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): March 1, 2018
 
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)
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐







ITEM 2.02.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
 
On March 1, 2018, Hudson Global, Inc. issued a press release announcing its financial results for the full year and three months ended December 31, 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

The exhibit listed in the following Exhibit Index is provided as part of the information furnished under Item 2.02 of this Current Report on Form 8-K:

EXHIBIT INDEX

99.1    Press Release of Hudson Global, Inc. issued on March 1, 2018.









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
 
 
 
 
Date:
March 1, 2018




Exhibit



Exhibit 99.1

                    https://cdn.kscope.io/195f496591f13c6a466bc50eb0316ef9-hsonlogoa02.jpg
For Immediate Release 
 
Contact:
 
David F. Kirby
 
 
 
 
Hudson
 
 
 
 
212-351-7216
 
 
 
 
david.kirby@hudson.com

Hudson Global Reports 2017 Fourth Quarter and Full-Year Results

NEW YORK, NY - March 1, 2018 - Hudson Global, Inc. (Nasdaq: HSON), a leading global talent solutions company, today announced financial results for the fourth quarter and full-year ended December 31, 2017.

2017 Fourth Quarter Summary

Revenue of $121.6 million increased 21.2 percent from the fourth quarter of 2016, or 16.4 percent in constant currency.

Gross margin of $48.7 million increased 13.9 percent from the fourth quarter of 2016, or 8.7 percent in constant currency.

Net loss of $2.0 million, or $0.06 per basic and diluted share, including goodwill impairment in China of $1.9 million, compared with net loss of $0.3 million, or $0.01 per basic and diluted share, for the fourth quarter of 2016.

Adjusted EBITDA* of $1.9 million, net of $1.3 million of expenses related to the announced divestitures, compared with adjusted EBITDA of $0.9 million in the fourth quarter of 2016.
    
2017 Full-Year Summary

Revenue of $456.7 million increased 8.0 percent from 2016, or 7.9 percent in constant currency.

Gross margin of $186.7 million increased 7.1 percent from 2016, or 6.6 percent in constant currency.

Net loss of $2.9 million, or $0.09 per basic and diluted share, including goodwill impairment in China of $1.9 million, compared with net loss of $8.8 million, or $0.26 per basic and diluted share, in 2016.

Adjusted EBITDA* of $6.9 million, net of $2.1 million of expenses related to the announced divestitures, compared with adjusted EBITDA loss of $1.5 million in 2016.

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


1



"We delivered solid gross margin growth in the fourth quarter, with growth in every product line, including permanent recruitment, temporary contracting, recruitment process outsourcing (“RPO”) and talent management," said Stephen Nolan, chief executive officer at Hudson. "We are pleased to report positive adjusted EBITDA for the sixth consecutive quarter as well as positive cash flow from operations. For the 2017 year, we delivered revenue and gross margin growth, significantly improved adjusted EBITDA and positive operating cash flow."

Strategic Update

On December 17, 2017, Hudson announced it had entered into definitive sale agreements to sell its recruitment and talent management operations in Europe and Asia Pacific to strategic buyers in three transactions. Hudson intends to focus on its growing, global RPO business going forward. Under the terms of the agreements, Hudson will receive estimated proceeds of $41.2 million in cash, subject to adjustment.

The transactions are subject to the approval of the majority of the outstanding shares of Hudson. Hudson filed a definitive proxy statement with the SEC on February 13, 2018 seeking shareholder approval for the sale of substantially all of its assets as a result of the proposed transactions and has called a special meeting of shareholders for March 20, 2018 at 8:00 a.m. ET to obtain such shareholder approval. Subject to the receipt of shareholder approval and satisfaction of other customary closing conditions, the company expects to close the transactions at the end of March 2018.

2



Regional Highlights

Americas

In the fourth quarter of 2017, Hudson Americas' gross margin decreased 7 percent compared with the fourth quarter of 2016, as growth in the retained business was offset by a large contract that ended in the third quarter of 2017. EBITDA was $0.5 million in the fourth quarter, unchanged from a year ago. The region delivered adjusted EBITDA of $0.5 million for the fourth quarter, compared with adjusted EBITDA of $0.6 million a year ago.

Hudson Americas' gross margin in 2017 increased 6 percent in constant currency from 2016, with RPO growth driven by new client wins and increased business with existing clients. EBITDA was $1.6 million in 2017, compared with $0.8 million in 2016. Adjusted EBITDA was $1.8 million in 2017, compared with adjusted EBITDA of $1.2 million in 2016.

