Hudson Global, Inc. (NASDAQ:HSON) Q4 2024 Earnings Call Transcript

Hudson Global, Inc. (NASDAQ:HSON) Q4 2024 Earnings Call Transcript March 14, 2025

Hudson Global, Inc. beats earnings expectations. Reported EPS is $-0.05, expectations were $-0.06.

Operator: Good morning. And welcome to the Hudson Global Conference Call for the Fourth Quarter of 2024. Our call today will be led by Chief Executive Officer, Jeffrey Eberwein, Chief Financial Officer, Matthew Diamond, and Global CEO of Hudson RPO, Jacob 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-Ks filed earlier 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 website, hudsonrpo.com. I encourage you to access our earnings material 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 Jeffrey Eberwein. Please go ahead.

Jeffrey Eberwein: Thank you, operator, and welcome, everyone. First off, I apologize for my voice. Secondly, more importantly, we thank you for your interest in Hudson Global, Inc. and for joining us today. I’ll start by reviewing our fourth quarter 2024 results. Matthew Diamond, our CFO, will provide some additional details on our financials. Lastly, Jacob Zabkowicz, global CEO of our Hudson RPO business, will provide us with an operations update. Our fourth quarter 2024 results reflect modest improvement over the prior year quarter. Overall, for the year, we were impacted by generally low levels of global hiring activity, as well as unusually low attrition rates at certain clients. Despite these challenges, we spent significant time in 2024 in restructuring and repositioning our business for growth.

I’ll let Jacob expand on some of these initiatives later on in the call. In the fourth quarter of 2024, we reported revenue of $33.6 million, down 2% year over year in constant currency, while our adjusted net revenue was $17.6 million, up 5.7% year over year in constant currency. Our fourth quarter 2024 adjusted EBITDA was $0.9 million, up from adjusted EBITDA of $0.1 million a year ago. In addition, we reported a net loss of $0.6 million, which is $0.20 per diluted share, versus net income of $0.7 million or $0.23 per diluted share in the same period of last year. Q4 2024 adjusted net loss per diluted share was $0.05 compared to our adjusted net income per diluted share of a positive $0.04 in the fourth quarter of last year. Now, I’ll turn the call over to Matthew Diamond, to review some financial results by region as well as some additional financial details from the fourth quarter.

Matthew Diamond: Thank you, Jeff, and good morning, everyone. Our Q4 2024 revenue for our Americas business increased 18% and adjusted net revenue increased 5% year over year in constant currency. We reported Q4 2024 adjusted EBITDA of $0.5 million, an increase from last year’s adjusted EBITDA of $0.2 million. Q4 2024 revenue for our Asia Pacific business decreased 10% while adjusted net revenue increased 6% year over year in constant currency. This contrast is attributable to a decline at a large MSP client where, as a reminder, the adjusted net revenue margins are significantly lower than those of our RPO accounts. In Q4 2024, we reported adjusted EBITDA of $0.9 million, which was flat versus adjusted EBITDA of $0.9 million a year ago.

Q4 2024 revenue for our EMEA business increased 7% versus the prior quarter in constant currency, and adjusted net revenue increased 5%. Our Q4 2024 adjusted EBITDA was $0.2 million compared to adjusted EBITDA of $0.6 million in the fourth quarter of 2023. Turning to some additional financial details, day sales outstanding was 51 days as of December 31, 2024, compared to 56 days as of September 30, 2024. The company generated $2.0 million of cash flow from operations during the fourth quarter of 2024, compared to $3.3 million of cash flow from operations in the fourth quarter of 2023. We ended the year with $17.7 million in cash, including $0.7 million of restricted cash. In connection with our acquisition activity in recent years, our balance sheet as of December 31, 2024, reflects $5.7 million of goodwill and $2.5 million of net amortizable intangible assets.

The company’s working capital, excluding cash, was $11.9 million compared to $12.0 million at December 31, 2023. I’ll now turn the call over to Jacob Zabkowicz to discuss our RPO business.

