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Hudson Global, Inc (NASDAQ:HSON)

Q4 2013 Earnings Call

February 27, 2014 10:00 am ET

Executives

David Kirby

Manuel Marquez Dorsch - Chairman, Chief Executive Officer and Chairman of Executive Committee

Stephen Nolan - Chief Financial Officer and Executive Vice President

Analysts

Jeffrey M. Silber - BMO Capital Markets U.S.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

Operator

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. [Operator Instructions] I'd now like to turn the conference over to David Kirby. Please go ahead, sir.

David Kirby

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 Manolo 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 the 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 analysts' 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 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 Manolo Marquez.

Manuel Marquez Dorsch

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 include the charge related to our European CEO transition towards the end of Q4. Gross margin was just under $57 million. And Stephen 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 3 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 20 countries. Many of the various business lines and independent approaches to the business still existed when I joined. They were not the necessary synergies, processes and homogeneous business practices required by a truly scalable business less dependent on an economic cycle. 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 4 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 a compelling digital presence.

We have advanced our strategy meaningfully in the past 3 years. Specifically in terms of our global practices, we're 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 5 categories of NelsonHall's evaluation of RPO providers. With an expanded sales organization now in place, 2014 is off to a strong start, with 8 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 multi-country delivery capabilities.

Unfortunately, our efforts in eDiscovery have yet to yield proportional results. We have, however, made considerable strides realigning 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 other positive indicators of the successful execution of our transformation. We started to enhance 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, the quality of our service to clients and candidates. Our global Net Promoter survey scores have increased by more than 20% in Australia, the U.K. and the U.S. 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 efforts.

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 and gross margins 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 top line and as a result on our earnings were eroded by a 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 had begun, to rightsize 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 our decline through our cost actions. In particular, we've reduced corporate and regional support cost 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 top line growth.

For a 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 core. Our front office productivity has held steady throughout 2012 and 2013 in most of our business lines, which suggest the potential to scale the top line 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 decline. 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 are making in our strategy; second, the positive indications from recent sequential growth in gross margin; third, the downstream benefits of rightsizing our cost base with a clear determination to continue seeking operating efficiencies; fourth, our strength and leadership team; and fifth, the selective investments we are making to rebuild scale in key markets and business lines.

Our leadership team is fully committed to achieving quarterly breakeven adjusted EBITDA within this year, and creating a strong base for continued profitable growth. As always, I would like to thank our people for their diligence and persistence, and our investors for their engagement with us on our journey.

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

Stephen Nolan

Thanks, Manolo, and thank you, all, for joining us this morning. I'll begin with overall results for the fourth quarter. Our revenue came in 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 that's 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 retail 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. Our Belgium grew over 30% sequentially, and the Netherlands and Spain grew by double digits 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 U.K., fourth quarter gross margin was 13% below last year, with England recruitment and our U.K. legal businesses provide -- posting disappointing results. Belgium was 11% below last year, but has regained traction after a difficult first 3 quarters of 2013.

In Australia, year-over-year revenue and gross margin declines slowed in the fourth quarter. The 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 have seen improvement 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 3 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 gross margin decline sequentially and on a year-over-year basis in the fourth quarter.

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

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

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

The 2 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 margin in the Americas and in the U.K. 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 requiring a large contract. As Manolo said, we have made some recent organizational changes in the U.S. legal practice and are aggressively ramping up our new business development efforts.

After the U.K., our new CEO, Alexis Bretteville, is finalizing a plan to regain top line momentum in that key market. We are the market leader in Scotland but need to recapture 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 3 regions. 45 positions were eliminated and 5 properties were exited or space reduced. For the full year 2013, we incurred $6.7 million in restructuring, and we continue to expect approximately 1.5x 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 stopped, and the balance was 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 borrowings, totaling $67 million in liquidity. We generated $4.1 million in operating cash flow during the quarter and had $500,000 in borrowing 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, which is 3 days better than a year ago and a 5-day improvement from the third quarter.

