PR Newswire | Aug 10, 2020 04:15PM EDT

08/10 15:15 CDT

51job, Inc. Reports Second Quarter 2020 Financial Results SHANGHAI, Aug. 10, 2020

SHANGHAI, Aug. 10, 2020 /PRNewswire/ -- 51job, Inc. (NasdaqJOBS) ("51job" or the "Company"), a leading provider of integrated human resource services in China, announced today its unaudited financial results for the second quarter of 2020 ended June 30, 2020.

Second Quarter 2020 Financial Highlights:

* Net revenues decreased 14.0% from Q2 2019 to RMB828.6 million (US$117.3 million) * Online recruitment services revenues decreased 17.6% * Other human resource related revenues decreased 7.7% * Income from operations was RMB165.5 million (US$23.4 million) * Fully diluted earnings per share was RMB5.55 (US$0.79) * Excluding share-based compensation expense, loss from foreign currency translation and change in fair value of equity securities investment, as well as the related tax effect of these items, non-GAAP adjusted fully diluted earnings per share was RMB5.28 (US$0.75)

Commenting on the results, Rick Yan, President and Chief Executive Officer of 51job, said, "Our second quarter results reflected a sequential rebound in our other HR services segment and sound profitability that balanced cost management and strategic investments. While economic recovery is underway in China and we have seen steady improvement in labor market activity since March, hiring tends to be a lagging indicator, and companies remain careful and selective in adding headcount amid lingering uncertainty from the COVD-19 pandemic and geopolitical tensions. As we rebuild our revenue pipeline and work with employers and job seekers to adjust to a new normal, we remain committed to providing our users with the high quality service, innovative technology and dedicated support they need to overcome current challenges. With our strong financial and competitive position, we will continue to prioritize new product development, strategic investments and operational improvement that we expect to drive our future growth and success."

Second Quarter 2020 Unaudited Financial Results

Net revenues for the second quarter ended June 30, 2020 were RMB828.6 million (US$117.3 million), a decrease of 14.0% from RMB963.6 million for the same quarter in 2019.

Online recruitment services revenues for the second quarter of 2020 were RMB503.3 million (US$71.2 million), representing a 17.6% decrease from RMB611.0 million for the same quarter of the prior year. The decline was due to the significant impact of the COVID-19 pandemic and global economic uncertainty on the business operations of companies in China, which has reduced their recruitment demand and curtailed their spending on the Company's online recruitment platforms compared to the same quarter in 2019.

Other human resource related revenues for the second quarter of 2020 decreased 7.7% to RMB325.4 million (US$46.1 million) from RMB352.6 million for the same quarter in 2019. The decrease was primarily due to fewer in-person training events conducted in the second quarter of 2020 as a result of the pandemic's impact on physical interaction and limitations on social gatherings and travel instituted by local authorities from time to time.

Gross profit for the second quarter of 2020 was RMB557.5 million (US$78.9 million) compared with RMB675.9 million for the same quarter of the prior year. Gross margin, which is gross profit as a percentage of net revenues, was 67.3% in the second quarter of 2020 compared with 70.1% for the same quarter in 2019. The decrease in gross margin was primarily due to a lower level of revenues in the second quarter of 2020, which was partially offset by a reduction in contributions to social welfare funds as well as less direct costs related to training events.

Operating expenses for the second quarter of 2020 decreased 3.4% to RMB391.9 million (US$55.5 million) from RMB405.6 million for the same quarter in 2019. Sales and marketing expenses for the second quarter of 2020 decreased 6.7% to RMB292.7 million (US$41.4 million) from RMB313.7 million for the same quarter of the prior year primarily due to a decrease in performance-based bonuses and a reduction in contributions to social welfare funds, which was partially offset by greater spending on advertising and promotion activities. General and administrative expenses for the second quarter of 2020 increased 7.9% to RMB99.2 million (US$14.0 million) from RMB92.0 million for the same quarter of the prior year primarily due to higher share-based compensation expense and a larger provision for doubtful accounts, which was partially offset by a decrease in salaries and performance-based bonuses as well as a reduction in contributions to social welfare funds.

Income from operations for the second quarter of 2020 was RMB165.5 million (US$23.4 million) compared with RMB270.2 million for the second quarter of 2019. Operating margin, which is income from operations as a percentage of net revenues, was 20.0% in the second quarter of 2020 compared with 28.0% for the same quarter in 2019. Excluding share-based compensation expense, operating margin would have been 24.6% in the second quarter of 2020 compared with 30.9% for the same quarter in 2019.

