Q1 2021 Hudson Global Inc Earnings Call

[music].

Good day, ladies and gentlemen, this is the conference operator today's conference call is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.

And.

[music].

Good morning, and welcome to the Hudson Global Conference call for the first quarter of 2020 one.

And I called this morning will be led by Chief Executive Officer.

Yes.

Your line.

And Chief Financial Officer, Matt Diamond. Please be advised that the statements made during the presentation include forward looking statements under the applicable security laws.

Such forward looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements.

The reason.

These risks are discussed enough.

Oh on 8-K filed today and in our other filings made with the Securities and Exchange Commission, including our annual report on the form 10-K, the company disclaims any obligations to update any forward looking statements. During the course of this conference.

Al.

Reference will be made in the non-GAAP to non-GAAP.

GAAP terms, such as constant currency adjusted EBITDA.

And adjusted earnings per diluted shares reconciliation for these measures are included in our earnings release and quarterly slides.

Both posted on our website Hudson R. P O dot com I encourage you to access our earnings materials at this time.

As they will serve as a helpful reference guide during our call.

I will now turn the call over to Jeff Eberwein, you may begin.

Thank you operator and welcome everyone.

Thank you for your interest and Hudson global and for joining us today.

I'll start by reviewing the first quarter 2021 highlights and Mike and Matt time, and our CFO will provide some additional details on our financial results.

I will then give an update on current business conditions.

For the first quarter of 2021, we reported revenue of $34 5 million up 27% year over year and constant currency.

Adjusted net revenue, formerly referred to as gross profit.

It was $12 7 million and increased 19% year over year and constant currency.

SG&A costs for $12 million and the first quarter of 13% versus the same period last year and constant currency we.

We reported adjusted EBITDA of 800000.

Up from an adjusted EBITDA loss of 100000, a year ago.

In addition, we reported a net loss of <unk> 2 million or seven tenths of share versus a net loss of <unk> 5 million or <unk> 17 cents a share and the same period last year.

We reported adjusted net income per share of <unk> and the first quarter of 2021 versus an adjusted net loss per share of <unk> <unk> a year ago.

Turning to the performance for the quarter by region, Our Asia Pacific business grew 29% and constant currency and adjusted net revenue grew 12% and constant currency.

Adjusted EBITDA of $1 1 million increased from adjusted EBITDA of $1 6 million a year ago.

Our Americas business grew revenue and adjusted net revenue, 42% and 46% and the constant currency, respectively, mostly due to the acquisition of Cui group that was made on the fourth quarter of last year.

Adjusted EBITDA of 200000 increased versus last year's adjusted EBITDA of 100000.

Our Europe business grew revenue, 6% and constant currency and adjusted net revenue, 5% and constant currency adjusted EBITDA of 200000, and the first quarter of 2021 increased compared to adjusted EBITDA of 100000, and the first quarter of last year.

Lastly, we believe it's important to highlight that adjusted net revenue for the company as a whole grew at a faster rate than our costs did in Q1, and that was particularly true and Asia Pacific and Europe.

This operating leverage that we're seeing is critical to achieving our goal of growing.

<unk> adjusted EBITDA as a percentage of adjusted net revenue to the 20% level before corporate costs over the long term.

I'll now turn the call over to Matt Diamond, our CFO to review some additional financial details from the first quarter.

Thank you, Jeff and good morning, everyone.

We ended the quarter with $23 6 million and cash and restricted cash.

Day sales outstanding was 41 days at March 2021, but low DSO of 44 days, we had and March 2020.

In connection with the acquisition of quick group and the fourth quarter of 2020, our balance sheet as of March 31, 2021 reflects $2 1 million of goodwill and $1 3 million of net intangible assets.

The company's working capital, excluding cash increased by $2 3 million and the first quarter to $6 8 million.

Up from $4 5 million at the end of the fourth quarter of 2020.

As a reminder, in April of 2019, we finalized a new credit facility in Australia to support the expected growth and working capital needs as a result of new client wins in that market.

But we had nothing drawn on this facility at the end of Q1.

The company used $2 4 million and cash flow from operations during the first quarter.

The outflow was due to the seasonal moves and working capital, we typically see and Q1 as well as the ramp up of a new MSP client and Australia.

I'll now turn the call back over to Jeff to give some more perspective on our <unk> business and to review the current trends and our business.

Thank you Matt.

Over the last 12 months, the COVID-19 pandemic created numerous challenges for our clients and our business around the world, but we are now emerging.

From this client crisis as you can see and our Q1 results, where we exhibited solid growth and revenue adjusted net revenue and adjusted EBITDA and all three regions.

Our Asia Pacific business continued to perform really well and we're very pleased about the recovery and our Americas results, which is due to organic and improvements that we made last year and the addition of <unk> group and the fourth quarter.

The recovery that we're seeing is uneven depending on country, but in general we're seeing increased activity levels at our existing clients and on improving pipeline of potential clients and.

Fortunately I want to thank all of our highly dedicated employees for their flexibility hard work and dedication to our clients and business and the challenging conditions that we've experienced over the last year.

Operator can you. Please open the line for questions.

As a reminder, if you would like to ask a question. Please press star one. The first question comes from the line of Josh Vogel with Sidoti.

Thank you good morning, Jack and Matt Good morning.

I got a bunch of questions here.

I guess the first one here you know I know it is likely and something to do with the nature of the contracts being <unk> of MSP, but can you talk about the difference in profitability by region.

