Hudson Global announces revised Q3 revenue & adjusted EBITDA outlook
Lack of growth in the top line did not allow the company to offset the selected investments made in its core growth areas and its transition costs toward a more efficient operating model. Adjusted EBITDA for the third quarter ended September 30, 2014, is now expected to be a loss of between $4.4 to $4.6 million, as compared with the expected range of breakeven to a loss of $2 million that was announced on July 31, 2014.
In the third quarter, Asia Pacific will report 15 percent gross margin growth on a year-over-year basis, helped by 27 percent growth in China. Gross margin in the UK and Continental Europe remained largely flat despite strong performances in Belgium and Spain, with 15 percent and 31 percent year-over-year gross margin growth respectively. Results in the Americas continued to lag with a 23 percent year-over-year gross margin decline. Hudson's global RPO and Talent Management business lines grew by 27 and 28 percent respectively year-over-year in gross margin. (All growth rates in constant currency)
During the quarter, the company began to implement the strategic actions identified in their engagement with AlixPartners. Hudson ceased direct operations in Sweden, moving to a licensing agreement, eliminating year-to-date adjusted EBITDA losses of $0.7 million, which will be reclassified as discontinued operations. Hudson Sweden's results are included in the third quarter results presented above. Hudson also confirmed progress towards a sale of its eDiscovery business.
The company expects to report $47 million in liquidity, composed of $19 million in cash and $28 million in availability under its credit facilities, as well as $8 million in outstanding borrowings.
"Our overall third quarter adjusted EBITDA will fall below expectations. However, we continued to demonstrate progress in gross margin growth in many of our markets and we are advancing our strategic actions, including the sale of our eDiscovery business, executing on the opportunities identified with AlixPartners to drive efficiencies through the organization and investing selectively in our core growth markets and practices," said Manuel Marquez, chairman and chief executive officer at Hudson. "As we approach profitability, the delivery on our targets is still highly sensitive to variations in our top line and business mix, but we expect that the actions taken will bring substantial improvement and help us deliver sustained value growth for our stockholders."