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Kanzhun Limited (BZ) Q2 2021 Earnings Call Transcript

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Kanzhun Limited (NASDAQ: BZ)
Q2 2021 Earnings Call
Aug 27, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Kanzhun Limited second-quarter 2021 financial results conference call. [Operator instructions] Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. [Inaudible], head of capital market and IR.

Please go ahead, ma'am.

Unknown speaker

Thank you, operator. Good evening, everyone. Welcome to our second-quarter 2021 earnings conference call. Joining me today are our founder, chairman, and CEO, Mr.

Jonathan Peng Zhao; and our director and CFO, Mr. Phil Yu 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 or unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different. The company cautions 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.

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During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a 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.jpn.com. With that, I will now turn the call to Jonathan, our founder, chairman, and CEO.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Hello, everyone. Welcome to our first earnings call as a public company. I would like to take the opportunity to express our sincere thanks to our users, employees, and investors. Thank you for your trust and support.

We will continue to focus on our main business, improve the efficiency of connecting talents to jobs utilizing the power of technology to deliver user satisfaction by optimizing efficiency, equality, and choice.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

We are pleased to report that we have achieved strong results in the second quarter this year. We recorded a total revenue of RMB 1.17 billion, an increase of 173.9% year over year. Our calculated cash billings reached RMB 1.44 billion with a year-on-year increase of 175.3%. While we maintained our market revenue growth, we also achieved positive non-GAAP profitability in this year -- in this quarter, sorry.

Our adjusted net income, which excluding share-based compensation expenses, were RMB 248.5 million.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

We believe our quality growth is a result of our efficient business model continuous enhancement of technology and the superior commercial products, which lead to the expansion of our user base and improve the service capabilities. In the past quarter, the average MAU of BOSS Zhipin app reached 30.4 million, a year-on-year growth of 44.5%. The ratio of DAU to MAU is relatively stable, indicates that we have maintained high user growth and activities.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Now let's take a closer look at our progress at the user level. Overall, in the second quarter, we continue to follow the path to be a platform that covers all industries, user groups, and job categories. From the perspective of job seekers, we further improved our service capabilities and the penetration rate among the white-collar workers in the higher-tier cities by continuing to solidify our competitive advantages. At the same time, we were aiming to expand our coverage in lower-tier cities and the traditional industries.

Being the largest group of job seekers, blue-collar workers are our important app users presently and the main driver of our user growth. The total number of the blue-collar users on our platform keeps increasing steadily. Due to the low online penetration rate of blue-collar recruitment and different behavioral preference from the white-collar users, we have made tailored adjustments and optimization in aspects such as matching algorithms, drop authenticity, user safety, and product usability. To better serve our gold collar users, we actively cooperate with headhunters and have made present progress.

We have also noticed that in the second quarter, which is typically the beginning of graduation season for college students. A large number of college students joined our platform through enhanced and diverse service such as online publicity and live campus recruitment activities, we have become the most preferred online recruitment platform for college graduates

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

On the enterprise user side, we have noticed that more and more enterprises started to attach greater importance to the efficiency and the return on investment of the recruitment platform. as a result of various factors, including the quarterly released recruitment demand brought about by the sustained post-pandemic economic recovery, the increase in the cost of human resources and emerged supply and demand in the China recruitment market. Thanks to our efficient and cost-effective business model, members of our enterprise users maintained its rapid growth trend. As of June 30, 2021, the accumulated number of verified enterprise users reached 14.85 million with a year-on-year growth of 78.5%.

The accumulative number of verified enterprises reached 7.2 million with a year-on-year growth of 76.1%. For the enterprise user composition, our BOSS population accounted for 65.8% of the whole enterprise users in the second quarter, which remains stable. It's worth mentioning that the proportion of small- and medium-sized enterprises has increased to 83.6%, which is closer to China's overall enterprise size ratio. This further proves that for the massive number of small- and medium-sized enterprises in China, direct chat between enterprise managers and job seekers is inconsistent with their demands.

