UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2012
HUDSON GLOBAL, INC.
(Exact name of registrant as specified in charter)
Delaware | 000-50129 | 59-3547281 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
560 Lexington Avenue
New York, NY 10022
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212) 351-7300
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
On November 1, 2012, Hudson Global, Inc. issued a press release announcing its financial results for the three months ended September 30, 2012. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
Included in Exhibit 99.1 are references to “liquidity.” The company believes that this non-GAAP measure provides investors useful information about its combined available cash and borrowing capacity.
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS. |
(a) Financial Statements.
None.
(b) Pro Forma Financial Information.
None.
(c) Shell Company Transactions
None.
(d) Exhibits
99.1 Press Release of Hudson Global, Inc. issued on November 1, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
HUDSON GLOBAL, INC. (Registrant) | ||
By: | /s/ MARY JANE RAYMOND | |
Mary Jane Raymond | ||
Executive Vice President and Chief Financial Officer | ||
Dated: | November 1, 2012 | |
Hudson Global, Inc.
Current Report on Form 8-K
Exhibit Index
Exhibit Number | Description | |
99.1 | Press Release of Hudson Global, Inc. issued on November 1, 2012. | |
Exhibit 99.1
For Immediate Release | Contact: | David F. Kirby | ||
Hudson | ||||
212-351-7216 | ||||
david.kirby@hudson.com | ||||
Hudson Global Reports 2012 Third Quarter Results
NEW YORK, NY - November 1, 2012 - Hudson Global, Inc. (Nasdaq: HSON), a leading global talent solutions company, today announced financial results for the third quarter ended September 30, 2012.
2012 Third Quarter Summary
• | Revenue of $187.9 million, a decrease of 23.3 percent from the third quarter of 2011, or 21.0 percent in constant currency. |
• | Gross margin of $67.7 million or 36.0 percent of revenue, representing a 27.2 percent decrease from the same period last year, or 24.5 percent in constant currency. |
• | Adjusted EBITDA* of $1.5 million, compared with adjusted EBITDA of $7.7 million in the third quarter of 2011. |
• | Restructuring charges of $1.5 million in the third quarter of 2012. |
• | EBITDA* of $0.7 million, compared with EBITDA of $7.4 million in the third quarter of 2011. |
• | Net loss of $2.2 million, or $0.07 per basic and diluted share, compared with net income of $3.4 million, or $0.11 per basic and diluted share, for the third quarter of 2011. |
* EBITDA and adjusted EBITDA are defined in the segment tables at the end of this release.
“During the third quarter, the business environment deteriorated further due to global economic uncertainties,” said Manuel Marquez, chairman and chief executive officer at Hudson. “While these conditions challenge our results in the near term, we remain fully committed to our strategy. Our restructuring actions during 2012 are helping us streamline our operations, advance our long-term goals and better position Hudson to capture the upside potential when conditions improve.”
“We continue our work toward breakeven EBITDA for the year, while focusing on our long-term objectives,” said Mary Jane Raymond, Hudson's chief financial officer. “Our liquidity position remains strong, with positive cash flow from operations year-to-date.”
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Strategic Initiatives
The company announced in May that the strategic initiatives launched in 2011 would be fast-tracked during 2012. That accelerated plan focused on:
• | Redirecting resources to, and driving sustainable growth from, high potential strategic businesses, RPO and eDiscovery, and focusing on the growth markets of the world. |
• | Optimizing its operations in underperforming sectors and markets to deliver improved performance, re-engineering its delivery model, and consolidating operations globally. |
• | Streamlining its back office support areas and business processes through shared services and global centers of excellence, to gain significant efficiencies of operation. |
Actions during the third quarter eliminated 30 positions, affecting front and back office roles, primarily in Europe. This resulted in a restructuring charge of $1.5 million in the third quarter, including some additional charges for real estate actions. Year to date, the company has eliminated 210 positions, or 9 percent of the company's total employee base, resulting in a total charge of
$7.6 million. During 2012, the total restructuring charge is expected to be $8 million to $9 million, including $0 million to $1 million in the fourth quarter. Cost savings are expected to offset approximately 75 percent of the charge in 2012, with annualized cost savings of twice the charge expected.
