Hudson Global, Inc. (NASDAQ:HSON) Q2 2023 Earnings Conference Call August 10, 2023 10:00 AM ET Company Participants Jeffrey Eberwein - CEO & Director Matthew Diamond - CFO Conference Call Participants Marc Riddick - Sidoti & Company Operator Good morning, and welcome to the Hudson Global Conference Call for the Second Quarter of 2023. Our call today will be led by Chief Executive Officer, Jeff Eberwein; and Chief Financial Officer, Matt Diamond. Please be advised that the statements made during the presenta ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |----------------------------------------------------------------------------------------------------|-------|----------|-------|-------|--------------|-------|--------|-----------|-----------------------------------|-------| | Q1 2023 \nRevenue | | Americas | | | Asia Pacific | | Europe | Corporate | \n$ 9.3 $ 27.3 $ 6.5 $ — $ 43.1 | Total | | Adjusted net revenue (1) | | | | | | | | | $ 8.9 $ 8.5 $ 4.4 $ — $ 21.8 | | | Net income | | | | ...

Hudson Global, Inc. (NASDAQ:HSON) Q1 2023 Earnings Conference Call May 10, 2023 10:00 AM ET Company Participants Jeff Eberwein - Chief Executive Officer Matt Diamond - Chief Financial Officer Conference Call Participants Edward Reilly - EF Hutton Marc Riddick - Sidoti & Company Gabe Sanchez - Private Investor 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, ...

PART I – FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Q1 2023 saw a significant financial downturn, with revenue decreasing to $43.1 million and net income sharply dropping to $0.4 million [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 revenue decreased 17% to $43.1 million, with operating income plummeting to $18 thousand and net income to $0.35 million Q1 2023 vs Q1 2022 Financial Performance (in thousands, except per share) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $43,072 | $51,917 | -17.0% | | **Operating Income** | $18 | $3,602 | -99.5% | | **Net Income** | $354 | $3,019 | -88.3% | | **Diluted EPS** | $0.11 | $0.97 | -88.7% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets slightly decreased to $65.5 million, while total liabilities reduced to $19.1 million Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,929 | $27,123 | | Total current assets | $52,352 | $55,512 | | Total assets | $65,469 | $67,942 | | Total current liabilities | $17,735 | $21,122 | | Total liabilities | $19,074 | $22,150 | | Total stockholders' equity | $46,395 | $45,792 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 net cash used in operating activities increased to $5.0 million, leading to a $5.2 million decrease in total cash Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used by operating activities | $(4,954) | $(2,386) | | Net cash used in investing activities | $(38) | $(93) | | Net cash used in financing activities | $(164) | $(226) | | **Net increase in cash, cash equivalents, and restricted cash** | **$(5,191)** | **$(2,591)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail RPO business, recent acquisitions, disaggregated revenue, tax benefits, and the stockholder rights plan - The company is a global provider of Recruitment Process Outsourcing (RPO) services, operating in three segments: Americas, Asia Pacific, and Europe, and has recently expanded through acquisitions in India (HnB, Karani) and the U.S. (Coit)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) Disaggregated Revenue by Source (in thousands) | Revenue Source | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | RPO Recruitment | $21,521 | $25,260 | | Contracting | $21,551 | $26,657 | | **Total Revenue** | **$43,072** | **$51,917** | - In Q1 2023, the company recognized a discrete tax benefit of approximately **$408 thousand** following the lapse of the statute of limitations for capital gains taxes in Spain, which contributed to a negative effective tax rate[95](index=95&type=chunk)[98](index=98&type=chunk) - The company maintains a **Stockholder Rights Plan**, extended through October 2024, to preserve its significant U.S. **Net Operating Losses (NOLs)** by deterring stock transfers that could trigger an "ownership change" under Section 382 of the tax code[139](index=139&type=chunk)[141](index=141&type=chunk)[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2023 revenue declined 17% due to challenging market conditions, with Americas and Asia Pacific segments down, while Europe showed growth [Executive Overview and Current Market Conditions](index=30&type=section&id=Executive%20Overview%20and%20Current%20Market%20Conditions) Challenging Q1 2023 market conditions, including inflation and decreased labor demand, impacted performance, while strategic alternatives are explored - The company's performance is being impacted by challenging market conditions, including high inflation, rising interest rates, and decreased demand for labor, which are expected to continue into Q2 