Sure.

And we look at.

Because of the MSP contracts, where that's where we're managing the temps in contractors.

And for clients.

That business results and a lot of revenue.

But a lot of pass through revenue until we recognize a high amount of revenue a high amount of cost of goods sold and the difference is and net revenue.

Whereas on the art side of 100% of the revenue goes to the net revenue and so are our preferred and metric.

To look at is.

Adjusted EBITDA divided by adjusted net revenue and I've talked before about.

The goal, we have of getting to 20%.

At the whole company and that's before corporate costs.

And the main thing we need is more growth and more scale and you can really see that and our Australia results. Our Asia Pacific results I should say where that margin is almost at that level I think it was the <unk>.

19, 5% and the first quarter and.

And the other two regions were much lower than that and.

And that's really just has to do with scale and that's really nothing to do with anything at the client level.

And so as we grow especially on those other regions are our profitability will improve basically it's just the classic economies of scale thing, where we can allocate our fixed costs that we have in those regions really are overhead costs I should say allocate those overhead costs over a wider base.

That's helpful. Thank you of actually since my next question just looking at the operating leverage and the model.

On a consolidated basis SG&A was up 13%, but adjusted net revenue was up 19% obviously.

Egypt Asia Pacific the best performer, there so really outside.

Outside of the economies of scale and the volume driven and is there any other areas, where we could expect the deleverage and the model for additional cost cuts.

Parnell employee productivity improvement I'm, just curious around the of that.

Yeah, I would say all of those things we have a cut.

Cut costs.

And efficiently.

Over the last three years and and made at the same time made investments and technology.

Sales and marketing also training and developing our people.

Which is a really important component of our business. So.

And we built the platform.

We have we have the costs of being global and as we grow and get scale.

We will see passive.

As of substantial benefits from that I guess all of that all of that said another way. If you. If you look at our company as a whole and this is before corporate costs I think our margin and again. This is based on our preferred metric of adjusted EBITDA divided by adjusted net revenue.

And.

Before corporate costs that number was about 12% and we have a goal of getting that number to 20% and.

And the way we do it is.

And that extra dollar of adjusted net revenue, we get we're really pushing hard for 30% of that or 30.

Two to drop to the EBITDA line.

Understood. Thank you.

Shifting gears, a little bit of nice to see the turnaround and Americas and I guess outside of Kuwait, you mentioned the recovery due to organic improvements made last year and can you just talk a little bit more about that.

Yeah sure we.

<unk> has invested and our sales and marketing.

Team there brought in more people and our business has a long sales cycle to it so.

And once we have a well functioning.

Sales and marketing effort.

And it takes a few quarters, sometimes as long as of year for.

For those results to really start to show up and our financial performance.

We can see the leading indicators, but it just takes a few quarters to start winning business and get that business.

Ramped up and we also made some cost reductions last year and I think I've talked about this on previous calls where we combined the management teams of.

Europe and the U S together and that's.

And that's working really well and our sales teams are working really well and winning business and so the I guess you call. It the legacy business that we have and the Americas has.

Prove significantly and then we acquired Kuwait and the fourth quarter.

But like if we look at.

Just a quarter over quarter comparison for example.

First quarter of this year compared to the fourth quarter of last year, we did have net revenue growing 33% quarter over quarter, and so that as of like for like comparison because of the fourth quarter did include a full quarter of Kuwait, So where.

That's one of the real bright spots of our company right now is the strength, we're seeing and the Americas, we were winning a lot of new business and we're very excited about the.

The team, we've put together and the results we're starting to see.

That's great and then just thinking about the.

The pipeline of activity.

So you are seeing some nice activity of wins that is tied to directly.

Definitely and.

And.

And the fast movers that we've seen coming out of the COVID-19 I might have mentioned this before or more.

Medium to.

No.

The large medium kind of category type of companies.

Move really quickly, we're particularly seeing that and life Sciences and tech where there they are well funded and they have aggressive growth plans.

And they are moving really quickly and one and partner with us.

Right away.

Out of the bigger companies.

There are always.

Slower to make decisions that are really big projects when the we win them, but they are slower to make decisions a lot of those conversations were on hold.

Over the last year and so there is still a need and they still wanted to go forward. It was just the delayed not cancelled which is an important point and we're starting to see that.

That part.

The out and a lot of those.

New business opportunities that have been on hold for six months or 12 months.

Those conversations have definitely heated up and we would expect to win some of those as the year progresses.

That's definitely good to hear.

A couple quick ones on the.

Client and pipeline related and then I'll jump back and the Q, but you said that even though the rhythm of Murray.

And then youre seeing increased levels of productivity at existing for claim and the improved line of potential clients talk just talk a little bit more about this uneven unevenness and which region of regions are showing the strongest pipeline improvement thus.

Thus far.

Sure the two.

<unk> strongest.

Or right now are the U S and Australia. So if I just think about our Asia Pacific business.

Australia is.

It got really really strong growth and a really exciting pipeline of new business opportunities same for China.

Hong Kong.

And is getting a little bit better than it was.

But.

Just a very different very different tone there.

And we're having really good growth and our southeast Asia operations, where we have the Singapore.

Hub.

So if I look across that whole region.

<unk>.

We have some really strong areas and then some other areas that are.

