falsedesktopHSON2020-09-30000121070820000034{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "\t\tPage\n\tPART I - FINANCIAL INFORMATION\t\nItem 1.\tFinancial Statements (Unaudited)\t\n\tCondensed Consolidated Statements of Operations - Three and Nine Months Ended September 30 2020 and 2019\t1\n\tCondensed Consolidated Statements of Other Comprehensive (Loss) Income - Three and Nine Months Ended September 30 2020 and 2019\t2\n\tCondensed Consolidated Balance Sheets - September 30 2020 and December 31 2019\t3\n\tCondensed Consolidated Statements of Cash Flows - Nine Months Ended September 30 2020 and 2019\t4\n\tCondensed Consolidated Statements of Stockholders' Equity - Three and Nine Months Ended September 30 2020 and 2019\t5\n\tNotes to Condensed Consolidated Financial Statements\t6\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t23\nItem 3.\tQuantitative and Qualitative Disclosures about Market Risk\t40\nItem 4.\tControls and Procedures\t40\n\tPART II - OTHER INFORMATION\t\nItem 1.\tLegal Proceedings\t41\nItem 1A.\tRisk Factors\t41\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t41\nItem 3.\tDefaults Upon Senior Securities\t41\nItem 4.\tMine Safety Disclosures\t41\nItem 5.\tOther Information\t41\nItem 6.\tExhibits\t42\n\tExhibit Index\t42\n\tSignatures\t43\n", "q10k_tbl_1": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenue\t25413\t25762\t74117\t68363\nOperating expenses:\t\t\t\t\nDirect contracting costs and reimbursed expenses\t16343\t14366\t46319\t35912\nSalaries and related\t8098\t8857\t24650\t27758\nOther selling general and administrative\t2049\t2022\t5584\t6911\nDepreciation and amortization\t25\t23\t73\t62\nTotal operating expenses\t26515\t25268\t76626\t70643\nOperating (loss) income\t(1102)\t494\t(2509)\t(2280)\nNon-operating income (expense):\t\t\t\t\nInterest income net\t14\t88\t133\t526\nOther income (expense) net\t96\t(87)\t474\t(215)\n(Loss) income from continuing operations before provision for income taxes\t(992)\t495\t(1902)\t(1969)\nProvision for income taxes from continuing operations\t165\t149\t538\t356\n(Loss) income from continuing operations\t(1157)\t346\t(2440)\t(2325)\n(Loss) income from discontinued operations net of income taxes\t0\t18\t0\t(113)\nNet (loss) income\t(1157)\t364\t(2440)\t(2438)\nBasic and diluted loss per share:\t\t\t\t\n(Loss) earnings per share from continuing operations\t(0.41)\t0.11\t(0.84)\t(0.74)\n(Loss) earnings per share from discontinued operations\t0\t0.01\t0\t(0.04)\n(Loss) earnings per share\t(0.41)\t0.12\t(0.84)\t(0.77)\nWeighted-average shares outstanding:\t\t\t\t\nBasic\t2858\t3082\t2920\t3150\nDiluted\t2858\t3118\t2920\t3150\n", "q10k_tbl_2": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nComprehensive (loss) income:\t\t\t\t\nNet (loss) income\t(1157)\t364\t(2440)\t(2438)\nOther comprehensive (loss) income:\t\t\t\t\nForeign currency translation adjustment net of applicable income taxes\t489\t(338)\t146\t(379)\nTotal other comprehensive income (loss) net of income taxes\t489\t(338)\t146\t(379)\nComprehensive (loss) income\t(668)\t26\t(2294)\t(2817)\n", "q10k_tbl_3": "\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t29345\t31190\nAccounts receivable less allowance for doubtful accounts of $20 and $174 respectively\t11916\t12795\nRestricted cash current\t154\t148\nPrepaid and other\t1213\t804\nTotal current assets\t42628\t44937\nProperty and equipment net\t132\t186\nOperating lease right-of-use assets\t269\t401\nDeferred tax assets\t725\t793\nRestricted cash\t234\t380\nOther assets\t7\t7\nTotal assets\t43995\t46704\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities:\t\t\nAccounts payable\t392\t1064\nAccrued expenses and other current liabilities\t8920\t8178\nShort-term debt\t810\t0\nOperating lease obligations current\t230\t246\nTotal current liabilities\t10352\t9488\nIncome tax payable\t859\t845\nOperating lease obligations\t43\t160\nLong-term debt\t516\t0\nOther liabilities\t167\t177\nTotal liabilities\t11937\t10670\nCommitments and contingencies\t\t\nStockholders' equity:\t\t\nPreferred stock $0.001 par value 10000 shares authorized; none issued or outstanding\t0\t0\nCommon stock $0.001 par value 20000 shares authorized; 3672 and 3663 shares issued; 2685 and 2936 shares outstanding respectively\t4\t4\nAdditional paid-in capital\t486659\t486088\nAccumulated deficit\t(438947)\t(436507)\nAccumulated other comprehensive loss net of applicable tax\t(333)\t(479)\nTreasury stock 987 and 726 shares respectively at cost\t(15325)\t(13072)\nTotal stockholders' equity\t32058\t36034\nTotal liabilities and stockholders' equity\t43995\t46704\n", "q10k_tbl_4": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash flows from operating activities:\t\t\nNet loss\t(2440)\t(2438)\nAdjustments to reconcile net loss to net cash used in operating activities:\t\t\nDepreciation and amortization\t73\t62\nProvision for