Technology
Quarterhill Announces Q2 2024 Financial Results
Published
2 years agoon
By
Mr. Vineet Khosla, AI and Machine Learning Pioneer, joins the Board of Directors
TORONTO, Aug. 9, 2024 /CNW/ – Quarterhill Inc. (“Quarterhill” or the “Company”) (TSX: QTRH) (OTCQX: QTRHF), a leading provider of tolling and enforcement solutions in the Intelligent Transportation System (“ITS”) industry, announces its financial results for the three and six months ended June 30, 2024. All financial information in this press release is reported in United States (“US”) dollars, unless otherwise indicated.
Quarterhill has changed the presentation currency of its financial statements to US dollars, its functional currency. A significant proportion of the Company’s sales, expenses, assets, and liabilities are denominated in US dollars. This change in presentation currency aims to enhance external stakeholders’ ability to assess Quarterhill’s financial performance and to reduce the impact of foreign exchange volatility.
Q2 2024 Highlights
Revenue was $41.5 million, up 7.5% compared to $38.6 million in Q2 2023.Adjusted EBITDA1 was $1.7 million compared to $2.9 million in Q2 2023.Cash from operations was $0.8 million compared to cash used in operations of ($10.3) million in Q2 2023.Revenue backlog3 was $500 million at June 30, 2024.Completed acquisition of Red Fox I.D. Limited (“Red Fox”), expanding the Company’s software offerings.Red Fox won two prestigious King’s Awards: one for innovation and one for excellence in international trade.
“Q2 saw continued execution on our goals to drive top-line growth, expand Adjusted EBITDA margin and improve cash flow,” said Chuck Myers, CEO at Quarterhill. “Adjusted EBITDA margin grew sequentially from Q1, and we anticipate continued progress in growing our margin throughout the year. Additionally, we generated positive cash flow from operations for the first time in two years and expect our cash balance to grow through the end of the year.”
“Our two business units – tolling and enforcement – made progress in Q2 on their ongoing projects as well as closing new business, resulting in a contracted revenue backlog of $500 million at quarter end. We remain focused on leveraging the improvements we’ve made in the past year to our project management and contract bidding processes to grow these leading businesses. At the same time, we continue to work to increase our market reach through operational integration, exploring new opportunities in Europe, penetrating the logistics sector and building-out our suite of software solutions, in particular with artificial intelligence (AI) applications.”
Board of Directors Update
Quarterhill announces that Vineet Khosla, Chief Technology Officer at the Washington Post, has joined the Board of Directors, effective immediately. Mr. Khosla has an extensive track record as an innovator and executive at some of the world’s largest technology companies. A pioneering researcher and leading voice in AI, machine learning, and cloud computing, he has driven significant advancements in these fields.
Since joining the Washington Post in 2023, Mr. Khosla has led the engineering team, executing the next phase of the company’s innovation strategy. Prior to the Post, Vineet served as Senior Engineering Manager at Uber, where he was responsible for the development of their map routing engine, which optimizes routes and timing. Before his tenure at Uber, he was the first engineering hire for Siri’s natural language engine at Apple, where he spent over eight years in senior engineering roles, developing and managing Siri’s AI engine. Mr. Khosla holds a Master’s in AI from the University of Georgia, earned in 2005.
“We are very pleased to welcome Vineet to the Board,” said Rusty Lewis, Chair of the Board at Quarterhill. “His deep expertise in AI and machine learning, combined with his experience at the intersection of transportation and technology, will play a key role in the development of our product roadmap and our push to expand the software side of our business.”
Q2 2024 Financial Review
Quarterhill’s Management’s Discussion and Analysis and financial statements for the three and six months ended June 30, 2024 are available at the Company’s website and at its profile at SEDAR+.
Financial statements for the three and six months ended June 30, 2023, have been prepared to reflect continuing operations, and therefore, exclude results during that period from Wi-LAN Inc. (“WiLAN”), which was sold by Quarterhill on June 15, 2023.
Revenues for the three and six months ended June 30, 2024, were $41.5 million and $76.4 million, up 7.5% and 14%, respectively, compared to $38.6 million and $67.0 million in the three and six months ended June 30, 2023. The increase in revenues was due to increased activity and improved performance with North American project revenue.
Gross profit2 as a value and as a percentage of revenues may be subject to significant variance in each reporting period due to the nature and type of contract and service work performed. Gross profit for the three and six months ended June 30, 2024, was $8.5 million and $14.9 million, or 21% and 19%, as compared to $10.0 million and $13.8 million, or 26% and 21%, in the three and six months ended June 30, 2023. While gross profit margin percentage has increased on a sequential quarterly basis, the year-over-year decreases compared to the prior year periods were primarily due to one tolling project that is in the maintenance phase but experiencing a transitory period of lower-than-expected margin. The year-over-year decreases in gross profit margin were partially offset by continued strong performance in the Company’s enforcement operations.
Total operating expenses are comprised of selling, general and administrative costs (“SG&A”), research and development (“R&D”) costs, depreciation, amortization of intangible assets and other charges. Total operating expenses for the three and six months ended June 30, 2024, were $10.8 million and $21.2 million compared to $10.6 million and $22.2 million in the three and six months ended June 30, 2023. The year-over-year changes were primarily due to lower R&D expenses and other charges offset by higher SG&A.
Adjusted EBITDA1 for the three and six months ended June 30, 2024, was $1.7 million and $1.8 million compared to $2.9 million and ($0.9) million for the three and six months ended June 30, 2023. The decrease in Adjusted EBITDA for the three months ended June 30, 2024, compared to the prior year period, was due to lower gross profit as previously explained, and offset, in part, by increased revenue and lower operating expenses. This increase in Adjusted EBITDA for the six months ended June 30, 2024, compared to the prior year period, was due to higher revenue and lower operating expenses.
Net loss from continuing operations for the three and six months ended June 30, 2024, was ($3.0) million and ($7.2) million, or ($0.03) and ($0.06) per diluted share, compared to a net loss from continuing operations of ($10.2) million and ($19.3) million, or ($0.09) and ($0.17) per diluted share, for the three and six months ended June 30, 2023.
Cash generated (used) in continuing operations for the three and six months ended June 30, 2024, was $0.8 million and ($9.3) million compared to cash used in continuing operations of ($6.9) million and ($13.5) million for the three and six months ended June 30, 2023.
Cash and cash equivalents were $24.0 million at June 30, 2024, compared to $42.7 million at December 31, 2023. The uses of cash in the three months ended June 30, 2024, included a net amount of $4.9 million spent on the acquisition of Red Fox.
Adjusted Working Capital4 was $68.4 million at June 30, 2024, compared to $78.9 million at December 31, 2023. Due to the nature of the Company’s business activities, operating cash flows may vary significantly between periods due to changes and timing in working capital balances.
1.
Please refer to the Adjusted EBITDA Non-IFRS Financial Measures section for further information.
2.
Please refer to Gross Margin % in the Supplementary Financial Measures section for further information.
3.
Please refer to the Backlog – Non-IFRS Financial Measures section for further information.
4.
Please refer to the Adjusted Working Capital – Non-IFRS Financial Measures section for further information.
Conference Call and Webcast
Quarterhill will host a conference call to discuss its financial results on Friday, August 9, 2024, at 10:00 AM Eastern Time.
Webcast Information
Live audio webcast will be available at: https://app.webinar.net/E0GnDAr2wRQWebcast replay will be available at: https://app.webinar.net/E0GnDAr2wRQ
Traditional Dial-in Information
To access the call from the U.S. and Canada, dial 1.800.836.8184 (Toll Free)To access the call from other locations, dial 1.289.819.1350 (International)
Rapidconnect
To instantly join the conference call by phone, please use the following URL to easily register and be connected into the conference call automatically: https://emportal.ink/4cZxWpC
Telephone Replay
Telephone replay will be available from August 9, 2024, until August 16, 2024, at: 1.888.660.6345 (Toll Free North America) or 1.289.819.1450.
