UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period

from to

Commission File Number: 001-33961

HILL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-0953973
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


One Commerce Square
2005 Market Street, 17th Floor
Philadelphia, PA						19103
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (215) 309-7700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	HIL	New York Stock Exchange ("NYSE")

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-Accelerated Filer

☐

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ý

There were ~~56,677,873~~57,086,992 shares of the Registrant’s Common Stock outstanding at ~~October 28, 2021.~~November 1, 2022.

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Index to Form 10-Q


PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	56

	Consolidated Balance Sheets at Se pt ~~ember~~September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	56

	Consolidated Statements of Operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	67

	Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	78

	Consolidated Statements of Stockholders' Equity for the three and n ~~ine~~nine months ended September 30,, 2022 and 2021 ~~and 2020~~ (unaudited)	89

	Consolidated Statements of Cash Flows for the nine months ended Se ~~ptember~~September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)	910

	Notes to Consolidated Financial Statements	1011

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2629

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3740

Item 4.	Controls and Procedures	3841

PART II	OTHER INFORMATION	3942

Item 1.	Legal Proceedings	3942

Item 1A.	Risk Factors	3942

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3942

Item 3.	Defaults Upon Senior Securities	3942

Item 4.	Mine Safety Disclosures	3942

Item 5	Other Information	3942

Item 6.	Exhibits	3942

Signatures		4043

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and it is Hill International, Inc.'s (the "Company") intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including, but not limited to, any projections of revenues, earnings, margin, profit improvement, cost savings or other financial items; any statements of belief, any statements concerning the Company's plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.

These forward-looking statements are based on the Company's current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although the Company believes that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.

Those forward-looking statements may concern, among other things:

•Statements about the Merger;

•The markets for the Company's services;

•Projections of revenues and earnings, anticipated contractual obligations, funding requirements or other financial items;

•Statements regarding the impact and effect of the COVID-19 pandemic;

•Statements concerning the Company's plans, strategies and objectives for future operations; and

•Statements regarding future economic conditions or the Company's performance.

Important factors that could cause the Company's actual results to differ materially from estimates or projections contained in our forward-looking statements include:

•Risks associated with our ability to consummate the Merger, and the timing of the closing of the Merger, including the risks that a condition to closing will not be satisfied within the expected timeframe or at all or that the closing of the Merger will not occur;

•The occurrence of any change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement;

•The outcome of any legal proceedings that have been or may be instituted against the parties to, and others related to, the Merger and the Merger Agreement;

•The Merger diverting management’s attention from our ongoing business operations;

•Restrictions on the conduct of our business prior to completing the Merger, which may prevent us from pursuing certain strategic transactions, undertaking certain financing transactions and otherwise pursuing other actions, even if such actions could prove beneficial, and may cause us to forego certain opportunities we might otherwise pursue absent the Merger Agreement;

•The risk that the pendency of the Merger could adversely affect our business and operations, including the risk that some of our current or prospective customers, lenders or partners may delay or defer decisions, which could negatively impact our revenues, earnings, cash flows and expenses, regardless of whether the Merger completed;

•The risks set forth in Item 1A, “Risk Factors,” in the Company's ~~most recent~~ Annual Report on Form ~~10-K;~~10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on March 31, 2022 (as amended by Amendment No. 1 thereto filed with the SEC on Form 10-K/A on May 2, 2022, (the "2021 Annual Report");

•Unfavorable global economic conditions may adversely impact its business;

•Our backlog, which is subject to unexpected adjustments and cancellations, may not be fully realized as revenue;

•Our expenses may be higher than anticipated;

•Modifications and termination of client contracts;

•Control and operational issues pertaining to business activities that the Company conducts pursuant to joint ventures with other parties; and

•The ability to retain and recruit key technical and management personnel.

Other factors that may affect the Company's business, financial position or results of operations include:

•Unexpected delays in collections from clients;

•Risks related to the effect of the COVID-19 pandemic on the Company, including its employees and related costs and including any project cancellations, delays and modifications;

•Risks ofrelated to the Company's ability to obtain debt financing or otherwise raise capital to meet required working capital needs and to support potential future acquisition activities;

•Risks ofrelated to international operations, including uncertain political and economic environments, acts of terrorism or war and other forms of geo-political unrest or conflict (including the ongoing conflict in Ukraine), potential incompatibilities with foreign joint venture partners, foreign currency fluctuations, civil disturbances and labor issues; and

•Risks related to contracts with governmental entities, including the failure of applicable governing authorities to take necessary actions to secure or maintain funding for particular projects with us, the unilateral termination of contracts by the governments and reimbursement obligations to the government for funds previously received.

The Company does not intend, and undertakes no obligation to, update any forward-looking statement other than as required by law. In accordance with the Reform Act, Item 1A of our 2021 Annual Report entitled "Risk Factors" contains cautionary statements that accompany those forward looking statements. You should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-Q, in our other filings with the ~~Securities and Exchange Commission ("SEC")~~SEC or in materials incorporated therein by reference.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Cash and cash equivalents	Cash and cash equivalents	$	26,293	$	34,229	Cash and cash equivalents	$	22,834	$	21,821
Cash - restricted	Cash - restricted	3,811		3,752		Cash - restricted	4,131		5,562
Accounts receivable, net	Accounts receivable, net	115,049		98,186		Accounts receivable, net	136,267		119,516
Current portion of retainage receivable	Current portion of retainage receivable	11,813		11,775		Current portion of retainage receivable	7,511		9,743
Accounts receivable - affiliates	Accounts receivable - affiliates	29,013		23,285		Accounts receivable - affiliates	19,702		21,741
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,494		9,378		Prepaid expenses and other current assets	9,224		9,937
Income tax receivable	Income tax receivable	1,026		2,298		Income tax receivable	1,397		2,163

Total current assets	Total current assets	200,499		182,903		Total current assets	201,066		190,483
Property and equipment, net	Property and equipment, net	8,816		9,443		Property and equipment, net	8,416		8,895
Cash - restricted, net of current portion	Cash - restricted, net of current portion	3,069		3,432		Cash - restricted, net of current portion	2,843		3,063
Operating lease right-of-use assets	Operating lease right-of-use assets	17,908		13,116		Operating lease right-of-use assets	15,825		18,347
Financing lease right-of-use assets	Financing lease right-of-use assets	692		288		Financing lease right-of-use assets	613		801
Retainage receivable	Retainage receivable	6,988		6,044		Retainage receivable	5,910		7,491
Acquired intangibles, net	Acquired intangibles, net	2,767		2,253		Acquired intangibles, net	2,963		3,002
Goodwill	Goodwill	44,903		46,397		Goodwill	40,105		44,127
Investments	Investments	2,511		2,805		Investments	1,139		2,038
Deferred income tax assets	Deferred income tax assets	3,880		3,698		Deferred income tax assets	1,944		2,165
Other assets	Other assets	2,268		1,620		Other assets	4,018		2,645

Total assets	Total assets	$	294,301	$	271,999	Total assets	$	284,842	$	283,057
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current maturities of notes payable and long-term debt	Current maturities of notes payable and long-term debt	$	22,780	$	987	Current maturities of notes payable and long-term debt	$	31,335	$	25,841
Accounts payable and accrued expenses	Accounts payable and accrued expenses	80,230		67,797		Accounts payable and accrued expenses	74,028		63,856
Income taxes payable	Income taxes payable	1,021		2,219		Income taxes payable	4,438		2,610
Current portion of deferred revenue	Current portion of deferred revenue	4,339		3,305		Current portion of deferred revenue	4,406		4,088
Current portion of operating lease liabilities	Current portion of operating lease liabilities	4,937		4,797		Current portion of operating lease liabilities	4,788		4,777
Current portion of financing lease liabilities	Current portion of financing lease liabilities	202		70		Current portion of financing lease liabilities	250		246
Other current liabilities	Other current liabilities	9,264		5,796		Other current liabilities	6,997		6,006

Total current liabilities	Total current liabilities	122,773		84,971		Total current liabilities	126,242		107,424
Notes payable and long-term debt, net of current maturities	Notes payable and long-term debt, net of current maturities	29,442		48,294		Notes payable and long-term debt, net of current maturities	28,816		29,302
Retainage payable	Retainage payable	285		600		Retainage payable	326		279
Deferred income taxes	Deferred income taxes	1,299		1,210		Deferred income taxes	918		959
Deferred revenue	Deferred revenue	7,527		7,488		Deferred revenue	3,627		9,541
Non-current operating lease liabilities	Non-current operating lease liabilities	18,393		13,184		Non-current operating lease liabilities	15,981		18,565
Non-current financing lease liabilities	Non-current financing lease liabilities	502		186		Non-current financing lease liabilities	385		573
Other liabilities	Other liabilities	7,253		6,778		Other liabilities	10,990		13,175

Total liabilities	Total liabilities	187,474		162,711		Total liabilities	187,285		179,818
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued	Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued	—		—		Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued	—		—
Common stock, $0.0001 par value; 100,000 shares authorized, 63,249 shares and 62,920 shares issued at September 30, 2021 and December 31, 2020, respectively		6		6
Common stock, $0.0001 par value; 100,000 shares authorized, 63,664 shares and 63,291 shares issued at September 30, 2022 and December 31, 2021, respectively						Common stock, $0.0001 par value; 100,000 shares authorized, 63,664 shares and 63,291 shares issued at September 30, 2022 and December 31, 2021, respectively	6		6
Additional paid-in capital	Additional paid-in capital	216,942		215,010		Additional paid-in capital	219,116		217,471
Accumulated deficit	Accumulated deficit	(81,467)		(79,542)		Accumulated deficit	(83,616)		(83,813)
Accumulated other comprehensive (loss) income		(66)		1,318
Less treasury stock of 6,807 at September 30, 2021 and December 31, 2020		(29,056)		(29,056)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(9,342)		(1,813)
Less treasury stock of 6,807 at September 30, 2022 and December 31, 2021						Less treasury stock of 6,807 at September 30, 2022 and December 31, 2021	(29,056)		(29,056)
Hill International, Inc. share of equity	Hill International, Inc. share of equity	106,359		107,736		Hill International, Inc. share of equity	97,108		102,795
Noncontrolling interests	Noncontrolling interests	468		1,552		Noncontrolling interests	449		444
Total equity	Total equity	106,827		109,288		Total equity	97,557		103,239
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	294,301	$	271,999	Total liabilities and stockholders’ equity	$	284,842	$	283,057

See accompanying notes to consolidated financial statements.

Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Consulting fee revenue	Consulting fee revenue	$	77,061	$	71,543	$	227,158	$	224,453	Consulting fee revenue	$	85,142	$	77,061	$	254,262	$	227,158
Reimbursable expenses	Reimbursable expenses	19,543		17,109		58,079		51,956		Reimbursable expenses	24,429		19,543		63,275		58,079
Total revenue	Total revenue	$	96,604	$	88,652	$	285,237	$	276,409	Total revenue	$	109,571	$	96,604	$	317,537	$	285,237
Direct expenses	Direct expenses	64,196		59,998		194,314		190,078		Direct expenses	74,917		64,196		213,620		194,314
Gross profit	Gross profit	$	32,408	$	28,654	$	90,923	$	86,331	Gross profit	$	34,654	$	32,408	$	103,917	$	90,923
Selling, general and administrative expenses	Selling, general and administrative expenses	28,121		25,588		82,906		80,543		Selling, general and administrative expenses	31,035		28,121		92,831		82,906
Foreign currency exchange loss (benefit)		511		(694)		2,751		3,622
Foreign currency exchange loss										Foreign currency exchange loss	803		511		3,730		2,751
Plus: Share of profit of equity method affiliates	Plus: Share of profit of equity method affiliates	551		983		1,805		2,021		Plus: Share of profit of equity method affiliates	506		551		1,456		1,805

Operating profit	Operating profit	$	4,327	$	4,743	$	7,071	$	4,187	Operating profit	$	3,322	$	4,327	$	8,812	$	7,071
Less: Interest and related financing fees, net	Less: Interest and related financing fees, net	1,226		1,275		4,077		3,870		Less: Interest and related financing fees, net	2,098		1,226		4,805		4,077
Less: Other loss, net		—		152		—		3,654
Earnings (loss) before income taxes		$	3,101	$	3,316	$	2,994	$	(3,337)
Other loss, net										Other loss, net	104		—		319		—
Earnings before income taxes										Earnings before income taxes	$	1,120	$	3,101	$	3,688	$	2,994
Income tax expense	Income tax expense	1,784		1,071		4,653		2,776		Income tax expense	1,823		1,784		3,602		4,653

Net earnings (loss)	Net earnings (loss)	$	1,317	$	2,245	$	(1,659)	$	(6,113)	Net earnings (loss)	$	(703)	$	1,317	$	86	$	(1,659)
Less: net earnings - noncontrolling interests		58		131		265		308
Net earnings (loss) attributable to Hill International, Inc.		$	1,259	$	2,114	$	(1,924)	$	(6,421)
Less: net (loss) earnings - noncontrolling interests										Less: net (loss) earnings - noncontrolling interests	(14)		58		(112)		265
Net (loss) earnings attributable to Hill International, Inc.										Net (loss) earnings attributable to Hill International, Inc.	$	(689)	$	1,259	$	198	$	(1,924)

Basic earnings (loss) per common share - Hill International, Inc.		$	0.02	$	0.04	$	(0.03)	$	(0.11)
Basic (loss) earnings per common share - Hill International, Inc.										Basic (loss) earnings per common share - Hill International, Inc.	$	(0.01)	$	0.02	$	—	$	(0.03)
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	57,245		56,702		57,102		56,551		Basic weighted average common shares outstanding	58,073		57,245		57,858		57,102

Diluted earnings (loss) per common share - Hill International, Inc.		$	0.02	$	0.04	$	(0.03)	$	(0.11)
Diluted (loss) earnings per common share - Hill International, Inc.										Diluted (loss) earnings per common share - Hill International, Inc.	$	(0.01)	$	0.02	$	—	$	(0.03)
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	57,245		56,702		57,102		56,551		Diluted weighted average common shares outstanding	58,073		57,245		59,767		57,102

See accompanying notes to consolidated financial statements.

Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) EARNINGS ~~(LOSS)~~

(In thousands)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net earnings (loss) $ 1,317 $ 2,245 $ (1,659) $ (6,113)
Foreign currency translation adjustment, net of tax (1,177) 639 (2,733) 5,385
Comprehensive earnings (loss) 140 2,884 (4,392) (728)
Less: Comprehensive (loss) earnings attributable to noncontrolling interests (32) 376 (1,084) 203
Comprehensive earnings (loss) attributable to Hill International, Inc. $ 172 $ 2,508 $ (3,308) $ (931)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) earnings	$	(703)	$	1,317	$	86	$	(1,659)
Foreign currency translation adjustment, net of tax	(2,969)		(1,177)		(7,611)		(2,733)
Actuarial losses from end of service benefit plan, net of tax	66		—		198		—
Comprehensive (loss) earnings	(3,606)		140		(7,327)		(4,392)
Less: Comprehensive (loss) earnings attributable to noncontrolling interests	(38)		(32)		5		(1,084)
Comprehensive (loss) earnings attributable to Hill International, Inc.	$	(3,568)	$	172	$	(7,332)	$	(3,308)

See accompanying notes to consolidated financial statements.

