Scholastic Reports Fiscal 2026 First Quarter Results

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]