UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
(Amendment No. 1)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2022
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 001-38704
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip Code)
(475 ) 988-2068
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller reporting company | |||||||||||||
| 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. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding on October 21, 2022 | |||||||
| Common Stock - $0.001 par value | ||||||||
| Page | ||||||||
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| Item 6. | ||||||||
EXPLANATORY NOTE
Hudson Global, Inc. (the “Company” or “Hudson”, “we”, “us”, and “our”) is filing this Amendment (this “Amended Form 10-Q”) to its Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2022 (the “Original Form 10-Q”), originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 10, 2022.
As disclosed in the Company’s Current Report on Form 8-K, as filed with the SEC on March 30, 2023, the Company is restating its previously issued unaudited condensed consolidated financial statements for the nine-month period ended September 30, 2022. Subsequent to the filing of the Original Form 10-Q, management identified an error relating to the accounting treatment of a discretionary bonus payment paid by the Company on behalf of a customer. The effect of this error is an understatement of revenue and direct contracting costs and reimbursed expenses in the amount of $5.762 million for the nine-month period ended September 30, 2022. This Amended Form 10-Q amends revenue and direct contracting costs and reimbursed expenses accordingly. The error had no impact on the Company’s consolidated balance sheet, consolidated statement of cash flows, net income, the presentation of non-GAAP metrics EBITDA and adjusted EBITDA, or any other accounts for such periods. Please see Note 16 to this Amended Form 10-Q, Restatement of Previously Reported Financial Statements for additional information and a summary of the accounting impacts of these adjustments to revenue and direct contracting costs and reimbursed expenses.
As a result of the error, the Company has concluded there was a material weakness in the Company’s internal control over financial reporting as of September 30, 2022 and that its disclosure controls and procedures were ineffective as of September 30, 2022. See additional discussion included in Part I Item 4 and Part II Item 1A of this Amended Form 10-Q.
We are filing this Amended Form 10-Q to amend and restate the Original Form 10-Q with modification as necessary to reflect the restatement. The following items have been amended to reflect the restatement:
Part I, Item 1. Condensed Consolidated Statements of Operations
Part I, Item 1. Note 4 - Revenue Recognition
Part I, Item 1. Note 5 - Acquisitions
Part I, Item 1. Note 14 - Segment and Geographic Data
Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I, Item 3. Quantitative and Qualitative Disclosures about Market Risk
Part I, Item 4. Controls and Procedures
Part II, Item 1A. Risk Factors
In addition, this Amended Form 10-Q updates the signature page. In accordance with Rule 12b-15 under the Exchange Act, the Company is also including with this Amended Form 10-Q new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2022 from the Company’s Chief Executive Officer (as principal executive officer) and Chief Financial Officer (as principal financial officer) dated as of the filing date of this Amended Form 10-Q (included in Part II, Item 6. “Exhibits” and attached as Exhibits 31.1, 31.2, 32.1, and 32.2).