We continue to have a good dialogue 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, commissions remain challenging in many markets, economic growth is inconsistent and hiring subdued. In our most promising market and practices, however, we are investing in our fee earner base in order to regain market share and to grow our top line. 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 6 months in the market, we expect to see a positive return on that investment at 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 2 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 $2.5 million and the $4.5 million loss. This revenue range implies a year-over-year decline of between 3% and 9%. Regionally we expect the Americas to lag our overall guidance range, while Asia Pacific should be within the range and Europe ahead of the range, even possibly delivering year-over-year growth.

Holly, please open the line for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] The first question will come from the line of Jeff Silber with BMO Capital Markets.

Jeffrey M. Silber - BMO Capital Markets U.S.

If you don't mind, I think I caught -- missed your guidance for the region in terms of how it fits into your revenue guidance for first quarter. Just could you cover that again?

Manuel Marquez Dorsch

Jeff, we don't hear you well.

Jeffrey M. Silber - BMO Capital Markets U.S.

Okay. 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.

Stephen Nolan

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.

Jeffrey M. Silber - BMO Capital Markets U.S.

Got it. 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?

Stephen Nolan

So again, gross margin percent will obviously depend on our mix of business, and we're seeing, obviously, different trends in different markets at the moment. But overall, I think if you compare the first quarter of last year, probably the Americas and Asia Pacific will be fairly similar on adjusted EBITDA, and Europe will be ahead.

Jeffrey M. Silber - BMO Capital Markets U.S.

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.

Stephen Nolan

China, it's a tough quarter with the holidays, and the -- both in the summertime as well as the Chinese New Year. But 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 business is growing some. So we are -- we do know that in terms of RPO, we had some good wins in the Asia Pac region in the first quarter. So that's -- there's, I would say, mixed signals but overall, they will beat the guidance.

Manuel Marquez Dorsch

Yes, I would comment on RPO and Talent Management specifically as well, which are growing very well and in a very healthy way in Asia Pacific. Out of the 8 new clients that we've won for RPO in January and February this year, 6 are mainly in Asia, and most particularly in China, which is going to have a positive effect on finance. I think the comment that Stephen was referring more are 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. So we are seeing more traction there, too. And all these sequential gains that we have experienced in Australia. And even if it looks like a drop in Q4, it's less of a drop than last year and less of a drop than we are seeing in our competitors. So we are positive that we win market share, and we can restore Australia to positive growth.

Operator

Your next question comes from the line of Mark Marcon.

Unknown Analyst

This is [indiscernible] calling in 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 throughout fiscal '14. If you could add a little bit more color to that, that would be great.

Stephen Nolan

So we -- I mean for '14, we continue to see at the moment, some tough conditions in our -- primarily in our eDiscovery business. Overall, our margins, I said gross margin 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.

Manuel Marquez Dorsch

Again, on RPO in North America, we are seeing positive traction. And in particular, Q4 in RPO in the Americas, we were at 29% over Q4 2012.

Operator

And your next question comes from the line of Ty Govatos [ph] with TG Research [ph].

Unknown Analyst

A couple of questions, if I may. Steve, is there an after-tax number to the reorg 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 3 decimal places per quarter?

Manuel Marquez Dorsch

That's exactly the question we were expecting from you.

Stephen Nolan

Let me start with the SG&A, Ty. We think, at the moment, we're targeting about 50 -- 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 the variable tax benefit could be up to 20% on the restructuring numbers that you saw. 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.

Manuel Marquez Dorsch

Yes. And as both Stephen and I have said, we are going to hold the line on the settings that we have done on the MD&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, we need to invest now to grow the top line so that we can benefit from the leverage that we have built in our cost structure after all the restructuring we've made in 2012 and 2013.

Unknown Analyst

Fair enough. That leads me to my other question. Manolo, where do you expect to add or focus on the fee earner additions?

Manuel Marquez Dorsch

So we will be doing that in the practices that have best potential for profitable growth, so for sure, on RPO and Talent Management. And then on the recruiting end, in every geography, what we will be doing is tagging the recruitment in those practices by geography, which is different because, I mean, IT practice is strong in some areas, and admin and finance is stronger in other areas. So we will attack that by geography, understanding where we have a key differentiating factor to win market share and better potential for profitable growth.

Unknown Analyst

When we were talking about the SG&A, it looks like you might be targeting $58 million but it might be $60 million with the fee earners. That implies an awful big investment in fee earners this year, or am I wrong?

