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Operator
Good day, ladies and gentlemen, and welcome to the second-quarter 2016 Hudson Global earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)
I would now like to introduce your host for today's conference, Mr. David Kirby. Sir, you may begin.
David Kirby - Director of IR
Thank you, Tamara, and good morning, everyone. Welcome to the Hudson Global conference call for the second quarter of 2016. The call this morning will be led by Chief Executive Officer, Stephen Nolan; and Chief Financial Officer, Patrick Lyons.
Please be advised that, except for historical information, statements made during the presentation constitute forward-looking statements under applicable securities laws. Such forward-looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. The risks are discussed in our Form 8-K filed today, and in our other filings made with the SEC.
The Company disclaims any obligation to update any forward-looking statements. During the course of this conference call, references will be made to non-GAAP terms such as adjusted EBITDA. A reconciliation is included in our earnings release and on our quarterly slides, both posted on our website, Hudson.com. We encourage you to access these materials at this time, as they will serve as a helpful reference guide during our call.
As you review our second-quarter results, please remember that we did exit a number of businesses in 2015 that are not classified as discontinued operations, and thus are part of the prior-year reported results. We have provided a reconciliation from reported to retained revenue and gross margin in the press release and the earnings slides, and we will refer to both sets of numbers. Retained revenue and gross margin exclude all businesses sold or exited in 2014 and 2015.
With that, I will turn the call over to Stephen Nolan.
Stephen Nolan - CEO
Thank you, David. And good morning, everyone, and thank you for joining us today. Before we begin the update on our business performance in the second quarter, I wanted to start by thanking all our colleagues around the world for their hard work and dedication in delivering excellent service to our clients across our RPO, Talent Management, and Recruitment businesses.
Earlier this month, I visited our teams in the UK, Belgium, France, and China, and I continue to be amazed and proud to hear about the quality of our service and the innovative and professional solutions our talented colleagues, both tenured and recently hired, are delivering every day to our clients.
On the flight home from Shanghai, I was reflecting on Hudson's transformation journey and the progress being made by our teams in each region. Our RPO and Talent Management businesses are growing nicely, and many of our key markets are performing well in a simpler, more cost-effective structure. Of course, there are a few challenges we are dealing with too, but it is worth noting that, over the past 12 months, Hudson's adjusted EBITDA would have been positive if you back out the arbitration settlement.
For the second quarter, we reported revenue of $113 million, which is at the upper end of our guidance. Compared to Q2 revenue last year, we saw a $5 million reduction due to the stronger dollar and a $9 million reduction due to the sale of two businesses in 2015. So, on a retained basis in constant currency, our revenue was up 4% from 2015.
Gross margin was $47 million, up almost 1% on last year on a retained basis in constant currency. Gross margin in our recruitment business fell 4.5% year-on-year with Perm 7% down, while Temp Contracting grew 2%. Gross margin in our Recruitment Process Outsourcing, or RPO business, grew 4%, while Talent Management grew 16%.
SG&A costs were $48 million, which included $2.5 million in costs relating to the settlement of the arbitration with the previous CEO. Excluding this matter, SG&A was 8% below last year in constant currency. At quarter-end, we had 1,230 fee earners, up 4% on last year and flat to Q1. Support costs were substantially lower in Corporate and the Americas.
We reported an adjusted EBITDA loss of $700,000, which included the $2.5 million of arbitration costs. Excluding these costs, our underlying results was well ahead of breakeven results a year ago. The improvement was driven by the progress we are making in almost all areas, with Europe up $1.2 million; Australia/New Zealand up $800,000; Americas up $200,000; and Corporate costs lower by $1.1 million. Asia adjusted EBITDA fell by $1.5 million with weak results across the region.
Turning to regional and country performance in the second quarter, Americas Q2 reported results now include RPO and related businesses. The comparison to last year is impacted by the sale of IT in June 2015. On a retained basis, gross margin was down 8%, due to the ending of one large project in Q2 last year, which was mostly offset by growth elsewhere in the business. SG&A costs were lower, as we completed the transition to a more cost-effective support structure at the end of 2015.
