tm2227102-3_6k - none - 1.406242s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2022
Commission File Number: 001-40460
KANZHUN LIMITED
18/F, GrandyVic Building,
Taiyanggong Middle Road
Chaoyang District, Beijing 100020
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒      Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 
Exhibit Index
Exhibit 99.1 — KANZHUN LIMITED Supplemental and Updated Disclosures
 

 
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KANZHUN LIMITED
By:
/s/ Yu Zhang
Name:
Yu Zhang
Title:
Director and Chief Financial Officer
Date: December 16, 2022
 

tm2227102-3_6k_DIV_15-exh99-1 - none - 28.0313821s
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Exhibit 99.1
KANZHUN LIMITED Supplemental and Updated Disclosures
KANZHUN LIMITED (the “Company” or “we”) has published a listing document (the “Listing Document”) with the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”), subsequent to its initial application filed with the Hong Kong Stock Exchange on October 10, 2022, in connection with a proposed dual primary listing (the “Listing”) of its Class A ordinary shares on the Main Board of the Hong Kong Stock Exchange by way of introduction.
The Listing Document contains additional new and supplemental descriptions of certain aspects of the Company’s business and financial information as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time (the “Listing Rules”), as well as updated disclosures of certain information previously disclosed in the Company’s annual report on Form 20-F for the year ended December 31, 2021 (the “2021 Form 20-F”) and Exhibit 99.1 to the current report on Form 6-K furnished by the Company on October 11, 2022, titled “KANZHUN LIMITED Supplemental and Updated Disclosures” ​(the “October Super 6-K”). This Supplemental and Updated Disclosures exhibit sets forth such additional new, supplemental, and updated information and disclosures as described below. The disclosures herein supplement, and should be read in conjunction with, the disclosures in the 2021 Form 20-F, the October Super 6-K, and other disclosures furnished on Form 6-K. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Listing Document.
There is no assurance as to if or when the Listing will take place. This communication is neither an offer to sell nor a solicitation of an offer to buy, nor shall there be any offer, solicitation, or sale of the Company’s securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful.
 

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FORWARD-LOOKING STATEMENTS
This exhibit contains forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates, and projections about us, our industries, and the regulatory environment in which we and companies integral to our business operate. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “target,” “goal,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our mission, goals and strategies; our future business development, financial condition and results of operations; the expected growth of the online recruitment service industry in China; our expectations regarding the prospects of our business model and demand for and market acceptance of our services; our expectations regarding maintaining and strengthening our relationships with users, business partners and other stakeholders; competition in our industry; relevant government policies and regulations relating to our industry, including those related to cybersecurity and data privacy, and to the Chinese economy; general economic and business conditions globally and in China, including the macroeconomic impact of the COVID-19 pandemic; the regulatory landscape in China; assumptions underlying or related to any of the foregoing; and other factors described under “Item 3. Key Information  —  D. Risk Factors” of our 2021 Form 20-F, “Risk Factor” in Exhibit 99.1 to the October Super 6-K, and “Risk Factors” in this exhibit.
The forward-looking statements made in this exhibit relate only to events or information as of the date on which the statements are made in this exhibit. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this exhibit completely in conjunction with documents we filed with or furnished to the SEC and with the understanding that our actual future results may be materially different from what we expect.
 

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SUMMARY
The following section sets forth certain information that have been updated and/or supplemented since the filing of our 2021 Form 20-F and the furnishing of the October Super 6-K in the Listing Document.
COMPETITIVE LANDSCAPE
China’s recruitment and online recruitment markets remain fragmented. Market participants in China’s recruitment market primarily include online recruitment platforms, online classifieds, and recruiting agencies. The top five companies accounted for an aggregate market share of approximately 8.6% and 9.0% in China’s recruitment market in 2021 and the six months ended June 30, 2022, respectively. We are the second largest market participant in China’s recruitment market in terms of recruitment revenue in 2021 and the six months ended June 30, 2022, with a market share of 2.1% and 2.3%, respectively. Market participants in China’s online recruitment market primarily include online recruitment platforms, online classifieds, and online portals offered by recruiting agencies. The top four online recruitment platforms accounted for an aggregate market share of approximately 15.9% and 15.7% in China’s online recruitment market in 2021 and the six months ended June 30, 2022, respectively. We are the largest online recruitment platform in China in terms of average MAU and online recruitment revenue in 2021 and the six months ended June 30, 2022, with a market share of 5.9% and 6.1% in terms of online recruitment revenue, respectively.
CERTAIN OPERATING AND FINANCIAL DATA
For the Three Months Ended
Mar 31,
2019
June 30,
2019
Sep 30,
2019
Dec 31,
2019
Mar 31,
2020
June 30,
2020
Sep 30,
2020
Dec 31,
2020
Mar 31,
2021
June 30,
2021
Sep 30,
2021
Dec 31,
2021
Mar 31,
2022
June 30,
2022
Sep 30,
2022
Average MAU (in millions)(1)
8.1 11.0 13.2 13.5 14.5 21.0 22.4 21.4 24.9 30.4 28.8 24.4 25.2 26.5 32.4
Average DAU/Average MAU
26.7% 27.8% 26.4% 24.8% 23.1% 27.4% 27.6% 26.3% 25.5% 26.9% 27.5% 26.5% 27.2% 28.7% 27.6%
Average monthly revenue
per average MAU (in
RMB)
6.8 7.3 7.3 7.5 6.5 6.8 8.8 10.0 10.6 12.8 14.0 14.9 15.1 14.0 12.1
For the Trailing 12-month Period Ended
Dec 31,
2019
Mar 31,
2020
June 30,
2020
Sep 30,
2020
Dec 31,
2020
Mar 31,
2021
June 30,
2021
Sep 30,
2021
Dec 31,
2021
Mar 31,
2022
June 30,
2022
Sep 30,
2022
Number of paid enterprise customers (in
millions)(2)
1.2 1.3 1.5 1.9 2.2 2.9 3.6 4.0 4.0 4.1 3.8 3.7
ARPU(3) for paid enterprise customers (in RMB thousands)
0.8 0.8 0.9 0.8 0.9 0.8 0.9 0.9 1.1 1.1 1.2 1.2
Number of key accounts
970 1,123 1,272 1,518 1,871 2,332 3,173 3,995 4,778 5,498 5,805 5,947
ARPU for key accounts (in RMB thousands)(2)
161 164 169 172 177 184 187 193 194 191 184 176
 
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SUMMARY
As of December 31,
As of June 30,
As of
September 30,
2019
2020
2021
2021
2022
2021
2022
(in millions, except for percentages)
Number of verified job seekers
44.8 76.7 97.9 95.8 100.8 97.1 113.2
Number of white and gold collar
30.7 43.4 52.8 51.0 54.9 51.9 60.3
% of white and gold collar
68.6% 56.6% 53.9% 53.2% 54.5% 53.4% 53.3%
Number of blue collar
10.7 21.3 28.5 27.7 29.5 28.2 33.4
% of blue collar
23.9% 27.8% 29.1% 28.9% 29.3% 29.0% 29.5%
Number of college students
3.4 12.0 16.7 17.1 16.3 17.1 19.5
% of college students
7.5% 15.6% 17.1% 17.8% 16.2% 17.6% 17.2%
As of December 31,
As of June 30,
As of September 30,
2019
2020
2021
2021
2022
2021
2022
(in millions, except for percentages)
Number of verified enterprise users
6.5 11.4 16.2 14.9 17.2 15.7 18.4
Number of Bosses
4.4 7.4 10.7 9.8 11.3 10.4 12.1
% of Bosses
67.7% 65.2% 66.0% 65.8% 65.7% 66.1% 65.9%
Number of recruiting professionals
2.1 4.0 5.5 5.1 5.9 5.3 6.3
% of recruiting professionals
32.3% 34.8% 34.0% 34.2% 34.3% 33.9% 34.1%
Number of verified enterprises
3.2 5.5 8.1 7.2 8.9 7.7 9.6
Number of SMEs (<100 people)
2.5 4.5 6.8 6.0 7.5 6.5 8.2
% of SMEs (<100 employees)
78.2% 81.7% 84.1% 83.6% 84.6% 83.9% 85.2%
For the Year Ended
December 31,
For the
Six Months
Ended
June 30,
For the
Nine Months
Ended
September 30,
2019
2020
2021
2021
2022
2021
2022
(in millions, except for percentages)
Newly verified job seekers
24.3 32.0 22.5 19.1 2.9 21.3 15.8
Newly verified enterprise users
3.1 5.0 4.8 3.4 1.0 4.3 2.2
Newly verified enterprises
1.5 2.3 2.6 1.7 0.8 2.1 1.5
Average monthly active job seekers(4)
10.1 17.6 23.7 24.1 23.1 24.5 25.2
Average monthly active enterprise users(5)
1.6 2.8 4.3 4.4 3.7 4.5 3.8
Average monthly active enterprises(6)
1.0 1.8 2.8 2.8 2.5 2.9 2.6
360-Day average active user retention rate(7)
19% 20% 20% 20% 22% 20% 22%
Effective conversion rate(8)
43% 43% 43% 42% 40% 42% 39%
Average non-cognizant conversion rate(9)
57% 67% 68% 67% 69% 67% 70%
 
