Led by sales from the Divergent series and higher e-book sales, EBITDA (earnings before interest, taxes, depreciation and amortization) rose 33% in HarperCollins’ second quarter ended December 31, 2013 compared to the second quarter of fiscal 2013, rising to $68 million. Revenue increased a more modest 4%, to $391 million.
As has been true since e-books became a meaningful part of publishers’ businesses, parent company News Corp attributed the profit improvement in part to higher sales of more profitable e-books. In the quarter, e-book sales rose 39% and accounted for 17% of total sales, up from 14% in the second quarter of fiscal 2013.
In addition to strong Divergent sales, other hot titles in the holiday period included The Pioneer Woman Cooks: A Year of Holidays by Ree Drummond and The First Phone Call from Heaven by Mitch Albom. HC CEO Brian Murray said that while Divergent was certainly the star of the second fiscal quarter, the company enjoyed solid gains across the board. The U.S. posted the strongest improvement, but Murray said HC's divisions in the U.K. and Australia also reported gains. Murray said as evidenced by the 39% increase in e-book sales, the company continued to see sold gains in digital sales in the quarter. Murray believes most readers who want a digital reading device already have one and that growth will depend on mix --fiction continues to outperform nonfiction in digital--and growth among adults in their twenties and thirties "who live on their devices." International sales of e-books are also growing, Murray said, especially for backlist where sales are growing faster than for the company as a whole.
Overall revenue gains were impacted by the sale the Women of Faith business and the decision by HC to get out of the distribution business. Excluding the impact of acquisitions, divestitures, and foreign exchange fluctuations, revenues increased 8% and EBITDA increased 38%, News said. Murray noted that the consolidation of HC's warehouse operations is nearly completed with Thomas Nelson moving its books to the Donnelley facility in January. During the most recent quarter Murray said HC had some glitches in getting orders to stores, but that that was mostly due to bad weather, particularly in the mid-west.
For the first half of the fiscal year, EBITDA was up 22%, to $111 million, despite a 1% decline in revenue, to $719 million. Murray is optimistic about prospects for the current quarter, noting that the first Divergent movie will open in late March.
