51job, Inc.
Q4 2008 Earnings Call Transcript

Published: 4 Mar 2009

[Operator:]

Good day, ladies and gentlemen. Welcome to the 51job, Inc.’s fourth quarter and fiscal year 2008 conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded. Now I would like to turn the conference over to your host, Ms. Linda Chien, Investor Relations Director of 51job. Please go ahead.

[Linda Chien:]

Thank you, Shaana. And thank you all for attending this teleconference of 51job management. With me for today's call are CEO Rick Yan and CFO Kathleen Chien, and we will discuss unaudited financial results for the fourth quarter and fiscal year ended December 31, 2008. A press release containing fourth quarter and full year 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 first quarter of 2009, 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 first quarter of 2009; 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 markets 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 first quarter of 2009 or as a result of new information, future events or otherwise. Now I'll turn the call over to, Rick Yan, Chief Executive Officer.

[Rick Yan:]

Thank you, Linda. Thank you for joining us on today's conference call. I will begin with an overview of the fourth quarter and full-year 2008 followed by Kathleen with a more detailed review of our financial results. Then I will discuss current market conditions and provide our outlook for the first quarter of 2009. Finally, we will open the call to your questions. Results for the fourth quarter were largely within our expectations. Total revenues for the fourth quarter came in at RMB196 million or approximately $29 million, which was slightly above our guidance range of RMB185 million to RMB195 million. Non-GAAP fully diluted earnings per common share for the fourth quarter were RMB0.24, in line with our prior forecast of RMB0.20 to RMB0.30. Additionally, already our weakest quarter from a seasonal perspective, the fourth quarter was further impacted by worsening global economic conditions, which negatively affected recruitment activities and corporate spending. Marketing materially weakened during the quarter, as employers scale back their high efforts. And those who are recruiting, they sell on smaller subjects. The effect was widespread across industries as well as geographies. As a result, we saw a decrease in print advertising volumes and unique employers utilizing our online services in the fourth quarter as well as lower spend per customer. While our recruitment businesses faced an uphill challenge in the fourth quarter, we were very pleased with the performance of our non-recruitment related services. Revenue increased more than 60% for the other HR services area in the fourth quarter, driven primarily by increased customer adoption for our outsourcing services. For the full year, revenues from other HR services grew more than 50% and maintained high growth rates throughout 2008 despite deteriorating economic conditions. We believe our ongoing investments to expand our portfolio of HR services are really beginning to bear fruit and providing us with a significant and distinct competitive advantage. We are not only establishing deeper relationships with customers and increasing cross-selling potential, but we are also building a more balanced and resilient business model, which will allow us to capture even greater opportunities in the future. We continue to believe that a comprehensive solution-based model will best serve the wide range of accounting in sophistication level in China. 2008 was no doubt a challenging year for 51job, but we will also remember it for the goals we attained. We celebrated our tenth year in operation, assisting over 250,000 corporate customers with their HR needs nationwide in 2008. We also achieved our seventh consecutive year of profitability. Once again, the only leading provider of online HR services to generate profit in China. With our broad product portfolio, superior customer service, premier brand and strong financial standing, we believe that we are strongly positioned to overcome what is slightly to be a difficult HR market in 2009. I would turn the call over now to Kathleen for more detailed financial review.

[Kathleen Chien:]

