“Building on the momentum in the first three months of the fiscal year, we had a strong second quarter with the book fairs channel leading the way and outperforming management’s expectations. The number of in-person book fairs is approximately 70% of pre-pandemic levels and revenue-per-fair has been better than anticipated,” said Peter Warwick, President and Chief Executive Officer. “Our education solutions business has seen higher sales of physical and digital product for both curriculum and supplemental materials including PreK On My Way and our new Rising Voices offering, which provides culturally relevant texts celebrating the stories of the historically underrepresented.”

 

“While we are facing cost pressures in our supply chain and labor pools, and some of our international businesses continue to be adversely affected by COVID-related restrictions, we remain optimistic in our ability to generate strong free cash flow and sustainable value for all of our stakeholders in large part due to our previous digital and infrastructure investments. These investments have brought increased sophistication to our data analytics which we are utilizing to balance printing capacity constraints against top selling products, asses rising overseas freight costs compared to domestic manufacturing, and optimize revenue per fair based on available inventory and resource capacity. Our award winning books, exceptional education materials and successful on-screen adaptations continue to drive demand for the rich content we produce across all of Scholastic’s businesses.” 

 

 

Consolidated revenues increased 29% to $524.2 million in the second quarter versus the prior year period, primarily driven by higher revenues in the U.S. book fairs and education channels. With schools back in session, the demand for in-person book fairs returned and the Company experienced higher than expected revenue per fair. Comprehensive instruction offerings, including PreK On My Way^TM, and professional learning services continued to drive revenue in the quarter, however the primary driver was revenues from the Company’s new Rising Voices Library^® offering which meets the increasing demand for culturally responsive content and instruction. The book clubs channel experienced a 10% increase in revenue per event, but due to industry-wide labor shortages and a discrete systems issue in the Company’s fulfillment operations, revenues fell short of prior period due to an increase in backlog. The trade channel continues to perform well with the release of Cat Kid Comic Club^®: Perspectives, the second title in the bestselling series by Dav Pilkey, and J.K. Rowling’s The Christmas Pig. Internationally, Canada performed well in the quarter with higher revenues in all channels and the UK remained relatively consistent when compared to the prior period. However, Australia and New Zealand experienced additional lockdowns during their school year resulting in lower revenues and the Asia markets continued to be impacted by COVID-related shutdowns and recently adopted restrictive regulations in China. 

 

 

Second quarter operating profit improved 71% to $83.4 million versus the prior year period primarily due to the favorable results in the U.S. book fairs channel and the higher revenues from the education solutions business. The Company also recognized a gain of $6.2 million on the sale of a facility located in Lake Mary, FL, as it continues to rightsize its real estate footprint to reduce occupancy costs. Operating income was partially offset by the lower book clubs revenue, the continued softness in the international markets due to ongoing issues with COVID and higher inflationary pressures in printing, paper, transportation and labor costs. Excluding one-time items in both periods, the Company had operating income of $84.3 million in the second quarter of fiscal 2022, compared to $54.3 million in the second quarter of fiscal 2021, an increase of $30.0 million, or 55%.

 

 

Net cash provided by operating activities was $78.0 million in the second quarter compared to $46.1 million in the prior year period, an increase of $31.9 million. The Company had free cash flow (a non-GAAP liquidity measure defined in the accompanying tables and reconciled to net cash provided) of $75.4 million in the second quarter compared to $30.9 million in the prior year period. As of November 30, 2021, the Company's cash and cash equivalents exceeded total debt by $286.4 million, compared to $161.8 million a year ago. The higher net cash position and the $44.5 million increase in free cash flow was primarily driven by the increase in revenues resulting in higher cash collections in the quarter compared to the prior period. 

 

During the quarter, the Company paid down the remaining $75.0 million in outstanding borrowings under its domestic revolving credit facility. On October 27, 2021, the Company entered into an amended and restated 5-year credit agreement which increased the borrowing capacity to $300 million and provides for an accordion feature to increase the facility by up to an additional $150 million. In September, the Company made a one-time cash payment of $20.0 million related to a previous disclosed legal matter for which the Company had already received $6.6 million in recoveries from its insurance programs during the first fiscal quarter. While the Company expects to receive additional recoveries from its insurance programs, it is premature to determine with any level of probability or accuracy the amount of those recoveries at this time. In October, the Company received cash proceeds of $10.4 million from the aforementioned sale of its Lake Mary facility. During the quarter, the Company entered into a purchase and sale agreement for its UK distribution center located in Witney and expects to recognize net cash proceeds of approximately $5.7 million from the sale in the fiscal fourth quarter.

 

The Company distributed $5.1 million in dividends over the course of the second quarter and reacquired $5.0 million of its common stock in fiscal year open market transactions to date. The Company will continue to evaluate capital allocations during the remainder of the current fiscal year. 

 

 

 

For the first six months of fiscal 2022, revenue was $784.0 million, compared to $621.4 million in the prior year period, an increase of $162.6 million, or 26%. The Company reported earnings per diluted share in the first six months of the fiscal year of $1.24, compared to a net loss per diluted share of $0.14 a year ago. Excluding one-time items of $0.07 and $0.39 per diluted share, respectively, the Company's earnings per diluted share was $1.17 in the first six months of fiscal 2022 versus earnings per diluted share of $0.25 in the prior year period. The favorable current period's results are mainly attributable to the recovery of the U.S. book fairs business, continued growth in the trade channel and the higher sales of the Company’s educational offerings.

 

Adjusted EBITDA (as defined) for the first six months of fiscal 2022 was a gain of $100.7 million, compared to a gain of $61.8 million in the first six months of fiscal 2021, an increase of $38.9 million, or 63%.

 

Net cash provided by operating activities was $141.6 million in the first six months of the current fiscal year compared to net cash provided by operating activities of $20.1 million in the same period last year. The Company had free cash flow (as defined) of $124.5 million in the current fiscal year-to-date, compared to free cash use of $4.0 million in the prior year period. The current year-to-date's free cash flow includes $18.8 million in capital expenditures and $8.7 million in net prepublication 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 second quarter of fiscal 2022. The dividend is payable on March 15, 2022 to shareholders of record as of the close of business on January 31, 2022. 

 

 

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 Flow”.  Please refer to the non-GAAP financial table attached to this press release for supporting details on the impact of one-time items on operating income, net income and diluted EPS, 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.

 

The Company will hold a conference call to discuss its results at 4:30 p.m. ET today, December 16, 2021. Peter Warwick, Scholastic’s President and Chief Executive Officer, 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, www.scholastic.com. 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 at investor.scholastic.com. 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 3080402. The recording will be available through Friday, December 24, 2021.

 

 

For more than 100 years, Scholastic Corporation (NASDAQ: SCHL) has been encouraging the personal and intellectual growth of all children, beginning with literacy. Having earned a reputation as a trusted partner to educators and families, Scholastic 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 bestselling 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. Learn more at www.scholastic.com.

 

This news release contains certain forward-looking statements relating to future periods. Such forward-looking statements are subject to various risks and uncertainties, including those arising from the continuing impact of COVID-19 related measures taken by governmental authorities, school administrators, or suppliers or customers which may curtail or otherwise adversely affect certain of the Company’s business operations, and the conditions of the children’s book and educational materials markets generally 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