Q2 2025 Scholastic Corp Earnings Call
Operator: The reconciliations of those measures to the most directly comparable gap measures may be found in the company's earnings release and accompanying financial tables filed this afternoon on a Form 8K.
The reconciliations of those measures to the most directly comparable GAAP measures may be found in the company's earnings release and accompanying financial tables.
I hope this afternoon on a form 8-K.
Operator: 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.
The earnings release has also been posted to our Investor Relations website.
We encourage you to review the disclaimers in our release and Investor presentation and to review the risk factors disclosed in the company's annual and quarterly reports filed with the SEC.
Operator: Should you have any questions after today's call, please send them directly to our IR email address, investor underscore relations at scholastic.com.
Should you have any questions. After todays call. Please send them directly to our IR E Mail address investor underscore relations at Scholastic Dot com.
Peter Warwick: Now I'd like to turn the call over to Peter Warwick to begin this afternoon's presentation.
Speaker Change: Now I'd like to turn the call over to Peter work to begin this afternoon's presentation.
Peter Warwick: Thanks Jeff and good afternoon everyone. Thank you for joining us. In the second quarter, Scholastic's book fairs and clubs continued delivering the joy and excitement of books and reading to millions of kids, while our global children's publishing and entertainment teams moved ahead with exciting plans for this fiscal year and next.
Peter Work: Thanks, Jeff and good afternoon, everyone. Thank you for joining us.
Peter Work: In the second quarter Scholastic book fairs, and clubs continue delivering the joy and excitement of books and reading to millions of kids, while our global children's publishing and entertainment teams moved ahead with exciting plans for this fiscal year and next.
Peter Warwick: As we discussed at our earnings call in September, second quarter results came in lower than the prior year, primarily reflecting the timing of this year's publishing plan. During the back-to-school season, we pursued multiple opportunities to drive long-term growth in our core markets and expand beyond them with new models, channels, and products, all leveraging Scholastic's trusted brand, iconic IT, global scale, and differentiated channels. We built upon Scholastic's unique capability to give kids access to engaging, high-quality books year after year through our school reading events and education businesses. We advanced our strategy as a global children's media and content company through our trade and entertainment division.
Peter Work: As we discussed in our earnings call in September 2nd quarter results came in lower than the prior year, primarily reflecting the timing of this year's publishing plan.
Peter Work: During the back to school season, we pursued multiple opportunities to drive long term growth in our core markets and expand beyond them with new models channels and products, all leveraging scholastics trusted brands iconic IP global scale and differentiated channels.
Peter Work: We built upon the scholastics unique capability to give kids access to engaging high quality books year after year through high school reading events and education businesses.
Peter Work: We advanced our strategy as a global children's media and content company through our trade and entertainment division's preparing best selling books and award winning media distribution through our own channels as well as through third party retailers silos and platforms.
Peter Warwick: preparing best-selling books and award-winning media for distribution through our own channels as well as through third-party retailers, sellers and platforms. To support this growth, we successfully upsized our unsecured revolving credit facility to $400 million last month. with our strong balance sheet and a history of robust free cash flow conversion, we remain committed to investing in our future while returning excess cash to enhance shareholder return. we've reaffirmed our fiscal 2025 guidance. This reflects our results in the first half of the year and confidence in the outlook for the second half. Haji and I will both discuss this further shortly.
Peter Work: To support this growth, we successfully upsized, our unsecured revolving credit facility to $400 million last month.
Peter Work: With a strong balance sheet and a history of robust free cash flow conversion, we remain committed to investing in our future, while returning excess cash to enhance shareholder returns.
Peter Work: Reaffirmed our fiscal 2025 guidance.
Peter Work: <unk> results in the first half of the year and confidence in the outlook for the second half.
Jean: Jean I will both discuss this further shortly.
Peter Warwick: I'd like to start by discussing our market outlook and how, after significant preparations over the past several years, Scholastic is positioned to navigate potential changes in U.S. policy as the administration changes. First, we're closely monitoring US trade policy, including toward China, Mexico, and Canada. With respect to our outlook for the second half of fiscal 2025, we forecast little exposure, as we've already purchased almost all of our inventory needs. We similarly see little impact on our inventory costs in the first half of Fiscal 2026, given those purchases will be mostly sitting in our warehouses by early summer.
I'd like to start by discussing our market outlook and how after significant preparations over the past several years scholastic is positioned to navigate potential changes in U S policy as the administration changes.
Jean: First we're closely monitoring U S trade policy, including towards China, Mexico and Canada.
Jean: With respect to our outlook for the second half of fiscal 2025, we forecast little exposure as we've already purchased almost all of our inventory needs.
Jean: We similarly see little impact on our inventory costs in the first half of fiscal 2026, given those purchases will be mostly sitting in our warehouses by early summer.
Peter Warwick: Scholastic's global scale and highly optimised supply chain has long provided substantial product cost advantage. especially for our school channel. The global pandemic four years ago presented an opportunity to diversify our supplier relationships and make sourcing processes more flexible. As a result, today we're better able to mitigate and hedge against tariff, shipping, out-of-stock and other risks. Longer term, we remain confident that our supply chain team can mitigate exposure to potential tariffs, just as they navigated the disruptions of the pandemic.
Jean: Scholastics global scale and highly optimized supply chain has long provided substantial product cost advantages, especially for our school channels.
Jean: The global pandemic for years ago presented an opportunity to diversify our supplier relationships and make sourcing processes more flexible.
Jean: As a result today, we are better able to mitigate and hedge against terrorists shipping out of stock and other risks.
Jean: Longer term, we remain confident that our supply chain team can mitigate exposure to potential tariffs just as they navigated the disruptions of the pandemic.
Peter Warwick: Second, with respect to education policy, we're monitoring potential changes in legislation and funding. The vast majority of educational publishers' sales occur at the state and local district level, with money from a combination of funding from local, state and federal sources. Conference policy and funding trends at the state and local level are most relevant to students, families, and class and to our business partners. Among these trends, we remain focused on school choice and voucher programs which are driving enrolment in charter, parochial and independent schools in many states. new educational savings account programs which give families funds to pay for tuition, homeschooling, enrichment and remediation activities in a growing number of states.
Second with respect to education policy, we're monitoring potential changes in legislation and funding.
Jean: The vast majority of educational publisher sales occur at the state and local district level with money from a combination of funding from local state and federal sources.
Jean: Consequently.
Jean: Policy and funding trends at the state and local level are most relevant to students families and classrooms.
Jean: Through our business.
All of these trends, we remain focused on school choice and voucher programs, which are driving enrollment in charter parochial and independent schools in many states.
Jean: New educational savings account programs, which give families funds to pay for tuition homeschooling enrichment and remediation activities and a growing number of states.
