Ladies and gentlemen, thank you for standing by and welcome to the Kanzhun Limited Second Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer 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 Second Quarter 2025 Earnings Conference call. Joining me today are our Founder, Chairman, and CEO, Mr. Peng Zhao, and our Director and CFO, Mr. 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 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 calls for you not to place 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 matters for comparison purposes only.
For a definition of non-GAAP financial matters and their reconciliation with GAAP to non-GAAP financial results, please see the earnings reviews issued earlier today. In addition, a webcast replay of this conference call will be available on our website at iibudgetin.com. With that, I will now turn the call to Jonathan , our Founder, Chairman, and CEO.
[Foreign Language] Hello everyone, thank you for joining our company's Second Quarter 2025 Earnings Conference Call. On behalf of the company's employees, management team, and the Board of Directors, I would like to extend our sincere gratitude to our numerous investors and friends who have continuously believed in and supported us. [Foreign Language] Today, I would like to report on four matters. First, our quarterly performance was good. Second, the supply-demand dynamics on our platform continue to improve. Third, we are making ongoing progress in AI.
Fourth, our recent Hong Kong share offering and future shareholder return arrangements. [Foreign Language] Let me start with an overview of our financial performance. In the second quarter, our company achieved a total revenue of RMB 2.1 billion, up 9.7% year-on-year. Our net income reached RMB 710 million, reflecting a 70.4% year-on-year growth, achieving a net margin exceeding 33%. [Foreign Language] Excluding share-based compensation expenses and other income, such as investment gains, our adjusted operating profit was RMB 818 million, up 33% year-on-year. Share-based compensation expenses for this quarter decreased by nearly 10% quarter-on-quarter for the second consecutive quarter, amounting to RMB 213 million, with the ratio to revenue narrowed by about 5% year-on-year.
[Foreign Language] The operating leverage from the economics of scale and the efficiency of this model supported our high-quality growth, characterized by simultaneous improvement in both revenue and profit. well as from SMEs, further increased year-over-year. From January to July, we've cumulatively added over 13 million verified users. In the second quarter, the average verified monthly active users on the BOSS Zhipin app reached 63.56 million, up 16.5% year-on-year, consistent with user growth and penetration trends. Revenue contributions from blue collar, lower tier cities, and small and medium-sized enterprises further increased compared to last year. [Foreign Language]
Second, during the second quarter and graduation season, we saw notable improvements in our platform's job supply and demand dynamics. Specifically, on the job seeker side, incremental job seeking demand from fresh graduates moderated, with the number of newly added verified graduates climbing over 20% year-on-year in June and July. On the employer side, recruitment demand for fresh graduates also increased. The number of new job postings for fresh graduates grew by over 18% year-on-year for the same period. [Foreign Language]
This aligns with the overall trend of recovery in the recruitment market. In July, the number of newly posted jobs on our platform increased by approximately 20% year-on-year. Both the number of employers posting new jobs and the average number of jobs posted per recruiter were higher than the same period last year. The improvement in supply and demand relationships also led to a significant year-on-year decrease in the CEB ratio for new users.[Foreign Language] Improved supply-demand dynamics also drove positive changes in monetization. The total paying enterprise customers in the 12 months ending June 30 reached 6.5 million, up 10% year-on-year. [Foreign Language]
From an industry perspective, blue collar manufacturing experienced a short-term slowdown in April due to tariffs, but resumed year-on-year growth from May onward, with growth rates continuing to outpace other industries. Southern service sectors saw accelerated year-on-year growth in the second quarter. We observed a noticeable recovery in the internet industry, with the number of active job postings in the second quarter reaching a new high since 2021, led by product and technical growth. [Foreign Language] Sir, the company's continued progress in AI, I will stick to the three perspectives: AI2C job seekers, AI2B enterprise users, and AI2 management. [Foreign Language]
First, AI2 job seekers. The AI interview training robot has made some new progress. This robot now starts to play a role in recommendations. Upon the job seeker's consent, we use data obtained during the interview process to recommend positions to job seekers, and users who participate in the experimental tool have achieved higher efficiency in the experiment received more answers. We continue to iterate AI-assisted user search. For users participating in the test, not only can the AI give more explanation for the research results, it can also provide dynamic content summaries, job search strategy planning, and revenue optimization guides based on user queries. Users in the experimental group gain more mutual achievements.