Improving off of trough conditions, but don't have that same robust growth outlook and a little bit similar and in Europe, where the UK is performing really well, we are winning new business and a lot of the conversations with companies for opportunities on Continental Europe.

We're in that.

Deep for each category and it is starting to thaw, but it has been slower to rebound than the U K and of course is highly related to different countries ex.

<unk> with.

With COVID-19.

When I was talking about Hong Kong and you also have some.

Political the <unk>.

Tests and things like that haven't helped.

Hiring activities and by multinationals, there, which is who our clients tend to be.

Sure and makes sense and just lastly, maybe a little bit more higher level of.

The of the new business or clients, who either winning are seeing and the pipeline I'm just curious.

The mix between those who either currently work with the competitor versus those who have never used.

And our PEO provider before I'm, just curious about what Youre seeing and then with that regard.

It's mainly the companies that have not used <unk> before.

Or maybe they have used it for one division or one country.

Kind of of pilot.

Or experiment program and.

And they've liked what they've seen and so now theyre doing it.

In the bigger way.

Yes, sometimes we win business from competitors and they win business from us, but that is much less common than a company.

Using <unk> for the first time, so a lot of these companies we've called on for a long time and.

And has been convincing them of about the benefits of and <unk> model and those conversations.

Haven't really heated up and the last.

Six months, so that's a good.

Leading indicator for our our our sales team and they're very busy and so we hope to convert a.

A lot of that potential and too.

Actual clients and.

Financial and operating performance.

Well I do appreciate all the insights and for fielding all my questions and I'll jump back and the Q&A. Thank you alright, thanks, Josh and good questions.

Again, if you would like to ask a question press Star one. The next question comes from the line of Walter Schenker with MAZ partners.

And I have a question on the comment first I'd like to commend you Jeff.

Rarely seen corporate insiders buy stock has consistently.

You have I realize it's a program, but it's nice to see.

People inside the company consistently buys stock, especially if they already have a significant position.

Kudos to you. It makes me feel good tone of the stock.

The question I have and I.

<unk> mentioned the company, but I'm, just going to do a headline company.

The company and we work announced partnership to help early and growth stage.

<unk> scale effectively and they talk about offering the Wii.

Work universe and again.

Access on demand and technology for acquiring solutions provide teams with resources, they need to expand and grow efficiently and electronic platform.

To get the just read some of the press release.

Electronic platforms and and.

And I.

And as you look forward your business I realize it's not the same but the little expense if you make it much easier for people inside our company.

And <unk>.

The two higher and feel comfortable about it would seem it might affect your business. So how do you look at I mean, there's big companies lots of stuff going on and all of course service businesses the electronically online.

Sure so.

A lot of these issues arent.

Sure.

And so black and White, we're one company and uses of lot of technology and the other and the other one doesn't or.

Debt and traditional business gets the disintermediation and because of.

Everyone using technology, so at our best and we are.

On the trusted partner to our clients and I think just going through what they've gone through over the last year makes them and see their need for a trusted partner.

More than ever before.

Probably the biggest reason why someone wouldn't.

<unk> with us or any of our company is they just don't see their need for it. They think of themselves. We can do all of this on our own and I think this last year has shown that.

They are.

Better off with a partner so we we are deeply involved with our clients helping.

Helping them use all of those technology tools.

And there is many many chief technology and tools out there to fit for them to use and we are technology agnostic in the sense that we're not developing our own tools and have skin in the game in terms of.

A financial incentive for our clients to use tool ex instead of two of why it's much more we have that expertise.

We can really help them evaluate and which tools they should use and the whole talent procurement talent assessment.

Process and then the acquisition, we made last year of quite group.

And it gets a little bit confusing because they are tech recruiters, but theyre also recruitment and technology experts. So they know a lot about.

All of the tools coming out of the Bay area.

And can answer questions for our clients about.

The pros and cons of different tools that are out there so.

I hope that answers your question and that's another really big category that we've been helping our clients.

It is.

Helping them.

Achieve and improve on their diversity and inclusion and hiring initiatives and ESG initiatives, which is pretty good we have a lot of expertise on that and.

And that's another.

Area, where were really valuable.

Partner consultant to work to our clients.

Okay. Thank you for sure.

The next question comes from the line of.

Josh Vogel with Sidoti.

Welcome back.

I just had one more the.

And I was checking on your recent Investor day, and a slide on the.

And the size of excellence and whether the Makena and then other several pins for leases under consideration India for the.

The Arizona and you discuss and.

Any additional plans for <unk> and <unk>.

And why these patients in particular.

Sure. We think this is a really important part of our business model it helps clients and it helps.

Us.

And the reason why I say it helps clients as that.

One of the things of that clients say, they really like about.

Partnering with the with the RP O <unk>.

Provider is our flexibility we can scale up the scale down.

Quickly to meet their needs and.

And we're able to do that by having these centers of excellence and various places around the world and then it helps us because we have a highly trained people who can work for multiple clients multiple time zones.

And we just get.

Greater efficiency at a lower cost and when we can do that for our clients. It helps us helps us win. So we've had a lot of success with our center and Scotland, and then and Asia. We've had two centers historically one and.

And the Philippines, and another one in China, and we are studying.

India, and having one and that market potentially.

Our hearts go out to debt that country and.

Just all of it almost all of the suffering and.

And that country right now because of COVID-19, but low.

Long term, we're very bullish on India, and having a presence on India and.

And we're still exploring having a center there and in Europe.

