EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

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

Hudson Highland Group Reports 2008

Third Quarter Financial Results

NEW YORK, NY – October 28, 2008 – 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, 2008.

2008 Third Quarter Summary

 

  •  

Revenue of $271.4 million, a decrease of 9.6 percent from $300.4 million for the third quarter of 2007

 

  •  

Gross margin of $114.9 million, or 42.3 percent of revenue, down 11.3 percent from $129.4 million, or 43.1 percent of revenue for the same period last year

 

 

•

  

Adjusted EBITDA* of $6.0 million, or 2.2 percent of revenue, down 43.6 percent from $10.6 million for the third quarter of 2007

 

 

•

  

EBITDA* of $3.1 million, or 1.1 percent of revenue, down 72.5 percent from $11.1 million for the same period last year

 

  •  

Net loss from continuing operations of $0.7 million, or $0.03 per basic and diluted share, compared with net income of $3.0 million, or $0.12 per basic and diluted share for the third quarter of 2007

 

  •  

Net loss of $0.3 million, or $0.01 per basic and diluted share, compared with net income of $3.6 million, or $0.14 per basic and diluted share for the third quarter of 2007

 

* Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release.

“Our third quarter performance was adversely impacted by weakening economic conditions in all of our major markets around the world,” said Jon Chait, Hudson Highland Group chairman and chief executive officer. Despite the macro-economic environment, we continued to see growth in continental Europe, North America’s Legal business and Asia. While we are clearly entering a negative economic cycle, I am encouraged by our team’s continuing diligence on cost containment and an across-the-board focus on high-demand specializations to cushion the cyclical impact.”

“In the third quarter, strong expense management helped offset the top-line challenges,” added Mary Jane Raymond, executive vice president and chief financial officer. “Our operational teams did a good job reducing expenses by $10 million from the prior year. In addition, our liquidity remains strong with more than $44 million in cash and a $75 million credit facility.”

Restructuring Program

During the remainder of 2008, the company expects to continue to streamline its operations in parallel with shifting market conditions. The company expects to have $8 - $12 million of restructuring charges for the full year, higher than the previous guidance range of $5 - $7 million, and including $2 - $6 million for the fourth quarter. During the first nine months of 2008, the company incurred $5.6 million of restructuring charges in conjunction with its 2008 program. Third quarter expenses were primarily related to severance and reorganization in Hudson Asia Pacific and Europe.

Share Repurchase Program

On February 4, 2008, the company announced that its board of directors authorized the repurchase of up to $15 million of the company’s common stock. The company intends to make purchases from time to time as market conditions warrant. During the third quarter, the company repurchased 53,500 shares at a total cost of approximately $0.5 million. Since the inception of the program, the company has repurchased 754,673 shares at a total cost of approximately $5.8 million.

Currency Impact during the Quarter

As the company noted previously, exchange rate movement during the third quarter negatively impacted reported results when compared to the prevailing rates at the time third quarter guidance was established. The strengthening U.S. dollar lowered both revenue and expenses in international operations. The impact on the third quarter was a $7.2 million reduction in reported revenue and a $1.1 million reduction in reported adjusted EBITDA.

Guidance

The company currently expects fourth quarter 2008 revenue of $205 - $220 million at prevailing exchange rates and adjusted EBITDA of $2 - $5 million, excluding the impact of any

restructuring, acquisitions or divestitures. This compares with revenue of $288.8 million and adjusted EBITDA of $13.1 million in the fourth quarter of 2007. Last year’s fourth quarter at current guidance exchange rates would have resulted in revenue of $236.9 million and adjusted EBITDA of $9.1 million.

Additional Information

Additional information about the company’s quarterly results can be found in the shareholder letter and the third quarter earnings slides in the investor information section of the company’s website at www.hudson.com.

Conference Call/Webcast

Hudson Highland Group will conduct a conference call Wednesday, October 29, 2008 at 9:00 AM ET to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 67938698 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 67938698. Hudson Highland Group’s quarterly conference call can also be accessed online through Yahoo! Finance at www.yahoo.com and the investor information section of the company’s website at www.hudson.com.

The archived call will be available for one week by dialing 1-800-642-1687 followed by the participant passcode 67938698. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 67938698.

