Scholastic's First-Quarter Net Loss Was Flat at $71.2 Million. The Loss Per Share Still Widened 33%, Because the Share Count Fell to 18.9 Million From 25.2 Million.

by Ellis Vance · September 30, 2026

Small-Cap Markets Correspondent, The SmallCap Signal

Scholastic Corp. (Nasdaq: SCHL) reported a fiscal first-quarter net loss of $71.2 million on Sept. 24, almost exactly the $71.1 million it lost in the same quarter a year earlier, according to the company's results release. Yet the diluted loss per share widened to $3.77 from $2.83, a 33% deterioration on an unchanged bottom line. The gap is arithmetic, not operations: basic weighted-average shares fell to 18.9 million from 25.2 million after a year in which the children's publisher spent the proceeds of a real-estate sale-leaseback buying back its own stock.

Revenue for the quarter ended Aug. 31 fell 4% to $216.8 million from $225.6 million, which the company attributed to lower Education and Children's Book Publishing and Distribution sales and to the loss of rental income it used to book in Overhead before it sold and leased back its buildings in December 2025. Operating loss was $92.2 million, identical to the prior-year period; the company noted that figure included one-time charges of $3.5 million this year versus $10.3 million last year, so on its adjusted basis the operating loss widened by $6.8 million to $88.7 million.

The quarter is the smallest of Scholastic's year by design. School book fairs, its most important channel, barely operate over the summer, and the release described School Reading Events activity as "minimal during the first quarter due to the seasonality of the business." Book Fairs revenue was $33.2 million, down $0.9 million; Book Clubs revenue was $2.1 million. Consolidated Trade revenue fell $3.0 million to $70.5 million, which the company pinned on international co-edition sales in the prior year that did not recur.

Education, the segment that has weighed on results for several quarters, saw revenue drop $9.7 million to $30.4 million. The release cited "continued pressure on school and district funding and spending on supplemental curriculum materials." The segment's operating loss widened to $23.3 million from $21.2 million. Entertainment moved the other way: revenue rose $6.5 million to $20.1 million on higher production activity, and its operating loss narrowed to $1.8 million from $4.0 million. International revenue edged up $1.1 million to $60.5 million, essentially flat once a $1.2 million currency tailwind is stripped out, with the segment's loss narrowing to $2.9 million.

Chief Executive Peter Warwick said in the release that "Scholastic continued to advance its fiscal 2027 priorities during the seasonally small first quarter, with strong early indicators across our businesses reinforcing our confidence entering the important back-to-school and fall season." The 10-Q filed the next day, Sept. 25, said book fair bookings for the fall season were ahead of the prior-year period and that the trade channel benefited from the August paperback release of "Sunrise on the Reaping," with a new Dav Pilkey Dog Man title, "Sprinkle in Time," and tie-in publishing for the new Harry Potter HBO series and the "Sunrise on the Reaping" film adaptation expected this fall.

The company affirmed its full-year outlook of revenue growth of approximately 2% to 4% and adjusted EBITDA of approximately $135 million to $145 million, along with free cash flow of approximately $35 million to $40 million, all as first set out in its July 23 fiscal 2026 results release. Scholastic also repeated that it cannot reconcile those forward-looking non-GAAP figures to GAAP "without unreasonable effort."

The adjusted EBITDA target is lower in absolute terms than the $151.5 million Scholastic reported for fiscal 2026, and the company has been explicit about why. The sale-leaseback added lease expense and removed rental income, and the July release said fiscal 2026 adjusted EBITDA would have been $132.4 million on a "comparable basis" that assumes the transactions had been in place all year. On that footing, the fiscal 2027 range represents growth. For the first quarter, the same comparable-basis adjustment turns a $7.9 million deterioration in adjusted EBITDA, to a loss of $63.6 million from a loss of $55.7 million, into a $0.6 million improvement against a restated prior-year loss of $64.2 million.

For context, Scholastic is the world's largest publisher and distributor of children's books through school-based book clubs and fairs, by its own description, and it reported fiscal 2026 revenue of $1,581.9 million, down 3%, with operating income of $15.2 million, according to the July release. That release also said free cash flow for the year was $436.0 million, of which more than $400 million was net proceeds from the sale-leaseback, and that the company returned over $285 million to shareholders during the year.

The share count is the part of this quarter's story that will persist. On April 23, Scholastic announced the final results of a modified Dutch auction tender offer, accepting 2,834,018 shares at $40.00 each for an aggregate $113,360,720, which it said represented approximately 13.7% of shares outstanding as of April 19, according to the results release filed as an exhibit to its Schedule TO. In the August quarter it bought a further 630,850 shares for $25.8 million, an average of $40.66 per share according to the 10-Q's repurchase table, and paid $3.8 million of dividends.

One of those August purchases was not an open-market trade. The 10-Q discloses that on Aug. 26 Scholastic bought 289,624 shares from the estate of M. Richard Robinson Jr., its late longtime chief executive, at $39.76 per share, a 3% discount to the $40.99 close on the day the agreement was signed, for $11.5 million. The filing says the board approved the transaction on the audit committee's recommendation without the participation of the estate's preliminary executor, Iole Lucchese, who is the company's board chair and an executive officer.

The result is that Scholastic had 17,581,344 shares of common stock and 828,100 shares of Class A stock outstanding as of Aug. 31, per the 10-Q cover page, and $157.4 million left on its repurchase authorization. It said it expects to keep buying "from time to time as conditions allow." The board declared a $0.25 quarterly dividend on Sept. 16, payable Dec. 15 to holders of record Oct. 30.

The balance sheet is the counterweight. Net debt stood at $86.8 million at Aug. 31, versus $242.8 million a year earlier and a net cash position of $48.9 million at fiscal year-end on May 31, according to the two releases. The swing during the quarter reflects the seasonal working-capital build: net cash used in operating activities rose to $94.6 million from $81.8 million, and free cash use was $110.8 million versus $100.2 million, which the company attributed to working capital, higher rent and lost rental income, and higher capital spending. Lines of credit and long-term debt were $184.8 million, drawn against a $400 million unsecured revolver that matures in November 2029, per the 10-Q.

There was also a small unusual item. The 10-Q says that following a Supreme Court ruling in February 2026 the company became entitled to refunds of tariffs paid under the International Emergency Economic Powers Act, and had received $9.4 million of such refunds as of Aug. 31, $6.6 million of it during the quarter. The 10-Q says the refunds lowered cost of goods sold in the quarter, largely benefiting the U.S. book fairs channel, and were partly offset by higher product and royalty costs in Education and higher postage costs.

What is next is the quarter that matters. Scholastic's fiscal second quarter, which runs through November, carries the fall book fair season and the holiday trade list, and is the period against which the affirmed guidance will really be tested. The first-quarter release offers bookings "ahead of prior year" as the leading indicator but no number for them, and the Education segment's trajectory depends on school budgets the company does not control. Whether the smaller share base turns into a per-share gain rather than a wider per-share loss will not be visible until the December report.