HUDSON GLOBAL, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Edgar Glimpses |
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") should be read in conjunction with the Condensed
Consolidated Financial Statements and the notes thereto, included in Part I of
this Form 10-Q. The reader should also refer to the Condensed Consolidated
Financial Statements and notes of Hudson Global, Inc. and its subsidiaries (the
"Company") filed in its Annual Report on Form 10-K for the year ended
. This MD&A contains forward-looking statements. Please see
"FORWARD-LOOKING STATEMENTS" for a discussion of the uncertainties, risks and
assumptions associated with these statements. This MD&A also uses the
non-generally accepted accounting principle measure of earnings before interest,
taxes, depreciation and amortization ("EBITDA"). See Note 13 to the Condensed
Consolidated Financial Statements of this Form 10-Q for EBITDA segment
reconciliation information. The tables and information in this MD&A were derived
from exact numbers and may have immaterial rounding differences.
This MD&A includes the following sections:
• Executive Overview


• Results of Operations

• Liquidity and Capital Resources

• Contingencies

• Recent Accounting Pronouncements

• Critical Accounting Policies

• Forward-Looking Statements

Executive Overview


Prior to the second quarter of 2018, the Company's core service offerings
included Permanent Recruitment, Contracting, and Talent Management Solutions
(collectively, Recruitment and Talent Management or "RTM"), as well as
Recruitment Process Outsourcing ("RPO"). On , the Company
completed the sale of its RTM businesses in Belgium, Europe (excluding Belgium),
and Asia Pacific ("APAC") in separate transactions (the "Sales Transactions") to
Value Plus NV, Morgan Philips Group S.A., and Apache Group Holdings Pty Limited,
respectively. The RTM businesses met the criteria for discontinued operations.
The proceeds from the sale were $39.0 million, or $28.0 million net of cash and
restricted cash sold of $9.5 million, and transaction costs of $1.6 million.
Debt assumed in the Sales Transactions by the buyers was $17.6 million.

The finalization of these transactions aligns the Company's strategy to focus
going forward on RPO solutions globally. With direct operations in nine
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 the best and
brightest 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 candidates more successful in achieving its clients'
business requirements.

The Company's proprietary frameworks, assessment tools and leadership
development programs, coupled with its broad geographic footprint allows the
Company to design and implement regional and global outsourced recruitment
solutions that the Company believes greatly enhance the quality and efficiency
of its clients' hiring.
To accelerate the implementation of the Company's strategy, the Company engaged
in the following initiatives:
•         Facilitating growth and development of the global RPO business through
          strategic investments in people, innovation and technology.


•         Building and differentiating the Company's brand through its unique
          outsourcing solutions offerings.


•         Improving the Company's cost structure and efficiency of its support
          functions and infrastructure.




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Index


This MD&A discusses the results of the Company's RPO businesses for the three
and six months ended  and 2018, and excludes the results of the
Company's RTM businesses, which, as discussed in Note 5 to the Condensed
Consolidated Financial Statements are reported in discontinued operations.
Current Market Conditions
Economic conditions in most of the world's major markets have remained stable
since 2018, although global growth continues to be projected to slow slightly in
2019 compared to the prior year. In the U.K., uncertainty around the 2016
referendum to exit the European Union (commonly referred to as "Brexit")
continues to impact global markets, including currencies, and has resulted in
increased volatility in the value of the British pound as compared to the U.S.
dollar. A weaker British pound compared to the U.S. dollar during a reporting
period causes local currency results of the Company's U.K. operations to be
translated into fewer U.S. dollars. The Company's U.K. operations, future
financial performance, and translation of results may be affected, in part, by
the outcome of tariff, trade, regulatory, and other negotiations as the U.K.
negotiates its exit from the European Union. In China, efforts to increase
fiscal and monetary stimuli to counter the impact of tariffs is expected to lead
to growth.
The Company closely monitors the economic environment and business climate in
its markets and responds accordingly. At this time, the Company is unable to
accurately predict the outcome of these events or changes in general economic
and political conditions and their effect on the demand for the Company's
services.
Financial Performance
The Company achieved mixed financial performance for the second quarter of 2019
in the markets in which it operates. On a constant currency basis, for the three
months ended , revenue increased by $9.9 million, or 59.7%, and
gross profit increased by $1.4 million or 13.2%, compared to the same period in
2018.

The changes in revenue were driven by strong results across all reportable segments.


The following is a summary of the highlights for the three and six months ended
 and 2018. This summary should be considered in the context of the
additional disclosures in this MD&A which further highlight the results by
segment.

•       Revenue was $26.4 million for the three months ended , compared to $17.0 million for the same period in 2018, for a
        increase of 55.2%.


•             On a constant currency basis, the Company's revenue

increased $9.9

              million, or 59.7%, primarily due to an increase of $9.2 million in
              RPO contracting revenue (up 169.4% compared to the same period in
              2018). RPO recruitment revenue also contributed $0.6 million (up
              5.7%) compared to the same period in 2018.


•       Revenue was $42.6 million for the six months ended ,

2019, compared to $33.2 million for the same period in 2018, an increase

of $9.4 million, or 28.2%.



•             On a constant currency basis, the Company's revenue 

increased $11.2

              million, or 35.8%, due to an increase of $12.1 million in RPO
              contracting revenue (up 131.8% compared to the same period in 2018)
              partially offset by a decrease of $0.9 million in RPO recruitment
              revenue (down 4.0% compared to the same period in 2018).