Regional Highlights
Americas
Hudson Americas' gross margin decreased 30 percent in the third quarter compared with the prior year period primarily due to reduced project demand in Legal eDiscovery, which had particularly strong growth last year. However, Legal eDiscovery continued to establish key relationships with clients during the third quarter to maintain its market position amidst difficult conditions. After strong double digit growth in recent quarters, RPO gross margin decreased 5 percent compared with third quarter 2011 due to more cautious hiring by clients. Actions taken to establish a more efficient operating platform delivered SG&A* and headcount reductions of 25 percent and 20 percent, respectively, from the same period a year ago. Adjusted EBITDA declined to $0.8 million for the third quarter, or 1.9 percent of revenue, compared with $2.0 million a year ago. The RPO business was named to the prestigious “Baker's Dozen” for the third year in a row, improving its position by two notches this year.
Asia Pacific
Facing a rapidly deteriorating economic environment, Asia Pacific remained a solid profit contributor, delivering adjusted EBITDA of $4.7 million, or 6.4 percent of revenue, though down from $7.1 million, or 7.0 percent of revenue in the third quarter of 2011. Hiring expectations and GDP growth have continued to slow throughout the region, contributing to a gross margin decline of 26 percent in constant currency in the third quarter from the prior year period. A 32 percent decline in permanent recruitment gross margin accounted for most of the overall gross margin
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drop. Talent Management continued to deliver double-digit gross margin growth in the quarter on increases in assessment services. Actions taken to reduce costs resulted in an SG&A* decline of 25 percent and headcount decline of 17 percent from the same period last year.
Europe
As expected given the significant economic weakness affecting business across Europe, gross margin was down 20 percent in constant currency compared with the third quarter of 2011. Reduced demand in the Financial Services sector remained a key contributing factor in the drop in gross margin in the U.K., while a decline in permanent recruitment in France and Belgium resulted in lower gross margin in continental Europe. Actions taken to address costs resulted in SG&A* and headcount reductions of 13 percent and 18 percent, respectively, from the same period a year ago. Adjusted EBITDA of $0.6 million, or 0.9 percent of revenue, was down from $3.9 million, or 4.0 percent of revenue a year ago.
* SG&A excludes non-operating expenses and rent redundancy.
Liquidity and Capital Resources
The company ended the third quarter of 2012 with $84.8 million in liquidity, composed of $34.9 million in cash and $49.9 million in availability under its credit facilities. The company generated $7.9 million in cash flow from operations during the quarter. The company had no outstanding borrowings at the end of the third quarter, compared with $1.5 million at the end of the second quarter of 2012.
Business Outlook
Given deteriorating economic conditions and the continuing weakness in the financial services sector, fourth quarter 2012 revenue may decline by 21 to 24 percent against the prior year fourth quarter at prevailing exchange rates. The company expects fourth quarter 2012 adjusted EBITDA between $0 and $3.5 million before restructuring charges and anticipates the charge in the quarter will range from $0 million to $1 million. In the fourth quarter of 2011 revenue was $222.7 million and adjusted EBITDA was $6.3 million. For the full year, revenue is expected to decline 17 to 19 percent at prevailing exchange rates and adjusted EBITDA is expected to range from $4 to $8 million.
Conference Call/Webcast
Hudson will conduct a conference call today at 10:00 a.m. ET to discuss this announcement. Individuals wishing to listen can access the webcast on the investor information section of the company's web site at Hudson.com.
The archived call will be available on the investor information section of the company's web site at Hudson.com.
About Hudson
Hudson is a global talent solutions company with expertise in leadership and specialized recruitment, contracting solutions, recruitment process outsourcing, talent management and eDiscovery. We help our clients and candidates succeed by leveraging our expertise, deep industry and market knowledge, and proprietary assessment tools and techniques. With approximately
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2,000 people in approximately 20 countries, and relationships with millions of specialized professionals, we bring an unparalleled ability to match talent with opportunities by assessing, recruiting, developing and engaging the best and brightest people for our clients. We combine broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve higher performance and outstanding results. More information is available at Hudson.com.
