• Revenue: Increased 4% to $335.4 million.
• Operating Loss: Improved to $20.9 million from $30.6 million in the prior year period.
• Adjusted EBITDA: $6 million, compared to a loss of $7.2 million a year ago.
• Net Loss: Improved to $1.3 million from a loss of $23.3 million in the prior year period.
• Children's Book Publishing and Distribution Revenue: Increased 5% to $203.3 million.
• Book Fairs Revenue: $110.7 million, an increase of 8%.
• Book Club Revenue: $15.2 million, an increase of 14%.
• Trade Publishing Revenue: $77.4 million, in line with the prior year.
• Entertainment Segment Revenue: $12.8 million, reflecting the contribution of 9 Story Media Group.
• Education Solutions Revenue: Decreased 16% to $57.2 million.
• International Segment Revenue: $59.3 million, with a $2.9 million increase excluding foreign currency impact.
• Free Cash Flow: Used $30.7 million, compared to $7.1 million in the prior year period.
• Net Debt: $189.4 million, compared to a net cash position of $107.7 million at the end of fiscal 2024.
• Share Repurchases: 1.45 million shares for $30 million.
• Adjusted EBITDA Forecast: Approximately $140 million, at the low end of guidance.
• Full Year Free Cash Flow Outlook: Between $20 million and $30 million.

• Warning! GuruFocus has detected 2 Warning Sign with QUBT.

Release Date: March 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Scholastic Corp (NASDAQ:SCHL) achieved modest revenue growth and improved operating results in the third quarter of fiscal 2025.
• The Children's Book Publishing and Distribution segment saw increased revenues and profits, driven by improved results in Book Fairs and Book Clubs.
• The acquisition of 9 Story Media Group contributed positively to the Entertainment segment's revenue and adjusted EBITDA.
• Scholastic Corp (NASDAQ:SCHL) returned over $35 million to shareholders through share repurchases and dividends last quarter.
• The company maintains a strong balance sheet with modest debt and significant options to unlock additional liquidity.

Negative Points

• There is increasing pressure on spending by families and schools on books and educational materials.
• The Education Solutions segment experienced a decline in sales and profits due to lower spending on supplemental curriculum.
• Uncertainty around federal education policy and funding mechanisms is causing schools to delay or pause purchases of instructional materials.
• The Entertainment segment faced delays in production green lights, impacting near-term demand for production service work.
• Scholastic Corp (NASDAQ:SCHL) anticipates minimal tariff-related exposure on inventory costs, but there is potential for increased costs in the future due to tariffs on non-book products.

Q & A Highlights

Q: How should we think about backlist sales given consumer pressure and the potential impact of new frontlist titles like the Hunger Games and Dog Man releases? A: Peter Warwick, President and CEO, explained that successful frontlist titles, such as those by Dav Pilkey and Suzanne Collins, drive backlist sales. The strong performance of these new releases is expected to boost backlist sales, particularly in the fourth quarter and into the next financial year.

Q: Has there been a change in funding levels for school districts and states affecting the Education Solutions segment? A: Peter Warwick noted that schools and districts are being more cautious with spending, primarily due to concerns about federal funding levels. While state and local funding remains stable, schools are focusing on core curriculum needs, impacting supplemental providers like Scholastic.

Q: Do you expect any material changes in federal funding for education? A: Peter Warwick stated that while federal funding is congressionally mandated and unlikely to be cut off suddenly, there is a trend towards more state and local spending. This shift presents opportunities for Scholastic in charter, private, and parochial schools.

Q: Can you provide more details on the strategic review of the Education Solutions business? A: Peter Warwick clarified that the review is internally led, focusing on optimizing resource allocation to ensure success in the supplemental education market. Scholastic aims to leverage its strong brand and market position to navigate current challenges.

Q: What is the fair value of Scholastic's real estate assets, including the Missouri warehouse and New York City headquarters? A: Haji Glover, CFO, stated that while Scholastic does not provide specific valuations, they have shared detailed information to allow investors to estimate values based on rental income and market cap rates.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.