Scholastic Reports Fiscal 2021 Third Quarter Results
Scholastic Corporation (NASDAQ: SCHL) reported financial results for the fiscal third quarter ending February 28, 2021, revealing a revenue decline of 26% to $277.5 million compared to $373.3 million in the previous year, mainly due to reduced sales in school book fairs amid ongoing COVID-19 restrictions. Despite the revenue drop, the operating loss improved to $24.2 million from $60.0 million year-over-year, aided by cost-reduction efforts. Net loss decreased by 68% to $13.9 million. Notably, the company's trade publishing segment thrived, showcasing strong growth in bestselling titles.
- Operating loss improved by 60% year-over-year to $24.2 million.
- Trade publishing segment revenue increased by 3%, driven by bestsellers.
- Successfully achieved $100 million in cost savings.
- Revenue declined by 26%, primarily due to lower school book fair sales.
- Operating loss of $24.2 million, although improved, still indicates challenges.
NEW YORK, March 18, 2021 /PRNewswire/ -- Scholastic Corporation (NASDAQ: SCHL), the global children's publishing, education and media company, today reported financial results for the Company's fiscal third quarter ended February 28, 2021. The third quarter is a seasonally lower revenue quarter for the Company in which it typically records a loss. School book fairs revenues declined in the quarter, as many schools were still operating in remote or hybrid mode. The impact on operating income from this revenue shortfall was offset by the continued effect of the Company's cost reduction program, resulting in a year-over-year improvement in the Company's quarterly operating loss, both before and after one-time items.
Fiscal Third Quarter 2021 Review
(In $ Millions) | ||||
Third Quarter | Variance | |||
FY 2021 | FY 2020 | $ | % | |
Revenues | ( | ( | ||
Operating income (loss) | (24.2) | (60.0) | 35.8 | |
One-time items | 12.3 | 43.2 | (30.9) | ( |
Operating income (loss), | (11.9) | (16.8) | 4.9 |
* Please refer to the non-GAAP financial tables attached |
Chairman's Commentary
"Getting kids back into school is now a clear national priority and we are experiencing growth in spring fair bookings as more districts offer in-person learning. We are seeing expanded opportunities in all of Scholastic's channels for summer reading, helped by the urgency of parents and educators to accelerate the reading growth of their children. In addition, significant federal stimulus dollars will be supporting K-12 education," said Richard Robinson, Chairman, President and Chief Executive Officer. "These trends support our confidence in a strong recovery for our school-related businesses in our coming fiscal year."
Mr. Robinson continued, "Although school book fairs revenues declined in the quarter, as expected, our trade, teaching resources and digital education businesses continue to perform extremely well. Scholastic's trade group was recently cited as 'untouchable' by Publishers Weekly as evidenced by our top position in their children's fiction bestseller list for 2020, where we held nearly
Mr. Robinson concluded, "We have successfully delivered on our committed
Revenues
Third quarter revenue was
Income
Operating loss in the third quarter was
Net loss for the current period was
Capital Position and Liquidity
Net cash provided by operating activities was
At quarter-end, the Company's cash and cash equivalents exceeded total debt by
Capital expenditures in the third quarter were
The Company also distributed
Overall Results – Third Quarter
(In $ Millions) | ||||
Third Quarter | FY2021 | FY2020 | ||
As Reported | One-Time Items | Ex. One-Times | Ex. One-Times | |
Earnings (loss) before taxes | ( | ( | ( | |
Interest (income) expense | 1.7 | - | 1.7 | (0.3) |
Depreciation and amortization | 15.9 | - | 15.9 | 16.1 |
Amortization of prepublication costs | 6.3 | - | 6.3 | 6.7 |
Adjusted EBITDA |
Loss before taxes for the quarter ended February 28, 2021 was
Fiscal 2021 Outlook
Scholastic sees increasing opportunities to help students returning to the classroom with its rich and diverse print and digital content, deep market penetration and a capacity through our school-based fair and club channels and curriculum services to help students read and learn. However, given continued COVID-related uncertainty, Scholastic is not providing a financial outlook for the remainder of its 2021 fiscal year.
With more schools resuming in-person instruction, the Company's augmented marketing efforts are driving an increase in spring fair bookings, although on-going COVID challenges will nevertheless have an impact on book fairs' results. The Company expects that its new summer reading campaigns in clubs, fairs and education, with programs and offers to help students accelerate their learning, will have a favorable impact on the Company's fourth quarter revenues. Additionally, Scholastic's trade spring frontlist features the next titles from a number of the Company's top-selling properties and authors, including Dav Pilkey and Wings of Fire™ author, Tui T. Sutherland.
