Cengage Learning II (CNGO) investor relations material

Executive summary

• Completed resegmentation into four operating units: Higher Education, Work, School, and English Language Learning, to enhance focus, execution, and customer engagement.

• Digital sales now comprise 79% of total revenues, with US Higher Ed at 91% digital, reflecting a largely complete digital transition.

• AI-driven product launches, including Student Assistant and Lexile Leveler, support digital strategy and future growth.

• Ed2Go adjusted cash revenues grew 24% year-over-year, marking 11 consecutive quarters of double-digit growth.

• Cost savings initiatives and operational discipline contributed to improved cash flow and reduced leverage, with $60M targeted for FY26 on top of $60M realized in FY25.

Financial highlights

• Q1 adjusted cash revenue was $254M, down 8% year-over-year, but only down 2% when normalized for nonrecurring items.

• Adjusted cash EBITDA was $15M, down $24M year-over-year, mainly due to non-recurring items and partnership timing.

• Trailing twelve-month adjusted cash revenues reached $1.52B, up 2% year-over-year; TTM adjusted cash EBITDA up 10% year-over-year when normalized.

• Q1 cash burn reduced to $109M, a significant improvement from $132M in Q1 FY25 and $166M in Q1 FY24.

• Net loss for Q1 was $24.3M, an improvement from $28.6M loss in the prior year, reflecting lower operating expenses and interest costs.

Outlook and guidance

• FY26 outlook projects strong revenue and EBITDA growth, supported by digital momentum and cost savings.

• At least $60M in cost savings expected in FY26, in addition to $60M realized in FY25.

• School segment anticipates modest full-year growth despite a low adoption year, with stronger adoption years ahead in FY27 and FY28.

• ELL segment expects broadly flat revenues and EBITDA for FY26, with a focus on core markets and sustainable growth.

• Temporary U.S. tax deduction increases from new legislation expected to reduce taxable income for fiscal 2026.