Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Linda Chien – VP and Head, IR

Rick Yan – CEO, President and Co-founder

Kathleen Chien – COO, Acting CFO and Co-founder

Analysts

Wendy Huang – RBS

Tim McHugh – William Blair

Alicia Yap – Barclays

Philip Wan – Morgan Stanley

Wallace Cheung – Credit Suisse

Dick Wei – JP Morgan

51job, Inc. (JOBS) Q4 2012 Earnings Call February 20, 2013 8:00 PM ET

Operator

Good morning, good evening, ladies and gentlemen. Thank you for holding. Welcome to the 51job, Inc. Fourth Quarter and Fiscal Year 2012 Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions. Instructions will be provided at that time.

(Operator Instructions)

I will now hand the conference over to Ms. Linda Chien, Vice President and Head of Investor Relations. Thank you, madam. Please go ahead.

Linda Chien

Thank you, Grace. And thank you all for attending this teleconference to discuss unaudited financial results for the fourth quarter and fiscal year ended December 31, 2012. With me for today’s call are Rick Yan, President and Chief Executive Officer; and Kathleen Chien, Chief Operating Officer and Acting Chief Financial Officer. A press release containing fourth quarter and full year 2012 results was issued earlier today and a copy may be obtained through our website at ir.51job.com.

Before we begin, I would like to remind you that during this call, statements regarding targets for the first quarter of 2013, future business and operating results constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectation and actual results could differ materially.

Among the factors that could cause actual results to differ, are the number of recruitment advertisements placed, sales orders received, and customer contracts executed during the remaining weeks of the first quarter of 2013; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the renminbi against the U.S. dollar and other currencies; behavioral and operational changes of customers in meeting their human resource needs as they respond to evolving social, economic and political changes in China as well as stock market volatilities; introduction by competitors of new or enhanced products or services; price competition in the market for the various human resource services that the company provides in China; acceptance of new products and services developed or introduced by the company outside of the human resources industry; and fluctuations in general economic conditions.

For additional information on these and other factors that may affect the company’s financial results, please refer to the Risk Factors section of the company’s filings with the Securities and Exchange Commission. 51job undertakes no obligation to update targets prior to announcing final results for the first quarter of 2013 or as a result of new information, future events or otherwise.

Also, I would like to remind you that during the course of this call, we may discuss non-GAAP measures. Reconciliation to the most directly comparable GAAP financial measures are provided in the table appended to the press release. This conference call is being broadcast on the Internet and is available through our website at ir.51job.com.

Now, I’ll turn the call over to Rick.

Rick Yan

Thank you, Linda and welcome to today’s call. I will begin with highlights for the fourth quarter and full year 2012, followed by Kathleen with a detailed presentation of our financial results. Then I will discuss current market conditions, our strategic objectives and guidance. Finally, we’ll open the call to your questions.

We were glad to see that hiring behavior and employer ended the year on a stable cause. Although the fourth quarter is a seasonally weak period for recruitment without that customer sentiment improved as more positive economic data as well as the on track political leadership transition gave enterprises some sense of relief.

As a result, we were pleased that fourth quarter revenues and non-GAAP EPS came in ahead of our guidance at RMB397 million and RMB2.30 respectively. For the full year 2012, our total revenues top RMB1.5 billion generating 10% growth during a year in which we absorb significant market volatility and the accelerated strategic exit and loss contribution of our print business.

We’re also proud to deliver to our shareholders record net income of RMB470 million in 2012. Good times or bad, achieving profitable growth and exercising financial discipline remain cornerstones of our management philosophy. Our online business closed the year with encouraging results with solid execution by the sales team, we saw a pick up in the growth rate of the online customer count. The number of unique employers increased 18% year-over-year in the fourth quarter, the fastest pace in 2012.

Although average revenue, although average spend per customer decreased compared to the year ago quarter, due to budget caution, which was pervasive for most of 2012, we continue to expand the customer base and engage employers of all types and sizes.

