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Hudson Global Reports 2016 Fourth Quarter and Full-Year Results

NEW YORK, March 02, 2017 (GLOBE NEWSWIRE) -- Hudson Global, Inc. (Nasdaq:HSON), a leading global talent solutions company, today announced financial results for the fourth quarter and full-year ended December 31, 2016.

2016 Fourth Quarter Summary

  • Revenue of $100.3 million declined 5.5 percent from the fourth quarter of 2015, or 0.4 percent in constant currency.
     
  • Gross margin of $42.8 million declined 3.7 percent from the fourth quarter of 2015, but was flat in constant currency.
     
  • Net loss* of $0.3 million, or $0.01 per basic and diluted share, compared with net loss* of $2.6 million, or $0.07 per basic and diluted share, for the fourth quarter of 2015.
     
  • Adjusted EBITDA** of $0.9 million, compared with adjusted EBITDA of $1.4 million in the fourth quarter of 2015.

               
2016 Full-Year Summary

  • On a reported basis, revenue of $422.7 million declined 8.7 percent from 2015, or 4.7 percent in constant currency. On a retained*** basis, excluding the Americas IT and the Netherlands businesses which were sold during the second quarter of 2015, revenue declined 3.1 percent from 2015, but increased 1.5 percent in constant currency.
     
  • On a reported basis, gross margin of $174.4 million declined 7.1 percent from 2015, or 4.0 percent in constant currency. On a retained*** basis, excluding the Americas IT and the Netherlands businesses, gross margin declined 3.8 percent in reported currency and 0.5 percent in constant currency from 2015.
     
  • Net loss* of $8.8 million, or $0.26 per basic and diluted share, compared with net income of $2.3 million, or $0.07 per basic and diluted share, in 2015.
     
  • Adjusted EBITDA** loss of $1.5 million, including $3.0 million of compensation and legal fees related to arbitration with the company's former chairman and chief executive officer, compared with adjusted EBITDA loss of $2.7 million in 2015. Adjusted EBITDA in 2016 would have been positive excluding the arbitration expense.

* Includes continuing and discontinued operations.
** Adjusted EBITDA and EBITDA are defined in the segment tables at the end of this release.
*** See reconciliation for retained revenue and gross margin tables at the end of this release.

“We continued to deliver gross margin growth in many of our markets, including Americas, Australia/New Zealand, Belgium, France, Hong Kong and Spain," said Stephen Nolan, chief executive officer at Hudson. "We generated over $5 million in cash flow from operations in the fourth quarter and delivered year-over-year improvement in adjusted EBITDA in 2016.”

Regional Highlights

Americas

In the fourth quarter of 2016, Hudson Americas' gross margin increased 5 percent compared with the fourth quarter of 2015. RPO gross margin increased in the quarter on continued client growth and expansion.  EBITDA was $0.5 million in the fourth quarter, compared with EBITDA of $0.6 million a year ago. The region delivered adjusted EBITDA of $0.6 million in the fourth quarter, compared with $0.7 million in the fourth quarter of 2015.

Hudson Americas' gross margin in 2016  decreased 15 percent on a reported basis in constant currency from 2015, but increased 7 percent on a retained*** basis. RPO gross margin increased by 7 percent in 2016, driven by new client wins and increased business with some existing clients. On a reported basis, EBITDA was $0.8 million, compared with $13.4 million in 2015, which included the $15.9 million gain on sale of the Americas IT business. On a reported basis, adjusted EBITDA was $1.2 million in 2016, compared with adjusted EBITDA loss of $0.7 million in 2015.

Asia Pacific

Hudson Asia Pacific's gross margin decreased 6 percent in constant currency in the fourth quarter of 2016 compared with the same period in 2015. Gross margin growth in Australia/New Zealand of 3 percent was offset by a 23 percent decline in Asia, driven by tougher market conditions and internal challenges in China following rapid growth in recent years. RPO gross margin declined by 11 percent, driven by 9 percent decline in Australia due to reduced client demand, as well as a 29 percent decline in China as the company shifts its focus to longer-term contracts. EBITDA was $0.0 million in the fourth quarter, compared with EBITDA of $1.0 million a year ago. Asia Pacific delivered adjusted EBITDA of $0.4 million, down from adjusted EBITDA of $1.7 million in the fourth quarter of 2015.

