Q4 2019 Earnings Call

Your joint Scholastic reports Q4 fiscal 2019 results in fiscal 2020 outlook.

At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time should you require any additional assistance during the call. Please press Star then zero on your Touchtone telephone as a reminder, this conference maybe recorded.

I would now like to turn the call over to your host senior Vice President Treasurer, and head of Investor Relations Gil Dickoff, Sir you may begin.

Thank you very much and good afternoon, everyone welcome to Scholastic <unk> fourth quarter 2009, King earnings call with me here today are <expletive> Robinson, our chairman President and Chief Executive Officer, and can carry the company's Chief Financial Officer.

We've posted an investor presentation on our IR website at Investor Dot Scholastic Dot com, which we encourage you to download if you have not already done so.

I'd like to point out that certain statements made today will be forward looking these forward looking statements by their nature are uncertain and may differ materially from actual results.

In addition, we will be discussing some non-GAAP financial measures as defined in regulation G. reconciliations of those measures to the most directly comparable GAAP measures can be found in the company's earnings release filed this afternoon on a form 8-K, which has also been posted to our Investor Relations website.

I encourage you to review the disclaimers in the press release and Investor presentation and to review the risk factors contained in our annual and quarterly reports filed with the SEC.

And now I would like to turn the call over to <expletive> Robinson.

Good afternoon, everyone and thank you for joining our call.

In fiscal 2019 after three quarters performance similar to fiscal 2018 operating income dropped nearly 40% in the fourth quarter, primarily due to the impact of the state sales tax collection efforts and our book clubs business and in book fairs, largely because of increased spending for incentives. We also continue to have increased cost for paper printing and labor.

Well 2019, so a 2% right revenue increased on strong trade performance and other important gains for the business.

Our focus for 2020 use on increasing operating income through targeted pricing initiatives and cost management, our comments today will detail or plan to improve operating income, but first I will provide some detail on the fourth quarter in clubs responding to the Supreme Court's Wayfair ruling we implemented a program to collect and Remits. The state sales tax for book club customers in every state.

This was a significant change in the way teachers had to manage their classroom orders and led to revenue loss as well as higher expenses.

We anticipate some continued impact in fiscal year 2020. However, we believe this will abate as the new process becomes familiar to our customers as has happened outside the United States. When we have had similar tax collection transitions.

In book fairs to counter competition from a new National book Fair provider, we increased incentives, including scholastic dollars tour customers, leading to higher expenses in the fourth quarter in terms of GAAP reporting. We also had a change in accounting you see six so six which Ken will explain more fully.

In print and digital as well as bringing scholastic literacy to the 1 billion dollar core reading market and we are expanding in Asia through English language learning products and services, which are growing rapidly to meet market needs throughout the region.

To improve margins, we're selectively increasing prices, reducing costs and leveraging new technologies for operating efficiencies as a result or efforts to improve margins in 2020, while increasing revenues.

We expect fiscal year 2020 revenues in the range of $1.61 0.67 to 1.70 billion up from 1.65 billion in fiscal year 2019, and adjusted EBITDA is expected to be 140 to 160 million up from 121.3 million and 2019.

Here are some of the key initiatives for 2020 and beyond.

First a focus on clear strategies to strengthen our largest business our market leading school district distribution channels in the U.S.

Well, we expect slightly lower revenues in fiscal year 2020 for clubs and fairs, we're making changes to prepare them for the future through improved technology and simplicity of use these channels remain key tourist sale children's books direct to students and families below by the teachers and schools they support.

Research studies and education show the importance of independent reading to the social emotional and academic growth of kids and Scholastic book clubs and book fairs are by far the most important channels for promoting independent reading in school, enabling children to choose and buy books. They want to read from a wide range of quality books at favorable prices.

In fares, we have grown or position significantly over a 20 year period, becoming the market leader by far we deliver more than 110000 fears in more than 60000 schools each year from or 58 regional distribution centers. In 2019, we have maintained revenues even as we faced increased competition.

