- Revenue: Increased 4% to $237.2 million.
- Operating Loss: Improved to $85.6 million from $92.8 million in the prior year period.
- Adjusted EBITDA: Loss of $60.5 million, improved from a loss of $70.6 million a year ago.
- Net Loss: Improved to $60.3 million from $69.5 million in the prior year period.
- EPS (Earnings Per Share): Loss declined to $2.13 compared to a loss of $2.20 last year.
- Children's Book Publishing and Distribution Revenue: Increased 3% to $105.4 million.
- Book Fair Revenue: Increased 5% to $28.8 million.
- Book Clubs Revenue: $2.7 million, in line with prior year period revenues of $2.6 million.
- Trade Revenue: $73.9 million, up slightly from $72.5 million in the prior year.
- Education Solutions Revenue: Down 16% to $55.7 million.
- Entertainment Segment Revenue: $16.6 million.
- International Segment Revenue: $56.8 million, compared to $57.2 million in the prior year period.
- Net Cash Used by Operating Activities: $41.9 million, compared to $38.1 million in the prior year.
- Free Cash Flow: Used $68.7 million, compared to a use of $57.8 million in the prior year period.
- Net Debt: $152.1 million, compared to a net cash position of $107.7 million at the end of fiscal 2024.
- Share Repurchases: 163,000 shares for $5 million.
- Capital Returned to Shareholders: Over $10 million in the first quarter.
- Fiscal Year 2025 Guidance: Revenue growth of 4% to 6%, adjusted EBITDA of $140 million to $150 million, and free cash flow between $20 million and $30 million.
Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First-quarter revenue increased year over year, driven by the acquisition of 9 Story Media Group.
- Seasonal operating loss improved compared to the previous year.
- Strong fall fair bookings with a target of 90,000 fairs in fiscal 2025.
- Positive early responses to new strategies in the book clubs segment.
- Successful integration and positive contribution from 9 Story Media Group in the new entertainment segment.
Negative Points
- First-quarter sales in the education solutions segment declined year over year.
- Lower spending on supplemental curriculum products impacted revenue.
- Trade publishing division faces difficult year-over-year comparisons in the second quarter.
- Net debt increased significantly due to the acquisition of 9 Story Media Group.
- Continued pressures on consumer spending affecting the fairs business.
Q & A Highlights
Q: Can you talk about what you're seeing with gross margins and whether you see further improvement looking out the rest of the year, given the downturn in inflation?
A: Haji Glover, CFO: The improvement in gross margins was driven by mix. We do see modest growth in our gross margin throughout the rest of the year, and we have planned for that in our outlook.
Q: Is the pressure on consumer spending still impacting the fairs business?
A: Peter Warwick, CEO: The fairs are operating as expected for the fall season. While consumer spending pressures continue, adjustments in how we present the fairs and a full schedule of 90,000-plus fairs this year are mitigating factors. We expect modest revenue per fair growth in fiscal 2025.
Q: How have the school reading events business, clubs, and school channels been performing so far this school year relative to your expectations?
A: Peter Warwick, CEO: They have been operating as expected with no surprises. The clubs business, in particular, has seen an uptick in the number of sponsors, especially teachers, indicating that our redesign efforts have been worthwhile.
Q: Can you provide additional color on the new go-to-market strategies for the clubs business?
A: Peter Warwick, CEO: We have redesigned our flyers to ignite interest among our core, most profitable customers. The process has become more teacher-centric, which we believe will be very beneficial.
Q: What are the prospects of getting new business from either new states or new state entities for the state-sponsored business in education solutions?
A: Peter Warwick, CEO: There is a growing recognition of the need to get books to students at home, which has been successful in several states. We are confident in having another good year in this part of the business, leveraging partnerships with states, philanthropic organizations, and parents.
Q: Are you comfortable with the current net debt position, or do you see the company allocating more cash flow to pay down the revolver in the future?
A: Haji Glover, CFO: We are confident in our current position. We are exploring other opportunities on our balance sheet in the medium term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
