Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Monster Worldwide Inc. (NYSE:MWW)

Q1 2010 Earnings Call

April 29, 2010 5:00 pm ET

Executives

Robert Jones - Investor Relations

Salvatore Iannuzzi - Chairman of the Board, President & Chief Executive Officer

Timothy T. Yates - Chief Financial Officer, Executive VP & Director

Darko Dejanovic - Executive VP, Global Chief Information Office & Head of Product

James M. Langrock - Senior VP Finance & Chief Accounting Officer

Analysts

Tim McHugh - William Blair & Co.

Mark Macon – Robert W. Baird

Jim Janesky – Stifel Nicolaus

John Blackledge – Credit Suisse

John Janedis – Wells Fargo

Toby Summer - SunTrust Robinson Humphrey

Operator

Welcome everyone to the Monster Worldwide first quarter 2010 earnings conference call. (Operator Instructions) I will now turn the call over to Mr. Bob Jones, Vice President of Investor Relations. Sir, you may begin.

Robert Jones

Thank you. Good afternoon and thank you for joining us on Monster Worldwide’s first quarter 2010 conference call. We will have formal remarks from Sal Iannuzzi, Chairman, President and Chief Executive Officer, and Tim Yates, Executive Vice President and Chief Financial Officer.

In addition to Sal and Tim, several members of our executive management team are available to answer your questions during the Q&A part of the call. They are Darko Dejanovic, CIO and Head of Product; Ted Gilvar, Chief Marketing Officer; James Langrock, Chief Accounting Officer; Michael Miller of General Counsel; Art O’Donnell, Global Customer Service; Lise Poulos, and Mark Stoever, Corporate Development and Strategic Alliances.

Before we begin, I would like to remind you that except for historical information the statements made during this conference call constitute forward-looking statements under applicable securities laws. Such forward-looking statements involve certain risks and uncertainties including statements regarding the company’s strategic direction, prospects and future results.

Certain factors including factors outside of our control 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 and the other risks discussed in our Form 10-K and our other filings made with the Securities & Exchange Commission.

With that, I would like to turn the call over to Sal for his comments.

Salvatore Iannuzzi

Thank you Bob. Good afternoon and thank you for joining us. Our first quarter operating results highlight a number of key points. Foremost, our strategy is working. We are differentiating Monster by using innovative technology and new products to create significant value for our customers and for job seekers. We are doing this globally which provides a powerful competitive advantage.

Second, product innovation is driving growth. Around the world we are seeing significant increases in renewal rates, win back of old customers and new customers. In the U.S. our Power Resume Search product was a key contributor to these positive trends. Our global expansion strategy is also working. As economies around the world begin to recover we are seeing growth in portions of every sector. The investments we have made in our sales force and in customer service continue to show results, positioning us well as the economies rebound.

In response to Monster’s strengthened value proposition, customers are increasing their purchases even before the economy goes into full recovery. We continue to gain global market share. In the U.S. we have successfully reversed the negative trends that existed in previous years. Outside of the U.S. we continue to build our strong leadership position.

As a result, our underlying fundamentals are strong. As you can see from our first quarter results we continue to be on track or slightly ahead of our quarterly financial and operating metrics. Bookings increased 17% year-over-year which was better than our internal expectations. Quarterly revenues of $215 million were just above our expectations and marked the first sequential increase since first quarter of 2008.

In this quarter in North America and Europe alone we added over 7,500 more customers than in the same period last year. Net cash increased to $262 million at the end of the first quarter.

[Audio Interruption]

To all those listening I apologize for the interruption. We are not exactly sure what happened but hopefully you can hear me now.

As I was saying, bookings increased 17% year-over-year which was better than our internal expectations. Quarterly revenues of $215 million were just above our expectations and marked the first sequential increase since the first quarter of 2008. This quarter in North America and Europe alone we added over 7,500 more customers than in the same period last year.