•       Gross profit was $11.7 million for the three months ended ,

2019, compared to $10.8 million for the same period in 2018, an increase

of $0.9 million, or 7.9%.


•             On a constant currency basis, gross profit increased $1.4 million
              or 13.2% due to a increase of $1.3 million in RPO recruitment gross
              profit (up 13.6% compared to the same period in 2018), and a slight
              increase in RPO contracting gross profit (up 7.2% compared to the
              same period in 2018).


•       Gross profit was $21.1 million for the six months ended ,

2019, compared to $21.0 million for the same period in 2018, an increase

of $0.1 million, or 0.5%.


•             On a constant currency basis, gross profit increased $1.1 million,
              or 5.7%, mainly due to a increase of $0.9 million in RPO
              recruitment gross profit (up 4.9% compared to the same period in
              2018) and an increase of $0.2 million in RPO contracting gross
              profit (up 20.2% compared to the same period in 2018).



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Index

•       Selling, general and administrative expenses (including salaries and
        related expenses) and other non-operating income (expense) ("SG&A and
        Non-Op") were $12.5 million for the three months ended ,
        compared to $12.1 million for the same period in 2018, an increase of
        $0.4 million, or 3.4%.


•             On a constant currency basis, SG&A and Non-Op increased $0.8
              million, or 7.2%. SG&A and Non-Op, as a percentage of

revenue, was

              47.4% for the three months ended , compared to 70.6%
              for the same period in 2018.


•       SG&A and Non-Op were $23.9 million for the six months ended ,

2019, compared to $25.0 million for the same period in 2018, a decrease

of $1.1 million, or 4.3%.



•             On a constant currency basis, SG&A and Non-Op a decreased 

of $0.1

              million, or 0.4%. SG&A and Non-Op, as a percentage of

revenue, were

              56.1% for the six months ended , compared to 76.6% for
              the same period in 2018.

• EBITDA loss was $0.9 million for the three months ended ,

compared to EBITDA loss of $1.3 million for the same period in 2018, a

decrease in EBITDA loss of $0.4 million. On a constant currency basis,

EBITDA loss decreased $0.5 million.

• EBITDA loss was $2.9 million for the six months ended ,

compared to EBITDA loss of $4.0 million for the same period in 2018, a

decrease in EBITDA loss of $1.2 million. On a constant currency basis,

EBITDA loss decreased $1.2 million.

• Net loss was $0.9 million for the three months ended ,

        compared to net loss of $1.4 million for the same period in 2018, a
        decrease in net loss of $0.5 million. On a constant currency basis, net
        loss decreased $0.6 million.


•       Net loss was $2.8 million for the six months ended ,
        compared to net income of $9.4 million for the same period in 2018, a

decrease in net income of $12.2 million. On a constant currency basis,

net income decreased $14.7 million.



Constant Currency
The Company operates on a global basis, with the majority of its gross profit
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 are translated into U.S. dollars using the same
foreign currency exchange rates that were used to translate financial data for
the current period. 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.
Changes in revenue, gross profit, SG&A and Non-Op, operating income (loss), net
income (loss), and EBITDA (loss) from continuing operations 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  and 2018.

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  Index


                               Three Months Ended June 30,                              Six Months Ended June 30,
                     2019                        2018                        2019                        2018
                      As           As          Currency       Constant        As           As          Currency       Constant

$ in thousands reported reported translation currency reported reported translation currency Revenue: Hudson Americas $ 3,982 $ 3,509 $ (8 ) $ 3,501 $

  7,122     $  7,209     $        (15 )   $  7,194
Hudson Asia
Pacific             17,454        9,600             (270 )      9,330       26,133       18,425           (1,404 )     17,021
Hudson Europe        4,978        3,906             (201 )      3,705        9,346        7,596             (448 )      7,148
Total             $ 26,414     $ 17,015     $       (479 )   $ 16,536     $ 42,601     $ 33,230     $     (1,867 )   $ 31,363
Gross profit:
Hudson Americas   $  3,591     $  2,923     $         (7 )   $  2,916     $  6,353     $  6,046     $        (11 )   $  6,035
Hudson Asia
Pacific              5,420        5,759             (310 )      5,449       10,010       10,682             (762 )      9,920
Hudson Europe        2,648        2,119             (187 )      1,932        4,692        4,227             (252 )      3,975
Total             $ 11,659     $ 10,801     $       (504 )   $ 10,297     $ 21,055     $ 20,955     $     (1,025 )   $ 19,930
SG&A and Non-Op
(a):
Hudson Americas   $  3,189     $  2,999     $         (7 )   $  2,992     $  6,400     $  5,831     $        (15 )   $  5,816
Hudson Asia
Pacific              5,028        5,248             (249 )      4,999        9,637        9,626             (705 )      8,921
Hudson Europe        2,618        2,083             (170 )      1,913        5,011        4,182             (255 )      3,927
Corporate            1,686        1,774               (3 )      1,771        2,870        5,343                2        5,345
Total             $ 12,521     $ 12,104     $       (429 )   $ 11,675     $ 23,918     $ 24,982     $       (973 )   $ 24,009
Operating income
(loss):
Hudson Americas   $    590     $    132     $          -     $    132     $    293     $    475     $          -     $    475
Hudson Asia
Pacific                683          853              (85 )        768          843        1,473              (85 )      1,388
Hudson Europe          136          180              (30 )        150          (66 )        232              (10 )        222
Corporate           (2,201 )     (2,424 )              -       (2,424 )     (3,844 )     (6,097 )             (1 )     (6,098 )
Total             $   (792 )   $ (1,259 )   $       (115 )   $ (1,374 )   $ (2,774 )   $ (3,917 )   $        (96 )   $ (4,013 )
Net (loss)
income,
consolidated      $   (900 )   $ (1,364 )   $       (163 )   $ (1,527 )   $ (2,802 )   $  9,357     $      2,531     $ 11,888
EBITDA (loss) from continuing operations (b):
Hudson Americas   $    428     $    (76 )   $          1     $    (75 )   $     14     $    215     $          1     $    216
Hudson Asia
Pacific                362          508              (62 )        446          314        1,052              (54 )        998
Hudson Europe           31           34              (17 )         17         (317 )         45                5           50
Corporate           (1,683 )     (1,768 )             (3 )     (1,771 )     (2,874 )     (5,339 )             (5 )     (5,344 )
Total             $   (862 )   $ (1,302 )   $        (81 )   $ (1,383 )   $ (2,863 )   $ (4,027 )   $        (53 )   $ (4,080 )



