Hudson Global Inc (HSON) 2013 Q4 法說會逐字稿

Good afternoon.

My name is Holly and I'll be your conference operator today.

At this time, we'd like to welcome everyone to the Hudson Global Q4 2013 earnings conference 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).

I'd now like to turn the conference over to David Kirby.

Please go ahead, sir.

Thank you, Holly; and good morning, everyone.

Welcome to the Hudson Global conference call for the fourth quarter of 2013.

Our call this morning will be led by Chairman and Chief Executive Officer, Manuel Marquez; and Executive Vice President and Chief Financial Officer, Stephen Nolan.

At this time, I will 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 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 SEC.

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 update any forward-looking statements, whether as the result of new information, future events, or otherwise.

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

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

I encourage you to access our earnings materials at this time.

They are posted under Featured Documents on the website and will serve as a helpful reference guide during our speakers' remarks.

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

Thank you, David; and thank you, all, for joining us on this year-end and fourth quarter 2013 earnings call.

Fourth quarter results were in line with the outlook we provided on last quarter's call, with revenues just under $160 million and adjusted EBITDA loss of $2 million, both right in the middle of our range.

Our adjusted EBITDA loss includes a charge related to our European CEO transition towards the end of Q4.

Gross margin was just under $57 million.

Basically, we will provide more details on our fourth quarter financial performance.

However, first, I would like to share with you the progress we've made over the past two years and some of our key focus areas for 2014.

When I joined Hudson in mid-2011, the Company was still a rapidly young organization, having been formed through 67 acquisitions of leading talent solutions boutique in more than 40 countries.

Many of the buyers' business lines and independent approaches to the business still assisted when I joined.

There were [not the necessary] synergies, processes, and homogeneous business practices required by a truly scalable business less dependent on economic cycles.

The opportunity to create value by transforming Hudson's mindset, processes, and culture to that of a global talent solution business was what attracted me and the new management team to Hudson.

At the start of our journey, we defined a new vision aimed at delivering significant and sustained value to our shareholders as a world-class global provider of talent solutions.

Our strategy was supported by four key initiatives.

First, capitalize on our global presence and deliver best practices across borders; second, improve the capabilities of our people; third, redirect our efforts to higher value-added talent solutions; and fourth, deliver compelling digital presence.

We have advanced our strategy meaningfully in the past three years.

Specifically, in terms of our global practices, we are making good progress in RPO.

In 2013, we achieved 16% revenue growth in constant currency through client expansion and diversification into contingent services.

We have improved our positioning on the Baker's Dozen, moving up from 12th place to ninth place globally, and we have most recently achieved the leader designation in all five categories of NelsonHall's evaluation of RPO providers.

With an expanded sales organization now in place, 2014 is off to a strong with eight new RPO clients already won this year.

Our talent management business represents an important 14% of the Company's gross margin and also continues playing a critical role in differentiating our services.

We launched new online assessment tools and continue to win business through our [marquee] country delivery capabilities.

Unfortunately, our efforts in eDiscovery have yet to yield proportional result.

We have however made considerable strides realizing this business and have recently hired accomplished sales and operational leaders who bring extensive knowledge in the areas of legal staffing and eDiscovery technology.

We have seen all the positive indicators of a successful execution of our transformation.

We further enhanced our digital presence and embraced social media as a key tool for our consultants and recruiters, expanding our reach and engagement with prospective customers on how to find candidates.

We have improved a critical performance metric like quality of our service to clients and candidates.

Our global net promoter survey scores have increased by more than 20% in Australia, the UK, and the US in 2013.

Our Employee Engagement Score has remained stable and above the global benchmark for professional services firms, notwithstanding the pressures brought by our transformation and restructuring effort.

And importantly, over this period, we were able to attract experienced executives who have brought innovative thinking and help us accelerate our transformation and adopt best practices.

In terms of our financial performance, in our first year, 2011, revenues on gross margin grew significantly and we had a record year of net income from operations.

But in 2012 and 2013, the advancements we have made on the topline and as a result on our earnings were eroded by our lack of operating synergies in the face of significant exposure to the effects of the European sovereign debt crisis and subsequent spillover into Asia.

