Hudson Highland Group Reports 2004 Fourth Quarter and Full Year
Financial Results NEW YORK, Feb. 3 /PRNewswire-FirstCall/ -- Hudson
Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading
providers of specialized professional staffing, retained executive
search and human capital solutions, today announced financial
results for the fourth quarter and full year ended December 31,
2004. 2004 Fourth Quarter Summary * Revenue of $344.1 million, an
increase of 20.9 percent from $284.6 million for the fourth quarter
of 2003 * Gross margin of $128.9 million, or 37.5 percent of
revenue, up 24.5 percent from $103.6 million, or 36.4 percent of
revenue, for the same year ago period * Adjusted EBITDA of $5.9
million, compared to a loss of $10.7 million in the fourth quarter
of 2003 * Net loss of $1.3 million, or $0.13 per basic and diluted
share, compared to a net loss of $43.4 million, or $5.14 per basic
and diluted share for the fourth quarter of 2003 2004 Full Year
Summary * Revenue of $1.256 billion, an increase of 15.8 percent
from $1.085 billion for 2003 * Gross margin of $470.2 million, or
37.4 percent of revenue, up 16.7 percent from $403.0 million, or
37.1 percent of revenue, for 2003 * Adjusted EBITDA of $1.0
million, compared to a loss of $60.1 million for 2003 * Cash and
cash equivalents of $21.1 million "The results we achieved in both
the fourth quarter and the full year reflect our repositioning and
the continued strengthening of both our business and the
marketplace," said Jon Chait, chairman and chief executive officer
of Hudson Highland Group. "We experienced solid improvement both
sequentially and year-over-year in all of our regional units. The
hard work of all our employees allowed us to take an important step
in our brief history by delivering $1.0 million of positive
adjusted EBITDA for the full year and begin 2005 with solid
momentum." Richard W. Pehlke, executive vice president and chief
financial officer of Hudson Highland Group commented, "We
anticipate making continued progress toward our long term goal of
sustainable EBITDA margins in the 7 to 10 percent range. Given the
current economic environment, we anticipate EBITDA margins in the
range of 1.5 to 2 percent in 2005 and 3.5 to 4 percent in 2006. "We
expect the first quarter of 2005, which is historically our
weakest, to show higher year-over-year revenue and a significant
improvement in operating results, although EBITDA may not reach
breakeven," added Mr. Pehlke. Full Year Results For the full year
2004, Hudson Highland Group reported revenues of $1.256 billion and
a net loss of $26.8 million, or $2.75 per basic and diluted share.
For the full year 2003, Hudson Highland Group reported revenues of
$1.085 billion and a net loss of $328.8 million, which included a
goodwill impairment charge of $202.8 million, or $39.15 per basic
and diluted share. Conference Call / Webcast Hudson Highland Group
will conduct a conference call today Thursday, February 3, 2005 at
10:30 AM ET to discuss this announcement. Investors wishing to
participate can join the conference call by dialing 1-800-374-1532
followed by the participant passcode 3355299 at 10:20 AM ET. For
those outside the United States, please call in on 1-706-634-5594
followed by the participant passcode 3355299. Hudson Highland
Group's quarterly conference call can also be accessed online
through Yahoo! Finance at http://www.yahoo.com/ and the investor
information section of the company's website at
http://www.hhgroup.com/. Hudson Highland Group Hudson Highland
Group is one of the world's leading professional staffing, retained
executive search and human capital solution providers. We help our
clients achieve greater organizational performance by assessing,
recruiting and developing the best and brightest people for their
businesses. Our approximately 3,800 employees in more than 20
countries are dedicated to providing unparalleled service and value
to our clients. More information about Hudson Highland Group is
available at http://www.hhgroup.com/. Safe Harbor Statement This
press release contains statements that the company believes to be
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact included in this press release,
including statements regarding the company's future financial
condition, results of operations, business operations and business
prospects, are forward-looking statements. Words such as
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"predict," "believe" and similar words, expressions and variations
of these words and expressions are intended to identify
forward-looking statements. All forward- looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from those described in the forward- looking
statements. These factors include, but are not limited to, the
impact of global economic fluctuations on temporary contracting
operations; the cyclical nature of the company's executive search
and mid-market professional staffing businesses; the company's
