BOSTON, March 29, 2021 /PRNewswire/ -- Learning
technology company Houghton Mifflin Harcourt ("HMH" or the
"Company") (Nasdaq: HMHC) today announced that it has entered into
a definitive agreement to divest HMH Books & Media, its
consumer publishing business, to HarperCollins Publishers, a
division of News Corp (Nasdaq: NWSA), a global, diversified media
and information services company, for a cash purchase price of
$349 million.The divestiture enables
HMH to focus singularly on K–12 education and accelerate growth
momentum in digital sales, annual recurring revenue and free cash
flow while paying down a significant portion of its debt.
For nearly two centuries, HMH Books & Media has published
some of the world's most renowned novels, nonfiction, cookbooks and
children's books. HMH publishes celebrated best-sellers such as the
popular J.R.R. Tolkien titles, The Best American® series,
major cookbook brands such as Instant Pot Miracle and the
How to Cook Everything® series, as well as iconic children's
books and characters such as Curious George®, Little Blue
Truck, and The Giver. HMH Books & Media also houses
HMH Productions, an innovative production company, with expertise
across all media platforms that produces TV, film, and interactive
media including Carmen
Sandiego (an original Netflix series and film) and
more.
"At HMH, we are incredibly proud of our legacy, which
encompasses nearly 200 years of innovation in trade publishing and
education, touching countless teachers, students and readers over
time. The divestiture of the HMH Books & Media business allows
us to deepen our focus on K–12 education, while also providing
our talented consumer publishing colleagues and authors with
infrastructure and support to fuel continued growth, champion new
stories and continue this legacy," said Jack Lynch, President and CEO, HMH.
HMH is the largest learning technology company in the K–12
market, serving 90% of the schools, teachers and students in the
U.S. "HMH is the leader in not only scale, but in proven,
research-based programs informed by learning science—and it is that
intersection of learning science and learning technology that sets
us apart. There is incredible demand for our expertise as schools
across the country plan for post-pandemic learning and recovery,"
added Lynch. "This is an inflection moment for K–12 education in
our country and for HMH as a trusted partner to schools and
teachers in advancing learning for every student."
As part of the agreement, all HMH Books & Media employees
will join HarperCollins, News Corp's trade publishing division. HMH
and News Corp will work closely to provide a smooth transition for
employees, customers, authors and illustrators.
The divestiture is subject to customary closing conditions,
including regulatory approvals. The transaction is expected to
close in the second quarter of 2021.
Updated Outlook
HMH today also updated its full-year
2021 outlook to adjust for the sale. The Company now expects 2021
billings in a range of $905 million
to $955 million with an unlevered
free cash flow margin in a range of 9% to 11%, reflecting the
expected removal of HMH Books & Media from continuing
operations. HMH will report the HMH Book & Media business as
discontinued operations beginning with the quarter ending
March 31, 2021.
HMH Books & Media contributed approximately $192 million in billings to HMH in 2020. HMH
expects total net cash proceeds of approximately $337 million, which it plans to use all net
proceeds to pay down debt, further aligning the company's capital
structure with its Digital First, Connected strategy.
Advisors
Centerview Partners served as exclusive
financial advisor to HMH. Wilmer Cutler
Pickering Hale and Dorr LLP acted as HMH's legal counsel and
Milbank LLP acted as HMH's antitrust counsel.
Investor Call Information
In connection with this
announcement, the Company will be holding a conference call at 8:30
a.m. ET on Monday, March 29, 2021, to
discuss the Transaction with 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: 5884357
Moderator:
Brian Shipman, Senior Vice
President, Investor Relations
Webcast
Link: https://edge.media-server.com/mmc/p/sx4ijh9j
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 April 8,
2021 via the following telephone numbers:
(855) 859-2056 in the United
States and (404) 537-3406 internationally using
passcode 5884357.
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.
About News Corp
News Corp (Nasdaq: NWS, NWSA; ASX:
NWS, NWSLV) is a global, diversified media and information services
company focused on creating and distributing authoritative and
engaging content and other products and services. The company
comprises businesses across a range of media, including: digital
real estate services, subscription video services in Australia, news and information services and
book publishing. Headquartered in New
York, News Corp operates primarily in the United States, Australia, and the United Kingdom, and its content and other
products and services are distributed and consumed worldwide. More
information is available at: http://www.newscorp.com.
About HarperCollins
HarperCollins Publishers is the
second-largest consumer book publisher in the world, with
operations in 17 countries. With 200 years of history and more than
120 branded imprints around the world, HarperCollins publishes
approximately 10,000 new books every year in 16 languages and has a
print and digital catalog of more than 200,000 titles. Writing
across dozens of genres, HarperCollins authors include winners of
the Nobel Prize, the Pulitzer Prize, the National Book Award, the
Newbery and Caldecott Medals, and the Man Booker Prize.
HarperCollins, headquartered in New
York, is a subsidiary of News Corp and can be visited online
at corporate.HarperCollins.com.
Use of Non-GAAP Financial Measures
To provide additional insights into our expected performance on
a forward-looking basis, we have presented the non-GAAP measure of
unlevered free cash flow margin. This measure is 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 financial information prepared in accordance
with GAAP. Management believes that the presentation of this
non-GAAP measure 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 unlevered free
cash flow margin provides useful information to our investors
because management regularly reviews this metric 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 their non-GAAP measures differently
and, as a result, our use of this non-GAAP measures may not be
directly comparable to free cash flow measures used by other
companies. Although we use non-GAAP 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. 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 and is
not intended to be a measure of residual cash flow available for
discretionary use. You are cautioned not to place undue reliance on
non-GAAP measures. Management is unable, without unreasonable
efforts, to present a quantitative reconciliation of this
forward-looking non-GAAP financial measure (Unlevered free cash
flow margin) to its most directly comparable forward-looking GAAP
financial measure (Cash flow from operating activities) because
management cannot reliably predict all of the necessary components
of such GAAP measure on a forward-looking basis.
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: the expected timetable for closing the disposition of
HMH Books & Media, including the satisfaction or waiver of
closing conditions; 2021 outlook for billings and free cash flow;
the use of the net proceeds from the transaction to pay down debt;
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; 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: any delays in
receiving required regulatory approvals; the Company's ability to
retain and hire key personnel; the risk that disruption resulting
from the transaction may adversely affect the Company's businesses
and business relationships, including with employees and suppliers;
delays in satisfying other closing conditions and disruptions in
the global credit and financial markets that could have a negative
impact on the completion of the transaction; 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; 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.
Contacts
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
Houghton Mifflin
Harcourt Company
|
HMH Books &
Media Calculation of Billings
|
|
Billings (in
thousands of dollars)
|
HMH
Books & Media
|
|
|
|
|
|
Years
Ended
December 31,
2020
|
|
|
Net sales
|
|
|
|
$
|
191,739
|
|
|
Change in deferred
revenue
|
|
|
|
|
(103)
|
|
|
HMH Books & Media
Billings
|
|
|
|
$
|
191,636
|
|
|
Billings is an operating measure utilized by the Company derived
as shown above.
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