Net cash increased to $262 million at the end of the first quarter. Let me spend a few moments discussing the key drivers behind these results. I would like to start by highlighting the role of product innovation. Our strategy is based on the premise that clients will pay a premium price for a differentiated, high value product. While still early the ongoing rollout of Power Resume Search in the U.S. is the best demonstration that this strategy is working.

Our Sixth Sense technology allows us to use great precision to solve the main problems of the recruitment process today. Companies see too many irrelevant resumes while seekers see too many irrelevant jobs. During this quarter bookings of Power Resume Search, our first Sixth Sense product already accounted for close to 40% of the resume database bookings even though it was only available for slightly more than half of our U.S. revenue base.

Since product launch, close to 6,700 purchases of which over 1,400 are new have shown a willingness to pay a premium price. Power Job Search, the seeker product equivalent to Power Resume Search, is also helping both our job postings and Resume Search businesses gain market share by making the job seeker search faster and more productive. The continuing rollout of Power Resume Search will drive new customer bookings throughout the year. As of a few weeks ago we were live in the United Kingdom and are pleased with the early results and level of interest. In January we launched a beta product in Canada and as of March are in beta in France. By September we will launch a beta in Australia.

No other existing product whether from traditional job boards or new competitors can deliver the reach, precision, speed or efficiency of Power Resume Search. None of our North American or global competitors have a comparable product. Ultimately we believe that continued product introductions based on Sixth Sense technology will lead to growth in new areas as well allowing the clients an end-to-end talent acquisition and internal management solution. We expect this to [offer] Monster another point of differentiation in the market.

Before we made these technology investments our products were becoming stale. We were losing market share and we could only compete by cutting price. Now we can compete on quality and differentiation and not play the price cutting game.

Let me take a few minutes now to talk about what we are seeing in the job market globally and how this is affecting our business. Country by country we are seeing different rates of recovery. Having a globally diverse business means we are able to benefit in regions where economies are recovering more quickly. In the U.S. the economic environment is pointing in the right direction. We have seen a dramatic take up in small business segments where the recession first showed itself with quarterly e-com bookings growth up 25% both sequentially and year-over-year. Traditionally small business growth is a precursor to recovery in medium and large businesses. Therefore we believe we will see more pickup in these areas as the year progresses.

In Asia we are seeing a quicker, more robust improvement in the job market than other parts of the globe. Year-over-year bookings have more than doubled in Korea. They are up 67% in China and 36% in India. In each of these countries we are benefiting from a combination of improved operating performance, innovation and economic recovery in local markets. We believe that both the larger countries and developing countries in Asia represent a significant growth opportunity for us.

Overall, the recession in Europe began later in the U.S. but in some countries we are seeing an earlier recovery. Based on year-over-year bookings we are seeing that the U.K. has stabilized. France, Belgium, Italy are all experiencing double digit growth. Scandinavia is up over 50% although operating from a small base. However, Germany, our largest European market along with the Netherlands, appears to be lagging the recovery.

In developing markets we are making headway in organizing our approach and we will continue to invest selectively. We don’t anticipate a significant short-term return but believe these investments will be a meaningful contributor to growth in the coming years. Over the next few quarters we expect the global economy to improve and become stronger. This improvement combined with continuing new product introductions will benefit Monster.

I would like to take a moment now to discuss market share growth and the current competitive environment. We are increasingly confident the company has reversed the long-term decline in market share. Based on internal estimates we believe we have increased global online recruitment share between 2-3 percentage points during 2009 and now have over 30% market share.

Regionally we increased share in all markets in which Monster participates. We believe these market share gains have continued into 2010. Market share data is difficult to analyze conclusively on a quarterly basis. However, each quarter we carefully evaluate our competitive wins and losses as we consummate new bookings. We are confident we are winning as we compete for business. This will become increasingly clear in the quarters ahead as bookings turn into revenues.