Peter Warwick: and the shift to science-based approaches to literacy instructions, which we've seen adopted across the country over the past two to three years. All three of these trends may accelerate over the next four years. We don't expect this to materially impact our outlook for fiscal 2025 or in the near term. But over the longer term, we believe Scholastic is uniquely positioned to meet the growing markets needs created by these trends and to support families and kids wherever they are.
Jean: And the shift to science based approaches to literacy instructions, which we've seen adopted across the country over the past two to three years.
Jean: All three of these trends match salaries over the next four years.
Jean: We don't expect this to materially impact our outlook for fiscal 2025 are in the near term.
Jean: Over the longer term, we believe scholastic is uniquely positioned to meet the growing market needs created by these trends and to support families and kids wherever they are five ways. We are doing this already are as follows.
Peter Warwick: Five ways we are doing this already are as follows. First, we're tapping into new sources of state, corporate, and philanthropic funding, all independent of federal funding and policy, to provide kids and families access to books and Second, we're designing new go-to-market strategies and offerings in our school reading events and education solutions divisions to serve charter, independent, and parochial schools where we have significant growth opportunities. Third, we're developing new supplemental instructional programs aligned with the science of reading and the growing nationwide consensus on how best to teach literature. Fourth, we're testing new direct-to-family offerings to support parents and kids with reading and learning at home, as we explore the larger direct-to-consumer opportunity for our brand and IT.
Jean: First.
Jean: We're tapping into new sources of state core press and philanthropic funding all independent of federal funding and policy to provide kids and families access to books and literacy.
Jean: Second we're designing new go to market strategies and offerings in our school reading events and education solutions divisions to theft charter independence, and parochial schools, where we have significant growth opportunities.
Jean: Third we're developing new supplemental instructional programs aligned with the science of reading and the growing nationwide consensus on how best to teach literacy.
Jean: Fourth we're testing new direct family offerings to support parents and kids with reading and learning at home as we explore the larger direct to consumer opportunity for our brand and IP.
Peter Warwick: And lastly, we continue to lean into the importance of literacy, something that people and politicians across the country can wholeheartedly agree on, especially in the face of declining reading scores in the U.S. Enabling kids to read is something that Scholastic is uniquely known for. Indeed, it lies at the core of our purpose. With respect to the impact of these potential policy changes and others, we're confident in our ability to operate nimbly and navigate changes that may occur in the future. But we're also proactively taking steps to target cost action.
Jean: And lastly, we continue to lean into the importance of literacy something that people and politicians across the country can wholeheartedly agree on especially in the face of declining reading scores in the U S.
Jean: Enabling kids to read something to scholastic is uniquely known for indeed it lies at the core of our purpose.
Jean: With respect to the impact of these potential policy changes and others. We're confident in our ability to operate nimbly navigate changes that may occur in the future, but we're also proactively taking steps to target cost actions and ensure our investments and resources are aligned with our growth priorities, which had you will.
Peter Warwick: and ensure our investments and resources are aligned with our growth priorities, which Haji will elaborate on.
Jean: Library to answer them.
Peter Warwick: With that, I'll turn to the highlights across our business sector. In the children's book publishing and distribution segment, execution was solid. However, results declined, primarily reflecting year-over-year timing factors in our trade publishing and school reading events division. In school reading events or SRE, schools book the largest number of fall fairs since the pandemic and we remain on track to achieve our target of 90,000 fairs in fiscal 2025. Looking ahead, the investments we're making in book fairs to grow our fair count and implement new merchandising and sales initiatives, as I have discussed on prior calls, are having a positive impact and should contribute to our performance this year and beyond, including modest growth in fiscal 2025.
Jean: With that I will turn to the highlights across our business segments.
Jean: And the children's book publishing and distribution segment execution was solid.
Jean: However results declined primarily reflecting year over year timing factors and our trade publishing in the school reading events divisions.
Jean: In school reading events, our SRA schools book, the largest number of full fast since the pandemic and we remain on track to achieve our target of 90000 fast in fiscal 2025.
Jean: Looking ahead the investments, we're making in book faster <unk> accounts and implement new merchandising and sales initiatives as I have discussed on prior calls are having a positive impact and should contribute to our performance this year and beyond including modest growth in fiscal 2025.
Peter Warwick: Also, within SRE, updated offerings in our school book clubs business drove higher student participation and revenue per sponsor. As the business continues to rebuild a profitable core, we're re-engaging loyal customers and revitalizing this strategic channel to teachers and families.
Also within our salary updated offerings in our school book clubs business drove higher student participation and revenue per sponsor as.
Jean: As the business continues to rebuild a profitable core we're re engaging while customers and revitalizing the strategic channel to teachers and families.
Peter Warwick: turning to our trade publishing division within the children's book segment. Revenues were down in the second quarter, in line with expectations based on this year's publishing schedule relative to a year ago when we recorded strong sales of multiple new titles from major scholastic authors and franchises. In Quarter 2, new Scholastic releases maintained our presence on bestseller lists. Top-selling titles last quarter included Christmas at Hogwarts by J.K. Rowling, which debuted at number one on the New York Times Picture Book Best Seller list and held the spot for seven straight weeks. The Christmas Pig in paperback, also by J.K.
Jean: Turning to our trade publishing division within the children's books segment revenues were down in the second quarter in line with expectations.
Jean: Just on this year's publishing schedule relative to a year ago. When we recorded strong sales of multiple new titles from major scholastic authors and franchises.
Jean: In quarter, two new scholastic releases maintained a presence on best seller lists top selling titles last quarter included Christmas is a hardware by J K Rowling, which debuted at number one on the New York Times Picture book bestseller list and held a spot for seven straight weeks.
Jean: The Christmas Peg in paperback also by J, K, Rowling, which debuted at number one on the New York Times paperback bestseller list and the final title and our own blade is bad guys series, the bad guys and one last thing.
Peter Warwick: Rowling, which debuted at number one on the New York Times paperback bestseller. and the final title in Aaron Blaiby's Bad Guys series, The Bad Guys in One Last Thing. New titles in our long-time best-selling global franchises, including the Harry Potter Interactive Edition, a special edition of Harry Potter and the Sorcerer's Stone, and the Hunger Games Illustrated Edition, which was a USA Today bestseller, they also performed strongly. Earlier this month, as we began our third quarter, Scholastic published the 13th book in Dave Pilkey's global best-selling series Dog Man, Big Jim Begins, which instantly became the number one best-selling book overall in the US and Canada, beating out every other adult and children's title on sale, and the number one best-selling children's book in the UK and Australia.
Jean: New titles in a long time, best selling global franchises, including the Harry Potter Interactive addition.
Jean: The addition of Harry Potter and the Sorceress stone.
Jean: The hunger games illustrated edition, which was the USA today bestseller. They also performed strongly.
