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Cengage Learning Holdings II Inc (CNGO)
OTHER OTC:CNGO
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Cengage Learning Holdings II
(OTC:CNGO)
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Rating:49Neutral
Price Target:
$23.50
▲(0.00% Upside)
Action:ReiteratedDate:02/20/26
The score is held back primarily by weak financial performance (declining revenue, net losses, and balance-sheet strain from negative equity). The earnings call provides a meaningful offset due to improving adjusted cash EBITDA, cash flow, and deleveraging progress, while technicals look stretched and valuation is unattractive given the negative P/E and no stated dividend yield.
Positive Factors
Digital-first Revenue Mix
A ~90% digital mix and launch of a unified K‑12 platform indicate durable structural shift to recurring, scalable digital delivery. This reduces marginal costs, enables subscription and analytics upsell, and supports steadier revenue visibility versus one-off print cycles over the next several quarters.
Improving Cash Generation & Deleveraging
Meaningful free cash flow improvement, lower net leverage and interest savings from repricing strengthen financial flexibility. Persistent cash generation and deleveraging reduce refinancing risk and provide capacity for continued investment in digital products and AI over the medium term.
Market Position in Higher Ed & Work
Strong growth in U.S. Higher Ed, expanding institutional sales and rapid ed2Go traction highlight competitive content and distribution strength in core end markets. Diversified revenue across Higher Ed and Work supports sustainable top-line recovery and cross-sell opportunities over upcoming adoption cycles.
Negative Factors
Balance Sheet Strain
Negative equity and a high debt-to-equity profile indicate structural balance-sheet vulnerability. Even with deleveraging progress, the reliance on debt financing elevates refinancing and covenant risk, limiting strategic optionality and increasing sensitivity to slower cash flow scenarios over the medium term.
Historic Revenue Decline & Net Losses
A recent revenue decline paired with negative net margins shows that accounting profitability still lags operational gains. While adjusted cash metrics improved, persistent GAAP losses and top-line pressure in prior periods constrain retained earnings rebuild and can weigh on long-term reinvestment capacity.
Segment Headwinds & Adoption Cyclicality
Regulatory and enrollment pressures in InfoSec/Milady and a known low-adoption K‑12 year create durable headwinds in specific subsegments. Dependence on large institutional adoptions and seasonal cycles makes revenue lumpy and increases execution risk as digital transition costs persist.
Cengage Learning Holdings II (CNGO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.47B
Dividend YieldN/A
Average Volume (3M)0.00
Price to Earnings (P/E)―
Beta (1Y)0.07
Revenue Growth0.49%
EPS Growth62.65%
CountryUS
Employees4,400
SectorCommunication Services
Sector Strength97
IndustryPublishing
Share Statistics
EPS (TTM)N/A
Shares Outstanding62,400,000
10 Day Avg. Volume0
30 Day Avg. Volume0
Financial Highlights & Ratios
PEG Ratio-0.27
Price to Book (P/B)-27.01
Price to Sales (P/S)0.88
P/FCF Ratio7.93
Enterprise Value/Market Cap1.91
Enterprise Value/Revenue1.87
Enterprise Value/Gross Profit3.54
Enterprise Value/Ebitda7.57
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Cengage Learning Holdings II Business Overview & Revenue Model
Company DescriptionCengage Learning Holdings II, Inc., together with its subsidiaries, operates as an education technology company worldwide. The company operates through three segments: Cengage Academic, Cengage Work, and Cengage Select. It offers eTextbooks; Cengage Unlimited, a subscription service for digital higher education materials; eTextbook subscription service; Cengage Infuse, an embedded course kit with a user experience for instructors; print textbooks, study guides, laboratory exercises, instructor editions, and supplemental products; and course and custom content development, and direct assistance to instructors and students for implementation and ongoing use of digital and print solutions. The company also provides various platforms, such as MindTap for as business and economics, social sciences, trades, and skills; WebAssign for mathematics and physics; Skills Assessment Manager for introductory computing; Cengage NOW for accounting; and Online Web-Based Learning for such as chemistry. In addition, it offers ed2go, an online learning platform; K-12, public, and academic libraries under the Gale brand, as well as licenses its proprietary and third-party content for integration with web-based information providers; English language curriculum and digital solutions under the NGL brand; educational resources for career-focused beauty and wellness education providers; and literacy materials to K-6 students under the Nelson brand. Further, the company Infosec, a cybersecurity education platform comprising Bootcamps, which provides instructor-led, digital course experiences for cybersecurity certifications or skill sets; Infosec Skills that offers training for reskilling and upskilling in the cybersecurity profession; and Infosec IQ, which offers security awareness training for non-technical learners to recognize, avoid, and report cyber-attacks and security incidents. The company was founded in 1903 and is headquartered in Boston, Massachusetts.
