Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in millions) | 2018 | 2017 | $ Change | 2018 | 2017 | $ Change | |||||||||||||||||
GAAP net revenues | $ | 44.7 | $ | 43.5 | $ | 1.2 | $ | 122.3 | $ | 119.9 | $ | 2.5 | |||||||||||
GAAP net income | 5.9 | 6.5 | (0.6 | ) | 12.9 | 14.8 | (1.9 | ) | |||||||||||||||
Net income margin % | 13 | % | 15 | % | 11 | % | 12 | % | |||||||||||||||
EBITDA | 14.2 | 13.5 | 0.7 | 33.9 | 34.6 | (0.8 | ) | ||||||||||||||||
Adjusted EBITDA | 15.9 | 14.1 | 1.7 | 37.4 | 36.0 | 1.4 | |||||||||||||||||
Adjusted EBITDA margin % | 35 | % | 32 | % | 31 | % | 30 | % | |||||||||||||||
Bookings | $ | 82.9 | $ | 78.5 | $ | 4.3 | $ | 135.8 | $ | 127.4 | $ | 8.5 | |||||||||||
Cash income | 45.1 | 40.2 | 5.0 | 36.5 | 28.6 | 7.9 | |||||||||||||||||
Cash income margin % | 54 | % | 51 | % | 27 | % | 22 | % |
• | Generally Accepted Accounting Principles (GAAP) net revenues for the nine months ended September 30, 2018 increased by $2.5 million, or 2%, to $122.3 million compared with $119.9 million in 2017. GAAP net revenues by segment for the nine months ended September 30, 2018, and the change from the same period of 2017, were as follows: |
◦ | Learning A-Z® - $59.5 million, increased $4.2 million or 8% |
◦ | ExploreLearning® - $23.2 million, increased $2.5 million or 12% |
◦ | Voyager Sopris Learning® - $39.6 million, decreased $(4.3) million or (10)% |
• | Bookings for the nine months ended September 30, 2018 increased by 7% to $135.8 million, compared with $127.4 million in the nine months ended September 30, 2017, with growth at the Learning A-Z and ExploreLearning segments offset by a decline in the Voyager Sopris Learning segment. |
• | The Company reported GAAP net income of $12.9 million during the nine months ended September 30, 2018, decreasing $1.9 million compared to net income of $14.8 million during the nine months ended September 30, 2017. Net income includes expenses of $2.1 million related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. ("VKidz") and its review of strategic alternatives and subsequent merger agreement with certain affiliates of Veritas Capital, in addition to higher tax expense. The Company's effective tax rate for the nine months ended September 30, 2018 is higher than the effective tax rate for the nine months ended September 30, 2017 as a result of reducing most of the valuation allowance against most of the Company's deferred tax assets in the fourth quarter of 2017. |
• | Adjusted EBITDA was $37.4 million, increasing $1.4 million from $36.0 million in 2017. The increase in GAAP net revenues, along with a greater portion of the top-line mix coming from the higher margin Learning A-Z and ExploreLearning segments, drove improvement in Adjusted EBITDA. |
• | Net interest expense was $2.7 million for the nine months ended September 30, 2018, down $1.2 million from the nine months ended September 30, 2017 as a result of the scheduled debt amortization payments and voluntary prepayments made during 2017. |
• | Cash Income was $36.5 million for the nine months ended September 30, 2018 compared to Cash Income of $28.6 million for the nine months ended September 30, 2017. Capital expenditures totaled $12.1 million in the nine months ended September 30, 2018 versus $13.9 million in the nine months ended September 30, 2017. |
• | The Company had cash and cash equivalents of $26.3 million at September 30, 2018. For the nine months ended September 30, 2018, cash provided by operations was $33.2 million, cash used in investing activities was $12.1 million, and cash used in financing activities was $3.4 million. At September 30, 2018, the principal amount of term loans outstanding was $44.0 million, there was $29.8 million available under the revolving credit facility and no borrowings were outstanding. |
