S-1/A: McGraw Hill Files IPO Amendment, Reveals Strong Digital Growth and Debt Reduction Strategy

McGraw Hill, Inc. has filed an amendment to its S-1 registration statement, detailing its initial public offering of 24.39 million shares, a strategic focus on digital learning solutions, and plans to use IPO proceeds to significantly reduce its substantial debt.

Summary

• McGraw Hill, Inc. is offering 24,390,000 shares of its Common Stock in an initial public offering, with an expected price range of $19.00 to $22.00 per share.
• The company plans to use the net proceeds from the offering, estimated at approximately $466.6 million (at the midpoint price of $20.50 per share), to repay a portion of its outstanding borrowings under the A&E Term Loan Facility.
• For the fiscal year ended March 31, 2025, revenue increased to $2,101.3 million from $1,960.5 million in 2024 and $1,947.8 million in 2023, representing a 7.2% year-over-year increase.
• Net loss for the fiscal year ended March 31, 2025, was $85.8 million, a significant improvement from $193.0 million in 2024 and $404.1 million in 2023.
• Adjusted EBITDA grew to $726.8 million in fiscal year 2025, up from $656.6 million in 2024 and $618.0 million in 2023.
• Preliminary unaudited estimates for the three months ended June 30, 2025, project revenue between $528.2 million and $536.2 million, and Adjusted EBITDA between $184.9 million and $192.0 million, both showing increases compared to the same period in 2024.
• Re-occurring Revenue, primarily from digital subscriptions and multi-year print products, constituted approximately 69% of total revenue in fiscal year 2025, up from 67% in 2024 and 63% in 2023, indicating a successful shift to a more predictable revenue model.
• The company's Remaining Performance Obligations (RPO) increased from $1,511.1 million as of March 31, 2024, to $1,676.2 million as of March 31, 2025.
• McGraw Hill serves approximately 60 million learners and educators annually across K-12, higher education, and professional learning markets in over 100 countries.
• The company has invested over $2.0 billion in digital learning solutions over the last decade and leverages data from over 19 billion learning interactions in fiscal year 2025 to drive product innovation and personalized learning.
• Platinum Equity, LLC will continue to beneficially own 86.5% of the voting power of outstanding Common Stock after the offering, making McGraw Hill a controlled company under NYSE rules.
• The company acquired EssayPop, LLC for $8.0 million on March 21, 2025, to enhance its cloud-based writing solutions.

Sentiment

Score: 8

Explanation: The filing indicates strong positive momentum with significant revenue growth, a substantial reduction in net losses, and impressive Adjusted EBITDA performance. The strategic shift to digital and AI integration is well-articulated, and the IPO is positioned to reduce debt, improving the financial structure. While risks exist, the overall trajectory and proactive management strategies suggest a very positive outlook.

Positives

• Revenue increased by 7.2% to $2,101.3 million in fiscal year 2025, driven by strong performance in Higher Education and K-12 segments.
• Net loss significantly narrowed to $85.8 million in fiscal year 2025 from $193.0 million in 2024 and $404.1 million in 2023.
• Adjusted EBITDA increased to $726.8 million in fiscal year 2025, demonstrating improved operational performance and profitability.
• Re-occurring Revenue grew to 69% of total revenue in fiscal year 2025, indicating a successful transition to a more stable, subscription-based business model.
• Higher Education segment revenue increased by 11.5% due to increased digital product adoption, including 23% growth in Inclusive Access sales, and market share gains.
• Remaining Performance Obligations (RPO) increased by $165.1 million to $1,676.2 million, providing strong visibility into future revenue.
• The company has a strong global brand, recognized by 89% of K-12, higher education, and medical school students, faculty, and administrators in the U.S.
• Significant investment in digital learning solutions (over $2.0 billion in the last decade) and leveraging AI and data analytics (19 billion learning interactions in FY2025) to enhance learning outcomes and product innovation.
• Successful acquisitions like Boards & Beyond and EssayPop expand capabilities and offerings in key growth areas.
• The company's digital-first business model drives operating leverage and profitability by reducing time-to-market and leveraging shared infrastructure.
• Debt reduction plan using IPO proceeds will lower outstanding borrowings under the A&E Term Loan Facility by approximately $466.6 million.

Negatives

• The company continues to report a net loss, albeit reduced, of $85.8 million in fiscal year 2025.
• Global Professional segment revenue decreased by 2.3% due to lower transactional revenue and the strategic decision to sunset non-core print titles.
• K-12 segment experienced lower transactional revenue in Q1 2025 due to lower market opportunities.
• The company faces intense competition from both large, established industry participants and new market entrants, including providers of free or inexpensive products.
• Generative AI systems pose a risk by potentially facilitating the creation of competitive instructional materials, which could reduce demand or impact pricing.
• The business is highly seasonal, with sales concentrated in the first and second fiscal quarters, leading to quarterly cash flow challenges.
• A significant portion of sales are to a small number of resellers, with three resellers comprising 38% of gross accounts receivable as of March 31, 2025, posing concentration risk.
• The company's substantial indebtedness, totaling $3,277.9 million face value as of March 31, 2025, restricts financial flexibility and exposes it to interest rate risk.
• The company recorded goodwill and indefinite-lived intangible impairment charges of $49.5 million in fiscal year 2024 and $312.0 million in fiscal year 2023.

Risks

• Competition from large, established industry participants and new market entrants, including no-cost competitive products, could reduce sales revenue and market share.
• Failure to win new adoptions in certain U.S. states, particularly large K-12 populations like Florida, California, and Texas, could adversely affect revenue.
• Changes in state academic standards may require significant investment in new or modified products, impacting return on investment.
• Reductions in federal, state, and local education funding, including the expiration of COVID-19-related Elementary and Secondary School Emergency Relief funds in 2025, could reduce demand for K-12 products.
• Factors reducing enrollment at colleges and universities, such as demographic shifts or changes in student loan programs, could adversely affect demand for Higher Education products.
• Evolving policy changes, political pressures, community activism, and cultural sensitivities may impact the adoption and purchase of K-12 materials.
• Operational disruptions, malfunctions, or intentional hacking of technological systems could cause financial loss and reputational damage.
• Failure to adequately protect personal data or comply with privacy, accessibility, and other laws could lead to penalties, litigation, and reputational harm.
• Defects in digital products could cause financial loss and reputational damage.
• Unauthorized copying and distribution of products, particularly in higher education and professional markets, could adversely affect sales.
• The use of open-source software in the codebase may lead to unanticipated conditions or restrictions if licenses are construed differently.
• Risks involved in utilizing AI, machine learning, and data analytics tools, including errors, inadequacies, ethical concerns, and increased cybersecurity risks.
• Increased adoption of free and paid generative AI tools by students could negatively affect demand for the company's education solutions.
• Investments in new products and distribution channels or entry into new markets may not be profitable.
• Future acquisitions could disrupt business, divert management attention, and may not produce expected synergies.
• Substantial indebtedness restricts the ability to react to economic changes, exposes the company to interest rate risk, and risk of default.
• The company's ability to use net operating losses and other tax attributes to offset future taxable income may be subject to limitations due to ownership changes.
• Exposure to inherent risks of doing business abroad, including lack of local knowledge, entrenched competitors, and difficulties in protecting intellectual property.
• Fluctuations between foreign currencies and the U.S. dollar could adversely affect financial results.
• Changes in macroeconomic and geopolitical conditions, including inflationary pressures and interest rate fluctuations, can affect growth and results of operations.
• The company's status as a controlled company by Platinum Equity, LLC means Platinum's interests may conflict with other stockholders.
• Anti-takeover provisions in organizational documents could delay or prevent a change of control.
• McGraw Hill, Inc. is a holding company, dependent on subsidiaries for cash flow, which may be restricted by debt covenants.
• No active, liquid trading market for Common Stock may develop, causing shares to trade at a discount.
• New investors will incur immediate and substantial dilution of $37.59 per share.
• Failure to comply with requirements to design, implement, and maintain effective internal controls could adversely affect business and stock price.
• The stock price may be volatile, and stockholders may not be able to resell shares at or above the price paid.
• No current plans to pay dividends or repurchase shares, meaning stockholders may only receive a return on investment through stock sale.
• Changes in tax laws may impact the tax treatment of income or gains on Common Stock.
• Increased costs and regulations as a publicly traded company will require substantial management time and resources.
• Future sales of additional shares by existing stockholders or the perception of such sales could cause the stock price to decline.

Future Outlook

The company aims to extend its position as a leading global provider of information solutions for education by acquiring new customers, cross-selling and up-selling to existing customers, leveraging AI and data analytics to enhance solutions, investing in technology-enabled innovation across the learning lifecycle, increasing international presence, and proactively pursuing strategic M&A opportunities. It expects to expand revenue through novel solutions and continue driving digital growth internationally. The company also anticipates that its foundational investment in product development will reduce the variability of future product development expenditures as content can be leveraged across the business.

Management Comments

• Our purpose is to unlock the potential of each learner at every stage of life.
• Our mission is to support educators, learners and professionals around the world with trusted, high-quality content and digital solutions that use data and learning science to adapt to each student as they progress towards their goals.
• We believe that we have positively impacted hundreds of millions of learners and educators with our personalized learning solutions to support learning at scale worldwide.
• McGraw Hill is one of the most trusted and recognized education brands in the world.
• Over the last decade, we have invested more than $2.0 billion in developing a suite of market leading digital learning solutions.
• We recognize that the integrity of educational content is of utmost importance, especially as generative AI becomes more integrated into the learning process.
• AI presents us with many new possibilities to better serve educators and students.
• Learning is a fundamental social experience, and we believe AI should be used to augment the teacher-student connection, not replace it.
• We view AI as a tailwind which advances our ability to personalize learning at scale by facilitating meaningful learning experiences and interactions through our learning solutions.
• We believe our global sales force is one of the largest in the education sector, underpinning our ability to serve learners, educators and professionals at scale across the learning lifecycle.
• Our value proposition is underpinned by our high-quality content, efficacious learning solutions, and customer support to meet educators' and learners' changing needs.
• Our digital-first business model drives operating leverage and profitability by reducing time-to-market and leveraging a shared infrastructure across all operating segments.
• Our culture centers around our belief that diverse experiences enrich the way we learn, teach and grow.
• We believe that education plays a vital role in shaping society. Not only does education drive earning potential, but we believe that there is a direct correlation between the quality of a country's education system and its economic success.
• We believe that personalized learning improves students performance and is essential to combating learning loss.
• We believe that high-quality technical digital learning solutions are critical tools to help address the growing demand for skilled professionals and close the widening global skills gap.

Industry Context

The education industry is undergoing significant modernization driven by technology, including data science, machine learning, and generative AI, which are reshaping learning experiences. There's a growing demand for personalized learning solutions, data-driven insights, and equitable access to affordable course materials. The industry also faces a need for technical, skills-based professional learning to prepare for future jobs, particularly in healthcare and AI-related fields, where significant shortages are projected. McGraw Hill positions itself as a leader in this transformation, leveraging its extensive content, data assets, and AI capabilities to provide adaptive learning solutions. The company operates in a market with a few large competitors but believes its comprehensive offerings across the entire learning lifecycle differentiate it.

Comparison to Industry Standards

• McGraw Hill is a top two provider in the K-12 market in the United States, serving approximately 99% of public K-12 districts.
• The company is a top two provider of digital and print learning solutions in the U.S. higher education market, serving approximately 82% of U.S. higher education institutions.
• Its AccessMedicine solution is available across approximately 94% of U.S. medical schools.
• McGraw Hill's Evergreen content delivery model, launched in 2023, provides continuous content updates, which the company believes 'outpaces the industry standard' of episodic revision cycles.
• The company's ALEKS math and science solution has supported over 64 million lifetime learners, demonstrating significant scale in adaptive learning.
• Inclusive Access, a course material affordability program, has saved students over $1.5 billion since fiscal year 2018, aligning with industry trends for equitable access.
• The company's digital revenue as a percentage of total revenue increased to 65% in fiscal year 2025, up from 31% in 2015, reflecting a strong digital transformation compared to traditional publishers.
• McGraw Hill commands the highest security grade in the education industry, according to a third-party platform that monitors internet-exposed assets, indicating a leading cybersecurity posture.
• The company's sales force of approximately 1,500 professionals worldwide is stated to be 'one of the largest' in the education sector, providing extensive global reach.

Management Changes

Corporate Governance

Legal Proceedings

• Florida False Claims Act Investigation: The Attorney General for the State of Florida issued a subpoena in June 2022 regarding alleged overcharges on instructional materials for public K-12 schools. The company is unable to predict the outcome or estimate potential loss.
• Author Royalty Class Action Lawsuit: Two class actions filed in January/February 2021 alleging breach of author agreements and implied covenant of good faith and fair dealing regarding royalty calculation methodology. The case was remanded by the U.S. Court of Appeals for the Second Circuit for further adjudication on one element of the breach of contract claim. The company intends to file a Motion for Summary Judgment.
• Achieve3000 vs. Beable Education Inc. Lawsuit: Achieve3000 filed a complaint in July 2020 alleging intellectual property/patent infringement, fraudulent inducement, unfair competition, theft of trade secret, tortious interference, and breach of contract. A patent was ruled invalid in January 2023, affirmed on appeal in July 2024. Achieve3000 filed an application to reissue the patent in November 2023. Discovery resumed in March 2025, with depositions expected in Q2 or Q3 2025. The company is unable to predict the outcome of counter-claims or estimate potential loss.

Related Party Transactions

• Advisory Agreement with Platinum Advisors: McGraw Hill, Inc. paid Platinum Advisors annual advisory fees of $10.0 million for each of the fiscal years ended March 31, 2025, 2024, and 2023, plus expense reimbursements. This agreement will be terminated upon the consummation of the IPO.
• Share Purchases by Management: Certain current and former members of the management team, including executive officers, purchased shares of Class B non-voting common stock from Platinum following the Acquisition.
• Investor Rights Agreement: To be entered into with Platinum, granting them board nomination rights, registration rights for their shares, and certain information and access rights. The company will indemnify Platinum and its affiliates for certain liabilities related to these services and agreements.
• Reserved Share Program: Up to 5% of the shares offered in the IPO are reserved for sale to directors, officers, employees, and certain affiliates of Platinum and/or Platinum Advisors.

Stakeholder Impact

• Shareholders: Will experience immediate and substantial dilution of $37.59 per share. Platinum Equity will retain significant control (86.5% voting power) post-IPO, potentially influencing corporate decisions. The stock price may be volatile due to market factors and potential future sales by large shareholders.
• Employees: Eligible for stock options and other stock-based compensation under the 2021 and new 2025 Stock Incentive Plans, aligning their interests with long-term shareholder value. New severance policies are in place for executives. Some employees may participate in the reserved share program for the IPO.
• Customers (Educators, Learners, Institutions): Benefit from continued investment in digital learning solutions, AI-powered tools (e.g., ALEKS, AI Reader), and high-quality proprietary content. The company's focus on affordability (Inclusive Access) and personalized learning aims to improve outcomes and access.
• Creditors: The IPO proceeds will be used to repay a portion of the A&E Term Loan Facility, reducing the company's overall indebtedness and potentially improving its credit profile.
• Suppliers: The company's reliance on third-party suppliers for paper, printing, distribution, and operational functions means their performance and cost changes (e.g., paper price increases) can impact the company's financial results.

Next Steps

• The company expects to complete its financial closing procedures for the three months ended June 30, 2025, after the completion of this offering.
• The company intends to adopt the McGraw Hill, Inc. 2025 Stock Incentive Plan upon completion of the offering, replacing the 2021 Plan.
• The company intends to adopt stock ownership guidelines for NEOs and certain non-employee directors in connection with this offering.
• The company will file one or more registration statements on Form S-8 under the Securities Act to register shares for the 2021 and 2025 Stock Incentive Plans.
• The company plans to continue investing in bringing local products onto its Connect solution in international higher education markets.
• The company intends to continue investing in K-12 programs to meet local standards in international markets like Spain and Mexico.
• The company expects to continue to drive digital growth internationally through the expansion of its ALEKS solutions.
• The company will continue to assess opportunities to acquire or partner with other businesses to complement organic growth efforts.
• McGraw Hill Education, Inc. intends to file a Motion for Summary Judgment in the author royalty class action lawsuit after the conclusion of discovery.
• Depositions of witnesses in the Achieve3000 vs. Beable Education Inc. lawsuit are anticipated to begin in the second or third quarter of 2025.
• The company will continue to monitor and reflect the impact of Pillar Two global minimum tax legislation in future periods.
• The company will continue to assess conclusions regarding the Florida False Claims Act investigation as it progresses.

Key Dates

Recommendation

McGraw Hill's S-1/A filing presents a compelling investment case, signaling a strong 'buy' recommendation for a seasoned investor. The company demonstrates robust financial improvement, evidenced by a significant reduction in net losses and consistent growth in Adjusted EBITDA and revenue over the past three fiscal years, with preliminary Q1 2025 results showing continued positive trends. The strategic pivot to a digital-first, subscription-based model is clearly paying off, as 'Re-occurring Revenue' now constitutes 69% of total revenue, enhancing predictability and stability. The planned use of IPO proceeds to reduce substantial debt is a prudent financial move that will strengthen the balance sheet and reduce interest expense, improving future profitability. While the 'controlled company' status and inherent industry risks exist, McGraw Hill's market leadership in key education segments (K-12, Higher Ed, Professional), substantial investment in AI and data-driven learning solutions, and strong brand recognition position it well for sustained growth in the evolving EdTech landscape. The company's ability to leverage its vast data assets and global sales force for customer acquisition and upselling further underpins its competitive advantage. The current valuation, as implied by the IPO price range, offers an attractive entry point given the company's demonstrated operational leverage and clear growth strategies.

Keywords

Education Technology, EdTech, Digital Learning, K-12 Education, Higher Education, Professional Learning, Artificial Intelligence in Education, AI, Adaptive Learning, SEC Filing, IPO, Initial Public Offering, Stock Incentive Plan, Debt Reduction, Financial Performance, Corporate Governance, Risk Factors, McGraw Hill