Q1 2025 Hudson Global Inc Earnings Call
J.J. Abramson: A film by J.J. Abramson Directed by J.J. Abramson Cinematography by J.J. Abramson Music by J.J. Abramson Edited by J.J. Abramson Produced by J.J. Abramson
J.J. Abramson: Please go ahead.
Speaker Change: Hey, good morning, Mark.
Speaker Change: So I was wondering if you could talk a little bit about certainly what the impact of headlines I was wondering if you and given the geographic footprint that you have so what if you could talk a little bit about maybe how you saw clients reacting throughout the quarter, maybe share a little bit about <unk>.
Speaker Change: Savings in and you know whether or not you feel as though the headlines had any any impact on on topline demand.
Jay: Jay why don't you address that.
Jay: Hey, Mark Good morning, Sir how are you today.
Speaker Change: Good morning Jake.
Speaker Change: It's a great question Yeah. Alex says he is as we entered into Q1 of this year. There is a lot of momentum and energy right. There is a lot of excitement you know getting coming from the great hesitation into into now 2025, but unfortunately right uncertainty within the broader macro environment created uncertainty.
Speaker Change: The hiring demands with our clients and when we have that uncertainty.
Speaker Change: The workforce plan is very difficult to forecast. So Q1, we did see some pause and that excitement around getting back to normalcy coming from the 2024, great hesitation and I think that has impacted I know it has impacted a lot of our enterprise level clients now there were still some.
Speaker Change: Specific areas, where we saw some you know some return to normalcy and that's in more in the commercial side of many of our partners, but if you look at future growth and the expansions that were they were being talked about at the end of 2024, we saw a little bit of a pause and hopefully as the markets and the macro markets continue to stabilize.
Speaker Change: That will then trickled down to many of our enterprise level clients.
Speaker Change: Okay, and then I was wondering how do you do you anticipate sort of any geographic differences as far as activity.
Speaker Change: Activity levels are or are you seeing are you getting much in way of feedback.
Speaker Change: That's where it sort of midway through Q2 with this when are you getting any feedback and are there is there any differentiation either regionally or by industry vertical.
Speaker Change: Another great question I would say if I look at the activity just across all the regions. As you know Hudson is operates in every region across the globe. We have you know very large footprint in APAC and also to me in the U S.
Speaker Change: If we look at the overall impact there really isn't.
Speaker Change: You know one area or one region, where you would say that there is more bullishness or more hesitation right I think there's hesitation and across the board yeah as the impacts of the macro environment impacted a lot of our a lot of our existing clients I think from a sector specific.
Speaker Change: You still see in the pharmaceutical and life sciences that being pretty resilient, we did see some uptick in the financial services sector. This last quarter, which is exciting to see but again, it's nothing nothing major to report either good or bad except that overall that uncertainty has created some turmoil in some hesitate.
Speaker Change: Within our existing portfolio.
Speaker Change: And Mark this is Jeff I would add if you if you drill down a little bit further as you know we report by region, but if you look at the country level.
Speaker Change: Seeing really good growth in India.
Speaker Change: We're also very excited about Latin America.
Speaker Change:
Speaker Change: China has been China, and Hong Kong has been slow and so if you if we're talking about where have we seen.
Speaker Change: A pause or hesitation, it's been U S China.
Speaker Change: Hong Kong are maybe a little bit Australia, and then in U K Europe I would say we were most disappointed with the results for that region.
Speaker Change: And in the U K, we had some client turnover we've had some management turnover. We think that is now fixed and is going to have a really good recovery and then we've continued to invest in the middle East and that is starting to show some signs.
Speaker Change: Of of growth and starting to show some rich.
Our return on our investment.
Speaker Change: Okay. That's that's helpful. Thank you and then I was wanted to talk a little bit about the digital a launch maybe you can spend a little more time on that and maybe some of the things that you're hoping to achieve there and the type of opportunities that might be presented from that.
Jake: I'm very very excited about that go ahead, Jake yes, we're extremely excited about that we're extremely excited to have Stephanie average join US is actually digital officer. She started this quarter as I mentioned earlier.