Asia Pacific

Hudson Asia Pacific's gross margin increased 19 percent in constant currency in the fourth quarter of 2017 compared with the same period in 2016. Gross margin growth across the region was led by Asia, up 23 percent, with strong growth in China and Singapore, up 37 percent and 36 percent respectively, from a year ago. Australia/New Zealand gross margin continued to grow, up 18 percent in the quarter, driven by double-digit growth in all product lines. EBITDA was $0.3 million in the fourth quarter, net of $1.9 million of goodwill impairment, compared with EBITDA of $0.0 million a year ago. Asia Pacific delivered adjusted EBITDA of $2.4 million, improving from adjusted EBITDA of $0.4 million in the fourth quarter of 2016.

In 2017, gross margin increased 9 percent in Hudson Asia Pacific in constant currency compared with 2016. Results were driven by 13 percent growth in temporary contracting and talent management, 12 percent growth in permanent recruitment, and 2 percent growth in RPO against 2016. Growth by country was led by Australia, up 6 percent, China, up 15 percent and Hong Kong, up 21 percent. EBITDA in 2017 was $2.5 million, net of $1.9 million of goodwill impairment, compared with an EBITDA loss of $0.3 million in 2016. Adjusted EBITDA was $6.7 million, improving from $2.6 million in 2016.

Europe

Hudson Europe's gross margin increased 0.3 percent in constant currency in the fourth quarter of 2017 compared with the fourth quarter of 2016. Gross margin growth was driven by Continental Europe, up 3 percent, led by growth in France, Poland, and Spain. In the U.K., gross margin declined 4 percent from the fourth quarter of 2016, as growth in talent management and RPO was offset by declines in recruitment. EBITDA was $1.5 million in the fourth quarter, compared with $0.3 million a year ago. Adjusted EBITDA was $1.9 million in the fourth quarter of 2017, improving from $1.3 million a year ago.

Hudson Europe's gross margin increased 4 percent in 2017 in constant currency compared with 2016. Continental Europe delivered 9 percent growth, driven by growth in Belgium, Spain, France and Poland, offset by the U.K., which was down 5 percent against 2016. In the U.K., growth in RPO and talent management of 4 percent and 21 percent, respectively, was offset by recruitment, down 8 percent from 2016. EBITDA was $4.6 million in 2017, compared with $1.1 million in 2016. Adjusted EBITDA was $7.1 million, compared with $4.2 million in 2016.

3



Liquidity and Capital Resources

The company ended the fourth quarter of 2017 with $43.1 million in liquidity, composed of $21.0 million in cash and $22.1 million in availability under its credit facilities. This compares with $16.8 million in cash and $20.1 million in availability under its credit facilities at the end of the third quarter of 2017. The company generated $6.0 million in cash flow from operations during the fourth quarter, compared with $5.6 million in the fourth quarter of 2016. The company had $7.1 million in outstanding borrowings at the end of the fourth quarter of 2017, primarily in Australia and the U.K.
    
Share Repurchase Program

During the fourth 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 106,644 shares for $0.2 million as part of its existing Rule 10b5-1 repurchase program during the fourth quarter. Since the inception of this program in the third quarter of 2015 through the end of the fourth quarter of 2017, the company has purchased 3,639,405 shares for $7.4 million.

Business Outlook

Given the expected timing of the pending sale transactions, the company will not provide guidance for the first quarter of 2018.

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.

4



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, Hudson’s ability to complete the sales of its recruitment and talent management operations in Europe and Asia Pacific on anticipated terms and timetable; the possibility that various closing conditions for the proposed sales may not be satisfied or waived; Hudson’s ability to obtain shareholder approval for the sale of substantially all of its assets as a result of the proposed sales; Hudson’s ability to achieve anticipated benefits from the proposed sales and operate successfully as a company focused on its RPO business; 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.

Important Additional Information and Where to Find It

This communication does not constitute a solicitation of a vote or proxy. In connection with the proposed transaction, Hudson has filed relevant materials with the SEC, including a proxy statement. INVESTORS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT HUDSON AND THE PROPOSED TRANSACTION. The proxy statement and certain other relevant materials and other documents filed by Hudson with the SEC may be obtained free of charge at the SEC’s website at http://www.sec.gov. In addition, investors may obtain copies of these documents free of charge by written

5



request Hudson Global, Inc., 1325 Avenue of the Americas, 12th Floor, New York, New York 10019 or by calling (212) 351-7300.

Participants in the Solicitation

Hudson and its executive officers and directors may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the executive officers and directors of Hudson and the number of shares of Hudson’s common stock beneficially owned by such persons is set forth in the proxy statement for Hudson’s special meeting of stockholders which was filed with the SEC on February 13, 2018, and Hudson’s Annual Report on Form 10-K for the period ended December 31, 2017. Investors may obtain additional information regarding the direct and indirect interests of Hudson and its executive officers and directors in the transaction by reading the proxy statement regarding the transaction.

###
Financial Tables Follow


6



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2017
 
2016
 
2017
 
2016
Revenue
$
121,617

 
$
100,314

 
$
456,721

 
$
422,744

Direct costs
72,884

 
57,540

 
269,985

 
248,327

Gross margin
48,733

 
42,774

 
186,736

 
174,417

Operating expenses:
 

 
 

 
 
 
 
Selling, general and administrative expenses
47,224

 
42,033

 
181,090

 
177,334

Depreciation and amortization
698

 
796

 
2,748

 
3,090

Business reorganization
76

 
616

 
712

 
1,580

Goodwill impairment
1,909

 

 
1,909

 

Total operating expenses
49,907

 
43,445

 
186,459

 
182,004

Operating income (loss)
(1,174
)
 
(671
)
 
277

 
(7,587
)
Non-operating income (expense):
 

 
 

 
 
 
 
Interest income (expense), net
(86
)
 
(93
)
 
(403
)
 
(357
)
Other income (expense), net
1

 
198

 
(510
)
 
(247
)
Income (loss) before provision for income taxes from continuing operations
(1,259
)
 
(566
)
 
(636
)
 
(8,191
)
Provision for (benefit from) income taxes
759

 
(458
)
 
2,284

 
742

Income (loss) from continuing operations
(2,018
)
 
(108
)
 
(2,920
)
 
(8,933
)
Income (loss) from discontinued operations, net of income taxes
13

 
(184
)
 
(21
)
 
143

Net income (loss)
$
(2,005
)
 
$
(292
)
 
$
(2,941
)
 
$
(8,790
)
Earnings (loss) per share:
 

 
 

 
 
 
 
Basic and diluted
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(0.06
)
 
$

 
$
(0.09
)
 
$
(0.27
)
Income (loss) from discontinued operations

 
(0.01
)
   

 
0.01

Net income (loss)
$
(0.06
)
 
$
(0.01
)
 
$
(0.09
)
 
$
(0.26
)
Weighted-average shares outstanding:
 

 
 

 
 
 
 
Basic
32,063

 
32,227

 
32,106

 
33,174

Diluted
32,063

 
32,227

 
32,106

 
33,174


7



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
December 31,
2017
 
December 31,
2016
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
21,040

 
$
21,322

Accounts receivable, less allowance for doubtful accounts of $684 and $799, respectively
71,878

 
58,517

Prepaid and other
4,125

 
4,265

Current assets of discontinued operations

 
38

Total current assets
97,043

 
84,142

Property and equipment, net
6,251

 
7,041

Deferred tax assets, non-current
6,404

 
6,494

Other assets
1,942

 
4,135

Total assets
$
111,640

 
$
101,812

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
6,957

 
$
4,666

Accrued expenses and other current liabilities
45,565

 
36,154

Short-term borrowings
7,080

 
7,770

Accrued business reorganization
919

 
1,756

Current liabilities of discontinued operations
56

 
233

Total current liabilities
60,577

 
50,579

Deferred rent and tenant improvement contributions
1,833

 
2,968

Income tax payable, non-current
2,231

 
2,211

Other non-current liabilities
3,847

 
4,169

Total liabilities
68,488

 
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
483,558

 
482,265

Accumulated deficit
(443,419
)
 
(440,478
)
Accumulated other comprehensive income
10,709

 
6,931

Treasury stock, 3,800 and 3,145 shares, respectively, at cost
(7,730
)
 
(6,867
)
Total stockholders’ equity
43,152

 
41,885

Total liabilities and stockholders' equity
$
111,640

 
$
101,812



8



HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended December 31, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
3,677

 
$
77,341

 
$
40,599

 
$

 
$
121,617

Gross margin, from external customers
 
$
3,180

 
$
25,049

 
$
20,504

 
$

 
$
48,733

Adjusted EBITDA (loss) (1)
 
$
517

 
$
2,408

 
$
1,856

 
$
(2,914
)
 
$
1,867

Business reorganization expenses (recovery)
 
9

 

 
67

 

 
76

Stock-based compensation expense
 
23

 
16

 
56

 
262

 
357

Impairment of long-lived assets
 

 
1,909

 

 

 
1,909

Non-operating expense (income),
including corporate administration charges
 
25

 
229

 
268

 
(522
)
 

EBITDA (loss) (1)
 
$
460

 
$
254

 
$
1,465

 
$
(2,654
)
 
$
(475
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
698

Interest expense (income), net
 
 
 
 
 
 
 
 
 
86

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
759

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(2,018
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
13

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(2,005
)
 
 
 
 
 
 
 
 
 
 
 
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 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.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(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 March 31, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
4,315

 
$
59,710

 
$
39,380

 
$

 
$
103,405

Gross margin, from external customers
 
$
3,836

 
$
19,735

 
$
18,861

 
$

 
$
42,432

Adjusted EBITDA (loss) (1)
 
$
334

 
$
121

 
$
1,493

 
$
(1,594
)
 
$
354

Business reorganization expenses (recovery)
 
(92
)
 

 
336

 
(22
)
 
222

Stock-based compensation expense
 
33

 
6

 
43

 
109

 
191

Non-operating expense (income),
including corporate administration charges
 
59

 
848

 
235

 
(761
)
 
381

EBITDA (loss) (1)
 
$
334

 
$
(733
)
 
$
879

 
$
(920
)
 
$
(440
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
666

Interest expense (income), net
 
 
 
 
 
 
 
 
 
88

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
155

Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(1,349
)
Income (loss) from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
35

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(1,314
)

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 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.

10



HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Year Ended December 31, 2017
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$16,196
 
$282,824
 
$157,701
 
$—
 
$456,721
Gross margin, from external customers
 
$14,420
 
$93,623
 
$78,693
 
$—
 
$186,736
Adjusted EBITDA (loss) (1)
 
$1,834
 
$6,731
 
$7,051
 
$(8,676)
 
$6,940
Business reorganization expenses (recovery)
 
(82)
 
1
 
815
 
(22)
 
712
Stock-based compensation expense
 
96
 
69
 
189
 
940
 
1,294
Impairment of long-lived assets
 
 
1,909
 
 
 
1,909
Non-operating expense (income),
including corporate administration charges
 
242
 
2,248
 
1,464
 
(3,444)
 
510
EBITDA (loss) (1)
 
$1,578
 
$2,504
 
$4,583
 
$(6,150)
 
$2,515
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
2,748
Interest expense (income), net
 
 
 
 
 
 
 
 
 
403
Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
2,284
Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(2,920)
Income (loss) from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
(21)
Net income (loss)
 
 
 
 
 
 
 
 
 
$(2,941)
 
 
 
 
 
 
 
 
 
 
 
For The Year Ended December 31, 2016
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$15,561
 
$236,839
 
$170,344
 
$—
 
$422,744
Gross margin, from external customers
 
$13,609
 
$84,126
 
$76,682
 
$—
 
$174,417
Adjusted EBITDA (loss) (1)
 
$1,209
 
$2,614
 
$4,194
 
$(9,485)
 
$(1,468)
Business reorganization expenses (recovery)
 
(39)
 
248
 
1,387
 
(16)
 
1,580
Stock-based compensation expense
 
108
 
161
 
206
 
974
 
1,449
Non-operating expense (income),
including corporate administration charges
 
370
 
2,543
 
1,537
 
(4,203)
 
247
EBITDA (loss) (1)
 
$770
 
$(338)
 
$1,064
 
$(6,240)
 
$(4,744)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
3,090
Interest expense (income), net
 
 
 
 
 
 
 
 
 
357
Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
742
Income (loss) from continuing operations
 
 
 
 
 
 
 
 
 
(8,933)
Income (loss) from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
143
Net income (loss)
 
 
 
 
 
 
 
 
 
$(8,790)

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 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.

11



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.
 
For The Three Months Ended December 31,
 
2017
 
2016
 
As
 
As
 
Currency
 
Constant
 
reported
 
reported
 
translation
 
currency
Revenue:
 

 
 

 
 

 
 

Hudson Americas
$
3,677

 
$
3,901

 
$
11

 
$
3,912

Hudson Asia Pacific
77,341

 
59,122

 
1,276

 
60,398

Hudson Europe
40,599

 
37,291

 
2,907

 
40,198

Total
$
121,617

 
$
100,314

 
$
4,194

 
$
104,508

Gross margin:
 

 
 

 
 

 
 

Hudson Americas
$
3,180

 
$
3,400

 
$
9

 
$
3,409

Hudson Asia Pacific
25,049

 
20,524

 
475

 
20,999

Hudson Europe
20,504

 
18,850

 
1,590

 
20,440

Total
$
48,733

 
$
42,774

 
$
2,074

 
$
44,848

SG&A (1):
 
 
 

 
 

 
 

Hudson Americas
$
2,681

 
$
2,836

 
$
5

 
$
2,841

Hudson Asia Pacific
22,596

 
20,065

 
426

 
20,491

Hudson Europe
18,772

 
17,651

 
1,450

 
19,101

Corporate
3,174

 
1,481

 

 
1,481

Total
$
47,223

 
$
42,033

 
$
1,881

 
$
43,914

Business reorganization expenses:
 

 
 

 
 

 
 

Hudson Americas
$
9

 
$
2

 
$

 
$
2

Hudson Asia Pacific

 
(24
)
 
1

 
(23
)
Hudson Europe
67

 
606

 
44

 
650

Corporate

 
32

 

 
32

Total
$
76

 
$
616

 
$
45

 
$
661

Operating income (loss):
 
 
 

 
 

 
 

Hudson Americas
$
484

 
$
552

 
$
5

 
$
557

Hudson Asia Pacific
81

 
(53
)
 
37

 
(16
)
Hudson Europe
1,557

 
419

 
81

 
500

Corporate
(3,296
)
 
(1,589
)
 

 
(1,589
)
Total
$
(1,174
)
 
$
(671
)
 
$
123

 
$
(548
)
EBITDA (loss):
 

 
 

 
 

 
 

Hudson Americas
$
460

 
$
458

 
$
(5
)
 
$
453

Hudson Asia Pacific
254

 
18

 
59

 
77

Hudson Europe
1,465

 
305

 
58

 
363

Corporate
(2,654
)
 
(458
)
 

 
(458
)
Total
$
(475
)
 
$
323

 
$
112

 
$
435


Note: Certain prior year amounts have been reclassified to conform to the current period presentation.

1.
SG&A is a measure that management uses to evaluate the segments’ expenses.

12



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

 
For The Year Ended December 31,
 
2017
 
2016
 
As
 
As
 
Currency
 
Constant
 
reported
 
reported
 
translation
 
currency
Revenue:
 

 
 

 
 

 
 

Hudson Americas
$
16,196

 
$
15,561

 
$
22

 
$
15,583

Hudson Asia Pacific
282,824

 
236,839

 
5,796

 
242,635

Hudson Europe
157,701

 
170,344

 
(5,400
)
 
164,944

Total
$
456,721

 
$
422,744

 
$
418

 
$
423,162

Gross margin:
 

 
 

 
 

 
 

Hudson Americas
$
14,420

 
$
13,609

 
$
19

 
$
13,628

Hudson Asia Pacific
93,623

 
84,126

 
1,442

 
85,568

Hudson Europe
78,693

 
76,682

 
(729
)
 
75,953

Total
$
186,736

 
$
174,417

 
$
732

 
$
175,149

SG&A (1):
 
 
 

 
 

 
 

Hudson Americas
$
12,712

 
$
12,495

 
$
11

 
$
12,506

Hudson Asia Pacific
86,716

 
81,409

 
1,188

 
82,597

Hudson Europe
72,047

 
72,978

 
(913
)
 
72,065

Corporate
9,615

 
10,452

 

 
10,452

Total
$
181,090

 
$
177,334

 
$
286

 
$
177,620

Business reorganization expenses:
 

 
 

 
 

 
 

Hudson Americas
$
(82
)
 
$
(39
)
 
$

 
$
(39
)
Hudson Asia Pacific
1

 
248

 

 
248

Hudson Europe
815

 
1,387

 
(2
)
 
1,385

Corporate
(22
)
 
(16
)
 

 
(16
)
Total
$
712

 
$
1,580

 
$
(2
)
 
$
1,578

Operating income (loss):
 
 
 

 
 

 
 

Hudson Americas
$
1,818

 
$
1,090

 
$
8

 
$
1,098

Hudson Asia Pacific
3,041

 
454

 
209

 
663

Hudson Europe
5,370

 
1,709

 
210

 
1,919

Corporate
(9,952
)
 
(10,840
)
 

 
(10,840
)
Total
$
277

 
$
(7,587
)
 
$
427

 
$
(7,160
)
EBITDA (loss):
 

 
 

 
 

 
 

Hudson Americas
$
1,578

 
$
770

 
$
7

 
$
777

Hudson Asia Pacific
2,504

 
(338
)
 
221

 
(117
)
Hudson Europe
4,583

 
1,064

 
142

 
1,206

Corporate
(6,150
)
 
(6,240
)
 

 
(6,240
)
Total
$
2,515

 
$
(4,744
)
 
$
370

 
$
(4,374
)


1.
SG&A is a measure that management uses to evaluate the segments’ expenses.





13