Good day. Thank you for standing by. Welcome to the Scholastic reports Q3 Fiscal Year 2024 Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jeffrey Mathews.

Welcome everyone to Scholastic’s fiscal 2024 third quarter earnings call. Today on the call, I am joined by Peter Warwick, our President and Chief Executive Officer and Haji Glover, our new Chief Financial Officer and Executive Vice President, who I am excited to welcome. As usual, we posted the accompanying investor presentation on our IR website at investor.scholastic.com, which you may download now if you’ve not already done so. We would like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties and actual results may differ materially from those currently anticipated. In addition, we will be discussing some non-GAAP financial measures as defined in Regulation G. The reconciliation of those measures to the most directly comparable GAAP measures may be found in the company’s earnings release and accompanying financial tables filed this afternoon on our Form 8-K. This earnings release has also been posted to our Investor Relations website. I encourage you to review the disclaimers in the release and investor presentation and to review the risk factors disclosed in the company’s annual and quarterly reports filed with the SEC. Should you have any questions after today’s call, please send them directly to our IR e-mail address, investors_relations@scholastic.com. And now, I’d like to turn the call over to Peter Warwick to begin this afternoon’s presentation.

So, thanks Jeff and good afternoon everyone. We appreciate you joining us today. During the third quarter, Scholastic executed our long-term strategy for growth and impact while delivering value for our shareholders. In particular, we continue to prove our leadership in children’s publishing and media through a consistent and growing presence on bestsellers lists and advanced our 360-degree content creation strategy including with our recently announced agreement to acquire 100% of the economic interest in 9 Story Media Group, which I’ll discuss in a moment. In quarter three, we also continued to execute solidly in School Reading Events and Education Solutions, while navigating the currently complex environment in U.S. schools and positioned ourselves for an important quarter four season and long-term growth. We demonstrated our confidence in the long-term outlook for our business with continued share buybacks, returning over $60 million to shareholders during the quarter through a combination of open market share repurchases and our regular dividend. As expected, in quarter three, Scholastic recorded modest revenue declines and higher losses, largely reflecting external factors and the shifting seasonality of our business. Going into quarter four, typically our biggest and most profitable quarter, we are confident in achieving our previously provided revised fiscal 2024 guidance for adjusted EBITDA of between $165 million to $175 million, with full year revenue approximately level with or slightly below the prior year. I am thrilled to be joined on today’s call by our new CFO, Haji Glover, who rejoined Scholastic in January. Haji is a forward-looking, growth-oriented finance leader, who already knows Scholastic well. He is well positioned to drive change and focus our business on the future, using his experience and perspective to build on the work of his predecessor, Ken Cleary, who led the finance organization to dramatically increase efficiencies across our…

Thank you, Peter, and good afternoon, everyone. Before I turn to our financial results, I would like to say how happy I am to be back at Scholastic, a company whose mission and people are very dear to me. As the new CFO, I have the privilege and the opportunity to lead a strong, mission-driven financial organization at Scholastic at a very exciting moment in the company’s history. The work that Ken and the finance team achieved to drive efficiencies over the past few years has created a solid foundation that we can now use strategically to accelerate opportunities for growth and value creation. Our outlook is also strengthened by the progress we have made over the past 1.5 years, allocating capital against our priorities, which include investing it in growth opportunities, maintaining a strong and efficient balance sheet and returning excess cash to the shareholders to enhance their returns. Our recent agreement to invest in 9 Story and the over $60 million we’ve returned to shareholders last quarter will speak to that progress. I look forward to supporting Peter, my talented colleagues and the Board and continuing to rigorously allocate capital to support Scholastic’s long-term growth. With that, I will now walk through our consolidated financial results. I will refer to our adjusted results for the third quarter, excluding one-time items unless otherwise indicated. In fiscal 2023, the company did not report one-time items. Please refer to our press release tables and SEC filings for a complete disclosure of one-time items. As Peter described in our seasonally smaller third quarter, revenues were $323.7 million, just slightly below the prior year period. Adjusted operating loss in the quarter grew to $30.6 million, as expected, reflecting increasing seasonality and spending in preparation for anticipated significant Q4 compared to $27.7 million a…

Thank you, Haji. As you have heard on the call today, there is an enormous amount of activity underway across the business. We are driving momentum behind the trusted Scholastic brand in our children’s publishing and media franchises, helping to reach more kids and families with high-quality engaging content that inspires learning on the page and screen, and driving long-term growth and shareholder value creation. I am excited about the potential of our strategy and the strength of execution underway across the businesses to reach our goal for long-term growth. Let me now turn the call over to Jeff.

Thank you, Peter. We appreciate our investors’ time today and continuing support. With that, we will open the call for questions.

[Operator Instructions] Our first question comes from the line of Brendan McCarthy with Sidoti. You may proceed.

Hey. Good afternoon everybody. Thanks for taking my questions. Just wanted to start off in the consolidated trade area, it looks like, the sales were up 7%, solid growth there. Can you talk about the frontlist and backlist I mean which contributed more to that growth?

We were particularly – it’s Peter here. We were particularly pleased with the performance over the holiday season. And on top of that, we did particularly well with a number of frontlist titles, particularly new graphics novels, which is a category that we are very much the market leader. So, it was – I mean it was really a question of the titles and authors, which we have published on a regular basis over a number of years, but also some good new titles as well. So, it was really a combination of – it was both new and continuity in that respect.

Understood. Got it. And then looking quickly at gross margins, they were up nicely year-over-year. How do you expect that trend to continue looking out the next couple of fiscal quarters?

Hi Brendan, this is Haji. Thanks for the question. So, as we are looking right now, with the cost of freight in our COGS line, you can see that we have a strong improvement year-to-date. Roughly about $20 million year-to-date that we have saved in both our COGS and our inventory, it’s really driven around our utilization, or we are basically back in line to pre-pandemic levels when it comes to our inventory levels, which is really driving the profitability in our gross margin section.

Got it. Thanks. That’s helpful. Turning to the Book Clubs business, another pretty large revenue decline there, but can you offer some insight into the timing of the shrink to grow strategy there? Maybe over the next couple of quarters, when do you expect the other revenue variation to kind of normalize?

Well, it’s a medium to longer term project, Brendan, in terms of what we are doing. What we are seeking to do is to have a smaller Book more profitable business. And I would expect that it’s going to take some quarters before we get to the destination that we might ultimately want to be to, but I am reasonably confident that there is going to be improvement quarter-over-quarter in terms of performance. And what we are doing at the moment is very much working right now on testing some new strategies for next year that we hope will contribute very much to our medium to long-term plan.

Got it. Thanks Peter. Maybe one more question for me, just looking at the 9 Story investment, and I know you mentioned probably lower capital intensity business that you are looking out in the future as well as certain tax advantages. But do you expect to see any integration costs or elevated costs from this investment over the next couple of quarters?

We don’t expect to see a large number of integration costs. If anything, we are looking to continue to let 9 Story’s working is to our and find opportunities to bolt on things within that business. But right now, it’s very efficient, and we could continue to see that there is potential opportunity for some synergies in the future.

Understood. Haji and Peter, thank you very much for the answers. I appreciate it. That’s all for me.

Thank you, Brendan.

Thank you. And this concludes our Q&A. I will pass the call back to management for any closing remarks.

Well, thank you, operator, and thank you to all of those who joined us this afternoon. I wish you all a happy spring. We look forward to engaging with our investors in the coming days and to providing a further update on our progress, including our investment in 9 Story and on our plan for fiscal 2025 in July on our year-end call. Thanks again. Goodbye.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.