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51job, Inc. (NASDAQ:JOBS)

Q2 2012 Earnings Call

August 9, 2012 9:00 p.m. ET

Executives

Linda Chien – Head of IR

Rick Yan – President and CEO

Kathleen Chien – COO and Acting CFO

Analysts

Philip Wan – Morgan Stanley

Wendy Huang - CIMB Securities

Stephen Sheldon - William Blair & Company

Alicia Yap – Barclays Capital

Alex Leung – SAC Capital

Wallace Cheung – Credit Suisse

Operator

Good morning and good evening, ladies and gentlemen. Thank you for holding. Welcome to the 51job Inc.’s second quarter 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. (Operator Instructions)

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

Linda Chien

Thank you, Ming, and thank you all for attending this teleconference to discuss unaudited financial results for the second quarter ended June 30, 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 second quarter 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 third quarter of 2012, 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 2012; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the renminbi against the US 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 third quarter of 2012 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. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables appended to the press release. This conference call is being broadcast on the internet and is available through our website at 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 a review of the second quarter, followed by Kathleen with a detailed presentation of our financial results. Then I will discuss current market conditions and our guidance. Finally, we’ll open the call to your questions.

During the second quarter, employers became more cautious about hiring amid increased economic uncertainty in China. Market demand for our recruitment services softened and this resulted in lower and slower top line growth with total revenues coming in at RMB360 million for the second quarter. Non-GAAP EPS of RMB2.1 was above our forecast range due to improved operating efficiency and cost management.

Taking a closer look at each revenue area, our online recruitment business increased 18% year over year. After completing a solid level of hiring during the post Chinese New Year period in February and March, we observed less activity in the second quarter as budget conscious employers faced stronger macro-headwinds. However despite these more challenging conditions, we transacted with an additional 15,000 enterprises compared to the year ago quarter, raising the number of unique employers using our online services to over 184,000 in the second quarter.

Reflecting the progressive declines in secular demand for print advertising services, as well as our decision to gradually discontinue these services, print revenues declined significantly in the second quarter. We expect to further reduce the number of cities where print is provided in the coming quarters. In the near term, this revenue loss from print will be a drag to our total revenue performance and cost comparisons to prior periods. However once this transition is completed, we believe the reallocation of resources to our faster growing business areas will position the company for strong future growth.

A continued bright spot in the second quarter was the steady development and rising contribution of our other HR services area. Revenues grew 28% year over year and employer demand for our business process outsourcing and training services has remained healthy. The recurring nature of our outsourcing services in particular has provided an offsetting effect to some of the hiring market volatility.

In addition, our integrated one-stop shop approach to sales and customer service enables us to leverage our existing assets across all business lines. We believe this will greatly benefit our total operating efficiency and productivity as other HR services area grows over time.

I will now turn the call over to Kathleen for a detailed discussion of the second quarter.

Kathleen Chien

Thank you, Rick. Our revenues for the second quarter totaled approximately RMB360 million, representing an 8% increase over the same quarter in 2011.

Our online revenues for the second quarter grew nearly 18% year over year to RMB236 million due to an increase in customer accounts as well as higher average revenue per customer. The number of unique employers using our online services increased 9% year over year to more than 184,000 companies for the second quarter of 2012.

We also saw a more than 7% year over year increase in the average number per customer due to the greater customer adoption and usage of online products. However compared to the first quarter of 2012, our average revenue per customer decreased sequentially primarily as a result of spending caution by employers in response to the macro-economic conditions.

Print advertising revenues decreased 57% from the second quarter of 2011 to RMB22 million. The decline was primarily due to the decreasing popularity and usage of print advertising services by enterprises as well as our actions to discontinue our print operations in a number of cities over the past year.

Print advertising pages in the second quarter of 2012 decreased 58% to approximately 660 pages compared with about 1600 pages in the year-ago quarter. In June, we discontinued the 51job weekly publication in Fuzhou, bringing the total number of current print cities down to 10. For the third quarter, we expect a continued steep decline of 50% or more in our print revenues compared to the year ago quarter.

