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51job, Inc. (NASDAQ:JOBS)

Q4 2010 Earnings Call

February 28, 2011 8:00 AM ET

Executives

Linda Chien – Assistant VP, IR

Rick Yan – Co-founder, President and CEO

Kathleen Chien – Co-founder, COO and Acting CFO

Analysts

Alicia Yap – Citigroup

Wendy Huang – RBS

Jenny Wu – Morgan Stanley

Ming Zhao – Susquehanna International Group

Operator

Good morning ladies and gentlemen. Thank you for holding. Welcome to the 51job Inc. fourth quarter and fiscal year 2010 conference call. At this time all participants are in a listen-only mode. After the presentation there will be an opportunity to ask questions (Operator Instructions)

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

Linda Chien

Thank you operator and thank you all for attending this teleconference to discuss un-audited financial results for the fourth quarter and fiscal year ended December 31, 2010. With me for today’s call are Rick Yan, Chief Executive Officer and Kathleen Chien, Chief Operating Officer and Acting Chief Financial Officer. A press release containing fourth quarter and full-year 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 first quarter of 2011, 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 2011, 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 factor 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 2011 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 fourth quarter and full-year 2010, followed by Kathleen with her detailed review of our financial results. I will then discuss our observations of current market conditions, as well as our objectives going forward. Finally, we’ll open the call to your questions.

2010 was a memorable year for 51job with record revenues, margins and profits. As market conditions improved and demand rebound, we achieved progressively better financial results during the year through consistent execution of our strategic initiatives. We closed out the year with an outstanding fourth quarter with revenues of RMB302 million, or approximately $46 million, well ahead of forecast.

Operating income increased 86% year-over-year to RMB78 million and operating margin reached over 27%. Non-GAAP earnings per common share came in at RMB1.27 or $0.38 per ADS. Again well ahead of our forecast. For the full-year 2010, revenues grew more than 33% to RMB1.09 billion or $165 million. We have most profitable year with operating income of RMB272 million and operating margin of 26%. Non-GAAP fully diluted earnings per common share in 2010 increased 86% to RMB4.67 or $1.42 per ADS.

This strong performance in the fourth quarter and the full-year 2010 was driven by the online business and growing contribution of our other HR services area. Our online business continued to experience a high growth to tax rate with the number of unique employers growing by nearly 47% year-over-year in the fourth quarter and 49% in 2010. During the past year, we have observed a significant increase in the usage of our online services as the acceptance of the internet as a recruitment channel by employers has improved.

Spending per customer has also trended upwards with employers purchasing more services to differentiate themselves and attract candidates to meet their hiring targets. In 2010, we also resumed geographical expansion utilizing our new online sales and operations center in Wuhan to cover five new cities. We have the largest sales footprint in China to serve employers and further penetrate this rapidly growing market. At the same time that we are capturing the online opportunity we are identifying and developing future revenues and streams.

From inception, our goal has been to become the largest integrated HR services provider in China, not just a leading job board. As the market evolve and HR departments become more sophisticated, we believe that the service components of our value proposition for the employers is becoming increasingly important. Our outsourcing business saw significant customer traction and our training services make solid progress in 2010. Other services such as campus recruitment, compensation benchmark and reports and placement services are also seeing stronger demand.

On the views of a successful is 2010, we are very well positioned strategically and financially to realize our goals in this New Year. I will turn the call over now to Kathleen for more detailed financial review.

Kathleen Chien

Thank you, Rick. Our revenues for the fourth quarter of 2010 totaled RMB302 million, a 34% increase compared to the same quarter in 2009. Our print advertising revenue decreased 20% to RMB52 million, compared with RMB65 million in the fourth quarter of 2009.

The year-over-year decline was primarily due to the discontinuation of print operations in six cities in 2010 and the resulting decrease in page volume. Our print advertising volume in the fourth quarter of 2010 was approximately 1700 pages, compared with about 2700 pages in the prior year quarter.

Our online revenues for the fourth quarter were RMB156 million, an increase of 60% compared to the same quarter in 2009. The number of unique employers using our online services totaled over 139,000 companies in the fourth quarter, an increase of 47% over the fourth quarter of 2009, due to the strong market demand. We also saw a 9% in average revenue per online customer compared to the year ago quarter. We contribute this increase to the growing acceptance and the effectiveness of our online recruitment products, as well as a more competitive talent market which drove employers to purchase more services to meet their demand for recruitment.

