Good morning, and welcome to the Hudson Global's Fourth Quarter 2023 Financial Results Conference Call. 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 today and in our other filings made by 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 2024 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 2023, we reported revenue of $34 million, down 22% year-over-year in constant currency. Adjusted net revenue was $17 million and decreased 26% year-over-year in constant currency. SG&A costs were $16 million in the fourth quarter, down 17% versus the same period last year in constant currency.

We reported adjusted EBITDA of $0.1 million, down from $2.4 million a year ago. In addition, we reported a net income of $0.7 million or $0.23 per diluted share versus net income of $0.1 million or $0.02 per diluted share in the same period last year.

We reported adjusted net income per diluted share of $0.04 in fourth quarter 2023 versus $0.33 a year ago. For further context, I would add that our fourth quarter 2023 adjusted EBITDA included $400,000 of expenses related to a true-up to our accounts receivable and related reserves.

These kind of expenses tend to be lumpy in nature, and our team is working hard to high-grade our client portfolio and therefore, our AR going forward. So adjusted EBITDA would have been $0.5 million, excluding these expenses.

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

Thank you, Jeff, and good morning, everyone. Revenue for Americas business decreased 38% and adjusted net revenue decreased 37% in constant currency. Adjusted EBITDA loss of $0.7 million decreased versus last year's adjusted EBITDA of $0.5 million. .

Revenue and adjusted net revenue for our Asia Pacific business each decreased 18% year-over-year in constant currency. Adjusted EBITDA of $0.9 million decreased from adjusted EBITDA of $2.1 million a year ago. Revenue and adjusted net revenue for our Europe business each decreased 17% versus the prior year quarter in constant currency.

Adjusted EBITDA of $0.6 million in the fourth quarter of 2023 increased slightly from adjusted EBITDA of $0.5 million a year ago. Turning to some additional financial details from the fourth quarter. We ended the fourth quarter with $23 million in cash and restricted cash.

Days sales outstanding was 49 days at December 2023, down slightly from DSO of 50 days in December 2022.

In connection with the acquisitions of Coit Group in 2020, Karani in 2021, Hunt & Badge in 2022 and Hudson Singapore in the fourth quarter of 2023, our balance sheet as of December 31, 2023, reflects $5.7 million of goodwill and $3.6 million of net amortizable intangible assets.

The company's working capital, excluding cash, increased significantly to $12.0 million at year-end 2023 from $7.3 million at the end of 2022. The company generated $3.3 million in cash flow from operations during the fourth 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. Our fourth quarter financial results continue to reflect the year-over-year impact of the slowdown in the U.S. tech sector hiring as well as fourth quarter hiring delays at certain clients which we expect to recover at the beginning in the second quarter of 2024.

In addition, we've made significant reductions to our cost structure in the second half of 2023 and the first quarter of 2024 while retaining the ability to deliver excellent service to our clients when activity rebounds. The fourth quarter represented a strategic shift for Hudson RPO.

In November, we hired Jake Zabkowicz as Hudson RPO's Global CEO, and he has begun implementing numerous positive changes to the business, including expanding our geographic presence as well as our service offering to existing RPO clients.

These growth initiatives, coupled with 2023's significant new business wins give us high confidence in our business improving in 2024. This confidence is demonstrated by our extensive history of opportunistic share repurchases, including a recent January repurchase via a privately negotiated transaction.

In addition, as a reminder, the company approved a new $5 million common stock share repurchase program in August 2023. Under this program, the company acquired 11,000 shares in the fourth quarter of 2024. And thus far -- sorry, in the fourth quarter of 2023 and thus far in 2024, we acquired a little over 44,000 shares.

The company continues to view share repurchases as an attractive use of capital going forward, and we expect to buy more when we can. Finally, we were excited to announce our Middle East acquisition on March 12. This small but important bolt-on acquisition gives us an immediate presence and book of business in the Middle East.

This acquisition will give our clients across the globe confidence that we can find in place the best talent in the UAE and the Middle East for their strategic business needs.

Building off our recent additions in Southeast Asia and the Middle east, we're excited to continue to expand our footprint as we execute on our strategy of global expansion through organic and inorganic growth.

Importantly, I want to thank all of our highly dedicated employees for their flexibility, hard work, 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 will now begin the question-and-answer session. [Operator Instructions] The first question comes from Marc Riddick with Sidoti & Company..