This Amended Form 10-Q is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatements as described below. Accordingly, this Amended Form 10-Q should be read in conjunction with our filings with the SEC subsequent to the date on which we filed the Original Form 10-Q. Among other things, forward-looking statements made in the Original Form 10-Q have not been revised to reflect events, results or developments that occurred or facts that became known to the Company after the date of the Original Form 10-Q, other than the restatement.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (As restated, see Note 16) | |||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Direct contracting costs and reimbursed expenses | |||||||||||||||||||||||
| Salaries and related | |||||||||||||||||||||||
| Office and general | |||||||||||||||||||||||
| Marketing and promotion | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Non-operating income (expense): | |||||||||||||||||||||||
| Interest income, net | |||||||||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Comprehensive (loss) income: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Foreign currency translation adjustment, net of income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Total other comprehensive loss, net of income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive (loss) income | $ | ( | $ | $ | $ | ||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, less allowance for doubtful accounts of $ | |||||||||||
| Restricted cash, current | |||||||||||
| Prepaid and other | |||||||||||
| Total current assets | |||||||||||
Property and equipment, net of accumulated depreciation of $ | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred tax assets, net | |||||||||||
| Restricted cash | |||||||||||
| Goodwill | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued salaries, commissions, and benefits | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
Note payable – short term | |||||||||||
| Operating lease obligations, current | |||||||||||
| Total current liabilities | |||||||||||
| Income tax payable | |||||||||||
| Operating lease obligations | |||||||||||
Note payable – long term | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss, net of applicable tax | ( | ( | |||||||||
Treasury stock, | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Provision for doubtful accounts | |||||||||||
| Benefit from deferred income taxes | ( | ( | |||||||||
| Stock-based compensation | |||||||||||
| Changes in operating assets and liabilities, net of effect of dispositions: | |||||||||||
| Increase in accounts receivable | ( | ( | |||||||||
| Increase in prepaid and other assets | ( | ( | |||||||||
| Increase in accounts payable, accrued expenses and other liabilities | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Cash paid for acquisitions, net of cash acquired | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Payments for business acquisition liabilities | ( | ||||||||||
| Purchase of treasury stock | ( | ||||||||||
| Cash paid for net settlement of employee restricted stock units | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Net increase in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash, beginning of the period | |||||||||||
| Cash, cash equivalents, and restricted cash, end of the period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash received during the period for interest | $ | $ | |||||||||
| Net cash payments during the period for income taxes | $ | $ | |||||||||
| Cash paid for amounts included in operating lease liabilities | $ | $ | |||||||||
| Supplemental non-cash disclosures: | |||||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
Business acquisition contingent consideration liability | $ | $ | |||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | |||||||||||||||||||||||||||||||||||||||||||
| Total stockholders’ equity, beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock and additional paid-in capital: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of net settled restricted stock from employees | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated deficit: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning balance | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Total stockholders’ equity, ending balance | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 1 – BASIS OF PRESENTATION
These interim unaudited condensed consolidated financial statements have been prepared in accordance with United States of America (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting and should be read in conjunction with the consolidated financial statements and related notes of Hudson Global, Inc. and its subsidiaries (the “Company”) filed in its Annual Report on Form 10-K for the year ended December 31, 2021.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of operating revenues and expenses. These estimates are based on management’s knowledge and judgments. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. The condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. Intra-entity balances and transactions between and among the Company and its subsidiaries have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation with no material impact on the condensed consolidated financial statements. For more information, see Note 2 to the Condensed Consolidated Financial Statements.
NOTE 2 – DESCRIPTION OF BUSINESS
The Company is comprised of the operations, assets, and liabilities of the Company’s three regional businesses: the Americas, Asia Pacific, and Europe. The Company provides Recruitment Process Outsourcing (“RPO”) permanent recruitment and contracting outsourced recruitment solutions. These services are tailored to the individual needs of primarily mid-to-large-cap multinational companies. The Company’s RPO delivery teams utilize state-of-the-art recruitment process methodologies and project management expertise in their flexible, turnkey solutions to meet clients’ ongoing business needs. The Company’s RPO services include complete recruitment outsourcing, project-based outsourcing, contingent workforce solutions, and recruitment consulting.
On August 19, 2022, Hudson completed the acquisition of Hunt & Badge Consulting Private Limited (“HnB”), an India-headquartered provider of recruitment services to customers operating in India. HnB partners with companies of all sizes, including well-known multinationals, across a variety of industries to help meet their talent procurement needs.
On October 29, 2021, Hudson completed the acquisition of Karani, LLC (“Karani”), a Chicago-headquartered recruiting services provider that primarily serves U.S.-based customers from its operations in India and the Philippines. Karani partners with recruitment and staffing firms to assist with recruiting, sourcing, screening, onboarding, and other talent-related services across a variety of industries. This acquisition has enhanced the Company’s global delivery capability by adding a substantial presence in India and the Philippines, fostering business in new markets, and further developing the Company’s technology recruitment capabilities.
