Kanzhun (NASDAQ:BZ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Kanzhun Limited reported a 14% year-on-year revenue growth to RMB 2.4 billion for Q2 2026, with an adjusted operating margin of 43.8%, up 1.9 percentage points from the previous year.

The company announced a shift in growth strategies, focusing on user penetration in lower-tier cities and increased monetization in first and second-tier cities, alongside leveraging AI to enhance platform efficiency.

The Board approved an annual dividend distribution of US$230 million, and the company completed US$300 million in share repurchases, totaling US$530 million in shareholder returns for 2026.

Kanzhun's AI-driven services, such as AI-powered interviews and resume filtering, are contributing to operational efficiencies and higher customer spending.

For Q3 2026, the company expects revenue growth between 11.4% and 15.6%, maintaining a strong cash position and committing to sustainable shareholder returns.

Full Transcript

OPERATOR (Operator)

Thank you for standing by, and welcome to Kanzhun Limited Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Laura Chan, Senior Manager of Investor Relations. Please go ahead, ma'am.

Laura Chan, Senior Manager of Investor Relations

Thank you, operator. Good evening and good morning, everyone. Welcome to our second quarter 2026 earnings conference call. Joining me today are our Founder, Chairman and CEO, Ms. Jonathan Hong Cha, and our Deputy CFO, Ms. Rongelong. 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 achievement of the company to be materially different.

The company cautions you not to place undue reliance on forward-looking statements and does not undertake any obligation to update these forward-looking statements except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For definitions of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial measures, 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.kanzhun.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO.

Jonathan Hong Cha, Founder, Chairman and CEO

Hello, everyone, and welcome to the company's second quarter 2026 earnings call. On behalf of all our employees, management and the Board of Directors, I would like to express our sincere gratitude to our listeners and investors. Today I will mainly focus on three areas: second quarter results, changes in the company's growth strategy, and shareholder return. In the second quarter, the company generated revenue of RMB up 14% year on year. In terms of profitability, adjusted income from operations excluding share-based compensation expenses was RMB 1.05 billion, up 19% year on year.

Our adjusted operating margin was 43.8%, up 1.9 percentage points year on year. As of June 13, the total paying enterprise customers over the trailing 12 months reached 7.2 million. Operating metrics reached record highs this quarter. Average monthly active users, or MAU, exceeded 17 million in the second quarter. The average number of matches per job seeker increased both year on year and quarter on quarter. Once again, user outcomes also improved.

Next, I would like to explain how the company's growth strategy differs between higher-tier and lower-tier cities. The second quarter of this year marks the fifth anniversary of the company's IPO. Investors who are familiar with us will remember that throughout the past five years, we have consistently maintained that the core driver of the company's growth is user growth. This is determined by the size of the market. China has nearly 500 million people in its urban workforce and more than 40 million active businesses.

Kanzhun has cumulatively served approximately 300 million users and approximately 22 million employers. Even from where we stand today, there is still considerable room to grow. Second, this is determined by our model. Kanzhun pioneered the mobile recommendation and direct chat model, and in so doing, these models substantially lowered the cost of communication between recruiters and job seekers. This low-cost model enables tens of millions of companies to shift from traditional recruitment to mobile internet recruitment, thereby digitalizing and mobilizing recruitment on a large scale.

For the vast majority of our enterprise users, the first time they used our services was also the first time they used online recruitment. Third, this is determined by our strength and user needs. Double-sided network effects give the company strong vitality. The larger the user base on both sides, the greater the variety of users. The more users express themselves and the more users interact, the better we can serve them. The process of driving user growth is also the process of continuously producing digital oil for the recommendation engine.

Over the past several years, we have consistently seen that as monthly activity on both sides has increased, user outcomes per user have also improved. With the engine supported by AI, we saw not only that AI improves the engine's efficiency, but also that the engine helps AI quickly establish its data flywheel. Over the next five years, we will adopt different growth strategies for Tier 3, 4, and 5 cities and for Tier 1 and Tier 2. In Tier 3, Tier 4, and Tier 5 cities, the core driver of growth will continue to be digital growth, and our most important objective will remain user penetration.

