Cambium Learning Group Announces Third Quarter Earnings

Quarterly Order Volume Growth Driven by Technology Segments

Nov 07, 2013, 16:10 ET from Cambium Learning Group, Inc.

DALLAS, Nov. 7, 2013 /PRNewswire/ -- Cambium Learning Group, Inc. (NASDAQ: ABCD, the "Company"), a leading educational solutions and services company committed to helping all students reach their full potential by providing evidence-based solutions and expert professional services, announced today its financial results for the third quarter of 2013.

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Three Months Ended September 30,

Nine Months Ended September 30,

($ in millions)

2013

2012

$ Change

% Change

2013

2012

$ Change

% Change

GAAP net revenues

$43.0

$46.0

$(3.0)

(6.5)%

$117.2

$114.2

$2.9

2.6%

Increase in deferred revenue

17.1

13.2

3.9

29.8%

7.6

6.4

1.2

18.2%

GAAP net income (loss)

0.1

(2.2)

2.3

105.7%

(8.5)

(45.0)

36.5

81.1%

EBITDA

10.9

11.1

(0.2)

(1.6)%

22.1

(5.9)

28.0

478.0%

Adjusted EBITDA

11.3

12.5

(1.2)

(9.4)%

24.8

16.9

7.8

46.4%

 

Financial Highlights for the Nine Months Ended September 30, 2013

For the first nine months of 2013, company-wide order volumes were flat compared to the same period of 2012, and order volume changes by segment were as follows:

    • Voyager Sopris Learning decreased 10%
    • Learning A-Z increased 27%
    • ExploreLearning increased 32%
    • Kurzweil/IntelliTools decreased 15%

Learning A-Z and ExploreLearning continued their trend of double-digit growth rates.  Offsetting this growth, Voyager Sopris Learning and Kurzweil/IntelliTools continued to show order volume declination as reductions in legacy products are currently outpacing gains from newer online and technology-enabled solutions. 

Other highlights include:

  • Overall, GAAP net revenues for the first nine months of 2013 increased by 3% to $117.2 million compared with $114.2 million in the first nine months of 2012.  GAAP net revenues by segment for the first nine months of 2013, and the percentage change from the first nine months of 2012, were as follows: 
    • Voyager Sopris Learning: $74.0 million, decreased 3%
    • Learning A-Z: $24.0 million, increased 28%
    • ExploreLearning: $11.5 million, increased 9%
    • Kurzweil/IntelliTools: $7.6 million, decreased 13%
  • On an adjusted basis, EBITDA was $24.8 million in the first nine months of 2013, up $7.8 million from $16.9 million in the first nine months of 2012. The increase in adjusted EBITDA was the result of lower costs in the Voyager Sopris Learning segment, primarily attributable to savings from the re-engineering and restructuring initiatives completed in 2012, and increased revenues in Learning A-Z which flowed through to earnings.
  • The GAAP net loss recorded in the nine months ended September 30, 2012 includes a goodwill impairment charge of $14.7 million related to the Company's Kurzweil/IntelliTools segment.
  • The Company has cash and cash equivalents of $53.8 million on the balance sheet as of September 30, 2013.  Cash provided by operations during the first nine months of 2013 was $23.3 million, cash used in investing activities was $20.1 million, and cash used in financing activities was $1.3 million.

Financial Highlights for the Three Months Ended September 30, 2013

For the quarter ended September 30, 2013, company-wide order volumes were up 6% compared to the same period of 2012, and order volume changes by segment were as follows:

    • Voyager Sopris Learning decreased 9%
    • Learning A-Z increased 45%
    • ExploreLearning increased 38%
    • Kurzweil/IntelliTools decreased 17%

On an adjusted basis, EBITDA for the quarter ended September 30, 2013 was $11.3 million, down $1.2 million from the quarter ended September 30, 2012. Net revenues were down $3.0 million for the quarter ended September 30, 2013 versus 2012, as much of the order volume increase was due to technology sales which are recognized as net revenues over their subscription period.  Additionally, expense related to the Company's annual bonus plan was $0.7 million higher during the quarter ended September 30, 2013 versus 2012, as estimated achievement levels were significantly reduced in the third quarter of 2012.

