Hudson Global(US:HSON)2024-08-08 20:45PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) Hudson Global, Inc.'s Q2 2024 unaudited financials reveal significant revenue decline, a shift to net loss, and reduced cash and equity Condensed Consolidated Statements of Operations The company experienced a significant revenue decrease and a shift from net income to a net loss in Q2 2024 and the first half of 2024 Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $35,712 | $44,897 | $69,603 | $87,969 | | Operating (Loss) Income | $(187) | $1,355 | $(3,227) | $1,373 | | Net (Loss) Income | $(441) | $578 | $(3,339) | $932 | | Diluted EPS | $(0.15) | $0.18 | $(1.10) | $0.30 | Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2024, shows reduced total assets, primarily due to decreased cash, and a decline in stockholders' equity Balance Sheet Summary (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,664 | $22,611 | | Total Current Assets | $42,018 | $45,847 | | Total Assets | $56,130 | $60,958 | | Total Current Liabilities | $12,734 | $11,210 | | Total Liabilities | $13,566 | $12,404 | | Total Stockholders' Equity | $42,564 | $48,554 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased in H1 2024, driven by net loss, while financing activities also used more cash Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,058) | $(2,305) | | Net cash provided by (used in) investing activities | $1,053 | $(39) | | Net cash used in financing activities | $(2,580) | $(2,032) | | Net decrease in cash, cash equivalents, and restricted cash | $(7,891) | $(4,473) | Notes to Condensed Consolidated Financial Statements Notes detail the company's RPO business across three segments, disaggregated revenue, stock repurchase program, and NOL protection plan - The company's primary business is providing Recruitment Process Outsourcing (RPO) services across three geographic segments: Americas, Asia Pacific, and EMEA16 Disaggregation of Revenue (in thousands) | Revenue Source | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | RPO | $17,770 | $21,919 | $33,608 | $43,440 | | Contracting | $17,942 | $22,978 | $35,995 | $44,529 | | Total Revenue | $35,712 | $44,897 | $69,603 | $87,969 | - The company has a $5 million stock repurchase program authorized in August 2023. During the six months ended June 30, 2024, it repurchased 131,438 shares for $2.1 million. As of June 30, 2024, $2.5 million remained available for purchase under this authorization9091202 - The company extended its Stockholder Rights Plan, designed to protect significant U.S. Net Operating Losses (NOLs), to October 15, 2027. The plan imposes a penalty on any person or group acquiring 4.99% or more of outstanding common stock without board approval105108111 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2024's revenue decline and net loss to challenging market conditions, affirming sufficient liquidity for the next 12 months - Challenging market conditions, including higher inflation, interest rates, and decreased labor demand, are cited as primary reasons for the business slowdown in the first half of 2024122123 Financial Performance Highlights - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $35.7M | $44.9M | $(9.2)M | (20.5)% | | Adjusted Net Revenue | $17.6M | $22.6M | $(5.0)M | (22.0)% | | EBITDA | $0.0M | $1.7M | $(1.7)M | (100)% | | Net (Loss) Income | $(0.4)M | $0.6M | $(1.0)M | (167)% | - The company believes it has sufficient liquidity to satisfy its needs for at least the next 12 months, with $14.7 million in cash and cash equivalents and access to a 4 million Australian dollar credit facility182 Results of Operations by Segment All three geographic segments experienced revenue declines in Q2 2024, with Americas, Asia Pacific, and EMEA reporting significant drops due to lower demand - Americas: Revenue for Q2 2024 decreased 19% to $7.0 million from $8.6 million in Q2 2023, primarily due to lower demand from existing clients for both RPO and contracting services139 - Asia Pacific (Constant Currency): Q2 2024 revenue decreased 19% to $22.6 million. This was driven by a 26% revenue decline in Australia, while Asia revenue grew 44% due to the Singapore Acquisition149150 - EMEA (Constant Currency): Q2 2024 revenue decreased 24% to $6.1 million. The U.K. business saw a 28% revenue decline due to lower demand, while Continental Europe grew 60% from new client wins159160 Liquidity and Capital Resources The company's liquidity weakened in H1 2024 due to increased cash usage in operations and financing, resulting in a lower cash balance Net Cash Flow Changes - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6.1) | $(2.3) | | Net cash provided by (used in) investing activities | $1.1 | $0.0 | | Net cash used in financing activities | $(2.6) | $(2.0) | | Net decrease in cash | $(7.9) | $(4.5) | - As of June 30, 2024, $7.4 million of the company's $14.7 million in cash and cash equivalents was held in the U.S., with the remainder held abroad, primarily in Australia ($2.8M) and the U.K. ($1.1M)183 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Hudson Global, Inc. is not required to provide quantitative and qualitative disclosures about market risk193 Controls and Procedures Management concluded that disclosure controls were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024194 - No material changes were made to the internal control over financial reporting during the six months ended June 30, 2024195 PART II – OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings expected to adversely affect its financial condition or operations - The company reports no material pending legal proceedings197 Risk Factors No new risk factors are disclosed; investors are referred to the 2023 Annual Report on Form 10-K for existing risks - The report directs readers to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K198 Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 87,188 shares for $1.5 million under its $5 million stock repurchase program, with $2.5 million remaining Share Repurchases for Quarter Ended June 30, 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1 - May 31, 2024 | 69,302 | $16.92 | | June 1 - June 30, 2024 | 17,886 | $16.28 | | Total | 87,188 | $16.79 | - As of June 30, 2024, approximately $2.5 million remained available for purchase under the company's August 2023 stock repurchase authorization202 Exhibits This section lists exhibits filed with the Form 10-Q, including the Rights Agreement amendment and CEO/CFO certifications