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Image source: The Motley Fool. Thursday, Aug. 13, 2026 at 8:30 a.m. ET President and Chief Executive Officer - Philip Moyer Executive Vice President and Chief Financial Officer - Bob Sallmann Treasurer and Senior Vice President, Investor Relations - Danielle Kloeblen Operator: Good morning, and welcome to the McGraw Hill Inc. Earnings Conference Call. [Operator Instructions] Following the prepared remarks, we will open the call for questions. I would now like to turn the call over to your host, Danielle Kloeblen, Treasurer and Senior Vice President, Investor Relations. Please go ahead, Danielle. Danielle Kloeblen: Good morning. Welcome to McGraw Hill's earnings call for the first quarter of fiscal year 2027. Joining me today are Philip Moyer, President and Chief Executive Officer, and Bob Sallmann, Executive Vice President and Chief Financial Officer. During today's call, we will make forward-looking statements based on our current expectations and the current economic environment. These statements, estimates, and projections are subject to significant uncertainties beyond management's control. As detailed in the cautionary language in our earnings release for the fiscal first quarter ended June 30, 2026, the accompanying investor presentation, our 10-Q for the same fiscal quarter and our other SEC filings. We will also reference certain non-GAAP measures today, which we believe provide useful supplemental insight into our financial and operational performance, though they are not substitute for GAAP measures. Definitions and GAAP reconciliations are available in our earnings release, the appendix to the investor presentation, and on our investor relations website. For those listening to a recording of this call, please note that the remarks are as of today, August 13, 2026, and have not been subsequently updated. With that, I'll turn the call over to the President and Chief Executive Officer, Philip Moyer. Philip Moyer: Good morning, everyone. Thank you for joining us. Millions of students and educators worldwide are preparing to head back to school, and McGraw Hill is leading the way. We're entering our most important selling season off the back of a stronger than expected first quarter. McGraw Hill has more paid enterprise users than any other education company in the world, over 100 million active curriculum licenses, over 7.5 million users of our AI solutions, and billions of learning interactions. This is what it looks like to be the world's preeminent education company. Q1 exceeded our expectations, both on revenue and profitability. Revenues grew 2.6% year-over-year, while recurring revenue grew 9.8%, representing 77% of total revenue. Adjusted EBITDA was $207 million, yielding a margin of 37.7%. More than 192 basis points of growth over the prior year, and net income was $58 million. These results represent disciplined execution across our teams, on our fiscal year 2026, where we delivered revenue growth, margin expansion, and positive net income, and a $646 million reduction in gross debt. In higher education, Inclusive Access, our Evergreen content delivery model, and our world-class go-to-market team continue to drive momentum. Q1 marked another quarter of share gains, extending our 10-year streak. Our Connect offering exhibits the stickiness of enterprise software, which gives us some considerable confidence as we head into the fall. In K-12, we're at the beginning of a multi-year curriculum adoption cycle, driven by the Science of Reading. 44 states representing 86% of K-5 enrollment have mandated Science of Reading based pedagogy with large states like California accelerating their ELA cycles. In fact, Stanford University projects 300 to 700 additional districts could adopt Science of Reading curriculum materials over the next 7 years, on top of the usual cycle. Our new literacy programs, Emerge, Summit, Soar, and Emerger Juntos, a comprehensive K-12 program built on the Science of Reading. It will also be one of the only dual language programs in the U.S. market. And I'm very happy to say that it's exceeding our expectations with early cumulative capture rates above our 25% to 30% target range. We've seen additional adoptions since last quarter. Many of which are in open territory districts that were not previously our customers in July. Our California ELA programs were recommended for approval by a state reviewer panel, and we're looking forward to November when the state will approve the final vendor list for the procurement cycle that begins in fiscal year 2028. I'm also excited to announce our expansion into the increasingly important dyslexia screening market. It's estimated that 1 in 10 people have dyslexia, including 10 million students in the United States alone. And as a result, 40 states in the United States have mandated student screenings for dyslexia. We're launching exclusive integration with Stanford University for ROAR, which stands for the Rapid Online Assessment of Reading. It's an evidence-based dyslexia screener and the only screener designed to assess foundational reading skills across the full K-12 spectrum. We integrate ROAR data with our McGraw Hill Plus analytics platform, which will uniquely help teachers identify, intervene, and target instruction all in a single unified interface and experience for the student and the teacher. On a separate note, I'm also excited that Florida has recently approved our math programs ahead of the state's upcoming adoption beginning in fiscal year 2028. In global professional medical information now doubles every 73 days. The need for curated medical grade content at scale is growing. And McGraw Hill is building directly into the convergence of medical education and clinical workflows. Our AI Reader tool now spans 4 new pharmacotherapy and pharmacological titles, with 96% of pharma doctor penetration. While our clinical reasoning tool has added 18 cases and landed its first commercial deals across osteopathic medicine, physician assistance, and nurse practitioner programs. I'm also excited to note that last month, our AI agent powered by Harrison's Medicine was tested head-to-head against leading LLM platforms. We saw a panel of respected medical editors and physicians, and it outperformed every tool on every question, delivering more complete, accurate, and up-to-date clinical responses without hallucinations. We're trusted by 98% of U.S. medical schools, and with our new agentic AI platforms, we're just scratching the surface of how our medical grade content can be applied across the $13 trillion medical industry. International also continues to present attractive growth opportunities. In Australia, we secured our largest K-12 ELA intervention deal with the Tasmania Department of Education, covering nearly 200 schools and approximately 5,000 students. Student populations around the world are growing, and McGraw Hill is one of a few edtech companies that is able to serve globally at scale. And these wins reflect the growth opportunity ahead. AI is another growth vector, and the narrative is shifting. The world is realizing that AI is not replacing jobs or destroying companies. It's making them better, and education is a best example of this. Humans have an insatiable desire for knowledge, and the need to educate the next generation is growing daily. We will simply not have astronauts reach Mars or manage fleets of robots, harness biology to extend lifespans, or usher in global peace and prosperity without doing an excellent job in education. Education is the fountainhead of human progress, and unlike other industries, it simply doesn't have a terminal value. The challenge is we must teach more subjects to more students faster and in more ways than ever before. Teachers and students are having a hard time keeping up, and they're looking for someone they can trust. According to our Global Education Insights report that we just released, educators are 81% more likely to completely trust AI that is embedded in existing educational platforms versus general purpose chatbots. It was also interesting that trust among educators in general purpose GenAI chatbots declined 33% year-over-year. These surveys, along with customer conversations, continue to reinforce that AI will be a tailwind for McGraw Hill, because we can teach more subjects to more students with more trust than any other option. A great example of this is the contrast between OER and McGraw Hill. As mentioned, we take more business from OER than we lose. The average school district uses over 2,400 disparate tools, and the average teacher and student has over 25 separate logins. Do-it-yourself content and chatbots that the educator must self-correct takes their time away from students and is not driving repeatable outcomes. McGraw Hill doesn't make educators piece it together. We deliver a fully integrated system of curriculum, assessment data, personalized learning, and professional development. Integrated directly into the daily workflows of the educator and the student. As we build our AI driven adaptive edtech tools, we start with a deep mode of high quality human curated content, a proprietary education ontology with 26 billion annual learning interactions and a 7,000-educator research network, and over 100 independent peer-reviewed education outcome validations. When given a choice between our integrated, trusted AI model versus a general purpose chatbot with OER content found on the internet with no efficacy studies, teachers and students tend to choose McGraw Hill. As a result, we now have 8 live AI learning tools serving more than 7.5 million active users with 3 additional launches planned this fiscal year. Our AI Reader alone has scaled to 63 million interactions across 2.6 million users to date. But we're just getting started. Agentic AI is quickly becoming one of the most important technologies in the AI race. Agentic AI allows companies to create purpose-built knowledge graphs and couple these with different size models to achieve higher accuracy rates, better speed and efficiency levels that surpass the general purpose AI models. We believe the future of knowledge will be agentic, and the agentic AI pilot that I mentioned last quarter continues to grow. We already have over 14 companies in our pilot group, and they're using a wide variety of third-party chatbots and open-source tools, which we can integrate with. We are building our agentic tooling to be a part of any education experience with any choice of chatbot that supports agentic standards. And we believe this represents an opportunity for meaningful TAM expansion. We look forward to sharing more about our agentic strategy, our broader suite of tools, and our growth priorities at our Investor Day on November 18. Our mission to build human intelligence across the full education life cycle has never been more vital, and our ability to deliver on it has never been stronger. Excited to now turn it over to Bob to walk through the financials of the quarter. Robert Sallmann: Thank you, Philip. We had a strong opening to the fiscal year. We outperformed our expectations and are building meaningful momentum towards multi-year growth. New wins, strong retention, upselling, pricing, and accelerating digital engagement are trending positively. However, we are taking a measured view as we await higher education enrollment and final K-12 district award decisions, both critical for the full-year outlook. And adjusted EBITDA can shift between Q1 and Q2 due to academic seasonality and K-12 shipment timing, which is why we focus on first half performance as a more meaningful measure. With that context, total revenue for the quarter was ahead of our expectations at $550 million, an increase of 2.6% year-over-year. Reoccurring revenue reached $426 million, an increase of nearly 10%, or 77% of the total revenue mix, demonstrating the durability and predictability of our model. And digital revenue increased nearly 9% year-over-year, representing 64% of total revenue. The remaining performance obligation was $1.5 billion and is expected to increase sequentially reflecting typical K-12 seasonality. Adjusted EBITDA was $207 million yielding a margin of 37.7%, an increase of 192 basis points compared to last year, or growth of 60 basis points when excluding benefits from the sale of intellectual property. Margin expansion was driven by cost discipline, digital mix, and AI productivity gains, even while investing in ELA, AI tools, and agentic curriculum pilots. Our industry leading margin profile reflects a differentiated value proposition. One that we believe is durable and positioning us well for continued expansion over time. This overall momentum we are seeing across revenue growth, margin expansion, price realization, and market share gains reflects AI as a genuine tailwind for our business, one you'll see playing out in each of our segments. Now, let's move on to the segments. Our momentum continued within higher education in the small but encouraging summer session with $200 million in revenue in the quarter, up 10% year-over-year, while reoccurring revenue grew 14% year-over-year. Trailing 12-month market share remained above 30% through June, an increase of 140 basis points year-over-year, according to MPI. At 57% of revenue, Inclusive Access continues to perform well with activations and adoptions both accelerating through June. Our Evergreen continuous content delivery model, which represents 68% of higher education revenue in the fiscal year 2026, protects our renewal base and enables more competitive takeaway opportunities, evidenced by 59% of our accounts rolling over to the latest release without sales rep intervention. Our value based pricing approach continues to stick, driven by ongoing product enhancements and a differentiated go-to-market approach. We are actively monitoring fall enrollment signals. Our overall guidance continues