Hudson Highland Group Reports 2011 Third Quarter Financial Results
November 01 2011 - 7:00AM
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 third quarter ended September 30, 2011.
2011 Third Quarter Summary
- Revenue of $245.1 million, an increase of 22.3 percent over the
third quarter of 2010, or 13.5 percent in constant currency
- Permanent recruitment revenue increased 22.7 percent from the
prior year quarter, or 13.3 percent in constant currency
- Temporary contracting revenue increased 23.6 percent in the
third quarter, or 15.1 percent in constant currency
- Gross margin of $93.0 million, or 37.9 percent of revenue, up
24.0 percent from the same period last year, or 14.9 percent in
constant currency
- EBITDA* of $7.4 million, or 3.0 percent of revenue, improved
from $1.2 million in the third quarter of 2010
- Net income of $3.4 million, or $0.11 per basic and diluted
share, compared with a net loss of $1.9 million, or $0.06 per basic
and diluted share, in the third quarter of 2010
* EBITDA is defined in the segment tables at the end of this
release and includes other non-operating income.
"Our diversified portfolio of professional recruitment practices
and global presence supported the delivery of meaningful
year-over-year growth during the third quarter," said Manuel
Marquez, chairman and chief executive officer of Hudson Highland
Group. "We are also encouraged by the continued momentum of
our legal and recruitment process outsourcing (RPO) solution
businesses, two practice areas specifically tailored to respond to
the growing international needs of our global clients."
"We continued to make strides on profitability metrics in the
third quarter," added Mary Jane Raymond, the company's chief
financial officer. "Our results are starting to reflect steps
we are taking to heighten productivity and leverage, which should
help offset the effects of challenging macro-economic
conditions."
Regional Results
Regional results for the third quarter in constant currency
were:
- Europe gross margin increased 10.4 percent, led by 12.6 percent
growth in continental Europe and 8.6 percent growth in the U.K.,
compared with third quarter 2010
- Australia/New Zealand gross margin increased 13.3 percent
compared with the prior year period, led by 22.3 percent growth in
permanent recruitment
- Americas gross margin increased 46.5 percent compared with the
prior year period, driven by 32.6 percent growth in temporary
contracting and continued strong growth in permanent recruitment
- Asia gross margin increased 4.9 percent compared with third
quarter 2010
Liquidity and Capital Resources
The company ended the third quarter of 2011 with $72.2 million
in liquidity, composed of $22.5 million in cash and $49.7 million
in availability under its credit facilities. The company used
$6.8 million in cash flow from operations during the quarter and
reduced its outstanding borrowings from $10.1 million at the end of
the second quarter to $6.6 million at the end of the third
quarter.
Guidance
The company currently expects fourth quarter 2011 revenue of
$225 - $240 million and EBITDA of $6 - $9 million at prevailing
exchange rates. This compares with revenue of $219.1 million
and EBITDA of $3.6 million in the fourth quarter of 2010.
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 today at 10:00 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; risks related to fluctuations in the company's
operating results from quarter to quarter; the ability of clients
to terminate their relationship with the company at any
time; competition in the company's markets; risks
associated with the company's investment strategy; risks related to
international operations, including foreign currency fluctuations;
the company's dependence on key management personnel; the company's
ability to attract and retain highly skilled professionals; risks
in collecting the company's accounts receivable; the company's
history of negative cash flows and operating losses may
continue; restrictions on the company's operating flexibility
due to the terms of its credit facilities; the company's ability to
refinance its existing AUD 17 million finance agreement with the
Commonwealth Bank of Australia prior to the December 5, 2011
termination date of the existing agreement; 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; risks related to our
dependence on uninterrupted service to clients; the company's
exposure to employment-related claims from both clients and
employers and limits on related insurance coverage; 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.
