Hudson Global Inc

Previous wording

This MD&A discusses the results of the Company’s business for the three months ended March 31, 2024 and 2023.

Current wording

This MD&A discusses the results of the Company’s business for the three and six months ended June 30, 2024 and 2023.

Previous wording

Our clients’ demands for RPO and contracting services largely depend on the market conditions and the strength of the labor markets in the countries where we operate. In the first quarter of 2024, the market conditions continued to be challenging due to higher inflation, higher interest rates and decreased demand for labor in certain markets. We anticipate that the market conditions will continue to be challenging into the second quarter of 2024.

Current wording

Our clients’ demands for RPO and contracting services largely depend on the market conditions and the strength of the labor markets in the countries where we operate. In the second quarter of 2024, the market conditions continued to be challenging due to higher inflation, higher interest rates and decreased demand for labor in certain markets. We anticipate that the market conditions will continue to be challenging into the second half of 2024.

Previous wording

Economic conditions in most of the world’s major markets slowed down in 2023. Higher than expected inflation in most markets and rising interest rates have led to significant market disruption, including further wage inflation, increased operating costs, staffing challenges, reduced consumer confidence, and limited capital market accessibility that impact our business. In addition, in connection with the challenging business environment, some of our customers have reduced demand, and certain other customers have eliminated our services on a temporary or permanent basis. These conditions and expected future inflation and potential interest rate increases could have material adverse impacts on various aspects of our business in the future.

Current wording

Economic conditions in most of the world’s major markets slowed down in 2023 and the first half of 2024. Higher than expected inflation in most markets and rising interest rates have led to significant market disruption, including further wage inflation, increased operating costs, staffing challenges, reduced consumer confidence, and limited capital market accessibility that impact our business. In addition, in connection with the challenging business environment, some of our customers have reduced demand, and certain other customers have eliminated our services on a temporary or permanent basis. These conditions and expected future inflation and potential interest rate increases could have material adverse impacts on various aspects of our business in the future.

Previous wording

The following is a summary of the Company’s financial performance highlights for the three months ended March 31, 2024 and 2023. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.

Current wording

The following is a summary of the Company’s financial performance highlights for the three and six months ended June 30, 2024 and 2023. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.

Previous wording

•Revenue was $33.9 million for the three months ended March 31, 2024, compared to $43.1 million for the same period in 2023, a decrease of $9.2 million, or 21.3%. The decrease in revenue was principally driven by declines in the Americas and Australia.

Current wording

•Revenue was $35.7 million for the three months ended June 30, 2024, compared to $44.9 million for the same period in 2023, a decrease of $9.2 million, or 20.5%. The decrease in revenue was principally driven by declines in Australia, the U.K, and the U.S.

Previous wording

◦On a constant currency basis, adjusted net revenue decreased $5.3 million, or 24.6%, primarily due to a decrease in RPO adjusted net revenue of$5.2 million, or 25.2%, compared to the same period in 2023.

Current wording

◦On a constant currency basis, adjusted net revenue decreased$4.9 million, or 21.7%, primarily due to a decrease in RPO adjusted net revenue of$4.6 million, or 21.3%, compared to the same period in 2023.

Previous wording

◦On a constant currency basis, SG&A and Non-Op decreased $2.2 million, or 10.2%, as compared to the same period in 2023. SG&A and Non-Op as a percentage of revenue was 56.1% for the three months ended March 31, 2024, compared to 49.9% for the same period in 2023.

Current wording

◦On a constant currency basis, SG&A and Non-Op decreased $3.2 million, or 15.4%, as compared to the same period in 2023. SG&A and Non-Op as a percentage of revenue was 49.3% for the three months ended June 30, 2024, compared to 46.7% for the same period in 2023.

Previous wording

•Net loss was $2.9 million for the three months ended March 31, 2024, compared to net income of $0.4 million for the same period in 2023, a decrease in net income of $3.3 million. On a constant currency basis, net income decreased $3.2 million.

Current wording

•Net loss was $0.4 million for the three months ended June 30, 2024, compared to net income of $0.6 million for the same period in 2023, a decrease in net income of $1.0 million. On a constant currency basis, net income also decreased $1.0 million.

Previous wording

◦On a constant currency basis, the Company’s revenue decreased $8.5 million, or 20.1%, primarily due to a decrease in RPO revenue of $5.6 million, or 26.1%, while contracting revenue decreased by $2.9 million, or 13.9%, compared to the same period in 2023.