Thank you, Rick. Revenues for the fourth quarter totaled RMB196 million, an 8% decrease from the same quarter in 2007. Our print advertising revenues decreased 37% year-over-year due to a slowdown in market demand, which resulted in less page volumes as well as lower average revenue per page. The number of print advertising pages in the fourth quarter decreased 13% to 3,452 pages compared with 3,962 pages in the same quarter in 2007. While we have generally maintained similar print advertising rates within each city over the past year, the continued growth in revenue contribution from the lower price cities decreased the overall average revenue per page. Our overall average revenue per page decreased approximately 28% compared to the fourth quarter of 2007. Online revenues decreased 5% year-over-year to RMB73 million in the fourth quarter due to reduced market demand and corporate spending for online services. Unique employers using online recruitment services in the fourth quarter were 57,071 compared with 57,565 in the same quarter of 2007. While our online pricing was relatively unchanged from the year-ago quarter, we saw a decrease in the average revenue per unique employers due to the customers choosing smaller and/or lower priced online packages. Revenues for other HR services increased 64% year-over-year to approximately RMB61 million in the fourth quarter. This growth was primarily driven by the greater customer demand for our HR outsourcing services and also included about RMB6 million in service fees that we receive from certain newspaper contractors. Gross margin was 51% compared with approximately 56% in the fourth quarter of 2007. The decrease was due to higher staff cost, technology cost and office expenses, which were particularly offset by lower print related expenses. Included in cost of services was share-based compensation expense of RMB1.2 million. Sales and marketing expenses increased to RMB58 million from RMB55 million in the fourth quarter of 2007. The increase was primarily the result of higher labor cost from staff additions and higher wage levels compared to the year-ago quarter. Included in sales and marketing expenses was share-based compensation expense of approximately RMB1 million in the fourth quarter. G&A expense for the fourth quarter was RMB30 million compared with RMB38 million in the fourth quarter of 2007. The decrease was primarily due to a loss provision of approximately RMB10 million related to a third-party contractor recognized in the fourth quarter of 2007, which was partially offset by high rental, property management and office expenses in the fourth quarter of 2008 as compared to the same quarter in 2007. Included in G&A expenses in the fourth quarter of 2008 was share-based compensation expense of RMB5 million. Operating income for the fourth quarter decreased to approximately RMB6 million from RMB20 million for the same quarter in 2007. Our effective tax rate for the fourth quarter was 45% compared with 33% in the fourth quarter of 2007, as certain non-tax deductible expenses, such as share-based compensation, comprised a higher portion of our taxable income base. Net income for the fourth quarter was approximately RMB7 million compared with RMB14 million in the fourth quarter of 2007. Our fully diluted earnings were RMB0.12 per common share, which is equivalent to $0.04 per ADS. Excluding share-based compensation expense and the impact of foreign currency translation, non-GAAP adjusted income was RMB14 million in the fourth quarter of 2008. Non-GAAP adjusted fully diluted earnings per common share for the fourth quarter were RMB0.24 or $0.07 per ADS. Now turning to our full year results, total revenues for 2008 increased 2% to RMB860 million. Gross margin for 2008 was 54% compared with 56% in 2007. Income from operations decreased 31% to RMB97 million, and net income decreased 26% to RMB77 million in 2008. Excluding share-based compensation expense and foreign currency translation loss, non-GAAP adjusted income decreased 20% to RMB122 million in 2008. Non-GAAP adjusted earnings per common share for 2008 was RMB2.15 or $0.63 per ADS. Turning to our balance sheet, our cash position remained strong as ever. At December 31, 2008, we had cash and short-term investments totaling almost RMB1.1 billion or approximately $158 million. This is an increase of approximately RMB70 million from the end of 2007. In the fourth quarter, as part of a share repurchase program approved by our Board and shareholders last September, we repurchased approximately 137,000 ADSs from the open market at an average price of $6.65 per ADS for an aggregate consideration of approximately $910,000 – for $910,000. The company’s authorized repurchase up to $25 million worth of outstanding ADSs. Now I’ll turn the call back over to Rick.

[Rick Yan:]

Thank you, Kath. The market for recruitment services is inevitably correlated to overall macroeconomic outlook. And thus we are likely to see a challenging hiring market in 2009. We expect that (inaudible) would decrease as employers navigate through these unprecedented times. In addition, visibility remains limited as more companies are hesitant to commit often and have adopted a buy-as-you-go approach to recruitment advertising. We are unable predict when conditions may improve, but we are encouraged that the Chinese government is taking active measures to bolster the economy and views employment as a major area of focus. While we face uncertainty in the near-term, we have not wavered in our conviction about the compelling long-term prospects of HR services market in China. As such, we believe it is critical that we continue to smartly invest in our businesses, particularly in the area of product development. In the online business, we continue to lead with the industry first user functionality and have a number of technology upgrades and website enhancements scheduled for launch over the next two quarters. In our outsourcing services area, we aim to be one of the strong growth momentum generated in 2008 and continue to expand our coverage network and service capabilities. Based on current market and operating conditions, our total revenue target for the first quarter of 2009 is an estimated range of RMB175 million to RMB185 million. Our estimated non-GAAP fully diluted EPS target for the first quarter of 2009 is between RMB0.00 and RMB0.10 per common share. Please note that this non-GAAP EPS range does not include share-based compensation expense or the impact of foreign currency translation losses or gains. Our management remains focused on delivering sustainable and profitable growth to shareholders. We are confident that we can buy this near-term financial discipline with the investments necessary for our future growth. We are well prepared and positioned to capitalize on opportunities in 2009 and beyond. That concludes our presentation. We will be happy to take your questions at this time. Operator?

