ConGen Limited, listed on NASDAQ, reported a robust financial performance for the third quarter of 2024, showcasing significant growth in revenue and net income. The company achieved a 19% year-over-year increase in revenue, reaching RMB 1.91 billion. Despite the challenging recruitment market, ConGen's strategic focus on blue-collar and small enterprise markets continues to yield positive results.
Key Takeaways
- Revenue grew by 19% year-over-year to RMB 1.91 billion.
- The BOSS Jiping app saw a 30% increase in monthly active users.
- Blue collar business contributed over 38% of total revenue.
- ConGen projects Q4 revenue to grow by up to 14.5% year-over-year.
Company Performance
ConGen Limited's performance in Q3 2024 highlights the company's ability to navigate a challenging recruitment market effectively. The company reported a net income of RMB 461 million and an adjusted operating income of RMB 610 million, marking a 10% increase from the previous year. The company's strong network effect and efficient business model have been pivotal in driving growth, especially in the blue-collar and small enterprise sectors.
Financial Highlights
- Revenue: RMB 1.91 billion, up 19% year-over-year
- Net Income: RMB 461 million
- Adjusted Operating Income: RMB 610 million, up 10% year-over-year
- Gross Margin: 84%
- Total (EPA:TTEF) Paid Enterprise Customers: 6 million, up 22% year-over-year
Company Outlook
Looking ahead, ConGen Limited projects revenue for Q4 2024 to be between RMB 1.795 billion and RMB 1.81 billion, reflecting a year-over-year growth of 13.6% to 14.5%. The company expects user growth of 15% and emphasizes maintaining profitability without major new investments. ConGen is also focusing on ethical recruitment practices within its blue-collar strategy.
Executive Commentary
CEO Jonathan Zhao expressed confidence in the company's growth potential, stating, "We have a double space to grow." CFO Fiyue Zhang emphasized operational efficiency, noting, "We will further improve our operating margin along with top-line growth."
Q&A
During the earnings call, analysts inquired about the impact of government policies on market conditions, to which ConGen responded positively, citing signs of market improvement. Questions also focused on the company's cautious approach to AI applications, with an emphasis on user safety.
Risks and Challenges
- Recruitment market challenges could impact growth.
- Increased marketing expenses due to sponsorships may affect margins.
- R&D expenses rose by 12%, which could pressure profitability if not managed.
- Macroeconomic factors and government policies could influence market conditions.
- Competition in the blue-collar and small enterprise sectors remains intense.
ConGen Limited's Q3 2024 results demonstrate its resilience and strategic focus amid a challenging market environment, positioning the company for continued growth in the upcoming quarters.
Full transcript - Boise Inc (BZ) Q3 2024:
Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to the ConGen Limited Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a Q and A session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms.
Wenbei Wang, Head of Investor Relations. Please go ahead, ma'am.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Thank you, operator. Good evening and good morning, everyone. Welcome to our Q3 2024 earnings conference call. Joining me today are our Founder, Chairman and CEO, Mr. Jonathan Peng Zhao and our Director and CFO, Mr.
Fiyue Zhang. Before we start, we would like to remind you that today's discussion may contain forward looking statements, which are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under company's control, which may cause actual results, performance or achievements of the company to be materially different. The company caution you not to place undue reliance on forward looking statements and do not undertake any obligation to update this forward looking information, except as required by law. During today's call, management will also discuss certain non GAAP financial measures for comparison purpose only. For a definition of non GAAP financial measures and the reconciliation of GAAP to non GAAP financial results, please see the earnings release issued earlier today.
In addition, a webcast replay of this conference call will be available on our website at ir.jpin.com. With that, I will now turn the call to Jonathan, our Founder, Chairman and CEO. Hello, everyone. Thank you for joining our company's Q3 2024 Earnings Conference Call. On behalf of the company's employees, management team and Board of Directors, I would like to extend our sincere gratitude to our users and investors who have continuously believed in us and supported us.