Our broad and differentiated product suite has been the key to these market share gains. For example, we have been able to offer combined packages of our new, Sixth Sense product with existing offerings like our Career Ad Network (CAN) which over the last 12 months averaged a monthly reach of over 75 million people. Moreover, to better demonstrate the value proposition of our combined product suite to customers we recently commissioned an independent third party study to validate the full impact of Career Ad Network. We long believe that our CAN product drives a high level of job seekers to our customer’s job postings and corporate career sites.

Because job seekers don’t come to those jobs and career sites in a direct manner the full value of CAN was often underestimated by our customers. The independent study conclusively demonstrated the number of applicants influenced by CAN was substantially higher than customers perceived. We are rapidly making the tracking technology used in this study available to our customers to help reinforce how Monster adds value and positively impacts their ongoing talent search.

Our IAF business is also starting to pick up momentum. During the quarter IAF had 4% revenue growth and more significantly 12% bookings growth. We are working on a number of innovations in this area that will drive this growth.

I also want to provide a quick update on our proposed acquisition of Hot Jobs. Tim will also give some additional details in his remarks. We are progressing through the SEC review. We remain optimistic that the transaction will close in the third quarter. As we have become more involved with the planning for the closing we are firmly convinced about the positive impact this transaction will have. Monster will be able to apply its Sixth Sense technology to the Hot Jobs seeker and client base. The combination will increase the scale of the offering, both in terms of the number of job seekers coming to the site as well as the number of job postings offered.

With the addition of the Hot Jobs network of more than 600 daily and weekly newspapers, Monster’s alliances with local papers will grow to approximately 1,000, giving Monster reach and putting Monster brands in front of readers in all 50 states. Also the additional newspaper alliances through their online and print classified ads will further Monster’s ability to connect job seekers with small, local businesses particularly in healthcare, education, skilled and hourly job categories.

Our estimates are still preliminary but we expect the Hot Jobs acquisition will add as much as $0.06 to $0.12 per share in 2011 after having paid Yahoo! for their traffic. Although it has been difficult we have invested prudently and significantly in Monster. We consistently have invested for the long-term and we are beginning to see the positive results of our strategy. We will continue to invest where the opportunities present themselves while staying within the 3-6% expense growth projection.

With that I would like to turn it over to Tim to provide a few more details on our financial results. Tim?

Timothy Yates

Thank you Sal and good afternoon everyone. I would like to start with a couple of housekeeping points. First, starting this quarter we are providing numeric disclosure of bookings. Bookings, which we have referred to as sales in the past and which we will henceforth refer to as bookings, represents the dollar volume of contractual orders received during the relevant period. Bookings are recognized to GAAP revenue consistent with our revenue recognition policies which have not changed.

Second, we are providing a range of guidance for the second quarter and full-year on bookings, pro forma revenue and pro forma earnings per share. Finally, we are providing summary slides to guide the conversation. You can see these slides I hope on the webcast and they are available for download on our Investor Relations website.

Turning now to slide 1, Q2 2010 Pro Forma Income Statement. Revenue was up 1% sequentially at $215 million and was somewhat higher than our expectation of flat to slightly down. The 15% year-over-year decrease is the lowest percentage decrease in five quarters. Operating expense during the quarter was $239 million, a 12% sequential increase and a 6% year-over-year decrease.

On a year-over-year basis, revenue was favorably impacted by $7.2 million of foreign exchange rates while operating expenses were negatively impacted by $6.7 million of currency or a net currency benefit of $500,000. Interest expense was $900,000. Our equity loss primarily related to our investment in CareerOne Australia was $800,000. Net loss was $17.3 million or $0.14 per share and EBITDA during the quarter was $2.7 million.

Slide 2 is our GAAP to non-GAAP reconciliation. Reconciling items in the quarter were $6.4 million in salary and related line representing severance associated with targeted, global headcount reductions and $4.4 million on the office and general line representing transaction expenses associated with the proposed acquisition of Hot Jobs.