[Operator:]

(Operator instructions) We will go first to Jason Brueschke with Citigroup.

[Jason Brueschke:]

Thank you. And good morning, Rick, Kathleen and Linda. I have a few questions if you don’t mind. First, could you give us an update kind of on the competitive landscape and maybe your views as to how some of your non-profitable competitors are fairing and maybe likely to fair and what that dynamic is like or how it’s likely to change in 2009? Second question on margins, if the demand side of the equation continues to decline, if the global situation continues to work it and China continues to worsen, what are your thoughts about scaling back on costs or investments to try to protect the margins to keep your string of seven years of profitability, keep that going? And then maybe the final question is, Rick, can I maybe get your views on the government’s economic stimulus package as it relates to private company and white-collar employment? Do you think that a lot of the massive infrastructure spend is likely to trickle down and spur the employment demand in your company’s clients? And if so, what do you think the lag time would be to see that effect really show up in your company’s demand for your recruiting and HR services? Thanks.

[Rick Yan:]

Thank you, Jason. First of all, in terms of competition, both of our major online competitors are partly or fully owned by foreign-listed companies. And based on those companies’ public results, we can tell that both of our major competitors are making and generating a little bit more than RMB20 million in sales, but let’s say both of them lost more than – I would say more than $50 million. So, almost RMB350 million last year. That is a lot of money for two companies to lose in one year in the online recruitment market. If you look at their financials, there has been funding on – there has been VC funding on one of them. And given the current economic environment, I’m not sure they can count on continue funding to sustain their kind of money-burning strategy. Obviously, and I don’t want (inaudible) Monster, which is a much bigger company and has more resources, but I think for Monster their challenge will be the slowing market in the US and Europe will also take away their resources and focus, you know, how much resources they have to truly invest in all parts of the world, given the economic situation across the globe. So I do think that this might be the beginning of the end of a faith of investment in China. I would characterize, before 2004, after the Internet bubble burst, our company grew, we grew and we went public in 2004. And by 2005, there’s an investment boom in China. There’s a lot of investment coming into China. Our major online competitors get funded, and there’s a lot of spending and investment into the online HR market or recruitment services market in the past three years. And I think by the end of 2008, I think the market condition changed. I think the HR market demand has slowed down, but the almost – the flow of free money may no longer exist. So I do think in 2009 we will probably see major changes in terms of a strategy as well as behavior from our major online competitors. And I think this is an end of a three-year kind of episode in the online recruitment market kind of history. Your second question about margins, yes, absolutely. We are very, very proud of our track record of seven consecutive years of profitability. And I think we are doing everything we can to maintain the track record. The track record takes a long time to build, and again, you could lose that track record in one year. So we are working very hard. And of course, you can see from the dynamics of our business, the different parts of our business that behave very differently. Our online, you can see that our online – you know, online declined a little bit in quarter four last year by about 5%. Our print was down a lot by more than 30%. Our HR – other HR services grew almost 60%. So the different parts of our business have different behavior. So our challenge is we do need to align our cost structure for some of the businesses like print, because we do believe the slowing down of the market demand for recruitment services will probably last a few quarters. So we have aligned our cost structure for those businesses to make sure that we have the right margin structure going forward. On the other hand, we also have areas of our businesses that are growing, and we want to make sure that they will continue to get resources to fund their growth. So, to put it in a very simple way, we are very – we would put a lot of emphasis on margin and profitable growth. It’s not today. This is what we’ve been doing for the past seven years. And we will try our best to maintain that track record. But then underneath there will be different parts of our business that would need to align our cost structure, and in some other businesses, we will need to continue to invest to get it – to keep it on the growth track. Kathleen, do you have anything to add on the margin front?

[Kathleen Chien:]

Jason, I think what we are seeing is that essentially we’ve been doing this for a long time. We’ve been very disciplined for a long time. I think we will be looking at our cost structure based on market conditions and working through it to make sure that we have the right problem to continue to have sustainable and profitable growth. I think it’s going to be a challenging year nevertheless. I think we can’t underestimate that. But nevertheless I think we just need to allocate resources correctly to weather through this situation. So I think that our focus on our discipline hasn’t changed and our philosophy has not changed.

