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HG

Hudson Global, Inc. (HSON)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue was $36.9 million, down 6.5% year over year, but up sequentially from $35.7 million in Q2; adjusted net revenue was $18.6 million versus $19.4 million YoY and $17.6 million in Q2 .
  • GAAP diluted EPS was a loss of $(0.28) versus $0.17 in Q3 2023 and $(0.15) in Q2 2024; adjusted diluted EPS was $(0.13) versus $0.24 in Q3 2023 and $0.04 in Q2 2024 .
  • Adjusted EBITDA fell to $0.8 million vs $2.0 million a year ago, but improved sequentially from $0.7 million; cash from operations improved to $1.3 million vs an outflow of $(0.7) million in Q3 2023, and total cash including restricted cash was $16.5 million at quarter-end .
  • Management cited continued market-driven hiring slowdown (particularly APAC financials), cost actions to protect profitability, and “land-and-expand” progress with existing clients; no quantitative forward guidance was provided .

What Went Well and What Went Wrong

What Went Well

  • Sequential improvement: revenue grew to $36.9 million from $35.7 million in Q2 and adjusted net revenue rose to $18.6 million from $17.6 million; adjusted EBITDA rose to $0.8 million from $0.7 million .
  • EMEA and Americas resilience: EMEA revenue +7% and adjusted net revenue +5% YoY; Americas revenue +6% YoY with adjusted EBITDA up to $0.6 million (vs $0.3 million) .
  • Strategic positioning and recognition: “We made multiple strategic hires… enhancing our geographic reach and service offerings,” and Hudson RPO ranked highly in APAC and EMEA on HRO Today’s Baker’s Dozen lists .

What Went Wrong

  • APAC weakness, notably financial services: Asia Pacific revenue -15% and adjusted net revenue -11% YoY; management flagged long-time APAC financial clients hiring “way below normal” .
  • Profitability compression YoY: GAAP diluted EPS moved to $(0.28) from $0.17; adjusted EBITDA dropped to $0.8 million from $2.0 million .
  • New logo conversion lag: “New logo sales continued to be a disappointment” with smaller scope deals and elongated decision cycles despite a robust pipeline .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Thousands)$39,398 $35,712 $36,853
Adjusted Net Revenue ($USD Thousands)$19,370 $17,615 $18,603
Net Income (Loss) ($USD Thousands)$533 $(441) $(846)
Operating Income (Loss) ($USD Thousands)$1,277 $(187) $(457)
Diluted EPS (GAAP) ($)$0.17 $(0.15) $(0.28)
Adjusted Diluted EPS ($)$0.24 $0.04 $(0.13)
Adjusted EBITDA ($USD Thousands)$2,004 $745 $839

Segment breakdown (Q3 2024 vs Q3 2023):

RegionQ3 2023 Revenue ($000)Q3 2024 Revenue ($000)Q3 2023 Adj. Net Rev ($000)Q3 2024 Adj. Net Rev ($000)Q3 2023 Adj. EBITDA ($000)Q3 2024 Adj. EBITDA ($000)
Americas$7,167 $7,578 $6,854 $6,634 $313 $631
Asia Pacific$26,106 $22,560 $8,694 $7,847 $2,333 $895
EMEA$6,125 $6,715 $3,822 $4,122 $195 $177

KPIs and cash/capital:

KPIQ2 2024Q3 2024
Days Sales Outstanding (days)59 56
Cash incl. Restricted ($USD Millions)$15.3 $16.5
Cash from Operations ($USD Millions)n/a$1.3; prior year Q3 $(0.7)
Share Repurchases ($USD Millions)$1.5 in Q2; $2.1 YTD through Q2 $0.4 in Q3; $2.5 YTD; $2.9 since Aug 2023

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/QuarterNone providedNone providedMaintained (no guidance)
Margins/OpEx/TaxFY/QuarterNone providedNone provided; management reiterated cost actions and variability by business mix; U.S. tax zero due to NOLs

