Scholastic Corporation (NASDAQ:SCHL) Q1 2021 Earnings Conference Call - Final Transcript

Sep 24, 2020 • 04:30 pm ET


Scholastic Corporation (NASDAQ:SCHL) Q1 2021 Earnings Conference Call - Final Transcript


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Kenneth J. Cleary

an 11% increase over last year driven by sales of our core instruction programs such as Summer LitCamp and After the Bell and our Grab and Go summer reading packs.

Digital revenues increased significantly driven by successful moves to deepen digital connections and offer schools the digital solutions they need in a remote learning environment. We also had higher volume sales across our Teaching Resources business including our First Little Readers packs and teaching guides, Jumbo and Summer Express activity books and Teachables lesson plans and activity sheets, where we increased our subscriber base by 21% over last year. Segment operating loss was $2.2 million, an $11.2 million improvement over last year's loss of $13.4 million as a result of our strong revenues and effective cost savings measures. In International, first quarter revenues were $70.7 million, down 5% compared to last year as a result of lower Book Fairs volumes in Canada, Australia and the UK due to school closings as well as lower direct sales in Asia.

These declines were partially offset by stronger trade publishing globally and good performance for book clubs in Australia. Many of our international operations in Australia and Asia are beginning to see increased activity as the pandemic has eased in these regions. Operating income of $6.2 million was a $9.9 million improvement over the prior year period due to our cost containment measures largely in labor and operations costs. Our cross-functional COVID taskforce substantially completed work to achieve $100 million in cost savings this year, as you can see from this quarter's results. We took action to streamline and improve procurement and rationalize our inventory purchases. We consolidated our Book Fairs distribution function, made difficult staffing decisions that reduced our workforce including the temporary closure of our distribution facilities and the elimination of redundant functions.

We have focused our Book Fair sales team on activities deemed critical to our customers while de-emphasizing low value add activities. We have streamlined our Book Clubs distribution function to achieve greater efficiencies and lower costs. We have consolidated certain corporate functions and permanently reduced costs as a result. We have halted all travel and entertainment spend and our more recent technology investments are enabling us to work effectively while many of our employees work remotely. We have identified areas of additional cost savings that we will continue to pursue throughout the fiscal year. Our program to reduce costs to mitigate the impact of lower COVID-related sales helped to reduce our selling, general and administrative expenses by $41.5 million in the current quarter compared to the first fiscal quarter last year, excluding one-time items.

A substantial portion of these costs are permanent and will not return as the pandemic eases. The lower overhead expense was primarily due to lower labor expenses and operational savings across multiple cost centers as well as lower technology-related spend in the current quarter. Our labor reductions and restructuring programs resulted in one-time pretax severance charge of $12 million this quarter, including $11 million