Scholastic (SCHL) Q4 Earnings call transcript Jul 18, 2024

In a recent earnings call, Scholastic, a leading global publisher and distributor of children's books, provided insights into its financial performance and strategic initiatives for the fiscal year 2024. The call, led by CEO Peter Warwick and CFO Haji Glover, shed light on the company's resilience amid market challenges and its strategic investments to drive long-term growth.

Strategic Investments and Market Headwinds

Scholastic reported a decline in its fourth-quarter revenue by 10%, marking a stark contrast to the strong performance in the same period last year. This decline was attributed to the increasing pressure on spending affecting the Education Solutions and School Reading Events businesses. Despite these challenges, Scholastic's adjusted operating income stood at $67 million, down from the previous year's record of $92 million.

In response to these headwinds, Scholastic has taken steps to manage expenses and maintain spending on long-term opportunities. For fiscal 2024, adjusted EBITDA was $137 million, a significant decrease from the previous year's $196 million. However, the company managed to generate strong free cash flow of $73 million, exceeding its revised outlook of $55 million to $65 million.

Navigating Market Challenges with Strategic Investments

Scholastic's strategic investment in 9 Story Media Group, a significant move to expand its reach in children's media, was a notable highlight. The acquisition of a 100% economic interest in 9 Story has significantly enhanced Scholastic's ability to reach more children and participate in the full life cycle of its franchises and IP. With the integration of 9 Story into Scholastic Entertainment, the company is poised to leverage its trusted brand and publishing IP across print, screens, and merchandising.

In the Education Solutions segment, Scholastic continues to invest in long-term growth opportunities despite current market challenges. The company has launched a new product plan, focusing on aligning its offerings with the science of reading and anticipating a cyclical return of spending on supplemental products in the future.

Expanding Reach and Engagement

Scholastic's commitment to capital allocation was evident in its return of over $181 million to shareholders through dividends and share repurchases. The company also announced a strategic investment of $182 million in 9 Story Media Group, highlighting its focus on long-term value creation.

Looking Ahead

For fiscal 2025, Scholastic is targeting modest growth in revenue and adjusted EBITDA, including the benefit of its strategic investment in 9 Story. The company is also focusing on expanding its reach through digital channels, leveraging its trusted brand and distribution infrastructure to meet the growing need for children's books and media.

In conclusion, Scholastic's earnings call underscores the company's resilience in navigating market challenges while investing in long-term growth opportunities. With a strategic focus on expanding its reach in children's media and building on its trusted brand, Scholastic is well-positioned to meet the evolving needs of children and families in the digital age.