McGraw Hill, Inc. 10-Q Summary: Quarter Ended December 31, 2025
Business Context and Reporting Period
This is a Quarterly Report on Form 10-Q for McGraw Hill, Inc. for the three and nine months ended December 31, 2025. The company is a leading global provider of information solutions for education across K-12, higher education, and professional learning. The reporting period follows the company's Initial Public Offering (IPO) completed on July 25, 2025, which converted Class A and B stock into a single class of Common Stock.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2025 | Nine Months Ended Dec 31, 2025 |
|---|---|---|
| Revenue | $434.2 million | $1,639.1 million |
| Net Income (Loss) | $(20.2) million | $85.6 million |
| Operating Income | $30.4 million | $283.1 million |
| Adjusted EBITDA | $135.9 million | $613.7 million |
| Cash from Operations | Filing text does not provide a clear value for the three-month period | $477.3 million |
| Cash and Equivalents | $514.4 million (as of Dec 31, 2025) | |
| Total Debt Outstanding | $2,682.3 million (as of Dec 31, 2025) | |
| Recurring Revenue % of Total | 82.3% | 71.2% |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 4.2% year-over-year (YoY) for the quarter and 0.7% for the nine-month period. Growth was driven by the Higher Education segment (+24.0% quarterly), offset by declines in K-12 (-14.6% quarterly) and International (-1.8% quarterly) segments.
- Profitability: Net loss for the quarter narrowed significantly to $(20.2) million from $(52.9) million in the prior year, primarily due to reduced interest expense and a tax benefit. Net income for the nine months increased 20.5% to $85.6 million.
- Debt Reduction: Total debt decreased by approximately $595.6 million during the nine-month period. This includes $385.7 million repaid using IPO proceeds and an additional $200.0 million repaid in the third quarter.
- Interest Expense: Net interest expense decreased 31.2% YoY for the quarter and 29.5% for the nine months, reflecting debt repayments and lower variable rates.
- One-Time Charges: The company recorded a $24.5 million loss on extinguishment of debt for the nine months ended Dec 31, 2025, related to accelerated amortization of debt discounts and financing costs.
Guidance, Outlook, and Risks
- Management Commentary: Management highlights a strategic shift toward digital subscription models, with recurring revenue representing 71% of total revenue for the nine months. The Higher Education segment continues to show strong growth in digital adoption and Inclusive Access sales.
- Leadership Transition: CEO Simon Allen notified the Board of his intention to retire effective February 9, 2026. Philip Moyer was appointed as the new President and CEO.
- Tax Law Impact: The enactment of the "One Big Beautiful Bill Act" (OBBBA) is expected to significantly reduce domestic income tax payable for the fiscal year ending March 31, 2026, due to accelerated deductibility of software development and interest.
- Legal Contingencies: The company faces litigation in Florida and Illinois regarding alleged violations of state False Claims Acts related to pricing of instructional materials. The company intends to file motions to dismiss but cannot predict the outcome.
- Risk Factors: Key risks include seasonality of the academic calendar, reliance on federal/state education funding, competition from free/inexpensive products, and potential impacts of political changes on the U.S. Department of Education.
Investor Verification Checklist
- Debt Covenants: Verify continued compliance with debt covenants following the significant debt reduction and leadership change.
- K-12 Market Opportunity: Assess the sustainability of the K-12 revenue decline, which was attributed to smaller market opportunities in key states (California, Texas, Florida) during the period.
- Legal Exposure: Monitor the status of the Florida and Illinois False Claims Act lawsuits and potential financial impact of treble damages.
- Recurring Revenue Quality: Analyze the Annual Net Dollar Retention (NDR) metrics for Higher Education (110%) and Global Professional (105%) to validate the recurring revenue growth narrative.
- Stock-Based Compensation: Review the impact of the $31.7 million stock-based compensation expense recognized in the nine-month period following the IPO.