Scholastic Corporation (NASDAQ:SCHL) Q3 2025 Earnings Conference Call March 20, 2025 4:30 PM ET Company Participants Jeffrey Mathews - Chief Growth Officer and Executive Vice President Peter Warwick - President and Chief Executive Officer Haji Glover - Chief Financial Officer and Executive Vice President Conference Call Participants Brendan McCarthy - Sidoti Operator Good day, and thank you for standing by. Welcome to the Scholastic Reports Third Quarter Fiscal Year 2025 Results. [Operator Instructions] Ple ...

Group 1: Pearson - Pearson is a global media conglomerate that publishes books, periodicals, reports, and screen-based services for professional communities worldwide [1] - The company has a Zacks Rank of 1 (Strong Buy) and has seen a 4.8% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Pearson's shares gained 4.1% over the last three months, outperforming the S&P 500, which lost 3.7% [2] Group 2: Veeva Systems - Veeva Systems provides cloud-based software applications and data solutions for the life sciences industry [2] - The company also holds a Zacks Rank of 1 and has experienced a 3.6% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [2] - Veeva Systems' shares increased by 5.6% over the last three months, again outperforming the S&P 500's loss of 3.7% [3] Group 3: Plains All American Pipeline - Plains All American Pipeline is a master limited partnership involved in the transportation, storage, terminalling, and marketing of crude oil, natural gas, natural gas liquids (NGL), and refined products in the U.S. and Canada [4] - The company has a Zacks Rank of 1 and has seen a significant 10.1% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days [4] - Plains All American Pipeline's shares surged by 18.3% over the last three months, significantly outperforming the S&P 500's loss of 3.7% [5]

Financial Data and Key Metrics Changes - Revenue growth was driven by a one percent increase overall, with research growth of five percent offsetting a six percent decline in learning [22][48] - Adjusted EPS increased by thirty-nine percent due to higher adjusted operating income and a lower adjusted effective tax rate [22] - Operating margin rose by two hundred eighty basis points to fourteen point two percent, while adjusted EBITDA grew four percent [23][50] Business Line Data and Key Metrics Changes - Research segment revenue increased by five percent in Q3 and three percent year-to-date, driven by AI licensing and open access programs [51][58] - Learning segment revenue decreased by six percent in Q3 but rose four percent year-to-date, with growth in professional content and AI licensing revenue [59][60] - Adjusted EBITDA for the research segment increased by twelve percent for the quarter, while the learning segment's adjusted EBITDA decreased by five percent [58][60] Market Data and Key Metrics Changes - Global R&D spend is projected to grow by eight percent in 2024, with similar growth expected in 2025 [13] - Approximately half of the company's revenues are recurring, with nearly seventy-five percent in the research segment [12][38] - The company has expanded access in emerging markets, including a multiyear agreement in India and Brazil, enhancing its geographic diversification [33][35] Company Strategy and Development Direction - The company is focusing on margin expansion as a multiyear strategic goal, with a two hundred eighty basis points improvement in operating margin reported [20][70] - The strategic position in AI development offers multiple advantages, with significant opportunities in corporate research and development [16][41] - The company is committed to continuous improvement and value creation, with a strong emphasis on operational discipline and fiscal prudence [77][79] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainties but emphasized the company's resilience through various economic cycles [9][10] - The company reaffirmed its fiscal 2025 outlook and raised its fiscal 2026 margin target, indicating confidence in revenue growth and cost structure rationalization [70][71] - Management remains optimistic about the long-term growth potential in research and AI licensing, despite short-term challenges in the learning segment [95][100] Other Important Information - The company has a strong balance sheet with thirty-one consecutive years of dividend increases, reflecting consistent cash generation [11] - The recent appointment of Doctor Karen Madden to the Board of Directors is expected to enhance the company's focus on corporate R&D [75] Q&A Session Summary Question: What are the drivers behind the upward revision of the 2026 margin target? - The upward revision is primarily driven by rationalizing the cost structure and confidence in revenue growth, particularly in AI [82][83][85] Question: How does the company compare its cost structure with competitors like Springer? - The company has identified opportunities to streamline its cost structure, particularly in corporate shared services, while acknowledging differences in business mix [90][91][92] Question: Can you confirm the nine million incremental AI revenue for Q3? - Yes, the full nine million was recognized in Q3, specifically in the research segment [93][94] Question: What is the outlook for the learning segment over the next twelve months? - The learning segment is expected to face tough comparisons but is anticipated to return to positive growth in fiscal 2026, supported by improved margins and new business [95][101] Question: How is the company thinking about capital allocation in the near term? - The company is evaluating the pace of share repurchases and will consider its cash flow situation as it moves forward [105][106] Question: What is the company's revenue exposure to US institutions, particularly medical libraries? - The company monitors developments in US funding closely, with a low single-digit impact anticipated from potential funding changes, and maintains strong relationships with medical libraries [117][122]