to embed an assumption of 1% enrollment growth, and we will update our assumptions as we gain more in the coming weeks. Shifting to K-12, revenue in the quarter was $274 million, up 1.3% year-over-year, with reoccurring revenue growing 7%, reflecting the durability of our multi-year contracts and strong capture rates and science in ELA. Outside of math in California and Texas, our K-12 capture rates are at the high end of the targeted range, and we're continuing to build momentum. As Philip mentioned, our new ELA program is delivering early results that stand above our targeted 25% to 30% capture rates. The multi-year ELA cycle is underway with 44 states aligned with the Science of Reading and California's adoption cycle starting in fiscal year 2028. Our supplemental and intervention pipeline is up double digits for fiscal year 2027 and we continue to see improvements in our renewal rates. We are embedding McGraw Hill Plus in Emerge, Summit and Soar to unify data across core, and assessments. Global Professional delivered $35 million in revenue in the quarter, with reoccurring revenues growing by over 6%. Medical Education represents 80% of the segment and has significant runway as AI-enabled clinical simulations and diagnostic training tools early traction. And as non-strategic print titles wind down, the true growth profile of this business becomes increasingly visible. International delivered $45 million in revenue in the quarter, impacted by the Middle East conflict which delayed K-12 shipments, which are now being fulfilled. Growth in the Middle East and Latin America is expected to offset continued higher education enrollment pressure in Canada. Positioning the region for growth in fiscal year 2027. We ended the quarter with $194 million in cash and $644 million in total liquidity with our revolving credit facility remaining undrawn. Q1 reflects a seasonal use of working capital tied to back to school preparation, which came in below prior year and drove improved cash flow from operations. Collections will ramp post our primary selling cycle, consistent with historical seasonality. CapEx and product development remain in line with our expectations. We have cycled through our cash trough and are now building cash with gross debt reduction as a top priority. We reduced gross debt by $646 million in FY 2026, lowering annualized cash interest expense by nearly $45 million and remain committed to our net leverage target of 2x to 2.5x. We will also continue to opportunistically evaluate ways to optimize our capital structure. In July, Moody's upgraded our credit ratings across the board, reflecting our strong financial profile, lower leverage, and commitment to continued gross debt reduction. Our $50 million of share repurchase authorization remains in place. Our capital allocation approach is unchanged. Organic reinvestment, debt reduction, select tuck-in M&A, and opportunistic share repurchases as a value-creating complement. The M&A pipeline remains active with select targets that accelerate our product development roadmap in adjacent areas that can be scaled across the organization. We are reaffirming this year 2027 guidance across all metrics ahead of the primary back to school period. Leading indicators are encouraging and we remain confident in our financial trajectory with greater visibility ahead as the large fiscal second quarter selling season progresses and we are seeing students arrive on campus. We will factor this into our guidance when we report fiscal second quarter results in November. Approach we took last year. We remain focused on execution, which will support our multi-year trajectory of mid-single-digit-plus revenue growth and continue margin expansion. With that, I'll turn the call back to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Steven Koenig with Macquarie Group. Please go ahead. Steven Koenig: My first question is for Bob. Can you give us some color on just the drivers of the outperformance in the quarter versus your internal expectations? And then I've got a follow up for Phil. Robert Sallmann: Sure thing. Thanks, Steven. Yes, we executed well across the businesses. We're building momentum as I highlighted. What we saw was really the performance or outperformance in K-12. As we highlighted, I want you to think about that being a first half and second half business and it's really critical for us to deliver our educational materials into districts ahead of back to school. And so what you're seeing is a little bit of that benefit where we executed and delivered in say June versus July, but it's really critical that we ensure those materials are there in district on time. I'm trying to say that's the biggest driver of the overperformance, but look, we're really pleased with the momentum we're building in higher ed and across the businesses. Steven Koenig: Philip, for you. Your data points on the superiority of your AI tools and adoption of AI Reader. It's very, very encouraging. Can you give us maybe a little bit more detail on how you're progressing with potential commercial constructs for your AI strategy and maybe what do you feel investors may not appreciate or need to know about that strategy. Philip Moyer: I would tell you we're super excited about a lot of what's happening in AI for us and just in tooling in general. One of the things I want to highlight for investors just in general is that this quarter we did over 284 curriculum and releases of AI tools and learning tools. Our pace of innovation is accelerating. It's one of the fastest that we've ever had. I believe I can safely say the fastest, while we expanded margins. Important to say, and there's two reasons for that. First of all, we're able to monetize on top of the existing curriculum licenses we have. We have over 100 million curriculum licenses. When you look at most other edtech companies, they have lots of free users and very few paid users, and we're starting to monetize. When I talked about the 7.5 million many of those are paying us additional fees on top of the curriculum license. Sharpen is a great example of that where today you pay for the curriculum and then Sharpen also adds in learning tools and you're going to see us do that across a wide spectrum of our curriculum across those 100 million curriculum licenses. And so in some cases it's an additional AI driven learning tool. In some cases, it's going to be an upcharge for AI access or MCP access. And in other cases, we're inventing brand new tools. So I would tell you that we're really excited about it. What you're seeing as well hold inside of organizations like higher ed as well as K-12 is our price. We're actually able to command more price in those markets, and that's being driven both by the tooling, the assessment products, and as well as the study aids on top of those 100 million licenses of curriculum. Operator: Your next question comes from the line of Henry Hayden with Rothschild & Co. Redburn. Please go ahead. Henry Hayden: We were hoping to get some incremental color on the guidance philosophy given there's been no change there despite strong momentum in the quarter. So how much conservatism have you baked in around cap rates in K-12? Should we expect there to be upside risk for the full year beyond kind of the previous indication for that to come in at the lower end of the range? And then just as a follow up, is there any more detail you'd be able to give us on the early indicators for the full year for California ELA and ELA more broadly as we think about the capture rates at the segment level moving forward. Robert Sallmann: We just spoke on June 11th when we developed our guide and used sort of all the insights we had at that point to inform what the guidance would be. And we provided a range, of course, for various different outcomes. As we progressed since then, a couple of months have passed. We haven't really seen a meaningful shift in terms of capture rates or anything that would indicate a difference. Now, we did highlight the momentum that we're building, particularly in higher ed, we saw capture rates, we're seeing price, we're seeing other areas, but the most meaningful measure for us will be when students arrive on campus. And so as we wait until the end of August and to September, those will be those indicators of where we'll be in higher ed. So consistent with our past practice this is an important quarter, but really it's not until we complete our second quarter that we can come back and have more visibility for the full year. Philip Moyer: And on ELA capture, we are very, very pleased with what's happening with our Emerge, Summit and Soar program. We're one of, as I mentioned in our earnings call or in some of my remarks, one of the only fully dual language programs that's in the United States that spans the full grade level. It's a really important differentiator. The other thing, we have built this thing, literally it's one of the largest single investments that we've made in the history of McGraw Hill to launch this program. And we're really, really excited about what's happening in the literacy market. It's one of the biggest mandate changes in curriculum that's ever occurred in the education market all simultaneously. We're excited as well about our Rapid Online Assessment of Reading, ROAR. So, we're bringing dyslexia screening with our literacy program, and we're seeing a great progress. I mentioned last quarter that we scored 212 out of a 214 rubric in Colorado. I'm happy to say that we just got through our panel of reviewers in California and so we're expecting the list to come out in the early September time period, but we've been recommended for approval. That ROAR program I mentioned is also approved in California. California and our early win rate is pretty extraordinary. We're seeing districts like Lake Washington, St. Cloud in Minnesota, Maricopa in Arizona, Snoqualmie in Washington, some really great districts that are adopting and this is what we call kind of year zero for the program. So it's just we're just bringing out fully as we get into next year and we're already seeing rates that are significantly higher than what we saw in our previous program. Wonders was about a $1.5 billion program for us over 10 years. And what we're seeing is traction that is actually exceeding a lot of what we saw when we first rolled that out. So exciting, an exciting moment for us in literacy as we look to the coming fiscal year. Operator: Your next question comes to the line of George Tong with Goldman Sachs. Please go ahead. George Tong: Higher education performance in the quarter was supported by share gains, pricing, and enrollment. Can you unpack these drivers and elaborate on how your performance compares with your largest competitors? Robert Sallmann: Sure, thanks George. When we think about that 10% revenue growth let's go back to last year and really this is relating to the spring semester and it's just a carry over from there. So what you're seeing is enrollment being up about 4%, that price we talked about price sticking at a greater rate. And so we'll see that at about 2%. And then the remainder of that is really the share gain piece. So that's really the drivers of the growth there. And I said previously in the prepared remarks, we're really well positioned as we walk into this important back to school as a student show up on campus with both price, with takeaways and some other things that'll allow that momentum to continue. Philip Moyer: I would add in a couple of things. First and foremost, I think that we have maybe one of the most world-class go-to-market organizations inside of the entire industry. And I would say that I've ever experienced. I worked in go-to-market organizations at Microsoft, Amazon, Google, some amazing, amazing organizations. And I would tell you this organization is world-class that we have. We made a deep investment in customer success as well that's paying off. Our retention rates are simply, I believe that we could say that it may be the best in the industry. The other thing that's really differentiating us is, move to Inclusive Access. We made that shift, making all of our content more accessible. I think in some cases from a pricing perspective, our competitors, but then we're adding more value on top of that, especially with something like Evergreen. And I'll see relationships jump from $200,000 to $600,000 really quickly because of people moving to both Inclusive Access and getting more students and then also Evergreen where you have more professors because we're constantly talking about the update into content. And then our customer success teams are landing with those professors. And some of our competitors are pulling their customer success team, pulling their go-to-market teams. I was with a professor last week, and great professor, and he said, the difference between you and everyone else is that your team, every person, they pick up the phone, They come in, they're there, they respond. They are world-class in terms of how they service the classroom, the professor, the institution. And so our feet on the ground in the organization, the relationships, and then our systematic execution, our pricing execution, and our content execution are just simply, there's not a lot of companies you can look at and say 10 straight or 40 straight quarters of share growth. It's a pretty extraordinary story. And we're really proud of that. George Tong: I was really intrigued about your announcement with ROAR. Did you not have a product that focused on dyslexia beforehand? Why this specific product? And what do you think it means in terms of the opportunities you have in that market? Philip Moyer: So as mentioned, approximately 1 in 10 people, it's estimated in the world have dyslexia. It's a unique wiring of the brain. And it turns out that you can actually rewire the brain. It's very important. There's been a tremendous amount of science