BOSTON, Feb. 25, 2021 /PRNewswire/ -- Learning
technology company Houghton Mifflin Harcourt ("HMH" or the
"Company") (Nasdaq: HMHC) today announced financial results for the
fourth quarter and full year ended December
31, 2020 and introduced new operational metrics HMH will use
to track growth in recurring revenue and progress on connected
solutions selling.
"As we head into a new year focused on executing against our
Digital First, Connected strategy, we are supporting teaching and
learning nationwide in every environment. HMH has unsurpassed reach
to the nation's schools and we continue to see strong growth in
important key performance indicators, including accelerating
digital adoption of our platforms and tools, positioning HMH
amongst the largest and fastest growing companies in the edtech
market," said Jack Lynch, President
and Chief Executive Officer of Houghton Mifflin Harcourt.
Q4 2020 Headlines:
HMH achieved 2020 billings at the top end of its revised
guidance range and positive free cash flow, outperforming its
revised guidance range for 2020. Additionally:
- Continued momentum with SaaS billings growth of 142% and
digital platform user growth of 306% for full year 2020
- Annualized Recurring Revenue (ARR) 1 of $58 million in 2020; HMH will report its Net
Retention Rate (NRR) beginning in the first quarter of 2021
- Connected Sales1 made up 50% of Education segment
billings in 2020
|
|
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
(in millions of
dollars)
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
Net sales
|
|
$
|
204
|
|
|
$
|
241
|
|
|
|
(15.7)
|
%
|
|
$
|
1,031
|
|
|
$
|
1,391
|
|
|
|
(25.8)
|
%
|
Change in deferred
revenue
|
|
|
(48)
|
|
|
|
(41)
|
|
|
|
(18.6)
|
%
|
|
|
58
|
|
|
|
201
|
|
|
|
(71.0)
|
%
|
Billings
1
|
|
|
155
|
|
|
|
201
|
|
|
|
(22.6)
|
%
|
|
|
1,089
|
|
|
|
1,591
|
|
|
|
(31.5)
|
%
|
Impairment charge for
goodwill
|
|
|
17
|
|
|
|
—
|
|
|
NM
|
|
|
|
279
|
|
|
|
—
|
|
|
NM
|
|
Net loss
|
|
|
(83)
|
|
|
|
(125)
|
|
|
|
33.5
|
%
|
|
|
(480)
|
|
|
|
(214)
|
|
|
NM
|
|
Adjusted EBITDA
2
|
|
|
16
|
|
|
|
(4)
|
|
|
NM
|
|
|
|
132
|
|
|
|
166
|
|
|
|
(20.5)
|
%
|
Pre-publication or
content development costs
|
|
|
(10)
|
|
|
|
(21)
|
|
|
|
52.4
|
%
|
|
|
(61)
|
|
|
|
(103)
|
|
|
|
40.2
|
%
|
Net cash provided by
operating activities
|
|
|
40
|
|
|
|
128
|
|
|
|
(68.6)
|
%
|
|
|
115
|
|
|
|
255
|
|
|
|
(54.8)
|
%
|
Free cash flow
2
|
|
|
14
|
|
|
|
96
|
|
|
|
(85.0)
|
%
|
|
|
3
|
|
|
|
115
|
|
|
|
(97.4)
|
%
|
|
1 An operating measure.
Please refer to "Operating Metrics" for an explanation.
|
2 Non-GAAP measure,
please refer to Use of Non-GAAP Financial Measures for an
explanation and reconciliation.
|
|
NM = not
meaningful
|
Joe Abbott, HMH's Chief Financial
Officer said, "During the quarter, we also continued to manage our
expenses with discipline, and as a result, delivered higher
adjusted EBITDA margins for the fourth quarter and for the full
year. Additionally, we generated positive cash flow during the
fourth quarter, resulting in positive free cash flow for the full
year."
Outlook:
HMH expects 2021 billings in a range of $1.10 billion to $1.15
billion resulting in an unlevered free cash flow margin in a
range of 9% to 11%.
