Scholastic Earnings Call Highlights Strong Core Growth

Scholastic ((SCHL)) has held its Q2 earnings call. Read on for the main highlights of the call.

Scholastic’s latest earnings call painted a picture of a company successfully leveraging its core strengths in children’s publishing while navigating pockets of softness in education and entertainment. Management struck an overall optimistic tone, underscoring solid adjusted EBITDA growth, strong book fairs and trade publishing momentum, and disciplined capital allocation, even as they acknowledged pressure from delayed education funding and slower content delivery in entertainment.

13% Adjusted EBITDA Growth Underscores Operating Momentum

Scholastic delivered a 13% increase in adjusted EBITDA in the second quarter, demonstrating improving profitability and operating leverage across its business. Management also reaffirmed its fiscal 2026 earnings guidance, signaling confidence that the current trajectory in margins and revenue mix can be sustained despite some segment-level headwinds. This combination of near-term performance and longer-term guidance helped frame the quarter as a step forward in the company’s multi-year plan.

Sale-Leasebacks Unlock Over $400 Million and Fuel Buybacks

The company closed two significant sale leaseback transactions, unlocking more than $400 million in net proceeds and reinforcing a disciplined approach to balance sheet optimization. A key highlight for investors was the decision to channel part of this capital into an expanded share repurchase authorization, which was raised by $150 million. This move signals management’s belief that the stock remains attractive and underscores a commitment to returning capital to shareholders while maintaining strategic flexibility.

Children’s Book Publishing and Distribution Drives Top-Line Growth

Scholastic’s core Children’s Book Publishing and Distribution segment once again led the way, with second-quarter revenues rising 4% to $380.9 million. The growth was powered by robust performance in school book fairs and trade publishing, reinforcing the company’s enduring strength in school-based reading events and its ability to engage young readers. This segment continues to serve as the primary engine of both growth and profitability, offsetting softness in other parts of the portfolio.

Book Fairs Power Ahead With Higher Revenue per Event

Within the children’s segment, book fairs remained a standout performer, with revenue climbing 5% year over year. Management pointed to both higher fair counts and increased revenue per fair, indicating that Scholastic is not only expanding its footprint in schools but also extracting more value from each event. The strong back-to-school season suggests that demand for in-person reading experiences and curated book offerings remains resilient despite broader shifts in consumer behavior.

Trade Publishing Shines on Hit Titles and Strong List

Trade publishing delivered a 7% revenue increase in the quarter, supported by a strong release slate and the enduring appeal of Scholastic’s key franchises. A notable driver was Dave Pilkey’s latest installment in the Dog Man series, “Big Jim believes,” which helped lift trade sales to $110.4 million. The performance highlights Scholastic’s ability to capitalize on blockbuster children’s properties and underscores the importance of franchise-driven publishing in maintaining growth.

International Segment Posts Solid Revenue Growth

Scholastic’s international segment also contributed to the quarter’s positive narrative, with revenues rising to $89.5 million from $86.7 million. Growth was driven by strong performance from leading franchises across key markets, demonstrating the global resonance of the company’s brands. While international remains a smaller contributor relative to the U.S. business, it provides a valuable diversification of revenue and a platform for scaling successful series worldwide.

Education Segment Hit by Delayed Funding and Slower Decisions

In contrast to the strength in trade and fairs, the Education segment faced meaningful challenges, with revenues falling to $62.2 million from $71.2 million. Management attributed the decline primarily to delayed federal disbursements and slower decision cycles at school districts, which weighed on near-term sales. While these issues appear more cyclical than structural, they highlight the business’s sensitivity to public funding timelines and procurement processes, and they remain a key risk area to monitor.

Entertainment Revenue Declines on Fewer Episode Deliveries

The Entertainment segment saw revenues slip by $1.7 million to $15.1 million, reflecting fewer episode deliveries in the quarter. The downturn illustrates the inherent lumpiness of production and delivery schedules in media-related businesses. Although management remains positive on the strategic importance of entertainment for extending intellectual property, the quarterly revenue volatility underscores why publishing and fairs remain the company’s financial backbone.

Book Clubs Feel Pressure from Fewer Teacher Sponsors

Book Clubs continued to be a softer spot, with revenues declining to $28.5 million from $33.2 million, largely due to a reduction in teacher sponsors. As classroom dynamics evolve and educators face increased demands on their time, Scholastic must adapt its Book Clubs model to stay relevant and convenient. The segment’s decline contrasts with the strength in book fairs, suggesting that school-based reading programs are fragmenting, with some formats faring better than others.

Guidance and Outlook: Confident on Growth Despite Mixed Segments

Looking ahead, Scholastic reaffirmed its FY 2026 earnings guidance, supported by the 13% adjusted EBITDA growth and a solid back-to-school season that pushed quarterly revenues to $551.1 million, up 1% from last year. Net income climbed to $66.3 million from $52 million, with adjusted earnings per diluted share rising to $2.57 from $1.82. Management expects continued revenue growth in school reading events and the entertainment division, while signaling modest declines in trade and international revenues against a particularly strong prior-year comparison. The company also plans to continue using capital from its sale leasebacks, including an expanded $150 million share repurchase authorization, to enhance shareholder returns while investing in growth initiatives.

In sum, Scholastic’s earnings call showcased a company leaning on its core strengths—children’s publishing, book fairs, and powerful franchises—while working through funding-driven pressure in education and timing-related volatility in entertainment. The reaffirmed long-term guidance, strong profitability metrics, and shareholder-friendly capital allocation underpin a broadly positive outlook, even as investors will need to watch how quickly the education and Book Clubs businesses can stabilize and re-accelerate.