And we like I said, we've had a lot of success with our center and Scotland, We're exploring opening one and South Africa, and then and the U S. Earlier. This year, we opened a center in Tampa and that is really off to a great start we've already hired quite a few people and that market that are helping.

Us.

Across the Americas and also helping.

Kuwait and the San Francisco area, and I think it's just a matter of time before we have one or more centers in the U S. Probably the next one would be somewhere in the in the western part of the country, but that's a really important part of our.

Pitch to clients and our delivery.

All of that said another way.

One point out of it might've been.

And having all of our people deeply.

<unk> embedded with the clients and their offices and I think the new delivery.

The model, especially in the post COVID-19 World is to have some of those people and the clients offices, but some of those people at one of our centers and.

And it's really a win win.

For the clients and also of better for us.

Alright, well, thank you and thanks again for taking all my questions.

Absolutely.

Again, if you would like to ask a question press Star one. The next question comes from the line of Mark the ship.

Good morning, Hi, can you hear me Hi can you hear me yes.

Oh good.

And a number of questions first of all of them.

Uh huh.

And have any forecast and.

On your press releases and the press release.

Would you like to comment on any and any forecast for the year for adjusted EBITDA and your or revenue company wide.

And then also.

I know you said you had some seasonal growth and working capital do you have any outlook for the.

Of the year's working capital change.

And then.

Also you have.

It didn't look like you do any buybacks this last quarter.

And.

And prior years, you've done a lot of you know of.

Around this time or earlier.

Are you at the current stock price are you less interested in doing.

The bags or.

Or do you have other acquisitions the week.

And would expect the possibly to happen this year or.

Or would that be later or what would be your your cash use.

Plan.

Yes.

Hi, I'm.

Im happy to discuss a little bit about the core kind of its true we don't have any specific guidance and here.

And I wouldn't want to give precise numbers, but I'm happier.

Happy to give directionally, the directional numbers and and say that what we're targeting on a constant currency basis is and.

Of revenue and adjusted net revenue growth of.

Double digits.

Solid solid double digit growth and <unk>.

Both of those and then.

At EBITDA, we expect to grow considerably as well of adjusted EBITDA was a it was on.

The loss of the full year last year, and we expected that it would be the.

Again this year.

So that's not a not a measurable percentage there but.

We expect we.

We expect that this will be a rebound here.

And as Jeff was mentioning earlier and the quote you see and the earnings release.

You know a lot of strength, especially in our and our Americas and our Asia Pacific markets.

We're seeing and improving pipeline.

We're seeing economies start to start to bump back.

For the restrictions are lifted and as the the vaccination programs have continued to extend and gain acceptance and the numbers are continuing to increase.

And here every day and more governments announcing that they're on a new restrictions being lifted and and on <unk>.

The progress being made and reopening business so.

And we expect that this year.

We will be solid for US you also asked about cash flow on in terms of cash flow.

Just a quick comment that typically in Q1 of each year.

It's typically down seasonal.

Because primarily because of <unk>.

The number of different factors there is bonus payments that go out and a lot of our exec and our entire Asia Pacific business are paid bonuses once a year and that once a year is and <unk>.

Q1 of each year.

So that's the big driver and in terms of why we always have the use of cash. In addition, we had a new MSP client and Australia that was starting up.

That was launched at the the very end of.

Q4 last year.

So there's working capital needs that are the.

That are in place.

As we as we ramp up with that client and order too.

And I don't see us gain momentum, there, but thats temporary and that will reverse.

For the balance of the year, we expect the cash flow will will will do better.

So in line with the with net income and as we expect net income to grow we also expect that on <unk>.

Ex any other.

And things happening, we would expect that on the cash flow should follow a similar trajectory as it did last year, where we had a use but then it improved visit.

And in 2019 as well the use for that and continues to strengthen and through the course of the year.

And Mark you asked about.

Capital allocation and we don't view these things as mutually exclusive but we are continuing to look at bolt on acquisition opportunities I would say, we're always in the market always.

Looking at things.

But extremely hard to predict.

And when something might happen and how much but the acquisition. We made last year I think is a decent a template to look at in terms of <unk>.

Size and what it did for US strategically of long said, we don't want to buy something just to get bigger it's got to really have some strategic value and be of great fit and I.

I would just encourage you to look at what we've done we think we're very shareholder.

<unk> the company.

The board and management own a significant amount of stock and.

And what the company has done historically is bought back a significant amount of stock and has done it and a lot of different ways through.

One of block trades from time to time through open market purchases through the <unk> program.

We've also pay dividends and a couple of times and.

And there's not too many other companies that have shrunk their share counts as much as we have over the last two years and.

And we're going to be opportunistic.

And we.

Do you think.

Share repurchases are are very attractive.

Including at today's price and we're going to be opportunistic and I would just tell you look at our history and.

No reason to think that.

We would change versus what we've done in the past.

Terrific. Thank you very much thanks for your questions.

Again, if you would like to ask the question Press Star One Thats star one for questions.

That concludes today's question and answer session I will now turn the call back over to Jeff Eberwein for closing remarks.

Well, thanks, everybody for joining us today are really great questions. So we thank you for your interest and our company and we're always available to take your calls or emails. The contact information is and our press release and our Investor Relations deck, that's on our website.

And we look forward to the.

And next quarter's call so have a great day.

