KANZHUN LIMITED

Ladies and gentlemen, thank you for standing by and welcome to the CanJun Limited fourth quarter and full year 2022 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a Q&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 Investor Relations. Please go ahead, ma'am.

Thank you, operator. Good evening and good morning, everyone. Welcome to our first quarter and full year D&D 22 earnest 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 and unknown ways 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 your 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-debt financial matters for comparison purposes only. For definition of non-debt financial measures and the reconciliation of debt to non-debt 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.jpim.com. With that, I will now turn the call to Jonathan, our Founder, Chairman, and CEO.

Hello everyone, welcome to our fourth quarter and full year 2022 earnings conference call. The past year has been a tough one for all of us.

I would like to express our sincere gratitude to our users and investors, and our employees.

Let me first introduce the performance of the fourth quarter and the whole year. In the fourth quarter, the fourth quarter, the company achieved a net budget of RMB1.1 billion, revenue of RMB10.8 billion, which is equal to the same as last year. Equalization is not an ideal result, mainly due to the previous epidemic. Especially the high peak of the epidemic in December caused a great challenge to the business of 4G.

First, I would like to share with you our performance for the fourth quarter and the full year of 2022. Over the past quarter, we recorded calculated cash fillings of RMB 1.1 billion and gap revenue of 1.08 billion, which is relatively flat compared with the same period of last year. That is not quite an ideal outcome, primarily affected by the simulated effects of the COVID-19 outbreak over the past quarter. The epidemic resurgence, particularly the surge in last December, posed great challenges to our normal patients during the fourth quarter.

The company did two big things in the fourth quarter. On December 22, the company made a double major listing in Hong Kong through the introduction method. In addition, as a FIFA official partner, we sponsored the 2022 Qatar World Cup, effectively improving the company's brand popularity and influence. In the fourth quarter, we achieved two significant milestones. On December 22nd, the company successfully completed our due primary listing on Stock Exchange Hong Kong by Wales introduction.

Secondly, we became an official partner of FIFA and sponsored the FIFA World Cup Qatar 2022. Although our sponsorship elevated our marketing expenses for the period, the broad exposure from this renowned event both effectively enhanced and expanded the influence of the company's brand. Despite this increase in expense, we were still able to achieve profitability in the fourth quarter. Our adjusted net income, which includes share-based compensation expenses, reached RMB 69.5 billion.

For the full year of 2022, our debt revenues were RMB 4.61 billion. Our calculate cash billing reached RMB 4.61 billion.

and our non-stack adjusted net income, including share-based compensation expenses, reached RMB 800 million.

At the operating level, although the fourth quarter is a traditional recruiting season, we have continued to have a good status of user growth. The MAU of the fourth quarter reached 3091 million, which is 26% of the total growth. The activity of the users, that is, the DAO and MAU, is also stable.

In terms of operations, the fourth quarter is the traditional oxygen in the recruitment industry. Nevertheless, we maintain a solid growth momentum with our new users. Our MAUs for the fourth quarter reached $30.91 billion, up 26% year-over-year. User-action rates, or our DAU to MAU ratio, remain stable.

Next, I would like to introduce what everyone is very concerned about, the growth of users after the Spring Festival and the recovery of business. After the return of the Spring Festival this year, we have seen a strong growth of users. All the data has created a new record. In January and February, the total number of new and complete users in the company was about 9 million. In January and February, the growth of MAU on the app was more than 50%. The activity of the users, that is, the proportion of GAU to MAU, has reached a new high. In February, the number of active enterprises has also exceeded the highest in history. The growth of MAU has also been good. While the growth of users is fast, the revenue of each user Now, let me share some details on the user growth and business recovery following the Spring Festival, which many of you may be interested in.

