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 ofHudson Global, Inc. and its subsidiaries (the "Company") filed in its Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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 in Part I, Item 1 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
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 seeks 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 global footprint, allow 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 meet the Company's objective, the Company engages 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; and
•Improving the Company's cost structure and efficiency of its support functions and infrastructure.
We continue to explore all strategic alternatives to maximize value for stockholders. We may pursue our goals through organic growth, strategic initiatives, or other alternatives. Additionally, we will also continue to monitor capital markets for opportunities to repurchase shares, and consider other actions designed to enhance stockholders value, including to review information regarding potential acquisitions, as well as to provide information about our business to third parties, from time to time.
This MD&A discusses the results of the Company's business for the three months
ended
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Current Market Conditions
After another challenging year in 2021, economic conditions in most of the world's major markets are expected to rebound in 2022. Some markets are beginning to see a potential path forward for improved economic conditions. However, expectations for recovery may be hampered by new variants of the virus. Policy measures enacted byU.S. and foreign governments to combat the economic impact of the virus provided support to local economies, but many of these measures have since been discontinued. In addition, the continued uncertainty has resulted in increased inflation and volatility in global currencies. Stronger foreign currencies in other markets compared to theU.S. dollar during a reporting period cause local currency results of the Company's foreign operations to be translated into moreU.S. dollars. The Company closely monitors the economic environment and business climate in its markets and responds accordingly.
COVID-19 Pandemic
The continuing impact of COVID-19 and its variants around the world presents significant risks to the Company, which the Company is unable to fully evaluate or even to foresee at the current time. However, the Company is vigilantly monitoring the business environment surrounding COVID-19 and continues to proactively address this situation as it evolves. The Company believes it can continue to take appropriate actions to manage the business in this challenging environment due to the flexibility of its workforce and the strength of its balance sheet. The COVID-19 pandemic affected the Company's operations in prior years and may continue to do so in the future. The COVID-19 pandemic may impact the Company's business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company's management and employees, marketing and sales operations, customer and consumer behaviors, as well as the overall economy. The scope and nature of these impacts, most of which are beyond the Company's control, continue to evolve and the outcomes are uncertain. Management cannot predict the continued impact of the COVID-19 pandemic may continue to have on the Company's sales or on economic conditions generally. The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might ends.
Financial Performance
The following is a summary of the Company's financial performance highlights
for the three months ended
•Revenue was$51.9 million for the three months endedMarch 31, 2022 , compared to$34.5 million for the first quarter of 2021, an increase of$17.5 million , or 50.7%. The increase in revenue was driven by growth in theAmericas ,Australia and theUK . •On a constant currency basis, the Compan's revenue increased$19.1 million , or 58.0%. RPO recruitment revenue increased$13.2 million , or 109.9%, while contracting revenue increased$5.8 million , or 28.0%, compared to the first quarter of 2021. Revenue included an increase of$2.6 million from the acquisition ofKarani, LLC . (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) •Adjusted net revenue was$25.6 million for the three months endedMarch 31, 2022 , compared to$12.7 million for the first quarter of 2021, an increase of$12.9 million , or 101.1%. •On a constant currency basis, adjusted net revenue increased$13.2 million , or 107.1%, mainly due to an increase in RPO recruitment adjusted net revenue of$12.9 million , or 112.0%, compared to the first quarter of 2021. Contracting adjusted net revenue increased by$0.3 million , or 37.0%, compared to the same period in 2021. Adjusted net revenue included an increase of$2.6 million from the acquisition ofKarani, LLC . •Selling, general and administrative expenses (including salaries and related expenses) and other non-operating income (expense) ("SG&A and Non-Op") was$21.7 million for the three months endedMarch 31, 2022 , compared to$12.6 million for the same period in 2021, an increase of$9.0 million , or 71.4%. - 25 -
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•On a constant currency basis, SG&A and Non-Op increased$9.3 million , or 75.7%. SG&A and Non-Op as a percentage of revenue was 41.7% for the three months endedMarch 31, 2022 , compared to 37.5% for the same period in 2021. •EBITDA was$3.9 million for the three months endedMarch 31, 2022 , compared to EBITDA of$0.1 million for the same period in 2021, an increase in EBITDA of$3.8 million . On a constant currency basis, EBITDA increased$3.9 million . •Net income was$3.0 million for the three months endedMarch 31, 2022 , compared to net loss of$0.2 million for the same period in 2021, an increase in net income of$3.3 million . On a constant currency basis, net income also increased$3.3 million .
