Hudson Highland Group Reports 2010 Second Quarter Financial Results
August 03 2010 - 4:01PM
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, 2010.
2010 Second Quarter Summary
- Revenue of $195.0 million, an increase of 12.1 percent from
$173.8 million for the second quarter of 2009, and an increase of
$14.9 million or 8.2 percent from the first quarter of 2010
- Gross margin of $74.2 million, or 38.1 percent of revenue, up
14.4 percent from $64.9 million, or 37.3 percent of revenue for the
same period last year, and an increase of $7.8 million or 11.8
percent from the first quarter of 2010
- EBITDA* of $3.1 million, or 1.6 percent of revenue, improved
from an EBITDA loss of $9.5 million for the second quarter of 2009,
which included $3.6 million of restructuring charges and $1.5
million of goodwill and other impairment charges
- Net income of $0.2 million, or $0.01 per basic and diluted
share, compared with net loss of $17.8 million, or $0.68 per basic
and diluted share, for the second quarter of 2009
* EBITDA is defined in the segment tables at the end of this
release and includes other non-operating income.
"Our second quarter was highlighted by strong sequential gross
margin growth across every major geography, with particular
strength in the U.K., Australia and Asia," said Jon Chait, Hudson
Highland Group's chairman and chief executive officer. "We have not
seen any signs of client pull back from our key markets, but remain
cautious given continuing uncertainties in the broader global
economy."
"Our operational cost discipline and targeted market investments
have served us well throughout this economic cycle, and helped our
return to profitability," said Mary Jane Raymond, the company's
executive vice president and chief financial officer.
Regional Results
The regional results in constant currency were as follows:
- Europe gross margin up 16 percent compared with second quarter
2009, and up 13 percent compared with first quarter 2010, led by 35
percent growth in the U.K. compared with second quarter 2009 and 19
percent sequentially
- Australia and New Zealand gross margin up 8 percent compared
with second quarter 2009, and up 26 percent compared with first
quarter 2010, led by an increase of 40 percent in permanent
recruitment compared with second quarter 2009
- Asia gross margin up 43 percent compared with second quarter
2009 and up 16 percent compared with first quarter 2010
- North America gross margin down 5 percent compared with second
quarter 2009, but up 8 percent compared with first quarter
2010
Liquidity and Capital Resources
The company ended the second quarter of 2010 with $37.9 million
in cash, an increase from $24.1 million in cash at the end of
the first quarter, including the proceeds of the equity offering
completed in early April 2010. The company had $12.8 million in
borrowings under its credit facilities.
The company made certain changes to its credit facilities
subsequent to quarter end. It completed a new
A$15 million ($13.5 million at current exchange rates) credit
agreement in Australia due to finding more favorable terms,
and accordingly, amended the Wells Fargo Foothill agreement to
include only the U.S. and U.K. receivables. The
availability under the new Australian agreement and the amended
Wells Fargo Foothill agreement is $15.2 million. The company is in
the process of considering other improvements to its
remaining U.S. and U.K. credit arrangements. Availability under
other local country facilities is $3.8 million for a total
availability of $19.0 million.
Guidance
The company currently expects third quarter 2010 revenue of $190
- $200 million and slightly positive EBITDA at prevailing exchange
rates. This compares with revenue of $169.6 million and an
EBITDA loss of $6.0 million in the third quarter of 2009.
Additional Information
Additional information about the company's quarterly results can
be found in the shareholder letter and the quarterly earnings
slides in the investor information section of the company's Web
site at www.hudson.com.
Conference Call/Webcast Hudson Highland Group
will conduct a conference call Wednesday, August 4, 2010 at 9:00
a.m. ET to discuss this announcement. Individuals wishing to listen
can access the Webcast on the investor information section of the
company's Web site at www.hudson.com.
