# Star Equity Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Star Equity Holdings, Inc.](/companies/strr.md) (CIK 1210708)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 09:15 ET
- Period: 2023-09-30
- Accession: 0001210708-23-000112
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1210708/000121070823000112/hson-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1210708/000121070823000112/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $39.4m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $127.4m | us-gaap:Revenues |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $1.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $430.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $533.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $1.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.17 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.17 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.48 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 3,141,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 3,134,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$3.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $64.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $774.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $21.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $49.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $60.8m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $13.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $14.1m | us-gaap:Liabilities |
| Short-term borrowings | at 2023-09-30 | $0 | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $46.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,153 characters.

*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 December 31, 2022. 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 14 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 Estimates
- 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 the Company and candidates more successful in achieving 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 the Company’s stockholders, including without limitation, improving the market position and profitability of our services in the marketplace, and enhancing our valuation. We may pursue our goals through organic growth, strategic initiatives, or other alternatives. Additionally, we will continue to monitor capital markets for opportunities to repurchase shares, and consider other actions designed to enhance value to our stockholders, as well as review information regarding potential acquisitions and provide information to third parties regarding potential dispositions of assets or business lines, from time to time.

This MD&A discusses the results of the Company’s business for the three and nine months ended September 30, 2023 and 2022.

### Current Market Conditions

Our clients’ demands for RPO and contracting services largely depend on the market conditions and the strength of the labor markets in the countries where we operate. In the third quarter of 2023, market conditions continued to be challenging due to higher inflation, higher interest rates and decreased demand for labor in certain markets. We anticipate that the market conditions will continue to be challenging into the fourth quarter of 2023.

Economic conditions in most of the world’s major markets slowed in 2022. Higher than expected inflation in most markets and rising interest rates have led to significant market disruption, including further wage inflation, increased operating costs, staffing challenges, reduced consumer confidence, and limited capital market accessibility that impact our business. In addition, in connection with the challenging business environment, some of our customers have reduced demand, and certain other customers have eliminated our services on a temporary or permanent basis. These impacts and expected future inflation and interest rate increases could have material adverse impacts on various aspects of our business in the future.

The continued economic uncertainty has also resulted in volatility in global currencies. Stronger foreign currencies in other markets compared to the U.S. dollar during a reporting period cause local currency results of the Company’s foreign operations to be translated into more U.S. dollars.

### COVID-19 Pandemic

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, having 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, are uncertain.

The following is a summary of the Company’s financial performance highlights for the three and nine months ended September 30, 2023 and 2022. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.

### Summary of Financial Performance Highlights for the Three Months Ended

### September 30, 2023

- Revenue was $39.4 million for the three months ended September 30, 2023, compared to $48.7 million for the same period in 2022, a decrease of $9.3 million, or 19.1%. The decrease in revenue was principally driven by declines in the Americas and Australia.
- On a constant currency basis, the Company’s revenue decreased $8.6 million, or 17.9%, primarily due to a decrease in RPO revenue of $5.0 million, or 20.8%, while contracting revenue decreased by $3.6 million, or 15.1%, compared to the same period in 2022.
- Adjusted net revenue was $19.4 million for the three months ended September 30, 2023, compared to $24.2 million for the same period in 2022, a decrease of $4.8 million, or 20.0%.
- On a constant currency basis, adjusted net revenue decreased $4.8 million, or 19.9%, primarily due to a decrease in RPO adjusted net revenue of $4.6 million, or 20.1%, compared to the same period in 2022.
- Selling, general and administrative expenses (including salaries and related expenses) and other non-operating income (expense) (“SG&A and Non-Op”) was $18.1 million for the three months ended September 30, 2023, compared to $22.6 million for the same period in 2022, a decrease of $4.4 million, or 19.7%.
- On a constant currency basis, SG&A and Non-Op decreased $4.4 million, or 19.6%, as compared to the same period in 2022. SG&A and Non-Op as a percentage of revenue was 46.0% for the three months ended September 30, 2023, compared to 47.0% for the same period in 2022.
- EBITDA was $1.2 million for the three months ended September 30, 2023, compared to EBITDA of $1.6 million for the same period in 2022, a decrease in EBITDA of $0.4 million. On a constant currency basis, EBITDA also decreased $0.4 million.
- Net income was $0.5 million for the three months ended September 30, 2023, compared to net income of $1.0 million for the same period in 2022, a decrease in net income of $0.4 million. On a constant currency basis, net income decreased $0.8 million.