Current wording

◦On a constant currency basis, the Company’s revenue decreased $17.4 million, or 20.0%, due to a decrease in RPO revenue of $9.7 million, or 22.3%, while contracting revenue decreased by $7.7 million, or 17.7%, compared to the same period in 2023.

Previous wording

•EBITDA loss was $2.7 million for the three months ended March 31, 2024, compared to EBITDA of $0.5 million for the same period in 2023, a decrease in EBITDA of $3.2 million. On a constant currency basis, EBITDA also decreased $3.2 million.

Current wording

•EBITDA loss was $2.7 million for the six months ended June 30, 2024, compared to EBITDA of $2.2 million for the same period in 2023, a decrease in EBITDA of $4.8 million. On a constant currency basis, EBITDA also decreased $4.8 million.

Previous wording

between periods as if exchange rates had remained constant period-over-period. The Company defines the term “constant currency” to mean that financial data for a previously reported period is translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Constant currency metrics should not be considered in isolation or as a substitute for reported results prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. The Company’s management reviews and analyzes business results in constant currency and believes these results better represent the Company’s underlying business trends. Changes in foreign currency exchange rates generally impact only reported earnings.

Current wording

The Company operates on a global basis, with the majority of its revenue generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect the Company’s results of operations. For the discussion of reportable segment results of operations, the Company uses constant currency information. Constant currency compares financial results between periods as if exchange rates had remained constant period-over-period. The Company defines the term “constant currency” to mean that financial data for a previously reported period is translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Constant currency metrics should not be considered in isolation or as a substitute for reported results prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. The Company’s management reviews and analyzes business results in constant currency and believes these results better represent the Company’s underlying business trends. Changes in foreign currency exchange rates generally impact only reported earnings.

Previous wording

Changes in revenue, adjusted net revenue, SG&A and Non-Op, operating income (loss), net income (loss), and EBITDA (loss) include the effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange adjustments on the Company’s operating results for the three months ended March 31, 2024 and 2023.

Current wording

Changes in revenue, adjusted net revenue, SG&A and Non-Op, operating income (loss), net income (loss), and EBITDA (loss) include the effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange adjustments on the Company’s operating results for the three and six months ended June 30, 2024 and 2023.

Previous wording

(b)SG&A and Non-Op is a measure that management uses to evaluate the segments’ expenses, which include the following captions on the Condensed Consolidated Statements of Operations: Salaries and related, Office and

Current wording

(b)SG&A and Non-Op is a measure that management uses to evaluate the segments’ expenses, which include the following captions on the Condensed Consolidated Statements of Operations: Salaries and related, Office and general, Marketing and promotion, and Other expense, net. Corporate management service allocations are included in the segments’ other income (expense).

Previous wording

For the three months ended March 31, 2024, RPO revenue decreased by $3.1 million, or 35%, while contracting revenue decreased by $0.2 million, or 47%, compared to the same period in 2023. The decreases in both RPO and contracting revenue were mainly due to lower demand from existing clients.

Current wording

For the three months ended June 30, 2024, RPO revenue decreased by $1.5 million, or 19%, while contracting revenue decreased by $0.0 million, or 22%, compared to the same period in 2023. The decreases in both RPO and contracting revenue were mainly due to lower demand from existing clients.

Previous wording

For the three months ended March 31, 2024, RPO adjusted net revenue decreased by $3.1 million, or 35%, compared to 2023. The decrease in RPO adjusted net revenue was due to the same factor noted above under “Revenue – Americas”.

Current wording

For the three and six months ended June 30, 2024, RPO adjusted net revenue decreased by $2.0 million, or 24%, and $5.1 million, or 29%, respectively, compared to 2023. The decrease in RPO adjusted net revenue was due to the same factor noted above under “Revenue – Americas”.

Previous wording

For the three months ended March 31, 2024, total adjusted net revenue as a percentage of revenue was 97%, compared to 96% for the same period in 2023. The increase in total adjusted net revenue as a percentage of revenue was attributed to the higher mix of RPO to contracting revenue.

Current wording

For the three months ended June 30, 2024 and 2023, total adjusted net revenue as a percentage of revenue was 91%, compared to 97% for the same period in 2023. The decrease in total adjusted net revenue as a percentage of revenue was attributed to the lower mix of RPO to contracting revenue.

