Monster Worldwide Reports Second Quarter and Six Months 2007 Results
Monster Worldwide, Inc. (NASDAQ:MNST) today reported financial
results for the second quarter and six months ended June 30, 2007.
Second Quarter Results
Total revenue grew 20%, or 18% before the benefit of foreign
exchange rates, to $331 million in the second quarter of 2007 from
$275 million in the comparable quarter of 2006.
Monster Careers revenue increased 23% to $291 million, compared
with $237 million in last year's second quarter, led by International
revenue growth of 57% to $117 million. Included in International
revenue is a $6.0 million benefit from the effect of foreign exchange
rates. North American Careers revenue increased 7% to $174 million in
the second quarter of 2007, while the Internet Advertising & Fees
business grew revenue 5% to $40 million.
Monster Worldwide's deferred revenue balance at June 30, 2007 was
$452 million, representing a 30% increase from last year's second
quarter balance of $349 million.
Income from continuing operations was $29 million, or $0.22 per
diluted share, in the second quarter of 2007. Income from continuing
operations includes pre-tax amounts of $5.3 million for legal and
professional fees related to the continuing external investigations of
the Company's historical stock option grant practices and $15.8
million of previously disclosed severance costs for former executives.
At June 30, 2007, the Company's net cash position was $719 million
compared with $674 million at March 31, 2007. Cash generated from
operating activities was $53 million compared to $63 million in the
second quarter of 2006. Free cash flow was $37 million versus $47
million in the comparable quarter of the prior year. Capital
expenditures totaled $16 million in the second quarter of 2007.
Sal Iannuzzi, Chairman and Chief Executive Officer of Monster
Worldwide, said, "Our second quarter financial results delivered 20%
top-line growth and earnings in line with our expectations. We
continued to experience strong performance in our International
business, reflecting our efforts to expand market share and brand
awareness in key markets in Europe and Asia. However, we are not
satisfied with our overall performance. We believe that we are capable
of significantly more robust growth and are taking decisive action to
increase our investment levels to deliver on the growth opportunities
in all of our businesses. As an indication of our confidence in the
Company's long-term prospects, we also intend to make active use of
the existing share repurchase program authorized by our Board of
Directors."
Six Months Results
Monster Worldwide reported total revenue of $660 million for the
six months ended June 30, 2007 compared to $532 million in the
comparable period last year, a 24% increase, or 22% before the benefit
of foreign exchange rates. Monster Careers revenue grew 26% to $582
million compared with $462 million in the 2006 period. Internet
Advertising & Fees reported revenue of $79 million, an increase of 12%
over the prior year period. The Company reported income from
continuing operations of $69 million, or $0.51 per diluted share. Net
income for the first six months of 2007 was $68 million, or $0.51 per
diluted share.
Restructuring Plan
Following a comprehensive business review, the Company's executive
management team announced a series of strategic restructuring actions
to position Monster Worldwide for sustainable long-term growth in the
rapidly evolving global online recruitment and advertising industries.
The restructuring plan consists of the following key initiatives:
-- A significant commitment to invest in innovative,
revenue-generating products and services, as well as
technology upgrades, which will make Monster Worldwide's
offerings more compelling for employers, job seekers and
advertisers, while strengthening the Company's infrastructure
to support long-term growth. In the near term, investments
also will include additional advertising and promotional
efforts to reinforce the Monster brand and drive customer
activity. At the same time, the Company will make investments
in products, technology and people to provide customers with
the level of service they expect from the market leader, as
career solutions continue to shift from print to online.
-- A substantial reduction in the current cost structure to
improve productivity, generate greater efficiency, support
investment, and foster an environment that encourages
innovation. Specifically, the Company expects to reduce its
current workforce by approximately 800 associates, or 15% of
its full-time staff, beginning immediately and into 2008. The
Company anticipates the majority of the reductions will occur
by the end of this year. The staff reduction will primarily
impact non-sales related functions in North America, although
portions of the global sales force with low productivity rates
will be affected.
-- Further streamlining the organizational structure by
centralizing certain non-revenue generating functions, such as
human resources and finance, which had operated
semi-autonomously within each business unit. This follows
management's decision in early June to realign the business
operations by function across the entire global organization.
Monster Worldwide expects the cost-saving component of the plan to
reduce the current operating expense base by $150 million to $170
million on an annualized basis, through a combination of workforce
reductions and the adoption of more efficient methodologies throughout
the operations. The Company will invest approximately $80 million on
an annualized basis in new product development and innovation,
enhanced technology, global advertising campaigns and selective sales
force expansion. Included in the $80 million is estimated depreciation
expense on incremental capital expenditures in new technology which
the Company anticipates will be approximately $50 million.
As a result of the restructuring initiatives, the Company expects
to record a cumulative pre-tax charge within the range of $55 million
to $70 million, beginning in the third quarter of 2007 and into 2008.
Approximately $15 million of the charge will be non-cash, primarily
related to fixed asset write-offs and accelerated depreciation for
assets to be phased out.
"The restructuring plan recognizes that we can - and will - do
better in driving long-term performance for our shareholders," Mr.
Iannuzzi added. "Our top priority is to invest in key areas that will
improve the customer experience and foster solid revenue growth, while
at the same time lowering our cost base and streamlining operations.
We will not allow short-term considerations to prevent us from
investing in world-class, innovative products that will serve the
next-generation of job seeker and employer needs. We are confident
that these investments will lead to higher levels of revenue growth
and strong operating margin expansion over time."
Mr. Iannuzzi concluded, "While I regret that workforce reduction
is a necessary part of our plan, we believe this action is in the best
interest of our customers and shareholders. A clearer and more
simplified structure will empower our talented associates to innovate,
share best practices and leverage the significant strengths that exist
at Monster. We're committed to assisting those associates who will be
affected as a result of this decision. We remain extremely optimistic
about the huge opportunity that exists in the global online
recruitment and internet advertising markets, and are confident that
our strategy positions us for future growth."
Business Outlook
For the remainder of 2007, the Company's business outlook reflects
the anticipated savings and investments of the restructuring plan
noted above, as well as other initiatives to improve long-term revenue
growth and profitability. Specific assumptions are as follows:
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$'s in millions Full Year 2007
------------------------------------------------------- --------------
Total Revenue $1,340-$1,370
Non-GAAP Operating Expenses* $1,070-$1,090
Interest and Other, net $26-$28
Effective Income Tax Rate 35%
Losses in Equity Interest $(11)-$(9)
*Non-GAAP operating expenses exclude ongoing costs associated with the
stock option investigations, related litigation and potential fines
or settlements; previously disclosed severance costs of $15.8 million
for former executive officers; and anticipated restructuring charges.
See below for Notes Regarding the Use of Non-GAAP Financial Measures.
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The total revenue outlook for the balance of 2007 assumes that the
rate of revenue growth in the third quarter will continue at
approximately the same rate as in the second quarter, offset by
planned reductions in certain interstitial ads and the elimination of
"work-at-home" job postings, with a higher revenue growth rate in the
fourth quarter.
Prior to the restructuring, the expected run-rate for 2007
non-GAAP operating expenses would have been $1.097 billion, and
expenses were increasing at a faster rate than revenue. The
restructuring is expected to reduce the current operating expense base
by approximately $150 million to $170 million on an annualized basis,
and more closely align future expense increases with revenue growth,
while providing $80 million for reinvestment in the business. The plan
will also provide the financial flexibility to make further
investments in response to potential opportunities.
The Company stated that, by re-energizing growth and controlling
expenses, the Company expects to generate an operating margin of 25%
by the fourth quarter of 2008.
