HRTH is an $11+ mill market cap company if U back out the $7.5 mill tax refunds expected in 2021 and the $10 mill PPP loan expected to be forgiven. The CEO ran a multi billion dollar company in related field for over a decade as CEO. He’s in his early 50s.
They just turned around one of their segments from a $4+ mill operating loss to a $5+ mill operating gain in one year. The other 2 segments are in areas that were bludgeoned by COVID so I’m expecting they’ll recover pretty well fairly soon
They had unusually high SGA likely from stock based compensation in the Q that likely masked the underlying biz this Q although I’m not sure on that yet (suspecting it because it is an outlier to other Qs).
Why would they do a share offering when they have approx $30 mill cash, $7.5 mill in tax refunds expected in 2021 and a $10 mill PPP loan that is expected to be fully forgiven? Take out the PPP loan from debt and they have plenty of liquidity especially given the restructuring wind down after Q2 and they have mentioned turning FCF + by Q3.
Yes they have had massive restructuring charges that you have to get a feel for as far as what still needs to be done but they’re getting closer. They just consolidated 3 facilities into 1 on the fulfillment/logistics side in Q4 so that IMO likely disrupted the logistics and fulfillment segment. They are still moving toward cloud based server alignment and asset light structure with a target of Q2 to have that being wrapped up so those costs should also decline IMO soon.
What would you pay for a business that went from a $4.8 mill operating loss to a $5.8 mill operating profit in one year during a pandemic with a large negative tangible book value but improving operating and revenue leverage? I guess $11 mill is way too much? Don’t forget they have 2 other segments that should benefit from economy opening back up more freely from COVID that should be given value in that $11 mill market cap calculation.
There clearly is risk around the pension plan that was frozen in the late 1990s and they starved it pretty bad when they darn near collapsed not long ago, but when I looked closer I liked the company in the $2s late last year and still think it is cheap considering their businesses look to be just getting started turning around with customer care segment being the big leader in 2020 (with the $10+ mill operating profit improvement). To each their own though, I can see why people don’t like it because of the pension liability or liquidity and such but it is way cheaper than most other stuff out there in micro cap space in my opinion and has a top talent CEO/Executive Chairman that almost no micro caps have running the show. He has a lot of work to do but so far IMO has done wonderfully well given the pandemic.
All IMO only, GL.
PS- Q4 is no longer seasonally stronger due to them jettisoning the packaging biz mostly. CEO mentioned that in Q3 CC if I recall correctly.
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