Cengage Learning Hldgs Ii Inc · OTC:CNGO
Cengage Learning Hldgs Ii — Cengage Learning Holdings II — Q2 2025 Earnings Presentation
31 slides from Cengage Learning Hldgs Ii's earnings presentation, Nov 7, 2024
Slide 1: Second Quarter Fiscal Year 2025 Investor Update
Second Quarter Fiscal Year 2025 Investor Update November 7, 2024
Slide 2: Agenda
Agenda • Introduction Richard Veith, SVP, Treasurer • Business Update Michael Hansen, Chief Executive Officer • Financial Update Necko F. Fosters Inclusivity and Bob Munro, Chief Financial Officer Belonging for Our Shirelle P. Workforce Develops Education • Q&A Content for Learners, Abbey K. Educato
Slide 3: 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-look
Slide 4: Business Update
Business Update Michael Hansen, Chief Executive Officer
Slide 5: Q2 Business Update
Q2 Business Update First half underlying performance on track – Robust underlying growth momentum and healthy sales pipelines going into H2 expected to reverse H1 temporary sales timing effects Reaffirming full year guidance - expect fourth consecutive year of solid revenue growth, with acceleration
Slide 6: Leveraging AI to accelerate our product strategy & drive productivity
Leveraging AI to accelerate our product strategy & drive productivity Expanding to new titles January We believe AI can enrich the 2025 relationship between instructors and learners of all ages Our Commitments Customer Facing Customer centric Pedagogical Ethical and Technical • Launched Student Assi
Slide 7: Financial Update
Financial Update Bob Munro, Chief Financial Officer
Slide 8: Financial Highlights
Financial Highlights • Solid underlying performance in Q2 and through October to close out a Quarter Ended September 30 successful fall season ∆ Actual ∆ Constant FY24 FY25 − Q2, H1 and TTM growth performance held back by temporary sales $M Rates Currency timing effects which are expected to largely
Slide 9: First Half FY25 Segment Performance
First Half FY25 Segment Performance1 CONSTANT ACTUAL RATES CURRENCY Adj Cash Revenue ($M) FY24 FY25 % Growth % Growth US Higher Ed 299 309 3% 3% International Higher Ed 56 55 (2%) (1%) Secondary 169 158 (6%) (6%) Cengage Academic 523 522 (0%) (0%) Cengage Work 62 71 15% 15% Research 122 113 (8%) (8%
Slide 10: Trailing Twelve Months Segment Performance
Trailing Twelve Months Segment Performance1 CONSTANT ACTUAL RATES CURRENCY Adj Cash Revenue ($M) FY24 FY25 % Growth % Growth US Higher Ed 594 624 5% 5% International Higher Ed 117 110 (6%) (6%) Secondary 222 187 (16%) (16%) Cengage Academic 933 921 (1%) (1%) Cengage Work 116 135 16% 16% Research 217
Slide 11: Cengage Academic
Cengage Academic Accelerating revenue growth in US HED, offset by temporary sales timing effects in Secondary US Higher Ed Academic H1 Adj Cash Revenue ($M) • US HED H1 revenues up 3% with successful fall season driven by US Higher Ed Institutional1 and lower returns on small residual print/bundle b
Slide 12: US Higher Education
US Higher Education Institutional models sustaining high growth and expected to approach half of FY25 US HED revenue • Sustained high growth in Institutional revenues over Institutional Revenues ($ Millions) multiple years, with significant future runway • Unique institutional offering with Cengage
Slide 13: Cengage Work
Cengage Work Adjusted cash revenues +15% with continued high growth momentum and rapid margin expansion Cengage Work Work • H1 revenues up 15%, with strong double-digit growth in ed2go H1 Adj Cash Revenue ($M) moderated by steady progression at Infosec ed2go 15% • Scaling profitably with rapidly exp
Slide 14: Cengage Select
Cengage Select1 Adjusted cash revenues -4% driven by temporary sales timing effects in Research and Australia, which are expected to reverse in H2 Research Select H1 Adj Cash Revenue ($M) • FY25 H1 revenue performance impacted by temporary sales H1 Adj Cash Revenue ($M) Research phasing effects in a
Slide 15: Summary of Cash Flows
Summary of Cash Flows SEP YTD SEP YTD Strong operating cash performance; $M FY24 FY25 Change unlevered free cash flow $128M, up $68M Adjusted Cash EBITDA1 300 323 24 • Driven by accelerating EBITDA growth and working capital Less: Prepublication Costs (37) (34) 3 improvements from ongoing global Les
Slide 16: Liquidity & Debt
Liquidity & Debt Strong & improving liquidity position • Cash/liquidity position expected to $M SEP 30, 2023 SEP 30, 2024 progressively build over FY25 second half, creating investment capacity Cash and Cash Equivalents 184 247 Improving interest cost/coverage ratio 1 Available under Revolving Credi
Slide 17: FY25 Full Year Outlook – Guidance Reaffirmed
