HMHC stock is up 5% today after Houghton Mifflin Harcourt (NASDAQ:HMHC) updated investors on its long-term strategy and reported record preliminary third-quarter results.
HMHC Stock Driven By Record Billings Growth
Houghton Mifflin Harcourt, a Boston-based publisher of textbooks and other learning materials, reported net sales of $563 million USD and expects year-to-date net sales of $1,147 million USD. Third-quarter cash flow from operating activities is expected to be $393 million USD, resulting in expected year-to-date cash flow from operating activities of $127 million USD. The rise in HMHC stock is being driven by third-quarter expected billings, which should be $746 million USD, a record growth rate for the company of 30%.
The update is a welcome reprieve for HMHC stock, which has dropped as much as 47% in 2019. In order to streamline operations to counteract the falling share price, the company has announced a number of strategic measures. The most notable of these is the cutting of 280 jobs, or 8% of the company’s total workforce, which will see Houghton Mifflin Harcourt pay out between $11 million USD and $13 million USD in severance packages. The company will also spend $1 million USD to $3 million USD in consolidating office space and will reduce spending on content development by 20%.
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“Today’s actions enable us to further leverage the strength of our portfolio to drive billings growth, simplify and strengthen our business model, reduce costs, and generate sustained and positive free cash flow,” said Jack Lynch, President and CEO of Houghton, adding that, “our estimated third quarter and year to date 2019 results indicate impressive financial performance, reflecting continued execution of our strategic plan.” HMHC stock is currently trading up at $5.50 following the update.
Updated Guidance
HMHC stock received a further boost after the company also updated its guidance for the year to include its expectation of free cash flow in a range of $100 million USD to $120 million USD. Also, in light of its strong 2019 financial performance, Houghton Mifflin Harcourt revised its full-year 2019 billings guidance range, which was previously $1,530 million USD to $1,610 million USD, to $1,590 million USD to $1,620 million USD.
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