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Operator: Good day, and welcome to the Tongdao Liepin Group 2026 1H Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to [ Liz Wang ]. Please go ahead, ma'am.
Xueni Wang: Thank you, operator. Hi, everyone. Thank you for joining us on today's earnings call to discuss our interim results. The company's financial and operating results were published and were 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 a detailed financial review. After the prepared remarks, we will be available to answer your questions. Our remarks will be in Chinese followed by English translation. Before we continue, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions. Such statements are based on management's current expectations, current markets, operating conditions and related events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ 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 note that certain financial measures that we use on this call are expressed on a non-GAAP basis. Our GAAP results and the 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.
Kebin Dai: [Interpreted] Dear investors, welcome to Tongdao Liepin Group's 2026 Interim Results Call. Thank you for your continued attention and support for the company. Against the backdrop of macroeconomic structural adjustments and profound changes in the employment market, we are actively implementing our development strategy of deepen value Win with AI. We are seizing opportunities amid transformation and continuously enhancing our capabilities [indiscernible]. Since the second half of last year, the company's cash billings has turned from decline to growth, and this growth accelerated further in the first half of this year. At the same time, both revenue and profit have reached a clear inflection point. In the first half of the year, the group generated revenue of RMB 989 million, representing a year-on-year increase of 5.6%. Consolidated gross margin increased to 79%, the highest level in recent 4 years, benefiting from organizational optimization and the efficiency gains brought by AI technology. The group recorded non-GAAP operating profit of RMB 136 million, up 8.8% year-on-year and non-GAAP profit attributable to owners of the company of around RMB 110 million, up 13.5% year-on-year. Looking at our core operating performance, excluding the impact of other income such as interest income and government subsidies, non-GAAP operating profit increased by a substantial 42.6% year-on-year, demonstrating that our operational improvement continues to accelerate. Looking back at the first half of the year, China's recruitment market continued to exhibit 2 major trends: a structural recovery and the deepening impact of AI. On one hand, the pace of the overall market recovery showed clear differentiation across industries, benefiting from the continued implementation of national policies to support economic growth and the strong expansion of emerging industries. Recruitment demand remained robust in sectors such as advanced manufacturing, telecommunications, semiconductors, IT and the Internet. We successfully captured the opportunities arising from the development of emerging industries. In the first half of the year, the number of newly posted positions on our platform increased by approximately 14% year-on-year, with job postings in segments, including smart hardware, artificial intelligence, aerospace equipment and vehicle manufacturing, each increasing by more than 35%. Growth in the second quarter further accelerated from the first quarter, indicating a continued recovery in corporate hiring confidence. On the other hand, AI is driving further evolution of talent demand and talent preference in the market. AI skills are rapidly transitioning from a value-added skill into a fundamental capability required in the labor market. According to Liepin's big data, in the first quarter of this year, the number of positions requiring proficiency in AI tools increased by nearly 100% year-on-year, further demonstrating the impact of AI in the recruitment market. In June of this year, we partnered with the AI and Management Research Center of [ Tsinghua ] University School of Economics and Management to jointly release the report of skills trends in the AI era, which provides new guidance for Chinese enterprises to gain an in-depth understanding of the evolution of talent structures and the shifting demands of capabilities in the age of AI. Going forward, we will continue our research collaboration with Tsinghua University, further lead the new paradigm in the talent recruitment industry and strengthen Liepin's dynamic capability edge in the AI era. The report shows that companies are increasingly willing to pay a premium for the talent with cross-functional capabilities, while overall talent demand is increasingly concentrated at mid- to senior levels. As a platform focused on mid- to high-end talent recruitment, Liepin embarked firmly on its transformation from the onset of the AI wave systematically integrating AI capabilities across the entire product and service life cycle. Against this backdrop, our BHC ecosystem has all demonstrated healthy growth. As of June 30, the cumulative number of registered individual users on the platform exceeded 122 million, representing a year-on-year increase of 9.6%. Monthly active users reached a record high in March this year, while the recall volume of core talent during the first half of the year also achieved rapid year-on-year growth. On the B side, the number of registered business users reached 1.51 million, up 5.4% year-on-year, including around 63,000 paid customers, representing a year-on-year increase of 0.4%. On the H side, the number of verified Headhunters reached approximately 231,000, up 6% year-on-year, while the number of times headhunters reached out to individual