51Job (JOBS) misses REVISED guidance on higher expenses, stock down (4Q04 earnings)

| About: 51job, Inc. (JOBS)
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51Job (ticker: JOBS), a Chinese online recruitment company, missed the low-end of its revised fully diluted EPS guidance of RMB 0.24 - 0.27 for Q4 2004 by RMB 0.03. Details:

Q4 Results:
(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Total revenues increased 31.8% to $14.5 million (RMB 120.4 million). RMB 120.4 million was at the high end of the company's revised guidance of RMB 117.0 - 121.0 million.
  • Net revenues, which reflect total revenues less business taxes and
    related surcharges, increased 31.4% to $13.8 million driven by recruitment advertising.
  • Print advertising revenues increased 30.2% to $8.9 million.
  • Estimated print advertising pages increased 58% to 2,346.
  • Online recruitment services revenues increased 26.7% to $3.6 million.
  • Unique employers using online recruitment services increased 43.5% to 22,966.
  • Executive search revenues increased 24.7% to $0.7 million.
  • Other human resource related revenues increased 69.8% to $1.3 million.
  • Gross profit increased 27.8% to $6.7 million.
  • Gross margin was 48.8% compared with 50.1%.
  • Operating expenses increased 56.1% to $4.5 million.
  • Operating expenses as a percentage of net revenues was 32.4% compared with 27.2%, due to a planned increase in sales and marketing expenditures.
  • Sales and marketing expenses grew 70% to $2.4 million due to hiring of sales personnel and increased spending on advertising, promotion and brand building.
  • General and administrative expenses increased 27.1% to $1.6 million due to higher costs associated with operating more offices, personnel additions, professional services fees and increased expenses related to being a public company.
  • Net income decreased 36.9 % to $1.5 million.
  • The decrease in net income was affected by tax exemptions available to the company in Q4 2003, the substantial majority of which have expired.
  • Fully diluted EPS decreased 51% to RMB 0.21. Company missed revised Q4 diluted EPS guidance of RMB 0.24 - 0.27.
  • Fully diluted earnings per ADS decreased 51% to RMB 0.42.
  • The fully diluted weighted average number of common shares outstanding increased to approximately 56.6 million in Q4 as a result of the issuance of 12,075,000 common shares in the Company's initial public offering and the conversion of 14,058,466 Series A Preference Shares into common shares.

Quarterly adjustment - clerical error:

  • Company discovered a clerical error that
    affected some prior period results.  The adjustments arose because, in the
    course of automating certain accounting processes at the Company, an
    accounting clerk erroneously made manual adjustments that duplicated the
    automated entries.
  • The Q2 2004 adjustment will reduce
    previously reported revenues by $157,000 and previously
    reported Q2 2004 net income by $94,000.
  • The Q3 2004 adjustment will reduce previously reported revenues by $262,000 and previously reported net income by $169,000.

Guidance for Q1 2005:

  • Revenue of RMB 132 - 138 million.
  • Fully
    diluted EPS of RMB 0.16 - 0.21.
  • In accordance with its sales and marketing plan,
    the Company increased spending on mass media advertising and promotion.
  • Profitability is
    expected to be impacted by increased headcount, higher costs associated with
    Sarbanes Oxley compliance, professional services fees and other expenses
    associated with being a public company.

CEO Comments on Q4:

''Although fourth quarter results were below our
expectations, 2004 was a strong year of growth and progress for 51job.  In
addition to significant year-over-year increases in revenues and net income,
we achieved several operating milestones, including conducting transactions
with over 140,000 corporate customers and expanding our nationwide network to
20 offices across China.''

CEO Comments on 2005:

''For 2005, we remain focused on further strengthening our brand as the
leading integrated human resource services provider in China. We believe that we are uniquely positioned to serve customers of all
sizes with our large geographic footprint, multiple distribution channels and
broad array of products and services.  Our sales force, which is now over
1,000-strong nationwide, is aggressively acquiring new customers and
up-selling new products and services to existing clients.  We are building
upon solid fundamentals and a significant market opportunity.  We believe that
51job is poised for continued growth and profitability in 2005 and beyond.''

JOBS stock market performance: