51job, Inc.
Q3 2015 Earnings Call Transcript

Published: 11 Nov 2015

[Operator:]

Good morning, afternoon, evening. Ladies and gentlemen, thank you for holding. Welcome to the 51job, Inc.'s Third Quarter 2015 Conference Call. [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, Gemma [ph], and thank you all for attending this teleconference to discuss unaudited financial results for the third quarter ended September 30th, 2015. 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 2015 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 fourth quarter of 2015, future business and operating results constitute forward-looking statements within the meaning of Section 21E 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 expectation 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 fourth quarter of 2014; any accounting adjustments that may occur during the quarterly close; fluctuations in the value of the renminbi against the U.S. dollar and other currencies; behavioral and operational changes of customers in meeting their human resource needs as they respond to evolving social, economic, regulatory and political changes in China as well as stock market volatility; 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; any risks related to acquisitions or investments the Company has made or will make in the future; 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 2015 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 will discuss non-GAAP measures. Reconciliation 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 ir.51job.com. I will turn the call over to Rick.

[Rick Yan:]

Thank you, Linda; and welcome to today's call. I will begin with an overview of the third quarter, followed by an assessment of current conditions. Then Kathleen will provide detailed discussion of our financial results and provide our guidance for the fourth quarter of 2015. Finally, we'll open the call to your questions. Results for the third quarter were very much in line with our expectations, as we pushed forward on our strategic plan. Total revenues were RMB525 million, at the high end of our guidance range, as we saw continued solid performance by other HR services and maintained stable growth in the online business. Non-GAAP EPS for the third quarter came in at RMB2.82, ahead of our forecast, as we remained disciplined on spending, making investments in new product development, but mindful of productivity and return benchmarks. In this period of challenging economic conditions in China, the other HR services area has played the leading role in our growth. Revenues increased 16% in the third quarter, driven by our BPO services, which has seen improved recent performance following more than a year of regulatory headwinds that required us to adjust our operations and took resources away from onboarding new business. With BPO resuming a higher growth trajectory, the inherent recurring nature of these services has provided some offsetting effects against recruitment demand fluctuations. Our broad and comprehensive suite of HR solutions uniquely gives us the opportunity to serve employers at any point in the talent management cycle as well as the business cycle. We are continuing to expand our capabilities across all aspects of HR-related services through in-house development as well as investment. In our online business, taking into consideration a weaker hiring environment since the beginning of this year, we made a strategic decision to be selective on new customer additions and to move away from low-priced volume-only growth. Instead, we have directed our efforts on building a high-quality revenue product line, deepening customer relationships, and extending our service coverage. Our sales focus has been to upsell our core employer base to more sophisticated online offerings and cross-sell our other value-added HR services, such as benefits and payroll processing, which result in longer-term customer engagement. We are pleased with the progress of this strategy thus far and the results can be seen in the realization of higher online ARPU as well as overall revenue per sales person in 2015 versus the prior year. Employers have rewarded us for the superior value of our products as we introduced new and more targeted solutions to the market. We will continue to emphasize value-creation and differentiate ourselves from competitors. On the jobseeker side, we remained the destination site for the best career opportunities in China. As of the end of the third quarter, our flagship 51job.com site has 94 million registered user accounts. We have also amassed 87 million resumes in our database. With the ratio of resumes to users above 90%, we are not about one-click sign-ups or pop-up ad visits. We're building strong and repeated [ph] engagement with jobseekers to assist them in achieving goals throughout their career. With the completed acquisition of Yingjiesheng.com aimed at college graduates and the development of 51jinying for experienced workers, we are confident that we are creating the highest quality recruitment platforms and networks in China. Turning now to our current market assessment. We have not observed any meaningful changes in demand lately, and we expect a similar tone of employer caution and moderate hiring we have seen all year to play out for the remainder of 2015. It is too early to provide an outlook for 2016 as the most important gauge of recruitment sentiment will be the Chinese New Year peak season period which will begin in mid-February next year. Market conditions and volatility aside, we stay focused on the execution of our multi-product strategic blueprint. This fall, the inclusion of Yingjiesheng into the 51job family strengthened our position and increased our effectiveness in serving the graduate segment. Throughout the combination of this online channel and our offline campus operations, we will assist millions of students as they enter the labor force this year in search for their first full-time job. For our higher-end 51jinying site, we are encouraged by the user reception that we have seen so far, and we have planned a series of events and activities to promote this new platform. Outside of recruitment, we are integrating more talent assessment tests and tools, attained through our recent investment [inaudible] into our training business. We remain active in pursuing acquisitions and investments related to the HR space that create new monetization opportunities in the future. We are well underway in laying the foundation of 51job's next development stage as we go wider and deeper into the needs of HR department. We are clear on what employers, jobseekers and shareholders expect from us and what we are committed to consistently deliver to them the best effort, results and returns in the HR industry in China. I will now turn the call over to Kathleen for a detailed financial discussion of the quarter.

