Star Equity Holdings, Inc.

Previous wording

The Company’s objective is to increase value to the Company’s stockholders by providing global Recruitment Process Outsourcing (“RPO”) solutions to customers. With direct operations in fourteen countries and relationships with specialized professionals and organizations around the globe, the Company brings a strong ability to match talent with opportunities by assessing, recruiting, developing, and engaging highly successful people for the Company’s clients. The Company combines broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve maximum performance. The Company’s focus is to continually upgrade its service offerings and delivery capability tools to make the Company and candidates more successful in achieving clients’ business requirements.

Current wording

The Company’s objective is to increase value to the Company’s stockholders by providing global Recruitment Process Outsourcing (“RPO”) solutions to customers. With direct operations in sixteen countries and relationships with specialized professionals and organizations around the globe, the Company brings a strong ability to match talent with opportunities by assessing, recruiting, developing, and engaging highly successful people for the Company’s clients. The Company combines broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve maximum performance. The Company’s focus is to continually upgrade its service offerings and delivery capability tools to make the Company and candidates more successful in achieving clients’ business requirements.

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 2023, 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 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 2024, the market conditions remained challenging due to persistent inflation, higher interest rates and decreased demand for labor in certain markets. We anticipate that these challenging market conditions will continue into 2025.

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 continued to slow down throughout 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

•Revenue was $161.3 million for the year ended December 31, 2023, compared to $200.9 million for 2022, a decrease of $39.6 million, or 20%. The decrease in revenue was principally driven by declines in the Americas and Australia.

Current wording

•Revenue was $140.1 million for the year ended December 31, 2024, compared to $161.3 million for 2023, a decrease of $21.3 million, or 13%. The decrease in revenue was principally driven by declines in Australia and the Americas.

Previous wording

◦On a constant currency basis, revenue decreased $34.7 million, or 18%, primarily due to a decrease in RPO revenue of $18.1 million, or 19%, and a decline in contracting revenue of $16.6 million, or 17%, compared to 2022.

Current wording

◦On a constant currency basis, revenue also decreased $21.3 million, or 13%, primarily due to a decrease in RPO revenue of $10.6 million, or 14%, and a decline in contracting revenue of $10.7 million, or 13%, compared to 2023.

Previous wording

•Selling, general and administrative expenses, and other non-operating income (expense) (“SG&A and Non-Op”) was $76.6 million for the year ended December 31, 2023, compared to $88.5 million for 2022, a decrease of $11.9 million, or 13%.

Current wording

•Selling, general and administrative expenses, and other non-operating income (expense) (“SG&A and Non-Op”) was $72.6 million for the year ended December 31, 2024, compared to $76.6 million for 2023, a decrease of $4.0 million, or 5%.

Previous wording

◦On a constant currency basis, SG&A and Non-Op decreased $10.7 million or 12%. SG&A and Non-Op, as a percentage of revenue, was 47% for the year ended December 31, 2023, compared to 45% for 2022. The increase was principally due to higher staff costs as a percentage of revenue, partially offset by a $1.1 million benefit payout in the Americas.

Current wording

◦On a constant currency basis, SG&A and Non-Op decreased $4.1 million or 5%. The decrease was principally due to higher staff costs as a percentage of revenue, partially offset by a $1.1 million benefit payout received in the Americas in the prior year. SG&A and Non-Op, as a percentage of revenue, was 52% for the year ended December 31, 2024, compared to 48% for 2023.

Previous wording

•EBITDA was $3.7 million for the year ended December 31, 2023, compared to EBITDA of $10.8 million for 2022. On a constant currency basis, EBITDA decreased $6.8 million in 2023 compared to 2022.

Current wording

•EBITDA loss was $2.5 million for the year ended December 31, 2024, compared to EBITDA of $3.7 million for 2023. On a constant currency basis, EBITDA decreased $6.1 million in 2024 compared to 2023.

Previous wording

•Net income was $2.2 million for the year ended December 31, 2023, compared to a net income of $7.1 million for 2022. On a constant currency basis, net income decreased $5.1 million in 2023.

Current wording

•Net loss was $4.8 million for the year ended December 31, 2024, compared to a net income of $2.2 million for 2023. On a constant currency basis, net income decreased $7.1 million in 2024.