Conference ID: 52352 and Replay Passcode: 52352#
Non-IFRS Financial Measures and Non-IFRS Ratios
Quarterhill uses both IFRS and certain non-IFRS financial measures to assess performance. Non-IFRS financial measures are financial measures disclosed by a company that (a) depict historical or expected future financial performance, financial position or cash flow of a company, (b) with respect to their composition, exclude amounts that are included in, or include amounts that are excluded from the composition of the most directly comparable financial measure disclosed in the primary financial statements of the company, (c) are not disclosed in the financial statements of the company and (d) are not a ratio, fraction, percentage or similar representation. Non-IFRS ratios are financial measures disclosed by a company that are in the form of a ratio, fraction, percentage or similar representation that has a non-IFRS financial measure as one or more of its components, and that are not disclosed in the financial statements of the company.
These non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS, and, therefore, are unlikely to be comparable to similar financial measures presented by other companies. Management believes these non-IFRS financial measures and non-IFRS ratios provide transparent and useful supplemental information to help investors evaluate our financial performance, financial condition, and liquidity using the same measures as management. These non-IFRS financial measures and non-IFRS ratios should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
Adjusted EBITDA – Non-IFRS Financial Measures
We use the non-IFRS financial measure “Adjusted EBITDA” to mean net (loss) income adjusted for (i) income taxes, (ii) finance expense or income; (iii) amortization and impairment of intangibles; (iv) other charges and other one-time items; (v) depreciation of right-of-use assets and property, plant and equipment; (vi) stock- based compensation; (vii) foreign exchange (gain) loss; and (viii) other income which includes equity in earnings from joint ventures; (ix) dividends received from joint ventures; and * changes in fair value of derivative liability. Adjusted EBITDA is used by our management to assess our normalized cash generated on a consolidated basis. Adjusted EBITDA is also a performance measure that may be used by investors to analyze the cash generated by Quarterhill. Adjusted EBITDA should not be interpreted as an alternative to net (loss) income and cash flows from operations as determined in accordance with IFRS or as measure of liquidity. The most directly comparable IFRS financial measure is Net (loss) income.
Adjusted EBITDA per share – Non-IFRS ratio
Adjusted EBITDA per share is calculated as Adjusted EBITDA divided by the basic weighted average of common shares. Adjusted EBITDA per share is used by our management and investors to analyze cash generated by Quarterhill on a per share basis. The most comparable IFRS measure is earnings per share.
Adjusted Working Capital
Adjusted Working Capital is calculated as current assets minus current liabilities, adjusted for convertible debentures and derivative liability. Adjusted Working Capital reflects our net working capital expected to be settled in cash within twelve months.
Backlog – Non-IFRS Financial Measures
We use the non-IFRS measure “backlog” to mean the total value of work that has not yet been completed but that in management’s experience of similar situations has: (a) a high certainty of being performed pursuant to existing contracts or work orders specifying job scope, value and timing; (b) an expectation of expansion of existing contracts due to expected extensions; and/or (c) been awarded to one or more of our ITS operating subsidiaries as evidenced by a binding contract or where the finalization of a binding contract is reasonably assured. Activities under such contracts may cover a period of up to 15 years. We do not include in “backlog”, the value of any expected but unsigned change orders that management considers may apply to such contracts.
Supplementary Financial Measures
Supplementary financial measures are financial measures disclosed by a company that (a) are, or are intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of a company (b) are not disclosed in the financial statement of the company, (c) are not non-IFRS financial measures, and (d) are not non-IFRS ratios.
Key supplementary measures disclosed are as follows:
Gross margin %
Calculated as gross profit as a percentage of revenue.
About Quarterhill
Quarterhill is a leading provider of tolling and enforcement solutions in the Intelligent Transportation System (ITS) industry. Our goal is technology-driven global leadership in ITS, via organic growth of our tolling and enforcement businesses, and by continuing an acquisition-oriented investment strategy that capitalizes on attractive growth opportunities within ITS and its adjacent markets. Quarterhill is listed on the TSX under the symbol QTRH and on the OTCQX Best Market under the symbol QTRHF. For more information: www.quarterhill.com.
Forward-looking Information
This news release contains forward-looking information and forward-looking statements within the meaning of applicable Canadian securities laws (collectively, “forward-looking statements”) regarding Quarterhill, its operating subsidiaries and their respective businesses. Such forward-looking statements relate to future events, conditions or future financial performance of Quarterhill based on future economic conditions and courses of action. All statements other than statements of historical fact may be forward-looking statements. Such forward-looking statements are often, but not always, identified by the use of any words such as “seek”, “anticipate”, “budget”, ”plan”, “goal”, and similar expressions. These statements involve known and unknown risks, assumptions, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. In particular, this news release contains forward-looking statements pertaining to, but not limited to, the following: operational and financial expectations for the 2024 financial year, including revenue, gross margin and Adjusted EBITDA expectations; and the Company’s business plan.
Although the forward-looking statements contained in this news release are based upon assumptions which management of the Company believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, but not limited to: the Company’s ability to execute on its business plan; successful integration of Red Fox; general economic and industry trends; operating assumptions relating to the Company’s operations; demand for the Company’s products and services; cost estimates for fixed price contracts; and the other assumptions set forth in the Company’s most recent annual information form available under the Company’s profile on SEDAR+ at www.sedarplus.ca.
The Company’s actual results could differ materially from those anticipated in the forward-looking statements, as a result of numerous known and unknown risks and uncertainties and other factors including, but not limited to: changes in demand for the Company’s products and services; general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates, stock market volatility; reliance on key management personnel; risks related to competition within the Company’s industry and relating to technological advances; litigation risks; cyber-security risks; fixed price contracts may result in unexpected costs to the Company; risks of health epidemics, pandemics and similar outbreaks; and the other risks set forth in the Company’s most recent annual information form and management’s discussion and analysis for the three and twelve months ended December 31, 2023 available under the Company’s profile on SEDAR+ at www.sedarplus.ca.
