Kanzhun Limited (BZ) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Kanzhun Limited Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a Q&A session. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Gwen Bei Wang , Head of Capital Market and IR. Please go ahead, ma’am.
Unidentified Company Representative: Thank you, Operator. Good evening, everyone. Welcome to our second quarter 2021 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao; and our Director and CFO, Mr. Phil Yu Zhang. Before we start, we would like to remind you that today’s discussion may contain forward-looking statements, which are based on management’s current expectations and observations that involve known 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 cautions you not to place undue reliance on forward-looking statements and do not undertake any obligation to update these forward-looking information except as required by law. During today’s call management will also discuss certain non-GAAP financial measures for comparison purposes only. For definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our website at ir.zhipin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO.
Jonathan Peng Zhao: Hello, everyone. Welcome to our first earnings call as a public company. I would like to take the opportunity to express our sincere thanks to our users, employees and investors. Thank you for your trust and support. We will continue to focus on our main business, improve the efficiency of connecting talents to jobs, utilizing the power of technology to deliver user satisfaction by optimizing efficiency, equality and choice. We are pleased to report that we have achieved strong results in the second quarter this year. We recorded a total revenue of RMB1.17 billion, an increase of 173.9% year-over-year. Our calculated cash billings reached RMB1.44 billion, with a year-on-year increase of 175.3%. Well, we maintained our rapid revenue growth, we also achieved positive non-GAAP profitability in this year -- in this quarter, sorry. Our adjusted net income which excluding share-based compensation expenses were RMB248.5 million. We believe our quality growth is a result of our efficient business model, continuous enhancement of technology and the superior commercial products, which leads to the expansion of our user base and improve the service capabilities. In the past quarter, the average MAU of BOSS Zhipin app reached 13.4 million, a year-on-year growth of 44.5%. The ratio of DAU to MAU is relatively stable indicates that we have maintained high user growth and activities. Now let’s take a closer look at our progress at the user level. Overall in the second quarter, we continue to follow the path to be a platform that covers all industries, user groups and job categories. From the perspective of job seekers, we further improved our service capabilities and the penetration rate among the white collar workers in the higher tier cities by continuing to solidify our competitive advantages. At the same time, we were aiming to extend our coverage in lower tier cities and the traditional industries. Being the largest group of jobseekers, blue collar workers are our important target users presently and the main driver of our user growth. The total number of the blue collar users on our platform keeps increasing steadily. Due to the low online penetration rate of blue collar recruitment and the different behavioral preference from the white collar users, we have made tailored adjustments and optimizations in aspects such as matching algorithm, job authenticity, user safety and product usability. And to better serve our gold collar users, we actively cooperate with headhunters and have made present progress. We have also noticed that in the second quarter, which is typically the beginning of graduation season for college students, a large number of college students joined our platform. Through enhanced and diverse services, such as online publicity and live campus recruitment activities, we have become the most preferred online recruitment platform for college graduates. On the enterprise user side, we have noticed that more and more enterprises started to attach greater importance to the efficiency and the return of investment of the recruitment platform. As a result of various factors, including the quarterly release recruitment demand brought about by the sustained post-pandemic economic recovery, the increase cost of human resources and the emerging supply and demand in the talent recruitment market. Since to our efficient and cost effective business model, numbers of our enterprise users maintain this rapid growth trend. As of June 30, 2021, the cumulative number of verified enterprise users reached 14.85 million with a year-on-year growth of 78.5%. The cumulative number of verified enterprises reached 7.2 million, with a year-on-year growth of 76.1%. For the enterprise user composition, our BOSS population accounted for 65.8% of the whole enterprise users in the second quarter, which remain stable. It’s worth mentioning that the proportion of small- and medium-sized enterprises has increased to 83.6%, which is closer to the China’s overall enterprises size ratio. This further proof that for the massive number of small- and medium-sized enterprises in China, direct chat between enterprise managers and job seekers is inconsistent with their demands, we will provide even better service for greater scale small- and medium-sized enterprises by further studying their