Q3 2022 Hudson Global Inc Earnings Call
[music].
Good morning, and welcome to the Hudson Global Conference call for the third quarter of 2022.
Our call today will be led by Chief Executive Officer, Dr. Pepper wine and Chief Financial Officer, Matt Diamond. Please be advised that the statements made during the presentation include forward looking statements under 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.
These risks are discussed in our form 8-K filed today and in our other filings made with the Securities and Exchange Commission, including our annual report on Form 10-K, the company disclaims any obligation to update any forward looking statements.
During the course of this conference call references will be made to non-GAAP term.
Such as constant currency adjusted EBITDA and adjusted earnings per diluted share.
Conciliation because these measures are included in our earnings release.
Quarterly slides posted.
Posted on our web site Hudson RP O Dot com.
I encourage you to access our earnings materials at this time.
I will start a helpful reference guide during our call I will now turn the call over to Jack otherwise.
Thank you operator and welcome everyone. We thank you for your interest in Hudson Global and for joining us today.
I'll start by reviewing the third quarter 2022 highlights and Matt Diamond our CFO will provide some additional details on our financial results.
I'll, then give an update on current business conditions.
For the third quarter of 2022, we reported revenue of $49 million up 16% year over year in constant currency.
Adjusted net revenue was $24 2 million and increased 42% year over year in constant currency.
SG&A costs were $21 2 million in the third quarter up 49% versus the same period last year in constant currency we.
We reported adjusted EBITDA of $3 million up 8% in constant currency versus a year ago.
In addition, we reported net income of $1 million 30, a share versus net income of $1 5 million or 49 cents per share in the same period last year.
Also we reported adjusted net income per diluted share of <unk> 58 in the third quarter versus 78 cents a year ago.
In the third quarter of 2022, we repurchased approximately $1 1 million of stock.
Since the beginning of 2019, we've reduced the companys share count by 13% and we continue to view share repurchases as an attractive use of capital.
We have 600000 remaining under our $10 million.
And share repurchase program.
I'll now turn the call over to Matt Diamond, our CFO to review our financial results by region as well as provide some additional financial details from the third quarter.
Thank you, Jeff and good morning, everyone.
Our Americas business grew revenue and adjusted net revenue, 69% and 70% in constant currency respectively.
Adjusted EBITDA of $1 $8 million increased versus last year's adjusted EBITDA of $1 4 million.
Revenue for our Asia Pacific business was roughly flat year over year in constant currency and adjusted net revenue grew 12% in constant currency.
Adjusted EBITDA of $1 7 million decrease from adjusted EBITDA of $2 2 million a year ago.
Our EMEA business grew revenues, 36% and adjusted net revenue, 51% in constant currency.
Adjusted EBITDA of $4 million in Q3, 2022 increased compared to adjusted EBITDA of $2 million in Q3 of last year.
Turning to some additional financial details from the third quarter.
We ended Q3 with $22 7 million in cash and restricted cash.
Days sales outstanding was 50 days at September 2022 up from DSO of 39 days in September 2021.
In connection with the acquisition of Cui group in the fourth quarter of 2020 Corona in the fourth quarter of 2021 and hunting badge in the third quarter of 2022, our balance sheet as of September 30th 2022 reflects $4 9 million of goodwill and $4 8 million of net amortize goodwill intangible assets.
Yeah.
The company's working capital excluding cash increased to $10 2 million in the third quarter of 2022 from $7 8 million at the end of 2021.
As a reminder, in April 2019, we finalized a credit facility in Australia to support the expected growth in 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 Q3.
The company used zero point $1 million in cash flow from operations during the third quarter.
I'll now turn the call back over to Jeff to give some more perspective on our business and to review current trends.
Thank you Matt.
In the third quarter of 2022, our business exhibited solid revenue and adjusted net revenue growth versus the prior year quarter.
While adjusted EBITDA remained flat year over year.
The third quarter's results were impacted by less favorable foreign exchange rates a reduction in project work and a slowdown in hiring activity in the technology sector, which is expected to continue into next year.
Despite these headwinds activity at most clients remains robust and our sales pipeline is heavily focused on the health care sector.
We're confident in our ability to manage the business in this environment and we remain well positioned to respond to needs.
Respond to the needs of our clients going forward.
Further I'd like to emphasize that our enterprise RP O work, which comprises approximately 75% of our business is holding up very well.
We did have temporary operational challenges at two of these clients in the quarter, which have since begun to abate.
