Hudson Global Inc (HSON) 2003 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Hudson Highland Group second quarter conference call.

During the presentation all participants will be in a listen only mode.

Afterwards, we will conduct a question-and-answer session.

At that time if you have a question, please press the 1 followed by a the 4 on the telephone.

As a reminder this conference is being recorded Wednesday July 30th, 2003.

I would now like to turn the conference over to Mr. John Chait, Chairman and Chief Executive Officer.

Please go ahead, sir.

Thank you very much.

Thank you for joining us at our Q2 earnings conference call.

With me today is Richard Pehlke, our Executive Vice President, CFO and Brendan Flood, Senior Vice President of Finance.

I would like to start off by reading the safe harbor language.

Please be advised that our remarks that follow, including answers to your questions, includes statements we believe to be forward looking statements within the meaning of the private securities litigation reform act.

These forward looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.

Those risks include among others, matters that we have described in our earnings release issued yesterday and in our filings with the Security and Exchange Commission.

We disclaim any obligation to update these forward looking statements.

With that, I would like to make some brief preliminary remarks and then turn it over to Rich for a more detailed analysis of our financial statements.

I'm not going to review the consolidated financial statements in any detail which I assume for purposes of my remarks all of you have had a chance to read them.

If not you will find them available on our website, www.hhgroup.com.

I am also not going to comment extensively on the consolidated year on year results, Q2, 03 to Q2, 02, since the expense base is radically different due to the spin of of TMP and the restructuring that were accomplished in 2002.

First I just want to also set the context of the environment in which we are currently operating today and remind you that in terms of the economies in which we operate and the revenues generated from those economies that we have clearly seen a reduction in activity since request Q2, 02 and even since Q4 of last year.

You should know HH Group is dependant on permanent employment.

One way or the other, permanent employment accounts for more than 50% of our gross margin as compared to temporary employment.

Permanent employment has always hurt more in recessions than temporary.

You should also note that 42.5% of our gross margin is attributable to what we classify as Europe, predominantly the European union, which been the worst hit economy in terms of the current economic environment.

Looking at the Q2 results and looking at Q2 compared to Q1, I would like to draw your attention to the fact that the loss on an adjusted EBITDA. basis was 12.4 million compared to 21.4 million in Q1.

Breaking that down further, revenue increased 10.1 million or approximately 4%.

The constant currency, the increase in revenue was.7% or approximately 2 million dollars.

Gross margin increased 6.2 million, quarter on quarter sequentially.

These are all sequential data.

Or 6.3%.

That increase was 2.9% in constant currency.

Expenses declined 2.8 million, but in constant currency, the decline was 6.4 million or 5.4%.

EBITDA was approximately the same in both reported -- as reported currency, this is adjusted EBITDA and constant currency at an improvement of about 9 million sequentially.

This includes the continuing maintenance of a rather conservative position for bad debt reserves globally.

The bad debt charge in the second quarter was approximately 4 million.

Approximately the same amount was charged in the first quarter.

Rich is going to discuss that in some detail in his remarks.

Drawing your attention to the balance sheet, one comment I would make before Rich will explain it in more detail is that -- our cash position at the end of the quarter was approximately 40 million, which was consistent with our cash position at the beginning of the quarter.

About 7 million of that cash was impacted from one time items, currency, and timing events.

Nevertheless, I think cash management during the quarter was excellent.

I want to recognize the contributions of our finance staff around the world and particularly Rich and Brendan and an excellent job of managing our cash resources.

Looking at the regional operations, all our regional organizations, in both Hudson and Highland, improved in quarter 2 compared to quarter 1 in terms of adjusted EBITDA.

In Hudson, adjusted EBITDA was a 1 million loss in quarter 2 compared to an 11.3 million loss in quarter 1.

Looking at the regions in North America we were impacted by decline and gross margin of about 1 million dollars in quarter 2, primarily due to decline in temporary contractors in the IT practice group.

Temporary margins in all our specialized segments within the north American operation are holding steady.

