51job Incorporated Q2 2010 Earnings Call Transcript

Aug. 7.10 | About: 51job, Inc. (JOBS)

51job Incorporated (NASDAQ:JOBS)

Q2 2010 Earnings Call

August 5, 2010 9:00 pm ET

Executives

Linda Chien - Assistant VP, IR

Rick Yan - CEO

Kathleen Chien - COO and Acting CFO

Analysts

Alicia Yap - Citigroup

Wendy Huang - ABN AMRO

Jenny Wu - Morgan Stanley

Ashish Thadhani - Gilford Securities

Operator

Good afternoon, ladies and gentlemen. Welcome to the 51job Incorporated second quarter 2010 conference call. (Operator Instructions)

I will now hand the conference over to Ms. Linda Chien, Assistant Vice President of Investor Relations.

Linda Chien

Thank you, Maggie, and thank you all for attending this teleconference to discuss unaudited financial results for the second quarter ended June 30, 2010.

With me for today's call are Chief Executive Officer, Rick Yan; and Chief Operating Officer and Acting Chief Financial Officer, Kathleen Chien.

A press release containing second quarter 2010 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 third quarter of 2010, future business, and operating results constitute forward-looking statements within the meaning of section 21-E 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 expectations, 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 third quarter of 2010; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the renminbi against the U.S. dollar and other currency; 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 third quarter of 2010 or as a result of new information, future events, or otherwise.

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 of the second quarter, followed by Kathleen with a more detailed review of our financial results. Then I will discuss current market conditions, as well as our strategic objectives and guidance for the third quarter of 2010. Finally, we will open the call to your questions.

Building off a strong post-Chinese New Year period in the first quarter, employers remained very active in their hiring efforts during the second quarter. As a result, our second quarter results exceeded expectations with revenues of RMB262 million or approximately US$39 million, ahead of our forecasted range of RMB250 million to RMB260 million.

An obvious highlight of the quarter was the terrific performance of our online business. This business achieved record revenues of RMB135 million, an increase of 74% over the second quarter of 2009, and 23% over the first quarter of 2010. On the strength of our brand, superior customer service and highly effective recruitment solutions, we believe that we are not only adding new customers at a rapid pace, but also capturing a greater share of recruitment budgets.

We have high confidence that we are cementing our leadership position in the Chinese online recruitment services industry. Although we are seeing increased adoption of online products by companies large and small, we believe the market remains under-penetrated.

We transacted with over 137,000 corporate accounts in the second quarter, our highest quarterly level ever. With a dynamic economy and an internet population of over 420 million and growing, we believe that our opportunity in China is fast. The momentum of our online business is robust, and we remain heavily focused on customer acquisition.

In light of the improved market sentiment this year, we increased headcount and spending in areas of sales and marketing as well as customer service and support to meet the demands of our expanding customer base. Despite these additional expenditures, we set new heights in gross margins of 68% and operating margin of 26% in the second quarter, by leveraging the powerful scale economies and efficiency of our operating model.

As a result, we achieved our most profitable quarter ever, with non-GAAP fully diluted earnings per common share of RMB1.11, which exceeded our guidance range of RMB0.95 to RMB1.05. This also marks our 29th consecutive quarter of profit, a record unbroken by the financial crisis and unmatched in our industry in China.

Due to favorable market conditions in our full execution, we are on track for a highly successful 2010. We have a clear strategic plan to drive profitable growth to deliver tangible results to our clients and to increase value for our shareholders.

I'll now turn the call over to Kathleen for more detail of our financial review.

Kathleen Chien

Thank you, Rick. Revenues for the second quarter totaled RMB262 million a 36% increase compared to the year-ago quarter. Print advertising revenues increased 7% to RMB72 million compared with RMB67 million in the second quarter of 2009. The year-over-year growth was primarily due to the improved market demand as well as a higher average revenue per page. However, as a result of the discontinuation of print operations in five cities this year so far, our page volumes have decreased by 9.5% over the year-ago quarter to about 2,600 pages.

In addition, print revenues in the second quarter as expected were slower sequentially following the seasonal swing that was demonstrated in the first quarter due to the post Chinese New Year peak. Strategically, we continued to review the conditions and outlook of the print market on a local basis and will continue to determine any action based on each city's individual characteristics and assessments.

