UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): April 28, 2010
Hudson
Highland Group, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation)
|
000-50129
|
59-3547281
|
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
560
Lexington Avenue
New
York, NY 10022
(Address
of Principal Executive Offices)
Registrant’s
telephone number, including area code (212) 351-7300
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (16 CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (16 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (16 CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (16 CFR
240.13e-4(c)
|
ITEM
2.02. RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
On April
28, 2010, Hudson Highland Group, Inc. issued a press release announcing its
financial results for the three months ended March 31, 2010. A copy of such
press release is furnished as Exhibit 99.1 to this Current Report.
Also on
April 28, 2010, Hudson Highland Group, Inc. posted on its web site a Letter to
Shareholders, Employees and Friends, which discusses results for the three
months ended March 31, 2010. A copy of such letter is furnished as Exhibit 99.2
to this Current Report.
Also on
April 28, 2010, Hudson Highland Group, Inc. issued a press release announcing
its business trends in the UK market for the three months ended March 31, 2010.
A copy of such press release is furnished as Exhibit 99.3 to this Current
Report.
ITEM
9.01. FINANCIAL
STATEMENTS AND EXHIBITS.
(a)
Financial Statements.
None.
(b) Pro
Forma Financial Information.
None.
(c) Shell
Company Transactions
None.
(d)
Exhibits
|
99.1
|
Press
Release of Hudson Highland Group, Inc. issued on April 28,
2010.
|
|
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99.2
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Letter
to Shareholders, Employees and Friends issued on April 28, 2010 and posted
to Company’s
website.
|
|
|
99.3
|
Press
Release of Hudson UK issued on April 28,
2010.
|
2
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
HUDSON
HIGHLAND GROUP, INC.
|
|||
|
(Registrant)
|
|||
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By:
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/s/
MARY JANE RAYMOND
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||
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Mary
Jane Raymond
|
|||
|
Executive Vice President and
Chief Financial
Officer
|
|||
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Dated:
April 28, 2010
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|||
3
Hudson
Highland Group, Inc.
Current
Report on Form 8-K
Exhibit
Index
|
Exhibit
Number
|
Description
|
|
|
99.1
|
Press
Release of Hudson Highland Group, Inc. issued on April 28,
2010.
|
|
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99.2
|
Letter
to Shareholders, Employees and Friends issued on April 28, 2010 and posted
to Company’s website.
|
|
|
99.3
|
Press
Release of Hudson UK issued on April 28,
2010.
|
Exhibit
99.1
|
For Immediate
Release
|
Contact:
|
David
F. Kirby
|
|
Hudson
Highland Group
|
||
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212-351-7216
|
||
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david.kirby@hudson.com
|
Hudson
Highland Group Reports 2010
First
Quarter Financial Results
NEW YORK, NY – April 28, 2010 –
Hudson Highland Group, Inc. (Nasdaq: HHGP), one of the world’s leading
providers of permanent recruitment, contract professionals and talent management
solutions, today announced financial results for the first quarter ended March
31, 2010.
2010
First Quarter Summary
|
|
·
|
Revenue
of $180.1 million, an increase of 9.1 percent from $165.2 million for the
first quarter of 2009, and a decrease of $2.4 million or 1.3 percent from
the fourth quarter of 2009
|
|
|
·
|
Gross
margin of $66.4 million, or 36.9 percent of revenue, up 7.1 percent from
$62.0 million, or 37.5 percent of revenue for the same period last year,
and a decrease of $3.0 million or 4.3 percent from the fourth quarter of
2009
|
|
|
·
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EBITDA*
loss of $1.4 million, or 0.8 percent of revenue, improved from an EBITDA
loss of $14.9 million for the first quarter of 2009, which included $5.8
million of restructuring charges
|
|
|
·
|
Net
loss from continuing operations of $4.1 million, or $0.16 per basic and
diluted share, compared with net loss from continuing operations of $14.8
million, or $0.59 per basic and diluted share, for the first quarter of
2009
|
|
|
·
|
Net loss of $4.2 million, or
$0.16 per basic and diluted share, compared with net loss of $5.6 million,
or $0.22 per basic and diluted share, for the first quarter of
2009
|
*
EBITDA is defined in the segment tables at the end of this release and includes
other non-operating income.
