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

Sep 24, 2020 • 04:30 pm ET

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

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Presentation
Executive
Richard Robinson

in the years to come. This program reduced the seasonal operating loss this quarter by $38.1 million, excluding one-time items and meaningfully lowered free cash use in the quarter. In the first quarter, most reductions were related to labor, resulting in a one-time pretax severance charge of $12 million. We have streamlined all of our U.S. units and particularly our Club and Fair organizations significantly reducing head count and improving efficiency.

As part of these cost focus measures, we sold our underutilized Danbury, Connecticut facility and we continue to pursue other cost saving actions in response to the changing circumstances of our school customers. This program is designed to enable us to reach our goals of preserving profitability and positioning ourselves to ramp operations efficiently as demand increases during the year. Longer term, we believe that our efforts will improve Scholastic's operating leverage, streamline financial processes and significantly lower cost base. At the same time, we're positioning the parts of our business that are less sensitive to COVID, trade and education for continued success for the rest of the year and beyond. We're proud of our strong frontlist and portfolio of popular IP and have accelerated our work to deepen our digital connections with our customers.

COVID-19 has fast tracked the digital revolution that was already underway and our blended traditional and digital solutions allows us to meet the customer current needs and anticipate how to best solve the challenges. Third, we are flexing the makeup of our products and services and the timing of delivery to meet customers where they are. Because of our transition to more flexible model, we're able to match our offering and therefore our costs with our best revenue potential. For example, we are now giving parents and schools the choice of shifting Club and Fair orders to homes as well as schools as many have requested. We've already seen a strong response to home shipments from parents ordering from Book Clubs. For schools operating in a tradition in-person manner, we are beginning to schedule in-person fairs for delivery later this fall.

For schools that opt for online fairs, we are enhancing our model to improve revenue per virtual fair with the new animated promotion website directed to virtually -- to parent and child customers ordering from home. Teachers and administrators are quickly settling into their new environments and we are beginning to see momentum. Now turning to Q1 performance in more detail, largely as a result of the challenges presented by COVID-19, Scholastic's first quarter revenue of $215.2 million was 7% lower than Q1 of last year. Excluding one-time items, the operating loss in the first quarter was $45 million, a 46% improvement from the prior year's operating loss of $83.1 million, also excluding one-time items due to our aggressive actions to reduce costs and transition to a more flexible and responsive model to meet new needs of schools and classrooms.

In trade, in the first quarter, our strong sales continued with The Ballad