Jake: Yeah, there's a world of talented is becoming more digitized across the board and at Hudson, We had a digital solution called talent Max essentially a bunch of third party providers that we embed into our partners now with Stephanie coming onboard we're building out our digital our proprietary digital solution called Hudson infusion and.
Jake: That is going to be revolutionary eyes from AI technology enablement, allowing us to compete on a global scale.
Jake: Other enterprise level providers, but more importantly, providing a service to our clients, where we can answer their specific needs without having to go through multiple layers of integration and multiple multiple weeks if not months of implementation. So.
Jake: Staffing team are are are really hitting the ground running where we're excited about what they're going to be producing for us and it will create that values and that the cost saving models that we want to have with our clients and our client portfolio that will ultimately better position us to win new deals to expand in.
Jake: Are there regions and to provide that level of service that a lot of our clients have been asking for but really don't know how to implement and where to implement that and we'll be coming out with a position on all of that.
Mark: And Mark I would agree.
Jake: Okay.
Jake: As I've talked about before you know when I joined the management in 2018, there are three areas that had been underinvested in and those are sales marketing and technology. So I would say we were.
Jake: Below average below below peers in our capabilities and those arent in those three levels and then over the years we've invested in those.
Jake: Really just to get to where we needed to be.
Jake: And now with our digital offering and with staff Adwords onboard where we're.
Jake: Going to be much more leading edge and <unk>.
Jake: Instead of playing defense on some of those issues are we will be able to play offense and be leading the peers instead of.
Just a even with them. So we're very excited about them.
Jake: Enhancing our offerings with that our digital capability and we've been meeting with our existing client base.
Jake: And the feedback has been very positive.
Jake: And then the last the last for me and maybe you could talk a little bit about obviously very strong balance sheet and an end and some opportunities. There just wonder if could talk a little bit about cash usage prioritization as well as maybe what youre seeing.
Jake: You know potential acquisition pipeline and valuations, maybe what you're seeing there and level of appetite there as well as maybe share repurchase thoughts. Thanks, Yeah really good question, Mark I would say R. R.
Jake: Top priority has been investing organically and because of our strong balance sheet, just kind of given us the confidence to make some of the hires that we've made over the last 18 months.
Jake: And as you know in a business like ours, we don't have a bricks and mortar. So we don't really have capex, but the way we invest it hurts bottomline results instantly.
Jake: <unk>, which is just a you know a different than an accounting treatment between us as a service business like ours and.
Jake: More capital oriented business.
Jake:
Jake: And if we had a less strong balance sheet, we might've been more reluctant to make some of those but the team that we have been building in terms of management.
Jake: <unk> marketing digital Tech is world class, where we think we are positioned to grow faster than peers because of the team. We've built and now we're very excited about that and we think that that will translate into financial results moving forward.
Jake: So that's it that's [noise].
Jake: Our first priority is organic growth and then second.
Jake: Is we have had historically some geographic holes in our portfolio and it's incredibly frustrating to lose business, because we couldn't service or potential client in an area or when an existing client says can you help me out in you know Latin America can you help me out in Japan.
Jake: And we have to say no. We can't we can't help you on those regions. You know you never want to say no to a two.
Jake: Our new business request from a client so we have been steadily making progress on.
Jake: On that in a variety of ways.
Jake: You know a year ago at this time, we we brought on board two different teams in the middle East that was a lot like doing an acquisition.
Jake: It hurt Bottomline results immediately it wasn't Ah Ah cash.
Jake:
Jake: Outflow immediately the way the way an acquisition was but.
Jake: It hit our income statement and then we've also been building a team from scratch.
Jake: In Latin America, and that is starting to starting to show some results.
Jake: A few years ago, we didn't have an ability to service clients in India and now I think we're becoming one of the top players in that country.
Jake: So the last.
Jake: Whole left to fill in our in our math really is Japan.
Jake:
Jake: And it's and it's not a place that all of our peers service Theres just a few of our peers, who can offer service. There. So that is an area that has been top of mind for us and we were always in the market looking at acquisitions.
Jake: And it's got to be something that is accretive and something that is one plus one equals three so filling a geographical is helpful.
Jake:
Jake: Adding a sector or some exposure that we don't have is helpful.
Jake: But we're not just looking to buy.
