McGraw Hill, Inc.

McGraw Hill reported first-quarter fiscal 2027 revenue of $550 million, up 2.6% year over year. Recurring revenue was $426 million, up nearly 10% and 77% of total revenue, while digital revenue increased nearly 9% and represented 64% of total revenue. Adjusted EBITDA was $207 million, with a 37.7% margin, up 192 basis points year over year; margin growth would have been 60 basis points excluding a benefit from the sale of intellectual property. Net income was $58 million. By segment, higher education revenue was $200 million, up 10%; K-12 revenue was $274 million, up 1.3%; Global Professional revenue was $35 million; and International revenue was $45 million. The company ended the quarter with $194 million in cash and $644 million in total liquidity, and it reiterated commitment to a 2x to 2.5x net leverage target. Management reaffirmed fiscal 2027 guidance across all metrics, but said it is still awaiting fall enrollment and final K-12 district awards; it also noted that guidance embeds 1% enrollment growth.

Philip Moyer framed the quarter as evidence that McGraw Hill is gaining momentum across its core businesses and AI initiatives. He emphasized share gains in higher ed, early traction for the new Science-of-Reading-based ELA programs, the launch of ROAR dyslexia screening with Stanford, and the company’s medical AI tools, saying AI is a tailwind rather than a threat. His tone was notably optimistic and expansive, with repeated claims that McGraw Hill’s integrated, trusted content plus AI gives it an advantage over general-purpose chatbots and OER.

Bob Sallmann focused on execution, seasonality, and capital discipline. He said the quarter beat expectations mainly because of stronger K-12 execution and stressed that Q1 and Q2 should be viewed together in a first-half/second-half business, especially with K-12 shipment timing and higher-ed enrollment still to come. Financially, he highlighted the $550 million revenue base, $426 million recurring revenue, $207 million adjusted EBITDA at a 37.7% margin, $194 million in cash, $644 million in liquidity, and the $646 million gross debt reduction in FY 2026 that lowered annualized cash interest by nearly $45 million. He also reiterated priorities: organic reinvestment, deleveraging, selective tuck-in M&A, and opportunistic buybacks, with the $50 million repurchase authorization still in place.

Analysts pressed on why guidance was unchanged despite a strong Q1, and management said the quarter was consistent with its first-half expectations, with more visibility needed after the fall enrollment and K-12 selling season. Questions also focused on the new ELA capture rates, with management saying Emerge, Summit and Soar are landing exceptionally well and early capture rates are above the 25% to 30% target range, especially outside California and Texas. On ROAR, management said it is a paid add-on and standalone opportunity that expands TAM, not a free bundle. Analysts also asked about delayed decision-making in K-12 and Texas Bluebonnet timing; management said it has not materially worsened and that shorter contracts could create future renewal opportunities.