Executive Summary / Key Takeaways

• Strategic Transformation: Hudson Global is undergoing a fundamental shift, transitioning from a pure-play RPO provider to a diversified holding company post-merger with Star Equity Holdings, aiming for increased scale, revenue diversification, and enhanced shareholder value through NOL utilization.
• RPO Business Turnaround: The core Hudson RPO business has demonstrated a significant turnaround, achieving its third consecutive quarter of year-over-year growth in adjusted net revenue and adjusted EBITDA in Q2 2025, signaling a positive inflection point.
• Digital & Geographic Expansion: Aggressive investments in proprietary digital solutions (Hudson Fusion) and strategic geographic expansion (Japan, Middle East, Latin America) are creating new competitive advantages and pathways for client acquisition and "share of wallet" growth.
• Ambitious Growth Outlook: Management projects robust growth for the combined entity, with net revenue growth of 13% in 2025, 26% in 2026, and 17-18% over the subsequent five years, underpinned by a strong sales pipeline and normalizing market conditions.
• Undervalued Asset with NOLs: The company's stock is considered "significantly undervalued" by management, with the merger expected to unlock substantial value through the utilization of $240 million in U.S. federal net operating losses.

A New Horizon: Hudson Global's Strategic Pivot and RPO Evolution

Hudson Global, Inc. (HSON), founded in 1999, has long been a specialized player in the Recruitment Process Outsourcing (RPO) sector, offering tailored talent solutions to mid-to-large multinational companies. Its journey has been marked by strategic evolution, from an initial focus on core RPO and contracting services to a recent, profound transformation. This evolution culminated in the definitive merger agreement with Star Equity Holdings, Inc. , which officially closed on August 22, 2025, fundamentally reshaping HSON into a diversified holding company. This strategic pivot, alongside significant internal investments in its core RPO business, positions Hudson Global for a new chapter of growth and value creation.

The talent solutions industry, a critical barometer of global economic health, is currently navigating a mixed macro environment. Persistent inflation, elevated interest rates, and geopolitical uncertainties have created a challenging backdrop, leading to fluctuating demand for labor and cautious hiring by clients. However, underlying these cyclical pressures is a secular trend towards the digitization of talent acquisition, with clients increasingly demanding automated, AI-driven solutions to streamline processes and enhance efficiency. This dynamic environment necessitates agility, specialized expertise, and technological leadership for companies to thrive.

Hudson Global's core RPO business, operating across three key geographic segments—Americas, Asia Pacific, and EMEA—has been strategically responding to these market forces. The company's "land and expand" strategy focuses on deepening relationships with existing clients and securing new logos by broadening service offerings and extending its global footprint. This approach is designed to increase "share of wallet" and drive organic growth, even when broader market conditions remain uncertain.

A cornerstone of Hudson Global's competitive strategy is its burgeoning technological differentiation. The company has launched a new digital division, spearheaded by Chief Digital Officer Stephanie Edwards, to develop and deploy proprietary digital solutions. Central to this initiative is Hudson Fusion, a digital platform leveraging AI for technology enablement, complemented by TalentIQ, a market insights platform. These tools are designed to revolutionize digital capabilities and enterprise strategies, offering innovative, efficient, cost-effective, and high-quality talent solutions. While specific quantitative performance metrics for Hudson Fusion are still emerging as it is in its infancy, management highlights its ability to streamline operations, improve candidate and hiring manager experience, and automate routine tasks. The modular, customized approach of Hudson Fusion is intended to solve client-specific problems, distinguishing HSON from competitors who may offer more generalized solutions. This digital push is viewed as a "unique differentiator" that enables Hudson Global to be "leading edge" and "play offense," potentially leading to new client acquisitions, as evidenced by a recent client relationship initiated solely through digital services. The proprietary digital solution is targeted for a full go-live by the end of Q3 or beginning of Q4 2025, signaling a near-term enhancement to its competitive moat.

In the broader competitive landscape, Hudson Global operates alongside larger, more diversified players such as Robert Half International (RHI), ManpowerGroup (MAN), Korn Ferry (KFY), and Randstad (RAND). While these competitors boast greater scale and broader brand recognition, Hudson Global carves out its niche through specialized RPO expertise and a client-focused consulting approach. For instance, HSON's tailored RPO services for multinational clients may offer greater efficiency in handling complex, ongoing recruitment needs compared to RHI's broader staffing model. Against ManpowerGroup's extensive global footprint, HSON differentiates through a more focused RPO strategy, potentially leading to lower operating costs for clients seeking customized permanent staffing solutions. While Korn Ferry excels in high-value executive search and leadership development, HSON aims for greater efficiency in volume-based recruitment for mid-to-large organizations. HSON's recent geographic expansion, particularly the acquisition of Alpha Consulting Group (ACG) in Japan, is critical to becoming a "truly global service provider," allowing it to compete with the few peers who offer services in this key market. However, HSON's relatively smaller scale compared to industry giants like MAN and Randstad could lead to higher operating costs and potentially slower market share capture in certain segments.

Performance Reflecting Strategic Execution

The strategic investments and operational streamlining efforts undertaken by Hudson Global are beginning to yield tangible results. Q2 2025 marked a significant inflection point, representing the third consecutive quarter of year-over-year growth in adjusted net revenue and adjusted EBITDA. This trend, which saw stronger growth in Q2 than Q1, is expected to continue through the end of 2025 and into 2026, indicating a clear business turnaround.