Thank you for joining the Hudson Global first quarter Conference call. Today's call has been recorded and will be available on the investors section of our web site Hudson Our PEO Dot Com you may now disconnect.

[music] of dividends.

The board.

[music].

[music].

[music].

Good morning, and welcome to the Hudson Global Conference call for the first quarter of 2021.

Our call. This morning will be led by Chief Executive Officer.

Jeff Eberwein.

And Chief Financial Officer, Matt Diamond. Please be advised that the statements made during the presentation include forward looking statements under the applicable securities laws.

Such forward looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements.

The reason.

These risks are discussed enough for.

Oh on 8-K filed today and in our other filings made with the Securities and Exchange Commission.

Food and our annual report on the full on.

10-K, B of the company disclaims any obligations to update any forward looking statements. During the course of this conference call rest.

For us will be made in the non-GAAP right.

GAAP terms, such as constant currency adjusted EBITDA.

And adjusted earnings per diluted shares reconciliation for these measures are included in our earnings release and quarterly slides both posted on our web site Hudson R. P. O dot com I encourage you to access our earnings materials at this time.

And as they will serve as a helpful reference guide during our call.

I will now turn the call over to Jeff Eberwein, you may begin.

Thank you operator and welcome everyone.

Thank you for your interest and Hudson global and for joining us today.

I'll start by reviewing the first quarter 2021 highlights and.

And Matt Diamond, our CFO will provide some additional details on our financial results.

I will then give an update on current business conditions.

For the first quarter of 2021, we reported revenue of $34 5 million of 27% year over year and constant currency.

Adjusted net revenue, formerly referred to as gross profit.

It was $12 7 million and increased 19% year over year and constant currency.

SG&A costs for 12 million and the first quarter of 13% versus the same period last year and constant currency.

We reported adjusted EBITDA of 800000.

Up from an adjusted EBITDA loss of 100000, and a year ago.

In addition, we reported a net loss of point of 2 million or seven tenths of share versus a net loss of <unk> 5 million or 17 cents a share and the same period last year.

We reported adjusted net income per share of seven cents and the first quarter of 2021 versus an adjusted net loss per share of <unk> a year ago.

Turning to the performance for the quarter by region, Our Asia Pacific business grew 29% and constant currency and adjusted net revenue grew 12% and constant currency.

Adjusted EBITDA of $1 1 million increased from adjusted EBITDA of <unk> 6 million a year ago.

Our Americas business grew revenue and adjusted net revenue, 42% and 46% and at constant currency, respectively, mostly due to the acquisition of Quaker group that was made on the fourth quarter of last year.

Adjusted EBITDA of 200000 increased versus last year's adjusted EBITDA of 100000.

Our Europe business grew revenue, 6% and constant currency and adjusted net revenue, 5% and constant currency adjusted EBITDA of 200000, and the first quarter of 2021 increase the compared to adjusted EBITDA of 100000, and the first quarter of last year.

Lastly, we believe it is important to highlight that adjusted net revenue for the company as a whole grew at a faster rate than our cost in Q1, and that was particularly true and Asia Pacific and Europe.

This operating leverage that we're seeing is critical to achieving our goal of growing.

R P O and adjusted EBITDA as a percentage of adjusted net revenue to the 20% level before corporate costs over the long term.

I'll now turn the call over to Matt Diamond, our CFO to review some additional financial details from the first quarter.

Thank you, Jeff and good morning, everyone.

We ended the quarter with $23 6 million and cash and restricted cash.

Day sales outstanding was 41 days at March 2021 below DSO of 44 days, we had and March 2020.

And in connection with the acquisition of quite group and the fourth quarter of 2020, our balance sheet as of March 31 try and 21 reflects $2 1 million of goodwill and $1 3 million of net intangible assets.

The company's working capital, excluding cash increased by $2 3 million and the first quarter to $6 8 million.

Up from $4 5 million at the end of the fourth quarter of 2020.

As a reminder, and April 2019, we finalized a new credit facility in Australia to support the expected growth and working capital needs as a result of new client wins and that market, but we had nothing drawn on this facility at the end of Q1.

The company used $2 4 million and cash flow from operations during the first quarter.

The outflow was due to the seasonal moves and working capital, we typically see and Q1 as well as the ramp up of the new MSP client and Australia.

I'll now turn the call back over to Jeff to give some more perspective on our RPM business and to review of current trends and our business.

Thank you Matt.

Over the last 12 months, the COVID-19 pandemic created numerous challenges for our clients and our business around the world, but we're now emerging from this crisis as you can see and our Q1 results, where we exhibited solid growth and revenue adjusted net revenue and adjusted EBITDA and all three regions.

And our Asia Pacific business continued to perform really well and we're very pleased about the recovery and our Americas results, which is due to organic and improvements that we made last year and the addition of quite group and.

And the fourth quarter.

The recovery that we're seeing is uneven depending on country.

But in general we're seeing increased activity levels at our existing clients and on improving pipeline of potential clients.

Importantly, I want to thank all of our highly dedicated employees for their flexibility hard work and dedication to our clients and business and the challenging conditions that we've experienced over the last year.

Operator can you. Please open the line for questions.

As a reminder, if you would like to ask a question. Please press star one. The first question comes from the line of Josh Vogel with Sidoti.

Thank you.

Morning, Jack and Matt.

Thanks.

I I got a bunch of questions here.

And I guess the first one here you know I know, there's likely something to do with the nature of the contracts being our field force of MSP, but can you talk about the difference in our profitability by region.

