Edited Transcript of HSON earnings conference call or presentation 31-Mar-20 2:00pm GMT

Our EMEA business produced another very solid quarter with revenue less certain direct costs up 36% in constant currency. The growth was driven by strong results in our businesses in Continental Europe. Adjusted EBITDA of $400,000 increased from an adjusted EBITDA loss of $300,000 in Q4 of last year. We’re very proud of the growth and momentum in our EMEA business.

Lastly, I’d like to extend a special congratulations to Matt Diamond for his promotion to CFO on January 1. I speak for the entire Hudson team when I say that we appreciate his hard work and dedication to our company.

I’ll now turn the call over to Matt to review some additional financial details from the fourth quarter.

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Matthew K. Diamond, Hudson Global, Inc. – CFO [3]

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Thank you, Jeff, and good morning, everyone. Our fourth quarter tax benefit from continuing operations was $900,000, primarily reflecting the release of reserves relating to uncertain tax positions from prior years. The company generated $2.7 million in cash flow from operations during the fourth quarter. Days Sales Outstanding was 42 days at December 2019, well improved from DSO of 50 days that we had in December 2018.

We ended the quarter with $31.7 million in cash and restricted cash. As a reminder, in April 2019, we finalized a new credit facility in Australia to support the expected growth in working capital needs as a result of new client wins in that market, but we had nothing drawn on this facility at the end of Q4.

I’ll now turn the call back over to Jeff to give some more perspective on our RPO business, Hudson’s corporate costs and to review current trends in our business.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [4]

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Thank you, Matt. Turning to Hudson’s corporate costs. Immediately following the closing of the divestitures at the end of the first quarter 2018, management reviewed the company’s corporate costs on a line-by-line basis and began to rightsize these costs for the new business model. We believe corporate costs in 2020 should be approximately $4 million, excluding nonrecurring items, or similar to the annualized run rate for corporate costs in Q3 and Q4 of 2019. This reduction in corporate costs has not impacted our operating business. For the full year 2019, the company’s corporate costs of $4.1 million exclude $1.1 million of nonrecurring expenses. For the full year 2018, corporate costs of $5.6 million excluded nonrecurring expenses of $2.4 million related to severance expense.

Turning to our stock buyback program. We repurchased 5,000 shares for — sorry, yes, 5,000 shares for $63,000 in the fourth quarter under our $10 million share repurchase program. Since the inception of this program in the third quarter of 2015 through the end of the fourth quarter of 2019, the company’s has purchased 433,000 shares for $8.3 million. To accelerate buyback activity, the company completed a tender offer in March of 2019 for 247,000 shares of the company’s common stock for an aggregate cost of $3.7 million, excluding fees expenses related to the tender offer. The company continues to view opportunistic share repurchases as an attractive use of capital and expects to continue its aggressive share repurchase strategy going forward. As an example, on March 27, 2020, the company completed transactions with certain shareholders to repurchase 259,000 shares of the company’s common stock for an aggregate cost of approximately $2.2 million, representing approximately 9% of the company’s shares outstanding as of the end of February 2020. Note, these transactions were done at a price below our cash per share as of December 31, 2019. Following these transactions, the company has approximately 2.7 million shares outstanding as of the end of March 2020.

Turning back to our business. As disclosed in our press release issued on March 13 as well as our 2019 Form 10-K filed today, our business may be adversely impacted by the recent COVID-19 outbreak and the accompanying economic downturn. This downturn as well as the uncertainty regarding the duration, speed and intensity of the outbreak has led to an initial reduction in demand for our services. Some of our customers have instituted temporary hiring freezes while other customers that are more capable of working remotely have been allowed to operate more or less as usual. The expected time line for this reduction in demand for our services remains highly uncertain and difficult to predict considering the rapidly evolving landscape. We are vigilantly monitoring the situation surrounded COVID-19 and will continue to proactively address this situation as it evolves. We’re confident we can continue to take appropriate actions to manage the business in this challenging environment due to the flexibility of our workforce and the strength of our balance sheet.

To this end, we’re cutting discretionary costs where we can and are prepared to further cut costs as necessary to protect our business. That said, we’re trying to take a balanced approach to the situation. We don’t want to overreact nor underreact as we remain focused on our objective of maximizing shareholder value over the long term.

Operator, can you please open the line for questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Josh Vogel from Sidoti.

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Joshua David Vogel, Sidoti & Company, LLC – Analyst [2]

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A nice way to close out 2019. My first question, I think it would be helpful to get a better understanding around your client demographics and end markets. Could — maybe any be classified as “essential?” And what are you doing to help them navigate through these uncertain times? And then maybe on a slight tangent, what work, if any, is still getting done through maybe a remote capability?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [3]

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Good question, Josh. I think there were 3 in there. So first off, on our business mix, we have some really high-quality clients. They’re mainly household names companies that you would all know, Fortune 500 type of companies that are, in general, healthy, have strong balance sheets and good credit ratings. And our mix is roughly 1/3 health care, 1/3 financial services and 1/3 other. And then within financial services, it’s a healthy mix between commercial banking, investment banking, insurance, pension funds, even one central bank is in there. So it’s a diverse collection of financial services. And so some of those businesses are fairly defensive and will hold up better in the economic downturn. And certainly, the health care businesses and consumer goods are deemed essential and are running and producing. I will say that pretty much globally, at least in the markets we’re in, our clients are working from home, working remotely where they can and our teams are as well.

No, I was just going to say, we are engaging very actively with our clients and our employees. And we are a partner, a talent — procurement talent management partner to our clients. And episodes like this, crises like this do show clients and potential clients that need to have a partner and an adviser to help them navigate these difficult times. And so, although economic activity is certainly being impacted, we’re hopeful that some good things will come out of this situation over the long term.

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Joshua David Vogel, Sidoti & Company, LLC – Analyst [4]

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Great. And you actually — that led in or you answered my next question, which was around understanding that one of the biggest risks or fallout from what’s going on could maybe be that clients may temper or lower the amount of employees they were looking to add over a certain period of time. But on the other side of it, there is a tailwind or benefit that could arise from this, and that is the need for a partner. Are there any other tailwinds or benefits that you could see emerging from all this uncertainty out there?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [5]

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Sure. When clients are surveyed about what they like about the RPO model and working with a partner, one of the things they often say is flexibility. And we provide partners the ability to flex up and down with their hiring needs. And one thing that’s helpful in that is these — are these centers of excellence that we have around the world that can help clients ramp up and ramp down their hiring levels. And so I think companies that are going to think rethink their business model and think, gee, we need to have more flexibility because it is a volatile world out there, and we need a partner who can help us. I think it’ll strengthen demand for RPO over time. So that could be a good thing to come out of this. And we also think, based on emerging from prior downturns, that some clients will look to add contingent contractor-type people before they add permanent employees. And so our push into the contracting space, we think, will position us well for that environment.

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Joshua David Vogel, Sidoti & Company, LLC – Analyst [6]

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Shifting gears a little bit. We know how strong the balance sheet is, especially entering — exiting 2019. I was just hoping you could share some insights around your overall liquidity position today.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [7]

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Yes, sure. We do have some seasonality in our cash flows at least historically, it might not always be like this in the future, but Q4 tends to be a strong cash-generating quarter. That’s been true in recent years and was certainly true in 2019. Q1 tends to be a weaker cash-generating quarter for a variety of reasons. It’s a slow period for us. It’s also when bonuses are paid, and we’re a people business. We do think — we don’t like to give guidance by quarter. We do think this year’s first quarter will be much better than last year’s first quarter in terms of earnings and cash flow generation. And we’re going to fight really hard to protect our cash-generation abilities and also protect our balance sheet. Said another way, we’re going to do everything in our power to not have any kind of meaningful cash burn going forward.