Financial Tables Follow
|
HUDSON HIGHLAND GROUP,
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share amounts) |
(unaudited) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September
30, |
September
30, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Revenue |
$ 245,081 |
$ 200,394 |
$ 710,998 |
$ 575,481 |
Direct costs |
152,089 |
125,403 |
441,341 |
359,833 |
Gross margin |
92,992 |
74,991 |
269,657 |
215,648 |
Operating expenses: |
|
|
|
|
Selling, general and
administrative expenses |
85,305 |
74,378 |
251,517 |
214,121 |
Depreciation and
amortization |
1,537 |
1,981 |
4,750 |
6,453 |
Business reorganization and
integration expenses |
-- |
41 |
747 |
705 |
Total operating expenses |
86,842 |
76,400 |
257,014 |
221,279 |
Operating income (loss) |
6,150 |
(1,409) |
12,643 |
(5,631) |
Other (expense) income: |
|
|
|
|
Interest, net |
(328) |
(497) |
(910) |
(972) |
Other, net |
(238) |
1,184 |
244 |
2,687 |
Fee for early extinguishment of
credit facility |
-- |
(563) |
-- |
(563) |
Income (loss) from continuing operations
before provision for income taxes |
5,584 |
(1,285) |
11,977 |
(4,479) |
Provision for (benefit from) income
taxes |
2,202 |
599 |
4,377 |
1,366 |
Income (loss) from continuing operations |
3,382 |
(1,884) |
7,600 |
(5,845) |
Income (loss) from discontinued operations,
net of income taxes |
-- |
(14) |
-- |
(31) |
Net income (loss) |
$ 3,382 |
$ (1,898) |
$ 7,600 |
$ (5,876) |
Basic earnings (loss) per
share: |
|
|
|
|
Income (loss) from continuing operations |
$ 0.11 |
$ (0.06) |
$ 0.24 |
$ (0.20) |
Income (loss) from discontinued
operations |
-- |
(0.00) |
-- |
(0.00) |
Net income (loss) |
$ 0.11 |
$ (0.06) |
$ 0.24 |
$ (0.20) |
|
|
|
|
|
Diluted earnings (loss)
per share: |
|
|
|
Income (loss) from continuing operations |
$ 0.11 |
$ (0.06) |
$ 0.24 |
$ (0.20) |
Income (loss) from discontinued
operations |
-- |
(0.00) |
-- |
(0.00) |
Net income (loss) |
$ 0.11 |
$ (0.06) |
$ 0.24 |
$ (0.20) |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
31,620 |
31,225 |
31,541 |
29,493 |
Diluted |
32,085 |
31,225 |
31,988 |
29,493 |
|
|
|
|
|
HUDSON HIGHLAND
GROUP, INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in thousands, except
per share amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
September 30,
2011 |
December 31,
2010 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 22,482 |
$ 29,523 |
Accounts receivable, less allowance for
doubtful accounts of $1,973 and $2,145, respectively |
151,517 |
128,576 |
Prepaid and other |
12,501 |
13,988 |
Total current assets |
186,500 |
172,087 |
Property and equipment, net |
17,126 |
16,593 |
Other assets |
16,561 |
17,154 |
Total assets |
$ 220,187 |
$ 205,834 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 10,500 |
$ 14,812 |
Accrued expenses and other current
liabilities |
80,709 |
74,990 |
Short-term borrowings |
6,561 |
1,339 |
Accrued business reorganization expenses |
1,200 |
2,619 |
Total current liabilities |
98,970 |
93,760 |
Other non-current liabilities |
10,955 |
10,493 |
Income tax payable, non-current |
8,272 |
8,303 |
Total liabilities |
118,197 |
112,556 |
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 32,922 and 32,181 shares,
respectively |
33 |
32 |
Additional paid-in capital |
470,005 |
466,582 |
Accumulated deficit |
(400,599) |
(408,199) |
Accumulated other comprehensive
income—translation adjustments |
32,943 |
34,902 |
Treasury stock, 71 and 9 shares,
respectively, at cost |
(392) |
(39) |
Total stockholders' equity |
101,990 |
93,278 |
Total liabilities and
stockholders' equity |
$ 220,187 |
$ 205,834 |
|
|
HUDSON HIGHLAND
GROUP, INC. |
SEGMENT ANALYSIS -
QUARTER TO DATE |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Three Months Ended September
30, 2011 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 96,753 |
$ 90,437 |
$ 47,691 |
$ 10,200 |