[Kathleen Chien:]

Thank you, Rick. In my following presentation, please be aware that all financial numbers are in our reporting currency of the Chinese renminbi, unless otherwise stated. Also, please note that all growth rates are on a year-on-year basis, as compared to the corresponding period in 2014, unless otherwise indicated. Our total revenues for the third quarter of 2015 were RMB525 million, representing an 11% increase. Online revenues for the third quarter grew 8% to RMB342 million. The increase was driven equally by employer growth and higher average revenue per employer. In connection with our strategic decision to control sales people additions this year, the growth in the number of unique employers moderated to 4% in the third quarter to a total of 296,000 companies. However, while pricing has been generally unchanged over the past year, we did see improvement in the sales productivity as our ARPU increased 4% in the quarter due to the upselling efforts of higher-value services, especially to our larger-sized, more established corporate customers We will continue to focus on sales efforts on building a high-quality revenue pipeline by enhancing our customer service and driving uptake of more sophisticated service offerings and maximizing our share of customer wallet. Revenues for other HR services increased 16% to RMB182 million in the third quarter, which is mainly driven by customer adoption and usage of our outsourcing business. Other HR's contribution to total revenues in the third quarter was 35%, compared with 33% in the year-ago period. We expect a further increase in revenue contribution from other HR services in the fourth quarter as campus recruitment services will see a strong seasonal activity. Gross profit grew 9% to RMB365 million and gross margin was 71%. Included in cost of services in the third quarter was share-based compensation expense of RMB3.2 million. Sales and marketing expenses increased 15% to RMB165 million in the third quarter. The increase was primarily due to a modest addition in sales headcount and higher employee compensation expenses, driven by upward wages estimates versus the year-ago quarter. Included in sales and marketing expenses was share-based compensation expense of $2.8 million in the third quarter. We expect sales and marketing expenses to rise in the fourth quarter as we host several yearend customer events and begin preparations for the upcoming Chinese New Year. We also stay on track with our marketing plan to promote our new platforms of Yingjiesheng and 51jinying. As a result, we do expect sales and marketing expenses as a percentage of sales to be higher than what it was in the corresponding period in 2014. G&A expenses increased 5% to RMB65 million in the third quarter. The increase is mainly due to the higher employee compensation expenses and office expenses, which is partially offset by a decrease in professional services fees. Share-based compensation expenses included in G&A was RMB14 million. Operating income for the third quarter was RMB135 million and operating margin was 26.3%, compared with 27.9% in the third quarter of 2014. Excluding share-based compensation expense, our operating margin would be 30.2%, compared with 32.6% in the year-ago quarter. Due to the recent depreciation of the renminbi against the U.S. dollar and its significant impact on the convertible senior notes we issued in 2014, we recognized a foreign exchange loss of RMB35 million in the third quarter. Under mark-to-market accounting, we also recognized a gain of about RMB54 million in the third quarter associated with the change in the fair value of these notes. Other income for the third quarter included RMB16 million in local government financial subsidies versus RMB5 million in the year-ago quarter. For the fourth quarter, we do not expect a material amount of subsidies versus the RMB20 million we received in the fourth quarter of 2014. Net income attributable to 51job for the third quarter was RMB166 million. Our fully diluted EPS was RMB2.62 or $0.41. Excluding share-based compensation expense, loss from foreign currency translation, the change in the fair value of the notes, as well as the related tax impact of these items, our non-GAAP adjusted net income attributable to 51job increased 11% to RMB167 million in the third quarter. Under the if-converted method, our non-GAAP adjusted fully diluted EPS was RMB2.82 or $0.44 per share. Regarding our balance sheet, we ended the third quarter with RMB4.7 billion in cash and short-term certificate of deposits, equivalent to approximately $742 million. During the third quarter we repurchased about 743,000 ADSs from the open market for an aggregate consideration of $20 million. Since June of 2014, we have repurchased about 1.7 million shares for about $50 million, under our current buyback program. Turning now to our guidance. Based on current market conditions our total revenues target for the fourth quarter of 2015 is in the estimated range of RMB580 million to RMB600 million. For the non-GAAP fully diluted EPS target, our estimated range is between RMB2.5 and RMB2.7 per share under the if-converted method. Please note that this non-GAAP EPS range does not include share-based compensation expense, the impact of foreign currency translation, any mark-to-market adjustment for the convertible notes, nor the related tax impact of these items. Our total share-based compensation expense is expected to be between RMB20 million and RMB21 million for the fourth quarter. This guidance reflects the current forecast, which is subject to change. That concludes our presentation. We will be happy to take your questions at this time. Operator?