### Summary of Financial Performance Highlights for the Nine Months Ended

### September 30, 2023

- Revenue was $127.4 million for the nine months ended September 30, 2023, compared to $157.3 million for the same period in 2022, a decrease of $30.0 million, or 19.0%. The decrease in revenue was principally driven by declines in the Americas and Australia.
- On a constant currency basis, the Company’s revenue decreased $24.9 million, or 16.4%, primarily due to a decrease in contracting revenue of $12.7 million, or 16.4%, while RPO revenue decreased by $12.2 million, or 16.4%, compared to the same period in 2022.
- Adjusted net revenue was $63.7 million for the nine months ended September 30, 2023, compared to $77.0 million for the same period in 2022, a decrease of $13.3 million, or 17.3%.
- On a constant currency basis, adjusted net revenue decreased $12.0 million, or 15.8%, primarily due to a decrease in RPO adjusted net revenue of $11.7 million, or 16.2%, compared to the same period in 2022.
- SG&A and Non-Op was $60.3 million for the nine months ended September 30, 2023, compared to $67.3 million for the same period in 2022, a decrease of $7.0 million, or 10.4%.
- On a constant currency basis, SG&A and Non-Op decreased $5.8 million, or 8.7%, as compared to the same period in 2022. SG&A and Non-Op as a percentage of revenue was 47.4% for the nine months ended September 30, 2023, compared to 43.4% for the same period in 2022.
- EBITDA was $3.4 million for the nine months ended September 30, 2023, compared to EBITDA of $9.7 million for the same period in 2022, a decrease in EBITDA of $6.3 million. On a constant currency basis, EBITDA decreased $6.0 million.
- Net income was $1.5 million for the nine months ended September 30, 2023, compared to net income of $7.1 million for the same period in 2022, a decrease in net income of $5.6 million. On a constant currency basis, net income decreased $5.8 million.

### Constant Currency (Non-GAAP Financial Measure)

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

Changes in revenue, adjusted net revenue, SG&A and Non-Op, operating income (loss), net income (loss), and EBITDA (loss) include the effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange adjustments on the Company’s operating results for the three and nine months ended September 30, 2023 and 2022.

#### Index

*$ in thousands*

| Revenue: | Three Months Ended September 30, 2023 As reported | 2022 As reported | Currency translation | Constant currency | Nine Months Ended September 30, 2023 As reported | 2022 As reported | Currency translation | Constant currency |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Americas | $7,167 | $12,555 | $(20) | $12,535 | $25,008 | $41,581 | $(95) | $41,486 |
| Asia Pacific | 26,106 | 29,965 | (1,133) | 28,832 | 81,784 | 91,042 | (4,456) | 86,586 |
| Europe | 6,125 | 6,166 | 470 | 6,636 | 20,575 | 24,703 | (493) | 24,210 |
| Total | $39,398 | $48,686 | $(683) | $48,003 | $127,367 | $157,326 | $(5,044) | $152,282 |
| Adjusted net revenue (a): |  |  |  |  |  |  |  |  |
| Americas | $6,854 | $11,926 | $(13) | $11,913 | $24,097 | $39,437 | $(70) | $39,367 |
| Asia Pacific | 8,694 | 8,324 | (295) | 8,029 | 26,734 | 25,711 | (1,233) | 24,478 |
| Europe | 3,822 | 3,949 | 303 | 4,252 | 12,886 | 11,898 | (49) | 11,849 |
| Total | $19,370 | $24,199 | $(5) | $24,194 | $63,717 | $77,046 | $(1,352) | $75,694 |
| SG&A and Non-Op (b): |  |  |  |  |  |  |  |  |
| Americas | $6,954 | $11,229 | $(45) | $11,184 | $25,204 | $34,096 | $(248) | $33,848 |
| Asia Pacific | 6,696 | 6,986 | (258) | 6,728 | 21,133 | 20,031 | (966) | 19,065 |
| Europe | 4,101 | 3,680 | 285 | 3,965 | 11,840 | 10,919 | (56) | 10,863 |
| Corporate | 372 | 676 | — | 676 | 2,135 | 2,287 | — | 2,287 |
| Total | $18,123 | $22,571 | $(18) | $22,553 | $60,312 | $67,333 | $(1,270) | $66,063 |
| Operating income (loss): |  |  |  |  |  |  |  |  |
| Americas | $(197) | $617 | $(5) | $612 | $(1,377) | $5,031 | $(43) | $4,988 |
| Asia Pacific | 2,228 | 1,569 | (48) | 1,521 | 6,338 | 6,418 | (313) | 6,105 |
| Europe | 150 | 345 | 25 | 370 | 1,496 | 1,282 | 6 | 1,288 |
| Corporate | (904) | (1,275) | — | (1,275) | (3,807) | (3,993) | — | (3,993) |
| Total | $1,277 | $1,256 | $(28) | $1,228 | $2,650 | $8,738 | $(350) | $8,388 |
| Net income, consolidated | $533 | $955 | $412 | $1,367 | $1,465 | $7,067 | $206 | $7,273 |
| EBITDA (loss) (c): |  |  |  |  |  |  |  |  |
| Americas | $20 | $810 | $(6) | $804 | $(876) | $5,515 | $(53) | $5,462 |
| Asia Pacific | 1,890 | 1,244 | (34) | 1,210 | 5,455 | 5,533 | (261) | 5,272 |
| Europe | (300) | 279 | 19 | 298 | 995 | 977 | 9 | 986 |
| Corporate | (363) | (705) | — | (705) | (2,169) | (2,312) | — | (2,312) |
| Total | $1,247 | $1,628 | $(21) | $1,607 | $3,405 | $9,713 | $(305) | $9,408 |

