What To Expect From Monster’s Q3 Results

Monster Worldwide (NASDAQ:MWW) released some preliminary Q3 results earlier this month, hinting at an overall revenue decline of around 14% year over year  driven by continued weakness in North America. The company expects North America sales to have declined about 16%year over year to around $100 million, driving down global Q3 2016 revenue to around $143-145 million compared to $167.1 million in the prior year quarter. This implies that international revenues are expected to have declined around 5% to $45 million last quarter. It is important to note that Monster’s top line declines have consistently increased in the first three quarters this year, from down  9% in Q1 to down 14% in Q3 2016. ^[1]

Monster’s upcoming complete third quarter results conference on October 21 should throw more color on its proposed acquisition by Randstad and the company’s financials including costs, geographical distribution of income and earnings per share.

Acquisition By Randstad On Track

As part of its second quarter earnings release in August, Monster Worldwide announced that it had agreed to be acquired by Randstad Holding for $429 million at a purchase price of $3.40 per share. This was around 23% ahead of the company’s trading price on August 8th, the last trading day prior to the announcement, and represented an almost 30% premium over the company’s 90-day average stock price.

However, Monster’s largest shareholder MediaNews Group Inc., with an ownership interest of 11.6% of the company’s outstanding shares, wasn’t pleased with the acquisition price considering the company’s stock price touched a high of $7.65 in October 2015 and the company bought back shares at an average price of about $6.00 in December 2015. In fact, MediaNews Group Inc. released an open letter last month to dissuade shareholders from accepting the $3.40 acquisition price, citing an arbitrary and low valuation.

Despite this resistance, the acquisition seems to be on track considering Randstad recently filed a statement with the SEC expressing confidence in its proposed offer ^[2] and Monster also stated earlier this month that it expects the acquisition to close this quarter.

Q2 Earnings Recap

For the second quarter ended June 30th, Monster’s revenue declined 10% over the previous year quarter to $150.9 million and missed market expectations of $157 million. This was primarily due to the decline in revenues from North America, which declined 14% on a year on year basis to $103.7 million.

The company reported an operating loss of $150.6 million, compared to net income of $3 million in the prior year quarter. The significant drop in the company’s income was primarily due to goodwill impairment charges of $142 million. This resulted in the company reporting a net loss of $124 million or $1.40 per share for the quarter, which was below than the market expectations of 4 cents a share.

1. Monster Worldwide Announces Preliminary Revenue for the Third Quarter 2016, Monster, October 6 2016 [↩]
2. Randstad reinforces support for Monster deal, Staffing Industry Analysts, October 4 2016 [↩]