“The
first quarter was characterized by improving economic conditions globally,
stronger than expected demand for permanent recruitment, and better
year-over-year and sequential performance from all of our regional operations”
said Jon Chait, Hudson Highland Group’s chairman and chief executive
officer.
“We are
particularly encouraged by the growth in our UK and Asian operations during the
period,” said Mary Jane Raymond, the company’s executive vice president and
chief financial officer. “In markets where demand was somewhat less robust at
this stage of the recovery, we still delivered improved profitability over the
prior year period as a result of previous cost reduction actions.”
Liquidity
and Capital Resources
At the
end of the first quarter of 2010, the company had $24.1 million in cash and
$10.5 million in borrowings under its primary credit facility and $0.9 million
in borrowings under its local credit facilities, down from $36.1 million in cash
and $10.5 million in borrowings at the end of the fourth quarter of 2009. The
primary use of cash in the first quarter was to fund the increase in temporary
contracting revenue. In addition, the company had availability as of
March 31, 2010 under its primary credit facility of $10.3 million and under
local country credit facilities of $4.8 million, for a total of $15.1 million.
Subsequent to March 31, 2010, the company raised an additional $19.2 million of
net cash proceeds from its recent public offering of common stock.
Guidance
The
company currently expects second quarter 2010 revenue of $190 - $200 million at
prevailing exchange rates and EBITDA of $1 - $4 million. This
compares with revenue of $173.8 million and an EBITDA loss of $9.5 million in
the second quarter of 2009.
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 Thursday, April 29, 2010 at 9:00
a.m. ET to discuss this announcement. Individuals wishing to listen can access
the Web cast on the investor information section of the company's Web site at
www.hudson.com.
The
archived call will be available on the investor information section of the
company's Web site at www.hudson.com.
About
Hudson Highland Group
Hudson
Highland Group, Inc. is a leading provider of permanent recruitment, contract
professionals and talent management services worldwide. From single placements
to total outsourced solutions, Hudson helps clients achieve greater
organizational performance by assessing, recruiting, developing and engaging the
best and brightest people for their businesses. The company employs
approximately 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; the ability of
clients to terminate their relationship with the company at any time; risks
in collecting the company’s accounts receivable; the company’s history of
negative cash flows and operating losses may continue; the company’s
limited borrowing availability under its credit facility, which may negatively
impact its liquidity; restrictions on the company’s operating flexibility due to
the terms of its credit facility; risks related to fluctuations in the company’s
operating results from quarter to quarter; risks related to international
operations, including foreign currency fluctuations; risks associated with the
company’s investment strategy; risks and financial impact associated with
dispositions of underperforming assets; 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; competition in the company’s markets; the company’s
exposure to employment-related claims from both clients and employers and limits
on related insurance coverage; the company’s dependence on key management
personnel; the company’s ability to attract and retain highly skilled
professionals; volatility of the company’s stock price; the impact of
government regulations; and restrictions imposed by blocking arrangements.
Additional information concerning these and other factors is contained in the
company's filings with the Securities and Exchange Commission. These
forward-looking statements speak only as of the date of this document. The
company assumes no obligation, and expressly disclaims any obligation, to update
any forward-looking statements, whether as a result of new information, future
events or otherwise.
