Q1 2024 Hudson Global Inc Earnings Call

Operator: Good morning, and welcome to the Hudson Global conference call for the first quarter of 2024. Our call today will be led by Chief Executive Officer Jeff Eberwein, Chief Financial Officer Matt Diamond, and Global CEO of Hudson RPO, JPMorgan.

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

Speaker Change: Our call today will be led by Chief Executive Officer.

Speaker Change: Jeff Eberwein, Chief Financial Officer, Matt Diamond, Inc. Global C O of Hudson, Our P O J.

Speaker Change: Shapka, let's.

Operator: [inaudible] 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 statement. These risks are discussed in our Form 8K to be filed today and in our other filings made with the Securities and Exchange Commission, including our annual report on Form 10K. The company disclaims any obligation to update any forward-looking statements.

Speaker Change: Please be advised that the statements made during the presentation include forward looking statements under applicable securities laws.

Speaker Change: 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 to be filed today and in our other filings made with the Securities and Exchange Commission, including.

Speaker Change: 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 EBITA and adjusted earnings per diluted.

Operator: 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 website, HudsonRpo.com. I encourage you to access our earnings materials at this time, as they will serve as a helpful reference guide during our call. Please note that today's conference is being recorded.

Speaker Change: Sure Reconciliations for these measures are included in our earnings release and quarterly slides both posted on our web site Hudson Our P O dot com.

Speaker Change: Encourage you to access our earnings materials at this time as they will serve as a helpful reference guide during our call. Please note today's conference is being recorded I will now turn the call over to Jeff Eberwein.

Okay.

Jeffrey E. Eberwein: Thank you, operator, and welcome, everyone. We thank you for your interest in Hudson Global and for joining us. We will start by reviewing the first quarter 2024 results, and Matt Diamond, our CFO, will provide some additional details on our financials. We're also excited to be joined on the call today by Jake Zapwicz, Global CEO of our Hudson RPO business, who joined the team in November and will provide us with an update today. As you can see in our news release issued this morning.

Jeffrey E. Eberwein: Thank you operator and welcome everyone.

Jeffrey E. Eberwein: Thank you for your interest in Hudson Global and for joining us today.

Jeffrey E. Eberwein: Corridor 2024 results were weak due to lower than normal hiring volumes at many of our clients. For the first quarter of 2024, we reported revenue of $33.9 million, down 20% year-over-year in costs and currency, while our adjusted net revenue was $16.3 million, down 25% year-over-year in costs and currency. Our adjusted EBITDA loss for the first quarter was $1.5 million versus positive adjusted EBITDA of $1.1 million a year ago. In addition, we reported a net loss of $2.9 million, or $0.95 per diluted share, versus net income of $400,000, or $0.11 per diluted share, in the same period of last year.

Jeffrey E. Eberwein: Start by reviewing the first quarter 2024 results.

Jeffrey E. Eberwein: And Matt Diamond, our CFO will provide some additional details on our financials.

Matthew K. Diamond: We're also excited to be joined on the call today by J exact words global CEO of our Hudson RP O business, who joined the team in November and will provide us with an update today.

As you can see in our news release issued this morning, our first quarter 2024 results were weak due to a lower than normal hiring volumes at many of our clients for the first quarter of 2024, we reported revenue of $33 9 million down 20% year over year in constant currency, while our adjusted.

Matthew K. Diamond: Net revenue was $16 3 million down 25% year over year in constant currency.

Matthew K. Diamond: Our adjusted EBITDA loss for the first quarter was $1 5 million versus positive adjusted EBITDA of $1 1 million a year ago.

In addition, we reported net loss of $2 9 million or 95 cents per diluted share.

Matthew K. Diamond: Versus net income of 400000 or 11 cents per diluted share in the same period of last year.

Matthew K. Diamond: Q1, 2024, adjusted net loss per diluted share compared to net income okay.

Matthew K. Diamond: Our diluted share of <unk> 22 cents in the first quarter of 2023.

Jeffrey E. Eberwein: Q1 2024 adjusted net loss per diluted share was $0.72 compared to net income per diluted share of $0.22 in the first quarter of 2023. Now I'll turn the call over to Matt Diamond, our CFO, to review our financial results by region, as well as some additional financial details from the first quarter.

Matthew K. Diamond: Now I'll turn the call over to Matt <unk>, our CFO to review our financial results by region as well as some additional financial details from the first quarter.

Thank you, Jeff and good morning, everyone.

