Q4 2025 Cengage Learning Holdings II Inc Earnings Call

Greetings.

Operator: Welcome to the Cengage Group's fourth quarter and full year 2025 year-end conference. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Sun gauge groups fourth quarter and full year 2025 year end conference call. At this time, all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the please press star zero on your telephone. Please note this conference is being recorded.

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.

Operator: I will now turn the conference over to your host, Richard Veith. Sir, you may be.

Now I'll turn the conference over to your host Richard face, Sir you may begin.

Richard Veith: Good morning, and welcome to Cengage Group's Fiscal 2025 Fourth Quarter and Full Year Investor Update. Joining me on the call are Michael Hansen, Chief Executive Officer, and Dean Tilsley, Chief Financial Officer.

Richard Face: Good morning, and welcome to <unk> group's fiscal 2025 fourth quarter and full year industrial update.

Speaker Change: Joining me on the call are Michael Hanson, Chief Executive Officer and.

Speaker Change: In details Lee Chief Financial Officer.

Richard Veith: Copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com forward slash investor. 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.

Speaker Change: A copy of the slide presentation for today's call has been posted to the company's website.

Speaker Change: Good grief dot com.

Speaker Change: Forward slash investors.

Speaker Change: The following discussion contains forward looking statements within the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.

Speaker Change: Such forward looking statements can be identified by words such as belief.

Speaker Change: But may well.

Speaker Change: Estimated 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.

Speaker Change: Because forward looking statements relate to the future.

Speaker Change: Subject to inherent uncertainties risks and changes in circumstances that are difficult to predict and many.

Speaker Change: Of which are outside of our control.

Richard Veith: Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statement.

Speaker Change: Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward looking statements.

Richard Veith: 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 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 the fiscal year 2025.

Speaker Change: 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 the risk factors section of our fiscal 2024 annual report for the year ended March 31, 2024 as may be updated by our quarterly reports for the fiscal year.

Speaker Change: 2025.

Richard Veith: The company's fiscal 2025 annual report will be posted shortly. 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.

Speaker Change: The company's fiscal 2025 annual report will be posted shortly.

Speaker Change: Any forward looking statements made in this presentation is based on currently available information.

Speaker Change: The company disclaims any obligation to publicly update or revise any forward looking statements, except as required by law.

Richard Veith: 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 for now.

Speaker Change: On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures.

Speaker Change: 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.

Richard Veith: I'll now turn the call over to Michael for an update on the business, followed by Dean who will take you through the fourth quarter and full year details before we open the call for questions. Michael. Thank you, Richard. Good morning, everyone. And thank you all for joining us today.

Speaker Change: I'll now turn the call over to Michael for an update on the business followed by Dean who will take you through the fourth quarter and full year details before we open the call for questions.

Speaker Change: Michael.

Michael Hanson: Thank you Richard Good morning, everyone and thank you all for joining us today.

Michael Hansen: I am pleased to report that Cengage Group delivered a fourth consecutive year of growth with adjusted cash revenue up 1% as reported and up 2% on an underlying basis. Adjusted cash EBITDA is up 15%, resulting in a strong EBITDA margin of 34%. These results reflect the continued execution of our strategy, the strength of our diversified portfolio, and our commitment to operational excellence.

Michael Hanson: I am pleased to report that Cengage group delivered a fourth consecutive year of growth with adjusted cash revenue up 1% as reported and up 2% on an underlying basis.

Speaker Change: Adjusted cash EBITDA is up 15%, resulting in a strong EBITDA margin of 34%.

Speaker Change: These results reflect the continued execution of our strategy.

Speaker Change: The strength of our diversified portfolio.

Speaker Change: And our commitment to operational excellence.

Michael Hansen: Let me walk you through the performance of our business unit. Our Cengage academic business grew adjusted cash revenue by 2% versus the prior year. Within Cengage Academic, the U.S. higher ed business continued to accelerate revenue growth with its adjusted cash revenue up 7% year-over-year. A key driver of this growth is the continued expansion of our institutional offerings. Institutional revenues now account for 51% of our fiscal year 25 higher ed revenues, underscoring the strength of our Cengage Unlimited institutional and inclusive access model. The growth in institutional sales is improving the financial profile of our higher ed.