With 85% of our Company's gross margin coming from Europe and Asia Pacific and with permanent recruitment, which is less resilient to economic downturns, constituting 58% of our gross margin in those regions, we needed to accelerate the work we've begun to right-size our cost base and establish more efficient operating procedures.

We made significant progress on cost.

Although we were unable to fully protect our bottom line from the significant gross margin decline we suffered, we offset 69% of that decline through our cost actions.

In particular, we've reduced corporate and regional support costs by $12 million or 23% from 2011.

We consolidated our regional operating platform.

Our work with our real estate and our IT cost base resulted in an additional $12 million savings in general expenses or 16% from 2011.

We eliminated in total 210 support and interim positions, a net reduction of 28% of those roles.

We will continue to pursue operating efficiencies, hold the line on the savings we've put in place, and examine all opportunities to reshape our business so that we can maximize shareholder value as we return to topline growth.

On the more efficient foundation for our business, we are now investing selectively to continue growing our RPO and talent management businesses globally and adding fee earners who have scaled our recruitment business where we have identified the best opportunities for profitable growth from our forum.

Our front office productivity has held steady throughout 2012 and 2013 in most of our business lines which suggest the potential to scale the topline through selective hiring to grow in our core market.

In fact, we have started to experience sequential improvement in many of our business lines.

Overall, our fourth quarter gross margin was flat sequentially in constant currency, an improvement on past sequential declines.

The fourth quarter's improved performance was largely driven by 23% growth in Continental Europe.

Our global RPO business continued to deliver, with gross margin growing by 11% sequentially in constant currency.

And we see evidence that we are regaining market share in our recruitment business in Asia Pacific.

In summary, as we enter 2014, we are confident that we are on the right trajectory and we are seeing clear evidence of advancement towards a successful outcome, including, first, the progress we're making in our strategy; second, the positive indications from recent sequential growth in gross margin; third, the downstream benefit of right-sizing our cost base with a clear determination to continue seeking operating efficiencies; fourth, our strengthened leadership team; and fifth, the selective investments we are making to rebuild a scale in key markets and business lines.

Our leadership team is fully committed to achieving quarterly breakeven adjusted EBITDA within this year and creating strong base for continued profitable growth.

As always, I like to thank our people for the diligence and persistence and our investors for their engagement with us on our journey.

And Stephen will now share more details on our financial performance and our outlook for the first quarter.

Thanks, Manolo; and thank you, all, for joining us this morning.

I'll begin with overall results for the fourth quarter.

Our revenue came at $159.5 million which was right in the middle of our outlook range and down 12% year-over-year in constant currency.

Gross margin was $57 million, down 14% year-over-year and flat sequentially, and both in constant currency.

Adjusted EBITDA was a $2 million loss, which included an $800,000 charge relating to the leadership change in Europe.

That was down from a $3.2 million profit in last year's fourth quarter and an improvement from a loss of $3 million in the third quarter of 2013.

Turning to regional and country performance, we delivered sequential gross margin improvement in several business lines and geographies.

European gross margin was up 11% sequentially compared to 8% in the same quarter in 2012.

Gross margin increased sequentially in almost all of our operating units in Continental Europe, but Belgium grew over 30% sequentially and The Netherlands and Spain grew by double-digit, both sequentially and year-over-year, this quarter.

On a year-over-year basis, European gross margin in the fourth quarter was 9% below 2012.

In the UK, fourth quarter gross margin was 13% below last year, with England recruitment and our UK legal businesses posting a disappointing result.

Belgium was 11% below last year, but has regained traction after a difficult first three quarters of 2013.

In Australia, year-over-year revenue and gross margin declines slowed in the fourth quarter.

Sequential quarterly decline of 4% from the traditionally stronger third quarter was significantly better than 2012.

Our performance compared favorably to most of our competitors.

A new operating model and leader were put in place in our recruitment business in the second half of last year and we've seen improvements in key indicators, including employee engagement, sales activities, prospect meetings, and candidate volume.

On the other hand, New Zealand is struggling with reduced activity in the public and private sectors after a solid first three quarters of the year.

In Asia, with new leadership, we are instituting operating practices to improve our results in these promising markets and we're pleased that China grew 4% sequentially in the fourth quarter.

Hong Kong and Singapore, however, which are both in rebuilding mode, saw our gross margin declines sequentially and on a year-over-year basis in the fourth quarter.