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SUMMARY
For the Year Ended
December 31,
For the
Twelve Months
Ended June 30,
For the
Twelve Months
Ended
September 30,
2019
2020
2021
2021
2022
2021
2022
Renewal Rate(10)
– Key accounts
95% 92% 94% 92% 96% 93% 96%
– Mid-sized accounts
75% 77% 77% 76% 82% 76% 81%
– Small-sized accounts
44% 44% 51% 52% 50% 54% 45%
All accounts
45% 45% 52% 52% 51% 54% 46%
Churn Rate(11)
– Key accounts
5% 8% 6% 8% 4% 7% 4%
– Mid-sized accounts
25% 23% 23% 24% 18% 24% 19%
– Small-sized accounts
56% 56% 49% 48% 50% 46% 55%
All accounts
55% 55% 48% 48% 49% 46% 54%
Notes:
(1)
The number of our average MAU decreased since the second quarter of 2021 due to the suspension of new user registration.
(2)
The number of our paid enterprise customers and ARPU for key accounts decreased in the twelve months ended June 30, 2022 due to (i) the suspension of new user registration and (ii) COVID-19’s impact on our enterprise customers’ recruitment demand and their recruitment related budgets.
(3)
Average revenue per paying user.
(4)
The sum of monthly active job seekers for each month during the given period divided by the number of months in the given period.
(5)
The sum of monthly active enterprise users for each month during the given period divided by the number of month in the given period.
(6)
The sum of monthly active enterprises for each month during the given period divided by the number of month in the given period.
(7)
The percentage of users that logged on to the BOSS Zhipin platform (mobile app, PC or mini-program) at a given day that also logged on to the BOSS Zhipin platform on the 360th day from the given date.
(8)
The percentage of candidates in the enterprise users’ recommendation list that the enterprise users choose to engage in direct chat, after browsing the job seekers’ mini resume. The slight decrease in effective conversion rate in the six months ended June 30, 2022 was primarily due to the suspension of new user registration as new enterprise users generally have higher recruitment demands and are more likely to choose to interact with job seekers after browsing their mini resume.
(9)
The percentage of users that completed resume delivery or exchanged contact information based on job recommendation that is different from the users’ self identified job expectation. This metric demonstrates our ability to discern latent user preference or need, thereby improving their overall job hunting and recruitment efficiency. For example, a job seeker that put down “data engineer” as his/her expected job position may receive recommendation of “data mining” positions if the system discerns a good fit based on latent preferences recognized through the job seeker ‘s behavior traits.
(10)
Renewal rate refers to the percentage of the enterprise customers during the previous twelve-month period of the given twelve-month period who contributed revenues to the Company during the given twelve-month period.
(11)
Churn rate refers to the percentage of the enterprise customers during the previous twelve-month period of the given twelve-month period who did not contribute revenue to the Company during the given twelve-month period.
 
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SUMMARY
The table below sets forth the breakdown of our revenue from enterprise customers by types of customer accounts.
For the Year Ended December 31,
For the Six Months Ended June 30,
For the Nine Months Ended
September 30,
2019
2020
2021
2021
2022
2021
2022
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
(unaudited)
(unaudited)
(in thousands, except for percentages)
Online recruitment services to enterprise customers
– Key accounts
155,819 15.8 330,795 17.2 928,360 22.0 362,763 18.7 517,925 23.3 643,114 20.5 775,037 22.9
– Mid-sized accounts
363,282 36.8 696,325 36.1 1,513,506 35.9 633,685 32.7 910,848 40.9 1,080,514 34.4 1,375,551 40.6
– Small-sized accounts
467,758 47.4 900,058 46.7 1,777,160 42.1 943,471 48.6 798,411 35.8 1,413,426 45.1 1,241,060 36.5
Total 986,859 100.0 1,927,178 100.0 4,219,026 100.0 1,939,919 100.0 2,227,184 100.0 3,137,054 100.0 3,391,648 100.0
The table below sets forth the breakdown of our revenue from enterprise customers by types of services.
For the Year Ended December 31,
For the Six Months Ended June 30,
For the Nine Months Ended
September 30,
2019
2020
2021
2021
2022
2021
2022
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
(unaudited)
(unaudited)
(in thousands, except for percentages)
Online recruitment
services to enterprise customers
– Paid job postings
626,837 63.5 1,283,317 66.6 2,995,806 71.0 1,320,085 68.0 1,630,674 73.2 2,172,590 69.3 2,481,781 73.2
– Value-added tools
360,022 36.5 643,861 33.4 1,223,220 29.0 619,834 32.0 596,510 26.8 964,464 30.7 909,867 26.8
Total 986,859 100.0 1,927,178 100.0 4,219,026 100.0 1,939,919 100.0 2,227,184 100.0 3,137,054 100.0 3,391,648 100.0
The table below sets forth the breakdown of our revenue by purchase methods.
For the Year Ended December 31,
For the Six Months Ended June 30,
For the Nine Months Ended
September 30,
2019
2020
2021
2021
2022
2021
2022
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
RMB
%
(unaudited)
(unaudited)
(in thousands, except for percentages)
Online recruitment services to
enterprise customers
– Subscription packages
627,404 62.8 1,256,532 64.6 2,772,587 65.1 1,210,551 61.9 1,626,991 72.3 1,995,076 63.0 2,444,729 71.3
– Standalone purchases
359,455 36.0 670,646 34.5 1,446,439 34.0 729,368 37.2 600,193 26.7 1,141,978 36.0 946,919 27.6
Subtotal 986,859 98.8 1,927,178 99.1 4,219,026 99.1 1,939,919 99.1 2,227,184 99.0 3,137,054 99.0 3,391,648 98.9
Others
– Subscription packages
5,084 0.5 10,015 0.5 22,738 0.5 10,263 0.5 16,473 0.7 16,867 0.5 26,667 0.8
– Standalone purchases
6,777 0.7 7,166 0.4 17,364 0.4 6,535 0.4 6,567 0.3 14,557 0.5 10,472 0.3
Subtotal 11,861 1.2 17,181 0.9 40,102 0.9 16,798 0.9 23,040 1.0 31,424 1.0 37,139 1.1
Total revenues
998,720 100.0 1,944,359 100.0 4,259,128 100.0 1,956,717 100.0 2,250,224 100.0 3,168,478 100.0 3,428,787 100.0
 
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SUMMARY
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth summary consolidated financial information for the Track Record Period and as of the applicable period ends. The summary consolidated financial information set forth below should be read together with, and is qualified in its entirety by reference to, the consolidated financial statements in this document, including the related notes, as well as the section headed “Financial Information.” Our consolidated financial information was prepared in accordance with U.S. GAAP.
Summary Consolidated Results of Operations
The following table sets forth key line items of our consolidated statements of profit or loss with line items in absolute amounts and as percentages of our revenue for the periods indicated:
For the Year Ended December 31,
For the Six Months Ended June 30,
2019
2020
2021
2021
2022
RMB
%
RMB
%
RMB
US$
%
RMB
%
RMB
US$
%
(unaudited)
(in thousands, except for percentages)
Revenues
Online recruitment services to enterprise customers
986,859 98.8 1,927,178 99.1 4,219,026 629,884 99.1 1,939,919 99.1 2,227,184 332,510 99.0
Others
11,861 1.2 17,181 0.9 40,102 5,987 0.9 16,798 0.9 23,040 3,440 1.0
Total revenues
998,720 100.0 1,944,359 100.0 4,259,128 635,871 100.0 1,956,717 100.0 2,250,224 335,950 100.0
Operating cost and expenses
Cost of revenues
(137,812) (13.8) (240,211) (12.4) (554,648) (82,807) (13.0) (250,029) (12.8) (351,578) (52,489) (15.6)
Sales and marketing expenses
(916,832) (91.8) (1,347,532) (69.3) (1,942,670) (290,033) (45.6) (1,152,780) (58.9) (921,900) (137,636) (41.0)
Research and development
expenses
(325,569) (32.6) (513,362) (26.4) (821,984) (122,719) (19.3) (413,728) (21.1) (598,425) (89,343) (26.6)
General and administrative
expenses
(132,999) (13.3) (797,008) (41.0) (1,991,123) (297,267) (46.7) (1,748,612) (89.4) (316,035) (47,183) (14.0)
Total operating cost and expenses
(1,513,212) (151.5) (2,898,113) (149.1) (5,310,425) (792,826) (124.6) (3,565,149) (182.2) (2,187,938) (326,651) (97.2)
Net (loss)/income
(502,055) (50.2) (941,895) (48.4) (1,071,074) (159,908) (25.0) (1,590,312) (81.3) 80,321 11,991 3.6
Non-GAAP Financial Measure
In addition to net income/(loss), we also use adjusted net income/(loss) (non-GAAP financial measure), to evaluate our business. We define adjusted net income/(loss) (non-GAAP financial measure) as net income/(loss) excluding share-based compensation expenses. Share-based compensation expenses are non-cash in nature and do not result in cash outflow, and the adjustment had been made during the Track Record Period for consistency.
We have included this non-GAAP financial measure in this document because it is a key measure used by our management to evaluate our operating performance, as it facilitates comparisons of operating performance from period to period. Accordingly, we believe that it provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors do. Our calculation of the non-GAAP financial measure may differ from similarly-titled non-GAAP measures, if any, reported by our peer companies. It should not be considered in isolation from, or as a substitute for, our financial information prepared in accordance with U.S. GAAP.
 