that's been done. At Stanford in particular, it's considered one of the best programs in the world around dyslexia. And the ability to be able to detect that early and then be able to provide the appropriate intervention and then instructional models to be able to actually rewire the brain, it's a really critical thing. And I think there's been a lot of science that's been done, and they've just been bringing out really solid screening for dyslexia. We've been in the intervention supplemental market for awhile. We also have fantastic literacy program and so this ability to be able to detect any kind of multiple learning disabilities, specifically dyslexia, which is the number one. It really gives us a way to walk into a school district and be able to give a holistic program that a lot of other organizations can't provide. We're also excited about it because it's also one of the only multilingual screeners that's in the marketplace. It also provides Spanish screening. As a whole, both here in the United States and on a worldwide basis, this allows us to both provide a literacy program, intervene properly, and then I'll say provide a service to the district in a single package, be able to understand proficiency for any kind of reading learner. George Tong: All right, let me shift gears a bit and maybe talk about the K-12 market. I know we're looking at six months instead of quarter by quarter, but some of the other folks in the industry have been talking about delayed decision-making. I'm wondering if you are seeing that. Has it gotten any worse or any better since we talked last quarter? Robert Sallmann: It hasn't meaningfully changed. We are watching some of the supplemental intervention decisions and that pipeline and how it's closing. But generally I would say it's consistent with our what we saw a month ago. And so again, we've built the pipeline. We're excited about where the supplemental intervention is, might be the one area where people are seeing a little bit slower delays around calls. But we haven't seen anything meaningfully shift. Operator: Your next call comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead. Faiza Alwy: I wanted to ask about K-12 also, and really just learn more about the demand for agentic AI solutions and kind of how that's balanced against more demand for paper and pen, particularly in the early elementary grades. So just would love your perspective on kind of how you're balancing those two things. Philip Moyer: Thank you for the question. This is such a wonderful question. And specifically, there is a lot of, I'll say, debate right now around what the appropriate amount of screen time is in the classroom. In some cases, a pretty significant backlash. We've seen actual bans in some classrooms for tools. And then we've seen it other areas, geographies around the world, a movement towards screens. We have a philosophy that screens are appropriate or best kind of used based on the amount of self-regulation that a particular student has. And I kind of liken it to the lens of a camera. It has to be very narrow and focused in some cases, but the more self-regulation you get, you're able to still focus while the world, you take in more of the world. And in the early years, last quarter I talked about, the announcement of the adoption in Seattle school districts, the school board was concerned and wanted us to assure them they only had 7% usage of instruction time was on a screen, which we can do. And it's precisely what we do about 20 minutes a week. And as we move into AI of a new higher grades you can definitely have more AI capabilities. So the early years, I would say we primarily use AI for assessment or short-term in some cases for intervention supplemental, but we're spending a lot of time as well in traditional teaching. The amazing thing about McGraw Hill is I think that we can safely say that we may be one of the largest, if not the largest, edtech companies in the world because of the 100 million paid subscribers to our content, but we're also one of the largest book and paper based programs in the world. And so we're one of the few companies on the planet that can serve at global scale print as well as digital in whatever way a school wants to use. And so and you'll see us continue to build tooling around this. You can see us continue to take leadership. We have literally hundreds of PhDs that are on our that are on our in our organization that focus significantly on this about the appropriateness of screens and then the appropriateness of paper based on the type of reader. And as I mentioned, we're one of few companies that can do this at scale. And let me add to that. I think printing at scale is very difficult and we do it extremely efficiently. And so if you think about some of the competitors. Robert Sallmann: that are digital first, digitally native, they will really have challenges printing at scale and doing it on time. And as I mentioned into my earliest question, it's really critical to deliver that print material on time when students need it ahead of the back to school season and do it efficiently. And we've been doing that for a very, very long time. So we are very well positioned should that market shift going forward. Faiza Alwy: Great. Thank you so much. And then just to follow up also, you talked about that you take more business from OERs than you lose. Just I'm curious if you can share kind of the latest developments around that. I know it's been it's been an important topic. So has anything shifted over the last couple months since we talked about this? Philip Moyer: No, it really hasn't. I've been really proud of the team throughout the summer. The summer tends to be a little bit of a slower selling season or in the school market, as you can imagine, a number of teachers are taking some well-earned breaks over the summer, but the team has been winning. And we've been continuing to take both share as well as take share from OER. The thing that I keep getting told by everyone, and I've mentioned before is that teachers don't want to have to spend all their time off building curriculum. They'd rather spend it in the classroom with students. And so kind of rolling your own with a chatbot or some OER resources and have to figure out how to build an assessment and then how to figure out how to build an activity or to build a case study that kind of reinforces. They really do love actually having somebody like McGraw Hill deliver the content to them in a package and then them being able to augment and focus on what they're amazing at, which is actually landing that content with students. They'll use a lot of additional content, but it really helps to start with a package that you trust and that has content that you know has been human curated and with assessments that actually have been third party validated. So we continue to win over the summer, I guess is what I would say, even though there's not a lot of teachers making decisions. Operator: Your next question comes from the line of Shlomo Rosenbaum with Stifel. Please go ahead. Shlomo Rosenbaum: Bob, I want to ask you a little bit about a question we had before and how it goes into the science of literacy. Last quarter, the company was closed. I would say a little bit, I don't know if you put it more conservative or talking down the capture rates that they were expecting and now you're talking about very strong capture rates. I'm trying to understand what changed in one quarter and does it have to do with the fact that you've come out with this next generation literacy curriculum and as you talk to that, I want to ask you to just explain a little bit about the change that's going on in the market with all the different states and how that's going to impact the cycles in terms of curriculum, it seems like it's additive to the existing cycles. It seems like something that's just not really appreciated out there in the market. And you can tell me if these two things are the capture rates in this science and literacy are connected. Robert Sallmann: Yes, great, great question. Let me kind of go through these in a few different pieces. So when we speak of our capture rates, and we talked about outside of California and outside of Texas, we're at the high end of our range. And historically, we've been in that 25% to 30% range. And then when we said that our blended rates were at the lower end of the range, implying that we have some opportunities to make some improvements in California, by example. What we are seeing, and there's lots of improvements that are happening, we are seeing some excitement around the changes we've made and its position as well for into '28. So we would expect those overall capture rates to continue. Now, when we talk about the Science of Reading in our new ELA program, it's been landing exceptionally well. When we launched Wonders over 10 years ago, we saw our early signals and early capture rates. We're well above those now with our new programs, Emerge Summit, Soar. So what you will see, and again, this is where I'm talking about momentum as we move to '28 those are the areas know some ongoing business. But I do want a couple areas outside of territory. So we're number studies were number two. So these are places that we are really well positioned, continuing to take share, continuing to expand our share. And so that's when I talk about momentum, those are the places we're seeing it. Shlomo Rosenbaum: Then how much of the beat in K-12 was really delivering the printed material ahead of expectations it sounded like that was something that was very key happened in June versus July so maybe you could kind of quantify that and lay out what we should be expecting for next quarter because it seems like it was somewhat of a pull full. Robert Sallmann: Yes, and I think and that's exactly it. I think about first half, right? And so we just want to ensure those students have all the materials ahead of back to school. And so I don't really think of it so much as a Q1, Q2, but that first half. And so when we look at the beat in K-12, it was in line with our first half expectations. And some of it came in faster in June versus July. And that's why in mind we kept our guidance as well, and we'll continue to monitor other trends as we go into next quarter. Operator: Your next question comes from the line of Joshua Chan with UBS. Please go ahead. Joshua Chan: I guess first question is on the LLMs. There's been some kind of more visible moves by the LLMs in the education space. So could you talk about what impact that might have on you and how you're thinking about the market, if at all? Philip Moyer: Yes, I would say I expect that every LLM will probably announce some kind of a set of relationships and partnerships in every industry. You'll see OpenAI make some announcements in healthcare. You'll see probably Microsoft make some announcements inside of education or financial services and Google make some announcements in manufacturing. Generally, big tech companies need to show that there's partners that they go-to-market with because they can't write all the lines of code. They can't certainly make all the prompts necessary to be able to deliver every vertical industry. And so as an example, the Anthropic announcement this past quarter, they announced the collection of different tools that support MCP and some curriculum resources. And they said, this is our strategy in education. We love Anthropic. We love Microsoft. We love Google. The important thing is, we announced this MCP agentic strategy specifically because we knew that all of the AI chatbots in the world going to be moving to the standardized protocol to be able to consult expert information and expert tooling, which is what we are. And so we don't see increased competition. I will say, I think it's a really important note. But we do see the more and more of these chatbots and the more and more companies that announce agentic protocol support for MCP gives us a bigger opportunity. I was with a really, really cutting edge university, very large university. They are working on their AI strategy. And it was so interesting to me because when I spoke to them, they said, oh my God, they said, we really hope you can make this simpler. We're already up to 64 different AI chatbots and we need help. And the beautiful thing about what we're building is that we're both building the ability to be able to participate with those chatbots, and then we're also building some of our own interfaces in case you didn't want a 65th chatbot, you can kind of depend on a McGraw Hill chatbot that gives you access to lots of content. When I was over in Scotland, I spent some time with some of our Harrison editors, as I mentioned as well. These are some of the most demanding positions in the world. I do encourage you to take a look at the list. It's a pretty incredible list. And we were using our agentic tooling to show them, to let them ask medical grade questions, things that you would use actually in care, point of care. And it was grilling our chatbot and the extraordinary performance just literally lit up the room against competitors, kind of like general purpose chatbots. And I guess the thing I would leave you with is that chatbots are wonderful, but they need to be grounded in truth. And that's what we do really well. And so we'll both build an experience that can participate and an experience that is completely packaged. Joshua Chan: And maybe one follow-up for Bob. I guess based on your comment about looking at the first half versus the first quarter, would it be fair to say that the guidance, the four-year guidance would have likely stayed the same no matter what happened in the quarter? Or is that what you mean by kind of waiting until Q2? I'm just curious because I guess the guidance not moving despite the strong Q1 kind of creates a certain optic. Robert Sallmann: No, no, I wouldn't categorize it exactly that