Scholastic Corporation (SCHL) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This summary covers Scholastic Corporation's Form 10-Q for the quarterly period ended November 30, 2025 (Fiscal Q2 2026). Scholastic operates in four primary segments: Children's Book Publishing and Distribution, Education Solutions, Entertainment, and International. The company's business is highly seasonal, with school-based channels typically generating lower revenue in Q1 and Q3 of the fiscal year.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenues | $551.1 million | $544.6 million | $776.7 million | $781.8 million |
| Operating Income | $82.9 million | $74.7 million | $(9.3) million | $(13.8) million |
| Net Income (Loss) | $55.9 million | $48.8 million | $(15.2) million | $(13.7) million |
| Diluted EPS | $2.17 | $1.71 | $(0.60) | $(0.48) |
| Cash & Equivalents | $99.3 million | $139.6 million | $99.3 million | $139.6 million |
| Total Debt | $280.6 million | $256.2 million | $280.6 million | $256.2 million |
| Operating Cash Flow (YTD) | $(8.6) million | $29.3 million | $(8.6) million | $29.3 million |
Material Changes vs. Prior Period
- Revenue Growth: Q2 revenues increased 1.2% year-over-year, driven by the global release of Dog Man #14, Hunger Games, and Harry Potter franchises, and a successful fall book fair season. YTD revenues declined 0.6% due to weakness in Education Solutions.
- Profitability: Q2 operating income improved 11% to $82.9 million, aided by cost-saving initiatives and higher margins in the Children's Book segment. However, YTD results remain in a loss position due to Q1 performance.
- Asset Impairments: The company recorded $8.6 million in asset impairments in Q2 (up from $0.1 million in Q2 2025). This included $3.4 million for Education Solutions products and $5.2 million for Entertainment film/TV programs. Total YTD impairments were $9.4 million.
- Segment Performance:
- Children's Book Publishing: Revenues up 3.8% QoQ; Operating income up 6.6%.
- Education Solutions: Revenues down 12.6% QoQ due to delayed school funding; Operating loss widened to $4.7 million.
- Entertainment: Revenues down 10.1% QoQ; Operating loss widened to $9.0 million primarily due to impairments.
- International: Revenues up 3.2% QoQ; Operating income more than doubled to $12.4 million.
- Cost Structure: Cost of Goods Sold (COGS) as a percentage of revenue improved to 40.9% in Q2 (from 42.0% prior year) due to better inventory utilization, though tariffs are expected to increase COGS in the upcoming peak season.
Guidance, Outlook, and Risks
- Outlook: Management expects positive trends in book fair counts and revenue per fair to continue into the spring season. Anticipated benefits include new trade releases such as Captain Underpants: The First Epic Manga and the 16th Wings of Fire book.
- Tariff Impact: The company expects approximately $10 million in incremental tariff expense for fiscal 2026, particularly impacting the book fairs channel during the Q4 peak season.
- Liquidity & Capital: Cash used in operating activities was $8.6 million YTD. The company has $124.6 million available under its U.S. Credit Agreement and $32.4 million in short-term facilities. Subsequent to quarter-end, the company entered into sale-leaseback agreements for its headquarters and distribution center, expected to provide additional liquidity.
- Shareholder Returns: A quarterly dividend of $0.20 per share was declared. The Board authorized an additional $80.0 million for share repurchases, bringing total remaining authorization to $150.0 million.
- Risks: Continued volatility in education funding, inflationary pressures on labor and transportation, and foreign exchange fluctuations remain key risks.
Investor Verification Checklist
- Verify the impact of the $8.6 million Q2 asset impairment on future Entertainment and Education segment profitability.
- Monitor the realization of the projected $10 million tariff expense in Q4 and its effect on margins.
- Assess the sustainability of the Education Solutions revenue decline amidst ongoing school funding delays.
- Review the terms and liquidity impact of the sale-leaseback transactions for the SoHo headquarters and Jefferson City distribution facility closed in December 2025.
- Track the execution of the new $150 million share repurchase authorization and its effect on diluted EPS.