Monster Worldwide, Inc. (NYSE:MWW)
Q4 2008 Earnings Call
January 29, 2009 5:00 pm ET
Robert Jones – Investor Relations
Salvatore Iannuzzi – Chairman of the Board, President & Chief Executive Officer
Timothy T. Yates – Chief Financial Officer, Executive Vice President & Director
Darko Dejanovic – Executive Vice President, Global Chief Information Office & Head of Product
[Otto] Donald – Customer Service
Poulos Lise – Executive Vice President & Chief Administrative Officer
Mark Stoever – Executive Vice President Internet Advertising & Fees
James M. Langrock – Senior Vice President Finance & Chief Accounting Officer
Mark S. Mahaney – Citigroup Smith Barney
John Janedis – Wachovia
Monica DiCenso – JP Morgan Securities
Christa Quarles – Thomas Weisel Partners
William Morrison – Thinkequity
Jeetil Patel – Deutsche Bank
My name is Marcelo and I will be your conference operator today. At this time I would like to welcome everyone to the Monster Worldwide fourth quarter 2008 earnings result conference cal. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) I would now like to turn the call over to Mr. Bob Jones, Vice President of Investor Relations
Thank you for joining us on Monster Worldwide’s fourth quarter and year end 2008 conference call. Our format calls for to have formal remarks from Sal Iannuzzi, Chairman, President & Chief Executive Officer and Tim Yates, Executive Vice President and Chief Financial Officer. We’ll be joined on the question and answer part of the call by several members of our executive management team they are Darko Dejanovic, CIO and Head of Product; [Otto] Donald, Customer Service, Lise Poulos, Chief Administrative Officer and Mark Stoever, Corporate Development and Strategic Alliances. James Langrock, Chief Accounting Officer is also with us on the call.
Before we begin I’d like to remind you that except for historical information, the statements made during this conference call constitute forward-looking statements under applicable securities law. Such forward-looking statements involve certain risks and uncertainties including statements regarding the company’s strategic direction, prospects and future results and do not include the effect of the defense or outcome of the ongoing litigations related to the company’s historical stock option grant practices or costs associated with the restructuring and the 2007 security breach.
Certain factors including factors outside of our call may cause actual results to differ materially from those contained in the forward looking statements including economic and other conditions in the markets in which we operate, risks associated with acquisitions and dispositions, competition, seasonality and the other risks discussed in our Form 10K and our other filings made with the Securities & Exchange Commission.
With that I’d like to turn the call over to Sal.
Welcome to our fourth quarter and yearend earnings conference call. We met and spoke with many of you at our investor conference in November and it’s a pleasure to speak with you again today. On today’s call I will briefly address the macroeconomic environment, our fourth quarter operating performance and our near term outlook and plans. Tim Yates our CFO will then discuss the fourth quarter and yearend financial results in detail.
On last quarter’s earnings call I spoke about the turbulence that the financial markets were experiencing around the global. With another quarter of perspective and data it is now clear that we are in one of the most challenging business environments in recent history. The Global economy has experienced a more significant deterioration than anyone expected and no one is certain where the bottom lies.
The recession has rapidly spread and the slowdown in Europe and Asia now parallel the weakness in North American markets. This worldwide economic slowdown has caused companies to reduce headcount, freeze hiring and delay recruitment related decisions. There are few, if any, industries or geographic markets that have been immune to the recession.
In this environment it is not surprising that Monster felt significant pressure on its revenue and profitability which was reflected in our fourth quarter financial results. When I came on board nearly two years ago, we were faced with a number of challenges, the biggest being innovating our product and upgrading our technology. In order to do that we had to restructure the company, rebuild the foundation, develop a new platform and then sell and market our products to customers and job seekers.
Our primary goal and the driving force behind our plan is to build global market share and position Monster for long term sustainable growth and profitability. The reinvestment and restructuring plan call for a balance of investments in key areas while at the same time reducing and controlling costs. We determined early on that to be successful we had to move quickly in order to first maintain and then build Monster’s global industry leading position and we did just that.
Despite the difficult market conditions we face, we are confident that the successful execution of this strategy will significantly benefit our customers and shareholders over the long term. The key elements of our investment plan is to fix our core. We are committed to competing on products and performance which will enable us to generate tangible results for our customers. We are fortunate to have a high brand awareness among seekers and employers, a global footprint, a dedicated and resourceful work force and the financial strength to support our growth plans to reach those goals.
