BOSS Zhipin: Recovery Confirmed, but Pace is Sluggish

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After the Hong Kong stock market closed on March 20th, BOSS Zhipin released its 2022 Q4 performance. In the online recruitment industry, BOSS Zhipin's competitive advantage is still relatively stable. Its high growth in the past year has been broken, mainly due to its exposure to network security inspections and the shrinkage of the business of its largest customer, an Internet company, rather than a decline in its competitiveness.

Therefore, after passing through the friction period, what we should look at is BOSS Zhipin's performance recovery, mainly focusing on the trend of macro expectations. The quarterly report basically reflects a skeletal reality: the outbreak of infections in various places, job seekers lying in bed due to illness, corporate expectations are conservative, and recruitment is cautious.

But standing at the present, future expectations are even more important. The short-term Yangkang and the Golden Recruitment Season after the Spring Festival are coming. Whether the confidence and expectations of enterprises accelerate recovery is the key.

It is recommended to pay attention to the management conference call on the outlook for the macro economy, and Dolphin will post it to the Changqiao app and user group for the first time. If interested, you can add the WeChat assistant (dolphinR123) to get it.

The core points of the quarterly report are as follows:

1. There is still a gap between short-term macro outlook and expectations: Although the revenue guidance meets market expectations, the liquidity indicator that reflects customer real needs is significantly lower than expected, which to some extent reflects that the pace of short-term macro recovery is relatively slow.

(1) Revenue: 1.23 billion yuan in Q4, a year-on-year decrease of 5.6%, which basically meets the market's consensus expectations. The revenue guidance for the first quarter of this year has basically reached the standard, but combined with the current liquidity, the real demand of enterprise customers is not good.

It is worth mentioning that BOSS Zhipin adjusted the fees for some enterprise customers at the beginning of this year, increasing them by 10% to 20%. Therefore, this guidance should also include the effect of part of the price increase.

(2) Cash collection: 1.1 billion yuan in Q4, a year-on-year decrease of 5.6%. The poor cash collection in Q4 may be related to the peak of the epidemic at the end of the year, the conservative short-term outlook of enterprises, and the delay of recruitment due to the successive infections of employees. Whether this is a one-time impact on the enterprise or whether conservative expectations will continue into the second quarter or even the whole year needs to be paid attention to the relevant answers of the management during the conference call.

1. BOSS Zhipin's own recovery situation: The number of paid enterprise accounts continued to decrease by 100,000 quarter-on-quarter in Q4, and overall monthly active users MAU also fell to 30.9 million, a loss of 1.5 million people. But when these two indicators are combined, it can be seen that the current Q4 is mainly affected by the epidemic.

From third-party data (Questmobile), the situation has improved: the monthly active users in January showed user return flow on a MoM basis, with a YoY growth of 35%, reflecting that job seekers have clearly become more active after Yangkang and the Spring Festival.

1. Excluding World Cup sponsorship fees, the quarter is still profitable: The largest expense in Q4 is undoubtedly the sponsorship fee that BOSS Zhipin paid for the World Cup, which is as high as 300-400 million yuan. If this expense is excluded, the core operating profit and the overall net profit after other financial net income and investment income are added are both positive, and the trend of profitable improvement continues. Management also set a mid-term operating profit target of over 20% in the previous quarter conference call.

On the other hand, the World Cup coincided with the Chinese New Year with only a six-week gap, so the spring recruitment budget for the first quarter may not need to be as high, which means that the profit margin for the first quarter will not drag down the whole year as much as in previous years.

5. Stable cash flow: As of the end of the fourth quarter, the company had a total of 13 billion yuan in cash and short-term investments, without any borrowing or debt. Although the operating cash flow in the fourth quarter was approximately 160 million yuan, and investment cash flow was negative 700 million yuan, the company has been able to generate relatively stable profits under normal operations, so the overall cash flow is controllable and there is no risk of short-term financing diluting equity.

6. Finally, the company also announced in the financial report that it will carry out a share repurchase plan of no more than $150 million in the next 12 months.

