Dice Holdings' CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.30.14 | About: DHI Group, (DHX)

Dice Holdings, Inc. (NYSE:DHX)

Q1 2014 Earnings Conference Call

April 30, 2014 08:30 ET

Executives

Jennifer Bewley - Vice President, Investor Relations and Corporate Communications

Mike Durney - President and Chief Executive Officer

John Roberts - Chief Financial Officer

Analysts

Youssef Squali - Cantor Fitzgerald

Randy Reece - Avondale Partners

Mike Purcell - Stifel

Ned Davis - William Smith & Company

Stephen Sheldon - William Blair

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2014 Dice Holdings, Inc. Earnings Conference Call. My name is Jim, and I am your operator for today. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Ms. Jennifer Bewley, Vice President of Investor Relations and Corporate Communications for Dice Holdings, Inc. Please proceed, ma’am.

Jennifer Bewley

Thanks and good morning, everyone. With me on the call today is Mike Durney, President and CEO of Dice Holdings, along with John Roberts, our Chief Financial Officer.

This morning, we issued a press release describing the company’s results for the first quarter of 2013. A copy of that release can be viewed on the company’s website at diceholdingsinc.com.

Before I hand the call over to Mike, I’d like to note that today’s call includes certain forward-looking statements, particularly statements regarding future financial and operating results of the company and its businesses. These statements are based on management’s current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein, due to changes in economic, business, competitive, technological and/or regulatory factors. The principal risks that could cause our results to differ materially from our current expectations are detailed in the company’s SEC filings, including our Annual Report on Form 10-K, in the sections entitled Risk Factors, Forward-looking Statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations. The company is under no obligation to update any forward-looking statements except as required by federal securities laws.

Today’s call also includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, free cash flow and adjusted revenues. For details on these measures, including why we use them and reconciliations to the most comparable GAAP measures, please refer to our earnings release and our Form 8-K that has been furnished to the SEC, both of which are available on our website.

With that, I will turn the call over to Mike.

Mike Durney

Great. Thanks, Jennifer. Let me welcome you all to the Dice Holdings’ first quarter earnings results conference call. First, I am going to turn the call over to John and he will give you an update on our Q1 financial performance. Then, I will cover the progress we are making on our strategic plan on Open Web and other product improvements. In addition, I will spend a few minutes discussing our expansion in oil and gas, recruiting with the acquisition of OilCareers late in the first quarter. And finally, we will open up to questions.

So, with that, I will turn over to John.

John Roberts

Thanks, Mike and thank you everyone for taking the time today to focus on our first quarter financial results. As we go to our refresh, this quarter’s financial performance includes several elements of forward movement: first, improved sales performance, which is reflected in the increased deferred revenue balance; two, an increase in the renewal rate on annual customers at dice.com as compared to the second half of 2013; and three, returning Slashdot Media to profitability. There is still more work to do including attracting more new customers across our brands and realizing the full value of all of our recently acquired businesses. We do expect to sell at online recruiting market as a backdrop to continue to work on our operations.

Revenues in the quarter increased 20% year-over-year to $60.7 million and adjusted EBITDA increased 10% year-over-year to $18.6 million or 30% of adjusted revenues for the first quarter. In both cases, the growth is primarily due to businesses acquired within the past 12 months. In the first quarter, overall recruitment activity was fairly consistent in tech energy, healthcare, and hospitality. Recruiting momentum is beginning to pickup in financial services, which resulted in the second consecutive quarter of year-over-year billings growth at eFinancialCareers.

In Tech & Clearance, revenues increased 1% year-over-year, including $2.1 million from our acquisition of The IT Job Board. For dice.com, revenues declined 4% year-over-year. Recruitment package customers were 8,000 at March 31 as compared to 8,100 at year end. New customer acquisition was slower this quarter, particularly in short-term contracts, which usually rebound from the seasonal end to the year. In Q1, the renewal rate on annual contracts was 67.5% by customer count, up from 66% in the fourth quarter with about 2,200 customers up for renewal in the first quarter. On March 31, we had 7,400 customers under annual contract or 93% of our recruitment package customers.