On January 10th we launched our new seeker experience simultaneously on 30 sites in 44 countries and in 14 languages. We will make it easier for seekers to find the job as well as provide career management resources for those who aren’t necessarily seeking a new job but are thinking long term about their careers. We want to be a trusted advisor and resources for seekers everywhere whether they’re active or passive and our new site allows us to be just that.
The timing of the relaunch given the economy, couldn’t be better. We now have the most compelling value proposition for employers and job candidates anywhere. Plain and simple, we have the best products in the online recruiting business today and we’re just getting started. The millions of seekers who visit our site find a more customized, personalized envelopment search experience. A first of its kind suite of career management tools and resources and a quicker, easier, more efficient registration, upload and maintenance process for their resume.
In short, it’s a next generation career resource tool that is a dynamic, interactive, intuitive destination experience for both active and passive job seekers. These new products include career mapping which allows seekers to compare their career path to others. Career snapshots which provide access to thousands of occupational profiles and career benchmarking which measures seekers against peers for compatible jobs.
While still early, we are very encouraged by the initial positive results and feedback we received in the US and internationally since the launch. Job seekers, and there are a lot of them, are telling us that the new site is easier to navigate, produces more targeting job offerings to their searches and gives them the tools to think about career choices and ultimately find a job.
On the employer customer side, the early feedback is that the new monster is easier and more intuitive. Allows for smarter and more targeted candidate searches and provides a greater return on investment. Although the level of business activity slowed around the world as a result of the economic situation, during the important fourth quarter renewal season we saw indications that we gained share with our existing large enterprise accounts.
The combination of improved results to customers and the anticipation of the new seeker experience strengthened our value proposition with both existing and new customers. As the largest player in the global market with the broadest resume database, we partially benefited from the flight to quality which occurred during the fourth quarter. We are confident that our newly aligned and outstanding US sales force is more equipped than ever with the right tools to take business and win the game.
We will continue to upgrade and modify the employer and seeker site as we incorporate feedback and add new features. We have created a unique partnership with the National Football League whereby monster will have a presence in several NFL events including the Pro Ball and the NFL draft. As part of its search for the NFL’s Director of Pandemonium position. This part of our strategy will allow us to creatively advertise and promote the monster brand throughout the year. For this Sunday’s Super Bowl game we will be running two ads. The first is traditional in nature and captures the festive mood of both the game and its viewers. The second is designed to generate an immediate response by bringing active and passive job seekers to the site during and immediately after the game.
Throughout the year we’ve managed our operating expenses to be more in line with the lower revenue level. As I said on past earnings calls we are doing everything within our power to maintain a reasonable return for our shareholders without sacrificing the future growth of the company and that continues to be the case. In the fourth quarter we lowered our non-GAAP operating expenses excluding China HR to $235 million representing a 10% sequential and 14% year-over-year decline.
Tim will provide further details but these expense improvements came from headcount reductions, greater marketing efficiencies, the elimination of certain discretionary costs as well as lower variable expenses due to the slowdown in business. We believe we have skillfully reduced these costs without comprising the investments that will make monster a better and stronger company in a post recession environment.
Examples of this are the successfully January 10th product launch, the expanded strength of our US sales force and the revamping of our customer service capability. One of our great strengths particularly during these turbulent times is our strong and liquid balance sheet. Our strong balance sheet has in part allowed us to make the critical investments in our technology, infrastructure, products and services. We believe that it gives us a leg up on the competition and positions us to take advantage of new opportunities that arise.
As you know, we recently closed on the acquisition of China HR. We believe that being the leader player in China represents a huge strategic advantage for monster over our competitors and we’ve been actively engaged in reorganizing and restructuring this business to maximize the opportunity. We have undertake structural changes that will bring China HR in line with Monster’s total focus on growth and profitability. Monster has the widest footprint of any company in this space and this geographic diversity has been a source of strength during the economic downturn while allowing us to truly serve customers on a global scale.
As a global leader one of the markets we lacked a presence in was Australia. Our joint venture with Career One News Limited, Australia’s job website is designed to penetrate the Australian market. This joint venture will offer combined online and print recruitment services that will further expand Monster’s international presence especially given their footprint of 140 newspapers that reach nearly 12 million people a week. We believe that our industry leading technology and online expertise combined with News Limited sales and marketing capability will bring a world class product to the local market.
Earlier this month we announced a strategic partnership with Sun Times News Group, publisher of the Chicago Sun Times and 70 other newspapers to launch co-branded websites that will offer combined online and print services for job seekers in the greater Chicago area. The Sun Times newspaper and website reach more than 4 million readers weekly in print and online. Monster now has affiliations with over 400 daily and weekly newspapers in the United States and we are committed to expanding these newspaper partnerships as they create new revenue opportunities for Monster.