The viewpoint of Dolphin Jun (Longbridge Road)

After the release of last quarter's financial report, Dolphin Jun explained in the summary "BOSS Direct Recruitment: Crazy World Cup explodes stock prices, is the after-mud a smooth road?" why BOSS direct recruitment has short-term pressure, but from the perspective of a medium-term of one year, the rebound strength of its own performance is much greater than the macro environment and peers (the proportion of Internet customers and small and medium-sized enterprises is relatively high).

From BOSS direct recruitment's revenue guidance for the first quarter of this year (a year-on-year growth of 10%-13%), the trend for macro improvement is determined, but because the cash flow may still be lower than market expectations, the real demand for corporate expansion has not rebounded as quickly as expected.

Judging from the quarterly increase in revenue/turnover ratio,S, companies still tend to be cautious about business expansion in the short term, preferring to recruit on demand (the platform's recruitment tools are used as needed). The flexibility needs of small and medium-sized enterprises are rebounding faster than large enterprises, and the overall enterprise-side is less likely to do longer-term recruitment planning.

However, due to the epidemic peak and the Chinese New Year holiday that followed the adjustment of epidemic prevention, except for the burst of deterministic demand in the offline cultural and tourism industry, most industries' production plans have been affected by short-term disturbances, and it can be understood that companies' outlook is conservative.

At the same time, combined with some high-frequency economic data, the capital market's expectations for economic recovery have also experienced a process from being conservative at the end of the year, to optimistic at the beginning of the year, and then to recent cautious downward adjustments. Correspondingly, BOSS Direct Recruitment's stock price has also experienced a roller coaster ride, with its market value returning to the level at the end of last year.

In the short term, Dolphin Jun believes that most of the macro pressures have already been reflected in the stock price, unless the economy continues to struggle in its recovery. From a medium to long-term perspective, the trend towards online recruitment and the penetration of blue-collar markets are still BOSS Direct Recruitment's long-term highlights. BOSS Direct Recruitment's flexible pricing method also matches blue-collar recruitment, and is expected to continue to gain a leading edge and industry dividends. However, we also pay close attention to the changes in BOSS Zhipin's competitive advantage in online recruitment. In "BOSS Zhipin: Crazy World Cup boosts stock price, is a smooth road after the mud?" and past in-depth articles, Dolphin Jun has already made many explanations. Whether it is the "monkey see, monkey do" of traditional recruitment websites (such as Ganji Direct Recruitment), or the emerging traffic gameplay of live broadcast recruitment (Kuaishou Fast Recruitment), we believe that the short- to medium-term impact on the competitive barriers of BOSS Zhipin is limited and the long-term impact still needs to continue to track the actions of peers.

It is recommended to pay attention to the macroeconomic outlook of the management conference call. Dolphin Jun will release it to the Changqiao app and user group as soon as possible. If you are interested, you can add the assistant WeChat (dolphinR123) to get it.

Financial Report Review for the Quarter

I. Decrease in user demand due to epidemic disruption

In the fourth quarter, BOSS Zhipin's MAU reached 30.9 million, with a loss of 1.5 million compared to the previous quarter. The activity of job seekers declined in the short term due to the peak of the epidemic after the traffic surge from the World Cup sponsorship.

However, according to third-party data, user indicators in January have shown a trend of rebound.

The number of paid enterprise users continued to decline month-on-month. Although there are adjustments to epidemic prevention policies, under the situation of widespread infection nationwide, enterprises are still cautious in the short term and are not eager to reopen or expand.

The paid ARPU of a single enterprise user has stabilized with a small increase month-on-month. In 2023, BOSS Zhipin raised the prices of enterprise customers in some industries by 10% -20%, and it is expected to be reflected in the next quarter quickly.

II. Income meets expectations, and cash receipts are under short-term pressure

The total revenue in the fourth quarter was 1.08 billion, a year-on-year decrease of 0.77%, which is basically in line with the company's guidance and market expectations. Considering the overall environment of the peak of the epidemic, the original expectations of core investment banks were not high. The revenue guidance for the first quarter of this year is in the range of 1.25 billion to 1.27 billion yuan, with a year-on-year growth of 10% to 13%. This is basically in line with market expectations. The trend of recovery reflected in the revenue guidance is obvious, but from the perspective of implicit cash receipt changes, it is still lower than market expectations, and the pace of corporate recovery is relatively slow.