###
Financial
Tables Follow
HUDSON
HIGHLAND GROUP, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except share and per share amounts)
(unaudited)
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Revenue
|
$ | 180,118 | $ | 165,150 | ||||
|
Direct
costs
|
113,697 | 103,146 | ||||||
|
Gross
margin
|
66,421 | 62,004 | ||||||
|
Operating
expenses:
|
||||||||
|
Selling,
general and administrative expenses
|
68,333 | 71,702 | ||||||
|
Depreciation
and amortization
|
2,287 | 3,788 | ||||||
|
Business
reorganization and integration expenses
|
113 | 5,839 | ||||||
|
Goodwill
and other impairment charges
|
- | - | ||||||
|
Total
operating expenses
|
70,733 | 81,329 | ||||||
|
Operating
(loss) income
|
(4,312 | ) | (19,325 | ) | ||||
|
Other
(expense) income:
|
||||||||
|
Interest,
net
|
(232 | ) | (191 | ) | ||||
|
Other,
net
|
658 | 621 | ||||||
|
(Loss)
income from continuing operations before income taxes
|
(3,886 | ) | (18,895 | ) | ||||
|
Provision
(benefit) for income taxes
|
252 | (4,060 | ) | |||||
|
(Loss)
income from continuing operations
|
(4,138 | ) | (14,835 | ) | ||||
|
(Loss)
income from discontinued operations, net of income taxes
|
(69 | ) | 9,276 | |||||
|
Net
(loss) income
|
$ | (4,207 | ) | $ | (5,559 | ) | ||
|
Basic
and duluted (loss) income per share:
|
||||||||
|
(Loss)
income from continuing operations
|
$ | (0.16 | ) | $ | (0.59 | ) | ||
|
(Loss)
income from discontinued operations
|
- | 0.37 | ||||||
|
Net
(loss) income
|
$ | (0.16 | ) | $ | (0.22 | ) | ||
|
Weighted
average shares outstanding:
|
||||||||
|
Basic
and duluted
|
26,257 | 25,171 | ||||||
HUDSON
HIGHLAND GROUP, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except per share amounts)
(unaudited)
|
March
31,
|
December
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 24,128 | $ | 36,064 | ||||
|
Accounts
receivable, net
|
113,213 | 98,994 | ||||||
|
Prepaid
and other
|
13,752 | 13,308 | ||||||
|
Total
current assets
|
151,093 | 148,366 | ||||||
|
Property
and equipment, net
|
17,874 | 19,433 | ||||||
|
Other
assets
|
12,420 | 14,145 | ||||||
|
Total
assets
|
$ | 181,387 | $ | 181,944 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 12,844 | $ | 12,811 | ||||
|
Accrued
expenses and other current liabilities
|
62,395 | 54,103 | ||||||
|
Short-term
borrowings
|
11,380 | 10,456 | ||||||
|
Accrued
business reorganization expenses
|
5,315 | 8,784 | ||||||
|
Total
current liabilities
|
91,934 | 86,154 | ||||||
|
Other
non-current liabilities
|
9,603 | 10,768 | ||||||
|
Income
tax payable, non-current
|
8,573 | 8,415 | ||||||
|
Accrued
business reorganization expenses, non-current
|
369 | 347 | ||||||
|
Total
liabilities
|
110,479 | 105,684 | ||||||
|
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 27,319 and
26,836 shares, respectively
|
27 | 27 | ||||||
|
Additional
paid-in capital
|
446,118 | 445,541 | ||||||
|
Accumulated
deficit
|
(407,721 | ) | (403,514 | ) | ||||
|
Accumulated
other comprehensive income—translation adjustments
|
32,484 | 34,509 | ||||||
|
Treasury
stock, 0 and 114 shares, respectively, at cost
|
- | (303 | ) | |||||
|
Total
stockholders’ equity
|
70,908 | 76,260 | ||||||
|
Total
liabilities and stockholders' equity
|
$ | 181,387 | $ | 181,944 | ||||
HUDSON
HIGHLAND GROUP, INC.
SEGMENT
ANALYSIS
(in
thousands)
(unaudited)
|
For
The Three Months Ended March 31, 2010
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
|
$ | 39,507 | $ | 76,654 | $ | 56,822 | $ | 7,135 | $ | - | $ | 180,118 | ||||||||||||
|
Gross
margin
|
$ | 9,279 | $ | 32,530 | $ | 17,776 | $ | 6,836 | $ | - | $ | 66,421 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 142 | $ | 87 | $ | (116 | ) | $ | - | $ | - | $ | 113 | |||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
(509 | ) | 1,178 | 582 | 188 | (2,097 | ) | (658 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
$ | (241 | ) | $ | 436 | $ | 249 | $ | 597 | $ | (2,408 | ) | $ | (1,367 | ) | |||||||||
|
Depreciation
and amortization expenses
|
2,287 | |||||||||||||||||||||||
|
Interest
expense (income)
|
232 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
252 | |||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
69 | |||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (4,207 | ) | |||||||||||||||||||||
|
For
The Three Months Ended March 31, 2009 (2)
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
(2)
|
$ | 44,023 | $ | 66,387 | $ | 49,997 | $ | 4,743 | $ | - | $ | 165,150 | ||||||||||||
|
Gross
margin
|
$ | 10,962 | $ | 30,313 | $ | 16,303 | $ | 4,426 | $ | - | $ | 62,004 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 1,624 | $ | 2,338 | $ | 1,884 | $ | (7 | ) | $ | - | $ | 5,839 | |||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
605 | 192 | 172 | (389 | ) | (1,201 | ) | (621 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
(5,391 | ) | (3,611 | ) | (1,751 | ) | (615 | ) | (3,548 | ) | (14,916 | ) | ||||||||||||
