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Earnings call · Aug 2026 (Q1 FY27)

SCHOLASTIC Q1 FY27 earnings call SCHL

Sep 24, 2026 Source

Executive summary

Scholastic Q1 FY27 — Strong Book Fairs Momentum and Entertainment Growth Offset Education Headwinds

Scholastic's first quarter, typically its smallest, saw robust performance in its Entertainment segment and promising early indicators for Book Fairs, driven by strong content franchises. However, the company faced headwinds in its Education segment due to continued pressure on school spending. Management reaffirmed its full-year fiscal 2027 guidance, confident in its strategic transformation and upcoming Q2 publishing slate.

Highlights

5

  • Entertainment segment revenue increased $6.5 million to $20.1 million, with adjusted operating loss improving by $2.4 million to $1.6 million.

  • Book Fairs bookings and fair counts are ahead of the prior year, showing strong early performance indicators for the fall season.

  • U.S. trade revenues increased 4% year-over-year, supported by strong performance from Dav Pilkey's titles.

  • International segment revenues increased to $60.5 million from $59.4 million, with adjusted operating loss improving to $2.7 million from $4.1 million.

  • Returned $29.6 million to shareholders, including $25.8 million in share repurchases and $3.8 million in dividends.

Concerns

4

  • Consolidated revenues decreased 4% to $216.8 million compared to $225.6 million in the prior year period.

  • Education segment revenues decreased $9.7 million to $30.4 million, reflecting pressure on school and district spending.

  • Adjusted operating loss increased to $88.7 million compared to $81.9 million in the prior year period, primarily due to higher overhead costs.

  • Net cash used by operating activities increased to $94.6 million compared to $81.8 million in the prior year period.

Guidance & targets

CategoryTargetConfidence
Full-year FY27 Revenue Growth
approximately 2% to 4%
high materiality
High
Full-year FY27 Adjusted EBITDA
approximately $135 million to $145 million
high materiality
High
Full-year FY27 Free Cash Flow
approximately $35 million to $40 million
high materiality
High
International Operating Income
modestly lower
low materiality
Medium
Education Segment Revenue Trends
improve as the year progresses
medium materiality
Medium
Education Segment Profitability
improved profitability
medium materiality
Medium
Entertainment Segment Growth and Profitability
growth and improved profitability for the full year
medium materiality
High
Book Fairs Revenue Growth
higher fare count and modest revenue per fare growth
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Children's Book Publishing and Distribution
Revenue decreased $3.6 million primarily due to lower consolidated trade revenues. Segment adjusted operating loss increased to $37.8 million from $34.3 million in the prior year period. On a comparable basis, adjusted operating loss increased $0.6 million. Book Fairs bookings and fair counts are ahead of prior year, with new models expanding reach.
Prior year revenue: $109.4 millionPrior year adjusted operating loss: $34.3 millionBook Fair revenues: $33.2 million (compared to $34.1 million prior year)Book Clubs revenues: $2.1 million (compared to $1.8 million prior year)Consolidated trade revenues: $70.5 million (compared to $73.5 million prior year)U.S. trade revenues: increased 4% year-over-year
$105.8 million——Adjusted operating loss of $37.8 million
Entertainment
Revenues increased $6.5 million driven by higher production revenues. Segment adjusted operating loss improved $2.4 million primarily reflecting higher revenues. Production activity and pipeline visibility remains strong, with expectations for growth and improved profitability for the full year.
Prior year revenue: $13.6 millionPrior year adjusted operating loss: $4 million
$20.1 million——Adjusted operating loss of $1.6 million
Education
Revenues decreased $9.7 million during the segment's seasonally smallest quarter, reflecting pressure on school and district spending and the conclusion of ESR funding. Segment adjusted operating loss increased to $23.3 million compared to $21.2 million in the prior year period. The decline primarily reflected lower revenues, largely offset by benefits from an improved cost structure. Targeting improved performance for the full year.
Prior year revenue: $40.1 millionPrior year adjusted operating loss: $21.2 million
$30.4 million——Adjusted operating loss of $23.3 million
International
Revenues were $60.5 million compared to $59.4 million a year ago. Excluding the $1.2 million favorable year-over-year impact of foreign currency exchange, revenues were approximately in line with prior year period. Segment adjusted operating loss improved to $2.7 million compared to $4.1 million in the prior year period, primarily reflecting continued cost management and operational efficiencies. Full year revenue growth is expected, but operating income is expected to be modestly lower due to inflation and higher fuel/freight costs.
Prior year revenue: $59.4 millionFavorable year-over-year impact of foreign currency exchange: $1.2 million
$60.5 million——Adjusted operating loss of $2.7 million

Product announcements

ProductTypeDetails
Harry Potter publishing programroadmap
Harry Potter and the Half Blood Prince (full color illustrated edition)launch
Philosopher's Stone paperback tie-inlaunch
Dog Man: Sprinkle in Timelaunch
Dog Man Dynamiteroadmap
Sunrise on the Reaping (film adaptation)launch
New Clifford the Big Red Dog animated serieslaunch

Deals & partnerships

Mattel Publishing and distribution partnership in India.

