Technology
TriNet Announces Fourth Quarter, Fiscal Year 2023 Results, and Dividend Initiation
Published
2 years agoon
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2% Growth in Total Revenues to $1.2 billion for the Fourth Quarter of 2023
1% Growth in Total Revenues to $4.9 billion for Fiscal Year 2023
68% Growth in Earnings per Share and 44% Growth in Adjusted Earnings per Share for the Fourth Quarter of 2023
17% Growth in Earnings per Share and 10% Growth in Adjusted Earnings per Share for Fiscal Year 2023
Initiating Inaugural Quarterly Dividend
DUBLIN, Calif., Feb. 15, 2024 /PRNewswire/ — TriNet Group, Inc. (NYSE: TNET), a leading provider of comprehensive and flexible human capital management (HCM) solutions for small and medium-size businesses (SMBs), today announced financial results for the fourth quarter ended December 31, 2023. The fourth quarter highlights below include non-GAAP financial measures which are reconciled later in this release.
Fourth quarter highlights include:
Total revenues increased 2% to $1.2 billion compared to the same period last year.Professional service revenues were flat at $189 million compared to the same period last year.Net income was $67 million, or $1.31 per diluted share, compared to net income of $49 million, or $0.78 per diluted share, in the same period last year.Adjusted Net Income was $82 million, or $1.60 per diluted share, compared to Adjusted Net Income of $71 million, or $1.11 per diluted share, in the same period last year.Adjusted EBITDA was $140 million, representing an Adjusted EBITDA Margin of 11.2%, compared to Adjusted EBITDA of $111 million, representing an Adjusted EBITDA Margin of 9.0% in the same period last year.Average Worksite Employees (WSEs) decreased 3% as compared to the same period last year and increased 1% as compared to the previous quarter, to approximately 338,000.HRIS Cloud Services Revenues decreased 14% to $12 million compared to the same period last year.Average HRIS Users decreased 14% as compared to the same period last year, to approximately 204,000.
Full year highlights include:
Total revenues increased 1% to $4.9 billion as compared to 2022.Professional service revenues were approximately flat at $756 million as compared to 2022.Net income was $375 million or $6.56 per diluted share, compared to net income of $355 million or $5.61 per diluted share, in 2022.Adjusted Net income was $446 million or $7.81 per diluted share, compared to net income of $448 million or $7.07 per diluted share, in 2022.Adjusted EBITDA was $697 million, representing an Adjusted EBITDA Margin of 14.2%, compared to Adjusted EBITDA of $688 million, representing an Adjusted EBITDA Margin of 14.1% in 2022.Average Worksite Employees (WSEs) decreased by 5% compared to 2022, to approximately 331,000.HRIS Cloud Services Revenues increased 16% to $52 million compared to 2022.Average HRIS Users decreased 13% compared to 2022, to approximately 215,000.
Dividend:
TriNet announces quarterly dividend of $0.25 per share.Ex-Dividend Date March 29, 2024, Dividend Record Date April 1, 2024, Dividend Payment Date April 22, 2024.
Leadership Change (for more information, please visit investor.trinet.com):
Burton M. Goldfield announced his intent to retire today concluding a successful 15-year career as President & CEO of TriNet. He will continue as a special advisor to the company through March 31, 2025.
“Throughout 2023 in what proved to be a challenging economic environment, TriNet focused its execution on the areas within our control,” said Burton M. Goldfield, TriNet’s President and CEO. “Through our investment in sales, we accelerated our new sales in the fourth quarter, and we just completed our best January ever. We benefited from strong customer retention as we kept our customers at the center of everything we do. Finally, we launched our inaugural dividend completing an extraordinary year of capital allocation.”
He continued, “As just announced, I am retiring and transitioning the leadership of TriNet to Mike Simonds, and I have every confidence in Mike to keep moving the company forward. I am very proud of what we created during my more than 15 years as President and CEO of TriNet. My goal was to create an enduring company, and I believe that TriNet’s best days are still ahead.”
“On behalf of the board, I would like to thank Burton for his incredible leadership,” said TriNet Chairman, David Hodgson. “We are thrilled to have Mike join TriNet as President and CEO. We have confidence that he is the right person to lead TriNet as it continues its growth.”
