Cengage Learning Holdings II, Inc.

Greetings. Welcome to this Engage Group's second quarter fiscal year 2025 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Richard Weiss. You may begin.

Good morning, and welcome to Cengage Group's fiscal 2025 second quarter investor update. Joining me on the call are Michael Hansen, Chief Executive Officer, and Bob Monroe, Chief Financial Officer. The copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com forward slash investors. The following discussion contains forward-looking statements within the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified by words such as believe, expect, may, will, estimate, likely, and similar words. and are neither historical facts nor assurances of future performance and relate to future results and events, and they are based on Cengage Group's current expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, and many of which are outside of our control. 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 subject to the risks and uncertainties discussed in the slide presentation, which accompanies this call, and in the risk factors section of our fiscal 2024 annual report for the year ended March 31st, 2024, as may be updated by our quarterly reports for fiscal year 2025. Any forward-looking statement made in this presentation is based on currently available information. The company disclaims any obligation to publicly update or revise any forward-looking statements except as required by law. On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures. Definitions and the rationale for using these measures and reconciliations of each to its most directly comparable GAAP financial measure are provided in the appendix to the slide presentation. I will now turn the call over to Michael for an update on the business, followed by Bob, who will take you through the second quarter and first half details before we open the call for questions. Michael?

Thank you, Richard, and good morning, everyone. Again, many thanks for joining us for our fiscal 2025 first half update. Having closed out a successful fall season, I am pleased to share that we are on track to deliver our guidance for fiscal 2025. We expect another year of solid revenue growth and strong double-digit profit growth. Our full year's guidance reflects the underlying sales momentum and strong sales pipelines we have taken into the second half. First half revenues of $841 million remained flat against a high prior year comparative, which benefited from earlier ordering and favorable timing of several large deals. Despite revenues being flat, EBITDA increased 8% to 323 million. This strong margin expansion in the first half of the year underlines the increasing impact of our now largely executed efficiency program and new operating model. We expect profit growth and margin expansion to further accelerate in the full year, whilst also funding the investments we are making in our business to sustain growth over the medium term. Our strong cash performance is also driven by an ongoing global working capital optimization program. This strong cash performance is providing us increased financial flexibility and capacity for both organic investment and accretive acquisition opportunities. Let's now take a closer look at the performance highlights across our business. Within Cengage Academic, our U.S. higher ed business continues to demonstrate strong momentum with a 3% improvement in first half revenues, totaling $309 million. Having returned to growth in fiscal 24, we expect our U.S. higher ed business to improve on last year's growth rate in fiscal 25. We are encouraged by the recent initial release of fall enrollment data by the National Student Clearinghouse. Looking beyond the headline numbers, our initial estimates are that enrollment is 1% to 2% ahead in the segments relevant to our business. Our secondary business had a solid fall season. With our long-term exclusive partner, Big Ideas Learning, we brought a brand new comprehensive K-12 math program entitled math and you to market math and you performed extremely well in its first adoption cycle garnering an estimate share of over 40 percent in the oklahoma math adoption which is a strong early indicator first half growth in secondary was held back by temporary sales timing impacts with the prior year first half representing a high comparative due to early ordering tied to significant wins in Nevada and Florida. These effects are expected to largely reverse in the second half, supported by our solid sales pipeline. Within second-edge work, add-to-go first half revenue increased 20% as more learners look at our advanced career training courses to prepare for in-demand careers. We recently announced that 18 of our most popular advanced career training courses received American Council on Education credit recommendation ratings, opening new pathways for Ed2Go learners to earn college credit for prior learning. Additionally, our InfoSec business, a leading cybersecurity education provider, had a solid first half year, with revenue up 4% compared to prior years. we are sharply focused on go-to-market strategies and product initiatives to accelerate InfoSec's growth over time with two notable recent wins from these efforts. The first is a substantial five-year agreement to deliver bootcamp and skills courses to personnel in federal government agencies. In addition, the InfoSec team announced a new partnership with Right Hand Cybersecurity to help organizations drive employee behavior change and reduce human cyber risk by a real-time training. CengageWork partners with over 1,800 academic institutions and 200 workforce agencies to provide flexible, affordable education programs that deliver impactful outcomes for both learners and businesses. Our most recent learner outcomes report found that 90% of learners enrolled in a Cengage work course completed. This is far above the industry average of 50 to 70%. This report is a continuation of our commitment to transparently measure educational outcomes and gather valuable feedback, ensuring our offerings align with learners' needs. In Cengage Selects, our ELT English language teaching business grew revenues by 7% in the first half, sustaining the strong underlying growth momentum this business has consistently shown over many years. We expect ELT to continue to be a key driver of long-term growth for Cengage Group, and we are pleased to share that we have extended our agreement with the National Geographic Society until 2043. This will allow us to deepen our strategic partnership with them. Overall, first half performance in Select was held back by temporary sales phasing in Research, with the prior year benefiting from timing of large archive sales and earlier subscription renewals. The business goes into the second half with a solid sales pipeline and renewal rates running at 93%. underpinning our expectation that these timing effects will reverse over the balance of the year. We are investing across our business to drive future growth and as part of this are committed to advancing our AI and machine learning capabilities to drive both learner and instructor outcomes and accelerate internal efficiencies. We are steadily expanding our innovation team led by Darren Person, Chief Digital Officer Michelle Gregory, Head of AI, working closely with the Chief Technology Officer Jim Chilton. This fall, we had over 5,000 higher ed students beta test our discipline-specific general AI-powered student assistance, receiving positive feedback from both learners and educators. Based on this feedback, we plan to expand the student assistance to additional disciplines in the coming months. Adding to our momentum in using AI to personalize learning, later this month, Infosec will launch the Skills Navigator, leveraging artificial intelligence to create custom training programs aligned to the skills recommended for a specific role or job posting. We are also leveraging strategic partners and their AI-enabled platforms. In some key operations, we are seeing the potential for up to 40% efficiency, and productivity gains. We will accelerate our investment in AI to improve student outcomes, instructor experiences, and operational productivity and efficiency while taking a disciplined approach to how and when we expect returns of these investments. In closing, we are pleased with our results at the half-year mark. and our progress across our key strategic initiatives. And we are confident that we will deliver our guidance for the full year. I will now turn the call over to Bob Munro, our Chief Financial Officer, to provide more detail of our financial performance.