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The latest in our selection of full conference call transcripts: the entire text of the Q&A from Monster’s (ticker: MNST) Q3 2005 conference call. This is part 2 of the call; the prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Question-and-Answer Session

Operator

Ladies and gentleman if you like to register your question please press the “1” followed by “4” on your telephone. You will hear a three prompt to acknowledge your request. Your question has been answered then you would like to withdraw your registration please press “1 “followed by “3”. If you using speakerphone please lift your handset before entering your request. One moment please for the first question. Our first question comes from line of Christa Quarles from Thomas Weisel Partners, please go ahead.

Christa Quarles

Hi I have couple of questions. First there has been some set of noise around some of the competitor pressure is driving Monster, I was wondering obviously it is competed with Yahoo, HotJobs for many years, and Korea built it as well as credit first. I was wondering if you could highlight, you do survey your employers the reasons why are they continue to choose you or not choose, as you have lost RSPs, and then the second I was wondering if you could highlight the growth in difference by US versus international and third I know its probably a little early for 2006 guidance but I was wondering if you could highlight this from a cost standpoint, do you feel like the sales force for example in Europe fairly well built out at this point and it is now about harvesting those people?

Steve Pogorzelski

Okay this is Steve, I would like to answer the first question, why the customers choose Monster. We believe that we are gaining market share in Monster North America against both our online and our offline competitors. We do very exhaustive surveys twice the year of over 10,000 customers, to measure customer satisfaction and loyalty. In the seven categories in which we survey our customers including our sales people, our communications customer service, our product, our technology or the website as well as financial billing and payment options, we come out number one in each and everyone of those respective areas. So customers truly have a very satisfied experience with Monster but the bottom line is why we continue to have very high renewal rates is that we simply derive results. The employers measure results based on time cost and quality and when it comes to shorting their hiring cycle, lower their cost per hire and finding quality candidates in what continues to be a skill shortage labor market economy, Monster comes in number one. Before Lanny answers the differed question let me talk to you about the European sales environment, we continue to believe that we need to invest in European sales results in strategic exercise right now, we make sure that we have the right sales people in the right segment in the right countries, we are doing a very good job in Europe, in ramping up our sales people and I think that we will make some pragmatic investments as we a large opportunity to scale in Europe and built up that sales force.

Lanny Baker

On the differed revenue question, if you look at it sequentially, the sequential increase was balanced about evenly between North America and Overseas. May be a little bit more of it in the US, and when we look at it on a year-over-year basis, the faster growth rate that you see in revenue overseas are also there within differed revenue. We will leave it at that.

Christa Quarles

So I guess, just solidify maybe Steve’s comments, do you expect margin improvements in Europe next year from the current level?

Steve Pogorzelski

Yes. When it comes Europe, it’s imperative in this stage as European adoption curves investing role, so in 2005 we made heavy investments in sales and marketing and going forward we think it’s finally time based portfolio approach is best in European markets or customer segments and infrastructure. And at the same time we are doing that taking a close look at the cost structure and the financial benefits of centralization and regionalisation while the 2005 investments really start to payoff. So we wont’ increase margins in Europe but we will do so without letting our abilities to grow and take advantage of the sizable opportunity that’s represented there.

Christa Quarles

Perfect thanks.

Operator

Our next question comes from the line of Douglas Arthur of Morgan Stanley. Please go ahead.

Douglas Arthur

Lanny, you mentioned that I think referring to North America Monster that e-commerce was now high teens percent of revenue so I am just wondering if you can sort of flesh out what the other percentages are for resume, job listings, etc., and then can you just update us on sort of how you are allocating the marketing spend clearly you are getting more out of that, it’s not growing as fast as it has in the past. What can you update us on the breakdown on where the spending is going in terms of traditional media versus e-commerce? Thanks

Lanny Baker

The mix of the business really hasn’t changed from what is has been from the last 6,7,8 quarters, 53% of the revenue came from postings just under 38% or so came from resumes and the rest came from other sources. The e-com business historically has been almost entirely postings revenue, but as I said as we’ve changed our product and we marketed it a little bit differently we are excited that we finally able to sell things other than just single job postings, selling bundles, and actually sell some resumes, so e-com is a kind of split between the those buckets, we are not going to quantify how much is in each bucket, but it has proponently leaned toward the postings and as you said correctly it’s percentage of the business.

