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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549  

FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2023
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 

HUDSON GLOBAL, INC.
(Exact name of registrant as specified in its charter)  
Delaware 59-3547281
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
53 Forest Avenue, Suite 102, Old Greenwich, CT 06870
(Address of principal executive offices) (Zip Code)
(475988-2068
(Registrant’s telephone number, including area code) 
  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueHSONThe NASDAQ Stock Market LLC
Preferred Share Purchase RightsThe NASDAQ Stock Market LLC

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
Non-accelerated filerSmaller 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 20, 2023
Common Stock - $0.001 par value 2,815,033




HUDSON GLOBAL, INC.
INDEX

  Page
  
Item 1. 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
  
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 




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,
2023202220232022
Revenue$39,398 $48,686 $127,367 $157,326 
Operating expenses:
Direct contracting costs and reimbursed expenses20,028 24,487 63,650 80,280 
Salaries and related14,335 18,897 49,206 56,379 
Office and general2,503 2,675 7,991 7,863 
Marketing and promotion881 1,015 2,794 3,049 
Depreciation and amortization374 356 1,076 1,017 
Total operating expenses38,121 47,430 124,717 148,588 
Operating income1,277 1,256 2,650 8,738 
Non-operating income (expense):
Interest income, net90 23 284 28 
Other (expense) income, net(404)16 (321)(42)
Income before income taxes963 1,295 2,613 8,724 
Provision for income taxes430 340 1,148 1,657 
Net income$533 $955 $1,465 $7,067 
Earnings per share:
Basic$0.17 $0.31 $0.48 $2.35 
Diluted$0.17 $0.30 $0.47 $2.25 
Weighted-average shares outstanding:
Basic3,068 3,034 3,062 3,010 
Diluted3,141 3,150 3,134 3,138 
 



See accompanying notes to Condensed Consolidated Financial Statements.


- 1 -


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2023202220232022
Comprehensive income (loss):
Net income$533 $955 $1,465 $7,067 
Other comprehensive loss:
Foreign currency translation adjustment, net of income taxes(498)(1,151)(561)(2,426)
Total other comprehensive loss, net of income taxes(498)(1,151)(561)(2,426)
Comprehensive income (loss)$35 $(196)$904 $4,641 

See accompanying notes to Condensed Consolidated Financial Statements.
- 2 -



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
September 30,
2023
December 31,
2022
ASSETS  
Current assets:  
Cash and cash equivalents$21,610 $27,123 
Accounts receivable, less allowance for expected credit losses of $146 and $51, respectively
24,889 26,270 
Restricted cash, current171 160 
Prepaid and other2,285 1,959 
Total current assets48,955 55,512 
Property and equipment, net of accumulated depreciation of $1,166 and $950, respectively
478 673 
Operating lease right-of-use assets1,101 685 
Deferred tax assets, net1,450 1,475 
Restricted cash195 194 
Goodwill4,871 4,875 
Intangible assets, net of accumulated amortization of $2,485 and $1,647, respectively
3,694 4,516 
Other assets12 12 
Total assets$60,756 $67,942 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$613 $1,678 
Accrued salaries, commissions, and benefits5,699 11,584 
Accrued expenses and other current liabilities6,265 6,273 
Note payable short term
 1,250 
Operating lease obligations, current541 337 
Total current liabilities13,118 21,122 
Income tax payable 81 
Operating lease obligations560 348 
Other liabilities442 599 
Total liabilities14,120 22,150 
Commitments and contingencies
Stockholders’ equity:  
Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding
  
Common stock, $0.001 par value, 20,000 shares authorized; 3,891 and
3,823 shares issued; 2,815 and 2,794 shares outstanding, respectively
4 4 
Additional paid-in capital492,554 491,567 
Accumulated deficit(425,980)(427,394)
Accumulated other comprehensive loss, net of applicable tax(2,200)(1,639)
Treasury stock, 1,076 and 1,029 shares, respectively, at cost
(17,742)(16,746)
Total stockholders’ equity46,636 45,792 
Total liabilities and stockholders’ equity$60,756 $67,942 

