Fiscal 2026 Q1 Review [Executive Summary & CEO Commentary](index=1&type=section&id=Executive%20Summary%20%26%20CEO%20Commentary) Scholastic reported a seasonal Q1 operating loss, with CEO Peter Warwick highlighting steady progress in book fairs, Entertainment IP, and strategic Education efforts, alongside real estate monetization plans - The company typically generates an **operating loss** in the first quarter due to **seasonality** when schools are not in session[1](index=1&type=chunk)[2](index=2&type=chunk) - **Fall book fair bookings are encouraging and exceed prior year bookings**, showing **strong engagement with hosts**[3](index=3&type=chunk) - Scholastic Entertainment is **expanding IP reach and value**, creating new brands, and building **higher-margin digital and licensing revenue streams**, leveraging 9 Story Media Group capabilities[3](index=3&type=chunk) - The Education division faced pressure from a **difficult and volatile funding environment**, leading to **delayed or reduced school purchases**[4](index=4&type=chunk) - The company is **evaluating potential sale-leasebacks of key real estate assets** to **enhance shareholder value**, which have **drawn substantial interest**[5](index=5&type=chunk) [Consolidated Financial Highlights](index=1&type=section&id=Consolidated%20Financial%20Highlights) Q1 FY26 saw a **5% revenue decrease** to **$225.6 million**, a **4% operating loss increase** to **$92.2 million**, and a **28% diluted loss per share widening**, while **Adjusted EBITDA improved 8%** to a **$55.7 million loss** | In $ millions (except per share data) | Fiscal 2026 | Fiscal 2025 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :--------- | :--------- | | Revenues | $ 225.6 | $ 237.2 | $ (11.6) | (5)% | | Operating income (loss) | $ (92.2) | $ (88.5) | $ (3.7) | (4)% | | Earnings (loss) before taxes | $ (97.0) | $ (91.8) | $ (5.2) | (6)% | | Diluted earnings (loss) per share | $ (2.83) | $ (2.21) | $ (0.62) | (28)% | | Operating income (loss), ex. one-time items * | $ (81.9) | $ (85.6) | $ 3.7 | 4 % | | Diluted earnings (loss) per share, ex. one-time items * | $ (2.52) | $ (2.13) | $ (0.39) | (18)% | | Adjusted EBITDA * | $ (55.7) | $ (60.5) | $ 4.8 | 8 % | [Overall Financial Performance](index=1&type=section&id=Overall%20Financial%20Performance) Consolidated revenues **decreased 5%** to **$225.6 million** due to lower Education Solutions sales, resulting in a **$92.2 million operating loss**, though **Adjusted EBITDA improved 8%** to a **$55.7 million loss** - Revenues **decreased 5% to $225.6 million**, mainly due to **lower Education Solutions sales** amid a **volatile funding environment**[7](index=7&type=chunk) - Operating loss **increased 4% to $92.2 million** (including one-time charges), but **improved by $3.7 million excluding these charges**[8](index=8&type=chunk) - **Adjusted EBITDA improved 8% to a loss of $55.7 million**, reflecting **reduced discretionary overhead** and **higher Children's Book Publishing and Distribution revenues**[8](index=8&type=chunk)[9](index=9&type=chunk) Quarterly Results by Segment [Children's Book Publishing and Distribution](index=2&type=section&id=Children's%20Book%20Publishing%20and%20Distribution) This segment's revenues **increased 4%** to **$109.4 million**, driven by an **18% rise in Book Fairs**, despite a **33% drop in Book Clubs**, leading to an improved operating loss of **$35.1 million** | Metric | FY26 Q1 ($M) | FY25 Q1 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Total Revenues | 109.4 | 105.4 | 4.0 | 4 % | | Book Fairs Revenues | 34.1 | 28.8 | 5.3 | 18 % | | Book Clubs Revenues | 1.8 | 2.7 | (0.9) | (33)% | | Consolidated Trade | 73.5 | 73.9 | (0.4) | (1)% | | Operating income (loss) | (35.1) | (36.6) | 1.5 | 4 % | - **Higher redemptions of Scholastic Dollars** in Book Fairs are indicative of **positive engagement with Book Fair hosts**[11](index=11&type=chunk) [Education Solutions](index=2&type=section&id=Education%20Solutions) Education Solutions revenues significantly **decreased 28%** to **$40.1 million** due to school funding uncertainty, resulting in an **increased operating loss of $21.2 million** | Metric | FY26 Q1 ($M) | FY25 Q1 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Revenues | 40.1 | 55.7 | (15.6) | (28)% | | Operating income (loss) | (21.2) | (17.0) | (4.2) | (25)% | - The division continues to execute on **more focused product, marketing, and sales strategies** with the long-term goal of **regaining market share**[12](index=12&type=chunk) [Entertainment](index=2&type=section&id=Entertainment) Entertainment revenues **decreased 18%** to **$13.6 million** due to production delays, widening the operating loss to **$4.0 