Monster Worldwide (MWW) Timothy T. Yates on Q4 2015 Results - Earnings Call Transcript

| About: Monster Worldwide, (MWW)

Monster Worldwide, Inc. (NYSE:MWW)

Q4 2015 Earnings Call

February 11, 2016 8:30 am ET

Executives

Bob Jones - Primary IR Contact

Timothy T. Yates - Chief Executive Officer & Director

Mark Stoever - President and Chief Operating Officer

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Analysts

Kevin McVeigh - Macquarie Capital (NYSE:USA), Inc.

Randle Glenn Reece - Avondale Partners LLC

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

George K. F. Tong - Piper Jaffray & Co (Broker)

Henry Sou Chien - BMO Capital Markets (United States)

Operator

Good morning and welcome to the Monster Worldwide Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Bob Jones, Investor Relations. Please go ahead.

Bob Jones - Primary IR Contact

Thank you, Andrew and good morning. Welcome to Monster's fourth quarter and full-year 2015 conference call and webcast. Tim Yates, Chief Executive Officer; Mark Stoever, President and COO and Mike McGuinness, Chief Financial Officer will review Monster's financial results and then we will open up the call for questions. Earlier this morning, we issued a press release announcing the company's results for the fourth quarter and full-year. A copy of the release can be viewed on the company's Investor Relations website at ir.monster.com.

Before we begin, I would like to remind you that some of the statements made during this call may constitute forward-looking statements under applicable securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. Please refer to the company's SEC filings for a description of the risk factors that may affect our results. Please note that some of the financial measures that are used on this call are expressed on a non-GAAP basis. The company's GAAP results and reconciliations of non-GAAP measures to GAAP measures can also be found in the release.

With that, I would now like to turn the call over to Tim Yates.

Timothy T. Yates - Chief Executive Officer & Director

Thank you, Bob. Good morning ladies and gentlemen, and welcome to Monster's fourth quarter earnings call. I will quickly review the results of the fourth quarter and then comment on what we have accomplished over the past year and what remains to be accomplished. Mark will focus on key operational priorities, and Mike will provide more detailed financial commentary.

Turning to the quarter, and all my percentage comparisons are at constant rates. All elements of earnings and cash flow were consistent with our plans. EPS was $0.12, at the midpoint of our guidance range. Pro forma EBITDA was $29 million, and EBITDA margin was 18%, a 600-basis-point improvement on a year-over-year basis. Free cash flow was $11.4 million, and we repurchased 1.3 million shares for $8 million. Bookings in Core Careers Europe and APAC were somewhat higher than our expectations, while in-quarter bookings in our core North American business were flattish and lower than our expectation, but importantly, significantly better than Q3.

We are not satisfied with our revenue in Q4, a decrease of 5% on a sequential basis. And each of us will provide color and address what we are doing to improve this result. Monster has made significant progress during the year 2015. We are a much stronger company than we were a year ago on many scores. On an earnings and cash flow basis, this was a year of real progress. For the full year, we generated a $107 million of adjusted EBITDA, and $70 million of cash EBITDA. EBITDA margins have substantially increased. Our net debt position went from a $117 million to $31 million, and we have recommenced our share buyback program.

In addition to improved profitability, and balance sheet strength, we're making concrete progress on executing our All the Jobs, All the People strategy, but there is a lot more to do and the progress is not yet fully visible in our revenue. I would like to squarely address the question, which I believe we all ask. What gives us the confidence that our strategy is working and why if our strategy is working, is revenue lagging? In addressing the question, it is important to understand that while our strategy is working and I will provide you the reasons we believe it is, it is not working as quickly as any of us would like. There are several proof points that indicate we are gaining momentum. First is the trend in bookings. You know we have been digging out of the hole, but the trend in our Core Careers business improved in 2015 versus the prior year.

On a full year basis, the bookings of our core European business were up 2% on a year-over-year basis, compared to a decrease of 6% in the prior year. In North America, in-quarter bookings were essentially flat on a year-over-year basis versus a decline in the prior year, and there was substantial variance between channels. In our staffing channel for example, bookings on a year-over-year basis are up over 10% for the full year. Staffing clients are known to be among the most sophisticated in the market. In addition, on a quarterly basis, the trends in bookings in North America and Europe improved relative to Q3. And you will note this in the improving trend in deferred revenue, which both Mike and I will discuss later.

Now, a word on bookings. We have historically provided bookings information, because we have felt that they are a good indicator of the underlying business trends we are seeing. But as our portfolio of products has evolved and changed, we have struggled to provide useful and informative information on bookings. This problem will be compounded by the shift to PPC ads which are not typically bought under a full year contract. So, while we believe that PPC ads will make us more competitive for many of our clients and will drive revenue and profit growth, the shift will make trend analysis of bookings less valuable.