We ended up with an adjusted EBITDA loss of about 2 million including, again,a bad debt reserve charge of about 3 million in the quarter, which was about the same amount as charged in quarter 1, but again was a continuation of our conservative position with respect to our bad debt reserve.

This does not reflect the impact of current operations, but Rich will discuss it in detail.

Except for the impact of IT services, which I noted earlier, Q2 was, basically, a case of small pluses and small minuses within our segments.

I would say, there are no significant trends within the operating segments of North America.

In our European operations, one thing to note is we have done an excellent job in shifting from permanent employment, which has suffered a decline to our human resource consulting business in the first half of the year throughout continental Europe.

In fact permanent revenues, permanent gross margins, have declined 23% year on year in this case, while HRC gross margin is up 44%.

So, you can see that our management has done an excellent job in offsetting the decline in permanent gross margin with an increase in our consulting business.

Sequentially, our consulting business was up $1 million in Q2 compared to Q1.

The margin which is only in the UK was maintained at a steady state.

Looking at an over all result in Europe, adjusted EBITDA was about a 1 million dollar loss in quarter 2 compared to an 8 million dollar loss in quarter 1, which is obviously a significant improvement.

Continental Europe contributed positively in terms of adjusted EBITDA.

Overall in Europe, positive contributions in terms of adjusted EBITDA were recorded in the UK operations, Belgium and Netherlands.

Again, given the economies in which these countries are operating, it is really a satisfactory result.

Looking at our Asia Pacific region, we saw that our operations operated in line with our expectations, which were quite high and we regarded their operations as satisfactory and we saw the impact of improved seasonality.

The adjusted EBITDA in the quarter was 1.9 million compared to a 1.1 million dollar loss in Q1.

Again, a significant improvement.

Looking at our Highland business, adjusted EBITDA in Q2 was a loss of 3.1 million, compared to 5.1 million.

A significant improvement.

Looking at specific European and regional operations, I should say regional operation, all the operations posted losses, but all posted improvements from Q1.

North America was able to reduce its adjusted EBITDA by 800,000.

In Europe, I'm sorry, we had 800,000 adjusted EBITDA loss compared to, actually, 2.4 million EBITDA loss in Q1.

So, a significant improvement.

European improvement, in terms of adjusted EBITDA, was .4 million and the Asia Pacific, .1 million.

North America we have continued to study and now have taken actions to reduce our infrastructure cost to a more appropriate level in parallel with our strategy of maintaining a global boutique business.

We've accelerated review of productive of individual partners and profitability of offices resulting in a further reduction in expense base since the end of the second quarter.

We believe that these actions will have an impact on the third quarter as well as beyond and we think we will position ourselves well for the future.

In Europe we are going through a similar review process but it has not been completed as of yet.

With that I'm going to turnover to Rich Pehlke for a more detailed examination of the financial statements.

Thank you, John.

I too, will not go through all the financial statements in detail.

But, I do want to touch on a couple key items that are normally a part of our discussions with the investment community and give you an update on where we stand.

Overall, our sentiment about expense control is very positive as we look at the results of the second quarter.

In virtually every segment of our business, we saw favorable improvement on a sequential basis when normalized for currency in terms of bringing the cost base down.

We are very pleased at the efforts of all our people worldwide and doing a fantastic job of managing this area, particularly in the tough environment that John outlined.

In constant currency basis, we improved about $6 million in expense savings, a little over 6 million in the quarter to quarter comparison.

We feel good about that.

The four largest areas, if you know our company at all, the four largest areas of expense in our SG&A line, other than employee and related expenses, which is the majority of our line, is our occupancy, marketing, bad debt and special services across our businesses.

In total, those four items only represent an aggregate of about 20% of our cost base.

So, again while they're a majority of the non-employee related stuff, it still isn't a large number in total.

I want to give you a little color on each line so that as you start to think about our business going forward, where you might see continued improvement and where you might see continued levels at the current run rate.

