Good morning, and welcome to the Hudson Global conference call for the Second Quarter of 2020. Our call this morning will be led by Chief Executive Officer, Jeff Eberwein; and Chief Financial Officer, Matt Diamond. 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 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 their earnings materials at this time as they will serve as helpful reference guide during our call. I will now turn the call over to Jeff Eberwein..

Thank you, operator and welcome everyone. We thank you for your interest in Hudson Global and for joining us today. I'll start by reviewing the second quarter 2021 highlights and Matt Diamond our CFO will provide some additional details on our financial results. I'll then give an update on current business conditions.

For the second quarter of 2021, we reported revenue of $39.7 million, up 41% year-over-year in constant currency. Adjusted net revenue formerly referred to as gross profit was $15.1 million and increased 53% year-over-year in cost and currency.

SG&A costs were $13.4 million in the first – in the second quarter up 33% versus the same period last year in constant currency. We reported adjusted EBITDA of $1.7 million up from an adjusted EBITDA loss of 0.4 million a year ago.

In addition, we reported a net loss of $100,000, or $0.04 a share, versus a net loss of $800,000 or $0.27 a share in the same period last year. We reported adjusted net income per share of $0.15 in the second quarter 2021, versus an adjusted net loss per share of $0.13 a year ago.

I'll now turn the call over to Matt Diamond, our CFO to review our financial results by region, as well as provide some additional details from the second quarter..

Thank you, Jeff. And good morning everyone. Our Asia Pacific business grew revenues 32% in constant currency, and grew adjusted net revenue 26% in constant currency. Adjusted EBITDA of 1.4 million increased from adjusted EBITDA of $1.0 million a year ago.

Our Americas business grew revenue and adjusted net revenue 139% and 159% in constant currency, respectively, with approximately 40% of this increase attributable to organic growth, with the remainder due to the acquisition of the COIT Group. Adjusted EBITDA $0.5 million increased versus last year's adjusted EBITDA loss of $0.6 million.

Our EMEA business grew revenue 39% in constant currency, and 30% in constant currency adjusted net revenue. Adjusted EBITDA of $0.6 million in Q2 2021 increased compared to adjusted EBITDA of $0.1 million in Q2 of last year.

Lastly, we believe it's important to highlight that adjusted net revenue grew at a faster rate than SG&A in Q2 across each of our three regions. This operational leverage, we are seeing is critical to achieving our goal of growing adjusted EBITDA before corporate costs as a percentage of adjusted net revenue to 20% over the long term.

Turning to some additional financial details from the second quarter, we ended Q2 with $24.5 million in cash and restricted cash. Days sales outstanding was 41 days at June 2021, slightly below DSO of 42 days that we had in June 2020.

In connection with the acquisition of COIT Group in the fourth quarter of 2020, our balance sheet as of June 30 2021, reflects 2.1 million of goodwill and 1.2 million of net intangible assets.

The company's working capital excluding cash increased to $6.4 million in the second quarter of 2021, up from $4.5 million at the end of the fourth quarter of 2020. As a reminder, in April 2019, we finalized a new credit facility in Australia to support the expected growth in working capital needs as a result of new client wins in that market.

But we had nothing drawn on this facility at the end of Q2. The company generated $1.0 million in cash flow from operations during the second quarter. I'll now turn the call back over to Jeff to give some more perspective on our RPO business and to review current trends in our business..

Thank you, Matt. As everyone knows, the COVID-19 pandemic created numerous challenges for our clients and business around the world last year, in the second quarter of 2021, we saw some regions rebound strongly, but others have yet to return to normal conditions.

Although the recovery thus far has been uneven, our business exhibited strong growth in revenue, adjusted net revenue and adjusted EBITDA across our three regions in the second quarter of 2021, versus the prior year quarter.

This growth was particularly strong in Australia, the UK and the Americas, whose economies have reopened and rebounded more so than economies in other areas. I'm very proud of how well our team has responded to and capitalized on the rebound in demand for our services.