|
Depreciation
and amortization expenses
|
3,788 | |||||||||||||||||||||||
|
Interest
expense (income)
|
191 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
(4,060 | ) | ||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
(9,276 | ) | ||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (5,559 | ) | |||||||||||||||||||||
|
For
the Three Months Ended June 30, 2009
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
|
$ | 43,133 | $ | 68,187 | $ | 56,653 | $ | 5,875 | $ | - | $ | 173,848 | ||||||||||||
|
Gross
margin
|
$ | 10,512 | $ | 31,280 | $ | 17,660 | $ | 5,432 | $ | - | $ | 64,884 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 1,124 | $ | 2,328 | $ | (8 | ) | $ | 104 | $ | 14 | $ | 3,562 | |||||||||||
|
Goodwill
and other impairment charges (recovery)
|
(120 | ) | - | - | 1,669 | - | 1,549 | |||||||||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
531 | 690 | (243 | ) | 168 | (1,200 | ) | (54 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
$ | (2,002 | ) | $ | (2,220 | ) | $ | 817 | $ | (2,063 | ) | $ | (4,035 | ) | $ | (9,503 | ) | |||||||
|
Depreciation
and amortization expenses
|
2,840 | |||||||||||||||||||||||
|
Interest
expense (income)
|
182 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
2,975 | |||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
2,272 | |||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (17,771 | ) | |||||||||||||||||||||
|
(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.
|
|
(2)
|
Prior
year revenue has been reclassed to conform to current year
presentation.
|
Exhibit
99.2
To:
Shareholders, Employees and Friends
Hudson
Highland Group 2010 First Quarter Financial Results
Market/Economic
Observations
The first
quarter was characterized by improving economic conditions in virtually all of
our markets, although at varying rates of speed and strength. Our
business continues to recover from the recession of 2009—in many markets faster
than would be implied simply by the improving macroeconomic
conditions. For example, in the United Kingdom, in an economy that is
slowly recovering, our operation experienced revenue growth of 19 percent over
the prior year period in constant currency, with permanent recruitment revenue
up 31 percent and contract revenue up 18 percent.
Across
many of our operations, permanent recruitment is recovering more rapidly than
contracting, and faster than we would have expected based on previous economic
recoveries. Normally, we would expect increasing demand to begin in
temporary contracting and later impact permanent recruitment. It is
difficult to pinpoint a single cause, but a primary factor is likely the global
skills shortage. Even at this early stage of the economic recovery, we believe
employers are seeking to augment their work forces in order to buttress their
skill base and establish a competitive advantage. In addition,
consistent with the economic recovery, employers are experiencing
attrition. Many commentators expect attrition to accelerate as the
recovery takes hold after six quarters of virtually no job
movement.
In the
first quarter of 2010, increasing demand for recruitment services was most
noticeable in large companies, while employment activity among small and medium
sized businesses remained slow. Smaller businesses were hit hard by
the economic crisis and had the least cushion from a balance sheet
standpoint. As a result, smaller companies may need several quarters
of improved financial results before they start to consider expanding their
employee base.
Gross
margins in temporary, or contract recruitment, remained under pressure in most
markets as the revenue mix is shifting toward larger employers that emphasize
procurement-oriented relationships. Those employers are flexing their
purchasing leverage in this early stage of recovery. However, we
believe that in our markets the supply/demand equilibrium will begin to shift as
the supply of candidates with the more critical skills becomes more constrained.
For this reason, we expect to see a trough in margins in 2010, followed by
stabilization and improvement in 2011.
The
United Kingdom was the first market in Europe to decline in the recession, but
has been the first market in the region to show strong signs of a re-emergence.
The broadening economic turnaround was apparent in our business and has now
expanded outside of the city of London and the banking and financial services
sectors. Early results indicate that our business in the United Kingdom is
recovering at an accelerated rate compared to some of our key competitors. We
attribute this to the determination and strategic management of the United
Kingdom leadership team through the recession, which we believe has positioned
the business to take full advantage of improvements in the global
economy.
