Scholastic Reports Fiscal 2025 First Quarter Results

In $ millions

First Quarter

Change

Fiscal 2025

Fiscal 2024

%

Revenues

$

237.2

$

228.5

$

8.7

4 %

Operating income (loss)

$

(88.5)

$

(99.1)

$

10.6

11 %

Earnings (loss) before taxes

$

(91.8)

$

(98.0)

$

6.2

6 %

Diluted earnings (loss) per share

$

(2.21)

$

(2.35)

$

0.14

6 %

Operating income (loss), ex. one-time items *

$

(85.6)

$

(92.8)

$

7.2

8 %

Diluted earnings (loss) per share, ex. one-time items *

$

(2.13)

$

(2.20)

$

0.07

3 %

Adjusted EBITDA *

$

(60.5)

$

(70.6)

$

10.1

14 %

* Please refer to the non-GAAP financial tables attached

In $ millions

First Quarter

Change

Fiscal 2025

Fiscal 2024

$

%

Net cash (used) provided by operating activities

$

(41.9)

$

(38.1)

$

(3.8)

(10) %

Additions to property, plant and equipment and prepublication expenditures

(24.4)

(19.7)

(4.7)

(24) %

Net borrowings (repayments) of film related obligations

(2.4)

—

(2.4)

NM

Free cash flow (use)*

$

(68.7)

$

(57.8)

$

(10.9)

(19) %

Net cash (debt)*

$

(152.1)

$

119.9

$

(272.0)

NM

* Please refer to the non-GAAP financial tables attached

Table 1

Scholastic Corporation

Consolidated Statements of Operations

(Unaudited)

(In $ Millions, except shares and per share data)

Three months ended

08/31/24

08/31/23

Revenues ⁽¹⁾

$

237.2

$

228.5

Operating costs and expenses:

Cost of goods sold

128.3

130.0

Selling, general and administrative expenses ⁽²⁾

182.1

184.2

Depreciation and amortization

15.3

13.4

325.7

327.6

Operating income (loss)

(88.5)

(99.1)

Interest income (expense), net

(3.0)

1.4

Other components of net periodic benefit (cost)

(0.3)

(0.3)

Earnings (loss) before income taxes

(91.8)

(98.0)

Provision (benefit) for income taxes ⁽³⁾

(29.3)

(23.8)

Net income (loss) ⁽¹⁾

(62.5)

(74.2)

Basic and diluted earnings (loss) per share of Class A and Common Stock ⁽⁴⁾

Basic

$

(2.21)

$

(2.35)

Diluted

$

(2.21)

$

(2.35)

Basic weighted average shares outstanding

28,290

31,564

Diluted weighted average shares outstanding

28,908

32,604

(1)

The financial results of 9 Story Media Group from the date of acquisition on June 20, 2024 through August 31, 2024

are included in the Company's consolidated results of operations as of August 31, 2024. The unaudited pro-forma

consolidated results of operations for the three months ended August 31, 2024 and August 31, 2023 as if the acquisition

had occurred on June 1, 2023, the beginning of fiscal 2024, includes revenues of $242.9 and $248.3, respectively, and

net loss of $64.3 and $78.9, respectively.

(2)

In the three months ended August 31, 2024 and August 31, 2023, the Company recognized pretax severance of $1.2

and $6.3, respectively, related to cost-savings initiatives. In the three months ended August 31, 2024, the Company

recognized pretax costs of $1.7 related to the acquisition of 9 Story Media Group.

(3)

In the three months ended August 31, 2024 and August 31, 2023, the Company recognized a benefit of $0.7 and

$1.6, respectively, for income taxes in respect to one-time pretax items.

(4)

Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding. Recalculating

earnings per share based on numbers rounded to millions may not yield the results as presented.

Table 2

Scholastic Corporation

Segment Results

(Unaudited)

(In $ Millions)

Three months ended

Change

08/31/24

08/31/23

$

%

Children's Book Publishing and Distribution ⁽¹⁾

Revenues

Books Clubs

$

2.7

$

2.6

$

0.1

4 %

Book Fairs

28.8

27.3

1.5

5 %

School Reading Events

31.5

29.9

1.6

5 %

Consolidated Trade

73.9

72.5

1.4

2 %

Total Revenues

105.4

102.4

3.0

3 %

Operating income (loss)

(36.6)

(41.0)

4.4

11 %

Operating margin

NM

NM

Education Solutions

Revenues

55.7

66.0

(10.3)

(16) %

Operating income (loss)

(17.0)

(18.7)

1.7

9 %

Operating margin

NM

NM

Entertainment ⁽¹⁾

Revenues

16.6

0.4

16.2

NM

Operating income (loss)

(0.5)

(0.5)

0.0

NM

Operating margin

NM

NM

International

Revenues

56.8

57.2

(0.4)

(1) %

Operating income (loss)

(8.3)

(8.2)

(0.1)

(1) %

Operating margin

NM

NM

Overhead

Revenues

2.7

2.5

0.2

8 %

Operating income (loss)

(26.1)

(30.7)

4.6

15 %

Operating income (loss)

$

(88.5)

$

(99.1)

$

10.6

11 %

NM - Not meaningful

(1)

The newly formed Entertainment segment includes the operations of Scholastic Entertainment Inc.

