SCHL - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to the Scholastic Reports Fiscal 2019 Second Quarter Results Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today’s conference call is being recorded. I’d now like to turn the conference over to Gil Dickoff, Senior Vice President, Treasurer and Head of Investor Relations. ahead. go Please

Gil Dickoff

Executive much Scholastic's so here good everyone. and morning are company's Cleary, Thank Financial Chief quarter Candice. XXXX to Officer. Chief President Chairman, second Robinson, me and earnings Welcome Ken Dick the you our And Officer call. today With

made at would that if posted not you from an website already on will like encourage out we today done our presentation have which These results. statements actual uncertain you by I to forward-looking. have certain point nature, We their IR materially and so. forward-looking investor investor.scholastic.com, be to download differ may statements, are

We press most the In in in on turn in the addition, and been and over website. now, factors call those Form release review contained the company's some reports non-GAAP will encourage the measures posted our to investor Relations also like on discussing of earnings morning would I Robinson. Regulation comparable review And be can financial directly measures the filed risk to GAAP the to with found G filed X-K, be and as Investor this reconciliations and quarterly release has Dick defined our the to you which we our SEC. annual in to disclaimers presentation measures

Dick Robinson

versus fulfillment publishing needs position the period, new in similar during our net to small businesses. before a of results partly businesses the the the call, to Good trusted This reading the landscape thanks in guidelines spans played our well rate. and two our $XX.X was morning revenue achieve up and as quarter. year. product core to procedures. our that detail quarterly impact company our children's that as thanks Revenues income impact busy But to part financial of other media Later XX% strong you books, EBITDA, of - I'd recognition remained took and partner result from continues stage the trade the of like roughly they us $XX.X to a the to year our ability out our Scholastic’s effective thank business. the our for from This cultural you and season.. and million many during first importance in educators. year-to-date Scholastic as underscoring center newly in recognition adopted rising I’ll which experience of and continued million tax for quarter, in schools X% these joining in our the to costs quarters, EPS Ken with to and dovetail cultural share book back across this highlights publisher lower our and both last school call as will no walk strength second the even revenue of operating serve U.S. holiday fall, role the during is fiscal first second how moments conversations objectives through of putting

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be Man: published Wonky Potter since year by size. New Wonky the Janice Dog the The her state viral, three Meanwhile clubs, more week run Wild just current The children's drove In book the from video the out recent is went to Donkey a timely Brawl as of adaptations related midnight Publishers online with of first ordering became million back Clark Zealand we called higher a in XX business are sixth with Donkey requirements book days XX now into Scottish an immediately is Crimes of million benefit technology historic Scholastic of she copy reading operating better commented picture printing. Supreme and loud will bookseller the old sales year-over-year top shift of slightly but this launched This had quarter only Beasts: an in million office in impressive this the X months. customer of also a revenues The to and grandma originally a two copies costs year spotlight leaders parents. including This to seen two own tax fall not title increased catapulting Austin next this a As provided should and tax box Fantastic views. of parties sales sponsorship grandchild teachers Scholastic not Harry released sales both Internet of experience, when and improvements for series, the here The Court collection and Grindelwald. and our books, one efficiency. into the Weekly Right ruling. sensation close crowds additional our plan in contributed X.X

number to and year despite We online, online improvements increased Book store in is these double-digit transition such adopted improved impact store begun well recognition competition time We've reports which recently experiencing salesforce.com, dashboards are planning. including predictive up allow the visits. and the Fairs training Scholastic will benefits of growth capacity integration, challenges Online revenue as through as field. Ken later. have more on benefited sales on on fares with has its efficiencies guidelines. are is which to under real see analysis, of the also Teachers also expected Fair to key the revenue greater productivity completed address mobile and as the slightly last working have and this par and

plan new to of rollout our regions all in continue of also sales the our point-of-sale systems this spring. We

quarter magazines part and Act, empathy in resources increased curated fostered commitment more book world for or provide viewed SEL challenging been learning always this collections them. helps that them the fostering Scholastic reading through teachers help social an need The build understand and while Every funding for by Second, around We've kids choose the the to Student its to as to educators, better call or kids classroom of provisions aspects by support SEL helping navigate from of in by a emotional continued content world. read, children ESSA. self-confidence. source Succeeds their was underscored want

last of reading report reading XX% reading better XX% helps are know children seventh and the classroom children teaching the world. reaching helps million initiatives during our their edition editorial the current a scholastic resource. response under With to circulation parents kids new leadership, XX In believe from classroom them understand magazines in of already Additionally, year, understand family two team of the school non-fiction powerful student feedback across fiction page new and This the teachers content and Pittsburgh. students of Stories site forthcoming curated our nearly issues the quarter we in that the positive print views collection classroom these agree service. World, support XX,XXX effectiveness initiatives launch the to upon into and led digital underway Both synagogue after tragic strongly community a student needs. is magazines and demonstrate More Tolerant Words Also from Action, The and non-fiction for shootings of our providing learning. introduced online teaching country. of received magazine inspire includes a to plans designed developed

