GlobeNewswire Inc | Aug 5, 2020 08:30AM EDT

August 05, 2020

OLD GREENWICH, Conn., Aug. 05, 2020 (GLOBE NEWSWIRE) -- Hudson Global, Inc. (Nasdaq: HSON), a leading global total talent solutions company, announced today financial results for the second quarter ended June30, 2020.

2020 Second Quarter Summary

-- Revenue of $24.6 million decreased 7.0% from the second quarter of 2019 (3.0% in constant currency). -- Adjusted net revenue of $8.9 million decreased 23.4% from the second quarter of 2019 (21.3% in constant currency). -- Net loss improved to $0.8 million, or $0.27 per basic and diluted share, from a net loss of $0.9 million, or $0.29 per basic and diluted share, for the second quarter of 2019. Adjusted net loss per diluted share (Non-GAAP measure)* was $0.13 versus $0.07 in the second quarter of 2019. -- Adjusted EBITDA (Non-GAAP measure)* loss was $0.4 million compared to adjusted EBITDA of $0.3 million in the second quarter of 2019. -- Share count reduced by 16% since December 31, 2018. -- Total cash including restricted cash was $29.9 million at June 30, 2020.

Our business in the second quarter of 2020 was impacted by the challenging macroeconomic environment caused by COVID-19, said Jeff Eberwein, Chief Executive Officer of Hudson Global. Our Asia Pacific region performed the best, growing revenue and adjusted EBITDA versus the prior year. Globally, we have now right-sized the business to better match clients' current needs while retaining the ability to respond quickly as activity rebounds.

Mr. Eberwein continued, Our top priority during this difficult time continues to be the health and safety of our team and clients. We are pleased with the resilience of our business thus far, which is a testament to the strength of our clients and the flexibility of our team. Our partnerships with our clients have deepened during this challenging time, and we are well positioned to emerge from this crisis as a stronger partner for our clients.

* The Company provides Non-GAAP measures as a supplement to financial results based on accounting principles generally accepted in the United States ("GAAP"). Adjusted EBITDA, EBITDA, and adjusted net loss per diluted share are defined in the segment tables at the end of this release and a reconciliation of such Non-GAAP measures to the most directly comparable GAAP measures is included within such segment tables.

Regional Highlights

Asia Pacific

Asia Pacific revenue of $18.8 million increased 14% while adjusted net revenue of $4.8 million decreased 7% in constant currency in the second quarter of 2020 compared to the same period in 2019. EBITDA was $1.0 million in the second quarter compared to EBITDA of $0.4 million in the same period one year ago, and adjusted EBITDA was $1.0 million compared to adjusted EBITDA of $0.7 million in the second quarter of 2019.

Americas

In the second quarter of 2020, Americas revenue of $2.2 million decreased 44%, while adjusted net revenue of $1.9 million decreased 47% in constant currency from the second quarter of 2019. EBITDA loss was $0.9 million in the second quarter compared to EBITDA of $0.4 million in same period of last year. The region recorded an adjusted EBITDA loss of $0.6 million compared to adjusted EBITDA of $0.6 million a year ago.

Europe

Europe revenue in the second quarter of 2020 declined 27% to $3.5 million, and adjusted net revenue of $2.2 million decreased 14% in constant currency from the second quarter of 2019. EBITDA was $0.3 million in the second quarter of 2020 compared to breakeven EBITDA in the same period of 2019. Adjusted EBITDA was $0.1 million for the second quarter of 2020 compared to adjusted EBITDA of $0.2 million a year ago.

Corporate Costs

In the second quarter of 2020, the Company's corporate costs were $0.8 million compared to $1.2 million in the prior year quarter. Corporate costs in the second quarter of 2020 period excluded non-recurring expenses of $0.1 million compared to $0.7 million in the second quarter of 2019.

Liquidity and Capital Resources

The Company ended the second quarter of 2020 with $29.9 million in cash, including $0.4 million in restricted cash. The Company generated $1.9 million in cash flow from operations during the second quarter of 2020, compared to using $1.5 million of cash flow from operations in the second quarter of 2019.

Share Repurchase Program

The Company has reduced its share count by 16% since December 31, 2018 and continues to view share repurchases as an attractive use of capital. Under its $10 million common stock share repurchase program, the Company has $1.7 million remaining.

COVID-19 Update

As disclosed in previously issued Company press releases as well as in our 2019 Form 10-K and first quarter 2020 Form 10-Q, our business has been adversely impacted by the COVID-19 outbreak and the accompanying economic downturn. This downturn, as well as the uncertainty regarding the duration, spread and intensity of the outbreak, led to an initial reduction in demand for our services in the first and second quarter of 2020. Some of our customers have instituted hiring freezes, while other customers that are more capable of working remotely have been allowed to operate somewhat as usual. The expected timeline for this reduction in demand for our services remains uncertain and difficult to predict considering the rapidly evolving landscape.