Let's talk about financial numbers for this quarter first. The company achieved a revenue of RMB1.91 billion, up 19% year on year and a net income of RMB460 1,000,000. Additionally, our adjusted operating income, which excludes share based compensation expenses, reached RMB610 1,000,000, reflecting a 10% year on year growth. During the Q3, which coincided with the Olympic Games and the Euro Cup 2024, the company allocated additional resources to brand promotion, which led to an increase in marketing expenses. It was a one off expenditure.
Our annual profit growth target remains firmly on track. Additionally, it is worth mentioning that as a company listed on NASDAQ for 3.5 years and with a secondary primary listing on Hong Kong Exchange for 2 years, our share based compensation expenses, which have historically accounted for a relatively high proportion of our revenue, has entered the anticipated phase of gradual reduction. In this quarter, these expenses demonstrated a decline both on a year on year and quarter on quarter basis. Reflecting on the Q3, our efforts can be summarized into 2 sentences. While the overall recruitment market environment remains challenging, the company's unwavering focus on key growth drivers continue to yield positive results.
Now let's take a look at a few notable highlights from the Q3. First, our user growth continued to demonstrate strong growth momentum. As we all know, user growth has always been an important growth driver for us. In this quarter, the average monthly active users on our BOSS Jiping app reached 58,000,000, representing a 30% year on year increase. From January to September 2024, newly added verified users exceeded 40,000,000.
Compared to the job seeker side, recruitment demand from enterprises showed a more moderate and steady upward trajectory. The number of newly posted drop off positions in the Q3 increased by 18% year on year. This growth is mainly driven by the user growth and market share expansion fueled by our relatively efficient business model. The second thing in the Q3, the growth of short term payment ratio affected by supply and demand has been slowed down. Despite this, the retention of enterprise user remains solid and the number of paid enterprise customers experienced a decent growth.
From July to September, the ratio of job seeker to enterprise users continued its upward trend since the Q2 with a gap compared to the same period last year continuing to widen. Relatively more job seekers have shortened the recruitment cycle for enterprises. That is the time it takes for enterprises to fill a right time position is reduced. In the short term, this may affect the enterprise users' willingness to pay, leading to a slower growth of the company's paying ratio. However, we have observed that the retention rate on the enterprise side remains solid.
This is definitely a good news in the long term. Investors and analysts who focus on the enterprise service market should have recognized that when the number of annual paying enterprise customers reaches a scale of 1,000,000, the retention of enterprise customers become decisive and it is a prerequisite for sustained growth. The total number of paid enterprise customers for the 12 months ended September 30, 2024 reached around 6,000,000, up 22% year on year. The third thing that is the average revenue per paid enterprise customers, namely ARPU, has remained stable. 4th, in the blue collar manufacturing sector, we are committed to purifying the market environment while striving to expand our front cycle and continue to achieve satisfactory growth.
Our strategy focuses on providing high quality recruiting companies with great opportunities to connect with candidates, leveraging a combination of innovative products, refined algorithms and robust operational capabilities. In terms of data on our platform, in the Q3, the accumulated number of enterprises joining Hailo, Cooch Select project grew by 45% quarter on quarter and signed contract value increased by over 40% quarter on quarter. This also helped as a result, this also helped the revenue contribution from overall blue collar business in terms of total revenue further increased to more than 38%. 5th, the company continues to invest in technology to create greater value. In the Q3, our platform facilitated an average of nearly 200,000,000 monthly mutual achievements, demonstrating a continued rise in the number of successful interaction based on mutual consent between enterprise users and job seekers on a per capital basis.
As an entrepreneur, I and my friends all view this data as a testament to the value of our company brings to the world. And this has always been the goal that our company will long pursue. Last, regarding shareholder returns, the company has repurchased around $130,000,000 worth of shares since our last earnings call, bringing the total repurchase for this year to approximately US220 million dollars representing 3.4% of our total shares. This underscores the company's confidence in our long term growth prospects and our commitment and our concern to delivering sustained returns to shareholders in any circumstances. That concludes my part of the call.
