Scholastic Reports Fiscal 2024 First Quarter Results
- Over $42M returned to shareholders in the quarter
- Affirming fiscal 2024 guidance
- Revenues decreased 13% to $228.5 million
- Operating loss increased 71% to $99.1 million
- Book Fairs revenues decreased 4%
- Book Clubs revenues decreased 59%
- Trade revenues decreased 19%
- Education Solutions revenues decreased 10%
- International revenues decreased 12%
The Company Affirms Fiscal 2024 Guidance
Over
Peter
"We have a strong plan for Book Fairs this year, building on the successful strategies that have transformed this business over the past two years. Applying that learning, we are also strategically transitioning Book Clubs to a smaller, more profitable core supporting future growth in School Reading Events. In our Trade division last quarter, we had multiple frontlist bestsellers, including This Winter by Alice Oseman, The Bad Guys® #17 in Let the Games Begin! by Aaron Blabey, The Official Harry Potter Cookbook and The Ballad of Songbirds and Snakes in paperback. These helped partly offset lower backlist sales, reflective of the overall retail bookselling market, which continued to revert to pre-pandemic sales levels. Looking ahead at the fall and spring, we are excited about new Dog Man, Cat Kid Comic Club, and Heartstopper titles, among others, plus the release of The Harry Potter Wizarding Almanac. We also expect the release of the new Goosebumps® TV series on Disney+® and Hulu® to introduce our beloved book series to a new generation of readers.
"In Education Solutions, we continued investing to build capabilities and to focus the organization around executing our blended learning strategy under new leadership. First quarter sales were lower year-over-year, as expected, reflecting the shifting seasonality of this business and the timing of revenues from state-sponsored programs. We remain positive about the remainder of the year and this compelling long-term growth opportunity, which builds on Scholastic's literacy-focused mission, strong position in schools and industry-leading literacy and reading offerings.
"Looking ahead, we're excited about fiscal 2024 and are affirming guidance. As it has for over a century, the back-to-school season represents another opportunity for Scholastic to help address the critical need for literacy, reading and stories, as we advance our strategy for growth, impact and shareholder value creation."
Fiscal 2024 Q1 Review
In $ millions | First Quarter | Change | |||||||
Fiscal 2024 | Fiscal 2023 | $ | % | ||||||
Revenues | $ | 228.5 | $ | 262.9 | $ | (34.4) | (13) % | ||
Operating income (loss) | $ | (99.1) | $ | (58.1) | $ | (41.0) | (71) % | ||
Earnings (loss) before taxes | $ | (98.0) | $ | (57.9) | $ | (40.1) | (69) % | ||
Operating income (loss), ex. one-time items * | $ | (92.8) | $ | (58.1) | $ | (34.7) | (60) % | ||
Earnings (loss) ex. one-times * | $ | (91.7) | $ | (57.9) | $ | (33.8) | (58) % | ||
Adjusted EBITDA * | $ | (70.6) | $ | (35.6) | $ | (35.0) | (98) % | ||
* Please refer to the non-GAAP financial tables attached |
Revenues decreased
Operating loss was
Quarterly Results
Children's Book Publishing and Distribution
In the fiscal first quarter, the Children's Book Publishing and Distribution segment's revenues decreased
- Book Fairs revenues were
, down$27.3 million 4% from the prior year period, primarily due to lower Scholastic Dollar redemptions. Fairs activity is minimal during the first quarter based on the seasonality of the business. We expect participation at our in-person book fairs to remain strong in fiscal 2024, with fair count on track to reach approximately90% of pre-pandemic levels. - Book Clubs revenues were
, as Clubs activity is seasonally quiet during the summer months, down$2.6 million 59% from the prior year. The Company combined theU.S. -based Book Clubs and Book Fairs businesses into an integrated School Reading Events business effective June 1, 2023. As part of the integration, Book Clubs underwent a successful organizational optimization this quarter, which is expected to create synergies and improved efficiencies. - Trade revenues were
, a decline of$72.9 million 19% from the prior year primarily due to continued softness in the retail market, which impacted sales, partly offset by revenues from frontlist bestsellers. Fiscal 2024 revenues are expected to benefit from new fall releases, including the latest in Dav Pilkey's Cat Kid Comic Club® series and the interactive MinaLima edition of Harry Potter and the Prisoner of Azkaban, as well as the release of the Goosebumps TV series on Disney+ and Hulu.