On October 1, 2020, the Company completed its acquisition of Coit Staffing, Inc., which expanded its presence in the technology sector and established a Technology Group located in San Francisco. In addition to providing RPO services to clients in the tech sector, the Technology Group operates jointly with the Company’s existing teams in the Americas, Asia Pacific, and Europe to provide continuous access to knowledge regarding new and emerging technologies in the RPO, Managed Solutions Provider, and Total Talent Solutions spaces, enabling the Company to better serve its clients around the world.
The Company operates directly in fourteen countries with three reportable geographic business segments: Americas, Asia Pacific, and Europe. See Note 14 to the Condensed Consolidated Financial Statements for further details regarding the reportable segments.
In December 2019, a novel strain of coronavirus, referred to as COVID-19, was reported. On March 11, 2020, the World Health Organization declared the outbreak to be a pandemic, based on the rapid increase in exposure globally. Despite
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
the decline in infection rates, the COVID-19 pandemic continues to have a lasting impact on various aspects of our business including but not limited to workforce shortages.
Some countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. COVID-19 continues to have an impact around the world and presents risks to the Company, which the Company is unable to fully evaluate or foresee at the current time. However, the Company is vigilantly monitoring the business environment surrounding COVID-19 and continues to proactively address this situation as it evolves. The Company believes it can continue to take appropriate actions to manage the business in this challenging environment due to the flexibility of its workforce and the strength of its balance sheet.
NOTE 3 – ACCOUNTING PRONOUNCEMENTS
Recent Accounting Standard Update Not Yet Adopted
NOTE 4 – REVENUE RECOGNITION
Nature of Services
We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Revenues are recognized over time, using an input or output method, as the control of the promised services is transferred to the client in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The majority of our contracts are short-term in nature as they include termination clauses that allow either party to cancel within a short termination period, without cause. Revenue includes billable travel and other reimbursable costs and is reported net of sales or use taxes collected from clients and remitted to taxing authorities.
We generally determine standalone selling prices based on the prices included in our client contracts, using expected cost plus profit, or other observable prices. The price as specified in our client contracts is generally considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar client in similar circumstances. Certain client contracts have variable consideration, including usage-based fees that increase the transaction price and volume rebates or other similar items that generally reduce the transaction price. We estimate variable consideration using the expected value method based on the terms of the client contract and historical evidence. These amounts may be constrained and are only included in revenue to the extent we do not expect a significant reversal when the uncertainty associated with the variable consideration is resolved. Our estimated amounts of variable consideration subject to constraints are not material, and we do not believe that there will be significant changes to our estimates.
We record accounts receivable when our right to consideration becomes unconditional. Contract assets primarily relate to our rights to consideration for services provided that such rights to consideration are conditional on satisfaction of future performance obligations. A contract liability for deferred revenue is recorded when consideration is received, or is
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
unconditionally due, from a client prior to transferring control of services to the client under the terms of a contract. Deferred revenue balances typically result from advance payments received from clients prior to transferring control of services. Other than deferred revenue, we do not have any material contract assets or liabilities as of and for the nine months ended September 30, 2022 and 2021. As of September 30, 2022 and December 31, 2021, deferred revenue was $223 and $533 , respectively.
Payment terms vary by client and the services offered. We consider payment terms that exceed one year to be extended payment terms. Substantially all of the Company’s contracts include payment terms of 90 days or less, and we do not extend payment terms beyond one year.
We primarily record revenue on a gross basis in the Consolidated Statements of Operations and Comprehensive Income based upon the following key factors:
•We maintain the direct contractual relationship with the client and are responsible for fulfilling the service promised to the client.
•We maintain control over our contractors while the services to the client are being performed, including our contractors’ billing rates, and are ultimately responsible for paying them.
RPO Recruitment. We provide complete recruitment outsourcing, project-based outsourcing, and recruitment consulting for clients’ permanent staff hires. We recognize revenue for our RPO recruitment over time in an amount that reflects the consideration we expect to be entitled to and have an enforceable right to payment in exchange for our services. The client simultaneously receives and consumes the benefits of the services as they are provided. The transaction prices contain both fixed fees and variable consideration. Variable consideration is constrained by candidates accepting offers of permanent employment. We recognize revenue on fixed fees as the performance obligations are satisfied and variable fees as the constraint is lifted. We do not incur incremental costs to obtain our RPO recruitment contracts. The costs to fulfill these contracts are expensed as incurred.