The archived call will be available on the investor information
section of the company's Web site at www.hudson.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 2,000 professionals serving clients and
candidates in approximately 20 countries. More information is
available at www.hudson.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 important factors, risks, uncertainties and assumptions,
including industry and economic conditions that could cause actual
results to differ materially from those described in the
forward-looking statements. Such factors, risks, uncertainties and
assumptions include, but are not limited to, global economic
fluctuations; the ability of clients to terminate their
relationship with the company at any time; risks in collecting
the company's accounts receivable; the company's history of
negative cash flows and operating losses may continue; the
company's limited borrowing availability under its credit facility,
which may negatively impact its liquidity; restrictions on the
company's operating flexibility due to the terms of its credit
facility; risks related to fluctuations in the company's operating
results from quarter to quarter; risks related to international
operations, including foreign currency fluctuations; risks
associated with the company's investment strategy; risks and
financial impact associated with dispositions of underperforming
assets; implementation of the company's cost reduction
initiatives effectively; the company's heavy reliance on
information systems and the impact of potentially losing or failing
to develop technology; competition in the company's
markets; the company's exposure to employment-related claims
from both clients and employers and limits on related insurance
coverage; the company's dependence on key management
personnel; the company's ability to attract and retain highly
skilled professionals; volatility of the company's stock
price; the impact of government regulations;
and restrictions imposed by blocking arrangements. 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
document. The company assumes no obligation, and expressly
disclaims any obligation, to update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
HUDSON HIGHLAND GROUP,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
share and per share amounts) |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
|
|
|
|
|
Revenue |
$ 194,969 |
$ 173,848 |
$ 375,087 |
$ 338,998 |
Direct costs |
120,732 |
108,964 |
234,430 |
212,110 |
Gross margin |
74,237 |
64,884 |
140,657 |
126,888 |
Operating expenses: |
|
|
|
|
Selling, general and administrative
expenses |
71,411 |
69,329 |
139,743 |
141,030 |
Depreciation and amortization |
2,186 |
2,840 |
4,472 |
6,628 |
Business reorganization and integration
expenses |
551 |
3,562 |
664 |
9,401 |
Goodwill and other impairment
charges |
-- |
1,549 |
-- |
1,549 |
Total operating expenses |
74,148 |
77,280 |
144,879 |
158,608 |
Operating income (loss) |
89 |
(12,396) |
(4,222) |
(31,720) |
Other (expense) income: |
|
|
|
|
Interest, net |
(243) |
(182) |
(475) |
(372) |
Other, net |
846 |
54 |
1,501 |
674 |
Income (loss) from continuing operations
before provision for income taxes |
692 |
(12,524) |
(3,196) |
(31,418) |
Provision for (benefit from) income
taxes |
515 |
2,975 |
766 |
(1,085) |
Income (loss) from continuing operations |
177 |
(15,499) |
(3,962) |
(30,333) |
Income (loss) from discontinued operations,
net of income taxes |
52 |
(2,272) |
(17) |
7,003 |