We will provide even better service for greater scale, small and medium-sized enterprises by further starting their recruitment needs and their characteristics. We also aim to actively expand into traditional industries such as manufacturing and finance while maintaining and strengthening our advantages in the industries we already well covered that Internet technology and urban services.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

In terms of our R&D capability, we continue to iterate our main app by every two to three weeks to optimize functions such as recruitment and job-seeking information display and management, bulk messaging, and middle interviews, aiming to improve our user experience and encourage their engagement. As a technology-driven company, technology capabilities accord our competitiveness, and we have been continuing to invest heavily in acquiring talent. As of June 30, we had an R&D team with more than 1,000 employees. In terms of algorithms on top of continuous pursuant of improving matching accuracy, we also pay a great deal of attention to delivering customized and fair recommendation results to enable more long-tail job seekers and SME enterprise users to be recommended and disposed and to facilitate as many users as possible to engage and fulfill their demands on our platform, ultimately improving user interaction and satisfaction.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

As for our operations, we continue to improve and refine our operational capabilities in detailed categories. We are also conducting in-depth research and optimization for position classification of job categories in specific industries. At the same time, we have made significant investment in platform security. Our offline security and review teams have covered four cities in China.

In each cover city, our team is able to arrive at the recruitment location within two hours after receiving users compliance, and we plan to further expand our site coverage in the future. Security of job seekers is the cornerstone of our platform's operation. Platform security and authenticity of job information have always been a crucial obstacle hindering the online penetration of blue-collar recruitment and job seeking in the past. In coordination with the expansion of our blue-collar business, we have made a series of security upgrades to further consolidate the infrastructure of our platform.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

We continue to improve the sales capability and expand the geographic coverage of our direct sales team. In the second quarter, we established new branches in Foshan and Dongguan bringing our total number of branches to 25. At the same time, we focused on strengthening the professional competency training for our sales force and improving the efficiency of individual sales personnel. As for marketing, we continue to implement dedicated marketing strategies [Inaudible] acquisition through both brand advertising and online traffic.

We were honored to have been appointed as official human resource supplier for the Beijing Winter Olympics. As a result, underpinned by our strengthened economies of scale, we continue to see significant improvement in the marketing promotion efficiency, which Phil, our CFO, will discuss this later in more detail.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Now let me spend some time to talk about the cybersecurity review that everyone is caring about. As we previously announced the company is currently actively cooperating with the Cyberspace Administration of China and the cybersecurity review. At the same time, the company is conducting its own self-examination and electrification program focusing on security and user privacy protection in accordance with the latest national laws and regulations, such as the data security law and personal information protection law. In compliance with regulatory requirements, our new user registration remains suspended on our BOSS Zhipin app, which will, to some extent, impact the company's user growth and revenue.

However, we firmly believe that the regulations are necessary to regulate the industry and protect the users and will ensure the long-term sustainable growth of the industry and the company. Given the current circumstances, we make more efforts to better serve our existing users. Meanwhile, we fully cooperate with review teams' work in the hope of completing the process earlier. However, the company does not yet have a clear time table for either the completion of reviewing or when shall we be able to resume new user registrations.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Finally, to summarize, China's online recruitment market still has ample room for its sustainable development, and the considerable number of job seekers and recruiters have not started to use online recruitment services. The existing service offering and the value provided to customers have yet to be fully explored. As the new generation of the online recruitment, we are adopting an innovative model by combining the recommendation, direct chat, and mobility with our dedication to the concept of user satisfaction first. We will continue to invest in technology in which our product offering and enhance our service capability, penetrate into more industries and regions.

Although there are some fluctuations in the short-term external environment, fundamentally, our business model remains effective and will be further demonstrated. We are full of confidence in the future growth potential and believe that we can continue to provide fair, valuable, and more efficient service to nearly 600 million workers and 14 million enterprises especially small and medium-sized enterprises and those long-tail workers in China.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

With that, I will turn to our CFO and director, Phil, for the review of our financials. Thank you.

Phil Yu Zhang -- Director and Chief Financial Officer

Thanks, [Inaudible]. Hello, everyone. Thank you for joining our earnings call today. I would like to give a brief overview of our second-quarter 2021 financial results, and then I will discuss our outlook for the third quarter.

Before I begin, please note that all amounts are all in RMB and all comparisons are on a year-over-year basis, unless otherwise stated. We continued to achieve robust operational financial growth in the second quarter of this year. Our calculated cash billings increased by 175.3% to RMB 1.44 billion, and our total revenues increased by 173.9% to RMB 1.17 billion in the quarter, beating our target. This rapid revenue growth was mainly due to the increase of revenue from our online recruitment service, which increased by 174.7% to RMB 1.16 billion, contributing to over 99% of our total revenues.

