Hudson Global, Inc. (NASDAQ:HSON) Q1 2025 Earnings Call Transcript

Hudson Global, Inc. (NASDAQ:HSON) Q1 2025 Earnings Call Transcript May 13, 2025

Operator: Good morning, and welcome to the Hudson Global Conference Call for the First Quarter of 2025. 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 filed earlier today and in our other filings made with the Securities and Exchange Commission, including our quarterly report on Form 10-Q.

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

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 our first quarter 2025 results. And Matt Diamond, our CFO, will provide some additional details on our financials. Lastly, Jake Zabkowicz, Global CEO of our Hudson RPO business will provide us with an update on RPO. For the first quarter of 2025, we reported revenue of $31.9 million down 3.3% year-over-year in constant currency, while our adjusted net revenue was $16.4 million, 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 $1.5 million a year ago.

In addition, we reported a net loss of $1.8 million or $0.59 per diluted share versus a net loss of $2.9 million or $0.95 per diluted share in the same period of last year. Q1 2025 adjusted net loss per share was $0.46 compared to a loss of $0.72 in the first quarter of last year. Although, overall results for the first quarter of 2025 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 first — 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. Q1 2025 revenue for our Americas business increased 15% and adjusted net revenue increased 3% year-over-year in constant currency. We reported Q1 2025 adjusted EBITDA of $0.1 million, an improvement versus last year’s adjusted EBITDA loss of $0.7 million. Q1 2025 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 2025, we reported adjusted EBITDA of $0.6 million, up from an adjusted EBITDA loss of $0.2 million a year ago. Q1 2025 revenue for our EMEA business decreased 7% versus the prior year quarter in constant currency and adjusted net revenue decreased 19%.

Our Q1 2025 adjusted EBITDA loss was $0.5 million compared to adjusted EBITDA of $0.3 million in the first quarter of 2024. Turning to some additional financial details for the quarter. Overall, day sales outstanding was 56 days at March 31, 2025 compared to 51 days at December 31, 2024. The company had an outflow of $0.8 million in cash flow from operations during the first quarter compared to a $1.8 million outflow from operations in the first quarter of 2024. We ended the first quarter with $17.2 million in cash, including $0.7 million of restricted cash. In connection with our acquisition activity in recent years, our balance sheet as of March 31, 2025 reflects $5.7 million of goodwill and $2.3 million of net amortizable intangible assets.

The company’s working capital, excluding cash, was $11.9 million, flat versus year-end 2024. I’ll now turn the call over to Jake to discuss our RPO business.

Jake Zabkowicz: 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 2025, we continue 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 2025, we continue 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 as a result we secured approximately $20 million of adjusted net revenue from renewals and extensions at existing clients plus approximately $2.4 million 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.

Jeff Eberwein: 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.

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Marc Riddick from Sidoti & Company. Please go ahead.

Marc Riddick: Hey. Good morning.

Jeff Eberwein: Good morning, Marc.

Marc Riddick: So, I was wondering if you could talk a little bit about certainly with the impact of headlines. I wondering — and given the geographic footprint that you have — just wondering if you could talk a little bit about maybe how you saw clients reacting throughout the quarter? Maybe share a little bit about patents and whether or not you feel as though the headlines had any impact on top line demand?

Jeff Eberwein: Jake, why don’t you address that?

Jake Zabkowicz: Yes. Couldn’t pay, Marc. Good morning, sir. How are you today?

Marc Riddick: Good. Good. Good morning, Jake.

Jake Zabkowicz: It’s a great question. I would say as we entered into Q1 of this year, there is a lot of momentum in energy, right? There’s a lot of excitement getting coming from the great hesitation into now 2025. But unfortunately, right, 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. 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 — by now, 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 2024 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.

Marc Riddick: 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 NOA feedback as we’re now sort of midway through Q2 at this one. Are you getting any feedback? And is there any differentiation either regionally or by industry vertical?

Jake Zabkowicz: Yeah, Marc 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 in 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 is more bullishness or more hesitation right? I think there’s hesitation across the board as the impacts of the macro environment impacted a lot of our existing clients. 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.

Jeff Eberwein: And Marc, 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 has been — China and Hong Kong has been slow. And so if you — if we’re talking about where have we seen a pause a hesitation it’s been US, China Hong Kong maybe a little bit Australia. And then in UK, Europe 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.

