Subscribe to AfterDawn's weekly newsletter.
Hudson Highland Group Reports 2007 Fourth Quarter and Full-Year Financial Results
NEW YORK, February 7 /PRNewswire/ --
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 fourth
quarter and full-year ended December 31, 2007.
2007 Fourth Quarter Summary
-- Revenue of US$290.5 million, an increase of 1.4 percent from US$286.4
million for the fourth quarter of 2006
-- Gross margin of US$130.0 million, or 44.7 percent of revenue, up 10.1
percent from US$118.1 million, or 41.2 percent of revenue for the same
period last year
-- Adjusted EBITDA of US$13.5 million, or 4.6 percent of revenue, up 14.4
percent from US$11.8 million for the fourth quarter of 2006
-- EBITDA of US$12.9 million, or 4.4 percent of revenue, up 75.9 percent
from US$7.3 million for the same period last year
-- Net income from continuing operations of US$4.6 million, or US$0.18
per basic and diluted share, compared with net income of US$1.2
million, or US$0.05 per basic and diluted share, for the fourth
quarter of 2006
-- Net income of US$12.0 million, or US$0.47 per basic and US$0.46 per
diluted share, compared with net income of US$22.8 million, or US$0.93
per basic and US$0.90 per diluted share, for the fourth quarter of
2006
2007 Full-Year Summary
-- Revenue of US$1.18 billion, an increase of 1.8 percent from US$1.16
billion for 2006
-- Gross margin of US$507.9 million, or 43.1 percent of revenue, an
increase of 10.6 percent from US$459.3 million, or 39.7 percent of
revenue for 2006
-- Adjusted EBITDA of US$41.5 million, or 3.5 percent of revenue, an
increase of 76.6 percent from US$23.5 million, or 2.0 percent of
revenue, for 2006
-- EBITDA of US$32.6 million, or 2.8 percent of revenue, an increase of
111.3 percent from US$15.4 million, or 1.3 percent of revenue for 2006
-- Net income from continuing operations of US$4.9 million, or US$0.19
per basic and diluted share, compared with a net loss of (US$8.2)
million, or (US$0.33) per basic and diluted share, for 2006
-- Net income of US$15.0 million, or US$0.59 per basic and US$0.58
diluted share, compared with net income of US$20.4 million, or US$0.83
per basic and diluted share, for 2006
"Our fourth quarter and full-year results demonstrate the value of our
geographic diversity and depth of specialization," said Jon Chait, Hudson
Highland Group chairman and chief executive officer. "Our international
operations delivered an adjusted EBITDA margin greater than seven percent,
which is in our long-term target range. With this week's Energy and
Engineering business sale, we have completed our non-core divestitures and
are focused globally on specialized high-margin business segments with strong
growth potential. We believe Hudson is well positioned today regardless of
what the economy may bring."
Mary Jane Raymond, executive vice president and chief financial officer,
added, "We expect earnings improvement in 2008 as a result of our stronger
core focus, process re-engineering in North America and continued strength of
our international operations. Additionally, strong cash flow in the fourth
quarter and transaction proceeds provide financial flexibility for
investments."
Sale of Energy and Engineering Business
On February 4, 2008, the company announced it had completed the asset
sale of its energy and engineering staffing businesses to System One Holdings
LLC. The company received approximately US$11 million in cash, subject to
post-closing adjustment; a five-year US$5 million seller note; and a warrant
exercisable for 10 percent of the equity of System One. Hudson Highland Group
also has the right to receive an additional US$600,000 in cash upon
resolution of certain liabilities, and has retained US$3.6 million of
receivables of the business. The company will treat the business as a
discontinued operation effective December 31, 2007.
Sale of Netherlands Reintegration Business
On December 20, 2007, the company announced it had completed the sale of
its Dutch Reintegration subsidiary, Hudson Human Capital Solutions B.V. to
Workx! Holding B.V. The company recorded a gain on the sale of approximately
US$5.0 million, including US$7.4 million in accumulated foreign currency
translation gains. As of December 1, 2007, the business was considered a
discontinued operation.
Share Repurchase Program
On February 4, 2008, the company announced that its board of directors
authorized the repurchase of up to US$15 million of the company's common
stock. The company intends to make purchases from time to time as market
conditions warrant.
Guidance
The company currently expects first quarter 2008 revenue of US$285 -
US$300 million at prevailing exchange rates and adjusted EBITDA of US$2 -
US$5 million, excluding the impact of any restructuring, acquisitions or
divestitures. This compares with revenue of US$288.1 million and adjusted
EBITDA of US$4.5 million in the first quarter of 2007.
During 2008, the company intends to streamline its support operations to
match its narrowed focus on specialization. Although the company has not
committed to take any such actions, the company expects to have US$5 - US$7
million of restructuring actions through this year, including US$1 - US$3
million in the first quarter.
Additional Information
Please find additional information about the company's quarterly results
in the shareholder letter 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 Thursday, February
7, 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 32241194 at 8:50 AM ET. For those outside the
United States, please call in on +1-706-634-5594 followed by the participant
passcode 32241194. 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 32241194. For those
outside the United States, the call will be available on +1-706-645-9291
followed by the participant passcode 32241194.
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-strategic assets; the company's reliance on information systems and
technology; competition; fluctuations in operating results; risks relating to
foreign operations, including foreign currency fluctuations; dependence on
highly skilled professionals and key management personnel; restrictions
imposed by blocking arrangements; exposure to employment-related claims
and limits on insurance coverage related thereto; government regulations;
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.
(All amounts in US Dollars unless otherwise specified.)
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 (1) 2007 (1) 2006 (1)
Revenue $290,484 $286,421 $1,179,075 $1,157,874
Direct costs 160,500 168,355 671,162 698,619
Gross margin 129,984 118,066 507,913 459,255
Operating expenses:
Selling, general
and
administrative 116,511 106,289 466,413 435,754
Acquisition-
related
expenses 837 858 5,299 1,687
Depreciation and
amortization 3,532 8,117 14,624 19,803
Business
reorganization
expenses
(recoveries) (276) 3,297 4,362 6,015
Merger and
integration
expenses
(recoveries) 8 287 (787) 362
Total operating
expenses 120,612 118,848 489,911 463,621
Operating income
(loss) 9,372 (782) 18,002 (4,366)
Other income
(expense):
Interest, net 195 173 700 (1,634)
Other, net (242) (223) 3,445 1,584
Income (loss)
from
continuing
operations
before income
taxes 9,325 (832) 22,147 (4,416)
Provision
(benefit)
for income
taxes 4,762 (2,011) 17,240 3,771
Income (loss) from
continuing
operations 4,563 1,179 4,907 (8,187)
Income from
discontinued
operations,
net of income
taxes 7,402 21,666 10,074 28,615
Net income $11,965 $22,845 $14,981 $20,428
Basic income
(loss) per share:
Income (loss)
from
continuing
operations $0.18 $0.05 $0.19 $(0.33)
Income from
discontinued
operations 0.29 0.88 0.40 1.16
Net income $0.47 $0.93 $0.59 $0.83
Diluted income (loss) per share:
Income (loss)
from
continuing
operations $0.18 $0.05 $0.19 $(0.33)
Income from
discontinued
operations 0.28 0.85 0.39 1.16
Net income $0.46 $0.90 $0.58 $0.83
Weighted average
shares
outstanding
Basic 25,479,000 24,668,000 25,274,000 24,471,000
Diluted 25,781,000 25,346,000 25,914,000 24,471,000
(1) Note -- 2007 and 2006 financial statements have been adjusted to
reflect the sales of businesses as discontinued operations and the
restatement filed on Form 8-K on February 4, 2008.
