Q4 2025 Scholastic Corp Earnings Call
Good day and thank you for standing by. Welcome to the Scholastic reports fourth quarter and fiscal year 2025 results. At this time, all participants are on a listen-only mode. After the speaker's presentation will open up for questions to ask a question during the session. You will need to press star 11 on your telephone, you will then hit an automated message. Advising your hand is raised 2 withdraw your question. Please press star 1 1 again, please be advised. That today's conference is being recorded, I would now like to hand the conference over to your speaker today, Jeffrey Mathews Executive Vice, President and chief growth officer. Please go ahead.
hello, and welcome everyone to Scholastics fiscal, 2025, fourth quarter, earnings call,
Speaker Change: today of the call, I'm joined by Peter War, our president and chief executive officer and how do you Glover our Chief Financial Officer
Speaker Change: As usual, we've posted the company, investor presentation on our IR website at investor.com scholastic.com which you may download now if you've not already done. So
Speaker Change: We would 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 actual results May differ materially from those currently anticipated.
Speaker Change: In addition, we'll be discussing some non-gaap Financial measures as defined in regulation, G.
The reconciliation of this measures to the most directly comparable, gaap measures may be found in the company's earnings release and accompanying Financial tables. File this afternoon on a form AK.
Speaker Change: This earnings release is also imposed to our investor relations website.
We encourage you to review the disclaimers in the release and investor presentation and to review the risk factors disclosing the company's annual and quarterly reports filed with the SEC.
Speaker Change: Should you have any questions after today's call? Please send them directly to our IR email. Address investor relations at scholastic.com.
Speaker Change: And now I'd like to turn the call over to Peter War to begin. This afternoon's, presentation. Thank you, Jeff and good afternoon, everyone. Thank you for joining us.
Peter War: Scholastic delivered strong financial and strategic results in the fourth quarter of fiscal 2025.
Adjusted a bit dark grew robustly in line with our original guidance range.
Controls and of sustained. Focus on operational. Efficiency allowed us to overcome continued pressure on consumer, and school spending while positioning us for earnings growth in fiscal 2026.
Peter War: Revenue growth was also in line with expectations driven by strong performance. In our children's book, publishing and distribution segment and the Strategic acquisition of 9-story Media Group early in the financial year.
Peter War: This strong finish reflects the collective efforts of our teams, amid a challenging, macroeconomic environment, we made meaningful progress on the priorities we set at the start of the Year, strengthening our core businesses. Unlocking value from our iconic IP and positioning Scholastic for long-term profitable growth.
We continue to return Capital to shareholders investing over 35 million in dividends and share repurchases. In the fourth quarter. For a total of 92 million in fiscal 2025 while advancing efforts to unlock value from our significant. Real estate assets. At the same time we began executing on a set of significant organizational changes work. That's continued into quarter 1, that we believe will strengthen leadership enhance growth and improve efficiencies
Peter War: These actions set the stage for continued, earnings growth and increase shareholder value in fiscal 2026 while deepening Scholastics impact in schools, homes and communities around the world.
Peter War: Let me now, walk through our quarter 4 and fiscal, 2025, segment performance.
Peter War: Children's book, publishing and distribution segment, revenue and profit. Increased last quarter driven by strength across both publishing and Book Fairs.
Peter War: In trade publishing, we launched sunrise on the reaping, the newest installment in Suzanne Collins Hunger, Games series, which became the biggest publishing event, yet this year.
Peter War: Released simultaneously in the US Canada, UK Australia and New Zealand. It topped best-seller lists globally across print e-book and audio formats. Driving significant Revenue growth in the us alone. The book sold over 2 million copies in its first month.
Peter War: Nearly 20 years. After the first Hunger Games book was published the franchise continues to resonate across generations and geographies.
Speaker Change: This launch followed the success of Dave, pilk. His dog man. Big Jim begins another Global phenomenon which helped Drive second half results and remains 1 of the world's top selling titles.
Speaker Change: These best sellers more than offset, headwinds in consumer spending and softness. In the broader retail book Market.
Speaker Change: In Book Fairs we saw higher fare counts in quarter 4 with combined case and shippable fairs Rising 4% to over 100,000 fairs for the year.
Speaker Change: This reflects continued improvements in our selling and marketing strategies and customer experience.
