HUDSON HIGHLAND GROUP RW BAIRD BUSINESS SOLUTIONS CONFERENCE. February 25, 2009

Transcription

1 HUDSON HIGHLAND GROUP RW BAIRD BUSINESS SOLUTIONS CONFERENCE February 25, 2009

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 forwardlooking 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 forwardlooking statements, including the impact of global economic fluctuations including the current economic downturn, the ability of clients to terminate their relationship with the company at any time, risks in collecting the company's accounts receivable, implementation of the company's cost reduction initiatives effectively and the other risks discussed in our filings made with the Securities and Exchange Commission. These forwardlooking 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 forwardlooking statements, whether as a result of new information, future events or otherwise. 2

3 Highland Group Highland delivers global permanent recruitment, contract staffing and talent management services Highland spun out from Monster Worldwide April 1, 2003 Highland represents the consolidation of 67 acquisitions by former parent (54 acquisitions related to, 13 related to Highland) Divested seven business units with approx $300M in revenue from Sept 2006 to May 2008, including Energy & Engineering and Highland Partners Worldwide capabilities from over 100 offices in more than 20 countries, with approximately 3,100 employees 3

4 Our Strategic Focus is Simple Specialized Professional Resources Specialized Defined as service with knowledge and insight about candidate skills and clients Goal is to position experts selling to experts Specializations typically command higher margins due to scarcity of resources Professional Candidates with degrees (accounting, law, IT) or knowledge skills Resources 4 Includes permanent recruitment, temporary or project staffing, and services in candidate identification and selection

5 Q Global Product Split Q Revenue Q Gross Margin Temporary Contracting Temporary Contracting 72% 8% Talent Mgmt. 36% 16% Talent Mgmt. 20% 48% Permanent Recruitment Permanent Recruitment 5

6 Q Regional Split Q Revenue Q Gross Margin 34% Asia Pacific 35% Asia Pacific 41% 25% 49% 16% Europe Americas Europe Americas 6

7 2008 Regional Gross Margin Composition Europe 2008 Gross Margin: Asia Pacific 2008 Gross Margin: Continental Europe Asia 56% 24% 44% 76% United Kingdom Australia / New Zealand 7

8 2008 Americas Practice Groups 2008 Revenue 2008 Gross Margin 62% IT&T 22% 36% 4% 12% 17% Recruitment & Talent Mgmt. Financial Solutions IT&T 21% 49% 36% 15% 17% 15% Recruitment & Talent Mgmt. Financial Solutions Legal Legal 8

9 Unique Strengths of Geographically diverse business will benefit the company as different regions recover at different times Our focus on specialized practice groups offers some protection from cyclical forces We have marketleading brands around the world: Australia/New Zealand Belgium Singapore and China Balance in Netherlands IT Banking in the UK Legal in North America 9

10 Revenue and EBITDA Progress Since Spin $US in Millions Revenue (Revenue growth) Adjusted EBITDA (As % of Revenue) $1,400 $1,200 $1,000 $800 $600 $400 $200 $ 14% 2% 2% 20% 20% 0% 2% 3% 17% $45 (8)% $30 2.0% 1.9% 2.8% 2.9% $15 $ $(15) $(30) $(45) $(60) 0.7% (7.0%) (1.3%) 0.4% 3.4% (2.3%) (7.1%) 0.8% Full Year First Half Full Year First Half 10 Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

11 Our Long Term EBITDA Margin Goal Remains 710% HHGP Asia Pacific Europe Americas 3.0% 1.0% 1.0% 3.0% 5.0% 7.0% 9.0% Long Term (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. 11

12 But Current Economic Conditions Will Slow our Progress 2009 Declines much larger than 2001 Real GDP Growth, Percentage Change from Prior Year United States (1.6) 1. 6 United Kingdom (2.8) 0. 2 Australia New Zealand (0.5) (0.4) 1. 9 Eurozone (2.0) 0. 5 Japan (0.3) (2.6) 0. 6 China Source: OECD Economic Outlook No. 84, November 2008, IMF Data, January 28, 2009, European Commission on Economic and Financial Affairs, January 19, 2009 Forecast. 12