The near term economic outlook is uncertain and visibility is limited. As a result we are diligently monitoring our cost profile so we can successfully balance short term operating expense with the longer term value of the business. We believe that any action beyond the measures we are taking in response to the current economic situation will be short sighted and not prudent.
While we recognize the impact the recession has on the overall job market and hiring we don’t want to overreact and lose the momentum we’ve built within the company so we feel it is a time to aggressively pursue the market share rather than retreat. As in the past, global economies will rebound and the job market will improve. Hopefully the stimulus packages that governments around the world are pumping in to the market will help the situation.
If the recession becomes deeper and more prolonged we will no doubt take swift and immediate action to adjust our cost structure as we have successfully demonstrated in the past. We believe our fundamental strength combined with our new products position us extremely well for the future. Now, I’d like to turn it over to Tim who will give you a little bit more detail in to our operating and financial performance in the fourth quarter.
Timothy T. Yates
Following our usual pattern first I am going to walk through our pro forma income statement excluding China HR then discuss the quarter’s results for China HR and finally I will highlight the pro forma adjustments which reconcile the GAAP income statement. You will note in our press release and supplemental information that we have broken out the fourth quarter 2008 results for China HR for this quarter only so we can compare and discus our results on a consistent basis. Our discussion today follows that disclosure.
After walking through the income statement we’ll provide some additional color on operating expenses, briefly discuss the results of our operating segments and in that context provide additional information on China HR and finally discuss our cash flow and liquidity position. [Inaudible] then we are discussing pro forma fourth quarter results excluding China Hr.
Fourth quarter revenue was $282 million. As Sal has noted the North American business continued to experience lower revenue in a weaker market and the economic slowdown in Europe and in Asia accelerated during the quarter. In addition, currency rates negatively impacted the top line by approximately $19 million. Normalizing for the impact of exchange rates, Q4 revenue declined 14% compared with last year.
Operating expense were $235 million in the fourth quarter, a 10% sequential and 14% year-over-year decline. On a year-over-year basis, currency had a favorable impact on operating expenses of $13 million. Revenue decline partially offset by our cost reduction initiatives resulted in a non-GAAP operating margin of 16.4%. Interest and other income was $1.6 million for the quarter compared to $6.8 million last year. Lower net interest income resulted from the negative spread incurred from our decision to draw down our revolving credit and invest the funds in short term treasuries as well as from lower market interest rates and a lower average cash balance.
Our effective tax rate was 32.7% for the quarter. The diluted share count was 119 million, a 6% year-over-year decrease mainly caused by repurchases of our common stock in prior quarters and a lower average quarterly stock price. Best pro forma income from continuing operations excluding China was $42 million or $0.27 per diluted share compared with $53 million or $0.42 per diluted share in last year’s fourth quarter.
Turning to China, revenue was $11.1 million and operating expenses were $16 million producing an operating loss of $4.9 million in the quarter. This compares to a net loss in equity interests in the third quarter of $2.3 million which of course represented our 45% share at that time.
I will now review the impact of the pro forma adjustments recorded in the fourth quarter that reconcile our GAAP and non-GAAP results. They are a revenue adjustment of $2.2 million related to the purchase accounting for China HR, $3.2 million of restructuring and other special charges, $3.3 million of legal fees related to stock option litigation. These costs were offset by $10 million of reimbursement of former officers as part of the stock option settlement. The net effect of these pro forma adjustments resulted in a pre-tax benefit of $1.3 million in the quarter and did not have material impact on our earnings per share.
For comparative purposes last year’s fourth quarter included $10 million of pro forma expenses or a $0.05 on GAAP earnings. Putting it all together GAAP revenue for the quarter was $291 million, operating expenses were $248 million and diluted earnings per share from continuing operations was $0.24 compared with $0.36 in the prior year period.
I this section I will discuss non-GAAP operating expenses before China HR. On the third quarter earnings call based on our visibility at that time we commented that pro forma operating expenses before China HR would be down during the quarter but not at the same rate as Q3 versus Q2 which was a 5% decline. In fact, operating expenses were down 10% sequentially in that quarterly including a 5% currency benefit.
As global economic conditions around the world deteriorated during the quarter we took a number of decisive actions to prevent more significant margin and earnings erosion while still continuing our strategic investments in the business. We identified and implemented cost saving measures in virtually every aspect of our business. Specifically, variable costs came down directly as a result of business deceleration. Sales commission are directly tied to sales volume, incentive compensation is tied to revenue and profitability.
