51job, Inc. (JOBS)

Q2 2012 Earnings Call

August 9, 2012 9:00 p.m. ET


Linda Chien – Head of IR

Rick Yan – President and CEO

Kathleen Chien – COO and Acting CFO


Philip Wan – Morgan Stanley

Wendy Huang - CIMB Securities

Stephen Sheldon - William Blair & Company

Alicia Yap – Barclays Capital

Alex Leung – SAC Capital

Wallace Cheung – Credit Suisse



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Good morning and good evening, ladies and gentlemen. Thank you for holding. Welcome to the 51job Inc.’s second quarter 2012 conference call. At this time all participants are in a listen-only mode. After the presentation there will be an opportunity to ask questions. (Operator Instructions)

I will now hand the conference over to Ms. Linda Chien, the Vice President and Head of Investor Relations. Thank you, madam. Please go ahead.

Linda Chien

Thank you, Ming, and thank you all for attending this teleconference to discuss unaudited financial results for the second quarter ended June 30, 2012. With me for today’s call are Rick Yan, President and Chief Executive Officer, and Kathleen Chien, Chief Operating Officer and Acting Chief Financial Officer. A press release containing second quarter 2012 results was issued earlier today and a copy may be obtained through our website at ir.51job.com.

Before we begin, I would like to remind you that during this call statements regarding targets for the third quarter of 2012, future business and operating results constitute forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934 as amended and as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and actual results could differ materially.

Among the factors that could cause actual results to differ are the number of recruitment advertisements placed; sales orders received and customer contracts executed during the remaining weeks of the third quarter of 2012; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the renminbi against the US dollar and other currencies; behavioral and operational changes of customers in meeting their human resource needs as they respond to evolving social, economic and political changes in China as well as stock market volatilities; introduction by competitors of new or enhanced products or services; price competition in the market for the various human resource services that the company provides in China; acceptance of new products and services developed or introduced by the company outside of the human resources industry; and fluctuations in general economic conditions.

For additional information on these and other factors that may affect the company’s financial results, please refer to the Risk Factors section of the company’s filings with the Securities and Exchange Commission. 51job undertakes no obligation to update targets prior to announcing final results for the third quarter of 2012 or as a result of new information, future events or otherwise.

Also I would like to remind you that during the course of this call we may discuss non-GAAP measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables appended to the press release. This conference call is being broadcast on the internet and is available through our website at 51job.com.

Now I’ll turn the call over to Rick.

Rick Yan

Thank you, Linda and welcome to today’s call. I will begin with a review of the second quarter, followed by Kathleen with a detailed presentation of our financial results. Then I will discuss current market conditions and our guidance. Finally, we’ll open the call to your questions.

During the second quarter, employers became more cautious about hiring amid increased economic uncertainty in China. Market demand for our recruitment services softened and this resulted in lower and slower top line growth with total revenues coming in at RMB360 million for the second quarter. Non-GAAP EPS of RMB2.1 was above our forecast range due to improved operating efficiency and cost management.

Taking a closer look at each revenue area, our online recruitment business increased 18% year over year. After completing a solid level of hiring during the post Chinese New Year period in February and March, we observed less activity in the second quarter as budget conscious employers faced stronger macro-headwinds. However despite these more challenging conditions, we transacted with an additional 15,000 enterprises compared to the year ago quarter, raising the number of unique employers using our online services to over 184,000 in the second quarter.

Reflecting the progressive declines in secular demand for print advertising services, as well as our decision to gradually discontinue these services, print revenues declined significantly in the second quarter. We expect to further reduce the number of cities where print is provided in the coming quarters. In the near term, this revenue loss from print will be a drag to our total revenue performance and cost comparisons to prior periods. However once this transition is completed, we believe the reallocation of resources to our faster growing business areas will position the company for strong future growth.

A continued bright spot in the second quarter was the steady development and rising contribution of our other HR services area. Revenues grew 28% year over year and employer demand for our business process outsourcing and training services has remained healthy. The recurring nature of our outsourcing services in particular has provided an offsetting effect to some of the hiring market volatility.

In addition, our integrated one-stop shop approach to sales and customer service enables us to leverage our existing assets across all business lines. We believe this will greatly benefit our total operating efficiency and productivity as other HR services area grows over time.

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