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Cambium Learning Group Announces First Quarter Earnings

Companies mentioned in this article: Cambium Learning Group, Inc.

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)%

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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(TM) 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((TM)) (
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,               December
                                                           31,

                                        2014              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,               December
                                                               31,

                                            2014              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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SOURCE Cambium Learning Group, Inc.