updated 2/9/2011 4:16:59 PM ET 2011-02-09T21:16:59

NEW YORK, Feb. 9, 2011 (GLOBE NEWSWIRE) -- Hudson Highland Group, Inc. (Nasdaq:HHGP), one of the world's leading providers of permanent recruitment, contract professionals and talent management solutions, today announced financial results for the fourth quarter and full year ended December 31, 2010.

Hudson delivered net income of $1.2 million, or $0.04 per basic and diluted share, driven by strong revenue and gross margin growth, in the fourth quarter of 2010. The company achieved $219.1 million in revenue and $3.6 million in EBITDA during that period. These results were driven by 40 percent revenue growth in permanent recruitment and 17 percent revenue growth in temporary contracting, compared with the prior year quarter. Sequentially, revenue grew 9 percent and cash flow from operations in the quarter was $5.7 million.

2010 Fourth Quarter Summary

  • Revenue of $219.1 million, an increase of 20.0 percent over the fourth quarter of 2009, and an increase of 9.3 percent from the third quarter of 2010
     
  • Gross margin of $82.9 million, or 37.9 percent of revenue, up 19.5 percent from the same period last year, and an increase of 10.6 percent from the third quarter of 2010
      
  • EBITDA* of $3.6 million, or 1.6 percent of revenue, improved from an EBITDA loss of $5.0 million for the fourth quarter of 2009, which included $5.9 million of restructuring charges
     
  • Net income of $1.2 million, or $0.04 per basic and diluted share, compared with net loss of $10.4 million, or $0.40 per basic and diluted share, for the fourth quarter of 2009

2010 Full Year Summary

  • Revenue of $794.5 million, an increase of 15.0 percent from $691.1 million for 2009
     
  • Gross margin of $298.6 million, or 37.6 percent of revenue, up 14.6 percent from $260.5 million, or 37.7 percent of revenue for prior year
     
  • EBITDA* of $6.5 million, or 0.8 percent of revenue, up from an EBITDA loss of $35.5 million for 2009
     
  • Net loss of $4.7 million, or $0.16 per basic and diluted share, compared with net loss of $40.6 million, or $1.56 per basic and diluted share, for 2009

* EBITDA is defined in the segment tables at the end of this release and includes other non-operating income.

"Hudson delivered its fourth consecutive quarter of increasing year-over-year revenue and gross margin growth during the fourth quarter, led by continued strong growth in permanent recruitment and a double-digit increase in temporary contracting," said Jon Chait, Hudson Highland Group's chairman and chief executive officer. "Sequential results were also outstanding, indicating a strong trend going into 2011."

"The company achieved $5.7 million of positive cash flow from operations in the fourth quarter and a greatly improved net cash position," said Mary Jane Raymond, the company's executive vice president and chief financial officer. "Despite a still-challenging macroeconomic environment, the company delivered strengthening financial results in 2010."

Regional Results

Regional results for the fourth quarter in constant currency were:

  • Europe gross margin was up 20 percent, led by 30 percent growth in the U.K., compared with fourth quarter 2009. Sequentially, Europe gross margin was up 12 percent compared with third quarter 2010.
     
  • Australia/New Zealand (ANZ) gross margin was up 23 percent compared with fourth quarter 2009, led by an increase of 53 percent in permanent recruitment. Sequentially, ANZ gross margin was seasonally down 4 percent compared with third quarter 2010.
     
  • Asia gross margin was up 26 percent compared with fourth quarter 2009 and up 6 percent compared with third quarter 2010.
     
  • North America gross margin was up 5 percent compared with fourth quarter 2009 and up 16 percent compared with third quarter 2010, delivering positive EBITDA for the second consecutive quarter.

Liquidity and Capital Resources

The company ended the fourth quarter of 2010 with $73.4 million in liquidity, composed of $29.5 million in cash and $43.9 million in availability under its credit facilities. The company generated $5.7 million in cash flow from operations during the quarter and reduced its outstanding borrowings by $12.5 million from $13.9 million at the end of the third quarter to $1.3 million at the end of the fourth quarter. Availability under the U.S., U.K., and Australian facilities at the end of the fourth quarter totaled $36.7 million, while availability under other local country facilities totaled $7.1 million.

