Scholastic Corporation

Good day and thank you for standing by. Welcome to the Scholastic Reports Q1 Fiscal Year 2025 Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I would now like to hand the conference over to your speaker today, Jeffrey Mathews.

Hello, and welcome everyone to Scholastic's fiscal 2025 first quarter earnings call. Today on the call, I'm joined by Peter Warrick, our president and chief executive officer, and Haji Glover, our chief financial officer and executive vice president. As usual, we posted the company investor presentation on our IR website at investor.scholastic.com, which you may download now if you've not already done so. We'd like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties, 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 GAAP measures may be found in the company's earnings release and accompanying financial tables filed this afternoon on a 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'd like to turn the call over to Peter Warrick to begin this afternoon's presentation.

Thank you, Jeff. And good afternoon, everyone. Thanks for joining us. I'd like to start by congratulating Jeff on his appointment as Scholastic's first Chief Growth Officer. In this new role, Jeff will refine and implement Scholastic's long-term growth strategy in partnership with his peers on our Management Executive Committee. He'll also continue to lead the company's investor relations and corporate development functions, as well as Scholastic's cross-company corporate sustainability and impact program. Jeff's deep knowledge of Scholastic and our industry, as well as 30 plus years of experience in strategy, M&A and investor relations, has already had a profound impact here since Jeff rejoined, as the company has prioritized growth, capital allocation and long-term shareholder value. I'm thrilled to have Jeff now also leading the development and implementation of growth initiatives across Scholastic, building on the long-term growth strategy and targets he's helped us to create. With that, I'll turn to our quarter one overview. Scholastic began fiscal 2025 preparing for the important back-to-school season, positioning the company in the school year ahead for yet another opportunity to bring the excitement of books, reading and stories to millions of kids and families while supporting schools and educators. During the first quarter, we continued to execute on our most compelling long-term growth initiatives. We invested to reinforce and build upon the unique strengths of our children's books and education businesses while advancing our growth strategy as a global children's media and content company with trusted and critically acclaimed publishing, a growing slate of exciting media properties in development and production, and early wins arising from our acquisition of Nine Story Media Group. First quarter revenue rose year over year on the addition of Nine Story and the seasonal operating loss improved. As a reminder, Scholastic typically records operating losses in the quiet first and third quarters, which coincide with summer and winter school breaks in the United States. During the quarter, we returned over $10 million to shareholders through a combination of open market share repurchases and our regular dividend. We remain confident in our outlook and are affirming our fiscal 2025 guidance. We continue to target modest top-line and bottom-line growth, reflecting the partial year contribution of Nine Story Media Group. We look forward to an important year ahead as we execute on our plan and advance long-term growth initiatives. We remain committed to our capital allocation priorities, investing in our most compelling growth opportunities and returning capital to shareholders. Now, with that, I'll turn to the highlights across our business segments. In its seasonally smallest quarter, children's books revenue continued to grow. Our school reading events division, which combined our book fairs and book clubs channels a year ago, produces minimal revenues during the first quarter when schools are not in session, but was busy over the summer preparing for the new school year. We remain focused on delivering the joyful celebration of reading that only scholastic book fairs can bring as we invest in this business for long-term growth. Continued category optimization, new case types, and strategic value pricing should all contribute to our performance this year and beyond. Fall fair bookings have been strong, and we remain on track to achieve our target of 90,000 fairs in fiscal 2025. In book clubs, initial responses to this fall's promotions indicate that the new strategies implemented for this back to school season are generating higher teacher and sponsor participation. After strategically transitioning book clubs to a smaller, more profitable core business in fiscal 2024, we're now in the process of reengaging loyal customers and revitalizing the strategic channel to teachers and families. While we expect the same headwinds we saw last spring, we're confident that school reading events, which raised approximately $200 million in cash and in-kind value last year for schools and teachers, is strongly positioned for the long term and remains as differentiated and relevant as ever. In trade publishing, we continued to execute well in a retail book selling market that was down slightly year over year per Sakana BookScan. First quarter was a relatively quiet quarter for our domestic trade publishing division versus a year ago, when sales in the quarter benefited from the release of the paperback edition of the fourth title in the Hunger Games series ahead of the title's movie release. Importantly, Scholastic's critically acclaimed publishing continued to successfully engage young readers last quarter, with multiple Scholastic published front and backlist titles maintaining their presence across the New York Times children's series, picture book, middle grade, and graphic novel bestseller lists. In quarter one, newly released successes included Aaron Blabe's latest title in the Bad Guys series, Bad Guys in the Serpent and the Beast, When We Flew Away by best-selling author Alice Hoffman, Karen's Sleepover, the latest graphic novel in the Babysitter Club Little Sisters series, and Unico Awakening, our first title in the new kid-friendly manga series. We also sell strong results from Pokemon Super Duper Extra Deluxe Handbook and the official Goosebumps coloring book ahead of the second season of the Goosebumps series for Disney+. Looking at this fall and quarter two, we're excited to be publishing, in time for the holiday season, additional new titles from best-selling global franchises, including the final book in Aaron Blaby's Bad Guys series and Christmas at Hogwarts, a picture book that will delight Harry Potter fans of all ages. Given the timing of this year's publishing plan compared to a year ago, our publishing division will face another difficult year-over-year comparison in quarter two. We continue to expect the releases of highly anticipated new Dogman and Hunger Games titles in the second half of the fiscal year to benefit full-year revenues. In our newest reportable segment, Scholastic Entertainment, the recent edition of Nine Story, which closed in June, positively contributed to revenue and EBITDA in the first quarter. Scholastic continued to advance its evolution as a global children's media company, expanding our ability to reach more kids where they are and profitably participate in the full lifecycle of our children's franchises and IP. Development and production continue to move forward on major projects. This fall, we are taking to market the first Magic School Bus series for preschool and an updated Clifford animated series. We also look forward to announcing soon the launch date of Goosebumps Season 2, airing on Disney+. These core Scholastic brands have significant upside for Scholastic as we leverage Nine Stories licensing and merchandising sales teams. We're taking advantage of early opportunities to monetize and expand the reach of classic Scholastic IP on advertising supported distribution platforms. In quarter one, we launched the magic school bus on Tubi, where it became one of our top performing properties. We also stood up a new Clifford classic channel on YouTube in the US with viewership showing positive momentum. We look forward to updating you on upcoming developments as we prepare for growth through synergies with Scholastic's existing print and media properties in fiscal 26 and beyond, while building on core properties in fiscal 2025. Turning to education solutions, first quarter sales declined year over year, reflecting lower curriculum and collection sales, primarily related to lower spending on supplemental curriculum products as school districts focus on adopting and implementing new English language art core programs. With spending on supplemental curriculum pressured in the near term, we move forward with investments in updated and new literacy programs that leverage Scholastic's content and align with current literacy instruction. We continue to anticipate these new products will contribute to growth beginning in fiscal 2026. Looking ahead, we expect lower sales trends in this segment to continue in the second quarter ahead of an anticipated larger and more profitable fourth quarter. We forecast growth in sales to state and community literacy partners in the second half of fiscal 2025, driven by expanded participation in state sponsored programs as our partners continue investing to improve kids access to books outside of school. And finally, in international, revenues were in line with prior year. We continue to expect modest growth in major markets and operational improvements in Canada to drive further improvements in operating margins and contribution relative to fiscal 2024. And with that, I'll turn the call over to Hadji to review our fiscal 2025 first quarter results.