What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-12-19 compared with 2025-09-19 · 170 added, 127 removed, 80 unchanged (79% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview and Outlook

Revenues for the first quarter ended August 31, 2025 were $225.6 million, compared to $237.2 million in the prior fiscal year quarter, a decrease of $11.6 million or 5%.

The Company reported net loss per diluted share of Class A and Common Stock of $2.83 in the first quarter of fiscal 2026, compared to $2.21 in the prior fiscal year quarter.

During the first fiscal quarter, the Company completed the integration of its Book Fairs, Book Clubs and Trade Publishing divisions into a new combined group, called the Children’s Book Group, which is expected to strengthen the segment's ability to connect publishing, merchandising, and distribution.

While the summer period is seasonally quiet for School Reading Events, the trade business performed in-line with the prior year quarter, driven by continued demand for several bestselling series.

The Company expects the remainder of fiscal 2026 to benefit from new releases, including Dav Pilkey’s Dog Man:

Big Jim Believes in November, a collector’s edition of Suzanne Collins’ Sunrise on the Reaping ahead of Lionsgate’s feature film adaptation, the illustrated edition of Catching Fire ® , along with the 25th I Survived book and the interactive illustrated edition of Harry Potter and the Goblet of Fire .

Education Solutions continued to be impacted by the volatile funding environment as schools delayed or reduced purchases;

however, the Company continues to refine its product portfolio to better align with the needs of educators and families.

The Entertainment segment continued to focus on expanding the reach of Scholastic's intellectual property despite delays in production demand, and is well-positioned for growth as industry greenlighting accelerates.

Internationally, results reflected increased profitability, primarily in Asia and Australia, driven by higher revenues and previously implemented cost-savings programs.

Results of Operations

Revenues for the quarter ended August 31, 2025 decreased by $11.6 million to $225.6 million, compared to $237.2 million in the prior fiscal year quarter.

Within the Children's Book Publishing and Distribution segment, revenues increased by $4.0 million, driven by increased revenues from School Reading Events as a result of increased redemptions of book fair incentive program credits.

In the Education Solutions segment, revenues decreased by $15.6 million primarily due to delayed or reduced school funding which resulted in lower sales of supplemental programs.

In the Entertainment segment, revenues decreased by $3.0 million, reflecting lower production revenues.

In local currency, International segment revenues increased by $2.4 million, primarily driven by higher sales in Australia, Asia and the U.K.

International segment revenues were impacted by favorable foreign exchange of $0.2 million in the quarter ended August 31, 2025.

In addition, rental income increased $0.4 million from the prior fiscal year quarter.

Components of Cost of goods sold for the three months ended August 31, 2025 and August 31, 2024 are as follows:

Three months ended

August 31, 2025 August 31, 2024

($ amounts in millions) % of Revenue % of Revenue

Components of Cost of goods sold for the three and six months ended November 30, 2025 and November 30, 2024 are as follows:

Three months ended Six months ended

November 30, 2025 November 30, 2024 November 30, 2025 November 30, 2024

($ amounts in millions) % of Revenue % of Revenue % of Revenue % of Revenue

Product, service and production costs and inventory reserves $ 133.5 24.2 % $ 132.8 24.4 % $ 202.1 26.0 % $ 207.0 26.5 %

4 unchanged sentences

Total $ 225.6 40.9 % $ 228.6 42.0 % $ 349.1 44.9 % $ 356.9 45.7 %

Cost of goods sold for the quarter ended November 30, 2025 was $225.6 million, or 40.9% of revenues, compared to $228.6 million, or 42.0% of revenues, in the prior fiscal year quarter.

The decrease in Cost of Goods sold as a percentage of revenues was primarily driven by improved utilization of inventory in the U.S.

book clubs channel which resulted in less excess and obsolete inventory and by lower inbound freight costs in the Company's international Major Markets.

This was partially offset by increased tariff charges, primarily in the U.S.

book fairs channel.

The Company expects the newly imposed tariffs to continue to increase Cost of goods sold, particularly during the upcoming peak selling season for the book fairs channel in the fourth fiscal quarter.

Based on current anticipated revenues and tariff policy, the Company continues to expect approximately $10 million of incremental tariff expense for fiscal 2026.

Cost of goods sold for the six months ended November 30, 2025 was $349.1 million, or 44.9% of revenues, compared to $356.9 million, or 45.7% of revenues, in the prior fiscal year period.

The decrease in Cost of goods sold as a percentage of revenues was primarily driven by improved utilization of inventory in the U.S.

book clubs channel which resulted in less excess and obsolete inventory and by lower inbound freight costs in the Company's international Major Markets.

This was partially offset by higher royalty costs as a result of an increase in the mix of higher-royalty bearing titles sold in the U.S.

trade channel in the period ended November 30, 2025 and increased tariff charges, primarily in the U.S.

book fairs channel.

Selling, general and administrative expenses for the quarter ended November 30, 2025 decreased to $217.5 million, compared to $224.9 million in the prior fiscal year quarter.