Table of Contents

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


		Common Stock			Additional Paid-in		Retained Earnings		Accumulated Other Comprehensive		Treasury Stock			Hill Share of Stockholders’		Non-controlling		Total Stockholders’			Common Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Treasury Stock			Hill Share of Stockholders’		Non-controlling		Total Stockholders’
		Shares	Amount		Capital		(Deficit)		Income (Loss)		Shares	Amount		Equity		Interests		Equity			Shares	Amount		Capital		(Deficit)		Income (Loss)		Shares	Amount		Equity		Interests		Equity
Balance - December 31, 2020		62,920	$	6	$	215,010	$	(79,542)	$	1,318	6,807	$	(29,056)	$	107,736	$	1,552	$	109,288
Net earnings (loss)		—	—		—		(3,184)		—		—	—		(3,184)		207		(2,977)
Other comprehensive loss		—	—		—		—		(297)		—	—		(297)		(1,259)		(1,556)
Balance - December 31, 2021																				Balance - December 31, 2021	63,291	$	6	$	217,471	$	(83,813)	$	(1,813)	6,807	$	(29,056)	$	102,795	$	444	$	103,239
Net (loss) income																				Net (loss) income	—	—		—		886		—		—	—		886		(97)		789
Other comprehensive (loss) income																				Other comprehensive (loss) income	—	—		—		—		(4,650)		—	—		(4,650)		140		(4,510)

Share-based compensation expense	Share-based compensation expense	270	—		1,371		—		—		—	—		1,371		—		1,371		Share-based compensation expense	331	—		771		—		—		—	—		771		—		771

Shares issued under employee stock purchase plan	Shares issued under employee stock purchase plan	44	—		95		—		—		—	—		95		—		95		Shares issued under employee stock purchase plan	42	—		56		—		—		—	—		56		—		56

Balance - June 30, 2021		63,234	$	6	$	216,476	$	(82,726)	$	1,021	6,807	$	(29,056)	$	105,721	$	500	$	106,221
Net earnings		—	—		—		1,259		—		—	—		1,259		58		1,317
Balance - June 30, 2022																				Balance - June 30, 2022	63,664	$	6	$	218,298	$	(82,927)	$	(6,463)	6,807	$	(29,056)	$	99,858	$	487	$	100,345
Net earnings (loss)																				Net earnings (loss)	—	—		—		(689)		—		—	—		(689)		(14)		(703)
Other comprehensive loss	Other comprehensive loss	—	—		—		—		(1,087)		—	—		(1,087)		(90)		(1,177)		Other comprehensive loss	—	—		—		—		(2,879)		—	—		(2,879)		(24)		(2,903)

Share-based compensation expense	Share-based compensation expense	3	—		443		—		—		—	—		443		—		443		Share-based compensation expense	10	—		818		—		—		—	—		818		—		818

Shares issued under employee stock purchase plan	Shares issued under employee stock purchase plan	12	—		23		—		—		—	—		23		—		23		Shares issued under employee stock purchase plan		—				—		—		—	—		—		—		—

Balance - September 30, 2021		63,249	$	6	$	216,942	$	(81,467)	$	(66)	6,807	$	(29,056)	$	106,359	$	468	$	106,827
Balance - September 30, 2022																				Balance - September 30, 2022	63,674	$	6	$	219,116	$	(83,616)	$	(9,342)	6,807	$	(29,056)	$	97,108	$	449	$	97,557

Balance - December 31, 2019		62,708	$	6	$	212,759	$	(71,360)	$	(3,817)	6,546	$	(28,231)	$	109,357	$	871	$	110,228
Balance - December 31, 2020																				Balance - December 31, 2020	62,920	$	6	$	215,010	$	(79,542)	$	1,318	6,807	$	(29,056)	$	107,736	$	1,552	$	109,288
Net earnings (loss)	Net earnings (loss)	—	—		—		(8,535)		—		—	—		(8,535)		177		(8,358)		Net earnings (loss)	—	—		—		(3,184)		—		—	—		(3,184)		207		(2,977)
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		5,096		—	—		5,096		(350)		4,746		Other comprehensive income (loss)	—	—		—		—		(297)		—	—		(297)		(1,259)		(1,556)

Share-based compensation expense	Share-based compensation expense	—	—		1,201		—		—		—	—		1,201		—		1,201		Share-based compensation expense	270	—		1,371		—		—		—	—		1,371		—		1,371
Shares issued under employee stock purchase plan	Shares issued under employee stock purchase plan	162	—		201		—		—		—	—		201		—		201		Shares issued under employee stock purchase plan	44	—		95		—		—		—	—		95		—		95
Transfer of shares pledged as collateral (1)		(261)	—		—		—		—		261	(825)		(825)		—		(825)

Balance - June 30, 2020		62,609	$	6	$	214,161	$	(79,895)	$	1,279	6,807	$	(29,056)	$	106,495	$	698	$	107,193
Net earnings		—	—		—		2,114		—		—	—		2,114		131		2,245
Other comprehensive income		—	—		—		—		394		—	—		394		245		639

Share-based compensation expense		—	—		415		—		—		—	—		415		—		415
Shares issued under employee stock purchase plan		16	—		20		—		—		—	—		20		—		20

Balance - September 30, 2020		62,916	$	6	$	214,596	$	(77,781)	$	1,673	6,807	$	(29,056)	$	109,438	$	1,074	$	110,512

Balance - June 30, 2021																				Balance - June 30, 2021	63,234	$	6	$	216,476	$	(82,726)	$	1,021	6,807	$	(29,056)	$	105,721	$	500	$	106,221
Net earnings (loss)																				Net earnings (loss)	—	—		—		1,259		—		—	—		1,259		58		1,317
Other comprehensive income (loss)																				Other comprehensive income (loss)	—	—		—		—		(1,087)		—	—		(1,087)		(90)		(1,177)

Share-based compensation expense																				Share-based compensation expense	3	—		443		—		—		—	—		443		—		443
Shares issued under employee stock purchase plan																				Shares issued under employee stock purchase plan	12	—		23		—		—		—	—		23		—		23

Balance - September 30, 2021																				Balance - September 30, 2021	63,249	$	6	$	216,942	$	(81,467)	$	(66)	6,807	$	(29,056)	$	106,359	$	468	$	106,827

(1) Reflects 261 shares of the Company's common stock pledged as collateral under the terms of a secured promissory note payable to the Company. During the three months ended March 31, 2020, the Company exercised its right to retain the shares upon the note holder's agreement to relinquish the shares upon the promissory note maturity date.

See accompanying notes to consolidated financial statements.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(1,659)	$	(6,113)
Net earnings (loss)						Net earnings (loss)	$	86	$	(1,659)

Adjustments to reconcile net loss to net cash provided by (used in):	Adjustments to reconcile net loss to net cash provided by (used in):					Adjustments to reconcile net loss to net cash provided by (used in):
Depreciation and amortization	Depreciation and amortization	1,856		3,380		Depreciation and amortization	1,784		1,856
Recovery of bad debts		(2,794)		(1,306)
Recovery for bad debt						Recovery for bad debt	(431)		(2,794)
Amortization of deferred loan fees	Amortization of deferred loan fees	568		521		Amortization of deferred loan fees	344		568
Deferred tax expense	Deferred tax expense	(120)		500		Deferred tax expense	140		(120)
Share-based compensation	Share-based compensation	1,814		1,616		Share-based compensation	1,589		1,814
Operating lease right-of-use assets	Operating lease right-of-use assets	3,306		3,163		Operating lease right-of-use assets	3,908		3,306
Loss on liquidation of subsidiary		—		4,064

Foreign currency remeasurement losses	Foreign currency remeasurement losses	2,510		3,622		Foreign currency remeasurement losses	1,544		2,510
Deferred payroll tax payments		—		2,711
Changes in operating assets and liabilities:

Accounts receivable	Accounts receivable	(15,521)		4,686		Accounts receivable	(23,773)		(15,521)
Accounts receivable - affiliate	Accounts receivable - affiliate	(5,728)		(6,294)		Accounts receivable - affiliate	2,039		(5,728)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(3,951)		(2,418)		Prepaid expenses and other current assets	253		(3,951)
Income taxes receivable	Income taxes receivable	1,232		39		Income taxes receivable	399		1,232
Retainage receivable	Retainage receivable	(953)		(416)		Retainage receivable	3,534		(953)
Other assets	Other assets	(1,926)		(2,643)		Other assets	(976)		(1,926)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	13,181		1,641		Accounts payable and accrued expenses	13,440		13,181
Income taxes payable	Income taxes payable	(1,202)		(1,161)		Income taxes payable	1,944		(1,202)
Deferred revenue	Deferred revenue	1,482		(2,451)		Deferred revenue	(4,351)		1,482
Operating lease liabilities	Operating lease liabilities	(2,698)		(3,259)		Operating lease liabilities	(3,702)		(2,698)
Other current liabilities	Other current liabilities	3,432		3,426		Other current liabilities	1,139		3,432
Retainage payable	Retainage payable	(314)		(730)		Retainage payable	47		(314)

Finance lease liabilities						Finance lease liabilities	(13)		—
Other liabilities	Other liabilities	492		688		Other liabilities	(1,260)		492

Net cash (used in) provided by operating activities		(6,993)		3,266
Net cash used in operating activities						Net cash used in operating activities	(2,316)		(6,993)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of NEYO Group	Purchase of NEYO Group	(681)		—		Purchase of NEYO Group	—		(681)

Purchase of property and equipment	Purchase of property and equipment	(1,197)		(1,101)		Purchase of property and equipment	(1,472)		(1,197)

Net cash used in investing activities	Net cash used in investing activities	(1,878)		(1,101)		Net cash used in investing activities	(1,472)		(1,878)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from term loans		—		1,291
Principal payments on finance leases						Principal payments on finance leases	(184)		—

Repayment of term loans	Repayment of term loans	(802)		(666)		Repayment of term loans	(505)		(802)
Proceeds from revolving loans	Proceeds from revolving loans	29,785		38,486		Proceeds from revolving loans	31,667		29,785
Repayment of revolving loans	Repayment of revolving loans	(25,816)		(24,268)		Repayment of revolving loans	(25,336)		(25,816)

Proceeds from stock issued under employee stock purchase plan	Proceeds from stock issued under employee stock purchase plan	118		221		Proceeds from stock issued under employee stock purchase plan	56		118

Net cash provided by financing activities	Net cash provided by financing activities	3,285		15,064		Net cash provided by financing activities	5,698		3,285
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,654)		(97)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,548)		(2,654)
Deconsolidated cash		—		9
Net (decrease) increase in cash, cash equivalents and restricted cash		(8,240)		17,123

Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(638)		(8,240)
Cash, cash equivalents and restricted cash — beginning of period	Cash, cash equivalents and restricted cash — beginning of period	41,413		24,982		Cash, cash equivalents and restricted cash — beginning of period	30,446		41,413
Cash, cash equivalents and restricted cash — end of period	Cash, cash equivalents and restricted cash — end of period	$	33,173	$	42,105	Cash, cash equivalents and restricted cash — end of period	$	29,808	$	33,173


		Nine Months Ended September 30,					Nine Months Ended September 30,
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:	2021		2020		Supplemental disclosures of cash flow information:	2022		2021
Interest and related financing fees paid	Interest and related financing fees paid	$	3,520	$	2,722	Interest and related financing fees paid	$	4,668	$	3,520
Income taxes paid	Income taxes paid	3,830		2,018		Income taxes paid	2,218		3,830
Transfer of proceeds from shares pledged as collateral to treasury stock		—		825

Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities	4,897		5,914		Cash paid for amounts included in the measurement of lease liabilities	5,681		4,897
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	8,568		288		Right-of-use assets obtained in exchange for operating lease liabilities	1,648		8,568
Right-of-use assets obtained in exchange for finance lease liabilities	Right-of-use assets obtained in exchange for finance lease liabilities	538		475		Right-of-use assets obtained in exchange for finance lease liabilities	—		538

See accompanying notes to consolidated financial statements.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 1 — The Company

Hill International, Inc. (“Hill” or the “Company”) is a professional services firm that provides program management, project management, construction management, construction claims and other consulting and advisory services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. Hill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.

All amounts included in the following Notes to the Consolidated Financial Statements are in thousands, unless otherwise indicated, except per share data.

On August 26, 2022, Hill, Global Infrastructure Solutions Inc. (“Parent”), and Liberty Acquisition Sub Inc., an indirect wholly owned subsidiary of Parent (“Merger Sub”), entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”), which amended and restated the Agreement and Plan of Merger, dated as of August 16, 2022, by and among the Company, Parent and Merger Sub. The Merger Agreement provides that, upon the terms and conditions set forth therein and in accordance with the General Corporation Law of the State of Delaware (“DGCL”), Merger Sub will be merged with and into Hill (the “Merger”) with Hill surviving the Merger as the surviving corporation and an indirect wholly owned subsidiary of Parent.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Hill’s common stock, other than as provided below, will be converted into the right to receive $3.40, without interest (such amount of cash, the “Merger Consideration”). The following shares of Hill common stock will not be converted into the right to receive the Merger Consideration in connection with the Merger: (i) shares held in treasury by Hill or owned by Parent or Merger Sub or any direct or indirect wholly owned subsidiaries of Parent, Merger Sub or Hill immediately prior to the effective time, and (ii) shares issued and outstanding immediately prior to the effective time that are held by a holder who is entitled to demand and has properly exercised and perfected demand and has properly exercised and perfected demand for appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) and has not effectively and validly withdrawn or lost such holder’s rights to appraisal.

Pursuant to the terms of the Merger Agreement, the consummation of the Merger remains subject to various closing conditions, including but not limited to (i) the receipt of consent or authorization under certain foreign antitrust laws, and (ii) the absence of any order that has the effect of preventing, making illegal or otherwise prohibiting the consummation of the Merger. As of the date hereof, the Company continues to expect to complete the Merger in the fourth calendar quarter of 2022. Upon the consummation of the Merger, Hill will no longer be traded or listed on any public securities exchange.

Note 2 — Liquidity

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company's principal sources of liquidity consisted of ~~$26,293~~$22,834 and ~~$34,229~~$21,821 of cash and cash equivalents, respectively, ~~$4,591~~$7 and ~~$7,495~~$2,643 of available borrowing capacity under the Domestic Revolving Credit Facility, respectively, ~~$1,614~~$175 and ~~$1,085~~$520 of available borrowing capacity under the International Revolving Credit Facility, respectively, and ~~$6,131~~$3,436 and ~~$3,131~~$5,980 under other foreign credit agreements, respectively. Additional information regarding the Company's credit facilities is set forth in Note 9 - Notes Payable and Long-Term Debt.

InOn March ~~2020,~~31, 2022 and September 30, 2022, the ~~World Health Organization declared COVID-19 a global pandemic as a result~~Company entered into amendments of its main credit facility with Société Générale that extends the maturity dates of the ~~further spread~~Domestic and International Revolving Credit Facilities to May 5, 2023 and the term loan facility to November 5, 2023. The interest rates on the Domestic and International Revolving Credit Facilities increased by 1.1% and 1.5%, respectively, effective March 31, 2022, while the term loan facility interest rate increased by 1.0%, effective March 31, 2022, and the Company paid an amendment fee of $463. The aggregate amount of the ~~virus into all regions~~credit commitments under the facilities was reduced by an amount equal to $500 on each of ~~the world, including those regions where the Company's primary operations occur. Variants of the virus continue to emerge in various region~~September 30, 2022 and ~~countries worldwide. The Company is focused on preserving its principal sources of liquidity and managing its cash flow~~October 31, 2022 and will ~~continue~~be further permanently reduced by $500 on November 30, 2022 and $3,000 on December 31, 2022. At September 30, 2022, the Company had $23,303 of borrowings and $4,972 of outstanding letters of credit under the Hill International, Inc. - Société Générale Domestic Revolving Credit Facility and $4,884 of borrowings and $509 of outstanding letters of credit under the Hill International N.V. - Société Générale International Revolving Credit Facility. These facilities are set to ~~evaluate the potential short-term and long-term implications of COVID-19~~mature on ~~its consolidated statements of operations.~~ May 5, 2023.

The Company believes that it has adequate liquidity and business plans to continue to operate the business ~~and mitigate the risks associated with COVID-19~~ for the next 12 months from November ~~8, 2021,~~14, 2022, the date of this filing. ~~Additional disclosure on~~This ability to continue as a going concern is dependent upon the ~~impact of COVID-19 on~~ability to refinance the ~~Company is~~Domestic and International Revolving Credit Facilities prior to their May 5, 2023 maturity date. As such, the consolidated interim financial statements included in ~~Part I. Item 2 Management's Discussion and Analysis section of~~ this Form ~~10-Q.~~10-Q do not include any adjustments that might result from the inability to refinance the Domestic and International Revolving Credit Facilities.

Note 3 — Basis of Presentation

Summary

The accompanying unaudited interim consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021, as amended. Accordingly, the accompanying unaudited interim consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements. The consolidated financial statements include the accounts of Hill and its wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The interim operating results are not necessarily indicative of the results for a full year.

NEYO Group Acquisition

On June 30, 2021, the Company acquired all of the equity interests of NEYO Group, a 120-person firm specializing in cost management and estimating support and also providing project management, project monitoring, and other services. NEYO maintains offices in Bangalore, Chennai, Delhi, and Mumbai, as well as project offices in Hyderabad, Pune, and Kolkata.

~~Table of Contents~~

~~Reclassification~~

Certain geographic regions have been combined in tables throughout the document including in Note 4 - Revenue from Contract with Clients and Note 12 - Segment and Related Information. In the current year, Americas includes United States and Latin America and Middle East/Asia/Pacific includes Middle East and Asia/Pacific. The related presentation for the three and nine months ended September 30, 2020 has been recast to conform to current year presentation.

~~Other Loss, net~~

During the nine months ended September 30, 2020, a loss of $4,064 was recognized due to the bankruptcy filing and deconsolidation of our operating subsidiary in Brazil (see Note 15), net of other non-operating income of $65. An additional $345 of other income was recognized during the three months ended March 31, 2020, representing the cancellation of a loan agreement made with the PIDC-Local Development Corporation that was funded to the Company on October 24, 2014 as part of the city of Philadelphia's (the "City") Economic Stimulus Program. In February 2020, the City agreed to cancel this loan as a result of the Company satisfying all obligations upon which cancellation of such debt was conditioned in such loan agreement.

Summary of Significant Accounting Policies

(a) Foreign Currency Translations and Transactions

Assets and liabilities of all foreign operations are translated at period-end rates of exchange while revenues and expenses are translated at the average monthly exchange rates. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity titled accumulated other comprehensive income (loss) until the entity is sold or substantially liquidated. Gains or losses arising from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency), including those resulting from intercompany transactions, are reflected in the Company's consolidated statements of operations. The impact of foreign exchange on long-term intercompany loans, for which repayment has not been scheduled or planned and permanent equity has been elected, are recorded in accumulated other comprehensive income (loss) on the Company's consolidated balance sheets.

(b) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and accounts receivable.

The Company maintains its cash accounts with high quality financial institutions. Although the Company believes that the financial institutions with which it does business will be able to fulfill their commitments, there is no assurance that those institutions will be able to continue to do so.

No single client accounted for 10% or more of total revenue for the three and nine months ended September 30, ~~2021~~2022 or ~~2020.~~2021.

