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SCHOLASTIC CORP - Quarter Report: 2025 February (Form 10-Q)

Basic and diluted earnings (loss) per share of Class A and Common Stock    Basic $()$()$()$()Diluted $()$()$()$()
See accompanying notes    


3

SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED
(Dollar amounts in millions)
 
 Three months endedNine months ended
February 28,February 29,February 28,February 29,
 2025202420252024
Net income (loss)$()$()$()$()
Other comprehensive income (loss), net:   
   Foreign currency translation adjustments ()()() 
   Pension and postretirement adjustments (net of tax)    
Total other comprehensive income (loss), net$()$()$()$ 
Comprehensive income (loss)$()$()$()$()
Total stockholders’ equity   Total liabilities and stockholders’ equity$ $ $ 
See accompanying notes
5

SCHOLASTIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
(Dollar amounts in millions, except per share data)
 Class A StockCommon StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Treasury Stock
At Cost		Total
Stockholders'
Equity of Scholastic Corporation		Noncontrolling InterestTotal
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at June 1, 2023$ $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — — ()— ()— ()
Foreign currency translation adjustment— — — — —  — —  —  
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — —  — — —  —  
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Other (noncontrolling interest)— — — — ()— — — ()()()
Balance at August 31, 2023 $  $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — —  —  —  
Foreign currency translation adjustment— — — — —  — —  —  
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — —  — — —  —  
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Balance at November 30, 2023 $  $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — — ()— ()— ()
Foreign currency translation adjustment— — — — — ()— — ()— ()
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — —  — — —  —  
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Other (share conversion)
()—  — ()— —  — —  
Balance at February 29, 2024 $  $ $ $()$ $()$ $ $ 

6

     
 Class A StockCommon StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)		Retained
Earnings		Treasury Stock
At Cost		Total
Stockholders'
Equity of Scholastic Corporation		Noncontrolling InterestTotal
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at June 1, 2024 $  $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — — ()— ()— ()
Foreign currency translation adjustment— — — — —  — —  —  
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — —  — — —  —  
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Balance at August 31, 2024 $  $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — —  —  —  
Foreign currency translation adjustment— — — — — ()— — ()— ()
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — — ()— — — ()— ()
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Balance at November 30, 2024 $  $ $ $()$ $()$ $ $ 
Net Income (loss)— — — — — ()— ()()
Foreign currency translation adjustment— — — — — ()— — ()— ()
Pension and post-retirement adjustments (net of tax of $)
— — — — —  — —  —  
Stock-based compensation— — — —  — — —  —  
Proceeds pursuant to stock-based compensation plans— — — —  — — —  —  
Purchases of treasury stock at cost— — ()— — — — ()()— ()
Treasury stock issued pursuant to equity-based plans— —  — ()— —   —  
Dividends ($ per share)
— — — — — — ()— ()— ()
Acquisitions, net of cash acquired()()
Purchase of noncontrolling interest ()
Other() 
Net cash provided by (used in) investing activities()()
Cash flows - financing activities:  
Borrowings under lines of credit and long-term debt, net of debt issuance costs  
Repayments of lines of credit and long-term debt()()
Borrowings under film related obligations  
Repayments of film related obligations() 
Repayments of capital lease obligations()()
Reacquisition of common stock()()
Proceeds pursuant to stock-based compensation plans  
Payment of dividends()()
Other() 
Net cash provided by (used in) financing activities  ()
Effect of exchange rate changes on cash and cash equivalents() 

6.
)$()$()$()Weighted average Shares of Class A Stock and Common Stock outstanding for basic earnings (loss) per share (in millions)  Dilutive effect of Common Stock potentially issuable pursuant to stock-based compensation plans (in millions)*    Adjusted weighted average Shares of Class A Stock and Common Stock outstanding for diluted earnings (loss) per share (in millions)  Earnings (loss) per share of Class A Stock and Common Stock:    Basic$()$()$()$()Diluted $()$()$()$()
Anti-dilutive shares pursuant to stock-based compensation plans*
    
* The Company experienced a net loss for the three and nine months ended February 28, 2025 and therefore did not report any dilutive share impact. The following potential common shares were excluded from the loss per diluted share computation: outstanding options and restricted stock units of  million and  million, respectively.

14
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)

remained available for future purchases of common shares under the repurchase authorization of the Board of Directors (the "Board") in effect on that date. See Note 12, "Treasury Stock", for a more complete description of the Company’s share buy-back program and Note 18, "Subsequent Events" for additional Board authorization for common share repurchases.

7.

% of the economic interests in the form of non-voting shares and % of the voting shares of 9 Story, a leading independent creator, producer and distributor of premium children’s content based in Toronto, Canada, with studios or offices in New York, United States, Dublin, Ireland and Bali, Indonesia. The aggregate purchase price was $, subject to further adjustment based on the final determination of purchase price adjustments, and was funded through borrowings under the U.S. Credit Agreement incurred during the first quarter of fiscal 2025. The acquisition of 9 Story further enhances the Company's development, production and licensing interests, expanding opportunities to leverage its brand and best-selling publishing and global children's franchises across print, screen and merchandising.

Pursuant to ASC Topic 810, Consolidation, 9 Story was determined to be a variable interest entity (VIE) and the Company was determined to be its primary beneficiary and therefore obtained a controlling financial interest over 9 Story. Accordingly, 9 Story has been consolidated into the Company's financial results.

9 Story met the definition of a business pursuant to ASC 805, Business Combinations, and the acquisition was accounted for as a business combination under the acquisition method of accounting. The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on currently available information. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. Refer to Note 8, Goodwill and Other Intangibles, for details regarding measurement period adjustments recorded during the nine months ended February 28, 2025.

15
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
 Accounts receivable Investment in film and television programs 
Property, plant and equipment (1)
 Operating lease right-of-use assets 
Other Intangible assets:
Existing content/IP Customer contracts/relationships 
Trade names
 Internally developed software 
Other assets (2)
 Total assets acquired Accounts payable 
Accrued expenses
 Deferred revenue 
Film related obligations
 Operating lease liabilities Other liabilities Total liabilities assumed Preliminary fair value of net assets acquired Goodwill Preliminary purchase price consideration$ 
(1) Includes a preliminary step-up adjustment of $.
(2) Includes $ of receivables related to government tax incentives.

The intangible assets acquired include intellectual property ("IP") related to 9 Story's existing and recognized program titles, customer contracts/relationships related to licensing, distribution and service arrangements, the trade names associated with 9 Story and Brown Bag Films, its animation studio, and internally developed software. The intellectual property and customer contracts/relationships were valued using the multi-period excess earnings valuation method and are being amortized over years, with the exception of contracts/relationships for service arrangements which are being amortized over years. The trade names were valued using the relief-from-royalty valuation method and are being amortized over years. The internally developed software was valued using the replacement cost method and is being amortized over years. The Company classified these fair value measurements as Level 3 due to the significant unobservable inputs used in the analyses, such as internally-developed discounted cash flow forecasts. The difference between the purchase price over the net identifiable tangible and intangible assets acquired was allocated to goodwill, which is not deductible for tax purposes. The goodwill balance is primarily attributable to the expected synergies from the business combination and acquired workforce. The goodwill and intangible assets acquired were allocated to the Entertainment segment.

