Scholastic (NASDAQ:SCHL) executives told investors the company’s fiscal 2026 third quarter results were in line with expectations, while highlighting balance sheet actions and an expanded capital return plan following the completion of major sale-leaseback transactions.
Sale-leaseback proceeds fuel expanded buyback plan
President and CEO Peter Warwick said Scholastic completed sale-leaseback transactions involving its New York City headquarters and Jefferson City distribution facility, unlocking “more than $400 million in net proceeds” in December. He described the move as an important step in optimizing the company’s balance sheet.
Building on that, management announced new long-term net leverage targets and a significantly larger repurchase authorization. Warwick said the board approved a new $300 million program consisting of:
- $200 million modified Dutch auction tender offer
- $100 million for open-market repurchases
Chief Financial Officer Haji Glover said the tender offer price range is $36 to $40 per share and is expected to commence Monday, March 23, 2026, and remain open until Monday, April 20, subject to customary conditions. Assuming full subscription, Warwick said the tender would represent about 25% of shares outstanding as of quarter end. Glover said the tender is expected to be funded with a combination of cash on hand and borrowings under the company’s credit facility.
Quarterly results reflect seasonal loss and sale-leaseback impact
Glover reported third quarter revenue of $329.1 million, down from $335.4 million a year earlier. Adjusted operating loss widened to $24.3 million from $20.9 million, and adjusted EBITDA was approximately break-even versus $6 million in the prior-year period.
Management emphasized the partial-year effect of the sale-leaseback transactions. Glover said the transactions reduce adjusted EBITDA by about $14 million on a partial-year basis in fiscal 2026, primarily from incremental lease expense and the elimination of rental income previously recognized on the assets. He added that excluding the partial-quarter impact in Q3 (about $3 million on adjusted operating loss and $6.7 million on adjusted EBITDA), adjusted operating loss would have been $21.3 million and adjusted EBITDA $6.7 million, roughly in line with the prior year.
Net loss for the quarter was $3.5 million, compared with a net loss of $1.3 million in the prior year. Adjusted loss per diluted share increased to $0.15 from $0.05.
Book Fairs strength offsets timing headwinds in Trade
In Children’s Book Publishing and Distribution, revenue declined 3% to $197.6 million, which Glover attributed to the timing of major publishing releases compared to last year, partly offset by continued strength in Book Fairs. Segment adjusted operating profit improved to $8.9 million from $7.6 million, aided by higher book fair revenue and cost discipline.
Book Fairs revenue increased 2% to $113.3 million, driven primarily by higher revenue per fair. Warwick and Glover both pointed to year-to-date fair count growth, higher revenue per fair, fewer cancellations, strategic merchandising and pricing initiatives, and increased adoption of eWallet. Warwick also cited strong redemption of Scholastic Dollars and said the company introduced “Discovery Fairs,” a new STEAM-focused fair format, with early pilots showing “robust demand.”
Book Clubs revenue was $14.6 million, roughly flat versus $15.2 million a year ago. Management said results continue to reflect changing classroom and teacher engagement patterns, but noted sequential improvement from the fall due to updated flyers, improved digital ordering, and targeted promotions. Warwick said the program is expected to reach nearly 300,000 teacher sponsors nationwide this year.
Trade Publishing revenue decreased 10% to $69.7 million from $77.4 million. Warwick attributed the decline to shifts in the publishing calendar versus last year, as well as adverse winter weather and other short-term factors affecting retail book purchasing. Still, he emphasized ongoing momentum across key franchises, including Dav Pilkey’s Dog Man universe, The Hunger Games, and Wings of Fire, while Glover said the company expects trade to be “slightly below” the prior year on a full-year basis due to the publishing schedule and short-term disruption in retail demand.
Entertainment expands digital reach; Education continues stabilization
Entertainment revenue rose to $16 million from $12.8 million, driven by increased episodic deliveries and higher production services revenue. Segment adjusted operating loss was $2.5 million, essentially flat with last year. Warwick said greenlight activity is improving and the company is working on major new projects expected to be announced in coming months.
Warwick also highlighted digital platform performance: Scholastic-branded YouTube channels generated more than 85 million views in the quarter, up over 200% year-over-year, with more than 21 million hours watched. The Scholastic TV app, launched in the fall, now offers more than 800 episodes and has generated nearly 100 million minutes watched and more than 5 million views, with average engagement of about 30,000 views per day.
In Scholastic Education, revenue declined 2% to $56.1 million, with Warwick citing tight spending on supplemental curricula and resources amid funding uncertainty and the transition toward science-based literacy approaches. He said the decline represented a “significant deceleration” from earlier quarters and noted year-over-year profitability improvement. Segment adjusted operating loss narrowed to $5.2 million from $6.9 million, which Glover attributed to a lower cost structure, improved operating discipline, and reorganization initiatives.
Warwick said the company’s goal is to stabilize Education in fiscal 2026 and return the segment to growth in fiscal 2027, while Jeff Mathews—appointed permanent president of Scholastic Education in January—said the team is encouraged by sequential improvements and that restructuring has created runway to invest in growth.
Guidance reaffirmed; leverage targets set; tariff impact noted
Management reaffirmed full-year fiscal 2026 adjusted EBITDA guidance of $146 million to $156 million, inclusive of the partial-year sale-leaseback impact. The company also reaffirmed free cash flow guidance to exceed $430 million, reflecting real estate sale proceeds as well as operating cash flow in excess of CapEx and prepayment needs. Warwick said full-year revenue is expected to be “approximately flat” versus the prior year, reflecting softness in Education and strong prior-year comparisons in Trade.
On the balance sheet, Glover said free cash flow in the quarter was $407 million, compared to free cash flow use of $30.7 million a year ago, primarily due to the sale-leaseback proceeds. Scholastic fully repaid its revolver balance and ended the quarter with net cash of $90.6 million, compared with net debt of $136.6 million at the end of fiscal 2025.
Glover announced long-term net leverage targets of 2.0x to 2.5x adjusted EBITDA, calling it a long-term goal rather than an immediate move. He added that even a fully executed tender offer would leave the company at “a little bit under one” turn of net leverage, though he noted seasonal working capital draws typically increase leverage during lower-revenue summer periods.
Glover also said the company continues to expect about $10 million of incremental tariff expense in cost of product this fiscal year and is monitoring policy changes.
About Scholastic (NASDAQ:SCHL)
Scholastic Corporation (NASDAQ: SCHL) is a global company dedicated to children’s publishing, education technology and distribution services. The company’s core business encompasses three primary segments: Children’s Book Publishing and Distribution, Education Technology, and International operations. Through its publishing arm, Scholastic produces and distributes a wide range of children’s books, novels, nonfiction titles and classroom magazines under well-known imprints such as Scholastic Press, Graphix and Chicken House.