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There was one client in Africa who ~~represents~~accounted for 10% or more toof gross accounts receivable at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which represents 14% ~~and 16%~~ of the gross accounts receivable balance at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. These amounts were fully reserved for at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The allowance for doubtful accounts is an estimate prepared by management based on identification of the collectability of specific accounts and the overall condition of the receivable portfolios. When evaluating the adequacy of the allowance for doubtful accounts, the Company specifically analyzes trade receivables, including retainage receivable, historical bad debts, client credits, client concentrations, current economic trends and changes in client payment terms. If the financial condition of clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Likewise, should the Company determine that it would be able to realize more of its receivables in the future than previously estimated, an adjustment to the allowance would increase earnings in the period such determination was made. The allowance for doubtful accounts is reviewed on a quarterly basis and adjustments are recorded as deemed necessary.

(d) Retainage Receivable

Retainage receivable represents balances billed but not paid by clients pursuant to retainage provisions in certain contracts and will be due upon completion of specific tasks or the completion of the contract.

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(e) Income Taxes

The Company estimates income taxes in each of the jurisdictions in which it operates. This process involves estimating its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company’s consolidated balance sheets. The Company assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent it believes recovery is not likely, the Company establishes a valuation allowance. To the extent the Company establishes a valuation allowance in a period, it must include an expense within the tax provision in the consolidated statements of operations. The Company has recorded a valuation allowance to reduce the deferred income tax assets to an amount that is more likely than not to be realized in future years. If the Company determines in the future that it is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position, that the deferred tax assets subject to the valuation allowance will be realized, then the previously provided valuation allowance will be adjusted.

The Company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is more likely than not that the benefit will be ultimately realized. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

(f) Revenue Recognition

The Company generates revenue primarily from providing professional services to its clients under various types of contracts. In providing these services, the Company may incur reimbursable expenses, which consist principally of amounts paid to subcontractors and other third parties and travel and other job related expenses that are contractually reimbursable from clients. The Company includes reimbursable expenses in computing and reporting its total revenue as long as the Company remains responsible to the client for the fulfillment of the contract and for the overall acceptability of all services provided.

If estimated total costs on any contract project a loss, the Company charges the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and others are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed for each subsequent reporting period until the project is complete. Such revisions could occur at any time, and the effects may be material.

See Note 4 - Revenue from Contracts with Clients for more detail regarding how the Company recognizes revenue under each type of its contractual arrangements.

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(g) Restricted Cash

Restricted cash primarily represents cash collateral required to be maintained in foreign bank accounts to serve as collateral for letters of credit, bonds or guarantees on certain projects. The cash will remain restricted until the respective project has been completed, which typically is greater than one year.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:

September 30, 2021 December 31, 2020
Cash and cash equivalents $ 26,293 $ 34,229
Cash - restricted 3,811 3,752
Cash - restricted, net of current portion 3,069 3,432
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 33,173 $ 41,413

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	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	22,834	$	21,821
Cash - restricted	4,131		5,562
Cash - restricted, net of current portion	2,843		3,063
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	29,808	$	30,446

(h) Earnings (loss) per Share

Basic earnings (loss) per common share have been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share incorporates the incremental shares issuable upon the assumed exercise of stock options and the assumed vesting of stock and deferred and restricted stock unit awards using the treasury stock method, if dilutive.

The Company has outstanding options to purchase approximately ~~1,353~~1,128 shares and ~~1,589~~1,353 shares at September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. In addition, the Company had ~~1,038~~138 and ~~715~~1,038 restricted and deferred stock units outstanding at September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. These awards were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 because they were anti-dilutive.

The following table provides a reconciliation to net ~~loss~~earnings (loss) used in the numerator for loss per share attributable to Hill:

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net earnings (loss) $ 1,317 $ 2,245 $ (1,659) $ (6,113)
Less: net earnings - noncontrolling interests 58 131 265 308
Net earnings (loss) attributable to Hill International, Inc. $ 1,259 $ 2,114 $ (1,924) $ (6,421)
Basic weighted average common shares outstanding 57,245 56,702 57,102 56,551
Effect of dilutive securities:
Stock options — — — —
Unvested share-based compensation units — — — —
Diluted weighted average common shares outstanding 57,245 56,702 57,102 56,551
Basic and diluted earnings (loss) per common share - Hill International, Inc. $ 0.02 $ 0.04 $ (0.03) $ (0.11)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) earnings	$	(703)	$	1,317	$	86	$	(1,659)
Less: net (loss) earnings - noncontrolling interests	(14)		58		(112)		265
Net (loss) earnings attributable to Hill International, Inc.	$	(689)	$	1,259	$	198	$	(1,924)

Basic weighted average common shares outstanding	58,073		57,245		57,858		57,102
Effect of dilutive securities:
Stock options	—		—		—		—
Unissued share-based compensation units	—		—		1,909		—
Diluted weighted average common shares outstanding	58,073		57,245		59,767		57,102

Basic and diluted (loss) earnings per common share - Hill International, Inc.	$	(0.01)	$	0.02	$	—	$	(0.03)

(i) New Accounting Pronouncements

Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.

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For additional information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to the consolidated financial statements in Item 8 of Form 10-K for the year ended December 31, ~~2020~~2021 filed with the SEC on March ~~16, 2021. See update below.~~31, 2022, as amended.

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~~Recently Adopted Accounting Pronouncements~~

~~In December 2019, the FASB issued~~ ~~ASU 2019-12 - Income Taxes (Topic 740)~~ Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in ASC 740 and improves how certain income tax-related guidance is applied. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption was permitted. The amendments in this update were applied prospectively. The Company adopted the new standard as of January 1, 2021. The standard did not have a material impact on the Company’s consolidated financial position or results of operations upon adoption.

~~Recently Issued Accounting Pronouncements~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments (Topic 326) - Credit Losses: Measurement of Credit Losses on Financial Instruments~~, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing January 1, 2023. The Company is in the process of assessing the impact of this ASU on our consolidated financial statements and disclosures.

Note 4 — Revenue from Contracts with Clients

The Company recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services.

Below is a description of the basic types of contracts from which the Company may earn revenue:

Time and Materials Contracts

Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the "cap value"). Due to the potential limitation of the cap value, the economic factors of the contracts subject to a cap value differ from the economic factors of basic T&M and cost plus contracts. The majority of the Company’s contracts are for consulting projects where it bills the client monthly at hourly billing rates. The hourly billing rates are determined by contract terms. Under cost plus a margin contracts, the Company charges its clients for its costs, plus a fixed fee or rate. Under time and materials contracts with a cap value, the Company charges the clients for time and materials based upon the work performed however there is a cap or a not to exceed value. There are often instances that a contract is modified to extend the contract value past the cap. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the client. When the Company is reaching the cap value, the contract will be renegotiated, or Hill ceases work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company will only include consideration for contract renegotiation's to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If the Company continues to work and is uncertain that a contract change order will be processed, the variable consideration will be constrained to the cap until it is probable that the contract will be renegotiated. The Company is only entitled to consideration for the work it has performed, and the cap value is not a guaranteed contract value.

Fixed Price Contracts

Under fixed price contracts, the Company’s clients pay an agreed amount negotiated in advance for a specified scope of work. The Company is guaranteed to receive the consideration to the extent that the Company delivers under the contract. The Company recognizes revenue over a period of time on fixed price contracts using the input method based upon direct costs incurred to date, which are compared to total projected direct costs. Costs are the most relevant measure to determine the transfer of the service to the client. The Company assesses contracts quarterly and will recognize any expected future loss before actually incurring the loss. When the Company is expecting to reach the total value under the contract, the Company will begin to negotiate a change order.

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Change Orders and Claims

Change orders are modifications of an original contract. Either the Company or its client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the client’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If the Company is having difficulties in renegotiating the change order, the Company will stop work if possible, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.

Claims are amounts in excess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.

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U.S. Federal Acquisition Regulations

The Company has contracts with the U.S. government that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“FAR”). These regulations are generally applicable to all of its federal government contracts and are partially or fully incorporated in many local and state agency contracts. They limit the recovery of certain specified indirect costs on contracts subject to the FAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of the Company's federal government contracts are subject to termination at the convenience of the federal government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.

Federal government contracts that are subject to the FAR and that are required by state and local governmental agencies to be audited are performed, for the most part, by the Defense Contract Audit Agency (“DCAA”). The DCAA audits the Company’s overhead rates, cost proposals, incurred government contract costs and internal control systems. During the course of its audits, the DCAA may question incurred costs if it believes the Company has accounted for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and recommend that its U.S. government corporate administrative contracting officer disallow such costs. Historically, the Company has not incurred significant disallowed costs because of such audits. However, the Company can provide no assurance that the DCAA audits will not result in material disallowances of incurred costs in the future.

Disaggregation of Revenues

The Company has 1one operating segment, the Project Management Group, which reflects how the Company is being managed. Additional information related to the Company’s operating segment is provided in Note 12 - Segment and Related Information. The Project Management Group provides extensive construction and project management services to construction owners worldwide. The Company considered the type of client, type of contract and geography for disaggregation of revenue. The Company determined that disaggregating by (1) contract type; and (2) geography would provide the most meaningful information to understand the nature, amount, timing, and uncertainty of its revenues. The type of client does not influence the Company’s revenue generation. Ultimately, the Company is supplying the same services of program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, labor compliance services and facilities management services. The Company’s contracts are generally long term contracts that are either based upon time and materials incurred or provide for a fixed price. The contract type will determine the level of risk in the contract related to revenue recognition. For purposes of disaggregation of revenue, the contract types have been grouped into: (1) Fixed Price - which include fixed price projects; and, (2) T&M - which include T&M contracts, T&M with a cap and cost plus contracts. The geography of the contracts will depict the level of global economic factors in relation to revenue recognition.

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The components of the Company’s revenue by contract type and geographic region for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
Fixed Price T&M Total Percent of Total Revenue Fixed Price T&M Total Percent of Total Revenue
Americas $ 5,398 $ 45,964 $ 51,362 53.1 % $ 5,046 $ 43,149 $ 48,195 54.4 %
Middle East/Asia/Pacific 773 20,848 21,621 22.4 % 7,655 15,074 22,729 25.6 %
Europe 10,898 2,999 13,897 14.4 % 7,387 4,078 11,465 12.9 %
Africa 1,125 8,599 9,724 10.1 % (75) 6,338 6,263 7.1 %
Total $ 18,194 $ 78,410 $ 96,604 100.0 % $ 20,013 $ 68,639 $ 88,652 100.0 %
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
Fixed Price T&M Total Percent of Total Revenue Fixed Price T&M Total Percent of Total Revenue
Americas $ 14,778 $ 132,923 $ 147,701 51.7 % $ 15,736 $ 130,094 $ 145,830 52.8 %
Middle East/Asia/Pacific 7,000 56,320 63,320 22.2 % 16,481 55,846 72,327 26.2 %
Europe 25,247 19,695 44,942 15.8 % 25,566 11,868 37,434 13.5 %
Africa 2,027 27,247 29,274 10.3 % 201 20,617 20,818 7.5 %
Total $ 49,052 $ 236,185 $ 285,237 100.0 % $ 57,984 $ 218,425 $ 276,409 100.0 %



	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
	Fixed Price		T&M		Total		Percent of Total Revenue		Fixed Price		T&M		Total		Percent of Total Revenue
Americas	$	6,068	$	51,807	$	57,875	52.7	%	$	5,398	$	45,964	$	51,362	53.1	%
Middle East/Asia/Pacific	3,507		21,871		25,378		23.2	%	773		20,848		21,621		22.4	%
Europe	8,923		7,361		16,284		14.9	%	10,898		2,999		13,897		14.4	%
Africa	3,791		6,243		10,034		9.2	%	1,125		8,599		9,724		10.1	%
Total	$	22,289	$	87,282	$	109,571	100.0	%	$	18,194	$	78,410	$	96,604	100.0	%



	Nine Months Ended September 30, 2022								Nine Months Ended September 30, 2021
	Fixed Price		T&M		Total		Percent of Total Revenue		Fixed Price		T&M		Total		Percent of Total Revenue
Americas	$	23,064	$	143,602	$	166,666	52.4	%	$	14,778	$	132,923	$	147,701	51.7	%
Middle East/Asia/Pacific	12,162		63,730		75,892		23.9	%	7,000		56,320		63,320		22.2	%
Europe	22,819		23,401		46,220		14.6	%	25,247		19,695		44,942		15.8	%
Africa	8,087		20,672		28,759		9.1	%	2,027		27,247		29,274		10.3	%
Total	$	66,132	$	251,405	$	317,537	100.0	%	$	49,052	$	236,185	$	285,237	100.0	%

The Company recognizes revenue as it transfers promised goods or services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company exercises judgment in determining if the contractual criteria are met to determine if a contract with a client exists, specifically in the earlier stages of a project when a formally executed contract may not yet exist. The Company typically has one performance obligation under a contract to provide fully-integrated project management services, and, occasionally, a separate performance obligation to provide facilities management services. Performance obligations are delivered over time as the client receives the service.

The consideration promised within a contract may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the client regarding acknowledgment and/or agreement with the modification, as well as historical experience with the client or similar contractual circumstances. The Company transfers control of its service over time and, therefore, satisfies a performance obligation and recognizes revenue over time by measuring the progress toward complete satisfaction of that performance obligation. The Company’s fixed price projects and T&M with a cap contracts expected to exceed the cap value generally use a cost-based input method to measure its progress towards complete satisfaction of the performance obligation as the Company believes this best depicts the transfer of control to the client. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Due to the nature of the work required to be performed under the Company’s performance obligations, estimating total revenue and cost at completion on its long-term contracts is complex, subject to many variables and requires significant judgment.

For basic and cost-plus T&M contracts and T&M with a cap ~~not expected to exceed the cap,~~ contracts, the Company recognizes revenue over time using the output method which measures progress toward complete satisfaction of the performance obligation based upon actual costs incurred, using the right to invoice practical expedient.

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Accounts Receivable

Accounts receivable includes amounts billed and currently due from clients and amounts for work performed which have not been billed to date. The billed and unbilled amounts are stated at the net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of client creditworthiness, historical payment experience and the age of outstanding receivables.

Contract Assets and Liabilities

Contract assets include unbilled amounts typically resulting from performance under long-term contracts where the revenue recognized exceeds the amount billed to the client. Retainage receivable is included in contract assets. The current portion of retainage receivable is a contract asset, which prior to the adoption of ASC 606, had been classified within accounts receivable.

The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized and are reported as deferred revenue in the consolidated balance sheets. The Company classifies billings in excess of revenue recognized as deferred revenue as current or non-current based on the timing of when revenue is expected to be recognized.

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing of the Company’s performance and client payments. The amount of revenue recognized during the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 that was included in the deferred revenue balance at the beginning of the periods was ~~$456~~$61 and ~~$579,~~$456, respectively. The amount of revenue recognized during the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 that was included in the deferred revenue balance at the beginning of the periods was ~~$4,051~~$7,981 and ~~$571,~~$4,051, respectively.

Remaining Performance Obligations

The remaining performance obligations represent the aggregate transaction price of executed contracts with clients for which work has partially been performed ~~or not started~~ as of the end of the reporting period. The Company’s remaining performance obligations include fixed fee projects that have an executed contract, a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. Although remaining performance obligations reflect business that is considered to be firm, cancellations, scope adjustments, foreign currency exchange fluctuations or project deferrals may occur that impact the value or expected timing of their recognition. Remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope, foreign currency exchange fluctuations and project deferrals, as appropriate. T&M contracts are excluded from the remaining performance obligation as these contracts are not fixed price contracts and the consideration expected under these contracts is variable as it is based upon hours and costs incurred in accordance with the ~~variable consideration optional exemption.~~right to invoice practical expedient. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$92,155~~$93,324 and ~~$101,800,~~$114,165, respectively. During the following 12 months, approximately ~~58.8%~~46.7% of the remaining performance obligations are expected to be recognized as revenue with the remaining balance recognized over 12 to 6 years.

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Note 5 — Accounts Receivable

The components of accounts receivable and accounts receivable - affiliates reflected in the Company's consolidated balance sheets are as follows:


Accounts Receivable	Accounts Receivable	September 30, 2021		December 31, 2020		Accounts Receivable	September 30, 2022		December 31, 2021
Billed (1)	Billed (1)	$	104,228	$	113,021	Billed (1)	$	112,646	$	112,441

Unbilled (2)	Unbilled (2)	51,719		37,960		Unbilled (2)	60,083		46,014
		155,947		150,981			172,729		158,455
Allowance for doubtful accounts (1)	Allowance for doubtful accounts (1)	(40,898)		(52,795)		Allowance for doubtful accounts (1)	(36,462)		(38,939)
Accounts receivable, net	Accounts receivable, net	$	115,049	$	98,186	Accounts receivable, net	$	136,267	$	119,516

Accounts Receivable - Affiliates	Accounts Receivable - Affiliates					Accounts Receivable - Affiliates
Billed (3)	Billed (3)	$	14,776	$	15,560	Billed (3)	$	3,755	$	10,229
Unbilled (2)	Unbilled (2)	14,938		8,380		Unbilled (2)	16,655		12,243
		$	29,714	$	23,940		$	20,410	$	22,472
Allowance for doubtful accounts	Allowance for doubtful accounts	(701)		(655)		Allowance for doubtful accounts	(708)		(731)
Accounts receivable - affiliates, net	Accounts receivable - affiliates, net	$	29,013	$	23,285	Accounts receivable - affiliates, net	$	19,702	$	21,741

(1) Includes ~~$24,025~~$23,479 and ~~$33,242~~$24,031 related to amounts due from a client in Libya as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which where both fully reserved for in the allowance for doubtful accounts. ~~The decrease in the balance at September 30, 2021 from December 31, 2020 is primarily due to the devaluation of the Libyan Dinar.~~.