users increased by 10.6% year-on-year. Building on the brand positioning of AI talent on Liepin, AI recruitment with Liepin, our AI products have become the company's most important growth driver. The current customer coverage of our AI account, including AI Pro account has increased to nearly 100%. At the end of last year, we upgraded our AI account to the AI Pro account, adding features such as AI-assisted search and AI job memory. These capabilities help recruiters expand the boundaries of talent discovery and deliver an experience that becomes more accurate and more seamless with every use. Within 6 months of the launch of the AI Pro account, around 40% of AI account customers had upgraded to the AI Pro account, while more than 70% of new customers chose the AI Pro account. Both the distribution rate per customer and the proportion of active accounts increased significantly compared with the AI account prior to the upgrade. Another fully AI-driven recruitment product Intended Candidate Search has further enhanced its delivery capabilities. Nearly 60% of job orders can now deliver the first interested candidate within 2 hours, and we have further shortened this delivery time to within 1 hour. At the same time, both the average daily number of orders initiated and the average daily number of CV downloads increased by more than 70% year-on-year. In terms of cash billings from our AI products, it exceeded RMB 100 million for the full year last year. In the first half of this year, AI products maintained a strong momentum with cash billings increasing by nearly 100% year-on-year. Going forward, AI products will contribute further to the continued increase of the company's overall cash billings. Our large language model Tongdao Hui Cai continues to evolve, leveraging extensive industry expertise and domain-specific data, it enhances both matching accuracy and efficiency. At the same time, based on behavioral feedback throughout the entire user journey, we have built a closed-loop reinforcement learning system, continuously improving the user interaction experience. Our C side, Career Partner AI has fully implemented a one-stop end-to-end service covering the entire process from career planning and extending career directions to precise job matching and revenue submission. In the first half of the year, we launched a new memory function module, which effectively extended the user interaction journey and strengthened user engagement, further enhancing individual user activity and the overall job seeking experience. Looking ahead, we see that amid the wave of AI reshaping the job structure, entry-level white-collar positions are facing significant pressure, while professional and leadership roles remain relatively stable. The impact on blue-collar positions meanwhile is also relatively limited. Accordingly, in terms of our future development strategy, on one hand, Liepin will continue to iterate our products and deepen our service around recruitment needs in the AI era, continuously strengthening our generational competitive advantage. On the other hand, we will continue to focus on the blue collar and urban services sectors, further expanding our commercialization footprint. This year marks Liepin's 15th year of deep engagement in the human resources industry. We understand that for companies today, finding the right candidate is no longer simply a matter of matching. It also requires extensive consideration of industry benchmarks, organizational strategy, organizational structure and logic and job design while also placing significant demand on the experience and capabilities of HR professionals. Looking ahead, Liepin aims to become a professional AI HR adviser. Within vertical industry ecosystems, we seek to deliver end-to-end AI solutions for complex long-horizon tasks from front-end consulting and process communication to talent sourcing and successful placement, providing HR professionals with comprehensive talent solutions for the AI era across the entire recruitment life cycle. This week, the company officially launched [ Lilly ], an AI agent targeting business users, marking a brand-new stage of development for our AI application business. Currently, Lilly is initially embedded within our AI Pro account with version 1 now available for client trial. We aim to help recruiters gradually transition from extensive use of our existing AI tools and features to end-to-end support delivered by this intelligent assistant. By expanding in-depth service offerings and introducing more invocation scenarios, we will further boost recruiters' reliance on and engagement with our AI products. Moving forward, Lilly will serve as a powerful catalyst for the end user penetration of our AI products and sustained business growth, opening a new chapter for Liepin in the application of AI agent within the HR sector. For the final part, let me talk about shareholder returns. At our 2025 Annual General Meeting, we committed that over the next 3 years, we would distribute dividends equivalent to no less than 50% of non-GAAP profit attributed to owners of the company. This year, we have completed the payment of the 2025 dividend with the actual payout ratio reaching approximately 63%. This fully demonstrates management's confidence in the company's profitability and our determination to actively enhance shareholder returns. As Liepin's operating performance continues to improve this year, we will continue to honor our commitment to shareholders while exploring diversified shareholder return initiatives and actively giving back to all of our investors for your long-standing trust and support of Liepin. We remain committed to creating sustainable and long-term value for our employees, customers and shareholders. That concludes my presentation. Next, our CFO team will walk you through the company's detailed financial performance.
