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Hudson Highland Group Reports 2008 First Quarter Financial Results
NEW YORK, May 5 /PRNewswire-FirstCall/ -- 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, 2008.
2008 First Quarter Summary
-- Revenue of $297.5 million, an increase of 3.2 percent from
$288.2 million for the first quarter of 2007
-- Gross margin of $126.2 million, or 42.4 percent of revenue, up
7.2 percent from $117.7 million, or 40.9 percent of revenue for the
same period last year
-- Adjusted EBITDA* of $6.7 million, or 2.3 percent of revenue, up
40.4 percent from $4.8 million for the first quarter of 2007
-- EBITDA of $5.3 million, or 1.8 percent of revenue, up 289.4 percent
from $1.4 million for the same period last year
-- Net income from continuing operations of $0.3 million, or $0.01 per
basic and diluted share, compared with net loss of ($1.8) million, or
($0.07) per basic and diluted share, for the first quarter of 2007
-- Net income of $1.4 million, or $0.05 per basic and diluted share,
compared with net income of $0.1 million, or $0.00 per basic and
diluted share, for the first quarter of 2007
* Adjusted EBITDA is defined in the segment tables at the end of this
release.
"During the first quarter, we benefited from our geographic diversification and specialized, professional-level recruitment focus," said Jon Chait, Hudson Highland Group chairman and chief executive officer. "While strong performances continued in Asia Pacific and Europe, our North America business performed admirably, including a particularly strong period for Hudson Legal, one of our specialized markets less impacted by economic cycles." "The energy and engineering business divestiture helped us further our strategic focus and drive additional operational cost reduction," added Mary Jane Raymond, executive vice president and chief financial officer. "We believe this will position Hudson for improved profitability when markets recover and, in the meantime, cushion our exposure to the economic cycle." Share Repurchase Program On February 4, 2008, the company announced that its board of directors authorized the repurchase of up to $15 million of the company's common stock. The company intends to make purchases from time to time as market conditions warrant. Through March 31, 2008, the company had repurchased 701,173 shares for a total cost of approximately $5.3 million. Restructuring Program During 2008, the company will streamline its support operations to match its focus on specialization. The company expects to have $5 - $7 million of restructuring actions throughout this year, including $1 - $2 million in the second quarter. During the first quarter of 2008, the company incurred $1.6 million of restructuring expenses, predominantly related to lease terminations and severance in Hudson Americas following the sale of its energy and engineering business. 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 business to System One Holdings LLC. The company received approximately $11 million in cash, subject to post-closing adjustment; a five-year, secured subordinated $5 million seller note; and a warrant exercisable for 10 percent of the equity of System One. Hudson Highland Group also retained $3.6 million of receivables of the business, all of which has been collected, and has the right to receive an additional $600,000 in cash upon resolution of certain liabilities. The company has treated the business as a discontinued operation effective December 31, 2007. As a result of the sale, the company allocated $6.9 million of goodwill and recorded a loss on sale of ($0.6) million. Guidance The company currently expects second quarter 2008 revenue of $300 - $315 million at prevailing exchange rates and adjusted EBITDA of $10 - $13 million, excluding the impact of any restructuring, acquisitions or divestitures. This compares with revenue of $298.5 million and adjusted EBITDA of $12.2 million in the second quarter of 2007. 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 Tuesday, May 6, 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 43059918 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 43059918. 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 43059918. For those outside the United States, the call will be available on 1-706-645-9291 followed by the participant passcode 43059918. 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.
