Hudson Global Reports 2015 Fourth Quarter And Full-Year Results

Delivers Positive Adjusted EBITDA in Q4 of $1.1 Million Initiates Quarterly Dividend

NEW YORK, March 03, 2016 (GLOBE NEWSWIRE) -- Hudson Global, Inc. (Nasdaq:HSON), a leading global talent solutions company, today announced financial results for the fourth quarter and full-year ended December 31, 2015.

2015 Fourth Quarter Summary
  • On a retained*** basis, excluding the Americas IT and the Netherlands businesses which were sold during the second quarter of 2015, revenue of $106.1 million declined 8.9 percent from the fourth quarter of 2014, but increased 0.9 percent in constant currency. On a reported basis, revenue declined 22.4 percent, or 14.3 percent in constant currency. 
  • On a retained*** basis, excluding the Americas IT and the Netherlands businesses, gross margin of $44.4 million declined 7.1 percent from the fourth quarter of 2014, but increased 2.3 percent in constant currency. On a reported basis, gross margin declined 16.6 percent or 8.3 percent in constant currency.  
  • Adjusted EBITDA* of $1.1 million, compared with adjusted EBITDA loss of $2.4 million in the fourth quarter of 2014.  
  • Net loss from continuing operations of $2.5 million, or $0.07 per basic and diluted share, compared with net loss of $3.5 million, or $0.11 per basic and diluted share, for the fourth quarter of 2014.  
  • Net loss** of $2.6 million, or $0.08 per basic and diluted share, compared with net income** of $2.7 million, or $0.08 per basic and diluted share, for the fourth quarter of 2014.

2015 Full-Year Summary
  • On a retained*** basis, excluding the Americas IT and the Netherlands businesses, revenue of $436.3 million declined 11.9 percent from 2014, but increased 0.1 percent in constant currency. On a reported basis, revenue of $463.2 million declined 20.3 percent from 2014, or 9.7 percent in constant currency.  
  • On a retained*** basis, excluding the Americas IT and the Netherlands businesses, gross margin of $181.3 million declined 9.8 percent in reported currency but increased 1.9 percent in constant currency from 2014. On a reported basis, gross margin of $187.7 million declined 15.8 percent from 2014, or 5.0 percent in constant currency. 
  • Adjusted EBITDA* loss of $4.4 million, compared with adjusted EBITDA loss of $7.5 million in 2014.  
  • Restructuring charges of $5.8 million and other income of $19.6 million, primarily a gain on sale of assets, in 2015 . 
  • Net income from continuing operations of $1.6 million, or $0.05 per basic and diluted share, compared with net loss of $15.8 million, or $0.48 per basic and diluted share, in 2014.  
  • Net income** of $2.3 million, or $0.07 per basic and diluted share, compared with net loss of $13.2 million, or $0.40 per basic and diluted share, in 2014.

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

"We continued to deliver constant currency gross margin growth in key practices and markets in the fourth quarter," said Stephen Nolan, chief executive officer at Hudson. "After completing significant strategic actions in 2014 and 2015 to narrow our focus on core businesses and reduce our cost structure, we are pleased to have delivered positive adjusted EBITDA in the fourth quarter. As a signal of the progress the company has made, we have initiated a dividend payment to shareholders starting later this month while we expect to continue our share buyback program."

Strategic Actions         

The company's strategic actions are focused on driving consistent, sustainable growth and profitability. To accelerate the implementation of the company's strategy, we have engaged in the following initiatives:
  • Investing in the core businesses and practices that present the greatest potential for profitable growth.
  • Facilitating growth and development of the global RPO business.
  • Further improving the company's cost structure and efficiency of its support functions and infrastructure.
  • Building and differentiating the company's brand through its unique talent solutions offerings.

