Sales in Houghton Mifflin Harcourt’s trade group rose 11.7% in the third quarter ended September 30, over the comparable period in 2016. The third quarter increase followed solid gains in the first half of 2017.
For the first nine months of 2017, revenue in the trade group was up 12.2% over the comparable period in 2016, hitting $130.2 million. Sales in the third quarter were $51.2 million, up from $45.8 million in the third quarter of 2016.
Despite the sales increase, operating income in the quarter fell 5.1%, to $3.1 million. The operating loss in the period, though, dropped; it fell to $1.7 million, from $6.8 million a year ago.
HMH attributed the revenue increase in the quarter to higher sales of frontlist and backlist print titles such as The Polar Express, the Little Blue Truck series, and It Takes Two. It also touted strong e-book sales, citing examples like The Handmaid’s Tale.
HMH said the lower earnings in the third quarter were due to a higher sales volume. The jump in volume translated to higher transportation costs, as well as increased costs associated with marketing. Offsetting those increases, somewhat, was the higher percentage of e-book sales which contain higher margins as well as lower costs resulting from HMH’s restructuring plan.
In February, HMH said it was implementing a company-wide reorganization aimed at cutting costs. Through the first nine months of 2017, the publisher has taken $39.4 million in charges, including $14.7 million in severance payments.
In HMH’s much larger education segment, sales fell $6 million in the quarter, to $480.8 million. The primary driver of the decrease was the lower basal sales of math and English Language Arts programs. Operating income in the quarter rose to $111.0 million, up from $106.5 million in the same period last year. The improved earnings were, HMH said, driven by a reduction in internal and outside labor costs, a reduction in marketing costs, and lower travel and entertainment expenses.
For 2017 in full, HMH said it expects net sales to be in a range of $1.3 to $1.4 billion, and billings to be in the range of $1.375 to $1.455 billion. At the moment. HMH said net sales are expected to be come at the higher, while billings are expected come in at the lower range.