Monster In Line on Lower Revenues

Monster Worldwide, Inc. (MWW - Analyst Report) yesterday reported revenues of $215 million in the third quarter of 2009, down 35% year over year and down 3.7% sequentially.

The company operates in three business segments: Careers North America, Careers International and Advertising & Communications. The revenue continues to be impacted by lower global demand for recruiting advertising services. Approximately 42% of revenues were generated from international operations and total revenue was negatively impacted by $7.4 million from unfavorable foreign exchange rates.

Careers North America generated revenue of $95 million, down 39% year over year. Careers International revenue came in at $85 million, down 40% year over year. Internet Advertising & Fees generated revenue of $35 million, essentially flat over the $35 million reported in last year’s third quarter.

Management stated that revenue and new business activity might have hit a bottom, but revenue continues to be challenged by the global economy and job market and by a reduction in deferred revenue coming into the quarter.

Operating expenses declined 19% from a year ago due to cost-cutting activities undertaken by management. However, this did not help margins due to a much lower revenue base. Operating margin came in at 1.8% -- significantly down from 21.1% in the year-ago quarter. Net income came in at $1.7 million compared to $48.0 million in the year-ago quarter. Earnings per share (EPS) came in at one cent, in line with the Zacks Consensus Estimate.

During the quarter, the company generated $12 million of cash from operations and used $12 million in capital expenditures. As of September 30, 2009, the company had approximately $207.9 million of cash and equivalents and total debt of $50 million. Deferred revenue was $266 million compared to $290 million in the previous quarter.

This worldwide economic slowdown has caused companies to reduce headcount, freeze hiring and delay recruitment related decisions. This has adversely affected the company’s business. The primary source of revenue for the company is recruitment advertising. Management stated that the global recruitment market remains challenging but the company remains excited about the upcoming launch of next-generation search-and-match products.

Monster is well positioned to capitalize on the eventual improvement in economic conditions across the world. With signs of a recovering economy, we expect companies to increase their recruitment via online vehicles such as Monster.com. However, the road to recovery will be a long one though.

Headquartered in New York, Monster Worldwide, Inc. is an online recruitment firm of the parent company Monster.com, the leading career website in the world. The company is also the largest advertising agency network for worldwide recruitment, and provides direct marketing services.