Good day and thank you for standing by. Welcome to the Scholastic Reports Q1 Fiscal Year 2025 Results Conference Call. 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. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeffrey Mathews.

Hello and welcome everyone to Scholastic's fiscal 2025 first quarter earnings call. Today on the call, I'm joined by Peter Warwick, our 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 investor.scholastic.com, which you may download 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 may 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. And now, I'd like to turn the call over to Peter Warwick to begin this afternoon's presentation.

Thank you, Jeff, and good afternoon everyone. Thanks for joining us. I'd like to start by congratulating Jeff on his appointment of Scholastic's first Chief Growth Officer. In this new role, Jeff will refine and implement Scholastic's long-term growth strategy in partnership with his peers on our management executive committee. He'll also continue to lead the company's investor relations and corporate development functions, as well as Scholastic's cross-company corporate sustainability and impact program. Jeff's deep knowledge of Scholastic and our industry, as well as 30-plus years of experience in strategy, M&A and investor relations, has already had a profound impact here since Jeff rejoined as the company has prioritized growth, capital allocation and long-term shareholder value. I'm thrilled to have Jeff now also leading the development and implementation of growth initiatives across Scholastic, building on the long-term growth strategy and targets he's helped us to create. With that, I'll turn to our quarter one overview. Scholastic began fiscal 2025 preparing for the important back-to-school season, positioning the company in the school year ahead for yet another opportunity to bring the excitement of books, reading and stories to millions of kids and families while supporting schools and educators. During the first quarter, we continued to execute on our most compelling long-term growth initiatives. We invested to reinforce and build upon the unique strengths of our children's books and education businesses while advancing our growth strategy as a global children's media and content company with trusted and critically acclaimed publishing, a growing slate of exciting media properties in development and production, and early wins arriving from our acquisition of 9 Story Media Group. First quarter revenue rose year-over-year on the addition of 9 Story and the seasonal operating loss improved. As a reminder, Scholastic typically records operating losses in the quiet first…

Thank you, Peter, and good afternoon, everyone. Today, I will refer to our adjusted results for the first quarter, excluding onetime items, unless otherwise indicated. Please refer to our press release tables and SEC filings for a complete discussion on onetime items. As Peter discussed earlier, revenues increased and operating loss improved from a year ago in our seasonally quiet first quarter. I'm proud of our team's hard work and preparation ahead of back-to-school season. The investments we are making in our core businesses position us well near and long term, and we look forward to making further progress against our plan this fiscal year and beyond. Turning to our consolidated financial results. In the first quarter, revenues increased 4% to $237.2 million and profitability improved on multiple measures. The company's seasonal operating loss in the quarter was $85.6 million, an improvement from $92.8 million from the prior year period. Adjusted EBITDA was a loss of $60.5 million, declining from a loss of $70.6 million a year ago. Net loss improved to $60.3 million from $69.5 million in the prior year period. On a per diluted share basis, loss declined to $2.13 compared to a loss of $2.20 last year. As a reminder, Scholastic results are highly seasonal. In addition to the first quarter, we also generally record an operating loss in the third quarter, with profitable second and fourth quarters. Now turning to our segment results. In Children's Book Publishing and Distribution, revenues for the first quarter increased 3% to $105.4 million, primarily driven by higher revenues in our trade channel. Segment operating loss decreased $4.4 million from the prior year period to $36.6 million, primarily reflecting higher revenues in a seasonally quiet quarter for the segment. In the first quarter, our School Reading Events business revenues and profits…

Thank you, Haji. As I laid out in July, Scholastic's fiscal 2025 plan is focused on building on and accelerating the progress we made last year towards our strategic goals. In the first quarter, we continued to execute on these initiatives as planned while preparing for the new school year in our School Reading Events. We remain confident that our core fundamental businesses are well positioned for long-term growth. We look forward to continuing to pursue Scholastic's opportunity to create value and impact this year and beyond. Thank you very much, and let me now turn the call over to Jeff.

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

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

Hey, good afternoon, everybody.

Good afternoon.

Wanted to start off looking at gross margins. It looks like there was a nice improvement there year-over-year. Can you talk about what you're seeing with gross margins and whether you see further improvement looking out the rest of the year, just given the downturn in inflation?

