Executive Summary
Scholastic’s QQ3 2025 results reveal modest revenue growth driven by strength in the Children's Book Publishing and Distribution segment, aided by the 9 Story Media Group acquisition. Revenue rose 3.6% year-over-year to $335.4 million, while gross margin remained robust at 53.9%; however, the company posted an operating loss of $23.9 million and a net loss of $3.6 million as higher operating expenses and a large, non-cash amortization impact in Entertainment weighed on results. Management emphasized discipline on costs, ongoing opportunities from frontlist/backlist dynamics (notably Dog Man and Hunger Games releases), and a strategic review of Education Solutions to optimize long-term profitability. The quarter featured meaningful buyback activity and a strong liquidity stance, including an expanded share-repurchase authorization. Looking ahead, Scholastic guided for approximately $140 million of adjusted EBITDA for the full year (low end of prior guidance) with modest revenue growth and free cash flow in the $20–$30 million range, reflecting planned capital expenditure and working capital investments. Tariffs are expected to have minimal near-term impact, with ongoing efforts to mitigate through sourcing and price actions. Investors should monitor consumer discretionary spending in books, school district purchasing cycles, federal funding uncertainties, tariff dynamics, and the progress of 9 Story-driven monetization across YouTube and streaming platforms.
Key Performance Indicators
QoQ: -42.78% | YoY:13.21%
QoQ: -131.99% | YoY:30.72%
QoQ: -107.38% | YoY:86.42%
QoQ: -107.51% | YoY:85.71%
Key Insights
Revenue: $335.4M (+3.6% YoY; -38.4% QoQ) | Gross Profit: $180.8M (Gross Margin 53.9%) | Operating Income: -$23.9M (Operating Margin -7.1%) | EBITDA: $4.5M | Net Income: -$3.6M | EPS: -$0.13 | Weighted Avg Shares: 27.8M | Cash & Equivalents: $94.7M | Total Assets: $1.961B | Total Liabilities: $1.020B | Net Debt: $296.0M | Free Cash Flow: -$21.0M | Share Repurchases: 1.45M shares for $30.0M; New buyback authorization $53.4M (Total $100M)...
Financial Highlights
Revenue: $335.4M (+3.6% YoY; -38.4% QoQ) | Gross Profit: $180.8M (Gross Margin 53.9%) | Operating Income: -$23.9M (Operating Margin -7.1%) | EBITDA: $4.5M | Net Income: -$3.6M | EPS: -$0.13 | Weighted Avg Shares: 27.8M | Cash & Equivalents: $94.7M | Total Assets: $1.961B | Total Liabilities: $1.020B | Net Debt: $296.0M | Free Cash Flow: -$21.0M | Share Repurchases: 1.45M shares for $30.0M; New buyback authorization $53.4M (Total $100M)
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
335.40M |
3.61% |
-38.41% |
| Gross Profit |
180.80M |
13.21% |
-42.78% |
| Operating Income |
-23.90M |
30.72% |
-131.99% |
| Net Income |
-3.60M |
86.42% |
-107.38% |
| EPS |
-0.13 |
85.71% |
-107.51% |
Key Financial Ratios
operatingProfitMargin
-7.13%
operatingCashFlowPerShare
$-0.43
freeCashFlowPerShare
$-0.76
dividendPayoutRatio
-158.3%
priceEarningsRatio
-42.26
Management Commentary
Themes from management discussion and Q&A:
- Growth and guidance: Peter Warwick stated that the company now forecasts full-year adjusted EBITDA of approximately $140 million, at the low end of guidance, with revenue modestly up YoY in the face of ongoing headwinds. (Quote: Peter Warwick)
- Inflationary/tariff context: Management highlighted tariff risk management as ongoing, noting supplier diversification and price actions as mitigants and that near-term tariff exposure is expected to be minimal for the remainder of fiscal 2025 and the first half of fiscal 2026. (Quote: Haji Glover)
- IP-driven momentum: The Dog Man and Hunger Games franchises drove frontlist strength and helped backlist dynamics; 9 Story expansion broadened distribution and monetization on streaming platforms. (Speaker: Peter Warwick)
- Education Solutions reflect cyclicality; a strategic review is underway to optimize long-term potential, with new literacy programs expected to contribute in fiscal 2026. (Speaker: Peter Warwick)
- Real estate and liquidity: Management highlighted a strong balance sheet with optionalities to monetize non-operating assets and a large share-repurchase program, including a revised authorization to $100M. (Speaker: Haji Glover, Peter Warwick)
We now forecast full year adjusted EBITDA of approximately $140 million, consistent with the low end of our fiscal 2025 guidance. Revenue is forecast to be up modestly year-over-year, reflecting the intensifying spending headwinds that we saw last quarter and that we expect to continue into the fourth quarter.
— Peter Warwick
As Peter noted, we continue to expect minimal tariff-related exposure on our inventory costs for the remainder of fiscal 2025 and the first half of fiscal 2026.
— Haji Glover
Forward Guidance
Management guidance centers on margin resilience and prudent cost management amid ongoing discretionary spending headwinds. For Q4, Scholastic expects modest revenue growth versus the prior year, supported by the release of The Hunger Games: Sunrise on the Reaping and continued School Reading Events momentum. Adjusted EBITDA is guided near $140 million (low end of prior range of $140–$150 million), with full-year free cash flow forecast in the $20–$30 million range due to planned CapEx and working capital investments. The company intends to press cost actions in Q4 to improve operating leverage, including prior reductions in discretionary/non-revenue-generating expenses and hiring freezes. Tariffs are anticipated to have only a mid-single-digit million-dollar impact in the next year, with ongoing efforts to mitigate through alternate sourcing and selective price increases. Key monitoring points for investors include: (i) end-user discretionary demand for children’s books in both school and retail channels; (ii) the pace of government and state/local education funding and its impact on Education Solutions; (iii) the effectiveness of 9 Story-driven monetization across digital platforms; (iv) the evolution of international markets (Canada, UK, NZ) and FX effects; (v) tariff dynamics and supply chain resiliency, particularly for non-book products.