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51job Inc. Earnings: They're Still Hiring in China

China's economy is showing signs of vulnerability, but companies are still hiring. 51job (NASDAQ: JOBS) -- a Shanghai-based provider of Internet-based recruitment services through China -- should know. It came through with another quarter of healthy growth, scoring double-digit percentage growth across its two main businesses.

51job checked in with first-quarter revenue of $81.2 million in its first quarter, 14% ahead of the prior year -- and just ahead of the guidance it issued in early March, calling for $78 million to $81 million on the top line.

It got there through a 13% uptick in its online recruitment services, a big deal since that accounts for 67% of its business. Other human resource-related revenue, accounting for the other third of 51job's business, managed to grow 18% since the prior year. 

There's no longer a need to break out its print publishing business. 51job ceased publication of 51job Weekly -- the weekly job listings that it would wedge into regional newspapers -- at the end of last year. It was once the driving force in 51job's business, but the Internet became too effective. 51job has spent the past couple of years winding down its print operations.

The news wasn't kind on the way down the income statement. Gross margin contracted, and income from operations only managed to grow by 3%. 51job's profit of $0.23 a share -- or $0.38 a share on a adjusted basis. That's at the midpoint of its earlier adjusted profit forecast. 

There are now 302,000 unique employers leaning on 51job to fill open positions, 5% more than a year earlier. Revenue is growing a lot faster than companies on its Rolodex, a good sign that it's succeeding on its goals of increasing customer spend and cross-selling other human resource services. Average revenue per online user has now posted year-over-year growth for four consecutive quarters. 

51job sees steadiness in the Chinese job market, but it remains to be seen what the country's decision to replace business tax for valued-added tax -- a move that went into effect earlier this month across all industries -- will have on the hiring scene. It will have a slight impact in revenue recognition on 51job's end.

51job's guidance for the current quarter calls for an adjusted profit between $0.36 a share and $0.39 a share -- just like the first quarter -- on $83.7 million to $86.8 million in revenue. That's not exciting on either front. Flat sequential earnings on an uptick in revenue implies that margins will continue to contract on a quarter-to-quarter basis. 51job's revenue growth will follow $80.2 million that it rang up in revenue a year earlier. Even at the high end it would nix 51job's string of quarters of double-digit year-over-year growth to four periods. Growth is slowing at 51job, but at least it's still growing.