HHGP Hudson Highland Grp., Inc. (MM)

NEW YORK, May 2 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (NASDAQ:HHGP), one of the world's leading providers of permanent recruitment, contract professionals and talent management solutions, today announced financial results for the first quarter ended March 31, 2007. 2007 First Quarter Summary * Revenue of $337.9 million, an increase of 3.2 percent from $327.3 million for the first quarter of 2006 * Gross margin of $125.9 million, or 37.3 percent of revenue, up 13.7 percent from $110.7 million, or 33.8 percent of revenue, for the same year-ago period * Adjusted EBITDA of $6.8 million, or 2.0 percent of revenue, up from an adjusted EBITDA loss of $3.6 million for the first quarter of 2006 * EBITDA of $3.7 million, or 1.1 percent of revenue, up from an EBITDA loss of $3.6 million for the same period last year * Net income of $0.4 million, or $0.01 per basic and diluted share, compared with a net loss of $8.1 million, or ($0.33) per basic and diluted share, for the first quarter of 2006 "Considering the first quarter is historically weaker given our seasonality and business mix, we achieved solid results," said Jon Chait, chairman and chief executive officer. "Hudson Asia Pacific and Hudson Europe continued to build upon their strengthening performance. Further, our Hudson Americas business is steadier than a year ago, though we still have work ahead to re-ignite the growth of our core markets within that region." "With the completion of our restructuring program this quarter, our financial strength continues to build and we believe we are well positioned for increased operating leverage," said Mary Jane Raymond, executive vice president and chief financial officer. Guidance The company currently expects second quarter 2007 revenue of $355 - $370 million at prevailing exchange rates and EBITDA of $12.5 - $13.5 million. This compares with revenue of $352 million and EBITDA of $8.5 million in the second quarter of 2006. Conference Call/Webcast Hudson Highland Group will conduct a conference call Thursday, May 3, 2007 at 9:00 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 5699225 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 5699225. 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/. About Hudson Highland Group Hudson Highland Group, Inc. is a leading provider of permanent recruitment, contract professionals and talent management services worldwide. From single placements to total outsourced solutions, Hudson helps clients achieve greater organizational performance by assessing, recruiting, developing and engaging the best and brightest people for their businesses. The company employs more than 3,600 professionals serving clients and candidates in more than 20 countries. More information 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 those under the caption "Guidance" and other 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 company's history of negative cash flows and operating losses may continue, the ability of clients to terminate their relationship with the company at any time, the impact of global economic fluctuations on temporary contracting operations; risks and financial impact associated with acquisitions and dispositions of non-strategic assets; 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; restrictions imposed by blocking arrangements; exposure to employment-related claims and limits on insurance coverage related thereto; government regulations; 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 review or confirm analysts' expectations or estimates or to update any forward-looking statements, whether as a result of new information, future events or otherwise. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) Three Months Ended March 31, 2007 2006(1) Revenue $337,899 $327,284 Direct costs 212,019 216,603 Gross margin 125,880 110,681 Operating expenses: Selling, general and administrative 119,066 114,296 Depreciation and amortization 3,809 4,185 Business reorganization expenses 3,116 - Total operating expenses 125,991 118,481 Operating loss (111) (7,800) Other income (expense): Interest, net 222 (392) Other, net 2,600 931 Income (loss) from continuing operations before income taxes 2,711 (7,261) Provision for income taxes 2,377 1,440 Income (loss) from continuing operations 334 (8,701) Income from discontinued operations, net of income taxes 19 621 Net income (loss) $353 $(8,080) Basic income (loss) per share: Income (loss) from continuing operations $0.01 $(0.36) Income from discontinued operations 0 0.03 Net income (loss) $0.01 $(0.33) Diluted income (loss) per share: Income (loss) from continuing operations $0.01 $(0.36) Income from discontinued operations 0 0.03 Net income (loss) $0.01 $(0.33) Weighted average shares outstanding Basic 24,919,000 24,224,000 Diluted 25,661,000 24,224,000 (1) 2006 financial statements have been adjusted to reflect the Highland Partners segment as a discontinued operation. The sale of Highland Partners was completed effective on October 1, 2006. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) March 31, December 31, 2007 2006 (unaudited) ASSETS Current assets: Cash and cash equivalents $47,009 $44,649 Accounts receivable, net 228,984 218,722 Prepaid and other 16,980 16,736 Total current assets 292,973 280,107 Intangibles, net 36,749 37,612 Property and equipment, net 27,985 28,105 Other assets 5,997 5,045 Total assets $363,704 $350,869 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $31,875 $24,075 Accrued expenses and other current liabilities 131,557 134,043 Short-term borrowings and current portion of long-term debt 5,129 238 Accrued business reorganization expenses 5,524 5,077 Accrued merger and integration expenses 634 837 Total current liabilities 174,719 164,270 Other non-current liabilities 7,650 8,204 Accrued business reorganization expenses, non-current 4,710 3,409 Accrued merger and integration expenses, non-current 1,418 1,721 Long-term debt, less current portion 170 235 Total liabilities 188,667 177,839 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued or outstanding - - Common stock, $0.001 par value, 100,000,000 shares authorized; issued: 25,221,955 and 24,957,732 shares, respectively 25 25 Additional paid-in capital 431,996 427,645 Accumulated deficit (301,528) (298,344) Accumulated other comprehensive income-translation adjustments 44,774 43,934 Treasury stock, 15,798 shares (230) (230) Total stockholders' equity 175,037 173,030 $363,704 $350,869 HUDSON HIGHLAND GROUP INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Ended March 31, 2007 Hudson Hudson Hudson Americas Europe Asia Pacific Corporate Total Revenue $112,804 $122,008 $103,087 $- $337,899 Gross margin $27,070 $59,023 $39,787 $- $125,880 Adjusted EBITDA (2) $(131) $7,247 $5,948 $(6,250) $6,814 Business reorganization expenses 729 2,447 14 (74) 3,116 EBITDA (2) (860) 4,800 5,934 (6,176) 3,698 Depreciation and amortization 1,149 1,653 892 115 3,809 Operating income (loss) $(2,009) $3,147 $5,042 $(6,291) $(111) For the Three Months Ended March 31, 2006(1) Hudson Hudson Hudson Americas Europe Asia Pacific Corporate Total Revenue $110,605 $116,141 $100,538 $- $327,284 Gross margin $22,855 $50,965 $36,861 $- $110,681 Adjusted EBITDA (2) $(5,975) $5,550 $4,732 $(7,922) $(3,615) EBITDA (2) (5,975) $5,550 $4,732 $(7,922) $(3,615) Depreciation and amortization 1,506 1,739 775 165 4,185 Operating income (loss) $(7,481) $3,811 $3,957 $(8,087) $(7,800) (1) 2006 financial statements have been adjusted to reflect the Highland Partners segment as a discontinued operation. The sale of Highland Partners was completed effective on October 1, 2006. (2) Non-GAAP earnings before interest, income taxes, special charges, other non- operating expense, and depreciation and amortization ("Adjusted EBITDA") and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization ("EBITDA") are 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 these measurements to evaluate capital needs working capital requirements. Adjusted EBITDA and 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 and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. DATASOURCE: Hudson Highland Group, Inc. CONTACT: David F. Kirby of Hudson Highland Group, +1-212-351-7216, or Web site: http://www.hhgroup.com/ http://www.yahoo.com/

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