Houghton Mifflin Harcourt Announces Third Quarter 2020 Results, Intent to Explore Potential Sale of HMH Books & Media Consumer Publishing Business

Learning technology company Houghton Mifflin Harcourt (“HMH” or the “Company”) (Nasdaq: HMHC) today announced financial results for the quarter ended September 30, 2020. The Company also announced its intent to explore the potential sale of HMH Books & Media, its Consumer Publishing business. The potential sale would reduce debt and build on the Company’s October 1 restructuring to align its cost structure to its digital-first, connected strategy, and create a pure-play learning technology company. The Company has engaged Centerview Partners to explore the potential sale of HMH Books & Media.

Q3 2020 Headlines:
While the COVID-19 pandemic continued to impact third quarter net sales and billings performance, HMH’s continued virtual learning support for customers and decisive cost and liquidity actions helped mitigate the impact of the COVID-19 pandemic on its profitability and cash flow, and resulted in strong cash generation in the seasonally important third quarter of 2020.
*Net sales declined 32% to $387 million in the third quarter, and declined 28% to $828 million on a year-to-date basis
*Billings1 declined 32% to $506 million in the third quarter, and declined 33% to $934 million on a year-to-date basis
*HMH concluded the Texas Literature adoption with a 34% share of the opportunity
*Significant growth in digital platform usage with a 388% increase in student assignments over the last twelve months as schools continue to adjust to remote learning environment
*Continued acceleration of SaaS billings growth to 147% for the last twelve months
*Net cash provided by operating activities of $264 million in the third quarter, and $75 million on a year-to-date basis
*Strong free cash flow2 of $237 million in the third quarter, and nearing break-even at $(11) million on a year-to-date basis

“HMH remains focused on our digital-first, connected strategy which has proven to be more important than ever in this unique back-to-school season. We are supporting teaching and learning nationwide whether done in person, fully remote or hybrid. Even as the near-term pressures of the COVID-19 pandemic impacted our billings for the third quarter, we are seeing very strong growth across the key indicators of our digital transformation, positioning HMH’s SaaS offerings amongst the largest and fastest growing in the edtech market,” said Jack Lynch, President and Chief Executive Officer of Houghton Mifflin Harcourt.

“We also announced our intention to explore a potential sale of HMH Books & Media. As we further advance our learning technology strategy, we believe this is the right time to focus our portfolio, which we believe will help to maximize shareholder value,” added Lynch. “At HMH we are very proud of our trade publishing heritage, and our Books & Media colleagues who have continued to innovate and evolve as the consumer publishing market has changed over time. Because of this heritage, we know the power a story has to inspire generations to make lives of meaning. We have grown and invested in this business over many years, and it has continually demonstrated strength and resilience – particularly this year through the challenges of the pandemic.”

Joe Abbott, HMH’s Chief Financial Officer said, “HMH remains in a position of financial strength, as we look to the end of 2020 and beyond. During the quarter, we continued to manage our expenses with discipline, and as a result, delivered adjusted EBITDA margins on par with the prior year despite net sales and billings declines. We generated strong cash during the third quarter, and we were near free cash flow break even for the year-to-date.”
more detail at: https://www.hmhco.com/about-us/press-releases/houghton-mifflin-harcourt-announces-third-quarter-2020-results-intent-to-explore-potential-sale-of-hmh-books-media-consumer-publishing-business

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