Speaker Change: Let me walk you through the performance of our business units.

Speaker Change: Our signature academic business grew adjusted cash revenue by 2% versus the prior year.

Speaker Change: Within seconds academic the U S higher Ed business continued to accelerate revenue growth with its adjusted cash revenue up 7% year over year.

Speaker Change: A key driver of this growth is the continued expansion of our institutional offerings.

Speaker Change: Institutional revenues now account for 51% of our fiscal year 'twenty five higher Ed revenues underscoring the strength of our cengage unlimited institutional and inclusive access models.

Speaker Change: The growth in institutional sales is improving the financial profile of our higher Ed business.

Michael Hansen: we are seeing higher sell-through rates, improved retention, better unit economics, and greater predictability.

Speaker Change: We're seeing higher sell through rates improved retention better unit economics and greater predictability.

Michael Hansen: Our Cengage work business continues to be a standout performer, with adjusted cash revenue up 14 percent. This growth is fueled by App2Go, which delivered its 11th consecutive quarter of high double-digit growth, ending the year with a 23% increase in adjusted cash revenue year-over-year. We are also seeing rapid margin expansion in this segment, positioning as well for continued success.

Speaker Change: I would say gets what business continues to be a standout performer with adjusted cash revenue up 14%.

Speaker Change: This growth is fueled by its to go would you limit its 11th consecutive quarter of high double digit growth ending the year with a 23% increase in adjusted cash revenue year over year.

Speaker Change: We are also seeing rapid margin expansion in this segment positioning us well for continued success.

Michael Hansen: Adjusted cash revenue for Cengage Select were down 6% versus the prior year, largely due to the expiration of a large government contract in the Middle East. Excluding this contract impact, Cengage Select revenues were down 2%. Importantly, we've seen a significant shift to digital by ELT customers where ELT digital's net sales rose from 37% in fiscal 24 to 64% in fiscal 25. This transition is creating a higher sell-through opportunity, stronger retention, and greater stickiness with our customers.

Speaker Change: Adjusted cash revenue for Cengage select were down 6% versus the prior year largely due to the expiration of a large government contract in the middle East.

Speaker Change: Excluding this contract impact Cengage select revenues were down 2%.

Speaker Change: Importantly, we've seen a significant shift to digital by E. L T customers, where E. L. T Digital's net sales rose from 37% in fiscal 'twenty four.

Speaker Change: To 64% in fiscal 'twenty five.

Speaker Change: This transition is creating a higher sell through opportunity stronger retention and greater stickiness with our customers.

Michael Hansen: This spring, we made great strides in the application of generative AI, which we see as a significant opportunity to drive future revenue growth and margin expense. In April, we announced the expanded availability of our Gen AI-powered student assistant. This fall, over 1 million students will have access to this tool embedded within our MindTap platform. Student Assistants support students by guiding them through the learning process with tailored, just-in-time feedback, helping them understand concepts and apply their knowledge, rather than simply providing answers. We also introduced a new AI-powered Faculty Insight Dashboard, launching this fall. Built on anonymized, real-time interactions from student assistants, this dashboard gives instructors class-level, actionable insights to support students, track learning patterns, and enhance engagement.

Speaker Change: This spring we made great strides in the application of generative AI, which we see as a significant opportunity to drive future revenue growth and margin expansion.

Speaker Change: In April we announced the expanded availability of our journey I powered student persistence.

Speaker Change: This fall over 1 million students will have access to this tool embedded within our mindset platform.

Speaker Change: Student assistant supports students by guiding them through the learning process with tailored just in time feedback, helping them understand concepts and apply that knowledge rather than simply providing answers.

Speaker Change: We also introduced a new AI powered faculty insights dashboard launching this fall.

Speaker Change: Built on the Anonymised real time interactions from student assistance. This dashboard gives instruct us last level actionable insights to support students track learning patterns and enhance engagement.

Michael Hansen: It helps faculty look beyond grades to understand how students study, where they struggle, and what support they need, enabling more personalized and effective instruction.

Speaker Change: It helps faculty look beyond grades to understand how students study.

Speaker Change: Where they struggle.

Speaker Change: And what support they need enabling more personalized and effective instruction.

Michael Hansen: This is the beginning of our significant push to give faculty the AI tools they need to augment instruction and improve learner outcomes.