How the Company Makes MoneyCengage generates revenue through multiple streams, primarily by selling educational content and technology solutions. The company earns money from the sale of textbooks, both in physical and digital formats, as well as from subscription-based access to its digital learning platforms, such as Cengage Unlimited, which allows students to access a broad range of materials for a flat fee. Additionally, Cengage partners with educational institutions to provide customized learning solutions and analytics services, which also contribute to its revenue. The company's ability to adapt to evolving educational trends and invest in digital technology plays a crucial role in sustaining its earnings and expanding its market share.
Cengage Learning Holdings II Earnings Call Summary
Earnings Call Date:Feb 19, 2026
(Q3-2026)
| Next Earnings Date:Jun 04, 2026
Earnings Call Sentiment Positive
The call conveyed a largely positive operational and financial trajectory: strong Q3 revenue (+10%) and a return to positive quarterly adjusted cash EBITDA (+$18M) driven by U.S. Higher Education and Work (notably ed2Go). TTM revenue and EBITDA improved, leverage declined to 2.5x, and strategic investments in AI, platform products and partnerships were emphasized. Headwinds remain in specific subsegments (InfoSec/Milady), a low K-12 adoption year affecting ELL and seasonality/transition effects from prior ERP rollout and print-to-digital migration. Overall, the positives—broad-based revenue growth, EBITDA improvement, deleveraging, and clear AI/digital execution—outweigh the localized challenges.Q3-2026 Updates
Positive Updates
Quarterly Revenue Growth
Q3 adjusted cash revenues of $245 million, up $22 million or 10% year-over-year, driven by growth across Nearly all segments.
EBITDA Turnaround
Q3 adjusted cash EBITDA increased $21 million to positive $18 million for the quarter versus negative $3 million in the prior-year period.
Trailing Twelve-Month (TTM) Improvement
TTM adjusted cash revenues of $1.53 billion, up $41 million or 3% year-over-year; TTM adjusted cash EBITDA of $532 million, up $29 million or 6% year-over-year, representing ~71% flow-through of revenue growth into EBITDA.
U.S. Higher Education Strength
Q3 Higher Education revenues grew 15% year-over-year (nearly 50% of company revenue); U.S. Higher Ed grew 20% year-over-year for the quarter, digital sales +9%, and institutional sales ~ $250 million year-to-date, up 23% and now ~56% of U.S. Higher Ed sales.
Work Segment Momentum
Work segment Q3 revenues up 6% year-over-year (4% year-to-date). ed2Go delivered 24% growth in the quarter and 26% year-to-date, with triple-digit growth in an emerging employer sales channel; Career & Technical Education (CTE) grew 14% year-over-year.
K-12 School Segment Recovery
School segment Q3 adjusted cash revenues increased 17% year-over-year, supported by early Gale renewals and stabilization of the business.
Cash Flow and Leverage Progress
Working capital improved (resolving prior invoicing/ERP issues), free-cash-flow improvement of $10 million versus prior year period, net leverage down 0.2x to 2.5x, and term loan repriced lowering borrowing costs by 50 basis points (incremental ~$8 million annual interest savings; total >$20 million savings since March 2024).