I am also encouraged by our pace of new business wins so far this year, as well as the robust growth of our sales pipeline. Importantly, I want to thank all of our highly dedicated employees for their flexibility, hard work, and dedication to our clients and business in the challenging conditions we've been working through.

Operator, could you please open the line for questions?.

Thank you. [Operator Instructions] And our first question is from Josh Vogel of Sidoti. Go ahead, sir..

Thank you. Good morning, Jeff and Matt.

First question, we know that tech is picking up nicely, because of the COIT acquisition in the past, you've also highlighted life sciences, health care, financial and business services, can you just get a little bit more insight into where you're seeing the strongest growth from an industry perspective, and same with the sales or the prospect for that thank you?.

Sure. In the U.S., what led us out of the recovery, at least from our perspective, were say fast growing companies in life sciences and technology, that's really been where a lot of our wins have taken place. And the technology wins have really been led by the COIT acquisition that we made about nine months ago.

And the team in the Americas that we already had is working really well with the COIT team. And together – working together they're starting to win bigger projects in the tech sector, more international projects in the tech sector.

So that's really exciting to see, I would say the other sectors are also emerging from COVID starting to hire more, having a strong rebound. But those two that I just talked about are – have been the highlights kind of off the bottom for us in the U.S.

and Europe and the UK, has been a variety of different industries, same thing for Australia and Asia Pac. And I would just say we were finding it more geographic than sector where in our European business, the UK has had a very strong rebound. Continental Europe slower, just slower to reopen, slower to start to ramp up hiring again.

Definitely very far below pre-COVID levels, similar in Asia Pac, Australia has been very, very strong. And other areas in Asia Pac have not been as strong as Australia has been. The one exception that might be the Singapore Southeast Asia region, we're seeing some really strong really strong growth in that area..

Those are great insights. Thank you. And you really have your, your finger on the pulse of what's going on in a lot of those markets. So, I feel like the UK and Australia are, sides of a different of the same coin but, you're seeing UK open up, Australia still having some lockdowns, I'm just curious about, it's still kind of early here.

But what's the chatter with clients around the Delta threat and is that delaying signings and or potential ramps?.

Not yet. We're watching it really, really closely. And the hope is that the vaccine rollouts continue, and that any second wave, third wave is not nearly as bad as what happened last year. And I think not to minimize the health risk at all, but I think companies have just a better game plan in general for how to handle the situation.

And they're trying as best as they can to return to normal, meet their own clients needs, we're trying to help them manage their workforce and meet their hiring needs. But we're not yet seeing a slowdown in the pace of the recovery because of delta, but we're watching it very closely..

Great, and in thinking about the adjusted net revenue and margin profile of the business right now, are you seeing more recruitment or contracting opportunities in the pipeline?.

We're seeing both. And we so we think both of those areas of our business are going to have good growth in '21, 2022. And over the long-term, and a lot of times they go together, it's really about we're in the client service business, we're helping them with their talent procurement needs, and anything revolving around their workforce.

And sometimes they need help with the contracting side of their business. And that's how the relationship starts. And it broadens from there. Other times, it starts with permanent recruiting.

And then we pick up the contracting business, we are seeing more and more clients want, what we would call a total talent solution where they want one partner to manage all of those things together. And so we feel really strongly that being in both those businesses is much better than just being in one of those businesses.

I would say a new trend that we're seeing is rapid response. So our traditional business has been larger enterprise deals where, it's typically a three year contract, it takes a long time to win that business.

There's a lot of thought that goes into how many people are going to be on the account, what exactly are they going to do? What's the scope of work? What, what services are we going to provide? And especially in the really fast moving sectors like tech and life sciences, that whole cycle is much, much shorter.

And it's much more about what quality people can you put on my account? And can they start yesterday. So there's different names for that in the industry. But it looks and feels different than the slower moving traditional enterprise piece of the business..

Great, thank you. And I want to shift gears a little bit. Good pace of new business wins, robust sales pipeline, understanding that you have to invest ahead of before seeing, the revenue really come in.

But when we think about investments, how and where should we expect to see this between, over the balance of the year between investing in people, sales and marketing and even perhaps technology?.