See accompanying notes to Condensed Consolidated Financial Statements.
- 3 -


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:  
Net income$1,465 $7,067 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization1,076 1,017 
Provision for expected credit losses44 26 
Benefit from deferred income taxes(38)(245)
Stock-based compensation987 1,786 
Changes in operating assets and liabilities, net of effect of dispositions:
Decrease (increase) in accounts receivable876 (6,154)
Increase in prepaid and other assets(365)(1,136)
Increase (decrease) in accounts payable, accrued expenses and other liabilities(7,066)2,736 
Net cash (used in) provided by operating activities(3,021)5,097 
Cash flows from investing activities:  
Capital expenditures(64)(430)
Cash paid for acquisitions, net of cash acquired (825)
Net cash used in investing activities(64)(1,255)
Cash flows from financing activities:  
Payments for business acquisition liabilities(1,250)(620)
Purchase of treasury stock(774)(1,131)
Cash paid for net settlement of employee restricted stock units(222)(246)
Net cash used in financing activities(2,246)(1,997)
Effect of exchange rates on cash, cash equivalents and restricted cash(170)(1,214)
Net (decrease) increase in cash, cash equivalents and restricted cash(5,501)631 
Cash, cash equivalents, and restricted cash, beginning of the period27,477 22,113 
Cash, cash equivalents, and restricted cash, end of the period$21,976 $22,744 
Supplemental disclosures of cash flow information:
Cash received during the period for interest$285 $28 
Net cash payments during the period for income taxes$1,979 $2,322 
     Cash paid for amounts included in operating lease liabilities$412 $390 
Supplemental non-cash disclosures:
Right-of-use assets obtained in exchange for operating lease liabilities$837 $772 
Business acquisition contingent consideration liability
$ $150 
 
See accompanying notes to Condensed Consolidated Financial Statements. 
- 4 -


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
 
Three Months EndedNine Months Ended
 September 30, 2023September 30, 2022September 30, 2023September 30, 2022
 Shares ValueSharesValueShares ValueSharesValue
Total stockholders’ equity, beginning balance2,823 $46,684 2,822 $45,168 2,794 $45,792 2,707 $39,316 
Common stock and additional paid-in capital:
Beginning balance3,889 492,427 3,816 490,494 3,823 491,571 3,694 489,253 
Stock-based compensation expense2 131 2 545 68 987 124 1,786 
 Ending balance3,891 492,558 3,818 491,039 3,891 492,558 3,818 491,039 
Treasury stock:
Beginning balance(1,066)(17,528)(994)(15,555)(1,029)(16,746)(987)(15,329)
Purchase of treasury stock(10)(201)(33)(1,131)(37)(774)(33)(1,131)
Purchase of net settled restricted stock from employees (13) (20)(10)(222)(7)(246)
 Ending balance(1,076)(17,742)(1,027)(16,706)(1,076)(17,742)(1,027)(16,706)
Accumulated other comprehensive loss:
Beginning balance(1,702)(1,360)(1,639)(85)
Other comprehensive loss(498)(1,151)(561)(2,426)
 Ending balance(2,200)(2,511)(2,200)(2,511)
Accumulated deficit:
Beginning balance(426,513)(428,411)(427,394)(434,523)
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses— — (51)— 
Net income533 955 1,465 7,067 
 Ending balance(425,980)(427,456)(425,980)(427,456)
Total stockholders’ equity, ending balance2,815 $46,636 2,791 $44,366 2,815 $46,636 2,791 $44,366 


See accompanying notes to Condensed Consolidated Financial Statements.
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Index
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, 2022.
    
    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 delivers Recruitment Process Outsourcing (“RPO”), services consisting of 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 recruitment process methodologies and project management expertise to meet clients’ ongoing business needs. The Company’s RPO services include complete recruitment outsourcing, project-based outsourcing, contingent workforce solutions, and recruitment consulting.

The Company’s core service offering is Recruitment Process Outsourcing, consisting of RPO and contracting. The Company provides complete recruitment outsourcing, project-based outsourcing, and recruitment consulting for clients’ permanent staff hires. Hudson’s RPO services leverage the Company’s consultants, supported by the Company’s specialists, in the delivery of its proprietary methods to identify, select, and engage the best-fit talent for critical client roles. In addition, the Company provides RPO clients with a range of outsourced professional contract staffing services and managed service provider services offered sometimes on a standalone basis and sometimes as part of a blended total talent solution. These services draw upon a combination of specialized recruiting and project management competencies to deliver a wide range of solutions. Hudson-employed professionals - either individually or as a team - are placed with client organizations for a defined period of time based on specific business needs of the client.
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 virus, 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 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.

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.
    

