Monster Worldwide Inc. (MWW) reported loss of 2 cents per share (including stock-based compensation but excluding one-time items) in the third quarter of 2014, which compared unfavorably with earnings of 11 cents per share in the year-ago quarter primarily due to a year-over-year decline in revenues. However, the company’s loss per share figure remained narrower than the Zacks Consensus Estimate of a loss of 3 cents.
Revenues declined 2.8% year over year to $191.2 million in the third quarter but surpassed the Zacks Consensus Estimate of $190 million. On a year-over-year basis, results were impacted by declines in revenues at Monster Careers and Internet Advertising & Fees.
Revenues in the International Careers segment were $66.5 million, down 4% year over year. Revenues in the Careers North America segment were $108.6 million, down 1% on a year-over-year basis.
Careers Total segment revenues were $175 million, down from $180 million in the year-ago quarter while Internet Advertising & Fees segment revenues were $16.2 million in the reported quarter, down 10% on a year-over-year basis.
Margins
Operating expenses grew 3% from the year-ago quarter to $187.9 million. While salaries & related increased 8.2%, marketing and promotion expenses decreased 7.8%. Office & general expenses were up 1.2% year over year.
Monster reported non-GAAP operating income of $3.3 million, which was down 76.6% from the year-ago quarter. Operating margin contracted 550 basis points (bps) to 1.7% from 7.2% in the year-ago quarter due to lower revenue base.
Balance Sheet & Cash Flow
Monster exited the quarter with $55.7 million in cash from operating activities compared with cash outflow of $9 million in the year-ago period. Free cash flow was $25 million. Deferred revenues were $281.1 million, compared with $342.2 million in the year-ago quarter.
Monster Worldwide repurchased 100K shares of common stock for $0.6 million. The company has repurchased approximately 25% of outstanding shares since the inception of the current program in the third quarter of 2013. As of Sep 30, 2014, the company had $41 million remaining under $200 million share repurchase authorization.
Fourth-Quarter Guidance
The company expects fourth-quarter Non-GAAP EPS from continuing operations in the range of 4 to 8 cents (excluding approximately $7 million related to stock-based compensation and approximately $1 million related to non-cash debt discount amortization on the convertible debt).
Our Take
Monster’s core business is showing signs of improvement and exhibiting robust potential for cash flow generation. Additionally, the company’s corporate restructuring initiative is expected to boost margins, going forward. Mobile has been the primary area of focus for the company for some time and the increasing penetration of smartphones should be considered a major positive, going forward.
However, the company continues to face significant competition from professional and social networking websites such as Facebook (FB) as well as from traditional advertising companies such as Omnicom Group (OMC).
Monster currently has a Zacks Rank #2 (Buy). A better-ranked stock in this sector is E-Commerce China Dangdang Inc. (DANG), sporting a Zacks Rank #1 (Strong Buy).
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