McGraw Hill Reaffirms Fiscal 2027 Revenue and EBITDA Guidance

McGraw Hill (NYSE: MH ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary McGraw Hill, Inc. reported total revenue of $1.2 billion for the first half of fiscal 2027, with recurring and digital revenue representing 71% and 60% of the mix, respectively. The company highlighted its competitive positioning in higher education, with a 4% increase in class sizes at top campuses and strong win rates in K-12, particularly with new ELA programs. Strategic acquisitions of TeachFX and Teach Ally are expected to expand McGraw Hill's addressable market and enhance its content development and localization capabilities.

The company is leveraging AI technology, including partnerships with Microsoft and Anthropic, to enhance its educational offerings while ensuring IP protection. Financial guidance for fiscal 2027 was reaffirmed, with expected revenue between $2.115 billion and $2.175 billion and adjusted EBITDA of $750 million to $790 million. Full Transcript OPERATOR McGraw Hill, Inc. Earnings Conference Call.

All participants are in a listen-only mode. As a reminder, today's call is being recorded and a written transcript and webcast replay will be made available in the Events and Presentations section of the Company's Investor Relations website. Following the prepared remarks, we will open the call for questions. I would now like to turn the call over to your host, Danielle Kloblin, Treasurer and Senior Vice President, Investor Relations.

Please go ahead, Danielle. Danielle Kloblin (Treasurer and Senior Vice President, Investor Relations) Good morning. Welcome to McGraw Hill's earnings call for the fiscal second quarter 2027. Joining me today are Philip Moyer, President and Chief Executive Officer, and Robert Sallmann, Executive Vice President and Chief Financial Officer.

During today's call, we will make forward-looking statements that are based on current expectations and the current economic environment. These statements, estimates and projections are subject to significant uncertainties beyond management control as detailed in the cautionary language in our earnings release for the fiscal second quarter ended September 30, 2026, the accompanying investor presentation, our Form 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 a substitute for GAAP measures. Definitions and GAAP reconciliations are available in our earnings release, the appendix to our 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, November 5, 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 (President and Chief Executive Officer) Good morning everyone and welcome to our fiscal Q2 earnings call. This back-to-school season, over 100 million active curriculum licenses place McGraw Hill at the center of the global education market. Operationally, it was one of our smoothest back-to-school seasons, powered by improvements in our technology and use of AI that help us serve customers with greater efficiency and higher satisfaction. We supported over 60 million digital units and shipped over 40 million books globally while handling more customer inquiries faster and with greater efficiency.

That execution is translating into encouraging momentum across our businesses. In higher education, we improved our competitive position, delivering continued share gains per MPI. And while headlines focus on consolidation of higher education institutions or uneven enrollment, we see access points multiplying. In fact, retained class sizes at our top 25 campuses increased by 4% year over year due to enrollment and higher inclusive access sell-through.

We also continue to expand our innovation and content with our evergreen delivery model, which now covers more than 800 titles. In K—12, we're seeing higher-than-expected win rates for our new ELA program above our 25% to 30% target range, including open territory with recent Science of Reading approvals in Pennsylvania and Colorado. In addition, we're receiving positive feedback on our updated California math teacher materials, setting us up for improved capture rates in that market. Moving forward, these leading indicators strengthen our confidence in the setup for fiscal year 2028.

Forty-four states have passed Science of Reading legislation. Emerge, Summit and SOAR, our bilingual K—12 literacy program that is integrated with McGraw Hill Plus and Stanford's ROAR dyslexia screener, was purpose-built for this super cycle.

We also expanded our addressable market with two acquisitions: TeachFX, an AI-native instructional coaching platform, opening the $6 billion professional learning market for educators, and Teach Ally, which embeds directly into teacher workflows and accelerates our internal content development efforts and localization capabilities, unlocking underpenetrated markets, including internationally in markets such as Latin America, which are benefiting from a growing middle class.

And in Global Professional, we continue to grow our digital portfolio, particularly in medical, where innovative agentic AI pilots with leading institutions are creating new opportunities that I will discuss shortly. Taken together, these points reinforce our confidence in the growth opportunities ahead. We're building a strong foundation for accelerated growth. Through the first half of fiscal year 2027, total revenue reached $1.2 billion, with recurring and digital revenue representing 71% and 60% of the mix, respectively.

Adjusted EBITDA of $458 million at a 39% margin remains a testament to our scale, efficiency and capacity for future growth. Early in my tenure I said that the last mile for new technology is hard, and that's especially true in education. This quarter we saw educators, parents and governments pushing back and even restricting general-purpose AI LLM tools in the classroom. Many technologists underestimate what it takes to build education technology that meets rigorous state and evidence-based standards.