We are confident in our ability to preserve and extend this position over the long term viewing competition as a healthy stimulus to offer the best customer experience.

While managing our costs, even more effectively through better targeting of incentives. We also will focus on these value propositions first improve the experience for fear chairperson students and parents the full rollout of new Pos devices enables better connectivity and broader parent use of an E wallet.

To deposit money in their children's book Fair account.

Second increase fear participation through marketing and promotional activities third provide personalized support services for volunteers hosting fears fourth expand our roster of high value fares through targeted incentives and fifth offering streamlined fares, which can be set up quickly.

In clubs, we will be focusing on transitioning a greater portion of parents to purchasing online.

Which supports our customer first goals by simplifying sales tax collection, while we continue to improve our ecommerce experience to meet today's expectations.

Or more than 750000 teacher customers told us that more than ever in these times of tight school budgets. Our book club rewards programs enables them to get.

Free an inexpensive books to build their classroom libraries and stimulate independent reading among their students. This is of critical importance to our nation's students as the recent kids and family Reading report showed US only one third one third of school age children have classroom libraries with books that they want to read.

In both of these channels, which carry the scholastic brand in every school every day, we have built deep relationships with publishers across the globe, who make were licensed products to us and continued to be viewed as the must have school partner, who can engage children and families sold celebrate reading and bring the most popular and diverse titles from all publishers to kids at affordable prices.

Next unquestionable strength in children's book publishing across age ranges.

This coming year, we have highly anticipated titles for every age group.

In Middle Grade the Dog Man series continues to dominate bestseller list and draw unprecedented numbers of new readers. They build these seven to book in the series Dog Man for whom the wall roles will be released in August of this year and the eight dog man. That's 22 will come out. This December through this period, Dave will be packing stadiums as part of his remarkable do good campaign, which includes the transcontinental tour and charitable components.

The power of the series as well as his landmark Captain Underpants series drives home the ever increasing popularity of graphic novels as well as the importance of book choice based on what kids want to read.

In November young readers will enjoy being introduced a dinky donkey the daughter and sequel to Wonky, Donkey, which was a viral sensation out of New Zealand last year.

Our beloved Clifford the big Red Dog, we'll make new friends. This winter with the premiere of the rebooted animated series on Amazon Prime and PBS Kids with an accompanying publishing plan and remain robust licensing program then right now as we speak in this very day in New York City Clifford is taking Manhattan with production in New York City of the live action feature coming in fall 2020 from Paramount.

We are thrilled to see the renewed success of scholastic entertainment as a creative engine that leverages platforms and media to bring new life to scholastic content has captivated young people for generations.

Trade sales in fiscal 2020 will also benefit from our recent recent purchase of the majority interest than make believe ideas UK publisher of creative books for young children.

And then in the wire your Oreo young adult the world caught fire once again with the announcement recently of a new novel in the worldwide best selling the hunger game series by Suzanne columns to come up come in May This crossover hit promises to capture new audiences as well as renewed interest in the series, which dominated bestseller lists earlier this decade and sold more than 70 million copies worldwide.

Turning to education, new market strategies advance, while our supplemental business remains strong.

We have a two prong strategy, you know that our new core offerings available or strengthen supplemental materials, such as guided reading and level book room, we'll continue to do to drive sales seeding the marketplace for core case, six reading program Scholastic literacy.

While we simultaneously pursue large scale adoption opportunities for both.

Fiscal 2020 will serve as a foundational year to build the opportunity pipeline for scholastic literacy customer response remains very positive and we anticipate initial revenues in the first quarter of fiscal 2020 with several districts across the country beginning to use this core program in the fall, we expect significant revenue and profit gains over the next several years related to scholastic literacy as well as our growing list of supplemental programs.

Our scholastic digital offerings, including literacy pro Scholastic first word and booked flicks total before there are an important part of the strategy, both as independent subscriptions and as part of Scholastic literacy. The oval overall market is taking note of our digital offerings as we earn awards and have moved up eight spots in Ed week, Mark market briefs ranking of digital tools access most by students and educators across the us.

Finally.