For the full year 2012, we provided online recruitment services to over 272,000 enterprises in China. As it has been since our inception, customer acquisition remains our foremost priority. The clear bright spot in the fourth quarter as well as for all 2012 was the strong performance in contribution of our other HR services area. These – and the services demonstrate a gain, the ability to withstand a challenging economic climate and maintain growth as they did during the financial crisis four years ago.

We are gaining customer acceptance and traction for these services reaffirming our confidence that we can capture enormous market potential that lies ahead. In addition, we believe the manner in which we’ve shared resources and integrated customer service between the other HR and recruitment areas uniquely positions us to take advantage of operational synergies and efficiency.

Finally, turning to our print business. We underwent a severe wind down in 2012, having the number of publications and reducing print contribution to 7% of total revenues. While we harbored some sentimental feelings that if the end of print is upon us. This managed exit enables us to focus on new opportunities in the Chinese HR market. This transition pays the way for new era in 51jobs development in 2013 and beyond.

I’ll now turn the call over to Kathleen for a detailed financial review.

Kathleen Chien

Thank you, Rick. Revenues for the fourth quarter totaled approximately RMB397 million representing a 7% increase over the same quarter in 2011. Our online revenues for the fourth quarter grew close to 10% year-over-year to RMB238 million primarily due to an increase in the volume of employers which were partially offset by the lower ARPU. Through solid sales efforts, the number of unique employers using our online services increased 18% year-over-year to more than 183,000 companies in the fourth quarter of 2012. However, on the ARPU front although the average spend per customer increased sequentially from the third quarter it decreased 7% in the fourth quarter on a year-over-year basis due to the uncertain economic climate and the spending caution in 2012.

In line with our ongoing strategic transition away from the print business, our print advertising revenues decreased 53% from the year ago quarter to RMB13 million. The number of print advertising pages in the fourth quarter of 2012 decreased 56% to approximately 380 pages compared with about 850 pages in the year ago quarter.

In November and December of 2012, we terminated the 51job Weekly publication in the cities of Shanghai and Ningbo respectively bringing the total number of current print cities down to seven. Although we expect a modest sequential rebound in print revenues in the first quarter due to seasonal demand in the post Chinese New Year period, we expect that print revenues will decrease approximately 50%, compared to the year ago quarter. Similarly, we expect that the contribution from the print business in the first quarter of 2013 as a percentage of total will be around half of what we had achieved in the first quarter of 2012, down to around 6%.

Other HR services maintain a healthy growth trajectory in 2012. Revenues for other HR services grew 17% to RMB147 million in the fourth quarter of 2012, primarily due to the increased demand and customer acceptance of our outsourcing services. The contribution of other HR services continue to increase and reach nearly 37% of total revenues, compared to 34% in the year ago quarter.

Our gross profit grew 7% to RMB269 million and gross margin was 78.6%, 55 basis points lower than the fourth quarter of 2011. Included in cost of services in the fourth quarter was higher share-based compensation expense in the amount of RMB2.1 million.

Our sales and marketing expenses decreased slightly year-over-year to approximately RMB97 million in the fourth quarter, primarily due to the lower advertising and promotion expenses, which were modestly offset by higher employee compensation expenses. Included in sales and marketing expenses was higher share-based compensation expense of RMB1.8 million in the fourth quarter.

G&A expenses for fourth quarter were RMB52 million, an increase of 28% from the year ago quarter due to higher employee compensation, rental and office expenses as well as bad debt provision. Share-based compensation expense included in G&A increased to nearly RMB10 million in the fourth quarter of 2012 compared with RMB7.7 million in the same quarter of the prior year.

Operating income for the fourth quarter of 2012 increased 7% year-over-year to RMB119 million. Operating margin was 31.4% compared with 31.8% in the same quarter of the prior year. But excluding share-based compensation expense, our operating margins was 35% relatively unchanged compared with the year ago quarter. Other income in the fourth quarter was more than RMB13 million, which was largely comprised of approximately RMB12 million in financial subsidy in RMB1.3 million and proceeds we received from the sale of a coupon advertising business we had invested in.