Steve Pogorzelski

Your question on marketing, I think related to the efficiency and productivity and how we think about what we are spending and the returns. Yes, over the last year marketing has been an area tremendous leverage for us. We have moved beyond the ages ago portals and Super Bowl advertising, to being much more targeted and measuring much more carefully with specific goals for every dollar that spends in terms of whether it is brand awareness, on the one side and offline media or it’s attracting customers and resumes in online media. As we look forward we talked about we are spending year-over -year the increase in Europe was over 100% and we are going to spend more on marketing everywhere. I think the right way to look at it is as we lower our expenses elsewhere, become more efficient in areas like sales and productivity and fixed cost, it frees up more money to put back in the machine and drive the growth of the business. Did that give a good picture on marketing?

Douglas Arthur

Yes that’s fine thanks a lot. I just a followup for Steve, what of the competitors in Europe are they sort of mix of traditional print newspaper and online, It’s a very fragmented market, very tough to get scale in any particular geography, its that a route in terms of a joint venture alliance or partnership you may explore in the future or you likely to just go alone or remains to be seen.

Steve Pogorzelski

I think if you look at Germany for instance Doug, that’s a highly fragmented market and we have been able to grow the business at significant levels, so this is the conclusion we’ve reached is the best thing to do is to go is to go there alone to invest in our brands, to drive more seekers to our sites because that is ultimately what makes the difference and then leverage the scalability of the model. Now it wouldn’t ruin anything out, but in the future plans it is focused on becoming number one in every market and growing organically.

Douglas Arthur

Great. Thank you.

Operator

Our next question comes from the line of Imran Khan from J.P.Morgan. Please go ahead.

Imran Khan

A couple of questions, it seems like you hired 83 people in Q3, I was wondering if you could comment which part of business you hired them and secondly if you could talk a little about how should we think about hiring going forward, then in terms of international could you give us update like how many international sales rep you have and how the productivity in the international market compares with the U.S. Sales reps market.

Lanny Baker

Sure with regard to headcount, the headcount updated in the quarter was about 4600 people, you are right, with an increase of 83 between June and September. On sequential basis worth about 2% in North America and 1% overseas, but in the Monster Division headcount grew about 5% from June to September, the U.S was up about 4% sequentially, we are adding some staff in our new center at Arizona. Head count in Europe was about 5% sequentially, so I think what you see when you see certainly look at those numbers there has been pretty consistent, steady incremental growth quarter over quarter up around the world at this point. So for the sales and productivity, today we’ve got a sales force in Europe that is not quite as big as the U.S. sales force but its pretty close it’s within 10% in parts of the U.S. sales force. You can certainly look at the revenue numbers generated by Monster North American, Monster Europe, gives us a great opportunity on sale and productivity which I’ll let Steve talk about it a little more detail.

Steve Pogorzelski

Our focus right now is on Market coverage and segmentation, as I said early getting right people in the right markets in the right channels. In terms of top line productivity, we are finding that, people in Europe, people in India, and people in China will have the same levels of talk time, standards performance, but what we are trying to do is increase sales optimization which is really what drives margin in our business. So we are pleased with the progress that we’ve had, with regard in overseas sales operations, there are comparable basis to where we were in earlier point in time in the United states when we had some room to grow that, you will see in the next year.

Imran Khan

Lanny, one last question, with regards to your e-commerce product that is growing very significantly. Could you give us some color how the margin structure is different than your traditional Monster business versus your e-commerce business, we think that e-commerce’s higher margins so can you give us some more color how better the margins are for e-commerce business?