(2) Amounts are net of unbilled reserves.

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(3) Includes ~~$1,568~~$802 and ~~$1,303~~$2,179 of retainage receivables due from affiliates as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Note 6 — Intangible Assets

The following table summarizes the Company’s acquired intangible assets:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization

Engineering license	Engineering license	$	2,653	$	—	$	2,100	$	—	Engineering license	$	2,900	$	—	$	2,900	$	—
Client relationships	Client relationships	509		395		509		356		Client relationships	508		445		509		407

Total	Total	$	3,162	$	395	$	2,609	$	356	Total	$	3,408	$	445	$	3,409	$	407

Intangible assets, net	Intangible assets, net	$	2,767			$	2,253			Intangible assets, net	$	2,963			$	3,002

~~During the year ended December 31, 2020, the Company acquired a Grandfathered Engineering Corporation license which was determined to have an indefinite useful life and therefore it is not amortized.~~

The Company amortizes client relationship intangible assets over the estimated useful life of ten years. Such amortization expense was $13 for the three months ended September 30, 2022 and 2021, ~~and 2020~~respectively and $38 ~~and $67~~ for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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The following table presents the estimated amortization expense for the next five years:


		Estimated Amortization Expense			Estimated Amortization Expense

Year ending December 31,	Year ending December 31,			Year ending December 31,

2021 (remaining 3 months)		$	13
2022		51
2022 (remaining 3 months)				2022 (remaining 3 months)	$	13
2023	2023	51		2023	50
2024	2024	—		2024	—
2025	2025	—		2025	—
2026				2026	—

Note 7 — Goodwill

The following table summarizes the changes in the Company’s carrying value of goodwill during the nine months ended September 30, ~~2021:~~2022:



Balance, December 31, ~~2020~~2021	$	~~46,397~~44,127
~~Additions~~ ~~(1)~~	~~162~~
Translation adjustments ~~(2)~~(1)	~~(1,656)~~(4,022)
Balance, September 30, ~~2021~~2022	$	~~44,903~~40,105

~~(1) Refer to Note 3 - Basis of Presentation,~~ ~~NEYO Group Acquisition~~ ~~subsection.~~

~~(2)~~(1) The translation adjustment was calculated based on the foreign currency exchange rates as of September 30, ~~2021.~~2022.

The Company (the reporting unit) performed its ~~2021~~2022 annual impairment test effective July 1, ~~2021~~2022 and noted no impairment. Based on the valuation as of July 1, ~~2021,~~2022, the fair value of the Company exceeded its carrying value. ~~The Company performs its annual impairment test during~~This was determined by using the ~~second half~~price offered by the transacting company of ~~each year unless events or circumstances indicate an impairment may have occurred before that time.~~$3.40 per share and multiplying it by the market cap as of July 1, 2022.

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The Company’s changes in estimates and assumptions, including decreases in stock price and market capitalization, could materially affect the determination of fair value and/or conclusions on goodwill impairment. As a result of recent events, including market volatility and the impact on the global economy, it is at least reasonably possible that changes in one or more of those assumptions could result in impairment of our goodwill in future periods.

Note 8 — Accounts Payable and Accrued Expenses

Below are the components of accounts payable and accrued expenses:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021

Accounts payable	Accounts payable	$	33,852	$	20,953	Accounts payable	$	32,982	$	23,573
Accrued payroll and related expenses*		24,824		28,508
Accrued payroll and related expenses						Accrued payroll and related expenses	20,311		19,699
Accrued subcontractor fees	Accrued subcontractor fees	11,669		8,711		Accrued subcontractor fees	13,812		12,203
Accrued agency fees	Accrued agency fees	4,450		4,239		Accrued agency fees	3,962		5,048
Accrued legal and professional fees	Accrued legal and professional fees	1,435		2,894		Accrued legal and professional fees	1,687		1,833
Other accrued expenses*		4,000		2,492
Other accrued expenses						Other accrued expenses	1,274		1,500
		$	80,230	$	67,797		$	74,028	$	63,856

* $1,818 in costs related to the Company's end of service benefit plan at December 31, 2020 that were previously included in other accrued expenses and are now reflected in accrued payroll and related expenses.

Note 9 — Notes Payable and Long-Term Debt

The table below reflects the Company's notes payable and long-term debt, which includes credit facilities:

Interest Rate (1)
Balance Outstanding as of
Loan Maturity Interest Rate Type September 30,
2021 December 31, 2020 September 30,
2021 December 31, 2020
Secured Credit Facilities
Hill International, Inc. - Société Générale 2017 Term Loan Facility 06/20/2023 Variable 7.54% 7.67% $ 28,725 $ 28,950
Hill International, Inc. - Société Générale Domestic Revolving Credit Facility (2)
05/04/2022 Variable 5.16% 5.50% 17,400 14,400
Hill International N.V.. - Société Générale International Revolving Credit Facility (3)
05/04/2022 Variable 4.07% 4.11% 4,747 4,035
Unsecured Credit Facilities
Hill International, Inc. - First Abu Dhabi Bank ("FAB") PJSC Overdraft Credit Facility (4)
04/18/2022 Variable 5.71% 5.65% — —
Hill International (North Africa) Ltd - Arab Bank PLC ("Arab Bank") Payroll Overdraft Facility (5)
07/16/2022 Variable N/A N/A — N/A
Hill International (North Africa) Ltd - Arab Bank General Simple Assignment of Contracts Overdraft Facility (5)
07/16/2022 Variable N/A N/A — N/A
Unsecured Notes Payable and Long-Term Debt
Hill International Spain S.A.-Bankia S.A. & Bankinter S.A.(6)
12/31/2021 Fixed 2.21% 2.21% 139 581
Philadelphia Industrial Development Corporation Loan 04/01/2027 Fixed 2.79% 2.79% 373 421
Hill International Spain S.A. - Bankinter S.A. 2020 Term Loan (5)(6)
05/04/2024 Variable 2.23% 2.23% 267 357
Hill International Spain S.A. - Banco Santander, S.A. Term Loan (5)(6)
05/30/2025 Fixed 3.91% 3.91% 320 367
Hill International Spain S.A. - BBVA, S.A. P.P. Term Loan (5)(6)
06/19/2025 Variable 2.28% 2.28% 327 367
Hill International Spain S.A. - Bankia. S.A. 2020 Term Loan (5)(6)
06/05/2025 Variable 2.54% 2.54% 270 303
Total notes payable and long-term debt, gross $ 52,568 $ 49,781
Less: unamortized discount and deferred financing costs related to Société Générale 2017 Term Loan Facility (346) (500)
Notes payable and long-term debt $ 52,222 $ 49,281
Current portion of notes payable 22,979 1,171
Current portion of unamortized debt discount and deferred financing costs (199) (184)
Current maturities of notes payable and long-term debt $ 22,780 $ 987
Notes payable and long-term debt, net of current maturities $ 29,442 $ 48,294

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			Interest Rate (1)		Balance Outstanding as of
Loan	Maturity	Interest Rate Type	September 30, 2022	December 31, 2021	September 30, 2022		December 31, 2021
Secured Credit Facilities
Hill International, Inc. - Société Générale 2017 Term Loan Facility	11/05/2023	Variable	7.49%	7.51%	$	28,425	$	28,650
Hill International, Inc. - Société Générale Domestic Revolving Credit Facility (2)	05/05/2023	Variable	5.17%	5.06%	23,303		19,400
Hill International N.V.. - Société Générale International Revolving Credit Facility (3)	05/05/2023	Variable	4.46%	4.06%	4,884		5,802
Unsecured Credit Facilities
Hill International, Inc. - First Abu Dhabi Bank ("FAB") PJSC Overdraft Credit Facility (4)	04/18/2023	Variable	5.62%	5.71%	2,695		151


Unsecured Notes Payable and Long-Term Debt

Philadelphia Industrial Development Corporation Loan	04/01/2027	Fixed	2.75%	2.79%	310		358
Hill International Spain S.A. - Bankinter S.A. 2020 Term Loan (5)(6)	05/04/2024	Variable	2.39%	2.23%	143		239
Hill International Spain S.A. - Banco Santander, S.A. Term Loan (5)(6)	05/30/2025	Fixed	3.86%	3.91%	200		295
Hill International Spain S.A. - BBVA, S.A. P.P. Term Loan (5)(6)	06/19/2025	Variable	2.25%	2.28%	204		300
Hill International Spain S.A. - Bankia. S.A. 2020 Term Loan (5)(6)	06/05/2025	Variable	2.50%	2.54%	170		248
Total notes payable and long-term debt, gross					$	60,334	$	55,443
Less: unamortized discount and deferred financing costs related to Société Générale 2017 Term Loan Facility					(183)		(300)
Notes payable and long-term debt					$	60,151	$	55,143
Current portion of notes payable					31,533		26,043
Current portion of unamortized debt discount and deferred financing costs					(198)		(202)
Current maturities of notes payable and long-term debt					$	31,335	$	25,841
Notes payable and long-term debt, net of current maturities					$	28,816	$	29,302

Footnotes to the Notes Payable and Long-Term Debt Table above:

(1) Interest rates for variable interest rate debt are reflected on a weighted average basis through September 30, ~~2021~~2022 since the loan origination or modification date.

(2) As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$6,509~~$4,972 and ~~$6,605~~$6,457 of outstanding letters of credit, respectively, in addition to the balances outstanding above, which resulted in ~~$4,591~~$7 and ~~$7,495~~$2,643 of available borrowing capacity under the Domestic Revolving Credit Facility, respectively. The amounts available were based on the maximum borrowing capacity of $28,282 and $28,500 as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. See 'Secured Credit Facilities' section below for further information.

(3) As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$558~~$509 and ~~$2,189~~$478 of outstanding letters of credit, respectively, in addition to the balances outstanding above, which resulted in ~~$1,614~~$175 and ~~$1,085~~$520 of available borrowing capacity under the International Revolving Credit Facility, respectively. The amounts available were based on the Company's borrowing capacity of ~~$6,919~~$5,568 and ~~$7,309~~$6,800 as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. See ''Secured Credit Facilities' section below for further information.

(4) FAB credit facility lender was formerly known as National Bank of Abu Dhabi. There is no stated maturity date; however, the facility is subject to be reviewed annually in April by FAB, or at any other time as determined by FAB. Therefore, the amount outstanding is reflected within the current maturities of notes payable and long-term debt. Balances outstanding are reflected in U.S. dollars based on the conversion rates from AED as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company had ~~$3,131~~$436 of availability under the credit facility as of September 30, ~~2021~~2022 and $2,980 as of December 31, ~~2020.~~2021.

(5) In July 2021, the Company, through one of its subsidiaries, entered into two overdraft facilities with Arab Bank. There is no stated maturity date however, the facilities are subject to be reviewed annually in July by Arab Bank. Amounts may be drawn in either Egyptian Pounds or in the U.S. Dollar. Interest rates are equal to 1.0%, plus the Central Bank of Egypt ("CBE") corridor rate. No amounts have been drawn on as of September 30, ~~2021.~~2022. The Company had $3,000 of availability under the credit facilities as of September 30, ~~2021.~~2022.

(6) Balances outstanding are reflected in U.S. dollars based on the conversion rates from Euros as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

(7) Includes loan agreements, through a subsidiary of the Company, entered into between April and June 2020, where the respective loan agreements require interest-only monthly payments during grace periods that last from six months or one year from the date of the agreements. The variable interest loans are subject to either semi-annual or annual review by the respective lenders thereof and the respective interest rates in respect thereof are determined based on the European Inter-Bank Offered Rate, or “EURIBOR,” for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available), plus a margin, as set by the respective lender.

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Secured Credit Facilities

The Company's secured credit facilities with Société Générale (the "International Lender") and other U.S. Loan Parties (the "U.S. Lenders") under a 2017 Term Loan of $30,000 (the "2017 Term Loan Facility"), a $25,000 U.S.-denominated revolving credit facility (the "Domestic Revolving Credit Facility"; together with the 2017 Term Loan Facility, the "U.S. Credit Facilities") and a €9,156 ($10,000 at closing) Euro-denominated revolving credit facility (the "International Revolving Credit Facility"; together with the U.S. Credit Facilities, the "Secured Credit Facilities") contain customary default provisions, representations and warranties, and affirmative and negative covenants, and require the Company to comply with certain financial and reporting covenants. The financial covenant is comprised of a maximum Consolidated Net Leverage Ratio of 3.00 to 1.00 for any fiscal quarter ending on or subsequent to March 31, 2017 for the trailing twelve months then-ended. The Consolidated Net Leverage Ratio is the ratio of (a) consolidated total debt (minus unrestricted cash and cash equivalents) to consolidated earnings before interest, taxes, depreciation, amortization, share-based compensation and other non-cash charges, including bad debt expense, certain one-time litigation and transaction related expenses, and restructuring charges for the trailing twelve months. In the event of a default, the U.S. Lender and the International Lender may increase the interest rates by 2.0%. The Company was in compliance with this financial covenant at September 30, ~~2021.~~2022.

On April 1, 2020, the Company amended its Secured Credit Facilities, which increased the credit commitment with one of the U.S. Lenders under the Domestic Revolving Credit Facility by $3,500 from $25,000 to $28,500 and simultaneously decreased the credit commitment with the International Lender under the International Revolving Credit Facility by €3,179 (approximately $3,500 at closing) from €9,156 (approximately $10,000) to €5,977 (approximately $6,536 at closing).

The aggregate unamortized debt issuance costs under the Domestic Revolving Credit Facility and International Revolving Credit Facility were ~~$403~~$1,569 and ~~$755~~$314 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and were included in prepaid expenses and other current assets and other assets in the consolidated balance sheets.

The interest rate on borrowings under the Domestic Revolving Credit Facility are, at the Company’s option, either the ~~LIBOR~~SOFR rate for the relevant interest period plus ~~3.75%~~4.85% per annum or the Base Rate plus ~~2.75%~~3.75% per annum. The interest rate on borrowings under the International Revolving Credit Facility will be the EURIBOR for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available), plus ~~4.50%~~6.00% per annum.

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Commitment fees are paid quarterly and are calculated at 0.50% annually on the average daily unused portion of the Domestic Revolving Credit Facility, and are calculated at 0.75% annually on the average daily unused portion of the International Revolving Credit Facility.

Generally, the obligations of the Company under the Domestic Revolving Credit Facility are secured by a first-priority security interest in the Eligible Domestic Receivables (as defined in the Domestic Revolving Credit Facility), cash proceeds and bank accounts of the Company and certain of the Company’s U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and such subsidiaries. The obligations of the Subsidiary (as defined in the International Revolving Credit Facility) under the International Revolving Credit Facility are generally secured by a first-priority security interest in substantially all accounts receivable and cash proceeds thereof, certain bank accounts of the Subsidiary and certain of the Company’s non-U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.

~~The~~On March 31, 2022 and September 30, 2022, the Company ~~is in discussions~~entered into amendments of its main credit facility with ~~both existing lenders and potential new lenders to refinance~~Société Générale that extend the ~~Secured Credit Facilities prior to their~~ maturity ~~in May 2022 for~~dates of the Domestic and International Revolving Credit Facilities to May 5, 2023 and ~~June 2023 for~~ the ~~2017 Term Loan Facility.~~term loan facility to November 5, 2023. The interest rates on the Domestic and International Revolving Credit Facilities by 1.1% and 1.5%, respectively, while the term loan facility interest rate increased by 1.0% and the Company paid an amendment fee of $463. The aggregate amount of the credit commitments under the facilities was and permanently reduced by an amount equal to $500 on each of September 30, 2022 and October 31, 2022 and will be further permanently reduced by $500 on November 30, 2022 and $3,000 on December 31, 2022.

Other Financing Arrangements

On May 1, ~~2021,~~2022, subsequent to the maturity of the Company's previous commercial premium financing arrangement in April 30, ~~2021~~2022 with AFCO Premium Credit LLC ("AFCO"), the Company entered into a new financing agreement for the renewal of its corporate insurance policies with AFCO for ~~$3,350.~~$3,577. The terms of the arrangement include a ~~$503~~$304 down payment, followed by monthly payments to be made over ~~a ten-month~~an eleven-month period at a ~~2.88%~~3.99% interest rate through ~~March 31, 2022.~~April 30, 2023.

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At September 30, ~~2021 and~~2022, there was $2,097 balance payable to AFCO. At December 31, ~~2020, balances~~2021, the balance payable to AFCO of ~~$1,717 and $872~~$862 were reflected in other current liabilities on the Company's consolidated balance sheets, respectively.

