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MONSTER WORLDWIDE, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge)
Monster Worldwide, Inc. (together with its consolidated subsidiaries, the
"Company," "Monster," "Monster Worldwide," "we," "our" or "us") makes
forward-looking statements in this report and in other reports and proxy
statements that we file with the United States Securities and Exchange
Commission ("SEC"). Except for historical information contained herein, the
statements made in this report constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements involve certain
risks and uncertainties, including statements regarding our 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. These factors include, among other things, the
global economic and financial market environment; risks associated with cuts in
government spending; risks relating to our foreign operations; risks relating to
the European debt crisis and market perceptions concerning the instability of
the euro; our ability to maintain and enhance the value of our brands,
particularly Monster; competition; risks related to our exploration of strategic
alternatives; fluctuations in our quarterly operating results; our ability to
adapt to rapid developments in technology; our ability to continue to develop
and enhance our information technology systems; concerns related to our privacy
policies and our compliance with applicable data protection laws and
regulations; intrusions on our systems; interruptions, delays or failures in the
provision of our services; our vulnerability to intellectual property
infringement claims brought against us by others; our ability to protect our
proprietary rights or maintain our rights to use key technologies of third
parties; the risk that acquisitions or partnerships may not achieve the expected
benefits to us; our ability to attract and retain talented employees, including
senior management; potential write-downs if our goodwill or amortizable
intangible assets become impaired; adverse determinations by domestic and/or
international taxation authorities related to our estimated tax liabilities;
effects of anti-takeover provisions in our organizational documents that could
inhibit the acquisition of Monster Worldwide by others; volatility in our stock
price; risks associated with government regulation; the outcome of litigation we
may become involved in from time to time; and other risks and uncertainties set
forth from time to time in our reports to the SEC, including under Part II,
"Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q.
Overview
Monster is the premier global online employment solution provider, inspiring
people to improve their lives, with a presence in approximately 55 countries
around the world. We have built on Monster's brand and created worldwide
awareness by offering online recruiting solutions that we believe are redefining
the way employers and job seekers connect. For employers, our goal is to provide
the most effective solutions and easiest to use technology to simplify the
hiring process and cost effectively deliver access to our community of job
seekers. For job seekers, our purpose is to help improve their careers by
providing work-related content, services and advice. Our services and solutions
include searchable job advertisements, resume database access, recruitment media
solutions through our advertising network and partnerships, and other
career-related content. Job seekers can search our job advertisements and post
their resumes for free on each of our career websites and mobile applications.
Employers pay to advertise available jobs and recruitment related services,
search our resume database, and access other career-related services.
Our investments in our technology platform have allowed us to continue
delivering innovative products and services on a global basis. Over the last few
years, we consolidated several technology systems and created a platform that is
more secure, scalable and redundant. Our strategy has been to grow our business
both organically and through strategic acquisitions and alliances in which the
growth prospects fit our long-term strategic growth plan.
Following the June 2011 launch of BeKnown ®, Monster's professional networking
application available on the Facebook platform, the Company announced the
integration into its core site experience in North America, South America,
Australia and throughout Europe. This application is available in 50 countries
and in 19 languages. BeKnown not only extends Monster's global reach and
leverages the world's most popular global social network, the integration into
the core site now enables job seekers on Monster to instantly see how they are
already connected to job opportunities through their Facebook and BeKnown
contacts. The site integration also expands employers' social recruiting reach
by getting their jobs in front of a growing professional network among
Facebook's members.
On August 24, 2010, the Company completed the acquisition of the Yahoo! HotJobs
Assets from Yahoo!, Inc. ("Yahoo!") which we believe has expanded our market
share in the North America online recruitment market. Concurrent with the
closing of the acquisition, Monster and Yahoo! entered into a three year
commercial traffic agreement whereby Monster became Yahoo!'s exclusive provider
of career and job content on the Yahoo! homepage in the United States and
Canada. This traffic agreement has increased our reach in North America.
Separately, we formed a multi-country relationship with Yahoo! across South
America to bring career opportunities and resources to Yahoo! users, employers
and job-seekers. We are now Yahoo!'s exclusive provider of career and job
content in key markets across South America.
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In 2008, we acquired Trovix Inc., a business that provides career-related
products and services that utilize semantic search technology, focusing on key
attributes such as skills, work history and education. Our patented 6Sense®
semantic search and matching technology, which is based upon Trovix technology,
is the backbone of a growing family of products for both job seekers and
employers. Our innovative and proprietary semantic resume search product,
Monster Power Resume Search® ("PRS") has been available to customers in North
America since late 2009, and more recently to customers in the United Kingdom
and France. We launched PRS in Germany in late 2011 and expect to rollout PRS in
the Netherlands in the future. Our 6Sense technology transforms traditional
keyword-based processes by assisting our customers in matching candidates to
their required job specifications. We also introduced 6Sense powered job search,
which has changed how seekers explore, find and apply for jobs. We introduced
our cloud based search product SeeMore® in the third quarter of 2011, which
allows our customers to utilize our 6Sense technology on their own talent
databases and the Company believes that SeeMore represents an incremental growth
opportunity.
The Career Ad Network ("CAN") is now the industry's largest recruitment-focused
online advertising network which reaches, on average, around 116 million
internet users each month on a global basis. We offer this innovative media
product to customers in North America and most major markets in Europe as well
as in Australia and Brazil and expect to expand this offering to other
international countries in which we operate. CAN distributes our customers' job
advertisements across a broad array of targeted websites and is an effective way
of expanding our customers' pool of active and passive seekers. Additionally, we
offer our customers application tracking services, diversity resume database
services and other ancillary services either directly or through alliances to
meet the changing needs of our customers.