In occupancy, as we have said many times, we are in an environment where we have excess real estate across all our businesses.

Part is due to the economic times and part is due to the fact of the inherited office space that we have from all the various acquisitions that built this business.

We continue to chisel away with that and try and rationalize that as best we can and we will continue to go forward to bring that down.

As I have said many times, that's probably more of a short to medium term level to address, simply because in a difficult environment, especially in the commercial real estate market, that is not always an easy fix in all markets.

We continue to address that very aggressively.

Marketing, which represents right now about 6% of our total SG&A costs is an area we will continue to spend and address as a business.

John outlined many times that this has been an area across all of our markets where we need to stay focused and trying to build the revenue base of our business and the Hudson Highland brand across all our market segments.

We think it will be managed well, because most of the expense is out at the unit level.

It is controlled with a pay back on a productivity based on our revenue achievement in each market.

Much of the expenditure is in the hands of our operating people and we continue to encourage them to do the right things to build that market presence across all their business units.

The bad debt John touch owed a moment ago is an area that we expect improvement on by the end of the year.

We still think this number is too high in terms of the PNL impact on our business.

It directly relates primarily to the North American operation, which we have discussed before, where we did have a portfolio and still have somewhat of a portfolio that has way too many receivables that are aged beyond what I would consider a normal level.

We have taken steps to rationalize that process and I'm going to address that individually in a moment.

As far as the Professional Services lines in our expense line, we have incurred a number of costs in terms of just becoming an entity.

The cost of putting our credit facility in place, legal cost in relation to setting up the on going operations of being a public company, have impacted our expense line and currently Professional Services represents about 3% of our SG&A.

It is my hope over time that I can manage that down.

It is probably somewhere between 1 and 2%.

I will caution everyone that is a gradual decline, because we continue to have to address, as everyone else does, issues around [INAUDIBLE] and for example, internal control reviews that are due to be done by the end of next year for our company it will be a factor.

We will have to build into our cost base and manage as best as we can.

It is a fact of life of being a public company today.

So that's the main color I wanted to give out on expenses.

Again, overall, we feel exceptional about the efforts our people have done to bring cost in line in a very quick format and it was very much in our area of expectation.

I want to also comment about the balance sheet for just a moment.

John mentioned the strong cash position at the end of the quarter.

We were pleased by that.

It is due to a number of factors, some of which are timing and some of which are permanent.

We did have a couple items that actually did improve the overall cash improvement.

We improved our DSO, again, the efforts of our people across the operations as well as in our back-office have worked hard to bring working capital management practices more in line with norm.

We saw 1.8 days reduction in our DSO and that is worth 5 to 6 million dollars on our balance sheet.

In addition, we had some outstanding securities that were, actually, payments for contracts in our search division that actually came into the money in the market rally, which show up in our other income line that, actually, positively impacted the balance sheet to the tune of a half million dollars.

And we also benefited from some of the foreign currency and some miscellaneous items that became more permanent that are probably worth 2 to 3 million dollars of a favorable cash impact as we work through issues on our balance sheet.

There are timing issues.

We have accrued taxes and pay role accrual that will come off in the third quarter and will show probably a little heavier burn than we maybe would have expected in the third quarter, because they didn't happen in the second quarter.

Most of the timing related are issues that moved cash expenditure to the tune of 7 million dollars from quarter 2 into quarter 3 and beyond.

So, again we feel good about where our cash position is overall.

Overall, our outlook on cash doesn't change.

Where we are encouraged is people are doing an excellent job of managing working capital, but we still have to watch it very carefully, particularly in this economy.

The final thing I will touch on again, I will go back to the accounts receivable, because I do want to talk about this in more detail about the future impact on PNL.

As I mentioned, bad debt expense is too high a factor in our overall expense line.

This is really a hang over from the past in terms of some bad business practices that as a business we just didn't have nailed down in our North American operation.

We have taken very dramatic and positive steps to improve that and I give you a lot of credit to the management for working so diligently.