The increase of revenue from online recruitment service was driven by the strong growth of our paid enterprise customers following the expansion of our user base and enhanced the service capabilities. As [Inaudible] just mentioned, with the recovery of recruitment demand and increasing penetration of online recruitment service, especially for enterprises, together with our innovative model, we have seen rapid growth of our accumulated enterprise users, which grew by over 78.5% to 14.9 million by the end of June 30, 2021. With more enterprise users posting jobs on our platform, more positions became commercially mature enough to be identified as hard position, which we can charge a fee for job posting, which leads to a higher paying ratio. These two factors combined contributing to our strong paid enterprise customers' growth, which increased by 135.9% to 3.61 million in the trailing 12 months ended June 30, 2021, compared to 1.53 million in the same period ended June 30, 2020.

Furthermore, a number of our key accounts grew by 146.6% in the trailing 12 months ended June 30, 2021, and leading to 229.3% growth in revenue from key accounts in this quarter, demonstrating the enhanced ability of serving large enterprises, converting more users to long-term customers and cross-selling more service to existing paid customers. Now turning to our cost side, total operating costs and expenses were RMB 2.59 billion for the quarter. If we exclude share-based compensation expenses, which were RMB 1.66 billion, including RMB 1.51 billion reward to our core management, our adjusted total operating cost and expenses were RMB 933.7 million, an increase of 63.1%, compared to RMB 572.3 million in the same quarter last year, resulting to a positive adjusted operating income of RMB 239.8 million. Our gross margin remains stable at 87.7%, with cost of revenue increased by 164.2% to RMB 143.2 million in this quarter, primarily driven by higher third-party payment processing cost, operational employee-related costs, server and bandwidth costs resulting from increased user base and transaction volume.

Sales and marketing expenses increased by 45.8% to RMB 534.2 million in this quarter, primarily due to our increased sales and marketing employee-related expenses and enhanced brand advertising and customer acquisition activities. Noteworthy, our sales and marketing expenses represented 45.7% of our revenue in this quarter, down by 40 percentage points from 85.9% in the same quarter last year. This decline in sales and marketing percentage demonstrated higher efficiency of our marketing initiatives and is a proof of our strong economy of scale. During this quarter, our R&D expense increased by 113.7% to RMB 250 million, primarily as a result of increased R&D personnel payroll, other employee-related costs, and share-based compensation.

We will continue to invest in R&D talent as one of our core growth strategy, allowing us to maintain our leading technology capabilities, which is the essential of our competitive needs. General and administrative expenses were RMB 1.67 billion for this quarter, mainly resulting from a one-time issuance of Class B ordinary shares to Techwolf Limited, which is a company controlled by our founder as a reward approved by the board before the IPO. Excluding share-based compensation, our G&A expense grew by 68.2% to RMB 83 million this quarter, which was mainly due to the expansion of our G&A team. As a result of the foregoing, our net loss was RMB 1.41 billion in the second quarter.

Excluding share-based compensation, we achieved profitability under the non-GAAP measure. Our adjusted net income in this quarter this year was RMB 246.5 million compared with adjusted net loss of RMB 143.4 million in the same quarter last year. Translating to an adjusted net margin of 21.1% for this quarter, representing a 54-percentage-point improvement. This operating leverage was driven by the economy of scale and our continued efforts in increasing efficiency and also is a proof of our strong network effect.

Supported by the strength of our profitability, we recorded the net cash generated from operating activities of RMB 671.2 million in this quarter compared to net cash used in operating activities of RMB 14.2 million in the same period of 2020. Moving to the balance sheet, as of June 30, 2021, our cash and cash equivalents and short-term investments were RMB 11.7 billion compared to RMB 4.5 billion as at December 31, 2020. The increase was primarily attributable to net proceeds from our successful listing as well as our growth in operating cash flow in the quarter. Now turning to our business outlook for the next quarter.

For the third quarter of 2021, we expect our net revenue to be between RMB 1.18 billion and RMB 1.21 billion, representing a year-on-year growth rate of approximately 100% to 105%. As we just discussed, there are still uncertainties regarding the ongoing cybersecurity review and timing to resume new users registration. The impact on our revenue was reflected in the outlook but still subjected to change. This estimate was based on assumption that the review will last until the end of September.

