Hudson Global, Inc. (NASDAQ:HSON) Q1 2023 Earnings Call Transcript May 14, 2023

Operator: Good morning, and welcome to the Hudson Global Conference Call for the First Quarter of 2023. Our call today will be led by Chief Executive Officer, Jeff Eberwein and Chief Financial Officer, Matt Diamond. Please advise that 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 filed today and with 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, adjusted earnings per diluted share. Reconciliations for these measures are included in our earnings release and in our quarterly slides, both posted on our website, hudsonrpo.com. I encourage you to access the earnings material at this time as the reserve as a helpful restaurant guide during this call. I will now turn the conference 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 2023 highlights, and Matt Diamond, our CFO, will provide some additional details on our financial results. I’ll then give an update on current business conditions. For the first quarter of 2023, we reported revenue of $43 million, down 13% year-over-year in constant currency. Adjusted net revenue was $22 million and decreased 12% year-over-year in constant currency. SG&A costs were $21 million in the first quarter, up 5% versus the same period last year in constant currency. We reported adjusted EBITDA of $1.1 million, down 77% in constant currency versus a year ago.

In addition, we reported net income of $0.4 million or $0.11 per share versus net income of $3 million or $0.97 per diluted share in the same period last year. We reported adjusted net income per diluted share of $0.22 in the first quarter of 2023 versus $1.23 a year ago. I will now 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 decreased 36% and 35%, respectively, in constant currency. Breakeven adjusted EBITDA decreased versus last year’s adjusted EBITDA of $3.5 million. Revenue for our Asia-Pacific business decreased 8% year-over-year in constant currency and adjusted net revenue grew 9% in constant currency. Adjusted EBITDA of $1.7 million decreased from adjusted EBITDA of $2.4 million a year ago. Our EMEA business grew revenue 16% and adjusted net revenue 31% in constant currency. Adjusted EBITDA of $0.5 million in the first quarter of 2023 increased from adjusted EBITDA of $0.3 million a year ago. Turning to some additional financial details from the first quarter, we ended Q1 with $22.3 million in cash and restricted cash.

Day sales outstanding was 53 days at March 2023, up from DSO of 47 days at March 2022. In connection with the acquisition of Coit Group in the Fourth Quarter of 2020, Karani in the Fourth Quarter of 2021, and Hunt & Badge in the third quarter of 2022, our balance sheet as of March 31, 2023, reflects $4.9 million of goodwill and $4.3 million of net amortizable intangible assets. The company’s working capital, excluding cash, increased significantly to $12.7 million in the first quarter of 2023 from $7.3 million at the end of 2022. The company used $5 million in cash flow from operations during the first quarter. The cash flow use was due to seasonal moves in working capital that we typically see in Q1 as well as a $2 million outflow for the final earn-out payment related to the Coit acquisition.

I’ll now turn the call back over to Jeff to give some more perspective on our RPO business and to review current trends in our business.

Jeff Eberwein: Thank you, Matt. In the first quarter of 2023, lower hiring activity, particularly in the technology sector, led to declines in revenue, adjusted net revenue, and adjusted EBITDA versus the prior year quarter. Activity and other sectors remained stable, and we’ve seen a number of new business wins thus far in 2023. Importantly, our experienced leadership team has a history of navigating different market cycles and continues to respond quickly to changes in the market to protect our profitability. We are confident in our ability to manage the business in this environment and remain well positioned to respond to the needs of our clients going forward. I want to thank all of our highly dedicated employees 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?

Q&A Session

Operator: [Operator Instructions] And the first question comes from Edward Reilly with EF Hutton.

Operator: Thank you. And the next question comes from Marc Riddick with Sidoti & Company.

Operator: Thank you. And the next question comes from Gabe Sanchez, a private investor.

Operator: [Operator Instructions] And if there is nothing more, I would like to return the floor to Jeff Eberwein for any closing comments.

Jeff Eberwein: Well, thank you, operator, and thank you for your questions today, very good questions. We appreciate you joining us. We appreciate your interest in the company and feel free to contact us any time by using the information in our press release or on our Investor Relations website, and we look forward to next quarter’s update call. Have a good day, everybody.

Operator: Thank you and thank you for joining the Hudson Global first quarter conference call. Today’s call has been recorded and will be available on the Investors section of our website, hudsonrpo.com.