The financial results of 9 Story, since the date of acquisition, were included in the Company's Condensed Consolidated Financial Statements as of February 28, 2025. 9 Story contributed total revenue of $ and net loss of $ from the date of acquisition on June 20, 2024 through February 28, 2025. The operations of 9 Story are reported in the Entertainment segment.

 
$
 $ 
$
 Net income (loss)()()()()

16
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
and $ for the three and nine months ended February 28, 2025, respectively, which were included in Selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

Purchase of Noncontrolling Interest

On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited, a UK-based children's book publishing company, for $, increasing the Company's total ownership from % to %. The acquisition was accounted for as an equity transaction as there was no change in control. The carrying value of the noncontrolling interest at the acquisition date was $. The difference between the fair value of consideration paid and the carrying value was recognized as an adjustment to Additional paid-in capital of $.

8.

 $ $ Accumulated impairment()()()Beginning balance$ $ $ Additions   
Measurement period adjustments (1)
   Foreign currency translation()  Ending balance $ $ $ 
(1) Measurement period adjustments for the 9 Story acquisition reflect an increase to goodwill of $ resulting from a net decrease in the estimated fair value of the net assets acquired. The decrease in the estimated fair value of the net assets acquired consisted of an increase to deferred tax liabilities of $, an increase to operating lease right-of-use assets of $, a decrease to lease liabilities of $, and a decrease to the purchase price as a result of a working capital adjustment of $.

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $ of Goodwill, net of measurement period adjustments, included in the Entertainment segment. Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

There were impairment charges related to Goodwill in any of the periods presented.


17
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
 $ $ Additions    Amortization expense()()()Foreign currency translation()  Impairments () 
Total other intangibles subject to amortization, net of accumulated amortization of $, $ and $, respectively
$ $ $ Total other intangibles not subject to amortization$ $ $ 
Total other intangible assets, net
$ $ $ 

In fiscal 2025, the Company completed the 9 Story acquisition which resulted in the recognition of $ of amortizable intangible assets. Refer to Note 7, "Acquisitions", for further details regarding the acquisition.

In fiscal 2024, the Company acquired certain amortizable intangible assets related to educational programs for $ and certain amortizable intangible assets of a U.S.- based children's book publishing business for $. These intangible assets are amortized over the estimated useful life of years and years, respectively.

In fiscal 2023, the Company acquired Learning Ovations, Inc., a U.S.-based education technology business, which resulted in the recognition of $ of amortizable intangible assets. During fiscal 2024, the Company assessed the recoverability of these assets which was impacted by the shift to an evidenced-based approach to literacy instruction within the education market. An asset impairment of $ was recognized in the fourth quarter of fiscal 2024. There were impairment charges related to Other intangible assets in the nine months ended February 28, 2025 and February 29, 2024.

Other intangible assets with indefinite lives consist principally of trademark and trade name rights. Other intangible assets with definite lives consist principally of customer lists, customer contracts/relationships, intellectual property, trade names and internally developed software. Intangible assets with definite lives are amortized over their estimated useful lives. The weighted-average remaining useful lives of all amortizable intangible assets is approximately years.

9.

 $ $ InternationalEquity method and other investments   EntertainmentTotal Investments $ $ $ 

The Company’s % equity interest in a children’s book publishing business located in the UK is accounted for using the equity method of accounting. Equity method income from this investment is reported in the International segment.

The Company has a % ownership interest in a financing and production company that makes film, television, and digital programming designed for the youth market. This equity investment does not have a readily determinable fair value and the Company has elected to apply the measurement alternative and report the investment at cost, less impairment on the Company's Condensed Consolidated Balance Sheets. There have been impairments or adjustments to the carrying value of the investment. This investment is included in the Entertainment segment.

The Company acquired investments of $ as part of the 9 Story acquisition which are included in the Entertainment segment. Included in these acquired investments, the Company acquired a % ownership
18
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
% ownership interest in a children's book publishing business located in the UK. This investment is accounted for at cost, less impairment on the Company's Condensed Consolidated Balance Sheets. There have been impairments or adjustments to the carrying value of the investment.

Income from equity investments is reported in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and totaled a loss of less than $ and income of $ for the three and nine months ended February 28, 2025, respectively, and a loss of $ and income of $ for the three and nine months ended February 29, 2024, respectively. The Company received dividends of $ in the three and nine months ended February 29, 2024. The Company did not receive any dividends in the nine months ended February 28, 2025.

10.

 $ $ $ Expected return on assets()()  Amortization of prior service (credit) loss  ()()Amortization of net actuarial (gain) loss  () Total$ $ $()$()UK Pension PlanUS Postretirement BenefitsNine months endedNine months endedFebruary 28,February 29,February 28,February 29,2025202420252024Components of net periodic benefit cost:Interest cost$ $ $ $ Expected return on assets()()  Amortization of prior service (credit) loss  ()()Amortization of net actuarial (gain) loss  () Total$ $ $()$()


Remaining Board authorization at February 28, 2025 represents the amount remaining under the Board authorization for Common share repurchases announced on March 20, 2024, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions. See Note 18, "Subsequent Events", for additional Board authorization for common share repurchases.

Repurchases of the Company's Common Stock were $ and $, including excise tax on share repurchases, during the three and nine months ended February 28, 2025, respectively. The Company's repurchase program may be suspended at any time without prior notice.

20
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
13.

)$()$()Other comprehensive income (loss) before reclassifications () ()Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of net actuarial (gain) loss (net of tax of $)
   
Amortization of prior service (credit) cost (net of tax of $)
 ()()Other comprehensive income (loss)() ()Ending balance at February 28, 2025$()$()$()Three months ended February 29, 2024Foreign currency translation adjustmentsRetirement benefit plansTotal
Beginning balance at November 30, 2023
$()$()$()Other comprehensive income (loss) before reclassifications() ()Less amount reclassified from Accumulated other comprehensive income (loss):
Amortization of net actuarial (gain) loss (net of tax of $)
   
Amortization of prior service (credit) cost (net of tax of $)
 ()()Other comprehensive income (loss)() ()Ending balance at February 29, 2024$()$()$()Nine months ended February 28, 2025Foreign currency translation adjustmentsRetirement benefit plansTotalBeginning balance at June 1, 2024$()$()$()Other comprehensive income (loss) before reclassifications() ()Less: amount reclassified from Accumulated other comprehensive income (loss)
Amortization of net actuarial (gain) loss (net of tax of $)
   
Amortization of prior service (credit) cost (net of tax of $)
 ()()Other comprehensive income (loss)() ()Ending balance at February 28, 2025$()$()$()Nine months ended February 29, 2024Foreign currency translation adjustmentsRetirement benefit plansTotalBeginning balance at June 1, 2023$()$()$()Other comprehensive income (loss) before reclassifications   Less: amount reclassified from Accumulated other comprehensive income (loss)
Amortization of net actuarial (gain) loss (net of tax of $)
   
Amortization of prior service (credit) cost (net of tax of $)
 ()()Other comprehensive income (loss)   Ending balance at February 29, 2024$()$()$()


21
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
 $ $ $ Other components of net periodic benefit (cost)Amortization of prior service (credit) loss()()()()Other components of net periodic benefit (cost)Less: Tax effect   Provision (benefit) for income taxesTotal cost, net of tax$ $ $ $

14.


