Good morning, and welcome to the Hudson Global Conference Call for the Third 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 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 to be filed on Monday, November 13th and in our 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 third quarter 2023 highlights, and Matt Diamond, our CFO, will provide some additional details on our financial results. I will then give an update on current business conditions.

For the third quarter of 2023, we reported revenue of $39 million, down 18% year-over-year in constant currency. Adjusted net revenue was $19 million and decreased 20% year-over-year in constant currency. SG&A costs were $17 million in the quarter, down 18% versus the same period last year in constant currency.

We reported adjusted EBITDA of $2 million, down 33% in constant currency versus a year ago. In addition, we reported net income of $0.5 million or $0.17 per diluted share versus net income of $1 million or $0.30 per diluted share in the same period last year.

We reported adjusted net income of $0.24 a share in the third quarter versus $0.58 a share 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 some additional financial details from the third quarter..

Thank you, Jeff, and good morning, everyone. Revenue for our Americas business decreased 43% and adjusted net revenue decreased 42% in constant currency. Adjusted EBITDA of $0.3 million decreased versus last year's adjusted EBITDA of $1.8 million.

Revenue for our Asia-Pacific business decreased 9% year-over-year while adjusted net revenue grew 8% in constant currency. Adjusted EBITDA of $2.3 million increased from adjusted EBITDA of $1.7 million a year ago. Revenue for our Europe business decreased 8% in constant currency and adjusted net revenue decreased 10% in constant currency.

Adjusted EBITDA of $0.2 million in the third quarter of 2023 decreased from adjusted EBITDA of $0.4 million a year ago. Turning to some additional financial details from the third quarter. We ended the third quarter with $22 million in cash and restricted cash.

Days sales outstanding was 53 days at September 2023, up from DSO of 50 days in September 2022. In connection with the acquisitions of Coit Group in the fourth quarter of 2020, Karani in the fourth quarter of 2021 and Hunt & Badge in the third quarter of 2022.

Our balance sheet as of September 30, 2023, reflects $4.9 million of goodwill and $3.7 million of net amortizable intangible assets. The company's working capital, excluding cash, increased significantly to $14.2 million in the third quarter of 2023 from $7.3 million at the end of 2022.

The company used $0.7 million in cash flow from operations during the third 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..

Thank you, Matt. In the third quarter of 2023, a market-driven slowdown in hiring activity led to disappointing declines in revenue, adjusted net revenue and adjusted EBITDA versus the prior year quarter. On the positive side, we continue to win new business that will ramp up in the coming months.

We are confident in our ability to manage the business in this environment and remain well positioned to respond to the needs of our clients going forward.

I would also like to highlight the flexibility of our cost structure, which is evidenced by SG&A dropping 18% year-over-year, essentially mirroring the declines in revenue and adjusted net revenue.

This flexibility stems from the collective discipline and experience of our teams and managing through downturns and is indicative of our ability and willingness to protect our profitability. As a reminder, the company approved a $5 million common stock share repurchase program on August 8.

Under this program, the company acquired about 10,000 shares in the third quarter for a total of $0.2 million. The company continues to view share repurchases as an attractive use of capital going forward, and we expect to buy more shares when we can. Finally, I'd like to highlight some recent exciting developments in our business.

First, we are excited to announce our Singapore acquisition on November 1. This accretive bolt-on acquisition significantly increases our market presence, capabilities and growth potential in Southeast Asia.

We believe a multi-service total talent strategy consisting of recruitment services contracting, project work, RPO and MSP is essential to accelerate our growth in Asia, where RPO adoption has lagged that of other regions and has typically been bundled with these other services.

Hudson Singapore brings to Hudson RPO the complement of capabilities needed to execute on this strategy. In addition, as we announced this morning, I would like to congratulate our Asia-Pacific team for ranking number one and our EMEA team for ranking number three overall in HRO Today's, Baker's Dozen regional RPO rankings.

The annual RPO Baker's Dozen list reflects the views of senior HR decision-makers and I'm proud of the world-class service we continue to deliver to our clients, and these rankings are a testament to our team's hard work and commitment to excellence.

Importantly, I'd like 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, can you please open the line for questions?.

We'll now begin the question-and-answer session. [Operator Instructions] Our first question will come from Marc Riddick with Sidoti. You may now go ahead..