The remaining 25% of our business which consist of.
Recruiter on demand work for the technology sector and project work is where we have begun to see a general slowdown.
Our teams have responded accordingly to these market changes to protect our profitability and also position the business to respond quickly when these conditions reverse.
<unk> I want to thank all of our highly dedicated employees for their flexibility hard work and dedication to our clients and business in the challenging conditions, we've been working through.
Operator can you. Please open the line for questions.
Thank you.
We will now begin the question and answer question.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Edward Riley.
Please go ahead.
Hi, Jeff in light of the challenging labor market. Currently I was wondering if you could maybe.
Talk about the company's cost structure in terms of fixed.
Fixed versus variable expenses.
Sure and away all of our costs are variable because it's all it's all people.
Probably a way to think about it is.
The the overhead we have you know management sales and marketing that.
Is fixed in the short term, but it doesn't have to be over the medium to longer term.
Good rule of thumb that we that we use is.
Ah.
About.
70%.
Of of revenue equates to variable costs. So in other words, if we add an extra $100 of revenue.
We at about $70 out variable costs and.
No fixed costs. So that's one way to think about it I hope that's.
That's helpful and I would say.
Labor markets are tight both for our clients and for US, particularly in the main markets. We're in which is a U S U K and Australia.
And compensation levels are up.
Which enables us to increase prices over time, but that happens with a lag. We typically have three year contracts, particularly in the enterprise <unk> business and although we do have some.
Automatic price Escalations that are.
Tied to CPI, most typically it's not until the contract comes up for renewal.
Can we.
Enter into those those pricing negotiations and given.
That's the.
Cost of.
Recruitment professionals is much higher than it was pre COVID-19. We do think we'll have an ability to incur.
Increased prices.
Going forward, Matt any any detail on.
On fixed versus variable cost and how.
Different ways of thinking about that.
Yeah.
Most of our fixed costs, we consider you know our within corporate as well and one of the things that we've done over the past several years is bring down our corporate cost to around the $4 million.
Mark where it had been significantly higher over the past several years. So that's why we feel fairly confident in the ability of.
That 70% variable with 30% continuing to flow down to the.
Margin that Jeff was talking about.
Okay got you. Thanks.
And just given the forward projections of unemployment creeping up I was wondering how you maybe see this environment from an opportunistic standpoint, maybe on acquisitions are or how the business might look maybe coming out on the other side.
Sure what what we're saying right now is more opportunities for enterprise RVO and this is typically with bigger companies.
500 company. This is our bread and butter business and if you think about.
What are.
The typical big company has dealt with over the last three years. They they really see the need for a partner like us more than ever before.
It's dealing with Covid ramping down ramping back up.
And then a lot of technology tools in the marketplace a lot of companies are much more serious about diversity and inclusion hiring goals. So.
So we can really add a lot of value and.
A lot of the big companies, especially ones, who had never done RP O four are.
Much more open to an <unk> solution like ours, and then Theres also some instances where.
Their existing provider.
It didn't perform well during COVID-19 or coming out of Covid and there are a few opportunities in the marketplace too.
To take share and so that's that's going to be in this environment.
The key focus of our growth is winning more enterprise RP O <unk>.
Clients that.
Those are those clients have been.
Distracted and busy and now they're really sitting down and and seriously considering RPM, sometimes for the first time.
And then on.
So that's about 75% of our business.
And then about 15% is project work that we do and there was quite a bit of project work coming out of Covid.
And we have seen a slowdown and some of those projects and one thing that hurt us in the third quarter as we had some projects.
And early <unk>.
Earlier than we expected and then we have some new projects starting up.
But there's kind of a lag there and I would roughly estimate that hurt our EBITDA by 500000 or so in the third quarter.
Just kind of carrying the cost with no revenue. So theres still project work to win but it is not as robust as it was earlier this year and that's really the seed corn for the future a lot of bigger companies that have never used RVO before.
We'll.
We'll hire us for a specific project, maybe it's in a particular country or in one of their divisions and that's a great way to get our foot in the door and develop a relationship and our team does a pretty good job of converting that to enterprise <unk> overtime and then we have about 10% of our business that is focused on that.
Technology sector, which is a little bit different business model, that's more for crude or on demand.
Shorter term contracts.
And.
You know that a lot of that work that we do do is for medium sized tech companies and in some cases pre IPO and that business has declined very significantly.
I forgot Lee.
From from the peak earlier this year.
And unclear when that.