Full year 2020 Financial Results:
Net Sales: HMH reported net sales of
$1,031 million for the full year
of 2020, down 26% compared to $1,391 million in 2019. The net sales
decrease was driven by a $371 million decrease in our
Education segment, offset by a $12 million increase in our HMH
Books & Media segment. Within our Education segment, the
decrease was primarily due to lower net sales in Extensions, which
decreased $252 million from
$632 million in 2019 to $380 million, due to lower sales and a difficult
comparison to prior year Texas K-6 sales coupled with the impact of
the COVID-19 pandemic in 2020. Also, contributing to the decrease
was lower professional services with the decline of the in-person
learning environment as a result of the COVID-19 pandemic. Further,
there were lower net sales from Core Solutions which decreased by
$119 million from $578 million in 2019 to
$459 million, primarily due to the smaller new adoption market
opportunity in Texas ELA, along with the impact of the COVID-19
pandemic. Within our HMH Books & Media segment, the
increase in net sales was primarily due to an increase in licensing
revenue of $13 million, which
includes $10 million of licensing
revenue from a new production series and $3
million from the Carmen Sandiego series on
Netflix.
Billings1: Billings for 2020
decreased $502 million, or 32%, from 2019. The billings
decrease was driven by a $515 million decrease in our
Education segment offset by a $13 million increase in our HMH
Books & Media segment. Within our Education segment,
the decrease was primarily due to lower Core Solutions billings
which decreased $306 million due to
the smaller new adoption market opportunity in Texas ELA, along
with the impact of the COVID-19 pandemic. Further, Extensions
billings decreased by $209 million due to lower billings of
the Heinemann products due to a difficult comparison to prior
year Texas K-6 billings coupled with the impact of the COVID-19
pandemic in 2020 and reduced face-to-face delivery of professional
services. HMH Books & Media billings increased primarily
due to an increase in licensing revenue of $13 million, which includes $10 million of licensing revenue from a new
production series and $3 million from
the Carmen Sandiego series on Netflix.
Cost of Sales: Overall cost of sales
decreased by $200 million to $644 million in 2020 from
$844 million in 2019, primarily due to lower billings and to a
lesser extent, lower amortization expense.
Selling and Administrative Costs: Selling and
administrative costs decreased by $185 million in 2020,
primarily due to lower labor costs of $77 million, resulting
from cost savings associated with our employee furlough initiative
in response to COVID-19, our 2020 Restructuring Plan and a freeze
on hiring. Further, there was a decrease in variable expenses of
$52 million, including reduced
commissions and transportation expenses due to lower billings and
$44 million of lower discretionary
costs related to travel, decreased marketing activities and other
expense reduction measures. There was also lower depreciation
expense of $11 million.
Restructuring/severance: Our
restructuring/severance and other charges for the full year ended
December 31, 2020 increased by
$12 million primarily due to
severance costs associated with the 2020 restructuring plan.
Operating Loss: Operating loss for 2020 was
$429 million, a $266 million unfavorable change from the
$163 million operating loss in 2019 primarily due to a
non-cash impairment charge for goodwill in 2020 of $279 million. This charge was a direct result of
the adverse impact that the COVID-19 pandemic had on our Company.
Additionally, lower net sales contributed to the operating loss.
Partially offsetting the unfavorable operating loss was a decrease
in selling and administrative expenses.
Net Loss: Net loss of $480 million for 2020 was a $266 million unfavorable change from the net loss
of $214 million in 2019, due
primarily to the same factors impacting operating loss along with
an increase in interest expense of $17
million resulting from the debt refinancing during the
fourth quarter of 2019 and a favorable change in income taxes of
$17 million due primarily to the
non-cash impairment on goodwill.
Adjusted EBITDA: Adjusted EBITDA for 2020 was
$132 million, a $34 million unfavorable change from
$166 million in 2019.
Cash Flows and Liquidity: Net cash provided
by operating activities for 2020 was $115 million compared
with $255 million in 2019. HMH's free cash flow, defined as
net cash from operating activities minus capital expenditures, for
2020 was $3 million, a $112
million unfavorable change compared to $115 million in
2019. The primary driver of the unfavorable change in net cash
provided by operating activities and free cash flow was the
COVID-19 pandemic in 2020.
As of February 25, 2021, there
were no amounts outstanding under our revolving credit facility. We
expect our net cash from operations combined with our cash and cash
equivalents and borrowing availability under our revolving credit
facility to provide sufficient liquidity to fund our current
obligations, capital spending, debt service requirements and
working capital requirements over at least the next twelve
months.