Net income for the fourth quarter increased 7% to RMB122 million compared with RMB114 million in the same quarter of 2011. Fully diluted earnings were RMB2.06 per common share, which is equivalent to US$0.66 per ADS. Excluding share-based compensation expense, the loss from foreign currency translation and the gain from the sale of the long-term investments and their related tax impact, our non-GAAP adjusted net income increased more than 8% year-over-year to RMB136 million in the fourth quarter. Our non-GAAP adjusted fully diluted earnings per common share were RMB2.3 or US$0.74 per ADS.

For the full year 2012, our total revenues increased 10% to RMB1.5 billion. Compared to the prior year, our online revenues increased more than 17% to RMB943 million comprising 62% of our total revenue. The number of unique employers for the full year 2012, increased 11% year-over-year to a total of over 272,000 companies.

In 2012, our print revenues decreased by nearly half to RMB105 million and represented just 7% of our total revenue. Our other HR services area grew 29% to RMB463 million and increased its contribution to 30% of total revenues in 2012.

Our growth margin in 2012, increased about 50 basis points to 72% driven primarily by the economies of scale. Our income from operation increased 10% to RMB485 million and net income increased more than 21% to RMB470 million in 2012.

Excluding, share based compensation expense loss from foreign currency translation and the loss from the impairment and gain from sale of long term investments as well as their related tax impacts, our non-GAAP adjusted net income increased 16% to RMB520 million in 2012. Our non-GAAP adjusted earnings per common share for 2012 was RMB8.75 or US$2.81 per ADS.

Moving on into our balance sheet. We generated very strong cash flow in the fourth quarter and throughout 2012, as our total cash and short-term investments increased to over RMB2.5 billion. This is approximately US$406 million and represents about US$14 per outstanding ADS.

During the fourth quarter, we also completed the acquisition of office space in a commercial building in Guangzhou. We paid a total purchase price of RMB95.8 million using our existing cash resources.

Now I’ll turn the call back over to Rick.

Rick Yan

Thank you, Kat. As I mentioned earlier, we found out 2012 concluded on a favorable note, as our conversations with customers took on a more positive plan. We believe that this improved tone has carried into the beginning of 2013. However, with year end and January being seasonally low – slow month for hiring, as well as a Chinese New Year holiday that end up only five days ago. We must admit that this initial assessment is based on fewer data points than usual.

With that said, encouraging customer feedback so far gives us optimism above a boost in recruitment activity and better market conditions this year. Enterprises are pre-poised to resume their growth and expansion plans, supported by stronger business covenants and economic sentiment.

Salary statistics also indicate that expectations for white color wage increase remain robust in the mid single digit, which we believe characterize a healthy recruitment market. As we await more color on hiring trends for the year, the emphasis of our time, resources and efforts is placed on the continued execution of our product development and sales strategies.

Our ongoing success hinges on staying current and relevant providing the most effective solutions to meet our customers changing HR needs. Our initiatives for 2013 are centered on further strengthening our position as the leading platform connecting employers and individuals in China. We are building on the momentum and solid progress achieve over the past 24 months on our mobile apps.

We have been consistently introducing upgrades every three to four months with new features that facilitate seamless integrated management of job seeker accounts between PC and mobile access. To date, there has been more than 6 million downloads of our apps and we are tremendously excited about the new possibilities we can develop to increase engagement with users.

On the sales front, we are pushing aggressively on customer acquisition into the over 100 geographies that we cover in China. In the next few months, we expect to take title to our new Wuhan facility, which will enable us to triple the capacity of our national customer service and call center over time. We feel confident that we are well positioned competitively to further consolidate our market leadership.

Turning now to our guidance. Please be aware that the Chinese New Year holiday fell 18 days later in 2013 versus last year, which represents a 20% delay in the 90 day quarter. As a result, we will capture less of the recruitment peak in the first quarter and more in the second quarter, relative to the same period in 2012, which will materially affect year-over-year comparisons.

