000121070812/31FALSEtrue2024Q2.01.01xbrli:sharesiso4217:USDiso4217:USDxbrli:shareshson:Countryhson:Segmentxbrli:pureiso4217:AUDiso4217:SGD00012107082024-01-012024-06-300001210708exch:XNASus-gaap:CommonStockMember2024-01-012024-06-300001210708exch:XNAShson:PreferredSharePurchaseRightsMember2024-01-012024-06-3000012107082024-07-1900012107082024-04-012024-06-3000012107082023-04-012023-06-3000012107082023-01-012023-06-3000012107082024-06-3000012107082023-12-3100012107082022-12-3100012107082023-06-300001210708us-gaap:CommonStockMember2024-03-3100012107082024-03-310001210708us-gaap:CommonStockMember2023-03-3100012107082023-03-310001210708us-gaap:CommonStockMember2023-12-310001210708us-gaap:CommonStockMember2022-12-310001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2024-03-310001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-03-310001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-12-310001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-12-310001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2024-04-012024-06-300001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-04-012023-06-300001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2024-01-012024-06-300001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-01-012023-06-300001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2024-06-300001210708us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-06-300001210708us-gaap:TreasuryStockCommonMember2024-03-310001210708us-gaap:TreasuryStockCommonMember2023-03-310001210708us-gaap:TreasuryStockCommonMember2023-12-310001210708us-gaap:TreasuryStockCommonMember2022-12-310001210708us-gaap:TreasuryStockCommonMember2024-04-012024-06-300001210708us-gaap:TreasuryStockCommonMember2023-04-012023-06-300001210708us-gaap:TreasuryStockCommonMember2024-01-012024-06-300001210708us-gaap:TreasuryStockCommonMember2023-01-012023-06-300001210708us-gaap:TreasuryStockCommonMember2024-06-300001210708us-gaap:TreasuryStockCommonMember2023-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001210708us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001210708us-gaap:RetainedEarningsMember2024-03-310001210708us-gaap:RetainedEarningsMember2023-03-310001210708us-gaap:RetainedEarningsMember2023-12-310001210708us-gaap:RetainedEarningsMember2022-12-310001210708us-gaap:AccountingStandardsUpdate201613Member2023-01-012023-06-300001210708us-gaap:RetainedEarningsMember2024-04-012024-06-300001210708us-gaap:RetainedEarningsMember2023-04-012023-06-300001210708us-gaap:RetainedEarningsMember2024-01-012024-06-300001210708us-gaap:RetainedEarningsMember2023-01-012023-06-300001210708us-gaap:RetainedEarningsMember2024-06-300001210708us-gaap:RetainedEarningsMember2023-06-300001210708us-gaap:CommonStockMember2024-06-300001210708us-gaap:CommonStockMember2023-06-3000012107082023-01-010001210708hson:PermanentRecruitmentMember2024-04-012024-06-300001210708hson:PermanentRecruitmentMember2023-04-012023-06-300001210708hson:ContractingMember2024-04-012024-06-300001210708hson:ContractingMember2023-04-012023-06-300001210708hson:PermanentRecruitmentMember2024-01-012024-06-300001210708hson:PermanentRecruitmentMember2023-01-012023-06-300001210708hson:ContractingMember2024-01-012024-06-300001210708hson:ContractingMember2023-01-012023-06-300001210708us-gaap:AccountingStandardsUpdate201613Member2024-03-310001210708us-gaap:AccountingStandardsUpdate201613Member2023-03-310001210708us-gaap:AccountingStandardsUpdate201613Member2023-12-310001210708us-gaap:AccountingStandardsUpdate201613Member2022-12-310001210708hson:SingaporeAcquisitionMember2023-10-312023-10-310001210708hson:SingaporeAcquisitionMember2023-10-310001210708hson:SingaporeAcquisitionMemberus-gaap:NoncompeteAgreementsMember2023-10-312023-10-310001210708hson:SingaporeAcquisitionMemberus-gaap:CustomerListsMember2023-10-312023-10-310001210708hson:SingaporeAcquisitionMemberus-gaap:TradeNamesMember2023-10-312023-10-310001210708hson:HnBAcquisitionMember2022-08-192022-08-190001210708hson:HnBAcquisitionMember2022-08-190001210708hson:HnBAcquisitionMemberus-gaap:FairValueInputsLevel3Member2024-06-300001210708hson:HnBAcquisitionMemberus-gaap:NoncompeteAgreementsMember2022-08-192022-08-190001210708hson:HnBAcquisitionMemberus-gaap:CustomerListsMember2022-08-192022-08-190001210708hson:HnBAcquisitionMemberus-gaap:TradeNamesMember2022-08-192022-08-1900012107082022-05-170001210708hson:RestrictedStockUnitsType1And2Member2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsTimeMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType2Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2023-01-012023-06-300001210708hson:RestrictedStockUnitsRSUsType1Member2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType2Member2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType1Memberus-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType2Memberus-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType1Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType2Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType1Memberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsType2Memberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2024-01-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMembersrt:DirectorMember2024-01-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMembersrt:DirectorMember2024-06-300001210708us-gaap:RestrictedStockMember2024-04-012024-06-300001210708us-gaap:RestrictedStockMember2023-04-012023-06-300001210708us-gaap:RestrictedStockMember2024-01-012024-06-300001210708us-gaap:RestrictedStockMember2023-01-012023-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2024-04-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2023-04-012023-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-300001210708hson:RestrictedStockUnitsRSUsCashSettledLiabilitiesMember2024-04-012024-06-300001210708hson:RestrictedStockUnitsRSUsCashSettledLiabilitiesMember2023-04-012023-06-300001210708hson:RestrictedStockUnitsRSUsCashSettledLiabilitiesMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsRSUsCashSettledLiabilitiesMember2023-01-012023-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2024-06-300001210708hson:RestrictedStockUnitsPerformanceBasedMember2023-12-310001210708hson:RestrictedStockUnitTimeBasedMember2023-12-310001210708us-gaap:RestrictedStockUnitsRSUMember2023-12-310001210708hson:RestrictedStockUnitsPerformanceBasedMember2024-01-012024-06-300001210708hson:RestrictedStockUnitTimeBasedMember2024-01-012024-06-300001210708hson:RestrictedStockUnitsPerformanceBasedMember2024-06-300001210708hson:RestrictedStockUnitTimeBasedMember2024-06-300001210708hson:RestrictedStockUnitsPerformanceBasedMember2022-12-310001210708hson:RestrictedStockUnitTimeBasedMember2022-12-310001210708us-gaap:RestrictedStockUnitsRSUMember2022-12-310001210708hson:RestrictedStockUnitsPerformanceBasedMember2023-01-012023-06-300001210708hson:RestrictedStockUnitTimeBasedMember2023-01-012023-06-300001210708hson:RestrictedStockUnitsPerformanceBasedMember2023-06-300001210708hson:RestrictedStockUnitTimeBasedMember2023-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2023-06-300001210708us-gaap:RestrictedStockMember2022-12-310001210708us-gaap:RestrictedStockMember2023-06-300001210708us-gaap:TaxAuthoritySpainMember2023-01-012023-03-310001210708us-gaap:RestrictedStockUnitsRSUMember2024-04-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2023-04-012023-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001210708us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-3000012107082023-01-012023-09-300001210708us-gaap:NoncompeteAgreementsMember2024-06-300001210708us-gaap:TradeNamesMember2024-06-300001210708us-gaap:CustomerListsMember2024-06-300001210708us-gaap:DevelopedTechnologyRightsMember2024-06-300001210708us-gaap:NoncompeteAgreementsMember2023-12-310001210708us-gaap:TradeNamesMember2023-12-310001210708us-gaap:CustomerListsMember2023-12-310001210708us-gaap:DevelopedTechnologyRightsMember2023-12-310001210708us-gaap:NoncompeteAgreementsMember2024-01-012024-06-300001210708us-gaap:TradeNamesMember2024-01-012024-06-300001210708us-gaap:CustomerListsMember2024-01-012024-06-300001210708us-gaap:DevelopedTechnologyRightsMember2024-01-012024-06-300001210708srt:MinimumMember2024-06-300001210708srt:MaximumMember2024-06-300001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2019-04-080001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2019-04-082019-04-080001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2024-06-300001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2024-04-012024-06-300001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2024-01-012024-06-300001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2023-04-012023-06-300001210708hson:NABFacilityAgreementMemberus-gaap:LineOfCreditMember2023-01-012023-06-300001210708hson:HSBCFacilityAgreementMemberus-gaap:LineOfCreditMember2022-05-252022-05-250001210708hson:HSBCFacilityAgreementMemberus-gaap:LineOfCreditMember2022-05-2500012107082015-07-3000012107082023-08-080001210708hson:June2015August2023AuthorizationMember2024-01-012024-06-300001210708hson:June2015August2023AuthorizationMember