Alongside work resumption following the Spring Festival this year, we saw a resurgence in new users that drove an array of our cooperative metrics to reach numerous record highs. During the first two months of 2023, our newly verified users quickly exceeded approximately 9 million. The average MAUs on our app for the first two months of 2023 increased by more than 50% year over year. User activity reaches, again, the average DAU to MAU also hit a record high. And in February, our monthly active enterprise users soared to the highest level yet in our history with solid year-on-year growth. While the total number of our users is growing rapidly, we are still able to deliver an enhanced user experience on our platform, which we would like to guarantee. The average number of both job seekers and enterprise users' achievements, which is the average monthly number of times of mutual consent agreed for a C-regimen, has continued to increase through February. To drive this growth, we are realizing new efficiencies within our platform's double-sided network, from our continuously improving algorithm capabilities and the deep exploration and insights into our users' needs and preferences that is afforded.

In the growth that we have seen in the first quarter, we have noticed a few key words worth sharing with you. The first word is blue-collar. Blue-collar in new users, whether in absolute quantity or in increase speed, is faster than white-collar. The second key word is second-tier and lower-tier cities. The speed of growth is obviously faster than first-tier cities. It proves that the company's efforts to continue to excel in the down-to-earth market are effective. The third key word is that small and medium-sized enterprises grow faster. In other words, we see that the recovery of small and medium-sized enterprises is faster than that of large enterprises. The fourth key word is cash. Cash income recovery is very fast. We are confident that we will receive cash in the first quarter. to a new record in history. It is expected that it will not be lower than 45% and 25% in comparison and comparison. The fifth key word is the city service industry, which requires face-to-face contact as a characteristic industry. This industry has been a bright spot in recovery recently. Since the Spring Festival, the number of new jobs has increased by more than 40%.

In terms of our robust user growth, we would like to share some keywords until now in this quarter. The first keyword is blue-collar. Among the new users following the Spring Festival, blue-collar users showed stronger adoption of our platform than white-collar users in terms of both absolute numbers and their growth rate. The second keyword is lower tier cities. In terms of reasons, the number of users from second and lower tier cities grew much faster than the number of users in first tier cities, which is a testament to our ability to extend our penetration effectively and continually in lower tier markets. The third keyword is the small and medium-sized enterprise. The recruitment demand from SMEs accelerated rapidly, which shows the faster recovery time of SMEs compared with large enterprises. The fourth keyword is our cash. We have witnessed a quick recovery of our cash collection. And we set our cash collections to reach an all-time high in the first quarter of 2023, with estimated over 45% growth sequentially and more than 25% growth year over year. The fifth and last keyword is the urban service industry. The urban service industry, characterized by face-to-face contact, has been a bright spot in the first quarter of this year. Since the spring festival, we have seen more than a 40% year-over-year increase in the total number of newly job postings.

Other industries also performed well. Sales, transportation, high-end manufacturing representing new energy vehicles, and medical and health industries all performed well. The real estate and education industries also showed signs of recovery after the Spring Festival. In recent years, sales, market marketing, purchasing, and so on, representing the increase in the number of corporate business activities, have continued to improve. The recruitment activities after the Spring Festival of medium-sized enterprises have also gradually begun to start. These all show that the overall economy presents a progressive attitude, which also makes us look forward to the growth of this year's performance.

Some other sectors also showed positive growth trends. Sectors including retail, transportation, and high-end manufacturing, such as the new energy and automobile, as well as the healthcare industry, all performed well. Real estate and education also showed encouraging signs of stabilization and recovery after the Spring Festival. The number of open positions in sales, marketing, procurement and other functions that are preventing improving business activities of enterprises have all continued to show week-over-week improvement in the first quarter. The recruitment activities of medium and large enterprises also gradually pick up after the Spring Festival. All of these trends show us signs of overall economic revival and give us confidence in our growth potential for this year.

We continue to work hard to fulfill the social responsibility of a listed company. In October 2022, the company entered China's charity charity 500 walls for the second consecutive time. The company and the Chinese Welfare Association, the employment service guidance center, jointly do the Welfare without barriers assistance and assistant service plan. In the whole year of 2022, we have served a total of 12.1 million Welfare seekers. We remain committed to undertaking our social responsibility as a public company.