In Q1 Q3. While continuing to grow, our leader base will agree with price increases as a growth factor. With regards to the pricing of our services, let me first take a look at the actual situation in the second quarter. Revenue in the second quarter would only be 2.4 billion. That is a candid number. It looks good, but here in Beijing, the price of a one-month card is just the price of two cups of coffee. And the value of many mutual matches that happen in every month combined is only enough to buy one bottle of mineral water.

What do we mean by this? For those who are less familiar with us, let me explain again. A mutual match on our platform is equivalent to a job seeker submitting an application to a specific recruiter on another recruitment platform, and that recruiter also confirming the acceptance of the application. That is what we call a mutual match. In Beijing, in Shanghai, in Shenzhen, in Guangzhou, in Hangzhou, in Chengdu, in many cases, one such match is worth only one bottle of mineral water.

To make this easier to understand, let's cite data from a leading recruitment platform in a mature market. According to publicly available information, one click on that platform costs approximately US$0.25 to US$1, while generating one application for basic flow costs approximately US$5 to US$10. I do not have data on how many applications for such a role result in one mutual match. If I assume, based on a high-efficiency case, that recruiters will give us one out of every five applications, that would translate into US$25 to US$50 per match.

This, my friends, gives you an intuitive sense of pricing. First, compared with developed countries, as importance placed on talent increases, the human resources services industry grows. There is considerable room for Chinese companies to increase what they pay for such services. Of course, this will take time. Time is a powerful force. One example is that today the salary of a valuable software engineer in China is roughly at the same level as in Silicon Valley.

Second, compared with one aspect of the enterprise in Beijing, I've seen that many enterprises have achieved a unit price which is about one-tenth of a bottle of mineral water. The total monthly equivalent cost of junior human resources personnel could buy 1,000 mutual matches. Therefore, we can say that compared with Beijing, the service price in our field also has some potential to be improved. Put differently, even if we do not perform this, the human resources service industry is destined not to be valued by companies.

It's destined not to receive high-quality resources, and it might be shrinking. Therefore, at the beginning of the second half of the year, the company's growth strategy has changed, which is based on the first-tier market and some second-tier cities to improve the user experience while gradually increasing the amount of customer payments in mature markets, including a revenue increase in payment rates. This process has been for a while. The results that we have seen are partly because of that.

Also, in the last quarter, and we predict that the growth and the profit growth in the second quarter will be better. That's part of the reason. This is the right time and right place to change the growth model, and everyone's expectations have played a critical role, which is mainly reflected in three elements. First, the large-scale application of AI increases the platform's efficiency. Secondly, some big customers in the white-collar or blue-collar sectors agree very much that they believe that AI-powered interview, AI-assisted resume filtering, and other competitive solutions also help them.

The combination with our platform's services is actually consistent with the pursuit of our users on the platform and within the market. That is to achieve not only the goal to do recruitment, but to build a successful hiring. This brings us to our closed-loop signal. The closer our services get to the actual hiring stage, and the closer we get to charging based on a successful hire, the more the next model approaches a closed loop. The company will continue to invest in exploring this area.

One point worth mentioning is that the revenue we received from our AI-enabled process business grew rapidly quarter over quarter in the second quarter. Let me discuss shareholder return. The Board today passed its resolution approving the distribution of annual dividends of US$230 million. Since the beginning of this year, the company has repurchased approximately US$300 million worth of shares, representing more than 4.7% of its total share count.

In 2026, the company's total shareholder returns through share repurchases and dividends amounted to US$530 million, exceeding 100% of last year's adjusted net income and also exceeding the 50% we previously committed to. We share the benefits of the company's growth with shareholders. That concludes my remarks. Next, I'll direct the APO Wende, where I'll walk you through the financials in detail.

