51job, Inc. Reports Fourth Quarter and Fiscal Year 2019 Financial Results
SHANGHAI, March 16, 2020 – 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 2019 ended December 31, 2019.
Fiscal Year 2019 Financial Highlights:
Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, said, “Through disciplined execution of our strategic plan in a year of high economic uncertainty and tough market conditions, we are pleased to have maintained growth and delivered profitable returns in 2019. We continued to uplift average spending by employers on our many online recruitment platforms and to improve cross-selling of other HR services to the customer base. We also further expanded 51job’s HR ecosystem with more products, technologies and partners that we believe bring exciting new monetization opportunities and enhance our growth trajectory over the long term. Although the impact of the coronavirus outbreak has led to a disruptive start to 2020 and significantly affected current visibility, our solid business fundamentals and ample financial resources will enable us to navigate through this challenging period, and we will continue to push forward with initiatives that strengthen our competitiveness and leadership in the HR industry for the future.”
Fourth Quarter 2019 Unaudited Financial Results
Online recruitment services revenues for the fourth quarter of 2019 were RMB613.4 million (US$88.1 million), representing a 5.0% decrease from RMB646.0 million for the same quarter of the prior year. The decline was due to weak macroeconomic conditions and soft hiring demand in China in 2019. The estimated number of unique employers utilizing the Company’s online services decreased 13.1% to 298,462 in the fourth quarter of 2019 compared with 343,405 for the same quarter of the prior year, primarily due to reduced recruitment need or inactivity expressed by employers. However, average revenue per unique employer increased 9.3% in the fourth quarter of 2019 as compared with the same quarter in 2018, driven by the Company’s up-selling efforts and focus on sales opportunities with larger-sized customer accounts. The estimated number of unique employers in the fourth 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 fourth quarter of 2019 increased 10.0% to RMB522.2 million (US$75.0 million) from RMB474.6 million for the same quarter in 2018. 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 2019 was RMB757.5 million (US$108.8 million) compared with RMB778.9 million for the same quarter of the prior year. Gross margin, which is gross profit as a percentage of net revenues, was 66.7% in the fourth quarter of 2019 compared with 69.5% for the same quarter in 2018. The increase in cost of services was primarily due to higher employee compensation expenses, seasonal staff additions and greater offline costs, such as venue rental and event decoration, incurred in providing on-site campus recruitment services to employers in the fourth quarter of 2019.
Operating expenses for the fourth quarter of 2019 increased 2.5% to RMB362.2 million (US$52.0 million) from RMB353.4 million for the same quarter in 2018. Sales and marketing expenses for the fourth quarter of 2019 decreased 1.8% to RMB260.0 million (US$37.4 million) from RMB264.8 million for the same quarter of the prior year primarily due to a decrease in performance-based bonuses and selling expenses, which was partially offset by higher advertising expenses. General and administrative expenses for the fourth quarter of 2019 increased 15.3% to RMB102.1 million (US$14.7 million) from RMB88.6 million for the same quarter of the prior year primarily due to a larger provision for doubtful accounts and higher share-based compensation expense.
Income from operations for the fourth quarter of 2019 decreased 7.1% to RMB395.3 million (US$56.8 million) from RMB425.5 million for the fourth quarter of 2018. Operating margin, which is income from operations as a percentage of net revenues, was 34.8% in the fourth quarter of 2019 compared with 38.0% for the same quarter in 2018. Excluding share-based compensation expense, operating margin would have been 37.8% in the fourth quarter of 2019 compared with 40.5% for the same quarter in 2018.
The Company recognized a loss from foreign currency translation of RMB5.8 million (US$0.8 million) in the fourth quarter of 2019 compared with RMB0.8 million in the fourth 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.
In the fourth quarter of 2019, the Company recognized a mark-to-market, non-cash loss of RMB42.4 million (US$6.1 million) associated with a change in fair value of equity securities investment in Huali University Group Limited, which completed an initial public offering in November 2019 and is traded on the Hong Kong Stock Exchange.
In the fourth quarter of 2019, the Company assessed and determined that the business prospects and value of its investment in a provider of on-demand work opportunities warranted an impairment. The Company recorded an impairment amount of RMB98.3 million (US$14.1 million).
Other income in the fourth quarter of 2019 included local government financial subsidies of RMB7.5 million (US$1.1 million) compared with RMB17.9 million in the fourth quarter of 2018.
Net income attributable to 51job for the fourth quarter of 2019 was RMB249.5 million (US$35.8 million) compared with RMB856.3 million for the same quarter in 2018. Fully diluted earnings per share for the fourth quarter of 2019 was RMB3.67 (US$0.53) compared with RMB6.22 for the same quarter in 2018.
In the fourth quarter of 2019, total share-based compensation expense was RMB34.1 million (US$4.9 million) compared with RMB27.9 million in the fourth quarter of 2018.
Excluding share-based compensation expense, loss from foreign currency translation, changes in fair value of equity securities investment and convertible senior notes, and impairment of long-term investments, as well as the related tax effect of these items, non-GAAP adjusted net income attributable to 51job for the fourth quarter of 2019 was RMB430.1 million (US$61.8 million) compared with RMB436.1 million for the fourth quarter of 2018. Non-GAAP adjusted fully diluted earnings per share was RMB6.33 (US$0.91) in the fourth quarter of 2019 compared with RMB6.67 in the fourth quarter of 2018.
Online recruitment services revenues in 2019 were RMB2,471.2 million (US$355.0 million), representing a 1.6% increase from RMB2,431.9 million in 2018. Average revenue per unique employer increased 16.7% in 2019 primarily due to successful up-selling efforts that resulted in greater spending by larger-sized customer accounts. Due to weak macroeconomic conditions in China as well as the Company’s strategic decision to focus on higher potential employers, moderate new user additions and terminate coverage of certain smaller-sized customer accounts in 2019, the estimated number of unique employers using the Company’s online recruitment services decreased 12.9% to 422,458 in 2019 from 485,008 in 2018. 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 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 in 2019 grew 13.2% to RMB1,528.8 million (US$219.6 million) from RMB1,350.0 million in 2018, primarily due to greater customer adoption of business process outsourcing, training, assessment and campus recruitment services.
Income from operations in 2019 increased 4.8% to RMB1,205.8 million (US$173.2 million) from RMB1,150.2 million in 2018. Operating margin was 30.1% in 2019 compared with 30.4% in 2018. Excluding share-based compensation expense, operating margin would have been 33.3% in 2019 compared with 33.2% in 2018.
Net income attributable to 51job in 2019 was RMB532.3 million (US$76.5 million) compared with RMB1,252.3 million in 2018. Fully diluted earnings per share in 2019 was RMB7.98 (US$1.15) compared with RMB19.82 in 2018.
Excluding share-based compensation expense, gain/loss from foreign currency translation, changes in fair value of equity securities investment and convertible senior notes, and impairment of long-term investments, as well as the related tax effect of these items, non-GAAP adjusted net income attributable to 51job in 2019 increased 8.2% to RMB1,483.3 million (US$213.1 million) from RMB1,370.5 million in 2018. Non-GAAP adjusted fully diluted earnings per share was RMB22.24 (US$3.19) in 2019 compared with RMB20.94 in 2018.
As of December 31, 2019, cash and short-term investments totaled RMB9,940.6 million (US$1,427.9 million) compared with RMB8,834.2 million as of December 31, 2018.
The call will also be available live and on replay through 51job’s investor relations website, http://ir.51job.com.
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, including the impact of the coronavirus. 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.