Speaker Change: This is the beginning of a significant push to give faculty the AI tools, they need to augment instruction and improve learner outcomes.

Michael Hansen: In our Gale business, we're launching an AI-powered Lexile Leveler. This tool allows teachers to adjust reading levels of Gale-authored content on demand. In user testing, 94% rated the output as very good or good, and 100% said they would use it in their classroom.

Speaker Change: And our game business, we are launching an AI powered <unk> level.

Speaker Change: This tool allows teachers to adjust reading levels of Gale also had content on demand.

Speaker Change: In user testing, 94% rate at the output is very good or good at 100% said they would use it in their classrooms.

Michael Hansen: And we are proud to see our school business featured in a recent NPR story highlighting how DeKalb County, Alabama dramatically improved student math performance using Big Ideas Learning as Cengage Partners. Alabama is now the only state in the Union where fourth grade math scores are higher than they were pre-pandemic. a testament to the impact of our learning material.

Speaker Change: And we are proud to see our school business featured in a recent MPR story, highlighting how Dekalb County, Alabama dramatically improved student mass performance using big ideas learning Cengage partner.

Speaker Change: Alabama is now the only state of the Union, where fourth grade math scores are higher than they were pre pandemic.

Speaker Change: A testament to the impact of our learning materials.

Michael Hansen: As part of our growth strategy, we are always looking for strategic investments that expand our offerings in key markets. VisibleBody, which we acquired during the second half of fiscal 2025, is on course for a successful integration in our existing portfolio. With VisibleBody, we bring augmented and mixed reality experiences to our global higher education and K-12 science customers. Customer acceptance has been extremely positive.

Speaker Change: As part of our growth strategy, we are always looking for strategic investments that expand our offerings in key markets.

Speaker Change: Visible body, which we acquired during the second half of fiscal 2025 is on course for a successful integration in our existing portfolio.

Speaker Change: With visible body, we bring augmented and mixed reality experiences to our global higher education, and K 12 science customers.

Speaker Change: Customer acceptance has been extremely positive.

Michael Hansen: With the new U.S. administration and Congress, our dedicated policy task force has been closely monitoring the various education-related executive orders and policies introduced in the past five months for potential impact to our business. Importantly, the inclusion of Workforce Pell in the recent budget reconciliation bill could create new opportunity for both our work and higher ed business. We will continue to monitor developments closely and we believe that we are well positioned to address the impact on our business and take advantage of emerging opportunities.

Speaker Change: With the New U S administration and Congress, our dedicated policy Task Force has been closely monitoring the various education related executive orders and policies introduced in the past five months for potential impacts to our business.

Speaker Change: Importantly, the inclusion of workforce pallet in the recent budget reconciliation bill could create new opportunities for both our work and higher Ed business.

Speaker Change: We will continue to monitor developments closely and we believe that we are well positioned to address the impact on our business and take advantage of emerging opportunities.

Michael Hansen: Looking ahead to fiscal year 26, our focus remains on delivering for our customers, maintaining cost discipline, and driving operational efficiency to deliver another year of revenue and e-data growth. Thank you for your continued support.

Speaker Change: Looking ahead to fiscal year 'twenty six our focus remains on delivering for our customers maintaining cost discipline and driving operational efficiency to deliver another year of revenue and EBITDA growth.

Speaker Change: Thank you for your continued support I will now hand, it over to our CFO, Dean Tinsley, who will walk us through the financials in more detail.

Dean Tilsley: I will now hand it over to our CFO, Dean Tilsley, who will walk us through the financials in more detail. Dean? Thank you, Michael, and good morning. 2025 was another strong year for Cengage. We achieved our fourth consecutive year of revenue growth, improved profitability, and continue to strengthen our financial foundation. These results have expanded our ability to invest in the business and grow long-term equity value. Full-year Cengage Group cash revenues came in at $1.54 billion, representing underloan growth of 2%. Adjusted cash EBITDA came in at $530 million, this represents growth of $71 million or 15% year-on-year and a 437 basis point improvement and margin to 34% in line with previous guidance.

Speaker Change: <unk>.

Speaker Change: Thank you Michael and good morning.

Speaker Change: 2025 was another strong year from say engaged we achieved our fourth consecutive year of revenue growth.