The information we are providing today is consistent with the disclosure we have provided over the past year, and we look forward to talking with you in the quarter ahead about how we might best provide information on the trends in our business. Ultimately of course, it's all about revenue and cash flow. Second, bookings of new strategic products continues to ramp. During 2015, total bookings for new products were $51 million compared to $37 million in 2014, with the greatest adoption in our most important clients. Third, as you know, we are focused on selling software solutions in addition to our core advertising and search products. In software solutions, we include applicant tracking system, Monster Cloud Search, Talent Gateway and Talent Fusion.

We conduct this business through our MGS and military channel and through a new group focused on selling those software solutions to our commercial clients. Since we established the group to focus on the commercial channel earlier in the year, we have seen sequential quarterly progress, although it's still early. As you know, we have been actively repositioning our MGS military business over the past year. From a peak in 2013, the revenue and EBITDA of this group has substantially declined in 2015. As we enter 2016, the backlog in the MGS military business has increased and we expect revenue and cash EBITDA to increase during the year.

Fourth, KPIs, renewal rates, new and win-back clients and organic traffic are much improved from their trough a couple of years ago. In Europe, where we made management changes at the beginning of the year, KPIs or renewal rates, new and win-back customers, average spend per client are all flattish or slightly up. In North America, we had improvement earlier in the year, and then again in the fourth quarter, but a weak third quarter as we previously discussed. As noted above, KPIs vary by channel. The weakest performance on a year-over-year basis from both a bookings and KPI point of view, was in our transactional channels and in Canada, which was negatively influenced by macro concerns. In their comments, Mark and Mike will provide more information on the results by channel.

The critical point we want you to take away is that we have improved KPIs and resultant bookings and revenue in Europe and our business in Europe is now growing. In North America, we have a diverse set of businesses and channels, ranging from our newspaper partnerships to our staffing vertical from large enterprise clients to SMB clients. Some of these are experiencing stronger KPIs in growth, while others are lagging. And those that lag do so for different reasons, which Mark will address. We believe that we have the ability to improve each of them, or if we can't, to find other alternatives for that piece of our business, if they are not sufficiently profitable.

Why then, if we are making progress, is it not yet showing in revenue increase? There are several reasons. First is the size of the hole we have been digging out of. We started the year with $40 million less in deferred revenue than the prior year. As a general rule of thumb, 90% of opening deferred rolls into revenue in the subsequent year. So in order to stay flat in revenue, we would have needed to produce $36 million of new revenue in 2015 and of course a multiple of that $36 million in incremental bookings. So, a minimum of 5% incremental bookings in 2015 was necessary just to stay flat in revenue.

Now, looking at that going into 2016, the situation is better. Deferred is $18 million lower coming into 2016, compared to $40 million coming into 2015, so we will have less of a headwind. We are digging out of this hole; not as fast as we would like, but we are digging out. Mike will provide more details in his commentary. Second is channel mix. As noted above, we underperformed our expectation in those channels in which bookings convert most quickly to revenue. Third is price. We experienced a decrease in average realized price in those channels which convert more quickly to revenue. This decrease in price led to lower than anticipated bookings, and thus to lower than anticipated revenue.

Over the full year, we saw a substantial increase in the volume of our traditional posting and resume products sold. The increase in volume of units was more than commensurate with increases in the job market generally. So, clients were buying an increasing number of units. However, the increase in volume was almost completely offset by a decrease in average realized price. We believe this resulted from newer competition, which increased through the year. Mark will talk about the actions we are taking to combat this.

In summary, our strategy is working and we're having good success with our most important clients. While the strategy was always conceived and communicated as a multi-year evolution, it is taking longer to gain traction than anyone would like. In executing this strategy, we are building our capabilities for the long-term. For example, as we bring PPC to the market, we want to make sure that we build it in a way which will allow us to ramp the product and provide significant value to our clients over the long-term. We have the resources, people, money, and management to stay the course and to become increasingly important to our clients. Of course, this will result in increasing revenue and cash flow.

Now, I'd like to turn the call over to Mark.

Mark Stoever - President and Chief Operating Officer

Thank you, Tim and good morning. 2015 was a year of transition as we continued to execute our strategy for bringing together All the Jobs and All the People. Throughout the year, we launched exciting new products to complement and enhance our industry-leading portfolio. These products are all critical elements of the feature-rich, cutting-edge digital and social recruiting platform Monster has designed to better connect people with jobs.

The transition to this new solution-oriented approach is a long-term endeavor that we believe will yield significant returns. The recruiting landscape continues to be dynamic and increasingly fragmented. Employers have many choices of tools to find talent and consumers have many choices in where and how they find job opportunities. We see this trend continuing and it further supports our belief, we will become more competitive across key customer segments by offering variable solutions to meet differing customer needs. We see evidence in the marketplace that such an approach will be superior to one based on narrowly defined hero products.

As we begin the new year, we believe our strategy is working. I'd like to share our key priorities and some exciting developments for how we will continue delivering against our strategic goals and improve our capability to meet customer needs. We remain committed to innovative solutions to helping people around the world connect to jobs. But first I'd like to comment on our fourth quarter results and the progress we made in the quarter.