The Company is vigilantly monitoring the business environment surrounding COVID-19 and continues to proactively address this situation as it evolves. The Company is confident that it can continue to take appropriate actions to manage the business in this challenging environment due to the flexibility of its workforce and the strength of its balance sheet.

Conference Call/Webcast

Hudson will conduct a conference call today at 10:00 a.m. ET to discuss this announcement. Individuals wishing to listen can access the webcast on the investor information section of the Company's web site at hudsonrpo.com.

If you wish to join the conference call, please use the dial-in information below:

-- Toll-Fee Dial-In Number: (866) 220-5784 -- International Dial-In Number: (615) 622-8063 -- Conference ID #: 4565667

The archived call will be available on the investor information section of the Company's web site at hudsonrpo.com.

About Hudson Global

Hudson Global, Inc. is a leading global total talent solutions provider operating under the brand name Hudson RPO. We deliver innovative, customized recruitment outsourcing and total talent solutions to organizations worldwide. Through our consultative approach, we develop tailored talent solutions designed to meet our clients strategic growth initiatives. As a trusted advisor, we meet our commitments, deliver quality and value, and strive to exceed expectations.

For more information, please visit us at hudsonrpo.comor contact us at ir@hudsonrpo.com.

Investor Relations:The Equity GroupLena Cati212 836-9611 /lcati@equityny.com

Forward-Looking Statements

This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as anticipate, "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties, and assumptions, including industry and economic conditions that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations; the adverse impacts of the recent coronavirus, or COVID-19 outbreak; the Companys ability to successfully achieve its strategic initiatives; risks related to the Companys large cash balance relative to its market capitalization as a small public company; risks related to potential acquisitions or dispositions of businesses by the Company; the Companys ability to retain and recruit qualified management and/or advisors; the Companys ability to operate successfully as a company focused on its RPO business; risks related to fluctuations in the Company's operating results from quarter to quarter; the ability of clients to terminate their relationship with the Company at any time; competition in the Company's markets; the negative cash flows and operating losses that may recur in the future; risks relating to how future credit facilities may affect or restrict our operating flexibility; risks associated with the Company's investment strategy; risks related to international operations, including foreign currency fluctuations, political events, natural disasters or health crises, including the ongoing COVID-19 outbreak; the Company's dependence on key management personnel; the Company's ability to attract and retain highly skilled professionals; the Company's ability to collect accounts receivable; the Companys ability to maintain costs at an acceptable level; the Company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; risks related to providing uninterrupted service to clients; the Company's exposure to employment-related claims from clients, employers and regulatory authorities, current and former employees in connection with the Companys business reorganization initiatives, and limits on related insurance coverage; the Companys ability to utilize net operating loss carry-forwards; volatility of the Company's stock price; the impact of government regulations; and restrictions imposed by blocking arrangements. Additional information concerning these, and other factors is contained in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

HUDSON GLOBAL, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited) Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019Revenue $ 24,573 $ 26,414 $ 48,704 $ 42,601 Operating expenses: Direct contracting costs andreimbursed 15,643 14,755 29,976 21,546 expensesSalaries and related 8,335 9,729 16,552 18,901 Other selling, general and 1,454 2,701 3,535 4,889 administrativeDepreciation and amortization 24 21 48 39 Total operating expenses 25,456 27,206 50,111 45,375 Operating loss (883 ) (792 ) (1,407 ) (2,774 )Non-operating income (expense):Interest income, net 40 125 119 438 Other income (expense), net 337 (91 ) 378 (128 )Loss from continuingoperation before provision (506 ) (758 ) (910 ) (2,464 )for income taxesProvision for income taxesfrom continuing 266 142 373 207 operationsLoss from continuing (772 ) (900 ) (1,283 ) (2,671 )operationsLoss from discontinuedoperations, net of income ? ? ? (131 )taxesNet loss $ (772 ) $ (900 ) $ (1,283 ) $ (2,802 )Basic and diluted loss per share:Loss per share from $ (0.27 ) $ (0.29 ) $ (0.43 ) $ (0.84 )continuing operationsLoss per share from ? ? ? (0.04 )discontinued operationsLoss per share $ (0.27 ) $ (0.29 ) $ (0.43 ) $ (0.88 )Weighted-average shares outstanding:Basic 2,839 3,082 2,952 3,184 Diluted 2,839 3,082 2,952 3,184