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Joshua David Vogel, Sidoti & Company, LLC – Analyst [8]

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Okay. The — you have a little less than $2 million remaining on the current purchase authorization. Is it likely that you and the Board will increase this at some point?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [9]

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Short version is, yes. We just — in a series of privately negotiated transactions last week, we just negotiated some private transactions to buy back 9% of our shares, and we did it below cash per share. So we’re pretty excited about that from a value accretion point of view. If a company can buy back stock below cash per share, it actually increases cash per share in addition to increasing value per share because the share count dropped more than the cash dropped. And having a strong balance sheet is really helpful to our business. We want to continue to have a strong balance sheet, but we think, at these stock price levels, repurchasing shares is most attractive thing we can do. So as you mentioned, we still have $1.7 million remaining on our authorization. And when that is fully used up, I would expect us to institute a new buyback program.

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Joshua David Vogel, Sidoti & Company, LLC – Analyst [10]

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Yes, great. Makes sense there. And then just one more, please. Clearly, a period of uncertainty and times like these suppress valuations but also favorably position others with available capital like yourself. So let’s maybe flash forward a few months. I was just wondering if you can discuss your appetite for M&A activity, whether from a geographic or service perspective. And again, understanding there’s so much uncertainty out there, but do you think that EBITDA multiples could meaningfully contract to your benefit?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [11]

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It’s certainly possible. We do look. We think it’s helpful to be in the market and to look at things, and we’ve learned quite a bit by doing that. I would say, just in general, the environment we’ve been in until very, very recently was more of a seller’s market than a buyer’s market. Sellers had quite lofty expectations at times. And so if one is value-oriented the way we are, there can often be a gap between the bid and the ask. And perhaps, that gap closes more due to this environment. On the same token, though, visibility is really, really low right now. It is very hard to predict when things get better, how quickly they get better, at least for us. I mean, we’re in a client service business, and we want to be — we talk to our clients all the time. We want to be closely attuned to the needs of our clients. We don’t want to overreact. We don’t want to underreact. And it’s hard — looking at any kind of target or M&A possibility, it’s hard to have a lot of confidence in the numbers that we’re looking at in any kind of target because there is just so much uncertainty in the environment right now.

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Operator [12]

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And our next question comes from Adam Waldo from Lismore Partners, LLC.

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Adam Waldo, Lismore Partners, LLC – Chairman of Managing Members [13]

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Clearly, you guys were having a terrific success here as you were exiting 2019. And then obviously, with the COVID outbreak, you sort of have to turn on a dime. So I wonder if you can give us a sense for a couple of things in terms of the macro environment. Goldman Sachs is out with a forecast today for U.S. GDP to be down over 30% year-over-year in the second quarter, global GDP for the second quarter to be down mid- to high single digits. In that kind of environment with employment levels rising rapidly, I guess, a 2-part question. One is, about how much of your revenue is tied to or conditional on employment levels per client? And then on a related point, can you give us a sense for how you would expect revenue to develop in the second quarter, if something like Goldman Sachs’ global GDP decline were to eventuate?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [14]

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Yes. It’s really hard to have a lot of confidence in any forecast right now, and I applaud people for trying. To us, the big question is, what do clients do for the full year? And there are very few examples, at least right now, where clients have radically changed their plans for the year. So in other words, if they hire fewer than planned in Q1, the big question hanging out there is, do they make that back up in Q3 and Q4, in which case we need to be ready for that, or is there a reduction in hiring volumes for the full year such that companies that tell us they’re going to hire, say, 500 people this year end up only hiring 200. And even our own clients don’t know what they’re going to do yet. So even if they had perfect knowledge — even if we had perfect knowledge into what they’re thinking, it could change on a dime. And so it’s just too early to say. And so what we’ve done in this environment is started to cut costs where we can, discretionary costs, and we are prepared to do more if this evolves into a, I don’t want to say, permanent reduction in activity, I would say a multi-quarter reduction in activity as opposed to a one quarter reduction in activity.