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SUMMARY
The table below sets forth a reconciliation of our net income/(loss) to adjusted net income/(loss) (non-GAAP financial measure) for the periods indicated:
For the Year Ended December 31,
For the Six Months Ended June 30,
2019
2020
2021
2021
2022
RMB
RMB
RMB
US$
RMB
RMB
US$
(unaudited)
(in thousands)
Net (loss)/income
(502,055) (941,895) (1,071,074) (159,908) (1,590,312) 80,321 11,991
Minus:
Share-based compensation expenses
(34,250) (657,236) (1,923,646) (287,193) (1,709,251) (283,046) (42,259)
Adjusted net (loss)/income (non-
GAAP financial measure)
(467,805) (284,659) 852,572 127,285 118,939 363,367 54,250
Our revenue experienced significant growth during the Track Record Period. We derive most of our revenues from paid enterprise customers on our online recruitment platform. We provide online recruitment services to enterprise users that allow them to post jobs and communicate with job seekers, which can be free or paid based on an innovative connection- oriented monetization strategy, supplemented by paid value-added tools to further enhance their recruitment efficiency as part of our holistic recruitment services to the enterprise users.
We incurred net loss in 2019, 2020 and 2021, primarily resulted from the increases in our total operating cost and expenses from RMB1.5 billion in 2019 to RMB2.9 billion in 2020 and further to RMB5.3 billion (US$792.8 million) in 2021, primarily due to the increase in sales and marketing expenses and general and administrative expenses. The increase in sales and marketing expenses from 2019 to 2021 was primarily due to increased payroll and other employee-related expenses with increased headcount and increased advertising expenses due to enhanced brand advertising activities. In connection with the suspension of new user registration, we strategically incurred less advertising expenses to improve marketing efficiency in the second half of 2021. Our sales and marketing expenses accounted for approximately 91.8%, 69.3% and 45.6% of total revenues in 2019, 2020 and 2021, respectively, and such decrease as a percentage of total revenues resulted from improved marketing efficiency as well as the decreased marketing activities in the second half of 2021 due to the suspension of new user registration. The increase in general and administrative expenses from 2019 to 2021 was primarily due to the one-off share-based compensation expenses of RMB533.1 million and RMB1.5 billion recognized in 2020 and in the second quarter of 2021, respectively, as well as increased headcount. Due to our significant investments in brand advertising activities and talents with our long term strategies, we recorded adjusted net loss (non-GAAP financial measure) of RMB467.8 million in 2019 and narrowed it down to RMB284.7 million in 2020. We recorded positive adjusted net income (non-GAAP financial measure) of RMB118.9 million for the first half of 2021, mainly benefiting from our improved operating leverage and the economy of scale. We recorded adjusted net income (non-GAAP financial measure) of RMB852.6 million (US$127.3 million) in 2021, primarily due to our increased operating leverage, as well as the decreased sales and marketing expenses as a percentage of total revenues resulting from improved marketing efficiency in the first half of 2021 and decreased marketing activities in the second half of 2021 due to the suspension of new user registration.
We recorded net income of RMB80.3 million (US$12.0 million) in the six months ended June 30, 2022, compared to net loss of RMB1.6 billion in the six months ended June 30, 2021. Our total operating cost and expenses decreased from RMB3.6 billion in the six months ended June 30, 2021 to RMB2.2 billion (US$326.7 million) in the six months ended June 30, 2022, primarily attributable to the decrease in sales and marketing expenses and general and administrative expenses. The decrease in sales and marketing expenses in the six months ended June 30, 2022 was primarily attributable to decreased advertising expenses resulting from the marketing strategy to improve marketing efficiency taking into consideration of the suspension of new user registration, partially offset by an increase in payroll and other employee-related expenses for our
 
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SUMMARY
sales and marketing staff. The decrease in general and administrative expenses in the six months ended June 30, 2022 was primarily due to one-off share-based compensation expenses of RMB1.5 billion in the second quarter of 2021, partially offset by the increased payroll and other employee-related expenses with increased headcount. We expected increased sales and marketing expenses in the second half of 2022 as we plan to continue to invest in advertising activities, including the sponsorship of major events, and online traffic acquisition to further enhance our brand awareness and facilitate our user growth in the long-term. However, we believe the increase in sales and advertising spending will not threaten our ability to record adjusted net income (non-GAAP financial measure) in 2022 and 2023.
Summary Consolidated Balance Sheets
As of December 31,
As of June 30,
2019
2020
2021
2022
RMB
RMB
RMB
US$
RMB
US$
(unaudited)
(in thousands)
Total current assets
1,707,793 4,747,312 12,958,954 1,934,721 13,518,507 2,018,261
Total non-current assets
171,206 335,967 682,669 101,920 854,128 127,518
Total assets
1,878,999 5,083,279 13,641,623 2,036,641 14,372,635 2,145,779
Total current liabilities
1,007,855 1,720,023 2,784,202 415,671 2,839,444 423,918
Total non-current liabilities
37,659 76,373 183,365 27,376 166,309 24,829
Total liabilities
1,045,514 1,796,396 2,967,567 443,047 3,005,753 448,747
Total mezzanine equity
2,494,421 5,587,000
Total shareholders’ (deficit)/equity
(1,660,936) (2,300,117) 10,674,056 1,593,594 11,366,882 1,697,032
Total liabilities, mezzanine equity
and shareholders’ (deficit)/
equity
1,878,999 5,083,279 13,641,623 2,036,641 14,372,635 2,145,779
Net current assets
699,938 3,027,289 10,174,752 1,519,050 10,679,063 1,594,343
Net assets
833,485 3,286,883 10,674,056 1,593,594 11,366,882 1,697,032
Our net assets increased from RMB833.5 million as of December 31, 2019 to RMB3.3 billion as of December 31, 2020, primarily attributable to (i) the issuance of Series F convertible redeemable preferred shares of RMB2.8 billion and (ii) share-based compensation reserves of RMB657.2 million recognized in 2020, including the issuance of Class B ordinary shares to TECHWOLF LIMITED, partially offset by net loss of RMB941.9 million and other comprehensive loss from foreign currency translation adjustments of RMB149.5 million recognized in 2020. Our net assets increased to RMB10.7 billion as of December 31, 2021, primarily attributable to (i) the issuance of Class A ordinary Shares of RMB6.4 billion upon our initial public offering in the United States, and (ii) share-based compensation reserves of RMB1.9 billion recognized in 2021, including the issuance of Class B ordinary shares to TECHWOLF LIMITED, partially offset by net loss of RMB1.07 billion recognized in 2021. Our net assets further increased to RMB11.4 billion as of June 30, 2022, primarily attributable to (i) net income of RMB80.3 million, (ii) share-based compensation reserves of RMB283.0 million, and (iii) other comprehensive income from foreign currency translation adjustments of RMB539.0 million recognized during the period, partially offset by the repurchase of Class A ordinary Shares of RMB268.0 million during the period.
Our net current assets increased from RMB10.2 billion (US$1.5 billion) as of December 31, 2021 to RMB10.7 billion (US$1.6 billion) as of June 30, 2022, primarily due to (i) an increase of RMB832.3 million in cash and cash equivalents and (ii) a decrease of RMB66.2 million in other payables and accrued liabilities, partially offset by (i) a decrease of RMB204.0 million in prepayments and other current assets, (ii) a decrease of RMB72.8 million in short-term investments, and (iii) an increase of RMB82.3 million in accounts payable.
 