Note 10 — Share-Based Compensation

The Company recognized total share-based compensation expense in selling, general and administrative expenses in the consolidated statement of operations of ~~$443~~$818 and ~~$415~~$443 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$1,814~~$1,589 and ~~$1,616~~$1,814 for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. Should there be a Change in Control of the Company, unvested shares would immediately vest. The Company's related share-based compensation is comprised of the following:

Restricted Stock Units

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company granted certain employees and executive officers equity awards in the form of restricted stock units ("RSU") that are subject to a combination of time and performance-based conditions under the 2017 Equity Compensation Plan (the "2017 Plan"), totaling ~~414~~486 and ~~723~~414 RSUs, respectively. During the three months ended September 30, 2022, 23 RSUs were granted. No RSUs were granted during the three months ended September 30, ~~2021 and 2020.~~2021. Each RSU entitles the grantee to 1one unit of the Company's common stock. The time-based RSUs vest annually over a three-year period on the anniversary date of each grant. Unvested time-based RSUs will be forfeited if the grantee separates from the Company prior to its vesting date. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the related compensation expense was recorded based on a weighted average price per share of $1.90 and $2.36, ~~and $3.28,~~ respectively. During the three months ended September 30, 2022, the related compensation expense was recorded based on a price per share of $1.74

The number of common shares to be issued under the performance-based RSUs will be determined based on three levels of performance metrics based on the Company's earnings and will be assessed on an annual basis for the years ended December 31, 2022, 2023 and 2024 for the RSUs granted during the nine months ended September 30, 2022 and for the years ended December 31, 2021, 2022 and 2023 for the RSUs granted during the nine months ended September 30, ~~2021 and for the years ended December 31, 2020, 2021 and 2022 for the RSUs granted during the nine months ended September 30, 2020.~~2021. If the Company meets the performance metrics for any one of the measurement periods, such units will vest on the next anniversary date of the grant date. All vested RSUs will be settled on the third anniversary of the grant date. Unvested RSUs are subject to forfeiture if the grantee separates from the Company prior to its vesting date. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company determined it was not probable that the target performance metric would be met for each of the RSU grants and, therefore, did not record any share-based compensation expense related to such RSUs.

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Deferred Stock Units

~~Deferred Stock Units~~During the nine months ended September 30, 2022 and 2021, the Company granted certain employees, executive officers and independent members of the Board of Directors equity awards in the form of deferred stock units ("DSU") ~~issued~~that are subject to a combination of time and performance-based conditions and, in the case of independent members of the Board of Directors, immediate vesting, under the 2017 Plan, ~~entitle participants~~totaling 1,066 and 780 DSUs, respectively. DSUstotaling 276 and 5

were granted during the three months ended September 30, 2022 and 2021, respectively. Each DSU entitles the grantee to ~~receive 1 share~~one unit of the Company's common ~~stock for~~stock. The time-based DSUs vest annually over a three-year period on the anniversary date of each ~~DSU and they~~grant.

Unvested time-based DSUs will ~~vest immediately upon separation~~be forfeited if the grantee separates from the ~~Company. The~~Company prior to its vesting date. During the nine

months ended September 30, 2022 and 2021, the related compensation expense was recorded based on a weighted average price

per share of $1.86 and $2.36 respectively. During the three months ended September 30, 2022 and 2021, the related compensation expense was recorded based on a weighted average price per share of $1.74 and $2.57, respectively.

The number of common shares to ~~these units was~~be issued under the performance-based DSUs will be determined based on three levels of

performance metrics based on the ~~stock price~~Company's earnings and will be assessed on an annual basis for the years ended December

31, 2022, 2023 and 2024 for the DSUs granted during the nine months ended September 30, 2022 and for the years ended

December 31, 2021, 2022 and 2023 for the DSUs granted during the nine months ended September 30, 2021. If the Company

meets the performance metrics for any one of the ~~Company's common stock~~measurement periods, such units will vest on the ~~grant~~next anniversary date of the ~~DSUs.~~

grant date. Unvested ~~DSUs~~RSUs are subject to forfeiture if the grantee separates from the Company prior to its vesting date.

~~During the three months ended September 30, 2021 and 2020, 5 and 39 DSUs were granted at a weighted average price of $2.57 and $1.58, respectively.~~ During the nine months ended September 30, 2022 and 2021, the Company determined it was not probable that the target performance

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metric would be met for each of the RSU grants and, ~~2020, 780 and 334~~therefore, did not record any share-based compensation expense related to such RSUs. Vested DSUs ~~were granted at a weighted average price of $2.42 and $1.70, respectively. DSUs granted partially include units awarded to~~will be issued immediately upon separation from the Company's board of directors (the "Board") as part of their annual service retainer. DSUs were also granted to executive officers that are subject to a combination of time and performance based conditions that vest over a three-year period.Company.

Stock Options

At September 30, ~~2021~~2022 and ~~2020,~~2021, the Company had approximately ~~1,353~~1,123 and ~~1,589~~1,353 stock options outstanding, respectively, with a weighted average exercise price of ~~$3.87~~$3.83 and ~~$4.02,~~$3.87, respectively. No stock options were granted during the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, options lapsed for approximately ~~211~~230 and ~~281~~211 shares, respectively, with a weighted average exercise price of ~~$4.95~~$4.05 and ~~$3.71,~~$4.95, respectively.

Note 11 — Income Taxes

The Company calculates the interim tax expense based on an annual effective tax rate ("AETR"). The AETR represents the Company’s estimated effective tax rate for the year based on full year projection of tax expense, divided by the projection of full year pretax book income/(loss) among the various foreign tax jurisdictions, adjusted for discrete transactions occurring during the ~~period.~~period. The effective tax rates were ~~57.5%~~162.8% and ~~32.3%~~57.5% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~155.4%~~97.7% and ~~(83.2)%~~155.4% for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. The interim tax calculation prescribed under ASC 740-270 can yield unconventional results as seen in the effective tax rate for the nine months ended September 30, 2021, which is impacted by discrete tax items such as uncertain tax positions and certain withholding taxes in relation to the mix of pretax earnings in certain jurisdictions in which no loss benefit is recognized.

The change in the Company’s effective tax rate for the nine months ended September 30, ~~2021~~2022 from the nine months ended September 30, ~~2020~~2021 was primarily due to the mix of pretax earnings in jurisdictions with different jurisdictional tax ~~rates, as well as~~rates. Additionally, the Company did not recognize any significant discrete tax items for the three months ended September 30, 2022, compared to the three months ended June 30, 2021 in which we recognized additional discreet expense for certain withholding taxes and uncertain tax ~~positions recorded in 2021.~~positions.

The reserve for uncertain tax positions amounted to ~~$7,740~~$5,621 and ~~$6,328~~$8,855 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The Company’s policy is to record income tax related interest and penalties in income tax ~~expense.~~expense (benefit). The Company recorded expense (benefit) for any tax-related interest and penalties of ~~$39~~$(20) and ~~$70~~$434 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$500~~$(395) and ~~$68~~$461 for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all, or some portion, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC 740, Income Taxes. In making this determination, management assesses all available evidence, both positive and negative, at the balance sheet date. This includes, but is not limited to, recent earnings, internally-prepared income projections, and historical financial performance.

On March 11, 2021 the American Rescue Plan Act was signed into law. The Company is currently evaluating the impact this legislation may have on its consolidated financial results, however the Company does not feel there will be a significant impact.

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Note 12 —Segment and Related Information

The Company operates as 1one reporting segment which reflects how the Company is managed, which provides construction and project management services to construction owners worldwide. Such services include program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, labor compliance services (collectively, "integrated project management") and facilities management services.

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The following tables present certain information for operations:

Total Revenue by Geographic Region:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020					2022				2021				2022				2021

Americas	Americas	$	51,362	53.1	%	$	48,195	54.4	%	$	147,701	51.7	%	$	145,830	52.8	%	Americas	$	57,875	52.7	%	$	51,362	53.1	%	$	166,666	52.4	%	$	147,701	51.7	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	21,621		22.4	%	22,729		25.6	%	63,320		22.2	%	72,327		26.2	%	Middle East/Asia/Pacific	25,378		23.2	%	21,621		22.4	%	75,892		23.9	%	63,320		22.2	%
Europe	Europe	13,897		14.4	%	11,465		12.9	%	44,942		15.8	%	37,434		13.5	%	Europe	16,284		14.9	%	13,897		14.4	%	46,220		14.6	%	44,942		15.8	%
Africa	Africa	9,724		10.1	%	6,263		7.1	%	29,274		10.3	%	20,818		7.5	%	Africa	10,034		9.2	%	9,724		10.1	%	28,759		9.1	%	29,274		10.3	%
Total	Total	$	96,604	100.0	%	$	88,652	100.0	%	$	285,237	100.0	%	$	276,409	100.0	%	Total	$	109,571	100.0	%	$	96,604	100.0	%	$	317,537	100.0	%	$	285,237	100.0	%

Consulting Fee Revenue by Geographic Region:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020					2022				2021				2022				2021

Americas	Americas	$	34,510	44.8	%	$	33,697	47.2	%	$	100,996	44.5	%	$	104,261	46.5	%	Americas	$	37,896	44.5	%	$	34,510	44.8	%	$	113,572	44.7	%	$	100,996	44.5	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	21,345		27.7	%	21,709		30.3	%	62,100		27.3	%	69,241		30.8	%	Middle East/Asia/Pacific	23,436		27.5	%	21,345		27.7	%	72,305		28.4	%	62,100		27.3	%
Europe	Europe	12,328		16.0	%	10,549		14.7	%	36,968		16.3	%	32,197		14.3	%	Europe	14,500		17.0	%	12,328		16.0	%	41,618		16.4	%	36,968		16.3	%
Africa	Africa	8,878		11.5	%	5,588		7.8	%	27,094		11.9	%	18,754		8.4	%	Africa	9,310		10.9	%	8,878		11.5	%	26,767		10.5	%	27,094		11.9	%
Total	Total	$	77,061	100.0	%	$	71,543	100.0	%	$	227,158	100.0	%	$	224,453	100.0	%	Total	$	85,142	99.9	%	$	77,061	100.0	%	$	254,262	100.0	%	$	227,158	100.0	%

For the three months ended September 30, 2022 the United States and the United Arab Emirates were the only countries to account for 10% or more of total revenue. For the three months ended September 30, 2021, the United States was the only country to account for 10% or more of total revenue. For the nine months ended September 30, ~~2021, the United States~~2022 and ~~the United Arab Emirates were the only countries to account for 10% or more of total revenue. For the three and nine months ended September 30, 2020,~~2021, the United States and the United Arab Emirates were the only countries to account for 10% or more of total revenue.

Operating Profit (Loss) by Geographic Region:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Americas (1)	Americas (1)	$	8,139	$	8,884	$	20,879	$	25,210	Americas (1)	$	6,436	$	8,139	$	22,288	$	20,879
Middle East/Asia/Pacific (1)	Middle East/Asia/Pacific (1)	2,872		1,457		6,054		3,939		Middle East/Asia/Pacific (1)	4,867		2,872		11,687		6,054
Europe (1)	Europe (1)	2,623		1,520		6,517		4,355		Europe (1)	3,770		2,623		7,785		6,517
Africa	Africa	1,032		485		5,117		1,763		Africa	2,520		1,032		5,695		5,117
Corporate (2)	Corporate (2)	(10,339)		(7,603)		(31,496)		(31,080)		Corporate (2)	(14,271)		(10,339)		(38,643)		(31,496)
Total	Total	$	4,327	$	4,743	$	7,071	$	4,187	Total	$	3,322	$	4,327	$	8,812	$	7,071

(1) includes Hill's share of ~~loss (profit)~~profit (loss) of equity method affiliates on the Consolidated Statements of Operations.

(2) includes foreign exchange losses ~~(benefit)~~ of ~~$511~~$803 and ~~$(694)~~$511 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$2,751~~3,730 and ~~$3,622~~2,751 for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

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Depreciation and Amortization Expense:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Project Management	Project Management	$	6	$	341	$	769	$	1,009	Project Management	$	349	$	6	$	1,049	$	769
Corporate ~~(1)~~	Corporate ~~(1)~~	561		364		1,087		2,371		Corporate ~~(1)~~	250		561		735		1,087
Total	Total	$	567	$	705	$	1,856	$	3,380	Total	$	599	$	567	$	1,784	$	1,856

(1) includes $1,582 additional depreciation charge for the write-off of leasehold improvements related to the Company subletting office space in Philadelphia to a third party for the nine months ended September 30, 2020.

Total Revenue by Client Type:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020					2022				2021				2022				2021

U.S. federal government	U.S. federal government	$	3,506	3.6	%	$	4,552	5.1	%	$	11,636	4.1	%	$	13,084	4.7	%	U.S. federal government	$	4,870	4.4	%	$	3,506	3.6	%	$	12,576	4.0	%	$	11,636	4.1	%
U.S. state, regional and local governments	U.S. state, regional and local governments	30,648		31.7	%	29,652		33.4	%	90,934		31.9	%	90,552		32.8	%	U.S. state, regional and local governments	35,922		32.8	%	30,648		31.7	%	103,331		32.5	%	90,934		31.9	%
Foreign governments	Foreign governments	23,401		24.2	%	23,149		26.1	%	75,137		26.3	%	74,118		26.8	%	Foreign governments	23,710		21.6	%	23,401		24.2	%	72,000		22.7	%	75,137		26.3	%
Private sector	Private sector	39,049		40.5	%	31,299		35.4	%	107,530		37.7	%	98,655		35.7	%	Private sector	45,069		41.2	%	39,049		40.5	%	129,630		40.8	%	107,530		37.7	%
Total	Total	$	96,604	100.0	%	$	88,652	100.0	%	$	285,237	100.0	%	$	276,409	100.0	%	Total	$	109,571	100.0	%	$	96,604	100.0	%	$	317,537	100.0	%	$	285,237	100.0	%

Property, Plant and Equipment, Net, by Geographic Location:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021

Americas	Americas	$	7,250	$	7,741	Americas	$	6,598	$	7,146
Middle East/Asia/Pacific	Middle East/Asia/Pacific	704		917		Middle East/Asia/Pacific	776		745
Europe	Europe	492		544		Europe	643		586
Africa	Africa	370		241		Africa	399		418
Total	Total	$	8,816	$	9,443	Total	$	8,416	$	8,895

Note 13 — Commitments and Contingencies

Legal Proceedings

From time to time, the Company is a defendant or plaintiff in various legal proceedings which arise in the normal course of business. As such the Company is required to assess the likelihood of any adverse outcomes to these proceedings as well as potential ranges of probable losses. A determination of the amount of the provision required for commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each proceeding. The provision may change in the future due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made. It is the opinion of management, after consultation with legal counsel, that the ultimate resolution of these proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

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Several lawsuits have been filed by purported stockholders of Hill relating to the Merger: on September 15, 2022, a lawsuit captioned Shiva Stein v. Hill International, Inc. et al, Case No. 1:22-cv-07907, was filed the United States District Court for the Southern District of New York (the “Stein Complaint”); on October 19, 2022, an additional lawsuit captioned Brian Dixon v. Hill International, Inc. et al., Case No. 1:22-cv-01374, was filed in the United States District Court for the District of Delaware; and on October 21, 2022 (the “Dixon Complaint” and together with the Stein Complaint and Dixon Complaint, the “Complaints”), another lawsuit captioned Sean Riley v. Hill International, Inc. et al., Case No. 1:22-cv-08983, was filed in the United States District Court for the Southern District of New York (the “Riley Complaint”). The Stein Complaint generally alleges that Hill made misleading or materially incomplete disclosures regarding the Merger in the preliminary proxy statement on Schedule 14A filed with the U.S. Securities and Exchange Commission (“SEC”) on September 14, 2022, including but not limited to claims that the preliminary proxy statement omitted material information regarding the financial projections provided to Houlihan Lokey and the valuation analyses performed by Houlihan Lokey, and that, as a result, Hill and each member of Hill’s board of directors violated Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each member of Hill’s board of directors violated Section 20(a) of the Exchange Act. The Stein Complaint also alleges that all defendants violated 17 C.F.R. § 244.100. The Dixon Complaint and Riley Complaint allege similar disclosure deficiencies with respect to Hill’s definitive proxy statement on Schedule 14A filed with the SEC on September 30, 2022 (the “Definitive Proxy Statement”). The Complaints generally seek (i) injunctive relief, (ii) rescission in the event the merger is consummated or alternatively rescissory damages, (iii) an accounting for all damages suffered, (iv) plaintiff’s costs and disbursements in connection with the actions, including plaintiff’s attorneys’ and experts’ fees, and (v) such other relief as the court deems just and proper. Additionally, Hill has received demand letters from purported stockholders of the Company that contain claims similar to those in the Complaints.

Hill and its board of directors believe that the claims asserted in the Complaints and demand letters are without merit. However, solely to moot the unmeritorious disclosure claims and minimize the risk, costs, burden, nuisance and uncertainties inherent in litigation, Hill supplemented the disclosures contained in the Definitive Proxy Statement on October 24, 2022 (the “Supplemental Disclosures”) which should be read in conjunction with the Definitive Proxy Statement. Nothing in the Supplemental Disclosures will be deemed an admission of the legal necessity or materiality under any applicable laws for any of the disclosures set forth therein.