• | The Company's technology-enabled products continue to receive industry recognition. The Company was recently awarded 14 Education Software Review (EDDIE) Awards for 2018, with Learning A-Z receiving 12 EDDIE awards, and ExploreLearning receiving two EDDIE awards. |
• | GAAP net revenues for the third quarter of 2018 increased by $1.2 million, or 3%, to $44.7 million compared with $43.5 million in 2017. GAAP net revenues by segment for the three months ended September 30, 2018, and the change from the same period of 2017, were as follows: |
• | Learning A-Z - $20.0 million, increased $1.5 million or 8% |
• | ExploreLearning - $8.0 million, increased $0.8 million or 11% |
• | Voyager Sopris Learning - $16.8 million, decreased $(1.1) million or (6)% |
• | Bookings for the third quarter of 2018 were $82.9 million, an increase of 6% compared with $78.5 million in the third quarter of 2017. |
• | The Company reported net income of $5.9 million during the third quarter of 2018, decreasing $0.6 million compared to net income of $6.5 million during the third quarter of 2017. Net income includes expenses of $1.0 million related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. and its review of strategic alternatives and subsequent merger agreement with certain affiliates of Veritas Capital, in addition to higher tax expense. |
• | Adjusted EBITDA for the third quarter of 2018 was $15.9 million, increasing $1.7 million from $14.1 million in 2017. The increase in GAAP net revenues, along with a greater portion of the top-line mix coming from the higher margin Learning A-Z and ExploreLearning segments, drove improvement in Adjusted EBITDA. |
• | Cash Income was $45.1 million for the third quarter of 2018 compared to Cash Income of $40.2 million for the third quarter of 2017. Capital expenditures totaled $4.1 million in the third quarter of 2018 versus $5.1 million in the third quarter of 2017. |
Q3 - 2018 % Change | YTD - 2018 % Change | ||||||||||||||||
Net Revenues | Bookings | Net Income | Cash Income | Net Revenues | Bookings | Net Income | Cash Income | ||||||||||
Learning A-Z | 8 | % | 7 | % | 5 | % | 5 | % | 8 | % | 9 | % | 2 | % | 5 | % | |
ExploreLearning | 11 | % | 31 | % | 3 | % | 37 | % | 12 | % | 24 | % | (1 | )% | 27 | % | |
Voyager Sopris Learning | (6 | )% | (9 | )% | 15 | % | (2 | )% | (10 | )% | (5 | )% | 6 | % | 61 | % | |
Shared Services | (18 | )% | 23 | % | (10 | )% | 6 | % | |||||||||
Cambium Learning Group, Inc. | 3 | % | 6 | % | (9 | )% | 12 | % | 2 | % | 7 | % | (13 | )% | 28 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net revenues | $ | 44,734 | $ | 43,523 | $ | 122,337 | $ | 119,855 | |||||||
Cost of revenues: | |||||||||||||||
Cost of revenues | 7,801 | 7,928 | 20,902 | 21,328 | |||||||||||
Amortization expense | 4,200 | 4,676 | 12,147 | 13,094 | |||||||||||
Total cost of revenues | 12,001 | 12,604 | 33,049 | 34,422 | |||||||||||
Research and development expense | 4,059 | 3,352 | 11,678 | 9,744 | |||||||||||
Sales and marketing expense | 12,283 | 12,771 | 37,803 | 37,871 | |||||||||||
General and administrative expense | 5,962 | 5,457 | 17,378 | 15,240 | |||||||||||
Shipping and handling costs | 323 | 414 | 630 | 727 | |||||||||||
Depreciation and amortization expense | 721 | 670 | 2,156 | 2,020 | |||||||||||
Total costs and expenses | 35,349 | 35,268 | 102,694 | 100,024 | |||||||||||
Income before interest and income taxes | 9,385 | 8,255 | 19,643 | 19,831 | |||||||||||
Net interest expense | (897 | ) | (1,271 | ) | (2,654 | ) | (3,834 | ) | |||||||
Other income (expense), net | (103 | ) | (108 | ) | (88 | ) | (325 | ) | |||||||
Income before income taxes | 8,385 | 6,876 | 16,901 | 15,672 | |||||||||||
Income tax expense | (2,508 | ) | (399 | ) | (3,982 | ) | (873 | ) | |||||||
Net income | $ | 5,877 | $ | 6,477 | $ | 12,919 | $ | 14,799 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.12 | $ | 0.14 | $ | 0.27 | $ | 0.32 | |||||||
Diluted | $ | 0.12 | $ | 0.14 | $ | 0.27 | $ | 0.31 | |||||||