Jacob Zabkowicz: Thank you, Matt, and good morning. Although we faced many challenges in 2024 that were largely out of our control, our business is better positioned for growth today than ever before. We restructured our organization and streamlined our operations, including our sourcing, screening, and onboarding procedures. During the year, we invested $3.4 million in sales, marketing, and technology above maintenance levels to enhance our future growth. We’ve also enhanced our go-to-market strategy by expanding our service offerings to existing and prospective clients alike. In 2024, we made multiple strategic hires with a focus on further enhancing our geographical reach and service offerings. We recently launched our digital division and hired Stephanie Edwards as Chief Digital Officer to revolutionize our digital capabilities and enterprise strategies, delivering innovative, efficient, cost-effective, and high-quality talent solutions to our clients worldwide.

Despite the challenging global talent environment, we continue to consistently deliver best-in-class service to a growing number of clients on a global scale. For the full year, we secured approximately $56 million of adjusted net revenue from renewals and extensions at existing clients, plus approximately $7 million in new logo wins. Our efforts are evidenced by a myriad of recognitions that we’re proud to have received, including the sixteenth consecutive year ranking among the HRO Today magazine’s Baker’s Dozen list of top enterprise RPO providers, the twelfth consecutive year as a top RPO provider in APAC, and the eighth consecutive year as a top RPO provider in EMEA. I’ll now turn the call back over to Jeffrey Eberwein for some closing remarks.

Jeffrey Eberwein: Thank you, Jacob. Before opening the line to questions, I’d like to reinforce Jacob’s message. That despite operating in a challenging global talent environment, we improved our internal operations and have simultaneously made growth investments as well as realized cost savings across our entire organization. These should improve our top and bottom line results in the coming quarters. Our talented team continues to provide excellent service and maintain high levels of client satisfaction. We’re encouraged by the size and breadth of our sales pipeline and believe we are poised to convert this pipeline into actual sales once market conditions improve. Operator, could you please open the line for questions?

Operator: To ask a question, you may press star then one on your telephone keypad. Pick up your handset before pressing the keys. Our first question today is from Marc Riddick with Sidoti. Please go ahead.

Marc Riddick: Hey, good morning. Wanted to see if we could spend a little time going over, I guess, when we last spoke, it was, I guess, when you reported Q3 results was right after the election, if I recall. Maybe you could spend a little bit of time discussing the demand environment that you’re seeing and maybe whether there’s some differentiation geographically or by industry vertical, you know, since the election and given everything that’s taking place now with tariffs and the like, and how you feel that’s impacting client demand trends at this point.

Q&A Session

Jacob Zabkowicz: Yeah. Jake, why don’t you handle that one? Yeah. Marc, good morning, and thanks for the question. I think a couple of things. Coming out of Q4 of last year, we definitely felt the momentum and an uptick of client behavior. We felt some positivity of growth and hiring activity. Not necessarily in one specific area or geography, but in specific pockets within clients. Commercial has always been a growing piece. Technology is hit and miss and bouncing back in the functional area. But now coming into Q1, and what we’re looking at now is there is still that momentum, but there’s a little bit of a hesitation still. And uncertainty in the market. And that uncertainty is having our partners question some of their hiring initiatives and hiring volumes but still a more positive viewpoint than what we saw in the beginning of 2024, you know, a year ago today.

Marc Riddick: Okay. Great. And then in prepared remarks, there was the commentary on the investments for future growth. Can you talk a little bit about maybe what you might be looking at for 2025 and then how that might play into CapEx levels vis-a-vis maintenance versus growth?