The Company’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. Readers are therefore cautioned that the foregoing lists of important factors are not exhaustive, and they should not unduly rely on the forward-looking statements included in this news release. All forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Quarterhill has no intention, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This news release contains “future-oriented financial information” and “financial outlooks” within the meaning of applicable Canadian securities laws (collectively, “FOFI”), including about the financial results, revenue, gross margin and Adjusted EBITDA of Quarterhill for the year ended December 31, 2024. FOFI, as with forward-looking statements generally, are, without limitation, based on the assumptions and qualifications, and are subject to the risks, set out above in respect of forward-looking statements. Quarterhill’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, the Company’s financial results may differ materially from the FOFI provided in this news release. The Company and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments and the FOFI contained in this news release was approved by management as of the date hereof, for purposes of providing further information about the Company’s future business operations and results. However, because this information is subjective and subject to numerous risks and assumptions, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, the Company undertakes no obligation to update such FOFI. Readers are cautioned that the FOFI contained in this news release should not be used for purposes other than for which it is disclosed herein, and such information is presented for illustrative purposes only and may not be an indication of the Company’s actual financial position or results of operations.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(in thousands and in United States dollars, except share and per share amounts)
Three months ended June 30,
Six months ended June 30,
2024
2023
2024
2023
(restated)
(restated)
Revenues
$41,513
$38,623
$76,410
$66,969
Direct cost of revenues
32,997
28,616
61,537
53,205
Gross profit
8,516
10,007
14,873
13,764
Operating expenses
Selling, general and administrative expenses
7,073
6,132
13,448
13,090
Research and development expenses
479
1,008
796
1,877
Depreciation of right-of-use assets
364
384
708
721
Depreciation of property, plant and equipment
383
407
760
818
Amortization of intangible assets
2,140
2,088
4,377
4,175
Other charges
321
555
1,155
1,519
10,760
10,574
21,244
22,200
Results from operations
(2,244)
(567)
(6,371)
(8,436)
Finance income
(97)
(27)
(365)
(60)
Finance expense
1,651
1,731
3,356
3,368
Foreign exchange (gain) loss
(387)
769
(1,497)
1,104
Other income
(267)
(227)
(134)
(458)
Change in fair value of derivative liability
(432)
(11)
(927)
(215)
Loss before taxes
(2,712)
(2,802)
(6,804)
(12,175)
Current income tax expense (recovery)
272
(2,688)
345
(2,570)
Deferred income tax (recovery) expense
(17)
10,073
36
9,665
Income tax expense
255
7,385
381
7,095
Net loss from continuing operations
(2,967)
(10,187)
(7,185)
(19,270)
Net loss from discontinued operations
–
(11,594)
–
(14,061)
Net loss
(2,967)
(21,781)
(7,185)
(33,331)
Other comprehensive loss that may be reclassified
subsequently to net loss:
Foreign currency translation adjustment
(247)
(2,905)
(932)
(2,590)
Comprehensive loss
($3,214)
($24,686)
($8,117)
($35,921)
Loss per share – Basic
From continuing operations
($0.03)
($0.09)
($0.06)
($0.17)
From discontinued operations
–
(0.10)
–
(0.12)
Loss per share – Basic
($0.03)
($0.19)
($0.06)
($0.29)
Loss per share – Diluted
From continuing operations
($0.03)
($0.09)
($0.06)
($0.17)
From discontinued operations
–
(0.10)
–
(0.12)
Loss per share – Diluted
($0.03)
($0.19)
($0.06)
($0.29)
Interim Condensed Consolidated Statements of Financial Position
(in thousands and in United States dollars)
As at
June 30, 2024
December 31, 2023
January 1, 2023
(restated)
(restated)
Current assets
Cash and cash equivalents
$24,041
$42,733
$48,905
Short-term investments
–
–
1,142
Restricted short-term investments
–
–
4,812
Accounts receivable, net
29,396
27,291
17,155
Unbilled revenue
39,465
34,247
30,529
Income taxes receivable
130
–
251
Inventories (net of obsolescence)
11,453
10,760
10,076
Prepaid expenses and deposits
4,067
4,795
5,050
108,552
119,826
117,920
Non-current assets
Accounts and other long-term receivables
4,516
4,364
397
Long-term prepaid expenses and deposits
–
–
1,257
Right-of-use assets, net
5,452
5,288
7,600
Property, plant and equipment, net
3,786
4,136
5,104
Intangible assets, net
79,799
79,092
104,164
Investment in joint venture
4,782
5,054
5,712
Investment in other entity
2,898
2,898
–
Deferred compensation asset
1,048
952
991
Deferred income tax assets
–
–
18,903
Goodwill
31,046
29,019
41,556
133,327
130,803
185,684
TOTAL ASSETS
$241,879
$250,629
$303,604
Liabilities
Current liabilities
Accounts payable and accrued liabilities
$28,350
$30,330
$34,685
Income taxes payable
734
662
724
Current portion of lease liabilities
2,056
1,954
1,924
Current portion of deferred revenue
6,869
5,806
6,295
Current portion of long-term debt
2,125
2,125
21,588
Convertible debentures
37,840
38,196
35,655
Derivative liability
1,296
2,290
1,316
79,270
81,363
102,187
Non-current liabilities
Deferred revenue
1,252
621
2,022
Long-term lease liabilities
5,529
5,727
7,116
Long-term debt
16,293
17,312
–
Deferred compensation liabilities
1,065
945
862
Deferred income tax liabilities
2,032
1,221
1,519
26,171
25,826
11,519
TOTAL LIABILITIES
105,441
107,189
113,706
Shareholders’ equity
Capital stock
314,119
313,738
401,248
Contributed surplus
126,863
126,129
37,545
Accumulated other comprehensive income
14,720
15,652
15,928
Deficit
(319,264)
(312,079)
(264,823)
136,438
143,440
189,898
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$241,879
$250,629
$303,604
Interim Condensed Consolidated Statements of Cash Flows
(in thousands and in United States dollars)
Three months ended June 30,
Six months ended June 30,
2024
2023
2024
2023
(restated)
Operating activities:
Net loss from continuing operations
($2,967)
($10,187)
($7,185)
($19,270)
Add (deduct) non-cash items:
Stock-based compensation expense
708
39
1,212
270
Depreciation and amortization
2,887
2,879
5,845
5,714
Foreign exchange (gain) loss
(387)
769
(1,497)
1,104
Other income
(315)
(227)
(134)
(458)
Deferred and non-cash income tax (recovery) expense
(17)
10,073
36
9,665
Embedded derivatives
(33)
–
6
93
Change in fair value of derivative liability
(432)
(11)
(927)
(215)
Non-cash interest expense
552
873
1,092
1,351
Net change in non-cash working capital balances
806
(11,083)
(7,760)
(11,704)
Cash generated from (used in) continuing operations
802
(6,875)
(9,312)
(13,450)
Net operating cash flows attributable to discontinued operations
–
(3,378)
–
(4,685)
Net cash generated from (used in) operating activities
802
(10,253)
(9,312)
(18,135)
Financing activities:
Dividends paid
–
(1,067)
–
(2,127)
Payment of lease liabilities
(561)
(436)
(1,138)
(828)
Repayment of long-term debt
(531)
(625)
(1,062)
(1,250)
Cash used in financing activities
(1,092)
(2,128)
(2,200)
(4,205)
Net financing cash flows attributable to discontinued operations
–
(51)
–
(100)
Net cash used in financing activities
(1,092)
(2,179)
(2,200)
(4,305)
Investing activities:
Net proceeds from disposition of a subsidiary
–
32,021
–
32,021
Cash sold on disposition of a subsidiary
–
(8,000)
–
(8,000)
Acquisition of business, Red Fox
(7,181)
–
(7,181)
–
Cash acquired on acquisition of business, Red Fox
2,296
–
2,296
–
Proceeds from sale of property, plant and equipment
10
–
10
–
Purchase of property, plant and equipment
(344)
(305)
(545)
(638)
Capitalized software costs
(650)
(932)
(1,373)
(2,316)
Cash (used in) generated from investing activities
(5,869)
22,784
(6,793)
21,067
Net investing cash flows attributable to discontinued operations
–
1,194
–
1,194
Net cash used in investing activities
(5,869)
23,978
(6,793)
22,261
Foreign exchange on cash held in foreign currencies
(223)
(2,514)
(386)
(2,692)
Net (decrease) increase in cash and cash equivalents
(6,382)
9,032
(18,692)
(2,871)
Cash and cash equivalents, beginning of period
30,423
37,002
42,733
48,905
Cash and cash equivalents, end of period
$24,041
$46,034
$24,041
$46,034
Interim Condensed Consolidated Statements of Shareholders’ Equity
(in thousands and in United States dollars)
Capital
Stock
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit
Total
Shareholders’
Equity
Balance, January 1, 2023 (restated)
$401,248
$37,545
$15,928
($264,823)
$189,898
Net loss
–
–
–
(33,331)
(33,331)
Other comprehensive loss
–
–
(2,590)
–
(2,590)
Stock-based compensation expense
–
288
–
–
288
Common shares issued from restricted stock units
60
(63)
–
–
(3)
Reduction of stated capital
(87,948)
87,948
–
–
–
Dividends declared
–
–
–
(1,060)
(1,060)
Balance, June 30, 2023
$313,360
$125,718
$13,338
($299,214)
$153,202
Balance, January 1, 2024
$313,738
$126,129
$15,652
($312,079)
$143,440
Net loss
–
–
–
(7,185)
(7,185)
Other comprehensive loss
–
–
(932)
–
(932)
Stock-based compensation expense
–
1,212
–
–
1,212
Common shares issued from restricted stock units
326
(423)
–
–
(97)
Common shares issued from deferred stock units
55
(55)
–
–
–
Balance, June 30, 2024
$314,119
$126,863
$14,720
($319,264)
$136,438
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands and in United States dollars, except share and per share amounts)
Three months ended June 30,
2024
2023
$
Per Share [2]
$
Per Share
(restated)
Net loss from continuing operations
($2,967)
($0.03)
($10,187)
($0.09)
Adjusted for:
Income tax expense
255
0.00
7,385
0.06
Foreign exchange (gain) loss
(387)
(0.00)
769
0.01
Finance expense, net
1,554
0.01
1,704
0.02
Other charges
321
0.00
555
0.01
Depreciation and amortization
2,887
0.03
2,879
0.03
Stock based compensation expense
708
0.01
39
0.00
Change in fair value of derivative liability
(432)
(0.00)
(11)
(0.00)
Other income
(267)
(0.00)
(227)
(0.00)
Adjusted EBITDA [1]
$1,672
$0.01
$2,906
$0.03
________________
________________
________________
________________
Weighted average number of Common Shares
Basic
115,274,980
114,649,772
Six months ended June 30,
2024
2023
$
Per Share [2]
$
Per Share
(restated)
Net loss from continuing operations
($7,185)
($0.06)
($19,270)
($0.17)
Adjusted for:
Income tax expense
381
–
7,095
0.06
Foreign exchange gain
(1,497)
(0.01)
1,104
0.01
Finance expense, net
2,991
0.03
3,308
0.03
Other charges
1,155
0.01
1,519
0.01
Depreciation and amortization
5,845
0.05
5,714
0.05
Stock based compensation expense
1,212
0.01
270
0.00
Change in fair value of derivative liability
(927)
(0.01)
(215)
(0.00)
Other income
(134)
–
(458)
(0.00)
Adjusted EBITDA [1]
$1,841
$0.02
($933)
($0.01)
________________
________________
________________
________________
Weighted average number of Common Shares
Basic
115,186,092
114,644,764
1.