We are seeing significant growth and momentum in international businesses, particularly in Asia.

As I mentioned, our strength and trade is the global story.

US based properties from Dave till Q series to news of the forthcoming hunger games novel resonate through the market.

And many markets and in turn we were having increasing success, bringing titles and authors from our international markets to new audiences everywhere, including arent blood abuse pick the grub and on those weirdo splashy weird from Australia.

We anticipate strong revenue and profit growth in our Asia business as we build upon our already strong brand and response to our English language learning programs targeted to meet the needs of the growing middle class of consumers, whether the students. We reach we aim to reach or in school at home or online scholastic can offer engaging an effective tools that are proven to work and building English language proficiency. There was great enthusiasm for the existing digital education products, especially prone scholastic first are foundational English language learning program for children four to eight.

These programs are sold to families through our local internet sales partners or directly through our as scholastic early English franchises.

Building on our global resources of both print and digital content, we will adapt the local market needs where necessary and can reach these consumers throughout Asia.

In conclusion for my remarks are 2020 focus will be on improving operating income and cost management, well developing scholastic leading market position globally.

With that I will turn the call over to Ken Cleary CFO .

Thank you <expletive> and good afternoon.

Today, I will refer to adjusted results for the fourth quarter and full year.

Excluding one time items unless otherwise indicated.

As you know we adopted the new revenue recognition guidelines under assay six or six in fiscal 2019.

Since the prior year's results have not been restated I will highlight the impact of these new standards on the current year's revenues and operating profits note that we will not need to make these accounting comparisons in future periods.

The net effect from the application of AC six or six on overall results in fiscal 2019 was a deferral of $12.8 million in revenues into the next fiscal year and a $7.7 million deferral of operating income mainly affecting our book fairs business.

The impact was more significant our fourth quarter results, which had a $23.9 million in deferred revenues and a $14.8 million a reduction in operating income.

Fiscal 2019 revenues were $1.65 billion versus $1.63 billion last year.

Operating income was $41 million compared to $75 million in fiscal 2018.

As we guide on May Thirtyth earnings per diluted share. Excluding one time items were 92 cents and adjusted EBITDA was $121.3 million.

Both of these are non-GAAP measures, which we define the financial tables accompanying this afternoon's release.

Excluding onetime items and the impact of assay six or six in the current year pro forma earnings per share were one dollar eight versus $1.43 last year.

The year over year shortfall versus our original fiscal 2019 outlook was predominantly a fourth quarter event.

Highlighted by three main factors.

One we transition to a new sales tax collection program book clubs operation in March in response to the Supreme courts.

Wayfair decision and subsequent state registration requirements. This transition significantly impacted book club revenues and operating income in the fourth quarter.

Results have largely been in line with the prior year until that time.

Two we had higher promotional and marketing spending including the use of more scholastic dollars in our book fairs business as we work more closely with our customers to create and deliver the incentives and services. They desire in order to reinforce our market leadership in fares, which help fair revenues in the fourth quarter sales were 1% higher excluding the impact of assay six or six.

Three we had a greater impact from the application of assay six so six on sales and profits in the fourth quarter as we issued more promotional scholastic dollar incentives in book fairs during that period.

Full year results were also affected by higher depreciation and amortization expense as expected a $14.7 million.

And the strong U.S. dollar, which resulted in a $15.4 million reduction in revenues and a $1.1 million reduction in operating income.

One time items reflected in our pre tax results above the operating line for the fiscal year totaled $16 million and included $8.1 million for the settlement of a legacy sales tax assessment and $6.5 million in severance as well as a 900000 dollar impairment recognized in connection with our New York City headquarters renovation and a $500000 charge related to branch consolidation in our international operations.

For comparison, the prior year period saw a $19.4 million in one time items above the operating line.

Now turning to our segment results.

In children's book publishing and distribution segment revenues for the fiscal year increased $20.1 million or 2% to $990.3 million as compared to the prior year driven by a 20% sales improvement in trade on the strength of a strong front list, including two new day Picky Dog man releases in the year in J.K. Rowling fantastic piece, the crimes of Grindelwald, along with strong graphics and paperback series and the viral sensation Milwaukee Donkey.