In terms of protecting job seekers' safety, we have applied AI to identify risky users. For instance, we have trained AI to recognize more sexually aggressive language and expressions that violate platform rules. Another example is that the AI tools we developed have made preliminary grades in identifying fake content tampered by other AIs. This is obviously a long-term and challenging test, but we firmly believe that more people are in need of such functions. [Foreign Language]
Ladies and gentlemen, please continue to stand by. The conference will resume shortly. Thank you for your patience.
Sir, can you hear me now? Can you hear me now?
Yes, we can hear you now. Please resume.
Okay, we start at the next hour.
[Foreign Language] Next, about AI to enterprises. We provide AI-assisted job posting optimization features for both many newly established startups and junior HRs. Currently, AI assists in posting tens of thousands of job positions on a daily basis. The key point here is how to prevent turning assistants into replacements. It is difficult, but we must persist in doing so. [Foreign Language] In terms of commercialization, we have extensively integrated AI to conduct experiments. For instance, we use AI to enhance the understanding of recruiters' intentions, thereby helping them to select value-added services which are more suited to their needs. Recruiters in the experimental group have made more proactive purchases, and because they have chosen more suitable products, their repeat purchases have also increased.
[Foreign Language] Now, AI to management. We promote the use of AI in research and development, transforming R&D tools and processes. In a certain technical department at the Beijing headquarters, 30% of the coding is now AI-generated. In another city, a newly established R&D department, 70% of the code is AI-generated. As a result, the speed of product R&D iteration and launch has significantly increased, allowing us to explore more possibilities within the same time frame. [Foreign Language] AI is playing an increasingly important role in customer service. It has achieved results in training new customer service staff, automatically inspecting customer service quality, and providing suggestions for recognizing and responding to customer emotions. This is crucial for improving user satisfaction and enhancing the well-being of customer service employees.
[Foreign Language] The last one, we would like to report our recent Hong Kong offering and shareholder return arrangements. The company completed a Hong Kong secondary share offering of HKD 2.2 billion on July 4th. The primary purpose was to enhance the liquidity in Hong Kong, allowing more investors in the Hong Kong stock market to understand and participate in the company's trading. The offering has achieved positive results, with a significant increase in Hong Kong stock trading volume compared to the pre-offering levels.
[Foreign Language] Regarding shareholder returns, the Board of Directors approved two shareholder return proposals today. First, an annual dividend policy was adopted. The company plans to pay out annual dividends going forward, with dividends of $80 million for the current fiscal year. Second, a new share repurchase program on a phased and accumulative perspective is launched. The company intends to repurchase up to $250 million of these shares over the next 12 months, starting August 29. We believe this fully demonstrates the company's sincerity in actively rewarding shareholders and sharing the benefits of our sustained growth with all investors. [Foreign Language] That concludes my part of the call. I'll now turn it over to our CFO, Yu for the review of our financials. Thank you.
Thanks, Jonathan. Hello everyone. Now, let me walk through the details of our financial results of the second quarter of 2025. We continued to achieve high-quality results in this quarter, represented by solid revenue growth and further improved profitability. The revenue growth this quarter was primarily attributed to the continued expansion of our user base, with the number of paying enterprise customers increased by 10% year-on-year to 6.5 million over the trailing 12 months ended June 30th. As the recruitment market demand has gradually recovered since the beginning of this year, and the job seeker recruiter ecosystem has improved, the willingness of enterprise clients to pay has been rising. Among them, the recovery in recruitment demand from small and medium-sized enterprises has been more pronounced, driving a quarter-on-quarter increase in the revenue contribution from SMEs.
ARPU maintained stable and modest growth, mainly benefiting from the expansion of paying amounts from key accounts. Moving to the cost side, total operating cost and expenses decreased by 7% year-on-year to RMB 1.5 billion this quarter. Share-based compensation expenses dropped by 24% year-on-year and 9% quarter-on-quarter to RMB 230 million, shrinking for the fourth consecutive quarters. Excluding share-based compensation expenses, adjusted income from operations grew by 33% to RMB 881 million, and our adjusted operating margin in the quarter reached 41.9%, up by 7.5% points year-on-year, hit a record high. Cost of revenues decreased by 3% year-on-year to RMB 307 million in this quarter, mainly due to the decrease in operational employee-related expenses as a result of improved operational efficiency as we continue to engage AI in our daily operations. Gross margin went up by 1.9% points year-on-year to 85.4%.
