Hudson Global Q1 2025 Earnings Call Transcript

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May 13, 2025

There are 6 speakers on the call.

Operator

Good morning, and welcome to the Hudson Global Conference Call for the First Quarter of twenty twenty five. Our call today will be led by Chief Executive Officer, Jeff Eberwein Chief Financial Officer, Matt Diamond and Global CEO, Hudson RPO, Jake Zabkowitz. 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 eight ks filed earlier today and in our other filings made with the Securities and Exchange Commission, including our quarterly report on Form 10 Q.

Operator

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 those 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 today's conference is being recorded.

Operator

I would now like to turn the call over to Jeff Eberwein. Please go ahead.

Speaker 1

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 our first quarter twenty twenty five results. Then Matt Diamond, our CFO, will provide some additional details on our financials. Lastly, Jake Zapkowitz, Global CEO of our Hudson RPO business, will provide us with an update on RPO.

Speaker 1

For the first quarter of twenty twenty five, we reported revenue of 31,900,000.0 down 3.3% year over year in constant currency, while our adjusted net revenue was $16,400,000 an increase of 2.2% year over year in constant currency. The Asia Pac region delivered the strongest results with a 14% increase in adjusted net revenue. Our adjusted EBITDA for the first quarter was a loss of 700,000 improved from a loss of $1,500,000 a year ago. In addition, we reported a net loss of $1,800,000 or $0.59 per diluted share versus a net loss of $2,900,000 or $0.95 per diluted share in the same period of last year. Q1 twenty twenty five adjusted net loss per share was $0.46 compared to a loss of $0.72 in the first quarter of last year.

Speaker 1

Although overall results for the first quarter of twenty twenty five were stronger than last year's first quarter, the overall talent environment remains uncertain due to macro conditions. We are confident in our ability to position the business for strong future growth while managing through the current environment, and we believe Hudson RPO will outperform its peers going forward. Later in the call, Jake will expand further on what we're doing to position Hudson RPO for future growth. Now, I'll turn the call over to Matt Diamond to review our first our financial results by region, as well as some additional financial details from the first quarter.

Speaker 2

Thank you,

Speaker 1

Jeff, and good morning, everyone.

Speaker 2

Q1 twenty twenty five revenue for our Americas business increased 15%, and adjusted net revenue increased 3% year over year in constant currency. We reported Q1 twenty twenty five adjusted EBITDA of 100,000.0 an improvement versus last year's adjusted EBITDA loss of $700,000 Q1 20 20 5 revenue for our Asia Pacific business decreased 7%, while adjusted net revenue increased 14% year over year in constant currency. This is largely due to a shift in revenue mix, with temporary contracting work comprising a lower share of revenue in the quarter. In Q1 twenty twenty five, we reported adjusted EBITDA of 600,000.0 up from an adjusted EBITDA loss of $200,000 a year ago. Q1 twenty twenty five revenue for our EMEA business decreased 7% versus the prior year quarter in constant currency, and adjusted net revenue decreased 19%.

Speaker 2

Our Q1 twenty twenty five adjusted EBITDA loss was $500,000 compared to adjusted EBITDA of $300,000 in the first quarter of twenty twenty four. Turning to some additional financial details for the quarter. Overall days sales outstanding was fifty six days at 03/31/2025, compared to fifty one days at 12/31/2024. The company had an outflow of $800,000 in cash flow from operations during the first quarter, compared to a $1,800,000 outflow from operations in the first quarter of twenty twenty four. We ended the first quarter with $17,200,000 in cash, including $700,000 of restricted cash.

Speaker 2

In connection with our acquisition activity in recent years, our balance sheet as of 03/31/2025, reflects $5,700,000 of goodwill and $2,300,000 of net amortizable intangible assets. The company's working capital, excluding cash, was 11,900,000.0 flat versus year end 2024. I'll now turn the call over to Jake to discuss our RPO business.

Speaker 3

Thank you, Matt, and good morning. Although we continue to face similar challenges as we did in 2024, most of these issues are impacting the entire industry. That said, due to steps we took and continue to take, our business is better positioned for growth today than ever before. Specifically, in the first quarter of twenty twenty five, we continued to make progress on our objectives and made multiple strategic hires, including Stephanie Edwards as our Chief Digital Officer to launch our digital division, which will revolutionize our digital capabilities and enterprise strategies. In the first quarter of twenty twenty five, we continued to drive our land and expand strategy with a focus on further enhancing our geographical reach as well as our service offerings to existing and prospective clients alike.

Speaker 3

As a result, we secured approximately $20,000,000 of adjusted net revenue from renewals and extensions at existing clients, plus approximately $2,400,000 in new logo wins for the quarter. Our talented team is strategically positioned to deliver exceptional results in the future. I'll now turn the call back over to Jeff for some closing remarks.