Revenue, preferred declined slightly, but remain near record levels supported by improvements in merchandising and strategies that grew transaction sizes.
Speaker Change: Slightly lower transaction, volumes tied to Consumer pressures, offset these gains.
In book clubs Revenue declined in quarter 4, due to fewer participating, teachers partly offset by larger order sizes and higher student participation per class.
Speaker Change: For the full Year Engagement strategies implemented, at the start of the school year, paid off driving growth in student participation and revenue per sponsor notably profit contribution from clubs rose again this year.
In our entertainment segment, fourth quarter Revenue, increased with the addition of 9 story Media Group, who successful integration has greatly enhanced our reach and monetization of Scholastic's content. The streaming platforms where kids are consuming the majority of media content today.
Speaker Change: We continue to see strong engagement on YouTube across Scholastic channels, like Clifford classic Goosebumps the Magic School Bus and ask Scholastic classic hub.
Momentum is also building in development and production, which I'll return to shortly.
Speaker Change: Turning to our education, segment revenue and profit declined in quarter 4 as the broader supplemental. Curriculum Market remained pressured.
However, areas less reliant on District budgets such as state and Community. Literacy Partnerships showed strength driven by increased participation in state sponsored programs, that expand kids access to books outside of school.
Speaker Change: We're encouraged by the growing number of State philanthropic, and Community Partners focused on literacy and see long-term potential in this segment.
Speaker Change: Finally International segment, revenue and profit increased in quarter 4, reflecting, strong trade Channel performance, particularly for Hunger Games, and Dogman titles.
Speaker Change: We also realized International Education business under a new structure, which improved operating efficiency and profitability.
In fiscal 2026, we expect a significantly grow profit building on the momentum of strong year-end results and multiple strategic initiatives.
Speaker Change: Adjusted a bit D, is targeted to grow strongly.
The benefit of last year's cost reductions and recent reorganizations. In addition to further cost management and initiatives to improve efficiencies are expected to more than offset, the incremental impact of tariffs from the current historically, High rates.
At the midpoint of guidance adjusted ebitda is expected to grow. 20%, excluding 10 million in incremental tariff expense, currently anticipated from implemented or announced tariffs.
Reflecting continued pressure on consumer and especially School spending revenue, is expected to grow modestly. Agile, discuss our financial Outlook in more detail shortly.
Speaker Change: In our children's book publishing and distribution segment. We have an exciting trade publishing schedule, including Dogman, Big Jim believes in the November, the latest in Dav Pilkey, Blockbuster series following the success of Big Jim begins, and the Dogman movie which debuted at number 1 at the box office and is now streaming on peacock.
Speaker Change: We're also publishing the full color edition of Dave's first. Ever graphic novel The Adventures of Super Diaper Baby re-releasing. His dragon books for early readers in a new collection and planning a major Captain Underpants publishing moment.
Speaker Change: March brings Wings of Fire. Number 16, the hybrid Prince. The First new book in the series, in 4 years, which kicks off a new trilogy.
We'll also publish a Wings of Fire number 9, Talons of power in graphic, novel format in January.
Supported by an enthusiastic Global fan base, the original and graphic novel series have sold a combined, 40 million copies, and remains steady performers on the New York Times Best Sellers List.
After March is huge Global release of sunrise on the reaping, we expect the Hunger Games series to continue as a key pillar of our catalog driven by ongoing sales of Sunrise as well as new heart. Cover box sets, Collector's Editions and Illustrated editions of Hunger Games titles, publishing in the year ahead.
Speaker Change: We're optimistic that the upcoming lines game movie and adaptation of the title expected in November 2026 as well as our publishing plan. For movie time, editions will also continue to engage current fans and attract new ones to the Hunger Games.
Speaker Change: Other major releases this year include the interactive edition of Harry Potter and the Goblet of Fire.
A new works from bestselling authors Alan, Gratz Rhea. Telga Tiffany D Jackson and promising. Debut authors,
The breadth of Scholastics best-selling series and authors across formats highlight the company's singular position and track record in building, beloved enduring brands.
Speaker Change: We expect growth in school book. Fair counts, supported by strategic improvements in selling marketing, and fair formats. We also remain focused on merchandising optimization and strategic pricing initiatives, which are expected to benefit modest Revenue per fare growth.
Speaker Change: Leveraging, Scholastics, trusted relationship and high-quality books and products.