The Americas had a tough quarter with gross margin down 14% sequentially and 17% below the fourth quarter of last year.

Looking at our global business lines, the strength and promise of our oilfield practice is reflected in a sequential gross margin performance in the fourth quarter, increasing by 11% this year after dropping 11% in the fourth quarter of 2012.

Our talent management business bounced back after the weak third quarter with over 40% sequential growth compared to the 27% in 2012.

The two areas of our business that have had the weakest performance relative to their potential are the Legal eDiscovery practice and our England recruitment business.

Legal eDiscovery gross margins in the Americas and the UK declined sequentially by 17% in the fourth quarter.

We have seen revenue and gross margin declines in 2012 and 2013, as we've been unable to adjust to a more subdued M&A environment and to build a sufficient pipeline of larger litigation project to replace acquiring large contracts.

As Manolo said, we have made some recent organizational changes in the US legal practice and are aggressively ramping up our new business development efforts.

As to the UK, our new CEO, Alexis Bretteville, is finalizing a plan to regain topline momentum in that key market.

We are the market leader in Scotland but need to recapture a positive momentum in England.

Alexis' focus will be on strengthening our team and reviving our performance in that market.

Here are some additional data points in the fourth quarter.

We incurred $2.8 million in restructuring charges in Q4, roughly evenly split between the three regions.

45 positions were eliminated and five properties were exited or space reduced.

For the full-year 2013, we incurred $6.7 million in restructuring and we continue to expect approximately 1.5 times in annual return on the charges we have taken.

We had $1.3 million in asset impairment charges in the fourth quarter.

About $900,000 of that was relating to a previously-capitalized software development project that we staffed and the balance is driven by adjustments to long-lived assets in Belgium and Singapore.

Our fourth quarter results included $100,000 of stock compensation compared to $200,000 a year ago.

The full-year charge was $2.1 million.

Our fourth quarter tax provision was $3.8 million as compared to $2.1 million a year ago.

The tax provision consisted almost entirely of a reserve for deferred tax assets, primarily in our Australian operation.

We ended the quarter with $37 million in cash and $30 million in available borrowing, totaling $67 million in liquidity.

We generated $4.1 million in operating cash flow during the quarter and had $500,000 in borrowings at the quarter end.

While our availability did come down this quarter, it was largely offset by strong collections at the end of the year.

Our DSO was 44 days, just 3 days better than a year ago and a 5-day improvement from the third quarter.

We continue to have a good dialog with our banks and we adjusted our facility with Westpac during the fourth quarter, as our business in Australia continues to operate in difficult market conditions.

Capital expenditure was $400,000 in the quarter and $2.6 million for the year.

We expect 2014 capital expenditures of between $3 million and $5 million, but we will continue to be prudent with our capital investments.

As we look to 2014, conditions remain challenging in many markets.

Economic growth is inconsistent and hiring subdued.

In our most promising markets and practices, however, we are investing in our fee earner base in order to regain market share and to grow our topline.

Given the stable productivity levels we have experienced in our key markets over the years and the consistent historical pattern of meaningful revenue generation after six months in the markets, we expect to see a positive return on that investment in the second half of 2014.

Our prospects for 2014 are further bolstered by the progress we've made on our cost base over the past two years and our ability to maintain a solid cash position during that time, despite revenue and gross margin declines.

With all this in mind, our outlook for the first quarter is for revenue of $145 million to $155 million at prevailing exchange rates and adjusted EBITDA of between a $2.5 million to a $4.5 million loss.

This revenue range implies a year-over-year decline of between 3% and 9%.

Regionally, I expect the Americas to lag our overall guidance range, while Asia Pacific should to be within the range and Europe ahead of the range, even possibly delivering year-over-year growth.

Holly, please open the lines for Q&A.

(Operator Instructions) Jeff Silber, BMO Capital Markets.

If you don't mind, I think I missed your guidance for the regions in terms of how it fit into your revenue guidance, first quarter, [comment that again].

Jeff, we don't hear you well.

Hello, can you hear me?

Okay.

Yes, now, it's better.

Okay, yes.

Yes, I'm sorry, I missed your implied regional guidance in terms of revenue, first quarter.

I was wondering if you could just repeat that and just provide a little color on where you see growth coming from in those regions.

Thanks.

So for the Americas, Jeff, we said that we would be lagging probably the overall guidance range while we thought Asia Pacific would be close to the range and Europe then ahead.

We're seeing, particularly in Continental Europe, some good traction right now and that's how we see it.

Got it.

Okay.

Thanks so much.

And in terms of your EBITDA guidance, if you could provide a little color or any guidance or range in terms of where you see gross margin percentage going forward?

So again, gross margins percent will obviously depend on our mix of business and we're seeing I would say different trends in different markets at the moment.

But overall, I think if you compare it to the first quarter of last year, probably the Americas and Asia Pacific will be fairly similar on adjusted EBITDA and Europe will be ahead.

[Got you].

And I guess the last question, I mean, if you could provide just some color on any changes in the quarter in China and Australia, that would be helpful.

China, it's a tough quarter with the holidays and [both time for the summertime] as well as the Chinese New Year.

China had a good start in January.

And I think Australia, as we've seen, the market itself is bumping along with some tough conditions in firm and the temp businesses growing some.

So we do know that in terms of RPO, we have some good wins in the Asia-Pac region in the first quarter.

So there was, I would say, mixed signals, but overall they will beat the guidance.

Yes, I would comment on RPO and talent management specifically as well, which are growing very well and very healthy way in Asia Pacific.

Out of the eight new clients that we've won for RPO in January and February this year, six are mainly in Asia and most particularly in China which is going to have a positive effect on China.

I think the comments that Stephen was referring more to our recruitment business in Australia and China; and yes, we have additional [pattern beating the summer] in Australia and the Chinese New Year in China, but we are seeing more traction there too.

And of these sequential gains that we have experienced in Australia and even if it looks like a drop in Q4 is less of a drop than last year and less of a drop that we're seeing in our competitors.

So we are positive that we win market share and we can restore Australia to positive growth.

Great.

Thanks so much.

That's helpful.

Mark Marcon.

Good morning.

[Mr.

Tristan from Handle] calling on behalf of Mark Marcon this morning.

I had a quick question regarding Hudson Americas and what you guys are seeing in terms of gross margin and throughout fiscal 2014, if you could add a little bit more color to that, that would be great.

Well, I mean for 2014, we continue to see at the moment some tough conditions primarily in our eDiscovery business and overall, our margins -- I'd say gross margins are holding up in that business, but we're just seeing a lower volume within our existing client base and so I think that will be our guidance at the moment.

Okay, thank you.

Again, on RPO in North America, we're seeing positive traction and in particular, Q4 in RPO in the Americas grew 29% over Q4 2012.

Okay, thank you.

That helped.

[Ty Govatos, TG Research].

Hi, a couple of questions if I may.

Steve, is there an after-tax number to the re-org and impairment charges?

And could you give us some kind of indication as to what the SG&A might look like going into the first quarter and for the full year, by three decimal places per quarter?

(multiple speakers) we were expecting from you.

Let me start with the SG&A side.

We think at the moment, we're targeting about in the range of $58 million to maybe up to $60 million in SG&A.

Some of it depends obviously on the net hiring numbers that we will have as we add our fee earners.

On the after-tax, I think there is very little tax benefit, could be up to 20% on the restructuring numbers that you saw.

Okay.

One other for -- yes, go ahead.

And then, the outlook for the year, again, I think our SG&A is somewhat tied to as we see the traction and we're chasing some of the opportunities in both the markets and practices that we've selected that the SG&A will somewhat follow the growth that we're trying to see there.

Yes.

And as both Stephen and I have said, we are going to hold the line on the savings that we have done on the SG&A on the support and admin cost line.

So if you see that SG&A will be growing is just on the fee earner space that we need to invest now to grow the topline so that we can benefit from the leverage that we have built in our process structure after all the restructuring we've made in 2012 and 2013.

Fair enough.

That leads me to my other question.

Manolo, where do you expect to add or focus on the fee earner additions?

So we will be doing that in the practices that have the best potential for profitable growth.

So, for sure, on RPO and talent management.

And then, on the recruiting end, in every geography where we will be doing is bagging their recruitment in those practices by geography, which differs, because I mean, IT practice is strong in some areas and admin and finance is strong in other areas.

So we will stack that by geography, understanding where we have a key differentiating factor to win market share and better potential for profitable growth.