“I know I speak for all TriNet colleagues when I thank Burton for his integral role in building TriNet into what it has become today,” said Kelly Tuminelli, TriNet’s Chief Financial Officer. “TriNet executed extraordinarily well throughout 2023 managing expenses prudently while investing in sales and service and executing against our capital plan which has culminated in our announced inaugural dividend. We look forward to our continued strong execution in 2024, ensuring we are there for our customers, colleagues, and stockholders.”
Dividend Announcement
On February 12, 2024, TriNet’s Board of Director’s approved a dividend of $0.25 per share. TriNet’s stock will have an Ex-Dividend Date of March 29, 2024, a Dividend Record Date of April 1, 2024, and a Dividend Payment Date of April 22, 2024.
First Quarter and Full-Year 2024 Guidance
In addition to announcing our fourth quarter 2023 results, we provide our first quarter and full-year 2024 guidance. Non-GAAP financial measures are reconciled later in this release. Percentages reflect the increase or (decrease) from the prior year quarter and prior year end.
Q1 2024
Full Year 2024
Low
High
Low
High
Total Revenues
— %
3 %
(1) %
4 %
Professional Service Revenues
2 %
8 %
1 %
5 %
Insurance Cost Ratio
86.5 %
82.5 %
88.5 %
86.5 %
Diluted net income per share of common stock
$ 1.82
$ 2.54
$ 4.57
$ 6.08
Adjusted Net Income per share – diluted
$ 2.10
$ 2.85
$ 5.80
$ 7.35
Annual Report on Form 10-K
We anticipate filing our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2023 with the U.S. Securities and Exchange Commission (SEC) and making it available at http://www.trinet.com today, February 15, 2024. This press release should be read in conjunction with the Form 10-K and the related Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Form 10-K.
Earnings Conference Call and Audio Webcast
TriNet will host a conference call at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its fourth quarter results for 2023 and provide first quarter and full-year financial guidance for 2024. TriNet encourages participants to pre-register for the conference call. Callers who pre-register will be given a unique PIN to gain immediate access to the call and bypass the live operator. To pre-register, go to: https://dpregister.com/sreg/10185965/fb77e71f5d. For those who would like to join the call but have not pre-registered, they can do so by dialing +1 (412) 317-5426 and requesting the “TriNet Conference Call.” The live webcast of the conference call can be accessed on the Investor Relations section of TriNet’s website at https://investor.trinet.com. Participants can pre-register for the webcast by going to: https://events.q4inc.com/attendee/789681153. A replay of the webcast will be available on this website for approximately one year. A telephonic replay will be available for one week following the conference call at +1 (412) 317-0088 conference ID: 4058379.
About TriNet
TriNet provides small and medium-size businesses (SMBs) with full-service industry-specific HR solutions, providing both professional employer organization (PEO) and human resources information system (HRIS) services. TriNet offers access to human capital expertise, benefits, risk mitigation, compliance, payroll, and R&D tax credit services, all enabled by industry-leading technology. TriNet’s suite of products also includes services and software-based solutions to help streamline workflows by connecting HR, benefits, employee engagement, payroll and time & attendance. Rooted in more than 30 years of supporting entrepreneurs and adapting to the ever-changing modern workplace, TriNet empowers SMBs to focus on what matters most – growing their business and enabling their people For more information, please visit TriNet.com or follow us on Facebook, LinkedIn and Instagram.
Use of Non-GAAP Financial Measures
Reconciliations of non-GAAP financial measures to TriNet’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section titled “Non-GAAP Financial Measures.”
Forward-Looking Statements
This press release contains, and statements made during the above referenced conference call will contain, statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among other things, TriNet’s expectations and assumptions regarding: TriNet’s financial guidance for the fourth quarter and full-year 2023 and the underlying assumptions; TriNet’s future financial performance and long-term growth; the continued value to customers and stockholders of TriNet’s product offerings; our ability to continue to grow new client sales, client tenure and improve retention, including through product and technological innovation; and the ability of our solutions to meet all client needs throughout their business cycle. Forward-looking statements are often identified by the use of words such as, but not limited to, “ability,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “guidance,” “impact,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “should,” “strategy,” “target,” “value,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are not guarantees of future performance but are based on management’s expectations as of the date hereof and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from our current expectations and any past or future results, performance or achievements expressed or implied by the forward-looking statements. Investors are cautioned not to place undue reliance upon any forward-looking statements.
Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include: our ability to manage unexpected changes in workers’ compensation and health insurance claims and costs by worksite employees; our ability to mitigate the unique business risks we face as a co-employer; the effects of volatility in the financial and economic environment on the businesses that make up our client base; loss of clients for reasons beyond our control and the short-term contracts we typically use with our clients; the impact of regional or industry-specific economic and health factors on our operations; the impact of failures or limitations in the business systems and service centers we rely upon; the impact of discontinuing our discretionary credits on our business and client loyalty and retention; changes in our insurance coverage or our relationships with key insurance carriers; our ability to improve our services and technology to satisfy client and regulatory expectations; our ability to effectively integrate businesses we have acquired or may acquire in the future; our ability to effectively manage and improve our operational effectiveness and resiliency; our ability to attract and retain qualified personnel; the effects of increased competition and our ability to compete effectively; the impact on our business of cyber-attacks, breaches, disclosures and other data-related incidents; our ability to protect against and remediate cyber-attacks, breaches, disclosures and other data-related incidents, whether intentional or inadvertent and whether attributable to us or our service providers; our ability to comply with constantly evolving data privacy and security laws; our ability to manage changes in, uncertainty regarding, or adverse application of the complex laws and regulations that govern our business; changing laws and regulations governing health insurance and employee benefits; our ability to be recognized as an employer of worksite employees and for our benefits plans to satisfy all requirements under federal and state regulations; changes in the laws and regulations that govern what it means to be an employer, employee or independent contractor; the impact of new and changing laws regarding remote work; our ability to comply with the licensing requirements that govern our HCM solutions; the outcome of existing and future legal and tax proceedings; fluctuation in our results of operations and stock price due to factors outside of our control; our ability to comply with the restrictions of our credit facility and meet our debt obligations; and the impact of concentrated ownership in our stock by Atairos and other large stockholders. Any of these factors could cause our actual results to differ materially from our anticipated results.
Further information on risks that could affect TriNet’s results is included in our filings with the SEC, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on our investor relations website at http://investor.trinet.com and on the SEC website at www.sec.gov. Copies of these filings are also available by contacting TriNet Corporation’s Investor Relations Department at (510) 875-7201. Except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements in this press release, and any forward-looking statements in this press release speak only as of the date of this press release. In addition, we do not assume any obligation, and do not intend, to update any of our forward-looking statements, except as required by law.
Contacts:
Investors:
Media:
Alex Bauer
Renee Brotherton / Josh Gross
TriNet
TriNet
(510) 875-7201
(408) 646-5103
Key Financial and Operating Metrics
We regularly review certain key financial and operating metrics to evaluate growth trends, measure our performance and make strategic decisions. These key financial and operating metrics may change over time. Our key financial and operating metrics for the periods presented were as follows:
Three Months Ended December 31,
Year Ended December 31,
(in millions, except per share and Operating Metrics data)
2023
2022
% Change
2023
2022
% Change
Income Statement Data:
Total revenues
$ 1,245
$ 1,226
2
%
$ 4,922
$ 4,885
1
%
Operating income
86
56
54
469
499
(6)
Net income
67
49
37
375
355
6
Diluted net income per share of common stock
1.31
0.78
68
6.56
5.61
17
Non-GAAP measures (1):
Adjusted EBITDA
140
111
26
697
688
1
Adjusted Net income
82
71
15
446
448
—
Operating Metrics:
Insurance Cost Ratio
87 %
88 %
(1)
%
84 %
84 %
—
%
Average WSEs (2)
337,924
347,671
(3)
331,423
348,543
(5)
Total WSEs at period end (2)
347,542
348,652
—
347,542
348,652
—
Average HRIS Users (3)
204,006
238,865
(15)
215,295
248,496
(13)
(1)
Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading “Non-GAAP Financial Measures”.
(2)
Total WSEs includes approximately 12,000 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,000 incremental WSEs for the fourth quarter of 2023 (1,000 for the full year 2023) that were charged a platform user access fee. Additionally, Total WSEs includes approximately 4,500 incremental WSEs for December 31, 2023 and Average WSEs includes approximately 4,800 for the fourth quarter of 2023 (1,500 for the full year 2023) additional service recipients. These were identified as a result of our ongoing effort to ensure that our billing practices best match the expectations of our customers. Please refer to Item 7 under Management Discussion & Analysis in our 2023 10-K.
(3)
For the year ended September 30, 2022, reflects HRIS Users from February 15, 2022, the date on which we acquired Zenefits, to the end of the period.