Please refer to the Adjusted EBITDA Non- IFRS Financial Measures section for further information.
2.
Please refer to the Supplementary Financial Measures for further information.
View original content:https://www.prnewswire.com/news-releases/quarterhill-announces-q2-2024-financial-results-302218638.html
SOURCE Quarterhill Inc.
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A webcast of the conference call will be available in the Investor Relations section of Escalade’s website at www.escaladeinc.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.
To participate in the live teleconference:
Domestic Live:
833-890-3250
International Live:
412-206-6441
To listen to a replay of the teleconference, which subsequently will be available through August 13, 2026:
Domestic Replay:
844-512-2921
International Replay:
412-317-6671
Conference ID:
10209663
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INVESTOR RELATIONS CONTACT
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812-467-1334
View original content to download multimedia:https://www.prnewswire.com/news-releases/escalade-announces-second-quarter-2026-results-conference-call-date-302833660.html
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The press release, live conference call and subsequent archived copies can be accessed on Analog Devices’ Investor Relations website at investor.analog.com. To participate in the live conference call, please pre-register at: register-conf.media.server.com. Upon registering, you will be emailed a dial-in number and unique PIN.
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781-461-3282
invesor.relations@analog.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/analog-devices-to-report-third-quarter-fiscal-year-2026-financial-results-on-wednesday-august-19-2026-302832572.html
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Scholastic Reports Fourth Quarter and Fiscal 2026 Results
Published
52 minutes agoon
July 23, 2026By
Fiscal 2026 Operating Income of $15.2 Million; Adjusted EBITDA of $151.5 Million, Up 4%, in Line With Guidance
Returned Over $285 Million to Shareholders During Fiscal Year
Fiscal 2027 Outlook Targets Return to Revenue Growth and Higher Adjusted EBITDA on Comparable Basis
NEW YORK, July 23, 2026 /PRNewswire/ — Scholastic Corporation (NASDAQ: SCHL), the global children’s publishing, education and media company, today reported financial results for the Company’s fiscal fourth quarter and full year ended May 31, 2026.
Peter Warwick, President and Chief Executive Officer, said, “Fiscal 2026 demonstrated the earnings power of a more focused Scholastic, as the Company made substantial progress in a multi-year transformation of its governance, organization, strategy and balance sheet. Adjusted EBITDA rose, in line with guidance, positioning the Company for growth in fiscal 2027.”
Fiscal 2026 revenue decreased 3%, and operating income was $15.2 million, compared with $15.8 million in fiscal 2025. Adjusted operating income, excluding one-time items, increased to $47.1 million from $35.8 million in the prior year period. Adjusted EBITDA was $151.5 million, up 4%, and increased 15% on a comparable basis, reflecting the full-year impact of additional lease expense and the loss of rental income from the sale-leaseback transactions in both periods. In the fourth quarter, Adjusted EBITDA increased $1.0 million on that same comparable basis, driven by continued strong execution in Book Fairs, Entertainment’s return to growth and disciplined cost management across the Company, even as revenue was affected by expected comparisons against an exceptional prior-year quarter in Trade and continued funding volatility in Education.
Mr. Warwick continued, “Today, our company is more clearly organized around the advantages that make Scholastic distinctive: a trusted brand, beloved IP, proprietary school-based channels and deep relationships with educators and families built over more than a century. Scholastic remains uniquely positioned to connect books, schools, homes and screens in ways that deepen kids’ engagement with stories and bring more children back to reading at a scale and depth that others cannot easily replicate.
“During the fourth quarter, we continued to see the impact of this strategy across the business. Book Fairs deepened our reach with schools and families, Trade Publishing remained anchored by enduring children’s franchises, and Entertainment expanded discovery and engagement with Scholastic IP across platforms. In Education, while funding volatility and a challenging supplemental curriculum market continued to pressure results, we made progress repositioning the business around a more focused strategy, improved execution and lower cost structure, with trends improving throughout the year.
“Fiscal 2026 was also an important year of capital deployment and shareholder value creation. Following the sale-leaseback transactions, we returned significant capital to shareholders through share repurchases, a modified Dutch auction tender offer and dividends, and established a long-term leverage framework that supports both disciplined investment and continued capital returns. Together, these actions completed major elements of our financial transformation and provide Scholastic with greater financial flexibility to enhance shareholder returns.
“As we enter fiscal 2027, Scholastic is strongly positioned to translate its durable advantages into profitable, sustained growth. Our outlook reflects expected revenue growth and higher Adjusted EBITDA on a comparable basis, reflecting the full-year impact of the sale-leaseback transactions in both periods. We remain focused on continued execution of our plan, disciplined cost management and targeted investment in the areas where Scholastic has the greatest opportunity to drive long-term growth, deepen our impact with children, families and educators, and create sustained value for shareholders.”
Outlook
In fiscal 2027, the Company expects revenue growth of approximately 2% to 4% and Adjusted EBITDA of approximately $135 million to $145 million. The Adjusted EBITDA range represents growth compared with fiscal 2026 Adjusted EBITDA on a comparable basis, reflecting the full-year impact of the sale-leaseback transactions in both periods.
This outlook reflects expected growth in Children’s Books, Entertainment and International, improved performance in Education, disciplined cost management and targeted investment in long-term growth opportunities.
The Company also expects Free Cash Flow (a non-GAAP financial measure, explained in the accompanying tables) of approximately $35 million to $40 million.
Fiscal 2026 Q4 Review
In $ millions (except per share data)
Fourth Quarter
Change
Fiscal 2026
Fiscal 2025
$
%
Revenues
$
476.1
$
508.3
$
(32.2)
(6) %
Operating income (loss)
$
51.4
$
53.5
$
(2.1)
(4) %
Earnings (loss) before taxes
$
14.5
$
48.9
$
(34.4)
(70) %
Diluted earnings (loss) per share
$
0.45
$
0.59
$
(0.14)
(24) %
Operating income (loss), ex. one-time items* (1)
$
58.3
$
63.4
$
(5.1)
(8) %
Diluted earnings (loss) per share, ex. one-time items*
$
2.19
$
0.87
$
1.32
152 %
Adjusted EBITDA* (1)
$
84.7
$
91.2
$
(6.5)
(7) %
Pro forma Adjusted operating income* (2)
$
58.3
$
59.5
$
(1.2)
(2) %
Pro forma Adjusted EBITDA* (2)
$
84.7
$
83.7
$
1.0
1 %
* Please refer to the non-GAAP financial tables attached
(1)
Fiscal 2026 fourth-quarter Operating income excluding one-time items and Adjusted EBITDA include
net costs of $4.2 and $7.8, respectively, related to the sale-leaseback transactions completed in
December 2025.
