Scholastic Reports Fiscal 2021 First Quarter Results
Scholastic Corporation (NASDAQ: SCHL) reported FY2021 Q1 results, with revenues of $215.2 million, down 7% from $232.6 million in FY2020. Operating loss improved to $57.0 million from $87.4 million, a 35% reduction. Notably, cost savings of $100 million enhanced cash flow and preserved liquidity. Digital billings increased by 15%, reflecting strong demand for educational resources. However, delays in school openings may impact revenue for the next quarter. The company is optimistic about future growth in digital education and bestsellers.
- Operating loss improved by 35% year-over-year
- Digital billings increased by 15%
- Successful execution of a $100 million cost savings program
- Net cash used in operations decreased by 73%
- Upcoming releases of popular titles expected to boost sales
- Revenues decreased by 7% due to COVID-19 disruptions
- Children's Book Publishing segment revenues fell 17%
- Expectations of a significant decline in revenues for clubs and fairs in Q2
NEW YORK, Sept. 24, 2020 /PRNewswire/ -- Scholastic Corporation (NASDAQ: SCHL), the global children's publishing, education and media company, today reported financial results for the Company's fiscal first quarter ended August 31, 2020. Scholastic typically reports an operating loss and high cash utilization in its fiscal first quarter, when most U.S. schools are not in session.
Fiscal First Quarter 2021 Review
(In $ Millions)
In $ millions | First Quarter | Variance | ||
FY 2021 | FY 2020 | $ | % | |
Revenues | ( | ( | ||
Operating income (loss) | (57.0) | (87.4) | 30.4 | |
One-time items | 12.0 | 4.3 | 7.7 | - |
Operating income (loss), excluding one-time items* | (45.0) | (83.1) | 38.1 |
* Please refer to the non-GAAP financial tables attached |
Chairman's Commentary
"The successful execution of our previously announced
Mr. Robinson continued, "We continue to leverage our amazing intellectual properties in the trade and media businesses. The Ballad of Songbirds and Snakes, published at the end of May, remained on bestsellers lists throughout the summer, while our entertainment unit announced development deals for live-action feature films of beloved book series, including Caster™, Goosebumps®, Animorphs®, and The Magic School Bus®. While not reflected in our first quarter results, Dav Pilkey's Dog Man: Grime and Punishment, released on September 1st, is already the number one bestselling book overall in the U.S., Australia and Canada, and we are actively preparing for the important fall release of J.K. Rowling's first new children's book in thirteen years, The Ickabog®."
Mr. Robinson concluded, "Spurred by remote learning experiences last spring, the digital evolution in home and school education is accelerating, leading to increased sales and usage of our highly innovative and award-winning digital literacy programs, Literacy Pro™, Scholastic F.I.R.S.T. ® and W.O.R.D.™, as well as expanded adoption of the digital editions of our classroom magazines and our recently released Learn at Home for families with fun educational activities for 4-10 year olds. Sales also grew for flexible solutions like our take-home Grab and Go reading packs to prevent the 'slide' in the academic growth of young learners due to their extended period away from school. As we celebrate our 100th anniversary next month, we continue to innovate learning solutions which will meet the needs of millions of students, parents and teachers now and for years to come, while we reduce our cost base and strengthen our businesses to emerge from this crisis a nimble and more profitable company."
Revenues
First quarter revenue was
Income
Operating loss in the first quarter was
Net loss for the current period was
Capital Position and Liquidity
Net cash used in operating activities was
At quarter-end, the Company's cash and cash equivalents exceeded total debt by
Capital expenditures in the first quarter were
The Company also distributed
Overall Results
(In $ Millions)
First Quarter FY2021 | As Reported | One-Time Items | Ex. One-Times |
Earnings (loss) before taxes | $ (51.8) | $ (12.0) | $ (39.8) |
Interest (income) expense | 1.2 | - | 1.2 |
Depreciation and amortization | 16.4 | - | 16.4 |
Amortization of prepublication costs | 6.3 | - | 6.3 |
Adjusted EBITDA | $ (27.9) | $ (12.0) | $ (15.9) |
Net loss before taxes for the quarter ended August 31, 2020 was
Fiscal 2021 Outlook
The Company has substantially completed work on lowering its cost base by
Segment Results
All comparisons detailed in this section refer to operating results for the first quarter ended August 31, 2020 versus the first quarter ended August 31, 2019.
