Scholastic Corp (SCHL) Reports Q4 EPS of $1.43, Beats on Revenues

Scholastic Corp (NASDAQ: SCHL) reported Q4 EPS of $1.43. Revenue for the quarter came in at $496.2 million versus the consensus estimate of $344.7 million.

"Strong fourth quarter results helped us reach the higher end of full-year guidance for earnings per share, excluding one-time items. We continued to invest in new publishing and productivity-focused technologies under our Scholastic 2020 plan. The implementation of new finance and operating systems will bring us information much more quickly, enabling improved inventory and cost management, and is expected to provide cost savings of $10 million in fiscal 2019,\" said Richard Robinson, Scholastic Chairman, President and Chief Executive Officer. \"A new CRM system now available to book fairs and education is now enabling improved marketing effectiveness and reduced costs. We have also retired over half of our legacy systems and migrated 95% of our customer-facing applications to the Cloud."

Mr. Robinson continued, "Fiscal 2018 also saw strong trade sales bolstered by top-selling titles across all genres – early years, graphic novels, series publishing and young adult – including Dav Pilkey\'s Dog Man, I Survived, Five Nights at Freddy's, Wings of Fire and Peppa Pig. We also expanded the Scholastic Education sales force and broadened our publishing program, including the development of a complete Pre-K to 6 core reading program, Scholastic Literacy, which is expected to drive significant sales beginning in fiscal 2020. We finished the major office renovation of our headquarters building, adding capacity and technology enhancements, and are now completing new high-value retail space for tenanting in fiscal 2019 and beyond.

"While spending will continue for publishing and multi-year technology improvements, we expect fiscal 2019 to show better results, including a return to modest positive free cash flow. With strong content for trade and education globally, increased opportunities for profitable growth in school book clubs and book fairs, and international expansion particularly in Asia, we continue to fulfill our mission of helping children around the world become better readers to support their personal and learning growth."

Outlook

Scholastic expects to grow operating income through both targeted revenue growth and lower operating costs and is committed to delivering improvements in operating margins using new Scholastic 2020 work streams to leverage technology to enhance marketing efficiency, as well as upgrade business processes, with the goal of reducing costs and offsetting inflationary pressures.

Topline growth over the next three years is projected in education and trade, underpinned by new publishing. More targeted revenue growth in clubs, fairs, and international is also expected as the Company utilizes its new transformative technology investments to launch products in a more efficient manner, expand its existing customer relationships and target new customers more effectively. The Company has set a three-year revenue target for fiscal year 2021 of $1.80 billion, up from $1.63 billion in fiscal 2018. In pursuit of this three-year target, the Company expects fiscal year 2019 revenues to be in the range of $1.65 to $1.70 billion.

During this period, the Company believes that the greatest impact from its Scholastic 2020 plan initiatives will be reflected in future cash flows as measured by earnings before interest, taxes, depreciation and amortization (EBITDA, as defined in the accompanying tables) and expects EBITDA to grow at a rate three-times that of revenue growth, inclusive of additional rental income to be achieved upon the successful conversion and leasing of the new retail space at its NYC headquarters. The Company has set an EBITDA target for fiscal year 2019 of $160 to $170 million, up from $140.1 million, excluding one-time items, in fiscal 2018. Scholastic expects earnings per diluted share in fiscal 2019 in the range of $1.60 to $1.70, up from earnings per diluted share, excluding one-time items, of $1.43 in fiscal 2018, reflecting a projected increase in operating income, as well as a reduction in the Company's effective tax rate given the full-year benefit of recent tax reform legislation.

For earnings history and earnings-related data on Scholastic Corp (SCHL) click here.

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