(2)
Pro forma Adjusted operating income and Pro forma Adjusted EBITDA reflect the full-period impact of
the sale-leaseback transactions in each period presented. The Company refers to these measures in
this release as results “on a comparable basis.” See Table 7 for the reconciliation to Adjusted operating
income and Adjusted EBITDA.
Revenues decreased 6% to $476.1 million, as continued growth in Book Fairs and higher Entertainment revenues were more than offset by lower Trade and International revenues due to more challenging comparisons with the prior-year publishing schedule and lower revenues in Education.
Operating Income decreased 4% to $51.4 million in the quarter compared to $53.5 million a year ago, including $6.9 million and $9.9 million in one-time charges in each period, respectively. Excluding one-time charges in both periods, adjusted operating income decreased $5.1 million to $58.3 million. On a comparable basis, reflecting the full-period impact of the sale-leaseback in both periods, adjusted operating income decreased $1.2 million from $59.5 million. Adjusted EBITDA (a non-GAAP measure of operations explained in the accompanying tables) was $84.7 million, compared to $91.2 million in the prior-year period. On the same comparable basis, Adjusted EBITDA increased $1.0 million from $83.7 million in the prior year period, primarily reflecting improved profitability in Children’s Book Publishing and Distribution and Entertainment, partly offset by lower results in Education and International.
Quarterly Results
Children’s Book Publishing and Distribution
In the fiscal fourth quarter, the Children’s Book Publishing and Distribution segment’s revenues decreased 4% to $276.3 million.
In School Reading Events, Book Fairs revenues were $186.6 million, up 5% from the prior year period, reflecting higher fair count. Book Clubs revenues were $12.2 million, a decline of 7% from the prior year period, primarily reflecting lower participation throughout the year.
Consolidated Trade revenues decreased 20% from the prior year period to $77.5 million, reflecting a challenging comparison with the prior-year publishing schedule, which included the release of Sunrise on the Reaping, the fifth book in Suzanne Collins’ global bestselling The Hunger Games® series.
Segment operating income was $60.3 million, compared to $57.6 million a year ago, which included one-time charges of $0.6 million. Excluding one-time charges, adjusted operating income increased $2.1 million, primarily driven by higher revenues and improved profitability in Book Fairs, partly offset by lower Trade results.
Education
Education revenues decreased 13% to $109.2 million, primarily reflecting continued pressure on school and district spending for supplemental curriculum materials. Segment operating income was $27.0 million, which included one-time charges of $0.9 million, compared to $30.7 million in the prior year period, which included one-time charges of $0.6 million. Excluding one-time charges, adjusted operating income decreased by $3.4 million, as a result of lower revenues, partly offset by benefits from the segment’s improved cost structure. While fourth-quarter revenues remained below the prior year, the rate of decline improved in the second half of fiscal 2026 compared to the first half of the year, as the segment advanced its product, marketing and sales strategies following its repositioning.
Entertainment
Segment revenues increased 42% to $21.0 million, reflecting higher production services revenues. Segment operating income was $0.4 million, which included one-time charges of $0.4 million, compared to an operating loss of $3.0 million in the prior year period, which included one-time charges of $0.9 million. Excluding one-time charges, adjusted segment operating income improved $2.9 million to $0.8 million, primarily reflecting higher revenues.
International
International revenues decreased 13% to $69.6 million, excluding favorable foreign currency exchange of $3.1 million, primarily reflecting lower Trade revenues against a more challenging comparison with the prior-year publishing schedule. Segment operating income was $2.9 million, which included one-time charges of $0.2 million, compared to $3.7 million in the prior year period, which included one-time charges of $2.4 million. Excluding one-time charges, adjusted operating income decreased by $3.0 million to $3.1 million primarily reflecting lower revenues, partly offset by cost management.
Overhead
Overhead costs were $39.2 million, which included one-time charges of $5.4 million, compared to $35.5 million in the prior year period, which included one-time charges of $5.4 million. Excluding one-time charges, adjusted overhead costs increased $3.7 million to $33.8 million. On a comparable basis, reflecting the pro forma impact of the sale-leaseback transactions in both periods, adjusted overhead costs were approximately in line with the prior-year period.
Fiscal 2026 Full Year Review
In $ millions (except per share data)
Full Year
Change
Fiscal 2026
Fiscal 2025
$
%
Revenues
$
1,581.9
$
1,625.5
$
(43.6)
(3) %
Operating income (loss)
$
15.2
$
15.8
$
(0.6)
(4) %
Earnings (loss) before taxes
$
85.2
$
(1.3)
$
86.5
NM
Diluted earnings (loss) per share
$
2.34
$
(0.07)
$
2.41
NM
Operating income (loss), ex. one-time items* (1)
$
47.1
$
35.8
$
11.3
32 %
Diluted earnings (loss) per share, ex. one-time items*
$
1.87
$
0.48
$
1.39
NM
Adjusted EBITDA* (1)
$
151.5
$
145.4
$
6.1
4 %
Pro forma Adjusted operating income* (2)
$
35.3
$
19.9
$
15.4
77 %
Pro forma Adjusted EBITDA* (2)
$
132.4
$
115.3
$
17.1
15 %
* Please refer to the non-GAAP financial tables attached
(1)
Fiscal 2026 full-year Operating income excluding one-time items and Adjusted EBITDA include net costs
of $7.2 and $14.5, respectively, related to the sale-leaseback transactions completed in December 2025.
(2)
Pro forma Adjusted operating income and Pro forma Adjusted EBITDA reflect the full-period impact of
the sale-leaseback transactions in each period presented. The Company refers to these measures in
this release as results “on a comparable basis.” See Table 7 for the reconciliation to Adjusted operating
income and Adjusted EBITDA.
Revenues decreased 3% to $1,581.9 million, primarily reflecting lower revenues in Education and lower Consolidated Trade revenues against a more challenging comparison with the prior-year publishing schedule, partly offset by strong performance in Book Fairs and higher Entertainment revenues.
Operating Income decreased 4% to $15.2 million, compared to $15.8 million a year ago, including $31.9 million and $20.0 million in one-time charges in each period, respectively. Excluding one-time charges in both periods, adjusted operating income increased $11.3 million to $47.1 million. On a comparable basis, reflecting the full-year impact of the sale-leaseback transactions in both periods, adjusted operating income increased $15.4 million to $35.3 million, compared to $19.9 million in the prior year. Adjusted EBITDA increased $6.1 million, or 4%, to $151.5 million, in-line with the Company’s guidance. On the same comparable basis, Adjusted EBITDA increased 15%, or $17.1 million, to $132.4 million from $115.3 million. The improvement on a comparable basis primarily reflected strong performance in Children’s Book Publishing and Distribution and International, as well as lower adjusted overhead costs, which more than offset the impact of lower sales in Education.
Capital Position and Liquidity
In $ millions
Full Year
Change
Fiscal 2026
Fiscal 2025
$
%
Net cash provided by operating activities
$
50.9
$
124.2
$
(73.3)
(59) %
Net proceeds from sale and lease transactions (1)
452.4
—
452.4
NM
Additions to property, plant and equipment and
prepublication expenditures
(66.3)
(76.7)
10.4
14 %
Net borrowings (repayments) of film related obligations
(1.0)
(18.3)
17.3
95 %
Free cash flow (use)*
$
436.0
$
29.2
$
406.8
NM
Net cash (debt)*
$
48.9
$
(136.6)
$
185.5
136 %
NM – Not Meaningful
* Please refer to the non-GAAP financial tables attached
(1) Excludes tax impact from sale-leaseback transactions.
