Good morning, and welcome to the Hudson Global Conference Call for the Fourth Quarter of 2021. 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 our earnings materials at this time as they will serve as a 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 fourth 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 fourth quarter of 2021, we reported revenue of $50.1 million, up 83% year-over-year in cost and currency. Adjusted net revenue was $22.3 million and increased 97% year-over-year in constant currency. Organic revenue growth, excluding the impact of the Karani acquisition we made in the fourth quarter of 2021 was 77% in constant currency.

Adjusted net revenue growth was 83% in constant currency. SG&A costs were $17.7 million in the fourth quarter, up 67% versus the same period last year in constant currency. We reported adjusted EBITDA of $4.6 million, up from 700,000 a year ago.

In addition, we reported net income of $2.1 million, or $0.67 per diluted share versus net income of $1.2 million, or $0.41 per diluted share in the same period last year. We reported adjusted net income per diluted share of $1.02 in the fourth quarter of 2021 versus $0.20 a year ago.

And I’ll turn the call over to Matt Diamond, our CFO, to review our financial results by region, as well as some additional financial details from the fourth quarter..

Thank you, Jeff. Good morning, everyone. Our Asia Pacific business grew revenue 61% and adjusted net revenue 46% in constant currency. Adjusted EBITDA of $2.4 million increased from adjusted EBITDA of $1.5 million a year ago.

Our Americas business grew revenue and adjusted net revenue 222% and 242% in constant currency, respectively, with approximately 80% of this growth attributable to organic growth, while the remainder was due to the acquisition of Karani in the fourth quarter of 2021.

Adjusted EBITDA of $2.7 million increased versus last year’s adjusted EBITDA loss of $0.1 million. Our EMEA business grew revenue 66% and adjusted net revenue 30% in constant currency. Adjusted EBITDA of $0.5 million in Q4 2021 increased compared to adjusted EBITDA of $0.2 million in Q4 of last year.

Lastly, we believe it is important to highlight that adjusted net revenue again grew at a faster rate than SG&A across each of our regions in Q4. 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 the 20% level over the long-term.

Turning to some additional financial details from the fourth quarter. We ended Q4 with $22.1 million in cash and restricted cash. Days sales outstanding was 43 days at December 2021, slightly higher than DSO of 41 days in December 2020.

In connection with the acquisition of Coit Group in the fourth quarter of 2020 and Karani in the fourth quarter of 2021, our balance sheet as of December 31, 2021 reflects $4.2 million of goodwill and $5.5 million of net intangible assets.

The company’s working capital, excluding cash, increased to $7.8 million in the fourth quarter of 2021 from $4.5 million at the end of 2020. As a reminder, in April 2019, we finalized a credit facility in Australia to support the expected growth and working capital needs as a result of new client wins in that market.

So we had nothing drawn on this facility at the end of Q4. Our balance sheet as of December 31, 2021 reflects a $2 million promissory note payable as a result of the Karani acquisition, with $1.25 million shown as a long-term note payable on the balance sheet and the remainder of $750,000 is included within other current liabilities.

The company generated $1.7 million in cash flow from operations during the fourth quarter. I’ll now turn the call back over to Jeff to give more perspective on our RPO business and to review current trends in our business..

Thank you, Matt. In Q4 2021, we continue to see activity levels rebound globally, offer the trough created by the COVID-19 pandemic. And our teams capitalized strongly on this resurgence in demand for our services.

Our business exhibited very strong growth in revenue, adjusted net revenue and adjusted EBITDA across all three of our regions in the fourth quarter of 2021 versus the prior year. This growth was strongest in the Americas, where both the legacy Americas business and the Coit business performed exceptionally well.

I’m proud to say that in the fourth quarter of 2021, the company reported its highest revenue, adjusted net revenue and adjusted EBITDA since its reorganization in early 2018. Our sales activity levels and pipeline remain very robust and I continue to be encouraged by the increasing level of collaboration across our teams globally.

