McGraw Hill (MH) Financials

McGraw Hill (NYSE: MH) shows a mixed but improving operating picture in 2026, with revenue growth and a sharp rebound in profitability from the prior quarter, but cash flow remains under pressure and leverage is still elevated.

On the income statement, McGraw Hill’s latest quarter (Q4 2026) delivered revenue of $463.7 million, up from $434.2 million in Q3 2026 and $473.3 million in Q4 2025. More importantly, the company swung from an operating loss in Q4 2026 to a small operating loss that was far better than the prior quarter, and it posted a net loss of $50.3 million, which was narrower than the $156.9 million loss in Q4 2025 but worse than the $20.2 million loss in Q3 2026.

For the full progression across 2026 so far, the company moved from Q1 net income of $0.5 million to Q2 net income of $105.3 million, then back to losses in Q3 and Q4. That suggests earnings can be highly seasonal and somewhat volatile, with recent quarters showing a weaker finish to the year.

Cash flow was the biggest concern in the latest quarter. McGraw Hill reported negative operating cash flow of $146.1 million in Q4 2026, reversing from positive operating cash flow of $309.0 million in Q3 2026. The decline was driven by a large negative swing in operating assets and liabilities. This is a red flag for investors because it means accounting earnings were not converting into cash in the period.

The balance sheet also shows meaningful leverage. As of Q3 2026, McGraw Hill had $2.61 billion of long-term debt and $13.2 million of short-term debt, against $775.3 million of total common equity. That is a heavy debt load relative to equity and helps explain why interest-related items are a meaningful drag on profitability.

At the same time, the company continues to produce strong gross margins. In Q4 2026, gross profit was $388.9 million on revenue of $463.7 million, which indicates the core publishing model still generates substantial value before operating and financing costs. The issue is that operating expenses and other charges are absorbing much of that gross profit.

Key takeaways for retail investors:

• Revenue continues to grow on a year-over-year basis in the latest quarter, rising to $463.7 million from $473.3 million in the prior-year quarter, and remaining above Q3 2026 levels.
• Q2 2026 was a standout quarter, with net income of $105.3 million and operating income of $156.5 million, showing the business can still generate solid earnings.
• Gross profit remains strong, suggesting the company’s core offerings still have healthy economics before overhead and financing costs.
• Results appear seasonal and volatile, with profits in one quarter and losses in the next, which makes trend analysis less straightforward.
• Amortization is a large recurring non-cash expense, which affects reported earnings and reflects the company’s acquisition-heavy asset base.
• Accounts receivable and deferred revenue are large balance-sheet items, consistent with a subscription or institutional revenue model, but they also make working capital movements important.
• Q4 2026 operating cash flow turned negative at $146.1 million, a sharp deterioration from the prior quarter’s strong cash generation.
• The company carries substantial debt, including $2.61 billion of long-term debt, which increases financial risk and interest burden.
• Operating income in Q4 2026 was negative, indicating expenses still exceeded core operating profit in the latest quarter.
• Net income deteriorated sharply from Q2 2026’s profit to losses in Q3 and Q4, suggesting the recent improvement was not yet sustained.

Bottom line: McGraw Hill has shown it can produce strong quarters, but the latest results highlight ongoing volatility, weak cash conversion, and a leveraged balance sheet. For investors, that means the stock likely depends on whether management can turn the 2026 profit rebound into a more durable trend while stabilizing cash flow.