Hudson Global Inc (HSON) 2012 Q2 法說會逐字稿

Good morning.

My name is Kimberly, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Hudson Global Q2 2012 earnings call.

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

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

(Operator Instructions).

Thank you, Mr. David Kirby.

You may begin your conference.

Thank you, Operator, and good morning, everyone.

Welcome to the Hudson Global conference call for the second quarter of 2012.

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

At this time, I'll read the 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 the actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the market in which we operate, risks associated with competition, seasonality and the other risks discussed in our filings made with the SEC.

These forward-looking statements speak only as of today.

The Company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts' expectations or estimates or to update any forward-looking statements whether as the 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 EBITDA.

An EBITDA reconciliation is included in our earnings release and on our quarterly slides, both posted on our website, hudson.com.

I encourage you to access these documents at this time.

They are posted under Featured Documents on the website.

With that, I will turn the call over to Manolo Marquez.

Thank you, David, and good morning everyone.

Earlier today, we released results for the second quarter of 2012.

As you are well aware, the difficult market conditions that we experienced in the first quarter became more pronounced and broadly distributed geographically and across industries in this quarter, and this significantly impacted the recruitment market.

We shared with you these expectations three months ago together with our plan to accelerate change in Hudson and strengthen the foundation of the Company and streamline our operations.

The actions that we took during the quarter allow us to meet our outlook and made us better equipped to face the current environment.

The moves we made were substantial.

Since the beginning of the year, we closed five offices and eliminated 180 positions, representing 8% of the Company's total employee base.

We are implementing a better operating model for the Company, including a more effective alignment between our front and back offices.

Changes of this scope can be disruptive for an organization, but our team has shown enduring dedication and commitment.

They fully support our actions and the vision we all share for the future of Hudson.

I want to commend them for their efforts during this pivotal quarter.

Let me now give you an overview of the second quarter financials and highlights of our performance.

Our guidance for the second quarter was a revenue decline of about 20%, adjusted EBITDA of $0 million to $3 million, and a restructuring charge of $4 million to $6 million.

I am pleased that we were able to deliver on our outlook amidst very difficult conditions and while implementing significant changes.

Revenue for the quarter was $205 million, 17% lower from the year ago period, or 14% in constant currency.

Gross margin was $77 million or 37.6% of revenue, down 19% in reported and 15% in constant currency from the year ago period.

SG&A expenses fell to $73 million, down 16% from the second quarter in 2011 or 12% in constant currency.

Adjusted EBITDA was $3.7 million compared with $8.1 million one year ago.

We took charges of $5.1 million in the second quarter for business reorganization expenses related to severance and other costs.

I will cover the details on the application of those charges in a moment.

Regarding second quarter specifics, gross margin in the Americas was down 5% compared to the same quarter last year.

Asia-Pacific and Europe gross margin declined by 18% and 16% respectively in constant currency.

The largest contributors to our shortfall globally were the financial services sector with a gross margin drop of 22% and Permanent Recruitment in Australia/New Zealand, which fell by 27% in constant currency.

We declined across the board, limiting or delaying hiring decisions.

Consistent with economic downturns, Permanent Recruitment in general is weak resulting in a gross margin decline in that line of business of 18%.

Our Legal e-Discovery Practice continues to experience a decline due to gaps in large project workflow and affected as well by a more subdued M&A environment.

Although Legal e-Discovery gross margin dropped by 21% globally, our prospects remain strong as we advance our strategy in this market.

We have continued to forge alliances with leading technology providers of advanced computer assisted review.

We just recently announced a partnership with Recommind to serve our clients with a fully integrated on-demand managed review solution.

Recommind is among the most advanced companies providing predictive coding and analytic software to the legal industry.

Through our partnership, we're offering law firms and corporations a better option to realize efficiencies in their discovery processes, resulting in lower, more predictable costs, and ultimately better quality.

A number of key practices and geographies delivered favorable performances during the quarter.

Our global RPO business continued to grow during the quarter, with especially strong double-digit growth in the Americas, though overall hiring delays in the current market slowed down even RPO trends.

Talent management also has shown substantial strength with an overall gross margin of approximately $40 million, Hudson Talent Management Solution encompassed services such as assessment, which features embedded proprietary tools, interview training, executive coaching, employee development, and outplacement.

Globally, talent management revenues were up 9% in constant currency and gross margin was up 4% over second quarter of 2011.