22
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
15.

% and %, respectively, compared to % and %, respectively, for the prior fiscal year period. The interim effective tax rate for the nine months ended February 28, 2025 varies from the statutory rate primarily due to the expected state and local income tax and non-deductible compensation for covered executive employees. Due to the seasonal nature of the business, the tax benefit on the operating loss for the nine months ended February 28, 2025 will be impacted by the Company's typically profitable fourth fiscal quarter.

The Company, including its domestic subsidiaries, files a consolidated U.S. income tax return, and also files tax returns in various states and other local jurisdictions. Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions. The Company is routinely audited by various tax authorities. The fiscal 2021 through 2024 tax years remain subject to audit.

The Organization for Economic Cooperation and Development (“OECD”) has implemented the global minimum tax rate of at least 15% for large multinational companies as of 2024 (“Pillar Two”). Under Pillar Two, a top-up tax will be required of such companies for any jurisdiction which has enacted Pillar Two if their effective tax rate falls below the 15% global minimum rate. Additionally, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Under the safe harbor, companies would be excluded from Pillar Two requirements provided certain criteria are met. The enactment of Pillar Two legislation does not have a material effect on the Company’s financial position. The Company will continue to monitor and reflect the impact of such legislative changes in future periods, as appropriate.

Non-income Taxes
 
The Company is subject to tax examinations for sales-based taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from taxing authorities. The Company assesses sales tax contingencies for each jurisdiction in which it operates, considering all relevant facts including statutes, regulations, case law and experience. Where a sales tax liability with respect to a jurisdiction is probable and can be reliably estimated for such jurisdiction, the Company has made accruals for these matters which are reflected in the Company’s Condensed Consolidated Financial Statements. These amounts are included in Selling, general and administrative expenses. Future developments relating to the foregoing could result in adjustments being made to these accruals.

16.
as of February 28, 2025 and
23
SCHOLASTIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(Dollar amounts in millions, except per share data)
and $ was recognized for the nine months ended February 28, 2025 and February 29, 2024, respectively.

17.
 $ $ Accrued bonus and commissions   Returns liability   Accrued other taxes   Accrued advertising and promotions   Other accrued expenses   Total accrued expenses$ $ $ 

18.

per share on the Company’s Class A and Common Stock for the fourth quarter of fiscal 2025. The dividend is payable on June 16, 2025 to shareholders of record as of the close of business on April 30, 2025.

On March 19, 2025, the Board also authorized an increase of $ for Common share repurchases under the Company's share buy-back program, resulting in a current Board authorization of $, which includes $ remaining from the previous Board authorization.

24
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Overview and Outlook

Revenues for the third quarter ended February 28, 2025 were $335.4 million, compared to $323.7 million in the prior fiscal year quarter, an increase of $11.7 million or 4%. The Company reported net loss per diluted share of Class A and Common Stock of $0.13 in the third quarter of fiscal 2025, compared to $0.91 in the prior fiscal year quarter.

During the third fiscal quarter, revenue growth was primarily driven by the contribution of 9 Story within the Entertainment segment. Despite increasing pressure on consumer spending which impacted the Children's Book Publishing and Distribution segment, revenues from School Reading Events increased over the prior year quarter while trade channel revenues remained consistent. The trade channel benefited from the release of the thirteenth book in Dav Pilkey’s global best-selling series, Dog Man®: Big Jim Begins, which also drove higher sales of backlist titles in the series, the benefit of which was offset by the general softness in the retail book market. While Education Solutions continued to be negatively impacted by the continued decline in spending on supplemental materials, the Company expects to launch new supplemental products over the summer for the next school year. Operating loss improved 32%, reflecting a reduction in discretionary overhead expenses and the higher revenues in the Children’s Book Publishing and Distribution segment, which more than offset the impact of lower sales in Education Solutions.

For the remainder of fiscal 2025, the Company expects increasing spending headwinds to continue to impact the trade channel resulting in softness in the retail book market as well as participation at book fairs. The Company expects new releases to benefit the trade channel in the fourth fiscal quarter, including the recently released fifth book in Suzanne Collins’ Hunger Games® series, Sunrise on the Reaping. Within the Entertainment segment, delays in production greenlights from major platforms are expected to impact production work in the near-term, however the Company remains focused on production and development work for video-on-demand platforms and making progress on Company-wide synergies which are expected to benefit the Entertainment segment in fiscal 2026 and beyond.

Results of Operations

Consolidated

Revenues for the quarter ended February 28, 2025 increased by $11.7 million to $335.4 million, compared to $323.7 million in the prior fiscal year quarter. Within the Children's Book Publishing and Distribution segment, revenues increased by $10.2 million, driven by increased revenues from School Reading Events as a result of higher fair count in the book fairs channel and higher revenue per sponsor and an increase in events in the book clubs channel. Trade channel revenues were consistent with the prior year as increased sales from the Dog Man® series, which included the latest release, Dog Man #13: Big Jim Begins, were offset by lower sales of backlist titles due to softness in the retail book market. In the Education Solutions segment, revenues decreased by $11.3 million primarily due to the continued decline in spending on supplemental materials, coupled with lower subscription revenues from Magazines+TM. In the Entertainment segment, revenues increased by $12.3 million, reflecting the addition of 9 Story. In local currency, International segment revenues increased by $2.9 million, primarily reflecting higher sales in Canada, the U.K. and New Zealand. International segment revenues were impacted by unfavorable foreign exchange of $2.7 million in the quarter ended February 28, 2025.

Revenues for the nine months ended February 28, 2025 increased by $2.4 million to $1,117.2 million, compared to $1,114.8 million in the prior fiscal year period. The overall increase in revenues was attributable to the Entertainment segment, which increased $44.9 million, reflecting the addition of 9 Story. Revenues in the Children's Book Publishing and Distribution segment decreased by $12.2 million, primarily driven by lower trade channel revenues which reflected the timing of new releases and softness in the retail book market, partially offset by increased revenues from School Reading Events as a result of higher revenue per sponsor and an increase in events in the book clubs channel. In the Education Solutions segment, revenues decreased by $31.4 million primarily due to the continued decline in spending on supplemental materials and lower subscription revenues from Magazines+. In local currency, International segment revenues increased by $1.0 million, primarily reflecting increased sales in Canada, the U.K. and New Zealand, partly offset by lower sales in Australia due to softness in the retail market. International segment revenues were impacted by unfavorable foreign exchange of $1.0 million in the period ended February 28, 2025.