Yes. Thank you for the question. As far as the gross margin, it's really mix that's driving the conversation around mix is really driving this. We do see modest growth in our gross margin throughout the rest of the year, and we planned for that already in our outlook.

Got it. Thanks, Haji. Yes, that's great. I wanted to turn to the Fairs business. I know last quarter, the fourth quarter of fiscal '24, I know you noted there was some pressure on consumer spending that impacted the Fairs business. Is that still a trend that you're seeing, I guess, looking out to the second quarter -- the second fiscal quarter?

Well, the -- we've really only just got moving with our Fairs business. But at the moment, the fairs are pretty much operating as we expected for the fall season. And whilst those pressures, I think, probably still continue, we've made some good adjustments in terms of how we present the fairs. And we also have the benefit of having a really full sort of 90,000-plus fairs this year. So that's also a mitigating factor. But I think it's also important to say that we're really only expecting modest revenue per-fair growth in fiscal 2025, which was not the case in fiscal 2024. And therefore, I think that gives us much more sort of sense that things will go as we are planning.

Got it. Thanks, Peter. And just as a follow-up question, and I know we're only one month into the -- about one month into the school year, but looking at the School Reading Events business, Clubs and then the school channels, how is that -- how have those businesses been performing so far this school year relative to your expectations at the start of the fiscal year?

They've been -- I mean, the good news is that they've been operating pretty much exactly as we expected. There have been no bad surprises, no good surprises. It's pretty much as we were expecting. And so I think that's pretty positive. I think the one area that we have been particularly pleased with, although it's the smallest of those two businesses, has been the Clubs business, where we've seen quite an uptick actually in the numbers of sponsors, particularly teachers. So I think the work that we did last year to prepare for redesigning the materials and content, I think, has been -- is early signs show that, that's having -- that's been a very worthwhile thing to have done.

Got it. And in the Clubs business, I know you mentioned you were testing and still are testing new go-to-market strategies there. Can you provide additional color on some of those strategies and I guess how they're resonating with customers at this point?

Yeah. I mean, one of the things that we've done is that we've redesigned our flyers, for example. And it's been very much focused on igniting the interest of our core customers and our core -- most profitable customers. So that's one thing that we've done. The other thing that we've been doing is actually the whole process has been very much more teacher-centric than it was the year before. And therefore, I think that's going to be very worthwhile, too.

Got it, that's helpful. I wanted to ask a question on the Education Solutions business. It sounds like the outlook there is quite favorable for the state-sponsored business in the back half of this year. I guess what's the -- I guess, what are some of the prospects of getting new business from either new states or new state entities for that line of business?

Well, I think the -- I mean, there's an overall trend which is kind of happening in the marketplace, which is that there's much greater attention being paid, particularly by education faculties, education departments but also by state legislatures in making sure that they can get books to students at home. It's been shown very much that one's able to do much more with kids who are striving readers as long as they have books in the home. And that's something that we've worked with within -- in a number of states and has been very successful. I think there's a growing recognition that, that is what's needed. In addition to that, we've also got other partnership models that we've been able to develop to get books into the home. And we're feeling that -- we're feeling quite confident that we'll have another good year in that part of the business. I mean, one of the good things that's happening in some ways is that whilst they're actually selling books into schools, particularly into school districts and all the rest of it has been more difficult for us, we've had this opportunity to actually get more of our books into the homes through the activities of partners, state, philanthropic and parents. And so we've been able -- we are very consciously building up that part of our business to sort of rebalance, to some extent, the business as there are changes in the marketplace.

Great. Thanks, Peter. One more for me and then I'll turn it over, just on the balance sheet. Just with the new net debt position, are you comfortable with where leverage is now? Or do you see the company allocating more cash flow to pay down the revolver in the future?

Currently, we are very confident in where we stand today. As we mentioned in the press -- in the -- in my sort of section that we are looking at other opportunities on our balance sheet, but that's in the immediate term right now.

Great. That’s all from me. Thanks, everybody.

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

Thank you, everyone, for joining today's call and for your continued support. I'd like to again thank all of Scholastic's employees for their hard work and preparation ahead of the back-to-school season. We look forward to an important year ahead as we execute on our plan for fiscal 2025 and make progress toward realizing Scholastic's long-term opportunities.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.