In closing, we delivered strong results for our first quarter as a public company, and I would like to thank again to our team, our esteemed users, and shareholders. In spite of the uncertainty of the cybersecurity review, we are still in a fast-growing stage with healthy financial status and improving leverage. Our long-term competence stays unchanged, and the business model remains effective. I'm excited about the coming quarter and looking forward to share our progress with you again.

This concludes my -- our prepared remarks. Now we would like to answer questions. Operator, please go ahead.

Questions & Answers:


Operator

Thank you. [Operator instructions] Your first question comes from the line of Ken Hu of TH Capital.

Unknown speaker

Good evening, management, and happy Friday. Just a couple of questions. The first one is we saw some data about the growing weakness of China economy. So under this kind of circumstances from your frontline employment activities, where do you see different industry? There are employers confidence level in terms of hiring people.

So that's number one. Number two, so the security review -- data security review has been in place for more than a month. And we don't know when this review is going to be lifted. So let's say if the government review is going to last for a while, and during this period, at this point, we can't really obtain the new customer online.

So what's the company's strategy to deal with it, to cope with it, and to get new customer online. So that's the two questions.

Phil Yu Zhang -- Director and Chief Financial Officer

OK. So I can answer your second -- first question first, and our CEO can comment on your second question. So our business, we have diversified industry contribution for our business. So new economy industries as a whole account for a large portion, but a single industry and single company contribution is low.

So I think overall, although the macro is not very strong, might be the situation, but we haven't seen such kind of strong signal on our platform. So our business growth is mainly driven by paying users growth [Inaudible]. We are still in the stage of seeing structural user increase at this moment. So we haven't seen a direct impact from macro, but we will closely monitor.

So recently, there are some industries, I think probably some investors, you would like to ask a question, so I can comment at this time. So some industries, for example, like education industry, is just one of the new economy industries just account for a small percentage in our total revenue. So education industry, this industry accounted for only mid-single digits for our total revenue now. So we think any one industry's impact to our business is limited.

So regarding the company-wise, so some companies, they might have got some like impact from either macro or either some like regulation related things. We think that because we serve a large number of small, medium-sized companies, so we have a relatively low contribution from top customers. Top 20 customers only account for less than 4% of total revenue. So changes in any single company or like, as I just mentioned, a single industry to our business would be only limited, have a limited impact on our growth trend.

So that's my answer to your question.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

OK. Now I will cover the question. So we are under this cyber security review. And since July now, our new user registration was suspended, and this will have impact on our business.

So this suspension of user registration has impact on our MAU and DAU. But since our large base of existing users can use our app normally, the MAU for July remains relatively stable. And our DAU to MAU ratio also remains stable, which means that we continue to keep our user actives. In the meantime, we are focusing to better serve our existing customers, which we made a lot of efforts.

And on the revenue side, we are also impacted because this extension was not only for job seekers, but also for enterprise users. Our sales team and customer service team focusing on serving the existing customers and on the professional and in-depth service capability, we conducted some captive trending to our teams. And the extent of the impact depends on how long the review will last. You can see that we have given guidance for our next quarter revenue, but this is an assumption that this new user registration suspension will last until the end of September.

But in fact, as an enterprise, we cannot and we not to predict on the timing of this suspension. But since we need to build this revenue guidance, we just make assumption that this was last till the end of September, which is we think is appropriate and reasonable. This has nothing to do with our estimate on when this will resume. And this is not something we should do.

But as your question on what we can do to increase our users, we cannot do anything about that because we are not allowed for new gestation. And we are focusing on our existing users. But I believe that the suspension of the impact to our business is temporary and our -- the effectiveness of our business model is not affected in the long run. And lastly, I'd like to emphasize that our whole company is fully cooperating with the review team on their work.

And that's all for my answer.

Thank you. Thank you. Thank you for the answers.

Operator

Your next question comes from Eddy Wang from Morgan Stanley. Please ask your question.

Eddy Wang -- Morgan Stanley -- Analyst

[Foreign language] I actually have two questions. First is regarding the third-quarter guidance. Although as Jonathan mentioned that this guidance is already affecting the suspension of the new user registration until the end of the third quarter. But actually, in my view that the guidance is still quite strong.