The $7.4 million decrease was primarily attributable to lower employee-related and external labor costs resulting from the Company's previous reorganization efforts and cost-saving initiatives and lower spending on general expenses.

In addition, the Company incurred lower severance expense of $1.3 million in the quarter ended November 30, 2025 related to cost-saving initiatives.

Selling, general and administrative expenses for the six months ended November 30, 2025 decreased to $394.7 million, compared to $407.0 million in the prior fiscal year period.

The $12.3 million decrease was primarily attributable to lower employee-related and external labor costs resulting from the Company's previous reorganization efforts and cost-saving initiatives and lower spending on general expenses.

This was partially offset by increased severance expense of $6.3 million in the period ended November 30, 2025 related to cost-saving initiatives.

Depreciation and amortization expense for the quarter ended November 30, 2025 was $16.5 million, which was comparable to $16.3 million in the prior fiscal year quarter.

There were no significant assets placed into service during the quarter ended November 30, 2025.

Depreciation and amortization expense for the six months ended November 30, 2025 was $32.8 million, compared to $31.6 million in the prior fiscal year period.

The $1.2 million increase in Depreciation and amortization expense was primarily due to new assets placed into service during the first quarter of fiscal 2026.

SCHOLASTIC CORPORATION Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Cost of goods sold for the quarter ended August 31, 2025 was $123.5 million, or 54.7% of revenues, compared to $128.3 million, or 54.1% of revenues, in the prior fiscal year quarter.

The increase in Cost of Goods sold as a percentage of revenues was primarily driven by higher royalty costs in the U.S.

trade channel and the timing of distribution and participation costs in Entertainment.

This was largely offset by lower product costs associated with the mix of products sold in Education Solutions and lower inbound freight costs in Canada, coupled with lower fulfillment costs in Australia.

The Company expects the newly imposed tariffs to increase Cost of good sold during its peak selling seasons in the second and fourth fiscal quarters, particularly within the book fairs channel.

Based on current anticipated revenues and tariff policy, the Company expects approximately $10 million of incremental tariff expense during fiscal 2026.

Selling, general and administrative expenses for the quarter ended August 31, 2025 decreased to $177.2 million, compared to $182.1 million in the prior fiscal year quarter.

The $4.9 million decrease was primarily attributable to lower employee-related costs resulting from the Company's previous reorganization efforts and cost-saving initiatives, coupled with decreased marketing expense in the U.S.

trade channel.

This was partially offset by increased severance expense of $7.6 million in the quarter ended August 31, 2025 related to cost-saving initiatives.

Depreciation and amortization expense for the quarter ended August 31, 2025 was $16.3 million, compared to $15.3 million in the prior fiscal year quarter.

The $1.0 million increase in Depreciation and amortization was primarily due to new assets placed into service during the first quarter of fiscal 2026.

Asset impairments for the quarter ended August 31, 2025 were $0.8 million.

The Company recognized an asset impairment of $0.8 million related to a product that is no longer being sold within the Children's Book Publishing and Distribution segment.

Interest expense for the quarter ended August 31, 2025 was $5.0 million, compared to $3.8 million in the prior fiscal year quarter.

Asset impairments for the quarter ended November 30, 2025 were $8.6 million.

The Company recognized asset impairments of $3.4 million related to certain products within the Education Solutions segment and $5.2 million primarily related to certain film and television programs in development within the Entertainment segment.

Asset impairments for the six months ended November 30, 2025 were $9.4 million.

The Company recognized asset impairments of $3.4 million related to certain products within the Education Solutions segment, $5.2 million primarily related to certain film and television programs in development within the Entertainment segment and $0.8 million related to a product that is no longer being sold within the Children's Book Publishing and Distribution segment.

Interest expense for the three and six months ended November 30, 2025 was $5.6 million and $10.6 million, respectively, compared to $4.9 million and $8.7 million, respectively, in the prior fiscal year periods.

The increase in interest expense was due to increased borrowings under the U.S.

Credit Agreement during the quarter ended August 31, 2025.

The Company continues to expect increased interest expense during fiscal 2026 as a result of higher anticipated borrowings under the U.S.

Credit Agreement.

Interest income for the quarter ended August 31, 2025 was $0.5 million, compared to $0.8 million in the prior fiscal year quarter.

The decrease in interest income was attributable to lower average short term investment balances in the quarter ended August 31, 2025.

Credit Agreement during the period ended November 30, 2025.

Interest income for the three and six months ended November 30, 2025 was $0.6 million and $1.1 million, respectively, which was comparable to $0.5 million and $1.3 million, respectively, in the prior fiscal year periods.

The Company invests excess cash in short term investments which earn competitive interest rates that change directionally in relation to the Federal Funds rate.

The Company's interim effective tax rate, inclusive of discrete items, for the quarter ended August 31, 2025 was 26.7%, compared to 31.9% for the prior fiscal year quarter.

The interim effective tax rate for the three months ended August 31, 2025 varies from the statutory rate primarily due to non-deductible compensation for covered executive employees and expected state and local income tax.

Net loss for the quarter ended August 31, 2025 increased by $8.6 million to $71.1 million, compared to a net loss of $62.5 million in the prior fiscal year quarter.