We continued to tightly control global headcount, mainly in this quarter through attrition. At the end of the year total headcount excluding China HR stood at 5,564 associates down over 100 associates from Q3. We continue to focus on efficiencies in our marketing and advertising spend. During the quarter marketing expense year-over-year was down 39%. But, based on internal global metrics, traffic was basically flat. As you know, we have focused on building the site to increase seeker engagement and improve search and match which will provide more relevant jobs to more relevant candidates. We are encouraged by the early returns from these efforts.
All categories of discretionary expense were scrutinized. Travel and entertainment for example was more stringently limited to direct customer related activities. Temporary staff was reduced where possible. As a result of these initiatives operating expenses came in at $235 million, the lowest level since the fourth quarter of 2006.
It is important to note that that we have been able to achieve this degree of operating expense reduction at the same time we have continued the significant investments in product, customer service and infrastructure which we have been talking about throughout the year.
Hopefully you have all experienced the new seeker site launched earlier this month. There are two important points to make about this launch in the context of a discussion on operating expense. First, the whole seeker experience has been redesigned and new functionality has been added. We did not compromise on the design, functionality or timing of its delivery.
Second, and perhaps equally important in the long run, this new seeker experience was launched globally over a weekend. This could not have been accomplished without the significant investments that have been made in systems and infrastructure over the year. Again, we did not compromise on this investment. We can’t stress it enough, the seeker experience has been redesigned to be completely personal, easy to use and engaging.
Our rebuilt site will attractive more seekers both active and passive as well as increase engagement while substantially improving the quality of the jobs and candidates we provide. This will result in a bigger audience, more relevant jobs for our employers and seekers and more opportunities for targeted advertising placement to monetize our seeker traffic. As Sal has said, we are very encouraged by the early returns and there will be more to come for both employers and seekers.
Turning now to segments we will discuss pro forma results and we will exclude the results of China HR from the combined careers and international segment. Revenue from the combined careers segment was $249 million, a 21% decrease from the prior year period including the currency impact the decrease was 15%. The non-GAAP careers operating margin for the fourth quarter was 22.8%.
As our business has evolved and as we have commented over time, our current segment disclosure while informative should be viewed in a broad context. We are managing our business on a global functional basis. Many of our clients are increasingly global and our product array is increasingly broad. To concretely illustrate this point two significant competitive advantage are our global breadth and the increasing importance of our product diversification.
We believe we are winning in the global market place against our top competition and gaining share but how do we measure this? Many clients buy a global package including media and the revenue can be split across all of our segments so to purely compare our North American revenue against a competitor who does not have an international or media capability would be misleading.
We commented in our investor day presentation that we think the best way to view competitor standing over time is through global revenue. While even getting this information on a global basis is an inexact science, we do believe that based on much anecdotal information and our own modeling that we are winning. Based on the best information we have, we believe that the global online market decreased approximately 5% during 2008 and the combined global online and offline market declined approximately 20% compared with our full year careers revenue increase of 1%.
The market in North America continued to deteriorate in the fourth quarter. You all know the economic backdrop. In this environment North American careers revenue declined 22% to $135 million in the fourth quarter. On a positive note we have seen a shift in our product mix as recruitment media including career add network or CAN was a larger contributor to revenue. As you know, we are committed to increasing our high [touch] field sales force which is now approximately 75% greater than at the beginning of the year.
Our new sales associates were able to generate incremental business and more importantly will provide expanded and deeper coverage this year. Despite the revenue decline the business generated a healthy non-GAAP operating margin of 25.4% in the fourth quarter. Our international business generated non-GAAP revenue of $144 million an experienced a share slowdown in all markets across Europe and Asia as we moved through the fourth quarter.
In addition as a result of the strengthen US dollar the business was negatively impacted by approximately $18 million of currency effects. Excluding the currency impact our international revenue declined 8%. Non-GAAP international operating margin was 19.8% in the quarter. Our YAF business generated revenue of $33 million in the quarter, a 6% increase over the prior year as our main revenue sources lead generation and display advertising both made positive contribution to the increase.
Military.com continues to perform well and Affinity Labs which we acquired a year ago continues to successfully build and penetrate targeted online communities. Offsetting this strong performance was weakness in our education related properties. We have recently reorganized this are including a plan to move these education assets to our Affinity Labs platform and are optimistic about these businesses.