During 2015, the company continued to execute on strategic actions in its previously announced efforts to focus on its core business lines and growth opportunities. During the second quarter, these actions included the divestiture of the company's Netherlands business as well as its Americas IT business. The company also exited its operations in Ukraine, Czech Republic, Slovakia and Luxembourg.  In the fourth quarter, the company completed the reduction in stranded support costs in the Americas following the exit of the Legal eDiscovery and IT businesses, in the fourth quarter of 2014 and second quarter of 2015, respectively. With these strategic divestitures complete, the company is now a more streamlined organization that is focused on delivering sustainable profitability in its core businesses -- Recruitment Process Outsourcing (RPO), Talent Management and Recruitment -- where it continues to invest in fee earners to drive growth.

Share Repurchase Program

During the fourth quarter, the company continued its share repurchase program for which it has an authorization of up to $10 million of the company's common stock. The company purchased 265,374 shares for $0.7 million as part of the buyback program during the fourth quarter and an additional 228,697 shares for $0.6 million during January and February 2016. Since the inception of this program in the third quarter of 2015, the company has purchased 756,331 shares for $2.0 million.

Dividend Program

As announced on December 21, 2015, the company will commence paying a regular, quarterly cash dividend, currently set at $0.05 per share per quarter on March 25, 2016 to shareholders of record as of March 15, 2016.

Regional Highlights

Americas

In the fourth quarter, Hudson Americas' gross margin increased 8 percent on a retained*** basis in constant currency but decreased 39 percent on a reported basis compared with the fourth quarter of 2014. The growth was driven by RPO, up 8 percent in the fourth quarter.  The region delivered adjusted EBITDA of $0.7 million, or 18 percent of revenue for the fourth quarter, as the company completed the reduction of stranded support costs following the sale of the Americas Legal eDiscovery and IT businesses.  Adjusted EBITDA in the fourth quarter of 2014 was a loss of $0.1 million on a reported basis.

Hudson Americas' gross margin in 2015 increased 12 percent on a retained*** basis in constant currency from 2014  but decreased 22 percent on a reported basis.  RPO gross margin increased by 13 percent in 2015, driven by new client wins and increased business with some existing clients. In June 2015, the company sold its Americas IT staffing business to Mastech, Inc. for $17.0 million in cash and $3.0 million in retained working capital. On a reported basis, adjusted EBITDA loss was $0.9 million in 2015, compared with adjusted EBITDA of $1.4 million, or 3 percent of revenue, in 2014, as the company completed the reduction of stranded support costs following the sale of the Americas Legal eDiscovery and IT businesses during 2015.

Asia Pacific

Hudson Asia Pacific's gross margin increased 6 percent in constant currency in the fourth quarter of 2015 from the same period in 2014. This was the eighth consecutive quarter of year-over-year constant currency gross margin growth. Results were fueled by growth in RPO, up 29 percent, and temporary contracting, up 8 percent from the fourth quarter of 2014.  This growth was primarily realized in Australia with gross margin increasing 12 percent, against the prior year, while Hong Kong, New Zealand and Singapore also delivered growth in the quarter.  China gross margin fell 12 percent as weaker demand in the fourth quarter hurt results after a very strong 2015.  Asia Pacific delivered adjusted EBITDA of $1.7 million, or 3 percent of revenue, improving from adjusted EBITDA of $0.2 million in the fourth quarter of 2014. 

In 2015, gross margin increased 10 percent in Hudson Asia Pacific in constant currency compared with 2014. Results were driven by 16 percent growth in permanent recruitment, 10 percent growth in temporary contracting, and 7 percent growth in RPO against 2014. Growth by country was led by China and Australia, up 24 percent and 6 percent, respectively, against prior year.  During 2015, Hudson continued to invest in additional consultants, up 9 percent from 2014. Adjusted EBITDA was $6.8 million, or 3 percent of revenue, improving from adjusted EBITDA of $1.9 million, or 1 percent of revenue, in 2014. 

Europe

Hudson Europe's gross margin decreased 3 percent in constant currency on a retained*** basis from the fourth quarter of 2014, and 14 percent on a reported basis. Excluding the impact of the Netherlands sale, Continental Europe gross margin increased by 9 percent in constant currency in the quarter. Belgium and Spain continued to deliver gross margin growth, up 11 percent and 40 percent respectively, somewhat offset by weaker results in France.  In the UK, 15 percent growth in RPO was offset by a 17 percent decline in recruitment. Adjusted EBITDA of $1.1 million, or  2 percent of revenue, compared with adjusted EBITDA was $1.8 million, or 3 percent of revenue, a year ago.

