[Executive Summary and Outlook](index=1&type=section&id=Executive%20Summary%20and%20Outlook) Scholastic achieved solid fiscal 2025 Adjusted EBITDA, driven by Children's Book Publishing, and is advancing its IP strategy while focusing on cost management and strategic initiatives for fiscal 2026 earnings growth [CEO Remarks and Strategic Overview](index=1&type=section&id=CEO%20Remarks%20and%20Strategic%20Overview) Scholastic achieved solid fiscal 2025 Adjusted EBITDA, driven by Children's Book Publishing, and is advancing its IP strategy while focusing on cost management and strategic initiatives for fiscal 2026 earnings growth - Delivered strong **Adjusted EBITDA** in line with original guidance for fiscal 2025, with strength in Children's Book Publishing offsetting weakness in the Education division[2](index=2&type=chunk) - The company is progressing on its **360-degree IP strategy**, highlighted by the global success of the new Hunger Games book and the integration of 9 Story Media Group to expand IP monetization[3](index=3&type=chunk) - The Education division is being repositioned under new leadership to better align with market needs amid challenges in school funding and the supplemental curriculum market[3](index=3&type=chunk) - Key strategic initiatives for fiscal 2026 include a strategic reorganization, cost reductions, and evaluating options to optimize real estate assets to drive long-term growth and shareholder value[4](index=4&type=chunk) [Fiscal 2026 Outlook](index=1&type=section&id=Fiscal%202026%20Outlook) Scholastic projects fiscal 2026 Adjusted EBITDA of **$160 million to $170 million** and **2% to 4% revenue growth**, despite anticipated school spending headwinds and **$10 million** in higher tariff costs Fiscal 2026 Guidance | Metric | Target | | :--- | :--- | | **Adjusted EBITDA** | $160 million to $170 million | | **Revenue Growth** | 2% to 4% | - Guidance includes approximately **$10 million** of expected incremental expense related to higher tariff rates[5](index=5&type=chunk) - The company anticipates a seasonal loss in the first quarter of fiscal 2026, approximately in line with the prior year[5](index=5&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) Scholastic reported a 7% revenue increase in Q4 and 2% for the full fiscal year 2025, driven by Children's Book Publishing and the 9 Story Media Group acquisition, despite declines in Education Solutions [Fourth Quarter Fiscal 2025 Review](index=2&type=section&id=Fourth%20Quarter%20Fiscal%202025%20Review) Q4 fiscal 2025 revenues grew **7% to $508.3 million**, driven by Children's Book Publishing and 9 Story Media Group, offsetting Education Solutions' decline, with operating income up **13%** and Adjusted EBITDA stable at **$91.2 million** Q4 Fiscal 2025 Financial Highlights (in millions, except per share data) | Metric | Q4 FY2025 | Q4 FY2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $508.3 | $474.9 | 7% | | **Operating Income** | $53.5 | $47.2 | 13% | | **Diluted EPS** | $0.59 | $1.23 | (52)% | | **Adjusted EBITDA** | $91.2 | $90.7 | 1% | - Revenue growth was primarily driven by higher revenues in Children's Book Publishing and Distribution and the contribution of 9 Story Media Group, partly offset by lower sales in Education Solutions[6](index=6&type=chunk) [Children's Book Publishing and Distribution](index=2&type=section&id=Q4%20Children's%20Book%20Publishing%20and%20Distribution) Segment revenue grew **9% to $288.2 million**, driven by **19%** Consolidated Trade growth from the new Hunger Games book and **5%** Book Fairs increase, despite a **9%** decline in Book Clubs Q4 Segment Revenue Breakdown (in millions) | Sub-segment | Revenue | YoY Change (%) | | :--- | :--- | :--- | | Book Fairs | $177.8 | 5% | | Book Clubs | $13.1 | (9)% | | Consolidated Trade | $97.3 | 19% | | **Total Segment Revenue** | **$288.2** | **9%** | - The strong performance in Consolidated Trade was driven by the fifth book in Suzanne Collins' global best-selling Hunger Games series, *Sunrise on the Reaping*[10](index=10&type=chunk) [Education Solutions](index=2&type=section&id=Q4%20Education%20Solutions) Education Solutions segment revenues decreased **7% to $125.7 million** due to supplemental curriculum market headwinds, leading to a **$4.3 million** adjusted operating income decline - Segment revenues decreased **7% to $125.7 million** due to continuing headwinds in the supplemental curriculum