EX-99.1 2 v219770_ex99-1.htm Unassociated Document
Exhibit 99.1
 

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

Hudson Highland Group Reports 2011 First Quarter Financial Results


NEW YORK, NY – April 26, 2011 – 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, 2011.

2011 First Quarter Summary

 
·  
Revenue of $218.5 million, an increase of 21.3 percent over the first quarter of 2010, and approximately flat to the fourth quarter of 2010

 
·  
Permanent recruitment continued to deliver the strongest service line revenue growth, up 31.8 percent from the prior year quarter

 
·  
Temporary contracting revenue increased 20.8 percent in the first quarter, representing the fifth consecutive quarter of accelerating growth over the prior year period

 
·  
Gross margin of $81.2 million, or 37.2 percent of revenue, up 22.2 percent from the same period last year, and a decrease of 2.1 percent from the fourth quarter of 2010

 
·  
All regions contributed to strong top-line growth, reporting double-digit revenue and gross margin increases in the first quarter compared with the prior year period

 
·  
EBITDA* of $2.5 million, or 1.2 percent of revenue, improved from an EBITDA loss of $1.4 million for the first quarter of 2010

 
·  
Net loss of $0.0 million, or $0.00 per basic and diluted share, compared with net loss of $4.2 million, or $0.16 per basic and diluted share, in the first quarter of 2010


* EBITDA is defined in the segment tables at the end of this release and includes other non-operating income.
 
 
 
 
“We are encouraged that the demand for our services continues to grow,” said Mary Jane Raymond, Hudson Highland Group’s interim chief executive officer and chief financial officer.  “This quarter was Hudson’s fifth consecutive quarter of increased revenue growth over prior year.  Even as some clients continue to face economic uncertainty, they are increasingly relying on Hudson to select their strategic hires.”

Regional Results

Regional results for the first quarter in constant currency were:

 
·  
Europe gross margin was up 18 percent, led by 21 percent growth in the U.K. and 16 percent growth in continental Europe, compared with first quarter 2010
 
 
·  
Australia/New Zealand gross margin was up 22 percent compared with the prior year period, led by 44 percent growth in permanent recruitment
 
 
·  
Asia gross margin was up 9 percent compared with first quarter 2010
 
 
·  
Americas gross margin was up 11 percent compared with the prior year period, driven by 9 percent growth in temporary contracting and 27 percent growth in permanent recruitment
 

Liquidity and Capital Resources

The company ended the first quarter of 2011 with $71.0 million in liquidity, composed of $28.3 million in cash and $42.7 million in availability under its credit facilities.  The company used $10.3 million in cash flow from operations during the quarter and increased its outstanding borrowings from $1.3 million at the end of the fourth quarter to $11.2 million at the end of the first quarter.  Cash usage in the first quarter was driven by revenue more weighted to the end of the quarter and payment of annual bonuses. Days Sales Outstanding (DSO) rose to 55 days from 49 at the end of 2010 and 53 a year ago.

Guidance
 
The company currently expects second quarter 2011 revenue of $230 - $240 million and EBITDA of $5 - $8 million at prevailing exchange rates.  This compares with revenue of $195.0 million and EBITDA of $3.1 million in the second 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 Wednesday, April 27, 2011 at 10:00 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; 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 facility; 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 share and per share amounts)
  
(unaudited)
  
             
   
Three Months Ended
  
   
March 31,
  
   
2011
    
2010
  
             
Revenue
   $ 218,539     $ 180,118  
Direct costs
     137,341       113,697  
Gross margin
     81,198       66,421  
Operating expenses:
                
Selling, general and administrative expenses
     78,808       68,333  
Depreciation and amortization
     1,576       2,287  
Business reorganization and integration expenses
     351       113  
Total operating expenses
     80,735       70,733  
Operating income (loss)
     463       (4,312 )
Other income (expense):
                