Segment operating loss was
Education Solutions
Education Solutions revenues decreased
Segment operating loss was
International
International revenues decreased
Operating loss was
Overhead
Overhead costs were
Capital Position and Liquidity
In $ millions | First Quarter | Change | |||||||
Fiscal 2024 | Fiscal 2023 | $ | % | ||||||
Net cash (used) provided by operating activities | $ | (38.1) | $ | (60.3) | $ | 22.2 | 37 % | ||
Additions to property, plant and equipment and | (19.7) | (16.2) | 3.5 | 22 % | |||||
Free cash flow (use)* | $ | (57.8) | $ | (76.5) | $ | 18.7 | 24 % | ||
Net cash (debt)* | $ | 119.9 | $ | 233.4 | $ | (113.5) | (49) % | ||
* Please refer to the non-GAAP financial tables attached |
Net cash used by operating activities decreased
The Company distributed
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 Flow". Please refer to the non-GAAP financial tables 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.
Conference Call
The Company will hold a conference call to discuss its results at 4:30 p.m. ET today, September 21, 2023. Peter
The conference call and accompanying slides will be webcast and accessible through the Investor Relations section of Scholastic's website, www.investor.scholastic.com. To access the conference call by phone, please go to this link (registration link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. Shortly following the call, an archived webcast and accompanying slides from the conference call will also be posted at investor.scholastic.com.
About Scholastic
For more than 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 international operations and exports in more than 135 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 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 shares and per share data) | ||||
Three months ended | ||||
08/31/23 | 08/31/22 | |||
Revenues | $ | 228.5 | $ | 262.9 |
Operating costs and expenses: | ||||
Cost of goods sold | 130.0 | 144.5 | ||
Selling, general and administrative expenses (1) | 184.2 | 162.8 | ||
Depreciation and amortization | 13.4 | 13.7 | ||
Total operating costs and expenses | 327.6 | 321.0 | ||
Operating income (loss) | (99.1) | (58.1) | ||
Interest income (expense), net | 1.4 | 0.2 | ||
Other components of net periodic benefit (cost) | (0.3) | 0.0 | ||
Earnings (loss) before income taxes | (98.0) | (57.9) | ||
Provision (benefit) for income taxes (2) | (23.8) | (12.5) | ||
Net income (loss) | (74.2) | (45.4) | ||
Less: Net income (loss) attributable to noncontrolling interest | — | 0.1 | ||
Net income (loss) attributable to Scholastic Corporation | $ | (74.2) | $ | (45.5) |
Basic and diluted earnings (loss) per share of Class A and Common Stock (3) | ||||
Basic | $ | (2.35) | $ | (1.33) |
Diluted | $ | (2.35) | $ | (1.33) |
Basic weighted average shares outstanding | 31,564 | 34,292 | ||
Diluted weighted average shares outstanding | 32,604 | 35,363 | ||
(1) In the three months ended August 31, 2023, the Company recognized pretax severance of | ||||
(2) In the three months ended August 31, 2023, the Company recognized a benefit of | ||||
(3) Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding. Recalculating earnings per share based |
Table 2 | |||||||
Scholastic Corporation | |||||||
Segment Results | |||||||
(Unaudited) | |||||||
(In $ Millions) | |||||||
Three months ended | Change | ||||||
08/31/23 | 08/31/22 | $ | % | ||||
Children's Book Publishing and Distribution | |||||||
Revenues | |||||||
Books Clubs | $ | 2.6 | $ | 6.3 | $ | (3.7) | (59) % |
Book Fairs | 27.3 | 28.3 | (1.0) | (4) % | |||
School Reading Events | 29.9 | 34.6 | (4.7) | (14) % | |||
Consolidated Trade | 72.9 | 90.1 | (17.2) | (19) % | |||
Total Revenues | 102.8 | 124.7 | (21.9) | (18) % | |||
Operating income (loss) | (41.5) | (30.1) | (11.4) | (38) % | |||
Education Solutions | |||||||
Revenues | 66.0 | 73.2 | (7.2) | (10) % | |||
Operating income (loss) | (18.7) | (4.3) | (14.4) | NM | |||
International | |||||||
Revenues | 57.2 | 65.0 | (7.8) | (12) % | |||
Operating income (loss) | (8.2) | (3.5) | (4.7) | (134) % | |||
