Tongdao Liepin Group
HKEX:6100
Tongdao Liepin Group
HKEX:6100
Price:
3.28 HKD
2.5%
Market Closed
Updated:
May 15, 2024
Section:
Earnings Call Analysis
Summary
Q3-2023
Q3-2023
Tongdao Liepin Q3 Revenue Slips, Recovery Signs Emerge
In Q3 2023, Tongdao Liepin's revenue fell 12.9% year-over-year to CNY 560 million, but the rate of decline improved from the previous quarter. The non-GAAP operating profit was CNY 66.23 million. New job postings on the platform rose 4.3%, indicating a recovery with the first positive growth this year. Business user registrations grew by 14.2% to 1.262 million, despite a decline in paying customers that has been mitigated with strategic product diversification. The platform's individual user base increased to 92.2 million, a 13% jump, with enhanced user registration quality. Challenges persist in the high-end recruitment market, reflected by a small drop in verified headhunters.
You don't have any saved screeners yet
Good day, and welcome to the Tongdao Liepin Group 2023 Q3 Earnings Conference Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Xueni Wang. Please go ahead.
Thank you. 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, 2023. The company's financial and operating results were published and was 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. After that, Mr. Tim Tian, our CFO, will continue with detailed financial review. The remarks will be in Chinese, followed by English translation.And before we continue, I would like to remind you that this call may contain forward-looking statements made under safe harbor provisions. Such statements are based on management's current expectations and current market and operating conditions and relate to events and 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 these and other risks, uncertainties and factors is included in the company's filings with the Hong Kong Stock Exchange. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law.Please also note that all financial measures are in RMB, unless otherwise stated and certain financial measures that we use on this call are expressed on a non-GAAP basis. Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in our earnings press release.I will now turn the call over to our Chairman and CEO, Rick. Please go ahead, sir.
[Foreign Language]
[Interpreted] Hi, everyone. Welcome to the Tongdao Liepin Group's earnings release for the third quarter of 2023. First of all, on behalf of our group, I would like to express my gratitude to our customers who have always been supported us and to the investors for their support. And, of course, a heart felt thanks goes to every employee of the group for their tireless efforts and dedication.
[Foreign Language]
[Interpreted] In the third quarter, our group achieved a revenue of CNY 560 million, representing a year-over-year decrease of 12.9%. This decline has narrowed by 5.5 percentage points compared to the second quarter. Our non-GAAP operating profit for the third quarter was CNY 66.23 million, bringing the accumulative non-GAAP operating profit for the first 3 quarters to CNY 130 million. Since the beginning of the year, business production and customer spending have gradually reduced and macroeconomic metrics shows signs of recovery. However, when focusing on the aspects such as enterprise profit and household income, we still perceive a discrepancy between the [indiscernible] at the macro level and the [ shell ] around us. The transmission from macroeconomic recovery to the rebound of enterprise confidence and market expectations still needs more time.
[Foreign Language]
[Interpreted] This year, we've seen various paces of recovery in the recruitment industry as well. Blue-collar recruitment, especially in urban services, has rebounded quickly, while the mid- to high-end white-collar market is relatively slow. The higher end headhunting market continues to face challenges. But, of course, since the third quarter, we've seen more supporting policies being introduced by the government. At the same time, a technological revolution led by AI is underway. We look forward to an improvement in market confidence and expectations, as well as the smoother transformation mechanism from macro economy to micro levels. Overall, the number of new job postings on our platform has shown a trend of sequential recovery on a quarterly basis throughout the year. The third quarter saw a year-over-year increase of 4.3%, marking the first quarter of positive growth this year. Except for a few pressure industries, most primary industries have seen an improvement in number of new job postings compared to the first half of the year.
[Foreign Language]
[Interpreted] As of the third quarter, our platform has accumulated 1.262 million registered business users, a 14.2% increase from the same time last year, facing a relatively pressured recruitment market, our unique brand effect and product positioning continue to attract more business users, including state-owned enterprises, government parks, rapidly developing emerging industries and small- and medium-sized enterprises with more flexible recruitment needs. We are continuously promoting a diversification of our product mix and flexible adjustments of our sales strategy for different type of customers. The launch of our lightweight recruitment package in the third quarter has contributed to incremental growth in new customers in the second half of the year and the year-over-year decline in the number of paying business customers in the first 3 quarters has narrowed compared to the first half of the year. Additionally, to better drive product innovation and improve production and [ research ] efficiency, we are fully embracing advanced technologies in data algorithm and product development across multiple dimensions. Our interactive job seeking AI system currently under development is expected to be fully launched next year.
