EX-99.1 2 v192365_ex99-1.htm

Exhibit 99.1
   

For Immediate Release
Contact:
David F. Kirby
  
   
Hudson Highland Group
  
   
212-351-7216
  
   
david.kirby@hudson.com
  

Hudson Highland Group Reports
2010 Second Quarter Financial Results

NEW YORK, NY – August 3, 2010 – 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 Web cast 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.

###
Financial Tables Follow

 
 
 
 
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)

   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
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,
    
December 31,
  
   
2010
    
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 )
Incme 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
  
         
Currency
    
Constant
        
   
As Reported
    
Translation
    
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.