Q2 2023 Hudson Global Inc Earnings Call

Good morning, and welcome to the Hudson Global Conference call for the second quarter of 2023.

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.

Forward looking statements involve certain risks and uncertainties that may cause actual results could differ materially from those contained in the Florida 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 they.

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 reconciliations for these measures are included in our earnings release.

And quarterly slides.

Both posted on our web site Hudson our appeal dotcom.

I encourage you to access our earnings materials at this time.

He will serve as 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.

Start by reviewing our second quarter, 2023 highlights 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 second quarter of 2023, we reported revenue of $45 million down.

Down 18% year over year in constant currency.

Adjusted net revenue was 23 million and decreased 15% year over year.

Yeah.

SG&A costs were $20 million in the first quarter down 5% versus the same period last year in constant currency.

We reported adjusted EBITDA of $2 6 million down 52% in constant currency versus a year ago.

In addition, we reported net income of 600000 or 18 cents per diluted share.

Versus net income of $3 1 million or 98 cents per diluted share in the same period last year.

We reported adjusted net income per share of 36 cents in Q1, sorry.

Sorry, Q2, 2023 versus $1 25, a year ago.

And now I'll 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 second quarter.

Yeah.

Thank you, Jeff and good morning, everyone.

Revenue and adjusted net revenue for our Americas business decreased 40% in constant currency.

Breakeven adjusted EBITDA decreased versus last year's adjusted EBITDA of $3 4 million.

Revenue for our Asia Pacific business increased 1% year over year and adjusted net revenue grew 11% in constant currency.

Adjusted EBITDA of $2 5 million decreased from adjusted EBITDA of $2 6 million a year ago, but increased 2% in constant currency.

Revenue for our EMEA business declined 34% in constant currency, while adjusted net revenue increased 10% in constant currency.

Adjusted EBITDA of $1 1 million in the second quarter of 2023 increased from adjusted EBITDA of $8 million a year ago.

Turning to some additional financial details from the second quarter.

We ended Q2 with $23 million in cash and restricted cash.

Days sales outstanding was 51 days at June 2023 down from DSO of 53 days at March 2020.

In connection with the acquisitions of quite group in the fourth quarter of 2020.

Ronnie and the fourth quarter of 2021, and Hunton badge and the third quarter of 2022, our balance sheet as of June 32023 reflects $4 9 million of goodwill.

$4.1 billion of net amortizing intangible assets.

The company also paid off this $1 3 million acquisition related note in the second quarter.

Yeah.

The company's working capital, excluding cash increased significantly to $12 5 million in the second quarter of 2023.

Seven 3 million at the end of 2022.

The company generated $2 6 million in cash flow from operations during the second 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 second quarter of 2023, lower hiring activity, particularly in the technology sector led to declines in revenue adjusted net revenue and adjusted EBITDA versus the prior year quarter.

Activity in other sectors remained in line with our expectations and we continue to win new business in the second quarter of 2023.

Although the timing of a recovery in the technology sector is difficult to predict we're confident in our ability to manage the business in this environment and we remain well positioned to respond to the needs of our clients going forward.

The second quarter of 2023, the company repurchased.

$600000 worth of stock.

Which completed the $10 million common stock repurchase program.

The company began buying under this program in 2015, and Opportunistically supplement it with a tender offer in 2019 as well as privately negotiated transactions with certain significant shareholders in 2020.

Altogether since 2015, the company repurchased 1 million shares at an average price of approximately $16 per share.

The company continues to view share repurchases as an attractive use of capital going forward as evidenced by our recent 5 million dollar share repurchase authorization.

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've experienced in recent years.

Operator can you now please open the line for questions.

We will now begin the question and answer session.

You ask a question you May press Star then one.

To withdraw your question from the queue.

<unk> Press Star then two.

At this time, we will pause momentarily to assemble our roster.

Yeah.

Our first question comes from Marc Riddick with Sidoti.

Hey, good morning.

Good morning, So I just I was wondering if you could talk a little bit about maybe and certainly it's it's pretty consistent.

With with a lot of appears of what.

Folks are seeing out there was one of you could talk a little bit about maybe what you're seeing as far as our clients are.

Activity as far as the delays.

If if you're getting the sense of whether it's within particular types of projects or or is it is there anything that's sort of a little different than maybe it's been maybe three six months ago or is it pretty similar to the actions that we saw earlier in the year.

