Q2 2024 Scholastic Corp Earnings Call
Good day and thank you for standing by. Welcome to the Scholastic Corporation fiscal 2024 second quarter earnings call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again.
Good day and thank you for standing by welcome to the Scholastic Corporation fiscal 2024 second quarter earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session. Please press <unk>.
Star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded. I would not like to hand the conference over to your speaker today, Jeffrey Mathews.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Jeffrey Matthews.
Thank you and hello and welcome everyone to Scholastic's fiscal 2024 second quarter earnings.
Jeffrey Matthews: Thank you and Hello, and welcome everyone to Scholastics fiscal 'twenty 'twenty four second quarter earnings call.
Today's call is joined by Peter Wark, our President and Chief Executive Officer, and Ken Cleary, our Chief Financial Officer and Acting President of the International FinancialUM Fnatic!
Jeffrey Matthews: On the call I'm joined by Peter work, our President and Chief Executive Officer.
Peter Work: Can't query, our Chief financial Officer, and acting President International.
As usual, we posted the accompanying investor presentation on our IR website at investor.scholastic.com, which you may download now if you have not already done.
Peter Work: Hugo we posted the accompanying investor presentation on our IR website.
Peter Work: Vector Tox scholastic Dotcom, which you may download it now if you have not already done so.
We'd 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 actually result in a different material from those currently in dis-
Peter Work: We'd like to point out that certain statements made today will be forward looking before.
Peter Work: 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'll be discussing some non-GAAP financial measures as defined in Regulation G.
Peter Work: In addition, well be discussing some non-GAAP financial measures as defined in regulation G.
The reconciliation of those measures is the most directly comparable GAAP measures that is found in the company's earnings release and the company's financial tables filed this afternoon on Form 8K. The earnings release has also been posted to the company's financial tables.
Peter Work: Reconciliations of these measures the most directly comparable GAAP measures.
Peter Work: The company's earnings release and accompanying financial tables filed this afternoon on a form 8-K.
Peter Work: So turning to it has also been posted to our Investor Relations website.
We encourage you to review the disclaimers in the release and investor presentation.
We encourage you to review the disclaimers in our release and Investor presentation.
and review the risk factors disclosed in the company's annual and quarterly reports filed with the FCC.
Peter Work: To review the risk factors disclosed in the company's annual and quarterly reports.
Peter Work: Filed with the SEC.
So if you have any questions after today's call, please send them directly to our IR email address, investor underscore relations at scholastic.com.
Peter Work: Should you have any questions. After todays call. Please send them directly to our IR E mail address and vector underscore relations at scholastic Dot com.
And now I would like to turn the call over to Peter Work to begin this afternoon's presentation.
Peter Work: And now I would like to turn the call over to Peter work to begin this afternoon's presentation.
Thanks, Jeff. And good afternoon, everyone. We appreciate your joining us.
Peter Work: Thanks, Jeff and good afternoon, everyone. We appreciate you joining us.
Elastic executed solidly in our second quarter during the important back to school season in the northern hemisphere
Peter Work: Last quick executed solidly in our second quarter during the important back to school season in the northern Hemisphere.
A school reading events and education divisions, while progressing their plans, continue to demonstrate scholastics unique capabilities. We give tens of millions of kids access to engaging high quality books.
Peter Work: Our school reading events and education divisions, while progressing that plants continued to demonstrate scholastics unique capabilities to get tens of millions of kids access to engaging high quality books.
Elastic trade publishing and entertainment teams continued to create and publish best-selling books and highly rated content and IP for the company's own channels as well as retailers and third-party
Peter Work: Plastics trade publishing and entertainment teams continue to create and publish best selling books for highly rated content and IP for the company's own channels as well as retailers and third party.
fulfilling the second pillar of Scholastic's unique integrated publishing and distribution pattern.
Peter Work: Fulfilling our second pillar scholastics unique integrated publishing and distribution strategy.
With kids back at school and parents and educators refocused on the importance of reading and learning, Elastic's mission is as relevant as ever.
Peter Work: With kids back in school and parents and educators refocused on the importance of reading and learning Scholastics mission is as relevant today, even in the more complex environment in U S schools in which we currently find ourselves operating this year.
even in the more complex environment in US schools in which we currently find ourselves operating.
Last quarter, we also took actions to create long-term value, continuing our investment in growth initiatives and returning over $58 million to shareholders through share buybacks and our dividend.
Peter Work: Last quarter, we also took actions to create long term value.
Peter Work: Our investments in growth initiatives, and returning over $58 million to shareholders through share buybacks and our dividend.
42 profits remain steady on modestly lower revenue.
Constitute profits remained steady and modestly lower revenues.
These results, however, came in below our expectations for profit growth as a result of external factors, a trend we now forecast to continue for the remainder of this school year. As a result, we've adjusted our fiscal 2024 guidance and have taken steps to target additional revenue opportunities and align spending in the second half of the year.
Peter Work: These results however came in below our expectations for profit growth as a result of external factors.
And we now forecast to continue for the remainder of the school year as a result, we've adjusted our fiscal 2020 for guidance and have taken steps to target additional revenue opportunities underlying spending in the second half of the year.
We remain positive about the outcome outlook for growth and impact as we continue executing on our strategy, investing in content and capabilities to drive growth and returning capital to shareholders, including under an expanded share repurchase authorization announced today.
Peter Work: We remain positive about.
Peter Work: Kind of outlook for growth and impact as we continue executing on our strategy.
Peter Work: <unk> content and capabilities to drive growth.
Peter Work: And returning capital to shareholders, including under an expanded share repurchase authorization announced today.
afternoon, I'd like to review our second quarter results and updated outlook for the rest of the year. Ken will then discuss our financial results.
Peter Work: This afternoon I'd like to review, our second quarter results and updated outlook for the rest of the year Ken.
Peter Work: Ken will then discuss our financial results in more detail.
I'd like to begin with some comments on the macro environment in which we're operating.
Peter Work: I'd like to begin with some comments on the macro environment in which we're operating.
As I referenced a moment ago, compared to a year ago, the environment in US schools is currently more complex and challenging, reflecting growing polarization in our society and politicization of schools and school boards, higher rates of absenteeism, and chronic teacher shortage.
Peter Work: First.
