Good day and thank you for standing by. Welcome to the Scholastic Corporation Fiscal 2024 Second Quarter Earnings 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.

Thank you, Allen. Hello, and welcome, everyone, to Scholastic's fiscal 2024 second quarter earnings call. Today on the call, I'm joined by Peter Warwick, our President and Chief Executive Officer, and Ken Cleary, our Chief Financial Officer and Acting President, International. 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'd 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'll be discussing some non-GAAP financial measures as defined in Regulation G. The reconciliations of those measures to the most directly comparable GAAP measures may be found in the company's earnings release and the 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. And now I'd like to turn the call over to Peter Warwick to begin this afternoon's presentation.

Thanks, Jeff, and good afternoon, everyone. We appreciate you joining us. Scholastic executed solidly in our second quarter during the important back-to-school season in the Northern Hemisphere. Our School Reading Events and Education divisions while progressing their plans continued to demonstrate Scholastic's unique capabilities to get tens of millions of kids' access to engaging high quality books. Scholastic's Trade Publishing and Entertainment teams continue to create and publish best-selling books and highly rated content and IP for the company's own channels, as well as retailers and third-party ones, fulfilling the second pillar of Scholastic's unique integrated publishing and distribution strategy. With kids back at school and parents and educators refocused on the importance of reading and learning, Scholastic's mission is as relevant as ever today, even in the more complex environment in U.S. schools in which we currently find ourselves operating this year. Last quarter, we also took actions to create long-term value, continuing our investments in growth initiatives and returning over $58 million to shareholders through share buybacks and our dividend. Quarter two profits remained steady on modestly lower revenues. These results, however, came in below our expectations for profit growth as a result of external factors, a trend we now forecast to continue for the remainder of the school year. As a result, we've adjusted our fiscal 2024 guidance and have taken steps to target additional revenue opportunities underlying spending in the second half of the year. We remain positive about long-term outlook for growth and impact, as we continue executing on our strategy. Investing in content and capabilities to drive growth and returning capital to shareholders, including under an expanded share repurchase authorization announced today. This afternoon, I'd like to review our second quarter results and updated outlook for the rest of the year. Ken will then…

Thank you, Peter, and good afternoon, everyone. Note that we recorded no one-time items in fiscal 2023 or in the second quarter of fiscal 2024. Please refer to our press release tables and SEC filings for a complete discussion of one-time items. As Peter discussed earlier, our second quarter profits improved year-over-year and we remain confident in our long-term growth outlook and shareholder value creation strategy. Results came in below expectations, however, largely due to external factors. Turning to our consolidated financial results. Second quarter revenues decreased 4% to $562.6 million. Operating income in the quarter was $101.3 million, up from $100.1 million in the prior year period. Net income was $76.9 million compared to $75.3 million in the prior year period and adjusted EBITDA increased to $124 million from $122 million a year ago. Earnings per diluted share was $2.45 compared to $2.12 last year as our share buyback efforts over the previous four quarters have driven down our outstanding share count. Now turning to our segment results. In Children's Book Publishing and Distribution, revenues for the second quarter decreased 6% to $392.8 million, primarily driven by lower participation in orders in Book Clubs as the business has repositioned to a smaller more profitable core, as well as lower timing related production revenue from Scholastic Entertainment. Operating margins improved and operating income decreased by only 2% from the prior year period to $110.8 million. Lower spending in clubs on promotions and operations, improved gross margins and consolidated trade, partially offset the impact of lower sales. Book Fairs revenues increased 1% to $242.1 million in the quarter, driven by higher fair count and increased redemptions of incentive program credits, partially offset by lower revenue per fair. As Peter noted, we benefited from modestly higher revenue per fair on same fair…

Thank you, Ken. As you and I've discussed this afternoon, Scholastic performed solidly in the second quarter despite the macro environment, the slowed profit growth below our expectations, and that's caused us to adjust our guidance. I'm confident that Scholastic's unique scale and ability to create high-quality books and content and get it to millions of kids in the U.S. and globally, there's so much potential for growth and impact today. I want to take a moment to thank Scholastic's world-class employees. They've worked tremendously hard this fall to serve our customers, engage our partners, and protect Scholastic's long-term mission and opportunity, and I'd also want to thank our shareholders for their continued support. So let me now turn the call over to Jeff.