As you heard from Tim, revenue from our new products continued to increase in the quarter and was up 11% sequentially and 63% year-over-year. In 2015, we saw the number of clients using our new products triple in the U.S. and more than double across Europe. These products now contribute 7% of the overall revenue for the company, compared to 4% in the fourth quarter of 2014. While we're encouraged by this continued growth, we do not think this represents the true or full impact that our new products will have on our revenue growth in the longer term. We are confident our overall results will strengthen as we continue to grow the adoption of our new products, while maintaining a focus on stabilizing and growing our core job advertising, and candidate search capability.

Momentum across Europe continued, and exceeded our expectations for the second consecutive quarter. As you recall, we successfully executed an expense reduction plan in the first half of the year, as a part of improving profitability in Europe, and we managed to do so without disrupting our sales progress. In fact, this quarter is the first quarter in almost three years that our Europe channels produced positive EBITDA.

Bookings were up 2% for the full year, with the second half delivering 7%. Bookings from new products in Europe grew 68% sequentially, and 76% year-over-year. Our new product offerings are helping us win new customers, as well as retaining existing, and winning back former clients. This resulted in over 3,500 additional customers in the quarter. In North America, our fourth quarter performance remained mixed across the different channels. Bookings did strengthen in the quarter, and were flat year-on-year, an improvement over the decline we saw in third quarter. We saw continued growth in the staffing and healthcare channels, which were offset primarily by our transactional segments, the small- or mid-market, SMB, and newspapers.

Factors that caused the third quarter slowdown in our transactional businesses of SMB and mid-market, continued in the fourth quarter. This included a less robust hiring environment, which is typical for the season. Further, the overall online job posting universe has changed, with the rise of new aggressive players in the one employee to 49 employee size segment. Monster has maintained a solid performance compared to our traditional competitors. However, these new competitors continued to put pressure on our posting business in this segment. Beginning in the third quarter, we put into place several initiatives designed to improve our competitive position and these efforts continued through the fourth quarter.

First, we implemented a more concentrated coverage model, focusing on those prospects with a higher propensity to convert to customers. Second, as most of this segment is fulfilled through our e-commerce platform, we've made several improvements to site flow and increased conversion, including to the checkout process and our job posting wizard. Third, we are testing a more flexible buying model, a subscription plan, which bundles multiple products, is aggressively priced against competitive offerings and provides flexible buying with recurring monthly provisions in billing. We believe this provides ample opportunities to increase market share by boosting diversified product usage from many of our customers in this segment, who only use a single Monster offering.

And lastly, with regard to our newspaper channel, Monster recently renewed its exclusive relationship with the Local Media Consortium, a vehicle by which we conduct business with and through nearly 750 different media outlets and their sales forces. Prior to this renewal, some publishers had moved away from the consortium, which adversely impacted bookings throughout 2015.

We have been actively pursuing new publishers, such as the recently announced partnership with the Akron Beacon Journal. We believe this segment will improve with this newly signed multiyear consortium agreement and look forward to working with the nation's leading publishers, as they use Monster to continue their shifts from print into broader digital recruitment solutions.

Turning to an update on traffic and consumer engagement, I'm pleased to report that in the fourth quarter, almost 3 million new members signed up for the Monster Services, an increase of an 11% year-over-year. We continue to maintain more than 4 million jobs across Monster's global job ad network, creating a significant valuable resource for people actively seeking job opportunities.

In North America, our organic traffic continues to grow and was up 9% year-over-year. This was driven by improvement in SEO from the increased number of jobs from the All the Jobs strategy, as well as our ongoing marketing efforts and a renewed focus on developing unique original and useful content.

Our consumer content such as advice and important related news has also helped increased job searches, apply starts, and new members. We've established a number of key priorities for 2016, all focused on revenue growth. These priorities include, first, a continued rollout and expansion of the All the Jobs and All the People strategy globally.

Second, we will improve the core business channels by improvement in our key seeker and employer site flows and maintaining our focus on improving job application and purchasing conversion rates.

Third, we will accelerate pay-per-click. We're accelerating the ramp of our pay-per-click ad platform. In the fourth quarter, we increased both the number of companies and the number of ads running throughout our job ad network.

We're encouraged by the fact that many of the companies that tried our PPC platform for the first time, continue to increase their campaign budgets with us. This growth in customer budget is a positive indication of the value we are delivering for our customers and of the overall opportunity we see in programmatic job advertising.

PPC is a critical component of our job advertising strategy, adding a new way to sell our ad inventory across all business channels. It is equally critical that we deploy PPC in a focused and thoughtful manner. And for that reason we have purposely managed the platform rollout. In the first quarter of 2016, we will focus on our agency channel, a critical set of partners that we work with to resell the Monster product portfolio. Throughout 2016, we will be bringing PPC to all customer segments.

