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Hudson Global Reports 2017 Third Quarter Results

NEW YORK, Nov. 02, 2017 (GLOBE NEWSWIRE) -- Hudson Global, Inc. (Nasdaq:HSON), a leading global talent solutions company, today announced financial results for the third quarter ended September 30, 2017.

2017 Third Quarter Summary

  • Revenue of $118.1 million increased 9.2 percent from the third quarter of 2016 and increased 6.5 percent in constant currency.
     
  • Gross margin of $47.2 million increased 8.5 percent from the third quarter of 2016 or 5.7 percent in constant currency.
     
  • Net loss of $0.8 million, or $0.03 per basic and diluted share, compared with net loss of $1.9 million, or $0.06 per basic and diluted share, for the third quarter of 2016.
     
  • Adjusted EBITDA* of $1.3 million, compared with adjusted EBITDA of $0.4 million in the third quarter of 2016.


"We delivered solid gross margin growth in the third quarter, with growth in permanent recruitment, RPO and talent management," said Stephen Nolan, chief executive officer at Hudson. "We are pleased to report positive adjusted EBITDA for the fifth consecutive quarter as well as positive cash flow from operations."

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

Regional Highlights

Americas

In the third quarter of 2017, Hudson Americas' gross margin decreased 1 percent compared with the third quarter of 2016. RPO gross margin was down slightly in the third quarter after double-digit growth in the first half of 2017. EBITDA was $0.5 million in the third quarter, compared with EBITDA of $0.3 million a year ago. The region delivered adjusted EBITDA of $0.6 million for the third quarter, compared with adjusted EBITDA of $0.4 million a year ago.

Asia Pacific

Hudson Asia Pacific's gross margin increased 10 percent in constant currency in the third quarter of 2017 compared with the same period in 2016. Gross margin growth was led by Asia, up 24 percent, with strong growth in Hong Kong and China, up 65 percent and 18 percent respectively, from a year ago. Australia/New Zealand gross margin continued to grow, up 5 percent in the quarter, driven by growth in temporary contracting and talent management. EBITDA was $1.7 million in the third quarter, compared with EBITDA of $0.3 million a year ago. Asia Pacific delivered adjusted EBITDA of $2.3 million, improving from adjusted EBITDA of $1.1 million in the third quarter of 2016.

Europe

Hudson Europe's gross margin increased 1 percent in constant currency in the third quarter of 2017 from the third quarter of 2016. Gross margin growth was driven by Continental Europe, up 4 percent, led by growth in Belgium and Poland. In the U.K., gross margin declined 3 percent against prior year, as growth in permanent recruitment and RPO was offset by declines in temporary contracting. EBITDA was a loss of $0.4 million in the third quarter, compared with a loss of $0.5 million a year ago. Adjusted EBITDA was $0.6 million in the third quarter of 2017, improving from $0.1 million a year ago.

Liquidity and Capital Resources

The company ended the third quarter of 2017 with $36.9 million in liquidity, composed of $16.8 million in cash and $20.1 million in availability under its credit facilities. This compares with $14.9 million in cash and $22.7 million in availability under its credit facilities at the end of the second quarter of 2017. The company generated $1.0 million in cash flow from operations during the third quarter, compared with $5.0 million use of cash in the third quarter of 2016. The company had $8.2 million in outstanding borrowings at the end of the third quarter of 2017, primarily in Australia and the U.K.

Share Repurchase Program

During the third quarter, the company continued its share repurchase program which has an authorization of up to $10 million of the company’s common stock. The company purchased 125,770 shares for $0.2 million as part of the repurchase program during the third quarter. Since the inception of this program in the third quarter of 2015 through the end of the third quarter of 2017, the company has purchased 3,532,761 shares for $7.2 million.

Business Outlook

With respect to forward-looking non-GAAP measures, a reconciliation of the non-GAAP measures to the corresponding GAAP measures is not available without unreasonable efforts due to the variability, complexity and low visibility of the non-cash and other items described below that we exclude from the non-GAAP outlook measures. The variability of these items is likely to have a significant impact on our future GAAP financial results.

Given current economic conditions, the company expects fourth quarter 2017 revenue of between $110 million and $120 million and adjusted EBITDA of between $1 million and $3 million at prevailing exchange rates. In the fourth quarter of 2016, revenue was $100.3 million and adjusted EBITDA was $0.9 million. This outlook assumes an average exchange rate of 1.32 US Dollars to the British Pound, 1.17 US Dollars to the Euro and 0.78 US Dollars to the Australian Dollar.