We recognize permanent placement revenue when employment candidates accept offers of permanent employment. We have a substantial history of estimating the financial impact of permanent placement candidates who do not remain with our clients through a guarantee period. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.
Contracting. We provide RPO clients with a range of outsourced professional contract staffing services and managed service provider services, sometimes offered on a standalone basis and sometimes offered as part of a blended total talent solution. We recognize revenue for our contracting services over time as services are performed in an amount that reflects the consideration we expect to be entitled to and have an enforceable right to payment in exchange for our services, which is generally calculated as hours worked multiplied by the agreed-upon hourly bill rate. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur incremental costs to obtain our contracting contracts. The costs incurred to fulfill these contracts are expensed as incurred.
In the first quarter of 2022, one contracting customer ended its agreement with the Company. For the full year ended December 31, 2021, the contracting customer generated revenue of $44,888, or 27% of the Company’s revenue, which is reported as revenue in the Company’s Condensed Consolidated Statements of Operations, and Direct contracting costs and reimbursed expenses of $43,980, which is reported as Direct contracting costs and reimbursed expenses in the Company’s Condensed Consolidated Statements of Operations. Revenue less direct contracting costs and reimbursed expenses for this customer was $908, or 1% of the Company’s total revenue less direct contracting costs and reimbursed expenses of $68,157, for the full year ended December 31, 2021. The Company does not believe that the loss of this customer will have a material adverse impact on the Company and its subsidiaries.
Unsatisfied performance obligations. As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Disaggregation of Revenue
| Three Months Ended September 30, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| RPO Recruitment | $ | $ | ||||||||||||
| Contracting | ||||||||||||||
| Total Revenue | $ | $ | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| (As restated) | ||||||||||||||
| RPO Recruitment | $ | $ | ||||||||||||
| Contracting | ||||||||||||||
| Total Revenue | $ | $ | ||||||||||||
NOTE 5 – ACQUISITIONS
Hunt & Badge Consulting Private Limited
On August 19, 2022, the Company entered into a share purchase agreement by and among Hudson RPO Limited, a wholly owned subsidiary of the Company (“HnB Buyer”), Hunt & Badge Consulting Private Limited (“Seller”), and certain principals of HnB, and completed the acquisition by HnB Buyer of all of the membership interests of the Seller (the “HnB Acquisition”).
Hunt & Badge Consulting Private Limited is a provider of recruitment services to customers operating in India. HnB partners with companies of all sizes, including well-known multinationals, across a variety of industries to help meet their talent procurement needs.
In connection with the HnB Acquisition, Seller received $1,064 in cash, subject to certain adjustments, at the closing of the HnB Acquisition. Additionally, Seller has a contingent right to receive earn-out payments not to exceed $350 in aggregate payable over an eighteen-month period, subject to the achievement of certain performance thresholds and, the satisfaction of certain conditions.
The HnB Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price of $1,274 , which consists of the amount paid in cash of $1,064 , a preliminary working capital adjustment of $60 , net of an owner receivable of $15 , and contingent earn-out payments of up to $350 (which such earn-out payments are contingent upon the achievement of certain revenue milestones through December 2023), was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of August 19, 2022, with the excess recorded as goodwill. The purchase price included $314 of cash and cash equivalents acquired. As of September 30, 2022, the estimated fair value for the contingent earn-out payments that the Company classified as Level 3 in the fair value hierarchy was $150 , which is based on achievement of 70 % of the specified revenue targets. These fair value estimates are classified as Level 3 measurements, and they are based on significant inputs not observed in the market and reflect our own assumptions (forecasted revenue) through December 31, 2023.
In determining the fair value of the contingent consideration liability, the Company used an estimate based on a number of possible projections over the earn-out period. Given the short duration of the earn-out period, the fair value of contingent liability was measured on an undiscounted basis. The Company will continue to reassess the fair value of the acquisition-related contingent consideration at each reporting period based on additional information as it becomes available. This contingent consideration will be remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be marked to market and included in “Other income (expense), net” on the
- 9 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Company’s Condensed Consolidated Statements of Operations. For the three months ended September 30, 2022, no gains or losses were recognized in earnings for changes in the remeasurement of the contingent consideration.
