David Kirby - Investor Relations Stephen Nolan - Chief Executive Officer Patrick Lyons - Chief Financial Officer.

Henry Chien - BMO Capital David Sachs - Hocky Capital.

Good morning. My name is Stephanie and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Hudson Global 2015 Third Quarter 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] Thank you. I would now like to turn the call over to David Kirby. Please go ahead, sir..

Thank you, Stephanie, and good morning, everyone. Our 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, the 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. These 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 EBITDA. An EBITDA reconciliation is included in our earnings release and quarterly slides, both posted on our website at hudson.com.

I encourage you to access those materials at this time as they will serve as a helpful reference guide during our call. As you review our results for the third quarter, please remember that we exited a number of businesses in 2015 that are now classified as discontinued operations and thus are part of the prior period reported results.

We have provided a reconciliation from reported to retained revenue and gross margins in the press release and in the earnings slides and we will refer to both sets of numbers. Retained revenue and gross margin exclude all businesses sold or exited in the current and prior year. With that, I will turn the call over to Stephen Nolan..

Thank you, David and good morning everyone. I am pleased to report continuing progress in our financial performance. Third quarter 2015 reported revenue of $110 million came in at the middle of our guidance.

Compared to Q3 last year, reported revenue was impacted by a $19 million reduction due to the stronger dollar and the $20 million reduction due to the sale of two businesses earlier this year. On a retained basis, our revenue grew 0.4% in constant currency. Gross margin was $45 million, up 3% year-over-year on a retained basis in constant currency.

Gross margin in our recruitment businesses grew 1.4% year-on-year with perm growing 5% while temp contracting fell 6%. RPO gross margin grew 12%, while talent management grew 2%. Reported SG&A costs were $46 million or 5% below last year on a retained basis in constant currency.

At quarter-end, we had almost 1,200 fee earners, flat to last year and we saw a nice improvement in productivity and leverage in most markets. Support costs were substantially lower with savings in compensation costs in both corporate and the Americas and ongoing savings in real estate and infrastructure in all geographies.

Third quarter adjusted EBITDA was a $400,000 loss compared with a $2.9 million loss last year on a reported basis. The year-on-year improvement in adjusted EBITDA is driven by the progress we are making in all areas with Asia Pacific up $1.7 million, corporate costs lower by $1.3 million and Europe improved by $400,000 on a reported basis.

While Americas reported results are impacted by the divestitures over the last year, the underlying business is performing well. We generated $4.8 million of operating cash flow this quarter of which $3 million related to the collection of the U.S. IT accounts receivable that we retained as part of that sale.

Turning to regional and country performance in the third quarter. Americas’ Q3 reported results now include RPO and related businesses. The comparison to 2014 is impacted by the sale of IT in June 2015.

Gross margin was flat compared with 2014 as growth with new and existing clients was offset by the end of a large contract at the beginning of this year. SG&A costs in the business unit were higher than last year due to investments in sales and delivery capabilities.

The results are also impacted by stranded costs that remained after the sale of IT and eDiscovery but these costs were substantially reduced by quarter end. Asia Pacific had a strong third quarter with year-on-year growth in revenue and gross margin of 3% and 13% respectively in constant currency.

Gross margin improvement was driven by our recruitment businesses in Australia and China. Perm grew 20% and temp contracting grew 8%. RPO grew 14% led by China and Hong Kong, while RPO in Australia saw increased activity levels at existing customers. Talent management remained soft compared with a very strong 2014, as a number of projects ended.

SG&A was 4% higher due to increased compensation for free earners. Adjusted EBITDA in the third quarter was $2.3 million or $1.7 million, better than last year. In Europe, we experienced the usual summer slowdown but we did see growth on a year-over-year basis in Belgium and Spain, offset by UK and France.

Gross margin from our retained business dropped 7% in constant currency and adjusted EBITDA was $200,000 or $800,000 better than last year on a retained basis. UK gross margin fell 15%, mainly due to weakness in perm, primarily in the legal, HR and accounting and finance practices.