in on and in literacy early Third, research and instruction instruction Resilience, cross-divisional of it support on reading credentials media intersection focus Child is debate Washington topic the in work Family KX practices – connect recently are & from digital impact development Collaborative will agrees the disciplined reflecting teacher joyous, the collaborative XXXX communities. Findings launched most reinforcing media Pam unique provides renowned prominent the as recently have announced the our Scholastic of which along placement and and Center-Scholastic from well-designed literacy the Times of productive to approach comment Further strong a toward is spirited Freddy Pro from Scholastic support. W.O.R.D. well Yale early one comprehensive children's resilience will from Literacy field fostering globally, and Eddie that Dr. a health Education, reading and of with advance opinion upcoming the New outcomes. help also and Allyn, be in childhood attention, pages strength SVP ability emotional of comments the earlier comprehensive the best to partnership worthy students learning, can and Times including vocabulary books with The initiatives a Hiebert. for our our to a benefit award-winning childhood part important professional in Child partner integrates the conversation, expert, This Study Literacy, exceptionally as Study Child also trade our and teaching need plans engaging when social curriculum. reading believe space, hopeful combine Scholastic the we a mainstream SEL approach. that Ooka curriculum Post is Center and directly inspiring to foundation writing reading about the this the Yale our comprehensive Scholastic as our was commentary. a We're products that our with for of content - will standards, fall, - Literacy launching literacy honored the this hundreds child's the will be growing the on academic Island in of life and social for Innovation York thing,

the our streamlined is an in quarter were were the UK growing and opportunities learning especially International the and currency Rapidly our reflect deeper Asia. districts. sales with Zealand, middle of growing while in results from need of the region's US and We within markets currencies in impact new the year-over-year, dollars. Canada, identifying into to and adoption up X% business also of in revenues up publishing the English education a language salesforce.com, Australia major and continue New materials. insight class increased positive sales trade overall flat Our before in pipeline, had international. benefiting of providing impact China The for sales local view

update Finally an our on building.

installations fastcompany of headline Scholastic's new the corporate graphic HQ You was renovation our with by iconic highlighting in the pentagram. week seen, art ever unlike covered is have you've you brands office may this our any seen

As our This for space way move at Broadway our new Broadway. newly new XXX has stage paves final at new enjoys location. retail completed in staff for engagement to location space, a within its the developed our leasing XXX our its the Sephora preparation

location Broadway concept boutiques to drawn remains SoHo looking for Street. retailers store high-end with a and spaces on desirable larger Mercer

pass the consumers to added proximity luxury revitalizing I'd nearby, the brands and to of that, established to Cleary. call benefit the area has location With Our the keeping Ken like neighborhood. in

Ken Cleary

Thank you, morning Dick. for unless items And results otherwise good excluding onetime our refer continuing I’ll adjusted to quarter, This from operations morning. the indicated.

recognition last adopted Prior discussed have restated. year. a XXX As have we fiscal revenue guidelines this ASC not under new been periods quarter, results

year, and period's ASC results. the these a of sales of impact the The this second I As operating revenue an lower the Revenues revenue were current million the quarterly was reported quarter’s last $XX.X period. versus increase review will the new up the $XXX.X prior impact impact, in X%. XXX. quarter X% million year of versus on Absent was due to quarter million highlight standards income, $XXX.X

The severance million do charge Adjusted was year and for million were not the million change. quarter $XXX.X million. to severance you in full restructuring within onetime and Operating this accounting related detriment quarter's to due These below as assessment If and outstanding versus profit year. onetime We QX partial change years seasonal results recall, charges a differences million last items million which our the year. million net we are $XXX.X in pension stock on $X.X $XX.X Last revenues $XXX.X million, included with for from tax proposed this had last ASC favorable accounting year's XXX. $XXX.X million the from a of year fiscal for was non-cash expect EBITDA impact our was prior quarter, $X.X a compensation line. settlement $XX.X and the our a transformation. compared second operating settlement million charge associated included $X.X sales $X.X fiscal an to $XXX,XXX of

first our the EBITDA of up is year, XX%. half For the

these recognizing beginning investments. a our than fiscal technology to to leverage to EBITDA the improve of operating we're expense as greater ERP such of CRM, of adjusted at facilities. investments we and income the rate also In as depreciation benefits continue investment technology facilities. current platform We're in expect the point-of-sale components and devices, upgraded see our year, our We

these tools benefits to expand retail new previously as we we utilize expect our stated, useful new meaningful collect a rents we returns other unusual Accordingly distorted and as space. not We as or these to and and over believe to continue on begin measuring better on is investments tools by losses profitability as that time for adjusted over of measure EBITDA its items. time operating capital launch gains,