The Company recognized a loss from foreign currency translation of RMB0.5 million (US$0.1 million) in the second quarter of 2020 compared with a gain of RMB28.6 million in the second quarter of 2019 primarily due to the impact of the change in exchange rate between the Renminbi and the U.S. dollar on the Company's U.S. dollar cash deposits.

In the second quarter of 2020, the Company recognized a mark-to-market, non-cash gain of RMB56.8 million (US$8.0 million) associated with a change in fair value of equity securities investment in Huali University Group Limited, which is traded on the Hong Kong Stock Exchange.

Other income in the second quarter of 2020 included local government financial subsidies of RMB144.9 million (US$20.5 million) compared with RMB123.1 million in the second quarter of 2019.

Net income attributable to 51job for the second quarter of 2020 was RMB376.7 million (US$53.3 million) compared with RMB67.4 million for the same quarter in 2019. Fully diluted earnings per share for the second quarter of 2020 was RMB5.55(US$0.79) compared with RMB1.00 for the same quarter in 2019.

In the second quarter of 2020, total share-based compensation expense was RMB38.1 million (US$5.4 million) compared with RMB28.0 million in the second quarter of 2019.

Excluding share-based compensation expense, gain/loss from foreign currency translation, and changes in fair value of equity securities investment and convertible senior notes, as well as the related tax effect of these items, non-GAAP adjusted net income attributable to 51job for the second quarter of 2020 was RMB358.5 million (US$50.7 million) compared with RMB400.1 million for the second quarter of 2019. Non-GAAP adjusted fully diluted earnings per share was RMB5.28(US$0.75) in the second quarter of 2020 compared with RMB5.90 in the second quarter of 2019.

As of June 30, 2020, cash and short-term investments totaled RMB10,729.4 million (US$1,518.7 million) compared with RMB9,940.6 million as of December 31, 2019.

Business Outlook

Based on current market and operating conditions, the Company's net revenues target for the third quarter of 2020 is in the estimated range of RMB820 million to RMB870 million (US$116.1 million to US$123.1 million). Excluding share-based compensation expense, any gain or loss from foreign currency translation and any change in fair value of equity securities investment, as well as the related tax effect of these items, the Company's non-GAAP fully diluted earnings target for the third quarter of 2020 is in the estimated range of RMB2.70 to RMB3.20 (US$0.38 to US$0.45) per share. The Company expects total share-based compensation expense in the third quarter of 2020 to be in the estimated range of RMB37 million to RMB39 million (US$5.2 million to US$5.5 million). The above forecast reflects 51job's current and preliminary view, which is subject to change and substantial uncertainty.

Guidance for earnings per share is provided on a non-GAAP basis due to the inherent difficulty in forecasting the future impact of certain items, such as gain/loss from foreign currency translation and change in fair value of equity securities investment. The Company is not able to provide a reconciliation of these non-GAAP items to expected reported GAAP earnings per share, without unreasonable efforts, due to the unknown effect and potential significance of such future impact.

Currency Convenience Translation

For the convenience of readers, certain Renminbi amounts have been translated into U.S. dollar amounts at the rate of RMB7.0651 to US$1.00, the noon buying rate on June 30, 2020 in New York for cable transfers of Renminbi as set forth in the H.10 weekly statistical release of the Federal Reserve Board.

Conference Call Information

The Company's management will hold a conference call at 9:00 p.m. Eastern Time on August 10, 2020 (9:00 a.m.Beijing / Hong Kong time zone on August 11, 2020) to discuss its second quarter 2020 financial results, operating performance and business outlook. To dial in to the call, please use the following telephone numbers:

US: +1-888-346-8982

International: +1-412-902-4272

Hong Kong: +852-3018-4992

Conference ID: 51job

The call will also be available live and on replay through 51job's investor relations website, http://ir.51job.com.

Use of Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), 51job uses non-GAAP financial measures of income before income tax expense, income tax expense, adjusted net income, adjusted net income attributable to 51job and adjusted earnings per share, which are adjusted from results based on GAAP to exclude share-based compensation expense, gain/loss from foreign currency translation, and changes in fair value of equity securities investment and convertible senior notes, as well as the related tax effect of these items. The Company believes excluding share-based compensation expense and its related tax effect from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. The Company believes excluding gain/loss from foreign currency translation, and changes in fair value of equity securities investment and convertible senior notes, as well as the related tax effect, from its non-GAAP financial measures is useful for its management and investors as such translation, mark-to-market gain or loss is not indicative of the Company's core business operations and will not result in cash settlement nor impact the Company's cash earnings. 51job also believes these non-GAAP financial measures excluding share-based compensation expense, gain/loss from foreign currency translation, and changes in fair value of equity securities investment and convertible senior notes, as well as the related tax effect of these items, are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial statements.