This platform offers customers the certainty of defined performance and Monster will benefit from higher marginal rates and more efficient distribution of site traffic among ad content. This allows us to deliver exactly what customers need and want, whether that be duration based or performance based.

And fourth, we'll be accelerating sales and productivity to drive revenue. In North America, we continue to top grade the talent and have implemented a number of channel specific operational and organizational initiatives, designed to improve customer success and increase revenue.

Today I'm also pleased to announce two significant initiatives that will increase our momentum, provide additional value and create an even stronger reason for customers to turn to Monster. First, the extension of Monster Social Job Ads to Facebook in the United States. Monster Social Job Ads is our programmatic job ad solution across social media channels, taking job ads to the right people in a narrowly targeted way.

In our first iteration with Twitter, we've already seen great success. By year-end 2015, we had over 3,900 clients with more than 17,500 campaigns. And now with Facebook, the power of our priority distribution and targeting capabilities has significantly greater reach.

Monster Social Job Ads on Facebook is planned in other markets, starting in the first quarter of 2016. Germany, for instance will go live in March. We will roll-out the Facebook platform to the other 16 markets, which currently have Monster Social Job Ads over the coming months.

Additionally, as we work to grow and advance our core businesses with initiatives like pay-per-click, social job ads, and others, a large part of our work has always been to increase the value proposition for both sets of our users, job candidates and employers.

This morning, we announced the formation of a joint venture with a company named kununu. kununu a subsidiary of XING is the leading review-based employer branding and transparency platform in Europe. They maintain a platform for employer transparency through ratings and reviews, and employment branding through company profiles. Our U.S. focused JV will initially test the delivery of content rich employer reviews and ratings from current employees in Canada and we expect this to contribute to our overall traffic and engagement strategy over time.

This information is designed to help inform consumers using the Monster platform about the companies they might work for and deliver several new tools for the employers to better manage their talent brands, including sellable branding and brand management products.

This effort is in its early stages, and the formation of the JV is just the first step in our development of this part of the Monster platform. We expect this to be a profitable venture for us, one which takes us into an adjacent space smartly with a knowledgeable partner to share technology and costs, and one which leverages our core employment data on consumers and clients.

Monster continues to deliver on its promise of connecting people around the world to job opportunities, while we have much work to do, it remains an incredibly exciting time for us, as we ramp up our strategic initiatives and take full advantage of the opportunities as they present themselves.

I'll now turn the call over to Mike.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Thank you, Mark, and good morning. I will review our fourth quarter financial results and provide guidance for the first quarter of 2016, before turning the call back to Tim. My comments will focus on our consolidated non-GAAP results, results and comparisons exclude the operations of JobKorea, which was sold in Q4 and treated as a discontinued operation. We recorded a pre-tax gain of $76 million or $57 million net of tax, related to the sale in the current quarter.

Slide five summarizes the fourth quarter pro-forma income statement. Our profitability metrics continued to improve in the fourth quarter. EPS was $0.12 at the mid-point of our guidance. Adjusted EBITDA was $29 million, up about $1 million sequentially with EBITDA margin expanding to 18.1% representing a sequential improvement of 130 basis points and a year-over-year improvement of 600 basis points. Q4 represented our sixth consecutive quarter of improvements on our key financial profitability metrics.

Revenue for the quarter was $159.2 million, down 4% sequentially on a constant currency basis and down 6% year-over-year at constant rates. Operating expenses of $141 million decreased 12% year-over-year and 5% sequentially at constant rates, reflecting the benefits of the Reallocate to Accelerate program.

Slide six summarizes the pro-forma adjustments during the quarter. The $300,000 on the salary and related line represents stock-based compensation. There was a $7 million impairment charge related to capitalized software costs, as shown on the office and general line. We incurred $4 million of costs related to the restructuring program, consisting primarily of severance. We exceeded our expectations of saving $40 million of cash expenses on an annual basis, and will not incur any additional charges related to this program. The $1.3 million adjustment within interest and other represents the non-cash amortization of our debt discount associated with our convertible notes.

Slide seven shows the non-GAAP expense trend. Currency had a 3 percentage point benefit on all expense captions on a year-over-year basis and a minimal impact on a sequential basis. Salary and related expenses at $71 million, decreased 18% year-over-year and 7% on a sequential basis. We ended the year with head count of 3,680, down 5% year-over-year. Marketing expense was $28 million, a 9% decreased year-over-year and a 7% sequential reduction.

We continue to benefit from the increased organic traffic resulting from the All the Jobs component of our strategy. Office and general expense was $42 million, a 12% decrease year-over-year and a 4% decrease sequentially.

Slide eight is our non-GAAP segment performance. Revenue in our North American Careers segment was $112 million, down 6% sequentially and 8% year-over-year. This sequential revenue decline was driven by declines in our transactional business including newspapers and Canada as discussed previously by Mark and Tim.