ability to manage its growth; risks associated with expansion; the
company's reliance on information systems and technology;
competition; fluctuations in operating results; risks relating to
foreign operations, including foreign currency fluctuations;
dependence on highly skilled professionals and key management
personnel; the impact of employees departing with existing
executive search clients; risks maintaining professional reputation
and brand name; restrictions imposed by blocking arrangements;
exposure to employment-related claims, and limits on insurance
coverage related thereto; government regulations; the company's
ability to successfully operate as an independent company and the
level of costs associated therewith; and restrictions on the
company's operating flexibility due to the terms of its credit
facility. Additional information concerning these and other factors
is contained in the company's filings with the Securities and
Exchange Commission. These forward-looking statements speak only as
of the date of this press release. The company assumes no
obligation, and expressly disclaims any obligation, to update any
forward-looking statements. HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands,
except per share amounts) (unaudited) Three Months Ended Year Ended
December 31, December 31, 2004 2003 2004 2003 Revenue $344,090
$284,646 $1,256,354 $1,085,299 Direct costs 215,164 181,089 786,134
682,270 Gross margin 128,926 103,557 470,220 403,029 Selling,
general and administrative expenses 128,749 119,986 489,322 484,407
Goodwill impairment charge - - - 202,785 Business reorganization
expenses (recoveries) (89) 17,281 3,361 26,823 Merger and
integration expenses (recoveries) 1,090 1,787 736 2,663 Operating
loss (824) (35,497) (23,199) (313,649) Other income (expense):
Interest income (expense), net (51) 93 (104) (283) Other, net (75)
(1,929) (1,834) (2,859) Loss before provision for income taxes
(950) (37,333) (25,137) (316,791) Provision for income taxes 387
6,104 1,638 12,021 Net loss $(1,337) $(43,437) $(26,775) $(328,812)
Basic and diluted loss per share: Loss before accounting change
$(.13) $(5.14) $(2.75) $(39.15) Net loss $(.13) $(5.14) $(2.75)
$(39.15) Weighted average shares outstanding 10,185 8,448 9,729
8,399 HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE
SHEETS (in thousands, except per share amounts) December 31,
December 31, 2004 2003 (unaudited) ASSETS Current assets: Cash and
cash equivalents $21,064 $26,137 Accounts receivable, net 197,582
149,042 Other current assets 10,071 17,719 Due from Monster
Worldwide, Inc. - 5,518 Total current assets 228,717 198,416
Property and equipment, net 36,360 38,625 Intangibles, net 6,104
2,180 Other assets 9,571 11,703 $280,752 $250,924 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $27,023
$26,495 Accrued expenses and other current liabilities 140,277
117,370 Accrued business reorganization expenses 8,930 11,543
Accrued merger and integration expenses 1,872 2,960 Current portion
of long term debt 4,066 453 Total current liabilities 182,168
158,821 Accrued business reorganization expenses, non-current 6,832
14,840 Accrued merger and integration expenses, non-current 3,329
4,209 Other non-current liabilities 2,648 3,391 Long-term debt,
less current portion 2,041 302 Total liabilities 197,018 181,563
Commitments and contingencies Stockholders' equity: Preferred
stock, $0.001 par value, 10,000 shares authorized; none issued or
outstanding � � Common stock, $0.001 par value, 100,000 shares
authorized; issued 10,306 and 8,573 shares, respectively 10 9
Additional paid-in capital 353,836 315,130 Retained deficit
(311,576) (284,801) Accumulated other comprehensive income: Foreign
currency translation adjustments 41,694 39,023 Treasury stock, 8
and 0 shares, respectively (230) - Total stockholders' equity
83,734 69,361 $280,752 $250,924 HUDSON HIGHLAND GROUP, INC. SEGMENT
ANALYSIS (in thousands) (unaudited) For the Three Months Ended
Corporate December 31, 2004 Americas Europe Asia Pac and Other
Total Revenue Hudson $97,818 $120,250 $109,622 $441 $328,131
Highland 11,968 1,988 2,003 - 15,959 $109,786 $122,238 $111,625
$441 $344,090 Gross Margin Hudson $25,155 $49,687 $38,519 $442
$113,803 Highland 11,267 1,936 1,920 - 15,123 $36,422 $51,623
$40,439 $442 $128,926 Adjusted EBITDA (1) Hudson $4,653 $1,427
$7,391 $(973) $12,498 Highland 992 (177) 124 - 939 Corporate - - -
(7,514) (7,514) $5,645 $1,250 $7,515 $(8,487) $5,923 For the Three
Months Ended December 31, 2003 Revenue Hudson $67,331 $99,091
$101,743 $268,165 Highland 11,486 3,243 1,752 16,481 $78,817
$102,334 $103,495 $284,646 Gross Margin Hudson $16,672 $39,965
$31,508 $88,145 Highland 10,915 3,122 1,375 15,412 $27,587 $43,087
$32,883 $103,557 Adjusted EBITDA (1) Hudson $(1,569) $(1,888)
$2,926 $(531) Highland 47 (2,017) 88 (1,882) Corporate - - -
$(8,273) (8,273) $(1,522) $(3,905) $3,014 $(8,273) $(10,686) (1)
Non-GAAP earnings before interest, income taxes, special charges