We also closed a number of practices, for example oil and gas in Scotland which impacted gross margin. RPO gross margin grew 18%, continuing their growth throughout this year. Continental Europe delivered gross margin growth of 5% led by an 11% growth in Belgium and 26% in Spain, offsetting a 10% fall in France.

We recently won two RPOs deals in France and we are seeing some progress there. In recent weeks I spent time in a number of markets, I was struck by the level of energy and activity in our offices.

We now have a powerful mix of tenured and recently hired leaders and our teams are working together to drive change in how we operate and to deliver improved results. One example is how our combined Hudson recruitment and talent management product offering are helping to deliver superior service for our clients and candidates.

In addition, we continue to invest in our RPO sales and delivery capabilities in all markets and are very pleased to see double-digit growth with new and existing clients. Having said that, we do recognize the macroeconomic concerns in many of our markets but remain focused on driving profitable growth in our core businesses.

To recap on what was a much improved quarterly performance; in Asia Pacific third quarter was the seventh consecutive quarter of year-over-year constant currency gross margin growth. Our teams in China and Australia delivered strong leverage on the incremental gross margin and significantly improved adjusted EBITDA from a year ago.

In Europe, our teams in Belgium and Spain continued to drive strong growth across every business line. Despite the challenging 12 months in the UK recruitment business, we have attracted and retained a very strong team that is getting back on track and I’m confident we will receive tangible improvements there in the short-term.

In the America, our RPO focused business is now well-positioned for double-digit growth with an excellent customer base and a right-sized cost structure supporting it. And in corporate, we now have a simpler, linear structure with lower running costs.

I’ll now turn over the call to Patrick, our Chief Financial Officer to review some additional data points from the third quarter as well as our fourth quarter outlook..

Thank you, Stephen and good morning everyone. In the third quarter, we incurred $2.3 million in restructuring charges in continuing operations. The charges mainly related to the elimination of stranded costs in U.S.

following the completion of our transitional support obligation for the businesses we sold, as well as real estate actions in the UK and Ireland. Our stock buyback program started in August and we purchased 262,000 shares in the third quarter at a cost of $700,000. Through October 29, we purchased an additional 58,000 shares at a cost of $145,000.

Our third quarter tax provision for continuing operations was a tax benefit of $1.6 million. Stock compensation expense was $200,000 in the quarter; capital expenditure was $1.1 million in the third quarter. We expect between 3 million to 4 million of CapEx for the full year.

We ended the quarter with $36.4 million in cash and $18.6 million in available borrowings, totaling $55 million in liquidity. We had minimal borrowings on our credit facilities at the end of the quarter.

This week, we replaced our Australia and New Zealand credit facilities with a new local bank which will provide us with increased availability at a lower cost.

Day sales outstanding or DSO was 48 days, an improvement of two days over last quarter but three days higher than a year ago, mainly driven by the growth in our business in China where credit terms are typically longer than what we see in our other major markets.

Looking to the fourth quarter and using our projected exchange rates for the quarter, we expect a revenue range of $100 million to $110 million. Reported fourth quarter 2014 revenue was $136.7 million which translates to $122.4 million at our estimated FX rates for the fourth quarter.

Adjusting for the businesses we have sold or exited, fourth quarter 2014 revenue was $104 million at constant rate. So, our fourth quarter revenue guidance ranges from 4% down to 6% up from prior year in constant currency. Regionally, we expect Asia Pacific revenue and adjusted EBITDA will grow year-over-year in constant currency.

Americas RPO revenue gross margin will be up in 2014; adjusted EBITDA in the Americas in the fourth quarter will also be helped by lower support costs. In Europe, we expect our retained business to be close to flat but improved from recent quarters as the UK stabilizes, while the rest of Europe remains steady.

Adjusted EBITDA in the retained business should be improved from prior year just as we saw in the third quarter.

Overall for the fourth quarter we expect adjusted EBITDA of between breakeven and 1.5 million profit, which compares to a reported loss in the fourth quarter 2014 of $2.4 million, with the year-on-year improvement driven by growth in Asia Pacific and a greater than 30% reduction in corporate costs. Operator, please open the line for Q&A..