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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 3 – ACCOUNTING PRONOUNCEMENTS
    
Adoption of New Accounting Pronouncements

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This update was issued by the Financial Accounting Standards Board (the “FASB”) in June 2016. This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) and replaces the methodology that recognizes impairment of financial instruments when losses have been incurred with a methodology that recognizes impairment of financial instruments when losses are expected. The new standard requires entities to use a forward-looking “expected loss” model for most financial instruments, including accounts receivable and unbilled services that is based on historical information, current information, and reasonable and supportable forecasts.

As a result of adopting the new standard, the Company recognized a cumulative increase to allowances for accounts receivable and unbilled services and a reduction to the 2023 opening balance of retained earnings of $51. Comparative periods prior to the adoption of this standard and their respective disclosures have not been adjusted. The adoption of ASU 2016-13 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.


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. Other than bonuses to be paid to contractors, on behalf of our clients, 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. Certain contract employees are entitled to performance bonuses at the sole discretion of the client and are constrained until approved. Bonuses approved and paid to our contracting employees were approximately $0.5 million in the nine months ended September 30, 2023, and $6.1 million in the nine months ended September 30, 2022.

    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 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, 2023 and 2022. As of September 30, 2023 and December 31, 2022, deferred revenue was $140 and $170, respectively.

    Payment terms vary by client and the services being provided to the client. 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.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)

    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. We provide complete recruitment outsourcing, project-based outsourcing, and recruitment consulting services for clients’ permanent staff hires. We recognize revenue for our RPO 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 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 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 contracts for outsourced professional contract staffing services and managed service provider services. The costs incurred to fulfill these contracts are expensed as incurred.

    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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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Disaggregation of Revenue

    The following table presents our disaggregated revenues by revenue source. For additional information on the revenues by geographical segment, see Note 14 to the Condensed Consolidated Financial Statements.
Three Months Ended
 September 30,
 20232022
RPO$18,876 $23,801 
Contracting20,522 24,885 
Total Revenue$39,398 $48,686 
Nine Months Ended
September 30,
20232022
RPO$62,316 $75,775 
Contracting65,051 81,551 
Total Revenue$127,367 $157,326 


NOTE 5 – ACCOUNT RECEIVABLE, NET

Accounts receivable balances are composed of trade and unbilled receivables. Unbilled accounts receivable represent revenue recorded in advance of processing formal invoices pursuant to the completion of contract provisions and, generally, become billable at contractually specified dates. Unbilled receivables of $6,024 and $8,523 as of September 30, 2023 and December 31, 2022, respectively, are expected to be invoiced and collected within one year. The Company records accounts receivable when its right to consideration becomes unconditional. Contract assets primarily relate to our rights to consideration for services provided that they are conditioned on satisfaction of future performance obligations. Accounts receivable, net, are stated at the amount the Company expects to collect, which is net of estimated losses resulting from the inability of its customers to make required payments.

Allowance for Expected Credit Losses

The allowance for doubtful accounts is estimated based on the CECL model and it takes into account information about past events, current conditions, and reasonable and supportable forecasts of future economic conditions. It represents the aggregate amount of credit risk arising from the inability of specific clients to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. When determining the collectability of specific customer accounts, a number of factors are evaluated, including: customer creditworthiness, past transaction history with the customer, changes in customer financial stability, payment terms or practices, and effect of market conditions on each customer. Other factors include, but are not limited to, current economic conditions and forward-looking estimates. Our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional provisions for expected credit losses in future periods. The risk of credit losses may be mitigated to the extent that we received a retainer from some of our clients prior to performing services. Changes in allowance for expected credit losses are recorded in office and general expenses on the Condensed Consolidated Statements of Operations and were not material for the three and nine months ended September 30, 2023. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate. Our billed accounts receivables are written off when the potential for recovery is considered remote.

The Company generally establishes customer credit limits and estimates the allowance for credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer’s credit quality and we adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality. Consistent with our adoption of ASU 2016-13, effective January 1, 2023 (refer to Note 3 – Accounting
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Pronouncements), the allowance for expected credit losses is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.

The following table summarizes the components of “Accounts receivable, net” as presented on the Condensed Consolidated Balance Sheets:
September 30,December 31,
Accounts Receivable:20232022
Billed receivables$19,011 $17,798 
Unbilled receivables6,024 8,523 
Accounts Receivable, Gross$25,035 $26,321 
Allowance for expected credit losses(146)(51)
Accounts Receivable, Net$24,889 $26,270 
The following table summarizes the total provision for expected credit losses and write-offs:
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2023202220232022
Beginning balance$102 $64 $51 $196 
Provision for expected credit losses44 15 44 26 
Write-offs (28) (171)
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses
  51  
Ending Balance$146 $51 $146 $51 
NOTE 6 – 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” or “HnB”), and certain principals of HnB, and completed the acquisition by HnB Buyer of all of the membership interests of the Seller (the “HnB Acquisition”).