Supplemental Financial Information
The Company has made available certain supplemental financial
information, in a separate document that can be accessed directly at
http://www.monsterworldwide.com/Q207.pdf or through the Company's
Investor Relations website at http://ir.monsterworldwide.com.
Conference Call Information
Second quarter 2007 results will be discussed on Monster
Worldwide's quarterly conference call taking place on July 30, 2007 at
10:00 AM EDT. To join the conference call, please dial (888) 551-5973
at 9:50 AM EDT and reference conference ID# 10294066. For those
outside the United States, please dial (706) 643-3467 and reference
the same conference ID#. The call will begin promptly at 10:00 AM EDT.
Individuals can also access Monster Worldwide's quarterly conference
call online through the Investor Relations section of the Company's
website at www.monsterworldwide.com. For a replay of the call, please
dial (800) 642-1687 or outside the United States dial (706) 645-9291
and reference ID #10294066. This number is valid until midnight
on August 1, 2007.
About Monster Worldwide
Monster Worldwide, Inc. (NASDAQ: MNST), parent company of
Monster(R), the premier global online employment solution for more
than a decade, strives to bring people together to advance their
lives. With a local presence in key markets in North America, Europe,
and Asia, Monster works for everyone by connecting employers with
quality job seekers at all levels and by providing personalized career
advice to consumers globally. Through online media sites and
services, Monster delivers vast, highly targeted
audiences to advertisers. Monster Worldwide is a member of the S&P 500
Index and the NASDAQ 100. To learn more about Monster's
industry-leading products and services, visit www.monster.com. More
information about Monster Worldwide is available at
www.monsterworldwide.com.
Notes Regarding the Use of Non-GAAP Financial Measures
Monster Worldwide, Inc. (the "Company") has provided certain
non-GAAP financial information as additional information for its
operating results. These measures are not in accordance with, or an
alternative for, generally accepted accounting principles ("GAAP") and
may be different from non-GAAP measures reported by other companies.
The Company believes that its presentation of non-GAAP measures, such
as operating income before depreciation and amortization, free cash
flow and net cash, provides useful information to management and
investors regarding certain financial and business trends relating to
its financial condition and results of operations. In addition, the
Company's management uses these measures for reviewing the financial
results of the Company and for budgeting and planning purposes.
Operating income before depreciation and amortization ("OIBDA") is
defined as income from operations before depreciation, amortization of
intangible assets and amortization of stock based compensation. The
Company considers operating income before depreciation and
amortization to be an important indicator of its operational strength.
This measure eliminates the effects of depreciation, amortization of
intangible assets and amortization of stock based compensation from
period to period, which the Company believes is useful to management
and investors in evaluating its operating performance. Operating
income before depreciation and amortization is a non-GAAP measure and
may not be comparable to similarly titled measures reported by other
companies.
Free cash flow is defined as cash flow from operating activities
less capital expenditures. Free cash flow is considered a liquidity
measure and provides useful information about the Company's ability to
generate cash after investments in property and equipment. Free cash
flow reflected herein is a non-GAAP measure and may not be comparable
to similarly titled measures reported by other companies. Free cash
flow does not reflect the total change in the Company's cash position
for the period and should not be considered a substitute for such a
measure.
Net cash is defined as cash and cash equivalents plus marketable
securities, less total debt. The Company considers net cash to be an
important measure of liquidity and an indicator of its ability to meet
its ongoing obligations. The Company also uses net cash, among other
measures, in evaluating its choices for capital deployment. Net cash
presented herein is a non-GAAP measure and may not be comparable to
similarly titled measures used by other companies.
The Operating Expenses included in the Company's outlook ranges
are non-GAAP financial measures within the meaning of Regulation G as
promulgated by the Securities and Exchange Commission because, among
other things, they do not include legal costs and expenses that the
Company will incur as a result of its historical stock option granting
practices. Because the Company cannot reasonably estimate or predict
these costs and expenses, the Company cannot calculate the most
directly comparable GAAP measure of Operating Expenses that would
include such legal costs and expenses. Therefore, the Company cannot
reconcile the non-GAAP measure to the most directly comparable GAAP
measure. While the amount of the legal costs and expenses associated
with the Company's historical stock option granting practices is
likely to be material, the Company believes that such costs and
expenses are of limited significance to an evaluation of the Company's
business fundamentals, since such costs and expenses bear little
relation to the Company's core business or operating prospects.
