Hudson Global, Inc. (NASDAQ:HSON) Q1 2024 Earnings Call Transcript

Hudson Global, Inc. (NASDAQ:HSON) Q1 2024 Earnings Call Transcript May 10, 2024

Hudson Global, Inc. misses on earnings expectations. Reported EPS is $-0.95298 EPS, expectations were $0.26. HSON isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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, Jake Zabkowicz. 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 to be 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. Reconciliations for these measures are included in our earnings release and quarterly slides, both posted on our Web site, 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 today's conference is being recorded. I will now turn the call over to Jeff Eberwein.

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 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 Zabkowicz, 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, our first quarter 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 constant currency, while our adjusted net revenue was $16.3 million, down 25% year-over-year in constant 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 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. 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.

Matt Diamond: Thank you, Jeff. And good morning, everyone. Revenue and adjusted net revenue for our Americas 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 breakeven adjusted EBITDA. Revenue for our Asia Pacific business decreased 18% while adjusted net revenue decreased 20% year-over-year in constant currency. 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 Q1 2024 adjusted EBITDA was $0.3 million compared to adjusted EBITDA of $0.5 million in the first quarter of 2023.

Turning to some additional financial details on the first quarter. We ended the first quarter with $21 million in cash, including $0.6 million of restricted cash. Days sales outstanding was 52 days at March 31, 2024, and compared to 49 days at December 31, 2023. 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 was $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.

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 Zabkowicz, Global CEO of Hudson RPO, to give some perspective on our RPO business.

Jake Zabkowicz: 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 a long term success. Thus far, we have announced an organic enhancement of our boutique search offering in two small but very important UAE based acquisitions of Executive Solutions and Striver. 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. 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've expanded our team with the hiring of Jeff Bettinger as the Chief Administrative Officer and Rachel Marshalsea as a 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. 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 in their workforce plans and we are 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 diverse set of opportunities, both enterprise and project 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 the 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 closing remarks.

Jeff Eberwein: Thank you, Jake. While 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 continue to make share repurchases under our $5 million common share repurchase program initiated in August 2023. Under this program to date, we have repurchased almost 21,000 shares in the open market for a total of $400,000. In addition, we repurchased a total of 44,000 additional shares in the first quarter of 2024 [Technical Difficulty] [fully] negotiated transaction, leaving a balance of $4 million available for purchase under our 2023 authorization.

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. Operator, can you please open the line for questions?

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