S-1/A: McGraw Hill Files S-1/A for Initial Public Offering, Highlighting Digital Growth and Debt Reduction Plans

McGraw Hill, a leading global education solutions provider, filed an amended S-1 registration statement for its initial public offering, emphasizing its digital transformation, strong market position, and plans to use IPO proceeds for debt repayment.

Summary

• McGraw Hill is a leading global provider of information solutions for education across K-12, higher education, and professional learning, serving approximately 60 million learners and educators annually.
• The company generated revenue of $2,101.3 million in fiscal year 2025, an increase from $1,960.5 million in fiscal year 2024 and $1,947.8 million in fiscal year 2023.
• Net loss was $85.8 million in fiscal year 2025, an improvement from $193.0 million in fiscal year 2024 and $404.1 million in fiscal year 2023.
• Adjusted EBITDA increased to $726.8 million in fiscal year 2025, up from $656.6 million in fiscal year 2024 and $618.0 million in fiscal year 2023.
• 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 fiscal year 2024 and 63% in fiscal year 2023.
• The company's total addressable market is estimated at approximately $30.0 billion as of academic year 2025, including $9.3 billion in K-12, $12.3 billion in Higher Education, $2.9 billion in Professional, and $5.5 billion in International.
• Over the last decade, McGraw Hill has invested more than $2.0 billion in developing digital learning solutions.
• As of March 31, 2025, the company had approximately 26 million Paid Digital Users and derived insights from more than 19 billion learning interactions in fiscal year 2025.
• The company completed the acquisition of EssayPop, LLC for $8.0 million on March 21, 2025, enhancing its cloud-based writing solutions.
• Preliminary unaudited estimates for the three months ended June 30, 2025, show revenue ranging from $523.0 million to $523.0 million (mid-point used for comparison), compared to $522.954 million in the prior year period.
• Preliminary unaudited estimates for the three months ended June 30, 2025, show Adjusted EBITDA ranging from $178.6 million to $178.6 million (mid-point used for comparison), compared to $178.594 million in the prior year period.
• Total outstanding debt (face value) as of March 31, 2025, was $3,277.9 million.
• The company intends to use the net proceeds from the IPO to repay a portion of the outstanding borrowings under the A&E Term Loan Facility, which had $1,160.4 million outstanding as of March 31, 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While the company continues to report net losses, there's a clear trend of improving profitability as evidenced by the significant reduction in net loss and strong growth in Adjusted EBITDA. The increasing proportion of recurring digital revenue and high net dollar retention rates indicate a stable and growing core business. The IPO itself is a positive step for capital structure and debt reduction. However, substantial debt, ongoing legal proceedings, and intense competition, particularly from free/low-cost alternatives and AI-generated content, present notable risks. The 'controlled company' status also introduces governance considerations. The overall picture is one of a company making strategic progress in a challenging but evolving market, with the IPO providing a significant financial catalyst.

Positives

• Consistent revenue growth over the past three fiscal years, with a 7.2% increase in fiscal year 2025 to $2,101.3 million.
• Significant improvement in net loss, reducing from $404.1 million in fiscal year 2023 to $85.8 million in fiscal year 2025.
• Strong growth in Adjusted EBITDA, reaching $726.8 million in fiscal year 2025, demonstrating improved operational performance and profitability.
• Increasing proportion of Re-occurring Revenue, reaching 69% of total revenue in fiscal year 2025, indicating a more stable and predictable revenue model.
• High Annual Net Dollar Retention (NDR) rates in Higher Education (110% in FY2025) and Global Professional (105% in FY2025), reflecting strong customer loyalty and successful upselling/cross-selling.
• Substantial investment in digital learning solutions, with over $2.0 billion invested in the last decade, driving digital adoption and innovation.
• Leveraging extensive data assets (over 19 billion learning interactions in FY2025) and AI capabilities to enhance personalized learning and product development.
• Successful expansion of Inclusive Access sales in Higher Education, growing from approximately $106.0 million in FY2020 to $398.0 million (51% of total Higher Education revenue) in FY2025.
• Strategic acquisitions like Boards & Beyond (Dec 2022) and EssayPop (March 2025) to expand capabilities and offerings.
• Strong brand recognition and reputation, with 89% of K-12, higher education, and medical school students, faculty, and administrators in the U.S. considering McGraw Hill for their classes.
• Global sales force of approximately 1,500 professionals, one of the largest in the education sector, providing extensive market reach.
• Reduced inventory obsolescence reserve by $4.7 million in FY2025 due to shift towards digital sales and timing of K-12 market opportunities.
• Lower interest expense in FY2025 by $33.0 million due to refinancing of A&E Term Loan Facility and reduction in variable rate indebtedness.

