BOSS Direct Employment: The recovery is certain, but the pace is protracted

Hello everyone, I'm Longbridge Dolphin-kun!

After the Hong Kong stock market on March 20, Beijing time, BOSS Zhiping released its fourth quarter results for 2022. In the online recruitment industry, BOSS Zhipin's leading edge is still relatively solid. The high growth of the past year was broken, mainly related to its network security review and the contraction of the business of the largest customer, the Internet company, rather than the decline in its own competitiveness.

Therefore, when the friction period is over, it is necessary to see the performance of BOSS Zhipin, and the main focus is on the macro expected trend. The quarterly report basically reflects a skinny reality: the epidemic infection in various places has peaked, job seekers are sick in bed, and companies are conservative and cautious in recruitment.

But in the present, expectations for the future are even more important. In the short term, the recruitment season after Yangkang and the Spring Festival is coming, and whether the confidence and expectations of enterprises accelerate the recovery is the key.

The key takeaways of the Four Seasons Report are as follows:

1. There is still a gap between the short-term macro outlook and expectations: Although the revenue guidance is in line with market expectations, the liquidity indicators reflecting the real demand of customers are significantly lower than expected, to some extent, reflecting the relatively slow pace of short-term macro recovery.

(1) Revenue: 1.23 billion in the fourth quarter, down 5.6% year-on-year, basically in line with market consensus. For the revenue guidance for the first quarter of this year, the revenue guidance is basically up to standard, but combined with the current flow, the real needs of corporate customers are not good.

It is also worth mentioning that BOSS Zhiping adjusted the fees of enterprise customers in some fields at the beginning of this year, increasing them by 10%-20%, so this guidance should also include part of the effect of price increases.

(2) Cash collection: 1.1 billion in the fourth quarter, down 5.6% year-on-year, poor cash collection in the fourth quarter may be related to the peak of the epidemic at the end of the year, the short-term outlook of the enterprise, and the delay in the recruitment of employees after infection. Whether this is a one-time impact on the company, or whether conservative expectations will continue into the second quarter or even the whole year, you need to pay attention to the relevant answers of management in the conference call.

2. BOSS Zhipin's own recovery: In the fourth quarter, paid enterprise accounts continued to decrease by 100,000 month-on-month, and the overall monthly active user MAU also fell to 30.9 million month-on-month, losing 1.5 million people. However, these two indicators are combined, and the current period in the fourth quarter is mainly affected by the epidemic.

According to third-party data (Questmobile), the follow-up situation has improved: monthly active users in January saw a month-on-month user return, an increase of 35% year-on-year, reflecting that after Yangkang and the Spring Festival, job seekers have clearly begun to be active.

3. Excluding the World Cup sponsorship fee, the quarter is still profitable: the biggest expense in the fourth quarter is BOSS Zhipin's sponsorship fee for the World Cup, which is as high as 300-400 million. If this expense is excluded, the core main profit for the period and the overall net profit after adding other financial net income and investment income are positive, and the trend of profit improvement continues. Management also gave an interim operating margin target of 20%+ on the last quarter's call.

On the other hand, this World Cup hit the Spring Festival, with an interval of only six weeks before and after, so the spring recruitment launch in the first quarter may not need to be so high, which means that the profit margin in the first quarter will not drag down the whole year as in previous periods.

5. Stable cash flow: As of the end of the fourth quarter, the company's book cash + short-term investment was 13 billion yuan, and there was no borrowing debt. The operating cash flow in the fourth quarter was about 160 million, although the investment cash flow was 700 million, but it has been able to make a relatively stable profit under normal operation, so the cash flow is generally controllable, and there is no risk of short-term financing diluting equity.

6. Finally, the company also announced in the financial report that it will conduct a buyback program of no more than $150 million in the next 12 months

Longbridge Dolphin-kun view

After the release of last quarter's earnings report, Dolphin Jun reviewed "BOSS Direct Employment: Crazy World Cup Burst Stock Prices, Is the Road After the Mud?" "Why BOSS Direct Employment is under pressure in the short term, but from the perspective of 1 year in the medium term, its own performance rebound is much greater than that of the macro environment and peers (Internet customers, small and medium-sized enterprises account for a relatively high proportion). ”

Judging from BOSS Zhipin's revenue guidance for the first quarter of this year (10%-13% year-on-year growth), the macro trend of improvement is certain, but because the cash flow may still be lower than market expectations, the real expansion needs of enterprises have not recovered as quickly as expected.

From the perspective of the high revenue/turnover ratio quarter by quarter: enterprises are still cautious about business expansion, and in the short term, they tend to recruit people on demand (platform recruitment props are used as they go), or the flexibility needs of small and medium-sized enterprises rebound faster than large enterprises, and the overall enterprise side is less likely to do more long-term recruitment planning.

