Good day, and thank you for standing by. Welcome to the Scholastic Corporation Reports Third Quarter Fiscal Year 2026 Results. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. I would now like to hand the conference over to your speaker today, Jeffrey Mathews, Executive Vice President, Chief Growth Officer, and President, Scholastic Education.

Hello, and welcome everyone to Scholastic Corporation's fiscal 2026 Third Quarter Earnings Call. Today on the call, I am joined by Peter Warwick, President and Chief Executive Officer, and Haji Glover, our Chief Financial Officer and Executive Vice President. As usual, we have posted the accompanying investor presentation on our IR website at investors.scholastic.com. You may download it now if you have 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 reconciliations of those measures to the most directly comparable GAAP measures can be found in the company's earnings release and accompanying financial tables filed this afternoon on a Form 8-K. This earnings release has also been posted to our Investor Relations website. We 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 email address, investor_relations@scholastic.com. I will now turn the call over to Peter Warwick to begin this afternoon's presentation.

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. In the third quarter, Scholastic Corporation advanced our strategy to support long-term growth and enhance shareholder value. A key milestone was the successful completion of our sale-leaseback transaction involving our New York City headquarters and Jefferson City distribution facility last December. This unlocked more than $400 million in net proceeds and represented an important step in optimizing Scholastic Corporation's balance sheet. Consistent with our disciplined approach to capital allocation and our belief that the company's shares represent a highly accretive investment, we moved quickly to return cash to shareholders under an upsized $150 million share repurchase authorization we have nearly exhausted. We have already bought back more than 4,400,000 shares for approximately $147 million in the open market, or $33.30 per share on average. With a view toward further optimizing our balance sheet and enhancing shareholder value, today, we are announcing long-term net leverage targets for the company, as Haji will discuss. As a next step, the board has authorized a $300 million share repurchase authorization comprising a $200 million modified Dutch auction tender offer, with the remaining $100 million to be used for repurchases in the open market. The offer price range has been set to $36 to $40 per share. Assuming it is fully subscribed, the tender offer would represent approximately 25% of Scholastic Corporation's shares outstanding as of quarter end. This is yet another step in the capital allocation strategy we have been executing since fiscal 2022, already returning over $650 million to shareholders through share repurchases and dividends while continuing to invest in initiatives that support long-term growth. Haji will provide additional details later in the call. Turning to our operating performance, third quarter results were in line with expectations as we continued executing…

Thank you, Peter. And good afternoon, everyone. As usual, I will refer to our adjusted results for the third quarter, excluding one-time items, unless otherwise indicated. Please refer to the tables in today’s earnings press release and SEC filings for a complete discussion on one-time items. As Peter discussed earlier, during the quarter we completed the sale-leaseback transaction related to our New York City headquarters and the Jefferson City distribution facilities. This generated over $400 million in net proceeds to be used in line with our capital allocation priorities. As noted last quarter, these highly accretive transactions will reduce adjusted EBITDA by approximately $14 million on a partial-year basis in fiscal 2026, primarily reflecting incremental lease expense and the elimination of rental income previously recognized on these assets. Please see last quarter’s earnings presentation for a reconciliation of the estimated partial-year and pro forma full-year P&L impact of the sale-leaseback transactions. Let me begin with our consolidated financial results. In the third quarter, revenues were $329.1 million compared to $335.4 million in the prior-year period. Adjusted operating loss was $24.3 million compared to $20.9 million in the prior-year period. Adjusted EBITDA was approximately breakeven compared to $6 million in the prior-year period, primarily reflecting the partial-year impact of the sale-leaseback transactions, offset by higher gross profits in Children’s Book Group reflecting company-wide cost discipline. Excluding the sale-leaseback transaction partial-quarter impact of $3 million on adjusted operating loss and $6.7 million on adjusted EBITDA, adjusted operating loss was $21.3 million and adjusted EBITDA was $6.7 million, approximately in line with the prior year. Net loss was $3.5 million compared to a net loss of $1.3 million in the prior-year period. On a per diluted share basis, adjusted loss increased to $0.15 compared to a loss of $0.05 last year. Turning to…

Thank you, Haji. In conclusion, we are pleased with our team’s progress during the quarter to advance our strategic plan and execute another step in our capital allocation strategy, including quickly and efficiently returning excess cash to shareholders. As we look to quarter four and beyond, we continue to benefit from the strength of our global franchises, trusted brand, and unique school-based channels, while expanding the reach of our stories and characters to audiences. At the same time, we will continue to reposition our Education business for growth. I would like to thank our employees, authors, illustrators, and creators for their dedication and hard work, as well as our shareholders for their continued support. Thank you very much. I will now turn the call over to Jeff. Thank you, Peter.

