BOSS Zhipin: Stable Performance, Policy Expectations Remain Key
After the Hong Kong stock market closed on August 29th Beijing time, Kanzhun.US released its 2023 second-quarter earnings report.
Overall, the financial report of BOSS Zhipin (Kanzhun) is in line with expectations, with no surprises in current revenue and guidance for the next quarter. The impressive profitability (core operating profit exceeding expectations by 113%) can be attributed to the following:
In the second quarter, the company gained nearly 4 million new users month-on-month, reaching a record high of 43.6 million. This influx of new registrations and users occurred naturally without excessive marketing efforts due to macroeconomic pressures. The majority of these new users were recent graduates and job seekers targeted by the company's market expansion strategy. However, there was also an increase in the frequency of logins from existing white-collar users in first- and second-tier cities.
Dolphin Research believes that the actual second-quarter performance is consistent with expectations, indicating that the current stock price already reflects the environmental pressures of the second quarter. Although the recovery of corporate customer payments has been slower than expected due to short-term macroeconomic issues, the record number of job seekers further solidifies BOSS Zhipin's industry position.
During an economic downturn, BOSS Zhipin can release profits by saving customer acquisition costs (there is still significant room for optimizing sales expenses). When the economy rebounds, platform revenue can also benefit accordingly.
In terms of valuation, short-term trends are closely tied to macroeconomic expectations. Referring to the situation in Q1:
(1) After the disclosure of first-quarter performance, the company revealed that although the situation in April and May improved compared to the previous quarter, there were still many uncertainties going forward. The incremental demand this year mainly came from small and medium-sized enterprises, while the recovery of recruitment demand from key account (KA) enterprises was slower. KA enterprises contributed over one-third of the company's revenue in 2022. Therefore, although Q1 performance was not poor, the stock price continued to weaken due to unchanged expectations. However, after the key conference in July and improved macroeconomic expectations, BOSS Zhipin experienced a small market rally.
(2) Therefore, the issues indicated by Q2 performance are similar to those in Q1. Under macroeconomic pressures, the job market is imbalanced. On one hand, there is an increasing number of job seekers but limited job opportunities. On the other hand, companies have cost control demands, resulting in insufficient motivation to pay for recruitment services.
However, we believe that the current valuation of $6.4 billion already reflects the pressures and pessimistic expectations of the past quarter. Considering recent policy signals and the time window, there is some room for policy speculation in the short term. From a medium to long-term perspective, Dolphin Research remains optimistic about BOSS Zhipin as a leading player in the industry, benefiting from the trend of online recruitment.
Detailed Analysis
1. Strong Job Demand, Record High Monthly Active Users
In the second quarter, the platform's monthly active users increased by 3.9 million compared to the previous month, reaching 43.6 million, continuing to reach a new high. This year's Spring Festival holiday was earlier, and there was interference from the peak of the sun, so the peak of job demand in the first half of the year was not in March and April, but in February and March.
This means that the majority of new users in the first half of the year were concentrated in the first quarter, so unlike previous years, the net increase of 3.9 million users in the second quarter was not as high as the 8.8 million in the first quarter.
Combined with the user data of other recruitment platforms in the QM, BOSS Zhipin is significantly better than other platforms, further proving and consolidating its industry position.
Compared with the problem of long-term non-updating in the resume database of peers, BOSS Zhipin's user ecosystem is more active, which is why it can attract more new cooperation or renewals from medium and large enterprises.
2. Imbalance between Job Supply and Demand + Graduation Season, Saving a Large Amount of Customer Acquisition Expenses
In the second quarter, the operating loss (revenue - cost - sales expenses - R&D expenses - administrative expenses) of BOSS Zhipin's core business turned positive compared to the previous quarter, and it was nearly double the expected level, mainly due to the unexpected reduction in customer acquisition expenses.
The gross profit margin also increased compared to the previous quarter, but it has not yet returned to the level of previous years. However, considering the more flexible payment of some small and medium-sized enterprise customers, when purchasing scattered props online, there will be issues related to Apple's channel sharing. In addition, due to the increase in traffic, the company has also added some servers to support it in the past year, so it may be difficult for the gross profit margin to return to the previous peak level.
3. Analysis of Enterprise Recruitment Demand from Revenue Perspective: Increase in Small and Medium-sized Enterprises, Slow Recovery of Large Enterprises
(1) Past Second Quarters: More Obvious Recovery in Recruitment Demand of Small and Medium-sized EnterprisesThe main source of income for the recruitment platform is from corporate clients, with 98.9% of the revenue coming from online recruitment on BOSS Zhipin. Therefore, the overall revenue growth is closely tied to corporate payments, and it accelerated in the second quarter due to a low base.
The company's revenue guidance for the third quarter is between 1.53 billion and 1.56 billion yuan, with a year-on-year growth of 30% to 32%. Although it is in line with market expectations, it is still considered favorable. Moreover, the management team probably did not take into account potential policy stimuli, but rather made projections based on monthly conditions.