Constant Currency (Non-GAAP measure)
The Company operates on a global basis, with the majority of its revenue generated outside of theU.S. Accordingly, fluctuations in foreign currency exchange rates can affect the Company's results of operations. For the discussion of reportable segment results of operations, the Company uses constant currency information. Constant currency compares financial results between periods as if exchange rates had remained constant period-over-period. The Company defines the term "constant currency" to mean that financial data for a previously reported period is translated intoU.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Constant currency metrics should not be considered in isolation or as a substitute for reported results prepared in accordance with generally accepted accounting principles ("GAAP") in theU.S. The Company's management reviews and analyzes business results in constant currency and believes these results better represent the Company's underlying business trends. Changes in foreign currency exchange rates generally impact only reported earnings. Changes in revenue, adjusted net revenue, SG&A and Non-Op, operating income (loss), net income (loss), and EBITDA (loss) include the effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange adjustments on the Company's operating results for the three months endedMarch 31, 2022 and 2021. - 26 -
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Index Three Months Ended March 31, 2022 2021 As As Currency Constant $ in thousands reported reported translation currency Revenue: Americas$ 14,611 $ 4,561 $ -$ 4,561 Asia Pacific 31,133 25,340 (1,456) 23,884 Europe 6,173 4,560 (142) 4,418 Total$ 51,917 $ 34,461 $ (1,598) $ 32,863 Adjusted net revenue (a): Americas$ 13,702 $ 4,209 $ -$ 4,209 Asia Pacific 8,213 5,758 (280) 5,478 Europe 3,658 2,751 (90) 2,661 Total$ 25,573 $ 12,718 $ (370) $ 12,348 SG&A and Non-Op (b): Americas$ 11,304 $ 4,487 $ -$ 4,487 Asia Pacific 6,178 4,996 (231) 4,765 Europe 3,503 2,681 (84) 2,597 Corporate 680 479 - 479 Total$ 21,665 $ 12,643 $ (315) $ 12,328 Operating income (loss): Americas$ 2,321 $ (298) $ -$ (298) Asia Pacific 2,274 1,063 (62) 1,001 Europe 256 200 (10) 190 Corporate (1,249) (947) - (947) Total
$ 3,019 $ (203) $ (40) $ (243) EBITDA (loss) (c): Americas$ 2,414 $ (278) $ -$ (278) Asia Pacific 2,027 762 (49) 713 Europe 147 70 (6) 64 Corporate (711) (479) - (479) Total$ 3,877 $ 75 $ (55) $ 20
(a)Represents Revenue less the Direct contracting costs and reimbursed expenses caption on the Condensed Consolidated Statements of Operations.
(b)SG&A and Non-Op is a measure that management uses to evaluate the segments' expenses, which include the following captions on the Condensed Consolidated Statements of Operations: Salaries and related, other selling, general and administrative, and Other expense, net. Corporate management service allocations are included in the segments' other income (expense).
(c)See EBITDA reconciliation in the following section.
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 considers EBITDA to be the best indicator of operating performance and most comparable measure across the regions in which the Company operates. Management 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 withU.S. 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. - 27 -
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The reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in the table below:
Three Months Ended March 31, $ in thousands 2022 2021 Net income (loss)$ 3,019 $ (203) Adjustments to Net income (loss) Provision for income taxes 536 178 Interest income, net (2) (10) Depreciation and amortization expense
324 110
Total adjustments from net income (loss) to EBITDA 858 278 EBITDA$ 3,877 $ 75 - 28 -
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Index Results of OperationsAmericas (reported currency) Revenue Three Months Ended March 31, 2022 2021 Change in $ in millions As reported As reported amount Change in %Americas Revenue$ 14.6 $ 4.6 $ 10.1 220 % For the three months endedMarch 31, 2022 , RPO recruitment revenue increased by$9.6 million , or 232%, while contracting revenue increased by$0.4 million , or 101%. The acquisition ofKarani, LLC contributed 56 percentage points to the revenue growth. (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) Adjusted net revenue Three Months Ended March 31, 2022 2021 Change in $ in millions As reported As reported amount Change in % Americas Adjusted net revenue$ 13.7 $ 4.2 $ 9.5 226 % Adjusted net revenue as a percentage of revenue 94 % 92 % N/A N/A For the three months endedMarch 31, 2022 , RPO recruitment