25
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Components of Cost of goods sold for the three and nine months ended February 28, 2025 and February 29, 2024 are as follows:
 Three months endedNine months ended
February 28, 2025February 29, 2024February 28, 2025February 29, 2024
($ amounts in millions)% of Revenue% of Revenue% of Revenue% of Revenue
Product, service and production costs and inventory reserves$87.4 26.1 %$83.5 25.8 %$294.4 26.3 %$299.3 26.9 %
Royalty and participation costs28.5 8.5 %26.9 8.3 %91.2 8.2 %90.5 8.1 %
Prepublication and production amortization
7.2 2.1 %6.7 2.1 %24.6 2.2 %20.6 1.8 %
Postage, freight, shipping, fulfillment and other31.5 9.4 %31.6 9.7 %101.3 9.1 %102.4 9.2 %
Total$154.6 46.1 %$148.7 45.9 %$511.5 45.8 %$512.8 46.0 %

Cost of goods sold for the quarter ended February 28, 2025 was $154.6 million, or 46.1% of revenues, compared to $148.7 million, or 45.9% of revenues, in the prior fiscal year quarter. Cost of goods sold was impacted by the addition of production and participation costs which were not present in the prior period as a result of the 9 Story acquisition in fiscal 2025. This increase was largely offset by the favorable mix of product sold in the quarter ended February 28, 2025, which resulted in lower product costs, primarily in the U.K. and New Zealand.

Cost of goods sold for the nine months ended February 28, 2025 was $511.5 million, or 45.8% of revenues, compared to $512.8 million, or 46.0% of revenues, in the prior fiscal year period. Cost of goods sold benefited from favorable product mix in the U.S. trade and book fairs channels as well as in the U.K. and New Zealand, which resulted in lower product costs, partly offset by the addition of production costs as a result of the 9 Story acquisition. The Company does not expect the remainder of fiscal 2025 to be materially impacted by the current tariff increases.

Selling, general and administrative expenses for the quarter ended February 28, 2025 decreased to $187.5 million, compared to $194.8 million in the prior fiscal year quarter. The $7.3 million decrease was primarily attributable to lower employee-related costs within overhead, lower commission expense and external labor costs within Education Solutions and a decrease in transaction costs related to the 9 Story acquisition of $2.5 million. This was partially offset by higher operating expenses from the addition of 9 Story and an increase in severance expense of $1.0 million from the Company's cost-saving initiatives.

Selling, general and administrative expenses for the nine months ended February 28, 2025 increased to $594.5 million, compared to $592.1 million in the prior fiscal year period. The $2.4 million increase was primarily attributable to the addition of 9 Story, which resulted in higher operating expenses in the period ended February 28, 2025, partially offset by $0.3 million of lower severance expense from cost-saving initiatives and lower commission expense and external labor costs within Education Solutions.

Depreciation and amortization expenses for the three and nine months ended February 28, 2025 were $16.9 million and $48.5 million, respectively, compared to $14.6 million and $42.1 million, respectively, in the prior fiscal year periods. The increase in Depreciation and amortization was primarily due to amortization expense on the intangible assets acquired as a result of the 9 Story acquisition. The Company also continues to shift spending to cloud computing arrangements in which the amortization expense is included in Selling, general and administrative expenses rather than Depreciation and amortization. Amortization related to cloud computing arrangements for the nine months ended February 28, 2025 increased by $2.0 million compared to the prior fiscal year period as a result of assets placed into service during fiscal 2024 and during the first half of fiscal 2025.

Asset impairments for the three and nine months ended February 28, 2025 were $0.3 million and $0.4 million, respectively, primarily related to the early exit of leased office space within the Entertainment segment. Asset impairments for the three and nine months ended February 29, 2024 were $0.5 million, primarily related to the early exit of leased sales office space within the Children's Book Publishing and Distribution segment.
26
SCHOLASTIC CORPORATION Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Interest expense for the three and nine months ended February 28, 2025 was $4.7 million and $13.4 million, respectively, compared to $0.5 million and $1.3 million, respectively, in the prior fiscal year periods. The increase in interest expense was due to borrowings under the U.S. Credit Agreement incurred during the first quarter of fiscal 2025 to fund the 9 Story acquisition. Interest expense is expected to increase by a similar amount for the fourth quarter of fiscal 2025.

Interest income for the three and nine months ended February 28, 2025 was $0.4 million and $1.7 million, respectively, compared to $1.1 million and $3.7 million, respectively, in the prior fiscal year periods. The decrease in interest income was attributable to lower average short term investment balances in the period ended February 28, 2025. The Company invests excess cash in short term investments which earn competitive interest rates that change directionally in relation to the Federal Funds rate.

The Company's interim effective tax rate, inclusive of discrete items, for the three and nine months ended February 28, 2025 was 87.3% and 65.5%, respectively, compared to 23.4% and 23.5%, respectively, for the prior fiscal year periods. The interim effective tax rate for the nine months ended February 28, 2025 varies from the statutory rate primarily due to the expected state and local income tax and non-deductible compensation for covered executive employees. Due to the seasonal nature of the business, the tax benefit on the operating loss for the nine months ended February 28, 2025 will be impacted by the Company's typically profitable fourth fiscal quarter.

Net loss for the quarter ended February 28, 2025 improved by $22.9 million to $3.6 million, compared to a net loss of $26.5 million in the prior fiscal year quarter. Loss per basic and diluted share of Class A and Common Stock was $0.13 for the fiscal quarter ended February 28, 2025, compared to $0.91 in the prior fiscal year quarter.

Net loss for the nine months ended February 28, 2025 improved by $6.5 million to $17.3 million compared to a net loss of $23.8 million in the prior fiscal year period. Loss per basic and diluted share of Class A and Common Stock was $0.61 for the nine months ended February 28, 2025, compared to $0.80 in the prior fiscal year period.

Children’s Book Publishing and Distribution
Three months endedNine months ended
February 28,February 29,$%February 28,February 29,$%
($ amounts in millions)
20252024ChangeChange20252024ChangeChange
Revenues$203.3 $193.1 $10.2 5.3 %$675.7 $687.9 $(12.2)(1.8)%
Cost of goods sold 92.0 87.5 4.5 5.1 %294.2 306.9 (12.7)(4.1)%
Other operating expenses (1)
103.7 102.8 0.9 0.9 %308.4 307.6 0.8 0.3 %
Asset impairments— 0.5 (0.5)(100.0)%— 0.5 (0.5)(100.0)%
Operating income (loss)$7.6 $2.3 $5.3 NM$73.1 $72.9 $0.2 0.3 %
Operating margin3.7 %1.2 %10.8 %10.6 %
(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses and depreciation and amortization.
NM Not meaningful

Revenues for the quarter ended February 28, 2025 increased by $10.2 million to $203.3 million, compared to $193.1 million in the prior fiscal year quarter. The increase in segment revenues was primarily driven by increased revenues from School Reading Events of $9.9 million. Book fairs channel revenues increased $8.0 million, driven by higher fair count as a larger number of fall-season fairs occurred in December compared to the prior year period. Revenue per fair was consistent with the prior fiscal year quarter. Book clubs channel revenues increased $1.9 million as a result of higher revenue per sponsor and an increase in events. Trade channel revenues were relatively consistent with the prior fiscal year quarter, increasing $0.3 million. In the quarter ended February 28, 2025, the Company benefited from increased sales from the Dog Man® series, which included the latest release, Dog Man #13: Big Jim Begins, in addition to sales of deluxe editions of titles in the Hunger Games® series and the release of Wings of Fire GraphixTM Novel #8: Escaping Peril. This was offset by lower sales of backlist titles reflecting continued softness in the retail book market.