In those cities where we have discontinued print operations, the transition to an online-only model has been assumed. Online revenues for the second quarter were RMB135 million, an increase of 74% compared to the same quarter in 2009. The number of unique employers using our online services topped 137,000 companies in the second quarter, an increase of 73%.

We saw robust growth across all regions and industries due to the strong hiring demand and the increased customer adoption of online services. Revenues for our other HR services increased 15% compared to the year-ago quarter to RMB 66 million, this increase was primarily driven by the growth in our outsourcing business as well as greater demand for our executive search and training service. Growth margins for the second quarter expanded to a record high of 68% from 60% in the second quarter of 2009 due to the economies of scale, the improved operating efficiency and a reduction in print related expenses.

Included in cost of services in the second quarter was share based compensation expense of approximately RMB1 million. Our sales and marketing expenses increased approximately 41% to RMB68.5 million in the second quarter. Due to the improved market conditions, we incurred higher sales compensation expenses, added headcount and increased spending on advertising and promotion activity.

Included in sales and marketing expenses was share based compensation expense of approximately RMB0.9 million in the second quarter. G&A expenses for the second quarter was RMB36 million, an increase of 5% from the year-ago quarter mainly due to higher employee compensation expenses. Share based compensation expense included in G&A in the second quarter was RMB4.6 million.

Operating income for the second quarter of 2010 increased to RMB64.5 million compared with RMB26.8 million in the same quarter in 2009. Our operating margins expanded to a record high 25.9% compared with 14.6% in the second quarter of 2009. The reduction in the effective tax rate to 23% in the second quarter of 2010 from 32.7% in the second quarter of 2009 was primarily due to the qualification of an operating entity as a high-end new technology enterprise in December of 2009 which is subject to a preferential tax rate of 15%.

For the full year of 2010, we do expect an effective tax rate in the low 20s based on our non-GAAP results for our consolidated operations. Net income for the second quarter was RMB54.3 million compared with RMB20.8 million in the same quarter of 2009. Fully diluted earnings were RMB0.97 per common share which is equivalent to $0.29 per ADS.

Excluding share based compensation expense and foreign currency translation loss and their related tax impact, our non-GAAP adjusted net income was RMB61.9 million in the second quarter, non-GAAP adjusted fully diluted earnings per common share were RMB1.11 or $0.33 per ADS.

Turning to our balance sheet, our cash provisions remain stronger than ever as we increase our cash and short-term investments to RMB1.4 billion or approximately US$208 million. Our short-term investments consist of certificate of deposit with original maturities of less than one year held in banking institutions in China.

In the second quarter, as part of the share repurchase program approved by our Board of Directors and shareholders in September of 2008, we've repurchased approximately 84,000 ADSs from the open market for an aggregate consideration of US$1.6 million, including transaction fees. To date under the program, we have repurchased approximately 1 million ADSs for a total of US$10.8 million.

We are authorized to repurchase up to US$25 million worth of outstanding ADSs, but the amount of repurchases that we can make are subject to daily trading volume and other regulatory restrictions.

Now, I'll turn the call back over to Rick.

Rick Yan

Thank you, Kathleen. Although the most difficult times are behind us, economies around the world, including China, continue to face various degrees of uncertainty and turbulence. In recent months, there have been media reports publicizing concerns about the Chinese economy, including inflation, currency appreciation, contentious labor relations and the threat of a real estate bubble.

However, for the most part, these issues have not dampened the recruitment plans of our customers, as we are seeing healthy levels of hiring activities across the board. In fact, we have received feedback from some employers regarding difficulties in fulfilling certain managerial and technical positions as well as their willingness to offer higher salaries to complete their recruitment target. In our opinion, a recovery trend in market demand remains in place.

Under these improved market conditions, we are making solid progress on our key strategic objectives. We continue to position our online business for growth, extending our service network and raising efficiency and productivity to handle our expanding customer base and data volumes.

At the same time, our local sales offices are increasing penetration in existing cities. Our recently established Wuhan call center is complementing this growth by targeting new cities.