Revenues for other HR services in the fourth quarter of 2010 increased 47% to RMB94 million. Due to the stronger market demand and greater sales efforts, we achieved a very solid growth in our outsourcing and training businesses. We also saw a very, very meaningful increase in demand for our seasonal campus recruitment services in the fourth quarter.

Gross margins for the fourth quarter expanded to 65.4% from 62.8% in the fourth quarter of 2009. The margin expansion was due to economies of scale, improved operating efficiencies and a reduction in printing related expenses which were partially offset by the higher bonuses and employee related expenses. Included in cost of services in the fourth quarter was share-based compensation expense of RMB1 million.

Sales and marketing expenses increased approximately 34% year-over-year to RMB84 million in the fourth quarter of 2010. We saw increases in salaries, commissions and bonuses as a result of the higher sales and headcount additions and we also incurred greater advertising expenses. Included in sales and marketing expenses was share-based compensation expense of approximately RMB0.9 million in the fourth quarter.

G&A expenses for the fourth quarter were RMB25 million, a decrease of 17% from the year ago quarter due to lower employee compensation expenses. Share-based compensation expense included in G&A in the fourth quarter was RMB2.9 million, lower than the RMB4.3 million posted in the fourth quarter of 2009. Operating income for the fourth quarter of 2010 increased 86% to RMB78 million, compared with RMB42 million in the same quarter of 2009. Our operating margin expanded to 27% compared with 20% in the fourth quarter of 2009.

The effective tax rate was 17% in the fourth quarter of 2010 compared with just 1% in the fourth quarter of 2009. remember – in December of 2009 one of our main operating entity qualified as a High and New Technology Enterprise which effected lower in tax rate from 25% to 15% for the full-year of 2009 and the cumulative tax impact was deflected in the fourth quarter of 2009.

Net income for the fourth quarter increased 44% to RMB67 million, compared with RMB46 million in the same quarter of 2009. Fully diluted earnings were RMB1.14 per common share, which is equivalent to $0.35 per ADS.

Excluding share-based compensation expense, foreign currency translation loss and their related tax impacts; our non-GAAP adjusted net income was RMB75 million in the fourth quarter. Non-GAAP adjusted fully diluted earnings per common share were RMB1.27 or $0.38 per ADS.

Now turning to our full-year results, our total revenues for 2010 increased 33% to RMB1.09 billion. Gross margin in 2010 increased by 600 basis points to 66.5% driven primarily by economies of scales and to a greater efficiency. Income from operations increased 126% to RMB272 million as net income increased 109% to approximately RMB235 million in the year 2010.

Excluding share-based compensation expense, foreign currency translation loss and their related tax impacts, our non-GAAP adjusted income increased to 90% to RMB265 million in 2010. Non-GAAP adjusted earnings per common share for 2010 was RMB4.67 or 1.42 per ADS – I should say $1.42 per ADS.

Looking at our balance sheet, our cash and short-term investments increased to nearly RMB1.5 billion or approximately $250 million. Most of our cash and short-term investments are denominated in RMB and deposited with banking institutions in China.

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

Rick Yan

Thank you. Noting off the tremendous momentum of 2010, we believe that we have the pieces in place for another year of achievement. Going into the third week of the post Chinese New Year seasonal peak, the data we have seen thus far indicate a continuation of robust market demand. The common feedback that we are hearing from employers is that people is a major bottleneck for their goals in China.

As companies have aggressively restarted their expansion plans in this vibrant economy over the past year, the market for qualified talent is growing increasingly competitive for employers and also driving wages upwards. A recent study we conducted showed nearly 90% of surveyed companies plan to increase salaries this year in order to retain workers. We have observed that as hiring becomes challenging, and the labor market tightens two trends are emerging. First, we are seeing growing adoption of our online services, across the board as employers seek a reliable provider to deliver proven results to meet their needs. Second, both new and existing customers are increasing their expenditures on online recruitment services and moving up the price list purchasing longer subscriptions, larger service packages and more prominent advertising options.

