McGraw Hill (MH) Q1 2026 earnings summary

Executive summary

• Q1 FY26 revenue grew 2.4% year-over-year to $535.7M, with digital and recurring revenue up over 7% and net income of $0.5M, a turnaround from a prior-year loss.

• Adjusted EBITDA rose 7.2% year-over-year to $191.4M, with margin expanding to 35.7%-36%.

• The July 2025 IPO raised $385.7M in net proceeds, used to reduce gross debt by $386M and annualized cash interest by $30M, strengthening the balance sheet.

• Digital innovation and AI-powered solutions, including Scribe and new product launches, contributed to operational efficiencies and market expansion.

• The company is well-positioned for future K-12 market cycles and continues to gain market share in higher education.

Financial highlights

• Gross profit for Q1 FY26 rose to $412.3M, with gross margin improving to 77%, up over 90 basis points year-over-year.

• Recurring revenue increased 7.1% year-over-year to $387.6M, comprising 72% of total revenue.

• Digital revenue rose 7.2% year-over-year to $325M, accounting for 60.7% of total revenue.

• Net income for Q1 FY26 was $0.5M, compared to a net loss of $9.4M in the prior year.

• Operating cash flow was negative $96.7M, reflecting seasonality and working capital changes.

Outlook and guidance

• FY26 revenue guidance is $1.986B–$2.046B, with recurring revenue expected between $1.477B–$1.517B and adjusted EBITDA of $663M–$703M.

• Medium- to long-term targets include 5%+ annual revenue growth, 75%+ recurring and digital revenue mix, and gross margin above 82%.

• Guidance reflects a temporary K-12 cycle dip, with growth investments planned ahead of larger market opportunities in FY27 and beyond.

• Tax liability is expected to be reduced to $30M–$50M due to federal policy changes.

• Management expects the One Big Beautiful Bill Act to favorably impact the income tax provision in the next quarter and fiscal year.