The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of various potential revenue results. The values assigned to the assets acquired and liabilities assumed are based on the fair value available and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Excluding the contingent consideration, any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The Company incurred transaction costs related to the HnB Acquisition of $37 that were expensed as part of “Office and general”.
The Company’s Consolidated Statements of Operations for the three months ended September 30, 2022 included revenue of $18 and net income of $3 from HnB.
| Fair Value | ||||||||
| Assets Acquired: | ||||||||
| Cash and cash equivalents | $ | |||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Property and equipment | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| Assets Acquired | $ | |||||||
| Liabilities Assumed: | ||||||||
| Accrued expenses and other current liabilities | $ | |||||||
| Other long-term liabilities | ||||||||
| Liabilities Assumed | $ | |||||||
| Fair value of net assets acquired and consideration transferred | $ | |||||||
| Fair Value | Useful Life | |||||||||||||
Non-compete agreements | $ | |||||||||||||
| Customer lists | ||||||||||||||
| Trade name | ||||||||||||||
| Total identifiable assets | $ | |||||||||||||
Karani, LLC
On October 29, 2021, the Company entered into a membership interest purchase agreement (the “MIPA”) by and among the Company, Hudson Global Resources Management, Inc. (“HGRM”), a wholly owned subsidiary of the Company, and Daniel Williams (“Williams”), and completed the acquisition (the “Karani Acquisition”) by HGRM of all of the membership interests of Karani, LLC, a Delaware limited liability company.
- 10 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Karani partners with recruitment and staffing firms to assist with recruiting, sourcing, screening, onboarding, and other talent-related services across a variety of industries to customers primarily located in the United States. On the date of acquisition, Karani had approximately 560 employees in India and 120 employees in the Philippines.
As outlined in the MIPA, Williams received (i) $6,805 in cash subject to certain adjustments set forth in the MIPA at the closing of the Karani Acquisition; and (ii) a non-interest bearing promissory note in the aggregate principal amount of $2,000 , payable in installments on the six-month and eighteen-month anniversaries of the closing date subject to the satisfaction of certain conditions as further described in the MIPA. There are no employment stipulations for Williams associated with the MIPA.
The Karani Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price of $8,673 , which consists of the amount paid in cash of $6,805 , a promissory note of $2,000 , and a working capital credit of $132 , was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of October 29, 2021, with the excess recorded as goodwill. The purchase price included $737 of cash and cash equivalents acquired. The Company incurred transaction costs related to the acquisition of approximately $200 that were expensed as part of Office and general on the Consolidated Statements of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In addition to the purchase price, Hudson agreed to pay a $250 retention payment to the Chief Financial Officer of Karani, which is classified as compensation expense, recorded on a straight-line basis.
The Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2022 included revenue of $2,541 and $7,658 , respectively, and net income of $385 and $744 , respectively, from Karani.
| Fair Value | ||||||||
| Assets Acquired: | ||||||||
| Cash and cash equivalents | $ | |||||||
| Accounts receivable | ||||||||
| Restricted cash, current | ||||||||
| Prepaid expenses and other assets | ||||||||
| Property and equipment | ||||||||
| Operating lease right-of-use assets | ||||||||
| Restricted cash | ||||||||
| Other long-term assets | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| Assets Acquired | $ | |||||||
| Liabilities Assumed: | ||||||||
| Accrued expenses and other current liabilities | $ | |||||||
| Operating lease obligations, current | ||||||||
| Operating lease obligations, non current | ||||||||
| Other long-term liabilities | ||||||||
| Liabilities Assumed | $ | |||||||
| Fair value of net assets acquired and consideration transferred | $ | |||||||
Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives on the date of acquisition.
