Attached files

file filename
8-K - 8-K - CAMBIUM LEARNING GROUP, INC.abcd-8k_20150626.htm

Slide 1

Real Progress for Every Student Investor Presentation June 2015 Exhibit 99.1

Slide 2

Forward Looking Statements and Non GAAP Financial Measures 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. (the “Company”), 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 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 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. Non-GAAP Financial Measures Bookings, 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 Bookings, Adjusted EBITDA and Cash Income 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 Bookings, 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.

Slide 3

Investment Highlights

Slide 4

Cambium Learning Group Helping All Students Reach Their Full Potential

Slide 5

Education is the Foundation of Everything Global preK-12 market expected to grow 6% in next two years The U.S. test rankings 20th in the world in Reading 30th in Math 24th in Science behind Latvia and Slovakia million students in the U.S.

Slide 6

PreK-12 Education Market Education in Flux Districts pulling back or out from Common Core Expect rigor of standards to increase More students will fall behind or fail More test scores tied to teachers’ salaries Parents, teachers, districts demand solutions Digital Solutions Rapidly Gaining Share Technology offers effective solution Digital share of the supplemental market: 59% in 2012; 59.7% in 2013: ~ 60.7% in 2014 Buying decisions often originate with teachers Technology Effective as 1on1 Replacement Cambium Learning Optimally Positioned to Serve Growing Need for Superior, Flexible Technology Solutions SALES OF PRINT & DIGITAL MEDIA TO U.S. PREK-12 Sources: National Center for Educational Statistics and Simba Information publication and “Publishing for the Pre-K-12 Market 2014 – 2015.” (Dollars in Billions)

Slide 7

Award Winning PreK-12 Solutions Solutions designed to help teachers around the world address the increasingly wide range of individual needs and potential of every student in their classroom 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 Product Pre-K 3rd Grade 6th Grade 12th Grade Adult

Slide 8

Cambium Learning’s Core Beliefs Every learner has untapped potential Data, instruction and practice drive improvement Teachers are the foundation – their Importance must be valued Phonics and Comprehension Math Fact Fluency Adaptive Literacy Intervention Advance the state of the art to change a child’s trajectory through technology-based solutions that are - personalized - adaptive -scalable

Slide 9

2013-14 Transformation: Actions Backfilling years of underinvestment, accelerating transition to technology-enabled solutions Developed, launched new Ticket to Read and The Learning Zoo, iPad apps Launched digital version of TransMath Updated Passport Reading Journeys Released LANGUAGE!Live online 100% digital subscription business Launched Reflex iPad app Embarked on a major project to port all Gizmos to HTML5 - compatible with Chromebooks and Android Learning A-Z is 100% digital subscription business Launched ReadyTest A-Z Launched Headsprout Educator Grant Program Transition to Digital Subscription Model Actions Closed class.com Sold IntelliTools for $0.8 million Exited TeacherMatch Reallocated resources to accelerate development and launch of technology-based subscriptions and products Kurzweil Education quickly transitioning to subscription Tightened product line through divestiture of IntelliTools Launched enhanced firefly product

Slide 10

2013-14 Transformation: Results Bookings - 60% of volumes generated by technology-enabled products versus 46% during 2013 and 37% in 2012 Cash income margin expansion of 78BP driven by technology-enabled products and cost management Adjusted EBITDA growth of 3% driven by 25% growth at Learning A-Z Prepaid $35 million in debt 2014 bookings growth of 30%, revenue growth of 33% Cash income up 23% Cash income margin in mid-40s 2015: see continued strong double-digit bookings growth Language!Live was up 130% 2014/13 firefly was up 14% 2014/13 2015: see bookings contraction slowing as print-based products transition out – could return to bookings growth driven by technology-enabled products in 2016 2014 transition year as Gizmos is upgraded and revised to HTML5 for multiplatform use; continued Reflex penetration Districts using Reflex increased 57% 2014 impacted by several multi-year sales from 2013 2015: see top-line acceleration

Slide 11

Digital Success: Learning A-Z and ExploreLearning

Slide 12

CAMBIUM IS AT AN INFLECTION POINT IN THE TRANSITION OF ITS LEGACY PRODUCTS TO DIGITAL, BUILDING ON THE SUCCESSFUL PENETRATION, DOUBLE-DIGIT GROWTH RATES AND STRONG PROFITABILITY OF ITS TWO DIGITAL-ONLY PRODUCT OFFERINGS 100% Digital Subscription Digital Transformation Underway Transition to a Digital Subscription Model

