Hudson Global Inc (HSON) 2009 Q4 法說會逐字稿

Good morning, my name is Darlene and I will be your conference operator today.

At this time I would like to welcome everyone to the Hudson Highland Group fourth-quarter and year-end earnings results conference call.

All lines have been placed on mute to prevent background noise.

After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions)

I would now like to turn the call over to Mr.

David Kirby, Investor Relations Director.

Sir, you may begin your conference.

Thank you very much, Darlene, and good morning, everyone.

Welcome to the Hudson Highland Group conference call for the fourth quarter 2009.

Our call this morning will be led by Chairman and Chief Executive Officer Jon Chait, and Executive Vice President and Chief Financial Officer, Mary Jane Raymond.

At this time I will reduce Safe Harbor statement.

Please be advised that except for historical information the statements made during the presentation constitute forward-looking statements under applicable securities laws.

Such forward-looking statements involve certain risks and uncertainties including statements regarding the Company's strategic direction, prospects and future results.

Certain factors, including factors outside of our control, may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate; risks associated with competition, seasonality and the other risks discussed in our filings made with the Securities and Exchange Commission.

These forward-looking statements speak only as of today.

The Company assumes no obligation and expressly disclaims any obligation to review or confirm analyst expectations or estimates or to update any forward-looking statements whether as a result of new information, future events or otherwise.

During the course of this conference call references will be made to non-GAAP terms such as adjusted EBITDA.

A reconciliation to GAAP is included in our earnings release and on our quarterly slides posted on our website Hudson.com.

I encourage you to access our fourth-quarter earnings call slides at this time.

They are posted on our website under featured documents and our speakers will refer to the slides periodically during their remarks.

With that I will turn the call over to Jon Chait.

Thank you very much, David, and thanks to all of you for joining us this morning.

I hope you've had a chance to take a look at our press release and shareholders' letter that were issued after the market closed yesterday and periodically we'll be making reference to those documents or to the schedules attached to them.

I am going to start off by making some general comments and then I am going to turn over to our Chief Financial Officer, Mary Jane Raymond, to make some more detailed comments with respect to our fourth-quarter and year-end results.

The economic recovery is taking shape in all of our major markets, although in varying strengths and speeds.

Normally cyclical trends predominate in the early stages of a recovery cycle and it would be expected that temporary recruitment would be recovering early.

But we are already seeing the influence of broad general trends in our current results.

In many markets permanent recruitment hiring in professional and managerial roles is increasing faster than we would have expected at this early stage of recovery.

As has been frequently commented on, the developed economies are suffering a severe skill shortage.

This is a particularly important factor in our business since we are squarely in the market most affected, the middle level of professional and managerial personnel that drives the results of client companies.

We have included a detailed sequential analysis of our fourth-quarter results as sequential growth is an important indicator of the speed of recovery.

The fourth-quarter is normally stronger than the third quarter in our business in the northern hemisphere as the third quarter is affected by summer holidays.

However, the opposite is true in Australia and New Zealand, typically producing weaker fourth-quarter results than those of the third due to the beginning of summer and year-end holidays.

As you can see from the financial tables attached to the press release, all of our business segments are turning towards recovery.

In some cases our operations are matching the improvements in the economy while in others we are outperforming the expected economic impact.

Is the recovery sustainable?

We believe so, although we think we will see bumps along the way in the major economies as financial regulators grapple with the final throes of the recession, the removal of economic stimulus programs, massive budget deficits and increasing interest rates to more normal levels.

It may not feel like a recovery in every street in the world or in every quarter, but we believe when we look back at 2010 it will mark the first year of a recovery cycle.

I want to highlight some important emerging regional trends in our business.

In the United Kingdom revenues increased sequentially by 6%, but importantly, permanent recruitment increased by 3% sequentially.

This sequential growth is particularly noteworthy given the strong performance in permanent recruitment in the United Kingdom in the third quarter.

The overall sequential growth was led by strength in London IT, banking and our legal practice.