way. I mean, I think what should we see things that are outside of that first half dynamic is where we would be making any sort of adjustments for our full year guide. So when we look at it, we're really pleased with the execution and the execution really across each the segments, but it came in line with my more in line with my first half expectation, hence why we didn't make any changes. But more importantly around that guide is we still have the remainder of the summer selling season in K-12, as well as the all-important students coming back to campus. So those are really the metrics we watch closely and that informs us more for the remainder of the year. And I'll tell you, Josh, this still is consistent with the philosophy and approach that we applied last year. Operator: Your next question comes from the line of Toni Kaplan with Morgan Stanley. Please go ahead. Toni Kaplan: You talked a lot about ROAR and I was hoping you could clarify whether this is an add-on type of offering to the traditional reading programs or is it included, but you can use it to sort of raise the price more or is it more of a retention tool? Just wanted to understand if there's financial upside that you're seeing from it specifically? Philip Moyer: Thank you very much for the question. We're really excited about it. And yes, it's all of the above, but we're not bundling in terms of like just throwing it in for free. It definitely is paid for offering. We do think it both enhances the package or the overall literacy program, and it's also an opportunity to expand our TAM. Over 40 states have mandated dyslexia screening, and you don't just screen once for the student. You can screen at any point in their life. Students life and quite frankly you can even screen for dyslexia well after the student graduates. In some cases schools are actually mandating multiple screenings throughout a student's life span, the time in the school. And you know what we're excited about is that this ROAR is a full K-12 screener. You can screen an 11th grader. You just caught that student or you can screen a kindergarten student and so that ability to be able to participate in the 40 state mandate is pretty incredible. It's about 86% of all the students are represented by those 40 states and then also, in Latin America, we have a very strong presence in Latin America and over in Spain. And so we're also excited about the fact that this is multilingual. And so we can also take this really important ability to be able to detect and intervene also into these Latin America markets where there's literally a burgeoning education marketplace. So definitely TAM expansion and also expansion of the services we provide. Robert Sallmann: And Toni, just specifically when we think about that integration with Emerge Summit and Soar, that would be an incremental add that we charge to the districts. And then we have the ability to sell it on a standalone basis as well. So you'll see both of those revenue streams coming forward as we move through the year our relationship with ROAR. Toni Kaplan: Great. And then just as a follow-up, you mentioned the comments about Florida approving the math programs in advance of their adoption period. And I was wondering is like was the timing of that you know faster than expected. It's a it seems like a good sign just given some of the other states like California and Texas where you've had sort of other issues, but I guess is this a good sign that you will see more adoption than normal in Florida, or is this a regular dynamic and it just happens ahead of the adoption period anyway? Philip Moyer: I think I would say it happened on time, so I wouldn't say that it wasn't before or after our expectation. The good news was that we literally got an expansive approval of the program, both the lower mats throughout K-12, and then also some of our upper mats. I mentioned that we had a release of ALEKS for Calculus. This is a really difficult thing to build a fully interactive, personalized experience. That's one of our elements as well. So Florida, and I want to really make sure all investors know, we do well in math. In some states, we're number one, number two, number three in math. We've done well in math for a long time. We were excited that we were approved by Florida. We've got great relationships in Florida. And so we were excited going into the selling season. And we also have one of the most beloved, and I do mean beloved tools. I sit with children in third grade. I've sat with them in seventh grade. I've sat with some up in the upper grades. They love ALEKS as a method for assessing and also doing personalized learning. And so the Florida, we were happy to get approved. We were also happy to get approved for the California ELA opportunity. And we continue to have good share in the math market around the country. So we're not increasing or decreasing our forecast. It happened on time. Operator: Your next question comes from the line of Ryan MacDonald with Needham & Company. Please go ahead. Ryan MacDonald: Phil, first one for you, and I'm going to be a little weird and go out of higher ed and K-12 on this one. I was very intrigued to hear about what you were talking about with Harrison's Medicine and medical journals and putting that into an agent and that showing better results than some of the other clinical journals evidence tools. So can you just talk about the sort of the level of prioritization you see for resources, time, investment in sort of globalization professional in that medical opportunity, given you have a seemingly sort of the startings of a product that is, is sort of strong from an efficacy perspective in a market where there's a lot of venture dollars going thrown at it companies with valuations that are 10x that of McGraw Hill at the moment, like how do you think about the prioritization of sort of investment when you have what seemingly is a very strong tool in a very interesting sector. Philip Moyer: I love this question, I will tell you, I'm really excited about the space. I looked over, I was talking to the board recently and noted that there's been a roughly 300% growth in the need for medical education. They're forecasting about 11 million shortage of healthcare workers by 2030. We've got 27% growth in doctors outside of the United States, about 11% growth here in the United States, like very vibrant market. We need to educate more healthcare workers around the world. We just converted a huge portion of our medical curriculum over in India. We just landed our first sale in India. For the medical curriculum, there's 800 different medical schools that are adopting medical curriculum. So it's a long way of me saying very vibrant market. Some of the tools that are out there to have I don't know, you can take a whole bunch of like public content and maybe some journal content, throw it together into a rag. That's relatively simple to build. That's not hard to build. A rag of an MCP interface on top of some information. What's really hard is grounding in content and having medical grade. Medical grade, you've got to get high levels of nines of repeatability to be able to participate in a clinical setting. And what was so exciting for us is that we put this in front of doctors and individuals that lead entire healthcare systems in some cases. And it was very repeatable in terms of how it was producing repeatable answers. When you have to curate information in the medical industry, you need experts to be able to trial it, you need to be able to fine tune it, you need to be able to ground it in the current science, and then you need to really make sure that you're able to maintain the security around it, make sure the model's not poisoned or tripped in any way, shape, or form. We view this as a really important opportunity for us. You will see us continue to add information and we literally have thousands of different, I'll say materials that are inside of our AccessMedicine, you're going to see us put interfaces MCP interfaces on top of this. We've got content in pharmacy, we've got content in physical therapy, we've got content in the highest levels of the medical space, in pharmacology, oncology, a whole variety of spaces. That is a very attractive content set that we start with. We're not relying on third parties, but when we start integrating third-party content in, our interface is going to become even more valuable. When I look at some of the things that are out there that got early starts, we're starting from a better place is what I would tell you. You'll see us continue to integrate more and more third party content in and work with our in our position in medical schools, hospitals and even in some cases, companies around the world. We started about 96%, as mentioned, of medical schools here in the United States, as an example, as our starting place for this opportunity. So very big opportunity for us, very big opportunity to expand TAM, and a very big opportunity to serve a rapidly growing market. Ryan MacDonald: I appreciate all the color there and it's certainly an exciting opportunity. Bob, for you, I understand maybe where we're still on the wait and see in terms of getting students on the campus and sort of seeing where that enrollment picture shakes out for the top line, but as we think about adjusted EBITDA and sort of the flow throughout the year. Were there any investments that maybe were sort of that shifted from Q1 into Q2 as you think about that first half, second half picture that's sort of keeping us, I guess, a bit more conservative on the adjusted EBITDA outlook with the reaffirmation of the guidance? Robert Sallmann: Yes. No we are executing really to that plan. We laid out our roadmap. We have that built on a monthly, quarterly basis. We're really executing to that plan. We haven't seen any real meaningful shifts one way or the other, both on the cost and investment side. Operator: Your next question comes from the line of Jeffrey Meuler with Baird. Please go ahead. Jeffrey Meuler: So your tone seems upbeat on - at least for literacy bookings trends in K-12 or more upbeat, I think than you sounded last quarter. The Q1 RPO or ending RPO and implied billings were weaker than I was expecting. Just any timing factors to talk to there? And I think there was a comment about additional adoption since last quarter. Was that in reference to something slipping out of Q1, but closing in Q2? Robert Sallmann: There is a little bit if you think about the timing of when we take those orders again in K-12, you see a lot of orders coming through the entire summer. We're managing that funnel and executing against us. We're watching that. So you could see a little bit of timing and again that comes back to my comment around it really being a first half, second half business. And you would have heard some commentary that I mentioned around supplemental intervention and timing in that funnel as well. So those would be the areas that we would be watching here over the remainder of the first half and then even into the second. Jeffrey Meuler: Okay. And then on research and development expense, is that the decline? Is it mostly about the timing of development cycles for ELA or something else? Or are you starting to see meaningful efficiency gains from AI or other factors in that line? Because I would also think we'd be seeing some AI investment coming through. Robert Sallmann: Yes. So we are making investment, but what we are seeing is that being offset by the efficiency gains that we are capturing. So what I will tell you is that change is really tied to timing in our roadmap more so than anything. But we are absolutely realizing productivity and efficiency gains, which is allowing us to bring product into market a little bit faster. Nothing there but timing and how we're thinking about our roadmap. It's consistent with what we laid out. Operator: Your next question comes from the line of Stephen Sheldon with William Blair. Please go ahead. Matt Filek: You have Matt Filek on for Stephen Sheldon. For K-12 in Texas, anything you can share on how Bluebonnet is performing and feedback you're hearing from districts using it? And with some districts opting for shorter term contracts, how do you think about the opportunity to win back those contracts as they come up for renewal over the next couple of years. Robert Sallmann: Yes, and Matt, this is consistent with how we saw it last quarter. And so those shorter contracts will provide us an opportunity to come back. Our intent is always to serve the teachers, provide them the highest quality materials, ensuring that they have more time with students and be as productive as possible. So our position has not changed from a quarter ago, and I think it's pretty consistent with how we spoke about it just two months ago. Matt Filek: And then can you just provide a quick refresh on how you're balancing M&A, share repurchases, and further deleveraging, and what types of assets are most attractive? I think last quarter you mentioned that you thought you may get a couple of deals done this year, so any update on all of that would be helpful. Robert Sallmann: You bet. A great question. And I'll reiterate our priorities remain unchanged, right? The first thing we always fully fund is organic investments that have the best ROI. Our second commitment is to deleveraging and we remain committed to the 2x to 2.5x. I want to get to below 3 as fast as possible. And then we are balancing that with M&A. And I talked about the funnel being robust, continues to be very robust. I think there is opportunity, I'll reiterate, we do think there's opportunity to do some nice tuck-ins that will accelerate that roadmap this year. And I think that's largely tied to seller expectations being more aligned with us and things that we can actually scale across our business. So I hope to be able to announce something this year. And then when we talk about that share