Scholastic Corp (SCHL) 2006 Q1 法說會逐字稿

At this time I would like to welcome everyone to the Scholastic quarter one 2006 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

It is now my pleasure to turn the floor over to your host, Dick Robinson, Chairman and CEO.

Sir, you may begin your conference.

This is Dick Robinson.

Before I talk, I'll introduce Dave Nelson, Vice President of Investor Relations.

Good morning.

This is Dave Nelson.

Before we begin I'd like to point out that the slides for this presentation are available for simultaneous viewing by going to our website, Scholastic.com, clicking on Investor Relations and following the links on that page.

I'd also like to note that this presentation contains certain forward-looking statements, which are subject to various risks and uncertainties, including the conditions of the children's book and educational materials markets and acceptance of the Company's products in those markets and other risks and factors identified from time to time in the Company's filings with the Securities and Exchange Commission.

Actual results could differ materially from those currently anticipated.

Now I'd like to introduce Dick Robinson, the Chairman, CEO and President of Scholastic, to begin our presentation.

Beta Dave, and welcome to Scholastic's earnings call and presentation for the first quarter of fiscal 2006.

I'm joined today by Chief Financial Officer, Mary Winston, who will speak after me and at the end of our presentation we'll both be available for questions as will members of our executive team.

Scholastic's mission is helping kids to read and learn, and by that measure the first quarter was phenomenally successful.

We published Harry Potter and the Half Blood Prince, the fastest selling book in history.

It was widely and enthusiastically praised by critics who would call this book a classic for the ages and got millions of people to celebrate its arrival with unparalleled public acclaim and interest.

Also on the literacy front, READ 180 sales grew another 36% breaking 100 million for the last 12 months.

More and more schools are using our revolutionary technology program and fundamentally improving the lives of thousands of struggling readers.

These accomplishments also helped us to meet our financial goals of higher revenue and margins resulting in a substantially lower seasonal loss in the quarter.

As we announced yesterday, more than 11 million copies of the U.S. edition of Harry Potter and the Half-Blood Prince were sold in the first nine weeks of publication.

Strong execution, improved distribution efficiencies and tight cost management resulted in better availability at retail and higher margins.

Excitement about Harry Potter also significantly boosted hardcover and paperback sales of the first five Harry Potter titles as new fans joined the longtime audience for this classic series.

In total we had approximately 185 million in net trade sales of all Harry Potter titles in the first quarter.

With the book still on many bestseller lists the release of the Goblet of Fire movie in November and the upcoming holiday season we expect continued demand for Harry Potter and the Half-Blood Prince.

Because of our successful distribution strategy throughout the launch booksellers and retailers currently hold sufficient stock to meet this demand, and we don't expect to record significant additional Harry Potter revenues this fiscal year.

Growth in READ 180 and other educational technology products resulted in record revenues and profits for Scholastic education last quarter.

Highlights include the launch of READ 180 enterprise edition with enhanced technology, improved data management tools and more structured instruction and professional development for teachers, which had strong sales from both existing and new customers.

We also have some fast-growing emerging programs like Scholastic RED, our professional development product which grew substantially with new online reading courses.

RED is helping major school systems such as the Department of Defense and Puerto Rico train their teachers and meet the requirements of no child left behind.

Also last quarter we launched FAST Math, the supplementary software product which applies the research behind READ 180 to teaching math facts.

And it received a very strong response from customers.

Finally, we continue to increase our emphasis on providing implementation, tech support and research-based validation to complement our technology products, particularly READ 180.

This ensures our program's effectiveness, making us to better partner and helping schools to raise students' achievement by providing the staff support from Scholastic that helps schools make full, effective use of the teaching power READ 180 technology brings to their struggling readers.

Another factor in last quarter's results was continuities where revenues declined as we execute our plan of focusing on our most productive customers, improving the customer experience and introducing new Scholastic branded learning products.

This strategy has succeeded in improving key metrics, including pay rates, bad debt and returns.

Our plan for the year, anticipated revenue declines in the first half substantially offset by revenue growth from new products in the second half of the year.

However, first-quarter revenue declines were greater than expected as recent launches of products like Scholastic's Phonics only partly offset the continued fall-off of the historical customer base.

We have scheduled two more major product launches, Word Advantage and Scholastic Classics, for the second quarter.

In addition to these product initiatives we have identified new customer acquisition channels for our core products that are generating strong customer response.

Given the nature of the continuities business model, these programs and marketing initiatives will begin to have an impact in the second half of this year and should partially, but not fully, offset revenue declines from the first and second quarters.

Overall the first quarter was a strong one, reflecting solid execution of our strategies and trade in education.

Looking forward we're also optimistic about school book clubs and book fairs which are now ramping up operations.

In clubs we have improved our kit designs, expanded offers and strengthened our teacher reward programs.

In fairs we are using new Customer Relationship Management tools to improve our fair bookings and have expanded support for fair organizers with the online chairperson’s toolkit as well as more book fair workshops.

As previously discussed, continuities will remain a focus for the rest of this fiscal year as we closely monitor our new programs and marketing initiatives.

Overall, based on first-quarter results and the outlook for our businesses, we are affirming our fiscal 2006 goals.

Before I pass the call to Mary Winston, I'd like to say a few words about hurricane Katrina and Scholastic's response.

As a company with very close relationships with parents, teachers and children throughout the country including the Gulf Coast, we feel a particular responsibility to use our strengths to assist in the recovery process and we have done the following things.

We are working with the American Red Cross and state Departments of Education to donate books and other materials to shelters and schools.

Also to assist with the short-term relief efforts Scholastic and its employees so far have contributed over $350,000 to the American Red Cross.

Our book clubs and fairs are coordinating school-based initiatives across the country that will offer teachers and their students a way to support relief efforts and will result in extensive donations of books.

Scholastic.com and our classroom magazines are providing timely age-appropriate news coverage and resources for children, parents and teachers, including advice on how to talk to children about this disaster and advice for teachers who bring displaced children into their classrooms.

And finally, we're working directly with state and federal education officials to target significant long-term donations of books and curriculum materials where they're needed.

We are proud of how teachers have turned to Scholastic through our network of communications with them to help implement their desire to help children in schools in the gulf state.

While we are prepared to do the same for Rita, like all Americans, we hope this hurricane will spare of the Gulf Coast of Texas from major damage.

Mary Winston will now discuss last quarter's results in more detail and our outlook for the rest of the year.

Thanks, Dick.

As Dick said, we are very pleased with last quarter's results.

We typically report a loss in the first quarter because most schools aren't in session and our club and fair businesses are not operating.

Last quarter significantly higher sales in children's book publishing and distribution as a result of Harry Potter and in Scholastic Education from educational technology boosted the company's revenues and decreased our net loss.

As a percent of revenues, cost of goods sold rose reflecting above-average costs associated with Harry Potter.

Selling, general and administrative expense declined as a percent of revenue as the growth in Harry Potter revenue did not require a proportionate increase in SG&A spending.

Bad debt fell reflecting improved pay rate and better overall credit performance in continuities.

Looking at the segment results, higher children's book publishing and distribution, revenues and operating profits primarily reflected sales of Harry Potter and the Half-Blood Prince, though we also saw an increase in sales of Harry Potter backlist titles.

Sales were also strong for new titles from the Charlie Bone and The Land of Elyon series as well as Cordelia Funke's most recent books Dragon Rider and Inkheart.

License publishing revenues were down as anticipated compared to a year ago when we had significant sales of books based on the movie Shark Tales through our partnership with DreamWorks which did not release a fall movie this year.

Non Harry Potter front list sales were also lower with more launches scheduled for the second quarter of this year compared to the first quarter of last year.

In continuities revenues declined due to a falloff in sales of our historical productline partially offset by the staged launch of new products as we complete market testing.

As Dick described, we have new products scheduled for launch this quarter which should offset declines in the historical business, particularly beginning in the second half of the year.

School book fairs and book clubs had minimal summertime revenues, as usual.

In educational publishing revenues were up 9%, and profits were up 23% fueled by growth in educational technology, which was up 32%.

These results reflect how our major education technology sales increasingly occur during the summer when school districts make the majority of their budgeted purchases.

As educators recognize the effectiveness of these products, they increasingly include them in their annual buying plans.

As a result, the first quarter becomes an even more significant part of the yearly segment results.

Growth in educational technology also contributed to higher margins last quarter, which improved from 20 -- to 21% from 19%.

In international, revenues were up 7% or 3% in local currency, primarily from stronger export sales and continued improvements in Australia.

Strength in these businesses partially offset lower results in the UK where we're rebuilding our trade and continuities businesses under new leadership.

Segment operating losses increased to 5.5 million.

Most of Scholastic's international subsidiaries typically generate loss, low revenues and operating losses in their first quarters since their schools are not in session.

Revenues in media, licensing and advertising rose 52% to 18.1 million in the first quarter compared to the prior year period primarily from increased production revenues from Maya & Miguel, Time Warp Trio and Clifford's Puppy Days, as well as from higher software sales and higher consumer magazine advertising and sponsorship.

Operating losses improved slightly to 5.7 million.

Finally, corporate overhead increased to 21.8 million, reflecting the timing of certain employee-related expenses.

As we stated before, managing working capital is a key priority for the Company.

The 5% reduction in inventory levels from a year ago is primarily due to better inventory planning and management across all businesses.

Higher accounts receivable at the end of the quarter primarily reflect Harry Potter sales, receipts of which are expected in the second quarter.

Accrued royalties also increased significantly primarily due to the Harry Potter launch.

Lower net debt and net debt to cap demonstrate the Company's focus on generating free cash flow, which has been used to reduce our debt levels.

Net cash used by operations increased last quarter compared to a year ago as the quarter's improved results were temporarily offset by higher working capital levels, especially accounts receivable, associated with the Harry Potter launch.

Next quarter's free cash flow should benefit as payments are received.

We expect hurricane Katrina to have some impact on our business, as Dick has described.

The most immediate effect has been school closings and unreachable customers.

Approximately 900 book fairs had already been scheduled at schools in the affected area representing less than 1% of total bookings planned for the year.

In addition, approximately 6000 book clubs sponsors, also less than 1% of the total, have been displaced, and we are sending mailings to approximately 45,000 continuities customers which represents less than 3% of the total.

There may also be some impact on school systems that are accepting displaced children, though based on the conversations that we've had with education leaders in surrounding states, the assimilation of displaced students is proceeding on as well.

Finally, the storm has also caused increased fuel prices which we expect to result in higher logistics and shipping costs for the year.

We are monitoring this situation very closely and, to the extent possible, we will attempt to mitigate higher costs and lost revenue by containing costs in other areas and through additional programs and promotions.

Now looking at our outlook for the year.

We expect strong results in trade, international and education, though we believe that education's revenues and profits are shifting somewhat to the first quarter relative to prior years.

We are also optimistic about the actions we've taken to grow clubs and fairs.

We expect to see revenue growth from our new products in continuities in the second half of the year and expect a small negative impact from Katrina.

Based on these factors we are affirming our fiscal 2006 goals of revenue of 2.3 to 2.4 billion, earnings per diluted share of $2.30 to $2.50 and free cash flow of 85 to 95 million.

And with that I'll turn the call back over to Dick.

Thank you, Mary.

I'll now moderate a question-and-answer period.

Beth Ford, Senior VP of Global Operations and IT;

Lisa Holton, President of Book Fairs and Trade;

Margery Mayer, President of Scholastic Education;

Judy Newman, President of Book Clubs and Scholastic at Home;

Seth Radwell, President of e-Scholastic; and Hugh Roome, President of International will join us for this Q&A session, which can now begin.

(OPERATOR INSTRUCTIONS).

Steven Barlow, Prudential Equity.

Thank you.

I'm a little confused on Harry Potter revenue.

If you say we're not going to have much Harry Potter revenue going forward for the rest of the year yet there's lots of inventory at the booksellers, it would suggest that they're not going to sell what they have.

Does that mean they're going to return what they have?

And second question would be -- I don't know whether my slide show didn't work -- could you break down the revenue by the children's book publishers by divisions, the continuities, fairs and clubs, etc.?

Thanks.

Steve, on Harry Potter, there is inventory out there.

We expect a good demand particularly running up to the holiday season and with the response to the movie.

We are appropriately reserved for those copies that are out there that will not sell.

Now we've put out a lot of copies as part of our whole marketing and distribution plan for Harry Potter, which did result in a very successful launch.

We recognize that there are copies out there which will probably not be sold in this period.

But we are appropriately reserved for those.

That accounts for the revenue issue you brought up.

Mary, do you want to talk about the segment?

Okay.

We apologize for the fact that your slide show wasn't working, so let me just kind of run through the revenue for the pieces of children's book publishing and distribution.

Total revenue for the segment is 275.3 million; for trade it's 213.3 million; for continuities it's 38.1 million; for book clubs it's 13.2 million; and for book fairs it's 10.7 million.

Thank you.

Bill Bird, Citigroup.

Just to clarify, I was wondering, are continuity revenues now expected to be down slightly in fiscal '06?

And also, I was just wondering if you could talk about fair bookings and how that's going so far.

Mary, will you take the continuity revenue?

Okay.

Hi, Bill.

In terms of our continuities business, we're certainly looking at it and assessing where we think we're going to be in terms of revenue for the year.

What we said earlier was that we felt that this was a year of stabilizing the business.

Clearly revenue is continuing to decline in the early part of the year.

We've got a number of product launches that are coming out here in the second quarter, and we're doing that in a very paced fashion, and we're testing the products to make sure that we're comfortable that they're going to work.

And we believe we're going to start to see some revenue from those products in the second half of the year.

We do think that the revenue from the new products is going to at least partially offset the decline in what we're seeing from the old business.

Judy, do you want to say anything additional on that point?

Sure.

Hello, Bill.

We're very excited, as you know, about the turnaround strategy.

And just to reiterate what Mary said, we do believe that the revenue from the new products will start to overwhelm, if you will, the old revenue from the historical business.

And most importantly, we're very excited that the stabilization metrics in this business are really coming through strongly.

So pay rates are up and bad debt rates are down and customer satisfaction is up.

Which are really the -- it's the basic on this business that we're very excited about in this turnaround.

So we're going to be building this new product revenue on that base.

Lisa, Do you want to talk a little bit about fair bookings which were obviously affected by Katrina?

Good morning.

To answer your question about fair bookings, at this point we are talking to meet our fair count budget.

Although some schools have been impacted by hurricane Katrina and they have actually canceled their fairs, we're working with them to reschedule where possible.

Although I'd like to stress, as Dick mentioned, that really what we're doing is reaching out to them in a soft way to see what we can do to help, whether it's rebooking the fair or help in any way that we can.

And in anticipation of any fairs that we won't be able to reschedule we actually have a pretty aggressive plan to work to book additional fairs elsewhere.

We've put some additional sales consultants on that and are stepping up efforts elsewhere to offset any net reduction in fair count.

Just as a follow-on on continuities, I was just wondering if you could elaborate a little bit on some of the new products and some of the factors that give you confidence that they can help to produce some resumption in growth.

Judy, do you want to tackle that one?

One of our exciting new product launches is called Scholastic Phonics, and we've been testing it actively.

And it's our signature reading learning product.

It's based on some of the -- much of the Scholastic learning products that the Scholastic education group had sold successfully to teachers for many years.

We've been testing it, and I think that's one of the key points to make that some of the product launches we'll be doing going forward in this business is based on solid testing rather than just throwing a whole bunch of untested product out there.

So we have a lot of good, solid test results to build our product development on.

We're seeing great starters.

We're seeing great retention, customers seem to like the product, they're staying with it.

It has a higher price point.

And customers are really saying they want their children to be learning to read with this product at home.

So it's a wonderful brand extension opportunity as well.

And we're taking the learnings that we're getting from that product and moving it into our next staged product launch which is called word advantage which you'll be seeing coming out in the second quarter.

Thank you very much.

Peter Salkowski (ph), Goldman Sachs.

First question, if you could just remind how many copies of Harry Potter number six you guys printed prior to the launch.

13.5 million were printed in the market, Peter.

Okay and you did a little over 11 million in the first nine weeks?

Yes, which is a faster rate than the book five.

Okay.

Switching to the club business, I know it's early in the year and schools have just started and there's certainly been some disruption down in the south and it looks like further in the next couple of days.

But if you could give us some sort of indication of how that business may be starting out during the beginning of this year -- I recall it was a little sluggish at the beginning of last year.

We really are not commenting on that, Peter.

It's -- we can just say that what we've seen is positive.

But it's so early in the year that we feel it's better for us to wait and see how the results flow in before we make any strong statements about how clubs and fairs are doing in the first and second quarter.

Within the fair business, sort of the goal for revenue per fair and the number of fairs for '06 in terms of an increase year-over-year from last year?

Have there been any comments about that.

That's sort of been a low single digit grower in the last year or so.

Well, we're anticipating, as Lisa said, a slight increase in number of fairs.

And we're continuing to work on revenue per fair.

The whole thing we talked about, holding more of these chairperson’s workshops and so forth, is focused on building revenue per fair, and we're confident that we are going to be able to continue to build revenue per fair.

But we're not -- we're certainly not moving to high double-digit growth.

We're still looking at mid single digit.

That's as a total between revenues and fairs the number of fairs you'll get mid single digits?

Yes.

On the READ 180 products, sounds like that product is continuing to do very well.

Could you give any indication, first of all I think you made a statement about sales between existing customers and also new customers -- how is that playing out in terms of are you getting some recurring customers and what percentage of them are coming back?

We certainly are.

Marjorie should talk to that.

Is that the whole question, Peter?

The other side of that question was I know you've come out with a high school product on the READ 180 I believe?

We came out with that three years ago.

Right, and how is that trending relative with this new enterprise product?

And then if you could give some sort of indication on profitability of that product that would be really nice.

Well, READ 180 has -- we're really pleased with the mix of old and new customers.

We have almost -- most of our old customers keep buying from us, keep adding stages, keep replenishing their classrooms and we have good acquisition of new customers as well.

This summer we launched a new edition of READ 180, which we called Enterprise.

And we've had a really strong reaction from our base and upgraded many customers into Enterprise and we've had lots of new customers for Enterprise.

In terms of our high school stage of READ 180, it's our second-fastest growing stage after our middle school stage.

It's very well positioned for the focus that the nation is putting on high schools because there's great recognition that in order to really revitalize our high schools in our cities and poorer areas we're going to have to teach kids to read.

And the profitability of READ 180 is -- I think you can see it in our results.

I think you can intuit it from our results.

It's got lots of positive effect on profitability.

We have had to add some capacity to take care of our READ 180 customers.

So we are investing in research and implementation.

But we've been able to drive down other marketing costs that are -- that one would find in a more traditional textbook model such as sampling and free with purchase.

Good.

Thank you very much.

Brandon Dobell, CSFB.

Just a couple of quick ones.

Mary, maybe if you could update us on where you guys are -- what your expectations are for CapEx in '06 given kind of how you started the year.

And then secondly, as you look at the media business, obviously off to a great start on the top line.

How should we think about that business the rest of the year, the sustainability of that kind of growth or the impact of the properties there?

And then profitability wise, should we see that kind of trend the same way as at the start of the year or is there something else we should keep in mind with that operating line?

Mary, do you want to take both of those questions?

Yes, and I'm going to ask you to repeat the second one, but first let me comment on CapEx.

At this point we -- as you know, we did indicate that we were going to have an increase in our CapEx spending for the year, so we did provide a number for that a couple months ago.

We are comfortably within that range and we're right on track with what we were expecting.

As we indicated, we are spending a little bit more in terms of IT and infrastructure spending.

And so that's what you're seeing in terms of the increase in first quarter this year versus first quarter last year.

And that's right on track as we had expected and indicated.

And then your second question, could you repeat that one more time?

I apologize.

Sure.

Just looking at the media category, just trying to get a better sense on how to model that the balance of the year.

Is the strong growth sustainable, or is that more of a near-term thing given how that business works?

And then, on the operating line, should we see the same kind of trend or a slight improvement in operating loss or as growth continues, if it does should there be any more leverage on that revenue as we finish out the year?

As it relates to the media licensing and advertising businesses, we've said before first of all it's made of three businesses.

It's our entertainment business, which, as you know, we really use as a brand management business and is not one that generally drives a lot of profitability.

And so the timing depends on the timing of when we deliver programming and shows to the networks in terms of revenue.

And so the timing is different year to year and it's generally not smooth and consistent throughout the year.

The other piece of that business, of course, is the software business, which is a little bit smoother and a little bit more stable, although some impact from the school season on that business as well because we do sell software products through our book clubs and book fairs.

And then the other piece is our consumer magazine advertising revenue that's in the business.

And that has a bit of seasonality to that as well because it's also influenced by the school year.

So in terms of the fluctuations that's what we would expect there.

Okay, and then maybe -- that's great -- maybe a bit of a prospective comment -- not that I want to go too far down this road.

But with what's going on today in the Gulf with the latest hurricane, maybe you could give us a sense of how important Texas is to your fairs and clubs businesses, what kind of stuff you guys have done to prepare or to prepare to mitigate for what might happen down there.

Obviously it's a tough call on what might happen, but I just want to get a sense for potential relative impact I guess.

Thanks.

At this point it's hard for us to fully quantify what the potential impact could be.

Clearly Texas is a bigger piece of our business in the Gulf area.

In terms of what we're doing to prepare for it, our main focus is on working with our customers and supporting them in areas that they need and being ready if they are in a situation where they need support or response from us being ready to provide that.

In terms of our own business, there's not a lot that we can do in terms of the timing or the current bookings we have around fairs and what we expect from the club business and whatnot.

So from that perspective we will certainly be reacting to what happens in the marketplace.

And then as we already indicated, we're also looking at other opportunities within the business if we do have fair cancellations and impacts on the club business where we can do other promotions to replace that revenue.

Thanks, Mary.

Appreciate it.

(OPERATOR INSTRUCTIONS).

Lauren Find, Merrill Lynch.

Just a few questions.

I'm wondering if you could break out the back and the front list for Harry Potter.

It would be helpful.

And then I'm wondering on the Accounts Receivable side, did you do a program similar to what I remember you did a couple of years ago which is basically extend the time that they have to pay you so that they would keep the inventory into the next quarter in view of the movie release?

The answer to the second part is no, we don't have any special program, Lauren, on -- with the retailers.

We don't need one because they're happy with the books that they've got.

And we're expecting that there will being some sell through in the next several months.

On the revenue on back list and front list, Mary, do you want to answer that one?

Of the 185 million in total Harry Potter revenue less than 10 -- about 10 million was back list.

Okay, and then I have a question looking at the cost side.

Is there a way -- again, I don't know if you'll be comfortable giving this -- to give us a sense of what the margin was on Harry Potter six.

I'm trying to distinguish what will recur in terms of some of the margin improvement.

And maybe another way to ask the question is I know that you were trying to reduce the number of warehouses related to the book fair and you would typically do that over the summer.

Could you maybe give us any quantification of what you might have done on that front?

Mary, why don't you answer this one and we'll ask Beth Ford to talk about the book fair warehouses.

Okay.

As it relates to the margins and profitability on Harry six -- as you know, we don't give specific margin of profitability on any particular property, but I can tell you some things that will kind of give you an indication.

This property was more profitable for us than prior releases, and it was mainly because we took a really proactive approach to how we managed the P&L for the particular property and looked at every cost item and took every opportunity to manage that effectively.

So through our operations, our logistics, our cost of product, our marketing spending and everything, we just looked at every component of that and brought the profitability up on that product.

So it was more profitable than prior products.

More certainly than five.

Beth, do you want to talk about the book fair consolidation?

Yes.

We're continuing down that path obviously in trying to optimize the network and we, again, executed some consolidations this summer, four to six consolidations.

We'll continue to look at that and model the network and look at where growth will be in the fairs over time to make sure that we have the network just right.

And back on the Harry Potter, we did feel pretty good about our execution on that property.

We really were able to offset what you're seeing in increased transportation costs by increasing density on the pallet, maximizing our load distribution.

We have a very tight load plan that we work very closely with our trade partners and trade division on.

So we executed that lay down very well.

Bill Rice (ph), U.S. Bank.

Good morning.

I was wondering if you could break out CapEx in terms of actual CapEx and what maintenance CapEx might be.

Mary, do you want to tackle that one?

Actually we don't provide a more detailed break out of our CapEx.

I think we do feel, though, that the number we've put out there in terms of guidance for the year is in the range of 65 to 75 million, and that includes what we need in terms of normal baseline maintenance in the business, and it also includes some degree of incremental spending on our IT infrastructure.

Does anyone want more information on that or should we move to the next question?

Steven Barlow, Prudential Equity.

On the core trade excluding Harry Potter it looks like the numbers were down fairly substantially.

Can you help us through -- I don't know, maybe it was a great trade last summer versus what happened this summer?

Is there different products or possibly what move, what worked and what didn't work this year versus a year ago?

Lisa, will you answer that one, please?

Sure.

There were a couple things.

Last year we actually had three big kind of moments in our media licensing that happened in Q1.

The first one was the tie-ins to DreamWorks Shark Tales, which went out big.

And the second were driven by two TV properties, Boohbah and the Rubber Dubbers.

Now those went out big in Q1, not necessarily stuck.

And so one of the key strategies that we're continuing with is working on our net returns.

So although this quarter was lower, A, due to the non-recurring media, we're actually very comfortable that we're still on track in terms of managing the overall business, and we actually have some big kits coming in Q2, most notably Cornelia Funke's new book, Inkheart which is a follow-up to Inkspell.

Can you give us a revenue forecast for trade without Harry for the year?

We don't usually comment on that do we, Mary?

We don't usually comment on that, do we Mary?

No.

Well, I tried.

Good try, Steve.

Okay, thank you.

Any further questions.

(OPERATOR INSTRUCTIONS).

It sounds like we've answered all the questions that have been asked.

So we thank you all for listening in on our Q1 and look forward to seeing you again in December.

Thanks very much to all.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time, and have a wonderful day.