KANZHUN LIMITED

Ladies and gentlemen, thank you for standing by, and welcome to the Ken June Limited Second Quarter 2023 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, Alfreda. Good evening and good morning, everyone. Welcome to our second quarter 2023 Earnings Conference Call. Joining me today are our founder, chairman, and CEO, Mr. Jonathan Peng Zhao, and our director and CFO, Mr. Xiu Weizhang. 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 caution you not to place undue reliance on forward-looking statements and do not undertake any obligation to update its forward-looking information, except as required by law. During today's call, management will also discuss certain non-dub financial measures for comparison purposes only. For a definition of non-debt financial matters and a reconciliation of debt to non-debt financial results, please see the earnings review issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.jp.com. With that, I will now turn the call to Jonathan, our founder, chairman, and CEO.

Hello, everyone. Welcome to our company's 2023 second quarter月期发布会. Hello, everyone. Welcome to our second quarter 2023 earnings conference call. On behalf of the company and our employees, I would like to express our sincere gratitude to our users and investors and friends of our company

for whom have been standing with us during all these difficult times.

First, I would like to share with you our performance for the second quarter of 2020 Street.

We recorded a debt revenue of RMB 1.49 billion for the quarter, up 34% year-on-year. Calculated cash feelings was RMB 1.62 million, up 65% year-on-year. Our net income for the quarter was approximately RMB 310 million, and our adjusted net income, which exceeds share-based compensation spaces, increased by 135% year-on-year to around RMB 570 million. This represents the highest quarterly record in the company's operational history.

The effectiveness of BossGP's business model and our organization which has been developed for over 10 years has once again been tested on our strong profitability. In the second quarter, our strong user growth trend continued from the first quarter. The newly verified users for this quarter reached 14 million.

and average monthly active users on the ForceGT app rose to 43.6 million, up 65% year-on-year. Among all the users we serve, Blue-collar users and users from second- and lower-tier cities grew faster, benefiting from our continuous efforts in a quite long period to expand our penetration to lower-tier cities and blue-collar populations.

From the needs of the recruiters, the recruiters in the past quarter have reached the highest level of history by an average of more than 100 users.

In terms of enterprise users, our average monthly active users hit a historical high in this quarter, primarily driven by increasing demand from blue-collar industries, SMEs, and lower-tier cities. 其中以城市蓝领和供应链物流蓝领为主的餐饮,酒店,旅游,美容保健,交通运输, Breaking down by sectors, recruitment demand in catering, hotels, tourism, beauty and personal care, as well as transportation and the logistics warehousing, where more urban and supply chain logistics blue-collar workers are involved, have increased significantly.

Our definition of the position of the Japanese army online in the service industry is that the position was active at that time, and the recruiter corresponding to this position was also active. The number of online positions in this strict context has exceeded one million, becoming the largest position type on the platform.

Our average daily active position in the urban service industry, which is defined as a position where both the job posting and the enterprise users are active in a single day, a relatively strict standard, exceeded one million for the first time and has become the largest job offering on our platform.

The revenue contribution from blue-collar users increased to more than 32% of our total revenues for this quarter, while the revenue contribution from second- and lower-tier cities exceeded 60% for the first time. I remember in the past two years' quarter report, we reported to investors several times that the company has always been investing in the power of algorithmic and product power to strengthen the understanding of users of different people and different cities and improve their services. So this year, in the face of the opportunity of blue-collar and small and medium-sized enterprises' growth, we have persisted in our efforts for several years and achieved some results. We will continue to work hard to promote our technical innovation.

As we have reported to our investors in our earnings call over the past two years, the company has been investing in algorithms and products to improve our captive service capabilities across various user groups and cities, utilizing our enhanced understanding of their evolving demands. Our years of past efforts enable us to achieve good progress as we capture the opportunity arising from blue-collar workers and SMEs growth this year. Moving forward, we will remain committed to innovation and further improve in this area.

