Good day, ladies and gentlemen and welcome to the Scholastic reports fiscal 2019 first quarter results. At this time, all participants are in listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Gil Dickoff, Senior Vice President, Treasurer and Head of Investor Relations. Sir, you may begin.

Thank you. Good morning Shannon. And thank you everybody on the call this morning. Welcome to Scholastic's first quarter 2019 earnings call. With me here today are Dick Robinson, our Chairman, President and Chief Executive Officer and Ken Cleary, the company's Chief Financial Officer. We have posted an investor presentation on our IR website at investor.scholastic.com, which we encourage you to download if you have not already done so. I would like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are uncertain and may differ materially from actual results. Also in addition, we will be discussing some non-GAAP financial measures as defined in Regulation G and the reconciliations of those measures to the most directly comparable GAAP measures can be found in the company's earnings release filed this morning on Form 8-K, which has also been posted on our Investor Relations website. We encourage you to review the disclaimers in our press release and investor presentation and to review the risk factors contained in our annual and quarterly reports filed with the SEC. And now, I would like to turn the call over to Dick Robinson.

Good morning everybody and thank you for joining our first quarter call. Scholastic begins the new fiscal year with positive indicators for year-over-year improvement in our core businesses, placing us firmly on track for achieving our fiscal 2019 operating results and goals. Our results this quarter reflect the strength of our trade publishing globally with sales up in a relatively flat market for children's and young adult books in the U.S. According to Publishers Weekly recently released annual rating based on 2017 sales, Scholastic is now the largest U.S.-owned book publisher, as well as the ninth largest publisher in the world. We also saw improved education revenues in the first quarter, despite a generally downmarket in that sector. And although we typically record a loss in the first quarter as U.S. schools are not in session over the summer, we delivered a smaller operating loss with margin improvement. In the quarter, we continued our companywide strategic technology advancements as well as the rollout of new print and digital core instruction products before the scheduled January 2019 launch of Scholastic literacy, our pre-K-12 balanced literacy core reading program and a major part of our education growth strategy. In a few moments, Ken Cleary will detail or quarterly financial results, EPS and EBITDA as well as the impact of the newly adopted revenue recognition guidelines in the quarter. But first I would like to walk you through some first quarter highlights. In children's book publishing and distribution, despite the Association of American Publishers reporting relatively flat revenue industrywide for the children's and young adult categories for 2018, Scholastic trade publishing was up year-over-year. Why? Scholastic books are loved by children and embraced by teachers and parents and in many cases, become part of our cultural fabric. We see evidence of this in…

Thank you Dick and good morning. This morning I will refer to our adjusted results from continuing operations for the quarter excluding one-time items unless otherwise indicated. Beginning this quarter, we have adopted the new revenue recognition guidelines under ASC 606. Prior period's results have not been restated. The new revenue recognition standard now requires us to defer certain revenues associated mainly with our book fairs incentive program. It has also required us to recognize as a current period expense, certain previously capitalized direct response advertising costs related to our classroom magazines business. As we review the quarter sales and operating income, I will highlight the impact of these new standards on the period costs. Revenues were $218.4 million versus $189.2 million in the first quarter last year, an increase of 15%. The current quarter's revenue includes an incremental $12.5 million in sales that were recognized under the ASC 606 accounting adoption as the seasonal pattern of revenue recognition will change. Later quarterly periods will have net cumulative revenue decreases that should approximate the first quarter increase. Operating loss was $83.3 million versus $93.5 million last year. The net benefit of the accounting change on the quarter's results was an incremental $5.2 million that should also reverse in the later quarterly periods. We had $500,000 in one-time items for severance associated with our cost cutting initiatives in Q1. Last year's one-time items included $6.7 million in non-cash impairment charges related to our headquarters renovation, as well as $1.6 million in restructuring severance charges. Adjusted EBITDA showed a loss of $64.5 million as compared to a loss of $78.1 million last year, reflecting improvement in the company's operating results as noted, including the incremental $5.2 million associated with ASC 606, along with higher levels of depreciation on facilities and technology upgrades…

Thank you Ken. Shannon, we are ready to open the lines up for questions now.

[Operator Instructions]. Our first question comes from Drew Crum with Stifel. Your line is open.

Okay. Thanks. Hi guys. Good morning. A couple of questions on Dog Man. Just can we talk about how the performance from the most recent title compares to previous releases? And any impact you are seeing on the backlist for that series? And I guess as it relates to trade in the children's book category described as flattish, any concerns that once the sales for Dog Man slow, your business sees a severe deceleration? I guess just the question is, I am just trying to get a sense of how you are feeling about your pipeline for trade through the balance of fiscal 2019? Thank you.