(in millions)
December 31,
2023
December 31,
2022
%
Change
Balance Sheet Data:
Working capital
115
338
(66)
%
Total assets
3,693
3,443
7
Debt
1,093
496
120
Total stockholders’ equity
78
775
(90)
Year Ended December 31,
(in millions)
2023
2022
% Change
Cash Flow Data:
Net cash provided by operating activities
$ 545
$ 562
(3)
%
Net cash used in investing activities
(70)
(226)
(69)
Net cash used in financing activities
(546)
(536)
2
Non-GAAP measure (1):
Corporate Operating Cash Flows
$ 539
$ 497
8
(1)
Refer to Non-GAAP measures definitions and reconciliations from GAAP measures under the heading “Non-GAAP Financial Measures”.
TRINET GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
(in millions except per share data)
2023
2022
2023
2022
Professional service revenues
$ 189
$ 189
$ 756
$ 754
Insurance service revenues
1,056
1,037
4,166
4,131
Total revenues
1,245
1,226
4,922
4,885
Insurance costs
919
916
3,513
3,463
Cost of providing services
77
78
307
303
Sales and marketing
71
63
285
242
General and administrative
57
76
211
241
Systems development and programming
16
19
65
73
Depreciation and amortization of intangible assets
19
18
72
64
Total costs and operating expenses
1,159
1,170
4,453
4,386
Operating income
86
56
469
499
Other income (expense):
Interest expense, bank fees and other
(16)
(5)
(40)
(39)
Interest income
16
14
72
22
Income before provision for income taxes
86
65
501
482
Income taxes
19
16
126
127
Net income
$ 67
$ 49
$ 375
$ 355
Other comprehensive income (loss), net of income taxes
6
—
3
(4)
Comprehensive income
$ 73
$ 49
$ 378
$ 351
Net income per share:
Basic
$ 1.33
$ 0.79
$ 6.61
$ 5.66
Diluted
$ 1.31
$ 0.78
$ 6.56
$ 5.61
Weighted average shares:
Basic
51
62
57
63
Diluted
51
62
57
64
TRINET GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31,
December 31,
(in millions, except share and per share data)
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$ 287
$ 354
Investments
65
76
Restricted cash, cash equivalents and investments
1,269
1,263
Accounts receivable, net
18
19
Unbilled revenue, net
447
375
Prepaid expenses, net
67
71
Other payroll assets
381
122
Other current assets
44
46
Total current assets
2,578
2,326
Restricted cash, cash equivalents and investments, noncurrent
158
153
Investments, noncurrent
143
151
Property and equipment, net
17
24
Operating lease right-of-use asset
24
31
Goodwill
462
462
Software and other intangible assets, net
172
163
Other assets
139
133
Total assets
$ 3,693
$ 3,443
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities
$ 87
$ 98
Revolving credit agreement borrowings
109
—
Client deposits and other client liabilities
65
106
Accrued wages
515
437
Accrued health insurance costs, net
175
174
Accrued workers’ compensation costs, net
50
54
Payroll tax liabilities and other payroll withholdings
1,438
1,087
Operating lease liabilities
14
15
Insurance premiums and other payables
10
17
Total current liabilities
2,463
1,988
Long-term debt, noncurrent
984
496
Accrued workers’ compensation costs, noncurrent, net
120
128
Deferred taxes
13
8
Operating lease liabilities, noncurrent
30
41
Other non current liabilities
5
7
Total liabilities
3,615
2,668
Stockholders’ equity:
Preferred stock
—
—
Common stock and additional paid-in capital
976
899
Accumulated deficit
(896)
(119)
Accumulated other comprehensive loss
(2)
(5)
Total stockholders’ equity
78
775
Total liabilities & stockholders’ equity
$ 3,693
$ 3,443
TRINET GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Year Ended December 31,
(in millions)
2023
2022
2021
Operating activities
Net income
$ 375
$ 355
338
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
72
64
54
Amortization of deferred costs
40
38
31
Amortization of ROU asset, lease modification, impairment, and abandonment
9
25
12
Stock based compensation
59
62
50
Accretion of discount rate on lease liabilities
2
2
2
Provision for doubtful accounts
3
2
—
Deferred income taxes
5
(22)
(9)
Losses from disposition of assets
1
6
—
Losses and impairment on investments
1
18
—
Changes in operating assets and liabilities:
Accounts receivable, net
(2)
—
3
Unbilled revenue, net
(72)
(51)
(78)
Prepaid expenses, net
4
(2)
(5)
Other payroll assets
(259)
(72)
10
Accounts payable and other current liabilities
(8)
(13)
33
Client deposits and other client liabilities
(40)
9
(37)
Accrued wages
77
65
60