Jean: Earlier this month as we began our third quarter Scholastic published the 13th book in Gatesville Keys Global Best selling series Dog Man Big Jim begins which instantly became the number one best selling book overall in the U S and Canada, beating out every other adult and childrens title on sale.
Jean: And the number one best selling children's book in the UK and Australia.
Peter Warwick: The global excitement behind Big Jim Begins is a testament to the prodigious creativity of Dave Pilkey, the unmatched editorial, marketing, sales, distribution and supply chain expertise of scholastic employees around the globe, and the enduring power of a great story to engage and capture the imagination of kids of all ages. We're optimistic that the title's incredible popularity will also contribute to backlist sales as new readers discover earlier Dogman titles and Dave's other series, CatKick Comic Club and Captain America. The release of the Dogman movie in January 2025, supported by extensive media and a worldwide author tour, should also support excitement and the virtuous circle from page to screen and back to page.
Jean: The global excitement behind Big Jim begins as a testament to the prodigious creativity of days Turkey.
Jean: The unmatched editorial marketing sales distribution and supply chain expertise of scholastic employees around the globe.
Jean: And the enduring power of a great story to engage and capture the imagination of kids of all ages.
We're optimistic that the titles incredible popularity will also contribute to backlist sales as new readers discovered early adult men titles and David Other series coming club and Captain Underpants.
Jean: The release of the Dog Man movie in January 2025, supported by extensive media and a worldwide author tour should also support excitement and the virtuous circle from page to screen and back to page.
Peter Warwick: Looking ahead, we're excited about our spring publishing schedule which includes the highly anticipated fifth book in Suzanne Collins' worldwide best-selling Hunger Games series, Sunrise on the Reap. Next March, the title will be released simultaneously in the US, Canada, UK, Australia and New Zealand.
Jean: Looking ahead, we're excited about our spring publishing schedule, which includes the highly anticipated fifth book and Suzanne Collins' worldwide best selling hunger game series Sunrise on the retail.
Jean: Next March the titles will be released simultaneously in the U S, Canada, U K, Australia, and New Zealand.
Peter Warwick: turning to the entertainment segment. Revenue and Adjusted EBITDA rose from the strategic acquisition of Nine Story Media Group in June as we continued to make progress on our integration and a promising joint development and production slate of major projects. As we've discussed previously, after the glut of spending on content production from approximately 2020 to 2022, the major streaming platforms and studios pulled back on production budgets and delayed green lights for series, feature films, and longer-form content in general. This has temporarily slowed, but not stopped, demand for production service work, as well as green lights for multiple promising projects on our shared development plan.
Jean: Turning to the entertainment segment.
Jean: Revenue and adjusted EBITDA Rose from the strategic acquisition of nine story Media group in June as we continued to make progress on our integration.
Jean: Pharmacy joint development and production slate of major projects.
Jean: As we've discussed previously after the lots of spending on content production from approximately 2020 to 2022.
Jean: Streaming platforms and studio has pulled back on production budgets and delayed Green lights for series feature films and longer form content in general this has temporarily slowed but not stopped demand for production services work as well as green light for multiple promising projects on a shared development slate.
Peter Warwick: Nevertheless, last quarter we were able to go to market with a new Magic School Bus series for preschool, Mighty Explorers, an updated Clifford Animated series, as well as others. These shows were met with great excitement among broadcasters and streamers. We also look forward to the second season of the animated kids series, Eva the Owlette, based on the best-selling Scholastic book series, Owl Diaries, by Rebecca Elliott, premiering on Apple TV Plus next month. The show was produced by Scholastic Entertainment, with production services and animation by Ninestore. There's also great enthusiasm externally and in the industry around the second season of our Goosebumps live action series airing on Disney Plus on January 10th, 2025.
Nevertheless, last quarter, we were able to go to market with a new Magic School bus series for preschool Mighty explorers and updated Clifford animated series as well as others. These shows were met with great excitement among broadcasters and streamers.
Jean: We also look forward to the second season of the animated Kids' series, either the outlet based on the best selling Scholastic book series Owl diaries by Rebecca Elliot premiering on Apple TV plus next month.
Jean: <unk> produced by Scholastic Entertainment with production services and animation by nine story.
There's also great enthusiasm externally and in the industry around the second season of a goose bumps live action series airing on Disney plus on January 10, 2025 base.
Peter Warwick: Based upon R. L. Stein's worldwide best-selling Scholastic book series and co-produced by Scholastic Entertainment, this core Scholastic brand has significant upside for us. We continue to publish new titles in the franchise, including the first Goosebumps graphics title, The Haunted Mask, which debuted earlier this fall. We're especially proud that earlier this month, Scholastic Entertainment and Nine Story received a total of 16 Children's and Family Emmy nominations, including nine nominations for Goosebumps. These nominations bring well-deserved recognition to the high quality and engaging content that our talented creators and teams create for children every day.
Jean: Based upon our RL Stines worldwide best selling Scholastic book series and co produced by Scholastic Entertainment. This course scholastic brand a significant upside for US we continue to publish new titles in the franchise, including the first goose bumps graphics title the haunted mask, which debuted earlier this.
Jean: Paul.
Jean: We're especially proud that earlier this month Scholastic entertainment to nine story received a total of 16 children's and family Emmy nominations, including nine nominations to Goose bumps.
Nominations bring well deserved recognition, so the high quality and engaging content to our talented creators and teams create for children everywhere.
Peter Warwick: YouTube continues to grow as the leading platform to reach kids with short-form content. To meet this demand, we're accelerating our digital-first production and development growth opportunities with multiple new projects based on Scholastic IP. We also continue to expand our reach and monetization on YouTube and other advertising-supported platforms, leveraging Nine Stories' distribution capabilities. Last quarter, we added to our content available on digital platforms, including classic Scholastic franchises such as Goosebumps, which is driving increased viewership and revenue.
Jean: <unk> continues to grow as the leading platform to reach kids with short form content.
Jean: To meet this demand we're accelerating our digital first production and development growth opportunities with multiple new projects based on scholastic IP. We also continue to expand our reach and monetization on Youtube and other advertising supported platforms leveraging nine stories distribution capabilities.
Jean: Last quarter, we added to our content available on digital platforms, including classic scholastic franchises, such as Goose pumps, which is driving increased viewership and revenues.
Peter Warwick: In summary, we remain very optimistic about Scholastic's long-term opportunity to build and grow beloved children's franchises on page and on screen, supported by our integrated Scholastic Entertainment team, which is nimbly navigating a dynamic entertainment sector.
Jean: In summary, we remain very optimistic about scholastics long term opportunity to build and grow beloved childrens franchises homepage and on screen supported by our integrated Scholastic Entertainment team, which is nimbly navigating a dynamic entertainment sector.