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Our net current assets increased from RMB3.0 billion as of December 31, 2020 to RMB10.2 billion (US$1.5 billion) as of December 31, 2021, primarily due to (i) an increase of RMB7.3 billion in cash and cash equivalents, (ii) an increase of RMB559.7 million in prepayments and other current assets, and (iii) an increase of RMB348.6 million in short-term investments, partially offset by an increase of RMB758.2 million and RMB226.9 million in deferred revenue and other payables and accrued liabilities, respectively.
Our net current assets increased from RMB699.9 million as of December 31, 2019 to RMB3.0 billion as of December 31, 2020, primarily due to an increase of RMB3.6 billion in cash and cash equivalents, partially offset by (i) a decrease of RMB605.6 million in short-term investments, (ii) an increase of RMB585.5 million in deferred revenue, and (iii) an increase of RMB125.1 million in other payables and accrued liabilities.
For a detailed discussion on our key balance sheet items and material changes in the various working capital items, see “Financial Information — Discussion of Key Balance Sheet Items” and “— Liquidity and Capital Resources.”
Summary Consolidated Statements of Cash Flows
For the Year Ended December 31,
For the Six Months Ended June 30,
2019
2020
2021
2021
2022
RMB
RMB
RMB
US$
RMB
RMB
US$
(unaudited)
(in thousands)
Net cash (used in)/generated from operating activities
(105,663) 395,911 1,641,381 245,052 836,543 480,948 71,804
Net cash (used in)/generated from investing activities
(1,223,803) 467,305 (601,862) (89,856) (167,365) (97,909) (14,617)
Net cash generated
from/(used in) financing
activities
993,475 2,882,112 6,431,263 960,162 6,412,214 (87,816) (13,111)
Effect of exchange rate changes on cash and cash equivalents
43,113 (154,480) (127,227) (18,994) 9,364 537,116 80,189
Net (decrease)/increase in cash and cash equivalents
(292,878) 3,590,848 7,343,555 1,096,364 7,090,756 832,339 124,265
Cash and cash equivalents
at the beginning of the
year/period
700,233 407,355 3,998,203 596,916 3,998,203 11,341,758 1,693,280
Cash and cash equivalents
at the end of the
year/period
407,355 3,998,203 11,341,758 1,693,280 11,088,959 12,174,097 1,817,545
We had operating cash outflow of RMB105.7 million in 2019, primarily resulted from the net loss of RMB502.1 million incurred in the same year, and operating cash inflow of RMB395.9 million, RMB1.6 billion (US$245.1 million) and RMB480.9 million (US$71.8 million) in 2020, 2021 and the six months ended June 30, 2022, respectively. For more details, see “Financial Information — Liquidity and Capital Resources.”
 
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Key Financial Ratios
The following table sets forth our key financial ratios for the periods indicated:
For the Year Ended
December 31,
For the Six Months
Ended June 30,
2019
2020
2021
2021
2022
Gross margin (%)(1)
86.2 87.6 87.0 87.2 84.4
Net (loss)/income margin (%)(2)
(50.2) (48.4) (25.0) (81.3) 3.6
Adjusted net (loss)/income margin (non-GAAP financial measure) (%)(3)
(46.8) (14.6) 20.0 6.1 16.1
Notes:
(1)
Gross margin equals the gross profit, calculated as total revenues minus cost of revenues, divided by total revenues for the period.
(2)
Net (loss)/income margin equals net (loss)/income divided by total revenues for the period.
(3)
Adjusted net (loss)/income margin (non-GAAP financial measure) equals adjusted net (loss)/income (non-GAAP financial measure) divided by total revenues for the period.
IMPACT OF COVID-19 ON OUR OPERATION
The ongoing COVID-19 pandemic has severely impacted China and the rest of the world, and has resulted in quarantines, travel restrictions, the temporary closure of offices and facilities and cancelation of public activities, among others.
Recently, there has been a recurrence of COVID-19 outbreaks in certain cities and provinces of China, including, among others, Shanghai, Beijing, Shenzhen, Chengdu and Zhengzhou due to the COVID-19 variants, which delayed the recovery of consumption and services. Although the COVID-19 pandemic accelerated the existing trend of bringing the recruitment process online and increased the market penetration of online recruitment platforms, the impact from the COVID-19 has reduced the employers’ willingness to recruit and their recruitment related budgets, and the combined effect had a negative impact on our business, especially in cities most impacted by the COVID-19 pandemic. For example, our calculated cash billings in Shanghai dropped by 52.4% in April 2022 and by 59.2% in May 2022, as compared to the same periods in 2021. In October 2022, our calculated cash billings in Zhengzhou dropped by 46.8% as compared to the same period in 2021. In addition, we made adjustments to operation hours and instituted work-from-home arrangements. Our Directors are of the view that the recent resurgence of the COVID-19 had an adverse impact on our business and results of operations up to December 6, 2022, or the Latest Practicable Date, while such adverse impact, as a whole, had been temporary in nature and will not have a material impact on us in the long run, on the basis that (i) despite some sporadic resurgence in certain areas from time to time, the recruitment demand adversely affected by the COVID-19 recovered in a speedy manner soon after the outbreak in an area is put under control within a relatively short period of time; for instance, compared to the decreases in calculated cash billings in Shanghai in April and May 2022, the calculated cash billings in Shanghai quickly recovered after the resurgence has been effectively controlled: the calculated cash billings in August 2022 decreased by only 6% compared to the same period in 2021, basically returning to a pre-COVID level, and the calculated cash billings in September 2022 increased by 141% compared to May 2022. Similarly, our calculated cash billings in Beijing and Zhengzhou where our operations were negatively impacted quickly recovered after the impact of the outbreak was subsumed. As such, the negative impact in recruitment demand in areas affected by COVID-19 outbreaks tended and is expected to only temporarily impact our business in the relevant areas. Our total calculated cash billings in September 2022 increased by 45.5% compared to that in May 2022; (ii) our business is mainly operated online, which had been less directly impacted by the restrictive measures; and (iii) we have also adopted enhanced hygiene and precautionary measures to prevent infection and transmission of the COVID-19 within our premises and among our staff, see “Business — Impact of COVID-19 on Our Operations” for details, which have been relatively effective and ensured that the productivity of our employees were not materially impacted.
 
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To the extent COVID-19 may continue to affect our customers’ ability to pay, customer demand for our services remain uncertain. In addition, with varying levels of temporary restrictions and other measures reinstated in different regions to contain infections, our operations in these regions may be affected when these restrictive measures are in force. As the global pandemic of COVID-19 continues to evolve, we will continue to monitor the COVID-19 situation closely. See “Risk Factors — Risks Relating to Our Business and Industry — The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial condition.”
RECENT DEVELOPMENTS
Cybersecurity Review
Pursuant to an announcement posted by the Cyberspace Administration of China, or the CAC, on July 5, 2021 relating to the cybersecurity review, our BOSS Zhipin app was required to suspend new user registration in China starting from the date thereof to cooperate with the cybersecurity review and prevent the expansion of risks. We have diligently provided our full cooperation in the national cybersecurity review, rigorously addressed the cybersecurity issues identified in the review process, and have taken comprehensive rectification measures. As approved by the Cybersecurity Review Office of the CAC, we have recommenced new user registration on our BOSS Zhipin app, effective from June 29, 2022.
We recorded MAU of 32.4 million, 32.5 million and 32.1 million in July, August and September 2022, respectively, representing growth of 3.0%, 15.0% and 20.8%, as compared to the same periods in 2021, respectively. We recorded average DAU as percentage of MAU of 27.5%, 27.7% and 27.7% in July, August and September 2022, respectively, representing growth of 0.0%, 0.4% and 0.0%, as compared to the same periods in 2021, respectively. From the date we recommenced new user registration to September 30, 2022, we recorded approximately 14.0 million newly verified users.
Financial Results for the Nine Months Ended September 30, 2022
The selected unaudited consolidated results of operations for the nine months ended September 30, 2021 and 2022 and the cash flow data for the nine months ended September 30, 2022 have been derived from our unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2021.
The consolidated financial information below should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited interim condensed consolidated financial information for the nine months ended September 30, 2022 and related notes. Our historical results do not necessarily indicate results expected for any future periods, and the results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2022. Please refer to “Financial Information,” “Risk Factors” and “Business” included elsewhere in this document for information regarding trends and other factors that may affect our results of operations.
 
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Summary Results of Operations
The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our total revenues for the periods presented.
For the Nine Months Ended September 30,
2021
2022
RMB
%
RMB
%
(unaudited)
(in thousands, except for percentages)
Revenues
Online recruitment services to enterprise customers
3,137,054 99.0 3,391,648 98.9
Others
31,424 1.0 37,139 1.1
Total revenues
3,168,478 100.0 3,428,787 100.0
Operating cost and expenses
Cost of revenues
(404,863) (12.8) (552,466) (16.1)
Sales and marketing expenses
(1,569,199) (49.5) (1,318,843) (38.5)
Research and development expenses
(623,051) (19.7) (888,655) (25.9)
General and administrative expenses
(1,871,950) (59.1) (472,099) (13.8)
Total operating cost and expenses
(4,469,063) (141.1) (3,232,063) (94.3)
Other operating income, net
10,948 0.3 14,245 0.4
(Loss)/Income from operations
(1,289,637) (40.8) 210,969 6.1
Investment income
15,791 0.5 31,112 0.9
Financial income, net
6,754 0.2 78,013 2.3
Foreign exchange (loss)/gain
(317) (0.0) 10,136 0.3
Other (expenses)/income, net
(6,669) (0.2) 3,682 0.1
(Loss)/Income before income tax expense
(1,274,078) (40.3) 333,912 9.7
Income tax expense
(30,066) (0.9) (41,874) (1.2)
Net (loss)/income
(1,304,144) (41.2) 292,038 8.5
Non-GAAP Financial Measure
The table below sets forth a reconciliation of our net (loss)/income to adjusted net income (non-GAAP financial measure) for the periods presented. See “Financial Information — Non- GAAP Financial Measure” for more details.
For the Nine Months
Ended September 30,
2021
2022
(unaudited)
(RMB in thousands)
Net (loss)/income
(1,304,144) 292,038
Minus:
Share-based compensation expenses
(1,808,174) (447,961)
Adjusted net income (non-GAAP financial measure)
504,030 739,999
 