doubtful accounts\t33\t66\nProvision for (benefit from) deferred income taxes\t76\t(258)\nStock-based compensation\t571\t811\nChanges in assets and liabilities net of effect of dispositions:\t\t\nDecrease (increase) in accounts receivable\t833\t(6358)\n(Increase) decrease in prepaid and other assets\t(418)\t298\n(Decrease) increase in accounts payable accrued expenses and other liabilities\t(86)\t267\nNet cash used in operating activities\t(1358)\t(7550)\nCash flows from investing activities:\t\t\nCapital expenditures\t(19)\t(70)\nNet cash used in investing activities\t(19)\t(70)\nCash flows from financing activities:\t\t\nNet borrowings and repayments under credit agreements\t0\t0\nProceeds from government lending\t1326\t0\nPurchase of treasury stock\t(2239)\t(4482)\nPurchase of restricted stock from employees\t(14)\t(41)\nNet cash used in financing activities\t(927)\t(4523)\nEffect of exchange rates on cash cash equivalents and restricted cash\t319\t(36)\nNet decrease in cash cash equivalents and restricted cash\t(1985)\t(12179)\nCash cash equivalents and restricted cash beginning of the period\t31718\t41060\nCash cash equivalents and restricted cash end of the period\t29733\t28881\nSupplemental disclosures of cash flow information:\t\t\nCash paid during the period for interest\t1\t5\nCash received during the period for interest\t139\t530\nNet cash payments during the period for income taxes\t676\t484\nCash paid for amounts included in operating lease liabilities\t198\t246\nSupplemental non-cash disclosures:\t\t\nRight-of-use assets obtained in exchange for operating lease liabilities\t77\t723\n", "q10k_tbl_5": "\tThree Months Ended\t\t\t\tNine Months Ended\t\t\t\n\tSeptember 30 2020\t\tSeptember 30 2019\t\tSeptember 30 2020\t\tSeptember 30 2019\t\n\tShares\tValue\tShares (a)\tValue\tShares\tValue\tShares\tValue\nTotal stockholders' equity beginning balance\t2685\t32392\t2960\t34001\t2936\t36034\t3190\t40487\nCommon stock and additional paid-in capital:\t\t\t\t\t\t\t\t\nBeginning balance\t3672\t486329\t3658\t485740\t3663\t486092\t3613\t485131\nStock-based compensation expense\t0\t334\t2\t202\t9\t571\t47\t811\nEnding balance\t3672\t486663\t3660\t485942\t3672\t486663\t3660\t485942\nTreasury stock:\t\t\t\t\t\t\t\t\nBeginning balance\t(987)\t(15325)\t(698)\t(12738)\t(726)\t(13072)\t(423)\t(8486)\nPurchase of treasury stock\t0\t0\t(23)\t(270)\t(260)\t(2239)\t(296)\t(4482)\nPurchase of restricted stock from employees\t0\t0\t0\t(1)\t(1)\t(14)\t(2)\t(41)\nEnding balance\t(987)\t(15325)\t(721)\t(13009)\t(987)\t(15325)\t(721)\t(13009)\nAccumulated other comprehensive (loss) income:\t\t\t\t\t\t\t\t\nBeginning balance\t\t(822)\t\t(647)\t\t(479)\t\t(606)\nOther comprehensive income (loss)\t\t489\t\t(338)\t\t146\t\t(379)\nEnding balance\t\t(333)\t\t(985)\t\t(333)\t\t(985)\nAccumulated deficit:\t\t\t\t\t\t\t\t\nBeginning balance\t\t(437790)\t\t(438354)\t\t(436507)\t\t(435552)\nNet (loss) income\t\t(1157)\t\t364\t\t(2440)\t\t(2438)\nEnding balance\t\t(438947)\t\t(437990)\t\t(438947)\t\t(437990)\nTotal stockholders' equity ending balance\t2685\t32058\t2939\t33958\t2685\t32058\t2939\t33958\n", "q10k_tbl_6": "\tThree Months Ended September 30\t\n\t2020\t2019\nRPO Recruitment\t8780\t11507\nContracting\t16633\t14255\nTotal Revenue\t25413\t25762\n", "q10k_tbl_7": "\tNine Months Ended September 30\t\n\t2020\t2019\nRPO Recruitment\t27488\t32790\nContracting\t46629\t35573\nTotal Revenue\t74117\t68363\n", "q10k_tbl_8": "\tThree Months Ended\tNine Months Ended\n\tSeptember 30 2019\tSeptember 30 2019\nLoss from sale of discontinued operations\t18\t(113)\nLoss from discontinued operations before income taxes\t18\t(113)\nProvision for income taxes\t0\t0\nLoss from discontinued operations net of income taxes\t18\t(113)\n", "q10k_tbl_9": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nStock options\t0\t0\t0\t0\nRestricted stock units\t334\t202\t571\t811\nTotal\t334\t202\t571\t811\n", "q10k_tbl_10": "\tNine Months Ended September 30\t\t\t\n\t2020\t\t2019\t\n\tNumber of Options\tWeighted Average Exercise Price per Share\tNumber of Options\tWeighted Average Exercise Price per Share\nOptions outstanding at January 1\t5000\t24.90\t5000\t24.90\nExpired/forfeited\t0\t0\t0\t0\nOptions outstanding at September 30\t5000\t24.90\t5000\t24.90\nOptions exercisable at September 30\t5000\t24.90\t5000\t24.90\n", "q10k_tbl_11": "\tNine Months Ended September 30\t\t\t\n\t2020\t\t2019\t\n\tNumber of Restricted Stock Units\tWeighted Average Grant-Date Fair Value\tNumber of Restricted Stock Units\tWeighted Average Grant-Date Fair Value\nUnvested restricted stock units at January 1\t63436\t15.12\t57773\t15.68\nGranted\t10310\t9.01\t85139\t15.04\nShares earned above target (a)\t0\t0\t723\t17.00\nVested)\t(33188\t12.83\t(61612)\t14.91\nForfeited)\t(22384\t15.20\t(15090)\t15.38\nUnvested restricted stock units at September 