Cambium Learning Group Reports Third Quarter 2018 Financial Results

Nov 01, 2018

Year-to-Date Results Demonstrate Bookings Strength and Margin Expansion

DALLAS, Nov. 01, 2018 (GLOBE NEWSWIRE) -- Cambium Learning®Group, Inc. (Nasdaq: ABCD, the "Company"), a leading educational technology solutions company committed to helping all students reach their full potential, announced today financial results for its third quarter ended September 30, 2018.

THIRD QUARTER 2018 RESULTS

"Cambium Learning Group's momentum continued in the all-important 2018 back-to-school selling season, with our year-to-date results driving Bookings growth and profit expansion over last year," stated John Campbell, Chief Executive Officer. "Third quarter Bookings grew 6% compared to the third quarter of 2017, led by strong performances in our SaaS segments of 7% at Learning A-Z and 31% at ExploreLearning. Our Adjusted EBITDA and cash income margins each expanded 300 basis points, even as we make planned investments in development, marketing and sales initiatives to support the long-term growth of our digital solutions. We were recognized again for our excellence in effective and high-quality instructional technologies winning an impressive 14 Education Software Review (EDDIE) Awards for 2018, with Learning A-Z winning 12 awards and ExploreLearning winning two, confirming that teachers trust that our solutions work in the classroom. We are continuing to execute our strategy consistently, focused on leveraging technology to deliver unique, personalized, adaptive, scalable and effective solutions that tap every learner's potential, keep teachers at the center of education, and focus on data, instruction, and practice as the keys to success in the classroom and beyond."

As previously announced on October 15, 2018, the Company has entered into a definitive merger agreement with certain affiliates of Veritas Capital, a leading private equity investment firm, for the acquisition of the Company.

Financial Snapshot

For the quarter ended September 30, 2018, the Company reported the following financial results:

  Three Months Ended September 30,   Nine Months Ended September 30,
(in millions) 2018   2017   $ Change   2018   2017   $ Change
GAAP net revenues $ 44.7     $ 43.5     $ 1.2     $ 122.3     $ 119.9     $ 2.5  
GAAP net income 5.9     6.5     (0.6 )   12.9     14.8     (1.9 )
Net income margin % 13 %   15 %       11 %   12 %    
EBITDA 14.2     13.5     0.7     33.9     34.6     (0.8 )
Adjusted EBITDA 15.9     14.1     1.7     37.4     36.0     1.4  
Adjusted EBITDA margin % 35 %   32 %       31 %   30 %    
                       
Bookings $ 82.9     $ 78.5     $ 4.3     $ 135.8     $ 127.4     $ 8.5  
Cash income 45.1     40.2     5.0     36.5     28.6     7.9  
Cash income margin % 54 %   51 %       27 %   22 %    

Nine Months Ended September 30, 2018 Financial Highlights

  • Generally Accepted Accounting Principles (GAAP) net revenues for the nine months ended September 30, 2018 increased by $2.5 million, or 2%, to $122.3 million compared with $119.9 million in 2017. GAAP net revenues by segment for the nine months ended September 30, 2018, and the change from the same period of 2017, were as follows:

    • Learning A-Z® - $59.5 million, increased $4.2 million or 8%

    • ExploreLearning® - $23.2 million, increased $2.5 million or 12%

    • Voyager Sopris Learning® - $39.6 million, decreased $(4.3) million or (10)%

  • Bookings for the nine months ended September 30, 2018 increased by 7% to $135.8 million, compared with $127.4 million in the nine months ended September 30, 2017, with growth at the Learning A-Z and ExploreLearning segments offset by a decline in the Voyager Sopris Learning segment.

  • The Company reported GAAP net income of $12.9 million during the nine months ended September 30, 2018, decreasing $1.9 million compared to net income of $14.8 million during the nine months ended September 30, 2017. Net income includes expenses of $2.1 million related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. ("VKidz") and its review of strategic alternatives and subsequent merger agreement with certain affiliates of Veritas Capital, in addition to higher tax expense. The Company's effective tax rate for the nine months ended September 30, 2018 is higher than the effective tax rate for the nine months ended September 30, 2017 as a result of reducing most of the valuation allowance against most of the Company's deferred tax assets in the fourth quarter of 2017.

