Cengage Group Announces First Half Fiscal Year 2025 Results

Boston, MA – November 7, 2024 - Cengage Group, a leading global education and technology company, reported its financial results for the second quarter and first half of Fiscal Year 2025, ended September 30, 2024.

Adjusted Cash Revenue for the first half of Fiscal Year 2025 was $841 million, flat against a high comparative which benefitted from earlier ordering and favorable timing of several large deals. Adjusted Cash EBITDA for the first half of Fiscal Year 2025 was $323 million, an increase of 8% over the first half of Fiscal Year 2024. Operating cash flow was $128 million, more than double the $60 million in the prior period.

“As we close out a successful fall season and first half of Fiscal 2025, we are on track and expect to deliver our fourth consecutive year of solid revenue growth. While first half revenues were held back by temporary sales timing effects, which are expected to reverse in the second half, our EBIDTA has increased by $23 million. This strong margin expansion underscores the increasing impact of our cost efficiency program and new operating model, which are substantially complete,” said Michael Hansen, Chief Executive Officer, Cengage Group.  

Hansen added, “We expect revenue growth and margin expansion to further accelerate in the full year, while we also fund AI initiatives and other investments in our business. We continue to focus our investment efforts in delivering differentiated products and services that help our customers realize tangible education outcomes and help fuel sustained business growth over the medium term.”

Earlier this month, Cengage Work, the company’s workforce skills training business, released the second edition of its learner outcomes report, which found 90% of learners enrolled in a Cengage Work course completed it, far above the industry averages of 50-70%. This report is a continuation of the company’s commitment to transparently measure educational outcomes and gather valuable feedback, ensuring offerings align with learners’ needs.

Additionally in the second quarter, Cengage Group extended its agreement with the National Geographic Society until 2043. As a premier education partner of the Society, this long-established strategic relationship allows Cengage to leverage the unique content, brand and other resources of the Society to drive learner engagement and outcomes through highly differentiated products for Secondary students and English language learners around the world. Learn more about the partnership here.

You can find more information about Cengage Group’s First Half Fiscal Year 2025 results below, and by visiting cengagegroup.com/investors.

 

Cengage Group First Half Fiscal 2025 Financial Results

$ millions	FY24	FY25	Delta
Adjusted Cash Revenue	$842	$841	0%
Digital Net Sales	$627	$631	1%
Adjusted Cash EBITDA	$300	$323	8%
Adjusted Cash EBITDA Margin	36%	38%	282 bps
Operating Cash Flow	$60	$128	$68
Net Leverage	3.2x	2.9x	0.3x

 

Cengage Group Second Quarter Fiscal 2025 Financial Results

$ millions	Q2 FY24	Q2 FY25	Delta
Adjusted Cash Revenue	$571	$564	-1%
Digital Net Sales	$441	$436	-1%
Adjusted Cash EBITDA	$281	$286	2%

 

Financial + Business Highlights

Fiscal Year 2025 Outlook

• Cengage Group is re-confirming expectations for the fiscal year ending March 31, 2025:
  • Fourth consecutive year of solid adjusted cash revenue growth
  • Strong, double-digit growth in adjusted cash EBITDA and accelerated margin expansion
  • Improved cash generation and operating cash conversion 
  • Continued deleveraging of the business, with ending net leverage 2.5X or lower, driven by EBITDA growth and cash generation

First Half FY25 Adjusted Cash Revenue was $841 million, flat year-over-year

• Cengage Academic: Adjusted Cash Revenue was flat at $522 million in the first half of FY25. This reflects robust sustained growth in US Higher Education moderated by temporary sales timing shortfalls in Secondary.  
  • The US Higher Education business continues to demonstrate strong digital and institutional revenue momentum, which underpins the 3% improvement in first half adjusted cash revenues to $309 million. Having returned to growth in fiscal 24, the US Higher Ed business is on track to grow again this year, with growth expected to improve in the second half and outpace FY24. In the trailing 12-month period, Institutional revenues, comprising Inclusive Access and the company’s unique Cengage Unlimited Institutional offering, grew 29% to $249 million and now represent around 40% of annual revenues. First half adjusted cash revenues for International Higher Education were $55 million, essentially flat against the prior period.
  • The Secondary business also had a solid fall season. First half adjusted cash revenues were $158 million, 6% behind a high FY24 first half comparative which benefitted from temporary sales timing effects. These effects are expected to largely reverse in the second half, underpinned by a solid sales pipeline.
     