Adjusted EBITDA in Careers-North America was $31 million and the EBITDA margin was a healthy 28% compared with 29% in Q3 and 25% in last year's fourth quarter. On a constant currency basis, revenue in International Careers was virtually flat sequentially and down 1% year-over-year. Revenue from Europe was up 2% sequentially and flat year-over-year at constant rates. We've seen sequential revenue growth in low-to-high single-digits in all key markets in Europe, due to strong bookings growth in the second half of 2015.

APAC revenue was down in the low-single digits on a year-over-year basis at constant rates. Careers-International EBITDA margins turned positive at 4.2% for the quarter, representing a significant improvement both sequentially and year-over-year. This was the first time in almost three years that Europe had positive EBITDA margins.

Slide nine takes us through cash flow and key balance sheet metrics. Adjusted EBITDA was $29 million. Net cash provided by operating activities was $18.7 million at the high end of our guidance, and includes approximately $2.5 million of cash severance payments. Capital expenditures were $7.3 million and free cash flow was $11.4 million.

Deferred revenue was $280 million, down from $298 million at the end of last year, or 3% at constant rates. This represents our lowest decline of deferred revenue in 2015 as we continue to replenish our deferred balance.

Total debt was $199 million. Net debt was $31 million. Total liquidity increased to $268 million and our leverage ratio decreased to 1.3 times in December 2015 from 2 times in September 2015.

We are extremely pleased with the improvements in our balance sheet over the past year, with total liquidity more than doubling, providing us the financial flexibility to return capital to shareholders, while supporting the strategic initiatives of the company.

We are happy to report that we returned $8 million of capital to our shareholders via our share repurchase program, and we believe there is no better use of our capital than Monster stock, particularly at current valuations.

Slide 10 summarizes our Q1 2016 guidance. We expect to generate $12 million to $17 million of cash flow from operations in the first quarter of 2016, and capital expenditures are expected to be between the range of $7 million to $9 million. We expect consolidated Q1 revenue to be flat to up slightly on a sequential basis. This revenue guidance assumes continued softness in the transactional space, as we implement our plan to take back and gain share, FX headwinds, as well as the impact of the current macro environment. We expect Q4 expenses to be up 4% to 5% sequentially, taking into account the normal seasonal increase in expenses from Q4 to Q1. Non-GAAP EPS is expected to be between $0.06 to $0.10.

With that, I'll turn the call back to Tim for his closing remarks.

Timothy T. Yates - Chief Executive Officer & Director

Thank you, Mike. 2015 was a year of stabilization and improvement. While data is hard to come by, we believe we are stabilizing our market share against our traditional competitors. Results of those who have already reported confirm this belief. We went from being liquidity and capital constrained to having substantial capital and liquidity. We improved the profitability of our key businesses. We have focused our management team, and our culture and morale are greatly improved.

2016 will be a year of building on our accomplishments, executing our All the Jobs, All the People strategy, and attacking the market aggressively. In wrapping up, I'd like to squarely address another question, I know you will have; are we committed to 5% revenue growth for 2016, and our 25% EBITDA margin by Q4 of 2016?

We know that the most important priority for Monster in 2016 is to grow revenue. We believe you know, we can control costs, and that focus will certainly continue. A point of revenue growth is considerably more valuable to us as shareholders at this time than an incremental point of margin growth, especially since we have already significantly improved EBITDA margins.

We are completely committed to revenue growth and our internal plans call for 5% revenue growth at constant rates. In order to achieve this level of growth, we will need to attain around 12% to 15% bookings growth in 2016. This would be great progress in a market environment, which is not expected to be robust. Because of the current uncertainty however, we are guiding to a low to mid single digit revenue growth for the year. Turning to the EBITDA margin part of the equation. During 2015, we largely focused on adjusted EBITDA margin improvement, while maintaining our core investment in sales and product.

As you know, we met the EBITDA margin we committed to earlier in the year. We now feel, there was an opportunity and a need to become more aggressive in the market. We have built significant new capabilities under the umbrella of All the Jobs and All the People. These include Social Job Ads, Talent Fusion and the software solutions mentioned above. These new products and features are supported by much more effective CRM and a substantially improved organic content on our sites. We are now adding PPC, which is the final piece of the initial strategy. We want to bring our capabilities to market more quickly and aggressively.

As a result we are going to shift our priorities somewhat from adjusted EBITDA margin improvement to revenue growth and increasing dollars of cash EBITDA. Cash EBITDA is defined as operating income, excluding depreciation, amortization and stock-based compensation. For 2016 we expect significant increases in cash EBITDA. In the current environment, we commit to generating between $85 million to $100 million of cash EBITDA for 2016.

At the mid-point of the range, this would be a 30% increase on a year-over-year basis. So, our annual guidance for 2016 is revenue increase in the low-to-mid single-digits, which can only result from significant increases in bookings and cash EBITDA of between $85 million to $100 million.