market[12](index=12&type=chunk) - The company is actively repositioning the segment to optimize for long-term growth and improved profitability[13](index=13&type=chunk) [Entertainment](index=3&type=section&id=Q4%20Entertainment) Entertainment segment revenue surged to **$14.8 million** from **$0.6 million**, primarily due to the 9 Story Media Group acquisition, resulting in a **$3.0 million** operating loss including **$2.7 million** intangible amortization - Segment revenues surged to **$14.8 million**, mainly reflecting the addition of 9 Story Media Group[14](index=14&type=chunk) - The segment incurred a **$3.0 million** operating loss, which included **$0.9 million** in one-time charges and **$2.7 million** of intangible amortization from the acquisition[14](index=14&type=chunk) [International](index=3&type=section&id=Q4%20International) International revenues increased **9%** on a constant currency basis to **$76.8 million**, driven by strong trade channel performance from the latest Hunger Games release, improving adjusted operating income by **$4.3 million** - Excluding a **$0.6 million** unfavorable currency impact, revenues increased **9% to $76.8 million**[15](index=15&type=chunk) - Growth was primarily driven by strong performance in trade channels across major markets following the latest Hunger Games release[15](index=15&type=chunk) [Overhead](index=3&type=section&id=Q4%20Overhead) Adjusted overhead costs, excluding one-time charges, increased by **$9.6 million** to **$35.5 million**, primarily due to the timing of employee-related expenses - Excluding one-time charges, adjusted overhead costs increased by **$9.6 million**, primarily attributable to the timing of employee-related expenses[16](index=16&type=chunk) [Full Year Fiscal 2025 Review](index=3&type=section&id=Full%20Year%20Fiscal%202025%20Review) Full fiscal year 2025 revenues grew **2% to $1.63 billion**, driven by the 9 Story Media Group acquisition and strong Book Fairs, while Adjusted EBITDA increased **6% to $145.4 million** Full Year Fiscal 2025 Financial Highlights (in millions, except per share data) | Metric | FY2025 | FY2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $1,625.5 | $1,589.7 | 2% | | **Operating Income** | $15.8 | $14.5 | 9% | | **Diluted EPS** | $(0.07) | $0.40 | (118)% | | **Adjusted EBITDA** | $145.4 | $136.9 | 6% | - Revenue growth was primarily driven by the contribution of 9 Story Media Group, higher revenues from new releases in Trade Publishing, and strong performance in Book Fairs[17](index=17&type=chunk) - Adjusted EBITDA increased by **6% to $145.4 million**, reflecting the benefit of the 9 Story Media Group acquisition and strong performance in the Children's Book Publishing and Distribution and International segments[19](index=19&type=chunk) [Capital Position and Shareholder Returns](index=4&type=section&id=Capital%20Position%20and%20Shareholder%20Returns) Scholastic's fiscal 2025 free cash flow decreased by 60%, shifting to a net debt position of $136.6 million after the 9 Story Media Group acquisition, while returning over $90 million to shareholders [Liquidity and Cash Flow](index=4&type=section&id=Liquidity%20and%20Cash%20Flow) Fiscal 2025 free cash flow decreased **60% to $29.2 million**, shifting the balance sheet from a **$107.7 million** net cash position to a **$136.6 million** net debt position post-acquisition Fiscal 2025 Cash Flow and Capital Position (in millions) | Metric | FY2025 | FY2024 | Change ($) | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $124.2 | $154.6 | $(30.4) | | **Free cash flow (use)** | $29.2 | $73.4 | $(44.2) | | **Net cash (debt)** | $(136.6) | $107.7 | $(244.3) | - The shift to a net debt position reflects borrowings under the company's revolving credit facility to fund the acquisition of 9 Story Media Group[21](index=21&type=chunk) [Shareholder Returns and Strategic Initiatives](index=4&type=section&id=Shareholder%20Returns%20and%20Strategic%20Initiatives) Scholastic returned over **$90 million** to shareholders in fiscal 2025 through **$22.6 million** in dividends and **$70.0 million** in share repurchases, while exploring real estate sale-leaseback transactions for liquidity - In fiscal 2025, the company returned capital to shareholders through[22](index=22&type=chunk) - **$22.6 million** in dividends[22](index=22&type=chunk) - **$70.0 million** in share repurchases (3,482,280 shares)[22](index=22&type=chunk) - The