Conference Call:
At 9:30 a.m. ET on Thursday, February 25,
2021, HMH will host a conference call to discuss the results
and management's outlook with its investors. The call will be
webcast live at ir.hmhco.com. The following information is provided
for investors who would like to participate:
Toll Free: (844) 835-6565
International: (484) 653-6719
Passcode: 1675959
Moderator: Brian Shipman, Senior Vice President,
Investor Relations
Webcast Link:
https://edge.media-server.com/mmc/p/oyi49sqv
An archived webcast with the accompanying slides will be
available at ir.hmhco.com for one year for those unable to
participate in the live event. An audio replay of this conference
call will also be available until March 7,
2021 via the following telephone numbers:
(855) 859-2056 in the United
States and (404) 537-3406 internationally using
passcode 1675959.
Use of Non-GAAP Financial Measures:
To supplement our financial statements presented in accordance
with Generally Accepted Accounting Principles (GAAP) and to provide
additional insights into our performance (for a completed period
and/or on a forward-looking basis), we have presented adjusted
EBITDA and free cash flow. These measures are not prepared in
accordance with GAAP. This information should be considered as
supplemental in nature and should not be considered in isolation or
as a substitute for the related financial information prepared in
accordance with GAAP. Management believes that the presentation of
these non-GAAP measures provides useful information to investors
regarding our results of operations and/or our expected results of
operations because it assists both investors and management in
analyzing and benchmarking the performance and value of our
business.
Management believes that the presentation of adjusted EBITDA
provides useful information to our investors and management as an
indicator of our performance that is not affected by debt
restructurings, fluctuations in interest rates or effective tax
rates, gain or losses on investments, non-cash charges and
impairment charges, or levels of depreciation or amortization along
with costs such as severance, separation and facility closure
costs, acquisition/disposition-related activity costs,
restructuring costs and integration costs. Accordingly, management
believes that this measure is useful for comparing our performance
from period to period and makes decisions based on it. In addition,
targets in adjusted EBITDA (further adjusted to include the change
in deferred revenue) are used as performance measures to determine
certain incentive compensation of management. Management also
believes that the presentation of free cash flow provides useful
information to our investors because management regularly reviews
these metrics as an important indicator of how much cash is
generated by general business operations, excluding capital
expenditures, and makes decisions based on it.
Other companies may define these non-GAAP measures differently
and, as a result, our use of these non-GAAP measures may not be
directly comparable to adjusted EBITDA and free cash flow used by
other companies. Although we use these non-GAAP measures as
financial measures to assess our business, the use of non-GAAP
measures is limited as they include and/or do not include certain
items not included and/or included in the most directly comparable
GAAP measure. Adjusted EBITDA should be considered in addition to,
and not as a substitute for, net income or loss prepared in
accordance with GAAP as a measure of performance; and free cash
flow should be considered in addition to, and not as a substitute
for, net cash from operating activities prepared in accordance with
GAAP. Adjusted EBITDA is not intended to be a measure of liquidity
nor is free cash flow intended to be a measure of residual cash
flow available for discretionary use. You are cautioned not to
place undue reliance on these non-GAAP measures. A reconciliation
of these non-GAAP financial measures to the most directly
comparable GAAP financial measures (to the extent available without
unreasonable efforts in the case of forward-looking measures) and
related disclosure is provided in the appendix to this news
release.
Operating Metrics:
Annualized Recurring Revenue (ARR) for a given
period is the annualized revenues derived from termed subscription
contracts existing at the end of the period. ARR excludes contracts
that are one-time in nature. ARR is currently one of the key
performance metrics being used by management to assess the health
and trajectory of our business. ARR does not have a standardized
definition and is therefore unlikely to be comparable to similarly
titled measures presented by other companies. ARR should be viewed
independently of U.S. GAAP revenue, deferred revenue and unbilled
revenue and is not intended to be combined with or to replace those
items. ARR does not represent revenue for any particular period or
remaining revenue that will be recognized in future periods. ARR is
not a forecast and the active contracts at the end of a reporting
period used in calculating ARR may or may not be extended or
renewed by our customers.
Connected Sales are billings from the sale of core,
intervention, supplemental, assessment and service offerings hosted
on or transitioning to be hosted on our Ed: Your Friend
in Learning® teaching and learning platform.
Billings is an operating measure which we derive
from net sales taking into account the change in deferred revenue.
