Professional Diversity Network Inc (IPDN) 2014 Q3 法說會逐字稿

Thank you. We will now be conducting the question-and-answer session. (Operator Instructions) The first question today comes from Andrew D'silva of Merriman Capital. Please go ahead.

I think you covered most of my questions in your prepared remarks. Just first off though, David, is the $349,000 that you mentioned in operating expense include contributions into cost of services? And then, I see NAPW's membership fees broken out, so I guess I can figure out the top-line myself unless there is other revenue items that are put into other line items there?

As you said, the top-line numbers are separated on the P&L statement. And to answer your question, the direct cost of sales and services, there is about 24,000 reflected in there from the PDN post merger operations.

And is that inclusive in the--

That's part of the 349.

And then you did a very good job explaining the Career Fair, that was actually one of the things that I wanted to touch on, but since you've spent a good amount of time on that, my last question is, as a company that's completed a merger and working out kinks, is there anything that you've discovered that you're either missing or would like to add either through strategic partnerships, internal build outs or tuck-in acquisitions that you think would be additive to your current business models?

Well, I think that it's important to note that the NAPW merger to us is a two plus two equals eight. We believe that the NAPW membership base will grow, the revenue will grow and that membership base will provide a very valuable talent pipeline to the Professional Diversity Networks' recruitment partners. We are planning and scoping additional products and services which we'll be deploying in 2015 including corporate membership programs for NAPW. And we continue to remain very focused on providing all diverse professionals with economic opportunity. NAPW really truly fits well into that mission.

We will continue to look at strategically advantageous opportunities for the Company to grow organically and inorganically. This obviously was our biggest acquisition to-date and we are aggressively working towards making sure that we're providing all the value possible on the combination of these two businesses. But I'm really pleased with the early progress that we've made in integrating these businesses. Some of the things that are off balance sheet that could cause some concern in any merger would be the blending together of two teams, two cultures and personalities. And I'm very pleased to report that we have really come together as business operators and as friends and we have a common focus, common objective and we're executing against the common mission.

So, I believe that opportunities will always be available to us and we're going to be selective in pursuing those opportunities in the future, but certainly we'll continue to look at them.

(Operator Instructions) Our next question comes from [Ron Shales], a private investor. Please go ahead.

I assume you've established appropriate costing and metrics having to do with membership retention at NAPW. Can you speak to that and any initial touch and feel for success or problems there on retention?

Specifically as it relates to retention, we are very focused on that. You would have noticed from Ms. Jones's comments that a good portion of her conversation focused around providing enhanced benefits for members. Again, the things that you don't see in an income statement and balance sheet are that we made an extraordinary investment in technology that is a networking platform that NAPW members will benefit from. In addition to that, Matt has created a compelling structure in order to increase the touch points that NAPW are going to have and have began to already have with its members. As I said in my opening comments, we did provide a little bit of insight into October. It was a very strong month for the Company, both on the recruitment side and for the NAPW membership side. Retention was up, new members were up, gross number of memberships were up, revenue was up. And we believe that the enhanced technological platform.

I mean in addition to the tech, bringing 18 events that are of quality on a regional basis versus one national event and still cutting $3 million out of a business that did $19 million in 2013 creates the opportunity to number one drive additional events revenue, but number two and possibly more important to bring the NAPW physical experience to more members. So if you are thinking about becoming an NAPW member and you live in Dallas or Washington D.C. or Los Angeles or Chicago, now you have the opportunity, instead of just going to one event in New York, you have the opportunity to go to a total of 18 events. We held our first event in Chicago recently. Approximately 30 employers paid to participate in that event and connect with our members and connect with NAPW, extraordinary employers like Accenture, Blue Cross Blue Shield and other very, very strong companies. They all rated it either good or great and all but one said that their hiring needs for the coming year were going to be greater than they were this year.

So it enables us -- bringing these NAPW events is only possible in the economic value proposition that we are putting forth because we are already doing PDN events and combining these events together making the PDN event better but they also provide NAPW in economical manner of reaching their members. And reaching the members with more frequency providing more retention efforts, providing a stronger networking platform is in our opinion the formula to increasing retention and really having a true focus on the membership success going forward.

