Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2017
 
HUDSON GLOBAL, INC.
(Exact name of registrant as specified in charter)
 
 
Delaware
 
000-50129
 
59-3547281
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)

1325 Avenue of the Americas
New York, NY 10019
(Address of Principal Executive Offices)
 
Registrant's telephone number, including area code (212) 351-7300
N/A
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)






ITEM 2.02.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
On November 2, 2017, Hudson Global, Inc. issued a press release announcing its financial results for the three months ended September 30, 2017. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
 
Included in Exhibit 99.1 are references to “liquidity.” The company believes that this non-GAAP measure provides investors useful information about its combined available cash and borrowing capacity.
 
ITEM 9.01.
FINANCIAL STATEMENTS AND EXHIBITS.
 
(a) Financial Statements.
None.
 
(b) Pro Forma Financial Information.
None.
 
(c) Shell Company Transactions
None.
 
(d) Exhibits
99.1    Press Release of Hudson Global, Inc. issued on November 2, 2017.


1




SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
 
HUDSON GLOBAL, INC.
 (Registrant)
 
 
 
By:
/s/ STEPHEN A. NOLAN
 
Stephen A. Nolan
 
Chief Executive Officer
 
 
 
 
Dated:
November 2, 2017


2




Hudson Global, Inc.
Current Report on Form 8-K
 
Exhibit Index


Exhibit Number
 
Description
99.1
 



3
Exhibit



Exhibit 99.1
https://cdn.kscope.io/9c4409f43b780537e4639b05d8b0f558-hsonlogoa01.jpg
    
For Immediate Release 
 
Contact:
 
David F. Kirby
 
 
 
 
Hudson
 
 
 
 
212-351-7216
 
 
 
 
david.kirby@hudson.com

Hudson Global Reports 2017 Third Quarter Results


NEW YORK, NY - November 2, 2017 - Hudson Global, Inc. (Nasdaq: HSON), a leading global talent solutions company, today announced financial results for the third quarter ended September 30, 2017.

2017 Third Quarter Summary

Revenue of $118.1 million increased 9.2 percent from the third quarter of 2016 and increased 6.5 percent in constant currency.

Gross margin of $47.2 million increased 8.5 percent from the third quarter of 2016 or 5.7 percent in constant currency.

Net loss of $0.8 million, or $0.03 per basic and diluted share, compared with net loss of $1.9 million, or $0.06 per basic and diluted share, for the third quarter of 2016.

Adjusted EBITDA* of $1.3 million, compared with adjusted EBITDA of $0.4 million in the third quarter of 2016.


"We delivered solid gross margin growth in the third quarter, with growth in permanent recruitment, RPO and talent management," said Stephen Nolan, chief executive officer at Hudson. "We are pleased to report positive adjusted EBITDA for the fifth consecutive quarter as well as positive cash flow from operations."

* Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release.

1



Regional Highlights

Americas

In the third quarter of 2017, Hudson Americas' gross margin decreased 1 percent compared with the third quarter of 2016. RPO gross margin was down slightly in the third quarter after double-digit growth in the first half of 2017. EBITDA was $0.5 million in the third quarter, compared with EBITDA of $0.3 million a year ago. The region delivered adjusted EBITDA of $0.6 million for the third quarter, compared with adjusted EBITDA of $0.4 million a year ago.

Asia Pacific

Hudson Asia Pacific's gross margin increased 10 percent in constant currency in the third quarter of 2017 compared with the same period in 2016. Gross margin growth was led by Asia, up 24 percent, with strong growth in Hong Kong and China, up 65 percent and 18 percent respectively, from a year ago. Australia/New Zealand gross margin continued to grow, up 5 percent in the quarter, driven by growth in temporary contracting and talent management. EBITDA was $1.7 million in the third quarter, compared with EBITDA of $0.3 million a year ago. Asia Pacific delivered adjusted EBITDA of $2.3 million, improving from adjusted EBITDA of $1.1 million in the third quarter of 2016.

