UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Hudson Global, Inc.
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Exhibit 99.1
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.
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"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.
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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.
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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.
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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
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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
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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 | |||||||||||
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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 | |||
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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. |
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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. |
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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