Professional Diversity Network Inc (IPDN) 2014 Q4 法說會逐字稿

Greetings. And welcome to Professional Diversity Network's 2014 Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

(Operator Instructions)

As a reminder this conference is being recorded.

I'd like to remind listeners that during the call certain information presented contains forward looking statements. These statements are based on management's current expectations and are subject to risk uncertainties and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from these 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, March 31, and Professional Diversity Network does not intend and undertakes no duty to update future events or circumstances. It is now my pleasure to introduce your host, Jim Kirsch, CEO. Thank you Mr. Kirsch, you may begin.

Thank you operator. Good afternoon and thank you for joining the Professional Diversity Network 2014 Investor call. Joining me today are as follows, Ms. Star Jones, our President, Mr. Matt Proman, our Chief Operating Officer, Mr. David Mecklenburger, our Chief Financial Officer and Mr. Chris Wesser, our general counsel.

This afternoon we will provide you with the following information, our financial results, an update of the integration of the National Association of Professional Women acquisition which was purchased in September 2014, and information about the purchase and early integration of the assets of Global Outreach Ventures which we referred to as Noble Voice.

Also because we are in the last day of the first quarter of 2015, we will also be including information relating to our progress in this quarter to date. This year we have successfully diversified our revenue. We have increased our revenue, and we have demonstrated revenue growth.

In the fourth quarter of 2014, we increased our revenues from $1.5 million to $8.3 million. Our unaudited revenue book as of March 30, 2015, that's yesterday, increased from $1.6 million last year to an excess of $11 million this year - $11.2 million.

Additionally, our registered users increased from March of 2014 of registered user joins of 37,000 to March 2015 to 218,000 new registered users.

I'd like to take a moment to discuss with you all today, the sequence of the four acquisitions that we have to date, and how those acquisitions are being integrated and overall affecting our company's performance.

As some of you may recall, our first acquisition after our IPO was that of a technology company that was incubated out of Carnegie Mellon University named [Career Emped]. That technology became the foundational technology for the Professional Diversity Network - enabled us to grow and scale our business in a relationship database mobile up environment.

Fortunately, when we acquired the National Association of Professional Women, we were able to leverage this technology to build a new online networking powerful system for the National Association of Professional Women. It was incredibly valuable for us to leverage that core technology and bring NAPW from a static content environment of the website that was - legacy began in 2008 and had only minor updates.

The ability for us to be able to quickly adopt a new platform that once again is mobile up and built on a relationship database that introduces new users and new members to each other and does predictive announcements of career opportunities, has helped NAPW solidify their membership proposition.

The second business that we purchased was a career events business whereby we performed Professional Diversity Networking events around the country. The National Association of Professional Women historically held one event in New York, their national event, and that was the only event outside the chapter events that was made available to the membership of NAPW. Star Jones, the President of our company has taken over our events division and has leveraged it extensively and will be speaking to that later during our announcements today.

But briefly I will say, that we are increasing the NAPW events dramatically from one event to eighteen events this year by leveraging our existing events' structure and being able to deliver these events in an efficient financial way by combining them with the professional networking career events that happened earlier in the day and using the same infrastructure for the evening events for the National Association of Professional Women.

The third acquisition that we did was in September of 2014, our biggest acquisition, the National Association of Professional Women. The National Association of Professional Women was a $19 million revenue business in a steady and substantial way and we felt was a very good business as it was.

However, in additional to the National Association of Professional Women's existing business, we saw a hidden value in an asset that's core to NAPW and that is the professional women who make up the membership. And the value of that talent pool to the recruitment client that we serve.

Therefore, we have been aggressively pursuing with the National Association of Professional Women, connecting those women with our corporate recruitment sponsors, thus deriving a new source of revenue that has completed accretive to the pre-exiting NAPD model.