[Rick Yan:]

Yes. Jason, on your last question, this is more a question for the economists, and I’m not an economist. So I’m not sure I can give you the right answer, but anyway I’ll try. I think the different reports that might suggest China might bottom out second half of 2009 or end of 2009, I think there might be – they might tend – incline to be optimistic. I think if you look at the China macroeconomics data, it kind of turns south really starting last November. So I think it would take some time for it to work out. The stimulus package, as you said, will focus mostly on the infrastructure investment. And the slowdown is really in three major sectors; the financial sector, the real estate sector and anything related to production and export. So consumption is – consumption, we haven’t seen a meaningful pickup in consumption. And I think what the government doing is, you know, doing all kind of physical spending to support the GDP. It’s not a transfer of wealth from the government to the consumers to spur consumption. So at this stage, I’m not sure how much help it will have in the short-term for the private companies or for corporate profitability in China. I think we remain very cautious about the current trajectory that it might last longer than what the market believes today. And it might actually go a little bit deeper before it stabilizes. So we are encouraged by all the work the government is doing that is certainly helping to increase the confidence in the economy. How much real impact it will have on corporate profitability and consumer spending? I think we might need to wait for a few more months to see real evidence.

[Jason Brueschke:]

Perfect. Thank you very much. Appreciate it.

[Rick Yan:]

Thank you, Jason.

[Operator:]

Thank you. We’ll move on now to Jenny Wu from Morgan Stanley.

[Jenny Wu:]

Hi, everyone. Thank you for taking my questions. Just to follow up the previous question you just mentioned, number one, I understand you only adjust your cost structure based on your business lines. So basically I understand you not only do not give guidance on the margin for each, but in just general, it is something (inaudible) for each business, how should we understand the different business lines? Thank you.

[Kathleen Chien:]

Jenny, I think – as you’ve said, that I think we managed our company as one business. In many of the things that there is a lot of share costs. So it’s difficult for us to give you sort of a segment-by-segment margin. So I don’t think that we could do that here, but I think what we are saying is that overall there is a lot of share service, if you will. We need to just make sure that we are devoting the right sales forces [ph] to the right people, the right business line. So that’s unfortunately the color we can give on that. But you can see that the different revenue streams that should have different growth rates or decline rates, if you will. So we will be making decisions based on that obviously.

[Jenny Wu:]

Okay. And on the cost control front, could you give us more color on the method you may put in place and eventually which part will be hit the most, such as should we think that gross margin would be largely sustainable or we will see (inaudible) the operating margins and especially based on the change of the competitive landscape? Should we also expect (inaudible) sales and marketing and something like that? Thank you very much.

[Kathleen Chien:]

I think what we need to do, I mean, in terms of looking at alignment of costs is that obviously if we have a smaller revenue base that we will be serving, we need to look at all the lines. I don’t think we could – in isolation we could just – sales and marketing, for example, I think will start at the top list. When we look at – we've given just the outlook for Q1 for it already and that is already a lower number than the quarter four numbers, if you will. So starting from the cost of service we need to make sure that in terms of whether or not we have the right people doing the right things, whether or not we can redeploy people to do different things, that could actually help generate revenues and improve services or efficiencies, all that down the line. I think – so we need to be very disciplined by hiring. We need to be disciplined by marketing expenditures. These are things that we could probably do more in the short-term, if you will. But again, I think a cost control measure or cost realignment initiative is going to be longer-term. I think those are the things that we could probably look at very quickly, but there will be a lot of different things that we will need to do over the course of the year, to get ourselves to the right structure if 2009 is going to be a slower year versus prior years. So I think (inaudible) all lines, if you will.

[Jenny Wu:]

Okay, thank you. And may I have another question. Just regarding the – obviously 2009 would be very challenging year. In the first quarter we see our guidance like the – (inaudible) to maintain the breakeven. And my question is just like – if we look forward, should we think the first quarter to be diverse or – and we would see the (inaudible) pickup of the dynamic, or should we expect the worst yet to come? And actually you may suffer from several quarters loss making and to – with these dimensions you’re still to manage the profitability for the full year. So similarly how should we think about the dynamic across the year?

