Q3 2024 Hudson Global Inc Earnings Call

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Speaker Change: Good morning, and welcome to the Hudson Global Conference Call for the third 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, Jake Zabkowicz.

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.

Speaker Change: These risks are discussed in our Form 8K, filed earlier 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: 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.

Speaker Change: 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.

Speaker Change: Please note, today's conference is being recorded. I will now turn the call over to Jeff Eberwein. Please go ahead.

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 2024 results, then Matt Diamond, our CFO, will provide some additional details on our financials.

Jeff Eberwein: Lastly, Jake Zabkowicz, Global CEO of our Hudson RPO business, will provide us with an update on our RPO business.

Matt Diamond: Our adjusted EBITDA for the third quarter was $0.8 million versus adjusted EBITDA of $2 million a year ago.

Matt Diamond: In addition, we reported a net loss of $0.8 million or $0.28 per diluted share versus net income of $0.5 million or $0.17 per diluted share in the same period of last year.

Matt Diamond: Q3 2024 adjusted net loss per share was 13 cents compared to net income per diluted share of 24 cents in the third quarter of last year.

Speaker Change: Now I'll turn the call over to Matt Diamond to review our financial results by region as well as some additional financial details from the third quarter.

Thank you, Jeff, and good morning, everyone.

Matt Diamond: Revenue for our Americas business increased 6% and adjusted net revenue decreased 3% year-over-year in constant currency.

Matt Diamond: We reported adjusted EBITDA of $0.6 million for the quarter, an increase from last year's adjusted EBITDA of $0.3 million.

Matt Diamond: Revenue for our Asia-Pacific business decreased 15%, and adjusted net revenue decreased 11% year-over-year in cost and currency.

Matt Diamond: In Q3 2024, we reported adjusted EBITDA of 0.9 million compared to adjusted EBITDA of 2.3 million a year ago.

Matt Diamond: Revenue for our EMEA business increased 7% versus the prior year quarter in constant currency and adjusted net revenue increased 5%.

Speaker Change: Our Q3 2024 adjusted EBITDA was 0.2 million, flat compared to adjusted EBITDA in the third quarter of 2023.

Speaker Change: Turning to some additional financial details in the third quarter, we ended the quarter with $16.5 million in cash, including $0.7 million of restricted cash.

Speaker Change: The company generated $1.3 million in cash flow from operations during the third quarter of 2024, compared to a $0.7 million cash outflow from operations in the third quarter of 2023.

Speaker Change: Today's sales outstanding was 56 days at September 30, 2024, compared to 59 days at June 30, 2024.

Speaker Change: In connection with our acquisition activity in recent years, our balance sheet as of September 30, 2024 reflects $5.8 million of goodwill and $2.8 million of net amortizable intangible assets.

Speaker Change: The company's working capital, excluding cash, was $14 million compared to $12 million at December 31, 2023.

Speaker Change: I'll now turn the call over to Jake to discuss our RPO business.

Jake Zabkowicz: Thank you, Matt, and good morning. In the third quarter of 2024, we will be moving multiple strategic players with a focus on further enhancing our geographical reach and service offerings.

Jake Zabkowicz: These individuals bring deep industry expertise to HUBZone RPO, further enhancing our global reputation and capabilities.

Jake Zabkowicz: Our efforts are evidenced by a myriad of recognitions we are proud to receive, including the 16th consecutive year ranking among HRA Today magazine's Baker's Dozen list of top enterprise RPO providers.

Jake Zabkowicz: Our land and expand focus and strategy saw incremental gains in Q3 as we were able to expand into new geographies and territories with some of our existing partners.

Jake Zabkowicz: The hiring bonds for many of our existing partners stabilized in Q3, where we did not see the fluctuations in demand as in previous quarters.

Jake Zabkowicz: However, new logo sales continue to be a disappointment with potential clients either delaying or shrinking their scope as they continue to reassess their needs and hiring volumes.

Speaker Change: Overall Q3 was marked with us continuing to react to the market and ensure our business is right size to support our clients demands and that we're able to provide the breadth of service that they need. I'll turn the call back over to Jeff for some closing remarks.

Jeff Eberwein: Thank you, Jake. Before opening the line to questions, I'd like to reinforce Jake's message that despite today's talent environment, we're encouraged by the feedback we're receiving from our clients.

Jeff Eberwein: and excited by our new business wins and robust sales pipeline. We have a very bright future ahead.

Jeff Eberwein: Furthermore, the results of the internal changes and cost-saving initiatives we've implemented across our entire organization should help our bottom-line results in the coming quarters. We're confident in our ability to deliver value to shareholders while serving the needs of existing and new clients going forward.

Operator, can you please open the line for questions?

We will now begin the question and answer session.

To withdraw your question, please press star then 2.

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

Speaker Change: Our first question today is from Mark Riddick with Sidoti and Company. Please go ahead.

Thank you. Good morning.

Good morning, Mark.

Speaker Change: Sure, I'll start and then I'll turn it over to Jake. I would say this year, the new business wins that we had in 2023 have started and played out.