In 2016, gross margin decreased 5 percent in Hudson Asia Pacific in constant currency compared with 2015. Results were driven by 16 percent growth in temporary contracting, 14 percent decline in permanent recruitment, and 2 percent growth in RPO against 2015. Growth by country was led by Australia, up 6 percent, as well as New Zealand and Hong Kong, both up 16 percent, though weighed down by lower results in China, off by 33 percent against prior year. EBITDA in 2016, was a loss of $0.3 million, compared with EBITDA of $2.9 million in 2015.  Adjusted EBITDA was $2.6 million, down from adjusted EBITDA of $7.0 million in 2015. 

Europe

Hudson Europe's gross margin increased 6 percent in constant currency in the fourth quarter of 2016 from the fourth quarter of 2015. Continental Europe gross margin increased by 20 percent in constant currency in the quarter. France, Belgium and Spain continued to deliver gross margin growth, up 35 percent, 16 percent and 9 percent respectively.  Gross margin in the U.K. was down 11 percent, as 18 percent growth in permanent recruitment did not offset declines in temporary contracting, driven by reduced demand in Financial Services and slower hiring patterns following the U.K. vote to exit the European Union.  EBITDA was $0.3 million in the fourth quarter, compared with EBITDA of $0.6 million a year ago. Adjusted EBITDA of $1.3 million compared with adjusted EBITDA of $1.1 million a year ago.

Hudson Europe's gross margin decreased 1 percent on a reported basis in 2016 in constant currency compared with 2015, but increased 3 percent on a retained*** basis. Continental Europe delivered 15 percent growth on a retained*** basis, driven by Belgium and France, up 15 percent and 21 percent, respectively, offset by the U.K., which was down 10 percent against 2015. In the U.K., growth in RPO of 11 percent was offset by recruitment, down 15 percent from 2015.  On a reported basis, EBITDA was $1.1 million in 2016, compared with a loss of $0.2 million in 2015. On a reported basis, adjusted EBITDA was $4.2 million, compared with $2.3 million in 2015.

Liquidity and Capital Resources

The company ended the fourth quarter of 2016 with $40.0 million in liquidity, composed of $21.3 million in cash and $18.6 million in availability under its credit facilities.  This compares with $37.7 million in cash and $20.5 million in availability under its credit facilities at the end of 2015. The company generated $5.6 million in cash flow from operations during the fourth quarter and used $9.4 million in cash flow from operations for the year of 2016. The company had $7.8 million of outstanding borrowings at the end of the fourth quarter of 2016. 
           
Share Repurchase Program

During the fourth quarter of 2016, the company continued its share repurchase program for which it has an authorization of up to $10 million of the company’s common stock. The company purchased 142,671 shares for $0.2 million as part of the buyback program during the fourth quarter. Since the inception of this program in the third quarter of 2015 through the end of 2016, the company has purchased 2,989,127 shares for $6.5 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 first quarter 2017 revenue of between $95 million and $105 million and adjusted EBITDA of between $1.5 million loss and $0.5 million gain at prevailing exchange rates. In the first quarter of 2016, revenue was $101.2 million and adjusted EBITDA was a loss of $2.0 million. This outlook assumes an average exchange rate of 1.25 US Dollars to the British Pound, 1.07 US Dollars to the Euro and 0.76 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; 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


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2016   2015   2016   2015
Revenue   $ 100,314     $ 106,109     $ 422,744     $ 463,197  
Direct costs   57,540     61,670     248,327     275,487  
Gross margin   42,774     44,439     174,417     187,710  
Operating expenses:                
Selling, general and administrative expenses   42,033     43,350     177,334     194,631  
Depreciation and amortization   796     805     3,090     3,845  
Business reorganization   616     161     1,580     5,828  
Total operating expenses   43,445     44,316     182,004     204,304  
Gain (loss) on sale and exit of businesses       17         19,835  
Operating income (loss)   (671 )   140     (7,587 )   3,241  
Non-operating income (expense):                
Interest income (expense), net   (93 )   (180 )   (357 )   (722 )
Other income (expense), net   198     (481 )   (247 )   (266 )
Income (loss) before provision for income taxes from continuing operations   (566 )   (521 )   (8,191 )   2,253  
Provision for (benefit from) income taxes   (458 )   1,963     742     646  
Income (loss) from continuing operations   (108 )   (2,484 )   (8,933 )   1,607  
Income (loss) from discontinued operations, net of income taxes   (184 )   (142 )   143     722  
Net income (loss)   $ (292 )   $ (2,626 )   $ (8,790 )   $ 2,329  
Earnings (loss) per share:                
Basic and diluted                
Income (loss) from continuing operations   $     $ (0.07 )   $ (0.27 )   $ 0.05  
Income (loss) from discontinued operations   (0.01 )       0.01     0.02  
Net income (loss)   $ (0.01 )   $ (0.08 )   $ (0.26 )   $ 0.07  
Weighted-average shares outstanding:                
Basic   32,227     34,274     33,174     33,869  
Diluted   32,227     34,274     33,174     34,084  


