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Executives

Linda Chien – Head of IR

Rick Yan – President and CEO

Kathleen Chien – COO and Acting CFO

Analysts

Tim McHugh – William Blair & Co.

Alicia Yap – Barclays Capital

Wendy Huang - CIMB Securities

Gillian Chung - Morgan Stanley

Betty Dai - CIMB Securities

Daniel Blair - Nomura

51job, Inc. (SUPX) Q3 2012 Earnings Call November 7, 2012 7:00 PM ET

Operator

Welcome to the 51job, Inc.'s third 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, Vice President and Head of Investor Relations. Thank you, madam. Please go ahead.

Linda Chien

Thank you, [Cheryl], and thank you all for attending this teleconference to discuss unaudited financial results for the third quarter ended September 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 third 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 fourth 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 recorded 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 first quarter, followed by Kathleen with a detailed presentation of our financial results. Then I'll discuss current market conditions and our guidance. Finally, we'll open the call to your questions.

After the pronounced softening in market demand in the second quarter, we saw hiring patterns stabilize in the third quarter. Employers resumed recruitment activity, although cautiously in a normalized pace, in line with historical trends we have observed. Both revenues and non-GAAP EPS came in just ahead of our guidance range at RMB374 million and RMB2.3 million, respectively.

Despite the persistent economic uncertainty dampening recruitment demand, we pushed forward our online business and achieved customer growth through solid sales execution in the third quarter. Leveraging our strong brand and large direct sales coverage network, we increased the number of corporate customers using our online services to 188,000 for the quarter. This 13% year-over-year growth was a faster rate compared to the first two quarters of 2012 and demonstrate our ability to make consistent progress on our number priority of customer acquisition even in less than ideal market conditions.

In addition, during this time the companies are closely monitoring every expenditure, we managed to maintain average revenue per customer at a similar level in the third quarter. ARPU was relatively unchanged compared to the year-ago quarter as well as to the preceding second quarter of 2012.

While we navigate through this period of recruitment market volatility, we continue to benefit from the steady development and rising contribution of our other HR services area. Revenues increased 26% year over year, led by demand for our business process outsourcing and training services. The time and effort we have dedicated to building these services are clearly bearing fruit and yielding meaningful results. We remain believers that market potential for HR outsourcing in particular is tremendous and that we are well-positioned in China to capture this opportunity through our deep relationships with hundreds of thousands of HR departments across the country.

Finally, turning to our print advertising services, we are coming to the sunset of this business as we terminate more applications. The revenue loss from print will be a drag to our overall revenue performance for a few more quarters. But we are confident that once the wind-down is complete, the transition of resources to other rapidly developing parts of our organization will set the foundation for our future growth.

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

Kathleen Chien

Thank you, Rick.

Revenues for the third quarter totaled approximately RMB374 million, representing a 9% increase over the same quarter in 2011. Online revenues for the third quarter grew 13% year over year to RMB241 million due to an increase in the customer accounts. The number of unique employers using our online services increased more than 13% year over year to 188,000 companies in the third quarter of 2012.

Despite the continued climate of spending caution by employers, ARPU was relatively unchanged as compared to the third quarter of 2011 and also to the second quarter of 2012. In addition, we expanded our geographic footprint to 79 cities for our Wuhan call centers during the quarter and we reached our planned target for the year, and including our sales offices, we are now providing direct coverage in 104 cities across China.

Print advertising revenues decreased 47% from the third quarter of 2011 to RMB23 million. The decline was primarily due to our decision to progressively discontinue print publications in response to the secular shift in customer demand away from print advertising. Although our revenue per page was higher in the third quarter, the number of print advertising pages in the third quarter of 2012 decreased 59% to approximately 550 pages, compared with 1,300 pages in the year-ago quarter. In August, we terminated the 51job weekly publication in the City of Hangzhou, bringing the total number of current print cities down to nine. For the fourth quarter, we are expecting the print revenue to decline further, to remain steep at about 50% or more, due to the seasonal yearend weakness and fewer publications in circulation.