In addition, we’re giving a wide guidance range than normal in the first quarter, given the limited data above the 2013 recommend peak available to us now. Based on current market conditions and also factoring in a significant decrease in print advertising revenues, our total revenue target for the first quarter of 2013 is in estimated range of RMB280 million to RMB400 million.

For the non-GAAP fully diluted EPS target, our estimated range is between RMB1.95 to RMB2.2 per common share. Please note that this non-GAAP EPS range does not include share-based compensation expense, gain or loss from foreign currency translation nor their related tax impact.

Total share-based compensation expense is expected to be between RMB13 million and RMB14 million for the first quarter. This guidance reflects our current forecast, which is subject to change. We are happy to usher out a volatile 2012 and welcome new opportunities in 2013. As we enter the year of the snake, it is fitting that 51job is shedding a layer of its own skin, leaving the print business behind us. In this our 15th year in operations, we maintain an urgency to innovate a new off. We believe our future prospects are brighter than ever.

Finally, before I open the floor to questions, I want to take a moment to thank our nearly 5,000 strong employees for their dedication and commitment year in and year out. I’m proud to work alongside each and every one of you.

That concludes our presentation. We’ll be happy to take your questions at this time, operator?

Question-and-Answer Session

Operator

Thank you. The first question comes from Wendy Huang. Please state your company name followed by your question.

Wendy Huang – RBS

My first question is related to your last comment on the year-over-year growth implied by the guidance. So, if I look at a high end guidance that implies only 5% year-over-year growth, so should be expect the year-over-year growth to pick-up dramatically in the rest of the year? Thank you.

Rick Yan

Wendy, I think in the first quarter obviously we have to factor in that we will continue to actually build a significant portion of revenues from the print business and that is actually more noticeable in terms of its impact in the first quarter, because that is typically the strongest quarter for the print business, so that is a reflection of that. And I think, we will continue to update everyone on what we see as we have more data for the year. And so I think that’s kind of where we stand at this point.

Wendy Huang – RBS

Okay. My second question is related to your HR especially the HR outsourcing business. So, while I look at the revenue contribution for this part of the business, it actually reached a historical high at 37%,I wonder how much of this was due to the strong seasonality of the campus recruitment and how much was due to the organic or sector growth of the HRO business.

Rick Yan

Typically, obviously in the fourth quarter that seasonality related campus recruitment, but we believe that actually outsourcing is a bigger driver of that growth this past year, I would say, because obviously I think the recruitment business was not as robust overall in 2012. So more of its growth is driven by the growth of the other HR including HRO.

Wendy Huang – RBS

Okay. How many HRO customers are you having now the number of city coverage?

Rick Yan

The number of customers is still in the thousands. So, that’s not something that you will see that we’ve gone to sort of a five-digit number yet because I think we have mentioned throughout the last few quarters, I think the focus now right now is to focus more on getting deeper in those accounts rather just spread to sort of smaller customers per say. But overall, I think well coverage is actually overall 100 cities already and that continues to expand.

Wendy Huang – RBS

Okay. Finally very quickly on the competitive environment, we have seen that the Monster.com is taking the ChinaHR while SEEK increased their stake in Zhaopin. So with one competitor getting weaker and one getting stronger, how will that change the competitive environment for 51job and affect your operation, and maybe if there is a marketing plan in the coming years?

Kathleen Chien

I guess I’ll give my comments and Rick will jump in also add to that. I think the China HR decline has been evident for several quarters now. So, I think the sale was not a surprise to anybody. But – so, I don’t think that really changes the competitive picture overall and I would not say necessarily that just because SEEK increased their holdings that makes our job being a stronger competitor, so I would probably refute that claim at this point in time. So I don’t actually think that again these are pretty much known factors, whether or not SEEK withholding 56% or 77%. It does only change how we compete with them. So I think that the base of this competition is largely unchanged for the most part and I think that we’re still running neck to neck, and the guy that we look at more obviously is just dropping in at this point in time, so that’s where we are. And, Rick can add to that.

