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    SCHL
    Earnings call· May 2026(Q4 FY26)

    SCHOLASTIC CORP SCHL

    Jul 23, 2026 Source

    Executive summary

    Scholastic Q4 FY26 — Strong Profitability Amidst Revenue Headwinds, Increased Dividend

    Scholastic concluded FY26 with strong adjusted profitability, driven by operational efficiencies and cost discipline, despite a revenue decline influenced by tough prior-year comparisons in trade publishing and continued funding volatility in education. The company significantly optimized its balance sheet through sale-leaseback transactions, accelerating shareholder returns and establishing a long-term leverage framework. Management is focused on translating this progress into renewed revenue growth and higher adjusted EBITDA in FY27, with a strong publishing pipeline and continued momentum in Book Fairs.

    Highlights

    5

    • Adjusted operating income increased 32% to $47.1 million for FY26, up from $35.8 million in the prior year.

    • Adjusted EBITDA grew 15% year-over-year on a comparable basis for FY26, reaching $151.5 million.

    • Book Fairs revenues increased 5% to $576 million for FY26, driven by higher fair count and revenue per fair.

    • Scholastic Entertainment revenues increased 42% to $21 million in Q4 FY26, reflecting higher production revenues.

    • The regular quarterly dividend was increased by 25% from $0.20 to $0.25 per share, commencing Q1 FY27.

    Concerns

    4

    • Total revenues decreased 3% to $1.6 billion for FY26, and 6% to $476.1 million in Q4 FY26.

    • Education segment revenues declined 14% to $267.6 million for FY26, and 13% to $109.2 million in Q4 FY26, due to funding volatility.

    • Trade Publishing revenues decreased 20% to $77.5 million in Q4 FY26, reflecting challenging prior year comparisons.

    • Net cash provided by operating activities decreased to $50.9 million in FY26 from $124.2 million in the prior year, primarily due to higher tax payments.

    Guidance & targets

    17
    CategoryTargetConfidence
    Revenue growth
    approximately 2% to 4%
    high materiality
    High
    Adjusted EBITDA
    $135 million to $145 million
    high materiality
    High
    Effective tax rate
    approximately 27% to 30%
    medium materiality
    Medium
    Children's Book Publishing and Distribution revenue growth
    full year revenue growth
    medium materiality
    High
    Children's Book Publishing and Distribution profitability
    improved profitability
    medium materiality
    High
    Book Fairs growth drivers
    higher fair count, modest revenue per fair growth
    medium materiality
    High
    Trade Publishing revenues
    stronger revenues
    medium materiality
    High
    Education segment performance
    improved performance
    medium materiality
    Medium
    Education segment revenue trends
    stabilization
    medium materiality
    Medium
    Entertainment revenue growth
    revenue growth
    medium materiality
    High
    Entertainment profitability
    improved profitability
    medium materiality
    High
    International growth
    growth
    medium materiality
    Medium
    International operating income
    modestly lower operating income
    medium materiality
    Medium
    Q1 FY27 revenues
    slightly down
    medium materiality
    High
    Revenue growth trajectory
    begin in the second quarter and continue through the balance of the year
    medium materiality
    High
    Q1 FY27 operating loss
    modestly greater than the prior year period
    medium materiality
    High
    Free cash flow
    $35 million to $40 million
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Children's Book Publishing and Distribution
    Q4 revenues decreased 4%. Full year revenues were $964.2 million, approximately in line with prior year. Q4 adjusted operating income increased $2.1 million. Full year adjusted operating income increased $12.4 million to $143.7 million, reflecting stronger operating leverage in Book Fairs and cost discipline, partly offset by lower results in trade publishing.
    		$276.3 million-4%—$60.3 million
    Book Fairs (within Children's Book Publishing and Distribution)
    Q4 revenues increased 5%. Full year performance benefited from higher fair count (over 103,000 case and shippable fairs) and higher revenue per fair.
    Full year revenues: $576 millionFull year growth: 5%
    		$186.6 million5%——
    Book Clubs (within Children's Book Publishing and Distribution)
    Q4 revenues decreased 7%. Full year decline reflected lower sponsor participation. Focus on simplifying program and improving execution.
    Full year revenues: $57.1 millionFull year growth: -11%
    		$12.2 million-7%——
    Trade Publishing (within Children's Book Publishing and Distribution)
    Q4 revenues decreased 20%. Full year decline reflected challenging comparison with prior year Q4 publishing schedule, which included 'Sunrise on the Reaping'.
    Full year revenues: $331.1 millionFull year growth: -6%
    		$77.5 million-20%——
    Education
    Q4 revenues decreased 13%. Full year revenues decreased 14%, largely due to ongoing funding volatility and pressure on school/district spending. Q4 adjusted operating income was $27.9 million (vs $31.3 million prior year). Decline decelerated in H2 FY26. Lower revenues pressured profitability, partially offset by improved cost structure and operating discipline.
    Full year revenues: $267.6 millionFull year growth: -14%Full year adjusted operating income: $0.2 million (vs $6.9 million prior year)
    		$109.2 million-13%—$27.9 million
    Scholastic Entertainment
    Q4 revenues increased 42% (vs $14.8 million prior year), reflecting higher production revenues. Full year revenues increased 8% (vs $61 million prior year). Q4 adjusted operating income improved $2.9 million to $0.8 million (vs loss of $2.1 million prior year). Full year adjusted operating loss was $9.3 million, reflecting timing of production activity and revenue recognition.
    Full year revenues: $65.7 millionFull year growth: 8%Full year adjusted operating loss: $9.3 million (vs $7.2 million prior year)
    		$21 million42%—$0.8 million
    International
    Q4 revenues were $69.6 million (vs $76.8 million prior year). Excluding $3.1 million favorable FX impact, decline reflected lower trade revenues against challenging prior year comparison. Full year revenues decreased 1% (excluding $6.3 million favorable FX impact). Q4 adjusted operating income was $3.1 million (vs $6.1 million prior year), largely reflecting lower revenues. Full year adjusted operating income increased to $7.1 million, reflecting operating improvements and cost discipline.
    Full year revenues: $277.2 millionFull year growth: -1% (excluding FX)Full year adjusted operating income: $7.1 million (vs $2.9 million prior year)
    		$69.6 million——$3.1 million