$ -- |
$ 245,081 |
Gross margin, from external customers |
$ 38,129 |
$ 31,439 |
$ 13,662 |
$ 9,762 |
$ -- |
$ 92,992 |
Business reorganization and integration
expenses (recovery) |
$ -- |
$ -- |
$ -- |
$ -- |
$ -- |
$ -- |
Non-operating expense (income), including
corporate administration charges |
1,873 |
1,421 |
497 |
427 |
(3,980) |
238 |
EBITDA (Loss) (1) |
$ 2,020 |
$ 3,934 |
$ 1,459 |
$ 1,289 |
$ (1,253) |
$ 7,449 |
Depreciation and amortization expenses |
|
|
|
|
|
1,537 |
Interest expense (income), net |
|
|
|
|
|
328 |
Provision for (benefit from) income
taxes |
|
|
|
|
|
2,202 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
|
-- |
Net income (loss) |
|
|
|
|
|
$ 3,382 |
|
|
|
|
|
|
|
For The Three Months Ended September
30, 2010 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 80,503 |
$ 72,974 |
$ 37,839 |
$ 9,078 |
$ -- |
$ 200,394 |
Gross margin, from external customers |
$ 32,647 |
$ 24,259 |
$ 9,311 |
$ 8,774 |
$ -- |
$ 74,991 |
Business reorganization and integration
expenses (recovery) |
$ -- |
$ -- |
$ 41 |
$ -- |
$ -- |
$ 41 |
Non-operating expense (income), including
corporate administration charges |
3,088 |
1,433 |
(407) |
478 |
(5,776) |
(1,184) |
EBITDA (Loss) (1) |
$ (2,128) |
$ 1,376 |
$ 532 |
$ 1,169 |
$ 244 |
$ 1,193 |
Depreciation and amortization expenses |
|
|
|
|
|
1,981 |
Interest expense (income), net |
|
|
|
|
|
497 |
Provision for (benefit from) income
taxes |
|
|
|
|
|
599 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
|
14 |
Net income (loss) |
|
|
|
|
|
$ (1,898) |
|
|
|
|
|
|
|
For the Three Months Ended December
31, 2010 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 90,616 |
$ 74,338 |
$ 44,268 |
$ 9,839 |
$ -- |
$ 219,061 |
Gross margin, from external customers |
$ 37,468 |
$ 25,231 |
$ 10,775 |
$ 9,450 |
$ -- |
$ 82,924 |
Business reorganization and integration
expenses (recovery) |
$ 865 |
$ 102 |
$ 21 |
$ -- |
$ -- |
$ 988 |
Non-operating expense (income), including
corporate administration charges |
1,337 |
886 |
(1,298) |
243 |
(2,979) |
(1,811) |
EBITDA (Loss) (1) |
$ 314 |
$ 1,254 |
$ 2,386 |
$ 1,523 |
$ (1,921) |
$ 3,556 |
Depreciation and amortization expenses |
|
|
|
|
|
1,730 |
Interest expense (income), net |
|
|
|
|
|
306 |
Provision for (benefit from) income
taxes |
|
|
|
|
|
116 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
|
212 |
Net income (loss) |
|
|
|
|
|
$ 1,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
2011 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 100,191 |
$ 86,143 |
$ 50,912 |
$ 10,132 |
$ -- |
$ 247,378 |
Gross margin, from external customers |
$ 42,228 |
$ 30,534 |
$ 13,021 |
$ 9,684 |
$ -- |
$ 95,467 |
Business reorganization and integration
expenses (recovery) |
$ 396 |
$ -- |
$ -- |
$ -- |
$ -- |
$ 396 |
Non-operating expense (income), including
corporate administration charges |
2,390 |
1,375 |
678 |
920 |
(5,358) |
5 |
EBITDA (Loss) (1) |
$ 2,735 |
$ 3,037 |
$ 1,160 |
$ 773 |
$ (44) |
$ 7,661 |
Depreciation and amortization expenses |
|
|
|
|
|
1,636 |
Interest expense (income), net |
|
|
|
|
|
375 |
Provision for (benefit from) income
taxes |
|
|
|
|
|
1,426 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
|
-- |
Net income (loss) |
|
|
|
|
|
$ 4,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
|
HUDSON HIGHLAND
GROUP, INC. |
SEGMENT ANALYSIS - YEAR
TO DATE |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Nine Months Ended September
30, 2011 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 290,656 |
$ 247,383 |
$ 144,415 |
$ 28,544 |
$ -- |
$ 710,998 |
Gross margin, from external customers |
$ 119,294 |
$ 85,992 |
$ 37,040 |
$ 27,331 |
$ -- |
$ 269,657 |
Business reorganization and integration
expenses (recovery) |
$ 747 |
$ -- |
$ -- |
$ -- |
$ -- |
$ 747 |
Non-operating expense (income), including
corporate administration charges |