We did bring an outside party in to help us rationalize the age portfolio to collect some long over due bills and clean up some billing errors as well as improve our unimplied cash position.

I am pleased to say, we brought our unimplied cash position down to almost negligible, relative to where we started the year and we work our way through the receivable portfolio.

Of interest to us is that by the end of the third quarter we expect to have a very good handle on the collect ability and the accuracy of our age portfolio of anything that is due through June 30th that was older than 90 days.

After the third quarter, anything that we believe is not a live receivable and has a good faith chance of turning into cash will be off our balance sheet and remove the PNL exposure from future periods.

The size of the portfolio to date is about $7 million.

So, we have reserve for a portion of this.

As mentioned earlier, we took bad debt reserve again in the second quarter and our team is working very hard to remove this.

But, it is our intention to go forward after the third quarter, without this as a PNL exposure in terms of these old items.

It will not temper our ability to go out and collect anything that is real.

It is just we don't feel it is an appropriate asset after that period of time to either have in our balance sheet or to have our investors to take possible PNL exposure too.

We will update that on the next quarter in term of where that project comes out and that is definitely on going.

With that, I think, John, we should probably go to the q and a section.

Yes.

Thank you, Rich.

Operator we are ready for the q and a session.

Yes, sir.

Ladies and gentlemen, if you would like to register a question, please press the 1 followed by the 4 on your telephone.

You will hear a 3 tone prompt to acknowledge your request.

If your question has been answered and you would like to withdraw your registration press the 1 followed by the 3.

If using a speaker phone, please lift the hand set before entering your request.

One moment please for our first question.

Our first question comes from the line of Matt Libdin with William Blair and Company.

Please go ahead with your question.

Yeah, good morning.

Did you guys make any changes to your compensation plans for your employees during the quarter at all?

Well, I don't recall during the quarter, in Highland we made some changes to the compensation plans that were effective post June 30th.

As I mention that, we took a number of actions in Highland North America to reduce our infrastructure costs and we -- our management there and this is really a credit to Mike Kelly and John Wallace, have worked hard at examining the costs and productivity issues in light of the current environment.

The infrastructure was built for a larger organization and our current strategy is to maintain a much smaller organization.

So, they have gone through a process of rationalizing that.

Part of the process, they also looked at what we call base compensation of partners compared to productivity.

Are you guys yet able to measure and track employee turnover and if so what is the trend there?

I don't think we have employee turnover for the whole business as an aggregate.

The trend has been basically, I guess from talking, it has been normal in terms of there hasn't been an active move in one direction or the other in terms of the turnover of our employees.

Generally, a lot of the turnover we experienced over the last few quarters has been at our direction in terms of people who have either not been performers or where we have made infrastructure changes.

Yeah, the thing I would add, Matt, we don't have a good measure.

It is one of the things on our list that we are working hard on to have in place by the end of the year.

Not only measuring the numbers, but measuring the cause and having more insight into the cause.

One of the things that tempers our concern about it right at the moment is that as Rich alluded to, a fair amount of the turnover is really at our initiation.

When I say ours, meaning management, not necessarily Chait and Pehlke, but operating management.

We have had a significant change in turnover improvement in terms of our operating management as you look through the company.

I would think it is quite normal, in my experience, to bring in new operating management running particular segments and particular businesses.

They are putting together new teams.

We have a very strong financially driven metric measured philosophy about running the operations.

That is not for everybody.

Obviously, in today's environment, as you know, as I have mentioned in the past, we look carefully at productivity of our employees.

Our game is not expense reduction, but looking at the productivity of the expenses we are spending.

Thanks.

Congratulations on the sequential improvement.

Thank you.

Thank you, Matt.

Our next question comes from the line of Mark Marcom with Wachovia Securities.

Good morning.

Good morning, Mark.

First of all congratulations on the sequential improvement, as well from me.

In the write up it sounded like you were being a little more cautious about the -- you know, the near term just given everything we are seeing in terms of macro evidence both here and in Europe.