Strategic AI & Partnership Initiatives
Expanded AI partnership with AWS, launched Instructor Assistant in January, partnered with LinkedIn Learning for 20 AI/security courses, embedding AI into products and reporting increased adoption and measurable learning improvements among active users.
Execution on Digital-First Strategy
Company nearing ~90% digital revenue mix in certain businesses, launched 'Explore' unified K-12 digital learning platform, and continued brand unification to support cross-sell and go-to-market simplification.
Negative Updates
Federal Regulatory and Immigration Headwinds
InfoSec and Milady (cybersecurity and Beauty & Wellness) remain challenged due to federal regulatory headwinds and immigration-related impacts on enrollment, resulting in year-over-year declines and a still-challenged near-term outlook.
K-12 Adoption Lull in 2026
2026 is a known low adoption year for K-12 segments with no large state adoptions versus $50 million of large state adoption in 2025; ELL Q3 was +1% YoY but would be down ~5% normalized for a nonrecurring $6 million Caribbean deal.
Lingering First-Half Operational Disruption
Invoicing issues tied to the new ERP rollout in prior quarters negatively impacted collections earlier in the year (although Q3 showed improvement).
Print Revenue Decline and Transition Costs
Print revenue has materially declined (from roughly $120 million annualized in prior years to about $40 million), historically creating a drag on growth during the transition period even as digital adoption accelerates.
Year-to-Date EBITDA Pressure (Normalized Items)
Year-to-date adjusted cash EBITDA was $362 million, a reported small decline of 2% year-over-year (flat when normalized for a one-time $6M ELL contract), indicating some remaining earnings pressure earlier in the fiscal year.
Concentration and Seasonality Risks
Q3 is a relatively quiet sales period for Higher Ed and K-12; growth is lumpy and dependent on adoption cycles and large institutional deals, making future quarter comparisons potentially volatile.
Additional Cash Outflows
An additional preferred equity dividend payment was made in 2026, representing a cash outflow that affects liquidity metrics despite overall deleveraging progress.
Company Guidance
Management’s forward-looking message emphasized continued deleveraging, stronger liquidity and ongoing revenue/EBITDA expansion: net leverage is down 0.2x to 2.5x and management expects it to improve further as Q4 cash collections ramp and restructuring costs decline; free cash flow improved by ~$10M year-over-year in Q3; term‑loan repricing cut funding costs by 50 bps for an incremental ~$8M of annual interest savings (>$20M total since Mar‑2024). They expect growth to be driven by Higher Ed and Work after Q3 adjusted cash revenue rose 10% to $245M and adjusted cash EBITDA improved $21M to +$18M; TTM adjusted cash revenue was $1.53B (+3%) and TTM adjusted cash EBITDA $532M (+6%) with ~71% flow‑through. Key segment momentum cited: U.S. Higher Ed +20% Q3, Higher Ed +15% Q3, institutional sales ≈$250M YTD (+23%, now 56% of U.S. Higher Ed), ed2Go +24% Q3/+26% YTD, CTE +14% Q3, School +17% Q3, while ELL is impacted by a $6M one‑off (normalized down ~5% YTD).Cengage Learning Holdings II Financial Statement Overview
Summary
Mixed fundamentals: revenue is declining (-7.4%) and net margin is negative (-7.7%), while leverage risk is elevated due to negative equity. Offsetting this, free cash flow is improving (+23%) and operations appear cash-generative despite accounting losses.Income Statement
Cengage Learning Holdings II shows a declining revenue trend with a negative revenue growth rate of -7.4% in the most recent year. The gross profit margin is relatively strong at 56.8%, but the company struggles with profitability, as indicated by a negative net profit margin of -7.7%. The EBIT and EBITDA margins are moderate at 15% and 21.9%, respectively, suggesting operational efficiency but insufficient to offset net losses.45
Neutral
Balance Sheet
The balance sheet reveals significant financial leverage with a high debt-to-equity ratio due to negative stockholders' equity. This indicates potential financial instability. The equity ratio is negative, reflecting the company's reliance on debt financing. Return on equity is also negative, further highlighting profitability challenges.30
Negative
Cash Flow
Cash flow analysis shows a positive free cash flow growth rate of 23%, indicating improved cash generation. The operating cash flow to net income ratio is positive, suggesting that the company generates cash from operations despite net losses. However, the free cash flow to net income ratio is low, indicating limited cash available after capital expenditures.55
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.50B | 1.48B | 1.50B | 1.42B | 1.37B | 1.24B |
| Gross Profit | 790.20M | 840.50M | 805.70M | 604.20M | 586.70M | 492.60M |
| EBITDA | 370.00M | 323.80M | 331.80M | 385.70M | 356.10M | 287.60M |
| Net Income | -46.30M | -114.40M | -80.90M | -40.20M | -44.60M | -110.10M |
Balance Sheet | ||||||
| Total Assets | 2.58B | 2.45B | 2.60B | 2.65B | 2.73B | 2.74B |
| Cash, Cash Equivalents and Short-Term Investments | 181.90M | 256.40M | 264.90M | 269.30M | 348.00M | 457.50M |
| Total Debt | 1.71B | 1.67B | 1.68B | 2.20B | 2.30B | 2.30B |
| Total Liabilities | 2.63B | 2.49B | 2.49B | 2.96B | 2.99B | 2.96B |
| Stockholders Equity | -57.00M | -48.10M | 114.70M | -308.80M | -258.20M | -212.30M |
Cash Flow | ||||||
| Free Cash Flow | 119.50M | 163.90M | 48.20M | 26.40M | 93.30M | 161.70M |
| Operating Cash Flow | 156.20M | 199.90M | 166.50M | 155.80M | 205.90M | 273.30M |
| Investing Cash Flow | -150.00M | -151.50M | -120.80M | -132.20M | -296.30M | -113.50M |
| Financing Cash Flow | -70.80M | -55.60M | -50.10M | -100.80M | -18.70M | -70.30M |
Cengage Learning Holdings II Technical Analysis
Positive
23.50
Price Trends
23.50
Neutral
23.50
Neutral
23.29
Positive
Market Momentum
<0.01
Positive
100.00
Negative
100.00
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CNGO, the sentiment is Positive. The current price of 23.5 is equal to the 20-day moving average (MA) of 23.50, equal to the 50-day MA of 23.50, and above the 200-day MA of 23.29, indicating a neutral trend. The MACD of <0.01 indicates Positive momentum. The RSI at 100.00 is Negative, neither overbought nor oversold. The STOCH value of 100.00 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CNGO.
Cengage Learning Holdings II Peers Comparison
UnderperformOutperform
Sector (60)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $1.61B | 16.49 | 13.61% | 4.48% | -5.33% | ― | |
65 Neutral | $869.60M | -173.77 | -0.35% | 2.78% | 2.53% | -23.86% | |
64 Neutral | $8.03B | 19.03 | 8.86% | 2.11% | 1.93% | 34.40% | |
60 Neutral | $48.67B | 4.58 | -11.27% | 4.14% | 2.83% | -41.78% | |
55 Neutral | $209.05M | -2.17 | ― | ― | -8.02% | -44.34% | |
49 Neutral | $1.47B | -31.72 | ― | ― | 0.49% | 62.65% |
* Communication Services Sector Average
CNGO
Cengage Learning Holdings II
23.50
2.75
13.25%
WLY
John Wiley Sons Cl A
30.50
-6.05
-16.55%
LEE
Lee Enterprises
9.40
0.60
6.82%
PSO
Pearson
12.82
-4.58
-26.31%
SCHL
Scholastic
34.18
13.76
67.38%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.