Ge Tian: [Interpreted] Once again, thank you all for joining the company's earnings call. In the first half of this year, we saw the recruitment market showing signs of recovery with significant structural opportunities emerging. The company reached an inflection point in its performance, transitioning from decline to growth. Cash billings have reported year-on-year growth for 4 consecutive quarters since the third quarter of last year. In the first half of 2026, the company generated revenue of RMB 989 million, representing a year-on-year increase of 5.6%. By business segment, revenue growth was primarily driven by our talent recruitment and other human resources service to business customers, which generated revenue of RMB 820 million, up 6.7% year-on-year. In particular, cash billings from our AI products increased by nearly 100% year-on-year. Meanwhile, revenue from talent development service to individual paying users remained broadly stable compared with the same period last year, increasing by 0.2% year-on-year. On the cost and expense side, the group's gross margin continued to improve in the first half of 2026 with gross margin increasing by 1.4 percentage points year-on-year to 79%. This was mainly attributable to an improved product mix driven by the increasing contribution of AI products as well as higher productivity across our delivery teams. In the first half of 2026, the group's total operating expense amounted to RMB 714 million with an overall operating expense ratio of 72.2%, down 0.5 percentage points from the same period last year. Among these sales and marketing expenses were RMB 462 million, representing a year-on-year increase of 9.8%. This was mainly due to higher online sales expense resulting from changes in the channel strategy of the online certification training business operated by our subsidiary. Research and development expenses were RMB 109 million in the first half of 2026, down 13.3% year-on-year, with the R&D expense ratio declining significantly by 2.4 percentage points to 11%. This was mainly driven by efficiency gains from the internal adoption and enablement of AI tools as well as the optimization and adjustment of our R&D organizational structure. General and administrative expenses were RMB 144 million with the G&A expense ratio at 14.5%, broadly stable compared with the same period last year. Looking ahead, we will continue to focus on cost reduction and efficiency enhancement, further deepen our streamlined management structure, strengthen our capabilities in refined operational management and continuously improve organizational effectiveness through the adoption of AI tools. Taking all of these factors together, the company delivered a significant improvement in operating performance in the first half of 2026 with substantial growth at the profit level. In the first half, the company's operating profit and profit attributable to owners of the company amounted to RMB 114 million and RMB 88 million, respectively, representing year-on-year increase of 5.2% and 9.6%. After adding back share-based compensation expenses and the amortization of intangible assets arising from acquisition, non-GAAP operating profit was RMB 136 million, up 8.8% year-on-year, while non-GAAP profit attributable to owners of the company was around RMB 110 million, representing a year-on-year increase of 30.5%. Excluding the impact of other income, which includes interest income, non-GAAP operating profit increased significantly by 42.6% year-on-year, demonstrating a further improvement in the quality of the company's operations. As of June 30, 2026, the company had a total cash reserves of more than RMB 2.4 billion. This provides a strong financial foundation for the company's future operations and development, the expansion of new products and markets as well as enhanced shareholder returns. In July this year, the group completed the payment of its 2025 annual dividend of HKD 0.2 per share with a payout ratio of 63%, exceeding our previous commitment to the market. As Rick also mentioned earlier, we have adopted a sustainable dividend policy. Going forward, the company will continue to enhance its shareholder return mechanism and launch diversified forms of shareholder returns so that we can share the benefits of the company's growth with all of our shareholders. This concludes my presentation. Operator, we can now open the floor for Q&A.