FY25 Full Year Outlook – Guidance Reaffirmed Adjusted Cash Revenue: Adjusted Cash EBITDA: Unlevered Free Cash Flow: Expecting fourth consecutive Anticipating strong double- Expect EBITDA growth and year of solid growth for digit EBITDA growth and working capital optimization Cengage Group accelerate
Slide 18: Q&A
Q&A Matt N., Cengage Select
Slide 19: Appendix
Appendix Rya C., Cengage Work
Slide 20: 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 by eliminating the effects of financing decisions as well as excluding the impact of activities not related to our ongoing operations. Howev
Slide 21: Cengage is a largely digital business, with Q2 FY25 TTM digital sales of $1.2B
Cengage is a largely digital business, with Q2 FY25 TTM digital sales of $1.2B representing 77% of total net sales • Cengage Group – FY25 digital sales at 77% growing 400bps over FY24, with Q2 TTM Cengage Group Net Sales1 ($M) most businesses seeing digital gains 1,287 1,333 1,504 1,499 • Cengage Ac
Slide 22: Q2 FY25 Segment Performance
Q2 FY25 Segment Performance1 CONSTANT ACTUAL RATES CURRENCY Adj Cash Revenue ($M) FY24 FY25 % Growth % Growth US Higher Ed 226 233 3% 3% International Higher Ed 34 33 (3%) (3%) Secondary 123 107 (13%) (13%) Cengage Academic 383 373 (3%) (3%) Cengage Work 31 37 20% 20% Research 75 72 (4%) (4%) Englis
Slide 23: Quarterly Segment Performance FY23 – FY25 Q2
Quarterly Segment Performance1 FY23 – FY25 Q2 Actual Rates Adj Cash Revenue ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Q1 FY25 Q2 FY25 US Higher Ed 77 224 105 190 73 226 110 204 76 233 International Higher Ed 23 37 27 34 22 34 25 30 22 33 Secondary 33 99 40 13 45 123 11 17
Slide 24: GAAP Results - Consolidated Statements of Operations
GAAP Results - Consolidated Statements of Operations Three Months ended Six Months Ended September 30, September 30, (in millions) 2024 2023 2024 2023 Revenues $ 406.8 $ 427.6 $ 739.1 $ 753.2 Cost of revenues, excluding amortization of pre-publication costs and identifiable intangible assets and dep
Slide 25: GAAP Results - Consolidated Balance Sheets
GAAP Results - Consolidated Balance Sheets As of As of September 30, March 31, September 30, March 31, Change 2024 2024 (in millions) 2024 2024 Change Assets Liabilities, Contingently Redeemable Convertible Cash and cash equivalents $ 246.9 $ 264.9 $ (18.0) Preferred Stock, and Stockholders' Deficit
Slide 26: Non-GAAP Financial Measures - Three & Six Months Ended
Non-GAAP Financial Measures¹ - Three & Six Months Ended Three Months Ended Six Months Ended September 30, B / (W) September 30, B / (W) 2024 2023 $ % 2024 2023 $ % Adjusted EBITDA: Adjusted EBITDA: Cengage Academic $ 138.3 $ 140.5 $ (2.2) (1.6)% Cengage Academic $ 245.8 $ 224.1 $ 21.7 9.7% Cengage W
Slide 27: Non-GAAP Cash Financial Measures - Three Months Ended
Non-GAAP Cash Financial Measures¹ - Three Months Ended Three Months Ended September 30, B / (W) 2024 2023 $ % Adj Cash Revenue: Cengage Academic 373.2 383.4 (10.2) (2.7)% Cengage Work 37.2 31.2 6.1 19.5% Research 71.6 74.7 (3.2) (4.2)% English Language Teaching 50.1 47.0 3.1 6.6% Other 22.2 24.5 (2.
Slide 28: Non-GAAP Cash Financial Measures - Six Months Ended
Non-GAAP Cash Financial Measures¹ - Six Months Ended Six Months Ended September 30, B / (W) 2024 2023 $ % Adj Cash Revenue: Cengage Academic 522.2 523.2 (1.0) -0.2% Cengage Work 70.9 61.6 9.2 15.0% Research 112.7 121.9 (9.2) -7.5% English Language Teaching 83.9 79.4 4.5 5.7% Other 34.4 38.4 (4.0) -1
Slide 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations¹ $M FY23 FY24 FY25 FY24 FY25 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 TTM TTM GAAP Revenue 303 384 376 361 1,423 326 428 365 384 1,503 332 407 1,490 1,489 Change in deferred revenue (52) 134 (70) 22 34 (55) 143 (83) 29 35 (55) 157 40 48 Adjusted Cash Revenue $ 251 $ 518 $ 306 $ 3
Slide 30: Total SG&A & Prepub Reconciliation
Total SG&A & Prepub Reconciliation $M FY23 FY24 FY25 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 1 SG&A - Management Reporting $ 178 $ 176 $ 183 $ 185 $ 723 $ 184 $ 187 $ 187 $ 196 $ 754 $ 180 $ 187 Equity-based comp & Non-core operating 4 3 2 5 14 4 21 34 12 70 14 7 2 Indirect cost of revenue (75) (72) (76
Slide 31: Summary of Cash Flows
Summary of Cash Flows $M SEP YTD SEP YTD Change FY24 FY25 Summary of cash flows: Net cash provided by operating activities (10) 64 74 Net cash used in investing activities (63) (60) 3 Net cash used in financing activities (12) (22) (10) Impact on cash and cash equivalents from changes in foreign cur
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