27
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Revenues for the nine months ended February 28, 2025 decreased by $12.2 million to $675.7 million, compared to $687.9 million in the prior fiscal year period. Trade channel revenues decreased $13.4 million, primarily due to lower sales of backlist titles reflecting continued softness in the retail book market and the timing of new releases as the prior year period benefited from the release of several frontlist titles, including Cat Kid Comic Club®: Influencers, the interactive edition of Harry Potter and the Prisoner of Azkaban, and the paperback edition of The Ballad of Songbirds and Snakes. This decline was partially offset by increased sales from the Dog Man series, which included the latest release, Dog Man #13: Big Jim Begins, and increased foreign rights sales in the period ended February 28, 2025. The overall decrease in segment revenues was partially offset by increased revenues from School Reading Events of $1.2 million. Book clubs channel revenues increased by $2.8 million, driven by higher revenue per sponsor and an increase in events. Book fairs channel revenues decreased $1.6 million as a result of slightly lower revenue per fair, due to the addition of smaller fairs, and decreased redemptions of book fairs incentive credits, partially offset by higher fair count.

Cost of goods sold for the quarter ended February 28, 2025 was $92.0 million, or 45.3% of revenues, which was comparable to $87.5 million, or 45.3% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the nine months ended February 28, 2025 was $294.2 million, or 43.5% of revenues, compared to $306.9 million, or 44.6% of revenues, in the prior fiscal year period. Cost of goods sold benefited from the mix of product sold in the period ended February 28, 2025, which included higher foreign rights sales in the trade channel and redemptions of book fair incentive credits for lower cost products, as well as lower print costs in the book fairs channel.

Other operating expenses for the three and nine months ended February 28, 2025 were $103.7 million and $308.4 million, respectively, compared to $102.8 million and $307.6 million, respectively, in the prior fiscal year periods. The increase in Other operating expenses was primarily attributable to higher distribution costs within the book fairs channel.

Asset impairments for the three and nine months ended February 29, 2024 were $0.5 million. The Company ceased use of a leased sales office space, as a result of which the Company recognized an impairment expense of $0.5 million in the third quarter of fiscal 2024.

Segment operating income for the quarter ended February 28, 2025 was $7.6 million, compared to $2.3 million in the prior fiscal year quarter. The $5.3 million improvement was primarily attributable to higher revenues from School Reading Events, primarily driven by higher fair count in the book fairs channel.

Segment operating income for the nine months ended February 28, 2025 was $73.1 million, compared to $72.9 million in the prior fiscal year period. Lower revenues, primarily within the trade channel due to softness in the retail book market, were offset by lower product costs associated with the mix of product sold in the period ended February 28, 2025 and lower print costs in the book fairs channel.

Education Solutions
Three months endedNine months ended
February 28,February 29,$ %February 28,February 29,$ %
($ amounts in millions)20252024ChangeChange20252024ChangeChange
Revenues$57.2 $68.5 $(11.3)(16.5)%$184.1 $215.5 $(31.4)(14.6)%
Cost of goods sold 23.0 26.2 (3.2)(12.2)%77.7 89.5 (11.8)(13.2)%
Other operating expenses (1)
41.1 43.1 (2.0)(4.6)%130.8 139.7 (8.9)(6.4)%
Operating income (loss)$(6.9)$(0.8)$(6.1)NM$(24.4)$(13.7)$(10.7)(78.1)%
February 29,$2024Change
(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses, severance and depreciation and amortization.

The Entertainment segment includes the operations of 9 Story and Scholastic Entertainment Inc. ("SEI"). SEI was reported in the Children's Book Publishing and Distribution segment in prior periods. The financial results for SEI for the three months and nine months ended February 29, 2024 have been reclassified to Entertainment to reflect this change. Refer to Note 7 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements" for further details regarding the acquisition of 9 Story.

Revenues for the three and nine months ended February 28, 2025 were $12.8 million and $46.2 million, respectively, compared to $0.5 million and $1.3 million, respectively, in the prior fiscal year period. The increase reflected the addition of 9 Story from the date of acquisition on June 20, 2024 through February 28, 2025 in which a majority of the revenues were driven by production revenue related to episodic deliveries, production
29
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
services provided to third parties and, to a lesser extent, revenues from royalties and distribution. Entertainment revenues have been impacted by delays in production greenlights from major platforms.

Cost of goods sold for the three and nine months ended February 28, 2025 was $7.2 million, or 56.3% of revenues, and $26.1 million, or 56.5% of revenues, respectively. Cost of goods sold primarily consists of production costs and amortization, participation expenses and interest on film related obligations.

Other operating expenses for the three months ended February 28, 2025 were $9.2 million, which included transaction costs of $0.5 million related to the 9 Story acquisition and severance expense of $0.7 million related to cost-saving initiatives. Other operating expenses for the three months ended February 29, 2024 were $3.6 million, which included transaction costs of $3.0 million related to the 9 Story acquisition.

Other operating expenses for the nine months ended February 28, 2025 were $28.9 million, which included transaction costs of $2.6 million related to the 9 Story acquisition and severance expense of $1.1 million related to cost-saving initiatives. Other operating expenses for the nine months ended February 29, 2024 were $5.7 million, which included transaction costs of $3.0 million related to the 9 Story acquisition.

Asset impairments for the three and nine months ended February 28, 2025 were $0.3 million. The Company ceased use of a leased office space as a result of which the Company recognized an impairment expense of $0.3 million in the third quarter of fiscal 2025.

Segment operating loss for the three and nine months ended February 28, 2025 was $3.9 million and $9.1 million, respectively.

International
Three months endedNine months ended
February 28,February 29,$%February 28,February 29,$%
($ amounts in millions)20252024ChangeChange20252024ChangeChange
Revenues$59.3 $59.1 $0.2 0.3 %$202.8 $202.8 $0.0 0.0 %
Cost of goods sold33.8 36.5 (2.7)(7.4)%118.0 121.3 (3.3)(2.7)%
Other operating expenses (1)
27.6 28.5 (0.9)(3.2)%89.5 87.6 1.9 2.2 %
Operating income (loss)$(2.1)$(5.9)$3.8 64.4 %$(4.7)$(6.1)$1.4 23.0 %
(1) Other operating expenses include selling, general and administrative expenses, bad debt expenses, severance and depreciation and amortization.

