McGraw Hill, Inc.

Leading global education-content franchise with excellent margins and cash generation, but LBO-style leverage suppresses returns.

Strengths

• 80.9% gross margin (89th pct) and 13.2% operating margin (77th) on a 137-year franchise
• FCF $246M (77th pct) and ~68% digital revenue with high retention/Evergreen model

Risks

• Debt/equity 3.53 (95th pct) keeps net margin (1.7%) and ROE (4.9%) only mid-pack
• Current ratio 0.77 and seasonal cash deficits
• Open-educational-resource and digital-discounting competition pressures pricing

Notable findings

• Exec changeRecent 8-K item 5.02 8-K ↗
• High leverageHigh leverage (debt/equity 3.53)
• Weak liquidityCurrent ratio 0.77 (<1)
• Customer concentration~68% of revenue from one customer/distributor — ” Raw Materials, Printing, Binding and Distribution Although our solutions continue to transition to primarily digital products (approximately 68% of revenue for the fiscal year ended March 31, 2