Forward-Looking Statements
This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and economic conditions' that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations; risks related to fluctuations in the company's operating results from quarter to quarter; the ability of clients to terminate their relationship with the company at any time; competition in the company's markets; risks associated with the company's investment strategy; risks related to international operations, including foreign currency fluctuations; the company's ability to implement cost reduction initiatives effectively, including the recently announced restructuring program; the company's dependence on key management personnel; the company's ability to attract and retain highly skilled professionals; risks in collecting the company's accounts receivable; the negative cash flows and operating losses that the company has experienced from time to time in the past may reoccur in the future; restrictions on the company's operating flexibility due to the terms of its credit facilities; the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; risks related to our dependence on uninterrupted service to clients; the company's exposure to employment-related claims from both clients and employers and limits on related insurance coverage; volatility of the company's stock price; the impact of government regulations; and restrictions imposed by blocking arrangements. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.
###
Financial Tables Follow
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HUDSON GLOBAL, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenue | $ | 187,873 | $ | 245,081 | $ | 593,301 | $ | 710,998 | |||||||
Direct costs | 120,207 | 152,089 | 375,359 | 441,341 | |||||||||||
Gross margin | 67,666 | 92,992 | 217,942 | 269,657 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative expenses | 66,074 | 85,305 | 214,070 | 251,517 | |||||||||||
Depreciation and amortization | 1,672 | 1,537 | 4,788 | 4,750 | |||||||||||
Business reorganization expenses | 1,520 | — | 7,551 | 747 | |||||||||||
Total operating expenses | 69,266 | 86,842 | 226,409 | 257,014 | |||||||||||
Operating income (loss) | (1,600 | ) | 6,150 | (8,467 | ) | 12,643 | |||||||||
Non-operating income (expense): | |||||||||||||||
Interest income (expense), net | (161 | ) | (328 | ) | (510 | ) | (910 | ) | |||||||
Other income (expense), net | 591 | (238 | ) | 215 | 244 | ||||||||||
Income (loss) before provision for income taxes | (1,170 | ) | 5,584 | (8,762 | ) | 11,977 | |||||||||
Provision for (benefit from) income taxes | 995 | 2,202 | (3,770 | ) | 4,377 | ||||||||||
Net income (loss) | $ | (2,165 | ) | $ | 3,382 | $ | (4,992 | ) | $ | 7,600 | |||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.11 | $ | (0.16 | ) | $ | 0.24 | |||||
Diluted | $ | (0.07 | ) | $ | 0.11 | $ | (0.16 | ) | $ | 0.24 | |||||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 32,156 | 31,620 | 32,024 | 31,541 | |||||||||||
Diluted | 32,156 | 32,085 | 32,024 | 31,988 | |||||||||||
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HUDSON GLOBAL, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands, except per share amounts) | |||||||
(unaudited) | |||||||
September 30, 2012 | December 31, 2011 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 34,883 | $ | 37,302 | |||
Accounts receivable, less allowance for doubtful accounts of $1,541 and $1,772, respectively | 115,548 | 131,489 | |||||
Prepaid and other | 12,987 | 13,132 | |||||
Total current assets | 163,418 | 181,923 | |||||
Property and equipment, net | 20,735 | 17,838 | |||||
Deferred tax assets, non-current | 10,593 | 8,628 | |||||
Other assets | 5,080 | 8,157 | |||||
Total assets | $ | 199,826 | $ | 216,546 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 8,529 | $ | 12,025 | |||
Accrued expenses and other current liabilities | 62,140 | 74,248 | |||||
Short-term borrowings | — | 3,384 | |||||
Accrued business reorganization expenses | 2,996 | 858 | |||||
Total current liabilities | 73,665 | 90,515 | |||||
Other non-current liabilities | 6,790 | 6,388 | |||||
Deferred rent and tenant improvement contributions | 8,564 | 4,479 | |||||
Income tax payable, non-current | 4,098 | 7,807 | |||||