In June, we launched two new city channels on our website, Shijiazhuang and Nanchang, with all sales-related responsibilities performed by our call canter. The early results have been positive, and we are pleased with the customer uptick in traffic to these new channels. As we fine tune our call canter operations, we expect to add headcount in new geographies on the coverage.

Another key objective is the ongoing development of our other HR value-added services. We are experiencing good traction in customer acceptance of our outsourcing and training services. In addition, we have recently renamed our salary survey department to HR Research Center and broadened its scope to analyze a wider range of HR issues facing companies in China today.

We are also providing a placement service to assist employers in recruiting for certain positions and industries. While many of these value-added services are in the early stage of development, as HR departments become more sophisticated, we believe we will continue to lead the industry in addressing the evolving needs, thereby strengthening our client relationships and growing our wallet share of overall HR budget.

Furthermore, by marketing all the product offerings from recruitment through outsourcing under the 51Job brand and umbrella, we increased our cross-selling opportunities and maximized our customer acquisition efforts.

Now, turning to our guidance, based on current market and operating conditions, our total revenue target for the third quarter of 2010 is in the estimated range of RMB255 million to RMB265 million. Our estimated non-GAAP fully diluted EPS target is between RMB0.95 to RMB1.05 per common share.

Please note that this non-GAAP EPS range does not include share-based compensation expense, foreign currency translation loss nor the related tax impact. This guidance reflects our true forecast which is subject to change.

Through solid execution, we believe we are enhancing our market leadership position from the competition. Our business model has proven to be resilient and our financial position is strong. We are building a firm foundation for sustainable long-term growth.

That concludes our presentation. We will be happy to take your questions at this time.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from Alicia Yap.

Alicia Yap - Citigroup

I am From Citigroup. So my first question is can you update us on the recruitment environment for the second half? Just wanted to get a sense that the solid trend that you saw post the Chinese New Year into the second quarter, was the momentum over or do you think is this is just the beginning of a much healthier business environment into the second half of next year? I understand you mentioned, I think the growth is coming from across the industry. Just wanted to get a sense, any particular industry vertical that you actually see a significant pick up this year.

Rick Yan

I think we started seeing a recovery trend at the beginning of 2010, actually probably towards the end of 2009 and we found that improvement trend remains in place. Though continue to see growth in terms of number of customers we transact in the second quarter, and if you look at our guidance we are pretty much assuming that the trend will continue into the third quarter.

Alicia Yap - Citigroup

Any particular industry to actually show significant pick up?

Rick Yan

As we've mentioned in the comment, I think recovery trend is pretty kind of broad based. And the fact that we transacted with 137 online employers in the second quarter shows that it's chosen by handful last customers. And it's really, really broad based. And if you look at the number of online customers you transact, that's almost more than 70% versus the same quarter last year. And also more than 20% growth over this first quarter. So that implies that is very broad based in terms of geography as well as in terms of industry.

Alicia Yap - Citigroup

I see. The second question is can you update us on the competitive landscape, I mean, given the recent development in some of your competitors? How do you think that will affect 51job?

Rick Yan

Yes. The competitive environment has been very challenging in the past five years, and last year we saw some changes at ChinaHR after it was fully acquired by Monster, there was a change in CEO and we are also seeing them being more rational in terms of their spending. We did notice that, a few weeks ago, there was a similar development happening in the Xiaoping that apparently the CEO was replaced, and there is a new interim CEO appointed by the shareholders. I think, looking at our competitors, or we do have our competitor's financials but we didn't look at their parent's financials.

Looks like they've been in the meaningful losses for many years and actually there have been media interviews of the Ex-CEO of Xiaoping that he said that they've been losing money for 13 years. So I assume that, a change seems to be necessary and if you look at what happened at Monster and ChinaHR, I guess they would have to more rational in terms of how to run the business going forward.

In terms of the impact to our 51job, we certainly welcome a more rational behavior, from our competitors that would certainly help to have a more healthy development of the overall industry, and maintain more healthy profit pool for the players. So far, we are the only one that's making money and making good money, and improving profits. And if the industry develops in a more healthy way, I think it will be good for the players as well as good for the customers and the job seekers.

Alicia Yap - Citigroup

Can I follow up on that and do you actually see some potential of pricing improvement? I think you indicated in this more rational competitive environment that if everybody is not trying to do the price war, then I think it may potentially benefit that?

