Cambium Learning Group Announces Third Quarter Earnings
Nov 06, 2014
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
(in millions) |
2014 |
2013 |
$ Change |
2014 |
2013 |
$ Change |
|||||||||||||||||
GAAP net revenues |
$ |
41.1 |
$ |
43.0 |
$ |
(1.8) |
$ |
108.5 |
$ |
117.2 |
$ |
(8.7) |
|||||||||||
GAAP net income (loss) |
1.0 |
0.1 |
0.9 |
(6.9) |
(8.5) |
1.6 |
|||||||||||||||||
EBITDA |
11.2 |
10.9 |
0.2 |
23.2 |
22.1 |
1.0 |
|||||||||||||||||
Adjusted EBITDA |
11.1 |
11.3 |
(0.2) |
23.8 |
24.8 |
(0.9) |
|||||||||||||||||
Cash income |
28.1 |
22.1 |
6.1 |
18.9 |
19.2 |
(0.2) |
For the nine months ended
Order Volume % Change |
||||
Q3 - 2014 |
YTD - 2014 |
|||
Learning A-Z™ |
43% |
33% |
||
ExploreLearning® |
19% |
7% |
||
Voyager Sopris Learning™ |
(14)% |
(21)% |
||
Kurzweil Education™ |
0% |
(21)% |
||
Cambium Learning Group, Inc. |
6% |
(5)% |
"We were very pleased to see overall order volume growth in the third quarter versus prior year. Our strategy to focus on and invest in technology-enabled educational solutions has driven this improvement," said
The Company continues to execute its strategy to shift resources to subscription and technology-enabled products. For the nine months ended
Learning A–Z delivered another historical high period of order volumes during the third quarter of 2014, continuing its trend of double-digit growth rates due to quality content, award-winning technology, and ongoing strategic investments. ExploreLearning was able to achieve strong year over year growth in the third quarter of 2014, bringing the year to date 2014 growth versus prior year to 7% and reversing the unfavorable trend from the first half of the year. Both Voyager Sopris Learning and Kurzweil Education showed some improvement in order volumes during the third quarter of 2014 compared to 2013, with Voyager Sopris Learning down 14% quarter over quarter and Kurzweil Education approximately flat quarter over quarter. These segments continue to experience declines in legacy products, which are outpacing gains from the newer technology-enabled solutions.
Other highlights include:
- Overall, GAAP net revenues for the nine months ended
September 30, 2014 decreased by 7% to$108.5 million compared with$117.2 million for the same period in 2013. GAAP net revenues by segment for the nine months endedSeptember 30, 2014 , and the change from the comparable period in 2013, were as follows:- Learning A–Z—$31.8 million, increased
$7.8 million or 32% - ExploreLearning—$13.1 million, increased
$1.6 million or 14% - Voyager Sopris Learning—$57.6 million, decreased
($16.4) million or (22%) - Kurzweil Education—$5.9 million, decreased
($1.7) million or (23%)
- Learning A–Z—$31.8 million, increased
- Adjusted EBITDA was
$23.8 million for the nine months endedSeptember 30, 2014 , down$0.9 million from$24.8 million in 2013. Most of the revenue decline was overcome by increasing contributions from the Company's higher margin technology-enabled products, combined with lower costs in the Voyager Sopris Learning segment attributable to efforts to right-size costs in slower-growing or declining areas of the Company. - Cash Income was
$18.9 million for the nine months endedSeptember 30, 2014 compared to$19.2 million for the same period in 2013. - The Company has cash and cash equivalents of
$44.4 million on the balance sheet as ofSeptember 30, 2014 . During the nine months endedSeptember 30, 2014 , cash provided by operations was$3.4 million , cash used in investing activities was$15.8 million , including$3.6 million related to theDecember 2013 Headsprout® acquisition, and cash used in financing activities was$11.1 million . During the nine months endedSeptember 30, 2014 , the Company repurchased$10.0 million aggregate principal amount of its 9.75% senior secured notes due 2017 for approximately$10.1 million . - On
October 15, 2014 , the Company entered into a note repurchase agreement with an investor, whereby it repurchased$10.0 million aggregate principal of its outstanding 9.75% senior secured notes due 2017 for$9.9 million plus accrued and unpaid interest. The Company expects to record a Loss on Extinguishment of Debt of approximately$0.1 million in connection with this repurchase, primarily related to the write-off of unamortized deferred financing costs. After completion of this transaction, total principal outstanding under the Company's 9.75% senior secured notes due 2017 is$155.0 million .