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
       
  December 31,
 2016
  December 31,
 2015
ASSETS      
Current assets:      
Cash and cash equivalents $ 21,322     $ 37,663  
Accounts receivable, less allowance for doubtful accounts of $799 and $860, respectively 58,517     62,420  
Prepaid and other 4,265     5,979  
Current assets of discontinued operations 38     81  
Total current assets 84,142     106,143  
Property and equipment, net 7,041     7,928  
Deferred tax assets, non-current 6,494     6,724  
Other assets 4,135     4,154  
Total assets $ 101,812     $ 124,949  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 4,666     $ 5,184  
Accrued expenses and other current liabilities 36,154     40,344  
Short-term borrowings 7,770     2,368  
Accrued business reorganization 1,756     2,252  
Current liabilities of discontinued operations 233     1,443  
Total current liabilities 50,579     51,591  
Deferred rent and tenant improvement contributions 2,968     4,244  
Income tax payable, non-current 2,211     2,279  
Other non-current liabilities 4,169     5,655  
Total liabilities 59,927     63,769  
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 34,910 and 35,260 shares, respectively 34     34  
Additional paid-in capital 482,265     480,816  
Accumulated deficit (440,478 )   (428,287 )
Accumulated other comprehensive income 6,931     10,292  
Treasury stock, 3,145 and 646 shares, respectively, at cost (6,867 )   (1,675 )
Total stockholders’ equity 41,885     61,180  
Total liabilities and stockholders' equity $ 101,812     $ 124,949  


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
                     
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 )
                     
For The Three Months Ended December 31, 2015   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 3,731     $ 53,268     $ 49,110     $     $ 106,109  
Gross margin, from external customers   $ 3,235     $ 21,609     $ 19,595     $     $ 44,439  
Adjusted EBITDA (loss) (1)   $ 673     $ 1,706     $ 1,114     $ (2,136 )   $ 1,357  
Business reorganization expenses (recovery)   102         205     (146 )   161  
Stock-based compensation expense   4     43     17     204     268  
Gain (loss) on sale and exit of businesses           17         17  
Non-operating expense (income),
including corporate administration charges
  4     665     325     (513 )   481  
EBITDA (loss) (1)   $ 563     $ 998     $ 584     $ (1,681 )   $ 464  
Depreciation and amortization expenses                   805  
Interest expense (income), net                   180  
Provision for (benefit from) income taxes                   1,963  
Income (loss) from continuing operations                   (2,484 )
Income (loss) from discontinued operations, net of income taxes                   (142 )
Net income (loss)                   $ (2,626 )
                         
  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.


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(in thousands)
(unaudited)
                     
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 )
                     
For The Three Months Ended March 31, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 3,837     $ 51,071     $ 46,319     $     $ 101,227  
Gross margin, from external customers   $ 3,341     $ 18,771     $ 19,150     $     $ 41,262  
Adjusted EBITDA (loss) (1)   $ 241     $ (152 )   $ 471     $ (2,569 )   $ (2,009 )
Business reorganization expenses (recovery)   (16 )   197     484     (28 )   637  
Stock-based compensation expense   28     80     44     219     371  
Non-operating expense (income),
including corporate administration charges
  67     802     273     (1,005 )   137  
EBITDA (loss) (1)   $ 162     $ (1,231 )   $ (330 )   $ (1,755 )   $ (3,154 )
Depreciation and amortization expenses                   688  
Interest expense (income), net                   54  
Provision for (benefit from) income taxes                   (326 )
Income (loss) from continuing operations                   (3,570 )
Income (loss) from discontinued operations, net of income taxes                   83  
Net income (loss)                   $ (3,487 )
                         
  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.