repurchase, that's just opportunistic. We'll go out and look at it and evaluate it in the open market when our blackout window is there. And that would be the third complement, the fourth complementary item to our capital allocation policy. Operator: Your next question comes from the line of Marvin Fong with BTIG. Please go ahead. Marvin Fong: Maybe, to start with supplemental intervention, I think I heard in the comments that the pipeline's on double digits. Maybe just a two-parter here. Just like what's driving that? I know ALEKS brought a new product there, but you're also bundling and cross-border on the course. So just kind of talk about what's working there. And the second part of the question is, you talked about also some possible delaying in the decision making there. So just kind of help us out square those two dynamics of the strong pipe sure. Robert Sallmann: I think there's two things that's really driving that increase in the pipeline. One you already addressed, which is expanding our portfolio of products. That's allowing us to increase our offering, but more importantly is being connected to the core. And we're seeing that resonate and simplifying offerings to the districts to the teachers having one McGraw Hill offering rather than having multiple point solutions has really resonated. So I think those are the things that we're seeing most attractive when we're talking to teachers. And of course, it's all tied back to outcomes that we can stand behind and efficacy. So those are the factors I think were well positioned. And then with respect for the timing, nothing that's -- maybe it's just close. We'll watch it closely several weeks ahead, but nothing that has really changed. But it would be something we would have noticed, you know. Operator: Your next question comes from the line of David Karnovsky with J.P. Morgan. Please go ahead. David Karnovsky: Just two quick ones from Bob. You saw in the 10-Q within K-12 a $7.5 million benefit from the sale of IP to a third party. Can you just clarify what this was, whether it was contemplated in guidance? Is this an ongoing opportunity for you? And then I think in your prepared statement, you noted some movement on Middle East delivery. Could you just talk to the dynamics there? Does the conflict in the region end up impacting the year, or is this just like a delay into later quarters? Thank you. Robert Sallmann: Yes, great questions on the $7.5 million. We created some jointly created some IP and we no longer are using the IP as we release Summit and Soar, those products will no longer be utilizing that jointly created IP. We sold the IP and so it won't recur. It was included in our original guide. But more importantly, what I'll tell you is it will ultimately benefit us longer term as there won't be any sort of shared royalty stream associated with that product. And so it's fully completely internally developed on Summit and Soar. And with respect to the Middle East conflict, no impact to the full year, purely timing. We're seeing things shift out of what would have typically gone in the first quarter into second or third. We've already procured and arranged production capability in the Middle East. Should this continued and conflict continue for a little bit longer. So we actually were well positioned going forward for us to meet the needs of our customers in region. Operator: This concludes our Q&A portion and this concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in McGraw Hill, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and McGraw Hill wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $432,621!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,314!* Now, it’s worth noting Stock Advisor’s total average return is 976% — a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 20, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. McGraw Hill (MH) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance outperformance was driven by disciplined execution in Higher Education share gains and early K-12 curriculum adoption capture rates. The company is capitalizing on a multi-year K-12 adoption cycle triggered by Science of Reading mandates in 44 states, representing 86% of K-5 enrollment. Strategic positioning in Higher Education is bolstered by the 'Inclusive Access' and 'Evergreen' models, which drive recurring revenue and automated account rollovers. Management attributes margin expansion to cost discipline, a shift toward digital mix, and early productivity gains realized through AI integration. The competitive strategy focuses on providing integrated, human-curated systems rather than disparate tools, addressing declining educator trust in general-purpose chatbots and the complexity of managing multiple disparate AI tools. Global Professional growth is being repositioned toward medical-grade AI tools for clinical workflows, targeting a shortage of 11 million healthcare workers by 2030. Fiscal 2027 guidance remains reaffirmed pending higher education enrollment signals and final K-12 district award decisions in the second quarter. Management expects meaningful TAM expansion through 'Agentic AI' tools that integrate with third-party chatbots via standardized protocols like MCP. The K-12 pipeline for supplemental and intervention products is up double digits, driven by the integration of McGraw Hill Plus analytics into core curriculum. Capital allocation priorities focus on organic reinvestment and achieving a net leverage target of 2x to 2.5x, with an active M&A pipeline for tuck-in deals. Future growth in International markets is expected to be driven by Middle East shipment recovery and expansion into Latin American literacy markets. A $7.5 million benefit from the sale of intellectual property in Q1 will improve long-term margins by eliminating future royalty streams on new ELA products. Middle East conflict caused temporary K-12 shipment delays in Q1, though management has secured local production to mitigate full-year impact. Gross debt was reduced by $646 million in the prior fiscal year, resulting in an annualized cash interest expense reduction of nearly $45 million. Management noted a measured view on K-12 due to some observed delays in district decision-making for supplemental and intervention products. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Outperformance was primarily driven by K-12 shipment timing, with materials delivered in June rather than July to ensure back-to-school readiness. Higher Education also contributed through 4% enrollment growth and 2% price realization, alongside continued market share gains. Revenue is generated through upcharges for AI access, additional fees for tools like 'Sharpen', and increased price realization on core curriculum licenses. Management highlighted that 7.5 million users are already active on AI tools, many of whom are paying fees on top of their base curriculum licenses. The partnership with Stanford for ROAR allows McGraw Hill to meet mandates in 40 states requiring dyslexia screening for 10 million U.S. students. It serves as both a standalone revenue stream and a differentiator for the core ELA program, offering the only multilingual K-12 screener in the market. Management views general AI as a tailwind rather than a threat, as their 'Agentic AI' strategy allows them to ground third-party chatbots in trusted, medical-grade content. Internal testing showed their Harrison's Medicine AI agent outperformed leading general LLMs in clinical accuracy and hallucination prevention.

Interested in McGraw Hill, Inc.? Here are five stocks we like better. McGraw Hill exceeded Q1 expectations: Revenue rose 2.6% to $550 million, recurring revenue increased nearly 10% to $426 million, and adjusted EBITDA margin expanded to 37.7%. Digital revenue reached 64% of the mix. Fiscal 2027 guidance was reaffirmed despite shipment timing issues and international delays. Higher Education led segment growth with a 10% revenue increase, while management highlighted strong K-12 literacy adoption momentum tied to science-of-reading mandates. AI and new assessment products remain growth priorities: The company plans additional AI launches and will integrate Stanford’s ROAR dyslexia screener into its analytics platform. McGraw Hill also reduced gross debt by $646 million in fiscal 2026 and continues to prioritize debt reduction, strategic acquisitions and selective share repurchases. Falling Inflation Sparks Optimism for These 3 Home Builder Stocks McGraw Hill (NYSE:MH) reported stronger-than-expected first-quarter fiscal 2027 results, with revenue growth, recurring-revenue gains and margin expansion, while reaffirming its full-year outlook ahead of its key back-to-school selling period. Revenue rose 2.6% year over year to $550 million for the quarter ended June 30, 2026. Recurring revenue increased nearly 10% to $426 million and represented 77% of total revenue, while digital revenue grew nearly 9% and accounted for 64% of the revenue mix. Adjusted EBITDA totaled $207 million, producing a 37.7% margin, up 192 basis points from the prior year. Net income was $58 million. → Lumentum Just Delivered the AI Growth Investors Wanted Tip The Risk / Reward Scale In your Favor With These 3 Names Chief Executive Officer Philip Moyer said the company entered its most important selling season following a stronger-than-expected quarter. He cited more than 100 million active curriculum licenses, more than 7.5 million users of McGraw Hill’s artificial intelligence tools and billions of learning interactions across its platforms. Chief Financial Officer Bob Sallmann said first-quarter outperformance was primarily driven by K-12 execution and the timing of deliveries, with some educational materials delivered in June rather than July. He cautioned that revenue and EBITDA can move between the fiscal first and second quarters because of academic seasonality and K-12 shipment timing, making first-half results a more meaningful measure. Higher Education: Revenue increased 10% year over year to $200 million, while recurring revenue grew 14%. Trailing 12-month market share remained above 30% through June, up 140 basis points year over year, according to MPI. Inclusive Access represented 57% of segment revenue. K-12: Revenue increased 1.3% to $274 million, and recurring revenue rose 7%. The company said capture rates outside California and Texas were at the high end of its target range. Global Professional: Revenue was $35 million, with recurring revenue increasing more than 6%. Medical education represents 80% of the segment, according to Sallmann. International: Revenue was $45 million. Middle East conflict delayed certain K-12 shipments, though the company said these orders are now being fulfilled and that the disruption is expected to affect timing rather than full-year results. → Ryman Checks Into a $1.38B Hospitality Upgrade KB Home Constructs Bullish Price Action As Wider Industry Thrives McGraw Hill reaffirmed fiscal 2027 guidance across all metrics. The company’s outlook continues to assume 1% higher-education enrollment growth, though management said it would reassess that assumption after gaining more visibility into fall enrollment trends as students arrive on campuses. Sallmann said the company expects to provide a more informed outlook when it reports fiscal second-quarter results in November. He said the first-quarter performance came in line with McGraw Hill’s first-half expectations, supporting the decision to maintain guidance. → Joby’s Defense Pivot Accelerates With $500M Resonant Sciences Deal Management emphasized an emerging multiyear K-12 curriculum adoption cycle tied to science-of-reading requirements. Moyer said 44 states, representing 86% of K-5 enrollment, have mandated science-of-reading-based pedagogy. He also pointed to California’s upcoming English language arts adoption cycle, with a final vendor list expected in November for procurement beginning in fiscal 2028. The company said its new literacy programs—Emerge!, Summit!, Soar! and ¡Emerger juntos!