I will now turn it over to our CFO, Phil, for the overview of our financials. Thank you.
Fiyue Zhang, Director and CFO, ConGen Limited: Thanks, Jonathan. Hello, everyone. Now let me walk through the details of our financial results of the Q3 of 2024. We delivered a solid set of financial results in this quarter despite the industry headwinds, with revenue grew by 19% year on year to RMB1.9 billion. This growth was mainly driven by the continued expansion of our enterprise user base as we further penetrated into blue collar industries, lower tiered cities, as well as small sized companies market, even facing a generally soft recruitment market.
Number of paid enterprise customers was 6,000,000 in the trailing 12 months ended September 30, 2024, up by 22 percent year on year and 2% quarter on quarter. ARPU in this quarter remained stable sequentially. Notably, our overall operating cost and expenses were flattish quarter on quarter, even including several one off or non structured expense items in this period. As one of our key focuses being sustainable cost control, we are confident that our effective business model can continue to generate strong operating leverage in the future. Looking at detailed financial metrics, excluding share based compensation expenses, adjusted operating costs and expenses increased by 23% year on year to RMB1.3 billion, flattish quarter on quarter.
Adjusted operating profit reached RMB6005 million, up by 10% year on year, with an adjusted operating margin of 32%. Cost of revenues increased by 17% year on year to RMB 314 1,000,000 in this quarter, mainly driven by higher server and bandwidth costs, payment processing costs as well as employee related expenses. Gross margin kept at the same level of 84% as last quarter. Sales and marketing expenses increased by 14% year on year to RMB522 1,000,000 in this quarter, primarily driven by the marketing campaigns launched during the Paris 2024 Olympic Games and the Euro Cup of 2024. Excluding the sponsorship expenses, we witnessed the improved efficiency and business leverage in both our selling and marketing expenses due to our strong brand recognition and powerful network effect inherent in our business.
We are confident that the enhanced marketing efficiency trend will continue to improve along with our top line growth. R and D expenses increased by 12% year on year to RMB464 1,000,000 in this quarter. Excluding share based compensation expenses, adjusted R and D expenses increased by 18% year on year to RMB361 1,000,000. The depreciation cost associated with our earlier investments in AI infrastructure has largely stabilized and is not expected to increase in the near future. Our G and A expenses increased by 31% year on year to RMB286 1,000,000 in this quarter, mainly due to higher employee related expenses and some one off expenditures that will not occur in the coming year.
Our net income was RMB464 1,000,000 in this quarter, up 9% year on year. And our adjusted net income in this quarter reached RMB739 million and increased by 4% year on year, which was affected by the decrease in the interest and investment income. Total share based compensation expenses amounted to RMB275 1,000,000 in this quarter, down by 9% quarter on quarter and 5% year on year. As Jonathan just mentioned, we are expecting total share based compensation expenses to continue the downward trend in 2025. Net cash provided by operating activities in this quarter was RMB812 1,000,000 relatively stable with that of the same period of last year.
As of September 30, 2024, our cash and cash equivalents, short term time deposits and short term investments totaled RMB16.6 billion. We launched an additional share repurchase program in August 2024, running concurrently with the March program, which allows us to buy back up to US350 million dollars of shares. Since the announcement of the August program, as Josephine just mentioned, we have repurchased a total consideration of approximately 130,000,000 dollars making the total buyback amount reached US220,000,000 dollars this year, demonstrating our commitment in shareholders' return and long term confidence of our business. And now for our business outlook. For the Q4 of 2024, we expect the total revenues to be between RMB1.795 billion and RMB1.81 billion, a year on year increase of 13.6 percent to 14.5%.
That concludes our prepared remarks. And now, we would like to answer questions. Operator, please go ahead with the queue.
Conference Operator: Thank you. Our first question comes from Eddie Huang with Morgan Stanley (NYSE:MS). Your line is open.
Eddie Huang, Analyst, Morgan Stanley: Thank you, management, for taking my question. I have two questions. The first one is that the government has launched a supportive policy since September end. Have you witnessed any signs of this policy has helped you boost the recruitment market? And have you witnessed any operating metrics improvement as well?