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Adam Waldo, Lismore Partners, LLC – Chairman of Managing Members [15]

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That’s tremendously helpful perspective. I wonder if we can turn to sort of capital allocation and balance sheet for a minute. You touched on the notion of M&A in this environment and the sort of risks and potential opportunities there. It seems like — and I don’t want to put words in your mouth, but it seems like in terms of capital allocation prioritization that with your shares trading below cash per share, it’s a pretty high bar to even think about M&A. Is that a fair inference to take from an investment return standpoint, management distraction standpoint and all the rest?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [16]

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That’s a great way to put it. It’s a high bar. It’s not an impossible bar, but it’s not a low bar. It’s a high bar, and it’s very attractive to buy back our own stock at current levels. And so that is the obvious thing to do in our minds. And if an interesting acquisition target came along, and we do look at things, we’d look at it short term, medium term, long term. We don’t want to buy something just to buy something or buy something just to get bigger. It’s got to really fit into what we’re doing. So it’s got to add something to the mix that makes us better, a geography or a skill set that we don’t have or maybe a sector that we’d like to be stronger in. And it would be much more likely to be on the smaller side than bigger side. We strongly believe in the walk, run, sprint philosophy when it comes to something like that where you do one, see how it goes, and then if it goes well, you earn the right to do another one. But in this environment with great uncertainty, never say never if some phenomenal deal came along. But anything compared to buying back stock at current levels, it’s just a tough comparison because buying back stock is so incredibly attractive right now.

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Operator [17]

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Our next question comes from Harry Sauers from Sauers Value Partners.

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Harry Sauers;Sauers Value Partners;Analyst, [18]

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I want to start by saying congratulations on a strong year and that I really appreciate the discussion of shareholder value really throughout this call. At least for me, especially in this small cap space, especially with companies that are trading below cash like this. There is a lot of managers who don’t seem to really understand it the way that you all seem to. So it’s really good to see that here with Hudson.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [19]

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Thank you.

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Harry Sauers;Sauers Value Partners;Analyst, [20]

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My first question, how would you describe how Hudson differentiates itself from your competition?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [21]

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That’s a great question, and it is incredibly hard to put it in a nutshell. But if — when I’ve tried to do it, probably the best — just a few phrases pop out. One is big company capability, but small company feel. We were rated in an industry survey #1 in the industry on customer service, and we take a lot of pride in that. Because of our small size, we’re able to be nimble and customize things, tailor things, solutions to our clients and not have a cookie-cutter approach. I’d also say, our real sweet spot is working with companies that hire 500 to 5,000 people per year. And there’s other companies, peers of ours, who work for companies that hire many, many more than that, companies that hire 10,000, 15,000, 20,000 a year. And almost by definition, when you get to that size range, you have to have more of a cookie cutter and more of an automated one-size-fits-all approach. And that’s — our sweet spot is more in that 500 to 5,000 size, and it tends to be professional roles where getting the right talent is mission critical to success. So for example, our clients are heavily in health care, and even within that, it’s pharma, medical devices, life sciences, financial services, where getting the right talent is just incredibly critical. Someone that has — not to knock this at all, it’s a great business to be in, but a client that has 20,000 factory workers probably is going to be a better fit for one of our peers than for us.

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Harry Sauers;Sauers Value Partners;Analyst, [22]

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In a similar vein, how long is your average client relationship?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [23]

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It’s hard to answer with precision. We have had clients. We had one client for almost 20 years. Our very first client was a well-known pharmaceutical company that hired us in Australia about 20 years ago, and so that was an incredibly long relationship. We have many clients that have been with us for 10 years. Contracts in this business typically are 3 years and with a very high renewal rate. Sometimes, the contracts get renewed for 3 years, sometimes it’s 2, sometimes there’s a 1-year extension before you do a 3-year extension. So it’s different by client and even by industry. But in general, we have long-term relationships, we have long-term clients, and we have a very high renewal rate when contracts come up for renewal.