Segment Results
All comparisons detailed in this section refer to operating results for the third quarter ended February 28, 2021 versus the third quarter ended February 29, 2020.
Children's Book Publishing and Distribution
In $ millions | Third Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | ||||
Book Clubs | $ 35.0 | $ 43.4 | $ (8.4) | ( |
Book Fairs | 27.0 | 100.1 | (73.1) | ( |
Trade | 79.3 | 76.7 | 2.6 | |
Total revenue | 141.3 | 220.2 | (78.9) | ( |
Operating income / (loss) | (6.6) | 2.2 | (8.8) | nm |
Operating income / (loss), before one-time items* | (3.7) | 2.2 | (5.9) | nm |
* Please refer to the non-GAAP financial tables attached |
Third quarter segment revenues fell
Education
In $ millions | Third Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | $ 66.3 | $ 74.3 | $ (8.0) | ( |
Operating income / (loss) | 10.1 | 9.8 | 0.3 |
For the current fiscal quarter, segment revenue was
International
In $ millions | Third Quarter | |||
2021 | 2020 | $ Change | % Change | |
Revenue | $ 69.9 | $ 78.8 | $ (8.9) | ( |
Operating income / (loss) | (1.1) | (3.7) | 2.6 | |
Operating income / (loss), before one-time items* | (0.9) | (3.7) | 2.8 |
* Please refer to the non-GAAP financial tables attached |
Third quarter segment revenues were
Overhead
In $ millions | Third Quarter | |||
2021 | 2020 | $ Change | % Change | |
Overhead expense | $ 26.6 | $ 68.3 | $ 41.7 | |
Overhead expense, excluding one-time items* | 17.4 | 25.1 | 7.7 |
* Please refer to the non-GAAP financial tables attached |
Corporate overhead for the third fiscal quarter was
Fiscal Year-To-Date 2021 Review
(In $ Millions) | ||||
Year-To-Date | Variance | |||
FY 2021 | FY 2020 | $ | % | |
Revenues | ( | ( | ||
Operating income (loss) | (32.4) | (42.3) | 9.9 | |
One-time items | 29.8 | 49.4 | (19.6) | ( |
Operating income (loss), excluding one-time items* | (2.6) | 7.1 | (9.7) | ( |
* Please refer to the non-GAAP financial tables attached |
Year-to-Date Results
For the first nine months of fiscal 2021, revenue was
Adjusted EBITDA (as defined) for the third fiscal quarter of 2021 was a gain of
Net cash provided by operating activities 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 table attached to this press release for supporting details on the impact of one-time items on operating income, net income and diluted EPS, 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, March 18, 2021. 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 4453507. The recording will be available through Friday, March 26, 2021.
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, school administrators, 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.
Table 1 | |||||||||||
Scholastic Corporation | |||||||||||
Consolidated Statements of Operations | |||||||||||
(Unaudited) | |||||||||||
(In $ Millions, except per share data) | |||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
02/28/21 | 02/29/20 | 02/28/21 | 02/29/20 | ||||||||
Revenues | |||||||||||
Operating costs and expenses: | |||||||||||
Cost of goods sold | 146.0 | 183.0 | 468.5 | 584.4 | |||||||
Selling, general and administrative expenses (1) | 130.1 | 194.9 | 405.9 | 574.8 | |||||||
Depreciation and amortization | 14.7 | 15.4 | 46.0 | 46.2 | |||||||
Asset impairments and write downs (2) | 10.9 | 40.0 | 10.9 | 40.0 | |||||||
Total operating costs and expenses | 301.7 | 433.3 | 931.3 | 1,245.4 | |||||||
Operating income (loss) | (24.2) | (60.0) | (32.4) | (42.3) | |||||||
Interest income (expense), net | (1.7) | 0.3 | (4.1) | 1.0 | |||||||
Other components of net periodic benefit (cost) | 0.1 | (0.4) | (0.1) | (1.0) | |||||||