The outcome of any current or future litigation related to the Merger, is uncertain. Such litigation, if not resolved, could prevent or delay consummation of the Merger and result in substantial costs to Hill, including any costs associated with the indemnification of directors and officers. One of the conditions to the consummation of the Merger is that no governmental entity of competent jurisdiction (i) enacted, issued or promulgated any order that is in effect or (ii) issued or granted any order or injunction (whether temporary, preliminary or permanent) that is in effect, in each case which has the effect of preventing, making illegal or otherwise prohibiting the consummation of the merger. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger, then such injunction may prevent the Merger from being consummated, or from being consummated within the expected time frame.

Loss on Performance Bond

On February 8, 2018, the Company received notice from the First Abu Dhabi Bank ("FAB", formerly known as the National Bank of Abu Dhabi) that Public Authority of Housing Welfare of Kuwait submitted a claim for payment on a Performance Guarantee issued by the Company for approximately $7,938 for a project located in Kuwait. FAB subsequently issued, on behalf of the Company, a payment on February 15, 2018. The Company is taking legal action to recover the full Performance Guarantee amount. On September 20, 2018 the Kuwait First Instance Court dismissed the Company's case. As a result, the Company fully reserved the performance guarantee payment above in the first quarter of 2018. The Company filed an appeal before the Kuwait Court of Appeals seeking referral of the matter to a panel of experts for determination. On April 21, 2019, the Court of Appeals ruled to refer the matter to the Kuwait Experts Department. Hearings with the Kuwait Experts Department were held during July and September 2019. A final report was issued by the panel of experts in October 2019 for the held hearings on January 7, 2020 and February 4, 2020 and reserved the case for judgment to be issued. In June 2020, the Kuwait Court of Appeal issued judgement confirming the Kuwait First Instance Court's decision. The Company filed a pleading before the Kuwait Cassation Court in August 2020. Hill's challenges are still pending before the Kuwait Cassation Court and a hearing has not yet been scheduled.

Other

The Company has identified a potential tax liability related to certain foreign subsidiaries’ failure to comply with laws and regulations of the jurisdictions, outside of their home country, in which their employees provided services. The Company has estimated the potential liability to be approximately ~~$334,~~$173, which is included in other liabilities in the consolidated balance sheet at September 30, ~~2021.~~2022.

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Note 14 — Leases

The Company leases office space, equipment and vehicles throughout the world. Many of the Company's operating leases include one or more options to renew at the Company's sole discretion. The lease renewal option terms generally range from 1 month to 5 years for office leases. The determination of whether to include any renewal or early termination options is made by the Company at lease inception when establishing the term of the lease. Based on the later of the lease's commencement date or Company's adoption of ASC-842 on January 1, 2019, the Company recognizes right-of use lease assets and lease liabilities on its consolidated balance ~~sheet~~sheets for all leases in excess of one year in duration. The lease liability represents the present value of the remaining lease payments, which only includes payments that are fixed and determinable at the time of commencement, over the lease term. The lease term may be adjusted for renewal or early termination options provided in the leases only if it is reasonably certain that the Company will exercise such options. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date for rent payments that are determined to be fixed, or are determinable at the lease commencement date. Some of the Company's lease arrangements require periodic increases in the Company's base rent that may be subject to certain economic indexes, among other items. In addition, these leases may require the Company to pay property taxes, utilities and other costs related to several of its leased office facilities. Typically, these amounts for such payments cannot be determined at the lease commencement date, and are identified as variable lease payment, which are recognized as incurred.

Total rent expense of ~~$1,950~~$2,117 and ~~$1,875~~$1,950 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$6,193~~$6,480 and ~~$6,038~~$6,193 for the nine months ended September 30, 2022 and 2021, ~~and 2020~~respectively, is included in selling, general and administrative and direct expenses in the consolidated statements of operations. Total rent expense for the nine months ended September 30, 2022 and 2021 included $1,614 and ~~2020 included~~ $1,631, ~~and $1,488,~~ respectively, that was associated with leases with an initial term of 12 months or less, in addition to variable costs the Company is responsible for paying on all leases.

The Company subleases certain real estate to third parties. The sublease income recognized for the three months ended September 30, 2022 and 2021, was $328 and ~~2020, was~~ $396, ~~and $390,~~ respectively. The sublease income recognized for the nine months ended September 30, 2022 and 2021 was $984 and ~~2020 was $1,190 and $946,~~1,190, respectively.

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The following is a schedule of maturities of lease liabilities by year as of September 30, ~~2021:~~2022:


		Total Operating Lease Payments			Total Finance Lease Payments				Total Operating Lease Payments			Total Finance Lease Payments
2021 (excluding the nine months ended September 30, 2021)		$	1,923		$	56
2022		5,988			216
2022 (excluding the nine months ended September 30, 2022)								2022 (excluding the nine months ended September 30, 2022)	$	1,481		$	66
2023	2023	5,212			216			2023	5,850			263
2024	2024	4,271			181			2024	4,891			228
2025	2025	3,471			65			2025	4,016			99
2026								2026	3,514			—
Thereafter	Thereafter	7,194			—			Thereafter	4,735			—
Total minimum lease payments (1)	Total minimum lease payments (1)	28,059			734			Total minimum lease payments (1)	24,487			656
Less amount representing imputed interest	Less amount representing imputed interest	4,729			30			Less amount representing imputed interest	3,718			21
Present value of lease obligations	Present value of lease obligations	$	23,330		$	704		Present value of lease obligations	$	20,769		$	635
Weighted average remaining lease term (years)	Weighted average remaining lease term (years)	5.62			3.46			Weighted average remaining lease term (years)	5.07			2.59
Weighted average discount rate	Weighted average discount rate	6.71		%	2.40		%	Weighted average discount rate	6.63		%	2.47		%

(1) Partially includes rent expense amounts payable in various foreign currencies and are based on the foreign currency exchange spot rates as of September 30, ~~2021,~~2022, where applicable.

~~Note 15 - Deconsolidation of Controlling Interest in Subsidiary~~

On June 12, 2020, Hill International Brasil S.A ("Hill Brazil") filed for bankruptcy and liquidation with the Bankruptcy Court of Sao Paulo, Brazil. Hill Brazil was a consolidated operating subsidiary of Hill International Brasil Participacoes LTDA ("Brazil Consolidated"). A trustee was appointed by the court on June 15, 2020 to oversee the settlement of liabilities and close the entity. The Company lost control of Hill Brazil on the date of the bankruptcy filing and, as a result, deconsolidated Hill Brazil at that time.

At June 12, 2020, Hill Brazil's assets totaled $1,901, and consisted of Cash of $9, Accounts receivable of $1,380, Property, Plant & Equipment of $295 and other assets of $217. At June 12, 2020, Hill Brazil's liabilities totaled $3,538 and consisted of Accounts payable and accrued expenses of $1,800, debt of $365, deferred revenue of $132 and other liabilities of $1,242. Therefore, Hill Brazil's liabilities exceeded assets by $1,638. The write-off of the investment in Hill Brazil by Brazil Consolidated resulted in a $1,201 loss. The write-off of the balance sheet and write-off of the investment in Hill Brazil resulted in a $437 gain on the deconsolidation before consideration of foreign currency adjustments and intercompany items.

In conjunction with the liquidation of Hill Brazil, the Company's intercompany receivables from Hill Brazil totaling $116 were fully reserved and an intercompany payable of $1,180 to Hill Brazil from Brazil Consolidated was written off against the income/loss of the liquidation. Additionally, $5,565 of accumulated other comprehensive losses related to foreign currency adjustments was taken into expense. This resulted in a net loss of $4,064 related to the deconsolidation which was recorded on the consolidated statements of operations under Other loss (income), net.

On December 29, 2020, Brazil Consolidated filed for bankruptcy and liquidation with the Bankruptcy Court of Sao Paulo Brazil. Brazil Consolidated was a consolidated subsidiary of Hill International, N.V. The Company lost control of Brazil Consolidated on the date of the bankruptcy filing and, as a result, deconsolidated Brazil Consolidated at that time which resulted in an additional net loss of $1,437 being recorded on the consolidated statements of operations under other loss (income), net for the year ended December 31, 2020. The balance sheet of Brazil Consolidated primarily consisted of intercompany payables. The corresponding intercompany receivables were written off on the respective entity's balance sheets in conjunction with the liquidation and deconsolidation of Brazil Consolidated resulting in no net consolidated income/loss impact. The net loss is primarily comprised of the deconsolidation of $1,350 of net assets, and $313 of accumulated other comprehensive losses related to foreign currency adjustments taken into expense which were offset by $226 of eliminated capital.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands).

Introduction

The following discussion should be read in conjunction with the information contained in Hill International, Inc.’s (collectively referred to as “Hill”, “we”, “us”, “our” and “the Company”) unaudited consolidated financial statements, including the notes thereto. Statements regarding future economic performance, management's plans and objectives and any statements concerning assumptions related to the foregoing contained in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. See our 2021 Annual Report, ~~on Form 10-K, for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (the "SEC") on March 16, 2021,~~ including the factors disclosed therein, as well as "Disclosure Regarding Forward-looking Statements" for certain factors that may cause actual results to vary materially from these forward-looking statements. We assume no obligation to update any of these forward-looking statements other than as required by law.

Overview

We earn revenue by deploying professionals to provide services to our clients, including project management, construction management, facilities management and related consulting. These services are primarily delivered on a “cost plus” or “time and materials” ("T&M") basis in which we bill negotiated hourly or monthly rates or a negotiated multiple of the direct cost of these professionals, plus actual out-of-pocket expenses. Our direct expenses are the actual cost of these professionals, including payroll and benefits, except for paid time-off, which is recorded in selling, general and administrative expenses ("SG&A") on our consolidated statements of operations. We also provide services under fixed price contracts and T&M contracts with a cap.

Our revenue consists of two components: consulting fee revenue ("CFR") and reimbursable expenses. The professionals we deploy are occasionally subcontractors. We generally bill the actual cost of these subcontractors and recognize this cost as both revenue (reimbursable expenses) and direct expense. CFR refers to our revenue excluding amounts paid or due to subcontractors. We believe CFR is an important measure because it represents the revenue on which we earn gross profit, whereas total revenue includes subcontractors on which we generally pass through the cost and earn minimal or no gross profit.

We compete for business based on a variety of factors such as technical capability, global resources, price, reputation and past experience, including client requirements for substantial experience in similar projects. We have developed significant long-standing relationships, which bring us repeat business and may be difficult for others to replicate. We believe we have an excellent reputation for attracting and retaining professionals. In addition, we believe there are high barriers to entry for new competitors especially in the project management market.

SG&A ~~consists~~expenses consist primarily of personnel costs that are not billable and corporate or regional costs such as sales, business development, proposals, operations, finance, human resources, legal, marketing, management and administration.

The Company operates as a single reporting segment, known as the Project Management Group which provides fee-based construction management services to our clients, leveraging our construction expertise to identify potential trouble, difficulties and sources of delay on a construction project before they develop into costly problems. Our experienced professionals are capable of managing all phases of the construction process from concept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers.

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appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) and has not effectively and validly withdrawn or lost such holder’s rights to appraisal.

Impact of COVID-19 on our Business

In March 2020, the World Health Organization declared COVID-19 a global pandemic as a result of the further spread of the virus into all regions of the world, including those regions where our primary operations occur. Variants of the virus continue to emerge in various regions and countries worldwide.

We instituted a work-from-home policy for all offices and employees globally in late March 2020, except for field-based employees who normally work on-site at our client’s facilities. These field-based employees are complying with our respective clients’ policies. The majority of our field employees were already located in the regions where they deliver their services, so the travel restrictions that have been enacted by various government authorities have not materially impaired our ability to continue to perform services for our clients. ~~Employees are returning~~As of September 30, 2022, most of our employees have returned to their assigned offices, on a modified basis, as their city, state and country reopens, consistent with the applicable requirements of local law.

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Most of the projects to which we provide services have been classified as essential services by the relevant governmental authority and as such have continued despite restrictions on the operation of "non-essential" businesses by certain governmental authorities. The majority of our billable employees have continued to provide billable services to our clients, either on-site or ~~remotely at the same or at a slightly reduced volume as in effect prior to the pandemic.~~remotely.

Nearly all our employees had company laptop computers and the ability to work remotely prior to the institution of our work-at-home policy. The work-at-home policy did not have a significant impact on our employees’ ability to perform their job requirements. Our internal control structure does not generally require physical access to our office locations, and has not to date and is not expected in the future, to be adversely impacted by the pandemic and the corresponding response by certain governmental authorities. Processes that require physical access to our offices, such as receiving mail (including collections) and processing and mailing manual checks, are being performed by designated individuals at a reduced frequency while certain of our offices continue to operate on a limited basis.

The main impacts on our business, ~~observed to date~~ other than those discussed above, ~~are~~were delays in the procurement processes of a number of our current and potential ~~clients. We expect these delays in the procurement process to adversely impact the timing~~clients and a temporary slowing of ~~our new bookings, resulting in lower bookings, CFR and backlog for the duration of the economic slowdown caused by the pandemic.~~

Management implemented various actions and policies that resulted in approximately $11,000 in cost reductions to partially offset the reduction in CFR for the year ended December 31, 2020. We expect costs in 2021 to increase modestly in line with an anticipated rebound in activity, as the effects of the COVID-19 pandemic subside and the Company's activity increases. We will continue to manage costs and thei~~r association with CFR relative to the continuing effects of the pandemic on our activities.~~

The full extent and duration of the impact of the pandemic on our operations and financial performance is currently unknown, and depends on future developments that are uncertain and unpredictable, including the institution of new lockdowns by certain government authorities, the duration and spread of the pandemic, its impact on capital and financial markets on a macro-scale and any new information that may emerge concerning the severity of the virus, its spread to other regions and the actions to contain the virus or treat its impact, among others.collections.

Management currently believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the continuing risks associated with the COVID-19 pandemic for at least the next 12 months from the date of this report.

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Results of Operations

Consolidated Results

(In thousands)


		Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change					Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
		2021		2020		$		%		2021		2020		$		%			2022		2021		$		%		2022		2021		$		%
Income Statement Data:	Income Statement Data:																	Income Statement Data:
Consulting fee revenue	Consulting fee revenue	$	77,061	$	71,543	$	5,518	7.7	%	$	227,158	$	224,453	$	2,705	1.2	%	Consulting fee revenue	$	85,142	$	77,061	$	8,081	10.5	%	$	254,262	$	227,158	$	27,104	11.9	%
Reimbursable expenses	Reimbursable expenses	19,543		17,109		2,434		14.2	%	58,079		51,956		6,123		11.8	%	Reimbursable expenses	24,429		19,543		4,886		25.0	%	63,275		58,079		5,196		8.9	%
Total revenue	Total revenue	$	96,604	$	88,652	$	7,952	9.0	%	$	285,237	$	276,409	$	8,828	3.2	%	Total revenue	$	109,571	$	96,604	$	12,967	13.4	%	$	317,537	$	285,237	$	32,300	11.3	%
Direct expenses	Direct expenses	64,196		59,998		4,198		7.0	%	194,314		190,078		4,236		2.2	%	Direct expenses	74,917		64,196		10,721		16.7	%	213,620		194,314		19,306		9.9	%
Gross profit	Gross profit	$	32,408	$	28,654	$	3,754	13.1	%	$	90,923	$	86,331	$	4,592	5.3	%	Gross profit	$	34,654	$	32,408	$	2,246	6.9	%	$	103,917	$	90,923	$	12,994	14.3	%
Selling, general and administrative expenses	Selling, general and administrative expenses	28,121		25,588		2,533		9.9	%	82,906		80,543		2,363		2.9	%	Selling, general and administrative expenses	31,035		28,121		2,914		10.4	%	92,831		82,906		9,925		12.0	%
Foreign currency exchange loss (benefit)		511		(694)		1,205		(173.6)	%	2,751		3,622		(871)		(24.0)	%
Foreign currency exchange loss																		Foreign currency exchange loss	803		511		292		57.1	%	3,730		2,751		979		35.6	%
Plus: Share of profit of equity method affiliates	Plus: Share of profit of equity method affiliates	551		983		(432)		(43.9)	%	1,805		2,021		(216)		(10.7)	%	Plus: Share of profit of equity method affiliates	506		551		(45)		(8.2)	%	1,456		1,805		(349)		(19.3)	%

Operating profit	Operating profit	$	4,327	$	4,743	$	(416)	(8.8)	%	$	7,071	$	4,187	$	2,884	68.9	%	Operating profit	$	3,322	$	4,327	$	(1,005)	(23.2)	%	$	8,812	$	7,071	$	1,741	24.6	%
Interest and related financing fees, net	Interest and related financing fees, net	1,226		1,275		(49)		(3.8)	%	4,077		3,870		207		5.3	%	Interest and related financing fees, net	2,098		1,226		872		71.1	%	4,805		4,077		728		17.9	%
Less: Other loss, net		—		152		(152)		(100.0)	%	—		3,654		(3,654)		(100.0)	%
Earnings (loss) before income taxes		$	3,101	$	3,316	$	(215)	(6.5)	%	$	2,994	$	(3,337)	$	6,331	(189.7)	%
Other loss, net																		Other loss, net	104		—		104		-%		319		—		319		100.0	%
Earnings before income taxes																		Earnings before income taxes	$	1,120	$	3,101	$	(1,981)	(63.9)	%	$	3,688	$	2,994	$	694	23.2	%
Income tax expense	Income tax expense	1,784		1,071		713		66.6	%	4,653		2,776		1,877		67.6	%	Income tax expense	1,823		1,784		39		2.2	%	3,602		4,653		(1,051)		(22.6)	%