Net income (loss) |
$ 229 |
$ (17,771) |
$ (3,979) |
$ (23,330) |
Basic earnings (loss) per
share: |
|
|
|
|
Income (loss) from continuing operations |
$ 0.01 |
$ (0.59) |
$ (0.14) |
$ (1.18) |
Income (loss) from discontinued
operations |
0.00 |
(0.09) |
(0.00) |
0.27 |
Net income (loss) |
$ 0.01 |
$ (0.68) |
$ (0.14) |
$ (0.91) |
|
|
|
|
|
Diluted earnings (loss) per
share: |
|
|
|
|
Income (loss) from continuing operations |
$ 0.01 |
$ (0.59) |
$ (0.14) |
$ (1.18) |
Income (loss) from discontinued
operations |
0.00 |
(0.09) |
(0.00) |
0.27 |
Net income (loss) |
$ 0.01 |
$ (0.68) |
$ (0.14) |
$ (0.91) |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic |
30,947 |
26,311 |
28,616 |
25,744 |
Diluted |
31,311 |
26,311 |
28,616 |
25,744 |
|
|
|
|
|
|
|
|
|
|
|
HUDSON
HIGHLAND GROUP, INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in thousands, except
per share amounts) |
(unaudited) |
|
|
|
|
June 30, 2010 |
December 31,
2009 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 37,896 |
$ 36,064 |
Accounts receivable, net |
119,851 |
98,994 |
Prepaid and other |
13,703 |
13,308 |
Total current assets |
171,450 |
148,366 |
Property and equipment, net |
15,649 |
19,433 |
Other assets |
14,156 |
14,145 |
Total assets |
$ 201,255 |
$ 181,944 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 9,389 |
$ 12,811 |
Accrued expenses and other current
liabilities |
72,608 |
54,103 |
Short-term borrowings |
12,748 |
10,456 |
Accrued business reorganization expenses |
3,370 |
8,784 |
Total current liabilities |
98,115 |
86,154 |
Other non-current liabilities |
8,531 |
10,768 |
Income tax payable, non-current |
8,026 |
8,415 |
Accrued business reorganization expenses,
non-current |
667 |
347 |
Total liabilities |
115,339 |
105,684 |
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 32,178 and 26,836 shares,
respectively |
32 |
27 |
Additional paid-in capital |
465,786 |
445,541 |
Accumulated deficit |
(407,493) |
(403,514) |
Accumulated other comprehensive
income—translation adjustments |
27,597 |
34,509 |
Treasury stock, 1 and 114 shares,
respectively, at cost |
(6) |
(303) |
Total stockholders' equity |
85,916 |
76,260 |
Total liabilities and stockholders'
equity |
$ 201,255 |
$ 181,944 |
|
|
|
HUDSON
HIGHLAND GROUP, INC. |
SEGMENT ANALYSIS -
QUARTER TO DATE |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Three Months Ended June 30,
2010 |
Hudson Americas |
Hudson Europe |
Hudson ANZ |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 40,819 |
$ 80,717 |
$ 65,249 |
$ 8,184 |
$ -- |
$ 194,969 |
Gross margin, from external customers |
$ 10,039 |
$ 34,559 |
$ 21,723 |
$ 7,916 |
$ -- |
$ 74,237 |
Business reorganization and integration
expenses (recovery) |
$ 101 |
$ 450 |
$ -- |
$ -- |
$ -- |
$ 551 |
Non-operating expense (income), including
corporate administration charges |
393 |
1,148 |
1,015 |
38 |
(3,440) |
(846) |
EBITDA (Loss) (1) |
$ (991) |
$ 2,466 |
$ 1,369 |
$ 1,311 |
$ (1,034) |
$ 3,121 |
Depreciation and amortization expenses |
|
|
|
|
|
2,186 |
Interest expense, net |
|
|
|
|
|
243 |
Provision for income taxes |
|
|
|
|
|
515 |
Income from discontinued operations, net of
taxes |
|
|
|
|
|
(52) |
Net income |
|
|
|
|
|
$ 229 |
|
|
|
|
|
|
|
For The Three Months Ended June 30,
2009 |
Hudson Americas |
Hudson Europe |
Hudson ANZ |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 43,133 |
$ 68,187 |
$ 56,653 |
$ 5,875 |
$ -- |
$ 173,848 |
Gross margin, from external customers |
$ 10,512 |
$ 31,280 |
$ 17,661 |
$ 5,431 |
$ -- |