We have always believed in a gradually growing corporate service market. Companies are willing to pay for value. The premise is that you really want to provide value. By the end of the second quarter, the number of paid corporate customers in the past 12 months has returned to a fast-growing track.

We have long been believed that in a mature market in enterprise service, people are willing to pay for value as long as what you are offering is truly valuable. By the end of the second quarter, our paid enterprise customers for the 12 months rebounded and resumed its fast growth momentum hitting a record high of 4.5 million, up 18% year-on-year and 13% quarter-on-quarter. The second quarter this year was challenging. However, we have witnessed some positive updates recently from an operational perspective. Following the graduation season in July, we saw overall recruitment demand on our platform recover quickly and has retained a sustainable promising upward trend since the beginning of August.

Lanling, representing the service industry, is still the best-performing industry. The blue-collar urban service industry continues to outperform across all sectors. While various white-collar positions have stabilized and started to recover, especially white-collar positions

across personnel, finance, administration, operations, and manufacturing. As a result, the number of our active enterprise users reached a new high for this year, as well as a record high in our corporate history.

Also,

This trend leads to the supply-to-demand ratio on our platform, as well as the ratio of job seekers to enterprise users is continuously improving.

I would like to thank you once again for this opportunity to understand the advantages of our business and support our investors. That's all for my introduction. Next, please welcome our sample field.

I would like to take this chance to thank again for all those investors who have understand our advantages and continue to support us. And that's all for my part of the call, and I will now turn it over to our CFO Phil for the review of our financial. Thank you.

Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results of the second quarter of 2023. So in the second quarter, we reached record-breaking results across different set of operational and financial figures, including MAU revenues, total paid enterprise customers, profitability metrics, and operating cash flows. Driven by our robust user growth and healthy user engagement, Our revenues maintained rapid growth momentum and hit a new high at RMB 1.49 billion, representing a solid 16% quarter-on-quarter growth and a 34% year-on-year growth. Moreover, our calculated cash billions reached RMB 1.62 billion, up 65% year-on-year. Total paid enterprise customers in the 12 years month ended July 30, 2023, reached $4.5 million, up 13% quarter-on-quarter, a record high and back to fast-growing trend. ARPPU for paid enterprise customers decreased slightly, both sequential and year-on-year, mainly due to faster revenue growth for small sized accounts as recruitment demand from SMEs recovered better compared to larger companies. Moving to the cost side, total operating cost and expenses for this quarter were RMB 1.31 billion, up 26% year on year. Excluding share based compensation, Our adjusted operating costs and expenses increased by 18% year-on-year to RMB $1.05 billion in this quarter. Adjusted operating margin is 29.2% for the quarter, up by 8.8% points year-on-year. Cost of revenues was RMB $270 million. up 55% year-on-year, representing a gross margin of 81.8%, up by 1.1 percentage point compared to the last quarter. The gross margin started to bottom out from first quarter, and this trend is mainly due to sequential revenue growth in the second quarter. Our sales and marketing expenses were RMB $472 million. up 18% year-on-year. Adjusted sales and marketing expenses was RMB $408 million, up 12% year-on-year. This increase was primarily due to increased headcount in sales department. Notably, brand advertising and customer acquisition cost remained relatively stable with the same period last year. while our training 12 months paid enterprise customers and MAU increased by 18% and 65% year on year, respectively, which strongly demonstrated our continuously improved marketing efficiency. Our R&D expenses increased by 19% year on year, to RMB $366 million, and our adjusted R&D expenses kept stable with the same period last year. Adjusted R&D expenses as percentage of revenue reduced in the quarter, showing continuous improving trend sequentially. Our G&A expenses increased by 27% year-on-year to RMB 203 million, and adjusted G&A expenses increased by 14% to RMB 126 million, representing 8% of total revenues. Excluding certain one-off expenses, the percentage of adjusted G&A expenses to total revenue showed a downtrend downward trend since 2022 benefiting from our improving operating efficiency net income was rmb 310 million and adjusted net income reached rmb 568 million more than doubled compared with the same period last year and hitting a record high and our adjusted net margin reached 38%, up 16% percentage points year-on-year, and 19 percentage points quarter-on-quarter. Net cash provided by operating activities was RMB $764 million, up more than three times year-on-year and hitting a record high. The significant increase primarily due to from the 65% year-on-year growth of calculated cash billions. As of June 30, 2023, our cash, cash equivalents, time deposit, and short-term investments will RMB $12.8 billion, and the long-term fixed income investments will RMB $2.0 billion. which totaled 14.7 billion. We are confident that our outstanding cash generation capability and ample cash reserve will support our commitment to further business expansion. And now for our business outlook, for the third quarter of 2023, we expect our total revenues to be between RMB 1.53 billion and RMB 1.56 billion, with an year-on-year increase of 30% to 32%. Given that there is still a whole month of September before the quarter ends, some level of uncertainty is still ahead. However, we are glad to witness an encouraging growth trend, leading by the improved recruitment demand since the beginning of August, especially in online standalone purchase from SMEs. As the autumn recruitment season approaches, which is our high season, we are also expecting better recruitment demand from larger companies in the coming months. That 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 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eddie Wang with Morgan Stanley. Your line is now open.