Some examples include share the fair, which allows communities to help students in need participate in Book Fairs.
Speaker Change: Our sponsored fairs program, where local and National Partners Fund fairs in high-need communities. Not currently served.
a new fare types, like Discovery fairs, which create new themed opportunities for schools to host a additional fairs during the year,
In book clubs, we'll continue executing revitalization strategies to sustain the profitable Revenue gains achieved last year.
Speaker Change: Focusing on teacher engagement and student participation.
We're particularly excited about the Strategic integration of trade publishing Book, Fairs and book clubs into our new children's book group. Under Sasha quinton's leadership
Sasha has had tremendous impact at Scholastic since joining in 2019. First leading the Book Fairs to significant profitable growth through her focus on kit first marketing, and Merchandising more recently. She led the integration of our fairs and clubs into a combined School reading events division.
Speaker Change: With the addition of Jackie DeLeo the 25-year industry leader who must recently helped lead Barnes & Noble's transformation efforts. We're better positioned than ever to align editorial, merchandising and distribution to expand our reach and deliver exceptional experiences for kids.
Speaker Change: This collaborative structure is uniquely possible at Scholastic. We expect it to unlock further efficiencies and potential. In our vertically, integrated children's book publishing and distribution.
Speaker Change: It will also facilitate more productive collaboration between our book and media businesses, and the ability of Scholastic IP to reach kids on both screens and the page, we expect this change will progressively Drive Revenue growth and increase profitability in fiscal, 2026 and Beyond.
Next ask Scholastic entertainment segment.
We expect to return to revenue growth in entertainment, as green lighting activity, picks up and our 360° IP strategy. Gains traction accelerated by our integration of the children's book group recent green lights, include Dasher, a full length holiday, special for Disney sandwich. A preschool animated series and Daniel Tiger's Neighborhood renewed for season 8 by PBS Kids.
Speaker Change: We also anticipate 2, more multi-event of venerable Scholastic brand.
Speaker Change: A note about Daniel Tiger.
Speaker Change: Scholastic owned 9 story, Media Group has co-produced the series since 2012 and also holds worldwide licensing and distribution rights.
This animated preschool Series has become a classic with kids and parents alike for its meaningful stories and ability to help young children. Learn life skills.
By far the biggest platform to kids media consumption, YouTube remains a priority. There's not only a new source of high margin Revenue, but greater reach for our IP where kids are today
Speaker Change: 2, new series are launching in October 1 with a toy partnership. Already secured and a goal for more by fiscal year end. We're also developing a new series for YouTube based on Bob Books, Scholastic's hugely popular and trusted phonics book series for young children. Among several planned IP collaborations, between our entertainment and children's book group. We expect this series to drop in Fall of 2026. Our digital distribution continues to grow with over 15,000, half hours of advertising video on demand or avoid content. Now available on various platforms, including 11, free apps supported
Streaming TV channels. These platforms represent both a new Revenue stream and expanded Global reach for our content.
Our brand IP distribution platforms, customer base and audience combined with our best-in-class capabilities, afford Scholastic, premium placement in the landscape of children's media and IP.
We remain confident in our opportunity as we continue to build a robust pipeline of Ip based content for screen and streaming platforms around the world.
Speaker Change: now, on to our education segment,
Sustainable profitable growth following a strategic reorganization under new leadership, Jeff Matthews. Scholastics Chief growth officer has stepped in as interim president, in addition to his current responsibilities
Speaker Change: With 2 Decades of Education experience, including as an edtech founder, Jeff brings a deep understanding of the market and is already implementing the next phase of our strategy.
Speaker Change: Extensive marketing customer research, confirms our belief in the relevance and strategic value of our supplemental literacy offerings.
Speaker Change: It also strengthens our commitment to this business.
Speaker Change: These trusted products magazines, book collections and classroom resources aligned with Scholastic's core strengths and have clear upside potential.
The supplemental curriculum Market has faced a perfect storm, volatile Federal funding, instructional shifts, and state adoption Cycles.
Speaker Change: But these Trends are cyclical and we expect conditions to begin improving over the next 12 to 24 months. In the meantime we're moving forward immediately to refocus our go-to Market, strategy around core, strengths and customer segments.
Speaker Change: Rationalize our product portfolio.
Speaker Change: Prioritize investment in high impact offerings.