Slide 3 is our Q1 2010 Expense Trends. The pro forma expense increase of $26 million or 12% on a sequential basis was consistent with the additional spending that we discussed last quarter. As we have commented, most of that increase is related to specific events which occur in the first quarter and will not be repeated for the remainder of the year. During the quarter marketing expenses increased by $14.3 million reflecting spending associated with the launch of our Sixth Sense product including Super Bowl advertising.

Salary and related expense was $10 million higher reflecting the combination of greater seasonal benefit, U.S. FICA tax for example, and the recommencement of an accrual for incentive compensation both of which increases were partially offset by continued tight control of headcount. On a year-over-year basis total operating expenses was 6% lower and headcount was 12% lower than in previous years.

Slide 4 is our bookings and revenue trends for the past 9 quarters. I want to use this slide to discuss the current trends in the business and so we will be focusing most of our comments on bookings. Briefly to walk through this slide, the green line represents the year-over-year percentage increase or decrease in bookings and the blue line represents the year-over-year percentage increase or decrease in pro forma revenue. The numbers at the top are the 9 quarters of bookings and pro forma revenues.

You will note from this slide the lag phenomenon between bookings and revenue which we have been discussing extensively over the past year. Total bookings in the quarter were $219 million, 17% over last year’s first quarter. This was the first year-over-year increase since the first quarter of 2008. As Sal has noted, we believe this increasingly strong performance is the result of a number of factors. Certainly the improvement in the global economies are helping but equally the improvements we have made in our customer value proposition over the last several years which is now most easily seen in Power Resume Search are allowing us to win increased business against competitors.

From a geographic point of view we had year-over-year growth in bookings in all of our major regions and in most of our major countries. The countries that lag are Germany and the Netherlands, reflecting a continued conservative posture being adopted by our clients in those countries. From a channel point of view in the United States we experienced strong growth in our government, field sales and e-com channels with more modest growth in our telesales and newspaper channels.

Our government channel is experiencing very strong performance and we believe we have significant opportunities to expand that business both in the United States and globally. Growth in those channels more than offset decreased activity in our staffing and healthcare channels. In all channels and geographies we noted significant improvement in customer renewal rates as well as an increase in new and win back customers and a firming of pricing.

Slide 4 is our Q1 2010 segment performance slide. I would briefly like to point out a few highlights. Total Career revenue was up 2% sequentially. Within that North America was up 7% while Career international was 3% lower on a sequential basis. Excluding currency impacts, the international segments revenue was essentially flat on a sequential basis and was negatively impacted by the slower recovery of Germany and the Netherlands. While we believe that over time the best measurement of market share is global revenue, and as Sal has commented, we believe we are gaining share on that basis. We will also note that our North American Careers segment was up 7% and that compares favorably on a sequential basis to those of our competitors who are primarily U.S. operations.

The combined Careers business bears most of the expense of the increased marketing spend in Q1 and their operating margin was directly impacted by that spend. Revenue in IAF for the quarter was $1 million lower or 3% on a sequential basis, 4% higher on a year-over-year basis. Sequential increases in our [regen] business was more than offset by a decline in our display business particularly in recruitment advertising. Operating income in this segment was $3 million lower than the fourth quarter, $1 million of that decrease resulting from reduced revenue and $2 million came from increase in operating expense. We continue to invest in the people and content which drive our IAF segment; military, the affinity sites, our education site, advertising on the Monster site as well as the international expansion of those capabilities. We are confident that these assets represent a significant opportunity for revenue growth as the global economies improve.

Slide 6 is key balance sheet and cash flow items. Net cash ended the quarter with $252 million and was up $12 million from year-end. Our strategy throughout this downturn has been to preserve our cash position while we continued to invest in our business in order to be well positioned as the economy and our clients recover. We believe we have achieved the first part of this objective and are in fact very well positioned as the economies recover.