The second question is, given the uncertainty of the macro economy, which could sustain into 2025, how should we think we could maintain the revenue growth in 2025? Thank you.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Thank you for your question. About the first one regarding the supporting policy since the end of September, I have several observations to share with you. Firstly, we noticed that the newly added enterprise users every day has been improving on a year on year basis since the end of October. And please note that November December are traditionally relatively low season for recruitment. However, the newly added enterprise users improving on a year on year basis since October, My understanding is that this is a good news and this trend have continued into November December.
And the second thing about the job seeker to recruiter ratio, which I believe many of you concerned have been continued to fall back. I have just discussed in my prepared remarks that during July to September, that number is high compared to the same period last year and now it is lower than the same period last year, which and reached relatively low level within this year, which means the supply and balance supply and demand unbalance issue is improving. Actual improvement of economy and actual improvement of the enterprise recruitment demand. So this should take some time and we should stay patient and calm. About the second question, facing the uncertainty of macro, how we can guarantee our continued revenue growth trend.
We have several key structural growth drivers for our revenue, which is still unchanged. The first thing is the user growth. Even though of all these uncertainties, we expect that we can still have at least 15% of overall user growth. The enterprise side might be slower, but still it can grow. And if the macro can stable at some level, then we expect that enterprise side have better performance.
So our user growth as the most important driver is still quite solid. And the second important driver is our paying ratio has still maintained a separate level. If you're looking back, our paying ratio started at even like 0% or 5% and improved along this year is now reaching at like 20% to 30% level. And so the upward trend is unchanged. And another opinion is that our pace the increase of payment ratio has some connection with the supply and demand balance.
And as the sign of the supply and demand balance improving, we expect that if the economy can be stable, then our payment ratio can return to our growth trend. If the macro can actually go back to growth, then my paying our paying ratio will experience a significant improvement.
Fiyue Zhang, Director and CFO, ConGen Limited: Drivers.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: And the 3rd driver is our ARPU. As far as we have got the 1st and second driver, which is NAV, we are not in a hurry to aggressively increase ARPU. So it will keep at a stable and slightly improvement trend. And I have some additional brand new growth driver, which is our Blue Collar business. Our blue collar contributed more than 38% in the Q3 of our total revenue.
This is quite important breakthrough. Several years ago, I have my various thoughts that I want to resolve the problem in the blue collar manufacturing recruitment industry, which is bad money driven on the good money and people with decent background cannot get good jobs. So we launched the College High Law project in the hope of someday, one day, the top good college agents can agree with us to agree with our rules to do a crewman business on our platform. And now we have saw some real money coming back from this, which is our dreams coming into the reality. That's my answer to your question.
Operator, let's move on to the next question.
Conference Operator: Thank you. Our next question comes from Timothy Zhao with GS. Your line is open.
Timothy Zhao, Analyst, Goldman Sachs (NYSE:GS): Thank you, management, for taking my questions. My first question is regarding the more detailed breakdown into the Q3, including the customer performance between the blue collar and white collar sectors as well as different sectors, subsectors as well. And as management mentioned that ARPU overall is relatively stable in the Q3. Could management provide more color in terms of ARPU and revenue trend between SMEs and the key accounts? And second question is regarding the user growth.
I think as management mentioned that I think in the 1st 9 months of this year, there were already 40,000,000 newly added verified users. And in my calculation, the individual users should already reach or get close to 200,000,000. Could management share about the total room for the individual users to grow? And as we are aiming for 15% or more than that growth into next year, how should we think about the sales and marketing expenses or the marketing expenses into next year? Thank you.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Thank you for your question. First one regarding different blue, white collar and industries. Of course, the overall growth rate of Blue Collar are still faster than White Collar. As I just mentioned, the revenue contribution have further increased to over 38%. However, compared to the same period last year, we have seen the blue collar revenue growth rate have been significantly slowing down, which was mainly affected by the weak urban service industry performance.