HUDSON GLOBAL, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts)(unaudited) June 30, December 2020 31, 2019ASSETS Current assets: Cash and cash equivalents $ 29,517 $ 31,190 Accounts receivable, less allowance for doubtfulaccounts of $155 and $174, 12,300 12,795 respectivelyRestricted cash, current 154 148 Prepaid and other 1,366 804 Total current assets 43,337 44,937 Property and equipment, net 146 186 Operating lease right-of-use assets 325 401 Deferred tax assets 696 793 Restricted cash 225 380 Other assets 7 7 Total assets $ 44,736 $ 46,704 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 670 $ 1,064 Accrued expenses and other current liabilities 8,988 8,178 Short-term debt 589 ? Operating lease obligations, current 267 246 Total current liabilities 10,514 9,488 Income tax payable 843 845 Operating lease obligations 63 160 Long-term debt 737 ? Other liabilities 187 177 Total liabilities 12,344 10,670 Commitments and contingencies Stockholders? equity: Preferred stock, $0.001 par value, 10,000 sharesauthorized; none issued or ? ? outstandingCommon stock, $0.001 par value, 20,000 sharesauthorized; 3,672 and 4 4 3,663 shares issued; 2,685 and 2,936 shares outstanding,respectivelyAdditional paid-in capital 486,325 486,088 Accumulated deficit (437,790 ) (436,507 )Accumulated other comprehensive loss, net of applicable (822 ) (479 )taxTreasury stock, 987 and 726 shares, respectively, at (15,325 ) (13,072 )costTotal stockholders? equity 32,392 36,034 Total liabilities and stockholders' equity $ 44,736 $ 46,704

HUDSON GLOBAL, INC.SEGMENT ANALYSIS - QUARTER TO DATE (continued)RECONCILIATION OF ADJUSTED EBITDA(in thousands)(unaudited) For The Three AsiaMonths Ended June Pacific Americas Europe Corporate Total30, 2020Revenue, from $ 18,833 $ 2,206 $ 3,534 $ ? $ 24,573 external customersAdjusted netrevenue, from $ 4,818 $ 1,893 $ 2,219 $ ? $ 8,930 external customers^ (1)Net loss $ (772 )Provision from 266 income taxesInterest income, (40 )netDepreciation and 24 amortizationEBITDA (loss) ^(2) $ 1,025 $ (918 ) $ 300 $ (929 ) (522 )Non-operatingexpense (income),including (86 ) 23 (209 ) (65 ) (337 )corporateadministrationchargesStock-basedcompensation 14 (10 ) 2 87 93 expense (income)Non-recurringseverance and ? 318 ? 81 399 professional feesAdjusted EBITDA $ 953 $ (587 ) $ 93 $ (826 ) $ (367 )(loss) ^(2) For The Three AsiaMonths Ended June Pacific Americas Europe Corporate Total30, 2019Revenue, from $ 17,454 $ 3,982 $ 4,978 $ ? $ 26,414 external customersAdjusted netrevenue, from $ 5,420 $ 3,591 $ 2,648 $ ? $ 11,659 external customers^(1)Net loss $ (900 )Provision for 142 income taxesInterest income, (125 )netDepreciation and 21 amortizationEBITDA (loss) ^(2) $ 362 $ 428 $ 31 $ (1,683 ) (862 )Non-operatingexpense (income),including 329 165 111 (514 ) 91 corporateadministrationchargesStock-basedcompensation 37 10 13 365 425 expenseNon-recurringseverance and ? ? ? 673 673 professional feesAdjusted EBITDA $ 728 $ 603 $ 155 $ (1,159 ) $ 327 (loss) ^(2)

(1) Represents Revenue less the Direct contracting costs and reimbursed expenses caption on the Condensed Consolidated Statements of Operations. Non-GAAP earnings before interest, income taxes, and depreciation and amortization (?EBITDA?) and Non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, business reorganization expenses, stock-based compensation expense, and other non-recurring expenses (?Adjusted EBITDA?) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and(2) evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.