Net earnings (loss)		$	1,317	$	2,245	$	(928)	(41.3)	%	$	(1,659)	$	(6,113)	$	4,454	(72.9)	%
Less: net earnings - noncontrolling interests		58		131		(73)		(55.7)	%	265		308		(43)		(14.0)	%
Net earnings (loss) attributable to Hill International, Inc.		$	1,259	$	2,114	$	(855)	(40.4)	%	$	(1,924)	$	(6,421)	$	4,497	(70.0)	%
Net (loss) earnings																		Net (loss) earnings	$	(703)	$	1,317	$	(2,020)	(153.4)	%	$	86	$	(1,659)	$	1,745	(105.2)	%
Less: net (loss) earnings - noncontrolling interests																		Less: net (loss) earnings - noncontrolling interests	(14)		58		(72)		(124.1)	%	(112)		265		(377)		(142.3)	%
Net (loss) earnings attributable to Hill International, Inc.																		Net (loss) earnings attributable to Hill International, Inc.	$	(689)	$	1,259	$	(1,948)	(154.7)	%	$	198	$	(1,924)	$	2,122	(110.3)	%

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Three Months Ended September 30, ~~2021~~2022 Compared to the

Three Months Ended September 30, ~~2020~~2021

Total Revenue by Geographic Region:


		Three Months Ended September 30,								Change					Three Months Ended September 30,								Change
		2021				2020				$		%			2022				2021				$		%

Americas	Americas	$	51,362	53.1	%	$	48,195	54.4	%	$	3,167	6.6	%	Americas	$	57,875	52.7	%	$	51,362	53.1	%	$	6,513	12.7	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	21,621		22.4	%	22,729		25.6	%	(1,108)		(4.9)	%	Middle East/Asia/Pacific	25,378		23.2	%	21,621		22.4	%	3,757		17.4	%
Europe	Europe	13,897		14.4	%	11,465		12.9	%	2,432		21.2	%	Europe	16,284		14.9	%	13,897		14.4	%	2,387		17.2	%
Africa	Africa	9,724		10.1	%	6,263		7.1	%	3,461		55.3	%	Africa	10,034		9.2	%	9,724		10.1	%	310		3.2	%
Total	Total	$	96,604	100.0	%	$	88,652	100.0	%	$	7,952	9.0	%	Total	$	109,571	100.0	%	$	96,604	100.0	%	$	12,967	13.4	%

Consulting Fee Revenue by Geographic Region:


		Three Months Ended September 30,								Change					Three Months Ended September 30,								Change
		2021				2020				$		%			2022				2021				$		%

Americas	Americas	$	34,510	44.8	%	$	33,697	47.2	%	$	813	2.4	%	Americas	$	37,896	44.5	%	$	34,510	44.8	%	$	3,386	9.8	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	21,345		27.7	%	21,709		30.3	%	(364)		(1.7)	%	Middle East/Asia/Pacific	23,436		27.5	%	21,345		27.7	%	2,091		9.8	%
Europe	Europe	12,328		16.0	%	10,549		14.7	%	1,779		16.9	%	Europe	14,500		17.0	%	12,328		16.0	%	2,172		17.6	%
Africa	Africa	8,878		11.5	%	5,588		7.8	%	3,290		58.9	%	Africa	9,310		10.9	%	8,878		11.5	%	432		4.9	%
Total	Total	$	77,061	100.0	%	$	71,543	100.0	%	$	5,518	7.7	%	Total	$	85,142	99.9	%	$	77,061	100.0	%	$	8,081	10.5	%

~~CFR was $77,061 and $71,543~~Total revenue increased approximately $12,967 for the three months ended September 30, ~~2021~~2022 when compared to the same period in 2021. CFR was $85,142 and ~~2020,~~$77,061 of the total revenue for the three months ended September 30, 2022 and 2021, respectively, which ~~comprised~~was 77.7% and 79.8% ~~and 80.7%~~ of total revenues, respectively.

The increase in ~~CFR and~~ total revenue ~~in 2021~~and CFR during the three months ended September 30, 2022 compared to the same period in the prior year ~~period~~ is primarily driven by activity ~~continuing to return~~returning to pre-COVID levels, including returns to full staffing on certain existing projects and mobilizations on certain newly awarded projects.

Gross Profit by Geographic Region:

Three Months Ended September 30, Change
2021 2020 $ %

% of
CFR % of
CFR
Americas $ 15,358 47.3 % 44.5 % $ 14,204 49.6 % 42.2 % $ 1,154 8.1 %
Middle East/Asia/Pacific 8,086 25.0 % 37.9 % 7,559 26.4 % 34.8 % 527 7.0 %
Europe 5,299 16.4 % 43.0 % 4,196 14.6 % 39.8 % 1,103 26.3 %
Africa 3,665 11.3 % 41.3 % 2,695 9.4 % 48.2 % 970 36.0 %
Total $ 32,408 100.0 % 42.1 % $ 28,654 100.0 % 40.1 % $ 3,754 13.1 %


	Three Months Ended September 30,												Change
	2022						2021						$		%

					% of Total Revenue						% of Total Revenue
Americas	$	15,277	44.1	%	26.4	%	$	15,358	47.3	%	29.9	%	$	(81)	(0.5)	%
Middle East/Asia/Pacific	8,951		25.8	%	35.3	%	8,086		25.0	%	37.4	%	865		10.7	%
Europe	6,136		17.7	%	37.7	%	5,299		16.4	%	38.1	%	837		15.8	%
Africa	4,290		12.4	%	42.8	%	3,665		11.3	%	37.7	%	625		17.1	%
Total	$	34,654	100.0	%	31.6	%	$	32,408	100.0	%	33.5	%	$	2,246	6.9	%

Gross profit (margin) as a percentage of ~~CFR increased 2.0%~~total revenue decreased for the three months ended September 30, ~~2021~~2022 compared to the same period in 2021. In the ~~2020. In all regions except Africa, gross profit~~Middle East/Asia/Pacific margin decreased as a percentage of ~~CFR~~total revenue due to the closeout of higher margin projects new projects and increased labor wages. In Africa, the increase in margin as a percentage of ~~CFR~~total revenue was due to ~~generally higher project margins. These increases were partially off-set by~~ a ~~decrease~~decline in ~~gross profit as a percentage of CFR in Africa as a result of the start of a large project with a lower margin.~~labor costs.

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SG&A Expenses

Our SG&A expenses increased $2,914 for the three months ended September 30, ~~2021 increased approximately $2,533 when~~2022 compared to the same period in ~~2020.~~2021. The increase ~~was primarily due to the reinstatement of the Company's 401(k) match,~~in year-over-year SG&A reflected increased investments in Hill's business development team as well as higher ~~labor~~ costs associated with ~~the expected achievement of certain bonus metrics in the current year~~consultants, temporary office support, and increased travel costs due to the lifting of COVID-19 stay-at-home orders that were in place during the same period in 2020. SG&A expenses represented approximately 36.5% and 35.8% of CFR for the three months ended September 30, 2021 and 2020, respectively.travel.

Foreign Currency Exchange Loss

There was a foreign currency exchange loss ~~(benefit)~~ of ~~$511~~$803 and ~~$(694)~~$511 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The currency exchange loss for nine months ended September 30, 2022 was primarily the result of the weakening of the Euro against the dollar. The currency exchange loss for the three months ended September 30, 2021 was primarily the result of ~~a 2%~~the weakening of the ~~Euro~~Libyan Dinar against the US Dollar and currencies pegged to the US Dollar. The foreign currency exchange benefit in 2020 was primarily the result of a 6% strengthening of the Euro against the US Dollar and currencies pegged to the US Dollar, partially offset by a 3% change in the Libyan Dinar.Euro.

Interest and Related Financing Fees, net

Interest and related financing fees for the three months ended September 30, ~~2021~~2022 were ~~$1,226,~~$2,098, net of $101 of interest income, compared to interest and related financing fees for the three months ended September 30, ~~2020~~2021 of ~~$1,275,~~$1,226, net of ~~$17~~$94 of interest income.

Other Loss, net

~~During~~Other loss, net is comprised primarily of interest cost from the ~~three months ended September 30, 2020, the Company recognized other non-operating loss~~Company's End of ~~$152. There was no such loss for the three months ended September 30, 2021.~~Service Benefit Plan.

Income Taxes

For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized income tax expense of ~~$1,784~~$1,823 and ~~$1,071,~~$1,784, respectively.

The effective income tax rate for the three months ended September 30, 2022 and 2021 were 162.8% and ~~2020 were~~ 57.5% ~~and 32.3%~~, respectively. The change in our effective tax rate for the three months ended September 30, ~~2021~~2022 was primarily a result of the mix of income among various jurisdictions with different statutory tax rates, as well as certain withholding taxes and uncertain tax positions recorded in 2021.

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Nine Months Ended September 30, ~~2021~~2022 Compared to the

Nine Months Ended September 30, ~~2020~~2021

Total Revenue by Geographic Region:


		Nine Months Ended September 30,								Change					Nine Months Ended September 30,								Change
		2021				2020				$		%			2022				2021				$		%

Americas	Americas	$	147,701	51.7	%	$	145,830	52.8	%	$	1,871	1.3	%	Americas	$	166,666	52.4	%	$	147,701	51.7	%	$	18,965	12.8	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	63,320		22.2	%	72,327		26.2	%	(9,007)		(12.5)	%	Middle East/Asia/Pacific	75,892		23.9	%	63,320		22.2	%	12,572		19.9	%
Europe	Europe	44,942		15.8	%	37,434		13.5	%	7,508		20.1	%	Europe	46,220		14.6	%	44,942		15.8	%	1,278		2.8	%
Africa	Africa	29,274		10.3	%	20,818		7.5	%	8,456		40.6	%	Africa	28,759		9.1	%	29,274		10.3	%	(515)		(1.8)	%
Total	Total	$	285,237	100.0	%	$	276,409	100.0	%	$	8,828	3.2	%	Total	$	317,537	100.0	%	$	285,237	100.0	%	$	32,300	11.3	%

Consulting Fee Revenue:


		Nine Months Ended September 30,								Change					Nine Months Ended September 30,								Change
		2021				2020				$		%			2022				2021				$		%

Americas	Americas	$	100,996	44.5	%	$	104,261	46.5	%	$	(3,265)	(3.1)	%	Americas	$	113,572	44.7	%	$	100,996	44.5	%	$	12,576	12.5	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	62,100		27.3	%	69,241		30.8	%	(7,141)		(10.3)	%	Middle East/Asia/Pacific	72,305		28.4	%	62,100		27.3	%	10,205		16.4	%
Europe	Europe	36,968		16.3	%	32,197		14.3	%	4,771		14.8	%	Europe	41,618		16.4	%	36,968		16.3	%	4,650		12.6	%
Africa	Africa	27,094		11.9	%	18,754		8.4	%	8,340		44.5	%	Africa	26,767		10.5	%	27,094		11.9	%	(327)		(1.2)	%
Total	Total	$	227,158	100.0	%	$	224,453	100.0	%	$	2,705	1.2	%	Total	$	254,262	100.0	%	$	227,158	100.0	%	$	27,104	11.9	%

~~CFR was $227,158 and $224,453~~Total revenue increased $32,300 for the nine months ended September 30, ~~2021~~2022 when compared to the same period in 2021. CFR was $254,262 and ~~2020,~~$227,158 for the nine months ended September 30, 2022 and 2021, respectively, which comprised ~~79.6%~~80.1% and ~~81.2%~~79.6% of total revenues, respectively.

The ~~increase~~increases in total revenue and CFR ~~in 2021~~for the nine months ended September 30, 2022 compared to the prior year period is primarily driven by activity ~~continuing to return~~returning to pre-COVID levels, including returns to full staffing on certain existing projects and mobilizations on certain newly awarded projects.

~~The increase in~~ Additionally, the purchase of NEYO group at the end of the second quarter of 2021 provided an additional $1,453 to total revenue ~~for~~and CFR during the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to revenue during 2020 being reduced as a result of delayed project starts and project suspensions due to the COVID-19 pandemic. The current year ~~increase includes a higher mix of sub-contractor work.~~period.

Gross Profit by Geographic Region:


		Nine Months Ended September 30,												Change					Nine Months Ended September 30,												Change
		2021						2020						$		%			2022						2021						$		%

						% of CFR						% of CFR											% of Total Revenue						% of Total Revenue
Americas	Americas	$	43,622	47.9	%	43.2	%	$	43,946	50.9	%	42.1	%	$	(324)	(0.7)	%	Americas	$	47,553	45.7	%	28.5	%	$	43,622	47.9	%	29.5	%	$	3,931	9.0	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	21,781		24.0	%	35.1	%	21,611		25.0	%	31.2	%	170		0.8	%	Middle East/Asia/Pacific	28,160		27.1	%	37.1	%	21,781		24.0	%	34.4	%	6,379		29.3	%
Europe	Europe	14,743		16.2	%	39.9	%	12,425		14.4	%	38.6	%	2,318		18.7	%	Europe	17,129		16.5	%	37.1	%	14,743		16.2	%	32.8	%	2,386		16.2	%
Africa	Africa	10,777		11.9	%	39.8	%	8,349		9.7	%	44.5	%	2,428		29.1	%	Africa	11,075		10.7	%	38.5	%	10,777		11.9	%	36.8	%	298		2.8	%
Total	Total	$	90,923	100.0	%	40.0	%	$	86,331	100.0	%	38.5	%	$	4,592	5.3	%	Total	$	103,917	100.0	%	32.7	%	$	90,923	100.0	%	31.9	%	$	12,994	14.3	%

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Gross profit (margin) as a percentage of ~~CFR~~total revenue increased ~~1.5%~~0.8% for the nine months ended September 30, ~~2021~~2022 compared to the same period in the ~~2020. In the Americas, gross profit as a percentage of CFR increased as a result of generally higher project margins.~~2021. In the Middle East/Asia/Pacific region, gross profit as a percentage of ~~CFR~~total revenue increased primarily due to ~~increased billing rates on~~new projects ~~in Asia.~~with lower labor costs. In Europe, gross profit as a percentage of ~~CFR~~total revenue increased due to ~~higher margin~~ mix of labor used on projects.

~~The increases above were partially off-set by a decrease in gross profit as a percentage of CFR in Africa as a result of the start of a large project with a lower margin.~~

SG&A Expenses

SG&A expenses for the nine months ended September 30, ~~2021~~2022 increased by approximately ~~$2,363~~$9,925 when compared to the same period in the prior year. The increase was primarily due to ~~a $5,900 increase~~investments in ~~labor costs~~the business development team and additional expenses associated with the NEYO group purchased at the end of the second quarter of 2021. In addition, consultants and temporary office support increased due to vacancies and additional work needed to address internal control deficiencies, and travel related expenses continue to increase towards a pre-COVID level. SG&A in 2022 also included a $0.6 million charge related to a bond that was called.The Company has received a final court order to have the ~~lifting of COVID-19 stay at home orders~~bond returned and ~~the ramping up of projects, the expected achievement of certain bonuses~~expects to reverse its charge in the ~~current year and the reinstatement~~second half of ~~the company 401(k) match. In addition, legal fees increased by $700 due to a settlement of previously incurred legal expenses in~~2022. Also, the prior year ~~which did not reoccur in 2021. Partially offsetting these increases~~period was ~~a $1,500 decrease~~reduced by an increase in bad debt ~~expense as a result~~recoveries associated with the receipt of ~~the Company receiving~~ payments against previously reserved ~~receivables. In addition, there was~~receivables, primarily on a ~~$1,600 additional depreciation charge in~~Libyan-based project.

Excluding the ~~first quarter~~impact of ~~2020 for~~ the ~~write-off of leasehold improvements related to the Company subletting office space in Philadelphia to a third party, which did not reoccur in 2021.~~above-referenced Libya bad debt recoveries and bond cost, SG&A expenses ~~represented approximately 36.5% and 35.9%~~as a percentage of ~~CFR for~~gross profit in the nine months ended September 30, 2022 and September 30, 2021 would have been 92.8% and ~~2020,~~94.7%, respectively.

Foreign Currency Exchange Loss

There were foreign currency exchange losses of ~~$2,751~~$3,730 and ~~$3,622~~$2,751 for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. For the nine months ended September 30, 2022, the foreign currency exchange losses were primarily caused by the weakening of the Euro. For the nine months ended September 30, 2021, the foreign currency exchange losses were primarily caused by ~~the strengthening of the Euro against the US Dollar and currencies pegged to the US Dollar by 5%, partially offset by~~ a 70% weakening of the Libyan Dinar against the Euro and an 4%8% weakening of the Egyptian pound against the Euro. For the nine months ended September 30, 2020, the foreign currency exchange losses were primarily caused by a 21.6% weakening of the Brazilian Real against the Euro prior to declaring bankruptcy of our Brazilian subsidiary.

Interest and Related Financing Fees, net

Interest and related financing fees increased ~~$207~~$728 to ~~$4,077~~$4,805 net of $69 interest income for the nine months ended September 30, ~~2021~~2022 as compared with ~~$3,870~~$4,077 for nine months ended September 30, ~~2020, which includes $94~~2021, net of $17 of interest income.