Revenues for the quarter ended February 28, 2025 increased by $0.2 million to $59.3 million, compared to $59.1 million in the prior fiscal year quarter. Local currency revenues across the Company's foreign operations increased by $2.9 million, excluding unfavorable foreign exchange impact of $2.7 million. In Australia and New Zealand, local currency revenues increased $1.8 million, driven by increased sales of education products in New Zealand, which more than offset lower revenues in Australia. In the U.K., local currency revenues increased $1.2 million, primarily within the trade channel, driven by higher sales of titles within Dav Pilkey's Dog Man series, which included the latest release, Dog Man #13: Big Jim Begins. In Canada, local currency revenues increased $1.2 million driven by higher revenues from the trade and book clubs channels, partially offset by lower book fairs channel sales. The overall increase in segment revenues was partially offset by a $0.6 million decrease in local currency revenues in Asia, primarily within the trade and education channels, partly offset by growth in India, as well as lower export channel sales of $0.7 million.

Revenues for the nine months ended February 28, 2025 and February 29, 2024 were $202.8 million. Local currency revenues across the Company's foreign operations increased by $1.0 million, excluding unfavorable foreign exchange impact of $1.0 million. In the U.K., local currency revenues increased $2.5 million, primarily driven by higher sales in the trade channel which benefited from the release of Jonty Gentoo: The Adventures of a Penguin by Julia Donaldson and Axel Scheffler and Dog Man #13: Big Jim Begins by Dav Pilkey as well as higher fair count in the book fairs channel. In Canada, local currency revenues increased $0.8 million, driven by higher sales from the book clubs channels, partially offset by lower sales of education products. Canada also benefited from lower trade sales returns from its major customers which partially offset the decline in trade channel sales. Partially offsetting the increase in segment revenues, local currency revenues in Australia and New
30
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
Zealand decreased $0.2 million as increased sales of education products in New Zealand were more than offset by lower revenues in Australia, primarily due to continued softness in the retail market. In Asia, local currency revenues decreased $0.5 million due to lower sales within the trade and education channels, partially offset by growth in India. In addition, export channel revenues decreased $1.6 million as compared to the prior fiscal year period.

Cost of goods sold for the quarter ended February 28, 2025 was $33.8 million, or 57.0% of revenues, compared to $36.5 million, or 61.8% of revenues, in the prior fiscal year quarter. Cost of goods sold as a percentage of revenues decreased as a result of lower product costs in the U.K. and New Zealand due to the mix of product sold in the quarter ended February 28, 2025, coupled with lower excess and obsolete inventory in Canada as a result of improved inventory usage.

Cost of goods sold for the nine months ended February 28, 2025 was $118.0 million, or 58.2% of revenues, compared to $121.3 million, or 59.8% of revenues, in the prior fiscal year period. Cost of goods sold as a percentage of revenues decreased as a result of lower product costs in the U.K. and New Zealand due to the mix of product sold in the period ended February 28, 2025, partly offset by increased fulfillment costs in Australia on lower revenues.

Other operating expenses for the three months ended February 28, 2025 were $27.6 million, compared to $28.5 million in the prior fiscal year quarter. Excluding favorable foreign exchange impact of $1.2 million, Other operating expenses were consistent with the prior quarter.

Other operating expenses for the nine months ended February 28, 2025 were $89.5 million, compared to $87.6 million in the prior fiscal year period. The $1.9 million increase in Other operating expenses was primarily due to higher general overhead costs and higher severance expense from the Company's cost-saving initiatives of $0.3 million in which the Company incurred $1.5 million in Asia in the period ended February 28, 2025, compared to $1.2 million in Canada in the prior fiscal year period.

Segment operating loss for the quarter ended February 28, 2025 was $2.1 million, compared to an operating loss of $5.9 million in the prior fiscal year quarter. The $3.8 million improvement was primarily attributable to higher revenues in Canada, the U.K. and New Zealand, coupled with lower product costs associated with the mix of product sold in the quarter ended February 28, 2025 and improved profitability in Canada which benefited from operating efficiencies.

Segment operating loss for the nine months ended February 28, 2025 was $4.7 million compared to an operating loss of $6.1 million in the prior fiscal year period. The $1.4 million improvement was primarily attributable to higher revenues in Canada, the U.K. and New Zealand, coupled with lower product costs associated with the mix of product sold in the period ended February 28, 2025 and improved profitability in Canada which benefited from operating efficiencies and lower trade sales returns. This improvement was partially offset by higher general overhead costs and lower profitability from Australia due to lower revenues and higher fulfillment costs.

Overhead

Unallocated overhead expense for the quarter ended February 28, 2025 decreased by $8.8 million to $18.6 million, from $27.4 million in the prior fiscal year quarter. The decrease was primarily attributable to lower employee-related costs, which were partially offset by increased severance expense of $0.2 million related to the Company's cost-savings initiatives and higher medical costs, as well as higher rental income of $0.3 million.

Unallocated overhead expense for the nine months ended February 28, 2025 decreased by $8.8 million to $72.6 million, from $81.4 million in the prior year period. The decrease was primarily attributable to lower employee-related costs, which included lower severance expense of $1.7 million related to the Company's cost-savings initiatives, partially offset by higher medical costs. In addition, the Company benefited from higher rental income of $1.1 million as a result of a new tenant leasing space in the Company's headquarters.

Seasonality

31
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions businesses operate on a school-year basis; therefore, the Company’s business is highly seasonal. As a result, the Company’s revenues in the first and third quarters of the fiscal year generally are lower than its revenues in the other two fiscal quarters. Typically, school-based channels and magazine revenues are minimal in the first quarter of the fiscal year as schools are not in session. Education channel revenues are generally higher in the fourth quarter. Trade channel and Entertainment segment revenues can vary throughout the year due to the timing of published titles' release dates and program production deliveries and the start dates of distribution license agreements.

Liquidity and Capital Resources

Cash provided by operating activities was $17.3 million for the nine months ended February 28, 2025, compared to cash provided by operating activities of $84.7 million for the prior fiscal year period, representing a decrease in cash provided by operating activities of $67.4 million. The decrease in cash provided was primarily driven by lower customer remittances and increased inventory purchases and royalty advance payments in the period ended February 28, 2025, as well as increased medical claim payments, interest payments related to the Company's borrowings and higher spending in Entertainment due to the acquisition of 9 Story in fiscal 2025. This was partially offset by lower tax payments and lower discretionary spending in the period ended February 28, 2025.

Cash used in investing activities was $232.0 million for the nine months ended February 28, 2025, compared to cash used in investing activities of $69.5 million in the prior fiscal year period, representing an increase in cash used in investing activities of $162.5 million. The increase in cash used was driven by the cash paid for the 9 Story acquisition of $176.2 million, net of cash acquired, during the nine months ended February 28, 2025, as compared to the prior year period in which the Company acquired certain amortizable intangible assets related to educational programs and a U.S.-based children's book publishing business for $6.0 million and purchased the remaining noncontrolling interest related to Make Believe Ideas Limited for $2.1 million. This was partially offset by lower capital expenditures of $3.9 million.