Sure we.

Look at them because of the MSP contracts, where that's where we're managing the temps in contractors.

For clients.

The.

That business results and a lot of revenue.

The law.

Lot of pass through revenue until we recognize and a high amount of revenue a high amount of cost of goods sold and the difference is and net revenue.

Whereas on the RP O side of 100% of the revenue goes to the net revenue and so are our preferred and metric.

To look at is.

And EBITDA divided by adjusted net revenue and I've talked before about.

The goal, we have of getting to 20%.

At the whole company and that's before corporate costs and.

And the main thing we need is more growth and more scale and you can really see that and our Australia results, Our Asia Pacific or is the results I should say where that margin is almost at that level I think it was 19, 5% and the first quarter.

And the other two regions were much lower than that.

And that's really just has to do with scale and that's really nothing to do with anything at the client level and.

So as we grow especially on those other regions are our profitability will improve basically it's just the classic economies of scale thing, where we can allocate our fixed costs that we have in those regions really are overhead costs I should say allocate those overhead costs over a wider base.

That's helpful. Thank you the actually my next question just looking at the operating leverage and the model.

On a consolidated basis SG&A was up 13%, but adjusted net revenue was up 19% obviously.

Egypt, The Asia Pacific the best performer, there so at the outside of the economies of scale and the volume driven and is there any other areas, where we can expect the deleverage and the model of additional costs caused by the kernel of employee productivity improvement I'm just curious around the bat.

Yeah, I would say I would say all of those things we have a cut the costs.

Significantly over the last three years and and made at the same time made investments and technology.

Sales and marketing also training and developing our people.

Which is a really important component of our business so with the.

And we built the platform.

We have we have the cost of being global and as we grow and get scale.

We will see.

As the substantial benefits from that I guess all of that all of that said another way. If you. If you look at our company as a whole and this is before corporate cost I think our margin and again. This is based on our preferred metric of adjusted EBITDA divided by adjusted net revenue.

And.

Before corporate costs that number was about 12% and we have a goal of getting that number to 20%.

And the way we do it is debt.

The net extra dollar of adjusted net revenue, we get we're really pushing hard for 30% of that or 30.

And two to drop to the EBITDA line.

Understood. Thanks.

Shifting gears, a little bit nice to see the turnaround and Americas and I guess outside of Kuwait, you mentioned the recovery due to organic equivalents made last year and can you just talk a little bit more about that.

Yeah, sure, we has invested and our sales and marketing.

Team, there and brought brought and more people and our business has a long sales cycle to it. So once we have a well functioning and.

Sales and marketing effort.

Takes a few quarters, sometimes as long as of year.

For those results to really start to show up and our financial performance.

We can see the leading indicators, but it just takes a few quarters to start winning business and get that business are.

Ramped up.

And we also made some cost reductions last year and I think I've talked about this on previous calls where we combine the management teams of.

Europe and the U S together, and that's working really well and our sales teams are working really well and and winning business and so the I guess you'd call. It the legacy business that we have and the Americas has improved significantly.

Significantly and then we acquired Kuwait and the and the fourth quarter.

And so like if we look at.

Just a quarter over quarter comparison for example for.

First quarter of this year compared to the fourth quarter of last year.

We did have net revenue growing 33% quarter over quarter, and so that as of like for like comparison because of the fourth quarter did include of.

Full quarter of Kuwait, so where.

And that's one of the real bright spots of our company right now is the strength, we're seeing and the Americas, we were winning a lot of new business and we're very excited about the.

The team, we've put together and the results for starting to see.

That's great and then just thinking about the.

The pipeline of activity.

So you are seeing some nice activity of wins that is tied to directly.

Definitely and.

And.

The fast movers that we've seen coming out of COVID-19 and.

And I mentioned this before our <unk>.

More and.

The medium to.

No.

The large medium and kind of category type of companies that move really quickly, we're particularly seeing that and life Sciences and tech where there they are well funded and they have aggressive growth plans and.

And they are moving really quickly and one and partner with us.

Right away.

Lot of the bigger companies that are always.

Slower to make decisions that are really big projects when the we win them, but they are slower to make decisions a lot of those conversations were on hold.

Over the last year and so there is still a need and they still wanted to go forward. It was just the delayed not cancelled which is an important point and we're starting to see that.

That part.

And I out and a lot of those are.

New business opportunities debt had been on hold for six months or 12 months.

And those conversations have definitely heated up and we would.

Specht of when some of those as the year progresses.

That's definitely good to hear a cause and a couple quick ones on the.

Client and pipeline related and then I'll jump back and the Q, but you said that even though the.

Marie the even youre seeing increased levels of productivity at existing from claim and the improved line of potential clients talk on just talk a little bit more about this uneven unevenness, and which region or regions are showing the strongest pipeline improvement thus.

Thus far.

Sure the two.

The strongest them on.

And our right now are the U S and Australia. So if I just think about our Asia Pacific business.

Australia is.

We've got really really strong growth and a really exciting pipeline of new business opportunities and same for China.

Hong Kong.

And is getting.

A little bit better than it was.

But.

Just a very different very different tone there.

And we're having really good growth and our southeast Asia operations, where we have a Singapore as of.

Hub.

So if I look across that whole region.

<unk>.

We have some really strong areas and then some other areas that are.