  • Adjusted EBITDA was $37.4 million, increasing $1.4 million from $36.0 million in 2017. The increase in GAAP net revenues, along with a greater portion of the top-line mix coming from the higher margin Learning A-Z and ExploreLearning segments, drove improvement in Adjusted EBITDA.

  • Net interest expense was $2.7 million for the nine months ended September 30, 2018, down $1.2 million from the nine months ended September 30, 2017 as a result of the scheduled debt amortization payments and voluntary prepayments made during 2017.

  • Cash Income was $36.5 million for the nine months ended September 30, 2018 compared to Cash Income of $28.6 million for the nine months ended September 30, 2017. Capital expenditures totaled $12.1 million in the nine months ended September 30, 2018 versus $13.9 million in the nine months ended September 30, 2017.

  • The Company had cash and cash equivalents of $26.3 million at September 30, 2018. For the nine months ended September 30, 2018, cash provided by operations was $33.2 million, cash used in investing activities was $12.1 million, and cash used in financing activities was $3.4 million. At September 30, 2018, the principal amount of term loans outstanding was $44.0 million, there was $29.8 million available under the revolving credit facility and no borrowings were outstanding.

  • The Company's technology-enabled products continue to receive industry recognition. The Company was recently awarded 14 Education Software Review (EDDIE) Awards for 2018, with Learning A-Z receiving 12 EDDIE awards, and ExploreLearning receiving two EDDIE awards.

Third Quarter 2018 Financial Highlights

  • GAAP net revenues for the third quarter of 2018 increased by $1.2 million, or 3%, to $44.7 million compared with $43.5 million in 2017. GAAP net revenues by segment for the three months ended September 30, 2018, and the change from the same period of 2017, were as follows:

    • Learning A-Z - $20.0 million, increased $1.5 million or 8%

    • ExploreLearning - $8.0 million, increased $0.8 million or 11%

    • Voyager Sopris Learning - $16.8 million, decreased $(1.1) million or (6)%

  • Bookings for the third quarter of 2018 were $82.9 million, an increase of 6% compared with $78.5 million in the third quarter of 2017.

  • The Company reported net income of $5.9 million during the third quarter of 2018, decreasing $0.6 million compared to net income of $6.5 million during the third quarter of 2017. Net income includes expenses of $1.0 million related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. and its review of strategic alternatives and subsequent merger agreement with certain affiliates of Veritas Capital, in addition to higher tax expense.

  • Adjusted EBITDA for the third quarter of 2018 was $15.9 million, increasing $1.7 million from $14.1 million in 2017. The increase in GAAP net revenues, along with a greater portion of the top-line mix coming from the higher margin Learning A-Z and ExploreLearning segments, drove improvement in Adjusted EBITDA.

  • Cash Income was $45.1 million for the third quarter of 2018 compared to Cash Income of $40.2 million for the third quarter of 2017. Capital expenditures totaled $4.1 million in the third quarter of 2018 versus $5.1 million in the third quarter of 2017.

Third Quarter 2018 Segment Results

Net Revenues, Bookings, Net Income, and Cash Income changes by segment for the three and nine months ended September 30, 2018, compared to the same period of 2017 were as follows:

  Q3 - 2018   YTD - 2018
  % Change   % Change
  Net         Net      
  Revenues Bookings Net Income Cash Income   Revenues Bookings Net Income Cash Income
Learning A-Z 8 % 7 % 5 % 5 %   8 % 9 % 2 % 5 %
ExploreLearning 11 % 31 % 3 % 37 %   12 % 24 % (1 )% 27 %
Voyager Sopris Learning (6 )% (9 )% 15 % (2 )%   (10 )% (5 )% 6 % 61 %
Shared Services     (18 )% 23 %       (10 )% 6 %
Cambium Learning Group, Inc. 3 % 6 % (9 )% 12 %   2 % 7 % (13 )% 28 %

MERGER AGREEMENT and VKIDZ TRANSACTION

As previously announced on October 15, 2018, the Company has entered into a definitive merger agreement with certain affiliates of Veritas Capital, a leading private equity investment firm, for the acquisition of the Company.