Jacob Zabkowicz: Jake, why don’t you ask that one as well? Yeah. Yeah. Marc, another great question. Thank you. So in 2024, our growth strategy was really focused on a couple of different factors. Right? You know, if you take one pillar of M&A and accruing to businesses in the Middle East, and M&A will continue to be a growth strategy for us as we look for companies to help support our both our geographical expansion and also our product portfolio expansion. The other thing we did in 2024 is we really enhanced our go-to-market in our commercial sales team, almost, you know, more than doubling our sales team size in 2024 to make sure that we can touch every geography that our clients are asking us to touch as well as enhancing our support in our sales and pitch management functions.

So we’re going to continue to be able to do that, you know, as we look for 2025 and onwards. But the other piece of the puzzle, Marc, I think we spoke about last time, is about our organic growth. And we’re really excited about this. And what I mean by organic growth is looking at our current market share or share of wallet with our existing partners, to be able to accommodate their needs in other geographies, other functional areas that we don’t support them today. So we’re really excited about that. We’re expanding that with our digital product portfolio. As I mentioned earlier, we’re hiring Stephanie Edwards and launching Hudson Digital. That solution is going to help streamline not only our operations, but if you think about clients today, every client has a talent ecosystem that they look at.

Right? And their talent ecosystem is a digital footprint, partnerships, multiple initiatives on the talent front as internal mobility, internal careers. So as we look at the digital side of the house, right, the digital will be able to really give us more of an improved candidate and hiring manager experience. We’re going to be able to automate routine tasks. We’re going to create more value for our clients, and we can’t forget that we’re in the business of people. Right? So we want to make sure that the experience on both the candidate and the hiring managers is top-notch, and that is going to come through with our digital footprint and our digital solution as we move forward.

Marc Riddick: Okay. Great. And then I was wondering if you could spend a little time on talked a little bit about the cash usage and prioritization. Maybe you could talk a little bit about what the acquisition pipeline might be looking like. And then maybe just general thoughts on maybe what’s out there, evaluation levels, and whether it’s about the same or maybe a little more or less attractive than it was maybe six months ago.

Jeffrey Eberwein: Yeah. Marc, this is Jeff. Good question. So our first priority is internal growth projects. Like, we highlight the over $3 million we spent in future growth, enhancing things that’s over and above maintenance levels. We think those investments have an incredibly high ROI, and are often better return and lower risk than doing an acquisition, but they are in a little bit it’s a little bit like doing an acquisition in our sector just because in both cases, we’re really adding people and capability. So you know, there’s a few geographic areas we would like to enhance. And so we’re always looking. There are often some interesting things out there. And the valuation part of it is important, but also important is the cultural fit and the one plus one equals three ask we have to look at something and say, you know, inside of Hudson, can we double or triple this business?

You know, is it really more valuable inside of Hudson than if they just continue as a standalone or inside somebody else’s organization? So all I can say is that we’re always looking. We’re still looking. You know, there’s still a gap between the bid-ask spread, you know, what we’re willing what we think the value is and what sellers think the value is, and we can be creative. But I would just tell you, you know, stay tuned on that. But there’s nothing big. There’s nothing imminent. There’s nothing, you know, transformative that we’re seriously looking at at this time.

Marc Riddick: Okay. And then I wanted to touch a little bit on maybe what you’re seeing for lead time trends with RPO. I wasn’t sure if, you know, the client hesitancy has been any how should we think about maybe how that is now versus historically? Within RPO.

Jacob Zabkowicz: Yeah. Jake, why don’t you start on that one? Marc, great question again. And what I would share with you is that the sales cycle hasn’t really changed a lot. For an enterprise RPO client. That still sits anywhere from nine to, you know, call it fourteen, sixteen months, you know, from the RFP initiation to potential signature and start. Right? You know, there’s a lot of factors that go into it. You know, what we saw in 2024 was a lot of hurry up and wait. And what I mean by that is we had clients and potential partners go out and ask for proposals, have multiple conversations, thinking about their hiring volumes for 2024 and into the future years. And then what would come to fruition was a fraction of that hiring volume and that hiring initiative.