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31, December 31,
2007 (1) 2006 (1)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $39,245 $44,649
Accounts receivable, net 189,072 199,583
Prepaid and other 18,493 16,609
Current assets from discontinued operations 12,265 19,266
Total current assets 259,075 280,107
Intangibles, net 78,235 38,916
Property and equipment, net 29,470 27,276
Other assets 7,214 4,560
Non-current assets of discontinued operations 212 1,323
Total assets $374,206 $352,182
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,237 $21,274
Accrued expenses and other current liabilities 120,842 125,561
Credit facility and current portion of
long-term debt 243 238
Accrued business reorganization expenses 3,490 5,077
Accrued merger and integration expenses 314 837
Current liabilities from discontinued operations 6,300 14,302
Total current liabilities 152,426 167,289
Other non-current liabilities 18,648 8,204
Accrued business reorganization expenses,
non-current 2,689 3,409
Accrued merger and integration expenses,
non-current 327 1,721
Long-term debt, less current portion 1 235
Total liabilities 174,091 180,858
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; none issued
or outstanding - -
Common stock, $0.001 par value, 100,000,000
shares authorized; issued: 25,690,631 and
24,957,732 shares, respectively 26 25
Additional paid-in capital 444,075 427,645
Accumulated deficit (288,587) (300,031)
Accumulated other comprehensive
income-translation adjustments 44,946 43,915
Treasury stock, 24,680 shares (345) (230)
Total stockholders' equity 200,115 171,324
$374,206 $352,182
(1) Note -- 2007 and 2006 financial statements have been adjusted to
reflect the sale of businesses as discontinued operations and the
restatement filed on Form 8-K on February 4, 2008.
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
For the Three Months
Ended Hudson Hudson Hudson
December 31, 2007 Americas Europe Asia Pacific Corporate Total
Revenue $68,482 $115,203 $106,799 $- $290,484
Gross margin $21,041 $60,386 $48,557 $- $129,984
Adjusted EBITDA (2) $1,207 $10,512 $8,736 $(6,982) $13,473
Acquisition-
related expenses - 837 - - 837
Business reorganization
(recoveries) (118) - (34) (124) (276)
Merger and
integration expenses 2 - - 6 8
EBITDA (2) 1,323 9,675 8,770 (6,864) 12,904
Depreciation and
amortization 1,069 1,381 1,037 45 3,532
Operating income
(loss) $254 $8,294 $7,733 $(6,909) $9,372
For the Three Months
Ended Hudson Hudson Hudson
December 31, 2006(1) Americas Europe Asia Pacific Corporate Total
Revenue $74,295 $114,603 $97,523 $- $286,421
Gross margin $24,397 $54,325 $39,344 $- $118,066
Adjusted EBITDA (2) $2,338 $7,627 $7,358 $(5,546) $11,777
Acquisition-
related expenses - 858 - - 858
Business
reorganization
expenses 323 2,162 666 146 3,297
Merger and
integration
expenses
(recoveries) 325 - (38) - 287
EBITDA (2) 1,690 4,607 6,730 (5,692) 7,335
Depreciation and
amortization 2,480 1,832 879 2,926 8,117
Operating income
(loss) $(790) $2,775 $5,851 $(8,618) $(782)
(1) Note -- 2006 financial statements have been adjusted to reflect the
sale of businesses as discontinued operations and the restatement
filed on Form 8-K on February 4, 2008.
(2) 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. Amortization for 2006
includes accelerated amortization expense related to changes in
estimates and valuations.
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
For the Year Ended
December 31, 2007 (1) Hudson Hudson Hudson
Americas Europe Asia Pacific Corporate Total
Revenue $291,525 $472,407 $415,143 $- $1,179,075
Gross margin $87,494 $239,559 $180,860 $- $507,913
Adjusted EBITDA (2) $(114) $34,716 $33,428 $(26,530) $41,500
Acquisition-related
expenses 3,551 1,748 - - 5,299
Business reorganization
expenses (recoveries) 541 2,438 (15) 1,398 4,362
Merger and integration
(recoveries) (50) - - (737) (787)
EBITDA (2) (4,156) 30,530 33,443 (27,191) 32,626
Depreciation and
amortization 4,354 6,059 3,937 274 14,624
Operating income
(loss) $(8,510) $24,471 $29,506 $(27,465) $18,002
For the Year Ended
December 31, 2006 (1) Hudson Hudson Hudson
Americas Europe Asia Pacific Corporate Total
Revenue $306,732 $458,815 $392,327 $- $1,157,874
Gross margin $91,461 $208,966 $158,828 $- $459,255
Adjusted EBITDA (2) $(5,396) $25,797 $30,801 $(27,701) $23,501
Acquisition-related
expenses - 1,687 - - 1,687
Business reorganization
expenses 1,764 2,684 874 693 6,015
Merger and integration
expenses (recoveries) 399 1 (38) - 362
EBITDA (2) (7,559) 21,425 29,965 (28,394) 15,437
Depreciation and
amortization 6,343 6,871 3,171 3,418 19,803
Operating income
(loss) $(13,902) $14,554 $26,794 $(31,812) $(4,366)
(1) Note -- 2007 and 2006 financial statements have been adjusted to
reflect the sale of businesses as discontinued operations and the
restatement filed on Form 8-K on February 4, 2008.