As a result, we have seen higher average revenue per online customer in the past few quarters heading up towards pre-financial crisis levels. We expect further improvement in revenue per customer this year as we institute price increases for certain products in selected cities. That being said, the primary engine of growth for the online business remains new customer acquisitions in greater penetration of the employer market. As such we will continue to add sales account and increase our promotional activity, maintaining sales and marketing expenses within the historical range of 25% to 30% or revenues.

Also full-year (inaudible) we resumed geographical expansion in 2010 with sales coverage provided by our new Wuhan call center. The developmental program of the center has been positive and we expect to accelerate the rollout in our new geographies this year. In January, we added seven new online channels for the cities of (inaudible). And there will be more to come in the coming quarters.

Without a doubt, we are offering the widest range of online product to the broadest customer base in China today. As we push ahead on our online initiatives, we continue to lay the foundation of our future growth and improve monetization efforts in our other HR services area. Our outsourcing services are steadily gaining awareness among employers as they note for a trusted partner to help them navigate complicated low cost social insurance regulations.

The Social Safety Net is a hot topic in government policy circles in China and we believe they focus on enforcing compliance to benefit the prospect of this business. Besides HRO, we have enhanced our training and assessment services with new modules as companies look to increase employee productivity and retention. We are also expanding our placement services to success employers who have more specialized or targeted recruitment needs.

With our result of focus on areas of high growth and potential, we are accordantly, the ever finding the print [ph] and managing its declining revenue contribution. However, the recruitment publication remains popular in seven geographies during seasonal periods especially in a post Chinese New Year peak. Therefore we continue to assess the condition of each city on an individual basis and expect to maintain some presence going forward.

From what we have seen so far, this year is off to a strong start. We will keep you updated as we take temperature [ph] checks our market demands throughout the year. Based on current market and operating conditions, our total revenue target for the first quarter of 2011 is in estimated range of RMB305 million to RMB315 million. Our estimated non-GAAP fully diluted EPS target is between RMB1.2 to RMB1.3 per common share. Please note that this non-GAAP EPS range does not include share-based compensation expense, foreign currency translation loss, nor their related tax impact. This guidance reflects our current forecast which is subject to change.

We are moving forward confidently with a clear strategic plan and execution plan. We are focused on investing for sustainable long-term growth and aim to deliver greater shareholder value in 2011. That concludes our presentation, we’ll be happy to take your questions at this time. Operator?

Question-and-Answer Session

Operator

Yes sir. Thank you. Ladies and gentlemen, at this time we will now begin the question and answer section. (Operator Instructions) One moment please for the first question. The first question comes from Alicia Yap. Please state your company name followed by your question. Please go ahead with your question.

Alicia Yap – Citigroup

Hi it’s from Citigroup. Good evening, Rick, Kathleen and Linda. Congratulations on a strong set of results. My first question is regarding your cost of revenues and gross margins. While the margins improved year-over-year, it did showed some deflation lower than the second and the third quarter level. Just tried to understand any particular reasons that we should be aware of was that due to higher wage pressure?

Kathleen Chien

I think seasonally usually Q4 in terms of the margin profile is actually not as good as prior quarters, because of a higher expenditures and also new additions in terms of the hiring in preparations for the New Year. So that is typically the pattern that is exhibited.

Alicia Yap – Citigroup

I see, okay. And then my second question, is regarding the outlook for this year, I mean I know it’s still a little bit early, it’s about only one week post the Chinese New Year. Just kind of wanted to get a sense like what is the demand like so far comparative to last year, do you see more volumes from the employer posting as the traffic to your sites. Any color you could provide also would be helpful?

Kathleen Chien

Well I think both this year and last year I think, its open to be very, very strong. I think we’ve seen good traction from the employer side, people posting online new openings and we also seen a lot of new traffic and new users coming on to site. So I think we feel very good about this year, and Rick had mentioned I think we feel like it’s also a good start. So we feel very positive actually.

Alicia Yap – Citigroup

I see, and then lastly, just trying to get any update in terms of your communications with your clients, in terms of the potential timing adjustment this year, I think you mentioned a couple of times previously. And do you think that these if at any, do you think this also will be followed by other players in the industry?