When that rebounds, it will at some point.
Our team would say a lot of those companies, there's a lot of hiring freezes in tech right now.
It is going to be very weak in the first quarter and the beginning of next year, but even if the.
Environment.
It doesn't improve a lot of these companies are kind of overdoing, it and will need to start to resume at least some hiring at some point next year, but that that once that much tougher to call, but we do think it will come back and it will come back strong and a lot of those clients say next time around that are going to.
Rely more on providers like us and because they they like the flexibility and the value of the service that we provide.
Awesome, that's really helpful. Thank you guys.
Yeah.
Our next question comes from Marc Riddick with Sidoti and company. Please go ahead.
Hey, good morning.
Good morning, Mark.
So I wanted to follow up on.
Sort of how you're viewing the the opportunity to take advantage of a rebound in <unk> going forward should we be in a position to do that could you talk a little bit about the your thoughts around headcount and talent retention and and the like I mean, obviously you communicated some of the.
Near term slowdown in activity, but I was wondering if you could talk maybe about the you know.
Just sort of making sure that you have enough talent to take advantage of any upticks.
Sure.
Really good question and.
There are a couple of levels to it there is what's going on at our clients.
And then what's going on with our own talent and.
On the enterprise RP O those those clients.
We have struggled to meet their hiring goals coming out of Covid and they've also experienced higher than normal turnover and what we're seeing right now is that those clients have.
Still have a talent shortage mentality and a fear of slowing down and if they do so they will miss out on talent and that'll put them at a competitive disadvantage and so we we are always looking for talent ourselves, we're particularly looking to grow.
And the enterprise RP O segment, and that's where when I look at our our sales pipeline it's got more.
Enterprise RP O projects that we're pursuing and fewer project RP O type of type of work and fewer.
Fewer things going on in the tech sector. So we've we've we're always looking for talent for enterprise.
Enterprise RP O and we've been able to redeploy some of the recruiters that we have that we're working for technology clients, we've been able to redeploy them too.
Life Sciences medical devices, which hasnt slowed down at all and what we're still seeing growth and so we do try really hard to retain people.
And redeploy them into into other accounts, but a win.
Business declines as much as it has like in the technology sector.
We have.
Shrunk, our our head count and that are in that vertical.
Yeah.
Okay, and then maybe you could just bring us up to speed on.
And I know hunting bedroom wasn't that long ago, but what if you could talk a little bit about overall thoughts on the acquisition multiples in the pipeline and an appetite.
Yeah sure I know, it's it's it's very interesting what we're seeing in the.
The acquisition marketplace, and we were always looking for acquisitions, it's helpful to be in the market and looking and now that we've done three we've done one year for the last three years, where we're kind of a known acquirer.
Acquirer and perhaps were getting shown more deals than previously just because of that but there are a decent number of opportunities in the marketplace.
A little bit surprising to me there their sales price expectations are are high.
And in general they've done well over the last two years and so.
It makes us a little a little wary, we never want to buy something at what could be a peak and we certainly don't want to pay a high multiple for it. So there is in short there's more opportunities out there than we've ever seen before but also in general.
I think their expectations are too high so we're continuing to look where we have a list where we're monitoring several of these situations and we think being patient and not are not changing our criteria is the right way to go.
Okay. That's that's helpful. Thank you and then I guess the last one for me I just wanted to sort of.
Similar vein as far as use of cash.
Mentioned in the press release, some some share repurchase activity during the quarter you have reduced share count quite a bit over the last few years. When if you could talk a little bit about that in an appetite as well. Thank you.
Yeah sure. We think our stock is a is cheap and it's very accretive to buy back stock when the multiple is low.
And when it's below what we believe the net asset value to be the tricky thing is.
Is the window being open or not.
Not a lot of time, just the window isn't open.
So we did have an opportunity in the third quarter, where the window was open for about a month it hadn't been opened in a while and so we did take advantage of that to to buy and some stock and as you know we bought back stock in a lot of different ways and.
Our preferred way to do it the easiest way to do it is to buy back a block.
Which we did during Covid there were two significant holders who wanted to wanted liquidity and so we were able to do to two big block trades back then and.
That was a much easier to execute and much more impactful than buying a little bit each day in the market as you know our stock is pretty illiquid.
So.
We'll be opportunistic.
<unk> would be to buy a block if a block ever becomes available.
But the window also has to be open so.
We think.
Share repurchases are a really good use of capital we expected to do more over time and we'll be opportunistic.