adjusted net revenue increased by$9.4 million , or 229%, compared to the same period in 2021. The acquisition ofKarani, LLC contributed 61 percentage points to the adjusted net revenue growth. The increase in RPO recruitment adjusted net revenue was driven by the revenue growth. For the three months endedMarch 31, 2022 , total adjusted net revenue as a percentage of revenue was 94%, compared to 92% for the same period in 2021. The increase in total adjusted net revenue as a percentage of revenue was attributed to the higher mix of RPO recruitment revenue to contracting revenue. SG&A and Non-Op Three Months Ended March 31, 2022 2021 Change in $ in millions As reported As reported amount Change in % Americas SG&A and Non-Op$ 11.3 $ 4.5 $ 6.8 152 % SG&A and Non-Op as a percentage of revenue 77 % 98 % N/A N/A For the three months endedMarch 31, 2022 , SG&A and Non-Op increased$6.8 million , or 152%, compared to the same period in 2021, while SG&A and Non-Op as a percentage of revenue decreased from 98% to 77%. The decrease of SG&A and Non-op as a percentage of revenue is primarily due to gains in adjusted net revenue outpacing the higher consultant staff cost from investments in the sales team and industry marketing activities. - 29 -
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Index Operating Income and EBITDA Three Months Ended March 31, 2022 2021 Change in $ in millions As reported As reported amount Change in %Americas Operating income (loss)$ 2.3 $ (0.3) $ 2.6 N/M EBITDA (loss)$ 2.4 $ (0.3) $ 2.7 N/M EBITDA (loss) as a percentage of revenue 17 % (6) % N/A N/A N/M = not meaningful For the three months endedMarch 31, 2022 , operating income was$2.3 million , compared to operating loss of$0.3 million in the same period in 2021. The operating income growth was primarily due to the stronger adjusted net revenue results and lower SG&A and Non-Op as a percentage of revenue. For the three months endedMarch 31, 2022 , EBITDA was$2.4 million , or 17% of revenue, compared to EBITDA loss of$0.3 million in the same period in 2021. The increase in EBITDA was due to the same factors noted above.
Revenue Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Asia Pacific Revenue$ 31.1 $ 23.9 $ 7.2 30 % For the three months endedMarch 31, 2022 , contracting revenue increased$4.7 million , or 25%, and RPO recruitment revenue increased by$2.5 million , or 50%, compared to the same period in 2021. InAustralia , revenue increased$6.4 million , or 29%, for the three months endedMarch 31, 2022 , compared to the same period in 2021. The increase was primarily in contracting revenue of$4.2 million , which increased 23%, and RPO recruitment revenue which increased by$2.1 million , or 55%. The increases in contracting and recruitment revenue were primarily due to higher volume from existing clients. InAsia , revenue increased$0.7 million , or 41%, for the three months endedMarch 31, 2022 compared to the same period in 2021. The increase for the three months endedMarch 31, 2022 was due to higher demand from existing clients. Adjusted net revenue Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in % Asia Pacific Adjusted net revenue$ 8.2 $ 5.5 $ 2.7 50 % Adjusted net revenue as a percentage of revenue 26 % 23 % N/A N/A
For the three months ended
InAustralia , adjusted net revenue increased by$2.3 million , or 54%, for the three months endedMarch 31, 2022 , compared to the same period in 2021. The increase was primarily reflected in RPO recruitment adjusted net revenue, which grew$2.1 million , or 58%, while contracting adjusted net revenue increased by$0.2 million , or 29%. - 30 -
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In
Total adjusted net revenue as a percentage of revenue was 26% for the three months endedMarch 31, 2022 , and 2021, compared to 23% for the same period in 2021. The increase in total adjusted net revenue as a percentage of revenue was attributed to the higher mix of RPO recruitment revenue to contracting revenue. SG&A and Non-Op Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Asia Pacific SG&A and Non-Op$ 6.2 $ 4.8 $ 1.4 30 % SG&A and Non-Op as a percentage of revenue 20 % 20 % N/A N/A
For the three months ended
Operating Income and EBITDA
Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Asia Pacific Operating income$ 2.3 $ 1.0 $ 1.3 127 % EBITDA$ 2.0 $ 0.7 $ 1.3 184 % EBITDA as a percentage of revenue 7 % 3 % N/A N/A For the three months endedMarch 31, 2022 , operating income was$2.3 million , compared to operating income of$1.0 million for the same period in 2021. The increase in operating income was principally due to the change in adjusted net revenue, as described above.