Other HR services revenues grew 28% to RMB102 million in the second quarter of 2012 primarily due to increased demand and customer acceptance of our outsourcing and training services. The contribution of other HR services to total revenues increased to 28% compared to 24% in the year-ago quarter.

Gross profit grew 11% to over RMB250 million and gross margin increased to 72.6% compared to 71.8% in the second quarter of 2011. The margin improvement was primarily due to the economies of scale and operating efficiency. Included in cost of services in the second quarter was share-based compensation expense of approximately RMB2 million.

Our sales and marketing expenses increased approximately 13% year over year to RMB89 million in the second quarter, primarily due to higher employee compensation expenses and headcount additions. Included in sales and marketing expenses was share-based compensation expense of RMB1.5 million in the second quarter.

G&A expenses for the second quarter were approximately RMB44 million, an increase of 11% from the year-ago quarter due to higher employee compensation, rental and office expenses. Share-based compensation expense included in G&A increased to RMB8 million in the second quarter of 2012 compared with RMB7 million in the same quarter of the prior year.

Operating income for the second quarter of 2012 increased 9% year over year to approximately RMB118 million. Operating margin was 34.3% compared with 34.5% in the same quarter of the prior year. Excluding share-based compensation expense, operating margin was 37.5% which is similar to that of the year ago quarter.

Net income for the second quarter increased 37% to approximately RMB115 million compared with RMB83 million in the same quarter of 2011. Our fully diluted earnings were RMB1.93 per common share, which is equivalent to USD0.61 per ADS. Excluding share-based compensation expense, gain or loss on foreign currency translation and loss from impairment of long term investment and the related tax impact, our non-GAAP adjusted net income increased 13% year over year to RMB125 million in the second quarter. Our non-GAAP adjusted fully diluted earnings per common share were RMB2.10 or USD0.66 per ADS.

And turning over to our balance sheet, we generated strong cash flow in the quarter as total cash and short term investments increased to RMB2.28 billion. This is equivalent to over USD358 and more than USD12 per outstanding ADS.

Over the past several weeks, the use of the variable interest entity structure by U.S. listed Chinese companies has received increased investor attention. I would also like to take this opportunity on today’s call to comment on 51job specific structure and clarify any misunderstanding.

In the case of 51job, because we operate in the internet business which is restricted by PRC regulations to a maximum of 50% foreign ownership, we do utilize a VIE structure and have had the structure in place since the year 2004. However, from an operational standpoint, our VIEs are not active in our day to day operation. In fact, our VIEs do not transact with customers and they do not collect cash. We also do not hold any key company assets such as our real estate properties under the VIEs. As a result, for 51job the financial contribution of VIEs from an operational perspective is negligible.

We believe in strong corporate governance and the effectiveness of our internal control. And we are committed to protecting and securing the operations and assets of 51job for all of our shareholders and stakeholders collectively.

Now I will turn the call back over to Rick.

Rick Yan

Thank you. We believe that heightened economic uncertainty and the deceleration in China’s growth rate have caused employers to be more conservative with their hiring. Accordingly we have seen market demand for our online recruitment services soften, still maintaining positive year over year growth a bit at a slower pace than the beginning of the year.

We continue observe that demand is being led by companies with larger budgets, greater resources and more formalized growth plans as they take advantage of their competitive position and move ahead to attract good candidates and strengthen their talent pool. On the other hand, smaller sized enterprises have been more hesitant and in some instances have delayed their hiring as they look for more clarity in the direction of their businesses.

While we have little influence on the recruitment decisions and budgets of customers, what we can control and are focused on is the execution of key initiative that will strengthen our company fundamentals for a sustainable long term growth. We continue to prioritize new customer acquisition even if initial spending is more as the diversification and expansion of the employer base will provide us with future cross-selling and up-selling opportunities.

We are also expanding our geographical reach, seeding and educating new city markets. We remain on track to reach a total of 100 cities under direct sales coverage by year end.