Other HR services revenues grew 26% to RMB110 million in the third quarter of 2012, primarily due to the increased demand in customer acceptance of our outsourcing or training services. Contribution of other HR services to total revenues continued to trend up and increased to over 29% compared to 26% in the year-ago quarter.

Gross profit grew 10% to RMB259 million and gross margin was 72.5%, slightly higher than the third quarter of 2011. Included in cost of services in the third quarter was higher share-based compensation expense in the amount of RMB2.2 million.

Our sales and marketing expenses increased 14% year over year to approximately RMB94 million in the third quarter, primarily due to higher employee compensation expenses and greater spending on marketing and promotional activities. Included in sales and marketing expense was higher share-based compensation expense of RMB1.9 million in the third quarter. Per our normal process, as we wrap up the year and prepare for the upcoming Chinese New Year holiday in 2013, we expect our sales and marketing expenses will increase in the fourth quarter due to headcount additions, customer events, and other promotional activities.

Our G&A expenses for the third quarter were over RMB48 million, an increase of 16% from the year-ago quarter, due to higher employee compensation, rental and office expenses. Share-based compensation expense included in G&A increased to RMB9.8 million in the third quarter of 2012 compared with RMB7.9 million in the same quarter of the prior year.

Operating income for the third quarter of 2012 increased 4% year over year to RMB117 million. Operating margin was 32.7% compared with 34.4% in the same quarter of the prior year. Excluding share-based compensation expense, our operating margin was 36.6% compared with 37.8% in the year-ago quarter.

Net income for the third quarter increased 16% to nearly RMB113 million compared with RMB97 million in the same quarter of 2011. Fully diluted earnings were RMB1.91 per common share, which is equivalent to USD0.61 per ADS. Excluding share-based compensation expense gain or loss from foreign currency translation and their related tax impact, our non-GAAP adjusted net income increased nearly 14% year over year to RMB126 million in the third quarter. Our non-GAAP adjusted fully diluted earnings per common share were RMB2.13 or USD0.68 per ADS.

Now turning over to our balance sheet, we generated a strong cash flow in the quarter as total cash and short-term investments increased to over RMB2.3 billion. This is equivalent to approximately USD372 million and nearly USD13 per outstanding ADS.

In September, we entered into an agreement to purchase office premises in a commercial building in Guangzhou. Our local sales office in that city has been occupying some of the space as a tenant for several years. We have already paid a total purchase price of RMB92.7 million to the seller as a deposit for the transaction in the third quarter. This amount is current included in our balance sheet as other long-term assets. Upon fulfillment of all contract terms by both parties, we will take title of the premises and this purchase will be reclassified into the property and equipment line item.

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

Rick Yan

Thank you, Kathleen.

Our conversations with employers continue to indicate a tone of caution and selectiveness with regard to corporate spending and headcount. In our opinion, employers have largely been in a holding pattern in recent months. While customers have added staff as needed, but at the same time they have been hesitant to make meaningful hiring commitments. As a result, we have seen neither a material improvement in market sentiment nor a further slowdown. We expect the pace of growth for our online recruitment business to remain moderate and measured during this period of economic doubt.

With the important Chinese government meetings starting this week in Beijing and the leadership transition finally underway, we are hopeful that there will be more clarity on the direction of the economy over the next few months. Whether policies are viewed as favorable or not by the general public, we are optimistic than an increased flow of information will help reduce the level of uncertainty that has been looming over corporate budget and recruitment plans. While a boost in business confidence would of course be our preferred results, should the opposite happen, we would also know and take the necessary actions in response. We have prepared for whatever the case may be.

During this time that everyone has been waiting for more signals regarding the economy, we have stayed focused on balancing strategic investments and efficiency measures. On the product front, we recently launched upgraded version of our mobile applications which enable greater real-time examination of job information to users. Job seekers can easily receive instant notifications or new postings and submit resumes through their mobile devices, as well as exchange thoughts with other users in employer [same cup] platforms. We view mobile internet as a natural extension of our PC platform and we're excited about the new opportunity this brings to engage our users.

The most valuable asset of services companies, including 51job, is its people. As we continue to expand and add to our headcount, we do face the growing problem on how to house our staff productively and economically. In addition to the new Wuhan building purchased last year, we just recently acquired some office premises in Guangzhou. Commercial rent in the large cities have been increasing significantly in China and we believe the use of cash on these real asset purchases is beneficial from both an operational and long-term investment perspective.