[Operator:]

Thank you. Ladies and gentlemen, at this time we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Xin Huang [ph] from Citigroup. Your line is open, please go ahead.

[Unidentified Participant:]

Hi, management. Thank you for taking my question. My first question is about the outlook for the number of unique employers. So there is a 5% Q-on-Q decline in Q3. Any color on this number for the fourth quarter and 2016, and the reason behind? Thank you. I have a follow-up question.

[Kathleen Chien:]

Hi. Thank you for the question. I think we've talked about the fact that we've actually been more modest in terms of our sales headcount additions this year, and that actually corresponds to the sort of more limited increase in customer accounts because that is not where we've been focused as much on this year. In terms of how that translates into the fourth quarter outlook, we do expect that the growth rate on a year-over-year basis to be similar levels than what it was actually in the third quarter. So that is what we're expecting. Going forward to 2016, I think we're a little bit early to kind of give too much color at this point in time because, looking at 2016, we'll have to assess what the tone of the market is after Chinese New Year. And we'll be happy to share more information at that time.

[Unidentified Participant:]

Thank you. My second question is, what's your differentiated strategy with large enterprise customers and SME customers in the second half going forward? Could you --

[Kathleen Chien:]

I think, looking at just different types of customers, obviously we would like to focus more of our energies on the larger-sized customers because they do have more sophisticated and more complicated needs, and that actually is better in terms of having a multiproduct strategy and a more comprehensive product range that we can offer to them, so that it matches up a lot better. I think with SMEs, they tend to be a lot more simplistic, they have shorter planning cycles and horizons, and much more ad hoc in terms of how they use services in general. So I think the engagement level sometimes is not as deep and not as sometimes continuous, if you will, as the larger enterprises. So I think -- we've said that we've been focused more on trying to create higher-quality revenues, and that to some degree ties to kind of focusing more energies on the larger-sized customers. So that's kind of what we've been focusing on this year.

[Unidentified Participant:]

Thank you. My last question is about the gross margin trend. So, how should we look at your online recruitment services and other HR related services GP margin, respectively? And how much of your overall GP margin change is due to the revenue mix change? Thank you.