So, yeah, that’s all we have, Wendy.

Wendy Huang – RBS

Okay. Thank you.

Operator

Thank you. (Operator Instructions) Next question comes from Mr. Tim McHugh. Please state your company name followed by your question.

Tim McHugh – William Blair

Yes, thank you. Tim McHugh with William Blair. I just want to ask first in terms of the seasonality or the impact of later Chinese New Year, is it fair to assume that the year-over-year growth rate will be higher than normal in the second quarter? I know you’re not guiding there, but I’m assuming the later New Year that means you wouldn’t see that revenue in Q1, we should see that in Q2?

Kathleen Chien

Yeah, directionally correct, yes, Tim.

Tim McHugh – William Blair

Okay. And the comments about the improved customer kind of sentiment, are you actually – I guess I want to understand that a little more, as you sense that it’s just a little bit more stable environment or are you sensing from customers that they actually are getting ready to kind of accelerate the pace of their hiring activity?

Rick Yan

I think the – we do have a lot of year-end customer events in the – across China. And in our discussion with customers I think people are feeling that the bottom of the slowdown of the Chinese economy is over, since quarter three of last year. So I think people are more positive about economic outlook. Also as we mentioned earlier on that the leadership transition has completed. I think people are more geared up to go to realize or implement the expansion plans. So I think I’d say that it is little better than just stable. We’re seeing that people are implementing the expansion plans.

Tim McHugh – William Blair

Okay, great. And, then just on the margins, the guidance for Q1 seems to imply a year-over-year decline. Can you – is that just the seasonal impact as well, that we’re seeing on margins from the later Chinese New Year or is there something else that explains it?

Rick Yan

I think that’s part of that and I think – again we’ll kind of go into a little bit of transitional upfront as we wind that down. So obviously with the total revenues not going as fast as normally we would like to see that will have some short-term impact on the margin. But I think our longer-term outlook did not changed.

Tim McHugh – William Blair

What is that – at this point from this margin structure, what is that longer-term kind of outlook. I guess margins were down slightly this past year, are we still in a position where you can continue to expand margins during the next few years?

Rick Yan

For last year actually if you take our share base compensation and sort of extraordinary items, if you will, I mean our margin structure was pretty stable overall I would say and to that in the course of the year we went to a lot of – our own transition with the print business. We also experienced a lower market demand environment if you will. So, I think that’s where we are, but we’ve always said that I think our margin improvement comes when we actually have good, strong revenue growth, the top line growth. So, I think that if we can return to a higher revenue growth profile, we do believe that there is room for us to continue to expand.

Tim McHugh – William Blair

Okay. And then just lastly the uses of cash, can you give us your updated thinking as you go into 2013 in terms of what your options are and how you’re prioritizing them?

Rick Yan

I think, obviously I don’t think our thinking overall has changed too much on that. I think there is opportunities for us to make investments through acquisition or what not that something that we will always keep as a top priority if we were to identify and we’re able to negotiate the right deal. Other than that I think we’ve also made some investments in just acquiring more office spaces for ourselves, for operational purposes in the fourth quarter that we completed the purchase in Guangzhou and in the first quarter of this year we’ll purchase and we’ll complete the purchase of the new building in Wuhan as well, but other than that I think we will be open minded and continue to review those options including other options that may make sense.

Tim McHugh – William Blair

Okay, great. Thank you.

Operator

Thank you. The next question comes from Alicia Yap. Please state your company name followed by your question.

Alicia Yap – Barclays

Hi. I’m from Barclays. Good morning Rick, Kathleen and Linda. Happy New Year and congratulation to another solid result. My first question is regarding your online recruitment business. Given that there is there is potential better sentiments around. So do you think that we will – we may have a chance to potentially adjust pricing later this year as demand picks up?