• Cengage Work first half adjusted cash revenues reached $71 million, up 15% over the prior year.  This sustained high double-digit growth was driven by ed2go, where first half revenue increased 20% as more learners look to Advanced Career Training courses to prepare for in-demand careers. The Infosec business, a leading cybersecurity education provider, had a solid first half, with revenue up 4% compared to the prior year. Cengage Work is expected to broadly maintain its strong first half growth through the full fiscal year.  
   
• In Cengage Select, first half adjusted cash revenues were $231 million, 3% behind a high comparative which was boosted by positive sales timing effects. The ELT (English Language Teaching) business grew adjusted cash revenues by 7% in the first half to $84 million, sustaining the strong underlying growth momentum this business has consistently delivered over many years. For the full year, ELT revenues are expected to be broadly flat, with strong underlying growth in core markets offset by a one-time rebasing of a large Ministry of Education contract.  First half adjusted cash revenues in Research were $113 million, $9 million behind a high prior period comparative which benefitted from favorable timing of large archive sales and earlier subscription renewals. The Research business is going into the second half with a solid sales pipeline and renewal rates running at 93%, underpinning the expectation that timing effects will reverse over the rest of the year.

First Half FY25 Adjusted Cash EBITDA $323 million, up 8% year-over-year

• Adjusted Cash EBITDA reached $323 million and margin improved 282 basis points. This reflects the increasing benefits of the cost savings program and new operating model, together with the profitable scaling of Cengage Work, which more than doubled its EBITDA contribution to $11 million.
• The implementation of the new operating model is substantially complete. The company remains on track to realize over $100 million of expected incremental savings over fiscal years 25 and 26, of which over $60 million is expected this fiscal year.  

Strong Balance Sheet + Improved Net Leverage

• At the end of the first half, cash balances were $247 million, and total liquidity was $442 million including the revolving credit facility. 
• The combination of trailing 12-months EBITDA growth and strong cash generation improved net leverage to 2.9X at the end of September, compared to 3.2X a year ago.  

About Cengage Group 

With more than 100 years of serving learners, Cengage Group is a global edtech company that enables student choice. No matter how, where, when or why someone wants to learn, our portfolio of education businesses supports all students, from middle school through graduate school and skills education, with quality content and technology. Collectively, our three business units – Cengage Academic, Cengage Work, and Cengage Select – help millions of students each year in more than 125 countries achieve their education and career goals and lead choice-filled lives. Visit us at www.cengagegroup.com or find us on LinkedIn and Twitter.

Forward-Looking Statements

This press release, the investor presentation and related discussion on the investor call contain "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "assess," "believe," "expect," "may," "will," "should," "could," "seek," "intend," "plan," "estimate," "project," "foresee," "likely," "focus," "grow," "achieve," "deliver," "execute," "gain," or "anticipate" or similar expressions that concern our strategies, objectives, plans or goals. All statements that are not strictly historical in nature are forward-looking. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside our control. Our actual results and financial condition may differ from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. You should consider such factors, many of which are outlined in the "Risk Factors" section of our FY24 Annual Report for the fiscal year ended March 31, 2024, and in our quarterly report for the quarter ended June 30, 2024, and the "Special Note Regarding Forward-Looking Statements" section of the same report.  The Company's Fiscal Year 2025 Quarterly Report for the quarter ended September 30, 2024 will be posted to the Company's website shortly. Such reports can be accessed at cengagegroup.com/investors. We cannot assure you that forward-looking statements will prove to be accurate, as actual actions, results and future events could differ materially from those anticipated or implied by such statements.  Any forward-looking statement made by us in this press release, the investor presentation and related discussion on the investor call, is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise.

This release contains non-GAAP financial measures. See the appendix in the investor presentation available at cengagegroup.com/investors for a definition of these non-GAAP financial measures and the rationale for their use.

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