Speaker Change: Improved profitability and continued to strengthen our financial foundation. The EEG results have expanded their ability to invest in the business and grow long term equity value.

Speaker Change: Full year think age group cash revenues came in at $1.54 billion, representing underlying growth of 2%.

Speaker Change: Adjusted EBITDA came in at $530 million.

Speaker Change: This represents growth of $71 million or 15% year on year.

Speaker Change: 437 basis point improvement in margin to <unk>.

Speaker Change: 84% in line with previous guidance.

Dean Tilsley: Sales of digital products across our higher ed and school businesses, as well as sales of our workforce skills courses, continue to be the main drive of the revenue growth for the company. Digital net sales were up 6% year-on-year and now represent 79% of total sales. EBITDA growth significantly outpaced revenue growth with accelerated margin expansion due to the flow through of cost savings related to implementing a new operating model. In fiscal 25, we delivered over $60 million in savings before taking account of new investment. All planned cost-saving initiatives are now fully in place and we remain on track to reach over $100 million in total savings by the end of Fiscal 2016.

Speaker Change: Sales of digital products across the higher Ed in school businesses as well as sales of our workforce skills courses.

Speaker Change: They need to be the main drivers of revenue growth for the company.

Speaker Change: Digital net sales were up 6% year on year and now represents 79% of total sales.

Speaker Change: EBITDA growth significantly outpaced revenue growth with accelerated margin expansion due to the flow through of cost savings related to implementing a new operating model.

Speaker Change: In fiscal 'twenty, five we delivered over $60 million in savings before taking account of new investment.

Speaker Change: All planned cost savings initiatives are now fully in place and we remain on track to reach over $100 million in total savings by the end of fiscal 'twenty six.

Dean Tilsley: We've continued strong cost discipline and targeted investment. We are well positioned to continue revenue and margin growth through the next fiscal year.

Speaker Change: With continued strong cost discipline and targeted investments, we are well positioned to continue revenue and margin growth through the next fiscal year.

Dean Tilsley: We're now turning to our business segment. Cengage Academic four-year cash revenue ended at $939 million, up 2% year-on-year. U.S. higher ed continued to be the engine of growth, up 7% year-on-year, driven by sustained institutional and digital sales growth. Institutional revenues were up 22% year-on-year, reaching $333 million, and now represent 51% of total U.S. higher ed revenue. U.S. higher ed digital-only net sales were up 8% year-on-year, following 6% growth last year, confirming the success of our digital strategy to drive sustained growth in standalone digital products. The transition from print to digital is now substantively complete, strengthening the product profile of the US higher ed, increasing profitability, customer retention, and predictability for this key segment.

Speaker Change: And now turning to our business segment.

Speaker Change: They engage academic full year cash revenue ended at $939 million.

Speaker Change: Up 2% year on year.

Speaker Change: U S higher Ed continued to be the agent growth up 7% year on year, driven by sustained institutional and digital sales growth.

Speaker Change: Institutional revenues were up 22% year on year, reaching $333 million and now represent 51% of total U S revenues.

Speaker Change: U S higher Ed digital only net sales were.

Speaker Change: We were up 8% year on year, following 6% growth last year confirming the success of our digital strategy to drive sustained growth in Standalone digital products.

Speaker Change: The transition from print to digital is now substantially complete strengthened.

Speaker Change: Strengthening the product profile of the U S higher Ed.

Speaker Change: Increasing profitability.

Speaker Change: Customer retention and predictability for this key segment.

Dean Tilsley: In addition to the digital growth, two consecutive years of student enrolment growth provided a further welcome boost.

Speaker Change: In addition to the digital growth.

Speaker Change: Two consecutive years of student enrollment growth and provided a further welcome days.

Dean Tilsley: Turning to International Higher Ed and Secondary Products. Cash revenues were down a combined 8.5% year-on-year. International higher ed was impacted by a decline in Canadian student enrolment due to government policy. coupled with Softness in their EMEA and Asia market for the first three quarters of the year. For OMEA in Asia, Q4 did see a material rebound, growing 10% year-on-year versus mid-single-digit decline for the first three quarters. We continue to transition into national revenues away from sprint to digital, repeating our proven US strategy. For the Latham market, we successfully repositioned their business from a direct go-to-market model to third-party partners.