Peter Work: As I referenced are referenced a moment ago compared to a year ago. The environment in U S. Schools is currently more complex and challenging reflecting growing polarization in our society and Politicised national schools or school boards higher rates of absenteeism.
Together, these factors have put greater demands on schools and teachers, including through expanded restrictions on educators, parents and kids' ability to choose books, and mandate changing how kids are taught, especially with respect to literacy and stroke.
Peter Work: Teach the shortages.
Peter Work: Together these factors have put greater demand hold schools and teachers.
Peter Work: <unk> through expanded restrictions on educators parents and kids ability to choose books and mandates changing how kids are taught.
Peter Work: Lastly, with respect to literacy instruction.
Taking the longer view, however, it's clear that reading, literacy and learning are acute priorities that families, educators and leaders all agree on, independent of geography or party affiliation.
Peter Work: Taking the longer view. However, it is clear that reading literacy and learning our acute priorities that families educators leaders all agree on independent of geography or party affiliation.
Elastic remains uniquely positioned to respond to these needs today and in the future
<unk> remains uniquely positioned to respond to these needs today and in the future.
We'll continue to focus on serving all kids, families and educators, as we've done for the past hundred
Peter Work: We'll continue to focus on serving all kids families educators I believe.
Peter Work: For the past 100 plus years.
Second, we tall signs of a modest short-term slowdown in consumer spending growth for a period this fall. Relative to prior year, an Expectations for our School-based Channel.
Peter Work: Second word.
Peter Work: We saw signs of modest short term slowdown in consumer spending growth for a period this fall relative to prior year and expectations for our school based channels.
During recent weeks, we've seen signs of a rebound. This pattern is in line with trends reported by some retailers before.
Peter Work: During recent weeks, we've seen signs of a rebound. This pattern is in line with trends reported by some retailers. This fall.
Retail sales of children's and young adult books also declined 2% during our second quarter versus a year ago, according to books.
Peter Work: Retail sales of children and young adults.
Peter Work: Books also declined 2% during our second quarter versus a year ago. According to book scales.
The retail adult and kids book market is still up significantly compared to the same period in 2019. So we see this dynamic largely as a reversion to pre-pandemic growth trends.
Peter Work: The retail I don't look at spot market is still up significantly compared to the same period in 2019. So we see this dynamic largely as a reversion to pre pandemic growth trends.
Third and positively, we continue to benefit from lower costs of paper, manufacturing, freight and shipping versus a year ago. This is seen in our inventory purchasing already and therefore cash flows and will be reflected in our property month as we sell through
Peter Work: Third and positively we continue to benefit from lower costs of paper manufacturing freight and shipping versus a year ago.
Peter Work: <unk> inventory purchasing already.
Peter Work: Therefore cash flows and will be reflected in 10 months.
Peter Work: Sell through.
Peter Work: Yes.
Peter Work: Turning to our results.
Quarter two is the seasonally largest quarter for the children's book.
Peter Work: Quarter, two is the seasonally largest quarter for the children's books segment.
Segment revenue declined 6%, reflecting the planned resizing of books.
Peter Work: Segment revenue declined 6%, reflecting the planned re sizing of book clubs as well as lower expected production revenue from Scholastic Entertainment, which is reported in consolidated trade.
as well as lower expected production revenue from Scholastic Entertainment, which is reported in consolidation.
Excluding Scholastic Entertainment, consolidated trade sales rose 3%
Peter Work: Excluding scholastic entertainment consolidated trade sales rose 3%.
fair sales grew 1% to 242 million in quarter two, surpassing the previous year's record and demonstrating their enduring presence in the U.S. education.
Peter Work: <unk> sales grew 1% to $242 million.
Peter Work: Water to surpassing the previous year's record and demonstrating their enduring presence in the U S education system.
Fair count rose as planned. Revenue per fair rose modestly on the same fair...
Peter Work: Share count rose as planned.
Peter Work: Revenue per fair rose modestly on a same fab basis, but declined on average due to mix, reflecting the addition of lastly, smaller fast to the full schedule as we increase that count.
but declined on average due to mix reflecting the addition of mostly small affairs to the full schedule as we increase fair count.
Cancellation rate improved year over year.
Peter Work: Cancellation rates improved year over year.
Peter Work: Over the past two years, we've transformed books fast with new customer centric strategies and operational improvements, which have resulted in higher participation and transactional sciences contributing to higher revenue per fair.
with new customer-centric strategies and operation improvements, which resulted in higher participation in transaction sizes, contributing to higher revenue per fair.
Average revenue per fair, or RPF, remains close to record levels, reflecting the progress we've made. However, this school year, we have seen RPF grow more slowly than last year, or our expectations for the current one, dampened by the macro factors in schools and consumer spending that I just described.
Peter Work: Average revenue per fab or RPF remained close to record levels, reflecting the progress. We've made however, this school yet we have seen RPF grow more slowly than last year or our expectations for the current one damn thing by the macro factors in schools and consumer spending.
Peter Work: That I just described.
Lastly, as a result, FAIR's profitability did not meet expectations because RPF contributes strongly to operating leverage and expanding margins.
Peter Work: Lastly, as a result fast profitability did not meet expectations, because RPF culture strongly to operating leverage and expanding margins.
Looking ahead at the second half of the school year, we ex- we likely expect full trends to continue into the spring. As is the historical path.
Peter Work: Looking ahead at the second half of the school year.
Peter Work: Currently expect full trends to continue into the spring as the historical patent Henry.
In response, however, we've made adjustments to our merchandising strategy in France.
Peter Work: In response, however, we've made adjustments to our merchandising strategy in France for the spring, which we're optimistic about we also remain confident in achieving near 90% pre pandemic frack counts this year.
which we're optimistic about. We also remain confident in achieving near 90% of pre-pandemic fire counts this year.
We remain focused on innovating and improving the book fair host experience with new tools like our updated online fair preview and improved online restock process.
Peter Work: We remain focused on innovating and improving the book first experience with new tools like our updated online fab preview and improved online restock process, while maintaining our focus on kids with high quality Kid centric merchandising.
while maintaining our focus on kids with high quality, kid-centric merchandise.
In our school book clubs, this year is a transitional year as we integrate clubs and fairs into a combined school reading events division.
Peter Work: And our school book clubs this year as a transitional year as we integrate clubs will fast into a combined pool reading events Division.
