) reported earnings of 8 cents in the fourth quarter of 2012,
which was in line with the Zacks Consensus Estimate. However,
earnings per share ("EPS") declined 55.6% year over year and
11.11% sequentially, primarily due to lower revenues and
operating margin growth.
Revenues declined 10.0% year over year and 4.7% sequentially
to $211.2 million in the fourth quarter. This was well short of
the Zacks Consensus Estimate of $216.0 million. Currency
translation had a negative impact of $1.3 million on
Bookings decreased 13.0% year over year but increased 23.0%
sequentially to $261.0 million that includes a negative impact of
$0.8 million from currency translation. The year-over-year
decline in bookings was primarily due to weak performance from
North America careers, which declined 5.0% year over year, while
Bookings in Europe declined 30.0% in the reported quarter.
In North America, government bookings plunged 19.0% and field
and telesales bookings decreased 6.0%, which fully offset a 7%
increase in Newspaper and a 5.0% jump in both e-commerce and
The sequential growth in bookings was primarily driven by a
26% increase in North America and a 30% jump in Europe.
Segment wise, Careers North America (52.8% of the total
revenue) revenues declined 6.0% year over year and 3.4% quarter
over quarter to $111.5 million. Careers-International (38.4% of
the total revenue) revenues decreased 14.5% year over year and
7.2% sequentially to $81.1 million. Internet Advertising &
Fees (8.8% of the total revenue) revenues of $18.6 million
declined 12.9% year over year and 1.2% from the previous
Operating margin declined significantly to 7.2% from 12.8% in
the year-ago quarter. Operating margin declined 20 basis points
("bps") on a sequential basis.
Segment wise, Careers North America margin declined 470 bps on
a year over year basis and 210 bps on a sequential basis.
Careers-International margin declined to 4.1% from 19.9% in the
year-ago quarter and 5.4% in the previous quarter. Internet
Advertising & Fees jumped to 27.5% from 18.2% in the year-ago
quarter and 26.6% in the previous quarter.
The weak result was primarily due to sharp rise in operating
expenses, which as a percentage of revenues jumped 560 bps from
the year-ago quarter and 20 bps sequentially. The sharp rise in
operating expense was primarily due to higher office and general
as well as marketing and promotion expenses in the quarter.
Net margin was 4.1% compared with 9.5% in the year-ago quarter
and 7.4% in the previous quarter.
Balance Sheet & Cash Flow
Monster ended the quarter with cash and equivalents of $148.2
million, down from $175.1 million at the end of the previous
quarter. Monster generated $17.0 million in cash from operations,
up from $7.7 million in the previous quarter.
Corporate Restructuring Initiatives
As announced earlier (concurrent with its third quarter
earnings release), Monster completed the sale of the ChinaHR
business to Saongroup and retained 10% minority stake in the
combined China entity. Monster also exited operations in Brazil
Through the restructuring initiative Monster aims to continue
and accelerate the redeployment of expenses into marketing and
sales in Monster's core markets (North America, Europe, Korea and
India), while reducing the run rate of operating expenses. On a
consolidated basis, these initiatives are expected to reduce
operating expense by approximately $130 million on an annualized
Assuming flattish revenue growth, these initiatives will
generate operating income of approximately $80.0 to $90.0
Monster had earlier announced that it is exploring strategic
alternatives with respect to maximizing shareholder value, and
retained Stone Key Partners LLC and BofA Merrill Lynch as
financial advisors in connection with this review. In its fourth
quarter call, Monster reiterated its stance and noted that the
process will take some time to complete.
Due to the uncertain macroeconomic environment and the
restructuring actions undertaken by the company, Monster did not
provide any guidance for bookings and revenues. Nevertheless, the
company provided earnings guidance in the range of 6 cents to 10
cents per share for the first quarter of 2013.
Monster's results continued to get hurt by reluctant
recruiters due to the sluggish macro-economic environment.
Monster continues to face significant competition from social and
professional networking websites such as
) as well as from traditional advertising companies such as
). Increasing competition is expected to hurt profitability going
However, the corporate restructuring initiative is expected to
boost margins going forward. The increasing macro-economic
visibility after the resolution of the fiscal cliff and recent
debt-agreement will boost top-line going forward.
Currently, Monster has a Zacks Rank #3 (Hold).
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