Speaker Change: Turning to international higher Ed and secondary products.

Speaker Change: Cash revenues were down a combined eight 5% year on year.

Speaker Change: International Hyatt was impacted by a decline in Canadian student enrollment due to government policy.

Speaker Change: Coupled with softness in the EMEA and Asia market.

Speaker Change: With three quarters of the year.

Speaker Change: For EMEA in Asia, Q4 did see a material rebound growing 10% year on year versus mid single digit decline.

Speaker Change: With three quarters.

Speaker Change: We continue to transition its national revenues away from print to digital repeating at proven UA strategy.

Speaker Change: For the Latam market, we successfully repositioned that business from a direct go to market model to third party partners.

Dean Tilsley: helping to improve profitability and reduce the need for future capital investment. Secondary cash revenue decline reflected a weak adoption year in high school and middle school programs. Softer off-cycle residual sales in Q4 due to macro challenges. and a sharper than expected decline in our legacy K-5 English Language Arts program, which as previously stated, we have been strategically exiting from this product. We continue to see good growth in career and technical education, along with advanced placement programs. all cornerstones of our education transformation strategy. We also see high double-digit growth in Big Ideas Math revenues, where we gained over 40% share in the Oklahoma adoption of our new program, Math & U.

Speaker Change: Helping to improve profitability and reduce the need for future capital investment.

Speaker Change: They seem to be cash revenue decline reflected a weak adoption year in high school and Middle School program.

Speaker Change: After all cycle residual sales in Q4 due to macro challenges.

Speaker Change: And a sharper than expected decline in our legacy K five English language Arts program.

Speaker Change: Which as previously stated we have been strategically exited from this product.

Speaker Change: We continue to see good growth in Korea, and technical education, along with advanced placement programs.

Speaker Change: All cornerstone of education to employment strategy.

Speaker Change: We will see high double digit growth in big ideas Maverick will.

Speaker Change: And we gained over 40% share in the Oklahoma adoption of a new program mass N G.

Dean Tilsley: We continue to make key investments in this area, placing us in a very strong position as we look towards future large estate adoptions in California and Florida.

Speaker Change: We continue to make key investments in this area, placing us in a very strong position as we look towards future large state adoption in California and Florida.

Dean Tilsley: Moving to CengageWorks, full year cash revenues were $143 million, up 14% year-on-year. where it continues to be an area of growth and focus for the company as the demand for advanced career training courses continues to grow strong. Add to grow revenues were over 20% again, representing the fifth consecutive year of double digit growth, resulting in the business more than doubling in size over the past four years. Moderating this growth, InfoSec Q4 revenues were negatively impacted by delays in key software renewals and by the federal government imposing restrictions to spend limits on government issued procurement cards, which resulted in reduced boot camp sales.

Speaker Change: Moving to stay engaged with.

Speaker Change: Full year cash revenues were $143 million up 14% year on year.

Speaker Change: Where it continues to be an area of growth focus for the company and the demand for advance career training courses continues to grow strongly.

Speaker Change: Integrated revenues were up over 20% again, representing the fifth consecutive year of double digit growth.

Speaker Change: Resulting in the business more than doubling in size over the past four years.

Speaker Change: Moderating this growth and as I say Q4 revenues were negatively impacted by delays in key software renewal and by the federal government imposing restriction.

Speaker Change: Spin limits on government issued procurement costs, which resulted in reduced <unk> sales.

Dean Tilsley: And the final segment, Cengage Select reported cash revenue at $431 million for down 6% year-on-year. The reported year-on-year change includes the one-time impact due to the expiration of a large government contract in the Middle East for our ELT business. Excluding this, the underlying growth rate for the select segment would be a decline of less than 2% due to market uncertainty for our research. The underlying growth in ELT, Malady and Australian K-12 businesses remains robust at a combined 8% growth year-on-year. Research Q4 performance was down 20% year-on-year, with two large China renewals being delayed as a result of recent trade tension.

Speaker Change: The final segment engaged licked reported cash revenue that $431 million were down 6% year on year.

Speaker Change: The reported year on year change includes the onetime impact.

Speaker Change: Due to the expiration of a large government contract in the middle East, whereas the LC business.