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and Cash Income are not prepared in accordance with GAAP and may be different from similarly named, non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company believes that these non-GAAP measures provide useful information to investors because they reflect the underlying performance of the ongoing operations of the Company and provide investors with a view of the Company's operations from management's perspective. Adjusted EBITDA and Cash Income remove significant purchase accounting, non-operational, or certain non-cash items from earnings. The Company uses Adjusted EBITDA and Cash Income to monitor and evaluate the operating performance of the Company and as the basis to set and measure progress towards performance targets, which directly affect compensation for employees and executives. The Company generally uses these non-GAAP measures as measures of operating performance and not as measures of the Company's liquidity. The Company's presentation of EBITDA, Adjusted EBITDA, and Cash Income should not be construed as an indication that our future results will be unaffected by unusual, non-operational, or non-cash items.
About
Media and Investor Contact:
investorrelations@cambiumlearning.com
Forward-Looking Statements
Some of the statements contained herein constitute forward-looking statements. These statements relate to future events, including the future financial performance of
Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
|||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2014 |
2013 |
2014 |
2013 |
||||||||||||
Net revenues |
$ |
41,144 |
$ |
42,957 |
$ |
108,467 |
$ |
117,172 |
|||||||
Cost of revenues: |
|||||||||||||||
Cost of revenues |
11,045 |
12,950 |
29,986 |
37,000 |
|||||||||||
Amortization expense |
4,695 |
4,692 |
13,213 |
12,680 |
|||||||||||
Total cost of revenues |
15,740 |
17,642 |
43,199 |
49,680 |
|||||||||||
Research and development expense |
2,745 |
2,486 |
8,090 |
7,345 |
|||||||||||
Sales and marketing expense |
11,015 |
10,943 |
31,680 |
32,991 |
|||||||||||
General and administrative expense |
5,039 |
5,122 |
14,676 |
16,795 |
|||||||||||
Shipping and handling costs |
666 |
721 |
1,266 |
1,419 |
|||||||||||
Depreciation and amortization expense |
1,050 |
1,227 |
3,150 |
3,663 |
|||||||||||
Embezzlement-related expense |
— |
3 |
— |
118 |
|||||||||||
Total costs and expenses |
36,255 |
38,144 |
102,061 |
112,011 |
|||||||||||
Income before interest, other income (expense) and income taxes |
4,889 |
4,813 |
6,406 |
5,161 |
|||||||||||
Net interest expense |
(4,377) |
(4,773) |
(13,535) |
(14,028) |
|||||||||||
Loss on extinguishment of debt |
— |
— |
(570) |
— |
|||||||||||
Other income, net |
535 |
215 |
965 |
645 |
|||||||||||
Income (loss) before income taxes |
1,047 |
255 |
(6,734) |
(8,222) |
|||||||||||
Income tax expense |
(52) |
(127) |
(146) |
(297) |
|||||||||||
Net income (loss) |
$ |
995 |
$ |
128 |
$ |
(6,880) |
$ |
(8,519) |
|||||||
Net income (loss) per common share: |
|||||||||||||||
Basic |
$ |
0.02 |
$ |
0.00 |
$ |
(0.15) |
$ |
(0.18) |
|||||||
Diluted |
$ |
0.02 |
$ |
0.00 |
$ |
(0.15) |
$ |
(0.18) |
|||||||
Average number of common shares and equivalents outstanding: |
|||||||||||||||
Basic |
45,664 |
47,563 |
45,663 |
47,439 |
|||||||||||
Diluted |
45,753 |
47,657 |
45,663 |
47,439 |
Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) |
|||||||
As of |
|||||||
September 30, 2014 |
December 31, 2013 |
||||||
(Unaudited) |
|||||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
44,403 |
$ |
67,993 |
|||
Accounts receivable, net |
28,561 |
15,767 |
|||||
Inventory |
6,311 |
9,221 |
|||||
Restricted assets, current |
1,463 |
1,343 |
|||||
Other current assets |
8,872 |
6,873 |
|||||
Total current assets |
89,610 |
101,197 |
|||||
Property, equipment and software at cost |
49,576 |
43,224 |
|||||
Accumulated depreciation and amortization |