Finally, the acquisition of Global Outreach which we referred to as Noble Voice which we made in the fourth quarter of 2014 - brought leverage to the other three components that we had previously acquired. Noble Voice was able to leverage their existing infrastructure to assist the Professional Diversity Network in growing our online traffic and our registered users in a dramatic way.

Additionally, it enabled us to fully realize the potential of our new hire advantage product which is a results based, results driver performance product that provides a sourced and qualified diverse candidate for our recruitment partners.

Now, we are able to provide that hire advantage service also to the members of NAPW thus enhancing the membership benefits without increasing either the expense or the cost of the membership. And solidifying the value of the NAPW membership.

So both for the Professional Diversity Network and for NAPW, Noble Voice brings accretive revenue and value to our existing members that we serve.

During the fourth quarter of 2014, we achieved the following objectives, increased revenue over a diverse product stack and clients by investing in our sales and marketing efforts across the Company's product offering, implemented expense reductions and cost controls identified in the 3rd quarter.

And I think it's important to keep in mind that there's a process of implementing expense cuts. It starts with the identification of those areas that we believe that we can cut and not adversely affect the business.

Then we move into the implementation phase which really was done in large part during the fourth quarter, whereby we are enacting those identified expense cuts and then finally which is happening more in the first quarter and second quarter of this year, we're realizing the benefit of those expense cuts.

And during the implementation phase we do and have experienced additional cost resulting from some of those cuts such as we were able to close one of the facilities -- one of the three facilities that NAPW had leased which generated a cost savings for the Company going forward, but we incurred cost for leasing agents and legal fees to extricate ourselves and sublease that facility.

We also purchased the assets of Global Outreach and we began the process of implementing Global Outreach Noble Voice across our multiple product platforms. We further designed, tested, and began to launch our hire advantage product and we specifically identified opportunities to benefit NAPW by providing a new mobile up relationship based online networking platform. Also identifying and scoping out a new CRM cloud based for the NAPW sales team to use to replace their legacy sales platform. And also to create an new membership success team for NAPW members.

During the first quarter of 2015, we achieved the following primary objectives, finalized expense reductions and cost control that we implemented in the fourth quarter, implemented ongoing cost containment measures, integrated the assets of Global Outreach Noble Voice to take advantage of the following areas including but not limited to our extensive membership growth - growing from 37,000 to 218,000 new registered users during the month of March over last year.

And I think it's important to note without our recruitment business incurring any additional marketing expenses. And also to begin to leverage the 4.5 million opted in career seekers that came along with the Noble Voice acquisition.

This is in addition to our approximately 3.5 million Professional Diversity Network members and the over 600,0000 National Association of Professional Women members. Thus, we have grown our talent pool and our actionable talent pool extensively.

Also in the quarter, we launched our hire advantage product for the NAPW members and have received a very vibrant and robust response to that service confirming our expected outcome and that is providing additional value to the NAPW members.

Also of great important, we launched the hire advantage product with our pilot business partner, the Manpower Group and we are now in the process of delivering sourced an qualified candidates to the Manpower Group and to 42 additional clients that we do business with today.

Our new NAPW networking website launched in February of the 1st quarter and our new cloud based CRP for NAPW went into deployment in March. We also launched the new NAPW membership success team in March. Our management team's most critical key performance indicators our KPIs have experienced material improvements thus far this year. Diversification of revenues and revenue growth, expense control and new membership registration.

I will now turn the call over to our CFO, David Mecklenburger who will discuss our financial results and answer any questions you may have about our reported financial information. Following our CF's comments, I will turn it over to our President, Ms. Star Jones who will provide you with her insights into our company and our progress today. David?

Thank you Jim. I'd just like to touch on a couple of the highlights of the financial end of the business we've experienced in the last quarter and the beginning of 2015. As Jim mentioned, the fourth quarter of 2014, we were very proud that we completed our acquisition of Noble Voice and began integrating that with Professional Diversity Network and we also continued our integration work of the acquisition we did at the end of the third quarter, the National Association of Professional Women.

One of the improvements that we made very shortly after the acquisition of NAPW were we able to sublet one of their facilities which will result of saving to the Company of over $300,000 a year.

Sales continue to grow and be very strong on a comparative basis, the Company had bookings in the third quarter of 2014 of $1.2 million and in the fourth quarter we were able to achieve bookings of $8.3 million. First quarter of 2015 we realized $11.2 million in book sales that $11.2 million is an unaudited number.

Our fourth quarter was a changing quarter for us as we integrated these two businesses. There were a number of noncash items that flowed through our income statement that I would like to point out. We had $565,000 of noncash stock compensation and over $700,000 of amortized intangibles.

We continued to identify costs and implement cost reductions and we are also starting to see the realization of those cost reductions in the first quarter and as we move into the second quarter.

Thank you David and David will be available for questions after Star's comments. I'd like to turn it over now to our President, Star Jones. Star?

Thank you Jim and David. This has been an amazing few months of growth in all aspects of our business. Our recent trip to Silicone Valley to conduct a week of diversity and inclusion activity really highlighted why after six months with PDN, I'm sure Diversity recruitment is an important front burner issue. And there is revenue for us to realize.

My goal has been to utilize my previous relationship with corporate America, companies like Google, Intel, Hyatt, McDonalds, [Publisis] Viacom, Morgan Stanley and the Federal Reserve who have all expressed specific interest in financially partnering in either our diversity marketing efforts and/or utilizing our recruitment products and services for their own diversity and inclusion initiative.

Additionally, my goal has been to introduce and reintroduce PDN and NAPW and our products and services to the corporate market place. These relationships are being fostered so that they translate not only into marketing and promotional relationships, but product and services sales for a variety of avenues.

One new product area of service that is the perfect blend of our PDN corporate clients and our NAPW clients and services it he NAPW corporate membership program. NAPW's corporate members will be selected from local businesses, large corporate civic groups, women's organizations and society's and local community groups. This program is designed to provide corporate members the opportunity to align with NAPW one of the largest professional women's networking in the country while conveying a commitment to gender diversity and inclusion.

The corporate membership program enhances and strengthens the NAPW overall membership strategy by increasing the number of professional women connected to corporate America on our membership role. And it also offers the opportunity for a company to increase visibility of the diversity and inclusion space to a valuable demographic.

Like our individual membership offering, different benefit packages will be offered to accommodate corporate member priorities. And membership priorities and enhancing the membership value proposition has really been our major goal this quarter for NAPW.

Specifically, we have added the following already in 2015. As Jim mentioned our new website NAPW dot com is bringing NAPW to the next level of member engagement through online tools and resources, helping every professional woman member take advantage of their membership. In addition to uploading their resume, members now have the ability to import their member profile through LinkedIn and Facebook. Members can now follow over 200 local chapter group pages and instantly connect through the activity wall.

And launching in the next sixty days, we expect that members will be able to connect to industry specific group pages to learn about industry trends and have access to a master event calendar that notifies and allows registration for attendance at national, regional, local, partner, and member sponsored events across the United States.

We have also launched the new career center on NAPW dot com so members can find professional tools, resources, and job opportunities all online.

Members are now able to opt in to hire advantage our recruitment product that delivers an actionable and qualified candidate to employers. Members can get their resume critiqued for free by a professional career consultant. They can use [Resonate] our patented resume [forming] technology that uses key words and phrases tailoring resumes to specific job postings. And members can now search over 100,000 jobs in the NAPW career center and can create customized job alerts straight to their inbox.

As Jim mentioned we have also grown our event business. NAPW members can take advantage of monthly meetings, events and programs at the more than 200 local chapters throughout the United States. Additionally, we have indeed created more events for members to engage and more in person networking moments.

We went from three events last year to five regional summits, a national summit, multiple career fairs, and several key city power networking events for a combination of 30 events nationwide. We are eagerly anticipating our upcoming regional and national networking summit plan in the spring and summer.

In Dallas, Washington, DC, Miami, Chicago, Los Angeles, and our national networking summit in New York City in the fall. With an expectation of 1,000 women or more each.

Career coaching and career advancement opportunities will be provided for all members at every summit giving members access to an array of employers, sponsors, philanthropic partners and exhibitors.

As 40 percent of our members are small business entrepreneurs, we've increased and improved our benefits design to help our members grow and promote their own businesses inside and outside of NAPW. For those members in HR or that own their own businesses, NAPW intends to offer a free job package we believe is valued at $2,000 to reach the over eight million members in our expanded professional network.

And we anticipate that the NAPW VIP members will be able to create their own business group page for added business promotion along with a branding advisor who will help them build it.

We're also brining more continued education to our members so they can complete or continue their college degrees and become every more qualified for better opportunity.

Starting in May 2015, NAPW anticipates that it will begin offering members the opportunity to continue to complete their education and it fully accredited nonprofit institution of higher learning. Through our new Operation Graduate program. The schools that will be a part of Operation Graduate will offer a variety of degree levels from Associates to Bachelors to Masters in a wide range of fields as well as a pathway to convert professional learning and on-the-job experience into academic credit saving time and money.

NAPW also anticipates being able to offer scholarships of $1,000 to $2,000 for members and their families giving their opportunity to finish their degree. As you can tell, we've been very busy. Every added product and service has been designed to increase the membership value proposition, service the members need, and make membership at NAPW a long term engagement that is both retainable and sustainable.

Now effectively communicated this renewed NAPW to members and the public is critical for its success. So we have both an internal and an external communication strategy that has and will be launched in the next 60 days.

Internally, the NAPW Membership Services Team has been launched this month. The MST is a more focused customer service initiative that we expect once fully implemented will contact new members within the first 24 hours to provide membership education.

Contact members a minimum of three times per year to ensure they are harnessing the power of NAPW. And provide a technology driven dashboard, if you will, for the member services team, to measure engagement and reach out to members who are not engaging robustly.

And then externally, that is where I get to do what I do best. The first week of May, we expect to launch a national wide media blitz in the form of a satellite television, radio, print and digital media tour that will outline and promote the NAPW.

Finally, research tells us that a diverse and inclusive workforce drives economic growth, captures a greater share of the consumer market, fosters a more creative and innovative work force and is necessary to build a competitive economy in a globalized world. Utilizing the collective strength of our members, partners and unique proprietary platforms, PDN and our subsidiaries are positioned to be the leader in business diversity recruiting, networking and professional development for women, minorities, Veterans, the LGBT community and disabled persons. Not only is it the right thing to do, it is the now the smart and business savvy thing to do. Thank you Jim.

Thanks Star and I appreciate your comments. It is clear that we have a very large and approachable market and diversity recruitment is becoming more and more important financially in the United States of America.

Additionally, the market place is firming up for the recruitment sector across the board due to the lower unemployment rate and scarcity in human capital. By all estimates, this will continue as the baby boomers leave the workforce and our population is not -- our existing population of citizens in the United States is not large enough to support the growth that we anticipate the country will have.

If that is the case, if market continues -- if the market conditions continue to be stable, and as they are today, we anticipate all recruitment businesses will do better including the Professional Diversity Network. But we have carved out a very important market position for ourselves. As the leader and the go to resource in diversity recruitment.

In the past two years, we've made significant progress in establishing the Company as the very centric market leader in diversity recruitment. The assets of our acquired companies have all been carefully selected to provide enhanced values which transcends their unique capabilities. In essence, two plus two does not equal four when we talk about the combination of these assets.

The NAPW members are a valuable talent pool for our diversity recruitment clients. Simply said, we monetize and are monetizing those members in a significant and important way while at the same time driving enhanced value to the NAPW membership. Our hire advantage product brings added membership benefits to the NAPW members who are seeking a new or a better career. But it also drives additional revenue to the Company from the market place of connecting those individuals with an employer.