Lanny Baker

Sure. It’s a little bit difficult to untangle various sales channel but at the top level the e-commerce business is definitely, we’ve said before many times, it’s our most efficient sales channel Its doesn’t have nearly the number of sales people headcount be it on the street, behind it, but on other hand it’s a business that is very clearly driven by marketing, so may be it has relatively a little bit more marketing drive in that business than sort of the average of the rest of the businesses. From an overall standpoint its clearly more productive that its been one of the factors that has helped Monster’s incremental profitability and its overall level of profitability this year and that’s why we were continuing to push on it. I think we will leave it at that.

Imran Khan

Great. Thank you.

Operator

Our next question comes from line of Jeremy Davis from Credit Suisse First Boston, please go ahead.

Jeremy Davis

Hi guys, just trying to get a sense for what might be left on the acquisition front from a geographic standpoint, I think on last quarter’s call you had mentioned Korea, Japan and Russia but I didn’t know if that was still the case or there are other areas that we should be looking toward in the future?

Andrew McKelvey

Yeah it can be. As I’ve said couple of times, we unfortunately seem to be running out of countries, Japan is so fragmented that it is really not even on the even on the radar list at this point, Russia yeah, but nothing now may be something Monster like in the future, so you look, we are not in South America and not in Africa, the answer is we are not. At this point we don’t have any plans to go to either of those continents. So I only repeat myself, we kind of run out a countries, we are looking at a way to get into countries like Brazil on a very modest basis and we will talk about that probably more next year, but right now we really don’t have a sites on anything particularly other than may be something here and something there in Europe. So that’s where stand in acquisitions.

Jeremy Davis

So it’s the strategy at this point than its kind of build your footprints organically from what you have in place already or the other TAC on acquisition opportunities that your are assessing even within the markets that you already have a presence?

Lanny Baker

Its much more the former than the later, there are an actual infact very few internet career websites that buy and eat, even if we get buy whatever we wanted to buy, so its not going to be much a TAC on and you are correct, most of the footprint would be organic.

Jeremy Davis

Okay, and then touching quickly on the AdComs business you talked about the lower expenses generally in the quarter but wondering if you could break that into what buckets you saw particular little lower expenses and how sustainable that is going forward?

Steve Pogorzelski

Before Lanny talks about talks about the numbers,. I believe its extremely sustainable, I think we are going improve on the results in AdComs both in North America and in Europe. We processing re-engineering, restructuring and technology, we believe we have a very had a efficient operation and the management team in North America has come up with new ways to make that even more efficient, so I think not only it is sustainable we will improve the numbers going into 2006, Lanny will talk to you about the numbers specifically.

Lanny Baker

Sure there are a couple of things at play, remember there isn’t really any marketing dollars that consequence in there so the question on cost that comes down to people and state, we’ve done something over the course of last year on facility side but we also restructured the way the business is organized from personal standpoint. Moving from a geography a very desperate field officers to cut in more of a hub and spoke model as more production is done in big production centers rather an out in the field, we’ve been carrying some of the cost of that restructuring over the last 9 to12 months and I think now you’re starting to see those sort of one time cost at the rate side going down as well getting into benefit of the work that we have done.

Jeremy Davis

Okay Thanks a lot, that’s all.

Operator

Our next question comes from the line of Matthew Litfin from William Blair & Co. Please go ahead.

Matthew Litfin

Hi Good morning congratulations on the results, two questions one for Steve and one for Lanny. Steve last quarter you mentioned a product level enquiry that you had received from Google, where did that go, and what is your view of the report yesterday regarding the potential Google base offering. And then Lanny just in light of Andy’s comments just now lack of countries to acquire into. Could you just give an update on the companies use of cash uses in the light of the building cash balance. Thanks.

