Thank you for standing by, and welcome to the Scholastic Reports Fourth Quarter Fiscal Year 2024 Results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded.

And now, I'd like to introduce your host for today's program, Jeffrey Mathews. Please go ahead, sir..

Hello, and welcome, everyone, to Scholastic's fiscal 2024 fourth quarter earnings call. Today on the call, I am joined by Peter Warwick, our President and Chief Executive Officer; and Haji Glover, our Chief Financial Officer.

As usual, we have posted the accompanying Investor Presentation on our IR website at investor.scholastic.com, which you may download now if you've not already done so. We would 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 reconciliation 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 our Form 8-K. 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_relations@scholastic.com.

And now, I would like to turn the call over to Peter Warwick to begin this afternoon's presentation..

Awakening, the highly-anticipated first title in a multi-volume kid-friendly manga series, and we'll also launch two additional middle-grade, full-color manga series later in the fiscal year.

In addition, we have a full lineup of exciting new titles from beloved and best-selling authors Raina Telgemeier, Alice Hoffman, Pam Muñoz Ryan and Brian Selznick.

We have new publishing in our major series like The Baby-Sitters Club, Goosebumps, and I Survived, and we'll be publishing the finale of Aaron Blabey's Bad Guys series in December, with another movie to follow in summer 2025.

In March, we'll be publishing That's Not Funny, David!, a brand new No, David! book from internationally acclaimed Caldecott Honor creator David Shannon. In School Book Fairs, we're planning for modest growth for fiscal 2025 as we invest in long-term growth initiatives, including actions to grow revenue per fair this year and beyond.

Share the Fair is a new giving program enabling schools to collect digital contributions from the school community to support students who need help buying books. The program was successfully piloted in fiscal 2024 and we're optimistic about its full rollout in fiscal 2025.

Continued category optimization, new case types, and strategic value pricing should also contribute positively to revenue per fair. We've exciting plans around the release of the next Dog Man title and film, leveraging Scholastic Book Fair's exclusive access to the hottest children's and young adult titles.

With respect to fair count, we've invested in our sales structure and processes to increase prospecting, reduce churn, and ensure our Book Fair host's success. So far, we're on track with early bookings to achieve our fiscal 2025 target of 90,000 fairs.

This year, we'll continue investing to grow long-term fair count and the addressable market for Book Fairs.

We're piloting new operating models to profitably serve schools outside our core public school markets and investing in our sponsored fairs' growth, which taps local and national organizations to bring book fairs to schools in high-need communities which we currently don't serve.

In School Book Clubs, we're launching redesigned flyers and new offers and enhancing our value proposition with unique Scholastic assets to reengage a profitable core of customers and revitalize this strategic channel to teachers and families.

Complementing our school-based channels to kids and families, and leveraging our trusted brand and distribution infrastructure, we've also begun piloting new direct-to-home channels and offers to families of young children.

Based on extensive research and testing, we're targeting a substantial opportunity to help parents and caregivers support their kid's early development as readers and learners.

While we don't expect these investments to materially contribute to top-line growth in fiscal 2025, we're optimistic about the opportunity in fiscal 2026 and beyond, and we look forward to providing further updates.

Turning to Education Solutions, we're targeting solid growth in our sales to the state and community literacy partners as these organizations continue investing to improve kid's access to books at home and outside the school, which is proven to benefit reading development.

We're also launching new partnership models and programs for philanthropic organizations to give kids in high-need schools and communities the ability to choose and build their own home libraries.

We expect growth from new literacy funding sources to help offset further declines in sales of supplemental literacy materials, especially those not explicitly aligned with the science of reading. This year, we plan to continue investing in a pipeline of literacy programs better aligned with current literacy instruction.

These include a new middle school ELA program leveraging our extensive and engaging classroom magazine content, new knowledge-building libraries to replace our level book rooms and guided reading collections, and engaging new decodable collections, including for older students building on our Ready4Reading program, which we launched last year.

We expect to launch these products in the 2025-'26 school year and anticipate they'll contribute to growth beginning in fiscal 2026 as the funding cycle for supplemental products improves.