Our professional contracting solutions business in the Netherlands grew once again.

It contributed to a 16% gross margin year-over-year increase for the country as a whole.

Along with our retained recruitment business in Belgium, these services represent the high quality, higher value offer that we're focusing on.

The key strategic initiatives that we launched in 2011 were geared to build that level of excellence in all our practices and unleash the long-term potential of our business.

The steps that we are taking this year accelerate the implementation of our plan.

They fortify our fundamentals and align our cost and operating structure with the realities of today's economic environment.

When I spoke to you last quarter, I announced that we would be taking actions in five areas, investing in high growth markets and services, maintaining focus on commitment to high performing teams, markets, and services, optimizing operations in underperforming markets, aligning our support function for global efficiency, and building the highest levels of employee engagement.

By focusing on these areas, we wanted to deliver the best possible results under the current economic conditions, while we made critical changes to create a stronger Company, one that is well positioned to exit the downturn with forward momentum and capable of achieving our long-term growth and profitability objectives.

The most significant actions we took were the following.

First, we moved high performing leaders to head our Singapore and Hong Kong offices and reinforced our teams in our RPO and Legal e-Discovery practices to capitalize on these growth opportunities.

Second, we shifted the focus of managers and consultants around the globe to enhance both our selling and delivery capabilities.

We eliminated organizational layers and associated support positions to create efficiencies in the front office and started implementing a more suitable delivery model for selected large accounts to improve productivity.

In the Americas, we restructured the IT practice to better serve our largest markets and clients, reducing headcount in low opportunity segments of the business.

All of these actions resulted in an overall reduction of 80 positions around the world.

Third, we continued consolidating our former Australia, New Zealand, and Asia back offices into a single Asia-Pacific location.

We also initiated implementation of our first shared services operations by combining regional and corporate accounting and tax teams.

These actions allowed us to reduce 50 positions in our back office during the first half.

Fourth, we reduced an additional 50 positions in market segments which are underperforming in the current economic environment.

And fifth, we consolidated offices, closing five properties, vacated 14,000 square feet in the London office, and relocated our Sydney office to more cost effective premises.

Our corporate and regional leadership teams are engaged in delivering our plan with focus and determination.

They have made a concerted effort to identify opportunities for improvement and resolve how best to execute, acting quickly to address the challenges and the opportunities.

We are making excellent progress, but we also recognize that we are undertaking a multiyear process and cannot change our business overnight.

The global economy is working against us and visibility remains low.

However, we expect to advance each quarter and we will continue to share our progress with you.

As we look to the second half of 2012, we know it will continue to be a transitional year.

Our third quarter will also be exposed to the typical summer seasonality of our European business.

We expect third quarter revenue to decline by as much as 7% on a sequential basis, which means it will continue to compare to the prior year with a decline of more than 20%.

On a full year basis, we continue to expect a revenue decline of approximately 15%.

As a result of the efficiencies we are achieving during the year, we expect to deliver positive EBITDA for 2012, inclusive of the $8 million to $10 million of restructuring charges.

During this summer, the European Union might face additional critical challenges and their decision could cause ripple effects in the rest of the world.

The road forward will be uneven until the economic picture brightens.

In this environment, our goals are to stay focused on execution, deliver on our commitments, and continue to implement our strategic vision.

I remain very positive about our long-term future of Hudson and have confidence that we will become a market leader in the talent solution space.

Our organization is engaged in this journey and more than ever, readying itself to win.

I will now turn the presentation over to Mary Jane, who will provide additional color on our second quarter results.

Thanks, Manolo, and thanks to all of you for joining us this morning.

We've posted some slides showing our results on the Hudson website, which you can reference during the call.

Manolo discussed the persistent market conditions, which show no signs of abating.

Our gross margin declined 15% in constant currency.

We offset three-quarters of that through restructuring and other cost management actions.

Our adjusted EBITDA was $3.7 million before restructuring charges.

Our EBITDA was a loss of $1.9 million.

Our net income, however, was positive $400,000 thanks to the successful conclusion of a legacy tax matter that allowed us to reverse a $3 million reserve.

Our liquidity remained at the same level as last year, helped by continued focus on cash management.

The Americas' revenue was down 11% with gross margin down at half that rate, or 5%, due to continued growth in RPO.

In Legal e-Discovery, the major part of our Americas' business, we are experiencing the slower initiation of larger projects, even though we continue to see a reasonable flow of work.