For the three months ended
Europe (constant currency) Revenue Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Europe Revenue$ 6.2 $ 4.4 $ 1.8 40 % For the three months endedMarch 31, 2022 , RPO recruitment revenue increased$1.0 million , or 37%, while contracting revenue increased$0.7 million , or 44%, compared to the same period in 2021. - 31 -
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In theU.K. , for the three months endedMarch 31, 2022 , revenue increased by$2.0 million , or 53%. The change was driven by increases in RPO recruitment and contracting revenue of$1.3 million and$0.7 million , respectively, reflecting higher demand from existing clients and the implementation of new contract wins. In Continental Europe, total revenue was$0.4 million for the three months endedMarch 31, 2022 , a decrease of 39%, compared to$0.7 million for the same period in 2021, due to lower demand from existing recruitment clients. Adjusted net revenue Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Europe Adjusted net revenue$ 3.7 $ 2.7 $ 1.0 37 % Adjusted net revenue as a percentage of revenue 59 % 60 % N/A N/A
For the three months ended
In theU.K. , total adjusted net revenue for the three months endedMarch 31, 2022 increased by$1.2 million , or 59%, compared to the same period in 2021. The increase was driven by RPO recruitment adjusted net revenue, which also increased by$1.2 million , or 60%. In Continental Europe, total adjusted net revenue was$0.4 million for the three months endedMarch 31, 2022 , a decrease of 37%, compared to$0.6 million for the same period in 2021, due to lower demand at existing clients. SG&A and Non-Op Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in %Europe SG&A and Non-Op$ 3.5 $ 2.6 $ 0.9 35 % SG&A and Non-Op as a percentage of revenue 57 % 59 % N/A N/A For the three months endedMarch 31, 2022 , SG&A and Non-Op increased$0.9 million , or 35%, compared to for the same period in 2021. The increase in SG&A and Non-Op was primarily due to higher consultant staff costs in the current year. For the three months endedMarch 31, 2022 , SG&A and Non-Op as a percentage of revenue was 57%, compared to 59% for the same period in 2021. The decrease in SG&A and Non-Op as a percentage of revenue was primarily due to gains in adjusted net revenue outpacing the increases in consultant staff costs noted above. Operating Income and EBITDA Three Months Ended March 31, 2022 2021 As Constant Change in $ in millions reported currency amount Change in % Europe Operating income$ 0.3 $ 0.2 $ 0.1 35 % EBITDA$ 0.1 $ 0.1 $ 0.1 131 % EBITDA as a percentage of revenue 2 % 1 % N/A N/A - 32 -
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For the three months endedMarch 31, 2022 , operating income was$0.3 million , compared to operating income of$0.2 million for the same period in 2021. The increase was principally due to the gains in RPO recruitment revenue noted above.
For the three months ended
The following are discussed in reported currency
Corporate Expenses, Net of Corporate Management Expense Allocations
Corporate expenses were$0.7 million for the three months endedMarch 31, 2022 , compared to$0.5 million for the three months endedMarch 31, 2021 . The increase was primarily due to higher staff costs and stock-based compensation expense, partially offset by higher corporate allocations.
Depreciation and Amortization Expense
Depreciation and amortization expense was$0.3 million for the three months endedMarch 31, 2022 , compared to$0.1 million for the same period in 2021. The increase was driven by amortization expense associated with the acquisition ofKarani, LLC of$0.2 million for the three months endedMarch 31, 2022 . (see Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) Other income (expense), Net
Other expense of
Provision for Income Taxes The provision for income taxes for the three months endedMarch 31, 2022 was$0.5 million on$3.6 million of pre-tax income, compared to a provision for income tax of$0.2 million on$0.0 million of pre-tax loss for 2021. The effective tax rates for the three months endedMarch 31, 2022 and 2021 were positive 15% and negative 721%, respectively. For the three months endedMarch 31, 2022 , the effective tax rate differed from theU.S. Federal statutory rate of 21% primarily due to changes in valuation allowances in theU.S. and certain foreign jurisdictions, which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, and non-deductible expenses.
Net Income (Loss)
Net income was$3.0 million for the three months endedMarch 31, 2022 , compared to net loss of$0.2 million for the three months endedMarch 31, 2021 . Basic and diluted earnings per share were$1.02 and$0.97 for the three months endedMarch 31, 2022 , respectively, compared to basic and diluted loss per share of$0.07 for the same period in 2021.