As we have seen from many quarters, our customers continue to buy additional and new services from us, which drove average revenue per customer to $1,022 per month, up 1% from the fourth quarter average and 3% year-over-year. Open Web, our big data recruiting tool contributed as did additional branding opportunities for our customers to reach tech professionals. Finally, in Tech & Clearance, while just 4% of our overall revenues, clearance jobs revenues declined 9% year-over-year, but had much stronger billings performance, which was up 9% year-over-year reflecting in large part a more certain market for government contractors.

Moving on to our finance segment, the revenues increased 2% year-over-year to $8.8 million, including $0.5 million positive impact on revenues from currency translation. We have seen stronger volume from large financial institutions in Europe and Asia as well as new agencies starting business to serve a better financial services recruiting market, which drives need for our services.

On a local currency basis, in the UK, revenues increased 3% year-over-year in sterling. In the Asia-Pac region, revenues were down 2% in Singapore dollars with stronger performance in Asia, which was up 6% year-over-year offset by continued softness in Australia. In Continental Europe and the Middle East, revenues were consistent in euros from last year’s first quarter. We are seeing stronger performance from the sell side and recruitment sectors in France, along with a stable Germany offset by softness in the Middle East. And finally, the U.S. was down 11% year-over-year.

In our energy segment, revenues were up 14% to $5.9 million in the first quarter, including $200,000 from our recent acquisition of OilCareers. OilCareers impact on EBITDA was a loss of $100,000 for the quarter due to deal-related expenses primarily. On an ongoing basis, OilCareers EBITDA margin is consistent with company average.

For healthcare, revenues totaled $6.5 million, with $5.9 million of that from HEALTHeCAREERS and BioSpace, which were acquired as part of the onTargetjobs acquisition late last year that reflects a reduction of $400,000 for purchase accounting. And revenues were $2.9 million in the hospitality segment, with a reduction of $0.5 million for purchase accounting.

Finally, corporate and other, this segment contains Slashdot Media, WorkDigital and our corporate-related costs. Slashdot Media revenues were flat year-over-year at $4.1 million. There was significant work done on this business over the past six months. We have implemented new revenue streams and during the quarter adjusted to the cost base with its EBITDA margin approaching the total company margin. Our corporate-related cash costs in Q1 were $3.4 million.

To wrap up the segments, Q1 billings by segment our Tech & Clearance up 8% year-over-year including the IT Job Board, Finance billings up 7% year-over-year and Energy billings decreased 1% year-over-year including OilCareers.

On the expense side, operating expenses increased year-over-year primarily due to the acquisitions including driving the lion share of the change in the cost of revenues and G&A lines. In addition, sales expense rose year-over-year reflecting the better billings performance in the quarter. Adjusted EBITDA which includes adding back $1.2 million for the fair value adjustment related to purchase accounting of the three acquisitions totaled $18.6 million during the first quarter. Reconciliations of adjusted EBITDA to net income and cash flow from operations are provided in our press release.

Cash flow from operations totaled $12 million during the first quarter, a decrease from the $21.9 million generated in the last year’s first quarter. Cash flow from operations was impacted by a few items. One, we are in the process of implementing new financial systems, tying together those systems with our new CRM resulted in delayed invoicing early in the quarter and a follow through on collections impacted accounts receivable. We expect the new systems will make us more efficient going forward and increase our ability to share amongst our brands.

On the liability side, the timing of performance bonus payments deferred from the prior year. We also paid about $1.5 million of separation payments related to the onTargetjobs acquisition during Q1. At March 31, deferred revenue totaled $88.2 million, up 14% year-over-year and sequentially. The $10.8 million sequential increase was primarily driven by increases at three of our recruiting brands. Dice.com, RigZone and eFinancialCareers, reflective of the improved sales performance. OilCareers added $1 million of the deferred revenue balance at quarter end.

Dice Holdings ended the quarter with $18 million in cash and equivalents and $121 million of debt outstanding. A few notable uses of cash in the quarter were. One, roughly $26 million for the OilCareers acquisition, net of cash acquired. We were able to use our cash outside the U.S. to pay for OilCareers. At quarter end approximately $13 million of our $18 million is outside the U.S. And second, we purchased slightly more than 960,000 shares of our common stock on the open market at an average cost of $7.26 per share for a total cost of approximately $7 million. At the end of the first quarter, we had about $41.9 million left on our current authorization, which the Board of Directors authorized in December 2013 for $50 million.