(SEI), which were included in the Children's Book Publishing and Distribution segment in prior periods,

and 9 Story Media Group. The financial results for SEI for the three months ended August 31, 2023

have been reclassified to Entertainment to reflect this change.

Table 3

Scholastic Corporation

Supplemental Information

(Unaudited)

(In $ Millions)

Selected Balance Sheet Items

08/31/24

08/31/23

Cash and cash equivalents

$

84.1

$

125.8

Accounts receivable, net

201.1

201.9

Inventories, net

310.3

353.2

Accounts payable

184.0

167.7

Deferred revenue

173.9

171.1

Accrued royalties

77.5

72.0

Film related obligations

34.1

—

Lines of credit and long-term debt

231.1

5.9

Net cash (debt) ⁽¹⁾

(152.1)

119.9

Total stockholders' equity

957.3

1,054.6

Selected Cash Flow Items

Three months ended

08/31/24

08/31/23

Net cash provided by (used in) operating activities

$

(41.9)

$

(38.1)

Property, plant and equipment additions

(20.0)

(14.3)

Prepublication expenditures

(4.4)

(5.4)

Net borrowings (repayments) of film related obligations

(2.4)

—

Free cash flow (use) ⁽²⁾

$

(68.7)

$

(57.8)

(1)

Net cash (debt) is defined by the Company as cash and cash equivalents less

production cash of $5.1 as of August 31, 2024, net of lines of credit, short-term

and long-term debt. Film related obligations are not included. The Company utilizes

this non-GAAP financial measure, and believes it is useful to investors, as an

indicator of the Company's effective leverage and financing needs.

(2)

Free cash flow (use) is defined by the Company as net cash provided by or used

in operating activities (which includes royalty advances) and cash acquired through

acquisitions and from sale of assets, reduced by spending on property, plant and

equipment and prepublication costs and adjusted for net cash flows from film

related obligations. The Company believes that this non-GAAP financial measure is

useful to investors as an indicator of cash flow available for debt repayment and

other investing activities, such as acquisitions. The Company utilizes free cash flow

as a further indicator of operating performance and for planning investing activities.

Table 4

Scholastic Corporation

Supplemental Results

Excluding One-Time Items

(Unaudited)

(In $ Millions, except per share data)

Three months ended

08/31/2024

08/31/2023

Reported

One-time

items

Excluding

One-time

items

Reported

One-time

items

Excluding

One-time

items

Diluted earnings (loss) per share ⁽¹⁾

$

(2.21)

$

0.08

$

(2.13)

$

(2.35)

$

0.15

$

(2.20)

Net income (loss) ⁽²⁾

$

(62.5)

$

2.2

$

(60.3)

$

(74.2)

$

4.7

$

(69.5)

Earnings (loss) before income taxes

$

(91.8)

$

2.9

$

(88.9)

$

(98.0)

$

6.3

$

(91.7)

Children's Book Publishing and Distribution ⁽³⁾

$

(36.6)

$

—

$

(36.6)

$

(41.0)

$

—

$

(41.0)

Education Solutions

(17.0)

—

(17.0)

(18.7)

—

(18.7)

Entertainment ^{(3) (4)}

(0.5)

1.7

1.2

(0.5)

—

(0.5)

International ⁽⁵⁾

(8.3)

—

(8.3)

(8.2)

1.2

(7.0)

Overhead ⁽⁶⁾

(26.1)

1.2

(24.9)

(30.7)

5.1

(25.6)

Operating income (loss)

$

(88.5)

$

2.9

$

(85.6)

$

(99.1)

$

6.3

$

(92.8)

(1)

Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding. Recalculating earnings 

per share based on rounded numbers may not yield the results as presented.

(2)

In the three months ended August 31, 2024 and August 31, 2023, the Company recognized a benefit of $0.7 and $1.6,

respectively, for income taxes in respect to one-time pretax items.

(3)

The newly formed Entertainment segment includes the operations of Scholastic Entertainment Inc. (SEI), which were included

in the Children's Book Publishing and Distribution segment in prior periods, and 9 Story Media Group. The financial results for

SEI for the three months ended August 31, 2023 have been reclassified to Entertainment to reflect this change.

(4)

In the three months ended August 31, 2024, the Company recognized pretax costs of $1.7 related to the acquisition of 9 Story

Media Group.

(5)

In the three months ended August 31, 2023, the Company recognized pretax severance of $1.2 related to cost-savings initiatives.