Specifically during the quarter while GAAP EBITDA was a loss of $8 million. Net cash provided by operations was $36 million. This relatively strong cash flow provided by operations largely reflects the seasonally high level of fourth quarter bookings and positive contribution from working capital. Deferred revenue was essentially flat at $305 million. This compares favorably to the first quarter of 2009 when deferred revenue was down 17% on a sequential basis. Given the strong $40 million in deferred in Q4 we are encouraged to have maintained substantially all of that increase in this year’s first quarter. Since many of our clients pay cash when they sign their contracts, as bookings increase cash and deferred revenue will increase but we caution this will not be linear and will dependent upon when during the year bookings are closed.

In addition our cash provided by operations will also be impacted by the timing of certain other cash flow items. For example, in the second quarter we have some international tax payments which will have a modest, less than $10 million, negative impact on our net cash position. We do, however, believe that both net cash and deferred revenue will be substantially higher at year-end excluding the impact of the Hot Jobs acquisition.

We define total liquidity as a combination of our gross cash and securities and the amount unused on our $250 million revolving credit. The availability under that credit agreement is based on a multiple of trailing 12 months EBITDA. It is because of this lagging phenomenon that we chose to amend our credit agreement in August of 2009 to provide additional financial flexibility. At the end of the first quarter our total liquidity was comprised of $312 million of gross cash and liquidities and $206 million of unused and available revolving credit. We anticipate total liquidity will bottom in the second or third quarter and provide ample liquidity to finance the acquisition of Hot Jobs and the ongoing operations of the company.

To summarize the first quarter revenue was slightly better than our expectations and was our first sequential quarterly increase since the first quarter of 2008. Bookings during the quarter were up 17% year-over-year and at the higher end of our internal expectations and continuing to demonstrate the success in the market of our products as well as the improving economic environment. Operating expense increase of 12% on a sequential basis, was in the middle of the 10-15% range we provided last quarter and reflects a number of seasonal expenditures which are not anticipated to recur for the remainder of the year. Net cash increased to $262 million.

I would now like to turn to our guidance for the second quarter and for the full-year. Please note the guidance covers our anticipated pro forma results and of course guidance is based on our current view of the global economy and job markets which forecasts progressive improvement throughout the year. Thereafter I will provide commentary on the economics if our proposed acquisition of Hot Jobs. These economics are not included in our guidance as the timing of the closure of the acquisition has some degree of uncertainty.

Slide 7 is full-year pro forma guidance. We currently anticipate that bookings for the year will grow between 15-20% on a year-over-year basis with a dollar range of $930-970 million. As a result, we currently anticipate revenue will be flat plus or minus a few percent resulting in a dollar range of $890-925 million. Operating expense on a full-year basis are currently expected to increase between 3-6% on a year-over-year basis. As a result of these forecasts, loss per share is currently anticipated to be between $0.12 and $0.20.

The results of the first quarter are consistent with these annual expectations. The current trends in our bookings lead us to believe we may come in at the higher end of our range on bookings but the flow through to revenue is heavily dependent on timing and product mix. As the year goes by we will be able to narrow the revenue and EPS ranges as appropriate.

Slide 8 is second quarter 2010 pro forma guidance. Bookings are anticipated to be in a range of $202-210 million representing a year-over-year increase of 15-20% over last year’s level of $175 million. During normal years the second quarter from a bookings point of view has tended to be somewhat lower than the first quarter and somewhat lower than the fourth quarter. We currently anticipate revenue in a range of $210-220 million, a year-over-year decrease of 2-6%. Again, this is consistent with the run off of deferred and a normally somewhat slower second quarter. As we look forward we anticipate year-over-year revenue increases in Q3 and Q4.

Based on these forecasts loss per share would be $0.02 to $0.06 as we do not anticipate material changes in interest income or expense lines and the equities lines during the second quarter compared to the first quarter. Based on our current visibility we anticipate being in the middle of these ranges. What I would also like to point out is $0.01 per share is equivalent to $1.8 million on a pre-tax basis.

This completes the slides. I will now turn to Hot Jobs. As we have noted we have received a request for additional information from the SEC and we and Yahoo! are preparing our responses. We continue to anticipate a closing of the transaction in the third quarter of 2010. We would like to provide the following financial commentary on the Hot Jobs business.