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE
(in thousands)
(unaudited)
                     
For The Year Ended December 31, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 15,561     $ 236,839     $ 170,344     $     $ 422,744  
Gross margin, from external customers   $ 13,609     $ 84,126     $ 76,682     $     $ 174,417  
Adjusted EBITDA (loss) (1)   $ 1,209     $ 2,614     $ 4,194     $ (9,485 )   $ (1,468 )
Business reorganization expenses (recovery)   (39 )   248     1,387     (16 )   1,580  
Stock-based compensation expense   108     161     206     974     1,449  
Non-operating expense (income),
including corporate administration charges
  370     2,543     1,537     (4,203 )   247  
EBITDA (loss) (1)   $ 770     $ (338 )   $ 1,064     $ (6,240 )   $ (4,744 )
Depreciation and amortization expenses                   3,090  
Interest expense (income), net                     357  
Provision for (benefit from) income taxes                   742  
Income (loss) from continuing operations                   (8,933 )
Income (loss) from discontinued operations, net of income taxes                   143  
Net income (loss)                   $ (8,790 )
                     
For The Year Ended December 31, 2015   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 28,627     $ 219,391     $ 215,179     $     $ 463,197  
Gross margin, from external customers   $ 16,111     $ 89,682     $ 81,917     $     $ 187,710  
Adjusted EBITDA (loss) (1)   $ (703 )   $ 6,955     $ 2,318     $ (11,260 )   $ (2,690 )
Business reorganization expenses (recovery)   1,108     669     2,883     1,168     5,828  
Stock-based compensation expense   569     787     808     2,067     4,231  
Gain (loss) on sale and exit of businesses   15,918         3,917         19,835  
Non-operating expense (income),
including corporate administration charges
  184     2,648     2,751     (5,317 )   266  
EBITDA (loss) (1)   $ 13,354     $ 2,851     $ (207 )   $ (9,178 )   $ 6,820  
Depreciation and amortization expenses                   3,845  
Interest expense (income), net                   722  
Provision for (benefit from) income taxes                   646  
Income (loss) from continuing operations                   1,607  
Income (loss) from discontinued operations, net of income taxes                   722  
Net income (loss)                   $ 2,329  
             
  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.

HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY
(in thousands)
(unaudited)

The company operates on a global basis, with the majority of its gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect its results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term “constant currency” to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Changes in revenue, gross margin, selling, general and administrative expenses ("SG&A"), business reorganization expenses and other non-operating income (expense), operating income (loss) and EBITDA (loss) include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company’s management reviews and analyzes business results in constant currency and believes these results better represent the company’s underlying business trends. The company believes that these calculations are a useful measure, indicating the actual change in operations. There are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings.

    For The Three Months Ended December 31,
    2016   2015
    As   As   Currency   Constant
    reported   reported   translation   currency
Revenue:                
Hudson Americas   $ 3,901     $ 3,731     $     $ 3,731  
Hudson Asia Pacific   59,122     53,268     1,453     54,721  
Hudson Europe   37,291     49,110     (6,894 )   42,216  
Total   $ 100,314     $ 106,109     $ (5,441 )   $ 100,668  
Gross margin:                
Hudson Americas   $ 3,400     $ 3,235     $ (1 )   $ 3,234  
Hudson Asia Pacific   20,524     21,609     185     21,794  
Hudson Europe   18,850     19,595     (1,854 )   17,741  
Total   $ 42,774     $ 44,439     $ (1,670 )   $ 42,769  
SG&A (1):                
Hudson Americas   $ 2,836     $ 2,609     $ (2 )   $ 2,607  
Hudson Asia Pacific   20,065     19,828     284     20,112  
Hudson Europe   17,651     18,580     (1,894 )   16,686  
Corporate   1,481     2,335         2,335  
Total   $ 42,033     $ 43,352     $ (1,612 )   $ 41,740  
Business reorganization expenses:                
Hudson Americas   $ 2     $ 102     $     $ 102  
Hudson Asia Pacific   (24 )            
Hudson Europe   606     205     (21 )   184  
Corporate   32     (146 )       (146 )
Total   $ 616     $ 161     $ (21 )   $ 140  
Operating income (loss):                
Hudson Americas   $ 552     $ 546     $ 2     $ 548  
Hudson Asia Pacific   (53 )   1,290     (114 )   1,176  
Hudson Europe   419     726     94     820  
Corporate   (1,589 )   (2,422 )       (2,422 )
Total   $ (671 )   $ 140     $ (18 )   $ 122  
EBITDA (loss):                
Hudson Americas   $ 458     $ 563     $ (2 )   $ 561  
Hudson Asia Pacific   18     998     (110 )   888  
Hudson Europe   305     584     97     681  
Corporate   (458 )   (1,681 )       (1,681 )
Total   $ 323     $ 464     $ (15 )   $ 449  
 

Note: Certain prior year amounts have been reclassified to conform to the current period presentation.