Rick Yan

Yeah, that’s an open question at this point because I think typically we don’t try to do anything in the first quarter because we want to have more data points and not disrupt the sales process with pricing changes during the peak periods when they’re very, very busy already with customers. So that’s something that will probably have more of a update for people in the second quarter and that’s when we will probably look at things if it makes sense at that point.

Alicia Yap – Barclays

I see good. And then the second question is on your other HR resources revenue line. So, this business as we know is already getting a very, very large contribution. I wonder if you get a sense how we can think about the opportunity for this business unit, if you can share the size of this market opportunity in China and also is it fair to assume that this business unit would ideally enjoy a relatively higher margins once you get to a certain scale longer term?

Rick Yan

I think our overall assessment when it comes to the outsourcing business, if you look across different countries across the world, the outsourcing business typically is a multi-time sort of market versus just recruitment if you will.

So, I think the overall potential longer term for this business is actually much more significant in our opinion. However, having said that, China is not very far along in its development and so if you look at our revenue profile, you can see that recruitment still has our total revenue situation and that – even with high growth rates from the outsourcing business, I mean it’s still 2 to 1 ratio between recruitment and all other HR services at this point in time.

But I think there is a sense that we get when we continue to engage with customers is that, people are always looking for ways to maybe specialize and outsource if you will, if possible as they get bigger, because I think there is efficiency that everyone is looking for. And so, I think that’s where we come in and we can play a good role to help the companies as they get bigger and better at their core business, but then we can actually help them provide some of these other services on the backend, which can help them manage and control their risks on the personnel side, but also be cost efficient if you will.

So I don’t think there is a hard data on how many people could actually be – actually working under this outsourced umbrella in China today yet. But it wouldn’t surprise me given the number of people in China overall that it would be hundreds of millions down the line, that could be actually covered under this kind of a service. So it’s early days yet and we’ll try to obviously share more data with people as the market landscape continues to develop more – and become more transparent, because right now I think – most of the competitors in this space are legacy players, which are stayed on enterprise or quasi-government entity. So there is not a lot of transparency in the data.

Alicia Yap – Barclays

I see, I see. And then just lastly, given your RMB400 million cash in the balance sheet, what is the plan for the use of cash and any potential – any kind of complimentary business acquisition target or maybe return the cash to the shareholders? Thank you.

Kathleen Chien

Yeah. As I’ve just also responded to Tim as well as yeah, I think – obviously I think we would prefer more as a investment approach to that and use of cash in terms of trying to scope and identify and negotiate opportunities to maybe look at expanding our businesses in a non-organic way if you will, so that definitely sort of a priority in terms of – or preference of how to utilize that cash. And, as I’ve also said – we’ve also spent some of that money to secure office spaces for the team for operational purpose going forward to make sure that we’re – has had a quick capacity and facilities to support our growth – the other- alternate could be – yeah we could at some point decide to also return or have alternatives that make sense. So I think it’s something that we’ll continue to review and look at depending on the market situation and – that’s where we are.

Alicia Yap – Barclays

Great. Thank you.

Rick Yan

Thank you, Alicia.

Operator

Thank you. Next question comes from Mr. Philip Wan. Please state your company name followed by your question.

Philip Wan – Morgan Stanley

Hi, good morning. This is Philip from Morgan Stanley.

Kathleen Chien

Hi, Phillips, good morning.

Linda Chien

Happy New Year.

Philip Wan – Morgan Stanley

Yeah, Happy New Year. I have two quick questions. Number one is about your selling and market expenses, for fourth quarter we did you see that some of our marketing continues to slow down in the quarter due to availability of parts in the New Year.

Rick Yan

Yes, good question, Phillip. Yes, I think we actually did because the Chinese New Year felt much later this year versus last year, that some of the events and activities actually got moved into January to some degree, yes.

Philip Wan – Morgan Stanley

Okay, thank you. And, then my second question is related to competition. I wonder if you could comment on the potential competition from social network between model, any feedback from the recruiters or jobseekers based on your observations that you can share with us?