30\t18174\t15.75\t66933\t15.22\n", "q10k_tbl_12": "\tYear\nEarliest tax years which remain subject to examination by the relevant tax authorities:\t\nU.S. Federal\t2016\nMajority of U.S. state and local jurisdictions\t2015\nAustralia\t2018\nBelgium\t2017\nCanada\t2015\nNetherlands\t2014\nSwitzerland\t2015\nUnited Kingdom\t2018\nJurisdictions in Asia\t2018\n", "q10k_tbl_13": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\t\n\t2020\t2019\t2020\t2019\t\nLoss per share (\"EPS\"):\t\t\t\t\t\nEPS - basic and diluted:\t\t\t\t\t\n(Loss) earnings per share from continuing operations\t(0.41)\t0.11\t(0.84)\t(0.74)\t\nEarnings (loss) per share from discontinued operations\t0\t0.01\t0\t(0.04)\t\n(Loss) earnings per share\t(0.41)\t0.12\t(0.84)\t(0.77)\t\nEPS numerator - basic and diluted:\t\t\t\t\t\n(Loss) income from continuing operations\t(1157)\t346\t(2440)\t(2325)\t\nIncome (loss) from discontinued operations\t0\t18\t0\t(113)\t\nNet (loss) income\t(1157)\t364\t(2440)\t(2438)\t\nEPS denominator (in thousands):\t\t\t\t\t\nWeighted average common stock outstanding - basic\t2858\t3082\t2920\t3150\t\nCommon stock equivalents: stock options and restricted stock units (a)\t0\t(a) 36\t0\t(a) -\t(a)\nWeighted average number of common stock outstanding - diluted\t2858\t3118\t2920\t3150\t\n", "q10k_tbl_14": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nUnvested restricted stock units\t18174\t0\t18174\t66933\nStock options\t5000\t5000\t5000\t5000\nTotal\t23174\t5000\t23174\t71933\n", "q10k_tbl_15": "\t2020\t2021\t2022\tTotal\nMinimum lease payments\t69\t182\t22\t273\n", "q10k_tbl_16": "\tSeptember 30\tDecember 31\n\t2020\t2019\nForeign currency translation adjustments\t(333)\t(479)\nAccumulated other comprehensive loss\t(333)\t(479)\n", "q10k_tbl_17": "\tAmericas\tAsia Pacific\tEurope\tCorporate\tInter-Segment Elimination\tTotal\nFor The Three Months Ended September 30 2020\t\t\t\t\t\t\nRevenue from external customers\t1934\t19877\t3602\t0\t0\t25413\nInter-segment revenue\t97\t0\t0\t0\t(97)\t0\nTotal revenue\t2031\t19877\t3602\t0\t(97)\t25413\nAdjusted net revenue from external customers (a)\t1678\t5002\t2390\t0\t0\t9070\nInter-segment adjusted net revenue\t97\t0\t(97)\t0\t0\t0\nTotal adjusted net revenue\t1775\t5002\t2293\t0\t0\t9070\nEBITDA (loss) (b)\t(789)\t517\t(40)\t(669)\t0\t(981)\nDepreciation and amortization\t(5)\t(13)\t(6)\t(1)\t0\t(25)\nIntercompany interest (expense) income net\t0\t(81)\t0\t81\t0\t0\nInterest (expense) income net\t(4)\t2\t0\t16\t0\t14\nIncome (loss) from continuing operations before income taxes\t(798)\t425\t(46)\t(573)\t0\t(992)\nFor The Nine Months Ended September 30 2020\t\t\t\t\t\t\nRevenue from external customers\t7328\t55661\t11128\t0\t0\t74117\nInter-segment revenue\t97\t6\t0\t0\t(103)\t0\nTotal revenue\t7425\t55667\t11128\t0\t(103)\t74117\nAdjusted net revenue from external customers (a)\t6431\t14331\t7036\t0\t0\t27798\nInter-segment adjusted net revenue\t97\t6\t(103)\t0\t0\t0\nTotal adjusted net revenue\t6528\t14337\t6933\t0\t0\t27798\nEBITDA (loss) (b)\t(1767)\t1879\t323\t(2397)\t0\t(1962)\nDepreciation and amortization\t(14)\t(38)\t(17)\t(4)\t0\t(73)\nIntercompany interest (expense) income net\t0\t(240)\t0\t240\t0\t0\nInterest (expense) income net\t(6)\t2\t0\t137\t0\t133\nIncome (loss) from continuing operations before income taxes\t(1787)\t1603\t306\t(2024)\t0\t(1902)\nAs of September 30 2020\t\t\t\t\t\t\nAccounts receivable net\t1353\t7558\t3005\t0\t0\t11916\nTotal assets\t3809\t14022\t7597\t18567\t0\t43995\n", "q10k_tbl_18": "\tAmericas\tAsia Pacific\tEurope\tCorporate\tInter- Segment Elimination\tTotal\nFor The Three Months Ended September 30 2019\t\t\t\t\t\t\nRevenue from external customers\t3510\t17436\t4816\t0\t0\t25762\nInter-segment revenue\t12\t0\t(1)\t0\t(11)\t0\nTotal revenue\t3522\t17436\t4815\t0\t(11)\t25762\nAdjusted net revenue from external customers (a)\t3205\t5574\t2617\t0\t0\t11396\nInter-segment adjusted net revenue\t11\t(12)\t0\t0\t1\t0\nTotal adjusted net revenue\t3216\t5562\t2617\t0\t1\t11396\nEBITDA (loss) (b)\t3\t821\t178\t(572)\t0\t430\nDepreciation and amortization\t(5)\t(12)\t(5)\t(1)\t0\t(23)\nIntercompany interest (expense) income net\t0\t(95)\t0\t95\t0\t0\nInterest income net\t0\t(4)\t0\t92\t0\t88\nIncome (loss) from continuing operations before income taxes\t(2)\t710\t173\t(386)\t0\t495\nFor The Nine Months Ended September 30 2019\t\t\t\t\t\t\nRevenue from external customers\t10632\t43569\t14162\t0\t0\t68363\nInter-segment revenue\t75\t0\t2\t0\t(77)\t0\nTotal revenue\t10707\t43569\t14164\t0\t(77)\t68363\nAdjusted net revenue from external customers (a)\t9558\t15584\t7309\t0\t0\t32451\nInter-segment adjusted net revenue\t72\t(70)\t3\t0\t(5)\t0\nTotal adjusted net revenue\t9630\t15514\t7312\t\t(5)\t32451\nEBITDA (loss) (b)\t17\t1135\t(139)\t(3446)\t0\t(2433)\nDepreciation and amortization\t(14)\t(27)\t(18)\t(3)\t0\t(62)\nIntercompany interest (expense) income