Cengage Learning Holdings II, Inc.

Greetings. Welcome to the Cengage Group's third 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. Sir, the floor is yours.

Good morning, and welcome to Cengage Group's fiscal 2025 third quarter investor update. Joining me on the call are Michael Hansen, Chief Executive Officer, and Bob Monroe, Chief Financial Officer. A 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 U.S. 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 statement. 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 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 third quarter and year-to-date details before we open the call for questions. Michael?

Thank you, Richard, and good morning, everyone. Thanks for joining us today for our fiscal year 2025 third quarter investor call. I'm pleased to provide you with an update on our business and our outlook for the future. At the close of our third quarter, we are on track to deliver a fourth consecutive year of solid revenue and EBITDA growth for fiscal year 2025. The seasonality of our business is apparent in our year-to-date results for the period ended December 31st, with adjusted cash revenues flat and adjusted cash EBITDA growing 11%. Trailing 12-month results for the period ending December 31st are more useful when considering seasonality and are more in line with our full-year guidance, with adjusted cash revenues increasing 2% and adjusted cash EBITDA growing 13%. Our businesses are performing well, and we are confident in our ability to deliver our guidance through the final quarter of this fiscal year. One contributor to our solid financial results is the cost savings and efficiency program we started more than a year ago, which is now substantially executed. Through this program, we simplified our operations, enabling strong EBITDA expansion. Building upon this strong foundation, we will continue our focus on cost discipline while deepening investment in key capabilities that will further differentiate Cengage Group from its competitors. We will share more details on these areas of differentiation in the coming quarters. Looking ahead, we are committed to further driving revenue and EBITDA growth as we lay plans for fiscal year 2026. We anticipate that it will be our fifth consecutive year of revenue and EBITDA growth with continued margin expansion. Our financial results have enabled many new investments in our business and operations, including acquisitions, partnership expansions, and AI investments covering both internal efficiencies and product enhancements. Starting with the internal efficiencies, we are leveraging select third-party vendor offerings across our systems and platforms from Salesforce to Workday to enable greater productivity in our workforce, such as in our content production operations. In addition, we are investing in automation to drive internal efficiencies, like in AI-powered search with products such as Atolio, to improve the availability of product and customer information to sales and marketing teams, and reduce the effort required to find answers to day-to-day problems. We believe these tools will significantly increase productivity of our go-to-market teams. Shifting to generative AI-powered product enhancements, in August, we announced beta testing of our GenAI-enabled student assistants to empower students and personalize learning. Based on the success of these beta tests, we have now expanded the student assistants to other courses and added features that allows students to provide feedback on AI responses. We are committed to deploying, at scale, GenAI-powered product enhancements and will do so in a disciplined way to ensure that we are getting an appropriate return on our investment. We also continue to make other investments in our business to drive revenue growth. In January, we announced the acquisition of Visible Body, a leader in interactive 3D models and software for the sciences. This acquisition enhances our science offerings, providing new mediums and interactive experiences to learners to engage and deepen their understanding of science concepts. The addition of VisibleBody aligns with our commitment to help learners gain the skills and competencies they need to enter the workforce and grow in their careers. We have also expanded our partnership with Big Ideas Learning ahead of future math adoptions in California and Florida. This partnership, nurtured over many years, is perfectly timed to support these important upcoming adoptions and further strengthen our position in these key markets. In personnel news, we recently announced the position of our CFO, Bob Monroe. Bob and I have worked together for many years at a few different companies. Since his arrival to join us at Cengage Group nearly six years ago, Bob and his team have reshaped the finance function into a key enabler for our growth. Thanks to Bob's leadership and vision, Cengage Group is on track to achieve its fourth consecutive year of revenue and profit growth. He has been instrumental in strengthening the company's balance sheet by progressively reducing debt and driving earnings growth by improving profit margins. Additionally, in partnership with his leadership team, Bob transformed the finance function and established best practices that we are leveraging across our global business. Bob has expressed a desire to leave Cengage Group for personal reasons and has remained committed to his role and team until we could find a highly capable successor. Dean Tilsley. Dean has a depth of experience with large global publicly traded and privately held companies. Dean's extensive experience leading results-driven teams, as well as his background in the education and technology industries, will be valuable to Cengage Group as we embark on the next phase of our journey. Dean and Bob will work side-by-side for the next month, and Dean will assume full responsibility as CFO as of March 1st. Bob will remain in an advisory capacity until April 30th to ensure a smooth transition. In the final quarter of fiscal year 2025, we are focused on closing the year strong and planning for a successful fiscal 26. Our focus remains on enabling high-quality, affordable, and job-relevant education that leads to employment. In conclusion, I want to express my confidence in our business and our ability to deliver on our commitments. I will now hand over the call to Bob Monroe, our CFO, who will walk us through the details of our Q3 results. Bob?