Hudson Europe's gross margin decreased 7 percent on a retained*** basis in 2015 in constant currency compared with 2014, and 14 percent on a reported basis. Continental Europe delivered 4 percent growth, driven by Belgium and Spain, up 7 percent and 40 percent, respectively, offset by the UK, which was down 16 percent against 2014. Growth in RPO of 16 percent was offset by recruitment, down 21 percent from 2014.  On a reported basis, adjusted EBITDA was $2.2 million, or 1 percent of revenue, compared with $6.1 million, or 2 percent of revenue in 2014.

Liquidity and Capital Resources

The company ended the fourth quarter of 2015 with $58.2 million in liquidity, composed of $37.7 million in cash and $20.5 million in availability under its credit facilities.  This compares with $34.0 million in cash and $24.0 million in availability under its credit facilities at the end of 2014. The company generated $0.8 million in cash flow from operations during the fourth quarter and used $17.4 million in cash flow from operations for the year of 2015. The company had $2.4 million of outstanding borrowings at the end of the fourth quarter of 2015. 

Business Outlook

Given current economic conditions and seasonality in Asia Pacific, the company expects first quarter 2016 revenue of between $95 million and $105 million and an adjusted EBITDA loss of between $1.0 million and $2.5 million at prevailing exchange rates. In the first quarter of 2015, revenue was $124.3 million on a reported basis and $106.9 million on a retained basis, and adjusted EBITDA was a loss of $4.3 million.  Starting in the first quarter of 2016, the company's adjusted EBITDA outlook and results will exclude stock-based compensation costs*. This outlook assumes an average exchange rate of 1.42 US Dollars to the British Pound, 1.10 US Dollars to the Euro and 0.71 US Dollars to the Australian Dollar.

Conference Call/Webcast

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

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

* See reconciliation for adjusted EBITDA and stock-based compensation at the end of this release.

About Hudson

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

Forward-Looking Statements

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

Financial Tables Follow

HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
               
  Three Months Ended   Year Ended
  December 31,   December 31,
  2015   2014   2015   2014
Revenue $ 106,109     $ 136,677     $ 463,197     $ 581,192  
Direct costs 61,670     83,421     275,487     358,347  
Gross margin 44,439     53,256     187,710     222,845  
Operating expenses:              
Selling, general and administrative expenses 43,350     55,649     194,631     230,321  
Depreciation and amortization 805     1,317     3,845     5,559  
Business reorganization expenses 161     1,763     5,828     3,789  
Impairment of long-lived assets     662         662  
Total operating expenses 44,316     59,391     204,304     240,331  
Gain (loss) on sale and exit of businesses 17         19,835      
Operating income (loss) 140     (6,135 )   3,241     (17,486 )
Non-operating income (expense):              
Interest income (expense), net (180 )   (128 )   (722 )   (661 )
Other income (expense), net (481 )   528     (266 )   202  
Income (loss) before provision for income taxes from continuing operations (521 )   (5,735 )   2,253     (17,945 )
Provision for (benefit from) income taxes 1,963     (2,196 )   646     (2,159 )
Income (loss) from continuing operations (2,484 )   (3,539 )   1,607     (15,786 )
Income (loss) from discontinued operations, net of income taxes (142 )   6,282     722     2,592  
Net income (loss) $ (2,626 )   $ 2,743     $ 2,329     $ (13,194 )
Earnings (loss) per share:              
Basic and diluted              
Income (loss) from continuing operations $ (0.07 )   $ (0.11 )   $ 0.05     $ (0.48 )
Income (loss) from discontinued operations     0.19     0.02     0.08  
Net income (loss) $ (0.08 )   $ 0.08     $ 0.07     $ (0.40 )
Weighted-average shares outstanding:              
Basic 34,274     32,995     33,869     32,843  
Diluted 34,274     32,995     34,084     32,843  

HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
       
  December 31,  2015   December 31,  2014
ASSETS      
Current assets:      
Cash and cash equivalents $ 37,663     $ 33,989  
Accounts receivable, less allowance for doubtful accounts of $860 and $986, respectively 62,420     74,079  
Prepaid and other 5,979     9,604  
Current assets of discontinued operations 81     1,249  
Total current assets 106,143     118,921  
Property and equipment, net 7,928     9,840  
Deferred tax assets, non-current 6,724     5,648  
Other assets 4,154     5,263  
Total assets $ 124,949     $ 139,672  
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 5,184     $ 6,371  
Accrued expenses and other current liabilities 40,344     54,065  
Short-term borrowings 2,368      
Accrued business reorganization expenses 2,252     3,169  
Current liabilities of discontinued operations 1,443     3,512  
Total current liabilities 51,591     67,117  
Deferred rent and tenant improvement contributions 4,244     5,899  
Income tax payable, non-current 2,279     2,397  
Other non-current liabilities 5,655     5,002  
Total liabilities 63,769     80,415  
Stockholders' equity:      
Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding      
Common stock, $0.001 par value, 100,000 shares authorized; issued 35,260 and 33,671 shares, respectively 34     34  
Additional paid-in capital 480,816     476,689  
Accumulated deficit (428,287 )   (430,616 )
Accumulated other comprehensive income 10,292     13,613  
Treasury stock, 646 and 129 shares, respectively, at cost (1,675 )   (463 )
Total stockholders' equity 61,180     59,257  
Total liabilities and stockholders' equity $ 124,949     $ 139,672  

HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
                     
For The Three Months Ended December 31, 2015   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 3,731     $ 53,268     $ 49,110     $     $ 106,109  
Gross margin, from external customers   $ 3,235     $ 21,609     $ 19,595     $     $ 44,439  
Adjusted EBITDA (loss) (1)   $ 669     $ 1,663     $ 1,097     $ (2,340 )   $ 1,089  
Business reorganization expenses (recovery)   102         205     (146 )   161  
Impairment of long-lived assets                    
Gain (loss) on sale and exit of businesses           17         17  
Non-operating expense (income), including corporate administration charges   4     665     325     (513 )   481  
EBITDA (loss) (1)   $ 563     $ 998     $ 584     $ (1,681 )   $ 464  
Depreciation and amortization expenses                   805  
Interest expense (income), net                   180  
Provision for (benefit from) income taxes                   1,963  
Income (loss) from continuing operations                   (2,484 )
Income (loss) from discontinued operations, net of income taxes                   (142 )
Net income (loss)                   $ (2,626 )
                     
For The Three Months Ended December 31, 2014   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 11,709     $ 58,351     $ 66,617     $     $ 136,677  
Gross margin, from external customers   $ 5,293     $ 22,930     $ 25,033     $     $ 53,256  
Adjusted EBITDA (loss) (1)   $ (139 )   $ 186     $ 1,840     $ (4,280 )   $ (2,393 )
Business reorganization expenses (recovery)       67     963     733     1,763  
Impairment of long-lived assets       314     348         662  
Non-operating expense (income), including corporate administration charges   (580 )   62     1,224     (1,234 )   (528 )
EBITDA (loss) (1)   $ 441     $ (257 )   $ (695 )   $ (3,779 )   $ (4,290 )
Depreciation and amortization expenses                   1,317  
Interest expense (income), net                   128  
Provision for (benefit from) income taxes                   (2,196 )
Income (loss) from continuing operations                   (3,539 )
Income (loss) from discontinued operations, net of income taxes                   6,282  
Net income (loss)                   $ 2,743  
  1. Non-GAAP earnings before interest, income taxes, and depreciation and amortization ("EBITDA") and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses ("Adjusted EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(in thousands)
(unaudited)
                     
