Platform Data Surpassing Records, Confident in Exceeding Expectations in Revenue (BOSS Zhipin 4Q22 Conference Call Summary)

The following is the summary of important information on BOSS Zhipin's 4Q22 performance conference call, and the financial report interpretation can refer to " BOSS Zhipin: Recovery Confirmed, But Pace Sluggish.

I. Management's Remarks

In the fourth quarter of last year, the company achieved a cash receipt of RMB 1.1 billion after calculation, and revenue of RMB 1.08 billion, which was flat with the same period last year. This was a less than ideal performance mainly due to the impact of the previous epidemic, especially the peak of the epidemic in December, which greatly challenged the business in the fourth quarter.

In the full year of 2022, the company achieved revenue of RMB 4.51 billion, and the calculated cash receipts were RMB 4.61 billion. After deducting equity incentive expenses, the adjusted net profit for the whole year was RMB 800 million.

The company did two major things in the fourth quarter of last year:

On December 22, 2022, the company achieved dual primary listing in Hong Kong;

In addition, we sponsored the 2022 Qatar World Cup as an official partner of FIFA, which effectively enhanced the company's brand awareness and influence, but also generated relatively high market costs in the short term. Nevertheless, we still achieved profitability in the fourth quarter. After deducting equity incentive expenses, the adjusted net profit in the fourth quarter was RMB 59.5 million.

In terms of operation, although the fourth quarter is the traditional off-season for recruitment, we still continued the trend of good user growth. MAU in the fourth quarter reached 30.91 million, a year-on-year increase of 26%. The user engagement rate, the ratio of DAU to MAU, also remained stable.

Regarding the situation of user growth and business recovery after the Spring Festival, we welcomed strong user growth and all data hit a historic high after the resumption of work after the Spring Festival this year. The cumulative number of new and improved users in January and February was about 9 million. The year-on-year growth rate of MAU on the APP in January and February exceeded 50%, and the DAU/MAU ratio reached a new high. The number of active corporate users in February also exceeded the historical peak and achieved good growth compared to the same period last year.

While the number of users is increasing rapidly, the average harvest per user (i.e. the number of successful resume exchanges or contact information exchanges) continued to increase in February, both on the job-seeker and enterprise sides, which is the result of the double-sided network effect and our continuous improvement of algorithms and understanding of users.

Among the growth we have seen since the first quarter of this year, there are several keywords worth sharing with everyone.

The first keyword is blue-collar workers-among the newly added users, blue-collar workers are both in absolute number and in growth rate faster than white-collar workers.

The second keyword is that the growth rate of second-tier and lower-tier cities is significantly faster than that of first-tier cities, proving that the company's efforts to penetrate the sinking market are effective. The third point is that small and micro-enterprises are growing at a faster rate. In other words, we see that small and micro-enterprises are recovering faster than large enterprises.

The fourth point is that cash income is recovering quickly. We are now confident that our cash collection will reach a new high in the first quarter, with a month-on-month growth rate of no less than 45% and a year-on-year growth rate of no less than 25%.

The fifth point is the urban service industry, which is characterized by the need for face-to-face contact. The urban service industry has been a bright spot in the recent recovery, with the number of new positions released after the Spring Festival increasing by more than 40% year-on-year.

Other industries are also showing good performance. The retail, transportation, high-end manufacturing represented by new energy and automobiles, and the medical and health industries are all performing well. The real estate and education sectors have also shown signs of recovery after the Spring Festival. Recently, positions representing the increase in business activities, such as sales, marketing, and procurement, have been continuously improving, and the recruitment activities of large enterprises have gradually begun to pick up after the Spring Festival. This all indicates that the overall economy is showing signs of recovery, and we are looking forward to the growth in performance this year.

We continue to work hard to fulfill our social responsibility as a listed company. In October 2022, the company was shortlisted for the second time in a row for the Top 500 Charitable and Public Welfare Organizations in China. The company collaborated with the China Disabled Persons' Federation Employment Service Guidance Center on the Disabled Persons' Barrier-Free Assistance Service Program. In the whole year of 2022, we served a total of 121,000 disabled job seekers. Recently, we cooperated with the Ministry of Education's campus recruitment service to organize the Spring Recruitment Festival, which is expected to cover more than 2,000 companies, and the number of job opportunities provided to university students is also considerable.

Today, our board of directors approved a new share buyback plan, which will allow us to repurchase up to $150 million over the next 12 months.

Q1: What is the trend of recovery after the Spring Festival? As far as the user end is concerned, what is the ratio of recovery between To B/C? As far as the enterprise end is concerned, from the perspective of newly-created positions and recruitment budget, what is the difference in the recovery rate between large and small enterprises?

A1: We see that after the Spring Festival, that is, after the end of January, the MAU and average DAU of our APP have reached a new historical high level. As for the B end, the number of active enterprises has already exceeded the historical peak.

As for the ratio of B/C, the current situation is about 9-10. The B end is still relatively less, but the trend is improving.