We are committed to growing all our [IAF] properties and believe our focus on new products like our new seeker experience will generate a larger and more relevant audience for our advertisers. Non-GAAP operating margin was 11.4% in the fourth quarter.
Now, let’s talk about China HR. As you know Monster’s initial investment was in early 2005 at a time when China was experiencing rapid GDP growth and local Internet companies were being valued at extremely rich multiples. Under the original agreement, the majority owners had the right to put their stake to Monster at a price equal to 11 times 2007 revenue. This structure clearly produced intense pressure from the controlling shareholders to show revenue growth and market share gains at an expensive profitability.
We are now operating in a very different environment as the current Chinese economy reflects the global economic slowdown. In addition as part of our due diligence process and we believe as a direct byproduct of the initial deal structure, we discovered that some of the revenue was clearly not sustainable and was produced at too great of a cost. The weakening economy combined with our belief that the expense base was inflated to produce marginal and perhaps unsustainable revenue were the key factors that led us to slowdown the closing and take the risk to renegotiate the transaction which resulted in a final price of $174 million of which $40 million is held in escrow, much lower than the $240 million which the majority owners sought.
At a purchase price of $240 million the multiple would have been 11 times for the 55% we didn’t own and 8.4 times for our blended investment. Based on $174 million, we actually paid our total cost is less than 6.6 times revenue and of course we saved $66 million some of which will be used to fund the operations of China HR so that we can take full advantage of the market opportunity.
As I already mentioned, our operating loss from China during the fourth quarter was $4.9 million and we also believe that the expense base had been increased in an effort to produce marginal revenue. Under the leadership of Ed Lowe, Monster’s Executive Vice President in charge of greater China we have acted quickly to reduce costs by implementing a reduction of approximately 300 associates or 20% of China HR’s work force and we have taken other measures to take expenses out of the business including a substantial reduction in temporary staff.
As we have noted previously the market opportunity will warrant increased investment over the next 18 months but before making those investments we believe it was appropriate to size the business at a level we felt the true underlying current business activity warrants.
Since we have a lot going on this quarter in our balance sheet and cash flow, I want to spend a moment to walk through the major movements in cash, most of which we discussed last quarter and at our investor conference. We started the quarter with $486 million of net cash which was $733 million cash and securities on the balance sheet less $247 million outstanding under our revolving credit at that time.
During the quarter EBTIDA including China HR was $68 million and the EBITDA margin was 23.6%. We made a cash payment of $36 million related to the resolution of the options investigation which have been accrued in the third quarter. Working capital absorbed $39 million of cash reflecting higher receivables and lower payables balance. Currency fluctuations negatively impacted our cash on hand by $20 million, we paid $174 million to acquire the remaining interest of China HR. Capital expenditures were $22 million reflecting our investment projects in technology, product and infrastructure.
Looking forward as results deteriorated during the quarter in addition to our efforts to control operating expenses, we also became increasingly stringent on new capital expenditures accept for those that are directly related to the seeker and employer product launches. We repaid $197 million against our revolving credit facility.
During the quarter we did not purchase stock under our share repurchase program and at the present time we will not extend the existing buyback program. However, we have the ability to act quickly with board approval to initiate a stock authorization if we believe it is prudent to move in that direction. Considering these major cash flow components, we ended the quarter with net cash of $255 million and total global liquidity in excess of $500 million including the $198 million currently available under our revolving credit. Of course our securities balance includes $90 million of auction rate securities which are categorized as long term.
We believe that our liquid balance sheet will provide us a real competitive advantage in this difficult operating environment. We are fortunate to have financial flexibility to support our internal objectives.
In looking at the first quarter of 2009 and including China HR we want to provide some context to operating expense as well as revenue. As you know we do not provide specific quarterly or annual guidance and we are maintaining that policy. However, given the extraordinary global and economic environment we and our customers are operating in and the short term impact of some first quarter specific events we feel some discussion is appropriate.
As discussed, we will actively support our new seeker product launch and the Monster brand with creative and exiting advertising. As a result, we expect that marketing expense will increase approximately $30 million over the fourth quarter of 2008 and then return to a normal run rate beginning in the second quarter of this year. The first quarter also carries a higher than normal load for compensation related expense particularly for employer paid benefits like FICA. This increase is expected to be largely offset by other salary related reduction in the quarter.
Based on what we see now we believe revenue will remain under pressure in the near term. Give the current recessionary environment and sales activity in the fourth quarter and the resulting lower level of deferred revenue going in to this year we expect first quarter revenue to decline sequentially at a similar rate to that experienced in the fourth quarter of 2008. We do point out that the environment is exceptionally uncertain and this outlook is based on the best information we have today.