    Operational metrics

    30
    Adjusted operating income
    $47.1 millionup 32% from $35.8 million
    FY26

    Increased $11.3 million from prior year.

    Adjusted operating income (comparable basis)
    $35.3 millionincreased $15.4 million from $19.9 million
    FY26

    Full year adjusted operating income on a comparable basis.

    Adjusted operating income (comparable basis)
    decreased $1.2 millionfrom $59.5 million in prior year period
    Q4 FY26

    Q4 adjusted operating income on a comparable basis.

    Adjusted EBITDA (comparable basis)
    increased 15%YoY
    FY26

    Full year adjusted EBITDA growth on a comparable basis.

    Adjusted EBITDA (comparable basis)
    increased $1 millionYoY
    Q4 FY26

    Q4 adjusted EBITDA increase on a comparable basis, primarily reflecting improved profitability in children book publishing and distribution and entertainment, partly offset by lower results in education and international.

    Sale-leaseback net proceeds
    over $400 million
    FY26

    Unlocked from real estate assets in December.

    Total capital returned to shareholders
    over $285 million
    FY26

    Substantially accelerated by sale-leaseback transactions and subsequent repurchase activity.

    Total capital returned to shareholders
    over $140 million
    Q4 FY26

    Capital returned in the fourth quarter.

    Adjusted net income
    $45.9 millioncompared to $22.9 million prior year
    Q4 FY26

    Increase primarily reflects benefit of strategies to reduce tax impact of sale-leaseback gain and fewer shares outstanding.

    Adjusted net income
    $45.4 millioncompared to $13.3 million in FY25
    FY26

    Increase largely reflects gain of sale-leaseback transactions and higher adjusted operating income.

    Book Fairs funds raised for schools
    approximately $250 million
    FY26

    Helped raise for schools.

    Magic School Bus copies in print
    more than 90 million
    cumulative

    As of FY26.

    YouTube views (Scholastic branded hub and single IP channels)
    547 million13% increase YoY
    FY26

    For Scholastic branded hub and single IP channels.

    YouTube watch time (Scholastic branded hub and single IP channels)
    over 6 billion63% increase YoY
    FY26

    For Scholastic branded hub and single IP channels.