company is exploring sale-leaseback transactions for its New York City real estate and Missouri distribution centers to provide significant liquidity for debt reduction and share repurchases[23](index=23&type=chunk) [Financial Statements and Supplemental Data](index=6&type=section&id=Financial%20Statements%20and%20Supplemental%20Data) This section provides unaudited consolidated financial statements, detailed segment results, key balance sheet and cash flow items, and reconciliations of non-GAAP measures for fiscal year 2025 [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents unaudited consolidated income statements for the three and twelve months ended May 31, 2025, detailing revenues, operating income, pre-tax earnings, net income, and earnings per share Consolidated Statements of Operations (Unaudited, in millions) | | Three months ended | Twelve months ended | | :--- | :--- | :--- | | | **05/31/25** | **05/31/24** | **05/31/25** | **05/31/24** | | **Revenues** | $508.3 | $474.9 | $1,625.5 | $1,589.7 | | **Operating income (loss)** | $53.5 | $47.2 | $15.8 | $14.5 | | **Earnings (loss) before income taxes** | $48.9 | $47.3 | $(1.3) | $16.2 | | **Net income (loss)** | $15.4 | $35.9 | $(1.9) | $12.1 | | **Diluted earnings (loss) per share** | $0.59 | $1.23 | $(0.07) | $0.40 | [Segment Results](index=7&type=section&id=Segment%20Results) This section details revenues and operating income by business segment for the fourth quarter and full fiscal year 2025, including Children's Book Publishing, Education Solutions, Entertainment, and International Full Year Fiscal 2025 Segment Revenues (in millions) | Segment | FY2025 Revenue | FY2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | **Children's Book Publishing & Dist.** | $963.9 | $953.3 | 1% | | **Education Solutions** | $309.8 | $351.2 | (12)% | | **Entertainment** | $61.0 | $1.9 | NM | | **International** | $279.6 | $273.6 | 2% | Full Year Fiscal 2025 Segment Operating Income (in millions) | Segment | FY2025 Op. Income | FY2024 Op. Income | Change (%) | | :--- | :--- | :--- | :--- | | **Children's Book Publishing & Dist.** | $130.7 | $123.3 | 6% | | **Education Solutions** | $6.3 | $15.8 | (60)% | | **Entertainment** | $(12.1) | $(11.2) | (8)% | | **International** | $(1.0) | $(6.9) | 86% | [Supplemental Financial Information](index=8&type=section&id=Supplemental%20Financial%20Information) This section provides a snapshot of key balance sheet and cash flow items as of May 31, 2025, including cash, receivables, debt, and Free Cash Flow calculations Selected Balance Sheet Items (in millions) | Item | 05/31/25 | 05/31/24 | | :--- | :--- | :--- | | Cash and cash equivalents | $124.0 | $113.7 | | Inventories, net | $250.2 | $264.2 | | Lines of credit and long-term debt | $256.2 | $6.0 | | Net cash (debt) | $(136.6) | $107.7 | | Total stockholders' equity | $946.5 | $1,018.1 | Selected Cash Flow Items (in millions) | Item | Twelve months ended 05/31/25 | Twelve months ended 05/31/24 | | :--- | :--- | :--- | | Net cash provided by operating activities | $124.2 | $154.6 | | Free cash flow (use) | $29.2 | $73.4 | [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of GAAP to non-GAAP measures, including adjustments to operating income, net income, EPS, and a full reconciliation of pre-tax earnings to Adjusted EBITDA Full Year Fiscal 2025 GAAP to Non-GAAP Reconciliation (in millions, except per share) | Metric | Reported (GAAP) | One-time Items | Excluding One-time Items (Non-GAAP) | | :--- | :--- | :--- | :--- | | **Operating Income** | $15.8 | $20.0 | $35.8 | | **Earnings Before Taxes** | $(1.3) | $20.0 | $18.7 | | **Net Income** | $(1.9) | $15.2 | $13.3 | | **Diluted EPS** | $(0.07) | $0.55 | $0.48 | Adjusted EBITDA Reconciliation - Full Year (in millions) | | FY2025 | FY2024 | | :--- | :--- | :--- | | **Earnings (loss) before income taxes as reported** | $(1.3) | $16.2 | | One-time items before income taxes | $20.0 | $30.2 | | Interest (income) expense | $16.4 | $(2.7) | | Depreciation and amortization | $110.3 | $93.2 | | **Adjusted EBITDA** | **$145.4** | **$136.9** |

