McGraw Hill, Inc. ((MH)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for McGraw Hill, Inc. painted a picture of robust performance in several key areas, particularly in Higher Education and digital revenue growth. The company demonstrated strategic financial management through debt reduction and cash flow improvements. However, challenges were noted in the K-12 segment and international markets, though these were anticipated and aligned with expectations.
Higher Education Revenue Growth
The earnings call revealed a significant expansion in Higher Education revenue, which grew by 14% year-over-year. This growth was driven by a notable increase in digital revenue, which surged by 18.4%. McGraw Hill’s market share in this segment rose by 160 basis points, reaching 30%.
Digital Revenue Expansion
Digital revenue was a standout performer, increasing by 7.6% year-over-year to $352 million. This segment now accounts for 53% of McGraw Hill’s total revenue, underscoring the company’s successful pivot towards digital solutions.
Adjusted EBITDA Growth
The company reported an increase in adjusted EBITDA, which reached $286 million, with a margin of 43%. This represents a 60 basis point improvement from the previous year, highlighting efficient cost management and operational execution.
Inclusive Access Growth
McGraw Hill’s Inclusive Access initiative saw a remarkable 37% growth in sales year-over-year. This program is now adopted by nearly 2,000 campuses, reflecting its growing acceptance and success in the educational sector.
Strong Cash Flow and Debt Reduction
The company made significant strides in financial management by prepaying $542 million in term loan debt year-to-date. This move is expected to save over $40 million in annualized cash interest, enhancing McGraw Hill’s financial flexibility.
K-12 Revenue Decline
Despite overall positive performance, the K-12 segment experienced an 11.2% decline in revenue year-over-year. This drop was attributed to a smaller market opportunity, which the company had anticipated.
International Revenue Decrease
International revenue decreased by 8.8% year-over-year. However, the decline was less severe compared to the previous quarter, indicating some stabilization in these markets.
Forward-Looking Guidance
Looking ahead, McGraw Hill provided optimistic guidance for the fiscal year 2026. The company expects total revenue to range between $2.031 billion and $2.061 billion, with adjusted EBITDA anticipated to be between $702 million and $722 million. The integration of AI into their products is expected to enhance learning experiences and drive future growth.
In summary, McGraw Hill’s earnings call highlighted strong performance in key areas such as Higher Education and digital revenue, alongside strategic financial management. While challenges remain in the K-12 and international markets, the company’s forward-looking guidance suggests continued growth and innovation, particularly through the integration of AI technologies.