recruitment needs and their characteristics. We also aim to actively expand into traditional industries such as manufacturing and finance, while maintaining and strengthening our advantages in the industries we already well covered with internet technology and urban services. In terms of our R&D capability, we continue to iterate our main app by every two weeks to three weeks to optimize functions such as recruitment and job seeking information display and management, work messaging and video interviews, aiming to improve our user experience and encouraging their engagement. As a technology driven company, technology capabilities are core to our competitiveness and we have been continuing to invest heavily in acquiring talents. As of June 30th, we had R&D team with more than 1,000 employees. In terms of algorithms, on top of continuous pursuit of improving matching accuracy, we also pay a great deal of attention to delivering customized and fair recommendation results to enable more long tail jobseekers and SME enterprise users to be recommended and exposed and to facilitate as many users as possible to engage and fulfill their demands on our platform, ultimately improving user interaction and satisfaction. As for our operations, we continue to improve and refine our operational capabilities in detailed categories. We are also conducting in-depth research and optimization for position classification of job categories in specific industries. At the same time, we have made significant investments in platform security. Our offline security and review teams have covered major cities in China. In each covered city, our team is able to arrive at the recruitment location within two hours after receiving users complaints and we plan to further expand our city coverage in the future. Security of job seekers is the cornerstone of our platforms operation. Platform, security and authenticity of job information have always been a crucial obstacle hindering the online penetration of blue collar recruitment and job seeking in the past. In coordination with expansion of our blue collar business, we have made a series of security upgrades to further consolidate the infrastructure of our platform. We continue to improve the sales capability and expand the geographic coverage of our direct sales team. In the second quarter, we established the new branches in Foshan and Dongguan bringing our total number of branches to 25. At the same time, we focused on the strengthening the professional competency training for our sales force and improving the efficiency of individual sales personnel. As for marketing, we continue to implement dedicated marketing strategies, user acquisition through both brand advertising and online traffic. We were honored to have been appointed as the official Human Resource Supplier for the Beijing Winter Olympics. As a result, underpinned by our students and economies of scale, we continue to see significant improvement in the marketing promotion efficiency, which Phil, our CFO will discuss these later in more details. Now let me spend some time to talk about the Cybersecurity Review that everyone is caring about. As we previously announced, the company is currently actively cooperating with the Cyberspace Administration of China on the Cybersecurity Review. At the same time, the company is conducting its own self examination and rectification program, focusing on security and user privacy protection, in accordance with the latest national laws and regulations such as the Data Security Law and Personal Information Protection Law. In compliance with regulatory requirements, our new user registration remain suspended on our BOSS Zhipin app, which will to some extent impact the company’s user growth and revenue. However, we firmly believe that the regulations are necessary to regulate the industry and protect the users, and will ensure the long-term sustainable growth of the industry and the company. Given the current circumstances, we make more efforts to serve better serve our existing users. Meanwhile, we fully cooperate with review teams’ work in the hope of completing the process earlier. However, the company does not yet have a clear timetable for either the completion of reviewing or when shall we be able to review new users with registrations. Finally, to summarize, China’s online recruitment market still has ample room for sustainable development and a considerable number of job seekers and recruiters have now started to use online recruitment services. The existing service offering and the value provided to customers have yet to be fully explored. As a new generation of the online recruitment, we are adopting an innovative model by combining the recommendation, direct chat and mobility with our dedication to the concept of user satisfaction first. We will continue to invest in technology, enrich our product offering and enhance our service capability, penetrate into more industries and regions. Although, there are some fluctuations in the short-term external environment, fundamentally, our business model remains effective and will be further demonstrated. We are full of confidence in the future growth potential and believe that we can continue to provide fair, valuable and more efficient service to nearly 600 million workers and 14 million enterprises, especially small- and medium-sized enterprises and both long tail workers in China. With that, I will turn to our CFO and Director, Phil, for the review of our financials. Thank you.