We will closely monitor our operating expense levels during this period and as Sal mentioned, we are prepared to take further action to realign expenses with lower revenues as the macroeconomic environment evolves. I will now hand the call back to Sal for his closing remarks.
I’d like to summarize by making a few key points regarding our strategy. Please bear with me as some of the comments I’m going to make maybe repetitive to the comments that Tim had and to some of the comments that I made earlier but I think it’s important to be certain that we give you as fulsome picture as possible of what our strategy is and the direction that we’re taking with Monster.
First of all, Monster’s future is solid. The successful overhaul of the seeker site and the new products we delivered to our customers, our employers is already beginning to pay dividend. During the quarter the global market took a more significant and severe down turn than anyone expected. In response, we quickly brought down expense levels without disrupting our investment programs.
There is no question Q1 will be challenging but as part of our strategy to build long term sustainable value and build our on global leadership position we will make strategic investments as appropriate. Specifically, our investment in marketing will support the recent launch and attract more visitors to our site. These costs along with the seasonal salary related costs which we will incur in the first quarter will most likely not allow Monster to be profitable in Q1. These costs will not occur in the second quarter or the second half of the year.
If the global market conditions continue to deteriorate it is certainly possible for Monster to experience an additional quarter or two of unprofitable results. We believe that the best interest of our shareholders will be served by continuing to improve our products, customer service and take market share. However, if the situation further deteriorates and appears more contracted we are prepared to take additional strong measures to increase profitability. I think we’ve proven that we really know how to do that and we can do it fast.
It’s important to note that we are closely watching the global situation and developing a number of new initiatives that we believe will supplement our current revenue stream. Monster has already made significant improvements to its products, services and overall customer experience. In the coming months we will make even more. Therefore, every month of continued investment increases the certainty that when the economy recovers Monster will be the preeminent company in the industry which is our overall objective.
During the current economic uncertainty the economy presents we are very optimistic about Monster’s future. We’re encouraged by the progress we made and are committed to delivering value to our shareholders over time. As always, I want to thank our customers and partners for their support as well as our associates for their continued enthusiasm and dedication to Monster. I would particularly like to point out this quarter the unbelievable effort that was made over the past year by our product and technology organization, they really did a fantastic job.
We are navigating through this troubling period together and we will continue to do everything in our power to grow the company and win market share. I’d also like to thank our shareholders for their ongoing support and interest in Monster. Now, I’d like to open it up for questions.
(Operator Instructions) Your first question comes from Mark S. Mahaney – Citigroup Smith Barney.
Mark S. Mahaney – Citigroup Smith Barney
Sal, if you could just look at some of the metrics that you’re tracking that indicate to you how well the new interface is on the job seeker side what would be a few things that you’d really point to as initially promising or things that you really want to track carefully going forward?
Thanks a lot for the question, I was hoping someone would ask it and you asked it first with the first question, I think that’s great. Since he led the site rebuild I’m going to turn it over to Darko and I think he’s prepared to give you some information and bear in mind the precursor to this is that this is early results. The site was launched January 10th and here we are its only about 20 days later so please bear in mind that it’s early in the game but the results I think you’ll find interesting.
As Sal mentioned we launched the site a couple of weeks ago. It’s too early to draw the final conclusions but we are very encouraged with the initial results. Some of the things that we monitor and track obviously is per visit metrics because they are the most relevant and they really measure the engagement of the site so I will mention a few that we clearly track and I’ll mention them for some of the key and larger markets that we have.
Job searches per visit we followed week-over-week increases anywhere from mid 40% to anywhere up to 88% with Netherlands being at 46%, US at 65%, Canada 77%. New accounts per visit we found the range again to be from mid to high 20s to over 50%, UK being in the 30s, Canada 37, France 50 and US 28%. Applied completes per visit from mid single percentage increases all the way up to 50 some percent France being 39%, Netherlands 51%, Canada 34%.
Clearly, the numbers are significant. We’ve got to track them for more time and see what happens but we are very encouraged. We also are tracking the click through rate for consumer advertisement on the new seeker site and we’re seeing increases in the range of two to three times over the previous click through rate which is very significant and very, very encouraging to start. Those are some of the metrics that we are tracking.
Our next question comes from John Janedis – Wachovia.
John Janedis – Wachovia
Sal you mentioned the renewal season, can you talk about renewal rates in the US, Europe and Asia, how do they look in 4Q relative to 3Q?
