Tongdao Liepin Group

HKEX:6100

Earnings Call Transcript 2021-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Tongdao Liepin Group 2021 Q3 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] In today's call, we have Mr. Rick Dai, Chairman and CEO; Mr. Tim Tian, CFO; and Ms. Xueni Wang, IR Director. I would now like to hand the conference over to your first speaker today. Ms. Xueni Wang, IR Director. Thank you. Please go ahead.

[Xueni Wang, executive]

Okay. Thank you, operator. Hi, everyone. Thank you for joining us on today's conference call to discuss our results for the 3 and 9 months ended September 30, 2021. The company's financial and operating results were published and posted on the company's IR website at ir.liepin.com. On today's call, Mr. Rick Dai, Company's Chairman and CEO, will kick off with our business operations and highlights. The remarks will be in Chinese, followed by English translation. After that, Mr. Tim Tian, our CFO, will continue with detailed financial review. After the prepared remarks, we will be available to answer your questions. Before we continue, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filing with the Hong Kong Stock Exchange. The company does not take any obligation to update any forward-looking statements as a result of the new information, future events or otherwise, except as required under law. Please also note that certain financial measures that we use in this call are expressed on a non-GAAP basis. Our GAAP results and consolidations of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate for all stated metrics mentioned during the call refers to year-over-year growth versus the same period last year. I will now turn the call over to our Chairman and CEO, Rick. Please go ahead, sir.

[Kebin Dai, executive]