Additionally, non-GAAP operating expenses exclude severance costs for
former executive officers and anticipated restructuring charges. While
the aggregate restructuring charge can be estimated, the Company
cannot determine the precise amount of the charge to be taken each
period. As a result, the Company is unable to reconcile the projected
non-GAAP operating expenses to a projection calculated in accordance
with GAAP.
Special Note: Except for historical information contained herein,
the statements made in this release, including the business outlook,
constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements involve certain
risks and uncertainties, including statements regarding the Company's
strategic direction, prospects and future results. Certain factors,
including factors outside of our control, may cause actual results to
differ materially from those contained in the forward-looking
statements, including economic and other conditions in the markets in
which we operate, risks associated with acquisitions or dispositions,
competition, ongoing costs associated with the stock option
investigations and lawsuits, costs associated with the restructuring,
and the other risks discussed in our Form 10-K and our other filings
made with the Securities and Exchange Commission, which discussions
are incorporated in this release by reference.
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MONSTER WORLDWIDE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Six Months Ended
Ended June 30, June 30,
----------------- -----------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenue $331,149 $275,169 $660,177 $532,205
---------------------------------- -------- -------- -------- --------
Salaries and related 146,153 98,862 268,500 190,415
Office and general 64,576 43,827 134,993 90,572
Marketing and promotion 78,045 73,212 156,114 139,011
---------------------------------- -------- -------- -------- --------
Total operating expenses 288,774 215,901 559,607 419,998
---------------------------------- -------- -------- -------- --------
Operating income 42,375 59,268 100,570 112,207
Interest and other, net 6,912 3,940 12,216 7,070
---------------------------------- -------- -------- -------- --------
Income from continuing operations
before income taxes and equity
interests 49,287 63,208 112,786 119,277
Income taxes 17,406 22,077 39,758 42,488
Losses in equity interests, net (2,966) (2,284) (4,386) (3,525)
---------------------------------- -------- -------- -------- --------
Income from continuing operations 28,915 38,847 68,642 73,264
Income (loss) from discontinued
operations, net of tax (299) 770 (544) 8,615
---------------------------------- -------- -------- -------- --------
Net income $ 28,616 $ 39,617 $ 68,098 $ 81,879
================================== ======== ======== ======== ========
Basic earnings per share:
Earnings per share from continuing
operations $ 0.22 $ 0.30 $ 0.53 $ 0.57
Income per share from discontinued
operations, net of tax - 0.01 - 0.07
---------------------------------- -------- -------- -------- --------
Basic earnings per share* $ 0.22 $ 0.31 $ 0.52 $ 0.64
================================== ======== ======== ======== ========
Diluted earnings per share:
Earnings per share from continuing
operations $ 0.22 $ 0.29 $ 0.51 $ 0.56
Income per share from discontinued
operations, net of tax - 0.01 - 0.07
---------------------------------- -------- -------- -------- --------
Diluted earnings per share* $ 0.21 $ 0.30 $ 0.51 $ 0.62
================================== ======== ======== ======== ========
* Earnings per share may not add
in certain periods due to
rounding.
