Hudson Highland Group. Baird Business Solutions Conference March 2, 2006

Transcription

1 Hudson Highland Group Baird Business Solutions Conference March 2,

2 Forward Looking Statements Please be advised that except for historical information, the statements made during this presentation and in these slides constitute forward-looking statements under applicable securities laws. Such forward-looking statements involve certain risks and uncertainties, including statements regarding the company's strategic direction, prospects and future results. Certain factors, including factors outside of our control, may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, risks associated with acquisitions, competition, seasonality and the other risks discussed in our filings made with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this presentation. 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. 2

3 Hudson Highland Group 2005 Gross Margin $536.9 M Perm (Hudson) 44% 35% Perm (Highland) 11% 10% HCS Perm Contingent and retained search, professional mid market (Hudson) to executive level (Highland) Contract Short to long term contract placements Focused on specialty staffing IT, Legal, and A&F Contract HCS (Human Capital Solutions) Talent management, assessment, career development and training Competency and performance mgmt Outsourcing and re-integration 3

4 Strategy Improving Profitability and Productivity is Fundamental to our Success Delivering the Strategy Focus on core professional staffing and project solutions work High-growth, high-margin Increase proportion of professional contract and project solutions to offset permanent placement volatility Leverage HCS offerings globally Continued growth in North America and Asia Measuring the Results Operating Leverage: Target 25 50% of incremental GM to EBITDA Target long term EBITDA margin of 7 10% 4

5 Projected Industry Growth by Practice Groups Staffing Industry Analysts Outlook on Temp Practice Groups in the US Accounting 14.0% Healthcare Industrial 5.0% 6.7% IT Staffing Legal 10.5% 11.0% Office/Clerical 6.5% Technical/Engineering 13.0% 0.0% 5.0% 10.0% 15.0% Source: Staffing Industry Analysts Forecast, August

6 Industry Issues and Challenges Impact of Economic Cycles Lack of Visibility These factors contributed to revised 2005 guidance in December Australia/New Zealand not showing recessionary signs, but low growth and tight labor market, hiring freezes, and slower growth in our key regions and practice groups Anticipate continuing softness in ANZ, in context of growing economy Hudson North America specific Q4 05 issues 6

7 2005 Financial Highlights Hudson Highland Group Made Excellent Progress in Q4 05 Revenue +14% +3% EBITDA +$33m +45% EBITDA % of Revenue 2.1% 2.0% EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 7

8 Growth Outlook, Focused on Increasing Profitability North America Continued growth in key practice groups, but at a more normalized rate Europe Execution of strategy to reduce exposure to lower margin work and raise profitability Asia Pac Good growth in Asia, and expect continued softness in ANZ in context of growing economy 8

9 Financial Overview 9

10 Delivering Operating Leverage Initial Efforts Paying Off Significant leverage exists in our business model Target 25 50% of gross margin growth to flow to EBITDA Given restructuring of the business, we have been at high end of the range in leverage of 49% based on regional leverage of: - Hudson North America 28% - Hudson Europe 71% - Hudson Asia Pac 45% - Highland Partners +100% Target of 25 50% operating leverage remains in place for

11 EBITDA Margin, 2005 Hudson North America Hudson Europe Hudson Asia Pacific Highland Partners HHGP % 0.0% 2.0% 4.0% 6.0% 8.0% EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 11

12 EBITDA Margin, Example to Reach 7% HHGP Target Hudson North America Hudson Europe Hudson Asia Pacific Highland Partners HHGP Long Term % 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 12

13 2005 Tax Overview As of 12/31/05, $US in Millions Tax loss carryforward of approx $270m, with a deferred tax asset of approx $98m ($70m in US, $28m in UK/Europe) Pretax Income Tax Provision Tax Rate North America $ (26.1) $ 0.2 NM Europe % ANZ % Asia % $ 10.3 $ % 13

14 Balance Sheet As of 12/31/05, $US in Millions Assets Liabilities and Equity Cash 34 Accounts Payable 25 Accounts Receivable 232 Accrued Expenses 140 Other Current Assets 14 ST Borrowings 33 Total Current Assets Net PP&E Intangibles Other Assets Total Assets Accrued Integration and Reorganization Costs Total Current Liabilities Long-term Liabilities LT Accrued Integration and Reorganization Costs Shareholders Equity 133 Total Liabilities and Equity