[Foreign Language]
[Interpreted] Regarding individual users, as of the end of the third quarter this year, the cumulative number of registered users on our platform reached 92.2 million, marking a 13% growth versus the same time last year. The quality of new registrations have continuously improved with the proportion of complete resumes and user activity levels reaching all-time highs for the period.In terms of targeted user attraction, we have observed a more pronounced aggregation [ results ] such as AI, smart manufacturing and among overseas talent. This year, we [ coronated ] the Innovating Hong Kong Global Talent Carnival, plus focusing on promoting talent exchange and cooperation in the Greater Bay Area, encompassing Guangdong, Hong Kong and Macau. This month, we officially launched our new overseas brand, Liepin in Hong Kong. Going forward, Liepin will connect high-quality talents with enterprises in Hong Kong, the Greater Bay Area and globally, bolstering worldwide talent interaction.
[Foreign Language]
[Interpreted] Students remains a vital force of our newly registered users. In the third quarter, as the exclusive human resource service provider, we co-hosted the 2024 Beijing College Graduates Employment Service Season with a Beijing Municipal Human Resource and Social Security Bureau and the state-owned Assets Supervision and Administration Commission, among other departments. This event is expected to feature over 140 online and off-line employment service activities, driving more than 6,000 companies to provide over 100,000 job positions. Additionally, our public welfare activities launched in the third quarter, such as the Global Management Trainee Talent Pool and Technology New Generation campus recruitment live streams aimed to effectively bridge the gap between top-tier students and the recruitment needs of enterprises, thereby realizing a higher social value for our platform.
[Foreign Language]
[Interpreted] In the third quarter of this year, our group's online certificate and training business experienced significant recovery. Following some structural adjustments to product categories last year, we have further focused on more promising sales that better match our high-quality professional users. Currently, the company has gained a certain market share in the psychological counseling training and is continuously strengthening our MBA training business forming 2 pillar categories. On the other hand, through the adoption of online management tools, we continue to empower and enhance operational efficiency does not only maximize the productivity of our experienced staff, but also enable new staff to quickly achieve high level of effectiveness. This strategical move effectively cater to the increase in user demand in the rejuvenating market, spearheading the recovery of our business.
[Foreign Language]
[Interpreted] This year, the entire high-end recruitment market, particularly the off-line market, has been exceedingly challenging. Regarding the supply side, some of the service providers have exceeded the market. As you can see, as of the end of the third quarter, there has been a slight decline in the number of verified headhunters on our platform. The decline was due to our proactive efforts to clean up inactive headhunting firm account that seize operation this year. Excluding this factor, the number of our verified headhunters on our platform continued to grow in the third quarter. It is precisely in such an environment and with these opportunities, we officially launched Duolie RCN, our new product that have incubated over the past 2 years to the headhunting industry at the end of September this year. Duolie is a SaaS product focused on the operational management of headhunting firms, driven by technology, algorithms and big data to aid these firms in digitizing the management of clients, talent and job operations. We hope that through this product, we can provide a one-stop solution for business empowerment, resource integration and thought management for headhunting firms, helping them to accumulate data and resources more efficiently and rapidly, and therefore, enhancing operational efficiency.