Loss per basic and diluted share of Class A and Common Stock was $2.83 for the fiscal quarter ended August 31, 2025, compared to $2.21 in the prior fiscal year quarter.

Subsequent to November 30, 2025, the Company entered into sale-leaseback agreements for its headquarters in New York City and primary distribution center in Jefferson City, Missouri which are expected to provide additional liquidity and may impact interest income and expense during the remainder of fiscal 2026.

Other non-operating expense for each of the three and six month periods ended November 30, 2025 was $1.6 million.

The Company incurred $1.6 million of costs related to the sale-leaseback transactions for the Company's headquarters in New York City and primary distribution center in Jefferson City, Missouri.

The Company's interim effective tax rate, inclusive of discrete items, for the three and six months ended November 30, 2025 was 26.4% and 28.0%, respectively, compared to 30.3% and 37.2%, respectively, for the prior fiscal year periods.

The interim effective tax rate for the six months ended November 30, 2025 varies from the statutory rate primarily due to non-deductible compensation for covered executive employees and expected state and local income tax.

Net income for the quarter ended November 30, 2025 increased by $7.1 million to $55.9 million, compared to $48.8 million in the prior fiscal year quarter.

Earnings per basic and diluted share of Class A and Common Stock were $2.21 and $2.17, respectively, for the fiscal quarter ended November 30, 2025, compared to $1.73 and $1.71, respectively, in the prior fiscal year quarter.

Net loss for the six months ended November 30, 2025 increased by $1.5 million to $15.2 million, compared to $13.7 million in the prior fiscal year period.

Loss per basic and diluted share of Class A and Common Stock was $0.60 for the period ended November 30, 2025, compared to $0.48 in the prior fiscal year period.

Children’s Book Publishing and Distribution

Three months ended

August 31, August 31, $ %

Three months ended November 30, Six months ended November 30,

($ amounts in millions)

2025 2024 Change Change

2025 2024 Change Change 2025 2024 Change Change

Revenues $ 380.9 $ 367.0 $ 13.9 3.8 % $ 490.3 $ 472.4 $ 17.9 3.8 %

8 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Revenues for the quarter ended August 31, 2025 increased by $4.0 million to $109.4 million, compared to $105.4 million in the prior fiscal year quarter.

Revenues from School Reading Events increased $4.4 million, driven by increased redemptions of book fair incentive program credits.

Revenues from School Reading Events are generally not significant in the first fiscal quarter as most schools are not in session.

Trade channel revenues were relatively consistent with the prior fiscal year quarter, decreasing $0.4 million, with continued success in the Hunger Games ® and Harry Potter ® franchises.

Cost of goods sold for the quarter ended August 31, 2025 was $62.2 million, or 56.9% of revenues, which was comparable to $58.9 million, or 55.9% of revenues, in the prior fiscal year quarter.

The increase in Cost of goods sold as a percentage of revenues was driven by higher royalty costs as a result of an increase in the mix of higher-royalty bearing titles sold in the trade channel in the quarter ended August 31, 2025, coupled with higher product costs related to redemptions of book fairs incentive program credits.

The Company expects the newly imposed tariffs to increase Cost of good sold during its peak selling seasons in the second and fourth fiscal quarters, particularly within the book fairs channel.

Other operating expenses for the quarter ended August 31, 2025 were $81.5 million, compared to $83.1 million in the prior fiscal year quarter.

The $1.6 million decrease in Other operating expenses was primarily attributable to lower marketing and other general costs, particularly in the trade channel.

Asset impairments for the quarter ended August 31, 2025 were $0.8 million.

The Company recognized an asset impairment of $0.8 million related to a certain product that is no longer being sold.

Segment operating loss for the quarter ended August 31, 2025 was $35.1 million, compared to $36.6 million in the prior fiscal year quarter.

The $1.5 million improvement was primarily attributable to the higher revenues from increased redemptions of book fairs incentive program credits.

Revenues for the quarter ended November 30, 2025 increased by $13.9 million to $380.9 million, compared to $367.0 million in the prior fiscal year quarter.

Trade channel revenues increased $7.6 million, driven by new releases in the quarter ended November 30, 2025, which included the latest title in the Dog Man ® series, Dog Man #14:

Big Jim Believes, the interactive illustrated edition of Harry Potter and the Goblet of Fire, the collector’s edition of Suzanne Collins’ Sunrise on the Reaping and the illustrated edition of Catching Fire ® .

Revenues from School Reading Events also increased $6.3 million, driven by higher fair count and increased revenue per fair in the book fairs channel, partly offset by lower book clubs channel revenues primarily due to lower sponsor participation.

Revenues for the six months ended November 30, 2025 increased by $17.9 million to $490.3 million, compared to $472.4 million in the prior fiscal year period.

Revenues from School Reading Events increased $10.7 million, driven by higher fair count and increased revenue per fair in the book fairs channel, coupled with increased redemptions of book fair incentive program credits.

This was partially offset by lower book clubs channel revenues primarily due to lower sponsor participation.