Speaker Change: Simplify Legacy operations, and organizational structures, and recruit a long-term leader for the division.
Speaker Change: we're targeting flat Revenue in FY, 26 while repositioning the business for improved profitability this year and Beyond
Speaker Change: Now, onto our International segment, revenue and profit are expected to decline. Modestly. Following last year's major curriculum sale. In New Zealand and strong Hunger Game and Dogman sales, across English-speaking markets, going forward, we're focused on growing our education and English language footprint in emerging markets and expanding Global reach for Scholastic stories.
Speaker Change: Before I turn the call over to Haji, I want to briefly touch on board governance.
Last week we announced the appointment of 2 new independent directors, Melena, Alberti and Anne, Clarke Wolff following a proactive refresh process initiated by our nominating and governance committee.
Speaker Change: Both of these highly qualified individuals will support the board's, focus on business transformation, growth strategies, and capital allocation, as well as other initiatives to maximize shareholder value with these additions. We've now appointed 7, new independent directors, over the past 4 years,
Speaker Change: I want to sincerely. Thank Jack, Davis, and David Young for their combined, 35 years of service, to Scholastic and to our shareholders as we begin fiscal 2026 and prepare for the back to school season. We're operating from a position of strength with a revitalized operating model, beloved content, and IP, and a deep commitment to Children's literacy and learning.
And with that, I'll turn it over to Haji.
Haji: Thank you, Peter and good afternoon everyone.
Haji: Before discussing our Outlook, let me begin with our Consolidated Financial results for the quarter and 4 fiscal year.
As usual, our refer to our adjusted results, excluding 1-time items, please refer to our press release tables in SEC filings for a complete discussion of 1-time items. In a reconciliation with related Gap, figures Revenue, increase 7% to 588.3 million in the fourth quarter and was up 2% to 1 billion, 6255.55 million for the fiscal year.
Adjusted operating income decreased to 63.4 million in the fourth quarter. From 66.8 million in the prior year period.
For the 4 year. Adjusted operating income was 35.8 Million compared to 44.7 million, Laura. Adjusted operating income in both periods. Versus a year ago was primarily caused by incremental amortization expenses on intangible assets related to the acquisition of 9-story and the first quarter of fiscal 2025
Haji: Adjusted ibida increased, 1% to 91.2 million in the fourth quarter and was up 6% to 145.4 million for the fiscal year.
Turning to our segment results.
Haji: In children's book, publishing and distribution.
Haji: Revenue for the fourth quarter, increased 9% to 288.2 million driven by strong performance and Book Fairs and our trade publishing division following the publication of sunrise on the reaping for the full fiscal year Revenue increase 1% to 963.9 million.
Haji: Up 7.8 million from the prior year. Period reflecting higher Revenue in our Consolidated trade and school reading events divisions. For the full fiscal year, adjusted operating income for the children's book segment increased 7.5 million to 131.3 million within School, reading events Book, Fairs Revenue, increased 5% in the fourth quarter, to 177.8 million and 1% for the full year to 548.3 million.
Haji: These results benefited from higher fare count, partially offset by modestly lower Revenue, per Fair.
Haji: Book clubs Revenue was 13.1 million in the fourth quarter, a decrease of 9% as a result of lower orders. In the quarter. Full year Revenue increased 2% to 64.2 million, reflecting higher Revenue, per sponsor, and an increase in orders during the year.
Haji: As Peter noted clubs contribution, margin improved in both periods.
and our trade publishing division Revenue in the fourth quarter, increased 19% to 97.3 million on increased sales driven by the latest Hunger, Games title sunrise on the reaping
for your Revenue, increased 1% to 351.4 million primarily due to increased sales for new titles and our Global best-selling, franchises Hunger Games, and Dogman, which more than offset the impact of consumer spending headwinds on backless sales
In the education segment, fourth quarter Revenue was 125.7 Million down 7% from the prior year period.
Haji: In full year Revenue was 309.8 Million down, 12%, compared to Prior year period.
Continuing headwinds in the supplemental. Curriculum Market was seen in lower spending by schools and districts. This was partially offset by growth in sales to non-school State and Community literacy partners.
Haji: Segment. Adjusted operating income was 31.3 million in the fourth quarter compared to 35.6 million in the prior year period.
Haji: 4 year, adjusted operating income for the segment was 6.9 million compared to 21.9 million in the prior year period.