Kathleen Chien

Yes, I think that it is something that everyone is looking at, in fact one of our competitors I believe actually raised some of their list prices as far as we know. This is continually something that we’ll be looking at very closely and as we reach that earlier that we will be raising prices in some of the products, some of the cities or is to combination of things. I think that acceptance of that seems to be – I think there is a fair amount of inflation going on in China as everyone is aware of, and I think everyone has just gone through a cycle for adjusting for a compensation and wages. So I think that we feel that it’s not going to be something that will be not accepted, I think it will take some time for some transition to happen, but I think that it will happen and I think we’re committed to doing some of that stuff.

Alicia Yap – Citigroup

Can I just follow-up on that? Just in order to help in terms of our modeling. Just a rough percentage term, what is the pricing percentage adjustment that you think for this year will be compared to last year on the average ARPU basis?

Kathleen Chien

I think we’ll have actually better color for everybody in the first Q call, because I think we’re looking at some of the stuff that we’re putting into place, not yet. So we will actually be able to provide more color for people on the Q1 call, once it’s actually taken more step than that. But I think that my sense is that I think we’re talking about mid to high single-digits overall. It’s something that we will look at, but again I think we will be able to provide people with more color probably during the Q1 call.

Alicia Yap – Citigroup

I see, and then so just follow on that, does that mean your Q1 guidance reflect mainly the volume growth and has not factored in pricing adjustments?

Kathleen Chien

There is a very, very limited pricing impact I would say for what we’ve actually budgeted for Q1, because I think we haven’t really put in any broad based price adjustments at this point yet.

Alicia Yap – Citigroup

Great, thank you so much.

Kathleen Chien

Sure, thank you.

Operator

Our next question comes from Ms. Wendy Huang. Please state your company name followed by your question.

Wendy Huang – RBS

Its Wendy from RBS. My first question is a follow-up on the ARPU and price increase. Can you clarify whether that’s mid to high single-digit refers to the ARPU or the price increase for 2011?

Kathleen Chien

No, it should be what we’ve realized in terms of what we captured per customer rather than the select because I guess that, they will not necessarily, they will not being all prices kind of adjust by same percentage. So I think we’re talking about the average.

Wendy Huang – RBS

Okay, and also I noted you also had the conversation benchmark report for your funds. So based on your report, what kind of rate inflation are you seeing among your customers for 2011?

Kathleen Chien

To be honest, I think the compensation adjustments, actually has varied quite a lot by the level of position we’re talking about. But what we see as the overall average so far this year is really sort of the high single-digit as sort of average overall if you will.

Wendy Huang – RBS

So how.

Kathleen Chien

I’m sorry.

Wendy Huang – RBS

How would this be compared to last year’s salary increase?

Kathleen Chien

It’s actually higher than last year. We would expect it to be actually – our survey reflects that it’s probably above 15% to 20% increase versus last year in terms of the percentage.

Wendy Huang – RBS

Okay.

Kathleen Chien

Yes.

Wendy Huang – RBS

And also can you tell me what kind of straight assumption you had built into your Q1 2011 bottom line guidance?

Kathleen Chien

I’m sorry, I didn’t catch your question, Wendy?

Wendy Huang – RBS

Can you give you a guidance, yes. You are guiding $0.36 to $0.39 for Q1 2011. So I wondered what kind of tax assumption you had viewed into that guidance.

Kathleen Chien

Our tax rate actually last year if you look at it overall, it was actually about 20% for the full-year. That is the tax rate that approximately that we’re applying at this time.

Wendy Huang – RBS

Okay, great. I will get back to the queue, thank you.

Kathleen Chien

Okay, thank you.

Operator

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

Jenny Wu – Morgan Stanley

Jenny Wu from Morgan Stanley. Thank you for taking my questions, and first of all congratulations on other strong quarter. My first question is regarding your cost again. It went down quite a large in 4Q, you mentioned due to some year-end expenses. And just wondering if the (inaudible) can you give some more details what this is mainly relate to – I mean any which business is it mainly related to. Is it more from the print or more from aligned? And also what kind of margin trend we should expect? As you mentioned, you’ve increased the price and the more operating leverage. So what kind of margin we could be expecting to reach this year? Thank you.