For 2014, we anticipate revenues in the range of $248 million to $255 million, the change from our last report primarily due to the acquisition of OilCareers. Our adjusted EBITDA is forecast to be $75 million to $77 million for the year. In Q2, we anticipate revenues of $62 million to $63 million and adjusted EBITDA of $19 million to $19.5 million. One item to note is that the purchase accounting for OilCareers is preliminary given the timing of the acquisition and will be finalized in Q2.

With that I will turn the call over to Mike.

Mike Durney

Great, thanks John. This morning, I want to update you on the key initiatives for the company, which we will do both build the stronger foundation and position us for recruiting’s future. We are the leading specialty online recruiting company in six key verticals. With that base, we are working to expand our market opportunity through, one, faster innovation of services, two, introducing new products and services, and three, acquisitions.

As we build our company, we focus on two main themes, expanding our relevance to professionals throughout their careers and thereby increasing our engagement with them more routinely and delivering access to the best talent efficiently to hiring managers and recruiters in order to make them as effective as possible. In order to fulfill that mission, we are building on culture of high-performance within the company and our efforts around the team, is the first step towards an even brighter future. The energy is high and we believe that enthusiasm helps spark our better sales performance.

While it would take some time to get the company’s organic growth rate to a reasonable pace, we are satisfied with the first signs of progress. In the meantime, we will post double-digit top line growth, primarily from acquisitions in 2013 and ‘14. Quarter delivering on our mission is enhancing our measure to expand the types of services we offer that combined with better execution is an area of investment and focus this year. Front and center is Open Web.

Open Web is a big gate of recruiting service that sources probably available information and creates professional profiles of individuals that are optimized for recruiters and hiring managers. In December, we launched Open Web as a separate product available through dice.com. In order to access Open Web profiles, hiring managers must purchase the service either as part of their dice.com recruitment package or they can buy standalone access to Open Web, which is still only accessible through dice.com. Through March, nearly 300 Open Web customers have been sold and has generated more than $1 million in sales.

First and foremost, Open Web is a service that drives sourcing efficiency. Here is one example, Tier 1, the large specialty retail chain recently shared they had been searching five months for complex hybrid telecommunications engineer and their talent manager turns Open Web and within two hours, they found their engineer even though they ran the exact search they have done thousands of other times on other services without Open Web. As Scot said, if I have used (indiscernible) tool from the start, I would have exceeded everybody’s expectations. To read this specific case study and others, please visit dice.com/openweb.

In terms of our expectations of Open Web as a commercial product, it’s ahead of where we planned to be at this stage and while small at this time we are encouraged that Open Web is getting us into new accounts. The product is sparking more discussions with customer prospects than we would have been able to achieve without a big data sourcing tool.

I am also happy to share that Open Web is a beta to The IT Job Board service in the UK and Europe. We are in test with several clients prior to our expected full release in Q2. When combined with our specialty services, Open Web is a one of the kind product. It delivers talent efficiently and we look forward to making the cornerstone of technology recruiting in Europe. Driving efficiency for professionals is equally as important to fulfill our customers and professionals’ needs.

To that end, we have launched an easy application process that integrates our customer systems both on our site and off known as Apply with Dice and Easy Apply. One of the most frustrating experiences for professionals is long application forms that vary if you (indiscernible) with applications through their own site. Apply with Dice is an answer to those frustrations. It’s a shortcut that our customers can place on job postings both on their site and on Dice, which allows candidates to use their Dice profile to apply for open positions in one click. Because this feature creates a seamless and short application process for tech professionals, one of the largest technology service providers in North America is reporting back to us while lifting applications to positions and Apply with Dice makes it perfectly feel which service is driving responses to their openings. This is a good example of how improving the candidate experience leads to a better ROI for employers. This feature is also available this week in the Dice mobile app to make on the go applications possible for adopting customers, resolving our longstanding annoyance for candidates.