Accrued health insurance costs, net
1
—
2
Accrued workers’ compensation costs, net
(12)
(8)
(7)
Payroll taxes payable and other payroll withholdings
351
158
(166)
Operating lease liabilities
(17)
(17)
(13)
Other assets
(38)
(55)
(60)
Other liabilities
(7)
(2)
(2)
Net cash provided by operating activities
545
562
218
Investing activities
Purchases of marketable securities
(276)
(410)
(444)
Proceeds from sale and maturity of marketable securities
286
469
349
Acquisitions of property and equipment and projects in process
(75)
(56)
(40)
Acquisitions of subsidiaries, net of cash acquired
—
(229)
—
Other Investments
(5)
—
—
Net cash used in investing activities
(70)
(226)
(135)
Financing activities
Repurchase of common stock
(1,122)
(523)
(94)
Proceeds from issuance of common stock
15
11
11
Payment of long-term financing costs and debt issuance costs
(9)
—
(9)
Proceeds from issuance of 2031 Notes
400
—
—
Proceeds from issuance of 2029 Notes
—
—
500
Repayment of borrowings
—
—
(370)
Proceeds from revolving credit agreement borrowings
695
—
—
Repayment of borrowings under revolving credit agreement
(495)
—
—
Awards effectively repurchased for required employee withholding taxes
(30)
(24)
(26)
Net cash provided by (used in) financing activities
(546)
(536)
12
Effect of exchange rate changes on cash and cash equivalents
—
(1)
—
Net increase (decrease) in cash and cash equivalents, unrestricted and restricted
(71)
(201)
95
Cash and cash equivalents, unrestricted and restricted:
Beginning of period
1,537
1,738
1,643
End of period
$ 1,466
$ 1,537
$ 1,738
Supplemental disclosures of cash flow information
Interest paid
$ 25
$ 18
12
Income taxes paid, net
114
128
129
Supplemental schedule of noncash investing and financing activities
Payable for purchase of property and equipment
$ 4
$ 6
3
Acquisitions of subsidiaries paid in stock
$ —
$ 17
—
Non-GAAP Financial Measures
In addition to the selected financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), we monitor other non-GAAP financial measures that we use to manage our business, to make planning decisions, to allocate resources and to use as performance measures in our executive compensation plan. These key financial measures provide an additional view of our operational performance over the long term and provide information that we use to maintain and grow our business.
The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation from, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
Non-GAAP Measure
Definition
How We Use The Measure
Adjusted EBITDA
• Net income, excluding the effects of:
– income tax provision,
– interest expense, bank fees and other,
– depreciation,
– amortization of intangible assets,
– stock based compensation expense,
– amortization of cloud computing
arrangements, and
– transaction and integration costs.
• Provides period-to-period comparisons on a
consistent basis and an understanding as to
how our management evaluates the
effectiveness of our business strategies by
excluding certain non-recurring costs, which
include transaction and integration costs, as
well as certain non-cash charges such as
depreciation and amortization, and stock-
based compensation and certain impairment
charges recognized based on the estimated
fair values. We believe these charges are
either not directly resulting from our core
operations or not indicative of our ongoing
operations.
• Enhances comparisons to prior periods
and, accordingly, facilitates the development
of future projections and earnings growth
prospects.
• Provides a measure, among others, used
in the determination of incentive compensation
for management.
• We also sometimes refer to Adjusted EBITDA
margin, which is the ratio of Adjusted EBITDA
to total revenues.
Adjusted Net Income
• Net income, excluding the effects of:
– effective income tax rate (1),
– stock based compensation,
– amortization of intangible assets, net,
– non-cash interest expense (2),
– transaction and integration costs, and
– the income tax effect (at our effective tax
rate (1) of these pre-tax adjustments.
• Provides information to our stockholders and
board of directors to understand how our
management evaluates our business, to monitor
and evaluate our operating results, and analyze
profitability of our ongoing operations and trends
on a consistent basis by excluding certain non-
cash charges.