net\t0\t(296)\t0\t296\t0\t0\nInterest income net\t0\t(4)\t0\t530\t0\t526\nIncome (loss) from continuing operations before income taxes\t3\t808\t(157)\t(2623)\t0\t(1969)\nAs of September 30 2019\t\t\t\t\t\t\nAccounts receivable net\t3295\t8594\t3849\t(47)\t0\t15691\nTotal assets\t5122\t11930\t7003\t23094\t0\t47149\n", "q10k_tbl_19": "\tAustralia\tUnited Kingdom\tUnited States\tOther\tTotal\nFor The Three Months Ended September 30 2020\t\t\t\t\t\nRevenue (a)\t18085\t3151\t1620\t2557\t25413\nFor The Three Months Ended September 30 2019\t\t\t\t\t\nRevenue (a)\t15325\t4295\t3219\t2923\t25762\nFor The Nine Months Ended September 30 2020\t\t\t\t\t\nRevenue (a)\t50082\t9629\t6393\t8013\t74117\nFor The Nine Months Ended September 30 2019\t\t\t\t\t\nRevenue (a)\t37382\t12794\t9759\t8428\t68363\nAs of September 30 2020\t\t\t\t\t\nNet assets\t4581\t3397\t18388\t5692\t32058\nAs of September 30 2019\t\t\t\t\t\nNet assets\t2737\t2358\t23387\t5476\t33958\n", "q10k_tbl_20": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\t\t\t2020\t2019\t\t\n\tAs\tAs\tCurrency\tConstant\tAs\tAs\tCurrency\tConstant\n in thousands\treported\treported\ttranslation\tcurrency\treported\treported\ttranslation\tcurrency\nRevenue:\t\t\t\t\t\t\t\t\nAmericas\t1934\t3510\t(2)\t3508\t7328\t10632\t(16)\t10616\nAsia Pacific\t19877\t17436\t677\t18113\t55661\t43569\t(820)\t42749\nEurope\t3602\t4816\t238\t5054\t11128\t14162\t15\t14177\nTotal\t25413\t25762\t913\t26675\t74117\t68363\t(821)\t67542\nAdjusted net revenue (a):\t\t\t\t\t\t\t\t\nAmericas\t1678\t3205\t(6)\t3199\t6431\t9558\t(10)\t9548\nAsia Pacific\t5002\t5574\t196\t5770\t14331\t15584\t(327)\t15257\nEurope\t2390\t2617\t131\t2748\t7036\t7309\t36\t7345\nTotal\t9070\t11396\t321\t11717\t27798\t32451\t(301)\t32150\nSG&A and Non-Op (b):\t\t\t\t\t\t\t\t\nAmericas\t2563\t3213\t(3)\t3210\t8295\t9612\t(10)\t9602\nAsia Pacific\t4486\t4741\t176\t4917\t12458\t14380\t(360)\t14020\nEurope\t2333\t2439\t123\t2562\t6610\t7450\t9\t7459\nCorporate\t669\t573\t(2)\t571\t2397\t3442\t(2)\t3440\nTotal\t10051\t10966\t294\t11260\t29760\t34884\t(363)\t34521\nOperating (loss) income:\t\t\t\t\t\t\t\t\nAmericas\t(767)\t160\t0\t160\t(1595)\t453\t(1)\t452\nAsia Pacific\t919\t1075\t33\t1108\t2360\t1918\t21\t1939\nEurope\t42\t316\t17\t333\t186\t250\t24\t274\nCorporate\t(1296)\t(1057)\t2\t(1055)\t(3460)\t(4901)\t0\t(4901)\nTotal\t(1102)\t494\t52\t546\t(2509)\t(2280)\t44\t(2236)\nNet (loss) income consolidated\t(1157)\t364\t17\t381\t(2440)\t(2438)\t54\t(2384)\nEBITDA (loss) from continuing operations (c):\t\t\t\t\t\t\t\t\nAmericas\t(789)\t3\t0\t3\t(1767)\t17\t0\t17\nAsia Pacific\t517\t821\t21\t842\t1879\t1135\t36\t1171\nEurope\t(40)\t178\t9\t187\t323\t(139)\t23\t(116)\nCorporate\t(669)\t(572)\t(1)\t(573)\t(2397)\t(3446)\t0\t(3446)\nTotal\t(981)\t430\t29\t459\t(1962)\t(2433)\t59\t(2374)\n", "q10k_tbl_21": "\tThree Months Ended\t\tNine Months Ended\t\n\tSeptember 30\t\tSeptember 30\t\n in thousands\t2020\t2019\t2020\t2019\nNet (loss) income\t(1157)\t364\t(2440)\t(2438)\nAdjustment for income (loss) from discontinued operations net of income taxes\t0\t18\t0\t(113)\n(Loss) income from continuing operations\t(1157)\t346\t(2440)\t(2325)\nAdjustments to loss from continuing operations\t\t\t\t\nProvision for income taxes\t165\t149\t538\t356\nInterest income net\t(14)\t(88)\t(133)\t(526)\nDepreciation and amortization expense\t25\t23\t73\t62\nTotal adjustments from net (loss) income to EBITDA (loss)\t176\t84\t478\t(108)\nEBITDA (loss) from continuing operations\t(981)\t430\t(1962)\t(2433)\n", "q10k_tbl_22": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tAs reported\t\tAs reported\t\tAs reported\nAmericas\t\t\t\t\t\t\t\t\t\nRevenue\t1.9\t3.5\t(1.6)\t\t(45)%\t7.3\t10.6\t(3.3)\t(31)%\n", "q10k_tbl_23": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tAs reported\t\tAs reported\t\tAs reported\nAmericas\t\t\t\t\t\t\t\t\t\nAdjusted net revenue\t1.7\t3.2\t(1.5)\t\t(48)%\t6.4\t9.6\t(3.1)\t(33)%\nAdjusted net revenue as a percentage of revenue\t87%\t91%\tN/A\t\tN/A\t88%\t90%\tN/A\tN/A\n", "q10k_tbl_24": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tAs reported\t\tAs reported\t\tAs reported\nAmericas\t\t\t\t\t\t\t\t\t\nSG&A and Non-Op\t2.6\t3.2\t(0.7)\t\t(20)%\t8.3\t9.6\t(1.3)\t(14)%\nSG&A and Non-Op as a percentage of revenue\t133%\t92%\tN/A\t\tN/A\t113%\t90%\tN/A\tN/A\n", "q10k_tbl_25": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tAs reported\t\tAs reported\t\tAs reported\t\nAmericas\t\t\t\t\t\t\t\t\t\nOperating income (loss)\t(0.8)\t0.2\t(0.9)\t\tN/M\t(1.6)\t0.5\t(2.0)\tN/M\nEBITDA (loss)\t(0.8)\t0\t(0.8)\t\tN/M\t(1.8)\t0\t(1.8)\tN/M\nEBITDA (loss) as a percentage of revenue\t(41)%\t-%\tN/A\t\tN/A\t(24)%\t-%\tN/A\tN/A\n", "q10k_tbl_26": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nAsia Pacific\t\t\t\t\t\t\t\t\t\nRevenue\t19.9\t18.1\t1.8\t\t10%\t55.7\t42.7\t12.9\t30%\n", "q10k_tbl_27": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nAsia