Earnings Call: Q2 2021

Aug 27, 2021

Earnings release

Ladies and gentlemen, thank you for standing by, and welcome to the Kanjin Limited Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a Q and 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 Capital Market and IR. Please go ahead, ma'am. Thank you, operator. Good evening, everyone. Welcome to our Q2 2021 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao and our Director and 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 or 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 caution you not to place undue reliance on forward looking statements and do 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 purpose only. For definition of non GAAP financial measures and the 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.jipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO. Hello, everyone. Welcome to our first earnings call as a public company. I would like to take the opportunity to express our sincere thanks to our users, employees and investors. Thank you for your trust and support. We will continue to focus on our main business, improve the efficiency of connecting talents to jobs, utilizing the power of technology to deliver user satisfaction by optimizing efficiency, equality and choice. We are pleased to report that we have achieved strong results in the Q2 this year. We recorded a total revenue of RMB 1,170,000,000, an increase of 173.9 percent year over year. Our calculated cash billings reached RMB 1,440,000,000,000, with a year on year increase of 175.3%. While we maintained our rapid revenue growth, we also achieved positive non GAAP profitability in this year in this quarter, sorry. Our adjusted net income, which excluding share based compensation expenses were RMB248.5 million. We believe our quality growth is a result of our efficient business model, continuous enhancement of technology and the superior commercial products, which lead to the expansion of our user base and improved service capabilities. In the past quarter, the average MAU of bus stripping app reached RMB 30,400,000, a year on year growth of 44.5%. The ratio of DAU to MAU is relatively stable, indicates that we have maintained high user growth and activities. Now let's take a closer look at our progress at the user level. Overall, in the Q2, we continue to follow the path to be a platform that covers all industries, user groups and job categories. From the perspective of job seekers, we further improved our service capabilities and the penetration rate among the white collar workers and the higher tier cities by continuing to solidify our competitive advantages. At the same time, we were aiming to expand our coverage in lower tier cities and the traditional industries. Being the largest group of job seekers, blue collar workers are our important target users presently and the main driver of our user growth. The total number of the blue collar users on our platform keeps increasing steadily. Due to the low online penetration rate of blue collar recruitment and the different behavioral preference from the white collar users, we have made tailored adjustments and optimizations in aspects such as matching algorithms, job authenticity, user safety and product usability. And to better serve our gold collar users, we actively cooperate with headhunters and have made pleasant progress. We have also noticed that in the Q2, which is typically the beginning of graduation season for college students, A large number of college students joined our platform. Through enhanced and diverse service such as online publicity and live campus recruitment activities, we have become the most preferred online recruitment platform for college graduates. On the enterprise user side, we have noticed that more and more enterprises started to attach greater importance to the efficiency and the return of investment of the RepuSign platform as a result of various factors, including the gradually released recruitment demand brought about by the sustained post pandemic economic recovery, the increased cost of human resources and the inverted supply and demand in the talent recruitment market. Thanks to our efficient and cost effective business model, numbers of our enterprise users maintained its rapid growth trend. As of June 30, 2021, the accumulated number of verified enterprise users reached 14,850,000 with a year on year growth of 78.5%. The cumulative number of verified enterprises reached 7,200,000 with a year on year growth of 76.1%. For the enterprise user composition, our boss population accounted for 65.8% of the whole enterprise users in the 2nd quarter, which remained stable. It's worth mentioning that the proportion of small and medium sized enterprises has increased to 83.6%, which is closer to the China's overall enterprises size ratio. This further proves that for the massive number of small and medium sized enterprises in China, Direct chat between enterprise managers and job seekers is inconsistent with their demands. We will provide even better service for a greater scale of small and medium sized enterprises by further studying their recruitment needs and their characteristics. We also aim to actively expand into traditional industries such as manufacturing and finance, while maintaining and strengthening our advantages in the industries we already well covered like Internet Technology and Urban Services. In terms of our R and