[Operator Instructions] Our first question comes from the line of Jeff Silber with BMO Capital..

Hi. Good morning, it’s Henry Chien calling for Jeff. I had a question about your 4Q guidance.

What is the -- if you can, what is the implied retained revenue growth rate for the quarter, do you have that?.

Minus 4 to plus 6 on prior year in constant currency on a retained basis, Henry..

And in terms of -- I am just curious, what is driving the gross margin expansion that you saw in the quarter and I am assuming also you say expect the next quarter?.

We have our mix of business there, Henry. So, I think it really depends on where we’re seeing growth in perm, in Asia Pacific as well as RPO..

[Operator Instructions] Your next question comes from Jamie Padgett with Helmet Capital. [Ph].

Couple of quick ones; one, you talked about in the press release that most of the stranded costs have now been eliminated from the business. But if I am looking at the guidance right, I think that the OpEx is expected to step down in Q4 versus Q3.

Is that just a full quarter impact of having those expenses out of there?.

Yes, it is Jamie. I mean it’s -- we’re working all to the third quarter in the Americas and as we exited that into fourth quarter, we are at a much lower rate now because we also had a transitional services agreement with Mastech who we sold the IT business to..

What is the impact of that agreement?.

Well, I just meant that we have to give transitional service to the third quarter; we’re not finished. We’re now able to kind of -- so from a real estate perspective as well as actual support costs in the Americas that’s at a much, much lower level than when we started third quarter..

And then as we look forward then, is the Q4 a good base to be thinking about into next year?.

Yes. I mean again you have there the seasonality, but yes, overall, I think we’re now -- with these retain businesses we have and a lot of the costs work we’ve done, you are looking at a good starting place..

What’s the typical seasonal pattern for your operating expenses?.

OpEx, I mean that moves around. In the first quarter we have obviously folks in Australia and Asia on holiday, so that tends to be bit lower and then picks up in Q2 and then drops off again in Q3 when we have the European holiday. So, it’s mostly fixed but there is some variability there depending on those factors..

And then the business in APAC, how much of that is China versus Australia and New Zealand?.

About 30% right now in Asia..

Okay, 30% Asia and then 70% is….

Yes, and that 70% is A and Z. [Ph].

What’s the business climate there, customers there feeling pretty negatively impacted by recent price changes in the commodity space or do you not really deal with many of the customers that would have exposure there?.

So, in Australia, the whole economy has some types of the commodity space. We did not have high dependency in Western Australia to particular practices, but it has had an impact for sure. In China, we’ve been working on diversifying our client base to doing more business with local owned companies.

So, we are seeing a broader kind of spread there of business and just been focused on some of the larger players..

And then another question on UK, what’s it take to really get that geography back on track for you guy; is it just the matter of allowing some of the recent hires there to mature and see the role and drive change?.

Yes, that’s a big part of this. We have just two big businesses -- two businesses in UK, a very strong business in Scotland which has -- the people there have been with us a long time and again they’ve had impacts from oil and gas and some of the financial services ups and downs I would say but that’s a very good business.

The English business is -- it has taken a bit more work but there are some really, really good out we’ve retained and some strong people that we’ve brought in. I was there this week and it’s a -- it has a very good feel right now compared to what it was earlier in the year..

So more optimistic about being able to close business and those kind of things?.

Yes, obviously the UK market has been very good, so we’re disappointed in the sense that we’ve missed probably some of the opportunities. There might be a softening thee I would say but from what we’re seeing in terms of our activity and market activities and it just feels like a progress.

But it does take time, get some people in; get them productive and that’s kind of the journey that we are on. It’s taking a bit longer than we’ve expected or hoped. But I had a good visit this week for sure..

And then just one final quick question about share count. It looks like it was up about 1 million shares quarter-over-quarter beside some share buyback activity, I think the stock price was about the same level quarter-over-quarter.

What cause that?.

I think it was a new program for them and for me it was I think impact of [indiscernible] as well as we had change in control. So, we’ll have to see if there is -- we can give you maybe offline a better reconciliation there. I don’t have it handy..