However, due to the ensuing epidemic peak and the Spring Festival holiday after the epidemic prevention adjustment, except for the outbreak of definite demand in industries such as offline travel, the production planning of other industries has mostly been disrupted in the short term, and the outlook of enterprises is conservative.

At the same time, combined with some high-frequency economic data, the capital market's expectations for economic recovery have also experienced a process from conservative at the end of the year, to optimistic at the beginning of the year, and then cautiously lowered recently. Therefore, the stock price corresponding to BOSS Zhiping has also gone a roller coaster, and the market value has returned to the level at the end of last year.

Dolphin Jun believes that most of the short-term macro pressure has been reflected in stock prices, unless the economy continues to recover. From a medium- to long-term perspective, the trend of online recruitment + blue-collar market penetration is still the long-term focus of BOSS Zhipin. BOSS Zhipin's flexible pricing method is also more suitable for blue-collar recruitment, and is expected to continue to gain a leading edge and industry dividends.

However, we are also very concerned about the change in competitive advantage in BOSS Direct Recruitment online recruitment. Dolphin Jun in "BOSS Direct Employment: Crazy World Cup Burst Stock Prices, Is the Road After the Mud? and in past in-depth articles, there have been many explanations. Whether it is the "sample learning" of traditional recruitment websites (such as rushing direct recruitment) or the live recruitment of emerging traffic gameplay (Kuaishou Quick Recruitment), we believe that the short-term and medium-term impact on the competitive barriers of BOSS Direct Recruitment is limited, and the long-term impact still needs to continue to track the actions of peers.

This quarter's earnings review

First, the epidemic disturbance has led to a decline in user demand

In the fourth quarter, BOSS directly hired MAUs reached 30.9 million, a loss of 1.5 million people from the previous quarter. After the World Cup sponsorship received a wave of traffic, the activity of job seekers declined in the short term due to the peak of epidemic infection.

However, from third-party data, user indicators have shown a recovery trend in January.

The number of paid enterprise users continued to weaken month-on-month, and despite the adjustment of epidemic prevention policies, under the intensive infection across the country, enterprises are still cautious in the short term and are not eager to reopen or expand.

Paid ARPU for single enterprise users increased steadily and slightly month-on-month, and BOSS Zhipin's price increase for enterprise customers in some industries in 2023 was 10%-20%, which is expected to be reflected soon in the next quarter.

Second, income is in line with expectations, and cash collection is under short-term pressure

Total revenue in the fourth quarter was 1.08 billion, down 0.77% year-on-year, basically in line with the company's guidance and market expectations. Considering the general environment of the peak of the epidemic infection, the original expectations of the core investment banks were not high.

The revenue guidance for the first quarter of this year is in the range of 1.25~1.27 billion yuan, an increase of 10%~13% year-on-year, which is also basically in line with market expectations. The recovery trend reflected in the revenue guidance is obvious, but the implied cash collection movement is still lower than market expectations, and the pace of business recovery is relatively slow.

Cash receipts in the fourth quarter were $1.1 billion, down 5.6% sequentially. The proportion of current revenue and cash collection has further increased compared with the previous quarter, which actually reflects that the recruitment strategy of enterprises is still biased towards short-term "just demand".

In the revenue structure, To B's online recruitment services still account for 98%, so the demand for corporate recruitment is still the main factor affecting the performance of BOSS Direct Recruitment. Unlike the general environment in which job seekers in the third quarter had strong demand but no money in their pockets and recruiters were cautious and hesitant in the short term, job seekers in the fourth quarter also stopped.

Other income, which mainly collects fees from job seekers, has increased significantly after the lifting of the registration ban due to the end of the network security review in the third and fourth quarters. The expansion of the paying user base has led to a significant increase in other revenue.

3. The profit of the current period is mainly affected by the launch of the World Cup + the one-time fee of the Hong Kong stock listing

The weakening of the profit side in the fourth quarter is more due to the impact of one-time expenses, sales expenses have World Cup sponsorship fees of 300 million to 400 million, and management expenses have some expenses for secondary listings in Hong Kong stocks, thus dragging down the profitability level of the current period in the fourth quarter. R&D expenses improved year-on-year.

If the sponsorship fee of the World Cup is excluded, as well as the expenditure of some listing expenses, the real profit level in the fourth quarter can still be normal in the bad macro environment, and Dolphin Jun roughly calculates that the operating profit margin of the main business is 7%, and the net profit margin is about 15%.

In the last quarter, the company's management gave guidance for the medium-term operating margin target of about 25%, and there is still a trend towards the improvement of the target as a whole.

Under Non-GAAP, which does not consider equity incentives, the main operating profit and cost structure is as follows:

Dolphin Jun believes that the time of the World Cup and the Spring Festival collide, and BOSS Direct Recruitment may reduce the Spring Festival launch because of the launch effect of the World Cup. In other words, after the fourth quarter was ugly due to the full profit margin, the profit margin in the first quarter will not drag down the full-year level as in previous years.