This is a summary of the third quarter fiscal 2006 earnings call conducted by 51job Inc. (JOBS) on November 9, 2006
Management:
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President, Chief Executive Officer, Secretary, Director Rick Yan
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Chief Financial Officer, Senior Vice President Kathleen Chien
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Investor Relations Director Linda Chien
Key Investors Issues
- Total revenues increased 12.5% to RMB180.8 million (US$22.9 million), in line with the guidance range of RMB173 to RMB183 million
- Net income increased 59.0% to RMB27.1 million (US$3.4 million) from RMB17.0 million for the same period in 2005.
- The Company recognized a foreign currency translation loss of RMB3.1 million (US$0.4 million) compared with a translation loss of RMB10.6 million in 2005 resulting from an appreciation of the Renminbi against the U.S. dollar.
Third Quarter Highlights:
Total revenues were RMB180.8 million (US$22.9 million), an increase of 12.5% from RMB160.8 million for the same quarter in 2005.
- Print advertising revenues increased 5.7% to RMB98.4 million (US$12.4 million) compared with RMB93.1 million for the same quarter in 2005.
- Average revenue per page increased 2.3% over the third quarter of 2005 with online recruitment services revenues of RMB57.6 million (US$7.3 million), representing a 29.6% growth from RMB44.4 million last year due to growth in the number of employers using the Company''s online services.
- Executive search revenues decreased 22.7% to RMB4.9 million (US$0.6 million) from RMB6.3 million for the same quarter last year.
- Other human resource related revenues grew 18.2% to RMB20.0 million (US$2.5 million) from RMB16.9 million in the third quarter last year.
Gross profit was RMB96.0 million (US$12.1 million), representing an increase of 15.9% from RMB82.9 million for the same quarter last year.
- Gross margin was 56.2% compared with 54.7% in the same quarter in 2005 due to greater economies of scale and increased revenue contribution from the online services business, which were partially offset by higher share-based compensation expenses.
- Operating expenses were RMB65.2 million (US$8.2 million) compared with RMB53.0 million for the same period last year.
- Operating expenses as a percentage of net revenues was 38.2% compared with 35.0% for the third quarter of 2005. Excluding share-based compensation expenses, operating expenses as a percentage of net revenues was 34.5% compared with 32.8% for the third quarter of 2005.
- Sales and marketing expenses were RMB35.5 million (US$4.5 million) compared with RMB27.9 million in 2005 mainly due to an increase in employee salaries and benefits, higher advertising and promotion expenses, and greater share-based compensation expenses.
- General and administrative expenses increased to RMB29.6 million (US$3.7 million) from RMB25.1 million in the third quarter last year.
Income from operations was RMB30.8 million (US$3.9 million) compared with RMB29.8 million for the same period last year.
-The Company''s effective tax rate decreased to 20.4% from 31.7% in the third quarter of 2005 due to tax exemptions obtained for certain Company entities in China.
-Fully diluted earnings per common share were RMB0.48 (US$0.06) compared with RMB0.30 for the same quarter in 2005.
Earnings guidance for fourth quarter of 2006
- The Company''s revenue target is in the range of RMB165 to RMB175 million (US$20.9 to US$22.1 million).
- Excluding share-based compensation expense and any foreign currency translation losses or gains, the Company''s non-GAAP fully diluted earnings target is in the range of RMB0.40 to RMB0.50 per common share (US$0.10 to US$0.13 per ADS).
- The Company expects aggregate share-based compensation expense to be approximately RMB8 million.
Key questions and answers of the third quarter fiscal earnings call conducted by 51job, Inc. on November 9, 2006
Safa Rashtchy:
Can you tell us how much of the growth came from new customers and how much of it came from existing customers converting from the print segment to the online segment and if you are feeling any pricing pressure?
Kathleen Chien: With the coastal cities and some of the larger cities where Internet penetration is higher, there are more instances of customers coming directly into the online business for us, whereas in some of the smaller cities and inland cities, the conversion from print to online as a percentage of new customers is a larger percentage.
Rick Yan: In terms of the competitive landscape, we monitor that very closely for our internal tracking system. From all the operating metrics that we have, we have not seen any change in the competitive position.
Jason Brueschke:
About stepping up some of your sales and marketing investment, is there any progress?
Rick Yan: Chinese New Year is a peak season for us in the recruitment business. Every year around fourth quarter, we tend to increase or expand our sales team so that we have more capacity to serve customers in the period after Chinese New Year. In terms of customer penetration, yes, this year we are actually doing more projects.
Jason Brueschke:
Is your sales force split into people whose specific job is to go out and bring in absolute new customers and a group that are designed to service and win back customers?
Rick Yan Every day we track customers posting on competitor products. We will analyze whether that is an existing customer or it is a new customer, and immediately our sales team will go and follow-up. In terms of customer penetration, we prefer to have senior management, or sales management as well as senior management involved in terms of penetrating existing accounts.
Nate Swanson:
What is the online equivalent of a dollar of print advertising?