Rick Yan

I think, we certainly hope that it is the way that industry should develop. I think our pricing level is very low compared to international standards. In fact our competitors have been losing money for 13 years is certainly not the right way to run the business. But I think it might be too early to tell, I guess if you look at what happened last year with Monster's acquisition of ChinaHR, it might take a while before they sort out there internal management, might take a while for them to figure out their strategy. But I think the direction will be pretty clear that the industry has to be more rational going forward. And I think that hopefully we have more room for us to go to more reasonable level of pricing compared to international standards.

Alicia Yap - Citigroup

Then lastly, the margin trend. If I remember correctly I think you usually have a higher investment in your sales and marketing expense in the fourth quarter, how should we think about the margin for the second half? Any room for further improvement?

Rick Yan

Our gross margin has been improving over the past couple of quarters because of increased efficiency, also the modest shift from print to online. If you look at the past two years, our sales and marketing has been around 25% to 30% of our revenues. That's been actually pretty stable.

So as you mentioned, we've been living in a very price-competitive environment for the past five years. And we've been very disciplined in the past five years to deliver not only those margins, but also improving margins over time. So I think we will continue to look for opportunities to improve margins.

Even if there is no pricing upside, I think we should learn how to excel in such a low price environment. And of course if there's any pricing improvement, then that would certainly help us to even expand our margins further.

Operator

The next question comes from Wendy Huang. Please state your company name followed by your questions.

Wendy Huang - ABN AMRO

You mentioned that you launched two new city channels, (Wuhan) and Shijiazhuang and meanwhile your own customers' numbers jumped quite a bit. So I wonder what percentage of those additional new customers you acquired online come from the two new cities' channel launch and how many city channels you have in total right now, and what's your target in the long term?

Kathleen Chien

Wendy, the channels were launched in mid to late June. So it actually no material impact certainly in the second quarter. And they are smaller cities. There are actually, if you count in the vertical channels, approximately 30 channels online. So it's a very small percent of total regardless. So I would say the new launch would not have contributed any meaningful amount of customers during the second quarter for the account.

Rick Yan

And in terms of cities going forward, we will continue to look at new geographies that will be served by our call center using our online platform.

Wendy Huang - ABN AMRO

Then moving to your print business, you cut your city by three this quarter, and now it's coming down to 17 cities. So what do you think the minimum number of cities that you need to have to maintain a minimum presence or exposure to the print recruitment business?

Kathleen Chien

I don't think that there is a so called minimum, because I think we've always talked about print as having a local scale critical mass that's important. So that's why all of the decision-making has been on a local, city-by-city basis. So I don't think that there is currently a hurdle that we need to think about for that.

We will continue to look at the city structure for all of the prints operations. We do believe that there will be additional to these that we might take steps on later in the year. So I do think that the decision again will be made on a city-by-city basis and there will not be a minimum number of cities that needs to maintain in thinking about having print operations, because it is a city-by-city localized operation.

Wendy Huang - ABN AMRO

So you will continue to look at what are (other) cities that you want to cut back?

Kathleen Chien

Perhaps, yes. If the economics and the outlook is not as attractive as we would like it to be, we will continue to make those decisions in the first half of the year.

Wendy Huang - ABN AMRO

My last question is regarding your guidance. Your advance from customers on the balance sheet increased from $147 million in Q1 to $159 million in Q2. There seems to be a strong indicator for the revenue growth in the following quarter, but why your revenue guidance actually suggests no sequential growth in Q3.

Kathleen Chien

Every quarter, if you look at from Q1 through Q2, we also had actually probably an increase in advance from customers. So I don't think that that's a perfect indication of just deferred revenues, because that's only one part of the revenue line for us.

We do think that as we have closed five cities in the first half of the year for print operations and as you can see that there was a very large decrease actually from Q2 from Q1 levels in print operations, there will be certain gaps that we need to fill, if you will, between the different product lines.

So I think guidance is a reflection of all of our product lines, not just online. So I think that is not perhaps the best way to just have taken one number to infer what will happen in Q3 overall. I think the guidance we gave actually reflects the total picture.