2023[156](index=156&type=chunk)[157](index=157&type=chunk) - Strategic initiatives include growing the RPO business through investments, differentiating the brand, improving cost structures, and exploring acquisitions or share repurchases to maximize stockholder value[153](index=153&type=chunk)[155](index=155&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q1 2023 consolidated revenue decreased 17% to $43.1 million, driven by declines in Americas and Asia Pacific, offset by Europe's growth Segment Revenue Performance - Q1 2023 vs Q1 2022 (in millions) | Region | Q1 2023 Revenue (As Reported) | Q1 2022 Revenue (As Reported) | % Change (Reported) | | :--- | :--- | :--- | :--- | | Americas | $9.3 | $14.6 | (37)% | | Asia Pacific | $27.3 | $31.1 | (12)% | | Europe | $6.5 | $6.2 | 5% | - The Americas segment experienced a **37% revenue decrease** to **$9.3 million**, primarily due to lower demand from existing RPO recruitment and contracting clients[172](index=172&type=chunk) - In Asia Pacific, a constant currency revenue decrease of **8%** was driven by a **$3.4 million decline** in Australian contracting revenue from the loss of a significant customer in Q1 2022, though RPO recruitment revenue grew[178](index=178&type=chunk)[179](index=179&type=chunk) - The Europe segment showed strong growth, with constant currency revenue increasing **16%**, driven by a **$1.0 million (28%) increase** in RPO recruitment revenue in the U.K. from new client wins and higher demand[189](index=189&type=chunk)[190](index=190&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and equivalents decreased to $22.3 million due to operating cash usage, but liquidity is deemed sufficient for the next 12 months Cash and Liquidity (in millions) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents, and restricted cash | $22.3 | $27.5 | | Cash held in U.S. | $10.1 | N/A | | Cash held outside U.S. | $11.8 | N/A | - Net cash used in operating activities increased to **$5.0 million** in Q1 2023 from **$2.4 million** in Q1 2022, primarily due to lower net income[203](index=203&type=chunk) - The company has an invoice finance credit facility in Australia for up to **4 million AUD**, with no amounts outstanding as of March 31, 2023[206](index=206&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is exempt from providing market risk disclosures - As a smaller reporting company, Hudson Global, Inc. is not required to provide quantitative and qualitative disclosures about market risk[218](index=218&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective due to a material weakness in revenue recognition for a non-routine transaction - A **material weakness** was identified in the internal controls over the revenue recognition process concerning the principal vs. agent assessment for a non-routine transaction[220](index=220&type=chunk) - Due to this material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of March 31, 2023[219](index=219&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any legal proceedings expected to materially adversely affect its financial condition or operations - The company is not currently involved in any legal proceedings that are reasonably expected to have a material adverse effect on its financials[225](index=225&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) For a comprehensive discussion of potential risks, readers are directed to the company's Annual Report on Form 10-K - For a detailed discussion of risk factors, the report directs investors to the company's Annual Report on Form 10-K for the year ended December 31, 2022[226](index=226&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock was repurchased in Q1 2023, with approximately $0.6 million remaining under the existing authorization - No shares of common stock were repurchased by the company during the three months ended March 31, 2023[228](index=228&type=chunk) - As of March 31, 2023, approximately **$572,226** remained available for share repurchases under the board's 2015 authorization[228](index=228&type=chunk) [Other Items (Items 3, 4, 5, 6)](index=44&type=section&id=Other%20Items%20%28Items%203%2C%204%2C%205%2C%206%29) Items 3, 4, and 5 report no material disclosures, while Item 6 lists the exhibits filed with the report - Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) are reported as 'None' or 'Not applicable'[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)