Education and HMH Books & Media segment billings represent an
operating measure which we derive from net sales taking into
account the change in deferred revenue. Billings for Core Solutions
and Extensions is an operating measure based on invoiced sales
adjusted for returns, other publishing income and change in
deferred revenue.
About Houghton Mifflin Harcourt
Houghton Mifflin Harcourt
(Nasdaq: HMHC) is a learning technology company committed to
delivering connected solutions that engage learners, empower
educators and improve student outcomes. As a leading provider of
K–12 core curriculum, supplemental and intervention solutions, and
professional learning services, HMH partners with educators and
school districts to uncover solutions that unlock students'
potential and extend teachers' capabilities. HMH serves more than
50 million students and 3 million educators in 150
countries, while its award-winning children's books, novels,
non-fiction, and reference titles are enjoyed by readers throughout
the world. For more information, visit www.hmhco.com.
Follow HMH on Twitter, Facebook and YouTube.
Contact
Investor Relations
Brian S.
Shipman, CFA
SVP, Investor Relations
(212) 592-1177
brian.shipman@hmhco.com
Media Relations
Bianca
Olson
SVP, Corporate Affairs
(617) 351-3841
bianca.olson@hmhco.com
Forward-Looking Statements
The statements contained herein include forward-looking
statements, which involve risks and uncertainties. These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes,"
"estimates," "projects," "anticipates," "expects," "could,"
"intends," "may," "will," "should," "forecast," "intend," "plan,"
"potential," "project," "target" or, in each case, their negative,
or other variations or comparable terminology. Forward-looking
statements include all statements that are not statements of
historical facts. They include statements regarding our intentions,
beliefs or current expectations concerning, among other things:
2021 outlook for billings and unlevered free cash flow margin; the
expected impact of our Digital First, Connected strategy and the
actions described in this press release; the expected impact of the
COVID-19 pandemic; our future results of operations, financial
condition, liquidity, prospects, growth and strategies; the timing,
structure and expected impact of our operational efficiency and
cost-reduction initiatives and the estimated savings and amounts
expected to be incurred in connection therewith; and potential
business decisions. We derive many of our forward-looking
statements from our operating budgets and forecasts, which are
based upon many detailed assumptions. We caution that it is very
difficult to predict the impact of known factors, and, of course,
it is impossible for us to anticipate all factors that could affect
our actual results. All forward-looking statements are based upon
information available to us on the date of this report.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. We caution
you that forward-looking statements are not guarantees of future
performance and that actual results may differ materially from
those made in or suggested by the forward-looking statements
contained herein. In addition, even if actual results are
consistent with the forward-looking statements contained herein,
those results or developments may not be indicative of results or
developments in subsequent periods.
Important factors that could cause actual results to vary from
expectations include, but are not limited to: the duration and
severity of the COVID-19 pandemic and its impact on the federal,
state and local economies and on K-12 schools; the rate and state
of technological change; state requirements related to digital
instructional materials; our ability to execute on our Digital
First, Connected growth strategy; increases in our operating costs;
management and personnel changes; timing, higher costs and
unintended consequences of our operational efficiency and
cost-reduction initiatives, including the actions described in this
press release; our ability to sell the HMH Books & Media
business and the terms of any such potential sale; and other
factors discussed in the "Risk Factors" section of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2020. In light of these risks,
uncertainties and assumptions, the forward-looking events described
herein may not occur.
We undertake no obligation, and do not expect, to publicly
update or publicly revise any forward-looking statement, whether as
a result of new information, future events or otherwise, except as
required by law. All subsequent written and oral forward-looking
statements attributable to us or to persons acting on our behalf
are expressly qualified in their entirety by the cautionary
statements contained herein.