Matthew K. Diamond: Thank you, Jeff, and good morning, everyone. Revenue and Adjusted Net Revenue for America's business both decreased 35% year-over-year in constant currency. We reported an adjusted EBITDA loss of $0.7 million for the quarter versus last year's break-even adjusted EBITDA. Revenue for our Asia-Pacific business decreased 18%, while adjusted net revenue decreased 20% year-over-year in constant currency.

Matthew K. Diamond: Revenue and adjusted net revenue for our Americas business decreased 35% year over year in constant currency.

Matthew K. Diamond: We reported an adjusted EBITDA loss of $7 million for the quarter versus last year's breakeven adjusted EBITDA.

Matthew K. Diamond: Revenue for our Asia Pacific business decreased 18%, while adjusted net revenue decreased 20% year over year in constant currency.

Matthew K. Diamond: In Q1, 2024, we reported an adjusted EBITDA loss of $2 million.

Matthew K. Diamond: In Q1 2024, we reported an adjusted EBITDA loss of 0.2 million compared to adjusted EBITDA of 1.7 million a year ago, revenue for our Europe business decreased 6% versus the prior year quarter in constant currency, and adjusted net revenue decreased 13%. Our adjusted EBITDA for Q1 2024 was $0.3 million compared to adjusted EBITDA of $0.5 million in the first quarter of 2023. Now, turning to some additional financial We ended the first quarter with $21.0 million in cash, including $0.6 million of restricted cash. Day sales outstanding were 52 days at March 31st, 2024, compared to 49 days at December 31st, 2023.

Matthew K. Diamond: Adjusted EBITDA of $1 7 million a year ago.

Matthew K. Diamond: Revenue for our Europe business decreased 6% versus the prior year quarter in constant currency.

Matthew K. Diamond: And adjusted net revenue decreased 13%.

Matthew K. Diamond: Our Q1 2024, adjusted EBITDA was 3 million compared to adjusted EBITDA was $5 million in the first quarter of 2023.

Matthew K. Diamond: Turning to some additional financial details from the first quarter.

Matthew K. Diamond: We ended the first quarter was $21.4 million in cash, including <unk> 6 million of restricted cash.

Days sales outstanding was 52 days at March 31, 2024.

Matthew K. Diamond: Hard to 49 days at December 31st 2023.

In connection with our recent acquisitions, including <unk> group in 2020.

Matthew K. Diamond: In connection with our recent acquisitions, including Coit Group in 2020, Karani in 2021, Hunt & Badge in 2022, and Hudson Singapore in 2023, our balance sheet as of March 31, 2024, reflects $5.7 million of goodwill and $3.3 million of net amortizable intangible assets. The company's working capital, excluding cash, is $10.2 million, compared to $12 million at year-end 2023. SG&A expense in the first quarter was $18 million, down 13% versus the same period last year in constant currency.

Matthew K. Diamond: Rami in 2020, one hunting badge in 2022 and Hudson Singapore in 2023.

Matthew K. Diamond: Balance sheet at March 31, 2024.

Matthew K. Diamond: $5 7 million goodwill and $3 3 million of net amortizing intangible assets.

Matthew K. Diamond: The company's working capital excluding cash was $10.

Matthew K. Diamond: Compared to $12 million at year end 2023.

Matthew K. Diamond: SG&A expense in the first quarter was 18 million down 13% versus the same period last year in constant currency.

Matthew K. Diamond: The company used $1 8 million in cash flow from operations during the first quarter of 2024.

Matthew K. Diamond: <unk> 5 million cash outflow from operations in the first quarter of 'twenty three.

Matthew K. Diamond: I'll now turn the call over to Jamie that quite global CEO of Hudson, the RPM to give some perspective on RPM.

Matthew K. Diamond: The company used $1.8 million in cash flow from operations during the first quarter of 2024, compared to a $5 million cash outflow from operations in the first quarter of 2023. I'll now turn the call over to Jake Zapkiewicz, Global CEO of Hudson RPO, to give some perspective on our RPO business.

Jamie: Thank you, Matt and good morning Han.

Jake Zapkiewicz: Thank you, Matt, and good morning. Hudson RPO made considerable strides in the first quarter of 2024 in both our service offerings and our global market presence to better position ourselves for long-term success. Thus far, we have announced an organic enhancement of our boutique search offering and two small but very important UAE-based acquisitions, Executive Solutions and Stryver. These acquisitions give us an immediate presence and book of business in the Middle East and ensure that we continue to find and place the best talent globally for our clients.

Jamie: Hudson RPM made considerable strides in the first quarter of 2024, and both our service offerings and our global market presence to better position ourselves for long term success.

Jamie: As far as we are announcing organic enhancement of our particular search offering and two small, but very important UAE UAE based acquisitions of executive solutions and Shriver. These.