Guidance

The company currently expects first quarter 2011 revenue of $200 - $210 million and EBITDA of $1 - $4 million at prevailing exchange rates. This compares with revenue of $180.1 million and an EBITDA loss of $1.4 million in the first quarter of 2010.

Additional Information

Additional information about the company's quarterly results can be found in the shareholder letter and the quarterly earnings slides in the investor information section of the company's Web site at www.hudson.com .

Conference Call/Webcast

Hudson Highland Group will conduct a conference call Thursday, February 10, 2011 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 more than 2,000 professionals serving clients and candidates in approximately 20 countries. More information is available at www.hudson.com .

Safe Harbor Statement

This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and economic conditions that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations; risks related to fluctuations in the company's operating results from quarter to quarter; the ability of clients to terminate their relationship with the company at any time; competition in the company's markets; risks associated with the company's investment strategy; risks related to international operations, including foreign currency fluctuations; the company's dependence on key management personnel; the company's ability to attract and retain highly skilled professionals; risks in collecting the company's accounts receivable; the company's history of negative cash flows and operating losses may continue; restrictions on the company's operating flexibility due to the terms of its credit facility; implementation of the company's cost reduction initiatives effectively; the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; risks related to our dependence on uninterrupted service to clients; the company's exposure to employment-related claims from both clients and employers and limits on related insurance coverage; volatility of the company's stock price; the impact of government regulations; and restrictions imposed by blocking arrangements. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.


Financial Tables Follow

         
         
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
         
         
   Three Months Ended

December 31, 
 Year Ended

December 31, 
  2010 2009 2010 2009
         
Revenue  $ 219,061  $ 182,504  $ 794,542  $ 691,149
Direct costs  136,137  113,129  495,969  430,696
Gross margin  82,924  69,375  298,573  260,453
Operating expenses:        
Selling, general and administrative expenses  80,192  69,192  294,313  277,634
Depreciation and amortization  1,730  3,174  8,184  12,543
Business reorganization and integration expenses  988  5,900  1,694  18,180
Goodwill and other impairment charges  --  --  --  1,549
Total operating expenses  82,910  78,266  304,191  309,906
Operating income (loss)  14  (8,891)  (5,618)  (49,453)
Other income (expense):        
Interest, net  (306)  (225)  (1,278)  (694)
Other, net  1,812  669  4,500  1,444
Fee for early extinguishment of credit facility  --  --  (563)  --
Income (loss) from continuing operations before provision for income taxes  1,520  (8,447)  (2,959)  (48,703)
Provision for (benefit from) income taxes  116  (3,450)  1,482  (5,750)
Income (loss) from continuing operations  1,404  (4,997)  (4,441)  (42,953)
Income (loss) from discontinued operations, net of income taxes  (213)  (5,429)  (244)  2,344
Net income (loss)  $ 1,191  $ (10,426)  $ (4,685)  $ (40,609)
Basic earnings (loss) per share:        
Income (loss) from continuing operations  $ 0.04  $ (0.19)  $ (0.15)  $ (1.65)
Income (loss) from discontinued operations  (0.01)  (0.21)  (0.01)  0.09
Net income (loss)  $ 0.04  $ (0.40)  $ (0.16)  $ (1.56)
         
Diluted earnings (loss) per share:        
Income (loss) from continuing operations  $ 0.04  $ (0.19)  $ (0.15)  $ (1.65)
Income (loss) from discontinued operations  (0.01)  (0.21)  (0.01)  0.09
Net loss  $ 0.04  $ (0.40)  $ (0.16)  $ (1.56)
         
Weighted average shares outstanding:        
Basic  31,234  26,329  29,931  26,036
Diluted  31,754  26,329  29,931  26,036
         
     
     
HUDSON HIGHLAND GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
     
     
   December 31, 
  2010 2009
ASSETS    
Current assets:    
Cash and cash equivalents  $ 29,523  $ 36,064
Accounts receivable, net  128,576  98,994
Prepaid and other  13,988  13,308
Total current assets  172,087  148,366
Property and equipment, net  16,593  19,433
Other assets  17,154  14,145
Total assets  $ 205,834  $ 181,944
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 14,812  $ 12,811
Accrued expenses and other current liabilities  74,990  54,103
Short-term borrowings  1,339  10,456
Accrued business reorganization expenses  2,619  8,784
Total current liabilities  93,760  86,154
Other non-current liabilities  10,493  11,115
Income tax payable, non-current  8,303  8,415
Total liabilities  112,556  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 32,181 and 26,836 shares, respectively  32  27
Additional paid-in capital  466,582  445,541
Accumulated deficit  (408,199)  (403,514)
Accumulated other comprehensive income—translation adjustments  34,902  34,509
Treasury stock, 9 and 114 shares, respectively, at cost  (39)  (303)
Total stockholders' equity  93,278  76,260
Total liabilities and stockholders' equity  $ 205,834  $ 181,944
             