(a) 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 Statement of Operations: Salaries and related, other selling,

general and administrative, and other income (expense), net. Corporate

management service allocations are included in the segments' other income

       (expense).



(b) See EBITDA reconciliation in the following section.

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Index


Use of EBITDA (Non-GAAP measure)
Management believes EBITDA is a meaningful indicator of the Company's
performance that provides useful information to investors regarding the
Company's financial condition and results of operations. Management also
considers EBITDA to be the best indicator of operating performance and most
comparable measure across the regions in which the Company operates. Management
also uses this measure to evaluate capital needs and working capital
requirements. EBITDA should not be considered in isolation or as a substitute
for operating income, or net income prepared in accordance with generally
accepted accounting principles in the United States of America ("GAAP") or as a
measure of the Company's profitability. EBITDA is derived from net income (loss)
adjusted for the provision for (benefit from) income taxes, interest expense
(income), and depreciation and amortization.

The reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in the table below:

                                               Three Months Ended            Six Months Ended
                                                    June 30,                     June 30,
$ in thousands                                 2019           2018          2019          2018
Net (loss) income                          $     (900 )    $  (1,364 )   $  (2,802 )   $   9,357
Adjustment for (loss) income from
discontinued operations, net of income
taxes                                               -            (11 )        (131 )      13,607
Loss from continuing operations                  (900 )       (1,353 )   $  (2,671 )   $  (4,250 )
Adjustments to loss from continuing
operations
Provision for income taxes                        142            109           207           281
Interest income, net                             (125 )          (60 )        (438 )         (60 )
Depreciation and amortization expense              21              2            39             2
  Total adjustments from net (loss)
income to EBITDA loss                              38             51        

(192 ) 223 EBITDA loss from continuing operations $ (862 ) $ (1,302 ) $ (2,863 ) $ (4,027 )





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Index


Results of Operations
Hudson Americas (reported currency)
Revenue
                                 Three Months Ended June 30,                                           Six Months Ended June 30,
                   2019            2018                                              2019              2018
                     As                           Change in
$ in millions    reported       As reported        amount        Change in %      As reported       As reported      Change in amount      Change in %
Hudson Americas
Revenue         $     4.0     $         3.5     $       0.5          13.5 %     $         7.1     $         7.2     $          (0.1 )         (1.2 )%



For the three months ended , RPO recruitment revenue increased by
$0.7 million, or 24.1%, and RPO contracting revenue declined by $0.2 million, or
39.9%. The increase in RPO recruitment revenue was attributable to growth of
existing RPO clients and new client wins.

For the six months ended , RPO contracting revenue decreased by
$0.4 million, or 41.1%, mainly offset by an increase in RPO recruitment revenue
of $0.4 million, or 6.9%, as compared to the same period in 2018.
Gross Profit
                             Three Months Ended June 30,                                         Six Months Ended June 30,
                2019              2018                                             2019              2018
$ in                                            Change in                                                          Change in

millions As reported As reported amount Change in %

     As reported       As reported       amount        Change in %
Hudson
Americas
Gross
profit     $      3.6        $       2.9      $       0.7          22.9 %     $      6.4        $        6.0     $       0.3           5.1 %
Gross
profit as
a
percentage
of revenue       90.2 %             83.3 %            N/A           N/A             89.2 %              83.9 %           N/A           N/A



For the three months ended , RPO recruitment gross profit increased
by $0.7 million, or 25.8%, partially offset by a slight decrease in RPO
contracting gross profit, as compared to the same period in 2018. The increase
in RPO recruitment gross profit was due to the same factors noted above for
revenue.

For the six months ended , RPO recruitment gross profit increased
$0.4 million, or 6.5%, partially offset by a slight decrease in RPO contracting
gross profit as compared to the same period in 2018. The increase in RPO
recruitment gross profit was attributable to growth of existing RPO clients.

For the three months ended , total gross profit as a percentage of
revenue was 90.2%, as compared to 83.3% for the same period in 2018. The
increase in total gross profit as a percentage of revenue was attributed to the
higher mix of RPO recruitment to RPO contracting revenue in 2019 as compared
to 2018.

For the six months ended , total gross profit as a percentage of
revenue was 89.2%, as compared to 83.9% for the same period in 2018. The
increase in total gross profit as a percentage of revenue was due to the same
factors noted above.