Last quarter, clubs' gross profits remained approximately level with prior year, while we right-sized the business.
Peter Work: Last quarter clubs gross profit remained approximately level with prior year, while we right size the business revenues.
Revenues declined 44% with planned reduction in unprofitable offers and promotional spending, resulting in lower orders.
Peter Work: <unk> declined 44% with planned reductions in unprofitable offers and promotional spending resulting in lower orders.
Participation and spending by teachers and families, however, were also lower than expected, delivering lower revenue per order, echoing the macro trends we're seeing elsewhere.
Peter Work: Participation spending by teachers and families. However were also lower than expected delivering lower revenue per order echo in the macro trends we are seeing elsewhere.
We see improvements in response rates as we continue to iterate our redesigned club flyers, which should benefit order numbers in the second half of the year. That said, we also expect to see the impact of lower teacher participation and spending in the fall to carry over into club spring results.
Peter Work: We see improvements in response rates as we continue to iterate redesign Flyers, which should benefit all the numbers in the second half of the year that said, we also expect to see the impact of lower teach a participation in spending in the fall to carry over into club spring results.
Galustics trade publishing continued to execute strongly in a retail book selling market that was down slightly year over year as I just described. This primarily
Peter Work: Elastic trade publishing continued to execute strongly.
Peter Work: Our retail book selling market that was down slightly year over year as I just described.
Peter Work: This primarily impacted backlist titles.
Very encouragingly, Scholastic's new front list titles continue to dominate and expand our presence on best cellar lists, achieving 117 weeks cumulatively on the New York Times middle grade best cellar list, and 88 weeks on the Times Young Adult best cellar.
Peter Work: Very encouragingly scholastics, new Frontlist titles continue to dominate and expand our presence on best seller lists achieving 117 weeks cumulatively on the New York Times Middle Grade bestseller list and 88 weeks on the times young adults bestseller list.
We also maintained our leading preface from the New York Times graphic books and manga and children's series best.
We also maintained our leading presence on the New York Times graphic books, and manga and children's series bestseller lists.
As best of year lists are published, elastic titles are found throughout.
Peter Work: Best of year less the published scholastic titles are found throughout.
Among our top sellers last quarter, the interactive additional Harry Potter and the prisoner Avast, Gabon and the Harry Potter visiting all linac, both regularly ranked on best seller lists.
The interactive edition of Harry Potter and the Prisoner of Azkaban and the Harry Potter Wizarding Almanac both regularly ranked on bestseller lists.
Cat Kid Comic Club number five, Influencers, from Dave Filkey, which shipped during Quarter 2 and went on sale on November 28th, became the number one best-selling book on Bookscan across kids and adult categories.
Peter Work: Cap Kid coming club number five influences from day, <unk>, which shipped during quarter two and went on sale on November 28 became the number one best selling book on book scan across kids and adult categories.
Its success has lifted backlist sales of Dave's Dog Man and Captain Underpants series too.
Peter Work: Its success is lifted backlist sales of data dog man and Captain Underpants series two.
The new paperback edition of The Ballad of Songbirds and Snakes, Zann Collins' prequel to The Hunger Games series, also performed strongly, driven by the highly anticipated movie release last month.
Peter Work: The new paperback edition of the Validus Sullivan <unk>, Zhang calling a prequel to the hunger games series also performed strongly driven by the highly anticipated movie release last launch.
Once again, Scholastic benefited from the virtuous circle from page to screen and back to page, which has helped build many of our mega publishing franchises.
Peter Work: Once again scholastic benefited from the virtuous circle from page to screen and back to page, which has helped many of our lack of publishing franchises.
Looking ahead, we're excited about our publishing plan for the spring, which includes new titles in Dave Pilkey's Dog Man and Alice Oseman's Heartstopper series, both of which are hugely popular, as well as a new title from New York Times best-selling adult and young adult author Alan Graff's, and new graphic novels in our Wings of Fire, Baby-Sitters Club and Amulet series.
Peter Work: Looking ahead, we're excited about how publishing planned for this spring, which includes new titles and day pill care Dog Man and Alex Alex Arismun Heartstopper series, both of which are hugely popular as well as a new title from New York Times bestselling cattle and young adults with Alan grabs a new graphic novel.
Peter Work: And our wings of fire Babysitters club Amulet series.
The new live-action Goosebumps TV series, co-produced by Scholastic Entertainment with Disney, also debuted in Quarter 2. Based on the classic Scholastic series, which has sold over 400 million copies, Goosebumps was Disney's most-watched season premiere of the year on both Disney Plus and Hulu.
Peter Work: The new live actual goose bumps television series co produced by Scholastic Entertainment with Disney.
Peter Work: <unk> debuted in quarter two.
Peter Work: Based on the classic Scholastic series, which has sold over 400 million copies Goose bumps was business most watched season premiere of the year on the Disney plus.
Since its launch, the series has reached the top 10 spots in streaming rankings overall. According to the Hollywood reporter, its success makes it, quote, a rare non-marble or star wars original series of Disney Plus in Nielsen's rank.
Peter Work: Hulu.
Peter Work: Since its launch the Sirius has reached the top 10 spots in streaming rankings overall, according to the Hollywood would reporter.
Peter Work: Success makes it close I ran non Marvel Star Wars original series, Disney plus and Neil <unk> the case.
Keeping up this momentum with today's readers and viewers finding comfort in the familiar brands of childhood, galactic entertainment has a broad slate of new, stagia projects in development that bring back legacy scholastic properties in fresh and innovative way.
Peter Work: Keeping up this momentum with today's regions will view as finding comfort in the familiar brands of childhood Scholastic Entertainment has a broad debate a new style of projects in development that bring back legacy scholastic properties in fresh and innovative ways.
We're partnering with top tier platforms, producers, screenwriters and actors, including co-producing the 39 clues with Ambulance and Netflix, developing Animorphs and Fly Guy as feature films, and working with Elizabeth Banks and Mark Platt Productions to bring the magic school bus to the big screen.
Peter Work: Partnering with top tier platforms producers screenwriters and actors, including co produce thing the 39 clues with amblin for Netflix developing any morphs and fly Guy as feature films and working with Elizabeth Banks productions to bring the Magic School bus to the Big <unk>.
