2014

Cambium Learning Group Announces Third Quarter Earnings Quarterly Order Volume Growth Driven by Technology Segments

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.



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