The cash receipt in the fourth quarter was 1.1 billion yuan, a decrease of 5.6% from the previous quarter. The proportion of current revenue to cash receipts has further increased compared to the previous quarter, which actually reflects that the enterprise side still leans towards short-term "just-in-time" recruitment strategies.

In the revenue structure, the To B network recruitment services still account for as much as 98%, so the demand for corporate recruitment is still the main factor affecting BOSS Zhipin's performance. Unlike the environment in the third quarter where job seekers had strong demand but no money, and recruiters were short-term cautious and hesitant, job seekers in the fourth quarter also rested at the same time.

Other income mainly charged to job seekers has significantly increased due to the end of network security reviews in the third and fourth quarters, and the unlocking of a large number of registered users. The expansion of the base of paying users has brought a significant increase in other income.

3. The current profit is mainly affected by the World Cup investment + the cost of going public in Hong Kong

The weakness in the profit side in the fourth quarter was more due to one-time cost impact. There were 300-400 million yuan in World Cup sponsorship fees on sales expenses, and some expenses for secondary listing in Hong Kong on management expenses, which dragged down the profitability level of the current quarter in the fourth quarter. R&D expenses have been optimized year-on-year.

If the World Cup sponsorship fee and some of the listing expenses are excluded, the real profit level in the fourth quarter can still achieve normal profit under adverse macro environment. Dolphin Jun roughly calculated that the main business operating profit margin is about 7%, and the net profit margin is about 15%.

The company's management previously gave a mid-term guidance target of around 25% for operating profit margin in the previous quarter, and the overall trend still shows an improvement trend towards the target.

Ignoring the non-GAAP equity incentive, the operating profit and cost structure of the main business are as follows:

Dolphin believes that due to the collision of the World Cup and the Spring Festival, BOSS Zhipin may reduce its Spring Festival investment due to the impact of the World Cup placement. This means that after the cost is maximized in the fourth quarter and the profit looks bad, the profit margin in the first quarter will not drag down the overall annual level as it did in previous years.

Longqi Dolphin Investment Research "BOSS Zhipin" Historical Research:

Financial Report Season:

November 30, 2022 Financial report review "BOSS Zhipin: Turning point after short-term impact of the epidemic, economic recovery comes first"

August 25, 2022 Telephone Conference "BOSS Zhipin: Continue to spend money rationally and prioritize efficiency while the business recovers (2Q22 conference call summary)"

August 24, 2022 Financial report review "After double pressure, BOSS Zhipin returns to growth countdown"

June 25, 2022 Telephone Conference "Service industry demand rebounds the most after the end of the epidemic, and competition has not yet seen a threat (BOSS Zhipin Conference Call)"

June 25, 2022 Financial report review "BOSS Zhipin: Withstood the headwinds and waited for the 'seal' to be lifted"

March 24, 2022 Telephone Conference "Continue to do fine-grained operations before unblocking (BOSS Zhipin conference call summary)"

March 24, 2022 Financial report review "BOSS Zhipin: Store grain now and build high walls in the future" On November 25, 2021, Financial Report Review of "BOSS Direct Recruitment: First Make Money to Winter through Supervision and Macro-pressure (including Key Points of Telephone Conference Summary)".

In-depth coverage.

On December 6, 2022, "BOSS Direct Recruitment: Crazy World Cup Boosts Stock Prices, Smooth Sailing After Mud?".

On December 13, 2021, "BOSS Direct Recruitment: Is the Recruitment Version of Pinduoduo Expensive for a Reason?".

On November 4, 2021, "BOSS Direct Recruitment: The Ultimate "BOSS" of the Recruitment Industry?".

Risk disclosures and disclaimers for this article: Dolphin Investment Research Disclaimer and General Disclosures.