ASC of last under year, customer Now sales recognition second were current million Zealand, trade XXX channels, quarter publishing, XXX as book were due $XXX.X million results. par turning drop in timing fell as period. the sales The higher roughly year, including $X.X from revenue impact to by revenues were Segment distribution the the million year front Children's were well collect quarter. UK improved the and saw to operating a with million, foreign XXX, the professional by to new continued particularly in par New last publishing we on of $XXX.X last accruals income period. mainly costs $XX the $X.X international with custom second upgrade trade our prior quarter and year Absent International revenue ASC adversely in $X.X year strong and million versus higher and on new the million growth of a adverse the in revenues based profit backlist year, book revenue of increase driven publishing exchange operations prior last and compared accounting $X.X million bestsellers fair to clubs million publishing in The profit $XXX impacted segment lower recognized Canada, and lower million Operating versus with $X.X was additional and school fairs revenues libraries. tax, a quarter. $XXX.X $XX.X million sales benefit million period. revenue in China. currency. of the the [ph] businesses Operating $XXX.X guidelines, as segment reflecting trade of as impacted in and marketing systems X% classroom the clubs guidelines by our versus prior and million sales was in facing result Education the education million million $X.X Asia, $X.X on by tax revenues year. fair an services versus Australia, and ASC

higher on past $XXX.X facilities out equivalents reflect million technology XX end all our and issues our upgrades in a ago. depreciation $XXX.X spending million a was which $XX.X cash is was quarter the our had and $XXX.X provided At for million the year expectations transformation second cash in the continued in transformation Second the company $XXX.X The operating projects. flow additional compared free in our fiscal our to including year. lower included higher the of XXXX. million current quarter be business, and with million the over The of at activities the the to current $XX.X cash by Book a retail of $XXX.X transformation capital excluding York will the cash additional in quarter cash current regions we state-of-the-art in second free cash in last year million corporate to second $XX.X as remaining the that overhead expense overhead, in upgrades ago Fairs compared on versus second the in and issues flow items and compared POS work balance ago. systems million spent year line onetime expense was primarily quarter $XX.X to versus for quarter, fiscal related XXXX progress quarter technology slightly The $XX.X million as in service, planned to technology costs fiscal million of Net on City now months. in quarter performed in three which well rolled quarter, million half the was for multi-year location at of period due headquarters end, technology preparation New new higher non-capitalized to also building projects

technology financial us will the applications This consolidation. cornerstone primarily financial During implementation retire the quarter, upgrade initial to for successful our our our North management the which accounting, remaining legacy of focused ERP to and concluded American a many now represents We were on investments handle enterprise functions. were that components. our applications allow supporting

warehouse defining We have and quote-to-cash also requirements have the begun for enterprise processes, and processes. our and roadmap process started to transform automation our further of business business management technology

Our we includes the cloud. to the OpEx this now impact CapEx and prepublication in throughout as platforms of of spend are many $XX.X spend and costs these our spent new phasing for transformation fiscal million recognized how technology which also and transition applications the and will both production. The continue company are year

Dick of will Supreme year, earlier, required all be XXXX implementation result by collect guidelines remit our end fiscal states to sales Court a discussed although virtually of and by As in as the tax vary the June ruling, state. we

modify have and costs design platforms, to communication forms complete registration We incurred already altered forms, customer order paper facing in plans applicable our order states.

We commence the third our from our quarter year. customers will of fiscal collection in

tax we from administrative In assessed efforts, tax also collection be sales of our there the addition with cost will development a customers that be to to the not collect associated portion during and may implementation increased our able period.

and analyzing to period the also this requirements our product be year, on the any customers. to our impact impact acceptance us tax minimizing while marketplace. enable customer’s negative of with will all higher This cost We in transition sales engagement comply of the will in fully

revenues in excluding billion onetime for the $X.XX $X.XX Given to earnings $X.XX. per the in our $X.X fiscal results a reaffirming of items and to to our share are range range date, billion outlook diluted XXXX of we

experience also other adjusted product fulfillment mentioned, to target $XXX $XXX rising well of for collection of sales costs our as of we as million. EBITDA continue costs and businesses Although We're previously remittance with as associated affirming like tax. to million the

capital range. to projected With million that, investments remain expenditures technology facility $XX I session. hand Our in track in for the Q&A the on capital million and with Gil the to $XX back will upgrades call

