Hudson Global reports Q3 results
Adjusted EBITDA* loss of $2.9 million, as compared with positive $1.5 million in the same period last year. Sequentially, adjusted EBITDA decreased 14.7 percent or 25.7 percent in constant currency.
Restructuring charges of $0.7 million in the third quarter of 2013, compared with $1.5 million in the third quarter of 2012 and $1.2 million in the second quarter of 2013.
Net loss of $5.0 million, or $0.15 per basic and diluted share, as compared with net loss of $2.2 million, or $0.07 per basic and diluted share in the same period last year. Sequentially, net loss decreased 13.1 percent.
* Adjusted EBITDA is defined in the segment tables at the end of this release.
"Our third quarter results were consistent with our expectations and reflect the continuing progress we are making to put the business on a path towards sustainable profitability and top-line growth," said Manuel Marquez, chairman and chief executive officer at Hudson. "Our recently reinforced leadership is already getting traction, working with their teams to sharpen execution throughout our organization. Despite the anticipated difficult conditions in several major markets, particularly Australia, we believe the business is trending positively overall, and we are gaining momentum as we continue to reduce our cost base while investing selectively to drive top-line growth."
Stephen Nolan, chief financial officer at Hudson stated, "We are working hard to institutionalize our commitment to improving efficiencies, sustaining operating leverage, and focusing investments in our key markets to support revenue growth. Also, importantly, we generated strong cash flow in the quarter, adding to our solid liquidity position."
Americas' gross margin decreased 5 percent in the third quarter as compared with the same period in 2012. Sequentially, gross margin decreased 2 percent, as compared with a decrease of 22 percent for the same period in 2012. The quarterly decline versus the third quarter of 2012 was driven primarily by an 18 percent reduction in IT gross margin, while Legal eDiscovery declined by 4 percent. RPO gross margin increased 9 percent compared with the third quarter of 2012. Actions to reduce costs delivered SG&A* and headcount reductions of 12 percent and 17 percent, respectively, from the same period a year ago, offsetting all of the gross margin decline from the same quarter a year earlier. Adjusted EBITDA was $1.3 million for the third quarter, or 3.7 percent of revenue, compared with $0.8 million, or 1.9 percent of revenue for the same quarter a year ago and $1.5 million in the second quarter of 2013.
Weak economic conditions and reduced hiring in Australia contributed to a gross margin decline of 23 percent in constant currency in Asia Pacific from the prior year period. Sequentially, gross margin decreased 8 percent in constant currency compared with a sequential decline of 9 percent in the same period of 2012. While conditions are difficult for Hudson and competitors alike, Hudson had some areas of growth. For example, recruitment gross margin in Australia/New Zealand in contracting and permanent placement increased 2 percent sequentially, while China gross margin increased 14 percent sequentially. Actions to reduce costs resulted in SG&A* and headcount declines of 6 percent and 13 percent, respectively, as compared with the same period last year, offsetting 23 percent of the constant currency gross margin decline. The region delivered an adjusted EBITDA loss of $0.5 million, or 0.8 percent of revenue, down from positive adjusted EBITDA of $4.7 million, or 6.4 percent of revenue in the third quarter of 2012 and $0.7 million in the second quarter of this year.
Europe's gross margin declined 12 percent in constant currency compared with the third quarter of 2012. Sequentially, gross margin declined 7 percent in constant currency compared with a 13 percent sequential decline a year ago. Against prior year, gross margin declines were driven primarily by softness in temporary contracting in the U.K. and talent management in continental Europe. Sequentially, gross margin in the U.K. increased slightly, as did temporary contracting in continental Europe, with talent management driving the overall sequential decline. Actions to address costs across Europe resulted in SG&A* and headcount reductions of 11 percent and 12 percent, respectively, from the same period a year ago, offsetting 96 percent of the constant currency gross margin decline. Adjusted EBITDA of $0.4 million, or 0.6 percent of revenue, was down from $0.6 million or 0.9 percent of revenue for the quarter a year ago, and up from $0.1 million in the second quarter of 2013.
* SG&A does not include non-operating expenses and rent redundancy. Refer to the Segment Analysis later in this document for reconciliation.
Liquidity and Capital Resources
The company ended the third quarter of 2013 with $72.1 million in liquidity, composed of $33.2 million in cash and $38.8 million in availability under its credit facilities. This compares with $34.9 million in cash and $49.9 million in availability under its credit facilities at the end of the third quarter of 2012. The company generated $5.6 million in cash flow from operations during the quarter and had no outstanding borrowings at the end of the third quarter.
Given current economic conditions, the company expects fourth quarter 2013 revenue of between $155 million to $165 million and adjusted EBITDA of between negative $1 million and negative $3 million at prevailing exchange rates. In the fourth quarter of 2012, revenue was $184.3 million and adjusted EBITDA was $3.2 million.
Hudson will conduct a conference call today at 10:00 a.m. ET to discuss this announcement. Individuals wishing to listen can access the webcast on the investor information section of the company's web site at Hudson.com.
The archived call will be available on the investor information section of the company's web site at Hudson.com.
Hudson is a global talent solutions company with expertise in leadership and specialized recruitment, contracting solutions, recruitment process outsourcing, talent management and eDiscovery. We help our clients and candidates succeed by leveraging our expertise, deep industry and market knowledge, and proprietary assessment tools and techniques. Operating in 20 countries through relationships with millions of specialized professionals, we bring an unparalleled ability to match talent with opportunities by assessing, recruiting, developing and engaging the best and brightest people for our clients. We combine broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve higher performance and outstanding results. More information is available at Hudson.com.
This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and economic conditions' that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations risks related to fluctuations in the company's operating results from quarter to quarter the ability of clients to terminate their relationship with the company at any time competition in the company's markets risks associated with the company's investment strategy risks related to international operations, including foreign currency fluctuations the company's dependence on key management personnel the company's ability to attract and retain highly skilled professionals the company's ability to collect accounts receivable the negative cash flows and operating losses that the company has experienced in recent periods and may experience from time to time in the future restrictions on the company's operating flexibility due to the terms of its credit facilities the company's ability to achieve anticipated cost savings through its cost reduction initiatives the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology risks related to providing uninterrupted service to clients the company's exposure to employment-related claims from clients, employers and regulatory authorities, current and former employees in connection with the company's business reorganization initiatives and limits on related insurance coverage the company's ability to utilize net operating loss carry-forwards volatility of the company's stock price the impact of government regulations and restrictions imposed by blocking arrangements. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.