Peter Warwick: turning to education solutions. Second quarter sales declined year over year. This was in line with the expectations we outlined on our last two earnings calls and reflected lower curriculum and book collection sales. Lower spending on supplemental curriculum products continues to be a headwind for this business. In anticipation of a recovery in supplemental curriculum spending in fiscal 2026, we continue to move forward with the development of updated and new literacy programs that leverage Scholastic's content and align with the shift to the science of reading. We're very excited about ExploreELA, a new digital, supplemental, research-based program for grades 6 through 8 that gives middle school educators instant access to the highest quality, standards-aligned content and instructional material.
Jean: Turning to education solutions.
Second quarter sales declined year over year. This was in line with the expectations. We outlined on our last two earnings calls and reflected lower curriculum and book collection sales lower.
Jean: Lower spending on supplemental curriculum products continues to be a headwind for this business.
Jean: In anticipation of a recovery in supplemental curriculum spending in fiscal 2026, we continue to move forward with the development of updated and new literacy programs that leverage scholastics content and align with the shift to the science of reading.
Jean: We're very excited about explore a.
Jean: Our new digital supplemental research based program for grades six through eight that gives the middle school educators instant access to the highest quality standards align content and instructional materials.
Peter Warwick: With exciting units and more than 1,000 engaging text and multimedia resources, which leverage content from our classroom magazines, Explore ELA develops the knowledge and literacy students need to read grade-level and increasingly complex text. Also in final stages of development, the new Scholastic Knowledge Library is a small group solution that integrates knowledge acquisition with instruction in essential literacy skills to build strong readers in grades K through 5. The evidence-based program boosts vocabulary and knowledge to enable students to read complex text across disciplines with differentiated instruction for teachers to ensure all students can access grade-level text. Both programs will be in the market for the 2025-26 school year and are expected to contribute to next fiscal year results.
Jean: Exciting units and more than a thousand engaging text multimedia resources, which leverage content from our classroom magazines explore elo develops the knowledge and literacy students need to read grade level and increasingly complex taxes.
Jean: Also in final stages of development, the new Scholastic knowledge Library is a small group solution that integrates knowledge acquisition with instruction and essential literacy skills to build strong readers in grades K through five.
Speaker Change: The evidence based program boost for Cadbury and knowledge to enable students to read complex text across disciplines with differentiated instruction for teachers to ensure all students can access grade level taxes.
Speaker Change: Both programs will be in the market for the 2025 2006 school year and are expected to contribute to next fiscal year results.
Peter Warwick: We continue to be optimistic about our state and community literacy partner business in the second half of fiscal 2025, driven by expanded participation in state sponsored programs as our partners continue investing to improve kids access to books outside of school. Overall, we remain positive about the opportunity for Scholastic's uniquely differentiated education. as we move forward with our investments in new products and partnerships, as I just discussed.
Speaker Change: We continue to be optimistic about a state and community literacy partner business in the second half of fiscal 2025, driven by expanded participation in state sponsored programs.
Speaker Change: Partners continue investing to improve kids' access to books outside of school.
Overall, we remain positive about the opportunity for scholastics uniquely differentiated education business.
Speaker Change: As we move forward with our investments in new products and partnerships as I just discussed.
Peter Warwick: In the international segment, revenues were in line with prior years. We continued to make progress, optimising the business to drive growth. Last quarter, we took steps to reorganise and realign our international education portfolio to improve coordination and decision-making across our various growth markets. We've now consolidated our product and marketing teams so we can better leverage our on-the-ground market knowledge and go-to-market capability. We continue to expect modest growth in major markets relative to fiscal 2020.
Speaker Change: In the International segment revenues were in line with prior year.
Speaker Change: Continued to make progress optimizing the business to drive growth.
Speaker Change: Quarter, we took steps to reorganize and realign our international education portfolio to improve coordination and decision making across our various credit markets. We've now consolidated our product and marketing teams. So we can better leverage our on the ground market knowledge and go to market capabilities with <unk>.
Speaker Change: <unk> two I expect modest growth in major markets relative to fiscal 2024.
Peter Warwick: As I laid out at the start of this year, Scholastic is focused on execution and achieving modest growth in Fiscal 2025 as we navigate near-term headwinds in some of our markets. At the same time, we're continuing our investments to grow in our core and adjoining markets, where favourable trends and Scholastic's brand, IP and channels present compelling opportunities.
As I laid out at the start of this year scholastic is focused on execution and achieving modest growth in fiscal 2025, as we navigate near term headwinds in some of our markets at the same time, we're continuing our investments to grow in our core and adjoining markets were favorable trends in <unk>.
Speaker Change: Elastic brand IP and channels present compelling opportunities.
Peter Warwick: The appointment last quarter of Jeff Matthews as our first Chief Growth Officer is helping to accelerate these cross-company growth initiatives as we prioritise three key areas. First, developing direct-to-consumer offerings and channels that leverage our brand and ideas. Second, expanding our partnerships with public and private funders to increase kids' and families' access to books. and third, creating stories and characters that leverage Scholastic's unique editorial, book distribution and entertainment capabilities. to engage more kids and create a more valuable global franchise. We're already seeing more momentum in these areas and I look forward to providing continued up.
Speaker Change: The appointment last quarter, Jeff Matthews as our first chief growth officer is helping to accelerate these cross company growth initiatives as we prioritize three key areas first developing direct to consumer offerings in channels that leverage our brand and IP.
Speaker Change: Second expanding our partnerships with public and private funders to increase kids and families access to books.
And third creating stories and characters that leveraged scholastics unique editorial book distribution and entertainment capabilities to engage more kids and create more valuable global franchises.
Speaker Change: We're already seeing more momentum in these areas and I look forward to providing continued updates.
Haji Glover: and now I'll turn the call over to Haji to review our fiscal 2025 second quarter results and outlook for the remainder.
Speaker Change: And now I'll turn the call over to <unk> to review, our fiscal 'twenty to 'twenty five second quarter results and outlook for the remainder of the year.
Haji Glover: Thank you, Peter, and good afternoon, everyone. Today I will refer to our adjusted results for the second quarter, excluding one-time items, unless otherwise indicated. Please refer to our press release tables and SEC filings for a complete discussion of one-time items. As Peter discussed earlier, second quarter revenues decrease year-over-year primarily due to timing-related factors in our children's book publishing segment. operating profits in the quarter decreased driven by these modest sell declines. Turning to our consolidated financial results, in the second quarter, revenues decreased 3% to $544.6 million. Operating income was $78.9 million compared to $101.3 million in the prior year period.
Speaker Change: Thank you Peter and good afternoon, everyone today, I will refer to our adjusted results for the second quarter, excluding onetime items unless otherwise indicated.
Speaker Change: Please refer to our press release tables in our SEC filings for complete discussion of one time items as Peter discussed earlier second quarter revenues decreased year over year, primarily due to timing related factors and our children's book publishing segment.
