NEW YORK, Oct. 25 - Hudson Highland Group, Inc. (Nasdaq: HHGP), one of the world's leading providers of specialized professional staffing, retained executive search and human capital solutions, today announced financial results for the third quarter and nine months ended September 30, 2005.
2005 Third Quarter Highlights
* Revenue of $356.6 million, an increase of 13.2 percent from $315.0
million for the third quarter of 2004
* Gross margin of $135.2 million, or 37.9 percent of revenue, an increase
of 16.1 percent from $116.4 million, or 37.0 percent of revenue, for the
third quarter of 2004
* EBITDA of $8.7 million, up from a loss of $2.4 million for the third
quarter of 2004
* Net income of $2.3 million, or $0.10 per basic share and $0.09 per
diluted share, compared to a net loss of $6.9 million, or $0.34 per
basic and diluted share for the third quarter of 2004
* Completed acquisition of Balance Ervaring op Projectbasis B.V.
(Balance), a leading professional contract staffing firm in the
Netherlands in August
"Our strategy is paying off," said Jon Chait, chairman and chief executive officer of Hudson Highland Group. "Our results to date have positioned the company for a strong 2005 overall and demonstrate continuing progress toward our long term profitability goals. Despite historically weak third quarter industry trends, every operating unit delivered improved profitability on a year-over-year basis."
"We achieved stronger operating leverage and better EBITDA margins than expected during the third quarter and are raising our guidance for the year accordingly," said Richard W. Pehlke, Hudson Highland Group's executive vice president and chief financial officer.
Guidance
Given the current economic environment, the company expects EBITDA as a percent of revenue to be at least 2 percent in 2005 and believes that an assumption of 12 to 15 percent revenue growth for 2005 remains reasonable. Considering the strong year-to-date results and the impact of the Balance acquisition, the company now expects 2005 full-year EBITDA to range from $30 to $34 million. This is based on expectations of constant currency revenue and gross margin growth of 30 to 35 percent in Hudson North America, 10 to 15 percent in Hudson Europe, and 0 to 5 percent in Hudson Asia Pacific and Highland Partners.
Given the current economic environment, the company continues to expect EBITDA as a percent of revenue to be 3.5 to 4 percent in 2006, and believes revenue growth assumptions above 10 percent would be unreasonable.
2005 Nine Month Results
For the first nine months of 2005, Hudson Highland Group reported revenue of $1.074 billion, up 17.8 percent from $912.3 million for the same nine-month period last year. Net income was $2.5 million, or $0.12 per basic share and $0.11 per diluted share, compared with a net loss of $25.4 million, or $1.33 per basic and diluted share, for the same nine-month period last year.
Conference Call / Webcast
Hudson Highland Group will conduct a conference call tomorrow Wednesday, October 26, 2005 at 9:00 AM EDT to discuss this announcement. Individuals wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 1462858 at 8:50 AM EDT. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 1462858. Hudson Highland Group's quarterly conference call can also be accessed online through Yahoo! Finance at http://www.yahoo.com and the investor information section of the company's website at http://www.hhgroup.com.