On a full-year basis in 2011 based on our modeling we currently anticipate between $20-40 million of EBITDA after, as Sal has noted, paying for the costs of the traffic we receive from Yahoo! under the traffic deal. This would result in between $0.06 to $0.12 in earnings per share including all amortization and estimated interest charges associated with the acquisition. We also believe there is potential upside to this forecast for two primary reasons. First, while the forecast bears the cost of the traffic pay to Yahoo! the substantial increase in traffic will be available to all of Monster’s clients, both the Hot Jobs clients and Monster’s existing clients, and will make us even more competitive as we compete in the market.

Second, while we believe Monster can better serve the Hot Jobs client base with our global product line and Sixth Sense premium product range our revenue model does not build in those potential revenue synergies. The impact on a pro forma and GAAP earnings in 2010 is heavily dependent on when the transaction closes. In 2010 we anticipate pro forma EBITDA in a range of $5 million on a quarterly basis and around $0.01 per share per quarter. Again that is dependent upon when the transaction actually closes. This estimate accommodates a certain amount of additional operating expenses in the first couple of quarters as we integrate the business.

We anticipate a total of $25 million of deal related and one-time costs associated with the closing and integration of the business. This includes the $4 million incurred in the first quarter and the remainder of this amount will be incurred between now and up to six months after the transaction closes. We are encouraged by the strong results that the Hot Jobs team is producing on an interim basis as we work together on the integration planning.

Now I would like to turn the call back to Sal for his wrap up.

Salvatore Iannuzzi

Thanks Tim. Most economies around the world are in some stage of improvement and we are seeing the benefits of our investment efforts in the acceptance of new products, gains in global market share and the positive impact of improved service. Monster’s investment in innovation has been made to address our customer’s needs and differentiate us from the competitors.

No competitor in the market has a product suite that can compare with ours. As a result, we see our products taking hold. Bookings are picking up momentum and we continue to be able to command premium pricing in a price competitive market. While we are not completely out of the woods yet. I am increasingly confident of our future and very comfortable with the guidance we have provided.

We are committed to achieving bookings growth of 15-20% for the quarter. We are currently comfortable at the middle of that range. Hopefully we will be at the high end of the range for all of 2010. We believe we can achieve this growth while holding operating expense to between 3-6% for the year.

Finally, I want to thank our shareholders for their ongoing support and interest in Monster, our numerous customers both new and existing for their embrace of our products. I would also like to thank all of our associates for their ongoing dedication and hard work. Our performance would not have been possible without their commitment and I look forward to continuing the momentum we have built together.

With that operator let’s open up the call to questions.

Question and Answer Session

Operator

(Operator Instructions) The first question comes from the line of Tim McHugh - William Blair & Co.

Tim McHugh - William Blair & Co.

I was wondering if you would comment on the pricing environment as you are seeing it and then generally your approach to the pricing environment right now?

Salvatore Iannuzzi

What we have seen and are very happy with is the price environment is improving. I think as we indicated in our comments that is due to the investments we have made and the value of our products and the value proposition we present to our customers. We are seeing in many areas pricing not only solidifying but in a number of cases improving compared to where we were certainly at this time last year.

Operator

The next question comes from the line of Mark Macon – Robert W. Baird.

Mark Macon – Robert W. Baird

I was wondering if you could just offer a little more color with regards to the differential between Power Resume Search relative to the old version in terms of pricing? Also, what are you seeing in terms of the client response in terms of do you need to train them or is it becoming intuitive and people are picking it up fairly quickly?

Salvatore Iannuzzi

I think first of all in terms of pricing as you know the Power Resume Search product is being offered at approximately a 30% premium to the old Classic search product. What we are seeing is that customers once they understand the value proposition are paying it and we are not really running into very much opposition if you will from a pricing standpoint at all.

