Exchange: NASDAQ | Sector: Communication Services | Industry: Publishing
Q4 2024
Published: Jul 19, 2024
Earnings Highlights
Revenue of $474.90M down 10.1% year-over-year
EPS of $1.23 decreased by 45.7% from previous year
Gross margin of 56.3%
Net income of 35.90M
""For fiscal 2025, we're targeting modest growth in revenue and adjusted EBITDA, including the benefit of our strategic investment in 9 Story."" - Peter Warwick
Scholastic Corporation (SCHL) Q4 2024 Results Analysis: Modest 2025 Growth Outlook Amid Strategic 9 Story Integration and Ongoing Education Solutions Headwinds
Executive Summary
Scholastic reported a challenging Q4 2024, with consolidated revenue down 10% year over year to $474.9 million and adjusted EBITDA of $91 million, reflecting headwinds in Education Solutions and Book Fairs. For the full year, revenue declined 7% to $1.60 billion and adjusted EBITDA declined to $136.9 million. The company disclosed a strategic pivot through the acquisition of 9 Story Media Group, which will be consolidated into an Entertainment segment, driving a longer-term growth trajectory via IP, licensing, and expanded multi-channel reach. Management guided for modest revenue growth (4–6%) and adjusted EBITDA of $140–$150 million in fiscal 2025, aided by 9 Story contributions (expected to exceed $80 million in revenue in 2025) and ongoing cost controls, while acknowledging continued pressure in Education Solutions and uneven consumer spending in the school channel. Scholastic underscored its strengths—brand, distribution scale, and cash generation—paired with a disciplined balance sheet (net debt near zero, cash of ~ $113.7M at year-end) and substantial free cash flow generation (FCF of $73.4M for 2024). The Q4 results reflect seasonal volatility, but the company remains positioned to pursue growth via entertainment, publishing franchises, and evolving book fairs and education products, with the expectation of a cyclical rebound in the 2025–2026 school years.
Key Performance Indicators
Revenue
474.90M
QoQ: 46.71% | YoY:-10.11%
Gross Profit
267.60M
56.35% margin
QoQ: 67.56% | YoY:-13.09%
Operating Income
66.00M
QoQ: 291.30% | YoY:-28.26%
Net Income
35.90M
QoQ: 235.47% | YoY:-52.58%
EPS
1.26
QoQ: 238.46% | YoY:-45.69%
Revenue Trend
Margin Analysis
Key Insights
Revenue: Q4 2024 revenue $474.9M, down 10% YoY; full-year revenue $1.60B, down 7% YoY; Gross margin 56.3%; Operating margin 13.9%; Net margin 7.6%; EPS (GAAP) $1.73 (Q4) vs $2.26 prior year; Adjusted EBITDA Q4 $91M, full-year $136.9M.
Cash flow: Net cash from operating activities $154.6M; free cash flow $73.4M; year-end cash and cash equivalents $113.7M; net debt near $10.1M; repurchased >3.9M shares; dividends and buybacks totaled >$181M in 2024.
Guidance: Fiscal 2025 revenue growth 4–6%; Adjusted EBITDA $140–$150M; 9 Story to contribute >$80M revenue in 2025; FCF guidance $20–$30M; seasonal losses expected in Q1 2025 in line with prior period.
Financial Highlights
- Revenue: Q4 2024 revenue $474.9M, down 10% YoY; full-year revenue $1.60B, down 7% YoY; Gross margin 56.3%; Operating margin 13.9%; Net margin 7.6%; EPS (GAAP) $1.73 (Q4) vs $2.26 prior year; Adjusted EBITDA Q4 $91M, full-year $136.9M.
- Segment highlights: Children’s Books revenue Q4 $266.0M (full-year $955.2M), Education revenues Q4 $135.7M (full-year $351.2M), International Q4 $70.8M (full-year $273.6M). Book Fairs revenue Q4 $169.5M (full-year $541.6M); Book Clubs Q4 $14.4M (full-year $62.7M).