—are generating early cumulative capture rates above McGraw Hill’s 25% to 30% target range. Moyer said the programs have won adoptions in districts that had not previously been McGraw Hill customers. He added that the company’s California ELA programs were recommended for approval by a state reviewer panel. McGraw Hill also announced an exclusive integration with Stanford University for ROAR, or Rapid Online Assessment of Reading, an evidence-based dyslexia screener. Moyer said 40 states have mandated dyslexia screening and estimated that one in 10 people have dyslexia, including 10 million U.S. students. ROAR will be integrated with the company’s McGraw Hill Plus analytics platform to help teachers identify students, intervene and target instruction through a unified interface. Management said the product will be a paid offering that can be sold as an add-on to literacy programs or on a standalone basis, representing both a product enhancement and a potential expansion of the company’s addressable market. Moyer described AI as a growth driver, saying McGraw Hill has eight live AI learning tools and plans three additional launches during fiscal 2027. AI Reader has generated 63 million interactions across 2.6 million users to date, according to the company. The CEO said McGraw Hill issued more than 284 curriculum and AI-tool releases during the quarter. He said the company is beginning to monetize AI capabilities through additional fees, upcharges for AI or model-context-protocol access, and new products layered on top of its curriculum licenses. Management said it believes its strategy is differentiated by human-curated content, proprietary education data and integration into educator workflows. Moyer said the company’s agentic AI tools are designed to work with third-party chatbots and open-source tools that support agentic standards. More than 14 companies are participating in its agentic AI pilot group, he said. In Global Professional, Moyer highlighted McGraw Hill’s medical-content opportunity. The company said its AI Reader tool now spans four pharmacotherapy and pharmacology titles and reaches 96% of pharmacy-doctor programs. Its clinical reasoning tool has added 18 cases and secured initial commercial deals with osteopathic medicine, physician assistant and nurse practitioner programs. Moyer also said an AI agent powered by Harrison’s Medicine was tested against leading large language model platforms before medical editors and physicians, and outperformed the other tools on every question in the evaluation. He said McGraw Hill is trusted by 98% of U.S. medical schools and sees opportunities to expand its medical-grade content into clinical workflows. McGraw Hill ended the quarter with $194 million in cash and $644 million in total liquidity, with its revolving credit facility undrawn. Sallmann said the company has passed its seasonal cash trough and is now building cash, with gross debt reduction remaining a priority. The company reduced gross debt by $646 million in fiscal 2026, lowering annualized cash interest expense by nearly $45 million. Management reiterated its target net leverage range of 2 times to 2.5 times and said Moody’s upgraded its credit ratings in July. McGraw Hill’s capital-allocation priorities remain organic investment, debt reduction, selective tuck-in acquisitions and opportunistic share repurchases. The company retains a $50 million share repurchase authorization and said its acquisition pipeline remains active, focused on targets that could accelerate product development in adjacent areas. McGraw Hill (NYSE:MH) is a global learning science company specializing in educational content, digital learning platforms, and assessment solutions. The company offers textbooks and course materials for K-12 and higher education, along with professional development resources for corporate and workforce training. Its digital solutions—including adaptive learning platforms and analytics-driven tools—support personalized instruction, progress tracking, and interactive engagement in both classroom and remote environments. Founded in 1888 in New York City, McGraw Hill has evolved from a technical periodical publisher into one of the world's leading providers of educational content and technology. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "McGraw Hill Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

McGraw Hill, Inc. (MH) came out with quarterly earnings of $0.59 per share, beating the Zacks Consensus Estimate of $0.48 per share. This compares to break-even earnings per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +22.92%. A quarter ago, it was expected that this company would post earnings of $0.15 per share when it actually produced earnings of $0.32, delivering a surprise of +113.33%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. McGraw Hill, Inc., which belongs to the Zacks Schools industry, posted revenues of $549.9 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 3.26%. This compares to year-ago revenues of $535.71 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. McGraw Hill, Inc. shares have lost about 29.7% since the beginning of the year versus the S&P 500's gain of 13.2%. While McGraw Hill, Inc. has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for McGraw Hill, Inc. was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.81 on $665.11 million in revenues for the coming quarter and $1.94 on $2.14 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Schools is currently in the top 43% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Bilibili (BILI), another stock in the broader Zacks Consumer Discretionary sector, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 27. This Chinese video sharing website is expected to post quarterly earnings of $0.23 per share in its upcoming report, which represents a year-over-year change of +27.8%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Bilibili's revenues are expected to be $1.16 billion, up 13.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report McGraw Hill, Inc. (MH) : Free Stock Analysis Report Bilibili Inc. Sponsored ADR (BILI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Enters Peak Selling Season With Momentum Amid Growing Revenue, Re-Occurring Revenue and Digital Revenue While Expanding Margins and Net Income COLUMBUS, Ohio, August 13, 2026--(BUSINESS WIRE)--McGraw Hill, Inc. (NYSE: MH) ("McGraw Hill" or the "Company"), a leading global provider of education solutions for preK-12, higher education and professional learning, today announced financial results for the fiscal first quarter 2027 ended June 30, 2026. Key Fiscal First Quarter 2027 Financial Highlights Total revenue of $549.9 million, an increase of 2.6% year-over-year, driven by strong execution in Higher Education and K-12 segments. Re-occurring revenue of $425.6 million, an increase of 9.8% year-over-year, representing 77% of total revenue. Digital revenue of $353.5 million, an increase of 8.8% year-over-year, underscoring the strength of the Company’s technology-based solutions, which are deeply embedded in the learning experience. Remaining performance obligation (RPO) of $1,522.2 million as of June 30, 2026, demonstrating predictability and visibility into future revenue growth. GAAP gross profit of $439.2 million, representing a GAAP gross profit margin of 79.9%, an increase of 290 basis points versus prior year. GAAP net income of $57.9 million, compared to $0.5 million in the prior-year period. Adjusted EBITDA(1) of $207.0 million, representing an Adjusted EBITDA margin(1) of 37.7%, an increase of 192 basis points versus prior year. Continued commitment to gross debt reduction, progressing toward the Company’s 2.0-2.5x net leverage target. In July 2026, Moody’s Ratings upgraded the Company’s credit ratings. "McGraw Hill's strong start to fiscal year 2027 reflects the strength of our strategy and the trust that millions of educators and institutions place in us to deliver successful learning outcomes," said Philip Moyer, President, Chief Executive Officer of the Company and a member of the Company’s Board of Directors. "This quarter, we exceeded our expectations while building positive momentum as we prepare for the most important quarter of our fiscal year." Mr. Moyer added, "AI was a contributor to the momentum we're seeing across revenue growth, margin expansion, price realization, and market share gains. AI represents a genuine tailwind for our business, and our agentic strategy continues to progress, representing an opportunity for meaningful TAM expansion ahead. By harnessing this technology, it will augment our current solutions and reinforce our ability to deliver precision education, the right content at the right moment, to our more than 100 million active curriculum licenses." "Fiscal first quarter 2027 represents a solid start to our fiscal year, with revenue, re-occurring revenue, and Adjusted EBITDA all coming in above our expectations," said Bob Sallmann, McGraw Hill’s Executive Vice President, Chief Financial Officer. "Re-occurring revenue and Adjusted EBITDA margins continue to grow, reflecting the durability of our model and cost discipline. Our margins are best-in-class among education peers, underscoring the strength and differentiation of our business. As we enter our peak selling season, our leading indicators, including our new K-12 ELA program delivering win rates above target, early stages of a multi-year K-12 curriculum adoption cycle, and continued Higher Education market share gains, are strengthening considerably. We believe that we are well positioned to deliver accelerating revenue growth and continued margin expansion in fiscal year 2027 and beyond." Fiscal First Quarter 2027 Strategic Highlights Served more than 7.5 million active users across eight live AI learning tools, with three additional launches planned for this fiscal year. Generated 63 million AI Reader learning interactions across approximately 2.6 million students since inception through July 2026, accelerating from approximately 47 million interactions and approximately 2.2 million students in fiscal year 2026. Expanded the Company’s Evergreen delivery model in Higher Education, driving share gains and improving the customer experience and retention. Advanced the Company’s agentic AI strategy at scale, with pilot opportunities progressing, including industries outside of education. Broadened the Company’s literacy portfolio with ROAR®, the Rapid Online Assessment of Reading, the only research-backed dyslexia screener for K-12, subsequent to the fiscal first quarter. Exclusive integration will bring assessment developed at the Stanford Graduate School of Education, Reading and Dyslexia Research Program to more K-12 classrooms. Fiscal First Quarter 2027 Financial Highlights Fiscal First Quarter 2027 Segment Highlights Higher Education Revenue totaled $199.8 million, an increase of 9.6% year-over-year, supported by market share gains, price realization and increases in enrollment. Re-occurring revenue totaled $182.1 million, an increase of 14.1% year-over-year. Continued Higher Education market share gains, including ~5 points of market share gained over the past four fiscal years from traditional competitors, according to MPI. Growth driven by continued Inclusive Access momentum and deeper campus penetration; Evergreen delivery model anchors renewal base and frees sales capacity to focus primarily on taking market share. K-12 Revenue totaled $274.4 million, up 1.3% year-over-year driven by the durability of multi-year contracts and capture rates in ELA and Science. Re-occurring revenue totaled $196.6 million, an increase of 7.1% year-over-year. Robust early capture rates for Emerge, Summit and Soar; 44 states now have a Science of Reading policy or regulation in place, covering 86% of U.S. K-5 public school enrollment. In July, the Company’s California ELA programs were recommended for approval by state reviewers, ahead of the state's approved vendor list to be released later in calendar year 2026. In August, Florida approved the Company’s Math program ahead of the state’s upcoming adoption beginning in fiscal year 2028. Global Professional and International Global Professional delivered 6.3% re-occurring revenue growth year-over-year, fueled by wins for the medical solutions portfolio, including AI-driven Clinical Reasoning, across Osteopathic Medicine, Physician Assistant, and Nurse Practitioner programs worldwide. International revenue was $45.2 million, with delayed Middle East K-12 shipments being fulfilled, and strong momentum in Latin America, offsetting Canadian enrollment headwinds, positioning the segment for growth in fiscal year 2027. Fiscal Year 2027 Guidance We are re-affirming our fiscal year 2027 guidance, which is included below. This fiscal year 2027 guidance is forward-looking and is based on the Company’s current expectations. Actual results may differ materially from what is indicated below. Earnings Conference Call and Webcast Today, August 13, 2026, at 8:30 a.m. ET, McGraw Hill will host a conference call via webcast to review fiscal first quarter 2027 results and provide a business update. The webcast will be hosted by Philip Moyer, President and Chief Executive Officer, and Bob Sallmann, Executive Vice President and Chief Financial Officer, and will conclude with a question-and-answer session. To access the live webcast or to view a replay, visit the Company's investor relations website at https://investors.mheducation.com/ The live question and answer portion of the call can be accessed by registering online at the Event Registration Page at which time registrants will receive dial-in information as well as a conference ID. Registration can be completed in advance of the conference call. About McGraw Hill McGraw Hill (NYSE: MH) is a leading global provider of education solutions for preK-12, higher education and professional learning, supporting the evolving needs of millions of educators and students around the world. We provide trusted, high-quality content and personalized learning experiences that use data, technology and learning science to help students progress towards their goals. Through our commitment to fostering a culture of innovation and belonging, we are dedicated to improving outcomes and access to education for all. We have over 30 offices across North America, Asia, Australia, Europe, the Middle East and South America, and make our learning solutions available in more than 80 languages. The Company’s fiscal year is the 52-week period ended March 31. Visit us at mheducation.com or find us on Facebook, Instagram, LinkedIn or X. Safe Harbor Statement This press release includes statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of forward-looking terminology, including terms such as "believes," "estimates," "anticipates," "expects," "projects," "intends," "plans," "may," "will," "should" or "seeks," or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts and include, but are not limited to, statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties, as they relate to events and depend on circumstances that may or may not occur in the future. The Company’s expectations, beliefs and projections are expressed in good faith, and the Company believes there is a reasonable basis for them; however, the Company cautions readers that forward-looking statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity, and the developments in the industry in which the Company operates, may differ materially from those made in or suggested by the forward-looking statements contained in this press release. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this press release, including those described under the headings "Risk Factors", "Management’s Discussion and Analysis of Financial Condition and Results of Operations", "Business" and "Cautionary Note Regarding Forward-Looking Statements" in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, and in other filings made with the U.S. Securities and Exchange Commission. In addition, even if our results of operations, financial condition and liquidity, and the developments in the industry in which we operate are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. Any forward-looking statements the Company makes in this press release speak only as of the date of such statement. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. (1) Non-GAAP Financial Measures In addition to presenting financial results that have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we have included in this release the following non-GAAP financial measures—EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net income (loss), Adjusted basic and diluted earnings (loss) per share, Adjusted operating and administrative expenses, Adjusted selling and marketing expenses, Adjusted general and administrative expenses, Adjusted research and development expenses and Net Leverage Ratio. All such financial measures are not required by or presented in accordance with GAAP. We believe that these non-GAAP financial measures are useful in evaluating our business and the underlying trends that affect our performance. The Company has included non-GAAP financial measures within the meaning of Regulation G and Item 10(e) of Regulation S-K. We include these non-GAAP financial measures in this release because management uses them to assess our performance. We believe that they reflect the underlying trends and indicators of our business and allow management to focus on the most meaningful indicators of our continuous operational performance. Although we believe these measures are useful for investors for the same reasons, readers of the financial statements herein should note that these measures are not a substitute for GAAP financial measures or disclosures. Each of these measures is not a recognized term under GAAP and does not purport to be an alternative to net income (loss), or any other measure derived in accordance with GAAP as a measure of operating performance, or to cash flows from operations as a measure of liquidity. Such measures are presented for supplemental information purposes only, have limitations as analytical tools and should not be considered in isolation or as substitute measures for our results as reported under GAAP. Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting our business, rather than evaluating GAAP results alone. Because not all companies use identical calculations, our measures may not be comparable to other similarly titled measures of other companies, and our use of these measures varies from others in our industry. Such measures are not intended to be a measure of cash available for management’s discretionary use, as they may not capture actual cash obligations associated with interest payments, other debt service requirements and taxes. Because of these limitations, we rely primarily on our GAAP results and use these non-GAAP measures only supplementally. See "Reconciliations of Non-GAAP Financial Measures" in the "Supplemental Information" section below and "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures" in our Quarterly Report on Form 10-Q filed on August 13, 2026, for reconciliations of non-GAAP financial measures to the most directly comparable financial measure stated in accordance with GAAP. (2) Learning interactions measures the volume of user-driven educational activities across McGraw Hill platforms, including answering questions, completing assignments, and engaging with learning content. This data captures activity across K-12 platforms (Open Learning, ConnectED, ALEKS), Higher Education (Smartbook, Connect), and Enterprise IDM. For the fiscal year ended March 31, 2026, coverage expanded to include A3K Literacy, Actively Learn, and additional Connect data. Forward-Looking Non-GAAP Financial Measures This press release contains forward-looking estimates of Adjusted EBITDA for fiscal year 2027. We provide this non-GAAP measure to investors on a prospective basis for the same reasons (as set forth above) that we provide it to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of fiscal year 2027 net income (loss) to a forward-looking estimate of fiscal year 2027 Adjusted EBITDA because certain information needed to make a reasonable forward-looking estimate of net income (loss) for fiscal year 2027 is unreasonably difficult to predict and estimate and is often dependent on future events that may be uncertain or outside of our control. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on our future financial results. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact. Supplemental Information Reconciliations of Non-GAAP Financial Measures EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin "EBITDA" is defined as net income (loss) from continuing operations plus interest expense (income), net, income tax provision (benefit), depreciation and amortization. "Adjusted EBITDA" is defined as net income (loss) from continuing operations plus interest expense (income), net, income tax provision (benefit), depreciation and amortization, restructuring and cost savings implementation charges, the effects of the application of purchase accounting, advisory fees paid to Platinum Advisors pursuant to the Advisory Agreement (which was terminated on July 25, 2025 in connection with the consummation of our initial public offering), impairment charges, transaction and integration costs, stock-based compensation, (gain) loss on extinguishment of debt and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations. Further, although not included in the calculation of Adjusted EBITDA below, we may at times add estimated cost savings and operating synergies related to operational changes ranging from acquisitions or dispositions to restructurings, and exclude one-time transition expenditures. "Adjusted EBITDA Margin" is calculated by dividing Adjusted EBITDA by total revenue. The following table presents a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measure for the periods presented. Adjusted net income (loss) and Adjusted basic and diluted earnings (loss) per share "Adjusted net income (loss)" is defined as net income (loss) from continuing operations adjusted to exclude amortization of intangible assets, restructuring and cost savings implementation charges, the effects of the application of purchase accounting, advisory fees paid to Platinum Advisors pursuant to the Advisory Agreement (which was terminated on July 25, 2025 in connection with the consummation of our initial public offering), impairment charges, transaction and integration costs, stock-based compensation, (gain) loss on extinguishment of debt and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations and the related tax impact of those adjustments. "Adjusted basic and diluted earnings (loss) per share" is calculated by dividing Adjusted net income (loss) by the basic and diluted weighted average shares outstanding. The following table presents a reconciliation of Adjusted net income (loss) and Adjusted basic and diluted earnings (loss) per share to the most directly comparable GAAP financial measure for the periods presented. Non-GAAP operating and administrative expenses "Adjusted operating and administrative expenses" is defined as GAAP operating and administrative expenses adjusted to exclude restructuring and cost savings implementation charges, advisory fees paid to Platinum Advisors pursuant to the Advisory Agreement (which was terminated on July 25, 2025 in connection with the consummation of our initial public offering), transaction and integration costs, stock-based compensation, amortization of product development costs and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations. "Adjusted selling and marketing expenses" is defined as GAAP selling and marketing expenses adjusted to exclude stock-based compensation and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations. "Adjusted general and administrative expenses" is defined as GAAP general and administrative expenses adjusted to exclude restructuring and cost savings implementation charges, advisory fees paid to Platinum Advisors pursuant to the Advisory Agreement (which was terminated on July 25, 2025 in connection with the consummation of our initial public offering), transaction and integration costs, stock-based compensation and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations. "Adjusted research and development expenses" is defined as GAAP research and development expenses adjusted to exclude stock-based compensation and the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations. The following table presents a reconciliation of these non-GAAP operating and administrative expenses to the most directly comparable GAAP financial measure for the periods presented. Net Leverage Ratio "Net Leverage Ratio" is calculated by dividing net debt as of the most recent balance sheet date by the Last Twelve Months ("LTM") Adjusted EBITDA. Net debt is defined as Gross Debt, net of cash and cash equivalents. Gross Debt is defined as the total amount of principal borrowings outstanding. LTM is defined as the twelve-month period ended on the last day of the most recently completed fiscal quarter and is calculated by adding the results for the three months ended June 30, 2026, to the results of the fiscal year ended March 31, 2026, and subtracting the three months ended June 30, 2025. Key Operating Metrics Re-occurring Revenue and Transactional Revenue Remaining Performance Obligation (RPO) Net Dollar Retention Net dollar retention "NDR" is calculated by dividing (a) the digital subscription amounts invoiced to existing customers during the year, inclusive of changes in enrollment, price changes and attrition by (b) the digital subscription amounts invoiced to such customers for the comparable prior year. Digital and Print Revenue Disaggregation of Revenue - Print and Digital View source version on businesswire.com: https://www.businesswire.com/news/home/20260812010516/en/ Contacts Investor Contacts: Danielle [email protected] Zack [email protected] Lizzie [email protected] Media Contacts: Cathy [email protected] Tyler [email protected]

This article first appeared on GuruFocus. Revenue: Total revenue was $550 million, an increase of 2.6% year over year. Recurring Revenue: Reached $426 million, an increase of nearly 10%, representing 77% of total revenue. Digital Revenue: Increased nearly 9% year over year, representing 64% of total revenue. Adjusted EBITDA: $207 million, yielding a margin of 37.7%, an increase of 192 basis points compared to last year. Net Income: $58 million. Higher Education Revenue: $200 million in the quarter, up 10% year over year, with recurring revenue growing 14%. K-12 Revenue: $274 million, up 1.3% year over year, with recurring revenue growing 7%. Global Professional Revenue: $35 million, with recurring revenues growing by over 6%. International Revenue: $45 million, impacted by the Middle East conflict which delayed K-12 shipments. Cash: Ended the quarter with $194 million in cash and $644 million in total liquidity. Remaining Performance Obligation: $1.5 billion. Warning! GuruFocus has detected 5 Warning Signs with MH. Is MH fairly valued? Test your thesis with our free DCF calculator. Release Date: August 13, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Q1 revenue and profitability exceeded expectations, with revenue up 2.6% and adjusted EBITDA margin expanding 192 basis points to 37.7%. Recurring revenue grew 9.8% year-over-year, now representing 77% of total revenue, highlighting the durability and predictability of the business model. Higher education continues to gain market share, extending a 10-year streak, with inclusive access and evergreen content driving momentum. New K-12 literacy programs (Emerge, Summit, SOAR) are exceeding targeted capture rates, with early traction in science of reading adoptions. AI solutions are scaling rapidly, with 7.5 million active users and the AI reader tool reaching 63 million interactions, while agentic AI pilots are expanding. The company is expanding into new markets like dyslexia screening with Stanford's ROAR, and has secured major international deals, including a large K-12 ELA contract in Tasmania. Gross debt was reduced by $646 million in FY2026, and Moody's upgraded credit ratings, reflecting a strong financial profile. The company is reaffirming FY2027 guidance, with leading indicators for the back-to-school season encouraging. AI is being monetized through upcharges on existing curriculum licenses, with 284 curriculum and AI tool releases in the quarter. The company's integrated approach, combining print and digital, is a competitive advantage, especially in early education where screen time is limited. The company is taking a measured view on full-year guidance due to uncertainty around higher education enrollment and K-12 district award decisions. K-12 revenue growth was modest at 1.3% year-over-year, with some order timing shifting between quarters. International revenue was impacted by the Middle East conflict, delaying K-12 shipments, though these are now being fulfilled. The company faces ongoing competition from general-purpose AI chatbots and OER, though it is taking share from OER. There is potential for delayed decision-making in the supplemental and intervention K-12 market, which could affect pipeline conversion. The sale of intellectual property provided a one-time benefit to EBITDA, and such gains are not expected to recur. Higher education enrollment growth is assumed at only 1%, and any shortfall could impact revenue. The company is still in early stages of monetizing AI, with many tools not yet fully commercialized. The Middle East conflict could continue to cause timing disruptions