Children's Book Publishing and Distribution
In $ millions | First Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | ||||
Book Clubs | $ 5.8 | $ 8.0 | $ (2.2) | ( |
Book Fairs | 13.2 | 27.5 | (14.3) | ( |
Trade | 71.9 | 74.1 | (2.2) | ( |
Total revenue | 90.9 | 109.6 | (18.7) | ( |
Operating income / (loss) | (29.2) | (41.7) | 12.5 | |
Operating income / (loss), before one-time items* | (29.2) | (41.7) | 12.5 |
* Please refer to the non-GAAP financial tables attached |
First quarter segment revenues decreased
Education
In $ millions | First Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | $ 53.6 | $ 48.4 | $ 5.2 | |
Operating income / (loss) | (2.2) | (13.4) | 11.2 | |
Operating income / (loss), before one-time items* | (2.2) | (13.4) | 11.2 |
* Please refer to the non-GAAP financial tables attached |
For the current fiscal quarter, segment revenue was
International
In $ millions | First Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | $ 70.7 | $ 74.6 | $ (3.9) | ( |
Operating income / (loss) | 5.2 | (3.7) | 8.9 | * |
Operating income / (loss), before one-time items* | 6.2 | (3.7) | 9.9 | * |
* Please refer to the non-GAAP financial tables attached |
First quarter segment revenues were
Overhead
In $ millions | First Quarter | |||
2021 | 2020 | $ Change | % Change | |
Overhead expense | $ 30.8 | $ 28.6 | $ (2.2) | ( |
Overhead expense, excluding one-time items* | 19.8 | 24.3 | 4.5 |
* Please refer to the non-GAAP financial tables attached |
Corporate overhead for the first fiscal quarter was
Dividend
As previously announced, the Company's Board of Directors declared a quarterly cash dividend of
Additional Information
To supplement our financial statements presented in accordance with GAAP, we include certain non-GAAP calculations and presentations including, as noted above, "Adjusted EBITDA" and "Free Cash Use". Please refer to the non-GAAP financial tables attached to this press release for supporting details on one-time items and the use of non-GAAP financial measures included in this release. This information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
Investor Conference Call
The Company will hold a conference call to discuss its results at 4:30 p.m. ET today, September 24, 2020. Scholastic's Chairman, President and CEO, Richard Robinson, and Kenneth Cleary, the Company's Chief Financial Officer, will moderate the call.
The conference call and accompanying slides will be webcast and accessible through the Investor Relations section of Scholastic's website, www.scholastic.com. Participation by telephone will be available by dialing (877) 654-5161 from within the U.S. or +1 (678) 894-3064 internationally. Shortly following the call, an archived webcast and accompanying slides from the conference call will also be posted to the Company's investor relations webpage at www.investor.scholastic.com. An audio-only replay of the call will be available by dialing (855) 859-2056 from within the U.S. or +1 (404) 537-3406 internationally, and entering access code 8359084. The recording will be available through Friday, October 2, 2020.
About Scholastic
For 100 years, Scholastic Corporation (NASDAQ: SCHL) has been encouraging the personal and intellectual growth of all children, beginning with literacy. Having earned a reputation as a trusted partner to educators and families, Scholastic is the world's largest publisher and distributor of children's books, a leading provider of literacy curriculum, professional services, and classroom magazines, and a producer of educational and entertaining children's media. The Company creates and distributes bestselling books and e-books, print and technology-based learning programs for pre-K to grade 12, and other products and services that support children's learning and literacy, both in school and at home. With 15 international operations and exports to 165 countries, Scholastic makes quality, affordable books available to all children around the world through school-based book clubs and book fairs, classroom libraries, school and public libraries, retail, and online. Learn more at www.scholastic.com.
Forward-Looking Statements
This news release contains certain forward-looking statements relating to future periods. Such forward-looking statements are subject to various risks and uncertainties, including those arising from the continuing impact of COVID-19 related measures taken by governmental authorities or suppliers or customers which may curtail or otherwise adversely affect certain of the Company's business operations, and the conditions of the children's book and educational materials markets generally and acceptance of the Company's products within those markets, and other risks and factors identified from time to time in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated.
