Scholastic Reports Fiscal 2020 Second Quarter Results

Operating Income Rises 7%; Affirming Full-Year Guidance

New York – December 19, 2019 – Scholastic Corporation (NASDAQ: SCHL), the global children’s publishing, education and media company, today reported financial results for the Company’s fiscal second quarter ended November 30, 2019.

“In the second quarter, Scholastic continued to stand out as the world’s leading children’s book publisher and distributor, at a time when the category is viewed as the most stable part of the market, with our new titles and series performing at the top of bestsellers’ lists,” said Richard Robinson, Chairman, President and Chief Executive Officer. “Trade revenues grew 8% despite difficult comparisons with last year. Book fairs increased revenues in a more competitive environment in this important back-to-school period. With actions taken to improve fair quality and selection, and the introduction of our e-Wallet digital payment option at more fairs, we saw an increasing number of transactions per fair. With additional steps taken to contain costs, fair profitability increased. While book clubs sales declined due to a lower number of teacher sponsors and the effect of sales tax collection, significant cost reductions largely mitigated the impact on club profitability in the quarter. Internationally, we saw growth in China in local currency terms, where we continue to expand our position as a leading provider of educational books for English language learning.”

Mr. Robinson continued, “Based on our overall year-to-date results and margin improvements from the on-going Scholastic 2020 process, we expect to remain on plan for the year, and are therefore affirming our guidance for revenues and adjusted EBITDA.”

Second quarter revenue was $597.2 million, a decrease of 1% compared to $604.7 million in the second quarter of 2019. Despite a decline in book clubs sales, revenue grew in book fairs, classroom collections and consulting services in Scholastic Education, Asia trade and education, and U.S. trade, which now includes the fully consolidated results of Make Believe Ideas. The Company’s trade channels performed well comparatively, especially in light of last year’s blockbuster release Fantastic Beasts™: The Crimes of Grindelwald, as well as the viral sensation, The Wonky Donkey, which together accounted for nearly $13 million in net sales in the prior year period. Top selling frontlist titles released in the current year period included Raina Telgemeier’s Guts, Alan Gratz’s Allies, Maggie Stiefvater’s Call Down the Hawk (The Dreamer Trilogy, Book 1), The Dinky Donkey, and Harry Potter and the Goblet of Fire: The Illustrated Edition.

Operating income in the second quarter was $105.1 million, a 7% increase as compared to $98.2 million a year ago, mainly attributable to process improvements in the Company’s book fairs operations, better cost management in clubs, and lower technology-related overhead expense. Excluding one-time items, operating income in the second quarter was $107.0 million, up 4% from the prior year period’s operating income of $102.9 million. 

The impact of foreign exchange on the Company’s international businesses resulted in a $1.9 million reduction in revenues versus the prior year period. 

Net income for the current period was $71.0 million, which approximated net income in the prior year period of $71.6 million. Earnings per diluted share in the second quarter was $2.02 compared to earnings per diluted share of $1.99 in the second quarter of 2019. Excluding one-time items, second quarter 2020 earnings per diluted share was $2.06, compared to $2.09 in the second quarter of 2019. 

Earnings before taxes for the quarter ended November 30, 2019 was $104.9 million compared to earnings before taxes of $98.4 million in the second quarter of the prior fiscal year, primarily reflecting lower selling, general and administrative expenses in Children’s Book Publishing and Distribution and lower technology services staffing in overhead for the current year period. Adjusted EBITDA (a non-GAAP performance measure defined in the accompanying tables and reconciled to net income) for the second quarter of 2020 was $129.3 million, compared to $123.2 million in the second quarter of 2019, a 5% improvement. The Company believes that Adjusted EBITDA is a meaningful measure of operating profitability and useful for measuring returns on capital investments over time as it is not distorted by unusual gains, losses, or other items, such as share repurchases.