Our technology team in 2020 acquisition, Coit Group, significantly outperformed our expectations in 2021 and has flourished inside of Hudson RPO. I’m very pleased with the progress we’ve been making with the integration of Karani, our recent acquisition, and continue to be very excited about its growth potential as part of Hudson RPO.

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 in recent years. We have a great team, and it’s exciting to see their efforts being reflected in our financial performance.

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

Thank you. [Operator Instructions] We have a question from the line of Walter Schenker with MAZ Partners..

Actually, just a couple of questions. And first, congratulations on the quarter and congratulations on astutely buying some stock. I realized it’s 10b5. The reports for the quarter and the year, the tax provision includes no tax in the U.S. due to the NOLs that’s all international tax, or it includes a provision for U.S.

taxes even though you don’t pay them?.

Now it’s a – hey, this is Matt. Thanks for the question. It’s the – it’s basically the mix of countries. The U.S., you’re correct. Because of the NOL, it doesn’t include taxes in the U.S..

So those are real taxes. So not an accounting thing. Those are actual taxes. Okay..

Yeah, you can – when we file – Walter, when we file our 10-K, you’ll be able to see the cash flow statement and you can see what we paid in cash. And there are some jurisdictions where we pay cash taxes, Australia, Hong Kong, UK are the three that come to mind..

Okay. And then not necessarily trying to backdoor a forecast, but this was a very good quarter, I realized there’s seasonal patterns and lots of other stuff. But you’ve had two acquisitions. You’ve got economic recoveries in parts of the world.

What happened in this quarter that was so atypical that in a very broad brush, I should not look for the quarters in 2022 to again, broad brush be in the same ballpark?.

Yeah. So really great question. Business –Q4 was one of those quarters, where business was strong across the board, every sector, every region, and it doesn’t always happen like that. And as you pointed out, there is some seasonality to our business. First quarter, for example, is almost always the weakest quarter of the year.

And that’s just due to less hiring activity, in general, in the first quarter than the fourth quarter. And that’s especially true in Asia PAC, kind of odd for us to think about in the U.S., but most of Australia is as an extended beach vacation in the month of January and then you also have Chinese New Year in China and Hong Kong.

So typically is the slowest quarter of the year. So I wouldn’t expect Q1 to equal the Q4 results. The flip side of that, though, is that the fourth quarter only included two months of the Karani acquisition. And so starting, obviously, in 2022, every quarter, we’ll have three months.

And we’re just getting started in integrating that business to our existing business. And we’re excited about the one plus one equals three potential there. But for right now, business is really strong, and we think we’re going to have another good year and in 2022..

And you would anticipate through the year 2022 to question to pick up additional contracts some ways – some places around the world, so that there should be organic growth in 2022?.

Yes, in a word, yes. I think said another way, if someone were to look at our trailing four quarter performance, I think there’ll be – there will continue to be a rising trend in our rolling 12-month performance. Another way to say that same thing is that we expect year-over-year growth every quarter in 2022..

Okay, which means the fourth quarter, I mean, in some ways the tides higher you have Karani, so you start ahead, but that also means that for the fourth quarter of 2022, which is annualizing the acquisition two-thirds of it anyway.

You would expect the business to be doing more a year out who knows, but we would expect to have growth year-over-year even in the fourth quarter, which annualized is the acquisition largely?.

Well, it’s hard to have a ton of visibility on Q4, here in March. We have a lot of visibility on the next – on the first half of the year. So a lot of confidence that Q1 is going to show good year-over-year growth versus Q1 last year. Same thing for Q2, probably the same thing for Q3, and let’s talk about Q4 when we get closer to it..

Okay. Thank you very much..

Thanks for the questions..

Thank you. [Operator Instructions] Okay, we have a question coming from the line of Will Hamilton with Manatuck Hill..

