Thank you for standing by, and welcome to the Scholastic Reports Fourth Quarter Fiscal Year 2024 Results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Jeffrey Mathews. Please go ahead, sir.

Hello, and welcome, everyone, to Scholastic's fiscal 2024 fourth quarter earnings call. Today on the call, I am joined by Peter Warwick, our President and Chief Executive Officer; and Haji Glover, our Chief Financial Officer. As usual, we have 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. 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 would like to turn the call over to Peter Warwick to begin this afternoon's presentation.

Thank you, Jeff, and good afternoon, everyone. Thank you for joining us. In the fourth quarter of fiscal 2024, Scholastic continued to execute on its strategy, investing in key growth initiatives and long-term opportunities while navigating current market headwinds. Increasing pressure on spending affecting our Education Solutions and School Reading Events businesses impacted consolidated revenue last quarter, resulting in a 10%, or $53 million, decline relative to last year's strong quarter-four performance, and that's in contrast to our expectations for modest growth. Consequently, profits in our seasonally most important fourth quarter fell below the prior year and our revised guidance. Fourth quarter adjusted operating income was $67 million, down from last year's record of $92 million. Adjusted EBITDA was $91 million, compared to $115 million a year ago. We took steps to manage expenses in line with lower-than-expected demand. SG&A and corporate overheads, excluding one-time items, both improved even as we maintained spending on long-term opportunities. For fiscal 2024, adjusted EBITDA was $137 million versus $196 million a year ago, again reflecting the revenue headwinds we've experienced since last fall. With careful working capital management and our businesses' capital efficient models, we continued to generate strong free cash flow of $73 million, up from $60 million in the prior year. This exceeded our revised outlook of $55 million to $65 million. Delivering on our commitment to capital allocation, we also deployed Scholastic's strong balance sheet to drive long-term value in fiscal 2024. We returned over $181 million to shareholders through dividends and share repurchases during the year. We also announced $182 million strategic investment in 9 Story Media Group, which we closed on June 20. Scholastic's investment to acquire 100% economic interest in 9 Story is a major advance in our evolution as a global children's media company. It greatly…

Thank you, Peter, and good afternoon, everyone. Today, I will refer to our adjusted results for the fourth quarter and full fiscal year, excluding one-time items, unless otherwise indicated. Please refer to our press release tables and SEC filings for a complete discussion of one-time items. As Peter noted, a more challenging market for our Education and Book Fair businesses caused Q4 performance to fall below our prior-year period and below our revised guidance. Widespread adoptions of ELA core curricula and the continued shift of science-based approaches for literacy instructions impacted spending on supplemental materials while increasing softness in customer spending impacted revenues per fair in Book Fairs. While steps were taken to preserve operating margins, we maintained spending on key initiatives including new structured literacy programs which we expect to launch in the 2025-2026 school years. In Book Fairs, we successfully added new fairs, but due to the strong operating leverage in this business, operating margins were negatively impacted by lower average revenue per fair. In response to these headwinds, we tightly managed inventory and cash, contributing to favorable free cash flow. Despite these challenges, trade channels in US and UK performed well due to a strong publishing pipeline and we resized our US Book Clubs business as we tested new offerings to profitably grow this channel in future periods. Internationally, our Canadian operations continue to benefit from restructuring activities in prior periods. Turning to our consolidated financial results, in the fourth quarter, relative to prior year, revenues decreased 10% to $474.9 million, reflecting the market headwinds I just described. Operating income of $66.8 million was down $25.2 million. Net income was $50.5 million compared to $75.7 million in the prior-year period, and earnings per diluted share were $1.73 compared to $2.26. This reflected in lower net income partially…

Thank you, Haji. While market conditions are more challenging in quarter four as the cyclical trends that we've seen this fiscal year continued, we managed our businesses carefully and kept sight on Scholastic's substantial strengths and opportunity. Scholastic's strengths are deep: Our trusted brand, proprietary distribution channels, unmatched children's content and global franchises, and our robust balance sheet and cash-generating businesses. And in a dynamic market driven by long-term favorable macro forces, our opportunity is vast: to serve the broader growing need for trusted children's books, reading, and media by investing in, building on, and adapting our strengths. In fiscal 2025, with the talent and creativity of our employees, authors, illustrators and creators, and the support of our shareholders, we look forward to continuing to pursue this opportunity to create value and impact. Thank you very much. And now, let me turn the call over to Jeff.