HnB 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 $1,260, which consists of the amount paid in cash of $1,064, a working capital adjustment of $47, net of an owner receivable of $28, 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. None of the goodwill is expected to be deductible for tax purposes. The Company’s goodwill represents the expected profit growth over time that is attributable to expanding our footprint and market share in India. The purchase price included $314 of cash and cash equivalents acquired. As of September 30, 2023, 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 the agreed upon minimum payment. These fair value estimates are based on significant inputs not observed in the market and reflect our own assumptions (forecasted revenue) through December 31, 2023.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)

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 Company’s Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2023, no gains or losses were recognized in earnings for changes in the remeasurement of the contingent consideration.

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 $63 that were expensed as part of “Office and general”. The Company’s accounting for the business combination was completed as of December 31, 2022.

The Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2023 included revenue of $8 and $48, respectively, and net loss of $47 and $76, from HnB, respectively.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on internal valuations at the date of the HnB Acquisition.
Fair Value
Assets Acquired:
Cash and cash equivalents$314 
Accounts receivable80 
Prepaid expenses and other assets77 
Property and equipment35 
Intangible assets150 
Goodwill687 
Assets Acquired$1,343 
Liabilities Assumed:
Accrued expenses and other current liabilities$20 
Other long-term liabilities63 
Liabilities Assumed$83 
Fair value of consideration transferred$1,260 
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 the HnB Acquisition.

Fair ValueUseful Life
Non-compete agreements
$40 3 years
Customer lists60 3 years
Trade name50 5 years
Total identifiable assets$150 
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
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 by HGRM of all of the membership interests of Karani, LLC, (the “Karani Acquisition”).

Karani, LLC (“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. None of the goodwill is expected to be deductible for tax purposes. The Company's goodwill represents the expected profit growth over time that is attributable to increasing our footprint and market share in India. 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. In addition to the purchase price, the Company 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 accounting for the business combination was completed as of December 31, 2021.

The Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2023 included revenue of $1,393 and $4,803, and net loss of $296 and $896, respectively, from Karani.

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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Below is a summary of the fair value of the net assets acquired on the acquisition date based on external valuations at the date of the Karani Acquisition.
Fair Value
Assets Acquired:
Cash and cash equivalents$737 
Accounts receivable1,521 
Restricted cash, current50 
Prepaid expenses and other assets177 
Property and equipment119 
Operating lease right-of-use assets100 
Restricted cash3 
Other long-term assets19 
Intangible assets4,540 
Goodwill2,131 
Assets Acquired$9,397 
Liabilities Assumed:
Accrued expenses and other current liabilities$436 
Operating lease obligations, current88 
Operating lease obligations, non-current12 
Other long-term liabilities188 
Liabilities Assumed$724 
Fair value of consideration transferred$8,673 
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 the Karani Acquisition.

Fair ValueUseful Life
Developed technology
$640 3 years
Customer lists2,800 6 years
Trade name1,100 10 years
Total identifiable assets$4,540 
Unaudited Pro Forma Financial Information

The following unaudited consolidated pro forma information gives effect to the acquisition of HnB as if the transaction had occurred on January 1, 2022.
September 30, 2022
Three Months EndedNine Months Ended
Revenue$48,761 $157,562 
Net income$987 $7,120 

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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
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, 2023 and 2022. 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 taken place on January 1, 2022.