Speaker Change: Operating profit in the quarter decreased driven by these modest declines.
Speaker Change: Turning to our consolidated financial results in the second quarter revenues decreased 3% to $544 6 million.
Speaker Change: Operating income was $78 9 million compared to $101 3 million in the prior year period adjust.
Haji Glover: Adjusted EBITDA was $108.7 million relative to $124 million a year ago. Net income was $52 million from $76.9 million in the prior year period. On a per diluted share basis, earnings were $1.82 compared to $2.45 last year.
Adjusted EBITDA was $108 7 million.
Relative to $124 million a year ago.
Speaker Change: Net income was $52 million.
Speaker Change: From $76 9 million in the prior year period.
Speaker Change: On a per diluted share basis earnings were $1 82, compared to $2 45 last year.
Haji Glover: Now turning to our segment results. In children's book publishing and distribution, revenues for the second quarter decreased 6% to $367 million, reflecting timing factors in our trade, publishing, and book fairs channels. Segment operating income was $102.1 million, a decrease of $9.5 million from a prior year Within our school reading events division, book fairs revenues were $231 million in the quarter, a decrease of 5%, reflecting slightly lower fair count and revenue per fair. Given the late Thanksgiving holiday in the U.S. and the impact of hurricanes on schools in the South, a larger number of fair bookings occurred in December this year.
Speaker Change: Now turning to our segment results in children's book publishing and distribution revenues for the second quarter decreased 6% to $367 million, reflecting timing factors and our trade publishing in book fairs channels.
Speaker Change: Segment operating income was $102 1 million a decrease of $9 5 million from a prior year period.
Speaker Change: Our school reading events Division book Fairs revenues were $231 million in the quarter.
Speaker Change: A decrease of 5%.
Speaker Change: Slightly lower fair count and revenue per fair.
Speaker Change: Given the late Thanksgiving holiday in the U S and the impact of Hurricanes on schools in the south.
Speaker Change: Larger number of fear bookings occurred in December of this year.
Haji Glover: in our fiscal third quarter compared to a year ago. As a result, fair count was lower in the second quarter versus a year ago. As we increase fare count for the season, adding smaller fares to the fall schedule, revenue per fare also decreased slightly. Still, RPF remained close to record levels and significantly higher than pre-pandemic levels. As Peter mentioned, we expect Faircount to contribute to modest growth in our book fairs business this school year. Book Club's revenue were $33.2 million in the quarter, an increase of 2%, reflecting higher revenue per sponsor and student per sponsor.
Speaker Change: In our fiscal third quarter compared to a year ago.
Speaker Change: As a result fair count was lower in the second quarter versus a year ago.
Speaker Change: As we increase spare count for the season, adding smaller fares to the fall schedule revenue per fair also decreased slightly still RPF remain close to record levels and significantly higher than pre pandemic levels.
Speaker Change: As Peter mentioned, we expect fair count to contribute to modest growth in our book fairs business. This school year.
Speaker Change: Book clubs revenue were $33 2 million in the quarter, an increase of 2%, reflecting higher revenue per sponsor and student per sponsor.
Haji Glover: After strategically transitioning book clubs to a smaller, more profitable core business in fiscal 2024, we've successfully implemented new strategies to re-engage sponsors and customers, and we're continuing to adapt various offerings to improve teacher engagement. In our trade publishing division, revenues were $102.8 million in the second quarter, compared to prior year period revenues of $117.9 million, in line with expectations. This reflected lower frontlist revenues compared to a year ago when sales benefited from big new titles in the Cat Kid comic club, Harry Potter, and Hunger Games franchises. Excluding the impact of timing in the quarter, new publishing releases performed strongly and continued to top best-seller lists.
Speaker Change: After strategically transitioning book clubs to a smaller more profitable core business in fiscal 2024, we successfully implemented new strategies to reengage sponsors and customers and we're continuing to adapt various offerings to improve teacher engagement.
Speaker Change: And our trade publishing division revenues were $102 8 million in the second quarter compared to prior year period revenues of $117 9 million in line with expectations.
Speaker Change: This reflected lower frontlist revenues compared to a year ago when sales benefited from big New titles and the Cat Kid comic club, Harry Potter and hunger game franchises.
Speaker Change: Excluding the impact of timing in the quarter, New publishing releases performed strongly and continues to top bestseller lists.
Haji Glover: We're excited about our major releases in the second half of this fiscal year including Dogman, Big Jim Begins, which published at the start of our third quarter and has already seen huge success worldwide, as well as a highly anticipated fifth book in the best-selling Hunger Games series, Sunrise on the Reaping, publishing at the start of our fourth quarter.
Speaker Change: We're excited about our major releases in the second half of this fiscal year, including to augment Big Jim begins which published at the start of our third quarter and has already seen huge success worldwide as well as our highly anticipated fifth book and the bestselling hunger game series Sunrise onto reaping publishing at the start of our fourth quarter.
Haji Glover: turning to our entertainment As a reminder, this segment consolidates results from the company's existing Scholastic Entertainment division reported in the children's book segment prior to fiscal 2025 with results from Nine Story Media Group in which we acquired 100% economic interest this past June. Entertainment segment revenues were $16.8 million, reflecting the contribution of nine stories. segment operating loss was $3.9 million, which includes increased amortization expense on intangible assets. On a pro forma basis, nine-story revenues were in line relative to the prior year period as anticipated. Primarily driven by delayed production green lights, as Peter detailed. While these industry-wide headwinds will impact production work in the short term, we continue to execute on the company-wide synergies which should benefit this segment in fiscal 2026 and beyond.
Speaker Change: Turning to our entertainment segment.
Speaker Change: As a reminder, this segment consolidated results from the company's existing Scholastic Entertainment Division reported in the children's book segment prior to fiscal 2025 with.
Speaker Change: With results from nine story media group in which we acquired 100% economic interest this past June.
Entertainment segment revenues were $16 8 million, reflecting the contribution of nine story.
Speaker Change: Segment operating loss was $3 9 million, which includes increased amortization expense on intangible assets.
Speaker Change: On a pro forma basis nine story revenues were in line relative to the prior year period as anticipated.
Speaker Change: Primarily driven by the late production Green lives as Peter detailed.
Speaker Change: While these industry wide headwinds will impact production work in the short term, we continue to execute on a company wide synergies, which should benefit this segment in fiscal 2026 and beyond.
Haji Glover: Turning to education solutions, segment revenues were down 12% to $71.2 million in the second quarter, primarily reflecting lower spending on supplemental curriculum products, coupled with lower revenues from state sponsored programs. As school districts focus on adopting and implementing new core programs, near term pressures on supplemental literacy curricula continue to impact sales of supplemental instructional materials and key product. including classroom libraries and collections in the second quarter. As Peter noted, our teams are developing new supplemental products for schools, which we expect to contribute to fiscal 2026 results. Segment operating loss was $0.5 million in the second quarter compared to operating income of $5.8 million in the prior year period on lower sales.