Gain (loss) on sale of assets and other (3) | 3.8 | - | 10.4 | - | |||||||
Earnings (loss) before income taxes | (22.0) | (60.1) | (26.2) | (42.3) | |||||||
Provision (benefit) for income taxes(4) | (8.0) | (16.8) | (7.6) | (11.6) | |||||||
Net income (loss) | (14.0) | (43.3) | (18.6) | (30.7) | |||||||
Less: Net income (loss) attributable to noncontrolling interest | (0.1) | 0.0 | 0.0 | 0.1 | |||||||
Net income (loss) attributable to Scholastic Corporation | ( | ( | ( | ( | |||||||
Basic and diluted earnings (loss) per share of Class A and Common Stock (5) | |||||||||||
Basic | ( | ( | ( | ( | |||||||
Diluted | ( | ( | ( | ( | |||||||
Basic weighted average shares outstanding | 34,348 | 34,544 | 34,316 | 34,750 | |||||||
Diluted weighted average shares outstanding | 34,687 | 34,842 | 34,490 | 35,049 | |||||||
(1) | In the three and nine months ended February 28, 2021, the Company recognized pretax severance of | ||||||||||
(2) | In the three and nine months ended February 28, 2021, the Company recognized pretax asset impairments of | ||||||||||
(3) | In the three and nine months ended February 28, 2021, the Company recognized pretax gain on the sale of its UK distribution center located in Southam of | ||||||||||
(4) | In the three and nine months ended February 28, 2021, the Company recognized a benefit for income taxes in respect to one-time pretax charges of | ||||||||||
(5) | 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 | NINE MONTHS ENDED | |||||||||||||
02/28/21 | 02/29/20 | Change | 02/28/21 | 02/29/20 | Change | |||||||||
Children's Book Publishing and Distribution | ||||||||||||||
Revenues | ||||||||||||||
Book Clubs | ( | ( | ( | ( | ||||||||||
Book Fairs | 27.0 | 100.1 | (73.1) | ( | 87.9 | 351.7 | (263.8) | ( | ||||||
Consolidated Trade | 79.3 | 76.7 | 2.6 | 276.9 | 254.4 | 22.5 | ||||||||
Total revenues | 141.3 | 220.2 | (78.9) | ( | 472.5 | 743.4 | (270.9) | ( | ||||||
Operating income (loss) | (6.6) | 2.2 | (8.8) | nm | 1.9 | 70.1 | (68.2) | ( | ||||||
Operating margin | - | |||||||||||||
Education | ||||||||||||||
Revenues | 66.3 | 74.3 | (8.0) | ( | 187.4 | 192.6 | (5.2) | ( | ||||||
Operating income (loss) | 10.1 | 9.8 | 0.3 | 19.8 | 2.6 | 17.2 | nm | |||||||
Operating margin | ||||||||||||||
International | ||||||||||||||
Revenues | 69.9 | 78.8 | (8.9) | ( | 239.0 | 267.1 | (28.1) | ( | ||||||
Operating income (loss) | (1.1) | (3.7) | 2.6 | 23.3 | 4.3 | 19.0 | nm | |||||||
Operating margin | - | - | ||||||||||||
Overhead expense | 26.6 | 68.3 | 41.7 | 77.4 | 119.3 | 41.9 | ||||||||
Operating income (loss) | ( | ( | ( | ( | ||||||||||
Table 3 | ||||||||||
Scholastic Corporation | ||||||||||
Supplemental Information | ||||||||||
(Unaudited) | ||||||||||
(In $ Millions) | ||||||||||
Selected Balance Sheet Items | ||||||||||
02/28/21 | 02/29/20 | |||||||||
Continuing Operations | ||||||||||
Cash and cash equivalents | ||||||||||
Accounts receivable, net | 238.0 | 281.2 | ||||||||
Inventories, net | 304.8 | 307.7 | ||||||||
Accounts payable | 134.3 | 187.9 | ||||||||
Accrued royalties | 77.6 | 77.3 | ||||||||
Lines of credit and current portion of long-term debt | 190.7 | 9.7 | ||||||||
Long-term debt | - | 6.4 | ||||||||
Total debt | 190.7 | 16.1 | ||||||||
Net debt (cash) (1) | (162.5) | (247.7) | ||||||||
Total stockholders' equity | 1,176.8 | 1,199.3 | ||||||||
Selected Cash Flow Items | ||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||
02/28/21 | 02/29/20 | 02/28/21 | 02/29/20 | |||||||
Net cash provided by (used in) operating activities | ||||||||||
Add: Net proceeds from sale of assets | 5.1 | 0.0 | 17.4 | 0.0 | ||||||
Less: Additions to property, plant and equipment | 10.9 | 17.7 | 37.1 | 48.4 | ||||||