Steve Pogorzelski

From a Google standpoint, first newspaper helpline, in the US is still a $5 billion market. So more players use the internet for their recruiting needs, Monster and industry we created will win. We believe that we provide a better more focused experience for jobseekers and a stronger value propositions in terms of time cost and quality and the tools we provide for employers. It is important that you understand that 75% of our traffic comes directly to Monster.com. That really to my mind reflects our brand resonance and the quality jobs that we provide and the trusted environment we have and that will prevail. If you look at our traffic just below the numbers, 55% of our traffic is looking at jobs, meaning that 45% of the traffic is looking at content, they are researching companies and they are managing the MyMonster accounts for their resumes non of which aggregators offer. Couple of other points, we focus on HR that is the only thing we do, we are 90+ brand awareness with both employers and consumers. The market is not fragment in the United States, it’s very easy for a job seeker to go to several sites and find hundreds and thousands of jobs and whereas the strength of the sales forces and the relationships we’ve built over the past ten years is over a 100s or 1000s of companies are going to be very difficult to replicate.

Lanny Baker

Now you question on the balance sheet gets to very hard why we focus on free cash, these are dollars that gives Monster and increasingly strong balance sheet and then strategically flexibility and the luxury to contemplate financial questions that would range from doing like things we done Korea to other users of cash. As we think about balance sheet, we consider it not only in terms of absolutely dollars which is $300 million in net cash, we are starting to feel pretty substantial, we are also thinking in relative terms compared to some of our peers and potential competitors, our cash balances are not as big in absolutely terms, but also in relation to our annual revenues our cash flow we don’t’ get to have quite the big GAAP cash reserves but some of the other companies do. So that’s all not come in direction or another, rather it’s trying to provide some background on our thinking and when we have something new to report and update for some of the uses of cash, we will be quick to update you.

Matthew Litfin

Fair enough. Thank you.

Operator

We do have time for one more question, and it is from the line of Jim Juneski from Ryan Bank, please go ahead.

Jim Juneski

Yes. Good morning. When you look at the front end loading or the smoothing of the expenses, that you talked about Lanny, do you expect that to continue into 2006?

Lanny Baker

I think, in the past we have spent a lot of money early in the year because it’s typically when jobseekers are out, and employees are out really aggressively looking higher indeed. As we come into the finish of this year, we’ve really momentum and profitability, as Monster North America that is really exceed as I said our expectations a little bit. It’s given us an opportunity to reinvest into the business so the outcome of that is the picture looks a little bit steadier this year seasonally or start to finish than it has in the prior years. And I thought some thing we would very much like to do, in the future, thinking about it on a very continual basis, rather than a quarter to quarter or half –half kind of model.

Jim Juneski

And last year, in the third quarter, the differed revenues were up sequentially somewhere around 9% to 10%, this year they were roughly flat, is there any trends as either early or late in the quarter that would help justify the difference year over year?

Lanny Baker

In the differed revenue there are couple of things going on, the e-commerce doesn’t appear to be a little bit bigger portion of the sale of the company, move those sales flow immediately into revenue, that is a very small effect but it’s something that I think will be important over time. Secondly there is little bit of lumpiness from year to year, quarter to quarter perspective in terms when contracts get signed, but I don’t think there is another major difference in what you are seeing differed revenue pattern this year versus last year. We are heading into the big seasonal sales quarter in the fourth quarter with the differed revenue balance is just 26% year over year. We are focused on sales force productivity and new products and marketing to continue to drive differed revenue, and profits down the road. So we feel pretty good about those numbers.

Jim Juneski

Okay great, thank you.

Operator

With the final question, I will turn the call back to you.

Bob Johns, Vice President Investor Relation

This is Bob Johns, once again thank you for joining us this morning, we appreciate your participation and support. To listen to a replay of the conference call, please visit the investor relations section of Monster Worldwide.com or dial 800-633-8282. And the reservation number 212648923. Also please feel free to call me at anytime at 212-351-7032 or Lanny at 212-351-7005 for any further questions. Thank you.

Operator

Ladies and gentlemen. That does conclude the conference call for today, we thank you for your participation.

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