On the product front, for our HR customers we recently introduced new functions in our eHire platform to improve resume collection and multi-user management. For job seekers we have integrated our social media, fan club function in our iPhone app enabling users to engage with each other and with corporates, as well as to apply the job openings through their mobile devices anywhere, anytime.

The rapid growth of the mobile internet user base in China is exciting and has been an important area of product development for us. We also remain committed to increasing our service efficiency. As always, we aim to further streamline processes and leverage assets across all of our business lines to capitalize on economies of scale and scope.

We pursued a number of efficiency projects during the financial crisis (indiscernible) as well, which have proven to be very effective. While some of the measures we are currently undertaking may not yield immediate results, we believe they will position us for future margin expansion.

Turning now to our guidance, based on current market conditions and factoring in a significant decrease in print advertising revenues, our total revenue target for the third quarter of 2012 is in the estimated range of RMB355 million to RMB370 million. Excluding print, this implies we are expecting revenues of our going concern businesses of online and other HR services to grow in the mid-teens percent range on a year-over-year basis in the third quarter.

For non-GAAP fully diluted EPS target, our estimated range is between RMB1.95 to RMB2.1 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 compensation expense is expected to be between RMB13 million to RMB14 million. This guidance reflects our current forecast which is subject to change.

Despite this period of recruitment demand volatility, our confidence in the long term prospects and growth potential of 51job has not wavered. Our blueprint for the future is clear as we strive to deliver strong value to all stakeholders and maximize returns to our shareholders.

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

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from Mr. Philip Wan from the company of Morgan Stanley.

Philip Wan – Morgan Stanley

I have a few questions. First of all, could you please comment about the competition, given the softening demand, have your competitors turned to be a more aggressive in terms of pricing and promotions? And how would 51job active pricing become the rationale again?

Rick Yan

Yeah in terms of the competition, the competitive landscape hasn’t really changed. We have seen some of the numbers coming from our competitors’ parent company and we know that ChinaHR has actually – have a kind of revenue decrease in the second quarter. So other than ChinaHR continue to kind of losing market share in the China market, I don’t think the level of the competitive landscape hasn’t really changed. We have not seen too much change in pricing. I think if the market demand is slow, if customers are not hiring, lowering prices is not going to increase the demand. I think we have not seen any meaningful changes in terms of the pricing trends.

Kathleen Chien

Philip, I will just add one point to that is that obviously as we said, we are not changing prices for the same product, but if demand were to soften, if you will, from the customer side, they will be purchasing less, if you will. So that overall really is what’s driving the change. If you look at our second quarter versus first quarter average revenue per customer, that has actually declined even though that on a year over year basis we’ve still grown. But on a quarter over quarter basis I think that, that’s really the change. So I don’t think that any pricing that we see is going to be more driven by competitors, it’s really about spending caution and the budgeting squeeze if you will from a customer side.

Philip Wan – Morgan Stanley

And then second quarter is, also can you share with us sales visibility with your online and other HR business?

Kathleen Chien

Sales visibility, is that what you said, Philip? I couldn’t hear you?

Philip Wan – Morgan Stanley

Yeah, sales visibility, for example, normally what – how long is the contract term designed with the online customers and the other business?

Kathleen Chien

Yeah, we probably have not seen much changes on this front, this past quarter. In the online space, it’s basically the membership periods anywhere from one month to one year. So I think that has not – we have not seen major changes in the shift in terms of how people buy on the duration side.

On the HR outsourcing side, that tends to be a longer contract in general to begin with, sort of a minimum of one year is what we start with. So there is no change in terms of behaviour, in terms of the tenure or the duration of the contract in the last quarter.

Philip Wan – Morgan Stanley

Have you seen any customers canceling their contracts to date?

Rick Yan

No, people are more cautious but I don’t think people are kind of canceling their hiring plan or place them all and then cancel, that hasn’t happened.

Operator

And we have the next question come from Ms. Wendy Huang from the company of CIMB.

Wendy Huang - CIMB Securities

My first question is regarding the world, China recruitment market, so you mentioned in your prepared remarks that you’re observing a weaker market demand. So by industry wise, which industries do you observe the weakening hiring demand? And also you mentioned that if we exclude the impact from the print city cuts your ongoing and it should be growing at mid-teens percentage range. So when should we expect this tough comp caused by the offline city cuts to end, or when should we see the overall revenue growth to recover to the mid-teens range?