Turning now to our guidance, based on current market conditions and factoring in a meaningful decrease in print advertising revenues, our total revenue target for the fourth quarter of 2012 is in the estimated range of RMB380 million to RMB395 million. For the non-GAAP fully diluted EPS target, our estimated range is between RMB2.05 to RMB2.2 per common share. Please note that this non-GAAP EPS range does not include share-based compensation expense, gain or loss from foreign currency translation, nor their related tax impact.

Total share-based compensation expense is expected to be between RMB13 million and RMB14 million for the fourth quarter. This guidance reflects our current forecast which is subject to change.

We are pleased to share with you another quarter of progress and solid financial performance. From a base of strong business fundamentals, we strive to develop the most comprehensive, efficient and resilient operating model to serve HR departments in China. We have confidence in our strategic plan and believe that we are building towards the long-term future of sustainable, profitable growth.

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

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will now begin the question-and-answer session. [Operator Instructions].

And the first question comes from Mr. Tim McHugh. McHugh, please state your company name and your question. Thank you.

Tim McHugh – William Blair & Co.

Thank you. It's Tim McHugh with William Blair. First, I just want to ask about the new customer additions for the online business. As you noted, it ticked up. Can you talk about what underlying activity you saw? Was that more small customers coming back where I think you're seeing some weakness the last couple of quarters? Or was it more broad-based? Or any more color you can provide us on that?

Kathleen Chien

Tim, thank you for the question. I think that, you know, as we've talked about in the last quarter, I think things were kind of stable and not making improvements but not really going the other way either. So I think people were cautious in terms of how much they were spending, but still people are making limited hire or making replacement hires still. We saw that across the board, that things were at least a little bit more stable on that. Actually it's reflected probably across all segments of the market smaller or larger companies alike.

Tim McHugh – William Blair & Co.

Okay. But the customer additions weren't disproportional to any one type of customer?

Kathleen Chien

No.

Tim McHugh – William Blair & Co.

Okay. And then, you know, the, I guess, the revenue per employer at this point -- or revenue per online employer, can you talk about kind of the trade-offs? As you've seen better growth, I imagine new customers come in at a lower revenue level. I'm just trying to understand the dynamic. I'm assuming pricing is kind of flat but you've seen more customers come in at a lower average level. And I guess offsetting that, are you still seeing more mature customers increasing their spend? If you could just give us some color on what's driving that revenue ARPU line?

Kathleen Chien

Yeah, I mean -- yeah, typically, I would say that, yeah, our pricing has been stable, so there's been really no change on that front. So we haven't tinkered with our pricing this last quarter or we don’t have plans to do anything in the fourth quarter at this point in time as well. So it's really a function of just getting more customers, you know. And typically, as you have already noted, that the newer customers will typically come in at a lower price point and then we'll have other customers who eventually kind of mature and growing with us over time will end up spending more than the new customers. So it kind of washes out at the end.

So if you look at our revenue growth rate versus our customer growth rate, it's basically a one-for-one kind of situation at the end, 13% for online both the revenue as well as the customer account. So this is more kind of overall where you see pricing ends up being washed with the newer customers coming in at the lower price point but then other customers buying more as they mature. And so it's really a one-for-one kind of a situation.

But we haven't done anything in terms of changing the price list, if you will. So it's really a function of just customer acquisitions driving that.

Tim McHugh – William Blair & Co.

Are you starting to see the regional or the geographic expansion to the Wuhan call center start to -- is that starting to have an impact on the number of clients online? Is that part of what we saw this quarter or is it still too small to be a meaningful driver?

Kathleen Chien

It's still small, so it's still a sort of single-digit percent of revenue contribution overall, so it's still small. But steady progress certainly though, so, steady progress.

Tim McHugh – William Blair & Co.

Okay. And last question at this point is, given the, I guess you bought the building for your call center and this addition on building this court. I guess, how much real estate, I guess, building, do you -- what's the value of those at this point? I can't recall if you also own your corporate headquarters.

