51job, Inc. :JOBS-US: Earnings Analysis: Q3, 2017 By the Numbers : December 28, 2017

51job, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of 51job, Inc. – DHI Group, Inc., SINA Corp., 58.com Inc. Sponsored ADR Class A and Renren Inc. Sponsored ADR Class A (DHX-US, SINA-US, WUBA-US and RENN-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 107.98 million, Net Earnings of USD -25.03 million.
  • Gross margins widened from 71.52% to 72.77% compared to the same period last year, operating (EBITDA) margins now 27.89% from 24.92%.
  • Earnings declined although operating margins improved from 24.92% to 27.89%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 107.98 97 87.05 100.03 88.38
Revenue Growth (%YOY) 22.18 15.77 11.14 7.07 8.7
Earnings (mil) -25.03 10.29 23.65 29.62 16.2
Earnings Growth (%YOY) -254.54 -59.93 79.91 33.69 -38.37
Net Margin (%) -23.18 10.61 27.17 29.61 18.33
EPS -0.41 0.17 0.4 0.5 0.28
Return on Equity (%) -3.03 1.28 3.16 4.17 2.35
Return on Assets (%) -7.5 3.31 8.16 10.69 6.05

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Market Share Versus Profits

Revenues History
Earnings History

JOBS-US’s change in revenue this period compared to the same period last year of 22.18% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that JOBS-US is holding onto its market share. Also, for comparison purposes, revenues changed by 11.32% and earnings by -343.29% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 71.52% to 72.77%, while operating margins improved from 24.92% to 27.89% over this period. For comparison, gross margins were 73.17% and EBITDA margins 28.27% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

JOBS-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 761.34, compared to last year’s level of 574.33 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 24.92% to 27.89%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 24.10% to -17.42%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

51job, Inc. engages in providing human resource services. It offers services in the areas of recruitment solutions, training and assessment, and human resources outsourcing and consulting. The company was founded by Kathleen Chien, Rick Yan, Lei Feng, and Norman Lui in 1998 and is headquartered in Shanghai, China.

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