Mr. Zhao, thank you for accepting my question. First of all, I would like to congratulate J. Carter, Ernest, and Changshuo History. I have two questions. The first is that Mr. Zhao's open remark mentioned that the demand for blue-collar companies is very high, and the demand for white-collar companies is recovering. I would like to ask if there are any external conditions that can make the recovery of these positions in Bailin better? This can let us know your opinion. Then, if we look at the trend, is the need for Bailin positions in China in the short term or the long term? There will be an imbalance in the structure of the supply and demand. If this happens, What impact will this have on the online recruitment pattern? This is the first question. The second question is, in the first half of the year, as Mr. Zhao mentioned, the entire number of paid users, the number of professional users, has also reached a new high. Then I would like to ask, if we look at the annual number of new customers online, Thank you, management, for taking my question. I have two questions. The first is about the blue collar recruitment. As Mr. Zhao has mentioned that although they are seeing improving demand for the white collar in terms of job posting. But what do you think, you know, as the macro improvements or the other factor will impact the demand of the white collar recruitment? And we all know that the blue collar demand actually is stronger than the white collar. So do you think this kind of dynamic in the recruitment in China will have the long-term impact on the competitive landscape of the online recruitment platforms? My second question is, in terms of the new addition of the annual subscription enterprise users, are they from the enterprise that has already used the other online platform and be attracted by us, or they never use any of the online platform. It's actually just a fresh new enterprise that go to our platform. Thank you.

Okay, I'll answer your question. Thank you for your question. I'll answer your second question first. In fact, in the past five or six years, every player in the network recruitment industry in China Thank you for your question. I would like to answer the second question first

So in the past five to six years, among all those online recruitment players, for a new customer who began to sign a new contract with any platform, there is always someone to help him to convert into a helping staff. There is a process from zero to one. Our role is to help, is to let a lot of new users who have never paid online recruitment services into this new area. The majority of our annual contract customers, I believe, is converted from our own unique customers. A small portion of that we are sharing with our competitors.

Our offline annual contract catchment majority are from the conversion of our online paid catchment.

But according to our observation, there is indeed evidence that from other platforms' offline contract catchment, However, according to our observation, there is evidence that the trend of the customers from our other online recruitment platform converting to our customers, the trend is increasing. From an operational perspective, it's not simply switching from A to Z, but dividing their budget into more cooperative partners. And back to your first question, the fixed external condition that's required for the white-collar equipment demand to recover, I believe it's time. This time, which will have an effect on the recovery of white-collar equipment under two mechanisms. The first mechanism is that the industry that recovers first will expand to other industries to help those industries recover.