Other Loss, net

~~During~~Other loss, net is comprised primarily of interest cost from the ~~nine months ended September 30, 2020 a loss~~Company's End of $4,064 was recognized due to the bankruptcy filing and deconsolidation of our operating subsidiary in Brazil (see Note 15 to the consolidated financial statements filed herein), net of other non-operating income of $65. An additional $345 of income was recognized during the first quarter of 2020 related to the cancellation of a PDIC Economic Stimulus Program Loan Agreement that the Company made on October 24, 2014 as a result of the Company satisfying all obligations in regard to the Loan Agreement.

~~There was no such loss for the nine months ended September 30, 2021.~~Service Benefit Plan.

Income Taxes

For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized income tax expense of ~~$4,653~~$3,602 and ~~$2,776,~~$4,653, respectively.

The effective income tax rate for the nine-month periods ended September 30, 2022 and 2021 was 97.7% and ~~2020 was~~ 155.4% ~~and (83.2)%~~, respectively. The change in the Company’s effective tax rate for the nine months ended September 30, ~~2021~~2022 was primarily a result of the mix of income among various foreign jurisdictions with different statutory tax rates, as well as certain withholding taxes and uncertain tax positions recorded in 2021.

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Liquidity and Capital Resources

Our primary cash obligations are our payroll and our project subcontractors. Our primary source of cash is receipts from clients. We generally pay our employees semi-monthly in arrears and invoice our clients monthly in arrears. Our clients generally remit payment approximately three months, on average, after invoice date. This creates a lag between the time we pay our employees and the time we receive payment from our clients. We bill our clients for any subcontractors used and pay those subcontractors after receiving payment from our clients, so no such timing lag exists for the payments we make to subcontractors.

We utilize cash on hand and our revolving credit facilities to fund the working capital requirement caused by the lag discussed above and other operating needs. We believe our expected cash receipts from clients, together with current cash on hand and revolving credit facilities, are sufficient to support the reasonably anticipated cash needs of our operations over the next twelve months from November ~~8, 2021,~~14, 2022, the date of this report.

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At September 30, ~~2021,~~2022, our primary sources of liquidity consisted of ~~$26,293~~$22,834 of cash and cash equivalents, of which ~~$26,111~~$18,474 was on deposit in foreign locations, and ~~$12,336~~$3,618 of available borrowing capacity under our various credit facilities. The Company is in discussion with both existing lenders and potential new lenders to refinance our secured credit facilities with Société Générale prior to their maturities in May 2022 for the Domestic and International Revolving Credit Facilities and June 2023 for the 2017 Term Loan Facility.

We also have relationships with other foreign banks for the issuance of letters of credit, letters of guarantee and performance bonds in a variety of foreign currencies. At September 30, ~~2021,~~2022, we had approximately ~~$63,573~~$66,979 of availability under these arrangements. Our sources of liquidity under arrangements with foreign banks are available for repatriation as deemed necessary by us, with some restrictions and tax implications.

~~Please see "Impact~~On March 31, 2022, we entered into an amendment of ~~COVID-19~~our main credit facility with Société Générale that extends the maturity dates of the Domestic and International Revolving Credit Facilities to May 5, 2023 and the term loan facility to November 5, 2023. The interest rates on the Domestic and International Revolving Credit Facilities increased by 1.1% and 1.5%, respectively, while the term loan facility interest rate increased by 1.0% and the Company paid an amendment fee of $463. The aggregate amount of the credit commitments under the facilities will automatically and permanently be reduced by an amount equal to $500 on each of September 30, 2022 and December 31, 2022.

Pursuant to the Merger Agreement, we also have agreed to various specific restrictions relating to the conduct of our ~~Business" above~~business between the date of the Merger Agreement and the time at which the Merger becomes effective, including but not limited to, agreeing to not to (i) issue or sell shares of our common stock or other equity or voting securities of the Company or any of its subsidiaries, or (ii) incur or assume any indebtedness, including by the issuance of any debt security (or any option, warrant, call or similar right to acquire any debt security), in each case subject to the terms of the Merger Agreement and any exceptions set forth therein. The Merger Agreement provides that, if requested by the Company, Parent and the Company shall use their respective commercially reasonable efforts to negotiate and enter into definitive documentation evidencing a credit facility or other interim financing in an amount to be mutually agreed by the parties thereto and otherwise on customary market terms as the parties shall mutually agree upon. However, this does not constitute a commitment to provide financing by Parent.

We believe that the Company has adequate liquidity and business plans to continue to operate the business for ~~our discussion about~~ the ~~impact~~next 12 months from November 14, 2022, the date of ~~COVID-19 on liquidity.~~this filing. This ability to continue as a going concern is dependent upon the ability to refinance the Domestic and International Revolving Credit Facilities prior to their May 5, 2023 maturity date. As such, the consolidated interim financial statements included in this Form 10-Q do not include any adjustments that might result from the inability to refinance the Domestic and International Revolving Credit Facilities. The Company has retained a debt advisor to assist in the refinancing of these facilities and is conducting a formal process to secure this funding. The Company expects to refinance these facilities by the end of 2022.

Sources of Additional Capital

A significant increase in our current backlog or impacts on our liquidity from the COVID-19 pandemic may require us to obtain additional financing. If additional financing is required in the future due to an increase in backlog, impacts from the COVID-19 pandemic or changes in strategic or operating plans, we cannot provide any assurance that any other sources of financing will be available, or if available, that the financing will be on terms acceptable to us.

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Cash Flows


		Nine Months Ended September 30,							Nine Months Ended September 30,
		2021		Change		2020			2022		Change		2021

Net cash (used in) provided by operating activities		$	(6,993)	$	(10,259)	$	3,266
Net cash used in operating activities								Net cash used in operating activities	$	(2,316)	$	4,677	$	(6,993)
Net cash used in investing activities	Net cash used in investing activities	(1,878)		(777)		(1,101)		Net cash used in investing activities	(1,472)		406		(1,878)
Net cash provided by financing activities	Net cash provided by financing activities	3,285		(11,779)		15,064		Net cash provided by financing activities	5,698		2,413		3,285
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,654)		(2,557)		(97)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,548)		106		(2,654)
Deconsolidated cash		—		(9)		9
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(8,240)			$	17,123

Net decrease in cash, cash equivalents and restricted cash								Net decrease in cash, cash equivalents and restricted cash	$	(638)			$	(8,240)

Operating ~~activities~~Activities

During the nine months ended September 30, 2022, cash used in operating activities was primarily due to an increase in accounts receivable, partially offset by an increase in accounts payable related to the timing of payments to vendors and subcontractors, an increase in other current liabilities and a decrease in retainage receivable. During the nine months ended September 30, 2021, cash used in operating activities was primarily due to increases in accounts receivable and prepaid expenses, partially offset by an increase in in accounts payable related to the timing of payments to vendors and subcontractors and an increase in other current liabilities. During the nine months ended September 30, 2020, cash provided by operating activities was primarily due to the deferral of payroll tax payments as part of the US government's COVID relief program, rent concessions from certain lessors primarily in the form of rent payment deferrals, and the timing of payments to vendors. The rent payment deferrals and half of the payroll tax deferrals are being paid during 2021. The remainder of the payroll tax deferral will be paid during 2022.

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Cash held in restricted accounts is used primarily as collateral for the issuance of performance and advance payment bonds, letters of credit and escrow. Restricted cash decreased from ~~$7,184~~$8,625 at December 31, ~~2020~~2021 to ~~$6,880~~$6,974 at September 30, ~~2021.~~2022.

We manage our operating cash flows by managing key working capital accounts in total. The primary elements of our working capital are accounts receivable, prepaid and other current assets, and accounts payable.

From year to year, the components of our working capital accounts may reflect significant changes. The changes are due primarily to the timing of cash receipts and payments within our working capital accounts combined with changes in our receivables and payables relative to the changes in our overall business.

Investing ~~activities~~Activities

During the nine months ended September 30, ~~2021 cash was used in investing activities for the purchase of a business~~2022 and ~~for fixed asset purchases. During the nine months ended September 30, 2020,~~2021, cash was used in investing activities for the purchase of fixed assets.

Financing activities

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, cash provided by financing activities was used to fund the ongoing operating activities.

Effect of Exchange Rate Changes on Cash

For the nine months ended September 30, 2022, the effects of exchange rate changes on cash was primarily driven by the weakening of the Egyptian Pound (16.1%) and Euro (6.5%) against the U.S. Dollar.

For the nine months ended September 30, 2021, the effects of exchange rate changes on cash was primarily driven by the weakening of the Libyan Dinar ~~(70.5%~~(70.3%) and Euro ~~(5.3%~~(3.1%) against the U.S. Dollar.

For the nine months ended September 30, 2020, the effects of exchange rate changes on cash was primarily driven by the recognition of balances previously included in accumulated other comprehensive losses into expense due to the bankruptcy and liquidation of our operating subsidiary in Brazil (see Note 15 to the consolidated financial statements filed herein) and a 31.7% weakening of the Brazilian Real against the Euro and a 4% weakening of the Euro against the U.S. dollar in 2020.

Backlog

Our backlog represents CFR, which includes management’s estimate of the amount of contracts and awards in-hand that we expect to recognize as CFR in future periods as a component of total revenue. Our backlog is evaluated by management, on a project-by-project basis, and is reported for each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or canceled.

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Backlog is not a measure defined in U.S. generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

Although backlog reflects business that we consider to be firm, cancellations or scope adjustments may occur. Further, substantially all of our contracts with our clients may be terminated at will, in which case the client would only be obligated to pay us for services provided through the termination date.

We adjust backlog to reflect project cancellations, deferrals and revisions in scope and cost (both upward and downward) known at the reporting date. Future contract modifications or cancellations, however, may increase or reduce backlog and future CFR.

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The following tables show our backlog by geographic region:


		Total Backlog				12-Month Backlog					Total Backlog				12-Month Backlog
September 30, 2021
September 30, 2022										September 30, 2022
Americas	Americas	$	283,317	42.8	%	$	103,197	41.7	%	Americas	$	341,605	47.8	%	$	122,398	48.4	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	156,600		23.7	%	72,961		29.5	%	Middle East/Asia/Pacific	164,167		23.0	%	62,385		24.7	%
Europe	Europe	106,823		16.2	%	38,664		15.6	%	Europe	110,357		15.4	%	42,224		16.7	%
Africa	Africa	113,980		17.3	%	32,738		13.2	%	Africa	98,854		13.8	%	25,657		10.2	%
Total	Total	$	660,720	100.0	%	$	247,560	100.0	%	Total	$	714,983	100.0	%	$	252,664	100.0	%

December 31, 2020
December 31, 2021										December 31, 2021
Americas	Americas	$	276,752	41.6	%	$	105,721	45.2	%	Americas	$	347,489	47.7	%	$	112,122	43.1	%
Middle East/Asia/Pacific	Middle East/Asia/Pacific	160,211		24.0	%	66,407		28.3	%	Middle East/Asia/Pacific	164,268		22.5	%	78,080		30.0	%
Europe	Europe	105,478		15.8	%	37,062		15.8	%	Europe	100,868		13.8	%	36,531		14.1	%
Africa	Africa	124,273		18.6	%	25,187		10.7	%	Africa	116,761		16.0	%	33,219		12.8	%
Total	Total	$	666,714	100.0	%	$	234,377	100.0	%	Total	$	729,386	100.0	%	$	259,952	100.0	%

At September 30, ~~2021,~~2022, our backlog was ~~$660,720~~$714,983 compared to ~~$666,714~~$729,386 at December 31, ~~2020.~~2021. We estimate that approximately ~~$247,560~~$252,664 or ~~37.5%~~35.3% of the backlog at September 30, ~~2021,~~2022, will be recognized over the next twelve months.

The amount of our new bookings, before any cancellations or other reductions, was ~~$274,500~~$266,807 and equates to a book-to-burn ratio of ~~120.8%~~104.9% for the nine months ended September 30, ~~2021.~~2022. Our book-to-burn ratio, a non-GAAP measure, is determined by taking our new CFR bookings and dividing it by CFR for the applicable period. This metric allows management to monitor the Company's business development efforts to ensure we grow our backlog and our business over time and management believes that this measure is useful to investors for the same reason.

The difference between the remaining performance obligations of ~~$92,155~~$93,324 and the backlog of ~~$660,720~~$714,983 at September 30, ~~2021~~2022 is due to the backlog including the full value of client contracts billed on a time and materials basis, ~~which~~whereas such time and material contracts, are not included as part of the remaining performance obligation. Such contracts are excluded from the remaining performance obligation because they are not fixed price contracts and the consideration expected under such contracts is variable as it is based upon hours and costs incurred, which results in the counter-party only being obligated to the Company for services provided through the completion or termination date.

Quarterly Fluctuations

Our operating results vary from period to period as a result of the timing of projects and assignments. We do not believe that our business is seasonal.

Inflation

Although we are subject to fluctuations in the local currencies of the countries in which we operate, we do not believe that inflation will have a significant effect on our results of operations or our financial position.

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Critical Accounting Policies

The Company’s interim financial statements were prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"), which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting these judgments increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in ~~the Company’s 2020~~our 2021 Annual ~~Report on Form 10-K.~~

~~Table of Contents~~

Report.

New Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to the consolidated financial statements filed herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to

provide the information under this item.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, ~~2021.~~2022. Management concluded that, due to the on-going remediation associated with the material weakness identified in our ~~2020~~2021 Annual Report, ~~on Form 10-K (“2020 Form 10-K"),~~ our disclosure controls and procedures were ineffective as of September 30, ~~2021~~2022 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

Exchange Act Rules 13a-15(e) and 15d-15(e) define “disclosure controls and procedures” to mean controls and procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The definition further states that disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

For a more comprehensive discussion of the material weaknesses in internal control over financial reporting previously identified by management as of December 31, ~~2020~~2021 and the remedial measures undertaken to address these material weaknesses, investors are encouraged to review Item 9A, Disclosure Controls and Procedures, of our ~~2020 Form 10-K.~~2021 Annual Report.

Changes in Internal Control Over Financial Reporting

Our remediation efforts for material weaknesses previously reported were ongoing during the nine months ended September 30, ~~2021,~~2022, as described in Item 9A of our ~~2020~~2021 Annual ~~Report on Form 10-K.~~Report. Management has implemented a series of both new and enhanced controls related to the deficiencies identified as a material weakness during the first three quarters of 2022. Management believes that effective performance of these controls over the course of 2022 will remediate the material weakness. Management has and will continue to conduct testing of these controls throughout the remainder of 2022. In order for the material weakness to be remediated, the controls must continue to be effective throughout 2022, evidenced by testing of these controls by both management and our independent auditors. There were no other material changes in our internal control over financial reporting that occurred during the nine months ended September 30, ~~2021~~2022 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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Part II — OTHER INFORMATION

Item 1. Legal Proceedings.

Information required by this item is incorporated by reference to Part I, item 1, Note 13 — Commitments and Contingencies, Legal Proceedings.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


						EXHIBIT INDEX

Exhibit No.						Description

2.1						Agreement and Plan of Merger
2.2						Amended and Restated Agreement and Plan of Merger (GIS)
10.1						Tender and Support Agreement
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document.
101.SCH						XBRL Taxonomy Extension Schema Document.
101.PRE						XBRL Taxonomy Presentation Linkbase Document.
101.CAL						XBRL Taxonomy Calculation Linkbase Document.
101.LAB						XBRL Taxonomy Label Linkbase.
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.
104						The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			Hill International, Inc.

			By:			/s/ Raouf S. Ghali
						Raouf S. Ghali
						Chief Executive Officer
						(Principal Executive Officer)
			Dated:			November ~~8, 2021~~14, 2022

			By:			/s/ Todd Weintraub
						Todd Weintraub
						Senior Vice President and Chief Financial Officer
						(Principal Financial Officer and Principal Accounting Officer)
			Dated:			November ~~8, 2021~~14, 2022

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	Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
	Fixed Price		T&M		Total		Percent of Total Revenue		Fixed Price		T&M		Total		Percent of Total Revenue
Americas	$	5,398	$	45,964	$	51,362	53.1	%	$	5,046	$	43,149	$	48,195	54.4	%
Middle East/Asia/Pacific	773		20,848		21,621		22.4	%	7,655		15,074		22,729		25.6	%
Europe	10,898		2,999		13,897		14.4	%	7,387		4,078		11,465		12.9	%
Africa	1,125		8,599		9,724		10.1	%	(75)		6,338		6,263		7.1	%
Total	$	18,194	$	78,410	$	96,604	100.0	%	$	20,013	$	68,639	$	88,652	100.0	%



	Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
	Fixed Price		T&M		Total		Percent of Total Revenue		Fixed Price		T&M		Total		Percent of Total Revenue
Americas	$	14,778	$	132,923	$	147,701	51.7	%	$	15,736	$	130,094	$	145,830	52.8	%
Middle East/Asia/Pacific	7,000		56,320		63,320		22.2	%	16,481		55,846		72,327		26.2	%
Europe	25,247		19,695		44,942		15.8	%	25,566		11,868		37,434		13.5	%
Africa	2,027		27,247		29,274		10.3	%	201		20,617		20,818		7.5	%
Total	$	49,052	$	236,185	$	285,237	100.0	%	$	57,984	$	218,425	$	276,409	100.0	%