Kathleen Chien

Yeah. We actually purchased an office building space in Shanghai back in 2005/2006 period and then we bought something in Wuhan in 2009 the first time, and then obviously we're actually closing in on the second building, and then now this Guangzhou building. I would say that certainly real typically appreciates over time. So we're not, obviously, not interested in trying to sell our space or anything, but we believe that all of the properties that we purchased in the past have appreciated quite significantly.

Tim McHugh – William Blair & Co.

Okay. Thank you.

Operator

Thank you. And the next question comes from Ms. Alicia Yap. Ms. Yap, would you please state your company followed by your question?

Alicia Yap – Barclays Capital

Hi, thank you. It's from Barclays. Good morning, Rick, Kathleen and Linda. Congratulations on the solid results.

My question actually was asked by Tim earlier, but I wanted to follow up a little bit on the ARPU. So, Kathleen, you mentioned that this is not truly based on the pricing, so it's washed up. I just wondered to get a sense whether some of these existing employers are actually spending more budget or is it because some of the pricing increase that you had last year that slowly factor in into the overall budget that they have?

Kathleen Chien

Well, by the first quarter basically, there's been no price increase for over a year in that sense. So I mean there will be no impact from the price list increase from last year, that's been carried over in the third quarter, because people [inaudible] 32:00 for example, last year in the third quarter, if they're reviewing a contract, they're actually at the same price list level, if you will. So there's been no sort of price element to how they renew, how they buy that will contribute to more upside for us.

Alicia Yap – Barclays Capital

Thank you.

Kathleen Chien

Yeah.

Alicia Yap – Barclays Capital

And then for the budget that they're spending more with you, did you get a sense that, is that their overall budget is increasing or is that they are cutting some of these maybe lower ROI advertising from the print or from other magazines into the online?

Kathleen Chien

I would just say that in general, I think sometimes what happens with the customers that have worked with us the first time, they will buy something more limited just because they're trying it out and they haven’t necessarily, you know, unless they're fully utilized in budget or haven't fully used this particular channel to conduct all the recruiting activity. So over time, as they see the richness of the product offering that we have across the different kind of -- on the online platform across the board, whether or not it's doing some more value-added services or actually using more of the resume bank or trying to get top billing for their postings or whatnot. I mean people end up actually then allocating more money into this platform.

So it's unclear whether or not they're taking it from another channel, but I would say that that's typically not necessarily the case because a lot of the customers we work with are typically first-time real buyers, if you will. So it's just as they get more comfortable and they see that this yields results, they're willing to spend a little bit more. But bear in mind, again, we're talking a few thousand dollars or a few hundred ones on those who start the first time. So the absolute dollar amount is not significant. But I think that it's not something that's onerous for them overall.

Alicia Yap – Barclays Capital

I see, I see. And then back to the increase on the -- 13% increase in the unique employers. I know that you mentioned it's across different cities, different business verticals. Just curious, did they, some of these, previously maybe they were your print customer, and then once you kind of like [die down] your print business and you are migrating some of your customers to the online platform?

Kathleen Chien

That's an ongoing exercise, I would say, so that's always going to continue happening, if you will. But I wouldn't say that that would have attributed anything additional or extraordinary percentage in the third quarter because the transition from the offline to online has been in progress for several quarters already.

Alicia Yap – Barclays Capital

I see.

Kathleen Chien

So that's maybe something that we'd attribute to that, yeah.

Alicia Yap – Barclays Capital

I see, understood. And then lastly, on the HR services, so, typically 4Q will be the strong season for the campus recruiting. So, would that mean, together with the continued ramp on the BPO business, would that be -- 4Q should be another strong momentum for HR services revenue, right?

Kathleen Chien

Yeah, I mean we continue to expect that we should continue to make progress on the other HR services. I think we probably have a little bit more limited expectations on campus-related activity this year versus last year just because I think given that corporate attitude toward making major investments, I think they've actually been -- holding back a little bit actually on the campus front. So I think we'll probably have a little bit more limited especially on the campus side, although we believe that with our other services, especially driven by the outsourcing service, that that should actually continue to perform well.

Alicia Yap – Barclays Capital

I see. Great. Thank you. Thanks for taking my questions.

