51job, Inc. Reports Fourth Quarter and Fiscal Year 2018 Financial Results

SHANGHAI, March 1, 2019 /PRNewswire/ --51job, Inc. (Nasdaq: JOBS) ("51job" or the "Company"), a leading provider of integrated human resource services in China, announced today its unaudited financial results for the fourth quarter and fiscal year of 2018 ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights:

• Total revenues increased 28.5% over Q4 2017 to RMB1,120.5 million (US$163.0 million), at the top of the Company's guidance range
• Online recruitment services revenues increased 24.4%
• Other human resource related revenues increased 34.6%
• Gross margin was 70.3% compared with 73.3% in Q4 2017
• Operating margin was 38.4% compared with 36.8% in Q4 2017
• Income from operations increased 34.1% over Q4 2017 to RMB425.5 million (US$61.9 million)
• Fully diluted earnings per share were RMB6.22 (US$0.90)
• Excluding share-based compensation expense, loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items, non-GAAP adjusted fully diluted earnings per share were RMB6.67 (US$0.97), exceeding the Company's guidance range

Fiscal Year 2018 Financial Highlights:

• Total revenues increased 31.3% over 2017 to RMB3,781.9 million (US$550.1 million)
• Gross margin was 72.2% compared with 73.2% in 2017
• Operating margin was 30.8% compared with 30.6% in 2017
• Income from operations increased 32.1% over 2017 to RMB1,150.2 million (US$167.3 million)
• Fully diluted earnings per share were RMB19.82 (US$2.88)
• Excluding share-based compensation expense, loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items, non-GAAP adjusted fully diluted earnings per share were RMB20.94 (US$3.05)
• Cash and short-term investments totaled RMB8,834.2 million (US$1,284.9 million) as of December 31, 2018

Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, said, "We are very proud to have celebrated our 20th anniversary by delivering robust financial results to our shareholders in 2018. Our online business demonstrated strong growth with progress in ARPU improvement due to greater usage and spending by employers for our ever expanding array of products and platforms. The other HR services area also performed well as we elevated cross-promotion efforts, gained customer acceptance and drove uptake of these value-added services. For 2019, we will stay focused on executing our high quality growth strategy, emphasizing deeper engagements with employers and capturing opportunities across the entire spectrum of HR needs in China."

Fourth Quarter 2018 Unaudited Financial Results

Total revenues for the fourth quarter ended December 31, 2018 were RMB1,120.5 million (US$163.0 million), an increase of 28.5% from RMB872.1 million for the same quarter in 2017.

Online recruitment services revenues for the fourth quarter of 2018 were RMB646.0 million (US$94.0 million), representing a 24.4% increase from RMB519.4 million for the same quarter of the prior year. The growth was driven by higher revenue per unique employer, which was partially offset by a decrease in the number of unique employers utilizing the Company's online services. Average revenue per unique employer increased 34.3% in the fourth quarter of 2018 as compared with the same quarter in 2017, due to successful up-selling efforts that resulted in the purchase of multiple and/or higher value online products and services as well as the Company's continued reallocation of sales resources away from smaller sized customer accounts. In line with the Company's strategic priority to focus more attention on higher potential employers, moderate new user additions and terminate coverage of certain customer accounts in 2018, the estimated number of unique employers decreased 7.4% to 343,405 in the fourth quarter of 2018 compared with 370,746 for the same quarter of the prior year. The estimated number of unique employers in the fourth quarter of 2018 reflects those employers currently assigned a unique identification number in the Company's management information systems and does not include employers utilizing Lagou.com.

Other human resource related revenues for the fourth quarter of 2018 increased 34.6% to RMB474.6 million (US$69.0 million) from RMB352.7 million for the same quarter in 2017. The increase was primarily due to greater usage and growth of seasonal campus recruitment, business process outsourcing, training and assessment services.

Gross profit for the fourth quarter of 2018 increased 23.0% to RMB778.9 million (US$113.3 million) from RMB633.0 million for the same quarter of the prior year. Gross margin, which is gross profit as a percentage of net revenues, was 70.3% in the fourth quarter of 2018 compared with 73.3% for the same quarter in 2017 due to higher employee compensation expenses as well as a greater portion of additional offline costs, such as venue rental and event decoration, incurred in providing on-site campus recruitment services to employers in the fourth quarter of 2018.

