A strong fourth quarter was not quite enough to lift fiscal 2016 results at HarperCollins, over fiscal 2015. For the year ended June 30, 2016, revenue at HC fell 1.2%, to $1.65 billion, compared to last year. EBITDA (earnings before interest, taxes, depreciation and amortization) fell from $221 million in fiscal 2015, to $185 million.
Sales in the fourth quarter ended June 30, 2016 rose 11.0%, to $433 million and EBITDA jumped 52%, to $50 million. Parent company News Corp attributed the fourth quarter improvement to a strong frontlist led by The Nest, The Rainbow Comes and Goes, and The World’s Worst Children, as well as continuing sales from Jesus Calling.
HC also benefited from an additional week of sales in the most recent quarter, which added $19 million to revenue, and from the expansion of the publisher's global footprint.
The fourth quarter gains, however, could not offset the declines posted by HC in the first nine months of fiscal 2016 compared to the same period in fiscal 2015 when sales of Divergent and American Sniper drove revenue higher. HC also reported that e-book sales fell for the full fiscal year and that digital sales (e-books and digital audio) accounted for 19% of consumer revenue in fiscal 2016 down from 23% in fiscal 2015.
In a conference call discussing results, Robert Thomson, CEO of News Corp, cited a "palpable upturn" at HC in the fourth quarter and said News remains confident in the future of book publishing.
HC CEO Brian Murray told PW that in addition to some solid performances by a number of titles, fourth quarter results benefited from easier comparisons to a year ago when Divergent and Sniper sales had cooled. Another factor, Murray said, was truer e-book comparisons after e-book pricing and business models "settled down" last year.
While e-book sales fell for the full year at HC, sales of digital audio had solid gains and HC increased its digital business with libraries, Murray said. Print sales also had a good gain in the year. While some industry members and observers have tied the increase in print sales mainly to adult coloring books, Murray said HC has seen improvement in print sales for many of its major authors. He speculated that the improvement is due to less of a difference between the price of e-books and discounted hardcovers as well as to "screen fatigue" among readers.
HC's bottomline has benefited from $20 million in costs savings from the integration of Harlequin, Thomson said, while Harlequin's top line has gained from being part of HC, which, in the case of certain titles, has lifted sales by 50% to 100%. Murray explained the HC and Harlequin have been able to exercise "true synergy." HC distribution into the trade has helped Harlequin accelerate its growth into bookstores as Harlequin continues its push beyond the romance category, Murray said, while the reverse is true in the case of some Avon books that have seen increased sales at outlets like Walmart where Harlequin has a strong presence.
The HC-Harlequin combination has also helped increase international sales. HC has rebranded all overseas Harlequin office as HarperCollins divisions while continuing to operate the existing Harlequin program. As part of developing a worldwide publishing program, Murray said HC has released 400 titles through its rebranded HC offices.
Murray said he is "very happy" with HC's position for the remainder of calendar 2016, although he noted the publisher faces a difficult comparison in the current quarter since last July sales of Go Set a Watchman set print sales records. Still, Murray said he has "high hopes" for a range of HC forthcoming books including Megyn Kelly's memoir and a new title from Divergent author Veronica Roth.
This story has been updated to include remarks by Robert Thomson and Brian Murray.