[Foreign Language]
[Interpreted] Based on this deeply integrated SaaS product, we have further developed a headhunting recruiting cooperation network, Duolie RCN, through AI-powered intelligent matching and facilitates cooperation among headhunters on the platform with platform rules and security mechanisms comprehensively protecting their interest and creating a new ecosystem of collaboration. At the same time, we provide them with 4 major empowerment, cooperation, resources, products and operations. For example, in terms of cooperation empowerment, this includes but it's not limited to various innovative cooperation modules associated with job postings, candidates, business development, et cetera. Additionally, we have seamlessly integrated AI algorithm into the entire workflow and operational scenarios of headhunters, bolstering increased collaboration between headhunting firms through diverse off-line approaches. In terms of resource empowerment, all headhunting firms joining Duolie RCN can access to a shared ecosystem of high-quality talent pools and more business opportunities and [ job orders ]. [Foreign Language]
[Interpreted] In just 1 month following the official launch, we have received considerable attention from the industry. As of today, we have established local service teams in numerous locations across the country, covering over 100 key cities where headhunters are concentrated, and RCN talent pool has reached tens of millions. This year marks the 12th year of the Liepin. We have experienced both soaring success in tailwinds and faced challenges in adversity. Regardless of the ever-changing external landscape, our commitment to the Chinese human resource industry remains unwavering. Upholding craftsmanship and series of innovation centered on our users, we continuously enhance our market insights and judgment. We look forward to further growth in our business as the market gradually gains momentum. We are deeply grateful to our investors who have constantly demonstrated interest and trust in our endeavors. Your support is greatly appreciated. Thank you.And now, I will turn the floor to our CFO, Tim, to introduce our 2023 third quarter financial performance.
[Foreign Language]
[Interpreted] Thank you, Rick, and thanks, everyone, for joining our third quarter 2023 earnings release conference. Our financial performance in the third quarter still faced considerable pressure with our revenue amounting to CNY 559 million, showing a year-on-year decrease due to soft macro condition and relatively weak recruitment demand, but the gap continued to narrow substantially compared to the second quarter.
[Foreign Language]
[Interpreted] Looking more closely into our revenue contribution. In the third quarter of 2023, our revenue from talent acquisition and other human resource services provided to our business customers was CNY 496 million, a year-on-year decrease of 14.4%. Enterprises remain relatively cautious in recruiting mid- to high-end talent during this time. We look forward to the implementation of more supportive policies and stable economic conditions to continue building up enterprise confidence in their future development and consequently boost the demand for mid- to high-end recruitment.On the other hand, our revenue from talent development service provided to individual users was CNY 62.05 million in the third quarter, a 1.7% year-on-year increase. We are pleased to see the substantial recovery in our online certification training business in the third quarter. As we continuously refine our advantage of skills and expanded customer lifetime value, we also continue to explore other high-potential markets, driving sustainable growth of our online certification training business.
[Foreign Language]
[Interpreted] In the third quarter of 2023, our gross profit was CNY 425 million, a 15% decrease compared to the same period last year, and the gross profit margin decreased to 76%. The decline in gross profit margin was primarily attributable to relatively stable cost and change of product mix. This year, there was increased demand from business customers for more result guaranteed services, such as closed-loop products and product-based services. These products generally require greater involvement from recruiting consultants, resulting in a lower gross profit margin.
[Foreign Language]
[Interpreted] Our total operating expenses were approximately CNY 490 million in the third quarter. The expenses can be broken down as follows: our R&D expenses kept decreasing in the third quarter of this year, coming down to CNY 89.23 million, representing a year-on-year decrease of 8.7%. As the company's product operation system matures, technological upgrades have resulted in increased efficiency in research and development, creating more room for our R&D expenses optimization. Consequently, we've been streamlining and reducing earnings expenses while still committing to the exploration of cutting-edge technologies and ongoing product development.
[Foreign Language]
[Interpreted] Our G&A expenses increased by 12.4% in the third quarter of this year, amounting to CNY 84.03 million. This increase was primarily attributable to one-off expenses, including compensation relating to streamlining staff and penalty fees from office rental adjustments. The benefits of these expense optimizations are expected to become more evident in our financial results next year.And lastly, our sales and marketing expenses in the third quarter of 2023 were around CNY 245 million, representing a year-on-year increase of 5.2%. This rise was mainly due to the launch of our lightweight subscription packages, which slightly increased sales personnel costs, as well as the incremental sales personnel from our recovery sub business provided to individual users. However, we maintain strict cost control over our marketing expenses during this period. Despite a reduction in total online marketing spending, we saw improved advertising outcomes. This success is attributed to our refined algorithm-driven marketing strategies and the synergistic use of various marketing channels. The optimization of sales and marketing expenses will be most visible in the fourth quarter.