Previous wording

For the year ended December 31, 2023, RPO adjusted net revenue decreased $18.6 million, or 38%, while contracting adjusted net revenue decreased $0.3 million, or 64%, compared to 2022. The decreases in RPO and contracting adjusted net revenue were due to the same factor noted above under “Revenue – Americas”.

Current wording

For the year ended December 31, 2024, RPO adjusted net revenue decreased $5.5 million, or 18%, while contracting adjusted net revenue increased $0.5 million, or 336%, compared to 2023. The changes in RPO and contracting adjusted net revenue were due to the same factors noted above under “Revenue – Americas.”

Previous wording

Total adjusted net revenue, as a percentage of revenue, increased to 96% for 2023, compared to 95% for 2022, primarily attributable to the higher mix of RPO to contracting revenue in 2023 compared to 2022.

Current wording

Total adjusted net revenue, as a percentage of revenue, decreased to 90% for 2024, compared to 96% for 2023, primarily attributable to the lower mix of RPO to contracting revenue in 2024 compared to 2023.

Previous wording

For the year ended December 31, 2023, SG&A and Non-Op decreased $13.2 million, or 30%, compared to 2022, while SG&A and Non-Op as a percentage of revenue increased from 86% to 100%. 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. SG&A and Non-Op in 2023 included proceeds received in early 2024 of $1.1 million related to a benefit payout.

Current wording

For the year ended December 31, 2024, SG&A and Non-Op decreased $6.2 million, or 20%, compared to 2023, while SG&A and Non-Op as a percentage of revenue decreased from 100% to 90%. The decrease in SG&A and Non-Op as a percentage of revenue was primarily due to the decline in consultant staff costs outpacing the decrease in adjusted net revenue. SG&A and Non-Op in 2023 included proceeds received in early 2024 of $1.1 million related to a benefit payout.

Previous wording

Operating loss of $2.5 million decreased compared to operating income of $4.3 million in 2022 primarily due to declines in adjusted net revenue and higher SG&A and Non-Op as a percentage of revenue.

Current wording

Operating loss of $0.6 million decreased compared to operating loss of $2.5 million in 2023 primarily due to lower declines in adjusted net revenue and lower SG&A and Non-Op as a percentage of revenue.

Previous wording

For the year ended December 31, 2023, EBITDA loss was $0.7 million, or 2% of revenue, compared to EBITDA of $4.9 million, or 9% of revenue, in 2022. The decrease in EBITDA was due to the same factors noted above.

Current wording

For the year ended December 31, 2024, EBITDA was $0.3 million, or 1% of revenue, compared to EBITDA loss of $0.7 million, or 2% of revenue, in 2023. The increase in EBITDA was due to the same factors noted above.

Previous wording

The difference between operating income and EBITDA for the year ended December 31, 2023, was primarily due to the proceeds of $1.1 million noted above.

Current wording

The difference between operating loss and EBITDA for the year ended December 31, 2023, was primarily due to the proceeds of $1.1 million related to a benefit payout recognized in 2023.

Previous wording

For the year ended December 31, 2023, contracting revenue decreased by $4.5 million, or 32%, while RPO revenue decreased by $0.3 million, or 2%, compared to 2022.

Current wording

For the year ended December 31, 2024, contracting revenue decreased by $12.9 million, or 18%, while RPO revenue decreased by $3.6 million, or 12%, compared to 2023.

Previous wording

In Australia, for the year ended December 31, 2023, revenue decreased $9.6 million, or 9%, compared to 2022. The decline was primarily in contracting revenue, which decreased by $10.7 million, or 14%, partially offset by RPO revenue, which increased by $1.1 million, or 5%. The decreases in contracting revenue was due to lower volume from existing clients, while the increase in RPO revenue were primarily due to higher demand from existing clients, as well as the implementation of new client contracts.

Current wording

In Australia, for the year ended December 31, 2024, revenue decreased $21.3 million, or 23%, compared to 2023. The decline was primarily in contracting revenue, which decreased by $13.4 million, or 20%, while RPO revenue, decreased by $7.8 million, or 31%. The decreases in both contracting and RPO revenue were primarily due to lower demand from existing clients.