(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, Office and general, Marketing and promotion, 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 Financial 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 with U.S. GAAP or as a measure of the Company’s profitability. EBITDA is derived from net income 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:

*$ in thousands*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income | $533 | $955 | $1,465 | $7,067 |
| Adjustments to Net income |  |  |  |  |
| Provision for income taxes | 430 | 340 | 1,148 | 1,657 |
| Interest income, net | (90) | (23) | (284) | (28) |
| Depreciation and amortization expense | 374 | 356 | 1,076 | 1,017 |
| Total adjustments from net income to EBITDA | 714 | 673 | 1,940 | 2,646 |
| EBITDA | $1,247 | $1,628 | $3,405 | $9,713 |

\- 33 -

### Results of Operations

#### Americas (reported currency)

### Revenue - Americas

*$ in millions*

| Americas | Three Months Ended September 30, 2023 As reported | 2022 As reported | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 As reported | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $7.2 | $12.6 | $(5.4) | (43)% | $25.0 | $41.6 | $(16.6) | (40)% |

For the three months ended September 30, 2023, RPO revenue decreased by $5.1 million, or 42%, while contracting revenue decreased by $0.3 million, or 56%, compared to the same period in 2022. The decreases in both RPO and contracting revenue were mainly due to lower demand from existing clients.

For the nine months ended September 30, 2023, RPO revenue decreased by $15.4 million, or 39%, while contracting revenue decreased by $1.2 million, or 60%, as compared to the same period in 2022. The decreases in both RPO and contracting revenue were due to the same factor noted above.

### Adjusted Net Revenue - Americas

*$ in millions*

| Americas | Three Months Ended September 30, 2023 As reported | 2022 As reported | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 As reported | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Adjusted net revenue | $6.9 | $11.9 | $(5.1) | (43)% | $24.1 | $39.4 | $(15.3) | (39)% |
| Adjusted net revenue as a percentage of revenue | 96% | 95% | N/A | N/A | 96% | 95% | N/A | N/A |

For the three and nine months ended September 30, 2023, RPO adjusted net revenue decreased by $5.0 million, or 42%, and $15.1 million, or 39%, respectively, compared to 2022. The decrease in RPO adjusted net revenue was due to the same factor noted above under “Revenue – Americas”.

For the three months ended September 30, 2023 and 2022, total adjusted net revenue as a percentage of revenue was 96%, compared to 95% for the same period in 2022. The increase in total adjusted net revenue as a percentage of revenue was attributed to the higher mix of RPO to contracting revenue.

For the nine months ended September 30, 2023, total adjusted net revenue as a percentage of revenue was 96%, compared to 95% for the same period in 2022. The increase in total adjusted net revenue as a percentage of revenue was due to the same factor noted above.

### SG&A and Non-Op -Americas

*$ in millions*

| Americas | Three Months Ended September 30, 2023 As reported | 2022 As reported | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 As reported | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| SG&A and Non-Op | $7.0 | $11.2 | $(4.3) | (38)% | $25.2 | $34.1 | $(8.9) | (26)% |
| SG&A and Non-Op as a percentage of revenue | 97% | 89% | N/A | N/A | 101% | 82% | N/A | N/A |

For the three months ended September 30, 2023, SG&A and Non-Op decreased $4.3 million, or 38%, compared to the same period in 2022, while SG&A and Non-Op as a percentage of revenue increased from 89% to 97%. The decrease in SG&A and No-Op was principally due to lower consultant staff costs. The increase in SG&A and Non-Op as a percentage of revenue was primarily due to the decline in adjusted net revenue outpacing the decrease in consultant staff costs.