[Interpreted] Hi, everyone. I'm glad to share with you the business and financial performance of Tongdao Liepin Group in the third quarter of 2021. Despite so many changes in the industry this year, our group still achieved robust growth with a highly efficient business model and flexible market strategies. The revenue of the third quarter reached RMB 680 million, a year-on-year increase of 50.2%, pushing out the total revenue of the first 3 quarters of 2021 to RMB 1.88 billion, a year-on-year increase of 49%. As of the end of the third quarter, for 4 consecutive quarters already, our revenue increased by more than 40%, meaning we are very likely to beat our previous guidance as discussed with you at the beginning of this year. The central conference on talent-related work in September brought the talent construction of our country onto a more profound strategic level. In the new era, China's economy is transforming away from the old-fashioned labor-intensive and heavy industry oriented base. So they're focusing more on capital, technology and knowledge intensive industries. Talent acquisition comes first during industrial transformation. Improving the efficiency of talent allocation and promoting industrial professionalization are the most crucial steps in carrying out national strategies. At the same time, we noticed that the overall macroeconomy recovered modestly this year. The number of Chinese enterprises continue to increase and the existing companies continue to mature, both resulting from rigorous development of key technologies and emerging industries. Organizational upgrade, strategic upgrades, digital transformation and other topics have also attracted more and more attention. All the changes mentioned above are trigging recruitment demand for educated, skilled and high quality talent. According to our data, new job postings on our platform increased by more than 39% year-on-year in the first 3 quarters. The average salary of new job postings soared from RMB 170,000 last year to RMB 200,000 this year, showing the mid- to high end talents are still in short supply, which we expect to be more obvious in the future because of the continuously lifted recruitment standard and rising budget allocation for recruitment. Therefore, we are more dedicated to serving and cultivating the mid- to- high-end recruitment market. In terms of the specific industries, the growth rate of new job postings in the high end manufacturing industry continued to lead in the third quarter, with a year-on-year growth of more than 55%, followed by transportation, energy and chemicals, telecommunication and biomedical industries. Among sub-industries, the growth of automotive and new energy-related industries were the most remarkable, with an increased rate of 94% and 80%, respectively. We are glad to see that our advantageous industries and job categories were also rapidly expanding in the recruitment market. The development further consolidated our advantages in the mid- to high-end market and strengthened our competitive edge with broadened user coverage. By the end of the third quarter, we've attracted over 940,000 registered business users with a year-on-year increase of nearly 40%. The number of registered headhunters on our platform surpassed 190,000. The remarkable business and financial performances were attributed to, firstly, our continuous technology innovation and service-oriented SaaS products. We are able to provide efficient and user-friendly product and in-depth advisory services. The capability further improved our user retention and ensured more sustainable revenue growth. Secondly, the record business growth was also a result of our proactive and agile marketing strategies. The market condition and competitive landscape went through great changes this year. We seized the favorable opportunities to expand our user coverage. In the third quarter, we implemented more aggressive marketing measures. Through precise marketing and adopting new marketing channels, our marketing efficiency has been greatly improved. With enhanced network effects and scale effects, we have broadened our user base, which included many small and medium high tech companies. Therefore, we further improved our competitive edge within our market segment. Third of all, we also benefited from our forward-looking market insights and maturing sales team. We formed an experienced sales teams covering all industries. With the support of our group's technology capabilities, we closely followed the market dynamics, made in-depth analysis and timely covered in the key industries and swiftly translate the latest trend into technology innovation and product upgrades. In terms of sales team construction, starting from the end of last year, we initiated a trial by splitting the sales team into new customer acquisition team and existing customer renewal team. And this year, we promoted the new structure nationwide. With further optimized team structure and professional training for our sales team, we've observed a significant improvement in sales personnel competency and sales efficiency. In the ever changing market environment, our fundamental capabilities developed in early-stage have been fully reviewed, allowing us to establish standards for talent acquisition industry and provide in-depth services to different customers this year. In terms of individual users, we remain committed in picturing a more comprehensive talent network to serve different types of individual users. Through machine learning integration, we can better model, predict and match talents job intention and scope of competency. So as to continuously improve our service and competitive advantage within individual users, by the end of the third quarter, we had more than 61.6 million registered individual users. The newly registered individual users amounted to 3.04 million in the third quarter, up 42% over the same period last year. Our brand recognition was further enhanced among individual users. Furthermore, with various job opportunities and the change in mentality toward job changes, the employee turnover rates significantly increased. The average employment period for a job was shortened among mid- to high end talent, decreasing from 3.67 years in 2018 to 3.2 years in 2021. In addition to the increase in employee mobility, young talents are also more adaptive to online recruitment tools. This year, we firmly executed our strategy in attracting more young generation. Talents can switch to student loan with one single click on our application. The user experience, matching accuracy, data security and the degree of personalized settings have been greatly optimized in this quarter. We are pleased to see that among the newly registered users in the third quarter of this year, the proportion of young users under the age of 25 has increased significantly to 47%, an increase of nearly 10 percentage points over the same period last year, and the user activity level and user stickiness have also increased significantly. At the same time, we continue to fulfill our mission of helping every talent achieve a better career success. As the extension of our professional career services on the 2C sides, our online professional education business provided a large number of high-quality focus for individual users with the empowerment from our group. Benefited from enriching product streams, our 2C revenue reached RMB 270 million in the first 3 quarters of 2021, an increase of 2.6x over the last year. In terms of products and R&D, we insisted, as always, on performing internal safety test before every product upgrade and function launch. We maintain a high duration frequency in terms of product user friendliness, security level and customize development to continuously improve our user experience. Talking about algorithms, through a thorough analysis of authorized behavioral data and optimization of our labeling system, which is tested both automatically and manually, we have different machines understanding of talents and positions and continuously improve our matching accuracy. In addition, this year, we also focused on optimizing our IT infrastructure. The R&D efficiency has dramatically improved and the time required for every project experiment has been reduced by 80%. With the trend of digitalization, the online recruitment market is gaining growth momentum. But at the same time, there is an urgent need for more structured regulatory system and powerful supervision to ensure the sustainable development of our industry. In terms of cybersecurity, we always take data security and user information protection as the tenants of our business operation. We adopted strict standards to review user registration, screen job postings and restrict data usage. We also conducted compliance tests on our applications to ensure healthy and compliant operations. At the same time, we provided our users with more options to control the exposure level of their information on the platform and personalize the display setting to further protect user information. In the future, we will continue to study new policies and work with relevant authorities to promote standardized development of the industry in terms of data security and user privacy protection. We will always leverage technology capability to serve the development of enterprises and individuals. China's economic structure is experiencing profound transformation nowadays and the corresponding labor structure among related industry needs to be optimized. The year of 2021 is the opening year of China's 14th 5-year plan. With the support of various policies from the government, the employment demand and employee mobility will continue to rise. Besides, this year also remarks the beginning of the second decade of our group after years of being vendor, we've built a solid business model, which is hard to replicate, and our business model has also been fully validated. At the same time, our new initiatives such as flexible staffing business, online service business and online professional education business also provides enterprises and individuals with more well-rounded one-stop talent services. We expect to gather more than 1 million registered business users on our platform by the end of this year. And a number of our high net worth paying business customers is expected to exceed more than 70,000. The number of paying business customers is expected to overpass 100,000 in the next 2 years. We are full of confidence in our unique market positioning and advantages. We are prepared and willing to provide more high-quality products and services to embrace the upgrade of the talent service industry. We will also explore and develop innovative business model to open more market space. In the interim conference call, I called for everyone to expect an exciting second half of the year. Now I also want to invite everyone altogether to witness and share the development for the second decade of our group. Now let me turn it to Tim to walk you through the key financials in the third quarter of our group. Thank you.