Europe

Hudson Europe's gross margin increased 1 percent in constant currency in the third quarter of 2017 from the third quarter of 2016. Gross margin growth was driven by Continental Europe, up 4 percent, led by growth in Belgium and Poland. In the U.K., gross margin declined 3 percent against prior year, as growth in permanent recruitment and RPO was offset by declines in temporary contracting. EBITDA was a loss of $0.4 million in the third quarter, compared with a loss of $0.5 million a year ago. Adjusted EBITDA was $0.6 million in the third quarter of 2017, improving from $0.1 million a year ago.



2



Liquidity and Capital Resources

The company ended the third quarter of 2017 with $36.9 million in liquidity, composed of $16.8 million in cash and $20.1 million in availability under its credit facilities. This compares with $14.9 million in cash and $22.7 million in availability under its credit facilities at the end of the second quarter of 2017. The company generated $1.0 million in cash flow from operations during the third quarter, compared with $5.0 million use of cash in the third quarter of 2016. The company had $8.2 million in outstanding borrowings at the end of the third quarter of 2017, primarily in Australia and the U.K.

Share Repurchase Program

During the third quarter, the company continued its share repurchase program which has an authorization of up to $10 million of the company’s common stock. The company purchased 125,770 shares for $0.2 million as part of the repurchase program during the third quarter. Since the inception of this program in the third quarter of 2015 through the end of the third quarter of 2017, the company has purchased 3,532,761 shares for $7.2 million.

Business Outlook

With respect to forward-looking non-GAAP measures, a reconciliation of the non-GAAP measures to the corresponding GAAP measures is not available without unreasonable efforts due to the variability, complexity and low visibility of the non-cash and other items described below that we exclude from the non-GAAP outlook measures. The variability of these items is likely to have a significant impact on our future GAAP financial results.

Given current economic conditions, the company expects fourth quarter 2017 revenue of between $110 million and $120 million and adjusted EBITDA of between $1 million and $3 million at prevailing exchange rates. In the fourth quarter of 2016, revenue was $100.3 million and adjusted EBITDA was $0.9 million. This outlook assumes an average exchange rate of 1.32 US Dollars to the British Pound, 1.17 US Dollars to the Euro and 0.78 US Dollars to the Australian Dollar.

Conference Call/Webcast

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.


3



About Hudson

Hudson is a global talent solutions company with expertise in leadership and specialized recruitment, recruitment process outsourcing, talent management and contracting solutions. We help our clients and candidates succeed by leveraging our expertise, deep industry and market knowledge, and proprietary assessment tools and techniques. Operating around the globe 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.

Forward-Looking Statements

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; the company’s ability to successfully achieve its strategic initiatives; 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; the negative cash flows and operating losses that may recur in the future; restrictions on the company's operating flexibility due to the terms of its credit facilities; 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 company’s ability to maintain costs at an acceptable level; 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; restrictions imposed by blocking arrangements; and risks related to potential acquisitions or dispositions of businesses by the company. 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.


                    
###
Financial Tables Follow


4



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
118,108

 
$
108,136

 
$
335,104

 
$
322,430

Direct costs
 
70,863

 
64,594

 
197,101

 
190,787

Gross margin
 
47,245

 
43,542

 
138,003

 
131,643

Operating expenses:
 
 

 
 

 
 

 
 

Salaries and related
 
36,473

 
34,151

 
105,978

 
106,282

Other selling, general and administrative
 
9,699

 
9,193

 
27,888

 
29,019

Depreciation and amortization
 
697

 
801

 
2,050

 
2,294

Business reorganization
 
477

 
183

 
636

 
964

Total operating expenses
 
47,346

 
44,328

 
136,552

 
138,559

Operating income (loss)
 
(101
)
 
(786
)
 
1,451

 
(6,916
)
Non-operating income (expense):
 
 

 
 

 
 

 
 

Interest income (expense), net
 
(110
)
 
(109
)
 
(317
)
 
(264
)
Other income (expense), net
 
(121
)
 
(295
)
 
(511
)
 
(445
)
Income (loss) from continuing operation before provision for income taxes
 
(332
)
 
(1,190
)
 
623

 
(7,625
)
Provision for income taxes from continuing operations
 
500

 
718

 
1,525

 
1,200

Income (loss) from continuing operations
 
(832
)
 
