Hudson Global, Inc 2017 Q4 - Results - Earnings Call Slides

The following slide deck was published by Hudson Global, Inc in conjunction with their 2017 Q4 earnings call.

Comments

[Strategic reply]

Very informative view and answer “My Name”. Thanks. Should your message translated into the following action: sell all your Hudson stock immediately?

[User 48955135]

Need to see what kind of a loss gets announced for Q1. What will things look like with only the RPO business? I never looked at the quarterly filings close enough to try to isolate what the revenue/expenses would look like - though I'm not sure that the info was ever presented in a form that would allow for doing that. In any case, Q1 earnings announcement should be interesting, and it should be on/by Monday, or else...

[Strategic Investor]

Hard to say. The RPO business generates about $5mn in contribution annually and the corporate expenses are about $7.5, so we would expect to lose 600-700k a quarter.

But there is considerable currency exposure, as always and then there are no doubt lots of "unusual" expenses. Nolan' package, various professional fees, plus the costs of the transition agreements while the RPO business fully separates during the course of the year.

Anyway, the separation was only done in the last days of March, so 1Q still included most of the disposed busienss results ...

I expect the income statement to look pretty ugly and the balance sheet will look pretty liquid. The question really is, what Eberwein is going to do with the cash.

This is an asset conversion play now and quite frankly, who know what business(es) this company will be in 24 months from now.

[Strategic Investor]

You mean the "stock" of hudson? fascinating that you have been a member for 4 years and finally decided to comment and that your name is "strategic reply" (as in, reply to strategic)...

at this point, revenue surges in the disposaly don't much help hudson, although there are some adjustments to prices based on working capital.

[User 48955135]

When the MBO was announced, I laughed and shook my head. What sense does it make? They work for years pouring money in to the turnaround, throw away cash repurchasing shares at $2 and higher, pay outside consultants lots to help them restructure. Then when the light of day begins to show, they sell it all off on the cheap.

At this point, the shares are trading above fair value...which is closer to $1.80 in my view.

With the new tax law, the value of the NOLs is slashed. This conference call and slide packet is useless - current operations are almost meaningless to shareholders/investors and little was discussed on forward outlook.

What shareholders and potential investors should be on the lookout for going forward is that Eberwein pulls another fast one and attempts to do some kind of M&A with AMRH. The remaining RPO business is complimentary and there will be about $60 million cash in HSON with no debt. You can be assured that Eberwein is looking at it and scheming because AMRH is a bottomless money pit which he is into heavily.

[Strategic Investor]

@Dutch: I hear that, although I think the strategy was always to stop the bleeding in an effort to do a higher quality deal. No doubt that much more value might have been preserved over the years had they been more aggressive in disposing businesses: Legal eDiscovery is the finest example. They thumb sucked their way to letting 2/3rd of the business evaporate. In fairness, that was a different management team. But there was never much industrial logic I think - remember that this was cobbled together by monster.com to build their portal, not to be a successful staffing business in its own right. So a breakup makes sense.

I read the proxy for the approval of the disposals, it is pretty clear that they have been working hard to find a decent deal.

The RPO business is the one part that grows steadily. It is also very very asset light and it has a different contracting cycle and sales are often "inside" sales, where Hudson employees integrate with the clients staff.

I have always thought the businesses deserved a higher valuation. I think they certainly got a decent price for Belgium. ANZ / APAC seems light - with only $13mn (including debt assumed) but that division, despite its size and market position has not made money in a very long time - margins are incredibly tight. I overvalued this division consistently and for years which is why the price seems low.

Though entirely reasonable and defensible, I think your estimate of fair value might be a bit low. I think they will have between $40-50mn in cash, the RPO business which with $60mn in revenue might be $18-24mn and they have the NOLs, which are still about $60mn in DTAs tho one has to place a big discount on these to assess the realizability of them. Still $5-10mn is probably not unreasonable, though $0 would be more conservative.

$58-$84mn seems about right, and with 32mn shares - that is a value of $1.80 to $ $2.60.

The big questions will be how the can redeploy tha cash. Given how asset light RPO is, they can't invest it there much (maybe a bit of CapEx in platforms and tools). They could purchase other RPO businesses, if they can get a good deal. RPO is generating something like $5mn but corporate is spending $7, so that will have to come down. Some of that $7 is related to the deals. but they probably need to take a total of at least $4m out and then grow RPO.

Might they turn this into a corp shell with an RPO operating sub and used it to buy unrelated businesses to realize NOL value? I think that they might do this, though I hope they wont pick AMRH.

[Strategic reply]

Almost there...

[Strategic reply]

Hudson

[Strategic Investor]

Funny how when they agree to do all the MBOs revenue surges.

[Strategic reply]

... no effect on the stocks!

[Strategic Investor]

The stocks of what?