Core Insights - Scholastic Corporation reported solid financial results for fiscal 2025, with Adjusted EBITDA in line with original guidance and a focus on cost management and profit growth for fiscal 2026 [1][2][6] - The company returned over $90 million to shareholders during the fiscal year, including dividends and share repurchases [21][22] Financial Performance - In Q4 of fiscal 2025, revenues increased by 7% to $508.3 million, driven by strong performance in Children's Book Publishing and Distribution, and the contribution from 9 Story Media Group [7][17] - Operating income rose 13% to $53.5 million, while Adjusted EBITDA increased by 1% to $91.2 million [8][17] - For the full year, revenues reached $1,625.5 million, a 2% increase from the previous year, with Adjusted EBITDA growing by 6% to $145.4 million [17][18] Segment Performance - The Children's Book Publishing and Distribution segment saw revenues rise by 9% to $288.2 million in Q4, while Education Solutions revenues decreased by 7% to $125.7 million due to market headwinds [9][13] - The Entertainment segment's revenues surged to $14.8 million, primarily due to the acquisition of 9 Story Media Group [14] - International revenues increased by 9% to $76.8 million, reflecting strong performance in trade channels [15] Strategic Initiatives - The company is implementing a strategic reorganization to enhance long-term growth and profitability, including a focus on product development aligned with educators' needs [4][5] - Scholastic is targeting Adjusted EBITDA of $160 million to $170 million for fiscal 2026, with revenue growth expected between 2% to 4% [6][17] Capital Position and Shareholder Returns - Scholastic distributed $22.6 million in dividends and repurchased shares worth $70 million during fiscal 2025 [21] - The company is exploring sale-leaseback transactions for its real estate assets to enhance liquidity for capital allocation priorities [22]

Core Insights - Scholastic has appointed Milena Alberti and Anne Clarke Wolff as independent directors to its board, effective July 16, 2025, while directors John L. Davies and David J. Young have stepped down immediately to facilitate this transition [1][2][3] Board Composition and Changes - The board has undergone significant refreshment, with seven new independent directors appointed over the past four years, reflecting a commitment to adapt to the business's evolving needs [2] - Alix Guerrier has been reappointed to the board as a representative of Class A Stockholders, indicating ongoing efforts to ensure diverse representation [2] Directors' Backgrounds - Milena Alberti brings over 30 years of experience in publishing and finance, having held key roles at Penguin Random House and Getty Images, and currently chairs the board of Pitney-Bowes Inc. [4][5][6] - Anne Clarke Wolff has 30 years of experience in financial services, having founded Independence Point Advisors and previously held senior positions at Bank of America and JP Morgan [7][8][9][10] Strategic Focus - The new directors are expected to support the board's focus on business transformation, growth strategies, and capital allocation, aimed at maximizing shareholder value during a pivotal time for Scholastic [3]

Group 1 - Scholastic Corporation declared a quarterly cash dividend of $0.20 per share for the first quarter of fiscal 2026, payable on September 15, 2025, to shareholders of record as of August 29, 2025 [1] - The company has over 100 years of experience in creating quality content and experiences focused on literacy for children [2] - Scholastic is the world's largest publisher and distributor of children's books, reaching over 135 countries [2]

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 is the largest publisher and distributor of children's books globally, reaching over 135 countries [1] Earnings Announcement - Scholastic will release its fourth quarter and fiscal year 2025 earnings on July 24, 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 Information - The earnings release will be available on the company's investor relations website [2] - A live webcast of the conference call can be accessed online, with archived materials available shortly after the call [2]

NEW YORK, June 23, 2025 /PRNewswire/ -- Scholastic Corporation (NASDAQ: SCHL), the global children's publishing, education and media company, today provides an update on key strategic and operational initiatives to enhance shareholder value. These actions accelerate Scholastic's ongoing efforts to achieve greater profitability and long-term growth and reinforce the Company's commitment to efficient capital allocation. In addition, the Company announced that it now expects fiscal 2025 Adjusted EBITDA (as def ...

