EX-99.1 2 v229813_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 2011 Second Quarter Financial Results

NEW YORK, NY – July 27, 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 second quarter ended June 30, 2011.

2011 Second Quarter Summary

 
·
Revenue of $247.4 million, an increase of 26.9 percent over the second quarter of 2010, or 13.8 percent in constant currency

 
·
Permanent recruitment remained strong, increasing 28.0 percent from the prior year quarter, or 13.3 percent in constant currency

 
·
Temporary contracting revenue increased 27.2 percent in the second quarter, or 14.8 percent in constant currency, representing the sixth consecutive quarter of accelerating growth over the prior year period

 
·
Gross margin of $95.5 million, or 38.6 percent of revenue, up 28.6 percent from the same period last year, or 14.7 percent in constant currency

 
·
EBITDA* of $7.7 million, or 3.1 percent of revenue, improved from $3.1 million in the second quarter of 2010

 
·
Net income of $4.2 million, or $0.13 per basic and diluted share, compared with net income of $0.2 million, or $0.01 per basic and diluted share, in the second quarter of 2010

* EBITDA is defined in the segment tables at the end of this release and includes other non-operating income.
 
“Our team delivered solid year-over-year growth on the top and bottom lines in every region of the world,” said Manuel Marquez, chairman and chief executive officer of Hudson Highland Group.  “We experienced particular market demand strength for our Legal and recruitment process outsourcing (RPO) solutions.  While the global economic recovery remains uncertain, the quality and experience of our consultant base and geographic breadth should help us deliver further financial performance gains during the second half of the year.”

“Improving net income and solid operating cash flow during the quarter reflect productivity improvements, return on key investments and market recognition of our service value,” added Mary Jane Raymond, the company’s chief financial officer.  “Our year-to-date results also reflect some benefits of worldwide currency movements, though that could vary during the second half given the global environment.”

Regional Results

Regional results for the second quarter in constant currency were:

 
·
Europe gross margin was up 9.7 percent, led by 10.5 percent growth in continental Europe and 9.0 percent growth in the U.K., compared with second quarter 2010

 
·
Australia/New Zealand gross margin was up 16.4 percent compared with the prior year period, led by 27.5 percent growth in permanent recruitment

 
·
Americas gross margin was up 29.5 percent compared with the prior year period, driven by 20.4 percent growth in temporary contracting and good improvements in permanent recruitment

 
·
Asia gross margin was up 14.0 percent compared with second quarter 2010
 
 
 

 

Liquidity and Capital Resources

The company ended the second quarter of 2011 with $77.7 million in liquidity, composed of $34.9 million in cash and $42.8 million in availability under its credit facilities.  The company generated $10.1 million in cash flow from operations during the quarter and reduced its outstanding borrowings from $11.2 million at the end of the first quarter to $10.1 million at the end of the second quarter.
 
Guidance
 
The company currently expects third quarter 2011 revenue of $230 - $240 million and EBITDA of $5 - $7 million at prevailing exchange rates.  This compares with revenue of $200.4 million and EBITDA of $1.2 million in the third 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, July 27, 2011 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 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
 
 
2

 
 
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Revenue
  $ 247,378     $ 194,969     $ 465,917     $ 375,087  
Direct costs
    151,911       120,732       289,252       234,430  
Gross margin
    95,467       74,237       176,665       140,657  
Operating expenses:
                               
Selling, general and administrative expenses
    87,405       71,411       166,213       139,743  
Depreciation and amortization
    1,636       2,186       3,213       4,472  
Business reorganization and integration expenses
    396       551       747       664  
Total operating expenses
    89,437       74,148       170,173       144,879  
Operating income (loss)
    6,030       89       6,492       (4,222 )
Other (expense) income:
                               
Interest, net
    (375 )     (243 )     (581 )     (475 )
Other, net
    (5 )     846       482       1,501  
Income (loss) from continuing operations before provision for income taxes
    5,650       692       6,393       (3,196 )
Provision for income taxes
    1,426       515       2,175       766  
Income (loss) from continuing operations
    4,224       177       4,218       (3,962 )
Income (loss) from discontinued operations, net of income taxes
    -       52       -       (17 )
Net income (loss)
  $ 4,224     $ 229     $ 4,218     $ (3,979 )
Basic earnings (loss) per share:
                               
Income (loss) from continuing operations
  $ 0.13     $ 0.01     $ 0.13     $ (0.14 )
Income (loss) from discontinued operations
    -       0.00       -       (0.00 )
Net income (loss)
  $ 0.13     $ 0.01     $ 0.13     $ (0.14 )
                                 
Diluted earnings (loss) per share:
                               
Income (loss) from continuing operations
  $ 0.13     $ 0.01     $ 0.13     $ (0.14 )
Income (loss) from discontinued operations
    -       0.00       -       (0.00 )
Net income (loss)
  $ 0.13     $ 0.01     $ 0.13     $ (0.14 )
                                 
Weighted average shares outstanding:
                               
Basic
    31,593       30,947       31,501       28,616  
Diluted
    32,039       31,311       31,939       28,616  
 
 
 
3

 
 
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
   
June 30,
   
December 31,
 
   
2011
   
2010
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 34,933     $ 29,523  
Accounts receivable, net
    159,383       128,576  
Prepaid and other
    14,973       13,988  
Total current assets
    209,289       172,087  
Property and equipment, net
    17,095       16,593  
Other assets
    18,131       17,154  
Total assets
  $ 244,515     $ 205,834  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Other (expense) income:
               