In the
first quarter, Hudson Asia continued to produce strong results as hiring
expectations in most of our key markets in the region have returned to
pre-recession levels, with particular growth in banking, finance and IT. Many
clients are finding that their internal recruiting resources cannot meet their
hiring needs, and while candidates are more willing to change jobs, ‘A’ level
candidates are becoming increasingly challenging to find.
Increases
in gross margin translated into EBITDA improvements at an outsized rate, with
Hudson achieving consolidated operating leverage of over 300 percent in the
first quarter compared with the prior year period. We believe that this trend
will continue throughout 2010 as we expect to benefit from the cost actions we
took in 2008 and 2009. Thus, in markets where gross margin is
recovering, our teams are doing a good job of converting the improved demand
into improved profits.
Regional
Highlights
Europe
In the
first quarter of 2010, Hudson Europe’s revenue increased 3 percent sequentially
from the fourth quarter of 2009, and increased 16 percent from the prior year
period. Growth in the region was driven by the United Kingdom, offset by
continued weakness in continental Europe. As previously noted, the United
Kingdom has continued to recover, with revenue and gross margin up 12 percent
and 8 percent, respectively, on a sequential basis and with larger gains on a
year-over-year basis. The United Kingdom was the largest contributor to the
company’s EBITDA in the first quarter.
In
continental Europe, we have not yet seen strong signs of a recovery but we
generally see stabilization. The region entered into the recession later than
the United Kingdom, and has shown that it will recover later. Revenue and gross
margin were down sequentially 10 percent and 8 percent, respectively, from the
fourth quarter of 2009, primarily due to competitive conditions in Belgium, the
Netherlands and Sweden, with other markets more flat. Last year, the decline
from the fourth quarter of 2008 to the first quarter of 2009 was 22
percent. The
economic stabilization and skill of our local leadership throughout 2009
resulted in a significant improvement in continental Europe’s profit
contribution compared with first quarter last year.
Hudson
Europe achieved a gross margin increase of $2.2 million from the prior year
period and reduced SG&A expenses. As a result, Europe produced EBITDA of
$0.4 million in the first quarter, representing improvements from a loss of $1.6
million in the fourth quarter of 2009 and from the prior year period loss of
$3.6 million.
Australia
and New Zealand
Australia
weathered the economic downturn better than most other major economies of the
world, and the recent financial trends of our Australia and New Zealand (ANZ)
business reflect this. Australia represented about 89 percent of the region’s
gross margin in the first quarter of 2010. Overall, ANZ gross margin increased 9
percent from the prior year period and declined 6 percent from the fourth
quarter of 2009. Permanent recruitment declined 1 percent from the fourth
quarter of 2009, a smaller seasonal decline than in prior years. EBITDA was a
profit of $0.2 million, compared with an EBITDA loss of $0.5 million in the
fourth quarter of 2009 and a loss of $1.8 million in the first quarter of
2009.
Asia
We have
seen a broadening of the recovery in Asia, from China into Hong Kong and
Singapore, as business confidence and employment intentions continue to improve.
Gross margin increased 55 percent in the first quarter of 2010 from the prior
year period and declined 5 percent from the fourth quarter of 2009. Banking and
finance have rebounded quickly in the region and were strong growth drivers in
Hong Kong and Singapore in the first quarter. In China, our IT business also
performed well in the quarter. EBITDA was $0.6 million in the first quarter,
compared with $1.2 million in the fourth quarter of 2009 and a loss of $0.6
million in the prior year period.
North
America
Hudson
North America showed continued signs of recovery in the first quarter of 2010,
as the typical seasonal decline from the fourth quarter was effectively
eliminated compared with prior years. On a sequential basis, revenue was 1
percent higher than the fourth quarter of 2009. Revenue was down 10 percent from
the prior year period, due to weakness in the Finance and IT businesses that
tend to serve smaller or niche companies. The Legal business, which represented
nearly 70 percent of the region’s revenue, increased compared with both the
fourth quarter of 2009 and the prior year period. Strength in Legal was
primarily due to increased M&A and intellectual property project
work.