For McGraw Hill, these standards have been guiding how we build for decades, and they are why pedagogically grounded solutions approved through rigorous curriculum selection processes like our solutions tend to be exempted from these restrictions. In fact, a recent study conducted by Morning Consult ranked us as the most trusted provider for AI-enabled teaching and learning among K—12 educators and administrators. Additionally, a study this quarter from Canvas, one of the largest LMS providers in the market, showed that McGraw Hill's Connect was the most used learning tool in the world on its systems, with over 11 million users.

Simultaneously, we're seeing renewed demand for print in classrooms. In education, print and digital are essential, and so many competitors can only deliver one. McGraw Hill's ability to serve both print and digital at scale is truly a competitive advantage. I'm now eight months into my tenure as CEO, and a key priority of mine has been to align our organizations and our leadership around our strategic priorities to drive greater growth.

An important first step has been ensuring we have the right leaders in place. I'm excited to announce that we have two new business unit presidents. Both are 25-year education veterans from within McGraw Hill: Robin Lucas for Higher Education, who led our most successful go-to-market team, and Janet Thompson for K—12, who led some of the most successful product launches in the K—12 market. With their leadership, our strategy will be to focus on executing better in our core.

We'll accelerate international as well as AI and other adjacencies while strengthening our enterprise capabilities. We must operate increasingly as an integrated company, and we will continue to break down the internal silos to enable us to scale our products globally. This brings me to why we're so well positioned to shape the future of education. Large language models are everywhere and increasingly undifferentiated as new agentic AI technology standards start to emerge.

The market is realizing that the value will be in coupling LLMs with high-quality content, deep educational context and teaching workflows, and McGraw Hill is leading the way. This quarter we accelerated our agentic AI tooling for education through Model Context Protocol, or MCP. We allow learners and educators to interface with our content safely, responsibly and with outcomes at the center. We maintain the productive struggle of education and IP protection for our content while leveraging the best of AI.

This content-as-a-service, grounded in trust, is proving to be exciting for our customers and technology partners. As our press release with Microsoft last week conveyed, McGraw Hill is among the first major education companies with a Copilot plug-in, making our content available via MCP to existing customers across K—12, higher education and professional learning. And today we announce that we are also among the first major K—12 core curriculum providers to make our proprietary content available to customers through Anthropic's Claude for Teachers.

Anthropic brings the model, and McGraw Hill brings trusted, standards-aligned curriculum built over decades, deep pedagogical expertise and relationships that put us inside of the classroom at scale. Our recently acquired TeachFX platform is already integrated into Claude for Teachers. It's also worth noting our recent collaboration with the University of California, San Francisco School of Medicine. McGraw Hill content, including the renowned Harrison's Principles of Internal Medicine, will power their clinical AI tool, Curate, to support medical students and residents during hospital rotations at the moments they need it most.

These connections raise the bar on our value proposition in the medical business, and I'm looking forward to showcasing more at our Investor Day on November 18, where our UCSF partners will join the conversation. We also continue to expand our portfolio of AI tools, with nine AI learning tools embedded into our solutions in the market. Our AI user base continues to grow, with unique users up double digits through the first half of the year and robust proprietary learning interactions, with over 80 million interactions across AI Reader alone since its inception. These results demonstrate growing adoption and engagement across our AI portfolio.

As all of these initiatives scale, we are confident they will be drivers of revenue and profitability beginning in fiscal year 2028. Before I turn it over to Bob, I'll say the next frontier of learning is here and we are just getting started. We believe McGraw Hill is the company uniquely positioned to lead with the speed, the scale, the financial profile and the institutional trust that is critical to succeed in education. And with that I want to thank you, and I'm going to turn it over to Bob.

Robert Sallmann (Chief Financial Officer) Thank you, Philip, and good morning, everyone. Our second quarter financial results demonstrated disciplined execution against our long-term strategy as we continue to track towards a meaningful revenue and cash flow generation inflection in fiscal year 2028. We remain committed to gross debt reduction and proactive balance sheet management as evidenced by our continuing deleveraging in the quarter and subsequent to quarter end. The extension of our maturity profile in the quarter.