million**, partly from **$2.5 million in intangible amortization** related to the 9 Story transaction | Metric | FY26 Q1 ($M) | FY25 Q1 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Revenues | 13.6 | 16.6 | (3.0) | (18)% | | Operating income (loss) | (4.0) | (0.5) | (3.5) | NM | - The company incurred **$2.5 million in intangible amortization** related to the **9 Story transaction** during the quarter[13](index=13&type=chunk) [International](index=2&type=section&id=International) International revenues grew **4%** to **$59.4 million** (excluding currency impact), driven by Australia, UK, and Asia, leading to a **49% improved operating loss** of **$4.2 million** | Metric | FY26 Q1 ($M) | FY25 Q1 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Revenues | 59.4 | 56.8 | 2.6 | 5 % | | Operating income (loss) | (4.2) | (8.3) | 4.1 | 49 % | - **Excluding favorable foreign currency exchange of $0.2 million**, International revenues **increased 4%**[14](index=14&type=chunk) - **Adjusted operating loss improved by $4.2 million**, driven by **higher revenues and operational efficiencies**[14](index=14&type=chunk) [Overhead](index=2&type=section&id=Overhead) Overhead costs were **$27.7 million**, but adjusted costs **decreased $6.6 million** excluding **$9.4 million in one-time charges**, reflecting successful cost-saving initiatives | Metric | FY26 Q1 ($M) | FY25 Q1 ($M) | Change ($M) | Change (%) | | :---------------------- | :----------- | :----------- | :---------- | :--------- | | Operating income (loss) | (27.7) | (26.1) | (1.6) | (6)% | - **Excluding one-time charges**, adjusted overhead costs **decreased $6.6 million** due to **cost-saving initiatives**[15](index=15&type=chunk) Capital Position and Liquidity [Cash Flow and Debt](index=3&type=section&id=Cash%20Flow%20and%20Debt) Net cash used by operating activities **increased 95%** to **$81.8 million**, and net debt rose to **$242.8 million**, reflecting working capital needs, dividends, and share repurchases | In $ millions | Fiscal 2026 | Fiscal 2025 | Change ($) | Change (%) | | :------------------------------------------------ | :---------- | :---------- | :--------- | :--------- | | Net cash (used) provided by operating activities | $ (81.8) | $ (41.9) | $ (39.9) | (95)% | | Additions to property, plant and equipment and prepublication expenditures | (14.9) | (24.4) | 9.5 | 39 % | | Net of borrowings (repayments) film related obligations | (3.5) | (2.4) | (1.1) | (46)% | | Free cash flow (use)* | $ (100.2) | $ (68.7) | $ (31.5) | (46)% | | Net cash (debt)* | $ (242.8) | $ (152.1) | $ (90.7) | (60)% | - Net cash used by operating activities **increased by 95% to $81.8 million**, driven by **lower net income** and **seasonal working capital**[17](index=17&type=chunk) - Net debt **increased to $242.8 million from $152.1 million**, reflecting **working capital, dividends, and share repurchases**[18](index=18&type=chunk) - The Company **distributed $5.2 million in dividends** and has **$70.0 million remaining for share repurchases**[18](index=18&type=chunk) [Real Estate Monetization Initiatives](index=3&type=section&id=Real%20Estate%20Monetization%20Initiatives) Scholastic is evaluating potential sale-leaseback transactions for its NYC and Missouri real estate, expecting **significant additional liquidity** for **debt reduction and share repurchases** this fall - Scholastic has **retained Newmark Group** to identify investment partners for **potential sale-leaseback transactions** of its owned real estate assets[19](index=19&type=chunk) - These processes are expected to **conclude this fall** and could provide **significant additional liquidity** for **debt reduction and share repurchases**[19](index=19&type=chunk) Additional Information [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) The company provides **non-GAAP measures** like **Adjusted EBITDA** and **Free Cash Flow** for supplemental understanding, not as substitutes for GAAP financial information - **Non-GAAP measures** like **"Adjusted EBITDA"** and **"Free Cash Flow"** are included to **supplement GAAP financial statements**[20](index=20&type=chunk) - This information is **supplemental and not a substitute for GAAP financial information**[20](index=20&type=chunk) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Scholastic discussed **Q1 results** on a September 18, 2025 conference call, with a webcast and slides available on its investor relations website - A conference call was held on **September 18, 2025, at 4:30 p.m. ET** to discuss results, moderated by **Peter Warwick and Haji Glover**[21](index=21&type=chunk) - **Access to the live webcast and dial-in details were provided**, with an **archived