For example, in culture, sports, entertainment, media, new energy, and the automotive market, it actually recovers faster.

For example, culture, sports, entertainment, media, new energy, automobile aftermarket, all these industries which are showing encouraging recruitment trend will impact other industries which can be affected by the recovery value.

And the second mechanism is that as time goes by, there were more concrete evidence which proved that the market is recovering in order to enhance people's confidence to increase their recruitment activity. For example, at the beginning, in the first quarter of this year, the large companies recovered relatively worse compared to the SMEs, which I assume the larger companies might be affected by confidence and

by confidence and forecast.

However, since the second quarter, we have witnessed that the enterprises with more than 10,000 employees and the medium-sized enterprises with between 500 to 1,000 employees

employees, their recovery are much faster. And for your question about the supply and demand, whether there is a structural imbalance, we have saw that for industries like real estate and the Internet, we do saw the declining equipment demand, but I don't think it has been strong enough to concrete a structural imbalance.

I'll answer that first.

That's my answer for your question.

Thank you, Professor. Thank you, Ed.

Thank you. Our next question comes from the line of Timothy Zhao with Goldman Sachs. Your line is now open.

Good evening, Mr. Zhao and Ms. Wenbei. Thank you for accepting my question. I have two questions that I would like to ask you. The first one is that we know that under current economic conditions, there may still be more supply of people looking for jobs. I don't know what strategies the company has to increase the return rate and ERP of the B-end? In addition to the existing business, do we have any other considerations about user transformation? This is the first question. The second question is to ask about the expectation of the change trend of the entire return users and ERP in the second half of this year. If we take a closer look at the construction of small and medium-sized enterprises, our offline list, and the blue and white collar, what special changes will there be in the second half of this year? Thank you, management, for taking my question. I have, I think, two questions. I think first, in the current market environment where we see a bigger number of the job seekers than the recruitment demand, what is our strategy in improving our pool as well as the paying ratio of the enterprise users? And do we have other monetization consideration on our massive user base? And what is our guidance or outlook on the paying number of customers, as well as our pull trend into the second half of this year? And if we break it down into SMEs, offline billings, and white-collar versus blue-collar, what will be the breakdown change over time in the second half? And secondly, it's on the OP margin in the second half. I'm just wondering if management have any guidance that would be very helpful. Thank you.

Thank you for your question. During this year's Q1 and Q2, we did see a lot of applicants for positions. For recruiters, it's easier to recruit people. During this process, whether we can start a C-end, which is a more difficult side, In the past 12 months, the number of customers paid to us from the customer side is more than 4 million, and from the company side, it is more than 2 million. In fact, the share of companies with more than 50 million in China is very low. Thank you for your question. So in the first and second quarter of this year, we do have written that

a lot of job seekers who find it more difficult to find a job and much easier for the enterprise to do the recruitment. But we have been quite very, very cautious on whether we should initiate some kind of monetization for the job seekers who are much more difficult under these circumstances. And we took no action. And for the enterprise users, I just talked about number, which is our last 12 months paid enterprise customers number is 4.5 million, and which is approximately over 2 million unpaid enterprises. That is a very small portion compared to more than 50 million enterprises in China. So we have learned that from our successful practice in blue collars and lower tier cities this year. We saw that our business model is very adaptive, so we will continue to bring more customers to our platform and convert them into paid customers.

And for your question of whether there are new initiatives for monetization products,

In terms of our monetization strategy, we believe that if you can provide higher value, if you can provide obvious value in a massive scale, you should definitely can do something, do more things in your monetization products, in your commercial products. That is actually part of the things what we are doing, and hopefully you can be patient enough to see that.

In your question, there are some questions

Regarding your question about the trend in our pool, our CFO will take that question.