Revenue Performance - Revenue for the year ended December 31, 2022, was $200.9 million, an increase of $31.7 million, or 19%, compared to $169.2 million in 2021[98]. - On a constant currency basis, revenue increased by $42.8 million, or 27%, driven by a 54% increase in RPO recruitment revenue and a 9% increase in contracting revenue[98]. - The Karani Acquisition contributed $8.3 million to revenue growth, accounting for 5 percentage points of the overall increase[99]. - Adjusted net revenue in the Americas for 2022 was $49.0 million, an increase of $21.9 million or 81% compared to 2021[107]. - Adjusted net revenue in the Asia Pacific for 2022 was $34.3 million, an increase of $7.6 million or 29% compared to 2021, with RPO recruitment adjusted net revenue rising by $6.9 million or 29%[116]. - In Europe, total revenue for 2022 was $31.1 million, an increase of $11.6 million or 60% compared to 2021, with RPO recruitment revenue increasing by $5.2 million or 45%[123]. Expenses and Profitability - SG&A and Non-Op expenses were $88.5 million for 2022, an increase of $25.2 million, or 40%, compared to $63.2 million in 2021[101]. - SG&A and Non-Op expenses in the Americas rose to $44.4 million, an increase of $19.1 million or 76% compared to 2021, while as a percentage of revenue, it decreased from 88% to 86%[109]. - SG&A and Non-Op expenses in Europe increased to $14.5 million, a rise of $4.1 million or 40% compared to 2021, while as a percentage of revenue, it decreased from 53% to 46%[127]. - EBITDA for 2022 was $10.8 million, compared to $4.9 million in 2021, reflecting an increase of $6.4 million on a constant currency basis[101]. - Operating income in the Americas for 2022 was $4.3 million, a growth of $2.6 million or 155% compared to 2021, with EBITDA reaching $4.9 million, up 171%[111]. - Operating income for the year ended December 31, 2022, was $1.7 million, a 47% increase from $1.2 million in 2021[129]. - EBITDA for the year ended December 31, 2022, was $1.5 million, representing a 68% increase from $0.9 million in 2021, and accounted for 5% of revenue[130]. Net Income and Cash Flow - Net income for the year ended December 31, 2022, was $7.1 million, an increase from $3.2 million in 2021, with a constant currency increase of $4.3 million[101]. - Net income increased to $7.1 million for the year ended December 31, 2022, compared to $3.2 million in 2021, with basic and diluted earnings per share of $2.37 and $2.27, respectively[136]. - Cash and cash equivalents totaled $27.5 million as of December 31, 2022, up from $22.1 million in 2021, with net cash provided by operating activities increasing to $9.5 million from $2.5 million[137][138]. - Net cash used in investing activities decreased to $1.3 million in 2022 from $6.3 million in 2021, primarily due to the acquisition of HnB[139]. Strategic Outlook and Risks - The company anticipates continued challenging market conditions into 2023 due to higher inflation and interest rates[91]. - The impact of COVID-19 and its variants continues to present significant risks, affecting operations and financial results[94]. - The Company is subject to various risks and uncertainties that could materially affect actual results, including global economic fluctuations and competition in the market[163]. - The Company has not provided quantitative disclosures about market risk as it qualifies as a smaller reporting company[164]. Tax and Compliance - The provision for income taxes was $2.3 million on $9.5 million of pre-tax income for 2022, with an effective tax rate of 24.6%[135]. - The Company has a gross liability for income taxes associated with uncertain tax positions amounting to $0.4 million as of December 31, 2022[156]. - The Company assesses tax positions and records tax benefits for all years subject to examination based on management's evaluation, recognizing the largest amount of tax benefit with greater than 50% likelihood of realization[158]. - The Company has provided tax on all unremitted earnings of foreign subsidiaries, recognizing the tax on Global Intangible Low Taxed Income (GILTI) as a period expense in the year incurred[159]. Corporate Governance and Future Investments - The company is exploring strategic alternatives to maximize shareholder value, including potential acquisitions and share repurchases[88]. - The company expects to make capital expenditures of less than $1 million for the full year 2023, focusing on strategic investments for future growth[142]. - Corporate expenses decreased by 13% to $2.9 million in 2022 from $3.3 million in 2021, mainly due to lower professional fees and stock compensation expenses[131]. - Depreciation and amortization expense rose to $1.4 million in 2022 from $0.6 million in 2021, driven by amortization related to acquisitions[132]. - Business combinations are accounted for under the acquisition method, with goodwill recorded when the purchase price exceeds the net fair value of assets acquired[160].

Hudson Global, Inc. (NASDAQ:HSON) Q4 2022 Earnings Conference Call March 30, 2023 10:00 AM ET Company Participants Jeff Eberwein - Chief Executive Officer Matt Diamond - Chief Financial Officer Conference Call Participants Marc Riddick - Sidoti & Company Ignacio Bernaldez - EF Hutton Operator Good morning, and welcome to the Hudson Global Conference Call for the Fourth Quarter of 2022. Our call today will be led by Chief Executive Officer, Jeff Eberwein and Chief Financial Officer, Matt Diamond. Please be ...