Core Insights - Scholastic has announced the formation of a new Children's Book Group, integrating its Trade Publishing, Book Fairs, and Book Clubs divisions, effective June 1, 2025, under the leadership of Sasha Quinton [1][2] - The reorganization aims to enhance Scholastic's ability to reach children through a unified approach across various channels, maximizing the value of its intellectual property [2][3] Leadership Changes - Sasha Quinton, previously President of School Reading Events, will take on the role of Executive Vice President and President of the Scholastic Children's Book Group, expanding her responsibilities to include Trade Publishing [2][3] - Jackie De Leo joins as Publisher and Chief Merchant, starting June 2, 2025, bringing over 25 years of experience in trade publishing and bookselling [3][4] Strategic Focus - The new structure is designed to improve collaboration between editorial, distribution, and merchandising, thereby enhancing the company's 360-degree IP creation strategy [2][3] - Scholastic aims to maintain its leading position in children's publishing while creating new stories and characters that resonate with children [3] Future Outlook - The company plans to provide additional details regarding the organization and strategic outlook for the Children's Book Group during its fiscal 2025 results announcement in July [5]

Core Viewpoint - Scholastic has appointed Chris Lick as Executive Vice President, General Counsel, and Corporate Secretary, effective June 1, 2025, succeeding Andrew Hedden who retired after 17 years in the role [1][2]. Group 1: Leadership Transition - Chris Lick will report directly to President and CEO Peter Warwick and is recognized as a key strategic partner to the executive leadership [2]. - Lick has been with Scholastic since 2008, holding various senior positions, most recently as Senior Vice President and Deputy General Counsel [3]. Group 2: Responsibilities and Expertise - In his new role, Lick will provide strategic legal counsel for Scholastic and its Board, overseeing critical legal functions such as trademarks, litigation, compliance, information security, content development, and strategic alliances and acquisitions [2]. - Lick brings nearly 25 years of legal experience, including corporate governance, technology, and intellectual property, and has served as a key advisor at the senior executive level [3]. Group 3: Company Overview - Scholastic Corporation has been a leader in children's publishing and education for over 100 years, focusing on literacy and creating quality content for children [4]. - The company is the largest publisher and distributor of children's books globally, reaching over 135 countries and promoting lifelong reading and learning [4].