Thanks, Timothy's question. So regarding the paid enterprise customers' number, in the quarter, we did record a very healthy rebound for the paid enterprise customers' number. So that metrics was back to 4.5 million for the 12 months paid enterprise customers. And in recent months, we witnessed a very quick increase for the small, medium-sized enterprise users paid to use our service. So this is the main driver. behind that increased number. So their purchase of our service is more through online, self-serve purchases. So basically, because of their contribution to the online, you know, their contribution to our total revenue is increasing. So that drags a little bit of the overall output. large enterprises, their R pool, this year's R pool compared with prior years is a little bit lower. But sequentially, we are witnessing that their R pool is recovering. So from the beginning of this year, we're continuously seeing that their R pool are increasing. So in terms of the sector, blue collar, particularly urban services from lower tier cities, contribute higher for the paid customers. And the quick rebound of paid enterprise customers, this fact also reflects, I think firstly, this is a sign of a recovery of the many aspects of the economy. our recruiting services can bring good value propositions to those businesses. So that's the reasons behind. And in terms of the company's margin, in this quarter, so basically in first quarter and second quarter, we continuously saw faster revenue growth. So given the future revenue streams will continue to rise, while major cost and expenses items are capped at mild growth pace, we think that our operating margin will maintain at healthy level and with upside potentials. This comment is more like a mid- to long-term comment. We expect the operating margin to steadily improve along with good top line growth. But in short term, it will subject it to seasonality and other one-off events.

Thank you. That's all of our answer to your question. And also, please proceed to the next slide.

Thank you. Our next question is from the line of Yubei with Haitong International. Your line is now open.

For example, in August, the active size of the recruitment users created a new high in the year and history. I would like to ask the management if this trend is in line with the general seasonal pattern. And what is the recovery trend of some K accounts in this? For example, are there any numbers, including the active rate, return rate, ARPU, etc., that can share with us? This is the first question. Thank you management for taking my questions. I actually have two for today. The first one is regarding our recent recovery trend. Like Zhao Zong has just mentioned, we've witnessed some encouraging trend from enterprise users in August. So I would like to further understand, does that comply to our normal seasonality? Or is it something that's quite unusual for this year? And then within that, what is the recovery momentum out there for our KA accounts? If management could share any operating metrics like engagement ratio, paying ratio, and ARPU, and et cetera, that we much appreciate it. So that was my first question. And then my second question is a little bit broader. We all acknowledge that this year, since that macro environment has been a little bit weaker than we thought it would be. So I'm just wondering under such a condition, what is our top strategic priority for now? Or maybe for the remaining couple of months this year, and for next year as well. So at the same time, what are the things that we might just want to lay back a little bit to wait for better opportunities in the future? So that was the second question. Thank you, management.

Thank you for your question. For your first question, whether the August trend is managed, for the online recruitment market,

There are two keywords. First one is the golden March and silver April. The second one is golden September and silver October, which both means a better market condition. And the second one for golden September and silver October, which is definitely starting from August.

And this has more relations to the larger companies.

For all those graduates from top universities who will graduate in July 2024, many larger companies were starting to do the recruiting for those top talents. during September to November this year.

On top of the seasonality, another factor is that I believe the recruitment demand is

gradually recovering alongside with the economy, and which will be shown in the data as follows.

In August, the daily active enterprise users number have reached a historical high.

Enterprises in all kinds of prices, large companies, medium-sized and small-sized, all types of companies have shown a very fast recovery trend in recruitment.

To be very honest, I can't tell how much proportion is due to the arrival of the forgotten, how much proportion is due to the gradual recovery, so I need to observe it for a longer time. But at present, I see that the trend of recruiters is good.

To be honest, I cannot clearly distinguish which part is from the United States and which part is from the recovery economy, but I still need to take some time to observe. But at least the current trend is quite encouraging.

The answer to the question about the KAA client is relatively simple. We see that companies with more than 500 employees, their new job increase rate is recently higher than that of companies with less than 500 employees.