Speaker Change: are pretty similar to our expectations and what has been a negative surprise is

Speaker Change: some of our existing base are having hiring volumes significantly below our expectations and I would

Speaker Change: In Q3, it was particularly noticeable in the financial sector in AsiaPAC. Long-time clients, for whatever reason,

Speaker Change: in recent quarters have hired way below normal and way below our expectations, and we think that's a temporary thing.

Speaker Change: and we'll be back to more average levels, historical levels next year, but that has been a headwind we've been facing this year. Jake, what would you add?

Jake Zabkowicz: Yeah, Jeff. Mark, good morning. I would just also add to... Morning.

Jake Zabkowicz: If you take a look at the fluctuations from last year to this year, last quarter to this quarter, our clients have roughly stabilized but well below, as Jeff mentioned, our expectations in previous quarters and in previous years hiring volumes.

Jake Zabkowicz: So, while new business is picking up, while we are seeing some efforts in that realm, our base accounts in the current hiring volume still are below the expectation.

Jake Zabkowicz: The good news is, as I mentioned earlier, that we are seeing our land and expand strategy working. We are expanding in new geographies and new territories with a couple of our key clients, which brings to light a lot of the good work that the team has been doing for them.

A different way to describe land and expand is

Jake Zabkowicz: We've been increasing our share of wallet on some of our accounts, and that's an ongoing initiative. We're just getting started with it, but so far we've had some successes with that.

Speaker Change: Okay, and then I was wondering if you could talk a little bit about, you mentioned the challenges as far as the financials. Are there any industry verticals that we should be thinking about or areas that are sort of leading the way, picking up activity, or is there any differentiation that might be a call out there?

Jake, why don't you take that one?

Jake Zabkowicz: Yeah, Mark, from a sector standpoint, life sciences and the pharmaceutical sector continues to be stable across the board for us, which is good.

Jake Zabkowicz: and I would say the technology sector, while we're seeing some incremental improvement, it's still not that hockey stick type of rebound that I think everybody was hoping for. So yeah, I think that would be more of a stable growth for us as we continue to move forward.

Jake Zabkowicz: but from a sector specific, you know, it's been pretty consistent just across the board.

Speaker Change: Okay, thanks. Now, switching gears, I mean, I was wondering, it might be kind of early for this, but I was wondering if there's any sort of feedback that you're receiving or any thoughts that you have as to the political ramifications and what that might lead to as far as client demand or any feedback that you're receiving from that standpoint.

Thank you for your time. Thank you. Thank you.

Speaker Change: too early to say. We did notice, you know, the market rebound yesterday and just in general the environment we've been in

Speaker Change: for years now has been a lot of uncertainty, you know, COVID, recovering out of COVID.

Speaker Change: then the inflation shock, interest rates going up, the cost of everything, including labor going up, and we've raised our prices accordingly, as has everybody else. So, anything that's a more calm, stable,

Speaker Change: been hiring at very low levels even you know the lowest we've seen for for a really long time and they tell us that it's

Speaker Change: you know short-term in nature and and things will return to normal but

Speaker Change: Okay and then last one for me and I was sort of curious as to thoughts on free cash flow and cash usage. You mentioned in the press release as far as some share of a purchase activity and the like. I just wanted to talk a little bit about maybe what you're seeing and is there anything out there in the acquisition pipeline that makes sense or maybe your thoughts as to what you're seeing in there as far as a volume or valuations or anything like that.

yeah, really good question, Mark

Speaker Change: building in areas like the Middle East where in the short run that cost us money, it hurts Yibida, but it's going to be

Speaker Change: a phenomenal medium and long-term investment and investments in our business really show up on the income statement not the not the cash flow statement because we don't we don't have any CapEx and when we think about acquisitions

Speaker Change: You know, we like to be in the market, we like to look.

There's nothing significant that's imminent.

Speaker Change: and our main goal there is to find something that's 1 plus 1 equals 3.

Speaker Change: either a geography enhancer, or maybe a sector vertical enhancer, or maybe something that would bring a slightly

Speaker Change: The acquisition side is really hard to predict, but if you look at what we've done, it's all been

Speaker Change: We are big fans of buying back stock. As you mentioned, we've bought back stock every time the window has been open. I think we've bought $2.5 million worth this year, and our share count is...

down in absolute terms over any time period.

Speaker Change: you want to look, which is not something many companies can say. And we think our stock is incredibly cheap and we think it's an excellent use of capital and something we expect to continue to do over time as we can.

Thank you for watching!

Thank you very much.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Jeff Eberwein for any closing remarks.

Speaker Change: Why don't we give it one minute just to see if anybody has a question. Operator, could you remind people how to...

Speaker Change: Again, if you have a question, please press star then 1.

[inaudible]

Speaker Change: Operator, any questions? There are no questions at this time. Okay.

Speaker Change: Well, that concludes the question and answer session. So thanks for joining us today and for your interest in Hubsan 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. Have a good day, everybody.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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