webcast and slides available at investor.scholastic.com**[22](index=22&type=chunk) [About Scholastic](index=3&type=section&id=About%20Scholastic) **Scholastic Corporation** is a **global children's publishing, education, and media company** with over 100 years of history, empowering literacy through diverse content and channels worldwide - **Scholastic Corporation (NASDAQ: SCHL)** is a **global children's publishing, education, and media company** with **over 100 years of history**[23](index=23&type=chunk) - The company's mission is to **empower children to become lifelong readers and learners** through **bestselling books, literacy resources, and entertaining media**[23](index=23&type=chunk) - Scholastic **operates globally, reaching over 135 countries** through **school-based book clubs, book fairs, libraries, retail, and online platforms**[23](index=23&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This news release contains **forward-looking statements** subject to market and product acceptance risks, where **actual results could differ materially** from current expectations - The news release contains **forward-looking statements** subject to **risks and uncertainties**, including **market conditions and product acceptance**[25](index=25&type=chunk) - **Actual results could differ materially** from those currently anticipated[25](index=25&type=chunk) Unaudited Financial Statements [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details revenues, operating costs, and net income (loss) for the three months ended August 31, 2025, and August 31, 2024 | | Three months ended | | | | :-------------------------------------- | :--------- | :--------- | :--------- | | | 08/31/25 | 08/31/24 | | | Revenues | $ 225.6 | $ 237.2 | | | Operating costs and expenses: | | | | | Cost of goods sold | 123.5 | 128.3 | | | Selling, general and administrative expense | 177.2 | 182.1 | | | Depreciation and amortization | 16.3 | 15.3 | | | Asset impairments and write downs | 0.8 | — | | | Total operating costs and expenses | 317.8 | 325.7 | | | Operating income (loss) | (92.2) | (88.5) | | | Interest income (expense), net | (4.5) | (3.0) | | | Other components of net periodic benefit (cost) | (0.3) | (0.3) | | | Earnings (loss) before income taxes | (97.0) | (91.8) | | | Provision (benefit) for income taxes | (25.9) | (29.3) | | | Net income (loss) | (71.1) | (62.5) | | | Basic and diluted earnings (loss) per share of Class A and Common Stock | | | | | Basic | $ (2.83) | $ (2.21) | | | Diluted | $ (2.83) | $ (2.21) | | | Basic weighted average shares outstanding | 25,161 | 28,290 | | | Diluted weighted average shares outstanding | 25,410 | 28,908 | [Segment Results](index=6&type=section&id=Segment%20Results) This section presents revenues and operating income (loss) for each operating segment for the three months ended August 31, 2025, and August 31, 2024 | | | | Three months ended | | | Change | | | :----------------------------------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | | | 08/31/25 | | | 08/31/24 | | $ | % | | Children's Book Publishing and Distribution | | | | | | | | | Revenues | | | | | | | | | Books Clubs | $ 1.8 | | $ 2.7 | | $ (0.9) | (33)% | | Book Fairs | 34.1 | | 28.8 | | 5.3 | 18 % | | School Reading Events | 35.9 | | 31.5 | | 4.4 | 14 % | | Consolidated Trade | 73.5 | | 73.9 | | (0.4) | (1)% | | Total Revenues | 109.4 | | 105.4 | | 4.0 | 4 % | | Operating income (loss) | (35.1) | | (36.6) | | 1.5 | 4 % | | Operating margin | NM | | NM | | | | | Education Solutions | | | | | | | | | Revenues | 40.1 | | 55.7 | | (15.6) | (28)% | | Operating income (loss) | (21.2) | | (17.0) | | (4.2) | (25)% | | Operating margin | NM | | NM | | | | | Entertainment | | | | | | | | | Revenues | 13.6 | | 16.6 | | (3.0) | (18)% | | Operating income (loss) | (4.0) | | (0.5) | | (3.5) | NM | | Operating margin | NM | | NM | | | | | International | | | | | | | | | Revenues | 59.4 | | 56.8 | | 2.6 | 5 % | | Operating income (loss) | (4.2) | | (8.3) | | 4.1 | 49 % | | Operating margin | NM | | NM | | | | | Overhead | | | | | | | | | Revenues | 3.1 | | 2.7 | | 0.4 | 15 % | | Operating income (loss) | (27.7) | | (26.1) | | (1.6) | (6)% | | Operating income (loss) | $ (92.2) | $ | (88.5) | $ | (3.7) | (4)% | [Supplemental Balance Sheet and Cash Flow Items](index=7&type=section&id=Supplemental%20Balance%20Sheet%20and%20Cash%20Flow%20Items) This section provides selected balance sheet items and cash flow details, including net cash from operating activities and free cash flow (use) | Selected Balance Sheet Items | | | | | :--------------------------- | :--------- | :--------- | :--------- | | | 08/31/25 | | 08/31/24 | | Cash and cash