This combination will result in top line growth, additional flexibility to invest in our businesses and accelerate growth into 2017 and beyond and a significant year-over-year increase in cash flow. In light of the likely increase in cash flow, I want to end by updating our thinking on our capital allocation philosophy, which remains largely as we have articulated each quarter over the past year.

We would like to make two refinements, however, first, we may look at small technology or product acquisitions. While there is nothing specifically planned today, as we look at our product offerings, there may be opportunity for us to add features or functionality better by buying rather than building.

We will only do so, if it's either cheaper or materially faster to buy versus build. An example of this, although a partnership not an acquisition is our exciting partnership with kununu and XING. We are entering a very attractive adjacent space in a smart way. We're partnering with an expert in the field and the partnership is a good way to leverage Monster's core capability and to provide additional benefits to our seekers and clients.

Second, it goes without saying that our primary use of capital is the Monster stock. We are driving to increase cash EBITDA, a great majority of which will be used to repurchase stock. While we fully intend to remain well capitalized and liquid, and while we will continue a base our buyback on free cash flow, our Board has authorized us to be more flexible in the timing of our implementation of that buyback in order to take advantage of the current market situation, and we intend to aggressively use this flexibility.

I'd like to thank our associates and our shareholders for their continued support of Monster as we build the company. I'd now like to open the call for your questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. . The first question comes from Kevin McVeigh of Macquarie. Please go ahead.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Great. Thanks. Hey, Tim and Mike, thanks for all the color. Just one point of clarification on the low to mid single-digit revenue guidance for 2016. Is that constant currency or is that USD?

Timothy T. Yates - Chief Executive Officer & Director

Constant currency.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Okay, super.

Timothy T. Yates - Chief Executive Officer & Director

I know, as I mentioned – and as I mentioned Kevin that would require a multiple of that in bookings growth.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Yes.

Timothy T. Yates - Chief Executive Officer & Director

Which then will make the situation better going into 2017.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Got it. And then, on the $85 million to $100 million cash EBITDA, Tim, very helpful. What's the CapEx associated with that, so we try to get a sense of where the free cash flow settle in 2016?

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yeah. Kevin, this is Mike McGuinness.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Hey, Mike.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yeah, hi. We are thinking $7 million to $9 million a quarter of CapEx. We've been on the lower end of that recently. So, if you annualize that about $30 million for the year.

Kevin McVeigh - Macquarie Capital (USA), Inc.

Awesome. Thanks, guys.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Thank you.

Operator

The next question comes from Randy Reece of Avondale Partners. Please go ahead.

Randle Glenn Reece - Avondale Partners LLC

Good morning.

Timothy T. Yates - Chief Executive Officer & Director

Good morning, Randy.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Good morning, Randy.

Randle Glenn Reece - Avondale Partners LLC

I wanted to discuss the – just the concept of going into the pay-per-click space and what do you think you're going to gain from there, and the potential that it could have an increased price pressure effect on your legacy business? Do you expect that business to be incremental or is it going to have some appeal to existing customers?

Mark Stoever - President and Chief Operating Officer

Hi, Randy, it's Mark. I'll take that. I think, we have said consistently that we do believe that this is an incremental opportunity for the business. There is a large piece of the business out there that has, over the last couple of years, switched to a performance job ad program. And so, in many ways, those customers don't exist within the Monster or the traditional job services today. So, we are focused on going after that piece of the business, first and foremost. And there is a significant opportunity there to bring in new clients and new dollars to the company.

That being said, as you know, we have always been very careful on how we have thought about pay-per-performance because, there was a lot to learn around what our duration-based postings do for our clients. And we still remain of the belief that there are many valid reasons why duration-based postings worked very well, and are very cost effective for many – many types of jobs in industries, but have now recognized that to gain share and be more relevant to the broader marketplace we ought to have multiple options. So, we believe it's a great opportunity, it's one of the last big pieces of the strategy rollout. And as I said in my formal comments, we're going to be doing much more of it in 2016, starting with our agency channel here in Q1.

Randle Glenn Reece - Avondale Partners LLC

If we look at the sequential decline in revenue, how much of that came from Internet Advertising & Fees, and Government Solutions?

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

It was – it wasn't a significant piece of it, Randy. It was – as we spoke about it – this is Mike, by the way, as we spoke about it – the major components of it, where the continued weakness in the transactional space, we include newspapers in that, because it is very transactional in nature, and we continue to have some of the lingering effects from the sales force changes we made in the enterprise space, but that's working itself through, and we think most of that's behind us. So, minimal from an IAF and MGS perspective.

Randle Glenn Reece - Avondale Partners LLC

All right. Very good. Thank you.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Thank you.

Operator

The next question comes from Mark Marcon of Baird. Please go ahead.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Good morning, and appreciate all the color, and the good progress on the profitability. Can you talk a little bit about your U.S. organic search visits, just the trend there, and what you would expect given the current level of investment, that you have in place?

