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Hudson Global Reports 2017 First Quarter Results

NEW YORK, May 04, 2017 (GLOBE NEWSWIRE) -- Hudson Global, Inc. (Nasdaq:HSON), a leading global talent solutions company, today announced financial results for the first quarter ended March 31, 2017.

2017 First Quarter Summary

  • Revenue of $103.4 million increased 2.2 percent from the first quarter of 2016 and increased 5.4 percent in constant currency.
     
  • Gross margin of $42.4 million increased 2.8 percent from the first quarter of 2016 and increased 6.0 percent in constant currency.
     
  • Net loss of $1.3 million, or $0.04 per basic and diluted share, compared with net loss of $3.5 million, or $0.10 per basic and diluted share, for the first quarter of 2016.
     
  • Adjusted EBITDA* of $0.4 million, compared with an adjusted EBITDA loss of $2.0 million in the first quarter of 2016.

"We delivered solid gross margin growth in key markets around the globe, led by Belgium, Australia/New Zealand, France and the Americas," said Stephen Nolan, chief executive officer at Hudson. "We are pleased to report positive adjusted EBITDA in the first quarter for the first time since 2011, as we benefited from our focus on growth and disciplined execution in core markets and practices."

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

Regional Highlights

Americas

In the first quarter, Hudson Americas' gross margin increased 15 percent compared with the first quarter of 2016. RPO gross margin increased in the first quarter on continued strong demand across the client base. EBITDA was $0.3 million in the first quarter, compared with EBITDA of $0.2 million a year ago. The region delivered adjusted EBITDA of $0.3 million for the first quarter, compared with adjusted EBITDA of $0.2 million a year ago, driven by gross margin growth.

Asia Pacific

Hudson Asia Pacific's gross margin increased 3 percent in constant currency in the first quarter of 2017 compared with the same period in 2016. Gross margin growth in Australia/New Zealand of 5 percent outweighed flat results in Asia, as China stabilized and Hong Kong delivered growth in the quarter. EBITDA was a loss of $0.7 million in the first quarter, compared with an EBITDA loss of $1.2 million a year ago. Asia Pacific delivered adjusted EBITDA of $0.1 million, improving from an adjusted EBITDA loss of $0.2 million in the first quarter of 2016.

Europe

Hudson Europe's gross margin increased 7 percent in constant currency from the first quarter of 2016. Growth was driven by Continental Europe, with gross margin higher by 22 percent, with double-digit growth in Spain, France, Belgium and Poland, on strong demand in permanent recruitment, as well as talent management. In the U.K., gross margin declined 11 percent against prior year, but increased 4 percent sequentially from the fourth quarter of 2016. EBITDA was $0.9 million in the first quarter, compared with an EBITDA loss of $0.3 million a year ago. Adjusted EBITDA was $1.5 million in the first quarter of 2017, improving by $1.0 million from a year ago.

Liquidity and Capital Resources

The company ended the first quarter of 2017 with $29.8 million in liquidity, composed of $14.8 million in cash and $15.0 million in availability under its credit facilities. This compares with $21.3 million in cash and $18.6 million in availability under its credit facilities at the end of the fourth quarter of 2016. The company used $9.0 million in cash flow from operations during the first quarter, largely due to growing accounts receivable, up $6.5 million in the first quarter from the fourth quarter of 2016, as well as an additional, monthly contractor payroll in the U.K. that fell within the calendar quarter. This compares with $5.8 million usage of cash in the first quarter of 2016. The company had $11.3 million in outstanding borrowings at the end of the first quarter of 2017, primarily in Australia and the U.K.

Share Repurchase Program

During the first 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 277,025 shares for $0.3 million as part of the repurchase program during the first quarter. Since the inception of this program in the third quarter of 2015 through the end of the first quarter of 2017, the company has purchased 3,266,152 shares for $6.8 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 second quarter 2017 revenue of between $104 million and $114 million and adjusted EBITDA of between $1 million and $3 million at prevailing exchange rates. In the second quarter of 2016, revenue was $113.1 million and adjusted EBITDA was a loss of $0.7 million. This outlook assumes an average exchange rate of 1.26 US Dollars to the British Pound, 1.07 US Dollars to the Euro and 0.75 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 March 31,
    2017   2016
Revenue   $ 103,405     $ 101,227  
Direct costs   60,973     59,965  
Gross margin   42,432     41,262  
Operating expenses:        
Selling, general and administrative expenses   42,269     43,642  
Depreciation and amortization   666     688  
Business reorganization expenses   222     637  
Total operating expenses   43,157     44,967  
Operating income (loss)   (725 )   (3,705 )
Non-operating income (expense):        
Interest income (expense), net   (88 )   (54 )
Other income (expense), net   (381 )   (137 )
Income (loss) from continuing operation before provision for income taxes   (1,194 )   (3,896 )
Provision for (benefit from) income taxes from continuing operations   155     (326 )
Income (loss) from continuing operations   (1,349 )   (3,570 )
Income (loss) from discontinued operations, net of income taxes   35     83  
Net income (loss)   $ (1,314 )   $ (3,487 )
Basic and diluted earnings (loss) per share:        
Basic and diluted earnings (loss) per share from continuing operations   $ (0.04 )   $ (0.10 )
Basic and diluted earnings (loss) per share from discontinued operations        
Basic and diluted earnings (loss) per share   $ (0.04 )   $ (0.10 )
Weighted-average shares outstanding:        
Basic   32,161     34,631  
Diluted   32,161     34,631  


HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
         
    March 31,
 2017
  December 31,
 2016
ASSETS        
Current assets:        
Cash and cash equivalents   $ 14,773     $ 21,322  
Accounts receivable, less allowance for doubtful accounts of $798 and $799, respectively   66,781     58,517  
Prepaid and other   5,079     4,265  
Current assets of discontinued operations   38     38  
Total current assets   86,671     84,142  
Property and equipment, net   7,028     7,041  
Deferred tax assets, non-current   7,136     6,494  
Other assets, non-current   3,784     4,135  
Total assets   $ 104,619     $ 101,812  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable   $ 6,450     $ 4,666  
Accrued expenses and other current liabilities   34,199     36,154  
Short-term borrowings   11,310     7,770  
Accrued business reorganization expenses   1,636     1,756  
Current liabilities of discontinued operations   137     233  
Total current liabilities   53,732     50,579  
Deferred rent and tenant improvement contributions   2,787     2,968  
Income tax payable, non-current   2,246     2,211  
Other non-current liabilities   4,019     4,169  
Total liabilities   62,784     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   482,456     482,265  
Accumulated deficit   (441,792 )   (440,478 )
Accumulated other comprehensive income   8,338     6,931  
Treasury stock, 3,427 and 3,145 shares, respectively, at cost   (7,201 )   (6,867 )
Total stockholders’ equity   41,835     41,885  
Total liabilities and stockholders' equity   $ 104,619     $ 101,812  


HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
                     
For The Three Months Ended March 31, 2017   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 4,315     $ 59,710     $ 39,380     $     $ 103,405  
Gross margin, from external customers   $ 3,836     $ 19,735     $ 18,861     $     $ 42,432  
Adjusted EBITDA (loss) (1)   $ 334     $ 121     $ 1,493     $ (1,594 )   $ 354  
Business reorganization expenses (recovery)   (92 )       336     (22 )   222  
Stock-based compensation expense   33     6     43     109     191  
Non-operating expense (income),
including corporate administration charges
  59     848     235     (761 )   381  
EBITDA (loss) (1)   $ 334     $ (733 )   $ 879     $ (920 )   $ (440 )
Depreciation and amortization expenses                   666  
Interest expense (income), net                   88  
Provision for (benefit from) income taxes                   155  
Income (loss) from continuing operations                   $ (1,349 )
Income (loss) from discontinued operations, net of income taxes       35  
Net income (loss)                   $ (1,314 )
                     
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, 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 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 June 30, 2016   Hudson
Americas
  Hudson
Asia Pacific
  Hudson
Europe
  Corporate   Total
Revenue, from external customers   $ 3,661     $ 62,039     $ 47,367     $     $ 113,067  
Gross margin, from external customers   $ 3,180     $ 22,416     $ 21,243     $     $ 46,839  
Adjusted EBITDA (loss) (1)   $ (45 )   $ 1,259     $ 2,308     $ (4,244 )   $ (722 )
Business reorganization expenses (recovery)   (22 )   77     109     (20 )   144  
Stock-based compensation expense   47     118     93     496     754  
Non-operating expense (income),
including corporate administration charges
  108     489     553     (1,137 )   13  
EBITDA (loss) (1)   $ (178 )   $ 575     $ 1,553     $ (3,583 )   $ (1,633 )
Depreciation and amortization expenses                   805  
Interest expense (income), net                   101  
Provision for (benefit from) income taxes                   808  
Income (loss) from continuing operations                   $ (3,347 )
Income (loss) from discontinued operations, net of income taxes       209  
Net income (loss)                   $ (3,138 )

(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 March 31,
  2017   2016
  As   As   Currency   Constant
  reported   reported   translation   currency
Revenue:              
Hudson Americas $ 4,315     $ 3,837     $ 9     $ 3,846  
Hudson Asia Pacific 59,710     51,071     1,852     52,923  
Hudson Europe 39,380     46,319     (5,006 )   41,313  
Total $ 103,405     $ 101,227     $ (3,145 )   $ 98,082  
Gross margin:              
Hudson Americas $ 3,836     $ 3,341     $ 8     $ 3,349  
Hudson Asia Pacific 19,735     18,771     353     19,124  
Hudson Europe 18,861     19,150     (1,576 )   17,574  
Total $ 42,432     $ 41,262     $ (1,215 )   $ 40,047  
SG&A (1):              
Hudson Americas $ 3,530     $ 3,128     $ 9     $ 3,137  
Hudson Asia Pacific 19,563     18,943     389     19,332  
Hudson Europe 17,472     18,784     (1,613 )   17,171  
Corporate 1,704     2,787         2,787  
Total $ 42,269     $ 43,642     $ (1,215 )   $ 42,427  
Business reorganization expenses:              
Hudson Americas $ (92 )   $ (16 )   $     $ (16 )
Hudson Asia Pacific     197     2     199  
Hudson Europe 336     484     (43 )   441  
Corporate (22 )   (28 )       (28 )
Total $ 222     $ 637     $ (41 )   $ 596  
Operating income (loss):              
Hudson Americas $ 392     $ 206     $ (1 )   $ 205  
Hudson Asia Pacific (313 )   (833 )   (56 )   (889 )
Hudson Europe 958     (240 )   107     (133 )
Corporate (1,762 )   (2,838 )       (2,838 )
Total $ (725 )   $ (3,705 )   $ 50     $ (3,655 )
EBITDA (loss):              
Hudson Americas $ 334     $ 162     $     $ 162  
Hudson Asia Pacific (726 )   (1,231 )   (55 )   (1,286 )
Hudson Europe 880     (330 )   82     (248 )
Corporate (928 )   (1,755 )       (1,755 )
Total $ (440 )   $ (3,154 )   $ 27     $ (3,127 )

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

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

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Hudson Global, Inc.