For the nine months ended September 30, 2023, SG&A and Non-Op decreased $8.9 million, or 26%, compared to the same period in 2022, while SG&A and Non-Op as a percentage of revenue increased from 82% to 101%. The increase in SG&A and Non-Op as a percentage of revenue was primarily due to the same factors noted above.

### Operating (Loss) Income and EBITDA -Americas

*$ in millions*

| Americas | Three Months Ended September 30, 2023 As reported | 2022 As reported | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 As reported | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating (loss) income | $(0.2) | $0.6 | $(0.8) | (132)% | $(1.4) | $5.0 | $(6.4) | (127)% |
| EBITDA (loss) | $— | $0.8 | $(0.8) | (98)% | $(0.9) | $5.5 | $(6.4) | (116)% |
| EBITDA (loss) as a percentage of revenue | —% | 6% | N/A | N/A | (4)% | 13% | N/A | N/A |

For the three months ended September 30, 2023, operating loss was $0.2 million, compared to operating income of $0.6 million in 2022, and EBITDA was $0.0 million, compared to EBITDA of $0.8 million in 2022.

For the nine months ended September 30, 2023, operating loss was $1.4 million, compared to operating income of $5.0 million in 2022, and EBITDA loss was $0.9 million, compared to EBITDA of $5.5 million in 2022.

The decreases in operating income and EBITDA for the three and nine months ended September 30, 2023, were primarily due to the Company’s decline in adjusted net revenue.

#### Asia Pacific (constant currency)

### Revenue - Asia Pacific

*$ in millions*

| Asia Pacific | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $26.1 | $28.8 | $(2.7) | (9)% | $81.8 | $86.6 | $(4.8) | (6)% |

For the three months ended September 30, 2023, contracting revenue decreased by $3.6 million, or 16%, while RPO revenue increased $0.8 million, or 11%, compared to 2022, as discussed below.

In Australia, revenue decreased $2.4 million, or 9%, for the three months ended September 30, 2023, compared to the same period in 2022. The decrease was primarily driven by contracting revenue which declined by $3.5 million, or 17% due to lower demand from existing clients. While contracting revenue decreased, RPO revenue grew by $1.1 million, or 20%, compared to 2022, as the result of new client wins and higher demand from existing clients.

In Asia, revenue decreased $0.1 million, or 4%, for the three months ended September 30, 2023, compared to the same period in 2022, due to lower demand from existing clients.

For the nine months ended September 30, 2023, contracting revenue decreased by $7.4 million, or 11%, while RPO revenue increased by $2.6 million, or 11%, as discussed below.

In Australia, revenue decreased $4.4 million, or 6%, for the nine months ended September 30, 2023, compared to the same period in 2022. The decrease was primarily in contracting revenue which declined by $7.5 million, or 12%, primarily due to the loss of a significant customer in the first quarter of 2022. While contracting revenue decreased, RPO revenue grew $3.0 million, or 17%, compared to 2022, primarily as the result of new client wins and higher demand from existing clients.

In Asia, revenue decreased $0.1 million or 1%, for the nine months ended September 30, 2023, compared to 2022.

### Adjusted net revenue - Asia Pacific

*$ in millions*

| Asia Pacific | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Adjusted net revenue | $8.7 | $8.0 | $0.7 | 8% | $26.7 | $24.5 | $2.3 | 9% |
| Adjusted net revenue as a percentage of revenue | 33% | 28% | N/A | N/A | 33% | 28% | N/A | N/A |

For the three months ended September 30, 2023, RPO adjusted net revenue increased $0.8 million, or 11%, while contracting adjusted net revenue decreased $0.1 million or 12%, compared to the same period in 2022.

In Australia, adjusted net revenue increased by $1.0 million, or 15%, for the three months ended September 30, 2023, compared to the same period in 2022. The increase was primarily reflected in RPO adjusted net revenue, which grew $1.1 million, or 20%, partially offset by contracting adjusted net revenue, which decreased by $0.1 million, or 11% compared to 2022.

In Asia, adjusted net revenue decreased by $0.3 million, or 20%, for the three months ended September 30, 2023, compared to the same period in 2022.

Total adjusted net revenue as a percentage of revenue was 33% for the three months ended September 30, 2023, compared to 28% for the same period in 2022. The increase in total adjusted net revenue as a percentage of revenue was attributed to a greater mix of higher margin RPO revenue to contracting revenue.