Jamie: These acquisitions give us an immediate presence in book of business in the Middle East and ensure that we continue to find and place the best talent globally for our clients.

Jake Zapkiewicz: We also initiated internal reorganization, allowing us greater agility to support our current clients and future partners, and also invested in our global sales organization to support the expansion initiatives that we've put in place. We expanded our team with the hiring of Jeff Bedinger as a Chief Administrative Officer and Rachel Marsalisi as the Director of Client Solutions for EMEA. Both Jeff and Rachel bring extensive experience and leadership excellence to our team and tremendous value to our organization as we continue to grow our global footprint.

Jamie: We also initiated an internal reorganization, allowing us greater agility to support our clients current clients and future partners and also invested in our global sales organization to support the expansion initiatives that we've put in place with <unk>.

Jamie: Standard our team with the hiring of Jeff Bettinger is the chief administrative officer and rates them ourselves. She is a director of client solutions for meal, both Jeff and Rachel bring extensive experience and leadership excellence to our team and tremendous value to our organization as we continue to grow our global footprint.

Jake Zapkiewicz: We are starting to see the market come back to life in certain sectors, such as industrial and life sciences. Our clients are becoming more bullish on their workforce plans, and we're at the early stages of seeing incremental growth within our current base. I'm optimistic about our future path forward. Our pipeline is continuing to grow with a diversity of opportunities, both enterprise and project solutions, and it has never been as robust as it is today.

Jamie: We're starting to see the market come back to life as certain sectors, such as industrial and life Sciences clients are becoming more bullish in that workforce plans and we're at the early stages of seeing incremental growth within our current base.

Jamie: I'm optimistic about our future path forward, our pipeline is continuing to grow with a diverse set of opportunities both enterprise and private solutions and it has never been as robust as it is today our investment in our go to market strategy is reaching new client groups across the globe and in six months since joining Hudson our leadership team continues to make necessary changes.

Jake Zapkiewicz: Our investment in our grow-to-market strategy is reaching new client groups across the globe, and in six months since joining Hudson, our leadership team continues to make necessary changes to become a leaner organization and provide excellent support to our clients. I will now turn the call back over to Jeff to review the outlook for our business and make closing remarks.

Jamie: They've become a leaner organization and provide excellent support to our clients I will now turn the call back over to Jeff to review the outlook for our business and closing remarks.

Jeff: Thank you Jake well first quarter results were weak and some of this weakness has continued into Q2. We are encouraged by the overall trends we're seeing in the RVO market feedback, we're receiving from our clients in general we expect hiring.

Jeffrey E. Eberwein: Thank you, Jake. The first quarter results were weak, and some of this weakness has continued into Q2. We are encouraged by the overall trends we're seeing in the RPO market and the feedback we are receiving from our clients. In general, we expect hiring to expand as we expand our footprint through organic and inorganic growth. We believe our stock remains undervalued, and during the first quarter, we continued to make share repurchases under our $5 million Common Share Repurchase Program initiated in August of 2023. And under this program, to date, we have repurchased almost 21,000 shares in the open market for a total of $4.5 billion. $400,000.

Jeff: Okay.

Jeff: To expand.

Jeff: As we expand our footprint.

Jeff: Through organic and inorganic growth.

Jeff: We believe our stock remains undervalued and during the first quarter, we continue to make share repurchases under our 5 million common share repurchase program initiated in August 2023.

Jeff: Under this program to date, we have repurchased almost 21000 shares in the open market for a total of.

Jeff: 400000.

In addition, we repurchased a total of 44.

Jeff: Additional shares in the first quarter of 2024.

Jeff: A negotiated transaction, leaving a balance of 4 million available for purchase under our 2023 authorization.

Jeff: We continue to view share repurchases as an attractive use of capital and we expect to buy more over time.

Jeff: I want all of our highly dedicated employees to be day to further flexibility hard work and dedication to our clients and business in the challenging conditions, we've been working through.

Jeffrey E. Eberwein: In addition, we repurchased a total of 44... [inaudible] We continue to view share repurchases as an attractive use of capital, and we expect to buy more over time. I want all of our highly dedicated employees to be thanked for their flexibility, hard work, and dedication to our clients and business and the challenging conditions we've been working through. Updater, can you please open the line for questions? We will now begin the question and answer session. If you want to ask a question, you may press star, then 1 on your telephone.

Speaker Change: Operator can you. Please open the line for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're really using a speakerphone. Please pick up your handset before pressing the keys.

Operator: We will now 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. If at any time your question has been answered and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Mark Riddick of Sidoti and Company. Please go ahead.