Haji: Lower Revenue impacted operating margins in both periods.
Haji: In the entertainment segment, fourth quarter Revenue was 14.8 million compared to 0.6 million in the prior year. Period in full year, Revenue was 61 million compared to 1.9 million in the prior year period.
James in both periods, reflected the contribution of the 9 story Media Group, which the company acquired in June of 2024,
Segment adjusted operating loss was 2.1 million in the fourth quarter compared to a loss of 0.5 million. A year ago segment adjusted operating loss was 7.2 million for the full year compared to a loss of 1.9 million a year ago.
Haji: The fourth quarter includes 2.7 million and the 4 year includes 9.2 million of incremental amortization expense on intangible assets related to the acquisition.
On a ProForm basis. 9 story Revenue was down relative to the prior year, period primarily reflecting lower production across the industry which has begun to accelerate as I'll discuss later on.
Haji: In the international segment, Revenue increased 8% to 76.8 million in the fourth quarter.
Haji: for the full year International segment, Revenue increased 2% to 279.6 million
Haji: Year-over-year. Foreign exchange had an unfair role impact of 600,000 in the fourth quarter and 1.6 million in the full year. Fiscal 2025
Haji: Revenue growth was driven primarily by strong trade Channel performance, across all, major markets,
Haji: Segment adjusted operating income improved to 6.1 million in the fourth quarter, compared to 1.8 million in the prior year period.
for fiscal, 2025 segment, adjusted operating income was 2.9 Million compared to a loss of 3.1 million in the prior year, reflecting higher revenue and operational efficiencies
Haji: Adjusted unallocated overhead costs were 30.1 million in the fourth quarter.
Increasing from 20.5 million in the prior year period reflecting the timing of employee related expenses.
For the full year. Adjusted unallocated overhead costs of 98.1 million increased slightly from 96 Million last year. Primarily related to higher employee related expenses.
Haji: Now, I'm turning to cash flow in the balance sheet.
Haji: for the full year, net cash provided by operating activities was 124.2 Million compared to 154.6%
Haji: This decrease was primarily driven by lower cash earnings and increased inventory purchases.
Haji: repayment of production, loans driven by working capital timing and our entertainment division
Haji: At your end, the company had borrowings of 250 million under its unsecured revolving credit facility.
At the end of fiscal 2025, net debt was 136.6 Million compared to a net cash position of 107.7 million. At the end of fiscal 2024, primarily reflecting cash, used to fund the 9-story Media Group acquisition and cash returned to shareholders through dividends and share repurchases.
Haji: During the year, we continue to return access cash to shareholders through our regular dividend and open market share repurchases consistent with our Capital allocation priorities.
Haji: We returned over 92 million to shareholders in fiscal 2025, including over 35 million in the fourth quarter.
Haji: in total, we repurchased nearly 3.5 million shares, which net of approximately 300,000 shares issued related to stock compensation represented 11% of the company's shares outstanding
Haji: Our current share buyback, authorization is 70 million, the company expects to continue purchasing shares from time to time as conditions allow on the open market or in negotiated private transactions for the foreseeable future.
Haji: As we discussed last quarter, we believe our strong balance sheet provides significant flexibility.
We have modest debt, we also have non-operating assets, that could be monetized for significant valuations when appropriate and market conditions, allow which could be deployed in accordance with our Capital allocation priorities, including debt reduction.
Haji: Over the past 6 months, as a commercial real estate market has improved, we've begun a process to explore potential, monetization opportunities to unlock value, from these substantial real estate assets.
In June, we retain Newark group to identify Investment Partners for a potential sale lease back transaction of all or part of Scholastic's office and Retail real estate in New York City.
Earlier this month. We also retain Newark for a similar process with respect to our distribution center in Jefferson City. Missouri, as we move forward with these processes over the next 90 to 120 days, we are optimistic about the significant opportunity for Value accretion. Although, there can be no guarantee that these processes will result in transactions within the coming months
Haji: Regardless, we remain committed to maximizing value of our real estate assets for the benefit of our shareholders.
I look forward to providing further updates on this process as needed and on our next earnings call.
Turning to our fiscal 2026 Outlook. Scholastic is targeting solid earnings growth, in fiscal 2026 with adjusted ibida of 160 to 170 million. An increase of approximately 20 million over fiscal 2025 at the midpoint mainly driven by discipline cost management and restructuring initiatives.