- Cash flow: Net cash from operating activities $154.6M; free cash flow $73.4M; year-end cash and cash equivalents $113.7M; net debt near $10.1M; repurchased >3.9M shares; dividends and buybacks totaled >$181M in 2024.
- Guidance: Fiscal 2025 revenue growth 4–6%; Adjusted EBITDA $140–$150M; 9 Story to contribute >$80M revenue in 2025; FCF guidance $20–$30M; seasonal losses expected in Q1 2025 in line with prior period.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
474.90M
-10.11%
46.71%
Gross Profit
267.60M
-13.09%
67.56%
Operating Income
66.00M
-28.26%
291.30%
Net Income
35.90M
-52.58%
235.47%
EPS
1.26
-45.69%
238.46%
Key Financial Ratios
currentRatio
1.27
grossProfitMargin
56.3%
operatingProfitMargin
13.9%
netProfitMargin
7.56%
returnOnAssets
2.04%
returnOnEquity
3.53%
debtEquityRatio
0.12
operatingCashFlowPerShare
$2.45
freeCashFlowPerShare
$1.74
dividendPayoutRatio
16.2%
priceToBookRatio
1.02
priceEarningsRatio
7.2
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and growth: Scholastic intends to accelerate long-term growth investments, including the 9 Story acquisition, to expand IP reach across print, screens, and merchandising. Management emphasized leveraging a trusted brand, franchises, and channels to reach kids where they are.
- Market conditions: Management highlighted persistent headwinds in Education Solutions and Book Fairs due to the shift to core curricula (science of reading) and higher absenteeism, along with softer consumer spending in the middle-class segment.
- 9 Story integration: The acquisition will be consolidated into a new Entertainment segment starting this fiscal year, with expectations of strong EBITDA margins and accelerated growth in 2026+. Management cited 9 Story’s IP partnerships (e.g., Daniel Tiger’s Neighborhood, Wild Kratts) and licensing capabilities as key value drivers.
- Operational efficiency: SG&A and corporate overhead declined, supporting margins amid slower top-line growth. Scholastic indicated ongoing investments in new product pipelines for Education Solutions and ongoing cost discipline to protect margins.
- Outlook and risk: Management signaled that the short-term cadence remains challenging but expressed confidence in a cyclical rebound in 2025–2026 and beyond, with attention to funding sources for literacy programs, book fairs, and partner programs.
"For fiscal 2025, we're targeting modest growth in revenue and adjusted EBITDA, including the benefit of our strategic investment in 9 Story."
— Peter Warwick
"Beginning in fiscal 2025, we will be adding a new Entertainment segment, which will consolidate results from Scholastic Entertainment division reported historically in the Children's Books segment with the newly added 9 Story Media Group."
— Haji Glover
Forward Guidance
Scholastic CFO and CEO outlined fiscal 2025 guidance anchored in modest topline growth and margin preservation, with the strategic inclusion of 9 Story expected to uplift the Entertainment segment and company-wide profitability. Key points:
- Revenue growth target: 4% to 6% for fiscal 2025, supported by strength in Children’s Books, revenue per fair initiatives, and a stabilized Book Clubs/Book Fairs trajectory plus contributions from 9 Story.
- Adjusted EBITDA: Targeted at $140M to $150M for fiscal 2025, driven by cost controls, scale benefits from the Entertainment segment, and synergies across the combined portfolio.
- 9 Story contribution: Expected to exceed $80M in revenue in fiscal 2025, with solid EBITDA margins and cross-channel licensing/merchandising upside.
- Free cash flow: Guidance implies $20M to $30M in 2025, reflecting working capital needs for the 9 Story integration and continued investments in core franchises and new literacy programs.
- Segment outlook: Modest growth in Book Fairs with revenue per fair improving but count still below pre-pandemic; Education Solutions to hold steady with new product launches in 2025–2026; International to show modest growth with margin improvements in Canada and English-language opportunities in Asia.
