SCHL

Multi-Year Transformation Progress

• Completed a multi-year transformation of governance, organization, strategy, and the balance sheet, including a refreshed board, strengthened management team, and organizational restructuring to unlock efficiencies and build integrated growth platforms.
• Completed sale-leaseback transactions for real estate assets in December 2025, unlocking over $400 million in net proceeds, improved balance sheet efficiency, and enabled accelerated shareholder returns.
• Returned over $285 million to shareholders in FY2026 via share repurchases (open market and modified Dutch auction tender) and dividends, and announced a 25% increase in the regular quarterly dividend, with a long-term leverage target of 2x to 2.5x adjusted EBITDA.

Core Strategic Alignment

• Scholastic's strategy is centered on its core mission of bringing children to reading through trusted, high-quality human-created content, supported by direct reach to schools and families, literacy solutions, and media extensions.
• Management notes growing market demand for trusted children's content amid a proliferation of low-quality unvetted content from AI and other sources, and growing focus on print reading, reduced screen time, and evidence-based literacy solutions, all of which play to Scholastic's core strengths.
• The company is using AI thoughtfully to improve internal workflows and productivity (e.g. animation, go-to-market functions) while preserving human editorial creativity and curation that defines Scholastic's content.

Segment-Specific Operational Progress

• Children's Book Group (CBG): Book fairs remained the core earnings engine, growing revenue and raising approximately $250 million in cash and in-kind resources for US schools in FY2026. Expansion pilots are underway for new markets including Christian schools, discovery fairs (combining reading with hands-on science learning), sponsored corporate formats, and early childhood non-school formats. A strong 2027 publishing pipeline includes the new Dog Man title, supporting publishing for upcoming The Hunger Games: Sunrise on the Reaping and Harry Potter media events, and exclusive publishing for the Crunch Labs/Mark Rober STEM brand.
• Scholastic Entertainment: Completed integration of Nine Story Media Group to build out a full content development platform. Production revenue grew 10%+ YoY in FY2026, with a new Clifford the Big Red Dog animated series set to premiere on PBS Kids in 2027, and a new live-action The Magic School Bus feature film in development with Legendary Entertainment. Digital channels grew rapidly in FY2026: YouTube channels generated 547 million views (+13% YoY) and 6 billion minutes of watch time (+63% YoY), and the Scholastic TV app reached over 530,000 downloads.
• Scholastic Education: Completed business repositioning to focus on the company's most differentiated literacy offerings, with improved cost structure and alignment to the science of reading trend. The rate of revenue decline slowed in H2 FY2026 relative to H1, amid ongoing volatile school district funding for supplemental curriculum.
• International: Combines local publishing with global franchise strength to leverage growing demand for trusted content. Recognized as Children's Publisher of the Year at the British Book Awards in 2026, with strong performance from global franchises including Dog Man and The Hunger Games.

• Full Year Fiscal 2027: Expects 2% to 4% total revenue growth compared to FY2026 reported revenue. Adjusted EBITDA is guided to $135 million to $145 million, with the midpoint representing ~6% growth compared to FY2026 comparable adjusted EBITDA of $132.4 million (adjusted for full-year sale-leaseback impact in both periods).
• Effective Tax Rate: Full year effective tax rate is expected to be 27% to 30% (excluding discrete items), including 4% to 6% in state income taxes.
• Segment Guidance:
  • Children's Book Publishing and Distribution: Expects full year revenue growth and improved profitability, led by continued book fairs growth (from higher fair count and modest revenue per fair growth) and trade publishing growth from its strong franchise pipeline.
  • Education: Expects revenue stabilization (particularly in H2 FY2027) and improved profitability, supported by a focused product portfolio, restructured cost structure, and improved sales execution, while assuming ongoing volatile school funding conditions.
  • Entertainment: Expects revenue growth and improved profitability driven by increased contracted production activity and a growing slate of approved projects.
  • International: Expects revenue growth from franchise activity, with modestly lower operating income due to inflation and higher input costs in some markets.
• Quarterly Trends: First quarter FY2027 revenue is expected to be slightly down YoY (consistent with seasonality, as Q1 is the smallest revenue quarter), with year-over-year growth starting in Q2 and continuing through the rest of the year. A seasonal Q1 operating loss modestly larger than the prior year is expected due to the sale-leaseback impact.
• Free Cash Flow: FY2027 free cash flow is guided to $35 million to $40 million, a modest improvement on a normalized basis (FY2026 included the one-time $400 million in sale-leaseback proceeds), driven by higher operating performance and lower one-time payments, partially offset by higher planned capital and pre-publication spending.
• Share Repurchases: $183 million remains authorized for future share repurchases, with the company planning to continue opportunistic repurchases as market conditions allow.