With that, we will open the call for questions. Operator?

Thank you. Press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. One moment for questions. Our first question comes from Brendan McCarthy with Sidoti & Company. You may proceed.

Great. Good afternoon, everybody. I appreciate you taking my questions here. Just wanted to start off looking at the rest of the fiscal year and specifically the fourth quarter. Just achieving the flat revenue target for the full fiscal year, it looks like it implies roughly 2% growth in the fourth fiscal quarter compared to the prior-year period. I just wanted to walk through some of the different factors at play there. I know that will exclude about $3 million in rental income in the quarter, and also a challenging comparison in the Trade channel, sales from The Hunger Games release in 2025. I am just curious as to your confidence in achieving that 2% growth target for the quarter?

Hi, Brendan. It is Peter here. I think Book Fairs are the major factor that we see in the fourth quarter in terms of revenue growth. It is a big quarter for Book Fairs, and we have been doing very well, and all the initial indications that we have got so far are positive. So that is one of the key factors. We also, of course, have to take into account, as you mentioned, the Trade timing issue that we do have to deal with, so Trade is not going to exceed the revenues that we got in the fourth quarter last year because of the big success of Sunrise on the Reaping. The other factor is really in Education, because we have been progressively closing the gap in Education against the prior year, and we are anticipating that the reduction that we have been seeing will be much less of an impact in the fourth quarter. It is a big quarter for Education, and it has been encouraging to see that in that segment we have been doing progressively better each quarter. We actually performed on the bottom line better in the third quarter than we did in the same third quarter last year, and so we are anticipating that all the work that Jeff and everybody has been doing in Education will begin to yield some results in the fourth quarter. So that is why we are feeling that we can be there or thereabouts on our revenues for the year.

Understood. I appreciate the detail there. And in the Education business, I think it is great to see the magnitude of top-line declines has been improving. It looks like in each quarter of this fiscal year. Can you talk about the sales pipeline for the fourth quarter as it relates to the different products being, you know, summer reading packages, supplemental materials, and maybe the state- or the state-sponsored programs as well?

In terms of the actual sales pipeline, we are obviously expecting to do well with summer reading because this is the quarter when a lot of that happens. One of the great things that we have seen with our sales pipeline is that it has been improving each quarter—quarter two is better than one, three better than two, and fourth looking better than three. So that is where we expect to do well, with summer reading. We are also expecting to do well with the Knowledge Library and with the book packs that we have been putting together that support science of reading. And we have also got the usual for the fourth quarter; we have good initiatives in line for the Books to Home through the programs that we do with the various states.

Understood. Thanks, Peter. And a similar question on the adjusted EBITDA guidance. It looks like you will need about $80 million in adjusted EBITDA in Q4 to hit the guidance range for the full fiscal year. Again, I know there is an impact from the sale-leaseback transaction—$14 million for the full second half of the fiscal year. Any other factors there that give you confidence that you will hit the guidance range?

Hey, Brendan. This is Haji. How are you doing?

Good, Haji. How are you?

I am alright. As we noted in the script today, we definitely are seeing some favorability from our cost mitigation actions that we have been taking throughout the year. So that is why we feel very confident in the fourth quarter. And plus, as you know from watching us over the years, the fourth quarter is our second biggest performing quarter. It is just a little bit more profitable because of all the cost actions that we have made throughout the year. That is really why we are very confident about the fourth quarter from a profitability standpoint.

That is great. And looking at the Entertainment segment, it looks like solid revenue growth there year over year in the third fiscal quarter. Are you really starting to see the pickup in greenlighting activity flow through to preproduction and ultimately the revenue?

Yes, we are. We have had a number of greenlights that have happened in the third quarter. We have just had a fairly significant one greenlit at the beginning of this week, post-closing for the third quarter, and that is looking good. It is looking better than it was, put it that way. I think that we have seen the bottom of that entertainment market. We have talked to one or two other companies who are involved in entertainment; they are seeing pretty much the same sort of thing. So I think entertainment has turned the corner. It is not going to grow explosively; it is going to be steady growth, but I think that the growth that we see now in that marketplace will sustain the revenues, activities, and bottom line that we have baked into our fourth quarter, and also set us up well for our fiscal year 2027.