[Ge Tian, executive]

Thank you, Rick and Xueni. And thanks, again, everyone, for joining our 2021 third quarter results release conference call. We continued to see robust growth during this quarter. The total revenue in the third quarter was RMB 682 million, about 40.2% increase from RMB 54 million in the same period of last past year. Our total revenue in the 9 months ended September 30, 2021, was RMB 1.88 billion, a 49% increase from RMB 1.6 billion in the first 3 quarters of 2020, resulting from the increase in the number of users brought by the strong hiring sentiment in the initial hiring segment and capturing more business opportunities in the favorable market conditions with our superior staff product and high-quality services. More specifically, we continue to see a more balanced revenue mix on 2B and 2C side, driven by our diversified value-added services. The revenue generated from talent acquisition services and other HR services was RMB 1.61 billion in the first 3 quarters of 2021, up by 36% versus last year. Our revenue generated from talent development services was RMB 266 million in the first 3 quarters of 2021, up by 260.2% versus last year. The major uplift in the 2C business reflected the incremental revenue from consolidating our certification training business starting from September of last year. The ascending recruitment demand for higher-end talents will provide us with greater growth potential on the 2B side, and on the individual increasing awareness for sales improvement will significantly drive our existing business. Our gross profit was RMB 1.48 billion in the first 3 quarters of 2021, up by 47.8% versus last year. Our gross margin remained at high level at 78.8%, slightly lower than the same period of last year due to recovery of our off-line services at the beginning of this year. Turning to operating expenses. Our sales and marketing expenses were RMB 867 million in the 9 months of 2021, up by 53.3% versus last year. The growth was mainly driven by additional marketing expenses related to the branding campaign as planned at the beginning of this year. Additional online marketing measures and increasing sales personnel in response to the surging business demand. As we step up our effort in marketing and branding, our sales and marketing expenses as a percentage of revenue slightly increased to 46.1% in the first 9 months of this year compared to 44.8% in the same period of last year. At the same time, we continuously improved sales efficiency by firmly pushing forward organizational upgrades and deeply connecting with our customers. Our G&A expenses were RMB 250 million in the first 3 quarters of 2021, up by 23.3% versus last year. The increase was primarily due to additional management costs as a result of our business expansion. Our G&A expenses as a percentage of revenue in the first 3 quarters of 2021 and 2020 were 13.2% and 15%, respectively. The improved G&A gross margin was mainly driven by the scale effect of our fast-growing top line and the decrease in the loss allowance for expected credit loss as a result of better internal control on trade receivables. In the first 3 quarters of this year, we continued to invest in R&D to optimize our matching algorithm, strengthen the data security capability and improve our IT infrastructure. Our R&D expenses were RMB 228 million in the 9 months ended September 2021, up by 31.6% versus last year. Our R&D costs margin was 12.2%, down by 1.6 percentage points. The decrease was mainly driven by the scale effect of our business expansion. As a result, our profit from operations in the 9 months ended September 2021 was RMB 197 million, up by 53% versus last year. Our net profit for the period was RMB 158 million, up by 50.5% versus last year. Particularly in the third quarter, our net profit increased by 96.4%, reaching RMB 88.4 million. And our net profit attributable to equity shareholders of the company increased by 125.8%, reaching RMB 74.7 million. Meanwhile, in the 9 months of 2021, our non-GAAP operating profit, excluding share-based compensation expenses and amortization of intangible assets resulting from acquisition was RMB 307 million, up by 48.1% versus last year. In the third quarter of 2021, our non-GAAP operation profit was RMB 141 million, up by 51.3% versus last year, and the non-GAAP operation profit margin was 20.7%. Our strengthening profitability is for our solid business model and a valid commercialization strategy. We will continue to pursue powerful and sustainable long-term development. The outstanding performance in the first 3 quarters of 2021 enhanced our confidence in finishing a remarkable year. With the ever changing market dynamics, we kept a sharp mind of the changes and proactively seized marketing opportunities through more aggressive marketing measures and upgraded product strategies. We will remain committed to delivering sustainable growth and creating long-term value for our customers and investors. With that, operator, please open the line for questions.