Speaker Change: At any time your question has been addressed and he would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Speaker Change: Our first question comes from Marc Riddick with Sidoti and company. Please go ahead.

Yes.

Marc Frye Riddick: Hey, good morning.

Marc Frye Riddick: Good morning.

Marc Frye Riddick: So I was wondering if you could talk a little bit about regional differentiation as far as what you're seeing with client activity and potential for recovery and maybe if you're seeing any green shoots that, whether it's by industry vertical or any call out that we should be thinking about as far as folks that are sort of willing to sort of pick up activity.

Marc Frye Riddick: So I was wondering if you could talk a little bit about regional differentiation as far as what youre seeing with the client activity and potential for recovery and maybe if you're if you're seeing any green shoots that are whether it's by industry vertical or or any call outs would you be thinking about as far as folks that are sort of willing to sort of you'll pick up.

Marc Frye Riddick: Our activity.

Jeffrey E. Eberwein: Good question, Mark. Jake, can you handle that one?

Speaker Change: Yeah. Good question, Mark I'm, Jake can you handle that one.

Jake Zapkiewicz: Yeah, absolutely. Mark, good morning. So, I would say from a geographical footprint. Good morning, sir.

Yeah, absolutely Mark good morning, So I was born in the geographical footprint. Good morning, Sir from a geographical footprint I think we're seeing signs of life back in the U S and also in EMEA Holistically.

Jake Zapkiewicz: From a geographical footprint, I think we're seeing signs of life back in the U.S. and also in the Middle East. The Middle East is continuing to be strong, as in the geographical footprint. There's a lot of investment with both, you know, regional companies and also multinationals coming into the Middle East. I think areas in APAC are seeing some strength coming back online, but it's a little bit slower compared to the other regions I just mentioned.

Jake: The middle East is continuing to be strong as in the geographical footprint. There's a lot of investments with both regional companies and also multinationals coming into the middle East I think areas in APAC, you do see some strength coming back online, but it's a little bit slower compared to the other reasons I just mentioned from the industrial from the sector.

Jake Zapkiewicz: From the industry, from the sector specifically, life sciences continues to be stable and strong. I do expect that to continue to be that cornerstone for us as we continue to move forward. And we're also seeing signs of life both in the financial sector and also manufacturing and industrial. Tech is still a little bit of a lagger right now for us, but we're bullish on tech picking back up in H2 of this next year. But from a standpoint of sector, we're seeing some strong signs again in life sciences, industrial, and manufacturing, and financial services.

Jake: Specific life Sciences continues to be stable and strong I do expect that to continue to be that cornerstone for us as we continue to move forward and we're also seeing signs of life Fulton financial and also manufacturing and industrial Tech is still being a little bit of a lag or right now for us, but we're bullish in tact picking back up in H two of its next year.

Speaker Change: <unk> bye.

Speaker Change: But from a standpoint of sector, we're seeing some strong signs again in life Sciences, industrial and manufacturing and financial services.

Speaker Change: Yeah.

Jake Zapkiewicz: Great, that's helpful. And I was wondering if you could talk a little bit about, are you seeing any changes as far as pricing, the environment, the pricing dynamic? And maybe, you know, are there any particular areas that we should be thinking about as far as some of the expense creep for the next couple of quarters or so ahead of future demand and recovery?

Speaker Change: Great. That's helpful and I was wondering can talk a little bit about are you seeing any changes as far as pricing environment pricing dynamic and maybe you know are there any particular.

Speaker Change: The areas that we should be thinking about as far as some of the expense.

Speaker Change: Creep for the for the next couple of quarters or so ahead of future demand recovery.

Jake Zapkiewicz: Yeah, Mark, I think that's another great question. I would, from a pricing and cost basis analysis with some of our partners, I would say yes. A lot of our partners are under cost pressure to look at different solutions for ways to create value for their businesses but also reduce costs within their businesses. And we're responding to and reacting to and partnering with a lot of our current clients as well as future clients on unique solutions to bring that to market for them.

Speaker Change: Yeah, Mark I think that's another great question I would I would from a from a pricing and cost basis analysis with some of our partners I would say, yes, a lot of our partners are under cost pressure to look at different solutions.

Speaker Change: There are ways to create value for their for their businesses, but also reduce cost within their businesses and we're responding and reacting in partnering with a lot of our current clients as well as future clients on unique solutions to bring that to market for them is it as robust as it has been in the past around cost pressures I think thats loosened up a little bit, but it's still <unk>.