Corporate Operating Cash Flows
• Net cash provided by (used in) operating
activities, excluding the effects of:
– Assets associated with WSEs (accounts
receivable, unbilled revenue, prepaid
expenses, other payroll assets and other
current assets) and
– Liabilities associated with WSEs (client
deposits and other client liabilities, accrued
wages, payroll tax liabilities and other payroll
withholdings, accrued health insurance
costs, accrued workers’ compensation costs,
insurance premiums and other payables, and
other current liabilities).
• Provides information that our stockholders and
management can use to evaluate our cash flows
from operations independent of the current assets
and liabilities associated with our WSEs.
• Enhances comparisons to prior periods and,
accordingly, used as a liquidity measure to manage
liquidity between corporate and WSE related
activities, and to help determine and plan our cash
flow and capital strategies.
(1)
Non-GAAP effective tax rate is 25.6% for the fourth quarter and full year of 2023 and 25.5% for the fourth quarter and full year of 2022, which excludes the income tax impact from stock-based compensation, changes in uncertain tax positions, and nonrecurring benefits or expenses from federal legislative changes.
(2)
Non-cash interest expense represents amortization and write-off of our debt issuance costs and loss on a terminated derivative.
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of net income to Adjusted EBITDA:
Three Months Ended
December 31,
Year Ended
December 31,
(in millions)
2023
2022
2023
2022
Net income
$ 67
$ 49
$ 375
$ 355
Provision for income taxes
19
16
126
127
Stock based compensation
16
16
59
62
Interest expense, bank fees and other (1)
16
5
40
39
Depreciation and amortization of intangible assets
19
18
72
64
Amortization of cloud computing arrangements
1
1
8
4
Transaction and integration costs
2
6
17
37
Adjusted EBITDA
$ 140
$ 111
$ 697
$ 688
Adjusted EBITDA Margin
11.2 %
9.0 %
14.2 %
14.1 %
(1)
2022 Interest expense, bank fees and other includes $17M of realized investments losses on sales and impairments related to AFS securities.
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share – diluted:
Three Months Ended
December 31,
Year Ended
December 31,
(in millions, except per share data)
2023
2022
2023
2022
Net income
$ 67
$ 49
$ 375
$ 355
Effective income tax rate adjustment
(3)
—
(2)
5
Stock based compensation
16
16
59
62
Amortization of intangible assets
5
5
20
18
Non-cash interest expense
1
—
2
1
Transaction and integration costs
2
6
17
37
Income tax impact of pre-tax adjustments
(6)
(6)
(25)
(30)
Adjusted Net Income
$ 82
$ 71
$ 446
$ 448
GAAP weighted average shares of common stock – diluted
51
62
57
64
Adjusted Net Income per share – diluted
$ 1.60
$ 1.11
$ 7.81
$ 7.07
The table below presents a reconciliation of net cash provided by operating activities to Corporate Operating Cash flows:
Year Ended
December 31,
(in millions)
2023
2022
Net cash provided by operating activities
$ 545
$ 562
Less: Change in WSE related other current assets
(329)
(149)
Less: Change in WSE related liabilities
335
214
Net cash used in operating activities – WSE
$ 6
$ 65
Net cash provided by operating activities – Corporate
$ 539
$ 497
Reconciliation of GAAP to Non-GAAP Measures for the first quarter and full-year 2024 guidance.
Low and high percentages represent increases (decreases) from the same periods in the previous year.
The table below presents a reconciliation of net income to Adjusted Net Income and Adjusted Net Income per share – diluted:
Q1 2023
Q1 2024 Guidance
FY 2023
Year 2024 Guidance
(in millions, except per share data)
Actual
Low
High
Actual
Low
High
Net income
$ 131
(29) %
(1) %
$ 375
(38) %
(17) %
Effective income tax rate adjustment
3
(108)
(77)
(2)
98
1
Stock based compensation
11
39
39
59
17
17
Amortization of intangible assets
6
(13)
(13)
20
(5)
(5)
Non-cash interest expense
—
(25)
(25)
2
(39)
(39)
Transaction and integration costs
5
(100)
(100)
17
(100)
(100)
Income tax impact of pre-tax adjustments
(6)
(6)
(6)
(25)
(9)
(9)
Adjusted Net Income
$ 150
(28) %
(3) %
$ 446
(34) %
(16) %
GAAP weighted average shares of common stock – diluted
60
57
Adjusted Net Income per share – diluted
$ 2.49
$ 2.10
$ 2.85
$ 7.81
$ 5.80
$ 7.35
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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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