For the nine months ended September 30, 2023, RPO adjusted net revenue increased by $2.3 million, or 11%, while contracting adjusted net revenue decreased slightly or by 1%, compared to the same period in 2022.

In Australia, adjusted net revenue increased by $2.7 million, or 14%, for the nine months ended September 30, 2023, compared to the same period in 2022. The increase was primarily reflected in RPO adjusted net revenue, which grew $2.8 million, or 16%, while contracting adjusted net revenue decreased by $0.1 million, or 2%, compared to 2022.

In Asia, adjusted net revenue decreased by $0.5 million, or 9%, for the nine months ended September 30, 2023, compared to the same period in 2022.

Total adjusted net revenue as a percentage of revenue was 33% for the nine months ended September 30, 2023, compared to 28% for the same period in 2022. The increase in total adjusted net revenue as a percentage of revenue was attributed to the higher mix of higher margin RPO revenue to contracting revenue.

### SG&A and Non-Op - Asia Pacific

*$ in millions*

*Asia Pacific*

|  | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| SG&A and Non-Op | $6.7 | $6.7 | $— | —% | $21.1 | $19.1 | $2.1 | 11% |
| SG&A and Non-Op as a percentage of revenue | 26% | 23% | N/A | N/A | 26% | 22% | N/A | N/A |

For the three months ended September 30, 2023, SG&A and Non-Op declined slightly, compared to the same periods in 2022.

For the nine months ended September 30, 2023, SG&A and Non-Op increased $2.1 million, or 11%, compared to the same periods in 2022. The increases in SG&A and Non-Op were primarily due to higher consultant staff costs.

For both the three and nine months ended September 30, 2023, SG&A and Non-Op as a percentage of revenue was 26%, as compared to 23% and 22%, respectively, for the same periods in 2022. For the three and nine months ended September 30, 2023, the increase in SG&A and Non-Op as a percentage of revenue was principally due to the lower mix of contracting revenue, where the majority of costs are reflected in adjusted net revenue.

### Operating Income and EBITDA - Asia Pacific

*$ in millions*

| Asia Pacific | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating income | $2.2 | $1.5 | $0.7 | 46% | $6.3 | $6.1 | $0.2 | 4% |
| EBITDA | $1.9 | $1.2 | $0.7 | 56% | $5.5 | $5.3 | $0.2 | 3% |
| EBITDA as a percentage of revenue | 7% | 4% | N/A | N/A | 7% | 6% | N/A | N/A |

For the three months ended September 30, 2023, operating income was $2.2 million, compared to operating income of $1.5 million in 2022, and EBITDA was $1.9 million, or 7% of revenue, compared to EBITDA of $1.2 million, or 4% of revenue, in 2022. The increases in operating income and EBITDA were principally due to the changes in adjusted net revenue, as described above.

For the nine months ended September 30, 2023, operating income was $6.3 million, compared to operating income of $6.1 million in 2022, and EBITDA was $5.5 million, or 7% of revenue, compared to EBITDA of $5.3 million, or 6% of revenue, in 2022. The increases in operating income and EBITDA were principally due to the changes in adjusted net revenue, as described above.

#### Europe (constant currency)

### Revenue - Europe

*$ in millions*

| Europe | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $6.1 | $6.6 | $(0.5) | (8)% | $20.6 | $24.2 | $(3.6) | (15)% |

For the three months ended September 30, 2023, RPO revenue decreased by $0.7 million or 15%, while contracting revenue increased by $0.2 million or 9%, compared to the same period in 2022, as further discussed below.

In the U.K., for the three months ended September 30, 2023, revenue decreased by $0.5 million, or 7%. The change was driven by a decrease in RPO revenue of $0.6 million, or 15% due to lower demand from existing clients, which was partially offset by an increase in contracting revenue of $0.2 million, or 9%, compared to the same period in 2022.

In Continental Europe, total revenue was $0.3 million for the three months ended September 30, 2023, a decrease of $0.1 million, or 14% compared to 2022. The decrease was primarily due to lower demand from existing recruitment clients.

For the nine months ended September 30, 2023, contracting revenue decreased by $4.2 million, or 36%, partially offset by RPO revenue, which increased by $0.5 million, or 4%, compared to the same period in 2022.

In the U.K., for the nine months ended September 30, 2023 revenue decreased by $3.5 million, or 15%, compared to the same period in 2022. The decrease was driven by contracting revenue, which declined $4.2 million, or 36%, partially offset by an increase in RPO revenue by $0.7 million, or 6%.

In Continental Europe, total revenue was $1.1 million for the nine months ended September 30, 2023, a decrease of $0.1 million, or 9%, compared to the same period in 2022. The decrease was primarily due to lower demand from existing recruitment clients.