NOTE 7 – 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 and May 17, 2022 (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 may also be subject to immediate vesting upon the occurrence of certain events including death, disability, retirement or a change in control of the Company. When we make grants of restricted stock or restricted stock units to our executive officers, including the named executive officers, we enter into Restricted Stock Agreements and Restricted Stock Unit Agreements with such executive officers that contain provisions that are triggered upon a termination of an executive officer or a change in control of our Company. For awards of restricted stock granted beginning on November 6, 2015, effective upon a change in control of our Company, if the executive is employed by us or an affiliate of ours immediately prior to the date of such change in control and is subsequently terminated within 12 months following the date of such change in control, the shares of restricted stock will fully vest and the restrictions imposed upon the restricted stock will be immediately deemed to have lapsed. For awards of restricted stock units granted beginning on March 10, 2016, effective upon a change in control of our Company, if the executive is employed by us or an affiliate of ours immediately prior to the date of such change in control and is subsequently terminated within 12 months following the date of such change in control, the restricted stock units will fully vest and the restrictions imposed upon the restricted stock units will be immediately deemed to have lapsed. 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, 2023, there were 213,885 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.
For the nine months ended September 30, 2023, the Company granted 28,841 restricted stock units subject to performance vesting conditions for the year ended December 31, 2023. For the nine months ended September 30, 2022, the Company granted 50,160 restricted stock units subject to performance vesting conditions for the year ended December 31, 2022, and granted 5,250 of discretionary time-vested restricted stock units to certain employees that were not subject to performance conditions.
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HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
A summary of the quantity and vesting conditions for stock-based units granted to the Companys employees for the nine months ended September 30, 2023 was as follows:
Vesting conditionsNumber of Restricted Stock Units Granted
Performance and service conditions - Type 1 (1) (2)
7,736 
Performance and service conditions - Type 2 (1) (2)
21,105 
Total shares of stock award granted28,841 

(1)The performance conditions with respect to restricted stock units may be satisfied as follows: 
(a)For grants to Corporate office employees subject to 2023 performance conditions, 100% of the restricted stock units may be earned on the basis of performance as measured by a “group adjusted 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, 2023, the Company granted 5,648 restricted stock units to its non-employee directors pursuant to the Director Plan.
    As of September 30, 2023, 249,064 restricted stock units are deferred under the Company’s ISAP.
For the three and nine months ended September 30, 2023 and 2022, the Company’s stock-based compensation expense related to restricted stock units and restricted shares of common stock were as follows:
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2023202220232022
Restricted shares of common stock$ $17 $16 $91 
Restricted stock units 131 528 971 1,695 
Total$131 $545 $987 $1,786 
 
Restricted Stock Units
    As of September 30, 2023, the Company had $607 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 0.6 years. Restricted stock units have no voting or dividend rights until the awards are vested.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
    Changes in the Company’s restricted stock units for the nine months ended September 30, 2023 and 2022 were as follows:

Nine Months Ended September 30, 2023
Performance-basedTime-based/Director Total
Number of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair ValueNumber of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair ValueNumber of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair Value
Unvested restricted stock units at January 1, 2023
130,186 $23.56 33,390 $20.31 163,576 $22.89 
Granted28,841 $22.27 5,648 $21.00 34,489 $22.06 
Shares earned above target (a)3,940 $35.72  $ 3,940 $35.72 
Vested(58,834)$22.10 (16,291)$19.46 (75,125)$21.53 
Forfeited(8,869)$35.10 (2,380)$14.54 (11,249)$30.75 
Unvested restricted stock units at September 30, 2023
95,264 $23.49 20,367 $21.86 115,631 $23.20 
 (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, 2022
Performance-basedTime-based/Director Total
Number of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair ValueNumber of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair ValueNumber of Shares of Restricted Stock UnitsWeighted Average Grant-Date Fair Value
Unvested restricted stock units at January 1, 2022
121,393 $15.88 46,500 $17.15 167,893 $16.23 
Granted50,160 $35.37 13,571 $37.67 63,731 $35.86 
Shares earned above target (a)36,884 $16.70  $ 36,884 $16.70 
Vested(78,251)$15.99 (18,056)$25.87 (96,307)$17.84 
Forfeited $ (3,675)$16.04 (3,675)$16.04 
Unvested restricted stock units at September 30, 2022
130,186 $23.56 38,340 $20.41 168,526 $22.84 

(a)    The number of shares earned above target are based on the performance targets established by the Compensation Committee at the initial grant date.
 (a)    The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
Shares of Common Stock 
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. (“Coit Acquisition”), of which all had vested as of June 30, 2023. As of September 30, 2023, the Company did not have any unrecognized stock-based compensation expense related to unvested restricted shares of common stock issued in connection with the Coit Acquisition.    
Changes in the Company’s restricted shares of common stock for the nine months ended September 30, 2023 and 2022, were as follows:
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
 Nine Months Ended
September 30,
 20232022
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 117,410 $9.57 34,818 $9.57 
Vested(17,410)$9.57 (17,408)$9.57 
Unvested restricted shares of common stock at September 30,
 $ 17,410 $9.57 