UNKNOWN, Chief Financial Officer

Thanks, Jonathan. Hello everyone. Now let me walk through the details of financial results of the second quarter of 2026. We continue to deliver a high-quality set of financial results this quarter, marked by solid revenue growth and further improved profitability. Our revenue achieved an accelerated trend, reaching RMB 2.4 billion, representing 14% year-on-year growth. Recruitment demand in the second quarter remained broadly stable. We drove revenue and profit growth through user base expansion and improved monetization from higher value services.

The number of paid enterprise customers increased by 11% year on year to 7.2 million over the trailing twelve months ended June 30, 2026. Importantly, the paying ratio among active enterprise users improved for the fourth consecutive quarter, reflecting our sustained progress in monetization. ARPPU for the quarter increased 7% year on year, driven by more efficient and valuable services, including an expanded suite of AI-powered features which encouraged higher customer spending.

Revenue growth was broadly balanced across different account sizes this quarter, with both key accounts and small-size accounts showing healthy momentum. Moving to the cost side, our total operating costs and expenses increased by 6% year on year to RMB 1.5 billion this quarter. Total share-based compensation expenses dropped by 19% year on year to RMB 186 million. As a percentage of revenue, share-based compensation expenses continued this downward trend to 7.8% this quarter, down 3.1 percentage points year on year.

We expect share-based compensation expenses as a percentage of revenue to remain at a high single-digit level for the full year of 2026. In the second quarter we sponsored the FIFA World Cup and increased our investment in AI-related cloud services. Meanwhile, our headcount grew sequentially, driven by stable growth in recruitment demand. Despite these investments, our profitability continued to improve. Excluding share-based compensation expenses, our adjusted operating margin expanded by 1.9 percentage points year on year to a record high of 43.8%.

This was primarily driven by our strong operating leverage, disciplined execution, and ongoing efforts to enhance operating efficiencies through AI applications. Looking into each segment, cost of revenues increased by 2% year on year to RMB 312 million this quarter. This increase was mainly due to higher server and bandwidth costs, partially offset by lower app store commission fees and improved operating efficiency as we widely leverage AI in our daily operations, verification and customer services.

As a result, our gross margin went up by 1.6 percentage points year on year to 87%. Sales and marketing expenses increased by 38% year on year to RMB 581 million this quarter, mainly due to the marketing campaign of the 2026 FIFA World Cup as well as an increase in sales employee-related expenses related to higher cash revenue. Our R&D expenses were RMB 431 million this quarter, up 3% year on year. Excluding share-based compensation expenses, our adjusted R&D expenses increased by 7% year on year to RMB 361 million, mainly due to higher cloud service fees and server depreciation expenses related to AI infrastructure investment.

Our G&A expenses decreased by 30% year on year to RMB 219 million this quarter, mainly due to lower employee-related expenses. Interest and investment income reached RMB 1.6 billion this quarter compared to RMB 157 million for the same quarter last year. This increase was mainly driven by investment income of around RMB 1.5 billion arising from the fair value changes of one of our invested companies which went public in January 2026. Income tax expenses were RMB 515 million this quarter compared to RMB 97 million in the same quarter last year.

This increase was also mainly due to the RMB 367 million tax impact from the aforementioned investment income, withholding tax of RMB 20 million, as well as the RMB 10 million provision for the top-up tax under the OECD Pillar Two rules and higher income from operations. Our net income reached RMB 1.9 billion this quarter, up 173% year on year. Excluding share-based compensation and net gains from the aforementioned investment, our adjusted net income increased by 9% to RMB 1.03 billion.

Net cash provided by operating activities was RMB 945 million this quarter, down 10% year on year. This decrease was mainly due to higher advertising and marketing expenditures and tax payment, as well as lower interest and investment income received, partially offset by increased cash collection from customers. As of June 30, 2026, our cash position, including cash, cash equivalents, short-term time deposits and short-term investments, but excluding investments in securities, stood at RMB 18.8 billion.