13 Unemployment Rates Around the Globe Percent of Labor Force United States United Kingdom Australia New Zealand Eurozone Japan Source: OECD Economic Outlook No. 84, November 2008, European Commission, Interim Forecast, January 19,

14 Adjusted EBITDA Trends $US in Millions 16.0 $ $11.9 $11.2 $10.6 $11.5 $ $4.5 $6.3 $4.7 $7.1 $ $ ($0.0) Q1 Q2 Q3 ($0.4) Q4 (4.0) $(4.7) ($3.4) (8.0) (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

15 Initial Trends in Q Trends in January 2009 were consistent with December 2008 Gross margin was down approx 42% (32% on a constant currency basis) from January 2008 We did not give guidance for Q1 2009, given low visibility in the current economic climate We do expect operating conditions to remain weak during the first quarter but we are finding opportunities: Public sector, energy, life sciences are hiring Tailoring solutions to client needs Continuing to be aggressive on costs while preserving revenue generators We expect the seasonal decline in Revenue and adjusted EBITDA from Q4 to Q1 to be larger than usual

16 16 Financial Results

17 Q Consolidated Financial Results $US in Millions Revenue Gross Margin SG&A Adj. EBITDA (1) Goodwill and other Impairments Op Income Net Income Diluted EPS (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 17(2) CC represents constant currency variance. 28% 16% 33% 23% 23% 12% 126% 118% CC CC CC CC CC CC Q $207.4 $86.5 $89.9 ($3.4) $67.1 ($80.2) ($80.3) ($3.20) Q $288.8 $129.4 $116.3 $13.1 $9.0 $12.0 $0.46

18 2008 Consolidated Financial Results $US in Millions Revenue 8% $1,080.2 $1, % CC Gross Margin 8% $464.1 $ % CC SG&A 5% $444.0 $ % CC Adj. EBITDA (1) 50% $20.1 $ % CC Goodwill and other Impairments $67.1 Op Income ($73.4) $16.7 CC Net Income ($74.3) $15.0 CC Diluted EPS ($2.95) $0.58 (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation. 18

19 Balance Sheet As of 12/31/08, $US in Millions Assets Liabilities and Equity Cash 49 Accounts Payable 16 Accounts Receivable 129 Accrued Expenses 78 Other Current Assets 16 ST Borrowings, Current Portion LTD 5 Total Current Assets 194 Accrued Integration and Reorg Costs 6 Total Current Liabilities 105 Net PP&E Intangibles Other Assets Total Assets Longterm Liabilities 17 LT Accrued Integration and Reorg Costs 1 Shareholders Equity 108 Total Liabilities and Equity

20 2008 Cash Flow Summary $US in Millions YTD Dec08 YTD Dec07 Net (loss) income $ (74.3) $ 15.0 Depreciation and amortization Goodwill and other impairment charges 67.1 Stockbased compensation Gain on asset disposition (5.9) (10.2) Change in accounts receivable Change in accounts payable and other liabilities (46.0) (12.7) Other 1.1 (1.0) Cash from operations Capital expenditures (10.6) (13.3) Free cash flow Payments for acquisitions and intangibles, net (6.6) (37.5) Proceeds from the sale of assets Net borrowings (repayments) 5.3 Purchase of treasury shares (7.5) Other Effect of exchange rates (5.4) 2.8 Change in cash 10.0 (5.4)

21 Q4 08 Regional Gross Margin Mix Approximate mix of gross margin by product around the globe Temp Perm Talent Mgmt Americas 80% 20% Europe 25% 50% 25% UK 40% 50% 10% Cont Europe 10% 50% 40% Asia Pacific 30% 60% 10% ANZ 40% 50% 10% Asia 95% 5% HHGP Total 36% 48% 16% 21