Mark Stoever - President and Chief Operating Officer

Yeah, Mark. It's Mark, I'll take that as well. As we've been saying now one of the key elements of the All the Jobs and All the People strategy is the ability to significantly expand the available content on the site, because the belief there is not only does it provide a much better experience for our candidates, because we provide many more opportunities for them. But that's content, that's good quality content that pick – gets picked up by the search engine. So we have been watching closely what that has done with respect to – to our organic search traffic coming into the site, and that has increased quarter-over-quarter since the beginning of the year when we first rolled out all of the jobs, and as you...

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

(44:19).

Mark Stoever - President and Chief Operating Officer

It has, organic search has.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I'm looking at slide four.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Q4.

Mark Stoever - President and Chief Operating Officer

Q4, you are looking at slide four, which is year – Q4 year-over-year is up 11%. And Q4...

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I'm sorry, I must be misinterpreting it. I'm translating the slides to basically be the actual number of visits. I'm looking at slide four of the presentation.

Timothy T. Yates - Chief Executive Officer & Director

Yes. Year-over-year.

Mark Stoever - President and Chief Operating Officer

Year-over-year, you're looking at the year-over-year slide, I don't have it in front of me, but the guys can show it to me.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Year-over-year, Mark.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

It's not year-over-year...

Mark Stoever - President and Chief Operating Officer

Oh, I'm sorry, you may be looking at Q4, which is the seasonality impact. In fact if you go back through I think, I...

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I'm also looking at Q4 of last year and it's up a little bit relative to Q4 of last year, but...

Mark Stoever - President and Chief Operating Officer

Yes. It's up 11% over last year and it came down from Q3 only because of the seasonality that we typically have in overall traffic on the web from Q3 to Q4. And you'll see that that has occurred in the previous years as well.

The other comment I'll make is, if you think about overall traffic to Monster, we have said that the strategy will allow us to offset a lot of the paid marketing that over the years we have had to use to acquire traffic. Obviously, the shift from paid to unpaid is very helpful. That continues to increase in terms of the overall traffic to the site, much more unpaid traffic today. And that channel, organic search channel, obviously doesn't just drive searches, but it will drive quality job views and quality apply starts. So it's a very important metric that we believe is one of the key KPIs for recognizing what the expansion of the job content is delivering.

Operator

The next question comes from George Tong of Piper Jaffray. Please go ahead.

George K. F. Tong - Piper Jaffray & Co (Broker)

Hi. Thanks. Good morning. Tim, you mentioned in the channels where bookings translate most quickly to revenue that mix somewhat underperformed expectations and that average realized price declined. Can you elaborate on these channels and strategies you have for reversing these trends?

Timothy T. Yates - Chief Executive Officer & Director

That's in the smaller channel, in the e-comm itself, for example, by one posting it tends to get used right away. So it converts right away. The newspaper channels have a faster conversion, and the smaller end of the SMB space have a faster conversion than the typical average enterprise client or staffing client. So it's localized. Both the actual price competition as compounded by how that converts into revenue occurred in the lower end of the market. Mark, why don't you refresh what the steps are we're taking.

Mark Stoever - President and Chief Operating Officer

Yes, George. I think when you think about what we're seeing in that segment, right, these are very small. I've characterized them as the employee size one to 49. As you look at the small business and mid-market, there are multiple segments even within those. So, historically, I think the way those customers bought, there were fewer alternatives out there. They all bought sort of similar products. But as those segments have further become sub-segments, there have been opportunities for smaller competitive offerings to come out there. You've probably heard a few of them.

And so we're taking a much more focused approach at the individual sub-segments of small business. So the one to 49, for example, we've recognized that there's been some opportunity to think about a differentiated solution. This is a segment that has long purchased mostly a single product, often just a single posting, and while our site has always allowed them to purchase multiple products, it hasn't really necessarily focused on overall lifetime value of that user.

So we have introduced a couple of things on the site, not just to improve the overall site flows and conversion of new prospects, but one of the more material initiatives was a new subscription service that is designed to increase product usage. So we will recognize if you're a small business and recognize that if you have a greater hiring need than a single person in the coming months, we will offer you a better packaged price with multiple products that deliver greater value to you. And that is in testing right now. It is only on a percentage of our new prospects that are coming to the site, but we are seeing good conversions of that.

And it's highlighting the fact that for this segment, if you can be simpler in your packaging, if you can price it aggressively, if you can demonstrate that you're delivering greater value through the bundled portfolio, it will create a longer lifecycle for these customers, and it would become less transactional in nature. So you can see on the site today, we've got a couple of options, mostly a three-month subscription package, but obviously as they increase to four months or five months or six more months, the lifetime value of those individual customers increases significantly.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes. And George, this is Mike. Again, just to add in terms of the channel mix. So if you think about the different channels we have, so staffing in healthcare had really strong performances in the fourth quarter, longer revenue conversions, enterprise was flattish which was an improvement from Q3, so we're happy about the trajectory there, but the declines were in the transactional space which convert to revenue quickly. So that's kind of the mix and that's the reason why there was a impact on revenue for Q4.