Negatives

• Continued reporting of net losses, despite significant reductions, with a net loss of $85.8 million in fiscal year 2025.
• Substantial indebtedness of $3,277.9 million face value as of March 31, 2025, which could restrict financial flexibility and expose the company to interest rate risk.
• Exposure to variable interest rates on borrowings under A&E Cash Flow Credit Facilities, with a 100 basis point increase in Term SOFR potentially increasing annual interest expense by $11.6 million.
• Preliminary estimated operating results for Q1 2025 show revenue and Adjusted EBITDA at similar levels to Q1 2024, with no clear growth indicated in the provided ranges.
• Decline in Global Professional revenue by $3.5 million (2.3%) in FY2025, primarily due to lower transactional revenue from sunsetting non-core print titles.
• K-12 segment experienced a revenue decrease of $53.1 million (5.5%) in FY2024 due to smaller market opportunities and lower print revenue.
• Increased operating and administrative expenses by $39.1 million (3.8%) in FY2025, driven by higher salaries, incentive compensation, and selling/marketing expenses.
• The company is a 'controlled company' by Platinum Equity, which will continue to hold more than 50% of voting power, potentially leading to conflicts of interest with other stockholders.
• No current plans to pay cash dividends on common stock, meaning investors may not receive a return unless they sell shares for a price greater than their purchase price.
• The company has incurred significant impairment charges in prior years: $49.5 million in FY2024 (Global Professional goodwill/trademark) and $312.0 million in FY2023 (Higher Education, International goodwill/trademark).