Operating income for the year was $82.9 million, a decrease of $23.1 million or 22% as compared to the prior year driven by lower sales and higher costs in book clubs as we rolled out new sales tax collection program and differentiated online and paper based offers and higher costs in book fairs associated with expanded services and increased promotional activity as well as the accounting impact of 86, so six.

In the fourth quarter, the children's books segment sales were down $27.3 million versus the fourth quarter of 2018 with higher trade sales more than offset by decline in club revenues related to the new sales tax collection program as well as the impact of AC six or six which caused $24 million at fair revenues to be deferred on the balance sheet.

Segment operating income in the fourth quarter declined $32.7 million as compared to the prior year.

16.7 million, resulting from the impact of assay six or six and the remainder due to the lower sales volumes in clubs and higher marketing promotion spend in fares in response to competitive pressures. In addition to higher depreciation expense associated with the new book fairs point of sale system now in service.

The deferred revenues and profits associated with scholastic dollars will be recognized largely in the first half of fiscal year 2020, with an equivalent amount of revenue deferred in the second half of fiscal year 2020, Accordingly in fiscal 2020 on a full year basis, we expect recognized revenues and profits associated with scholastic dollars to be flat year over year.

In education for the fiscal year segment revenue was $297.4 million up 3% compared to $288.6 million a year ago, when higher sales of our instructional products and programs, including guided reading level book room, and look at our summer reading program.

Segment operating income was $30.6 million in fiscal 2019 down $3.3 million from the prior fiscal year with higher costs in the current year with the launch of scholastic literacy and higher amortization of new digital subscription products now in the market.

Education segment revenues in the fourth quarter was $117.7 million slightly ahead of last year's $117.2 million in recorded revenues.

Segment operating income for the quarter was $36.9 million, a 5.7 million dollar drop versus the $42.6 million recorded in the fourth quarter of fiscal 2018.

International segment revenues for the fiscal year fell $3.4 million.

Or 1% to $366.2 million compared to $369.6 million in the prior year.

Higher trade publishing results in all of our major markets and increased education sales in the UK, Australia, and Asia were more than offset by a $15.4 million adverse impact from foreign exchange in constant currency terms revenues were up 3% year over year.

Segment operating income fell $3.2 million or 17% to $15.3 million versus last year, mainly as a result of higher operating expenses on lower revenues in Canadian book clubs in Education. In addition to a $1.1 million hit from foreign exchange.

Sales in the fourth quarter rose $1.3 million or 1% to $94.3 million versus the prior year period, driven by strong trade channels in all international markets.

International finished I'm upbeat note with operating income in the fourth quarter of 15% compared to the fourth quarter of 2018, largely driven by trade.

Unallocated corporate overhead expense for the fiscal year was $87.8 million slightly higher than $83.4 million last year.

The increase was primarily due to increased costs when can the ongoing rollout of a new cloud based ERP system as we expected as well as higher depreciation expense related to our recently completed headquarters renovation and new technology platforms now in service.

Net cash provided by operating activities was $116.4 million compared to $141.5 million last year and free cash flow as defined by US was a net use of $12.4 million versus a net use of $16.1 million last year.

Capital expenditures the main driver of our free cash use in the year was $95 million versus $121.5 million in fiscal 2018.

As we discussed last quarter, we utilized our strong balance sheet to optimize our procurement opportunities throughout the year.

Which help to address industry wide capacity constraints and longer lead times with our strategic printers paper suppliers.

The higher inventory levels and quicker payment terms taken together has significant impact on our working capital utilization and resulting free cash use for the year.

We distributed $21.1 million in dividends and repurchased $8.5 million of our common stock during the year.

We continued our open markets tie back stock buyback program into new fiscal year with an incremental $8.7 million in repurchases.

After giving effect to these additional purchases of stock in the new fiscal year, we have $44.2 million remaining under our current authorization.