Wendy Huang - ABN AMRO

To clarify the advance from customers, it's mainly related to the online business?

Kathleen Chien

Yes, it would be more related to online. That's correct.

Operator

The next question comes from Jenny Wu. Please state your company name followed by your questions.

Jenny Wu - Morgan Stanley

Morgan Stanley. My first question is regarding the sales and marketing. I see there is an increase in the second quarter. So what's the reason for this? And specifically, how much increase is coming from the headcount increase and how much from advertising promotion?

Kathleen Chien

I think we've actually mentioned that the increase comes from a combination of sales headcount increase, bonuses and commissions related to improved revenue performance as well as the increased advertising and promotion expenses. So all three categories actually came into play to contribute to that. I think the first two, the sales-related ones, are the larger portion versus the marketing increase.

Jenny Wu - Morgan Stanley

So how much increase for advertising promotion?

Kathleen Chien

I don't have that number exactly with me right now. But the sales-related expenses were the larger increase within that pool.

Jenny Wu - Morgan Stanley

Are you going to increase advertising expenses?

Kathleen Chien

We continue to look at that as a percentage of our revenue. I think Rick mentioned already earlier, sales and marketing as a percentage of revenue will probably be kept at a similar percentage throughout the year. So we will continue look at that. If it actually makes sense and it is actually something that continues to drive longer-term growth, yes.

Jenny Wu - Morgan Stanley

So in other words, as a percentage of total sales, sales and marketing expenses were pretty much stable in the previous levels. Is that right?

Kathleen Chien

We are looking at targeting as a percentage of revenue, yes, at a similar level. That's correct

Jenny Wu - Morgan Stanley

We saw continued cost control in the marketing space starting last year. Just curious how much is due to the employee headcount cut, how much by the salary control and how much by the product efficiency?

Kathleen Chien

It's efficiency mostly. We did not actually have any layoff. We talked about the fact that through attrition, I think our headcount did decrease last year, but I think our current headcount levels are similar to last year's levels. So I don't think it's actually related to headcount changes too much. So it's efficiency and the various measures that we've taken to improve our operations' streamlining and looking for other economies of scale.

Jenny Wu - Morgan Stanley

Most importantly, how much do you think you can do to improve the margins and what kind of margin level you could achieve in the next several quarters and over the longer term?

Kathleen Chien

Very honestly, I think, obviously we believe there is room to grow, we've always said that. But a very related question in that is also pricing level going out for the long-term. So I think in the last four quarters, I think we've continued to make strides forward. We continue to look at efficiency metrics across the board for the different business lines. And I think as they continue to scale, we believe that there is upside to the various businesses.

So obviously it's hard to say what that sort of the final limit is, so I won't comment on that right now. But I think that it will also be related a bit to what the pricing level is, because pricing is something that kind of falls directly to the bottom-line. And given what Rick had just mentioned earlier about the possibility of some changes perhaps in the competitive landscape going forward, that would be a very large variable.

Jenny Wu - Morgan Stanley

And just specifically, how about the margin trend over the short-term, for example, for 4Q and the next year?

Kathleen Chien

I don't think it'll be right to comment on it right now, especially for next year given that as you know, Chinese New Year is a very good indicator of the market demand. And then also, pricing is very far off because we don't know that right now yet.

But I think that we're happy to see the increases that we have made so far in the first half of the year, both last quarter and this quarter. We continue to make some strides forward. So I think hopefully that second half of the year will be similar to what first half of the year has brought us, and we'll have to wait and see and keep you updated.

Jenny Wu - Morgan Stanley

And lastly, you just mentioned the headcount issue. How many employees do you have as of second quarter?

Kathleen Chien

It's about 4,000.

Jenny Wu - Morgan Stanley

So what's the change year-over-year and Q-on-Q?

Kathleen Chien

Year-on-year we are about the same actually, because the composition has changed, but it's the same number approximately.

Jenny Wu - Morgan Stanley

So it means you probably have increased the salaries for the employees. What's the change for the year?

Kathleen Chien

Well, I think I had talked about this in earlier calls. I think when we did a survey of the marketplace, I think the average salary increases that were given were approximately 6% earlier this year. So there will be people that have gotten more and there's people that have gotten less obviously. But that's sort of the market situation.