US$ in Millions, except EPS US$ in Millions, except EPS US$ in Millions Q4 2022: Hudson Asia Pacific 6 (1) + / - indicates whether the caption was higher (+) or lower (-) than the comparison period. (2) CC represents constant currency. (3) Excludes stock compensation expense. (4) Adjusted EBITDA and Adjusted Diluted EPS are non-GAAP financial measures. Please reference slide 13 of this presentation for a reconciliation of these non-GAAP measures. Europe 18% Europe 15% Asia Pacific 39% Americas 43% Contracti ...

Financial Data and Key Metrics Changes - For Q3 2022, the company reported revenue of $49 million, a 16% increase year-over-year in constant currency [4] - Adjusted net revenue was $24.2 million, up 42% year-over-year in constant currency [4] - SG&A costs were $21.2 million, a 49% increase compared to the same period last year in constant currency [4] - Adjusted EBITDA was $3 million, an 8% increase in constant currency year-over-year [4] - Net income was $1 million or $0.30 per share, down from $1.5 million or $0.49 per share in the same period last year [4] - Adjusted net income per diluted share was $0.58, compared to $0.78 a year ago [4] Business Line Data and Key Metrics Changes - The Americas business saw revenue and adjusted net revenue growth of 69% and 70% in constant currency, respectively [6] - Adjusted EBITDA for the Americas increased to $1.8 million from $1.4 million year-over-year [6] - Asia Pacific revenue was roughly flat year-over-year in constant currency, while adjusted net revenue grew 12% [6] - EMEA business revenue grew by 36% and adjusted net revenue by 51% in constant currency, with adjusted EBITDA increasing to $0.4 million from $0.2 million year-over-year [7] Market Data and Key Metrics Changes - The company ended Q3 with $22.7 million in cash and restricted cash [8] - Days sales outstanding (DSO) increased to 50 days in September 2022, up from 39 days in September 2021 [8] - Working capital, excluding cash, increased to $10.2 million in Q3 2022 from $7.8 million at the end of 2021 [9] Company Strategy and Development Direction - The company is focusing on enterprise RPO work, which comprises approximately 75% of its business, and is seeing robust activity in this area despite some operational challenges [12][13] - The company aims to win more enterprise RPO clients, particularly from larger companies that are increasingly recognizing the value of RPO solutions [21][22] - The company is also monitoring acquisition opportunities but is cautious about high sales price expectations in the current market [32][33] Management's Comments on Operating Environment and Future Outlook - Management noted that the third quarter results were impacted by unfavorable foreign exchange rates, a reduction in project RPO work, and a slowdown in hiring activity in the technology sector [11] - Despite these challenges, the sales pipeline remains strong, particularly in the healthcare sector, which is expected to drive future growth [12][42] - Management anticipates that the fourth quarter may be flat to down compared to Q3 due to seasonality and ongoing weakness in the tech sector [41] Other Important Information - The company repurchased approximately 1.1 million shares in Q3 2022 and has reduced its share count by 13% since the beginning of 2019 [5] - The company has $600,000 remaining under its 10 million common share repurchase program [5] Q&A Session Summary Question: Discussion on the company's cost structure in light of the labor market - Management indicated that about 70% of revenue equates to variable costs, with fixed costs primarily in management, sales, and marketing [16][18] Question: Opportunities for acquisitions in the current environment - Management sees more opportunities for enterprise RPO with larger companies, especially those that have not previously utilized RPO services [21][22] Question: Talent retention and headcount management - Management is actively looking for talent, particularly in the enterprise RPO segment, and has redeployed recruiters from the technology sector to other growing areas [29] Question: Update on acquisition multiples and pipeline - Management noted that while there are more opportunities in the acquisition marketplace, sales price expectations remain high [32][33] Question: Use of cash for share repurchases - Management believes share repurchases are a good use of capital when the stock is undervalued and has taken advantage of open windows for buybacks [36][38] Question: Seasonal trends in revenue - Management confirmed that Q4 is typically slower than Q3, with expectations of a flat to down performance due to seasonality and tech sector weakness [40][41]