    Scholastic TV app downloads
    more than 530,000
    cumulative

    Since launch.

    Scholastic TV app minutes watched
    over 226 million
    cumulative

    Since launch.

    Book Fairs count
    over 103,000
    FY26

    Held during the fiscal year.

    International segment favorable FX impact
    $3.1 million
    Q4 FY26

    Favorable impact of foreign currency exchange in the quarter.

    International segment favorable FX impact
    $6.3 million
    FY26

    Favorable impact of foreign currency exchange for the full year.

    Adjusted unallocated overhead costs
    $33.8 millioncompared to $30.1 million prior year
    Q4 FY26

    Q4 adjusted unallocated overhead costs.

    Adjusted unallocated overhead costs
    $94.6 milliondecreased $3.5 million from $98.1 million prior year
    FY26

    Full year adjusted unallocated overhead costs.

    Adjusted unallocated overhead costs (comparable basis)
    approximately in lineYoY
    Q4 FY26

    Q4 adjusted unallocated overhead costs on a comparable basis.

    Adjusted unallocated overhead costs (comparable basis)
    $106.4 milliondecreased $7.6 million from $114 million prior year
    FY26

    Full year adjusted unallocated overhead costs on a comparable basis, reflecting benefits of cost saving initiatives, lower employee expenses, and streamlined corporate functions.

    Revolving credit facility outstanding
    $75 million
    FY26 end

    Outstanding under its $400 million unsecured revolving credit facility.

    Shares repurchased
    7.3 million
    FY26

    For $268.6 million, including open market repurchases and a modified Dutch auction tender offer.

    Dividends paid
    $20 million
    FY26

    Regular dividends paid for the full year.

    Dividends paid
    $4.6 million
    Q4 FY26

    Regular dividends paid in the fourth quarter.

    Share repurchase authorization remaining
    $183 million
    as of May 31, 2026

    Remaining authorized for future repurchase under stock repurchase program.

    Regular quarterly dividend increase
    25%from $0.20 to $0.25 per share
    Q1 FY27 onwards

    Increased from $0.20 to $0.25 per share, commencing with Q1 FY27.

    Long-term net leverage target
    2 to 2.5x
    long-term

    Established as a long-term target framework.

    Industry KPIs

    6
    MetricValueDetails
    Total revenue$1.6 billionUSD
    Net income EPS$1.87USD/share
    Adjusted EBITDA$151.5 millionUSD
    Operating income margin$15.2 millionUSD
    Cash marketable securities$48.9 millionUSD
    Free cash flow operating cash flow$436 millionUSD

    Product announcements

    7
    ProductTypeDetails
    Dog Man (next title)launch
    Sunrise on the Reaping (Lionsgate film adaptation)launch
    Harry Potter series (HBO)launch
    Baby-Sitters Club, Wings of Fire, I Survived (new publishing)launch
    Clifford the Big Red Dog animated serieslaunch
    Magic School Bus (live-action feature film)launch
    Winnifred Duck (picture book)launch

    Risks & headwinds

    4
    Education segment funding volatilityOngoing

    Q4 revenues down 13% to $109.2 million; FY26 revenues down 14% to $267.6 million

    Mitigation: Repositioning business with stronger product portfolio, improved cost structure, and reorganized go-to-market activities; targeting stabilization in revenue trends in H2 FY27.

    Challenging prior year publishing comparisonsQ4 FY26

    Trade Publishing Q4 revenues decreased 20% to $77.5 million

    Mitigation: Strong pipeline of new publishing and franchise activity (Dog Man, Hunger Games, Harry Potter) expected to drive frontlist sales and extend franchises in FY27.

    Higher tax payments and severance-related paymentsFY26

    Net cash provided by operating activities decreased to $50.9 million in FY26 from $124.2 million in prior year

    Mitigation: FY27 outlook for free cash flow includes lower cash taxes and lower cash severance and other one-time payments.

    Inflation and higher fuel, freight, and labor costsFY27

    Modestly lower operating income expected in International segment

    Mitigation: Continued focus on operating efficiency and cost discipline across the business.