That said, we’re out trying to get new clients all the time. It’s often companies that have never used an RPO before, and it’s a very long sales cycle because we have to educate them on the benefits of RPO, and we’re asking them to change how they’ve done talent procurement and talent management versus how they’ve done it, in some cases, for decades. Occasionally, we win business from competitors and occasionally, we lose business to competitors. But the vast majority of the time, when we get new business, it’s a first-time — what we call first-time RPO as somebody who’s never used RPO before. And almost always, it ends up being a long-term relationship, and we have a really good track record of expanding those relationships once we get a foot in the door.

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Harry Sauers;Sauers Value Partners;Analyst, [24]

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All right. So you discussed that there has been some initial reduction in client business due to the COVID-19 issue. How large has this been relative to your total revenues in the past on a percentage basis?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [25]

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Well, let me give you a few anecdotes that might be helpful. In a press release, a few weeks ago, we did mention China. That was the first place that we saw weakness, which makes sense. China is less than 5% of our global revenue. And what we saw was very — well, we always knew Q1 would be on the weaker side. It always is because of Chinese New Year. And it’s just a weird coincidence that the virus started to hit that country around Chinese New Year. So the whole country was on holiday in late January. The first thing the government did was extend the national holiday. And then when people came back from holiday, everybody was pretty much ordered to work from home. So we saw a huge reduction in activity defined as hiring volumes. It certainly didn’t go to 0, but it was a significant decline. And that lasted about 6 weeks, and then it’s been rapidly returning to normal in China. It’s not quite back to normal. A few weeks ago, it might have been 70% back to normal, and now it might be 90%, 95% back to normal. And we’re hoping that it’s a similar pattern in other countries that started to be impacted later. So if you just think about that, a very significant decline in activity for 6 weeks or so and then a return to normal. And the critical question that hasn’t been answered yet, and we won’t know for several months is that lower hiring volume in that 6-week period, is that made up for later in the year or is it never made up for. We just don’t know that yet.

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Harry Sauers;Sauers Value Partners;Analyst, [26]

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All right. Well, I appreciate those insights there. How much in costs could be cut in an emergency situation? I know you’ve discussed that you’re willing to do what it takes to make sure that we’re not just burning through cash because obviously, especially with the opportunity to buy back stock below cash, that’s a very vital piece of our balance sheet and our strengths here. So yes, how much could you — assuming this COVID-19, let’s say, it goes on for another year, how much in your cost can you cut that?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [27]

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Well, we have the fortune that we don’t really have any assets in our business. It’s all people. And so we could talk about how much of our cost structure is fixed or variable, but in some ways, it’s pretty much all variable because it’s people. What we’ve done, thus far, is — what I would say is a discretionary cost reduction in that, obviously, there is no travel and entertainment right now. We have reduced our activity levels in certain places. It’s very much a client-by-client basis, but some people are taking time off, taking vacation. There are some furloughs in a few places, and we can do more of that if this turns into a year-long downturn instead of a quick one quarter downturn. And so if we look at what we have done in prior downturns, we have done some reductions of our staff levels. But we’ve also done things to preserve that capability for when activity returns. We’ve done thing like 4-day work weeks or even 3-day work weeks, and we can do things like that again on a client-by-client basis. It’s all about maximizing value over the long term. And so we don’t want to overreact, we don’t want to underreact. Said another way, we don’t want to cut too little — cut cost too little because that could lead to losses and cash burn. But on the same token, if we cut too much and client activity demand rebounds and we’re not there to service our clients, that’s very bad for long-term shareholder value.

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Harry Sauers;Sauers Value Partners;Analyst, [28]

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Right. Yes. Could you give any hard figures in regard to that?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [29]

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It’s really hard to do that at this time, but we will do everything in our power to not have losses and cash burn over any meaningful period of time.

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Harry Sauers;Sauers Value Partners;Analyst, [30]

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I appreciate that. And I have one last question for you. Are you looking at taking advantage of any government programs that may be available to you to strengthen the business?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [31]

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Yes.