Accounts payable
  $ 13,784     $ 14,812  
Accrued expenses and other current liabilities
    96,761       74,990  
Short-term borrowings
    10,145       1,339  
Accrued business reorganization expenses
    1,821       2,619  
Total current liabilities
    122,511       93,760  
Other non-current liabilities
    10,771       10,493  
Income tax payable, non-current
    8,319       8,303  
Total liabilities
    141,601       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 32,934 and 32,181 shares, respectively
    33       32  
Additional paid-in capital
    469,009       466,582  
Accumulated deficit
    (403,975 )     (408,199 )
Accumulated other comprehensive income—translation adjustments
    38,177       34,902  
Treasury stock, 58 and 9 shares, respectively, at cost
    (330 )     (39 )
Total stockholders’ equity
    102,914       93,278  
Total liabilities and stockholders’ equity
  $ 244,515     $ 205,834  
 
 
4

 
 
 
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
 
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
  $ 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  
 
                                               
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  
                                                 
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
  $ -     $ -     $ 41     $ -     $ -     $ 41  
Non-operating expense (income), including corporate administration charges
    3,088       1,433       (407 )     478       (5,213 )     (621 )
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 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 )
 
(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.
 
 
 
5

 
 
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS - YEAR TO DATE
(in thousands)
(unaudited)
 
For the Six Months Ended June 30, 2011
 
Hudson
Europe
   
Hudson
ANZ
   
Hudson
Americas
   
Hudson
Asia
   
Corporate
   
Total
 
Revenue, from external customers
  $ 193,901     $ 156,947     $ 96,725     $ 18,344     $ -     $ 465,917  
Gross margin, from external customers
  $ 81,164     $ 54,553     $ 23,379     $ 17,569     $ -     $ 176,665  
Business reorganization and integration expenses
  $ 747     $ -     $ -     $ -     $ -     $ 747  
Non-operating expense (income), including corporate administration charges
    4,000       2,420       1,261       1,011       (9,174 )     (482 )
EBITDA (Loss) (1)
  $ 4,910     $ 4,077     $ 781     $ 1,745     $ (1,326 )   $ 10,187  
Depreciation and amortization expenses
                                            3,213  
Interest expense (income), net
                                            581  
Other (expense) income:
                                            2,175  
Loss (income) from discontinued operations, net of taxes
                                            -  
Net income (loss)
                                          $ 4,218  
                                                 
For the Six Months Ended June 30, 2010
 
Hudson
Europe
   
Hudson
ANZ
   
Hudson
Americas
   
Hudson
Asia
   
Corporate
   
Total
 
Revenue, from external customers
  $ 157,372     $ 122,071     $ 80,325     $ 15,319     $ -     $ 375,087  
Gross margin, from external customers
  $ 67,074     $ 39,499     $ 19,331     $ 14,753     $ -     $ 140,657  
Goodwill and other impairment (recovery)
  $ -     $ -     $ -     $ -     $ -     $ -  
Business reorganization and integration expenses
    537       (116 )     243       -       -       664  
Non-operating expense (income), including corporate administration charges
    2,326       1,597       (116 )     226       (5,534 )     (1,501 )
EBITDA (Loss) (1)
  $ 2,901     $ 1,617     $ (1,232 )   $ 1,907     $ (3,442 )   $ 1,751  
Depreciation and amortization expenses
                                            4,472  
Interest expense (income), net
                                            475  
Provision for (benefit from) income taxes
                                            766  
Loss (income) from discontinued operations, net of taxes
                                            17  
Net income (loss)
                                          $ (3,979 )
 
(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.
 
 
 
6

 
 
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 June 30,
 
   
2011
   
2010
 
               
Currency
   
Constant
 
   
As reported
   
As reported
   
translation
   
currency
 
Revenue:
                       
Hudson Europe
  $ 100,191     $ 80,717     $ 8,585     $ 89,302  
Hudson ANZ
    86,143       65,249       13,203       78,452  
Other (expense) income:
    50,912       40,819       13       40,832  
Hudson Asia
    10,132       8,184       602       8,786  
Total
    247,378       194,969       22,403       217,372  
                                 
Direct costs:
                               
Hudson Europe
    57,963       46,158       4,667       50,825  
Hudson ANZ
    55,609       43,526       8,698       52,224  
Hudson Americas
    37,891       30,780       -       30,780  
Hudson Asia
    448       268       24       292  
Total
    151,911       120,732       13,389       134,121  
                                 
Gross margin:
                               
Hudson Europe
    42,228       34,559       3,918       38,477  
Hudson ANZ
    30,534       21,723       4,505       26,228  
Hudson Americas
    13,021       10,039       13       10,052  
Hudson Asia
    9,684       7,916       578       8,494  
Total
  $ 95,467     $ 74,237     $ 9,014     $ 83,251  
                                 
Selling, general and administrative (a):
                               
Hudson Europe
  $ 37,180     $ 31,296     $ 3,536     $ 34,832  
Hudson ANZ
    26,803       19,883       3,952       23,835  
Hudson Americas
    11,358       11,223       19       11,242  
Hudson Asia
    8,056       6,689       466       7,155  
Corporate
    5,644       4,506       2       4,508  
Total
  $ 89,041     $ 73,597     $ 7,975     $ 81,572  
 
(a) Selling, general and administrative expenses include depreciation and amortization expenses.
 
 
7