2024-01-292024-01-290001210708hson:June2015August2023AuthorizationMember2024-04-012024-06-300001210708hson:OpenMarketSharePurchasesMember2024-01-012024-06-300001210708hson:June2015August2023AuthorizationMember2023-01-012023-06-300001210708hson:June2015August2023AuthorizationMember2024-06-300001210708hson:August82023AuthorizationMember2024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2024-04-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2024-04-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2024-04-012024-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2024-04-012024-06-300001210708us-gaap:IntersegmentEliminationMember2024-04-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2024-01-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2024-01-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2024-01-012024-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2024-01-012024-06-300001210708us-gaap:IntersegmentEliminationMember2024-01-012024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2024-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2024-06-300001210708us-gaap:IntersegmentEliminationMember2024-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2023-04-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2023-04-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2023-04-012023-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2023-04-012023-06-300001210708us-gaap:IntersegmentEliminationMember2023-04-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2023-01-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2023-01-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2023-01-012023-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2023-01-012023-06-300001210708us-gaap:IntersegmentEliminationMember2023-01-012023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAmericasMember2023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonAsiaPacificMember2023-06-300001210708us-gaap:OperatingSegmentsMemberhson:HudsonEuropeMember2023-06-300001210708us-gaap:OperatingSegmentsMemberus-gaap:CorporateMember2023-06-300001210708us-gaap:IntersegmentEliminationMember2023-06-300001210708country:AU2024-04-012024-06-300001210708country:US2024-04-012024-06-300001210708country:GB2024-04-012024-06-300001210708hson:OtherMember2024-04-012024-06-300001210708country:AU2023-04-012023-06-300001210708country:US2023-04-012023-06-300001210708country:GB2023-04-012023-06-300001210708hson:OtherMember2023-04-012023-06-300001210708country:AU2024-01-012024-06-300001210708country:US2024-01-012024-06-300001210708country:GB2024-01-012024-06-300001210708hson:OtherMember2024-01-012024-06-300001210708country:AU2023-01-012023-06-300001210708country:US2023-01-012023-06-300001210708country:GB2023-01-012023-06-300001210708hson:OtherMember2023-01-012023-06-300001210708country:AU2024-06-300001210708country:US2024-06-300001210708country:GB2024-06-300001210708hson:OtherMember2024-06-300001210708country:AU2023-06-300001210708country:US2023-06-300001210708country:GB2023-06-300001210708hson:OtherMember2023-06-3000012107082018-10-150001210708us-gaap:SeriesBPreferredStockMember2018-10-150001210708srt:MinimumMember2018-10-1500012107082018-10-152018-10-15
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
or
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-38704
HUDSON GLOBAL, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Delaware | | 59-3547281 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) |
53 Forest Avenue, Suite 102, Old Greenwich, CT 06870
(Address of principal executive offices) (Zip Code)
(475) 988-2068
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $0.001 par value | | HSON | | The NASDAQ Stock Market LLC |
Preferred Share Purchase Rights | | | | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ☐ | | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | | Smaller reporting company | ☒ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
Class | | Outstanding on July 19, 2024 |
Common Stock - $0.001 par value | | 2,751,386 |
| | | | | | | | |
| | Page |
| | |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
| | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 6. | | |
| | |
| | |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | $ | 35,712 | | | $ | 44,897 | | | $ | 69,603 | | | $ | 87,969 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Direct contracting costs and reimbursed expenses | 18,097 | | | 22,314 | | | 35,658 | | | 43,622 | |
Salaries and related | 14,325 | | | 17,393 | | | 29,491 | | | 34,871 | |
Office and general | 2,412 | | | 2,549 | | | 5,341 | | | 5,488 | |
Marketing and promotion | 778 | | | 932 | | | 1,656 | | | 1,913 | |
Depreciation and amortization | 287 | | | 354 | | | 684 | | | 702 | |
Total operating expenses | 35,899 | | | 43,542 | | | 72,830 | | | 86,596 | |
Operating (loss) income | (187) | | | 1,355 | | | (3,227) | | | 1,373 | |
Non-operating (expense) income: | | | | | | | |
Interest income, net | 94 | | | 130 | | | 187 | | | 194 | |
Other (expense) income, net | (95) | | | (50) | | | (134) | | | 83 | |
(Loss) income before income taxes | (188) | | | 1,435 | | | (3,174) | | | 1,650 | |
Provision for income taxes | 253 | | | 857 | | | 165 | | | 718 | |
| | | | | | | |
| | | | | | | |
Net (loss) income | $ | (441) | | | $ | 578 | | | $ | (3,339) | | | $ | 932 | |
Earnings (loss) per share: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Basic | $ | (0.15) | | | $ | 0.19 | | | $ | (1.10) | | | $ | 0.30 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Diluted | $ | (0.15) | | | $ | 0.18 | | | $ | (1.10) | | | $ | 0.30 | |
Weighted-average shares outstanding: | | | | | | | |
Basic | 3,011 | | | 3,084 | | | 3,026 | | | 3,059 | |
Diluted | 3,011 | | | 3,138 | | | 3,026 | | | 3,130 | |
See accompanying notes to Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Comprehensive (loss) income: | | | | | | | |
Net (loss) income | $ | (441) | | | $ | 578 | | | $ | (3,339) | | | $ | 932 | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustment, net of income taxes | 118 | | | (54) | | | (518) | | | (63) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income (loss), net of income taxes | 118 | | | (54) | | | (518) | | | (63) | |
Comprehensive (loss) income | $ | (323) | | | $ | 524 | | | $ | (3,857) | | | $ | 869 | |
See accompanying notes to Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 14,664 | | | $ | 22,611 | |
Accounts receivable, less allowance for expected credit losses of $378 and $378, respectively | 24,512 | | | 19,710 | |
Restricted cash, current | 420 | | | 354 | |
Prepaid and other | 2,422 | | | 3,172 | |
| | | |
Total current assets | 42,018 | | | 45,847 | |
Property and equipment, net of accumulated depreciation of $1,649 and $1,564, respectively | 336 | | | 421 | |
Operating lease right-of-use assets | 1,056 | | | 1,431 | |
Goodwill | 5,724 | | | 5,749 | |
Intangible assets, net of accumulated amortization of $3,353 and $2,771, respectively | 3,040 | | | 3,628 | |
Deferred tax assets, net | 3,526 | | | 3,360 | |
Restricted cash | 195 | | | 205 | |
Other assets | 235 | | | 317 | |
| | | |
Total assets | $ | 56,130 | | | $ | 60,958 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 1,115 | | | $ | 868 | |
Accrued salaries, commissions, and benefits | 5,428 | | | 4,939 | |
Accrued expenses and other current liabilities | 5,427 | | | 4,635 | |
| | | |
Operating lease obligations, current | 764 | | | 768 | |
| | | |
Total current liabilities | 12,734 | | | 11,210 | |
Income tax payable | 90 | | | 87 | |
Operating lease obligations | 292 | | | 664 | |
| | | |
Other liabilities | 450 | | | 443 | |
| | | |
Total liabilities | 13,566 | | | 12,404 | |
Commitments and contingencies | | | |
Stockholders’ equity: | | | |
Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding | — | | | — | |
Common stock, $0.001 par value, 20,000 shares authorized; 4,003 and 3,896 shares issued; 2,751 and 2,807 shares outstanding, respectively | 4 | | | 4 | |
Additional paid-in capital | 493,500 | | | 493,036 | |
Accumulated deficit | (428,586) | | | (425,247) | |
Accumulated other comprehensive loss, net of applicable tax | (1,808) | | | (1,290) | |
Treasury stock, 1,252 and 1,089 shares, respectively, at cost | (20,546) | | | (17,949) | |
Total stockholders’ equity | 42,564 | | | 48,554 | |
Total liabilities and stockholders’ equity | $ | 56,130 | | | $ | 60,958 | |
See accompanying notes to Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (3,339) | | | $ | 932 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
Depreciation and amortization | 684 | | | 702 | |
Provision for expected credit losses | 3 | | | — | |
Benefit from deferred income taxes | (250) | | | (345) | |
Stock-based compensation | 565 | | | 856 | |
| | | |
| | | |
Changes in operating assets and liabilities, net of effect of dispositions: | | | |
Increase in accounts receivable | (5,048) | | | (1,231) | |
Increase in prepaid and other assets | (351) | | | (849) | |
Increase (decrease) in accounts payable, accrued expenses, and other liabilities | 1,678 | | | (2,370) | |
| | | |