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23 23 Appendix

24 EBITDA Reconciliation, Full Year $US in Millions 2008 Revenue ,080.2 Gross margin Adjusted EBITDA (1) (28.3) 20.1 Acquisitionrelated exp Reorg expense M&I expense Goodwill and other impairm EBITDA (1) (39.8) (29.3) (58.6) D&A Operating income (loss) (44.4) (5.4) 6.0 (29.5) (73.4) 2007 Revenue ,173.1 Gross margin Adjusted EBITDA (1) (0.1) (26.5) 40.1 Acquisitionrelated exp Reorg expense (0.0) M&I expense (0.1) (0.7) (0.8) EBITDA (1) (4.2) (27.2) 31.3 D&A Operating income (loss) (8.5) (27.5) Revenue ,153.5 Gross margin Adjusted EBITDA (1) (5.4) (27.7) 22.6 Acquisitionrelated exp Reorg expense M&I expense (0.0) 0.4 EBITDA (1) (7.6) (28.4) 14.5 D&A Operating income (loss) (13.9) (31.8) (5.2) 2005 Revenue ,127.7 Gross margin Adjusted EBITDA (1) (37.4) 7.4 Acquisitionrelated exp Reorg expense 0.5 (0.0) M&I expense (0.0) (0.0) (0.1) EBITDA (1) (37.4) 7.0 D&A Operating income (loss) (0.6) (38.0) (9.5) 24 (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

25 EBITDA Reconciliation, Full Year $US in Millions 2004 Revenue Gross margin Adjusted EBITDA (1) 0.2 (0.8) 20.6 (33.2) (13.2) Acquisitionrelated exp Reorg expense (0.3) 1.0 M&I expense (0.1) 0.4 (0.2) 0.1 EBITDA (1) (0.8) (1.5) 21.1 (33.2) (14.3) D&A Operating income (loss) (6.0) (5.8) 15.0 (35.2) (32.0) 2003 Revenue Gross margin Adjusted EBITDA (1) (16.4) (14.2) 3.9 (31.2) (57.9) Acquisitionrelated exp Goodwill Impairment Reorg expense M&I expense (0.1) 2.9 (0.1) 2.7 EBITDA (1) (73.5) (155.0) (11.6) (31.4) (271.6) D&A Operating income (loss) (77.4) (158.8) (17.2) (34.4) (287.8) 25 (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

26 EBITDA Reconciliation, Q1 $US in Millions Q Revenue Gross margin Adjusted EBITDA (1) (5.9) 6.3 Acquisitionrelated exp Reorg expense 1.5 (0.2) M&I expense (0.0) EBITDA (1) (0.2) (5.9) 4.9 D&A Operating income (loss) (1.4) (6.0) 1.0 Q Revenue Gross margin Adjusted EBITDA (1) (1.4) (6.2) 4.5 Acquisitionrelated exp Reorg expense (0.1) 3.1 M&I expense EBITDA (1) (2.1) (6.2) 1.1 D&A Operating income (loss) (3.2) (6.3) (2.6) Q Q Revenue Gross margin Adjusted EBITDA (1) (6.8) (7.9) (4.7) Acquisitionrelated exp Reorg expense (0.0) (0.0) M&I expense EBITDA (1) (6.8) (7.9) (4.7) D&A Operating income (loss) (8.2) (8.1) (8.8) Revenue Gross margin Adjusted EBITDA (1) (10.1) (0.0) Acquisitionrelated exp Reorg expense 0.6 (0.1) (0.0) 0.5 M&I expense (0.0) (0.0) EBITDA (1) (10.1) (0.5) D&A Operating income (loss) (0.6) (10.3) (4.9) 26 (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