(1,908
)
 
(902
)
 
(8,825
)
Income (loss) from discontinued operations, net of income taxes
 
(16
)
 
35

 
(34
)
 
327

Net income (loss)
 
$
(848
)
 
$
(1,873
)
 
$
(936
)
 
$
(8,498
)
Basic and diluted earnings (loss) per share:
 
 

 
 

 
 

 
 

Basic and diluted earnings (loss) per share from continuing operations
 
$
(0.03
)
 
$
(0.06
)
 
$
(0.03
)
 
$
(0.26
)
Basic and diluted earnings (loss) per share from discontinued operations
 

 

 

 
0.01

Basic and diluted earnings (loss) per share
 
$
(0.03
)
 
$
(0.06
)
 
$
(0.03
)
 
$
(0.25
)
Weighted-average shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
32,151

 
33,572

 
32,120

 
34,121

Diluted
 
32,151

 
33,572

 
32,120

 
34,121

Dividends declared per common share
 
$

 
$

 
$

 
$
0.10




5



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
 
 
 
 
 
 
September 30,
2017
 
December 31,
2016
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
16,835

 
$
21,322

Accounts receivable, less allowance for doubtful accounts of $778 and $799, respectively
 
71,325

 
58,517

Prepaid and other
 
4,962

 
4,265

Current assets of discontinued operations
 

 
38

Total current assets
 
93,122

 
84,142

Property and equipment, net
 
6,173

 
7,041

Deferred tax assets, non-current
 
6,698

 
6,494

Other assets
 
3,814

 
4,135

Total assets
 
$
109,807

 
$
101,812

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
4,688

 
$
4,666

Accrued expenses and other current liabilities
 
42,179

 
36,154

Short-term borrowings
 
8,206

 
7,770

Accrued business reorganization expenses
 
1,523

 
1,756

Current liabilities of discontinued operations
 
29

 
233

Total current liabilities
 
56,625

 
50,579

Deferred rent and tenant improvement contributions
 
2,198

 
2,968

Income tax payable, non-current
 
2,204

 
2,211

Other non-current liabilities
 
4,004

 
4,169

Total liabilities
 
65,031

 
59,927

Stockholders’ equity:
 
 

 
 

Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding
 

 

Common stock, $0.001 par value, 100,000 shares authorized; issued 34,959 and 34,910 shares, respectively
 
34

 
34

Additional paid-in capital
 
483,202

 
482,265

Accumulated deficit
 
(441,414
)
 
(440,478
)
Accumulated other comprehensive income
 
10,529

 
6,931

Treasury stock, 3,694 and 3,145 shares, respectively, at cost
 
(7,575
)
 
(6,867
)
Total stockholders’ equity
 
44,776

 
41,885

Total liabilities and stockholders' equity
 
$
109,807

 
$
101,812



6



HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended September 30, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
4,044

 
$
76,509

 
$
37,555

 
$

 
$
118,108

Gross margin, from external customers
 
$
3,668

 
$
25,407

 
$
18,170

 
$

 
$
47,245

Adjusted EBITDA (loss) (1)
 
$
579

 
$
2,338

 
$
621

 
$
(2,236
)
 
$
1,302

Business reorganization expenses (recovery)
 

 

 
477

 

 
477

Stock-based compensation expense
 
20

 
24

 
45

 
140

 
229

Non-operating expense (income),
including corporate administration charges
 
76

 
629

 
479

 
(1,063
)
 
121

EBITDA (loss) (1)
 
$
483

 
$
1,685

 
$
(380
)
 
$
(1,313
)
 
$
475

Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
697

Interest expense (income), net
 
 
 
 
 
 
 
 
 
110

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
500

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
$
(832
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
(16
)
Net income (loss)
 
 
 
 
 
 
 
 
 
$
(848
)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended September 30, 2016
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
4,163

 
$
64,607

 
$
39,366

 
$

 
$
108,136

Gross margin, from external customers
 
$
3,691

 
$
22,414

 
$
17,437

 
$

 
$
43,542

Adjusted EBITDA (loss) (1)
 
$
423

 
$
1,122

 
$
100

 
$
(1,294
)
 
$
351

Business reorganization expenses (recovery)
 
(3
)
 
(1
)
 
188

 
(1
)
 
183

Stock-based compensation expense
 
5

 
(41
)
 
55

 
134

 
153

Non-operating expense (income),
including corporate administration charges
 
95

 
889

 
323

 
(1,012
)
 
295

EBITDA (loss) (1)
 
$
326

 
$
275

 
$
(466
)
 
$
(415
)
 
$
(280
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
801

Interest expense (income), net
 
 
 
 
 
 
 
 
 
109

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
718

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
$
(1,908
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
35

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(1,873
)

(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses, stock-based compensation expense and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.

7



HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended June 30, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
4,161

 
$
69,264

 
$
40,166

 
$

 
$
113,591

Gross margin, from external customers
 
$
3,735

 
$
23,432

 
$
21,159

 
$

 
$
48,326

Adjusted EBITDA (loss) (1)
 
$
404

 
$
1,868

 
$
3,081

 
$
(1,934
)
 
$
3,419

Business reorganization expenses (recovery)
 
1

 

 
(64
)
 

 
(63
)
Stock-based compensation expense
 
20

 
19

 
45

 
433

 
517

Non-operating expense (income),
including corporate administration charges
 
82

 
540

 
488

 
(1,100
)
 
10

EBITDA (loss) (1)
 
$
301

 
$
1,309

 
$
2,612

 
$
(1,267
)
 
$
2,955

Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
687

Interest expense (income), net
 
 
 
 
 
 
 
 
 
119

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
870

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
$
1,279

Income (loss) from discontinued operations, net of income taxes
 
 
 
(53
)
Net income (loss)
 
 
 
 
 
 
 
 
 
$
1,226

 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended December 31, 2016
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
3,901

 
$
59,122

 
$
37,291

 
$

 
$
100,314

Gross margin, from external customers
 
$
3,400

 
$
20,524

 
$
18,850

 
$

 
$
42,774

Adjusted EBITDA (loss) (1)
 
$
587

 
$
373

 
$
1,302

 
$
(1,355
)
 
$
907

Business reorganization expenses (recovery)
 
2

 
(24
)
 
606

 
32

 
616

Stock-based compensation expense
 
27

 
(4
)
 
13

 
130

 
166

Non-operating expense (income),
including corporate administration charges
 
100

 
383

 
378

 
(1,059
)
 
(198
)
EBITDA (loss) (1)
 
$
458

 
$
18

 
$
305

 
$
(458
)
 
$
323

Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
796

Interest expense (income), net
 
 
 
 
 
 
 
 
 
93

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
(458
)
Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
$
(108
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
(184
)
Net income (loss)
 
 
 
 
 
 
 
 
 
$
(292
)

(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses, stock-based compensation expense and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.

8



HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE (continued)
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Nine Months Ended September 30, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
12,519

 
$
205,483

 
$
117,102

 
$

 
$
335,104

Gross margin, from external customers
 
$
11,239

 
$
68,573

 
$
58,191

 
$

 
$
138,003

Adjusted EBITDA (loss) (1)
 
$
1,317

 
$
4,325

 
$
5,195

 
$
(5,763
)
 
$
5,074

Business reorganization expenses (recovery)
 
(91
)
 

 
749

 
(22
)
 
636

Stock-based compensation expense
 
73

 
53

 
133

 
678

 
937

Non-operating expense (income),
including corporate administration charges
 
218

 
2,019

 
1,196

 
(2,922
)
 
511

EBITDA (loss) (1)
 
$
1,117

 
$
2,253

 
$
3,117

 
$
(3,497
)
 
$
2,990

Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
2,050

Interest expense (income), net
 
 
 
 
 
 
 
 
 
317

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
1,525

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(902
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
(34
)
Net income (loss)
 
 
 
 
 
 
 
 
 
$
(936
)
 
 
 
 
 
 
 
 
 
 
 
For The Nine Months Ended September 30, 2016
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
11,660

 
$
177,717

 
$
133,053

 
$

 
$
322,430

Gross margin, from external customers
 
$
10,210

 
$
63,601

 
$
57,832

 
$

 
$
131,643

Adjusted EBITDA (loss) (1)
 