Hudson Highland Group
Hudson Highland Group is one of the world's leading professional staffing, retained executive search and human capital solution providers. We help our clients achieve greater organizational performance by attracting, selecting, engaging and developing the best and brightest people for their businesses. Our approximately 3,800 employees in more than 20 countries are dedicated to providing unparalleled service and value to our clients. More information about Hudson Highland Group is available at http://www.hhgroup.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 impact of global economic fluctuations on temporary contracting operations; the cyclical nature of the company's executive search and mid-market professional staffing businesses; the company's ability to manage its growth and fund working capital associated therewith; risks associated with expansion; 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; the impact of employees departing with existing executive search clients; risks maintaining professional reputation and brand name; restrictions imposed by blocking arrangements; exposure to employment- related claims, and limits on insurance coverage related thereto; government regulations; the company's ability to successfully operate as an independent company and the level of costs associated therewith; and restrictions on the company's operating flexibility due to the terms of its credit facility. 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Revenue
$356,604 $315,029 $1,074,307 $912,264
Direct costs 221,436 198,615 669,765 570,970
Gross margin 135,168 116,414 404,542 341,294
Selling, general and
administrative expenses 126,661 115,797 381,974 346,211
Depreciation and amortization 4,217 4,368 13,701 14,362
Business reorganization
expenses (recoveries) (149) 3,314 143 3,450
Merger and integration
recoveries - (317) (35) (354)
Operating income (loss) 4,439 (6,748) 8,759 (22,375)
Other income (expense):
Other income (expense), net 380 128 376 (1,759)
Interest income (expense),
net (331) 203 (1,253) (53)
Income (loss) before provision
for income taxes 4,488 (6,417) 7,882 (24,187)
Provision for income taxes 2,193 530 5,359 1,251
Net income (loss) $2,295 $(6,947) $2,523 $(25,438)
Basic and diluted income
(loss) per share:
Basic income (loss) $.10 $(.34) $.12 $(1.33)
Diluted income (loss) $.09 $(.34) $.11 $(1.33)
Weighted average shares
outstanding:
Basic 23,875,000 20,306,000 21,686,000 19,146,000
Diluted 25,540,000 20,306,000 22,951,000 19,146,000
HUDSON HIGHLAND GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
September December
30, 31,
2005 2004
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $33,698 $21,064
Accounts receivable, net 241,127 197,582
Other current assets 15,977 14,187
Total current assets 290,802 232,833
Property and equipment, net 32,644 36,360
Intangibles, net 31,200 6,104
Other assets 5,233 6,081
$359,879 $281,378
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $36,595 $27,023
Accrued expenses and other current liabilities 146,685 140,903
Short-term borrowings and current portion of
long-term debt 25,784 4,066
Accrued business reorganization expenses 5,079 8,930
Accrued merger and integration expenses 1,487 1,872
Total current liabilities 215,630 182,794
Accrued business reorganization expenses,
non-current 4,439 6,832
Accrued merger and integration expenses,
non-current 2,121 3,329
Other non-current liabilities 4,396 2,648
Long-term debt, less current portion 1,134 2,041
Total liabilities 227,720 197,644
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: 24,210,911 and
20,612,966 shares, respectively 24 21
Additional paid-in capital 403,549 353,825
Accumulated deficit (309,052) (311,576)
Accumulated other comprehensive income --
translation adjustments 37,868 41,694
Treasury stock, 15,798 shares (230) (230)
Total stockholders' equity 132,159 83,734
$359,879 $281,378
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
For the Three Months
Ended September 30,
2005 Americas Europe Asia Corporate Total
Pac & Other
Revenue
Hudson $109,090 $117,285 $114,410 $471 $341,256
Highland 11,132 3,271 945 - 15,348
$120,222 $120,556 $115,355 $471 $356,604
Gross Margin
Hudson $28,694 $49,561 $42,093 $309 $120,657
Highland 10,327 3,206 978 - 14,511
$39,021 $52,767 $43,071 $309 $135,168
Adjusted EBITDA(1)
Hudson $5,079 $3,537 $8,730 $(948) $16,398
Highland 1,032 160 215 - 1,407
Corporate - - - (9,298) (9,298)
$6,111 $3,697 $8,945 $(10,246) $8,507
EBITDA(1)
Hudson $5,080 $3,537 $8,730 $(948) $16,399
Highland 1,180 160 215 - 1,555
Corporate - - - (9,298) (9,298)
$6,260 $3,697 $8,945 $(10,246) $8,656
For the Three Months
Ended September 30,
2004 Americas Europe Asia Corporate Total
Pac & Other
Revenue
Hudson $83,013 $114,957 $102,175 $683 $300,828
Highland 11,181 1,318 1,702 - 14,201
$94,194 $116,275 $103,877 $683 $315,029
Gross Margin
Hudson $22,658 $43,129 $36,501 $643 $102,931
Highland 10,664 1,253 1,566 - 13,483
$33,322 $44,382 $38,067 $643 $116,414
Adjusted EBITDA(1)
Hudson $3,014 $(318) $7,227 $(1,328) $8,595
Highland 1,293 (890) 81 - 484
Corporate - - - (8,462) (8,462)
$4,307 $(1,208) $7,308 $(9,790) $617
EBITDA(1)
Hudson $1,995 $(268) $7,807 $(1,328) $8,206
Highland (1,316) (890) 82 - (2,124)
Corporate - - - (8,462) (8,462)
$679 $(1,158) $7,889 $(9,790) $(2,380)
(1) See the Reconciliation of Adjusted EBITDA to Operating Income (Loss)
for a description of note (1).
