HHGP Hudson Highland Grp., Inc. (MM)

NEW YORK, July 25 /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 second quarter ended June 30, 2007. 2007 Second Quarter Summary -- Revenue of $348.9 million, a decrease of 0.9 percent from $352.1 million for the second quarter of 2006 -- Gross margin of $137.6 million, or 39.4 percent of revenue, up 7.0 percent from $128.6 million, or 36.5 percent of revenue, for the same year-ago period -- Adjusted EBITDA of $13.2 million, or 3.8 percent of revenue, up 42.7 percent from $9.3 million for the second quarter of 2006 -- EBITDA of $11.7 million, or 3.3 percent of revenue, up 36.9 percent from $8.5 million for the same period last year -- Net income of $3.2 million, or $0.13 per basic and $0.12 per diluted share, compared with net income of $2.2 million, or $0.09 per basic and diluted share, for the second quarter of 2006 "During the second quarter, we delivered strong improvement over the same period last year, largely driven by our Europe and Asia Pacific operations," said Jon Chait, Hudson Highland Group chairman and chief executive officer. "EBITDA increased faster than gross margin as we continue to benefit from operating leverage." "While last year's particularly strong third quarter performance will be tough to beat, we remain squarely focused on driving steady operational and profitability improvements," said Mary Jane Raymond, executive vice president and chief financial officer. Guidance The company currently expects third quarter 2007 revenue of $340 - $355 million at prevailing exchange rates and adjusted EBITDA of $9 - $12 million. This compares with revenue of $352.5 million and adjusted EBITDA of $12.1 million in the third quarter of 2006. 2007 Six-Month Results For the first six months of 2007, the company reported revenue of $686.8 million, up 1.1 percent from $679.4 million for the same six-month period last year. Net income was $3.6 million, or $0.14 per basic and diluted share, compared with a net loss of $5.9 million, or ($0.24) per basic and diluted share, for the same six-month period last year. Additional Information Please find additional information about the company's quarterly results in the shareholder letter in the investor information section of the company's website at http://www.hhhgroup.com/. Conference Call/Webcast Hudson Highland Group will conduct a conference call Thursday, July 26, 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 7025727 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 7025727. 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/. The archived call will be available for one week by dialing 1-800-642-1687 followed by the participant passcode 7025727. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 7025727. 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; 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 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 Six Months Ended June 30, June 30, 2007 (1) 2006 (1) 2007 (1) 2006 (1) Revenue $348,861 $352,084 $686,760 $679,368 Direct costs 211,258 223,458 423,277 440,061 Gross margin 137,603 128,626 263,483 239,307 Operating expenses: Selling, general and administrative 124,399 119,374 243,465 233,670 Depreciation and amortization 3,952 4,028 7,761 8,213 Business reorganization expenses 1,578 658 4,694 658 Merger and integration expenses (recoveries) (42) 72 (42) 72 Total operating expenses 129,887 124,132 255,878 242,613 Operating income (loss) 7,716 4,494 7,605 (3,306) Other income (expense): Interest, net 435 (760) 657 (1,152) Other, net (21) 128 2,579 1,059 Income (loss) from continuing operations before income taxes 8,130 3,862 10,841 (3,399) Provision for income taxes 4,637 2,586 7,014 4,026 Income (loss) from continuing operations 3,493 1,276 3,827 (7,425) Income (loss) from discontinued operations, net of income taxes (258) 890 (239) 1,511 Net income (loss) $3,235 $2,166 $3,588 $(5,914) Basic income (loss) per share: Income (loss) from continuing operations $0.14 $0.05 $0.15 $(0.31) Income (loss) from discontinued operations (0.01) 0.04 (0.01) 0.07 Net income $0.13 $0.09 $0.14 $(0.24) Diluted income (loss) per share: Income (loss) from continuing operations $0.13 $0.05 $0.15 $(0.31) Income (loss) from discontinued operations (0.01) 0.04 (0.01) 0.07 Net income (loss) $0.12 $0.09 $0.14 $(0.24) Weighted average shares outstanding Basic 25,247,000 24,414,000 25,084,000 24,318,000 Diluted 26,164,000 25,172,000 25,907,000 24,318,000 (1) Note - 2007 and 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 STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) (unaudited) June 30, December 31, 2007 (1) 2006 (1) (unaudited) ASSETS Current assets: Cash and cash equivalents $56,727 $44,649 Accounts receivable, net 