Net cash used in by operating activities | (6,058) | | | (2,305) | |
Cash flows from investing activities: | | | |
Capital expenditures | (23) | | | (39) | |
Proceeds from corporate benefit policy | 1,076 | | | — | |
| | | |
Net cash provided by (used in) investing activities | 1,053 | | | (39) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Payments for business acquisition liabilities | — | | | (1,250) | |
| | | |
Purchase of treasury stock (including payment of tax withholdings) | (2,382) | | | (573) | |
Cash paid for net settlement of employee restricted stock units | (198) | | | (209) | |
Net cash used in financing activities | (2,580) | | | (2,032) | |
Effect of exchange rates on cash, cash equivalents, and restricted cash | (306) | | | (97) | |
Net decrease in cash, cash equivalents, and restricted cash | (7,891) | | | (4,473) | |
Cash, cash equivalents, and restricted cash, beginning of the period | 23,170 | | | 27,477 | |
Cash, cash equivalents, and restricted cash, end of the period | $ | 15,279 | | | $ | 23,004 | |
Supplemental disclosures of cash flow information: | | | |
| | | |
Cash received during the period for interest | $ | 187 | | | $ | 195 | |
Net cash payments during the period for income taxes | $ | 467 | | | $ | 1,188 | |
Cash paid for amounts included in operating lease liabilities | $ | 396 | | | $ | 264 | |
Supplemental non-cash disclosures: | | | |
Right-of-use assets obtained in exchange for operating lease liabilities | $ | — | | | $ | 837 | |
| | | |
See accompanying notes to Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | |
| | June 30, 2024 | | June 30, 2023 | | June 30, 2024 | | June 30, 2023 | |
| | Shares | | Value | | Shares | | Value | | Shares | | Value | | Shares | | Value | |
Total stockholders’ equity, beginning balance | | 2,833 | | | $ | 44,303 | | | 2,824 | | | $ | 46,395 | | | 2,807 | | | $ | 48,554 | | | 2,794 | | | $ | 45,792 | | |
| | | | | | | | | | | | | | | | | |
Common stock and additional paid-in capital: | | | | | | | | | | | | | | | | | |
Beginning balance | | 3,995 | | | 493,418 | | | 3,861 | | | 492,044 | | | 3,896 | | | 493,040 | | | 3,823 | | | 491,571 | | |
Stock-based compensation expense | | 8 | | | 86 | | | 28 | | | 383 | | | 107 | | | 464 | | | 66 | | | 856 | | |
Ending balance | | 4,003 | | | 493,504 | | | 3,889 | | | 492,427 | | | 4,003 | | | 493,504 | | | 3,889 | | | 492,427 | | |
| | | | | | | | | | | | | | | | | |
Treasury stock: | | | | | | | | | | | | | | | | | |
Beginning balance | | (1,162) | | | (19,044) | | | (1,037) | | | (16,910) | | | (1,089) | | | (17,949) | | | (1,029) | | | (16,746) | | |
Purchase of treasury stock (including payment of tax withholdings) | | (87) | | | (1,463) | | | (27) | | | (573) | | | (150) | | | (2,399) | | | (27) | | | (573) | | |
Purchase of net settled restricted stock from employees | | (3) | | | (39) | | | (2) | | | (45) | | | (13) | | | (198) | | | (10) | | | (209) | | |
Ending balance | | (1,252) | | | (20,546) | | | (1,066) | | | (17,528) | | | (1,252) | | | (20,546) | | | (1,066) | | | (17,528) | | |
| | | | | | | | | | | | | | | | | |
Accumulated other comprehensive loss: | | | | | | | | | | | | | | | | | |
Beginning balance | | | | (1,926) | | | | | (1,648) | | | | | (1,290) | | | | | (1,639) | | |
Other comprehensive income (loss) | | | | 118 | | | | | (54) | | | | | (518) | | | | | (63) | | |
Ending balance | | | | (1,808) | | | | | (1,702) | | | | | (1,808) | | | | | (1,702) | | |
| | | | | | | | | | | | | | | | | |
Accumulated deficit: | | | | | | | | | | | | | | | | | |
Beginning balance | | | | (428,145) | | | | | (427,091) | | | | | (425,247) | | | | | (427,394) | | |
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses | | | | — | | | | | — | | | | | — | | | | | (51) | | |
Net (loss) income | | | | (441) | | | | | 578 | | | | | (3,339) | | | | | 932 | | |
Ending balance | | | | (428,586) | | | | | (426,513) | | | | | (428,586) | | | | | (426,513) | | |
| | | | | | | | | | | | | | | | | |
Total stockholders’ equity, ending balance | | 2,751 | | | $ | 42,564 | | | 2,823 | | | $ | 46,684 | | | 2,751 | | | $ | 42,564 | | | 2,823 | | | $ | 46,684 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
See accompanying notes to Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 1 – BASIS OF PRESENTATION
These interim unaudited condensed consolidated financial statements have been prepared in accordance with United States of America (“U.S.”) generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting and should be read in conjunction with the consolidated financial statements and related notes of Hudson Global, Inc. and its subsidiaries (the “Company”) filed in its Annual Report on Form 10-K for the year ended December 31, 2023.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of operating revenues and expenses. These estimates are based on management’s knowledge and judgments. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. The condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. Intra-entity balances and transactions between and among the Company and its subsidiaries have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation with no material impact on the condensed consolidated financial statements. For more information, see Note 2 to the Condensed Consolidated Financial Statements.
NOTE 2 – DESCRIPTION OF BUSINESS
The Company delivers Recruitment Process Outsourcing (“RPO”) services consisting of recruitment and contracting solutions tailored to the individual needs of primarily mid-to-large multinational companies. The Company operates directly in fourteen countries with three reportable geographic business segments: the Americas, Asia Pacific, and Europe, Middle East, and Africa ("EMEA"). The Company’s RPO delivery teams utilize recruitment process methodologies and project management expertise to meet clients’ ongoing business needs. The Company’s RPO services include complete recruitment outsourcing, project-based outsourcing, contingent workforce solutions, and recruitment consulting for clients’ permanent staff hires. Hudson’s RPO services leverage the Company’s consultants, supported by the Company’s specialists, in the delivery of its proprietary methods to identify, select, and engage the best-fit talent for critical client roles. In addition, the Company provides RPO clients with a range of outsourced professional contract staffing services and managed service provider services offered sometimes on a standalone basis and sometimes as part of a blended total talent solution. These services draw upon a combination of specialized recruiting and project management competencies to deliver a wide range of solutions. Hudson RPO-employed professionals - either individually or as a team - are placed with client organizations for a defined period of time based on specific business needs of the client.
On March 12, 2024 and April 15, 2024, the Company announced that it had entered into strategic agreements with Executive Solutions and Striver, respectively, both Dubai-based talent solutions companies. These agreements allowed the Company to expand its global footprint and client base in the Middle East market. The Company evaluated the agreements under ASC 805 “Business Combinations” and determined that the transactions did not qualify as either business combinations or asset purchases. Payments associated with these agreements were classified as compensation expense and were included in the “Salaries and related” caption on the Company’s Condensed Consolidated Statements of Operations.
In February 2024, Hudson RPO announced an expansion of its service offerings to include executive search in North America, focusing on Life Sciences and Human Resources. This expansion, coupled with the Company’s existing RPO strategy, provides a comprehensive talent acquisition approach, enabling clients to develop streamlined and centralized hiring strategies within a flexible and scalable total talent solution. This service offering better positions the Company as a strategic partner helping clients to implement successful business strategies.
On November 15, 2023, Hudson announced the appointment of Jacob “Jake” Zabkowicz as Global Chief Executive Officer of Hudson RPO. Mr. Zabkowicz leads the vision, strategy, and execution of Hudson RPO’s growth plan, while Jeff Eberwein, Chief Executive Officer of Hudson Global, Inc., continues to focus on capital allocation, acquisitions, corporate strategy, and maximizing shareholder value.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
On October 31, 2023, Hudson completed its acquisition of Hudson Global Resources (Singapore) Pte. Ltd. (“Hudson Singapore”), a provider of recruitment services primarily to clients operating in Singapore. Hudson Singapore has a 30-year track record of senior placements and project recruitment work across Southeast Asia including Singapore, Malaysia, the Philippines, Vietnam, Thailand, and Indonesia.
See Note 14 to the Condensed Consolidated Financial Statements for further details regarding the Company’s reportable segments: Americas, Asia Pacific, and EMEA.