Pacific\t\t\t\t\t\t\t\t\t\nAdjusted net revenue\t5.0\t5.8\t(0.8)\t\t(13)%\t14.3\t15.3\t(0.9)\t(6)%\nAdjusted net revenue as a percentage of revenue\t25%\t32%\tN/A\t\tN/A\t26%\t36%\tN/A\tN/A\n", "q10k_tbl_28": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nAsia Pacific\t\t\t\t\t\t\t\t\t\nSG&A and Non-Op\t4.5\t4.9\t(0.4)\t\t(9)%\t12.5\t14.0\t(1.6)\t(11)%\nSG&A and Non-Op as a percentage of revenue\t23%\t27%\tN/A\t\tN/A\t22%\t33%\tN/A\tN/A\n", "q10k_tbl_29": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nAsia Pacific\t\t\t\t\t\t\t\t\t\nOperating income\t0.9\t1.1\t(0.2)\t\t(17)%\t2.4\t1.9\t0.4\t22%\nEBITDA\t0.5\t0.8\t(0.3)\t\t(39)%\t1.9\t1.2\t0.7\t61%\nEBITDA as a percentage of revenue\t3%\t5%\tN/A\t\tN/A\t3%\t3%\tN/A\tN/A\n", "q10k_tbl_30": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nEurope\t\t\t\t\t\t\t\t\t\nRevenue\t3.6\t5.1\t(1.5)\t\t(29)%\t11.1\t14.2\t(3.0)\t(22)%\n", "q10k_tbl_31": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nEurope\t\t\t\t\t\t\t\t\t\nAdjusted net revenue\t2.4\t2.7\t(0.4)\t\t(13)%\t7.0\t7.3\t(0.3)\t(4)%\nAdjusted net revenue as a percentage of revenue\t66%\t54%\tN/A\t\tN/A\t63%\t52%\tN/A\tN/A\n", "q10k_tbl_32": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nEurope\t\t\t\t\t\t\t\t\t\nSG&A and Non-Op\t2.3\t2.6\t(0.2)\t\t(9)%\t6.6\t7.5\t(0.8)\t(11)%\nSG&A and Non-Op as a percentage of revenue\t65%\t51%\tN/A\t\tN/A\t59%\t53%\tN/A\tN/A\n", "q10k_tbl_33": "\tThree Months Ended September 30\t\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t2019\tChange in amount\t\tChange in %\t2020\t2019\tChange in amount\tChange in %\n in millions\tAs reported\tConstant currency\t\tAs reported\t\tConstant currency\nEurope\t\t\t\t\t\t\t\t\t\nOperating income (loss)\t0\t0.3\t(0.3)\t\t(87)%\t0.2\t0.3\t(0.1)\t(32)%\nEBITDA (loss)\t0\t0.2\t(0.2)\t\tN/M\t0.3\t(0.1)\t0.4\tN/M\nEBITDA (loss) as a percentage of revenue\t(1)%\t4%\tN/A\t\tN/A\t3%\t(1)%\tN/A\tN/A\n", "q10k_tbl_34": "\tFor the Nine Months Ended September 30\t\n in millions\t2020\t2019\nNet cash used in operating activities\t(1.4)\t(7.6)\nNet cash used in by investing activities\t0\t(0.1)\nNet cash used in financing activities\t(0.9)\t(4.5)\nEffect of exchange rates on cash cash equivalents and restricted cash\t0.3\t0\nNet decrease in cash cash equivalents and restricted cash\t(2.0)\t(12.2)\n", "q10k_tbl_35": "Period\tTotal Number of Shares Purchased\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs\tApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)\nJuly 1 2020 - July 31 2020\t0\t0\t0\t1703000\nAugust 1 2020 - August 31 2020\t0\t0\t0\t1703000\nSeptember 1 2020 - September 30 2020\t0\t0\t0\t1703000\nTotal\t0\t0\t0\t1703000\n", "q10k_tbl_36": "Exhibit No.\tDescription\n31.1*\tCertification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.\n31.2*\tCertification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.\n32.1**\tCertification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.\n32.2**\tCertification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.\n101*\tThe following materials from Hudson Global Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30 2020 are filed herewith formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30 2020 and 2019 (ii) the Condensed Consolidated Statements of Other Comprehensive Income (Loss) for the three and nine months ended September 30 2020 and 2019 (iii) the Condensed Consolidated Balance Sheets as of September 30 2020 and December 31 2019 (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30 2020 and 2019 (v) the Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30 2020 and 2019 and (vi) Notes to Condensed Consolidated Financial Statements.\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_1", "cf": "q10k_tbl_4"}None
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-31.1
hson-20200930exx311.htm
EX-31.2
hson-20200930exx312.htm
EX-32.1
hson-20200930exx321.htm
EX-32.2
hson-20200930exx322.htm
Hudson Global Earnings 2020-09-30
Balance Sheet
Income Statement
Cash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin
10-Q 1 hson20200930-10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
o
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: 000-50129
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, Old Greenwich, CT 06870
(Address of principal executive offices) (Zip Code)
(203) 409-5628
(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 x No o
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 x No o
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
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
Emerging growth company
o
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. o
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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 United States 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, 2019.
