What happened
Shares of Chinese online recruitment platform Kanzhun (BZ 0.74%) rose today, and were up 9.4% as of 1:30 p.m. ET.
Kanzhun reported its first-quarter earnings today, and logged a nice beat on revenue and earnings per American depositary receipt (ADR). Given China's recent economic troubles and widespread lockdowns under its zero-COVID policy, one might have thought the recruitment platform would face headwinds. But there was apparently enough hiring, much of it likely done online, for Kanzhun to report very strong revenue growth.
So what
In the first quarter, Kanzhun reported revenue growth of 44.3% to $179.5 million, and a net loss of just $1.9 million, a significant improvement over the prior year's $27.4 million net loss. In the release, CEO Jonathan Peng Zhao said:
We are pleased to report another quarter of solid performance despite headwinds and challenges. Our effective and resilient business model, combined with our strong value propositions and industrial competence, were further proven with sustainable revenue growth momentum and sturdy profit capability. While facing the negative impact of the pandemic's resurgence in China, we believe that our quality services and technologies continue to make us well positioned to serve the needs of our users and uphold our social responsibility in overcoming difficulties during these challenging times.
Some might be surprised at such rapid growth, considering China's economy has been sputtering for over a year due to various factors, including the tech industry's regulatory crackdown, the popping of China's property bubble, and harsh anti-COVID lockdowns.
But in recent months, Chinese authorities have signaled an end to the tech crackdown, and its central bank has moved to cut interest rates, even while most other developed nations have been raising them. Therefore, perhaps companies are looking to hire again, and turning to digital tools to do it.
It should be noted that although revenue growth came in at 44.3%, billings were only up 9.2%. Billings incorporate the change in revenue but also deferred revenue. Kanzhun does generate a majority of revenue from ongoing subscriptions from enterprises, which is recognized ratably over time. So while 44.3% growth looks quite strong, the 9.2% billings growth is perhaps more reflective of new business generated in the quarter.
That being said, even 9.2% growth is somewhat impressive, given all of the headwinds right now in the Chinese economy, and it was still above expectations.
Now what
Kanzhun currently trades for a little over 10 times sales, but it also has a sterling balance sheet with about $1.9 billion in cash and no debt, good for about 16% of the current market cap.
The company certainly looks like a promising growth stock, but investors will have to judge whether they are confident investing in China. Regulators' actions over the past two years, as well as geopolitical concerns, have certainly increased risks for investing in the country. While China's economy and stock market are poised for a rebound after several bad years, investors should probably incorporate a higher level of risk in the price they are willing to pay.