All of our entertainment projects include fresh publishing programs tied to our new media moments.
Peter Work: Screen.
Peter Work: All of our entertainment projects include fresh publishing programs tied to our new media moments as well as classic in time consumer product programs for the existing and emerging fan bases.
as well as classic and time-consuming product programs for the existing and emerging fan bases.
Peter Work: Now moving to education solutions.
Corsitude sales were up 1% relative to last year's record levels. This division also navigated the changing school environment while developing new channels and models to expand kids' access to books and literacy beyond school.
Peter Work: Quarter, two sales were up 1% relative to last year's record levels. As this division also navigated the changing school environment, while developing new channels models that span kids' access to books and literacy beyond schools. We also continued investing to build new flexible.
We also continued investing to build new flexible supplemental learning programs that respond to evolving needs in the market.
Peter Work: Mental learning programs that respond to evolving needs in the marketplace.
Sales of book collections rose through our partnerships with states and school districts.
Peter Work: Sales of book collections Rose through our partnerships with states and school districts. This growth continue to offset declines in sales of supplemental instructional materials that we've seen over the past few quarters.
This growth continue to offset declines in sales of supplemental instruction materials that we've seen over the past few quarter.
This strict shift approaches to literacy and disruption, often in response to state and local laws and regulations.
Peter Work: Districts shift approach is to literally in the chassis and structural awful in response to state and local laws and regulations.
In some cases, districts are pausing new purchases leaving teachers
Peter Work: In some cases districts are pausing new purchases, leaving teachers.
using existing materials and pedagogies as they work to retrain teachers and implement new curricula. In the meantime, we continue work to realign key product lines to the science of reading while we invest in new content and products.
Peter Work: Using existing materials and political cheese.
Peter Work: Work to retrain teachers and implement new curriculum.
Peter Work: Meantime, we continue work to realign key product lines to the science of reading, while we invest in new content and products.
Looking ahead, we remain positive about the need and long-term opportunity for scholastics literacy-focused education business. As we move forward with our plan to build new digital and print solutions, building on our current profitable print-based education business as I just...
Peter Work: Looking ahead, we remain positive about the mid and long term opportunity for scholastic literacy focused education business as we move forward with our plan to build new digital print solutions building on our current profitable print based education business as I just discussed.
Last week, we announced an expanded investment in our summer learning offering, which has emerged as a significant differentiated opportunity for Scholastic to grow and drive impact.
Peter Work: Last week, we announced an expanded investment in our summer learning offering which has emerged as a significant differentiated opportunity for scholastic to grow and will drive impact.
School districts of acute needs to support students, educators and families within structural programs and books at home and outside normal school hours year-round.
Peter Work: All districts of acute needs to support students educators and families within structural programs and books at home and outside normal school hours year round.
Scholastic Aquired from Lit Life Inc. writes to and control of Lit Count, a foundational reading skills program for summer, an extended learning, which we co-developed and have been successfully selling since 2015. We also acquired all rights and control of maths.
Peter Work: Elastic our clients, let life, Inc rights too and control of lit count foundational reading skills program for summer and extended learning, which we co developed and have been successfully selling since 2015.
Peter Work: We also acquired all rights and cultural match Ken.
a new companion program for LITCAMP, which we expect to be in the market for this summer.
Peter Work: New companion program to lift camp, which we expect to be in the market, but this summer.
We're excited about this move, which solidifies Scholastic's position as a leading provider of high-impact solutions for someone like you.
Peter Work: We're excited about this move which solidify scholastics position as a leading provider of high impact solutions.
After nearly four months in the position, education solutions, president Beth Polkari is moving forward with plans. The reinvent our classroom, magazines business, has a comprehensive blended content and data-driven instructional program.
Peter Work: <unk>.
Peter Work: After nearly four months in the physician education solutions precedent that the car is moving forward with plans to reinvent our classroom magazines business as a comprehensive blended content in data driven and structural program.
She and the Education Solutions team are also looking at opportunities to strengthen other core businesses within the division, while targeting revenue opportunities.
Peter Work: She and the educational solutions team are also looking at opportunities with <unk>.
Peter Work: <unk> and other core businesses within the division, while targeting revenue opportunities with <unk>.
particularly focused on the approximately $50 billion in unspent federal assasounding which must be obligated by September 2024.
Peter Work: Particularly focused on the approximately $50 billion in unspent federal funding, which must be obligated by September 2024.
Turning to our international segment, revenues declined 4% in local currencies. The sales in Australia and New Zealand were impacted by continueds?n?z endatal deaths in the igen
Peter Work: Turning to our international segment revenues declined 4% in local currency sales in Australia, and New Zealand were impacted by continued softness in the overall retail market.
But higher book, present trade sales in the UK partly offset.
Peter Work: But higher book PRASM trade sales in the U K, partly offset this.
As a reminder, Ken Cleary now leads this division as President of International, building on his deep operating knowledge of Scholastic to help our international subsidiaries better leverage US resources and drive growth. Of course, he also continues to serve as our CFO as we move forward with the search process, which has been productive. We look forward to providing further updates in the coming weeks.
Peter Work: As a reminder, Ken Cleary now leads this division's president of international building on its deep operating knowledge of scholastic to help our international subsidiaries better leveraged U S resources and drive growth.
Ken Cleary: Of course, it's also it also continues to serve as our CFO as we move forward with the search process, which has been productive we look forward to providing a further update in the coming weeks.
So as Ken will discuss in more detail shortly, largely as a result of external factors, we're revising our fiscal 2024 guidance on accounts of lower than expected, profit growth in quarter two and reduced expectations for the second half of the year.
Ken Cleary: So as Ken will discuss in more detail shortly largely as a result of external factors. We are revising our fiscal 2024 guidance on account of lower than expected profit growth in quarter, two and reduced expectations for the second half of the year.
Classic continues to build on our unique strengths is the world's largest and most trusted childrens publisher and distributor.
Ken Cleary: Last quarter solid execution reinforces our conviction in our long term growth outlook as well as our commitment to continue deploying capital to investing growth and enhance shareholder returns.
And now I'll ask Chen to provide greater detail on the quarter's results.
Ken Cleary: And now I'll ask Ken to provide greater detail on the quarter's results.