Compared to blue collar, white collar is relatively stable. In terms of subsectors, as I just said, the urban service industry has been relatively weak since the Q2. However, we covered a little bit in recent weeks. For the better performed industries, we have several highlights, manufacturing industries, logistics and warehouse, automobile are the 3 best performed industries in the Q3 and the recent weeks. For example, the manufacturing industry has year on year revenue growth more than 45% in the Q3.
And about the different size of enterprises, we noticed these are on the two end of the market. First one is hypercell enterprise with more than 10,000 employees performed the best in the Q3. And the second one is a small and micro sized enterprises with employee less than 100 people. My understanding that this is actually a quite good news because majority of China's enterprises are small sized companies, which is also the main contribution of our new users new enterprise users.
Fiyue Zhang, Director and CFO, ConGen Limited: I would like to add one point regards our 3 accounts breakdown. Key accounts recorded the highest revenue growth, which is up more than 30% year over year. The overall ARPU up 5% year over year, flat quarter over quarter. Among all three segments, key accounts ARPU improved the most.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: And about your second question for our user growth potential, it's actually a quite good question. So we have actually started through several different channels on methodology that come to a conclusion that China's marketable employees, the number of China's marketable employees are more than 400,000,000, which means we have a double space to grow. And on the enterprise side, the room or space is even bigger. Official number is that China has more has 40,000,000 to 15,000,000 enterprises. Some channels said even more than 50,000,000.
No matter what, we have very strong advantages in terms of enterprise size service because we are our model are very simple for small or even micro sized companies and across different industries, which can support our very strong and large room for our enterprise users. And we are not planning to spending a lot of money on marketing or user acquisition. There are two reasons. First, due to a very strong double sided network effect, the natural traffic has accounted for a very significant portion of our newly used new users. And secondly, technically speaking, there is no big events or marketing campaign, which we need to spending more money on.
So as a result, we will keep our marketing expense at a relatively low level. And that's my answer to your questions. Thank you, Timothy. And operator, let's move on to the next question.
Conference Operator: Thank you. Our next question comes from Wei Zhang with UBS. Your line is open.
Wei Zhang, Analyst, UBS: Thank you, management, for taking my question. My first question is on blue collar recruitment. Could management maybe share your future growth strategy for the blue collar business around manufacturing and other verticals? Do we plan to build our offline service capabilities for the blue collar recruitment? And also have we observed any change in the competitive landscape here?
And second, just on the profitability outlook for next year, understand management has shown a very strong commitment to protecting profitability in light of the macro uncertainties. So if we just look at our profit goal for the next year, what do we see as the major drivers for profitability improvement? And is there any potential new investments that we should consider? Thank you.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Okay. Thank you for your question. We just talked about the improvement to the achievement we have in the blue collar, especially manufacturing sector. So the essence of that is actually is an idea or concept becomes reality, which is the factories, intermediaries, workers and the platform. Those 4 parties can coexist under one co recognized game rules, which can allow everyone to be more efficient and earn money with dignity.
And now that idea has come into the attitude. So this is actually a very hard process. And I'll talk again about Essence, which is every player, the factories, agents, workers and platforms, they are all battling against the short term interest and long term interest. For example, one manufacturing worker who is quite clearly aware that his working salary should be in the RMB 6,000 per month range. However, if someone posts a job of RMB 150,000 per month, he is quite hard to resist attempt to submit a resume.
So it's a fight for a potential for job and the secured working opportunity. And the example I just said is actually unreal, worker facing on the current market condition in a good season that his salary can raise to around 8,000 per month. So I control the related similar kind of jobs, so salary range is no more than 8,000. If we have that, that can have I have permission to answer your two questions. And the question about the competitive landscape, so if I continue to control the workers' salary range, which are job posting can be no higher than RMB 8,000 per month, in short term, I may not be able to compete with the platform allows people to post jobs with over RMB 150,000 per month.