Sales and marketing expenses decreased by 23% year-on-year to RMB 420 million during this quarter, primarily driven by decreases in advertising and marketing expenses and employee-related expenses. However, our strong brand recognition enhanced marketing efficiency and superior user engagement, guaranteed that we can still maintain robust user growth momentum. Our R&D expenses decreased by 6% year-on-year to RMB 416 million in this quarter. This decrease was primarily driven by reduced public cloud service fees related to AI. Our G&A expenses increased by 19% to RMB 311 million in this quarter, primarily due to an increase in employee-related expenses and investment in new initiatives. Our net income increased by 70% to RMB 711 million in this quarter, with adjusted net income increased by 31% to RMB 941 million. Margins also expanded significantly and reached record highs.
Our net margin improved by 12.1% points year-on-year to 33.8%, while our adjusted net margin reached 44.8%, up 7.3% points year-on-year. Both of these two margins have maintained sustainable improvement over the past three consecutive quarters. Net cash provided by operating activities reached RMB 1,052 million in this quarter, up 21% year-on-year. As of June 30, 2025, we continue to maintain a strong cash position of RMB 16.0 billion. In July, we completed the secondary share offering of 34.5 million Class A ordinary shares at HKD 66 per share, comprising a Hong Kong public tranche and an international tranche. Net profits from this share offering amounted to approximately HKD 2.2 billion. This offering, on one side, improved our Hong Kong liquidity and broadened our shareholder base.
On the other side, it further strengthened our cash position, giving us both strategic flexibility and financial capacity to pursue long-term growth initiatives and enhance our shareholder returns. One new initiative Jonathan just mentioned is that our Board of Directors has just approved the adoption of an annual dividend policy with a dividend amount of $80 million for the fiscal year of 2025. Combined with a renewed $250 million share repurchase program, our commitment to shareholder returns continued to enhance. For our business outlook, just like we communicated before, we expect our revenue growth to reaccelerate starting this quarter, along with the recovery of recruitment market momentum. For the third quarter of 2025, we expect our total revenues to be between RMB 2.13 billion and RMB 2.16 billion, a year-on-year increase of 11.4%- 13%. This concludes our prepared remarks, and now we would like to answer questions.
Operator, please go ahead.
Thank you. As a reminder to ask a question, please press Star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press Star one and one again. Once again, please press Star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press Star one and one again. Thank you. We are now going to proceed with our first question. The questions come from the line of Eddie Wang from Morgan Stanley. Please ask your question.
[Foreign Language] Thank you, management, for taking my question. I have two questions. The first one is, the recruitment demand recovery we witnessed on BOSS Zhipin platform in the second quarter and July. Is there any different driver for such a recovery this time versus before? For example, has the food delivery battle led to the surge in service industry blue-collar recruitment demand? Do you think the recruitment demand in the second quarter is sustainable or not? How's your view and outlook for the third quarter? The second question is that you mentioned previously that your R&D department, most of the coding has been generated by AI. What's your view on the AI's impact on the white-collar recruitment, especially on hiring demand of the programmers? Thank you.
[Foreign Language] Thank you for your question. About the recovery trend of the recruitment market, compared to before, we saw small features and the big features. The small one is the job postings from the internet sector have recovered to a new high since 2021, as we just communicated. The big one is that the smaller size or micro-size enterprises have been recovering much faster. [Foreign Language] One data to share with you is that the company with employees less than 20, less than 20 employees in the second quarter's revenue contribution goes up to almost 20%, which is the highest, representing the highest growth rate among all different size companies.
[Foreign Language] Let's expand the size a little bit to companies with less than 100 employees. The year-on-year growth rate of new job postings by those companies has also significantly exceeded the platform's overall level. [Foreign Language] Regarding your question of the impact of the food delivery competition, our observation is the impact is quite minor or negative. The data shows that the job postings related to riders or food delivery guys have been quite small among all of our job postings, and we also haven't observed any higher than average level of revenue growth from those jobs.
[Foreign Language] About your third question, whether this recovery could be sustainable, our view is positive, as have several evidence for it. First one is we have communicated before that the very poor job seeker to recruiter ratio starting last July, the situation had been improved since last November 2024, which by that time has recovered to the same period of November 2023. After that, the job seeker to recruiter ratio or dynamics have been continued to improving, and in the second quarter, we have seen a much more obvious recovery for that number, which we have just communicated.
[Foreign Language] From my perspective, from daily operations, our business growth rate in the third quarter is expected to further accelerate compared to the second quarter, which I have quite confidence with. That's our answer to the question. Operator, let's move on to the next.
Sure. We are now going to proceed with our next question. The questions come from the line of Wei Xiong from UBS. Please ask your question.
