Hudson Global, Inc.
Hudson Highland Group Reports 2011 Third Quarter Financial Results
Hudson Highland Group, Inc. 01.11.2011 12:00 --------------------------------------------------------------------------- NEW YORK, 2011-11-01 12:00 CET (GLOBE NEWSWIRE) -- 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 85,305 74,378 251,517 214,121 administrative expenses Depreciation and amortization 1,537 1,981 4,750 6,453 Business reorganization and -- 41 747 705 integration expenses ------------------------------------------- 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 -- (563) -- (563) credit facility ------------------------------------------- Income (loss) from continuing 5,584 (1,285) 11,977 (4,479) operations before provision for income taxes Provision for (benefit from) income 2,202 599 4,377 1,366 taxes ------------------------------------------- Income (loss) from continuing 3,382 (1,884) 7,600 (5,845) operations Income (loss) from discontinued -- (14) -- (31) operations, net of income taxes ------------------------------------------- Net income (loss) $ 3,382 $ (1,898) $ 7,600 $ (5,876) =========================================== Basic earnings (loss) per share: Income (loss) from continuing $ 0.11 $ (0.06) $ 0.24 $ (0.20) operations Income (loss) from discontinued -- (0.00) -- (0.00) operations ------------------------------------------- Net income (loss) $ 0.11 $ (0.06) $ 0.24 $ (0.20) =========================================== Diluted earnings (loss) per share: Income (loss) from continuing $ 0.11 $ (0.06) $ 0.24 $ (0.20) operations Income (loss) from discontinued -- (0.00) -- (0.00) operations ------------------------------------------- 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 December 30, 31, 2011 2010 --------------------- ASSETS Current assets: Cash and cash equivalents $ 22,482 $ 29,523 Accounts receivable, less allowance for doubtful accounts 151,517 128,576 of $1,973 and $2,145, respectively 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; 33 32 issued 32,922 and 32,181 shares, respectively Additional paid-in capital 470,005 466,582 Accumulated deficit (400,599) (408,199) Accumulated other comprehensive income-translation 32,943 34,902 adjustments 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 Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia September 30, 2011 -------------------------------------------------------------- Revenue, from $ 96,753 $ 90,437 $ 47,691 $ 10,200 $ -- $ 245,081 external customers ============================================================== Gross margin, $ 38,129 $ 31,439 $ 13,662 $ 9,762 $ -- $ 92,992 from external customers ============================================================== Business $ -- $ -- $ -- $ -- $ -- $ -- reorganization and integration expenses (recovery) Non-operating 1,873 1,421 497 427 (3,980) 238 expense (income), including corporate administration charges -------------------------------------------------------------- EBITDA (Loss) (1) $ 2,020 $ 3,934 $ 1,459 $ 1,289 $ (1,253) $ 7,449 Depreciation and 1,537 amortization expenses Interest expense 328 (income), net Provision for 2,202 (benefit from) income taxes Loss (income) from -- discontinued operations, net of taxes ---------- Net income (loss) $ 3,382 ========== For The Three Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia September 30, 2010 -------------------------------------------------------------- Revenue, from $ 80,503 $ 72,974 $ 37,839 $ 9,078 $ -- $ 200,394 external customers ============================================================== Gross margin, $ 32,647 $ 24,259 $ 9,311 $ 8,774 $ -- $ 74,991 from external customers ============================================================== Business $ -- $ -- $ 41 $ -- $ -- $ 41 reorganization and integration expenses (recovery) Non-operating 3,088 1,433 (407) 478 (5,776) (1,184) expense (income), including corporate administration charges -------------------------------------------------------------- EBITDA (Loss) (1) $ (2,128) $ 1,376 $ 532 $ 1,169 $ 244 $ 1,193 Depreciation and 1,981 amortization expenses Interest expense 497 (income), net Provision for 599 (benefit from) income taxes Loss (income) from 14 discontinued operations, net of taxes ---------- Net income (loss) $ (1,898) ========== For the Three Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia December 31, 2010 -------------------------------------------------------------- Revenue, from $ 90,616 $ 74,338 $ 44,268 $ 9,839 $ -- $ 219,061 external customers ============================================================== Gross margin, $ 37,468 $ 25,231 $ 10,775 $ 9,450 $ -- $ 82,924 from external customers ============================================================== Business $ 865 $ 102 $ 21 $ -- $ -- $ 988 reorganization and integration expenses (recovery) Non-operating 1,337 886 (1,298) 243 (2,979) (1,811) expense (income), including corporate administration charges -------------------------------------------------------------- EBITDA (Loss) (1) $ 314 $ 1,254 $ 2,386 $ 1,523 $ (1,921) $ 3,556 Depreciation and 1,730 amortization expenses Interest expense 306 (income), net Provision for 116 (benefit from) income taxes Loss (income) from 212 discontinued operations, net of taxes ---------- Net income (loss) $ 1,191 ========== For the Three Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia June 30, 2011 -------------------------------------------------------------- Revenue, from $ 100,191 $ 86,143 $ 50,912 $ 10,132 $ -- $ 247,378 external customers ============================================================== Gross margin, $ 42,228 $ 30,534 $ 13,021 $ 9,684 $ -- $ 95,467 from external customers ============================================================== Business $ 396 $ -- $ -- $ -- $ -- $ 396 reorganization and integration expenses (recovery) Non-operating 2,390 1,375 678 920 (5,358) 5 expense (income), including corporate administration charges -------------------------------------------------------------- EBITDA (Loss) (1) $ 2,735 $ 3,037 $ 1,160 $ 773 $ (44) $ 7,661 Depreciation and 1,636 amortization expenses Interest expense 375 (income), net Provision for 1,426 (benefit from) income taxes 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 Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia September 30, 2011 ---------------------------------------------------------------- Revenue, from $ 290,656 $ 247,383 $ 144,415 $ 28,544 $ -- $ 710,998 external customers ================================================================ Gross margin, $ 119,294 $ 85,992 $ 37,040 $ 27,331 $ -- $ 269,657 from external customers ================================================================ Business $ 747 $ -- $ -- $ -- $ -- $ 747 reorganization and integration expenses (recovery) Non-operating 5,873 3,840 1,758 1,438 (13,153) (244) expense (income), including corporate administration charges ---------------------------------------------------------------- EBITDA (Loss) $ 6,930 $ 8,011 $ 2,242 $ 3,034 $ (2,580) $ 17,637 (1) Depreciation and 4,750 amortization expenses Interest expense (income), 910 net Provision for (benefit 4,377 from) income taxes Loss (income) from discontinued -- operations, net of taxes ---------- Net income $ 7,600 (loss) ========== For The Nine Hudson Hudson Hudson Hudson Corporate Total Months Ended Europe ANZ Americas Asia September 30, 2010 ---------------------------------------------------------------- Revenue, from $ 237,875 $ 195,045 $ 118,165 $ 24,396 $ -- $ 575,481 external customers ================================================================ Gross margin, $ 99,722 $ 63,758 $ 28,643 $ 23,525 $ -- $ 215,648 from external customers ================================================================ Goodwill and $ -- $ -- $ -- $ -- $ -- $ -- other impairment (recovery) Business 536 (116) 285 -- -- 705 reorganization and integration expenses (recovery) Non-operating 5,414 3,030 (523) 704 (11,312) (2,687) expense (income), including corporate administration charges ---------------------------------------------------------------- EBITDA (Loss) $ 771 $ 2,994 $ (699) $ 3,076 $ (3,196) $ 2,946 (1) Depreciation and 6,453 amortization expenses Interest expense (income), 972 net Provision for (benefit 1,366 from) income taxes Loss (income) from discontinued 31 operations, net of taxes ---------- Net income $ (5,876) (loss) ========== -------------------------------------------------------------------------------- - (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 As Currency Constant reported reported translatio currency n --------------------------------------------- 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 News Source: NASDAQ OMX 01.11.2011 Dissemination of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: English Company: Hudson Highland Group, Inc. United States Phone: Fax: E-mail: Internet: ISIN: US4437921061 WKN: End of Announcement DGAP News-Service ---------------------------------------------------------------------------
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