Cengage Learning II (CNGO) investor relations material

Executive summary

• Q1 FY27 revenue was $329 million, down 2% year-over-year, with strong growth in the Work segment offset by declines in Higher Education and ELL; digital transformation and organizational realignment continue.

• Adjusted EBITDA increased 4% to $96 million, driven by 160 basis points of margin expansion and cost reduction initiatives.

• The business is over 80% digital, investing in AI-enabled tools, and has centralized product development to accelerate digital growth.

• Net loss improved to $10.5 million from $21.6 million, reflecting lower costs and reduced restructuring charges.

• Opportunities for profitable growth remain in FY27 despite short-term headwinds from print declines and deal timing.

Financial highlights

• Q1 FY27 revenue was $329M, down $5M (2%) year-over-year; Adjusted EBITDA rose to $96M, up $3M (4%), with margin expanding to 29.3%.

• Trailing twelve months (TTM) revenue grew 3% to $1,512M, and TTM Adjusted EBITDA increased 10% to $520M; margin up 200 basis points to 34.4%.

• Net leverage improved to 2.6x, down 0.5x year-over-year, with liquidity rising to $431M.

• Unlevered free cash flow in Q1 was negative $62 million, reflecting seasonality and royalty payment timing.

• Net loss narrowed and cost of revenue fell by $15.6 million, mainly due to lower print costs and royalties.

Outlook and guidance

• Continued strong demand expected in Work and Higher Ed segments, with digital and AI tools driving growth.

• K12/School segment anticipated to rebound gradually as state adoption cycles increase.

• Management expects sufficient liquidity for ongoing operations and capital needs for the next 12 months.

• No specific forward guidance provided; no material changes to risk factors or accounting policies.