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  Index

SG&A and Non-Op
                                  Three Months Ended June 30,                                        Six Months Ended June 30,
                     2019              2018         Change in                          2019              2018         Change in
 $ in millions    As reported       As reported       amount       Change in %      As reported       As reported       amount       Change in %
Hudson Americas
SG&A and Non-Op $      3.2        $        3.0     $      0.2           6.3 %     $      6.4        $        5.8     $      0.6           9.8 %
SG&A and Non-Op
as a percentage
of revenue            80.1 %              85.5 %          N/A           N/A             89.9 %              80.9 %          N/A           N/A



For the three months ended , SG&A and Non-Op increased $0.2
million, or 6.3%, as compared to the same period in 2018 due to investments in
the sales team and industry marketing activities.
For the six months ended , SG&A and Non-Op increased $0.6 million,
or 9.8%, as compared to the same period in 2018 due to the factors noted above.
Operating Income and EBITDA
                               Three Months Ended June 30,                                           Six Months Ended June 30,
                   2019             2018          Change in                         2019             2018
$ in millions   As reported      As reported        amount      Change in %      As reported      As reported     Change in amount      Change in %
Hudson
Americas
Operating
income        $        0.6     $      0.1        $      0.5          347.0 %   $        0.3     $        0.5     $          (0.2 )        (38.3 )%
EBITDA (loss) $        0.4     $     (0.1 )      $      0.5          663.2 %   $          -     $        0.2     $          (0.2 )        (93.5 )%
EBITDA income
(loss) as a
percentage of
revenue               10.7 %         (2.2 )%            N/A            N/A              0.2 %            3.0 %               N/A            N/A



For the three months ended , EBITDA was $0.4 million, or 10.7% of
revenue, as compared to EBITDA (loss) of $0.1 million, or 2.2% of revenue, for
the same period in 2018. The increase in EBITDA for the three months ended  was principally due to the increase in gross profit.
For the six months ended , EBITDA was $0.0 million, or 0.2% of
revenue, as compared to EBITDA of $0.2 million, or 3.0% of revenue, for the same
period in 2018. The increase in EBITDA for the three and six months ended  was principally due to the factor noted above.


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Index


Hudson Asia Pacific (constant currency)
Revenue
                               Three Months Ended June 30,                                       Six Months Ended June 30,
                    2019             2018                                           2019            2018
                     As            Constant      Change in                           As           Constant       Change in
$ in millions     reported         currency        amount       Change in %       reported        currency        amount        Change in %
Hudson Asia Pacific
Revenue       $     17.5          $     9.3     $      8.1          87.1 %     $     26.1       $     17.0     $       9.1          53.5 %



For the three months ended , RPO contracting revenue increased $8.7
million or 260.1%, partially offset by RPO recruitment revenue, which decreased
$0.6 million, or 10.4%, as compared to the same period in 2018.

In Australia, revenue increased $7.1 million, or 86.5%, for the three months
ended , as compared to the same period in 2018. An increase in RPO
contracting of $8.2 million or 247.9% was partially offset by a decrease in RPO
recruitment revenue of $1.1 million or 21.7%. The increase in RPO contracting
revenue primarily reflected the implementation of a new contract win while the
decrease in RPO recruitment revenue was due to a large client project that was
delivered in the first half of 2018.

In Asia, revenue increased $1.1 million, or 96.8%, for the three months ended , as compared to the same period in 2018. The increase for the three months ended was due to higher demand from existing clients.

For the six months ended , RPO contracting revenue increased by $10.9 million, or 207.0% partially offset by a decrease in RPO recruitment revenue of $1.8 million, or 15.4% as compared to the same period in 2018.


In Australia, revenue increased $7.3 million, or 49.3%, for the six months ended
, as compared to the same period in 2018. The increase was
primarily in RPO contracting revenue, which increased by $9.7 million, or 185.0%
, partially offset by a decrease in RPO recruitment revenue of $2.4 million or
25.1% for the six months ended , as compared to the same period in
2018. The movements in revenue for the six months ended  were a
result of the same factors noted above.

In Asia, revenue increased $1.8 million, or 81.1%, for the six months ended , as compared to the same period in 2018. The increase in revenue for
the six months ended  was a result of a new client win and higher
demand from existing clients.
Gross Profit
                                 Three Months Ended June 30,                                      Six Months Ended June 30,
                  2019           2018                                                 2019          2018
                   As          Constant                                                As         Constant       Change in
 $ in millions  reported       currency      Change in amount      Change in %      reported      currency        amount        Change in %
Hudson Asia Pacific
Gross profit   $    5.4       $     5.4     $               -         (0.6 )%     $    10.0      $     9.9     $       0.1           0.9 %
Gross profit
as a
percentage of
revenue            31.1 %          58.4 %                 N/A          N/A             38.3 %         58.3 %           N/A           N/A



For the three months ended , RPO contracting gross profit increased
slightly by 8.2%, offset by a slight decrease in RPO recruitment gross profit of
1.7%, as compared to the same period in 2018.

In Australia, gross profit decreased by $0.4 million or 9.9% for the three
months ended , as compared to the same period in 2018. The decrease
was primarily in RPO recruitment gross profit of $0.6 million or 14.2% partially
offset by an increase in RPO contracting gross profit of $0.2 million or 8.1%
for the three months ended , as compared to the same period in
2018.

In Asia, gross profit increased $0.4 million, or 38.2%, for the three months ended , as compared to the same period in 2018.