Previous wording

For the year ended December 31, 2023, RPO adjusted net revenue increased by $0.8 million, or 3%, while contracting adjusted net revenue decreased by $0.1 million, or 4%, compared to the same period in 2022.

Current wording

For the year ended December 31, 2024, RPO adjusted net revenue decreased by $3.2 million, or 11%, while contracting adjusted net revenue decreased by $0.8 million, or 24%, compared to the same period in 2023.

Previous wording

Adjusted net revenue as a percentage of revenue, for the year ended December 31, 2023, was 32%, compared to 29% for 2022. The increase in total adjusted net revenue as a percentage of revenue was attributed to the greater mix of higher margin RPO revenue to contracting revenue in 2023 (as contracting is generally a lower margin service offering), compared to 2022.

Current wording

Adjusted net revenue as a percentage of revenue, for the year ended December 31, 2024, was 34%, compared to 32% for 2023. The increase in total adjusted net revenue as a percentage of revenue was attributed to the greater mix of higher margin RPO revenue to contracting revenue in 2024 (as contracting is generally a lower margin service offering), compared to 2023.

Previous wording

For the year ended December 31, 2023, SG&A and Non-Op increased $1.9 million, or 7%, compared to 2022. The increase was primarily due to higher consultant staff costs. SG&A and Non-Op, as a percentage of revenue, was 27% in 2023, compared to 23% in 2022. The increase was principally due to the lower mix of contracting revenue, where the majority of costs are reflected in adjusted net revenue.

Current wording

For the year ended December 31, 2024, SG&A and Non-Op increased $1.3 million, or 5%, compared to 2023. The increase was primarily due to higher consultant staff and overhead costs. SG&A and Non-Op, as a percentage of revenue, was 33% in 2024, compared to 27% in 2023. The increase in SG&A and Non-Op as a percentage of revenue was primarily due to the decline in adjusted net revenue.

Previous wording

Operating income was $6.9 million for the year ended December 31, 2023, compared to $8.1 million for 2022. The decrease in operating income was principally due to the change in SG&A and Non-Op, as described above.

Current wording

Operating income was $1.1 million for the year ended December 31, 2024, compared to $6.9 million for 2023. The decrease in operating income was principally due to the changes in adjusted net revenue and SG&A and Non-Op, as described above.

Previous wording

For the year ended December 31, 2023, EBITDA was $5.9 million, or 6% of revenue, compared to EBITDA of $7.0 million, or 6% of revenue, in 2022. The decrease in EBITDA for the year ended December 31, 2023 was principally due to the factors noted above.

Current wording

For the year ended December 31, 2024, EBITDA was $0.5 million, or 1% of revenue, compared to EBITDA of $5.8 million, or 6% of revenue, in 2023. The decrease in EBITDA for the year ended December 31, 2024 was primarily due to the factors noted above.

Previous wording

For the year ended December 31, 2023, RPO revenue decreased by $19.0 million, or 39%, while contracting revenue decreased by $1.4 million, or 59%. The decreases in both RPO and contracting revenue were mainly due to lower demand from existing clients.

Current wording

For the year ended December 31, 2024, RPO revenue decreased by $1.4 million, or 8%, while contracting revenue decreased by $0.1 million, or 1% compared to 2023.

Previous wording

In the U.K., for the year ended December 31, 2023, revenue decreased by $4.4 million, or 15%, to $24.8 million from $29.2 million in 2022. The decrease was principally driven by lower contracting revenue of $4.5 million.

Current wording

In the U.K., for the year ended December 31, 2024, revenue decreased by $2.6 million, or 10%, to $22.9 million from $25.5 million in 2023. The decrease was principally driven by lower RPO revenue of $2.5 million.

Previous wording

In Continental Europe, for the year ended December 31, 2023, total revenue was $1.4 million, compared to $1.8 million for 2022, a decrease of $0.3 million, or 19%. The decrease was due to lower demand from existing recruitment clients.

Current wording

In Continental Europe, for the year ended December 31, 2024, total revenue was $2.3 million, compared to $1.4 million for 2023, an increase of $0.9 million, or 66%. The increase was primarily due to new client wins.