For The Three Months Ended September 30, 2015   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 3,735     $ 55,609     $ 50,684     $     $ 110,028  
Gross margin, from external customers   $ 3,176     $ 23,376     $ 18,593     $     $ 45,145  
Adjusted EBITDA (loss) (1)   $ (321 )   $ 2,324     $ 149     $ (2,572 )   $ (420 )
Business reorganization expenses (recovery)   589     336     1,278     61     2,264  
Gain (loss) on sale and exit of  businesses   (20 )       (167 )       (187 )
Non-operating expense (income), including corporate administration charges   99     308     798     (1,447 )   (242 )
EBITDA (loss) (1)   $ (1,029 )   $ 1,680     $ (2,094 )   $ (1,186 )   $ (2,629 )
Depreciation and amortization expenses                   955  
Interest expense (income), net                   93  
Provision for (benefit from) income taxes                   (1,648 )
Income (loss) from continuing operations                   (2,029 )
Income (loss) from discontinued operations, net of income taxes                   (55 )
Net income (loss)                   $ (2,084 )
                     
For The Three Months Ended March 31, 2015   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 10,978     $ 53,139     $ 60,200     $     $ 124,317  
Gross margin, from external customers   $ 4,621     $ 20,876     $ 22,407     $     $ 47,904  
Adjusted EBITDA (loss) (1)   $ (906 )   $ 891     $ (23 )   $ (4,224 )   $ (4,262 )
Business reorganization expenses (recovery)   421     8     880     34     1,343  
Non-operating expense (income), including corporate administration charges   293     79     1,247     (1,632 )   (13 )
EBITDA (loss) (1)   $ (1,620 )   $ 804     $ (2,150 )   $ (2,626 )   $ (5,592 )
Depreciation and amortization expenses                   1,111  
Interest expense (income), net                   80  
Provision for (benefit from) income taxes                   (129 )
Income (loss) from continuing operations                   (6,654 )
Income (loss) from discontinued operations, net of income taxes                   (184 )
Net income (loss)                   $ (6,838 )
  1. Non-GAAP earnings before interest, income taxes, and depreciation and amortization ("EBITDA") and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses ("Adjusted EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.
HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE
(in thousands)
(unaudited)
                     
For The Year Ended December 31, 2015   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 28,627     $ 219,391     $ 215,179     $     $ 463,197  
Gross margin, from external customers   $ 16,111     $ 89,682     $ 81,917     $     $ 187,710  
Adjusted EBITDA (loss) (1)   $ (854 )   $ 6,814     $ 2,209     $ (12,550 )   $ (4,381 )
Business reorganization expenses (recovery)   1,108     669     2,883     1,168     5,828  
Change in control stock-based compensation   418     646     699     777     2,540  
Gain (loss) on sale and exit of businesses   15,918         3,917         19,835  
Non-operating expense (income), including corporate administration charges   184     2,648     2,751     (5,317 )   266  
EBITDA (loss) (1)   $ 13,354     $ 2,851     $ (207 )   $ (9,178 )   $ 6,820  
Depreciation and amortization expenses                   3,845  
Interest expense (income), net                   722  
Provision for (benefit from) income taxes                   646  
Income (loss) from continuing operations                   1,607  
Income (loss) from discontinued operations, net of income taxes                   722  
Net income (loss)                   $ 2,329  
                     
For The Year Ended December 31, 2014   Hudson Americas   Hudson Asia Pacific   Hudson Europe   Corporate   Total
Revenue, from external customers   $ 50,146     $ 246,873     $ 284,173     $     $ 581,192  
Gross margin, from external customers   $ 20,757     $ 93,014     $ 109,074     $     $ 222,845  
Adjusted EBITDA (loss) (1)   $ 1,448     $ 1,908     $ 6,114     $ (16,946 )   $ (7,476 )
Business reorganization expenses (recovery)   94     1,322     1,407     966     3,789  
Impairment of long-lived assets       314     348         662  
Non-operating expense (income), including corporate administration charges   1,237     1,162     5,546     (8,147 )   (202 )
EBITDA (loss) (1)   $ 117     $ (890 )   $ (1,187 )   $ (9,765 )   $ (11,725 )
Depreciation and amortization expenses                   5,559  
Interest expense (income), net                   661  
Provision for (benefit from) income taxes                   (2,159 )
Income (loss) from continuing operations                   (15,786 )
Income (loss) from discontinued operations, net of income taxes                   2,592  
Net income (loss)                   $ (13,194 )
  1. Non-GAAP earnings before interest, income taxes, and depreciation and amortization ("EBITDA") and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses ("Adjusted EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.