Yes. Drew, I will ask Ellie to answer some questions specific to Dog Man. But the overall trend in children's books in our list is amazing. I mean we have just tons and tons of great titles and bestsellers in every category. The series are really driving a tremendous amount. Dog Man is part of it and Dog Man is unique this year and it's doing awfully well, but just overall it's still under 10% of our current revenues in trade even in this quarter, which was a big one for Dog Man. And in December, we will have yet another Dog Man, but this is not all about Dog Man. It's about the breadth and range of our trade titles, the momentum we have in the business, the tremendous support we are getting from various distribution people for our trades. I will ask Ellie to enhance that comment and especially in relationship to Dog Man.

Hi. Well, I will say that the Dog Man sales are up significantly from the last book and I think what we are seeing is tremendous momentum building as a series. Since we are able to maintain with Dav Pilkey publishing two books a year, we are seeing it just grow and grow. So the sales are up significantly and we have very high expectations with the book that is coming out in December, as Dick mentioned. In terms of what's the future coming up in children's, we have a really strong list still to be published this fall and going into the spring, with titles that were mentioned, new graphic memoir by Jarrett called Hey, Kiddo. We have more Harry Potter publishing coming up against the exhibition that's opening up in October. A box set of some of the illustrated editions and new publishing. So we have a lot coming up and the movie Fantastic Beast will be opening. We have the original screenplay by J. K. Rowling coming up in November. So we have a lot coming up and a big pipeline that we are excited to be publishing.

Okay. Great. Thank you. And then maybe shifting gears to the clubs business. I know it's only the fiscal first quarter, but you noted an uptick in club sponsorship. Just any commentary on leading indicators going into fiscal 2Q? And has your view on the business in any way changed for fiscal 2019 relative to the guidance or the update provided back in the summer?

Yes. I will ask Judy to talk a little bit about that. We think we are having a very good September and that's great, because that sets the stage for the rest of the year. But you know, those good signs don't mean that we are necessarily going to return to massive revenue increases, although that's very good right now.

Yes. Hi Drew.

Hi Judy.

You know we don't speak about percentages or anything. But it was off to a great start with teacher sponsors coming back online and a lot of enthusiasm in ordering. And I think what also is interesting is that we are having a lot more parents come. And order online and as our technology platform has become really quite sophisticated and up to speed and on terms of other e-commerce platforms, our parents can order online and that number is growing each year. And so that's a big foundational change in the business model that we were able to leverage throughout the year. So we are excited about that. We can do one-to-one marketing to parents and the parent enthusiasm ordering online then reflects up to the teachers in the classroom orders as well. So it's all a very nice new kind of energy in online ordering in our business model.

Okay. Thanks. I guess one last question from me. Just remind us what the timing is for Scholastic literacy? And I guess related to education, Ken, is there anyway to quantify the impact that you saw from the shift in customer buying patterns in the quarter from the fiscal fourth quarter to this quarter? Thanks.

So yes, clearly we saw a lot of the revenues did shift over into this year. Without giving complete numbers, because there are opportunities that come in our pipeline, I would say that most of the increase, you can attribute most of the increase to a shift over from last year.

Okay.

I think the introduction of Scholastic literacy in January will be a very significant event for Scholastic education and for the company. We are back in the core reading game, as you know, Drew, with that new program, which will be very strong in balanced literacy, but will also provide the skills necessary for kids to achieve higher marks on tests. So it's a very comprehensive core literacy, all the skills and with a lot of digital support that I think is really going to make a good impact on reading education.

And Dick, just one more question from me. Texas has got a very large reading adoption in calendar 2019. Are you guys in any way participating in that next year?

We are not. Scholastic literacy just was not -- we are focused on adoptions, but balanced literacy is everywhere and not just in the adoption states. But we will not participate from what you rightly say is a significant Texas adoption. We were working hard in Texas to get people interested in our program, but we won't dip into those particular revenue streams.

Okay. Very good. Thank you guys.

Thank you.

Thank you. [Operator Instructions]. And I am currently showing no further questions at this time. I would like to turn the call back over to Richard Robinson for closing remarks.

Thank you all for participating in our first quarter call. We will look forward to seeing you in December. We are looking forward to a good quarter and a good year. Thank you very much.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.