Hudson (HSON) is Officially a Net-Net Stock

Hudson Global, Inc. (HSON) is a company that specializes in recruitment services. The company is listed on the Nasdaq, after being spun out of in 2003. 

In 2013, Jeff Eberwein started building a position in Hudson through his fund Lone Star Value. In 2014, Eberwein was elected CEO. Entities affiliated with Eberwein own about 8% in the company. It is worth noting, that Eberwein’s track record is somewhat dented after two rather unsuccessful control situations at Digirad (DRAD) and ATRM Holdings (ATRM).

At the end of 2017, Hudson announced three divestitures to exit its agency recruitment businesses. The company also announced that it would focus on its global Recruitment Process Outsourcing (RPO) business going forward. The transactions closed at the end of March 2018, netting Hudson $39 million in cash. 

Hudson RPO | New Business Model post-restructuring
Hudson RPO | New Business Model post-restructuring

The RPO business that remained did about $66 million in revenues in 2018. Although Hudson is yet to file its annual report (10K) for 2019, management presentation states that Hudson is in line to deliver a positive EBITDA in 2019 on revenues north of $70 million. 

At the time of its most recent filing, Hudson had $29 million of cash, no debt, and over $341 million of usable NOL carryforwards. Yesterday, Hudson ended the trading session with the last recorded trade of $9.55 or a market cap of 28 million. 

In his book, the Intelligent Investor, Benjamin Graham defined Net-Net Stocks as stocks that are trading below their net-current-assets alone. Current assets consist of cash or assets that can easily be converted to cash. 

In the case of Hudson, the company trades below its last stated cash level, with no debt and a business that is expected to have been profitable in 2019. You can buy the cash and get the business for free.

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