[Kathleen Chien:]

To be honest, I mean we don't kind of separate us. We actually do share a lot of the, sort of, the back-office sometimes in terms of how we look at our customer service offerings. So I think looking at the gross margin, yes, I think we did actually have a slight dip this quarter versus what it was last quarter and last year. But it's actually mostly because we've actually added some staffing in general, and we actually moved to a new service center in Wuhan as well. So we were actually bulking up a little bit, so we did that, more headcount than previous quarters. So that's really what's behind it. But overall I would say that, if you look at the longer term kind of the history of our development, our cost structure, I think we focus on growing total revenues. If that can go up, I think it's not really related to whether or not we can offer more -- whether or not other HR services or recruitment services. I think we're actually able to make some progress on gross margins regardless of it. But it's really tied to just having a higher total revenue growth, and that's what we need to focus on.

[Operator:]

Thank you. Your next question comes from the line of Alicia Yap from Barclays. Your line is open, please go ahead.

[Alicia Yap:]

Hi. Good morning, Rick, Kathleen and Linda. Thanks for taking my questions. I have a couple of quick questions. Number one is on the broader market demand. With the number of the internet company consequently announcing that they will freeze their hiring plan, except for continuing the campus recruitment. Have you started to see some slowdown in the white-collar sector recruitment environment?

[Kathleen Chien:]

I would say that I think there's been a lot of coverage obviously on the BAT [ph] coming on and saying they're kind of taking their foot off the pedal a little bit hiring. But I don't think that that has had a significant impact on the overall sentiment of the market. I think they were a little bit frenzy in their hiring in the last few years, and that's probably driven by the fact that they've been overreaching and kind of getting to a lot of different segments in the last, I would say, couple of years, if you will. So I think this year overall we haven't been as positive, overall, in terms of just market sentiment in general, and I don't think that that assessment has changed just because the BAT [ph] guys have actually made the announcement at this time. So I think our assessment is that so far this year it's kind of been not as strong as previous years anyways. I think that the BAT [ph] making the announcement just validates that belief, that that is the case, if you will. So I think that's it. I don't think that's materially made an impact at this point in time.

[Alicia Yap:]

I see. And I understand, I think Rick mentioned on the prepared remarks that it's still too early to comment on 2016. But given the continued slowing growth, do you think the hiring environment will be even more challenging as employers kind of revise or reassess their hiring plan after the Chinese New Year when they come back? Just based on your -- I mean your kind of like, you know, your past experience, if we are heading towards the end of the year, is it a weaker or softer -- as we enter the next year, is that usually more cautious hiring than even before?

[Rick Yan:]

Yeah. I would comment that if you -- in the second half of this year, there's been a lot of news saying that the Chinese economy is slowing down, and there were expectation or even speculations that recruitment demand will slow down more meaningfully. But if you look at what we -- look at our quarter three results, as well as what we forecast for quarter four, I think we are still at the same trajectory as what we have been, you know, for the rest of this year. In other words, we have not seen any deterioration in the second half of 2015 versus the first half of 2015. It is not a great year, it's a solid year, but it hasn't gone worse. So, yeah, we mentioned it's hard to predict 2016 until we get to the Chinese New Year peak season. But as of now, seeing what we've seen so far in the four quarters of 2015, we probably think that things are holding up not great, but following the same trajectory. That's our best estimate at this time.

[Alicia Yap:]

I see. And then just lastly, quickly on the sales and marketing spend. I know we have been kind of controlling a little bit on the expenses in the second half. Will this kind of maintaining in the future quarters or will we need to scale back even more if the top line actually continue to face headwinds? Thank you.

[Kathleen Chien:]

I think our plan is probably pull back a little bit more on the sales side but probably allocate more to marketing to some degrees because we're actually focusing on also launching our new platforms, if you will. So overall I think there will be a kind of -- exercising some control over that total bucket of spending, but I think in terms of allocation, we will actually probably be making some tweaks and probably focusing a little bit more on the marketing element rather than the sales element. And that's kind of what we're looking at towards doing for the next few quarters probably.

[Alicia Yap:]

Great, great. Thanks for the color. Thank you.

[Rick Yan:]

Thank you.

[Linda Chien:]

Thank you.

[Operator:]

Your next question comes from the line of Wendy Huang from Macquarie. Your line is open, please go ahead.