Based on the current tariff policy. Our guidance includes a approximately, 10 million of expected incremental, tariff expense, and our cost of product.
Haji: We expect higher tariffs to primarily impact the cost of non-book and Novelty items sold in our children's book business, which we currently Source from countries with tariff, increases including China overall. We remain confident that our global scale, highly optimized supply chain, and pricing power, will help mitigate against any further material tariff related exposure this year.
Fiscal 2026 revenues expected to grow 2 to 4% reflecting strength in our core businesses partially offset by continuing headwinds on consumer spending.
Haji: Our outlook for free cash flow in fiscal, 2026 is 30 to 40 million, reflecting higher, expected earnings, improved, working capital, and lower cash tax, partially offset by higher Capital Investments and other accrued expenses.
Haji: Over the last several months, we have taken strategic steps to position our organization, to operate more efficiently, aligning spending with our long-term strategy, and permanently lowering our cost structure by reducing non-revenue, generating and Consulting expenses. We expect the restructuring actions, across all segments to further benefit this fiscal Year's results.
Haji: Each business segment has contributed significantly to our sustained cost management and execution strategies.
Haji: In fiscal 2025, these actions resulted in cost Savings of approximately 25 million on an annualized basis.
Haji: of which 15 million was realized during the year, with 10 million of additional benefits, expected in fiscal 2026,
Haji: In addition, we expect an incremental 15 to 20 million in cost savings.
Haji: Reading events given its high operating, leverage anticipated. Revenue growth will have a positive impact on the operating margins and profitability.
Haji: Revenue, and trade publishing is expected to be solid given the strength of the publishing calendar, and approximately level with fiscal 20125, which benefited from 2, Global hits. In addition, we expect the Strategic integration and reorganization of children's book group to drive, long-term Revenue growth and increase profitability in fiscal, 2026 and Beyond through operational. Efficiencies and the alignment of our editorial, merchandising and distribution teams,
Peter War: In the entertainment segment. We expect to benefit from recent production and development, green light momentum, as Peter discussed
Peter War: These Productions will contribute to revenue growth primarily in the second half of this fiscal year with the majority of the benefit in fiscal 2027 reflecting Revenue recognition. Typical for our developments in Productions.
Peter War: We anticipate adjusted ebida in line with prior year.
Peter War: In the education segment, we are targeting Revenue approximately in line with prior year.
Peter War: As Peter noted following our strategic reorganization under new leadership, we are repositioning this business for a long-term growth.
Peter War: As we execute on several key initiatives, we anticipate improved profitability in fiscal 2026 and Beyond.
Peter War: In the international segment, we anticipate a modest decrease in revenue and profits following the strong performance and trade channels. And fiscal 2025 unallocated overhead costs are expected to decrease next year as we continue to improve efficiencies and benefit from cost reductions in our overhead functions. As I discussed earlier,
Peter War: as a reminder, Scholastic results are highly seasonal. We generally record an operating loss in our first and third quarters with profitable second and fourth quarters.
Peter War: And the fiscal first quarter, we expect a seasonal loss approximately in line with the prior year period.
Peter War: Thank you for your time today, and I will now hand the call back to Peter for his final remarks.
Thank you Haji. We're very pleased with the meaningful progress. Our team has made over the past 6 months, executing strongly reducing significant costs.
Strengthening our organization and organizational structures returning, Capital to shareholders, and taking steps to optimize our capital structure and balance sheet.
Peter War: Thanks to this work which continues we're well positioned for profitable strategic growth in fiscal 2026. We continue to focus on our long-term opportunity as a global leader in the children's publishing media and education, space West. Scholastics brand IP and distribution channels present compelling growth opportunities to meet kids, families, and schools, essential needs to educate, inform, and engage kids.
Peter War: I want to thank our employees, authors illustrators and creators for their tremendous dedication and hard work, and our shareholders for their continued support.
We all look forward to continuing our momentum, to create value and impact in the year ahead.
Jeff: Thank you very much. And now, let me turn the call over to Jeff.
Thank you, Peter with that. We will open the call for questions, operator.
Speaker Change: Thank you at this time. We'll conduct a question. Answer session.
Speaker Change: To ask a question. You need to press star 1, 1 1 at your telephone and wait for him to be announced to withdraw your question. Please press star 1 1 1 again.