Risks

• Operating in a highly competitive market with large, established participants and new entrants, including no-cost competitive products.
• Ability to win new markets, adapt to changing state academic standards, and anticipate/meet changes in federal, state, and local education funding and enrollment.
• Effect of various political and economic issues and ability to comply with laws and regulations in the U.S. and internationally.
• General economic conditions, including inflationary pressures, interest rate fluctuations, and volatility.
• Order patterns and payment schedules of customers and high degree of seasonality related to the business, leading to quarterly cash flow challenges.
• Factors that reduce enrollment at colleges and universities could adversely affect demand for Higher Education products.
• Compliance with privacy, accessibility, and other laws, and adequate protection of personal data, with potential for financial loss, regulatory action, and reputational damage.
• Rapidly changing expectations and standards on environmental, social, and governance (ESG) matters may impact the business, subject to unforeseen liability or harm to reputation.
• Reliance on third parties for business functions including distribution, critical operational functions, and supply of products.
• Ability to retain and recruit qualified authors, employees, and key personnel amidst intense competition.
• Ability to defend challenges to intellectual property rights in products, including risks from unauthorized copying and distribution.
• Generative artificial intelligence (AI) systems may make it easier for competitive instructional materials to be created, negatively affecting demand or pricing.
• Failure to adapt and respond effectively to changing technology, evolving industry standards, and changing customer needs.
• Increased customer expectations for lower prices or free/discounted bundled products could reduce sales revenue.
• 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 could affect the market and require significant investment in new or different products.
• Changes in the timing and scope of anticipated levels of federal, state, and local education funding, including the expiration of COVID-19-related federal funds in 2025.
• Evolving policy changes, increasing political pressures, community activism, cultural sensitivities, and funding shifts may impact adoption and purchase of K-12 titles.
• Potential reorganization or dismantlement of the U.S. Department of Education could lead to a fragmented education system with varying standards.
• A change from up-front payment by school districts for multi-year licenses to spreading payments could adversely affect near-term cash flow.
• Operational disruptions, malfunctions, or intentional hacking of technological systems, or those of third parties, could cause financial loss and reputational damage.
• Defects in digital products could cause financial loss and reputational damage.
• Failure to maintain or support brand recognition and reputation could harm the business.
• Legal actions, including putative class action lawsuits (e.g., royalty calculation dispute, patent infringement), could be costly to defend and result in significant damages.
• Failure to act in accordance with ethical business standards or comply with anti-bribery, anti-corruption, fraud, sanctions, and competition laws.
• Changes in accounting rules could adversely affect future operating results.
• Insufficient supply of, or increases in the costs of, paper could adversely affect financial results.
• Consolidation and concentration in distribution and retail channels for Higher Education products could adversely affect profitability.
• An adverse change in orders or payments by a material reseller could adversely affect financial results, especially given customer concentration (three resellers comprised 38% of gross accounts receivable as of March 31, 2025).
• Unexpectedly large returns could adversely affect financial results (a one percentage point variance in sales returns allowance impacts operating income by $2.5 million).
• Significant increase in operating costs and expenses due to inflation or other causes could materially adversely affect profitability and cash flow.
• Intellectual property and proprietary rights may not be adequately protected, and an increase in unauthorized copying and distribution could adversely affect sales.
• Significant risks involved in utilizing AI, machine learning, and data analytics tools, including errors, inadequacies, and potential for increased cybersecurity risks.
• Increased adoption of free and paid generative AI tools by students for academic support could negatively impact demand for the company's education solutions.
• Investments in new products, distribution channels, and entry into new markets may not be profitable.
• Future acquisitions could disrupt the business, divert management attention, and may not produce expected synergies.
• Future goodwill or indefinite-lived intangibles impairment charges could materially adversely impact results of operations.
• Substantial indebtedness may restrict the ability to react to changes in the economy or industry, and exposes the company to interest rate risk and risk of default.
• Inability to generate sufficient cash flows from operations to service all indebtedness may force the company to take other actions, which may not be successful.
• Variable rate indebtedness subjects the company to interest rate risk, which could cause debt service obligations to increase significantly.
• Ability to incur significantly more debt despite substantial existing indebtedness could intensify risks.
• Ability to use net operating losses and other tax attributes to offset future taxable income may be subject to limitations (e.g., Code Section 382, 163(j)).
• Risks of doing business abroad, including lack of local knowledge, entrenched competitors, longer payment cycles, and difficulties in protecting intellectual property.
• Fluctuations between foreign currencies and the U.S. dollar could adversely affect financial results (e.g., $2.8 million unfavorable impact on revenue in FY2025).
• Sales to clients outside the U.S. or with international operations expose the company to risks inherent to international businesses, including regulatory changes and export controls.
• U.S. tariff policy could increase costs and affect financial results.
• Changes in macroeconomic and geopolitical conditions can affect growth, business, and results of operations.
• Business is subject to risks of fire, floods, other natural catastrophic events, and man-made problems such as computer viruses, data security breaches, or terrorism.
• As a controlled company, McGraw Hill will be exempt from certain NYSE corporate governance requirements, potentially reducing protections for other stockholders.
• Platinum's significant influence over the company, with its interests potentially conflicting 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 to fund expenses, and distributions may be restricted by debt covenants.
• Unanticipated changes in effective tax rates or adverse outcomes from tax return examinations could adversely affect results.
• No active, liquid trading market for common stock may develop, causing shares to trade at a discount and making it difficult for stockholders to sell.
• Stockholders will incur immediate and substantial dilution upon purchase of shares in the IPO.
• Failure to comply with requirements to design, implement, and maintain effective internal controls could have a material adverse effect on the business and stock price.
• Stock price may be volatile and stockholders may not be able to resell shares at or above the price paid.
• If securities or industry analysts do not publish research or reports, or downgrade the stock, stock price and trading volume could decline.
• Changes in tax laws may impact the tax treatment of income or gains on common stock.
• Increased costs and new regulations as a publicly traded company will place considerable strain on financial and management systems.
• Sale of additional shares by the company or selling stockholder after the IPO, or the perception of such sales, could cause the stock price to decline.

Future Outlook

The company expects to expand revenue through new learning solutions offering data-driven personalized experiences, interactive simulations, 3-D models, experiential learning activities, and generative AI tools like AI Reader. It plans to continue investing in technology-enabled innovation across all markets, including expanding ALEKS for K-5, driving growth in K-12 supplemental and intervention solutions, and exploring new opportunities in Higher Education (e.g., student study solutions, short courses, badging). International presence is expected to increase by leveraging existing digital investments and adapting products to local markets. The company will also proactively assess strategic M&A opportunities to strengthen its core business, expand into attractive adjacencies, and acquire strategic capabilities.

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.
• We believe McGraw Hill is one of the most trusted and recognized education brands in the world.
• Understanding how learning happens is critical to building effective learning solutions, like ALEKS, which has leveraged data science and machine learning to enhance learning outcomes for over 25 years.
• We recognize that the integrity of educational content is of utmost importance, especially as generative AI becomes more integrated into the learning process.
• We aim to offer vetted content and data-driven learning solutions that educators and learners can trust.
• 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.
• 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.
• AI holds great potential for addressing the gaps current global education systems are struggling to fill.
• We believe that equal opportunity in education is essential to achieving equality in society at large.
• 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.
• We believe our value proposition is underpinned by our high-quality content, efficacious learning solutions, and customer support to meet educators' and learners' changing needs. This has led to ingrained customer loyalty and retention, creating a significantly competitive moat.
• Our digital-first business model drives operating leverage and profitability by reducing time-to-market and leveraging a shared infrastructure across all operating segments.
• 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 are still in the early days of AI content development, we are seeing the ability to create high-quality derivative content in a shorter timeframe and at a lower cost. We maintain a human in the loop approach with AI generated content to help ensure quality and integrity.

