Scholastic (SCHL) investor relations material

Executive summary

• First quarter revenue declined 5% to $225.6 million, reflecting normal seasonality and lower Education Solutions sales amid a challenging funding environment.

• Operating loss increased to $92.2 million, in line with seasonal patterns, while adjusted EBITDA loss improved 8% to $55.7 million due to cost controls and higher Children's Book segment revenues.

• Integration of Book Fairs, Book Clubs, and Trade Publishing into the Children's Book Group was completed to streamline operations and drive long-term growth.

• Real estate monetization advanced, with strong investor interest in SoHo headquarters and Jefferson City distribution center; sale-leaseback transactions are being explored.

• Full-year guidance for fiscal 2026 was affirmed, with management expressing confidence in delivering profit growth and long-term value.

Financial highlights

• Revenues were $225.6 million, down 5% year-over-year, with net loss increasing to $71.1 million and diluted EPS of $(2.83) compared to $(2.21) last year.

• Adjusted operating loss improved to $81.9 million from $85.6 million prior year; adjusted EBITDA loss was $55.7 million, better than $60.5 million a year ago.

• Free cash flow usage increased to $(100.2) million from $(68.7) million prior year, mainly due to higher inventory, severance, and timing of expenses.

• Net debt rose to $242.8 million from $152.1 million at the end of fiscal 2025, driven by working capital requirements.

• Gross margin was 45.3%, down slightly from 45.9% year-over-year, with cost of goods sold impacted by higher royalty costs and tariffs.

Outlook and guidance

• Fiscal 2026 guidance affirmed: revenue growth of 2% to 4%, adjusted EBITDA of $160–$170 million, and full-year free cash flow between $30 and $40 million.

• Expects $10 million in incremental tariff expenses and higher interest costs due to increased borrowings.

• Strong second quarter anticipated, driven by major trade releases and higher Book Fair bookings.

• Management expects continued share repurchases and is exploring real estate sale-leasebacks to enhance liquidity.

• Cost reduction initiatives underway, targeting $15–$20 million in savings, especially in non-revenue and consulting expenses.