Scholastic’s Earnings Call Highlights Growth and Challenges

Scholastic ((SCHL)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Scholastic showcased a generally positive sentiment, highlighting strong financial performance, successful book launches, and strategic acquisitions that have spurred growth across several segments. Despite these achievements, the company acknowledged ongoing challenges in the Education and Entertainment segments, as well as consumer spending pressures that continue to affect revenue per fair.

Strong Financial Performance

In the fourth quarter, Scholastic reported a 7% increase in revenue, reaching $508.3 million, while the fiscal year saw a 2% rise to $1,625.5 million. Adjusted EBITDA also showed growth, increasing by 1% in Q4 to $91.2 million and 6% for the fiscal year, totaling $145.4 million. These figures underscore the company’s robust financial health and its ability to navigate market challenges effectively.

Successful Book Launches

A significant highlight was the 19% revenue increase in Trade Publishing during Q4, driven by the successful launch of ‘Sunrise on the Reaping’ from the Hunger Games series. This title alone sold over 2 million copies in its first month, demonstrating the strong market demand and effective marketing strategies employed by Scholastic.

Book Fairs and Clubs Performance

The book fairs segment experienced a 5% revenue increase in Q4 and a 1% rise for the full year, attributed to higher fair counts. Book clubs also saw a 2% revenue increase for the year, with improved profit contributions, indicating steady performance in these traditional channels.

Strategic Acquisitions and Integration

The integration of 9 Story Media Group has enhanced Scholastic’s reach and monetization capabilities, contributing to growth in the Entertainment segment. This strategic acquisition is part of the company’s broader efforts to expand its footprint and leverage synergies across its media and publishing businesses.

International Segment Growth

The international segment reported an 8% revenue increase in Q4 and a 2% rise for the full year, driven by strong performance in the trade channel. This growth highlights Scholastic’s successful international strategies and its ability to capitalize on global market opportunities.

Efficient Cost Management

Scholastic’s focus on cost management and restructuring has resulted in $25 million in annualized savings, with $15 million realized in FY 2025. These efforts are crucial for maintaining profitability and ensuring long-term financial stability.

Decline in Education Segment

The Education segment faced challenges, with revenue decreasing by 7% in Q4 and 12% for the full year. This decline is attributed to ongoing headwinds in the supplemental curriculum market, which the company is actively addressing.

Entertainment Segment Losses

Despite strategic acquisitions, the Entertainment segment reported an adjusted operating loss of $2.1 million in Q4 and $7.2 million for the full year, impacted by incremental amortization expenses. Scholastic is working to mitigate these losses through strategic initiatives and cost management.

Challenges in Consumer Spending

Revenue per fair saw a slight decline due to lower transaction volumes, a result of consumer spending pressures. Scholastic is monitoring these trends closely and adjusting its strategies to better align with consumer behavior.

Increased Debt

The company’s net debt stood at $136.6 million at the end of fiscal 2025, compared to a net cash position of $107.7 million at the end of fiscal 2024. This increase is primarily due to the acquisition of 9 Story Media Group, reflecting Scholastic’s strategic investments in growth.

Forward-Looking Guidance

Looking ahead, Scholastic has set ambitious targets for fiscal 2026, aiming for a 20% growth in adjusted EBITDA, reaching $160 to $170 million, alongside a revenue growth of 2% to 4%. The company plans to focus on cost management, organizational restructuring, and leveraging its intellectual property through integrated book and media businesses to drive long-term profitability and shareholder value.

In summary, Scholastic’s earnings call painted a picture of a company on a positive trajectory, with strong financial performance and strategic initiatives paving the way for future growth. While challenges remain, particularly in the Education and Entertainment segments, Scholastic’s proactive strategies and robust market presence position it well for continued success.