The mix is just presently more focused on shorter assignments.

Americas' adjusted EBITDA of $2.5 million included early effects of restructuring and about $500,000 of nonrecurring benefits, some also related to the tax settlement.

Adjusted EBITDA was $600,000, above last year.

Even if we see some slowing in the second half of the year in this market, this good progress on the Americas' profitability is particularly beneficial for our corporate tax position.

Europe's revenue declined 13% in constant currency and gross margin declined 16%.

On a constant currency basis, the entire revenue decline was in the UK, which was affected by the continued weakness in the financial services sector, a dominant part of the UK economy.

In continental Europe, our revenue was flat.

Gross margin fell 11%, 80% of which was due to France.

Our professional contracting businesses in Scotland, Belgium, and the Netherlands grew 16%.

Consequently, Europe's adjusted EBITDA was 3% of revenue and $2.4 million or about $3.1 million below the second quarter of last year.

Restructuring is expensive in Europe.

We incurred $3.1 million of restructuring charges in the region in the quarter.

In Asia-Pacific, revenue declined 17% in constant currency and gross margin declined 18%.

Across the region, clients in many sectors are increasingly cautious about hiring.

Clients are very focused on cost control stemming from reduced worldwide demand for goods from the region, which in turn is affecting demand within the region.

Australia accounts for 75% of the revenue decline, as we anniversary some large June 30 year-end projects we discussed last year.

Even in China, we see some clients starting to place more reliance on their in-house teams.

Nonetheless, we remain very confident about our prospects in this region and we are well on with the model changes that Manolo described.

Asia-Pac's adjusted EBITDA was $3.7 million.

In addition, Asia-Pac stepped up focus on cash management, reduced their DSO four days, contributing to an overall one-day decline in the DSO for the Company.

Regarding our restructuring plan, so far it's been implemented very well.

Regarding the support functions, the decision to move to shared services was a big step.

We have established Pittsburgh as our main English language accounting center, leveraging the PeopleSoft platform.

This will allow us to consolidate accounting and tax teams in Pittsburgh and reduce the number of general ledger operations without a loss of governance.

For operations that should remain closer to the customer, we expect to leverage common practices to reduce variability, headcount, and systems applications.

Transitions like these go on for several quarters.

We've started by combining four senior leader finance positions into two.

We have begun the deployment of PeopleSoft in the UK, which has run on a variety of local and in-house systems.

In the Asia-Pac region, our transactional accounting is already outsourced on the PeopleSoft platform.

We now have underway the integration of the A&Z and Asia Finance, IT, and other support teams, which previously were completely separate.

This has allowed the consolidation of roles at various levels.

Our processes in Asia have been very good, but as we grow we need to evolve to models that can support that growth.

Leveraging global systems and processes to support the front office will reduce the administrative burden on the front line management.

In continental Europe, the move to shared services has begun as well, through the greater use of our support teams in Belgium and Scotland.

Further work in continental Europe will follow the completion of the work in Pittsburgh and Asia-Pac.

Within our program, however, perhaps the more critical actions are those that we've taken to improve the front office operations.

These were designed to accelerate our strategy.

Our more decentralized regional approach has given rise to many operational variations that reduced our flexibility and leverage.

We have standardized the operating models to provide more consistency for similar types of clients.

This consistency allows more rapid deployment of adjustments in response to changes in conditions, and provides for a clearer assessment of what are the better business opportunities.

We have been able to reduce layers of management and administrative workload, so our leaders can spend more time on solutions with clients.

To further enroll our front line leaders in this change initiative, we have completed a global leadership-training program focused on optimizing our market position through quality execution.

Taking both the front office and back office changes into account, we've eliminated 180 positions, consolidated five offices since the beginning of the year, for a total charge of $6 million.

$5.1 million was recorded in this quarter.

We still expect to stay within our previously announced range of $8 million to $10 million, since we will continue the work we've discussed for the rest of the year.

The completion of these actions will not only improve our operating model, they will also expand opportunities for our high performing people.

Regarding our outlook for the third quarter, we expect to see ongoing reduced levels of demand, as Manolo has commented.

We expect third quarter revenue to decline as much as 7% on a sequential basis, which means we will continue to compare to the prior year with a decline of more than 20%.

We expect adjusted EBITDA in the range from $0 million to $2 million, with a charge of up to $2 million.

Finally, here are some specific financial data points on the quarter.