Weighted average shares
outstanding:
Basic 130,542 128,551 130,268 127,662
================================== ======== ======== ======== ========
Diluted 133,121 132,009 133,324 131,390
================================== ======== ======== ======== ========
Operating income before
depreciation and amortization:
Operating income $ 42,375 $ 59,268 $100,570 $112,207
Depreciation and amortization of
intangibles 11,543 11,155 21,524 20,927
Amortization of stock based
compensation 17,116 3,423 21,478 5,452
---------------------------------- -------- -------- -------- --------
Operating income before
depreciation and amortization $ 71,034 $ 73,846 $143,572 $138,586
================================== ======== ======== ======== ========
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MONSTER WORLDWIDE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Six Months Ended June
June 30, 30,
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Cash flows provided by
operating activities:
Net income $ 28,616 $ 39,617 $ 68,098 $ 81,879
-------------------------- ---------- ---------- ---------- ----------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
(Income) loss from
discontinued
operations, net of tax 299 (770) 544 (8,615)
Depreciation and
amortization of
intangibles 11,543 11,155 21,524 20,927
Provision for doubtful
accounts 2,630 1,840 5,113 4,664
Non-cash compensation 17,116 3,423 21,478 5,452
Common stock issued for
matching contribution
to 401(k) plan - 858 - 1,854
Deferred income taxes (7,605) 2,593 (5,505) 9,329
Gain on disposal of
assets (572) - (572) -
Loss in equity
interests and other 2,966 2,284 4,386 3,519
Changes in assets and
liabilities, net of
business combinations:
Accounts receivable (4,804) (21,388) 20,366 (24,450)
Prepaid and other (4,202) (8,248) (4,204) (9,740)
Deferred revenue 2,360 5,544 8,051 21,444
Accounts payable,
accrued liabilities
and other 7,163 24,478 (1,787) 32,855
Net cash provided by
(used for) operating
activities of
discontinued
operations (2,349) 1,342 (5,332) 5,668
---------- ---------- ---------- ----------
Total adjustments 24,545 23,111 64,062 62,907
-------------------------- ---------- ---------- ---------- ----------
Net cash provided by
operating activities 53,161 62,728 132,160 144,786
-------------------------- ---------- ---------- ---------- ----------
Cash flows used for
investing activities:
Capital expenditures (15,602) (16,127) (37,214) (25,543)
Purchase of marketable
securities (317,555) (608,773) (682,586) (943,763)
Sales and maturities of
marketable securities 277,903 406,537 589,565 644,538
Payments for
acquisitions and
intangible assets, net
of cash acquired (142) (16,832) (1,806) (18,282)
Investment in
unconsolidated
affiliate - - - (19,936)
Net proceeds from sale
of business - 32,950 32,950
Cash funded to equity
investee (1,600) (4,800) (4,100) (4,800)
Net cash used for
investing activities
of discontinued
operations - - - (2,469)
-------------------------- ---------- ---------- ---------- ----------
Net cash used for
investing activities (56,996) (207,045) (136,141) (337,305)
-------------------------- ---------- ---------- ---------- ----------
Cash flows provided by
financing activities:
Payments on capital
lease obligations - (87) - (363)
Payments on acquisition
debt (5,552) (7,480) (21,862) (29,685)
Proceeds from exercise
of employee stock
options 10,006 31,571 53,401 91,165
Excess tax benefits
from stock option
exercises 5,857 6,049 12,343 17,324
Repurchase of common
stock (6,716) (5,879) (10,042) (14,416)
Structured stock
repurchase, net - - - (22,758)
-------------------------- ---------- ---------- ---------- ----------
Net cash provided by
financing activities 3,595 24,174 33,840 41,267
-------------------------- ---------- ---------- ---------- ----------
Effects of exchange rates
on cash 1,037 1,167 2,000 1,714
Net increase (decrease) in
cash and cash equivalents 797 (118,976) 31,859 (149,538)
Cash and cash equivalents,
beginning of period 89,742 166,035 58,680 196,597