- 11 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| Fair Value | Useful Life | |||||||||||||
Developed technology | $ | |||||||||||||
| Customer lists | ||||||||||||||
| Trade name | ||||||||||||||
| Total identifiable assets | $ | |||||||||||||
Unaudited Pro Forma Financial Information
The following unaudited consolidated pro forma information gives effect to the acquisitions of Karani and HnB as if the transactions had occurred on January 1, 2021.
| September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| (As restated) | ||||||||||||||||||||||||||
| Revenue | $ | 48,761 | $ | 157,562 | $ | $ | ||||||||||||||||||||
| Net income | $ | 983 | $ | 7,115 | $ | $ | ||||||||||||||||||||
The unaudited pro forma supplemental information provided above is based on estimates and assumptions that the Company believes are reasonable, and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets for the three and nine months ended September 30, 2022 and 2021. This supplemental pro forma information has been prepared for comparative purposes and is not intended to reflect what would have occurred had the HnB Acquisition and the Karani Acquisition taken place on January 1, 2021.
NOTE 6 – STOCK-BASED COMPENSATION
Incentive Compensation Plan
The Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated on May 24, 2016 and further amended on September 14, 2020 (the “ISAP”), pursuant to which it can issue equity-based compensation incentives to eligible participants. The ISAP permits the granting of stock options, restricted stock, restricted stock units, and other types of equity-based awards. The Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) will establish such conditions as it deems appropriate on the granting or vesting of stock options, restricted stock, restricted stock units, and other types of equity-based awards. As determined by the Compensation Committee, equity awards also may be subject to immediate vesting upon the occurrence of certain events following a change in control of the Company. The Company primarily grants restricted stock and restricted stock units to its employees. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock of the Company issued under the ISAP.
The Compensation Committee administers the ISAP and may designate any of the following as a participant under the ISAP: any officer or other employee of the Company or its affiliates or individuals engaged to become an officer or employee; consultants or other independent contractors who provide services to the Company or its affiliates; and non-employee directors of the Company. On May 17, 2022, the Company’s stockholders at the 2022 Annual Meeting of Stockholders approved amendments to the ISAP to, among other things, increase the number of shares of the Company’s common stock that are reserved for issuance by 250,000 shares. As of September 30, 2022, there were 235,616 shares of the Company’s common stock available for future issuance under the ISAP.
All share issuances related to stock compensation plans are issued from the aforementioned stock available for future issuance under stockholder approved compensation plan.
In the first quarter of 2021, the Company granted restricted stock units subject to performance vesting conditions for the years ended December 31, 2021 and December 31, 2020 of 73,596 and 53,075 , respectively. In addition, in the first quarter of 2021, the Company granted 25,500 of discretionary time-vested stock units to certain employees that were not subject to performance conditions. For the nine months ended September 30, 2022, the Company granted 50,160 restricted stock units
- 12 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
subject to performance vesting conditions for the year ended December 31, 2022, and granted 5,250 of discretionary time-vested stock units to certain employees that were not subject to performance conditions.
| Vesting conditions | Number of Restricted Stock Units Granted | |||||||
Performance and service conditions - Type 1 (1) (2) | ||||||||
Performance and service conditions - Type 2 (1) (2) | ||||||||
Service conditions only - Type 1 (2) | ||||||||
| Total shares of stock award granted | ||||||||
(1)The performance conditions with respect to restricted stock units may be satisfied as follows:
(a)For employees from the Americas, Asia Pacific, and Europe, (i) 70 % of the restricted stock units may be earned on the basis of performance as measured by a “regional adjusted EBITDA”, and (ii) 30 % of the restricted stock units may be earned on the basis of performance as measured by a “group adjusted EBITDA”;
(b)For grants to Corporate office employees subject to 2022 performance conditions, 100% of the restricted stock units may be earned on the basis of performance as measured by a “group adjusted EBITDA”; and.
(c)For grants to Coit Principals subject to 2022 performance conditions, 100 % of the restricted stock units may be earned on the basis of performance as measured by a “Coit EBITDA”.