Our newest program, which will continue to be funded with available cash we may repurchase our shares from time to time as conditions allow.

At fiscal year end, our net cash position was $326.8 million down from $384 million a year ago. The lower net cash balances primarily due to planned capital spending programs on technology investments aligned with our scholastic 2020 long term margin improvement plan as well as the completion of our headquarters renovation.

We also made $18.5 million in acquisitions and other investments, including our purchase of the majority interest and make believe idea is limited in the UK and a 4.62% investment picture starring LLC.

A financing and production company working with POC distributors and content partners to make film television and digital programming for the youth market.

Now briefly on cost reduction plans in the past fiscal year, we realized $10.8 million in sustainable savings from Scholastic 2020 plan initiatives and our recent investment in data and technology. Although much of these savings were offset by wage inflation and distribution transportation and some higher costs incurred with our paper and printing vendors due to capacity constraints.

As we've talked about previously our scholastic 2020 deployment is champion by an integrated cross disciplinary team from operations logistics manufacturing technology data and analytics and finance underlying proactive efforts to drive down spend.

In fiscal 2020, we are targeting even higher net bottom line benefit from these efforts and we'll report on these initiatives and result in savings throughout the fiscal year.

Now to address our outlook and guidance ranges for fiscal year 2020.

We are projecting fiscal year 2020 revenues to be in the range of $1.67 billion to $1.7 billion up from $1.65 billion in fiscal 2019.

And we are seeing an adjusted EBITDA target of $140 million to $160 million up from $121.3 million in fiscal 2019.

We're no longer providing annual EPS guidance as we believe adjusted EBITDA is a more meaningful measure of operating profitability and returns on capital investments made without distortion from unusual items and share repurchases.

Revenue growth will be led by trade publishing, including new releases in our important hunger games Captain Underpants Dog man wings of fire and I survive franchises as well as growth in licensing.

The new hunger games novel set to release in May 2020 was the positive impact on sales and operating profits in the fourth fiscal quarter. However, there will be meaningful cash outlays made throughout the fiscal year for author advances publishing costs marketing and promotion.

Trade sales will also see a boost from the recent majority acquisition a make believe ideas.

Clubs and fairs, we will continue to be important channels to engage students and their parents ensure kids have access to the best books at affordable prices, we expect the marketplace to remain competitive as discussed earlier, we are executing a plan to reinforce our market leadership, we expect lower clubs and fairs revenues in fiscal 2020, as we work to transition more customers to our clubs online ordering platform and away from paper based order forms and simplify our book fairs for organized some volunteers.

The wrong with more company provides support services, including set up and fair replenishment.

We are working diligently to streamline our cost structure in clubs and develop more focused marketing and promotions affairs and should see improvement in operating results in the new fiscal year.

As <expletive> mentioned, we also expect targeted growth in education in both a supplemental business and our newly available core offerings. We believe the scholastic literacy contains a number of key features that differentiates it from other available products that will lead to initial market penetration in fiscal 2020.

In international we expect to accelerate revenue growth in trade and education, particularly in China through both Internet stores in our own channels, we expect to achieve greater efficiencies as we leverage our new Scholastic Asia shared services operation.

International will also benefit from the upcoming hunger games novel, We're publishing rights in Canada, UK, Australia, and India as well as audio World rights.

In fiscal 2020, we plan to one drive additional sustainable operational efficiencies throughout our supply chain to target cost savings to help alleviate inflationary pressures and labor fuel postage as well as any impact from tariffs and three implement selective pricing increases.

As we move further into our scholastic 2020 transformation plan, we will achieve greater benefits from the new technology platforms and data analytics programs, including Salesforce Dot com integrate analytics ERP deployment, Pos any wallet e-commerce enablement and the infrastructure upgrades, we have placed in service. Although we will continue to see higher levels of depreciation and amortization from these capital investments.

We also expect to receive higher rental income as we begin to lease out available space here in Soho as a result, the result of the investments we've made to create new high value retail and multi purpose mixed use space over the past two years.