Trade channel revenues also increased $7.2 million, with continued success in the Dog Man , Hunger Games ® and Harry Potter ® franchises, which included several new releases during the period ended November 30, 2025.

Cost of goods sold for the quarter ended November 30, 2025 was $146.5 million, or 38.5% of revenues, compared to $143.3 million, or 39.0% of revenues, in the prior fiscal year quarter.

The decrease in Cost of goods sold as a percentage of revenues was primarily driven by improved utilization of inventory in the book clubs channel which resulted in less excess and obsolete inventory, partially offset by increased tariff charges in the book fairs channel.

Cost of goods sold for the six months ended November 30, 2025 was $208.7 million, or 42.6% of revenues, compared to $202.2 million, or 42.8% of revenues, in the prior fiscal year period.

Cost of goods sold benefited from improved utilization of inventory in the book clubs channel resulting in less excess and obsolete inventory, which was substantially offset by higher royalty costs as a result of an increase in the mix of higher-royalty bearing titles sold in the trade channel in the period ended November 30, 2025 and increased tariff charges in the book fairs channel.

The Company expects the newly imposed tariffs to continue to increase Cost of goods sold, particularly during the upcoming peak selling season for the book fairs channel in the fourth fiscal quarter.

Other operating expenses for the quarter ended November 30, 2025 increased by $4.0 million to $125.6 million, compared to $121.6 million in the prior fiscal year quarter.

Other operating expenses for the six months ended November 30, 2025 increased by $2.4 million to $207.1 million, compared to $204.7 million in the prior fiscal year period.

The increase in Other operating expenses was primarily attributable to inflationary pressures and higher expected credit losses on customer receivables.

Asset impairments for the six months ended November 30, 2025 were $0.8 million.

During the first quarter of fiscal 2026, the Company recognized an asset impairment of $0.8 million related to a certain product that is no longer being sold.

Refer to Note 5, "Asset Write Down," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details.

Segment operating income for the quarter ended November 30, 2025 increased by $6.7 million to $108.8 million, compared to $102.1 million in the prior fiscal year quarter.

Segment operating income for the six months ended November 30, 2025 increased by $8.2 million to $73.7 million, compared to $65.5 million in the prior fiscal year period.

The improvement was primarily attributable to increased revenues from the book fairs and trade channels.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Education Solutions

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2025 2024 Change Change

Three months ended November 30, Six months ended November 30,

($ amounts in millions) 2025 2024 Change Change 2025 2024 Change Change

Revenues $ 62.2 $ 71.2 $ (9.0) (12.6) % $ 102.3 $ 126.9 $ (24.6) (19.4) %

2 unchanged sentences

39.7 44.4 (4.7) (10.6) % 81.7 89.7 (8.0) (8.9) %

Operating income (loss) $ (21.2) $ (17.0) $ (4.2) (24.7) %

Asset impairments 3.4 — 3.4 NM 3.4 — 3.4 NM

Operating income (loss) $ (4.7) $ (0.5) $ (4.2) NM $ (25.9) $ (17.5) $ (8.4) (48.0) %

(1) Other operating expenses include selling, general and administrative expenses and depreciation and amortization.

Revenues for the quarter ended August 31, 2025 decreased by $15.6 million to $40.1 million, compared to $55.7 million in the prior fiscal year quarter.

NM Not meaningful

Revenues for the quarter ended November 30, 2025 decreased by $9.0 million to $62.2 million, compared to $71.2 million in the prior fiscal year quarter.

The decrease in segment revenues was primarily driven by delayed or reduced school funding which resulted in lower sales of supplemental programs, in addition to lower subscription revenues from Magazines+.

Revenues from sponsored programs were consistent with the prior fiscal year quarter.

Revenues for the six months ended November 30, 2025 decreased by $24.6 million to $102.3 million, compared to $126.9 million in the prior fiscal year period.

The decrease in segment revenues was primarily driven by delayed or reduced school funding which resulted in lower sales of supplemental programs.

In addition, lower revenues from Magazines+ and the timing of revenues from sponsored programs contributed to the decrease in revenues from the prior fiscal year quarter.

Cost of goods sold for the quarter ended August 31, 2025 was $19.3 million, or 48.1% of revenues, compared to $27.4 million, or 49.2% of revenues, in the prior fiscal year quarter.

Cost of goods sold as a percentage of revenues decreased due to lower product costs associated with the mix of products sold during the quarter ended August 31, 2025.

Other operating expenses for the quarter ended August 31, 2025 were $42.0 million, compared to $45.3 million in the prior fiscal year quarter.

The $3.3 million decrease in Other operating expenses was primarily attributable to lower employee-related and external labor costs.

Segment operating loss for the quarter ended August 31, 2025 was $21.2 million, compared to $17.0 million in the prior fiscal year quarter.

The $4.2 million decline was driven by lower revenues, primarily attributable to delayed or reduced school funding which resulted in lower sales of supplemental materials, partially offset by lower employee-related and external labor costs.

Entertainment

In addition, lower subscription revenues from Magazines+ and the timing of revenues from sponsored programs in the first fiscal quarter contributed to the decrease in revenues from the prior fiscal year period.