Previous wording

For the three months ended March 31, 2024, SG&A and Non-Op decreased $2.6 million, or 28%, compared to the same period in 2023, while SG&A and Non-Op as a percentage of revenue increased from 101% to 112%. The decrease in SG&A and No-Op was principally due to lower consultant staff costs. The increase in SG&A and Non-Op as a percentage of revenue was primarily due to the decline in adjusted net revenue outpacing the decrease in consultant staff costs.

Current wording

For the three months ended June 30, 2024, SG&A and Non-Op decreased $2.9 million, or 32%, compared to the same period in 2023, while SG&A and Non-Op as a percentage of revenue decreased from 104% to 86%. The decrease in SG&A and No-Op was principally due to lower consultant staff costs. The decrease in SG&A and Non-Op as a percentage of revenue was primarily due to the decline in consultant staff costs as a percentage of adjusted net revenue.

Previous wording

For the three months ended March 31, 2024, operating income was $0.3 million, compared to operating income of $0.5 million for the same period in 2023, and EBITDA was $0.3 million, or 4% of revenue, compared to EBITDA of $0.5 million, or 7% of revenue, for the same period in 2023.

Current wording

For the three months ended June 30, 2024, operating income was $0.3 million, compared to operating loss of $0.6 million in 2023, and EBITDA was $0.4 million, compared to EBITDA loss of $0.5 million in 2023.

Previous wording

For the three months ended March 31, 2024, operating loss was $1.2 million, compared to operating loss of $0.6 million in 2023, and EBITDA loss was $0.9 million, compared to EBITDA loss of $0.4 million in 2023.

Current wording

For the six months ended June 30, 2024, operating loss was $0.9 million, compared to operating loss of $1.2 million in 2023, and EBITDA loss was $0.5 million, compared to EBITDA loss of $0.9 million in 2023.

Previous wording

The increases in operating loss and EBITDA loss for the three months ended March 31, 2024, were primarily due to the Company’s decline in adjusted net revenue.

Current wording

The increases in operating income and EBITDA for the three and six months ended June 30, 2024, were due to the same factors noted above.

Previous wording

For the three months ended March 31, 2024, contracting revenue decreased by $3.0 million, or 16%, while RPO revenue increased $1.8 million, or 23%, compared to 2023, as discussed below.

Current wording

For the three months ended June 30, 2024, contracting revenue decreased by $3.8 million, or 20%, while RPO revenue decreased $1.6 million, or 18%, compared to 2023, as discussed below.

Previous wording

In Asia, revenue increased $0.7 million, or 27%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase in revenue was primarily driven by the acquisition of Hudson Global Resources (Singapore) Pte. Ltd. (“Singapore Acquisition”) (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q), which contributed 34 percentage points to the revenue growth.

Current wording

In Asia, revenue increased $1.2 million, or 44%, for the three months ended June 30, 2024, compared to the same period in 2023. The increase in revenue was primarily driven by the acquisition of Hudson Global Resources (Singapore) Pte. Ltd. (“Singapore Acquisition”) (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q), which contributed 58 percentage points to the revenue growth.

Previous wording

In Australia, adjusted net revenue decreased by $2.3 million, or 35%, for the three months ended March 31, 2024, compared to the same period in 2023. The decrease was primarily driven by RPO adjusted net revenue which declined by $2.2 million, or 37%.

Current wording

In Australia, adjusted net revenue decreased by $5.1 million, or 35%, for the six months ended June 30, 2024, compared to the same period in 2023. The decrease was primarily reflected in RPO adjusted net revenue, which declined by $4.7 million, or 37%, while contracting adjusted net revenue decreased by $0.4 million, or 24%, compared to 2023.

Previous wording

In Asia, adjusted net revenue increased by $0.7 million, or 45%, for the three months ended March 31, 2024, compared to the same period in 2023. The increase in revenue was primarily driven by the Singapore Acquisition (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q), which contributed 48 percentage points to the adjusted net revenue growth.

Current wording

In Asia, adjusted net revenue increased by $1.6 million, or 50%, for the six months ended June 30, 2024, compared to the same period in 2023. The increase in adjusted net revenue was primarily driven by the Singapore Acquisition, which contributed 63 percentage points to the revenue growth.

Previous wording

For the three months ended March 31, 2024, SG&A and Non-Op increased $0.3 million, or 4%, compared to the same periods in 2023. The increases in SG&A and Non-Op were primarily due to higher consultant staff costs.