Linda Chien

Thank you, Alicia.

Operator

And the next question comes from Ms. Wendy Huang. Ms. Huang, would you please state your company name followed by your question?

Wendy Huang - CIMB Securities

Thank you for taking my question. Firstly, based on your interaction with your customers, how has your customer sentiment changed versus a month ago? And also, have you started talking with the customer about their 2013 hiring sense? Thank you.

Kathleen Chien

I'd say that, yeah -- I mean I wouldn't say that the sentiment has changed too much. Again, everyone is kind of waiting for the leadership transition which is now starting to go underway. Today actually they opened up the party congress. So I wouldn't that there's been any real changes in attitude. I think everyone is still kind of feeling their way and trying to get a better -- more information, if you will.

It's a little bit early for people to know exactly what they're going to do in 2013 yet, and next year actually Chinese New Year falls a little bit later than this year, so it's actually happening in sort of mid-February, if you will. So it's going to still -- there's still a little bit of time before they kind of finalize or take action. And I think a lot of that will rest on what this week's meeting in Beijing will kind of signal in terms of what the message of the leadership will send out. So I think we need to have a little bit more time to get more understanding. We'll continue to interface with customers and learn and understand what they're looking for, but I think it's a little bit early for them to kind of put everything out there, to know exactly what they want to do for 2013 at this point in time.

Wendy Huang - CIMB Securities

Okay. And for your non-GAAP OP margin, it seems to trend down slightly sequentially. So, how should we be thinking of the margin going forward? Also getting to Q4, it's usually a seasonally high season for the sales and marketing activities.

Kathleen Chien

Fourth quarter is seasonally a quarter we spend more money because we have a lot of activities and a lot of preparations for the following year, including some additional hiring as well. So I think that that's kind of a same pattern that we would expect to kind of go through as we have the past years. I think again third quarter, yes, it's true that the margin was down slightly but it's not meaningful. I think that we're pretty much on the same course that we were at, so I think it's kind of a steady kind of a situation for now.

Wendy Huang - CIMB Securities

Okay. Lastly, on your Guangzhou building, what would be the main function of that building? How many people can that building accommodate?

Kathleen Chien

Actually we have -- the space that we've acquired actually gives us about 35% probably more capacity for expansion. So it's actually larger than our -- what we're occupying in [inaudible] it actually reserves room for expansion for us.

Wendy Huang - CIMB Securities

Okay, great. Thank you.

Linda Chien

Thank you.

Operator

[Operator Instructions]. And the next question comes from Ms. Gillian Chung. Ms. Chung, please state your company name followed by your question. Go ahead please.

Gillian Chung - Morgan Stanley

Thank you for taking my questions. This is from Morgan Stanley. My question is, how many of your online customers are actually using your other HR services? And what's the percentage to last year? Is it possible to provide a breakdown of your HR services? I just would like to know which services are the most popular ones. Thanks.

Kathleen Chien

I think, you know, the HR services sector and our recruiting services, in terms of the customer, it's actually 100% overlap basically. So, people that actually use -- or customer that -- business process outsourcing are typically recruiting customers. So that's a 100% overlap.

In terms of the percentages, however, that's still very, very small because just last quarter we transacted with 188,000 customers in the recruitment space. But in terms of number of customers we're serving on the outsourcing side, that's still in a few thousand. So I mean it's 2%, 3% penetration if you think of it in that perspective. That hasn't been changing. I would say it hasn't changed much from this year versus last year because again with the recruitment customer accounts still growing very healthily, that percentage is unlikely to have meaningful change I think in the short term.

In terms of the other HR services revenue overall, the biggest components typically actually are outsourcing services and our training services. That would be the over half of the revenue, is that bucket, typically not recorded, but there's other products that are a little more seasonal, so the percentages actually change every quarter. But overall, definitely still that the training services and the outsourcing services that are actually the major revenue items within that bucket.

Gillian Chung - Morgan Stanley

Thanks a lot.

Operator

And the next question comes from Betty Dai. Ms. Dai, would you please state your company name followed by your question? Thank you.