D capability, we continue to iterate our main app by every 2 to 3 weeks to optimize functions such as recruitment and job seeking information display and management, bulk messaging and video interviews, aiming to improve our user experience and encouraging their engagement. As a technology driven company, technology capabilities are core to our competitiveness, and we have been continuing to invest heavily in acquiring talents. As of June 30, we had R and D team with more than 1,000 employees. In terms of algorithms, on top of continuous pursuant of improving matching accuracy, we also pay a great deal of attention to delivering customized and fair recommendation results to enable more long tail job seekers and SME enterprise users to be recommended and exposed and to facilitate as many users as possible to engage and fulfill their demands on our platform, ultimately improving user interaction and satisfaction. As for our operation, we continue to improve and refine our operational capabilities in detailed categories. We are also conducting in-depth research and optimization for position classification of job categories in specific industries. At the same time, we have made significant investment in platform security. Our offline security and review teams have covered cities in China. In each covered city, our team is able to arrive at the recruitment location within 2 hours after receiving users' complaints, and we plan to further expand our city coverage in the future. Security of job seekers is the cornerstone of our platform's operation. Platform security and authenticity of job information have always been a crucial obstacle hindering the online penetration of blue collar recruitment and job seeking in the past. In coordination with the expansion of our blue collar business, we have made a series of security upgrades to further consolidate the infrastructure of our platform. We continue to improve the sales capability and expand the geographic coverage of our direct sales team. In the Q2, we established new branches within Foshan and Dongguan, bringing our total number of branches to 25. At the same time, we focused on the strengthening the professional competency training for our sales force and improving the efficiency of individual sales personnel. As for marketing, we continue to implement dedicated marketing strategies for user acquisition through both brand advertising and online traffic. We were honored to have been appointed as official human resource supplier for the Beijing Winter Olympics. As a result, underpinned by our strength and economies of scale, we continue to see significant improvement in the marketing promotion efficiency, which Phil, our CFO will discuss this later in more details. Now let me spend some time to talk about the cyber security review that everyone is caring about. As we previously announced, the company is currently actively cooperating with the Cyberspace Administration of China on the cybersecurity review. At the same time, the company is conducting its own self examination and rectification program, focusing on security and user privacy protection in accordance with the latest national laws and regulations such as the data security law and personal information protection law. In compliance with regulatory requirements, our new user registration remains suspended on our bus shipping app, which will, to some extent, impact the company's user growth and revenue. However, we firmly believe that the regulations are necessary to regulate the industry and protect the users and will ensure the long term sustainable growth of the industry and the company. Given the current circumstances, we make more efforts to better serve our existing users. Meanwhile, we fully cooperate with review team's work in the hope of completing the process earlier. However, the company does not yet have a clear timetable for either the completion of reviewing or when shall we be able to review new user registrations. Finally, to summarize, China's online recruitment market still has ample room for sustainable development and a considerable number of job seekers and recruiters have not started to use online recruitment services. The existing service offering and the value provided to customers have yet to be fully explored. As a new generation of online recruitment, we are adopting an innovative model by combining the recommendation, direct check and mobility with our dedication to the concept of user satisfaction first. We will continue to invest in technology, enrich our product offering and enhance our service capability, penetrate into more industries and regions. Although there are some fluctuations in the short term external environment, fundamentally, our business model remains effective and will be further demonstrated. We are full of confidence in the future growth potential and believe that we can continue to provide fair, valuable and more efficient service to nearly 600,000,000 workers and 14,000,000 enterprises, especially small and medium sized enterprises and those long tail workers in China. With that, I will turn to our CFO and Director, Phil, for the review of our financials. Thank you. Thanks, Jonathan and Ben Wei. Hello, everyone. Thank you for joining our earnings call today. I would like to give a brief overview of our Q2 2021 financial results, and then I will discuss our outlook for the Q3. Before I begin, please note that all amounts are