Jake: Revenue or EBITDA, where we're really looking at things, where we can honestly say gee that that acquisition target inside of Hudson.
Jake: Can really be a one plus one equals three outcome and then lastly on share repurchases, where we think our stock is is significantly cheap on any measure our we do have a history of doing share repurchases.
Jake: It's hard to do in the open market with such an illiquid stock and historically, we we've had the most success and doing.
Jake: Negotiated kind of one off trades with a significant shareholders, who want to exit and where we're we're very open minded to doing that we're open minded to doing it in the open market, although it's hard to get much volume that way.
Jake: And then we did a significant tender offer a few years ago I think it was at $15 a share and our stock prices below that so all of those options are on the table.
Jake: We do want to.
Jake: Buyback stock over time, and reduce our share count and absolute terms over time, we have done that over the last.
Jake: Five to seven years, and we want to continue doing that and in the future is just.
Speaker Change: You know the Windows Gotta be open end and things.
Speaker Change: Things like that except for the negotiated transactions definitely way, we can we can buy stock when the window is not open as if it's a one off negotiated transaction.
Speaker Change: Thank you.
Mark: Good questions. Thank you Mark.
Speaker Change: Again, if you have a question. Please press star one. The next question comes from David Secrete a private investor. Please go ahead.
Good morning, David Good morning.
David Secrete: Thanks for taking my call.
David Secrete: A lot of my questions were answered already but I did have a few others regarding that.
Speaker Change: It offerings that you.
Speaker Change: Do you have in play now and that are being developed well those take time to build out and could they be available. The clients you know a third quarter fourth quarter.
Jacob David: Jacob David Great question, and good morning, Sir how are you today.
Speaker Change: Good good thank you.
Speaker Change: So you just it's just that we are we are going through our build out in our strategy for the digital fleet Stephan team as I mentioned, we've invested heavily into this into this mix as Jeff mentioned earlier when I first started at Hudson. There were a couple of key areas that we need to do to resolve one was the geographical footprint in a couple of those areas that we've invested.
Speaker Change: And and are investing in and the other is that digital strategy, so with bringing on staff and team we will be in a position to start offering a proprietary digital solution at the end of Q3 beginning of Q4 is really what timeline. We're shooting for now some of that might change if we might be able to bring some of the timeline up.
Speaker Change: We are working with a couple of our existing clients, who really really are excited about what we're doing and they want it to be the first one on a couple of different platforms that we're building out. So we are we are going through that timeline, but the plan is to have that digital suite and digital solutions up and running before the end of the year again with it.
Speaker Change: With a really a go live of in the end of Q3, beginning of Q4 timeframe.
Speaker Change: Okay good to hear.
Speaker Change: I noticed Q1, 2024, you had a big quarter for renewals and expansions.
This past quarter of 2025.
Speaker Change: Likewise, another nice quarter, including a new logo win.
Speaker Change: Is that more seasonal where you get those spikes in the Q1 or is that something that that that momentum can continue through the next few quarters.
Speaker Change: David another great question. So so yeah, we do have some cyclical nature of our contracts in it with our partnerships today, However, as I mentioned with our land and expand strategy. We're also looking at the share of wallet and market share that we have with our current clients and our account leaders are now looking at areas.
Speaker Change: How can we expand with them further right so offering them services in Latin America, now that we have that capability where.
Speaker Change: Last year at this time or two years ago. At this time, we werent able to do that offering them solutions in the middle East right and where again, we have boots on the ground we have resources.
Speaker Change: In country that can help drive those solutions further and then also on the digital side. So while we do have cyclical nature and our contracts right that that does come up. We are also looking to see that expansion into new geographies, new territories and also on that digital suite. So we're hoping to continue this trend.
Speaker Change: We are hoping to we're in active conversations with many of our partners today and how do we further expand our services and part of what you saw in Q1 of this year was just that we arent yet we are taking our existing clients and we're expanding with them in new geographies and territories that we didnt have with them in the in previous years.
Speaker Change: And again.
Speaker Change: <unk> of that is to continue to expand is as those options and those those opportunities can become available to us.
David Secrete: Got it David.
David Secrete: I'd add that if you look if you think about it in terms of a trend lines like the last four quarters last eight quarters.