27 EBITDA Reconciliation, Q2 $US in Millions Q Revenue Gross margin Adjusted EBITDA (1) (9.2) 11.2 Acquisitionrelated exp Reorg expense M&I expense 0.0 (0.1) (0.0) EBITDA (1) (9.2) 10.2 D&A Operating income (loss) (9.3) 6.6 Q Revenue Gross margin Adjusted EBITDA (1) (1.3) (6.5) 11.9 Acquisitionrelated exp Reorg expense (0.0) (0.0) M&I expense (0.0) (0.0) EBITDA (1) (4.8) (8.1) 6.5 D&A Operating income (loss) (6.0) (8.2) 2.7 Q Revenue Gross margin Adjusted EBITDA (1) (3.0) (6.8) 7.1 Acquisitionrelated exp Reorg expense 0.2 (0.1) M&I expense EBITDA (1) (3.3) (7.2) 6.3 D&A Operating income (loss) (4.5) (7.3) 2.4 Q Revenue Gross margin Adjusted EBITDA (1) (9.4) 4.7 Acquisitionrelated exp Reorg expense (0.1) (0.1) M&I expense EBITDA (1) (9.4) 4.8 D&A Operating income (loss) (0.3) (9.5) (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

28 EBITDA Reconciliation, Q3 $US in Millions Q Q Revenue Gross margin Adjusted EBITDA (1) (6.0) 6.0 Acquisitionrelated exp Reorg expense M&I expense (0.0) EBITDA (1) (6.0) 3.1 D&A Operating income (loss) (6.1) (0.9) Revenue Gross margin Adjusted EBITDA (1) (6.8) 10.6 Acquisitionrelated exp Reorg expense (0.1) (0.0) (0.0) 0.0 (0.1) M&I expense (0.0) (0.7) (0.8) EBITDA (1) (6.0) 11.1 D&A Operating income (loss) (6.1) 7.6 Q Q Revenue Gross margin Adjusted EBITDA (1) (7.4) 8.8 Acquisitionrelated exp Reorg expense M&I expense EBITDA (1) (7.6) 5.9 D&A Operating income (loss) (0.3) (7.8) 2.1 Revenue Gross margin Adjusted EBITDA (1) (9.8) 3.1 Acquisitionrelated exp Reorg expense M&I expense EBITDA (1) (9.8) 3.1 D&A Operating income (loss) (9.9) (0.6) 28 (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.

29 EBITDA Reconciliation, Q4 $US in Millions Q Revenue Gross margin Adjusted EBITDA (1) (0.5) (7.1) (3.4) Acquisitionrelated exp Reorg expense M&I expense Goodwill, other charges EBITDA (1) (42.5) (17.2) (8.9) (8.1) (76.8) D&A Operating income (loss) (43.6) (18.5) (9.8) (8.2) (80.2) Q Revenue Gross margin Q Q Revenue Gross margin Adjusted EBITDA (1) (5.5) 11.5 Acquisitionrelated exp Reorg expense M&I expense 0.3 (0.0) 0.3 EBITDA (1) (5.7) 7.1 D&A Operating income (loss) (0.8) (8.6) (1.0) Revenue Gross margin Adjusted EBITDA (1) (7.0) 13.1 Acquisitionrelated exp Reorg expense (0.1) (0.0) (0.0) (0.1) (0.3) M&I expense EBITDA (1) (6.9) 12.5 D&A Operating income (loss) (6.9) 9.0 Adjusted EBITDA (1) (8.2) (0.4) Acquisitionrelated exp Reorg expense M&I expense (0.0) (0.0) EBITDA (1) (8.2) (0.5) D&A Operating income (loss) (0.0) (8.3) (4.7) (1) Adjusted EBITDA is a nongaap measure defined as earnings before interest, income taxes, depreciation, amortization, and also excludes merger and integration costs, business reorganization, acquisitionrelated compensation and impaired goodwill. A reconciliation of EBITDA to operating income (loss) is included in the presentation.