However, when examining the specific payment situation, there are noticeable differences in the recovery of demand between key account (KA) large enterprise clients and small and medium-sized business (SMB) clients. The increase in demand is mainly driven by small and medium-sized enterprises:
a. The number of paying corporate clients has reached a new high
Although the number of corporate paying accounts reached 4.5 million in the second quarter, an increase of 500,000 compared to the previous quarter, the total number of corporate accounts increased by 900,000 in the first half of the year. If we assume that, on average, each company corresponds to 2 accounts (this value will continue to be lower than 2 as the number of small and medium-sized enterprises increases), it means that BOSS Zhipin has added at least 450,000 paying corporate clients.
Looking at alternative data, the number of job postings in the second quarter has also increased significantly compared to both the previous quarter and the same period last year. It is worth mentioning that the demand for job postings in internet and IT companies has started to recover.
b. Average payment per individual corporate user has decreased
However, starting from the second quarter, the trailing twelve months (TTM) revenue from payments has still been declining compared to the previous quarter (-3.9%).
But if we compare the TTM revenue from the first quarter to the TTM revenue from the second quarter, we can see that the latter includes the worst quarter of last year (Q2). Therefore, excluding the disruptive factors caused by the pandemic, the average payment per corporate user on the platform is indeed decreasing.
Of course, there are two reasons for the decline:
On the one hand, the recruitment demand of large KA enterprises is still slow to recover. Apart from longer processes and insufficient response to environmental changes, the caution of large enterprises towards macro uncertainties is also a contributing factor.
On the other hand, the increase in the proportion of revenue from small and medium-sized enterprises has lowered the average payment.
However, for BOSS Zhipin, although the contribution of revenue from small and medium-sized enterprises has been increasing year by year, one-third of its KA enterprise clients still account for the demand recovery pace, which has a significant impact on revenue or cash flow.
(2) Short-term demand trend from revenue and deferred revenue: There is a recovery, but not much, pay attention to policy implementation.
Looking at BOSS Zhipin, there are two key forward-looking indicators: cash receipts and deferred revenue.
In the second quarter, cash receipts were 162 billion yuan, and the year-on-year growth rate appeared high due to the low base, but it is not meaningful. However, compared with the previous quarter, it is slightly lower. Deferred revenue also showed a small increase on a quarterly basis, indicating a recovery, but not a significant one.
Here, Dolphin Research believes that in addition to the poor macro expectations in the second quarter and the slow recovery of enterprise recruitment demand, there is also a reason for the "Golden March and Silver April" peak shifting to "Golden February and Silver March" as mentioned earlier.
The revenue guidance of 30-32% for the third quarter is neither good nor bad. According to the management's relatively cautious guidance style in the past, this expectation should be the result of extrapolation based on recent monthly conditions. There have also been some stimulating signals in the macro environment in the past two days, so it is worth paying attention to the management's remarks during the conference call to see if there are any assumptions and adjustments based on recent conditions.
Dolphin Research "BOSS Zhipin" historical research:
Earnings season
May 24, 2023, earnings review "BOSS Zhipin: "Industry BOSS" Position Still Strong, Waiting for the Wind"2023 March 21st Telephone Conference "Platform Data Hits New High, Confidence in Revenue Exceeding Expectations (BOSS Zhipin 4Q22 Conference Summary)"
2023 March 20th Earnings Report Review "BOSS Zhipin: Recovery Confirmed, but Pace is Slow"
2022 November 30th Earnings Report Review "BOSS Zhipin: Short-term Impact of Epidemic, Turning Point Comes after Economic Bottoming Out"
2022 August 25th Telephone Conference "BOSS Zhipin: Rational Spending and Efficiency First while Business Operations Recover (2Q22 Conference Summary)"
2022 August 24th Earnings Report Review "After Double Pressure, BOSS Zhipin Returns to Growth Countdown"
2022 June 25th Telephone Conference "Service Industry Demand Rebounds the Most after the End of the Epidemic, Competition has not yet Seen as a Threat (BOSS Zhipin Telephone Conference)"
2022 June 25th Earnings Report Review "BOSS Zhipin: Withstood the Headwinds, Awaiting the "Unsealing""
2022 March 24th Telephone Conference "Continue to Refine Operations before Unsealing (BOSS Zhipin Telephone Conference Summary)"
2022 March 24th Earnings Report Review "BOSS Zhipin: Accumulate Grain for the Present, Build High Walls for the Future"
2021 November 25th Earnings Report Review "BOSS Zhipin: Dual Pressure from Regulation and Macroeconomics, Making Money for the Winter (Including Key Points from the Conference Summary)"Deep Dive
On December 6, 2022, "BOSS Zhipin: Crazy World Cup Boosts Stock Price, Smooth Sailing After the Mud?"
On December 13, 2021, "BOSS Zhipin: Recruitment Version of Pinduoduo, Reasonably Priced?"
On November 4, 2021, "BOSS Zhipin: The Ultimate "BOSS" in the Recruitment Industry?"