(2)To the extent restricted stock units are earned, such restricted stock units will vest on the basis of service as follows:
(a)33 % and 66.6 % for Type 1 and Type 2, respectively, of the restricted stock units will vest on the first anniversary of the grant date;
(b)33 % and 16.7 % for Type 1 and Type 2, respectively, of the restricted stock units will vest on the second anniversary of the grant date; and
(c)34 % and 16.7 % for Type 1 and Type 2, respectively, of the restricted stock units will vest on the third anniversary of the grant date; provided that, in each case, the employee remains employed by the Company from the grant date through the applicable service vesting date.
The Company also maintains the Director Deferred Share Plan (the “Director Plan”) as part of the ISAP pursuant to which it can issue restricted stock units to its non-employee directors. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock issued under the ISAP upon a director ceasing service as a member of the Company’s Board. The restricted stock units vest immediately upon grant and are credited to each of the non-employee director’s retirement accounts under the Director Plan. Restricted stock units issued under the Director Plan contain the right to a dividend equivalent award in the form of additional restricted stock units. The dividend equivalent award is calculated using the same rate as the cash dividend paid on a share of the Company’s common stock, and then divided by the closing price of the Company’s common stock on the date the dividend is paid to determine the number of additional restricted stock units to grant. Dividend equivalent awards have the same vesting terms as the underlying awards. During the nine months ended September 30, 2022, the Company granted 8,321 restricted stock units to its non-employee directors pursuant to the Director Plan.
As of September 30, 2022, 222,607 restricted stock units are deferred under the Company’s ISAP.
On October 1, 2020, the Company granted 52,226 restricted shares of common stock to be issued over 30 months in connection with the acquisition of Coit Staffing, Inc. See “Shares of Common Stock” in this Note 6 for additional information.
- 13 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Restricted shares of common stock | $ | $ | $ | $ | ||||||||||||||||||||||
| Restricted stock units | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Restricted Stock Units
As of September 30, 2022, the Company had $2,049 of unrecognized stock-based compensation expense related to outstanding unvested restricted stock units. The Company expects to recognize that cost over a weighted average service period of 1.22 years. Restricted stock units have no voting or dividend rights until the awards are vested.
| Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
| Performance-based | Time-based/Director | Total | |||||||||||||||||||||||||||||||||
| Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | ||||||||||||||||||||||||||||||
Unvested restricted stock units at January 1, 2022 | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Shares earned above target (a) | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Vested | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
| Forfeited | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
Unvested restricted stock units at September 30, 2022 | $ | $ | $ | ||||||||||||||||||||||||||||||||
(a) The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
(a) The number of shares earned above target are based on the performance targets established by the Compensation Committee at the initial grant date.
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| Performance-based | Time-based/Director | Total | |||||||||||||||||||||||||||||||||
| Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | Number of Shares of Restricted Stock Units | Weighted Average Grant-Date Fair Value | ||||||||||||||||||||||||||||||
Unvested restricted stock units at January 1, 2021 | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Vested | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
| Forfeited | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||
Unvested restricted stock units at September 30, 2021 | $ | $ | $ | ||||||||||||||||||||||||||||||||
(a) The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
- 14 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Shares of Common Stock
As of September 30, 2022, the Company had approximately $33 of unrecognized stock-based compensation expense related to outstanding unvested restricted shares of common stock issued in connection with the acquisition of Coit Staffing Inc. These shares had a grant price of $9.57 and a remaining average expected life of 0.50 years. Restricted shares of common stock have no voting or dividend rights until the awards are vested.
Changes in the Company’s restricted shares of common stock for the nine months ended September 30, 2022 and 2021 were as follows:
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Number of Restricted Shares of Common Stock | Weighted Average Grant-Date Fair Value | Number of Restricted Shares of Common Stock | Weighted Average Grant-Date Fair Value | |||||||||||||||||||||||
| Unvested restricted shares of common stock at January 1 | $ | $ | ||||||||||||||||||||||||
| Vested | ( | $ | ( | $ | ||||||||||||||||||||||
Unvested restricted shares of common stock at September 30 | $ | $ | ||||||||||||||||||||||||
NOTE 7 – INCOME TAXES
Income Tax Provision
Under ASC 270, “Interim Reporting”, and ASC 740-270, “Income Taxes – Intra Period Tax Allocation”, the Company is required to adjust its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate. Jurisdictions with a projected loss for the full year where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. Applying the provisions of ASC 270 and ASC 740-270 could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.