Total revenue reached $632 million, a decline of 5.5% year over year, favorable to expectations despite lower capture rates in select math markets, while capture rates otherwise remained at the high end of our 25% to 30% target range. First half revenue was $1.2 billion, a decline of 1.9% compared to the prior year. As a reminder, revenue and 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, which is tracking to expectations. Recurring revenue was $414 million in the quarter, down 2% versus last year, with first half recurring revenue of $840 million, up 3.7% year over year.

Digital revenue increased 2.6% year over year in the quarter and grew 5.6% year over year in the first half. Growth in our recurring and digital revenue streams reflects how learning solutions are delivered and consumed, which demonstrates the long-term trajectory of our business. The remaining performance obligation was $1.8 billion, reinforcing the visibility and predictability of our revenue base and our confidence in our outlook. Gross margin remained robust at 79.2% in the quarter, flat versus prior year, with 130 basis point improvement over prior year.

During the first half of our fiscal year, adjusted EBITDA for the quarter was $251 million, representing a 39.6% adjusted EBITDA margin and in line with our expectations. Given the top line, we view our industry-leading margin profile as durable and are confident in our ability to continue margin expansion in the fiscal year and beyond. Moving to the segments, in Higher Education second quarter revenue was $213 million, up slightly year over year despite a difficult comparison with outsized transactional revenue in the prior year. Recurring revenue grew 5.5% year over year.

First half revenue increased 4.5% to $413 million, outpacing the industry, driven by 9.8% recurring revenue growth due to underlying McGraw Hill—specific indicators, which remain strong. Share gains continue to build consistent with prior years. Higher Ed's trailing-twelve-month market share increased year over year, offsetting fall enrollment that was flat to down 1%. Our inclusive access revenue mix expanded 400 basis points to 58% of revenue in the first half of the fiscal year.

Evergreen continues to strengthen our renewal base, with nearly half of our sales reps reporting easier renewals and 20% higher competitive win rates. Our value-based pricing also remains a tailwind, an outcome of our investments in innovation, product, and customer service. In K—12, second quarter revenue was $325 million, a decline of 9.6% year over year, with first half revenue of nearly $600 million, down 4.9% year over year, approximately $400 million of which was recurring and relatively flat versus prior year. As noted earlier, the timing of district orders is a key reason that we focus on first half performance.

Our capture rate remains at the high end of our 25% to 30% range excluding California and Texas math, reflecting strength in science and ELA. In California math, our Teacher's Guide is resonating well, with our pilots up 4x year over year. We have made investments in professional learning and implementation support and academic coaching to better serve the common needs of prospective customers. In Texas, we are seeing notable strength in our math program that serves grades 9—12.

The prevalence of short-term duration contracts with state-sponsored curriculum also supports our view of incremental opportunities in the coming years. K—12 is entering a multi-year ELA super cycle driven by structural demand. Our ELA program's momentum is ramping, reinforcing optimism in core and addressable market expansion in areas such as supplemental, intervention, assessment, and professional development. Our supplemental and intervention business remains steady with increasing retention rates and pipeline expansion that sets us up for growth in the second half of the year and beyond.

In Global Professional, our medical business grew 7% year over year, which now represents the majority of our segment. Revenue mix continues to improve as the impact of non-strategic print lessens. And in International, second quarter revenue of $51 million increased 1.6% year over year as our established global supply chain was able to serve our customers in the Middle East region despite the ongoing conflict. Turning to cash flow and the balance sheet, first half cash flow from operations was $190 million, an increase of $22 million year over year, driven by favorable working capital, while CapEx and product development remained in line with expectations.

We ended the quarter with $233 million of cash and $644 million of total liquidity. As we continue to build cash through December, we also executed another $50 million of voluntary term loan paydown, bringing total debt reduction since the IPO to approximately $700 million. Net leverage now stands at 3.2 times. We remain committed to 2 to 2.5 times net leverage target, with the multi-year K—12 ELA adoption opportunity serving as a meaningful accelerant as large multi-year contracts drive upfront cash.

Our progress was recognized by S&P's credit rating upgrade this quarter following the recent Moody's upgrade, both meaningful validations of our financial trajectory. Our capital allocation framework remains consistent: organic growth reinvestments, debt paydown, tuck-in M&A such as TeachFX and Teach Ally, and opportunistic share repurchases. Moving to our guidance, our first half execution gives us confidence to reaffirm our fiscal year 2027 guidance. We expect revenue to be in the range of $2.115 billion to $2.175 billion and recurring revenue of $1.587 billion to $1.627 billion.

Adjusted EBITDA is expected to be in the range of $750 million to $790 million with the implied margin of 35.9%, representing a year over year increase of 50 basis points.