Our second quarter results included $960,000 of stock comp, compared to $1.2 million a year ago.

Against last year, we are accruing our performance grants at a lower level.

Our tax rate as a percentage of pretax income is not meaningful this quarter due to the credit previously discussed.

For the year, we expect to record an overall tax benefit of $2 million to $3 million barring any unusual items.

Our DSO was 50 days, as I mentioned, improving one day from last year and three days from the first quarter.

CapEx was $5 million in the quarter.

Breaking that down, it was $1 million of new spending and included $4 million for the landlord funded improvements in the Sydney property.

We've moved to a smaller, more efficient space that will provide about $500,000 of savings a year.

We ended the quarter with $29 million in cash, $51 million in available borrowings, totaling $80 million in liquidity.

We generated a normalized $4 million in operating cash flow during the quarter, or $8 million reported considering the other side of the transaction to record the landlord improvements.

We had $1.5 million in borrowings at the end of the quarter.

Year to date, our normalized cash flow is a use of $3 million.

We have amended our primary credit facility to accommodate the restructuring that we've taken this year.

The present global economic conditions are challenging to all companies in our industry.

It's clear to us that the actions we initiated in the second quarter were needed to change the operating model of the Company more fundamentally.

The alignment of the leadership team to adopt more common operating models that have shown good success in our Company for both the front and the back offices is an important tangible commitment to improving our results and advancing our strategic goals.

With that, Manolo and I would be happy to take your questions.

(Operator Instructions) Your first question comes from the line of Jeff Silber with BMO Capital Markets.

I know you don't always give specific guidance by region, but any color that you can give us both on revenue trends and EBITDA trends for the current quarter would be helpful.

Thanks.

I would expect the trends to continue in the second half of the year, similar to what you saw in the second quarter.

In terms of specific numbers, anything -- the Americas may be better off than what's going on in Europe or do you even think that?

Yes.

When I say similar to the trends of the first -- of the second quarter, in the second quarter we saw growth in the -- sorry, we saw a decline of 11% in Americas, 18% in Europe, and 20% in Asia Pacific.

Consequently, I would expect us to see that on a reported basis.

I would expect to see that sort of a trend relationship going forward for the second half.

Thanks for clarifying that.

And in terms of trying to figure out what normalized EBITDA might be once you get all the benefits of the restructuring.

Let's assume that demand kind of stays where it is at these subpar levels, where do you think EBITDA percentages could go?

Well, I think obviously as you say, the EBITDA percentage depends a little bit on where the revenue is.

But if we assume that the revenue is at a roughly similar level and we just take the benefits in the restructuring, just limiting it to that conversation, we expect, as we said in the last call, to realize benefits in the neighborhood of about two times the charge.

So that would add to the EBITDA and from there on, more or less the same revenue.

We would expect that to add in a discernible way to what the EBITDA percentage is.

And in theory that benefit would be coming next year?

I know you get some this year, but that two times number would beginning next year?

We had said that in this year, obviously, we will see some benefits of the charge, particularly in regions where it's more -- the charge tends to have a more leverageable effect.

But our goal was to achieve at least half the charge in this year and then a full two times next year.

Great, and then just a couple numbers questions.

In terms of guidance for the year for stock based comp and capital spending?

Yes, I would expect it to be in the neighborhood of about $4 million.

I'm sorry, that's what, that's stock-based comp or capital spending?

I'm so sorry.

Well, we had $900,000 in this quarter.

So if we take that roughly in the neighborhood of [four] for the stock-comp, it's going to be between $3 million and $ 4 million for the year.

With respect to the capital, I would expect the capital to be in the range of about $2 million to $4 million for the year.

Okay, great.

And in terms of share count that we should be using for 3Q?

The share count is in the range of about $30 million.

Let me just look up the exact number for you.

All right, I'll jump back in queue.

You can tell me later.

Jeff, we'll check the exact share count.

I appreciate it.

Thanks.

Your next question comes from the line of Morris Ajzenman from Griffin Securities.

Just one question at this point right now, and looking at your revenue declines, again kind of significant.

Do you want to comment on, it looks like you're losing market share.

It's difficult to talk about market share in a market that is as fragmented as our market when you look at aggregated numbers.

For example, we are not present in Germany and Japan and just slightly present in Latin America, where some of the growth is happening.

The only way that we can really say whether we are losing or gaining market share in the segments where operate is to estimate whether we are winning or losing when we compete head-to-head.