Cost of goods sold for the quarter ended November 30, 2025 was $23.8 million, or 38.3% of revenues, which was comparable to $27.3 million, or 38.3% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the six months ended November 30, 2025 was $43.1 million, or 42.1% of revenues, compared to $54.7 million, or 43.1% of revenues, in the prior fiscal year period.

Cost of goods sold as a percentage of revenues decreased due to lower product costs associated with the mix of products sold during the period ended November 30, 2025.

Other operating expenses for the quarter ended November 30, 2025 decreased by $4.7 million to $39.7 million, compared to $44.4 million in the prior fiscal year quarter.

Other operating expenses for the six months ended November 30, 2025 decreased by $8.0 million to $81.7 million, compared to $89.7 million in the prior fiscal year period.

The decrease in Other operating expenses was primarily attributable to lower employee-related and external labor costs and reduced spending on general overhead expenses.

Asset impairments for the three and six months ended November 30, 2025 were $3.4 million.

During the second quarter of fiscal 2026, the Company recognized an asset impairment of $3.4 million related to certain education products.

Refer to Note 5, "Asset Write Down," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details.

Segment operating loss for the quarter ended November 30, 2025 increased by $4.2 million to $4.7 million, compared to $0.5 million in the prior fiscal year quarter.

Segment operating loss for the six months ended November 30, 2025 increased by $8.4 million to $25.9 million, compared to $17.5 million in the prior fiscal year period.

The overall decline was driven by lower revenues and the asset impairments recognized during the period ended November 30, 2025, partially offset by lower employee-related and external labor costs as well as reduced spending on general overhead expenses.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2025 2024 Change Change

Entertainment

Three months ended November 30, Six months ended November 30,

($ amounts in millions) 2025 2024 Change Change 2025 2024 Change Change

Revenues $ 15.1 $ 16.8 $ (1.7) (10.1) % $ 28.7 $ 33.4 $ (4.7) (14.1) %

2 unchanged sentences

10.1 10.9 (0.8) (7.3) % 19.6 19.7 (0.1) (0.5) %

Operating income (loss) $ (4.0) $ (0.5) $ (3.5) NM

Asset impairments 5.2 — 5.2 NM 5.2 — 5.2 NM

Operating income (loss) $ (9.0) $ (4.7) $ (4.3) (91.5) % $ (13.0) $ (5.2) $ (7.8) (150.0) %

(1) Other operating expenses include selling, general and administrative expenses and depreciation and amortization.

2 unchanged sentences

Refer to Note 9 "Acquisitions," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details regarding the acquisition of 9 Story.

Revenues for the quarter ended August 31, 2025 decreased by $3.0 million to $13.6 million, compared to $16.6 million in the prior fiscal year quarter.

The decrease in segment revenues was primarily driven by lower production revenues due to fewer episodic deliveries as compared to the prior fiscal year quarter, partially offset by increased production services revenues.

Entertainment revenues continue to be impacted by delays in production greenlights from major platforms.

Cost of goods sold for the quarter ended August 31, 2025 was $8.1 million, or 59.6% of revenues, compared to $8.3 million, or 50.0% of revenues in the prior fiscal year quarter.

Revenues for the quarter ended November 30, 2025 decreased by $1.7 million to $15.1 million, compared to $16.8 million in the prior fiscal year quarter.

The decrease in segment revenues was primarily driven by lower production revenues due to fewer episodic deliveries as compared to the prior fiscal year quarter and lower distribution revenues.

Revenues for the six months ended November 30, 2025 decreased by $4.7 million to $28.7 million, compared to $33.4 million in the prior fiscal year period.

The decrease in segment revenues was primarily driven by lower production revenues due to fewer episodic deliveries as compared to the prior fiscal year period and lower distribution revenues.

This was partially offset by increased production services revenues.

Cost of goods sold for the quarter ended November 30, 2025 was $8.8 million, or 58.3% of revenues, compared to $10.6 million, or 63.1% of revenues in the prior fiscal year quarter.

The decrease in Cost of goods sold as a percentage of revenues was primarily driven by the timing of distribution and participation expenses.

Cost of goods sold for the six months ended November 30, 2025 was $16.9 million, or 58.9% of revenues, compared to $18.9 million, or 56.6% of revenues in the prior fiscal year period.

The increase in Cost of goods sold as a percentage of revenues was primarily driven by the timing of distribution and participation expenses, and, to a lesser extent, the increase in production services revenues which have a higher cost compared to production revenues related to episodic deliveries.

Other operating expenses for the quarter ended August 31, 2025 were $9.5 million, compared to $8.8 million in the prior fiscal year quarter.

The $0.7 million increase in Other operating expenses reflects a full quarter of expenses in fiscal 2026 as compared to a partial quarter in fiscal 2025 as the 9 Story acquisition occurred on June 20, 2024.

Segment operating loss for the quarter ended August 31, 2025 was $4.0 million compared to $0.5 million in the prior fiscal year quarter.

The $3.5 million increase in operating loss was primarily driven by lower revenues as a result of fewer episodic deliveries in the quarter ended August 31, 2025.

