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Cambium Learning Group Announces First Quarter Earnings - Valley News Live - KVLY/KXJB - Fargo/Grand Forks

Cambium Learning Group Announces First Quarter Earnings

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SOURCE Cambium Learning Group, Inc.

Company Continues to Shift Resources to Engaging, Innovative Technology Product Lines

DALLAS, May 8, 2014 /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 first quarter of 2014.


Three Months Ended March 31,

($ in millions)

2014

2013

$ Change

% Change

GAAP net revenues

$31.1

$31.4

$(0.3)

(1.1)%

Decrease in deferred revenue

(10.4)

(7.9)

(2.5)

(31.5)%

GAAP net loss

(6.6)

(9.1)

2.5

27.4%

EBITDA

3.4

0.5

2.9

588.3%

Adjusted EBITDA

3.6

2.2

1.4

61.7%

Cash Income (Loss)

(9.7)

(8.3)

(1.3)

(16.2)%

 

Cambium Learning Group, Inc. Corporate Logo.

Financial Highlights for the Quarter Ended March 31, 2014

Company-wide order volumes in the first quarter of 2014 were down 7% compared with the same period of 2013, and order volume changes by segment were as follows:

    • Voyager Sopris Learning™ decreased 18%
    • Learning A–Z increased 24%
    •  ExploreLearning® decreased 7%
    • Kurzweil/IntelliTools decreased 31%

Learning A–Z continued its trend of double-digit growth rates. 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. ExploreLearning results were in line with management expectations, but the comparison to prior year is impacted by timing of deals, including a large multiyear order in the first quarter of 2013. ExploreLearning order volume growth for the trailing 12 months ended March 31, 2014, compared with the trailing 12 months ended March 31, 2013, was 21%.

On an adjusted basis, EBITDA was $3.6 million in the first quarter of 2014, up $1.4 million from $2.2 million in the first quarter of 2013. The improvement in adjusted EBITDA reflects the increasing contribution from the Company's higher margin technology products, as well as lower costs in the Voyager Sopris Learning segment attributable to last year's efforts to right-size costs in slower-growing areas of the company. To facilitate expected growth in the Learning A-Z and ExploreLearning segments, the Company has made investments in 2013 and continuing into 2014 in the sales force and product development efforts for these units, which are expected to increase costs as a percentage of net revenues at these segments for the full year 2014.

Other highlights include:

  • Overall, GAAP net revenues for the first quarter of 2014 decreased by 1% to $31.1 million compared with $31.4 million in the first quarter of 2013.  GAAP net revenues by segment for the first quarter of 2014, and the percentage change from 2013, were as follows:
    • Voyager Sopris Learning: $14.3 million, decreased 18%
    • Learning A–Z: $10.2 million, increased 34%
    • ExploreLearning: $4.5 million, increased 19%
    • Kurzweil/IntelliTools: $2.1 million, decreased 19%
  • In 2014, management began using a new non-GAAP metric, which it refers to as Cash Income, to set and measure progress toward performance targets. Cash Income reduces Adjusted EBITDA for capital expenditures and removes the timing differences for recognition of deferred revenues and related deferred expenses. Cash Income (Loss) was $(9.7) million in the first quarter of 2014, down $1.3 million from $(8.3) million in the first quarter of 2013. Cash Income declined primarily due to the reduction in order volume.
  • The Company has cash and cash equivalents of $41.2 million on the balance sheet as of March 31, 2014. During the first quarter of 2014, cash used in operations was $16.6 million, cash used in investing activities was $7.6 million, including $3.6 million related to the December 2013 Headsprout® acquisition, and cash used in financing activities was $2.5 million.
  • During the first quarter of 2014, the Company repurchased 167,961 shares of its outstanding common stock for $0.3 million. After these transactions, the Company has $0.3 million remaining under its previously disclosed share repurchase authorization.
  • During the quarter ended March 31, 2014, the Company repurchased $2.0 million aggregate principal amount of its 9.75% senior secured notes due 2017 for approximately $2.0 million. In April 2014, the Company repurchased an additional $5.0 million aggregate principal amount for $5.1 million.
  • In April 2014, the Company completed the sale of its IntelliTools product line for $0.8 million

"We were happy with the performance of our Learning A–Z and ExploreLearning segments during the first quarter, and we believe that our focus on educational technology aligns well with the changing market," said John Campbell, chief executive officer of Cambium Learning Group, Inc. "The first quarter order volume results for Voyager Sopris Learning and Kurzweil/IntelliTools were disappointing, but the first quarter is seasonally our least important quarter and we are looking forward to helping teachers improve student reading, writing, math and science performance in the coming year."

Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, and Cash Income are not prepared in accordance with GAAP and may be different from similarly named, non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company believes that these non-GAAP measures provide useful information to investors because they reflect the underlying performance of the ongoing operations of the Company and provide investors with a view of the Company's operations from management's perspective. Adjusted EBITDA and Cash Income remove significant purchase accounting, non-operational, or certain non-cash items from earnings. The Company uses Adjusted EBITDA and Cash Income to monitor and evaluate the operating performance of the Company and as the basis to set and measure progress toward performance targets, which directly affect compensation for employees and executives. The Company generally uses these non-GAAP measures as measures of operating performance and not as measures of the Company's liquidity. The Company's presentation of EBITDA, Adjusted EBITDA, and Cash Income should not be construed as an indication that our future results will be unaffected by unusual, non-operational, or non-cash items.

