Inquired about how the growth algorithm for Higher Ed is changing from FY26 to FY27, given the exceptional past performance.

Explained that FY26's 12% growth was driven by sustained share gains, 3-4% enrollment growth (higher than national 1.3%), 2% net price realization, and a non-recurring 3% benefit from lower sales returns. FY27 will see continued share gains but without the one-time sales return benefit, leading to mid-single-digit growth. “That 12%, let me break it down for you. The biggest driver of that is that ongoing sustained share gains. That will continue.”

Asked about pockets of strength in K-12 in FY26 and how state-level dynamics (Florida, Texas, California) are informing the FY27 outlook.

Highlighted strength in science programs and Florida ELA. For FY27, open territory and supplemental intervention are strong. California math adoption is slower due to district delays and market fragmentation, while Texas math is seeing shorter contracts and experimentation. “The overall timing has just shifted a little bit because of a few large districts moving into fiscal year 2028.”

Inquired about the literacy opportunity, particularly the risk of states adopting OER curriculum similar to Texas math, given the legislative mandates.

Stated no similar OER contagion in literacy. Emphasized McGraw Hill's unique position with multilingual, accessible, balanced screen-time programs, and significant investment ($100M+). Cited 6:1 win ratio against OER and issues with Texas's OER (4,000 errors). “I really haven't seen a contagion or similar movements in other states as it relates to literacy as Texas and [indiscernible] math.”

McGraw Hill (MH) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q4 FY26)· Consumer Staples· Jun 11, 2026

Source: earnings call transcript

Executive summary

McGraw Hill Q4 FY26 — Strong AI-driven Growth and Debt Reduction

McGraw Hill delivered a strong Q4 FY26, exceeding revenue and adjusted EBITDA expectations, driven by robust performance in Higher Education and significant debt reduction. The company is strategically leveraging AI to expand its market and enhance learning solutions, despite facing headwinds in the K-12 segment due to slower adoption cycles in key states. Management is focused on accelerating growth in FY27 and beyond, prioritizing reinvestment, further debt reduction, and selective acquisitions.

Highlights

FY26 revenue of $2.1 billion exceeded the high end of guidance.
Recurring revenue grew nearly 6% in FY26, reaching $1.5 billion and representing over 73% of total revenue.
Adjusted EBITDA for FY26 was $744 million, up 2% YoY, with margin expanding nearly 80 basis points to 35.4%.
Gross debt reduced by $646 million in FY26, lowering annualized cash interest expense by nearly $45 million.
Higher Education revenue grew 12% YoY to $879 million in FY26, marking the 40th consecutive quarter of market share gains.

Concerns

K-12 revenue was down 9% YoY in FY26 to $884 million due to a smaller market opportunity and difficult prior year comparison.
California math adoption cycle has been slower than expected, with some districts delaying decisions to FY28.
International revenue declined 7% YoY in FY26 due to macro pressures and Middle East project delays.
Q4 FY26 revenue was $464 million, down 2% YoY, reflecting a smaller K-12 market opportunity.
Anticipate K-12 capture rate for FY27 to be at the low end of the historical 25% to 30% range.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year revenue	$2.115 billion to $2.175 billion high materiality	FY27	High
Full-year recurring revenue	$1.587 billion to $1.627 billion medium materiality	FY27	High
Full-year adjusted EBITDA	$750 million to $790 million high materiality	FY27	High
Full-year adjusted EBITDA margin	35.9% medium materiality	FY27	High
Full-year unlevered free cash flow	approximately $400 million high materiality	FY27	High
Full-year CapEx and product development	approximately 10% of revenue medium materiality	FY27	High
Full-year cash and GAAP taxes	$20 million to $40 million low materiality	FY27	High
Full-year GAAP interest expense	below $180 million low materiality	FY27	High
Net leverage target	2x to 2.5x high materiality	Long-term	High
Share repurchase plan	$50 million high materiality	Ongoing	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Higher Education Growth driven by market share gains, enrollment, pricing, and lower sales returns. Marked 40th consecutive quarter of market share gains. Demand particularly strong in business and science disciplines. Recurring revenue: $734 millionRecurring revenue growth YoY: 10%Market share: approaching 31%Net Promoter Score: record high in springNet Dollar Retention: 114%Evergreen revenue share: 68%Inclusive Access revenue share: 56%	$879 million	12%	—	—
K-12 Reflecting anticipated smaller market opportunity and difficult prior year comparison. Performance came in slightly ahead of expectations due to stronger capture rates in key adoption markets. California math adoption slower than expected, but opportunity remains intact. Early momentum in ELA programs. Recurring revenue: $620 millionRecurring revenue growth YoY: 3%Capture rates: slightly ahead of expectations	$884 million	-9%	—	—
Global Professional Remained steady, supported by medical content and early traction from AI-enabled solutions, partially offset by transition away from noncore print products. Believed to be the final year of nonstrategic print business wind-down. Digital revenue growth YoY: 4%Medical education revenue share: >75%	—	—	—	—
International Due to macro pressure in select markets. Q4 performance impacted by Middle East project delays shifted into H2 FY27. Outlook improving in FY27 with easing headwinds and strengthening positioning.	—	-7%	—	—