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

The company operates on a global basis, with the majority of its gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect its results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term "constant currency" to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period.  Changes in revenue, gross margin, selling, general and administrative expenses ("SG&A"), business reorganization expenses and other non-operating income (expense), operating income (loss) and EBITDA (loss) include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company's management reviews and analyzes business results in constant currency and believes these results better represent the company's underlying business trends. The company believes that these calculations are a useful measure, indicating the actual change in operations. There are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings.
  For The Three Months Ended December 31,
  2015   2014
  As   As   Currency   Constant
  reported   reported   translation   currency
Revenue:              
Hudson Americas $ 3,731     $ 11,709     $ (25 )   $ 11,684  
Hudson Asia Pacific 53,268     58,351     (7,968 )   50,383  
Hudson Europe 49,110     66,617     (4,874 )   61,743  
Total $ 106,109     $ 136,677     $ (12,867 )   $ 123,810  
Gross margin:              
Hudson Americas $ 3,235     $ 5,293     $ (24 )   $ 5,269  
Hudson Asia Pacific 21,609     22,930     (2,554 )   20,376  
Hudson Europe 19,595     25,033     (2,225 )   22,808  
Total $ 44,439     $ 53,256     $ (4,803 )   $ 48,453  
SG&A (1):              
Hudson Americas $ 2,609     $ 5,430     $ (27 )   $ 5,403  
Hudson Asia Pacific 19,828     22,728     (2,641 )   20,087  
Hudson Europe 18,580     23,211     (2,002 )   21,209  
Corporate 2,335     4,280         4,280  
Total $ 43,352     $ 55,649     $ (4,670 )   $ 50,979  
Business reorganization expenses:              
Hudson Americas $ 102     $     $     $  
Hudson Asia Pacific     67     (6 )   61  
Hudson Europe 205     963     (102 )   861  
Corporate (146 )   733         733  
Total $ 161     $ 1,763     $ (108 )   $ 1,655  
Operating income (loss):              
Hudson Americas $ 546     $ (262 )   $ 3     $ (259 )
Hudson Asia Pacific 1,290     (1,017 )   200     (817 )
Hudson Europe 726     288     (85 )   203  
Corporate (2,422 )   (5,144 )       (5,144 )
Total $ 140     $ (6,135 )   $ 118     $ (6,017 )
EBITDA (loss):              
Hudson Americas $ 563     $ 441     $ 12     $ 453  
Hudson Asia Pacific 998     (257 )   81     (176 )
Hudson Europe 584     (695 )   80     (615 )
Corporate (1,681 )   (3,779 )       (3,779 )
Total $ 464     $ (4,290 )   $ 173     $ (4,117 )

Note: Certain prior year amounts have been reclassified to conform to the current period presentation.
  1. SG&A is a measure that management uses to evaluate the segments' expenses.
HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY (continued)
(in thousands)
(unaudited)
   
