Houghton Mifflin Harcourt Announces Third Quarter 2015 Results

Third Quarter 2015 Highlights:
•HMH captured approximately 40% market share in its addressable domestic education market for K-12 instructional materials, including 45% of the new adoption market for the first nine months of the year.
•Net sales increased 4% to $576 million compared with $551 million in the third quarter of 2014. On an organic basis, which excludes the contribution from the acquired Educational Technology and Services (EdTech) business , net sales would have been $493 million.
•The EdTech business contributed net sales of $82 million for the quarter.
•Billings declined approximately 1% to $682 million compared with $692 million in the third quarter of 2014.
•Net income increased over 22% or $24 million to $131 million compared with net income of $107 million in the third quarter of 2014.
•Adjusted EBITDA of $192 million was 4% or $8 million lower compared with $200 million in the third quarter of 2014. Adjusted cash EBITDA was $298 million, 13% or $43 million lower compared with $341 million in the third quarter of 2014.

Full Year 2015 Outlook and Recent Highlights:
•In light of a softer open territory market and smaller supplemental and residual market, the Company is revising its full year 2015 guidance for billings, net sales and content development spend. Our addressable open territory market is expected to grow by 1 percent for the full year. While this is a rebound from the first half of the year, it is 5 percentage points below our initial expectations. Billings are now expected to be in the range of 1% to 4% lower than full year billings in 2014 and net sales are expected to be in the range of 3% to 6% higher than net sales in 2014. Content development spend is expected to be in the range of $110 to $120 million.
•On November 3, 2015, the Company’s Board of Directors authorized the repurchase of an additional $500 million of shares of HMH’s common stock bringing the program total to $1 billion. On a pro forma basis, as of the end of the third quarter, approximately $760 million would have been available for share repurchases under this aggregate program which may be executed through the end of 2018.
•The Company is planning to increase its debt by an additional $250 million, subject to market and other conditions.

“In spite of market challenges and revisions to our 2015 guidance, our underlying business remains healthy. We continue to lead our core domestic education market, and have been encouraged by the strides made in key strategic growth areas,” commented Linda K. Zecher, President and Chief Executive Officer of HMH, “In 2015, we set out to accelerate the growth of our professional development and services lineup, build on our consumer and early childhood offerings, and further enhance our industry-leading digital capabilities. We have taken clear and meaningful action on all of these fronts, which we believe will be key contributors to our future success. We have expanded our share repurchase program to an aggregate $1 billion given our confidence in the long term prospects of the business.”

Eric Shuman, Chief Financial Officer of HMH, stated, “To date in 2015 we have continued to generate free cash flow, invest in our growth, execute on key strategic initiatives and maintained a leading 40% market share despite the overall anticipated contraction in the domestic education market this year. We believe that this is a testament to the ongoing strength of our business and further underscores our long-term growth potential.”
See more at: http://www.hmhco.com/media-center/press-releases/2015/november/hmh-3q2015-earnings-release#sthash.QjC7ydRg.dpuf

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