From the perspective of large and small enterprises, we always see that small enterprises are more flexible and can recover faster. When the situation is not good, their recovery speed will also be slower. This time, we also saw that the recovery behavior of large enterprises in recruiting will lag behind that of small enterprises, but it is also a process of recovery. Q2: How does the company view the competition in the online recruitment industry in 2023? How will it balance the goal of revenue growth and profitability from a strategic perspective?

A2: From the current situation, I feel that our competitive position in the internet recruitment industry in China has not undergone significant changes, and the overall trend remains constant. I agree with your prediction that due to the economic recovery this year, some of our peers, like us, have been holding back for a few years and have increased their budgets to acquire more users and revenue, which is a reasonable speculation. In the first quarter of this year, we felt pressure from major competitors in terms of user acquisition.

What will we do? Will it affect our profitability? First of all, we will not execute a strategy of following in the competition, and we will continue to do things in our own way, maintaining a reasonable strategy based on high user retention and active usage, and hope to achieve an annual plan of 40-45 million user growth.

I am confident that in this process, it is not a matter of achieving it by spending too much money, so it should not have too much impact on our margin implementation.

Q3: What is the impact of the mismatch between job seekers and the overall recruitment market? What is the impact on the platform? Will there be adjustments in the strategy? What is the real situation about the recent rumors of labor glut?

A3: We see two types of blue-collar workers: one is blue-collar workers in the urban service industry, whose user and job growth rates are also very fast.

The other is blue-collar workers in the manufacturing industry. From the situation after the Spring Festival until about seven or eight weeks later, we found that at the beginning, the job growth rate was slow, and the job seeker growth rate was fast. In recent weeks, we have seen that this situation is gradually easing.

There is also an interesting phenomenon we have observed. Actually, when job seekers and recruiters on our platform communicate with each other, the job seeker may have some gains in the end. Compared with previous years, the gain of the job seeker in the manufacturing industry has indeed decreased, but the number is not significant. On the other hand, the effort the job seeker puts into getting such gains has increased significantly.

We see this interesting phenomenon, which we are talking about for the first time in a public forum, as a matter of perception versus results. A blue-collar worker in the manufacturing industry looking for a job may have slightly lower chances of success, but his or her perceived difficulty in the process is relatively severe. This is what we have seen happening on the ground.

Regarding this mismatch, it is indeed difficult for the platform when there are many job seekers and fewer positions, as we cannot invent many jobs. However, it is interesting that many workers in the manufacturing industry, urban service industry, and urban logistics and express industry have relatively strong mobility in terms of their skills and age, and they may adapt to more positions. We have seen in the past few years that many job seekers actually use this method to adapt and satisfy themselves when there are fewer jobs of a certain type.

Q4: How does the company view the long-term impact of ChatGPT on the Chinese recruitment market?

A4: From the company's perspective, I don't think now is a good time to talk about the challenges we have encountered and the things we are ready to do in our business. I can responsibly say that we have been highly concerned about the challenges and opportunities that this technology may bring, and this has been the case for the past few months. Recently, we have seen some application scenarios of LinkedIn, such as generating a resume and highlighting the strengths of job seekers.

Will ChatGPT challenge a lot of white-collar jobs? I think it will, just as in the process of producing and moving goods in factories and warehouses, robots have largely replaced human physical labor. Next, I think some so-called mental labor may also be replaced by generative AI technology, such as ChatGPT.

We can tell our users and investors, no later than some advanced companies, that based on AIGC technology, we can actually do something more valuable. I hope this day will come early and I hope you have confidence in us.

Q5: Regarding technology investment and innovation, in which areas does the company plan to invest in R&D in 2023? How do you consider the impact of ChatGPT-type technology on the entire internet recruitment model and the optimization of human resource allocation efficiency?

A5: In our investment plan this year, we will still increase our investment in technology. When we make these plans, we don't have much consideration for the investment in the training of generative technology scene models, or even how to build technical capabilities. We have not yet included this in the R&D investment budget for this year. What we have is a normal plan.

Our normal plan is still to continue to increase investment, with major expenditures on more expensive and more computer science engineers and scientists.

At the same time, we also considered hardware investment because we still have some catching up to do in this area, and we have made plans for hardware investment.

Of course, the hardware investment does not include the computing power required to deal with deep-level technology, which is not included in our current plan. I am not ready to report our mature plan to you yet.

However, I think we still have the ambition and responsibility, as well as the strength, to face this challenge brought by AIGC to many companies. We warmly embrace the changes brought by new technology.

Q6: Regarding marketing, how does the management view the marketing effect of the whole World Cup? What will be the marketing rhythm in 2023? A6: Regarding the marketing of the World Cup, how do you see its results? I think it meets our expectations. In the acquisition of new users since January and February, we have achieved very effective efficiency in digital marketing. The cost of customer acquisition is not high— in fact, it is not because the market has lowered, nor because of a sudden improvement in our deployment technology, but because the promotion of the World Cup is a successful strategy, it has greatly increased the company's brand awareness, thereby reducing our marketing costs for user acquisition this year, and has been continuing to play such a role.

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