[Foreign Language] Thank you, management, for taking my questions. I have two questions. First is our margins continue to expand this year to a very high level. Given such a high base, how should we think about the margin trend in the next year and beyond? Also, considering our healthy and stable margins and cash flow, what do we consider as the most important investment areas going forward? A second, it looks like some startup companies are ramping up advertising investment recently. Does it affect our marketing and user acquisition cost? How do we assess the impact on the competition landscape in blue-collar segments and online recruitment market overall, as well as our competitive modes? Thank you.
Thanks for the question, and I'll answer the margin question first. You were right that our margin continues to improve. We think that this is mainly related to our business model. Because we run an online recruitment marketplace, the scale effect brought by our company's business model is significant. We believe this is the fundamental reason for the continuous improvement of our profit margins. In the past several quarters, we implemented effective cost control to make sure we put our focus on the high-quality part of growth, which kept our cost growth rate lower than that of revenue. With our revenue steady growth, the direction of gradual improvement of our profit margin is quite clear, and this is a kind of a definite.
We believe the margin improving is a long-term thing, and it should run step by step, not all of a sudden, not grow too fast or too high in the short- term. In terms of the areas that we would like to invest, we will continue to invest into our business. Our future investment priorities remain consistent with our previous ones, mainly focusing on R&D, innovation, and new business initiatives, etc. You also can see that we generated a very healthy cash flow. In this quarter, we generated more than RMB 1 billion operating cash flow. Actually, this is the consecutive two quarters. The first quarter, the operating cash flow is also about RMB 1 billion. We already had two consecutive quarters with over RMB 1 billion operating cash flow.
With such healthy cash reserves, we will mainly use our cash at talent development, probably like overseas expansion, and more importantly, shareholder return programs in the future. That's my comment related to the margin and our use, how to use the cash in the future. Go ahead, thank you.
[Foreign Language] About the second question, yes, we do observe that many of our peers will do some advertising marketing events in certain segments, including both mature companies or startups. However, so far till now, the impact to us is quite limited. [Foreign Language] My observation or my understanding is that at this current stage, a marketing wall, the meaningness of a marketing wall is very small. I want to clarify one thing is that even though our marketing expenses as a percentage of revenues continue to decline, on an absolute amount basis, we are still investing in the largest amount of marketing and advertising expenses among the industry.
[Foreign Language] In the meantime, due to our very powerful double-sided network effect, we have a very high user acquisition efficiency. We can maintain a very robust user growth while our user acquisition costs are still kept at quite a low level. Also, our user retention is the highest among our peers. To sum up, we have very strong marketing investments. Our user acquisition efficiency is high. Our user retention is high. That's why I said at the current stage, the meaningness is quite low to start a marketing wall, this is the same in many technology companies.
We would like to answer the second question from Eddie about whether AI will replace the programmers. From our own situation, yes, our recruitment for entry-level programmers has been slowing down, but we are still hiring. We are focusing on those people who have more potential, who are much smarter, can break down the questions, and look from a bigger picture perspective. I think that's also happening in many other technology companies.
[Foreign Language] What I'm facing to recruiting the entry-level programmers are I'm spending more money, more cost, recruitment cost to hire the people with more talents or more potentials. We will actually, we might somehow increase the recruitment cost for those types of people. I think that that's also happening to many other technology companies. [Foreign Language] My thinking on this issue is that in the past, the normal structure is one senior programmer with some junior level team to do a more simplified job. Now it will turn into one senior programmer or senior technical guys with AI. The salary we need to pay and the hiring efforts we need to invest to hire that senior guy actually increases.
[Foreign Language] The junior engineer or junior programmer as a percentage of overall white-collar employees, which in our country might be more than 100 million, my gut feeling is less than 2%. That change to the impact of hiring of white-collar is very limited. [Foreign Language] That's all of our answers to the questions. Operator, let's move on to the next one.
Sure. We are now going to proceed with our next question. The questions come from the line of Timothy Zhao from Goldman Sachs. Your line is open. Please go ahead.