5,873 |
3,840 |
1,758 |
1,438 |
(13,153) |
(244) |
EBITDA (Loss) (1) |
$ 6,930 |
$ 8,011 |
$ 2,242 |
$ 3,034 |
$ (2,580) |
$ 17,637 |
Depreciation and amortization
expenses |
|
|
|
|
4,750 |
Interest expense (income),
net |
|
|
|
|
910 |
Provision for (benefit from)
income taxes |
|
|
|
|
4,377 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
-- |
Net income (loss) |
|
|
|
|
|
$ 7,600 |
|
|
|
|
|
|
|
For The Nine Months Ended September
30, 2010 |
Hudson Europe |
Hudson ANZ |
Hudson Americas |
Hudson
Asia |
Corporate |
Total |
Revenue, from external customers |
$ 237,875 |
$ 195,045 |
$ 118,165 |
$ 24,396 |
$ -- |
$ 575,481 |
Gross margin, from external customers |
$ 99,722 |
$ 63,758 |
$ 28,643 |
$ 23,525 |
$ -- |
$ 215,648 |
Goodwill and other impairment (recovery) |
$ -- |
$ -- |
$ -- |
$ -- |
$ -- |
$ -- |
Business reorganization and integration
expenses (recovery) |
536 |
(116) |
285 |
-- |
-- |
705 |
Non-operating expense (income), including
corporate administration charges |
5,414 |
3,030 |
(523) |
704 |
(11,312) |
(2,687) |
EBITDA (Loss) (1) |
$ 771 |
$ 2,994 |
$ (699) |
$ 3,076 |
$ (3,196) |
$ 2,946 |
Depreciation and amortization
expenses |
|
|
|
|
6,453 |
Interest expense (income),
net |
|
|
|
|
972 |
Provision for (benefit from)
income taxes |
|
|
|
|
1,366 |
Loss (income) from discontinued
operations, net of taxes |
|
|
|
31 |
Net income (loss) |
|
|
|
|
|
$ (5,876) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
|
|
HUDSON HIGHLAND
GROUP, INC. |
Reconciliation For
Constant Currency |
(in
thousands) |
(unaudited) |
|
The company operates on a global
basis, with the majority of our gross margin generated outside of
the United States. Accordingly, fluctuations in foreign currency
exchange rates can affect our results of operations. Constant
currency information compares financial results between periods as
if exchange rates had remained constant period-over-period. The
company currently defines the term "constant currency" to mean that
financial data for a previously reported period are translated into
U.S. dollars using the same foreign currency exchange rates that
were used to translate financial data for the current
period. |
|
Changes in revenue, 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. |
|
|
|
|
|
|
For The
Three Months Ended September 30, |
|
2011 |
2010 |
|
As reported |
As
reported |
Currency
translation |
Constant
currency |
Revenue: |
|
|
|
|
Hudson Europe |
$ 96,753 |
$ 80,503 |
$ 4,031 |
$ 84,534 |
Hudson ANZ |
90,437 |
72,974 |
10,854 |
83,828 |
Hudson Americas |
47,691 |
37,839 |
15 |
37,854 |
Hudson Asia |
10,200 |
9,078 |
552 |
9,630 |
Total |
245,081 |
200,394 |
15,452 |
215,846 |
|
|
|
|
|
Direct costs: |
|
|
|
|
Hudson Europe |
58,624 |
47,856 |
2,144 |
50,000 |
Hudson ANZ |
58,998 |
48,715 |
7,374 |
56,089 |
Hudson Americas |
34,029 |
28,528 |
-- |
28,528 |
Hudson Asia |
438 |
304 |
24 |
328 |
Total |
152,089 |
125,403 |
9,542 |
134,945 |
|
|
|
|
|
Gross margin: |
|
|
|
|
Hudson Europe |
38,129 |
32,647 |
1,887 |
34,534 |
Hudson ANZ |
31,439 |
24,259 |
3,480 |
27,739 |
Hudson Americas |
13,662 |
9,311 |
15 |
9,326 |
Hudson Asia |
9,762 |
8,774 |
528 |
9,302 |
Total |
$ 92,992 |
$ 74,991 |
$ 5,910 |
$ 80,901 |
|
|
|
|
|
Selling, general and administrative
(a): |
|
|
|
|
Hudson Europe |
$ 34,630 |
$ 32,473 |
$ 2,000 |
$ 34,473 |
Hudson ANZ |
26,759 |
22,083 |
3,463 |
25,546 |
Hudson Americas |
11,970 |
9,572 |
18 |
9,590 |
Hudson Asia |
8,114 |
7,224 |
455 |
7,679 |
Corporate |
5,369 |
5,007 |
2 |
5,009 |
Total |
$ 86,842 |
$ 76,359 |
$ 5,938 |
$ 82,297 |
|
|
|
|
|
|
|
|
|
|
(a) Selling, general and
administrative expenses include depreciation and amortization
expenses and insurance recovery. |
CONTACT: David F. Kirby
Hudson Highland Group
212-351-7216
david.kirby@hudson.com
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