In International, modest growth across major markets, including in trade and continued operational improvements in Canada, are expected to drive further improvements in operating margins and contribution relative to fiscal 2024 as we pursue opportunities to build operating scale in major markets and expand our English language offering in Asia.

Haji will provide more details in a moment, including the expected contribution of our strategic investment in 9 Story and the actions we're taking on the cost side. In summary, Scholastic's fiscal 2025 plan is to continue and accelerate the progress of fiscal 2024 toward our strategic goals.

As we respond to our dynamic markets, both in the short- and long-term, we remain committed to realizing the full potential of Scholastic's unique strengths, our trusted brand, our unique channels, and our extensive content to meet an essential growing need among kids, parents, and educators, giving kids the power and joy of stories and learning.

With that, I'll turn the call over to Haji to review our fiscal 2024 results and fiscal 2025 guidance..

first, investing in growth opportunities; second, maintaining a strong and efficient balance sheet; and third, returning excess cash to shareholders to enhance their returns.

As discussed, beginning in fiscal 2025, we will be adding a new Entertainment segment, which will consolidate results from the company's existing Scholastic Entertainment division reported historically in the Children's Books segment with the newly added 9 Story Media Group.

The current slide as well as tables in the earnings press release provide historic results for both Scholastic Entertainment and 9 Story. As Peter just discussed, both businesses' results benefited in fiscal 2022 and 2023 from high levels of spending on new productions by major streaming platforms.

This retracted in 2024 with fewer productions being greenlit and is expected to remain under pressure for the next 12 to 18 months. While this has impacted all players in the industry, 9 Story has been able to outperform peers on the strength of its premium reputation, IP, and partnerships, much like Scholastic Entertainment has.

In fiscal 2025, we expect solid growth in segment adjusted EBITDA as we execute on the Company-wide synergies and franchise plans which should benefit this segment and Children's Books results in fiscal 2026 and beyond.

In fiscal 2025, our priority is to continue executing our strategic growth initiatives, including the integration of 9 Story, while navigating continued headwinds in our Education Solutions segment, resuming modest growth in Children's Books and tightly managing short-term spending.

Based on this plan, we expect revenue growth from 4% to 6%, and targeting adjusted EBITDA of $140 million to $150 million. In the Children's Books segment, we have a very exciting publishing plan bidding on our global franchises. In Book Fairs, we expect modest growth on increased fair count and new merchandising and sales initiatives.

We will continue to explore strategies in Book Clubs to increase teacher engagement. In our new integrated Entertainment segment, we expect to benefit from the addition of 9 Story in its strong franchises and partnerships as we execute on our strategic strategies, which we anticipate driving further growth in 2026 and beyond.

We expect 9 Story to contribute over $80 million in revenue with solid EBITDA in fiscal 2025. In the Education Solutions segment, we expect sales to hold steady despite soft spending on supplemental offerings offset by forthcoming new product launches slated for the 2025-2026 school year.

Our primary focus remains on expanding initiatives aimed at securing new funding sources to tackle the prevalent reading challenges nationwide. We expect unallocated overhead costs to remain approximately level next year as we continue to improve efficiencies and build capabilities to support long-term growth.

As a reminder, Scholastic results are highly seasonal. We generally record an operating loss in our first and third quarters, coinciding with summer and winter school vacations, with profitable second and fourth quarters. We expect our seasonal loss in Q1 of fiscal 2025 to be in line with prior period.

We are looking forward to an exciting and busy year ahead. Thank you for your time today, and now I will hand the call back to Peter for his final remarks..

to serve the broader growing need for trusted children's books, reading, and media by investing in, building on, and adapting our strengths.

In fiscal 2025, with the talent and creativity of our employees, authors, illustrators and creators, and the support of our shareholders, we look forward to continuing to pursue this opportunity to create value and impact. Thank you very much. And now, let me turn the call over to Jeff..

Thank you, Peter. With that, we will open the call for questions.

Operator?.

Certainly. [Operator Instructions] And our first question for today comes from the line of Brendan McCarthy from Sidoti & Company.

Your question, please?.

Hi, good afternoon, everybody, and thanks for taking my questions. I wanted to start off looking at the Book Fairs business.

