Cengage Learning II (CNGO) Q1 2025 earnings summary

Executive summary

• Revenue for Q1 FY25 grew 2.1% year-over-year to $332.3 million, driven by gains in Academic and ELT, while Work, Research, and Other segments declined.

• Net loss improved to $28.6 million from $35.4 million in the prior year, reflecting higher revenues, cost efficiencies, and lower interest expense.

• Adjusted EBITDA increased 28.9% to $88.8 million, with margin expansion across most segments.

• Operating cash outflow improved to $95.4 million, reflecting better collections and lower interest payments.

• Substantial completion of a new operating model and cost savings program, with $60M+ in savings actioned for FY25 and at least $100M targeted over FY25 and FY26.

Financial highlights

• Q1 revenue: $332.3 million, up 2.1% year-over-year; Adjusted EBITDA: $88.8 million, up 28.9%.

• Net loss: $28.6 million, improved from $35.4 million loss in Q1 FY24.

• Adjusted EBITDA margin expanded to 26.7% from 21.2% year-over-year.

• Operating cash flow outflow: $95.4 million, improved from $131.5 million prior-year.

• Digital net sales reached $1.16 billion trailing 12 months, representing 76% of total net sales.

Outlook and guidance

• FY25 guidance reaffirmed, expecting solid revenue growth, accelerated EBITDA growth, and margin expansion.

• New operating model expected to be substantially complete by September 30, 2024, with all material cash payments by March 31, 2025.

• One-time restructuring costs estimated at $85–$90 million, including $32 million in severance.

• No material changes to risk factors or liquidity outlook for the remainder of FY25.

• Anticipated meaningful increase in unlevered free cash flow driven by EBITDA growth and improved working capital.