Pursuant to the terms of the merger agreement, the holders of common stock of the Company currently outstanding are entitled to receive $14.50 in cash per share at the closing. The transaction was unanimously approved by the board of directors of the Company. Following the execution of the merger agreement, the stockholder representing a majority of the issued and outstanding common stock delivered a written consent approving and adopting the merger agreement and the transaction. The Company's outstanding credit facility will be repaid at closing. Subject to customary closing conditions and regulatory approvals, the Company expects the transaction to close in the fourth quarter of 2018 or the first quarter of 2019.

Immediately prior to the closing, the Company will close its previously announced acquisition of VKIDZ Holdings Inc. ("VKidz"), an award winning Florida-based edtech company dedicated to helping deliver the best education to students using digital solutions. Under the terms of the agreement, the purchase price will include issuance of 6.7 million shares of Cambium Learning Group common stock to the sellers, plus payment of outstanding debt of VKidz on the consummation date of the transaction. In 2017, VKidz had Bookings of approximately $21.1 million and Cash Income of approximately $5.7 million. At September 30, 2018, VKidz had debt principal outstanding of $19.8 million and cash of $3.3 million. For each share of Company common stock issued in connection with the Company's acquisition of VKidz, holders are entitled to receive $11.50 in cash.

Conference Call

In consideration of the Company's recently announced definitive merger agreement with certain affiliates of Veritas Capital, management will not conduct a third quarter 2018 conference call.

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 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 restructuring, 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 toward performance targets. Further, the Cash Income measure directly affects 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 Cambium Learning Group, Inc.

Cambium Learning® Group (Nasdaq: ABCD) is an award-winning educational technology solutions leader dedicated to helping all students reach their full potential through individualized and differentiated instruction. Using a research-based, personalized approach, Cambium Learning Group delivers SaaS resources and instructional products that engage students and support teachers in fun, positive, safe and scalable environments. These solutions are provided through Learning A-Z® (online differentiated instruction for elementary school reading, writing and science), ExploreLearning® (online interactive math and science simulations and a math fact fluency solution) and Voyager Sopris Learning® (blended solutions that accelerate struggling learners to achieve in literacy and math and professional development for teachers). We believe that every student has unlimited potential, that teachers matter, and that data, instruction, and practice are the keys to success in the classroom and beyond.

Come learn with us at www.cambiumlearning.com.

Media and Investor Contact:

Barbara Benson
Cambium Learning Group, Inc.
investorrelations@cambiumlearning.com

LHA
Jody Burfening/Carolyn Capaccio
212.838.3777
ccapaccio@lhai.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., business plans or strategies, projected or anticipated benefits or other consequences of Cambium Learning Group, Inc.’s plans or strategies, financing plans, projected or anticipated benefits from acquisitions that Cambium Learning Group, Inc. may make, and involve known and unknown risks, uncertainties, and other factors that may cause the markets, actual results, levels of activity, performance, or achievements of Cambium Learning Group, Inc., to be materially different from any actual future results, levels of activity, performance, or achievements. These risks and other factors you should consider include, but are not limited to, conditions to the closing of the proposed transaction, including the obtaining of required regulatory approvals, may not be satisfied; risks associated with the financing of the transaction; the proposed transaction may involve unexpected costs, liabilities or delays; the business of the Company may suffer as a result of uncertainty surrounding the proposed transaction; the outcome of any legal proceedings related to the proposed transaction; the Company may be adversely affected by other economic, business  and/or competitive factors; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the ability to recognize benefits of the proposed transaction; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed transaction; other risks to consummation of the proposed transaction, including the risk that the proposed transaction will not be consummated within the expected time period or at all; the ability to successfully attract and retain a broad customer base for current and future products; changes in customer demands or industry standards; success of ongoing product development; maintaining acceptable margins; the ability to control costs; K-12 enrollment and demographic trends; the level of educational funding; the impact of federal, state, and local regulatory requirements on the business of the company; the loss of key personnel; the impact of competition; the uncertainty of general economic conditions and financial market performance; explorations of possible transactions and other strategic alternatives; and those other risks and uncertainties listed under the heading "RISK FACTORS" in Cambium Learning Group, Inc.'s Form 10-K and other reports filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "projects," "intends," "prospects," or "priorities," or the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Cambium Learning Group, Inc., does not assume or undertake any obligation to update the information contained in this press release, and expressly disclaims any obligation to do so, whether as a result of new information, future events, or otherwise.