all in RMB and all comparisons are on a year over year basis unless otherwise stated. We continued to achieve robust operational financial growth in the Q2 this year. Our calculated cash billings increased by 175.3 percent to RMB1.44 billion and our total revenues increased by 173.9 percent to RMB1.17 billion in the quarter, beating our target. This rapid revenue growth was mainly due to the increase of revenue from our online recruitment service, which increased by 174.7 percent to RMB1.16 billion, contributing to over 99% of our total revenues. The increase of revenue from online recruitment service was driven by the strong growth of our paid enterprise customers following the expansion of our user base and enhanced service capabilities. As Jonathan just mentioned, with the recovering of recruitment demand and increasing penetration of online recruitment service, especially for enterprises, together with our innovative model, we have seen rapid growth of our accumulated enterprise users, which grew by over 78.5% to 14,900,000 by the end of June 30, 2021. With more enterprise users posting jobs on our platform, more positions became commercially mature enough to be identified as house position, which we can charge a fee for job posting, which leads to a higher paying ratio. These two factors combined contributing to our strong paid enterprise customers' growth, which increased by 135.9 percent to 3.61 $1,000,000 in the trailing 12 months ended June 30, 2021, compared to $1,530,000 in the same period ended June 30, 2020. Furthermore, number of our key accounts grew by 146.6% in the trailing 12 months ended June 30, 2021 and leading to 229.3% growth in revenue from key accounts in this quarter, demonstrating the enhanced ability of serving large enterprises, converting more users to long term customers and cross selling more service to existing paid customers. Now turn to our cost side. Total operating cost and expenses were RMB2.59 billion for the quarter. If we exclude share based compensation expenses, which were RMB1.66 1,000,000,000, including our RMB1.51 billion reward to our core management. Our adjusted total operating cost and expenses were RMB933.7 million, an increase of 63.1 percent compared to RMB572.3 million in the same quarter last year, resulting to a positive adjusted operating income of RMB239.8 million. Our gross margin remains stable at 87.7 percent with cost of revenue increased by 164.2 percent to RMB143.2 million in this quarter, primarily driven by higher third party payment processing costs, operational employee related costs, server and bandwidth cost, resulting from increased user base and transaction volume. Sales and marketing expenses increased by 45.8 percent to RMB534.2 million in this quarter, primarily due to our increased sales and marketing employee related expenses and enhanced brand advertising and customer acquisition activities. Note worthy, our sales and marketing expenses represented 45.7% of our revenue in this quarter, down by 40 percentage points from 85.9% in the same quarter last year. This decline in sales and marketing percentage demonstrated higher efficiency of our marketing initiatives and is a proof of our strong economy of scale. During this quarter, our R and D expense increased by 113.7 percent to RMB250 1,000,000, primarily as a result of increased R and D personnel payroll, other employee related costs and share based compensation. We will continue to invest in R and D talent as one of our core growth strategy, allowing us to maintain our leading technology capabilities, which is the essential of our competitive needs. General and administrative expenses were RMB1.67 billion for this quarter, mainly resulting from a one time issuance of Class B ordinary shares to Tech Wolf Limited, which is a company controlled by our founder as a reward approved by the Board before the IPO. Excluding share based compensation, our G and A expense grew by 68.2% to RMB83 1,000,000 this quarter, which was mainly due to the expansion of our G and A team. As a result of the foregoing, our net loss was RMB1.41 billion in the 2nd quarter. Excluding share based compensation, we achieved profitability under the non GAAP measure. Our adjusted net income in this quarter, this year was RMB246,500,000 compared with adjusted net loss of RMB143.4 million in the same quarter last year, translating to an adjusted net margin of 21.1 percent for this quarter, representing a 54 percentage points improvement. This operating leverage was driven by the economy of scale and our continued efforts in increasing efficiency and also is a proof of our strong network effect. Supported by the strength of our profitability, we recorded the net cash generated from operating activities of RMB671.2 million in this quarter compared to net cash used in operating activities of 14,200,000 in the same period of 2020. Moving to the balance sheet. As of June 30, 2021, our cash and cash equivalents and short term investments were RMB 11,700,000,000 compared to RMB4.5 billion as the December 31, 2020. The increase was primarily attributable to net proceeds from our successful listing as well as our growth in operating cash flow in the quarter. Now turning to our business outlook for the next quarter. For the Q3 of 2021, we expect our net revenue to be between RMB1.18 billion and RMB1.21 21,000,000,000 representing a year on year growth rate of approximately 100% to 105%. As we