Scholastic Corporation — Fiscal 2027 Q1 Earnings Summary

Financial Performance

• Consolidated revenues decreased 4% year-over-year to $216.8 million from $225.6 million.
• Operating loss was $92.2 million, consistent with the prior year period.
• Earnings before income taxes were a loss of $93.7 million, an improvement of $3.3 million (3%) from a loss of $97.0 million in the prior year.
• Diluted loss per share was $3.77, a 33% increase from a loss of $2.83 in the prior year.
• Adjusted operating loss was $88.7 million, an increase of $6.8 million (8%) from $81.9 million; on a comparable basis reflecting sale-leaseback transactions, the loss increased $2.0 million to $88.7 million from $86.7 million.
• Adjusted EBITDA was a loss of $63.6 million, a 14% deterioration from a loss of $55.7 million; on a comparable basis, Adjusted EBITDA improved $0.6 million to a loss of $63.6 million from a loss of $64.2 million.
• Net cash used in operating activities was $94.6 million, compared to $81.8 million in the prior year.
• Free cash flow use was $110.8 million, compared to a use of $100.2 million in the prior year.
• Net debt was $86.8 million, a significant improvement from $242.8 million in the prior year, primarily due to proceeds from sale-leaseback transactions.
• Deferred revenue was $171.6 million as of August 31, 2026, down from $181.0 million in the prior year.

Guidance and Future Outlook

• The Company affirmed its fiscal 2027 full-year revenue growth guidance of approximately 2% to 4%.
• The Company affirmed its fiscal 2027 full-year Adjusted EBITDA guidance of approximately $135 million to $145 million.
• The Company expects fiscal 2027 full-year Free Cash Flow of approximately $35 million to $40 million.
• Management expressed confidence in the growth trajectory outlined at year-end and affirmed full-year guidance.

Business Segments and Product Lines

• Children's Book Publishing and Distribution: Revenues decreased 3% to $105.8 million. Book Fairs revenues were $33.2 million (down $0.9 million), Book Clubs were $2.1 million (up $0.3 million), and Consolidated Trade revenues were $70.5 million (down $3.0 million). Segment adjusted operating loss was $37.8 million.
• Education: Revenues decreased 24% to $30.4 million due to pressure on school and district funding. Segment adjusted operating loss was $23.3 million.
• Entertainment: Revenues increased 48% to $20.1 million, driven by higher production revenues. Segment adjusted operating loss improved to $1.6 million from $4.0 million.
• International: Revenues increased 2% to $60.5 million; excluding favorable foreign currency exchange of $1.2 million, revenues were in line with the prior year. Segment adjusted operating loss improved to $2.7 million from $4.1 million.
• Overhead: Costs were $26.0 million, including $2.7 million in one-time charges. Adjusted overhead costs increased $5.0 million to $23.3 million, primarily due to higher corporate initiative costs and employee expense timing.

Market and Competitive Landscape

• The Education segment faces continued pressure on school and district budgets and spending on supplemental curriculum materials.
• International revenues were impacted by favorable foreign currency exchange of $1.2 million.
• Consolidated Trade revenues were impacted by higher international co-edition sales in the prior year that did not recur.

Risks and Challenges

• The operating loss included the full-period impact of sale-leaseback transactions completed in December 2025, which eliminated rental income recorded in Overhead.
• One-time charges of $3.5 million were recognized in the current period, compared to $10.3 million in the prior year.
• The Company noted uncertainty in predicting future one-time items, including severance charges, asset impairments, and gains/losses on asset sales, which prevents reconciliation of forward-looking non-GAAP measures to GAAP without unreasonable effort.

Management Commentary and Tone

• Peter Warwick, President and CEO, stated that early indicators across businesses reinforce confidence entering the back-to-school and fall season.
• Management highlighted positive momentum in Children's Books with Book Fair bookings ahead of the prior year and a strong publishing and franchise schedule.
• Entertainment production activity and pipeline continued to grow strongly, with expanded capabilities to extend Scholastic IP across formats.
• In Education, the company is aligning cost structures and advancing business transformation to support long-term growth despite budget pressures.

Other Key Points

• The Company returned approximately $29.6 million to shareholders in the quarter, including the repurchase of 630,850 shares for $25.8 million and $3.8 million in dividends.
• As of August 31, 2026, $157.4 million remained authorized for future share repurchases.
• Net debt reduction of $156.0 million was driven by net proceeds from sale-leaseback transactions, partly offset by capital returns to shareholders.
• A conference call was held on September 24, 2026, with Peter Warwick and CFO Haji Glover.