Houghton Mifflin Harcourt (HMH) is a global learning company and a provider of Pre-K-12 content, services, and technology, serving more than 50 million students throughout the U.S. and in 150 countries worldwide.

With approximately 88% of its revenues coming from education, and the remaining 12% from trade and reference, HMH prioritizes the Pre-K-12 market. Its portfolio encompasses K-12 education, early learning, general interest, children’s and reference works. HMH is the leading provider of educational content by market share in the United States.

Houghton Mifflin Harcourt’s history as an educational publisher goes back to 1832. In 2006, Houghton Mifflin was acquired by Riverdeep, an Irish company led by Barry Callaghan. By the end of 2007, it closed its acquisition of Harcourt from Reed Elsevier. In April 2015, HMH signed an agreement to acquire the Educational Technology and Services business of Scholastic Corporation.

Analysis Key Developments

Financial

In 2017 revenue for all of Houghton Mifflin Harcourt’s increased by 34.8 million USD, or 2.5%, from 1.37 billion USD for the same period in 2016 to 1.41 billion USD. The growth was driven by an increase in HMH’s Trade Publishing segment, primarily due to sales of the Whole30 series and Tim Ferriss’ Tribe of Mentors and Tools of Titans, stronger e-book sales, such as The Handmaid’s Tale and 1984, and backlist print title sales such as The Polar Express and The Giver, along with a lower product return rate and higher subrights income. Within the company’s Education segment, the increase was primarily due to greater sales from Extension businesses, which primarily consist of Heinemann, intervention, supplemental and assessment products as well as professional services. Moreover, the company’s adjusted EBITDA increased from 183 million USD to 219 million USD in 2017.

Internal Organization

In March 2017 HMH announced, as part of the restructuring, that it is making “organizational design changes across layers of the company below the executive team” that will result in “reductions in force.” When the reorganization is complete, HMH expects to save between 70 million USD and 80 million USD annually, beginning in 2019.

In March 2017, HMH announced that Jean S. Desravines, CEO of the national education nonprofit New Leaders, has been appointed to HMH’s board of directors.

In February 2017, HMH announced the appointment of John (Jack) J. Lynch, Jr. as the company’s president, chief executive officer and a member of the Board of Directors. Also in February, the company announced that Brian Shipman joined the company as Senior Vice President and head of Investor Relations.

In July 2017, HMH partnered with King-Devick technologies, inc. to bring the King-Devick Reading Acceleration Program (K-D RAP), a new approach to strengthening literacy skills by teaching the physical act of reading, to students in elementary classrooms. (PR 14.07.2017)

International

HMH sells its educational solutions into global education markets predominantly to large English-language schools in high growth territories primarily in Asia, the Pacific, the Middle East, Latin America, the Caribbean and Africa. HMH’s revenues for 2017 from the US were 1.34 billion USD (2016: 1.29 billion USD) and from international businesses were 72 million USD (2016: 88 million USD). The lower sales from the international business were primarily due to a large Department of Defense order in 2016 not repeating in 2017.

Digital

While print remains the primary format in which HMH’s trade books are produced and distributed, the market for trade titles in digital format, primarily e-books, has developed over the past several years, and generally represents approximately 10% of the company’s annual Trade Publishing net sales.

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