Hey, good morning..

Good morning, Marc..

So I was wondering if you could talk a little bit about the Singapore acquisition, sort of how it came to be and some of the – a little background there.

And then on top of that, maybe you could sort of maybe give a bit of an update on maybe what you're seeing with overall potential pipeline and valuations and the like?.

Yes.

On acquisitions, you mean?.

Correct..

Yes. So this is a business we've known for a long time and collaborated with them and we actually – we find that in some markets like the U.S., UK and Australia. Clients are perfectly happy with everything being unbundled.

So they'll have an RPO provider, do the RPO work, a separate provider, do the MSP or contracting work, maybe a separate provider do consulting recruitment services. And then in other markets, we find that clients really prefer a bundled approach where you can do everything in a one-stop shop, and we call that a total talent solution.

And Asia-Pac and Southeast Asia, Singapore is definitely one of those markets. And so it has been a growth area for us, but there's a lot of new business opportunities that we were missing out on because we weren't able to offer all those solutions in a package. And so there's a few instances where we bid jointly with this business.

And so our teams got to know each other really well and collaborated really well. And one thing led to another, and we found out that it might be for sale. And so we decided to acquire it to really beef up our offering and our business in Southeast Asia. And we think it's a very attractive valuation and so we're happy to have it.

And on the acquisition pipeline, there are some other situations like that, we could be entering for a value-oriented buyer like ourselves. I think we're entering a better environment where sellers' expectations are becoming more reasonable and we're in an environment where companies are rethinking things.

And so there's a few situations out there where something that could be interesting to us is non-core to them. And there are several ones that we're working on. It's always hard to predict. Bolt-on acquisitions and the timing and the number.

But there's a few of those kind of special situations out there where something is probably a better fit for us than the owner, and they reached a conclusion that it's non-core, which is what happened with this Singapore acquisition, and we were able to get it for our acquisition criteria, which is pretty strict..

That's very helpful. Thank you for details on that.

I was wondering if you could talk a little bit about the new business wins and sort of the opportunity set that you're seeing there? Are you getting the sense that – is this a sort of winning from competitors kind of situation? Are you getting a sense that there's maybe a little bit more outsourcing from customers? I mean I know that the client demand scenarios right now aren't quite where folks would like them to be, but what new business you are seeing? Are you getting a sense of what the sourcing of where that's coming from?.

Yes. I would say that the two strongest areas of new business wins for us, maybe three are health care is one area that's been strong, and there's been quite a bit of activity in health care where there's been some companies merge, there's been some companies spin-off divisions.

And when a large health care company spins off one of its businesses, whether it's for – it's almost always for strategic reasons. A lot of times, that's an opportunity to partner with them, maybe they haven't used RPO before.

And now that it's an independent company, they want to explore that or maybe the incumbent provider isn't a good fit for the company that got spun off. So there are a few situations out there like that, that we've taken advantage of. So health care has been, I would say, the strongest area of activity and new wins.

And when we talk about health care, we mean life sciences, pharmaceuticals, medical devices, we don't really do much in the health care provider space. So it's really more life sciences than it is traditional health care providers. Another area is anything to do with the environment.

So a big win of ours, it's a European headquartered company that just did a large acquisition in the U.S., and we're going to be helping them in Europe and the U.S., very large private company, and they have a lot of products and services that involve clean water, clean air, hygiene, and that has been a growth area.

And then another is infrastructure, we've had some wins in involving companies that are either building infrastructure or infrastructure-oriented type of companies, including a company that finances green infrastructure projects.

So we're in a market where, in general, there is a slowdown, but there are some pockets of strength and one thing we'd like to say is there's always somebody hiring somewhere that probably could use our help..

That's very helpful. Thank you very much..

Good questions. Thank you..

[Operator Instructions] That concludes today's question-and-answer session. I would now like to turn the call over to Jeff Eberwein for closing remarks..

Thank you all for joining us today and for your interest in Hudson Global. Please feel free to contact us any time using the contact information found in our press release or on our Investor Relations website. We look forward to next quarter's update call. Have a great day..

The conference has now concluded. Thank you for joining the Hudson Global third quarter conference call. Today's call has been recorded and will be available on the Investors section of our website, hudsonrpo.com..