About 51job

Founded in 1998, 51job is a leading provider of integrated human resource services in China. With a comprehensive suite of HR solutions, 51job meets the needs of enterprises and job seekers through the entire talent management cycle, from initial recruitment to employee retention and career development. The Company's main online recruitment platforms ( http://www.51job.com, http://www.yingjiesheng.com, http://www.51jingying.com, http://www.lagou.com, and http://www.51mdd.com), as well as mobile applications, connect millions of people with employment opportunities every day. 51job also provides a number of other value-added HR services, including business process outsourcing, training, professional assessment, campus recruitment, executive search and compensation analysis. 51job has a call center in Wuhan and a nationwide network of sales and service locations spanning more than 30 cities across China.

Contact

Investor Relations, 51job, Inc.Tel: +86-21-6879-6250Email: ir@51job.com

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "targets, "confident" and similar statements. Among other things, statements that are not historical facts, including statements about 51job's beliefs and expectations, the business outlook and quotations from management in this announcement, as well as 51job's strategic and operational plans, are or contain forward-looking statements. 51job may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. All forward-looking statements are based upon management's expectations at the time of the statements and involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: execution of 51job's strategies and business plans; growth and trends of the human resource services industry in China; market acceptance of 51job's products and services; competition in the industry; 51job's ability to control costs and expenses; 51job's ability to retain key personnel and attract new talent; relevant government policies and regulations relating to 51job's industry, corporate structure and business operations; seasonality in the business; fluctuations in the value of the Renminbi against the U.S. dollar and other currencies; risks related to acquisitions or investments 51job has made or will make in the future; accounting adjustments that may occur during the quarterly or annual close or auditing process; and fluctuations in general economic and business conditions in China and globally, including the impact of the coronavirus or other pandemic. Further information regarding these and other risks are included in 51job's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release and based on assumptions that 51job believes to be reasonable as of this date, and 51job undertakes no obligation to update any forward-looking statement, except as required under applicable law.

51job, Inc.

Consolidated Statements of Operations and Comprehensive Income

For the Three Months Ended

June 30, 2019 June 30, 2020 June 30, 2020

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited)

RMB RMB US$ (Note 1)

Revenues:

Online recruitment services 611,025 503,254 71,231

Other human resource related revenues 352,567 325,374 46,054

Net revenues 963,592 828,628 117,285

Cost of services (Note 2) (287,733) (271,176) (38,382)

Gross profit 675,859 557,452 78,903

Operating expenses:

Sales and marketing (Note 3) (313,687) (292,732) (41,434)

General and administrative (Note 4) (91,956) (99,192) (14,040)

Total operating expenses (405,643) (391,924) (55,474)

Income from operations 270,216 165,528 23,429

Gain (Loss) from foreign currency translation 28,571 (547) (77)

Interest and investment income, net 45,424 66,419 9,401

Change in fair value of equity securities investment - 56,806 8,040

Change in fair value of convertible senior notes (333,287) - -

Other income, net 123,059 144,590 20,465

Income before income tax expense 133,983 432,796 61,258

Income tax expense (67,420) (59,621) (8,439)

Net income 66,563 373,175 52,819

Net loss attributable to non-controlling interests 861 3,485 493

Net income attributable to 51job, Inc. 67,424 376,660 53,312

Net income 66,563 373,175 52,819

Other comprehensive income (loss) 378 (5) (1)

Total comprehensive income 66,941 373,170 52,818

Earnings per share:

Basic 1.03 5.62 0.80

Diluted (Note 5) 1.00 5.55 0.79

Weighted average number of common shares outstanding:

Basic 65,618,355 67,009,015 67,009,015

Diluted 67,754,553 67,878,333 67,878,333

Notes:

(1) The conversion of Renminbi amounts into U.S. dollar amounts is based on thenoon buying rate of RMB7.0651

to US$1.00 on June 30, 2020 in New York for cable transfers of Renminbi as setforth in the H.10 weekly statistical

release of the Federal Reserve Board.

(2) Includes share-based compensation expense of RMB4,459 and RMB6,079 (US$860)for the three months ended

June 30, 2019 and 2020, respectively.

(3) Includes share-based compensation expense of RMB3,833 and RMB5,225 (US$740)for the three months ended

June 30, 2019 and 2020, respectively.