We believe the long-term growth opportunities overseas are significant and
believe that we are positioned to benefit from our expanded reach and broadened
product portfolio, increased brand recognition around the world, and the
continued secular shift towards online recruiting. We operate a government
solutions business, Monster Government Solutions ("MGS"), which sells online
solutions to federal, state and local governments and educational institutions
within the United States. We have expanded our MGS business to Europe and
recently signed the largest international transaction in the Company's history
with the United Kingdom Government for over $20.0 million. MGS provides
recruitment solutions that engage seekers and employers online, enables MGS
customers to attract qualified candidates, expedites time to hire and creates
online communities using innovative technologies and services. These services
primarily include customized career sites hosted by MGS utilizing a "Software as
a Service" ("SaaS") model.
Our Internet Advertising & Fees business operates a network of websites that
connect companies to highly targeted audiences at critical stages in their
lives. Our goal is to offer compelling online services for the users of such
websites through personalization, community features and enhanced content. We
monetize this web traffic through display advertising and lead generation. We
believe that these properties appeal to advertisers and other third parties as
they deliver certain discrete demographics entirely online. Beginning in the
third quarter of 2011, the Company no longer engages in arbitrage lead
generation activities due to the diminishing profit opportunity and the
promulgation of new regulations applicable to the Company's customers in the
for-profit education business.
On March 1, 2012, the Company announced that it had resolved to explore
strategic alternatives to maximize value for the Company's stockholders. There
can be no assurance that this process will result in the pursuit or consummation
of any strategic transaction. During this process, we do not intend to provide
interim updates or announce or otherwise disclose developments (whether or not
material) related to the strategic review process. On November 8, 2012, the
Company announced actions designed to concentrate resources on core businesses
within North America and key European and Asian markets with increased spending
in marketing and sales. In addition to our decision in the third quarter of 2012
to sell the Careers-China business, the Company will evaluate options in
developing markets as well as implement additional cost reduction initiatives.
We expect the estimated one-time costs of these actions to be approximately
$50.0 million-$60.0 million, the majority of which will be cash and will be
recorded as restructuring expenses primarily in the fourth quarter of 2012.
January 2012 Restructuring
On January 24, 2012, the Company committed to a plan to take a series of
strategic restructuring actions. The Company's decision to adopt the strategic
restructuring actions resulted from the Company's desire to provide the Company
with more flexibility to invest in marketing and sales activities in order to
improve its long-term growth prospects and profitability. Through September 30,
2012, the Company has notified approximately 325 associates and approximately
60 associates have voluntarily left the Company, reducing the Company's
workforce by approximately 385 associates. The restructuring actions also
included the consolidation of certain office facilities and the impairment of
certain fixed assets. To date, the Company has incurred $26.2 million of
restructuring costs.
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Business Held for Sale
During the third quarter of 2012, as part of the Company's review of strategic
alternatives, the Company made the decision to sell its Careers-China business
unit which was acquired in October 2008. The sale of the Careers-China business
is expected to be completed during the next 12 months. Operating results for the
Careers-China business, which had previously been included in the Company's
Consolidated Statement of Operations for the periods subsequent to the October
2008 acquisition, have now been reclassified as business held for sale for all
periods presented. Additionally, the Company recorded a goodwill impairment
charge of $216.2 million which is reported as a component of (Loss) income from
discontinued operations, net. The goodwill impairment resulted from the recent
financial performance of Careers-China compared to previously forecasted
results, updated projections of future profitability as well as indicative
offers from potential buyers of the Careers-China business. Please see Note 10,
Goodwill and Note 11, Discontinued Operations in Notes to the Consolidated
Financial Statements in Part I of this Form 10-Q.
Constant Currency Presentation
Revenue and bookings (which represent the value of contractual orders received
during the relevant period) from our international operations has historically
represented, and we expect will continue to represent, a significant portion of
our business. As a result, our revenue and bookings growth has been impacted,
and we expect will continue to be impacted, by fluctuations in foreign currency
exchange rates. In order to provide a framework for assessing how our
consolidated and Careers-International operating results performed excluding the
impact of foreign currency fluctuations, we additionally present the
year-over-year percentage change in revenue and bookings performance on a
constant currency basis, which assumes no change in the exchange rate from the
prior-year period. This constant currency is provided in addition to, and not as
a substitute for, the year-over-year percentage change in revenue and bookings
on an as-reported basis.
Results of Operations
Consolidated operating results as a percentage of revenue for the three and nine
months ended September 30, 2012 and 2011 are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
(dollars in thousands) 2012 2011 2012 2011
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Salaries and related 45.5 % 48.9 % 46.5 % 49.9 %
Office and general 27.6 % 21.3 % 25.4 % 22.9 %
Marketing and promotion 20.2 % 17.3 % 21.8 % 19.8 %
Restructuring and other special charges 0.1 % 0.8 % 3.8 % 0.3 %
Recovery of restitution award from former
executive 0.0 % 0.0 % -0.8 % 0.0 %
Total operating expenses 93.4 % 88.3 % 96.7 % 92.9 %
Operating income 6.6 % 11.7 % 3.3 % 7.1 %
Interest and other, net -0.7 % -0.5 % -0.6 % -0.3 %
Income before income taxes and loss in equity
interests 5.9 % 11.2 % 2.7 % 6.8 %
(Benefit from) provision for income taxes -11.8 % 3.5 % -5.8 % 2.2 %
Loss in equity interests, net -0.1 % -0.1 % -0.1 % -0.1 %
Income from continuing operations 17.6 % 7.5 % 8.4 % 4.5 %
(Loss) income from discontinued operations,
net of tax -105.2 % 5.3 % -35.6 % 1.1 %
Net (loss) income -87.6 % 12.8 % -27.2 % 5.6 %
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