[Foreign Language]
[Interpreted] This is the decrease in revenue and negative operating leverage, our bottom line performance remained under pressure in the third quarter. But as we firmly executed multiple cost reduction and efficiency improvement strategies, we achieved positive profit consecutively in the third quarter. During the reporting period, our non-GAAP operating profit amounted to CNY 66.23 million. Our non-GAAP net profit attributable to equity shareholders of the company was CNY 49.4 million.
[Foreign Language]
[Interpreted] And lastly, we will continue to strengthen and improve the shareholder return mechanism in the future, aiming to bring more long-term value to our customers, employees and investors.And this concludes my prepared remarks. Thank you.And operator, we are ready to take questions.
[Operator Instructions] We will take our first question from Thomas Chong with Jefferies.
[Interpreted] I have 2 questions. My first question is about how should we think about the trend in terms of the cash billing, the number of job postings, as well as the MAU trend?And my second question is about operating expenses. Can management comment about the sales and marketing expenses, as well as our user acquisition strategies?
[Foreign Language]
[Interpreted] Thank you for your question. This year, individual users have been quite active with both the number of newly registered users and user activity reaching high levels. In the third quarter, the number of new individual users on our platform increased by 2.23 million, representing a year-on-year growth of 6.8%. As of now, the number of active users each month in 2023 has reached a historical high with the average monthly active users in the third quarter, increasing by 11.4% year-on-year. This success has been attributed to our optimized customer acquisition channels, the continuous implementation of our strategy to rejuvenate our brand and efforts to refine our user recall strategies. However, on the other hand, we've seen that this year, jobseekers who are currently employed and are still quite cautious about changing jobs, showing a strong preference for stability.
[Foreign Language]
[Interpreted] The number of new job postings is an important and leading indicator we use to assess recruitment demand. In the third quarter, the number of new job postings on our platform achieved a year-on-year increase for the first time. Looking at different industries, sectors such as energy, chemical, environmental protection, transportation, trade logistics, advertising media and services and also et cetera, also seen year-on-year increase of over 20% in new job postings during the third quarter. However, it still takes some time to translate recovery in new job postings to our job business improvement and positive cash billings. At the same time, industries traditionally known for high employment capacity such as finance, real estate and Internet and health care are still under considerable pressure and further recovery is pending policy support and implementation.
[Foreign Language]
[Interpreted] I would like to share with you the performance of our cash billings. Looking at the first 3 quarters, we've seen a rather slow recovery in enterprise confidence. The hiring of mid- to high-end talents, including the general white-collar positions remain cautious, contributing to the overall market pressure. So our cash billings for the third quarter were also adversely impacted. Looking at the fourth quarter, challenges persist. But, of course, we are thoroughly prepared to navigate through the crucial month of December. We will share more details with you in a timely miner.
[Foreign Language]
[Interpreted] This year, our group has made significant efforts in cost reduction and efficiency improvement, minimizing unnecessary expenses to ensure the stability of our operating cash flow. Looking at the whole year, the total amount of operating expenses will demonstrate a notable optimization over last year's figures, especially in the fourth quarter. However, due to the decrease in revenue this year, the expense ratio will experience a certain uplift. [ Especially ] in the third quarter, there was a increase -- year-on-year increase in G&A expenses. This was mainly due to the one-off expenses associated with some cost reduction and efficiency improvement measures. And these efforts are expected to create opportunities for optimizing our G&A expenses in the coming year and over the mid- to long- term.
[Foreign Language]
[Interpreted] In the third quarter, our sales and marketing expenses experienced a slight increase compared to the same period last year. This was primarily due to the modest growth in our sales personnel attributed to the recovery and expansion of our online certification training business to gain more market share. And looking at the entire year, our sales and marketing expenses are projected to decrease by 15% compared to last year, with a significant potential for expense optimizations in operations related to user traffic. We expect a further decrease in the coming year. And also, we are exploring ways to further optimize our sales organizational structure to enhance the efficiency of acquiring business customers. And, of course, it's already mid to late of the fourth quarter, so we are still doing a lot of pipelines for the next year. But so far, since everything is still unclear now, so continues in optimization of sales cost, especially marketing cost is one of our main task.
