Scholastic Corporation

Thank you for standing by and welcome to Scholastic's first quarter fiscal 2022 earnings call. At this time, all participants are in a listen-only mode. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Senior Vice President, Treasurer, and Head of Investor Relations, Gail Dickoff.

Thank you and good afternoon. Welcome to Scholastic's first quarter fiscal 2022 earnings call. Joining me on today's call are Peter Rorick, Scholastic's president and chief executive officer, and Ken Cleary, our chief financial officer. We have posted an investor presentation on our IR website at investor.scholastic.com, which we encourage you to download if you have not already done so. I'd like to point out that certain statements made today will be forward-looking. Such forward-looking statements are subject to various risks and uncertainties, including those arising from the continuing impact of COVID-19 on the company's business operations. These forward-looking statements, by their nature, are uncertain, and actual results may differ materially from those currently anticipated. In addition, we will be discussing some non-GOT financial measures as defined in Regulation G, and the reconciliations of those measures to the most directly comparable gap measures can be found in the company's earnings release filed this afternoon on the Form 8K, which has also been posted to our investor relations website. We encourage you to review the disclaimers in our press release and investor presentation and to review the risk factors contained in our annual and quarterly reports filed with the SEC. If you have any questions after today's call, please send them directly to our IR email address, investor underscore relations at scholastic.com. And now I would like to turn the call over to Peter Warrick to begin this afternoon's presentation.

Good afternoon, everyone, and thank you for joining the call today. Back to school is always an important time at Scholastic, and this year that's no different. In fact, it may be one of the more important moments in our history. For many students and teachers, it's been nearly two years since they entered a classroom together. Just this past week, I reached out to more than two million of our nation's teachers with a message and a promise to them that Scholastic is not only a constant that they can rely on, but that we're eager to be side by side with them, meeting their real time reading, literacy and learning needs. As one teacher responded, and I quote, every day is a new opportunity for my students to start and learn new things as they missed so much last school year. All of us at Scholastic couldn't agree more. As the first quarter of our new fiscal year showed, we've nimbly supported educators, families and children in literacy and reading. While this is historically a relatively quiet quarter for the company, we worked with fervour and a clear focus to increase access to books and reading over the summer. and then seamlessly shifted to back-to-school offerings to help support learning acceleration and social-emotional healing. All of these efforts led to a 21% increase in revenue versus prior year and an improvement in our seasonal first-quarter operating loss, which was reduced by 44% compared to the same period last year. Trade publishing and education solutions in particular drove positive results for the company. and we anticipate continued strength in both of these areas going forward. Ken will go into further details around our first quarter results, but overall, we're pleased that the momentum reported in our business from the close of fiscal year 2021 has largely continued, and we're optimistic about this fall. At the same time, while we're encouraged to see so many children around the world returning to the classroom, we're staying in close contact with our school partners to ensure that we're well positioned to respond to any changes in the landscape as the pandemic lingers. In our all-important school distribution channels, the summer's traditionally less active for our company. However, in this unusual year, we use this time period as a pulse check to gauge how our customers feel about the fall. We know teachers are stepping up to create safe and welcoming environments for their students, even as they have concerns around their own well-being and making up for lost time. In recent weeks, we've seen higher engagement from our book club's teacher sponsors, and in our book fairs, we've seen higher revenue per fair. School communities see these experiences as critical pieces of the return to normalcy and supportive of their learning goals. as a child's sense of personal choice around books is an empowering experience that uniquely engages them in reading, and that's leading to an energy and appetite to host fairs, with fall bookings running ahead of management's expectations. Overall, we continue to expect incremental improvements in our number of case fairs held and remain cautiously optimistic. In our trade publishing, our exemplary track record continues with top-line growth increasing 27% in fiscal 22 quarter one compared to fiscal 21 in the same timeframe. Our content continues to resonate with a success bolstered by creative marketing and publicity. We're also benefiting from strengthened connections to parents as a result of the company's pivots to support families during COVID. Among our recent successes, Time named three scholastic titles to their list of the 100 best young adult books of all time, and Brian Selznick's forthcoming book, Kaleidoscope, received a shining review in the New York Times just last week. We're also eager to see families fall in love with J.K. Rowling's forthcoming book, The Christmas Pig, to be published in October. This title, based on pre-sales, is already a leading bestseller on the Amazon holiday list. Our expertise in helping children navigate the world around them is also evident by the continued success of titles such as Refugee, from Alan Gratz, and his latest, Ground Zero, which was published in advance of the 20th anniversary of 9-11. And there remains no doubt that Dogman and our Graphics Babysitters Club are cemented as popular draws. Finally, our strategic growth around leveraging our powerful IP continues to gain traction. Poppy Place, a live-action scripted series based on our best-selling series of the same name by Ellen Miles, premieres October 15th on Apple TV+. On the heels of an impressive year, our now formally combined education solutions segment reported an increase in revenue of 49% versus the prior year period. This new structure brings all the key strengths of our multiple channels within the segment to the forefront. Rose L. Smichel has formed a leadership team that now includes our new Chief Academic Officer, former Interim Chancellor of DC Public Schools, Dr. Amanda Alexander, as well as fresh expertise in product development and digital marketing to help design and position solutions to meet the immediate needs of educators while planning for the future growth. While keeping the benefits of our tried and true whole school and classroom library collections, which pivoted exceptionally well during the pandemic with grab-and-go packs, we also saw high performance from our digital product suite, which now includes a universal access teacher dashboard, as well as a new bilingual and blended pre-K curriculum. And responding to the needs of a hybrid market, our K-12 classroom magazines have continued to innovate, and are rebranded as Scholastic Magazines Plus, signaling to our customers the increasingly flexible and desirable mix of both print and digital features, as well as instructional tools to use in person or remotely. All of this is unfolding against the backdrop of landmark federal funding for K-12 schools to support the learning acceleration of our students. In international, a decrease in revenue this past quarter is a reflection of how and where COVID has caused new or continued disruptions. Similar to the US, we anticipate that as restrictions lift, our recovery will resume in these disrupted areas and we'll simultaneously continue to focus on our growth opportunities in Asia. I spent the past two months listening to my colleagues and deeply engaging in my new role as CEO. As I had been inspired by the Scholastic mission during my tenure as a board member, I now stand impressed by what I've witnessed firsthand from our employees in their day-to-day work. We're committed to our mission. We have a parallel content, proprietary distribution, and we have deep relationships, all making our company unique in our ability to serve children. In this coming year, we're energized to meet the clear demand we're seeing for our offerings. It's evident that while we won't reach pre-pandemic levels in the near term, book fairs are on the rise and educators are eager to refresh their classroom libraries through our collections as well as through our clubs, and they're delighted by our expanded offerings. While we'll need to navigate ongoing industry-wide challenges that could potentially affect our performance, such as labour shortages, supply chain issues, paper procurement and both inflationary and COVID-related pressures, We continue to believe that our previous cost-saving actions and identification of strategic measures will significantly mitigate these effects. Finally, I'd like to welcome our newest board member, Fidel Walker, Head of Kids Audio Content at Spotify Inc., elected yesterday during our annual shareholders meeting. Vidal brings a shared passion for brilliant content creation for children and a prominent career in the area of children's entertainment and media. A point of view and eye for modernization will surely be a beneficial addition to our board. And with that, I'd like to turn the call over to Ken Cleary.