51job, Inc. Reports Second Quarter 2008 Financial Results

2008-08-06 16:00:00

51job, Inc. Reports Second Quarter 2008 Financial Results

    SHANGHAI, China, Aug. 6 /Xinhua-EMWNews/ -- 51job, Inc.

(Nasdaq: JOBS), a leading provider of integrated human resource services in

China, announced today unaudited financial results for the second quarter

of 2008 ended June 30, 2008.




Second Quarter 2008 Financial Highlights: -- Total revenues increased 4.2% over Q2 2007 to RMB218.7 million (US$31.9 million), impacted by the Sichuan earthquake, change in the public holiday calendar and softening market demand for recruitment services -- Online revenues increased 17.0% over Q2 2007 to RMB83.3 million (US$12.1 million) -- Gross margin of 54.9% compared with 57.8% in Q2 2007 -- Fully diluted earnings per common share were RMB0.34 (US$0.10 per ADS) -- Excluding share-based compensation expense and foreign currency translation loss, non-GAAP adjusted fully diluted earnings per common share were RMB0.58 (US$0.17 per ADS), in line with the Company's guidance range of RMB0.53 to RMB0.68 Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, Inc., said, "Revenues for the second quarter were below expectations as we were impacted by the combination of the devastating Sichuan earthquake, the loss of the seasonal recruitment peak following the elimination of the May weeklong holiday and reduced demand for recruitment services. During the quarter, we began to see sluggish hiring by our corporate customers amid higher labor costs, challenging conditions for certain industries including exporters and slower economic growth in China. We expect recruitment activity in the third quarter will further moderate as we believe regulations instituted by the government for the Olympic Games will restrict normal business practices for companies in Beijing and indirectly affect businesses nationwide. In addition, we expect individuals will focus more on these once- in-a-lifetime Games in China and less on job searches during this period." "Despite this difficult market environment, we continue to view 2008 as a year of investment and will remain aggressive in executing our strategic initiatives of new product development and brand building. We manage our business for the long term and will not sacrifice future growth for short-term results. We strongly believe these investments will enable us to extend our market leadership position in China and position us for higher growth and profitability when economic conditions improve," said Mr. Yan. Second Quarter 2008 Unaudited Financial Results Total revenues for the second quarter ended June 30, 2008 were RMB218.7 million (US$31.9 million), an increase of 4.2% from RMB209.9 million for the same quarter in 2007. Print advertising revenues for the second quarter of 2008 decreased 12.7% to RMB93.9 million (US$13.7 million) compared with RMB107.6 million for the same quarter in 2007. The decrease was primarily the result of general business disruptions and reduced customer activity resulting from the Sichuan earthquake in May, the loss of the post-holiday seasonal peak following the government's elimination of the weeklong May holiday this year, a decline in customer demand and lower average revenue per page. Print advertising prices charged in each city were generally unchanged year-over-year and average revenue per page in the second quarter of 2008 decreased 13.7% over the same quarter in 2007 due to higher revenue contribution from lower priced cities. The estimated number of print advertising pages generated in the second quarter of 2008 was 4,263 compared with 4,213 pages in the same quarter in 2007. Online recruitment services revenues for the second quarter of 2008 were RMB83.3 million (US$12.1 million), representing a 17.0% growth from RMB71.2 million for the same quarter of the prior year. The increase was mainly attributable to the growth in the number of employers using the Company's online services and higher average revenue per unique employer, which was partially offset by general business disruptions for many customers resulting from the Sichuan earthquake and reduced customer demand. Unique employers using the Company's online recruitment services increased 11.8% to 64,813 in the second quarter of 2008 compared with 57,975 in the same quarter of the prior year. Executive search revenues for the second quarter of 2008 decreased 32.5% to RMB3.2 million (US$0.5 million) from RMB4.7 million