Rick Yan

Yeah, Philip, I think we’ve been looking at the social network space for many years and although it is a growing phenomenon in the U.S. and maybe in certain European markets but we look at most of the major players in China and we have not found anyone with a meaningful traction.

At this stage, we still believe that there are some fundamental differences in the way people work and also in certain cultural behavior that we do not think that social networks will be a meaningful alternative to recruitment in China at least in the near term. We do have -we do take some of the features and functions in those social network surfaces and implement them under 51job that come in our website. We are constantly monitoring the development of different social networks and at this stage we are still at the monitoring stage. We have not decided to do anything yet and it has not been an impact to us at the customer end or even at the user end so far.

Kathleen Chien

Yeah, Philip, I’ll just add to that, I think even today when you look at the U.S. which is a much more developed market, I don’t think that it has to be a pure substitution. I think that there’re different segments or different customer groups that they could potentially be targeting, the job seeker demographic can also be somewhat different. So I do think that this is something we are going to monitor, but think at this point we do not see any impact really from these type of players in China.

Philip Wan – Morgan Stanley

All right. That’s very helpful. One other question, you mentioned that stabilization for improving outlook on the recruiting demand. I wonder if there is any particular industry doing better or seeing a more rapid discovery of the observation?

Linda Chien

Hey, Philip. This is interesting. We’ve been doing – this is our 15th year in operations and over the past decade when the economy is good, we see that all the industries are growing and increasing people demand and actually also across various geographies. So, same at this stage we have not seen any differences in industry or geographies in terms of demand growth.

Philip Wan – Morgan Stanley

All right. Thank you.

Operator

Thank you. (Operator Instructions). Your next question comes from Mr. Wallace Cheung. Please state your company name followed by your question.

Wallace Cheung – Credit Suisse

Hi, good morning. Thanks for taking my questions and as we are moving the whole Internet market obviously moving to get the mobile Internet space. So, the management discussed more about your mobile Internet strategy. Is it necessary to do that, do you see more of the customers using your 51job right now instead of the west side. In particular and 51job business model, which is still a little bit reliant on your positive approach is. So the migration into mobile Internet have any kind of impact on the future sort of platform cost part of it as well. Thank you.

Rick Yan

Well, I think for us, I don’t think that you have to be one or the other in terms of the how users actually use mobile to access the site versus the PC. We actually see that people actually use it a complimentary perspective because there would be certain types of information activity, they will prefer to use a PC to perform, for example including their personal data which they will have the biggest concern they will be able to see everything a little bit better whereas maybe for notifications and maybe once they’ve completed their resume, the application process can sometimes be done both on the PC as well as on the mobile.

So, I think that is more of a complimentary usage rather than one person to the other in terms of how our user use it. As Rick mentioned in his earlier comments, there is an over sort of 6 million downloads of our app to-date and we’re pleased to see that continues to grow very quickly. So that’s an encouraging sign, but again I don’t think that there is necessarily sort of substituting each other and they’re exclusive to each other, the way that people are using it. But fundamentally what we’re serving in terms of the demand from the employer side and the jobseeker side is unchanged. So I don’t think that today the mobile development will actually have any impact on mobile internet either.

Wallace Cheung – Credit Suisse

Thank you. Just two quick follow-ups. So from one, management view is that, I mean in your particular product assortment, we don’t see any potential particular sort of impact from the mobile Internet. On the other hand do you see that the percentage of the chance for mobile now is rising and what’s rough percentage of the traffic on the mobile, absolute mobile portal? Thank you.

Rick Yan

Mobile is still a small part of the total. So it’s rising obviously and you start from a very, very small base, so obviously it’s going to grow. But it’s still small and it’s not the predominant channel. I think, of course, you’re more experienced than I am, maybe – the others were, I think they have got 70%, 80% coming from mobile, but I mean this is not where we are. So we are probably still in the single digits.

Wallace Cheung – Credit Suisse

Okay. Thank you so much.

Rick Yan

Thanks, Wallace.

Operator

Thank you. The next question comes from Mr. Dick Wei. Please state your company name followed your question.