I am wondering if you can provide anymore detail.

We did send a signal in the near term that we were being more cautious.

That's to basically say that what I think have you seen from other companies in the industry as well as what we are experiencing is that basically we have not yet seen a sustained -- the sustained momentum that moved the monthly trends in a significant way like we had hoped we would see.

What has happened then and it has made it tougher for our newer people as we have been changing out the management and investing in newer revenue producing people in North America, for example, to ramp up.

That has in affect.

So, our caution was related to the slope of improvement as we approached the end of the year.

You don't think it is getting worse, do you?

No.

I don't think we have the science to tell it is getting worse at all.

But, we thought we would be creeping along a little better than this.

We thought we would have traction in some of the newer areas a little faster than this.

Again, as we look at our metrics for sequential improvement as well as monthly trends, we are seeing improvement.

We'd just like it to be a little more.

So, what we're doing and what we're trying to do -- and what we are seeing in our business is we are seeing the expense side and control side of things kind of come in line with what we expected.

We just need a little more help from the revenue side in terms of the energy and the economy, if you will.

Because, again, of what John outlined.

The perm mix in our business and the sustained improvement and growing the business on a contract basis.

So should we generally -- what it sounds like is you are not seeing anything get worse.

Things might be getting marginally better, but not improving at the rate that one would have hoped, maybe three months ago.

I thinks that been echoed by virtually every other staffing and recruiting company I follow.

I think you summed it up well.

Okay.

So would we still expect -- if things improve slightly, would we still see some EBITDA improvement, you know, going into the next couple quarters?.

Third quarter is a tough one to call, because obviously, as you know as visibility in this business is always tough, we have outlined for you a couple of things that are on our radar screen.

John talked about the fact that we are looking hard at Highland in Europe.

I outlined the fact that I want to make sure I get the receivable issues cleaned up in the third quarter.

So all the impact on the things in EBITDA have to be factored in.

If you negate that wev'e sent the caution out to the slope of improvement probably is flatter in the near term versus what we were expecting in the year.

So, maybe just slight improvement?

I'm assuming you are still looking for some improvement.

Is that right?

I think our guidance hasn't changed, Mark, in terms of reaching break even by the second half of 04.

We are just saying that as Rich said, the slope of getting there may be different.

The other thing to point out is that as we have talked about our shift in Europe towards a little more emphasis on hr consulting and a little less on perm, we are coming into the, obviously, in the third quarter the holiday season in Europe.

Sure.

That consulting business as well, just like the perm business, is very vulnerable in the holiday period.

As vulnerable as the temp business is, the perm business is more vulnerable, because it is driven by permanent employment and in the consulting business you have to have people working to render services.

So, we're thinking, again you are implying that against the matrix of a gradual improvement, a marginal improvement.

We are saying, well, third quarter might be a little softer. 4th quarter will be a little better than the third quarter and the same levels that we thought.

Okay.

Where would you expect, you know, cash to be?

If we take a look at your current liabilities they went from 152.3 to 168.3.

You mentioned the timing differences.

How would you expect cash to play out over the next, you know, 3 and 6 months?

If we see a very cautious and flatish type of movement over the next couple quarters we will see our cash dip down to the levels we thought we would see which is probably dipping down below, down to the $10 million range or so, depending on the timing of expenditures.

A lot will depend, again,on how things play out from the payroll side and our major cash items as well as timing things going away and how we can stretch it.

The good news is, I still think we have more than adequate cash sources to meet our needs and to get through this time and we don't foresee using the credit facility.

Okay.

Your corporate expense was about 8.3 million this quarter.

What can that get down to?

I mean you gave us details, but in broad strokes, how much improvement should we get there?

In the near term, I think what I was trying to say is in the near term it won't move substantially.

Okay.

If I take the two bigger items I called out and marketing, we are encouraging our people to spend marketing dollars, where appropriate, to build a business and from the standpoint of Professional Services, I don't see that moving pretty dramatically in the near term.