Improving off of trough conditions, but don't have that same robust growth outlook and a little bit similar and in Europe, where the UK is performing really well, we are winning new business and a lot of the conversations with companies for opportunities on Continental Europe.

We're in that.

Deep for each category and it is starting to thaw, but it has been slower to rebound than the U K and of course, it is highly related to different countries ex.

Experience with the.

With COVID-19.

When I was talking about Hong Kong and you also have some.

Political the protests and things like that hasn't helped.

And hiring activities and by multinationals, there, which is who our clients tend to be.

Sure and just for.

Lastly, and maybe a little bit more higher level.

Of the of the new business of clients you either winning are seeing and the pipeline I'm just curious like.

And the mix between those who either currently work with the competitor versus those who have never used oh on RP O provider before I'm, just curious about what youre seeing and then with that regard.

It's mainly the companies that have not used <unk> before.

Or maybe they've used it for one division or one country.

The kind of a pilot.

Or experiment program and they've liked what they've seen and so now theyre doing it.

And the bigger way.

Yes, sometimes we win business from competitors and they win business from us, but that is much less common than a company.

Using <unk> for the first time, so a lot of these companies we've called on for a long time and.

And has been convincing them of about the benefits of and <unk> model and those conversations.

And have really heated up and the last.

Six months, so that's a good.

The leading indicator for our our our sales team and other they're very busy and so we hope to convert.

A lot of that potential and to.

The actual clients and for.

Financial and operating performance.

Well I do appreciate all the insights and for fielding all my questions and I'll jump back and the Q&A. Thank you alright, thanks, Josh good questions.

Again, if you would like to ask a question press the star one. The next question comes from the line of Walter Schenker with MAZ partners.

And I have a question on the comment first I'd like to commend you Jeff.

Rarely seen corporate insiders buy stock has consistently.

You have I realize it's a program, but it's nice to see.

People inside the company consistently by stock, especially if they already have a significant position.

Kudos to you makes me feel good tone of the stock.

The question I have and I won't mention the company, but I'm just going to do a headline company.

The company and we work announced partnership to help early and growth stage.

<unk> scale effectively and they talk about offering the we were.

Work universe and again.

Access on demand and technology for us hiring solutions provide teams with the resource they need to expand and grow efficiently and electronic platform.

And to get there just read some of the press release.

Electronic platforms and and.

The effect as you look forward your business I realize it's not the same but to the little extent, if you make it much easier for people inside our company too.

The two higher and feel comfortable about it would seem it might affect your business. So how do you look at I mean, this big companies lots of stuff going on and all of cross service businesses electronically online.

Sure so.

You know a lot of these issues arent.

And so black and White, we're one company and uses of lot of technology and the other and the other one doesn't to more of.

And that of traditional business gets the disintermediation and because of.

Everyone using technology, so at our best and we are a.

The trusted partner to our clients and I think and just going through what they've gone through over the last year makes them and see their need for a trusted partner and.

More than ever before.

Probably the biggest reason why someone wouldn't partner with us or any of RPM company.

They just don't see their need for a day thing to themselves. We can do all of this on our own and I think this last year has shown that they are better off with a partner. So we we are deeply involved with our clients and health.

Helping them use all of those technology tools.

And.

And many many chief technology and tools out there to trip for them to use and we are technology agnostic in the sense that we're not developing our own tools and have skin in the game in terms of.

A financial incentive for our clients to use tool ex instead of two of why it's much more we have that expertise and <unk>.

And we can really help them evaluate which tools and they should use and the whole talent procurement talent assessment.

Process and then the acquisition, we made last year of quite group.

And it gets a little bit confusing because they are tech recruiters, but theyre also the recruitment and technology experts. So they know a lot about.

All of the tools coming out of the Bay area.

And the can answer questions for our clients about.

Of the pros and cons of different tools that are out there. So.

Hope that answers your question and I would say another really big category that we've been helping our clients.

With is the.

Helping them achieve.

Achieve and improve on their diversity and inclusion hiring initiatives and ESG initiatives and some pretty good and we have a lot of expertise on that and that's another.

Area, where were really valuable par.

Partner of consultant to work to our clients.

Okay. Thank you for sure.

Mhm.

The next question comes from the line of.

Josh Vogel with Sidoti.

Welcome back.

I just had one more.

I was checking on your recent Investor day, and a slide on the <unk>.

And this is of excellence and where they're located and then other several pins places under consideration and India.

Resona can you discuss any.

Any additional plans for so he's an and.

Why these patients in particular.

Sure. We think this is a really important part of our business model it helps clients and it helps.

Us.

And the reason why I say it helps clients as that.

And one of the things the clients say, they really like about.

Partnering with the with the RP O <unk>.

Provider is our flexibility we can scale up the scale down.

Quickly to meet their needs and we're able to do that by having these centers of excellence and in various places around the world and then it helps us because we have a highly trained people who can work for multiple clients multiple time zones.

And we just get a greater efficiency at a lower cost and when we can do that for our clients. It helps us it helps us win so we've had a lot of success with our center and Scotland, and then and Asia. We've had two centers historically, one and the Philip.

<unk> and another one in China, and we are studying.

On India, and having one and that market potentially.

And our Hearts go out to that country and.

Just all of the all of US all of the suffering.

And in that country right now because of COVID-19, but long term, we're we're very bullish on India, and having a presence on India and.

And we're so exploring having of center there and in Europe.