[Foreign Language] Thank you, management, for taking my question. Two questions from my side. First is regarding the AI application or AI features. If management can introduce more detail about the specific use scenarios on the enterprise side and what kind of commercial product that we are thinking of. Also, we note that recently the company leveraged AI to develop mini programs or applications of different features. Just wondering from your perspective, which ones have the more commercial potential? Secondly is regarding your recent financing activities in Hong Kong markets. I'm very glad to see you also announced the share purchase and the annual dividend policy this year. Just wondering if management can share what is your thoughts on the capital markets going forward. For example, what are your plans to improve the liquidity in the Hong Kong markets? What are the detailed dividend plans that you have in mind? Thank you
[Foreign Language] Actually, yes, we do have some good progress on the AI product development side. We have been broadly to do some new product launching and development. I can give you more examples. [Foreign Language] The first one is an agent. We developed a recruitment agent called Hammer AI recruitment agent. Currently, we use it with approximately 500 recruiters daily. The recruiters can complete the majority of their work on our platform by simply interacting with Hammer AI recruitment agent through dialogue. Of course, this part should have the job seeker's consent. Sometimes job seekers might say no, but if the job seeker is okay, the Hammer AI recruitment agent will complete its job until to get to achieve an exchange of revenue or company formation or achievement.
[Foreign Language] We will attach very great patience to iterate this agent Hammer. Rather than saying that we are using new technology to validate what we have already known, Hammer actually will let us be to even greater harmony. [Foreign Language] O n Hammer AI recruitment agent is actually quite strange. The second one, we have been more aggressive. The second example is where the job seekers have more tolerance towards this product. The recruiters, it has higher leverages in terms of the negotiation program. It is actually a product we designed for large state-owned enterprises which have just launched. [Foreign Language]
Finally, this system allows for customization of digital human avatars, interview questions, and interview reports. It also supports AI-powered follow-up questions, multimodal candidate emotion recognition, and image recognition. Using this technology, we have supported over 20 AI-powered interview events for resident graduates at over 10 large state-owned enterprises, attracting nearly 30,000 participants. The response has been positive. [Foreign Language]
I think that we have a lot of those examples, and that also should be quite common in many other companies. Actually, I felt that the combination of AI technology and the current products, or application in technology management and the daily operation, is still at an early stage. The new technology combined with the older business, for this matter, the more revolutionized the product is, it will be more like a brown activities movement. The killer level applications will be generated among a lot of those brown movements. We have enough patience, and we have enough assets to waiting for that kind of application to be born.
[Foreign Language] Everybody cares about the AI, we are also quite cared about it. The fundamental principle is just treating it like a brown movement. [Foreign Language] The next stage is AI will be everything in our daily life. [Foreign Language]
Okay, I will answer the second question. As you know, the company has a very healthy cash balance on hand. We have more than RMB 16 billion cash reserves. In terms of the operating cash flow, every quarter we have incremental more than RMB 1 billion inflow. Basically, the company does not need to raise money from the market. Our capital activity, our fundraising activity.
In July, the purpose of that activity is to improve our Hong Kong line liquidity because in the past, we got public listed in Hong Kong through the introduction without issuing new shares. That made us with a very poor liquidity in our Hong Kong stock trading. We want to solve this problem, and we think that solving this problem could be both benefit to the company and benefit to our investors, to our shareholders. That's why we took a very rare approach to launch a public offering in Hong Kong. The offering was very successful, and all the participating investors all made money, and our Hong Kong line liquidity realized a breakthrough, and our liquidity started to improve since the offering. What I'm saying is that the company, we consider shareholders as our partners, and we consider the shareholder return a very important topic.
In the past, we mainly used a share repurchase program to return cash to the shareholders. We totally already launched four phases, and the total purchased shares total amount more than about $400 million. This time, the company renewed our share repurchase program, and also we announced our annual dividend policy. We make this as a regular routine and make it an annual thing. Basically, every year we will consider our operating situations and pay dividends to our shareholders. This year, for the fiscal year of 2025, we announced $18 million for the dividend for this year. Our Hong Kong line liquidity, because of the public share offering, we raised HK$2.2 billion. That's roughly $280 million. Compared with our renewed share repurchase program, which is $250 million plus our $18 million annual dividend, our announced amount is already higher than the amount that we raised in our earlier public offering.
That also showed that we had a good commitment to our shareholders' returns. One last thing related to our shareholder returns is that our share-based compensation as an expense, we received comments from shareholders that saying share-based compensation was one a little bit high, and we controlled these expenses. From the results, you can see that in the past several quarters, these expenses continued to decline in terms of total amount and in terms of percentage to the revenues. All the above are just evidence or some kind of things that show that our attitude toward the shareholders' return. We consider this as a very important thing, and we will continue to do that in the future.
Okay, that's all of our answers to today's questions. Operator.
Due to time constraints, this concludes today's question- and- answer session. At this time, I will turn back the call to Wenbei for any additional or closing remarks.
Thank you again for joining us today. If you have any further questions, please contact the company in tax directly. Thank you.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.