In terms of training, what we are seeing is the product even in our internal training has shown us it is fairly quick for someone to pick up the techniques that are necessary to use it and use it effectively and make the transition, if you will, from classic search to Power Resume Search [or] Sixth Sense. So I think that customers do not seem to be having much difficulty. We are not seeing a significant increase in customer service calls or to our technology folks in terms of requests for assistance in learning to use it which is further evidenced by the fact we have over 1,500 new customers that have not bought search from us before which have now bought Power Resume Search and as I said both paid the price as well as are finding it fairly straightforward to use.

Darko Dejanovic

We are absolutely not seeing any issues with customer acceptance. I think one of the most comments we receive is ease of use and how simple the interface is. If anything I think most customers pick it up fairly quickly and like any tool you have to use it more in order to be fully proficient but they are able to function in an hour or two after seeing the product and performing searches.

Operator

The next question comes from the line of Jim Janesky – Stifel Nicolaus.

Jim Janesky – Stifel Nicolaus

Can you walk us through your revenue outlook for the second quarter and comment at the lower end why you would expect revenues to possibly be down sequentially?

James Langrock

A lot of it depends on the timing of the bookings during the quarter. Right now we have it at the midpoint is what we believe it would be but depending on the timing of the bookings, the product mix and the length of the contracts can drive revenue. The range is pretty tight at the 210 to the 220 so a lot of it has to do with the timing of the current quarter bookings, when those come in and what the product mix is so that could drive it to the lower end.

Salvatore Iannuzzi

We believe as Tim indicated earlier $1.8 million makes $0.01 difference in terms of EPS. So it is a little bit of conservatism on the far end of that range. Absolutely, as James said and Tim has said we expect to be somewhere in the middle but it would be careless of us to not leave a little bit of a buffer because as James indicated when some contracts come in, the longevity of those contracts, a bunch of other issues can move a few million dollars fairly easily.

Operator

The next question comes from the line of John Blackledge – Credit Suisse.

John Blackledge – Credit Suisse

A question on deferred revenue. It was flat quarter-over-quarter. I am just wondering how you see it trending in the second quarter and the rest of the year? Will it be up kind of similar levels at 15-20% versus the first quarter level? How do you reconcile the bookings growth with deferred revenue?

Timothy Yates

Right now we would anticipate deferred revenue in 2Q to be flat to slightly down. The way that you reconcile bookings to deferred revenue, the simplest way to do it you have an opening balance of deferred revenue, we started the quarter at $305 million. We had net bookings of $219 million. So that goes into the deferred revenue. Then you have revenue you recognized during the quarter of $215 million so that is a reduction to deferred revenue. When you do that math it is going to be off a little bit but the big driver of that is foreign exchange. A lot of our deferred revenue would be in foreign locations. So that is the way to start with deferred revenue, add net bookings, subtract revenue and that would make the ending balance taking into consideration the FX.

James Langrock

As I mentioned in my comments that is because of the weakness in last year that is causing the trough in the second quarter. So by the end of the year, third quarter and fourth quarter as we commented we expect a substantial increase in deferred and cash. So you have one more quarter here where it is flattish to a little bit down.

Operator

The next question comes from the line of John Janedis – Wells Fargo.

John Janedis – Wells Fargo

Given your comments regarding Power Resume Search and based on commentary from some of your competitors I guess I would say I had hoped for slightly better revenue for the year given the share gains you have discussed. Can you help us think about your revenue guidance? Meaning to assume flattish revenue growth for the year what is the contribution from the pricing benefit from Sixth Sense relative to volume increases for postings and the database?

Salvatore Iannuzzi

I think first of all because of all the things James and Tim have referred to in terms of how the bookings turn to revenue I think the important number to follow though that will reap the benefits where the power of Sixth Sense will show itself first is in the bookings and the momentum of building up in the bookings. I think the bookings we are seeing today, the increase in the bookings, is partially as I indicated in my comments, due to the improvement in a number of economies around the world. But it is also being pushed here in the U.S. because of Sixth Sense. So I think it is benefiting bookings. I think we are seeing new customers come to Monster because of the power of Sixth Sense and realizing the power the product has.