Speaker Change: Turning to education solutions segment revenues were down 12% to $71 2 million in the second quarter, primarily reflecting lower spending on supplemental curriculum products, coupled with lower revenues from state sponsored programs at school district focus on adopting and implementing new core programs near term pressures on supplemental literacy.
Speaker Change: <unk> continued to impact sales of supplemental instructional materials and key product lines.
Speaker Change: Including classroom libraries and collections in the second quarter.
As Peter noted our teams are developing new supplemental products for schools, which we expect to contribute to fiscal 2026 results SYGMA.
Segment operating loss was <unk> 5 million in the second quarter compared to operating income of $5 8 million in the prior year period on lower sales.
Haji Glover: Looking at the remainder of the year we expect to continue to face headwinds in this segment as anticipated in fiscal 2025 as we move forward with our investments in this business. We remain optimistic about the state and community literacy partner business in the second half of fiscal 2025. International segment revenues were $86.7 million in the second quarter, in line with prior year period revenues. excluding the 1.9 million year-over-year impact of favorable foreign currency exchange international revenues were down 1.7 reflecting lower revenues in Australia driven by softness in retail markets. In the second half of the year, we expect modest growth in operational efficiencies to drive improvements in operating margins and contribution in the international segment, relative to the same period in fiscal 2024.
Speaker Change: Looking at the remainder of the year, we expect to continue to face headwinds in this segment.
Speaker Change: Anticipated in fiscal 2025, as we move forward with our investments in this business.
Speaker Change: We remain optimistic about the state and community literacy partner business in the second half of fiscal 2025.
Speaker Change: International segment revenues were $86 7 million in the second quarter in line with prior year period revenues.
Speaker Change: Excluding the $1 $9 million year over year impact of favorable foreign currency exchange.
Speaker Change: National revenues were down $1 7 million, reflecting lower revenues in Australia, driven by softness in retail market.
Speaker Change: In the second half of the year, we expect modest growth and operational efficiencies to drive improvements in operating margins and contribution and the international segment relative to the same period in fiscal 2024 segment operating income decreased slightly to $7 1 million compared to $8 million in the prior year period.
Haji Glover: Segment operating income decreased slightly to $7.1 million compared to $8 million in the prior year period.
Haji Glover: Unallocated overhead costs of $25.9 million in the second quarter increased from $23.3 million in the prior period, primarily driven by higher employee benefit costs.
Speaker Change: On the allocated overhead costs of $25 9 million in the second quarter increased from $23 3 million in the prior period, primarily driven by higher employee benefit costs.
Haji Glover: Now I'm turning to Caslow in The Balance. Net cash provided by operating activities was $71.2 million, compared to $109.7 million in the prior year. This decrease was primarily driven by higher inventory partly related to major releases later this fiscal year. higher interest payments related to the company's borrowing. and lower customer remittance on decreased sales. Free cash flow in the second quarter was $42.4 million compared to $88.6 million in the prior year. primarily reflecting lower operating cash flow. As a reminder, we now include production spending and borrowing related to production loans, both within the new entertainment as part of our definition of free cash flow.
Speaker Change: Now turning to cash flow and the balance sheet net.
Net cash provided by operating activities was $71 2 million compared to $109 7 million in the prior year.
Speaker Change: This decrease was primarily driven by higher inventory purchases partly related to major releases later this fiscal year.
Speaker Change: Higher interest payments related to the Companys borrowings and.
And lower customer amendments on decreased sales.
Speaker Change: Free cash flow in the second quarter was $42 4 million compared to $88 6 million in the prior year period.
Speaker Change: Merrily, reflecting lower operating cash flow.
Speaker Change: As a reminder, we now include production spending and borrowing related to production loans, both within the New Entertainment segment as part of our definition of free cash flow.
Haji Glover: Last quarter, consistent with our capital allocation priorities, we successfully upsized our unsecured revolving credit facility from $300 million to $400 million and reset the maturity until November 2029. At quarter end, the company had borrowings of $250 million under the facility. At the end of the quarter, net debt was $120.8 million compared to a net cash position of $107.7 million at the end of fiscal 2024. primarily driven by nine-story media group acquisition, seasonal free cash use, and cash return to shareholders. We continue to return access cash to our shareholders in the second quarter through our regular dividend and open market share repurchase.
Speaker Change: Last quarter consistent with our capital allocation priorities, we successfully upsized, our unsecured revolving credit facility from 300 million to $400 million and reset the maturity until November 2029.
Speaker Change: At quarter end, the company had borrowings of 250 million under the facility.
Speaker Change: At the end of the quarter net debt was $120 8 million compared to a net cash position of $107 7 million at the end of fiscal 2024 <unk>.
Primarily driven by mine story Media group acquisition.
Speaker Change: Seasonal free cash use and cash returned to shareholders.
Speaker Change: We continue to return excess cash to our shareholders in the second quarter through our regular dividend and open market share repurchases.
Haji Glover: We repurchased 185,000 shares last quarter for $5 million. Together with our regular dividend, we returned over $10 million in the second quarter. We'll continue to pursue opportunities to optimize our strong 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 return.
Speaker Change: We repurchased 185000 shares last quarter for $5 million.
Together with our regular dividend, we returned over $10 million in the second quarter.
We will continue to pursue opportunities to optimize our strong balance sheet and deploy capital by first investing in growth opportunities.
Speaker Change: Maintaining a strong and efficient balance sheet and third returning excess cash to shareholders to enhance their returns.
Haji Glover: As we look ahead to the rest of the year, we've reaffirmed our fiscal year 2025 guide. We continue to expect revenue growth of 4% to 6% and adjusted EBITDA of $140 million to $150 million. Looking at the outlook for the remainder of the year, in our seasonally smaller third quarter, we expect revenue and adjusted EBITDA growth compared to the prior year, largely driven by positive timing-related factors in our trade and school reading events divisions that I discussed earlier. We also anticipate solid performance in our fourth quarter, driven by our trade division with the release of the fifth Hunger Games book, and modest growth in school reading events versus a relatively soft comparison in the prior year.
Speaker Change: As we look ahead to the rest of the year, we reaffirmed our fiscal year 2025 guidance.
Speaker Change: We continue to expect revenue growth of 4% to 6% and adjusted EBITDA of $140 million to $150 million looking at the outlook for the remainder of the year and our seasonally smaller third quarter, we expect revenue and adjusted EBITDA growth compared to the prior year.
Speaker Change: Largely driven by positive timing related factors and our trade and school reading events divisions that I discussed earlier.