Betty Dai - CIMB Securities

Hi. I am from CIMB. I have two questions. The first is, offline printing ad price per page was much higher compared to 2Q, and what's the main reason behind that? Do you see this trend to continue in the fourth quarter?

Kathleen Chien

I think the pricing really depends on what the mix of the cities that's contributing to that count. So we haven't done anything with the actual pricing on a same-city basis, if you will. So the price list that's been offered in all the cities are the same. It's just the mix of cities that make up those page count actually change from quarter to quarter, also as we transition print at different cities and whatnot. So that's what's kind of driving that. So we are not expecting to do anything with the price list itself. So the list price should stay the same, but the actual contribution by cities will continue to change as we again have phased out different cities over time. And that will actually then have an implication on the overall -- what the average price is. But we don't focus on that for the most part and we're expecting that the overall revenue levels should be down 50% on the print line for the fourth quarter. So that's what we're looking at.

Betty Dai - CIMB Securities

Okay. And did you increase any sales headcount in the third quarter?

Kathleen Chien

We did actually have some headcount additions, but quite still kind of limited headcount. So overall we've added about a couple of hundred people -- about 150 people actually since the last quarter. So it was actually more than 50% in the sales side though.

Betty Dai - CIMB Securities

Okay, thanks.

Operator

And the next question comes from Mr. Daniel Blair. Mr. Blair, please state your company followed by your question. Go ahead please.

Daniel Blair - Nomura

Nomura. Thanks for the call, guys. Three questions for me. Just on your fourth quarter guidance, if you can just tell us what that infers for online, what you'd expect revenue growth to be to the online.

Secondly, if you can just give us some detail on the competitive landscape, how it's faring between yourselves, Zhaopin, ChinaHR. And then thirdly, just an update on, have you seen any threats from social media, whether it's LinkedIn or someone else? Thank you very much.

Kathleen Chien

Okay, I'll take the first one and Rick is actually going to take the second and third one. Just on the overall guidance, typically we don't break out specific lines, if you will, for the guidance, because it's a mix of different things moving. But overall I would say that typically in the fourth quarter we are not expecting that the online revenues this time to actually have a major difference from what we achieved in the third quarter, I would say. So I would say that, on a year-over-year basis, we're still looking at probably low teens for the online business. But on a quarter-to-quarter basis, that growth might be actually more limited. That's what we're looking at for the online services in the fourth quarter.

Now I'll let Rick actually jump in and actually answer the competitive landscape.

Rick Yan

Yeah. The competitive landscape hasn't really changed in the past year. We're still competing with mostly Zhaopin, and to a lesser extent, on ChinaHR. If you look at the financial results that's been announced by Seek, we're growing at similar rate, although I think we're gaining shares at a very slow pace. ChinaHR seems to be falling behind further and further. So basically we are still competing with the same people, Zhaopin and ChinaHR, and we do believe that we are slowly gaining shares against those players.

In terms of other competitors, we have not seen any new entrants into the market. At one point Baidu had an entry and there were other people trying to enter the market. But in the past year, it's pretty obvious that none of them have gained any kind of traction. So the competitive landscape remains the same, not only this year, probably the same for the past five years, as we can see.

On your third question, in terms of the new media, yeah, we look at LinkedIn from time to time. There are a number of LinkedIn-like imitations in China. We look at almost all of them. It seems like this business model hasn't really kind of taken off in China. We put -- we watch them very closely.

We also experiment with our own way of creating some kind of social media between our users. It's our priority to try to engage our users from time to time and make sure that whenever they look for job, they come back. And hopefully even when they're not looking for jobs, they can come back and look for additional information and share ideas with other users. So this is something that we are working on.

We have not seen any impact on customer spending in the sense that whether customers are moving budget from the traditional recruitment advertising into the kind of social network. We have not seen that, even in campus recruitment. We look at customer's project, we look at how they are using. They are still using traditional players and doing pretty much the same as what we've been doing in the past couple of years.

So, LinkedIn is something that we monitor closely over time, but again at this stage, we don't see that as kind of gaining traction in the Chinese market.

Daniel Blair - Nomura

That's great. Thanks for that.

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 support of 51job. Thank you. Bye-bye.

Operator

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

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