McGraw Hill Q1 Earnings Call Highlights
Key Points
- 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.
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.
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.
Segment Performance and Guidance
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.
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.
K-12 Literacy Cycle and Dyslexia Screening
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.
AI Products, Pricing and Medical Content
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.
Cash, Debt Reduction and Capital Allocation
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.
About McGraw Hill (NYSE:MH)
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].
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Source MarketBeat