SCHL: Financial
Table 1 | |||||||
Scholastic Corporation | |||||||
Consolidated Statements of Operations | |||||||
(Unaudited) | |||||||
(In $ Millions, except per share data) | |||||||
THREE MONTHS ENDED | |||||||
08/31/20 | 08/31/19 | ||||||
Revenues | |||||||
Operating costs and expenses: | |||||||
Cost of goods sold | 123.2 | 137.1 | |||||
Selling, general and administrative expenses (1) | 132.1 | 165.9 | |||||
Bad debt expense | 1.4 | 1.6 | |||||
Depreciation and amortization | 15.5 | 15.4 | |||||
Total operating costs and expenses | 272.2 | 320.0 | |||||
Operating income (loss) | (57.0) | (87.4) | |||||
Interest income (expense), net | (1.2) | 0.7 | |||||
Other components of net periodic benefit (cost) | (0.2) | (0.4) | |||||
Gain (loss) on sale of assets and other (2) | 6.6 | - | |||||
Earnings (loss) before income taxes | (51.8) | (87.1) | |||||
Provision (benefit) for income taxes(3) | (12.0) | (28.6) | |||||
Net income (loss) | (39.8) | (58.5) | |||||
Less: Net income (loss) attributable to noncontrolling interests | 0.0 | 0.0 | |||||
Net income (loss) attributable to Scholastic Corporation | ( | ( | |||||
Basic and diluted earnings (loss) per share of Class A and Common Stock (4) | |||||||
Basic | ( | ( | |||||
Diluted | ( | ( | |||||
Basic weighted average shares outstanding | 34,258 | 34,871 | |||||
Diluted weighted average shares outstanding | 34,393 | 35,174 | |||||
(1) | In the three months ended August 31, 2020, the Company recognized pretax severance of | ||||||
(2) | In the three months ended August 31, 2020, the Company recognized pretax gain on the sale of its Danbury facility of | ||||||
(3) | In the three months ended August 31, 2020 and August 31, 2019, the Company recognized a benefit for income taxes in respect to one-time pretax charges of | ||||||
(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 | |||||||||
08/31/20 | 08/31/19 | Change | |||||||
Children's Book Publishing and Distribution | |||||||||
Revenues | |||||||||
Book Clubs | ( | ( | |||||||
Book Fairs | 13.2 | 27.5 | (14.3) | ( | |||||
Consolidated Trade | 71.9 | 74.1 | (2.2) | ( | |||||
Total revenues | 90.9 | 109.6 | (18.7) | ( | |||||
Operating income (loss) | (29.2) | (41.7) | 12.5 | ||||||
Operating margin | - | - | |||||||
Education | |||||||||
Revenues | 53.6 | 48.4 | 5.2 | ||||||
Operating income (loss) | (2.2) | (13.4) | 11.2 | ||||||
Operating margin | - | - | |||||||
International | |||||||||
Revenues | 70.7 | 74.6 | (3.9) | ( | |||||
Operating income (loss) | 5.2 | (3.7) | 8.9 | ||||||
Operating margin | - | ||||||||
Overhead expense | 30.8 | 28.6 | (2.2) | ( | |||||
Operating income (loss) | ( | ( | |||||||
Table 3 | |||||||
Scholastic Corporation | |||||||
Supplemental Information | |||||||
(Unaudited) | |||||||
(In $ Millions) | |||||||
Selected Balance Sheet Items | |||||||
08/31/20 | 08/31/19 | ||||||
Continuing Operations | |||||||
Cash and cash equivalents | |||||||
Accounts receivable, net | 219.6 | 226.1 | |||||
Inventories, net | 323.2 | 403.6 | |||||
Accounts payable | 168.3 | 226.4 | |||||
Accrued royalties | 56.2 | 63.3 | |||||
Lines of credit and current portion of long-term debt | 19.9 | 13.0 | |||||
Long-term debt | 200.0 | - | |||||
Total debt | 219.9 | 13.0 | |||||
Total finance lease liabilities | 11.8 | 11.1 | |||||
Net debt (1) | (135.6) | (186.4) | |||||
Total stockholders' equity | 1,147.4 | 1,196.7 | |||||
Selected Cash Flow Items | |||||||
THREE MONTHS ENDED | |||||||
08/31/20 | 08/31/19 | ||||||
Net cash provided by (used in) operating activities | ( | ( | |||||
Add: Net proceeds from sale of assets | 12.3 | 0.0 | |||||
Less: Additions to property, plant and equipment | 16.0 | 13.5 | |||||
Pre-publication expenditures | 5.2 | 7.4 | |||||
Free cash flow (use) (2) | ( | ( | |||||
(1) | Net debt is defined by the Company as lines of credit and short-term debt plus long-term-debt, net of cash and cash equivalents. 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. 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 | ||||||||||||
Consolidated Statements of Operations - Supplemental | ||||||||||||
Excluding One-Time Items | ||||||||||||
(Unaudited) | ||||||||||||
(In $ Millions, except per share data) | ||||||||||||
THREE MONTHS ENDED | ||||||||||||
Reported | One-time | Excluding | Reported | One-time | Excluding | |||||||
