Executive Summary
Scholastic’s QQ2 2025 results reflect a mixed but constructive positioning as the company navigates timing-driven publishing schedules and ongoing investments in growth initiatives. Revenue totaled $544.6 million, down 3% year-over-year primarily due to timing factors in Trade Publishing and School Reading events, yet delivery improved meaningfully quarter-over-quarter after a lighter prior-year comparator, underscoring the second-half cadence supported by key releases and fair-value initiatives. Gross margin remained strong at 58.0%, with an operating margin of 13.7% and EBITDA of $94.4 million (margin ~17.3%), delivering a net income of $48.8 million and diluted EPS of $1.71–$1.73. The quarter featured a meaningful contribution from Scholastic Entertainment post 9 Story acquisition, a substantial uplift in Book Fairs activity, and ongoing progress in Education Solutions with two new digital literacy programs in final development for 2025–26. Management reaffirmed fiscal 2025 guidance, signaling a disciplined path to growth through cost actions, balance-sheet strength, and selective capital deployment. The company also outlined strategic priorities—expanding direct-to-consumer channels, strengthening state and community partnerships, and accelerating IP-driven content across book and screen—to build durable franchises. Overall, the QQ2 performance supports a constructive investment narrative anchored in content-driven growth, monetization of new platforms (YouTube and digital distribution), and leverageable synergies from the 9 Story integration, with a cautious but favorable view on the trajectory into 2025–26.
Key Performance Indicators
QoQ: 129.60% | YoY:-3.20%
QoQ: 190.17% | YoY:-3.81%
QoQ: 184.41% | YoY:-26.26%
QoQ: 178.08% | YoY:-36.54%
QoQ: 178.28% | YoY:-30.80%
Key Insights
Revenue: $544.6m (-3.2% YoY; +129.6% QoQ vs. Q1 2025 at $237.2m) | Gross profit: $316.0m; gross margin 58.0% | Operating income: $74.7m; operating margin 13.7% | EBITDA: $94.4m; EBITDA margin 17.3% | Net income: $48.8m; net margin 8.96% | EPS: $1.73 (GAAP) / $1.71 (diluted) | Weighted average shares: 28.2m (basic) / 28.6m (diluted) | Cash flow from operations: $71.2m | Free cash flow: $60.3m | Capex: -$10.9m | Net debt: $228.2m | Cash: $139.6m | Total assets: $2.0368b | Total liabilities: $1.050...
Financial Highlights
Revenue: $544.6m (-3.2% YoY; +129.6% QoQ vs. Q1 2025 at $237.2m) | Gross profit: $316.0m; gross margin 58.0% | Operating income: $74.7m; operating margin 13.7% | EBITDA: $94.4m; EBITDA margin 17.3% | Net income: $48.8m; net margin 8.96% | EPS: $1.73 (GAAP) / $1.71 (diluted) | Weighted average shares: 28.2m (basic) / 28.6m (diluted) | Cash flow from operations: $71.2m | Free cash flow: $60.3m | Capex: -$10.9m | Net debt: $228.2m | Cash: $139.6m | Total assets: $2.0368b | Total liabilities: $1.0508b | Equity: $986.0m | Current ratio: 1.24 | Quick ratio: 0.81 | Long-term debt: $335.6m | Revolving credit facility: $400m facility upsized; $250m drawn at quarter end | Guidance reaffirmed: Revenue growth 4–6%; Adjusted EBITDA $140–$150m; Full-year free cash flow $20–$30m.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
544.60M |
-3.20% |
129.60% |
| Gross Profit |
316.00M |
-3.81% |
190.17% |
| Operating Income |
74.70M |
-26.26% |
184.41% |
| Net Income |
48.80M |
-36.54% |
178.08% |
| EPS |
1.73 |
-30.80% |
178.28% |
Key Financial Ratios
operatingProfitMargin
13.7%
operatingCashFlowPerShare
$2.52
freeCashFlowPerShare
$2.14
dividendPayoutRatio
11.5%
Management Commentary
- Strategy and growth: Management highlighted a dual emphasis on expanding Scholastic’s global reach through IP-driven content in books and entertainment, plus direct-to-family offerings and expanded partnerships. The Dog Man movie cycle and the ongoing Hunger Games schedule are cited as key catalysts for backlist and cross-media monetization. The company reaffirmed growth priorities under the new Chief Growth Officer, including direct-to-consumer channels, public/private funding partnerships, and story development across book and media IP.
- Operational performance: QQ2 results were impacted by timing factors in Trade Publishing and School Reading events, with Book Fairs contributing to modest growth in the year, aided by higher participation and revenue per sponsor in Book Clubs. Entertainment benefited from the 9 Story integration, with revenue of $16.8m but a segment loss ($3.9m) driven by higher amortization and one-time intangibles associated with the acquisition. Management noted production headwinds in the broader industry while signaling long-term synergy potential.
- Cash flow and balance sheet: Operating cash flow was $71.2m; free cash flow was $42.4m under the adjusted definition; overall free cash flow for the quarter was $60.3m. The revolving credit facility was upsized to $400m, with $250m drawn, indicating strong liquidity and capacity to fund growth while returning cash to shareholders.
- Guidance and risk: Management reiterated FY2025 guidance amid potential policy shifts and currency volatility but emphasized hedging, cost actions, and improved supply-chain resilience as mitigants. They are monitoring policy impacts on state/local funding and education reforms while pursuing cost discipline and reorganizations to enhance efficiency. A notable quote from the CFO reinforces the near-term outlook: “As we look ahead to the rest of the year, we've re-affirmed our fiscal year 2025 guidance. We continue to expect revenue growth of 4% to 6% and adjusted EBITDA of $140 million to $150 million.”
“intangible impairments that we have -- not impairments, the intangibles that we have in the business, that actually impacted the quarter by at least 2 -- 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.”
— Haji Glover
“As we look ahead to the rest of the year, we've re-affirmed our fiscal year 2025 guidance. We continue to expect revenue growth of 4% to 6% and adjusted EBITDA of $140 million to $150 million.”
— Haji Glover
Forward Guidance
Scholastic reaffirmed its FY2025 guidance: total revenue expected to grow 4%–6% and adjusted EBITDA of $140–$150 million, with full-year free cash flow targeted at $20–$30 million. Management anticipates a modest third quarter with growth relative to the prior year driven by timing factors in Trade Publishing and School Reading events, and stronger fourth-quarter performance anchored by the Hunger Games publishing window and continued growth in Book Fairs and school-reading channels. The guidance assumes ongoing operational improvements, cost actions (including discretionary non-revenue generating spend reductions and hiring freezes in non-priority areas), and capital discipline. Key risks to guidance include: (i) variability in publishing schedules and consumer demand, (ii) policy or funding shifts at state/local government levels affecting education budgets and supplemental materials, (iii) FX volatility in International segments, and (iv) concentration risk around large IP-driven titles. Investors should monitor: progress on SRE merchandising modernization, Florida “New World Reading”/Lastinger initiatives and other state partnerships, the pace of 9 Story integration benefits, and the timing of upcoming major releases (Dog Man, Hunger Games Sunrise on the Reaping) which could materially influence quarterly cadence and back-end profitability.