What we’ve seen and I’ll take it first in the US, the situation clearly deteriorated further in Q4. I think that particularly at the beginning of the quarter with an instability in the economy, the procrastination that I think we all saw in Congress, markets froze. It triggered an equal response if you will in Europe. So, I guess if I had to sum it up Q3 certainly wasn’t great but Q4 things really tightened up.
In terms of how Monster behaved during that is we’re very encouraged that particularly with our big enterprise customers, for the most part and I don’t want to overstate this, I want to be careful that I give you as balanced a view as I possibly can, for the most part though what we saw was that Monster was able – the spend of customers was without question less, there was much more concern on their part however, the amount that they spent with Monster versus other entities seemed to be significantly greater.
In other words, if they spent $1 we got more of that $1 spent as a percentage than in the past. Unfortunately, having said that they are spending less dollars overall. But, I think from what we could see that was largely the result of a lot of the investments that we’ve been making. I think the promise of the new – we had delivered towards the end of Q4 the new employer site and we had presold, in other words we had told them about that quite a bit and the new seeker experience coming I think improved customer service.
I think what was also very critical was the investment that we made in terms of the significantly increased field sales team. I think all those things combined in a difficult market for Monster to navigate fairly well.
Our next question is from the line of Monica DiCenso – JP Morgan Securities.
Monica DiCenso – JP Morgan Securities
I know you mentioned people spending less overall. I’m just kind of wondering if you can give us more color on the competitive environment both in the US and internationally especially with one of your big competitors sort of making a push to grow their presence in Europe?
I’m not going to mention the competitor I think you’re referring to since you were kind of enough not to mention them but I think what we have seen in Europe and for that matter here in the United States, there’s no question there is competition. In Europe I think we have actually seen not only one competitor but a number of our competitors retreat from a number of markets as their under the same pressure if not more acute pressure than we are.
I think that here in the United States there’s been more competition for transactions but since the first day we got here and certainly what’s been our experience throughout the entire management team, if you have the best product, if you have the best services, at the end of the day you should get a bigger part of the pie.
I think what we started to see in Q4, once again, we’re certainly not happy with where the market is overall but I think that we received an awful lot of information from customers and the dialog we were having with customers to say that they were very interested in doing business and reducing business actually with competition with Monster and I think it was the quality of the product not so much – there’s always price competitiveness but that did not drive [inaudible] to Monster.
Our next question comes from Christa Quarles – Thomas Weisel Partners.
Christa Quarles – Thomas Weisel Partners
I had a follow up on the deferred revenue I guess I’m surprised it was down only 21% and you did mention some of the share gains but I was curious if you believed it fully reflected the gravity of the full fourth quarter and perhaps even the sentiment that has already manifested in Q1 so far. Then I was also wondering if you could just comment on your newspaper partnership, just whether or not they’re still really benefiting from you? Any quantification of qualification around that?
I’ll answer and then I think Tim will add some information to it. I’ll do the second part of the question first, with regard to the newspapers I think those relationship as time has gone on they’ve become more profitable for Monster. I think they have also benefitted the newspapers which we all know are having a difficult time so I think that strategy is paying off. We’ve gotten smarter and the newspapers have gotten smarter in terms of how to construct those relationships and I think that’s actually benefitted both sides.
We are interested in doing more of them. I think that from what I can tell the way we’ve dealt with those relationships, the newspapers seem to be pleased with the performance. I mean, we’d all like it to be even better but the economy is what it is. I think that you’ll see an increase overtime in terms of the numbers of those relationships. Tim, did you want to add something to that?
Timothy T. Yates
The relevant comparison is versus the Q4 of last year where the deferred revenue coming in to the year was $524 million and that reflects the fact that there is a lot of renewal activity going on. It is a substantially lower number coming in to the year but the amount of it is still reasonable and does reflect the renewal activity that we have during the quarter.
I’d like to add something to that, I think what we are seeing, and this is also in response Christa to your question and also to a question we had a moment ago, I think that what we’re seeing, and this should not come to a surprise to anyone, companies are getting more and more cautious about what they commit to because of the uncertainty in the economy. So, there’s more communication if you will, we haven’t seen a tremendous amount of actual reality on this but we’ve had a lot of dialog.
Customers are more concerned about committing for full years or in some cases customers are committed for more than a full year. So, the numbers as they pertain to deferred, etc., I think over time the mix of that you will see change just because of the way the business is going to be conducted. I actually think that is a good thing not a negative from the standpoint that as the economy picks up I think companies are going to buy more because they’re going to need to buy more and will of course have the flexibility to do that.