equivalents | $ 94.3 | | $ 84.1 | | Accounts receivable, net | 187.0 | | 201.1 | | Inventories, net | 322.2 | | 310.3 | | Accounts payable | 175.8 | | 184.0 | | Deferred revenue | 181.0 | | 173.9 | | Accrued royalties | 86.6 | | 77.5 | | Film related obligations | 14.7 | | 34.1 | | Lines of credit and long-term debt | 331.2 | | 231.1 | | (1) Net cash (debt) | (242.8) | | (152.1) | | Total stockholders' equity | 878.0 | | 957.3 | | Selected Cash Flow Items | | | | | | | Three months ended | | | | 08/31/25 | | 08/31/24 | | Net cash provided by (used in) operating activities | $ (81.8) | | $ (41.9) | | Property, plant and equipment additions | (10.0) | | (20.0) | | Prepublication expenditures | (4.9) | | (4.4) | | Net borrowings (repayments) of film related obligations | (3.5) | | (2.4) | | (2) Free cash flow (use) | $ (100.2) | | $ (68.7) | - **Net cash (debt)** is defined as **cash and cash equivalents less production cash, net of lines of credit and short-term and long-term debt, excluding film related obligations**[32](index=32&type=chunk) - **Free cash flow (use)** is defined as **net cash from operating activities, adjusted for acquisitions, asset sales, capital expenditures, prepublication costs, and film related obligations**[33](index=33&type=chunk) [Supplemental Results - Excluding One-Time Items](index=8&type=section&id=Supplemental%20Results%20-%20Excluding%20One-Time%20Items) This table reconciles reported financial results to those excluding **one-time items** for diluted EPS, net income, earnings before taxes, and segment operating income | | | | | Three months ended | | | | | | | | | :----------------------------------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | | | | | 08/31/2025 | | | | | 08/31/2024 | | | | | | | Reported | One-time items | | Excluding One-time items | | | Reported | One-time items | | Excluding One-time items | | | Diluted earnings (loss) per (1) share | $ (2.83) | $ 0.31 | $ (2.52) | | $ (2.21) | $ 0.08 | $ (2.13) | | | (2) Net income (loss) | $ (71.1) | $ 7.8 | $ (63.3) | | $ (62.5) | $ 2.2 | $ (60.3) | | | Earnings (loss) before income taxes | $ (97.0) | $ 10.3 | $ (86.7) | | $ (91.8) | $ 2.9 | $ (88.9) | | | Children's Book Publishing (3) and Distribution | $ (35.1) | $ 0.8 | $ (34.3) | | $ (36.6) | $ — | $ (36.6) | | | Education Solutions | (21.2) | — | (21.2) | | (17.0) | — | (17.0) | | | (4) Entertainment | (4.0) | 0.0 | (4.0) | | (0.5) | 1.7 | 1.2 | | | (5) International | (4.2) | 0.1 | (4.1) | | (8.3) | — | (8.3) | | | (6) Overhead | (27.7) | 9.4 | (18.3) | | (26.1) | 1.2 | (24.9) | | | Operating income (loss) | $ (92.2) | $ 10.3 | $ (81.9) | | $ (88.5) | $ 2.9 | $ (85.6) | | - **One-time items for Q1 FY26** included **$0.8M asset impairment** in Children's Book Publishing, **less than $0.1M acquisition costs** in Entertainment, **$0.1M severance** in International, and **$8.7M severance plus $0.7M other expenses** in Overhead[36](index=36&type=chunk)[37](index=37&type=chunk) [Adjusted EBITDA (Consolidated & Segment)](index=9&type=section&id=Adjusted%20EBITDA%20(Consolidated%20%26%20Segment)) This section calculates consolidated and segment **Adjusted EBITDA**, reconciling it from earnings before income taxes, excluding **one-time items**, interest, depreciation, and amortization | | | Three months ended | | | | :------------------------------------------ | :------- | :------- | :------- | :------- | | | 08/31/25 | | 08/31/24 | | | Earnings (loss) before income taxes as reported | $ (97.0) | | $ (91.8) | | | One-time items before income taxes | 10.3 | | 2.9 | | | Earnings (loss) before income taxes excluding one-time items | (86.7) | | (88.9) | | | (1) Interest (income) expense | 4.5 | | 3.4 | | | Depreciation and amortization | 26.5 | | 25.0 | | | (2) Adjusted EBITDA | $ (55.7) | | $ (60.5) | | | | | | | | | | Three months ended | | | | | | | | :----------------------------------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | | | CBPD (1) | EDUC (1) | ENT (1) | INTL (1) | OVH (1) | | Total | | | Earnings (loss) before income taxes as reported | $ (35.1) | $ (21.2) | $ (4.5) | $ (4.7) | $ (31.5) | | $ (97.0) | | | One-time items before income taxes | 0.8 | — | 0.0 | 0.1 | 9.4 | | 10.3 | | | Earnings (loss) before income taxes excluding one-time items | (34.3) | (21.2) | (4.5) | (4.6) | (22.1) | | (86.7) | | | (2) Interest (income) expense | 0.0 | 0.0 | 0.5 | (0.0) | 4.0 | | 4.5 | | | (3) Depreciation and amortization | 7.6 | 6.1 | 4.8 | 1.9 | 6.1 | | 26.5 | | | Adjusted EBITDA | $ (26.7) | $ (15.1) | $ 0.8 | $ (2.7) | $ (12.0) | | $ (55.7) | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | 08/31/24 | | | | | | | | | CBPD (1) | EDUC (1) | ENT (1) | INTL (1) | OVH (1) | | Total | | | Earnings (loss) before income taxes as reported | $ (36.6) | $ (17.0) | $ (1.1) | $ (8.7) | $ (28.4) | | $ (91.8) | | | One-time items before income taxes | — | — | 1.7 | — | 1.2 | | 2.9 | | | Earnings (loss) before income taxes excluding one-time items | (36.6) | (17.0) | 0.6 | (8.7) | (27.2) | | (88.9) | | | (2) Interest (income) expense | 0.0 | — | 1.1 | (0.0) | 2.3 | | 3.4 | | | (3) Depreciation and amortization | 7.5 | 6.2 | 3.5 | 1.9 | 5.9 | | 25.0 | | | Adjusted EBITDA | $ (29.1) | $ (10.8) | $ 5.2 | $ (6.8) | $ (19.0) | | $ (60.5) | | - **Adjusted EBITDA** is defined as **earnings (loss), excluding one-time items, before interest, taxes, depreciation, and amortization**, and is considered a **meaningful measure of operating profitability**[40](index=40&type=chunk)

Core Insights - Scholastic Corporation reported financial results for the fiscal first quarter ended August 31, 2025, affirming its fiscal 2026 guidance despite a seasonal operating loss [1][2][6] - The company experienced a decrease in revenues by 5% to $225.6 million, primarily due to lower sales in the Education Solutions segment [6][7] - Adjusted EBITDA improved by 8% to a loss of $55.7 million, reflecting a reduction in discretionary overhead expenses and higher revenues in the Children's Book Publishing and Distribution segment [7][8] Financial Performance - Revenues decreased from $237.2 million in fiscal 2025 to $225.6 million in fiscal 2026, a decline of $11.6 million or 5% [6][7] - Operating loss increased to $92.2 million from $88.5 million year-over-year, with one-time charges impacting both periods [7][8] - Diluted earnings per share fell to $(2.83) from $(2.21), a decrease of 28% [6][7] Segment Analysis - Children's Book Publishing and Distribution segment revenues increased by 4% to $109.4 million, driven by strong performances in book fairs and franchises like Hunger Games [9][11] - Education Solutions revenues decreased by 28% to $40.1 million due to funding uncertainties affecting school purchases [12][13] - Entertainment segment revenues fell by 18% to $13.6 million, primarily due to anticipated production delays [13][14] Capital Position and Liquidity - Net cash used by operating activities was $81.8 million, compared to $41.9 million in the prior year, reflecting lower net income and seasonal working capital needs [16][18] - Free cash flow usage increased to $100.2 million from $68.7 million year-over-year, driven by higher operating cash use [16][18] - Net debt rose to $242.8 million from $152.1 million, influenced by working capital requirements and dividends [18][19] Strategic Initiatives - The company is focused on optimizing capital allocation and strengthening its balance sheet, including evaluating potential sale-leaseback transactions for key real estate assets [6][20] - Scholastic is expanding its digital and licensing revenue streams through new initiatives, including a Scholastic-branded streaming app and tie-in products for new IP [4][6] - The company aims to enhance its Education division by refining its product portfolio and aligning marketing strategies to better meet educators' needs [5][12]

Core Insights - 9 Story Media Group has partnered with Future Today to launch the first-ever Scholastic-branded streaming app, available on Roku and Amazon Fire TV, providing families with a free and safe platform for on-demand access to Scholastic programming [1][3]. Company Overview - 9 Story Media Group is a leading creator, producer, and distributor of children's media, now part of the Scholastic portfolio, recognized for its digital content strategy and AVOD distribution [7]. - Future Today is a leader in ad-supported streaming media, managing top free channels across various OTT platforms and providing technology solutions for content owners [8][9]. Content Offering - The Scholastic app features over 400 hours of premium content from iconic titles such as "Clifford the Big Red Dog," "The Magic School Bus," and "Goosebumps," targeting children ages 2-12 and their families [2][3]. Strategic Goals - The app is part of Scholastic's broader strategy to expand access to its catalog of children's series, leveraging synergies from its investment in 9 Story [3]. - The collaboration aims to meet the strong demand for quality nostalgic content, ensuring families have access to trusted stories that entertain and educate [5].

Wall Street expects a year-over-year decline in earnings on higher revenues when Scholastic (SCHL) reports results for the quarter ended August 2025. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on September 18, might help the stock move higher if these key numbers are better than expectat ...