1. Children's Book Publishing and Distribution:

• Q4 FY2026: Revenue of $276.3 million, down 4% YoY; adjusted operating income of $60.3 million, up $2.1 million YoY. The segment accounts for 58% of total Q4 revenue and 60% of full year total revenue.
  • Book fairs: Q4 revenue of $186.6 million, up 5% YoY; full year revenue of $576 million, up 5% YoY, driven by higher fair count (over 103,000 fairs held in FY2026) and higher revenue per fair.
  • Book clubs: Q4 revenue of $12.2 million, down 7% YoY; full year revenue of $57.1 million, down 11% YoY due to lower sponsor participation.
  • Trade publishing: Q4 revenue of $77.5 million, down 20% YoY; full year revenue of $331.1 million, down 6% YoY, primarily due to tough comparisons against the prior year release of Sunrise on the Reaping.
• Full year FY2026: Revenue of $964.2 million, flat YoY; adjusted operating income of $143.7 million, up $12.4 million YoY, driven by book fairs strength and cost discipline.

1. Education:

• Q4 FY2026: Revenue of $109.2 million, down 13% YoY, accounting for 23% of total Q4 revenue; adjusted operating income of $27.9 million, down $3.4 million YoY.
• Full year FY2026: Revenue of $267.6 million, down 14% YoY, accounting for 17% of full year total revenue; adjusted operating income of $0.2 million, down $6.7 million YoY. The revenue decline reflected ongoing school funding volatility, though the rate of decline decelerated in H2, with restructuring and cost discipline partially offsetting revenue pressure on profitability.

1. Scholastic Entertainment:

• Q4 FY2026: Revenue of $21 million, up 42% YoY, accounting for 4.4% of total Q4 revenue; adjusted operating income of $0.8 million, an improvement of $2.9 million YoY (up from a $2.1 million loss in the prior year).
• Full year FY2026: Revenue of $65.7 million, up 8% YoY, accounting for 4.1% of full year total revenue; adjusted operating loss of $9.3 million, compared to a $7.2 million loss in the prior year, due to timing of production activity and revenue recognition.

1. International:

• Q4 FY2026: Revenue of $69.6 million, down 9.4% YoY, accounting for 14.6% of total Q4 revenue; adjusted operating income of $3.1 million, down $3 million YoY.
• Full year FY2026: Revenue of $277.2 million, down 1% YoY, accounting for 17.3% of full year total revenue; adjusted operating income of $7.1 million, up $4.2 million YoY, driven by operating improvements and cost discipline. Excluding a $6.3 million favorable foreign exchange impact, the revenue decline was driven by tough year-over-year publishing schedule comparisons, offset by strong global franchise performance.

• Ongoing volatility in K-12 school district funding for supplemental curriculum creates continued headwinds for the Education segment, with uncertain near-term spending trends.
• Tough year-over-year comparisons against the 2025 release of the high-demand Sunrise on the Reaping created revenue declines in Trade Publishing and the International segment in FY2026.
• Inflation and higher fuel, freight, and labor costs in some international markets are expected to pressure international operating income in FY2027.
• Forward-looking results are inherently uncertain, and actual outcomes may differ materially from current guidance due to the impact of unforeseen risks and market changes.
• Low sponsor participation continues to pressure Book Clubs revenue.

Q: The 3% FY2026 revenue decline missed prior guidance; what key factors drove this miss, and what is the outlook? / A: The main surprise was lower than expected end-of-year school district spending on supplemental education, which impacted the Education segment more than anticipated. All other business segments performed well in-line with expectations for the quarter and full year. Education is positioned to stabilize in FY2027 after 2026 restructuring.

Q: Book fairs grew 5% in Q4 FY2026; was growth driven by higher fair count or higher revenue per fair, and what is the FY2027 outlook? / A: Growth was primarily driven by higher fair count, with a modest contribution from higher revenue per fair. Strong performance was also supported by growing e-wallet adoption, strong product mix, and strong growth in sponsored fairs for low-income schools. For FY2027, management expects continued growth in both fair count and revenue per fair, with lower cancellations and strong early prospecting for the fall semester.

Q: What gives management confidence Education can stabilize revenue in FY2027, and what inflection is expected? / A: After a full year of restructuring work in FY2026, Education now has a stronger product portfolio aligned to the science of reading trend, a trimmed cost structure to improve profitability, and a newly reorganized go-to-market led by a new Chief Revenue Officer joined in Q4 FY2026. Management expects revenue performance and profitability to improve through the year, with stabilization and year-over-year growth starting in the second half of FY2027, assuming no further market deterioration.

Q: What level of revenue will allow Scholastic Entertainment to reach sustained profitability, and what is the segment outlook? / A: Management has high visibility into FY2027 revenue, with contracted production already exceeding 100% of FY2026 total revenue. The segment is positioned for long-term growth, with multiple major projects in discussion with large studios that will likely be announced in coming quarters. Management expects continued revenue growth and improving profitability in FY2027.

Q: How will share repurchases be funded in FY2027, given the large repurchases completed in FY2026? / A: The company has a strong cash position and unused capacity under its $400 million revolving credit facility, with only $75 million drawn as of the end of FY2026. Management remains confident there is sufficient capacity from both cash on hand and available credit to fund the full $183 million remaining in authorized repurchases, while staying within the long-term 2x to 2.5x net leverage target.