Average number of common shares and equivalents outstanding: | |||||||||||||||
Basic | 47,273 | 46,460 | 47,116 | 46,316 | |||||||||||
Diluted | 48,503 | 47,629 | 48,351 | 47,522 |
September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 26,255 | $ | 8,493 | |||
Accounts receivable, net | 26,327 | 12,937 | |||||
Inventory | 1,704 | 2,382 | |||||
Restricted assets, current | 961 | 961 | |||||
Other current assets | 13,167 | 11,193 | |||||
Total current assets | 68,414 | 35,966 | |||||
Property, equipment and software at cost | 63,720 | 65,250 | |||||
Accumulated depreciation and amortization | (43,440 | ) | (43,164 | ) | |||
Property, equipment and software, net | 20,280 | 22,086 | |||||
Goodwill | 43,518 | 43,518 | |||||
Other intangible assets, net | 2,858 | 3,607 | |||||
Pre-publication costs, net | 18,071 | 17,758 | |||||
Restricted assets, less current portion | 615 | 1,293 | |||||
Deferred tax assets | 27,497 | 30,614 | |||||
Other assets | 4,040 | 3,712 | |||||
Total assets | $ | 185,293 | $ | 158,554 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 2,344 | $ | 2,388 | |||
Accrued expenses | 16,302 | 12,121 | |||||
Current portion of long-term debt | 6,776 | 5,958 | |||||
Deferred revenue, current | 96,468 | 86,913 | |||||
Total current liabilities | 121,890 | 107,380 | |||||
Long-term liabilities: | |||||||
Long-term debt | 36,781 | 41,841 | |||||
Deferred revenue, less current portion | 17,751 | 13,995 | |||||
Other liabilities | 9,072 | 9,630 | |||||
Total long-term liabilities | 63,604 | 65,466 | |||||
Stockholders' equity (deficit): | |||||||
Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at September 30, 2018 and December 31, 2017) | — | — | |||||
Common stock ($.001 par value, 150,000 shares authorized, 53,832 and 53,333 shares issued, and 47,300 and 46,800 shares outstanding at September 30, 2018 and December 31, 2017, respectively) | 54 | 53 | |||||
Capital surplus | 290,837 | 289,022 | |||||
Accumulated deficit | (276,322 | ) | (288,490 | ) | |||
Treasury stock at cost (6,532 shares at September 30, 2018 and December 31, 2017) | (12,784 | ) | (12,784 | ) | |||
Accumulated other comprehensive loss: | |||||||
Pension and postretirement plans | (1,986 | ) | (2,093 | ) | |||
Accumulated other comprehensive loss | (1,986 | ) | (2,093 | ) | |||
Total stockholders' equity (deficit) | (201 | ) | (14,292 | ) | |||
Total liabilities and stockholders' equity (deficit) | $ | 185,293 | $ | 158,554 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income | $ | 5,877 | $ | 6,477 | $ | 12,919 | $ | 14,799 | |||||||
Reconciling items between net income and EBITDA: | |||||||||||||||
Depreciation and amortization expense | 4,921 | 5,346 | 14,303 | 15,114 | |||||||||||
Net interest expense | 897 | 1,271 | 2,654 | 3,834 | |||||||||||
Income tax expense | 2,508 | 399 | 3,982 | 873 | |||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) | 14,203 | 13,493 | 33,858 | 34,620 | |||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: | |||||||||||||||
Income from sale of excess state tax credits | — | — | (222 | ) | — | ||||||||||
Restructuring costs | — | 281 | — | 281 | |||||||||||
Merger, acquisition and disposition activities | 1,402 | 138 | 3,023 | 477 | |||||||||||
Stock-based compensation and expense | 249 | 217 | 728 | 641 | |||||||||||
Adjusted EBITDA | 15,854 | 14,129 | 37,387 | 36,019 | |||||||||||
Change in deferred revenues | 37,701 | 35,065 | 12,887 | 7,646 | |||||||||||
Change in deferred costs | (4,344 | ) | (3,906 | ) | (1,755 | ) | (1,175 | ) | |||||||
Capital expenditures | (4,068 | ) | (5,096 | ) | (12,056 | ) | (13,912 | ) | |||||||
Cash income | $ | 45,143 | $ | 40,192 | $ | 36,463 | $ | 28,578 |
Three Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Bookings | $ | 40,714 | $ | 18,007 | $ | 24,151 | $ | 82,872 | |||||||
Change in deferred revenues | (20,653 | ) | (10,208 | ) | (6,840 | ) | (37,701 | ) | |||||||
Other | (88 | ) | 153 | (502 | ) | (437 | ) | ||||||||