Overhead | |||||||
Operating income (loss) | (30.7) | (20.2) | (10.5) | (52) % | |||
Operating income (loss) | $ | (99.1) | $ | (58.1) | $ | (41.0) | (71) % |
Table 3 | ||||
Scholastic Corporation | ||||
Supplemental Information | ||||
(Unaudited) | ||||
(In $ Millions) | ||||
Selected Balance Sheet Items | ||||
08/31/23 | 08/31/22 | |||
Cash and cash equivalents | $ | 125.8 | $ | 239.7 |
Accounts receivable, net | 201.9 | 242.9 | ||
Inventories, net | 353.2 | 379.1 | ||
Accounts payable | 167.7 | 208.9 | ||
Deferred revenue | 171.1 | 182.6 | ||
Accrued royalties | 72.0 | 85.0 | ||
Lines of credit and current portion of long-term debt | 5.9 | 6.3 | ||
Long-term debt | — | — | ||
Total debt | 5.9 | 6.3 | ||
Net cash (debt) (1) | 119.9 | 233.4 | ||
Total stockholders' equity | 1,054.6 | 1,166.3 | ||
Selected Cash Flow Items | ||||
Three months ended | ||||
08/31/23 | 08/31/22 | |||
Net cash provided by (used in) operating activities | $ | (38.1) | $ | (60.3) |
Less: | ||||
Additions to property, plant and equipment | 14.3 | 11.4 | ||
Prepublication expenditures | 5.4 | 4.8 | ||
Free cash flow (use) (2) | $ | (57.8) | $ | (76.5) |
(1) Net cash (debt) is defined by the Company as cash and cash equivalents, net of lines of credit and short-term debt plus long-term-debt. | ||||
(2) Free cash flow (use) is defined by the Company as net cash provided by or used in operating activities (which includes royalty advances) |
Table 4 | |||||||||||||||||
Scholastic Corporation | |||||||||||||||||
Supplemental Results | |||||||||||||||||
Excluding One-Time Items | |||||||||||||||||
(Unaudited) | |||||||||||||||||
(In $ Millions, except per share data) | |||||||||||||||||
Three months ended | |||||||||||||||||
08/31/2023 | 08/31/2022 | ||||||||||||||||
Reported | One-time | Excluding | Reported | One-time | Excluding | ||||||||||||
Diluted earnings (loss) per share (1) | $ | (2.35) | $ | 0.15 | $ | (2.20) | $ | (1.33) | $ | — | $ | (1.33) | |||||
Net income (loss) (2) | $ | (74.2) | $ | 4.7 | $ | (69.5) | $ | (45.5) | $ | — | $ | (45.5) | |||||
Earnings (loss) before income taxes | $ | (98.0) | $ | 6.3 | $ | (91.7) | $ | (57.9) | $ | — | $ | (57.9) | |||||
Children's Book Publishing and Distribution | $ | (41.5) | $ | — | $ | (41.5) | $ | (30.1) | $ | — | $ | (30.1) | |||||
Education Solutions | (18.7) | — | (18.7) | (4.3) | — | (4.3) | |||||||||||
International (3) | (8.2) | 1.2 | (7.0) | (3.5) | — | (3.5) | |||||||||||
Overhead (4) | (30.7) | 5.1 | (25.6) | (20.2) | — | (20.2) | |||||||||||
Operating income (loss) | $ | (99.1) | $ | 6.3 | $ | (92.8) | $ | (58.1) | $ | — | $ | (58.1) | |||||
(1) Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding. Recalculating earnings per share based | |||||||||||||||||
(2) In the three months ended August 31, 2023, the Company recognized a benefit of | |||||||||||||||||
(3) In the three months ended August 31, 2023, the Company recognized pretax severance of | |||||||||||||||||
(4) In the three months ended August 31, 2023, the Company recognized pretax severance of |
Table 5 | ||||||
Scholastic Corporation | ||||||
Consolidated Statements of Operations - Supplemental | ||||||
Adjusted EBITDA | ||||||
(Unaudited) | ||||||
(In $ Millions) | ||||||
Three months ended | ||||||
08/31/23 | 08/31/22 | |||||
Earnings (loss) before income taxes as reported | $ | (98.0) | $ | (57.9) | ||
One-time items before income taxes | 6.3 | — | ||||
Earnings (loss) before income taxes excluding one-time items | (91.7) | (57.9) | ||||
Interest (income) expense | (1.4) | (0.2) | ||||
Depreciation and amortization (1) | 15.8 | 16.2 | ||||
Amortization of prepublication costs | 6.7 | 6.3 | ||||
Adjusted EBITDA (2) | $ | (70.6) | $ | (35.6) | ||
(1) For the three months ended August 31, 2023 and August 31, 2022, amounts include depreciation of | ||||||
(2) Adjusted EBITDA is defined by the Company as earnings (loss), excluding one-time items, before interest, taxes, depreciation and |
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SOURCE Scholastic Corporation