(4) Includes share-based compensation expense of RMB19,684 and RMB26,826(US$3,797) for the three months ended

June 30, 2019 and 2020, respectively.

(5) On April 15, 2019, the convertible senior notes matured, and the noteholders requested the conversion of the senior

notes into 4,035,664 shares.

51job, Inc.

Consolidated Statements of Operations and Comprehensive Income

For the Six Months Ended

June 30, 2019 June 30, 2020 June 30, 2020

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited)

RMB RMB US$ (Note 1)

Revenues:

Online recruitment services 1,224,401 1,050,271 148,656

Other human resource related revenues 651,052 569,468 80,603

Net revenues 1,875,453 1,619,739 229,259

Cost of services (Note 2) (537,097) (525,479) (74,377)

Gross profit 1,338,356 1,094,260 154,882

Operating expenses:

Sales and marketing (Note 3) (602,415) (568,924) (80,526)

General and administrative (Note 4) (182,199) (189,834) (26,869)

Total operating expenses (784,614) (758,758) (107,395)

Income from operations 553,742 335,502 47,487

Gain from foreign currency translation 42,351 9,624 1,362

Interest and investment income, net 77,980 110,734 15,673

Change in fair value of equity securities investment - 66,697 9,440

Change in fair value of convertible senior notes (752,073) - -

Other income, net 185,387 148,925 21,079

Income before income tax expense 107,387 671,482 95,041

Income tax expense (127,476) (96,392) (13,643)

Net income (loss) (20,089) 575,090 81,398

Net loss attributable to non-controlling interests 2,697 6,816 965

Net income (loss) attributable to 51job, Inc. (17,392) 581,906 82,363

Net income (loss) (20,089) 575,090 81,398

Other comprehensive income 60 303 43

Total comprehensive income (loss) (20,029) 575,393 81,441

Earnings (Loss) per share:

Basic (0.27) 8.70 1.23

Diluted (Note 5) (0.27) 8.56 1.21

Weighted average number of common shares outstanding:

Basic 63,642,818 66,906,106 66,906,106

Diluted 63,642,818 67,942,579 67,942,579

Notes:

(1) The conversion of Renminbi amounts into U.S. dollar amounts is based on thenoon buying rate of RMB7.0651

to US$1.00 on June 30, 2020 in New York for cable transfers of Renminbi as setforth in the H.10 weekly

statistical release of the Federal Reserve Board.

(2) Includes share-based compensation expense of RMB9,120 and RMB11,996(US$1,698) for the six months ended

June 30, 2019 and 2020, respectively.

(3) Includes share-based compensation expense of RMB7,840 and RMB10,312(U$1,460) for the six months ended

June 30, 2019 and 2020, respectively.

(4) Includes share-based compensation expense of RMB40,302 and RMB52,946(US$7,494) for the six months ended

June 30, 2019 and 2020, respectively.

(5) On April 15, 2019, the convertible senior notes matured, and the noteholders requested the conversion of the senior

notes into 4,035,664 shares. The impact of share options was excluded in thecomputation of diluted loss per share for

the six months ended June 30, 2019 because the effect would be anti-dilutive.

51job, Inc.

Reconciliation of GAAP and Non-GAAP Results

For the Three Months Ended

June 30, 2019 June 30, 2020 June 30, 2020

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited)

RMB RMB US$ (Note 1)

GAAP income before income tax expense 133,983 432,796 61,258

Add: Share-based compensation 27,976 38,130 5,397

Add (Less): (Gain) Loss from foreign currency translation (28,571) 547 77

Less: Change in fair value of equity securities investment - (56,806) (8,040)

Add: Change in fair value of convertible senior notes 333,287 - -

Non-GAAP income before income tax expense 466,675 414,667 58,692

GAAP income tax expense (67,420) (59,621) (8,439)

Tax effect of non-GAAP line items (64) (8) (1)

Non-GAAP income tax expense (67,484) (59,629) (8,440)

Non-GAAP adjusted net income 399,191 355,038 50,252

Non-GAAP adjusted net income attributable to 51job, Inc. 400,052 358,523 50,745

Non-GAAP adjusted earnings per share:

Basic 6.10 5.35 0.76

Diluted (Note 2) 5.90 5.28 0.75

Weighted average number of common shares outstanding:

Basic 65,618,355 67,009,015 67,009,015

Diluted 67,754,553 67,878,333 67,878,333

For the Six Months Ended

June 30, 2019 June 30, 2020 June 30, 2020

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited)

RMB RMB US$ (Note 1)