Operating expenses for the fourth quarter of 2018 increased 11.9% to RMB353.4 million (US$51.4 million) from RMB315.7 million for the same quarter in 2017. Sales and marketing expenses for the fourth quarter of 2018 increased 10.5% to RMB264.8 million (US$38.5 million) from RMB239.6 million for the same quarter of the prior year primarily due to higher employee compensation expenses, headcount additions and greater advertising expenses. General and administrative expenses for the fourth quarter of 2018 increased 16.5% to RMB88.6 million (US$12.9 million) from RMB76.1 million for the same quarter of the prior year primarily due to higher employee compensation and office expenses.

Income from operations for the fourth quarter of 2018 increased 34.1% to RMB425.5 million (US$61.9 million) from RMB317.3 million for the fourth quarter of 2017. Operating margin, which is income from operations as a percentage of net revenues, was 38.4% in the fourth quarter of 2018 compared with 36.8% for the same quarter in 2017. Excluding share-based compensation expense, operating margin would have been 40.9% in the fourth quarter of 2018 compared with 39.2% for the same quarter in 2017.

The Company recognized a loss from foreign currency translation of RMB0.8 million (US$0.1 million) in the fourth quarter of 2018 compared with a gain of RMB7.7 million in the fourth quarter of 2017 primarily due to the impact of the change in exchange rate between the Renminbi and the U.S. dollar on the Company's U.S. dollar cash deposits and U.S. dollar-denominated convertible senior notes issued in 2014.

In the fourth quarter of 2018, the Company recognized a mark-to-market, non-cash gain of RMB448.9 million (US$65.3 million) associated with a change in fair value of convertible senior notes compared with a loss of RMB4.8 million in the fourth quarter of 2017. The large non-cash gain was a result of the significant change in the price of the Company's American Depositary Shares traded on the Nasdaq Global Select Market during the fourth quarter of 2018 and its corresponding effect on the fair value of the convertible senior notes.

Other income in the fourth quarter of 2018 included local government financial subsidies of RMB17.9 million (US$2.6 million) compared with RMB11.5 million in the fourth quarter of 2017.

Net income attributable to 51job for the fourth quarter of 2018 was RMB856.3 million (US$124.5 million) compared with RMB305.4 million for the same quarter in 2017. Fully diluted earnings per share for the fourth quarter of 2018 were RMB6.22 (US$0.90) compared with RMB4.42 for the same quarter in 2017.

In the fourth quarter of 2018, total share-based compensation expense was RMB27.9 million (US$4.1 million) compared with RMB21.1 million in the fourth quarter of 2017.

Excluding share-based compensation expense, gain/loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items, non-GAAP adjusted net income attributable to 51job for the fourth quarter of 2018 increased 34.8% to RMB436.1 million (US$63.4 million) compared with RMB323.4 million for the fourth quarter of 2017. Non-GAAP adjusted fully diluted earnings per share were RMB6.67 (US$0.97) in the fourth quarter of 2018 compared with RMB5.01 in the fourth quarter of 2017.

Fiscal Year 2018 Unaudited Financial Results

Total revenues in 2018 were RMB3,781.9 million (US$550.1 million), an increase of 31.3% from RMB2,881.2 million in 2017.

Online recruitment services revenues in 2018 were RMB2,431.9 million (US$353.7 million), representing a 29.9% increase from RMB1,871.7 million in 2017. Average revenue per unique employer increased 39.1% in 2018 primarily due to successful up-selling efforts that resulted in greater spending by customers as well as price increases on select online products and packages in 2018. In line with the Company's strategic priority to focus more attention on higher potential employers, moderate new user additions and terminate coverage of certain customer accounts in 2018, the estimated number of unique employers using the Company's online recruitment services decreased 6.6% to 485,008 in 2018 from 519,257 in 2017. An employer who purchases online services multiple times or in multiple quarters throughout the fiscal year is counted as one unique employer for the annual total. The estimated number of unique employers in 2018 reflects those employers currently assigned a unique identification number in the Company's management information systems and does not include employers utilizing Lagou.com.

Other human resource related revenues in 2018 grew 33.7% to RMB1,350.0 million (US$196.4 million) from RMB1,009.5 million in 2017.

Income from operations in 2018 increased 32.1% to RMB1,150.2 million (US$167.3 million) from RMB870.8 million in 2017. Operating margin was 30.8% in 2018 compared with 30.6% in 2017. Excluding share-based compensation expense, operating margin would have been 33.6% in 2018, similar to 2017.

Net income attributable to 51job in 2018 was RMB1,252.3 million (US$182.1 million) compared with RMB371.9 million in 2017. Fully diluted earnings per share in 2018 were RMB19.82 (US$2.88) compared with RMB6.08 in 2017.

Excluding share-based compensation expense, gain/loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items, non-GAAP adjusted net income attributable to 51job in 2018 increased 44.2% to RMB1,370.5 million (US$199.3 million) from RMB950.3 million in 2017. Non-GAAP adjusted fully diluted earnings per share were RMB20.94 (US$3.05) in 2018 compared with RMB15.16 in 2017.