Thank you, Peter, and good afternoon, everyone. Note that we recorded note one-time items in fiscal 2023 from the second quarter of fiscal 2024. Please refer to our press release tables and SEC filings for complete discussion of one-time.
Ken Cleary: Thank you Peter and good afternoon, everyone.
Ken Cleary: Note that we recorded no onetime items fiscal 2023 during the second quarter of fiscal 2024.
Please refer to our press release tables, and SEC filings for complete discussion of one time items as.
As we discussed earlier, our second quarter profits improved year over year. And we remain confident in our long-term growth outlook and shareholder value creation stress.
Ken Cleary: As Peter discussed earlier, our second quarter profits improved year over year, and we remain confident in our long term growth outlook shareholder value creation strategy.
Results came in below expectations however. What would do external factors? Turn to our
Ken Cleary: <unk> came in below expectations, however, largely due to external factors.
Ken Cleary: Turning to our consolidated financial results second quarter revenues decreased 4% to $562 6 million operating income in the quarter was $101 3 million up from $100 1 million in the prior year period.
Second quarter revenues decreased 4% to $562.6 million.
Appranging income in the quarter was $101.3 million, up from $100.1 million in the prior year period.
Net income was $76.9 million compared to $75.3 million in the prior year period. And adjusted the increase to $124 million from $122 million a year.
Ken Cleary: Net income was $76 9 million compared to $75 3 million in the prior year period, and adjusted EBITDA increased to $124 million from $122 million a year ago.
Her first pergilluted share was $2.45 compared to $2.12 last year as their share buyback efforts over the previous four quarters have driven down our outstanding share.
Ken Cleary: Earnings per diluted share was $2 45, compared to $2 12 since last year as our share buyback efforts over the previous four quarters have driven down our outstanding share count.
Turning to our segment results, in children's book publishing and distribution, revenues for the second quarter decreased 6% to $392.8 million, primarily driven by lower participation in orders and book clubs as the business is repositioned to a smaller, more profitable core as well as lower timing-related production revenue from Scholastic Entertainment.
Ken Cleary: Now turning to our segment results in children's book publishing and distribution revenues for the second quarter decreased 6% to $392 8 million.
Primarily driven by lower participation in orders and book clubs as the business is reposition to a smaller more profitable core as well as lower timing related production revenue from scholastic Entertainment.
operating margins improved and operating income decreased by only 2% from the prior year period $110.8 million
Ken Cleary: Operating margins improved and operating income decreased by only 2% from the prior year period, the $110 8 million.
Lower spending and clubs, promotions and operations, improve gross margins and consolidate trade, partially offset the impact the lower set.
Ken Cleary: Lower spending in clubs on promotions and operations improved gross margins and consolidated trade, partially offset the impact of lower sales booked.
Book fair's revenues increased 1% to $242.1 million in the quarter, driven by higher fair count and increased redemptions of incentive program credits, partially offset by lower revenue per fair. As Peter noted, we benefited from modestly higher revenue per fair on a same fair basis.
Ken Cleary: Book Fairs revenues increased 1% $242 $1 million in the quarter, driven by higher fair count and increased redemptions of incentive program credits, partially offset by lower revenue per fair.
Ken Cleary: Peter noted we benefited from modestly higher revenue per fair on a same fair basis.
Bearcane remains on track to reach nearly 90% of pre-pandemic levels this year, up from 85% in fiscal 2020.
Ken Cleary: Share count remains on track to reach nearly 90% of pre pandemic levels. This year up from 85% in fiscal 2023.
Full clubs revenues of $32.4 million were down versus the prior period revenues of $57.6 million.
Ken Cleary: Book clubs revenues of $32 $4 million were down versus the prior year period revenues at $57 6 million as part of the transition of this challenge to a smaller more profitable core we eliminated unprofitable offerings during the back to school season.
As part of the transition of this challenge to a smaller, more profitable core, we eliminated unprofitable offerings during the back to school.
Consolidated trade revenues were $118.3 million in the second quarter compared to prior period revenues of $119.9 million.
Ken Cleary: Consolidated trade revenues were $118 $3 million in the second quarter compared to prior period revenues of $119 9 million.
The segment revenue decrease was driven by lower revenues in Scholastic Entertainment relative to the prior year when the company completed the delivery of episodes of the animated series Eva the Owl based on Scholastic's Owl Diaries.
Ken Cleary: The segment revenue decrease was driven by lower revenues in scholastic entertainment relative to the prior year when the company completed the delivery of episodes of the animated series, even the outlet based on Scholastics Owl Diaries series.
Excluding the year-over-year impact of these media revenues, trade increased 3%, driven by multiple frontless bestsellers in the quarter, despite continued softness in the retail bookselling mark.
Ken Cleary: Excluding the year over year impacted these media revenues trade increased 3% driven by multiple Frontlist best sellers in the quarter. Despite continued softness in the retail book selling market.
Education solutions segment revenues were up 1% to $81 million in the second quarter, driven by higher revenues in state and district partnerships. Partially offset by sales declines and supplemental instructional materials related to the shift in prevailing approaches to literacy and structure.
Ken Cleary: Education solutions segment revenues were up 1% to $81 million in the second quarter, driven by higher revenues and state and district partnerships, partially offset by sales declines supplemental instructional materials related to the shift in prevailing approaches to literacy instruction.
Second profit decreased $1.2 million, $25.8 million, compared to the prior period. Larger reflecting lower gross margins due to products.
Ken Cleary: Segment profit decreased $1 2 million to $5 8 million compared to the prior period, largely reflecting lower gross margins due to product mix.
Growth in low margin, customized book collections, driven by district seeking to comply with state and local content mandates, contributed to this shift.
Ken Cleary: Growth in low margin customized book collections, driven by district seeking to comply with state and local content mandates contributed to this year.
International segment revenues of $86.5 million in the second quarter. Trailed the prior year period revenues of 89.6 million.
International segment revenues of $86 5 million in the second quarter trailed the prior year period revenues of $89 6 million, excluding the $700000 year over year impact of favorable foreign currency exchange International revenues were down $3 $8 million, reflecting lower Rev.
excluding the $700,000 Euro-year impact of fair-bel-for-in-currency exchange, international revenues were down $3.8 million, reflecting lower revenues in Australia and New Zealand, and softness and retail book selling continued to impact trade sales in these...
