Cengage Learning Hldgs Ii Inc · OTC:CNGO
Cengage Learning Hldgs Ii — Cengage Learning Holdings II — Q1 2024 Earnings Presentation
31 slides from Cengage Learning Hldgs Ii's earnings presentation, Aug 10, 2023
Slide 1: First Quarter Fiscal Year 2024 Investor Update
First Quarter Fiscal Year 2024 Investor Update August 10, 2023
Slide 2: Safe Harbor/Forward-looking statements
Safe Harbor/Forward-looking statements Cautionary Note Regarding Forward-Looking Statements The following slides and related discussion contain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward- looking
Slide 3: Agenda
Agenda • Introduction Richard Veith, SVP, Treasurer • Business Update Michael Hansen, Chief Executive Officer • Financial Update Bob Munro, Chief Financial Officer Pooja R. • Q&A Cengage Work Takeyce W. Cengage Academic Michael C. Cengage Select
Slide 4: Business Update
Business Update Michael Hansen, Chief Executive Officer
Slide 5: Q1 Business Update
Q1 Business Update Fiscal year 2024 is off to a strong start, continuing momentum from FY2023. Our full year guidance is unchanged. Q1 results and leading indicators put us on track for a third consecutive year of adjusted cash revenue growth and increased ELPP profitability. The health of the busin
Slide 6: Financial Update
Financial Update Bob Munro, Chief Financial Officer
Slide 7: Financial Highlights
Financial Highlights Q1 Adjusted Cash Revenue $270M up +8% Quarter Ended June 30 • Revenue growth across all business units led by sustained high growth in Work (+25%) $M FY23 FY24 Δ • Good underlying momentum in Select (+7%) & Academic (+6%), with Q1 benefitting from sales Adjusted Cash Revenue $25
Slide 8: Segment Performance - Q1 FY24
Segment Performance¹ - Q1 FY24 Adj. Cash Revenue ($M) Q1 FY23 Q1 FY24 % Growth US Higher Ed $77 $73 (6%) International Higher Ed 22 21 (3%) Secondary 33 45 39% Cengage Academic $132 $140 6% Cengage Work $24 $30 25% Research 47 47 0% English Language Teaching 24 32 31% Other 16 14 (11%) Cengage Selec
Slide 9: Cengage Academic
Cengage Academic Revenue for the quarter up +6% driven by strong Secondary performance aided by earlier ordering; US Higher Ed net sales held back by timing of channel sales US Higher Ed Academic Q1 Net Sales • Net sales down -5% for the quarter compared to prior year due Q1 Net Sales US Higher Ed t
Slide 10: Cengage Work
Cengage Work Strong start to the year: sustained revenue momentum accelerating TTM revenue growth to +17% vs +13% in FY23; $2M positive ELPP contribution in Q1 ed2go Work Q1 Net Sales Q1 Net Sales • Q1 net sales up +32% driven principally by ACT (advanced ed2go career training) enrollment growth, bo
Slide 11: Cengage Select
Cengage Select1 Net sales up +7% driven by strong underlying momentum in ELT, boosted by favorable order timing; Research net sales were flat due to temporary renewal timing shifts Research Select Q1 Net Sales Research • Net sales of $47 million temporarily flat to prior year due to Q1 Net Sales 0%
Slide 12: Summary of Cash Flows
Summary of Cash Flows June YTD June YTD $M Change FY23 FY24 Adj. Cash ELPP 1 $ 1 $ 3 $ 1 Q1 Levered Free Cash outflow of $165M Less: Capex (6) (8) (2) • Principally driven by normal Change in Working Capital 2 (62) (90) (27) cash cycle - timing of royalty, annual incentive and other Unlevered Free C
Slide 13: Liquidity & Net Debt
Liquidity & Net Debt As of JUN 30, MAR 31, JUN 30, Maintained strong liquidity position $M 2022 2023 2023 • Cash at quarterly low point reflecting seasonality of business Cash and Cash Equivalents $ 191 $ 269 $ 103 • Cash and liquidity position expected to progressively build over balance 1 Availabl
Slide 14: FY24 Full Year Outlook – Guidance Reaffirmed
FY24 Full Year Outlook – Guidance Reaffirmed Adjusted Cash Revenue Adjusted Cash ELPP Net Leverage Expect steady growth over FY23 • Academic/Select FY24 Anticipating continued profit Expect ELPP growth and growth over FY23 improved operating cash growth expected to performance to drive moderate vs F
Slide 15: Q&A
Q&A Thais A., Cengage Academic
Slide 16: Appendix
Appendix Sherrise R., Cengage Select
Slide 17: Definitions: Non-GAAP Financial Measures
Definitions: Non-GAAP Financial Measures We believe that certain non-GAAP financial measures provide useful information for evaluating our business performance. These non-GAAP measures are on a constant currency basis whereby we convert current period and prior period amounts from local currency to
Slide 18: Delivering on the digital growth strategy
Delivering on the digital growth strategy: June FY24 TTM digital sales of $1,063M represent 73% of total Net Sales • Cengage Group – FY24 digital sales remain steady at 73%, driven by US HED Total Cengage Group Net Sales1 ($M) • Cengage Academic – Digital sales climb to 88% in US HED reflecting stab