Effective Tax Rate
The provision for income taxes for the nine months ended September 30, 2022 was $1,657 on a pre-tax income of $8,724 , compared to a provision for income taxes of $475 on pre-tax income of $1,644 for the same period in 2021. The Company’s effective income tax rate was positive 19 % and positive 29 % for the nine months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, the effective tax rates differed from the U.S. Federal statutory rate of 21 % primarily due to changes in valuation allowances in the U.S. and certain foreign jurisdictions, which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses.
Uncertain Tax Positions
As of both September 30, 2022 and December 31, 2021, the Company had $360 , respectively, of unrecognized tax benefits, excluding interest and penalties, which if recognized in the future, would lower the Company’s effective income tax rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. As of September 30, 2022 and December 31, 2021, the Company had $124 and $110 , respectively, of accrued interest and penalties associated with unrecognized tax benefits.
Based on information available as of September 30, 2022, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $400 over the next 12 months as a result of projected resolutions of global tax examinations and controversies and potential expirations of the applicable statutes of limitations.
- 15 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
In many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by the relevant tax authorities. Tax years with net operating losses (“NOLs”) remain open until such losses expire or until the statutes of limitations for those years when the NOLs are used expire. As of September 30, 2022, the Company’s open tax years, which remain subject to examination by the relevant tax authorities, are between 2014 and 2021 depending on the jurisdiction.
The Company believes that its unrecognized tax benefits as of September 30, 2022 are appropriately reflected for all years subject to examination above.
Net Operating Losses (“NOLs”), Capital Losses, and Valuation Allowance
The Company recorded a valuation allowance against all of our deferred tax assets for NOLs and Capital Losses as of September 30, 2022 and December 31, 2021. We intend to continue maintaining a full valuation allowance on our deferred tax assets for NOLs until there is sufficient evidence to support the reversal of all or some portion of these allowances in the future.
NOTE 8 – EARNINGS PER SHARE
Basic earnings per share is computed by dividing the Company’s net income by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company’s net income by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options “in-the-money”, unvested restricted stock, and unvested restricted stock units. The dilutive impact of stock options, unvested restricted stock, and unvested restricted stock units is determined by applying the “treasury stock” method. Performance-based restricted stock awards are included in the computation of diluted earnings per share only to the extent that the underlying performance conditions: (i) are satisfied prior to the end of the reporting period; or (ii) would be satisfied if the end of the reporting period were the end of the related performance period and the result would be dilutive under the treasury stock method. Stock awards subject to vesting or exercisability based on the achievement of market conditions are included in the computation of diluted earnings per share only when the market conditions are met.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||
| Earnings per share (“EPS”): | |||||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||||||||
| EPS numerator - basic and diluted: | |||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||||||||
| EPS denominator (in thousands): | |||||||||||||||||||||||||||||
| Weighted average common stock outstanding - basic | |||||||||||||||||||||||||||||
| Common stock equivalents: restricted stock units and restricted shares of common stock | |||||||||||||||||||||||||||||
Weighted average number of common stock outstanding - diluted | |||||||||||||||||||||||||||||
- 16 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Unvested restricted shares of common stock | ||||||||||||||||||||||||||
| Unvested restricted stock units | ||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||
NOTE 9– GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company recorded goodwill of $687 on August 19, 2022 in connection with the HnB Acquisition, $2,131 on October 29, 2021 in connection with the Karani Acquisition, and $2,088 in connection with the acquisition of Coit Staffing Inc. on October 1, 2020. (See Note 5 for further information on the HnB Acquisition and the Karani Acquisition).
For the nine months ended September 30, 2022 and the twelve months ended December 31, 2021, the changes in carrying amount of goodwill were as follows:
| Carrying Value | ||||||||
| 2022 | ||||||||
| Goodwill, January 1, | $ | |||||||
| Acquisition | ||||||||