Net cash provided by operating activities was $50.9 million, compared to $124.2 million in the prior year period, primarily reflecting higher tax payments associated with the sale-leaseback transactions, as well as higher severance-related payments as part of cost savings initiatives. Free cash flow was $436.0 million in fiscal 2026, compared to $29.2 million in the prior year period, primarily reflecting over $400 million in net proceeds from the Company’s sale-leaseback transactions.
The Company ended fiscal 2026 with net cash of $48.9 million compared to a net debt position of $136.6 million at the end of fiscal 2025, primarily reflecting the net proceeds from the sale-leaseback transactions, partly offset by significant capital returns to shareholders.
In fiscal 2026, the Company returned approximately $288.6 million to shareholders through share repurchases and dividends. This included the repurchase of 7,336,966 shares of common stock for $268.6 million, including shares purchased through the Company’s modified Dutch auction tender offer and open-market repurchases, and $20.0 million of dividends, including $4.6 million in the fourth quarter.
At May 31, 2026, $183.0 million remained authorized for future repurchases under the Company’s stock repurchase program. The Company expects to continue purchasing shares, from time to time as conditions allow, on the open market or in negotiated private transactions.
Additional Information
To supplement our financial statements presented in accordance with GAAP, we include certain non-GAAP calculations and presentations including, as noted above, “Adjusted EBITDA, “Adjusted Operating Income”, and “Free Cash Flow”. Please refer to the non-GAAP financial tables attached to this press release for supporting details on the impact of one-time items on operating income, net income and diluted EPS, and the use of non-GAAP financial measures included in this release. This information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
Conference Call
The Company will hold a conference call to discuss its results at 4:30 p.m. ET today, July 23, 2026. Peter Warwick, Scholastic President and Chief Executive Officer, and Haji Glover, the Company’s Chief Financial Officer, Executive Vice President, will moderate the call.
A live webcast of the call can be accessed at https://edge.media-server.com/mmc/p/n2mcunuo. To access the conference call by phone, please go to https://register-conf.media-server.com/register/BIe4453c04814b4def819b83eaf92a8731, which will provide dial-in details. To avoid delays, participants are encouraged to dial into the conference call five minutes ahead of the scheduled start time. Shortly following the call, an archived webcast and accompanying slides from the conference call will be posted at investor.scholastic.com.
About Scholastic
For more than 100 years, Scholastic Corporation (NASDAQ: SCHL) has been meeting children where they are – at school, at home and in their communities – by creating quality content and experiences, all beginning with literacy. Scholastic delivers stories, characters, and learning moments that empower all kids to become lifelong readers and learners through bestselling children’s books, literacy- and knowledge-building resources for schools including classroom magazines, and award-winning, entertaining children’s media. As the world’s largest publisher and distributor of children’s books through school-based book clubs and book fairs, classroom libraries, school and public libraries, retail, and online, and with a global reach into more than 135 countries, Scholastic encourages the personal and intellectual growth of all children, while nurturing a lifelong relationship with reading, themselves, and the world around them. Learn more at www.scholastic.com.
Forward-Looking Statements
This news release contains certain forward-looking statements relating to future periods. Such forward-looking statements are subject to various risks and uncertainties, including the conditions of the children’s book and educational materials markets generally and acceptance of the Company’s products within those markets, and other risks and factors identified from time to time in the Company’s filings with the Securities and Exchange Commission. Actual results could differ materially from those currently anticipated.
SCHL: Financial
Table 1
Scholastic Corporation
Consolidated Statements of Operations
(Unaudited)
(In $ Millions, except shares and per share data)
Three months ended
Twelve months ended
05/31/26
05/31/25
05/31/26
05/31/25
Revenues
$
476.1
$
508.3
$
1,581.9
$
1,625.5
Operating costs and expenses:
Cost of goods sold
190.4
207.3
689.8
718.8
Selling, general and administrative expenses
219.7
227.8
807.2
822.3
Depreciation and amortization
13.1
17.2
58.8
65.7
Asset impairments and write downs
1.5
2.5
10.9
2.9
Total operating costs and expenses
424.7
454.8
1,566.7
1,609.7
Operating income (loss)
51.4
53.5
15.2
15.8
Interest income (expense), net
(0.9)
(4.3)
(11.2)
(16.0)
Other components of net periodic benefit (cost)
(0.3)
(0.3)
(1.3)
(1.1)
Loss on sale of investments
(17.2)
—
(17.2)
—
Gain (loss) on sale and leaseback transactions
(18.5)
—
99.7
—
Earnings (loss) before income taxes
14.5
48.9
85.2
(1.3)
Provision (benefit) for income taxes
5.1
33.5
28.5
0.6
Net income (loss)
$
9.4
$
15.4
$
56.7
$
(1.9)
Basic and diluted earnings (loss) per share of Class A and
Common Stock (1)
Basic
$
0.46
$
0.59
$
2.39
$
(0.07)
Diluted
$
0.45
$
0.59
$
2.34
$
(0.07)
Basic weighted average shares outstanding
20,343
26,113
23,698
27,631
Diluted weighted average shares outstanding
20,992
26,209
24,222
27,907
(1)
Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding.
Recalculating earnings per share based on numbers rounded to millions may not yield the results as
presented.
Table 2
Scholastic Corporation
Segment Results, Excluding One-Time Items
(Unaudited)
(In $ Millions)
Three months ended
Change
Twelve months ended
Change
05/31/26
05/31/25
$
%
05/31/26
05/31/25
$
%
Children’s Book Publishing
and Distribution
Revenues
Book Clubs
$
12.2
$
13.1
$
(0.9)
(7) %
$
57.1
$
64.2
$
(7.1)
(11) %
Book Fairs
186.6
177.8
8.8
5 %
576.0
548.3
27.7
5 %
School Reading Events
198.8
190.9
7.9
4 %
633.1
612.5
20.6
3 %
Consolidated Trade
77.5
97.3
(19.8)
(20) %
331.1
351.4
(20.3)
(6) %
Total Revenues
276.3
288.2
(11.9)
(4) %
964.2
963.9
0.3
0 %
Operating income (loss) ex.
one-time items *
60.3
58.2
2.1
4 %
143.7
131.3
12.4
9 %
Adjusted operating margin *
21.8 %
20.2 %
14.9 %
13.6 %
Education
Revenues
109.2
125.7
(16.5)
(13) %
267.6
309.8
(42.2)
(14) %
Operating income (loss) ex.
one-time items *
27.9
31.3
(3.4)
(11) %
0.2
6.9
(6.7)
(97) %
Adjusted operating margin *
25.5 %
24.9 %
0.1 %
2.2 %
Entertainment
Revenues
21.0
14.8
6.2
42 %
65.7
61.0
4.7
8 %
Operating income (loss) ex.
one-time items *
0.8
(2.1)
2.9
138 %
(9.3)
(7.2)
(2.1)
(29) %
Adjusted operating margin *
3.8 %
NM
NM
NM
International
Revenues
69.6
76.8
(7.2)
(9) %
277.2
279.6
(2.4)
(1) %
Operating income (loss) ex.
one-time items *
3.1
6.1
(3.0)
(49) %
7.1
2.9
4.2
145 %
Adjusted operating margin *
4.5 %
7.9 %
2.6 %
1.0 %
Overhead
Revenues
—
2.8
(2.8)
(100) %
7.2
11.2
(4.0)
(36) %
Operating income (loss) ex.
one-time items *
(33.8)
(30.1)
(3.7)
(12) %
(94.6)
(98.1)
3.5
4 %
Operating income (loss) ex.
one-time items *
$
58.3
63.4
(5.1)
(8) %
$
47.1
35.8
11.3
32 %
Adjusted operating margin *
12.2 %
12.5 %
3.0 %
2.2 %
NM – Not meaningful
* Please refer to Table 4 for one-time items and a reconciliation of the non-GAAP financials.