Slide 19: US Higher Education
US Higher Education Solid digital performance underpinned by strong Institutional sales growth across both Inclusive Access (IA) and Cengage Unlimited Institutional (CU-I). Overall courseware activations and CU subscriptions grow modestly Quarter 1 Key US HED Stats TTM to June 30, 2023 Institutional
Slide 20: US Higher Education – Sales by Product Type
US Higher Education¹ – Sales by Product Type Gross Sales Net Sales Sales by Product Type - Q1 JUN TTM Q1 JUN TTM US Higher Ed ($M) % PY % % % FY24 Growth FY24 $ B/(W) Growth FY24 Growth FY24 Growth Cengage Unlimited $23.2 5% $177.9 ($6.6) -4% $22.9 6% $175.8 -3% Standalone 22.4 -8% 214.8 $24.6 13% 2
Slide 21: US Higher Education – Unit Analysis
US Higher Education¹ – Unit Analysis TTM % of Units from Recurring Products Q1 FY24 Units by Product Type 88% 89% 93% Non-Recurring 10% 8% 12% 3% 10% Print Rental 6% 9% 1% Cengage Unlimited 33% 31% 31% 26% 34% 28% 29% 32% ebooks/CU eText 25% 25% 23% 25% Student Choice Courseware² 91% Recurring Non-r
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures¹ Three Months Ended Three Months Ended June 30, B / (W) June 30, B / (W) 2023 2022 $ % 2023 2022 $ % Adjusted Revenue: Prepub Additions: Cengage Academic $ 190.8 $ 175.8 $ 15.0 8.5% Cengage Academic $ 9.1 $ 8.1 $ (1.0) (12.3)% Cengage Work 28.4 23.3 5.1 21.9% Cengage Work
Slide 23: Non-GAAP Cash Financial Measures
Non-GAAP Cash Financial Measures¹ Three Months Ended Three Months Ended June 30, B / (W) June 30, B / (W) 2023 2022 $ % 2023 2022 $ % Adjusted Cash Revenue: Prepub Additions: US Higher Ed $ 72.8 $ 77.4 $ (4.5) (5.9)% Cengage Academic $ 9.1 $ 8.1 $ (1.0) (12.3)% International Higher Ed 21.5 22.3 (0.8
Slide 24: GAAP Results
GAAP Results Three Months Ended June 30, 2023 (in millions) 2024 2023 Revenues $ 325.6 $ 302.5 Cost of revenues, excluding amortization of pre-publication costs and identifiable intangible assets and depreciation stated below 148.6 136.5 Amortization of pre-publication costs 17.8 18.0 Amortization o
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations¹ $M FY22 FY23 FY24 FY23 FY24 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 TTM TTM GAAP Revenue 302 389 333 347 1,372 303 384 376 361 1,423 326 1,373 1,447 Impact of foreign currency (4) (4) (3) (4) (15) (1) 1 3 - 3 (1) (12) 4 Adjusted revenue 298 385 330 344 1,356 301 385 379 361 1,427
Slide 26: Total SG&A & Prepub Reconciliation
Total SG&A & Prepub Reconciliation $M FY22 FY23 FY24 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Additions to pre-publication costs $ 14 $ 16 $ 16 $ 26 $ 72 $ 14 $ 16 $ 18 $ 27 $ 74 $ 16 Proforma SG&A1,2,3 161 174 174 184 693 178 177 184 185 723 184 Total Spend - Management Reporting $ 174 $ 190 $ 190 $ 210 $
Slide 27: Balance Sheet
Balance Sheet As of As of June 30, March 31, June 30, March 31, (in millions) Change Change 2023 2023 2023 2023 Liabilities, contingently redeemable convertible Assets preferred stock and stockholders' deficit Cash and cash equivalents $ 103.5 $ 269.3 $ (165.8) Accounts payable and accrued expenses
Slide 28: Summary of Cash Flows
Summary of Cash Flows JUN YTD JUN YTD $M Change FY23 FY24 Summary of cash flows: Net cash used by operating activities (105) (132) (26) Net cash used in investing activities (33) (34) (1) Net cash used in financing activities (18) (1) 17 Impact on cash and cash equivalents from changes in foreign cu
Slide 29: Reconciliation of FY22-23 to FY24 Constant Currency
Reconciliation of FY22-23 to FY24 Constant Currency1 $M FY22 FY23 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Adjusted Cash Revenue at FY23 FX Rates $243 $513 $263 $346 $1,365 $252 $523 $313 $388 $1,476 Constant Currency Adjustment ($2) ($4) ($4) ($4) ($14) ($2) ($3) ($4) ($5) ($16) Adjusted Cash Revenue at FY24
Slide 30: Segment Performance - Trailing Twelve Months
Segment Performance¹ - Trailing Twelve Months Adj. Cash Revenue ($M) FY23 FY24 % Growth % Proforma² Growth US Higher Ed $621 $592 (5%) (5%) International Higher Ed 116 121 4% 4% Secondary 150 197 31% 31% Cengage Academic $888 $910 2% 2% Cengage Work $71 $112 58% 17% Research 204 212 4% 4% English La
Slide 31: Quarterly Segment Performance FY22 – FY24
Quarterly Segment¹ Performance FY22 – FY24 Adj. Cash Revenue ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 US Higher Ed $85 $252 $111 $181 $77 $224 $105 $190 $73 International Higher Ed 21 37 24 33 22 38 28 34 21 Secondary 32 88 17 12 33 99 40 13 45 Cengage Academic $1
Cengage Learning Holdings II — Q1 2024 Earnings Presentation on 6ix