And we had like I said, we've had a lot of success with our center and Scotland, We're exploring opening one and South Africa, and then and the U S. Earlier. This year, we opened a center and Tampa and that is really off to a great start we've already hired quite a few people and that market that are helping us.

And across the Americas, and and also helping.

Kuwait and the San Francisco area, and I think it's just a matter of time before we have one or more centers in the U S. Probably the next one would be somewhere in the in the western part of the country, but that's a really important part of our pitch.

Pitch to clients and our delivery.

So all of that said another way of RP.

<unk>, one point out of it might've been.

Having all of our people deeply.

Deeply embedded with the clients and their offices and I think the new delivery.

The model, especially in the post COVID-19 World is to have some of those people and the clients offices, but some of those people at one of our centers and.

It's really a win win and it's better for their clients and and also better for us.

Alright, well, thank you and thanks again for taking all my questions.

Absolutely.

Again, if you would like to ask a question press Star one. The next question comes from the line of Mark the ship.

Good morning, Hi, can you hear me all right.

And you hear me yes.

Good.

I have a number of questions first of all of them.

You don't have any forecast.

And your press releases and the press release.

Would you like to comment on any and any forecast for the year for adjusted EBITDA in the or or or revenue company wide.

And then also.

I know you said you had some seasonal growth and working capital do you have any outlook for the year's working capital change.

And then.

Also you have.

Didn't look like you do any buybacks this last quarter.

And prior years, you've done a lot of you know around this time or earlier.

Are you at the current stock price are you less interested in doing a book.

And I bags or.

Or do you have other acquisitions that we could expect the possibility of happened this year or.

Or would that be later or what what would be your your cash use.

Plan.

Yes.

Hi, I'm.

And I'm happy to discuss a little bit about the core kind of its true we don't have any specific guidance and here.

And I wouldn't want to give precise numbers, but I'm happier.

Happy to give directionally, the directional numbers and and say that what we're targeting on a constant currency basis is rare.

Of revenue and adjusted net revenue growth of.

Double digits.

Solid solid double digit growth and <unk>.

Both of those and then our adjusted EBITDA, we expect to grow considerably as well adjusted EBITDA was a loss for the full year last year, and we expected that it would be big.

The gain this year sort of.

That's not a not a measurable percentage there but.

We expect our we expect we expect that this would be a rebound year.

And as Jeff has mentioned in an earlier and the quote you see and the earnings release.

We're seeing a lot of strength, especially in our and our Americas and our Asia Pacific markets.

And we're seeing and improving pipeline.

And we're seeing economies start to start to bump back as the restrictions are lifted and as the the vaccination programs have continued to extend and gain acceptance and the numbers are continuing to increase.

And here every day and more governments announcing that you know there are the new restrictions being lifted and and on new progress being made and reopening business. So.

We expect that this year.

We will be solid for us.

And that's about cash flow on in terms of cash flow just a quick comment that typically in Q1 of each year.

It's typically down seasonal.

Because primarily because of <unk>.

The number of different factors, there's bonus payments that go out and a lot of our exact and our entire Asia Pacific business are paid bonuses are once a year and that once a year is and Q.

Q1 of each year.

So that's the big driver and in terms of why we always have the use of cash. In addition, we had a new MSP client and Australia that was starting up.

And that was launched at the at the very end of Q.

Q4 last year.

So there's working capital needs that are that you know that are in place.

As we as we ramp up with that client and order too.

In order to the us gained momentum there, but thats temporary and that will reverse.

For the balance of the year, we expect the cash flow will will will do better.

And in line with the with net income as we expect net income to grow and we also expect that our ex.

Ex any other.

And the things happening, we expect that on the cash flow should follow a similar trajectory as it did last year, where we had to use with and it improved visit.

And in 2019 as well the use for that and continues to strengthen and through the course of the year.

And Mark you asked about.

Capital allocation and we don't view these things as mutually exclusive but we are continuing to look at bolt on acquisition opportunities I would say, we're always in the market always looking at things.

But extremely hard to predict.

When something might happen and how much but the acquisition. We made last year I think is a decent a template to look at in terms of size and what it did for US strategically of long said, we don't want to buy something just to get bigger it's got to really have some strategic value and be of great fit.

And.

I would just encourage you to look at what we've done we think we're very shareholder focused company.

The board and management own a significant amount of stock and.

And what the company has done historically is bought back a significant amount of stock and has done it and a lot of different ways through.

One of block trades from time to time through open market purchases through our <unk> program.

We've also pay dividends and a couple of times and.

And there's not too many other companies out of shrunk their share counts as much as we have over the last two years and we're going to be opportunistic.

And we.

Do you think.

Share repurchases are are very attractive.

Including at today's price and we're going to be opportunistic and I would just tell you look at our history and.

No reason to think that we would.

<unk> versus what we've done in the past.

Terrific. Thank you very much and thanks for your questions.

Again, if you would like to ask a question press Star one that's part of one for questions.

That concludes today's question and answer session I will now turn the call back over to Jeff Eberwein for closing remarks.

Well, thanks, everybody for joining us today are really great questions. So we thank you for your interest and our company and we're always available to take your calls or emails. The contact information is and our press release and our Investor Relations deck, that's on our website.

And we look forward to our.

The next quarter's call so have a great day.

Thank you for joining the Hudson Global first quarter Conference call. Today's call has been recorded and will be available on the investors section of our web site Hudson R. P. O Dot com you may now disconnect.