Speaker Change: Excluding this the underlying growth rate for the late statement would be a decline of less than 2%.

Speaker Change: Due to market uncertainty for our research business.

Speaker Change: The underlying growth in ELT M'lady in Australia U K 12 businesses remains robust at a combined 8% growth year on year.

Speaker Change: Recessed Q4 performance was down 20% year on year with two large China renewals being delayed as a result of recent trade tension.

Dean Tilsley: and lower activity at leading U.S. research universities as they assess the impact of federal announcements to their research funding. to need to add cash performance.

Speaker Change: And lower activity at leading U S Research University as they assess the impact of federal announcements to their research funding.

Speaker Change: Turning to our cash performance.

Dean Tilsley: Our business is highly cash-generative, with full-year unlevered free cash flow or operating cash flow reaching $328 million, up from $317 million in the prior period. This operating cash performance is lower than the previous guidance, reflecting three main factors. First, it was a decision to bring forward royalty and other Select April 1 contracted payments to March due to the company transitioning to its new accounting ERP system on April 1. We wanted to avoid any risk of non-payment for these critical contracts. Second, several large sales channel partners sent payments on April 1 versus March as expected. Both these occurrences reverse in 2026 and will generate strong Q1 cash results.

Speaker Change: Our business is highly cash generative with full year, unlevered free cash flow or operating cash flow, reaching $328 million.

Speaker Change: From $317 million in the prior period.

Speaker Change: This operating cash performance is low.

Speaker Change: Lower than the previous guidance, reflecting three main factors.

Speaker Change: But let's see what the decision to bring forward royalty in other select April one contracted payments in March due.

Speaker Change: Due to the company transitioning to a new accounting ERP system on April one we wanted to avoid any risk of nonpayment for these critical contracts.

Speaker Change: Second they have large sales channel partners.

Speaker Change: <unk> on April one this as much as expected.

Speaker Change: Both of these occurred to reverse in 2026 and will generate strong Q1 cash results.

Dean Tilsley: Finally, there was an increase in long-term deferred revenue due to the strong growth in our institutional and ed2go businesses. The combination of these three factors result in a drag on change in working capital. All year levered free cash flow was $49 million compared to $46 million in the prior period.

Speaker Change: Finally, there was an increase in long term deferred revenue due to the strong growth in our <unk>.

Speaker Change: Institutional and <unk> businesses.

Speaker Change: The combination of these three factors resulted in a drag on change in working capital.

Speaker Change: Full year Levered free cash flow was $49 million.

Speaker Change: Compared to $46 million in the prior period.

Dean Tilsley: Non-operating cash flow were impacted by the accretive acquisition of visible body. Successful settlement of outstanding legal cases. and moderately higher restructuring costs associated with run rate expense takeout. This was offset by lowered net interest payments of $78 million, reflecting the lower interest rate negotiated last November, and helped by our interest rate swaps, hedging $550 million of the term loan at a fixed rate of $3.23. To remind everyone, a revised agreement lowered margins by 50 basis points to 350 basis points over Sofra. and we expect us to fall another 25 basic points by Q3 this year as we continue to lower our net level.

Speaker Change: Nonoperating cash flow were impacted by the accretive acquisition of visible body.

Speaker Change: Successful settlement of outstanding legal cases.

Speaker Change: And moderately higher restructuring costs associated with run rate expanded takeout.

Speaker Change: This was offset by lower net interest payments of $78 million.

Speaker Change: Reflecting the lower interest rate and negotiated last November and helped by our interest rate swaps hedging $550 million of the term loan at a fixed rate of 3.23%.

Speaker Change: To remind everyone and revised agreement lowered margin by 50 basis point to 350 basis points.

Speaker Change: Although the software.

Speaker Change: And we expect this to fall another 25 basis points by Q3 this year as we continue to load up.

Speaker Change: Acreage.

Dean Tilsley: We finished the 25 fiscal year with a net leverage margin of 2.6x compared to 3x for the prior year. and since July 24 Cengage has paid three quarterly cash dividends on our preferred equity reflecting the strength of our liquidity position. At the end of March, cash balances totaled $256 million, with total liquidity of around $0.5 billion.

Speaker Change: We finished at 25 fiscal year with a net leverage margin of 268.

Speaker Change: Compared to three eight for the prior year.