In October 2022, the company was once again shortlisted for inclusion in the 2022 China's top 500 enterprises list for the second consecutive year. The company and the China Disabled Persons Federation Employment Service and Administration Center jointly launched the Barrier Free Job Search Assistance Service Plan for persons with disabilities. to provide service to accumulated 121,000 disabled job seekers throughout 2022. We also recently co-organized the Onward Spring Recruitment Festival with the Ministry of Education's 24365 Campus Recruitment Service, which is expected to offer hundreds of thousands of open positions for college students across more than 2,000 enterprises.

One more thing to share with you.

Today, our board of directors approved a new share repurchase program to repurchase up to $150 million over the next 12 months to support our long-term share price stability. With that, I will turn the call over to our CFO Phil for review of our financials. Thank you.

Thanks Jonathan and hello everyone. Now let me go through the details of our financial results of the fourth quarter and the full year of 2022. That may help you better understand our numbers. Before I begin, please note that all comparisons are from year-on-year basis, unless otherwise stated. Our revenues and calculated cash billions reached RMB 1.08 billion and RMB 1.1 billion respectively this quarter, stayed at the same level with the fourth quarter of 2021, despite the COVID impact. For the full year of 2022, our revenues grew by 6% to RMB 4.5 billion, Total paid enterprise customer number for 2022 was 3.6 million, down by 10% compared to 2021, mainly due to the decreases in small-sized accounts affected by the user registration suspension in the first half of the year, as well as COVID outbreak in second quarter and fourth quarter. while the paying ratio and output in each quarter stayed steadily at a healthy level. Revenues and the numbers of key accounts and mid-sized accounts maintained good gross momentum and both achieved a record high in 2022. Now, let's turn to the cost side. Total operating costs and expenses were RMB 1.4 billion in the quarter. up 70% year-on-year, mainly due to, number one, increased employee-related expenses, including share-based compensation related to Hong Kong IPO. And number two, 2022 World Cup sponsorship. For the full year of 2022, total operating costs and expenses decreased by 12% to RMB 4.7 billion. Cost of revenues increased by 35% to RMB 202 million in this quarter, primarily driven by the increases in employee-related expenses and server and bandwidth costs, as our user base continues to expand and higher security requirements. Browse margin. excluding share-based compensation expenses, was 82.6% for the quarter, down by 1 percentage point compared to last quarter, mainly because of the revenue growth in the quarter was impacted by the COVID situation, while the majority of the cost was still relatively fixed. For the full year of 2022, cost of revenues increased by 36% to RMB 755 million, with an 84.1 adjusted gross margin, down by 3 percentage points compared to 2021. Due to similar reasons, we are expecting a gradual sequential recovery of gross margins this year along with our revenue growth. Sales and marketing expenses increased by 83% year-on-year to RMB 682 million in the quarter, which was primarily due to the marketing campaign of 2022 FIBA World Cup. For the full year of 2022, our sales and marketing expenses will RMB 2.2 billion, up 3% year on year. Excluding the World Cup sponsorship expenses, we saw a 46% year-on-year decline in branding and customer acquisition costs in 2022, demonstrating our improved marketing efficiency as a result of stronger brand recognition and user satisfaction. For 2023, we will maintain this effective marketing strategy while expecting user growth continues to be robust. Our marketing expenses will be monitored and under our food control. Our R&D expenses in this quarter increased by 48% year on year to R&D 294 million mainly due to the increase of employee related expenses. For the full year of 2022, R&D expenses or RMB 1.80 billion, up by 44% year-on-year for the same reason. GMA expenses in this quarter increased by 108% year-on-year to RMB 248 billion, primarily due to increased employee-related expenses and professional service fees related to our new primary listing in Hong Kong. Excluding share-based compensation and Hong Kong leasing related fees, our adjusted G&A expenses in this quarter was $123 million, up by 50% year-on-year. And for the full year of 2022, G&A expenses decreased by 64%, primarily due to the one-off share-based compensation expenses of RMB 1.1 billion recognized in 2021 related to our US IPO. Our simple calculation shows that if we exclude the share based compensation and World Cup sponsorship and the professional service fees related to our Hong Kong listing, our adjusted operating margin was 20% for this quarter and 19% for the full year 2022. Net loss in this quarter was RMB 185 million. Excluding share based compensation, our adjusted net income for this quarter was RMB 59 million. In 2022, we generated positive annual net income of RMB 107 million and adjusted net income of RMB 799 million. Our net cash generated from operating activities was RMB 156 million for this quarter and RMB 1 billion for the full year. As of December 31, 2022, our cash, cash equivalents, and short-term investments reached to RMB 13.2 billion. And now, for our business outlook. For the first quarter of 2023, we expect our total revenues to be between RMB 1.25 billion and RMB 1.27 billion. A year-on-year increase of 9.8% to 11.6%. As Jonathan just mentioned, our calculated cash billing in this quarter is expected to increase by over 45% quarter-over-quarter and more than 25% year-over-year, which gives us a good start for the year. With our robust user growth and improving signs for the recovery of the economy, we are optimistic for the whole year outlook and feel confident to strive for an accelerating business growth. With that, I conclude my prepared remarks. Now I would like to answer questions. Operator, please go ahead.