We recognized that not all of our current potential customers have the resources to source candidates for themselves regardless of how efficient we make our services. And as I shared with you last year, we accelerated the service that we are going to utilize for sometime to the other brands. This service fills the gap and helps customers search, match and filter for further candidates. We are building on early successes, including helping a hedge fund, find and hire its latest credit analyst in 25 days and the investment manager hiring investment analyst in just over a month with eFinancialCareers service as the backbone. We will continue to add resources to get this service into more geographies for EFC and to build in our technology vertical. There is much more to come to drive efficiency in our product in 2014 and part of that is a cohesive focused mobile strategy across our brands.

During the quarter, we pushed updates to the new version of the Dice mobile app, launched an iPhone app for the HEALTHeCAREERS and continue to see outsized growth of 86% year-over-year and mobile traffic to reach them. For Dice, the update included job recommendations and an integrated experience from discovery of a job to our app. For example, tech professional may discover a career opportunity on Twitter to our Twitter cards, which we have now branded as #Dice141. As we discussed in our last call, this advancement enables us to attach richer information for our clients to their everyday tweets of job postings on Twitter through Dice. With our mobile update, when they click on the Twitter card, they will be taken to our app to view the job.

Speaking of #Dice141, customers who are early adopters and are utilizing them in their recruiting have identified several benefits. One, it’s easier for candidates to apply on the go with all the information on the job in the tweet; two, they are getting greater reach with more technology professionals viewing the Twitter card as compared to more standard tweet; and three, those technology professionals are converting into additional views on an increasing application.

As I said before, we believe we can lead in recruiting to a social network that allows for instantaneous connections like Twitter. It’s all about efficiency. In fact, there is a clear theme to our product efforts in the first quarter easing efficiency on our platforms and off. Our work to improve our products and position is in its early stages, but we are getting into a good rhythm and once we add to the team as planned, we anticipate an acceleration and innovation through 2014. We covered our team and our price advancing plus new launch expanding our market opportunity. With the acquisition of OilCareers during the quarter, we see some opportunity to expand our energy segment and move our energy recruiting service forward in Europe. To put some context in our mind, it’s a great combination. A majority of Rigzone’s revenue is in the North America, while two-thirds of OilCareers revenues are in Europe. Together, we have a lot of experience and expertise in online recruting for the energy sector and we see lots of opportunities to leverage the best of both plans. In addition, we immediately had sales, marketing, and product team that helps us pursue our international initiatives in energy.

Finally, I wanted to follow up on onTargetjobs acquisition from November of 2013. We are integrating our healthcare brands, HEALTHeCAREERS and Health Callings. The integration is well underway to consolidate the business, in this with our overarching goals create the best recruitment solution for hospitals and health systems. We have integrated the teams with the focus on enhancing sales and product for the HEALTHeCAREERS service. In addition, we have leveraged some of our resources into rebuilding the BioSpace service serving the biotech and life sciences industry. We have been pleased with the performance of our recently acquired brands, including HEALTHeCAREERS, Hcareers for the hospitality industry and The IT Job Board.

With regard to the lot of energy and effort towards our priorities for this year, which are one, continue to build the dice.com products and sales; two, invest in WorkDigital and focus our efforts on enhancing data; three, developing mobile-enabled slides and apps; and four, expanding the culture of innovation and efficiency throughout the company. This year sets a clear path for our company to build the stronger foundation, expand our market opportunity and position us to lead the future of recruiting. With the best position in six key recruiting verticals, our early progress is rewarding, because we understand leveraging success amongst each brand with a little bit of right returns for professionals, hiring managers and shareholders.

So with that, let’s open it up to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Youssef Squali from Cantor Fitzgerald. Please proceed.

Youssef Squali - Cantor Fitzgerald

Yes, thank you very much. This is Youssef Squali. So, just couple of questions. To start, so trying to get to some organic growth numbers, it looks like of our math we are getting to organic core down about 2% for the quarter, ex-acquisitions. First of all, is that how the good number you get to? And I guess more importantly what kind of organic growth is baked into your Q2 and 2014 guidance? And second on Dice down 4%, yet your deferred revenues up 14%, maybe you can kind of talk a little bit about let’s drive in deferred revenues, how much of that is acquisition versus not and kind of what’s baked into again expectations for Dice? Do we kind of get back to positive growth by the end of the year? Thanks.