Total liabilities | 93,117 | 109,189 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding | — | — | |||||
Common stock, $0.001 par value, 100,000 shares authorized; issued 33,257 and 32,776 shares, respectively | 33 | 33 | |||||
Additional paid-in capital | 473,184 | 470,786 | |||||
Accumulated deficit | (402,282 | ) | (397,290 | ) | |||
Accumulated other comprehensive income—translation adjustments | 36,089 | 34,255 | |||||
Treasury stock, 65 and 79 shares, respectively, at cost | (315 | ) | (427 | ) | |||
Total stockholders’ equity | 106,709 | 107,357 | |||||
Total liabilities and stockholders' equity | $ | 199,826 | $ | 216,546 | |||
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HUDSON GLOBAL, INC. | ||||||||||||||||||||
SEGMENT ANALYSIS - QUARTER TO DATE | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
For The Three Months Ended September 30, 2012 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 39,102 | $ | 73,437 | $ | 75,334 | $ | — | $ | 187,873 | ||||||||||
Gross margin, from external customers | $ | 9,587 | $ | 29,852 | $ | 28,227 | $ | — | $ | 67,666 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 758 | $ | 4,736 | $ | 649 | $ | (4,614 | ) | $ | 1,529 | |||||||||
Business reorganization expenses (recovery) | 282 | 190 | 1,048 | — | 1,520 | |||||||||||||||
Office integration expense | — | (64 | ) | — | — | (64 | ) | |||||||||||||
Non-operating expense (income), including corporate administration charges | 865 | 1,222 | 1,766 | (4,444 | ) | (591 | ) | |||||||||||||
EBITDA (loss) (1) | (389 | ) | 3,388 | (2,165 | ) | (171 | ) | 663 | ||||||||||||
Depreciation and amortization expenses | 1,672 | |||||||||||||||||||
Interest expense (income), net | 161 | |||||||||||||||||||
Provision for (benefit from) income taxes | 995 | |||||||||||||||||||
Net income (loss) | $ | (2,165 | ) | |||||||||||||||||
For The Three Months Ended September 30, 2011 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 47,691 | $ | 100,637 | $ | 96,753 | $ | — | $ | 245,081 | ||||||||||
Gross margin, from external customers | $ | 13,662 | $ | 41,201 | $ | 38,129 | $ | — | $ | 92,992 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 1,956 | $ | 7,071 | $ | 3,893 | $ | (5,233 | ) | $ | 7,687 | |||||||||
Business reorganization expenses (recovery) | — | — | — | — | — | |||||||||||||||
Office integration expense | — | — | — | — | — | |||||||||||||||
Non-operating expense (income), including corporate administration charges | 497 | 1,848 | 1,873 | (3,980 | ) | 238 | ||||||||||||||
EBITDA (loss) (1) | $ | 1,459 | $ | 5,223 | $ | 2,020 | $ | (1,253 | ) | $ | 7,449 | |||||||||
Depreciation and amortization expenses | 1,537 | |||||||||||||||||||
Interest expense (income), net | 328 | |||||||||||||||||||
Provision for (benefit from) income taxes | 2,202 | |||||||||||||||||||
Net income (loss) | $ | 3,382 | ||||||||||||||||||
1. | Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. |
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HUDSON GLOBAL, INC. | ||||||||||||||||||||
SEGMENT ANALYSIS - QUARTER TO DATE (continued) | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
For The Three Months Ended June 30, 2012 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 45,487 | $ | 76,926 | $ | 82,425 | $ | — | $ | 204,838 | ||||||||||
Gross margin, from external customers | $ | 12,359 | $ | 31,901 | $ | 32,808 | $ | — | $ | 77,068 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 2,452 | $ | 3,720 | $ | 2,440 | $ | (4,887 | ) | $ | 3,725 | |||||||||
Business reorganization expenses (recovery) | 749 | 1,007 | 3,149 | 185 | 5,090 | |||||||||||||||
Office integration expense | — | 190 | — | — | 190 | |||||||||||||||
Non-operating expense (income), including corporate administration charges | 945 | 1,901 | 1,596 | (4,073 | ) | 369 | ||||||||||||||
EBITDA (loss) (1) | $ | 758 | $ | 622 | $ | (2,305 | ) | $ | (1,001 | ) | $ | (1,926 | ) | |||||||
Depreciation and amortization expenses | 1,610 | |||||||||||||||||||
Interest expense (income), net | 189 | |||||||||||||||||||
Provision for (benefit from) income taxes | (4,119 | ) | ||||||||||||||||||
Net income (loss) | $ | 394 | ||||||||||||||||||
For The Three Months Ended December 31, 2011 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 47,802 | $ | 83,185 | $ | 91,751 | $ | — | $ | 222,738 | ||||||||||