Our fiscal year 2020 outlook includes capital expenditures of $75 million to $85 million compared to $95 million in fiscal 2019.

Prepublication and production spend is projected to trend slightly higher in fiscal 2020 inclusive of an expanded development slate of children's entertainment programming to maximize our creative content and characters.

And with that I will hand, the call back to Gil for Q and a session.

Thanks, very much Ken.

We are ready to now open the line for questions.

Thank you Sir if you have a question at this time. Please press Star then wanting a touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Our first question comes from the line.

Hi, drew Crum of Stifel. Your line is open.

Okay. Thanks, guys good afternoon.

Talk a little bit more about your experience with the programs put into place to address the competition in fares and then I guess on a related note three issues that impacted fiscal Fourq Q you kind of addressed this in your preamble, but.

You may be discuss in more detail. When you expect these to stabilize I guess im speaking specifically to the.

The sales tax collection issues for clubs the competition fares and then the higher input costs.

Oh, although answer a couple of these myself drew and then ask Ken to supplement my comments.

In terms of the book fairs.

We you asked about the incentive plans and other operating costs, we did have.

As Ken alluded we did.

Give out some extra scholastic dollars.

To ensure that we got renewals of fares that we thought might be vulnerable.

But we have probably extended the program a little farther than we needed to.

No Weve gave away a little bit more slapstick dollars than we expected we also had.

The cost increases in certain core areas of.

Hoping.

Labor labor, particularly driver labor costs and areas like that.

But as a principal effect was through the scholastic incentives scholastic dollars.

On the clubs.

We began collecting sales tax in the third quarter March through May.

We expect that we will have some additional sales tax impact from September .

2019 through.

January 2020.

After that it should have.

Recalibrate to what people did in the spring, we we have improved the offerings that we have made through our collection processes.

So we're not expecting a.

The dramatic impact the way, we got in those in the fourth quarter.

Weve corrected some of the issues that caused that.

Revenues decline.

So were that we would do.

We do feel we're going to get some impact from sales tax during the year that will be offset by the fact that the.

As you know we did pay we self assess some sales tax.

Historically in the business and as we collect full sales tax from all our customers that will.

It will that will drop off.

I'll turn to Ken for the <unk>.

Other answers.

Sure just to just to build on.

Dicks comments on scholastic dollars.

There there were higher incentives in Q4, and we also did some work to improve.

Fair quality and really provide the fares that are that our customers want. So there was some there were some labor and warehouse costs associated with that as well as far as.

Sales tax goes it really isn't a cost issue going forward the way it was it's now.

Do.

What's going to be the impact on the business in terms of the topline. So the work's been done to implement what we're doing in terms of the collection of sales tax and we we also had to lap some costs in terms of.

Before we implemented sales tax last year, we had to.

Register in certain states and obviously, we couldnt collect in some states and are those with our program. We launched in March and we started collecting in March so let's say state.

Went online with their registration earlier as early as October and in some instances we were responsible for that sales tax. So we bore that burn we talked a little bit about that earlier in the year.

What was it what was it could sorry my mistake.

You made reference to higher paper printing and labor cost. So that's something that you see is ongoing or does that abate can you offset it with pricing and other initiatives.

So sure. So we are actively working on on pricing and other initiatives in.

Dicks comments, you heard about margin improvement. So yes, we're not predicting substantial revenue pickups in particularly in clubs and fairs next year.

But we are we are expecting margin improvement and some of that comes through pricing now we do have some elasticity in those markets. So it's somewhat target it's not across the board, but we are doing other things to.

Without getting too many details we do have some cross channel initiatives, where procurement should be better targeted and stronger and we should be able to leverage our inventory across the organization better. So there are things in play.

Some of our systems implementations are designed to address some of this as well and support this.

So its really around.

Around some of the some of the procurement efforts and making sure that we are.

During our demand planning appropriately and on the other side selective pricing.

Okay.

I do think we showed we did we lagged a little in.

Meeting the cost increases we knew there were coming but because of the lead times that we have in our businesses, we weren't able to quite catch up with them last year, and we are doing a much better job going forward on that topic.