Mike Durney

Sure. So, let me take the deferred revenue piece first and then moving back to the growth. So, if you look at the deferred revenue increase from the end of the year, about $1 million of it is related to OilCareers. So, if you look at that, that’s kind of the piece from the most recent acquisition. If you look at where the majority of the change is coming from, if you look at Dice and Tech & Clearance growth overall and the billings being up 8% in their year-over-year, I mean that has the majority of where the change is coming year-over-year.

Youssef Squali - Cantor Fitzgerald

So, would that imply if the billings are up for Dice, would that imply an inflection point back in the second half, so we get to positive growth?

Mike Durney

Yes. I think if you look at what’s happened in the first quarter, certainly the number of short-term customers has declined as it has been through 2013 and something we are focused on and looking at different ways to further penetrate the smaller shorter term customer base, not because shorter term customers will change the revenue so much, but because they are good needs, but what’s happening is the bigger customers continue to buy more product from us as evidenced by the revenue per customer. And so we – and we are seeing some – some good performance in first quarter in terms of retaining those customers and sign them at greater level. So, the expectation is that later in the year, it will be an inflection point from a dice.com standpoint. And you see the reflected in the organic growth guidance for Tech & Clearance as well.

Youssef Squali - Cantor Fitzgerald

Okay. And then on the cash, can you talk a little bit about the heath of the balance sheet, I think you have $18 million in cash, I know you still have fair amount of debt $121 million, how do you look at the use of cash, you have been somewhat after buying back, your stock does the current cash levels still afford you that possibility or do you feel that, that’s not top of mind right now?

Mike Durney

No, I think it’s still course of the opportunity I don’t think our view of that has changed. I mean, as we look at capital allocation moving forward, it’s a balance of a few things. It’s investing in growth in the business. It’s buying back shares. And in most recent quarter, it was used for – to use some trapped non-U.S. cash to pay for the OilCareers acquisition.

Youssef Squali - Cantor Fitzgerald

Okay, thank you.

Mike Durney

Thank you.

Operator

Thank you. The next question comes from the line of Randy Reece from Avondale Partners. Please proceed.

Randy Reece - Avondale Partners

Good morning. I have been spending time around these recruiting industry tradeshows here in town. And it sounds like the enthusiasm about an Open Web sourcing tool is pretty high that the big most interest that I hear is to find the tool that covers all occupations, and I was wondering if your development past includes going in that direction?

Mike Durney

Yes. So, Randy, I think Open Web as a tool can be used ultimately for anything, right. We do any search in any market because of indexes, profiles across multiple platforms. So, it’s not specific to any one vertical. We firmly believe though the best application for it is combining our proprietary databases and the data you get out of those together with what you find from the Open Web sources. So, I would say what you are hearing is not overly surprising and probably fits with recruiting general, where there is a need for general services and there is a need for specialty services. And ultimately, we think Open Web together with our specialty services has the potential to solve both of those.

Randy Reece - Avondale Partners

Yes, that is the element that people I spoke with had – with missing was on the database side, your candidates are primarily technology and there needs to be some integration with profiles covering broader range, but I do understand that you have plans to extend those to your other brands?

Mike Durney

Yes. I mean, we have plans to do a number of things with Open Web and the technology behind Open Web certainly expanding into other brands is one of them. We are determining what the best fruit is and where the most value is, but I just said the Open Web service itself and the technology behind it conserve any category.

Randy Reece - Avondale Partners

Just kind of playing with numbers, it looks like that you have brought, I am going to guess Tech & Clearance sales and marketing expense down significantly and I know you had been expecting to get more and more of your own traffic, what is the progress been like on that front?

Mike Durney

The progress is along the lines that we saw in 2013, where we are getting benefit from product improvements. We are getting benefit from the acquisitions we have made. We are getting benefit from some organic traffic. So, your sub-position was correct, but we are spending less on marketing as was the case through 2013.

Operator

Thank you. The next question comes from Mike Purcell from Stifel. Please go ahead.

Mike Purcell - Stifel

Yes, good morning. Thanks for taking the question. John, Mike I kind of wanted to go back to Youssef’s question earlier on Tech & Billing, so if I had my numbers right, the Tech & Billings was 8% growth this quarter and I think it was got minus one the quarter before and maybe minus 3 or 4 the quarter before that, is that correct?

Mike Durney

Yes.

