Sometimes double-digit growth isn't enough. Revenue is slowing at 51job (JOBS), and the deceleration is unfortunately starting to pick up the pace. Shares of the Shanghai-based provider of online recruitment services moved lower after posting disappointing first-quarter results after Thursday's market close.
Revenue rose 12.4% to $135.9 million through the first three months of the year in local currency, and a mere 5.1% advance in U.S. dollars, given the weakness in the yuan over the past year. You have to go back nearly three years to find the last time that 51job was growing slower on a local currency basis. The real dagger here is that 51job was targeting 15% to 20% top-line growth for the quarter back in late February. The company has historically been conservative in spooning out its guidance, but it fell short of the mark this time.
Image source: 51job.
Working overtime
The company did manage to post double-digit percentage growth in both of its primary businesses. Online recruitment services -- its primary business, accounting for a little more than two-thirds of the revenue mix -- rose 11.9% to hit $91.4 million in revenue for the quarter. The balance of 51job's business comes from other human-resources-related revenue, and that segment rose 13.5% to land on $44.1 million.
The number of employers leaning on 51job to fill their vacancies is thinning out, but that's by design: 51job is weaning its sales team away from smaller customers, hoping to build on its relationship with larger and more lucrative accounts. The number of unique employers has declined 10% to 337,166 over the past year, but the average revenue per unique employer has risen 24.5% in the same period. The shift in its strategic priority is debatable, but for now it's working.
This is still a scalable business model, and with several but not all expense line items growing slower than revenue, it isn't a surprise to see profitability once again outpacing the top-line spurt. Adjusted earnings rose 44% to $52.1 million, or $0.79 a share. The company may have fallen short on its revenue goal, but it easily exceeded the $0.62 to $0.66 per-share profit it was targeting for the quarter.
Looking ahead to the current quarter, 51job's guidance calls for $139.3 million to $145.3 million in revenue. This would be a 4% to 9% year-over-year increase on the top line -- more deceleration for the slowing company. It's eyeing adjusted earnings per share of $0.62 to $0.66, exactly what it was targeting for the first quarter -- but this time it would be well short of the $0.82 a share it rang up in the second quarter of last year.
Shares of 51job opened lower on Friday following the report, and the deceleration is real. Trade tensions with China also aren't helping, but as long as Chinese employers have jobs to fill, 51job will be there trying to make the connections happen.
