Scholastic Q2 Earnings Call Highlights

Scholastic (NASDAQ:SCHL) reported solid fiscal 2026 second-quarter results, citing strength in its back-to-school season, continued momentum in key publishing franchises, and progress on cost reductions and strategic initiatives. Management also highlighted the closing of two sale-leaseback transactions that generated more than $400 million in net proceeds and prompted an expanded share repurchase authorization.

Second-quarter results and profitability trends

Chief Financial Officer Haji Glover said second-quarter revenue rose 1% year over year to $551.1 million, while operating income increased to $95.0 million from $78.9 million. Adjusted EBITDA improved to $122.5 million versus $108.7 million a year earlier, which management attributed in part to ongoing cost-saving initiatives. Net income was $66.3 million compared with $52.0 million in the prior-year period.

On a per-share basis, adjusted earnings increased to $2.57 per diluted share from $1.82 a year ago. Glover noted that the second quarter is typically one of the company’s more profitable periods as school-based channels ramp during back-to-school season.

Children’s Book Publishing: book fairs lead; book clubs softer

In the Children’s Book Publishing and Distribution segment, second-quarter revenue increased 4% to $380.9 million, driven by book fairs and trade publishing. Segment adjusted operating profit rose to $108.8 million from $102.1 million.

Book Fairs revenue grew 5% to $242.0 million. Management pointed to higher fair count and increased revenue per fair, alongside lower cancellations and higher e-wallet usage. CEO Peter Warwick said the company continues to pursue initiatives designed to “profitably grow fairs,” including expanding the addressable market, improving selling effectiveness, introducing new fair formats, and using pricing optimization in merchandising.

By contrast, Book Clubs revenue declined to $28.5 million from $33.2 million, which management attributed to lower teacher sponsors and evolving classroom engagement patterns. Glover said the company anticipates these trends continuing into the spring season.

Trade publishing and franchise performance

Trade Publishing revenue rose 7% to $110.4 million, supported by new releases across major franchises. Warwick highlighted Dav Pilkey’s “Dog Man: Big Jim Begins” (the 14th title in the series), which debuted as the number one best-selling title across adult and children’s categories in the U.S. on November 11 and had sold over 2 million print copies. He also cited strong performance for other franchise titles, including “Sunrise on the Reaping” in the Hunger Games universe, the Harry Potter series boosted by a new interactive illustrated edition of “The Goblet of Fire,” and Wings of Fire, including the prequel “Darkstalker.”

Looking ahead, management reiterated that trade publishing is expected to be in line with the prior year on a full-year basis. Glover noted that the fiscal 2026 publishing schedule is weighted more toward the second quarter compared with the prior year, which benefited from major releases later in the year.

Entertainment, Education, and International results

Scholastic’s Entertainment segment posted revenue of $15.1 million versus $16.8 million a year ago, which Glover said was “primarily driven by fewer episode deliveries.” Segment adjusted operating loss improved slightly to $3.6 million. Warwick said the company began production on three premium animated series with major media partners during the quarter and described that activity as a sign of improving greenlight momentum. He also pointed to growth in digital distribution, including YouTube performance and early traction for Scholastic TV.

Warwick said that since an August update to add Scholastic branding across YouTube channels, the company has reached more than 253 million views and over two million subscribers across Scholastic channels. He added that Scholastic TV, launched in September, had recorded more than 350,000 downloads, 3.5 million views, and over 64 million minutes watched to date.

In Scholastic Education, revenue declined to $62.2 million from $71.2 million due to a “challenging funding environment,” including delayed federal disbursements and slower district decision cycles. Segment adjusted operating loss widened to $1.3 million from $0.5 million. However, management emphasized that reorganization initiatives and cost reductions helped offset lower sales, and said the company was seeing improvement in its second-half pipeline.

International segment revenue rose to $89.5 million from $86.7 million, with management citing contributions from the new Dog Man title and other franchises. Segment adjusted operating income increased to $12.8 million from $7.1 million, reflecting higher revenue and operational efficiencies.

Sale-leasebacks, capital returns, and updated outlook

Management emphasized capital allocation and liquidity following the closing of two sale-leaseback transactions involving owned real estate in New York City and Jefferson City distribution centers. Glover said the company expects net proceeds of over $400 million to be used in line with its priorities, including share repurchases. The board expanded the company’s open market share repurchase authorization to $150 million, and Glover said Scholastic expects to continue repurchasing shares as conditions allow, either in open market purchases or negotiated private transactions.

On leverage, Glover said the company expects to initially pay down its revolving credit facility and aims to return to “moderate” leverage, which he described as historically being “right around one and three quarters.” At quarter-end, Scholastic had $275 million of borrowings under its unsecured revolving credit facility and net debt of $186.6 million.

For guidance, management said it affirmed its fiscal 2026 adjusted EBITDA and free cash flow outlook before the impact of the sale-leasebacks. Adjusting for a partial-year impact of the transactions, Scholastic now expects adjusted EBITDA of $146 million to $156 million, including an estimated $14 million partial-year benefit. For free cash flow, the company updated its outlook to exceed $430 million, reflecting the real estate proceeds, compared with its prior expectation of $30 million to $40 million.

Glover also said the company continues to expect approximately $10 million of incremental tariff expense in cost of product this fiscal year, and management indicated it expects fiscal 2026 revenue to be level with or slightly above the prior year, with growth in school reading events and entertainment partly offset by modestly lower trade and international revenue comparisons in the second half.

About Scholastic (NASDAQ:SCHL)

Scholastic Corporation (NASDAQ: SCHL) is a global company dedicated to children’s publishing, education technology and distribution services. The company’s core business encompasses three primary segments: Children’s Book Publishing and Distribution, Education Technology, and International operations. Through its publishing arm, Scholastic produces and distributes a wide range of children’s books, novels, nonfiction titles and classroom magazines under well-known imprints such as Scholastic Press, Graphix and Chicken House.