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Revenues
Our revenues increased by 8.2% from RMB3.2 billion for the nine months ended September 30, 2021 to RMB3.4 billion in the nine months ended September 30, 2022. This increase primarily resulted from our continued investment in enhancing our service capabilities. In particular, revenues from key accounts increased by 20.5% from RMB643.1 million in the nine months ended September 30, 2021 to RMB775.0 million in the nine months ended September 30, 2022, and revenues from mid-sized accounts increased by 27.3% from RMB1.1 billion in the nine months ended September 30, 2021 to RMB1.4 billion in the nine months ended September 30, 2022. The increase was partially offset by the decrease in revenues from small-sized accounts, which was historically driven by new user growth while our new user registration was suspended during most of the nine months ended September 30, 2022. Our key accounts increased by 48.9% from 3,995 in the twelve months ended September 30, 2021 to 5,947 in the twelve months ended September 30, 2022.
Cost of revenues
Our cost of revenues increased by 36.5% from RMB404.9 million for the nine months ended September 30, 2021 to RMB552.5 million in the nine months ended September 30, 2022, primarily driven by (i) an increase of RMB80.4 million in payroll and other employee-related expenses with the increased headcount, particularly in security and operation personnel, (ii) an increase of RMB37.6 million in depreciation and amortization mainly related to servers, and (iii) an increase of RMB28.8 million in server and bandwidth service cost in line with our business growth, partially offset by a decrease of RMB13.6 million in third-party payment processing cost.
Sales and marketing expenses
Our sales and marketing expenses decreased by 16.0% from RMB1.6 billion for the nine months ended September 30, 2021 to RMB1.3 billion in the nine months ended September 30, 2022, primarily attributable to a decrease of RMB463.7 million in advertising expenses resulting from the decreased marketing activities taking into consideration of the suspension of new user registration in the first half year of 2022, partially offset by an increase of RMB201.4 million in payroll and other employee-related expenses for our sales and marketing staff.
Research and development expenses
Our research and development expenses increased by 42.6% from RMB623.1 million in the nine months ended September 30, 2021 to RMB888.7 million in the nine months ended September 30, 2022, which was mainly attributable to an increase of RMB251.7 million in payroll and other employee-related expenses due to increased headcount in research and development personnel and increased share-based compensation expenses.
General and administrative expenses
Our general and administrative expenses decreased by 74.8% from RMB1.9 billion in the nine months ended September 30, 2021 to RMB472.1 million in the nine months ended September 30, 2022. This decrease was mainly attributable to the one-off share-based compensation expenses of RMB1,506.4 million recognized in the second quarter of 2021, related to the issuance of Class B Ordinary Shares to TECHWOLF LIMITED, partially offset by increased payroll and other employee-related expenses with increased headcount.
(Loss)/Income from operations
As a result of the foregoing, we recorded RMB211.0 million of income from operations in the nine months ended September 30, 2022, as compared to a loss from operations of RMB1.3 billion in the nine months ended September 30, 2021.
Income tax expense
We accrued income tax expense of RMB41.9 million in the nine months ended September 30, 2022, as compared to that of RMB30.1 million in the nine months ended September 30, 2021.
 
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Net (loss)/income
We recorded net income of RMB292.0 million in the nine months ended September 30, 2022, as compared to a net loss of RMB1.3 billion in the nine months ended September 30, 2021.
Cash flows
The following table sets forth a summary of our cash flows for the nine months ended September 30, 2022.
For the Nine Months
Ended September 30,
2022
(unaudited)
(RMB in thousands)
Net cash generated from operating activities
847,499
Net cash used in investing activities
(2,091,086)
Net cash used in financing activities
(41,278)
Effect of exchange rate changes on cash and cash equivalents
1,101,863
Net decrease in cash and cash equivalents
(183,002)
Cash and cash equivalents at beginning of the period
11,341,758
Cash and cash equivalents at end of the period
11,158,756
Cash position
The balance of cash and cash equivalents and short-term investment was RMB13.9 billion as of September 30, 2022.
Operating activities
Net cash generated from operating activities in the nine months ended September 30, 2022 was RMB847.5 million. The difference between this net cash generated from operating activities and the net income of RMB292.0 million in the same period was due to adjustments for non-cash items that primarily include share-based compensation expenses of RMB448.0 million, amortization of right-of-use assets of RMB106.5 million and depreciation and amortization expenses of RMB98.0 million, partially offset by cash used for an increase in working capital mainly resulting from a decrease of RMB104.4 million in operating lease liabilities and a decrease of RMB71.5 million in other payables and accrued liabilities partially offset by an increase of RMB80.1 million in deferred revenue and a decrease of RMB30.8 million in prepayments and other current assets.
Investing activities
Net cash used in investing activities in the nine months ended September 30, 2022 was RMB2.1 billion, primarily due to purchase of short-term investments of RMB3.8 billion, partially offset by proceeds from maturity of short-term investments of RMB2.0 billion.
Financing activities
Net cash used in financing activities in the nine months ended September 30, 2022 was RMB41.3 million, primarily attributable to RMB279.4 million of repurchase of Class A Ordinary Shares, partially offset by proceeds of RMB238.1 million from the exercise of share options.
Outlook
We expect to record a net loss and a significant decrease in adjusted net income (non-GAAP financial measure) in 2022, primarily due to (i) slower revenue growth because of the macroeconomic uncertainties,
 
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resurgence of COVID-19 in certain areas in China, and that the revenues from the new users registered in the second half of 2022 may take some time to ramp up, (ii) higher payroll and employee-related expenses as we continue to increase headcount in our research and development team in particular to build our core capabilities and improve our services, as well as headcount in our sales and security teams, and (iii) higher sales and marketing expenses as a percentage of total revenues in 2022 as we have invested, and plan to continue to invest in advertising activities, including the sponsorship of major events, after the resumption of our new user registration to further enhance our brand awareness and facilitate our user growth in the long-term. While the expenses for such promotional advertising activities are recognized in 2022, we do view these investments on our branding as having long-term impacts on the brand equity for our users and customers.
Recent Regulatory Developments
Regulatory Developments Related to our Business Operations
On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law (《中華人民共和國數據安全法》), or the Data Security Law, which took effect in September 2021. On August 20, 2021, the State Council promulgated the PRC Personal Information Protection Law (《中華人民共和國個人信息保護法》), or the PIPL, effective from November 1, 2021. See “Regulations — Regulations Related to Privacy Protection.”
On July 30, 2021, the PRC State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure (《關鍵信息基礎設施安全保護條例》), effective on September 1, 2021, which set out the definition of critical information infrastructure. As of the date of this document, no detailed implementation rules have been issued by the relevant governmental authorities, and we have not been informed by any governmental authority that we are a critical information infrastructure operator.
On December 28, 2021, the CAC, the NDRC, the MIIT, and several other PRC governmental authorities jointly issued the revised Cybersecurity Review Measures (《網絡安全審查辦法》) which became effective on February 15, 2022, pursuant to which, among other things, a critical information infrastructure operator shall apply for cybersecurity review to the Cybersecurity Review Office of the CAC if it anticipates that its procurement of network products and services affect or may affect national security after the network products and services being put into use. See “Regulations — Regulations Relating to Information Security and Censorship” for details, including the initiatives we have undertaken and our PRC Legal Adviser’s view.
In addition, on November 14, 2021, the CAC published draft Regulations on the Administration of Network Data Security (solicitation for comment), or the Draft Regulations on Network Data Security (《網絡數據安全管理條例(徵求意見稿)》), for public comments, which provides that data processors conducting certain activities shall apply for cybersecurity review. See “Regulations — Regulations Relating to Information Security and Censorship” for details, including our PRC Legal Adviser and Directors’ view.
On July 7, 2022, the CAC issued the Measures for the Security Assessment of Outbound Data Transfers (《數據出境安全評估辦法》), which became effective on September 1, 2022.
Our Directors and PRC Legal Advisers are of the view that, during the Track Record Period and up to the Latest Practicable Date, based on the analysis detailed in “Regulations — Regulations Relating to Information Security and Censorship,” and “Business — Data Privacy and Security,” we had not been and were not involved in any non-compliance incident related to data privacy and security, which, individually or in the aggregate, have had or are reasonably likely to have a material and adverse, financial or operational, impact on the Group, and we are in compliance with applicable laws and regulations on cybersecurity, data security and personal data protection in all material respects in the PRC, and if the Draft Regulations on Network Data Security were implemented in the current form, our Directors and our PRC Legal Advisers do not foresee any material impediments for us to comply with the requirements under the Draft Regulations on Network Data Security in all material aspects. In addition, our Directors believe that the aforementioned laws and regulations did not and will not materially affect our Group’s operations and financial performance.
 