  For The Year Ended December 31,
  2015   2014
  As   As   Currency   Constant
  reported   reported   translation   currency
Revenue:              
Hudson Americas $ 28,627     $ 50,146     $ (104 )   $ 50,042  
Hudson Asia Pacific 219,391     246,873     (37,354 )   209,519  
Hudson Europe 215,179     284,173     (30,548 )   253,625  
Total $ 463,197     $ 581,192     $ (68,006 )   $ 513,186  
Gross margin:              
Hudson Americas $ 16,111     $ 20,757     $ (101 )   $ 20,656  
Hudson Asia Pacific 89,682     93,014     (11,717 )   81,297  
Hudson Europe 81,917     109,074     (13,532 )   95,542  
Total $ 187,710     $ 222,845     $ (25,350 )   $ 197,495  
SG&A (1):              
Hudson Americas $ 17,413     $ 19,343     $ (101 )   $ 19,242  
Hudson Asia Pacific 83,035     90,962     (11,230 )   79,732  
Hudson Europe 80,858     103,068     (12,793 )   90,275  
Corporate 13,327     16,948         16,948  
Total $ 194,633     $ 230,321     $ (24,124 )   $ 206,197  
Business reorganization expenses:              
Hudson Americas $ 1,108     $ 94     $ 1     $ 95  
Hudson Asia Pacific 669     1,322     (181 )   1,141  
Hudson Europe 2,883     1,407     (158 )   1,249  
Corporate 1,168     966         966  
Total $ 5,828     $ 3,789     $ (338 )   $ 3,451  
Operating income (loss):              
Hudson Americas $ 12,931     $ 870     $ 3     $ 873  
Hudson Asia Pacific 3,548     (3,013 )   169     (2,844 )
Hudson Europe 1,743     3,112     (456 )   2,656  
Corporate (14,981 )   (18,455 )       (18,455 )
Total $ 3,241     $ (17,486 )   $ (284 )   $ (17,770 )
EBITDA (loss):              
Hudson Americas $ 13,341     $ 117     $ 33     $ 150  
Hudson Asia Pacific 2,839     (890 )   (295 )   (1,185 )
Hudson Europe (210 )   (1,187 )   190     (997 )
Corporate (9,150 )   (9,765 )       (9,765 )
Total $ 6,820     $ (11,725 )   $ (72 )   $ (11,797 )
  1. SG&A is a measure that management uses to evaluate the segments' expenses.
HUDSON GLOBAL, INC.
RECONCILIATION FOR RETAINED REVENUE AND GROSS MARGIN
(in thousands)
(unaudited)
 
Revenue, Q4 2015 vs Q4 2014
  For The Three Months Ended December 31,
  Reported     Retained (1)
  Q4 2015 Variance  vs Q4 2014 Constant Currency     Q4 2015 Variance  vs Q4 2014 Constant Currency
Americas $ 3,731   (68.1 )% (68.1 )%     $ 3,731   1.0 % 1.7 %
Asia Pacific 53,268   (8.7 )% 5.7 %     53,268   (8.7 )% 5.7 %
Europe 49,110   (26.3 )% (20.5 )%     49,056   (9.8 )% (3.9 )%
Total $ 106,109   (22.4 )% (14.3 )%     $ 106,055   (8.9 )% 0.9 %
                 
                 
Gross Margin, Q4 2015 vs Q4 2014  
  For The Three Months Ended December 31,
  Reported     Retained (1)
  Q4 2015 Variance  vs Q4 2014 Constant Currency     Q4 2015 Variance  vs Q4 2014 Constant Currency
Americas 3,235   (38.9 )% (38.6 )%     $ 3,234   6.7 % 7.6 %
Asia Pacific 21,609   (5.8 )% 6.1 %     21,609   (5.8 )% 6.0 %
Europe 19,595   (21.7 )% (14.1 )%     19,547   (10.6 )% (2.5 )%
Total $ 44,439   (16.6 )% (8.3 )%     $ 44,390   (7.1 )% 2.3 %

(1) Retained revenue and gross margin and divested revenue and gross margin are non-GAAP terms that management believes provide a better understanding of the underlying revenue and gross margin trends in the business following the divestitures in the second quarter of 2015. Divested revenue and gross margin includes such items attributable to the following businesses: the Americas IT staffing business, the Netherlands business, Ukraine, Czech Republic, Slovakia and Luxembourg. The non-GAAP financial measures do not replace the presentation of GAAP financial results and should only be used as a supplement to, not as a substitute for, Hudson's financial results presented in accordance with GAAP. The above table provides a reconciliation of the non-GAAP financial measure used in its financial reporting to the most directly comparable GAAP financial measure.
HUDSON GLOBAL, INC.
RECONCILIATION FOR RETAINED REVENUE AND GROSS MARGIN
(in thousands)
(unaudited)
 