Speaker 1

Thank you, Jake. Before opening the line to questions, I'd like to reinforce Jake's message that despite the fact that we continue to operate in a challenging global environment, we continue to focus our efforts on improving our operations internally across our entire organization. These should help our bottom line results in the coming quarters. We're encouraged by our new business wins and robust sales pipeline, and we are well positioned to turn this pipeline into actual sales and capture new opportunities once market conditions improve. Operator, can you please open the line for questions?

Operator

Thank you. We will now begin the question and answer session. And you would like to withdraw your question, please press then 2. As a reminder, if you have a question, please press 1. The first question comes from Mark Riddick from Sidoti and Company.

Operator

Please go ahead.

Speaker 1

Hey, good morning. Morning, Mark.

Speaker 4

So I was wondering if you could talk a little bit about, certainly with the impact of headlines, was wondering if you could talk a little bit about maybe how you saw clients reacting throughout the quarter, maybe share a little bit about cadence and whether or not you feel as though the headlines had any impact on top line demand?

Speaker 1

Jake, why don't you address that?

Speaker 3

Yes. Hey, Mark. Good morning, How are you today?

Speaker 4

Good, good. Good morning, Jake.

Speaker 3

It's a great question. I would say as we entered into Q1 of this year, there was a lot of momentum and energy, right? There was a lot of excitement coming from the great hesitation into now 2025. But unfortunately, uncertainty within the broader macro environment created uncertainty with hiring demands with our clients. And when we have that uncertainty, the workforce plan is very difficult to forecast.

Speaker 3

So Q1 we did see some pause in 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 specific areas where we saw some return to normalcy, and that's more in the commercial side of many of our partners. But if you look at future growth and the expansions that were being talked about at the end of twenty twenty four, we saw a little bit of a pause. And hopefully as the markets and the macro markets continue to stabilize, that will then trickle down to many of our enterprise level clients.

Speaker 4

Okay. And then I was wondering, do you anticipate sort of any geographic differences as far as activity levels? Or are you seeing or getting much in the way of feedback as we're now sort of midway through Q2 at this point? Are you getting any feedback? And is there any differentiation either regionally or by industry vertical?

Speaker 3

Mark, another great question. I would say, if I look at the activity just across all the regions, as you know, Hudson operates in every region across the globe. We have a very large footprint in APAC and also EMEA in The US. If we look at the overall impact, there really isn't one area or one region where you would say that there's more bullishness or more hesitation, right? I think there's hesitation and across the board as the impacts of the macro environment impacted a lot of our existing clients.

Speaker 3

I think from a sector specific, you still see in the pharmaceuticals 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 major to report either good or bad, except that overall that uncertainty has created some turmoil and some hesitation within our existing portfolio.

Speaker 1

And Mark, this is Jeff. I would add, if you drill down a little bit further, as you know, we report by region, but if you look at the country level, we're seeing really good growth in India, we're also very excited about Latin America. China and Hong Kong have been slow and so if we're talking about where we've seen a pause, a hesitation, it's been US, China, Hong Kong, maybe a little bit Australia. And then UKEurope, I would say we're most disappointed with the results for that region. And in The UK, 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 of growth and starting to show some return on our investment.

Speaker 4

Okay, that's helpful. Thank you. And then I was wondering if could talk a little bit about the digital launch. Maybe you could 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.

Speaker 1

I'm very excited about that. Go ahead Jake.

Speaker 3

Yeah, Margaret, we're extremely excited about that. We're extremely excited to have Stephanie Edwards join us as our Chief Digital Officer. She started this quarter as I mentioned earlier. Listen, the world of talent is becoming more digitized across the board, right? And at Hudson, you know, we had a digital solution called TalentMax, essentially a bunch of third party providers that we've embedded into our partners.

Speaker 3

Now with Stephanie coming on board, we're building out our digital, our proprietary digital solution called Hudson Fusion. And that is going to be revolutionized from an AI technology enablement, allowing us to compete on that global scale with 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 Steph and team are really hitting the ground running. We're excited about what they're going to be producing for us, And it will create that values and 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 further 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 it.

Speaker 3

We'll be coming out with a position on all of that.

Speaker 1

Mark, would as talked about before, you know, when I joined the management in 2018, there are three areas that had been under invested in and those are sales, marketing, and technology. So I'd say we were below average, below peers in our capabilities in those three levels. And then over the years we've invested in those really just to get to where we needed to be. And now with our digital offering and with Steph Edwards on board, we're going to be much more leading edge and instead of playing defense on some of those issues, we'll be able to play offense and be leading the peers instead of just even with them. So we're very excited about enhancing our offerings with that digital capability and we've been meeting with our existing client base and the feedback has been very positive.