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. All per share amounts and shares outstanding for the three and nine months ended September 30, 2020 and all prior periods reflect the Company's 1-for-10 reverse stock split, which was effective June 10, 2019. For more information, see Note 2.
NOTE 2 – DESCRIPTION OF BUSINESS
The Company is comprised of the operations, assets, and liabilities of the Company's three regional businesses of Hudson Americas, Hudson Asia Pacific, and Hudson Europe. The Company provides Recruitment Process Outsourcing ("RPO") permanent recruitment and contracting outsourced recruitment solutions. These services are tailored to the individual needs of primarily mid-to-large-cap multinational companies. The Company's RPO delivery teams utilize state-of-the-art recruitment process methodologies and project management expertise in their flexible, turnkey solutions to meet clients' ongoing business needs. The Company's RPO services include complete recruitment outsourcing, project-based outsourcing, contingent workforce solutions, and recruitment consulting.
The Company operates directly in ten countries with three reportable geographic business segments: Americas, Asia Pacific, and Europe. See Note 12 for further details regarding the reportable segments.
Corporate expenses are reported separately from the reportable segments and pertain to certain functions, such as executive management, corporate governance, human resources, accounting, tax, marketing, information technology, 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).
In December 2019, a novel strain of coronavirus, referred to as COVID-19, was reported to have originated in Wuhan, Hubei Province, China. On January 30, 2020, the World Health Organization (“WHO”) declared that the virus had become a global public-health emergency. On March 11, 2020, the WHO declared the outbreak to be a pandemic, based on the rapid increase in exposure globally. Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. Our business continues to be impacted by the outbreak and the accompanying economic downturn. Some of our customers continue to have instituted hiring freezes, while other customers operating in the banking, pharmaceutical and technology industries, which may be considered as essential businesses in different jurisdictions, or customers that are more capable of working remotely than other industries, have been allowed to operate as usual. The inability to conduct in-person interviews has also impacted our business. The expected timeline for this reduction in demand for our services remains uncertain and difficult to predict considering the rapidly evolving landscape.
In connection with the COVID-19 pandemic, certain foreign government organizations have begun to offer wage assistance subsidies and tax credits to companies in exchange for maintaining specified levels of compensation and related costs for employees residing in those countries. The Company recognizes the receipt of funds from these organizations in the Other income (expense), net caption on the Condensed Consolidated Statements of Operations. For the three and nine months ended
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
September 30, 2020, the Company received $199 and $464, respectively, related to foreign government assistance, which amounts are included within Other income (expense), net. In the United States, the Company received a $1.3 million loan in connection with the Paycheck Protection Program (“PPP”), administered by the U.S. Small Business Administration (“SBA”), under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). All or a portion of the PPP loan may be forgiven by the SBA under certain conditions. Subsequent to the end of the third quarter, the Company applied for loan forgiveness. To the extent that forgiveness is obtained for any portion of the loan in the future, it will be reflected in Other income (expense), net. For more information, see Note 9.
On June 10, 2019, the Company announced a reverse stock split of its outstanding shares of common stock, par value $0.001 per share, at a ratio of 1-for-10 (the “Reverse Split”) and that it had filed a Certificate of Amendment of the Company's Amended and Restated Certificate of Incorporation in order to effect the Reverse Split. The filed certificate also reduced the number of authorized shares of common stock to 20 million shares. The Reverse Split and reduction in authorized shares were approved by the Company's Board of Directors (the "Board") on February 25, 2019, and it was approved by the stockholders of the Company at the annual meeting on May 6, 2019. The Board approved the ratio of 1-for-10 on May 24, 2019, and the Reverse Split became effective as of the close of business on June 10, 2019. The Reverse Split had no effect on the par value of the Company's common stock but it reduced the number of issued and outstanding shares of common stock by a factor of 10. Accordingly, the issued and outstanding shares, stock-based compensation disclosures, net loss per share, and other share and per share disclosures for all periods presented have been retrospectively adjusted to reflect the impact of this Reverse Split.
NOTE 3 – ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Pronouncements
On October 1, 2019, we elected to adopt Accounting Standards Update ("ASU") No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15") on a prospective basis. This ASU provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. ASU 2018-15 aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, ASU 2018-15 amends Accounting Standards Codification ("ASC") 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a CCA. The amendments in ASU 2018-15 are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. ASU 2018-15 had no impact on the Company's consolidated financial statements.
On January 1, 2019, we adopted ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. In July 2018, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements" ("ASU 2018-11"). This ASU allows adoption of the standard as of the effective date without restating prior periods. We did not elect to recognize the lease assets and liabilities in the statement of financial position for short-term leases. For more information, see Note 9.
On January 1, 2019, we adopted ASU No. 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU 2018-02"), which provides guidance on reclassification of certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), enacted on December 22, 2017. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the application of the Tax Act. Additionally, ASU 2018-02 requires financial statement preparers to disclose (1) a description of their accounting policy for releasing income tax effects from accumulated other comprehensive income, (2) whether they elect to reclassify the stranded income tax effects from the Tax Act, and (3) information about other income tax effects related to the application of the Tax Act that are reclassified from accumulated other comprehensive income to retained earnings, if any. The adoption had no impact on the Company's consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Recent Accounting Standard Update Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (“ASU 2016-13”). This standard requires an impairment model (known as the current expected credit loss ("CECL") model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally requires a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. The Company will adopt the guidance when it becomes effective.
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 output measure, 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 the 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. 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.
We record accounts receivable when our right to consideration becomes unconditional. Contract assets primarily relate to our rights to consideration for services provided that they 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 transfer services. We do not have any material contract assets or liabilities as of and for the nine months ended September 30, 2020.