Gross
margin declined 15 percent from the prior year period and 9 percent from the
fourth quarter of 2009. Temporary contracting gross margin percentage was 20.8
percent, a decline of 90 basis points from the prior year period, attributable
to lower overall average bill rates and a change in client mix toward high
volume clients with lower margins in this early stage of
recovery. Expenses were down 30 percent from the prior year period,
generating an EBITDA loss of $0.2 million in the first quarter, compared with a
loss of $1.2 million in the fourth quarter of 2009 and a loss of $5.4 million in
the prior year period.
Corporate
Corporate
SG&A expenses were $4.5 million in the first quarter of 2010, a decrease of
$0.3 million from the first quarter of 2009. The decrease was driven by lower
compensation costs.
We have
increased our corporate management cost allocation to better reflect the time
spent by corporate resources on regional matters as a result of the management
reductions in 2008 and 2009. This has the effect of reducing the reported EBITDA
loss for our corporate segment and also reduces the reported EBITDA results of
our regional businesses by a corresponding amount. In the first quarter of 2010,
we allocated $2.1 million of corporate expenses to our regional businesses, up
from $1.1 million a year ago.
As a
result of the decrease in the incurred expenses and the higher allocation to the
regional businesses in 2010, EBITDA was a loss of $2.4 million compared to a
loss of $3.5 million in the prior year period.
Liquidity
and Capital Resources
At the
end of the first quarter of 2010, the company had $24.1 million in cash and
$10.5 million in borrowings under its primary credit facility and $0.9 million
in borrowings under its local credit facilities, down from $36.1 million in cash
and $10.5 million in borrowings at the end of the fourth quarter of 2009. The
primary use of cash in the first quarter was to fund the increase in temporary
contracting revenue. In addition, the company had availability as of
March 31, 2010 under its primary credit facility of $10.3 million and under
local country credit facilities of $4.8 million, for a total of $15.1 million.
Subsequent to March 31, 2010, the company raised an additional $19.2 million of
net cash proceeds from its recent public offering of common stock.
Guidance
The
company currently expects second quarter 2010 revenue of $190 - $200 million at
prevailing exchange rates and EBITDA of $1 - $4 million. This
compares with revenue of $173.8 million and an EBITDA loss of $9.5 million in
the second quarter of 2009.
Safe
Harbor Statement
This
letter 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 letter, 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
impact of global economic fluctuations including the current economic downturn;
the ability of clients to terminate their relationship with the company at any
time; risks in collecting our accounts receivable; implementation of the
company’s cost reduction initiatives effectively; the company’s history of
negative cash flows and operating losses may continue; the company's limited
borrowing availability under our credit facility, which may negatively impact
our liquidity; restrictions on the company’s operating flexibility due to the
terms of its credit facility; fluctuations in the company’s operating results
from quarter to quarter; risks relating to the company’s international
operations, including foreign currency fluctuations; risks related to our
investment strategy; risks and financial impact associated with dispositions of
underperforming assets; 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; the company’s exposure to employment-related claims from both
clients and employers and limits on related insurance coverage; the company’s
dependence on key management personnel; volatility of stock price; the impact of
government regulations; financial impact of audits by various taxing
authorities; 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 letter. 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.