So as just an example, you know, we would talk to clients about hiring a thousand people globally. And when it came to the final, you know, signature on the contract, it might have been, you know, a quarter of that. Right? And now in 2025, what’s promising we’re seeing a little bit is we’re seeing, you know, a lot more inquiries, a lot more activity. As Jeff mentioned earlier, the pipeline is continuing to grow. But there’s still some uncertainty on what that future volume is going to continue to look like with the macro environment conditions that we’re living in today. But still that momentum that we’re having. So I would share with you that we would still expect that sales cycle to be consistent throughout. I hope and I have confidence that we will start to see more decisions coming in 2025 as things were put on hold in 2024, at the end of and also at the end of 2023.

But, you know, only time will tell with the market and the conditions, but we are better poised to not only react, but to answer and to consult with our clients by the investments that we’ve made this last year, which we’re extremely excited about.

Marc Riddick: Excellent. Thank you very much.

Operator: The next question is from David Siegfried, a Private Investor. Please go ahead.

David Siegfried: Hey. Good morning, guys. How are you today?

Jeffrey Eberwein: Good morning, David. Thanks.

David Siegfried: Yeah. Good morning. Thanks for taking my call. So I noticed, you know, the biggest RPO spend comes out of America and EMEA markets. Do you see these markets as your biggest growth targets?

Jacob Zabkowicz: Yeah. David, I’ll take that one. So if you think about our current, you know, where Hudson RPO is today, you know, we are a dominant force in our APAC region. And through recognitions, through revenue, and through clients. And if you look at the Americas and the EMEA market, there’s a huge opportunity for growth and expansion in both of those markets. From a new logo perspective and organic perspective. And they’re going to be our focus across the board, you know, in the future years to come. And we’re investing heavily in those markets right now as well with operational leaders, with sales, and our go-to-market team and strategies alike. So you are 100% correct that those are huge growth markets for us. But I also don’t want to forget about, you know, specific areas in our APAC market that we’re seeing significant opportunities as well.

Such as Southeast Asia, Japan, the Manila area is always a strong growth area for us. So the US and the US and America’s market is key as well as the India market, and you can continue to see our focus and growth in those areas.

David Siegfried: Got it. And so then the $7 million in new logo wins and the $62 million in renewals and expansions, do you see that trend continuing with, like, particularly, like, with new logo wins?

Jacob Zabkowicz: Dude, I hope that our new logo wins go, you know, increases with that as the market picks up and the investment that we’re making. But definitely, our renewals and expansions, you know, we are better positioned right now to expand with our current client base. And again, from a geographical expansion and from a product portfolio expansion. We’re seeing a huge increase in requests for more talent intelligence, and that is, you know, looking at market mapping, looking at, you know, factors that will impact their overall talent acquisition strategy. We’re seeing an increase in digital requests. Right? How to leverage AI as part of the overall process, how to think about your talent ecosystem and be able to respond.

And enhance that client’s, and that partner’s, talent agenda. So when we look at the growth trajectory, you know, the hope and the drive of our team is continuing on the upward trajectory. And, you know, the pipeline is encouraging as we continue to move forward.

David Siegfried: Okay. Good. I think I read somewhere that the attrition rate right now is about 4% which is low and that you anticipate reverting back to high single digits or maybe low double digits. Do you are you beginning to see that trend take place, or is that do you see that happening over the next few quarters?

Jacob Zabkowicz: It’s another great question. And if you think about the last three years, right, during the great resignation attrition in 2021 and 2022 was at all-time record highs. Right, in lifetime highs in some instances, in some areas and geographies. In 2023, that pendulum shifted. Right? And we saw very low attrition in 2023 and 2024, and partially because, you know, the previous years, you had such high attrition. People made jumps and made moves. So we are starting to see the pendulum shift back to more of that center mass and that normalcy. How fast will that happen? There’s a lot of macroeconomics and factors that we just can’t control. And, you know, obviously, a lot of, you know, changes in different geographies across the board.