### Adjusted Net Revenue - Europe

*$ in millions*

| Europe | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Adjusted net revenue | $3.8 | $4.3 | $(0.4) | (10)% | $12.9 | $11.8 | $1.0 | 9% |
| Adjusted net revenue as a percentage of revenue | 62% | 64% | N/A | N/A | 63% | 49% | N/A | N/A |

For the three months ended September 30, 2023, adjusted net revenue decreased by $0.4 million, or 10%, driven by an decrease in RPO of $0.4 million, or 10%, led by the U.K. as discussed below.

In the U.K., total adjusted net revenue for the three months ended September 30, 2023 decreased by $0.4 million, or 10%, compared to 2022. The decrease was driven by RPO adjusted net revenue, which declined by $0.3 million, or 9%, compared to 2022.

In Continental Europe, total adjusted net revenue was $0.3 million for the three months ended September 30, 2023, a decrease of $0.1 million, or 15% compared to 2022. The decrease was primarily due to lower demand from existing clients.

For the nine months ended September 30, 2023, adjusted net revenue increased by $1.0 million, or 9%, driven by an increase in RPO revenue, which grew $1.0 million, or 9%, compared to the same period in 2022.

In the U.K., total adjusted net revenue for the nine months ended September 30, 2023 increased by $1.2 million, or 11%, compared to the same period in 2022, driven by an increase in RPO of $1.2 million, or 11%.

In Continental Europe, for the nine months ended September 30, 2023, total adjusted net revenue decreased by $0.1 million, or 10%, compared to the same period in 2022, due to lower demand from existing clients.

### SG&A and Non-Op - Europe

*$ in millions*

| Europe | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| SG&A and Non-Op | $4.1 | $4.0 | $0.1 | 3% | $11.8 | $10.9 | $1.0 | 9% |
| SG&A and Non-Op as a percentage of revenue | 67% | 60% | N/A | N/A | 58% | 45% | N/A | N/A |

For the three and nine months ended September 30, 2023, SG&A and Non-Op increased $0.1 million, or 3%, and $1.0 million, or 9%, respectively, compared to the same periods in 2022. The increases in SG&A and Non-Op were primarily the result of higher consultant staff costs in the current year.

For the three and nine months ended September 30, 2023, SG&A and Non-Op as a percentage of revenue was 67% and 58%, compared to 60% and 45%, respectively, in 2022. The increases in SG&A and Non-Op as a percentage of revenue were primarily due to the higher consultant staff costs.

### Operating Income and EBITDA - Europe

*$ in millions*

| Europe | Three Months Ended September 30, 2023 As reported | 2022 Constant currency | Change in amount | Change in % As reported | Nine Months Ended September 30, 2023 Constant currency | 2022 | Change in amount | Change in % |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating income | $0.1 | $0.4 | $(0.2) | (59)% | $1.5 | $1.3 | $0.2 | 16% |
| EBITDA | $(0.3) | $0.3 | $(0.6) | (201)% | $1.0 | $1.0 | $— | 1% |
| EBITDA as a percentage of revenue | (5)% | 4% | N/A | N/A | 5% | 4% | N/A | N/A |

For the three months ended September 30, 2023, operating income was $0.1 million, compared to operating income of $0.4 million for the same period in 2022, and EBITDA loss was $0.3 million, or 5% of revenue, compared to EBITDA of $0.3 million, or 4% of revenue, for the same period in 2022.

For the nine months ended September 30, 2023, operating income was $1.5 million, compared to operating income of $1.3 million for the same period in 2022, and EBITDA was $1.0 million, or 5% of revenue, compared to EBITDA of $1.0 million, or 4% of revenue, for the same period in 2022.

### The following are discussed in reported currency

### Corporate Expenses, Net of Corporate Management Expense Allocations

Corporate expenses were $0.4 million for the three months ended September 30, 2023 as compared to $0.7 million for the same period in 2022, representing a decrease of $0.3 million. The decrease in Corporate expenses was primarily due to lower stock compensation expense and staff costs.

For the nine months ended September 30, 2023, corporate expenses were $2.2 million compared to $2.3 million for the same period in 2022, a decrease of $0.1 million. The decrease was primarily due to lower stock compensation expense and staff costs partially offset by higher professional fees, lower corporate allocations, and higher travel and entertainment expenses.

### Depreciation and Amortization Expense

Depreciation and amortization expense was $0.4 million and $1.1 million for the three and nine months ended September 30, 2023, compared to $0.4 million and $1.0 million for the same periods in 2022, respectively. The higher depreciation and amortization expense was driven by amortization expense in connection with the Coit Acquisition and the Karani Acquisition.