NOTE 3 – ACCOUNTING PRONOUNCEMENTS
Recent Accounting Standard Update Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. This standard provides additional disclosures about significant expenses in operating segments. The guidance is effective for all entities, for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the effect of adopting this new accounting guidance, and will adopt the guidance when it becomes effective.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies FASB Accounting Standards Codification 740 to enhance the transparency and decision usefulness of income tax disclosures. ASU No. 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance, and will adopt the guidance when it becomes effective.
Adoption of New Accounting Pronouncements
On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This update was issued by the Financial Accounting Standards Board (the “FASB”) in June 2016. This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) and replaces the methodology that recognizes impairment of financial instruments when losses have been incurred with a methodology that recognizes impairment of financial instruments when losses are expected. The new standard requires entities to use a forward-looking “expected loss” model for most financial instruments, including accounts receivable and unbilled services that is based on historical information, current information, and reasonable and supportable forecasts.
As a result of adopting the new standard, the Company recognized a cumulative increase to allowances for accounts receivable and unbilled services and a reduction to the 2023 opening balance of retained earnings of $51. Comparative periods prior to the adoption of this standard and their respective disclosures have not been adjusted. The adoption of ASU 2016-13 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 4 – REVENUE RECOGNITION
Nature of Services
We account for a contract when both parties to the contract have approved the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Revenues are recognized over time, using an input or output method, as the control of the promised services is transferred to the client in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The majority of our contracts are short-term in nature as they include termination clauses that allow either party to cancel within a short termination period, without cause. Revenue includes billable travel and other reimbursable costs and is reported net of sales or use taxes collected from clients and remitted to taxing authorities.
We generally determine standalone selling prices based on the prices included in our client contracts, using expected cost plus profit, or other observable prices. The price as specified in our client contracts is generally considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar client in similar circumstances. Certain client contracts have variable consideration, including usage-based fees that increase the transaction price and volume rebates or other similar items that generally reduce the transaction price. We estimate variable consideration using the expected value method based on the terms of the client contract and historical evidence. These amounts may be constrained and are only included in revenue to the extent we do not expect a significant reversal when the uncertainty associated with the variable consideration is resolved. Other than bonuses to be paid to contractors, on behalf of our clients, our estimated amounts of variable consideration subject to constraints are not material, and we do not believe that there will be significant changes to our estimates. Certain contract employees are entitled to performance bonuses at the sole discretion of the client and are constrained until approved. No bonuses were approved and paid to our contract employees on behalf of our clients in the six months ended June 30, 2024 and 2023.
We record accounts receivable when our right to consideration becomes unconditional. Contract assets primarily relate to our rights to consideration for services provided that such rights to consideration are conditional on satisfaction of future performance obligations. A contract liability for deferred revenue is recorded when consideration is received, or is unconditionally due, from a client prior to transferring control of services to the client under the terms of a contract. Deferred revenue balances typically result from advance payments received from clients prior to transferring control of services. Other than deferred revenue, we do not have any material contract assets or liabilities as of and for the six months ended June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, deferred revenue was $193 and $96, respectively.
Payment terms vary by client and the services being provided to the client. We consider payment terms that exceed one year to be extended payment terms. Substantially all of the Company’s contracts include payment terms of 90 days or less, and we do not extend payment terms beyond one year.
We primarily record revenue on a gross basis in the Condensed Consolidated Statements of Operations and Comprehensive Income based upon the following key factors:
•We maintain the direct contractual relationship with the client and are responsible for fulfilling the service promised to the client.
•We maintain control over our contractors while the services to the client are being performed, including our contractors’ billing rates, and are ultimately responsible for paying them.
RPO. We provide complete recruitment outsourcing, project-based outsourcing, and recruitment consulting services for clients’ permanent staff hires. We recognize revenue for our RPO over time in an amount that reflects the consideration we expect to be entitled to and have an enforceable right to payment in exchange for our services. The client simultaneously receives and consumes the benefits of the services as they are provided. The transaction prices contain both fixed fees and variable consideration. Variable consideration is constrained by candidates accepting offers of permanent employment. We recognize revenue on fixed fees as the performance obligations are satisfied and variable fees as the constraint is lifted. We do not incur incremental costs to obtain our RPO contracts. The costs to fulfill these contracts are expensed as incurred.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
We recognize permanent placement revenue when employment candidates accept offers of permanent employment. We have a substantial history of estimating the financial impact of permanent placement candidates who do not remain with our clients through a guarantee period. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.
Contracting. We provide clients with a range of outsourced professional contract staffing services and managed service provider services, sometimes offered on a standalone basis and sometimes offered as part of a blended total talent solution. We recognize revenue for our contracting services over time as services are performed in an amount that reflects the consideration we expect to be entitled to and have an enforceable right to payment in exchange for our services, which is generally calculated as hours worked multiplied by the agreed-upon hourly bill rate. The client simultaneously receives and consumes the benefits of the services as they are provided. We do not incur incremental costs to obtain our contracts for outsourced professional contract staffing services and managed service provider services. The costs incurred to fulfill these contracts are expensed as incurred.
Unsatisfied performance obligations. As a practical expedient, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an expected original duration of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
Disaggregation of Revenue
The following table presents our disaggregated revenues by revenue source. For additional information on the revenues by geographical segment, see Note 14 to the Condensed Consolidated Financial Statements.
| | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2024 | | 2023 | |
RPO | $ | 17,770 | | | $ | 21,919 | | |
Contracting | 17,942 | | | 22,978 | | |
Total Revenue | $ | 35,712 | | | $ | 44,897 | | |
| | | | |
| | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 | |
RPO | $ | 33,608 | | | $ | 43,440 | | |
Contracting | 35,995 | | | 44,529 | | |
Total Revenue | $ | 69,603 | | | $ | 87,969 | | |
| | | | |
NOTE 5 – ACCOUNTS RECEIVABLE, NET
Accounts receivable balances are composed of trade and unbilled receivables. Unbilled accounts receivable represent revenue recorded in advance of processing formal invoices pursuant to the completion of contract provisions and, generally, become billable at contractually specified dates. Unbilled receivables of $7,257 and $5,163 as of June 30, 2024 and December 31, 2023, respectively, are expected to be invoiced and collected within one year. The Company records accounts receivable when its right to consideration becomes unconditional. Contract assets primarily relate to our rights to consideration for services provided that they are conditioned on satisfaction of future performance obligations. Accounts receivable, net, are stated at the amount the Company expects to collect, which is net of estimated losses resulting from the inability of its customers to make required payments.
The Company generally establishes customer credit limits and estimates the allowance for credit losses on a country or geographic basis. Customer credit limits are based upon an initial evaluation of the customer’s credit quality and we adjust that limit accordingly based upon ongoing credit assessments of the customer, including payment history and changes in credit quality. Consistent with our adoption of ASU 2016-13, effective January 1, 2023 (refer to Note 3 – Accounting
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Pronouncements), the allowance for expected credit losses is determined based on an assessment of past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends.
The following table summarizes the components of “Accounts receivable, net” as presented on the Condensed Consolidated Balance Sheets:
| | | | | | | | | | | | | | |
| June 30, | | December 31, | |
Accounts Receivable: | 2024 | | 2023 | |
Billed receivables | $ | 17,633 | | | $ | 14,925 | | |
Unbilled receivables | 7,257 | | | 5,163 | | |
Accounts Receivable, Gross | $ | 24,890 | | | $ | 20,088 | | |
Allowance for expected credit losses | (378) | | | (378) | | |
Accounts Receivable, Net | $ | 24,512 | | | $ | 19,710 | | |
| | | | |
The following table summarizes the total provision for expected credit losses and write-offs:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Beginning balance | $ | 367 | | | $ | 102 | | | $ | 378 | | | $ | 51 | |
Provision for expected credit losses | 11 | | | — | | | 3 | | | — | |
Write-offs | — | | | — | | | (3) | | | — | |
Cumulative-effect adjustment from adoption of ASU 2016-13, Credit Losses | — | | | — | | | — | | | 51 | |
Ending Balance | $ | 378 | | | $ | 102 | | | $ | 378 | | | $ | 102 | |
| | | | | | | |
NOTE 6 – ACQUISITIONS
Hudson Global Resources (Singapore) Pte. Ltd.
On October 31, 2023, the Company entered into a share purchase agreement by and among, Hudson RPO Limited, a wholly owned subsidiary of the Company (“Buyer”), and Hudson Global Resources (Australia) Pty Limited (“Seller”), and completed the acquisition by Hudson RPO Limited of all of the shares of Hudson Global Resources (Singapore) Pte. Ltd. (“Singapore Acquisition”).
Hudson Singapore is a provider of recruitment services primarily to clients operating in Singapore, with a 30-year track record of senior placements and project recruitment work across Southeast Asia including Singapore, Malaysia, the Philippines, Vietnam, Thailand, and Indonesia.