Speaker Change: We also anticipate solid performance in our fourth quarter, driven by our trade division with the release of the fifth hunger games books and modest growth in school reading events versus a relatively soft comparison in the prior year.
Haji Glover: The outlook for a full-year free cash flow remains between $20 million and $30 million, reflecting our planned CapEx and this year's larger-than-usual working capital investment.
Speaker Change: Look for full year free cash flow remains between $20 million and $30 million, reflecting our planned capex and this year's larger than usual working capital investments.
Haji Glover: In a dynamic market, we believe Scholastic is well-positioned to navigate and mitigate the potential impact of policy and other changes, as Peter discussed. While we don't anticipate any of these market dynamics to impact our outlook for the remainder of fiscal 2025, we'll continue to closely monitor potential changes.
Speaker Change: In a dynamic market, we believe scholastic is well positioned to navigate mitigate the potential impact of policy and other changes as Peter discussed.
Speaker Change: While we don't anticipate any of these market dynamics to impact our outlook for the remainder of fiscal 2025, we will continue to closely monitor potential changes.
Haji Glover: We are also taking proactive steps to target additional cost actions that will benefit the current fiscal year and our cost structure going into next year. as part of our ongoing efforts to align spending with our long-term priorities. we have cut back in discretionary, non-revenue-generating expenses. and Consulting in Non-Priority Functions and Business. We have frozen hiring in these areas, too, and executed a series of strategic departmental reorganizations globally.
We are also taking proactive steps to target additional cost actions that will benefit the current fiscal year and our cost structure going into next year.
Speaker Change: As part of our ongoing efforts to align spending with our long term priorities, we have cutback in discretionary non revenue generating expenses.
Speaker Change: In consulting and non priority functions and businesses.
Speaker Change: We have frozen hiring in these areas too and executed a series of strategic departmental reorganizations globally.
Haji Glover: We remain confident in Scholastic's long-term growth opportunity and look forward to the second half of fiscal 2025.
Speaker Change: We remain confident in scholastic long term growth opportunity and look forward to the second half of fiscal 2025.
Peter Warwick: Thank you for your time today, and I will now hand the call back to Peter for his final remark.
Speaker Change: Thank you for your time today, and I will now hand, the call back to Peter for his final remarks.
Peter Warwick: Thank you, Haji. After solidly executing in the second quarter and positive about Scholastic's prospects, for the remainder of the year we're focused on delivering modest growth. For next year and beyond, I'm excited about the investments we're currently making to leverage Scholastic's unique assets and strengths and profitably grow in and beyond our core markets, as I've discussed this afternoon. I again want to acknowledge the dedication and innovation of our employees, the talent of the creators, teachers and parents we work with. and the support of our shareholders, which together enable Scholastic to bring stories, reading and learning to kids around the globe.
Speaker Change: Thank you <unk>.
Speaker Change: After solidly executing in the second quarter and positive about scholastics prospects for the remainder of the year, we are focused on delivering modest growth.
Speaker Change: So next year and beyond I'm excited about the investments, we're currently making to leverage scholastics unique assets and strengths and profitably grow even beyond our core markets as I've discussed this afternoon.
Speaker Change: I again want to acknowledge the dedication and innovation of our employees the talent of the creators teachers and parents we work with.
Speaker Change: And the support of our shareholders, which together enable scholastic to bring stories reading and learning to kids around the globe.
Peter Warwick: Thank you very much.
Operator: Let me now turn the call over.
Speaker Change: Thank you very much let me now turn the call over to Jeff. Thank.
Operator: Thank you, Peter. With that, we will open the call for questions. Operator. Thank you, Jeff. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. One moment for our first question.
Jeff Matthews: Thank you Peter with that we will open the call for questions operator.
Jeff Matthews: Jeff and as a reminder to ask a question simply press Star one one on your telephone and wait for your name to be announced.
Speaker Change: To remove yourself, Chris Star one again.
Jeff Matthews: Yes.
Jeff Matthews: One moment for our first question.
Brendan Mccarthy: and he comes from the line of Brendan McCarthy. With Sidoti, please proceed.
Speaker Change: And it comes from the line of Brendan Mccarthy with Sidoti. Please proceed.
Brendan Mccarthy: Great, good afternoon, everybody. Thanks for taking my questions.
Brendan Mccarthy: Great. Good afternoon, everybody. Thanks for taking my questions.
Brendan Mccarthy: I just wanted to start out at the segment margin level, specifically the entertainment segment.
Brendan Mccarthy: Just wanted to start out at the segment margin level.
Brendan Mccarthy: Specifically the entertainment.
Haji Glover: I wonder if you could walk us through some of the dynamics and factors that drive margins in that new entertainment segment and what kind of drove segment operating loss for this recent quarter.
Brendan Mccarthy: <unk>.
Brendan Mccarthy: Wondering if you could walk us through some of the dynamics in factors that drive margins and that New Entertainment segment.
Brendan Mccarthy: And what kind of drove.
Brendan Mccarthy: Segment operating loss for this recent quarter.
Haji Glover: Hey Brandon, this is Haji. How are you doing?
Brian: Hey, Brian how are you doing.
Haji Glover: Good, Haji, how are you? All right, so just taking the entertainment segment and mainly around the intangible impairments that we have, not impairments, the intangibles that we have in the business, that actually impacted the quarter by at least two, I think it was like 2.3 million. which is part of the buy of the deal, and then also we have production expenses as well.
Brian: Good how do you how are you alright, so just take care of me.
Brian: <unk> segment.
Brian: Mainly around <unk>.
Intangible impairments that we have a lot of impairments of intangibles that we have in the business.
Patrick: Patrick quarter by at least two figure looks like.
Brian: $2 3 million.
Brian: Which is part of the.
Brian: Goodbye.
And then also we have production expenses as well so those are the major drivers for the margin change.
Haji Glover: So those are the major drivers for the margin change.
Brendan Mccarthy: Yeah, that makes sense. Thanks, Haji.
Speaker Change: Got it that makes sense. Thanks Rajiv.
Brendan Mccarthy: And then let's follow up with the... So go ahead. Yeah, I was also going to say, with all that stuff that's being backed up when you look at the EBITDA. Got it. Okay.
Speaker Change: Just a follow up with the.
Speaker Change: Sorry go ahead, yes, it's also I've got to say with all of that stuff is being backed out when you look at the EBITDA.
Speaker Change: Got it got it.
Brendan Mccarthy: Just as a as a follow up for the entertainment segment, the Dogman movie that's due to come out in January 2025. What kind of role did Nine Story, you know, play in that production or distribution there? And maybe you could just kind of walk us through how that worked its way through the entertainment business.
Speaker Change: Sure.
Just as a follow up for the Entertainment segment, the dog Man movie Thats due to come out in January 2025.
