51job's CEO Discusses Q2 2011 Results - Earnings Call Transcript

51job, Inc. (JOBS)

Q2 2011 Earnings Call

August 4, 2011 9:00 p.m. ET

Executives

Linda Chien - Assistant VP, IR

Rick Yan - President and CEO

Kathleen Chien - Acting CFO and COO

Analysts

Wendy Huang - RBS

Ming Zhao - SIG

Tim McHugh - William Blair

Gillian Chung - Morgan Stanley

Presentation

Operator

Good morning and good evening ladies and gentlemen, thank you for holding. Welcome to the 51job, Inc. Second Quarter 2011 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, Assistant Vice President of Investor Relations. Thank you, Madam. Please go ahead.

Linda Chien

Thank you, Mein, and Thank you all for attending this teleconference to discuss un-audited financial results for the second quarter ended June 30, 2011. 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 2011 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 2011, future business and operating results constitute forward-looking statements within the meaning of Section 21E 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 expectation 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 2011; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the Renminbi against the U.S. dollar and other currency; 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 volatility; 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 2011 or as a result of new information, future events or otherwise.

Now I’ll turn the call over to Rick.

Rick Yan

Thank you, Linda, and welcome everyone to today’s call. I will begin with an overview of the second quarter followed by Kathleen with a detailed presentation of our financial results. Then I would discuss current market conditions and our objectives moving forward. Finally, we will open the call to your questions.

We are very pleased to deliver to our shareholders another quarter of solid revenue growth and profitability total revenues for the second quarter were RMB332 million or approximately US$51.4 million, an increase of 27% over the year ago quarter. Non-GAAP EPS exceeded our expectations coming in at RMB1.87 or US$0.58 per ADS.

Looking at each business area, our online business continued to grow robustly as revenue increased 49% year-over-year. We further expanded our customer base in existing and new geographies with nearly 169,000 companies purchasing some type of online recruitment services from us in the second quarter. Average revenue per online customer also increased due to greater demand and competition among employers for talent as well as the impact of the new rate card that was implemented in April of this year.

The transition to the new rate card has been smooth and has not hindered our customer acquisition or retention efforts. In our other HR services area we saw a pickup of activity led by our outsourcing and training businesses. Revenues for the other HR services increased 43% compared to a year ago quarter on the back of growing market acceptance and customer adoption of these services.

As expected our print advertising revenue decreased in the second quarter due to the discontinuation of operations in certain cities over the past year and the resulting decline in page volumes. Going forward we believe that print revenue contribution will progressively decrease as more employers choose our online services for their recruitment advertising needs.

While favorable market conditions have played an important role in growth, our margin improvement has been driven by the significant economy of scale and operating efficiency we have built into our service model. Gross margin hit a record high of 71.8% and excluding share based compensation, which increased meaningfully in the second quarter, operating margin reached 37.6%. As we grow and more deeply penetrate the market, we believe there is further room for margin expansion to exploit synergies between our businesses and to increase our share of overall our HR budgets.

We are on pace for an exceptional year of revenue growth and profitability. With our proven track record for execution, established industry leadership position and powerful brand we possess distinct competitive advantages and move forward confidently to position 51job for sustainable, profitable growth over the long term. I will now turn the call over to Kathleen for a more detailed financial review.

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