In connection with the Singapore Acquisition, Seller received $2,546 in cash, subject to certain adjustments, at the closing of the Singapore Acquisition. Additionally, Seller has a contingent right to receive earn-out payments not to exceed approximately $317, based upon the achievement of certain performance thresholds and subject to the satisfaction of certain conditions.
The Singapore Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price of $2,574, consisted of the amount paid in cash of $2,546 and a preliminary working capital adjustment of $28. Potential contingent earn-out payments of up to approximately $317 were excluded from the purchase price as the associated revenue milestones were not achieved by the seller through December 2023. No fair value was assigned to the earn-out as the performance thresholds were not achieved. The purchase price, which included $491 of cash and cash equivalents acquired, was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of October 31, 2023, with the excess recorded as goodwill. None of the goodwill is expected to be deductible for tax purposes. The Company’s goodwill represents the expected profit growth over time that is attributable to expanding our footprint and market share in Singapore and Southeast Asia.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
The values assigned to the assets acquired and liabilities assumed are based on the fair value available and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The Company incurred transaction costs related to the Singapore Acquisition of $13 that were expensed as part of “Office and general”.
Below is a summary of the fair value of the net assets acquired on the acquisition date based on external valuations at the date of the Singapore Acquisition.
| | | | | | | | |
| | Fair Value |
Assets Acquired: | | |
Cash and cash equivalents | | $ | 491 | |
Accounts receivable | | 753 | |
Prepaid expenses and other assets | | 88 | |
Property and equipment | | 9 | |
Operating lease right-of-use assets | | 32 | |
Deferred tax assets | | 766 | |
Intangible assets | | 212 | |
Goodwill | | 847 | |
Assets Acquired | | $ | 3,198 | |
Liabilities Assumed: | | |
Accrued expenses and other current liabilities | | $ | 580 | |
Other long-term liabilities | | 44 | |
Liabilities Assumed | | $ | 624 | |
| | |
Fair value of consideration transferred | | $ | 2,574 | |
| | |
Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives on the date of the Singapore Acquisition.
| | | | | | | | | | | | | | |
| | Fair Value | | Useful Life |
Non-compete agreements | | $ | 28 | | | 5 years |
Customer lists | | 97 | | | 4 years |
Trade name | | 87 | | | 5 years |
Total identifiable assets | | $ | 212 | | | |
| | | | |
Hunt & Badge Consulting Private Limited
On August 19, 2022, the Company entered into a share purchase agreement by and among Hudson RPO Limited, a wholly owned subsidiary of the Company (“HnB Buyer”), Hunt & Badge Consulting Private Limited (“Seller” or “HnB”), and certain principals of HnB, and completed the acquisition by HnB Buyer of all of the membership interests of the Seller (the “HnB Acquisition”).
HnB is a provider of recruitment services to customers operating in India. HnB partners with companies of all sizes, including well-known multinationals, across a variety of industries to help meet their talent procurement needs.
In connection with the HnB Acquisition, Seller received $1,064 in cash, subject to certain adjustments, at the closing of the HnB Acquisition. Additionally, Seller has a contingent right to receive earn-out payments not to exceed $350 in
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
aggregate payable over an eighteen-month period, subject to the achievement of certain performance thresholds and, the satisfaction of certain conditions.
The HnB Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price of $1,260, which consists of the amount paid in cash of $1,064, a working capital adjustment of $46, net of an owner receivable of $28, and contingent earn-out payments of up to $350 (which such earn-out payments are contingent upon the achievement of certain revenue milestones through December 2023), was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of August 19, 2022, with the excess recorded as goodwill. None of the goodwill is expected to be deductible for tax purposes. The Company’s goodwill represents the expected profit growth over time that is attributable to expanding our footprint and market share in India. The purchase price included $314 of cash and cash equivalents acquired. As of June 30, 2024, the estimated fair value for the contingent earn-out payments that the Company classified as Level 3 in the fair value hierarchy was $150, which is the agreed upon minimum payment. These fair value estimates are based on significant inputs not observed in the market and reflect our own assumptions (forecasted revenue) through December 31, 2023.
In determining the fair value of the contingent consideration liability, the Company used an estimate based on a number of possible projections over the earn-out period. Given the short duration of the earn-out period, the fair value of contingent liability was measured on an undiscounted basis. The Company will continue to reassess the fair value of the acquisition-related contingent consideration at each reporting period based on additional information as it becomes available. This contingent consideration will be remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be marked to market and included in “Other income (expense), net” on the Company’s Condensed Consolidated Statements of Operations. For the three and six months ended June 30, 2024, no gains or losses were recognized in earnings for changes in the remeasurement of the contingent consideration.
The values assigned to the assets acquired and liabilities assumed are based on the fair value available and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Excluding the contingent consideration, any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The Company incurred transaction costs related to the HnB Acquisition of $63 that were expensed as part of “Office and general”. The Company’s accounting for the business combination was completed as of December 31, 2022.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Below is a summary of the fair value of the net assets acquired on the acquisition date based on internal valuations at the date of the HnB Acquisition.
| | | | | | | | |
| | Fair Value |
Assets Acquired: | | |
Cash and cash equivalents | | $ | 314 | |
Accounts receivable | | 80 | |
Prepaid expenses and other assets | | 77 | |
Property and equipment | | 35 | |
Intangible assets | | 150 | |
Goodwill | | 687 | |
Assets Acquired | | $ | 1,343 | |
Liabilities Assumed: | | |
Accrued expenses and other current liabilities | | $ | 20 | |
Other long-term liabilities | | 63 | |
Liabilities Assumed | | $ | 83 | |
| | |
Fair value of consideration transferred | | $ | 1,260 | |
| | |
Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives on the date of the HnB Acquisition.
| | | | | | | | | | | | | | |
| | Fair Value | | Useful Life |
Non-compete agreements | | $ | 40 | | | 3 years |
Customer lists | | 60 | | | 3 years |
Trade name | | 50 | | | 5 years |
Total identifiable assets | | $ | 150 | | | |
| | | | |
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 7 – STOCK-BASED COMPENSATION
Incentive Compensation Plan
The Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated on May 24, 2016 and further amended on September 14, 2020 and May 17, 2022 (the “ISAP”), pursuant to which it can issue equity-based compensation incentives to eligible participants. The ISAP permits the granting of stock options, restricted stock, restricted stock units, and other types of equity-based awards. The Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) will establish such conditions as it deems appropriate on the granting or vesting of stock options, restricted stock, restricted stock units and other types of equity-based awards. As determined by the Compensation Committee, equity awards may also be subject to immediate vesting upon the occurrence of certain events including death, disability, retirement or a change in control of the Company. When we make grants of restricted stock or restricted stock units to our executive officers, including the named executive officers, we enter into Restricted Stock Agreements and Restricted Stock Unit Agreements with such executive officers that contain provisions that are triggered upon a termination of an executive officer or a change in control of our Company. For awards of restricted stock granted beginning on November 6, 2015, effective upon a change in control of our Company, if the executive is employed by us or an affiliate of ours immediately prior to the date of such change in control and is subsequently terminated within 12 months following the date of such change in control, the shares of restricted stock will fully vest and the restrictions imposed upon the restricted stock will be immediately deemed to have lapsed. For awards of restricted stock units granted beginning on March 10, 2016, effective upon a change in control of our Company, if the executive is employed by us or an affiliate of ours immediately prior to the date of such change in control and is subsequently terminated within 12 months following the date of such change in control, the restricted stock units will fully vest and the restrictions imposed upon the restricted stock units will be immediately deemed to have lapsed. The Company primarily grants restricted stock and restricted stock units to its employees. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock of the Company issued under the ISAP.
The Compensation Committee administers the ISAP and may designate any of the following as a participant under the ISAP: any officer or other employee of the Company or its affiliates or individuals engaged to become an officer or employee, consultants or other independent contractors who provide services to the Company or its affiliates, and non-employee directors of the Company. On May 17, 2022, the Company’s stockholders at the 2022 Annual Meeting of Stockholders approved amendments to the ISAP to, among other things, increase the number of shares of the Company’s common stock that are reserved for issuance by 250,000 shares. As of June 30, 2024, there were 129,051 shares of the Company’s common stock available for future issuance under the ISAP.
All share issuances related to stock compensation plans are issued from the aforementioned stock available for future issuance under stockholder approved compensation plan.
For the six months ended June 30, 2024, the Company granted 47,647 restricted stock units subject to performance vesting conditions for the year ended December 31, 2024, and granted 12,540 of discretionary time-vested restricted stock units to certain employees that were not subject to performance conditions. For the six months ended June 30, 2023, the Company granted 28,841 restricted stock units subject to performance vesting conditions for the year ended December 31, 2023.