Kathleen Chien

Yeah, Wendy, if you note that where we are in terms of print contribution to total revenues, I mean every quarter that’s really shrunken over time. So but we expect that again for the full year 2012 that print contribution over total would be probably in a single digit percentage of sales. I think that’s just a process that we need to go through. There is no way to kind of fast forward on that front. So I think it took us about two year plus, to two and a half years now to get to where we’re down to 10 cities. We still have a bit to go but in terms of how that impacts us is the drag, it’s going to be less and less meaningful over time. But now I think that we still need to get through this and I think that – that’s why we try to be more clear and try to break out the different components at least to try to help people have a better understanding of the different trajectories that’s been experienced by the business as we are investing in for the future versus a business that we are transitioning out of. So I think that’s kind of where we are.

Rick Yan

In terms of the growth, I think certainly we are seeing a slower growth rate today versus in the past two years an also in the first quarter. But on the other hand, we at least for the third quarter of 2012 we are seeing as we said that a mid-teens growth, kind of a growth rate percentage range. And interestingly, historically we haven’t really found any kind of diversions in terms of growth by industry or even by geography. So actually in the past nine years, whenever we see growth, we see all the different geographical area growing, and we also see different industries growing. I think this time the same when it slows down, it seems like everything is like going to sink rather than certain industries are slowing down more specifically. So at this state we don’t see any meaningful discrepancy between growth among different industries.

Wendy Huang - CIMB Securities

Okay. Maybe just a follow up on that, recently I came across a comment made by HR experts from Sequent job (ph), she basically said that the job market for grade As is worse since 2009, and so she estimated that the multinational corporations may be hiring 15% less grade As the last year and 30% fewer than that of 2010. So how should we translate the gloomy maybe hiring demand for the grade As into the sequent jobs operation results going forward?

Kathleen Chien

Wendy, I think if you look at our growth rate in the second quarter versus last year’s second quarter versus the prior year, you can already see that has been reflected. So I don’t think that, that information is actually new information in that sense because again our growth rate this year versus the prior two years has already been a haircut if you will. So I think that’s – it’s all kind of in line with what we are experiencing at this point in time.

And then also – but again I would caution with the fact that with multinational it is a small part of the total pool of customers we’re serving and that I wouldn’t say that, that captures the entire picture if you will. But again, I think what I think hasn’t commented on the graduate side, that’s actually already reflected with the fact that we are actually at a slower growth base in the second quarter this year versus the second quarter last year. So I think if you look at those numbers, they actually tie up pretty well.

Wendy Huang - CIMB Securities

And regarding the online recruitment part, number of the online recruiters expanded double digits over the past two quarters, that seems quite healthy. So how should we expect the online customer expansion going forward in the second half?

Kathleen Chien

I think our hope – obviously our effort always continues to be on customer acquisition. So I think we’re going to continue to push forward on that front. I think the challenge for us then on the other end would be the fact what I addressed earlier about the pricing or the spending per customer, if you will. I think in a slower economic environment people will spend less. So even though I think we will continue to have customer acquisition growth, we will have to be I guess always balanced by the fact that the pricing might move a little bit the other way. So I think always, always, always, I think our history of growth has always been based on customer growth. So that’s the one thing that we are very focused on and good market or bad market, that’s something we can’t do and can’t change if you will. So that’s what we are going to be focusing on. So we do expect that we will be directing more efforts to continue that move forward on.

Rick Yan

As we mentioned earlier on, I think larger customers are still pretty active in the recruitment market. The smaller sized enterprises tend to be more cautious now and obviously if the economy kind of picks up again, and the smaller and medium sized enterprises become more active, then we would expect our growth in the unique online employers to come back to the historical growth rate trends.

Wendy Huang - CIMB Securities

Okay. My next question is regarding the margin and earnings trends. It seems that you have implemented quite a good cost control and also you maintained the margin in the past few quarters. So how should we catch the margin trend going forward and also what’s your plan for hiring the sales people or the HR expertise?