Table 3
Scholastic Corporation
Supplemental Information
(Unaudited)
(In $ Millions)
Selected Balance Sheet Items
05/31/26
05/31/25
Cash and cash equivalents
$
134.9
$
124.0
Accounts receivable, net
236.4
273.4
Inventories, net
265.0
250.2
Accounts payable
144.2
157.3
Deferred revenue
179.2
178.8
Accrued royalties
50.3
69.1
Film related obligations
17.1
18.3
Lines of credit and long-term debt
80.5
256.2
Net cash (debt) (1)
48.9
(136.6)
Total stockholders’ equity
750.8
946.5
Selected Cash Flow Items
Three months ended
Twelve months ended
05/31/26
05/31/25
05/31/26
05/31/25
Net cash provided by (used in) operating activities
$
90.0
$
106.9
$
50.9
$
124.2
Net proceeds from sale and lease transactions (3)
—
—
452.4
—
Property, plant and equipment additions
(15.0)
(12.3)
(48.4)
(52.2)
Prepublication expenditures
(4.9)
(8.7)
(17.9)
(24.5)
Net borrowings (repayments) of film related obligations
(0.1)
0.3
(1.0)
(18.3)
Free cash flow (use) (2)
$
70.0
$
86.2
$
436.0
$
29.2
(1)
Net cash (debt) is defined by the Company as cash and cash equivalents less production cash of $5.5
and $4.4 as of May 31, 2026 and May 31, 2025, respectively, net of lines of credit and short-term and
long-term-debt. Film related obligations are not included. The Company utilizes this non-GAAP financial
measure, and believes it is useful to investors, as an indicator of the Company’s effective leverage and
financing needs.
(2)
Free cash flow (use) is defined by the Company as net cash provided by or used in operating activities
(which includes royalty advances) and cash acquired through acquisitions and from the sale of assets,
reduced by spending on property, plant and equipment and prepublication costs and adjusted for net
cash flows from film related obligations. The Company believes that this non-GAAP financial measure
is useful to investors as an indicator of cash flow available for debt repayment and other investing
activities, such as acquisitions. The Company utilizes free cash flow as a further indicator of operating
performance and for planning investing activities.
(3)
Excludes tax impact from sale-leaseback transactions.
Table 4
Scholastic Corporation
Supplemental Results – Excluding One-Time Items
(Unaudited)
(In $ Millions, except per share data)
Three months ended
05/31/2026
05/31/2025
Reported
One-time
items
Excluding
One-time
items
Reported
One-time
items
Excluding
One-time
items
Diluted earnings (loss) per share (1)
$
0.45
$
1.79
$
2.19
$
0.59
$
0.29
$
0.87
Net income (loss) (2)
$
9.4
$
36.5
$
45.9
$
15.4
$
7.5
$
22.9
Earnings (loss) before income taxes (3)
$
14.5
$
42.6
$
57.1
$
48.9
$
9.9
$
58.8
Children’s Book Publishing and
Distribution (4)
$
60.3
$
—
$
60.3
$
57.6
$
0.6
$
58.2
Education (5)
27.0
0.9
27.9
30.7
0.6
31.3
Entertainment(6)
0.4
0.4
0.8
(3.0)
0.9
(2.1)
International (7)
2.9
0.2
3.1
3.7
2.4
6.1
Overhead (8)
(39.2)
5.4
(33.8)
(35.5)
5.4
(30.1)
Operating income (loss)
$
51.4
$
6.9
$
58.3
$
53.5
$
9.9
$
63.4
Twelve months ended
05/31/2026
05/31/2025
Reported
One-time
items
Excluding
One-time
items
Reported
One-time
items
Excluding
One-time
items
Diluted earnings (loss) per share (1)
$
2.34
$
(0.47)
$
1.87
$
(0.07)
$
0.55
$
0.48
Net income (loss) (2)
$
56.7
$
(11.3)
$
45.4
$
(1.9)
$
15.2
$
13.3
Earnings (loss) before income taxes (3)
$
85.2
$
(50.6)
$
34.6
$
(1.3)
$
20.0
$
18.7
Children’s Book Publishing and
Distribution (4)
$
142.9
$
0.8
$
143.7
$
130.7
$
0.6
$
131.3
Education (5)
(4.1)
4.3
0.2
6.3
0.6
6.9
Entertainment(6)
(16.1)
6.8
(9.3)
(12.1)
4.9
(7.2)
International (7)
6.4
0.7
7.1
(1.0)
3.9
2.9
Overhead (8)
(113.9)
19.3
(94.6)
(108.1)
10.0
(98.1)
Operating income (loss)
$
15.2
$
31.9
$
47.1
$
15.8
$
20.0
$
35.8
(1)
Earnings (loss) per share are calculated on non-rounded net income (loss) and shares outstanding. Recalculating
earnings per share based on rounded numbers may not yield the results as presented.
(2)
In the three and twelve months ended May 31, 2026, the Company recognized a benefit of $6.1 and a provision of
$39.3, respectively, for income taxes in respect to one-time pretax items. In the three and twelve months ended May
31, 2025, the Company recognized a benefit of $2.4 and $4.8, respectively, for income taxes in respect to one-time
pretax items.
(3)
In the three and twelve months ended May 31, 2026, the Company recognized a pretax loss of $17.2 related to the
sale of its 26.2% equity interest in a U.K.-based children’s book publishing business. In the three months ended May
31, 2026, the Company recognized an adjustment of $18.5 million to the pretax gain related to the sale-leaseback
transactions. In the twelve months ended May 31, 2026, the Company recognized a pretax gain of $99.7 related to
sale-leaseback transactions involving its facilities in New York City and Jefferson City, Missouri.
(4)
In the twelve months ended May 31, 2026, the Company recognized a pretax asset impairment charge of $0.8 related
to a certain product. In the three and twelve months ended May 31, 2025, the Company recognized a pretax asset
impairment charge of $0.6 related to a digital product.
(5)
In the three and twelve months ended May 31, 2026, the Company recognized pretax asset impairment charges of
$0.9 and $4.3, respectively, related to certain education and digital products. In the three and twelve months ended May
31, 2025, the Company recognized a pretax asset impairment charge of $0.6 related to certain digital products.
(6)
In the three and twelve months ended May 31, 2026, the Company recognized other pretax expenses of $0.4 and $1.4,
respectively. In the twelve months ended May 31, 2026, the Company recognized pretax severance of $0.2 and a pretax
asset impairment charge of $5.2 primarily related to certain film and television programs in development. In the three
and twelve months ended May 31, 2025, the Company recognized pretax severance of $0.3 and $1.4, respectively,
related to cost-savings initiatives, pretax costs of $0.4 and $3.0, respectively, related to the acquisition of 9 Story Media
Group and pretax asset impairment charges of $0.2 and $0.5, respectively, related to the early exit of certain leased
office space in Canada and Ireland.
(7)
In the three and twelve months ended May 31, 2026, the Company recognized pretax severance of $0.2 and $0.7,
respectively, related to cost-savings initiatives. In the three and twelve months ended May 31, 2025, the Company
recognized pretax severance of $1.3 and $2.8, respectively, related to cost-savings initiatives and a pretax asset
impairment charge of $1.1 related to the reorganization in China.
(8)
In the three and twelve months ended May 31, 2026, the Company recognized pretax severance of $3.7 and $15.5,
respectively, related to cost-savings initiatives, and other pretax expenses of $1.7 and $3.8, respectively. In the three
and twelve months ended May 31, 2025, the Company recognized pretax severance of $3.4 and $7.6, respectively,
related to cost-savings initiatives, other pretax expenses of $1.9 and $2.3, respectively, and an asset impairment
charge of $0.1 related to the early exit of an office lease.
Table 5
Scholastic Corporation
Consolidated Statements of Operations – Supplemental
Adjusted EBITDA
(Unaudited)
(In $ Millions)
Three months ended
05/31/26
05/31/25
Earnings (loss) before income taxes as reported
$
14.5
$
48.9
One-time items before income taxes
42.6
9.9
Earnings (loss) before income taxes excluding one-time items
57.1
58.8
Interest (income) expense (1)
0.9
4.5
Depreciation and amortization
26.7
27.9
Adjusted EBITDA (2)
$
84.7
$
91.2
Twelve months ended
05/31/26
05/31/25
Earnings (loss) before income taxes as reported
$
85.2
$
(1.3)
One-time items before income taxes
(50.6)
20.0
Earnings (loss) before income taxes excluding one-time items
34.6
18.7
Interest (income) expense (1)
11.6
16.4
Depreciation and amortization
105.3
110.3
Adjusted EBITDA (2)
$
151.5
$
145.4
(1)
Amounts include production loan interest amortized into cost of goods sold.