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1 moment for our first question.
Speaker Change: Our first question will come flying a Brandon McCarthy from sedoti. Your line is open.
Great. Good afternoon and, and thanks for taking my questions here.
Brandon McCarthy: I wanted to start off on the call side. I know you pointed to potential cost Savings in fiscal 26. Curious as to what are the sources of those cost savings going forward?
Hey Brandon, how you doing? This is Haji.
Brandon McCarthy: Hey, Haji good, how are you? All right? Uh, so majority of the costs actions are coming out of uh non more discretionary uh functions things that we can uh cut back on as we're looking to be more frugal as an organization. Um,
Brandon McCarthy: Things that are not really Revenue driven. Uh those are the major areas that we're looking at uh, from our perspective right now.
Brandon McCarthy: Got it. So you expect that will flow through to overhead ultimately stepping down, um, in fiscal 26 compared to fiscal 25.
Brandon McCarthy: FY 26. Uh, so the FY 25 stuff as we showed in the uh or we talked about in The Script.
Brandon McCarthy: We're experiencing, we saw 15 million of that. And that's why 25 and we're going to see another 10 million in FY, 26.
Brandon McCarthy: Great, great, got it. And turning to the education Solutions business.
I think you mentioned you're looking for maybe flat Revenue there in fiscal 26
Speaker Change: Curious as to what are the kind of driving factors behind that expectation and is that different from what you had expected for fiscal 26, you know, a couple quarters ago.
Speaker Change: Yeah, it's it's Peter here. Um yeah we when we actually look at our, our overall education business. Um we do have Parts which actually have been going. Well um and therefore a lot of the state sponsored work, um, that we do for example, and some of the supported, um, work that we get, I I'm going to go in well so we could see, we would certainly see those, um, you know, increasing. I mean the market continues to be particularly difficult, um, especially with districts and schools, but we do expect the situation to progressively improve just because of the normal cyclicality of the of the education business. So we think that we'll be in a good position to, um, you know, to at least have flat revenues in in, in what we're what we do in
Speaker Change: Education. But Allied to that is the fact that we see growth in the more profitable parts of the business um, that we that we're conducting and also we're taking some major steps to um, make sure that we are operating as efficiently as possible and repositioning the uh, the business for um, you know, for medium to longer-term growth.
Speaker Change: Great. Thanks Peter. I appreciate the color there. And when you look at how, you know states are are school districts are approaching uh literacy instruction,
Speaker Change: Are are you still seeing a a pretty large shift towards, you know, the science-based reading approach? And do you ultimately still anticipate to launch products? Uh, geared towards the science of reading in fiscal 26.
Speaker Change: Yes. I mean, science science of reading is certainly, um, continuing, um, it's sort of growth and, and the importance across States. Um, we've already got some materials, which we have, which are ready for it. The knowledge library, for example, um, is strongly aligned with the science of reading, um, and has had very, uh, we expect it to have a very positive feedback. So that's, that's all looking good. I think the other thing which is happening around literacy though, which is worth saying, is this increasing realization that having books in the home, is 1 of the really key things for helping kids.
Speaker Change: And of course, that's where our state sponsored and some of our other activities are based. So I think what we're doing is very, very much in line with the way in which literacy is being tackled, you know, in in all states.
Speaker Change: Understood there and and on the state sponsored programs.
Speaker Change: Uh, what What's the pipeline look like there? I know that there's a handful of states in the Southeast that you're
Speaker Change: That you have partner a partnership with, um, just just wondering what the pipeline looks like for additional Partners. We have the pipeline, the pipeline we have. We have multiple conversations which are going on with state governments, um, and, um, I just had a full, um, as it were review of this. Actually, uh, this week, I'm I'm pretty optimistic that, that, that things are going well. Both in terms of being able to expand what we do in those states, which are in generally speaking are in the Southeast. Um, we also have technology though that that that the sales Cycles are quite long and and um, you know, we've been in discussions for quite some time. Um, but I think there's a growing realization that you know, this this literacy is a problem that really needs to be tackled um and people understand that. That that's what that's 1 parents and electors and everybody else wants. And I think that, you know, we're seeing that there's there's very very
Progress being made in a number of states. Now,
Speaker Change: And it's also understood and that we're that we're a very uniquely positioned here. You know, our brand, our books, our distribution channels. Um we can really offer a tremendous service here and you know that's recognized by the way, we've been able to um build our business here, over the last um over the last 4 years.
