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• Overall Quarterly Performance

  • Q1 fiscal 2027 results exceeded internal expectations for both revenue and profitability, with total revenue of $550 million (up 2.6% year-over-year), recurring revenue of $426 million (up 9.8% year-over-year, representing 77% of total revenue), adjusted EBITDA of $207 million (37.7% margin, up 192 basis points year-over-year), and net income of $58 million.
  • Digital revenue grew nearly 9% year-over-year, representing 64% of total revenue. Gross debt was reduced by $646 million in fiscal 2026, lowering annualized cash interest expense by nearly $45 million, and Moody's upgraded the company's credit ratings in July 2026.

• Product and Market Expansion

  • Higher Education: Extended a 10-year streak of market share gains, with the inclusive access evergreen content model driving strong retention and takeaway from competitors; 59% of accounts roll over to the latest content release without sales representative intervention.
  • K-12: Launched a comprehensive new suite of science of reading-aligned ELA programs (Emerge, Summit, SOAR, Emerge Juntos) that is one of the only full-grade-range dual language programs in the U.S. market. Early capture rates exceed target, with wins in many new (open territory) districts, and California's state reviewer panel has recommended the program for approval ahead of the fiscal 2028 adoption cycle. Florida approved the company's K-12 math programs ahead of the upcoming adoption cycle. Expanded into the mandated dyslexia screening market via the exclusive ROAR (Rapid Online Assessment of Reading) integration with Stanford University, the only full K-12 evidence-based multilingual dyslexia screener, which will integrate with the company's McGraw-Hill Plus analytics platform.
  • Global Professional: The company's AI-powered medical agent (built on Harrison's Medicine content) outperformed all leading general-purpose LLMs in blinded testing by a panel of medical editors and physicians, delivering more accurate, complete, and up-to-date clinical responses without hallucinations. The company serves 98% of U.S. medical schools, with early commercial traction for new AI clinical reasoning tools.
  • International: Secured the largest ever K-12 ELA intervention deal with the Tasmania Department of Education in Australia, covering nearly 200 schools and 5,000 students.

• AI Strategy

  • The company now has 8 live AI learning tools serving over 7.5 million active users, with 3 additional launches planned for fiscal 2027. The AI reader tool alone has reached 63 million learning interactions across 2.6 million users. 81% of educators trust embedded platform AI over general-purpose chatbots, and trust in general-purpose Gen AI chatbots declined 33% year-over-year, creating a tailwind for McGraw-Hill's trusted, curated offering.
  • The company is prioritizing agentic AI, which uses purpose-built knowledge graphs paired with flexible model choices to deliver higher accuracy than general-purpose AI. The agentic AI pilot now includes over 14 partner companies, with tooling built to integrate with any third-party chatbot that supports open agentic standards, creating meaningful total addressable market (TAM) expansion.

• Management maintained its full-year fiscal 2027 guidance, with no upward or downward revision, consistent with the company's past practice of updating guidance only after the Q2 selling season concludes and full visibility into fall higher education enrollment and K-12 adoption outcomes is available.
• Full-year guidance continues to embed an assumption of 1% higher education enrollment growth; management will update this assumption when more visibility is available in the coming weeks.
• Management reaffirmed its multi-year target of mid-single digit plus revenue growth and continued margin expansion.
• Capital allocation guidance remains unchanged: the top priority is full funding of high-ROI organic investments, followed by deleveraging to reach a target net leverage ratio of 2.0x to 2.5x, followed by opportunistic tuck-in M&A, and opportunistic share repurchases under the existing $50 million authorization.
• Management expects overall full-year International growth in fiscal 2027, with Middle East shipment delays only impacting Q1 timing and not full-year results.