I think over time you will see some more of that come in the U.K. where we have just introduced it. I think if we step out of beta in Canada and go into beta in France we will see some benefits start to accrue there. That could push the momentum of the bookings. Again, as both Tim and James have indicated it really depends on when those bookings occur and how it builds up into deferred that will give more punch into revenue. Definitely as we build up the bookings and which then goes up to deferred this is all going to be beneficial as we go into 2011 and create the momentum that we need there.

What has really happened here and Sixth Sense is going to help this but the economy and a lot of other products are also going to help. As we went through the heart of the recession, I almost said depression and believe me at points in time it did feel like a depression, we depleted our deferred revenue. We depleted our backlog if you will that converts to revenue. What you are seeing overall now and we are very happy to see happening is with the 17% growth in bookings is we are beginning to replenish, adjusting for seasonality because Q4 is always a very big quarter for us. Q1 is lighter. Q2 is probably the lightest quarter of the year and then it begins to build up into Q3 and going into Q4.

What we are hoping and what we are seeing with the kinds of increases, the 15-20% increase we are forecasting right now on bookings will be the replenishment of hat deferred which will put us in a much better position going into 2011. If we are surprised and the economies pick up even more strongly than what we are seeing right now obviously these numbers could be pushed up. I think we would be pushing it at this point. We just don’t have enough clarity to forecast that at this point. I think we are comfortable where we are.

Timothy Yates

One other point, you have to realize going into 2009 we had $414 million of deferred revenue. For the most part that would all be going into revenue in 2009. Starting in 2010 we have $305 million so over $100 million less of deferred revenue so to Sal’s point we have $100 million we have to make up and the 15-20% bookings growth is covering that so the flat to slightly down or up is making up that $100 million coming into the year. That is important to realize that as well when we are talking about the growth.

Salvatore Iannuzzi

Right now, as I said before and I want to re-emphasize, Sixth Sense is definitely starting to play a significant role in the momentum of bookings here in the United States and that is with very limited, only about 45% or so of our customers in the United States, our billings base if you will, had access to it. Now more and more customers are being added and converted in terms of the technology necessary to facilitate Sixth Sense and by the end of this quarter the vast majority will be able to buy the product. Coupled with the expansion into Europe and overseas as I mentioned I think we will see that momentum build more and that should benefit us going forward.

Operator

The next question comes from the line of Analyst for Toby Summer - SunTrust Robinson Humphrey.

Analyst for Toby Summer - SunTrust Robinson Humphrey

What is the tax rate and guidance? Also if you could talk about your view on headcount going forward as we see increases in bookings and a little bit of a turn where you see that going as the year progresses?

Timothy Yates

The tax rate for the full-year will be around 30%. You have to realize that is an estimate. It depends on where the income is being reported and what jurisdiction but it is approximately 30% tax rate.

Salvatore Iannuzzi

With regard to the headcount I think that we are anticipating now we will add some headcount as the year progresses. Again, that is totally predicated on where we see the economy going, where we see the bookings going, etc. there may be a need to add some folks. For example, I have already approved adding some people to Scandinavia. We have also approved recently I visited together with James and Lee, South Korea and we approved the addition of a few people there. So selectively and where necessary to take advantage of the opportunities we will add some people but we are not anticipating at all a significant increase in people at this point. Certainly we are very comfortable that whatever expansion we do need to do with be within that range of the 3-6% increase in expenses.

I am told there are no more questions. Thank you all for participating. I apologize for the interruption. Hopefully some of you could hear the music and enjoy that. We will hopefully do a little bit better next time and not have the interruption. Thank you very much for your time this evening.

Operator

Ladies and gentlemen this does conclude today’s conference call. Thank you for your participation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Monster Worldwide Inc. Q1 2010 Earnings Call Transcript
This Transcript
All Transcripts