Scholastic Reports Fiscal 2026 Second Quarter Results

Core Insights - Scholastic Corporation reported strong financial performance in the second quarter of fiscal 2026, driven by successful book fairs and trade publishing, particularly from popular titles like "Dog Man: Big Jim Believes" [2][4] - The company has authorized a $150 million expanded share repurchase program as part of its capital allocation strategy following the successful sale-leaseback of major real estate assets, which generated over $400 million in net proceeds [4][19] - The outlook for fiscal 2026 remains positive, with expected Adjusted EBITDA between $146 million and $156 million and free cash flow forecasted to exceed $430 million [7][20] Financial Performance - Revenues for the second quarter increased by 1% to $551.1 million, with notable growth in the Children's Book Publishing and Distribution segment, offset by a decline in Education Solutions sales [9][11] - Operating income rose by 11% to $82.9 million, while Adjusted EBITDA improved by 13% to $122.5 million, reflecting higher revenues and reduced discretionary overhead expenses [10][12] - The diluted earnings per share increased by 27% to $2.17, and when excluding one-time items, it rose by 41% to $2.57 [9][10] Segment Analysis - The Children's Book Publishing and Distribution segment saw revenues increase by 4% to $380.9 million, with Book Fairs contributing $242.0 million, up 5% from the previous year [11][12] - Education Solutions revenues decreased by 13% to $62.2 million due to a challenging funding environment, resulting in a segment operating loss of $4.7 million [13] - The International segment's revenues increased by 4% to $89.5 million, driven by the success of global franchises, with operating income improving significantly [15] Capital Position and Shareholder Returns - The company generated $73.2 million in net cash from operating activities, with free cash flow increasing by 40% to $59.2 million [17][18] - Scholastic's net debt increased to $186.6 million, primarily due to share repurchases, and the company distributed $5.1 million in dividends during the quarter [18][19] - Following the sale-leaseback transactions, the company expects a significant boost to free cash flow, with an estimated $400 million benefit anticipated [20]