Professional Diversity Network Inc (IPDN) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Professional Diversity Network's Third Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded.

Please note that on this call certain information presented contains forward-looking statements. These statements are based on our management's current expectations, and are subject to risks, uncertainties, and assumptions. Potential risks and uncertainties that could cause the Company's business and financial results to differ materially from those forward-looking statements are described in the Company's periodic reports filed with the SEC from time to time.

All information discussed on this call is as of today, November 14, 2013, and Professional Diversity Network does not intend and undertakes no duty to update future events or circumstances.

I would now like to turn the program over to your host for today's conference, James Kirsch, CEO. Please proceed.

Thank you for joining our call today to discuss our third quarter 2013 results. On the call with me today will be my partner, Mr. Rudy Martinez, the Founder of our flagship site ihispano.com, and our Chief Financial Officer, Mr. David Mecklenburger.

I am pleased to express to you today three important highlights from the quarter. We are beginning to realize early returns on our ongoing investment into our direct sales efforts has resulted from our direct sales force bookings, which increased by 152% in the third quarter over the second quarter of 2013.

Excluding the $100,000 non-recurring expense accrual associated with the Careerimp acquisition, we narrowed our operating loss this quarter from last quarter by about 17%, as we move towards a streamlined operating model.

We enhanced our offering of diversity recruitment services as demonstrated by the following key accomplishments. We acquired and integrated Personnel Strategies Inc. We entered into a business alliance with the National Black MBA Association, and we increased the velocity of registering new members from 90,000 in the second quarter to over 120,000 new members in the third quarter. I will further expand upon these highlights, and give an update on our business during the call today.

But first, David Mecklenburger, our CFO, will provide the financial results for the quarter, and finally, we will open up the call for your questions. David.

Thank you, Jim. Our total revenue for the third quarter was $979,000, a 42.7% decrease from the $1,708,000 in the same period one year prior. This was attributable primarily to our January 1 change in business partner relationships from Monster Worldwide to LinkedIn as previously disclosed. These figures include revenue from recruitment solutions for the third quarter of $602,000, compared to $1 million for the third quarter of 2012.

Our total operating expenditures for the quarter ended September 30 were $1,439,000, compared with $1,091,000 in the period prior, a 32% increase substantially attributable to the additional costs of being a public company, along with our investment in a direct sales and marketing force.

I would like to note that in the total operating expenditures, just mentioned, there is a $100,000 of a contingent liability related to the purchase of the assets of Careerimp that we did in the second quarter of this year. This is included as a component of accrued expenses, and is also included in general administrative expenses. This accrual will most likely recur in the fourth quarter, but will not recur beyond that.

Our net loss for the third fiscal quarter was $272,000, a 147% decrease from the $578,000 income that was reported in the second quarter one year prior -- I'm sorry I the third quarter one year prior.

Loss from operations was $459,000, compared with income of $617,000 in the year prior period. This represents a 174% decrease, both of which are attributable to the previously mentioned change in the business model that went into effect that first of the year.

We had a comprehensive net loss per share of $0.04 during the fiscal third quarter 2013, compared to a comprehensive net income per share of $0.17 during the same quarter one year prior. The change in comprehensive loss per share was attributable to the change in the business model that went into effect the first of the year.

Our cost of services for the third quarter was $235,000 compared with $281,000 in the same period one year prior.

Our sales and marketing expense for the 3 months ended September 30 was $607,000, an increase of $134,000, or 28%, compared to the $473,000 for the 3 months ended September of 2012. This was attributable to the growth of our direct sales force as a result of our business plan for 2013.

General and administrative expenses were $530,000 for the third quarter, compared with $296,000 for the third quarter of 2012, and this was attributable primarily to the cost of being a public company, and the previously mentioned one-time expense of $100,000 related to the second quarter acquisition of the Careerimp software.

I will now highlight the balance sheet. I'd like to note that I'm going to be comparing the third quarter balances to the June 30 second quarter balances, rather than the December 31, 2012 balances, due to the material change in the balance sheet that resulted from our first quarter initial public offering.

Our cash position at the end of the third quarter was a strong $19,808,000, just $332,000, or 1.7% reduction from the second quarter. This was attributable to the funding of operating expenses, and the purchase of Personnel Strategies Inc., which Jim will discuss in more detail later.