[Kathleen Chien:]

Well, I think in the past, Jenny, what we’ve said is that typically we feel that the Chinese New Year is a – it gives us a sentiment of what the year in terms of the (inaudible). But bear in mind that this has been – in the last six months it’s been fairly extraordinary in terms of the market situation environment. The macro was something, and I agree we have to have the same discussion. I remember maybe six to nine months ago, no one could have predicted where we would be today. So I think it’s difficult for me personally to give you an outlook for 2009 for China overall. But what I will say is that when we say that we will look at the cost structure to be reliant [ph], that’s going to be an ongoing exercise. So we need to have the right cost structure that can actually serve our revenue, whatever level it will be, because we are very committed to make sure that it’s going to be a sustainable situation for the company over the long run. To be honest, I think if the situation were to all of a sudden drop off another 50%, maybe there’s something we can do to kind of align ourselves to that structure immediately. And that would be something that we’d have to work through. But nevertheless I think we have been very disciplined about what we’ve done in the past. I think we are – even in a very difficult structure now, I think we are very committed to making sure that we can actually not go into a loss making situation. So our hope is that actually the next few quarters will be similar in terms of where we are now. But I just don’t have enough information [ph] to give you the outlook now. And we’ve always given the one quarter forward guidance, and I think that will continue to be our practice and we will continue to update the community about what we understand about the market as we understand it. So I think that’s how much we know right now.

[Jenny Wu:]

Okay, thank you very much. That’s all my questions.

[Rick Yan:]

Thank you, Jenny.

[Operator:]

Thank you very much. We’ll move on to Scott Berg now from ThinkEquity.

[Scott Berg:]

Hi, everyone. Nice quarter. I guess let me start off with HR services. What was their strength in the quarter? And I guess how does that look going into the new year?

[Kathleen Chien:]

I think in the last few years you can see that every quarter we’ve actually had a fairly nice growth in the other HR services. And that’s really a testament to the fact that the diversification into the different areas in HR services has been something that’s been well received by customers and that we continued to have more customers, recruiting (inaudible) in those spaces. So we still feel optimistic that this is still in the early stage of development because I think we’ve always said that I think outsourcing as an area overall is a very large market opportunity. If you look at different markets across the world, they are more developed. So we continue to feel that that’s something that will be highlighted or a strong performer for us, but we will see how and if anything goes in terms of the overall macro situation will impact that. But for now, I think we continue to be very optimistic about the potential of that business.

[Scott Berg:]

Okay. And then I guess on the gross margin front, kind of I think a related a question. Gross margins have picked on every quarter since the second quarter of ’07. Is this more of a function of the mix of the different services shifting to what I assume is slightly lower margin within the HR – you know, the other HR-related services, or is there something else kind of comprising this change?

[Kathleen Chien:]

I think it’s really sort of also going back to sales and marketing as well. I mean, we’ve kind of accelerated our sales and marketing expenditure over the last few quarters. And so that’s part of the equation. And certainly I think with some of the more sort of nascent businesses taking up a larger percentage of revenues overall, that will have some impact. So I think the structure is that we are funding some of the growth in some of the newer businesses, and I think that’s sort of what we would expect over time, if you will. These businesses are not as mature yet, and so we are thinking to ramp up on that. And then the additional sales and marketing investments that we’ve made in the last few quarters have also reflected in that as well. Although I think you’re just – if you’re just talking about the gross margin, I think that’s really part of the fact that we are building out the network, if you will, to serve these additional new services.

[Scott Berg:]

Okay, great. That’s all I have for now. Thank you.

[Kathleen Chien:]

Thank you.

[Rick Yan:]

Thank you, Scott.

[Operator:]

Thank you. (Operator instructions) We’ll move on now to Wendy Huang from RBS.

[Wendy Huang:]

Hi, thanks for taking my questions. A couple of questions, first, could you elaborate a little bit on the growth momentum of the outsourcing services and what particular type of employers or companies are joining the growth in that business? And I have a follow-up. Thank you.

[Kathleen Chien:]

I think, you know – again, as I’ve said just a little bit ago, I think we’ve continued to be pleased to see the number of new customers. We’ve continued to recruit into the outsourcing service because it’s a newer product line for us and it’s something that most customers have just started to test out and tried to embrace their deal. I think –

[Wendy Huang:]

For this year stronger demand from the multi-national company or domestic company or from the SMEs?