Good morning, Marc..

Good morning. So I wanted to go over a few things. Certainly, there's been some announcements since Jake joined in November.

So I was wondering if you could talk a little bit about some of the changes that you were talking about in the press release and some of the moves there as well as the acquisition and sort of maybe how the acquisition came to be..

Sure. So we are global, but there, to be frank, are some holes in our portfolio. And in the past, we have lost out on some new business opportunities by only being able to serve potential clients in, say, 80% of their needs. And so we have been looking over time to fill some of those holes in our portfolio.

And although we've done a little bit of work for European and American clients in the Middle East, we have never had a strong presence there. And with this acquisition, we acquired a very experienced team and business licenses and all the things we needed to do to take on bigger projects in that region. And we see it as a high-growth region.

There's a lot of multinationals there, and it is a competitive advantage to be able to serve global clients in that region when only a few of our competitors were able to do so.

So it was an opportunity we found out about and it was -- we had several members of our management team meet with them, do the due diligence, and we were able to close it very quickly. I would say it was a small but important acquisition..

Okay. Great. Thanks for that. And then you also had the announcement a few weeks ago the addition of Chief Administrative Officer in Hudson RPO. Could you maybe spend a little time talking about that..

Sure. No, this was an idea of Jake's, and the gentleman we hired Jeff Bettinger. He's a very experienced CHRO. He's had that role at several multinational companies. And so when we're pitching for new business, he can be part of that pitch. And he's been in the client's shoes and has been an RPO client for many years in his previous work experiences.

And that's another thing that we think gives us a real edge when pitching for new business is having a former CHRO in the room speaking the same language with the client, and he comes with a tremendous amount of contacts in the industry. And so all these moves are meant to help accelerate our growth and of course, in a profitable way.

So we think we're incredibly well positioned to grow faster than our peers going forward. And all these moves that we're making are in that vein..

Okay. Great. And then just a couple more from me. One of the things that I thought was kind of interesting in the commentary of the -- both your prepared remarks and in the press release, I think you alluded to expecting to see some improvement in client activity beginning in the second quarter.

I was wondering, maybe if you could, maybe, share some thoughts as to, maybe, what you're seeing or where the improvement in the visibility or maybe just some confidence that we'll start to see a little more activity around that time..

Yes. Good question and very observant, Marc.

2023 was a year of opposites in a way in that continues to be very low levels of hiring in the tech sector, very few IPOs even though a few big tech companies are having a strong stock price performance and there's a lot of buzz around certain things like AI and cybersecurity, very low levels of tech hiring, and so we had a full year of just extremely low levels of tech hiring similar to the deep recession years, 20 years ago, financial crisis, it really feels like that in the tech sector.

In addition, another thing we saw on the weak side was several clients delay hiring in the fourth quarter, we saw that acutely. And what we see in recessions is reductions of hiring plans. So we'll have a client say, just for an example, maybe they're planning to hire 500 people a quarter.

And they say, you know what, we're going to change that to 200 people a quarter or 100 people a quarter or just put on a hiring freeze that's the kind of behavior you see in recessions. What we saw instead was we're still going to hire 500 people, but let's push that into Q1, what's the rush.

And it felt to us like some of our clients were struggling to hit budget and pulling out doing all the things they could do to push expenses into 2024. And we saw a little bit -- Q1 is always a weak quarter for us because of just seasonal slowdowns in Australia, China, Hong Kong, Chinese New Year.

But importantly, those hiring plans haven't gotten canceled or even reduced, they just got pushed into the future. And what I meant by 2023 being a year of opposites was we saw that weakness. But at the same time, it was a very strong year for new business wins.

I think we won more new business in 2023 than any year I can remember in terms of total contract value, and we'll really start to see the benefit of some of those new client wins in Q2 and by midyear when they're fully ramped up.

I think a couple of those new wins will be in our top five client list, which doesn't always happen that you win some new business, and within six months, they're in your top five client list.

So we're in this odd dynamic now where we had weak fourth quarter results, we will have a weak first quarter results, but pretty good visibility into a strong rebound starting in Q2, and we're very excited about what we think we can show in the second half of this year..

That’s very helpful. Thank you..

Thank you, Marc..

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

Well, thank you again for joining us today and for your interest in Hudson Global. 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 good day, everybody..

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