Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 1, 2018
Cambium Learning Group, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
001-34575
27-0587428
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
 
17855 Dallas Parkway, Suite 400, Dallas, Texas
75287
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (888) 399-1995
Not Applicable
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company
¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨









Item 2.02 Results of Operations and Financial Condition.
On November 1, 2018, Cambium Learning Group, Inc. (the "Company") issued a press release announcing its financial results for the three and nine months ended September 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this current report on Form 8-K and the exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
 
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.

Exhibit No.
Description
99.1

 







SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Cambium Learning Group, Inc.
 
 
 
 
November 1, 2018
 
 
/s/ Barbara Benson
 
 
 
Name: Barbara Benson
 
 
 
Title: Chief Financial Officer




Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12525805&doc=3

Cambium Learning Group Reports Third Quarter 2018 Financial Results
Year-to-Date Results Demonstrate Bookings Strength and Margin Expansion

DALLAS, TX – November 1, 2018 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%

1



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.

2



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
% Change
 
YTD - 2018
% Change
 
Net Revenues
Bookings
Net Income
Cash Income
 
Net 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.

3



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.

4



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





5



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


6



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
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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





7



Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – 2018
(unaudited)
 
Three Months Ended September 30, 2018
(in thousands)
Learning A-Z
 
Explore
Learning
 
Voyager Sopris
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



8



 
Nine Months Ended September 30, 2018
(in thousands)
Learning A-Z
 
Explore
Learning
 
Voyager Sopris
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
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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



9



Cambium Learning Group, Inc. and Subsidiaries
Reconciliation of Bookings to Net Revenues by Segment – 2017
(unaudited)
 
Three Months Ended September 30, 2017
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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
(in thousands)
Learning A-Z
 
ExploreLearning
 
Voyager Sopris
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
(in thousands)
Learning A-Z
 
Explore
Learning
 
Voyager Sopris
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


10



 
Nine Months Ended September 30, 2017
(in thousands)
Learning A-Z
 
Explore
Learning
 
Voyager Sopris
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




11