-------------------------- ---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 90,539 $ 47,059 $ 90,539 $ 47,059
========================== ========== ========== ========== ==========
Free cash flow:
Net cash provided by
operating activities $ 53,161 $ 62,728 $ 132,160 $ 144,786
Less: Capital expenditures (15,602) (16,127) (37,214) (25,543)
-------------------------- ---------- ---------- ---------- ----------
Free cash flow $ 37,559 $ 46,601 $ 94,946 $ 119,243
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MONSTER WORLDWIDE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets: June 30, 2007 December 31, 2006
-------------- -----------------
Cash and cash equivalents $ 90,539 $ 58,680
Available-for-sale securities 630,914 537,893
Accounts receivable, net 419,033 444,747
Property and equipment, net 122,077 102,402
Goodwill and intangibles, net 644,631 640,736
Other assets 203,375 185,345
------------------------------------- -------------- -----------------
Total assets $ 2,110,569 $ 1,969,803
===================================== ============== =================
Liabilities and Stockholders' equity:
Accounts payable, accrued expenses
and other $ 278,553 $ 358,850
Deferred revenue 452,196 444,145
Long-term income taxes payable 89,910 -
Other liabilities 30,169 33,459
Debt 1,972 23,664
------------------------------------- -------------- -----------------
Total liabilities 852,800 860,118
------------------------------------- -------------- -----------------
Stockholders' equity 1,257,769 1,109,685
------------------------------------- -------------- -----------------
Total liabilities and stockholders'
equity $ 2,110,569 $ 1,969,803
===================================== ============== =================
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MONSTER WORLDWIDE, INC.
UNAUDITED OPERATING SEGMENT INFORMATION
(in thousands)
MONSTER
---------------------------------------
Three
Months Careers Careers- Internet
Ended June - North Inter- Advertising Corporate
30, 2007 America national & Fees Subtotal Expenses Total
----------- --------------------------------------- --------- --------
Revenue $174,481 $116,845 $ 39,823 $331,149 $331,149
Operating
income 54,579 12,055 5,211 71,845 $(29,470) 42,375
OIBDA 60,845 17,362 7,750 85,957 (14,923) 71,034
Operating
margin 31.3% 10.3% 13.1% 21.7% 12.8%
OIBDA
margin 34.9% 14.9% 19.5% 26.0% 21.5%
MONSTER
---------------------------------------
Three
Months Careers Careers- Internet
Ended June - North Inter- Advertising Corporate
30, 2006 America national & Fees Subtotal Expenses Total
----------- --------------------------------------- --------- --------
Revenue $162,816 $ 74,374 $ 37,979 $275,169 $275,169
Operating
income 55,597 2,003 12,563 70,163 $(10,895) 59,268
OIBDA 61,337 7,064 14,235 82,636 (8,790) 73,846
Operating
margin 34.1% 2.7% 33.1% 25.5% 21.5%
OIBDA
margin 37.7% 9.5% 37.5% 30.0% 26.8%
MONSTER
---------------------------------------
Six Months Careers Careers- Internet
Ended June - North Inter- Advertising Corporate
30, 2007 America national & Fees Subtotal Expenses Total
----------- --------------------------------------- --------- --------
Revenue $358,498 $223,051 $ 78,628 $660,177 $660,177
Operating
income 120,457 20,016 9,515 149,988 $(49,418) 100,570
OIBDA 131,995 29,956 14,189 176,140 (32,568) 143,572
Operating
margin 33.6% 9.0% 12.1% 22.7% 15.2%
OIBDA
margin 36.8% 13.4% 18.0% 26.7% 21.7%
MONSTER
---------------------------------------
Six Months Careers Careers- Internet
Ended June - North Inter- Advertising Corporate
30, 2006 America national & Fees Subtotal Expenses Total
----------- --------------------------------------- --------- --------
Revenue $322,814 $138,965 $ 70,426 $532,205 $532,205
Operating
income 110,156 2,768 22,049 134,973 $(22,766) 112,207
OIBDA 119,989 11,788 25,843 157,620 (19,034) 138,586
Operating
margin 34.1% 2.0% 31.3% 25.4% 21.1%
OIBDA
margin 37.2% 8.5% 36.7% 29.6% 26.0%
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