[Joe Yu:]

Hi. This is Joe Yu calling on behalf of Wendy Huang. Thank you so much for taking my question, management. I just have a quick question on your number of unique employer. I saw the number went down this quarter, probably because our strategy of giving up some low ASP customers. I just want to know that, can you give us some color about going forward what's the strategy? Is this number going to continue to go down? And what's going to -- that have impact on the revenue per unique employer? Thank you.

[Kathleen Chien:]

Hi. Thank you for the question. Yeah, I think, yeah, in terms of where we're headed, I think that we're going to be more modest in looking at the volume growth in terms of de-emphasizing [ph], trying to get a lot through the lower-end kind of SMEs, if you will. So I do think that in terms of the growth rate year over year, that number will be more modest. So, similar to what it was actually in the third quarter probably. And then yes, we're focusing obviously on trying to upsell and cross-sell more services into the larger accounts because, as we said a little bit earlier on the call, we do believe that, with the larger organization, they do have multiple points of entry for us, and that's not just related to recruitment services and products. So I think that's really what we're trying to focus on. At the same time, I think we talked a little bit earlier about how we are trying to now also focus on launching a new platform with 51jinying and also with the completed acquisition of Yingjiesheng, we do believe that we're actually having the opportunity to expand our reach and trying to segment the different demographics on the jobseeker side as well, and hopefully that will also give us more ways to engage our customers and try to continue to actually upselling and cross-selling more services into larger customers.

[Joe Yu:]

Great. That's very helpful. Thank you.

[Linda Chien:]

Thank you.

[Operator:]

Your next question comes from the line of Tian Hou from T.H. Capital. Your line is open, please go ahead.

[Tian Hou:]

Yeah, good morning, management. I have a couple of questions. The first one is regarding, you said, upsell and down-sell, and I wonder that's the focus and what have you seen in the upsell and down-sell? What particular product you may see to bring some kind of a revenue growth in the future? So that's the first question. The second one is, what's the overlapping between, you know, for the employers, between you and Zhilian Zhaopin?

[Kathleen Chien:]

Thank you for the question. Let me try to talk about the first one first. I guess, in terms of just talking about upsell and cross-sell, I think 51job, which is our core product for several years in terms of the recruitment services that we offer, with the completed acquisition of the Yingjiesheng platform and the newly launched platform of 51jinying, we think that that actually allows us to expand the lifecycle of engagement of users, if you will. Yingjiesheng is obviously focused on the campus segment, so that allows us to go deeper and younger, if you will, versus the traditional 51job positioning. With 51jinying, actually that's for more experience workers who may not have been actually as active now in their kind of jobseeking kind of plan and their career planning cycle. And so we hope to actually re-engage them through the 51jinying platform. So again that's just kind of trying to expand our coverage of users. And by expanding the universe of users, if you will, then that maps into actually trying to help our corporate customers then reach out and recruit different levels of talent, if you will. And so that's really what we mean by also extending and cross-selling more services into the same customer account. So I think that's what we're talking about. Also, obviously, within each of the platforms I just mentioned, there's always different products that we can actually try to offer and try to guide our customers to use to actually increase the visibility and also enhance the type of candidates and the number of candidates that they're actually able to source through the platforms, if you will. So that's something that we continue to actually help our customers navigate through and understand.

[Rick Yan:]

Yeah. In terms of the second question about -- I guess your question is about customer overlap with Zhilian Zhaopin.

[Tian Hou:]

Yes.

[Rick Yan:]

We -- the internal monitoring we have, we have some overlap on the larger-end customers because the very large customers, they have more needs and they might tend to use multiple vendors. But I think that there's a small -- it's a small number. But in general, if you look at the financials, you will see that their ARPUs is meaningfully lower than ours. I think they focus more on the lower-priced, lower-end customers. And as we said in this conference call, given the economic condition, we think the SMEs are more -- first of all, they are the lower-growth [inaudible] in the overall market and I think they are very price-sensitive and their retention rate tends to be lower. So I think we have some overlap at the top end, and then we focus on more the higher-end or the higher-priced customers where they are more going into the low price competition model.