• Higher Education: Generated $200 million in revenue, up 10% year-over-year, with recurring revenue growing 14% year-over-year. It contributed 36.4% of total company revenue in the quarter. Trailing 12-month market share exceeded 30% (up 140 basis points year-over-year), with Inclusive Access representing 57% of segment revenue and evergreen content delivery representing 68% of segment revenue in fiscal 2026.
• K-12: Generated $274 million in revenue, up 1.3% year-over-year, with recurring revenue growing 7% year-over-year. It contributed 49.8% of total company revenue in the quarter. Early capture rates for the new science of reading-aligned ELA program exceed the targeted 25-30% range, and the supplemental and intervention pipeline is up double digits for fiscal 2027.
• Global Professional: Generated $35 million in revenue, with recurring revenue growing over 6% year-over-year. It contributed 6.4% of total company revenue in the quarter. Medical education represents 80% of the segment, with early traction for AI-enabled clinical tools as non-strategic print titles are wound down.
• International: Generated $45 million in revenue, negatively impacted by delayed K-12 shipments due to the Middle East conflict (delays have now been resolved). It contributed 8.2% of total company revenue in the quarter. Growth in the Middle East and Latin America is expected to offset ongoing higher education enrollment pressure in Canada for full fiscal 2027.

• Final full-year results depend on two uncertain near-term factors: actual fall 2026 higher education enrollment and final K-12 district adoption award decisions, which have not yet been finalized.
• Some K-12 supplemental intervention adoption decisions are experiencing minor delays, though there has been no meaningful change in overall timing versus last quarter.
• The ongoing Middle East conflict caused temporary delays to K-12 product shipments in the region, though shipments are now being fulfilled and no full-year revenue impact is expected.

Q: What is the commercial model for McGraw-Hill's AI strategy, and what do investors need to understand about it? / A: The company's pace of AI and curriculum innovation is the fastest in its history, even as margins expand. Most AI tools are monetized as add-ons to the company's existing base of 100 million paid curriculum licenses, with many 7.5 million active AI users already paying incremental fees on top of core curriculum costs. The company can command higher prices for AI-enhanced offerings across higher education and K-12, with new AI tools and upcharges rolling out across the full product portfolio.

Q: What are the core drivers of Higher Education's 10% year-over-year revenue growth this quarter, and how does McGraw-Hill perform against competitors? / A: The growth breaks down to ~4% from higher enrollment, ~2% from better price realization, and the remaining portion from market share gains. McGraw-Hill has a world-class go-to-market and customer success organization, with 10 straight years of consecutive share gains (40 straight quarters of growth). The company's shift to inclusive access and evergreen content delivery, paired with consistent on-the-ground professor support that many competitors have scaled back on, drives sustained differentiation and retention.

Q: What is ROAR dyslexia screening, and how will it be monetized? / A: ROAR is an evidence-based Stanford-developed full K-12 multilingual dyslexia screener, launched to capitalize on mandates for dyslexia screening in 40 U.S. states covering 86% of U.S. students. It is not bundled for free with core literacy programs: it is sold as a paid incremental add-on to core ELA programs, and can also be sold on a standalone basis, creating TAM expansion for the company. It also supports expansion into international markets like Latin America.

Q: How does McGraw-Hill balance demand for AI/digital tools with ongoing demand for print, especially in early elementary grades where screen time backlash is growing? / A: The company's philosophy matches AI and screen use to student self-regulation: in early grades, AI is used only for short assessment and intervention bursts (as little as 20 minutes per week, matching district screen time limits), with the majority of instruction delivered through traditional print. McGraw-Hill is one of the few companies that can scale both high-quality efficient print and digital/AI offerings globally, giving it a major advantage over digital-native competitors that struggle to deliver print on time and at scale. The company has hundreds of PhDs focused on matching instructional format to student needs.

Q: How does the company prioritize investment in the global professional/medical AI opportunity, relative to other growth areas? / A: The global medical education market is growing rapidly (with an expected 11 million global healthcare worker shortage by 2030), making this a high-priority long-term growth opportunity. McGraw-Hill starts with an unmatched base: it already serves 98% of U.S. medical schools, with a massive library of curated, peer-reviewed medical-grade content. The company's AI agent outperformed general-purpose LLMs in blinded medical testing, because it is grounded in the company's curated, expert-vetted content rather than unvetted public data, creating a durable competitive advantage over new venture-backed entrants. The company will continue investing to expand tooling and TAM across clinical and education markets.