But we are starting to see in pockets that attrition starting to normalize. And, obviously, as attrition normalizes, hiring lines pick up, which will obviously help our business overall. But not to mention too, we will keep a close eye as clients look for, you know, help around internal mobility and skills-based hiring and consulting on, you know, what are the skills for the future that we’re currently participating with many of our partners today.

David Siegfried: Okay. So I got two more questions. One other question. The September investor presentation I think I mentioned the right now, we’re about 20,000 annual hires. The goal is over the next three years to reach 60,000 annual hires. And to grow the RPO clients by 50%. Is that still the goal?

Jacob Zabkowicz: Very much so. Right? We want to continue to grow organically with our partners and increasing our share of wallet with them and showing them that Hudson RPO is their partner of choice across their entire talent spectrum. And with our current client base, we have a great opportunity to be able to do that. Again, as we bring on and made investments both in our operational talent and also our go-to-market talent. The number of clients we are, you know, our go-to-market team is definitely, you know, hunting for new logo partners, and, you know, signing new logo contracts into our business today. Which we are also excited about. But we are doing it as thoughtful and a careful approach. We’re making sure that we don’t jeopardize the quality of service that our clients have come to know Hudson RPO to be able to deliver.

We have many partners that have been with us for twelve, thirteen, fourteen years that are that’s unheard of in our industry. Right? And so we want to continue to provide that quality level of service and that and then with a level of service to our clients. So, yes, long-winded answer, sir, to your simple question. We do still have that growth trajectory in mind and definitely targets to keep that pace.

David Siegfried: Okay. Excellent. Now I noticed in the Q2 call in August, it was mentioned this it was just mentioned that a soft goal perhaps to reach or repurchase 10% of the shares in 2024. So in the first three quarters, you bought back 154,000 shares. Just an average cost of about sixteen. Nothing was repurchased in the fourth quarter. So, I mean, the price is where it is right now. Where do you see do you have any goals for 2025 when it comes to repurchase activity?

Jeffrey Eberwein: Yeah. This is Jeff. I can talk about that. Yeah. It’s, you know, we say it’s a soft goal. Just because it’s, you know, there’s things outside our control. You know, sometimes the window isn’t open. And the most efficient way we have found to buy back stock, especially in meaningful quantities, is through negotiated transactions. So, you know, if a shareholder needs to exit or needs to reduce a position, we have a standard agreement that they can sign that allows us to trade anytime even if the window is closed. And it’s we have found that’s the most efficient way to buy back stock over time, and we didn’t have any of those in Q4. The 10% threshold is what’s allowed by our NOL. So you can think of that as a maximum.

That we would do in any one calendar year. But I would say that, you know, that was a soft goal in 2024. We didn’t quite hit it. But it’s, you know, another soft goal that we have in 2025. We think our stock is significantly undervalued. By a very long stretch. So as long as that’s the case, we’re going to have that as a soft goal to buy back a significant amount of stock every year. But like I said, it’s, you know, there’s some things outside our control. You need a willing we’re a willing buyer. You need a willing seller. We saw the negotiated deals. In the past, we have bought in the open market. You know, that is difficult given how illiquid our stock is in the 10b-18 rules. We have done tender offers in the past, and I would just say all those tools are in the toolkit.

And are ones we consider all the time.

David Siegfried: Okay. Excellent. Well, very good. It sounds like you’re making nice progress and thank you for the time.

Jeffrey Eberwein: Thank you. Thank you, David.

Operator: Again, if you have a question, please press star then one. Showing no further questions. I would like to turn the conference back over to Jeffrey Eberwein for any closing remarks.

Jeffrey Eberwein: Well, very good questions today. We really appreciate the interest in the company and the dialogue, the Q&A. We’re always open to hearing from you. The contact information is in our press release as well as our investor presentations. We look forward to talking to you next quarter, and thanks again for your interest in the company.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.