Other operating expenses for the three and six months ended November 30, 2025 were $10.1 million and $19.6 million, respectively, which were comparable to $10.9 million and $19.7 million, respectively, in the prior fiscal year periods.

Asset impairments for the three and six months ended November 30, 2025 were $5.2 million.

During the second quarter of fiscal 2026, the Company recognized asset impairments of $4.9 million related to certain film and television programs in development and $0.3 million related to its ownership interest in a children's book publishing business located in the UK.

Refer to Note 5, "Asset Write Down," of Notes to the Consolidated Financial Statements in Item 8, "Consolidated Financial Statements and Supplementary Data" for further details.

Segment operating loss for the quarter ended November 30, 2025 was $9.0 million compared to $4.7 million in the prior fiscal year quarter.

The $4.3 million increase in operating loss was primarily driven by the asset impairments recognized during the quarter ended November 30, 2025.

Segment operating loss for the six months ended November 30, 2025 was $13.0 million compared to $5.2 million in the prior fiscal year period.

The $7.8 million increase in operating loss was primarily driven by lower production and distribution revenues, coupled with the asset impairments recognized during the period ended November 30, 2025.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

International

Three months ended

August 31, August 31, $ %

($ amounts in millions) 2025 2024 Change Change

Three months ended November 30, Six months ended November 30,

($ amounts in millions) 2025 2024 Change Change 2025 2024 Change Change

Revenues $ 89.5 $ 86.7 $ 2.8 3.2 % $ 148.9 $ 143.5 $ 5.4 3.8 %

2 unchanged sentences

29.2 32.1 (2.9) (9.0) % 57.4 61.9 (4.5) (7.3) %

Operating income (loss) $ (4.2) $ (8.3) $ 4.1 49.4 %

Operating income (loss) $ 12.4 $ 5.7 $ 6.7 117.5 % $ 8.2 $ (2.6) $ 10.8 NM

(1) Other operating expenses include selling, general and administrative expenses and depreciation and amortization.

Revenues for the quarter ended August 31, 2025 increased by $2.6 million to $59.4 million, compared to $56.8 million in the prior fiscal year quarter.

Local currency revenues across the Company's foreign operations increased by $2.4 million, excluding favorable foreign exchange impact of $0.2 million.

In Australia and New Zealand, local currency revenues increased $1.6 million, primarily driven by increased trade channel sales in Australia.

In Asia, local currency revenues increased $1.5 million, primarily driven by increased trade and education sales, which included growth in India and the Philippines.

In the U.K., local currency revenues increased $0.7 million, primarily within the trade channel, which continued to benefit from Sunrise on the Reaping .

NM Not meaningful

Revenues for the quarter ended November 30, 2025 increased by $2.8 million to $89.5 million, compared to $86.7 million in the prior fiscal year quarter.

Local currency revenues across the Company's foreign operations increased by $3.3 million, excluding unfavorable foreign exchange impact of $0.5 million.

In the U.K., local currency revenues increased $1.7 million, primarily within the trade channel which benefited from the latest Dog Man series release, Big Jim Believes .

In Australia and New Zealand, local currency revenues increased $0.9 million, primarily driven by increased education sales in New Zealand.

In Canada, local currency revenues increased $0.5 million, driven by increased trade channel sales as a result of the latest Dog Man series release, partially offset by lower book fairs channel sales due to teacher strikes in a certain province and lower book clubs channel sales due to lower sponsor participation.

In Asia, local currency revenues were consistent with the prior year quarter, increasing $0.1 million.

In addition, export channel sales were consistent with the prior fiscal year quarter with an increase of $0.1 million compared to the prior fiscal year quarter.

Revenues for the six months ended November 30, 2025 increased by $5.4 million to $148.9 million, compared to $143.5 million in the prior fiscal year period.

Local currency revenues across the Company's foreign operations increased by $5.7 million, excluding unfavorable foreign exchange impact of $0.3 million.

In Australia and New Zealand, local currency revenues increased $2.5 million, primarily driven by increased trade channel sales in Australia and education sales in New Zealand.

In the U.K., local currency revenues increased $2.4 million, primarily attributable to increased sales from the trade channel, driven by the latest Dog Man series release, Big Jim Believes, and the continued benefit of Sunrise on the Reaping, as well as increased revenues from the book fairs channel .

In Asia, local currency revenues increased $1.6 million, primarily driven by increased trade and education sales, which included growth in India.

In addition, export channel sales increased $0.3 million compared to the prior fiscal year quarter.

The overall increase in segment revenues was partially offset by a $1.6 million decrease in local currency revenues in Canada, primarily driven by lower trade channel sales due to temporarily reduced order volumes from certain customers, and lower book clubs channel sales.

The overall increase in segment revenues was partially offset by a $1.1 million decrease in local currency revenues in Canada, primarily driven by lower book clubs and book fairs channel sales.

Cost of goods sold for the quarter ended November 30, 2025 was $47.9 million, or 53.5% of revenues, compared to $48.9 million, or 56.4% of revenues, in the prior fiscal year quarter.