Current wording

For the six months ended June 30, 2024, SG&A and Non-Op increased $0.3 million, or 2%, compared to the same periods in 2023. The increase in SG&A and Non-Op was primarily due to the Singapore Acquisition.

Previous wording

For the three months ended March 31, 2024, SG&A and Non-Op as a percentage of revenue was 33%, as compared to 26%, for the same periods in 2023. For the three months ended March 31, 2024, the increase in SG&A and Non-Op as a percentage of revenue was principally due to the decline in adjusted net revenue.

Current wording

For three and six months ended June 30, 2024, SG&A and Non-Op as a percentage of revenue was 32% and 33%, as compared to 26%, respectively, for the same periods in 2023. For the three and six months ended June 30, 2024, the increase in SG&A and Non-Op as a percentage of revenue was principally due to the Singapore Acquisition.

Previous wording

For the three months ended March 31, 2024, operating loss was $0.5 million, compared to operating income of $1.6 million in 2023, and EBITDA loss was $0.6 million, or 3% of revenue, compared to EBITDA of $1.4 million, or 5% of revenue, in 2023. The declines were principally due to the change in adjusted net revenue, as described above.

Current wording

For the three months ended June 30, 2024, operating income was $0.5 million, compared to operating income of $2.4 million in 2023, and EBITDA was $0.2 million, or 1% of revenue, compared to EBITDA of $2.1 million, or 8% of revenue, in 2023. The decreases in operating income and EBITDA were principally due to the declines in adjusted net revenue, as described above.

Previous wording

For the three months ended March 31, 2024, RPO revenue decreased by $0.7 million or 15%, while contracting revenue increased by $0.3 million or 14%, compared to the same period in 2023, as further discussed below.

Current wording

For the three months ended June 30, 2024, contracting revenue decreased by $1.0 million or 29%, while RPO revenue decreased by $0.9 million or 20%, compared to the same period in 2023, as further discussed below.

Previous wording

In the U.K., for the three months ended March 31, 2024, revenue decreased by $0.5 million, or 8%. The change was driven by a decrease in RPO revenue of $0.8 million, or 19% due to lower demand from existing clients, which was partially offset by an increase in contracting revenue of $0.3 million, or 14%, compared to the same period in 2023.

Current wording

In the U.K., for the three months ended June 30, 2024, revenue decreased by $2.1 million, or 28%. The change was driven by a decrease in RPO and contracting revenue of $1.2 million, or 27%, and $1.0 million, or 29%, respectively, compared to the same period in 2023. The decreases were due to lower demand from existing clients.

Previous wording

In Continental Europe, total revenue was $0.5 million for the three months ended March 31, 2024, an increase of $0.1 million, or 25% compared to 2023. The increase was primarily due to higher demand from existing recruitment clients.

Current wording

In Continental Europe, total revenue was $0.6 million for the three months ended June 30, 2024, an increase of $0.2 million, or 60% compared to 2023. The increase was primarily due to new client wins.

Previous wording

For the three months ended March 31, 2024, adjusted net revenue decreased by $0.6 million, or 13%, driven by a decrease in RPO of $0.7 million, or 15%, led by the U.K. as discussed below.

Current wording

For the three months ended June 30, 2024, adjusted net revenue decreased by $1.1 million, or 23%, driven by a decrease in RPO revenue of $1.0 million, or 23%, led by the U.K. as discussed below.

Previous wording

In the U.K., total adjusted net revenue for the three months ended March 31, 2024 decreased by $0.7 million, or 16%, compared to 2023. The decrease was driven by RPO adjusted net revenue, which declined by $0.7 million, or 18%, compared to 2023.

Current wording

In the U.K., total adjusted net revenue for the three months ended June 30, 2024 decreased by $1.3 million, or 30%, compared to 2023. The decrease was driven by RPO adjusted net revenue, which declined by $1.3 million, or 30%, compared to 2023.

Previous wording

For the three months ended March 31, 2024, SG&A and Non-Op decreased $0.4 million, or 9%, compared to the same periods in 2023. The decrease in SG&A and Non-Op were primarily the result of lower consultant staff costs in the current year.

Current wording

For the three and six months ended June 30, 2024, SG&A and Non-Op decreased $0.3 million, or 8%, and $0.7 million, or 9%, respectively, compared to the same periods in 2023. The decreases in SG&A and Non-Op were primarily the result of lower consultant staff costs in the current year.