Phil Yu Zhang: Thanks, Jonathan and Gwen Bei. Hello, everyone. Thank you for joining our earnings call today. I would like to give a brief overview of our second quarter 2021 financial results and then I will discuss our outlook for the third quarter. Before I began, please note that all amounts are all in RMB and all comparisons are on a year-over-year basis unless otherwise stated. We continued to achieve robust operational financial growth in the second quarter of this year. Our calculated cash billings increased by 175.3% to RMB1.44 billion and our total revenues increased by 173.9% to RMB1.17 billion in the quarter, beating our target. This rapid revenue growth was mainly due to the increase of revenue from our online recruitment service, which increased by 174.7% to RMB1.16 billion, contributing to over 99% of our total revenues. The increase of revenue from online recruitment service was driven by the strong growth of our paid enterprise customers following the expansion of our user base and enhanced the service capabilities. As Jonathan just mentioned, with the recovering of recruitment demand and increasing penetration of online recruitment service, especially for enterprises, together with our innovative model, we have seen rapid growth of our accumulated enterprise users, which grew by over 78.5% to 14.9 million by the end of June 30, 2021. With more enterprise users posting jobs on our platform, more positions became commercially mature enough to be identified as hot position, which we can charge a fee for job posting, which leads to a higher paying ratio. These two factors combined contributing to our strong pay enterprise customers growth, which increased by 135.9% to 3.61 million in the trailing 12 months ended June 30, 2021, compared to 1.53 million in the same period ended June 30, 2020. Furthermore, number of our key accounts grew by 146.6% in the trailing 12 months ended June 30, 2021, and leading to 229.3% growth in revenue from key accounts in this quarter, demonstrating the enhanced ability of serving large enterprises, converting more users to long-term customers and cross-selling more service to existing paid customers. Now turn to our cost side, total operating cost and expenses were RMB2.59 billion for the quarter. If they exclude the share-based compensation expenses, which were RMB1.66 billion, including RMB1.51 billion reward to our core management, our adjusted total operating costs and expenses were RMB933.7 million, an increase of 63.1%, compared to RMB572.3 million in the same quarter last year, resulting to a positive adjusted operating income of RMB239.8 million. Our gross margin remained stable at 87.7%, with cost of revenue increased by 164.2% to RMB143.2 million in this quarter, primarily driven by hire third-party payment processing cost, operational employee-related cost, server and bandwidth costs, resulting from increased the user base and the transaction volume. Sales and marketing expenses increased by 45.8% to RMB4 -- RMB534.2 million in this quarter, primarily due to our increased sales and marketing, employee-related expenses and enhance the brand advertising and customer acquisition activities. Noteworthy, our sales and marketing expenses represented 45.7% of our revenue in this quarter, down by 40 percentage points from 85.9% in the same quarter last year. This declining sales and marketing percentage demonstrated higher efficiency of our marketing initiatives and it is a proof of our strong economies of scale. During this quarter our R&D expense increased by 113.7% to RMB250 million, primarily as a result of increased R&D personnel, payroll, other employee-related cost and share-based compensation. We will continue to invest in R&D talents as one of our core growth strategy, allowing us to maintain our leading technology capabilities, which is essential of our competitiveness. General and administrative expenses were RMB1.67 billion for this quarter, mainly resulting from a one-time issuance of Class B ordinary shares to TECHWOLF LIMITED, which is a company controlled by our founder as a reward approved by the Board before the IPO. Excluding share-based compensation, our G&A expense grew by 68.2% to RMB83 million this quarter, which was mainly due to the expansion of our G&A team. As a result of the foregoing, our net loss was RMB1.41 billion in the second quarter. Excluding share-based compensation we achieved the profit -- profitability under the non-GAAP measure, our adjusted net income in this quarter -- this year was RMB246.5 million, compared with adjusted net loss of RMB143.4 million in the same quarter last year, translating to adjusted net margin of 21.1% for this quarter, representing of 54 percentage point improvements. This operating leverage was driven by the economy of scale and our continued efforts in increasing efficiency and also is a proof of our strong network effect. Supported by the strength of our profitability, we recorded the net cash generated from operating activities of RMB671.2 million in this quarter, compared to net cash used in operating activities of RMB14.2 million in the same period of 2020. Moving to the balance sheet. As of June 30, 2021, our cash and cash equivalents and short-term investments were RMB11.7 billion, compared to RMB4.5 billion as the December 31, 2020. The increase was primarily attributable to net proceeds from our successful listing, as well as our growth in operating cash flow in the quarter. Now turning to our business outlook for the next quarter. For the third quarter of 2021, we expect our net revenue to be between RMB1.18 billion and RMB1.21 billion, representing a year-on-year growth rate of approximately 100% to 105%. As we just discussed, there are still uncertainties regarding the ongoing Cybersecurity Review and timing to resume new users’ registration. The impact on our revenue was reflected in the outlook, but still subjected to change. This estimate was based on assumption that the review will last till the end of September. In closing, we delivered a strong result for our first quarter as a public company and I would like to thank again to our team, our esteemed users and shareholders. In spite of the uncertainty of the Cybersecurity Review, we are still in a fast growing stage, with healthy financial status and improving leverage. Our long-term competence stays unchanged and the business model remains effective. I am excited about the coming quarter and looking forward to share our progress with you again. This concludes my -- our prepared remarks. Now we would like to answer questions. Operator, please go ahead.