[Operator]

[Operator Instructions] And your first question comes from the line of Steven Tsai from Morgan Stanley.

[Steven Tsai, analyst]

Congratulations on the strong results. My first question is about the strong growth in 3Q, particularly around your 2B businesses. Could management share with us the underlying growth drivers behind that? Was that because of the existing paying customers spending more or more of growth in the number of paying customers for the businesses? And the related question, how should we think about the 4Q given with the macroenvironment across many big verticals? And also, previously, you talked about full year revenue to grow around 35%. Any change to that guidance? And another housekeeping question, why did your G&A expense has decreased a lot sequentially? Can we extrapolate that number into 4Q?

[Ge Tian, executive]

Okay. Thanks, Steven. I'll take this question. So regarding the first part of the question regarding the drivers of the 3Q revenue, I think in the third quarter, our revenue grew nearly 40% on the 2B side, driven by the increase of the number of paying customers and the ARPU, especially the growth of the number of paying customers. And in the second half of the year, we have quickly seen some market opportunities and carry out more proactive marketing strategies to attract new users. That would be one of the most important reasons. And the number of registered business users have also increased by nearly 40%, providing us more sales leads. And at the same time, with the optimization and upgrade of our sales teams, organizational structure and training system, our sales team competency and the sales efficiency have also been significantly improved. On the other hand, we carefully segmented our users and dug deeper into their diverse needs. With reach and the diversified product mix already, we continue to optimize our products and services, resulting in a very healthy and stable growth of our ARPU as a result. Our business and the financial performance were quite robust in the first 3 quarters and we can see that this trend is also going to continue in the fourth quarter. So as you just mentioned right at the beginning of the year, we had a guidance of 30% to 35% growth versus last year, right? But I think after closing the third quarter, for the whole year, our revenue growth will definitely beat 40% increase, an increase of almost 10% points compared with what we communicated beginning of the year. Regarding the decrease on the G&A, I think our G&A cost margin was 13.2% in the first 3 quarters this year. If you look at all the quarters together, down by 2.8 percentage points versus the same period of last year. But if you only look at the third quarter itself, the year-on-year decline trend is even more obvious. And this is firstly as a result of the scale effect from the rapid growth of our top line and I think more importantly, that's driven by the collection of the bad debt in the third quarter. Secondly, optimized cost structure also came from the effective cost control, driven by our more digital and more systematic business operations. So that kind of explains the reason. I think we're still going to have a view that the G&A is going to be at a very favorable level in the fourth quarter and for the full year as well.

[Operator]

And your next question comes from the line of Frank Tao from Huatai Securities.

[Ye Tao, analyst]

Congrats on the solid results. 2 questions here. The first one is, can management share with us the breakdown for talent acquisition services and other HR services in the third quarter? How much of the revenue is generated from the new business such as Wenjuanxing and Xunhou and also maybe for just on the revenue generation from Saiyou business would be great. And the second question is on how should we gather the sales and marketing expense ratio over the long run? How much room is there to further optimize the expense ratio?