Cost of goods sold for the six months ended November 30, 2025 was $83.3 million, or 55.9% of revenues, compared to $84.2 million, or 58.7% of revenues.

Cost of goods sold as a percentage of revenues decreased as a result of lower inbound freight costs in the Company's Major Markets.

Other operating expenses for the quarter ended November 30, 2025 were $29.2 million, compared to $32.1 million in the prior fiscal year quarter.

The $2.9 million decrease was primarily driven by lower employee-related costs, primarily in Canada and Asia, which included lower severance expense of $1.0 million related to cost-saving initiatives, in addition to lower bad debt expenses in Asia.

Other operating expenses for the six months ended November 30, 2025 were $57.4 million, compared to $61.9 million in the prior fiscal year period.

The $4.5 million decrease was primarily driven by lower employee-related costs, primarily in Canada and Asia, which included lower severance expense of $0.9 million, in addition to lower bad debt expenses in Asia.

Segment operating income for the quarter ended November 30, 2025 was $12.4 million, compared to $5.7 million in the prior fiscal year quarter.

The $6.7 million improvement was primarily attributable to increased revenues in the Major Markets, coupled with improved margins driven by lower inbound freight costs and operational efficiencies.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Cost of goods sold for the quarter ended August 31, 2025 was $35.4 million, or 59.6% of revenues, compared to $35.3 million, or 62.1% of revenues, in the prior fiscal year quarter.

Cost of goods sold as a percentage of revenues decreased as a result of lower inbound freight and postage costs in Canada and lower fulfillment costs in Australia.

Other operating expenses for the quarter ended August 31, 2025 were $28.2 million, compared to $29.8 million in the prior fiscal year quarter.

The $1.6 million decrease was primarily driven by lower employee-related costs and decreased bad debt expenses in Asia, in addition to lower operating expenses in Australia.

Segment operating loss for the quarter ended August 31, 2025 was $4.2 million, compared to an operating loss of $8.3 million in the prior fiscal year quarter.

The $4.1 million improvement was primarily attributable to increased profitability in Asia and Australia, driven by increased revenues and lower operating costs.

Unallocated overhead expense for the quarter ended August 31, 2025 increased by $1.6 million to $27.7 million, from $26.1 million in the prior fiscal year quarter.

The increase was primarily attributable to increased severance expense related to cost-savings initiatives of $7.5 million, partially offset by lower employee-related costs resulting from the Company's previous reorganization efforts and cost-savings programs.

Segment operating income for the six months ended November 30, 2025 was $8.2 million, compared to an operating loss of $2.6 million in the prior fiscal year period.

The $10.8 million improvement was primarily attributable to increased revenues in the U.K, Australia and New Zealand, and Asia, coupled with improved margins driven by lower inbound freight costs and operational efficiencies.

Unallocated overhead expense for the quarter ended November 30, 2025 decreased by $3.3 million to $24.6 million, from $27.9 million in the prior fiscal year quarter.

The decrease was primarily attributable to lower employee-related costs resulting from the Company's previous reorganization efforts and cost-savings programs, coupled with higher rental income related to leased space in the Company's headquarters.

Unallocated overhead expense for the six months ended November 30, 2025 decreased by $1.7 million to $52.3 million, from $54.0 million in the prior fiscal year period.

This was partially offset by increased severance expense related to cost-savings initiatives of $7.6 million.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

The Company’s Children’s Book Publishing and Distribution school-based book club and book fair channels and most of its Education Solutions businesses operate on a school-year basis;

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Liquidity and Capital Resources

Cash used in operating activities was $81.8 million for the three months ended August 31, 2025, compared to cash used in operating activities of $41.9 million for the prior fiscal year period, representing an increase in cash used in operating activities of $39.9 million.

The increase in cash used was primarily driven by increased inventory purchases, which included higher tariff payments, higher severance and tax payments, and higher interest payments related to the Company's borrowings, coupled with the timing of payments of general operating expenses.

This was partially offset by higher customer remittances in the quarter ended August 31, 2025.

The increased tariffs are expected to impact Cost of goods sold as the related inventory is sold during the Company's peak selling seasons in the second and fourth fiscal quarters.

Cash used in investing activities was $14.9 million for the three months ended August 31, 2025, compared to cash used in investing activities of $200.8 million in the prior fiscal year period, representing a decrease in cash used in investing activities of $185.9 million.

The decrease in cash used was primarily driven by the cash paid for the 9 Story acquisition of $176.4 million, net of cash acquired, during the three months ended August 31, 2024, coupled with lower capital expenditures of $10.0 million.

Cash provided by financing activities was $66.8 million for the three months ended August 31, 2025, compared to cash provided by financing activities of $211.9 million for the prior fiscal year period, representing a decrease in cash provided by financing activities of $145.1 million.

The decrease in cash provided was primarily attributable to net borrowings under the U.S.

Credit Agreement of $75.0 million in the three months ended August 31, 2025, compared to $225.0 million in the prior fiscal year quarter in which the Company incurred increased borrowings to fund the 9 Story acquisition.