Asia-Pacific had a mixed second quarter with year-on-year growth in revenue of 13%, while gross margin fell 2% in constant currency. We saw strong gross margin growth in our recruitment businesses in Australia and New Zealand, as well as RPO in Australia. Talent management gross margin grew across the region.
Our Recruitment and RPO businesses in China had another soft quarter, as we dealt with tougher market conditions and some internal challenges. Our business there grew very rapidly over the last few years, and we've had some growing pains. During my recent visit, I had good discussions with our talented leaders, and I am confident that we have a plan to leverage our strong presence and brand in China, as we focus aggressively on the market opportunities and also disciplined execution.
At the region level, Temp Contracting grew 14% while Perm fell 13%. RPO grew 10%, led by Australia, with weaker results in both China and Hong Kong. In Europe, we saw gross margin growth also on a year-over-year basis in Belgium, France, and Spain, offset by weaker results in the UK. Overall, gross margin from our Retained business was up 5% from 2015, with RPO up 12%, driven mainly by new clients.
In the UK, gross margin fell 10%, with weaker results in Scotland Temp Contracting, as a number of large projects ended; but Perm did grow. In England, Temp was flat year-on-year, while Perm remained weak as we saw lower activity in a number of practices, mainly accounting and finance, and supply chain, where we had changes in leadership.
We did see some impact on Perm, particularly in June, from the EU Referendum, as clients delayed hiring decisions. Our talented management business in the UK, which is still quite small but is gaining momentum with increased focus. Continental Europe delivered strong gross margin growth across all markets of 19%; Belgium up 19%; France up 23%; and Spain up 11%.
Looking at our performance in the first six months of 2016 on a retained basis in constant currency, we grew revenue by 2.3%. Gross margin was flat with growth in Americas, Europe, and Australia/New Zealand, offset by Asia. RPO was up 11%; Talent Management up 8%; Temp Contracting up 3%, offset by Perm down 9%.
Our gross margin split in the first-half was 40% for Perm and approximately 20% each for RPO, Talent Management and Temp Contracting. As I noted last quarter, this mix will change each quarter as -- depending on the market and also client demand, but also as we exit -- I'm sorry -- as we execute our strategic priorities. While we are focused on growing each piece of the business, we are encouraged to see this more balanced portfolio.
Excluding the arbitration settlement, our first-half adjusted EBITDA would've been positive and over $3 million better than the first-half of 2015. Again, I'm very grateful for the team's contribution and dedication to Hudson's commitment to profitable growth. For 2016, we expect continued progress in our core markets and practices, and to deliver full-year profitability at the adjusted EBITDA level.
I'll now turn the call over to our Chief Financial Officer, Patrick Lyons, to review some additional data points on the second-quarter, as well as our third-quarter outlook.
Patrick Lyons - CFO
Thank you, Stephen, and good morning, everyone. We incurred $100,000 in restructuring charges and continuing operations in the second quarter, mainly for severance actions in France and Asia-Pacific. We purchased 582,000 of Hudson shares in the second quarter at a cost of $1.4 million. From inception of the stock buyback program in August 2015 through July 27, we have purchased 1.7 million shares at a cost of $4.2 million.
Our second-quarter tax provision for continuing operations was a tax charge of $800,000. Capital expenditure was $600,000 in the second quarter. We expect approximately $2 million to $3 million of CapEx for 2016. We ended the quarter with $25 million in cash and $20 million in available borrowings, totaling $45 million in liquidity. We had $7 million in borrowings on our credit facility at the end of the second quarter, all in Australia, as we funded our growth in Temp Contracting.
Days sales outstanding, or DSO, was 49 days, down one day compared to last year and three days lower compared to March this year. Looking to the third quarter and using our projected average exchange rates for the quarter, we expect a revenue range of $105 million to $115 million. Reported third-quarter 2015 revenue was $110 million, which translates to $105 million at constant FX rates.
Our third-quarter 2016 revenue guidance ranges from flat to plus-9% against prior-year in constant currency. Regionally, we expect Asia-Pacific revenue will be above last year in constant currency, with solid year-over-year growth in Temp Contracting, somewhat offset by weaker Perm performance in Asia. We expect adjusted EBITDA to be lower, due to conditions in China, and the impact of growth in Temp Contracting, against slowing Perm activity.