Net revenues | $ | 19,973 | $ | 7,952 | $ | 16,809 | $ | 44,734 |
Nine Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Bookings | $ | 64,996 | $ | 27,977 | $ | 42,868 | $ | 135,841 | |||||||
Change in deferred revenues | (5,364 | ) | (4,870 | ) | (2,653 | ) | (12,887 | ) | |||||||
Other | (88 | ) | 81 | (610 | ) | (617 | ) | ||||||||
Net revenues | $ | 59,544 | $ | 23,188 | $ | 39,605 | $ | 122,337 |
Three Months Ended September 30, 2018 | |||||||||||||||||||
(in thousands) | Learning A-Z | Explore Learning | Voyager Sopris Learning | Other | Consolidated | ||||||||||||||
Net income | $ | 9,619 | $ | 2,975 | $ | 5,948 | $ | (12,665 | ) | $ | 5,877 | ||||||||
Reconciling items between net income and EBITDA: | |||||||||||||||||||
Depreciation and amortization expense | — | — | — | 4,921 | 4,921 | ||||||||||||||
Net interest expense | — | — | — | 897 | 897 | ||||||||||||||
Income tax expense | — | — | — | 2,508 | 2,508 | ||||||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) | 9,619 | 2,975 | 5,948 | (4,339 | ) | 14,203 | |||||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: | |||||||||||||||||||
Merger, acquisition and disposition activities | — | — | — | 1,402 | 1,402 | ||||||||||||||
Stock-based compensation and expense | 70 | 53 | 59 | 67 | 249 | ||||||||||||||
Adjusted EBITDA | 9,689 | 3,028 | 6,007 | (2,870 | ) | 15,854 | |||||||||||||
Change in deferred revenues | 20,653 | 10,208 | 6,840 | — | 37,701 | ||||||||||||||
Change in deferred costs | (2,256 | ) | (900 | ) | (1,188 | ) | — | (4,344 | ) | ||||||||||
Capital expenditures - product development | (1,995 | ) | (1,002 | ) | (598 | ) | — | (3,595 | ) | ||||||||||
Capital expenditures - general expenditures | (271 | ) | (110 | ) | (67 | ) | (25 | ) | (473 | ) | |||||||||
Cash income | $ | 25,820 | $ | 11,224 | $ | 10,994 | $ | (2,895 | ) | $ | 45,143 |
Nine Months Ended September 30, 2018 | |||||||||||||||||||
(in thousands) | Learning A-Z | Explore Learning | Voyager Sopris Learning | Other | Consolidated | ||||||||||||||
Net income | $ | 28,396 | $ | 8,322 | $ | 9,738 | $ | (33,537 | ) | $ | 12,919 | ||||||||
Reconciling items between net income and EBITDA: | |||||||||||||||||||
Depreciation and amortization expense | — | — | — | 14,303 | 14,303 | ||||||||||||||
Net interest expense | — | — | — | 2,654 | 2,654 | ||||||||||||||
Income tax expense | — | — | — | 3,982 | 3,982 | ||||||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) | 28,396 | 8,322 | 9,738 | (12,598 | ) | 33,858 | |||||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: | |||||||||||||||||||
Income from sale of excess state tax credits | — | — | — | (222 | ) | (222 | ) | ||||||||||||
Merger, acquisition and disposition activities | — | — | — | 3,023 | 3,023 | ||||||||||||||
Stock-based compensation and expense | 197 | 153 | 177 | 201 | 728 | ||||||||||||||
Adjusted EBITDA | 28,593 | 8,475 | 9,915 | (9,596 | ) | 37,387 | |||||||||||||
Change in deferred revenues | 5,364 | 4,870 | 2,653 | — | 12,887 | ||||||||||||||
Change in deferred costs | (964 | ) | (243 | ) | (548 | ) | — | (1,755 | ) | ||||||||||
Capital expenditures - product development | (5,869 | ) | (3,038 | ) | (1,793 | ) | — | (10,700 | ) | ||||||||||
Capital expenditures - general expenditures | (847 | ) | (271 | ) | (182 | ) | (56 | ) | (1,356 | ) | |||||||||
Cash income | $ | 26,277 | $ | 9,793 | $ | 10,045 | $ | (9,652 | ) | $ | 36,463 |
September 30, 2018 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Deferred revenue, current | $ | 55,955 | $ | 23,355 | $ | 17,158 | $ | 96,468 | |||||||
Deferred revenue, less current portion | 8,482 | 4,087 | 5,182 | 17,751 | |||||||||||
Deferred revenue | $ | 64,437 | $ | 27,442 | $ | 22,340 | $ | 114,219 |
September 30, 2018 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Deferred costs, current | $ | 5,425 | $ | 1,956 | $ | 2,640 | $ | 10,021 | |||||||
Deferred costs, less current portion | 822 | 343 | 1,006 | 2,171 | |||||||||||
