Scholastic Corporation — FY2024 Form 10-K
Business context and period. This annual report covers the fiscal year ended May 31, 2024, not a standalone calendar-year 2023 quarter. Scholastic publishes and distributes children’s books and educational materials and produces children’s media. Its reported segments were Children’s Book Publishing and Distribution, Education Solutions, and International. The business is seasonal, with school-based sales generally lower in the first and third fiscal quarters.
Financial performance
| Metric | FY2024 | FY2023 |
|---|---|---|
| Revenue | $1,589.7 million | $1,704.0 million |
| Gross profit (revenue less cost of goods sold) | $884.6 million; 55.6% margin | $917.6 million; 53.8% margin |
| Operating income | $14.5 million; 0.9% margin | $106.3 million; 6.2% margin |
| Net income | $12.1 million | $86.5 million |
| Diluted earnings per share | $0.40 | $2.49 |
| Cash provided by operating activities | $154.6 million | $148.9 million |
| Cash and cash equivalents at year-end | $113.7 million | $224.5 million |
FY2024 investing activities used $89.7 million and financing activities used $176.1 million. At May 31, 2024, current assets were $676.9 million and current liabilities were $534.7 million. Debt was $6.0 million, all current, with no borrowings under the U.S. revolving credit agreement at year-end. The company subsequently borrowed $200 million under that agreement, primarily to finance its 9 Story acquisition.
FY2024 revenue by segment was $955.2 million for Children’s Book Publishing and Distribution, $351.2 million for Education Solutions, and $273.6 million for International. These figures total $1,580.0 million; the company reported total revenue of $1,589.7 million including $9.7 million of headquarters rental income.
For the fourth quarter of FY2024, revenue was $474.9 million and net income was $35.9 million, compared with $528.3 million and $75.8 million, respectively, in the fourth quarter of FY2023.
Material changes versus the prior year
- Revenue fell 6.7%; net income declined to $12.1 million from $86.5 million, and operating income fell by $91.8 million.
- Children’s Book Publishing and Distribution revenue decreased 8.0%, largely as the company reduced book clubs to a smaller, more profitable core; U.S. book-club revenue fell $55.1 million. Book fairs revenue also declined, primarily from lower revenue per fair.
- Education Solutions revenue decreased 9.2%, reflecting lower supplemental curriculum, summer reading, and magazine sales amid school spending pressure and increased competition. Segment operating income fell to $15.8 million from $58.4 million.
- International revenue decreased 2.1%; the segment reported a $6.9 million operating loss versus a $3.6 million loss. Weakness in Asia and Australia was partly offset by growth in the UK.
- Cost of goods sold improved to 44.4% of revenue from 46.2%, helped by lower printing, inbound freight, and royalty costs. However, SG&A rose $46.4 million, including restructuring costs, 9 Story investment costs, and higher book-fair labor, equipment, and warehouse costs.
Outlook, risks, and unusual items
- Management expects the external environment to continue pressuring FY2025 results, while anticipating benefits from strategic investments. It is pursuing accelerated growth and margin targets over the next three to five years but gave no specific financial guidance in the provided filing text.
- On June 20, 2024, after year-end, Scholastic acquired 9 Story Media Group for CAD $250 million (approximately $182 million), subject to adjustments. Its operations, together with Scholastic Entertainment, are expected to form a new Entertainment segment beginning in FY2025. Purchase accounting was incomplete as of the report date.
- Management expects approximately $13 million to $14 million of FY2025 interest expense from the post-year-end acquisition borrowings. It also expects higher inventory purchases to affect FY2025 operating cash flow.
- FY2024 included $10.0 million of asset impairments and write-downs: $6.1 million related to education products affected by the shift toward science-of-reading instruction and $3.9 million related to exiting leased office space. The company also recorded $10.9 million of restructuring and cost-savings expense and $9.3 million of 9 Story-related costs.
- Key risks include changing school purchasing and literacy approaches, competition and customer concentration in trade publishing, book-fair execution and costs, paper and shipping cost volatility, foreign exchange, cybersecurity and privacy risks, and reliance on creative talent and third-party technology providers. The company reported no cybersecurity incident it believed had materially affected or was reasonably likely to materially affect it.
- Various ordinary-course legal claims are pending; the company does not expect reasonably possible losses, after recorded accruals, to materially affect its financial position or results. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether book clubs can stabilize at the targeted smaller core and whether book-fair revenue per fair and operating margins recover.
- Whether Education Solutions products align successfully with prevailing literacy approaches and school budgets, and whether further product impairments occur.
- The 9 Story acquisition’s final purchase-price allocation, contribution to revenue and cash flow, integration costs, and effect of floating-rate debt and interest expense.
- Whether operating cash flow remains resilient as inventory purchases rise, given the sharp year-over-year reduction in cash balances and substantial share repurchases.
- How management’s multi-year growth and margin ambitions translate into measurable FY2025 guidance and segment reporting under the new four-segment structure.