Thank you very much.
Thank you.
And if you'd like to ask a question. Please press Star then one at this time. Our next question comes from Walter.
I mean <unk> partners. Please go ahead.
Hi, Jeff Good morning.
Yeah.
Hum two different questions.
Seasonally.
The third quarter at least in Europe as it tends to be somewhat quiet fourth quarter.
Maybe not in Asia, but maybe there is well run into some holidays.
Is the.
Third and fourth quarters.
A lot of other stuff overwhelms that seasonally somewhat slower than the first if you just sort of traditionally run through the quarters as to the seasonal seasonality.
Sure Yeah.
We usually the fourth quarter.
Is slower than the third and in the first quarter is usually the slowest quarter of the year.
Said another way typically the strongest quarters of the year Q2 and Q3.
I did mention in my prepared comments that there were.
Couple of operational challenges with.
Two enterprise RP O clients one is implementing.
Some new it systems and that caused a disruption we're already seeing that abate and the early part of Q4 and another was a health care company that spun off part of their business and so it went from being one public company to two public companies and the good news there is that both remain clients and have a healthy.
Look but that that separation into two two separate companies also caused a hiring disruption in Q3 that that we also think will abate in Q4, so there's many things.
Each year is different each quarter is different but there's many things that will be better for us.
In Q4 versus Q3, except the tech sector, which we think is going to be a worse in Q4 than Q3 just.
Many many companies in the technology sector are.
Putting on a hiring freeze.
Laying off people.
And.
So that's going into that that's going to be pretty slow. So we we kind of stopped giving official guidance Ah <unk>.
During during Covid.
But when I look forward.
You know Q4.
It probably is going to be.
Flat to down versus versus Q3.
Just because of seasonality and weakness in the tech sector and in Q1.
Also it is typically the weakest quarter of the year and.
I'd say the most optimistic thing is that a big companies the enterprise <unk> clients.
We haven't seen any changes there there's still a lot of new business to win.
Our new business pipeline is robust.
And for the first time I can remember well over half of it is focused on the health care sector, which for US is typically pharmaceuticals life Sciences medical devices and a lot of a lot of those companies have never used <unk> before and are looking to use RP O or for whatever reason, they're unhappy with their provider.
And looking to switch and we're aggressively pursuing some.
Some of those clients.
Right, Okay, and just sort of dip totally different subject person I'd like to commend you for continuing to buy stock screwed everyday.
See your form that you bought another 500 shares.
I realize you are quiet periods, but in regard to the company I realize the company has a window in but it would be as a shareholder I would.
Like to hope that the goal.
Is at least over time.
Through blocks were in the market to offset the share creep.
Which is standard for almost every company.
But.
It would be nice given our resources and balance sheet too if we have the opportunity to buy back enough stock to at least keep the share count relatively constant.
Florida, one shareholder.
Yeah, no. That's good that's good that and we agree.
Okay. Thanks, a lot Jeff.
Thank you.
Again, if you'd like to ask a question. Please press Star then one our next question is a follow up from Edward Riley with please go ahead.
Hey, guys just a another one from me just wondering if you could give us a breakdown of revenue by industry in the quarter and maybe what you expect this to look like over the next few quarters just given the.
Robust sales pipeline, particularly within the health care space.
I don't know if Matt has those numbers offhand, but my way.
Youre right. The question is on revenue.
The sector or the Permian.
So adjusted revenue.
It's typically a quarter financial services and our financial services tends to hold up.
Really well.
Unlike some peers, we don't have.
I have a lot of exposure to.
The more volatile cyclical aspects of financial services.
And then.
Second biggest sector is a health care life.
Life Sciences.
And Teck has has shrunk.
Quite a bit it was.
Maybe 20%.
At the peak this year and it was above 10% say, 12% or so in the third quarter and is going to be less than 10% in the fourth quarter.
And then.
The other part of our business so.
I talked about financial services health care and attack and everything else is.
Call it 30%, 35% and it's a collection of consumer manufacturing.
Those are the two main two main areas there.
Okay got it thanks.
That concludes today's question and answer session I will now turn the call over to Jeff Eberwein for closing remarks.
Okay. Good good questions everybody.
Thank you for joining us today and for your interest in Hudson Global feel.
Feel free to contact us anytime using the contact information found in our press release or on our Investor Relations website.
Look forward to next quarter's update call have a great day.
Thank you for joining the Hudson Global third quarter Conference call. Today's call has been recorded and will be available on me and that's currently.