Kathleen Chien

I think Wendy, we have always been very careful in terms of managing our productivity overall, if you will. So that’s why I think we have been very disciplined on how do we look at our headcount growth versus our revenue growth. So I think this year so far we haven’t been aggressive as you know the last couple of years in terms of our overall hiring in general. So I think that’s why we have actually delivered I think a steady margin for the business. So I think that’s continue – that’s going to be the same way we look at it. I think just as our customers are cautious, we need to kind of follow where the market is and I think that we expect our headcount growth this year will probably be lower than it was last year on a percentage basis.

Wendy Huang - CIMB Securities

Final question, housekeeping question on the other income, this quarter it was 3 million, what’s that for?

Kathleen Chien

We typically have some financial subsidies and other things that come in. So I mean last year at the same quarter we also had some subsidies that were provided to us. So that’s really the bulk of that.

Operator

We have our next question come from Mr. Tim McHugh from the company of William Blair & Co.

Stephen Sheldon - William Blair & Company

Hi this is Stephen Sheldon in for Tim McHugh. Thanks for taking my question. How are the new sales territories performing that you’ve expanded into for the last 18 months?

Kathleen Chien

We believe that the expansion into the new cities are pretty much on track and to our expectations although that in terms of the actual contributions to total revenue is very small at this time. We are really at the stage where we are really seeding new markets for a longer term growth, and these are cities that we’ve added in the last year and a half, if you will. So overall contribution is actually still a small percentage of total in a single digit but that is actually what our expectations are. So we are on track on that front.

Stephen Sheldon - William Blair & Company

And then what are your updated thoughts on the controlled usage for cash?

Kathleen Chien

I don’t think that there is anything new that’s come up on that front. Again I think in previous calls I think we maybe or with others we’ve discussed, whether or not that’s really for acquisitions, whether or not that’s for potential share buyback or whether or not that’s for dividend payout, I think those are still discussions that we are having ongoing within the company. So at this time, there has been nothing that has been decided yet.

Operator

We have our next question come from Ms. Alicia Yap from the company of Barclays.

Alicia Yap – Barclays Capital

My first question is based on your experience and discussion with your customer, do you think that the 3Q in China will be bottomed in terms of the sentiment and should we start to see the sentiment picking up in fourth quarter? And given recruiting is a lagging indicator, so should we expect you will only see the pick up more meaningfully in the first quarter next year?

Rick Yan

I think recruitment is a leading indicator in a slowdown and maybe a lagging indicator when the economy recovers. So I am not sure we have kind of completed the slowdown, we are already in a recovery phase. And what we are seeing is we are seeing a lower level of activity and based on our guidance and our comments on the prior quarters we would be at a similar level as quarter two. I don’t think we or anyone knows whether this is the bottom or it will go further or when we recover. I don’t think our customers know that, I don’t think we know more than what we see so far and what we gave in our guidance.

Kathleen Chien

Alicia, I will just add that I think typically the challenge is that everyone is in an environment trying to get a clarity and I think this is a – sometimes it’s a decision that’s really made by a cut-in things, that’s sort of what the overall business confidence it. And I think individually every company has certain circumstances that may not really reflect the total economy, it’s more about the company situation. So sometimes what you have individual discussions of customers, it’s hard to disaggregate what is the company’s circumstance issue versus like a macro kind of issues.

But I think as Rick has just said, I do think that right now what we are seeing in our guidance reflects the fact that we don’t think that there has been material change between or we expect that there is going to be material change between the third quarter and what second quarter came in at. So I think there is a little bit of a holding pattern I guess on that front. And we believe that – again we are still waiting for the leadership change to take place in China later in the later. Maybe there will be more clarity and more policy steps that are taken that might actually guide people one way or the other. But I think for now we are really in a holding pattern still yet. So we will just have to kind of wait to learn more and hear more and hopefully be able to share with everybody what more of a market view is maybe in the next call.