Previous wording

In Australia, adjusted net revenue increased by $0.8 million, or 3%, for the year ended December 31, 2023, compared to the same period in 2022. The increase was primarily in RPO adjusted net revenue, which grew $0.9 million, or 4%, partially offset by a decrease in contracting adjusted net revenue of $0.1 million, or 4% as compared to 2022. The increase in RPO

Current wording

For the year ended December 31, 2024, adjusted net revenue decreased by $1.3 million, or 8%, driven by a decrease in RPO adjusted net revenue of $1.4 million, or 9%, compared to the same period in 2023, partially offset by an increase in contracting adjusted net revenue of $0.1 million, or 34%.

Previous wording

In the U.K., total adjusted net revenue for the year ended December 31, 2023, increased $0.7 million, or 5%, compared to the same period in 2022. The change in the U.K. was primarily driven by an increase in RPO adjusted net revenue of $0.7 million, or 5%.

Current wording

In the U.K., total adjusted net revenue for the year ended December 31, 2024 decreased by $2.4 million, or 16%, compared to the same period in 2023, driven by a decrease in RPO adjusted net revenue of $2.6 million, or 17%.

Previous wording

In Continental Europe, for the year ended December 31, 2023, total adjusted net revenue decreased by $0.3 million, or 21%, compared to the same period in 2022.

Current wording

In Continental Europe, for the year ended December 31, 2024, total adjusted net revenue increased by $0.9 million, or 70%, compared to the same period in 2023, due to new client wins.

Previous wording

Operating income was $2.0 million for the year ended December 31, 2023, compared to $1.8 million for 2022. The increase was principally due to the adjusted net revenue gains, as described above.

Current wording

Operating income was $0.5 million for the year ended December 31, 2024, compared to $2.0 million for 2023. The decrease was principally due to lower adjusted net revenue, as described above.

Previous wording

The difference between operating income and EBITDA for the years ended December 31, 2023 and 2022 was principally due to foreign currency exchange, corporate management expenses, and the one-time client administrative costs of $0.2 million.

Current wording

The difference between operating income and EBITDA for the years ended December 31, 2024 and 2023 was principally due to corporate management expenses and foreign currency exchange.

Previous wording

For the year ended December 31, 2023, corporate expenses were $3.0 million compared to $2.9 million for 2022, a increase of $0.1 million, or 2%. The increase was primarily due to higher professional fees, partially offset by lower compensation expenses.

Current wording

For the year ended December 31, 2024, corporate expenses were $3.6 million compared to $3.0 million for 2023, an increase of $0.6 million, or 20%. The increase was primarily due to lower corporate allocations, partially offset by lower travel and entertainment and stock-based compensation expenses.

Previous wording

Depreciation and amortization expense was $1.5 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

Depreciation and amortization expense was $1.4 million and $1.5 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

Net interest income was $0.4 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively. The increase was due to higher interest rates.

Current wording

Net interest income was $0.4 million for each of the years ended December 31, 2024 and 2023.

Previous wording

Net other income was $0.8 million for the year ended December 31, 2023, as opposed to net other income of $0.0 million for the same period in 2022. The increase in income was primarily due to a benefit payout of $1.1 million, partially offset by one-time client administrative costs of $0.2 million.

Current wording

Net other expense was $0.0 million for the year ended December 31, 2024, as opposed to net other income of $0.8 million for the same period in 2023. The decrease in net other income was primarily due to a benefit payout of $1.1 million, partially offset by one-time client administrative costs of $0.2 million, both of which were incurred in the prior year.

Previous wording

The provision for income taxes for the year ended December 31, 2023 was $0.4 million, on $2.6 million of pre-tax income, compared to a provision from income taxes of $2.3 million on $9.5 million of pre-tax income for 2022. The effective tax rate for the year ended December 31, 2023 was 14.4%, compared to 24.6% for 2022. The change in the Company’s effective tax rate compared to 2022 is primarily related to recognition of deferred tax assets in Belgium and Canada, the reduction and effective lapsing of statutes for certain historic foreign uncertain tax positions and foreign tax rate differences, as well as changes in valuation allowances in the U.S. and certain foreign jurisdictions. For the year ended December 31, 2022, the effective tax rate difference from the U.S. federal statutory rate of 21% was primarily attributable to changes in valuations allowances in the U.S. and certain foreign subsidiaries, which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, and non-deductible expenses.

