Hudson Highland cuts Q2 sales outlook
Hudson Highland Group (Nasdaq: HHGP) plunged Monday after the provider of professional staffing services and talent management services cut its second quarter sales outlook.
The New York-based company said that it expects second quarter sales to clock in between $348 million to $350 million, below its prior guidance of $355 million to $370 million. Hudson Highland’s new sales outlook is also below the mean of five analysts surveyed by Thomson Financial of $363 million.
Hudson Highland also said it expects to report a gross margin dollar increase of approximately 7% over the prior year period.
“Revenue is not all that indicative of the business,” said William Blair analyst Tim McHugh. “This remains a turnaround story. The company will make decisions that will adversely affect the top line, but not necessarily the overall profitability. [Revenue] is not a line we tend to focus on as much.”
Hudson Highland said it expects EBITDA to fall in the middle of its previous guidance range of $12.5 million to $13.5 million. This estimate excludes a $1.5 million restructuring charge due to a recapture by the landlord at its former New York City office location.
Hudson Highland’s EBITDA was in line with McHugh’s second quarter estimate of $13 million.
“This is a positive economic outcome for the company,” said Hudson Highland CFO Mary Jane Raymond. “This action relieves us of all future related lease obligations, any potential subtenant default, additional subtenant leasehold improvements, and approximately half of the broker commissions.”
Hudson Highland said it will disclose second quarter earnings and third quarter guidance on July 25. Based on second quarter trends and preliminary analysis of operational expectations for the third quarter, Hudson Highland says the high end of the third quarter adjusted EBITDA guidance range is expected to be flat, between $9 million to $12 million.
“Third quarter guidance was lower due to a slower than expected turnaround in the North American operations,” said McHugh.
Shares of Hudson Highland tumbled 22.71%, or $5.00, to $17.02 mid-day Monday.