             
 
 
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
             
             
For The Three Months Ended December 31, 2010 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 90,616  $ 74,338  $ 44,268  $ 9,839  $ --   $ 219,061
Gross margin, from external customers  $ 37,468  $ 25,231  $ 10,775  $ 9,450  $ --   $ 82,924
Business reorganization and integration expenses (recovery)  $ 865  $ 102  $ 21  $ --   $ --   $ 988
Non-operating expense (income), including corporate administration charges  1,337  886  (1,298)  243  (2,980)  (1,812)
EBITDA (Loss) (1)  $ 314  $ 1,254  $ 2,386  $ 1,524  $ (1,922)  $ 3,556
Depreciation and amortization expenses            1,730
Interest expense (income), net             306
Provision for (benefit from) income taxes            116
Loss (income) from discontinued operations, net of taxes            213
Net income (loss)            $ 1,191
             
For The Three Months Ended December 31, 2009 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 74,502  $ 61,494  $ 39,011  $ 7,497  $ --   $ 182,504
Gross margin, from external customers  $ 33,006  $ 18,970  $ 10,220  $ 7,179  $ --   $ 69,375
Business reorganization and integration expenses (recovery)  $ 3,135  $ 849  $ 1,794  $ --   $ 122  $ 5,900
Non-operating expense (income), including corporate administration charges  91  177  (936)  (22)  21  (669)
EBITDA (Loss) (1) $ (1,553) $ (492) $ (1,162) $ 1,167 $ (3,008) $ (5,048)
Depreciation and amortization expenses            3,174
Interest expense (income), net             225
Provision for (benefit from) income taxes            (3,450)
Loss (income) from discontinued operations, net of taxes            5,429
Net income (loss)            $ (10,426)
             
For the Three Months Ended September 30, 2010 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 80,503  $ 72,974  $ 37,839  $ 9,078  $ --   $ 200,394
Gross margin, from external customers  $ 32,647  $ 24,259  $ 9,311  $ 8,774  $ --   $ 74,991
Business reorganization and integration expenses (recovery)  $ --   $ --   $ 41  $ --   $ --   $ 41
Non-operating expense (income), including corporate administration charges  3,088  1,433  (407)  478  (5,213)  (621)
EBITDA (Loss) (1)  $ (2,128)  $ 1,376  $ 532  $ 1,169  $ 244  $ 1,193
Depreciation and amortization expenses            1,981
Interest expense (income), net             497
Provision for (benefit from) income taxes            599
Loss (income) from discontinued operations, net of taxes            14
Net income (loss)            $ (1,898)
             
For the Three Months Ended March 31, 2010 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 76,654  $ 56,822  $ 39,507  $ 7,135  $ --   $ 180,118
Gross margin, from external customers  $ 32,530  $ 17,776  $ 9,279  $ 6,836  $ --   $ 66,421
Business reorganization and integration expenses (recovery)  $ 87  $ (116)  $ 142  $ --   $ --   $ 113
Non-operating expense (income), including corporate administration charges  1,178  582  (509)  188  (2,097)  (658)
EBITDA (Loss) (1)  $ 436  $ 249  $ (241)  $ 597  $ (2,408)  $ (1,367)
Depreciation and amortization expenses            2,287
Interest expense (income), net             232
Provision for (benefit from) income taxes            252
Loss (income) from discontinued operations, net of taxes            69
Net income (loss)            $ (4,207)
             
             
             
(1)  Non-GAAP earnings before interest, income taxes, and depreciation and amortization ("EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
             
             
 
HUDSON HIGHLAND GROUP, INC.
SEGMENT ANALYSIS - YEAR TO DATE
(in thousands)
(unaudited)
             
             
             
             
             
