In connection with the release of its third quarter results, Houghton Mifflin Harcourt said it is exploring the potential sale of its trade division, Houghton Mifflin Harcourt Books & Media. In addition, Ellen Archer, president of the trade group, has left the company. Ed Spade, who most recently served as v-p sales and national accounts and head of HMH Audio, will serve as interim president.
HMH said it is looking to sell the trade group as part of its restructuring efforts aimed at accelerating its transition from a print-based publisher to a “pure-play learning technology company.” At the start of October, HMH cut about 525 jobs in its educational publishing business in an attempt to streamline its operations and save up to $100 million annually. The trade division was not affected by those cuts.
Sales in HMH’s educational division have been hammered by the Covid-19 pandemic. For the nine-month period ended September 30, 2020, revenue plunged 46.3% from the same period a year ago, falling to $698 million. EBITDA (earnings before interest, taxes, depreciation, and amortization) declined to $137.2 million in the nine months, from $188.9 million in 2019.
Total sales at the company for the nine months dropped 38.7%, to $827.7 million. The net loss rose to $396.7 million, from $88.7 million, in the first nine months of 2019. The most recent loss included $262 million in writedowns, plus $35.5 million in severance charges tied to the October reorganization.
The trade division has performed significantly better than the education group. For the nine-month period, sales inched up 1%, to $129.2 million, and adjusted EBITDA increased 24.5%, to $12.2 million. In the third quarter, sales rose 15.8% over 2019, to $55.7 million. Most of the sales gain was due to licensing revenue of $7.3 million, which included $4.3 million from the Carmen Sandiego series on Netflix. Sales in the adult and young reader’s categories were hurt by the closure of bookstores during the Covid-19 pandemic and the corresponding delay in releases of new frontlist titles, HMH said.
Archer joined the HMH trade group as president in early 2016. During her tenure, she put more emphasis on broadening the company’s business by expanding its licensing operations and moving into different formats, including audiobooks, and presided over the launch 2019 launch of HMH Audio.