Scholastic Affirms FY2027 Outlook as Q1 Revenue Falls 4%

Scholastic Corporation (NASDAQ: SCHL) affirmed its fiscal 2027 outlook after first-quarter revenue declined 4%, as weakness in Education Solutions and children’s publishing offset strong growth in Entertainment. The company recorded a seasonal operating loss in what it described as its smallest revenue quarter, while pointing to back-to-school activity and its fall publishing schedule as key factors for the second quarter.

For the three months ended August 31, 2026, revenue fell to $216.8 million from $225.6 million a year earlier. The GAAP operating loss was unchanged at $92.2 million, while the pretax loss narrowed to $93.7 million from $97.0 million. The GAAP diluted loss per share widened to $3.77 from $2.83.

Excluding one-time items, the adjusted operating loss increased to $88.7 million from $81.9 million, and the adjusted diluted loss per share widened to $3.63 from $2.52. Adjusted EBITDA was negative $63.6 million, compared with negative $55.7 million in the prior-year quarter.

The reported year-over-year comparison was affected by sale-leaseback transactions completed in December. On a comparable basis that assumes the transactions occurred at the start of fiscal 2026, the prior-year adjusted operating loss would have been $86.7 million and adjusted EBITDA would have been negative $64.2 million. Against those figures, the latest adjusted operating loss was 2% larger, while adjusted EBITDA improved by $0.6 million.

Education weakness offsets Entertainment growth

Children’s Book Publishing and Distribution revenue decreased 3% to $105.8 million. School Reading Events revenue fell 2% to $35.3 million, while Consolidated Trade revenue declined 4% to $70.5 million. The segment’s adjusted operating loss widened to $37.8 million from $34.3 million.

Management said early Book Fairs indicators were positive, with bookings and the number of fairs ahead of the prior year. The fall Trade Publishing schedule includes Harry Potter releases ahead of the planned HBO series, a new Dog Man title and tie-in publishing for Sunrise on the Reaping ahead of The Hunger Games movie.

Education Solutions posted the steepest revenue decline among Scholastic’s operating segments. Sales dropped 24% to $30.4 million, and the adjusted operating loss increased to $23.3 million from $21.2 million. Scholastic attributed the pressure to constrained school and district budgets following the March expiration of ESSER funding, as well as declining enrollment alongside higher salaries and fixed costs. The company said it is accelerating a go-to-market transformation focused on sales productivity and execution.

Entertainment revenue rose 48% to $20.1 million as production activity increased. Its adjusted operating loss narrowed to $1.6 million from $4.0 million, while segment adjusted EBITDA reached $5.7 million, up from $0.8 million. Scholastic also said its digital platforms continued to broaden the reach of its intellectual property.

International revenue increased 2% to $60.5 million, and the segment’s adjusted operating loss narrowed to $2.7 million from $4.1 million. The company cited operating discipline and activity around the Dog Man and Hunger Games franchises, while its partnership with Mattel is expanding its reach in India.

Corporate overhead contributed an adjusted operating loss of $23.3 million, compared with $18.3 million a year earlier. On a comparable basis, the prior-year overhead loss was $19.4 million after accounting for the sale-leaseback impact.

Full-year outlook maintained

Scholastic continues to expect fiscal 2027 revenue growth of 2% to 4%. It also maintained its forecast for adjusted EBITDA of $135 million to $145 million, representing year-over-year growth on a comparable basis, and free cash flow of $35 million to $40 million on a normalized basis.

Management expects year-over-year revenue growth to begin in the second quarter as the back-to-school and fall selling season progresses. The company said its priorities include executing growth initiatives while maintaining cost discipline and financial flexibility.

Free cash flow use totaled $110.8 million in the first quarter, compared with $100.2 million a year earlier. As of August 31, cash and cash equivalents were $106.8 million, while lines of credit and long-term debt totaled $184.8 million. Net debt, as defined by the company, was $86.8 million, down from $242.8 million a year earlier.

The outlook remains subject to the seasonal concentration of Scholastic’s business and pressure on school and district spending. The company’s fiscal 2027 free-cash-flow comparison also excludes the unusual benefit of more than $400 million in net proceeds from sale-leaseback transactions recorded in fiscal 2026.