Mike Purcell - Stifel

Okay, so we are seeing improvement there, I was wondering I wanted if you could talk about the cadence of that. And then secondly as that continues to grow, could you give us some – a little bit more color on how Open Web, I am just curious – are they – is Open Web separately is that in the package count or not. And then before, could you also give us some color that for customers that are now including Open Web what their renewals rates are doing? Thanks.

Mike Durney

Yes, so just to clarify the second clearance point too, that includes the IT Job Board just so it’s (indiscernible) just okay, I just want to clarify that point.

John Roberts

Yeah, so on customers if somebody buys Open Web separately within Dice, they are a customer, if somebody buys Open Web and if somebody buys Open Web together with their Dice recruitment package that’s one customer.

Mike Purcell - Stifel

Okay. Then are you seeing any cannibalization between the two and then again are the renewal rates at a higher level for customers that are including Open Web as part of your full services?

Mike Durney

I would say we are not seeing any cannibalization. I think what we are seeing is actually opening more doors and giving us an opportunity to renew customers that may not have renewed now with the delta in terms of the renewal rate is not great. Yeah, right so it’s 100 to 200 basis points what it was with the back half of last year, but it is having an impact. So there is certainly no cannibalization. These people who are buying service find the benefit of having both. Generally, you have the database and the specific content in the form of profiles that is unique to Dice together with the ability to supplement with new and different profiles or supplement the profiles that we have with other data to buy both. So there is certainly - we see no cannibalization and we are seeing uplift.

Mike Purcell - Stifel

Okay. And then just on the tech market overall the recruiting trends are about stable of what you say the quarter before, so I am just wondering if we are seeing tailwinds influencing your numbers are if this is more of your product improvement generating some better numbers right now?

Mike Durney

Yes, I would say it’s a good question. I think it’s stable. I think it’s on the margin and might be slightly better. So I think it’s probably some combination. But I would say it’s more our product and how we are going to market with it in our sales reorganization and the focus and it is just providing some tailwind. Honestly I would say it’s both and it’s easier to get momentum if it’s stable to slightly better.

Mike Purcell - Stifel

Okay. And then lastly on energy, it was down 1% in billings versus I think up 3% the quarter before is there anything there to note?

Mike Durney

Yes, I will take that one, you guys have followed us for a long-time know that energy bounces up or down and it’s up 50% and then it’s down 3% and it was up 20% and this is one of those quarters where couple of things go into the second quarter, few things may have fallen into the fourth quarter. I would say there is no – there is nothing to be read from it.

Mike Purcell - Stifel

Okay, thank you.

Operator

Thank you. The next question comes from the line of Ned Davis from William Smith & Company. Please proceed.

Ned Davis - William Smith & Company

Good morning. Just following up from the last question, trying to get a little bit better handle on your competitive position and how you think you are doing and particularly in the – from the tax areas, do you think that you are differentiating your product significantly more than you have been in the past and if that is your strategy which is fully in the Financial and Tech & Clearance sectors, is that how you expect to drive market share and then eventually organic growth and can you give a little bit more color on that?

Mike Durney

Sure, yes. No, I think the simple answer is yes, we aim to differentiate our products and the value of being a specialist, I think you asked about finance and tech together, I would view them as slightly different. If you look at the financial services industry and some of the issues that had, the specialty nature serve us well in some respects and has heard over the last few years in terms of what’s happened in that industry. There are few other direct providers of the type of information we have about professionals in financial services other than some of the big generalists.

And tech is a little bit than that. There are lots of places where there is information about tech professionals. One of the great benefits of Open Web is we aggregate all that information, because there is so much of it. So, there is places that people can find information about profiles like Github and StackOverflow and Quora and Reddit and Meetup and there is lots of them and all of those can be used as a source of information for professionals as can generalists. Generalists, it’s a little bit harder because of the skill specificity of tech people, but again, the real value of Open Web is we are aggregating a lot of that information and putting it into a usable profile and competitively that’s where we are going.

Ned Davis - William Smith & Company

Okay. And on the – can I just ask just generally with the acquisition in I think energy in the quarter, your UK and European volumes, I don’t know whether you commented in the press release on that, but how are you overall outside of the U.S., particularly in light of the acquisitions you made there?

