar, white-collar is relatively stable. In terms of sub-sectors, as I just said, the urban service industry has been relatively weak since the second quarter. However, it has recovered a little bit in recent weeks. For the better-performing industries, we have several highlights. The manufacturing industry, logistics, and warehouse, and the automobile industry were the three best-performing industries in the third quarter and recent weeks. For example, the manufacturing industry had a year-on-year revenue growth of more than 45% in the third quarter. Regarding the different sizes of enterprises, we noticed this on the two ends of the market. The first one is super hyper-scale enterprises with more than ten thousand employees, which performed the best in the third quarter. The second one is small and micro-sized enterprises with employees less than a hundred people. My understanding is that this is actually quite good news because the majority of China's enterprises are small-sized enterprises, which is also the main contribution of our new enterprise users. I would like to add one point regarding our key accounts breakdown. Key accounts recorded the highest revenue growth, which is up more than 30% year-over-year. The overall ARPU was up 5% year-over-year, flat quarter-over-quarter. Among all three segments, key accounts ARPU improved the most. Regarding your question about our user growth potential, it is actually quite a good question. We have actually studied through several different channels on technology and come to a conclusion that China's marketable employees are more than 400 million, which means we have double the space to grow. On the enterprise side, the room or space is even bigger. The official number is that China has 40 to 50 million enterprises. Some channels say more than 15 million. No matter what, we have a very strong advantage in terms of enterprise service because our model is very simple for small or even micro-sized companies and across different industries, which can support our very strong and large room for our enterprise users. We are 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. Technically speaking, there are no big events or marketing campaigns that we need to spend more money on. As a result, we will keep our marketing spending relatively low. That is my answer to your question. Thank you, Timothy. Operator, let's move on to the next question.

Thank you. Our next question comes from Wei Zhang with QBS. Your line is open.

Thank you, management, for taking my question. My first question is on blue-collar recruitment. Could management 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 blue-collar recruitment? Also, have we observed any change in the competitive landscape here? Second, just on the profitability outlook for next year. I understand management has shown a very strong commitment to protecting profitability in light of macro uncertainties. So if we just look at our profit goal for next year, what do we see as the major drivers for profitability improvement? Is there any potential new investment that we should consider?

Thank you for your question. We just talked about the improvement and achievement we have in the blue-collar, especially the manufacturing sector. The essence of that is an idea or concept becoming reality, which is the factories, intermediaries, workers, and platform. Those four parties can coexist under one code recognized through game loops, which can allow everyone to be more efficient and earn money with dignity. Now that idea has come into reality. This is actually a very hard process. I will talk about the essence, which is every player, the factories, agents, workers, and platforms, are all battling against short-term interest and long-term interest. 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 posted a job of RMB 15,000 per month, it is quite hard to resist the temptation to submit a resume. It is a fight for a potential job and the current working opportunity. The example I just said is actually unreal. In a good season, his salary can raise to around RMB 8,000 per month. I control the related similar kind of jobs to a threshold range with no more than RMB 8,000. If we had that, that can help. Regarding the competitive landscape, if I continue to control the workers' salary range, the job posting can be no higher than RMB 8,000 per month. In the short term, I may not be able to compete with the platform that allows people to post jobs with over RMB 15,000 per month. But in the long term, I have a strong advantage because I actually return the truth to this job position. Regarding how committed I will invest in offline placement, what we are currently doing is quite difficult and…

Thank you. Our last question comes from Tianan Shao with CICC. Your line is open.

Thanks, management, for taking my question. I have two questions. My first question is how is our overseas business, and how can we balance our profit goals with overseas business investment? My second question is, we have noticed an industry-wide trend towards AI products like AI interviews. 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.

Thank you for your question. Regarding your first question about our overseas business and the relation with investment and our profit target, one thing is clear: next year, we will not have a very big investment in our overseas business. Our business development methodology is that we will not release the eagle until we see the rabbit, which means we will not increase investment hierarchy before we have some certainty. We have to do some very small experiments with limited cost. In our plan, we do not expect to clearly see that rabbit next year, so that will not affect our profit target. In terms of AI application, actually, within the industry and all other industries, the reality is the high prospect of the technology cannot correlate with the real application scenario. There is a very loud lightning but a very small flame. That is an industry effect. 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 any side to use the advantage of AI to have advantages over the other side. The second principle we insist on is the right to know. Whenever a user is facing a potential counterpart for AI, we should let that user know. The third principle is that the current application scenario, which can be perfectly done without a large language model, does not necessitate using a large language model to do it again, which is actually kind of wasteful. Apart from all those theories, we have several real applications. In terms of protecting the safety of our users, our AI technology has been quite useful. We disclosed in the past that we have over 900 people on our security team. This year, we increased more than tens of millions of new users, but we did not increase the total number of our security team. One important reason is that we used our AI technology to assist with verification, which largely increased our overall review efficiency. In the history of bad people fighting this platform, the first principle is actually the fighting of the cost. Whenever the evil guys are harsh to do bad things on the platform, they will not continue to do that. With the help of AI, we can actually increase our ability to do this, so it can create real value for our operation. That is my answer to your question. I think that is all the questions for tonight. Operator?

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

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

Thank you for your participation. This does conclude the program. You may now disconnect. Good day.