in international shipments. The company's guidance was not raised despite strong Q1, indicating management's caution about the full-year outlook. Q: Can you give us some color on the drivers of the outperformance in the quarter versus your internal expectations? A: Bob Sallmann (CFO): The outperformance was primarily driven by K-12, where we executed and delivered educational materials ahead of the back-to-school season, with some shipments occurring in June versus July. This is a first-half/second-half business, and it's critical to deliver materials on time. We are pleased with the momentum building in higher ed and across all businesses. Q: Can you provide more detail on how you're progressing with commercial constructs for your AI strategy and what investors may not appreciate about it? A: Philip Moyer (CEO): We are monetizing AI on top of our existing 100 million curriculum licenses, unlike other ed tech companies with mostly free users. Many of our 7.5 million AI users are paying additional fees. We are adding AI-driven learning tools, upcharging for AI access, and inventing new tools. This allows us to command more price in higher ed and K-12 markets, driven by tooling, assessment products, and study aids. Q: Given the strong momentum in the quarter, why was guidance not changed, and how much conservatism is baked into K-12 capture rates? A: Bob Sallmann (CFO): We developed guidance in June with all available insights. Since then, we haven't seen a meaningful shift in capture rates. The most significant indicator will be when students arrive on campus in late August and September. Consistent with past practice, we will provide more visibility after completing the second quarter. Philip Moyer (CEO): Our new ELA programs (Emerge, Summit, SOAR) are exceeding expectations with capture rates above our 25%-30% target. We are seeing early traction in districts like Lake Washington, St. Cloud, and Maricopa, and the program is performing better than our previous Wonders program at launch. Q: Can you unpack the drivers of higher education performance, including share gains, pricing, and enrollment, and how you compare to competitors? A: Bob Sallmann (CFO): The 10% revenue growth was driven by enrollment up about 4%, price sticking at about 2%, and the remainder from share gains. Philip Moyer (CEO): Our world-class go-to-market organization, deep investment in customer success, and move to inclusive access are key differentiators. Our retention rates may be the best in the industry, and we have achieved 40 straight quarters of share growth, which is an extraordinary story. Q: Did you not have a dyslexia product before, and why this specific product with Stanford's ROAR? What is the market opportunity? A: Philip Moyer (CEO): Approximately one in 10 people have dyslexia, and early detection and intervention can rewire the brain. We've been in the intervention supplemental market, but this partnership allows us to offer a holistic program. ROAR is one of the only multilingual screeners and provides Spanish screening. With 40 states mandating dyslexia screening, this expands our TAM and allows us to provide a complete literacy, intervention, and screening package to districts. Q: Are you seeing delayed decision-making in the K-12 market, and has it gotten worse or better since last quarter? A: Bob Sallmann (CFO): It hasn't meaningfully changed. We are watching supplemental intervention decisions and how the pipeline is closing, but it's consistent with what we saw a month ago. The supplemental intervention area might be seeing slightly slower decisions, but nothing has shifted meaningfully. Q: How are you balancing demand for agentic AI solutions against demand for paper and pen, particularly in early elementary grades? A: Philip Moyer (CEO): We believe screens are appropriate based on a student's self-regulation. In early years, we primarily use AI for assessment or short-term intervention, with about 20 minutes of screen time per week. We are one of the few companies that can serve at global scale in both print and digital. Our hundreds of PhDs focus on the appropriateness of screens versus paper, and we can deliver print materials efficiently and on time, which is a competitive advantage. Q: You mentioned taking more business from OER than you lose. Has anything shifted in the last couple of months? A: Philip Moyer (CEO): No, it really hasn't. Teachers don't want to spend time building curriculum from scratch with chatbots or OER resources. They prefer a trusted, human-curated package with validated assessments, allowing them to focus on teaching. We continue to win over the summer, even though it's a slower selling season. Q: Last quarter you were more conservative on capture rates, but now you're talking about very strong capture rates. What changed, and how does the science of reading market shift impact cycles? A: Bob Sallmann (CFO): Outside of California and Texas, we are at the high end of our 25%-30% capture rate range. The excitement around our new ELA program positions us well for fiscal 2028. Philip Moyer (CEO): The science of reading is one of the biggest mandate changes in curriculum history. Our new programs are landing exceptionally well, with early capture rates exceeding what we saw with Wonders. We are winning in open territory districts and are well-positioned for the multi-year adoption cycle. Q: How much of the K-12 beat was from delivering printed material ahead of expectations, and what should we expect for next quarter? A: Bob Sallmann (CFO): It's important to think about the first half rather than Q1 versus Q2. The K-12 beat was in line with our first-half expectations, with some revenue coming in faster in June versus July. We kept our guidance and will continue to monitor trends into next quarter. Q: How are LLMs' moves into education impacting you, and how are you thinking about the market? A: Philip Moyer (CEO): We expect LLMs to announce partnerships in every industry, but they can't deliver vertical solutions alone. We announced our MCP agentic strategy to integrate with any chatbot. We see this as a bigger opportunity, not increased competition. Chatbots need to be grounded in truth, which is what we do well. We are building both our own interfaces and the ability to participate with other chatbots. Q: Is ROAR an add-on offering, included in traditional reading programs, or a retention tool? Is there financial upside? A: Philip Moyer ( For the complete transcript of the earnings call, please refer to the full earnings call transcript.

McGraw Hill, Inc. (NYSE:MH) shares gained 3.9% after the education solutions provider delivered first-quarter earnings and revenue above Wall Street forecasts. Growth in recurring and digital revenue, alongside stronger profitability, provided momentum as the company approaches the most important selling period of its fiscal year. McGraw Hill reported adjusted earnings of $0.59 per share for the fiscal first quarter ended June 30, 2026, exceeding the analyst consensus of $0.48 by $0.11. Revenue increased 2.6% year over year to $549.9 million, comfortably ahead of Wall Street expectations of $532 million. The performance was supported by solid execution across the company’s Higher Education and K-12 businesses, with recurring revenue continuing to represent a substantial proportion of overall sales. “McGraw Hill’s strong start to fiscal year 2027 reflects the strength of our strategy and the trust that millions of educators and institutions place in us to deliver successful learning outcomes,” said Philip Moyer, President and Chief Executive Officer. “This quarter, we exceeded our expectations while building positive momentum as we prepare for the most important quarter of our fiscal year.” Recurring revenue increased 9.8% from the same quarter last year to $425.6 million. That represented approximately 77% of McGraw Hill’s total quarterly revenue, highlighting the increasing importance of predictable, recurring income to the company’s business model. Digital revenue also delivered solid growth, increasing 8.8% year over year to $353.5 million. The expansion of digital and recurring sales provides McGraw Hill with greater revenue visibility while reducing its reliance on traditional one-time educational product purchases. Profitability improved significantly during the quarter. Adjusted EBITDA reached $207.0 million, equivalent to a margin of 37.7%. The adjusted EBITDA margin expanded by 192 basis points compared with the prior-year period, indicating that McGraw Hill was able to translate modest overall revenue growth into stronger operating profitability. GAAP net income showed an even more substantial improvement, rising to $57.9 million from just $0.5 million in the comparable quarter last year. The increase provides another indication of the stronger earnings performance achieved during the opening quarter of fiscal 2027. Following the better-than-expected quarter, McGraw Hill maintained its existing outlook for fiscal 2027. The company continues to forecast annual revenue of between $2.115 billion and $2.175 billion. At $2.145 billion, the midpoint of the range sits marginally below the analyst consensus estimate of $2.15 billion. McGraw Hill also expects recurring revenue of between $1.587 billion and $1.627 billion for the year. Adjusted EBITDA is projected to reach between $750 million and $790 million. Management’s comments highlighted the importance of the upcoming quarter, which represents the company’s most significant selling period of the fiscal year. Momentum across Higher Education and K-12, together with the continued expansion of digital and recurring revenue, gives McGraw Hill a stronger foundation heading into that period. The first-quarter results also suggest that improving revenue quality is supporting greater profitability, with recurring sales approaching four-fifths of total revenue and adjusted EBITDA margins expanding. The 3.9% rise in McGraw Hill shares reflects a stronger-than-expected start to fiscal 2027, with both earnings and revenue surpassing Wall Street forecasts. While the midpoint of full-year revenue guidance remains slightly below consensus, growth in recurring revenue, an 8.8% increase in digital sales and the sharp improvement in GAAP net income provided encouraging signals. Attention will now turn to McGraw Hill’s peak selling quarter and whether the company can build on its first-quarter momentum while remaining on track to deliver its fiscal 2027 revenue and adjusted EBITDA targets. McGraw Hill stock price

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. McGraw Hill stock has rebounded in the short term but is still down sharply year to date, which sits alongside a mixed valuation picture and raises questions about how much downside is already reflected in the price. Year to date the share price has fallen 32.8%, which suggests sentiment has been weak even though the more recent 7 day and 30 day moves have been positive. Moody’s recent upgrade of McGraw Hill’s credit ratings may support views of a stronger balance sheet. However, any renewed concern about leverage or funding costs could still weigh on how investors price the equity. The stock screens as overvalued on market multiples, and with a value score of 4 out of 6 the broader checks point to a mixed picture rather than a clear bargain or obvious excess. The issue now is whether that combination of a weak year to date performance and an only mid range valuation profile leaves McGraw Hill attractively priced or still leaning expensive. Find out why McGraw Hill's -32.8% return over the last year is lagging behind its peers. The P/E ratio suits McGraw Hill because earnings are a key focus for how investors assess established education businesses. McGraw Hill currently trades on a P/E of 59.5x, which sits above the Consumer Services industry average of 17.2x and below the peer average of 66.3x. That already places the stock toward the higher end of the sector on this metric. The fair P/E ratio implied by the broader checks is 35.7x. This is the multiple that might be expected for McGraw Hill given its profile. However, the current 59.5x sits well above that level. Despite Moody’s recent upgrade of McGraw Hill’s credit ratings, which points to a healthier balance sheet, the market is still pricing the stock at a premium that the fair ratio framework does not fully support. On the P/E multiple, McGraw Hill stock currently screens as overvalued compared with both its own fair ratio and the wider Consumer Services industry. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives pick up where McGraw Hill's valuation puzzle leaves off and explain which expectations for growth, margins and earnings would need to hold for the stock to be worth significantly more or less than it is today. Each narrative links a fair value estimate to a specific storyline about McGraw Hill's potential catalysts and risks, so you can observe over time which version of events is closer to what actually happens on the Community page. One of the top community narratives on McGraw Hill: 22% undervalued Read one of the top narratives on McGraw Hill Do you think there's more to the story for McGraw Hill? Head over to our Community to see what others are saying! For McGraw Hill, the P/E premium signals that the market is already baking in firm expectations, even after a weak year to date return. The current multiples suggest the stock still leans overvalued rather than offering an obvious discount. That puts the focus squarely on whether earnings can grow into this price and keep justifying a higher P/E than the wider Consumer Services peer group. The crux for both bulls and bears is whether McGraw Hill can sustain the kind of profitability and balance sheet strength that make this premium feel warranted rather than stretched. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include MH. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]