And in this case, we feel that we are usually succeeding.

But it doesn't show easily on the aggregated numbers.

So it's very difficult to give you a number on that.

Actually, one last question and it's not related to the first question.

On a sequential basis, is it fair to presume during the second quarter that each month was more difficult than the preceding month?

I would say as a general matter, not speaking on the month to month trend, just as a general matter, I think we did, and I think most of our competitors also saw that the conditions certainly became more challenging.

But as that tracks through the months, an enormous variety of factors can affect that.

I will say on top of that, that when we decided to take actions, we did that earlier in the year.

So most of the restructuring actions were done, as we have said, on the first half of the year.

So economic conditions might prevail to be difficult, but I think our organization is better equipped now to confront them.

(Operator Instructions) Your next question comes from the line of Mark Marcon with R.W. Baird.

Wondering if you could just talk a little bit about the Legal slowing.

How much of that was due to projects winding down versus a shift towards shorter length projects?

Well that year, just one big project that we had in the US on a major merge operation was valued at $60 million.

And we have occasionally one of those big projects every year.

So this is what we refer to in terms of the large project workflow.

We do see specifically in the M&A environment that the actual market has slowed down a bit and we see that, but I think that majorly what you compare our current Legal business with last year, you can tag that to a specific large project.

Okay, and in terms of the projects that you're currently working on, can you talk a little bit about the pricing environment?

What are you seeing on the Legal side at this point?

I think, Mark, first of all I think under these conditions, Legal projects are expensive.

So it would be not even probably reasonable to say that we don't have some pressures on pricing on a continuing basis.

But the expansion of our services, particularly to include project management and partnerships, as we've just discussed with respect to Recommind, do allow us to offer a more integrated and value-added service to the client that has had a good impact on what the pricing has been, and has allowed us, in some cases, to really sustain or improve margins with clients.

Having said that, for the more traditional part of the business, the ongoing document review and staffing, I think as I said there's no question that we continue to see pricing pressure with clients, as they nonetheless do move projects along.

We've seen other periods of time where projects stopped at a much greater rate.

Okay, great.

Can you talk a little bit about the pricing environment that you're currently seeing in Europe?

And I'm talking about specifically on the temp side.

Sure.

As you know, our temp business in Europe, just let's take Europe for a second, is between The Netherlands and the UK.

In The Netherlands, we saw significant price compression back in 2009 that I would say has generally not completely returned.

But nonetheless, I do think that the team there is doing a good job holding up their margins on that more specialty professional engineering and contracting business.

With respect to the UK, however, as we've discussed in the past and as you know, quite a lot of the contracting is in the financial services sector.

And consequently, we see clients moving to more procurement driven type buying, which we've seen in the past and I would say is continuing if not with more intensity.

And that's having an effect, dampening the temp gross margin in that region.

I think generally speaking, we see an interesting combination of clients wanting to be able to get projects done that advance their initiatives and trying to be extremely cost conscious in doing it.

What about Belgium?

What are you seeing there?

Well, that's a good question.

Sorry, right, we have a very, very good interim management business in Belgium, and while they have seen some margin deterioration over the last year that had probably a little bit to do with the level of people that are being placed among sort of more senior people, they're not all at exactly the same level.

And I think there -- clients are also being very cautious.

Countries in the middle of Europe do not have as much latitude at the present moment to have much visibility into what the economy is.

Nonetheless, that business for us grew 9% in the quarter and it continues to do a nice job and form a pretty a good service for our clients.

Great, and then in The Netherlands there have been some recent union agreements.

Does that have any impact on you at all?

I'm talking about parity pay.

No, that doesn't.

The projects we are embarking on in The Netherlands are very specific, high value engineering projects.

I think our goal, Mark, besides the analogy that Mary Jane has explained to you, I'd like to link your questions to more of the strategic environment that we are pushing in Hudson.

I think that when you have a very tough economic environment like everybody is experiencing, all our clients are experiencing, you certainly have price pressures on all the services that anybody provides and that's here and it will continue until the economy recovers.

But, the areas where we offer services that are more high value like the contracting business that we have in The Netherlands or the perm business we have in Belgium, those services are much more resilient to price pressures.

In Legal e-Discovery, as we have shared, the same thing.

When we are embarked into more complex projects that require intensive use of technology and project management, they are much more resilient to price pressures.

And in the areas where the services are more commoditized, price pressures are harder.