Noble Voice benefits from being in the PDN family because they are now able to realize revenue from recruiters who find value in the career consultations that Noble Voice is having. Noble Voice is currently processing approximately 4,000 inbound calls on a daily basis from individuals who are seeking a job. When we acquire Noble Voice, there was no revenue associated with recruitment and those conversations. And we are changing that in an accreted manner.

Furthermore, our online recruitment business is experienced enhanced value due to an increase in traffic engagement and in new registered users as demonstrated by our year over year monthly growth up from 37,000 registered members to 218,000 registered members in March alone. Our plan is to continue to increase our membership, add more value to our members, and our business partners and realize the benefits of the cost controls and expense cuts enacted in the first quarter of 2015.

Our revenue has increased from a run rate of $6 million to over $40 million in just 12 months. And what's important is we are still in the early stages of our growth trajectory. With that said, operator, we will turn it over to the callers for questions.

Thank you. We will now be conducting a question and answer session.

(Operator Instructions)

One moment please while we poll for questions.

Thank you. Our first question comes from the line of Andrew D'Silva with Merriman Capital. Please proceed.

Good afternoon, thanks for taking my call. Just a couple of quick questions. Real fast, what were fourth quarter revenues for the fourth quarter and can you also break out what sales were for NAPW as well?

So, I'll take that. Fourth quarter revenues were $8.3 million...

With bookings, right...

.. with bookings

.. which closely matched revenues.

Do you want to take it David?

Sure, and Andrew what was the second part of your questions?

Yes, what were the revenues for NAPW for the quarter?

Well the bookings...

The -- sorry Andrew the sales for NAPW for the fourth quarter were just over $6 million.

Okay, good.

Did you initially have to ratchet up spending -- recruitment spending for NAPW after you made the acquisition and should we expect that the level during the fourth quarter is the level we should model going forward or is spending expected to go down after the initial [pick]?

That's a good question Andrew and what we found with the acquisition of NAPW, we purchased it right at the end of the third quarter. The Company had been in a state where they had not been able to purchase leads and spend money the way they wanted to, so upon our acquisition, we primed the pump and took care of some older accounts payable that they had and helped the Company get back on its feet from a marketing perspective and the accounting treatment of that required us to expense those purchases in the fourth quarter even though a lot of them are diving sales into the first quarter.

So, to answer your question, you will not be seeing that level of spending going forward and the expenses we do expect them to flatten while the sales grown.

Okay. And are we calling a Global Outreach Ventures or Noble Voice right now?

Noble Voice.

Okay. What were the gross margins for that division, so I can get a sense of that going forward?

And then were the primary reason for the (technical difficulty)

North of 60% gross profit margin and I'll let Jim address the question about the traffic.

Right so Andrew the acquisition of Noble Voice provided us with very complimentary traffic. And we're able to leverage their existing traffic but we've also been able to -- I mean strategy that Noble Voice was using for their company as a standalone business into the greater Professional Diversity Network which gave us dramatically enhanced results. Yes, we did announce that we hit 10,000 members in a day and I think you can see that from a 218,000 new registered user mark in March that that's not an anomaly.

Okay. Thanks for taking my call and good luck this year.

Thank you.

(Operator Instructions)

Just a moment please while I poll for additional questions.

Thank you. There are no further questions in queue at this time. I would like to turn the floor back over to management for closing remarks.

Thank you operator. On behalf of our senior management team who's on the call today and also for our newest additional members from Global Outreach, Noble Voice and Mr. Jorge Perez I want to thank you for joining the call today.

We are very exciting about 2015. We're laser focused as I said on making sure that we are managing this company to profitability. We think it's very important that we are fiscally disciplined and that we continue to demonstrate the revenue growth that we've had and dial that into a long-term profitable business in a very large addressable market.

Thank you for joining our call today. And as always, we look forward to our follow up calls and questions. Thank you very much and have a pleasant afternoon. Good bye.

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