225,593 218,722 Prepaid and other 16,428 16,736 Total current assets 298,748 280,107 Intangibles, net 45,227 37,612 Property and equipment, net 28,730 28,105 Other assets 5,774 5,045 Total assets $378,479 $350,869 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $31,981 $24,075 Accrued expenses and other current liabilities 132,589 134,043 Short-term borrowings and current portion of long-term debt 321 238 Accrued business reorganization expenses 3,805 5,077 Accrued merger and integration expenses 384 837 Total current liabilities 169,080 164,270 Other non-current liabilities 17,643 8,204 Accrued business reorganization expenses, non-current 4,305 3,409 Accrued merger and integration expenses, non-current 1,380 1,721 Long-term debt, less current portion 100 235 Total liabilities 192,508 177,839 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: 25,540,213 and 24,957,732 shares, respectively 26 25 Additional paid-in capital 436,835 427,645 Accumulated deficit (298,290) (298,344) Accumulated other comprehensive income-translation adjustments 47,681 43,934 Treasury stock, 18,431 and 15,798 shares, respectively (281) (230) Total stockholders' equity 185,971 173,030 $378,479 $350,869 (1) Note - 2007 and 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. SEGMENT ANALYSIS (In thousands) (unaudited) For the Three Months Ended June 30, Hudson Hudson Hudson 2007 (1) Americas Europe Asia Pacific Corporate Total Revenue $106,615 $125,745 $116,501 $- $348,861 Gross margin $25,962 $64,488 $47,153 $- $137,603 Adjusted EBITDA (2) $(751) $10,886 $9,617 $(6,548) $13,204 Business reorganization expenses (7) (7) 17 1,575 1,578 Merger and integration recoveries (42) - - - (42) EBITDA (2) (702) 10,893 9,600 (8,123) 11,668 Depreciation and amortization 1,180 1,714 992 66 3,952 Operating income (loss) $(1,882) $9,179 $8,608 $(8,189) $7,716 For the Three Months Ended June 30, Hudson Hudson Hudson 2006 (1) Americas Europe Asia Pacific Corporate Total Revenue $119,145 $122,062 $110,877 $- $352,084 Gross margin $28,971 $56,225 $43,430 $- $128,626 Adjusted EBITDA (2) $(1,416) $7,972 $9,541 $(6,845) $9,252 Business reorganization expenses (recoveries) 250 (57) 152 313 658 Merger and integration expense 72 - - - 72 EBITDA (2) (1,738) $8,029 9,389 (7,158) 8,522 Depreciation and amortization 1,313 1,776 771 168 4,028 Operating income (loss) $(3,051) $6,253 $8,618 $(7,326) $4,494 (1) Note - 2007 and 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 and 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. Amortization for 2006 includes accelerated amortization expense related to changes in estimates and valuations. HUDSON HIGHLAND, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Six Months Ended June 30, Hudson Hudson Hudson 2007 (1) Americas Europe Asia Pacific Corporate Total Revenue $219,419 $247,753 $219,588 $- $686,760 Gross margin $53,032 $123,511 $86,940 $- $263,483 Adjusted EBITDA (2) $(882) $18,133 $15,565 $(12,798) $20,018 Business reorganization expenses 722 2,440 31 1,501 4,694 Merger and integration recoveries (42) - - - (42) EBITDA (2) (1,562) 15,693 15,534 (14,299) 15,366 Depreciation and amortization 2,329 3,367 1,884 181 7,761 Operating income (loss) $(3,891) $12,326 $13,650 $(14,480) $7,605 For the Six Months Ended June 30, Hudson Hudson Hudson 2006 (1) Americas Europe Asia Pacific Corporate Total Revenue $229,750 $238,203 $211,415 $- $679,368 Gross margin $51,826 $107,190 $80,291 $- $239,307 Adjusted EBITDA (2) $(7,391) $13,522 $14,273 $(14,767) $5,637 Business reorganization expenses (recoveries) 250 (57) 152 313 658 Merger and integration expense 72 - - - 72 EBITDA (2) (7,713) 13,579 14,121 (15,080) 4,907 Depreciation and amortization 2,819 3,515 1,546 333 8,213 Operating income (loss) $(10,532) $10,064 $12,575 $(15,413) $(3,306) (1) Note - 2007 and 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 and 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. Amortization for 2006 includes accelerated amortization expense related to changes in estimates and valuations. HUDSON HIGHLAND, INC. (in thousands) For the Three Months Ended Total September 30, 2006 (1) Adjusted EBITDA (2) $12,122 Business reorganization expenses 2,090 Merger and integration (recoveries) 14 EBITDA (2) 10,018 Depreciation and amortization 3,868 Operating income $6,150 (1) Note - 2007 and 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 and 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. Amortization for 2006 includes accelerated amortization expense related to changes in estimates and valuations. DATASOURCE: Hudson Highland Group, Inc. CONTACT: David F. Kirby of Hudson Highland Group, +1-212-351-7216, or Web site: http://www.hhgroup.com/

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