Alicia Yap – Barclays Capital

And second question quickly on your online recruiting business, should we expect the ARPU also experience on steady increase in the third quarter similar to the trend that we saw in the second quarter?

Kathleen Chien

I think at this point, I guess like I said we believe that our outlook for now for the third quarter will be kind of similar to what it was in the second quarter. So it might be similar kind of a situation.

Alicia Yap – Barclays Capital

And lastly on the competitive front, I actually just recently came across some aggressive ad campaign by ChinaHR. So just wonder have you seen that steam they are actually picking up a little more aggressively recently?

Kathleen Chien

Honestly speaking, I would say no. We have not. In fact, I think we are hearing less and less of them from a customer front – our perspective on the sales side. So I would say that, that’s not what we are hearing overall in the marketplace.

Operator

Now we have our next question come from Mr. Alex Leung from the company of SAC.

Alex Leung – SAC Capital

First, I just want to make sure I heard you right. Kathleen, did you say that print in 3Q is going to go down some more but did you quantify that? Did I hear you say it’s going to have?

Kathleen Chien

I said yes, on a year over year basis we expect that the print revenues will decline by more than 50%. Yes, I did say that.

Alex Leung – SAC Capital

Okay. Got it. And then next one on the online side, I am just curious how the seasonality plays out usually because it sounds like Wang Ji (ph) is usually in the first half and if you look at last year, your number of customers on the online side quarter on quarter basis went down in 3Q and went down again in 4Q. They went up a lot in the first half. So this year would the same thing naturally happen, is this just what’s normal, so the number of customers might actually go down a bit in 3Q, down a bit in 4Q?

Kathleen Chien

Definitely in the 4Q normally goes down because it’s end year. Between second and third Q it’s kind of not material difference up or down. It’s kind of small increases one way or the other but it’s not meaningful. But 4Q typically goes down, yes.

Alex Leung – SAC Capital

HR services has become kind of the bright spot for you guys, and last year, you had good Q-on-Q growth in this line pretty much as a quarter. In Q2 this year it was kind of flat Q-on-Q, you talk that up to kind of just the overall macro as well or I guess what’s locked down other than just on your basic figure, but it seems like your penetration is really early in that, right, so it would seem that you could still keep growing that even sequentially. How could Q2 kind of was flat?

Kathleen Chien

Honestly speaking, with the other HR services, it’s just a little bit lumpy because the business is actually in early stage development. Sometimes you get a lot of contracts that all come in through a certain quarter versus another quarter. So it’s just a little bit lumpier. So it’s not smooth if you will. So I guess that’s why we always look at year over year rather than on a Q-on-Q basis. So if you look at the year over year, I think the trends are still very healthy, same as it was in the first quarter. So I don’t think there is anything new or different on that sense.

Alex Leung – SAC Capital

And then last question is on the balance sheet, if I look at your current assets, your prepayments went up quite a bit quarter on quarter, (indiscernible) what was that because it’s gone up quite a bit in the last two quarters sequentially?

Kathleen Chien

There is no meaningful difference in terms of how we run the business. It may be just a sort of cut off issues on certain things that needed to kind of move from one category, other payables, receivables and what not, but nothing meaningful in terms of the changes in the underlying business.

Operator

And we have the next question come from Mr. Wallace Cheung from the company of Credit Suisse.

Wallace Cheung – Credit Suisse

Quickly when we see like this round of the economy slowdown, how do we compare the cycle the interest in line (ph), i.e. the number of available sort of a recruitment vacancy as declining or simply customers are more selective in terms of their advertising campaigns maybe (indiscernible) fewer platform now, there could be only advertisement on one or two platform. And also are we seeing the – price pick up by the customers, if there is any kind of changes from last time, are they asking for more discounts still waiting to advertise or simply they just don’t want to take any time right now?

Kathleen Chien

I think we still maintain that we are in the sort of ‘08-‘09 situation where everyone was a little bit shell shocked and just – I do think that as I said earlier I am kind of using the word, it’s kind of holding pattern, or people are just taking a little bit more time to figure out how quickly they want to recruit, how – they are more cautious on how they want to add to the headcount and what not.