[Ge Tian, executive]

Sure. Thanks, Frank, for your question. Regarding the breakdown of the revenue, I think, first of all, credit to the favorable market conditions and high user retention of our SaaS products. Our recruitment business maintained the strong growth momentum of the first half of the year, resulting in remarkable performance for the first half. And in the third quarter, the revenue from our online recruitment business, including both 2B and 2C segments accounting for around 80% of our total revenue. And the robust growth over the past 4 quarters in a row has also enhanced our confidence for the fourth quarter. In terms of the new initiatives, like online survey business, flexible staffing business and online professional certificate training, I think in total, they accounted for about 20% of our total revenue. And talking a bit more on Saiyou, our online professional certification training services accounts for about 9% of the total revenue, if you look at separately. And by integrating the Saiyou business, we actually extended our service chain for our individual users and opened a new service scenario for our job seekers on this platform. And right now, there are many favorable policies in the professional education industry from the government, and our group will definitely continue to empower the business to establish a strong technical teams and other functions like finance or legal. On top of that, leveraging our leading position in the online recruitment market, we could also make thorough data analysis and provide valuable insights of the future industrial development to help the business to adjust its direction whenever needed. Regarding the sales and marketing expenses, I think our sales and marketing cost margins slightly increased in the first 3 quarters. And there are I think mainly 3 reasons here. And the first one is that the additional costs related to brand upgrade campaigns as planned at the beginning of the year, which already occurred in the first quarter. And the second reason is that we step up our marketing efforts to obtain more users in the favorable market conditions, especially in the third quarter. And we optimized our marketing strategies like precisely targeting more channels are -- basically, our marketing efficiency was also largely improved.

At the end of this year, right, I think if you look into the past couple of quarters, right, our sales team was also expanding as our business grew rapidly and the team structure upgraded. And I think the third reason here is that we actually consolidated our online professional education business in all 3 months in the third quarter. And the sales and marketing cost margin for this business is slightly higher than the group, bringing up the overall sales and marketing gross margin a little bit of the group. But I think in the long term, we still see ample room to optimize our sales and marketing cost margin. I think in terms of marketing, the cost really to brand upgrade in the first quarter was actually one-off, right? We had the brand upgrade in the first quarter, and we won't repeat that in the next year. And basically, it was fully floating in the first quarter of the year. And also, you can see our strategies in attracting more young talents were quite effective. Basically, around half of the new registered users in the third quarter were the younger generations. I think Rick already provided a lot of data just now. And although we didn't rely on burning money to sustain our business growth, with these favorable market conditions, we definitely adopted more aggressive marketing strategies and still trying to focus on efficiency and precise marketing. We definitely reacted to the market conditioning agilely, and adjusted our marketing strategies according to all our internal measures like RI and our other index to make sure it's the most effective. I think the last part is that in terms of the cost of the sales personnel, we definitely observed that our sales efficiency was greatly improved as we optimized the organizational structure by splitting the sales team into the 2 teams that Rick just already mentioned, right? And if you look at other measures like what we did is that we basically, we adjusted the bonus repayment scheme, which was also quite helpful in terms of reducing the costs. So basically, we improved our sales efficiency by 58% to 60% in the first 3 quarters of this year compared to the same period of 2019, even 2020, right, meaning that our sales cost margin actually decreased versus last year and the year before. Overall, I think our sales team was only set up like 7 years ago, right? I mean, it's still maturing and developing. So in the longer run, our sales efficiency will definitely be further improved while the relations with the customers getting stronger and better. And our sales and marketing cost margin will still have a lot of room to optimize together with the sales increase and the scale effect. And I think on top of the sales and marketing expenses, I think we're definitely going to invest more into the R&D from the savings we got from the sales and marketing or the G&A, I think I just touched in the first question from Morgan Stanley. Yes, that's my answer to your question.

[Operator]

Our next question comes from the line of Wei Xiong from UBS.