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Solely based on the due diligence conducted by the Joint Sponsors (including but not limited to discussing with the PRC legal advisers of the Company and the Joint Sponsors, conducting expert due diligence with the PRC Legal Adviser and reviewing the legal opinions of the PRC Legal Adviser with assistance of the Joint Sponsors’ PRC legal advisers), nothing has come to the attention of the Joint Sponsors that would reasonably cause the Joint Sponsors to disagree with the Director ‘s view above in all material aspects.
See “Regulations — Regulations Relating to Information Security and Censorship” for further details, including our PRC Legal Adviser and Joint Sponsors’ view.
Regulatory Developments on Overseas Offering and Listing
Cybersecurity and Data Privacy
According to the Cybersecurity Review Measures (《網絡安全審查辦法》), online platform operators possessing personal information of more than one million users seeking to be listed on a foreign stock exchange (國外上市) must apply for a cybersecurity review. Our PRC Legal Adviser is of the view that the term of “listing on a foreign stock exchange (國外上市)” under the revised Cybersecurity Review Measures does not include “listing in Hong Kong,” and therefore we are not subject to the mandatory obligation of ex ante application for cybersecurity review for the Listing.
Pursuant to Article 13 of the Draft Regulations on Network Data Security (《網絡數據安全管理條例(徵求意見稿)), data processors shall, in accordance with relevant laws and regulations, apply for cybersecurity review for their listing in certain circumstances. See “— Regulatory Developments Related to our Business Operations” for our Director, PRC Legal Adviser and Joint Sponsors’ view.
CSRC Procedures
On December 24, 2021, the CSRC issued the draft Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (《國務院關於境內企業境外發行證券和上市的管理規定(草案徵求意見稿)), or the Draft Provisions, and the draft Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (《境內企業境外發行證券和上市備案管理辦法(徵求意見稿)), or the Draft Administration Measures, for public comments. Pursuant to these drafts, overseas offering and/or listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC within three business days after submitting its application documents by the issuer or its designated principal domestic operating entity. See “Risk Factors — Risks Related to Doing Business in China — The approval of or filing and reporting with the China Securities Regulatory Commission or other PRC government authorities may be required in connection with the Introduction under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and reporting procedures” and “Regulations — Regulations on Overseas Offering and Listing” for more details.
Based on the analysis detailed in “Regulations — Regulations on Overseas Offering and Listing”, if these draft regulations become effective in their current form before the Listing, our Directors and PRC Legal Adviser (i) do not foresee any material legal impediment for us to comply with these requirements or complete the filing with the CSRC in all material respects; (ii) do not foresee these regulations to have any material adverse impact on our business operations, Contractual Arrangements and the Listing; (iii) are of the view that the Contractual Arrangements are expected to remain compliant.
Solely based on the due diligence conducted by the Joint Sponsors (including but not limited to discussing with the PRC legal advisers of the Company and the Joint Sponsors, conducting expert due diligence with the PRC Legal Adviser and reviewing the legal opinion of the PRC Legal Adviser with assistance of the Joint Sponsors’ PRC legal advisers), nothing has come to the attention of the Joint Sponsors that would reasonably cause the Joint Sponsors to disagree with the Director ‘s view above in all material aspects. See “Regulations — Regulations on Overseas Offering and Listing” for details.
 
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Class Action
We and certain of our officers and directors have been named as defendants in a putative securities class action filed on July 12, 2021. In September 2022, with the aid of a mediator, the parties reached a tentative agreement in principle to settle the case, which is a subsequent event after June 30, 2022. As a result of such tentative agreement in principle to settle, we recorded a contingent liability in our consolidated statements as of and for the six months ended June 30, 2022. On November 10, 2022, the Court granted preliminary approval of the parties’ settlement agreement, pursuant to which, without any admission or finding of any wrongdoing on the part of any of the Defendants, the parties agreed that, in consideration of Kanzhun’s payment of US$2.25 million, all actual and potential claims and causes of action that have been or could have been alleged against Kanzhun and the individual defendant are resolved and discharged and precluded from being raised again in any future action. See “Business — Legal Proceedings and Compliance.” See also “Directors and Senior Management — Directors — Legal proceedings involving certain Directors” for other class action lawsuits involved our Directors.
 
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RISK FACTORS
The following section sets forth certain risk factors that have been updated and/or supplemented since the filing of our 2021 Form 20-F and the furnishing of the October Super 6-K, as well as additional risk factors relating to the Listing.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We have a limited operating history and generated net losses in 2019, 2020 and 2021 and negative operating cash flow in 2019, and we may not be able to sustain and manage our growth, control our costs and expenses, implement our business strategies or achieve profitability in the future. Any new product or service we may launch and any new market sectors we may enter will come with additional risks.
We have experienced rapid growth in our business and operations since our inception in 2014, which places significant demands on our management, operational and financial resources. We generated net losses of RMB502.1 million, RMB941.9 million and RMB1.1 billion (US$159.9 million) in 2019, 2020 and 2021, respectively. We generated net income of RMB80.3 million (US$12.0 million) in the six months ended June 30, 2022. We generated negative operating cash flow of RMB105.7 million in 2019. Given our limited operating history, net losses and negative operating cash flow we incurred and the rapidly evolving market where we compete, we may encounter difficulties as we establish, expand or enhance our operations, feature and service development, sales and marketing efforts, technology and general and administrative capabilities. As a result, we may not generate net profits or positive operating cash flow, or sustain our historical levels of growth in the future. We believe that our continued growth and our ability to achieve profitability will depend on many factors, including our ability to further improve our user experience and broaden the spectrum of our service offerings, to further increase our presence in different user groups, especially blue-collar users, to continue to invest in technologies and deepen our data insights, and to explore other potential sectors in the human resource service market and achieve full coverage of users’ career lifecycle. There can be no assurance that we will achieve any of the above, and our failure to do so may materially and adversely affect our business and results of operations.
Particularly, our efforts to expand our product and service offerings to users and explore other sectors in the human resource service market will require significant resource investments from us, and such efforts may not be successful. Expansion into new product and service offerings or other sectors in the human resource service market may be subject to risks such as:

limited brand recognition (compared with our established services or market sectors);

costs incurred in product and service development and marketing;

lack of experience and expertise in connection with the new product and service or market vertical;

adjustment to the preferences and customs of a different group of users;

compliance with potential new regulations and policies;

difficulties in managing upsized operations and maintaining operational efficiency; and

competition with new competitors, including those with a more established local presence.
The occurrence of any of these risks could negatively affect our business in new markets and consequently our business and operating results.
We expect our costs and expenses to continue to increase in the future as we expand our user base, broaden our service offerings and develop and implement new products, services and features that may entail more complexity. We expect to continue to invest in our infrastructure in order to provide our services more rapidly and reliably to users. Continued growth could strain our ability to maintain reliable service levels for our users, develop and improve our operational, financial, legal and management controls, and enhance our reporting systems and procedures. If we are unable to generate adequate revenues and to manage our costs and expenses, we may continue to incur significant net losses and negative operating cash flow in the future
 
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and may not be able to achieve or subsequently maintain profitability. If we fail to achieve the necessary level of efficiency in our operation as it grows, our business, operating results and financial condition could be harmed.
If our job seekers’ or employers’ profiles are out-of-date, inaccurate, fraudulent or lack credible information, we may not be able to effectively create value for our users, which could materially and adversely impact our reputation and business prospects.
We adopt a suite of registration procedures to verify the identity of our job seekers and enterprise users, and we also have ongoing risk assessment procedures for enterprise users. Our intelligence system detects suspicious user input that may undermine the integrity of the community and will then require such users to go through additional authentication procedures. See “Business — Risk Management and Internal Control” for further details. However, we cannot assure you that we will be able to remove all the job seekers and enterprise users that submit out-of-date, inaccurate, fraudulent or otherwise incredible profile or job post information to our database. If we are not able to effectively filter out these job seekers and enterprise users, our users that submit legitimate and accurate profile information may be misled or even defrauded by them, wasting their time and resources in the recruitment process, and our reputation and business prospects will also be materially and adversely impacted as a result. We might also be ordered to make rectifications or even be subject to confiscation of illegal gains and a fine in an amount of up to RMB30,000 if we fail to review the authenticity and legality of the materials provided by the employers in accordance with the PRC laws. See “Regulations — Regulations Relating to Talent Intermediary Services” for further details.
Our business is subject to complex and evolving PRC laws and regulations regarding cybersecurity and information security. Any failure or perceived failure to comply with these laws and regulations could result in penalties, claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
Regulatory authorities in China have enhanced data protection and cybersecurity regulatory requirements. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Different PRC regulatory bodies, including the SCNPC, the MIIT, the CAC, the MPS and the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications, which may create difficulties in ensuring full compliance and increase our operating cost. Non-compliance could result in penalties or other significant legal liabilities.
Numerous regulations, guidelines and other measures have been and are expected to be adopted under the PRC Cybersecurity Law. For example, the PRC government promulgated the Cybersecurity Review Measures (《網絡安全審查辦法》) in April 2020, which became effective in June 2020. Under these measures, critical information infrastructure operators must pass a cybersecurity review when purchasing network products and services which affect or may affect national security. On December 28, 2021, the CAC, together with certain other PRC governmental authorities, jointly released the revised Cybersecurity Review Measures, which took effect on February 15, 2022. Pursuant to the revised Cybersecurity Review Measures, critical information infrastructure operators procuring network products and services and online platform operators conducting data processing activities that affect or may affect national security shall conduct a cybersecurity review according to these measures. If a critical information infrastructure operator anticipates that its procurement of network products and services affect or may affect national security after the network products and services being put into use, it shall apply for cybersecurity review to the Cybersecurity Review Office of the CAC. In addition, online platform operators possessing personal information of more than one million users seeking to be listed on a foreign stock exchange must apply for a cybersecurity review. The revised Cybersecurity Review Measures also provide that the Cybersecurity Review Office of the CAC may initiate cybersecurity review against relevant operators if the authorities believe that the network products, network services or data processing activities of such operators affect or may affect national security. The revised Cybersecurity Review Measures set out certain risk factors which would be the focus in assessing the national security risk during a cybersecurity review. Pursuant to an announcement posted by the CAC on July 5, 2021 relating to the cybersecurity review, our BOSS Zhipin app was required to suspend new user registration in China to cooperate with the cybersecurity review and prevent the expansion of risks. As approved by the
 