$ 64,884 |
Business reorganization and integration
expenses (recovery) |
$ 1,125 |
$ 2,328 |
$ (8) |
$ 104 |
$ 13 |
$ 3,562 |
Non-operating expense (income), including
corporate administration charges |
531 |
690 |
(243) |
168 |
(1,200) |
(54) |
EBITDA (Loss) (1) |
(2,003) |
(2,220) |
817 |
(2,063) |
(4,033) |
(9,502) |
Depreciation and amortization expenses |
|
|
|
|
|
2,840 |
Interest expense, net |
|
|
|
|
|
182 |
Provision for income taxes |
|
|
|
|
|
2,975 |
Loss from discontinued operations, net of
taxes |
|
|
|
|
|
2,272 |
Net loss |
|
|
|
|
|
$ (17,771) |
|
|
|
|
|
|
|
For the Three Months Ended September
30, 2009 |
Hudson Americas |
Hudson Europe |
Hudson ANZ |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 35,705 |
$ 67,898 |
$ 59,026 |
$ 7,018 |
$ -- |
$ 169,647 |
Gross margin, from external customers |
$ 9,264 |
$ 29,565 |
$ 18,755 |
$ 6,606 |
$ -- |
$ 64,190 |
Business reorganization and integration
expenses (recovery) |
$ 592 |
$ 1,881 |
$ 405 |
$ -- |
$ -- |
$ 2,878 |
Non-operating expense (income), including
corporate administration charges |
569 |
554 |
(12) |
70 |
(1,280) |
(99) |
EBITDA (Loss) (1) |
$ (2,795) |
$ (2,406) |
$ 1,155 |
$ 961 |
$ (2,913) |
$ (5,998) |
Depreciation and amortization expenses |
|
|
|
|
|
2,741 |
Interest expense, net |
|
|
|
|
|
97 |
Benefit from income taxes |
|
|
|
|
|
(1,215) |
Income from discontinued operations, net of
taxes |
|
|
|
|
|
(770) |
Net loss |
|
|
|
|
|
$ (6,851) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP earnings
before interest, income taxes, 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. 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, EBITDA as presented above
may not be comparable with similarly titled measures reported by
other companies. |
(2) Prior year revenue has
been reclassed to conform to current year presentation.
|
|
HUDSON
HIGHLAND GROUP, INC. |
SEGMENT ANALYSIS - YEAR
TO DATE |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months Ended June 30,
2010 |
Hudson Americas |
Hudson Europe |
Hudson ANZ |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 80,325 |
$ 157,372 |
$ 122,071 |
$ 15,319 |
$ -- |
$ 375,087 |
Gross margin, from external customers |
$ 19,331 |
$ 67,074 |
$ 39,499 |
$ 14,753 |
$ -- |
$ 140,657 |
Business reorganization and integration
expenses (recovery) |
$ 243 |
$ 537 |
$ (116) |
$ -- |
$ -- |
$ 664 |
Non-operating expense (income), including
corporate administration charges |
(116) |
2,326 |
1,597 |
226 |
(5,534) |
(1,501) |
EBITDA (Loss) (1) |
$ (1,232) |
$ 2,901 |
$ 1,617 |
$ 1,907 |
$ (3,442) |
$ 1,751 |
Depreciation and amortization expenses |
|
|
|
|
|
4,472 |
Interest expense, net |
|
|
|
|
|
475 |
Provision for income taxes |
|
|
|
|
|
766 |
Loss from discontinued operations, net of
taxes |
|
|
|
|
|
17 |
Net loss |
|
|
|
|
|
$ (3,979) |
|
|
|
|
|
|
|
For The Six Months Ended June 30,
2009 |
Hudson Americas |
Hudson Europe |
Hudson ANZ |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 87,156 |
$ 134,575 |
$ 106,649 |
$ 10,618 |
$ -- |
$ 338,998 |
Gross margin, from external customers |
$ 21,482 |
$ 61,584 |
$ 33,964 |
$ 9,858 |
$ -- |
$ 126,888 |
Business reorganization and integration
expenses (recovery) |
$ 2,746 |
$ 4,666 |
$ 1,877 |
$ 98 |
$ 14 |
$ 9,401 |
Non-operating expense (income), including
corporate administration charges |
1,136 |
882 |
(70) |
(221) |
(2,401) |
(674) |
EBITDA (Loss) (1) |
(7,393) |
(5,829) |
(935) |
(2,678) |
(7,583) |
(24,418) |
Depreciation and amortization expenses |