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Harry Sauers;Sauers Value Partners;Analyst, [32]

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And you can tell me a bit about that.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [33]

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We’ve — it’s so rapidly evolving, and we’ve actually created an internal team, task force to monitor all of the programs being offered all around the world just so we can keep track of them and take advantage of them. And these are anecdotes, but China, for example, is paying for 2 months of rent for people that experienced the disruption. So we’re taking advantage of that. The U.K. recently passed a measure where employers can furlough employees, and the government will reimburse wages up to 80% with a cap. And so we have taken advantage of that in one location. And it’s a really good way to preserve workforce capability. It’s a good way to keep our team safe, so they can be at home and isolate. But at the same time, they still have a job, they still have benefits. And it’s in the government’s interest to not have mass layoffs, and you’re starting to see programs to help companies get through this difficult period. And so we are — we have an internal task force, we’re staying on top of it, and we will partner with governments on these programs wherever and whenever they become available.

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Harry Sauers;Sauers Value Partners;Analyst, [34]

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Sure. What about ones from the U.S. government?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [35]

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We’re still analyzing those. We’re — about 25% of our business is in the Americas. And obviously, the U.S. is the biggest country in that, but we also have Canada and some activity in Latin America. So we’re studying it, but it just got finalized last week.

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Harry Sauers;Sauers Value Partners;Analyst, [36]

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Right. And I imagine there’s more to come as well.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [37]

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Yes.

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Operator [38]

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(Operator Instructions) Our next question comes from Mark Bishop from Investor.

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Mark Bishop, [39]

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Just on that last question, how many employees do you have in, say, the U.S. right now and globally?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [40]

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Sure. Probably a good way to answer that, and this is going to be kind of rough terms, is that our business is 50% in Asia Pac; 25%, U.K., Europe; 25%, the Americas; and we have about 400 employees globally. So the math across roughly — it might be a little bit less than that in the U.S., but the math is going to be roughly right there.

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Mark Bishop, [41]

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Okay, that’s great. Can you still hear me?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [42]

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Yes.

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Mark Bishop, [43]

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Okay, great. So that would make you a small — I believe that would make you a small business under the U.S. stimulus plan. Is that right?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [44]

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We are studying that. We think so. It’s certainly true if the definition is just our U.S. employees.

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Mark Bishop, [45]

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I think it’s 500 total. Isn’t it 500 total?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [46]

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Yes, you’re right. We are under 500 total. So even if one looks at it globally, we’re under 500 in total.

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Mark Bishop, [47]

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Okay. That’s great. So that would mean you get grants from the U.S. government eventually, assuming that you use it for — is that right?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [48]

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Potentially, we’re studying that.

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Mark Bishop, [49]

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Okay. Are there some — what’s the — is there a particular issue with that?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [50]

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Well, there is different programs that we’ve seen. Some from the FDA, some from other organizations. And if you participate in one program, you might not be able to participate in others, and a lot of these were just passed last week. So we are studying it, and we’ll look into it, and we’re not going to let any opportunities pass us by.

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Mark Bishop, [51]

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Yes, I’m sure you won’t. That’s great. All right. That’s terrific. And then on — you answered a lot of my questions. On the — so on the cash flow, is there any willingness of any of your customers to — are any of them discussing helping you in any way?

Or they’re all worried about their own cash flow? Or would any of them — have you had any discussions about spreading out your cash flow somewhat? Or is that not helpful to you?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [52]

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Well, the answer to that is, yes, I think. So we talk to our clients all the time. And our clients tend to be smart and long-term oriented. And by smart, I mean, they’re not penny wise and pound foolish. So if the discussion is often about what their need is and what should our team size be to meet their need. And there have been times in the past, and I think there will be times now and also in the future, where clients request X, Y and Z. And they know it’s a partnership, and they know that they’re requesting X, Y and Z, they’ll have to pay for X, Y and Z. And that’s the way a partnership works, and it’s got to be fair, and it’s got to work for all sides because we haven’t seen any example of clients putting pressure on us or trying to take advantage of the situation or cut pricing or get out of contracts or anything like that. Our clients are long-term oriented, partnership oriented. They’re big companies with healthy balance sheets, and they’re more trying to figure out how to navigate this crisis and looking for help in navigating the crisis.