Revenue Performance - Revenue for Q3 2022 was $48.7 million, an increase of $3.7 million or 8.2% compared to Q3 2021, driven primarily by growth in the Americas [163]. - Adjusted net revenue for Q3 2022 was $24.2 million, up $6.2 million or 34.2% from Q3 2021, with RPO recruitment adjusted net revenue increasing by $6.9 million or 42.8% [163]. - For the nine months ended September 30, 2022, revenue was $151.6 million, an increase of $32.4 million or 27.2% compared to the same period in 2021, mainly due to growth in the Americas [166]. - Adjusted net revenue for the nine months ended September 30, 2022, was $77.0 million, an increase of $31.2 million or 68.1% from the same period in 2021 [166]. - For the three months ended September 30, 2022, total revenue was $48.7 million, a 8% increase from $45.0 million in the same period of 2021 [169]. - For the nine months ended September 30, 2022, total revenue was $151.6 million, a 27% increase from $119.1 million in the same period of 2021 [169]. Expenses and Profitability - SG&A and Non-Op expenses for Q3 2022 were $22.6 million, an increase of $6.1 million or 36.6% compared to Q3 2021, with SG&A as a percentage of revenue rising to 46.4% [166]. - EBITDA for Q3 2022 was $1.6 million, a slight increase from $1.5 million in Q3 2021 [166]. - Net income for Q3 2022 was $1.0 million, down from $1.5 million in Q3 2021, reflecting a decrease of $0.5 million [166]. - For the nine months ended September 30, 2022, EBITDA was $9.7 million, significantly up from $2.0 million in the same period of 2021 [166]. - Operating income for the total was $1.3 million for the three months ended September 30, 2022, compared to $1.4 million in 2021 [169]. - Net income for the three months ended September 30, 2022, was $955,000, a decrease of 36% from $1.5 million in the same period of 2021 [173]. - For the nine months ended September 30, 2022, operating income was $5.0 million, compared to $0.1 million in 2021, and EBITDA was $5.5 million, or 13% of revenue, compared to $0.2 million in 2021 [184]. Regional Performance - RPO recruitment revenue increased by $5.1 million, or 73%, for the three months ended September 30, 2022, compared to the same period in 2021 [175]. - Adjusted net revenue for the Americas was $11.9 million for the three months ended September 30, 2022, representing a 70% increase from $7.0 million in 2021 [177]. - For the three months ended September 30, 2022, revenue in Asia Pacific was $30.0 million, a decrease of $0.1 million, or 0.3%, while for the nine months it increased to $91.0 million, up $10.3 million, or 13% [186]. - For the nine months ended September 30, 2022, RPO recruitment revenue in Asia increased by $5.5 million, or 31%, while contracting revenue increased by $4.8 million, or 8% [188]. - For the three months ended September 30, 2022, revenue in Europe was $6.2 million, an increase of $1.6 million, or 36%, while for the nine months it was $18.9 million, up $5.1 million, or 36% [203]. - For the nine months ended September 30, 2022, RPO recruitment revenue increased by $4.1 million, or 48%, while contracting revenue increased by $0.9 million, or 17% compared to the same period in 2021 [205]. Cash and Liquidity - As of September 30, 2022, cash and cash equivalents totaled $22.7 million, compared to $22.1 million as of December 31, 2021 [225]. - Net cash provided by operating activities was $5.1 million for the nine months ended September 30, 2022, compared to $0.8 million in 2021, resulting in an increase of $4.3 million [226]. - The Company believes it has sufficient liquidity to meet its needs for at least the next 12 months based on its financial position as of September 30, 2022 [231]. - The Company held $12.9 million of its cash and cash equivalents in the U.S. as of September 30, 2022, with the remainder held in various countries including Australia ($3.6 million) and Hong Kong ($1.3 million) [232]. - The Company has no outstanding debt or financial guarantees other than those related to the Karani Acquisition [231]. Market Conditions and Future Outlook - The company anticipates continued challenging market conditions into 2023 due to higher inflation and decreased demand for labor [156]. - The ongoing COVID-19 pandemic has negatively impacted certain currencies compared to the U.S. dollar in the countries where the Company operates [242]. - The Company does not have any off-balance sheet arrangements that could materially affect its financial condition [233]. - The Company evaluates its liabilities in light of prevailing circumstances and has appropriate procedures in place for identifying potential claims [235].

… a leading global total talent solutions provider Nasdaq: HSON Investor Presentation SEPTEMBER 2022 Forward-Looking Statements This presentation contains statements that the Company believes to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this presentation, ...