Houghton Mifflin
Harcourt Company
|
Consolidated
Balance Sheets
|
|
|
|
December
31,
|
|
(in thousands of
dollars, except share information)
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
281,200
|
|
|
$
|
296,353
|
|
Accounts receivable,
net
|
|
|
152,832
|
|
|
|
184,425
|
|
Inventories
|
|
|
166,963
|
|
|
|
213,059
|
|
Prepaid expenses and
other assets
|
|
|
19,931
|
|
|
|
19,257
|
|
Total current
assets
|
|
|
620,926
|
|
|
|
713,094
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and
equipment, net
|
|
|
93,202
|
|
|
|
100,388
|
|
Pre-publication
costs, net
|
|
|
203,149
|
|
|
|
268,197
|
|
Royalty advances to
authors, net
|
|
|
42,485
|
|
|
|
44,743
|
|
Goodwill
|
|
|
437,977
|
|
|
|
716,977
|
|
Other intangible
assets, net
|
|
|
428,584
|
|
|
|
474,225
|
|
Operating lease
assets
|
|
|
126,850
|
|
|
|
132,247
|
|
Deferred income
taxes
|
|
|
2,415
|
|
|
|
2,520
|
|
Deferred
commissions
|
|
|
30,659
|
|
|
|
29,291
|
|
Other
assets
|
|
|
34,879
|
|
|
|
31,490
|
|
Total
assets
|
|
$
|
2,021,126
|
|
|
$
|
2,513,172
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
19,000
|
|
|
$
|
19,000
|
|
Accounts
payable
|
|
|
49,104
|
|
|
|
52,128
|
|
Royalties
payable
|
|
|
50,771
|
|
|
|
72,985
|
|
Salaries, wages, and
commissions payable
|
|
|
21,944
|
|
|
|
54,938
|
|
Deferred
revenue
|
|
|
342,605
|
|
|
|
305,285
|
|
Interest
payable
|
|
|
11,017
|
|
|
|
3,826
|
|
Severance and other
charges
|
|
|
19,590
|
|
|
|
12,407
|
|
Accrued pension
benefits
|
|
|
1,593
|
|
|
|
—
|
|
Accrued postretirement
benefits
|
|
|
1,555
|
|
|
|
1,571
|
|
Operating lease
liabilities
|
|
|
9,669
|
|
|
|
8,685
|
|
Other
liabilities
|
|
|
24,973
|
|
|
|
24,325
|
|
Total current
liabilities
|
|
|
551,821
|
|
|
|
555,150
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net
of discount and issuance costs
|
|
|
624,692
|
|
|
|
638,187
|
|
Operating lease
liabilities
|
|
|
132,014
|
|
|
|
134,994
|
|
Long-term deferred
revenue
|
|
|
562,679
|
|
|
|
542,821
|
|
Accrued pension
benefits
|
|
|
24,061
|
|
|
|
23,648
|
|
Accrued
postretirement benefits
|
|
|
16,566
|
|
|
|
15,113
|
|
Deferred income
taxes
|
|
|
16,411
|
|
|
|
30,871
|
|
Other
liabilities
|
|
|
2,419
|
|
|
|
6,028
|
|
Total
liabilities
|
|
|
1,930,663
|
|
|
|
1,946,812
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01
par value: 20,000,000 shares authorized; no shares issued
and
outstanding at December 31, 2020 and 2019
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.01
par value: 380,000,000 shares authorized; 150,459,034 and
148,928,328 shares issued at December 31, 2020 and
2019, respectively; 125,852,000
and
124,351,294 shares outstanding at December 31, 2020 and 2019,
respectively
|
|
|
1,505
|
|
|
|
1,489
|
|
Treasury stock,
24,577,034 shares as of December 31, 2020 and 2019, respectively,
at cost
|
|
|
(518,030)
|
|
|
|
(518,030)
|
|
Capital in excess of
par value
|
|
|
4,918,542
|
|
|
|
4,906,165
|
|
Accumulated
deficit
|
|
|
(4,255,830)
|
|
|
|
(3,775,992)
|
|
Accumulated other
comprehensive loss
|
|
|
(55,724)
|
|
|
|
(47,272)
|
|
Total stockholders'
equity
|
|
|
90,463
|
|
|
|
566,360
|
|
Total liabilities and
stockholders' equity
|
|
$
|
2,021,126
|
|
|
$
|
2,513,172
|
|
Houghton Mifflin