Thank you, Peter. We appreciate your time today and continued support. With that, I will turn the call over to the operator.

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

Hi, good afternoon, Ken and Peter. Thanks for taking my questions today.

Hi, Brendan.

Pleasure.

Hi, so I think we could start off by taking a look at Book Clubs business, I guess, how from a revenue perspective or just in general, how small do you expect the business to get eventually?

Well, I don't -- I don't think we've got an exact number in mind, and actually what we -- what we've always planned for is that there would be a reduction in the revenues in Book Clubs, but that would form a much more stable basis in order to go forward and to increase the profitability. So essentially what we've been doing is a sort of shrink to grow strategy and, you know, the revenues have been a little bit below, perhaps what we might have expected, because of the general environment within schools, but I don't think it's in any way undermine the strategy that we're -- that we're pursuing for a longer term, you know, profitable and stable Book Clubs business.

Got it. Understood. And then looking at the Education Solutions segment, you mentioned there has been a shift in spending supplemental instruction spending at the school and district level, can you go into detail about, I mean, what exactly this change looks like, and then also maybe what Scholastic is going to adapt?

Well, the thing -- what's happening within schools and literacy is sort of a movement away from what was termed as a guided reading approach to literacy towards a more phonics-based approach, which is called the signs of reading. And that's a trend that has accelerated over the last two or three years. And what we're doing is clearly adapting our own supplemental materials, so that they are much more in tune with the signs of reading. What's important to say is the independent reading is still incredibly important in the literacy journey and that Scholastic is better positioned there than any other literacy provider.

Got it. That's helpful. And then Peter, I know you mentioned the ESSER funding initiative due to sunset I believe in 2025. I guess, did you see any benefit from that spending in the second quarter -- second fiscal quarter?

It's due to -- what's going to happen is that the funding has to be obligated. In other words, doesn't necessarily have to be immediately spend but it has to be committed by no later than September 2024. So we would expect that with a lot of hard asset on our part, that there are still good opportunities for us both in the second part of this financial year, but also in the following financial year as well. Also, we're encouraging all that we can to make sure that those federal - ESSER funds can be used in areas where we have really tremendous products. So particularly in areas like summer reading, for example, so that we can really make sure that schools have got the funding that they need for what is an increasing priority in how they do things, which is why the summer book collections, et cetera, becomes so important to us and we can see that the remaining ESSER funding is one of the sources, whereby we will be able to do and continue to get very strong representation in the purchasing at that time.

Got it. And then one last question for me, just with regards to the retail book market, I know you mentioned strong results from the frontlist titles, I'm just curious as to maybe your outlook on the backlist titles and when that market might return to growth?

I don't have a complete roadmap on that, but I think what we -- one of the things that we have been seeing is some pickup in trade sales, main street sales as it were during the last few weeks and we're particularly benefiting from that because of the titles that we've got, that have done so well, the Cat Kid and other titles. I think what's important about backlist is the most successful publishers all have really strong backlist, and is particularly important for us because we can monetize those backlist not just through sales of books on bookshelves. But we through our media activities, we were able to, as I mentioned in the report, we can see other purposes for that intellectual property, and, you know, that is going to be an increasingly important part of what we do, and furthermore, as there has been sort of changes in the sort of screen-based market at the moment, whereby fewer but much more higher value properties are being transformed into media interest streaming and particularly into feature films, then the high quality of our backlist titles and our characters are really important, and as we've discovered in recent discussions with houses in LA and elsewhere, is the tremendous value that screen-based companies see in our backlist. And so having that backlist, I think what we're going to find is an increasing part of the value of that is going to be coming through screen-based opportunities rather than just paper-based opportunities, but it is, as I mentioned in the talk, it's the virtuous circle going from print to screen to merchandising to back to the books.

Thank you. That's all from me.

Thank you.

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

Thank you very much, Josh, and thank you to all of you who joined us this afternoon, and of course, I wish everyone a very happy holiday season. We look forward to engaging with our investors in coming days and to providing a further update on our progress in March on our quarter three call. Thank you.

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