TMP Worldwide (NYSE:MWW): Unemployent Investment

TMP Worldwide (NYSE:MWW): Unemployent Investment

Business fundamentals continue to improve. The company is back in growth mode for the first time since 3Q08 with revenue up 4% Y/Y organically in 3Q, driven by both North America and International careers, which grew 6.4% and 2.3% Y/Y, compared to (4.8%) and (2.0%) last quarter. 3Q bookings were up 23% Y/Y organically, and deferred revenue of $299M is $30M higher than 3Q09 and $20M higher than 2Q10, indicating solid business momentum and an encouraging business outlook.

2011 guidance implies strong top-line growth acceleration and improving profitability. The company guided to 20-25% revenue growth in 2011 and we believe this guidance implies a high-teen organic growth, significantly improving from roughly flat growth in 2010 and well above our previous estimates.

Further, management noted that at least 50% of the incremental revenue will flow to operating income, indicating the substantial leverage opportunity in the model. Management also believes that the company can achieve 25% EBITDA margin in 18-24 months. International growth opportunity is promising. With international showing solid growth momentum in 3Q (Europe and Asia up 28% and 32% FX neutral), management noted that as more developed markets ramp up, it expects international segment to produce attractive operating margin short-to-medium term.

A few negatives were Internet Advertising and Fees underperforms. IAF revenue of $34.9M was flat Y/Y. The weakness is mainly due to reduction in recruitment budget for some of its major customers.

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