Asia again produced strong results in the quarter led by China, which showed a strong sequential improvement from the third quarter of 2009 and was nearly flat to prior year.

To give you some idea of the speed and magnitude of the recovery in China, consider the following.

In the third quarter revenues and gross margin in China were almost 40% below the prior year, yet in the fourth quarter revenues and gross margin were nearly breakeven with prior year.

Singapore was also a contributor to a strong fourth-quarter result in Asia.

We expect continued strength in Asia as its economic recovery continues to outpace that of other developed economies; although there remains some risk given potential changes in government economic and financial policies.

In the fourth quarter Australia/New Zealand permanent recruitment gross margin was up 9% sequentially which was contrary to the normal seasonal trend.

We were pleased to report that both Australia and New Zealand produced a profit in adjusted EBITDA for the quarter and for every quarter in 2009.

In addition, so far in 2010 it appears that the Austrian recruitment recovery is continuing.

This is a result of the strengthening Australian economy, but it's also a reflection of our positioning in the market relative to our competition.

We are seeing promising improvement in the recruitment demand combined with some big wins which we expect will drive our results in 2010.

The only negative trend in the Australian market is the sharp decline in outplacement which is typical of the cycle, but faster than we had expected.

Again, it's a good sign economically, but leading to some tough comparisons after a booming year in 2009.

In North America we saw the reemergence of growth in our legal business in the fourth quarter.

North American gross margin was up 10% sequentially from the third quarter of 2009.

Thus far in 2010 we have seen a continuation of the fourth-quarter upward trend in the legal business.

Continental Europe revenue improved 12% sequentially and produced positive adjusted EBITDA for the quarter.

The consensus view among economists is that the European economic recovery will lag that of many other developed economies around the world.

While this may be true, we believe that its impact on our business will be slower growth in profitability rather than a decline.

Nevertheless, Europe was one of our most profitable regions on an adjusted EBITDA basis in the fourth quarter and for the year and we expect it will be in 2010 as well.

On a consolidated basis fourth-quarter adjusted EBITDA was a profit of about $200,000, an improvement from a loss of $2.6 million in the fourth quarter of 2008 and an improvement over the third quarter of 2009 which was an adjusted EBITDA loss of $3.2 million.

With that I am going to turn over to Mary Jane Raymond to discuss the financial results in more detail after which we will begin a Q&A.

Mary Jane?

Thanks, Jon.

Good morning.

Our earnings slides for our call are posted on the website Hudson.com.

They further illustrate the quarter's results.

They start with the sequential progress from the third quarter, they move into prior year and they include some important reconciliations.

I will refer to those from time to time in the remarks.

Just as a small note -- the SEC recently issued an interpretation on their term EBITDA to include the effects of non-operating income or expense.

For the fourth quarter and the full year of 2009 in our company EBITDA was not a key metric and our adjusted EBITDA definition is unchanged.

But going forward, any references to EBITDA from us will include the effects of non-op income and expense and I will point that out to you.

As Jon discussed, we are seeing signs of recovery in all of our key markets at varying strengths and speeds.

We do see that continuing into the first quarter.

In the fourth quarter we achieved 8% sequential revenue and gross margin growth from Q3 and a positive adjusted EBITDA of $200,000.

As was the case for others in our industry, this was affected by a few extra days in the quarter and those extra days affect the growth rates by between 2 and 3 percentage points.

This is inconsequential to the full year.

In our case we are actually a calendar year company; but we conform to year-end roll forward procedures for some of our local operations previously on the 445 convention.

Our adjusted EBITDA improved in each sequential quarter of 2009 showing the benefits of the restructuring program and how quickly our operations responded to the improving market conditions.

Compared to prior year our revenue and gross margin declined in the quarter.

Declines for revenue and gross margin were 12% and 18% respectively on a reported basis and 21% and 27% for the revenue and gross margin respectively on a constant currency basis.

These declines to prior year were a full one-third less than the declines experienced in the third quarter compared to the third quarter of 2008.

All of our regions improved sequentially.