Operator: Thank you. Your first question comes from the line of Ken Hu of TH Capital. Please ask your question.
Ken Hu: Good evening, management, and happy Friday. Just a couple of questions, the first one is, so we saw some data about the growing weakness of China economy. So under this kind of a circumstances, from your frontline employment activities, what do you see different industry, there are employers confidence level in terms of hiring people. So, that’s number one. Number two. So, the Security Review -- Data Security Review has been in place for more than a month and we don’t know when this review is going to be lifted. So let’s say, if the government review is going to last for a while, and during this period, at this point, we can’t really obtain the new customer online. So what’s company’s strategy to deal with it, to cope with it and to get new customers online? So that’s the two questions. Thank you.
Phil Yu Zhang: Okay. So I can answer your second -- first question first and our CEO can comment on your second question. So, our business -- we have diversified industry contribution for our business. So new economy industries as a whole account for a large portion, although, single industry and single company contribution is low. So, I think, overall, the -- although the macro is not very strong, might not -- might be the situation, but we haven’t see such kind of a strong signal on our platform. So, our business growth is mainly driven by paying users growth. We are still in the stage of seeing structural user increase at this moment. So, we haven’t seen direct impact from macro, but we will closely monitor. So recently there are some like -- some industries, I think, probably, some investors, you would like to ask a question. So I can comment at this time. So some industries, for example, like education industry, is just the one of the new economy industries, just account for a small percentage in our total revenue. So education industry, this industry accounted for only mid-single digits for our total revenue now. So we think any one industry’s impact to our business is limited. So regarding the company wise, so some companies, they might thoughts some like the impact from either macro or either something like regulation related things. We think that, because we serve a large number of small-/medium-sized companies, so we have relatively low contribution from top customers. Top 20 customers only account for less than 4% of total revenue. So changes in any single company, or like, as I just mentioned, the single industry to our business would be only limited -- have a limited impact on our growth trend. So that’s my answer to your question.
Ken Hu: Thank you, Phil.
Jonathan Peng Zhao:
Phil Yu Zhang: Sure.
Jonathan Peng Zhao:
Unidentified Company Representative: Okay. Now I will cover the question.
Ken Hu:
Unidentified Company Representative: Okay. So we are under this Cybersecurity Review and since July the 5th you know our new user registration was suspended and this do have impact on our business. So this especially user registration has impact on our MAU and DAU. But since our large base of existing users can use our app normally. So the MAU for July remains relatively stable and our DAU to MAU ratio also remain stable, which means that we continue to keep our user activities. In the meantime, we are focusing to better serve our existing customers, which we make a lot of efforts. And on the revenue side, we are also impacted, because this suspension was not only for job seekers, but also for enterprise users. Our sales team and customer service team focusing on serving the existing customer, as on the professional and in-debt service capability we conducted some capital training for our teams. And the extent of the impact depends on the how long the review will last. You can see that we had given guidance for our next quarter revenue. But this is our assumption that this new user registration suspension will last till the end of September. But instead as an enterprise, we cannot and we should not to predict on the timing of this suspension. But since we need to give this revenue guidance, we just make assumption that this will last till the end of September, which is we think is appropriate and reasonable. This has nothing to do with our estimate on when this will resume and this is not something we should do. But as your question on what we can do to increase our new users, we cannot do anything about that, because we are not allowed for our new user registration and we are focusing on our existing users. But I believe that this suspension of the impact to our business is temporary and our effecting -- the effectiveness of our new business model is not affected in the long run. And lastly, I like to emphasize that our whole company is fully cooperating with the review team on their work. And that’s all from my past conference.
Ken Hu: Thank you. Thank you. Thank you for the answer.
Operator: Your next question comes from Eddy Wang of Morgan Stanley. Please ask your question.