Thank you. If you would like to ask a question over the phone, you need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, you can press star 1 and 1 again. So once again, that's star 1 and 1 on your keypad to ask a question. Please stand by while we compile the Q&A queue.

Thank you. We'll now take our first question.

Please stand by. And your first question is from the line of Wei Xiong from UBS. Please go ahead.

The first one is to ask the management to share more about the trend of recovery after the Spring Festival. For example, from the user's point of view, what is the proportion of BC in our new users? And then from the corporate point of view, if we look at the new position and recruitment budget of the corporate users, what is the difference between the speed of recovery of large and small enterprises? Can you also introduce it to everyone? The second question is about how to view the competition of the online recruitment industry in the next two or three years. Thank you, management, for taking my questions. My first question is about could management share more color on the recovered trends post-Chinese New Year? For example, how do you see the ratio between business user growth versus the job seeker user growth? And if we look at the recruiting budget recovery, how do we compare the difference between the K customers versus SME customers? And second, also want to ask your thoughts on the competitive landscape in 2023 if we think about whether the competitors will raise or step up their investment in a reopened environment, and how do we balance the revenue growth versus the margin target for the whole year 2023? Thank you.

Thank you for your question. Everyone is very concerned about the recovery after the Spring Festival and the opening of China's energy. We see that after the Spring Festival, that is, after the end of January, the company's HPE MAU and average DAU are at the highest level in history. And then from the point of view of B, from the point of view of recruitment, the number of active entrepreneurs has exceeded the highest level in history. Of course, this is not only a recovery, but also a good news. And then you also care about our ratio of B and C. This is indeed a double-edged sword a very important data in the platform. The current situation is about 9 to 10. B will still be a little less, but the trend is in the process of improvement. From the situation of big companies and small companies, in fact, we have also talked about this topic at this phone conference before. We always see that small companies are more flexible. the recovery will be faster. When the situation is not good, the speed of the fall will also be slower. We also saw this time that the behavior of large enterprises to restore recruitment will be relatively late for small enterprises, but it is also in the process of recovery. I would like to add a little bit of my personal observation. In fact, it is often not entirely due to the problem of strength. In terms of strength, the strength of a large enterprise will be stronger. I think it's often because of the degree of cautiousness of decision-making. The bigger the company decides, the more cautious it is. I experienced the same situation in 2008 and 2009. Small companies recover faster than big companies. This is a case of a user who cares about you.

Thank you for your question. Regarding your concern about the situation after the Spring Festival, as I just discussed, we recorded historical highs for both our MAUs and DAUs, which have a very significant growth in the first quarter. And in terms of enterprise users, our active enterprise number has hit a historical high. which means not only recovery, but also a good information. And for the ratio of enterprise customers to job seekers, they still stay at like one to nine or one to 10. But the trend is improving. In terms of the size of enterprises, we have reached that the SMEs is more flexible and their recovery is faster. And of course, when the situation is bad, the fall of them also will be factual. And for the large enterprises, their recovery is later than SMEs, but it's still during the recovery process. I would like further to add that this is not all about capability. It's because the large enterprises, they are more prudent when making their decisions. I had the same experience in 2008 and 2009. In that situation, the SMEs will also recover much faster.