When we were talking about the SG&A, it looks like you might be targeting 58%, but it might be 60% with the fee earners.

That implies an awful big investment in fee earners this year or am I wrong?

Well, which we will be phasing out appropriately although we would rescue it.

I mean always preserving a good pattern of profitability, so which is kind of something we need to lock in, but we'll be [skewed] to this first and second quarter because we want to have as much of a return on that investment we've seen the year and as Stephen has explained, usually takes six months for a new recruit to ramp up.

So we know that all the people that we recruit in the first and second quarter will deliver within the year.

Sounds good.

But the payoff of our investment is not going to be a long-term payoff.

I mean, we will tune everything up so that the whole thing works.

And as I said, we definitely want to reach breakeven and above breakeven on adjusted EBITDA quarterly within this year.

Sounds good.

Thank you, Manolo.

I appreciate the time.

[Bill Moskowitz, My Priorities Capital].

Yes.

Good morning, folks.

Hi, Bill.

Hey, just a question on eDiscovery, what's our differentiating factor there?

Well, eDiscovery, we were a leading eDiscovery provider of managed services on the starting part of the industry.

And other companies based on technology had evolved in the technology field, making investments in technology; I think that's where we were lagging.

We do have now a second window advantage in that end, because most of the technology is now provided by other firms.

So we're partnering with them.

But our edge in eDiscovery is the fact that we were a leading provider of the staffing services that we now have to complement with technology.

And how long have we been focusing on this as a key initiative?

So I started doing that when I joined.

So that was a two years and half ago, or almost three years now.

Then, I appointed Lori Hock as Head of America to bring more focus in the Americas region and start doing that approximately one year ago.

She joined in January 2013.

And Lori recruited the new Head of eDiscovery which comes from the technology environment from Recommind.

If I recall well, in October 2013.

So that's the --

So we're losing money there.

We are not losing money.

The eDiscovery business is profitable.

But we are not making as much money as we did before.

Okay.

Well, regarding --

I get your point and I think my answer to you is that we will review all the strategic options that would enhance shareholder value, nothing will be off the table.

And what we will be doing is ensure that all portfolio is healthy and nothing is off the table.

Having said that, we believe we are on the right track on our current plan and we will continue investing as I said to Ty on the practices that have most potential to grow profitably in our core markets.

Okay.

Well, just a follow-up here on costs, you made a statement, I believe, that costs are down $12 million since 2011, a drop of 23%.

That sounds pretty good except our revenue is down 33%.

That's right.

That's right.

So that would mean we're on a glide path of a rock here and it's most disturbing that we just cannot get any sales traction.

I mean other firms -- we seem to be losing share because other firms are not experiencing this to the degree we have.

So what are the key factors here which are retarding sales growth?

No, you are absolutely right.

I mean, let me just clarify that we took out $24 million, not $12 million.

So it was $12 million on that support cost and $12 million on real estate and IT, so which is all $24 million.

And you are absolutely right, that help, that's pushing down 69% of the gross margin fall.

So almost two-thirds or about two-thirds of it, but not fully.

So the disappointing result is that the gross margin, the topline, decreased faster that what we could take out in terms of cost.

One of the members of my management team uses the analogy of a leaky market.

Our organization was a leaky market and as we were trying to mend the bucket, we were losing topline.

I think that what we have now and it was difficult to do everything at the same time, what we have now built, it's a strong foundation and now, what we need to do is absolutely grow the topline and recover scale.

The good news is that productivity has held steady as Stephen right now said.

So we have not lost the capability to grow.

It's just now adding fee earners.

We've lost in two years approximately 25% of fee earners.

Some of that was pruning our organization, some of that was inevitable turnover that was caused by all the transformation we were going through.

And now, we have to rebuild that in an intelligent way, focusing on the areas where we are stronger and show more potential for profitable growth, which is what we are doing.

And as we are mentioning our progress, we want to -- I mean, in order to ensure that we build credibility in our market and with our people and to continue attracting talent, we are measuring sequential growth to ensure that we are rebuilding that scale and that we are regaining market share and that we are certainly seeing in Continental Europe and that we are certainly seeing in Australia and in some pockets in Asia.