Kathleen Chien

Two things I guess, I think let me try to make sure I heard you correctly, I think you mentioned something related to cost structure. What kind of additional costs we had added.

Rick Yan

I think Wendy, I think you might be referring to the sales and marketing expenses, right?

Jenny Wu – Morgan Stanley

First of all for your costs, Yan. Which…

Kathleen Chien

Yes, I think what I mentioned already to Alicia was that we do actually typically expect to add headcount during the fourth quarter in preparation for Chinese New Year. So there was headcount increase across different business lines and that actually kind of filters to all parts of the P&L when that cost of goods sold in terms of people for operational purposes, it also flows through sales or marketing, for additional sales and marketing headcounts. So actually people costs actually flow through the entire P&L for adding to the cost structure.

So and then additionally obviously you see that sales and marketing as a percentage increase was actually higher than the other categories, and that’s a reflection of the fact that we always do more year-end promotional activities, our customer meets [ph] and what not and that’s not related to a specific product line, it’s actually a company event that actually targets customers that actually spends across multiple business lines. So that’s what the additional costs would be related to. I think I heard you mentioned something related to margins for 2011. I think we’ve already given guidance for Q1, and I think that’s kind of where we are at this point. I think we’ll continue to look out and as I mentioned earlier that we’ll probably be initiating more price increases down the line.

So I think it’s probably better for us to update everyone once we have more clarity and the more information to share on how that would impact the full-year rather than speculate right now, what that would be, because we have not put those still yet.

Jenny Wu – Morgan Stanley

Okay, sure. And how about your general expenses, they just simply trended down a lot. Is it – I heard you responded to the decrease in share-based compensations. Can you give us more details on that?

Kathleen Chien

Yes, they were just related to some forfeiture of options of some of the staff that had department, that was actually something that we had to be accounted for in the fourth quarter. So that’s a big part of that change if you will. So we actually expect that in Q4 and the number – it’s actually Q4, I would say lower than what it should be as a norm if you will. So we expect that number to pump back up to more closer to the Q3 level.

Jenny Wu – Morgan Stanley

Okay. You had mentioned the price increase. Can you give us the details how much on average increased, and again (inaudible) this year, and do you expect further price increase?

Kathleen Chien

Jenny, I think I have already mentioned we will be putting through probably price increases but we haven’t done that and broadly yet, so we’ll be looking to do that actually after the Chinese New Year peak so that they’ll settle the dust if you will. So I will be able to give you more information once we’ve actually decided what the actual numbers are, but as I’ve mentioned already to – when Wendy and when Alicia had asked the same question was that we are targeting – raising our average revenue per user if you will by mid to high single-digits as a goal that we’re kind of setting up front. But we haven’t put to those price increases yet specifically. So I can’t give you more information than that at this point in time.

Jenny Wu – Morgan Stanley

Okay, sure. Is that price increases for the online or you’re also considering about the price increase for the trainings?

Kathleen Chien

We are looking at mainly for online. We are actually not.

Jenny Wu – Morgan Stanley

So what’s the (inaudible).

Kathleen Chien

I’m sorry, what was the question?

Jenny Wu – Morgan Stanley

Yes, I mean for your trainings, going forward what kind of level you’ll see more reasonable you will try to maintain.

Kathleen Chien

Well if you look at what we’ve done in 2010, it continues to be a city by city decision, and I think as we mentioned before, our printers at very city specific environment if you will. So I think we had actually proactively taken step to discontinue some cities where we felt that it was not something that would actually keep us longer term higher growth potential.

So I think we’ll continue to have those reviews on a city by city basis. I think it’s very likely that we might be taking some steps in more cities for this year but again I think it would be a city by city decision and the criteria we use to measure performance for that continues to be same. So I don’t think that any of our metrics have changed since last year on that front.

Jenny Wu – Morgan Stanley

Okay, thank you.

Kathleen Chien

Thank you.

Operator

(Operator Instructions) We have a follow-up question from Wendy Huang. Please go ahead madam. Your line is open.

Wendy Huang – RBS

Thanks for taking my follow-up questions. First of all in Q4, you are keeping your offline presence in 15 cities. So in a long-term, when you keep offline presence or where it got to maybe 0% of the total revenue eventually?

