r/valueinvesting
McGraw Hill (MH) is quietly becoming an AI education stock.
MH beat Q4 earnings with strong profit growth, AI adoption, debt reduction, and buybacks, despite flat top-line revenue.
- Significant earnings beat and margin expansion driven by recurring digital revenue and profitability improvements.
- Strong AI and digital adoption with over 7.5M users of AI tools and upcoming Agentic AI pilots.
- Solid capital allocation featuring substantial debt reduction and a new share repurchase program.
- Top-line revenue growth is stagnant, with Q4 revenue declining 2% YoY and full-year revenue barely growing.
$MH Q4 FY2026:
Revenue: $463.7M vs. $441.2M expected
Adjusted EPS: $0.31 vs. $0.15 expected
EPS surprise: +106.7%
Adjusted EBITDA: $130.6M
Adjusted EBITDA margin: 28.2%
The top line was not exciting.
Q4 revenue fell 2% year-over-year, and full-year revenue rose just 0.1% to $2.10B.
But the profit story improved sharply.
Full-year recurring revenue increased 5.8% to $1.54B, now making up more than 73% of total revenue.
Digital revenue rose 5.5% to $1.43B.
Adjusted EBITDA increased to $744.3M, with margin improving to 35.4%.
Net income improved to $35.3M, compared with a loss of $85.8M last year.
McGraw Hill now has:
More than 100M active student and educator curriculum licenses
More than 7.5M users of AI-enabled learning tools
More than 25B learning interactions across its platforms
Management is also preparing to pilot a new Agentic AI tool tied to its precision education model.
Capital allocation helped too.
The company reduced gross debt by $645.6M in fiscal 2026 and approved a new $50M share repurchase plan.
It was a profitability, recurring revenue, digital learning, AI adoption, debt reduction, and buyback story.
The Form 4 pattern here, to me, seems unusually clean for a post-IPO name. Five different insiders have bought since the IPO last July, and nobody has sold (not a single share over 10.5 months). Six open-market purchases totaling $1.32M, all discretionary. Four insiders bought at the $17 IPO price the day after, including the CFO, CHRO, and CDIO. Steven Reinemund (former PepsiCo CEO/Chairman) has been the most active, adding $236K at $15.03 in November and $794K at $13.70 in February. Hard to ignore that one. The structural caveat is Platinum Equity still controls 86.5% of voting power post-IPO. Stock at $12.26 puts even Reinemund's most recent buy \~10% underwater. He's either early or wrong.
Ohhhhhh you have got to be fucking kidding me. McGraw Hill is public now?!
I’m interested. These guys have a lock on state and local testing.