[Wei Xiong, analyst]

Congratulations on another solid quarter. First, I want to ask about our customer mix. In the prepared remarks, management mentioned very robust growth from a few emerging verticals such as manufacturing, transportation, et cetera. So could management share the revenue contribution from these new verticals? And also, I wonder, compared to the traditional key customer verticals for us, do we see any different hiring demands from these new customer verticals? And what's our strategy to further strengthen our penetration there? And second, maybe from a slightly longer business planning point of view, we've already established quite a solid position in the mid- to high end talent services. How do we think about the market opportunities in the blue-collar recruitment segment? And is there any strategy or business update that you could share with us, that would be great.

[Kebin Dai, executive]

[Interpreted] So let me answer your question first. So like I mentioned in the early remarks, like you were asking about in your first question about the difference between the new customer verticals and the other traditional industries, so this year, especially during the second half of the year, we expanded our competitive edge in more industries. So this year, the top-5 industries in terms of new job postings, including smart manufacturing, energy, biomedical and others, collectively, they accounted for around 35% of our total revenue, an increase by 6 percentage points compared to last year, and the proportion of new job postings in these industries increased by 3 percentage points.

So the demand of the business users in this industry are not fundamentally different from the others. But they will set higher standards for talent, like the requirements on the relevant skill sets instead of just massive major labors. So these are mostly medium-sized companies in this industry. And usually, they don't have professional teams or HR's to focus on recruitment. So they will need to recruit talent. They also need to recruit talent across industries. Therefore, they will have higher demand for external professional talent recruitment services. So through our algorithms, we clearly label both core clients and send the sales lease to our sales team. And actually, most of these companies were our clients already. It was just with more durable policies and capital injections, these industry achieved such growth. And more than ever, they need professional talent services providers like us. So insurance allow us to better capture this opportunity. And on top of that, since we've studied and grasped the trends of industrial development ahead of time, we've expanded our service in this high-tech industry from last year. And we accumulated industrial know-how and convert our know-how into data sets and then translate them into product upgrades. So the procedure has improved our matching efficiency in this industry and get us prepared for the user expansion this year. So your second question was regarding our opinion on the blue-collar and white collar markets and also the long-term strategy. So for us, these 2 markets are both quite great. And in the white-collar market, I think there will be quite a turbulence in the future because, in the past, the work and job opportunities were relatively universal and overlapped for white collars. But we think that in the future, companies will more focus on white collars skill sets. Especially during the industrial transformation, more companies will operate in tech and knowledge intensive way and the demand for experienced talent and more skilled talent will be higher than before. So our group will continue to dig deep into the white-collar market and extend our advantage in other user groups like outstanding students, so in order to build a more comprehensive user coverage. And also, we will continue to expand our service offerings in professional skill training industries in an intent to help with the skill upgrade of the talent in our country. So in China, the biggest problem that the blue-collar market is facing is the diminishing of the demographic dividend. And this problem is indeed more visible in the blue collar market. So in the blue-collar market or lower white collar market, we think flexible staffing should be a better business model. Now that more and more companies are paying attention to client management to improve the internal operation efficiency and flexible staffing will help companies save costs and workload during the recruitment and lower the risk of redundant or insufficient labor force, and these are absolutely what company would want during their development. As a group, we've been exploring the flexible staffing market for over 2 years, and we adopted the platform system model to support our business development. Our recruitment managing platform and employee management system allow us to allocate employees in batches and manage them online. And other than that, we also leverage our data analytics capability and providing guidance on industrial development to our flexible staffing business, so that it can adjust focal industries ahead of time. And although flexible staffing business is still a new initiative of our group, it grows rapidly, and we'll keep empowering this business with our technical capability and leveraging the advantages of our group's platform in order to realize greater synergy effects in the blue collar and lower white collar markets.

[Operator]

Our next question comes from the line of Melody Chan from Jefferies.

[Melody Chan, analyst]

Congratulations on the solid results. I have 2 questions. The first is can management share the observation on the recent hiring demand? And how should we think about next year, given that there is a COVID resurgence and the macro environment is weak and also different regulation? And my second question is about the implementation of PRC [indiscernible] in November? And are we seeing any impact on our business for the matching algorithm of this strategy?