Interest, net
     (206 )     (232 )
Other, net
     487       658  
Income (loss) from continuing operations before provision for income taxes
     744       (3,886 )
Provision for income taxes
     750       252  
Loss from continuing operations
     (6 )     (4,138 )
Loss from discontinued operations, net of income taxes
     -       (69 )
Net loss
   $ (6 )   $ (4,207 )
Basic earnings (loss) per share:
                
Loss from continuing operations
   $ (0.00 )   $ (0.16 )
Loss from discontinued operations
     -       (0.00 )
Net loss
   $ (0.00 )   $ (0.16 )
                 
Diluted earnings (loss) per share:
                
Loss from continuing operations
   $ (0.00 )   $ (0.16 )
Loss from discontinued operations
     -       (0.00 )
Net loss
   $ (0.00 )   $ (0.16 )
                 
Weighted average shares outstanding:
                
Basic
     31,325       26,257  
Diluted
     31,325       26,257  

 
 
 
HUDSON HIGHLAND GROUP, INC.
  
CONDENSED CONSOLIDATED BALANCE SHEETS
  
(in thousands, except per share amounts)
  
(unaudited)
  
             
             
   
March 31,
    
December 31,
  
   
2011
    
2010
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 28,311     $ 29,523  
Accounts receivable, net
     145,505       128,576  
Prepaid and other
     14,046       13,988  
Total current assets
     187,862       172,087  
Property and equipment, net
     16,114       16,593  
Other assets
     18,422       17,154  
Total assets
   $ 222,398     $ 205,834  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 11,732     $ 14,812  
Accrued expenses and other current liabilities
     82,434       74,990  
Short-term borrowings
     11,156       1,339  
Accrued business reorganization expenses
     2,176       2,619  
Total current liabilities
     107,498       93,760  
Other non-current liabilities
     10,491       10,493  
Income tax payable, non-current
     8,158       8,303  
Total liabilities
     126,147       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 32,838 and 32,181 shares, respectively
     33       32  
Additional paid-in capital
     467,782       466,582  
Accumulated deficit
     (408,205 )     (408,199 )
Accumulated other comprehensive income—translation adjustments
     36,947       34,902  
Treasury stock, 53 and 9 shares, respectively, at cost
     (306 )     (39 )
Total stockholders’ equity
     96,251       93,278  
Total liabilities and stockholders' equity
   $ 222,398     $ 205,834  
 
 
 
 
 
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
                   
                   
 
For The Three Months Ended March 31,  2011
  
Hudson
Europe
    
Hudson ANZ
    
Hudson
Americas
    
Hudson Asia
    
Corporate
    
Total
  
Revenue, from external customers
   $ 93,710     $ 70,804     $ 45,812     $ 8,213     $ -     $ 218,539  
Gross margin, from external customers
   $ 38,937     $ 24,019     $ 10,356     $ 7,886     $ -     $ 81,198  
Business reorganization and integration expenses
   $ 351     $ -     $ -     $ -     $ -     $ 351  
Non-operating expense (income), including corporate administration charges
     1,610       1,045       583       91       (3,816 )     (487 )
EBITDA (Loss) (1)
   $ 2,175     $ 1,041     $ (379 )   $ 973     $ (1,284 )   $ 2,526  
Depreciation and amortization expenses
                                             1,576  
Interest expense (income), net
                                             206  
Provision for (benefit from) income taxes
                                             750  
Loss (income) from discontinued operations, net of taxes
                                             -  
Net income (loss)
                                           $ (6 )
                                                 