For the second quarter of 2025, Hudson Global reported revenue of $35.54 million, a slight decrease from $35.71 million in Q2 2024. However, adjusted net revenue, a key metric for the company, increased by 5.1% year-over-year in constant currency to $18.6 million. This growth was accompanied by a notable improvement in adjusted EBITDA, which rose to $1.3 million in Q2 2025 from $0.7 million in Q2 2024. Despite these operational improvements, the company reported a net loss of $0.7 million, or $0.23 per diluted share, compared to a net loss of $0.4 million, or $0.15 per diluted share, in the prior-year period. This net loss reflects the immediate impact of growth investments, which are expensed rather than capitalized.

Segment-wise, performance was varied but generally positive:

• Americas: Revenue increased 2% year-over-year in constant currency to $7.14 million, driven by new client wins in contracting. Adjusted net revenue, however, decreased 1% to $6.30 million, primarily due to lower RPO demand from existing clients and a shift towards a lower-margin contracting mix. Adjusted EBITDA improved to $0.7 million from $0.6 million.
• Asia Pacific: Revenue decreased 3% in constant currency to $21.57 million, largely due to declines in Australia's contracting revenue. Crucially, adjusted net revenue surged by 17% to $8.84 million, reflecting a favorable shift in revenue mix towards higher-margin RPO services and a return to more normal activity levels in the financial sector after a depressed 2024. Adjusted EBITDA significantly improved to $1.9 million from $0.8 million.
• EMEA: Revenue increased 6% in constant currency to $6.83 million, primarily from a 36% increase in U.K. contracting revenue. However, adjusted net revenue decreased 9% to $3.50 million, and the segment reported an adjusted EBITDA loss of $0.4 million, compared to a profit of $0.3 million in Q2 2024. This was largely due to higher consultant staff costs and a decrease in RPO revenue in the U.K. and Continental Europe. The Middle East, a region of recent investment, is beginning to show traction.
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The company's liquidity remains robust, with $17.5 million in cash and cash equivalents and restricted cash as of June 30, 2025. Net cash used in operating activities significantly improved to $0.7 million for the six months ended June 30, 2025, compared to $6.1 million in the prior year, driven by favorable working capital and a lower net loss. Management believes this provides sufficient liquidity for at least the next 12 months. Furthermore, the company maintains an active share repurchase program, authorized for up to $5 million, reflecting management's view that the stock is "significantly undervalued."

A Transformed Outlook: Growth, Diversification, and Value Unlock

Hudson Global's future is defined by its recent strategic pivot and an ambitious growth outlook. The merger with Star Equity Holdings, Inc. , which closed on August 22, 2025, is a transformative event, creating a larger, diversified holding company with four reporting segments: Building Solutions, Business Services (Hudson RPO), Energy Services, and Investments. This combined entity is projected to have pro-forma annualized revenues of $210 million.

Management's guidance for the combined company is compelling, projecting approximately 13% net revenue growth in 2025, a substantial 26% growth in 2026, and a sustained 17% to 18% growth over the subsequent five years. These projections are based on the assumption of a "regular mid-cycle economic environment" and a return to normalized hiring activity among clients. The confidence in this outlook stems from several strategic initiatives:

• Geographic Expansion: The acquisition of Alpha Consulting Group (ACG) in Japan on July 23, 2025, is a critical step, filling the "last major geographic hole" for Hudson RPO and enabling it to serve global clients in the world's third-largest recruitment market. Investments in Latin America and the Middle East are also beginning to yield revenue.
• Service Diversification: The integration of McKinsey CMO Group, specializing in recruitment marketing and brand strategy, expands HSON's service suite, allowing it to offer more comprehensive solutions and increase its "share of wallet" with existing clients.
• Digital Leadership: The Hudson Fusion platform is expected to be a key differentiator, enhancing efficiency and client value, and opening new avenues for client acquisition.
• Attrition Normalization: After unusually low attrition rates in 2023-2024 (8-9%), a return to historical levels (around 15%) is anticipated to be a tailwind, driving increased hiring volumes.

The merger is expected to deliver significant value through greater scale, enhanced revenue diversification, and the elimination of redundant public company and overhead costs. Crucially, it increases the likelihood of utilizing Hudson Global’s substantial $240 million U.S. federal net operating losses (NOLs), a key driver for long-term shareholder returns.

However, this ambitious outlook is not without risks. The prevailing macro environment, characterized by persistent inflation and high interest rates, continues to create uncertainty, potentially impacting client hiring decisions. Geographic and sector-specific headwinds, such as the slowdown in China and Hong Kong or the volatility in the financial sector, could temper growth. Furthermore, the integration of Star Equity's diverse businesses into a new holding company structure presents operational challenges, and the successful realization of merger synergies and NOL utilization is subject to various conditions and future performance.

Conclusion

Hudson Global is at a pivotal juncture, transforming into a diversified holding company while simultaneously revitalizing its core RPO business. The recent turnaround in adjusted net revenue and EBITDA, fueled by strategic investments in digital capabilities and geographic expansion, signals a robust foundation for future growth. The integration of proprietary technology like Hudson Fusion and the strategic entry into key markets like Japan underscore a commitment to competitive differentiation and increased "share of wallet."

The merger with Star Equity Holdings (STRR) is poised to unlock significant value through enhanced scale, revenue diversification, and the strategic utilization of substantial NOLs. While macroeconomic uncertainties and integration challenges persist, management's clear vision, ambitious growth targets, and a proven track record of operational improvements position Hudson Global as a compelling investment opportunity. For discerning investors, HSON represents a transformed entity, leveraging its RPO expertise and technological leadership to drive long-term value in a dynamic global talent market.