Gross margin, from external customers | $ | 13,738 | $ | 33,598 | $ | 37,312 | $ | — | $ | 84,648 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 2,445 | $ | 4,988 | $ | 2,967 | $ | (4,131 | ) | $ | 6,269 | |||||||||
Business reorganization expenses (recovery) | — | — | (27 | ) | — | (27 | ) | |||||||||||||
Office integration expense | — | — | — | — | — | |||||||||||||||
Non-operating expense (income), including corporate administration charges | 1,204 | 1,847 | 1,854 | (4,615 | ) | 290 | ||||||||||||||
EBITDA (loss) (1) | $ | 1,241 | $ | 3,141 | $ | 1,140 | $ | 484 | $ | 6,006 | ||||||||||
Depreciation and amortization expenses | 1,501 | |||||||||||||||||||
Interest expense (income), net | 234 | |||||||||||||||||||
Provision for (benefit from) income taxes | 962 | |||||||||||||||||||
Net income (loss) | 3,309 | |||||||||||||||||||
1. | Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. |
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HUDSON GLOBAL, INC. | ||||||||||||||||||||
SEGMENT ANALYSIS - YEAR TO DATE | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
For The Nine Months Ended September 30, 2012 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 129,758 | $ | 224,627 | $ | 238,916 | $ | — | $ | 593,301 | ||||||||||
Gross margin, from external customers | $ | 33,776 | $ | 91,067 | $ | 93,099 | $ | — | $ | 217,942 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 3,485 | $ | 10,577 | $ | 4,505 | $ | (14,254 | ) | $ | 4,313 | |||||||||
Business reorganization expenses (recovery) | 1,051 | 1,264 | 4,917 | 319 | 7,551 | |||||||||||||||
Office integration expense | — | 441 | — | — | 441 | |||||||||||||||
Non-operating expense (income), including corporate administration charges | 2,556 | 4,855 | 5,143 | (12,769 | ) | (215 | ) | |||||||||||||
EBITDA (loss) (1) | $ | (122 | ) | $ | 4,017 | $ | (5,555 | ) | $ | (1,804 | ) | $ | (3,464 | ) | ||||||
Depreciation and amortization expenses | 4,788 | |||||||||||||||||||
Interest expense (income), net | 510 | |||||||||||||||||||
Provision for (benefit from) income taxes | (3,770 | ) | ||||||||||||||||||
Net income (loss) | $ | (4,992 | ) | |||||||||||||||||
For The Nine Months Ended September 30, 2011 | Hudson Americas | Hudson Asia Pacific | Hudson Europe | Corporate | Total | |||||||||||||||
Revenue, from external customers | $ | 144,415 | $ | 275,927 | $ | 290,656 | $ | — | $ | 710,998 | ||||||||||
Gross margin, from external customers | $ | 37,040 | $ | 113,323 | $ | 119,294 | $ | — | $ | 269,657 | ||||||||||
Adjusted EBITDA (loss) (1) | $ | 3,998 | $ | 16,325 | $ | 13,550 | $ | (15,733 | ) | $ | 18,140 | |||||||||
Business reorganization expenses (recovery) | — | — | 747 | — | 747 | |||||||||||||||
Office integration expense | — | — | — | — | — | |||||||||||||||
Non-operating expense (income), including corporate administration charges | 1,756 | 5,280 | 5,873 | (13,153 | ) | (244 | ) | |||||||||||||
EBITDA (loss) (1) | $ | 2,242 | $ | 11,045 | $ | 6,930 | $ | (2,580 | ) | $ | 17,637 | |||||||||
Depreciation and amortization expenses | 4,750 | |||||||||||||||||||
Interest expense (income), net | 910 | |||||||||||||||||||
Provision for (benefit from) income taxes | 4,377 | |||||||||||||||||||
Net income (loss) | $ | 7,600 | ||||||||||||||||||
1. | Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. |
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HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY
(in thousands)
(unaudited)
The company operates on a global basis, with the majority of its gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect its results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term “constant currency” to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Changes in revenue, gross margin, selling, general and administrative expenses ("SG&A"), business reorganization expenses and other non-operating income (expense), operating income (loss) and EBITDA (loss) include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company’s management reviews and analyzes business results in constant currency and believes these results better represent the company’s underlying business trends. The company believes that these calculations are a useful measure, indicating the actual change in operations. There are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings.