[Foreign Language]
[Interpreted] So I will ask more in terms of R&D expenses. In the third quarter, thanks to the [ iteration ] of our operational system and improvements in the product R&D efficiency, we were able to optimize our R&D expenses while continuing to incubate and launch new businesses. And this trend is expected to persist throughout the year. Overall, the cost reduction and efficiency enhancement will remain the primary focus of our refined operational strategy this year and may not be very visible in the third quarter, but in the mid- to long-term, it will be more evident. And we will also maintain the [ stringent ] cost control while meeting business needs and also bolstering industry innovation.
[Foreign Language]
We will take our next question from Di Shi with CICC.
[Interpreted] Okay. I will now translate my questions. The first one is that, if we break down the Q3 revenue growth, how is the performance of the number of paid enterprise customers and the ARPU, respectively? And after we introduced the lightweight basic package in Q3, how is the performance in stimulating enterprise customers' willingness to pay? And has it reached our original expectation?The second question is about the recent performance of Wenjuanxing. How is this growth momentum after the pandemic? And how [ good ] is our strategy to find some new growth drivers for this business?
[Foreign Language]
[Interpreted] Expanding our paying customer has always been a core strategy for our company. Facing a challenging major recruitment market, our group started to promote lightweight online recruitment package in the third quarter. This move was in attracting small- and medium-sized enterprises that have recruitment needs that are constrained by limited budget. Currently, the introduction of this lightweight online recruitment package has brought incremental new customers for our group in the second half of the year, particularly in emerging sectors such as new energy, artificial intelligence and new materials. The pace of new customer acquisition in these areas has significantly increased in the second half of the year.
[Foreign Language]
[Interpreted] I perhaps previously imagined the year-on-year decline in our paying customers for the first 3 quarters has shown a narrowing trend compared to the first half of the year. Heading into the fourth quarter, our strategy continues to be focused in converting more users into paying customers. However, the relatively lower unit price of our lightweight online recruitment package is expected to impact the ARPU of our paying customers. But despite this as this package contains only online products, its gross margin is quite impressive. And this year, the most crucial objectives for our business are to retain customers and acquire more new customers. After forming initial partnership with the small- and medium-sized enterprises, we are continuously pursuing and capturing opportunities for upselling and cross-selling, aiming to enhance ARPU as the market gradually recovers in the future.
[Foreign Language]
[Foreign Language]
[Interpreted] Regarding Wenjuanxing, our online service has been one of the most standout sub businesses for our group over the past 3 years. This year, despite facing a decline in user traffic due to the easing of the pandemic restrictions, this segment has maintained its dominant position in the online service market. Its market share is more than the cumulative market share of this second and third and even fourth players. And moreover, its overall traffic still significantly exceed the pre-pandemic level. So although the -- our traditional advertising revenue model has been adversely impacted this year. But since in the past 2 years, we have been deeply exploring and promoting our survey SaaS products. And these efforts aim to provide users with greater value and bolster closer customer relations. So currently, the SaaS-related incremental revenue account for half of the total revenue from our SaaS business.
[Foreign Language]
[Interpreted] Additionally, large [ language ] models and AI [indiscernible] have opened up broader development opportunities for our survey operations. We are trying to introduce features such as automatic questionnaire generation and stabilized results -- standardized results analysis by integrating cutting-edge technologies. These advancements enhance the convenience and visual appeal of our service and save users' time on fundamental tasks. So looking ahead, we aim to continuously optimize the user experience and strengthen user engagement through ongoing technological innovation. And since it's a public platform, we warmly invite everyone to try and experience these new features.
[Foreign Language]
[Foreign Language]
We will take our next question from Wei Xiong with UBS.
[Interpreted] First, I want to ask how should we think about the competitive landscape in the mid- to high-end talent recruiting market next year? And if the market warms up, do we expect the competitive pressure to intensify? And what are our strategic priorities to strengthen our advantages?And second, just a follow-up on the RCN, could management share more color in terms of the number of headhunters joining the network and what's our current business and monetization model? And looking ahead, how should we think about the growth and margin level for this new business?