Yes, really great question, Josh. So, historically, we've talked about the need to invest in sales, marketing and technology. And, to be honest, that was partly a function of investments that should have been made a long time ago. So we're really just catching up in some ways.

And that is a – an important theme, important investment we've been making for several years now. We feel like we're really starting to see the benefits of that, we feel like we're very well positioned, coming out of COVID, just all the efforts we had made on that front. And so we're continuing to invest in those areas.

But I'd say most of those investments have already been made. And we're really seeing the benefits of it. So, as a percentage of revenue, those investments will probably decline over time, even if they're going up in absolute dollars. And as we grow, it's really about hiring really talented people who can work with our clients.

So our headcount is growing at a pretty rapid pace. But it's really people more on the solution delivery side, who are working with our clients on that talent procurement function as opposed to sales, marketing and tech, we're investing in both..

Alright, great. Just one last one, it's apparent in the numbers, that COIT is very, very good boost in the Americas, appears to be performing very well, maybe even ahead of expectations, it gives some thoughts on that.

But just the usual check in here also, on the M&A pipeline, thoughts about what you're seeing, and whether something would be more appealing from a specialty or industry perspective, like COIT was or a geography which COIT was as well.

But I'm just curious, what types of potential deals are you seeing in the pipeline? And what do you have the, the bigger appetite for?.

Yes, really, really good question, Josh. And, something we think about all the time. And I think it's important on that topic to really stick to first principles. And we want to do something that adds shareholder value. That's our first principle. And second principle is something that is a accretive to our clients, and our business and our team.

So, we don't have to do anything. But if we find things to do, that fit those criteria, we will pursue them.

I think another really important criteria is, what's the industrial logic, can we look at an acquisition target, and say, inside of Hudson, we can double or triple what they're doing, because of our global infrastructure, and that has been playing out in the COIT transaction.

It's, I think we can strongly say, it is operating at a higher level and winning more business because it's part of Hudson. So that gets to the one plus one equals three. So that has been meeting and even exceeding our expectations.

And so in a perfect world, maybe we would find an acquisition like that to do once a year, and it would be in that 5 million to 10 million zone. If we found more to do, and we did two or three in a year, I think our team could handle that. They're giving me dirty looks while I say that.

But if we went three years, and we didn't find anything that fit our criteria, we wouldn't do anything. So it's all about being in the market, looking, having those conversations, staying in touch with potential targets.

But from this discussion, just from following the industry and following other companies, for a transaction to be completed, all the stars have to line-up and the buyers expectations and sellers expectations have to be in the same zip code. And sometimes they are and sometimes they're not.

So we would, we would love to do an acquisition like COIT, once a year to just accelerate our growth. But we're going to stick really firmly to our criteria. And all that said another way, we're not going to buy something just to get bigger..

I appreciate all those insights and certainly impressive performance coming out of COVID here. I'll hop back in the queue. Thank you..

Thanks, Josh. Good questions..

And our next question is from Walter Schenker of MAZ Partners. Please go ahead ask your question..

Hi. It's a question about the company buyback. Jeff, obviously, you continue under your program to buy stock. We are experiencing share creep, which all public companies do. And there's nothing wrong with that, if the insiders the board are issued a few shares of stock. I mean for the quarter was 2.906 million versus 2.839 million a year ago.

We generate a million of cash in the quarter. Why isn't? And I realized it's the decision of the board.

Why wouldn't the company be using the cash flow? Or the ample cash position to at least offset share creep given we have $1.7 million left in the buyback?.

Yes, really, really good question, Walter, and something and good morning, by the way, and something we think about, and discuss and debate all the time. So it's very much top of mind, I have to say a couple things to that. We did issue some shares to the COIT team as part of that acquisition. So that's the single biggest reason for the share creep.

Are the shares that we issued October 1, and that acquisition has worked out really well. So we're happy with that. That's a high class problem to have, I guess, I would say. And I would just strongly encourage you to look at our history, a lot of companies talk about buying back stock.