Three Months Ended September 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
As | As | Currency | Constant | ||||||||||||
reported | reported | translation | currency | ||||||||||||
Revenue: | |||||||||||||||
Hudson Americas | $ | 39,102 | $ | 47,691 | $ | (18 | ) | $ | 47,673 | ||||||
Hudson Asia Pacific | 73,437 | 100,637 | (2,169 | ) | 98,468 | ||||||||||
Hudson Europe | 75,334 | 96,753 | (5,226 | ) | 91,527 | ||||||||||
Total | $ | 187,873 | $ | 245,081 | $ | (7,413 | ) | $ | 237,668 | ||||||
Gross margin: | |||||||||||||||
Hudson Americas | $ | 9,587 | $ | 13,662 | $ | (17 | ) | $ | 13,645 | ||||||
Hudson Asia Pacific | 29,852 | 41,201 | (718 | ) | 40,483 | ||||||||||
Hudson Europe | 28,227 | 38,129 | (2,633 | ) | 35,496 | ||||||||||
Total | $ | 67,666 | $ | 92,992 | $ | (3,368 | ) | $ | 89,624 | ||||||
SG&A and other non-operating income (expense) (1): | |||||||||||||||
Hudson Americas | $ | 9,692 | $ | 12,200 | $ | (14 | ) | $ | 12,186 | ||||||
Hudson Asia Pacific | 26,272 | 35,943 | (673 | ) | 35,270 | ||||||||||
Hudson Europe | 29,345 | 36,147 | (2,745 | ) | 33,402 | ||||||||||
Corporate | 174 | 1,253 | (2 | ) | 1,251 | ||||||||||
Total | $ | 65,483 | $ | 85,543 | $ | (3,434 | ) | $ | 82,109 | ||||||
Business reorganization expenses: | |||||||||||||||
Hudson Americas | $ | 282 | $ | — | $ | — | $ | — | |||||||
Hudson Asia Pacific | 190 | — | — | — | |||||||||||
Hudson Europe | 1,048 | — | — | — | |||||||||||
Corporate | — | — | — | — | |||||||||||
Total | $ | 1,520 | $ | — | $ | — | $ | — | |||||||
Operating income (loss): | |||||||||||||||
Hudson Americas | $ | 221 | $ | 1,689 | $ | (2 | ) | $ | 1,687 | ||||||
Hudson Asia Pacific | 3,746 | 6,293 | (47 | ) | 6,246 | ||||||||||
Hudson Europe | (791 | ) | 3,537 | (77 | ) | 3,460 | |||||||||
Corporate | (4,776 | ) | (5,369 | ) | — | (5,369 | ) | ||||||||
Total | $ | (1,600 | ) | $ | 6,150 | $ | (126 | ) | $ | 6,024 | |||||
EBITDA (loss): | |||||||||||||||
Hudson Americas | $ | (389 | ) | $ | 1,459 | $ | (26 | ) | $ | 1,433 | |||||
Hudson Asia Pacific | 3,388 | 5,223 | (47 | ) | 5,176 | ||||||||||
Hudson Europe | (2,165 | ) | 2,020 | 112 | 2,132 | ||||||||||
Corporate | (171 | ) | (1,253 | ) | 5 | (1,248 | ) | ||||||||
Total | $ | 663 | $ | 7,449 | $ | 44 | $ | 7,493 | |||||||
1. | SG&A and other non-operating income (expense) is a measure that management uses to evaluate the segments’ expenses, which include the following captions on the Condensed Consolidated Statements of Operations: Selling, general and administrative expenses and other income (expense), net. Corporate management service allocations are included in the segments’ other income (expense). |
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