The investors section.
Web site Hudson IPO dotcom.
[music].
[music].
Good morning, and welcome to you.
Hudson Global conference call for the third quarter of 2022 I.
Our call today 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 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.
These risks are discussed in our form 8-K filed today and in our other filings made with the Securities and Exchange Commission, including our annual report on Form 10-K, the company disclaims any obligation to update any forward looking statements.
During the course of this conference call references will be made to non-GAAP terms, such as constant currency adjusted EBITDA and adjusted earnings per diluted share.
Conciliation, but these measures are included in our earnings release.
Quarterly slides posted.
Posted on our web site Hudson RP O Dot com.
I encourage you to access our earnings materials at this time.
They will serve a helpful reference guide during our call I will now turn the call over to Jeff Eberwein.
Thank you operator and welcome everyone. We thank you for your interest in Hudson Global and for joining us today.
I'll start by reviewing the third quarter 2022 highlights and Matt Diamond our CFO will provide some additional details on our financial results.
I'll, then give an update on current business conditions.
For the third quarter of 2022, we reported revenue of $49 million up 16% year over year in constant currency.
Adjusted net revenue was $24 2 million and increased 42% year over year in constant currency.
SG&A costs were $21 2 million in the third quarter up 49% versus the same period last year in constant currency we.
We reported adjusted EBITDA of $3 million up 8% in constant currency versus a year ago.
In addition, we reported net income of 1 million or <unk> 30, a share versus net income of $1 5 million or <unk> 49 per share in the same period last year.
Also we reported adjusted net income per diluted share of <unk> 58, and the <unk>.
Third quarter versus 78 cents a year ago.
In the third quarter of 2022, we repurchased approximately $1 1 million.
Doc.
Since the beginning of 2019, we've reduced the companys share count by 13% and we continue to view share repurchases as an attractive use of capital.
We had 600000 remaining under our $10 million.
And share repurchase program.
I'll now turn the call over to Matt Diamond, our CFO to review our financial results by region as well as provide some additional financial details from the third quarter.
Thank you, Jeff and good morning, everyone.
Our Americas business grew revenue and adjusted net revenue, 69% and 70% in constant currency respectively.
Adjusted EBITDA of $1 $8 million increased versus last year's adjusted EBITDA of $1 4 million.
Revenue for our Asia Pacific business was roughly flat year over year in constant currency and adjusted net revenue grew 12% in constant currency.
Adjusted EBITDA of $1 7 million decrease from adjusted EBITDA of $2 2 million a year ago.
Our EMEA business grew revenues, 36% and adjusted net revenue, 51% in constant currency.
Adjusted EBITDA of $4 million in Q3, 2022 increased compared to adjusted EBITDA of $2 million in Q3 of last year.
Turning to some additional financial details from the third quarter.
We ended Q3 with $22 7 million in cash and restricted cash.
Days sales outstanding was 50 days at September 2022 up from DSO of 39 days in September 2021.
In connection with the acquisition of <unk> group in the fourth quarter of 2020 karate in the fourth quarter of 2021 and hunting badge in the third quarter of 2022, our balance sheet as of September 32022 reflects $4 9 million of goodwill and $4 8 million of net amortized global intangible asset.
Sure.
The Companys working capital, excluding cash increased to $10 2 million in the third quarter of 2022 from $7 8 million at the end of 2021.
As a reminder, in April 2019, we finalized a credit facility in Australia to support the expected growth in 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 Q3.
The company used zero point $1 million in cash flow from operations during the third quarter.
I'll now turn the call back over to Jeff to give some more perspective on our Rps business and to review current trends.
Thank you Matt.
In the third quarter of 2022, our business exhibited solid revenue and adjusted net revenue growth versus the prior year quarter.
Adjusted EBITDA remained flat year over year.
The third quarter's results were impacted by less favorable foreign exchange rates.
A reduction in project work and a slowdown in hiring activity in the technology sector, which is expected to continue into next year.
Despite these headwinds activity at most clients remains robust and our sales pipeline is heavily focused on the health care sector.
We're confident in our ability to manage the business in this environment and we remain well positioned to respond to needs.
Respond to the needs of our clients going forward.
Further I'd like to emphasize that our enterprise <unk>, which comprises approximately 75% of our business is holding up very well.
We did have temporary operational challenges at two of these clients in the quarter, which have since begun to abate.
The remaining 25% of our business which consist of.
