Cengage Learning II (CNGO) Q3 2026 earnings summary

Executive summary

• Q3 fiscal 2026 delivered strong momentum, with Adjusted Cash Revenue up 10% year-on-year and Adjusted Cash EBITDA up $21 million, turning a prior-year loss into a profit, driven by robust growth in U.S. higher education and the work segment.

• Digital and institutional sales outperformed, reflecting the success of the platform strategy, customer relationships, and expanded AI-driven capabilities.

• New partnerships and AI-driven product launches enhanced the connection between education and employment and improved operational efficiency.

• Operating model changes unified all businesses under a single brand, streamlining go-to-market and cross-selling opportunities and strengthening global presence.

Financial highlights

• Q3 Adjusted Cash Revenue rose $22 million (10%) year-on-year to $245 million; Adjusted Cash EBITDA improved by $21 million to $18 million, with margin rising to 7%.

• TTM Adjusted Cash Revenue reached $1.53 billion, up 3% year-on-year; TTM Adjusted Cash EBITDA was $532 million, up 6%, with margin at 35%.

• Q3 GAAP revenue was $360 million (up 6.8% YoY); operating income increased to $54.1 million from $37.7 million last year; net income for Q3 was $20.9 million, reversing a loss of $3.2 million.

• Levered Free Cash Flow for the nine months ended December 31 increased by $10 million year-on-year to $78 million.

• Operating expenses down 2% year-on-year for the quarter, flat on a TTM basis, reflecting improved leverage and efficiency savings.

Outlook and guidance

• Continued focus on digital transformation, AI integration, and go-to-market initiatives expected to drive future growth, especially in Higher Education and Work segments.

• Investments in K-12 and ELL segments position the company for large adoption years in 2027 and 2028, with improved performance expected in the School segment.

• Management expects further improvement in free cash flow and leverage as collections ramp up in Q4 and lower interest payments from term loan repricing.