Our accounts receivable were $594,000, an increase of $147,000, or 32.9%, as compared with $447,000 at the end of the second quarter. This was due to increased bookings by our direct sales force in the third quarter. We also had a decrease in prepaid expenses, which consisted primarily of a decrease in our prepaid directors and officers liability insurance.

Our total assets at the end of the period were $22,205,000, a reduction of $269,000, or 1.2% from the $22,474,000 that the company reported at June 30, 2013. This was attributable to a decrease in cash used to fund the operations of the company.

Our accounts payable at September 30, 2013 were $207,000, 18.8%, or $48,000 less than the balance at June 30, 2013, which was $255,000. This decrease was attributable to differences in timing of the purchases made during the respective quarters. It's worth noting that the company has no debt as of September 30, 2013.

Our total stockholders equity at September 30 was $20,060,000, a reduction of $268,000, or 1.3% from the $21,328,000 reported at June 30, and again, this decrease was attributable to our operating loss for the quarter.

Now I'd like to turn it back over to Jim to give us his update on the business.

Thank you, David, greatly appreciate it. During the first quarter, the company undertook an initial public offering, and at that time we articulated some of our goals for the proceeds, and how we would use the proceeds of the initial public offering.

Some of those goals could be listed as to build our internal sales force, to make strategic acquisitions and build strategic alliances, and to mature our relationship with LinkedIn. I'm please to report that in the third quarter of 2013, we made extensive progress executing against this business plan.

Our direct sales force, which was launched in the beginning of 2013 experienced a 152% increase in sales from the group over the second quarter. We're very excited about the amount of traction we are getting with clients, and the way that our product is being received.

Additionally, we have found that strategic acquisitions could be rolled up into the business, and successfully integrated in a manner that we think will be very accretive immediately, and in the long term. During the quarter, we acquired Personnel Strategies Inc., and we are already starting to see early benefits from this relationship. There is a synergy between this career events business that employers are using to do outreach to diverse candidates in a physical environment that coincides with our online recruitment model.

Additionally, we formed an alliance with the National Black MBA Association, which we believe, and is generally acknowledged, to be one of the premier professional organizations in the nation. We are powering the National Black MBA Association's career center, and our sales team is providing sales resources to monetize that career center.

In addition to the National Black MBA, we also brought on other strategic alliances that we believe, long term, will have a positive effect on the business, demonstrating that we can build a platform, not only with purchase acquisitions, but through strategic business alliances.

Finally, we are very excited about our progress with LinkedIn. The engagement we're getting from the LinkedIn team, and the reception of our product from LinkedIn's customers has been very positive, and we are looking forward to a very bright, long-term future with an outstanding partner in online recruitment.

With that, I would like to also mention one point, and that is, unrelated to the efforts and work that we did internally, and that is a development that occurred with the federal government, and their adoption of new EEO and OFCCP regulations.

These regulations require an enhanced effort by employers, who are subject to these rules and regulations, which according to the Department of Labor represents approximately 25% of the United States workforce, specifically as it related to our company, the regulations require an enhance diversity recruitment outreach, and an annual effectiveness assessment to be produced by these companies each year, which makes our product offering even more important and compelling to those companies who are subject to these rules and regulations.

Before we turn it over for questions, I would like to note that each and every member of this company is extremely focused on delivering shareholder value, in addition to providing economic opportunity for those that we serve. Each and every day, we are providing career opportunity to great Americans, including those heroes of our country who are veterans, those who are disabled, people of color, and women. We're very proud of the work that we're doing, and we feel very good, and highly rewarded about the progress that we have made to date.

With that, I'll turn it over to questions.

Thank you. Ladies and gentlemen, we'll now be conducting a question and answer session. (Operator Instructions). Our first question comes from Andrew D'Silva with Merriman Capital Incorporated. Please proceed with your question.

Hi, guys, thanks for taking my call. Just got a couple quick question for you. As far as your product deployments go with LinkedIn, how many products have been deployed within their sales network, and how many more do you currently have projected in your pipeline, at least sometime in the future?

Thanks for your question. I appreciate it. During the quarter, there was an adoption of our OFCCP products by the LinkedIn team. We actually were invited to present at LinkedIn's annual TalentConnect, which is their conference that they hold once a year, where they invite in actually about 3,000 or 4,000 employers. And we were the moderator and host of the diversity and inclusion session, where we talked about our approach toward diversity recruitment and the new OFCCP products and solutions that we offer that LinkedIn is now carrying and offering to their clients.