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Part I - Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q3 FY2025, covering operations, balance sheets, cash flows, and notes [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 FY2025 revenues increased, operating loss narrowed, and net loss significantly improved to $(3.6) million Q3 & YTD FY2025 vs FY2024 Statement of Operations (in millions, except per share data) | Metric | Three Months Ended Feb 28, 2025 | Three Months Ended Feb 29, 2024 | Nine Months Ended Feb 28, 2025 | Nine Months Ended Feb 29, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $335.4 | $323.7 | $1,117.2 | $1,114.8 | | **Operating income (loss)** | $(23.9) | $(34.9) | $(37.7) | $(32.7) | | **Net income (loss)** | $(3.6) | $(26.5) | $(17.3) | $(23.8) | | **Diluted earnings (loss) per share** | $(0.13) | $(0.91) | $(0.61) | $(0.80) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $1,961.3 million due to the 9 Story acquisition, with rising liabilities and decreasing equity Balance Sheet Summary (in millions) | Metric | Feb 28, 2025 | May 31, 2024 | Feb 29, 2024 | | :--- | :--- | :--- | :--- | | **Total current assets** | $757.0 | $676.9 | $728.7 | | **Total assets** | $1,961.3 | $1,671.2 | $1,715.2 | | **Total current liabilities** | $616.7 | $534.7 | $608.5 | | **Total liabilities** | $1,020.0 | $653.1 | $717.6 | | **Total stockholders' equity** | $941.3 | $1,018.1 | $997.6 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased, investing cash flow surged for the 9 Story acquisition, and financing cash flow turned positive Nine-Month Cash Flow Summary (in millions) | Cash Flow Activity | Nine Months Ended Feb 28, 2025 | Nine Months Ended Feb 29, 2024 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $17.3 | $84.7 | | **Net cash provided by (used in) investing activities** | $(232.0) | $(69.5) | | **Net cash provided by (used in) financing activities** | $197.6 | $(129.4) | | **Net increase (decrease) in cash and cash equivalents** | $(19.0) | $(114.1) | | **Cash and cash equivalents at end of period** | $94.7 | $110.4 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, 9 Story acquisition, amended credit agreement, and subsequent events including dividends and share repurchases - The company completed the acquisition of 9 Story on June 20, 2024, for an aggregate purchase price of **$193.7 million**, funded through borrowings. This acquisition enhances the company's development, production, and licensing capabilities[62](index=62&type=chunk) - The acquisition of 9 Story resulted in the recognition of **$71.0 million** in Goodwill and **$85.3 million** in amortizable intangible assets, which were allocated to the new Entertainment segment[65](index=65&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - On November 26, 2024, the company amended its credit agreement, increasing the unsecured revolving credit facility to **$400.0 million** from **$300.0 million** and extending the maturity date to November 26, 2029[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - Subsequent to the quarter's end, on March 19, 2025, the Board declared a quarterly dividend of **$0.20 per share** and increased the share repurchase authorization by **$53.4 million**, bringing the total current authorization to **$100.0 million**[104](index=104&type=chunk)[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A discusses Q3 FY2025 revenue growth, improved operating loss, segment performance, liquidity, and future outlook [Overview and Outlook](index=29&type=section&id=Overview%20and%20Outlook) Q3 FY2025 revenues grew and net loss per share improved, but the outlook anticipates continued spending headwinds and production delays Q3 FY2025 Key Metrics | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | **Revenues** | $335.4M | $323.7M | +4% | | **Net Loss per Diluted Share** | $(0.13) | $(0.91) | Improved | - Future outlook is cautious, expecting increased spending headwinds to impact the trade channel and book fairs, and delays in production greenlights to affect the Entertainment segment in the near-term[107](index=107&type=chunk) [Results of Operations by Segment](index=31&type=section&id=Results%20of%20Operations%20by%20Segment) Q3 segment performance was mixed, with Children's Book Publishing growth, Education Solutions decline, and new Entertainment segment results Q3 FY2025 Segment Performance (in millions) | Segment | Revenue | % Change YoY | Operating Income (Loss) | Operating Income (Loss) YoY | | :--- | :--- | :--- | :--- | :--- | | **Children's Book Publishing & Distribution** | $203.3 | +5.3% | $7.6 | $2.3 | | **Education Solutions** | $57.2 | -16.5% | $(6.9) | $(0.8) | | **Entertainment** | $12.8 | NM | $(3.9) | $(3.1) | | **International** | $59.3 | +0.3% | $(2.1) | $(5.9) | - Children's Book Publishing and Distribution growth was driven by a $9.9 million increase in School Reading Events, particularly a higher fair count in the book fairs channel[122](index=122&type=chunk) - Education Solutions' decline was attributed to school districts decreasing spending on supplemental programs to focus on new core programs[129](index=129&type=chunk) - The