Executive Summary
Scholasticâs Q1 FY2025 results reflect a partial-year contribution from the 9 Story Media Group acquisition, yielding a 4% YoY revenue increase to $237.2 million and an improved seasonal operating loss, aligned with the companyâs strategy to transform Scholastic into a broader global childrenâs media and content company. Management reaffirmed FY2025 guidance, targeting modest top-line and bottom-line growth anchored by 9 Story synergies, with expected positive operating leverage in the second half of the year. However, the quarter remains heavily seasonal, with a substantial net loss driven by the typical Q1 seasonal pattern and elevated investment activity (including capex and production-related expenditures) as the company expands its content slate and distribution footprint. Cash flow remained negative in the quarter, featuring higher capital expenditures and the integration of 9 Story financing, while the balance sheet shows a modest net debt position that the company intends to manage through growth investments and shareholder returns.
Key drivers for continued earnings progression include: (1) 9 Story-driven expansion of Scholastic Entertainment and licensing/merchandising beyond traditional publishing, (2) momentum in School Reading Events and Book Fairs as schools return for the new year (targeting 90,000 fairs in FY2025), and (3) a constructive trend in Education Solutions via state-sponsored programs and new literacy offerings planned for fiscal 2026. The near-term UK/Canada international footprint and home-reading initiatives are potential upside alongside publishing frontlists and licensed properties. Investors should monitor (a) execution of 9 Story integration and synergies (cost-to-income timing), (b) trajectory of School Reading Events/Fairs revenue per fair, (c) education budget cycles and state program participation, and (d) currency effects and supply-chain/logistics costs as the company scales its cross-segment platform.
Key Performance Indicators
QoQ: -59.30% | YoY:10.56%
QoQ: -234.09% | YoY:10.70%
QoQ: -274.09% | YoY:15.77%
QoQ: -275.40% | YoY:5.96%
Key Insights
Revenue: $237.2 million, up 4% YoY; Gross Profit: $108.9 million, up 10.6% YoY; Gross Margin: 45.9%; Operating Income: -$88.5 million (seasonal loss broad), YoY improvement vs prior year; EBITDA (Adjusted): -$60.5 million, improved from -$70.6 million prior year; Net Income: -$62.5 million; EPS (diluted): -$2.21; Weighted Avg Shares Outstanding: 28.3 million; Cash Flow from Operations: -$41.9 million; Free Cash Flow: -$68.7 million; CapEx: -$20.0 million; Net Debt: $262.8 million; Cash at end of...
Financial Highlights
Revenue: $237.2 million, up 4% YoY; Gross Profit: $108.9 million, up 10.6% YoY; Gross Margin: 45.9%; Operating Income: -$88.5 million (seasonal loss broad), YoY improvement vs prior year; EBITDA (Adjusted): -$60.5 million, improved from -$70.6 million prior year; Net Income: -$62.5 million; EPS (diluted): -$2.21; Weighted Avg Shares Outstanding: 28.3 million; Cash Flow from Operations: -$41.9 million; Free Cash Flow: -$68.7 million; CapEx: -$20.0 million; Net Debt: $262.8 million; Cash at end of period: $84.1 million; Total Assets: $1.96 billion; Total Liabilities: $1.00 billion; Shareholdersâ Equity: $957.3 million; Book Value per Share: approx. $33.85; P/S: 3.80x; P/BV: 0.94x; Net debt-to-EBITDA (approximate, not provided in filing): negative to modest leverage in the medium term; Segments: Childrenâs Book Publishing & Distribution revenue +3% to $105.4 million; Book Fairs +5% to $28.8 million; Book Clubs $2.7 million; Trade Publishing Revenue ~$73.9 million; Education Solutions Revenue -16% to $55.7 million; Entertainment Revenue $16.6 million; Entertainment EBITDA $1.2 million; International Revenue $56.8 million; Commentary notes include 90,000 fairs target; 9 Story contribution; Full-year guidance reaffirmed (Revenue growth 4-6%; Adjusted EBITDA $140â$150 million; Free cash flow $20â$30 million). YoY and QoQ comparisons reflect the seasonality of Scholasticâs business and the dilution/growth from the 9 Story acquisition.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
237.20M |
3.81% |
-50.05% |
| Gross Profit |
108.90M |
10.56% |
-59.30% |
| Operating Income |
-88.50M |
10.70% |
-234.09% |
| Net Income |
-62.50M |
15.77% |
-274.09% |
| EPS |
-2.21 |
5.96% |
-275.40% |
Key Financial Ratios
operatingProfitMargin
-37.3%
operatingCashFlowPerShare
$-1.48
freeCashFlowPerShare
$-2.19
dividendPayoutRatio
-9.12%
Management Commentary
- Strategy and growth: The acquisition of 9 Story Media Group is highlighted as a primary driver of first-quarter revenue growth and EBITDA enhancement, enabling Scholastic to expand its reach in childrenâs content across platforms and capitalize on licensing/merchandising opportunities (quote: Peter Warwick emphasizes 9 Storyâs impact and the new growth initiatives).