Recruiter on demand work for the technology sector and project <unk> is where we have begun to see a general slowdown.
Our teams have responded accordingly, today's market changes to protect our profitability and also position the business to respond quickly when these conditions reverse <unk>.
Importantly, I want to thank all of our highly dedicated employees for their flexibility hard work and dedication to our clients and business in the challenging conditions, we have been working through.
Operator can you. Please open the line for questions.
Thank you.
I will begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Edward Riley.
Please go ahead.
Hi, Jeff.
Right.
Challenging labor market currently I was wondering if you could maybe.
Talk about the company's cost structure in terms of.
Fixed first variable expenses.
Sure.
In a way all of our costs are variable because it's all it's all people.
Probably a way to think about it is.
The overhead we have management sales and marketing.
Ed.
Is fixed in the short term, but it doesn't have to be over the medium to longer term.
A good rule of thumb that we that we use is.
About.
70%.
Of of revenue equates to variable costs. So in other words, if we add an extra $100 of revenue.
At about $70 out variable costs.
And.
No fixed costs.
So that's one way to think about it I hope that.
That's helpful and I would say.
Labor markets are tight both for our clients and for US, particularly in the main markets. We're in which is U S U K and Australia.
And compensation levels are up.
Which enables us to increase prices over time, but that happens with a lag we typically have three year contracts, particularly in the enterprise <unk> business.
And although we do have some.
Automatic price Escalations that are.
Tied to CPI, most typically it's not until the contract comes up for renewal.
Can we.
Enter into those.
Does pricing negotiations and given.
Debt.
Cost of.
Recruitment professionals is much higher than it was pre COVID-19, we do think we'll have an ability to.
Increased prices.
Going forward, Matt any any detail on.
On fixed versus variable cost and how.
Different ways to think about that.
Yeah.
Most of our fixed costs, we will consider.
Our within corporate as well and one of the things that we've done over the past several years is bring down our corporate cost to around the $4 million.
Mark where it had been significantly higher over the past several years. So that's why we feel fairly confident in the ability of.
That 70% variable with 30% continuing to slow down to the.
Margin that Jeff was talking about.
Okay got you. Thanks.
Okay.
And just given the forward projections of unemployment creeping up I was wondering how you maybe see this environment from an opportunistic standpoint, maybe on acquisitions or how the business might look maybe coming out on the other side.
Sure.
We are seeing right now is more opportunities for enterprise RVO and this is typically with bigger companies.
500 company this is our bread and butter.
And if you think about.
What.
The typical big company has dealt with over the last three years, they really see the need for a partner like us more than ever before.
It is dealing with COVID-19 ramping down ramping back up.
And then a lot of technology tools in the marketplace a lot of companies are much more serious about diversity and inclusion hiring goals. So.
So we can really add a lot of value and.
A lot of the big companies, especially ones, who had never done RP O before our.
Much more open to an <unk> solution like ours, and then Theres also some instances where.
<unk>.
Their existing provider.
It didn't perform well during COVID-19 or coming out of Covid.
And there are a few opportunities in the marketplace too.
To take share and so that's that's going to be in this environment.
The key focus of our growth is winning more enterprise.
Clients.
<unk>.
Those are those clients have been.
Distracted and busy and now they're really sitting down and.
Seriously considering rps sometimes.
The first time.
And then on.
So that's about 75% of our business.
And then about 15% is project work that we do and there was quite a bit of project work coming out of Covid.
And we have seen a slowdown in some of those projects and one thing that hurt us in the third quarter as we had some projects.
And early.
Earlier than we expected and then we have some new projects starting up.
But there's kind of a lag there and I would roughly estimate that hurt our EBITDA by 500000 or so in the third quarter.
Just kind of carrying the cost with no revenue. So theres still project work to win but it is not as robust as it was earlier this year and Thats really the seed corn for the future a lot of bigger companies that have never used RVO before.
Will.
We'll hire us for a specific project, maybe it's in a particular country or in one of their divisions and Thats, a great way to get our foot in the door and develop a relationship and our team does a pretty good job of converting that to enterprise <unk> overtime and then we have about 10% of our business that is our focus.
On the technology sector, which is a little bit different business model, that's more for crude or on demand.
Shorter term contracts.
And.
That.
Lot of that work that we do is for medium sized tech companies and in some cases pre IPO and that business has declined.
Very significantly.
From from the peak earlier this year.
And.
Unclear when that.