MH operating KPIs by quarter

MH operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q4 FY26	Jun 2026 Q1 FY27	Change vs prior quarter
AI learning tool users	7.5M+ We now have launched 8 AI learning tools, which serve more than 7.5 million users, and we have 3 additional launches planned this fiscal year. Source: earnings call transcript	7.5M+ over 100 million active curriculum licenses, over 7.5 million users of our AI solutions, and billions of learning interactions. Source: earnings call transcript	—
Active licenses	100M+ We have over 100 million active licenses by students and educators of this curriculum. Source: earnings call transcript	100M+ over 100 million active curriculum licenses, over 7.5 million users of our AI solutions, and billions of learning interactions. Source: earnings call transcript	—
Remaining performance obligation	$1.7B The remaining performance obligation was $1.7 billion and will increase in the fiscal second quarter of 2027, reflecting the typical K-12 seasonality. Source: earnings call transcript	$1.5B The remaining performance obligation was 1.5 billion and is expected to increase sequentially reflecting typical K-12 seasonality. Source: earnings call transcript	-11.8%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Agentic AI tool	launch	piloting now
Connect platform with Learning Coach	expansion	—
AI Reader accessibility features	update	—
AI literacy modules	launch	—
California math curriculum	update	—
New literacy curriculum (EMERGE, Summit, SOAR)	launch	early stages (Year 0)
K-12 AI curriculum	launch	—
ALEKS Calculus	expansion	—
Global Professional medical offerings	expansion	—

Deals & partnerships

Kiron Learning partnership

Partnership to develop Learning Coach, an AI conversation and tutoring tool, for integration into McGraw Hill's Connect platform.

Risks & headwinds

K-12 Market Opportunity FY26, continuing into FY27

$884 million revenue in FY26, down 9% YoY.

Mitigation:Focus on ELA refresh cycle, strong performance in open territory and supplemental intervention.

California Math Adoption Delays FY27 and potentially FY28

80% of the $1 billion market remains undecided.

Mitigation:Customizing materials to evolving needs, responding to feedback, leveraging ability to deliver varied pedagogies.

International Macro Pressure & Project Delays FY26, H2 FY27 for project delays

$39 million impairment charge in Q4 FY26.

Mitigation:Better positioning across key markets, new commercial opportunities, outlook improving in FY27.

Lower K-12 Capture Rates FY27

Expectation for FY27 to be at the low end of the historical 25% to 30% range.

Mitigation:Focus on open territory and supplemental intervention, course-correcting in Texas and California math.

Screen Time Backlash/Tool Fatigue Ongoing

Not explicitly quantified, but mentioned 'negative correlation between screen time and comprehension' for early learners.

Mitigation:Leveraging ability to deliver both digital and paper-based content, balancing screen time for assessment vs. traditional methods, focusing on integrated solutions to reduce tool fatigue.

OER/AI-Generated Curriculum Competition Ongoing

McGraw Hill's win ratio against OER is 6:1. Texas Bluebonnet had >4,000 errors.