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Index




For the six months ended , RPO contracting gross profit increased
by $0.1 million, or 21.6%, partially offset by a decrease in RPO recruitment of
$0.1 million or 1.1% as compared to the same period in 2018.

In Australia, gross profit decreased by $0.4 million or 5.7%, for the six months
ended , as compared to the same period in 2018. The decrease was
primarily in RPO recruitment gross profit which declined by $0.4 million, or
6.3%, for the six months ended , as compared to the same period in
2018. This decrease was partially offset by an increase in RPO contracting gross
profit of $0.1 million.

In Asia, gross profit increased $0.5 million or 24.3%, for the six months ended , as compared to the same period in 2018.


Total gross profit as a percentage of revenue was 31.1% for the three months
ended , as compared to 58.4% for the same period in 2018. The
decrease in total gross profit as a percentage of revenue was primarily due to
the increase in revenue.

Total gross profit as a percentage of revenue was 38.3% for the six months ended
, as compared to 58.3% for the same period in 2018. The decrease in
total gross profit as a percentage of revenue was primarily due to the increase
in revenue.
SG&A and Non-Op
                                Three Months Ended June 30,                                      Six Months Ended June 30,
                 2019           2018                                                2019           2018
                  As          Constant                                               As          Constant       Change in
$ in millions  reported       currency     Change in amount      Change in %      reported       currency        amount        Change in %
Hudson Asia Pacific
SG&A and
Non-Op        $    5.0       $    5.0     $               -           0.6 %     $     9.6       $     8.9     $       0.7           8.0 %
SG&A and
Non-Op as a
percentage of
revenue           28.8 %         53.6 %                 N/A           N/A            36.9 %          52.4 %           N/A           N/A


For the three months ended , SG&A and Non-Op increased slightly, or 0.6%, as compared to the same period in 2018.


For the six months ended , SG&A and Non-Op increased $0.7 million,
or 8.0%, as compared to the same period in 2018. The increase was primarily due
to higher consultant staff costs and investments in the sales team.

For the three months ended , SG&A and Non-Op, as a percentage of revenue, was 28.8%, as compared to 53.6% for the same period in 2018. The decrease was principally due to the higher revenue noted above.

For the six months ended , SG&A and Non-Op, as a percentage of revenue, was 36.9%, as compared to 52.4% for the same period in 2018. The decrease was principally due to the factors noted above.

Operating Income and EBITDA

                               Three Months Ended June 30,                                        Six Months Ended June 30,
                2019          2018                                                2019          2018
$ in             As         Constant                                               As         Constant
millions      reported      currency      Change in amount      Change in %
    reported      currency      Change in amount      Change in %
Hudson Asia
Pacific
Operating
income       $     0.7     $     0.8     $          (0.1 )        (11.1 )%     $     0.8     $     1.4     $          (0.5 )        (39.3 )%
EBITDA       $     0.4     $     0.4     $          (0.1 )        (18.8 )%     $     0.3     $     1.0     $          (0.7 )        (68.5 )%
EBITDA as a
percentage
of revenue         2.1 %         4.8 %               N/A            N/A              1.2 %         5.9 %               N/A            N/A



                                     - 33 -

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Index



For the three months ended , EBITDA was $0.4 million, or 2.1% of
revenue, as compared to EBITDA of $0.4 million, or 4.8% of revenue, for the same
period in 2018.
For the six months ended , EBITDA was $0.3 million, or 1.2% of
revenue, as compared to EBITDA of $1.0 million, or 5.9% of revenue, for the same
period in 2018. The decrease in EBITDA was principally due to the increase in
SG&A and Non-Op noted above.
For the three months ended , operating income was $0.7 million, as
compared to operating income of $0.8 million for the same period in 2018.
For the six months ended , operating income was $0.8 million, as
compared to operating income of $1.4 million for the same period in 2018. The
decrease in operating income was principally due to the change in EBITDA
described above.

                                     - 34 -

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Index


Hudson Europe (constant currency)
Revenue
                            Three Months Ended June 30,                                    Six Months Ended June 30,
                 2019          2018                                           2019            2018
                  As         Constant      Change in                           As           Constant       Change in

$ in millions reported currency amount Change in % reported currency amount Change in % Hudson Europe Revenue $ 5.0 $ 3.7 $ 1.3 34.4 % $

     9.3         $     7.1     $       2.2          30.7 %



For the three months ended , RPO contracting revenue and recruitment revenue increased by $0.7 million, or 46.3% and $0.5 million, or 11.2%, respectively, as compared to the same period in 2018.


In the U.K., for the three months ended , revenue increased by $0.7
million, or 19.5% as compared to the same period in 2018. The change was driven
by an increase in RPO contracting revenue of $0.7 million or 44.7%, as compared
to the same period in 2018.

In Continental Europe, total revenue was $0.5 million for the three months ended
, as compared to $0.0 million for the same period in 2018, an
increase of $0.5 million. The increase in revenue for the three months ended
 was due to higher demand at existing clients and new contracts.

For the six months ended , RPO contracting and RPO recruitment increased by $1.7 million, or 58.4%, and $0.5 million, or 11.2%, respectively, as compared to the same period in 2018.


In the U.K., for the six months ended , revenue increased by $1.6
million, or 22.7%, to $8.5 million, from $6.9 million for the same period in
2018. For the six months ended , the increase in the U.K. was
driven by an increase in RPO contracting revenue of $1.7 million, or 58.4%,
partially offset by a decrease in RPO recruitment of $0.1 million or 2.0% as
compared to the same period in 2018.