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, recruitment process outsourcing, talent management and contracting solutions. We help our clients and candidates succeed by leveraging our expertise, deep industry and market knowledge, and proprietary assessment tools and techniques. Operating around the globe through relationships with millions of specialized professionals, we bring an unparalleled ability to match talent with opportunities by assessing, recruiting, developing and engaging the best and brightest people for our clients. We combine broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve higher performance and outstanding results. More information is available at Hudson.com.

Forward-Looking Statements

This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and economic conditions' that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations; the company’s ability to successfully achieve its strategic initiatives; risks related to fluctuations in the company's operating results from quarter to quarter; the ability of clients to terminate their relationship with the company at any time; competition in the company's markets; the negative cash flows and operating losses that may recur in the future; restrictions on the company's operating flexibility due to the terms of its credit facilities; risks associated with the company's investment strategy; risks related to international operations, including foreign currency fluctuations; the company's dependence on key management personnel; the company's ability to attract and retain highly skilled professionals; the company's ability to collect accounts receivable; the company’s ability to maintain costs at an acceptable level; the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; risks related to providing uninterrupted service to clients; the company's exposure to employment-related claims from clients, employers and regulatory authorities, current and former employees in connection with the company’s business reorganization initiatives and limits on related insurance coverage; the company’s ability to utilize net operating loss carry-forwards; volatility of the company's stock price; the impact of government regulations;  restrictions imposed by blocking arrangements; and risks related to potential acquisitions or dispositions of businesses by the company. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

                                                                          

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,
    2017   2016   2017   2016
Revenue   $ 118,108     $ 108,136     $ 335,104     $ 322,430  
Direct costs   70,863     64,594     197,101     190,787  
Gross margin   47,245     43,542     138,003     131,643  
Operating expenses:                
Salaries and related   36,473     34,151     105,978     106,282  
Other selling, general and administrative   9,699     9,193     27,888     29,019  
Depreciation and amortization   697     801     2,050     2,294  
Business reorganization   477     183     636     964  
Total operating expenses   47,346     44,328     136,552     138,559  
Operating income (loss)   (101 )   (786 )   1,451     (6,916 )
Non-operating income (expense):                
Interest income (expense), net   (110 )   (109 )   (317 )   (264 )
Other income (expense), net   (121 )   (295 )   (511 )   (445 )
Income (loss) from continuing operation before provision for income taxes   (332 )   (1,190 )   623     (7,625 )
Provision for income taxes from continuing operations   500     718     1,525     1,200  
Income (loss) from continuing operations   (832 )   (1,908 )   (902 )   (8,825 )
Income (loss) from discontinued operations, net of income taxes   (16 )   35     (34 )   327  
Net income (loss)   $ (848 )   $ (1,873 )   $ (936 )   $ (8,498 )
Basic and diluted earnings (loss) per share:                
Basic and diluted earnings (loss) per share from continuing operations   $ (0.03 )   $ (0.06 )   $ (0.03 )   $ (0.26 )
Basic and diluted earnings (loss) per share from discontinued operations               0.01  
Basic and diluted earnings (loss) per share   $ (0.03 )   $ (0.06 )   $ (0.03 )   $ (0.25 )
Weighted-average shares outstanding:                
Basic   32,151     33,572     32,120     34,121  
Diluted   32,151     33,572     32,120     34,121  
Dividends declared per common share   $     $     $     $ 0.10  


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
         
    September 30,
 2017
  December 31,
 2016
ASSETS        
Current assets:        
Cash and cash equivalents   $ 16,835     $ 21,322  
Accounts receivable, less allowance for doubtful accounts of $778 and $799, respectively   71,325     58,517  
Prepaid and other   4,962     4,265  
Current assets of discontinued operations       38  
Total current assets   93,122     84,142  
Property and equipment, net   6,173     7,041  
Deferred tax assets, non-current   6,698     6,494  
Other assets   3,814     4,135  
Total assets   $ 109,807     $ 101,812  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 4,688     $ 4,666  
Accrued expenses and other current liabilities   42,179     36,154  
Short-term borrowings   8,206     7,770  
Accrued business reorganization expenses   1,523     1,756  
Current liabilities of discontinued operations   29     233  
Total current liabilities   56,625     50,579  
Deferred rent and tenant improvement contributions   2,198     2,968  
Income tax payable, non-current   2,204     2,211  
Other non-current liabilities   4,004     4,169  
Total liabilities   65,031     59,927  
Stockholders’ equity:        
Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding        
Common stock, $0.001 par value, 100,000 shares authorized; issued 34,959 and 34,910 shares, respectively   34     34  
Additional paid-in capital   483,202     482,265  
Accumulated deficit   (441,414 )   (440,478 )
Accumulated other comprehensive income   10,529     6,931  
Treasury stock, 3,694 and 3,145 shares, respectively, at cost   (7,575 )   (6,867 )
Total stockholders’ equity   44,776     41,885  
Total liabilities and stockholders' equity   $ 109,807     $ 101,812  