So yes, I mean, looking back, I would have liked to do what we have done in a shorter period of time and if I could have rebuilt the new management team that we've got now in six months rather than two years, it would have felt completely differently but unfortunately it took time.

Well, I heard you say, you're reviewing all strategic options.

So I congratulate you and the Board on that.

As a long-term holder, boy, our patience is running thin, but we would expect the Board to exercise its fiduciary responsibility and certainly look at all strategic options, especially we're five years into this recovery, five years.

Interest rates are not going to remain this historically low for ever and ever and we've got a ship here that has not been able to turn.

So we urge the Board to take action.

Okay.

I will talk later with regard to our Board, but I can assure you that our Board takes this thing very seriously and they reviewed all these actions and one of the actions they did is appoint me two and a half years ago.

So that's -- I mean, I understand it's five years into the recovery, but we are taking all that action and I think that I do a little bit on telling that two-year story because yes, I mean, we are making now progress and we've seen that in the fourth quarter.

It took the time, but it is a story.

I mean you have to do a lot of things.

[When is a better] time to reach to the level that we are reaching now.

Okay, thank you.

[David Sachs, Hockey Capital].

Hi.

A couple of questions.

First, starting with the RPO business.

If you could size the wins there and in terms of aggregate dollars and when they will affect the P&L or start to be shown in the P&L?

Well, I'll start with the timing, David, it's Stephen.

They will come over the rest of this year.

I don't have to be honest or at least make comment on the size of the deals right now, but they -- obviously, with our investment in this business, we're expecting wins and our key is to keep that pipeline going and it's looking strong, but as importantly is to get this business implemented as fast as possible as we head into probably Q2, Q3.

Could you just size the business in terms of revenue or gross margin on a LTM basis?

It's about a $50 million sales business now.

It's about 16% of our total gross margin.

Okay.

I'm sorry, what was this number, 15% of gross margin?

16%, yes.

About 15% or 16%, yes.

And then, in terms of the pipeline, let me go back one second, the eight wins that you announced in the first couple of months of this year, why were you successful in winning those?

Was there something unique about your service offerings?

What's the such incorporate advantage in terms of winning these RPO or --?

Well, we were very proud of that.

I think that we were competing with all the major RPO contenders in every one of those single cases and we won over all of them.

And I think that rather than tell you how good we are, which it's always embarrassing and I think that I can refer to this new report that has been published by NelsonHall that goes over a detailed analysis of the five key characteristics of an RPO provider and have carefully examined and analyzed all the major RPO providers and have given often a leadership status on all the five categories and I mean if you read the report, you'll see that on the graph, on the top quadrant, I mean, we are the top quadrant, but we are leading the pack.

So I think it is about quality of service, breadth of service, operational ability, it's about added value to the clients, so it's about all of that.

And in terms of these eight wins, in aggregate, will this be sufficient to move this $50 million business 10%, 20%?

Just to kind of a sense of order of magnitude on the benefit of these recent wins.

Sorry, David, I can't really comment [on that].

Okay.

And then, in terms of your pipeline and the ability to scale this business, what are you seeing today?

Based on this report, it would suggest you would win everything.

But clearly, that's not the case.

What do you say in terms of the pipeline is bigger and the likelihood that these eight wins weren't an accident, but just the beginning of what you think is a proper turnaround in this?

Well, we've been very successful in Asia-Pacific.

In another report, which is the one I also refer to the Baker's Dozen, we are number two RPO provider in Asia Pacific, number four in Europe, and number five in the US and it is not just size, it's size, quality, et cetera.

So our RPO business beat us out in Asia-Pacific where we are very, very strong there.

But we need to also -- and I did make RPO a global business a year-and-a-half ago.

So we need to get more traction in Europe and mainly in the US where it's the biggest market and most of the opportunities, and we have invested in a new team in RPO in the US which joined us during 2013 after Lori Hock joined us as CEO of the US.

The market in RPO seems to be growing somewhere between 10% and 15%.

We are trying to beat the average market growth.

So that's what we expect organically.

And as we contemplate (inaudible) auctions, we might also contemplate whether there is a possibility that we need to contemplate more aggressive actions to accelerate the growth in RPO.

On that topic, unfortunately, given your share price and your -- but you do have [significant] liquidity, but your share price is a significant handicap in this industry.

It is.