In Continental Europe, total revenue was $0.8 million for the six months ended
, as compared to $0.2 million for the same period in 2018, for an
increase of $0.6 million, or 283.3%, due to higher demand at existing
recruitment clients and new contracts.

Gross Profit

                           Three Months Ended June 30,                                    Six Months Ended June 30,
               2019            2018                                           2019          2018
$ in            As           Constant       Change in                          As         Constant       Change in
millions     reported        currency        amount        Change in %      reported      currency        amount        Change in %
Hudson
Europe
Gross
profit     $     2.6       $      1.9     $       0.7          37.1 %     $     4.7      $     4.0     $       0.7          18.0 %
Gross
profit as
a
percentage
of revenue      53.2 %           52.1 %           N/A           N/A            50.2 %         55.6 %           N/A           N/A



For the three months ended , gross profit increased by $0.7 million
or 37.1%, primarily driven by an increase in RPO recruitment of $0.7 million or
36.6%, as compared to the prior year period in 2018.

In the U.K., total gross profit for the three months ended 
increased $0.2 million, or 11.0%, as compared to the same period in 2018. The
increase in the U.K. was driven by RPO recruitment and RPO contracting gross
profit, which increased by $0.1 million, or 7.2% and $0.0 million, or 44.5%,
respectively, as compared to the same period in 2018.

In Continental Europe, for the three months ended , total gross
profit increased $0.5 million, as compared to the same period in 2018, driven by
RPO recruitment revenue.


                                     - 35 -

--------------------------------------------------------------------------------

Index


For the six months ended , RPO recruitment gross profit increased
by $0.7 million or 18.0%, driven by RPO contracting and RPO recruitment, which
increased by $0.6 million, or 16.7%, and $0.1 million or 40.2%, respectively, as
compared to the same period in 2018.

In the U.K., total gross profit for the six months ended  increased
$0.1 million, or 2.8%, as compared to the same period in 2018. The change in the
U.K. was primarily driven by an increase in RPO contracting of $0.1 million, or
40.7%, as compared to the same period in 2018.

In Continental Europe, for the six months ended , total gross profit increased $0.6 million, or 274.2%, as compared to the same period in 2018.

SG&A and Non-Op

                           Three Months Ended June 30,                                    Six Months Ended June 30,
               2019            2018                                           2019          2018
$ in            As           Constant       Change in                          As         Constant       Change in
millions     reported        currency        amount        Change in %      reported      currency        amount        Change in %
Hudson
Europe
SG&A and
Non-Op     $     2.6       $      1.9     $       0.7          36.9 %     $     5.0      $     3.9     $       1.1          27.6 %
SG&A and
Non-Op as
a
percentage
of revenue      52.6 %           51.6 %           N/A           N/A            53.6 %         54.9 %           N/A           N/A



For the three months ended , SG&A and Non-Op increased $0.7
million, or 36.9%, as compared to the same period in 2018. The increase in SG&A
and Non-Op was a result of higher consultant and support staff costs as compared
to the prior year.

For the six months ended , SG&A and Non-Op increased $1.1 million, or 27.6%, as compared to the same period in 2018. The increase in SG&A and Non-Op was due to the same factors noted above.


For the three months ended , SG&A and Non-Op, as a percentage of
revenue, was 52.6%, as compared to 51.6% for the same period in 2018. The
increase in SG&A and Non-Op, as a percentage of revenue, for the three months
ended  was primarily due to the increase in support costs partially
offset by the growth in revenue noted above.

For the six months ended , SG&A and Non-Op, as a percentage of revenue, was 53.6%, as compared to 54.9% for the same period in 2018. The decrease in SG&A and Non-Op, as a percentage of revenue, for the six months ended was primarily due to the growth in revenue noted above.

Operating Income and EBITDA

                              Three Months Ended June 30,                                          Six Months Ended June 30,
               2019            2018                                                 2019          2018
$ in            As           Constant                                                As         Constant
millions     reported        currency      Change in amount      Change in %      reported      currency      Change in amount     Change in %
Hudson
Europe
Operating
income
(loss)     $     0.1       $      0.2     $               -         (9.3 )%     $    (0.1 )    $     0.2     $          (0.3 )        (129.7 )%
EBITDA
(loss)     $       -       $        -     $               -         82.4  %     $    (0.3 )    $     0.1     $          (0.4 )        (734.0 )%
EBITDA
(loss) as
a
percentage
of revenue       0.6 %            0.5 %                 N/A          N/A             (3.4 )%         0.7 %               N/A             N/A


For the three months ended , EBITDA slightly increased to 0.6% of revenue, as compared to EBITDA of 0.5% of revenue for the same period in 2018.

                                     - 36 -

--------------------------------------------------------------------------------

Index


For the six months ended , EBITDA loss was $0.3 million, or 3.4% of
revenue, as compared to EBITDA of $0.1 million, or 0.7% of revenue, for the same
period in 2018. The decrease in EBITDA was principally due to the changes in
gross profit and SG&A and Non-op.
For the three months ended , operating income was $0.1 million, as
compared to operating income of $0.2 million for the same period in 2018. The
decrease was principally due to the increase in SG&A and Non-Op.
For the six months ended  , operating loss was $0.1 million as
compared to operating income of $0.2 million for the same period in 2018. The
increase in operating loss was due to the same factors noted above.