Speaker 4

And then the last for me, maybe you could talk a little bit about, obviously, very strong balance sheet and some opportunities there. Was wondering if could talk a little bit about cash usage prioritization as well as maybe what you're seeing from potential acquisition pipeline and valuations maybe what you're seeing there and level of appetite there as well as maybe share repurchase thoughts? Thanks.

Speaker 1

Yeah, really good question Mark. I would say our top priority has been investing organically and because of our strong balance sheet, it's kind of given us the confidence to make some of the hires that we've made over the last eighteen months and as you know in a business like ours we don't have bricks and mortar, so we don't really have CapEx, but the way we invest, hurts bottom line results instantly, which is just a difference in accounting treatment between a service business like ours and a more capital oriented business. Know, and if we had a less strong balance sheet, we might have been more reluctant to make some of those, but the team that we have been building in terms of management, sales, marketing, digital, tech is world class. We think we are positioned to grow faster than peers because of the team we've built and we're very excited about that and we think that will translate into financial results moving forward. That's been our first priority is organic growth and then second is we have had historically some geographic holes in our portfolio and it's incredibly frustrating to lose business because we couldn't service a potential client in an area or when an existing client says, can you help me out in Latin America, can you help me out in Japan, and we have to say no, we can't help you in those regions.

Speaker 1

Never want to say no a new business request from a client. So we have been steadily making progress on that in a variety of ways. Know, a year ago at this time, we brought on board two different teams in The Middle East that was a lot like doing an acquisition. You know, it hurt bottom line results immediately. It wasn't a cash outflow immediately the way an acquisition was, but it hit our income statement.

Speaker 1

And then we've also been building a team from scratch in Latin America and that is starting to show some results. 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. So the last hole left to fill in map really is Japan and it's not a place that all of our peers service, there's 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're always in the market looking at acquisitions 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 in Adding a sector or some exposure that we don't have is helpful. But we're not just looking to buy revenue or EBITDA. We're really looking at things where we can honestly say, Gee, that acquisition target inside of Hudson can really be a one plus one equals three outcome.

Speaker 1

And then lastly, on share repurchases where we think our stock is significantly cheap on any measure. We do have a history of doing share repurchases. It's hard to do in the open market with such an illiquid stock and historically we've had the most success in doing negotiated kind of one off trades with significant shareholders who want to exit and we're very open minded to doing we're open minded to doing it in the open market, although it's hard to get much volume that way. And then we did a significant tender offer a few years ago. I think it was at $15 a share and our stock price is below that.

Speaker 1

So all of those options are on the table. We do want to buy back stock over time and reduce our share count in absolute terms over time. We have done that over the last five to seven years and we want to continue doing that in the future. It's just you know, the window's got to be open and things like that except for the negotiated transactions. That's the way we can buy stock when the window's not open as if it's a one off negotiated transaction.

Speaker 4

Thank you.

Speaker 1

Good questions. Thank you, Mark.

Operator

The next question comes from David Siegfried, a private investor. Please go ahead.

Speaker 1

Good morning, David. Hey, good morning.

Speaker 5

Good morning. Thanks for taking my call. A lot of my questions were answered already, but I did have a few others regarding the digital offerings that you have in play now and that are being developed. Will those take time to build out?

Speaker 4

And could they be available to clients third quarter, fourth quarter?

Speaker 3

Jake? David, great question and good morning sir. How are you today?

Speaker 5

Good. Thank you.

Speaker 3

So just that we are going through our build out and our strategy for the digital suite. Steph and team, as I mentioned, we've invested heavily into this mix. As Jeff mentioned earlier, when I first started at Hudson, there were a couple of key areas that we need to resolve. One was a geographical footprint in a couple of those areas that we've invested in and are investing in, and the other is that digital strategy. So with bringing on Steph 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.

Speaker 3

Now some of that might change. We might be able to bring some of the timeline up. We are working with a couple of our existing clients who really really are excited about what we're doing and they want to be the first one on, you know, a couple different platforms that we're building out. So we are going through that timeline, but the plan is to have that digital suite and digital solution up and running before the end of the year, again with really a go live of end of Q3 beginning of Q4 timeframe.

Speaker 5

Okay, good to hear. Now I noticed Q1 twenty twenty four you had a big quarter for renewals and expansions this past quarter twenty twenty five. Likewise another nice quarter including a new logo win. Is that more seasonal where you get those spikes in the Q1? Or is that something that momentum can continue through the next few quarters?

Speaker 3

Another great question. So we do have some cyclical nature in our contracts and with our partnerships today. However, as I mentioned with our land and expand strategy, we're also looking at the share of wallet or the market share that we have with our current clients. And our account leaders are now looking at areas, how can we expand with them further? Right?