In fact, Continental Europe, as Jon just illustrated, had the strongest sequential growth while Asia, the three countries part of the Asia Pac region, revenue was roughly flat to prior year for the quarter on both a reported and constant currency basis.

For them gross margin improved 5% and 2% respectively.

The month of December for Asia actually was substantially above prior year on both a reported and constant currency basis.

The sequential performance is depicted in our slide deck from pages 3 to 6 and the comparisons to prior year are on pages 7 to 10.

With respect to our restructuring program, we had a charge in the quarter of $5.9 million.

This ends the 2009 restructuring program.

The full year cost of the program is $19.2 million for 2009.

It is already yielding results.

Our rough expectations, if we were to look at our company growing from here, is that we believe that the reductions taken on the charge of $19.2 million should drop the cost structure permanently between $50 million and $60 million.

However, having said that, we have maintained significant excess capacity in our company in the revenue producing staff in real estate.

We have talked all along through 2009 that it was a priority for our company to retain the high-performing (inaudible).

As you can see in the responses to the improving economy, that allowed our people to be ready to take advantage of the upturn.

As business resumes we expect to see significant operating leverage both as this capacity that exists today takes advantage of the growth as well as the permanent savings.

In the fourth quarter for example we offset the prior-year gross margin decline by 120%.

In other words, the cost savings were greater than the gross margin decline by over $2 million.

We expect that we will see operating leverage starting to work in the -- sorry.

We saw the improvements in the operating leverage in the fourth quarter.

The expenses, for example, increased 3% in the fourth quarter while the gross margin improved 8%.

The leverage going forward may not be consistent quarter to quarter.

For example, the benefits costs in the United States are higher in the first half of the year than they are in the second half of the year.

With that said my rough estimate is that the leverage per quarter should be in the range of about 60% going forward.

With respect to non-operating income and expense, we will include this, as I just said, in the definition of EBITDA going forward.

In our company non-op typically includes FX gains and losses as well as from time to time the gains or losses on transactions that are not in discontinued operations.

As a general matter for our company, this line is typically under $1 million and frankly is often positive, but going forward we will attempt to signal what we think that will be.

From a tax point of view the reported tax rate for the year is about a 12% benefit.

This is the first time our company has booked a consolidated tax benefit on a consolidated loss.

So in other words, the math is going in the right direction.

This is because prior to the recession most of our larger markets established a profitability trend.

We hope to be using these benefits soon, even as soon as 2010.

This benefit is lower than the normal 35% tax benefit due to the valuation reserves we have in some countries where tax benefits won't be realized for some years.

For example, in the United States.

From a cash point of view the Company's cash balance was $36 million at December 31, with a net cash of $25.5 million, down $8.5 million from the end of the third quarter.

The uses of cash were roughly $4 million in restructuring, $2 million in the payroll for the increased contractors and roughly $2 million for CapEx.

The additional availability under our primary credit facility with Foothill is about $2 million.

However, during the fourth quarter we increased our borrowing capacity by signing two local facilities giving us another availability of $8 million for a total availability on credit facilities of $10 million.

As I turn to our outlook for the first quarter, as we indicated we are not giving formal guidance on the first quarter but we do expect to see the positive trends of Q4 continuing into Q1 on a seasonally adjusted basis.

Generally speaking, as you know Q1 is a smaller quarter than Q4.

From a cash perspective this will result in a use of cash as we finance this growth.

I think the cash use in the first quarter could be between $10 million and $12 million that would break down as follows.

About $4 million in restructuring as we wind down the final payments for the 2009 restructuring charge.

Generally speaking, we expect that virtually all the remaining payouts or about another $4 million will be roughly finished by the end of Q2 2010.

So in other words, there is about $8 million still accrued against the 2009 charge and my general feeling is that the vast majority of that will pay out in the first half of the year.

We will also have, with respect to cash use in Q1, a growing contractor payroll.

As most of you know, our credit facility is receivables based so we usually will pay the contractors obviously, then raise the invoice, then borrow against the invoice.

And as usual in Q1 we have year-end tax payments and other sorts of your-end payments.