Eddy Wang: Thank you for taking my question. I actually have two questions. Firstly, regarding the third quarter guidance. Also, as Jonathan mentioned that, this guidance already is affecting the suspension of the new user registration till the end of the third quarter. But actually, in my view, that the guidance is still quite strong. So, just to mention that, if you have focused on the existing users services and the user experience. So basically I just want to ask, this is will reflect in the app of the existing users or will reflected the paying pain ratio improvements of the overall enterprise users. That’s the number one question. And the number two question is that, given the more stringent regulatory environment for the internet or these fast growing industries, like education. So we will see more and more the staffs or employees from this industry actually is looking for the new jobs. So, in the short-term, I mean, maybe it has some headwinds in terms of a higher demand of this fast growing company. But how do you think in the longer term, this situation will benefit the overall the online recruitment industry? Thank you.
Phil Yu Zhang: So, Eddy, I would like to add a little bit color to the ARPU of the second quarter. So second quarter, our enterprises, like, ARPU on our platform was relatively stable. So it’s the revenue growth of our business, mainly driven by the number of enterprises users growth, not the ARPU. So this is the situation of second quarter. So, Jonathan, can comment your next two questions.
Jonathan Peng Zhao: Okay. Firstly, I will make supplement to Phil’s comments on your first question. And currently, our whole sales team and our customer service team are focusing on our existing users. We are continuing to improve our renewal and the repurchase rate. And this does not just help our current state this will help us in the long run. But currently we can be more focused on this matter and from a group level, so we can make the strengthening our service capabilities. And regarding your second question for the educational industry, we do have noticed a lot of employees who leave their companies and we have seeing our existing users that the job seekers from the educational industry has been more and more active to looking for jobs. And there are two kinds of job seekers in this industry. First one is this standard jobs like technology, products, human resource, G&A and operations, which has some relation to the industry, but not so much. So they are more common for every industry. So they are much easier to find a new job. And the second type is for the K-12 teachers and coaches. And for them there are two ways. First one they can go to the institutions who are -- there are opening for teachers like the school or college. And the second one is they can change their job career direction. We have noticed because these companies in the education industry they have been recruiting heavily recent years. So there are a lot of junior workers like fresh graduates or newly graduated for one year to two years in recent years, so they are more flexible in job seeking. They -- so my observation is that they can emerging quite well and are still living well. So the situation on our platform is there are still a certain number of job seekers there, but they are emerging into the overall job seeker group quite well and looking for the future and as the overall educational sector accounted for quite small number of our overall user base. So we didn’t observe any very obvious impact to our overall industry. So it’s just a merging and emerging situation and but they are actually increasing their activities. That’s my answer to your second question.
Eddy Wang:
Jonathan Peng Zhao:
Operator: Your next question comes from Piyush Mubayi of Goldman Sachs. Please ask your question.
Piyush Mubayi: Thank you, Jonathan, Phil, Gwen Bei. If I can just go through the business as it’s been performing, your guidance at RMB1.2 billion for the third quarter is strong despite the CAC Review. I wonder if you could take us through the drivers that you’re observing and what the risk reward around that number is, i.e., can it slowdown from here, if COVID was to pick up or any other event was to happen or would it accelerate as you go through potentially a slowdown in the economy, based on what you’ve observed through the early part of 2020? My second question is on your deferred revenue, which is RMB276 in terms of the change. It points to the -- to a slowdown the first quarter and we are observing after three quarters of an acceleration in the number. Could you just help us understand what’s going on there? And the third question centers around, how well you manage costs in the second quarter. And I wondered, given the outlook for the third quarter, would you be -- will you be running the sales and marketing expense line that’s tightly managed as you were running it in the second quarter, so that the focus remains on what is necessary in the quarter and thereafter from a cash perspective? Thank you.
Phil Yu Zhang: Okay. Thank you for your question. So I should answer your second question first. So regarding the, sorry, sorry, what’s your second question?