Previous wording

Corporate expenses were $1.5 million for the three months ended March 31, 2024 as compared to $0.9 million for the same period in 2023, representing an increase of $0.5 million. The increase was primarily due to higher professional fees, and lower corporate allocations, partially offset by lower travel and entertainment expenses.

Current wording

For the six months ended June 30, 2024, corporate expenses were $2.3 million compared to $1.8 million for the same period in 2023, an increase of $0.4 million. The increase was primarily due to higher professional fees, and lower corporate allocations, partially offset by lower travel and entertainment expenses.

Previous wording

Depreciation and amortization expense was $0.4 million for the three months ended March 31, 2024, compared to $0.3 million for the same period in 2023.

Current wording

Depreciation and amortization expense was $0.3 million and $0.7 million for the three and six months ended June 30, 2024, compared to $0.4 million and $0.7 million for the same periods in 2023, respectively.

Previous wording

Other expense, net was $0.0 million for the three months ended March 31, 2024, compared to other income, net of $0.1 million for the same period in 2023.

Current wording

Other expense, net was $0.1 million for each of the three months ended June 30, 2024 and 2023. For the six months ended June 30, 2024, other expense, net was $0.1 million, compared to other income, net of $0.1 million in 2023.

Previous wording

The benefit from income taxes for the three months ended March 31, 2024 was $0.1 million on $3.0 million of pre-tax loss, compared to a benefit from income tax of $0.1 million on $0.2 million of pre-tax income for the same period in 2023. The effective tax rates for the three months ended March 31, 2024 and 2023 were positive 3% and negative 65%, respectively. For the three months ended March 31, 2024, 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, foreign tax rate differences, and non-deductible expense. For the three months ended March 31, 2023, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to a discrete tax benefit recognized following the lapse of certain statutes of limitations related to Spain, recognition of a portion of a deferred tax asset in Canada, state income taxes, changes in valuation allowances in the U.S. and certain foreign jurisdictions which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses.

Current wording

The provision for income taxes for the six months ended June 30, 2024 was $0.2 million on $3.2 million of pre-tax income, compared to a provision for income tax of $0.7 million on $1.7 million of pre-tax income for the same period in 2023. The effective tax rates for the six months ended June 30, 2024 and 2023 were negative 5% and positive 44%, respectively. For the six months ended June 30, 2024, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to pretax losses for which no tax benefit can be recognized, foreign tax rate differences, and non-deductible expense. For the six months ended June 30, 2023, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to a discrete tax benefit recognized following the lapse of certain statutes of limitations related to Spain, recognition of a portion of a deferred tax asset in Canada, state income taxes, changes in valuation allowances in the U.S. and certain foreign jurisdictions which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses.

Previous wording

Net loss was $2.9 million for the three months ended March 31, 2024, compared to net income of $0.4 million for the three months ended March 31, 2023, a decrease in net income of $3.3 million. Basic and diluted loss per share were $0.95 for the three months ended March 31, 2024, compared to basic and diluted earnings per share of $0.12 and $0.11, respectively, for the same period in 2023.

Current wording

Net loss was $0.4 million for the three months ended June 30, 2024, compared to net income of $0.6 million for the three months ended June 30, 2023, a decrease in net income of $1.0 million. Basic and diluted loss per share were both $0.15 for the three months ended June 30, 2024, compared to basic and diluted earnings per share of $0.19 and $0.18, respectively, for the same period in 2023.

Previous wording

As of March 31, 2024, cash and cash equivalents and restricted cash totaled $21.0 million, compared to $23.2 million as of December 31, 2023. The following table summarizes the Company’s cash flow activities for the three months ended March 31, 2024 and 2023:

Current wording

As of June 30, 2024, cash and cash equivalents and restricted cash totaled $15.3 million, compared to $23.2 million as of December 31, 2023. The following table summarizes the Company’s cash flow activities for the six months ended June 30, 2024 and 2023:

Previous wording

For the three months ended March 31, 2024, net cash used in operating activities was $1.8 million, compared to $5.0 million of net cash used in operating activities for the same period in 2023, resulting in a $3.2 million increase in net cash used. The decrease in net cash used was principally driven by more favorable working capital comparisons to the prior year, partially offset by the Company’s lower net income in 2024.

Current wording

For the six months ended June 30, 2024, net cash used in operating activities was $6.1 million, compared to $2.3 million of net cash used in operating activities for the same period in 2023, resulting in a $3.8 million increase in net cash used. The increase in net cash used was principally driven by the Company’s lower net income in 2024, as well as less favorable working capital comparisons to the prior year.