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 3,600 professionals serving clients and candidates in more than 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 those under the caption “Guidance” and other 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 risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to, the company’s history of negative cash flows and operating losses may continue; the ability of clients to terminate their relationship with the company at any time; the impact of global economic fluctuations on temporary contracting operations; risks and financial impact associated with acquisitions and dispositions of non-core businesses; 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 and the company’s dependence on highly skilled professionals; fluctuations in the company’s operating results from quarter to quarter; risks relating to the company’s international operations, including foreign currency fluctuations; dependence on key management personnel; restrictions imposed by blocking arrangements; exposure to employment-related claims from both clients and employers and limits on insurance coverage related thereto; government regulations; any impairment to the carrying value of goodwill; restrictions on the company’s operating flexibility due to the terms of its credit facility; and the company’s ability to maintain effective internal control over financial reporting. 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 press release. The company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts’ expectations or estimates or 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
September 30,		     Nine Months Ended
September 30,		  
     2008     2007     2008    2007  

Revenue

    $ 271,425     $ 300,351     $ 872,853    $ 884,211  

Direct costs

      156,575       170,924       495,178      507,750  
                               

Gross margin

      114,850       129,427       377,675      376,461  
                               

Operating expenses:

          

Selling, general and administrative expenses

      108,852       118,026       354,163      348,603  

Acquisition-related expenses

      —         311       —        4,462  

Depreciation and amortization

      3,946       3,540       11,375      11,082  

Business reorganization expenses

      2,931       (56 )     5,321      4,638  
                               

Total operating expenses

      115,729       121,821       370,859      368,785  
                               

Operating (loss) income

      (879 )     7,606       6,816      7,676  

Other income (expense):

          

Interest, net

      323       (141 )     866      506  

Other, net

      575       1,096       1,900      3,684  
                               

Income before provision for income taxes

      19       8,561       9,582      11,866  

Provision for income taxes

      757       5,609       8,724      12,245  
                               

Net (loss) income from continuing operations

      (738 )     2,952       858      (379 )

Net income from discontinued operations

      429       627       5,153      3,395  
                               

Net (loss) income

    $ (309 )   $ 3,579     $ 6,011    $ 3,016  
                               

Basic income (loss) per share:

          

(Loss) income from continuing operations

    $ (0.03 )   $ 0.12     $ 0.03    $ (0.02 )

Income from discontinued operations

      0.02       0.02       0.21      0.14  
                               

Net (loss) income

    $ (0.01 )   $ 0.14     $ 0.24    $ 0.12  
                               

Diluted income (loss) per share:

          

(Loss) income from continuing operations

    $ (0.03 )   $ 0.12     $ 0.03    $ (0.02 )

Income from discontinued operations

      0.02       0.02       0.21      0.14  
                               

Net (loss) income

    $ (0.01 )   $ 0.14     $ 0.24    $ 0.12  
                               

Weighted average shares outstanding:

          

Basic

      25,245       25,443       25,180      25,205  

Diluted

      25,245       26,058       25,550      25,205  

HUDSON HIGHLAND GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

      September 30,
2008		     December 31,
2007		  
     (unaudited)        
ASSETS     

Current assets:

     

Cash and cash equivalents

    $ 44,321     $ 39,245  

Cash - restricted

      —         —    

Accounts receivable, net

      177,011       187,980  

Prepaid and other

      18,263       18,389  

Current assets from discontinued operations

      —         13,461  
                

Total current assets

      239,595       259,075  

Goodwill

      66,275       73,444  

Other intangibles, net

      3,842       4,791  

Property and equipment, net

      27,590       29,470  

Other assets

      13,248       7,214  

Non-current assets from discontinued operations

      —         212  
                

Total assets

    $ 350,550     $ 374,206  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

     

Accounts payable

    $ 23,062     $ 20,988  

Accrued expenses and other current liabilities

      98,892       120,323  

Short-term borrowings

      997       243  

Accrued business reorganization expenses

      3,676       3,490  

Current liabilities from discontinued operations

      —         7,382  
                

Total current liabilities

      126,627       152,426  

Other non-current liabilities

      20,378       18,976  

Accrued business reorganization expenses, non-current

      2,021       2,689  
                

Total liabilities

      149,026       174,091  

Commitments and contingencies

     

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: 26,163 and 25,691 shares, respectively

      26       26  

Additional paid-in capital

      449,550       444,075  

Accumulated deficit

      (282,576 )     (288,587 )

Accumulated other comprehensive income - translation adjustments

      39,713       44,946  

Treasury stock, 662 and 25 shares, respectively, at cost

      (5,189 )     (345 )
                

Total stockholders’ equity

      201,524       200,115  
                
   $ 350,550     $ 374,206  
                

HUDSON HIGHLAND GROUP, INC.