Payment terms vary by client and the services offered. 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 as a principal in the 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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
•
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 Recruitment. We provide complete recruitment outsourcing, project-based outsourcing, and recruitment consulting for clients' permanent staff hires. We recognize revenue for our RPO recruitment 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 the 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 recruitment contracts. The costs to fulfill these contracts are expensed as incurred.
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 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. 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 contracting contracts. 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 from continuing operations by revenue source. For additional information on the disaggregated revenues by geographical segment, see Note 12 of the Notes to the Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 5 – DISCONTINUED OPERATIONS
On March 31, 2018, the Company completed the sale of its Recruitment and Talent Management ("RTM") businesses in Belgium, Europe (excluding Belgium), and Asia Pacific ("APAC") in separate transactions to Value Plus NV, Morgan Philips Group S.A., and Apache Group Holdings Pty Limited, respectively. The gross proceeds from the sale were $38,960. In addition, $17,626 of debt was assumed by the buyers. The RTM businesses met the criteria for discontinued operations set forth in ASC 205.
Reported results for the discontinued operations were as follows:
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2019
Loss from sale of discontinued operations
$
18
$
(113
)
Loss from discontinued operations before income taxes
18
(113
)
Provision for income taxes
—
—
Loss from discontinued operations, net of income taxes
$
18
$
(113
)
NOTE 6 – STOCK-BASED COMPENSATION
Incentive Compensation Plan
The Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated May 24, 2016 and further amended on September 14, 2020 (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 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 also may be subject to immediate vesting upon the occurrence of certain events following a change in control of the Company. 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 September 14, 2020, the Company's 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 September 30, 2020, there were 265,076 shares of the Company’s common stock available for future issuance under the ISAP.
The Company also maintains the Director Deferred Share Plan (the "Director Plan") 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 nine months ended September 30, 2020, the Company granted 42,134 restricted stock units to its non-employee directors pursuant to the Director Plan.
As of September 30, 2020, 196,911 restricted stock units are deferred under the Company’s ISAP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
For the three and nine months ended September 30, 2020 and 2019, the Company’s stock-based compensation expense related to stock options and restricted stock units was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Stock options
$
—
$
—
$
—
$
—
Restricted stock units
334
202
571
811
Total
$
334
$
202
$
571
$
811
Stock Options
Stock options granted by the Company generally expire between five and ten years after the date of grant and have an exercise price of at least 100% of the fair market value of the underlying share of common stock on the date of grant.
As of September 30, 2020, the Company had no unrecognized stock-based compensation expense related to outstanding unvested stock options.
Changes in the Company’s stock options for the nine months ended September 30, 2020 and 2019 were as follows:
Nine Months Ended September 30,
2020
2019
Number of
Options
Weighted
Average
Exercise Price
per Share
Number of
Options
Weighted
Average
Exercise Price
per Share
Options outstanding at January 1,
5,000
$
24.90
5,000
$
24.90
Expired/forfeited
—
—
—
—
Options outstanding at September 30,
5,000
$
24.90
5,000
$
24.90
Options exercisable at September 30,
5,000
$
24.90
5,000
$
24.90
Restricted Stock Units
As of September 30, 2020, the Company had approximately $87 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 1.30 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 nine months ended September 30, 2020 and 2019 were as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
(a)
The number of shares earned above target are based on the performance target established by the Compensation Committee at the initial grant date.
Subsequent to the end of the third quarter, on October 1, 2020, the Company granted 52,226 shares of common stock to be issued over 30 months in connection with the acquisition of Coit Staffing, Inc. See Note 14 for additional information.
NOTE 7 – INCOME TAXES
Income Tax Provision
Under ASC 270, "Interim Reporting", and ASC 740-270, "Income Taxes – Intra Period Tax Allocation", 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.
In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus packages. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The CARES Act, which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based-tax laws. The enactment of the CARES Act and other COVID-19 measures did not result in any material adjustments to our income tax provision for the three and nine months ended September 30, 2020, or to our net deferred tax assets as of September 30, 2020. The Company continues to monitor federal, state, and international regulatory developments in relation to COVID-19 and their potential impact on our operations.
Effective Tax Rate
The provision for income taxes for the nine months ended September 30, 2020 was $538 on a pre-tax loss from continuing operations of $1,902, compared to a provision for income taxes of $356 on pre-tax loss from continuing operations of $1,969 for the same period in 2019. The Company’s effective income tax rate was negative 28% and negative 18% for the nine months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to 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, changes to unrecognized tax benefits, foreign tax rate differences, and non-deductible expenses.
Uncertain Tax Positions
As of September 30, 2020 and December 31, 2019, the Company had $654 and $663, 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 September 30, 2020 and December 31, 2019, the Company had $563 and $551, respectively, of accrued interest and penalties associated with unrecognized tax benefits.
Based on information available as of September 30, 2020, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $200 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.
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 September 30, 2020, the Company's open tax years, which remain subject to examination by the relevant tax authorities, were principally as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Year
Earliest tax years which remain subject to examination by the relevant tax authorities:
U.S. Federal
2016
Majority of U.S. state and local jurisdictions
2015
Australia
2018
Belgium
2017
Canada
2015
Netherlands
2014
Switzerland
2015
United Kingdom
2018
Jurisdictions in Asia
2018
The Company believes that its unrecognized tax benefits as of September 30, 2020 are appropriately recorded for all years subject to examination above.