[Kathleen Chien:]

I think when we first started the business what we saw – one of the most key compelling proposition that we have and the key advantage for us versus our competitors was that we were really the only company that actually could have a national platform to service companies, because a lot of the providers in the past have been sort of, let’s say, a Beijing FESCO or Shanghai FESCO where if your company with multi-city or multi-provincial province presence, it was hard for you to consolidate your supplier relationship. And so that was really the proposition that was the very differentiated for us versus our competitor. So it was for a company that’s not necessarily they were multi-nationals, but just company that had different presence, different cities or provinces. I think as we’ve kind of grown that business over time, we are now seeing that there are also customers who are in single cities or single locations that have started to look into this as a viable option. Also I believe that this is going to be something that will continue to go forward. But at this point in time, I mean, the number of customers we have in that is still a relatively small compared to the more mature businesses of the advertising business. So I think the key to growth for this as well will be to continue to acquire more customers into default [ph]. So customer acquisition will be very, very critical and key to this business as well.

[Wendy Huang:]

What kind of competitive advantage you have versus some other traditional events [ph] like FESCOs to check the customers to use your outsourcing service rather than theirs?

[Kathleen Chien:]

I think as is true for most services business, it’s really about service quality, consistency and delivering at a good value proposition – you know, price performance, if you will. So I think we have a very large network now. We actually have experienced sales and support structure for this business. And I think winning on service quality will be something that’s going to be very key because I think in the past I would say that many of the sort of more government-affiliated providers have not done as well on the service front. And I think we’ve also utilized our expertise in the technology area in terms of building the right platform to help serve these customers in a better, more efficient and more user-friendly way.

[Wendy Huang:]

Okay. My second question is, your print advertising business dropped significantly while your online business seems holding on better well. So could you maybe comment how this two segments affected differently by the economy?

[Kathleen Chien:]

I think that part of this – there are two dynamics going on obviously, but I think a couple of things. One is that print has always been a more transactional business. So people make one of five decisions often. So I think in a situation where people were a little bit more hesitant about what the future hold, I think people were maybe choosing to go to an auction [ph] where it’s not as sort of transactional. And then also with some of the online services, we’ve actually in the last year been working on, sort of working with customer into longer term membership models, if you will. So I think that’s why it has been able to weather the downturn a little bit better. So a lot of customers that we’ve been working with are people that we now are on a longer term relationship with rather than the one-off transactional decision. And so I think that’s part of the difference. And then secondly, I think in terms of the overall big picture, I think certainly online continues to be a high growth segment versus print, I mean, even before this last quarter when things were more difficult. In the last probably three years or so, you could see that the growth rate of the online has been at a higher rate to offline. So I think (inaudible) kind of bear out in terms of the overall market trend and the shift in user behavior.

[Wendy Huang:]

Okay. My last question is on your Q1 guidance. Historically we see that Q1 is a strong season for your business. However, this time you guide 6% to 11% sequential decline. So could you maybe help us understanding maybe how the different businesses were affected in Q1?

[Kathleen Chien:]

I think we believe that the recruitment related businesses on the advertising side will be something that kind of is the first to face the more difficult challenges in terms of the macro environment. I think that bore [ph] out already in Q4. I don’t think it’s going to be that different in terms of the relative impact in Q1. I do think that the other services sector has been doing better partly also because they were on longer term relationship contract and so longer selling cycle, but it’s also a more stable structure. But again, with recruitment I think I can only say that most of the companies that we’re talking to, a lot of the customers that we understand have been very, very disciplined about hiring in the last couple months, in fact, many of the companies are really only working on new placement hires. So that’s the reality and that’s the situation that everybody is in right now. And so for us to give a guidance that’s on a sequential decline is not surprising I think given that the market conditions I think have declined over time. And I think what we are seeing really reflects what’s going on in the marketplace.

[Wendy Huang:]

How does the seasonality look like for the outsourcing business? Is Q1 particularly a strong quarter or normal quarter or just big [ph] quarter?

[Kathleen Chien:]

I think outsourcing is not really a seasonal business, because if you actually work with people to actually, let’s say, process payments for them, it happens every month regardless of whether or not it’s a high season. It’s like paying salary for somebody. You still pay them if they are still an employee. And that’s why we felt that this is a good balance to the recruitment business for us because it’s more stable.

[Wendy Huang:]

Okay, thanks. Thank you very much.

[Operator:]

Thank you. We have no further questions in queue. I’ll turn the call back over to Rick Yan.

[Rick Yan:]

Thank you for joining us today. We look forward to speaking with you next quarter. And we value your continued support of 51job. Thank you.

[Operator:]

Thank you. That does conclude today’s conference. We appreciate your participation and hope that you have a good day.