(2) 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. Amortization for 2006
includes accelerated amortization expense related to changes in
estimates and valuations.
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. 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.
Quarter Ended December 31,
2007 2006 (1)
As Currency Constant As
Reported Translation Currency Reported
Revenue:
Hudson Americas $68,482 $(165) $68,317 $74,295
Hudson Europe 115,203 (9,171) 106,032 114,603
Hudson Asia Pacific 106,799 (12,760) 94,039 97,523
Total 290,484 (22,096) 268,388 286,421
Direct costs:
Hudson Americas 47,441 (46) 47,395 49,898
Hudson Europe 54,817 (4,000) 50,817 60,278
Hudson Asia Pacific 58,242 (7,557) 50,685 58,179
Total 160,500 (11,603) 148,897 168,355
Gross margin:
Hudson Americas 21,041 (119) 20,922 24,397
Hudson Europe 60,386 (5,171) 55,215 54,325
Hudson Asia Pacific 48,557 (5,203) 43,354 39,344
Total $129,984 $(10,493) $119,491 $118,066
Selling, general and
administrative (2)
Hudson Americas $20,903 $(135) $20,768 $24,539
Hudson Europe 52,092 (4,469) 47,623 49,388
Hudson Asia Pacific 40,858 (4,493) 36,365 32,865
Corporate 7,027 - 7,027 8,472
Total $120,880 $(9,097) $111,783 $115,264
(1) Note -- 2006 financial statements have been adjusted to reflect the
sale of business segments as discontinued operations.
(2) Selling, general and administrative expenses include depreciation
and amortization and acquisition related expenses. Amortization for
2006 includes accelerated amortization expense related to changes
in estimates and valuations.
HUDSON HIGHLAND GROUP, INC.
RECONCILIATION FOR CONSTANT CURRENCY
(in thousands)
(unaudited)
Year Ended December 31,
2007 (1) 2006 (1)
As Currency Constant As
Reported Translation Currency Reported
Revenue
Hudson Americas $291,525 $(239) $291,286 $306,732
Hudson Europe 472,407 (38,382) 434,025 458,815
Hudson Asia Pacific 415,143 (40,251) 374,892 392,327
Total 1,179,075 (78,872) 1,100,203 1,157,874
Direct costs:
Hudson Americas 204,031 (61) 203,970 215,271
Hudson Europe 232,848 (18,871) 213,977 249,849
Hudson Asia Pacific 234,283 (24,405) 209,878 233,499
Total 671,162 (43,337) 627,825 698,619
Gross margin:
Hudson Americas 87,494 (178) 87,316 91,461
Hudson Europe 239,559 (19,511) 220,048 208,966
Hudson Asia Pacific 180,860 (15,846) 165,014 158,828
Total $507,913 $(35,535) $472,378 $459,255
Selling, general and
administrative (2)
Hudson Americas $95,513 $(198) $95,315 $103,200
Hudson Europe 212,650 (17,3860) 195,264 191,727
Hudson Asia Pacific 151,369 (13,018) 138,351 131,198
Corporate 26,804 - 26,804 31,119
Total $486,336 $(30,602) $455,734 $457,244
(1) Note -- 2007 and 2006 financial statements have been adjusted to
reflect the sale of business segments as discontinued operations.
(2) Selling, general and administrative expenses include depreciation and
amortization and acquisition related expenses. Amortization for 2006
includes accelerated amortization expense related to changes in
estimates and valuations.
Web site: http://www.hudson.com