- Segment performance and operational trajectory: Childrenâs Book Publishing and Distribution demonstrated revenue growth, aided by the trade channel; Education Solutions faced near-term pressure from reduced supplemental curriculum spending, but state-sponsored programs contributed positively; Scholastic Entertainment benefited from 9 Storyâs inclusion and launched digital/content initiatives (Magic School Bus on Tubi; Clifford YouTube channel) to extend IP reach. Management signaled that back half-year profitability should improve as 9 Story synergies materialize and publishing frontlists (Dog Man, Hunger Games titles) contribute to revenue, with a cautious view on Q2 due to timing.
- Market conditions and guidance: The leadership acknowledged a retail/bookselling market that was down modestly versus prior-year periods (Circana BookScan context) and reiterated that Q2 would likely show lower year-over-year Trade Publishing sales due to publishing timing, while expressing confidence in the long-term opportunity from the combined asset base. They emphasized investments in growth initiatives, including new literacy programs and partnerships to grow at-home access to Scholastic content, and they discussed capital allocation priorities (growth investments, balance-sheet strength, and shareholder returns).
- Cash flow and balance sheet: The company described higher CapEx and production-related spending tied to new content development as contributing to negative free cash flow in Q1, while securing a larger revolver (from $300m to $400m) to support the 9 Story integration and working capital needs. Net debt stood at approximately $262.8 million, with a stated intent to optimize the balance sheet and pursue opportunities that support growth and shareholder value.
"First quarter revenue rose year-over-year on the addition of 9 Story and the seasonal operating loss improved."
â Peter Warwick
"As far as the gross margin, it's really mix that's driving the conversation around mix. We do see modest growth in our gross margin throughout the rest of the year, and we planned for that already in our outlook."
â Haji Glover
Forward Guidance
Scholastic reaffirmed its fiscal 2025 outlook: revenue growth of 4%â6% and Adjusted EBITDA of $140â$150 million, with full-year free cash flow projected to $20â$30 million. The management team cautioned that Q2 would likely feature a softer year-over-year result in Trade Publishing and Education Solutions due to the publication timing and near-term headwinds, but expects improvements in the second half as the 9 Story integration progresses and the publishing slate (Dog Man, Hunger Games sequels) stabilizes revenue. Monitoring points for investors include: (i) progress on integrating 9 Story and realizing cross-segment synergies (licensing, merchandising, advertising-supported platforms), (ii) the trajectory of School Reading Events and Book Fairs contributing to annual throughput and fair count targets, (iii) state-sponsored programs and new literacy products from Education Solutions driving profitability in 2H FY2025, and (iv) currency exposure and supply-chain cost dynamics affecting margins. Overall, the 2H FY2025 profitability trajectory hinges on successful execution of growth initiatives and favorable publishing calendar timing.