Manuel Marquez Dorsch

Well, which we will be phasing out appropriately, although we would skew it, I mean, always preserving a good pattern of profitability, so which is kind of something we need to lock in, but will be skewed to the first and second quarter, because we want to have as much of a return on that investment within the year. And as Stephen has explained, it usually takes 6 months for a new recruit to ramp up. So we know that all the people that we recruit on the first and second quarter will deliver within the year. So the payoff of the investment is not going to be a long-term payoff. I mean, we will give everything up so that the whole thing works. And as I've said, we definitely want to reach breakeven and above breakeven on adjusted EBITDA quarterly within this year.

Operator

Your next question comes from the line of Bill Nasgovitz of Heartland Capital.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

Just a question on eDiscovery. What's our differentiating factor there?

Manuel Marquez Dorsch

Well, we -- 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 are 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.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

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

Manuel Marquez Dorsch

So I started doing that when I joined, so that was 2.5 years ago, almost 3 years now. Then I appointed Lori Hock as Head of Americas to bring more focus in the Americas region and start doing that approximately 1 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...

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

So we're losing money there.

Manuel Marquez Dorsch

We are not losing money. The eDiscovery business is profitable, but we are not making as much money as we did before.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

Okay, well, regarding...

Manuel Marquez Dorsch

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 our 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.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

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's down 33%.

Manuel Marquez Dorsch

That's right, that's right.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

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. In other firms -- we seem to be losing share because other firms are not experiencing this to the degree we have. So what is -- what are the key factors here which are retarding sales growth?

Manuel Marquez Dorsch

You're absolutely right. I mean, let me just clarify that we took out $24 million, not $12 million, so it was $12 million on the support cost and $12 million on real estate and IT. So it's about $24 million. And you're absolutely right. That helped, that cushioned down 69% of the gross margin fall. So almost 2/3 or above 2/3 of it, but not fully. So the disappointing result is that the gross margin top line have decreased faster than what we could take out in terms of cost. One of the members of my management team uses the analogy of a leaky bucket. Our organization was a leaky bucket. And as we were trying to mend the bucket, we were losing top line. I think that's what we have now, and it was difficult to do everything at the same time. What we have now built is a strong foundation. And now what we need to do is absolutely grow the top line and recover scale. The good news is that productivity has held steady, as Stephen and I have said, so we have not lost the capability to grow. It's just now adding fee earners. We've lost, in 2 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 measuring our progress, and 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's we're certainly seeing in Continental Europe, and that's what we're 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 a new management team that we've got now in 6 months rather than 2 years, it would have felt completely differently, but unfortunately it took time.

William John Nasgovitz - Heartland Group, Inc. - Heartland Value Fund

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 if -- we're 5 years into this recovery, 5 years. Interest rates are not going to remain this historically low forever and ever, and we've got a ship here that has not been able to turn. So we urge the board to take action.

Manuel Marquez Dorsch

Okay. I will translate that with our -- to our board. But I can assure you that our board takes these things very seriously, and they have reviewed all these actions, and one of the actions they did is appoint me 2.5 years ago. So I mean, I understand it's 5 years into the recovery, but we are taking all that action, and I think that -- I do want to leave it on telling that 2-year story, because yes, we are making now progress, and we've seen that in the fourth quarter. It took the time, but it is historic. I mean, you have to do a lot of things, one step at a time to reach to the level we are reaching now.

Operator

Your next question comes from the line of David Sachs [ph] with Hocky Capital [ph].

Unknown Analyst

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?

Stephen Nolan

So 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 to 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.

Unknown Analyst

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

Stephen Nolan

It's about a $50 million sales business. Now it's about 16% of our total gross margin.

Unknown Analyst

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

Stephen Nolan

16%, yes. About 15% or 16%, yes.

Unknown Analyst

And then in terms of the pipeline -- well, let me go back one second. The 8 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 Hudson corporate advantage in terms of winning these RPO or...

Manuel Marquez Dorsch

Well, we're very proud of that. I think 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 is 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 5 key characteristics of an RPO provider and have carefully examined and analyzed all the RPO -- major RPO providers and have given Hudson a leadership status on all the 5 categories. And I mean, if you read the report, you will 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.