Ken Cleary: In Australia, and New Zealand and softness in retail book selling continue to impact trade sales in these countries.
Fegman offering income increased $1.3 million to $8 million, primarily driven by improved results in Canada, which benefited from the reorganization of book clubs in the first-
Ken Cleary: Segment operating income increased $1 3 million to $8 million.
Ken Cleary: Primarily driven by improved results in Canada, which benefited from the reorganization of book clubs in the first quarter.
Unallocated overhead costs of $23.3 million decreased from $26.8 million in the prior period, benefiting from higher rental income associated with an additional 10 in the retail space of the company's own headquarter building in New York City. We continue to market floors two through four of our headquarter building for outside.
Ken Cleary: Unallocated overhead costs of $23 3 million decreased from $26 $8 million in the prior period benefiting.
Ken Cleary: Benefiting from higher rental income associated with an additional tenant in the retail space of the company's own headquarter building in New York City.
Ken Cleary: We continue to market floors, two through four of our headquarter building for outside tenants.
We recognize rental revenue of $2.3 million in the second quarter. As a reminder, this was previously recorded as a benefit nest DNA in the prior year period.
Ken Cleary: We recognize rental revenue of $2 $3 million in the second quarter. As a reminder, this was previously recorded as a benefit in SG&A in the prior year period.
On the 26,600 square feet least as of today, we expect annualized straight line rental revenue to total approximately $9.9 million in fiscal 2024. Now turn to-
Ken Cleary: On the 26600 square feet leased as of today, we expect annualized straight line rental revenue to total approximately $9 9 million in fiscal 2024.
Netcash provided by operating activities was $109.7 million in the current quarter, compared to $81.6 million in the prior period.
Ken Cleary: Now turning to cash flow and the balance sheet.
Ken Cleary: Net cash provided by operating activities was $109 $7 million in the current quarter compared to $81 $6 million in the prior period.
Lower inventory spend in the quarter, driven by a lower freight and manufacturing cost compared to a year ago, benefited working cap.
Ken Cleary: Lower inventory spend in the quarter, driven by a lower freight and manufacturing costs compared to a year ago benefited working capital.
As we know, in the last quarter, we continue to manage inventory purchases substantially closer to our demand, resulting in sufficient inventory on hand and lower spend.
Ken Cleary: As we noted last quarter, we continue to manage inventory purchases substantially closer to our demand, resulting in sufficient inventory on hand and lower spend.
We also continue to expect our cost of product per unit to decline in fiscal 2024 from the prior year with this benefit appearing in the P&L in the second half of this fiscal year.
Ken Cleary: We also continue to expect our cost of product per unit to decline in fiscal 2024 from the prior year with this benefit appearing in the P&L in the second half of this fiscal year.
Precash Low in the second quarter was $88.6 million compared to $62.7 million in the prior year period reflecting this tighter inventory.
Ken Cleary: Free cash flow in the second quarter was $88 6 million compared to $62 7 million.
Ken Cleary: In the prior year period, reflecting this tighter inventory management.
At the end of the second quarter, at the end of the quarter, cash and cash equivalence, net of total debt was $143.2 million compared to $218.5 million at the end of fiscal 2023.
Ken Cleary: At the end of the second quarter at the end of the quarter cash and cash equivalents net of total debt was $143 2 million compared to $218 5 million at the end of fiscal 2023.
In addition to investments in content and capabilities to drive growth, we continue to return capital to shareholders in the second quarter for a regular dividend and open market share repair repair?
Ken Cleary: In addition to investments in content and capabilities to drive growth. We continued to return capital to shareholders in the second quarter for our regular dividend and open market share repurchases, we repurchased almost one 4 million shares last quarter were $52 3 million.
We repurchased almost 1.4 million shares last quarter for $52.3 million.
Together with our regular dividends, we returned over $58 million in the second quarter and $101 million this fiscal
Ken Cleary: Together with our regular dividend, we returned over $58 million in the second quarter and $101 million this fiscal year.
In the fiscal year 2024 thus, 2024 thus far we have repurchased 2.2 million shares, which net of 391,000 shares issued relates to stock compensation, represents 6% of the company shares outstanding. Company shares outstanding are now below 30 million.
Ken Cleary: In the fiscal year 2024, thus.
Ken Cleary: 2024, thus far we have repurchased $2 2 million shares, which net of 391000 shares issued related to stock compensation represents 6% of the company's shares outstanding.
Ken Cleary: Company shares outstanding are now below $30 million.
Today, we announced our board directors has authorized an additional $66.2 million for repurchases, topping up our current share by-back authorization to $100 million.
Ken Cleary: Today, we announced that our board of directors has authorized an additional $66 $2 million for repurchases topping up our current share buyback authorization to $100 million.
Blastigre remains consistent in our capital allocation priorities, and we are committed to pursuing opportunities to leverage our balance sheet and deploy capital by first, investing in growth opportunities. Second, maintaining a strong and efficient balance sheet. And third, returning excess cash to shareholders to enhance their...
Ken Cleary: Elastic remains consistent and our capital allocation priorities and we are committed to pursuing opportunities to leverage our balance sheet and deploy capital.
Ken Cleary: First investing in growth opportunities.
Ken Cleary: Maintaining a strong and efficient balance sheet and third returning excess cash to shareholders to enhance their returns.
Turn to our outlook. Based on our second quarter results, and our current forecast for the second half of the year, we have updated our fiscal 2024 guidance. We now expect adjusted EBITDA of 165 to 175 million dollars.
Ken Cleary: Turning to our outlook based on our second quarter results and our current forecast for the second half of the year. We have updated our fiscal 2024 guidance. We now expect adjusted EBITDA of $165 million to $175 million.
This excludes the impact the one-time charges relate to restructuring cost-aiming activities of $7 million to $10 million of which we have incurred $6.3 million so far.
This excludes the impact of onetime charges related to restructuring and cost saving activities of 7 million to $10 million of which we have incurred $6 $3 million. So far this year.
All your revenues expected to be your approximately level width were slightly below the price.
Ken Cleary: Full year revenue is expected to be approximately level with or slightly below the prior year.
As a reminder, Scholastic typically generates the greatest contribution in the seasonally important second and fourth quarters. We continue to expect solid fourth quarter performance following a seasonally...
