- Revenue: Decreased 10% to $474.9 million in Q4; decreased 7% to $1.6 billion for the full fiscal year.
- Adjusted Operating Income: $67 million in Q4, down from $92 million last year.
- Adjusted EBITDA: $91 million in Q4, down from $115 million last year; $137 million for the full year, down from $196 million.
- Free Cash Flow: $73 million, up from $60 million in the prior year.
- Net Income: $50.5 million in Q4, down from $75.7 million last year; $34.6 million for the full year, down from $86.3 million.
- Earnings Per Diluted Share: $1.73 in Q4, down from $2.26 last year; $1.14 for the full year, down from $2.49.
- Children's Book Publishing and Distribution Revenue: Decreased 9% to $206 million in Q4; decreased 8% to $955.2 million for the full year.
- Book Fairs Revenue: Decreased 6% in Q4 to $169.5 million; decreased 2% for the full year to $541.6 million.
- Book Clubs Revenue: $14.4 million in Q4, down from $26.2 million last year; $62.7 million for the full year, down from $117.8 million.
- Trade Publishing Revenue: Increased to $81.6 million in Q4 from $79.3 million last year; $349 million for the full year, in line with $348.1 million last year.
- Education Solutions Revenue: Decreased 17% in Q4 to $135.7 million; decreased 9% for the full year to $351.2 million.
- International Revenue: Decreased to $70.8 million in Q4 from $73.9 million last year; $273.6 million for the full year, down from $279.4 million.
- Shareholder Returns: Returned over $181 million through dividends and share repurchases in fiscal 2024.
- Strategic Investment: $192 million investment in 9 Story Media Group, closed on June 20.
Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Scholastic Corp (SCHL, Financial) generated strong free cash flow of $73 million, up from $60 million in the prior year.
- The company returned over $181 million to shareholders through dividends and share repurchases during the year.
- The acquisition of 9 Story Media Group is expected to significantly expand Scholastic Corp (SCHL)'s opportunities in children's media.
- Trade publishing saw a 3% increase in sales, driven by the success of the Dog Man series.
- Scholastic Corp (SCHL) is planning for modest growth in revenue and adjusted EBITDA for fiscal 2025, including benefits from the 9 Story acquisition.
Negative Points
- Consolidated revenue declined by 10% or $53 million in the fourth quarter, impacted by market headwinds.
- Fourth quarter adjusted operating income decreased to $67 million from $92 million in the prior year.
- Adjusted EBITDA for fiscal 2024 was $137 million, down from $196 million a year ago.
- Revenues in the children's book segment declined by 9%, reflecting resizing of book clubs and lower participation in school book fairs.
- Education solutions segment revenues declined by 17% in the fourth quarter, impacted by schools pausing spending on supplemental curriculum products.
Q & A Highlights
Q: Can you talk about your outlook for revenue per fair looking into fiscal '25? And do you expect to surpass the 90% of pre-pandemic fair levels looking out into the next fiscal year?
A: We expect modest growth in revenue per fair for fiscal 2025. However, we anticipate that the revenue count will be less than pre-pandemic levels as we focus on fairs that are more profitable and scalable. We have implemented several improvements to reduce churn and better target the addressable market.
Q: Can you provide some detail on how far along in the shrink-to-grow strategy Scholastic is for the book clubs business?
A: We have trialed several strategies and will be implementing changes from the fall of this year. Our focus is on ensuring profitability while modestly growing the business and engaging teachers more effectively. The goal is to maintain profitability and re-engage our core customers.
Q: Are there any acquisition opportunities in the education solutions segment, particularly companies geared towards the science of reading?
A: We see broad opportunities across education, children's books, and entertainment segments. We are making organic investments to align our products with new pedagogies and continue to review acquisition opportunities that align with our strategic goals.
Q: What factors could cause material underperformance or outperformance relative to your expectations for fiscal '25?
A: Two main factors could impact performance: the economic environment affecting middle-class families' ability to spend on books and the slower-than-expected adoption of supplemental reading materials due to the focus on new literacy programs and curricula. These factors could continue to pose challenges in the upcoming financial year.
Q: How is Scholastic planning to address the headwinds in the education solutions segment?
A: We are targeting growth in sales to state and community literacy partners and launching new partnership models. We are also investing in a pipeline of literacy programs aligned with current literacy instruction, which we expect to contribute to growth starting in the 2025-2026 school year.
Q: What are the expectations for the new entertainment segment combining Scholastic Entertainment and 9 Story Media Group?
A: We expect solid growth in segment adjusted EBITDA as we execute on company-wide synergies and franchise plans. The addition of 9 Story Media Group is anticipated to contribute over $80 million in revenue with solid EBITDA in fiscal 2025.
Q: How is Scholastic planning to grow the book fairs business in fiscal 2025?
A: We are planning for modest growth by increasing fair count and implementing new merchandising and sales initiatives. We are also piloting new operating models to serve schools outside our core markets and investing in partnerships to bring book fairs to high-need communities.
Q: What are the key growth initiatives for Scholastic in fiscal 2025?
A: Key initiatives include expanding our entertainment segment, launching new literacy programs, growing our book fairs and book clubs businesses, and piloting new direct-to-home channels for families with young children. We are also focusing on leveraging our trusted brand and content to reach kids both on screen and on the page.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