Our strong cash position and cash-generating capability enable us to sustainably deliver our shareholder return commitments. As Jonathan just mentioned, the board declared an annual cash dividend of approximately 230 million. Combined with over US$300 million in share repurchase we have completed year to date, which represents roughly 4.6% of our total outstanding shares, our total shareholder return so far this year is exceeding US$530 million, representing an over 100% shareholder return ratio compared to the adjusted net income last year.

Cumulatively, we have now bought back over 10% of our total shares outstanding. And now for our business outlook for the third quarter of 2026. We expect our total revenues to be between RMB 2.41 billion and RMB 2.5 billion, a year-on-year increase of 11.4% to 15.6%. That concludes our prepared remarks. Now we would like to take questions. Operator, please go ahead.

OPERATOR (Operator)

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. We will now proceed to take our first question, and the question comes from the line of Timothy Chow of GomezX. Please go ahead, Timothy. Your line is open.

Timothy Chow, Analyst at GomezX

Thank you for taking my question. My first question is regarding your AI monetization. Could management share more color on the latest progress of your AI products? For the closed-loop services that you just mentioned, could you share any color on the overall revenue scale and how do you think about the overall AI impact on the matching efficiency, and if there's any quantitative metrics that you can share, that would be great. Secondly, on your Nambego large language model, I noticed that you recently launched Nambego 4.23B model.

Just wondering what is the improvement versus the last generation? And how do you compare the latest model versus the top larger complex model in the market? And what is your different value proposition? Thank you.

OPERATOR (Operator)

Thank you. We will now proceed to take our next question. And our next question comes from the line of Eddie Wong of Morgan Stanley. Please go ahead, Eddie. Your line is open.

Eddie Wong, Analyst

Thank you, management, for taking my question. My first question is related to the macro impact. What's your view on the macro impact on our company, especially for the second half of this year? As most Internet companies that have reported second-quarter results have mentioned the macro overhangs and the weak consumption. To what extent will both be affected under such macro backdrop and how much of this macro-driven pressure can be offset through our operation improvement?

The second question is related to the AI development, AI services, and the products we have launched and probably will launch. Do you expect they will have different cost structure and will this affect our overall margin? In addition, do we have plan to materially ramp up the capex as we have seen with some of the other Internet companies? Thank you.

Jonathan Hong Cha, Founder, Chairman and CEO

So thank you for your question regarding the macro situation. I actually respect your professional observation and won't talk too much about it, but I have been running our business for more than 12 years and we have experienced a lot. Whether you have experience or not, we have all gone through that. So we have always maintained to be a very stable and maybe trustworthy business, and we will continue to maintain this very stable operation. And we have a big opportunity here which is our potential market size.

We have served over 300 million customers and more than 22 million enterprises, but it is well known that the average life cycle according to the Central Bank of China's enterprise is less than three years. So within all those 22 million companies we have served, a lot of them are not active anymore. They have turned into new elements and beginning new companies. So for ease of observation, even if we consider those 40 million enterprises as a fixed situation, we have more than double of our market to grow, and on top of that a lot of new companies are emerging every year.

So our actual market size is even bigger. And the second opportunity is in the payment ratio. So our actual annual served number of enterprises is more than 10 million, and over 50% of them are using our service for free. So from that perspective, this is our second driver or second growth opportunity. So I will use one first-tier city as an example. We just reported that we intend to increase monetization for certain first-tier cities. So in this particular city, including both paid and free service, the average cost per mutual match our customers can get for this city, for example, it's like X RMB, and if we turn those free customers into our lowest level of paying customers then those costs will grow by at least 15%. So please rest assured, both our investors, clients, and the public, that actually this is a very minimal change. I just explained that for a lot of our customers the average cost to achieve a mutual matching is only the price of one bottle of mineral water at 7‑11. So either one bottle of mineral water or 1.15 bottles of mineral water is a minimal, very minimal cost to every enterprise.