Company Overview - Scholastic Corporation has been a leader in children's publishing for over 100 years, focusing on literacy and educational content [1] - The company operates globally, reaching over 135 countries, and is the largest publisher and distributor of children's books through various channels [1] Earnings Announcement - Scholastic will release its first quarter fiscal year 2026 earnings on September 18, 2025, at 4:00 PM ET [2] - A conference call will follow at 4:30 PM ET, hosted by the President and CEO, Peter Warwick, and CFO, Haji Glover [2] - Participants are encouraged to join the call five minutes early to avoid delays [2] Access to Information - The earnings release will be available on the company's investor relations website [2] - An archived webcast and audio replay of the conference call will also be accessible shortly after the live event [2]

Part I [Business](index=4&type=section&id=Item%201.%20Business) Scholastic Corporation, a leading children's book publisher and educational materials provider, operates through four segments with a highly seasonal business model - Scholastic Corporation is the world's largest publisher and distributor of children's books, primarily operating through school-based book clubs and fairs[13](index=13&type=chunk) Fiscal Year 2025 Revenue by Segment | Segment | Revenue (in millions) | % of Total Revenue | | :--- | :--- | :--- | | Children's Book Publishing and Distribution | $963.9 | 59.3% | | Education Solutions | $309.8 | 19.1% | | Entertainment | $61.0 | 3.8% | | International | $279.6 | 17.2% | | Overhead | $11.2 | 0.6% | | **Total** | **$1,625.5** | **100.0%** | - The company's business is highly seasonal, with lower revenues in the first and third fiscal quarters due to its school-year-based channels[50](index=50&type=chunk) Employee Distribution as of May 31, 2025 | Business Channel/Function | Full-time | Part-time | Seasonal | Total | | :--- | :--- | :--- | :--- | :--- | | Central Functions | 670 | 25 | — | 695 | | Primary U.S. Warehouse | 675 | 130 | 5 | 810 | | Book Fairs Warehouses | 640 | 700 | 435 | 1,775 | | Scholastic Reading Events | 505 | 10 | 75 | 590 | | Trade | 205 | 5 | — | 210 | | Education Solutions | 540 | 60 | — | 600 | | Entertainment | 760 | — | — | 760 | | International | 1,005 | 70 | 15 | 1,090 | | International Warehouses | 310 | 10 | 240 | 560 | | **Total** | **5,310** | **1,010** | **770** | **7,090** | [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces key risks including talent dependency, evolving customer patterns, rising costs, competition, cybersecurity, technological adaptation, regulatory changes, acquisition integration, and concentrated stock ownership - The company's business is highly dependent on maintaining strong relationships with authors, illustrators, and other creative talent[63](index=63&type=chunk) - The top five trade customers account for approximately **75% of U.S. trade business** and **16% of total company revenues**, indicating significant customer concentration risk[84](index=84&type=chunk) - As of May 31, 2025, the company held **$198.9 million in goodwill** and **$87.9 million in intangible assets**, subject to impairment risk if business objectives are not met[75](index=75&type=chunk) - Voting power is exclusively vested in Class A Stockholders, with the Estate of Richard Robinson owning a majority, controlling Board elections and major corporate actions[107](index=107&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments from the SEC - None[112](index=112&type=chunk) [Cybersecurity](index=20&type=section&id=Item%201C.%20Cybersecurity) Scholastic implements a NIST-CSF-based cybersecurity program, overseen by the Board's Technology, Data and Supply Chain Committee, with no material incidents reported to date - The company adopted the **NIST-CSF** as its cybersecurity program blueprint since 2018[114](index=114&type=chunk) - The Board's Technology, Data and Supply Chain Committee oversees cybersecurity risks, receiving quarterly updates from the CIO and CISO[116](index=116&type=chunk) - As of the report date, no past cybersecurity incidents are believed to have materially affected the company's business or financial condition[115](index=115&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) The company operates global owned and leased facilities, including its New York City headquarters and a primary Missouri warehouse, with the headquarters generating rental income Major Facilities as of May 31, 2025 | Location | Primary Purpose | Owned Square Footage | Leased Square Footage | | :--- | :--- | :--- | :--- | | Metropolitan NY Area | Principal offices | 355,000 | 19,000 | | U.S. Various Locations | Book Fairs warehouses | — | 2,302,000 | | Jefferson City, MO Area | Primary warehouse | 1,459,000 | — | | International | Warehouse and office | 236,000 | 1,022,000 | - The company's SoHo, New York City headquarters generated **$11.2 million in rental income** during fiscal 2025[123](index=123&type=chunk) [Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings, with management not expecting any material adverse effect on its financial position or results of operations - The company accrues for probable and estimable legal liabilities, anticipating no material adverse effect from current matters on its financial position[126](index=126&type=chunk) [Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[127](index=127&type=chunk) Part II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Scholastic's common stock trades on NASDAQ, with the company declaring a **$0.20 per share quarterly dividend** and repurchasing **$70.9 million in shares** during fiscal 2025 - On July 16, 2025, the Board declared a regular quarterly cash dividend of **$0.20 per share** for Q1 fiscal 2026[132](index=132&type=chunk) Share Repurchases (Fiscal 2025 vs. 2024) | Fiscal Year | Shares Repurchased | Average Price Paid | Total Cost (incl. tax) | | :--- | :--- | :--- | :--- | | 