Cash Flow and Cash Position

Net cash provided by operating activities was $111.9 million in the current fiscal quarter compared to net cash provided by operating activities of $128.5 million in the second quarter of fiscal 2019. The Company had free cash flow (a non-GAAP liquidity measure defined in the accompanying tables and reconciled to net cash use) of $87.7 million in the current quarter, compared to a free cash flow of $93.5 million a year ago, mainly as a result of higher working capital usage and a reduction in payables.

At quarter end, the Company's cash and cash equivalents exceeded its total debt by $261.7 million, compared to $344.6 million a year ago. The lower net cash position is primarily due to planned capital spending on technology investments aligned with the Company’s Scholastic 2020 growth initiatives, higher royalty advances, and the continued use of the strong balance sheet to support favorable negotiations with strategic suppliers, resulting in a significant reduction in accounts payable. The Company also distributed $5.2 million in dividends and reacquired $7.1 million of its common stock in open market transactions over the course of the second fiscal quarter.

Capital expenditures in the second quarter were $17.2 million, $6.0 million lower than the prior year period, as expected, due to lower outlays for facilities upgrades and book fairs’ new point-of-sale system deployment. 

Fiscal 2020 Outlook Affirmed

The Company remains on course to achieve its operating goals for the 2020 fiscal year and is affirming its outlook for revenues in the range of $1.67 to $1.70 billion, up from $1.65 billion in fiscal 2019, and Adjusted EBITDA (as defined in the accompanying tables) of $140 to $160 million, up from $121.3 million in fiscal 2019. The Company’s long-term capital investment plan also remains on target with planned capital expenditures of $75 to $85 million in fiscal 2020, compared to $95.0 million in fiscal 2019.

Segment Results

All comparisons detailed in this section refer to operating results for the second quarter ended November 30, 2019 versus the second quarter ended November 30, 2018.

Second quarter revenues fell $4.3 million, or 1%, to $413.6 million, driven by a decline in sponsorship levels coupled with lower revenue per sponsor in the Company’s book clubs channel. Sales in the Company’s trade channel grew 8%, which now includes fully consolidated Make Believe Ideas results, and book fairs increased 2%, both versus the prior year period. While book fairs had lower planned fair count in the quarter as it continued its successful management of data-driven fair scheduling in peak periods, the number of transactions per fair and revenue per fair were both higher year-over-year. Trade’s new frontlist titles sold well in the quarter while media and entertainment saw increased revenues tied to its new Clifford® animated programming on Amazon Prime and PBS KIDS. Segment operating income improved by $3.3 million, or 3%, to $109.6 million, mainly reflecting lower operating expenses in the Company’s club and fairs channels driven by new technology and data capabilities, and business process improvements, as well as increased sales tax collections in clubs.

For the current quarter, segment revenue was $69.9 million, compared to $71.5 million a year ago, a 2% decrease, primarily the result of lower revenues in the segment’s national partnership program. This drop was partially offset by revenue growth in classroom book collections and in professional learning consulting services. Segment operating income was $6.2 million, a $2.1 million, or 25%, decline versus the prior year period, partially driven by higher amortization expense associated with Scholastic Literacy, the Company’s comprehensive approach to core literacy instruction for grades K-6, as well as its digital subscription components. 

Second quarter revenue was $113.7 million, a $1.6 million decline from the prior year period. Excluding the $1.9 million unfavorable impact of foreign exchange in the current fiscal quarter, segment revenues were marginally higher in the current period with growth in Australia/New Zealand and in China, Korea and India. The segment’s core digital learning products, Scholastic Literacy Pro and Scholastic Literacy Pro Library, registered an increase in active users across key markets in Asia in the quarter.  Operating income for the quarter was $11.7 million, a decrease of $1.3 million, as compared to the prior year period, partially reflecting lower revenues in Canada and higher costs in Asia. 

Corporate overhead for the second fiscal quarter was $20.5 million, excluding one-time items of $1.9 million, pre-tax, which compared favorably with the $24.7 million recorded in the prior year period, after excluding $4.7 million in one-time items. The lower overhead expense in the current fiscal quarter was primarily due to favorable staffing levels and lower contracted services in the Company’s technology operations, as planned. Non-recurring items reflected in overhead in the current period included $1.0 million resulting from a settlement relating to an intellectual property producing agreement and $0.9 million in pre-tax severance.  