HUDSON GLOBAL, INC.SEGMENT ANALYSIS - YEAR TO DATE (continued)RECONCILIATION OF ADJUSTED EBITDA(in thousands)(unaudited) For The Six Months AsiaEnded June 30, Pacific Americas Europe Corporate Total2020Revenue, from $ 35,784 $ 5,394 $ 7,526 $ ? $ 48,704 external customersAdjusted netrevenue, from $ 9,329 $ 4,753 $ 4,646 $ ? $ 18,728 external customers^(1)Net loss $ (1,283 )Provision from 373 income taxesInterest income, (119 )netDepreciation and 48 amortizationEBITDA (loss) ^(2) $ 1,362 $ (978 ) $ 363 $ (1,728 ) (981 )Non-operatingexpense (income),including 104 160 (208 ) (434 ) (378 )corporateadministrationchargesStock-basedcompensation 38 (4 ) 4 199 237 expense (income)Non-recurringseverance and ? 318 ? 359 677 professional feesAdjusted EBITDA $ 1,504 $ (504 ) $ 159 $ (1,604 ) $ (445 )(loss) ^(2) For The Six Months AsiaEnded June 30, Pacific Americas Europe Corporate Total2019Revenue, from $ 26,133 $ 7,122 $ 9,346 $ ? $ 42,601 external customersAdjusted netrevenue, from $ 10,010 $ 6,353 $ 4,692 $ ? $ 21,055 external customers^(1)Net loss $ (2,802 )Loss fromdiscontinuedoperations, net of (131 )incometaxesLoss fromcontinuing (2,671 )operationsProvision for 207 income taxesInterest income, (438 )netDepreciation and 39 amortizationEBITDA (loss) ^(2) $ 314 $ 14 $ (317 ) $ (2,874 ) (2,863 )Non-operatingexpense (income),including 543 288 263 (966 ) 128 corporateadministrationchargesStock-basedcompensation 58 23 14 514 609 expenseNon-recurringseverance and ? ? ? 939 939 professional feesAdjusted EBITDA $ 915 $ 325 $ (40 ) $ (2,387 ) $ (1,187 )(loss) ^(2)

(1) Represents Revenue less the Direct contracting costs and reimbursed expenses caption on the Condensed Consolidated Statements of Operations. Non-GAAP earnings before interest, income taxes, and depreciation and amortization (?EBITDA?) and Non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, business reorganization expenses, stock-based compensation expense, and other non-recurring expenses (?Adjusted EBITDA?) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and(2) evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.



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

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

Three Months Ended June 30, 2020 2019 As As Currency Constant reported reported translation currencyRevenue: Asia Pacific $ 18,833 $ 17,454 $ (937 ) $ 16,517 Americas 2,206 3,982 (11 ) 3,971 Europe 3,534 4,978 (146 ) 4,832 Total $ 24,573 $ 26,414 $ (1,094 ) $ 25,320 Adjusted net revenue ^(1) Asia Pacific $ 4,818 $ 5,420 $ (249 ) $ 5,171 Americas 1,893 3,591 (5 ) 3,586 Europe 2,219 2,648 (67 ) 2,581 Total $ 8,930 $ 11,659 $ (321 ) $ 11,338 SG&A:^(2) Asia Pacific $ 3,878 $ 4,695 $ (238 ) $ 4,457 Americas 2,790 3,022 (8 ) 3,014 Europe 2,127 2,509 (75 ) 2,434 Corporate 994 2,204 (2 ) 2,202 Total $ 9,789 $ 12,430 $ (323 ) $ 12,107 Operating income (loss): Asia Pacific $ 927 $ 683 $ (4 ) $ 679 Americas (900 ) 590 ? 590 Europe 85 136 11 147 Corporate (995 ) (2,201 ) (2 ) (2,203 )Total $ (883 ) $ (792 ) $ 5 $ (787 )EBITDA (loss): Asia Pacific $ 1,025 $ 362 $ 3 $ 365 Americas (918 ) 428 ? 428 Europe 300 31 12 43 Corporate (929 ) (1,683 ) 1 (1,682 )Total $ (522 ) $ (862 ) $ 16 $ (846 )



(1) Represents Revenue less the Direct contracting costs and reimbursed expenses caption on the Condensed Consolidated Statements of Operations. SG&A is a measure that management uses to evaluate the segments? expenses(2) and includes salaries and related costs and other selling, general and administrative costs.

HUDSON GLOBAL, INC.RECONCILIATION OF ADJUSTED NET LOSS PER DILUTED SHARE(unaudited)

Three Months Ended June 30, June 30, 2020 2019Net loss per diluted share $ (0.27 ) $ (0.29 )Add: Non-recurring items per diluted share 0.14 0.22 (after-tax)Adjusted net loss per diluted share ^(1) $ (0.13 ) $ (0.07 )

Adjusted net loss per diluted share is a Non-GAAP measure defined as reported net loss per diluted share before items such as non-recurring severance and professional fees after tax that is presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to(1) evaluate capital needs and working capital requirements. Adjusted net loss per diluted share should not be considered in isolation or as a substitute for net loss per share and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Further, Adjusted net loss per diluted share as presented above may not be comparable with similarly titled measures reported by other companies.