McGraw Hill, Inc.

Hello and welcome to the McGraw-Hill Fiscal Third Quarter 2026 Earnings Conference Call for the quarter ended December 31st, 2025. All participants are in a listen-only mode. As a reminder, today's call is being recorded and a written transcript will be made available in the events and presentation section of the company's Investor Relations website. A webcast replay of today's call will also be made available on the company's investor relations website. Following the prepared remarks, we will open the call for questions. I would now like to turn the call over to your host, Danielle Cloblin, Treasurer and Senior Vice President, Investor Relations. Please go ahead, Danielle.

Good evening and welcome to McGraw-Hill's fiscal third quarter 2026 earnings call. Joining me today are Simon Allen, chair of the board of directors, Philip Moyer, president and chief executive officer, and Bob Solomon, executive vice president and chief financial officer. As announced on January 6th, 2026, Simon retired as president and CEO on February 9th and remains chair of the board. During today's call, we'll be making forward-looking statements about the company. These statements are based on our current expectations and the current economic environment. Forward looking statements, estimates, and projections are inherently subject to significant economic, competitive, regulatory, and other uncertainties and contingencies, many of which are beyond the control of management. These forward-looking statements are also subject to the cautionary statement that is included in our fiscal third quarter 2026 earnings release, the accompanying investor presentation, and our Form 10-Q for the fiscal third quarter 2026 and other filings with the SEC. Important assumptions and factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our earnings release issued today as well as in our SEC filings. We will also refer to certain non-GAAP measures today. We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. In the earnings press release, the appendix of the accompanying investor presentation, and as a supplemental file on our investor relations website, you can find a definition of these non-GAAP measures and reconciliations to their most directly comparable GAAP measures. For those who listened to the recording of this call, we remind you that the remarks made herein are as of today, February 11th, 2026, and have not been subsequently updated. With that, I'll turn the call over to the Chair of the Board of Directors, Simon Allen.

Thank you, Danielle, and good morning, everyone. It's an exciting time for McGraw-Hill as we continue to build momentum, deliver strong quarterly results, and position ourselves for a return to growth in fiscal year 2027. Revenue for the third quarter increased 4.2% year over year, driven by our higher education business, which continues to outperform the market. Reoccurring revenue grew 14.8% over prior year, representing 82% of total revenue, while digital revenue expanded 11%, representing 84% of total revenue. Adjusted EBITDA increased 7.7% versus prior year, yielding a margin of 31.3%. These fiscal Q3 results reflect strong execution and ongoing momentum, giving us the confidence to raise fiscal year 2026 guidance, which Bob will discuss shortly. Education is fundamental to society and our mission serves as our foundation, fueling our resilient, high-margin, cash-generative business model. How trusted content and innovative technology doesn't just deliver information, it empowers educators to engage learners with personalized experiences that enrich understanding and growth. Our multi layered mode built on intellectual property first party data fueled by billions of learning interactions each year and domain expertise across the learning lifecycle creates what we believe is a distinct competitive advantage at scale. Unlike generic AI. McGraw-Hill applies AI thoughtfully to improve learning outcomes, leveraging our multilayered mode to deliver evidence-based impact while saving educators valuable time. This approach is resonating. A recent study conducted by Morning Consult ranked us as the top education company for effectively utilizing AI recognized by both students and instructors. Before moving forward, I want to acknowledge my decision to retire as CEO and president. Leading this team of over 4,000 mission-driven employees to transform a legacy publisher into a market-leading digital education solutions provider, powered by the trust, innovation, and strong financial profile that you'll hear more about today, has been the greatest honor of my career. I will continue as chair of the board and will remain deeply engaged to ensure a smooth transition to Philip Moyer, who will lead the next chapter of LaCroix Hill's proud history. When the board and I began our search for my successor, we were looking for a seasoned CEO and technology leader who could not only appreciate our strong foundation, financial profile, and trusted brand, but also harness these strengths to fully capitalize on the enormous opportunities ahead for McGraw-Hill. We led a comprehensive search and I can say with absolute confidence that we found the right leader in Philip. Philip brings a wealth of experience from senior technology focused roles at Google, Amazon, Microsoft, and most recently the CEO of Vimeo. One of the many attributes that set him apart was his early career passion for using technology to envision the future of education. from his creation of a digital software solution to modernize the management of individualized education plans to the growth he led in the education sector while at Vimeo, we believe that Philip brings the perfect blend of operational excellence, strategic vision, and customer-centric technology expertise to honor the commitments we have made to grow profitably, to expand margins, and to achieve our two to two and a half times net leverage target. Philip, I'm extremely excited about our partnership. Welcome to McGraw-Hill.