Since December, yes, this is manly driven by stock compensation..

[Operator Instructions] Our next question comes from Ankur Sagar, [ph] a Private Investor..

The restructuring that you had initiated few quarters ago, is that a fully done or is there something left that is still going on in the fourth quarter?.

That program at this stage is largely complete. I do expect there will be some small additional charges in Q4 as we ramp up that program and some usual true-up activities but compared to Q3, I’d expect that to be a lot less into the fourth quarter and likely less than a $1 million..

The fourth quarter guidance that you provided is definitely better than we have seen from Hudson in a few years, so congrats for that.

But going forward, to maintain consistent and increased profitability -- visibility, where will that come from? Do you still expect the operating expenses to bring it down or is it just more now growth centric in your core regions?.

Well, I think it’s been -- I think -- I am here two years, just over two years and we definitely had to get to cost base rise, which I think we’ve made great progress taking the last -- in the last quarter or two. But we also have some investment in fee earners.

We had practices that in certain markets where we just -- we didn’t have enough people and sometimes that tied to leadership or just all sorts of different factors.

So, I think the -- we don’t -- we’re not giving any guidance on 2016 at this point, but our goal, as I said now for the last several quarters, was to get to a profitable place by the end of this year with a focus on growing as well as optimizing the costs, which for me is more fee earners and lower infrastructure.

And I think we’ve made, as I said, great progress there and intend to do everything we can to enhance that as we go into next year. But one option that we’re looking at is we -- if we add fee earners in certain markets between now and the end of the year, and we will see that SG&A go up in Q1 and the benefit will come later in the year.

So, you have to think about it in our context as well that before we still have some work to do in certain markets to add consultants and business producers..

So, I know you’re not providing any guidance for 2016, but just internally you have any set goal or target to achieve let’s say GAAP profitability by what timeframe?.

No, I mean no comment at this point on that..

Your next question comes from David Sachs with Hocky Capital..

So, if you could talk a little bit about the visibility in 2016, the RPO and talent management revenue streams? Maybe you don’t want to provide specific numbers, but just a sense of how much of 2016 might already be, call it in backlog or under contract?.

Well, on RPO, David, as we know, there is multiyear contracts that we have there, and as always there is new business that we’re bringing in, some people having had us fix say they are hiring but choose to go back the independent health model. So, we will always have business coming in and out there.

And again just the color on China what we’re seeing there is a lot of projects growth. So that is slightly different model than the multiyear deal. So, it’s kind of somewhat -- it’s more of a steady stream that we have in perm for sure.

But most of the clients that we’ve had or have at the moment will continue into 2016 and the new folks that we’re bringing online; our goal is to retain all the clients that we currently have.

So, we saw double-digit growth in Q3 and we think it will continue in Q4 and -- so it’s a mix of finding the projects, signing up new customers, getting them on stream and billing as soon as we can and maintaining obviously as much of customer base that we have at the moment.

Talent management is doing very, very well in Belgium and staring to feel it’s more of an opportunity actually in the Europe. A lot of our APAC business is tied to public sector which has -- is choppy let’s say.

So that one was very strong last year, is fine this year, but just is we’re bidding all this, we are in lot of different projects, typically within public sector and it’s hard to give a view into next year right now..

[Operator Instructions] We will follow-up from Jamie Padgett with Helmet Capital. [Ph].

Two quick follow-ups, gross margin, what’s the typical season pattern we should expect there?.

It doesn’t change that much, Jamie. I mean it’s within our RPO depends to be on -- if we have some projects or some new wins. And perm will depend really on the holiday probably as biggest the impact. So, Q1 tends to be a bit softer because of the Asia-Pac holidays. That’s the best probably..

Is it the impact on the utilization of the fee earners that shows up in gross margin, correct?.

We see higher gross margin if we have more fee earners. And then the question is when -- as we increase productivity that allows leverage into adjusted EBITDA. So the goal is you have right number of people or driving your gross margin.