Maybe they offset share creep, but we've shrunk our share count in absolute terms by a huge number. I think something like 16%, since the beginning of 2019, in absolute terms. So a lot of companies talk about buybacks, don't do them or maybe talk about buybacks and do just enough to offset the creep.

But we've actually shrunk our share count in absolute terms. And we've done it every way a company can possibly do it. We've done a tender offer.

We've done open market purchases through 10b-18 plan, we've done block trades with shareholders who have wanted to exit and we're going to continue to think about all those tools in the toolkit, use those tools in the toolkit. Be opportunistic. And so I would just say we're a company that believes in buying back stock, especially when we're cheap.

We think that's the most accretive thing to do on a NAV per share basis. And, I just I would just tell you to stay tuned and take some comfort in our past behavior..

Okay, thanks a lot. And congratulations on the business moving forward strongly. Thanks..

Thanks, Walter..

[Operator Instructions] And our question, next question is from Josh Vogel of Sidoti, please go ahead, sir..

Hey yes, just a follow-up. Thank you thinking about the new client wins. And I know you touched on this. But are you seeing more short, basically, what's the split between those larger enterprises versus the emerging growth companies? What does the mix look like there? Thank you..

Yes, that's a good question. I don't have an exact percentage for you. And it wouldn't be an apples to apples comparison, because we didn't have COIT a year ago at this time. And they specialize in the fast moving kind of mid-size technology sector that's experiencing really fast growth right now.

But in the U.S., really healthy mix between those kind of clients, and larger let's say Fortune 500 type of clients. But where our sales pipeline and backlog are really exciting. And it's a lot of different sectors, a lot of different geographies.

And just taking a step back from all of that is really helpful to us to have clients and potential clients that see their need for a partner. When our sales team are meeting with clients talking about their needs. One of the biggest hurdles they have to overcome is when a client says okay, everything you do is great.

But we can just do all this on our own, we don't need you thank you very much. And if you think about what big companies are all companies have gone through over the last year with dealing with COVID dealing with transitioning to a remote, fully remote, partially remote workforce.

Another big theme is all of the technology tools that are available these days in HR and talent assessment, talent procurement, ad on top of that, every company that we speak to is working on their diversity and inclusiveness, hiring and retention programs. And now everybody is ramping back up to varying degrees.

So my point is the everything we've gone through over the last year and a half has really made companies see their need for a partner, and highlighted the benefits that a trusted partner like us, can really bring to a client.

And that in, so that's, so there's definitely a cyclical rebound, I think there's something stronger, that's more secular, where clients more so than ever before, see their need for a partner, see the value of the services, that we can provide. Value the expertise that our team has developed over 20 years.

And that's what just gives us a lot of confidence about our business going forward..

That's great. And, the running theme here, especially in the U.S. are supply constraints.

And when we when we see these faster moving, condensed sales and ramp cycle engagements, are you having trouble finding the talent?.

Yes, but we're being more creative. And opening the center in Tampa has been really helpful. And we the success of that has led us to want to have more centers like that. And I think we have a slide in our investor deck of the places that are under consideration.

So, we really think that's an important part of our model going forward is developing a center of excellence in an area where there's just so many benefits to it. So we're going to open more centers like that. And a disproportionate amount of our hiring is going to be in places like that.

But there's a mad scramble for talent, and we're in the business of recruiting talent. And so if we can't recruit talent to come to work for Hudson to work for our clients, we're in the wrong business. And this is what we do. This is what we're good at. And I think we're doing a good job..

Great. Well, well, thank you again, for taking all my questions and good luck over the balance of the year..

Thank you..

And that concludes today's question and answer session. I will now turn the call over to our CEO, Jeff Eberwein for closing remarks..

Well, thank you again for joining us today and for your interest in Hudson Global. We look forward to next quarters call. And in the meantime, if you have any questions, our contact information is on our press releases and our website and our investor deck and talk again soon. Thanks..

Thank you for joining the Hudson Global second quarter conference call. Today's call has been recorded and will be available on our investors section of our website hudsonrpo.com. Thanks, everyone..