Can you talk about your outlook for revenue per fair looking into fiscal '25? And do you expect to surpass the 90% of pre-pandemic fair levels looking out into the next fiscal year?.

Yeah. It's Peter here. So, in terms of revenue per fair going forward, we're expecting modest growth in the forthcoming financial -- in the financial year 2025.

We would be -- in terms of the revenue count, we expect that we're going to be probably less than we were pre-pandemic, because during the pre-pandemic period, we did do some book fairs that really didn't make very much money at all. And it's much better for us to focus on fairs which have the scale.

I think what's important is that we put in place, as I described during the call, a number of big improvements, I think, which means that we will be able to make sure that there's less churn, to make sure that we can really focus on the fairs that do the best thing.

And really, we focused on the addressable market, which means the addressable market is one where we can do well with the size of revenues that we hold..

Great. Thanks, Peter. I appreciate the color there. Wanted to turn to the Book Clubs business and the shrink-to-grow strategy.

I'm wondering if you can provide some detail on how far along in that strategy Scholastic is, and maybe how much longer the company -- or I guess how much more work on that front does Scholastic have to do as it relates to fiscal '25?.

Well, I think we've spent a lot of time working what's the best ways of handling that. And I think that we've worked hard and trialed a number of things that we'll be implementing from the fall of this year. I think we're optimistic the changes that we're making are going to be much more in tune with being able to grow back the business.

But the key point about this, Brendan, is that we need -- this business needs to be profitable, and we have been able to make sure that the profitability year-over-year has not deteriorated. But what we want to be able to do is to modestly grow the business. And also, I think, most importantly, to really engage as much as possible teachers with us.

I think that we're really committed in the period going forward to be as teacher-centric as we possibly can in the way that we manage that business..

Understood. And turning to the Education Solutions business, I know the broad transition to the science of reading has been a bit of a headwind on spending, but as it relates to Scholastic's capital allocation framework, I know acquisitions have always been a big part of that.

Are you seeing any opportunity out there to maybe go out and acquire a company that is fully geared towards the science of reading?.

Hi, Brendan. This is Jeff Mathews here. I can address that on the corporate development....

Hey, Jeff..

Hi. Hey, Brendan. From corporate development perspective. Look, as we've discussed, we see broad opportunities across both Education and our Children's Book segment, now adding the Entertainment segment. In the -- where we're seeing the most compelling opportunities are, we have some great products that weren't properly aligned.

We are taking those kind of great bones and then making investments to align them with new pedagogies. The core value around independent reading is still there. That's mostly done organically. We continue to look at opportunities additionally in that segment, while we review opportunities on the children's content and media side as well..

Got it. Thanks, Jeff. And one more question for me looking out to fiscal '25 and as it relates to some of the guidance numbers that you provided.

What factors have been causing material underperformance or outperformance relative to your expectations for fiscal '25?.

Yeah, it's Peter here. There were two main factors. And they were -- the first factor was really that, during the final quarter, the number of kids who are actually buying books at our book fairs declined, because they didn't have any money from their parents to buy the books.

And I think this is very much reflective of the economic environment of many sort of middle-class families whose kids go to public schools. That's certainly one fact. And that took us by surprise. The number of kids who are actually participating in the book fairs was lower than we had seen in the fall fairs.

The other factor was the one that we've already mentioned really about in the education area that we expected that there will be more opportunities than actually turned out to be the case for supplemental reading materials.

And that was because just the sheer volume of new literacy programs and new curricula and particularly those associated with the science of reading. We would see that as being a bit of a continuing headwind, if you like, during the forthcoming financial year, but it is cyclical.

It's something which we'll be in a good position in school years '25-'26 to be able to provide schools with what they need in order to supplement the new materials they've got and to be able to -- they'll have much more time to be able to do that once teachers are properly trained and fully familiar with the new core curriculum materials that they're using..

Got it. Thank you, everybody. That's all for me..

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks..

Well, thank you very much. It's Peter here. And thank you to all of -- those of you who joined us this afternoon. Scholastic has got an important exciting year ahead.

We look forward to engaging with our investors in the coming days and to providing further updates on our progress, including with our growth initiatives on our upcoming quarterly calls, including the next one in September. Goodbye..

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day..