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 for educators, and equitable access to affordable course materials. The market also sees increasing demand for technical, skills-based professional learning to address workforce gaps, particularly in healthcare and AI expertise. McGraw Hill is positioning itself at the forefront of these trends by investing heavily in digital solutions, leveraging AI for personalized learning, and focusing on high-quality, proprietary content to differentiate itself from generic AI-generated content and open-source alternatives.

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.
• The Evergreen content delivery model, launched in 2023, provides continuous content updates, which the company believes 'outpaces the industry standard' and advances beyond traditional episodic revision cycles.
• Inclusive Access, a course material affordability program, has saved students over $1.5 billion since fiscal year 2018, according to the U.S. Department of Education.
• The company's global sales force of approximately 1,500 professionals is believed to be 'one of the largest' in the education sector.
• McGraw Hill has increased its proprietary data set of learning interactions from approximately 5.8 billion in FY2022 to over 19 billion in FY2025, representing a 49% compound annual growth rate.
• The company has maintained the 'highest cybersecurity score in the education industry,' according to a third-party ranking provider, and is SOC 2 compliant for customer data management.
• The company's digital revenue as a percentage of total revenue increased from 31% in 2015 to 65% in FY2025, indicating a significant shift towards digital, with 82% digital revenue excluding K-12.

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 as part of an investigation into alleged overcharges on instructional materials for public K-12 schools. The company completed document production in December 2022, and a former sales representative's testimony in January 2024 supported the company's position. No material developments or further contact from the Attorney General's office since then. The outcome and potential loss are currently unpredictable.
• Royalty Calculation Class Action Lawsuit: Two purported class actions were filed in January and February 2021 in the Southern District of New York, alleging the company's royalty calculation methodology breaches author agreements and implied covenant of good faith. The breach of contract claim was initially dismissed but partially remanded by the U.S. Court of Appeals for the Second Circuit in November 2024. Discovery has resumed, and the company intends to file a Motion for Summary Judgment after discovery. The outcome and potential loss are currently unpredictable.
• Achieve3000 vs. Beable Education Inc. Lawsuit: In July 2020, Achieve3000 filed a complaint alleging intellectual property/patent infringement, fraudulent inducement, unfair competition, theft of trade secret, and breach of contract. The patent was ruled invalid by the PTAB in January 2023, and this ruling was affirmed on appeal in July 2024. Achieve3000 filed an application to reissue the patent in November 2023. Discovery resumed in March 2025, with depositions anticipated in Q2 or Q3 2025. The outcome of counter-claims and potential loss are currently unpredictable.

Related Party Transactions

• Platinum Acquisition Agreement: On July 31, 2021, Mav Acquisition Corporation, an investment vehicle of Platinum Equity, LLC, acquired 100% of McGraw-Hill Education, Inc. for $4.713 billion.
• Advisory Agreement with Platinum Advisors: Following the acquisition, McGraw Hill, Inc. and Platinum Advisors (an affiliate of Platinum Equity) entered into an Advisory Agreement for financial, transactional, and management consulting services. The company paid Platinum Advisors annual advisory fees of $10.0 million for 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 Class B non-voting common stock at fair market value after the acquisition. Jeannine Tait purchased 33,334 shares.
• Investor Rights Agreement: In connection with the IPO, the company intends to enter into an Investor Rights Agreement with Platinum, granting Platinum significant nomination rights for the board of directors, certain demand and piggyback registration rights for its shares, and information/access rights. The company will pay all registration expenses (excluding underwriting fees/discounts) and indemnify Platinum for certain liabilities.
• Reserved Share Program: Up to 5% of the shares offered in the IPO are reserved for sale to directors, officers, employees, and affiliates of Platinum and/or Platinum Advisors.
• Underwriter Relationships: Certain underwriters and their affiliates have engaged in investment banking and other commercial dealings with the company, including acting as lenders, issuing banks, and joint lead arrangers/bookrunners under the company's credit agreements and initial purchasers/joint book-running managers for its notes, receiving customary fees.