Harcourt Company
|
Consolidated
Statements of Operations
|
|
|
|
(Unaudited)
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
(in thousands of
dollars, except share and per share data)
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net
sales
|
|
$
|
203,561
|
|
|
$
|
241,475
|
|
|
$
|
1,031,292
|
|
|
$
|
1,390,674
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales,
excluding publishing rights and
pre-publication
amortization
|
|
|
100,677
|
|
|
|
134,695
|
|
|
|
497,816
|
|
|
|
668,108
|
|
Publishing rights
amortization
|
|
|
4,761
|
|
|
|
6,340
|
|
|
|
20,056
|
|
|
|
26,557
|
|
Pre-publication
amortization
|
|
|
32,137
|
|
|
|
41,375
|
|
|
|
126,180
|
|
|
|
149,515
|
|
Cost of
sales
|
|
|
137,575
|
|
|
|
182,410
|
|
|
|
644,052
|
|
|
|
844,180
|
|
Selling and
administrative
|
|
|
111,095
|
|
|
|
146,400
|
|
|
|
478,101
|
|
|
|
662,606
|
|
Other intangible
asset amortization
|
|
|
6,766
|
|
|
|
5,791
|
|
|
|
25,585
|
|
|
|
25,310
|
|
Impairment charge for
goodwill
|
|
|
17,000
|
|
|
|
—
|
|
|
|
279,000
|
|
|
|
—
|
|
Restructuring/severance and other charges
|
|
|
98
|
|
|
|
15,821
|
|
|
|
33,643
|
|
|
|
21,742
|
|
Operating
loss
|
|
|
(68,973)
|
|
|
|
(108,947)
|
|
|
|
(429,089)
|
|
|
|
(163,164)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement benefits
non-service (expense) income
|
|
|
(1,039)
|
|
|
|
42
|
|
|
|
(856)
|
|
|
|
167
|
|
Interest
expense
|
|
|
(15,526)
|
|
|
|
(13,636)
|
|
|
|
(65,959)
|
|
|
|
(48,778)
|
|
Interest
income
|
|
|
26
|
|
|
|
1,459
|
|
|
|
899
|
|
|
|
3,157
|
|
Change in fair value
of derivative instruments
|
|
|
500
|
|
|
|
272
|
|
|
|
672
|
|
|
|
(899)
|
|
Gain on
investments
|
|
|
353
|
|
|
|
—
|
|
|
|
2,091
|
|
|
|
—
|
|
Income from
transition services agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,248
|
|
Loss on
extinguishment of debt
|
|
|
—
|
|
|
|
(4,363)
|
|
|
|
—
|
|
|
|
(4,363)
|
|
Loss before
taxes
|
|
|
(84,659)
|
|
|
|
(125,173)
|
|
|
|
(492,242)
|
|
|
|
(209,632)
|
|
Income tax (benefit)
expense
|
|
|
(1,514)
|
|
|
|
(55)
|
|
|
|
(12,404)
|
|
|
|
4,201
|
|
Net loss
|
|
$
|
(83,145)
|
|
|
$
|
(125,118)
|
|
|
$
|
(479,838)
|
|
|
$
|
(213,833)
|
|
Net loss per share
attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.66)
|
|
|
$
|
(1.01)
|
|
|
$
|
(3.82)
|
|
|
$
|
(1.72)
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
125,867,093
|
|
|
|
124,342,086
|
|
|
|
125,455,487
|
|
|
|
124,152,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houghton Mifflin
Harcourt Company
|
Consolidated
Statements of Cash Flows
|
|
|
|
Years Ended
December 31,
|
|
(in thousands of
dollars)
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(479,838)
|
|
|
$
|
(213,833)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
|
236,489
|
|
|
|
272,692
|
|
Operating lease
assets, amortization and impairments
|
|
|
5,397
|
|
|
|
15,949
|
|
Amortization of debt
discount and deferred financing costs
|
|
|
6,004
|
|
|
|
4,286
|
|
Gain on
investments
|
|
|
(2,091)
|
|
|
|
—
|
|
Deferred income
taxes
|
|
|
(14,355)
|
|
|
|
4,535
|
|
Stock-based
compensation expense
|
|
|
11,573
|
|
|
|
13,968
|
|
Impairment charge for
goodwill
|
|
|
279,000
|
|
|
|
—
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