Revenue, 2015 vs 2014
  For The Year Ended December 31,
  Reported     Retained (1)
  2015 Variance  vs 2014 Constant Currency     2015 Variance  vs 2014 Constant Currency
Americas $ 28,627   (42.9 )% (42.8 )%     $ 14,898   6.7 % 7.5 %
Asia Pacific 219,391   (11.1 )% 4.7 %     219,391   (11.1 )% 4.7 %
Europe 215,179   (24.3 )% (15.2 )%     201,997   (13.9 )% (4.9 )%
Total $ 463,197   (20.3 )% (9.7 )%     $ 436,286   (11.9 )% 0.1 %
                 
                 
Gross Margin, 2015 vs 2014  
  For The Year Ended December 31,
  Reported     Retained (1)
  2015 Variance  vs 2014 Constant Currency     2015 Variance  vs 2014 Constant Currency
Americas $ 16,111   (22.4 )% (22.0 )%     $ 12,723   10.8 % 11.8 %
Asia Pacific 89,682   (3.6 )% 10.3 %     89,682   (3.6 )% 10.3 %
Europe 81,917   (24.9 )% (14.3 )%     78,944   (18.3 )% (7.5 )%
Total $ 187,710   (15.8 )% (5.0 )%     $ 181,349   (9.8 )% 1.9 %

(1) Retained revenue and gross margin and divested revenue and gross margin are non-GAAP terms that management believes provide a better understanding of the underlying revenue and gross margin trends in the business following the divestitures in the second quarter of 2015. Divested revenue and gross margin includes such items attributable to the following businesses: the Americas IT staffing business, the Netherlands business, Ukraine, Czech Republic, Slovakia and Luxembourg. The non-GAAP financial measures do not replace the presentation of GAAP financial results and should only be used as a supplement to, not as a substitute for, Hudson's financial results presented in accordance with GAAP. The above table provides a reconciliation of the non-GAAP financial measure used in its financial reporting to the most directly comparable GAAP financial measure.
HUDSON GLOBAL, INC.
RECONCILIATION FOR ADJUSTED EBITDA
(in thousands)
(unaudited)
 
Starting in the first quarter of 2016, the company's adjusted EBITDA results will exclude stock-based compensation costs. The tables below show the previously reported adjusted EBITDA, the stock-based compensation cost previously included in that adjusted EBITDA, and the revised adjusted EBITDA.
   
   
For The Three Months Ended December 31, 2015 Total
Reported Adjusted EBITDA (loss) (1) $ 1,089  
Stock-based compensation 270  
Revised Adjusted EBITDA (loss) $ 1,359  
   
For The Three Months Ended December 31, 2014 Total
Reported Adjusted EBITDA (loss) (1) $ (2,393 )
Stock-based compensation $ 418  
Revised Adjusted EBITDA (loss) $ (1,975 )
   
For The Three Months Ended September 30, 2015 Total
Reported Adjusted EBITDA (loss) (1) $ (420 )
Stock-based compensation 203  
Revised Adjusted EBITDA (loss) $ (217 )
   
For The Three Months Ended March 31, 2015 Total
Reported Adjusted EBITDA (loss) (1) $ (4,262 )
Stock-based compensation 532  
Revised Adjusted EBITDA (loss) $ (3,730 )
   
For The Twelve Months Ended December 31, 2015 Total
Reported Adjusted EBITDA (loss) (1) $ (4,381 )
Stock-based compensation 1,689  
Revised Adjusted EBITDA (loss) $ (2,692 )
   
For The Twelve Months Ended December 31, 2014 Total
Reported Adjusted EBITDA (loss) (1) $ (7,476 )
Stock-based compensation 1,300  
Revised Adjusted EBITDA (loss) $ (6,176 )
  1. Non-GAAP earnings before interest, income taxes, and depreciation and amortization ("EBITDA") and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses ("Adjusted EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. 
Contact:David F. KirbyHudson212-351-7216david.kirby@hudson.com

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