Ken Cleary: As a reminder, scholastic typically generates the greatest contribution and the seasonally important second and fourth quarters, we continue to expect solid fourth quarter performance.
During our seasonally smaller third quarter.
We now forecast fiscal 2020 for catbacks and free publication spending of $100 million to $110 million compared to $88.9 million in fiscal 2023 and full year free cash flow of between 35 million and 45.
Ken Cleary: We now forecast fiscal 'twenty, 'twenty, four capex and pre publication spending of $100 million to $110 million compared to $88 9 million in.
Ken Cleary: In fiscal 2023, and full year free cash flow of between $35 million and $45 million.
Peter discussed earlier in response to this revised outlook. We have taken steps to target additional revenue opportunities and align spending in the second half of the year.
Ken Cleary: As Peter discussed earlier in response to this revised outlook, we've taken steps to target additional revenue opportunities and align spending in the second half of the year.
Though we have reduced our outlook for the year, largely based on external factors that Peter described, our business remains fundamentally strong and remain focused on a long-term growth and our capital allocation priorities, including returning capital to share.
Ken Cleary: So we have reduced our outlook for the year largely based on external factors that Peter described our business remains fundamentally strong and remain focused on our long term growth and our capital allocation priorities, including returning capital to shareholders.
Thank you for your time today and have a happy holiday season. I'll now hand the call back to Peter for his final remarks.
Speaker Change: Thank you for your time today and have a happy holiday season.
Speaker Change: I'll hand, the call back to Peter for his final remarks, Thank you Ken.
As you and I have discussed this afternoon, Scholastic performed solidly in the second quarter despite a macro environment that slowed profit growth below our expectations and has caused us to a
Peter Work: Thank you and I have discussed this afternoon scholastic performed solidly in the second quarter. Despite the macro environment slowed profit growth below our expectations.
Peter Work: Caused us to adjust our guidance and we're confident scholastics unique scale and ability to create high quality books and content and get it to millions of kids in the U S and globally, so much potential for growth and impact today.
Confident, scholastics unique scale and ability to create high quality books and content and get it to millions of kids in the US and globally. There's so much potential for growth and impact today.
I want to take a moment to thank Scholastics World Class employees. They've worked tremendously hard this fall to serve our customers, engage our partners, and protect Scholastics' long-term mission and opportunity. And I'd also want to thank our shareholders for their continued support. So let me now turn the call over to Jeff.
Peter Work: I wanted to take a moment to thank scholastics World class employees.
Peter Work: Worked tremendously hard this fall to serve our customers engage our partners and protect scholastics long term mission and opportunity and I would also want to thank our shareholders for their continued support so let me now turn the call over to Jeff.
Thank you Peter. We appreciate your time today and continuing support. With that, I'll turn the call over to the operating.
Jeff: Thank you Peter.
Jeff: We appreciate your time today and continuing support with that I will turn the call over to the operator.
Thank you. As a reminder, to ask a question, please press R11 on your telephone and wait for your name to be announced. To withdraw your question, please press R11 again. One moment for question.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.
And our first question comes from the line of Brendan McCarthy with Sidori, you may proceed.
Speaker Change: And our first question comes from the line of Brendan Mccarthy with Sidoti You May proceed.
Hey, good afternoon, Ken and Peter, thanks for taking my questions today.
Brendan Mccarthy: Hey, good afternoon, Ken and Peter Thanks for taking my questions today.
Hey, so I think we can start off taking a look at the book clubs, business. I guess how from a revenue perspective or, you know, just in general, how small do you expect the business to?
Speaker Change: Hey, Brian.
Speaker Change: So I think we could start off taking a look at the book clubs business I guess, how from a revenue perspective or just in general how small do you expect the business to.
Speaker Change: To get eventually.
Well, I don't think we've got an exact number in mind. And actually, what we've always planned for is that there would be a reduction in the revenues in book clubs, but that would form a much more...
Speaker Change: Well I don't think we've got an exact.
Speaker Change: Exact number in mind.
Speaker Change: And actually what we what we've always planned for is that there would be a reduction in the revenues in book clubs, but that would form a much more.
A stable basis in order to go forward and to increase the.
in order to go forward and to increase the profitability. So essentially what we've been doing is a sort of shrink to grow strategy. And you know, the revenues have been a little bit the low perhaps what we might have expected because of the general environment within schools. But I don't think it's in any way undermined the strategy that we're pursuing for a longer term, you know, profitable and stable book clubs business. American Route 2.
Speaker Change: Profitability, so essentially what we've been doing is sort of shrink to grow strategy.
Speaker Change: And.
Speaker Change: The revenues have been a little bit below perhaps what we might have expected because of the general environment within schools, but I don't think it's in any way undermined the strategy that we're that we're pursuing.
Speaker Change: Longer term.
Speaker Change: In a profitable and stable book clubs business.
Speaker Change: Got it understood.
And then looking at the education solution segment, you mentioned there's been a shift in spending, supplemental instruction spending at the school and district level.
Speaker Change: And then looking at the Education solutions segment.
You mentioned theres been a shift in spending supplemental instruction spending at the school district level.
Can you go into detail about what exactly this change or it looks like and then also maybe what scholastic is doing to a death?
Speaker Change: Can you go into detail about.
Speaker Change: What.
Speaker Change: Equity this change.
Speaker Change: Sure looks like and then also maybe what scholastic is doing to adapt.
What's happening within schools is a literacy, is sort of a movement away from what was termed as a guided reading approach to literacy towards a more phonics based approach, which is called the Science of Read.
Speaker Change: But the thing what's happening within schools and literacy is sort of a movement away from.
Speaker Change: What was the <unk>.
Speaker Change: <unk> is a guided reading approach too.
Speaker Change: Literacy towards a more falling spaced.
Speaker Change: Approach, which is called the science of reading.
That's a trend that has accelerated over the last two or three years.
Speaker Change: That's a trend.
Speaker Change: Has accelerated over the last two or three years.
And what we're doing is clearly adapting our own supplemental materials so that they are much more in tune with the sciences of reading. What's important to say is the independent reading is still incredibly important in the literacy journey.
Speaker Change: And what we're doing is clearly.
Speaker Change: <unk> <unk> supplemental materials, so that they are much more in June.
Speaker Change: With the science of reading, what's important to say.