Speaker Change: Understood I appreciate the detail there Peter.
Speaker Change: And wanted to talk about the, the trade channels uh, combination with the school channels. I guess. Are you, are you seeing or hearing any initial feedback? Uh, from customers just related to that combination or or maybe any internal feedback on on kind of how that or I guess what impact that combination that has made
Uh, so far, well, they the the main impact at the moment is really internal rather than external, um, and it's been tremendous actually. I mean, I've been super pleased with the way in which people feel that this creates an environment whereby the both the publishing and the distribution channels can work more effectively together going forward. Um, and um, there is tremendous, excitement about that internally, and we're going to see that externally as well. I'm I'm I'm sure, I mean, we have the, we have the opportunity to be able to link what we're selling in schools uh, through the book Book, Fairs and book club channels in a much more integrated way than we've done before. With the, with the trade, uh, with the trade publishing. Um, and we'll see that because that they work, they're working on short-term gains, um, which we can leverage in and benefit from in FY, 26, particularly in, in, in book.
As in the spring for example. Um and you know we have this secret source which is that we are both a publisher and a distributor and that gives us a lot of knowledge. It gives us a lot of Leverage and it's very, very powerful. And I think that um bringing this together has been something that um I think it's really going to make a difference and it's even going to make a difference in the short term. Um it's going to have a much bigger impact I think during the you know once you go forward into the next 2 years, Beyond FY, 26.
Speaker Change: Great. That makes sense. Uh, 1 more question for me, just on the entertainment business. Um, it looks like Revenue stepped down there in fiscal 25, but you're looking for the return of Revenue growth in in fiscal, 26, I guess, from a, from a profitability standpoint, uh, what's your expectation? There for the entertainment business for a fiscal 26.
Uh, Brandon, this is how you again. Uh, we we expect it to be, uh, slightly lower, but a lot of this year uh we have the headwinds, of course inflation, that is impacting that uh organization. Um but we're guiding uh to see basically flat profitability.
Speaker Change: understood and is that just
Speaker Change: Just so to uh, provide more detail there, is that just inflationary impacts on on the production, side on the cost side? Or are there other? You know, cost Trends in in play there? Yeah. So from a, from an entertainment perspective, we're we're actually seeing, uh,
Speaker Change: The the production activity pick up a little bit with more green lights coming in. Uh but that's usually going to like I said in the in the uh, my uh talked earlier. It's going to mainly impact Us in FY 27. Um we're going to see some stuff on the end of of FY 26. But mainly in XY, 27 on the revenue side
Got it, got it. And and Hy I know you mentioned the the real estate assets and the potential monetization. There are you able to provide any color on the timing of a potential sale lease back transaction? And
Speaker Change: Um, you know, looking at, you know, I know you mentioned, you know, potentially buying back shares or you know, paying down debt. But um are you confident or are you confident in buying back shares at this level, or how do you how can we kind of think about the capital allocation priorities?
Speaker Change: Well, first of all, I'll talk about the timing. Uh the team is working very uh really hard right now to get the things out uh, on a new market. It's been a really good partner with us so far, and we're hoping, uh, as I mentioned earlier to have something within the next 90 to 120 days. Uh, in terms of our Capital, allocation priorities, uh, we're going to remain consistent with, you know, returning Capital to share.
Speaker Change: Turtles as as as possible when we can. Um, but we, we did a lot of share repurchasing and the fourth quarter, uh, which is shown, uh, in our numbers already. So, uh, we were ahead of the game because the share price was, uh, you know, a good good opportunity for us to really buy some stuff back.
Speaker Change: Great. Thanks Haji. Thanks Peter. That's all from me.
Speaker Change: All right. Thank you.
Speaker Change: Thank you.
Speaker Change: And this concludes our Q&A. I want to pass a call back to management for enclosure marks.
Speaker Change: The value and impact. That's that's so important to us and we look forward to providing more updates including on our first quarter call in um in a couple of months time. So thank you to all who joined us this afternoon live or if you if you're listening to the recorded call later, we very much appreciate your support. So thank you all very much and goodbye.
Ladies and gentlemen, this concludes today's conference call, thank you for participating. You may now disconnect everyone have a great day.