HG
Hudson Global, Inc. (HSON)·Q2 2025 Earnings Summary
Executive Summary
- Q2 2025 delivered modest top-line stability with revenue at $35.5M (-0.5% YoY) while adjusted net revenue rose 5.8% YoY to $18.6M; adjusted EBITDA increased 76.6% YoY to $1.3M as mix and APAC margin expansion drove improvements .
- Diluted EPS was a loss of $0.23 vs. a loss of $0.15 YoY; non-GAAP adjusted diluted EPS improved to $0.12 from $0.04 YoY, reflecting $1.04M after-tax non-recurring severance/professional fees excluded in adjusted results .
- Regional performance was mixed: APAC adjusted net revenue +16–17% YoY and adjusted EBITDA +146% YoY; EMEA revenue +12% YoY but adjusted net revenue -4–9% and adjusted EBITDA swung to a loss; Americas adjusted EBITDA modestly improved .
- Operating cash flow turned positive ($0.1M) vs. a $(4.3M) outflow in Q2 2024; total cash including restricted cash was $17.5M, with working capital ex-cash at $12.2M; management called out “land & expand,” digital tools (Hudson Fusion), and bolt-ons (ACG Japan; CMRG integration) as growth drivers .
- Potential catalysts: Aug. 21 shareholder votes on the merger with Star Equity (scale, diversification, overhead reductions), a resumption of share repurchases post-merger, and increasing adoption of Hudson Fusion digital services .
What Went Well and What Went Wrong
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What Went Well
- APAC mix shift away from lower-margin temporary contracting, driving adjusted net revenue +17% YoY and adjusted EBITDA +145.8% YoY; “modest upturn” in APAC cited by management .
- Positive OCF inflection: $0.1M inflow vs. $(4.3M) YoY; DSO held at 56 days; cash and restricted cash totaled $17.5M .
- Strategic actions: acquisition of Alpha Consulting Group (Japan) and integration of McKinsey CMO Group (CMRG) to extend capabilities and footprint; management sees these as accretive to revenue near-term and capability enhancing .
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What Went Wrong
- EMEA profitability deteriorated: revenue +6–12% YoY, but adjusted net revenue -4–9% and adjusted EBITDA swung to a loss of $(0.4)M (from +$0.3M); higher SG&A pressured margins .
- GAAP bottom line remains negative: net loss $(0.7)M and diluted EPS $(0.23), with reliance on non-GAAP adjustments ($1.04M after-tax) to show adjusted EPS improvement .
- Continued corporate/non-recurring costs: corporate costs ~$0.9M excluding $0.6M non-recurring; investments above maintenance levels ($1.4M YTD) weigh near-term profitability .
Financial Results
Segment breakdown (Q2 2024 → Q2 2025):
Key KPIs and balance sheet:
Guidance Changes
Note: Management provided qualitative outlook (continued growth into 2026; investments in sales, marketing, technology) but no quantitative ranges .
Earnings Call Themes & Trends
Management Commentary
- “The overall increase in adjusted net revenue in the second quarter of 2025 reflects a modest upturn in business activity, particularly in the Asia Pacific region.” – Jake Zabkowicz .
- “Altogether in the first half of 2025, we invested approximately $1.4 million in sales, marketing, and technology above maintenance levels to enhance future growth.” – Jeff Eberwein .
- “We recently completed two strategic transactions: acquiring Alpha Consulting Group... [Japan] and integrating McKinsey CMO Group (CMRG).” – Jake Zabkowicz .
- “Our digital division... is probably the most important thing we’ve done recently… we have a client… going to start a relationship with us by using our digital services.” – Jeff Eberwein .
- “We see our base, our legacy clients returning to more normal activity levels… we’re winning new clients at a faster rate than we have historically.” – Jeff Eberwein .
Q&A Highlights
- APAC margin drivers: recovery from depressed prior-year financial sector hiring and mix shift away from temp contracting lifted adjusted net revenue/margins .
- Americas growth: new logo wins plus “land & expand” into existing accounts drove revenue despite broader U.S. macro job concerns .
- ACG (Japan) acquisition: expected immediate revenue; breakeven near-term bottom-line with profit-sharing structure and low upfront cash outlay .
- CMRG integration: team hire with profit-sharing, adds employer branding/marketing capability; similar structure to Middle East talent integration .
- Capital allocation post-merger: prioritize profitable organic investments and bolt-ons; aim to resume buybacks given perceived share undervaluation .
Estimates Context
- S&P Global consensus for HSON was unavailable due to missing mapping in SPGI CIQ at the time of analysis; therefore, we cannot present revenue/EPS vs. consensus for Q2 2025.
- Implications: sell-side models should reflect APAC margin expansion, higher adjusted net revenue mix, and EMEA profitability pressure; adjusted EPS benefited from $1.04M after-tax non-recurring items, which should be normalized in forward estimates .
Key Takeaways for Investors
- Mix-driven profitability improvement is real: adjusted net revenue +5.8% YoY and adjusted EBITDA +76.6% YoY on stable revenue; APAC margin expansion is the key swing factor (bold positive momentum) .
- Americas steady, EMEA lagging: watch EMEA SG&A and project conversion; continued Americas “land & expand” offsets macro noise .
- Digital/AI suite (Hudson Fusion) is gaining traction and can be a wedge for new logos; early digital-only engagements are a promising pipeline feeder .
- Strategic footprint now includes Japan via ACG; expect near-term breakeven then profits as the platform scales, with minimal upfront consideration and profit-sharing alignment .
- Cash generation inflection and disciplined cost posture: OCF turned positive; working capital ex-cash improved; ample liquidity with $17.5M total cash, supporting organic/digital investments .
- Merger vote (Aug. 21) is a catalyst: if approved, scale/diversification and overhead synergies could unlock buybacks and accelerate bolt-ons; monitor disclosure on integration and synergy targets .
- Modeling notes: normalize non-recurring items ($1.04M after-tax) out of EPS; incorporate APAC margin uplift and EMEA headwinds; pending merger may alter public company cost structure assumptions .