I don't think it's appropriate to comment on specific numbers for our internal situation, so I won't talk about that. But for sure, I think that this year I think most companies have had to go through salary increases, but it is not the level that I think maybe had been reported in the blue collar market in the South when people talked about 30% or 40%, because I don't think that's a realistic situation for the white collar workers.

Jenny Wu - Morgan Stanley

What percentage of sales and what percentage of total cost are for human capital for 51job?

Kathleen Chien

A lot of it is related to bonuses. So I don't think it is easy to answer that because that will fluctuate a little bit. But I will say that normally if you look at the business like ours, I would say compensation costs are a very large part of the total because we're a service industry. We don't have any other infrastructure for the most part except for a network operations cost and most of it is people related.

Jenny Wu - Morgan Stanley

One last housekeeping question. I see there is some increase for your other income, what was that?

Kathleen Chien

Within that 2.2 million plus, we actually received a one-time subsidy in our Wuhan operation of about 1.8 million.

Jenny Wu - Morgan Stanley

It's one-off right?

Kathleen Chien

Yes, that's a one-off one. Yes, that's correct.

Operator

The next question comes from Ashish Thadhani.

Ashish Thadhani - Gilford Securities

Nice quarter. I have a couple of questions. First one is on the online segment; over the last couple of quarters the incremental growth that you've seen over there, can you break that out by market growth versus share gains, and how much of it is pent-up demand versus sustainable growth? Some color along those lines would be helpful.

Kathleen Chien

I think unfortunately there is no sort of a publicly available share data for everybody in a sort of, I guess from a very transparent and consistent source if you will. But we do believe that based on some of the information that was, I believe discussed on the call with Monster recently, I think that certainly at least in relation to ChinaHR's operations, I think certainly share gain is a very, very sort of a clear situation.

I believe that they were looking at bookings growth in maybe 30%, 40% kind of a range. And I think we actually had a 70% plus quarter. So I think certainly in relation to ChinaHR, we are very confident that that seems to be the case. I do not have specific information that's been publicly disclosed by (inaudible) Xiaoping. So it is difficult for me to comment on specifically, but we are very pleased with our progress and we believe that we are making very, very significant thrives in our online business. So that's as much as the publicly available information that we can verify and attest to.

In terms of, I guess just overall online, I just feel that this is something that the turning point kind of happened for us last year where, online became the number one revenue contributor to our business and I think customer acceptations across the board seems to have picked up quite a bit and that, part of it certainly, this year versus last year is that, there were some artificially sort of pent up demand, that carried over last year I would say, but I think we've now had about fourth quarters where we feel that the momentums happening.

We feel that the market is still pretty solid and there continues to be new employers coming into the fold all the time. So I think it's new market, new customers and just new demand as well.

Ashish Thadhani - Gilford Securities

So in the second half of this year you would obviously anticipate some stabilizing or moderation in the online, year-over-year growth numbers, of course from what you saw in the second quarter right?

Kathleen Chien

That's correct. In terms of relative growth rate; yes, I think first half of year was much lower, last year. Second half of last year, we have already seen the pick-up.

Ashish Thadhani - Gilford Securities

Then with respect to these management issues at one of your primary competitor, in the second half of this year do you see any meaningful impact on your business by way of either client defections or more sales and marketing spending on your part?

Kathleen Chien

To be honest, I think it's a positive for us, but we don't know the extent of how it will develop. I mean a lot of it is rumor based right now. So I can't comment on rumor of situation, regardless but I think that the fact that the reputational hit that they took is significant; it's because the incidence has been there widely reported in the Chinese media, certainly. So I don't think that's favorable either for a team or for customer, a perception of brand.

So we will continue to work hard on our sales and marketing though, because again as I said earlier that we believe that there is new demand, new customers. So the marketing decisions will not be made primarily on competitor situation. But having said that, I do think that it could be something that's more favorable for us and hopefully we can capture this the opportunity.

Kathleen Chien

Okay. I think that was our last question. So maybe, Rick, if you have anything else.

Rick Yan

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

Operator

Thank you, ladies and gentlemen. This concludes the 51job Incorporated second quarter 2010 conference call. Thank you for participating. You may now disconnect.

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