Dick Wei – JP Morgan

Hi. This is Dick Wei from JP Morgan. Good morning, Rick, Kathleen and Linda. Just a couple of questions to understand better your outsourcing business, I wondered how are you going to drive the business going down to the road. I wonder what are the typical employers you’re looking after, like how many employees do those employers you has, is that less than 50 or is it more like 100 people kind of range? And then also how should we be thinking about when you’re catering to these clients and how are we going into maybe the payroll processing or going to the benefits processing towards maybe you can describe how the process work? That would be great. Thank you.

Rick Yan

Thanks for the question Dick. Essentially for the outsourcing business, our primary focus is still on medium and larger size companies at this point in time because I think we feel that these are companies with staff in multiple geographies and that really plays to our strength as a national platform service provider. Typically these are companies that would have hundreds or thousands of employees. So they’re not going to be companies with like 10 people or 15 people. So that’s not really the focus of our customer base at this point. So does that answer your question fully?

Dick Wei – JP Morgan

Right. Just following that, what is kind of a typical services that you launch first.

Kathleen Chien

Yes.

Dick Wei – JP Morgan

And what that follows?

Kathleen Chien

Yeah, more people start actually with the benefits processing rather than payroll, because I think historically people are more sensitive about outsourcing payroll information because there are taxation issues related to payrolls as some companies prefer to keep in-house for the most part. So the hope that we kind of go into the account usually start with the benefits processing and that is the biggest part of what we do today in the outsourcing side.

Dick Wei – JP Morgan

Got it. And then lastly just, what is the current head count for that business for you guys and then also what is the just rough margin for that business? Thank you.

Kathleen Chien

Dick, I think we actually won many of our – all of our services kind of cross-multiple kind of business lines, so it’s more kind of somewhat opportunity to try to identify necessarily what our head count specifically belong to the outsourcing business per se. But I think that again because we won everything together we don’t actually breakout the margin profile among the business – different used because again that’s opportunely trying to allocate our costs between the units, so that’s where we are.

Dick Wei – JP Morgan

Sounds good. Thanks a lot, Kathleen.

Kathleen Chien

Thanks.

Operator

Thank you. The last question comes from Ms. Wendy Huang. Please state your company name followed by your question. Thank you.

Wendy Huang – RBS

Wendy from CIMB. Just I have some housekeeping questions. What’s your current average contract period for your online customers?

Kathleen Chien

I would say, if you look at the average that would not have changed. I would say that it is probably sort of three to four months, because we have a lot at the end, which is the one month and we have a lot at the other end, which is the 12 months. So, on average, I’d say it’s probably between three and four months.

Wendy Huang – RBS

Okay. So how many call center staff do you have now and what kind of business model they are handling?

Rick Yan

We have a few 100 people in the call center service and I didn’t get the second part of your question, Wendy.

Wendy Huang – RBS

Kind of the percentage of the business volume the call center is handling now?

Rick Yan

It’s still single percentage of revenue.

Wendy Huang – RBS

Okay. Lastly, I’m just curious, now you are cutting to only seven cities for the print business, so what are those remaining seven cities?

Rick Yan

Do you want a list of them?

Wendy Huang – RBS

Yeah.

Rick Yan

Yeah, you can actually see that on our website as well, but it’s actually Xian, Chengdu, Nanjing, Guangzhou, Shenzhen, Shenyang and that – which one that I just missed now. The Harbin, sorry, thank you.

Wendy Huang – RBS

Okay. Thank you very much.

Rick Yan

Thanks, Wendy.

Operator

Thank you. Mr. Yan, there are no further questions at this time. Please continue with any final comments. Thank you.

Rick Yan

Thank you for joining us today. We look forward to speaking with you next quarter and value your continued support of 51job. Bye, bye.

Operator

Ladies and gentlemen, this concludes the 51job, Inc. Fourth Quarter and Fiscal Year 2012 Conference Call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: 51job's CEO Discusses Q4 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts