McGraw Hill, Inc. (MH) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for joining McGraw-Hill's earnings call covering the fiscal second quarter of 2027. Joining me are Philip Moyer, our President and Chief Executive Officer, and Bob Sallmann, Executive Vice President and Chief Financial Officer. During this call, we'll make forward-looking statements, which rest on current expectations and the current economic environment; these statements, estimates and projections carry significant uncertainties beyond management's control, as spelled out 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. Today we'll also be discussing some non-GAAP metrics, which in our view offer helpful additional perspective on how the business is performing financially and operationally—although these should not be treated as replacements for GAAP figures. You can find the definitions along with the GAAP reconciliations in our earnings release, in the appendix of our investor presentation, and on our Investor Relations website. Anyone who is listening to a replay of this call should be aware that these remarks reflect information as of today, November 5, 2026, and have not been updated since then. With that, I'll hand things over to Philip Moyer, our President and Chief Executive Officer.

Good morning, everyone, and thanks for joining our fiscal Q2 earnings call. During this back-to-school period, more than 100 million active curriculum licenses put McGraw-Hill at the heart of the worldwide education marketplace. From an operational standpoint, it ranked among our smoothest back-to-school seasons, driven by upgrades to our technology and our use of AI that let us serve customers more efficiently and with higher satisfaction. We supported more than 60 million digital units and shipped more than 40 million books around the world, while resolving more customer inquiries more quickly and efficiently. That execution is turning into encouraging momentum across our businesses. In higher education, we strengthened our competitive position, posting continued share gains per MPI. While the news coverage tends to focus on mergers within higher education and inconsistent enrollment figures, we're actually seeing more access points emerge. Specifically, at our 25 largest campuses, retained class sizes increased 4% compared with a year earlier, driven by enrollment and better Inclusive Access sell-through. We're also continuing to grow our innovation and content via the Evergreen delivery model, which has now grown to cover over 800 titles. In K-12, win rates for our new ELA program are coming in above expectations—surpassing our 25% to 30% target range—including in open territory, with recent Science of Reading approvals in Pennsylvania and Colorado. On top of that, feedback has been favorable for our revised California math teacher materials, positioning us for stronger capture rates in that market moving forward. Those forward-looking signals give us more confidence about how fiscal 2028 is shaping up. Science of Reading laws have now been enacted in 44 states. Our bilingual K–12 literacy offering, Emerge, Summit and Soar—built to work alongside McGraw-Hill Plus and Stanford's ROAR Dyslexia Screener—was designed from the ground up for this super cycle. We also expanded our addressable market through two acquisitions: TeachFX, an AI-native platform for instructional coaching, which opens up the $6 billion professional learning market for educators; and Teachally, which plugs straight into teachers' workflows and accelerates our in-house content creation and localization work, unlocking markets that remain underpenetrated—including internationally, in places like Latin America, where a growing middle class is providing a tailwind. Within Global Professional, our digital offerings keep expanding—especially in medical, where agentic AI trials alongside top institutions are opening fresh possibilities I'll cover shortly. All of this strengthens our belief in the growth prospects before us. We are laying a solid groundwork for faster expansion. During the first six months of fiscal 2027, revenue totaled $1.2 billion, and recurring plus digital revenue accounted for 71% and 60% of the mix, respectively. Adjusted EBITDA came to $458 million, a 39% margin, which speaks to our scale, our efficiency, and our ability to grow going forward. When I started in this role, I noted that the final stretch for any new technology is difficult, and nowhere is that more true than in education. During this quarter, we observed educators, parents, and governments resisting and even placing limits on general-purpose AI LLM tools in classrooms. A lot of technologists fail to appreciate what is required to create edtech that satisfies strict state standards and evidence-based criteria. At McGraw-Hill, those standards have influenced how we build for decades, which is why solutions rooted in pedagogy and approved through rigorous curriculum selection processes such as ours typically wind up exempt from restrictions of that kind. In fact, a recent Morning Consult study ranked us as the most trusted provider for AI-enabled teaching and learning among K-12 educators and administrators. Additionally, this quarter Canvas—among the biggest LMS providers in the market—published a study indicating that Connect from McGraw-Hill ranked as the most widely used learning tool globally across its systems, with more than 11 million users. Meanwhile, we are observing a resurgence of demand for print materials in classrooms. Within education, both print and digital are necessary, yet numerous competitors are able to offer only one of the two. McGraw-Hill's capacity to provide both print and digital at scale genuinely constitutes a competitive advantage. I am presently 8 months into my role as CEO, and one of my central priorities has been bringing our organizations and leadership into alignment around our strategic priorities so as to generate stronger growth. Getting the right leadership team set up was a key initial move. I'm happy to share that two new business unit presidents are joining us. Both bring 25 years of education experience, having come up through McGraw-Hill: Robin Lucas takes on Higher Education, after heading our top-performing go-to-market team; and Jana Thompson leads K-12, where she drove several of the strongest product launches in that market. Under their guidance, we'll concentrate on sharper execution in our core. At the same time, we'll push faster on international expansion plus AI and other adjacencies, and we'll build up our enterprise capabilities. We need to function more and more as one unified organization, and we'll keep dismantling the barriers between internal teams so we can take our products to a global scale; that leads me to the reasons we're positioned so strongly to shape education's future. Large language models are ubiquitous and becoming less distinguishable from one another. As emerging standards for agentic AI technology begin to take shape, the market is coming to understand that value lies in pairing LLMs with top-quality content, rich educational context and teaching workflows, and McGraw-Hill is at the forefront. During this quarter, we sped up our agentic AI tooling for education. With Model Context Protocol, also called MCP, learners and educators can connect with our content in a secure, responsible way, and we keep outcomes front and center. We preserve both the productive struggle that's part of education and IP protection for what we publish, while still taking advantage of AI at its best. This Content-as-a-Service approach, built on trust, is generating real enthusiasm among our customers and technology partners. As our press release with Microsoft last week made clear, McGraw-Hill stands among the first major education companies to offer a Copilot plugin, which opens our content through MCP to current customers spanning K-12, higher education and professional learning. We also said today that we're one of the first big K-12 core curriculum companies to offer our own proprietary content to customers via Claude for Teachers from Anthropic. The model comes from Anthropic; the trusted, standards-aligned curriculum comes from McGraw-Hill, developed over many decades, together with deep teaching expertise and relationships that put us in classrooms at scale—and TeachFX, which we acquired recently, is already integrated into Claude for Teachers. Also worth mentioning is our recent collaboration with the University of California, San Francisco School of Medicine. McGraw-Hill material—including the well-known Harrison's Principles of Internal Medicine—will be driving their clinical AI product, Curate, assisting medical students and residents during hospital rotations at the moment they need support most. Connections like this raise the standard for what we provide in the medical business, and I'm eager to share more on November 18 at our Investor Day, when partners from UCSF will take part in the discussion. We're also continuing to expand our range of AI tools, with nine AI learning tools integrated into our solutions currently available in the market. Our AI user base continues to grow, and during the first half of the year unique users climbed by double digits, along with robust proprietary learning interactions—over 80 million of them across AI Reader by itself since its launch. These figures demonstrate increasing adoption and engagement across our whole AI portfolio. As each of these initiatives expands, we're confident they'll begin generating revenue and profitability in fiscal year 2028. Before I turn things over to Bob, let me note that the next frontier of learning has arrived, and we're only at the beginning; we believe McGraw-Hill is the company uniquely positioned to lead, given the speed, the scale, the financial profile and the institutional trust that's essential to succeeding in this education industry. With that, I thank you, and I'll turn it over to Bob.

Thank you, Philip, and good morning to all of you. The financial results we posted for the second quarter showed disciplined execution of our long-term strategy, and we remain on track toward a significant inflection in revenue and cash flow generation in fiscal year 2028. We stay committed to reducing gross debt and to managing the balance sheet proactively, as shown by our continued deleveraging during the quarter and, after the quarter ended, the extension of our maturity profile. For the quarter, total revenue was $632 million, a 5.5% decrease year-over-year. That result was favorable compared with expectations, even though capture rates in select mass markets were lower, while capture rates elsewhere remained at the high end of our 25% to 30% target range. First half revenue reached $1.2 billion, down 1.9% from the prior year. As a reminder, academic seasonality and K-12 shipment timing can cause revenue and EBITDA to shift between Q1 and Q2, which is why we focus on first half performance, and that is tracking to expectations. Reoccurring revenue for the quarter was $414 million, down 2% versus last year, and first half reoccurring revenue was $840 million, up 3.7% year-over-year. On the digital side, revenue was up 2.6% versus a year ago for the quarter, and for the first half it rose 5.6% year-over-year. The gains we're seeing in recurring and digital revenue reflect the way learning solutions get delivered and consumed, and that shows the long-term direction of our business. Our remaining performance obligation stood at $1.8 billion, which underscores both how visible and predictable our revenue base is and our confidence in the outlook. Gross margin stayed strong at 79.2% for the quarter, unchanged from a year earlier, and was up 130 basis points year-over-year across the first half of our fiscal year. Adjusted EBITDA came in at $251 million for the quarter, a 39.6% adjusted EBITDA margin, which is consistent with what we expected given the top line. We see our leading margin profile in the industry as something that will last, and we're confident about our capacity to keep expanding margins in the fiscal year and beyond. Now turning to the segments. For Higher Education, second quarter revenue came in at $213 million, a slight year-over-year increase even with a tough comparison against unusually large transactional revenue in the prior year. Reoccurring revenue rose 5.5% compared with a year earlier. First half revenue was up 4.5%, reaching $413 million, ahead of the industry, powered by 9.8% growth in reoccurring revenue thanks to underlying McGraw-Hill-specific indicators, which are still strong. We keep building share gains, in line with prior years. Higher Ed's trailing 12 months market share rose year-over-year, which offset fall enrollment that was flat to down 1%. During the first half of this fiscal year, the share of revenue coming from Inclusive Access grew by 400 basis points, reaching 58%. At Evergreen, our renewal base keeps getting stronger—close to 50% of sales reps say renewals have become simpler, and competitive win rates are up 20%. Value-based pricing is still providing a boost as well, reflecting what we've put into innovation, product, and customer service. In K-12, second-quarter revenue was $325 million, a 9.6% decline versus the same period last year, while first-half revenue reached just under $600 million, down 4.9% year over year; about $400 million of that was recurring and was basically level with the prior year. As I said before, when district orders land is a big reason we focus on first-half results. Our capture rate remains at the high end of the 25% to 30% range, excluding California and Texas Math, which demonstrates strength in science and ELA. With California Math, our Teacher's Guide is being well received in pilots, and those pilots are up 4x year-over-year. We've put money into professional learning, implementation support and academic coaching so we can more effectively meet the common needs of prospective customers. In Texas, we're seeing substantial strength in our math program for grades 9 to 12. The number of short-term contracts with state-sponsored curriculum is another reason we believe there are incremental opportunities ahead over the next several years. A multiyear ELA super-cycle, driven by structural demand, is what K-12 is entering. Our ELA program keeps gaining momentum, and that strengthens our confidence about growth in core and addressable markets in areas such as supplemental, intervention, assessment and professional development. Retention rates are climbing and the pipeline is expanding in our supplemental and intervention business, which is holding steady and putting us in position to grow in the second half of the year and beyond; in Global Professional, our medical business grew 7% year over year and now makes up the majority of segment revenue. As the impact of nonstrategic print fades, our revenue mix continues to improve. Turning to International, Q2 revenue came in at $51 million, up 1.6% versus a year ago, since our established worldwide supply chain managed to keep serving Middle East customers through the continuing conflict. Moving on to cash flow and the balance sheet: first-half operating cash flow was $190 million, $22 million higher year-over-year, aided by favorable working capital, and CapEx plus product development remained consistent with our expectations. We ended the quarter holding $233 million in cash along with $644 million of total liquidity, and we keep adding to cash through December. We additionally repaid another $50 million on our term loan voluntarily, taking cumulative debt reduction since the IPO to about $700 million. Net leverage now stands at 3.2x. We remain dedicated to achieving net leverage of 2x to 2.5x, and the multiyear K-12 ELA adoption window serves as a significant catalyst, since sizable multiyear agreements produce cash upfront. This quarter, S&P's credit rating upgrade acknowledged our progress—coming on the heels of the recent Moody's upgrade—and together these represent meaningful validations of our financial trajectory. Our capital allocation framework stays the same: reinvesting in organic growth, paying down debt, tuck-in M&A like TeachFX and Teachally, and opportunistic share repurchases. Turning to guidance: our first half execution makes us confident enough to reaffirm our fiscal year 2027 guidance. We anticipate revenue between $2.115 billion and $2.175 billion, with reoccurring revenue of $1.587 billion to $1.627 billion. We anticipate adjusted EBITDA will land between $750 million and $790 million, which implies a margin of 35.9% — that's a 50 basis point rise compared with the prior year. In addition, we still expect to generate roughly $400 million in unlevered free cash flow, with cash and GAAP taxes coming in toward the lower end of the $20 million to $40 million range. Every other modeling assumption is unchanged from what we shared earlier. Revenue growth in the second half is underpinned by solid RPO visibility, ongoing share gains, pricing, and the timing of school starts — and together these more than offset the somewhat softer enrollment environment. The signals we track—particularly across K-12—continue to support our forecast: a substantial step-up in pace during fiscal 2028, aided by the forthcoming ELA super-cycle. We're eager to lay out more detail on how we plan to grow and our multiyear view during our Investor Day on November 18. With that, I'll return the call to the operator so we can take your questions.

This is Steve Koenig from Macquarie. Philip, MH is obviously an early mover when it comes to using AI in education, and I congratulate you on how quickly you've done that. What I want to dig into, following last week — you announced your content would be accessible through Microsoft Copilot via MCP. This morning you issued a press release about bringing your K-12 content into Claude. I'd like to understand which factors drive your choice to open your content to MCP and to integrate with third-party agents? And then, how do these efforts make sure the educational struggle for learners remains intact? And how will you safeguard your IP?

Steve, many thanks for that question. It's only been roughly 3 to 4 months since we began discussing this, and we couldn't be prouder to be moving this quickly and to have all these press releases over the last few months, or the last few weeks. It truly shows the speed at which we're progressing, the innovation we're delivering, and the clear vision the entire organization holds regarding the future of education and AI. It also shows, through a lot of the press releases with UCSF, with Microsoft Copilot, with Anthropic — and you'll see more — that one size does not fit all. You've observed over the past quarter that classrooms, in many cases, want it either outside the classroom or fully ambient within the experience. In other cases, they want the chatbot front and center; in some cases, organizations want to be able to use their own chatbot. And the question you raise about how you protect your IP and then also monetize in that kind of world is precisely why we're building with this MCP technology; we like to think of the future of a lot of this as almost an app store. And anyone using our MCP interface must, first and foremost, hold a license to our content, and that's essential. And we have pretty substantial technology and security wrapping around our content with MCP, first and foremost, so we can protect it. And then the beauty of MCP is also that the experience can be exactly how the learner, the educator, the school wants it to be. So whatever chatbot or AI tooling they want to use, we can plug in that way. And we can actually see what's happening. We can see the kinds of questions, we can see where the student is — or where the educator is struggling, where they want more information, where they're engaging with our content, where they might not be. And so we get a much richer and deeper experience in being able to understand, and it improves our own authorship. And that capacity to both govern and stay open—plus getting additional data and deeper insight from the content—is exactly why we're advancing so quickly with this technology. We genuinely believe that in the old world, you simply take the PDF, you take our content, and it's all or nothing. Either you hand it over to the AI model or you don't. Here, with MCP, you can literally drill right down to the question, see it, and potentially even monetize it. The business model around this will vary. In some cases, it'll be a slight uplift on our price, and we're already discussing monetization with a number of organizations. In other cases, it could be a block of questions that you pay for, or elsewhere, with some large organizations, they prefer paying by the token; and so in all of those cases, this MCP technology lets us protect, integrate, and also monetize under the business model that fits each educator and student.

I'm curious — as you work through your first pilots and begin rolling this out, how do you see monetization developing? Are you likely to stay with this hybrid approach? Might it differ depending on market or segment? And then, how quickly does this turn into meaningful revenue potential for McGraw-Hill? That's all from me.

Thanks; we have two strategies for accelerating growth. The first is providing support for more students — more of our curriculum in more places, so to speak — and the second is offering more tooling layered on top of that curriculum; let me use the K-12 marketplace as an example. The acquisition we recently completed around Teachally lets us be fully customized in the classroom exactly as the educator wants — in the language, in the culture, in the localization that they want and that educator needs. And in that scenario, the student is quite distant from AI, but we can plug our content, our curriculum, into that Teachally tool. So Teachally becomes a route for us to monetize on the back end in support of that teacher. When it comes to higher ed, many professors as well as students want a chatbot that interfaces directly with the content. And in that scenario, we can either apply an upcharge. In the third scenario, as I believe I've mentioned, as we consider relationships such as the one we did with UCSF, we're actually in the hospital or with students, with residents for instance, or even, for example, in a pharmaceutical space where a tremendous amount of research is being done that leverages our content — that's a scenario where we can supply big blocks of tokens and big blocks of questions to universities. And so each of those business models — in some cases, it's one of our own tools that's supporting the classroom; in another case, it's an interface that's interactive. And then in the third case, it's literally wholesale access to some of our content. And we're seeing all three business models develop pretty quickly. And in fact, organizations, customers, actually request all three of those business models right now. And so we're — as we mentioned, our goal is to have as many organizations in this pilot as possible. This is one of the reasons we're so excited to make these public announcements — this is the opening of our beta for these products. And our goal is, by the time we reach fiscal year '28, to have fully formed business models with each of these different scenarios.

Let me drill down on strategy a bit. You've been moving really fast with MCP. Could you expand on how big an impact you anticipate this having on fiscal 2028 revenues and costs, and which key indicators you're watching that will drive monetization down the road?

Everything begins, for us, with how many students and educators are engaging with our content — that tells us a great deal. So we want to get right down to a very granular level — not merely the licenses, the 100 million licenses we're selling, but specifically full-on engagement. That's how we focus internally around MCP and around our tooling; we're really getting right down to what the value of the paragraph inside our content is. So engagement with our content and the count of those curriculum licenses is a great indicator for us. And then beyond that, the places where we integrate, the ability to integrate and to be, I'll say, paid for those integrations, because there's simply more interactivity with the content than there has been in prior models — that tells us too that there's a value proposition tied to it; so think of it as more curriculum licenses, more engagement, and then our ability to be paid in more value. And so the pipeline around that is building. A lot of — at Investor Day, we're going to actually show some of these things, like some of the work we're doing with UCSF and things we're doing in the medical field; we're going to be showing Teachally and demonstrating how this engagement works, and then also some of our vision for how we can expand TAM with the opportunity.

That's useful. Now, when you consider the effect throughout your company, how would you weigh the possible advantages for higher ed against those for K-12?

Absolutely. In K-12, from my experience, each classroom I visit wants the curriculum to feel like their own. They want it tailored to the students they teach. And frequently, if all you have is plain text, static text, it's hard to tailor it to the student experience you have locally. So the effort we — the acquisition we made involving Teachally and definitely TeachFX, these are 2 strong instances where you personalize deeply for the students, for your culture, for the localization, and that matters since we're a global company. And more and more, we must be capable of serving a worldwide audience as well as a multilingual audience and a multicultural audience. So our capacity in the K-12 space — there's an enormous emphasis on making it personal for the teacher and for that classroom. So it's going to get more personalized; in the higher education space, it's remarkable how, in many ways, so much information comes at these university students and also at the professors, and they must teach more within such a limited amount of time; and so this — they're shifting from just-in-case to just-in-time. So this lets us serve up, in bite-size chunks, exactly the section the professor is working on that week; they can distribute things such as playlists of content every week, and they can observe the interactivity of the content; and so in that space, you're truly doing far more bite-sized chunks; and in the higher — in the medical field, this is where we're especially excited; we believe the point-of-care space, the specialization space, that capacity to appear in a wide range of other places we could never have envisioned with some of the more static content formats we've had, and the capacity to provide literally an answer right at the moment of care, we think it's an exceptional opportunity. Given the trust that most doctors and MDs and DOs and dentists and physicians and so on place in our content, we're truly excited to remain a part of their journey through their whole life.

I'd like to ask a follow-up about your Higher Education segment. More precisely, we have noticed ongoing momentum and share gains relative to a number of your competitors. So, first, we're curious how you view whether that path can be sustained. And second, as you've moved through successive renewal cycles, how are the forces behind those gains evolving? Are institutional-level digital solutions increasingly acting as a driver and a point of differentiation?

Thanks, Henry. Truly an amazing team. We couldn't be prouder of this group. At this point we're at — by my count, this is the 41st consecutive quarter of share growth. The leadership at that organization has been remarkable. Given the execution that team delivers, I wish some of you could witness what I see internally with that Higher Education team. It's simply a world-class go-to-market team, along with the product organization. In the higher ed space, we're among the most innovative organizations; and you can observe what quality execution from this team looks like. What I'd tell you is that a few things deserve your attention. To begin with, retention in this marketplace is extremely hard, and in that retention we are world-class. We keep discussing this, and it comes down to the individuals who are on the ground alongside the professors, alongside the institutions, making sure they have what they need. The Evergreen model we have is, once again, a unique differentiator in the business. Our capacity to continuously update changing information for professors in a way that integrates directly into their workflow is greatly valued for this. And the last thing I'd mention is simply our capacity to price at the right level. Inclusive Access has mattered for students because it makes it simpler to ensure that everyone has the content for the class, and it also makes purchasing easier for the institution.

Yes, and Henry, let me approach this from a financial standpoint. So, looking at the second quarter results, the fact that GAAP revenue came in flat is essentially due to the transactional revenue from the prior year being a very tough comparison. What I'd say is that the underlying performance of the business—when we examine activations and that recurring revenue—is growing at a mid-single-digit rate. When we look at the first half performance, it also supports that mid-single-digit growth. And in terms of how I think about the drivers behind that growth, as we highlighted on the call, enrollments are flat to down 1%. Then I look at where we're seeing the benefits, and pricing is continuing to hold up better than we had anticipated. We're going out and adding more value for our professors and for the students through our platform, and we're being rewarded with that higher pricing. That's generating roughly a 2% benefit for us. And then finally, those ongoing share gains—all the things Phil discussed around differentiation—that's the 3% to 4% benefit. So as we roll all of that up and I think about how we'll finish the year, the underlying business, again, is supporting that mid-single-digit growth.

Phil, could you speak about the K-12 business? Clearly, there's a lot of very encouraging and interesting commentary ahead of the ELA super cycle, with some early wins ahead of your historical market share capture rates in that 25% to 30% range. Can you just remind us how impactful some of these open territory early wins are for the larger state adoption cycles as we get into the next couple of years here, and what you're hearing in the early days on California Math and their feedback on your ELA product?