Recoveries in the staffing industry, as many of you know, are working capital intensive.

We have mentioned that we are seeing signs of recovery in every region.

A simultaneous recovery is good, but I do think it will be a little bit cash intensive in the beginning of the year.

With respect to our now effective S-3 shell filing, we are limited in what we can say about that under the securities laws as you know.

And of course a shell filing is generally intended to be a multi-year structure.

We are exploring alternatives to fund the typical recovery-driven working capital needs and we anticipate that any increase in capital would also drive an increase under our credit facility.

Any funds raised, though, will help drive an expected $40 million improvement in the EBITDA during 2010.

Turning to our outlook.

We agree as Jon went through in some detail with the general sentiment of our industry.

The recovery we are seeing is there.

It's fairly moderate and it's not terribly predictable, particularly on a quarter-by-quarter basis.

It varies throughout the world and is subject to some interesting fluctuations, like increases and decreases in private and public spending, and also exactly how lending from banks will come back online for some of our larger customers.

Having said that, while I don't have specific numbers for the first quarter I will say this, we expect to see some seasonal slowdown in Q1 from Q4.

But I would expect that the current recovery to at least partially offset part of that seasonality.

We anticipate that the revenue will certainly be above Q1 of last year, and generally I think it will be in the range of about Q3.

Q1 is seasonally smaller than Q4 so it would be difficult for us to predict that it will be sequentially higher than Q4.

The EBITDA in Q1 will be a small loss but significantly better than the prior year at the operating level, and no restructuring charges for new actions in 2010.

We may have, just so that you know, with respect to the restructuring charge sort of the minor adjustments that tend to come up.

For example, the accretion of the lease charge as that comes over over time, but those numbers are fairly small.

For the whole year of 2010, despite the limited visibility I think we all have, we believe that a profit at the EBITDA level is a reasonable view of the year.

I referred to earlier that we expected we could have a $40 million improvement.

That just doing math would yield about a $3 million positive if you add it to the loss we have in 2009.

As I say, I think that is a reasonable view of the year as we look at the pace and speed of the recovery that is available to us now.

Things like the non-operating income are pretty uncertain by their nature and may be in the range of plus or minus a few million dollars.

I have been asked pretty often what our company's view is of what life will look like in a normalized year.

If the current pace of the recovery continues, we could certainly see 2011 as a normalized year.

Our company expects to capitalize on the restructuring actions we have discussed in previous calls as well as the changes in the operating structures that our organizations have taken.

So for example, if we were to achieve about $900 million of revenue, we could be in a position to deliver 5% to 7% EBITDA assuming no anomalies in non-op.

This would represent substantial progress against our 7% to 10% EBITDA goal.

With that let me turn it over to Jon Chait.

Thank you very much, Mary Jane.

Operator, we are ready for Q&A.

(Operator Instructions) Mark Marcon.

Nice to hear the more positive tone.

Jon, we have talked over the years.

You sound -- the tone of the note that you sent out last night and what you are saying, cash challenges notwithstanding, it sounds like you do feel even better than you did a month ago as it relates to what you are seeing on the demand environment.

Is that an accurate characterization?

And if so, what gives you the confidence that this isn't a blip?

Well, I hate to be accused of being optimistic.

It's not like you.

I know, it's completely out of character.

However, I feel looking at our results after a wrenching year I do feel optimistic -- not optimistic but also realistic.

We have seen across many geographies -- and that is an important aspect, a good, solid initial stage recovery.

And I think we are seeing it in both contract and perm.

The perm piece is, I think, unexpectedly surprising.

I noticed in many other reports of many other companies they are also seeing pretty solid perm results as well.

So I think it's a sign that, as I said in my remarks, every recovery is different.

One of the things that we all have to ask is in this recovery is perm coming back faster than we would have expected.

And I think there is a reasonable viewpoint at this point that it is.

The results in January, again, are carrying through the momentum that we saw in the end of the fourth quarter.

At the moment we feel good.