Operator: [Operator Instructions] We'll take our first question from [ Jenny Su ] with CICC.
Unknown Analyst: [Foreign Language] Let me translate. This is [ Jenny Su ] from CICC. So I have 2 questions. The first one, how is AI changing the recruitment demand? And what's your outlook for the industry from your perspective? And my second question is the company has achieved significant improvements in the first half. So moving forward, could you please share more about your outlook for the second half of 2026?
Kebin Dai: [Interpreted] Thank you for the question. From an industry perspective, China's recruitment market is currently presenting structural opportunities. Strategic emerging industries represented by the AI value chain and advanced manufacturing continue to expand. Meanwhile, traditional industries are accelerating their intelligent transformation along the upstream and downstream of the AI sector. In the first half of the year, Liepin capitalized on the new opportunities arising from these changes and achieved growth against the market downturn. In terms of talent demand, employers are placing significantly greater emphasis on candidates' AI skills. Liepin's platform data shows a sharp increase in newly posted positions that specify AI tool proficiency as a requirement. AI application capability is rapidly transitioning from a value-added skill into a fundamental capability and is now extending further into advanced confidence such as AI agents. At the same time, the popularization of AI technology has given rise to substantial new demand. For example, talent that combines AI capabilities with cross-industry background. In this new environment, recruitment challenges are intensifying. First, companies have raised their standards for talent identification and assessment, senior technical talent, management talent and composite talent who meet the demands of the AI era remain in scarce supply, making talent identification and comprehensive assessment increasingly difficult. Second, talent profiles are becoming less defined. Employers now place greater demands on candidate judgment, integrated cognition, aesthetic sensibility and other implicit capabilities, adding a certainty to the recruitment process. Finally, as recruitment difficulty continues to rise, enterprise expectations for recruitment efficiency have increased as well, underscoring an urgent need for recruiters to expand their capability boundaries and improve the quality of recruitment delivery. In response to this market and demand shifts, our core operating strategy is to help enterprise resolve their recruitment pain points, leveraging Liepin's high-quality talent pool, deep industry know-how and continuously evolving AI products, we aim to continue creating deep value for our clients and unlock a new round of growth for Liepin through capability deployment.
Ge Tian: [Interpreted] As noted in our earlier remarks, cash billings have recorded year-on-year growth for 4 consecutive quarters since the third quarter of last year. Building on the foundation, we expect cash billing for the full year 2026 to maintain mid-single-digit growth. Combined with the deferred effect of cash billings from the second half of 2025, this will continue to drive revenue growth. In terms of gross margins, we are pleased to see the company's gross margin improved by 1.4 percentage points year-on-year in the first half. For the full year, we will continue to focus on AI products and sustain improvements in product mix and delivery efficiency. Accordingly, we expect the 2026 gross margin to maintain the growth trend established in the first half. On the expense side, we estimate that total operating expense in 2026 will see a modest increase as the business recovers, though the overall operating expense ratio is expected to decline. Other income declined in the first half, primarily due to lower principal resulting from shareholder return-related outflows and the impact of overseas rate cuts. Concurrently, the depreciation of the U.S. dollar also resulted in certain foreign exchange losses. We expect these headwinds to partially improve in the second half. Based on the above assessment, profit performance in the second half will show a significant year-on-year improvement compared to the first half. And we expect full year non-GAAP profit attributable to owners of the company to grow by more than 20% year-on-year. As profit upside is substantially unlocked, we will also deliver enhanced value returns to our shareholders. Operator, we are ready for the next question.