Absolutely. Thank you, Ryan, for the question. First, I'll say there's been some really exciting developments over this quarter. Sure, I'm proud that my home state of Pennsylvania decided to put us on their list for ELA, and Colorado too. Take some of the states or districts we won, like up in Washington — Snoqualmie, Lake Washington, and Seattle — those are three very, very different districts with very different dynamics and students, and I'll just call it teaching dynamics. Seeing this range of school districts beginning to adopt our ELA program is a really good signal for us. And certainly the fact that Colorado, where we scored 211 out of 212 on their rubric, and Pennsylvania too, which has a very complex rubric — and California as well. We were thrilled to make it through their process, and we hope to be on their list when they publish around January. So as we head into the selling season, in year 0 of our product, we're getting very, very strong feedback on our ELA product. I believe I've said before that the market, as we enter this coming year — or entering the cycle, rather — could be as much as an additional 10% beyond what it has been previously. And our capture rates are stronger than usual. Another thing that's exciting is that in open territory, we're sometimes seeing districts adopt us before we've even appeared on certain state lists — that's a really strong signal for us. And one of the most important aspects of the program is that we're among the only dual literacy programs that sit truly end-to-end within the marketplace, and that's growing more important all the time. On top of that, it opens up an opportunity in Latin America that we haven't had before. So we see this as an opportunity both in the United States and down in Latin America. As I believe I've said before—and we'll discuss it extensively at Investor Day—this shift toward what people call the science of reading is a global phenomenon, not something limited to the United States. So combining this comprehensible program with the ROAR Screener for Dyslexia that we just announced, our ability to compete in this market places us among the most comprehensive solutions coming to market this year—arguably the most comprehensive of any. That growth potential is, I should say, something that excites us.

To follow up, the midterms clearly aren't fully settled yet — just a couple of days have passed. What caught my attention was Texas, where you obviously saw a couple of flips: Talarico won, and then Hinojosa at the governor level. I'm just curious — given the historical criticism those 2 individuals have aimed at both the Texas Education Agency as a whole and the Bluebonnet curriculum, what incremental opportunities do you see in Texas to perhaps operate in a better environment than this past year relative to Bluebonnet, and what changes do you think might be coming there?

Thanks for asking that as well; serving Governor Abbott for more than 12 years has meant a great deal to us. We've built some really solid ties throughout Texas and with districts, so the partnership we've enjoyed couldn't make us more thankful. That said, as you pointed out, Governor Elect Hinojosa, along with the school board's newly elected members over these past 48 hours — Governor Hinojosa previously sat on a school board down in Austin. My sense is she holds quite firm views about education. Looking at it from the outside, I think changes could be coming. What this really shows, I think, is how this market actually works. We've often said that the final stretch in education is tough, and that's exactly what you're seeing here. When we mention the confidence that McGraw-Hill enjoys from administrators all the way down to the classroom, that's the point we're making about why it matters so much: politics and requirements can shift instantly, so you have to be trusted at every single stage. That's why we're glad to back Governor-Elect Hinojosa and the members of the Board of Education.

Also, I want to remind everyone that we've observed contracts with shorter terms, and we flagged that during our previous earnings, and as that continues to develop, it puts us in a strong spot if those contracts become available to us at an earlier duration than what we'd seen before. So we believe we're well positioned to keep serving Texas in a very meaningful way.

Perhaps I could ask about M&A. A few quarters back, I believe you mentioned having an active pipeline, and you definitely followed through on that. Could you give us an update on where things stand now? Do you feel you've met your near-term objectives? Or do you still expect to remain active in that market?

Yes. As opportunities arise, we keep assessing them. I'd like to believe that whenever assets hit the market, we typically see everything within the education space. Beyond that, we also generate a great deal of proprietary transactions; so looking at our funnel, it remains quite robust for what I'd describe as more tuck-in acquisitions. We're genuinely pleased with what we've recently closed, since both TachFX and Teachally are TAM-expanding. And although in the — I'd say, during the current year, you won't observe a meaningful financial impact, meaning they could be somewhat dilutive to EBITDA and negligible on the revenue side for the rest of the year, what truly excites us is the capacity to expand TAM and gain access to new wallet as we head into '28. And once more, when we consider acquisitions, many of these are make-versus-buy choices; and in the end, when a great asset becomes available such as what we've just closed, those are the kinds of things we keep evaluating.

And then a follow-up: you said that screentime and print are getting renewed attention — more print, and an effort to reduce screentime. How should that shape the way we think about the long-term trajectory for digital in the K-12 segment specifically? Do you view it as leveling off at this point, or simply expanding more slowly when it comes to penetration? I'd just like to hear your latest thinking on that, plus what it means for gross margin.