SEGMENT
ANALYSIS
(in
thousands)
(unaudited)
|
For
The Three Months Ended March 31, 2010
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
|
$ | 39,507 | $ | 76,654 | $ | 56,822 | $ | 7,135 | $ | - | $ | 180,118 | ||||||||||||
|
Gross
margin
|
$ | 9,279 | $ | 32,530 | $ | 17,776 | $ | 6,836 | $ | - | $ | 66,421 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 142 | $ | 87 | $ | (116 | ) | $ | - | $ | - | $ | 113 | |||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
(509 | ) | 1,178 | 582 | 188 | (2,097 | ) | (658 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
$ | (241 | ) | $ | 436 | $ | 249 | $ | 597 | $ | (2,408 | ) | $ | (1,367 | ) | |||||||||
|
Depreciation
and amortization expenses
|
2,287 | |||||||||||||||||||||||
|
Interest
expense (income)
|
232 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
252 | |||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
69 | |||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (4,207 | ) | |||||||||||||||||||||
|
For
The Three Months Ended March 31, 2009 (2)
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
(2)
|
$ | 44,023 | $ | 66,387 | $ | 49,997 | $ | 4,743 | $ | - | $ | 165,150 | ||||||||||||
|
Gross
margin
|
$ | 10,962 | $ | 30,313 | $ | 16,303 | $ | 4,426 | $ | - | $ | 62,004 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 1,624 | $ | 2,338 | $ | 1,884 | $ | (7 | ) | $ | - | $ | 5,839 | |||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
605 | 192 | 172 | (389 | ) | (1,201 | ) | (621 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
(5,391 | ) | (3,611 | ) | (1,751 | ) | (615 | ) | (3,548 | ) | (14,916 | ) | ||||||||||||
|
Depreciation
and amortization expenses
|
3,788 | |||||||||||||||||||||||
|
Interest
expense (income)
|
191 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
(4,060 | ) | ||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
(9,276 | ) | ||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (5,559 | ) | |||||||||||||||||||||
|
For
the Three Months Ended June 30, 2009
|
Hudson
Americas
|
Hudson
Europe
|
Hudson
ANZ
|
Hudson
Asia
|
Corporate
|
Total
|
||||||||||||||||||
|
Revenue
|
$ | 43,133 | $ | 68,187 | $ | 56,653 | $ | 5,875 | $ | - | $ | 173,848 | ||||||||||||
|
Gross
margin
|
$ | 10,512 | $ | 31,280 | $ | 17,660 | $ | 5,432 | $ | - | $ | 64,884 | ||||||||||||
|
Business
reorganization and integration expenses (recovery)
|
$ | 1,124 | $ | 2,328 | $ | (8 | ) | $ | 104 | $ | 14 | $ | 3,562 | |||||||||||
|
Goodwill
and other impairment charges (recovery)
|
(120 | ) | - | - | 1,669 | - | 1,549 | |||||||||||||||||
|
Non-operating
expense (income), including corporate administration
charges
|
531 | 690 | (243 | ) | 168 | (1,200 | ) | (54 | ) | |||||||||||||||
|
EBITDA
(Loss) (1)
|
$ | (2,002 | ) | $ | (2,220 | ) | $ | 817 | $ | (2,063 | ) | $ | (4,035 | ) | $ | (9,503 | ) | |||||||
|
Depreciation
and amortization expenses
|
2,840 | |||||||||||||||||||||||
|
Interest
expense (income)
|
182 | |||||||||||||||||||||||
|
Provision
for (benefits from) income taxes
|
2,975 | |||||||||||||||||||||||
|
Loss
(income) from discontinued operations, net of taxes
|
2,272 | |||||||||||||||||||||||
|
Net
Income (loss)
|
$ | (17,771 | ) | |||||||||||||||||||||
|
(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.
|
|
(2)
|
Prior
year revenue has been reclassed to conform to current year
presentation.
|
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. The company uses constant currency to depict the current period results
at the exchange rates of the prior 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.
|
2010
|
2009
|
||||||||||||||||
|
Currency
|
Constant
|
||||||||||||||||
|
As
Reported
|
Translation
|
Currency
|
As
Reported
|
||||||||||||||
|
Revenue:
|
|||||||||||||||||
|
Hudson
Americas
|
$ | 39,507 | $ | (30 | ) | $ | 39,477 | $ | 44,023 | ||||||||
|
Hudson
Europe
|
76,654 | (5,352 | ) | 71,302 | 66,387 | ||||||||||||
|
Hudson
ANZ
|
56,822 | (15,140 | ) | 41,682 | 49,997 | ||||||||||||
|
Hudson
Asia
|
7,135 | (208 | ) | 6,927 | 4,743 | ||||||||||||
|
Total
|
180,118 | (20,730 | ) | 159,388 | 165,150 | ||||||||||||
|
Direct
costs:
|
|||||||||||||||||
|
Hudson
Americas
|
30,228 | (14 | ) | 30,214 | 33,061 | ||||||||||||
|
Hudson
Europe
|
44,124 | (3,205 | ) | 40,919 | 36,074 | ||||||||||||
|
Hudson
ANZ
|
39,046 | (10,384 | ) | 28,662 | 33,694 | ||||||||||||
|
Hudson
Asia
|
299 | (12 | ) | 287 | 317 | ||||||||||||
|
Total
|
113,697 | (13,615 | ) | 100,082 | 103,146 | ||||||||||||
|
Gross
margin:
|
|||||||||||||||||
|
Hudson
Americas
|