"We saw another very solid quarter for our Learning A-Z and ExploreLearning segments and we remain committed to our strategy of providing compelling, innovative technology-based educational solutions across all of our businesses," said John Campbell, chief executive officer of Cambium Learning Group, Inc.  "Our performance for the start of the 2013-2014 school year was in line with management's expectations and I am pleased that we have been able to slow the rates of decline we were seeing last year in the Voyager Sopris Learning and Kurzweil/IntelliTools segments."

Share repurchase transaction

On November 4, 2013, the Company entered into a stock purchase agreement with an investor pursuant to its share repurchase program.  The transaction settled on November 6, 2013 with the Company purchasing 1,861,969 shares for a total cost of $4.4 million.  After the completion of this transaction, the Company has $0.6 million remaining under the existing share repurchase authorization.

Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA and Adjusted Net Revenues are not prepared in accordance with GAAP and may be different from 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 Adjusted Net Revenues remove significant purchase accounting, non-operational or certain non-cash items from earnings. The Company uses Adjusted EBITDA and Adjusted Net Revenues 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 Adjusted Net Revenues should not be construed as an indication that future results will be unaffected by unusual, non-operational or non-cash items.

About Cambium Learning Group, Inc. Cambium Learning Group is a leading educational solutions and services company that is committed to helping every student reach their full potential by providing evidence-based solutions and expert professional services to empower educators and raise the achievement levels of all students. Cambium is composed of four business units: Voyager Learning (www.voyagerlearning.com) and Sopris Learning (www.soprislearning.com), Learning A–Z® (www.learninga-z.com), ExploreLearning® (www.explorelearning.com), and Kurzweil/IntelliTools (www.kurzweiledu.com). Together, these business units provide best-in-class intervention and supplemental instructional materials; gold-standard professional development and school-improvement services; breakthrough technology solutions for online learning and professional support; valid and reliable assessments; and proven materials to support a positive and safe school environment. For more information, visit www.cambiumlearning.com

Media and Investor Contact: Philip Davis Cambium Learning Group, Inc. 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 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, 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 and education technology 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, and those other risks and uncertainties listed under the heading "RISK FACTORS" in Cambium Learning Group, Inc.'s Form 10-K. 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

Nine Months Ended       

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

Net revenues

$

42,957

$

45,958

$

117,172

$

114,242

Cost of revenues:

Cost of revenues

12,950

14,274

37,000

39,837

Amortization expense

4,692

7,035

12,680

19,984

Total cost of revenues

17,642

21,309

49,680

59,821

Research and development expense

2,486

2,622

7,345

8,606

Sales and marketing expense

10,943

11,331

32,991

35,268

General and administrative expense

5,122

4,837

16,795

15,643

Shipping and handling costs

721

1,204

1,419

2,485

Depreciation and amortization expense

1,227

1,592

3,663

4,842

Goodwill impairment

14,700

Embezzlement-related expense

3

493

118

452

Impairment of long-lived assets

236

3,347

Total costs and expenses

38,144

43,624

112,011

145,164

Income (loss) before interest, other income  (expense) and income taxes

4,813

2,334

5,161

(30,922)

Net interest expense

(4,773)

(4,628)

(14,028)

(14,032)

Other income, net

215

163

645

236

Income (loss) before income taxes

255

(2,131)

(8,222)

(44,718)

Income tax expense

(127)

(104)

(297)

(258)

Net income (loss)

$

128

$

(2,235)

$

(8,519)

$

(44,976)

Net income (loss) per common share:

Basic net income (loss) per common share

$

0.00

$

(0.05)

$

(0.18)

$

(0.90)

Diluted net income (loss) per common share

$

0.00

$

(0.05)

$

(0.18)

$

(0.90)

Average number of common shares and  equivalents outstanding:

Basic

47,563

49,284

47,439

49,722

Diluted

47,657

49,284

47,439

49,722

 

 

 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

As of

September 30, 2013

December 31, 2012

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$

53,793

$

51,904

Accounts receivable, net

31,551

17,813

Inventory

10,591

16,620

Tax receivables

12,234

Restricted assets, current

1,350

4,387

Assets held for sale

380

Other current assets

6,316

5,892

Total current assets

103,601

109,230

Property, equipment and software at cost

41,862

35,535

Accumulated depreciation and amortization

(20,854)