A summary of the quantity and vesting conditions for stock-based units granted to the Company’s employees for the six months ended June 30, 2024 was as follows:
| | | | | | | | | | | | | | |
Vesting conditions | | | | | | Number of Restricted Stock Units Granted | | |
Performance and service conditions - Type 1 (1) (2) | | | | | | 14,939 | | | |
Performance and service conditions - Type 2 (1) (2) | | | | | | 32,708 | | | |
Service conditions only - Type 1 (2) | | | | | | 12,540 | | | |
Total shares of stock award granted | | | | | | 60,187 | | | |
(1)The performance conditions with respect to restricted stock units may be satisfied as follows:
(a)For grants to Corporate office employees subject to 2024 performance conditions, 100% of the restricted stock units may be earned on the basis of performance as measured by a “group adjusted EBITDA”.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
(2)To the extent restricted stock units are earned, such restricted stock units will vest on the basis of service as follows:
(a)33% and 66.6% for Type 1 and Type 2, respectively, of the restricted stock units will vest on the first anniversary of the grant date;
(b)33% and 16.7% for Type 1 and Type 2, respectively, of the restricted stock units will vest on the second anniversary of the grant date; and
(c)34% and 16.7% for Type 1 and Type 2, respectively, of the restricted stock units will vest on the third anniversary of the grant date; provided that, in each case, the employee remains employed by the Company from the grant date through the applicable service vesting date.
The Company also maintains the Director Deferred Share Plan (the “Director Plan”) as part of the ISAP pursuant to which it can issue restricted stock units to its non-employee directors. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock issued under the ISAP upon a director ceasing service as a member of the Company’s Board. The restricted stock units vest immediately upon grant and are credited to each of the non-employee director’s retirement accounts under the Director Plan. Restricted stock units issued under the Director Plan contain the right to a dividend equivalent award in the form of additional restricted stock units. The dividend equivalent award is calculated using the same rate as the cash dividend paid on a share of the Company’s common stock, and then divided by the closing price of the Company’s common stock on the date the dividend is paid to determine the number of additional restricted stock units to grant. Dividend equivalent awards have the same vesting terms as the underlying awards. During the six months ended June 30, 2024, the Company granted 4,672 restricted stock units to its non-employee directors pursuant to the Director Plan.
As of June 30, 2024, 218,538 restricted stock units are deferred under the Company’s ISAP.
For the three and six months ended June 30, 2024 and 2023, the Company’s stock-based compensation expense related to restricted stock units and restricted shares of common stock were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | |
Restricted shares of common stock | | $ | — | | | $ | — | | | $ | — | | | $ | 16 | |
Restricted stock units | | 86 | | | 383 | | | 464 | | | 840 | |
Restricted stock units-cash settled liabilities | | 101 | | | — | | | 101 | | | — | |
Total | | $ | 187 | | | $ | 383 | | | $ | 565 | | | $ | 856 | |
Restricted Stock Units
As of June 30, 2024, the Company had $951 of unrecognized stock-based compensation expense related to outstanding unvested restricted stock units. The Company expects to recognize that cost over a weighted average service period of 0.8 years. Restricted stock units have no voting or dividend rights until the awards are vested.
Changes in the Company’s restricted stock units for the six months ended June 30, 2024 and 2023 were as follows:
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2024 | | | | |
| Performance-based | | Time-based/Director | | Total | | |
| Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | | | |
Unvested restricted stock units at January 1, 2024 | 95,264 | | | $ | 23.49 | | | 80,422 | | | $ | 16.50 | | | 175,686 | | | $ | 20.29 | | | | | |
Granted | 47,647 | | | $ | 14.51 | | | 17,212 | | | $ | 16.07 | | | 64,859 | | | $ | 14.93 | | | | | |
Shares earned above target (a) | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | | | |
Vested | (56,263) | | | $ | 21.69 | | | (10,835) | | | $ | 18.49 | | | (67,098) | | | $ | 21.17 | | | | | |
Forfeited | (28,841) | | | $ | 22.27 | | | (340) | | | $ | 17.72 | | | (29,181) | | | $ | 22.22 | | | | | |
Unvested restricted stock units at June 30, 2024 | 57,807 | | | $ | 18.45 | | | 86,459 | | | $ | 16.16 | | | 144,266 | | | $ | 17.08 | | | | | |
(a) The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
(a) The number of shares earned above target are based on the performance targets established by the Compensation Committee at the initial grant date.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 | | | | |
| Performance-based | | Time-based/Director | | Total | | |
| Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | Number of Shares of Restricted Stock Units | | Weighted Average Grant-Date Fair Value | | | | |
Unvested restricted stock units at January 1, 2023 | 130,186 | | | $ | 23.56 | | | 33,390 | | | $ | 20.31 | | | 163,576 | | | $ | 22.89 | | | | | |
Granted | 28,841 | | | $ | 22.27 | | | 3,710 | | | $ | 21.31 | | | 32,551 | | | $ | 22.16 | | | | | |
Shares earned above target (a) | 3,940 | | | $ | 35.72 | | | — | | | $ | — | | | 3,940 | | | $ | 35.72 | | | | | |
Vested | (58,834) | | | $ | 22.10 | | | (12,373) | | | $ | 19.13 | | | (71,207) | | | $ | 21.59 | | | | | |
Forfeited | (8,869) | | | $ | 35.10 | | | (1,700) | | | $ | 14.54 | | | (10,569) | | | $ | 31.79 | | | | | |
Unvested restricted stock units at June 30, 2023 | 95,264 | | | $ | 23.49 | | | 23,027 | | | $ | 21.53 | | | 118,291 | | | $ | 23.11 | | | | | |
(a) The number of shares earned above target are based on the performance targets established by the Compensation Committee at the initial grant date.
(a) The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
Shares of Common Stock
Changes in the Company’s restricted shares of common stock for the six months ended June 30, 2024 and 2023, were as follows:
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | Six Months Ended June 30, |
| | | 2023 | |
| | | | | Number of Restricted Shares of Common Stock | | Weighted Average Grant-Date Fair Value | |
Unvested restricted shares of common stock at January 1 | | | | | 17,410 | | | $ | 9.57 | | |
Vested | | | | | (17,410) | | | $ | 9.57 | | |
Unvested restricted shares of common stock at June 30, | | | | | — | | | $ | — | | |
NOTE 8 – INCOME TAXES
Income Tax Provision
Under ASC 270, “Interim Reporting”, and ASC 740-270, “Income Taxes – Interim Reporting”, the Company is required to adjust its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate. Jurisdictions with a projected loss for the full year where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. Applying the provisions of ASC 270 and ASC 740-270 could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections.
Effective Tax Rate
The provision for income taxes for the six months ended June 30, 2024 was $165 on a pre-tax loss of $3,174, compared to a provision for income taxes of $718 on pre-tax income of $1,650 for the same period in 2023. The Company’s effective income tax rate was negative 5% and positive 44% for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to pretax losses for which no tax benefit can be recognized foreign tax rate differences, and non-deductible expense. For the six months ended June 30, 2023, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to a discrete tax benefit recognized following the lapse of certain statutes of limitations related to Spain, recognition of a portion of a deferred tax asset in Canada, state income taxes, changes in valuation allowances in the U.S. and certain foreign jurisdictions which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses. The current YTD ETR differs significantly from the prior period YTD ETR primarily due to the interaction of similar rate reconciliation items, including change in valuation allowance, with a negative pretax book income in the current period versus positive pretax book income in the prior year comparative period.
Uncertain Tax Positions
As of both June 30, 2024 and December 31, 2023, the Company had $60, respectively, of unrecognized tax benefits, excluding interest and penalties, which if recognized in the future, would lower the Company’s effective income tax rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as part of the provision for income taxes. As of June 30, 2024 and December 31, 2023, the Company had $30 and $27, respectively, of accrued interest and penalties associated with unrecognized tax benefits.
The statute of limitations for capital gains taxes on the transfer of shares in Spain lapsed in January 2023. The FIN48 reserve for Spain capital gains taxes, interest, and penalties of approximately $408 was released as a tax benefit in the first quarter of 2023.
Based on information available as of June 30, 2024, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by $0 over the next 12 months as a result of projected resolutions of global tax examinations and controversies and potential expirations of the applicable statutes of limitations.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
In many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by the relevant tax authorities. Tax years with net operating losses (“NOLs”) remain open until such losses expire or until the statutes of limitations for those years when the NOLs are used expire. As of June 30, 2024, the Company’s open tax years, which remain subject to examination by the relevant tax authorities, are between 2016 and 2023 depending on the jurisdiction.