There are certainly lots of negatives on the horizon, which I mentioned, (technical difficulty) the governments of the world unwind massive stimulus programs and other things.

And I think that ends a layer of unpredictability, but nevertheless I think the economies of the world will carry the day.

All right.

And then can you talk a little bit about Australia?

Obviously nice improvement there.

Can you just talk about the headwinds, both the pros and the cons as it relates to Australia and Asia Pac in general as we look at it, particularly with regards to the headwinds in terms of outplacement?

How is that going to impact the year and how we should think about that?

Sure.

Let me talk generally and then I will ask Mary Jane maybe to comment on some of the numbers.

But first of all, when you talk about Australia you have to talk about China because as a natural resources driven economy that is really being driven by demand from China.

You probably saw the report yesterday that China is now the world's biggest exporter surpassing Germany in the last month.

And as I mentioned in my remarks, we have seen a very sharp recovery in our Chinese business, which again is completely consistent with all of the economic news coming out of China.

So that demand is driving the Australian economy which in turn is driving our business.

We have a nice business in natural resources, but it drives the economy generally.

Of course, the Australian economy came through the recession almost unscathed.

Frankly off the top of my head I don't remember if it was a technical recession in Australia.

So I think first of all there is a good economic backdrop.

Secondly, our business, I think, is well-positioned and I think our team has done an excellent job competitively, certainly in the fourth quarter and coming into the first quarter.

So we are seeing a good solid demand in our recruitment business.

As I indicated in my remarks and you have picked up, we have a slight headwind in the sense that we had a booming year last year in outplacement.

Obviously, we weren't alone but we had a very good year in outplacement.

And we are seeing a very sharp fall-off in outplacement demand this year.

It's a positive indicator.

It's a contrary indicator; positive for the economy but a bit of headwind for us.

I would say we certainly believe and expect that the demand for recruitment will be enough that it outstrips what the fall-off we get that we see from outplacement.

In the course of time in our business we also have a very strong business in assessment and development, and it tends to be the mirror image of outplacement.

It tends to work in a recovering environment as a strong positive.

However, we have not seen that kick in yet.

So we do see the net effect of what we call our talent management business as being a bit of a headwind at this point.

Maybe, Mary Jane, if you would just give some quantification to that?

Well, a lot of ways to define headwind.

First of all, my comment that I thought Q1 would be more or less on par with Q3.

Actually it's a more regional point of view.

I think Europe will be a bit better because Q1 normally is better in Europe and I think Australia -- Asia Pacific in general and probably Australia in particular will be down against Q3.

So the normal seasonality of Q1 being the very light quarter in the Asia Pac region due to basically the summer holidays coupled with Chinese New Year I think will persist.

Past that I think, as Jon says, we could see a sort of slight troughing effect of outplacement coming down with recruitment, in other words perm, going up.

But the fact remains that we are seeing perm come up.

So unlike, for example, maybe Q3 and the beginning of the fourth quarter we saw outplacement dropping but we didn't really see as strong a recovery in perm as we had by the end of the quarter.

So I think it's tough to put numbers on it, but I would say in terms of looking at certainly Q1 the normal seasonality between Q3 and Q1 for Europe and Australia and Asia Pac will hold.

Okay.

Mary Jane, can you just size outplacement for us just in terms of what its revenue and margin contribution or profitability was in '09, just as we think about that unwinding?

Obviously that is the necessary precondition that we have to improvement.

We want to see that drop-off, but we just wanted to figure out exactly what are we offsetting.

Well, in round numbers I think the revenue for that is in probably about $10 million a year in a strong year.

So what would we see that drop to?

It could go into the range of $2 million to $3 million, because obviously if the economy is recovering there simply isn't any demand for it.

Obviously it's coupled by another factor which is as the economy recovers the employer behavior is that while they still could be laying people off, the economy is rebounding enough that they don't have to pay for the outplacement.

That is a sort of duplicative effect that takes the revenue down, so call that going from in the range of $10 million last year to in the range of $2 million to $3 million.