Slide 13

MAJOR COMPETITORS WHY WE WIN Saves teachers time and money One-stop library of literary resources Research-based solutions World acclaimed authors and advisors Powerfully effective solutions Source: Company management. Cambium’s Competitive Positioning Open Source Materials Gizmos – interactive exploration is the most effective method for understanding and retaining difficult concepts Reflex – the world’s best tool to help students gain automaticity, perform better on high stakes tests, and have fun

Slide 14

Long-term Strategy Accelerate Bookings and Revenue Growth – Expand Profit Margins Goals Shift to subscription-based models Invest wisely in highest-return opportunities Focus on driving margin expansion and cash flow generation

Slide 15

Experienced Management Team Former President of Cambium Learning Technologies, COO of Voyager Learning Company Former COO and business unit head of a research-based reading company (Breakthrough to Literacy) within McGraw-Hill Director of Technology for Tribune Education, General Manager of a software start-up (Insight Industries) and Director of Applications and Technical Support for a hardware manufacturer (Commodore International) John Campbell Chief Executive Officer CFO since 2013; former Controller of Cambium Learning Group, Inc. and Controller of Voyager Learning Company Principal Accounting Officer of the Company since March 2010 Pegasus Solutions, Inc., Coopers & Lybrand, CPA Barbara Benson Chief Financial Officer Began publishing career as a sales representative in 1975 39 years of industry experience; former President of Houghton Mifflin School Division Original Co-Founder of Cambium Learning Group in 2003 George A. Logue President, Voyager/Sopris 10 years public school educator, 40 years in educational publishing, curriculum /educational resource consultant Co-founded Learning A-Z Wright Group, Addison-Wesley Publishing, Scott Foresman Publishing Companies, consultant Bob Holl President, Learning A-Z Former classroom educator Founded ExploreLearning Intimately involved in the design and development of award-winning products David Shuster President, ExploreLearning

Slide 16

Financials by Segment ($ millions)

Slide 17

Cambium Learning Group Financials ($ millions)

Slide 18

Balance Sheet Data and Metrics ($ millions) 2013 2014 Q1 2014 Q1 2015 Cash $ 68.0 $ 34.4 $ 41.2 $ 19.8 Accounts receivable 15.8 14.3 10.6 12.0 Inventory 9.2 5.3 8.4 5.5 Deferred revenue 61.4 71.2 50.9 61.7 Long-term debt (face) 175.0 140.0 173.0 140.0 Working capital (1) $ 0.7 $ 3.1 $ 8.3 $ 6.9 Net Debt/TTM Adjusted EBITDA 3.4 x 3.3 x 4.0 x 3.4 x Net Debt/TTM Cash Income 4.6 x 4.6 x 6.1 x 4.7 x (1) Working capital excludes cash, deferred costs and deferred revenue

Slide 19

Investment Highlights

Slide 20

Appendix

Slide 21

Non-GAAP Financial Measures Non-GAAP Financial Measures Bookings, 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 Bookings, Adjusted EBITDA and Cash Income 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 Bookings, 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.

Slide 22

Reconciliation of Net Loss to Cash Income ($ millions) Cambium Learning Group 2012 2013 2014 Q1 2015 TTM Net loss $ (133.8) $ (14.3) $ (10.0) $ (5.9) Reconciling items between net loss and EBITDA: Depreciation and amortization expense 30.9 22.4 22.5 22.3 Net interest expense 18.7 18.8 17.7 16.6 Income tax expense 0.3 0.2 0.6 0.6 EBITDA $ (83.9) $ 27.1 $ 30.8 $ 33.6 Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: Other income, net (1.1) (0.8) (1.10) (1.0) Loss on extinguishment of debt – – 0.9 0.7 Merger, acquisition and disposition activities 0.8 0.7 1.1 1.1 Stock-based compensation and expense 0.9 1.1 0.5 0.5 Impairment - goodwill and long-lived assets 94.7 1.2 – – Restructuring costs, management transition, and other adjustments 10.0 1.9 – – Adjusted EBITDA $ 21.4 $ 31.2 $ 32.2 $ 34.9 Change in deferred revenues 8.3 9.3 9.9 10.9 Change in deferred costs (1.6) (1.3) (1.1) (1.5) Capital expenditures (17.4) (16.2) (17.9) (18.7) Cash income $ 10.7 $ 23.0 $ 23.1 $ 25.6

Slide 23

Reconciliation of Bookings to Net Revenue ($ millions) Cambium Learning Group 2012 2013 2014 Q1 2015 TTM Bookings $ 158.6 $ 158.0 $ 150.6 $ 153.0 Change in deferred revenues (8.3) (9.3) (9.9) (10.9) Other (1.4) 1.9 1.0 - Net revenues $ 148.9 $ 150.6 $ 141.7 $ 142.1