Bringing brands including Barbie, Hot Wheels, and Masters of the Universe to young readers across India through Scholastic's local publishing expertise and reach.

Risks & headwinds

School and district spending pressure in Education segment Summer (Q1 FY27)

Education segment revenues decreased $9.7 million to $30.4 million.

Mitigation:Go-to-market transformation focused on improving sales productivity and execution, actions to restructure products and operations, diversifying customer base, and aligning cost structure.

Higher overhead costs Q1 FY27

Adjusted operating loss increased to $88.7 million compared to $81.9 million in the prior year period, primarily reflecting higher overhead costs.

Mitigation:Managing corporate costs with discipline while making targeted investments to support FY27 growth priorities.

Inflation and higher fuel and freight costs in International markets Full-year FY27

International operating income is expected to be modestly lower.

Mitigation:Continued cost management and operational efficiencies across the business.

What to watch in Q2 FY27

Book Fairs revenue per fair growth

Next quarter (Q2 FY27)
Current Modest revenue per fare growth expected, but accurate validation pending more fairs.
Target Confirmation of strong revenue per fair growth.

Why it matters

Book Fairs are a core growth and earnings engine, and revenue per fair is a key driver of profitability.

We continue to expect higher fare count and modest revenue per fare growth to contribute to revenue growth in our Book Fairs business this fiscal year. With the operating leverage in this business expected to support improved profitability.

Q&A highlights

Clarification on whether the 'modestly lower' international operating income due to fuel costs is a new development and if it's factored into the reaffirmed FY27 adjusted EBITDA guidance.

Haji Glover confirmed that the fuel costs are specific to international markets due to the war, but these costs were already anticipated and factored into the full-year forecast, hence the reaffirmation of guidance.

“some of the stuff we've already already anticipated within our forecast, our full year forecast. So we're in line with everything right now. And that's the reason why we're reaffirming our guidance.”

asked by Brendan McCarthy · answered by Haji Glover

2 min read 6 chapters

Detailed narrative

Q1 Seasonality and Strategic Focus

Scholastic's first quarter is seasonally the smallest, representing only 14% of last year's full-year revenue, leading to an expected operating loss of $92.2 million. Despite this, the company continued to invest in growth priorities and advanced strategic transformation, reaffirming its full-year fiscal 2027 guidance for revenue growth of approximately 2% to 4% and adjusted EBITDA of $135 million to $145 million. The company remains focused on translating prior fiscal year progress into stronger performance gains.

Children's Book Publishing and Distribution Momentum

The Book Fairs business is entering its important fall season with strong early indicators, including bookings and fair counts ahead of the prior year. The company is expanding its total addressable market by reaching new school communities and formats, reinforcing confidence in its sustainable and profitable growth. Book Clubs are focused on simplification and innovating promotions. Trade Publishing anticipates a strong Q2 with major franchises like Harry Potter, including a new HBO series adaptation, and Dav Pilkey's 'Dog Man: Sprinkle in Time' releasing in November, celebrating 10 years of Dog Man with over 70 million books in print worldwide.

Entertainment Segment's Strong Performance

The Entertainment segment delivered a strong first quarter with revenue increasing by $6.5 million to $20.1 million, driven by significantly increased production activity. The segment's adjusted operating loss improved by $2.4 million to $1.6 million, reflecting higher revenues and operating leverage. A strong pipeline of contracted projects and expanding engagement with Scholastic IP, such as Clifford's YouTube views increasing 52% year-over-year, supports expectations for accelerating growth and improved profitability for the full year.

Education Segment Repositioning

The Education segment experienced a $9.7 million revenue decrease to $30.4 million in its smallest quarter, pressured by school and district spending constraints, expanding unfunded mandates, and the conclusion of ESR funding in March. The company is undergoing a go-to-market transformation to improve sales productivity, diversify its customer base, and align its cost structure with market conditions. Management targets improved full-year performance and profitability, with revenue trends expected to improve as the year progresses.

International Business and Key Partnerships

The International segment saw revenues increase to $60.5 million from $59.4 million, with improved adjusted operating loss of $2.7 million compared to $4.1 million, due to continued cost management and operational efficiencies. The business benefits from global franchises like Hunger Games and Harry Potter. A new publishing and distribution partnership with Mattel in India was announced, bringing brands like Barbie and Hot Wheels to young readers, leveraging Scholastic's local publishing expertise and reach.

Capital Allocation and Shareholder Returns

Net debt decreased significantly to $86.8 million from $242.8 million in the prior year, primarily due to net proceeds from sale-leaseback transactions completed last December. The company returned $29.6 million to shareholders in Q1, comprising $25.8 million in share repurchases and $3.8 million in dividends. Approximately $157 million remained authorized for future share repurchases, which the company expects to continue from time to time as conditions allow.

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