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,
  2018   2017   2018   2017
Net revenues $ 44,734     $ 43,523     $ 122,337     $ 119,855  
Cost of revenues:              
Cost of revenues 7,801     7,928     20,902     21,328  
Amortization expense 4,200     4,676     12,147     13,094  
Total cost of revenues 12,001     12,604     33,049     34,422  
Research and development expense 4,059     3,352     11,678     9,744  
Sales and marketing expense 12,283     12,771     37,803     37,871  
General and administrative expense 5,962     5,457     17,378     15,240  
Shipping and handling costs 323     414     630     727  
Depreciation and amortization expense 721     670     2,156     2,020  
Total costs and expenses 35,349     35,268     102,694     100,024  
Income before interest and income taxes 9,385     8,255     19,643     19,831  
Net interest expense (897 )   (1,271 )   (2,654 )   (3,834 )
Other income (expense), net (103 )   (108 )   (88 )   (325 )
Income before income taxes 8,385     6,876     16,901     15,672  
Income tax expense (2,508 )   (399 )   (3,982 )   (873 )
Net income $ 5,877     $ 6,477     $ 12,919     $ 14,799  
Net income per common share:              
Basic $ 0.12     $ 0.14     $ 0.27     $ 0.32  
Diluted $ 0.12     $ 0.14     $ 0.27     $ 0.31  
Average number of common shares and equivalents outstanding:              
Basic 47,273     46,460     47,116     46,316  
Diluted 48,503     47,629     48,351     47,522  


Cambium Learning Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
       
  September 30, 2018   December 31, 2017
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 26,255     $ 8,493  
Accounts receivable, net 26,327     12,937  
Inventory 1,704     2,382  
Restricted assets, current 961     961  
Other current assets 13,167     11,193  
Total current assets 68,414     35,966  
Property, equipment and software at cost 63,720     65,250  
Accumulated depreciation and amortization (43,440 )   (43,164 )
Property, equipment and software, net 20,280     22,086  
Goodwill 43,518     43,518  
Other intangible assets, net 2,858     3,607  
Pre-publication costs, net 18,071     17,758  
Restricted assets, less current portion 615     1,293  
Deferred tax assets 27,497     30,614  
Other assets 4,040     3,712  
Total assets $ 185,293     $ 158,554  
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      
Current liabilities:      
Accounts payable $ 2,344     $ 2,388  
Accrued expenses 16,302     12,121  
Current portion of long-term debt 6,776     5,958  
Deferred revenue, current 96,468     86,913  
Total current liabilities 121,890     107,380  
Long-term liabilities:      
Long-term debt 36,781     41,841  
Deferred revenue, less current portion 17,751     13,995  
Other liabilities 9,072     9,630  
Total long-term liabilities 63,604     65,466  
Stockholders' equity (deficit):      
Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at September 30, 2018 and December 31, 2017)      
Common stock ($.001 par value, 150,000 shares authorized, 53,832 and 53,333 shares issued, and 47,300 and 46,800 shares outstanding at September 30, 2018 and December 31, 2017, respectively) 54     53  
Capital surplus 290,837     289,022  
Accumulated deficit (276,322 )   (288,490 )
Treasury stock at cost (6,532 shares at September 30, 2018 and December 31, 2017) (12,784 )   (12,784 )
Accumulated other comprehensive loss:      
Pension and postretirement plans (1,986 )   (2,093 )
Accumulated other comprehensive loss (1,986 )   (2,093 )
Total stockholders' equity (deficit) (201 )   (14,292 )
Total liabilities and stockholders' equity (deficit) $ 185,293     $ 158,554  


Cambium Learning Group, Inc. and Subsidiaries
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income
(unaudited)
       