NOTE 8 – 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 loss per share calculations for the three and nine months ended September 30, 2020 and 2019 were as follows:
- 13 -
HUDSON GLOBAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Loss per share ("EPS"):
EPS - basic and diluted:
(Loss) earnings per share from continuing operations
$
(0.41
)
$
0.11
$
(0.84
)
$
(0.74
)
Earnings (loss) per share from discontinued operations
—
0.01
—
(0.04
)
(Loss) earnings per share
$
(0.41
)
$
0.12
$
(0.84
)
$
(0.77
)
EPS numerator - basic and diluted:
(Loss) income from continuing operations
$
(1,157
)
$
346
$
(2,440
)
$
(2,325
)
Income (loss) from discontinued operations
—
18
—
(113
)
Net (loss) income
$
(1,157
)
$
364
$
(2,440
)
$
(2,438
)
EPS denominator (in thousands):
Weighted average common stock outstanding - basic
2,858
3,082
2,920
3,150
Common stock equivalents: stock options and restricted stock units (a)
—
(a)
36
—
(a)
—
(a)
Weighted average number of common stock outstanding - diluted
2,858
3,118
2,920
3,150
(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 6 for further details on outstanding stock options and unvested 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 income (loss) per share for the three and nine months ended September 30, 2020 and 2019 did not include the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Consulting, Employment, and Non-compete Agreements
The Company has entered into various consulting and employment agreements with certain key members of management. These agreements generally (i) are one year in length, (ii) contain restrictive covenants, (iii) under certain circumstances, provide for compensation and, subject to providing the Company with a release, severance payments, and (iv) are automatically renewed annually unless either party gives sufficient notice of termination.
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 legal reserves are included under the caption "Other non-current liabilities" in the Condensed Consolidated Balance Sheets. The Company's reserves were $0 as of September 30, 2020 and December 31, 2019, respectively.
Departure of Chief Financial Officer
As previously disclosed, on May 31, 2019, the Company and Patrick Lyons, the Company's former Chief Financial Officer, determined that Mr. Lyons would leave his positions with the Company effective June 30, 2019. As a result, during the three and six months ended June 30, 2019, the Company recognized compensation expense of $485 to its former Chief Financial Officer classified within salaries and related expense in the Company's Condensed Consolidated Statements of Operations. Additionally, Mr. Lyons agreed to serve as a consultant to the Company to assist with certain financial and operational matters from July 1, 2019 through December 31, 2019. In consideration for his services as a consultant, the Company paid Mr. Lyons 750 shares of the Company’s common stock at the end of each month during the term of his consulting agreement with the Company.
Operating Leases
Effective January 1, 2019, the Company adopted the new lease guidelines detailed in ASU 2016-02. Lease payments for short-term leases with terms of 12 months or less based on original lease commencement date are recognized on a straight-line basis over the lease term. Adoption of this standard resulted in the recording of net operating lease right-of-use assets and corresponding operating lease liabilities of $0.7 million for rented office spaces.
Our office space leases have remaining lease terms of one year to three 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 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 nine months ended September 30, 2020 and 2019 were $407 and $399, respectively (reflected in Net cash used in operating activities). The weighted average remaining lease term of our operating leases as of September 30, 2020 was 1.1 years.
As of September 30, 2020, future minimum operating lease payments are as follows:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
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 September 30, 2020, there were no amounts outstanding under the NAB Facility Agreement. Interest expense and fees incurred on the NAB Facility Agreement were $4 and $14 for the three and nine months ended September 30, 2020, 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 September 30, 2020.
Amounts borrowed from the NAB Facility are 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.
Paycheck Protection Program
On April 26, 2020, the Company's wholly owned U.S. subsidiary, Hudson Global Resources Management, Inc., received a $1.3 million loan in connection with the PPP as part of the CARES Act, administered by the SBA. As a result of the COVID-19 pandemic, in applying for the loan the Company made a good faith assertion based upon the degree of uncertainty introduced to the capital markets and the industries affecting the Company's customers and the Company's dependency to curtail expenses to fund ongoing operations as the anticipated reduction in RPO recruitment revenue is expected to impact the business. The PPP loan proceeds are used to help offset payroll costs as stipulated in the legislation. All or a portion of the PPP loan may be forgiven by the SBA upon application by the Company and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities. The Company intends to comply with the loan forgiveness provisions in the legislation, however, there are no assurances that the Company will obtain forgiveness for any portion of the loan.
The PPP loan has a 1.00% interest rate and is scheduled to mature on April 26, 2022. The loan is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. As of September 30, 2020, $810 of the PPP loan proceeds are reflected in Short-term debt, $516 are reflected in Long-term debt on the Condensed Consolidated Balance Sheets, and the Company recorded $6 of interest expense. As of September 30, 2020, the Company is in compliance with all provisions related to the PPP loan.
NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of applicable tax, consisted of the following:
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 11 – 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. The Company intends to make purchases from time to time as market conditions warrant. This authorization does not expire. During the nine months ended September 30, 2020, no purchases of shares were made under this authorization. The Company repurchased 48,706 shares on the open market for $655 during the same period last year. As of September 30, 2020, under the July 30, 2015 authorization, the Company had repurchased 432,563 shares for a total cost of $8,297.
In addition to the shares repurchased above under the $10,000 authorization plan, on February 22, 2019, the Company commenced a tender offer to purchase up to 315,000 shares of the Company’s common stock at a purchase price of $15.00 per share. The tender offer expired on March 22, 2019. In accordance with the terms and conditions of the tender offer, the Company acquired 246,863 shares for an aggregate cost of $3,703, excluding fees and expenses of $125.
On March 27, 2020, the Company, in addition to the $10,000 authorization plan, completed transactions with certain stockholders to repurchase 259,331 shares of the Company's common stock, for an aggregate cost of $2,238, excluding fees of $1.
Reverse Stock Split
On June 10, 2019, the Company announced a Reverse Split of its outstanding shares of common stock at a ratio of 1-for-10 and that it had also reduced the number of authorized shares of common stock to 20 million shares. The Reverse Split had no effect on the par value of the Company's common stock, but it reduced the number of issued and outstanding shares of common stock by a factor of 10. All issued and outstanding shares, stock-based compensation disclosures, net loss per share, and other share and per share disclosures for all periods presented have been retrospectively adjusted to reflect the impact of this Reverse Split.
NOTE 12 – SEGMENT AND GEOGRAPHIC DATA
Segment Reporting
The Company operates in three reportable segments: the regional businesses of Americas, Asia Pacific, and Europe. Corporate expenses are reported separately from the three reportable segments and pertain to certain functions, such as executive management, corporate governance, human resources, accounting, administration, tax, and treasury. 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, net is the only significant asset separated by segment for internal reporting purposes.