Scholastic(SCHL) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues decreased by 5% to $225.6 million in Q1 2026, reflecting the seasonality of the business [11] - Adjusted EBITDA was a loss of $55.7 million, an improvement from a loss of $60.5 million a year ago [12] - Net loss was $63.3 million compared to $60.3 million in the prior year period, with adjusted loss per diluted share increasing to $2.52 from $2.13 [12] Business Line Data and Key Metrics Changes - Children's Book Publishing and Distribution revenues increased by 4% to $109.4 million, with Book Fair revenue rising 18% to $34.1 million [13][14] - Trade Publishing revenues were essentially flat at $73.5 million, driven by strong demand for key titles [14] - Scholastic Education segment revenues decreased to $40.1 million from $55.7 million, reflecting lower spending on supplemental curriculum products [15] - Entertainment segment revenues decreased by $3 million to $13.6 million, primarily due to fewer episodic deliveries [15] Market Data and Key Metrics Changes - International segment revenues increased to $59.4 million from $56.8 million, with growth driven by higher revenues in Australia, the UK, and Asia [16] - The company expects to see growth opportunities in expanding English as a second language programs in markets like India and the Philippines [10] Company Strategy and Development Direction - The company is focused on building long-term opportunities as a global leader in children's publishing, media, and education [20] - Ongoing real estate monetization efforts are generating significant investor interest, with processes expected to conclude in the fall [18] - The integration of Trade, Fairs, and Clubs into a new Children's Book Group aims to streamline operations and enhance data analytics [7] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term potential of the Education segment despite current funding uncertainties [10] - The company is affirming its fiscal year 2026 guidance for revenue growth of 2% to 4% and adjusted EBITDA of $160 to $170 million [19] - Management highlighted the importance of aligning spending with long-term goals to drive favorable operating margins [19] Other Important Information - The company had borrowings of $325 million under its unsecured revolving credit facility, with net debt increasing to $242.8 million [17] - Free cash use in Q1 was $100.2 million compared to $68.7 million in the prior year, reflecting lower cash flow from operations [17] Q&A Session Summary Question: Feedback on new products in Education Solutions business - Management received positive feedback on new products, particularly Knowledge Library, despite a difficult selling environment due to funding uncertainties [22][23] Question: Key variables to monitor for spending trends - Management indicated that schools continue to spend, but uncertainty in future funding may lead to cautious purchasing [24] Question: Timing for financial impact from YouTube content - Management expects gradual benefits from the digital model and advertising revenue, with significant growth anticipated over time [28] Question: Cost structure and expense reduction opportunities - Management is actively identifying areas for cost reduction, with an expected $15 million to $20 million in savings [33] Question: Guidance affirmation and potential performance variables - Management expressed confidence in their guidance, noting that retail market conditions and tariff impacts are key factors to monitor [34][35]