Note: No quantitative guidance ranges were issued in Q3 2024; management commentary focused on cost initiatives, client demand stabilization in base accounts, and pipeline progress .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
Hiring volumes/new logo pipelineQ1: Weak hiring; early signs of life in industrial/life sciences; pipeline robust . Q2: Clients hesitant; smaller-scope deals; elongated sales cycles .Stabilized hiring volumes within base accounts but still below expectations; new logo sales disappointing; land-and-expand showing gains .Stabilization in base; conversion lag persists; gradual improvement expected.
Regional dynamicsQ1: Strength in U.S., EMEA, Middle East; APAC slower . Q2: Broad declines YoY across regions .Americas and EMEA up YoY; APAC down; noted APAC financials hiring “way below normal” .Mixed; APAC remains headwind; EMEA/Americas resilient.
Sector trendsQ1: Life sciences strong; industrial/manufacturing improving; tech lagging . Q2: Similar commentary; smaller deal sizes .Life sciences/pharma stable; financial services weak; tech incremental improvement but no “hockey stick” rebound .Life sciences steady; tech slow recovery; financials under-hiring.
Cost actions/profitabilityQ2: Workforce reductions; cost-saving actions to protect profitability .Reiterated internal changes expected to help bottom line in coming quarters .Ongoing cost discipline; expected margin support.
Capital allocationQ1/Q2: Active buybacks; soft goal to repurchase ~10% of shares in 2024 subject to windows/liquidity .Continued repurchases ($0.4m in Q3; $2.5m YTD), emphasis on undervaluation .Consistent buyback cadence.
M&A/Geographic expansionQ1/Q2: Small acquisitions in UAE (Executive Solutions, Striver) to expand footprint .Strategic hires and portfolio expansion; APAC/EMEA recognition (HRO Today rankings) .Continued bolt-ons and talent upgrades.
Tax mix/NOLsQ2: Tax rate hard to predict; U.S. tax zero due to NOLs; use blended statutory rates .NOL protection reiterated; U.S. NOL $302m (12/31/2023) .Ongoing benefit from NOLs; variability by geography.
Macro/politicalQ1/Q2: Uncertainty affecting client decisions .Too early to tell; calmer, pro-business environment would help, notably financials .Macro watch; potential tailwind if stability improves.

Management Commentary

  • “Results for the third quarter of 2024 continued to be impacted by a market-driven slowdown in hiring activity… We have taken steps to mitigate the impacts… while positioning ourselves for a market recovery.” — CEO Jeff Eberwein .
  • “We made multiple strategic hires… enhancing our geographic reach and service offerings… evidenced by… our 16th consecutive year ranking among HRO Today’s Baker’s Dozen list of top enterprise RPO providers.” — Global CEO Jake Zabkowicz .
  • “The results of the internal changes and cost saving initiatives… should help our bottom line results in the coming quarters.” — CEO Jeff Eberwein .
  • “Long-time clients… in the financial sector in Asia Pac… have hired way below normal…” — CEO Jeff Eberwein .
  • “Life sciences and pharmaceuticals… continue to be stable… technology… incremental improvement…” — Global CEO Jake Zabkowicz .

Q&A Highlights

  • Regional divergence: Americas and EMEA showed growth; APAC weakness driven by financial sector clients hiring below historical norms; management expects normalization next year .
  • Sector mix: Life sciences/pharma stable; tech improving modestly; financial services remains soft, viewed as short-term .
  • Capital allocation and M&A: Preference for organic growth; selective bolt-on acquisitions for geography/verticals; active buybacks ($2.5m YTD), share count reduction a priority .
  • Tax and mix: U.S. tax zero due to NOLs; overall tax rate driven by geographic mix; advised using blended statutory rates .
  • Pipeline conversion: Continued hesitation and smaller deal scope; focus on land-and-expand to grow share of wallet .

Estimates Context

  • Wall Street consensus (S&P Global) for EPS and revenue was unavailable due to a mapping issue for HSON; as a result, estimate-based comparisons and beat/miss analysis cannot be provided at this time [SpgiEstimatesError: Missing CIQ mapping for ticker 'HSON'].
  • Given the absence of consensus data, investors should note the sequential improvement in revenue and adjusted net revenue, versus year-over-year declines, and the qualitative setup for potential recovery as hiring volumes normalize, per management commentary .

Key Takeaways for Investors

  • Sequential progress with revenue (+3% QoQ) and adjusted net revenue reflects stabilization in base accounts, though APAC financials remain a drag; watch for normalization in APAC financials into 2025 .
  • No quantitative guidance; management emphasizes cost actions and land-and-expand strategy, suggesting near-term margin support as volumes recover .
  • EMEA and Americas resilience offset APAC weakness; if tech continues gradual recovery and life sciences remains stable, mix could improve .
  • Strong cash generation in Q3 ($1.3m from operations) and $16.5m cash provide flexibility to continue buybacks and selective bolt-ons; repurchases are an ongoing capital return lever .
  • Recognition and awards in APAC/EMEA support brand strength and could aid pipeline conversion as broader hiring picks up .
  • Near-term trading: stock may respond to signs of APAC financials rebound and to incremental sequential improvements; buyback activity offers downside support .
  • Medium-term thesis: cost discipline + share-of-wallet expansion within existing clients, layered with targeted M&A/talent upgrades, can drive operating leverage as hiring volumes return to historical levels .