Kathleen Chien

I think we’ve just said that we will continue look at it a city by city decision. So I don’t think it’s a decision that we’re going to take a sort of all or nothing kind of approach. So I think we’ll continue to view the cities as contract come up from renewals and I think it’s a prospect for growth or for profitability and pricing for those of specific publications do not need meet our expectations, I think there are steps that we’ll continue to take this – reduce the number of cities.

So I don’t think that that number is going to go to zero immediately, because I said it’s not all or nothing, but I think it is very likely that we’ll continue to discontinue cities as we kind of go through the year, because I think that’s something as we said that we have more limited expectations for print, and we think we’re still managing it, but I don’t think that when cities especially where I think Rick has already mentioned on the call that we’re seasonally very strong, and we’re – in specific cities that continues to be a very, very important channel of recruitment, I don’t see that it makes sense for us to do away with it if you will immediately. I think that continues to be a very viable business.

So again it’s a city by city decision. It’s not an all or nothing. So I don’t think that it’s going away in 2011. So that’s where we’re at.

Wendy Huang – RBS

Okay. So it still has important strategy to grow in your long-term plans?

Kathleen Chien

It is still a part of our business if you will. If you’re looking now, I don’t know 15, 20 years, I don’t know I couldn’t answer that question but I think we feel very comfortable by 2011 this is continuously part of the portfolio, and I think it’s an important part of the portfolio is select the cities that continues to run.

Wendy Huang – RBS

Okay, secondly, can you give me an update on your – on the coverage of your HR outsourcing business. In terms of the cities that you’re covering and number of customers that are using your HR outsourcing?

Kathleen Chien

I think in terms of the coverage of cities that we can serve, I think we continue to expand that a little bit, I think we’re close to a 100 at this point in time. And I think in terms of customers unfortunately as I said the number is very, very small compared to where our recruitment business, that is still in a few thousands. So but we continue to make some progress.

Wendy Huang – RBS

Okay, finally I wonder if you can give me a sense about online recruitment and penetration of the overall market, say for your existing online customers what percentage of their HR or HR recruitment budgets they have allocated online and also for the overall employer group in the market, what percentage of those recruiters have ever used those online services?

Kathleen Chien

Wendy, I wouldn’t be able to just generalize and give a number nowhere on that one. What I can tell you is that we know how many customers we transact with. I think we’ve already alluded to the fact that we transacted with about 214,000 for the full-year 2010. It depends on what you believe the number of companies is in each city for you to get a sense of penetration. In terms of our recruitment budget is as a percentage HR spend to be very honest, I think for most companies, that number should be very small. It would not surprise me for larger companies especially that number is less than 10%.

Wendy Huang – RBS

Yes, how about the online and offline migration within the recruitment budgets for your…?

Kathleen Chien

I don’t generalize for that unfortunately, and again like I said earlier, that’s a very city by city characteristic. So I don’t think we could actually just generalize to give a number. It would be a responsible need to do so.

Wendy Huang – RBS

Okay, great. Thank you.

Kathleen Chien

Thank you.

Operator

The next question comes from Ming Zhao. Please state your company name followed by your question.

Ming Zhao – Susquehanna International Group

Hi this is Ming Zhao from SIG. Thank you for taking my questions. My first question is could you give us some color about your other HR [ph] related service line, it you went up a lot, your revenue this quarter. What are the major drivers or components behind that growth? So how we should like at that line going forward?

Kathleen Chien

Yes, I mean for the other HR services, the two larger service lines within that, one is the HR outsourcing and the second one is training. Seasonally in Q4 you saw that it was actually a very, very rapid increase as high number versus the other categories and that’s actually driven by seasonally. We actually conduct a lot of recruitment projects for campus recruitment for larger companies if you will. So that is a seasonal activity that typically happens and it gets booked in Q4 each year if you will. We actually did see that year-over-year when we look at 2010 versus 2009 that a lot of companies that actually stepped up their effort on campus recruitment in 2010.

