Hudson Highland Group

Transcription

1 Hudson Highland Group Investor Presentation RW Baird Conference February 28,

2 Forward Looking Statements Please be advised that except for historical information, the statements made during this presentation and in these slides constitute forwardlooking 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, dispositions of nonstrategic assets, 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 The Year in Review 2006 was a year that tested our resilience Consolidated EBITDA improved 21% from 2005 Good, but not good enough 3

4 Our strategic focus is simple Specialized Professional Recruitment 4

5 Defining our market opportunity Specialized Defined as service with knowledge and insight as to candidate skills and/or client sectors Meaningful brand positioning as an expert Focused on those specializations with higher margins due to scarcity of resources Professional Candidates with degrees (accounting, law, IT) or specific skills Excludes industrial, clerical and general technical Recruitment Both permanent placement and temporary contracting and also services that enhance recruitment 5

6 Keys to unlocking profitability & value We will expand high margin professional contracting as a greater proportion of revenue We will expand the North America business unit We will create a Global Identity with clients and candidates through brand positioning Global and Local specializations Talent management Candidate focus We will narrow our scope we can t win in everything we are in Focus on a few large specializations where we can establish meaningful size, scale and share 6

7 Narrowing our focus Hudson Highland Gross Margin 2005 Projected* Core 63% Core 90% Non-Core 37% Non-Core 10% * Projected data assumes the company is able to divest the non-core assets referenced in our February 7, 2007 shareholder letter, and later in this presentation. 7

8 Financial and Operational Update 8

9 Key Financial Messages Earnings Cash 9

10 Revenue and EBITDA progress since spin $US in Millions Revenue Adjusted EBITDA $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $45 $30 $15 $- $(15) $(30) $200 $ $(45) $(60) 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. 10

11 Quarterly Comparison, 2006 vs $US in Millions Revenue EBITDA $360 $350 $340 $330 $320 $353 $351 $349 $341 $342 $338 $337 $327 Q1 Q2 Q3 Q $12 $8 $4 $0 -$4 $12.0 $10.0 $9.0 $7.0 $6.0 $4.5 $1.4 $(3.6) Q1 Q2 Q3 Q Q Guidance: Revenue of $ M, given prevailing exchange rates Adjusted EBITDA of $3M including $3-4M of restructuring charges Guidance as presented February 7, 2007 in the Q earnings release. 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. 11

12 2006 Review Hudson Americas had a poor first half of 2006 We restated our first quarter for issues related to staff turnover in North America All our international regions delivered improved EBITDA for the year We reduced expenses through a restructuring program coincident with the sale of Highland Partners Hudson Americas returned to profitability in the second half We delivered EBITDA of $25.6 million, 21% ahead of

13 2006 Restructuring Program Announced restructuring charge in August to lower our cost structure: 1) Consolidating support functions 2) Reducing redundant sales functions and unprofitable offices 3) Moving to more economical properties Incurred restructuring costs of $6.4M in 2006, and expect $3-4M in Q1 07 Expect total cost of approximately $10M, annualized cost savings of $12-14M 13

14 Divestiture Economics We continue to divest non-core elements of our portfolio Multiples may be lower than our trading multiple 2-6x on proceeds 4-6x on total cash realized Divestitures allow us to unlock the cost structure We have additional non-core businesses, approximately 10% of revenue at 4 5% EBITDA margins, that we may sell over the next year We will continue to operate these businesses until this process is completed 14

15 Cash Flow 2006 cash flow from operations significantly improved at $36M Up from 2005 cash flow from operations of ($26M) Net cash was $44.6M We consider cash flow as important as earnings main drivers are focus on DSO and overall working capital management 15

16 Our long term EBITDA margin goal remains 7-10% HHGP Hudson Asia Pacific Long Term Hudson Europe Hudson North America -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 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. 16

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18 Selected Financials, Q4 $US in Millions Q4 06 Q4 05 Var ($) Var (%) Revenue % Gross Margin % SG&A % ADJ EBITDA (1) % EBITDA (1) % Gross Margin % 37.4% 34.5% Temp GM % 18.8% 18.7% (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. 18

19 Selected Financials, Full Year $US in Millions Var ($) Var (%) Revenue 1,372 1, % Gross Margin % SG&A % Adj EBITDA (1) % EBITDA (1) % Gross Margin % 35.9% 34.9% Temp GM % 17.9% 18.0% (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 Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (6) 16 Reorg expense M&I expense 0 - (0) - 0 EBITDA (1) (6) 12 D&A Operating income (loss) (9) 4 Q Hudson Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (8) 5 Reorg expense M&I expense - - (0) - (0) EBITDA (1) (8) 4 D&A Operating income (loss) (8) 0 (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. 20

21 EBITDA Reconciliation, Full Year $US in Millions 2006 Hudson Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (1) (28) 32 Reorg expense M&I expense 0 0 (0) - 0 EBITDA (1) (3) (28) 25 D&A Operating income (loss) (10) (32) Hudson Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (33) (5) Reorg expense 1 0 (0) - 1 M&I expense (0) 0 (0) - 0 EBITDA (1) 4 (0) 23 (33) (6) D&A Operating income (loss) (2) (5) 17 (35) (25) 2005 Hudson Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (37) 21 Reorg expense 1 (0) 0-1 M&I expense (0) - (0) - (0) EBITDA (1) (37) 21 D&A Operating income (loss) (38) Hudson Americas Europe Asia Pac Corp Total Adjusted EBITDA (1) (13) (13) 6 (31) (51) Goodwill impairment Reorg expense M&I expense (0) 3 (0) - 3 EBITDA (1) (70) (154) (9) (31) (265) D&A Operating income (loss) (74) (159) (15) (34) (282) (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. 21

22 Balance Sheet As of 12/31/06, $US in Millions Assets Liabilities and Equity Cash Accounts Receivable Other Current Assets Current Assets, Disc Ops Total Current Assets Net PP&E Intangibles Other Assets Non-Current Assets, Disc Ops Total Assets Accounts Payable 24 Accrued Expenses 134 ST Borrowings 0 Accrued Integration and Reorg Costs 5 Current Liabilities, Disc Ops 1 Total Current Liabilities 164 Long-term Liabilities 8 LT Accrued Integration and Reorg Costs 3 Non-Current Liabilities, Disc Ops 2 Shareholders Equity 173 Total Liabilities and Equity