Scholastic’s third quarter results were met with a significant negative reaction from the market. Management attributed the underperformance to persistent headwinds in its Education Solutions segment, where delayed and cancelled federal grants weighed on sales. CEO Peter Warwick described the quarter as “reflecting the normal seasonality of our business,” but acknowledged that ongoing funding uncertainty and reduced spending by schools contributed to the revenue decline. The company also highlighted operational improvements and strong performance in its Children’s Book Publishing and Distribution segment, with continued demand for key franchises like Hunger Games and Harry Potter bolstering trade sales.
Is now the time to buy SCHL? Find out in our full research report (it’s free).
Scholastic (SCHL) Q3 CY2025 Highlights:
- Revenue: $225.6 million vs analyst estimates of $238.9 million (4.9% year-on-year decline, 5.6% miss)
- Adjusted EPS: -$2.52 vs analyst expectations of -$2.41 (4.6% miss)
- Adjusted EBITDA: -$55.7 million vs analyst estimates of -$62.76 million (-24.7% margin, 11.3% beat)
- EBITDA guidance for the full year is $165 million at the midpoint, above analyst estimates of $163.3 million
- Operating Margin: -40.6%, down from -36.2% in the same quarter last year
- Market Capitalization: $661.1 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Scholastic’s Q3 Earnings Call
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Brendan Michael McCarthy (Sidoti): Asked about early feedback on new Education Solutions products and their resonance with schools. Interim head Jeffrey Mathews noted positive customer feedback but stressed that funding delays are limiting purchasing decisions.
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Brendan Michael McCarthy (Sidoti): Inquired about variables that could turn around the Education Solutions trend. Mathews emphasized that increased funding certainty would likely lead to stronger demand for supplemental classroom materials.
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Brendan Michael McCarthy (Sidoti): Sought clarity on the timeline and financial impact of the entertainment segment’s YouTube and digital initiatives. CEO Peter Warwick and CFO Haji Glover replied that high-margin digital income is expected to grow over time, with more meaningful impact anticipated in 2027.
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Brendan Michael McCarthy (Sidoti): Asked about further cost reduction opportunities in SG&A. Glover explained that most planned savings are already reflected in guidance, but the company will continue to identify additional efficiency opportunities.
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Unknown Analyst (B. Riley Securities): Questioned the trajectory for Education Solutions profitability as funding conditions evolve. Mathews expects a more back-end loaded year, with potential improvement if federal and state headwinds moderate.
Catalysts in Upcoming Quarters
In the coming quarters, our analyst team will watch for (1) the sales performance of new trade publishing titles and the impact of fall book fairs, (2) stabilization or improvement in Education Solutions as federal and state funding conditions evolve, and (3) measurable progress in monetizing digital and entertainment content. The pace of cost reductions and operational integration will also be key signposts for future profitability.
Scholastic currently trades at $26.58, down from $27.65 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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