When that when that rebounds, it will at some point our team would say a lot of those companies. There's a lot of hiring freezes in tech right now.
It's going to be very weak in the first quarter and the beginning of next year, but even if that.
Environment.
Doesn't improve a lot of these companies are kind of overdoing, it and we will need to start to resume at least some hiring at some point next year, but that one that one is tougher to call, but we do think it will come back and it will come back strong and a lot of those clients say next time around that are going to.
Rely more on providers like us and because they like the flexibility and the value of the service that we provide.
Awesome, that's really helpful. Thank you guys.
Our next question comes from Marc Riddick with Sidoti <unk> Company. Please go ahead.
Hey, good morning.
Good morning, Mark.
So I wanted to follow up on sort of how you're viewing the.
The opportunity to take advantage of a rebound going forward should we be in a position to do that.
Talk a little bit about the.
Your thoughts around headcount and talent retention and the like I mean, obviously you communicated some of the near term slowdown in activity, but I was wondering if you could talk maybe about the.
Just sort of making sure that you have enough talent to take advantage of any upticks.
Sure.
Really good question and.
There are a couple of levels to it there is what's going on at our clients.
And then whats going on with our own talent and.
On the enterprise RP O.
Those those clients.
Have struggled to meet their hiring goals coming out of Covid and they have also experienced higher than normal turnover and what we're seeing right now is that those clients.
<unk>.
Still have a talent shortage mentality and a fear of slowing down and if they do so they will miss out on talent and that will put them at a competitive disadvantage and so we we are always looking for talent ourselves, we're particularly looking to grow and.
The enterprise <unk> segment, and that's where when I look at our our sales pipeline it's got more.
Enterprise <unk> projects that we're pursuing and fewer project RP O type of type of work and fewer.
Fewer things going on in the tech sector.
So we've we've we're always looking for talent for.
Enterprise <unk> and we've been able to redeploy.
Some of the recruiters that we have that we're working for technology clients, we've been able to redeploy them too.
Life Sciences medical devices, which hasnt slowed down at all and what we're still seeing growth and so we do try really hard to retain people.
And redeploy them into into other accounts, but when.
Business declines as much as it has like in the technology sector.
We have.
<unk> shrunk, our our head count in that in that vertical.
Okay, and then maybe you could just bring us up to speed on.
No one bedroom wasn't that long ago, but what if you could talk a little bit about.
Overall thoughts on the acquisition multiples in the pipeline and appetite.
Yeah sure I know, it's a very interesting what we're seeing in the.
Acquisition marketplace, and we were always looking for acquisitions, it's helpful to be in the market and looking and now that we've done three we've done one a year.
For the last three years, we're kind of unknown.
<unk> and perhaps we're getting shown more deals than previously just because of that but there are a decent number of opportunities in the marketplace.
A little bit surprising to me there their sales price expectations are.
Hi, Ann.
And in general they've done well over the last two years and so.
It makes us a little a little wary, we never want to buy something at what could be.
And we certainly don't want to pay a high multiple for it. So there is in short there is more opportunities out there than we've ever seen before but also in general.
Their expectations are too high so we're continuing to look where we.
We have a list where we're monitoring several lease situations and we think being patient and not.
Not changing our criteria is the right way to go.
Okay. That's helpful. Thank you and then I guess the last one for me I just wanted to sort of.
Similar vein as far as use of cash.
Mentioned in the press release.
Share repurchase activity during the quarter, you reduce share count.
Quite a bit over the last few years, when if you could talk a little bit about that and appetite as well. Thank you.
Yes, sure we think our stock is cheap and it's very accretive.
Buyback stock when the multiple is low.
And when it's below what we believe the net asset value to be.
The tricky thing is.
Is the window being open or not.
A lot a lot of time, just the window is open.
So we did have an opportunity in the third quarter, where the window was open for about a month. It hadn't been opened in a while until we did take advantage of that to buy some stock.
And as you know we bought back stock in a lot of different ways and.
Our preferred way to do it the easiest way to do it is to buy back a block.
Which we did during Covid there were two significant holders who wanted to wanted liquidity and so we were able to do to two big block trades back then.
<unk>.
That was much easier to execute and much more impactful than buying a little bit each day in the market as you know our stock is pretty illiquid.
So.
We'll be opportunistic our preference would be to buy a block if a block ever becomes available.
But the window also has to be open so.
We think sure.
Share repurchases are a really good use of capital.
Expected to do more over time, and we'll be opportunistic.