- Monitoring factors: The trajectory will hinge on school budget cycles, the rate of adoption of science-of-reading curricula, consumer spending trends in Scholastic’s core markets, and the successful integration of 9 Story into the Entertainment segment. Achievability is contingent on stabilizing Education Solutions demand and realizing cross-business synergies from the 9 Story platform.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SCHL Focus
56.35%
13.90%
3.53%
7.20%
NYT
49.30%
18.30%
6.23%
18.35%
WLYB
70.80%
17.00%
3.42%
20.53%
GCI
31.60%
3.68%
-7.20%
-3.74%
LEE
97.70%
-2.31%
1.02%
-1.27%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Mid-to-long-term, Scholastic presents an attractive risk-adjusted growth profile tied to a diversified portfolio across publishing, education, and entertainment. The key catalysts are (i) the successful integration of 9 Story to create a scalable Entertainment segment with cross-channel IP licensing opportunities, (ii) a refreshed publishing slate that leverages global franchises and high-margin graphic novels, and (iii) a managed shift in Education Solutions toward higher-margin, science-aligned offerings and new literacy products expected to contribute meaningfully from fiscal 2026 onward. The main risks are short-term headwinds in Education Solutions and Book Fairs, which could dampen near-term top-line growth and margins. Given the 4–6% revenue growth target for 2025, an adjusted EBITDA target of $140–$150M, and the potential for $80M+ in 2025 revenue from 9 Story, the investment case rests on successful execution, favorable literacy funding environments, and continued strength in Scholastic’s brand and franchises. Investors should monitor: (1) 9 Story integration progress and cross-brand licensing; (2) school funding cycles and the science-of-reading adoption pace; (3) international market performance, particularly in Asia and Canada; (4) evolving consumer spend on books and school-related products; (5) cost discipline and SG&A efficiency to protect margins amid revenue headwinds.
Key Investment Factors
Growth Potential
Broad runway from multi-channel strategy: leveraging 9 Story’s IP across print, digital, licensing, and merchandising; expanding direct-to-home channels; expanding school and community literacy partnerships; and accelerating global publishing franchises (Dog Man, Hunger Games, Harry Potter-related titles). The Entertainment segment is expected to drive revenue growth with >$80M in 2025 and synergies into 2026+, supported by a robust pipeline and licensing opportunities.
Profitability Risk
Headwinds in Education Solutions due to science-of-reading curriculum adoption, variable school spending, and Book Fair consumer participation; execution risk in integrating 9 Story and achieving projected cross-sell across platforms; dependence on seasonal school calendars and fair counts; FX exposure in International; dependence on partnerships with studios and streaming platforms for 9 Story content.
Financial Position
Strong balance sheet with low net debt (~$10.1M), cash and cash equivalents ~ $113.7M, and total liquidity supported by a revolver facility for 9 Story integration; sizeable free cash flow generation ($73.4M in 2024) and a disciplined capital allocation framework that prioritizes growth investments, debt management, and shareholder returns.
SWOT Analysis
Strengths
World-class children's content portfolio (Dog Man, Goosebumps, Harry Potter tie-ins) and global franchises
Strong distribution footprint (schools, libraries, retail, online)
Solid balance sheet with low net debt and robust FCF generation
Strategic IP development and licensing capabilities (Entertainment and 9 Story integration)
Resilient cash return policy (dividends and buybacks)
Weaknesses
Seasonal concentration of profitability (loss in Q1 and Q3)
Education Solutions exposure to shifting curricula adoption (science of reading) and school spending cycles
Book Fairs and Book Clubs sensitivity to middle-class consumer spending and absenteeism
Oil- (FX) exposure in International markets; integration risk of 9 Story
Execution risk around new product launches and transition from legacy operations
Opportunities
9 Story integration to accelerate growth and global licensing/merchandising
Expansion of direct-to-home and family engagement channels
New literacy programs aligned with science of reading to drive future growth (FY26–FY27)
Partnership models with states, communities, and philanthropic orgs to fund literacy
Threats
Macro weakness in school budgets and consumer discretionary spend
Competition from digital content, streaming, and external licensing providers
Delay or failure in 9 Story integration impacting synergies
Currency fluctuations affecting International results
Platform cycles in entertainment affecting production pipelines and profitability