The competitive status of the internet shopping industry has not changed much. This is my observation. Secondly, I agree with your prediction. This year, because of the recovery of the economy, we, as well as our colleagues, have also gone down a few years. This year, we spent more budget to increase I think it's a very reasonable guess. In the first quarter of this year, we also felt the pressure from major competitors on user acquisition. I think you are right. The third thing is how we do it. Will it affect our profits? I think, first, we will not follow such a strategy in the competition. We have never followed it. We will still do things in our own way. We will keep a high level of user retention. a strategy to increase user growth. Moreover, we hope to achieve a plan for an annual growth of 4,000 to 4,500 million users. I am very confident that during this process, it will not be achieved by spending too much money. Therefore, it should not affect the achievement of our margin too much. This is my view on your question.

And for your second question about the competition, currently the overall competitive landscape has not changed. As you have practically predicted that along with the recovery of the economy, our peers, they are planning to spend more to acquire new users this year. And we have already felt that kind of pressure in this quarter. But in terms of what we plan to do and whether it will impact our profits, our strategy that we will not follow, we will do things according to our own pace and strategy. Based on our high user retention and safety and reasonable growth strategy, we are still hoping to reach the new user growth target of 40 to 45 million this year. I'm quite confident that we can achieve that target without overspending and won't affect our margin.

Thank you, management. Thank you.

Thank you. We'll now take our next question.

Please stand by.

And the next question is from the line of Eddie Wang from Morgan Stanley. Please go ahead.

Thank you for answering my question. I have a few questions for you. First, I see that the unemployment rate in January and February is relatively high, especially in the youth. Mr. Zhao also mentioned that the demand for blue-collar companies will increase relatively quickly. The demand is relatively large. The demand for white-collar companies is relatively small. I don't know. Because more young people may be college graduates, I don't know what impact this mismatch will have on the entire recruitment market this year. For us, what is the impact of this mismatch on the recruitment platform? Then we don't know what kind of adjustments will be made strategically. It's more focused on the recruitment of the blue-collar side or something like that. This is the first question. The second question is that there are some rumors now that maybe this is the labor after the return of the city. That is to say, maybe one or two weeks found the entire labor force of this There are some public requests because everyone is back one after another. But maybe if you look at March, there have been some cases of overwork. I don't know what the real situation is like on the ground. Have we seen it? The third one may be a relatively small problem, a relatively long problem. I want to hear Mr. Zhao's thoughts. Because everyone says that the emergence of GDP Thank you for taking my question. I have two questions. First is about the unemployment rates in the February and January actually has been quite high, especially for the youth and employment rates. So do you expect that, you know, I think in terms of the labor supply side, there's more of the, you know, the university or college graduates, but for the demand side, actually the blue-collar jobs actually have quite a high demand. So this mismatch will impact on the overall landscape of the recruitment in China and how Boston will try to leverage on this mismatch and adjust our strategy in this year. The second question is, we heard that There's no longer the labor shortage after the Chinese New Year when more and more, you know, the labor actually coming back to the tier one or tier two cities. Not sure if this is what we also witness on the ground as well. The third question is a little bit long term about the chart GPT. People are talking about that in the longer term. It's a little bit, you know, the lower or a little bit mid to low the jobs of the white collar could be replaced by the chapter deputy in the longer term so what's your thoughts on the uh on this thank you um