Okay. Thank you very much.
Thank you.
Again, if you'd like to ask a question. Please press Star then one at this time. Our next question comes from Walter.
And then the partners. Please go ahead.
Hi, Jeff.
Good morning.
Two different questions.
Seasonally.
The third quarter at least in Europe , as it tends to be somewhere quiet at the fourth quarter.
Maybe not in Asia, but maybe there is well run into some holidays.
Is the.
Third and fourth quarters, and I realize a lot of other stuff overwhelms that seasonally somewhat slower than the first if you could just sort of traditionally run through the quarters as to the seasonal seasonality.
Sure Yes.
Usually the fourth quarter.
Is slower than the third and in the first quarter is usually the slowest quarter of the year.
Said another way typically the strongest quarters of the year Q2 and Q3.
Did mention in my prepared comments that there were a couple of operational challenges with.
Two enterprise RPM clients one is implementing.
Some new it systems and that caused a disruption we're already seeing that abate and the early part of Q4 and another was a health care company.
That spun off part of their business and so it went from being one public company to two public companies and the good news there is that both remain clients and have a healthy outlook, but that that separation into two two separate companies also caused.
Our hiring disruption in Q3 that we also think will abate in Q4, so there's many things.
Each year is different each quarter is different but there's many things that will be better for us in Q4 versus Q3, except the tech sector.
We think there's going to be worse in Q4 than Q3.
Many many companies in the technology sector are.
Putting on a hiring freeze.
Laying off people.
And.
So that's going to that's going to be pretty slow. So we we kind of stopped giving official guidance.
During during Covid.
But when I look forward.
Q4.
It probably is going to be.
Flat to down versus versus Q3.
Just because of the seasonality and weakness in the tech sector. And then Q1 is also it's typically the weakest quarter of the year and.
I'd say the most optimistic thing is that the big companies the enterprise <unk> clients.
We haven't seen any changes there there's still a lot of new business to win.
Our new business pipeline is robust and for the first time I can remember well over half of it is focused on the health care sector, which for US is typically pharmaceuticals life Sciences medical devices.
A lot of those companies have never used <unk> before and are looking to use RVO or for whatever reason, they're unhappy with their provider and looking to switch.
We are aggressively pursuing.
Some of those clients.
Okay, and just on the dip totally different subject personally I'd like to commend you for continuing to buy stock it's good everyday.
Your form that you bought another 500 shares.
I realize through quiet periods, but in regard to the company.
I realize the company has a window in.
It would be.
Shareholder I would like to hope that the goal.
Is at least over time, whether through blocks were in the market to offset the share creep.
<unk>, which is standard for almost every company.
But it.
It would be nice given our resources and balance sheet too if we have the opportunity to buy back enough stock to at least keep the share count relatively constant.
Florida, one shareholder.
No. That's good that's a good that and we agree.
Okay. Thanks, a lot Jeff.
Thank you.
Again, if you'd like to ask a question. Please press Star then one our next question is a follow up from Edward 90, Lithia, but please go ahead.
Hey, guys just another one for me just wondering if you could give us a breakdown of revenue by industry in the quarter.
What do you expect this to look like over the next few quarters, just given the robust sales pipeline, particularly within the health care space.
I don't know if Matt has those numbers offhand, but my way.
The question is on revenue.
Victor.
Yes.
So adjusted revenue.
It's typically a quarter financial services and our financial services tends to hold up.
Really well.
Unlike some peers, we don't have.
They have a lot of exposure to.
The more volatile.
Cyclical aspects of financial services.
And then R. R.
Second biggest sector is healthcare life.
Our life Sciences.
And Teck has has shrunk.
Quite a bit it was.
Maybe 20%.
At the peak this year and it was above 10% say, 12% or so in the third quarter, it's going to be less than 10% in the fourth quarter.
And then.
The other part of our business so.
I talked about financial services health care and in Tech and everything else is.
Call it 30%, 35% and it's a collection of consumer manufacturing.
Those are the two main two main areas there.
Okay got it thanks.
That concludes today's question and answer session I will now turn the call over to Jeff Eberwein for closing remarks.
Okay. Good good questions everybody.
Thank you for joining us today and for your interest in Hudson Global and feel free to contact us anytime using the contact information found in our press release or on our Investor Relations website.
Look forward to next quarter's update call have a great day.
Thank you for joining the Hudson Global third quarter Conference call. Today's call has been recorded and will be available on the investor.
The Investor section.
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