|
4,363
|
|
Change in fair value
of derivative instruments
|
|
|
(672)
|
|
|
|
899
|
|
Changes in operating
assets and liabilities, net of acquisitions
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
31,593
|
|
|
|
19,182
|
|
Inventories
|
|
|
46,096
|
|
|
|
(28,850)
|
|
Other
assets
|
|
|
(11,425)
|
|
|
|
(20,155)
|
|
Accounts payable and
accrued expenses
|
|
|
(34,941)
|
|
|
|
(12,136)
|
|
Royalties payable and
author advances, net
|
|
|
(19,956)
|
|
|
|
9,342
|
|
Deferred
revenue
|
|
|
57,178
|
|
|
|
200,473
|
|
Interest
payable
|
|
|
7,191
|
|
|
|
3,690
|
|
Severance and other
charges
|
|
|
7,183
|
|
|
|
10,631
|
|
Accrued pension and
postretirement benefits
|
|
|
3,443
|
|
|
|
(4,800)
|
|
Operating lease
liabilities
|
|
|
(1,996)
|
|
|
|
(17,281)
|
|
Other
liabilities
|
|
|
(10,625)
|
|
|
|
(7,980)
|
|
Net cash provided by
operating activities
|
|
|
115,248
|
|
|
|
254,975
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sales
and maturities of short-term investments
|
|
|
—
|
|
|
|
50,000
|
|
Additions to
pre-publication costs
|
|
|
(61,331)
|
|
|
|
(102,562)
|
|
Additions to
property, plant, and equipment
|
|
|
(50,940)
|
|
|
|
(37,561)
|
|
Acquisition of
business, net of cash acquired
|
|
|
—
|
|
|
|
(5,447)
|
|
Investment in
preferred stock
|
|
|
—
|
|
|
|
(750)
|
|
Net cash used in
investing activities
|
|
|
(112,271)
|
|
|
|
(96,320)
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Proceeds from term
loan, net of discount
|
|
|
—
|
|
|
|
364,800
|
|
Proceeds from senior
secured notes, net of discount
|
|
|
—
|
|
|
|
299,880
|
|
Borrowings under
revolving credit facility
|
|
|
150,000
|
|
|
|
60,000
|
|
Payments of revolving
credit facility
|
|
|
(150,000)
|
|
|
|
(60,000)
|
|
Payments of long-term
debt
|
|
|
(19,000)
|
|
|
|
(772,000)
|
|
Payments of deferred
financing fees
|
|
|
—
|
|
|
|
(8,493)
|
|
Tax withholding
payments related to net share settlements of restricted stock
units
|
|
|
(48)
|
|
|
|
(2,018)
|
|
Issuance of common
stock under employee stock purchase plan
|
|
|
918
|
|
|
|
1,028
|
|
Net collections under
transition service agreement
|
|
|
—
|
|
|
|
1,136
|
|
Net cash used in
financing activities
|
|
|
(18,130)
|
|
|
|
(115,667)
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
(15,153)
|
|
|
|
42,988
|
|
Cash and cash
equivalents at the beginning of the period
|
|
|
296,353
|
|
|
|
253,365
|
|
Cash and cash
equivalents at the end of the period
|
|
$
|
281,200
|
|
|
$
|
296,353
|
|
|
Houghton Mifflin
Harcourt Company
|
|
Non-GAAP
Reconciliations (Unaudited)
|
Adjusted
EBITDA
|
Consolidated
|
(in thousands of
dollars)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net loss
|
|
$
|
(83,145)
|
|
|
$
|
(125,118)
|
|
|
$
|
(479,838)
|
|
|
$
|
(213,833)
|
|
|
Interest
expense
|
|
|
15,526
|
|
|
|
13,636
|
|
|
|
65,959
|
|
|
|
48,778
|
|
|
Interest
income
|
|
|
(26)
|
|
|
|
(1,459)
|
|
|
|
(899)
|
|
|
|
(3,157)
|
|
|
Provision (benefit)
for income taxes
|
|
|
(1,514)
|
|
|
|
(55)
|
|
|
|
(12,404)
|
|
|
|
4,201
|
|
|
Depreciation
expense
|
|
|
12,699
|
|
|
|
14,530
|
|
|
|
50,715
|
|
|
|
61,475
|
|
|
Amortization expense
– film asset
|
|
|
9,099
|
|
|
|
3,063
|
|
|
|
13,953
|
|
|
|
9,835
|
|
|