GAAP income before income tax expense 107,387 671,482 95,041

Add: Share-based compensation 57,262 75,254 10,652

Less: Gain from foreign currency translation (42,351) (9,624) (1,362)

Less: Change in fair value of equity securities investment - (66,697) (9,440)

Add: Change in fair value of convertible senior notes 752,073 - -

Non-GAAP income before income tax expense 874,371 670,415 94,891

GAAP income tax expense (127,476) (96,392) (13,643)

Tax effect of non-GAAP line items (56) (39) (6)

Non-GAAP income tax expense (127,532) (96,431) (13,649)

Non-GAAP adjusted net income 746,839 573,984 81,242

Non-GAAP adjusted net income attributable to 51job, Inc. 749,536 580,800 82,207

Non-GAAP adjusted earnings per share:

Basic 11.78 8.68 1.23

Diluted (Note 2) 11.44 8.55 1.21

Weighted average number of common shares outstanding:

Basic 63,642,818 66,906,106 66,906,106

Diluted 65,542,618 67,942,579 67,942,579

Notes:

(1) The conversion of Renminbi amounts into U.S. dollar amounts is based on thenoon buying rate of RMB7.0651

to US$1.00 on June 30, 2020 in New York for cable transfers of Renminbi as setforth in the H.10 weekly statistical

release of the Federal Reserve Board.

(2) On April 15, 2019, the convertible senior notes matured, and the noteholders requested the conversion of the senior

notes into 4,035,664 shares.

51job, Inc.

Consolidated Balance Sheets

As of

December 31, June 30, June 30, 2019 2020 2020

(In thousands, except share and per share data) (unaudited) (unaudited) (unaudited)

RMB RMB US$ (Note 1)

ASSETS

Current assets:

Cash 2,294,904 1,953,885 276,554

Restricted cash 66,169 - -

Short-term investments 7,645,686 8,775,551 1,242,099

Accounts receivable (net of allowance of RMB21,952 and

RMB18,915 as of December 31, 2019 and June 30, 2020,

respectively) 266,437 207,615 29,386

Prepayments and other current assets 669,208 408,797 57,861

Total current assets 10,942,404 11,345,848 1,605,900

Non-current assets:

Long-term investments 1,482,544 1,551,453 219,594

Property and equipment, net 271,932 273,514 38,713

Goodwill 1,036,124 1,036,124 146,654

Intangible assets, net 203,162 182,887 25,886

Right-of-use assets 320,809 319,401 45,208

Other long-term assets 10,420 15,219 2,154

Deferred tax assets 22,147 28,052 3,971

Total non-current assets 3,347,138 3,406,650 482,180

Total assets 14,289,542 14,752,498 2,088,080

LIABILITIES, MEZZANINE EQUITY AND EQUITY

Current liabilities:

Accounts payable 48,114 49,748 7,041

Salary and employee related accrual 162,775 156,139 22,100

Taxes payable 267,596 153,164 21,679

Advance from customers 1,108,518 999,801 141,513

Lease liabilities, current 34,817 38,852 5,499

Other payables and accruals 1,211,642 1,163,578 164,694

Total current liabilities 2,833,462 2,561,282 362,526

Non-current liabilities:

Lease liabilities, non-current 50,763 49,801 7,049

Deferred tax liabilities 214,307 214,356 30,340

Total non-current liabilities 265,070 264,157 37,389

Total liabilities 3,098,532 2,825,439 399,915

Mezzanine equity:

Redeemable non-controlling interests 216,974 209,550 29,658

Shareholders' equity:

Common shares (US$0.0001 par value: 500,000,000 shares

authorized, 66,784,688 and 67,159,498 shares issued and

outstanding as of December 31, 2019 and June 30, 2020,

respectively) 53 54 8

Additional paid-in capital 4,901,466 5,063,342 716,670

Statutory reserves 17,930 17,930 2,538

Accumulated other comprehensive income 254,524 254,827 36,068

Retained earnings 5,774,358 6,356,264 899,671

Total 51job, Inc. shareholders' equity 10,948,331 11,692,417 1,654,955

Non-controlling interests 25,705 25,092 3,552

Total equity 10,974,036 11,717,509 1,658,507

Total liabilities, mezzanine equity and equity 14,289,542 14,752,498 2,088,080

Note (1): The conversion of Renminbi amounts into U.S. dollar amounts is basedon the noon buying rate of RMB7.0651 to US$1.00

on June 30, 2020 in New York for cable transfers of Renminbi as set forth inthe H.10 weekly statistical release of the Federal

Reserve Board.

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SOURCE 51job, Inc.