So to be honest it was something that was actually overshot our expectations in Q4 as well. So that is the situation, but I would say that we’ll go back to Q1 that would be something that we’re not reflected in Q1, because again that’s a seasonal activity. So Q1 I would expect the larger contribution again will be coming from the outsourcing and from our training businesses.

Ming Zhao – Susquehanna International Group

Okay, thanks for the answer. And my second question is on the online recruitment service, the decline number was down by 2% quarter-over-quarter, but if you look at a year ago, Q4 number was higher than the third quarter. So what was the change there? Is that because you’re seeing as a different seasonality? Could you give us some comments on that?

Kathleen Chien

To be honest I didn’t think that it was a very meaningful change overall. Usually in prior years, I mean if you take out 2010 which actually had a very bumpy year. We had a pretty low first half and a very, very robust second half. So it’s actually a little bit skew towards the end in terms of the growth in 2009. I think in years prior to that, I think Q4 and Q3 tends to be actually very similar in terms of customer accounts and similar revenue levels. So I actually thing that 2010 was actually probably more of the norm than the abnormal. And I think 2009 was actually where we were pretty heavily weighted on the backend, because of actually coming out of the financial crisis for the first half and people had actually pent-up demand that were actually realized in the second half.

Ming Zhao – Susquehanna International Group

Okay, I see, the other question is on your expense line. I guess the marketing expense was bigger than expected, but the G&A small is smaller than expected. You explained a little bit on the SBC impact there, but the SBC impact, its only about 1,600 but we’re talking about 14,000 – sorry, yes 14 million difference quarter-over-quarter and you said its going back to the Q3 level. So I just wondered what caused that expense to come down other than some people leaving.

Kathleen Chien

I don’t think it was actually 14 million, I think the number is about 4 –a little bit – it’s over 4 million – year-over-year. Sorry, I am looking at year-over-year I am sorry about that, I was looking at year-over-year. Yes, it was actually usually there was actually bonuses, payoffs and what not and actually very different, you can’t do a sequential comparison almost in terms of how we look at it, because typically if you look at even prior year again, Q3 tends to be higher than Q4 fairly significantly and that’s because some of the bonus, payoffs and accruals and things are different.

Ming Zhao – Susquehanna International Group

But you had less payoff in the fourth quarter it should be even higher than that, not lower?

Kathleen Chien

No, we actually had more bonus that we accrued and already accounted in Q3 rather than in Q4. So it’s actually when you look at it every year.

Ming Zhao – Susquehanna International Group

Okay.

Kathleen Chien

It’s actually difference. Yes.

Ming Zhao – Susquehanna International Group

And what about the sales and marketing expenses, increase in the first quarter...

Kathleen Chien

Marketing is always created for the backend. So we said that with always more promotional activity that happen in the fourth quarter. In addition, we actually had more hiring usually in the fourth quarter in preparation for Q1, because we want people to be hired and ready to go when actually Chinese year rolls around. So we actually would actually bump up our headcount prior to that. And to be honest with the higher revenue levels, we also had healthy bonus payoffs related in sales and marketing. So that is a reason why you see that there is actually a fairly big run up in terms of sales and marketing expenses.

Ming Zhao – Susquehanna International Group

Okay, I see, and my last question is on your call center. Could you give us some metrics like how many staff are working in that call center and how that call center play in terms of a role to get to your customers?

Kathleen Chien

Primarily the call center is really used for reaching out to new geographies where we do not have physical office. And we have about a 100 people now calling out if you will from our call center in Wuhan at this point in time. As a percentage of our total staff, it’s still small, it’s probably about 5% of our sales staff, because sales staff we usually have about 40%, 45% of our total headcount. So that number is still small at this point in time, but we continue to feel that that has a very good result in terms of what we’ve done – in terms of feedback from customers and acceptance so far.

So we believe that we’ll continue to push forward on that front. We’ve mentioned earlier that we will continue to be booming out introducing new BE [ph] channels online. So the coverage will be mainly headed out of the call center.

Ming Zhao – Susquehanna International Group

Well thank you very much.

Kathleen Chien

Okay. Thank you.

Operator

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

Rick Yan

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

Operator

Ladies and gentlemen, this concludes the 51job Inc.’s fourth quarter and fiscal year 2010 conference call. Thank you for participating. You may now disconnect.

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