That is great. And from an operating income perspective there in the Entertainment segment, are you looking for positive operating income in Q4, or will that flow through in fiscal 2027 maybe?

We should see a little bit of profitability in the fourth quarter from them, from an EBITDA basis.

Got it. Okay. Great. I appreciate the detail. That is all for me.

Thank you, Brendan.

Thanks. Bye.

Our next question comes from Drew Crum with B. Riley Securities. You may proceed.

Okay. Thanks. Hey, guys. Good afternoon. Peter, just on the Book Fairs business to start, a few weeks into the current quarter, it sounds like you are pretty encouraged by what you are seeing, how the business is tracking. Any specific KPIs you can point to behind the confidence in the outlook?

We can point to, first of all, the number of fairs, which is up, so that is good. Also, the revenue per fair is looking in line or better with what we were anticipating. And we have also had fewer cancellations than the prior year. Those are really the big three in terms of performance. So we are feeling good about that. And, thankfully, this year any bad weather was during the time when there were not very many Book Fairs. Compared to some other years, that has been a factor, but we have not really had that in our fairs this year. So things are looking promising.

Got it. Okay. And then maybe for Jeff or Haji—you guys narrowed the revenue guidance range for the year, it looks like; I know, a $15 million to $25 million downgrade to the top end. Our interpretation is this is specific to the Education segment. Was it a shortfall in fiscal 3Q relative to your internal model? Is the business not tracking to your previous plan for fiscal 4Q, or is it a combination of both factors? Because I thought you guys did a pretty nice job of narrowing the year-on-year decline—that is the first part of the question. And did I hear correctly that you expect that business to grow top line in fiscal 2027?

Drew, it is Jeff Mathews here. Great question. So on the adjustment in the top-line outlook, I want to be clear that we mentioned year-to-date Education results. The change in outlook was really more related to some of the dynamics we saw last quarter in Trade. I will let Haji talk about that. As far as the fiscal 2027 outlook for Education, of course, we have not provided guidance for next year. Our goal very much from the beginning has been to return this business to growth. We know that is its opportunity, and it is the mandate the team and I have. We will provide more outlook on that, but clearly we are encouraged by the sequential improvements in the business. The cost savings that we have taken, restructuring very strategically, have given us the runway to make some investment in the growth that we will need to drive for next year. Haji, do you want to take the first part on guidance?

Yes. On the Trade business, as we mentioned before, we had a very strong fourth quarter with the Sunrise on the Reaping book that came out, so we are dealing with that. But at the end of the day, we see other groups like Entertainment performing well in the fourth quarter, so that is why we are expecting some good news. And then you take the impact of the sale-leaseback—if you back that out from an adjustment basis, I think that is about $6 million on the top line as well. The other organizations, in terms of, like Peter had mentioned earlier, we definitely see some strong performance in the CBG group, mainly Fairs, and a leveling off in the Clubs business within that group.

Got it. Okay. And then maybe, Haji, one last one for you. I am not sure you are going to answer this, but I will try. The language you use for the 2.0x to 2.5x net leverage target—being “longer term”—how soon could we see the business reach that threshold?

Like I said before, we are definitely not going to jump in and go right up to 2.0x or 2.5x day one. Right now, as you know, we are in a net cash position. But once we go into the tender, if we fully execute the tender, that would only pull us to a little bit under 1.0x net leverage turn. So we feel very comfortable with that number. Like I said, this is a very historical moment for Scholastic Corporation—just setting out targets in general. So I am confident in our future and making sure we continue to manage our balance sheet effectively. One point I do want to mention on that: we will be saving some working capital draw as well on our debt because, due to our seasonality, we do not have a lot of revenue coming in this period, so we would have to draw on that. So that would increase the leverage, but that is seasonal.

Thank you. Alright.

And this concludes our question-and-answer session. I will pass the call back to Peter Warwick for any closing remarks.

Thank you very much, and thank you to all of you for joining our call today. As you know, we appreciate your support. We will continue on our strategy to strengthen Scholastic Corporation’s operating performance and create long-term value as we move through the end of fiscal 2026. So again, thank you all for your support, and goodbye.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.