08/31/20 | items | One-time items | 08/31/19 | items | One-time items | |||||||
Revenues | ||||||||||||
Operating costs and expenses: | ||||||||||||
Cost of goods sold | 123.2 | - | 123.2 | 137.1 | - | 137.1 | ||||||
Selling, general and administrative expenses (1) | 132.1 | (12.0) | 120.1 | 165.9 | (4.3) | 161.6 | ||||||
Bad debt expense | 1.4 | - | 1.4 | 1.6 | - | 1.6 | ||||||
Depreciation and amortization | 15.5 | - | 15.5 | 15.4 | - | 15.4 | ||||||
Total operating costs and expenses | 272.2 | (12.0) | 260.2 | 320.0 | (4.3) | 315.7 | ||||||
Operating income (loss) | (57.0) | 12.0 | (45.0) | (87.4) | 4.3 | (83.1) | ||||||
Interest income (expense), net | (1.2) | - | (1.2) | 0.7 | - | 0.7 | ||||||
Other components of net periodic benefit (cost) | (0.2) | - | (0.2) | (0.4) | - | (0.4) | ||||||
Gain (loss) on sale of assets and other (2) | 6.6 | - | 6.6 | - | - | - | ||||||
Earnings (loss) before income taxes | (51.8) | 12.0 | (39.8) | (87.1) | 4.3 | (82.8) | ||||||
Provision (benefit) for income taxes(3) | (12.0) | 3.1 | (8.9) | (28.6) | 1.2 | (27.4) | ||||||
Net income (loss) | (39.8) | 8.9 | (30.9) | (58.5) | 3.1 | (55.4) | ||||||
Less: Net income (loss) attributable to noncontrolling interests | 0.0 | - | 0.0 | 0.0 | - | 0.0 | ||||||
Net income (loss) attributable to Scholastic Corporation | ( | ( | ( | ( | ||||||||
Diluted earnings (loss) per share | ( | ( | ( | ( | ||||||||
(1) | In the three months ended August 31, 2020, the Company recognized pretax severance of | |||||||||||
(2) | In the three months ended August 31, 2020, the Company recognized pretax gain on the sale of its Danbury facility of | |||||||||||
(3) | In the three months ended August 31, 2020 and August 31, 2019, the Company recognized a benefit for income taxes in respect to one-time pretax charges of | |||||||||||
Table 5 | ||||||||||
Scholastic Corporation | ||||||||||
Consolidated Statements of Operations - Supplemental | ||||||||||
Adjusted EBITDA | ||||||||||
(Unaudited) | ||||||||||
(In $ Millions) | ||||||||||
THREE MONTHS ENDED | ||||||||||
08/31/20 | 08/31/19 | |||||||||
Earnings (loss) before income taxes as reported | ( | ( | ||||||||
One-time items before income taxes | 12.0 | 4.3 | ||||||||
Earnings (loss) before income taxes excluding one-time items | (39.8) | (82.8) | ||||||||
Interest (income) expense | 1.2 | (0.7) | ||||||||
Depreciation and amortization(1) | 16.4 | 16.1 | ||||||||
Amortization of prepublication costs | 6.3 | 6.4 | ||||||||
Adjusted EBITDA(2) | ( | ( | ||||||||
(1) | For the three months ended August 31, 2020 and August 31, 2019, amounts include depreciation of | |||||||||
(2) | 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 | ||||||||||||||
Segment Results - Supplemental | ||||||||||||||
Excluding One-Time Items | ||||||||||||||
(Unaudited) | ||||||||||||||
(In $ Millions) | ||||||||||||||
THREE MONTHS ENDED | ||||||||||||||
Reported | One-time | Excluding | Reported | One-time | Excluding | |||||||||
08/31/20 | items | One-time items | 08/31/19 | items | One-time items | |||||||||
Children's Book Publishing and Distribution | ||||||||||||||
Revenues | ||||||||||||||
Book Clubs | ||||||||||||||
Book Fairs | 13.2 | 13.2 | 27.5 | 27.5 | ||||||||||
Consolidated Trade | 71.9 | 71.9 | 74.1 | 74.1 | ||||||||||
Total Revenues | 90.9 | 90.9 | 109.6 | 109.6 | ||||||||||
Operating income (loss) | (29.2) | - | (29.2) | (41.7) | - | (41.7) | ||||||||
Operating margin | - | - | - | - | ||||||||||
Education | ||||||||||||||
Revenues | 53.6 | 53.6 | 48.4 | 48.4 | ||||||||||
Operating income (loss) | (2.2) | - | (2.2) | (13.4) | - | (13.4) | ||||||||
Operating margin | - | - | - | - | ||||||||||
International | ||||||||||||||
Revenues | 70.7 | 70.7 | 74.6 | 74.6 | ||||||||||
Operating income (loss) (1) | 5.2 | 1.0 | 6.2 | (3.7) | - | (3.7) | ||||||||
Operating margin | - | - | ||||||||||||
Overhead expense (2) | 30.8 | (11.0) | 19.8 | 28.6 | (4.3) | 24.3 | ||||||||
Operating income (loss) | ( | ( | ( | ( | ||||||||||
(1) | In the three months ended August 31, 2020, the Company recognized pretax severance of | |||||||||||||
(2) | In the three months ended August 31, 2020, the Company recognized pretax severance of | |||||||||||||
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SOURCE Scholastic Corporation