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Mark Bishop, [53]

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That’s terrific. And so then on the — the last thing is on the buybacks that you mentioned. I know that you’re limited by your NOLs in what you can do, and you just bought back wherever it was close to 9% of your stock. Is there — I know it’s a difficult formula, but last year, you did a similar amount in the first quarter and then you kind of did only a small amount the rest of the year, I believe, unless you can correct me, if that’s false. Is there — would you imagine that, that would probably tie your hands in a similar way this year? Or has something changed in the shareholder, large, large holder composition or something that changes the math that lets you do significantly more this year?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [54]

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Yes. You’re right that this gets very complicated very quickly. The NOL calculations are very complicated. And unfortunately, we have a thinly traded stock. And so when — so we have done 2 things historically: one is have a ongoing 10b-5 program that buys a little bit in the market, and there are a lot of complicated rules around that in terms of how much volume we can buy, times of day we can trade and not trade. It can only be on an uptick, I think. So there is just a lot of days that even if we’re in the market every day, there is just a lot of days that we just don’t buy back very much stock because our stock is thinly traded. And then from time to time, we have done bigger things, like last year we did the tender offer. This time around, we had the opportunity to do a couple of privately negotiated transactions with stockholders that were wanting to reallocate in their portfolios and wanted the liquidity and wanted to reallocate. So we’ve done all of those things in the past, and we’ll continue to do them in the future, I think.

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Mark Bishop, [55]

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Okay. So is there — I guess, I’m not that familiar with the — all the rules, they’re complicated, but — for me, but…

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [56]

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Us too.

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Mark Bishop, [57]

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The — besides the little-by-little program you get going, is there a similar limit on what you can do from time to time when somebody calls you up and says, I want to sell some shares? Or does that somehow free your hand under the rules, and you can just buy whatever they offer?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [58]

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That’s not — yes, that’s not an easy one to answer either. It’s easier if the window is open to do a trade with someone. If the window is not open, and obviously, it wasn’t open last week when we did these trades, they have to sign a somewhat lengthy legal agreement that says, they acknowledge that the company has material nonpublic information, they don’t. So they’re acknowledging the information asymmetry, and they want to do the trade anyway. So you can imagine that from the time the discussion started, we drafted the document, send it to them, legal reviewed it, finally got it signed off. There is just a lot of stockholders out there that just wouldn’t want to mess with that or wouldn’t want to sign a document like that. We found 2 significant stockholders who were willing to trade in those circumstances, and we’re willing to sign that document, and so that enabled us to do these privately negotiated transactions.

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Mark Bishop, [59]

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Okay, that’s great. But is it still within about the same amount that you bought last year as a percentage. So my question is, whether if — once the window is open, can you go meaningfully higher under the NOL rules? Or does that — or are there other rules under the NOL thing that limit your ability to do private transactions, too? Or is it dependent on whether it’s a 5% shareholder or not that’s doing sale?

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [60]

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Yes, the 5% shareholder thing does come into play because we have to watch the shareholdings of those who are above 5%. And then every time we shrink the share count, someone who’s above 5 actually goes up if they’re not participating in the buyback. So that gets complicated, but it’s also true that most tax attorneys would advise clients, if they have an NOL, to be careful about exceeding 10% in any 1 year. So it’s not a hard and fast rule, but it is guidance that is given. So there is circumstances where we would stay below that, and then there’s other circumstances where we would go above it, despite a potential risk.

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Operator [61]

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This concludes today’s question-and-answer session. I will now turn the call over to Jeff Eberwein for closing remarks.

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Jeffrey E. Eberwein, Hudson Global, Inc. – CEO & Director [62]

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Thank you all again for joining us today and your interest in Hudson Global. We look forward to next quarter’s update call. Thank you.

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Operator [63]

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Thank you. Thank you for joining the Hudson Global Fourth Quarter Conference Call. Today’s call has been recorded and will be available on the Investors section of our website, hudsonrpo.com. You may now disconnect.