The gross margin on that business as a general matter is fairly good, call it 50%-ish.

But obviously if that is replaced by perm business, maybe not perfectly one-for-one every dollar immediately, the margin on perm is good as well.

So does that help you?

It does.

Can you talk a little bit -- more really appreciate the color with regards to the cash.

Can you talk a little bit more about any other outflows that we might expect on the cash side in Q1?

It sounds like you have got some options laid out in order to be able to fund the growth, because it does sound like things are getting better.

I think number one, things are getting better.

Two, I think it has obviously been a factor that, just liquidity in general, that we as a company and every company on the planet focused a lot on last year.

So I think we are seeing -- we are fortunate we are seeing a lot of efforts come to fruition.

As to unusual outflows, I don't think so.

We have for this entire year I think -- I will just cast a look to my guys here -- only one remaining earnout that is in the range of about $2-ish million and is in the second-ish quarter.

So from an earnout perspective let's take that.

We don't have any unusual outflows in that direction.

My expectation is that the major flows for restructure -- will be for paying out the restructuring reserve, which we, of course, will finish and are committed to not having any more of, and funding the payroll on the uptick.

The biggest thing we are trying to deal with is ensuring that our company is in a good position to take advantage of the growth opportunities before it without missing a beat.

So that has us funding increased payroll contractors in three countries.

That is kind of good problem to have.

But that is really what I expect.

I don't think there is anything more unusual than that.

If there is something on your mind you are waiting for me to say, I am happy for you to prompt me.

No, no.

I just wanted to make sure I wasn't missing anything.

We knew about the restructure -- with the restructuring payouts it still needed to come through.

Wasn't sure if there was anything else on the earnout side, so that is a positive.

One other quick thing I will just mention is, as you know we sold our energy business in the beginning of 2008.

As a small reminder we had a seller's note on that.

We just recently closed a prepayment on that note of over $3 million so we also have a, possibly in the category of unusual, inflow in the first quarter.

Great.

And then just a quick question for Jon.

Jon, you have a great pulse on the general macro environment.

What are you hearing from your folks in China?

Obviously things have been growing quite rapidly over there, but there has been some discussion recently about a potential bubble and tightening on capital requirements by the banks over there.

Are you seeing any sort of signs of a pullback or how would you characterize that?

On that one I don't have any great inside information.

The thing about our business is that it is almost entirely focused on multinational companies.

So what is benefiting us right now is the continued sort of outsourcing of Western companies to their Chinese subsidiaries.

We don't have any significant domestic Chinese business.

We have aspired to it.

Historically, those companies were difficult to deal with, either because of the control of the state, they weren't anxious to pay our fees, a number of other things.

As that whole economy begins to normalize we continue to look at that market to see if there is an opportunity for us, but right now our business is really focused on multinationals.

One of the things about our business that in a way is promising for the future is that we have a very strong technology business.

So that is staffing for primarily US technology companies and they are Fortune 50 names.

That business really fell off badly in 2009 as those companies cut back on their outsourcing initiatives.

That business has not particularly come back very well in the beginning of 2010, end of 2009.

So in a way it's a little bit of a hidden asset.

We have a very strong market position.

We are definitely not losing share.

We are very close to our clients.

And if that kicks in it will been a nice positive for us, but so far it hasn't kicked in.

Good to hear.

Thank you.

Jeff Silber.

Just looking out at the current year I am just wondering what your CapEx budget is.

Do you think you are going to be adding any offices?

You mentioned excess capacity so I am assuming not, but just was curious.

From a CapEx point of view, the CapEx budget is $5 million.

Do we think we will be adding any offices?

I don't think so, at least not that anybody has told me yet.

But I think as a general matter I don't think so because part of our management through 2009 still retains some space for the guys to grow as we get through 2009.

The capital from a facilities point of view that we still could encounter that is part of the five could be the reconfiguration of space to use space more efficiently.

We probably have one or two offices where it's probably not the most efficient layout, but that is where I would see it from a facilities side.