Speaker Change: What kind of role did nine story, playing that production or distribution, there and maybe you could just kind of walk us through how that worked its way through the entertainment business.
Haji Glover: Yes, so from that perspective, we didn't have anything to do with the actual Dog Man movie. That's actually done through DreamWorks. But what we see the benefit from is actually in the book sales. So we're hoping that the movie gets the excitement that we need, and that we continue to see a pull-through on the backlist as well as the frontlist.
Speaker Change: Yes, so from that perspective, we didn't have anything to do with the actual dogma movie.
Speaker Change: It's actually gone through Dreamworks.
Speaker Change: But where we see the benefit from its actually in the book sales. So we're hoping that the.
Moving to the excitement that we need and then we continue to see you pull through on the backlist as well as the Frontlist.
Speaker Change: Got it that makes sense.
Brendan Mccarthy: And then more of a broad question here on the education solutions side of the business. And as it relates to the incoming Trump administration, just I guess just curious as to what's your base case for, you know, any funding changes there? I know that Trump has mentioned potentially eliminating the Department of Education, just curious as base case as to, you know, what changes we might see and ultimately how that will impact the business and spending.
Speaker Change: And then more of a broad question here on the education solutions side of the business.
Speaker Change: And as it relates to the incoming Trump administration, just I guess, just curious as to what's your base case for any funding changes there I know that.
Speaker Change: Trump has mentioned potentially eliminating the department of education, just curious this base case.
Speaker Change: What changes, we might see and ultimately how that will impact the business and spending.
Peter Warwick: Well in the, Brendan it's Peter, in the short term we don't expect that to have any material impact one way or the other in our current financial year.
Speaker Change: Well in the Brexit strata in the short term, we don't expect that to have any.
Speaker Change: Material impact one way or the other in our current financial year.
Peter Warwick: I think going forward what we're likely to see is a further decentralisation really in terms of funding and decision making from federal level to state and local levels. That's already happening. And of course the big thing is that most of the funding, most of the decision making about educational books is actually done at state and local level. It's not really done at federal level. It's done to some extent with federal funding but the major funding has always been at state and level. I think you're looking at only about 13 to 14% of funding for education being done from federal funding.
Speaker Change: I think going forward.
Speaker Change: What we what we're likely to see.
Speaker Change: <unk> is a third.
Speaker Change: Further decentralisation rally in terms of funding and decision, making from federal level to state and local levels, that's already happening and of course, the big thing is that most of the funding most of the decision making about educational.
Speaker Change: Books is actually done at the state and state and local level, it's not really done at federal level, it's done to some extent with federal funding, but the major funding.
Has always been at.
State level I think Ken.
Speaker Change: Youre looking at only about 13% to 14% of funding for education being done.
Peter Warwick: Of course we sell at the district level.
Speaker Change: From federal from Federal funding of course, we sell at the district level.
Brendan Mccarthy: Great thanks Peter, that's helpful. And then on the state literacy partnerships, I think you mentioned in the remarks you're pretty optimistic about the outlook there for the rest of the fiscal year. Maybe you could talk about what's driving that optimism. We've got more students.
Brendan Mccarthy: Great. Thanks, Peter that's helpful and then on the state literacy partnerships.
Speaker Change: You mentioned in the remarks, you are pretty optimistic about the outlook there for the rest of the fiscal year.
Speaker Change: Maybe you could talk about what's driving that optimism.
Speaker Change: And we've got more steep the main the main factors actually got more students in.
Peter Warwick: The main factor is actually we've got more students in our New World Reading Initiative project in Florida, which we do with the Leisinger Center at the University of Florida. So those numbers are going well, and it's been a big success as we've discussed in the past. We've also got other projects ongoing, but the big difference really in terms of our optimism for going forward is really the Florida project.
Speaker Change: Sure.
Speaker Change: New World Reading initiative.
Speaker Change: Project in Florida, which we should we do with less danger center at the University of Florida. So those numbers are growing well and it's been a big success as we've as we've discussed.
Speaker Change: And they in the past.
Speaker Change: We've also got other projects ongoing but the big the big the Big difference really in terms of our optimism for going forward is really the is it Florida projects.
Got it got it and one more question from me just on the capital allocation priorities. How did you I think you mentioned.
Brendan Mccarthy: And one more question for me just on the capital allocation priorities. Haji, I think you mentioned strengthening the balance sheet is kind of second in line there. How can we kind of think about leverage, where it stands now relative to your goals for leverage or where you would ultimately want leverage to fall long term?
Speaker Change: Strengthening the balance sheet.
Speaker Change: Second in line there.
Speaker Change: How can we how can we kind of think about leverage where it stands now relative to your goals for leverage or where you would ultimately want leverage to fall long term.
Haji Glover: Well, right now, we're very much comfortable with our leverage that we have today. We're considering to increase modestly to support new growth initiatives that we have been contemplating within the organization and continue to contemplate because we do see a lot of adjacencies within the markets that we play in.
Speaker Change: Well right now we're very much comfortable with our leverage that we have today.
Speaker Change: We're considering to increase modestly to support new growth initiatives that we have.
Speaker Change: Been contemplating within the organization and continue to contemplate.
Speaker Change: Because we do see a lot of adjacencies within the markets that we play in.
Haji Glover: And with our strong brand, we want to continue to leverage that. And then, of course, returning excess cash to shareholders is always a priority for us as well.
Speaker Change: With our strong brand and we want to continue to leverage that and then of course, returning excess cash to shareholders. This is always a priority for us as well.
Brendan Mccarthy: Great, thanks everybody. That's all for me.
Speaker Change: Great. Thanks, everybody that's all from me.
Operator: Thank you.
Operator: And this concludes our Q&A session for today. I will pass the call back to management for closing comments.
Speaker Change: Thank you and this concludes our Q&A session for today.
Speaker Change: Pass the call back to management for closing comments.
Peter Warwick: Well thank you everyone for joining today's call and for your continued support. I'd just like to again thank all of Scholastic's employees for their great work this fall, executing on a solid back-to-school season and preparing for a big second half.
Speaker Change: Well. Thank you everyone for joining today's call and for your continued support I'd just like to again, thank all of scholastics employees for their great work. This fall executing on a solid back to school season, and preparing for a big second half we look forward to executing on our plan for fiscal 2025 and.
Peter Warwick: We look forward to executing on our plan for fiscal 2025 and continuing to make progress towards realising Scholastic's long-term And of course, I wish everyone a happy holiday.
Speaker Change: <unk> to make progress towards realizing scholastics long term opportunities and of course, I wish everyone a happy holiday season.
Operator: And thank you so much, and this concludes today's conference call. Thank you all for participating, and you may now disconnect.
Speaker Change: And thank you so much and this concludes today's conference call. Thank you all for participating and you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].