The New York-based recruiting company recorded a net loss of $2.9 million, or nine cents per basic and diluted share, compared with net loss of $8.8 million, or 26 cents per basic and diluted share, the prior year. During the fourth quarter, Hudson posted revenue of $121.6 million, a 21.2 percent gain from its previous fourth quarter. The company also recorded a loss of $2 million, or six cents per basic and diluted share, compared with net loss of $2.6 million, or $300,000, or one cent per basic and diluted share, last year.
“We delivered solid gross margin growth in the fourth quarter, with growth in every product line, including permanent recruitment, temporary contracting, recruitment process outsourcing and talent management,” said Stephen Nolan, CEO at Hudson. “We are pleased to report positive adjusted EBITDA for the sixth consecutive quarter as well as positive cash flow from operations. For the 2017 year, we delivered revenue and gross margin growth, significantly improved adjusted EBITDA and positive operating cash flow.”
During the fourth quarter, Hudson continued its share repurchase program which has an authorization of up to $10 million of the company’s common stock. The company purchased 106,644 shares for $200,000 as part of its existing repurchase program during the fourth quarter. Since the inception of this program in the third quarter of 2015 through the end of the fourth quarter of 2017, the company has purchased 3,639,405 shares for $7.4 million.
Sale of Three Business Units
In three transactions, Hudson Global recently entered into definitive purchase agreements with strategic buyers to sell its recruitment and talent management operations in Europe and Asia Pacific. The company intends to focus on its growing global recruitment process outsourcing (RPO) business going forward. Under the terms of the agreements, the company will receive estimated proceeds of $41.2 million in cash, subject to adjustment.
“We are excited to focus on the RPO business going forward and pleased to have reached these agreements for the sale of our recruitment and talent management businesses,” said Mr. Nolan. “This decision is a result of a lengthy and thorough review of our strategic alternatives and our desire to focus on the growing RPO business.”
Value Plus NV, led by Hudson Benelux CEO Ivan De Witte, is purchasing Hudson’s recruitment and talent management operations in Belgium, the Netherlands and Luxembourg for $24.7 million in estimated net proceeds. The business was established by Mr. De Witte in 1982 and has a team of 250 people including consultants, researchers, R&D and support staff. Morgan Philips Group SA will acquire Hudson’s recruitment and talent management operations in the rest of Europe for $10.5 million in estimated net proceeds.
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The proposed deal covers Hudson Global operations in the U.K., France, Spain and Poland as well as a network of franchise operations in Denmark, Sweden, Norway, Czech Republic, Ukraine and Slovakia. Established in 2013, Morgan Philips Group has offices in the U.S., Europe, Latin America, the Middle East and Asia. It provides executive search, permanent and temporary recruitment, interim management and talent management. The acquisition will create a combined business with a turnover of 130 million euros with 600 employees in 20 countries, according to industry sources.
The transactions are expected to close in the first half of this year, subject to the approval of the majority of the outstanding shares of Hudson and satisfaction of customary closing conditions, said the company.
Recent Shareholder Activity
While it remains to be seen how shareholders will react, Hudson’s stock has seen a wave of activity in recent months. Zacks Investment Research recently raised shares of Hudson Global from a “strong sell” rating to a “hold” rating. In addition, major shareholder Sagard Capital Partners, L.P. sold 1.1 million shares of the stock in a recent transaction. The shares were sold at an average price of $1.80, for a total value of $1.98 million. The sale was disclosed in a filing with the Securities & Exchange Commission. Currently, just 12.2 percent of the stock is owned by company insiders.
Several institutional investors have recently added to or reduced their stakes in Hudson. Renaissance Technologies boosted its position in the company by 14.8 percent since the start of the year. Renaissance now owns 248,096 shares, valued at $588,000 after buying an additional 31,996 shares during the period. Geode Capital Management raised its holdings in Hudson Global by 2.3 percent. Geode now owns 95,731 shares, valued at $226,000 after buying an additional 2,119 shares during the period. And Frontier Investment Management Co. increased its position by .8 percent in the second quarter. Frontier now owns 521,901 shares valued at $1,028,000 after buying an additional 4,269 shares during the period. Institutional investors currently own just under 75 percent of the company’s stock.
Shares in Hudson fell 2.55 percent to $1.91 upon release of its earnings. The company has a current market cap of $59.7 million. Given the expected timing of the pending sale transactions, the company will not provide guidance for the first quarter of 2018.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media