So what we have done in the restructuring that Mary Jane and I have described, is adapt our delivery model to both cases.

So where we find that clients are seeking more of a volume deal, what we need to do is make sure that we have an efficient delivery organization that is adjusted to the cost that our clients are willing to pay.

And we have a fantastic RPO business that really understands how to provide volume in a very efficient way, and we are taking that model as we have reorganized our front office.

And the in terms of the restructurings, you mentioned that you should get about $4 million to $5 million in savings from the restructuring this year with roughly $16 million to $20 million on a full run rate basis.

How quickly does that ramp up?

And then also, does that presume that further revenue declines or can you still get that amount even if revenue continues to decline at the current rate?

Sure.

I think that far and away the most important part with respect to this charge is that we would have done the vast majority of this anyway.

In the -- we've done a lot of work in the support services over the past years, but what we haven't done is moved to shared services.

That is a really important thing to do.

It's what we should be doing and we would be on with that even if the economy were booming.

And the same thing with respect to our front office.

I think in terms of being sure that the services that we provide, particularly those that really have the ability to help the client advance their strategy, are very important for us to position better in the marketplace than arguably we have been so far.

That strategy is really important and the commonization of the front office models is very, very essential to the more rapid deployment of that.

So I think that would have happened anyway.

There are probably some positions, as in these times, which is more related to best fitting the size of the organization to the current economic conditions.

And arguably, some of that may not have happened or at least not have happened as fast, but the main goal is to actually realign the front office so that the return, if you will, on the gross margin generated is improved.

That is an important goal for us and is an important part of our compensation metrics actually.

So it's been that much embedded into one of the important financial delivery aspects of the Company.

Having said that then, with respect to the realization of the charge, obviously if the gross margin were to continue to decline it's tough to have a continuous offset of that.

But having said that, I think quite a lot of this, as Manolo said in his more detailed remarks, is people related and as the people do depart, many of which have already done so, we start to realize to realize those benefits right away.

Thanks for the color.

Let me just answer the question on the shares outstanding.

Today, we have 33.2 million shares, total shares.

By the year-end, we would expect to have total shares outstanding of 33.5 million and diluted shares of 33 million.

Your next question comes from the line of Ty Govatos with CL King.

It was close enough.

A couple of questions.

The SG&A, do you think you can ratchet that down again in the third quarter from the second quarter levels?

We would expect to see the SG&A declining in the third quarter compared to the second quarter, yes.

Okay.

If I look, and I want to come back to the normalized EBITDA levels, if you could stay at $775 million annualized, do you think the cost savings would be enough to give you a year or two out $20 million in EBITDA?

What I can say to you is we are very committed to seeing meaningful improvement in the EBITDA margin.

As a -- if you took two times savings against where we would be prior to the charge, that obviously would be the number and we would work really hard to sustain that.

That is really the goal.

It's important for us to move the EBITDA return on revenue meaningfully as a result of these actions.

I think that the most that we can say, Ty, is that when I have explained the different categories of the 180 positions that we have eliminated, which is where most of the cost savings are coming from, I haven't specifically said that 130 positions were tied to changes that we were doing on the model that we are using to operate.

That changes the shape of the Company and changes the profitability of the Company, and these 130 positions are not going to come back.

Got you.

And then the other 50 positions are really linked to the economic environment.

As revenues increase, we might have to add people in that category, but we also will make sure that when we add some of these people back, we will ensure productivity gains and improve efficiency.

Sounds good.

One more technical question.

What would be the after tax number on the charge, the restructuring charge?

If you haven't got it, don't worry about it.

We can talk about it later.

I think first of all, certainly the advancement in the US, though the charge isn't very large in the US, the advancement in the US profitability allows us to see some decent tapping of the NOL a little bit there.

Probably, frankly, though, I'd say probably a good let's say 80% of the charge should have a reasonable tax benefit, say in the neighborhood of 20% all things taken into account.

But the part of the charge that we will take in France, as an example, will probably not be tax benefited given their current situation.

So if you took 20% on 80 kind of thing, you're probably in the ballpark.

Sounds good.

Thanks an awful lot.

I appreciate it.

(Operator Instructions) And there are no audio questions.

Well, thank you operator.

If there are no further questions at this time, we'd like to thank you all for joining the Hudson Global second quarter conference call.

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

Thank you and have a great day.

Thank you, that does conclude today's Hudson Global Q2 2012 earnings conference call.

You may now disconnect.