Where I do hope to make a difference is following the third quarter is take away the PNL exposure from the bad debt situation.

Okay.

Last question, you know, it has been 3 months since you operated independently.

Can you kind of give us a feel in terms of, you know, what's changed in terms of your independence and where are you still kind of tied in with them?

Maybe I'll start to turn it over to Rich to talk about the financial side.

We are note really tied into Monster in very many respects at all.

They are minor and rich and Brendan can comment on them.

They are not material at all.

We did announce we have a contract with Monster, but it is in the category of many other people in the staffing business.

I think one of the things that has changed is, I feel we have a much better focus on our basic business throughout our organization.

Part of that you are seeing in our cash management.

People are taking responsibility and credit , again, to Rich and Brendan and the finance team around the world.

They are taking responsibility and taking action to manage our cash much more carefully, because we done have a big parent we can turn to to bail us out.

I think throughout the operations people are taking more responsibility for their operations and we are seeing the benefits.

We are seeing the benefits in places like Belgium and the Netherlands and the UK and not dislike the others, these are hard hit economic markets that had a positive contribution to EBITDA in Q2.

So, that's really down, I think, to people taking responsibility for results.

Rich?

Yeah, John said it well.

The relationships -- first of all, overall, the relationship has been extremely constructive from the spin date and through the first quarter of our independence.

We always have issues relative to if things are unwinding et cetera, we still rely on Monster in our shared services agreement for our tax services and we have a very constructive relationship with their whole finance team.

We did sign the Monster agreement globally.

We remain a major customer of Monster's and our people are working vigorously and constructively throughout the world with Monster in terms of actually doing our business.

So, from that perspective it has been very healthy and it has worked out very well.

I give them credit from the standpoint as they came through and have done all the things they said they would do to help us get established as a company and it has been a very constructive relationship.

Great.

Thank you very much and best of luck.

Thanks, Mark.

Thank you, Mark.

The next question comes from the line of Ty Vatos with CL King, please go ahead.

Hi, how are you?

Could you give us some kind of an update on the new sales people that have been added and how effective that is.

We have had about a hundred -- I think the total new hires in North America for example are just over a hundred in gross numbers.

They have contributed incremental revenue to the business and sequentially that gotten better in virtually every month.

We are pleased.

Tom Moran and his people are working exceptionally hard to build out.

We have added new practice groups or offices as we call them in 13 of our major cities across the United States.

We will probably have additional hires coming up in the third quarter as well.

We are encouraging that.

We continue to believe that our market presence in North America is not as well established as we would like it to be, as we envision it being.

They are working very hard to put the right people in the right places and build a very scalable and leverageable model that positively contributes to the growth of the business.

So, I think we are in general pleased, in this kind of an economy, you can never be pleased enough.

It is a tough go and it makes it tough for new people starting out.

But, we are encouraged by what we are seeing.

We are encouraged by the quality of people we are adding to the organization.

I mean, I think as we have gotten to know a little more of our operating management and the people that they are bringing aboard, I think there has been a significant upgrade in the quality of our people.

Terrific.

Could you give us any idea of when you expect, and I realize it is rough, to reach a break even point where the up front costs are offset by the revenue additions?

Are you talking about just for the new people?

Yeah, just adding the new people.

Oh, man.

You know, I don't know that answer off the top of my head.

I just don't know.

That's fair.

This is Brendan.

Yeah.

I think we have continued to go with what we have said before and that it will typically take in the region of 6 to 9 months for all these people to be truly effective.

So we are really looking the back end of the year going into the first half of 2004 before we really start to see some break even momentum from all of these people.

Terrific.

Thanks an awful lot.

The next question comes from the line of Russ Haberman with Haberman fund.

How are you gentlemen?

Two quick questions, you talked about cutting expenses in the U.S. in the third quarter.

Could you put numbers to that, possibly?

This is the Highland restructuring or Highland changes.

Are we able to put numbers there?

In terms of what it will mean for us in the third quarter?

Yeah.