[Kebin Dai, executive]

[Interpreted] So with the occasional resurgence of the pandemic, online recruitment is welcomed by more and more companies. And with a soft micro environment, companies are more willing to adopt online recruitment, which is more efficient and more cost effective. Both the macroeconomic downturn and the resurgence of the pandemic could have some impacts on the recruitment industry. But the specific impact on us were always very limited. Even during the half year, like 2020, we weren't heavily impacted. So usually, there are 2 kinds of recruitment demand for our company. One is expanding recruitment demand, and another one is replacing recruitment demand. And when the company is under pressure, the expanding recruitment demand will be impacted first. And this kind of recruitment demand is mainly focused on basic talent. And as our online recruitment platform, focusing on the mid- to high-end market, our customers are not only relatively large in scale and sites, their business operations are also relatively stable. So even when the expanding recruitment demand is decreasing, companies will still have great replacing demands for senior talent. So that's why I was saying that even during challenging times, the impact on our group was still limited. With the upgrade of China's economic structure and the transformation of the industrial structure, especially the fast development of emerging industries and tax-related industries, company's recruitment demand for skilled talents are much more urgent. So I'm relatively optimistic about next year. However, the survival environment for small and medium-sized companies, especially the small and micro companies are what we should worry about. Due to the market condition, their sustainability is much lower and their recruitment demand will also decrease dramatically. So the strengthening supervision on several industries this year was mainly for the purpose of preventing the random or our force expansion of the capital, but didn't really impact the company's regular operations. The government encourages the development of new industries and the mobility of the talent, and this will, in turn, increase recruitment demand. For instance, we are seeing that the technical talent in TMT industries were joining some real economy-related industries. So we didn't see any decrease in the talent mobility in the TMT industry. So your second question was regarding the impact on regulation. We have always highly valued the data security and user information privacy. We are the first company in the industry to adopt virtual intermediary phone number to connect users. And at the same time, our company has an internal security team to review the data security very strictly. And also our matching algorithm, and our business operations have always followed the strictest data security rules. So when the regulatory system become more structured and after relevant laws and policies were enacted, we were able to implement with calm and confidence. And that's also why our application could operate steadily and healthily, as always. So we always emphasis on empowering the security track with technology capability. During the enterprise registration and review process, we built two mechanisms. One is intelligent risk control model and one is manual review system. The efficiency of security track was greatly improved through system identifications and also the risk alert. For our individual users, their primary purpose is to find a job on our platform, so we provide deep and accurate talent and job matching with full authorization of our users. And we will also provide more personalized information protection to our individual users. And at the same time, the data that our technical employees processed are also decentralized, and only that they can proceed with user profiling and data set labeling. As a technology-driven talent service platform, the mid- to high end talent that we mainly focus on are more willing to authorize and provide rich information to us in order to receive better service. We fully protect our users' personal information and offer better products using experiences while ensuring that we are compliant with all the regulations. And at the same time, we insisted on investing in R&D. And a great part of our R&D expenses were invested in enhancing data security and personal information protection. So with the continuous perfection of the regulatory structure, we are more confident in delivering great performances, leveraging our advantages. During the past 1.5 years, our technical team has labeled around 500,000 data sets. And we've also successfully launched a set of data tech in more than 140 industries, and the accuracy rate increased to more than 90%. And also the major upgrade of our IT infrastructure significantly shortened technical test and integration time. And so those are the results of our R&D investment, and we also did with full authorization from our users. So next, we are going to march into a space of focusing more on operational efficiency. And we will also keep improving data quality, empowering matching accuracy and improving user experience with comprehensive authorizations from our users. And that's my answer to your question.

[Xueni Wang, executive]

And so in the interest of time, that concludes our Q&A session. Thank you once again for joining us today. And if you have any further questions, please contact us through our IR e-mail, [e-mail], and have a great day. Thank you. Bye-bye.

[Ge Tian, executive]

Thank you. Bye-bye.

[Kebin Dai, executive]

Thank you. Thank you, everyone.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]