[Foreign Language]
[Interpreted] This year, the entire [ management ] high-end recruitment market, including high-end headhunting market is under significant pressure. So this year, some players in the recruiting industry continue to face pressure to assess and this situation may even continue for some time. Despite the challenge we will face this year, the BHC ecosystem has still shown healthy growth. And looking ahead, as the economy recovers and entrepreneurial confidence is restored, the market will still require high-quality talents to drive industry structural upgrades and sustain economic development. And with over a decade of deep involvement in the mid- to high-end online recruitment market, we are confident in this regard. And also the leading players in the recruitment industry each possess unique advantages. So market recovery and collaborative development are not mutually exclusive.
[Foreign Language]
[Interpreted] Of course, when the market displays signs of recovery, it won't be limited to specific industries alone. It will be a consequence of overall stability and improvement across various sectors and acceleration of several industries. When industries like the Internet and finance gradually stabilize and experience increased demand for recruitment, these traditional advantage sectors will continue to serve as a cornerstone of our recovery expansion. And also emerging industries such as high-end manufacturing will generate increased demand for recruitment, typical need for top-tier talents with the supply side optimization progress, we will also become a better choice for our high-quality mid- to high-end recruitment services for a wider range of enterprises.
[Foreign Language]
[Interpreted] In addition, this year, we introduced lightweight packages tailored to serve small- and medium-sized enterprises. This strategic move allows us to upsell and cross-sell leveraging our extensive product portfolio to establish a strong foundation as the recruitment market recovers. And also this year, we started to explore into market outside Mainland China through the Hong Kong market with the expectation of expanding the advantages of our service to broader markets. And lastly, for the off-line headhunting market, they are the front line perceivers of the macroeconomic. And if the economy recovers in the future, their business rebound will also be very rapid. So these aspects are referenced with our RCN businesses, which we've actively cultivated over the past 2 years. And also, in fact, this is related to your second question. So I will continue to share the progress of our RCN products.
[Foreign Language]
[Interpreted] The RCN model represents a revolutionary change in the headhunting industry. The nature [ of this product ] is to standardize and centralize the fragmented market, maximizing matching efficiencies through AI and collaboration. This approach reduces traditional headhunting firms reliance on senior headhunters and thereby lowering costs. As a result, companies can enjoy highly efficient headhunting services. And the model enables smoother utilization of headhunting services, which are resort-oriented recruitment services across more [ positions ] and enterprises. And as we made through its technological and business model revolution in the global headhunting industry.
[Foreign Language]
[Interpreted] During the past 2 years of incubation, we have worked closely with nearly 30 headhunting firms to refine our products. The collaborative ecosystem rely on a strong integration within the SaaS product, resulting in a relatively high entry barrier. However, once the collaboration is established, the depth of our partnership becomes very strong. As mentioned earlier, our new product, Duolie RCN was officially launched in the third quarter to the headhunting industry. Within just 1 month after the launch, we attracted significant industry attention. And by the end of this year, we expect the number of collaborating headhunting firms to double, covering nearly 1,000 headhunters and we anticipate even faster growth next year.
[Foreign Language]
[Interpreted] Currently, our business operates under 2 monetization models. The first is a commission-based collaboration network fee, where we charge a fixed rate based on the GMV of the [ recruitment ] firm. And the second is the revenue sharing model that depends on the segments in which Liepin is actively involved throughout the recruitment process. There are various ways to engage in this entire process. The primary costs associated with this business are already reflected in our current financial results. We are very confident in greater partnerships with headhunting firms and in a larger GMV in the future. And this confidence is built on over a decade of experience and expertise in the mid- to high-end recruitment market. We hope to empower young headhunters rapid growth through the combination of technology and collaboration will also boosting the revenue of headhunting firms, and we aim to expand the headhunting market and hope that investors can join us in witnessing the growth of this business.Thank you. And in the interest of time, this concludes our conference call today. If you have any further questions, please do not hesitate to contact our IR team through the e-mail ir@liepin.com. And thank you for your time today. See you next quarter. Bye-bye.
[Foreign Language]
[Foreign Language]
This concludes today's call. Thank you for your participation. You may now disconnect.