Prepublication expenditures | 5.1 | 7.1 | 15.3 | 21.5 | ||||||
Free cash flow (use) (2) | ( | |||||||||
(1) | Net debt (cash) 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 | ||||||||||||||
Supplemental Results | ||||||||||||||
Excluding One-Time Items | ||||||||||||||
(Unaudited) | ||||||||||||||
(In $ Millions) | ||||||||||||||
THREE MONTHS ENDED | ||||||||||||||
Reported | One-time | Excluding | Reported | One-time | Excluding | |||||||||
02/28/21 | items | One-time items | 02/29/20 | items | One-time items | |||||||||
Diluted earnings (loss) per share (1) | ( | ( | ( | ( | ||||||||||
Net income (loss) (2) | ( | ( | ( | ( | ||||||||||
Children's Book Publishing and Distribution(3) | ( | ( | ||||||||||||
Education | 10.1 | - | 10.1 | 9.8 | - | 9.8 | ||||||||
International(4) | (1.1) | 0.2 | (0.9) | (3.7) | - | (3.7) | ||||||||
Overhead(5) | (26.6) | 9.2 | (17.4) | (68.3) | 43.2 | (25.1) | ||||||||
Operating income (loss) | ( | ( | ( | ( | ||||||||||
NINE MONTHS ENDED | ||||||||||||||
Reported | One-time | Excluding | Reported | One-time | Excluding | |||||||||
02/28/21 | items | One-time items | 02/29/20 | items | One-time items | |||||||||
Diluted earnings (loss) per share (1) | ( | ( | ||||||||||||
Net income (loss) (2) | ( | ( | ||||||||||||
Children's Book Publishing and Distribution(3) | ||||||||||||||
Education | 19.8 | - | 19.8 | 2.6 | - | 2.6 | ||||||||
International(4) | 23.3 | 2.8 | 26.1 | 4.3 | - | 4.3 | ||||||||
Overhead(5) | (77.4) | 24.1 | (53.3) | (119.3) | 49.4 | (69.9) | ||||||||
Operating income (loss) | ( | ( | ( | |||||||||||
(1) | 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. | |||||||||||||
(2) | In the three and nine months ended February 28, 2021, the Company recognized a benefit for income taxes in respect to one-time pretax charges of | |||||||||||||
(3) | In the three and nine months ended February 28, 2021, the Company recognized pretax asset impairment of | |||||||||||||
(4) | In the three and nine months ended February 28, 2021, the Company recognized pretax severance of | |||||||||||||
(5) | In the three and nine months ended February 28, 2021, the Company recognized pretax severance of | |||||||||||||
Table 5 | ||||||||||
Scholastic Corporation | ||||||||||
Consolidated Statements of Operations - Supplemental | ||||||||||
Adjusted EBITDA | ||||||||||
(Unaudited) | ||||||||||
(In $ Millions) | ||||||||||
THREE MONTHS ENDED | ||||||||||
02/28/21 | 02/29/20 | |||||||||
Earnings (loss) before income taxes as reported | ( | ( | ||||||||
One-time items before income taxes | 12.3 | 43.2 | ||||||||
Earnings (loss) before income taxes excluding one-time items | (9.7) | (16.9) | ||||||||
Interest (income) expense | 1.7 | (0.3) | ||||||||
Depreciation and amortization(1) | 15.9 | 16.1 | ||||||||
Amortization of prepublication costs | 6.3 | 6.7 | ||||||||
Adjusted EBITDA(2) | ||||||||||
NINE MONTHS ENDED | ||||||||||
02/28/21 | 02/29/20 | |||||||||
Earnings (loss) before income taxes as reported | ( | ( | ||||||||
One-time items before income taxes | 29.8 | 49.4 | ||||||||
Earnings (loss) before income taxes excluding one-time items | 3.6 | 7.1 | ||||||||
Interest (income) expense | 4.1 | (1.0) | ||||||||
Depreciation and amortization(1) | 49.3 | 48.1 | ||||||||
Amortization of prepublication costs | 19.0 | 19.7 | ||||||||
Adjusted EBITDA(2) | ||||||||||
(1) | For the three and nine months ended February 28, 2021, 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. | |||||||||
SCHL: Financial
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SOURCE Scholastic Corporation
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