We're not going to make any forward statements about additional products that LinkedIn might pick up in the future, but we are very enthused about the product set that they are carrying currently, and their method of integration.

Good. And then as far as LinkedIn goes, I know that long-line networking and job listing business style is very weighted towards the fourth quarter. Have you seen any indication of that thus far, and then have their sales guys really been in tune with your guys learning the products, and are you please with that progress to day?

We have had an extensive amount of productive conversations integration with LinkedIn cross-platform, both on the operational side, the senior executive side, and especially on the sales side. We're very pleased with their level of engagement, and interaction. We do have within our agreement with LinkedIn confidentiality, so we can't get into the details about the acceleration of the pace of adoption from their clients. But we're feeling very, very good about the relationship, both on the LinkedIn internal side, and on their client side.

I can't really state how important these new regulations are to any company who is subject to OFCCP and EO compliance and the services that we provide. Because, these new requirements for the first time state that employers have to demonstrate effectiveness. And prior to this you didn't have to demonstrate effectiveness. You had to demonstrate and document that you were doing the outreach. This is very much in tune with our business model. This is very much in tune with how we built the business, and we think we are the superior resource for this product set in America today. And LinkedIn now has the ability to offer that product to their customers.

Good. I definitely see the value add in that. That makes perfect sense to me. How about within your own, continually growing internal sales force. Are they seeing traction right now in Q4? I mean that would hit your top line this quarter, essentially, and that would be pushed back 60 days or anything. So, I mean, are they getting more activity right now, or is it still kind of steady state in Q3?

We are very pleased with the acceleration of engagement and activity that our internal sales force is having. And I will also say that, even though it's early on in our acquisition with PSI, we are already seeing that we're getting increased opportunities to both monetize professional networking conferences, which is the core business of PSI. But we're also getting a reverberation back of PSI customers, who are adopting our online products.

So I would say that we are feeling very good about the progress that we're making, and very optimistic about the future.

Good. And then with PSI, did you guys give any metrics in the beginning of the call as far as how much the acquisition was for, and then the kind of the metrics behind how much revenue they were generating before the acquisition, or any cash flows that were able to provide you with?

No, we did not discuss those numbers in this call. the acquisition was done in late September. It was for cash payment of $200,000 and there is an earn out involved with a number of contingencies where the one-year mark and two-year mark have the potential payout on an earn out of anywhere from $100,000 to $200,000 for each of those years.

And I would also just add to that, David, that we would like to let our investor base know that PSI was a profitable business when we acquired it. Yes.

Okay. Good. And I guess my last question really has to do with membership growth within your various networks. Last time I heard it was around 2.5 million. Do you have an exact number or an estimate of where you're at right now?

We added 122,000 new members during the third quarter, and so now we are north of 2.6 million.

Great, great. Alright, that's everything I had. Thanks a lot.

I think it's significant to note that there was approximately a 33% increase in new members quarter-over-quarter.

What was quarterly, what did you rate, how many people did you add in the second quarter?

90,000.

[80,000].

Oh, wow, yes that is significant. Great. And then what about year-over-year? I mean is it still trending up sequentially every quarter?

There was an acceleration from the second to third quarter.

And a significant, significant gain year-over-year. We don't have those numbers in front of us.

Perfect. Great, guys. Thanks a lot.

Thank you.

Thank you. (Operator Instructions). Thank you. Our next question comes from Leonard Cooper, who is a private investor. Please proceed with your question.

Do you hear me?

We do.

I'd like to know what company's report I'm now getting. What is the name of your company?

It's Professional Diversity Network, Inc.

Okay. I called your number, I called a number to receive the report from another company, and I was connected to two different companies, not the one I asked for.

And who did you call?

I'm sorry. There seems to be some technical difficulty with that person's telephone line. (Operator Instructions)

This is getting Leonard's comment?

It appears there is no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Thanks very much. We really do appreciate your participation on the call, and for those of you who are investors in the business, we value your partnership. We're dedicated to our mutual success going forward. We're really excited about what's occurred in the third quarter. We've made a lot more progress than we can summarize on a call here today.

On the technology side, we have deployed new releases that enhance our ability to provide economic opportunity for those that we serve. And we also have gotten ahead of the curve in delivering OFCCP solutions that are going to be of great value to our current and future customers.

We're very fortunate to have an extremely strong relationship with LinkedIn. We're very excited about the progress that we're making with them. And we look forward to a number of good years, positive outcomes, and we appreciate your interest in our company and participating on the call today. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.