So we should see some as Ken pointed out margin improvement next year offsetting cost increases.

Okay.

Shifting gears to the trade business.

Can you talk about your expectations for this new hunger games book relative to.

What you experienced with the first three books and is there a way to size. That's make believe ideas franchise or book program that you've acquired.

Yeah, I think make make believe ideas.

It runs in terms of of.

Between 35 and $40 million.

Last year, we owned a portion of that so we got a pickup equity pickup of some of the operating income.

But no revenues this year, we will get the revenues and we will.

Also get the full benefit of the operating income.

Ticket growing is it a growing franchise yeah no no. It's a wonderful yes, it's gone it's pretty good. So we acquired a minority interest four years ago and.

It's grown.

Doubled at least in that time.

Through early childhood business absolutely remarkable.

It goes through mass market channels, primarily through reader link to Walmart Costco, Kate could target and so forth and so it's a great business.

Okay, and then on hunger games.

Hunger games, it's hard to tell we're coming you know it's the last week of the fiscal year virtually that this thing comes out.

So, we'll we'll put out a certain number of copies based on past performance, but we.

It's been some years since the last when it came out.

And we are.

We were confident that the program is as strong as ever but we are not sure what's going to happen until we put the.

Some copies out in the market and see what would happen. So we'll be taking some reserves against the.

That whatever expected revenue, we might get but it's certainly been a great series over time.

Okay.

And then on the education business.

There's been some investment made ahead of the glass litter CE launch should we now that Thats behind you I think the majority of that spend is behind you should we expect to see.

Oh, I improve and I'm, sorry, if I missed that.

You cut out during your.

Prepared remarks, but was there any sales impact from scholastic literacy during the quarter and in the press release.

You made reference to participating in some state adoption in open territories that the COVID-19 or is that calendar 2000.

Most of the revenues going to be fiscal 21.

We're getting some revenue this summer a little bit.

Drew but we introduced the program the somewhat late in the year, we were sending out samples and.

February and March.

And so we got some revenues for the summer quarter being a core textbook product in the summer quarter is when you would expect the highest level of revenues, but because of the late introduction, it's going to be fairly minimal for this summer.

But we are big.

The several adoption opportunities, which I'm sure you're aware of and 21.

And we expect of the participant in that but I think the main thing is going to be you know will.

It just adds another way for us to go in to talk to the literacy coordinator or the Chief academic officer, we're offering a comprehensive literacy solutions, including core.

Supplemental digital so forth and so on it.

Just complements our offering and gives us expanded revenue opportunities, but that's going to take a while to show up in the operating statement.

Okay and this is just one more question can you comment on what your expectations are around incremental rental income for fiscal 2000.

We will have some.

So we have several people who were actively.

Engaged in competing for some space that we have.

Not all of it but some of it.

And the unfortunately, I predicted that we would be able to announce the signed leases.

In this quarterly call, but but.

The market being what it is that slipped a little bit and so we will.

We'll probably have something to announce fairly soon.

And then the but the market's still there as you know the retail market as well.

Not that great overall, but for this position in Soho that we have in the amount of space we have.

We're pretty pretty strong competitor for all the major brands that want to be in Soho.

Okay, great. Okay. Thanks, guys.

Thank you thanks drew.

Thank you at this time I'd like to turn the call back over to Chairman President Chief Executive Officer, Richard Robinson for any closing remarks, Sir well. Thank you very much all for your attention. This was a relatively long call for us as we had as an important quarter and we had an important new year, we were very disappointed in our fourth quarter performance as you know.

Weve, taking of 10 steps throughout the company to improve that.

We've got commitment from everybody that we're going to have a better year in 2020 and get back to toward or or better operating income as the year goes on we are and we thank you for your support.

And we will do our best to make good on our promises. Thank you very much and we will.

We will see you in September .

Thank you, Sir ladies and gentlemen that concludes today's conference. Thank you for your participation and have a wonderful day.

Disconnect your lines at this time.

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