(6)

In the three months ended August 31, 2024  and August 31, 2023, the Company recognized pretax severance of $1.2 and $5.1,

respectively, related to cost-savings initiatives.

Table 5

Scholastic Corporation

Consolidated Statements of Operations - Supplemental

Adjusted EBITDA

(Unaudited)

(In $ Millions)

Three months ended

08/31/24

08/31/23

Earnings (loss) before income taxes as reported

$

(91.8)

$

(98.0)

One-time items before income taxes

2.9

6.3

Earnings (loss) before income taxes excluding one-time items

(88.9)

(91.7)

Interest (income) expense ⁽¹⁾

3.4

(1.4)

Depreciation and amortization ⁽²⁾

25.0

22.5

Adjusted EBITDA ⁽³⁾

$

(60.5)

$

(70.6)

(1)

For the three months ended August 31, 2024, amount includes production loan interest of

$0.4 amortized into cost of goods sold.

(2)

For the three months ended August 31, 2024 and August 31, 2023, amounts include

prepublication and production cost amortization of $6.7 and $6.7, respectively, and

depreciation of $0.7 and $0.6, respectively, recognized in cost of goods sold, amortization

of deferred financing costs of $0.1 and $0.1 respectively, and amortization of capitalized

cloud software of $2.2 and $1.7, respectively, recognized in selling, general and

administrative expenses.

(3)

Adjusted EBITDA is defined by the Company as earnings (loss), excluding one-time

items, before interest, taxes, depreciation and amortization. The Company believes

that Adjusted EBITDA is a meaningful measure of operating profitability and useful for

measuring returns on capital investments over time as it is not distorted by unusual

gains, losses, or other items.

Table 6

Scholastic Corporation

Consolidated Statements of Operations - Supplemental

Adjusted EBITDA by Segment

(Unaudited)

(In $ Millions)

Three months ended

08/31/24

CBPD ^{(1) (2)}

EDUC ⁽¹⁾

ENT ^{(1) (2)}

INTL ⁽¹⁾

OVH ⁽¹⁾

Total

Earnings (loss) before income taxes as reported

$

(36.6)

$

(17.0)

$

(1.1)

$

(8.7)

$

(28.4)

$

(91.8)

One-time items before income taxes

—

—

1.7

—

1.2

2.9

Earnings (loss) before income taxes excluding one-time items

(36.6)

(17.0)

0.6

(8.7)

(27.2)

(88.9)

Interest (income) expense ⁽³⁾

0.0

—

1.1

(0.0)

2.3

3.4

Depreciation and amortization ⁽⁴⁾

7.5

6.2

3.5

1.9

5.9

25.0

Adjusted EBITDA ⁽⁵⁾

$

(29.1)

$

(10.8)

$

5.2

$

(6.8)

$

(19.0)

$

(60.5)

Three months ended

08/31/23

CBPD ^{(1) (2)}

EDUC ⁽¹⁾

ENT ^{(1) (2)}

INTL ⁽¹⁾

OVH ⁽¹⁾

Total

Earnings (loss) before income taxes as reported

$

(41.1)

$

(18.7)

$

(0.5)

$

(8.5)

$

(29.2)

$

(98.0)

One-time items before income taxes

—

—

—

1.2

5.1

6.3

Earnings (loss) before income taxes excluding one-time items

(41.1)

(18.7)

(0.5)

(7.3)

(24.1)

(91.7)

Interest (income) expense

0.0

0.0

—

(0.1)

(1.3)

(1.4)

Depreciation and amortization ⁽⁴⁾

7.7

7.8

0.1

1.9

5.0

22.5

Adjusted EBITDA ⁽⁵⁾

$

(33.4)

$

(10.9)

$

(0.4)

$

(5.5)

$

(20.4)

$

(70.6)

(1)

The Company's segments are defined as the following: CBPD - Children's Book Publishing and Distribution segment; EDUC - Education

Solutions segment; ENT - Entertainment segment; INTL - International segment; OVH - unallocated overhead.

(2)

The newly formed Entertainment segment includes the operations of Scholastic Entertainment Inc. (SEI), which were included in the

Children's Book Publishing and Distribution segment in prior periods, and 9 Story Media Group. The financial results for SEI for the

three months ended August 31, 2023 have been reclassified to Entertainment to reflect this change.

(3)

For the three months ended August 31, 2024, amount includes production loan interest of $0.4 amortized into cost of goods sold.

(4)

Depreciation and amortization in the Children's Book Publishing and Distribution, Education Solutions and International segments

includes amounts allocated from overhead.

(5)

Adjusted EBITDA is defined by the Company as earnings (loss), excluding one-time items, before interest, taxes, depreciation

and amortization. The Company believes that Adjusted EBITDA is a meaningful measure of operating profitability and useful for

measuring returns on capital investments over time as it is not distorted by unusual gains, losses, or other items.