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS
(in thousands)
(unaudited)
For the Nine Months
Ended September 30,
2005 Americas Europe Asia Corporate Total
Pac & Other
Revenue
Hudson $327,815 $364,341 $334,236 $1,662 $1,028,054
Highland 34,820 8,426 3,007 - 46,253
$362,635 $372,767 $337,243 $1,662 $1,074,307
Gross Margin
Hudson $82,970 $154,522 $122,057 $1,182 $360,731
Highland 32,635 8,233 2,943 - 43,811
$115,605 $162,755 $125,000 $1,182 $404,542
Adjusted EBITDA(1)
Hudson $12,957 $12,567 $25,658 $(3,340) $47,842
Highland 2,978 179 (723) - 2,434
Corporate - - - (27,708) (27,708)
$15,935 $12,746 $24,935 $(31,048) $22,568
EBITDA(1)
Hudson $12,483 $12,646 $25,658 $(3,340) $47,447
Highland 3,272 179 (730) - 2,721
Corporate - - - (27,708) (27,708)
$15,755 $12,825 $24,928 $(31,048) $22,460
For the Nine Months
Ended September 30,
2004 Americas Europe Asia Corporate Total
Pac & Other
Revenue
Hudson $235,243 $327,233 $302,805 $1,263 $866,544
Highland 32,948 5,463 7,309 - 45,720
$268,191 $332,696 $310,114 $1,263 $912,264
Gross Margin
Hudson $59,899 $132,382 $104,841 $1,166 $298,288
Highland 31,109 5,177 6,720 - 43,006
$91,008 $137,559 $111,561 $1,166 $341,294
Adjusted EBITDA(1)
Hudson $6,054 $(458) $15,967 $(4,453) $17,110
Highland 2,101 (1,115) 946 - 1,932
Corporate - - - (23,959) (23,959)
$8,155 $(1,573) $16,913 $(28,412) $(4,917)
EBITDA(1)
Hudson $5,105 $(408) $16,329 $(4,453) $16,573
Highland (293) (1,281) 947 - (627)
Corporate - - - (23,959) (23,959)
$4,812 $(1,689) $17,276 $(28,412) $(8,013)
(1) See the Reconciliation of Adjusted EBITDA to Operating Income (Loss)
for a description of note (1).
HUDSON HIGHLAND GROUP, INC.
RECONCILIATION OF ADJUSTED EBITDA TO OPERATING INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Hudson
Adjusted EBITDA(1) $16,398 $8,595 $47,842 $17,110
Business reorganization
(expenses) recoveries 1 (706) (430) (891)
Merger and integration
recoveries - 317 35 354
EBITDA(1) 16,399 8,206 47,447 16,573
Depreciation and amortization (3,744) (3,860) (12,264) (11,192)
Operating income $12,655 $4,346 $35,183 $5,381
Highland
Adjusted EBITDA(1) $1,407 $484 $2,434 $1,932
Business reorganization
(expenses) recoveries 148 (2,608) 287 (2,559)
EBITDA(1) 1,555 (2,124) 2,721 (627)
Depreciation and amortization (327) (473) (1,023) (1,305)
Operating income (loss) $1,228 $(2,597) $1,698 $(1,932)
Corporate
Adjusted EBITDA and EBITDA(1) $(9,298) $(8,462) $(27,708) $(23,959)
Depreciation and amortization (146) (35) (414) (1,865)
Corporate expenses $(9,444) $(8,497) $(28,122) $(25,824)
Hudson Highland Group
consolidated
Adjusted EBITDA(1) $8,507 $617 $22,568 $(4,917)
Business reorganization
(expenses) recoveries 149 (3,314) (143) (3,450)
Merger and integration
recoveries - 317 35 354
EBITDA(1) 8,656 (2,380) 22,460 (8,013)
Depreciation and amortization (4,217) (4,368) (13,701) (14,362)
Operating income (loss) $4,439 $(6,748) $8,759 $(22,375)
(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.