just discussed, there are still uncertainties regarding the ongoing cybersecurity review and timing to resume new users registration. The impact on our revenue was reflected in the outlook, but still subjected to change. This estimate was based on assumption that the review will last till the end of September. In closing, we delivered strong results for our Q1 as a public company. And I would like to thank again to our team, our esteemed users and shareholders. In spite of the uncertainty of the cybersecurity review, we are still at a fast growing stage with healthy financial status and improving leverage. Our long term competence stays unchanged and the business model remains effective. I'm excited about the coming quarter and looking forward to share our progress with you again. This concludes our prepared remarks. Now we would like to answer questions. Operator, please go ahead. Thank you. We will now begin the question and answer session. Your first question comes from the line of Tian Hou of TH Capital. Please ask your question. Just a couple of questions. The first one is, so we saw some data about the growing weakness of China economy. So under this kind of circumstances, from your frontline employment activities, where do you see different industry, their employer's confidence level in terms of hiring people? So that's number 1. Number 2, so the security review data security review has been in place for more than a month, and we don't know when this review is going to be lifted. So let's say if the government review is going to last for a while and during this period, at this point, we can't really obtain the new customer online. So what's company's strategy to deal with it, to cope with it and to get new customer online? So that's the 2 questions. Thank you. Okay. So I can answer your second first question first, and our CEO can comment on your second question. So our business, we have diversified industry contribution for our business. So new economy industries as a whole account for a large portion, but a single industry and a single company contribution is low. So I think overall, although the macro is not very strong, might be the situation, but we haven't seen such kind of strong signal on our platform. So our business growth is mainly driven by paying users growth. We are still in a stage of seeing structural user increase at this moment. So we haven't seen direct impact from macro, but we will closely monitor. So recently, there are some like some industries, I think probably some investors you would like to ask a question, so I can comment at this time. So some industries, for example, like education industry, as just one of the new economy industries just account for small percentage in our total revenue. So education industry, this industry accounted for only mid single digits for our total revenue now. So we think any one industry's impact to our business is limited. So regarding the company wise, so some companies, they might got some like impact from either macro or either some like regulation related things. We think that because we serve a large number of small medium sized companies, so we have a relatively low contribution from top customers. Top 20 customers only account for less than 4% of total revenue. So changes in any single company or like as I just mentioned, the single industry to our business would be only limited have a limited impact on our growth trend. So that's my answer to your question. Okay. Now I will cover the question So we are under the cybersecurity review. And since July 5 till now, our new user registration was suspended, and this still has impact on our business. So this suspension of user registration has impact on our MAU and DAU. But since our large base of existing users can use our app normally, So the MAU for July remains relatively stable. And our DAU to MAU ratio also remains stable, which means that we continue to keep our user activities. In the meantime, we are focusing to better serve our existing customers, which we make a lot of efforts. And on the revenue side, we are also impacted because this suspension was not only for job seekers but also for enterprise users. Our sales team and customer service team focusing on serving the existing customers and on the professional and in-depth service capability, we conducted some capital training to our teams. And the extent of the impact depends on the how long the review will last. You can see that we have gave guidance for our next quarter revenue, but this is an assumption that this new user registration suspension will last till the end of September. But in fact, as an enterprise, we cannot and we should not predict on the timing of this suspension. But since we need to give this revenue guidance, we just make assumption that this would last till the end of September, which is we think is appropriate and reasonable. This has nothing to do with our estimate on when this will resume, and this is not something we should do. But as your question on what we can do to increase our new users, we cannot do anything about that because we are not allowed for new user registration, and we are focusing on our existing users. But I believe that this suspension of the impact to our business is temporary, and our the effectiveness of our business model is not affected in the long run. And lastly, I'd like to emphasize that our whole company is fully cooperating with the review