Mike Durney

I am sorry, in energy specifically.

Ned Davis - William Smith & Company

Well, really maybe just looking at Europe, UK and Europe just generally…

Mike Durney

Okay.

Ned Davis - William Smith & Company

I know you have different strategies with the different verticals, but I am just wondering how you are doing over there and maybe you can give us any more kind of insight on that?

Mike Durney

Sure. So, if we take energy first, so Rigzone is a global brand. They obviously started in North American and has significant strength in North America and has significant strength amongst multinational providers in the oil and gas sector. If you look around the world, one of the growth areas for that was Europe in the North Sea, specifically some in Africa and then Asia. And we have made progress on Rigzone in each of those areas, but what we found is we came up against a relatively formidable competitor in OilCareers serving the North Sea market and Europe and to a lesser extent, Africa and they have a fabulous brand in those markets. And so what we do is we took an opportunity to consolidate the two of them and now we are by far the leader – we are the leader before, but now by far the leader in energy recruiting. I think there is still lots of opportunity in Asia. We have to further penetrate the Asia market, but now I think Europe is really strong for us in energy.

Financial services, as John commented in some of his remarks, we have been saying for a while we thought we are starting to see signs that the environment was getting better in UK and Europe and now we have I think finally seen it. So, there is a contrast there between the revenue performance and the billings performance and what we are hearing from customers. So, revenue still reflects we are talking to the past year as it rolls forward, but the activity in Europe, kind of the Europe and the UK, not every market, but a lot of the markets has been really strong over the last three months. And so we are pretty happy about that and we feel good about the fact that we thought we are seeing signs over the last six to nine months. And now we have actually seen some proof points in our energy services.

Tech, the effort on we bought The IT Job Board, about nine months ago. I think UK continues to be good. Benelux, the Benelux region is relatively strong. Germany is still a challenge for us. It’s a challenge in (financial services), but Germany is a challenge in tech, but having that infrastructure to be able to build out tech in Europe and then eventually in Asia is really important strategically for us, but I would say, more remaining to your specific question, I think the UK and Benelux for us has been pretty good and Germany we are still looking for ways to perform well there.

Ned Davis - William Smith & Company

Thank you.

Operator

Thank you. (Operator Instructions) The next question comes from the line of Tim McHugh from William Blair. Please proceed.

Stephen Sheldon - William Blair

Hey, good morning. It’s Stephen Sheldon for Tim. First, just wanted to get some detail on the Open Web rollout, I think you said that 300 clients are currently paying for it. What percentage is that of your total client base is actually using the product right now? And then could you also maybe give some detail on of those 300 how many are using that on a standalone basis versus adding it on?

Mike Durney

Sure. So, as the percentage of people actually using it, it’s either 100% or pretty near 100%, because in order to use it, you have to have paid for it. That was kept a little away from 100%, because we may have given somebody some free trials for a short period of time, but in order to use it now, you have to pay for it, once again to have the beta and once we are in through transition. So on the question of how many standalone, there are very few standalone and that’s what we expected. I think one of the things that has happened is I think we sold a few standalone and then customers of Open Web said well, I think I’d be enhanced by putting the two together and so then bought Dice, which obviously is a better result, but the answer on standalone is there is very few that are actually still only standalone.

Stephen Sheldon - William Blair

Okay. And then looking at the cost of revenue, jumped quite a bit this quarter, I think in your commentary you said that a lot of that was due to the acquisitions, but I was just – can you give some color on that?

John Roberts

Sure. So most of it, if you look at cost of revenues and G&A actually if you look at those changes year-over-year, I mean, the majority of the changes due to the acquired businesses over the last 12 months, I mean there is a mix of items in there related to the businesses from primarily onTargetjobs, but also some of the other acquisitions were done. So – and that’s – that is the majority of what the increase is.

Stephen Sheldon - William Blair

Okay, thanks.

Operator

Thank you. I would now like to turn the call over to Jennifer Bewley for closing remarks.

Jennifer Bewley

Thank you for your time this morning and interest in our company. Management will be available to answer any follow-up questions you may have. Please call Investor Relations at 212-448-4181 to be placed in the queue. Have a great day.

Operator

Thank you for joining today’s conference. This concludes the presentation. You may now disconnect. Good day.

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