[Tian Hou:]

I see. So the second -- the next question is related to your Yingjiesheng. Do you mind to give us some color regarding how many registered users and what's the contribution in addition to, you know, you expand into this segment? And how much -- how many registered user are on those -- on this site? And what's the revenue outlook could be from this side? More color on that.

[Kathleen Chien:]

Yeah. I mean just on Yingjiesheng, I think historically, I think for them, things are a little bit different than how we look at the 51job metrics in many ways, because every year it's a new batch of people that come in that become -- the platform. So it's a little bit less kind of the same kind of model. But I would say that China graduates over 7 million new graduates every year, and I think based on our interaction with them and actually going on to campuses and doing all the recruitment with our customers, I mean the sort of the popularity and their sort of brand name and their reach is actually very, very high, and their awareness is very high. I think millions of users, actually traffic, on that system every year. And that's what we've seen. I think that they probably register over a million registered users, of which some people actually come through the platform and don't register. So I think they have a very good coverage in that particular segment. What's very unique about them is that they have the depth of content that's actually very useful for new job applicants in the sort of job space because they're actually giving out a lot of information related to how you actually interview, career planning tips and other things. That's actually very tactical. And China's graduates I think tend to be very, I guess, result-driven in terms of what they look for in terms of content online. And I think they're looking for very specific sort of the question that get asked in certain interviews by certain companies, and the accumulation of that content on that platform has been very significant over these last several years. So that's something that's very welcomed and very much in-demand when the peak season comes. In terms of overall contribution though to us at this point, I would say that we don't expect that to be that meaningful yet at this time, because this is the first year that we've started working with them. They've just gotten integrated. And that if you look at our current levels, we are, for example, in the third quarter, we did north of RMB300 million in terms of online revenues. As a percentage of that, Yingjiesheng will still be very small, single-digit, very, very small at this point. But going forward, we do expect that they do have a good platform to engage with people, we hope to be able to introduce new product and services onto that platform. But that's not going to be that meaningful at this time though.

[Tian Hou:]

Okay. Thank you. That's all my questions.

[Operator:]

[Operator Instructions] You have a question from the line of David Li from Lizard Investors. Your line is open, please go ahead.

[David Li:]

Thanks guys for taking my question. I just have a couple of questions. First of all, I want to understand, as you continue to grow other HR revenue pretty aggressively, how should I think about you growing the OpEx to drive revenue growth and at what point in time that they will fail [ph] or [inaudible] the other?

[Kathleen Chien:]

Sorry, can I just clarify? Do you mean like when other services will leapfrog you mean recruitment services? Is that the question?

[David Li:]

No, no. I [inaudible] yeah, as the growth rate for other HR revenue continue to grow much faster than the online business, I just want to understand how the OpEx, how you guys flex the OpEx to achieve that and how you guys get operating leverage over time?

[Kathleen Chien:]

I think in terms of OpEx specifically, well, if you look at OpEx, the G&A infrastructure and then the sales and marketing, with -- we kind of run it -- marketing kind of runs together in many ways because we run it -- the outsourcing because it's also under the 51job umbrella, so it's hard to -- for us to kind of separately break that out, if you will. But I think we -- we believe that with the outsourcing services just as in recruitment, we have the investment that we need to make initially in terms of having a technology platform and a service network, if you will, offices and personnel. But as we are able to ramp up in terms of revenues in the service segment, I do expect that we will have operating leverage continuously, because we get more efficient and processing one customer versus five customers in one location will be incrementally more cost-effective for us going forward. So I think in terms of the cost model, we think that it actually is very similar to how we run the online platform. So that's kind of the profile, if you will. So I'm not sure that quite answers your question, but that's how we look at that business.

[David Li:]

That's great. And also, I just want to ask you a little about, so, qualitatively, how do I break down some of the categories of the higher value-added services to your customers? They ultimately obviously drive your other HR revenues. And also, any way you can quantify the opportunity in each one of those category?