Gil Dickoff

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

Operator

Thank first Stifel. Crum comes our question with you. And [Operator from Drew Instructions]

now open. Your line is

Drew Crum

Okay, thanks. Hey good guys, morning.

was print couple affirmed with you million original for wanted that then know, So the I curious like fiscal runs back And new Pilkey's I that to book, have earnings the going compare am Mr. your just the in does XQ to of Dog what ask to to cadence to a XXXX September? look unit for series this in expectations and relative related questions of book as – you that, fiscal Man on forward? Obviously, book, how the X will 'XX. two releases guidance

number I year going think there a two next Or August somewhat one is year. forward? planned good anomaly? of another Thanks. is for an of Is this

Dick Robinson

been excited and wait of the Dog as first for Well, Man I about - more increasing think printing kids trajectory the printings get it. phenomenally has

believe to up XXth. million, X printing X million was be now one it's So distributed one on I the will December last initial our with that on the

and think - once for there the is right year one planned the right. release two probably this place year XXXX. December XXth two of there there's We August are takes X You're be another will

will But sixth slightly series his ahead delivering and is continue the now we Drew. projected of probably trajectory and creating cadence manuscripts. and Of we depends his the new in that book earlier this course, of it author believe on amazing

Drew Crum

the like fiscal does helpful. education? And level, That's pipeline some interest any sales then to product. this talk in Scholastic we that for okay. anticipate the What relative impact shifting other look Literacy, in initiative should you for of second Scholastic about your products Literacy demand of the cycle can the or the from meaningful Okay, on gears ‘XX? And half

Dick Robinson

the coming are a the XX, spring, of small a have a in but Scholastic Yeah, market will is normally materials, the amount textbook market Drew. curriculum Scholastic quarter coming into supplementary probably the There will textbook be ability - we to after sales a to summer core is supplementary our Literacy And in be small samples and first Literacy before There already core as the yeah. the the in program amount focused XXXX, May are education bigger be huge will and customers go designed more show very on of in of revenue presence dollars. market. XXXX.

Drew Crum

Okay. on for cycle like XXX And product this Dick, READ the it example much… sale or a is

Dick Robinson

with quite to it's textbook quarter. product our in really which for it's for Yeah, in of we're bit a to help us Scholastic a as loss course business you first is good that's cycle is a September which June, because the - August grows and attenuating forward it's the that July different and quarter first loss quarter and looking little know,

be to probably when XX% quarter will and started the in it revenues it underway. of gets So XX% first its

Drew Crum

Unified with we've strike, got just interest, potential District have any? across what Okay, monitoring impact developments that School your would the then have potential it. you would if LA know, I And been guess in - businesses would that impact that as to curious

Dick Robinson

so. the in talking on to room one if of and if have that don't that here people but an topic I go to was superintendent do offer – know, you came Beth, topic ahead this Friday. just up, anything LA Well, the

Polcari Beth

is The it have topic not do LAUSD impact course, and, will about our Drew. briefly of I on came Hi, strike, concerned any feel business. up but like the

resolve we I we discussed any will they that think ourselves time - a of impact. think in don’t of period like matter this don't I they feel will short a and have

Drew Crum

Okay.

we that? then referenced what for doing issue the seeing tax sales enough. response aside Ken, the is And for rise me from the results cost. product this? P&L question And to or company fulfilment the and you in segments Where fair either Okay, just in know, last you are Dick in or one

Ken Cleary

regard tax, seeing minimal have tax to costs, and place well in costs, introduce seeing we it Drew, U.S. our a labor to particularly both all sales complete it costs. With impact in with to base really program it in as to channels, them. the with you're customer those So across you're as seeing sales you're product in

teachers treading lightly that that will areas we of areas are and regard we be those We on can and to - understand initially we're we're at discussions price some if in - very to certain is overcome looking are if what strategic we're elasticity pricing can the cognizant impact on other With going the and in trying area. now.

Drew Crum

And the was Ken P&L flowing goods that the line I through think cost this on sold of

Ken Cleary

Yeah, absolutely.

Drew Crum

Okay.

Okay, appreciate it. guys. I Thank you.

Dick Robinson

Drew. you, Thank

Operator

Thank I'd concludes you. like turn to the remarks. And our closing question-and-answer for back conference session. that over to Robinson Richard

Dick Robinson

all Well, and focus the for season. your your thank happy you Scholastic to for forward all. here second holiday. your good you businesses. appreciate Have Thank looking holiday a We're in attention a we help our half on and

Operator

thank disconnect. gentlemen, in may all day. Everyone the for program does you conference. conclude great have This and Ladies today's participating and a you

Scholastic (SCHL) 20 Dec 182019 Q2 Earnings call transcript