For The Year Ended December 31, 2010 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 328,491  $ 269,383  $ 162,432  $ 34,236  $ --   $ 794,542
Gross margin, from external customers  $ 137,191  $ 88,989  $ 39,417  $ 32,976  $ --   $ 298,573
Business reorganization and integration expenses (recovery)  $ 1,402  $ (15)  $ 307  $ --   $ --   $ 1,694
Non-operating expense (income), including corporate administration charges  6,751  3,916  (1,822)  947  (13,729)  (3,937)
EBITDA (Loss) (1)  $ 1,086  $ 4,248  $ 1,687  $ 4,599  $ (5,117)  $ 6,503
Depreciation and amortization expenses            8,184
Interest expense (income), net             1,278
Provision for (benefit from) income taxes            1,482
Loss (income) from discontinued operations, net of taxes            244
Net income (loss)            $ (4,685)
             
For The Year Ended December 31, 2009 Hudson

Europe


Hudson ANZ
Hudson

Americas


Hudson Asia 


Corporate


Total
Revenue, from external customers  $ 276,975  $ 227,169  $ 161,872  $ 25,133  $ --   $ 691,149
Gross margin, from external customers  $ 124,162  $ 71,689  $ 40,959  $ 23,643  $ --   $ 260,453
Goodwill and other impairment (recovery)  $ --   $ --   $ (120)  $ 1,669  $ --   $ 1,549
Business reorganization and integration expenses (recovery)  9,682  3,130  5,133  98  137  18,180
Non-operating expense (income), including corporate administration charges  1,528  94  769  (173)  (3,662)  (1,444)
EBITDA (Loss) (1) $ (9,787) $ (274) $ (11,349) $ (551) $ (13,505) $ (35,466)
Depreciation and amortization expenses            12,543
Interest expense (income), net             694
Provision for (benefit from) income taxes            (5,750)
Loss (income) from discontinued operations, net of taxes            (2,344)
Net income (loss)            $ (40,609)
             
 
             
(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 operates on a global basis, with the majority of our gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term "constant currency" to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. 
In prior periods the company reported constant currency by translating financial data for the current reported period 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's current definition of constant currency produces similar results to the previous method with inconsequential differences and was implemented to improve operating efficiencies. The impact to the variance analysis of presenting constant currency results under the current definition was a change of less than 2% for any single reportable segment's revenues, gross margin and SG&A.
Changes in revenue, direct costs, gross margin, selling, general and administrative expenses and operating (loss) income include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company's management reviews and analyzes business results in constant currency and believes these results better represent the company's underlying business trends. 
The company believes that these calculations are a useful measure, indicating the actual change in operations. Earnings from subsidiaries are rarely repatriated to the United States, and there are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings and not the company's economic condition.
         
  For The Three Months Ended December 31,
  2010 2009
 

As reported


As reported
Currency

translation
Constant

currency
Revenue:        
Hudson Europe $90,616 $74,502  $ (3,717) $70,785
Hudson ANZ  74,338  61,494  5,121  66,615
Hudson Americas  44,268  39,011  12  39,023
Hudson Asia  9,839  7,497  315  7,812
Total  219,061  182,504  1,731  184,235
         
Direct costs:        
Hudson Europe  53,148  41,496  (1,862)  39,634
Hudson ANZ  49,107  42,524  3,516  46,040
Hudson Americas  33,493  28,791  --   28,791
Hudson Asia  389  318  15  333
Total  136,137  113,129  1,669  114,798
         
Gross margin:        
Hudson Europe  37,468  33,006  (1,855)  31,151
Hudson ANZ  25,231  18,970  1,605  20,575
Hudson Americas  10,775  10,220  12  10,232
Hudson Asia  9,450  7,179  300  7,479
Total $82,924 $69,375 $62 $69,437
         
 Selling, general and administrative (a):        
Hudson Europe $35,632 $32,165  $ (1,726) $30,439
Hudson ANZ  23,622  19,250  1,587  20,837
Hudson Americas  9,905  11,833  11  11,844
Hudson Asia  7,824  6,210  239  6,449
Corporate  4,937  2,908  --   2,908
Total $81,920 $72,366 $111 $72,477
 
         
         
 (a) Selling, general and administrative expenses include depreciation and amortization expenses.
CONTACT:  David F. Kirby
          Hudson Highland Group 
          212-351-7216 
          david.kirby@hudson.com

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