Operator: We'll next go to Thomas Chong with Jefferies.
Thomas Chong: [Foreign Language] [Interpreted] I have 2 questions. My first question is about our AI progress. How should we think about the monetization potential? And my second question is about operating expenses, in particular, AI spending, marketing as well as user acquisition cost.
Kebin Dai: [Interpreted] Thank you for the questions. As I mentioned earlier, enterprise evaluation criteria and hiring preference for talent are evolving rapidly. The focus of hiring demand is no longer on quantity, but on precision. The difficulty of identifying and assessing truly scarce talent continues to rise, which in turn creates great growth opportunities for mid- to high-end platforms like Liepin. Currently, leveraging AI recruitment products such as the AI Pro account and Intended Candidate Search, we have effectively helped enterprise recruiters achieve improvements in hiring quality and work efficiency and the product value has been fully validated in our first half performance. At the same time, as AI continues to advance, our products need to be more deeply embedded into the daily workflows of recruiters, empowering enterprise organizational capability building through comprehensive end-to-end service. As I noted in my opening remarks, this week, we launched Lilly, an AI agent targeting business users, further extending our service boundaries across the [indiscernible] value chain, such as organizational development, role planning and design and talent identification and assessment. Lilly can assist recruiters in calibrating role requirements, defining talent profiles, conducting cross-industry talent mapping, delivering tiered talent recommendations and driving recruitment projects at the operational level. Delivering these capabilities requires deep industry know-how and a substantial pool of high-quality talent resources, and these are precisely Liepin's foundational strength and competitive advantages. At this stage, Lilly is embedded within our AI Pro account, further enhancing its appeal and boosting client stickiness and penetration. Based on user feedback from the first week, we have been highly impressed by both Lilly's response speed and the wise of its capabilities, and we are fully confident in this product. Moving forward, we will continue to co-create with clients. And as Lilly continues to iterate, we invention -- it's eventually becoming available as a stand-alone offering, serving as a key lever to expand our client base and extend our service chain. We believe the launch of Lilly will further strengthen the company's AI product matrix, drive sustained rapid growth in the AI segment and continue to lead innovation and transformation in the recruitment industry. We also welcome all investors and analysts to activate an AI Pro account to experience Lilly firsthand.
Ge Tian: [Interpreted] Thank you, Thomas, for your question. We expect total operating expense in 2026 to see a modest increase. However, as revenue grows, the overall operating expense ratio is expected to decline. Among these, the sales expense ratio is expected to edge up slightly, mainly due to higher expense resulting from changes in the market channels operated by our subsidiary. For Liepin's main platform, benefiting from AI tool enablement and productivity gains, the sales expense ratio is expected to decline year-on-year with marketing expense remaining a relatively low proportion of total sales expense. On the general and administrative expense side, we expect overall stability of the full year with the G&A expense ratio expected to remain broadly stable with a moderate decline. We will continue to advance our streamlined management structure and focus on enhancing organizational operation effectiveness. For research and development expenses, supported by organizational efficiency gains driven by AI tool enablement, we expect the downward trend to continue for the full year. In terms of marketing promotion and user acquisition, we continue to attract individual users through the brand positioning of AI talent on Liepin and remain committed to substituting premium products for conventional marketing spend. This is also reflected in our user performance. Registered individual users grew by 9.6% year-on-year in the first half and MAU reached a record high, demonstrating the effectiveness of the current strategy. Going forward, we aim to continue delivering high-quality growth through the service capabilities of our products. Okay. In the interest of time, that concludes our Q&A session. Thank you all once again for joining us today. If you have any further questions, please contact our IR team. Have a good night. Bye.
Xueni Wang: Thank you.
Operator: And this does conclude today's call. We thank you for your participation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live Call.]