Entertainment segment's results reflect the addition of 9 Story, though revenues have been impacted by delays in production greenlights from major platforms[139](index=139&type=chunk)[140](index=140&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity changed significantly due to the 9 Story acquisition, with decreased operating cash flow and increased financing from borrowings - Cash provided by operating activities decreased by **$67.4 million** for the nine-month period, primarily due to lower customer remittances and increased inventory and royalty payments[159](index=159&type=chunk) - Cash used in investing activities increased by **$162.5 million**, driven by the **$176.2 million** net cash paid for the 9 Story acquisition[160](index=160&type=chunk) - Cash provided by financing activities increased by **$327.0 million**, mainly due to **$275 million** in borrowings to fund the 9 Story acquisition, while share repurchases decreased to **$40.0 million** from **$143.0 million** YoY[161](index=161&type=chunk) - As of February 28, 2025, the company had **$124.6 million** of availability under its U.S. Credit Agreement and **$16.2 million** under other short-term facilities[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Outlines primary market risks from foreign currency and interest rate fluctuations, detailing debt obligations and risk management - The company's main market risks stem from foreign currency exchange rate changes and interest rate volatility on its variable-rate borrowings[169](index=169&type=chunk)[170](index=170&type=chunk) Debt Obligations as of February 28, 2025 (in millions) | Debt Type | Total Fair Value | Average Interest Rate | | :--- | :--- | :--- | | **Lines of credit and current portion of long-term debt** | $5.8 | 4.9% | | **Long-term debt** | $275.0 | 6.1% | | **Film related obligations** | $18.8 | ~6.3% (weighted avg) | [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls and procedures were effective, with no material changes to internal financial reporting controls - The CEO and CFO have certified that the company's disclosure controls and procedures were effective as of the end of the quarter[173](index=173&type=chunk) - There were no material changes to the company's internal control over financial reporting during the third fiscal quarter[173](index=173&type=chunk) Part II - Other Information [Business](index=40&type=section&id=Item%201.%20Business) Confirms no material business changes except for the new Entertainment segment, incorporating 9 Story for content development and licensing - The company has established a new fourth reportable segment: Entertainment[176](index=176&type=chunk) - The Entertainment segment includes the newly acquired 9 Story and the existing Scholastic Entertainment Inc. (SEI), which was previously part of the Children's Book Publishing and Distribution segment[176](index=176&type=chunk) - The segment's activities include content development, production via its in-house animation studio Brown Bag Films, and global distribution and licensing of its large programming library[177](index=177&type=chunk) [Risk Factors](index=41&type=page&id=Item%201a.%20Risk%20Factors) Introduces new risk factors post-9 Story acquisition, including potential loss of Canadian tax credits, content buyer dependence, and integration risks - A new risk is the potential loss of Canadian government tax credits, which are crucial for financing productions, if the acquired entity (9 Story) ceases to be controlled by Canadian nationals[181](index=181&type=chunk) - The entertainment business faces risks from the rapidly evolving media industry, including consolidation of platforms and changing consumer habits, which could impact demand for its content[182](index=182&type=chunk) - There is a risk that the company may not achieve the expected synergies and financial benefits from the 9 Story acquisition, which could adversely affect financial performance[183](index=183&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details common stock repurchases during Q3 FY2025, with 1,450,274 shares repurchased, and a subsequent increase in authorization Share Repurchases for Q3 FY2025 | Period | Total Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Dec 2024 | 235,336 | $21.23 | | Jan 2025 | 237,344 | $21.05 | | Feb 2025 | 977,594 | $20.44 | | **Total** | **1,450,274** | **N/A** | - Subsequent to February 28, 2025, the Board authorized an increase of **$53.4 million** for common stock repurchases, bringing the total current authorization to **$100 million**[184](index=184&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) Reports no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 FY2025 - No directors or officers informed the company of the adoption or termination of a Rule 10b5-1 trading arrangement during the third quarter[187](index=187&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including the Third Amendment to the Credit Agreement and CEO/CFO certifications - Key exhibits filed include the Third Amendment to the Credit Agreement and CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[189](index=189&type=chunk)[190](index=190&type=chunk)