Speaker 3

So offering them services in Latin America now that we have that capability where, you know, last year at this time or two years ago at this time, we weren't able to do that. Offering them solutions in The Middle East, right? And we're again, we have boots on the ground.

Speaker 5

Have

Speaker 3

resources in country that can help drive those solutions further and then also on the digital side. While we do have cyclical natures in our contracts, right, 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. 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.

Speaker 3

We are taking our existing clients we're expanding with them in new geographies and territories that we didn't have with them in previous years. And again, the intent of that is to continue to expand as those options and those opportunities can become available to us.

Speaker 1

Got it. David, I would add that if you look if you think about it in terms of trend lines like the last four quarters, last eight quarters, we think the trend lines for new business will be up and to the right and that will lead adjusted net revenue, which we think we've turned the corner on. After, I don't know, six quarters of negative year over year growth in adjusted net revenue. We finally had positive year over year growth in Q4, slightly positive in Q1, and we see that trend continuing unless something really negative happens in macro environment. I will say there is some seasonality to the new business wins.

Speaker 1

You may recall that our business started in Australia and that's our single biggest country, 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 just in general, I would expect Q1 to be the busiest quarter of the year for renewals and extensions just because we have such a large client base in Australia, but the trend is what I focus on, I think that trend will be positive.

Speaker 5

Very good. And that's why you're able to make that comment that you believe Tufsum will outperform your peers going forward, because of the trends that you see.

Speaker 1

Yes, and the team, which, and the leading indicator even before that is the team that we've been building over the last eighteen months.

Speaker 5

Right, got it. And then another question regarding attrition rate. So 2024 attrition rate was low. If the attrition rate 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?

Speaker 1

Absolutely. Absolutely. You know, if you go back to 2022, which was our high watermark, attrition was significantly above historical levels. 2024, it was significantly below historical levels and it's, I would say, kind of Q4 last year, Q3, Q4 last year is when we saw an inflection, we saw it starting to return to normal levels. It's still below normal, but it does seem like it is returning to historical levels which are for Fortune 500 companies, it's typically in that 15% range and just to put it in context, in 2022 it was above 20% which we had never seen before and in 2024, there were reporters where it was 8%, nine %, which we had never seen before.

Speaker 1

Going back fifteen years, we've never seen an attrition rate that low before. So it does seem like it's returning to normal.

Speaker 5

Good. And then, Jake, so you've been global CEO for a year and a half.

Speaker 4

So where the company is at now compared to where it was when you joined,

Speaker 5

mean, you happy with the progress?

Speaker 3

Thanks, David. Yes. You know, what's interesting is that we've really invested a lot. We have a couple of strategies. One is land and expand, which you've heard me say on these calls.

Speaker 3

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, you know, can operate, you know, from, you know, just across the globe, right? 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 turned over leadership and we've invested a lot. We brought in industry experts that have decided to leave other firms and come into Hudson RPO, which we're very excited about.

Speaker 3

So industry leaders that have been there and done that before and are on the journey with Hudson right now which we're again extremely excited. Now on top of that we're going be able to offer a digital suite and 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're extremely fortunate and excited about that. We just need the market to calm down a little bit.

Speaker 3

We need get some return to normalcy. The macro environment needs to settle down because right now we are

Speaker 5

a little

Speaker 3

bit at the mercy of that macro environment where that uncertainty creates pause and hesitation, right? And even in hiring decisions or attrition rates, right? That uncertainty drives that. So if we can get to some certainty, we get some more confidence in the markets, I think that we will be very bullish this next year.

Speaker 5

Okay, very good. Well, thank you. Thank you for the call.

Speaker 3

Thank you, David.

Speaker 1

Thank you.

Operator

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

Speaker 1

Well, thank you for your interest in Hudson today. We appreciate your time, and we look forward to next quarter's results and investor call.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • For Q1 2025, total revenue was $31.9 M, down 3.3% y-o-y in constant currency, while adjusted net revenue rose 2.2% to $16.4 M.
  • The Asia Pacific region led growth with a 14% increase in adjusted net revenue, while Americas saw 3% ANR growth and positive EBITDA, and EMEA experienced a 19% ANR decline.
  • Overall profitability improved, with adjusted EBITDA loss narrowing to $0.7 M from $1.5 M a year ago and adjusted net loss per share shrinking to $0.46 from $0.72.
  • Hudson RPO is expanding via a land-and-expand strategy—securing $20 M in renewals/extensions and $2.4 M in new logo wins—and is launching a proprietary digital division later this year.
  • With $17.2 M in cash and minimal CapEx needs, management continues to prioritize organic investment in sales, marketing and technology, while remaining open to accretive acquisitions and share repurchases.
AI Generated. May Contain Errors.
Earnings Conference Call
Hudson Global Q1 2025
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