team on their work. And that's all for my questions. Thank you. Thank you. Thank you for the answer. Your next question comes from Eddie Wang from Morgan Stanley. Please ask your question. Thank you for taking my question. I actually have 2 questions. First is regarding the Q3 guidance. Also, as Jonathan mentioned that this guidance already affecting the suspension of the new user registration till the end of Q3. But actually, in my view, that the guidance is still quite strong. So Johnson mentioned that if you have focused on the existing users, the services and the user experience, So basically, I just want to ask, this is will reflect in the ARPU of the existing users or will reflect the paying ratio improvement of the overall enterprise users? That's the number one question. And the number 2 question is that given the more stringent regulatory environment for the Internet or these fast growing industries like education. So we will see more and more the staffs or employees from this industry actually is looking for the new jobs. So in the short term, I mean, maybe it has some headwinds in terms of the higher demand of this fast growing companies. But how do you think in the longer term, this situation will benefit the overall online recruitment industry? Thank you. So Eddie, I would like to add a little bit color to the ARPU of the Q2. So Q2, our enterprises like ARPU on our platform was relatively stable. So it's the revenue growth of our business mainly driven by the number of enterprises users growth, not the ARPU. So this is the situation of the Q2. So Jonathan can comment your next two questions. Okay. Firstly, I will make some payment to Phil's comments on your first question. And currently, our wholesale team and our customer sales team are focusing on our existing users. We are continuing to improve our renewal and repurchase rate. And this does not just help our current state. This will help us in the long run. But currently, we can be more focused on this matter and from a group level, so we can make this strengthening our service capabilities. And regarding your second question for the educational industry, we do have noticed a lot of employees quitting their companies. And we have seen in our existing users that the job seekers from the educational industry has been more and more active to looking for jobs. And there are 2 kinds of job seekers in this industry. First one is these standard jobs like technology, products, human resource, G and A and operations, which has some relation to the industry, but not so much. So they are more common for every industry, so they are much easier to find a new job. And the second type is for the K-twelve teachers and coaches. And for them, there are 2 ways. First one, they can go to the institutions who are opening for teachers like the school or the college. And second one, they can change their job career direction. We have noticed that because these companies in the educational industry, they have been recruiting heavily recent years. So there are a lot of junior workers like fresh graduates or newly graduated for 1 to 2 years in recent years. So they are more flexible in job seeking. So my observations is that they can emerging quite well and still living well. So the situation on our platform is there are still a certain number of job seekers, but they are emerging into the overall job seeker group quite well and looking for a future. And as the overall educational sector accounted for quite a small number of our overall user base, So we didn't observe any very obvious impact to our overall industry. So it's just a melting and emerging situation. And but they are doing that they are doing increasing their activities. That's my answer to your second question. Your next question comes from Piyush Mubayi of Goldman Sachs. Please ask your question. Thank you, Jonathan, Phil, Wenbei. If I can just go through the business as it's been performing, your guidance of $1,200,000,000 for the 3rd quarter is strong despite the CAC review. I wonder if you could take us through the drivers that you're observing and what the risk reward around that number is, I. E, can it slow down from here if COVID was to pick up or any other event were to happen? Or would it accelerate as you go through potentially a slowdown in the economy based on what you've observed through the early part of 2020? My second question is on your deferred revenue, which is 276,000,000 in terms of the change. It points to a slowdown, the 1st slowdown we are observing after 3 quarters of an acceleration in the number. Could you just help us understand what's going on there? And the third question centers around how well you've managed costs in the Q2. And I wanted given the outlook for the Q3, would you be running a sales and marketing expense line that's as tightly managed as you were running it in the Q2, so that the focus remains on what is necessary in the quarter thereafter from a cash perspective? Thank you. Okay. Thank you for your question. So I should answer your second question first. So regarding the sorry, what's your second question? On the deferred sorry, the second one is on So the deferred revenue, yes, sorry, the deferred revenue, the changes of deferred revenue was mainly a seasonality issue. So normally, our Q2 in terms of the cash revenue, cash collected from business is low. So the lower conversion rate or lower percentage as the GAAP revenue to the