9,279 | (16 | ) | 9,263 | 10,962 | ||||||||||||
|
Hudson
Europe
|
32,530 | (2,147 | ) | 30,383 | 30,313 | ||||||||||||
|
Hudson
ANZ
|
17,776 | (4,756 | ) | 13,020 | 16,303 | ||||||||||||
|
Hudson
Asia
|
6,836 | (196 | ) | 6,640 | 4,426 | ||||||||||||
|
Total
|
$ | 66,421 | $ | (7,115 | ) | $ | 59,306 | $ | 62,004 | ||||||||
|
Selling,
general and administrative (1)
|
|||||||||||||||||
|
Hudson
Americas
|
$ | 10,785 | $ | (49 | ) | $ | 10,736 | $ | 15,132 | ||||||||
|
Hudson
Europe
|
31,453 | (2,135 | ) | 29,318 | 33,179 | ||||||||||||
|
Hudson
ANZ
|
17,608 | (4,655 | ) | 12,953 | 16,658 | ||||||||||||
|
Hudson
Asia
|
6,224 | (164 | ) | 6,060 | 5,695 | ||||||||||||
|
Corporate
|
4,550 | (1 | ) | 4,549 | 4,812 | ||||||||||||
|
Total
|
$ | 70,620 | $ | (7,004 | ) | $ | 63,616 | $ | 75,476 | ||||||||
|
(1)
|
Selling,
general and administrative expenses include depreciation and amortization
expenses.
|
Exhibit
99.3
Hudson
UK Results May Signal Beginning of Recruitment Industry Rebound
Critical,
professional-level skills shortage drives increased hiring for many
employers
LONDON, ENGLAND – 28th APRIL 2010 – Driven largely
by resurgent professional-level hiring activity in London, Glasgow and
Edinburgh, international recruiter Hudson (Nasdaq: HHGP) achieved a solid 18
percent year-over-year gross margin increase in the UK market during its fiscal
first quarter ended 31 March 2010. Specifically, the company recorded
gross margin of £9.5 million (U.S. $14.8 million) compared with £8 million (U.S.
$11.5 million) for the same period a year ago. Further, Hudson
achieved 14 percent sequential gross margin growth from the fourth quarter of
2009, something rarely achieved in an industry that historically starts the year
slowly, further indicating the strength of the market upturn.
Hudson’s
strong results come amidst other emerging industry signs that the employment
market is starting to pick up. According to the latest Recruitment and Employment
Confederation (REC) report, permanent placements rose in the UK at their
fastest pace in more than twelve years during March 2010, defying traditional
pre-election economic uncertainty. In addition, short-term staff
appointments rose at their fastest rate in nearly three years, and salaries for
permanent positions climbed again.
“Needless
to say, the past 18 months have been extremely challenging for anyone in the
recruitment field,” said Jon Chait, Hudson chairman and chief executive officer,
and head of its UK business operation. “Employers have had to weather
extremely lean times, reducing their workforce and deferring new hires until the
economy began showing signs of improvement. Today, the skills
shortage is an acute problem for both the public and private
sectors.”
“Our
focus on professional-level specialty skills (IT, legal, accounting, sales and
marketing) and key growth industries (banking and finance, healthcare and
energy) is evidence that we have made some good choices during this downturn,
and we believe are now well positioned to benefit from a market upturn,” Chait
added. “Our progress is also a testament to the quality and
dedication of our consultants, and their ability to seize market opportunities
in this fast-changing environment.”
-
Ends -
Exhibit
99.3
Hudson
Hudson 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 approximately 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; the ability of
clients to terminate their relationship with the company at any time; risks
in collecting the company’s accounts receivable; the company’s history of
negative cash flows and operating losses may continue; the company’s
limited borrowing availability under its credit facility, which may negatively
impact its liquidity; restrictions on the company’s operating flexibility due to
the terms of its credit facility; risks related to fluctuations in the company’s
operating results from quarter to quarter; risks related to international
operations, including foreign currency fluctuations; risks associated with the
company’s investment strategy; risks and financial impact associated with
dispositions of underperforming assets; 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; competition in the company’s markets; the company’s
exposure to employment-related claims from both clients and employers and limits
on related insurance coverage; the company’s dependence on key management
personnel; the company’s ability to attract and retain highly skilled
professionals; 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.