So just to mention that if you have focused on the [Inaudible] user services and the user experience, so basically, I just want to ask, this is well reflected in the ARPU of the existing users or will reflect the paying ratio improvement of the overall enterprise users. That's the number one question. And the number two question is that given the most tangent regulatory environment for the Internet all these fast-growing industries like education, so we will see more and more the staff or employees from this industry actually is looking for the new jobs. So in the short term, I mean, maybe you have some headwinds in terms of a higher demand of these fast-growing companies, but how do you think in the longer term, this situation will benefit the overall online recruitment industry?

Phil Yu Zhang -- Director and Chief Financial Officer

So, Eddy, I would like to add a little bit color to the ARPU of the second quarter. So second quarter, our enterprises like ARPU on our platform was relatively stable. So it's -- the revenue growth of our business, mainly driven by the number of enterprises' users' growth. Not the ARPU.

So this is a situation of the second quarter. So Jonathan can comment on your next two questions

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

OK. Firstly, I will make supplement to Phil's comments on your first question. And currently, our wholesale team and our customer sales team are focusing on our existing users. We are continuing to improve our renewal and repurchase rate.

And this does not just help our current states. This will help us from. But currently, we can be more focused on this matter and from a group level, so we can make this strengthening our communities. And regarding your second question for the educational industry, we do have noticed a lot of employees to leave their companies.

And we have seen our existing users that the job seekers from the educational industry has been more and more active to looking for jobs. And there are two kind of dossiers in this industry. First one is this standard jobs like technology, products, human resource G&A and operations, which has some relation to the industry, but not so much. So they are more common for every industry.

So they are much easier to find a new job. And the second half is for the K-12 teachers and coaches. And for them, there are two ways. First one, they can go to the institutions while they are opening for teachers like the school or college and second line, they can change their job career direction.

We have noticed because these companies in the educational industry, they have been recruiting heavily recent years. So there are a lot of junior workers like fresh graduates or newly graduated for one to two years in recent years. So they are more flexible in job seeking. So my observation is that they can emerging quite well and are still living well.

So the situation on our platform is there are still a certain number of job seekers. They are emerging into the overall job seeker group quite well and looking for the future. And as the overall educational sector accounted for a quite small number of our overall user base. So we didn't observe any very obvious impact to our overall industry.

So it's just melting any margin situation. And -- but they are doing increasing their activities. That's my answer to your second question.

Eddy Wang -- Morgan Stanley -- Analyst

[Foreign language]

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Operator

Your next question comes from [Inaudible] of Goldman Sachs. Please ask your question.

Unknown speaker

Thank you, Jonathan, Phil, [Inaudible]. If I can just go through the business as it's been performing, your guidance of 1.2 billion for the third quarter is strong despite the CSC review. I wonder if you could take us through the drivers that you're observing, and what the risk reward around that number is, i.e., can it slow down from here if COVID was to pick up or any other event was to happen, or would it accelerate as you go through potentially a slowdown in the economy based on what you've observed through the early part of 2020? My second question is on your deferred revenue, which are 276 in terms of the change. It points to a slowdown.

The first slowdown we are observing after three quarters of an acceleration in the number. Could you just help us understand what's going on there? And the third question centers around how well you've managed costs in the second quarter. And I wanted -- given the outlook for the third quarter. Will you be running a sales and marketing expense line? It's just tightly managed as you were running it in the second quarter so that the focus remains on what is necessary in the quarter thereafter from a cash perspective.

Thank you.

Phil Yu Zhang -- Director and Chief Financial Officer

OK. Thank you for your questions. So I should answer your second question first. So regarding the -- sorry.

What's your second question?

Unknown speaker

On the deferred -- sorry. The second one is on --

Phil Yu Zhang -- Director and Chief Financial Officer

So the deferred revenue -- yes. Sorry. The deferred revenue, the changes of deferred revenue was mainly a seasonality issue. So normally, our second quarter in terms of the cash revenue, cash collected from business is low.

So the lower conversion rate or lower percentage as the GAAP revenue to the calculated cash billing, that ratio basically is related to the seasonality. So we are still seeing healthy -- at least for the second quarter, we are still seeing healthy cash revenue growth. And we didn't see any slowdown with our cash revenue changes. So this is the second question.

So your first question regarding for the overall guidance, so I think it's now -- it's already by the end of August, and we believe that we have a certain level of visibility of August, the whole month, and we have already completed July. So basically, we only have one month is ahead of our growth. And so basically, we have a certain level of confidence of our business growth in third quarter, no matter what happens in the third month of this quarter. So this is our rationale to do the forecast.