For the recovery of key customers, the answer is quite simple, that we have saw that enterprises with more than 500 employees is newly posted, number of newly posted jobs, the growth rate, the sequential growth rate is faster compared to enterprises with less than 500 employees.

And in terms of accounting strategy, I would like to share with you several things we have been holding true all this year. The first one is

Based on the NTS, we will continue to increase our market share.

Based on the NTS, we will continue to increase our market share.

As we said, we have 12-month high enterprises, nearly over 2 million, which is a small portion compared to 15 million enterprises in China. We still have a very long way to go. And our second strategy, which is also something we have been doing for quite a long time, which is to continue to input, invest in technology, not only for application technology, but also career-fine fundamental studies.

In fact, under the difficult circumstances of the second quarter of this year, we have seen the growth of Lanling's services and the services of the downstream cities grow rapidly. I understand that it is the investment of many years of technology that allows us to

Actually, for the second quarter, which is a relatively tough time, we can capture the growth in the blue collar and lower tier cities. I believe which is the result of all these years of continuous investment technology, which help us to capture the opportunity when the environment allows.

In terms of continuous technological and basic scientific research, I understand that many of our respected companies, advanced companies, the alpha that is reflected in them is often due to their ability to establish themselves and thus be able to adapt to the environment of the client.

In my understanding, for our continuous to increase investment in technology and fundamental science, which is also what we saw for all those larger companies, advanced companies we respect, is that their outstanding alpha coming from their own capabilities allow them to adapt to new opportunities once they come.

Thank you.

That's my answer for your question. Thank you.

Thank you, Mr. Zhao.

Thank you. Our next question comes from the line of Wei Zong with UBS. Your line is now open.

Hi, Mr. Zhao. Good evening, everyone. Thank you for answering my question. Congratulations on the very strong profits this quarter. First of all, I would like to ask about the rhythm of the recovery of corporate recruitment. Because in the past period of time, the red line may be more inclined to reduce the cost-effectiveness after uncertainty. So I would like to ask, if the red line begins to stabilize and warm up, will the enterprise also need a longer time to restart the expansion of personnel and increase recruitment budget? Thank you management for taking my questions. First, just want to follow up on the recovery pace of the enterprise hiring demand. Given that we're experiencing a long period of uncertainties in the macro, and enterprises seem to lean forward or focus more on cost controls, will that last a little bit longer? Which means that after the macro environment stabilizes and started to warm up, enterprises might still need a little bit while to restart headcount expansion. just given our very resilient cash position and profitability, just want to get an update on the progress of our share buyback program, as well as management's other thoughts regarding our shareholder returns. Thank you. 好,那个我先说一些小微企业,我们遇到的小微企业,就是说举例说有个人招了十个人,有两个人走了,那么对他来说他今天确实需要十个人,

Thank you for your question. And I will start with small and medium or even micro enterprises. For example, for small enterprises, when you have 10 employees, when two of them are

leave the job, they simply need to recruit two more in order to keep on with their business. I think those activities are the same for small and medium-sized enterprises. Anytime they need to do the recruitment whenever they have enough.

And then the behavior of big companies, I think, as all of us will understand, the behavior of big companies will be more cautious and slower. I am willing to say two phenomena. One phenomenon is that And for large companies, as we have all known, that larger companies are more cautious and slow in terms of increasing their headcount and budget.

And I can give you two examples of phenomena. The first one is the large companies have been less active in laying out foreign people. So that situation is becoming less and less.

And another thing is that we have all witnessed a lot of large companies. They do the layoff on one hand and do the recruitment on the other hand simultaneously.

which is actually, this is a very good opportunity for them to fire those people who are expensive and low quality and hire some people with high quality but much more cheaper. So this is the opportunity which all of those well-trained administrators will take.

As for how to see the whole industry, no matter big or small, start to recruit people,

我现在暂时回答不了这个问题,我对此没有明确的预测。 And in terms of when we can expect enterprises across all industries and all different sizes starting to do a very aggressive recruiting, I don't have a clear view at this moment.