Current wording

The provision for income taxes for the year ended December 31, 2024 was $1.3 million, on $3.5 million of pre-tax loss, compared to a provision from income taxes of $0.4 million on $2.6 million of pre-tax income for 2023. The effective tax rate (“ETR”) for the year ended December 31, 2024 was negative 37.5%, compared to 14.4% for 2023. For the year ended December 31, 2024, the effective tax rates differed from the U.S. federal statutory rate of 21% primarily due to pre-tax losses for which no tax benefit can be recognized, changes in valuation allowances in the U.S., China, and certain foreign jurisdictions that reduce or eliminate the ETR on current year profits or losses, foreign tax rate differences, and non-deductible expenses. For the year ended December 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 ETR on current year profits or losses, foreign tax rate differences, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses. The current year ETR differs significantly from the prior year ETR primarily due to the interaction of similar rate reconciliation items, including change in valuation allowance, with a negative pretax book income in the current period versus positive pretax book income in the prior year comparative period.

Previous wording

Net income was $2.2 million for the year ended December 31, 2023, compared to net income of $7.1 million for 2022, a decrease in net income of $4.9 million. Basic and diluted earnings per share were $0.72 and $0.70, respectively for the year ended December 31, 2023, compared to basic and diluted income per share of $2.37 and $2.27 in 2022.

Current wording

Net loss was $4.8 million for the year ended December 31, 2024, compared to net income of $2.2 million for 2023, a decrease in net income of $7.0 million. Basic and diluted losses per share were $1.59 for the year ended December 31, 2024, compared to basic and diluted income per share of $0.72 and $0.70, respectively, in 2023.

Previous wording

As of December 31, 2023, cash and cash equivalents and restricted cash totaled $23.2 million, as compared to $27.5 million as of December 31, 2022. The following table summarizes the cash flow activities for the years ended December 31, 2023 and 2022:

Current wording

As of December 31, 2024, cash and cash equivalents and restricted cash totaled $17.7 million, as compared to $23.2 million as of December 31, 2023. The following table summarizes the cash flow activities for the years ended December 31, 2024 and 2023:

Previous wording

For the year ended December 31, 2023, net cash provided by operating activities was $0.3 million, as compared to $9.5 million of net cash provided by operating activities for the same period in 2022, resulting in a decrease in net cash provided by operating activities of $9.1 million. The decline was principally from the Company’s lower net income in 2023, along with less favorable working capital comparisons to the prior year.

Current wording

For the year ended December 31, 2024, net cash used in operating activities was $2.8 million, as compared to $0.3 million of net cash provided by operating activities for the same period in 2023, resulting in a decrease in net cash provided by operating activities of $3.1 million. The decline was principally from the Company’s lower net income in 2024, partially offset by more favorable working capital comparisons to the prior year.

Previous wording

For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, as compared to $1.3 million in 2022. Net cash used in investing activities in 2023 primarily reflects the cash paid of $2.1 million in October 2023 for the acquisition of Singapore, while net cash used in investing activities in 2022 reflects cash paid of $0.8 million in August 2022 for the acquisition of HnB (see Note 5 to the Consolidated Financial Statements in Item 8 for additional information.)

Current wording

For the year ended December 31, 2024, net cash provided by investing activities was $1.1 million, compared to $2.2 million of net cash used in investing activities in 2023. Net cash provided by investing activities in 2024 reflects $1.1 million in cash received from benefit payouts, while net cash used in investing activities in 2023 primarily reflects cash paid of $2.1 million in October 2023 for the acquisition of Singapore (see Note 5 to the Consolidated Financial Statements in Item 8 for additional information.)

Previous wording

For the year ended December 31, 2023, net cash used in financing activities was $2.5 million, compared to 2.0 million in 2022. The increase in net cash used in financing activities was mostly attributable to higher loan repayments of $0.6 million related to the Karani Acquisition, partly offset by lower repurchases of common stock of $0.2 million in 2023 compared to the previous year.

Current wording

For the year ended December 31, 2024, net cash used in financing activities was $3.1 million, compared to $2.5 million in 2023. The increase in net cash used was primarily attributed to repurchases of shares of common stock of $2.8 million in 2024, including cash paid for tax withholdings, compared to repurchases of $1.0 million in the previous year.