Scholastic(SCHL) - 2025 Q2 - Quarterly Report

Financial Performance - Revenues for the second quarter ended November 30, 2024 were $544.6 million, a decrease of$18.0 million or 3% compared to the prior fiscal year quarter [166]. - Net income per diluted share for the second quarter of fiscal 2024 was $1.71, down from$2.45 in the prior fiscal year quarter [166]. - Revenues for the six months ended November 30, 2024 decreased by $9.3 million to$781.8 million, compared to $791.1 million in the prior fiscal year period [169]. - Revenues for the quarter ended November 30, 2024 decreased by$18.0 million to $544.6 million, a decline of 3.2$71.2 million, a decrease of 12.1% from $81.0 million in the prior fiscal year quarter [236]. - Revenues for the quarter ended November 30, 2024 increased by$0.2 million to $86.7 million, compared to$86.5 million in the prior fiscal year quarter [244]. - Revenues from the Entertainment segment for the three and six months ended November 30, 2024 were $16.8 million and$33.4 million, respectively, compared to $0.4 million and$0.8 million in the prior fiscal year period [241]. Segment Performance - The Children's Book Publishing and Distribution segment saw a revenue decrease of $22.4 million, primarily due to lower trade channel revenues [169]. - Revenues from the Entertainment segment increased by$32.6 million, reflecting the addition of 9 Story [169]. - Education Solutions segment revenues decreased by $20.1 million to$126.9 million, driven by lower spending on supplemental materials [183]. - The Children's Book Publishing and Distribution segment saw a revenue decrease of $25.4 million, primarily due to lower trade channel revenues and a shift in book fair deliveries [195]. - Education Solutions segment revenues decreased by$9.8 million, attributed to reduced spending on supplemental materials and lower subscription revenues from Magazines+ [208]. - The Entertainment segment's revenues increased by $16.4 million, benefiting from the addition of 9 Story [195]. Expenses and Costs - Selling, general and administrative expenses for the six months ended November 30, 2024 increased to$407.0 million, compared to $397.3 million in the prior fiscal year period [172]. - Selling, general and administrative expenses increased to$224.9 million, up $11.8 million from the prior fiscal year quarter, primarily due to higher operating expenses from the addition of 9 Story [198]. - Cost of goods sold for the quarter was$228.6 million, or 42.0% of revenues, compared to $234.1 million, or 41.6$27.3 million, or 38.3% of revenues, compared to $30.7 million, or 37.9$48.9 million, or 56.4% of revenues, compared to $48.9 million, or 56.5$89.7 million, a decrease of $6.9 million compared to$96.6 million in the prior fiscal year period [239]. Cash Flow and Liquidity - Cash provided by operating activities was $29.3 million for the six months ended November 30, 2024, a decrease of$42.3 million compared to $71.6 million in the prior fiscal year period [221]. - Cash provided by financing activities was$214.5 million for the six months ended November 30, 2024, an increase of $312.3 million compared to cash used in financing activities of$97.8 million in the prior fiscal year period [222]. - The Company's cash and cash equivalents totaled $139.6 million at November 30, 2024, compared to$149.5 million at November 30, 2023 [223]. - Cash used in investing activities was $217.2 million for the six months ended November 30, 2024, an increase of$168.1 million compared to the prior fiscal year period, driven by the acquisition of 9 Story for $176.2 million [251]. - The Company expects to maintain sufficient liquidity, with cash and cash equivalents of$139.6 million and availability under the U.S. Credit Agreement of $149.6 million as of November 30, 2024 [224]. Tax and Interest - The interim effective tax rate for the six months ended November 30, 2024 was 37.2$8.7 million, compared to $0.8 million in the prior fiscal year period, due to borrowings for the 9 Story acquisition [173]. - The average interest rate on long-term debt is 6.8$250.0 million as of November 30, 2024 [229]. - The company is subject to market risks from changes in interest rates affecting its variable-rate borrowings [257]. Strategic Initiatives - The Company expects revenues to benefit from new releases, including the thirteenth book in the Dog Man series and the fifth book in the Hunger Games series [167]. - The company is developing new supplemental products for schools, expected to launch for the 2025/2026 school years [194]. - The company has $76.6 million remaining available for future purchases of common shares under its open-market buy-back program as of November 30, 2024 [252]. - The company categorizes its businesses into four reportable segments: Children's Book Publishing and Distribution, Education Solutions, International, and Entertainment [277]. - The company’s operating philosophy focuses on using cash from operating activities for debt reduction, reinvestment, and strategic acquisitions [252]. Risks and Challenges - The company faces risks from changing industry trends in the media and content sector, which may affect the demand for its entertainment programming [281]. - The company’s entertainment business relies on key relationships with buyers of film and television content, which may impact financial performance due to demand fluctuations [264]. - The entertainment segment includes operations from the recently acquired 9 Story Media Group Inc., which may impact the company's financial performance if synergies are not realized [265]. - The company reported a significant increase in cash used for acquisitions, with the previous year involving only$5.8 million for educational programs and $2.1 million for a noncontrolling interest [251].