for the same quarter in 2007 due to fewer assignments and candidate placements. For the second quarter of 2008, other human resource related revenues increased 44.7% to RMB38.4 million (US$5.6 million) from RMB26.5 million in the second quarter of 2007 due principally to a greater number of customers using corporate training and human resource outsourcing services. Gross profit for the second quarter of 2008 was RMB114.4 million (US$16.7 million) compared with RMB115.1 million for the same quarter of the prior year. Gross margin, which is equal to gross profit divided by net revenues, decreased to 54.9% in the second quarter of 2008 compared with 57.8% in the same quarter in 2007 due primarily to an increase in wages and labor costs. Operating expenses for the second quarter of 2008 increased 16.8% to RMB84.1 million (US$12.3 million) from RMB72.0 million for the same quarter of 2007 due primarily to higher sales and marketing expenses. Operating expenses as a percentage of net revenues was 40.4% for the second quarter of 2008 compared with 36.2% for the second quarter of 2007. Excluding share-based compensation expense, operating expenses as a percentage of net revenues was 37.5% in the second quarter of 2008 compared with 33.3% in the second quarter of 2007. Sales and marketing expenses for the second quarter of 2008 increased 23.6% to RMB52.2 million (US$7.6 million) from RMB42.2 million for the same quarter of the prior year due to higher labor costs resulting from staff additions and rising wage levels as well as greater advertising and promotion expenses. General and administrative expenses for the second quarter of 2008 were RMB31.9 million (US$4.7 million) compared with RMB29.8 million in the second quarter of 2007 due primarily to higher office expenses, labor costs and share-based compensation expense, which were partially offset by lower professional services fees. Income from operations for the second quarter of 2008 decreased 29.7% to RMB30.3 million (US$4.4 million) from RMB43.1 million for the same quarter of the prior year. The Company's effective tax rate was 36.3% in the second quarter of 2008 compared with 31.2% in the second quarter of the prior year due primarily to the increase in the loss from foreign currency translation resulting from the appreciation of the Renminbi against the U.S. dollar. Loss from foreign currency translation is not deductible from taxable income under PRC tax law. Net income for the second quarter of 2008 decreased 37.8% to RMB19.3 million (US$2.8 million) from RMB31.0 million for the same quarter in 2007. Fully diluted earnings per common share for the second quarter of 2008 were RMB0.34 (US$0.05) compared with RMB0.55 for the same quarter in 2007. Fully diluted earnings per ADS for the second quarter of 2008 were RMB0.68 (US$0.10) compared with RMB1.10 in the second quarter of 2007. In the second quarter of 2008, the Company recognized total share-based compensation expense of RMB7.2 million (US$1.0 million) compared with RMB6.8 million in the second quarter of 2007. The Company also recognized a foreign currency translation loss of RMB6.6 million (US$1.0 million) in the second quarter of 2008 compared with a translation loss of RMB4.3 million in the second quarter of 2007 resulting from the appreciation of the Renminbi against the U.S. dollar. Excluding share-based compensation expense and foreign currency translation loss which had no impact on the Company's cash earnings, non-GAAP adjusted net income for the second quarter of 2008 decreased 21.5% to RMB33.1 million (US$4.8 million) from RMB42.1 million for the second quarter of 2007. Non-GAAP adjusted fully diluted earnings per common share were RMB0.58 (US$0.08) in the second quarter of 2008 compared with RMB0.74 in the second quarter of 2007. Non-GAAP adjusted fully diluted earnings per ADS in the second quarter of 2008 were RMB1.17 (US$0.17) compared with RMB1.49 in the second quarter of 2007. Six Months 2008 Unaudited Financial Results Total revenues for the six months ended June 30, 2008 were RMB455.2 million (US$66.4 million), an increase of 10.9% from RMB410.4 million in the comparable period in 2007. Income from operations for the six months ended June 30, 2008 decreased 18.9% to RMB68.8 million (US$10.0 million) from RMB84.9 million for the same period last year. Net income for the first half of 2008 decreased 34.2% to RMB41.6 million (US$6.1 million) from RMB63.2 million for the same period in 