Marc Riddick: Okay. That’s helpful. Thank you. And then I was wondering you talk a little bit about the digital launch. Maybe you could just 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.

Jeff Eberwein: Very excited about that. Go ahead Jake.

Jake Zabkowicz: We’re extremely excited about that. We’re extremely excited to have Stephanie Edwards joining 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? At Hudson we had a digital solution called Talent Max essentially a bunch of third-party providers that we’ve embedded into our partners. Now with Stephanie coming on board we’re building on our digital — our proprietary digital solution called Hudson Infusion. And that is going to be revolutionarize from an AI technology enablement allowing us to compete on the 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 in 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 and we’ll be coming out with a position on all of that.

Jeff Eberwein: And Marc I would as I’ve talked about before 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’d say we were below average, below peers and 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 onboard, 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.

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

Jeff Eberwein : Yes. Really good question, Marc. I would say, our top priority has been investing organically, and because of our strong balance sheet has kind of given us the confidence to make some of the hires that we’ve made over the last 18 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, it 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. 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. You never want to say no to a new business request from a client. So we have been steadily making progress on that in a variety of ways. 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.

It hurt bottom line results immediately. It wasn’t a cash outflow immediately the way an acquisition was. But it hit our income statement. And then we’ve also been building a team from scratch in Latin America, and that is starting to show some results. 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 and our 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, 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 equal three outcome.” 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 that — 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, so all of those options are on the table. We do want to buy back stock overtime, and reduce our share count in absolute terms overtime. We have done that over the last five to seven years. And we want to continue doing that in the future. It’s just the window has got to be open and things like that, except for the negotiated transaction — definitely a way we can buy stock when the window is not open, as if it’s a one-off negotiated transaction.

Marc Riddick: Thank you.

Jeff Eberwein: Good questions. Thank you, Marc.

Operator: [Operator Instructions] The next question comes from David Siegfried, a Private Investor. Please go ahead.

Jeff Eberwein: Good morning, David.

Unidentified Analyst: Hey, good morning. 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? And could they be available to clients third quarter, fourth quarter?

Jeff Eberwein: Jake?

Jake Zabkowicz: Yeah. David, great question and good morning, sir, how are you today?

Jeff Eberwein: Good. Very good. Thank you.

Jake Zabkowicz: So, just to add, 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 needed 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. 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 a couple of 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 the Q4 timeframe.

Unidentified Analyst: Okay. Good to hear. Now, I noticed Q1 2024, you had a big quarter for renewals and expansions. This past quarter, 2025, 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 can continue through the next few quarters?

Jake Zabkowicz: David, another great question. So, we do have some cyclical nature in our contracts 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? So, offering them services in Latin America now that we have that capability where 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, where again we have boots on the ground. We have resources in country that can help drive those solutions further and then also on the digital side.

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

Unidentified Analyst: Got it.

Jeff Eberwein: 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 we — 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 the macro environment. I will say there is some seasonality to the new business wins. 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 and I think that trend will be positive.

Unidentified Analyst: Very good. And that’s why you’re able to make that comment that you believe Hudson will outperform your peers going forward because of the trends that you see.

Jeff Eberwein: Yes. And the team which — and the leading indicator even before that is the team that we’ve been building over the last 18 months.

Unidentified Analyst: 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?

Jeff Eberwein: Absolutely. Absolutely. If you go back to 2022, which was our high watermark, attrition was significantly above historical levels. In 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 and 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, the reporters where it was 8% 9%, which we had never seen before going back 15 years, we’ve never seen an attrition rate that low before. So, it does seem like it’s returning to normal.

Unidentified Analyst: Good. And then Jake, so you’ve been Global CEO for 1.5 years — so where the company is at now, compared to where it was when you joined. I mean you happy with the progress?

Jake Zabkowicz: Thanks, David. Yes, 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 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 from 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 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. 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 to 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 — some return to normalcy. The macro environment needs to settle down, because right now we are a little 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.

Unidentified Analyst: Okay. Great work. Thank you. Thanks for the call.

Jake Zabkowicz: Thank you, David.

Matt Diamond: 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.

Jeff Eberwein: 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.