Speaker Change: And since July 24, Thank agent paid three quarterly cash dividend on our preferred equity, reflecting the strength of our liquidity position.

Speaker Change: At the end of March cash balances totaled $256 million.

Speaker Change: With total liquidity of around <unk> 5 billion.

Dean Tilsley: So to finish, I would like to reiterate that 25 represented a strong year for execution and operational transformation. leaving the company in a strong operational position to maintain sustainable revenue-inevitable growth and the financial flexibility to invest in organic growth and targeted M&A.

Speaker Change: So to finish I would like to reiterate the 25 represented a strong year for execution and operational transformation.

Speaker Change: Leaving the company has strong operational position to maintain sustainable revenue and EBITDA growth and.

Speaker Change: And the financial flexibility to invest in organic growth and targeted M&A.

Operator: I will now pass back to the operator for questions.

Speaker Change: I will now pass back to the operator for questions.

Speaker Change: Okay.

Speaker Change: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the You may press star 2 if you would like to remove your question.

Speaker Change: Confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press Star two if you would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we pull.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Nick Dempsey: And our first question for today is from Nick Dempsey with Barclays. Yeah, good morning guys. Just a couple for me. So you've seen 14% constant currency revenue growth in the quarter to end March in US higher ed. Looking at Pearson in the same period, they grew 6%. Do you think that you have gained share versus Pearson or versus others in terms of adoptions? Or is the difference perhaps more to do with mix, higher proportion of institutional revenues, for example, in your mix of revenues? And second question, just on your comments in research in relation to US universities, does the weakness you've seen in the quarter relate to an inability to get new sales over the line in this uncertain environment?

Speaker Change: Your first question for today is from Nick Dempsey with Barclays.

Nick Dempsey: Hi, Yeah. Good morning, guys just a couple from me so.

Speaker Change: So you've seen 14% constant currency revenue growth in the quarter to end of March in the U S higher Ed.

Speaker Change: Passing on the same period they grew 6%.

Speaker Change: Do you think that you have gained should have us passing all of us as others in terms of assumptions or is it difference, perhaps more to do with mix high proportion of institutional revenues for example in Europe.

Speaker Change: It makes it revenues.

Speaker Change: And second question just on your comments in research in relation to U S. Universities does the weakness you've seen in the quarter run rate.

Speaker Change: But if you could give me your sales over the line in this uncertain environment, well have you actually seen universities breaking into subscription deals midway.

Nick Dempsey: Or have you actually seen universities break into subscription deals midway and ask for lower spending?

Speaker Change: Oscar.

Speaker Change: Manuel.

Speaker Change: Got it.

Michael Hansen: Yeah, Nick, it's Michael. Thanks for the questions, and let me take them in reverse order. With regard to the library spend, we're seeing exactly what you're describing, meaning the uncertainty in the environment causes people to not make decisions and therefore not write new orders. What we haven't seen is people breaking existing orders, so that is not a phenomenon that we've observed in the library market.

Speaker Change: Yes, Nick it's Michael Thanks for Thanks for the question. So let me take them in reverse order with regards to the library spend we're seeing exactly what you're describing meaning the uncertainty in the environment causes people to not make decisions and therefore not write new orders, what we haven't seen is people.

Speaker Change: <unk> existing orders so.

Speaker Change: That is not a phenomenon that we've observed in the library market and to your question is on higher Ed you know.

Michael Hansen: And to your question on higher ed, you know, you've been following us in the industry for a long time, and you know how difficult it is to really assess truly market share gains. All the data that we have that we track with our internal systems would indicate that we have had modest share gains, but as I said, you know, the database of those share gains is not always reliable, and it's better to look at it over a longer period of time. And over that longer period of time, looking back over the last three years or so, we've seen consistent share gains for our products.

Speaker Change: You've been following us in the industry for a long time and you know how difficult is to really assess to be market share gains all the data that we have that we track with our internal systems would indicate that we have had a modest share gains.

Speaker Change: As I said, it's a database of of those share gains is not always reliable and it's better to look at it over a longer period of time and over that longer period of time looking back over the last three years or so we've seen consistent share gains for our products.

Speaker Change: Okay.

Operator: This concludes today's conference and you may disconnect your line. Thank you for your.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.