And we think that we try to be conservative with our numbers. But all of the numbers are still based on some like our probably extrapolated covenant for September. So this is our initial thought and it's subjected to change. So we hope that you can understand in normal situation what we can get for the third quarter.

So we can give you some kind of like a sense to the numbers that we can have in the third quarter. It's better than we don't mention anything about our third quarter under the cybersecurity review by the regulator. So this is our intention. So I share it with you.

And the third question is regarding third quarter cost expenses, we think that because we are not allowed to grow our users and our enterprise customers, so our top line are, in some extent, got impacted. But we would like to -- as Jonathan just mentioned, we would like to enhance our service to existing enterprise customers, existing job seekers. And by serving them well and we can try our best to have, I think, the best we can have with the revenue. So this is the revenue.

And regarding for the expenses, that clearly we would like to have very stringent measures for our various cost items. And so for the largest cost item is marketing and traffic-related item. And because we are not allowed to grow our users, so we reduced our user acquisition-related marketing activities. So that will balance the -- because we cannot -- might not generate enough revenue, but we spent less in third quarter.

So generally speaking, we think that we can -- we hope that we can control the third-quarter margin and we can deliver a solid third-quarter results. Let's see.

Unknown speaker

Thank you, and congratulations. Again.

Phil Yu Zhang -- Director and Chief Financial Officer

Thank you.

Operator

Your next question comes from Wei Xiong of UBS. Please ask your question.

Wei Xiong -- UBS -- Analyst

[Foreign language] Thank you, management, for taking my questions. First question, I want to ask about the potential impact on personal data protection law, would that potentially impact our operation -- is there any adjustment that we need to make that could impact the effectiveness of our matching and recommendation algorithm. And secondly, I just want to follow up on the latest progress in the blue-collar segment recruitment business, if there's any operating data or financial data that management can share, it will be very helpful. And if we look at the second half of this year and the next year, what are your strategies and some of the operational goals that you could share? Thank you.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

OK. I will take your first question regarding the Personal Information Protection law. And this is actually not a new regulation. And our understanding is that this is constructed based on the network security law and the data security.

So this law [Inaudible]. And along the process, we have been strictly following the progress of the laws, rules, and we have been adjusting our boundaries of our app according to our understanding. And before this personal information protection law came out, we also noticed that there are addressed for comments and combined it with our work. We sorted out our personal information [Inaudible] act from various perspectives, such as product, operations, and data securities and continue to updating once again to improving our systems and procedures to be more in compliance with recent laws.

And next one is about -- we want to highlight that our app has been attacked very great importance as a privacy protection since day one. For example, during our communication between job seekers and enterprises, so the switching of resume or contract information had to have happened after the counterparty clicked Yes, and then they can share the information, we have been insisting on this one for many, many years. And on this impact on our recommendation algorithms, and we have do a lot of work and started on that. And since we are collecting user data according with the law, we don't think this will have too much impact on our commission results.

because the most sensitive data are not used in the algorithms and have no fundamental impact to our business. So we have been doing our studies and understanding and continuing to improve the user privacy protection. And we do believe this regulation more regulations are good, a good thing to the overall industry and use user protection. And we will turn our back to be in compliance with the regulations.

That's all for my questions -- answer for my first question.

Phil Yu Zhang -- Director and Chief Financial Officer

So regarding the blue-collar business. So in the quarter, we are seeing faster user growth from both blue collar and white-collar segments. And blue-collar segment continues to outgrow our white-collar business. So among all subsectors related to blue collar, urban service sector grew nicely with verified enterprise users up by more than 120% year-over-year.

So we see good momentum, good progress with our blue-collar business. And in the second half, we think that we will continue to focus on building foundations of our blue-collar recruitment service. We will further optimize our product and service improve blue-collar job seekers user experience. Because of blue collars job seekers, they have different user preference.

So we are providing more user-friendly products like mini resume -- simplified mini resume templates. And algorithms, we are also making blue-collar-related customization like in terms of the recommendation, we provide them with business areas related to recommendation. And also to protect the blue-collar job seekers, we would like to implement stricter platform rules to restrict false information and illegal recruitment activities on [Inaudible]. In the second quarter, as Jonathan just talked, we enhanced our own platform, security and verification team.