The Company believes that its unrecognized tax benefits as of June 30, 2024 are appropriately reflected for all years subject to examination above.
Net Operating Losses (“NOLs”), Capital Losses, and Valuation Allowance
The Company recorded a valuation allowance against all of our consolidated US deferred tax assets for NOLs and Capital Losses as of June 30, 2024 and December 31, 2023. We intend to continue maintaining a full valuation allowance on our deferred tax assets for NOLs until there is sufficient evidence to support the reversal of all or some portion of these allowances in the future.
NOTE 9 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the Company’s net income (loss) by the weighted average number of shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings (loss) per share is computed by dividing the Company’s net income (loss) by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options “in-the-money”, unvested restricted stock, and unvested restricted stock units. The dilutive impact of stock options, unvested restricted stock, and unvested restricted stock units is determined by applying the “treasury stock” method. Performance-based restricted stock awards are included in the computation of diluted earnings per share only to the extent that the underlying performance conditions: (i) are satisfied prior to the end of the reporting period; or (ii) would be satisfied if the end of the reporting period were the end of the related performance period and the result would be dilutive under the treasury stock method. Stock awards subject to vesting or exercisability based on the achievement of market conditions are included in the computation of diluted earnings per share only when the market conditions are met.
A reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share calculations for the three and six months ended June 30, 2024 and 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2024 | | 2023 | | 2024 | | 2023 | |
Earnings (loss) per share (“EPS”): | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Basic | | $ | (0.15) | | | $ | 0.19 | | | $ | (1.10) | | | $ | 0.30 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Diluted | | $ | (0.15) | | | $ | 0.18 | | | $ | (1.10) | | | $ | 0.30 | | |
EPS numerator - basic and diluted: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Net (loss) income | | $ | (441) | | | $ | 578 | | | $ | (3,339) | | | $ | 932 | | |
EPS denominator (in thousands): | | | | | | | | | |
Weighted average common stock outstanding - basic | | 3,011 | | | 3,084 | | | 3,026 | | | 3,059 | | |
Common stock equivalents: restricted stock units and restricted shares of common stock | | — | | | 54 | | | — | | | 71 | | |
Weighted average number of common stock outstanding - diluted | | 3,011 | | | 3,138 | | | 3,026 | | | 3,130 | | |
(a) The diluted weighted average number of shares of common stock outstanding did not differ from the basic weighted average number of shares of common stock outstanding because the effects of any potential common stock equivalents (see Note 7 to the Condensed Consolidated Financial Statements for further details on unvested
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
restricted stock units) were anti-dilutive and therefore not included in the calculation of the denominator of dilutive earnings per share.
The weighted average number of shares outstanding used in the computation of diluted net earnings per share for the three and six months ended June 30, 2024 and 2023 did not include the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| | | | | | | | |
Unvested restricted stock units | | — | | | — | | | — | | | 497 | |
| | | | | | | | |
Total | | — | | | — | | | — | | | 497 | |
NOTE 10– GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company recorded goodwill of $847 on October 31, 2023 in connection with the Singapore Acquisition (See Note 6 for further information on the Singapore Acquisition).
For the six months ended June 30, 2024 and the twelve months ended December 31, 2023, the changes in carrying amount of goodwill were as follows:
| | | | | | | | | | |
| | Carrying Value | | |
| | 2024 | | |
Goodwill, January 1, | | $ | 5,749 | | | |
| | | | |
Currency translation | | (25) | | | |
Goodwill, June 30, 2024 | | $ | 5,724 | | | |
| | | | | | | | | | | | | |
| | | Carrying Value | | |
| | | 2023 | | |
Goodwill, January 1, | | | $ | 4,875 | | | |
Acquisitions | | | 847 | | | |
Currency translation | | | 27 | | | |
Goodwill, December 31, 2023 | | | $ | 5,749 | | | |
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Intangible Assets
The Company’s intangible assets consisted of the following components as of June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
June 30, 2024 | | Weighted Average Remaining Amortization Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Non-compete agreements | | 3.1 | | $ | 146 | | | $ | (107) | | | $ | 39 | |
Trade name | | 6.4 | | 1,635 | | | (622) | | | 1,013 | |
Customer lists | | 3.0 | | 3,955 | | | (2,046) | | | 1,909 | |
Developed technology | | 0.5 | | 657 | | | (578) | | | 79 | |
| | | | $ | 6,393 | | | $ | (3,353) | | | $ | 3,040 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2023 | | Weighted Average Remaining Amortization Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Non-compete agreements | | 3.4 | | $ | 147 | | | $ | (98) | | | $ | 49 | |
Trade name | | 6.7 | | 1,638 | | | (515) | | | 1,123 | |
Customer lists | | 3.5 | | 3,957 | | | (1,690) | | | 2,267 | |
Developed technology | | 0.9 | | 657 | | | (468) | | | 189 | |
| | | | $ | 6,399 | | | $ | (2,771) | | | $ | 3,628 | |
| | | | | | | | |
Amortization expense for the three and six months ended June 30, 2024 was $295 and $582, respectively. Intangible assets are amortized on a straight-line basis over their estimated useful lives. No impairment in the value of amortizable intangible assets was recognized during the six months ended June 30, 2024 and 2023.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Estimated future amortization expense for intangible assets for the remainder of the fiscal year ending December 31, 2024, and for each of the next fiscal years are as follows:
| | | | | | | | | | | |
2024 | | | $ | 547 | |
2025 | | | 870 | |
2026 | | | 634 | |
2027 | | | 549 | |
2028 | | | 129 | |
Thereafter | 311 | |
| | | $ | 3,040 | |
The change in the book value of amortizable intangible assets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | January 1, 2024 Beginning Balance | | | | Amortization | | Translation and Other | | June 30, 2024 Ending Balance |
Non-compete agreements | | $ | 49 | | | | | $ | (9) | | | $ | (1) | | | $ | 39 | |
Trade name | | 1,123 | | | | | (109) | | | (1) | | | 1,013 | |
Customer lists | | 2,267 | | | | | (355) | | | (3) | | | 1,909 | |
Developed technology | | 189 | | | | | (109) | | | (1) | | | 79 | |
| | $ | 3,628 | | | | | $ | (582) | | | $ | (6) | | | $ | 3,040 | |
| | | | | | | | | | |
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Litigation and Complaints
The Company is subject, from time to time, to various claims, lawsuits, contracts disputes, and other complaints from, for example, clients, candidates, suppliers, landlords for both leased and subleased properties, former and current employees, and regulators or tax authorities arising in the ordinary course of business. The Company routinely monitors claims such as these, and records provisions for losses when the claim becomes probable and the amount due is estimable. Although the outcome of these claims cannot be determined, the Company believes that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or liquidity.
For matters that reach the threshold of probable and estimable, the Company establishes reserves for legal, regulatory, and other contingent liabilities. The Company did not have any legal reserves as of June 30, 2024 and December 31, 2023.
Operating Leases
Our office space leases have lease terms of one year to four years. Some of these operating leases include options to extend the lease terms, and some operating leases include options to terminate the leases earlier than the expiration of the full terms. These options are considered in our determination of the valuation of our right-of-use assets and lease liabilities.
None of our operating leases include implicit rates, and we have determined that the difference between the contractual cost basis and the present value of lease payments calculated using incremental borrowing rates is not material. Our operating lease costs for the six months ended June 30, 2024 and 2023 were $679 and $588, respectively (reflected in Net cash used in operating activities). The weighted average remaining lease term of our operating leases as of June 30, 2024 was 1.6 years.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
As of June 30, 2024, future minimum operating lease payments are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | 2025 | | 2026 | | 2027 | | | | | | Total |
Minimum lease payments | $ | 394 | | | $ | 562 | | | $ | 92 | | | $ | 8 | | | | | | | $ | 1,056 | |
Invoice Finance Credit Facility
On April 8, 2019, the Company’s Australian subsidiary (“Australian Borrower”) entered into an invoice finance credit facility agreement (the “NAB Facility Agreement”) with National Australia Bank Limited (“NAB”). The NAB Facility Agreement provides the Australian Borrower with the ability to borrow funds based on a percentage of eligible trade receivables up to a maximum of 4 million Australian dollars. No receivables have terms greater than 90 days, and any risk of loss is retained by the Australian Borrower. The interest rate is calculated as the variable receivable finance indicator rate, plus a margin of 1.60% per annum. Borrowings under this facility are secured by substantially all of the assets of the Australian Borrower. The NAB Facility Agreement does not have a stated maturity date and can be terminated by either the Australian Borrower or NAB upon 90 days written notice. As of June 30, 2024, there were no amounts outstanding under the NAB Facility Agreement. Interest expense and fees incurred on the NAB Facility Agreement were $5 and $9 for the three and six months ended June 30, 2024, respectively, and $5 and $9 for the three and six months ended June 30, 2023, respectively.
