51job, Inc. Reports Third Quarter 2018 Financial Results

SHANGHAI, Nov. 9, 2018 /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 third quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights:

• Total revenues increased 31.1% over Q3 2017 to RMB954.6 million (US$139.0 million), exceeding the Company's guidance range
• Online recruitment services revenues increased 33.0% over Q3 2017 to RMB649.3 million (US$94.5 million)
• Other human resource related revenues increased 27.2% over Q3 2017 to RMB305.4 million (US$44.5 million)
• Gross margin was 72.5% compared with 72.8% in Q3 2017
• Income from operations increased 34.6% over Q3 2017 to RMB270.5 million (US$39.4 million)
• Fully diluted earnings per share was RMB5.16 (US$0.75)
• 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 RMB5.09 (US$0.74), exceeding the Company's guidance range

Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, said, "Deploying a high-quality growth strategy by delivering the best to employers and job seekers, we are pleased to report another quarter of solid financial results.  In the third quarter, our online business again saw further improvement in average revenue per employer as we successfully drove greater spending by customers.  In the other HR services area, demand and usage continued to see good growth as employers sought more assistance and solutions to address talent management challenges.  With a broad portfolio of products and services, robust business fundamentals, and a long, proven track record of healthy, profitable operations, 51job remains confident and excited about the tremendous HR market opportunity in China."

Third Quarter 2018 Unaudited Financial Results

Total revenues for the third quarter ended September 30, 2018 were RMB954.6 million (US$139.0 million), an increase of 31.1% from RMB728.2 million for the same quarter in 2017.

Online recruitment services revenues for the third quarter of 2018 were RMB649.3 million (US$94.5 million), representing a 33.0% increase from RMB488.2 million for the same quarter of the prior year.  This growth was driven by higher average revenue per unique employer, which was partially offset by a decrease in the number of unique employers.  Average revenue per employer increased 38.6% in the third quarter of 2018 due to successful up-selling efforts that resulted in the purchase of multiple and/or higher value online products and services by customers, as well as price increases for select like-for-like products when compared with the same quarter in 2017.  In line with the strategic priority to focus more attention on higher potential employers, the Company has chosen to moderate new user additions and to terminate coverage of certain customer accounts in 2018, and therefore, the estimated number of unique employers decreased 4.1% to 365,386 in the third quarter of 2018 compared with 380,866 in the same quarter of the prior year.  The estimated number of unique employers in the third 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 third quarter of 2018 increased 27.2% to RMB305.4 million (US$44.5 million) from RMB240.0 million for the same quarter in 2017.  This increase was mainly due to greater usage and growth of business process outsourcing, training, assessment and placement services.

Gross profit for the third quarter of 2018 increased 30.6% to RMB684.7 million (US$99.7 million) from RMB524.2 million for the same quarter of the prior year.  Gross margin, which is gross profit as a percentage of net revenues, was 72.5% in the third quarter of 2018 compared with 72.8% for the same quarter in 2017.

Operating expenses for the third quarter of 2018 increased 28.1% to RMB414.1 million (US$60.3 million) from RMB323.3 million for the same quarter in 2017.  Sales and marketing expenses for the third quarter of 2018 increased 32.0% to RMB323.4 million (US$47.1 million) from RMB245.0 million for the same quarter of the prior year primarily due to higher employee compensation expenses, headcount additions, and greater advertising and promotion expenses.  General and administrative expenses for the third quarter of 2018 increased 16.0% to RMB90.8 million (US$13.2 million) from RMB78.2 million for the same quarter of the prior year primarily due to higher employee compensation, rent and office expenses.

Income from operations for the third quarter of 2018 increased 34.6% to RMB270.5 million (US$39.4 million) from RMB200.9 million for the third quarter of 2017.  Operating margin, which is income from operations as a percentage of net revenues, was 28.7% in the third quarter of 2018 compared with 27.9% for the same quarter in 2017.  Excluding share-based compensation expense, operating margin would have been 31.7% in the third quarter of 2018 compared with 31.1% for the same quarter in 2017.

The Company recognized a loss from foreign currency translation of RMB67.1 million (US$9.8 million) in the third quarter of 2018 compared with RMB2.2 million in the third 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 third quarter of 2018, the Company recognized a mark-to-market, non-cash gain of RMB548.6 million (US$79.9 million) associated with a change in fair value of convertible senior notes compared with a loss of RMB351.5 million in the third 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 third quarter of 2018 and its corresponding effect on the fair value of the convertible senior notes.

During the third quarter of 2018, the Company recognized a gain of RMB61.1 million (US$8.9 million) from the sale of shares in Shanghai Gaodun Education & Training Co., Ltd. ("Golden Finance").  The Company reduced its stake in Golden Finance from 15.0% to 12.7% as of September 30, 2018.

Net income attributable to 51job for the third quarter of 2018 was RMB785.4 million (US$114.4 million) compared with net loss of RMB(167.0) million for the same quarter in 2017.  Fully diluted earnings per share for the third quarter of 2018 was RMB5.16 (US$0.75) compared with loss per share of RMB(2.76) for the same quarter in 2017.

In the third quarter of 2018, total share-based compensation expense was RMB29.2 million (US$4.2 million) compared with RMB22.9 million in the third quarter of 2017.

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 net income attributable to 51job for the third quarter of 2018 increased 58.8% to RMB333.1 million (US$48.5 million) compared with RMB209.8 million for the third quarter of 2017.  Non-GAAP adjusted fully diluted earnings per share were RMB5.09 (US$0.74) in the third quarter of 2018 compared with RMB3.32 in the third quarter of 2017.

As of September 30, 2018, cash and short-term investments totaled RMB8,695.3 million (US$1,266.1 million) compared with RMB7,132.0 million as of December 31, 2017.

Business Outlook

Based on current market and operating conditions, the Company's total revenues target for the fourth quarter of 2018 is in the estimated range of RMB1,090 million to RMB1,120 million (US$158.7 million to US$163.1 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 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 fourth quarter of 2018 is in the estimated range of RMB4.45 to RMB4.75 (US$0.65 to US$0.69) per share. The Company expects total share-based compensation expense in the fourth quarter of 2018 to be in the estimated range of RMB30 million to RMB31 million (US$4.4 million to US$4.5 million).

Currency Convenience Translation

For the convenience of readers, certain Renminbi amounts have been translated into U.S. dollars at the rate of RMB6.8680 to US$1.00, the noon buying rate on September 28, 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 November 8, 2018 (9:00 a.m. Beijing / Hong Kong time zone on November 9, 2018) to discuss its third quarter 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, 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 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, 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, placement, 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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