Mitigation:Emphasizing high-quality, integrated, pedagogically sound solutions, highlighting poor outcomes and errors in OER/generic AI.

Not quantified in terms of financial impact, but mentioned active litigation against pirate websites.

Mitigation:Active litigation, advocating for legal licensing, developing agentic technologies for secure and auditable content delivery.

Q&A highlights

Asked for segment-level revenue growth assumptions for FY27, specifically for K-12 and Higher Ed.

Management detailed assumptions including continued share gains in Higher Ed with 1% enrollment growth, K-12 market slightly smaller than original estimates with lower capture rates (25-30%), return to growth in International, and mid-single-digit growth in Global Professional's Medical segment offset by print wind-down.

“when I roll all that up together, Steven, that's where you get that midpoint of our guide around 2%, we feel good about it, and we think it's been a prudent guide.”

asked by Stephen Sheldon · answered by Philip Moyer

3 min read 7 chapters

Detailed narrative

AI-Powered Innovation and Competitive Moat

McGraw Hill is making significant strides in AI-powered innovation, having launched 8 AI learning tools serving over 7.5 million users, with 3 more planned for the current fiscal year. The company emphasizes its competitive moat built on proprietary content, 190 terabytes of learning data from 25.6 billion interactions, and independent validation of student outcomes.

This data-driven approach allows for precision education experiences and expansion into new addressable markets, including agentic AI tools.

K-12 Market Dynamics and ELA Opportunity

The K-12 market experienced a 9% revenue decline in FY26, with the California math adoption cycle being slower than expected due to market fragmentation and district delays. However, the company is well-positioned for a multi-year nationwide English Language Arts (ELA) refresh cycle, having invested over $100 million in its EMERGE, Summit, and SOAR programs since 2021.

Early wins for ELA in Colorado and Seattle are encouraging, especially given ELA represents approximately 40% of historical K-12 revenue.

Higher Education Outperformance

Higher Education revenue grew 12% in FY26, marking the 40th consecutive quarter of market share gains, with share now approaching 31% according to MPI. This growth was driven by sustained market share gains, enrollment increases (3-4% for McGraw Hill vs. 1.3% national average), and a 2% net price realization.

The Evergreen delivery model now represents 68% of Higher Education revenue, and Inclusive Access accounts for 56% of revenue in FY26.

Global Professional and International Outlook

The Global Professional business remained steady with 4% digital revenue growth in FY26, primarily driven by medical content and early traction from AI-enabled solutions. Internationally, despite a 7% revenue decline in FY26 due to macro pressures and Middle East project delays, the outlook for FY27 is improving.

The company sees new commercial opportunities in favorable demographic markets such as Latin America and the Middle East, supported by new commercial opportunities and easing headwinds.

Capital Allocation and Debt Reduction

McGraw Hill reduced gross debt by $646 million in FY26, lowering net leverage by approximately 80 basis points and annualized cash interest expense by nearly $45 million. The company remains committed to a net leverage target of 2x to 2.5x and has authorized a $50 million share repurchase plan.

This capital allocation approach balances reinvestment in the business, further debt reduction, and selective tuck-in acquisitions to drive long-term value.

Agentic AI and TAM Expansion

The company is piloting a new agentic AI tool to make its precision education experience accessible as a trusted AI agent, representing a new business model and addressable market expansion opportunity. This approach allows for safe, auditable content delivery, addressing the need for just-in-time education in fields like medicine and computer science.

Management believes this can offer a more cost-effective and pedagogically effective solution compared to large, inefficient AI models, with business models evolving over the next six months.

Screen Time and Pedagogy

Management acknowledges concerns about screen time, especially for younger learners, and emphasizes McGraw Hill's unique ability to deliver education through various modalities, from AI tools to traditional paper methods. The company's curriculum development focuses on balancing screen time (e.g., 20 minutes per week for Emerge) with effective assessment tools like ALEKS, which uses screens efficiently.

This diverse delivery capability is seen as a significant strength unmatched by competitors.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.