So, I think we’ll see an increasing change in the way business may be done in this market largely driven by the economy. So, that number gets a little bit hazier if you will. I think Tim’s comment is still very true, it’s indicative, but there are some moving parts. I won’t say their quite significant but they’re there at this point.
Your next question comes from William Morrison – Thinkequity.
William Morrison – Thinkequity
Two quick questions, one I was wondering if you could – it sounds like you’re doing a lot of things to adjust the China business, if you could maybe just give us some color, guidance for the first quarter on that business? Should we expect that business to grow or be down from the fourth quarter levels? Then I was also curious on the Internet business up 6% which is actually pretty strong relative to what we’re seeing in the rest of the market. Is that an organic number or if you could back out the revenue from the acquisition you discussed?
Tim is indicating he’ll take the second question and I’ll take the first in regards to China. Tim I think went through a good amount of information in terms of what the dynamics are of the transaction that we did in terms of acquiring the remaining shares of China HR. I think that we have to right size, and we’re not done yet by any stretch but we have to right size particularly the population of the firm. Actually, we believe that has actually been completed as of about a week ago now.
I think for the future, without question China is having similar difficulties to the rest of the world. I think as many of us, I think we all know, China to a significant degree is the factory to the world at this point and as thing have slowed down they have slowed down very significantly. Having said that I think that revenue should probably be, we don’t see signs of serious deterioration from where we are now but this is early in the game for us.
It’s early in the game in terms of the change of mix, of how the business was conducted before and how it’s conducted now. So, it would be difficult for me, given all the moving parts to give you further direction on that. But, without question we wouldn’t have closed the deal to be honest with you had we not believed and still very much believe that China is going to prove to be a very strong component in the Monster mix in the future and be a significant contributor.
Timothy T. Yates
As you point out, most of the percentage increase results from the acquisition of Affinity Labs. The display advertising and lead gen advertising were up on all properties with the exception of, as I mentioned, our education properties. There are three different factors going on under the numbers, pretty strong results in lead gen and display on all properties other than education and that’s Monster [track] fast rev. Secondly, the acquisition of Affinity Labs offset in the other properties by a reduction in those education properties.
Your next question comes from Jeetil Patel – Deutsche Bank.
Jeetil Patel – Deutsche Bank
On the database side are you seeing a big impact in terms of enterprises cutting back in the number of licenses or subscriptions they’re holding to that side of the business? Obviously no surprise in the environment that we’re in but do you think you’re past most of the cutbacks on the database side at this point or do you think that’s still going to be an ongoing issue in the first half?
I think so far the reduction has been in line if you will with the percentage of revenue decrease that we’re experiencing. Now, as to whether that will continue or whether we’re at the bottom, if I could answer that question I’d sleep a lot better tonight. We couldn’t begin to answer that. It really is the economy but the slowdown in the mix and the slowdown that you see in job postings, that you see in resume searches are fairly in line within reason.
Timothy T. Yates
Postings a little more than resumes have not [inaudible] significantly.
In line with what you’re seeing with the revenue side. Where we’re seeing increased activity okay is in the CAN product that’s very exciting, there’s some acceptance by customers so they’re allocating a few more dollars if you will to that sector. But, overall the business mix, the volume that you’re seeing and what you’re seeing with revenue are not at this point not that far out of line with each other.
Jeetil Patel – Deutsche Bank
Just on the international side, I mean you’ve got a decline exiting the quarter and I’m just curious how much of the issue is a function of – obviously fx is a function there but how much of it do you think is volume on the posting side versus more pricing action that you may be taking?
Once again, the pricing pressure, there’s always pricing pressure. I don’t think that’s a material factor at all. The decrease that you’re seeing internationally is volume related, heavily related to the deteriorating economy and the sudden nature of the drop off. People didn’t just wake up and say, “Hey we’re going to negotiate harder to do deals.” I think the deals just got much like the United States companies are more reluctant to commit, to spend big numbers but also what we’re seeing is although the overall amount of spend I less we seem to be getting a little bit more of it than our competition.
At this time we have reached the end of the allotted time for questions and answers and we’ll turn the call back over to Mr. Bob Jones.
Thank you all for joining us this evening for our fourth quarter 2008 conference call. Please feel free to call me at any time at 212-351-7032 if you have any further questions. We appreciate it very much.
Ladies and gentlemen this does conclude today’s conference call. We’d like to thank you for your participation. You are now free to disconnect.
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