                                     - 37 -

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Index

The following are discussed in reported currency

Corporate Expenses, Net of Corporate Management Fee Allocations


Corporate expenses were $1.7 million for the three months ended ,
as compared to $1.8 million for the same period in 2018, a decrease of $0.1
million. The decrease for the three months ended  was primarily due
to a decrease in staff costs.

For the six months ended , corporate expenses were $2.9 million as
compared to $5.3 million for the same period in 2018, for an increase of $2.5
million. The decrease for the six months ended  was primarily a
result of additional compensation expense of $2.6 million recognized in the
prior year due to severance expense for three corporate executives, partially
offset by compensation expense of $0.5 million in the current year for severance
expense (see Note 10).

Depreciation and Amortization Expense


Depreciation and amortization expense was $0.0 million for the three and six
months ended , as compared to $0.0 million for the same periods in
2018.

Interest Income, Net

Interest income was $0.1 million and $0.4 million for the three and six months
ended , as compared to $0.1 million and $0.1 million for the same
periods in 2018, respectively.

Provision for Income Taxes


The provision for income taxes for the six months ended  was $0.2
million on $2.5 million of pre-tax loss from continuing operations, as compared
to a provision for income tax of $0.3 million on $4.0 million of pre-tax loss
from continuing operations for the same period in 2018. The effective tax rates
for the six months ended  and 2018 were negative 8.4% and 7.1%,
respectively. For the six months ended , the effective tax rate
differed from the U.S. Federal statutory rate of 21% primarily due 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, variations from the U.S. Federal statutory rate in foreign
jurisdictions, taxes on repatriations or deemed repatriation of foreign profits,
and non-deductible expenses.

Net (Loss) Income


Net loss was $0.9 million for the three months ended  as compared
to net loss of $1.4 million for the three months ended . Basic and
diluted loss per share were $0.29 for the three months ended , as
compared to basic and diluted loss per share of $0.42 for the same period in
2018.

Net loss was $2.8 million for the six months ended , as compared to
net income of $9.4 million for the same period in 2018, a decrease in net income
of $12.2 million. Basic and diluted loss per share were $0.88 for the six months
ended , as compared to basic and diluted income per share of $2.90
for the same period in 2018, primarily reflecting income from discontinued
operations of $4.22 per share.

                                     - 38 -

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Index


Liquidity and Capital Resources
As of , cash and cash equivalents and restricted cash totaled $29.1
million, as compared to $41.1 million as of . The following
table summarizes the Company's cash flow activities for the six months ended
 and 2018:
                                                         For the Six Months Ended June 30,
$ in millions                                              2019                     2018
Net cash used in operating activities              $            (7.7 )       $           (18.2 )
Net cash (used in) provided by investing
activities                                                      (0.1 )                    27.7
Net cash (used in) provided by financing
activities                                                      (4.3 )                     7.4
Effect of exchange rates on cash, cash
equivalents, and restricted cash                                 0.1                       0.2
Net (decrease) increase in cash, cash
equivalents, and restricted cash                   $           (12.0 )       $            17.1



Cash Flows from Operating Activities
For the six months ended , net cash used in operating activities
was $7.7 million, as compared to $18.2 million of net cash used in operating
activities for the same period in 2018, resulting in a decrease in net cash used
in operating activities of $10.5 million. The decrease in net cash used in
operating activities resulted principally from more favorable working capital
comparisons to the prior year, due to a lower seasonal effect following the
divestiture of the RTM businesses in 2018.
Cash Flows from Investing Activities
For the six months ended , net cash used in investing activities
was $0.1 million, as compared to $27.7 million of net cash provided by investing
activities for the same period in 2018 resulting in a decrease in net cash
provided by investing activities of $27.8 million. The decrease in net cash
provided by investing activities was due to the sale of the RTM businesses in
the prior year.
Cash Flows from Financing Activities
For the six months ended , net cash used in financing activities
was $4.3 million, as compared to net provided by financing activities of $7.4
million for the same period in 2018, resulting in a decrease in net cash
provided by financing activities of $11.7 million. The increase in net cash used
in financing activities was primarily attributable to an increase in net
borrowings by subsidiaries prior to disposal of the RTM businesses in 2018, as
well as cash paid for shares repurchased of $4.3 million in 2019.

Invoice Finance Credit Facility


On , 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 sold to NAB up to a maximum
of 4 million Australian dollars. No receivables sold to NAB have terms greater
than 90 days, and any risk of loss is retained by the Australian Borrower. As
amounts are collected from outstanding receivables, additional invoices may be
sold to replenish available funds. 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 , there were no amounts
outstanding under the NAB Facility Agreement. Interest expense incurred on the
NAB Facility Agreement was $7 for the three and six months ended .
The Company was in compliance with all financial covenants under the NAB
Facility Agreement as of .

                                     - 39 -

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Index



Liquidity Outlook
As of , the Company had cash and cash equivalents on hand of $28.5
million, supplemented by additional borrowing availability of $4.0 million under
the NAB Facility Agreement, and no long-term debt obligations or other similar
long-term liabilities aside from operating lease obligations recorded in
connection with the new accounting guidance in ASU 2016-02 (see Note 3). The
Company has no financial guarantees, outstanding debt or other lease agreements
or arrangements that could trigger a requirement for an early payment or that
could change the value of our assets. The Company believes that it has
sufficient liquidity to satisfy its needs through at least the next 12 months,
based on the Company's financial position as of . The Company's
near-term cash requirements during 2019 are primarily related to funding
operations. For the full year 2019, the Company expects to make capital
expenditures of less than $0.5 million.
As of , $23.6 million of the Company's cash and cash equivalents
noted above were held in the U.S. and the remainder were held outside the U.S.,
primarily in Switzerland ($1.4 million), the U.K ($0.8 million), Australia ($0.7
million), China ($0.6 million), and Hong Kong ($0.6 million). The majority of
the Company's offshore cash is available to it as a source of funds, net of any
tax obligations or assessments.