2007. Fully diluted earnings per common share for the first half of 2008 was RMB0.73 (US$0.11) from RMB1.12 in the comparable period in 2007. Fully diluted earnings per ADS for the first half of 2008 were RMB1.47 (US$0.21) compared with RMB2.23 in the same period in 2007. Excluding share-based compensation and foreign currency translation loss, non-GAAP adjusted net income for the six months ended June 30, 2008 decreased 14.9% to RMB71.9 million (US$10.5 million) from RMB84.4 million for the six months ended June 30, 2007. Non-GAAP adjusted fully diluted earnings per common share were RMB1.27 (US$0.19) in first half of 2008 compared with RMB1.49 in the same period in 2007. Non-GAAP adjusted fully diluted earnings per ADS in the first half of 2008 were RMB2.53 (US$0.37) compared with RMB2.98 in the same period in 2007. As of June 30, 2008, the Company had cash and short-term investments totaling RMB1.041 billion (US$151.7 million) compared with RMB1.008 billion at December 31, 2007 and RMB1.023 billion at March 31, 2008. Business Outlook The Company expects that the Olympic Games in Beijing will negatively impact customer demand and recruitment behavior in China in the third quarter as government regulations restrict normal business practices for companies in Beijing and, to a lesser extent, businesses nationwide. In addition, the Company expects high public interest in the Olympic Games will reduce job searching activity by individuals during this period. For the third quarter of 2008, based on current market and operating conditions, the Company's revenue target is in the estimated range of RMB205 million to RMB215 million (US$29.9 million to US$31.3 million). Excluding share-based compensation expense and any foreign currency translation losses or gains, the Company's non-GAAP fully diluted earnings target for the third quarter of 2008 is in the estimated range of RMB0.38 to RMB0.48 per common share (US$0.11 to US$0.14 per ADS). The Company expects aggregate share-based compensation expense in the third quarter of 2008 to be approximately RMB7 million to RMB8 million (US$1.0 million to US$1.2 million). Other Company News In July, the Company changed its newspaper contractor in Tianjin to Tianjin Education News. There was no interruption in the printing and distribution of 51job Weekly during the transition. Currency Convenience Translation For the convenience of readers, certain Renminbi amounts have been translated into U.S. dollars at the rate of RMB6.8591 to US$1.00, the noon buying rate in the City of New York for cable transfers of Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York, as of June 30, 2008. Conference Call Information Management of 51job will host a conference call at 9:00 p.m. Eastern Time on August 6, 2008 (9:00 a.m. Shanghai / Hong Kong time zone on August 7, 2008) to discuss second quarter 2008 results. The call will be available live and on replay through 51job's investor relations website, http://ir.51job.com . Please go to the website at least fifteen minutes early to register and download and install any necessary audio software. Participants may also dial into the teleconference at +1-800-238-9007 (+1-719-457-2552 for international callers) and provide the passcode 3267347. An audio replay of the conference call will be available three hours after completion through August 13, 2008, by dialing +1-888-203-1112 (+1-719-457-0820 for international callers) and entering the passcode 3267347. Use of Non-GAAP Financial Measures To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (GAAP), 51job uses non-GAAP measures of adjusted net income, adjusted earnings per common share and adjusted earnings per ADS, which are adjusted from results based on GAAP to exclude the impact of share-based compensation expense and foreign currency translation gain or loss. The Company believes excluding stock-based compensation expense from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. The Company believes excluding foreign currency translation gain or loss from its non-GAAP financial measures is useful for its management and investors as such translation gain or loss is unrelated to the Company's core business operations and will not result in cash settlement nor impact the Company's cash earnings. 51job also believes these non-GAAP measures excluding share-based compensation expense and foreign currency translation gain or loss are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial statements.