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Cybersecurity Review Office of the CAC, we have recommenced new user registration on our BOSS Zhipin app, effective from June 29, 2022.
On July 30, 2021, the PRC State Council promulgated the Regulations on Security Protection of Critical Information Infrastructure (《關鍵信息基礎設施安全保護條例》), which became effective on September 1, 2021. See “Regulations — Regulations relating to information security and censorship” for further details. As of the date of this document, no detailed implementation rules have been issued by the relevant governmental authorities. However, as this regulation was newly issued and the relevant governmental authorities may further formulate detailed rules or explanations with respect to the interpretation and implementation of this regulation. As of the date of this document, we have not been informed by any governmental authority that we are a critical information infrastructure operator.
In the PRC, the internet information is regulated from a national security standpoint. According to the PRC National Security Law (《中華人民共和國國家安全法》), institutions and mechanisms for national security review and administration will be established to conduct national security review on key technologies and network information technology products and services that affect or may affect national security. The PRC Data Security Law (《中華人民共和國數據安全法》) took effect in September 2021 and provides for a security review procedure for the data processing activities that affect or may affect national security. See “Regulations — Regulations relating to information security and censorship” for further details. It is not clear under the Data Security Law what constitutes “important data” or “state critical data.” If we are deemed to collect “important data” or “state critical data,” we may need to adopt internal reforms in order to comply with the Data Security Law, which may increase the cost of operations, or decline the user growth or engagement, or otherwise harm our business.
In addition, on November 14, 2021, the CAC published draft Regulations on the Administration of Network Data Security (solicitation for comment), or the Draft Regulations on Network Data Security (《網絡數據安全管理條例(徵求意見稿)), for public comments. See “Regulations — Regulations relating to information security and censorship” for further details. As of the date of this document, this draft has not been formally adopted. Substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation. In general, compliance with the existing PRC laws and regulations and additional laws and regulations related to data security and personal information protection that PRC regulatory bodies may enact in the future may be costly and result in additional expenses to us, and subject us to negative publicity.
On July 7, 2022, the CAC issued the Measures for the Security Assessment of Outbound Data Transfers (《數據出境安全評估辦法》), which became effective on September 1, 2022. These measures require the data processor providing data overseas and falling certain circumstances to apply for the security assessment of cross-border data transfer with the local provincial-level counterparts of the national cybersecurity authority. See “Regulations — Regulations relating to information security and censorship” for further details. As of the date of this document, the exact scope of “important data” under the current regulatory regime remains unclear, and the applicability of certain circumstances are still subject to further interpretation by relevant government authorities. The PRC government authorities may have discretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be required to report any security assessment for cross-border data transfers to the CAC.
While we take measures to comply with applicable cybersecurity and data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us and business partners. The activities of third parties such as our customers and business partners are beyond our control. It also remains uncertain whether the future regulatory changes would impose additional restrictions on companies like us. If any of our business partners violate relevant laws and regulations, or fails to fully comply with the service agreements with us, or if any of our employees fails to comply with our internal control measures and misuses the information, we may be subject to legal liabilities. Any failure or perceived failure to comply with all applicable cybersecurity and data privacy and protection laws and regulations, or any failure or perceived failure of our business partners to do so, or any failure or perceived failure of our employees to comply with our internal control measures, may prevent us from using or providing certain network products or services,
 
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result in government enforcement actions and investigations, fines and other penalties such as suspension of our related business, closure of our apps and suspension of new downloads of our apps, as well as subjecting us to negative publicity and legal proceedings or regulatory actions and discouraging current and potential users and customers from using our services, which could have a material adverse effect on our business and results of operations.
In addition, regulatory authorities around the world have adopted or are considering a number of legislative and regulatory proposals concerning data protection. These legislative and regulatory proposals, if adopted, and the uncertain interpretations and application thereof could, in addition to the possibility of fines, result in an order requiring that we change our data practices and policies, which could have an adverse effect on our business and results of operations. The European Union General Data Protection Regulation, or the GDPR, which came into effect on May 25, 2018, includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data, affords new data protection rights to individuals and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or non-financial losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our platform and input protected information, we may become subject to provisions of the GDPR.
Any lack of or failure to maintain requisite approvals, licenses or permits applicable to our business may have a material and adverse impact on our business, financial condition and results of operations, and compliance with applicable laws or regulations may require us to obtain additional approvals or licenses or change our business model.
Our business is subject to supervision and regulation by various governmental authorities in China. These governmental authorities include the CAC, the MOFCOM, the MIIT, the SAMR, the MCT, the NRTA, and their corresponding local regulatory authorities. These governmental authorities promulgate and enforce laws and regulations that cover a variety of business activities that relating to our operations, such as provision of internet information, among other things. These regulations in general regulate the entry into, the permitted scope of, as well as approvals, licenses and permits for, the relevant business activities.
We provide services through our online recruitment platform, including certain live streaming recruitment services, short videos relating to job hunting and recruitment, in-app streaming interview and career development-related video courses, which may be considered as internet audio-visual program services. An internet audio-visual program service provider shall obtain the License for Online Transmission of Audio-Visual Programs, or the Audio-Visual License. According to the applicable PRC laws, only companies wholly state-owned or state-controlled are eligible to obtain the Audio-Visual License. As advised by our PRC Legal Adviser, based on a consultation with the Media Integration Development Division of Beijing Municipal Radio and Television Bureau, a company that is not eligible for the Audio-Visual License for providing internet audio-visual program services is allowed to apply for the registration and filing with the National Internet Audio-Visual Platforms Information Registration Management System (“Audio-Visual Filing”), when its number of daily active users and program inspectors, personnel within a company that is responsible for reviewing and vetting the content of the internet audio-visual program, reach the respective threshold. As of the Latest Practicable Date, we have not obtained the Audio-Visual License, as we are not a state-owned company or state-controlled company, or completed the Audio-Visual Filing, as the number of the daily active users and the number of program inspectors of the internet audio-visual program services on our platform are both below the specific thresholds. We may be subject to penalties or investigations in the future, in which case we may be involved in legal proceedings, have any illegal gains confiscated, have our relevant business suspended, or face other penalties. See “Regulations — Regulations Relating to Online Transmission of Audio-Visual Programs” for more details.
We have obtained the value-added telecommunication service license concerning the internet information service, or ICP license, for provision of internet information services. The ICP license is essential to the operation of our existing and future business and is subject to regular government review or renewal. However, we cannot assure you that we can successfully renew our ICP license in a timely manner or at all as required by
 
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PRC laws to operate our online recruitment platform. Due to the evolving nature of the interpretation and application of the laws and regulations applicable to our industry in China, we cannot assure you that the permitted scope and other aspects of our ICP license are sufficient as legally required to conduct all of our present business. The regulatory authorities may determine that the scope of our ICP license is not broad enough to carry on all of our businesses and require that we expand the scope of our ICP license. As certain prerequisites are needed to meet to expand the scope of our ICP license to include certain types of services as stipulated in the Classification Catalogue of Telecommunications Services, we may not be able to meet such requirement and expand the scope of our ICP license. We may be subject to penalties or investigations due to the limitation of the scope of our ICP license in the future, in which case we may be involved in legal proceedings, have any illegal gains confiscated, have our relevant business suspended, or face other penalties.
We may be required to apply for and obtain additional licenses, permits or approvals, make additional registrations, update our registrations or expand the scope of our permits and approvals, and we cannot assure you that we will be able to meet these requirements timely, or at all, in the future. As we expand our business scope and explore different business initiatives, the business measures we have adopted or may adopt in the future may be challenged under PRC laws and regulations. For instance, while we believe we are not subject to any online game virtual currency laws and regulations for certain virtual tokens we offer in our mobile applications, the PRC government authorities may take a view contrary to ours. As a result, we may be required to obtain additional approvals or licenses and change certain aspects of our business to ensure compliance with existing and future online game virtual currency laws and regulations. If we fail to timely obtain, maintain or renew all the required licenses or permits or make all the necessary filings or change aspects of our business, we may be subject to various penalties or other regulatory actions, such as confiscation of revenues from the unlicensed activities, the imposition of fines and the discontinuation or restriction of our operations. Any such regulatory actions may disrupt our operations and materially and adversely affect our business, financial condition and results of operations.
The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial condition.
The ongoing COVID-19 pandemic has continued to spread across the world and has created unique global and industry-wide challenges. COVID-19 has resulted in quarantines, travel restrictions, the temporary closure of offices and facilities in China and many other countries. New COVID-19 variants have also emerged across the globe, potentially extending the period during which COVID-19 will negatively impact the global economy.
Recently, there has been a recurrence of COVID-19 outbreaks in certain cities and provinces of China, including, among others, Shanghai, Beijing, Shenzhen, Chengdu and Zhengzhou due to the COVID-19 variants, which delayed the recovery of consumption and services. The impact from the COVID-19 has reduced the employers’ willingness to recruit and their recruitment related budgets, which had a negative impact on our business, especially in cities most impacted by the COVID-19 pandemic. For example, our calculated cash billings in Shanghai dropped by 52.4% in April 2022 and by 59.2% in May 2022, as compared to the same periods in 2021. In October 2022, our calculated cash billings in Zhengzhou dropped by 46.8% as compared to the same period in 2021. In addition, we made adjustments to operation hours and instituted work-from-home arrangements. We have also adopted enhanced hygiene and precautionary measures to prevent infection and transmission of the COVID-19 within our premises and among our staff.
The potential downturn brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, and any associated negative impact on us will depend on many factors beyond our control. The extent to which the COVID-19 pandemic impacts our long-term results remains uncertain, and we are closely monitoring its impact on us. Our business, results of operations, financial conditions and prospects could be adversely affected directly, as well as indirectly to the extent that the ongoing COVID-19 pandemic harms the Chinese and global economy in general. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also heighten many of the other risks described in this “Risk Factors” section.
We are subject to risks relating to third-party online payment platforms.
Currently, we collect payments for our services through third-party online payment systems. In all these online payment transactions, secured transmission of confidential information such as our users’ credit card
 