                                     - 40 -

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Index


Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors.

Contingencies

From time to time in the ordinary course of business, the Company is subject to
compliance audits by federal, state, local, and foreign government regulatory,
tax, and other authorities relating to a variety of regulations, including wage
and hour laws, unemployment taxes, workers' compensation, immigration, and
income, value-added, and sales taxes. The Company is also subject to, from time
to time in the ordinary course of business, various claims, lawsuits, 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. Periodic events and management actions such as business
reorganization initiatives can change the number and type of audits, claims,
lawsuits, contract disputes, or complaints asserted against the Company. Events
can also change the likelihood of assertion and the behavior of third parties to
reach resolution regarding such matters.
The economic circumstances in the recent past have given rise to many news
reports and bulletins from clients, tax authorities, and other parties about
changes in their procedures for audits, payment, plans to challenge existing
contracts, and other such matters aimed at being more aggressive in the
resolution of such matters in their own favor. The Company believes that it has
appropriate procedures in place for identifying and communicating any matters of
this type, whether asserted or likely to be asserted, and it evaluates its
liabilities in light of the prevailing circumstances. Changes in the behavior of
third parties could cause the Company to change its view of the likelihood of a
claim and what might constitute a trend. Employment laws vary in the markets in
which we operate, and in some cases, employees and former employees have
extended periods during which they may bring claims against the Company.
For matters that have reached the threshold of probable and estimable, the
Company has established reserves for legal, regulatory, and other contingent
liabilities. The Company's reserves were $0.0 million as of  and
, respectively. Although the outcome of these matters cannot be
determined, the Company believes that none of the currently pending matters,
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, results of operations or liquidity.

Recent Accounting Pronouncements
See Note   3   to the Condensed Consolidated Financial Statements included in
Part I of this Form 10-Q for a full description of relevant recent accounting
pronouncements, including the respective expected dates of adoption.
Critical Accounting Policies
See "Critical Accounting Policies" under Item 7 of the Company's Annual Report
on Form 10-K for the fiscal year ended  filed with the SEC on
 and incorporated by reference herein. There were no changes to the
Company's critical accounting policies during the three months ended .

Effective , we adopted Topic 606, which requires judgment in
estimating the transaction price for revenue from contracts with customers. We
have reached conclusions on key accounting assessments and estimates related to
the impact of the new standard, which are described in Note 4 - "Revenue
Recognition" in the Notes to the Condensed Consolidated Financial Statements,
included in Part I of this Form 10-Q.

FORWARD-LOOKING STATEMENTS
This Form 10-Q contains statements that the Company believes to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact included in this Form 10-Q, including statements regarding the
Company's future financial condition, results of operations, business operations
and business prospects, are forward-looking statements. Words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "predict,"
"believe," and similar words, expressions, and variations of these words and
expressions are intended to identify forward-looking statements. All
forward-looking statements are subject to important factors, risks,
uncertainties, and assumptions, including industry and economic conditions that
could cause actual results to differ materially from those described in the
forward-looking statements. Such factors, risks, uncertainties, and assumptions
include, but are not limited to, (1) the Company's ability to operate
successfully as a company focused on its RPO business, (2) global economic
fluctuations, (3) the Company's ability to successfully execute its strategic
initiatives, (4) risks related to fluctuations in the Company's operating
results from quarter to quarter, (5) the ability of clients' to terminate their
relationship with the Company

                                     - 41 -

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Index


at any time, (6) competition in the Company's markets, (7) the negative cash
flows and operating losses that may recur in the future, (8) risks associated
with the Company's investment strategy, (9) risks related to international
operations, including foreign currency fluctuations, (10) the Company's
dependence on key management personnel, (11) the Company's ability to attract
and retain highly-skilled professionals, (12) the Company's ability to collect
its accounts receivable, (13) the Company's ability to maintain costs at an
acceptable level, (14) the Company's heavy reliance on information systems and
the impact of potentially losing or failing to develop technology, (15) risks
related to providing uninterrupted service to clients, (16) the Company's
exposure to employment-related claims from clients, employers, and regulatory
authorities, current and former employees in connection with the Company's
business reorganization initiatives, and limits on related insurance coverage,
(17) the Company's ability to utilize net operating loss carry-forwards, (18)
volatility of the Company's stock price, (19) the impact of government
regulations, (20) restrictions imposed by blocking arrangements, (21) risks
related to potential acquisitions or dispositions of businesses by the Company,
and (22) those risks set forth in "Risk Factors." The foregoing list should not
be construed to be exhaustive. Actual results could differ materially from the
forward-looking statements contained in this Form 10-Q. In view of these
uncertainties, you should not place undue reliance on any forward-looking
statements, which are based on our current expectations. These forward-looking
statements speak only as of the date of this Form 10-Q. The Company assumes no
obligation, and expressly disclaims any obligation, to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.



                                     - 42 -

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Index

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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