$
622

 
$
2,241

 
$
2,883

 
$
(8,128
)
 
$
(2,382
)
Business reorganization expenses (recovery)
 
(41
)
 
273

 
781

 
(49
)
 
964

Stock-based compensation expense
 
81

 
161

 
192

 
842

 
1,276

Non-operating expense (income),
including corporate administration charges
 
269

 
2,177

 
1,149

 
(3,150
)
 
445

EBITDA (loss) (1)
 
$
313

 
$
(370
)
 
$
761

 
$
(5,771
)
 
$
(5,067
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
2,294

Interest expense (income), net
 
 
 
 
 
 
 
 
 
264

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
1,200

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(8,825
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
327

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(8,498
)

(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses, stock-based compensation expense and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.


9



HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY
(in thousands) (unaudited)

The company operates on a global basis, with the majority of its gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect its results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term “constant currency” to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Changes in revenue, gross margin, selling, general and administrative expenses ("SG&A"), business reorganization expenses and other non-operating income (expense), operating income (loss) and EBITDA (loss) include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company’s management reviews and analyzes business results in constant currency and believes these results better represent the company’s underlying business trends. The company believes that these calculations are a useful measure, indicating the actual change in operations. There are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings.
 
Three Months Ended September 30,
 
2017
 
2016
 
As
 
As
 
Currency
 
Constant
 
reported
 
reported
 
translation
 
currency
Revenue:
 
 
 
 
 
 
 
Hudson Americas
$
4,044

 
$
4,163

 
$
10

 
$
4,173

Hudson Asia Pacific
76,509

 
64,607

 
2,208

 
66,815

Hudson Europe
37,555

 
39,366

 
575

 
39,941

Total
$
118,108

 
$
108,136

 
$
2,793

 
$
110,929

Gross margin:
 
 
 
 
 
 
 
Hudson Americas
$
3,668

 
$
3,691

 
$
8

 
$
3,699

Hudson Asia Pacific
25,407

 
22,414

 
625

 
23,039

Hudson Europe
18,170

 
17,437

 
521

 
17,958

Total
$
47,245

 
$
43,542

 
$
1,154

 
$
44,696

SG&A (1):
 
 
 
 
 
 
 
Hudson Americas
$
3,154

 
$
3,287

 
$
2

 
$
3,289

Hudson Asia Pacific
23,031

 
21,183

 
491

 
21,674

Hudson Europe
17,613

 
17,433

 
473

 
17,906

Corporate
2,374

 
1,441

 

 
1,441

Total
$
46,172

 
$
43,344

 
$
966

 
$
44,310

Business reorganization expenses:
 
 
 
 
 
 
 
Hudson Americas
$

 
$
(3
)
 
$

 
$
(3
)
Hudson Asia Pacific

 
(1
)
 
(3
)
 
(4
)
Hudson Europe
477

 
188

 
3

 
191

Corporate

 
(1
)
 

 
(1
)
Total
$
477

 
$
183

 
$

 
$
183

Operating income (loss):
 
 
 
 
 
 
 
Hudson Americas
$
558

 
$
409

 
$
5

 
$
414

Hudson Asia Pacific
1,868

 
714

 
122

 
836

Hudson Europe
(75
)
 
(389
)
 
43

 
(346
)
Corporate
(2,452
)
 
(1,520
)
 

 
(1,520
)
Total
$
(101
)
 
$
(786
)
 
$
170

 
$
(616
)
EBITDA (loss):
 
 
 
 
 
 
 
Hudson Americas
$
483

 
$
326

 
$
(2
)
 
$
324

Hudson Asia Pacific
1,685

 
275

 
118

 
393

Hudson Europe
(380
)
 
(466
)
 
20

 
(446
)
Corporate
(1,313
)
 
(415
)
 

 
(415
)
Total
$
475

 
$
(280
)
 
$
136

 
$
(144
)

(1)
SG&A is a measure that management uses to evaluate the segments’ expenses and includes salaries and related costs and other selling, general and administrative costs.

10