So Eddie, just as we go through all these years, I am confident we are not only surviving, we should and we will be better and better. All right, thank you. And about the second question, thank you Eddie for asking me that. So actually all those companies who have invested a lot of capex for like arms race or things like that, I think they have their ambitions, they have their beliefs, but most importantly they have the financial capabilities. So for a company like us, when we chose the path of following or the taillight strategy and we prioritize AI applications and smaller-size companies, that is our approach, our strategy to facing this AI maybe disruption or AI impact and what we can do. So thank you for your trust, but I believe our investment in AI will not impact our overall cost structure or impact our operation capability and financial margins. So we will maintain current level of investment. And as you see, as you know, we have good profitability. So we will maintain around 20% to 25% of R&D expenses and we will spend incremental money on AI to give more support. But I will not sacrifice our safety on our cash flow.

I won't do that. Just don't worry. And that's our answer to those two questions. Thank you.

OPERATOR (Operator)

Thank you. We will now proceed to take our next question. And the next question comes from Wei Xiong of UBS. Please go ahead. Wei, your line is open.

Wei Xiong, Analyst at UBS

Thank you, management, for taking my questions. First, it's encouraging to see our margins have been maintaining at a very healthy level. So could we quantify the benefits from AI in our internal use to drive better efficiency and lower cost, and how much room of further improvement do we see? Also, after the investment in World Cup, how should we think about the investment plans, the expenses, and the margin trends in the second half? And second, could we please get an update on your overseas business, including Offer Today?

And how should we think about if there's any plan to expand into other markets? Thank you.

UNKNOWN, Chief Financial Officer

Thank you. I will take the first question on margin. So actually we have been leveraging AI in all aspects of our daily operations, including security verifications, sales and marketing, and operating and everywhere. But to quantify it may be more easier in the cost line. So since 2023 we have been witnessing that, alongside with our user growth, our overall headcount of operating employees maintained stable. So as a result, the employee-related cost as a percentage of revenue continued to go down and helped to contribute around 2 percentage points of our gross margin.

So you can see our gross margin now stayed at a very healthy high‑80s level, and we believe we at least maintain this very high gross margin level. And for our outlook for the second half, yes, we have sponsored the FIFA World Cup. But the cost will be evenly distributed or recognized within second quarter and third quarter. And apart from that, we will maintain our current investment level of the cloud service rental cost for our AI model training.

So we are expecting maybe in the third quarter the margin level should be similar to the second quarter, and for the full year, as we expected at the beginning of this year, our overall adjusted operating margin can still slightly increase.

Jonathan Hong Cha, Founder, Chairman and CEO

And thank you for your concern about Offer Today. So our current goal for Offer Today is in like maybe five years from today that it can bring the company with 100 to 150 million US dollars of revenue about the market size of Hong Kong. So we call it like maybe a middle dish, not too fast but low. And the lessons we learned from Offer Today is that it took around two, three years for a new business like Offer Today to enter into a market and then next additional five years to grow to achieve like 100 to 250 million US dollars of revenue.

So we consider this kind of city worth investing. Of course those cities are in Asia and Europe. Of course we need to avoid those high geopolitical risk areas. So to sum up, like two, three years of adoption and mature five years of development, there are still a lot of cities of this size and worth investing. And also we have some markets we call it slow dish, maybe take a longer term around 10 to 15 years, which can also achieve revenue like 100 to 150 million US dollars.

So the profile of this kind of market is like maybe generally younger in the average age of the citizens and these developing countries. But it's developing quite early. Its total population is around slightly less than 100 million. So some places like Vietnam, Argentina, or Brazil. So in like 10 to 15 years we are hoping this kind of city can accept new models like we have created and bring about nice profit or revenue to the company by then. So this topic is about Offer Today and what lessons it can give us to developing our overseas business.

And that's our answers to all the questions today. Thank you.

OPERATOR (Operator)

Thank you. Due to time constraint, that concludes today's question and answer session. At this time I'll turn the conference back to Laura for any additional or closing remarks.

Laura Chan, Senior Manager of Investor Relations

Thank you once again for joining us today. If you have any further questions, please contact our Investor Relations directly. Thank you.

OPERATOR (Operator)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.