51job, Inc. Reports Second Quarter 2019 Financial Results

SHANGHAI, Aug. 6, 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 second quarter of 2019 ended June 30, 2019.

Second Quarter 2019 Financial Highlights:

• Net revenues increased 7.6% over Q2 2018 to RMB963.6 million (US$140.4 million)
• Online recruitment services revenues increased 3.8%
• Other human resource related revenues increased 14.8%
• Gross margin was 70.1% compared with 71.6% in Q2 2018
• Income from operations increased 23.9% over Q2 2018 to RMB270.2 million (US$39.4 million)
• Operating margin was 28.0% compared with 24.4% in Q2 2018
• Fully diluted earnings per share was RMB1.00 (US$0.15)
• Excluding share-based compensation expense, gain 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 RMB5.90 (US$0.86)

Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, said, "We continue to face tough market conditions in 2019 as economic uncertainty has weighed on companies in China. With employers being cautious on spending and highly selective in adding headcount during this business cycle, we have seen a slowdown in recruitment activity which has affected the growth of our online business. In the other HR services area, there has been some resiliency as our HR outsourcing business is making progress after operational adjustments stemming from the implementation of new tax and social insurance regulations earlier this year. Despite soft demand, we are executing our strategic plan with efficiency and cost effectiveness, which enabled us to maintain solid margins and profitability in the second quarter. With proven focus, discipline and experience, we are managing through current market challenges while continuing to invest, innovate and incubate new HR products and services that will drive 51job's growth and development over the long term."

Second Quarter 2019 Unaudited Financial Results

Net revenues for the second quarter ended June 30, 2019 were RM963.6 million (US$140.4 million), an increase of 7.6% from RMB895.5 million for the same quarter in 2018.

Online recruitment services revenues for the second quarter of 2019 were RMB611.0 million (US$89.0 million), representing a 3.8% increase from RMB588.4 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 20.0% in the second quarter of 2019 as compared with the same quarter in 2018, due to 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 and moderate new user additions, the estimated number of unique employers decreased 13.5% to 326,996 in the second quarter of 2019 compared with 377,831 for the same quarter of the prior year. The estimated number of unique employers in the second quarter of 2019 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 second quarter of 2019 increased 14.8% to RMB352.6 million (US$51.4 million) from RMB307.1 million for the same quarter in 2018. The increase was primarily due to greater usage and growth of business process outsourcing, training and assessment services.

Gross profit for the second quarter of 2018 increased 5.4% to RMB675.9 million (US$98.5 million) from RMB641.0 million for the same quarter of the prior year. Gross margin, which is gross profit as a percentage of net revenues, was 70.1% in the second quarter of 2019 compared with 71.6% for the same quarter in 2018 due to higher employee compensation expenses.

Operating expenses for the second quarter of 2019 decreased 4.1% to RMB405.6 million (US$59.1 million) from RMB422.9 million for the same quarter in 2018. Sales and marketing expenses for the second quarter of 2019 decreased 6.1% to RMB313.7 million (US$45.7 million) from RMB334.2 million for the same quarter of the prior year primarily due to lower advertising expenditures, performance-based bonuses and selling expenses, which was partially offset by higher employee salaries and social insurance payments. General and administrative expenses for the second quarter of 2019 increased 3.7% to RMB92.0 million (US$13.4 million) from RMB88.7 million for the same quarter of the prior year primarily due to higher employee compensation expenses, which was partially offset by lower office expenses.

Income from operations for the second quarter of 2019 increased 23.9% to RMB270.2 million (US$39.4 million) from RMB218.1 million for the second quarter of 2018. Operating margin, which is income from operations as a percentage of net revenues, was 28.0% in the second quarter of 2019 compared with 24.4% for the same quarter in 2018. Excluding share-based compensation expense, operating margin would have been 30.9% in the second quarter of 2019 compared with 27.2% for the same quarter in 2018.

The Company recognized a gain from foreign currency translation of RMB28.6 million (US$4.2 million) in the second quarter of 2019 compared with a loss of RMB80.8 million in the second quarter of 2018 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.

In the second quarter of 2019, the Company recognized a mark-to-market, non-cash loss of RMB333.3 million (US$48.5 million) associated with a change in fair value of convertible senior notes compared with RMB309.3 million in the second quarter of 2018. On April 15, 2019, the convertible senior notes matured and the principal amount of US$172.5 million was converted into 4,035,664 shares.

Other income in the second quarter of 2019 included local government financial subsidies of RMB123.1 million (US$17.9 million) compared with RMB154.0 million in the second quarter of 2018.

Net income attributable to 51job for the second quarter of 2019 was RMB67.4 million (US$9.8 million) compared with net loss of RMB(56.6) million for the same quarter in 2018. Fully diluted earnings per share for the second quarter of 2019 were RMB1.00 (US$0.15) compared with loss per share of RMB(0.92) for the same quarter in 2018.

In the second quarter of 2019, total share-based compensation expense was RMB28.0 million (US$4.1 million) compared with RMB25.1 million in the second quarter of 2018.

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 second quarter of 2019 increased 11.5% to RMB400.1 million (US$58.3 million) compared with RMB358.7 million for the second quarter of 2018. Non-GAAP adjusted fully diluted earnings per share were RMB5.90 (US$0.86) in the second quarter of 2019 compared with RMB5.43 in the second quarter of 2018.

As of June 30, 2019, cash and short-term investments totaled RMB9,756.7 million (US$1,421.2 million) compared with RMB8,834.2 million as of December 31, 2018.

Business Outlook

Based on current market and operating conditions, the Company's net revenues target for the third quarter of 2019 is in the estimated range of RMB915 million to RMB955 million (US$133.3 million to US$139.1 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. 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. Excluding share-based compensation expense and any gain or loss from foreign currency translation, as well as the related tax effect of these items, the Company's non-GAAP fully diluted earnings target for the third quarter of 2019 is in the estimated range of RMB4.00 to RMB4.30 (US$0.58 to US$0.63) per share. The Company expects total share-based compensation expense in the third quarter of 2019 to be in the estimated range of RMB32 million to RMB33 million (US$4.7 million to US$4.8 million).

Presentation and Reclassification of Government Surcharges

Beginning January 1, 2019, the Company's presentation of government surcharges has changed, and government surcharges have been included in cost of services. The prior year's amount of government surcharges has been reclassified to conform with the current year's presentation. This reclassification had no effect on the reported results in the consolidated statements of operations and comprehensive income.

Currency Convenience Translation

For the convenience of readers, certain Renminbi amounts have been translated into U.S. dollar amounts at the rate of RMB6.8650 to US$1.00, the noon buying rate on June 28, 2019 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 9:00 p.m. Eastern Time on August 5, 2019 (9:00 a.m. Beijing / Hong Kong time zone on August 6, 2019) to discuss its second quarter 2019 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 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, http://www.lagou.com, and http://www.51mdd.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, campus recruitment, executive search and compensation analysis. 51job has a call center in Wuhan and a nationwide network of sales and service locations spanning 37 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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