  1. SG&A is a measure that management uses to evaluate the segments’ expenses.


HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY (continued)
(in thousands)
(unaudited)
 
    For The Year Ended December 31,
    2016   2015
    As   As   Currency   Constant
    reported   reported   translation   currency
Revenue:                
Hudson Americas   $ 15,561     $ 28,627     $ (22 )   $ 28,605  
Hudson Asia Pacific   236,839     219,391     (2,235 )   217,156  
Hudson Europe   170,344     215,179     (17,537 )   197,642  
Total   $ 422,744     $ 463,197     $ (19,794 )   $ 443,403  
Gross margin:                
Hudson Americas   $ 13,609     $ 16,111     $ (22 )   $ 16,089  
Hudson Asia Pacific   84,126     89,682     (1,533 )   88,149  
Hudson Europe   76,682     81,917     (4,550 )   77,367  
Total   $ 174,417     $ 187,710     $ (6,105 )   $ 181,605  
SG&A (1):                
Hudson Americas   $ 12,495     $ 17,413     $ (33 )   $ 17,380  
Hudson Asia Pacific   81,409     83,035     (1,642 )   81,393  
Hudson Europe   72,978     80,858     (4,716 )   76,142  
Corporate   10,452     13,327         13,327  
Total   $ 177,334     $ 194,633     $ (6,391 )   $ 188,242  
Business reorganization expenses:                
Hudson Americas   $ (39 )   $ 1,108     $     $ 1,108  
Hudson Asia Pacific   248     669     29     698  
Hudson Europe   1,387     2,883     (141 )   2,742  
Corporate   (16 )   1,168         1,168  
Total   $ 1,580     $ 5,828     $ (112 )   $ 5,716  
Operating income (loss):                
Hudson Americas   $ 1,090     $ 12,931     $ 10     $ 12,941  
Hudson Asia Pacific   454     3,548     119     3,667  
Hudson Europe   1,709     1,743     381     2,124  
Corporate   (10,840 )   (14,981 )       (14,981 )
Total   $ (7,587 )   $ 3,241     $ 510     $ 3,751  
EBITDA (loss):                
Hudson Americas   $ 770     $ 13,354     $ 27     $ 13,381  
Hudson Asia Pacific   (338 )   2,851     123     2,974  
Hudson Europe   1,064     (207 )   413     206  
Corporate   (6,240 )   (9,178 )       (9,178 )
Total   $ (4,744 )   $ 6,820     $ 563     $ 7,383  
 
  1. SG&A is a measure that management uses to evaluate the segments’ expenses.


HUDSON GLOBAL, INC.
RECONCILIATION FOR RETAINED REVENUE AND GROSS MARGIN
(in thousands)
(unaudited)
 
Revenue, 2016 vs 2015      
    For The Year Ended December 31,
    Reported     Retained (1)
    2016 Variance
 vs 2015
  Constant
Currency
      2016   Variance
 vs 2015
  Constant
Currency
Americas       $ 15,561   (45.6 )%   (45.6 )%     $ 15,561   4.5 %   4.6 %
Asia Pacific   236,839   8.0 %   9.1 %     236,839   8.0 %   9.1 %
Europe   170,344   (20.8 )%   (13.8 )%     170,344   (15.7 )%   (7.7 )%
Total   $ 422,744   (8.7 )%   (4.7 )%     $ 422,744   (3.1 )%   1.5 %
                                   
                                     
Gross Margin, 2016 vs 2015  
    For The Year Ended December 31,
    Reported     Retained (1)
    2016
  Variance
 vs 2015
  Constant
Currency
    2016 Variance
 vs 2015
  Constant
Currency
Americas   $ 13,609   (15.5 )%   (15.4 )%     $ 13,609   7.0 %   7.2 %
Asia Pacific   84,126   (6.2 )%   (4.6 )%     84,126   (6.2 )%   (4.6 )%
Europe   76,682   (6.4 )%   (0.9 )%     76,682   (2.9 )%   3.1 %
Total   $ 174,417   (7.1 )%   (4.0 )%     $ 174,417   (3.8 )%   (0.5 )%
 
  1. Retained revenue and gross margin and divested revenue and gross margin are non-GAAP terms that management believes provide a better understanding of the underlying revenue and gross margin trends in the business following the divestitures in the second quarter of 2015. Divested revenue and gross margin includes such items attributable to the following businesses: the Americas IT staffing business, the Netherlands business, Ukraine, Czech Republic, Slovakia and Luxembourg. The non-GAAP financial measures do not replace the presentation of GAAP financial results and should only be used as a supplement to, not as a substitute for, Hudson’s financial results presented in accordance with GAAP. The above table provides a reconciliation of the non-GAAP financial measure used in its financial reporting to the most directly comparable GAAP financial measure. 
Contact:
David F. Kirby
Hudson
212-351-7216
david.kirby@hudson.com

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