Hey, good morning, guys. Congrats again on the quarter. Just a couple of quick questions. The net revenue retention, if I were to say that ways, continues to grow. I know that’s partly driven – is mainly driven by the acquisitions in America where you have retained more of that.

But I’m just wondering if that mid-50s is kind of a good number on a collective basis to use going forward?.

Yeah.

Are you talking about growth? Or are you talking about margin percentages?.

I’m talking about – well, I’m sorry, flip it around. The direct costs are the difference between the gross and the net revenues narrowed in that I know is driven by your acquisitions in Americas where you retain more of that, where there’s less direct costs.

So I was just wondering, in terms of for modeling purposes, if that percentage that we saw here in fourth quarter is a good number to use going forward?.

Yeah. Well, I don’t know if this is exactly answering your question. But we focus a lot more on net revenue than the gross revenue because of the pass-through effect. That’s one thought. And the second thought is we are seeing operating leverage as we grow. So I think that’s that’s true.

Even if we did no acquisitions, we’d still be having some operating leverage and then putting the acquisitions on top of it and it enhances the operating leverage. And by operating leverage, what I mean is, our SG&A costs are growing at a slower – don’t grow as quickly as the top line is growing..

Right. Hence the margin growth you’re seeing here..

That’s right..

Okay, I was just wondering also in terms of the environment, where it’s obviously very tight labor.

Can you speak to what you’re seeing in terms of pricing and fees, either for new clients or existing clients?.

Yeah, no, good question. it’s a strong business environment for both volume and price. Big companies, we typically work for net to larger-sized companies. In general, there’s a lot of competition for talent, especially in the three sectors that we predominantly focus on healthcare, tech, and financial services.

And so clients are really struggling to acquire the talent they need. And they need as much help as they can get. And so we’re seeing strong volume and less price sensitivity than you might see it other times. I would just say, another way to summarize it is that our clients are much more outcome focused than beating us up on price..

Right, great. Last one for me is just two acquisitions recently, Coit is obviously paying off nicely, just maybe you can speak to what you have in the pipeline right now? Yeah, that’d be great..

Sure, no, another good question. The bar to look is low, but the bar to act is high. We’re not just looking to add revenue. We’re really looking for those situations, where there’s one plus one equals three, where we can look at the acquisition target, and honestly say jeez inside of Hudson RPO, it’s going to be so much more valuable.

And we’ve certainly seen that with the Coit Group, that the combination of their team and our team attacking the market together has been successful beyond – it’s been better than the best case, it’s gone incredibly well.

We think the Karani acquisition also is going to have a lot of synergies one plus one equals three that it’s more valuable as part of Hudson RPO than it would have been just continuing on their own. And that’s really what we’re looking for.

So I would say, we’re always looking, there’s not a ton of acquisition targets in the RPO space, it’s a small industry, but we do look all the time. And it’s helpful to be in the market, looking for bolt-on acquisitions. We’ve learned a lot from doing so.

And I think, in a perfect scenario, we would find one a year similar to the last two in terms of size and in terms of one plus one equals three, but we don’t have to do anything. And so if we don’t find anything that fits our criteria fine, we’ll just keep executing on our current plan, which is a really good plan.

But if we find several to do, our team would get mad at me. But we could do more than one a year if the opportunities were there. But so far doing the two we’ve done, it’s been about the right size and about the right pacing in terms of having them be a year apart..

Okay, thank you..

Thank you. And this concludes today’s question-and-answer session. I will now turn the call over to Jeff Eberwein for closing remarks..

Well, good questions, everybody. Thank you, again, for joining us today and for your interest in Hudson Global. Feel free to contact us anytime using the contact information found in our press release or on our Investor Relations website. We look forward to next quarter’s update call. Thanks, and have a good day..

And thank you for joining the Hudson Global fourth quarter conference call. Today’s call has been recorded and will be available on the Investor section of our website hudsonrpo.com..