  Three Months Ended September 30,   Nine Months Ended September 30,
(in thousands) 2018   2017   2018   2017
Net income $ 5,877     $ 6,477     $ 12,919     $ 14,799  
Reconciling items between net income and EBITDA:              
Depreciation and amortization expense 4,921     5,346     14,303     15,114  
Net interest expense 897     1,271     2,654     3,834  
Income tax expense 2,508     399     3,982     873  
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 14,203     13,493     33,858     34,620  
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:              
Income from sale of excess state tax credits         (222 )    
Restructuring costs     281         281  
Merger, acquisition and disposition activities 1,402     138     3,023     477  
Stock-based compensation and expense 249     217     728     641  
Adjusted EBITDA 15,854     14,129     37,387     36,019  
Change in deferred revenues 37,701     35,065     12,887     7,646  
Change in deferred costs (4,344 )   (3,906 )   (1,755 )   (1,175 )
Capital expenditures (4,068 )   (5,096 )   (12,056 )   (13,912 )
Cash income $ 45,143     $ 40,192     $ 36,463     $ 28,578  


Cambium Learning Group, Inc. and Subsidiaries
Reconciliation of Bookings to Net Revenues by Segment – 2018
(unaudited)
   
  Three Months Ended September 30, 2018
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Bookings $ 40,714     $ 18,007     $ 24,151     $ 82,872  
Change in deferred revenues (20,653 )   (10,208 )   (6,840 )   (37,701 )
Other (88 )   153     (502 )   (437 )
Net revenues $ 19,973     $ 7,952     $ 16,809     $ 44,734  


  Nine Months Ended September 30, 2018
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Bookings $ 64,996     $ 27,977     $ 42,868     $ 135,841  
Change in deferred revenues (5,364 )   (4,870 )   (2,653 )   (12,887 )
Other (88 )   81     (610 )   (617 )
Net revenues $ 59,544     $ 23,188     $ 39,605     $ 122,337  


Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – 2018
(unaudited)
   
  Three Months Ended September 30, 2018
      Explore   Voyager Sopris        
(in thousands) Learning A-Z   Learning   Learning   Other   Consolidated
Net income $ 9,619     $ 2,975     $ 5,948     $ (12,665 )   $ 5,877  
Reconciling items between net income and EBITDA:                  
Depreciation and amortization expense             4,921     4,921  
Net interest expense             897     897  
Income tax expense             2,508     2,508  
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 9,619     2,975     5,948     (4,339 )   14,203  
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:                  
Merger, acquisition and disposition activities             1,402     1,402  
Stock-based compensation and expense 70     53     59     67     249  
Adjusted EBITDA 9,689     3,028     6,007     (2,870 )   15,854  
Change in deferred revenues 20,653     10,208     6,840         37,701  
Change in deferred costs (2,256 )   (900 )   (1,188 )       (4,344 )
Capital expenditures - product development (1,995 )   (1,002 )   (598 )       (3,595 )
Capital expenditures - general expenditures (271 )   (110 )   (67 )   (25 )   (473 )
Cash income $ 25,820     $ 11,224     $ 10,994     $ (2,895 )   $ 45,143  


  Nine Months Ended September 30, 2018
      Explore   Voyager Sopris        
(in thousands) Learning A-Z   Learning   Learning   Other   Consolidated
Net income $ 28,396     $ 8,322     $ 9,738     $ (33,537 )   $ 12,919  
Reconciling items between net income and EBITDA:                  
Depreciation and amortization expense             14,303     14,303  
Net interest expense             2,654     2,654  
Income tax expense             3,982     3,982  
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 28,396     8,322     9,738     (12,598 )   33,858  
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:                  
Income from sale of excess state tax credits             (222 )   (222 )
Merger, acquisition and disposition activities             3,023     3,023  
Stock-based compensation and expense 197     153     177     201     728  
Adjusted EBITDA 28,593     8,475     9,915     (9,596 )   37,387  
Change in deferred revenues 5,364     4,870     2,653         12,887  
Change in deferred costs (964 )   (243 )   (548 )       (1,755 )
Capital expenditures - product development (5,869 )   (3,038 )   (1,793 )       (10,700 )
Capital expenditures - general expenditures (847 )   (271 )   (182 )   (56 )   (1,356 )
Cash income $ 26,277     $ 9,793     $ 10,045     $ (9,652 )   $ 36,463  