### Other Income (expense), Net

Other expense was $0.4 million for the three months ended September 30, 2023, compared to other income of $0.0 million for the same period in 2022. For the nine months ended September 30, 2023, other expense was $0.3 million, compared to other expense of $0.0 million in 2022. The higher expense for the three and nine months ended September 30, 2023 was primarily due to one-time client administrative costs of $0.3 million.

### Provision for Income Taxes

The provision for income taxes for the nine months ended September 30, 2023 was $1.1 million on $2.6 million of pre-tax income, compared to a provision for income tax of $1.7 million on $8.7 million of pre-tax income for the same period in 2022. The effective tax rates for the nine months ended September 30, 2023 and 2022 were positive 44% and positive 19%, respectively. For the nine months ended September 30, 2023, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to foreign tax rate differences, 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, taxes on repatriations or deemed repatriation of foreign profits, and non-deductible expenses, partially offset by a discrete tax benefit recognized following the lapse of certain statutes of limitations related to Spain and recognition of a portion of a deferred tax asset in Canada. For the nine months ended September 30, 2022, the effective tax rates differed from the U.S. Federal statutory rate of 21% primarily due to changes in valuation allowances in the U.S. and certain foreign jurisdictions, which reduces or eliminates the effective tax rate on current year profits or losses, foreign tax rate differences, and non-deductible expenses.

### Net Income

Net income was $0.5 million for the three months ended September 30, 2023, compared to net income of $1.0 million for the three months ended September 30, 2022, a decrease in net income of $0.4 million. Basic and diluted earnings per share were $0.17 for the three months ended September 30, 2023, compared to basic and diluted earnings per share of $0.31 and $0.30, respectively, for the same period in 2022.

Net income was $1.5 million for the nine months ended September 30, 2023, compared to net income of $7.1 million for the same period in 2022, a decrease in net income of $5.6 million. Basic and diluted earnings per share were $0.48 and $0.47, respectively for the nine months ended September 30, 2023, compared to basic and diluted earnings per share of $2.35 and $2.25, respectively, for the same period in 2022.

### Liquidity and Capital Resources

As of September 30, 2023, cash and cash equivalents and restricted cash totaled $22.0 million, compared to $27.5 million as of December 31, 2022. The following table summarizes the Company’s cash flow activities for the nine months ended September 30, 2023 and 2022:

*$ in millions*

|  | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(3.0) | $5.1 |
| Net cash used in investing activities | (0.1) | (1.3) |
| Net cash used in financing activities | (2.2) | (2.0) |
| Effect of exchange rates on cash, cash equivalents, and restricted cash | (0.2) | (1.2) |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | $(5.5) | $0.6 |

### Cash Flows from Operating Activities

For the nine months ended September 30, 2023, net cash used by operating activities was $3.0 million, compared to $5.1 million of net cash provided by operating activities for the same period in 2022, resulting in a $8.1 million increase in net cash used. The net cash used was principally driven by the Company’s lower net income in 2023, as well as less favorable working capital comparisons to the prior year.

### Cash Flows from Investing Activities

For the nine months ended September 30, 2023, net cash used in investing activities was $0.1 million compared to $1.3 million of net cash used in investing activities in 2022. The decrease primarily reflects the net cash payment of $0.8 million in the prior year for the acquisition of HnB as well as lower capital expenditures. See Note 6 to Consolidated Financial Statements for additional information.

### Cash Flows from Financing Activities

For the nine months ended September 30, 2023, net cash used in financing activities was $2.2 million, compared to net cash used in financing activities of $2.0 million in 2022. The increase in net cash used was due to higher loan repayments of $0.6 million related to the Karani Acquisition, partly offset by lower repurchases of common stock of $0.4 million in 2023 compared to the previous year.

### Invoice Finance Credit Facility

On April 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 of September 30, 2023, there were no amounts outstanding under the NAB Facility Agreement. Interest expense and fees incurred on the NAB Facility Agreement were $4 and $13 for the three and nine months ended September 30, 2023, respectively, and $5 and $14 for the three and nine months ended September 30, 2022, respectively. The Australian Borrower was in compliance with all financial covenants under the NAB Facility Agreement as of September 30, 2023.

### Liquidity and Capital Resources Outlook

As of September 30, 2023, the Company had cash and cash equivalents on hand of $21.6 million. The Company also has the capability to borrow an additional 4 million Australian dollars under the NAB Facility Agreement. 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 of September 30, 2023. The Company’s near-term cash requirements during 2023 are primarily related to the funding of the Company’s operations. For the full year 2023, the Company expects to make capital expenditures of less than $0.5 million.