such as restaurants, hotels, and travel agencies that require face-to-face contact. This does not mean that the number of applicants increases rapidly. The only problem is that the number of applicants does not increase rapidly. In the field of manufacturing, it is true that from work after the Spring Festival For example, in this week, in about 7 or 8 weeks, the growth rate of the職位 was slower and the growth rate of the求職者 was faster. In fact, in the past few weeks, we have seen that this situation is slowing down. At the same time, there is another observation that we have seen that is quite interesting. In fact, in our platform, in order to test between the employer and the recruiter. In the end, there will be some revenue. In terms of revenue, if you look at the manufacturing industry, compared to the previous year, the revenue has indeed decreased, but the number has not decreased much. On the contrary, the person who wants to get this kind of revenue, the effort he has put in, has increased a lot. We see this interesting phenomenon. This is also the first time we talk about this phenomenon in a public space. So, in fact, it is the sense of body and the result. A blue collar worker looking for a job in the manufacturing industry, its result is that it has dropped a little. To be honest, it's not very serious. We see it, but its sense of body is indeed more severe. I think this is what you just said. Yes, on the ground. Yes, we see this phenomenon on the ground. I think you are also very professional about this configuration. Indeed, when a bunch of investors don't have a position, when there are fewer recruiters, this is a bit of a headache as a platform, because we can't actually invent a lot of positions. However, what's interesting is that quite a lot of workers, in the position of ordinary workers in the manufacturing industry, in some positions in the service industry, In terms of city logistics, it has a relatively strong mobility. In terms of age and skills, it can adapt to many positions. In the past few years, we have seen that many players have adapted to and satisfied themselves with this method when they had less work. Thank you for your question.

Regarding your first question, there are two types of blue-collar users on our platform. The first one is urban service. And within the urban service industry, we have both fast growth in users as well as job coaches. So there is no issue about lack of job posting. It is fine for this factor. And in terms of manufacturing, after the Chinese New Year Festival until this week, which is seven to eight weeks after the Spring Festival, in the first, we did saw that the job posting growth has been much lower compared to the job seeker growth. But the situation has been improving recently. There is a quite interesting observation. There is a key metric we look at on our platform, which is the achievement, which means the mutual consent achieved between job seekers and enterprise users on our platform. So within the manufacturing industry, what we have observed that compared to last year, the average achievement per person has greatly decreased, but not huge. But the effort for a job seeker to achieve the same level of achievement has been much greater. This is the first time I have been talking about this metric publicly. So the result is that the overall achievement result has decreased a little bit, but the effort one job seeker needs to put is much bigger. So they felt the feeling of the severity of job seeking is much greater compared to what they have said. So about the mismatching questions you asked, which is quite professional, that a lot of job seekers cannot find a job and less job offerings, which under this situation is quite difficult for our platform. But in the past, what we have seen that especially within the blue-collar manufacturing, other service logistics sub-sectors, there is quite a lot of flexibility for the job seekers, both in terms of their skills and ages and the job they're working. So we have seen the adaption of the job seekers to switching between different kind of industries to satisfy their needs for job seeking.

And then there's the hot topic recently, the topic of chat GPT. To be honest, from the company's point of view, in our business, because the technology is not mature enough, especially the recent release of this technology, the challenges we have encountered and the things we are ready to do, I don't think it's a good time to I am responsible for saying that we have been paying close attention to the challenges and opportunities that this technology may bring. This is the situation in the past few months. Recently, we have seen some of the operating scenarios of LinkedIn, such as creating a resume, creating a personal advantage, etc. You mentioned earlier that the labor union has faced many challenges over the past 100 years. I think this is a very real topic. I think it's true. Just like in the process of factory production and the movement of goods in warehouses, in fact, the robot has brought a lot of human physical labor. Then I think there are some so-called party labor. And regarding your last question of ChartGPT, which is a quite interesting question, it's still too early to comment for the actual application of this technology on platform.

There's not too much to say, but we have been highly focused on this technology and the challenge and opportunity to my race. So recently we noticed that the team has already applied this technology to some scenario, for example, to generate a resume or personal advantages and et cetera. So our team has been seriously following and thinking on this. So whether this will impose a challenge for some of the white-collar jobs, which is a very valid concern, similar to the manufacturing industry, like moving elements within the warehouse, the robot has to pay some of the physical work for the blue-collar workers. So the new technology, some of the what kind of jobs might be also replaced by some of the AI. So that's a potential trend.

I also hope that we can use the speed of some advanced companies to tell our users and investors that based on I hope that we can in the not far future from now be able to tell our users, our investors

what kind of value we can create for our users based on the AIGC technology, and I hope that they will be far.

I'm quite confident. Thank you.

Thank you. We'll now take our next question. Please stand by. This is from the line of Timothy Xiao from Goldman Sachs. Please go ahead.