Unknown Analyst

And in terms of these 8 wins, in aggregate, will this be sufficient to move this $50 million business, 10%, 20%? Or just a kind of a sense of the order of magnitude on the benefit of these recent wins.

Stephen Nolan

Sorry, David, I can't really comment on that right now.

Unknown Analyst

Okay. And then in terms of your pipeline and the ability to scale this businesses, what are you seeing today? Based on this report, it would suggest you'd win everything. But clearly that's not the case. So what do you say in terms of the pipeline, it's bigger and the likelihood that these 8 wins weren't just an accident, but just the beginning of what you think is a proper turnaround in this?

Manuel Marquez Dorsch

Well, we've been very successful in Asia Pacific. And in another report, which is the one I also refer to, the Baker's Dozen, we are #2 RPO provider in Asia Pacific, #4 in Europe and #9 in the U.S., and this is not just size, it's size, quality, et cetera. So our RPO business did start in Asia Pacific, where we are very, very strong there, but we need to also -- and I did make RPO a global business 1.5 years ago. So we need to get more traction in Europe and maybe in the U.S., where it's the biggest markets and most of the opportunities, and we have invested in a new team in RPO in the U.S., which joined us during 2013 after Lori Hock joined us as CEO of the U.S. 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, as if we've got options, we might also contemplate whether it's a possibility that we need to contemplate more aggressive actions to accelerate the growth in RPO.

Unknown Analyst

On that topic, unfortunately, given your share price and your -- but you do have a measurable [ph] liquidity, but your share price is a significant handicap in this industry. It seems like these businesses trading for sort of between 2x and 3.5x revenues in the RPO niche, at the low end of that would be essentially 100% of your market cap for only 11% of your revenue. So it would seem challenging to acquire in that space?

Manuel Marquez Dorsch

Yes, absolutely. Well, my statement is a long-term statement, not something that we could do right away.

Unknown Analyst

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 [indiscernible] character for someone to switch from a more successful and profitable organization to use a Hudson turnaround for it?

Manuel Marquez Dorsch

Well, I have to share with you, and this is one thing that I'm most proud of, everything I've done at Hudson is attracting a great 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 2 years, as they joined, they have invested their own money buying shares in the open market. So that shows the confidence they're having in what we're doing. And their confidence is based mainly on 3 things. I mean, obviously, when I recruit them, I share with them very openly our vision, our strategy, the area where we have a great opportunity and a dominant position, and the area where we are weak that, with our industry experience, they can help us reinforce. They see Hudson as a young company with a lot of potential, a company where they can make a personal impact and enjoy the challenges, to help us build a growing company from the ground up with sustainable profitability. So Hudson is, in terms of our platform, in terms of our size, looks like a grown-up company, but it was the product of those 67 acquisitions, and Hudson is only a 10-years-old company.

Unknown Analyst

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 and in prior investment presentations that you felt that the business could achieve a high single-digit, 7% or 8% EBITDA margin when the business did kind of recover the top line. You've taken a more cost sensitive sense but it seems that, that range is fairly 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?

Manuel Marquez Dorsch

I think that all depends on the timeframe 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 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 gross margin growth.

Unknown Analyst

Okay. Just working backwards, if we got to -- what level of sales at this point would we need to achieve whether it be a 4% to 5% margin or a 7% to 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've taken 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 incremental revenue to start driving margin?

Stephen Nolan

Dave, it's Stephen. I think we're taking, as you can tell, some very serious steps here, some positive steps forward, I think. And I think we are -- I'd like to see the traction coming through at the moment, before I could 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 this quarter and on the trends that we're seeing, and I would leave it at that.

Unknown Analyst

I'm encouraged by the wins in RPO, and the stabilization and especially the improvement in China. Hopefully, 2014 is a year of continued sequential improvement.

Operator

And your final question is a follow-up question from the line of Ty Govatos [ph] with TG Research [ph].

Unknown Analyst

Yes, Manolo, again, when we spoke, you talk about the breakeven EBITDA this year. And I realized 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?

Manuel Marquez Dorsch

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

Unknown Analyst

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?

Stephen Nolan

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

Operator

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

David Kirby

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. Thank you, all, and have a great day.

Operator

Thank you for your participation in today's conference call. You may now disconnect.

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