and depreciation and amortization ("Adjusted EBITDA") is presented
to provide additional information about the Company's operations on
a basis consistent with the measures which the Company uses to
manage its operations and evaluate its performance. Management also
uses this measurement to evaluate capital needs and working capital
requirements. Adjusted EBITDA should not be considered in isolation
or as a substitute for operating income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a
measure of the Company's profitability or liquidity. Furthermore,
adjusted EBITDA as presented above may not be comparable with
similarly titled measures reported by other companies. HUDSON
HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited)
For the Year Ended Corporate December 31, 2004 Americas Europe Asia
Pac and Other Total Revenue Hudson $333,061 $447,483 $412,427
$1,704 $1,194,675 Highland 44,916 7,451 9,312 - 61,679 $377,977
$454,934 $421,739 $1,704 $1,256,354 Gross Margin Hudson $85,054
$182,069 $143,360 $1,608 $412,091 Highland 42,376 7,113 8,640 -
58,129 $127,430 $189,182 $152,000 $1,608 $470,220 Adjusted EBITDA
(1) Hudson $10,707 $969 $23,358 $(5,426) $29,608 Highland 3,093
(1,292) 1,070 - 2,871 Corporate - - - (31,473) (31,473) $13,800
$(323) $24,428 $(36,899) $1,006 For the Year Ended December 31,
2003 Revenue Hudson $278,935 $364,766 $377,555 $1,021,256 Highland
43,764 15,104 5,175 64,043 $322,699 $379,870 $382,730 $1,085,299
Gross Margin Hudson $65,220 $154,632 $122,840 $342,692 Highland
41,866 14,034 4,437 60,337 $107,086 $168,666 $127,277 $403,029
Adjusted EBITDA (1) Hudson $(12,343) $(13,003) $6,606 $(18,740)
Highland (3,683) (8,147) (682) (12,512) Corporate - - - $(28,827)
(28,827) $(16,026) $(21,150) $5,924 $(28,827) $(60,079) (1)
Non-GAAP earnings before interest, income taxes, special charges
and depreciation and amortization ("Adjusted EBITDA") is presented
to provide additional information about the Company's operations on
a basis consistent with the measures which the Company uses to
manage its operations and evaluate its performance. Management also
uses this measurement to evaluate capital needs and working capital
requirements. Adjusted EBITDA should not be considered in isolation
or as a substitute for operating income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a
measure of the Company's profitability or liquidity. Furthermore,
adjusted EBITDA as presented above may not be comparable with
similarly titled measures reported by other companies. HUDSON
HIGHLAND GROUP, INC. RECONCILIATION OF ADJUSTED EBITDA TO OPERATING
LOSS (in thousands) (unaudited) Three Months Ended Year Ended
December 31, December 31, 2004 2003 2004 2003 Hudson Adjusted
EBITDA (1) $12,498 $(531) $29,608 $(18,740) Business reorganization
(expenses) (125) (9,572) (1,016) (15,777) Merger and integration
(expenses) (495) (1,787) (141) (2,663) Depreciation and
amortization (5,051) (3,747) (16,243) (14,071) Goodwill impairment
- - - (195,404) Operating income (loss) $6,827 $(15,637) $12,208
$(246,655) Highland Adjusted EBITDA (1) $939 $(1,882) $2,871
$(12,512) Business reorganization (expenses) recoveries 214 (7,629)
(2,345) (10,829) Merger and integration (expenses) (595) - (595) -
Depreciation and amortization (500) (954) (1,805) (4,234) Goodwill
impairment - - - (7,381) Operating income (loss) $58 $(10,465)
$(1,874) $(34,956) Corporate and Other Adjusted EBITDA (1) $(7,514)
$(8,273) $(31,473) $(28,827) Business reorganization (expenses) -
(80) - (217) Depreciation and amortization (195) (1,042) (2,060)
(2,994) Corporate expenses $(7,709) $(9,395) $(33,533) $(32,038)
Hudson Highland Group consolidated Adjusted EBITDA (1) $5,923
$(10,686) $1,006 $(60,079) Business reorganization (expenses)
recoveries 89 (17,281) (3,361) (26,823) Merger and integration
(expenses) (1,090) (1,787) (736) (2,663) Depreciation and
amortization (5,746) (5,743) (20,108) (21,299) Goodwill impairment
- - - (202,785) Operating loss $(824) $(35,497) $(23,199)
$(313,649) (1) Non-GAAP earnings before interest, income taxes,
special charges and depreciation and amortization ("Adjusted
EBITDA") is presented to provide additional information about the
Company's operations on a basis consistent with the measures which
the Company uses to manage its operations and evaluate its
performance. Management also uses this measurement to evaluate
capital needs and working capital requirements. Adjusted EBITDA
should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of the
Company's profitability or liquidity. Furthermore, adjusted EBITDA
as presented above may not be comparable with similarly titled
measures reported by other companies. DATASOURCE: Hudson Highland
Group, Inc. CONTACT: Richard W. Pehlke of Hudson Highland Group,
+1-212-351-7285, ; or John D. Lovallo of Ogilvy Public Relations
Worldwide, +1-212-880-5216, , for Hudson Highland Group Web site:
http://www.hhgroup.com/
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