Amortization
expense
|
|
|
43,664
|
|
|
|
53,506
|
|
|
|
171,821
|
|
|
|
201,382
|
|
|
Non-cash charges –
goodwill impairment
|
|
|
17,000
|
|
|
|
—
|
|
|
|
279,000
|
|
|
|
—
|
|
|
Non-cash charges –
stock compensation
|
|
|
2,822
|
|
|
|
2,874
|
|
|
|
11,573
|
|
|
|
13,968
|
|
|
Non-cash charges –
loss on derivative instruments
|
|
|
(500)
|
|
|
|
(272)
|
|
|
|
(672)
|
|
|
|
899
|
|
|
Inventory
obsolescence related to strategic transformation
plan
|
|
|
—
|
|
|
|
9,758
|
|
|
|
—
|
|
|
|
9,758
|
|
|
Fees, expenses or
charges for equity offerings, debt or
acquisitions/dispositions
|
|
|
714
|
|
|
|
5,596
|
|
|
|
1,080
|
|
|
|
6,327
|
|
|
Restructuring/severance and other charges
|
|
|
98
|
|
|
|
15,821
|
|
|
|
33,643
|
|
|
|
21,742
|
|
|
Gain on
investments
|
|
|
(353)
|
|
|
|
—
|
|
|
|
(2,091)
|
|
|
|
—
|
|
|
Loss on
extinguishment of debt
|
|
|
—
|
|
|
|
4,363
|
|
|
|
—
|
|
|
|
4,363
|
|
|
Adjusted
EBITDA
|
|
$
|
16,084
|
|
|
$
|
(3,757)
|
|
|
$
|
131,840
|
|
|
$
|
165,738
|
|
|
Free Cash
Flow
|
Consolidated
|
(in thousands of
dollars)
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Years Ended
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
40,082
|
|
|
$
|
127,603
|
|
|
$
|
115,248
|
|
|
$
|
254,975
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to
pre-publication costs
|
|
|
(10,010)
|
|
|
|
(21,030)
|
|
|
|
(61,331)
|
|
|
|
(102,562)
|
|
|
Additions to
property, plant, and equipment
|
|
|
(15,665)
|
|
|
|
(10,211)
|
|
|
|
(50,940)
|
|
|
|
(37,561)
|
|
|
Free Cash
Flow
|
|
$
|
14,407
|
|
|
$
|
96,362
|
|
|
$
|
2,977
|
|
|
$
|
114,852
|
|
|
We are unable to
reconcile forward looking cash flow (both before and after interest
payments) and related margin without unreasonable efforts.
Unlevered free cash flow margin is the ratio of free cash flow
before interest payments to billings.
|
Houghton Mifflin
Harcourt Company
|
Calculation of
Billings (Unaudited)
|
|
Billings
(in thousands of dollars)
|
Consolidated
|
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net sales
|
|
$
|
203,561
|
|
|
$
|
241,475
|
|
|
$
|
1,031,292
|
|
|
$
|
1,390,674
|
|
|
Change in deferred
revenue
|
|
|
(48,169)
|
|
|
|
(40,618)
|
|
|
|
58,178
|
|
|
|
200,662
|
|
|
Billings
|
|
$
|
155,392
|
|
|
$
|
200,857
|
|
|
$
|
1,089,470
|
|
|
$
|
1,591,336
|
|
|
|
Education
|
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net sales
|
|
$
|
140,979
|
|
|
$
|
189,387
|
|
|
$
|
839,553
|
|
|
$
|
1,210,646
|
|
|
Change in deferred
revenue
|
|
|
(48,294)
|
|
|
|
(40,514)
|
|
|
|
58,281
|
|
|
|
201,621
|
|
|
Education
Billings
|
|
$
|
92,685
|
|
|
$
|
148,873
|
|
|
$
|
897,834
|
|
|
$
|
1,412,267
|
|
|
|
HMH
Books & Media
|
|
|
|
|
Three Months
Ended
December
31,
|
|
|
Years
Ended
December
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Net sales
|
|
$
|
62,582
|
|
|
$
|
52,088
|
|
|
$
|
191,739
|
|
|
$
|
180,028
|
|
|
Change in deferred
revenue
|
|
|
125
|
|
|
|
(104)
|
|
|
|
(103)
|
|
|
|
(959)
|
|
|
HMH Books & Media
Billings
|
|
$
|
62,707
|
|
|
$
|
51,984
|
|
|
$
|
191,636
|
|
|
$
|
179,069
|
|
|
Billings is an
operating measure utilized by the Company derived as shown
above.
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SOURCE Houghton Mifflin Harcourt