Trade Division Bright Spot in Bad Year for HMH

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Houghton Mifflin Harcourt’s trade division was something of a bright spot in what was a disappointing 2016 for the entire company. Revenue for all of HMH fell 3% in 2016 compared to 2015, dropping to $1.37 billion. In 2016 the company recorded a net loss of $285 million, up from $134 million in 2015.

HMH attributed the higher loss, in part, to a one-time impairment charge of $139 million related to intangible assets associated with its decision to stop using trademarked names such as Holt McDougal and various supplemental brands in favor of branding products under the HMH and Houghton Mifflin Harcourt names,

In statements accompanying the financials, HMH executives made it clear they are not expecting a turnaround this year. "We view 2017 as an investment and transition year for HMH,” said Joe Abbott HMH CFO. “We are utilizing our capital to enhance our competitive position in major adoption markets by making investments in our core curriculum products ahead of major selling opportunities in 2018, 2019 and beyond.”

In addition to making investments, HMH will also cut costs: ”HMH is taking steps to improve its operational efficiency and right-size its cost structure, including a thorough review and evaluation of the Company's current operating model and organizational design in order to ensure an efficient and effective structure. These steps will include strategic cost cutting to simplify the business,” the company said.

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Revenue in the company’s education group fell 3.5%, to $1.21 billion, while the net loss soared to $182 million, from $4.9 million in 2015, with the 2016 loss reflecting the $139 million writedown.

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The largest drop in education group sales, $108 million in the year, came from its basal and supplementary publishing businesses. Another down area was the company's assessment business, where revenue fell by $21 million. Partially offsetting this decline was a $49.0 million contribution from its EdTech business, which the company acquired in May 2015 from Scholastic. Sales at Heinemann rose $18.0 million and international revenue increased $11.0 million.

Sales in the much smaller trade division were up slightly; they climbed to $165.6 million, from $165.0 million in 2015. The trade group’s net loss was reduced to $6.9 million, from $7.1 million.

HMH said the increase in trade division revenue was led by strong sales of frontlist titles like The Whole30, Tools for Titans, and Food Freedom Forever. Partially offsetting gains in frontlist was a decline in e-book sales, which HMH said was “due to lower subscriptions.”

HMH currently has about 4,500 employees. Last week it announced that Jack Lynch had been named its new CEO.

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