So I don’t think – we are still kind of in the same situation. But it’s not quite comparable sometimes to think about it from -- the customer penetration is actually different now versus it was three or four years ago. I mean in terms of number of customers we are serving now versus a few years ago, that’s actually a very meaningful magnitude change already. So I guess for us I do think that if you look at when we talked about the average revenue per customer between Q1 versus Q2 I do think that people are more cautious. So they are spending a little bit less. But we are not actively trying to change pricing for the same product, same thing. So I think people are just taking their time, figuring out where things are going. And so people are still recruiting but just not as aggressive as they were in the first part of the year, and that people are trying to figure out whether or not there is more policy that’s going to be coming in to kind of help boost the business activities or whether or not this is really a bottom or not bottom. And I think just people are trying to get clarity on that. But I think in the ’08-’09 situation, I think there was a couple of quarters where people didn’t want to do anything period. So I think that was actually a lot of more extreme in terms of people’s attitude.

Wallace Cheung – Credit Suisse

So basically I think the visibility is still at least better than what we have seen in the last cycle.

Kathleen Chien

I think people are not as the ’08-’09 stage yet.

Wallace Cheung – Credit Suisse

I think you have a lot of like last account, normally at the beginning of the year you may have come up some kind of like a three year plan, would they change the plan, and also we are getting into stage of the campus recruitment right now. So would thy change your plan in terms of number of hiring or privately through an acquisition or would these things have any kind of impact on your campus recruitment efforts?

Kathleen Chien

It’s a little bit early yes for us to kind of answer that because the campus is more of Q4 kind of a situation. But I do think that yeah, people are going to be a little bit more cautious but campus recruitment as a percentage of overall hiring is very small for a large company. So I don’t think that’s going to move the needle too much on the overall number of people they recruit. So that’s not really going to be that significant. So we will have more information as we kind of get into more of the Q4 kind of situation. So I think that’s kind of where we are.

Operator

And we have our next question come from Mr. Greg Jones from the company Office Group.

Unidentified Analyst

Actually I have two questions. The first question is about your Wuhan calling center. Is it possible to quantify the percentage of revenue now driven by the calling center? And my second question is about, I have just read from social network, online recruitment, and we saw a listing record strong growth in the second quarter and some social network in China like renren also launched this online recruitment channel. Have you seen some fierce competition from these names?

Rick Yan

It’s our policy not to disclose revenues by geography and we’re not going to talk about revenue by geography. In terms of the social network, professional social network we noted that closely in the couple of - past couple of years we have not seen anyone with any traction for the – for the application in the recruitment space. I don’t think if renren is offering any meaningful recruitment services to corporations in China.

So yes, we know LinkedIn is doing well in the U.S. but we have not seen any professional social network in China with any meaningful traction.

Kathleen Chien

Yeah Gregory, I will just add that earlier in my comments I did that our Wuhan call center is still contributing for a single person of revenue. So – but we are not going to provide the very specific percentages but – again we have said a single percentage of revenue, so it’s not that meaningful but it’s on track to our expectations. And I guess as Rick just also said with social network, I actually don’t think the renren news they actually try to get into this business. So two years ago actually and we have not seen any traction and in fact, they stopped doing that. And I am actually little bit surprised that, that news has been re-circulated now and they are doing something differently because again, we are not seeing them as a viable competitor really in our space and we do not believe that they have the ability or the intent to maintain a sales force to actually reach out to customers and really service their needs. So we are not seeing any threat from them at this point in time. And I think that the market structure in China is actually quite different from the market structure in the U.S. and some of the other markets that maybe LinkedIn has similar kind of focus already. So we just don’t see that today that there is any sort of a meaningful critical mass network on a social site that can offer services that’s effective or a broad category in a large number of job vacancies and recruitment needs that companies have at this point in time.

Operator

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 again next quarter, and we value your continued support of 51job. Bye-bye.

Operator

Thank you ladies and gentlemen, this concludes the 51job, Inc.’s second quarter 2012 conference call. Thank you for your participation. You may now disconnect.

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