2025 | 3,482,280 | $20.10 | $70.9 million | | 2024 | 3,993,576 | $39.00 | $156.8 million | - As of May 31, 2025, approximately **$70.0 million** remains available for future common share repurchases under board authorizations[133](index=133&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2025 revenues grew **2.3% to $1.626 billion**, driven by Entertainment and Children's Book Publishing, but a **net loss of $1.9 million** resulted from increased interest expense related to the 9 Story acquisition Fiscal 2025 vs. 2024 Consolidated Results | Metric | Fiscal 2025 | Fiscal 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,625.5 M | $1,589.7 M | +2.3% | | Operating Income | $15.8 M | $14.5 M | +$1.3 M | | Net Income (Loss) | ($1.9 M) | $12.1 M | -$14.0 M | | Diluted EPS | ($0.07) | $0.40 | -$0.47 | - Fiscal 2025 revenue growth was primarily driven by a **$59.1 million increase** in Entertainment (9 Story acquisition) and a **$10.6 million increase** in Children's Book Publishing, offset by a **$41.4 million decrease** in Education Solutions[164](index=164&type=chunk) - Interest expense significantly increased to **$18.2 million** in fiscal 2025 from **$1.9 million** in fiscal 2024, primarily due to debt for the 9 Story acquisition[174](index=174&type=chunk) - Cash provided by operating activities decreased to **$124.2 million** in fiscal 2025 from **$154.6 million** in fiscal 2024, due to lower customer remittances and increased inventory and royalty payments[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from foreign currency and variable-rate debt interest rate fluctuations, managing currency risk with short-term forward exchange contracts without speculative derivatives - The company's primary market risks include foreign currency exchange rate fluctuations and interest rate changes on its variable-rate debt[212](index=212&type=chunk)[213](index=213&type=chunk) Debt Obligations by Maturity as of May 31, 2025 (in millions) | Type | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lines of credit/Current Debt | $6.2 | $— | $— | $— | $— | $— | $6.2 | | Long-term debt | $— | $— | $— | $— | $250.0 | $— | $250.0 | | Film related obligations | $6.1 | $9.3 | $0.7 | $2.2 | $— | $— | $18.3 | [Consolidated Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited consolidated financial statements for fiscal years 2023-2025, including key statements and notes, with critical audit matters identified for book fair revenue recognition and 9 Story acquisition asset valuation Consolidated Balance Sheet Highlights (as of May 31) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total Current Assets | $725.3 | $676.9 | | Total Noncurrent Assets | $1,224.8 | $994.3 | | **Total Assets** | **$1,950.1** | **$1,671.2** | | **Liabilities & Equity** | | | | Total Current Liabilities | $626.4 | $534.7 | | Total Noncurrent Liabilities | $377.2 | $118.4 | | Total Stockholders' Equity | $946.5 | $1,018.1 | | **Total Liabilities & Equity** | **$1,950.1** | **$1,671.2** | Consolidated Cash Flow Highlights (Year ended May 31) | (in millions) | 2025 | 2024 | 2023 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $124.2 | $154.6 | $148.9 | | Net cash used in investing activities | ($252.9) | ($89.7) | ($99.6) | | Net cash from (used in) financing activities | $137.3 | ($176.1) | ($139.5) | | Net increase (decrease) in cash | $10.3 | ($110.8) | ($92.1) | - Ernst & Young LLP identified two critical audit matters: school-based book fair revenue recognition and the valuation of 9 Story acquisition assets[455](index=455&type=chunk)[460](index=460&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=93&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[475](index=475&type=chunk) [Controls and Procedures](index=93&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of May 31, 2025, with the independent auditor issuing an unqualified opinion - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of May 31, 2025[476](index=476&type=chunk) - Management concluded that the Corporation's internal control over financial reporting was effective as of May 31, 2025, based on the COSO 2013 framework[477](index=477&type=chunk) [Other Information](index=93&type=section&id=Item%209B.%20Other%20Information) During the fourth quarter of fiscal 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended May 31, 2025[479](index=479&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=93&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[480](index=480&type=chunk) Part III This section incorporates by reference information from the definitive proxy statement for the September 17, 2025 Annual Meeting, covering directors, executive officers, governance, compensation, security ownership, and accounting fees [Directors, Executive Officers and Corporate Governance](index=94&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders [Executive Compensation](index=94&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=94&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders [Certain Relationships and Related Transactions, and Director Independence](index=94&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders [Principal Accounting Fees and Services](index=94&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's definitive proxy statement for the upcoming Annual Meeting of Stockholders Part IV [Exhibits, Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, supplementary information, and exhibits filed with the annual report, including corporate governance documents and compensation plans [Form 10-K Summary](index=99&type=section&id=Item%2016.%20Summary) This item is noted as 'None' in the report - None[497](index=497&type=chunk)