Deferred Revenue by Segment – 2018
(unaudited)
   
  September 30, 2018
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Deferred revenue, current $ 55,955     $ 23,355     $ 17,158     $ 96,468  
Deferred revenue, less current portion 8,482     4,087     5,182     17,751  
Deferred revenue $ 64,437     $ 27,442     $ 22,340     $ 114,219  


Deferred Costs by Segment – 2018
(unaudited)
   
  September 30, 2018
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Deferred costs, current $ 5,425     $ 1,956     $ 2,640     $ 10,021  
Deferred costs, less current portion 822     343     1,006     2,171  
Deferred costs $ 6,247     $ 2,299     $ 3,646     $ 12,192  


Cambium Learning Group, Inc. and Subsidiaries
Reconciliation of Bookings to Net Revenues by Segment – 2017
(unaudited)
   
  Three Months Ended September 30, 2017
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Bookings $ 38,136     $ 13,742     $ 26,660     $ 78,538  
Change in deferred revenues (19,625 )   (6,755 )   (8,685 )   (35,065 )
Other     152     (102 )   50  
Net revenues $ 18,511     $ 7,139     $ 17,873     $ 43,523  


  Nine Months Ended September 30, 2017
          Voyager Sopris    
(in thousands) Learning A-Z   ExploreLearning   Learning   Consolidated
Bookings $ 59,696     $ 22,506     $ 45,189     $ 127,391  
Change in deferred revenues (4,350 )   (1,901 )   (1,395 )   (7,646 )
Other     47     63     110  
Net revenues $ 55,346     $ 20,652     $ 43,857     $ 119,855  


Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – 2017
(unaudited)
   
  Three Months Ended September 30, 2017
          Voyager        
      Explore   Sopris        
(in thousands) Learning A-Z   Learning   Learning   Other   Consolidated
Net income $ 9,169     $ 2,876     $ 5,186     $ (10,754 )   $ 6,477  
Reconciling items between net income and EBITDA:                  
Depreciation and amortization expense             5,346     5,346  
Net interest expense             1,271     1,271  
Income tax expense             399     399  
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 9,169     2,876     5,186     (3,738 )   13,493  
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:                  
Restructuring costs         281         281  
Merger, acquisition and disposition activities             138     138  
Stock-based compensation and expense 53     30     67     67     217  
Adjusted EBITDA 9,222     2,906     5,534     (3,533 )   14,129  
Change in deferred revenues 19,625     6,755     8,685         35,065  
Change in deferred costs (1,585 )   (624 )   (1,697 )       (3,906 )
Capital expenditures - product development (2,020 )   (667 )   (1,150 )       (3,837 )
Capital expenditures - general expenditures (637 )   (202 )   (201 )   (219 )   (1,259 )
Cash income $ 24,605     $ 8,168     $ 11,171     $ (3,752 )   $ 40,192  


  Nine Months Ended September 30, 2017
          Voyager        
      Explore   Sopris        
(in thousands) Learning A-Z   Learning   Learning   Other   Consolidated
Net income $ 27,725     $ 8,366     $ 9,229     $ (30,521 )   $ 14,799  
Reconciling items between net income and EBITDA:                  
Depreciation and amortization expense             15,114     15,114  
Net interest expense             3,834     3,834  
Income tax expense             873     873  
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 27,725     8,366     9,229     (10,700 )   34,620  
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:                  
Restructuring costs         281         281  
Merger, acquisition and disposition activities             477     477  
Stock-based compensation and expense 153     84     212     192     641  
Adjusted EBITDA 27,878     8,450     9,722     (10,031 )   36,019  
Change in deferred revenues 4,350     1,901     1,395         7,646  
Change in deferred costs (423 )   (131 )   (621 )       (1,175 )
Capital expenditures - product development (5,818 )   (2,148 )   (3,959 )       (11,925 )
Capital expenditures - general expenditures (1,030 )   (369 )   (316 )   (272 )   (1,987 )
Cash income $ 24,957     $ 7,703     $ 6,221     $ (10,303 )   $ 28,578  

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Source: Cambium Learning Group, Inc.