So that will all above measures, we think that we will make sure blue-collar people, they can have a satisfied user experience, and that will also increase their user stickiness and increase their platform loyalty. And in terms of the blue-collar business, the revenue contribution on our platform continues to grow. So in second quarter, the revenue from blue-collar business accounts for roughly like the mid-20s of our total revenue. So this is still in an uptrend.

So we would like to see in future growing percentage from blue-collar contribution to our business.

Wei Xiong -- UBS -- Analyst

[Foreign language] Thank you, management.

Operator

Your next question comes from Colin Liu of China Renaissance. Please ask your question.

Colin Liu -- China Renaissance Securities -- Analyst

[Foreign language] I'll translate for myself. So as you mentioned that there is a very pertaining growth from blue-collar business market -- And I just want to -- particularly in the urban blue-collar segment. But apart from that, there's a still very large portion of the market, what we call traditional blue-collar workers from manufacturing or from construction industries. I wonder, going into the second half and the rest of this year, do we have any strategic updates on that part, how can we accelerate growth, particularly toward that part of the business? And the second question from me is when we deepen our penetration across [Inaudible] is sort of in [Inaudible] the compute work with a number of partners? And what's the strategy of choosing or working with different kinds of partners?

Phil Yu Zhang -- Director and Chief Financial Officer

OK. Thank you for your questions. So I would like to briefly answer your question and Jonathan will give you more color about the -- our strategy or our cooperation with agencies for the blue-collar business. So regarding -- you just mentioned the manufacturing-related blue collar and also maybe construction-related blue collar, I think they are part of a blue-collar market.

But we see that urban service sector is the largest and the fastest-growing segment among all of the blue-collar segments on our platform. We think that because of various structural trend letting more people coming to urban area finding a job, so our app, because of our model is very friendly to job seekers and employers, we can serve such kind of groups of people very well. So we see that our urban service sector, blue-collar people are near-term focused. We also believe that manufacturing like logistic related and also like construction-related real estate-related blue collars, they are also very important, but they are not imminent our focus, we can serve them.

And -- but we think that the largest proportion of growth might still come from the urban service area. And regarding the corporation pattern between the urban service blue collar and manufacturing-related blue collar are a little bit different, because of most of the urban service enterprises users, they come to platform to hire job seekers directly. But for manufacturing enterprises, they tend to use agencies to hire blue-collar people from online platforms. So that's why we need to cooperate with third-party agencies.

We cannot do it by only ourselves. So Jonathan can comment a little bit with our cooperations with the agencies.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

And to answer your questions, you just mentioned the word partner. I'm thinking because when you are mentioning partner, you are referring to those talent agencies in the manufacturing area. The fact is that in the massive -- a huge manufacturing industry in China, there are a lot of agencies that are recruiting people for the enterprises. But -- and -- but when there are more workers -- ordinary workers come to our platform, we are observing that both agencies come to our platform to find the talents together for the enterprises.

And that arises the challenge on how to cooperate with those agencies. And to find an answer, we find our way so we can show this system from four people, which is job seekers, enterprises, agencies and platform to 3%. That means we will stand together firmly with the job seekers. We will find a way to do that with those agencies to find a more clear gaming rules.

So -- we have done a lot of work to standardize this industry to protect our users, to protect our ecosystem. So we achieved the manner. So we're doing a lot of work on this. We will need some time, but our whole team are quite positive on this.

So we can find an effective way to cooperate and to tap further into this manufacturing industry. That's my answer to your question.

Colin Liu -- China Renaissance Securities -- Analyst

[Foreign language]

Operator

OK. Due to time constraints, that concludes today's question-and-answer session. At this time, I will turn the conference back to [Inaudible] for any additional or closing remarks.

Unknown speaker

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

Phil Yu Zhang -- Director and Chief Financial Officer

Thank you.

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

[Foreign language]

Operator

[Operator signoff]

Duration: 84 minutes

Call participants:

Unknown speaker

Jonathan Peng Zhao -- Founder , Chairman, and Chief Executive Officer

Phil Yu Zhang -- Director and Chief Financial Officer

Eddy Wang -- Morgan Stanley -- Analyst

Wei Xiong -- UBS -- Analyst

Colin Liu -- China Renaissance Securities -- Analyst

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