Piyush Mubayi: On the deferred, sorry, the second one is on…
Phil Yu Zhang: So the deferred revenue, yes, sorry, the deferred revenue, the changes of deferred revenue was mainly seasonality issue. So, normally our second quarter in terms of the cash revenue, cash collected from business is low. So the lower conversion rate or lower percentage as the GAAP revenue to the calculated cash billing, that ratio basically is related to the seasonality. So we are still seeing healthy, at least for the second quarter, we are still seeing healthy cash revenue growth and we didn’t see any like a slowdown with our cash revenue changes. So this is a second the second question. So, your first question regarding for the overall the guidance, so I think, it’s now -- it’s already by the end of August and we believe that we have a certain level of visibility of August, the whole month and we have already completed the July. So, basically, we only have one month is ahead of our growth. And so, basically, we have certain level of confidence of our business growth in third quarter no matter what happens in the third month of this quarter. So this is our rationale to do the forecast. And we think that the -- we try to be conservative with our numbers. But all of the numbers are still based on some like our -- probably, like, extrapolated judgment for the September. So this is our initial thought and it’s subjected to change. So we hope that you can understand in normal situation what we can get for the third quarter, so we can give you some kind of like sense to the numbers that we can have in third quarter, is better than we don’t mention anything about our third quarter and the Cybersecurity Review by the regulator. So this is our intention. So I share it with you. And the third question regarding third quarter cost expenses, we think that, because we are not allowed to grow our users and our enterprise customers, so our topline are in some extent got impacted, but the way we like to, as Johnson just mentioned, the way we like to enhance our service to existing enterprise customers, existing job seekers, and by serving them well and we can try our best to have, I think, the best we can have with the revenue. So this is the revenue. And regarding for the expenses, definitely we would like to have very stringent measures for our various cost items. And so for the largest cost item is marketing and traffic related item. And because we are not allowed to grow our users, so we reduce our user acquisition-related marketing activities. So that will balance the -- because we cannot generate -- might not generate enough revenue, but we spend less in third quarter. So, generally speaking, we think that we can -- we hope that we can control the third quarter margin and we can deliver a solid the third quarter results, let’s see.
Piyush Mubayi: Thank you and congratulations again.
Phil Yu Zhang: Thank you.
Operator: Your next question comes from Wei Xiong of UBS. Please ask your question.
Wei Xiong: Thank you management for taking my questions. First question, I want to ask about the potential impact on Personal Data Protection Law, would that potentially impact our operation or is there any adjustment that we need to make that could impact the effectiveness of our matching and recommendation algorithm? And secondly, just want to follow up on the latest progress in the blue collar segment recruitment business. If there’s any operating data or financial data that management can share, it will be very helpful? And if we look at the second half of this year and the next year, what are your strategies and some of the operational goals that you could share? Thank you.
Jonathan Peng Zhao:
Unidentified Company Representative: Okay. I will take your first question regarding the Personal Information Protection Law. And this is actually not a new regulation and our understanding that this is constructed based on the Network Security Law and the Data Security Law. So this law has been in its origin. And along the along the process, we have been strictly following the progress of the law rules and we have been adjusting our boundaries of our app according to our understanding. And before this Personal Information Protection Law came out, we also noticed that there are gaps for comments and combining it with our work. We sorted out our Personal Information Protection Law from various perspectives, such as products, operations and data security, and continue to updating once again to improving our systems and procedures to be more in compliance with these laws. And next one is about, we want to highlight that our app have been attached very great importance to the privacy protections since the day one. For example, during our communication between jobseekers and enterprises, so the switching of resume or contact formation has to be happened after the contract parties clicked yes and they -- then they can share the information. We have been insisting on this one for many, many years. And on this impact on our recommendation algorithms, we have done a lot of work and studies on that. And but we are -- since we are collecting user data according with the law, we don’t think this will have too much impact on our commission results, because the most sensitive data are not used in the algorithm and have no fundamental impact to our business. So we have been doing our studies and doing our understanding and continuing to improving the user privacy protection. And we do believe these are regulations, more strict regulations are good thing to the overall industry and user protections, and we will do our best to be incompliance with the regulations. That’s all for my question -- answer for my first question.
