Monster Worldwide Breaks Even in Q2, Misses Estimates - Analyst Blog

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Monster Worldwide Inc. ( MWW ) broke even (including stock based compensation but excluding one-time items) in the second quarter of 2014, missing the Zacks Consensus Estimate by 3 cents, primarily due to a year-over-year decline in revenues. Shares of Monster Worldwide were down 2.17% (12 cents) following the earnings release.

Revenues

Revenues declined 2.8% year over year to $194.4 million in the second quarter and missed the Zacks Consensus Estimate of $199.0 million as well. On a year-over-year basis, results were impacted by declines in revenues at Monster Careers (down 1.8% year over year to $178.6 million) and Internet Advertising & Fees (down 13% year over year to $15.9 million).

Revenues in the Careers North America segment were $110.3 million, up 0.5% year over year. Revenues in the International Careers segment were $68.3 million, down 5.3% on a year-over-year basis.

Careers Total segment revenue was $178.6 million, down 1.8% from the year-ago quarter while IAF segment revenue was $15.9 million in the reported quarter, down 13% on a year-over-year basis.

From a geographical perspective, revenues from Europe were down 5% year over year. APAC revenues were down 6% on a year-over-year basis, primarily due to a tough macroeconomic environment in India. Korea continues to hold its own in a macroeconomic environment that has shown slight improvement.

Currently, Monster provides access to resumes of over 150 million candidates with an additional 200 million yet to be commercialized. Mobile accounted for 35% of the total traffic in the reported quarter.

Engagement on the market-leading résumé search platform was up significantly with user messaging growing every week by over 25%.

 In Jul 2014, the company had commercially launched three new and exciting products in North America including TalentBin by Monster, Monster Twitter Cards and Talent CRM. All of the products received rave reviews from the market, which is a major positive for the company.

Margins

Operating expenses increased 3.4% from the year-ago quarter to $189.7 million. While salaries & related increased (up 15.4% year over year), the other components of operating expenses decreased. Office & general expenses (down 3.1% year over year) and marketing and promotion expenses (down 13.9% year over year) lowered overall operating expenses.    

Monster reported operating income of $4.7 million versus operating income of $16.5 million reported in the year-ago quarter. Operating margin contracted 580 basis points (bps) to 2.8% from 8.2% in the year-ago quarter due to lower revenue base.

Net income from continuing operations (including stock based compensation but excluding all one-time items) was $34.0 million or breakeven compared to $11.8 million or 10 cents per share reported in the year-ago quarter.

Monster Worldwide, Inc - Earnings Surprise | FindTheBest



Balance Sheet & Cash Flow

Monster had $18.9 million in cash from operating activities in comparison to cash outflow of $8.6 million in the prior quarter. Free cash flow was $8.2 million. Deferred revenue was $341.9 million, which remained flat sequentially.

Monster Worldwide repurchased 2 million shares of common stock in the reported quarter. The company has repurchased approximately 25% of outstanding shares over the last twelve months.

Guidance

Monster expects the bottom like to range from breakeven to earnings of 4 cents per share in the third quarter. The Zacks Consensus Estimate is pegged at 6 cents per share, which is above the higher end of management's guidance.

The company expects to generate operating cash flow between $15.0 million and $25.0 million on a quarterly basis going forward.

Management expects to generate between $75 million to $95 million of cash flow from operations in 2014.

Our Take

The partnership with H&Q is believed to aid the company in extending its footprint in South Korea. Additionally, Monster's core business is showing signs of improvement and exhibiting robust potential for cash flow generation. Additionally, the company's corporate restructuring initiative is expected to boost margins, going forward.

Additionally, we believe that the new strategy of realigning the business along the three pillars will drive growth and profitability in the long term.

Mobile has been the primary area of focus for Monster for some time and the fact that the penetration of smartphones is increasing should be considered a major positive going forward.

However, the company continues to face significant competition from professional and social networking websites such as Facebook ( FB ) and LinkedIn ( LNKD ) as well as from traditional advertising companies such as Omnicom Group ( OMC ).

Currently, Monster has a Zacks Rank #3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MWW , OMC , FB , LNKD

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