Name: SCHOLASTIC CORP Q2 2025 Earnings Call
Start: 2024-12-19T21:31:00.000Z

Executive Summary

Q2 FY25 revenue fell 3% to $544.6m and diluted EPS was $1.71 (non‑GAAP EPS $1.82) as timing of publishing releases and a shift of fall book fair bookings into December weighed on results; management reaffirmed FY25 guidance for +4–6% revenue growth and $140–$150m adjusted EBITDA .
Children’s Books was down 6% on lower Trade and Book Fairs timing; Education Solutions declined 12% on reduced supplemental curriculum spending; Entertainment contributed 9 Story revenue but posted an operating loss largely due to intangible amortization .
Liquidity and capital return remained intact: free cash flow was $42.4m, net debt was $120.8m after the 9 Story acquisition, the revolver was upsized to $400m, and the company paid a $0.20 dividend and repurchased ~185k shares ($5.0m) in the quarter .
Near‑term catalysts are concentrated in 2H: Dog Man: Big Jim Begins (published in December) and the Dog Man feature film (Jan 31, 2025) plus Sunrise on the Reaping (Mar 2025) underpin management’s expectation for Q3 revenue/EBITDA growth and a solid Q4 .

What Went Well and What Went Wrong

What Went Well
- “Schools booked the largest number of fall fairs since the pandemic,” and fair count remains on track to 90,000 for FY25, supporting Book Fairs’ strategic reach despite timing shifts .
- Dog Man: Big Jim Begins immediately became the #1 bestselling book overall in the U.S. and Canada and #1 children’s book in the UK and Australia, with additional support from the January film release to drive backlist pull‑through .
- Balance sheet and liquidity actions: the unsecured revolver was upsized to $400m, supporting growth investments while returning excess cash to shareholders; FY25 guidance was reaffirmed .
What Went Wrong
- Quarterly results were “lower than a year ago, primarily reflecting the timing of this year’s publishing releases,” with Trade and Book Fairs revenue deferred into December and later quarters .
- Book Fairs revenue declined 5% as more fairs shifted to December; revenue per fair slipped slightly due to the mix of smaller fairs; late Thanksgiving and hurricanes in the South also reduced Q2 fair count .
- Education Solutions revenue fell 12% and swung to a small operating loss on continued softness in supplemental curriculum spending as schools adopt core programs .

Financial Results

Summary results vs prior quarter and prior year:

Metric	Q2 FY2024	Q1 FY2025	Q2 FY2025
Revenue ($m)	$562.6	$237.2	$544.6
Operating Income ($m)	$101.3	$(88.5)	$74.7
Diluted EPS (GAAP)	$2.45	$(2.21)	$1.71
Diluted EPS ex. one‑time	$2.45	$(2.13)	$1.82
Adjusted EBITDA ($m)	$124.0	$(60.5)	$108.7

Wall Street consensus comparison (S&P Global):

Consensus estimates for Q2 FY25 revenue and EPS were unavailable in this session due to S&P Global data limits; therefore, we cannot compute a beat/miss. Attempted retrieval failed due to SPGI daily limit.

Segment breakdown (revenue and operating income):

Segment / KPI	Q2 FY2024	Q2 FY2025
Children’s Book Publishing & Distribution Revenue ($m)	$392.4	$367.0
• Book Fairs Revenue ($m)	$242.1	$231.0
• Book Clubs Revenue ($m)	$32.4	$33.2
• Consolidated Trade Revenue ($m)	$117.9	$102.8
CBPD Operating Income ($m)	$111.6	$102.1
Education Solutions Revenue ($m)	$81.0	$71.2
Education Operating Income ($m)	$5.8	$(0.5)
Entertainment Revenue ($m)	$0.4	$16.8
Entertainment Operating Income ($m)	$(0.8)	$(4.7)
International Revenue ($m)	$86.5	$86.7
International Operating Income ($m)	$8.0	$5.7

Cash flow and balance sheet KPIs:

KPI	Q2 FY2024	Q2 FY2025
Free Cash Flow ($m)	$88.6	$42.4
Net Cash (Debt) ($m)	$143.2	$(120.8)
Dividend Declared	—	$0.20 per share for Q3 FY25 (payable Mar 14, 2025)
Shares Repurchased (Q2)	—	185,378 shares for $5.0m

Drivers and context:

Entertainment segment operating loss included ~$2.4m of intangible amortization; excluding amortization, the operating loss would have been ~$1.5m .
International revenue was flat reported; ex‑FX, revenue declined 2% (Australia retail softness); International operating income declined with one‑time charges .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth	FY2025	+4% to +6% (July and Sept reaffirmed)	+4% to +6% (Dec reaffirmed)	Maintained
Adjusted EBITDA	FY2025	$140m–$150m (July and Sept reaffirmed)	$140m–$150m (Dec reaffirmed)	Maintained
Free Cash Flow	FY2025	$20m–$30m (Q4 FY24 outlook)	$20m–$30m (Dec reaffirmed)	Maintained
Book Fairs Fair Count	FY2025	On track to 90,000 fairs	On track to 90,000 fairs	Maintained
Dividend	Q3 FY2025	—	$0.20 per share (declared; payable Mar 14, 2025)	Announced