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numbers and personal information over public networks is essential to maintaining users’ trust and confidence on our online recruitment platform.
We do not have control over the security measures of our third-party online payment vendors. Any security breaches of the online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential user information and could, among other things, damage our reputation and the perceived security of all of the online payment systems that we use. If a well-publicized internet or mobile network security breach were to occur, users may become reluctant to pay for our services even if the publicized breach did not involve payment systems or methods used by us. In addition, billing software errors could damage user confidence in these online payment systems. If any of the above were to occur and damage our reputation or the perceived security of the online payment systems we use, we may lose users and users may be discouraged from purchasing our services, which may have a material adverse effect on our business. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material billings software errors.
In addition, there are currently only a limited number of reputable third-party online payment systems in China. If any of these major payment systems decides to cease to provide services to us, or significantly increase the percentage they charge us for using their payment systems for our services, our results of operations may be materially and adversely affected.
We have granted and expect to continue to grant share-based awards in the future under our share incentive plan, which may increase share-based compensation expenses, affect our financial performance, and potentially dilute the shareholding of our Shareholders.
In order to attract and retain qualified employees, provide incentives to our directors and employees, and promote the success of our business, we adopted a share incentive plan in September 2020, which was amended and restated in May 2021 (as so amended and restated, the “2020 Share Incentive Plan”) and, conditionally adopted the Post-IPO Share Scheme on December 14, 2022 with effect from Listing. For details, see “Share Incentive Plans.” As of the Latest Practicable Date, options and restricted share units to purchase 93,148,510 of our Class A Ordinary Shares had been granted and outstanding, excluding options that were forfeited or canceled after the relevant grant dates. For the years ended December 31, 2019, 2020 and 2021 and the six months ended June 30, 2022, we recorded RMB34.3 million, RMB657.2 million, RMB1.9 billion (US$287.2 million) and RMB283.0 million (US$42.3 million) in share-based compensation expenses, respectively.
We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based awards to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.
RISKS RELATING TO DOING BUSINESS IN CHINA
The approval of or filing and reporting with the China Securities Regulatory Commission or other PRC government authorities may be required in connection with the Introduction under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and reporting procedures.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and the Introduction may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for the Introduction, or a
 
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rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
Our PRC Legal Adviser has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the listing and trading of our Class A Ordinary Shares because (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether listing like ours under this document are subject to the M&A Rules, (ii) our wholly-owned PRC subsidiaries were not established through a merger or acquisition of the equity or assets of a “PRC domestic company” as such term is defined under the M&A Rules, and (iii) no provision in this regulation clearly classifies contractual arrangements as a type of transaction subject to its regulation. However, we cannot assure you that relevant PRC government authorities, including the CSRC, would reach the same conclusion as our PRC Legal Adviser. If it is determined that the CSRC approval is required for the Introduction, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory authorities.
On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law (《關於依法從嚴打擊證券違法活動的意見》). These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies (中概股公司) and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on December 24, 2021, the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (《國務院關於境內企業境外發行證券和上市的管理規定(草案徵求意見稿)), or the Draft Provisions, and a draft of Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (《境內企業境外發行證券和上市備案管理辦法(徵求意見稿)), or the Draft Administration Measures, for public comments.
The Draft Provisions and the Draft Administration Measures propose to establish a new filing-based regime to regulate overseas offerings and/or listings by domestic companies. According to the Draft Provisions and the Draft Administration Measures, an overseas offering and/or listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC within three business days after submitting its application documents by the issuer or its designated principal domestic operating entity. Specifically, the examination and determination of an indirect offering and/or listing will be conducted on a substance-over-form basis, and an offering and listing shall be considered as an indirect overseas offering or listing by a domestic company if the issuer meets the following conditions: (i) the operating income, gross profit, total assets, or net assets of the domestic enterprise in the most recent fiscal year was more than 50% of the relevant line item in the issuer ‘s audited consolidated financial statement for that year; and (ii) senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC, or the main place of business is in the PRC or carried out in the PRC. According to the Draft Administration Measures, the issuer or its designated principal domestic operating entity, as the case may be, shall file with the CSRC and report the relevant information for its initial public offering, follow-on overseas offering and other equivalent offering activities. Failure to comply with the filing requirements may result in fines to the relevant domestic companies, suspension of their businesses, revocation of their business licenses and operation permits and fines on the controlling shareholder, actual controllers, directors, supervisors, and senior management and other responsible persons. The Draft Administration Measures also sets forth certain circumstances where overseas offerings and listings by domestic enterprises shall be prohibited.
As of the date of this document, the Draft Provisions and the Draft Administration Measures were released for public comment only. There are uncertainties as to whether the Draft Provisions and the Draft Administration Measures would be further amended, revised or updated. Substantial uncertainties exist with respect to the enactment timetable and final content of the Draft Provisions and the Draft Administration Measures. As the CSRC may formulate and publish guidelines for filings in the future, the Draft Administration Measures does not provide for detailed requirements of the substance and form of the filing documents.
 
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In a Q&A released on its official website, the respondent CSRC official indicated that the proposed new filing requirement will start with IPO candidates and listed companies seeking to carry out activities such as follow-on overseas financing. As for the filings for the existing companies, the regulator will grant adequate transition period and apply separate arrangements. The Q&A also addressed the contractual arrangements and pointed out that if relevant domestic laws and regulations have been observed, companies with compliant VIE structure may seek overseas listing after completion of the CSRC filings. Nevertheless, it does not specify what qualify as compliant VIE structures and what relevant domestic laws and regulations are required to be complied with. Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that we will be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all, in our future overseas offerings, if any.
In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, such as a cybersecurity review, are required for the Introduction, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for the Introduction, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government review or authorization for the Introduction. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our shares. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt the Introduction. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for the Introduction, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our shares. See “Risk Factors — Risks Related to Our Business and Industry — Our business is subject to complex and evolving PRC laws and regulations regarding cybersecurity and information security. Any failure or perceived failure to comply with these laws and regulations could result in penalties, claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.”
The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections.
Our auditor, the independent registered public accounting firm that issues the audit report in our SEC filings, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB was unable to conduct inspections without the approval of the Chinese authorities, our auditor was historically not inspected by the PCAOB before 2022. As a result, we and investors in our securities are deprived of the benefits of such PCAOB inspections. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong in 2022. However, the inability of the PCAOB to conduct inspections of auditors in China in the past made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that have been subject to the PCAOB inspections, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
 
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RISK FACTORS
Our ADSs may be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
The Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021 or any year thereafter, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify an issuer as a “Commission Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong, and our auditor was subject to this determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to secure complete access to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong. For this reason, we do not expect to be identified as a Commission-Identified Issuer following the filing of our annual report for the fiscal year ending December 31, 2022. In accordance with the HFCAA, however, our securities will be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if the PCAOB is unable to inspect or completely investigate PCAOB-registered public accounting firms headquartered in China for three consecutive years in the future, or two consecutive years if proposed changes to the law, or the Accelerating Holding Foreign Companies Accountable Act, are enacted. In the event of such prohibition, the Nasdaq may determine to delist our securities.
If our shares and ADSs are prohibited from trading in the United States, such a prohibition would substantially impair the ability of our investors to sell or purchase our ADSs when they wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our Class A Ordinary Shares or ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.
On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to two, then our shares and ADSs could be prohibited from trading in the United States in a shorter period in the event that we become identified as a Commission-Identified Issuer.
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