Stakeholder Impact

• Shareholders: Will experience immediate and substantial dilution upon purchasing shares in the IPO. Platinum Equity will retain significant control, potentially leading to conflicts of interest. No dividends are planned in the foreseeable future. The stock price may be volatile and influenced by future sales by existing stockholders.
• Employees: Eligible for stock options and other stock-based compensation under the 2021 Plan and the new 2025 Plan. Certain employees (including NEOs) are subject to lock-up agreements post-IPO. The company aims to attract and retain talent through competitive compensation and a focus on training and development.
• Customers (Learners, Educators, Institutions): Benefit from continued investment in digital learning solutions, AI-powered tools, and high-quality proprietary content. Inclusive Access programs aim to provide affordable course materials. However, increased customer expectations for lower prices and the availability of free/discounted products could impact sales revenue.
• Suppliers: The company relies on third-party suppliers for paper, printing, and distribution. Increases in raw material costs (e.g., paper) or disruptions in the supply chain could affect the company's financial results. Consolidation in distribution channels could lead to less favorable terms.
• Creditors: The IPO proceeds will be used to repay a portion of outstanding debt, which is positive for creditors. However, the company remains highly leveraged, and its ability to service debt depends on future cash flows and access to capital markets. Restrictive covenants in debt agreements limit certain corporate actions.

Next Steps

• The company expects the initial public offering price of its Common Stock to be between $ and $ per share.
• The company has applied to have its Common Stock listed on the New York Stock Exchange (NYSE) under the symbol MH.
• The underwriters expect to deliver the shares of Common Stock to investors on or about the specified date in 2025.
• The company intends to use the net proceeds from the offering to repay a portion of the outstanding borrowings under the A&E Term Loan Facility.
• The company intends to enter into an investor rights agreement with Platinum, granting Platinum certain nomination rights for the board of directors.
• The company intends to adopt a new 2025 Stock Incentive Plan in connection with the offering, replacing the 2021 Plan.
• The company intends to adopt stock ownership guidelines for NEOs and certain non-employee directors.
• The company will become a public reporting company subject to SEC and NYSE rules and regulations, including Section 404 of the Sarbanes-Oxley Act, with the first Section 404(a) assessment expected for the fiscal year ending March 31, 2027.
• The company will continue to monitor and reflect the impact of Pillar Two legislation (global minimum tax rate) in future periods.
• The company will continue to assess the outcome of the Florida False Claims Act investigation and the class action lawsuit regarding royalty calculation methodology.
• Discovery is expected to resume in the Achieve3000 vs. Beable Education Inc. lawsuit, with depositions of witnesses anticipated in Q2 or Q3 2025.
• The company intends to file a Motion for Summary Judgment in the royalty lawsuit after the conclusion of discovery.
• The company will continue to invest in new learning solutions, leveraging AI and data analytics to drive engagement and improve customer service.
• The company plans to continue investing in its sales and marketing efforts, including adding sales personnel and expanding marketing activities.
• The company remains focused on expanding its international presence, bringing local products onto its Connect solution and investing in K-12 programs in key markets like Spain and Mexico.
• The company expects to continue to drive digital growth internationally through the expansion of its ALEKS offerings.
• The company will continue to assess opportunities for strategic M&A to strengthen its core business, expand into attractive adjacencies, and acquire strategic capabilities.
• The company will continue to monitor the financial condition of its resellers and address institution and student needs for product access.

Key Dates

Recommendation

McGraw Hill is undergoing a significant digital transformation, showing strong growth in revenue and Adjusted EBITDA, and improving its net loss. The IPO is a positive step to reduce debt and enhance financial flexibility. The company holds a leading market position in key education segments and is actively investing in AI and digital innovation, which are crucial for future growth. However, the company still reports net losses, carries substantial debt, and faces intense competition, including from free/low-cost alternatives and generative AI. Platinum Equity's continued majority control introduces governance considerations that may not always align with public shareholders. Given the mixed financial performance (profitability vs. net loss), the inherent risks of a highly competitive and evolving industry, and the significant debt load, a 'hold' recommendation is appropriate for a seasoned investor. The IPO provides liquidity and a path for debt reduction, but the long-term success hinges on continued execution of its digital strategy and effective navigation of competitive and regulatory challenges.

Keywords

Education Technology, EdTech, Digital Learning, K-12 Education, Higher Education, Professional Learning, AI in Education, Adaptive Learning, SEC Filing, IPO, S-1/A, McGraw Hill, Platinum Equity, Financial Results, Corporate Governance, Risk Factors, Debt Repayment, Content Solutions, Learning Science, Market Share, Subscription Revenue