Additional qualitative outlook:

Management expects Q3 revenue and adjusted EBITDA growth YoY (timing benefits in Trade and School Reading Events) and a solid Q4 led by Sunrise on the Reaping and modest SRE growth versus a soft prior year .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q‑2 and Q‑1)	Current Period (Q2 FY25)	Trend
Entertainment market conditions	Streaming platforms pulled back on production budgets; planning for synergies and growth in FY26+	Operating loss in Entertainment; margins impacted by intangible amortization and production expenses; delayed greenlights industry‑wide	Stabilizing near‑term; synergy focus for FY26+
Education policy/funding	Push to science‑of‑reading pressured supplemental materials; investing for new product launches in 2025‑26	Monitoring potential U.S. policy changes; limited near‑term impact; longer‑term shift to state/local; focused on school choice/ESAs; new supplemental programs coming	Neutral near‑term; constructive longer‑term
Book Fairs (fair count/RPF)	Lower RPF vs record levels; growing fair count; targeting 90,000 fairs	Lower Q2 fair count due to bookings shifting to December; slightly lower RPF from more smaller fairs; late Thanksgiving/hurricanes impacted timing	Timing headwind in Q2; favorable setup for Q3
Direct‑to‑consumer/digital	Piloting direct‑to‑home channels; leveraging YouTube presence via 9 Story	Accelerating digital‑first production/monetization of IP on YouTube and ad‑supported platforms	Building momentum
State/community literacy partnerships	Growth seen in non‑school literacy partners; strategic opportunity	Optimistic on H2 driven by Florida “New Worlds Reading” initiative growth	Improving
Supply chain/tariffs	—	Low near‑term exposure; diversified sourcing reduces potential tariff/shipping risks	Managed risk

Management Commentary

CEO on Q2 setup and outlook: “Second quarter results were lower than a year ago, primarily reflecting the timing of this year’s publishing releases… we have reaffirmed our guidance for fiscal 2025” .
CEO on Book Fairs and pipeline: “Schools booked the largest number of fall fairs since the pandemic… Dog Man: Big Jim Begins… [is] the number one bestselling book… Sunrise on the Reaping [in March 2025]” .
CFO on guidance and 2H phasing: “We continue to expect revenue growth of 4% to 6%, and adjusted EBITDA of $140 million to $150 million… we expect revenue and adjusted EBITDA growth in [Q3]… [and] solid performance in [Q4] driven by Trade and modest SRE growth” .

Q&A Highlights

Entertainment margins: Operating loss was mainly driven by intangible amortization (~$2.3m) and production expenses; EBITDA backs out these items .
Dog Man film economics: 9 Story/Scholastic Entertainment had no involvement in the film production; expected benefits flow through book sales and backlist pull‑through, not Entertainment segment P&L .
Education policy risk: Management expects little impact in FY25; longer term, more decentralization to state/local with only ~13–14% of funding federal; business sells at district level .
State literacy partnerships: Optimism tied to expanding Florida “New Worlds Reading” program participation .
Leverage framework: Comfortable with current leverage; could modestly increase to support adjacencies; capital returns remain a priority .

Estimates Context

We attempted to retrieve S&P Global consensus for Q2 FY25 revenue and EPS, but the request failed due to SPGI’s daily limit; as a result, we cannot quantify beat/miss versus Street for this quarter in this session [SPGI retrieval error noted].
Management’s reaffirmed FY25 guide and explicit 2H commentary (Q3 growth; Q4 Trade catalyst) suggest estimates could pivot toward heavier 2H weighting in Trade/SRE and continued conservatism in Education Solutions given supplemental spending headwinds .

Key Takeaways for Investors

2H catalysts are strong: Dog Man (book and Jan film) and Sunrise on the Reaping (Mar) should lift Trade and support Q3/Q4 performance; management explicitly guides to Q3 revenue/EBITDA growth and a solid Q4 .
Q2 softness was largely timing‑related (shift of fairs/publication cadence) rather than demand destruction; fair count and pipeline commentary support recovery into Q3 .
Education Solutions remains a headwind near term as supplemental budgets lag core adoptions; new supplemental products launch for 2025‑26 to re‑accelerate in FY26 .
Entertainment adds revenue scale but near‑term margins are pressured by amortization and industry greenlight delays; synergy and digital monetization should matter more by FY26 .
Balance sheet and capital returns intact: upsized $400m revolver, continuing buybacks and a $0.20 dividend provide support during the investment phase .
Free cash flow was lower YoY in Q2 as inventory and interest rose, but seasonality and 2H catalysts should improve cash generation into year‑end within the $20–$30m FY25 FCF framework .
Risk watchlist: consumer pressure on Book Fairs revenue per fair, supplemental education spending recovery timing, and entertainment greenlight cadence; tariff exposure appears mitigated near term by earlier purchasing and diversified sourcing .

SCHOLASTIC CORP (SCHL)·Q2 2025 Earnings Summary