calculated cash billion, that ratio basically is related to the seasonality. So we are still seeing healthy at least for the Q2, we are still seeing healthy cash revenue growth. And we didn't see any like a slowdown with our cash revenue changes. So this is the second question. So your first question regarding for the overall guidance. So I think it's now it's already by the end of August, and we believe that we have a certain level of visibility of August, the whole month, and we have already completed July. So basically, we only have 1 month is ahead of our growth. And so basically, we have certain level of confidence of our business growth in Q3, no matter what happens in the 3rd month of this quarter. So this is our rationale to do the forecast. And we think that we try to be conservative with our numbers, but all of the numbers are still based on some like our probably like extrapolated judgment for the September. So this is our initial thought and it's subjected to change. So we hope that you can understand in normal situation what we can get for the Q3. So we can give you some kind of like sense to the numbers that we can have in Q3. It's better than we don't mention anything about our Q3 under the cybersecurity review by the regulator. So this is our intention. So I share it with you. And the third question regarding Q3 cost expenses, we think that because we are not allowed to grow our users and our enterprise customers, So our top line are in some extent got impacted. But we would like to as Johnson just mentioned, we would like enhance our service to existing enterprise customers, existing job seekers. And by serving them well, and we can try our best to have, I think, the best that we can have with the revenue. So this is the revenue. And regarding for the expenses, definitely, we would like to have very stringent measures for our various cost items. And so for the largest cost item is marketing and traffic related item. And because we are not allowed to grow our users, So we reduced our user acquisition related marketing activities. So that will balance the because we cannot generate might not generate enough revenue, but we spend less in Q3. So generally speaking, we think that we can we hope that we can control the 3rd quarter margin and we can deliver solid third quarter results. Let's see. Your next question comes from Wei Zhang of UBS. Please ask your question. Thank you, management, for taking my questions. First question, I want to ask about the potential impact on personal data protection law. Would that potentially impact our operation? Or is there any adjustment that we need to make that could impact the effectiveness of our matching and recommendation algorithm? And secondly, just want to follow-up on the latest progress in the blue collar segment recruitment business. If there is any operating data or financial data that management can share, it will be very helpful. And if we look at the second half of this year and the next year, what are your strategies and some of the operational goals that you could share? Thank you. Okay. I will take your first question regarding the personal information protection law. And this is actually not a new regulation. And our understanding that this is constructed based on the network security law and the data security law. So this law has its origins. And along the process, we have been strictly following the progress of the laws rules, and we have been adjusting our boundaries of our app according to our understanding. And before this personal information protection law came out, we also noticed that there are drafts for comments and combined it with our work. We sorted out our personal information processing task from various perspectives, such as products, operations and data securities, and continued to updating once again to improving our system and procedures to be more in compliance with these laws. And next one is about we want to highlight that our app has been attached very great importance to the privacy protection since day 1. For example, during our communication between job seekers and enterprises, so the switching of resume or contact formation had to be happened after the counterparty clicked yes, and then they can share the information. We have been insisting on this one for many, many years. And on this impact on our recommendation algorithms, we have do a lot of work and studies on that. And since we are collecting user data according to the law, we don't think this will have too much impact on our combination results because the most sensitive data are not used in the algorithms and have no fundamental impact to our business. So we have been doing our studies and doing our standings and continuing to improving the user privacy protection. And we do believe these regulations, more strict regulations are good thing to the overall industry and the user protections. And we will do our best to be in compliance with the regulations. That's all for my question answer for my first question. So regarding the blue collar business, So in the quarter, we are seeing faster user growth from both blue collar and white collar segments. And blue collar segment continues to outgrow our white collar business. So among all subsectors related to blue collar, urban service sector grew nicely with verified enterprise users up by more than 120% year over year. So we see good momentum, good progress with our blue collar