Just one other question. You've talked a lot about the benefits and an exhaustive list -- an extensive list I should say programs and activities. Have you also been zealous on the cost side with respect to delivery and margins?

Well both NAPW membership and PDN's online recruitment services are extraordinarily high margin business. And so--

What does that mean, high margin, what kind of percentage?

I will let our CFO comment to the exact percentages of margins. But, our margins at PDN have been -- you may know if you look back in time, our gross margins have been very high and you will see that the gross margins of NAPW historically have been very high. On the cost side, we've run costs on the business and we did that without sacrificing the opportunity for near term revenue growth or long-term revenue growth. And so we will continue to expand the business and expand it with high profit margin product categories and do so in the most efficient manner possible.

David, do you want to speak for a moment to the gross profit margins on both product lines?

The similarities in the business models are one of the things that attracted us to the combination. Both companies' direct costs of delivering services probably averages around 20% of sales, giving us roughly an 80% gross margin. The events business is the exception of that. The cost of putting out our events are significantly higher. Those margins tend to fall more around the 40% area, but still very strong.

The next question comes from Tony Polak of Aegis. Please go ahead.

Just for future reference, the best time to do a conference all generally isn't 4:30 on a Friday. So in future it'd be better if you did it another time. Just wanted to know on the acquisition. Could you give us the revenues for the first nine months of that Company?

Certainly, David. Just the acquired company, David.

The revenues of NAPW -- give me one second -- for the first nine months of 2014 were $18.9 million.

Can you give us a breakdown of what that revenue came from?

That revenue comes from membership revenue, that comes from products that they sell to their members, it comes from profiles, it comes from press releases that they sell and they also sell an annual membership book.

Could you give a separate down approximate, where it comes from?

Rough numbers, I would say 80% to 85% of it is the membership revenue.

And could you give us a number on how many members are present?

You want me to jump into that, David?

Go ahead, Jim. I don't have this in front of me right now.

There's approximately 600,000 total members, approximately 60,000 paid members.

And what do the members get that are not paying?

The members who don't pay get an inclusion in the Career Center. They don't get the inclusion in the NAPW networking site. And they also get and the ability to attend one networking event so that they can experience the chapter events and connect with more aggressively engaged members.

And Jim, may I add, please? When an initial member becomes a member, they not only have access to the Career Center, but they have access to job listing and they can get job alerts. They have access to attend one NAPW networking event for free on their local level or on one of our professional networking events. And they also get a career assessment and they use our proprietary resume product, which is Resunate, for 30 days. So the value in becoming an initial member is in hopes of encouraging you to see the benefit and the value proposition so that you will become a paid member.

Is there -- do you have a set rate? Is it a graduated rate? Is it discounted if you sign up for more than one year?

Matt, do you want to address that?

Matt Proman - Chief Operating Officer

Right now all the membership programs that we have, which are six, are all annual. In the past, I've experimented with two-year, three-year, five-year memberships. There were some issues with that in trying to justify what your costs are and what the value is over five years and how to recognize the actual revenue. So we've been just putting annual membership 12 months together right now. When I did roll out three-year and five-year, there was -- we did see an increase in sales, but there was a lot of downside from accounting standpoint and that's why we decided to go back to all annual memberships.

Is there a cyclicality in quarter-by-quarter on post businesses?

The PDN business is heavily weighted towards the fourth quarter, the recruitment side of the business, and the NAPW membership business is more consistent throughout the year.

There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Thank you very much, operator. Again, I want to thank everyone for participating on our call today. On behalf of our entire Company, I want to express to you our true excitement about the future success of our Company. Our product line is growing with very high margins. Our total addressable market in both recruitment revenue and NAPW membership services is vast. We will continue to focus on cost savings, efficiencies, high margin product lines and growth in the coming quarters and years. Finally, our management team is available to all interested parties for one-on-one discussions if you would like to ask any additional questions after the call. Thank you once again and have a nice evening.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a great day.