    What to watch in Q1 FY27

    5

    Education segment revenue trends

    H2 FY27
    CurrentDeclined 13% in Q4 FY26; rate of decline decelerated in H2 FY26
    TargetStabilization, especially in H2 FY27

    Why it matters

    The Education segment has been a drag on overall revenue; stabilization is key for overall revenue growth and improved profitability.

    In education, we are targeting improved performance compared to fiscal 2026. Our outlook assumes stabilization and revenue trends, especially in the second half of the year, and improved profitability

    Q&A highlights

    6

    What were the main reasons for the 3% revenue decline in FY26, which was below expectations?

    Peter Warwick explained that the decline was primarily due to a challenging comparable in Q4 FY26 against the strong performance of 'Sunrise on the Reaping' in Q4 FY25, and lower-than-expected revenue from the Education segment due to funding volatility and a lack of surge in spending by schools at year-end.

    “I mean the 2 main factors were that in the fourth quarter, we had a very challenging comparable situation because of the great success that we had with Sunrise on the reaping in the fourth quarter of 2025. So that was one of the factors that was there. That was a more, shall we say, predictable factor. A less predictable factor was the fact that we also didn't get as much revenue from the education segment as we were expecting because in common with many other providers, particularly supplementary education providers. And there wasn't the surge in spending by schools and districts towards the end of their public sector financial year.”

    asked by Brendan Michael McCarthy · answered by Peter Warwick

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Transformation and Balance Sheet Optimization

    Fiscal 2026 marked a significant year for Scholastic's transformation, focusing on governance, organization, strategy, and balance sheet efficiency. The company refreshed its Board, strengthened management, and reorganized to create integrated growth platforms. Major steps were taken to optimize the balance sheet, including sale-leaseback transactions that unlocked over $400 million in net proceeds, which were used to increase liquidity and accelerate shareholder returns. This transformation reinforces Scholastic's long-term strategy and commitment to disciplined investment and capital returns.

    02

    Children's Book Group Momentum and Strategy

    The Children's Book Group (CBG), encompassing publishing and school-based channels, is a central pillar of Scholastic's growth. Book Fairs continued to be a core earnings engine, with growth driven by higher fair counts, improved revenue per fair, and increased adoption of digital tools like eWallet. The company is expanding its reach to new school communities and formats, including discovery fairs and sponsored corporate events. Scholastic Trade publishing benefits from a strong pipeline of new releases and major franchises like Dog Man, The Hunger Games, and Harry Potter, with significant media events expected to drive demand and introduce new readers.

    03

    Entertainment Division Expansion and Franchise Reinforcement

    Scholastic Entertainment is broadening how children engage with Scholastic stories across various media. The successful integration of 9 Story Media Group provides a complete platform for developing trusted children's content. The division built momentum in FY26 with double-digit production revenue growth and continued activity across major franchises. Upcoming projects include a new Clifford the Big Red Dog animated series (PBS Kids, 2027) and a live-action Magic School Bus feature film starring Elizabeth Banks. Digital platforms like YouTube and the Scholastic TV app are also extending reach, with significant increases in views and watch time for Scholastic properties.

    04

    Education Segment Repositioning and Market Alignment

    The Education segment is navigating a pressured purchasing environment due to funding volatility, but performance improved in the second half of FY26. Scholastic is repositioning the business around its core literacy strengths, aligning with the macro shift towards science-based reading instruction and whole books. The company has a stronger product portfolio, improved cost structure, and is reorganizing go-to-market activities with a new Chief Revenue Officer. The goal for FY27 is to stabilize revenue and improve profitability, leveraging Scholastic's unique position to address the increasing focus on children's reading achievement and reduced screen time.

    05

    International Growth and Industry Recognition

    Scholastic's international business extends its publishing, franchises, and literacy expertise globally, benefiting from similar trends seen in the U.S. The company combines locally developed publishing with global franchise strength, with major franchises like Dog Man and The Hunger Games performing well. Scholastic's international strength was recognized with multiple awards at the British Book Awards, including Children's Publisher of the Year, Illustrator of the Year for Dave Pilkey, and Children's Fiction Book of the Year and Marketing Strategy of the Year for Sunrise on the Reaping. The company sees opportunities to expand franchises and improve operating efficiency in priority markets.

    AI-generated summary of the company’s earnings call. Not investment advice.