Year-to-Date Results

For the first six months of fiscal 2020, revenue was $829.8 million, compared to $823.1 million in the prior year period, an increase of $6.7 million, or 1%. The Company reported earnings per diluted share in the first six months of the fiscal year of $0.35, compared to $0.29 a year ago. Excluding one-time items of $0.13 and $0.11 per diluted share, respectively, the Company’s earnings per diluted share was $0.48 in the first six months of fiscal 2020 versus $0.40 in the prior year period. The favorable current period’s results are mainly attributable to robust trade sales globally in the first six months of fiscal 2020, and higher margin contribution from the Company’s U.S. book fairs operations. 

Adjusted EBITDA (as defined) for the first six months of fiscal 2020 was $68.3 million, compared to $58.7 million in the first six months of fiscal 2019, an increase of $9.6 million, or 16%, and primarily the result of higher reported earnings and higher depreciation and amortization in the current year period.

Net cash provided by operating activities was $14.3 million in the first six months of the current fiscal year compared to $39.5 million in the same period last year. The Company had a free cash use (as defined) of $30.8 million in the current fiscal year-to-date, compared to a free cash use of $32.4 million in the prior year period. The current year-to-date’s free cash use includes $30.7 million in capital expenditures and $14.4 million in net prepublication and production spend.  


As previously announced, the Company's Board of Directors declared a quarterly cash dividend of $0.15 per share on the Company’s Class A and Common Stock for the third quarter of fiscal 2020. The dividend is payable on March 16, 2020 to shareholders of record as of the close of business on January 31, 2020.

Additional Information

To supplement our financial statements presented in accordance with GAAP, we include certain non-GAAP calculations and presentations including, as noted above, “Adjusted EBITDA” and “Free Cash Use”. Please refer to the non-GAAP financial tables attached to this press release for supporting details on one-time items and the use of non-GAAP financial measures included in this release. This information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

Conference Call

The Company will hold a conference call to discuss its results at 4:30 p.m. ET today, December 19, 2019. Scholastic’s Chairman, President and CEO, Richard Robinson, and Kenneth Cleary, the Company’s Chief Financial Officer, will moderate the call.

The conference call and accompanying slides will be webcast and accessible through the Investor Relations section of Scholastic’s website, Participation by telephone will be available by dialing (877) 654-5161 from within the U.S. or +1 (678) 894-3064 internationally. Shortly following the call, an archived webcast and accompanying slides from the conference call will also be posted to the Company’s investor relations webpage at An audio-only replay of the call will be available by dialing (855) 859-2056 from within the U.S. or +1 (404) 537-3406 internationally, and entering access code 8489087. The recording will be available through Friday, December 27, 2019.

About Scholastic

Scholastic Corporation (NASDAQ: SCHL) is the world's largest publisher and distributor of children's books, a leading provider of literacy curriculum, professional services and classroom magazines, and a producer of educational and entertaining children's media. The Company creates and distributes quality books and e-books, print and technology-based learning programs for pre-K to grade 12 and other products and services that support children's learning and literacy both in school and at home. With 15 international operations and exports to 165 countries, Scholastic makes quality, affordable books available to all children around the world through school-based book clubs and book fairs, classroom libraries, school and public libraries, retail and online. True to its mission of 99 years to encourage the personal and intellectual growth of all children beginning with literacy, the Company has earned a reputation as a trusted partner to educators and families. Learn more at

Forward-Looking Statements

This news release contains certain forward-looking statements relating to future periods. Such forward-looking statements are subject to various risks and uncertainties, including the conditions of the children’s book and educational materials markets and acceptance of the Company’s products within those markets, and other risks and factors identified from time to time in the Company’s filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated.

SCHL: Financial
Contact: Scholastic Corporation
Investors: Gil Dickoff, (212) 343-6741
Media: Anne Sparkman, (212) 343-6657

Click here for a PDF version of this release with tables.