As of December 31, 2018, cash and short-term investments totaled RMB8,834.2 million (US$1,284.9 million) compared with RMB7,132.0 million as of December 31, 2017.

Business Outlook

Based on current market conditions and factoring in seasonality related to the Chinese New Year holiday in 2019, the Company's total revenues target for the first quarter of 2019 is in the estimated range of RMB935 million to RMB975 million (US$136.0 million to US$141.8 million). Guidance for earnings per share is provided on a non-GAAP basis due to the inherent difficulty in forecasting the future impact of certain items, such as gain/loss from foreign currency translation and change in fair value of convertible senior notes. The Company is not able to provide a reconciliation of these non-GAAP items to expected reported GAAP earnings per share, without unreasonable efforts, due to the unknown effect and potential significance of such future impact and changes. Excluding share-based compensation expense, any gain or loss from foreign currency translation, and any mark-to-market gain or loss associated with a change in fair value of convertible senior notes, as well as the related tax effect of these items, the Company's non-GAAP fully diluted earnings target for the first quarter of 2019 is in the estimated range of RMB4.25 to RMB4.55 (US$0.62 to US$0.66) per share. The Company expects total share-based compensation expense in the first quarter of 2019 to be in the estimated range of RMB31 million to RMB32 million (US$4.5 million to US$4.7 million).

Currency Convenience Translation

For the convenience of readers, certain Renminbi amounts have been translated into U.S. dollar amounts at the rate of RMB6.8755 to US$1.00, the noon buying rate on December 31, 2018 in New York for cable transfers of Renminbi as set forth in the H.10 weekly statistical release of the Federal Reserve Board.

Conference Call Information

The Company's management will hold a conference call at 8:00 p.m. Eastern Time on February 28, 2019 (9:00 a.m. Beijing / Hong Kong time zone on March 1, 2019) to discuss its fourth quarter and fiscal year 2018 financial results, operating performance and business outlook. To dial in to the call, please use the following telephone numbers:

The call will also be available live and on replay through 51job's investor relations website, http://ir.51job.com.

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 financial measures of income before income tax expense, income tax expense, adjusted net income, adjusted net income attributable to 51job and adjusted earnings per share, which are adjusted from results based on GAAP to exclude share-based compensation expense, gain/loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items. The Company believes excluding share-based compensation expense and its related tax effect 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 gain/loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect, from its non-GAAP financial measures is useful for its management and investors as such translation or mark-to-market gain/loss is not indicative of 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 financial measures excluding share-based compensation expense, gain/loss from foreign currency translation and change in fair value of convertible senior notes, as well as the related tax effect of these items, 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

Founded in 1998, 51job is a leading provider of integrated human resource services in China. With a comprehensive suite of HR solutions, 51job meets the needs of enterprises and job seekers through the entire talent management cycle, from initial recruitment to employee retention and career development. The Company's main online recruitment platforms (http://www.51job.com, http://www.yingjiesheng.com, http://www.51jingying.com, and http://www.lagou.com), as well as mobile applications, connect millions of people with employment opportunities every day. 51job also provides a number of other value-added HR services, including business process outsourcing, training, professional assessment, executive search and compensation analysis. 51job has a call center in Wuhan and a nationwide sales office network spanning 25 cities across China.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "targets, "confident" and similar statements. Among other things, statements that are not historical facts, including statements about 51job's beliefs and expectations, the business outlook and quotations from management in this announcement, as well as 51job's strategic and operational plans, are or contain forward-looking statements. 51job may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. All forward-looking statements are based upon management's expectations at the time of the statements and 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: execution of 51job's strategies and business plans; behavioral and operational changes of enterprises in meeting their human resource needs as they respond to evolving social, political, regulatory and financial conditions in China; introduction by competitors of new or enhanced products or services; price competition in the market for the various human resource services that 51job provides in China; acceptance of new products and services developed or introduced by 51job outside of the human resources industry; risks related to acquisitions or investments 51job has made or will make in the future; accounting adjustments that may occur during the quarterly or annual close or auditing process; fluctuations in the value of the Renminbi against the U.S. dollar and other currencies; and fluctuations in general economic and business conditions in China. Further information regarding these and other risks are included in 51job's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release and based on assumptions that 51job believes to be reasonable as of this date, and 51job undertakes no obligation to update any forward-looking statement, except as required under applicable law.

Contact:
Linda Chien
Investor Relations
51job, Inc.
+86-21-6879-6250
ir@51job.com

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