Phil Yu Zhang: So regarding the blue collar in this -- so, in the quarter, we are seeing faster user growth from both blue collar and white collar segments. And blue collar segment continues to outgrow our white collar business. So, among all sub-sectors related to blue collar, urban service sector grew nicely with verified enterprise users up by more than 120% year-over-year. So we see good momentum, good progress with our blue collar business. And in the second half, we think that we will continue to focus on building foundations of our blue collar recruitment service. We will further optimize our products and service, improve blue collar job seekers user experience. Because of blue collar job seekers, they have different user preference. So we are providing more user friendly products to them, like mini resume, simplified mini resume templates. And algorithms, we are also making blue collar related to customization, like in terms of the recommendation, we provide them with business areas related recommendation. And also to protect blue collar job seekers, we will have to implement stricter platform rules to restrict false information and illegal recruitment activities on BOSS Zhipin. In the second quarter, as Jonathan just talked, we enhanced our own platform security and verification team. So that will all but measures, we think that we will make sure a blue collar people, they can have a satisfied user experience and that will also increase their user stickiness and increase their platform loyalty. And in terms of the blue collar business, the revenue contribution on our platform continues to grow. So in second quarter, the revenue from blue collar business accounts for roughly like mid-20s of our total revenue. So this is a still up -- uptrend, so we will have to see in future growing percentage from blue collar contribution to our business.
Wei Xiong: Thank you, management.
Operator: Your next question comes from Colin Liu of China Renaissance. Please ask your question.
Colin Liu: I’ll translate for myself. So as you mentioned that, there is a very pertaining growth from blue collar business market and I just want to particularly in the urban blue collar segment, but apart from that there’s a still very large portion of the market, well, what we call traditional blue collar workers for manufacturing or from construction industries. I wonder going into the second half and the rest of this year, do we have any strategic updates on that part? How can we accelerate growth, particularly towards that part of the business? And the second question from me is, when we deepen our penetration across blue collar market, it’s sort of actually that the company is going to work with a number of partners and what’s the strategy of choosing or working with different kinds of partners? Thank you.
Phil Yu Zhang: Okay. Thank you for your question. So, I would like to briefly answer your question, and Jonathan, will give you a more color about the -- our strategy or our cooperation with agencies for the blue collar business. So, regarding, you just mentioned, the manufacturing related blue collar and also maybe construction related blue collar. I think they are part of blue collar market. But we see that the urban service sector is the largest and the fastest growing segment among all of the blue collar segments on our platform. We think that because of various structural trend letting more people coming to urban area finding a job. So our app, because of our model is very friendly to job seekers and employers, we can serve such kind of groups of people very well. So we see that the -- our urban service sector blue collar people are our near-term focus. And we also believe that manufacturing like logistic related and also like construction related, real estate related blue collars, they are also very important, but they are not imminent our focus. We can serve them and but we think that the largest proportion of growth might still come from the urban service area. And regarding the cooperation pattern between the urban service blue collar and manufacturer relate related collar -- blue collar are a little bit different, because of most of the urban service enterprises users, they come to platform to hire job seekers directly. But for manufacturing enterprises, they tend to use agencies to hire blue collar people from online platforms. So that’s why we need to cooperate with third-party agencies. We cannot do it by only ourselves. So Jonathan can comment a little bit with our cooperation with the agencies.
Jonathan Peng Zhao:
Unidentified Company Representative: And to answer your questions, you just mentioned the word partner. I’m thinking, because when you are mentioning partner, we are referring to those talent agencies in the manufacturing area. The fact is that, in the massive huge manufacturing industry in China, there are a lot of agencies that are recruiting people for the enterprises. But -- and if -- but when there are more workers, ordinary workers come to our platform, we are observing that those agencies come to our platform to find the talents together for the enterprises and that arises the challenge on how to cooperate with agencies. And to find an answer, we find a way so we can show this, this came from four people, which is job seekers, enterprises, agencies and platform to 3%. That means we will stand together strong firmly with the job seekers. So we will find a way to negotiate with those agencies to find a more clear the talent rules. So we have done a lot of work to analyze this industry to protect our users, to protect our ecosystem so we in -- achieved manner. So we are doing a lot of work on this. We will need some time. But our whole team are quite positive on this so we can find effective way to cooperate and to tap further into this manufacturing industry. That’s my answer to your question.
Colin Liu:
Operator: Okay. Due to constraint that concludes today’s question-and-answer session. At this time, I will turn the conference back to Gwen Bei for any additional or closing remarks.
Unidentified Company Representative: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or the TBT Investor Relations. Thank you.
Phil Yu Zhang: Thank you.
Jonathan Peng Zhao: Thank you.
Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.