    About 51job



    51job, Inc. (Nasdaq: JOBS) is a leading provider of integrated human

resource services in China with a strong focus on recruitment related

services. Offering a broad array of products and services, 51job connects

millions of job seekers with employment opportunities and streamlines the

recruitment process and human resource administration for tens of thousands

of companies in China. Through print advertisements in 51job Weekly and

online recruitment services at http://www.51job.com, both domestic Chinese

employers and multinational companies alike are able to attract, identify

and recruit new employees. 51job also provides executive search services

and a number of other value- added human resource services, including

training, business process outsourcing and salary surveys. 51job's

nationwide office network in China spans 26 cities operating 23 local

editions of 51job Weekly.



    Safe Harbor Statement



    Statements in this release regarding targets for the third quarter of

2008, 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

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 2008; any

accounting adjustments that may occur during the quarterly close;

fluctuations in the value of the Renminbi against the U.S. 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 its 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 Company's filings with the

Securities and Exchange Commission. 51job undertakes no obligation to

update these targets prior to announcing final results for the third

quarter of 2008 or as a result of new information, future events or

otherwise.




-- Financial tables to follow -- 51job, Inc. Consolidated Statements of Operations For the Three Months Ended June 30, June 30, June 30, 2007 2008 2008 (In thousands, except number of shares and per share data) (unaudited)(unaudited) (unaudited) RMB RMB USD (Note 1) Revenues: Print advertising 107,569 93,946 13,696 Online recruitment services 71,203 83,287 12,143 Executive search 4,676 3,158 460 Other human resource related revenues 26,497 38,354 5,592 Total revenues 209,945 218,745 31,891 Less: Business and related tax (10,775) (10,476) (1,527) Net revenues 199,170 208,269 30,364 Cost of services (Note 2) (84,076) (93,867) (13,685) Gross profit 115,094 114,402 16,679 Operating expenses: Sales and marketing (Note 3) (42,232) (52,208) (7,611) General and administrative (Note 4) (29,804) (31,927) (4,655) Total operating expenses (72,036) (84,135) (12,266) Income from operations 43,058 30,267 4,413 Loss from foreign currency translation (4,270) (6,564) (957) Interest and investment income 5,946 6,811 993 Other income (expense) 392 (220) (32) Income before provision for income tax 45,126 30,294 4,417 Income tax expense (14,095) (10,984) (1,602) Net income 31,031 19,310 2,815 Earnings per share: Basic 0.55 0.34 0.05 Diluted 0.55 0.34 0.05 Earnings per ADS (Note 5): Basic 1.10 0.68 0.10 Diluted 1.10 0.68 0.10 Weighted average number of common shares outstanding: Basic 56,206,580 56,576,628 56,576,628 Diluted 56,613,893 56,747,286 56,747,286 Notes: 1. The conversion of RMB amounts into USD amounts is based on the noon buying rate of USD1.00=RMB6.8591 on June 30, 2008 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. 2. Includes share-based compensation expense of RMB1,168 and RMB1,153 (US$168) for the three months ended June 30, 2007 and 2008, respectively. 3. Includes share-based compensation expense of RMB1,005 and RMB992 (US$145) for the three months ended June 30, 2007 and 2008, respectively. 4. Includes share-based compensation expense of RMB4,648 and RMB5,053 (US$737) for the three months ended June 30, 2007 and 2008, respectively. 5. Each ADS represents two common shares. 51job, Inc. Consolidated Statements of Operations For the Six Months Ended June 30, June 30, June 30, 2007 2008 2008 (In thousands, except number of shares and per share data) (unaudited)(unaudited) (unaudited) RMB RMB USD (Note 1) Revenues: Print advertising 221,126 216,372 31,545 Online recruitment services 132,788 161,717 23,577 Executive search 8,528 8,655 1,262 Other human resource related revenues 47,988 68,439 9,978 Total revenues 410,430 455,183 66,362 Less: Business and related tax (21,878) (22,816) (3,326) Net revenues 388,552 432,367 63,036 Cost of services (Note 2) (168,926) (193,163) (28,162) Gross profit 219,626 239,204 34,874 Operating expenses: Sales and marketing (Note 3) (76,008) (107,599) (15,687) General and administrative (Note 4) (58,719) (62,766) (9,151) Total operating expenses (134,727) (170,365) (24,838) Income from operations 84,899 68,839 10,036 Loss from foreign currency translation (7,037) (16,836) (2,455) Interest and investment income 11,396 13,056 1,904 Other income (expense) 370 (49) (7) Income before provision for income tax 89,628 65,010 9,478 Income tax expense (26,442) (23,451) (3,419) Net income 63,186 41,559 6,059 Earnings per share: Basic 1.12 0.73 0.11 Diluted 1.12 0.73 0.11 Earnings per ADS (Note 5): Basic 2.25 1.47 0.21 Diluted 2.23 1.47 0.21 Weighted average number of common shares outstanding: Basic 56,175,178 56,549,376 56,549,376 Diluted 56,583,148 56,724,423 56,724,423 Notes: 1. The conversion of RMB amounts into USD amounts is based on the noon buying rate of USD1.00=RMB6.8591 on June 30, 2008 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. 