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

Certainly. [Operator Instructions] And our first question for today comes from the line of Brendan McCarthy from Sidoti & Company. Your question, please?

Hi, good afternoon, everybody, and thanks for taking my questions. I wanted to start off looking at the Book Fairs business. Can you talk about your outlook for revenue per fair looking into fiscal '25? And do you expect to surpass the 90% of pre-pandemic fair levels looking out into the next fiscal year?

Yeah. It's Peter here. So, in terms of revenue per fair going forward, we're expecting modest growth in the forthcoming financial -- in the financial year 2025. We would be -- in terms of the revenue count, we expect that we're going to be probably less than we were pre-pandemic, because during the pre-pandemic period, we did do some book fairs that really didn't make very much money at all. And it's much better for us to focus on fairs which have the scale. I think what's important is that we put in place, as I described during the call, a number of big improvements, I think, which means that we will be able to make sure that there's less churn, to make sure that we can really focus on the fairs that do the best thing. And really, we focused on the addressable market, which means the addressable market is one where we can do well with the size of revenues that we hold.

Great. Thanks, Peter. I appreciate the color there. Wanted to turn to the Book Clubs business and the shrink-to-grow strategy. I'm wondering if you can provide some detail on how far along in that strategy Scholastic is, and maybe how much longer the company -- or I guess how much more work on that front does Scholastic have to do as it relates to fiscal '25?

Well, I think we've spent a lot of time working what's the best ways of handling that. And I think that we've worked hard and trialed a number of things that we'll be implementing from the fall of this year. I think we're optimistic the changes that we're making are going to be much more in tune with being able to grow back the business. But the key point about this, Brendan, is that we need -- this business needs to be profitable, and we have been able to make sure that the profitability year-over-year has not deteriorated. But what we want to be able to do is to modestly grow the business. And also, I think, most importantly, to really engage as much as possible teachers with us. I think that we're really committed in the period going forward to be as teacher-centric as we possibly can in the way that we manage that business.

Understood. And turning to the Education Solutions business, I know the broad transition to the science of reading has been a bit of a headwind on spending, but as it relates to Scholastic's capital allocation framework, I know acquisitions have always been a big part of that. Are you seeing any opportunity out there to maybe go out and acquire a company that is fully geared towards the science of reading?

Hi, Brendan. This is Jeff Mathews here. I can address that on the corporate development...

Hey, Jeff.

Hi. Hey, Brendan. From corporate development perspective. Look, as we've discussed, we see broad opportunities across both Education and our Children's Book segment, now adding the Entertainment segment. In the -- where we're seeing the most compelling opportunities are, we have some great products that weren't properly aligned. We are taking those kind of great bones and then making investments to align them with new pedagogies. The core value around independent reading is still there. That's mostly done organically. We continue to look at opportunities additionally in that segment, while we review opportunities on the children's content and media side as well.

Got it. Thanks, Jeff. And one more question for me looking out to fiscal '25 and as it relates to some of the guidance numbers that you provided. What factors have been causing material underperformance or outperformance relative to your expectations for fiscal '25?

Yeah, it's Peter here. There were two main factors. And they were -- the first factor was really that, during the final quarter, the number of kids who are actually buying books at our book fairs declined, because they didn't have any money from their parents to buy the books. And I think this is very much reflective of the economic environment of many sort of middle-class families whose kids go to public schools. That's certainly one fact. And that took us by surprise. The number of kids who are actually participating in the book fairs was lower than we had seen in the fall fairs. The other factor was the one that we've already mentioned really about in the education area that we expected that there will be more opportunities than actually turned out to be the case for supplemental reading materials. And that was because just the sheer volume of new literacy programs and new curricula and particularly those associated with the science of reading. We would see that as being a bit of a continuing headwind, if you like, during the forthcoming financial year, but it is cyclical. It's something which we'll be in a good position in school years '25-'26 to be able to provide schools with what they need in order to supplement the new materials they've got and to be able to -- they'll have much more time to be able to do that once teachers are properly trained and fully familiar with the new core curriculum materials that they're using.

Got it. Thank you, everybody. That's all for me.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks.

Well, thank you very much. It's Peter here. And thank you to all of -- those of you who joined us this afternoon. Scholastic has got an important exciting year ahead. We look forward to engaging with our investors in the coming days and to providing further updates on our progress, including with our growth initiatives on our upcoming quarterly calls, including the next one in September. Goodbye.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.