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
                     
For The Three Months Ended September 30, 2017   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 4,044     $ 76,509     $ 37,555     $     $ 118,108  
Gross margin, from external customers   $ 3,668     $ 25,407     $ 18,170     $     $ 47,245  
Adjusted EBITDA (loss) (1)   $ 579     $ 2,338     $ 621     $ (2,236 )   $ 1,302  
Business reorganization expenses (recovery)           477         477  
Stock-based compensation expense   20     24     45     140     229  
Non-operating expense (income),
including corporate administration charges
  76     629     479     (1,063 )   121  
EBITDA (loss) (1)   $ 483     $ 1,685     $ (380 )   $ (1,313 )   $ 475  
Depreciation and amortization expenses                   697  
Interest expense (income), net                   110  
Provision for (benefit from) income taxes                   500  
Income (loss) from continuing operations                   $ (832 )
Income (loss) from discontinued operations, net of income taxes       (16 )
Net income (loss)                   $ (848 )
                     
For The Three Months Ended September 30, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 4,163     $ 64,607     $ 39,366     $     $ 108,136  
Gross margin, from external customers   $ 3,691     $ 22,414     $ 17,437     $     $ 43,542  
Adjusted EBITDA (loss) (1)   $ 423     $ 1,122     $ 100     $ (1,294 )   $ 351  
Business reorganization expenses (recovery)   (3 )   (1 )   188     (1 )   183  
Stock-based compensation expense   5     (41 )   55     134     153  
Non-operating expense (income),
including corporate administration charges
  95     889     323     (1,012 )   295  
EBITDA (loss) (1)   $ 326     $ 275     $ (466 )   $ (415 )   $ (280 )
Depreciation and amortization expenses                   801  
Interest expense (income), net                   109  
Provision for (benefit from) income taxes                   718  
Income (loss) from continuing operations                   $ (1,908 )
Income (loss) from discontinued operations, net of income taxes       35  
Net income (loss)                   $ (1,873 )
 
(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, stock-based compensation expense 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.


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(in thousands)
(unaudited)
                     
For The Three Months Ended June 30, 2017   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 4,161     $ 69,264     $ 40,166     $     $ 113,591  
Gross margin, from external customers   $ 3,735     $ 23,432     $ 21,159     $     $ 48,326  
Adjusted EBITDA (loss) (1)   $ 404     $ 1,868     $ 3,081     $ (1,934 )   $ 3,419  
Business reorganization expenses (recovery)   1         (64 )       (63 )
Stock-based compensation expense   20     19     45     433     517  
Non-operating expense (income),
including corporate administration charges
  82     540     488     (1,100 )   10  
EBITDA (loss) (1)   $ 301     $ 1,309     $ 2,612     $ (1,267 )   $ 2,955  
Depreciation and amortization expenses                   687  
Interest expense (income), net                   119  
Provision for (benefit from) income taxes                   870  
Income (loss) from continuing operations                   $ 1,279  
Income (loss) from discontinued operations, net of income taxes       (53 )
Net income (loss)                   $ 1,226  
                     
For The Three Months Ended December 31, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 3,901     $ 59,122     $ 37,291     $     $ 100,314  
Gross margin, from external customers   $ 3,400     $ 20,524     $ 18,850     $     $ 42,774  
Adjusted EBITDA (loss) (1)   $ 587     $ 373     $ 1,302     $ (1,355 )   $ 907  
Business reorganization expenses (recovery)   2     (24 )   606     32     616  
Stock-based compensation expense   27     (4 )   13     130     166  
Non-operating expense (income),
including corporate administration charges
  100     383     378     (1,059 )   (198 )
EBITDA (loss) (1)   $ 458     $ 18     $ 305     $ (458 )   $ 323  
Depreciation and amortization expenses                   796  
Interest expense (income), net                   93  
Provision for (benefit from) income taxes                   (458 )
Income (loss) from continuing operations                   $ (108 )
Income (loss) from discontinued operations, net of income taxes       (184 )
Net income (loss)                   $ (292 )
 
(1) Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses, stock-based compensation expense 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.


