Participants

Jeffrey Eberwein; Chief Executive Officer, Director; Hudson Global Inc

Matthew Diamond; Chief Financial Officer; Hudson Global Inc

Jacob Zabkowicz; Global Chief Executive Officer; Hudson Global Inc

Marc Riddick; Analyst; Sidoti

David Siegfried

Presentation

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, 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 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 Jeff 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 and for joining us today.
I'll start by reviewing our fourth quarter 2024 results, then 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 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, restructuring and repositioning our business for growth. I'll let Jake expand on some of these initiatives later on in the call.
In the fourth quarter 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 or $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 Matt 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. 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, 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 at December 31, 2024, compared to 56 days at September 30, 2024. The company generated of $2.0 million 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 30, 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 Jake 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 have 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 to deliver 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 evident and by a myriad of recognitions that we're proud to have received, including the 16th consecutive year ranking among the HRO Today, Magazine's, Baker Dozen list of top enterprise RPO providers the 12th 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 Jeff for some closing remarks.

Jeffrey Eberwein

Thank you, Jake. Before opening the line to questions, I'd like to reinforce Jake'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, can you please open the line for questions?

Question and Answer Session

Operator

(Operator Instructions) Mark Riddick with Sidoti.

Marc Riddick

Hey, good morning. Wanted to see if we could spend 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 3Q results just 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 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?

Jeffrey Eberwein

Yeah Jake, why don't you handle that one?

Jacob Zabkowicz

Yes, 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 technologies hit and miss and bouncing back on the functional area. But now coming into Q1 and what we're looking at now is there's 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 more positive viewpoint than what we saw in the beginning of 2024, 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?

Jeffrey Eberwein

Jake, why don't you want to answer that one as well?

Jacob Zabkowicz

Yeah, yeah. Mark, another great question. Thank you. So in 2024, our growth strategy was really focused on a couple of different factors, right?
If you take one pillar of M&A and acquiring two businesses in the Middle East, and M&A will continue to be a growth strategy for us as we look for we look at companies to help support 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 and our commercial sales team, almost 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 and our sales and bid management functions.
So we're going to continue to be able to do that as we look for 2025 and onwards. But the other piece of the puzzle, Mark, 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. And so we're really excited about that.
We're expanding that with our digital product portfolio.
As I mentioned earlier, with hiring of 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 account ecosystem is a digital footprint, partnerships, multiple initiatives on talent front is 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 the 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 high-end managers is top-notch, and that is going to come through with our digital footprint and our digital solutions as we move forward.

Marc Riddick

Okay. Great. And then I was wondering if you could spend a little time on you talked a little bit at the cash usage and prioritization.
Maybe you could talk a little bit about what the acquisition pipeline might be looking like maybe just general thoughts on maybe what's out there at valuation 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 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 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 capabilities.
So 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 is important, but also important is the cultural fit and the one plus one equal three aspect.
We have to look at something and say, inside of Hudson, can we double or triple this business? Is it really more valuable inside of Hudson and if they just continue as a stand-alone or inside somebody else's organization.
So all I can say is that we're always looking, we're still looking there's still a gap between the bid-ask spread, 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, stay tuned on that, but there's nothing big, there's nothing imminent. There's nothing 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 the client had since the year there's been any how should we think about maybe how that is now versus historically within RPO?

Jeffrey Eberwein

Yeah, Jake, why don't you Yeah, Mark.

Jacob Zabkowicz

Marc, great question again. And what I would share with you is that the sales cycle is it hasn't really changed a lot for an enterprise RPO client that still sits anywhere from to, call it, 14, 16 months from the RFP initiation to potential signature and start, right?
There's a lot of factors that go into it. What we saw in 2024 was a lot of hurry up and weight. And what I mean by that is we had clients and potential partners go out and ask for proposals you 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 just an example, we would talk to a client about hiring 1,000 people globally. And when it came to the final signature on the contract, it might have been a 1/4 of that right?
And now in 2025, with what's promising we're seeing a little bit is we're seeing 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 there's 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 have confidence that we will start to see more decisions coming in 2025 as things were put on hold in 2024 at the and also at the but only time will tell what 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

David Siegfried, a private investor.

David Siegfried

Hey, good morning guys. How are you today? So I noticed 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 where Hudson RPO is today, 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.
Both from a new logo perspective and organic perspective. And they're going to be our focus across the board 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're 100% correct that those are huge growth markets for us. But I also don't want to forget about specific areas in our APAC market that we're seeing significant opportunities as well, such as Southeast Asia, Japan, Manila area is always a strong growth area for us.
So but US and the US and the Americas market is key as well as the EMEA market and you can continue to see our focus and growth in those areas.

David Siegfried

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

Jacob Zabkowicz

David, I hope that our new local wins increases with that as the market picks up and the investment that we're making. But definitely, our renewals and expansions. We are better positioned right now to expand with our current client base.
And again, from a geographical expansion and from our product portfolio expansion. We're seeing a huge increase in request for more count intelligence. And that is looking at market mapping, looking at 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 count ecosystem and be able to respond and enhance that clients and that partner's talent agenda.
So when we look at the growth trajectory, the hope and the drive of our team is continuing on an upward trajectory. And 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 how do you see that happening over the next few quarters?

Jacob Zabkowicz

It, it's another great question. And if you think about the last three years, right, during the great resignation, attrition in '21 and '22 was at all-time record highs. Right, in lifetime highs in some instances in some of the areas and geographies.
In 2023, that pendulum slip has shifted, right? And we saw a very low attrition in '23 and '24 and partially because the previous years, you had such high attrition and people made jumps and made moves so we are starting to see the pendulum shift back to more of that center mass and normalcy.
How fast will that happen? There's a lot of macroeconomics and factors that we just can't control.
And obviously, a lot of changes in different geographies across the board. But we are starting to see in pockets that attrition is starting to normalize. And obviously, as attrition normalizes, hiring volumes pick up, which will obviously help our business overall.
But not to mention too, we will keep a close eye as clients look for help around internal mobility and skills-based hiring and consulting on 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 that right now, we're about 20,000 annual hires. The goal is over the next three years to reach 60,000 annual hires and the RPO clients by 50%.
Is that still the goal? 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 count spectru

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 our go-to-market team is definitely hunting for new mobile partners and signing new level of contracts into our business today, which we are also excited about. But we are doing it in a thoughtful and careful approach.
We're making sure that we don't jeopardize the quality of service that our clients have come to known Hudson RPO to be able to deliver. We have many partners that have been with us for 12, 13, 14 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 the 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. I noticed in the Q2 call in August, mentioned it was just mentioned a soft goal perhaps to 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 16%. Nothing was repurchased in 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

this is Jeff, I can talk about that. Yes, we say it's a soft goal just because it's there's things outside our control. Sometimes the window is an open and the most efficient way we have found to buy back stock, especially in meaningful quantities is through negotiated transactions.
So 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 any time, 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, that was a soft goal in 2024, we didn't quite hit it, but it's 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 there's some things outside our control, we need a willing. We're a willing buyer, you need a willing seller at least on negotiated deals.
In the past, we have bought in the open market that is difficult given how our liquid our stock is in the 10b-18 rules. We had done tender offers in the past, and I would just say all those tools 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.

Jacob Zabkowicz

Thank You, David.

Operator

(Operator Instructions) Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Jeff Eberwin 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 has now concluded. Thank you for attending today's presentation. You may now disconnect.