Harsh Conditions Hit Hudson Global
Harsh Conditions Hit Hudson Global
Hudson Global, Inc. has announced financial results for the first quarter ended March 31, 2013.
2013 First Quarter Summary
? Revenue of $165.7 million, a decrease of 17.4 percent from the first quarter of 2012, or 16.8 percent in constant currency.
? Gross margin of $56.7 million or 34.2 percent of revenue, representing a 22.6 percent decrease from the same period last year, or 22.2 percent in constant currency.
? Adjusted EBITDA loss* of $4.9 million, compared with adjusted EBITDA loss of $0.9 million in the first quarter of 2012.
? Restructuring charges of $2.0 million in the first quarter of 2013.
? EBITDA loss* of $6.6 million, compared with EBITDA loss of $2.2 million in the first quarter of 2012.
? Net loss of $8.2 million, or $0.25 per basic and diluted share, compared with net loss of $3.2 million, or $0.10 per basic and diluted share, for the first quarter of 2012.
* EBITDA and adjusted EBITDA are defined in the segment tables at the end of this release.
"Global market conditions continue to be harsh," said Manuel Marquez, chairman and chief executive officer at Hudson. "As we expected, this had an impact on our first quarter 2013 results. Notwithstanding this, we are confident we are making good progress on our strategy. We believe our critical foundational work will ultimately allow us to better withstand the economic down cycles and serve as an engine for stronger performance in the future."
"While focusing on our strategy and top line action plans, managing our costs and liquidity will remain equally important," said Mary Jane Raymond, chief financial officer at Hudson.
Hudson Americas' gross margin decreased 31 percent in the first quarter compared with the prior year period due to declines in both temporary contracting and permanent recruitment. Legal eDiscovery continued to see lower demand levels with gross margin down 33 percent from the period a year ago, while RPO gross margin decreased 37 percent compared with the first quarter of 2012 driven by softer hiring trends. Actions taken to reduce costs delivered SG&A* and headcount reductions of 26 percent and 25 percent, respectively, from the same period a year ago, offsetting 83 percent of the gross margin decline. Adjusted EBITDA loss was $0.4 million for the first quarter, or 1.0 percent of revenue, compared with positive $0.3 million for the quarter a year ago.
In Asia Pacific, economic uncertainty and increasing hesitation from clients contributed to a gross margin decline of 26 percent in constant currency in the first quarter from the prior year period. A 34 percent decline in permanent recruitment gross margin accounted for most of the overall gross margin drop. After 36 percent gross margin growth in 2012, Talent Management declined 10 percent in the quarter against the prior year quarter as some client projects were delayed. Actions taken to reduce costs resulted in an SG&A* decline of 19 percent and headcount decline of 20 percent from the same period last year, offsetting 67 percent of the gross margin decline from the period a year ago. The region delivered adjusted EBITDA loss of $0.4 million, or 0.8 percent of revenue, down from positive $2.1 million, or 2.9 percent of revenue in the first quarter of 2012.
Driven by ongoing economic weakness across Europe, gross margin was down 15 percent in constant currency compared with the first quarter of 2012. The U.K. showed signs of stabilization with smaller declines in temporary recruitment and strong growth in Legal eDiscovery, though Talent Management was softer. In continental Europe, reduced hiring activity continued to impact permanent recruitment, down 29 percent in constant currency. Actions taken to address costs across Europe resulted in SG&A* and headcount reductions of 11 percent and 16 percent, respectively, from the same period a year ago, offsetting 70 percent of the gross margin decline from the period a year ago. Adjusted EBITDA loss of $0.1 million was down from positive $1.4 million, or 1.7 percent of revenue for the quarter a year ago.
* SG&A does not include non-operating expenses and rent redundancy. Refer to the Segment Analysis later in this document for reconciliation.
The company continued its program in the first quarter, resulting in restructuring charges of $2.0 million, primarily in Europe. During 2013, the total restructuring charge is expected to be up to $4 million with up to $1 million of the remaining charges to be incurred in the second quarter.
Liquidity and Capital Resources
The company ended the first quarter of 2013 with $69.5 million in liquidity, composed of $32.5 million in cash and $37.0 million in availability under its credit facilities. The company used $3.8 million in cash flow from operations during the quarter. The company had no outstanding borrowings at the end of the first quarter.
Given current economic conditions, second quarter 2013 revenue may decline by 12 to 17 percent against the second quarter of 2012 at prevailing exchange rates. The company expects second quarter 2013 adjusted EBITDA to be between negative $2 and positive $1 million before restructuring charges and anticipates the restructuring charge in the quarter of up to $1 million. In the second quarter of 2012, revenue was $204.8 million and adjusted EBITDA was $3.7 million.