(2)
Adjusted EBITDA is defined by the Company as earnings (loss), excluding one-time items,
before interest, taxes, depreciation and amortization. The Company believes that Adjusted
EBITDA is a meaningful measure of operating profitability and useful for measuring returns
on capital investments over time as it is not distorted by unusual gains, losses, or other
items.
Table 6
Scholastic Corporation
Consolidated Statements of Operations – Supplemental
Adjusted EBITDA by Segment
(Unaudited)
(In $ Millions)
Three months ended
05/31/26
CBPD (1)
EDUC (1)
ENT (1)
INTL (1)
OVH (1)(4)
Total
Earnings (loss) before income taxes as reported
$
60.1
$
27.0
$
(0.0)
$
(14.8)
$
(57.8)
$
14.5
One-time items before income taxes
—
0.9
0.4
17.4
23.9
42.6
Earnings (loss) before income taxes excluding
one-time items
60.1
27.9
0.4
2.6
(33.9)
57.1
Interest (income) expense (2)
0.2
0.0
0.5
0.0
0.2
0.9
Depreciation and amortization (3)
8.3
6.0
8.0
2.2
2.2
26.7
Adjusted EBITDA (4)
$
68.6
$
33.9
$
8.9
$
4.8
$
(31.5)
$
84.7
Three months ended
05/31/25
CBPD (1)
EDUC (1)
ENT (1)
INTL (1)
OVH (1)
Total
Earnings (loss) before income taxes as reported
$
57.5
$
30.7
$
(2.9)
$
2.9
$
(39.3)
$
48.9
One-time items before income taxes
0.6
0.6
0.9
2.4
5.4
9.9
Earnings (loss) before income taxes excluding
one-time items
58.1
31.3
(2.0)
5.3
(33.9)
58.8
Interest (income) expense (2)
0.1
0.0
0.7
0.1
3.6
4.5
Depreciation and amortization (3)
8.0
6.2
5.0
2.0
6.7
27.9
Adjusted EBITDA
$
66.2
$
37.5
$
3.7
$
7.4
$
(23.6)
$
91.2
Twelve months ended
05/31/26
CBPD (1)
EDUC (1)
ENT (1)
INTL (1)
OVH (1)(4)
Total
Earnings (loss) before income taxes as reported
$
142.5
$
(4.1)
$
(17.9)
$
(12.9)
$
(22.4)
$
85.2
One-time items before income taxes
0.8
4.3
6.8
17.9
(80.4)
(50.6)
Earnings (loss) before income taxes excluding
one-time items
143.3
0.2
(11.1)
5.0
(102.8)
34.6
Interest (income) expense (2)
0.4
0.0
2.2
0.1
8.9
11.6
Depreciation and amortization (3)
31.2
24.9
24.4
8.1
16.7
105.3
Adjusted EBITDA (4)
$
174.9
$
25.1
$
15.5
$
13.2
$
(77.2)
$
151.5
Twelve months ended
05/31/25
CBPD (1)
EDUC (1)
ENT (1)
INTL (1)
OVH (1)
Total
Earnings (loss) before income taxes as reported
$
130.5
$
6.3
$
(14.3)
$
(3.1)
$
(120.7)
$
(1.3)
One-time items before income taxes
0.6
0.6
4.9
3.9
10.0
20.0
Earnings (loss) before income taxes excluding
one-time items
131.1
6.9
(9.4)
0.8
(110.7)
18.7
Interest (income) expense (2)
0.2
0.0
3.2
0.1
12.9
16.4
Depreciation and amortization (3)
31.1
24.8
21.5
7.9
25.0
110.3
Adjusted EBITDA
$
162.4
$
31.7
$
15.3
$
8.8
$
(72.8)
$
145.4
(1)
The Company’s segments are defined as the following: CBPD – Children’s Book Publishing and Distribution
segment; EDUC – Education segment; ENT – Entertainment segment; INTL – International segment; OVH –
unallocated overhead.
(2)
Amounts include production loan interest amortized into cost of goods sold.
(3)
Depreciation and amortization in the Children’s Book Publishing and Distribution, Education and International
segments includes amounts allocated from overhead.
(4)
Adjusted EBITDA for unallocated overhead and total includes the net cost impact of the sale-leaseback
transactions of $7.8 and $14.5 for the three and twelve months ended May 31, 2026, respectively.
Table 7
Scholastic Corporation
Pro Forma Supplemental Information
(Unaudited)
(In $ Millions)
Three months ended
Change
05/31/26
05/31/25
$
%
Adjusted unallocated overhead
$
(33.8)
$
(30.1)
$
(3.7)
(12) %
Incremental full-year impact of sale-leaseback transactions
—
(3.9)
3.9
Pro forma Adjusted unallocated overhead (1)
$
(33.8)
$
(34.0)
$
0.2
1 %
Adjusted operating income
$
58.3
$
63.4
$
(5.1)
(8) %
Incremental full-year impact of sale-leaseback transactions
—
(3.9)
3.9
Pro forma Adjusted operating income (1) (2)
$
58.3
$
59.5
$
(1.2)
(2) %
Adjusted EBITDA
$
84.7
$
91.2
$
(6.5)
(7) %
Incremental full-year impact of sale-leaseback transactions
—
(7.5)
7.5
Pro forma Adjusted EBITDA (1) (2)
$
84.7
$
83.7
$
1.0
1 %
Twelve months ended
Change
05/31/26
05/31/25
$
%
Adjusted unallocated overhead
$
(94.6)
$
(98.1)
$
3.5
4 %
Incremental full-year impact of sale-leaseback transactions
(11.8)
(15.9)
4.1
Pro forma Adjusted unallocated overhead (1)
$
(106.4)
$
(114.0)
$
7.6
7 %
Adjusted operating income
$
47.1
$
35.8
$
11.3
32 %
Incremental full-year impact of sale-leaseback transactions
(11.8)
(15.9)
4.1
Pro forma Adjusted operating income (1) (2)
$
35.3
$
19.9
$
15.4
77 %
Adjusted EBITDA
$
151.5
$
145.4
$
6.1
4 %
Incremental full-year impact of sale-leaseback transactions
(19.1)
(30.1)
11.0
Pro forma Adjusted EBITDA (1) (2)
$
132.4
$
115.3
$
17.1
15 %
(1)
Pro forma Adjusted unallocated overhead, Pro forma Adjusted operating income and Pro forma Adjusted
EBITDA reflect the net impacts of the sale-leaseback transactions as if the transactions had occurred on
June 1, 2024, the beginning of fiscal 2025. Fiscal 2026 reported results include the actual impact beginning
upon completion of the transactions in December 2025. The incremental adjustments shown above reflect
the additional impact for the portion of fiscal 2026 prior to completion of the transactions. Fiscal 2025
reported results include no impact from the transactions.
(2)
For fiscal 2026, the full-year pro forma cost impact was $19.0 on Adjusted operating income, consisting of
$7.2 recognized in reported fiscal 2026 results and $11.8 of incremental adjustments. For fiscal 2026, the
full-year pro forma cost impact on Adjusted EBITDA was $33.6, consisting of $14.5 recognized in reported
fiscal 2026 results and $19.1 of incremental adjustments. For fiscal 2025, the full-year pro forma cost
impacts were $15.9 on Adjusted operating income and $30.1 on Adjusted EBITDA.
View original content to download multimedia:https://www.prnewswire.com/news-releases/scholastic-reports-fourth-quarter-and-fiscal-2026-results-302833617.html
SOURCE Scholastic Corporation
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