NOTE 8 – 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, 2023 was $1,148 on a pre-tax income of $2,613, compared to a provision for income taxes of $1,657 on pre-tax income of $8,724 for the same period in 2022. The Company’s effective income tax rate was positive 44% and positive 19% for the nine months ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, 2023, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to foreign tax rate differences, state income taxes, 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, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses, partially offset by a discrete tax benefit recognized following the lapse of certain statutes of limitations related to Spain and recognition of a portion of a deferred tax asset in Canada. For the nine months ended September 30, 2022, 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, and non-deductible expenses.
Uncertain Tax Positions 
    As of September 30, 2023 and December 31, 2022, the Company had $60 and $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, 2023 and December 31, 2022, the Company had $25 and $129, respectively, of accrued interest and penalties associated with unrecognized tax benefits.
The statute of limitations for capital gains taxes on the transfer of shares in Spain lapsed in January 2023. The FIN48 reserve for Spain capital gains taxes, interest, and penalties of approximately $408 was released as a tax benefit in the first quarter of 2023.
        Based on information available as of September 30, 2023, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by $85 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.
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Index
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, 2023, the Company’s open tax years, which remain subject to examination by the relevant tax authorities, are between 2016 and 2022 depending on the jurisdiction.
    The Company believes that its unrecognized tax benefits as of September 30, 2023 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 consolidated US deferred tax assets for NOLs and Capital Losses as of September 30, 2023 and December 31, 2022. 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 9 – 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.
    A reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and nine months ended September 30, 2023 and 2022 were as follows:

 Three Months Ended
 September 30,
Nine Months Ended
September 30,
2023202220232022
Earnings per share (“EPS”):    
Basic$0.17 $0.31 $0.48 $2.35 
Diluted$0.17 $0.30 $0.47 $2.25 
EPS numerator - basic and diluted:
Net income$533 $955 $1,465 $7,067 
EPS denominator (in thousands):   
Weighted average common stock outstanding - basic3,068 3,034 3,062 3,010 
Common stock equivalents: restricted stock units and restricted shares of common stock73 116 72 128 
Weighted average number of common stock outstanding - diluted
3,141 3,150 3,134 3,138 



- 18 -

HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)

    The weighted average number of shares outstanding used in the computation of diluted net earnings per share for the three and nine months ended September 30, 2023 and 2022 did not include the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive:
Three Months Ended
 September 30,
Nine Months Ended
September 30,
2023202220232022
Unvested restricted shares of common stock    
Unvested restricted stock units 22,540 300 17,750 
Total 22,540 300 17,750 


NOTE 10– GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company recorded goodwill of $687 on August 19, 2022 in connection with the HnB Acquisition (See Note 6 for further information on the HnB Acquisition).

For the nine months ended September 30, 2023 and the twelve months ended December 31, 2022, the changes in carrying amount of goodwill were as follows:

Carrying Value
2023
Goodwill, January 1,$4,875 
Acquisition 
Currency translation(4)
Goodwill, September 30, 2023
$4,871 

Carrying Value
2022
Goodwill, January 1,$4,219 
Acquisition687 
Currency translation(31)
Goodwill, December 31, 2022
$4,875 
- 19 -

HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)


Intangible Assets
The Company’s intangible assets consisted of the following components as of September 30, 2023 and December 31, 2022:

September 30, 2023Weighted Average Remaining Amortization Useful Lives
(in years)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Non-compete agreements1.9$118 $(94)$24 
Trade name7.01,547 (461)1,086 
Customer lists3.73,857 (1,516)2,341 
Developed technology
1.2657 (414)243 
$6,179 $(2,485)$3,694 

December 31, 2022Weighted Average Remaining Amortization Useful Lives
(in years)
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Non-compete agreements2.6$118 $(85)$33 
Trade name7.61,548 (312)1,236 
Customer lists4.43,857 (1,001)2,856 
Developed technology
1.8640 (249)391 
$6,163 $(1,647)$4,516 
Amortization expense for the three and nine months ended September 30, 2023 was $278 and $838, respectively. Intangible assets are amortized on a straight-line basis over their estimated useful lives. No impairment in the value of amortizable intangible assets was recognized during the nine months ended September 30, 2023 and 2022.
- 20 -

HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)


Estimated future amortization expense for intangible assets for the remainder of the fiscal year ending December 31, 2023, and for each of the next fiscal years are as follows:

2023$279 
20241,081 
2025822 
2026586 
2027505 
Thereafter421 
$3,694 

The change in the book value of amortizable intangible assets is as follows:

January 1, 2023
Beginning Balance
AcquisitionAmortizationTranslation and Other
September 30, 2023
Ending Balance
Non-compete agreements$33 $ $(9)$ $24 
Trade name1,236  (150) 1,086 
Customer lists2,856  (514)(1)2,341 
Developed technology
391  (165)17 243 
$4,516 $ $(838)$16 $3,694 
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Litigation and Complaints 
    The Company is subject, from time to time, to various claims, lawsuits, contracts disputes, and other complaints from, for example, clients, candidates, suppliers, landlords for both leased and subleased properties, former and current employees, and regulators or tax authorities arising in the ordinary course of business. The Company routinely monitors claims such as these, and records provisions for losses when the claim becomes probable and the amount due is estimable. Although the outcome of these claims cannot be determined, the Company believes that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or liquidity.
    For matters that reach the threshold of probable and estimable, the Company establishes reserves for legal, regulatory, and other contingent liabilities. The Company did not have any legal reserves as of September 30, 2023 and December 31, 2022.
Operating Leases
    Our office space leases have lease terms of one year to five years. Some of these operating leases include options to extend the lease terms, and some operating leases include options to terminate the leases earlier than the expiration of the full terms. These options are considered in our determination of the valuation of our right-of-use assets and lease liabilities.
    None of our operating leases include implicit rates, and we have determined that the difference between the contractual cost basis and the present value of lease payments calculated using incremental borrowing rates is not material. Our operating lease costs for the nine months ended September 30, 2023 and 2022 were $877 and $863, respectively (reflected in Net cash used in operating activities). The weighted average remaining lease term of our operating leases as of September 30, 2023 was 2.2 years.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
    As of September 30, 2023, future minimum operating lease payments are as follows:
20232024202520262027Total
Minimum lease payments$147 $531 $325 $91 $7 $1,101 
    
Invoice Finance Credit Facility

    On April 8, 2019, the Company’s Australian subsidiary (“Australian Borrower”) entered into an invoice finance credit facility agreement (the “NAB Facility Agreement”) with National Australia Bank Limited (“NAB”). The NAB Facility Agreement provides the Australian Borrower with the ability to borrow funds based on a percentage of eligible trade receivables up to a maximum of 4 million Australian dollars. No receivables have terms greater than 90 days, and any risk of loss is retained by the Australian Borrower. The interest rate is calculated as the variable receivable finance indicator rate, plus a margin of 1.60% per annum. Borrowings under this facility are secured by substantially all of the assets of the Australian Borrower. The NAB Facility Agreement does not have a stated maturity date and can be terminated by either the Australian Borrower or NAB upon 90 days written notice. As of September 30, 2023, there were no amounts outstanding under the NAB Facility Agreement. Interest expense and fees incurred on the NAB Facility Agreement were $4 and $13 for the three and nine months ended September 30, 2023, respectively, and $5 and $14 for the three and nine months ended September 30, 2022, respectively.

    The NAB Facility Agreement contains various restrictions and covenants for the Australian Borrower including (1) that EBITDA must be at least two times total interest paid on debt on a 12-month rolling basis; (2) minimum tangible net worth must be at least 2.5 million Australian dollars and be equal to at least 25% of total tangible assets on June 30 and December 31 (as defined in the NAB Facility Agreement); and (3) additional periodic reporting requirements to NAB. The Australian Borrower was in compliance with all financial covenants under the NAB Facility Agreement as of September 30, 2023.

    Amounts borrowed from the NAB Facility may be large, contain short maturities and have quick turnovers. Amounts borrowed and repaid are presented on a net basis on the Condensed Consolidated Statements of Cash Flows.

NOTE 12 – STOCKHOLDERS EQUITY

Common Stock
    
    On July 30, 2015, the Company announced that its Board authorized the repurchase of up to $10,000 of the Companys common stock. On August 8, 2023, the Company’s Board of Directors authorized a new stock repurchase program for up to $5,000 of the Company’s outstanding shares of common stock. The Company has repurchased shares from time to time as market conditions warrant. This authorization does not expire. Under the new stock repurchase program, the Company intends to repurchase shares through open market purchases, privately negotiated transactions, block purchases, or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934 (the “Exchange Act”).

