Scholastic Corporation

Good day, and thank you for standing by, and welcome to the Scholastic Fiscal 2022 Third Quarter Earnings Call. At this time, our participants are in a listen-only mode. Please be advised, this call is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your host today, Paul Hukin, Chief Accounting Officer in Investor Relations. You may begin.

Hello and welcome everyone to Scholastic's fiscal 2022 third quarter earnings call. Joining me on the call today are Peter Warwick, our president and chief executive officer, and Ken Cleary, our chief financial officer. As usual, we have posted the accompanying investor presentation on our IR website at investor.scholastic.com, which you may download now if you've not already done so. We would 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 and its variants 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-GAAP financial measures, as defined in Regulation G. The reconciliations of those measures to the most directly comparable gap measures may be found in the company's earnings release and accompanying financial tables, filed this afternoon on Form 8K. This earnings release has also been posted to our Investor Relations website. We encourage you to review the disclaimers in the release and investor presentation and to review the risk factors disclosed in the company's annual and quarterly reports filed with the SEC. Should 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 Warwick to begin this afternoon's presentation.

Good afternoon, everyone, and thank you for joining the call today. While there's what we hope to be promising news in moving past the pandemic, we're of course deeply saddened and concerned by the events unfolding in Ukraine. As we've been for more than a century, we're focused on how we can support children in deciphering these challenging times. Our expert team of writers and editors at Scholastic Magazines Plus immediately created tailored materials to help teachers facilitate classroom conversations appropriately. We also have a number of trade book titles, such as Alan Grazzi's Refugee, which can be starting points for children, at home or in school, to begin to understand what this experience may be like for displaced families. We'll continue to listen to teachers, parents and children to learn what they need and execute our mission by being a timely and reliable resource for them. From an operations perspective, while our financial exposure is limited, we have suspended any business dealings with Russia. Turning to our third quarter of fiscal year 2022, a number of continuing themes drove positive momentum around Scholastic. Our intellectual property continues to lead the industry and in many cases crosses over audiences, regions and media. Increased demand for independent reading is bolstering our business. Book fairs are back and growing, providing a renewed sense of normalcy in schools. Loyalty to book clubs remains strong. A unified approach to the education business increased opportunity and has grown revenue. And finally, customers and stakeholders continue to turn to us, knowing that our committed and mission-driven employees will meet their needs as they re-emerge from the pandemic. Ken will provide greater detail as usual, but I'm pleased to share that revenues for the third quarter grew 24% to $344.5 million versus $277.5 million in the prior year period. Now I'd like to walk you through highlights from our segments this past quarter and areas that we're looking forward to in our all-important quarter four. In trade, as written about in Publishers Weekly, Dave Pilkey led a number of lists in 2021. Dogman, Mothering Heights, was the overall top-selling book, with more than one million copies sold. Dogman, Grime and Punishment also stayed strong. and the newest title, Cat Kid Comic Club Perspectives, was high in the hardcover frontlist category. In the same category, J.K. Rowling's The Christmas Pig came in at number five, and Harry Potter continues to rank well throughout the lists. We also have exciting activity in the world of film, TV and streaming. Aaron Blaby's The Bad Guys, a highly anticipated animated feature with DreamWorks, debuts in April. This series, which originated with us in Australia, remains an excellent example of the strength of our international book publishing to capture the attention of children throughout the world. And our own Scholastic Entertainment continues to bring our backlist intellectual property to the forefront, with a number of production announcements, such as the recently greenlit live-action series of Goosebumps with Disney+, and Season 2 of Stillwater on Apple TV. Overall, this activity not only raises the potential of our backlist, but also strengthens our opportunity for licensing. All of these engaging titles, in combination with a curated selection of books from publishers worldwide, translate into an unparalleled distribution channel in our fairs and clubs business. As we shared in December, our fairs come back in quarter two exceeded expectations, and we're pleased to report this positive trend has continued. We're maintaining 70% of our pre-pandemic levels of in-person fairs. Revenue per fair remains strong and it's been great to see the joy expressed by children and adults alike who are thrilled to have the fair's experience come back to their schools. As I noted earlier, our book club's business is seeing a clear demand for independent reading and continued loyalty from teachers. The negative impacts from the industry-wide labour shortage in our previously disclosed systems issue did impact quarter three. But I'm pleased to say that thanks to our diligent employees and management of the labour issue, our backlog from the fall is fully rectified and all critical systems issues have been addressed. While we mitigate any remaining issues, we've resumed our standard day-to-day processes and we're returning to the service levels our customers expect and deserve. Our dedication to the literacy journey for each child is what truly sets us apart in the industry. Our Education Solutions Division adds to that mission by creating high-quality book collections, reading curricula, and print and digital instructional tools for U.S. schools and districts. Our company was founded on magazines in 1921, and now, 101 years later, I think you'll be heart-pressed to find a magazine success story leveraging print and digital experiences comparable to Scholastic in relevancy and reach. This month, we announced an expansion of our titles to meet increased demand for high-quality materials. Magazines Plus launched pre-orders for the highly anticipated StoryWorks 1, which will first ship in fiscal 2023 and now creates a full line of StoryWorks English language arts titles for grades 1 to 6, making it an important whole school offering aligned to standards for any U.S. elementary school. Pairing our deep expertise in reading with our ability to involve keeps our magazine strong and profitable as we continue to advance from print into a highly interactive digital experience. Overall, our education solutions segment is performing ahead of expectations with continuing momentum around our curriculum and digital offerings. Summer reading remains at the forefront of needs among educators who are working to accelerate learning and to catch up from lost time due to the pandemic. The environment remains unpredictable due to both COVID and because of the varying size and accessibility of district and school funding channels. But our longevity and expertise, as well as our experience with market cycles, positions as well for the demanding quarter four, which is historically a high-volume period. In international, as I mentioned earlier, we continue to see strength in our publishing with standouts from Australia-based Aaron Blaby and the global response to US-based Dave Pilkey. In the UK, Tom Gates' latest title has performed well and his brand extends to Sky TV and merchandise. Outside of publishing, our international fairs and clubs businesses continue to work their way through the impact of COVID. In Asia, We're working closely with our franchise partners and our direct-to-home team to manage costs and better understand new regulations in China. Finally, a brief update on our cross-divisional collaboration, the New Worlds Reading Initiative, with the State of Florida and the University of Florida Lastinger Center for Learning. This past quarter, we surpassed the milestone of 100,000 children having signed up for home delivery of books to promote independent reading. This is a remarkable achievement in such a short time, with 350,000 books shipped since we started in December. To execute this five-year partnership, which we expect will only grow in its reach, we've opened a new distribution facility in Florida. Overall, Scholastic's positive results this fiscal year to date have benefited from the long-term effects of our previous investments in technology and infrastructure, as well as the enduring expertise and passion of our employees and the ongoing loyalty of our customers. We enter the final quarter of our fiscal year with strong and solid momentum driven by a thoughtful strategic vision rooted in our enduring educational mission. I look forward to sharing more with you in the future on forthcoming titles, initiatives and offerings. And with that, I'll now turn the call over to Ken.