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE (continued)
(in thousands)
(unaudited)
                     
For The Nine Months Ended September 30, 2017   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 12,519     $ 205,483     $ 117,102     $     $ 335,104  
Gross margin, from external customers   $ 11,239     $ 68,573     $ 58,191     $     $ 138,003  
Adjusted EBITDA (loss) (1)   $ 1,317     $ 4,325     $ 5,195     $ (5,763 )   $ 5,074  
Business reorganization expenses (recovery)   (91 )       749     (22 )   636  
Stock-based compensation expense   73     53     133     678     937  
Non-operating expense (income),
including corporate administration charges
  218     2,019     1,196     (2,922 )   511  
EBITDA (loss) (1)   $ 1,117     $ 2,253     $ 3,117     $ (3,497 )   $ 2,990  
Depreciation and amortization expenses                   2,050  
Interest expense (income), net                   317  
Provision for (benefit from) income taxes                   1,525  
Income (loss) from continuing operations                   (902 )
Income (loss) from discontinued operations, net of income taxes       (34 )
Net income (loss)                   $ (936 )
                     
For The Nine Months Ended September 30, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 11,660     $ 177,717     $ 133,053     $     $ 322,430  
Gross margin, from external customers   $ 10,210     $ 63,601     $ 57,832     $     $ 131,643  
Adjusted EBITDA (loss) (1)   $ 622     $ 2,241     $ 2,883     $ (8,128 )   $ (2,382 )
Business reorganization expenses (recovery)   (41 )   273     781     (49 )   964  
Stock-based compensation expense   81     161     192     842     1,276  
Non-operating expense (income),
including corporate administration charges
  269     2,177     1,149     (3,150 )   445  
EBITDA (loss) (1)   $ 313     $ (370 )   $ 761     $ (5,771 )   $ (5,067 )
Depreciation and amortization expenses                   2,294  
Interest expense (income), net                   264  
Provision for (benefit from) income taxes                   1,200  
Income (loss) from continuing operations                   (8,825 )
Income (loss) from discontinued operations, net of income taxes       327  
Net income (loss)                   $ (8,498 )
 
(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, stock-based compensation expense 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.


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,
  2017   2016
  As   As   Currency   Constant
  reported   reported   translation   currency
Revenue:              
Hudson Americas $ 4,044     $ 4,163     $ 10     $ 4,173  
Hudson Asia Pacific 76,509     64,607     2,208     66,815  
Hudson Europe 37,555     39,366     575     39,941  
Total $ 118,108     $ 108,136     $ 2,793     $ 110,929  
Gross margin:              
Hudson Americas $ 3,668     $ 3,691     $ 8     $ 3,699  
Hudson Asia Pacific 25,407     22,414     625     23,039  
Hudson Europe 18,170     17,437     521     17,958  
Total $ 47,245     $ 43,542     $ 1,154     $ 44,696  
SG&A (1):              
Hudson Americas $ 3,154     $ 3,287     $ 2     $ 3,289  
Hudson Asia Pacific 23,031     21,183     491     21,674  
Hudson Europe 17,613     17,433     473     17,906  
Corporate 2,374     1,441         1,441  
Total $ 46,172     $ 43,344     $ 966     $ 44,310  
Business reorganization expenses:              
Hudson Americas $     $ (3 )   $     $ (3 )
Hudson Asia Pacific     (1 )   (3 )   (4 )
Hudson Europe 477     188     3     191  
Corporate     (1 )       (1 )
Total $ 477     $ 183     $     $ 183  
Operating income (loss):              
Hudson Americas $ 558     $ 409     $ 5     $ 414  
Hudson Asia Pacific 1,868     714     122     836  
Hudson Europe (75 )   (389 )   43     (346 )
Corporate (2,452 )   (1,520 )       (1,520 )
Total $ (101 )   $ (786 )   $ 170     $ (616 )
EBITDA (loss):              
Hudson Americas $ 483     $ 326     $ (2 )   $ 324  
Hudson Asia Pacific 1,685     275     118     393  
Hudson Europe (380 )   (466 )   20     (446 )
Corporate (1,313 )   (415 )       (415 )
Total $ 475     $ (280 )   $ 136     $ (144 )
 
(1) SG&A is a measure that management uses to evaluate the segments’ expenses and includes salaries and related costs and other selling, general and administrative costs.

Contact:
David F. Kirby
Hudson
212-351-7216
david.kirby@hudson.com

Hudson Global, Inc.

HUDSON - FROM GREAT PEOPLE TO GREAT PERFORMANCE ®

Hudson (NASDAQ: HSON) is a global talent solutions company with expertise in leadership and specialized recruitment, contracting solutions, recruitment process outsourcing, talent management and eDiscovery. We leverage our deep industry and market knowledge and proprietary assessment tools to help businesses and professionals achieve higher performance and outstanding results. Operating in 20 countries, we combine broad geographic presence, world-class talent solutions and a tailored, consultative approach to attract, develop and retain the best and brightest people for our clients.