The NAB Facility Agreement contains various restrictions and covenants for the Australian Borrower including (1) that EBITDA must be at least two times total interest paid on debt on a 12-month rolling basis; (2) minimum tangible net worth must be at least 2.5 million Australian dollars and be equal to at least 25% of total tangible assets on June 30 and December 31 (as defined in the NAB Facility Agreement); and (3) additional periodic reporting requirements to NAB. The Australian Borrower was in compliance with all financial covenants under the NAB Facility Agreement as of June 30, 2024.
Amounts borrowed from the NAB Facility may be large, contain short maturities and have quick turnovers. Amounts borrowed and repaid are presented on a net basis on the Condensed Consolidated Statements of Cash Flows.
On May 25, 2022, Hudson Global Resources (Singapore) Pte. Ltd. (“Singapore Borrower”), which the Company acquired on October 31, 2023 (see Note 5 to the Consolidated Financial Statements in Item 8), and the Hong Kong and Shanghai Banking Corporation Limited (“HSBC”), entered into an invoice finance credit facility agreement (the “HSBC Facility Agreement”). The HSBC Facility Agreement allows the Singapore Borrower to borrow funds up to a maximum of 1 million Singapore dollars, based on a percentage of eligible trade receivables. All receivables have a term of no more than 60 days, and any risk of loss is borne by the Singapore Borrower. The interest rate is calculated as the bank’s external cost of capital, plus a margin of 3.5% per annum. The Company ended the HSBC Facility Agreement in May 2024. Interest expense and fees incurred on the HSBC Facility Agreement were $2 and $6 for the three and six months ended June 30, 2024.
The HSBC Facility Agreement contains various restrictions and covenants for the Singapore Borrower including (1) minimum tangible net worth must be at least 1 million Singapore dollars (as defined in the HSBC Facility Agreement); and (2) additional periodic reporting requirements to HSBC. The Company was in compliance with all financial covenants under the HSBC Facility Agreement as of June 30, 2024.
NOTE 12 – STOCKHOLDERS’ EQUITY
Common Stock
On July 30, 2015, the Company announced that its Board authorized the repurchase of up to $10,000 of the Company’s common stock and this repurchase program was completed in June 2023. On August 8, 2023, the Company’s Board of Directors authorized a new stock repurchase program for up to $5,000 of the Company’s outstanding shares of common stock. The Company has repurchased shares from time to time as market conditions warrant. This authorization does not expire. Under the new stock repurchase program, the Company intends to repurchase shares through open market purchases, privately negotiated transactions, block purchases, or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934 (the “Exchange Act”).
During the six months ended June 30, 2024 the Company repurchased a total of 131,438 shares of its common stock for a cost of $2,119 under this authorization. Of these shares, 44,250 shares were repurchased on January 29, 2024 in
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
connection with a transaction with a certain shareholder totaling $655 that excludes tax withholdings. The Company also repurchased 69,567 shares during the second quarter in connection with transactions with certain shareholders totaling $1,181, as well as 17,621 shares of its common stock on the open market for a cost of $283. For the six months ended June 30, 2023, the Company repurchased 27,277 shares of its common stock on the open market for $573. As of June 30, 2024, under the July 30, 2015 and August 8, 2023 authorizations combined, the Company had repurchased an aggregate of 644,850 shares for a total cost of $12,505, completing the July 30, 2015 authorization and leaving $2,495 available for purchase under the August 8, 2023 authorization.
The Company cannot predict when or if it will repurchase any shares of common stock as such stock repurchase program will depend on a number of factors, including constraints specified in any Rule 10b5-1 trading plans, price, general business and market conditions, and alternative investment opportunities. Information regarding share repurchases will be available in the Company’s periodic reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission as required by the applicable rules of the Exchange Act.
NOTE 13 – SHELF REGISTRATION STATEMENT
On June 30, 2022, the Company filed a shelf registration on Form S-3 with the SEC. Under the Form S-3, the Company may offer, issue and sell, from time to time, in one or more offerings and series, together or separately, shares of its common stock, shares of preferred stock, debt securities, subscription rights, purchase contracts, or units, which together shall have an aggregate initial offering price not to exceed $100,000,000. The registration statement was declared effective by the SEC on July 26, 2022. As of June 30, 2024, no securities had been offered or issued under the registration statement.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 14 – SEGMENT AND GEOGRAPHIC DATA
Segment Reporting
The Company operates in three reportable segments: the Hudson regional businesses of Americas, Asia Pacific, and EMEA. Corporate expenses are reported separately for the three reportable segments and pertain to certain functions, such as executive management, corporate governance, investor relations, legal, accounting, tax, and treasury. A portion of these expenses are attributed to the reportable segments for providing the above services to them, and have been allocated to the segments as management service expenses, and are included in the segments’ non-operating other income (expense). Segment information is presented in accordance with ASC 280, “Segment Reporting.” This standard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses based upon internal accounting methods. The Company’s financial reporting systems present various data for management to run the business, including internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. Accounts receivable and long-lived assets are the only significant asset separated by segment for internal reporting purposes.
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Americas | | Asia Pacific | | EMEA | | Corporate | | Inter-Segment Elimination | | Total |
For The Three Months Ended June 30, 2024 | | | | | | |
Revenue, from external customers | $ | 6,972 | | | $ | 22,649 | | | $ | 6,091 | | | $ | — | | | $ | — | | | $ | 35,712 | |
Inter-segment revenue | 59 | | | — | | | 34 | | | — | | | (93) | | | — | |
Total revenue | $ | 7,031 | | | $ | 22,649 | | | $ | 6,125 | | | $ | — | | | $ | (93) | | | $ | 35,712 | |
Adjusted net revenue, from external customers (a) | $ | 6,344 | | | $ | 7,627 | | | $ | 3,644 | | | $ | — | | | $ | — | | | $ | 17,615 | |
Inter-segment adjusted net revenue | 58 | | | (92) | | | 34 | | | — | | | — | | | — | |
Total adjusted net revenue | $ | 6,402 | | | $ | 7,535 | | | $ | 3,678 | | | $ | — | | | $ | — | | | $ | 17,615 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
EBITDA (loss) (b) | $ | 402 | | | $ | 224 | | | $ | 149 | | | $ | (770) | | | $ | — | | | $ | 5 | |
Depreciation and amortization | (232) | | | (46) | | | (7) | | | (2) | | | — | | | (287) | |
Intercompany dividend/interest (expense) income, net | — | | | (131) | | | — | | | 131 | | | — | | | — | |
Interest income, net | — | | | 2 | | | — | | | 92 | | | — | | | 94 | |
Provision for income taxes | (52) | | | (16) | | | (167) | | | (18) | | | — | | | (253) | |
Net income (loss) | $ | 118 | | | $ | 33 | | | $ | (25) | | | $ | (567) | | | $ | — | | | $ | (441) | |
| | | | | | | | | | | |
For The Six Months Ended June 30, 2024 | | | | | | | | |
Revenue, from external customers | $ | 12,966 | | | $ | 44,158 | | | $ | 12,479 | | | $ | — | | | $ | — | | | $ | 69,603 | |
Inter-segment revenue | 114 | | | — | | | 34 | | | — | | | (148) | | | — | |
Total revenue | $ | 13,080 | | | $ | 44,158 | | | $ | 12,513 | | | $ | — | | | $ | (148) | | | $ | 69,603 | |
Adjusted net revenue, from external customers (a) | $ | 12,149 | | | $ | 14,173 | | | $ | 7,623 | | | $ | — | | | $ | — | | | $ | 33,945 | |
Inter-segment adjusted net revenue | 113 | | | (139) | | | 26 | | | — | | | — | | | — | |
Total adjusted net revenue | $ | 12,262 | | | $ | 14,034 | | | $ | 7,649 | | | $ | — | | | $ | — | | | $ | 33,945 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
EBITDA (loss) (b) | $ | (462) | | | $ | (377) | | | $ | 417 | | | $ | (2,255) | | | $ | — | | | $ | (2,677) | |
Depreciation and amortization | (581) | | | (84) | | | (14) | | | (5) | | | — | | | (684) | |
Intercompany dividend/interest (expense) income, net | — | | | (263) | | | — | | | 263 | | | — | | | — | |
Interest income, net | — | | | 5 | | | — | | | 182 | | | — | | | 187 | |
Provision for income taxes | (67) | | | 201 | | | (253) | | | (46) | | | — | | | (165) | |
Net income (loss) | $ | (1,110) | | | $ | (518) | | | $ | 150 | | | $ |