Hi, Mr. Zhao, good evening. Congratulations on the steady performance of the company and the very strong one-year income and progress. I have two questions for the management. The first one is about technical investment and technical innovation. I saw that in 2022, R&D earned about 20% of the total income. In 2023, what are our company's plans to invest in product and technology development, especially considering AIGCGPT technology? How do we think about this kind of technology for the entire Internet photo model, especially about the optimization of human resources configuration efficiency? This is the first question. The second question is about marketing, because we see that the advertising marketing of the entire World Cup has ended. Thank you, management, for taking my question and congrats on the solid result and strong outlook for the first quarter. I have two questions. First is about technology innovation, including the recent AIGC technology and considering the R&D expenses accounts for around 20% of the revenue in 2022. How should we think about in which areas that we are planning to invest in 2023 in terms of R&D investments? And what do we think about the impact from these technologies on the online recruitment model and on improving the efficiency of human capital allocation? And secondly, as we understand the marketing campaign around the FIFA World Cup has finished, could members share anything that you have observed about the marketing outcome? and what is your pace of marketing and branding that we are thinking of for this year? Thank you.

In terms of production technology, as you mentioned, we will continue to increase our investment in technology in this year. When we were doing these projects, we did not consider the production technology scene too much. model training, and even the development of basic capabilities. We haven't included this part in the budget for this year's R&D. This is our normal plan. Our normal plan will continue to increase. The main expenditure will still be in more expensive and more on the part of engineers and 3D scientists. At the same time, we also considered the input of hardware, because we originally had some places to make up for this, and we also made plans for the input of hardware. Of course, this does not include what you just mentioned and what another colleague mentioned. Okay.

About your first question regarding our R&D investment this year, as always, we will continue to enhance the technology investment this year, but we haven't taken too much into the consideration of all these potential AIGC application scenarios and modeling training, et cetera. We are actually looking at that, but haven't done that for our annual budgeting. So in our... uh no more plans um the major expense will be for better and even more extensive engineers and computer scientists and also we will increase our input in hardware which we have been uh we have so we will pay more notice uh youtube but uh as i just said we haven't considered too much about all those air gc and energy technologies

But I think we still have the ambition, the responsibility, and the strength to welcome AIGC to many, many companies. As an online company in China, a company that has a market share of about 3 billion, we will work very hard to embrace the changes brought by new technologies.

But I am confident to say that we have enough ability and ambition to further invest into this technology as a large company and we are fully capable and we will do that.

Then you just asked about our big marketing event last year. The launch of the World Cup from December 18 to December 12 is a successful approach. It has greatly improved the brand reputation of the company, thereby reducing the cost of digital marketing for our users this year, and continues to play such an important role.

And about your second question regarding our big event of the Sponsor Street for People workshop, I can see that the result, the outcome is in accordance with our expectations. So the very robust user growth in the first two months of this year, what we have witnessed is quite efficient within the digital marketing, which results in very cheap customer acquisition cost per person. This is not because the market has offered a lower price, more we have found out a new technology for marketing, but mainly because the very high exposure of our marketing campaign during the last lasting for one month last year has been quite successful. So our brand recognition has been improved and this effect to reduce our digital marketing expense will continue to benefit us during this year.

I'd like to add a little bit to this marketing expense question. So I think that first of all, in terms of the user growth, 2023 would be, we consider this would be a good year of the user growth. And you know that the way you use branding as performance based traffic acquisition advertisement as approach to acquire new users. And nowadays, we put more resources towards the branding over the performance ad. So the branding percentage, branding related expenses, their percentage continues to rise within our overall marketing expenses. And this trend will continue and we think that looking ahead for 2023, But there is no other big branding events happening. So overall, our user growth strategy or user growth targets for 2023 won't affect our overall margin. And I also need to mention that our margin is more linear or more related to our top five growths. So we expect that if the revenue can grow higher and faster, then we would like to see further margin expansion for 2023. So, so far we think that we are, you know, holding positive views towards this trend. So we believe that

Thank you. That's very helpful.

Thank you. Due to time constraints, that concludes today's question and answer session. At this time, I will hand 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 TPG Investor Relations. Thank you.

Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.