[Kathleen Chien:]

In the other HR services, the leading product line is actually the business process outsourcing, which is then more focused on the benefits and benefits processing, if you will. So that's actually helping companies make the contributions to the various [ph] welfare funds and actually helping them with the onboarding, departure file management, with all the logistics and routine administrative aspects of HR department that we would be undertaking. In addition to that, the two more significant product lines within the other HR services is actually training, which tend to be short-term workshops and seminars that we offer to people which are being paid for by the corporate, which actually then enhances their productivity through the training, whether or not that's specific kind of knowledge for let's say finance or sales skills or it's more soft skills like leadership or kind of management related modules, if you will. And then the third one is actually probably campus recruitment at this point, which are the project-based type of work we take on, on behalf of large corporates, and that includes going to the various universities to help them organize and host the recruitment sessions, as well as actually offering them tools and system to select, filter or potentially even interview or test candidates as they actually go through the hiring process. So those three are the biggest ones in terms of the services offered under the other HR services.

[David Li:]

What about opportunities like payment processing? I mean I understand [inaudible] in China is very unique, it's very different from what we have in the U.S., U.S. is way ahead of this, but I'm talking about maybe even three to four years from now, are there anything that you guys can [inaudible] innovatives, maybe it's a push product or something like that, is there anything that you guys can work with the customers and to create some sort of demand or new demand?

[Kathleen Chien:]

Actually we do offer that. When I said earlier about the business process outsourcing, I mean payroll is part of that, but the take-up of that is actually much more limited versus the benefit part at this point in time, and just partly because historically China, the corporates are more hesitant to outsource payroll, because with payroll, there's also other issues related to taxation and other matters that companies sometimes prefer to keep in-house. But certainly we are -- we have the capability and we do actually offer these services already. Just in terms of take-up, it's -- payroll is actually much more of a backseat to where benefits sit currently in China, at this point. But we do actually have the capabilities, it's actually not so difficult for us to perform. And so it's just a matter of customer behavior and customer adoption and continuing education will be more required.

[David Li:]

Okay, okay. That's great. And also one more thing [inaudible] about what -- I mean I understand the two acquisitions you guys made in the previous quarter were fairly small. I'm just kind of curious, on a like-for-like basis, what your organic growth rate of the business and also both top line and your operating income?

[Kathleen Chien:]

Well, at this point, as we said that the acquisitions have contributed very, very limited revenues, so in the third quarter it's still basically organic.

[David Li:]

Okay.

[Kathleen Chien:]

Yeah.

[David Li:]

And if you add the cost line [ph], that it contributed a little bit more than might have, you know, if you exclude your operating income, show a little bit more growth?

[Kathleen Chien:]

It would have helped a little bit, but I would say that it wouldn't be that significant, like is aid. Because the total profile is still limited at this time. But hopefully as we continue to complete the integration and complete more new introduction of service offerings and products to our customers, we'll actually be able to show more stuff. And if that becomes more meaningful, we'll also be able to walk people through that because the impact will be more significant.

[David Li:]

Okay. Have you guys seen, just on the two acquisitions you guys have made, ever since they became part of your platform, ever since you closed the deal, have they shown like the growth rates being accelerated, etcetera, etcetera, etcetera? And how have the business been performing since they've been part of 51job?

[Kathleen Chien:]

We've been pleased with the integration so far, but I think it does take a little bit of time to ramp. I think with Yingjiesheng, because Q4 is where seasonally it's actually more active, we're pleased with the progress so far. But hopefully we'll be able to share more details with people when actually we close the quarter. But we're pleased with the integration so far.

[David Li:]

Great. Thank you.

[Kathleen Chien:]

Thank you.

[Operator:]

There appears to be no further questions from the phones. I'd like to hand back to Mr. Rick Yan for any additional or closing remarks.

[Rick Yan:]

Thank you for joining us today. We look forward to speaking with you next quarter, and we value your support of 51job. Have a good day. Thank you. Bye-bye.

[Operator:]

That does conclude today's call. Thank you for your participation. You may all disconnect.