SEGMENT ANALYSIS

(in thousands)

(unaudited)

 

For the Three Months Ended September 30, 2008    Hudson
Americas		     Hudson Europe     Hudson Asia
Pacific		     Corporate     Total  

Revenue

    $ 66,485     $ 99,124     $ 105,816     $ —       $ 271,425  
                                        

Gross margin

    $ 17,967     $ 50,520     $ 46,363     $ —       $ 114,850  
                                        

Adjusted EBITDA (1)

    $ 1,586     $ 3,247     $ 7,179     $ (6,004 )   $ 6,008  

Business reorganization expenses

      136       788       2,007       —         2,931  

Merger and integration (recoveries) expenses

      (15 )     24       —         1       10  
                                        

EBITDA (1)

      1,465       2,435       5,172       (6,005 )     3,067  

Depreciation and amortization

      1,175       1,495       1,223       53       3,946  
                                        

Operating income (loss)

    $ 290     $ 940     $ 3,949     $ (6,058 )   $ (879 )
                                        
For the Three Months Ended September 30, 2007    Hudson
Americas		     Hudson Europe     Hudson Asia
Pacific		     Corporate     Total  

Revenue

    $ 75,667     $ 115,006     $ 109,678     $ —       $ 300,351  
                                        

Gross margin

    $ 23,178     $ 58,393     $ 47,856     $ —       $ 129,427  
                                        

Adjusted EBITDA (1)

    $ 1,355     $ 6,053     $ 9,990     $ (6,749 )   $ 10,649  

Acquisition-related expenses

      —         311       —         —         311  

Business reorganization (recoveries) expenses

      (63 )     (2 )     (12 )     21       (56 )

Merger and integration recoveries

      (10 )     —         —         (742 )     (752 )
                                        

EBITDA (1)

      1,428       5,744       10,002       (6,028 )     11,146  

Depreciation and amortization

      998       1,471       1,023       48       3,540  
                                        

Operating income (loss)

    $ 430     $ 4,273     $ 8,979     $ (6,076 )   $ 7,606  
                                        

 

(1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization (“Adjusted EBITDA”) and non-GAAP earnings before interest, income taxes, other non-operating expense, 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. Adjusted EBITDA and 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, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.

HUDSON HIGHLAND GROUP, INC.

SEGMENT ANALYSIS

(in thousands)

(unaudited)

 

For the Nine Months Ended September 30, 2008    Hudson
Americas		     Hudson Europe    Hudson Asia
Pacific		    Corporate     Total  

Revenue

    $ 221,254     $ 327,295    $ 324,304    $ —       $ 872,853  
                                      

Gross margin

    $ 60,901     $ 173,537    $ 143,237    $ —       $ 377,675  
                                      

Adjusted EBITDA (1)

    $ 4,544     $ 19,030    $ 21,121    $ (21,145 )   $ 23,550  

Business reorganization expenses

      1,826       1,393      2,102      —         5,321  

Merger and integration expenses

      —         38      —        —         38  
                                      

EBITDA (1)

      2,718       17,599      19,019      (21,145 )     18,191  

Depreciation and amortization

      3,518       4,467      3,231      159       11,375  
                                      

Operating (loss) income

    $ (800 )   $ 13,132    $ 15,788    $ (21,304 )   $ 6,816  
                                      
For the Nine Months Ended September 30, 2007    Hudson
Americas		     Hudson Europe    Hudson Asia
Pacific		    Corporate     Total  

Revenue

    $ 223,044     $ 352,823    $ 308,344    $ —       $ 884,211  
                                      

Gross margin

    $ 66,461     $ 177,697    $ 132,303    $ —       $ 376,461  
                                      

Adjusted EBITDA (1)

    $ (1,321 )   $ 23,240    $ 24,692    $ (19,547 )   $ 27,064  

Acquisition-related expenses

      3,551       911      —        —         4,462  

Business reorganization expenses

      659       2,438      19      1,522       4,638  

Merger and integration recoveries

      (52 )     —        —        (742 )     (794 )
                                      

EBITDA (1)

      (5,479 )     19,891      24,673      (20,327 )     18,758  

Depreciation and amortization

      3,285       4,668      2,900      229       11,082  
                                      

Operating (loss) income

    $ (8,764 )   $ 15,223    $ 21,773    $ (20,556 )   $ 7,676  
                                      

 

(1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization (“Adjusted EBITDA”) and non-GAAP earnings before interest, income taxes, other non-operating expense, 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. Adjusted EBITDA and 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, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.