Financial Tables Follow
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended
March 31,
2008 2007
Revenue $297,507 $288,150
Direct costs 171,282 170,407
Gross margin 126,225 117,743
Operating expenses:
Selling, general and administrative 119,519 112,965
Acquisition-related expenses - 298
Depreciation and amortization 3,863 3,695
Business reorganization expenses 1,320 3,116
Merger and integration expenses 75 -
Total operating expenses 124,777 120,074
Operating income (loss) 1,448 (2,331)
Other income (expense):
Interest, net 360 212
Other, net 426 2,607
Income (loss) from continuing operations
before income taxes 2,234 488
Provision for income taxes 1,966 2,266
Income (loss) from continuing operations 268 (1,778)
Income from discontinued operations,
net of income taxes 1,096 1,833
Net income $1,364 $55
Basic and diluted income (loss) per share:
Income (loss) from continuing operations $0.01 $(0.07)
Income from discontinued operations 0.04 0.07
Net income $0.05 $-
Weighted average shares outstanding:
Basic 25,500,000 24,919,000
Diluted 25,887,000 24,919,000
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands, except share and per share amounts)
(unaudited)
ASSETS March 31, December 31,
2008 2007
Current assets:
Cash and cash equivalents $25,290 $39,245
Restricted cash, short term 1,100 -
Accounts receivable, net 219,284 189,072
Prepaid and other 23,522 18,493
Current assets from discontinued operations - 12,265
Total current assets 269,196 259,075
Intangibles, net 74,836 78,235
Property and equipment, net 28,993 29,470
Other assets 11,318 7,214
Non-current assets from discontinued
operations - 212
Total assets $384,343 $374,206
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $27,291 $21,237
Accrued expenses and other current
liabilities 124,159 120,842
Credit facility and current portion of
long-term debt 1,834 243
Accrued business reorganization expenses 4,048 3,490
Accrued merger and integration expenses 294 314
Current liabilities from discontinued
operations - 6,300
Total current liabilities 157,626 152,426
Accrued business reorganization
expenses, non-current 2,668 2,689
Accrued merger and integration
expenses, non-current 277 327
Other non-current liabilities 19,003 18,649
Total liabilities 179,574 174,091
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: 25,888,548 and 25,690,631
shares, respectively 26 26
Additional paid-in capital 445,013 444,075
Accumulated deficit (287,223) (288,587)
Accumulated other comprehensive
income-translation adjustments 51,399 44,946
Treasury stock, 585,802 and 24,680
shares, respectively (4,446) (345)
Total stockholders' equity 204,769 200,115
$384,343 $374,206
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
Hudson
For the Three Months Hudson Hudson Asia
Ended March 31, 2008 Americas Europe Pacific Corporate Total
Revenue $83,262 $113,352 $100,893 $- $297,507
Gross margin $22,755 $59,149 $44,321 $- $126,225
Adjusted EBITDA (1) $1,227 $6,178 $5,229 $(5,928) $6,706
Business reorganization
expenses (recoveries) 1,462 (237) 95 - 1,320
Merger and integration
expenses (recoveries) (2) 77 - - 75
EBITDA (1) (233) 6,338 5,134 (5,928) 5,311
Depreciation and
amortization 1,173 1,647 990 53 3,863
Operating income (loss) $(1,406) $4,691 $4,144 $(5,981) $1,448
Hudson
For the Three Months Hudson Hudson Asia
Ended March 31, 2007 Americas Europe Pacific Corporate Total
Revenue $76,547 $118,343 $93,260 $- $288,150
Gross margin $22,084 $57,048 $38,611 $- $117,743
Adjusted EBITDA (1) $(1,369) $6,827 $5,570 $(6,250) $4,778
Acquisition-related
expenses - 298 - - 298
Business reorganization
expenses (recoveries) 729 2,447 14 (74) 3,116
EBITDA (1) (2,098) 4,082 5,556 (6,176) 1,364
Depreciation and
amortization 1,127 1,570 883 115 3,695
Operating income (loss) $(3,225) $2,512 $4,673 $(6,291) $(2,331)
(1) Non-GAAP earnings before interest, income taxes, special charges,
other non-operating expense, and depreciation and amortization
("Adjusted EBITDA") and non-GAAP earnings before interest, income
taxes, other non-operating expense, and depreciation and amortization
("EBITDA") are presented to provide additional information about the
company's operations on a basis consistent with the measures which the
company uses to manage its operations and evaluate its performance.
Management also uses these measurements to evaluate capital needs and
working capital requirements. Adjusted EBITDA and EBITDA should not be
considered in isolation or as a substitute for operating income, cash
flows from operating activities, and other income or cash flow
statement data prepared in accordance with generally accepted
accounting principles or as a measure of the company's profitability
or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented
above may not be comparable with similarly titled measures reported by
other companies.
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