Cengage Learning II (CNGO) Q4 2024 earnings summary

Executive summary

• Achieved fiscal 2024 guidance with 5% revenue growth to $1.535 billion and 10% adjusted cash EBITDA growth to $461 million, marking a third consecutive year of mid-single-digit revenue growth and double-digit profitability increase.

• EBITDA margin expanded to 30%, up 122 basis points year-over-year.

• All business units—Academic, Work, and Select—contributed to growth; U.S. Higher Ed returned to growth, driven by digital sales and positive enrollment trends, while Cengage Work grew 19% and became profitable.

• Strategic operating model changes and cost savings program implemented, targeting $60 million incremental savings in fiscal 2025 and $90–$100 million over fiscal 2025–26.

• Successfully refinanced $1.6 billion term loan, extended maturity to 2031, reduced interest costs, and improved capital structure with preferred equity issuance.

Financial highlights

• FY24 adjusted cash revenue was $1.535 billion, up 5% year-over-year; Q4 revenue was $413 million, up 8%.

• Adjusted cash EBITDA for FY24 was $461 million, up 10%; Q4 EBITDA was $134 million, up 19%.

• Digital net sales rose 9% to $1.145 billion, now 75% of total sales.

• EBITDA margin increased to 30%, up 122 basis points from prior year.

• Unlevered free cash flow increased to $317 million, up $65 million from prior year.

Outlook and guidance

• Fiscal 2025 expected to deliver robust top-line growth, with accelerated adjusted EBITDA growth and margin expansion.

• $60 million in incremental cost savings targeted for fiscal 2025, with $90–$100 million total over fiscal 2025–26.

• Unlevered free cash flow expected to increase meaningfully, driven by EBITDA growth and working capital improvements.

• Cengage Academic expected to deliver low single-digit growth, underpinned by digital expansion; Cengage Work anticipated to maintain strong double-digit revenue growth and margin improvement.

• Working capital expected to be neutral or better in fiscal 2025, with continued strong cash generation.