About Cambium Learning Group, Inc.
Cambium Learning® Group is a leading educational solutions and services company that is committed to helping all students reach their full potential by providing evidence-based solutions and expert professional services to empower educators and raise the achievement levels of all students. The company is composed of four business units: Voyager Sopris Learning (www.voyagersopris.com), Learning A–Z (www.learninga-z.com), ExploreLearning® (www.explorelearning.com), and Kurzweil Educational Systems® (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. Cambium Learning Group, Inc. (ABCD), is based in Dallas, Texas. For more information, please 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 March 31


2014


2013

Net revenues

$

31,080


$

31,429


Cost of revenues:

Cost of revenues


9,011



11,403

Amortization expense


4,080



3,707

Total cost of revenues


13,091



15,110


Research and development expense


2,747



2,331

Sales and marketing expense


10,582



10,333

General and administrative expense


5,180



6,793

Shipping and handling costs


196



299

Depreciation and amortization expense


1,064



1,216

Total costs and expenses


32,860



36,082


Loss before interest, other income (expense) and income taxes


(1,780)



(4,653)


Net interest expense


(4,738)



(4,576)

Loss on extinguishment of debt


(213)



-

Other income, net


215



219

Loss before income taxes


(6,516)



(9,010)


Income tax expense


(71)



(68)

Net loss

$

(6,587)


$

(9,078)


Net loss per common share:

Basic

$

(0.14)


$

(0.19)

Diluted

$

(0.14)


$

(0.19)


Average number of common shares and equivalents outstanding:






Basic


45,685



47,397

Diluted


45,685



47,397

 

 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)



As of


March 31,

2014


December 31,

2013


(unaudited)



ASSETS


Current assets:

Cash and cash equivalents

$

41,239


$

67,993

Accounts receivable, net


10,599



15,767

Inventory


8,355



9,221

Restricted assets, current


1,343



1,343

Other current assets


7,175



6,873

Total current assets


68,711



101,197


Property, equipment and software at cost


45,061



43,224

Accumulated depreciation and amortization


(24,865)



(22,909)

Property, equipment and software, net


20,196



20,315


Goodwill


47,842



47,842

Acquired curriculum and technology intangibles, net


7,811



8,719

Acquired publishing rights, net


4,219



4,705

Other intangible assets, net


5,870



6,251

Pre-publication costs, net


14,115



13,401

Restricted assets, less current portion


5,166



5,492

Other assets


10,126



8,288

Total assets

$

184,056


$

216,210

 

 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)



As of


March 31,

2014


December 31,

2013


(unaudited)



     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:






Capital lease obligations, current

$

1,026


$

995

Accounts payable


1,701



1,301

Accrued expenses


12,319



25,279

Deferred revenue, current


44,250



53,532

Total current liabilities


59,296



81,107


Long-term liabilities:

Long-term debt


172,536



174,491

Capital lease obligations, less current portion


1,755



2,019

Deferred revenue, less current portion


6,687



7,829

Other liabilities


13,726



13,954

Total long-term liabilities


194,704



198,293



Stockholders' equity (deficit):

Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at March 31, 2014 and December 31, 2013)


-



-

Common stock ($.001 par value, 150,000 shares authorized, 51,208 and 51,208 shares issued, and 44,874 and 45,042 shares outstanding at March 31, 2014 and December 31, 2013, respectively)


51



51

Capital surplus


283,785



283,673

Accumulated deficit


(339,282)



(332,695)

Treasury stock at cost (6,334 and 6,166 shares at March 31, 2014 and December 31, 2013, respectively)


(12,448)



(12,147)

Other comprehensive income (loss):






Pension and postretirement plans


(2,050)



(2,072)

Accumulated other comprehensive income (loss)


(2,050)



(2,072)

Total stockholders' equity (deficit)


(69,944)



(63,190)

Total liabilities and stockholders' equity (deficit)

$

184,056


$

216,210

 

 

Reconciliation Between Net Loss and Cash Income (Loss) for the Three Months Ended March 31, 2014 and 2013

(Unaudited)



Three Months Ended March 31,

($ in thousands)

2014


2013

Net loss

$

(6,587)


$

(9,078)

Reconciling items between net loss and EBITDA:






Depreciation and amortization


5,144



4,923

Net interest expense


4,738



4,576

Income tax expense


71



68

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


3,366



489


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






Other income, net


(215)



(219)

Loss on extinguishment of debt


213



-

Merger and acquisition activities


150



158

Stock-based compensation and expense


112



229

Adjustments related to purchase accounting


-



29

Adjustments to CVR liability


-



55

Management transition


-



1,501

Adjusted EBITDA


3,626



2,242


Change in deferred revenues


(10,424)



(7,924)

Change in deferred costs


1,100



1,137

Capital expenditures


(3,986)



(3,792)

Cash income (loss)

$

(9,684)


$

(8,337)

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