McGraw Hill, Inc. 10-Q Summary: Quarter Ended June 30, 2026
Business Context and Reporting Period
This is a Quarterly Report on Form 10-Q for McGraw Hill, Inc. for the three-month period ended June 30, 2026. McGraw Hill is a leading global provider of education solutions operating through four reportable segments: K-12, Higher Education, Global Professional, and International. The company recently completed its initial public offering (IPO) in July 2025, transitioning from private ownership under Platinum Equity to a public company.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 |
|---|---|---|
| Revenue | $549.9 million | $535.7 million |
| Net Income | $57.9 million | $0.5 million |
| Operating Income | $114.3 million | $96.2 million |
| Adjusted EBITDA | $207.0 million | $191.4 million |
| Diluted EPS | $0.30 | $0.00 |
| Cash and Equivalents | $193.6 million | $247.3 million (end of period) |
| Total Debt Outstanding | $2.63 billion | $2.63 billion |
| Operating Cash Flow | $0.6 million | $(96.7) million |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased dramatically from $0.5 million to $57.9 million, driven by a significant reduction in the effective tax rate (from 98.7% to 15.5%) due to the enactment of the "One Big Beautiful Bill Act" (OBBBA) and a decrease in valuation allowances.
- Revenue Growth: Total revenue grew 2.6% year-over-year. Higher Education revenue increased 9.6% due to digital adoption and enrollment growth, while International revenue declined 12.1% due to lower enrollments in Canada and timing shifts in Spain and the Middle East.
- Cost Management: Cost of sales decreased 10.3% primarily due to lower manufacturing and royalty costs associated with a strategic shift away from print offerings in K-12 and International segments.
- Interest Expense: Net interest expense decreased 22.1% to $45.8 million, reflecting debt repayments made with IPO proceeds and lower interest rates on the A&E Term Loan Facility.
- Operating Expenses: Operating and administrative expenses rose 5.6% to $255.1 million, largely due to increased stock-based compensation ($3.9 million) following the IPO and higher salaries/wages.
Guidance, Outlook, and Risks
- Outlook: Management expects the OBBBA tax law changes to significantly reduce domestic income tax liability for the fiscal year ending March 31, 2027. The company continues to invest in product development ($34.4 million in the quarter) and capital expenditures ($23.9 million) to support digital migration.
- Share Repurchase: On June 2, 2026, the Board approved a $50 million share repurchase plan.
- Key Risks:
- Legal Proceedings: The State of Florida filed a complaint alleging violations of the Florida False Claims Act regarding pricing. While the lower court dismissed the complaint in April 2026, the State has appealed. Similar qui tam complaints are pending in Illinois.
- AI and Technology: Risks associated with the disruption of markets by artificial intelligence and the costs of compliance and development.
- Seasonality: Cash flows are heavily influenced by the academic calendar, with significant working capital needs in the first half of the fiscal year.
Investor Verification Checklist
- Verify the sustainability of the 15.5% effective tax rate and the specific impact of the OBBBA on future deferred tax assets.
- Monitor the status of the Florida False Claims Act appeal and potential exposure from similar qui tam complaints in other states.
- Assess the trajectory of International revenue recovery, given the 12.1% decline and specific headwinds in Canada and the Middle East.
- Review the execution of the $50 million share repurchase plan and its impact on liquidity.
- Confirm the continued growth in Re-occurring Revenue (77% of total revenue) as a key indicator of business stability.