Core Insights - Scholastic reported quarterly earnings of $0.87 per share, exceeding the Zacks Consensus Estimate of $0.85 per share, but down from $1.73 per share a year ago, indicating an earnings surprise of +2.35% [1] - The company achieved revenues of $508.3 million for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 2.77% and up from $474.9 million year-over-year [2] - Scholastic has surpassed consensus EPS estimates three times over the last four quarters and topped revenue estimates twice in the same period [2] Earnings Outlook - The sustainability of Scholastic's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is -$2.09 on revenues of $244.84 million, while for the current fiscal year, it is $2.13 on revenues of $1.7 billion [7] Industry Context - The Publishing - Books industry, to which Scholastic belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Core Insights - Scholastic Corp. reported strong second-quarter results, with adjusted earnings of 87 cents per share, surpassing the analyst consensus estimate of 85 cents [1] - Quarterly revenue reached $508.3 million, exceeding the Street estimate of $494.58 million [1] Financial Performance - The company achieved solid financial results in fiscal 2025, with strong Adjusted EBITDA aligning with original guidance [2] - Continued strength in Children's Book Publishing and Distribution, along with disciplined cost management, helped mitigate macroeconomic pressures on school spending affecting the Education division [3] Future Outlook - Scholastic anticipates "significant growth" in fiscal 2026 Adjusted EBITDA, projecting it to be between $160 million and $170 million, driven by core business strength and cost savings, despite ongoing challenges in school spending [4] - Revenue growth is expected to be between 2% to 4% in fiscal 2026 [4] Stock Performance - Following the earnings report, Scholastic stock rose by 12.39%, reaching $24.22 in extended trading [4]

Financial Data and Key Metrics Changes - Revenue increased by 7% to $508.3 million in Q4 and up 2% to $1.6255 billion for the fiscal year [28] - Adjusted operating income decreased to $63.4 million in Q4 from $66.8 million in the prior year, with full year adjusted operating income at $35.8 million compared to $44.7 million [29] - Adjusted EBITDA increased by 1% to $91.2 million in Q4 and up 6% to $145.4 million for the fiscal year [29] Business Line Data and Key Metrics Changes - Children's book publishing and distribution revenue increased by 9% to $288.2 million in Q4, driven by strong performance in book fairs and trade publishing [29] - Education segment revenue decreased by 7% in Q4 to $125.7 million and down 12% for the full year to $309.8 million, reflecting continued headwinds in the supplemental curriculum market [31] - Entertainment segment revenue increased to $14.8 million in Q4 compared to $0.6 million in the prior year, with full year revenue at $61 million compared to $1.9 million [32] Market Data and Key Metrics Changes - International segment revenue increased by 8% to $76.8 million in Q4 and up 2% to $279.6 million for the fiscal year, driven by strong trade channel performance [34] - Foreign exchange had an unfavorable impact of $600,000 in Q4 and $1.6 million for the full year [34] Company Strategy and Development Direction - The company aims to strengthen its core businesses and unlock value from its iconic intellectual property while positioning for long-term profitable growth [7][8] - Strategic integration of trade publishing, book fairs, and book clubs is expected to drive long-term revenue growth and increase profitability [19][20] - The company is exploring monetization opportunities for its real estate assets to unlock value for shareholders [38][39] Management's Comments on Operating Environment and Future Outlook - Management noted continued pressure on consumer and school spending but expects modest revenue growth in fiscal 2026 [14][15] - The company anticipates adjusted EBITDA growth of approximately 20% in fiscal 2026, excluding expected tariff expenses [14][40] - Management expressed optimism about the education segment's potential for growth through state-sponsored programs and literacy partnerships [25][60] Other Important Information - The company returned over $92 million to shareholders in fiscal 2025, including $35 million in Q4 [37] - The company appointed two new independent directors to support business transformation and growth strategies [26] Q&A Session Summary Question: What are the sources of cost savings going forward? - Cost actions are primarily from non-discretionary functions, focusing on areas that are not revenue-driven [51][52] Question: What are the driving factors behind flat revenue expectations in the Education Solutions business? - Parts of the education business are performing well, particularly state-sponsored work, but overall market conditions remain cyclically difficult [54][55] Question: Is there a shift towards science-based reading approaches in literacy instruction? - There is a growing importance of science-based reading, and the company has materials aligned with this approach [57] Question: What is the pipeline for additional state partnerships in literacy programs? - The company is optimistic about expanding partnerships with state governments, although sales cycles are long [60][61] Question: What is the expectation for profitability in the entertainment business for fiscal 2026? - Profitability is expected to be slightly lower but in line with the current year, impacted by inflation [64] Question: What is the timing for potential sale leaseback transactions of real estate assets? - The company is working towards having something within the next 90 to 120 days regarding real estate monetization [66]

Fourth Quarter 2025 Earnings Call Presentation Thursday, July 24, 2025 Forward-Looking Statements / Regulation G This presentation contains certain statements made today which will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties, and actual results may differ materially from those currently anticipated. 2 Peter Warwick President and Chief Executive Officer Fourth Quarter & Fiscal 2025 Results Today's comments include references to certain ...