2. Includes share-based compensation expense of RMB2,352 and RMB2,162 (US$315) for the six months ended June 30, 2007 and 2008, respectively. 3. Includes share-based compensation expense of RMB2,022 and RMB1,860 (US$271) for the six months ended June 30, 2007 and 2008, respectively. 4. Includes share-based compensation expense of RMB9,835 and RMB9,475 (US$1,381) for the six months ended June 30, 2007 and 2008, respectively. 5. Each ADS represents two common shares. 51job, Inc. Reconciliation of GAAP and Non-GAAP Results For the Three Months Ended June 30, June 30, June 30, 2007 2008 2008 (In thousands, except number of shares and per share data) (unaudited)(unaudited) (unaudited) RMB RMB USD (Note 1) GAAP income before provision for income tax 45,126 30,294 4,417 Add back: Share-based compensation expense 6,821 7,198 1,050 Add back: Loss from foreign currency translation 4,270 6,564 957 Non-GAAP income before provision for income tax 56,217 44,056 6,424 Non-GAAP income tax expense (14,100) (10,992) (1,603) Non-GAAP adjusted net income 42,117 33,064 4,821 Non-GAAP adjusted earnings per share: Basic 0.75 0.58 0.08 Diluted 0.74 0.58 0.08 Non-GAAP adjusted earnings per ADS (Note 2): Basic 1.50 1.17 0.17 Diluted 1.49 1.17 0.17 Weighted average number of common shares outstanding: Basic 56,206,580 56,576,628 56,576,628 Diluted 56,613,893 56,747,286 56,747,286 For the Six Months Ended June 30, June 30, June 30, 2007 2008 2008 (In thousands, except number of shares and per share data) (unaudited)(unaudited) (unaudited) RMB RMB USD (Note 1) GAAP income before provision for income tax 89,628 65,010 9,478 Add back: Share-based compensation expense 14,209 13,497 1,967 Add back: Loss from foreign currency translation 7,037 16,836 2,455 Non-GAAP income before provision for income tax 110,874 95,343 13,900 Non-GAAP income tax expense (26,449) (23,464) (3,421) Non-GAAP adjusted net income 84,425 71,879 10,479 Non-GAAP adjusted earnings per share: Basic 1.50 1.27 0.19 Diluted 1.49 1.27 0.19 Non-GAAP adjusted earnings per ADS (Note 2): Basic 3.01 2.54 0.37 Diluted 2.98 2.53 0.37 Weighted average number of common shares outstanding: Basic 56,175,178 56,549,376 56,549,376 Diluted 56,583,148 56,724,423 56,724,423 Notes: 1. The conversion of RMB amounts into USD amounts is based on the noon buying rate of USD1.00=RMB6.8591 on June 30, 2008 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. 2. Each ADS represents two common shares. 51job, Inc. Consolidated Balance Sheets December 31, June 30, June 30, 2007 2008 2008 (In thousands, except number of shares) (audited) (unaudited) (unaudited) RMB RMB USD (Note 1) ASSETS Current assets: Cash 1,007,520 865,046 126,116 Short-term investments -- 175,600 25,601 Accounts receivable (net of allowance of RMB3,879 and RMB3,823 as of December 31, 2007 and June 30, 2008, respectively) 29,706 29,444 4,293 Prepayments and other current assets 33,132 60,915 8,881 Deferred tax assets, current 4,930 4,087 596 Total current assets 1,075,288 1,135,092 165,487 Long-term investments 8,788 7,983 1,164 Property and equipment 205,984 206,354 30,085 Intangible assets 6,869 5,718 834 Other long-term assets 5,031 5,175 754 Deferred tax assets, non-current 1,206 1,160 169 Total assets 1,303,166 1,361,482 198,493 LIABILITIES Current liabilities: Accounts payable 9,804 13,846 2,019 Salary and employee related accrual 29,064 18,850 2,748 Taxes payable 33,498 21,762 3,173 Advance from customers 75,535 98,095 14,301 Other payables and accruals 28,214 24,141 3,520 Total current liabilities 176,115 176,694 25,761 Deferred tax liabilities, non-current 516 682 99 Total liabilities 176,631 177,376 25,860 Shareholders' equity: Common shares (US$0.0001 par value; 500,000,000 shares authorized, 56,519,471 and 56,641,283 shares issued and outstanding as of December 31, 2007 and June 30, 2008, respectively) 47 47 7 Additional paid-in capital 894,019 909,636 132,617 Statutory reserves 5,991 5,991 874 Other comprehensive gain 680 1,075 157 Retained earnings 225,798 267,357 38,978 Total shareholders' equity 1,126,535 1,184,106 172,633 Total liabilities and shareholders' equity 1,303,166 1,361,482 198,493 Note 1: The conversion of RMB amounts into USD amounts is based on the noon buying rate of USD1.00=RMB6.8591 on June 30, 2008 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. For more information, please contact: Linda Chien Investor Relations 51job, Inc. Tel: +86-21-6879-6250 Email: investor.relations@51job.com

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