The majority -- the single largest item in the $5 million is the completion of the PeopleSoft investment in Australia where we are building a hosted PeopleSoft platform.

They are the last major region in our company to come off their legacy systems on to a single, market available ERP system.

That is in the range of call it about $1.5 million of the $5 million.

Okay, great.

That is helpful.

Jon, I am just curious, given where you are right now and what we have been seeing from some of the other companies in the space being -- I guess picking up the pace of acquisition activity.

Are you happy with the platform you have in terms of the geographies you are in, the businesses you are in?

Are there any opportunities that you might be looking for?

Thanks.

I think my attitude about it, Jeff, is that 2010 we need to focus on rebuilding our business.

I think the opportunity is there for us and we are very focused on capturing it.

I think in terms of any kind of major acquisition we would be pushing it off and thinking about it to 2011 or even 2012.

I think we have such a good opportunity with the business we have right now that is what we are focused on.

Okay, appreciate the color.

Thanks so much.

(Operator Instructions) There are no questions at this time.

Thank you very much, operator.

I will just -- before I turn over to David for the formal conclusion, I will just mention a few concluding remarks.

2009 was a wrenching year for Hudson.

Headcount was down 30% globally and we have made significant adjustments to our cost base.

But as we look out to the next 11 months of 2010 we have many reasons to be optimistic.

We are seeing positive signs of recovery in virtually all of our markets and we expect to be profitable in EBITDA for 2010 without restructuring.

Certainly a better economic environment is critical.

And in this very initial stage we are seeing improvements in key markets that are better than would have been expected from the economy alone on both the top and the bottom lines.

Mark Marcon.

Okay.

Mark, go ahead.

I hit the button as the operator first came on to say that -- sorry to screw up the order in terms of your concluding comments.

I was wondering if you could talk a little bit more about what you are seeing out of North America and just the certainty that you have on the legal business in terms of it coming back.

That has been a little bit on the lumpy side in the past.

Yes, yes.

First of all, we are seeing good, steady progress in legal in the fourth quarter.

We are seeing a continuation in the first quarter.

It is different than we have seen in the past.

In the past we have been able to capture very large opportunities involving -- when I say large, involving up to several hundred legal contractors in some cases working on projects that lasted multiple years.

We are not seeing those kind of opportunities in the market today.

We don't know if that is a -- frankly, we don't have visibility to say that is a secular change.

We don't know if it's just an economically driven change or not.

But what we are seeing is a number of good kind of medium-sized projects of 20, 30, 50 contractors, although for shorter durations.

So not multiple years but in some cases a couple of months.

In some cases some very short-term projects.

But a real -- I think in a sense it's a real change that we have seen in the marketplace.

Nevertheless, we think we continue to capture a good share of market, a good share of the market that is available and we are seeing at this point steady growth.

So I think as we look out to 2010 in a very, as you put it, a very lumpy business we feel pretty good about it.

Our other -- and that is roughly half our business.

The other part of our business is divided between IT and financial solutions.

Our IT business in North America has been pretty flat, sequentially flat over the recent quarters when we look at metrics such as contractors on billing.

So we have not seen a recovery in that business as many of our competitors have reported.

We do see IT as a pretty significant driver of our business throughout other parts of our business, other markets.

We are seeing good demand in IT as, again, many other companies have commented upon.

But at the moment we see that as a potential upside for us in the North American market.

There are no further questions in queue.

So continuing my conclusion.

As I said, we are optimistic as we look out to 2010.

Every recovery brings some important changes to our industry.

In this recovery we are seeing an unusually quick rebound in perm across a number of markets.

This could be an important indicator of future demand trends in the middle of the senior market.

We also recognize that 2009 was a wrenching year for our shareholders.

We can only thank you for your patience and assure you that the entire Hudson team is focused on maximizing our return on the recovery.

With that I will turn over to David.

Thank you very much, Jon.

And thank you, everyone, for joining the Hudson Highland Group call for the fourth quarter of 2009.

Our call today has been recorded and the webcast will be available later today on the investors section of our website, Hudson.com.

Have a great day.