Deferred costs | $ | 6,247 | $ | 2,299 | $ | 3,646 | $ | 12,192 |
Three Months Ended September 30, 2017 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Bookings | $ | 38,136 | $ | 13,742 | $ | 26,660 | $ | 78,538 | |||||||
Change in deferred revenues | (19,625 | ) | (6,755 | ) | (8,685 | ) | (35,065 | ) | |||||||
Other | — | 152 | (102 | ) | 50 | ||||||||||
Net revenues | $ | 18,511 | $ | 7,139 | $ | 17,873 | $ | 43,523 |
Nine Months Ended September 30, 2017 | |||||||||||||||
(in thousands) | Learning A-Z | ExploreLearning | Voyager Sopris Learning | Consolidated | |||||||||||
Bookings | $ | 59,696 | $ | 22,506 | $ | 45,189 | $ | 127,391 | |||||||
Change in deferred revenues | (4,350 | ) | (1,901 | ) | (1,395 | ) | (7,646 | ) | |||||||
Other | — | 47 | 63 | 110 | |||||||||||
Net revenues | $ | 55,346 | $ | 20,652 | $ | 43,857 | $ | 119,855 |
Three Months Ended September 30, 2017 | |||||||||||||||||||
(in thousands) | Learning A-Z | Explore Learning | Voyager Sopris Learning | Other | Consolidated | ||||||||||||||
Net income | $ | 9,169 | $ | 2,876 | $ | 5,186 | $ | (10,754 | ) | $ | 6,477 | ||||||||
Reconciling items between net income and EBITDA: | |||||||||||||||||||
Depreciation and amortization expense | — | — | — | 5,346 | 5,346 | ||||||||||||||
Net interest expense | — | — | — | 1,271 | 1,271 | ||||||||||||||
Income tax expense | — | — | — | 399 | 399 | ||||||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) | 9,169 | 2,876 | 5,186 | (3,738 | ) | 13,493 | |||||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: | |||||||||||||||||||
Restructuring costs | — | — | 281 | — | 281 | ||||||||||||||
Merger, acquisition and disposition activities | — | — | — | 138 | 138 | ||||||||||||||
Stock-based compensation and expense | 53 | 30 | 67 | 67 | 217 | ||||||||||||||
Adjusted EBITDA | 9,222 | 2,906 | 5,534 | (3,533 | ) | 14,129 | |||||||||||||
Change in deferred revenues | 19,625 | 6,755 | 8,685 | — | 35,065 | ||||||||||||||
Change in deferred costs | (1,585 | ) | (624 | ) | (1,697 | ) | — | (3,906 | ) | ||||||||||
Capital expenditures - product development | (2,020 | ) | (667 | ) | (1,150 | ) | — | (3,837 | ) | ||||||||||
Capital expenditures - general expenditures | (637 | ) | (202 | ) | (201 | ) | (219 | ) | (1,259 | ) | |||||||||
Cash income | $ | 24,605 | $ | 8,168 | $ | 11,171 | $ | (3,752 | ) | $ | 40,192 |
Nine Months Ended September 30, 2017 | |||||||||||||||||||
(in thousands) | Learning A-Z | Explore Learning | Voyager Sopris Learning | Other | Consolidated | ||||||||||||||
Net income | $ | 27,725 | $ | 8,366 | $ | 9,229 | $ | (30,521 | ) | $ | 14,799 | ||||||||
Reconciling items between net income and EBITDA: | |||||||||||||||||||
Depreciation and amortization expense | — | — | — | 15,114 | 15,114 | ||||||||||||||
Net interest expense | — | — | — | 3,834 | 3,834 | ||||||||||||||
Income tax expense | — | — | — | 873 | 873 | ||||||||||||||
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) | 27,725 | 8,366 | 9,229 | (10,700 | ) | 34,620 | |||||||||||||
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: | |||||||||||||||||||
Restructuring costs | — | — | 281 | — | 281 | ||||||||||||||
Merger, acquisition and disposition activities | — | — | — | 477 | 477 | ||||||||||||||
Stock-based compensation and expense | 153 | 84 | 212 | 192 | 641 | ||||||||||||||
Adjusted EBITDA | 27,878 | 8,450 | 9,722 | (10,031 | ) | 36,019 | |||||||||||||
Change in deferred revenues | 4,350 | 1,901 | 1,395 | — | 7,646 | ||||||||||||||
Change in deferred costs | (423 | ) | (131 | ) | (621 | ) | — | (1,175 | ) | ||||||||||
Capital expenditures - product development | (5,818 | ) | (2,148 | ) | (3,959 | ) | — | (11,925 | ) | ||||||||||
Capital expenditures - general expenditures | (1,030 | ) | (369 | ) | (316 | ) | (272 | ) | (1,987 | ) | |||||||||
Cash income | $ | 24,957 | $ | 7,703 | $ | 6,221 | $ | (10,303 | ) | $ | 28,578 |