|
|
|
|
|
6,628 |
Interest expense, net |
|
|
|
|
|
372 |
Benefit from income taxes |
|
|
|
|
|
(1,085) |
Income from discontinued operations, net of
taxes |
|
|
|
|
|
(7,003) |
Net loss |
|
|
|
|
|
$ (23,330) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP earnings
before interest, income taxes, 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. 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, EBITDA as presented above
may not be comparable with similarly titled measures reported by
other companies. |
(2) Prior year revenue has
been reclassed to conform to current year presentation. |
|
HUDSON
HIGHLAND GROUP, INC. |
Reconciliation For
Constant Currency |
(in
thousands) |
(unaudited) |
|
|
|
|
|
The company defines the term
"constant currency" to mean that financial data for a period are
translated into U.S. Dollars using the same foreign currency
exchange rates that were used to translate financial data for the
previously reported period. The company uses constant currency to
depict the current period results at the exchange rates of the
prior period. Changes in revenues, direct costs, gross margin and
selling, general and administrative expenses include the effect of
changes in foreign currency exchange rates. Variance analysis
usually describes period-to-period variances that are calculated
using constant currency as a percentage. The company's management
reviews and analyzes business results in constant currency and
believes these results better represent the company's underlying
business trends. |
|
|
|
|
|
The company believes that these
calculations are a useful measure, indicating the actual change in
operations. Earnings from subsidiaries are rarely repatriated to
the United States, and there are no significant gains or losses on
foreign currency transactions between subsidiaries. Therefore,
changes in foreign currency exchange rates generally impact only
reported earnings and not the company's economic condition. |
|
|
|
|
|
|
2010 |
2009 |
|
As Reported |
Currency
Translation |
Constant
Currency |
As Reported |
Revenue: |
|
|
|
|
Hudson Americas |
$ 40,819 |
$ (28) |
$ 40,791 |
$ 43,133 |
Hudson Europe |
80,717 |
3,916 |
84,633 |
68,187 |
Hudson ANZ |
65,249 |
(8,566) |
56,683 |
56,653 |
Hudson Asia |
8,184 |
(158) |
8,026 |
5,875 |
Total |
194,969 |
(4,836) |
190,133 |
173,848 |
Direct costs: |
|
|
|
|
Hudson Americas |
30,780 |
-- |
30,780 |
32,621 |
Hudson Europe |
46,158 |
2,100 |
48,258 |
36,907 |
Hudson ANZ |
43,526 |
(5,905) |
37,621 |
38,992 |
Hudson Asia |
268 |
(6) |
262 |
444 |
Total |
120,732 |
(3,811) |
116,921 |
108,964 |
Gross margin: |
|
|
|
|
Hudson Americas |
10,039 |
(28) |
10,011 |
10,512 |
Hudson Europe |
34,559 |
1,816 |
36,375 |
31,280 |
Hudson ANZ |
21,723 |
(2,661) |
19,062 |
17,661 |
Hudson Asia |
7,916 |
(152) |
7,764 |
5,431 |
Total |
$ 74,237 |
$ (1,025) |
$ 73,212 |
$ 64,884 |
Selling, general and administrative (1) |
|
|
|
|
Hudson Americas |
$ 11,223 |
$ (37) |
$ 11,186 |
$ 12,049 |
Hudson Europe |
31,296 |
1,545 |
32,841 |
31,488 |
Hudson ANZ |
19,883 |
(2,771) |
17,112 |
17,611 |
Hudson Asia |
6,689 |
(135) |
6,554 |
5,769 |
Corporate |
4,506 |
-- |
4,506 |
5,252 |
Total |
$ 73,597 |
$ (1,398) |
$ 72,199 |
$ 72,169 |
|
|
|
|
|
|
|
|
|
|
(1) Selling, general and
administrative expenses include depreciation and amortization
expenses. |
|
|
|
|
CONTACT: Hudson Highland Group, Inc.
David F. Kirby
212-351-7216
david.kirby@hudson.com
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