On just the high land, boy, I don't know of that number off -- probably in the neighborhood of maybe a half million dollars.

Will there be further cuts subsequent to that?

In highland North America, I don't think we envisioned that being the case.

I think as John mentioned in his comment about it, the infrastructure in that business was probably established for a higher business than what I think Mike and John see it running -- playing out to be in the near term.

So, I think we are comfortable at the leverage people and support people we have with the number of partners we have across the business and positioned to bring it to profitability.

Then you talked about the accounts receivable.

You said you're working on a pot of 7 million of questionable receivables.

Can you tell us what is reserved or how big your allowance is, today, against that?

The allowance ,today, is roughly about 50% against that.

One of the things that will work out as we go through this process is making sure that we also, at the end of the day remove the PNL exposure and make sure we still have adequate reserves for our on going business.

But, a couple things contributed to this and I want to make sure people understand what this issue is.

What I felt is the most important thing to do first is and I give a lot of credit to our team who have stepped in and done we have changed our credit collections and policies practices throughout our business.

They are much tighter.

They are much more front end focused.

We are removing the things that got this business in this stance in the first place.

That's the first way that you stem this.

By good management practice from every step of the way of your customer interaction all the way through a collected bill.

So,we have taken a number of very positive steps to remove that risk from the business and mitigate that risk going forward.

The second thing is making sure what we have on the balance sheet is a good receivable.

We expect to finish that project in the course of the third quarter and we will make all our final evaluations based on the readout of that report and we are working -- my team is working diligently with the operation to do that.

One final clerical issue related to that receivable.

You had about 11 million 4 as a receivable from Monster as of the end of June.

Will you receive that over the next three or six months?

No, we are still scheduled to receive that in equal installments over the course of the next three quarters, I believe.

Thank you.

The best of luck.

Thank you.

Our next question comes from the line of Jeff Sober with Harris Nesbitt Gerard.

Please go ahead.

Good morning.

If I could ask you to maybe to do backward looking instead of forward looking and talk about the quarter that just ended.

You mentioned in your remarks, I believe, that some of the monthly trends have been improving and I was wondering if we could get a little more color on that.

Are there any areas that have been improving faster or slower than others?

I know you are a lot of different geographies in verticles, but any color would be appreciated.

Thanks.

Well, the improvement in terms of monthly trends has been in the area of weekly and gross margin and revenue and has been small increments.

So again, it speaks to the point that was raised earlier on the call that we don't see things getting worse.

We see things have bounced maybe off the bottom and gradually continued to improve and we are encouraged by that.

I guess the other areas of sequential improvement that are probably even more important is what John talked about in his call.

Our people have done a good job of going through and making sure they focused on the areas where the opportunities are.

In Europe we talked about the shift to human resource consulting, away from some of the contracting and perm side, just because of the fact that the economy has been very tough.

So, they found creative ways to make sure we keep our market presence and activity levels at a good rate that have contributed positively to the business.

But again, you know, what we are looking for, in terms of going forward, is more strengthening in the overall improvement across all of our business lines.

Okay.

Are you seeing any lag between the U.S. and Europe?

I know there has been some talk whether that lag still exists or not.

But, I'm wondering generally what you are seeing.

It is very difficult for us to actually tell, Jeff because our businesses differ so much.

In the U.S. we are in broad strokes, 80% temporary and continental Europe it is zero temporary.

In the UK it is probably 50-50 at this point.

It is hard to tell.

I would say that we are not seeing signs of a lag in our business, but I'm on the sure any business is a barometer.

I appreciate the help and keep up the good work.

Thank you.

Gentlemen.

I am showing no further questions.

Please continue with your presentation or any closing remarks.

Well, there being no further questions, then we will close the conference call.

A replay of the conference call will be available, Brendan, on our website for a certain number of days.

Other than that, Rich will be available in particular to answer questions, detailed financial questions.

I certainly will be available as well.

Thank you very much for attending and thank you for your interest in Hudson Highland Group.

Ladies and gentlemen that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your line.