Cash provided by financing activities was $197.6 million for the nine months ended February 28, 2025, compared to cash used in financing activities of $129.4 million for the prior fiscal year period, representing an increase in cash provided by financing activities of $327.0 million. The increase in cash provided was primarily attributable to borrowings of $275 million under the U.S. Credit Agreement incurred during the nine months ended February 28, 2025 to fund the 9 Story acquisition and working capital needs. In addition, the Company repurchased common stock of $40.0 million, compared to repurchases of $143.0 million in the prior fiscal year quarter, which also resulted in lower dividends of $1.9 million, partially offset by $18.6 million of net repayments of film related obligations in the nine months ended February 28, 2025.

Cash Position

The Company’s cash and cash equivalents totaled $94.7 million at February 28, 2025, $113.7 million at May 31, 2024 and $110.4 million at February 29, 2024. Cash and cash equivalents held by the Company’s U.S. operations totaled $41.0 million at February 28, 2025, $54.9 million at May 31, 2024 and $66.2 million at February 29, 2024. Due to the seasonal nature of its business as discussed under “Seasonality”, the Company usually experiences negative cash flows in the June through September time period.

The Company’s operating philosophy is to use cash provided by operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses or acquiring other strategic assets, as well as engaging in shareholder enhancement initiatives, such as share repurchases or dividend declarations. Under the Company's open-market buy-back program, $46.6 million remained available for future purchases of common shares as of February 28, 2025. Subsequent to February 28, 2025, the Board authorized an increase of $53.4 million for common share repurchases, resulting in a current Board authorization of $100 million, which includes the remaining amount from the previous Board authorization.

The Company has maintained, and expects to maintain for the foreseeable future, sufficient liquidity to fund ongoing operations, including working capital requirements, pension contributions, postretirement benefits, debt service, planned capital expenditures and other investments, as well as dividends and share repurchases. As
32
SCHOLASTIC CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
of February 28, 2025, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $94.7 million, cash from operations and the Company's U.S. Credit Agreement. On November 26, 2024, the U.S. Credit Agreement was amended, which, among other things, increased the borrowing limit from $300 million to $400 million and extended the maturity to November 26, 2029. See Note 4 of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information regarding the U.S. Credit Agreement. The Company expects the U.S. Credit Agreement to provide it with an appropriate level of flexibility to strategically manage its business operations. The Company's U.S. Credit Agreement, less borrowings of $275.0 million and commitments of $0.4 million, has $124.6 million of availability. Additionally, the Company has short-term credit facilities of $25.6 million, less current borrowings of $5.8 million and commitments of $3.6 million, resulting in $16.2 million of current availability under these facilities at February 28, 2025. Accordingly, the Company believes these sources of liquidity are sufficient to finance its currently anticipated ongoing operating needs, as well as its financing and investing activities.

Financing
 
The Company is party to the U.S. Credit Agreement and certain credit lines with various banks, including those related to film related obligations, as described in Note 4 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements."

New Accounting Pronouncements
 
Reference is made to Note 1 of Notes to Financial Statements - unaudited in Item 1, “Financial Statements,” for information concerning recent accounting pronouncements since the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains forward-looking statements. Additional written and oral forward-looking statements may be made by the Company from time to time in Securities and Exchange Commission ("SEC") filings and otherwise. The Company cautions readers that results or expectations expressed by forward-looking statements, including, without limitation, those relating to the Company’s future business prospects and strategic plans, ecommerce and digital initiatives, new product introductions, strategies, new education standards, goals, revenues, improved efficiencies, general operating costs, including transportation and labor costs and the extent such costs are impacted by inflationary pressures, manufacturing costs, medical costs, potential cost savings, tax incentives, merit pay, operating margins, working capital, liquidity, capital needs, the cost and timing of capital projects, interest costs, cash flows and income, are subject to risks and uncertainties, which may have an impact on the Company's operations and could cause actual results to differ materially from those indicated in the forward-looking statements, due to factors including those noted in the Annual Report and this Quarterly Report and other risks and factors identified from time to time in the Company’s filings with the SEC. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

33
SCHOLASTIC CORPORATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company conducts its business in various foreign countries, and as such, its cash flows and earnings are subject to fluctuations from changes in foreign currency exchange rates. The Company sells products from its domestic operations to its foreign subsidiaries, creating additional currency risk. The Company manages its exposures to this market risk through internally established procedures and, when deemed appropriate, through the use of short-term forward exchange contracts, which were not significant as of February 28, 2025. The Company does not enter into derivative transactions or use other financial instruments for trading or speculative purposes.
 
Market risks relating to the Company’s operations result primarily from changes in interest rates in its variable-rate borrowings. The Company is subject to the risk that market interest rates and its cost of borrowing will increase and thereby increase the interest charged under its variable-rate debt.

Additional information relating to the Company’s outstanding financial instruments is included in Note 4 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements.”

The following table sets forth information about the Company’s debt instruments as of February 28, 2025:

($ amounts in millions)Fiscal Year Maturity
 
2025 (1)
2026202720282029ThereafterTotalFair
Value at
02/28/2025
Debt Obligations        
Lines of credit and current
  portion of long-term debt		$— $5.8 $— $— $— $— $5.8 $5.8 
Average interest rate— 4.9 %— — — — 
Long-term debt$— $— $— $— $— $275.0 $275.0 $275.0 
Average interest rate— — — — — 6.1 %
Film related obligations (2)
$1.9 $6.7 $7.4 $0.7 $2.1 $— $18.8 $18.8 
Average interest rate5.6 %6.5 %6.4 %6.0 %5.8 %— 
(1) Fiscal 2025 includes the remaining three months of the current fiscal year ending May 31, 2025.
(2) Film related obligations are due on demand. Outstanding borrowings are presented by fiscal year maturity based on expected repayment dates per loan agreements.


34
SCHOLASTIC CORPORATION
Item 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of the Corporation, after conducting an evaluation, together with other members of the Company’s management, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of February 28, 2025, have concluded that the Corporation’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Corporation in its reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and accumulated and communicated to members of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. There was no change in the Corporation’s internal control over financial reporting that occurred during the quarter ended February 28, 2025 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

35

PART II – OTHER INFORMATION
SCHOLASTIC CORPORATION
Item 1. Business

In Item 1 (Business) in Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024, the Company included a description of its business activities. Except as set forth below, as of the date of this Quarterly Report on Form 10-Q there have been no material changes to the business described in the Company’s Annual Report for the fiscal year ended May 31, 2024.

The Company categorizes its businesses into four reportable segments: Children's Book Publishing and Distribution, Education Solutions, International and the newly formed Entertainment segment. The Entertainment segment includes the operations of 9 Story Media Group Inc. as acquired on June 20, 2024, including its studios in Canada, Ireland and Indonesia ("9 Story"), and Scholastic Entertainment Inc. ("SEI"). SEI was reported in the Children's Book Publishing and Distribution segment in prior periods. Refer to Note 7 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements" for further details regarding the acquisition of 9 Story. There have been no other changes to the Company's segments. A description of the Entertainment segment is below.

ENTERTAINMENT

The Entertainment segment includes the development, production, distribution and licensing of kids and family film and television content. This segment creates, develops, and produces award-winning branded properties using owned or licensed IP through its creative affairs group. The Company has an in-house animation studio, Brown Bag Films, which is recognized for producing high-quality and popular programs such as “Doc McStuffins®,” “Daniel Tiger’s Neighborhood®,” “Octonauts®,” “Wild Kratts®,” "Blue's Clue's & You!®," and “The Magic School Bus Rides Again".