As of September 30, 2023, $10.3 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 Australia ($5.9 million), the U.K. ($1.2 million), China ($0.7 million), India ($0.7 million), Belgium ($0.6 million), the Philippines ($0.5 million), Singapore ($0.4 million), Canada ($0.4 million) and Switzerland ($0.3 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.

### 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 U.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 of September 30, 2023 and December 31, 2022. 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 accounting pronouncements, including the respective expected dates of adoption.

### Critical Accounting Estimates

See “Critical Accounting Estimates” under Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 11, 2022 and incorporated by reference herein. There were no changes to the Company’s critical accounting policies or estimates during the nine months ended September 30, 2023.

### 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) rising inflationary pressures and interest rates, (3) the adverse impacts of the coronavirus, or COVID-19 pandemic, (4) the Company’s ability to successfully achieve its strategic initiatives, (5) risks related to potential acquisitions or dispositions of businesses by the Company, (6) the Company’s ability to operate successfully as a company focused on its RPO business, (7) risks related to fluctuations in the Company’s operating results from quarter to quarter, (8) the loss of or material reduction in our business with any of the Company’s largest customers, (9) the ability of clients to terminate their relationship with the Company at any time, (10) competition in the Company’s markets, (11) the negative cash flows and operating losses that may recur in the future, (12) risks relating to how future credit facilities may affect or restrict our operating flexibility, (13) risks associated with the Company’s investment strategy, (14) risks related to international operations, including foreign currency fluctuations, political events, natural disasters or health crises, including the ongoing COVID-19 pandemic, the Russia-Ukraine war, the Hamas-Israel war, and potential conflict in the Middle East (15) the Company’s dependence on key management personnel, (16) the Company’s ability to attract and retain highly skilled professionals, management, and advisors, (17) the Company’s ability to collect accounts receivable, (18) the Company’s ability to maintain costs at an acceptable level, (19) the Company’s heavy reliance on information systems and the impact of potentially losing or failing to develop technology, (20) risks related to providing uninterrupted service to clients, (21) 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, (22) the Company’s ability to utilize net operating loss carry-forwards, (23) volatility of the Company’s stock price, (24) the impact of government regulations, (25) restrictions imposed by blocking arrangements, (26) a material weakness in our internal control over financial reporting that could have a significant adverse effect on our business and the price of our common stock, (27) the potential for a shutdown of the US government if the U.S. Congress is unable to agree on terms for a spending bill sufficient to fund the operation of the U.S. government and (28) those risks set forth in “Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.” 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.

## Market risk

As filed, 160 characters.

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

## Controls and procedures

As filed, 3,061 characters.

### Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. As a result of the material weakness identified below, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2023.

In connection with the preparation of the audited financial statements to be included in the 2022 Annual Report on Form 10-K, management identified a material weakness in the design and implementation of internal controls over the revenue recognition process, specifically the failure to properly evaluate whether the Company was to be considered the principal or the agent in a non-routine transaction involving a discretionary bonus paid by the Company on behalf of a customer. The material weakness resulted in an understatement of revenue and direct contracting costs and reimbursed expenses in the amount of $5.762 million for the three-month and six-month periods ended June 30, 2022 and the nine-month period ended September 30, 2022. The Company’s remediation plan is described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Management is committed to remediating the material weakness in a timely fashion and to making continuous improvements to the Company’s internal control over financial reporting. Management will continually assess the effectiveness of the remediation efforts and may determine to take additional measures to address control deficiencies or modify the remediation plan.

### Changes in Internal Control Over Financial Reporting

During the three months ended September 30, 2023 management performed remediation actions to address the material weakness as noted above. These actions included reviewing processes and controls mitigating the risk of material non-routine transactions not being correctly reported or disclosed in line with U.S. GAAP. The Company enhanced period-end close procedures to identify and review material non-routine transactions, introducing new processes and a key financial reporting control.

While management’s actions to design a new control have been completed, the material weaknesses will not be considered to be remediated until the applicable control has operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The material weakness is expected to be fully remediated by the end of the fiscal year 2023.

Other than as discussed above, during the quarter ended September 30, 2023, there were no other changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 474 characters.

In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, the Risk Factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, that could materially and adversely affect our results of operations or financial condition.

Filed Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001210708-23-000112. Last ingested by Listed: Nov 4, 2026, 19:33 ET. No prices; not investment advice.