Scholastic Corp (NASDAQ:SCHL) reported Q2 EPS of $1.72, versus $0.90 reported last year. Revenue for the quarter came in at $514 million, versus $401.4 million reported last year.
Outlook:
In fiscal 2023, the Company expects the overall demand for independent reading resources at home and in school to remain strong, and management will continue to reallocate investments to yield the best returns by focusing on the value of the Company's intellectual property, expanding its education solutions channel and, where appropriate, adjust product pricing.
In the book fairs channel, the Company will strategically increase fair count, anticipating 85% pre-pandemic levels, while maintaining strong revenue per fair, continuing to leverage improved distribution efficiencies and sales and marketing efforts. Labor and system issues in the book clubs channel have been mitigated and higher operating incomes are expected on improved customer confidence. The Company is also excited about new releases in the trade channel from some of the most popular best-selling series and authors such as Wings of FireTM GraphixTM by Tui Sutherland, Cat Kid Comic Club®: Collaborations by Dav Pilkey, Brian Selznick's Big Tree and many more. The Company's content benefited from on-screen adaptations such as Dreamworks' The Bad GuysTM and Netflix (NASDAQ:NFLX)'s HeartstopperTM in fiscal 2022 and moving forward Scholastic Entertainment has 35+ projects in development, some of which will impact next fiscal year, such as Eva the OwletTM, a new animated kids and family series on AppleTV+ based on the New York Times bestselling Scholastic book series "Owl Diaries"TM by award-winning author Rebecca Elliott.
The Company anticipates increased demand of its educational products supported by continued government-related funding programs, as well as improvements in Education Solutions' sales and marketing efforts. The Company will enter its second year of the New Worlds Reading Initiative, which will begin in the second fiscal quarter, and will look for future state-sponsored programs opportunities as they arise. The sales of Scholastic Magazines+TM have reached near pre-pandemic levels with distribution of over 125M units of digital and physical product to children throughout the U.S. The Company will prudently increase spending to improve cross-selling initiatives and data-driven selling opportunities which will benefit future periods but will impact next fiscal year, decreasing operating income.
Internationally, the Company is expecting modest improvement in operating profits as the major markets continue to recover from the impacts of the global pandemic and Asia benefits from the Company's strategic exit of the low-margin direct sales business.
Overhead costs are expected to increase next year due to higher salary related costs as a result of continuing inflationary pressures and an increase in spending on transformative and digital services as the Company invests in future growth opportunities. The Company will continue to explore further opportunities for measured cost savings with process improvements and automation, product rationalization and overall improvements in resource allocation to increase shareholder value.
The Company expects fiscal year 2023 revenues to increase 8%-10% and has set an Adjusted EBITDA (as defined in the accompanying tables) target for fiscal year 2023 of $195M to $205M, up from $188.9M in fiscal 2022.