Timothy T. Yates - Chief Executive Officer & Director

And it's Tim. I would add a sort of more macro point on it. Over time, there have been increases and decreases and ebbs and flows of new competitors who get very hot and then tend to stabilize. We fully intend to compete in this sector of the market, so long as it's profitable, which it is sufficiently profitable. So we intend to be very aggressive in competing against this newer form of competition.

George K. F. Tong - Piper Jaffray & Co (Broker)

Got it. Very helpful. And, Tim, can you also discuss from a 2016 perspective, how long do you expect it will take for bookings performance to translate in terms of revenue growth, so the timing of a positive revenue inflection and what factors would cause the translation to be faster or slower from bookings revenue?

Timothy T. Yates - Chief Executive Officer & Director

The sooner we get the bookings, the sooner we'll get revenues. That's what I tell the guys, but I'll let Mike answer the question...

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes...

Timothy T. Yates - Chief Executive Officer & Director

More directly...

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes, George, as we think about 2016 and the revenue guidance of low-to-mid single digits that would translate from a booking growth of, as Tim said, of 8% to 12%, 13%, and in Q1 we are thinking mid-single digits and then it kind of expands from there and there's reasons for that. As we introduce PPC into the market by now. As Mark said, it's mainly in the agency space, but then we're going to expand that to other verticals in the year. We expect the positive trends internationally to continue, as well the things we're doing in the transactional space to remediate those issues as well. We're factoring that in the second quarter and then for sure growth in the third and fourth quarter. And the continued stability in North America sales, and so if you think of all that on top of the ramp of the other new products that's what gives us confidence that we can attain these bookings metrics that we have embedded in our 2016 plan.

Operator

The next question comes from Jeff Silber of BMO. Please go ahead.

Henry Sou Chien - BMO Capital Markets (United States)

Hey, good morning. It's Henry Chien calling in for Jeff.

Timothy T. Yates - Chief Executive Officer & Director

Hey, Henry.

Henry Sou Chien - BMO Capital Markets (United States)

Hey, guys. I appreciate the comments on the staffing and healthcare channels as well as the SMB and newspaper. I was wondering if you could remind us on the percentage of revenue mix between the different channels or however you look at your different segments. Thanks.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes, Henry. No problem. What I'll call the transactional space, which includes newspapers, the lower-end midmarket and small businesses in about 25% to 30% of the business in North America, Enterprise is about 25% of the business in North America, and staffing is about 15% to 20%, and then healthcare is smaller than that but building quickly. So these are all components that are sizable businesses for us and we're working obviously to continue the growth in those spaces.

Henry Sou Chien - BMO Capital Markets (United States)

Got it. And the remaining percentage, I'm assuming that's the new products.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes, but in terms of verticals, there is government in there.

Henry Sou Chien - BMO Capital Markets (United States)

Right.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

That's a piece, yes, the big piece is government. So that's kind of the delta as you get to the full NA, and this is full Careers-NA.

Henry Sou Chien - BMO Capital Markets (United States)

Okay. Got it. Okay. That's helpful. Thank you. And I wanted to ask about the comment of looking at buy or build or potentially acquire, just wondering if you could put some color on what product areas you're looking at to potentially build or buy? Thank you.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes.

Timothy T. Yates - Chief Executive Officer & Director

Go ahead, Mike.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Yes. So I could take that. I don't think we're going to get specific. Henry, you said we'd do anything that can augment our strategy sort of tuck-in acquisitions. But we would only consider acquisitions that it's economically better to buy rather than build and it would allow us to get into the market more rapidly. So we're not going to get any more specific than that, but...

Timothy T. Yates - Chief Executive Officer & Director

In spite the fact that the guys will kick me under the table, I'll be a little bit more specific than they are...

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

You can.

Timothy T. Yates - Chief Executive Officer & Director

...I'm allowed to be. Look at some of the – we don't play – and I don't want you to go away thinking we're going to going do it – but as I look at the areas of the job market which we're not effectively covering, you could look at something like the lower end of the market, part-time gig economy as something where we should have an offering that's better than it is, as we get more flexibility to expand the market. So that's a space that I would think it might be worthwhile for us to consider something.

Henry Sou Chien - BMO Capital Markets (United States)

Got it. Okay. I appreciate that. Thanks a lot.

Michael B. McGuinness - Executive Vice President, Chief Financial Officer

Thanks, Henry.

Timothy T. Yates - Chief Executive Officer & Director

Thanks, Henry.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Bob Jones for any closing remarks.

Bob Jones - Primary IR Contact

Thank you for your time this morning and your interest in Monster Worldwide. Management will be available to answer any follow-up questions you may have. Thanks once again and have a good day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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