Jake Zapkiewicz: Is it as robust as it has been in the past around cost pressures? I think that's loosened up a little bit, but it's still top of mind coming out of the pandemic and into 2023. Now we're in 2024, of course. So that is already there. We're being both aggressive in our go-to-market strategy and investing in our growth to be able to help support our clients and meet them where they are. And that's why you saw the recent acquisitions in the Middle East, because we have a lot of our partners that would like to drive some solutions and partnerships in those.

Speaker Change: A mind coming out of the pandemic and into 2023 now we're in 2024 of course. So is that is there we're being we're being both aggressive in our go to market strategy and investing in our growth to be able to help support our clients and meet them, where they are and that's why you saw the recent acquisitions of the middle East.

Speaker Change: Because we have a lot of our partners that would like to drive some solutions and partnerships in those regions.

Great and that actually leads me right into what my next question was going to be which is sort of the general sort of acquisition pipeline that you see out there and maybe you can sort of talk about maybe if you've seen much of a change of availability of of targets valuation competition for assets things like that.

Marc Frye Riddick: Great, and that actually leads me right into what my next question was going to be, which is sort of the general sort of acquisition pipeline that you see out there, and maybe you can sort of, you know, talk about whether you've seen much of a change in the availability of targets, valuation, and competition for assets.

Speaker Change: Jeff would you like to take that.

Jeffrey E. Eberwein: Jeff, would you like to take this?

Jeff: No you go ahead.

Jeffrey E. Eberwein: Okay, thanks Mark. So from a standpoint of acquisitions and targets, part of our growth strategy is M&A, and we're going to continue down this road. We're very bullish about the targets that are out there. I can tell you that, you know, we are having many opportunities come across our door and on our desk, and we're looking at every opportunity holistically. I am bullish about H2 for us, both from an organic growth perspective and from an M&A activity.

Jeff: Thanks, Phil.

Speaker Change: So from a standpoint of acquisition targets. It part of our growth strategy is M&A and we're going to continue down. This route we're very bullish about the targets that are out there I can tell you that.

Speaker Change: We are having many opportunities come across our door.

Speaker Change: And in our desk and where we're looking at every opportunity Holistically I do I do I am bullish about H two for US both from our organic growth and from a M&A activity and from M&A activity I can share with you. There's a lot of partners are there are a lot of opportunities that are out there both from a geographical standpoint, but also.

Jeffrey E. Eberwein: And in terms of M&A activity, I can share with you that there are a lot of partners, or there are a lot of opportunities that are out there, both from a geographical standpoint but also from an industrial and sector expertise.

Speaker Change: From an industrial and sector expertise that we're looking to bring in to round out our overall service offerings for our clients.

Speaker Change: Mark I would just add to that that our preference always is organic growth investing in our team.

Jeffrey E. Eberwein: Mark, I would just add to that. Our principle always is organic growth, investing in our team, making some key hires, growing our team, and with a couple of these small acquisitions in the Middle East, it felt more like we just hired the teams than did an acquisition, which is a faster, more effective way to do some of the small ones. So acquisitions are really just meant to fill in gaps in our geographies or maybe some of our sector expertise, and we continue to look. We benefit a lot from being in the market and looking, but our bar is really high to complete one.

Marc Frye Riddick: Gotcha, thank you very much Again, if you...

Speaker Change: Making some key hires growing our team.

Speaker Change: And with a couple of days.

Speaker Change: Small acquisitions in the middle East.

Speaker Change: It was.

Speaker Change: Felt more like we just hired the teams then.

Speaker Change: Did an acquisition which is a.

Speaker Change: Faster.

Speaker Change: More effective way to do some of the small ones. So acquisitions are really just meant to fill in gaps in our <unk>.

Speaker Change: Thiago fees or maybe some of our.

Speaker Change: Sector expertise and we continue to look at.

Speaker Change: We benefit a lot from being in the market and looking but our bar is really high too.

Speaker Change: A complete one.

Speaker Change: Yeah.

Speaker Change: Gotcha. Thank you very much.

Speaker Change: Again, if you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star then 1. That concludes today's question and answer session. I will now turn the call over to Jeff Eberwein for closing remarks.

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

Jeffrey E. Eberwein: Thank you all 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. We look forward to next quarter's update call.

Jeffrey E. Eberwein: Hey, everybody.

Jeffrey E. Eberwein: Yeah.

Jeffrey E. Eberwein: Thank you all 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. We look forward to next quarter's update call.

Jeffrey E. Eberwein: Thank you for joining the Hudson Global first quarter Conference call. Today's call is being recorded and will be available on the investors section of the website Hudson RP of dotcom.

Operator: Thank you for joining the Hudson Global First Quarter conference call. Today's call has been recorded and will be available on the investor section of the HudsonRPO.com website. You may now disconnect.

Speaker Change: You may now disconnect.