On September 26, 2024, Scholastic Corp (SCHL, Financial) released its 8-K filing detailing the financial results for the fiscal first quarter ended August 31, 2024. Scholastic Corp is an American publishing and education media company that focuses on books and educational material for schools, teachers, parents, and children. It creates print, digital, and audiobooks, learning materials and programs, classroom magazines, and other products that support children's learning and reading both at home and at school. The company also owns rights to various books, including Harry Potter, Dog Man, and The Hunger Games among others. It has three reportable segments: Children's Book Publishing and Distribution, Education Solutions, and International. The majority of its revenue is from the Children's Book Publishing and Distribution segment.
Performance Overview
Scholastic Corp reported revenues of $237.2 million for the first quarter of fiscal 2025, a 4% increase from $228.5 million in the same period last year. This growth was primarily driven by the contribution of 9 Story Media Group, which was recorded in the Entertainment segment. The company's operating loss decreased by 11% to $88.5 million, compared to $99.1 million in the prior year. Excluding one-time charges, the operating loss improved by 8% year-over-year.
Segment Analysis
In the Children's Book Publishing and Distribution segment, revenues increased by 3% to $105.4 million. Book Fairs revenues rose by 5% to $28.8 million, while Book Clubs revenues remained stable at $2.7 million. Consolidated Trade revenues saw a 2% increase to $73.9 million, driven by higher foreign rights revenues.
The Education Solutions segment experienced a 16% decline in revenues to $55.7 million, primarily due to lower sales of supplemental curriculum products. However, the segment's operating loss improved to $17.0 million from $18.7 million in the prior year, reflecting higher state-sponsored program revenues and lower operating expenses.
The newly formed Entertainment segment, which includes the operations of Scholastic Entertainment Inc. and 9 Story Media Group, reported revenues of $16.6 million. The segment's operating loss was $0.5 million, including one-time charges of $1.7 million. Excluding these charges, the adjusted segment operating income was $1.2 million.
Financial Achievements
Scholastic Corp's adjusted EBITDA improved by 14% to a loss of $60.5 million. The company's net cash used by operating activities was $41.9 million, in line with the prior year period. Free cash use was $68.7 million, compared to $57.8 million in the previous year, reflecting higher capital expenditures and production spend. The net debt position was $152.1 million, compared to a net cash position of $119.9 million in the prior year, due to borrowings under the existing revolving credit facility to fund the acquisition of 9 Story Media Group.
Key Metrics
| Metric | Q1 FY2025 | Q1 FY2024 | Change |
|---|---|---|---|
| Revenues | $237.2 million | $228.5 million | 4% |
| Operating Loss | $(88.5) million | $(99.1) million | 11% |
| Net Loss | $(62.5) million | $(74.2) million | 16% |
| Adjusted EBITDA | $(60.5) million | $(70.6) million | 14% |
Commentary and Analysis
"During our first quarter, Scholastic prepared for another important back-to-school season, as we executed on our long-term growth initiatives. In the seasonally quiet quarter for our school-based channels, first quarter’s operating loss improved modestly versus the prior year," said Peter Warwick, President and Chief Executive Officer.
Scholastic Corp's performance in the first quarter of fiscal 2025 demonstrates the company's resilience and strategic focus on long-term growth. The acquisition of 9 Story Media Group has significantly contributed to the revenue growth in the Entertainment segment, while the Children's Book Publishing and Distribution segment continues to show steady performance. However, the decline in the Education Solutions segment highlights the challenges faced by the company in adapting to changing market demands.
Overall, Scholastic Corp's financial achievements and strategic initiatives position the company well for future growth. The company's focus on expanding its reach and impact through new releases and innovative strategies is expected to drive further improvements in its financial performance.
Explore the complete 8-K earnings release (here) from Scholastic Corp for further details.
