- Adjusted EBITDA Growth 13% increase in the second quarter, driven by strong performance in children's book publishing.
- Sale Leaseback Proceeds Unlocked $400 million in net cash, to be used for shareholder returns and debt reduction.
- Shareholder Returns $500 million returned via buybacks and dividends since FY2022, reducing shares by 25%.
- Children’s Publishing Profit Segment adjusted operating profit rose to $108.8 million on 4% revenue growth to $380.9M.
- International Segment Performance Revenue of $89.5 million, with adjusted operating income up to $12.8 million (vs. $7.1M prior year).
Segment Performance
The Children's Book Publishing and Distribution segment delivered strong results, with revenues increasing 4% to $380.9 million and segment adjusted operating profit improving to $108.8 million. Trade publishing also delivered a strong quarter, with revenues increasing 7% to $110.4 million. The international segment saw strong performance across global markets, with revenues up $3.3 million from the prior year period, driven by the new Dog Man title and new additions across other major franchises.
Cash Flow and Capital Allocation
Net cash provided by operating activities was $73.2 million, with free cash flow of $59.2 million. The company continued to return excess cash to shareholders through its regular dividend and share repurchases. Scholastic had borrowings of $235 million under its unsecured revolving credit facility and net debt of $186.6 million.
Outlook and Valuation
The company expects fiscal 2026 revenues to be level with or slightly above the prior year, with adjusted EBITDA and free cash flow reaffirmed, excluding the impact of the sale leaseback transactions. With a P/E Ratio of -209.21 and a P/S Ratio of 0.41, the market appears to be pricing in some challenges. However, the EV/EBITDA ratio of 8.55 suggests a relatively reasonable valuation. The Dividend Yield of 2.96% and Free Cash Flow Yield of 6.86% are also attractive. Analysts estimate next year's revenue growth at 1.5%, which may provide a positive catalyst for the stock.
Sale Leaseback Transactions
The sale leaseback transactions are expected to generate net cash proceeds of over $400 million, which will be used to return excess cash to shareholders through share repurchases and other means. The company's goal is to return to moderate levels of leverage, consistent with its recent levels, and to continue returning excess cash to shareholders.