(14,514)

Property, equipment and software, net

21,008

21,021

Goodwill

47,404

47,404

Acquired curriculum and technology intangibles, net

6,508

9,320

Acquired publishing rights, net

5,429

7,602

Other intangible assets, net

6,481

7,836

Pre-publication costs, net

13,949

11,660

Restricted assets, less current portion

5,796

6,754

Other assets

9,325

9,632

Total assets

$

219,501

$

230,459

 

 

 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

As of

September 30, 2013

December 31, 2012

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

(unaudited)

Current liabilities:

Capital lease obligations, current

$

965

$

1,290

Accounts payable

1,652

3,007

Contingent value rights

7,599

Accrued expenses

20,590

20,530

Deferred revenue, current

51,023

45,974

Total current liabilities

74,230

78,400

Long-term liabilities:

Long-term debt

174,450

174,328

Capital lease obligations, less current portion

2,278

3,014

Deferred revenue, less current portion

8,138

5,631

Other liabilities

14,001

15,131

Total long-term liabilities

198,867

198,104

Stockholders' equity (deficit):

Preferred stock ($.001 par value, 15,000 shares authorized, zero  shares issued and outstanding at September 30, 2013 and December 31, 2012)

Common stock ($.001 par value, 150,000 shares authorized, 51,208 and 51,208 shares issued, and 46,904 and 47,098 shares outstanding at September 30, 2013 and December 31, 2012, respectively)  

51

51

Capital surplus

283,572

282,450

Accumulated deficit

(326,961)

(318,442)

Treasury stock at cost (4,304 and 4,110 shares at September 30, 2013 and December 31, 2012, respectively)

(7,772)

(7,528)

Accumulated other comprehensive loss:

Pension and postretirement plans

(2,486)

(2,576)

Accumulated other comprehensive loss

(2,486)

(2,576)

Total stockholders' equity (deficit)

(53,596)

(46,045)

Total liabilities and stockholders' equity (deficit)

$

219,501

$

230,459

 

 

Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Income (Loss) and Adjusted EBITDA for the Three Months Ended September 30, 2013 and 2012

Three Months Ended September 30,

2013

2012

(In thousands)

(Unaudited)

Total net revenues

$

42,957

$

45,958

Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: Adjustments related to purchase accounting

57

58

Adjusted net revenues

$

43,014

$

46,016

Net income (loss)

$

128

$

(2,235)

Reconciling items between net income (loss) and EBITDA:

Depreciation and amortization

5,919

8,627

Net interest expense

4,773

4,628

Income tax expense

127

104

Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)

10,947

11,124

Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:

Other income, net

(215)

(163)

Re-engineering and restructuring costs

491

Merger and acquisition activities

171

160

Stock-based compensation and expense

384

313

Embezzlement-related expense

3

493

Adjustments related to purchase accounting

57

49

Adjustments to CVR liability

54

Adjusted EBITDA

$

11,347

$

12,521

 

 

 

Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and Adjusted EBITDA for the Nine Months Ended September 30, 2013 and 2012

Nine Months Ended September 30,

2013

2012

(In thousands)

(Unaudited)

Total net revenues

$

117,172

$

114,242

Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: Adjustments related to purchase accounting

75

313

Adjusted net revenues

$

117,247

$

114,555

Net loss

$

(8,519)

$

(44,976)

Reconciling items between net loss and EBITDA:

Depreciation and amortization

16,343

24,826

Net interest expense

14,028

14,032

Income tax expense

297

258

Income (loss) from operations before interest, income taxes, and depreciation and amortization (EBITDA)

22,149

(5,860)

Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:

Other income, net

(645)

(236)

Re-engineering and restructuring costs

6,240

Management transition

1,501

Merger and acquisition activities

485

684

Stock-based compensation and expense

975

518

Embezzlement-related expense

118

452

Adjustments related to purchase accounting

95

247

Adjustments to CVR liability

74

161

Goodwill impairment

14,700

Adjusted EBITDA

$

24,752

$

16,906

SOURCE Cambium Learning Group, Inc.



RELATED LINKS

http://www.cambiumlearning.com