It seems like these businesses are trading for sort of between 2 times and 3.5 times revenues in the RPO niche, at the low end of that would be essentially 100% of your market cap from REITs, 11% of your revenue.

So it would seem a challenging acquirer in that space?

No, my statement is a long-term statement, not something we could do right away.

Okay.

And then, one other question, you were talking about adding fee earners to the equation for the overall Company.

What's the message as to why these people would want to join Hudson at this stage?

What's attractive to your platform for that?

Well, I mean I --

[Yes], for someone to switch from a more success than profitable organization do you see Hudson turnaround for it?

Well, I have to share with you -- and this is the one thing that I'm most proud of, everything I've done in Hudson is attracting a great a leadership team and I mean, you know the profiles of all and I have not repeated that in my earnings call today, but I have done that in previous earnings call.

Not only they joined Hudson, but every single member that have joined my management team in the past two years, as they join, they have invested their own money buying shares in the open market.

So that shows the confidence they are having in what we're doing and their confidence is based mainly on three things.

I mean, obviously, when I recruited [and I shared] with them very openly, our vision, our strategy, the area where we have a great opportunity and a dominant position and the areas where we are weak that with our industry experience, they can help us reinforce.

May say Hudson as a junk company with a lot of potential but on a company what they can make a personal impact and enjoy the challenges to but build the growing company from the ground up with sustainable profitability.

So Hudson is a -- in terms of our platform, in terms of our size, looks like a grown-up company, but it was the product of all 67 acquisitions and Hudson is only a ten-years-old company.

Well, I guess I'm encouraged that the integration of some of these acquisitions seems to be occurring now and the expense structure is being rationalized.

You had mentioned a number of calls ago in prior investment presentations that you talked that the business could achieve a high-single-digit 7% or 8% EBITDA margin when the business had kind of recovered its topline.

You've taken more costs that's been spent but it seems that that ranges is barely unrealistic.

Have you reevaluated sort of what you think this business would look like in a couple of years with a bounce in your aggregate revenue and sort of what that would look like in your mind?

I think that all depends on the time frame that you take into account.

I think that the average return on sales of the staffing industry of the good performers is between 4% to 6%, more in the 4% to 5% range today.

So that is something that we certainly should aim to achieve in the medium term, but the performers that are more skewed to a permanent recruitment like we are, they are on the 7% to 10% range.

So that shouldn't be unreasonable once we finalize our transformation and scale up our business with a gross margin growth.

Okay, cool.

Just working backwards if we got to -- what level of sales at this point would we need to achieve whether it would be a 4% to 5% margin or 7% or 8% and we can figure out how long it might take you, but the business went from $1 billion or $940 million to $660 million over the last couple of years.

Yes, you're taking some nice costs out; as you said, you couldn't keep up with that sales degradation but where in your judgment do we need to get that leverage on the incremental revenue to start driving margin?

Look, David, it's Stephen.

I think we're taking as you can tell some very serious steps there, some positive steps forward, I think.

And I think we are -- I like to see the traction coming through at the moment before I sort of come up with a number on the call here about what we should be shooting at.

So I think that's focusing on on this quarter and on the trends that we are seeing, and I want to leave it at that.

Well, I appreciate your time, I'm encouraged by the wins in RTO and stabilization and especially the improvement in China.

Hopefully 2014 is a year of continued sequential improvement.

Thanks.

Thank you, David.

Ty Govatos, TG Research.

Yes, Manolo again, when we spoke, you talk about the breakeven EBITDA this year, and I realize we're aiming at a moving target, but would your goal be for the full year breakeven or by on a quarterly basis by the end of the year?

On a quarterly basis, within the year.

So that means that we have to wait until the fourth quarter but my statement was on a quarterly basis within a year.

Understand.

And one more numbers question for Stephen.

Do you have any guess at all on what your tax rate might look like this year?

I save the good ones for last.

I don't really have a number right now, Ty, but it's probably not that little bit relevant but you sort of feel material I would say so.

Fair enough.

Okay.

Thanks again for the time.

Thank you.

At this time, there are no further questions, I'll turn the call back over to Mr. Kirby for closing remarks.

Thank you, operator; and thank you, all, for joining the Hudson Global fourth quarter conference call today.

Today's call has been recorded and will be available later today on the Investors section of our website, hudson.com.

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