您问到我们回购这些领域的事情,要请Phil来回答您的问题。

So last year we had our first trench of share buyback programs. The size was $150 million and we used up the money at the end. This year we have announced a new round of share repurchase program in Q1. The total size is also $150 million. We just executed a little bit, and we will continue to execute it going forward. Regarding our situation, we have high cash positions and good profitability plus positive free cash flow. We do appreciate shareholder continuous support, and we definitely will think about how to improve shareholders' returns. Company is doing some research and trying to find appropriate ways to increase shareholders' value. So please give us some time.

Thank you. That's all for our answers. And operator, please proceed to the next question.

Thank you. Our next question comes from the line of with CICC. Your line is now open.

I have two questions. The first is, we see that the blue line of the service industry and warehouse logistics is a stable growth point for us this year. We understand that compared to other peers, our performance is outstanding enough. What are our main competitive advantages? And how do we see the continuity of business in this regard? The second question is, Okay, I will translate it by myself. The first one is that the service industry and warehousing logistic blue-collar workers have been a stable growth point for us this year. We want to know if our performance stands out compared to other competitors in the same field and what our main competitive advantages are. How do we currently view the sustainability of this business? Second one is, as for the platform VC ratio, what are the recent trends since the beginning of the year? How has the renewal rate of long-term customers and the speed of income recombination changed compared to before. Thank you.

Thank you. Thank you for your question.

Our Moocolor users accounted for more than 30% of our total users. And as I just said, the job posting daily, average active job posting for the service, urban service industry has exceeded more than one million every day, which these two numbers combined together showcase a very strong advantage with several-sided network effect. And that also demonstrated by our very smooth growth in further expanding into the lower tier cities.

A very strong double-sided network effect have helped us to gain our strong advantages in the white collar

and the first tier cities area. And this will also help us to further expanding to lower tier cities and blue collar users.

And the achievement we have for blue collar users has a very high relationship with the project we reported before.

That is a high-world project, counter project. And there is a situation in the online recruitment for blue-collar users for a job which is the actual salary is 5,000 RMB per month. Those people who post a job with more than 8,000 RMB per month are much easier to receive revenue.

And from a platform's perspective, alongside with our continuous investment in technology, and if you stick to your policy of protecting the job seekers and help those recruiters, help those users,

who can tell the truth, who are more authenticated, have more exposure, and those who are not be punished, then you can attract more and more blue-collar users coming to your platform.

And based on that policy and the power of technology,

The counter project we have been doing for quite a while has shown very strong durability for the blue collar ecosystem.

Okay, so remaining a couple of questions, I'll answer one by one.

So first of all, your question is, you know, the C to B ratio for the platform. So we witnessed the platform C to B ratio as a key indicator of platform demand and supply. So basically, this demand and supply ratio continued to improve starting from year begin. We think this is a very clear evidence that shows overall economy is through a rail recovery. In terms of what I just mentioned is the platform active user demand and supply ratio. And in terms of the daily newly acquired users, so this C to B ratio in short term, partially due to seasonality and partially due to macro recovery with leaf In August, we are seeing much improved C to B ratio, and that ratio is, you know, best year to date. You know, we consider this as a very encouraging sign. And in terms of the second question, annual contract, you know, retention, and in terms of their, like, NDRR, net dollar retention rate. We are seeing both metrics are, you know, secretionally bottom out from the beginning of the year. The trend will likely to go on in the following quarters. And last question regarding the revenue recognition thing. In short term, because of a higher percentage of contribution from SME clients and less little bit less annual contracts you know our online purchase normally will be consumed by you know those customers in short term short period of time so revenue recognition in short term will slightly you know faster than before however this is just a temporary situation and mainly related to faster SME growth in the near term so that's my question That's my answer to your question.

Thank you. Thank you. Due to time constraints, 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 team directly. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.