During the nine months ended September 30, 2023, the Company repurchased a total of 36,842 shares of its common stock on the open market for a cost of $774. Of these shares, 27,277 shares were repurchased under the July 30, 2015 authorization for $573, and 9,565 were repurchased under the August 8, 2023 authorization for $201. In the same period last year, the Company repurchased 32,615 shares of its common stock on the open market for $1,131 under the July 30, 2015 authorization.

As of September 30, 2023, under the July 30, 2015 and August 8, 2023 authorizations combined, the Company had repurchased an aggregate of 502,020 shares for a total cost of $10,201, completing the July 30, 2015 authorization and leaving $4,799 available for purchase under the August 8, 2023 authorization.

The Company cannot predict when or if it will repurchase any shares of common stock as such stock repurchase program will depend on a number of factors, including constraints specified in any Rule 10b5-1 trading plans, price, general business and market conditions, and alternative investment opportunities. Information regarding share repurchases will be available in the Company’s periodic reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission as required by the applicable rules of the Exchange Act.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
    
NOTE 13 – SHELF REGISTRATION STATEMENT
On June 30, 2022, the Company filed a shelf registration on Form S-3 with the SEC. Under the Form S-3, the Company may offer, issue and sell, from time to time, in one or more offerings and series, together or separately, shares of its common stock, shares of preferred stock, debt securities, subscription rights, purchase contracts, or units, which together shall have an aggregate initial offering price not to exceed $100,000,000. The registration statement was declared effective by the SEC on July 26, 2022. As of September 30, 2023, no securities had been offered or issued under the registration statement.

NOTE 14 – SEGMENT AND GEOGRAPHIC DATA
Segment Reporting
    The Company operates in three reportable segments: the Hudson regional businesses of Americas, Asia Pacific, and Europe. Corporate expenses are reported separately for the three reportable segments and pertain to certain functions, such as executive management, corporate governance, investor relations, legal, accounting, tax, and treasury. A portion of these expenses are attributed to the reportable segments for providing the above services to them, and have been allocated to the segments as management service expenses, and are included in the segments’ non-operating other income (expense). Segment information is presented in accordance with ASC 280, “Segment Reporting. This standard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses based upon internal accounting methods. The Company’s financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. Accounts receivable and long-lived assets are the only significant asset separated by segment for internal reporting purposes.
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Index
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
AmericasAsia PacificEuropeCorporateInter-Segment EliminationTotal
For The Three Months Ended September 30, 2023
Revenue, from external customers$7,167 $26,106 $6,125 $ $ $39,398 
Inter-segment revenue119  18  (137) 
Total revenue$7,286 $26,106 $6,143 $ $(137)$39,398 
Adjusted net revenue, from external customers (a)
$6,854 $8,694 $3,822 $ $ $19,370 
Inter-segment adjusted net revenue119 (109)(19) 9  
Total adjusted net revenue$6,973 $8,585 $3,803 $ $9 $19,370 
EBITDA (loss) (b)
$20 $1,890 $(300)$(363)$ $1,247 
Depreciation and amortization(313)(52)(7)(2) (374)
Intercompany dividend/interest (expense) income, net (128) 128   
Interest income, net 2  88  90 
Provision for income taxes(44)(520)26 108  (430)
Net income (loss)$(337)$1,192 $(281)$(41)$ $533 
For The Nine Months Ended September 30, 2023
Revenue, from external customers$25,008 $81,784 $20,575 $ $ $127,367 
Inter-segment revenue230  (6) (224) 
Total revenue$25,238 $81,784 $20,569 $ $(224)$127,367 
Adjusted net revenue, from external customers (a)
$24,097 $26,734 $12,886 $ $ $63,717 
Inter-segment adjusted net revenue230 (147)(66) (17) 
Total adjusted net revenue$24,327 $26,587 $12,820 $ $(17)$63,717 
EBITDA (loss) (b)
$(876)$5,455 $995 $(2,169)$ $3,405 
Depreciation and amortization(936)(111)(22)(7) (1,076)
Intercompany dividend/interest (expense) income, net (375)1,218 375 (1,218) 
Interest income, net 6  278  284 
Provision for income taxes111 (1,440)(387)568  (1,148)
Net income (loss)$(1,701)$3,535 $1,804 $(955)$(1,218)$1,465 
As of September 30, 2023
Accounts receivable, net$6,020 $12,674 $6,195 $ $ $24,889 
Long-lived assets, net of accumulated depreciation and amortization (c)
$8,119 $867 $39 $18 $ $9,043 
Total assets$18,594 $23,759 $