Four of the five large publicly held trade publishers managed to improve their operating margins in 2016 over 2015, despite generally weak revenue performances.

Penguin Random House, which reported its results last week, saw revenue fall 9.6% in 2016, to €3.36 billion, but since EBITDA (earnings before interest, taxes, depreciation, and amortization) dropped only 3.6%, its operating margin in the year rose to 16%, from 15% in 2015. In a letter to employees, PRH CEO Markus Dohle said that a key to maintaining strong profitability levels has been the company’s commitment to “preserving a vital and vibrant bookselling community” as well as “maximizing efficiencies in our cutting-edge supply chain.” Dohle also noted PRH’s long-term commitment to print—“even when it was in decline earlier this decade”—and its use of technology to increase the reach of its books.

PRH parent company Bertelsmann noted that 2.8% of the PRH revenue decline was due to the negative impact of foreign exchange, and 2.9% was due to asset sales (PRH sold Author Solutions, Fodor’s, and Random House Studios). The remaining 3.9% decline was due to a drop in both print and e-book sales, which offset gains in digital audiobooks.

The U.S. accounted for 56.5% of PRH’s revenue last year—€1.99 billion, or about $2.05 billion at current exchange rates. In 2015, the U.S. accounted for 55.6% of total sales. Dohle said that 2017 has gotten off to a good start “in most of our territories.” He also noted that improving the discoverability of its books in physical stores and online remains a top priority. In addition, Dohle wrote that PRH plans to take steps to maintain a “competitive bookselling landscape” and to accelerate its diversity efforts “in the content we publish and promote, and of course under our own roof.”

The only large publisher that had a sales gain in 2016 was Lagardère Publishing, but that increase was partly due to the March 2016 purchase of the publishing arm of the Perseus Books Group, which added about $75 million to Lagardère’s American subsidiary, Hachette Book Group. Without Perseus, revenue at HBG would have fallen 4.2%, but the acquisition lifted the North American share of Lagardère Publishing’s revenue to 27% in 2016, up from 25% in 2015. Recurring EBIT rose 5% at Lagardère, helped by profit improvement in the U.S., and the company’s margin inched up to 9.2% from 9% in 2015.

Revenue in calendar 2016 at HarperCollins was just about the same as in 2015, down about $1 million on sales of $1.65 billion. EBITDA increased 11.2% to $209 million, yielding a margin of 12.7%. As with PRH, the bottom line of which benefited from the completion of the integration of Penguin and Random House, HC’s earnings were helped by the completion of the integration of Harlequin.

Simon & Schuster’s margin bumped up to 15.5%, from 14.6% in 2015, as earnings rose 4.4% with a 1.7% revenue decline. The decrease in revenue reflected lower digital book sales, partially offset by growth in digital audio sales. (Digital sales represented 23% of S&S’s total revenues for 2016.) The increase in operating income mainly resulted from lower production, inventory, and selling costs, S&S parent company CBS said.

Houghton Mifflin Harcourt’s trade publishing division was the only one of the five publicly traded companies that had a decline in operating margin in 2016. Its EBITDA fell 19.4% in 2016. HMH said the decline in earnings was due in part to higher selling and administrative costs, primarily related to a rent increase for new office space and higher bad-debt expense.

Operating Performance, 2014–2016

2014 2015 2016 Change 2016 v. 2015
Penguin Random House (€ in millions)
Total Sales €3,324.0 €3,717.0 €3,361.0 -9.6%
Operating EBITD €452.0 €557.0 €537.0 -3.6%
Margin 13.6% 15.0% 16.0%
Lagardère Publishing (€ in millions)
Total Sales €2,004.0 €2,206.0 €2,264.0 2.6%
Recurring EBIT €197.0 €198.0 €208.0 5.0%
Margin 9.8% 9.0% 9.2%
HarperCollins ($ in millions)
Total Sales $1,590.0 $1,647.0 $1,646.0 0.0%
EBITDA $218.0 $188.0 $209.0 11.2%
Margin 13.7% 11.4% 12.7%
Simon & Schuster ($ in millions)
Total Sales $778.0 $780.0 $767.0 -1.7%
Operating Income $101.0 $114.0 $119.0 4.4%
Margin 13.0% 14.6% 15.5%
Houghton Mifflin Harcourt Trade ($ in millions)
Total Sales $163.2 $164.9 $165.6 0.4%
Adjusted EBITDA $12.7 $7.7 $6.2 -19.4%
Margin 7.8% 4.7% 3.8%