Liquidity and Capital Resources
As ofMarch 31, 2022 , cash and cash equivalents and restricted cash totaled$19.5 million , compared to$22.1 million as ofDecember 31, 2021 . The following table summarizes the Company's cash flow activities for the three months endedMarch 31, 2022 and 2021: - 33 -
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Index For the Three Months Ended March 31, $ in millions 2022 2021 Net cash used in operating activities $ (2.4) $ (2.4) Net cash used in investing activities (0.1) - Net cash used in financing activities (0.2) -
Effect of exchange rates on cash, cash equivalents, and restricted cash
0.1 (0.2) Net decrease in cash, cash equivalents, and restricted cash $ (2.6) $ (2.6)
Cash Flows from Operating Activities
For the three months ended
Cash Flows from Investing Activities
For the three months ended
Cash Flows from Financing Activities
For the three months ended
Invoice Finance Credit Facility
OnApril 8, 2019 , the Company's Australian subsidiary ("Australian Borrower") entered into an invoice finance credit facility agreement (the "NAB Facility Agreement") with National Australia Bank Limited ("NAB"). The NAB Facility Agreement provides the Australian Borrower with the ability to borrow funds based on a percentage of eligible trade receivables up to a maximum of$4 million Australian dollars. No receivables have terms greater than 90 days, and any risk of loss is retained by the Australian Borrower. The interest rate is calculated as the variable receivable finance indicator rate, plus a margin of 1.60% per annum. Borrowings under this facility are secured by substantially all of the assets of the Australian Borrower. The NAB Facility Agreement does not have a stated maturity date and can be terminated by either the Australian Borrower or NAB upon 90 days written notice. As ofMarch 31, 2022 , there were no amounts outstanding under the NAB Facility Agreement. Interest expense and fees incurred on the NAB Facility Agreement was$5 for each of the three months endedMarch 31, 2022 and 2021. The Australian Borrower was in compliance with all financial covenants under the NAB Facility Agreement as ofDecember 31, 2021 .
Liquidity Outlook
As ofMarch 31, 2022 , the Company had cash and cash equivalents on hand of$19.2 million . The Company also has the capability to borrow an additional4 million Australian dollars under the NAB Facility Agreement. In addition, the Company issued a promissory note of$2.0 million , in connection with the acquisition ofKarani, LLC . Other than as described above, 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 ofMarch 31, 2022 . The Company's near-term cash requirements during 2022 are primarily related to the funding of the Company's operations. For the full year 2022, the Company expects to make capital expenditures of less than$1.0 million . As ofMarch 31, 2022 ,$6.2 million of the Company's cash and cash equivalents noted above were held in theU.S. and the remainder were held outside theU.S. , primarily inAustralia ($6.4 million ),Hong Kong ($2.1 million ), theU.K. ($1.1 million ),China ($0.8 million ),India ($0.6 million ),Singapore ($0.5 million ),Switzerland ($0.4 million ),Belgium - 34 -
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(
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 byU.S. 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 types of audits, claims, lawsuits, contract disputes, or complaints asserted against the Company. Such events can also change the likelihood of assertion and the behavior of third parties to reach resolution regarding such matters. The economic conditions 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 reach the threshold of probable and estimable, the Company establishes reserves for legal, regulatory, and other contingent liabilities. The Company did not have any reserves as ofMarch 31, 2022 orDecember 31, 2021 . 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 in Part I, Item 1 of this Form 10-Q for a full description of relevant recent accounting pronouncements, including the respective expected dates of adoption.
Critical Accounting Policies & Estimates
See "Critical Accounting Policies & Estimates" under Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 filed with theSEC onMarch 11, 2022 and incorporated by reference herein. There were no changes to the Company's critical accounting policies during the three months endedMarch 31, 2022 . - 35 -
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FORWARD-LOOKING STATEMENTS
This Form 10-Q contains statements that the Company believes to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and 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) global economic fluctuations, (2) the adverse impacts of the coronavirus, or COVID-19 pandemic, (3) the Company's ability to successfully achieve its strategic initiatives, (4) risks related to potential acquisitions or dispositions of businesses by the Company, (5) the Company's ability to operate successfully as a company focused on its RPO business, (6) risks related to fluctuations in the Company's operating results from quarter to quarter, (7) the loss of or material reduction in our business with any of the Company's largest customers, (8) the ability of clients to terminate their relationship with the Company at any time, (9) competition in the Company's markets, (10) the negative cash flows and operating losses that may recur in the future, (11) risks relating to how future credit facilities may affect or restrict our operating flexibility, (12) risks associated with the Company's investment strategy, (13) risks related to international operations, including foreign currency fluctuations, political events, natural disasters or health crises, including the ongoing COVID-19 pandemic, (14) the Company's dependence on key management personnel, (15) the Company's ability to attract and retain highly skilled professionals, management, and advisors, (16) the Company's ability to collect accounts receivable, (17) the Company's ability to maintain costs at an acceptable level, (18) the Company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology, (19) risks related to providing uninterrupted service to clients, (20) 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, (21) the Company's ability to utilize net operating loss carry-forwards, (22) volatility of the Company's stock price, (23) the impact of government regulations, (24) restrictions imposed by blocking arrangements, and (25) those risks set forth in "Risk Factors in the Company's Annual Report on From 10-K for the year endedDecember 31, 2021 ." 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. - 36 -
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