Yeah, I would say there is.

No.

Real significant changes either positive or negative versus a few months ago.

Yes.

The biggest observation we have is.

How the difference between sectors.

So in the technology sector, our team would describe hiring conditions as a nuclear winter.

It was about 20% of our total business.

Last year and now it's less than 5%, which just gives U S. A.

A sense of the magnitude of the decline in hiring in the tech sector.

The other sectors, you know I'd say the strongest sector is life sciences.

But it really.

It goes to a sector by sector or even company by company. So like for example, our biggest.

New client win this year is a European.

Company that specializes in clean water and.

Different hygiene and sanitation type of projects.

And they recently just made a really large acquisition in the U S.

So what we thought was going to be a decent sized wind turned into a really really big win after they made that significant acquisition, we're just getting ramped up with them and then another.

Decent size when we had this year is in the gaming sector. So it's hard to draw.

A big sweeping themes, except for the nuclear winter in the tech sector hiring.

Now we've been able to find pockets, where companies are growing and hiring and really value our services and our need need help navigating the environment. So I would say the most encouraging thing is that we continue to win.

New business this year.

Okay, and that's why if you could talk a little bit about maybe what your what your thoughts are as far as the the maybe the acquisition pipeline that you're seeing and then maybe a bigger picture sense. The you know thoughts around you know no.

Hopefully when we get to recover from this oh.

Activity at some point you know, how we might see industry consolidation shakeout going forward, but maybe just sort of maybe just big picture thoughts around around what we might see with with those kind of opportunities.

Yeah, there's really really good question Mark.

So.

If for whatever reason last year, we probably saw more targets.

I'm kind of on the market, we were having more conversations.

And then before so I would say.

The high point for discussions was late 2021 and first half of 2022.

You know there are a decent number of discussions decent number of targets that we were looking at and.

It was just a big gap between or.

Perspective on value and their perspective on value and.

Some of them some of them did get sold most of them didn't.

And then a few of them now have a lot more realistic expectations.

A whole other category, just hunkering down and waiting for a better day, but the ones where they have lower expectations, maybe they had a failed sale process or.

It just took a few quarters or the slowdown in activity to sneak in.

Those are cars that we remain in kind of active dialogue with them.

So we're always having discussions with somebody somewhere.

So we just describe it as you know not as heated as it was and.

2021 2022 but are there there's a few that that could be interesting largely because they've they have more realistic expectations today as I did say 18 months ago.

No. That's that's really helpful. I appreciate the commentary there.

I was wonder if you can talk a little bit about maybe what you're seeing as far as Canada, the availability and you know it's.

From but from a talent side of things certainly it seems as though there continues to be a challenge, but I was wondering if you can.

Are you getting a sense that there are maybe maybe that varies by by specialties like but maybe you could talk a little bit about what you're seeing there as far as you know are we seeing any changes there as far as I.

How many candidates are out there are any pockets.

Potential green shoots from that standpoint.

Yeah, that's a really good question I would describe it.

High level.

As.

The labor market is still tight but not as tight.

As it was but then you get.

Some significant differences, depending on sector and depending on geography.

So despite what I said about the technology sector, where there are.

A lot more.

I think candidates looking than there are jobs available.

Most companies that we talk to whether they're in health care financial services consumer are they do have a lot of roles a lot of I T rolls.

They might not be and California, they might be in the middle of the country or somewhere internationally.

And those have still been hard to fill them you know.

It's a very ubiquitous skill set.

And then within the technology sector itself.

The the green shoots.

That that we see and I even.

Shuttered I've mentioned this phrase, but you know AI and cyber security there are companies getting funded and typically once a company gets funded they have aggressive growth goals that they need to me, which means they need to hire more tech.

Tech specialists were engineers.

Programmers Pete people like that and so that that is the one.

Area, maybe also it services those are the areas, where we see some hiring activity.

I appreciate the color and all about was this the urge to power AI questions back and certainly lead to a whole different area, but I do appreciate it. Thank you.

Yeah.

Yeah.

Excuse me.

If you have a question. Please press the Star then one.

That concludes today's question and answer session.

Now I'll turn the call over to Jeff Eberwein for closing remarks.

Yeah.

Thank you all again for joining us today and for your interest in Hudson Global 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.

Thank you for joining the Hudson Global second quarter Conference call. Today's call has been recorded and it will be available on the investors section of our website.

I'd say our appeal.

Got it.

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