But in the long term, I have strong advantages because I actually returned the truth of this job position. And second, about how committed I will invest to do the offline placement because the things I'm currently we are doing is quite difficult and need a lot of input from every level. So I hope I can continue to do that, which we have already established very clear advantages. So in the short term, I won't invest heavily in the placement while continuing our current game with those 4 participants and hopefully we can have good results. And the second question, I will give a short but clear answer.
So facing all these difficulties, we need to find out which thing is definitely right to do. And we believe to guarantee our profit or profitability is definitely cracked things. So we need to do and we will guarantee our profit. And in terms of managing our next year profit target, I'm quite I have very strong confidence. I won't talk too much about our management details, but with one thing I can say is that we have very strong operational averages.
So as long as we can have which will majority turn into our profit, this trend is quite clear.
Fiyue Zhang, Director and CFO, ConGen Limited: Regarding our company's margin outlook in 2025, I can offer some of our thoughts. Regarding the gross margin, we expect our gross margin will be flat or improve slightly next year. Sales efficiency improvement will leave additional leverage to selling expenses. Absolute amount of marketing spending will be capped at 2024 level or even decrease. R and D headcount likely will not increase.
There is no near term actual investment to AI and hardware. So our and one more thing is our new business. We expect our new business spending will be with disciplined approach. So all in all, our operating margin will further improve, As Johnson said, we'll further improve along with our top line growth. So this is our view towards the margin profit.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Okay. Thank you. In light of the time constraint, I think operator we can take one last question.
Conference Operator: Thank you. Our last question comes from Yanyan Xiao with CICC. Your line is open.
Fiyue Zhang, Director and CFO, ConGen Limited: Thanks management for taking my question and I have two questions. My first question is how is our overseas business progressing and how can we balance our profit control goals with overseas business investment? And my second question is, we've noticed that an industry wide trend towards AI products like AI interviews. So how do you view the current application scenarios of AI in the recruitment field? And what potential new revenue or cost reduction opportunities might there be?
Thank you.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Thank you for your question. About your first question of our overseas business and the relation with investment and relation with our profit target. So one thing is clear that this next year, we won't have very big investment in our overseas business. This has a relation to our business developer methodology, which is we want to release the evil until we see the rapid, which means we won't increase investment heritage before we have some certainty. So we have to do some very small experiment with limited cost.
So in our plan, we won't expect we can clearly see that profit next year, so that won't affect our profit target next year. In terms of AI application, actually now within the industry or actually other all the industries, the reality is the high prospect of the technology cannot correlate with real actually application scenario. So there's a very loud, frightening, but very small frame. So that's an industry fact. But I want to further explain our opinion during our industrial practice.
The first one is we will insist on the equality between job seekers and the Kultras. We will not allow once any site to use advantage of AI to have advantages over the other side. And the second principle we insist is the right to know. So whenever a users are facing the potential counterparty of AI, we should let that user know. And the 3rd policy, we insist that the current application scenario, which can be perfectly done without large language model, there is no necessity to use a lot of LMM to do it again, which is a factory kind of waste.
Apart from all those series, we have several real applications. So in terms of protecting the safety of our users, our AI technology has been quite useful. We've disclosed in the past that we have over 900 people of our security team. And this year, we increased more than tens of millions of new users, but we didn't increase the total number of our security team. One important reason is that we used our AI technology to assist with the verification, which largely increased our overall review efficiency.
So in the history of the bad people fighting with the platform, the first principle is actually the fighting of the cost. Whenever evil guys feel like first to do things to do best things on the platform, then he will not continue to do that. With the help of AI, we can actually increase our advantages over that, so it can create real value for our operation. And that's my answer for your questions. And I think that's all the questions for tonight.
Operator?
Conference Operator: Thank you. Due to time constraint, that concludes today's question and answer session. At this time, I will turn the conference back to Wimby for any closing remarks.
Jonathan Peng Zhao, Founder, Chairman and CEO, ConGen Limited: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or TPG Investor Relations. Thank you.
Conference Operator: Thank you for your participation. This does conclude the program. You may now disconnect. Good
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