business. And in the second half, we think that we will continue to focus on building foundations of our blue collar equipment service. We will further optimize our products and service improve blue collar job seekers user experience. Because of blue collar job seekers, they have different user preference. So we are providing more user friendly products to them like mini resume simplified mini resume templates. And algorithms, we are also making blue collar related customization. Like in terms of the recommendation, we provide them with business areas related recommendation. And also to protect blue collar job seekers, we would like to implement stricter platform rules to restrict false information and illegal recruitment activities on Bausch Japan. In the Q2, as Jonathan just talked, we enhanced our own platform security and verification team. So that will all about measures, we think that we will make sure blue collar people, they can have a satisfied user experience and that will also increase their user stickiness and increase their platform loyalty. And in terms of the blue collar business, the revenue contribution on our platform continues to grow. So in the Q2, the revenue from Blue Collar business accounts for roughly like mid-20s of our total revenue. So this is still in uptrend. So we would like to see in future growing percentage from blue collar contribution to our business. Your next question comes from Colin Liu of China Renaissance. Please ask your question. I'll translate for myself. So as we mentioned that there is a very burgeoning growth from blue collar business market. And I just want to particularly in the urban blue collar segment, but apart from that there's a still very large portion of the market, what we call traditional blue collar workers from manufacturing or from construction industries. I wonder going into the second half and the rest of this year, do we have any strategic updates on that part? How can we accelerate growth particularly towards that part of the business? And the second question from me is, when we deepen our penetration across Luta and Marty, it's sort of inevitable that the company is going to work with a number of partners and what's the strategy of choosing or working with different kinds of partners? Thank you. Okay. Thank you for your question. So I would like to briefly answer your question and Jonathan will give you more color about the our strategy or our cooperation with agencies for the blue collar business. So regarding you just mentioned blue collar, I think they are part of blue collar market. But we see that urban service sector is the largest and the fattest growing segment among all of the blue collar segments on our platform. We think that because there is a structural trend letting more people coming to urban area finding a job. So our app, because of our model is very friendly to job seekers and employers, we can serve such kind of groups of people very well. So we see that our urban service sector blue collar people are our near term focus. And we also believe that manufacturing, like logistic related and also like construction related, real estate related, the blue collars, they are also very important. But they are not imminent our focus. We can serve them. And but we think that the largest proportion of growth might still come from the urban service area. And regarding the cooperation pattern between the urban service blue collar and manufacturing related color blue collar are a little bit different because of most of the urban service enterprises users, they come to platform to hire job seekers directly. But for manufacturing enterprises, they tend to use agencies to hire blue collar people from online platforms. So that's why we need to cooperate with 3rd party agencies. We cannot do it by only ourselves. So Jonathan can comment a little bit with our cooperation with agencies. And to answer your questions, you just mentioned the word partner. I'm thinking because when you are mentioning partner, we are referring to those talent agencies in the manufacturing area. The fact is that in the massive huge manufacturing industry in China, there are a lot of agencies that are recruiting people for the enterprises. But when there are more workers, ordinary workers come to our platform, we are observing that those agencies come to our platform to find the talents together for the enterprises. And that arises the challenge on how to cooperate with those agencies. And to find an answer, we find a way so we can show this game from 4 people, which is job seekers, enterprises, agencies and platform to 3%. That means we will stand together strongly with the job seekers. So we will find a way to negotiate with those agencies to find a more clear game rules. So we have done a lot of work to standardize this industry, to protect our users, to protect our ecosystem, so in an achieved manner. So we are doing a lot of work on this. We will need some time, but our whole team are quite positive on this, so we can find an effective way to cooperate and to tap further into this manufacturing industry. That's my answer to your question. Okay. Due to time constraint, that concludes today's question and answer session. At this time, I will turn the conference back to Wenbei 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 the TMBG Investor Relations. Thank you. Thank you. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you