For The Three Months Ended March 31,  2010
  
Hudson
Europe
    
Hudson ANZ
    
Hudson
Americas
    
Hudson Asia
    
Corporate
    
Total
  
Revenue, from external customers
   $ 76,654     $ 56,822     $ 39,507     $ 7,135     $ -     $ 180,118  
Gross margin, from external customers
   $ 32,530     $ 17,776     $ 9,279     $ 6,836     $ -     $ 66,421  
Business reorganization and integration expenses
   $ 87     $ (116 )   $ 142     $ -     $ -     $ 113  
Non-operating expense (income), including corporate administration charges
     1,178       582       (509 )     188       (2,097 )     (658 )
EBITDA (Loss) (1)
   $ 436     $ 249     $ (241 )   $ 597     $ (2,408 )   $ (1,367 )
Depreciation and amortization expenses
                                             2,287  
Interest expense (income), net
                                             232  
Provision for (benefit from) income taxes
                                             252  
Loss (income) from discontinued operations, net of taxes
                                             69  
Net income (loss)
                                           $ (4,207 )
                                                 
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
   $ 865     $ 102     $ 21     $ -     $ -     $ 988  
Non-operating expense (income), including corporate administration charges
     1,337       886       (1,298 )     243       (2,980 )     (1,812 )
EBITDA (Loss) (1)
   $ 314     $ 1,254     $ 2,386     $ 1,524     $ (1,922 )   $ 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
                                             213  
Net income (loss)
                                           $ 1,191  
                                                 
                                                 
For the Three Months Ended June 30, 2010
  
Hudson
Europe
    
Hudson ANZ
    
Hudson
Americas
    
Hudson Asia
    
Corporate
    
Total
  
Revenue, from external customers
   $ 80,717     $ 65,249     $ 40,819     $ 8,184     $ -     $ 194,969  
Gross margin, from external customers
   $ 34,559     $ 21,723     $ 10,039     $ 7,916     $ -     $ 74,237  
Business reorganization and integration expenses
   $ 450     $ -     $ 101     $ -     $ -     $ 551  
Non-operating expense (income), including corporate administration charges
     1,148       1,015       393       38       (3,440 )     (846 )
EBITDA (Loss) (1)
   $ 2,466     $ 1,369     $ (991 )   $ 1,311     $ (1,034 )   $ 3,121  
Depreciation and amortization expenses
                                             2,186  
Interest expense (income), net
                                             243  
Provision for (benefit from) income taxes
                                             515  
Loss (income) from discontinued operations, net of taxes
                                             (52 )
Net income (loss)
                                           $ 229  
 
(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 March 31,
  
   
2011
    
2010
  
   
As reported
    
As reported
    
Currency
    
Constant
  
 
translation
    
currency
  
Revenue:
                        
Hudson Europe
   $ 93,710     $ 76,654     $ 1,470     $ 78,124  
Hudson ANZ
     70,804       56,822       6,113       62,935  
Hudson Americas
     45,812       39,507       10       39,517  
Hudson Asia
     8,213       7,135       389       7,524  
Total
     218,539       180,118       7,982       188,100  
                                 
Direct costs:
                                
Hudson Europe
     54,773       44,124       1,034       45,158  
Hudson ANZ
     46,785       39,046       4,194       43,240  
Hudson Americas
     35,456       30,228       (14 )     30,214  
Hudson Asia
     327       299       19       318  
Total
     137,341       113,697       5,233       118,930  
                                 
Gross margin:
                                
Hudson Europe
     38,937       32,530       436       32,966  
Hudson ANZ
     24,019       17,776       1,919       19,695  
Hudson Americas
     10,356       9,279       24       9,303  
Hudson Asia
     7,886       6,836       370       7,206  
Total
   $ 81,198     $ 66,421     $ 2,749     $ 69,170  
                                 
    Selling, general and administrative (a):
                                
Hudson Europe
   $ 35,271     $ 31,453     $ 353     $ 31,806  
Hudson ANZ
     22,582       17,608       1,899       19,507  
Hudson Americas
     10,472       10,785       17       10,802  
Hudson Asia
     6,890       6,224       322       6,546  
Corporate
     5,169       4,550       (2 )     4,548  
Total
   $ 80,384     $ 70,620     $ 2,589     $ 73,209  
 
(a) Selling, general and administrative expenses include depreciation and amortization expenses.