This segment is also responsible for exploiting the Company's film and television assets, which include a large television programming library based on the Company's IP as well as third party programs. The Company distributes its animated and, to a lesser extent, live-action programming through various domestic and international channels, including subscription video on demand (SVOD), linear TV (traditional broadcast) and advertising-based video on demand (AVOD) including YouTube.

The Company has a consumer products division which builds global entertainment brands for kids, with expertise across creative, brand marketing, licensing and merchandising, working closely with television and digital distribution teams, as well as third party IP owners, licensees and retailers to ensure coordinated and strategic brand management.


36

SCHOLASTIC CORPORATION
Item 1a. Risk Factors

In Item 1A (Risk Factors) in Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024, the Company described material risk factors which could affect its business. Except as set forth below, as of the date of this Quarterly Report on Form 10-Q there have been no material changes to the risk factors described in the Company’s Annual Report for the fiscal year ended May 31, 2024. Any of the risks identified in such Annual Report, in this Quarterly Report on Form 10-Q or in other reports the Company files with the SEC, and other risks the Company has not anticipated or discussed, could have a material adverse impact on the Company’s business, financial condition or results of operations.

Changes in tax laws or a change in tax status may result in a loss of government tax credits in the Company's entertainment business.

The Company, through its economic control of 9 Story, presently benefits from significant Canadian government tax credits at both the federal and provincial level. The Company's entertainment business finances a significant portion of its production budgets from such government tax credits and certain anticipated government tax credits are used as collateral for the production loans. Pursuant to an opinion issued by the Minister of Canadian Heritage with respect to the Company’s investment in 9 Story, the Company anticipates that 9 Story will continue to be eligible for such tax credits. The Company could lose its Canadian government tax credits and incentives if the Canadian regulated business into which the Company has invested (9 Story) ceases to be controlled by Canadian nationals. In order to preserve the benefits, the Company's voting equity ownership of 9 Story is limited to 25% of the total voting equity shares outstanding. Further, 9 Story’s business is managed by a board of directors, a majority of whose members are Canadian nationals who are not otherwise affiliated with the Company, consistent with the Company’s representations to the Canadian Ministry of Heritage. There can be no assurance that the individual tax incentive programs currently available to the Company will not be reduced, amended, or eliminated or that the Company or any specific production will continue to qualify for them, any of which may have an adverse effect on the Company’s entertainment business, results of operations, or financial condition.

The Company's entertainment business depends on key relationships with buyers of film and television content and uncertainty with buyers or changes in demand for film and television content may impact the financial performance of the entertainment business.

The media and content industry in which the Company's entertainment business operates is rapidly evolving, including the market and demand for film and television content, with the entrance of new major streaming platforms and consolidation of traditional platforms, as well as the changing viewing habits of children and youth. While the Company believes that the demand for high-quality content will continue, industry trends may continue to change and the Company's entertainment business may be adversely affected by such changing industry trends, including potential impacts of mergers and acquisitions in the industry. There can be no certainty that demand for content will be sustained over the long term, that consumers will have an appetite for the programming produced by the Company's entertainment business or that the Company will be able to identify and be responsive to new content trends.

The Company may not be able to sustain, manage or effectively execute on its strategy with respect to its acquisition of 9 Story, which may impact the Company's financial performance.

The expected financial benefits of the Company's acquisition of 9 Story depend, among other things, on its ability to realize synergies with 9 Story and develop new programming utilizing Scholastic's current and future IP that achieves market and audience acceptance. If the Company is unable to do this, the Company's business, financial condition, and performance could be materially and adversely affected.

37

SCHOLASTIC CORPORATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to repurchases of shares of Common Stock by the Corporation during the three months ended February 28, 2025:
 
Issuer Purchases of Equity Securities
(Dollars in millions, except per share amounts)
Period Total number of
shares purchased		Average
price paid
per share		Total number of shares
purchased as part of publicly
announced plans or
programs
Maximum number of shares (or
approximate dollar value) that may yet be purchased under the plans or programs (i)
December 1, 2024 through December 31, 2024235,336$21.23235,336$71.6
January 1, 2025 through January 31, 2025237,344$21.05237,344$66.6
February 1, 2025 through February 28, 2025977,594$20.44977,594$46.6
Total1,450,2741,450,274$46.6
(i) Represents the amount remaining at February 28, 2025 under the Board authorization for Common share repurchases announced on March 20, 2024, which is available for further repurchases, from time to time as conditions allow, on the open market or through privately negotiated transactions. See Note 12 of Notes to Condensed Consolidated Financial Statements - unaudited in Item 1, “Financial Statements,” for a description of the Company’s share buy-back program and share repurchase authorizations. Subsequent to February 28, 2025, the Board authorized an increase of $53.4 million for common stock repurchases, resulting in a current Board authorization of $100 million, which includes the remaining amount from the previous Board authorization.
38


SCHOLASTIC CORPORATION
Item 5. Other Information

During the three months ended February 28, 2025, none of our directors or officers informed us of the or of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as each term is defined in Item 408(a) of Regulation S-K).


39

SCHOLASTIC CORPORATION
Item 6. Exhibits

Exhibits:
10.1*
10.2
21
31.1
31.2
32
101
Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended February 28, 2025 formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.
104Cover Page, formatted in Inline Extensible Business Reporting Language and contained in Exhibit 101.
*The referenced exhibit is a management contract or compensation plan or arrangement described in Item 601(b) (10) (iii) of Regulation S-K.

40

SCHOLASTIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q, DATED February 28, 2025
Exhibits Index
Exhibit NumberDescription of Document
10.1*
Letter Agreement dated January 30, 2025 between Peter Warwick and the Company.
10.2
Third Amendment, dated as of November 26, 2024, to the Amended and Restated Credit Agreement dated as of October 27, 2021 (the “Credit Agreement”) by and between Scholastic Corporation and Scholastic Inc., the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Form 8-K filed December 3, 2024).
21Subsidiaries of the Corporation, as of February 28, 2025.
31.1Certification of the Chief Executive Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of the Chief Financial Officer of Scholastic Corporation filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32Certifications of the Chief Executive Officer and Chief Financial Officer of Scholastic Corporation furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended February 28, 2025 formatted in Inline Extensible Business Reporting Language: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Changes in Stockholders' Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.
104Cover Page, formatted in Inline Extensible Business Reporting Language and contained in Exhibit 101.
*The referenced exhibit is a management contract or compensation plan or arrangement described in Item 601(b) (10) (iii) of Regulation S-K.

41

SCHOLASTIC CORPORATION
SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  SCHOLASTIC CORPORATION
  (Registrant)
 
Date: March 21, 2025By:/s/ Peter Warwick
  
 
  Peter Warwick
  

President and Chief Executive Officer
(Principal Executive Officer)
 
Date: March 21, 2025By:/s/ Haji L. Glover
  
 
  Haji L. Glover
  
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

42

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