David Secrete: We think the trend lines for new business will be up into the right.
David Secrete: And that will lead adjusted net revenue and which we think we've turned the corner on we after I don't know.
David Secrete: Six quarters of negative year over year growth in our <unk>.
David Secrete: <unk> net revenue, we finally had positive year over year growth in Q4 are slightly positive in Q1.
David Secrete: And.
David Secrete: We see that trend continuing unless.
David Secrete: Something really negative happens in the macro environment.
David Secrete: I will I will say there is some seasonality to the new business wins.
David Secrete: Recall that our business started in Australia, and that's our single biggest country.
David Secrete: And Australia has a march fiscal year end. So we do have an unusually large number of contracts that renew in the March timeframe. So.
David Secrete: I just in general I would expect Q1 to be the busiest quarter of the year for renewals and extensions just because we have.
David Secrete: Such a large client base in Australia, but the trend is what I focus on and I think that trend will be will be positive.
David Secrete: Very good and Thats why you are able.
David Secrete: To make that comment that you believe the customer will outperform your peers going forward because of the trends that you see.
David Secrete: And the team, which is the leading indicator even before that is is the team that we've been building over the last 18 months.
David Secrete: Right.
David Secrete: Got it and then.
David Secrete: Okay.
Speaker Change: Another question regarding attrition rate. So you know 2024 and attrition rate was low.
David Secrete: If it.
David Secrete: It gets back to normal in 2025, or I don't know, if it's trending that way could that be a tailwind for the company.
David Secrete: Absolutely.
David Secrete: Absolutely.
David Secrete: If you go back to 2022, which was our high watermark attrition was significantly above historical levels.
David Secrete: 2024, it was significantly below historical levels and it's.
David Secrete: I would say kind of Q4 last year Q3, Q4 of last years. When we saw an inflection we saw it starting to return to normal levels are still below normal.
David Secrete: But it does seem like it is a returning to historical levels, which are.
David Secrete: For Fortune 500 companies its typically in that 15% range and.
David Secrete: Just to put it in context.
David Secrete: And 2022, it was above 20%, which we had never seen before and in 2024.
David Secrete: There were quarters, where it was eight 9%, which we had never seen before I'm going going back 15 years, we'd never seen an attrition rate that low before so it does seem like its returning to normal.
Good.
David Secrete: And then.
David Secrete: So you've been global CEO for a year and a half.
David Secrete: So where the company is at now compared to where it was when you joined.
David Secrete: Hum.
David Secrete: I mean, you're happy with the progress.
David Secrete: Yeah. Thanks, David Yes, you know what's interesting is that we've really invested a lot. We are we have a couple of strategies, one is land and expand which you've heard me say on these calls and the other one is invest to grow and grow to invest and if you look at our capabilities right now our geographical capabilities right now we can operate.
David Secrete: From you know just across the globe and we have the capabilities and skill sets to be able to do that we've invested a lot in our leadership and you know we've we've turned over leadership and we've invested a lot we brought and industry experts that have had decided to leave other firms and come into Hudson RPI, which we're very excited about so <unk>.
David Secrete: <unk> leaders that have been there and done that before and are on the journey with Hudson right now, which we're getting extremely excited.
David Secrete: Now on top of that we're going to be able to offer a digital suite in a digital solution. So something that we weren't able to compete at the larger enterprise scale before we will and we will be competing against at that level and so we were extremely fortunate excited about that we just need the market to calm down a little bit yeah.
David Secrete: You can return to normalcy, the macro environment is a settle down because right now we.
David Secrete: We are we are a little bit at the mercy of that macro environment, where that uncertainty creates pause and hesitation right and even even in hiring decisions or attrition rate right that uncertainty drives that so if we can get this uncertainty and we get some more confidence in the markets I think that we will we will.
David Secrete: Very bullish this next year.
David Secrete: Okay very good well. Thank you. Thank you for the call.
Tahira: Thank you Tahira.
Tahira: This concludes our question and answer session I would like to turn the conference back over to Jeff Eberwein for closing remarks.
Tahira: Well. Thank you for your interest in Hudson today, we appreciate your time and we look forward to next.
Tahira: Next quarter's results and Investor call.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.