In addition, the Company did not repurchase common stock in the three months ended August 31, 2025, compared to $5.0 million of common stock repurchases in the prior fiscal year quarter.

Cash used in operating activities was $8.6 million for the six months ended November 30, 2025, compared to cash provided by operating activities of $29.3 million for the prior fiscal year period, representing an increase in cash used in operating activities of $37.9 million.

The increase in cash used was primarily driven by higher severance and tax payments, higher interest payments related to the Company's borrowings, an additional contribution to the UK Pension Plan and the timing of payments of general operating expenses.

Cash used in investing activities was $29.2 million for the six months ended November 30, 2025, compared to cash used in investing activities of $217.2 million in the prior fiscal year period, representing a decrease in cash used in investing activities of $188.0 million.

The decrease in cash used was primarily driven by the cash paid for the 9 Story acquisition of $176.2 million, net of cash acquired, during the six months ended November 30, 2024, coupled with lower capital expenditures of $10.9 million.

Cash provided by financing activities was $13.9 million for the six months ended November 30, 2025, compared to cash provided by financing activities of $214.5 million for the prior fiscal year period, representing a decrease in cash provided by financing activities of $200.6 million.

The decrease in cash provided was primarily attributable to lower borrowings under the U.S.

Credit Agreement of $100.0 million in the six months ended November 30, 2025, compared to $250.0 million in the prior fiscal year quarter in which the Company incurred increased borrowings to fund the 9 Story acquisition, coupled with higher repayments of $75.0 million in the six months ended November 30, 2025.

This was partially offset by an increase in net repayments of film related obligations of $11.4 million.

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

In addition, the Company did not repurchase common stock in the six months ended November 30, 2025, compared to $10.0 million of common stock repurchases in the prior fiscal year period.

Cash Position

The Company’s cash and cash equivalents totaled $94.3 million at August 31, 2025, $124.0 million at May 31, 2025 and $84.1 million at August 31, 2024.

The Company’s cash and cash equivalents totaled $99.3 million at November 30, 2025, $124.0 million at May 31, 2025 and $139.6 million at November 30, 2024.

Cash and cash equivalents held by the Company’s U.S.

operations totaled $28.6 million at August 31, 2025, $48.7 million at May 31, 2025 and $30.4 million at August 31, 2024.

operations totaled $46.2 million at November 30, 2025, $48.7 million at May 31, 2025 and $86.5 million at November 30, 2024.

Due to the seasonal nature of its business as discussed under “Seasonality”, the Company usually experiences negative cash flows in the June through September time period.

The Company’s operating philosophy is to use cash provided by operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses or acquiring other strategic assets, as well as engaging in shareholder enhancement initiatives, such as share repurchases or dividend declarations.

Under the Company's open-market buy-back program, $70.0 million remained available for future purchases of common shares as of August 31, 2025.

The Company’s operating philosophy is to use cash provided by operating activities to create value by paying down debt, reinvesting in existing businesses and, from time to time, making acquisitions that will complement its portfolio of businesses or acquiring other strategic assets, as well as engaging in shareholder enhancement initiatives such as share repurchases and dividend declarations.

Under the Company's open-market buy-back program, $70.0 million remained available for future purchases of common shares as of November 30, 2025.

Subsequent to November 30, 2025, the Board authorized an increase of $80.0 million for common stock repurchases, resulting in a current Board authorization of $150.0 million, which includes the remaining amount from the previous Board authorization.

The Company has maintained, and expects to maintain for the foreseeable future, sufficient liquidity to fund ongoing operations, including working capital requirements, pension contributions, postretirement benefits, debt service, planned capital expenditures and other investments, as well as dividends and share repurchases.

As of August 31, 2025, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $94.3 million, cash from operations and the Company's U.S.

As of November 30, 2025, the Company’s primary sources of liquidity consisted of cash and cash equivalents of $99.3 million, cash from operations and the Company's U.S.

Credit Agreement.

See Note 5 of Notes to the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information regarding the U.S.

See Note 6, "Debt," of Notes to

SCHOLASTIC CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

the Financial Statements - Unaudited in Item 1, "Financial Statements," for more information regarding the U.S.

Credit Agreement.

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The Company's U.S.

Credit Agreement, less borrowings of $325.0 million and commitments of $0.4 million, has $74.6 million of availability at August 31, 2025.

Additionally, the Company has short-term credit facilities of $38.8 million, less current borrowings of $6.2 million and commitments of $3.6 million, resulting in $29.0 million of current availability under these facilities at August 31, 2025.

Credit Agreement, less borrowings of $275.0 million and commitments of $0.4 million, has $124.6 million of availability at November 30, 2025.

Additionally, the Company has short-term credit facilities of $41.6 million, less current borrowings of $5.6 million and commitments of $3.6 million, resulting in $32.4 million of current availability under these facilities at November 30, 2025.

Accordingly, the Company believes these sources of liquidity are sufficient to finance its currently anticipated ongoing operating needs, as well as its financing and investing activities.

The Company is exploring options to potentially leverage its real estate assets.

The Company is party to the U.S.

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis