Hudson Highland Group. Investor Presentation

Transcription

1 Hudson Highland Group Investor Presentation 1

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, dispositions, 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 Hudson (89% of 2005 GM) - permanent and contract professional staffing, and talent management Highland (11%) - retained executive search Worldwide capabilities from over 110 offices in over 20 countries Approximately 3,800 employees 3

4 Hudson Highland Group 2005 Gross Margin $536.9 M Perm (Hudson) Contract & Solutions 44% 35% Perm (Highland) 11% 10% Talent Mgmt Perm Contingent and retained search, professional mid market (Hudson) to executive level (Highland) Contract & Solutions Short to long term contract placements Focused on specialty staffing Talent Mgmt IT, Legal, and A&F Assessment, career development, training and coaching Competency and performance mgmt Outsourcing and re-integration 4

5 Diversified Global Operations 2005 Gross Margin $536.9 M Asia Pac 40% 30% 30% Europe Americas 5

6 Industry Specialization Represents Hudson s 3 Major Regions (2005 GM of $320m) Accounting & Finance 20% Legal 14% Sales & Marketing 5% HR 4% Engineering, Aerospace & Defense 3% IT 21% Engineering, Energy 6% Other 27% Includes Hudson North America, UK, and Australia. Other primarily includes Office Services, Technical and Operations, Commercial, and Trade. 6

7 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 Talent Management 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% 7

8 Financial Highlights Progress in each year since spin $US in Millions Revenue Adjusted EBITDA $1,600 $1,400 $1,200 $1,000 $800 $600 $30 $15 $- $(15) $(30) $400 $200 $ $(45) $(60) $(75) 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. 8

9 Stock Price Chart Despite EBITDA progress, recent softness has driven the stock down 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 HHGP S&P 500 Comps Comps include Robert Half, MPS Group, Kforce, Spherion, CDI and Manpower. 9

10 Q Summary Good progress internationally, but weaker than expected results in Hudson Americas Hudson Americas results driven by lower y/y gross margin primarily in IT and Financial Solutions And higher SG&A costs due to continued spending on PeopleSoft and investments in Financial Solutions practice group Initial response in Hudson Americas focused on improving branch accountability and containing expenses; key personnel changes also made 10

11 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

12 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 Growth in Asia, and expect continued softness in ANZ in context of growing economy 12

13 EBITDA Margin, 2005 Hudson Americas 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. 13

14 EBITDA Margin, Example to Reach 7% HHGP Target Hudson Americas 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. 14

15 Financial Overview 15

16 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 were at the 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

17 Balance Sheet As of 3/30/06, $US in Millions Assets Liabilities and Equity Cash 33 Accounts Payable 35 Accounts Receivable 238 Accrued Expenses 136 Other Current Assets 14 ST Borrowings 34 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 130 Total Liabilities and Equity

18 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: 5 10% in Hudson Americas 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 May 3, 2006 in the Q earnings release. 18

19 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 Guidance includes $5.3 million in stock compensation expense for FAS 123R; 2005 costs were $4.5 million and 2005 results adjusted to include this per the modified retrospective method As presented May 3, 2006 in the Q earnings release. 19

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21 Selected Financials $US in Millions Q1 06 Q1 05 Var ($) Var (%) Revenue (8) (2.3%) Gross Margin (0) (0.1%) SG&A % EBITDA (1) (0) 2 (2) (105.9%) Gross Margin % 37.2% 36.3% Temp GM % 17.5% 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. 21

22 Selected Financials $US in Millions Var ($) Var (%) Revenue 1,428 1, % Gross Margin % SG&A % EBITDA (1) 25 (7) 32 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. 22

23 EBITDA Reconciliation, Q1 $US in Millions Q Hudson Highland Americas Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) (3) (8) (0) Reorg expense M&I expense EBITDA (1) (3) (8) (0) D&A Operating income (loss) (5) (8) (5) Q Hudson Highland Americas Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) (10) 2 Reorg expense 1 (0) M&I expense (0) (0) EBITDA (1) (10) 2 D&A Operating income (loss) (10) (3) (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. 23

24 EBITDA Reconciliation, Full Year $US in Millions 2005 Hudson Highland Americas Europe Asia Pac Partners Corp Total Adjusted EBITDA (1) (37) 25 Reorg expense 1 (0) 0 (0) - 0 M&I expense (0) - (0) - - (0) EBITDA (1) (37) 25 D&A Operating income (loss) (38) Adjusted EBITDA (1) (33) (3) Reorg expense 1 0 (0) 2-3 M&I expense (0) 0 (0) 1-1 EBITDA (1) 4 (0) 23 (0) (33) (7) D&A Operating income (loss) (2) (5) 17 (2) (35) (27) 2003 Adjusted EBITDA (1) (13) (13) 6 (13) (31) (64) Goodwill impairment Reorg expense M&I expense (0) 3 (0) EBITDA (1) (70) (154) (9) (31) (31) (296) D&A Operating income (loss) (74) (159) (15) (35) (34) (317) (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. 24