15 2006 Outlook Expect to Continue to Make Progress toward our Goals Expect FY 2006 constant currency revenue growth of 1 5% and FY 2006 constant currency gross margin growth of 5 10%, based on regional revenue growth of: 7 12% in Hudson North America 0 5% in Hudson Europe 0 5% in Highland Partners (5) 5% in Hudson Asia Pacific Goal to build a sustainable, profitable business, regardless of revenue growth As presented February 16, 2006 in the Q earnings release. 15

16 2006 Outlook Expect to Continue to Make Progress toward our Goals Target long term EBITDA margin of 7 10% Expect % EBITDA margin for FY 2006, given current economic conditions Expect Q1 revenue and EBITDA lower than prior year due to Asia Pacific business conditions Guidance includes $4.9 million in stock compensation expense for FAS 123R; 2005 costs would have been $4.5 million As presented February 16, 2006 in the Q earnings release. 16

17 Financial Appendix 17

18 Selected Financials $US in Millions Q4 05 Q4 04 Var ($) Var (%) Revenue % Gross Margin % SG&A % EBITDA (1) % Gross Margin % 37.4% 37.5% Temp GM % 18.7% 17.9% (1) EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) follows. 18

19 Selected Financials $US in Millions Var ($) Var (%) Revenue 1,428 1, % Gross Margin % SG&A % EBITDA (1) 30 (3) 33 NM Gross Margin % 37.6% 37.4% Temp GM % 18.0% 17.4% (1) EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) follows. 19

20 EBITDA Reconciliation, Q4 $US in Millions Q Hudson Highland N. America Development Americas (2) Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) 5 (0) (8) 7 Reorg expense M&I expense (0) - - (0) EBITDA (1) 5 (0) (8) 7 D&A Operating income (loss) 4 (0) (8) 2 Q Hudson Highland N. America Development Americas (2) Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) 5 (1) (8) 6 Reorg expense (0) - (0) 0 - (0) - (0) M&I expense (0) 1-1 EBITDA (1) 5 (1) (8) 5 D&A Operating income (loss) 3 (1) 2 (0) 5 0 (8) (1) (1) Adjusted EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, and impaired goodwill. EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. (2) Hudson Americas represents Hudson North America and Hudson Development combined. 20

21 EBITDA Reconciliation, Full Year $US in Millions 2005 Hudson Highland N. America Development Americas (2) Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) 18 (4) (36) 30 Reorg expense 1-1 (0) 0 (0) - 0 M&I expense (0) - (0) - (0) - - (0) EBITDA (1) 18 (4) (36) 30 D&A Operating income (loss) 13 (4) (36) Hudson Highland N. America Development Americas (2) Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) 11 (5) (31) 1 Reorg expense (0) 2-3 M&I expense (0) - (0) 0 (0) 1-1 EBITDA (1) 10 (5) (0) (31) (3) D&A Operating income (loss) 5 (6) (1) (4) 18 (2) (34) (23) (1) Adjusted EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, and impaired goodwill. EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. (2) Hudson Americas represents Hudson North America and Hudson Development combined. 21

22 Revenue Growth, Q $US in Millions Hudson North America 20% Hudson Europe (2%) Hudson Asia Pacific Highland Partners 4% (6%) Q4 05 Q4 04 $- $20 $40 $60 $80 $100 $120 $140 Consolidated revenue growth of 3% in Q vs prior year. 22

23 Revenue Growth, 2005 $US in Millions Hudson North America 34% Hudson Europe 8% Hudson Asia Pacific Highland Partners 2% 6% $- $100 $200 $300 $400 $500 $600 Consolidated revenue growth of 14% in 2005 vs prior year. 23

24 EBITDA Margin, Q Hudson North America Hudson Europe Hudson Asia Pacific Highland Partners HHGP Q4 05 Q % 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% EBITDA is a non-gaap measure defined as earnings before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 24

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