We expect America's RPO revenue will return to growth in Q3, with positive momentum at existing and new clients. Adjusted EBITDA should be up on 2015. In Europe, we expect revenue and adjusted EBITDA to be lower than prior-year, due to continued difficult trading conditions in the UK. It is too early to say how the results of the Brexit vote will impact our second-half results, but we are taking a business-as-usual approach in the short-term.
In total for the third quarter, we expect adjusted EBITDA of between a $500,000 loss and a $1 million profit, which compares to a reported loss of $200,000 a year ago. We expect the year-on-year improvement in adjusted EBITDA to be driven by the Americas, Australia, as well as lower corporate costs, offset in part by the weakness noted in the UK in China. I would also note that Q3 is a seasonally weak quarter for us in Continental Europe, due to summer holidays.
Operator, please open the line for Q&A.
Operator
(Operator Instructions) Morris Eisenman, Griffin Securities.
Morris Ajzenman - Analyst
Looking at this quarter, I think you said there's $2.5 million arbitration charge, and I looked at your -- I guess your operating income, and looking at it here again, it had a loss of $2.4 million.
Is it fair to -- I mean, I'm just trying to look at this on a GAAP basis at this point here. Am I missing something? Were you close to breakeven on a operating income basis?
And then going forward, how do we see GAAP earnings? And then if you could talk about cash flow per quarter going forward, how does that play out now that the business is kind of under control and expenses are presumably better under control. How does that play out? First discuss this quarter and then going forward.
Stephen Nolan - CEO
Okay, Morris. Thank you for the questions. And this is Stephen. You are right with the analysis. I think when you move from adjusted EBITDA, and take out the depreciation and the reorg that, with the $2.5 million, we were basically breakeven in the second quarter. So, yes.
I think part of what we see now is obviously we have been doing some restructuring in the past and -- but that's now at a much lower level. And obviously, that would help us, I think, get to a positive operating income. The SG&A base -- we've obviously been investing in the S, the selling cost, and trying to reduce as much as possible of the G&A; whether it's in support or in real estate or in other IT, all those other areas have been a sharp focus for us.
The key now is for us to try and get the people that we have -- our talented sort of people on the front desk to grow gross margin and to be productive. And I think that's really been the main focus. We're not going to be adding as many people. The goal is to retain, get them productive, and to grow the gross margin while keeping a sharp eye on the G&A costs in particular.
So, that's really our short-term outlook at the moment. Obviously, there are other things going on outside of our control. For example, in the UK, with some of the delays we are seeing now on hiring, that's just going to make the second-half a bit more painful than we might have hoped for.
Morris Ajzenman - Analyst
Now, if you reached $115 million in the third quarter top line, would you be in the black on an operating income basis? And then secondly, I don't have -- your 10-Q is not out yet, but how are you on a cash generation basis after CapEx? How is that playing out? And how do you see that playing out going forward?
Stephen Nolan - CEO
So, I think what's -- what we see happening at the revenue is obviously a bit of a mix change. Right? So, we see really good growth now in Temp Contracting in Australia and New Zealand, which we are very happy to have that mix in a healthier place. It's hard to be dependent on Perm.
RPO and Talent Management -- again, longer-term deals growing. So, I think the revenue of the $115 million, it will be -- some of it is just dependent on how that mix works out and the impact on profitability. So, at the moment, we are guiding from a small loss to a positive, so hitting those numbers -- to answer your question directly -- yes, we should be right around breakeven.
In terms of the cash, we -- after the CapEx, I think we will be probably close to breakeven in the third quarter. Normally, we see top seasonality in the first half and then stronger cash generation as we finish the year. So Q4 for us is definitely a very strong quarter in cash generation. Q3 this year should be close to, let's say, a small burn or a small cash generation.
Morris Ajzenman - Analyst
Thank you.
Stephen Nolan - CEO
Thank you.
Operator
Thank you. (Operator Instructions) And I'm showing no further questions at this time. I would like to turn the conference back over to Mr. David Kirby for any final remarks.
David Kirby - Director of IR
Thank you, Tamara, and thank you all for joining us today on Hudson Global's second-quarter conference call. Our call today has been recorded and will be available on the Investor section of our website, Hudson.com. Thank you and have a great day.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.