(29,148) |
(22,909) |
|||||
Property, equipment and software, net |
20,428 |
20,315 |
|||||
Goodwill |
47,842 |
47,842 |
|||||
Acquired curriculum and technology intangibles, net |
6,038 |
8,719 |
|||||
Acquired publishing rights, net |
3,248 |
4,705 |
|||||
Other intangible assets, net |
4,871 |
6,251 |
|||||
Pre-publication costs, net |
15,081 |
13,401 |
|||||
Restricted assets, less current portion |
4,451 |
5,492 |
|||||
Other assets |
8,578 |
8,288 |
|||||
Total assets |
$ |
200,147 |
$ |
216,210 |
Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) |
|||||||
As of |
|||||||
September 30, 2014 |
December 31, 2013 |
||||||
(Unaudited) |
|||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|||||||
Current liabilities: |
|||||||
Capital lease obligations, current |
$ |
1,061 |
$ |
995 |
|||
Accounts payable |
3,723 |
1,301 |
|||||
Accrued expenses |
15,943 |
25,279 |
|||||
Deferred revenue, current |
60,416 |
53,532 |
|||||
Total current liabilities |
81,143 |
81,107 |
|||||
Long-term liabilities: |
|||||||
Long-term debt |
164,635 |
174,491 |
|||||
Capital lease obligations, less current portion |
1,217 |
2,019 |
|||||
Deferred revenue, less current portion |
10,204 |
7,829 |
|||||
Other liabilities |
12,818 |
13,954 |
|||||
Total long-term liabilities |
188,874 |
198,293 |
|||||
Stockholders' equity (deficit): |
|||||||
Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at September 30, 2014 and December 31, 2013) |
— |
— |
|||||
Common stock ($.001 par value, 150,000 shares authorized, 51,251 and 51,208 shares issued, and 44,917 and 45,042 shares outstanding at September 30, 2014 and December 31, 2013, respectively) |
51 |
51 |
|||||
Capital surplus |
284,109 |
283,673 |
|||||
Accumulated deficit |
(339,575) |
(332,695) |
|||||
Treasury stock at cost (6,334 and 6,166 shares at September 30, 2014 and December 31, 2013, respectively) |
(12,448) |
(12,147) |
|||||
Accumulated other comprehensive loss: |
|||||||
Pension and postretirement plans |
(2,007) |
(2,072) |
|||||
Accumulated other comprehensive loss |
(2,007) |
(2,072) |
|||||
Total stockholders' equity (deficit) |
(69,870) |
(63,190) |
|||||
Total liabilities and stockholders' equity (deficit) |
$ |
200,147 |
$ |
216,210 |
Reconciliation Between Net Income (Loss) and Cash Income (Unaudited) |
|||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
(in thousands) |
2014 |
2013 |
2014 |
2013 |
|||||||||||
Net income (loss) |
$ |
995 |
$ |
128 |
$ |
(6,880) |
$ |
(8,519) |
|||||||
Reconciling items between net income (loss) and EBITDA: |
|||||||||||||||
Depreciation and amortization expense |
5,745 |
5,919 |
16,363 |
16,343 |
|||||||||||
Net interest expense |
4,377 |
4,773 |
13,535 |
14,028 |
|||||||||||
Income tax expense |
52 |
127 |
146 |
297 |
|||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) |
11,169 |
10,947 |
23,164 |
22,149 |
|||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: |
|||||||||||||||
Other income, net |
(535) |
(215) |
(965) |
(645) |
|||||||||||
Loss on extinguishment of debt |
— |
— |
570 |
— |
|||||||||||
Merger, acquisition and disposition activities |
346 |
171 |
689 |
485 |
|||||||||||
Stock-based compensation and expense |
135 |
384 |
383 |
975 |
|||||||||||
Embezzlement-related expense |
— |
3 |
— |
118 |
|||||||||||
Adjustments related to purchase accounting |
— |
57 |
— |
95 |
|||||||||||
Adjustments to CVR liability |
— |
— |
— |
74 |
|||||||||||
Management transition |
— |
— |
— |
1,501 |
|||||||||||
Adjusted EBITDA |
11,115 |
11,347 |
23,841 |
24,752 |
|||||||||||
Change in deferred revenues |
24,436 |
17,085 |
9,300 |
7,556 |
|||||||||||
Change in deferred costs |
(2,745) |
(1,972) |
(1,182) |
(768) |
|||||||||||
Capital expenditures |
(4,667) |
(4,409) |
(13,027) |
(12,383) |
|||||||||||
Cash income |
$ |
28,139 |
$ |
22,051 |
$ |
18,932 |
$ |
19,157 |
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