They’re paid obviously based on commission, so some of that -- but really the rest of the cost should be flat and you get more leverage. So that’s really what we saw in the third quarter was a nice improvement. And many of the markets on folks will be hirers and earlier this year that’s now become productive.

And we will continue to invest in fee earners in some of those markets for sure..

But the fee earners are -- they show up within as I said, off against gross profit as opposed in the SG&A..

No. They’re in SG&A..

So what’s the cost in against gross margin then?.

It’s mostly our temp contracting book. So that’s what we’re paying the temps, so we have the revenue and then we include and there the cost. So perm would come through at a 100% gross margin and but temp as you can see that’s in the 20s probably because we’re paying the temps..

And fee earners are all in the SG&A?.

Yes, correct..

And then one other question, the accrued reorganization expenses around the balance sheet, is that expected to be cash and when will you pay that out?.

That will largely be paid out over the next probably 18 months, so a lot of it will be in the next 12 months..

[Operator Instructions] Our next question is a follow-up from David Sachs with Hocky Capital..

Just a quick numbers question. So in terms of the if I annualize the third quarter, fourth quarter that suggests the Company’s doing somewhere between $400 million and $450 million, $180 million to $190 million in gross margin.

The current run rate of corporate expense, what would you guesstimate that is sort of exiting 2015 and how much gross margin and/or revenue with that overhead level support? I’m just trying to think through the marginal contribution of revenue growth which we haven’t seen in a while..

I think on corporate cost, David, our exit rate will be about 10 million annualized..

And that 10 million would support how much above the current level of business before you have to sort of adding overhead, if you will?.

Not much. I mean our goal is to get it with simplified structure, get it lower and then some of that money, we know savings does go back into increasing fee earners what we have now leaders and good practices in market like the UK. So, there will be short term hit on that because we may be adding SG&A but the gross margin will come.

And the fixed cost which we’ve been bringing down and our goal -- Patrick and I is to keep them as low as we can..

And based on what you’ve just discussed on the conference call with double-digit growth in RPO and somewhat positive growth in talent management, those in the third quarter represent 37% of your gross margin mix and they are growing faster than the overall Company is, and they have the highest margin contribution of your business portfolio.

So that should suggest that the overall margins of the Company even if revenue were to be flat next year, should be higher.

Is that the right way to think about it?.

Yes. Look, our -- we’ve been investing in kind of each of the three main legs but the contracting book of business for us has been good in certain regions, not in others. If that’s comes back, that would have an impact on that GM and what would fall out.

If things stay as they are and we do -- we will continue to increase our business on talent management. And yes that would have a more incremental return on EBITDA..

And your predecessor used to give a multiyear goal of achieving, call it industry average profitability of 4% or 5%, maybe even higher EBITDA percentage of revenues.

Is that still a realistic expectation for Hudson in the next 24 months to achieve something along those lines, based on the cost take out you’ve identified and implemented as well as the continued growth in RPO and talent management, hopefully a recovery in these other temp and perm businesses?.

Look, I think there is two things, one is absolutely the goal [ph] and I think with all of the noise that we’ve had this year and we are working on our budget for next year but I think on our next call we will have a better view of what we would be able to say there but it is absolutely our goal to get to sort of right return based on the mix of the business that we have and so that will continue..

And one last, if you could just comment on the recent board addition, the gentleman that you added appears to have quite an attractive background. This explains the relationship how you found him and what benefits you might get from his involvement in the Company? Thanks..

Yes, Ian, we’ve spent a time this week and have met now several times is -- we’re very pleased to have to him. Certainly we wish Dick Stolz all the best and thank him for his nine years. It’s a network David and if you just -- some of them we met and we liked and he was very excited to join Hudson board.

Very experienced and he’s obviously a global prospective as well as which I think is great..

[Operator Instructions] At this time, there are no additional questions in queue..

Thank you, Stephanie. And thank you everyone for joining the Hudson Global third quarter conference call. Our call today has been recorded and will be available on the Investors section of our website, hudson.com shortly. Thank you. And have a great day..

Thank you. This concludes today’s conference. You may now disconnect..