Speaker Change: Is the independent reading is still incredibly important in the literacy journey.
And the elastic is better positioned there than any other literacy provides.
Speaker Change: And that scholastic is better positioned than any other legacy provider.
Got it, that's helpful. Then Peter, I know you mentioned the ESS R funding initiative due to sunset, I believe, in 2025. I get to defend a benefit from that spending in the second quarter, second fiscal quarter.
Speaker Change: Got it that's helpful and then Peter I know you.
Speaker Change: I mentioned the U S. S are funding initiatives.
Speaker Change: Due to Sunset I believe in 2025.
Speaker Change: I guess did you see any benefit from that spending in the second quarter second fiscal quarter.
What's got to happen is that the funding has to be obligated. In other words, it doesn't necessarily have to be immediately spent, but it has to be committed by no later than September 2024.
Speaker Change: It's due to what's got to happen is that the funding has to be obligated in other words it doesn't necessarily have to be immediately spend but it has to be committed by no later than September 2024.
So we would expect that with a lot of hard effort on our part, that there are still good opportunities for us, both in the second part of this financial year, but also in the following financial year as well.
Speaker Change: So we would expect that.
Speaker Change: With a lot of hard asset called out past that there are still good opportunities for us both.
Speaker Change: The second part of this financial year, but also in the following financial year as well.
Also, we're encouraging all that we can.
Speaker Change: Also with encouraging all that we can to make sure that those <unk>.
to make sure that those federal f's of songs can be used in areas where we have really tremendous products.
Speaker Change: Federal lesser funds can be used in areas, where we have really tremendous products, so, particularly in areas like summer reading for example.
So particularly in areas like summer reading, for example.
so that we can really make sure that schools have got the funding that they need for what is an increasing priority in how they do things. Why are there some of the book collections?
So that we can really make sure that schools have got the funding that they need for what is an increasing priority and holiday yet.
Speaker Change: They do things, which is why the similar book collections et cetera becomes so important to us and we can say that the remaining funding is one of the sources, whereby we will be able to do and continue to get very very strong representation in the purchasing at that time.
etc. become so important to us and we can see that the remaining as a funding is one of the sources whereby we will be able to do and continue to get very very strong representation in the purchasing at that time.
Got it. And then one last question for me, just with regards to the retail book market. I know you mentioned strong results from the front list titles. I'm just curious as to maybe.
Speaker Change: Got it got it and then one last question for me just with regards to the retail book market. I know you mentioned strong results from the Frontlist titles.
Speaker Change: I'm just curious as to maybe your outlook on the backlist titles and when that market might return to growth.
Backlist titles and when that market might return to growth.
I don't have a complete roadmap on that, but I think what we, what one of the things that we have been seeing is some pickup in trade sales, Main Street sales as it were during the last few weeks. And we're particularly benefiting from that because of the
Speaker Change: I don't have a complete roadmap.
Speaker Change: But.
Speaker Change: I think what we one of the things that we have been seeing.
Speaker Change: Some pickup in <unk> sales.
Speaker Change: Mainstream sales as they were during the last few.
Speaker Change: Weeks.
Speaker Change: And we're particularly benefiting from that.
Speaker Change: Because of this.
titles that we've got that have been so well, the cat kid and other titles. I think what's important about...
Speaker Change: Hey.
Speaker Change: Titles that we've got that done.
Speaker Change: Well the cap Kid and other titles I think whats important about backlist.
is that the most successful publishers all have really strong backlist and it's particularly important for us because we can monetize those backlist not just through sales of books on bookshelves but we through our media activities we're able to, as I mentioned in the report, that we can see other purposes for that intellectual probably... talking too much of a
Speaker Change: Is that.
Speaker Change: The most successful publishers all have really strong Barclays and its particularly important for us because we can monetize those back case, not just through sales of books of bookshelves.
Speaker Change: But we throw a major activities.
Speaker Change: We're able to as I mentioned in the in the report we can see other purposes for that intellectual property.
And that is going to be an increasingly important part of what we do and furthermore, as there's been sort of changes in the sort of screen base.
Speaker Change: And that is going to be an increasingly important part of what we do and Furthermore.
Speaker Change: As.
Speaker Change: There's been sort of changes in the sort of screen based.
market at the moment whereby fewer but much more higher value properties are being transformed into media, interstraming and particularly into feature films. Then the high quality of our backlist, the titles, not characters.
Speaker Change: Market at the moment, whereby fewer but much more higher value.
Speaker Change: Properties are being are being.
Speaker Change: Farmed into.
Speaker Change: Into major interest streaming particularly into into feature films.
Speaker Change: And the high quality of our backlist titles locked characters.
are really important. And as we've discovered in recent discussions with houses in L.A. and elsewhere, is the tremendous value that screen-based companies see in our backs.
Speaker Change: Sure.
Speaker Change: Really important and as we've discovered in recent discussions with houses in MLA Enel sweat is the tremendous value that.
Speaker Change: Screen based companies see in our backlist and so having that boxes I think what we're going to find is that an increasing part of the value of that is going to be coming through screen based opportunities rather than just paper based opportunities, but it is as I mentioned in the talk.
And so having that back to us, I think what we're going to find is that the increasing part of the value of that is going to be coming through screen-based opportunities rather than just pay-for-based opportunities. But it is, as I mentioned in the talk, it's a virtual circle going from print to screen, to merchandising to back to the books.
Speaker Change: A virtual circle going from print.
Speaker Change: To screen to merchandising to.
Speaker Change: Back to the <unk>.
Speaker Change: Back to the books.
Speaker Change: Got it. Thank you that's all for me.
Thank you. Thank you.
Thank you and this concludes our Q&A. I will pass the call back to management for any closing remarks.
Speaker Change: Thank you and this concludes our Q&A I will pass the call back to management for any closing remarks.
So thank you very much Josh and thank you to all of you who joined us this afternoon. And of course, I wish everyone a very happy holiday season. We look forward to engaging with our investors in coming days and to providing a further update on our progress in March on our quarter three call.
Speaker Change: So thank you very much Josh and thank you to all of you who joined US This afternoon.
And of course, I wish everyone, a very happy holiday season, and we look forward to engaging with our investors in coming days.
Speaker Change: And to providing a further update on our progress in March on our quarter three call. Thank you.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect.
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