Lots of talk about growth, de-leveraging, etc but then still a $35mm loss due to debt servicing.
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Greetings,
As I stated previously:
If I were a betting person, I would expect to see at least one of the following by the end of the next quarter:
Sale of a division. There have been rumors of spinning off ELT for years. I could see this happening if NG would allow it.
Consolidation of locations. This is tricky, but Mason has been consolidating due to low-cost talent over the past few years. Could Boston be shuttered and operations moved to the Midwest?
I realized the dream of becoming my own CEO several years ago, but I enjoyed my years at Cengage.
Ignoring trends and interest rates is what (will) ultimately end Cengage. During the Trump years, rates were kept artificially low to stimulate Obama's eight years of disaster.
Instead of using those four years to right the financial ship, leadership invested heavily in CSG initiatives and borrowing. Had it tightened the belt five or six years ago and leveraged cost savings to pay down debt while rates were low things may be different.
Especially since the Covid lockdown allowed online publishers to make a short-term ki-ling.
I was not able to hear the First Friday call. If anyone has it, please post a link. If the Cenforce were posting hard questions, that would be a first, and I would imagine it upset the Axis of Education.
I would have to review the exact figures but last quarter was staggering. Mr. Cook pulled a Hess and made an emergency exit.
I feel sorry for the people still at Cengage. There are few jobs out there because Bidenomics and Pearson, Wiley, and McGraw can only absorb so much.
I hope everyone has a soft landing and ends up in a better position than they are now. Again, if anyone could post some detailed information about what's going on I would love to know. Any chance someone will post the emails?
I'll even buy a few rounds at Lucky's!
Wait???? KC's linkedin profile says he's a genius! He has an Ivy League undergrad and MBA from Stanford. What happened?
I'll tell you what happened. He got tons of dough for failing and will soon go do it to another company. The cesspool is real!
Wait, there were fresh layoffs today?
After several "reorgs" that gutted departments all over the company, KC is out. Of course I'm sure he'll get a golden parachute worth $$$$$$$$$. Ethos!
"NYC's Berghof" LOL
Someone get an extinguisher because IPS is on fire.
Oh. He wont relocate, he'll just force everyone else to relocate.
@4rmg+1o6jeUzY I could not agree more. Anyone who has spent any time with MH knows that he is an elitist and despises the midwest. When I worked in Farmington Hills he never spent more than a few hours there. When he first took over and the company was in financial peril he opened a small office in downtown Manhattan for himself. He sold it as a "drop in" location for anyone who was in the area, but it was for himself. I'm sure he views Boston as provinicial but its at least close enough to NYC. The thought of MH relocating to Mason is laughable. He would liquidate the entire company before he moved to southern Ohio.
IPS. Do you think the Apollo infusion is a set rate, that allows them to pay off higher rate debt?
Like a balance transfer from a crazy high rate card to a card with lower rate.
This would make sense.
"Hard pass. At a First Friday, MH was talking about walking down the streets of Madison Wisconsin on a college visit like it was the quaintest little thing. So adorable!!! No way will Cengage move to Ohio. Too far from New York and the east coast."
Does that clown realize that had he identified himself to students, he would have been ridiculed and set upon?"
It's important to revel in the past and collapse in the future.
"Could Boston be shuttered and operations moved to the Midwest?"
Hard pass. At a First Friday, MH was talking about walking down the streets of Madison Wisconsin on a college visit like it was the quaintest little thing. So adorable!!! No way will Cengage move to Ohio. Too far from New York and the east coast.
IPS is an absolute gem.
I will have to go back and look, but seem to remember cash levels fluctuating significantly quarter to quarter in the past.
Interest rates will only continue to rise.
The only thing Cengage has going for it is that it will be collecting cash this quarter with back to school. If its cash on hand and A/R are less than they were same quarter last year, they are screwed.
IPS you are approaching national treasure status!
A long-time ex-Cenforcer and I were discussing the report and I have to believe the only thing that saved sales in Q1 was school ordering.
This has to be the remnants of COVID spending that will completely dry up after this year.
The current qtr. will most likely tell us what will happen. I just don't see any real evidence that there is momentum anywhere.
Greetings,
I went over the numbers quickly, but several areas upset my stomach. Please remember that I spent less than ten minutes glancing at the report. If enough people are interested, I will do a more thorough analysis.
1- I warned of interest tied to variable LIBOR rates about a year ago. It's even worse than expected because LIBOR is no longer being used and has been replaced by SOFR, which caused a 100-basis point jump in rate - costing an additional 16.2 million dollar impact on financing costs.
2- Revenue is up 7.6%, but this is due to a one-time (non-recurring) inventory purge. I don't have all the details, but I had warned that the last report showed signs that KY would be shuttered to save the lease payments.
Someone may know where this inventory originated from. Consolidation of locations along with the cash infusion of a one-time sale?
3- Restructuring of operations. This is Cengage, so it's to be expected that a certain percentage will realize their dream of becoming their CEO. I want to examine the non-GAAP accounting methods used due to managerial realignment.
4- VERY ALARMING - Cash on hand down 160M, which is more than the 103M Cengage has on hand.
Right now, cash is costly to borrow, and it's getting more challenging due to the Fed (rightfully) repeatedly raising rates. The Obama and Trump years saw artificially low rates, but under Biden, growth has been discouraged due to economic policies that favor China. Raising rates is the only way to end the terrible inflation we're seeing, but it also hurts business growth, as borrowing is expensive and markets are limited.
If someone could go back eight quarters and pull the cash-on-hand numbers we could establish a pattern of percentage loss.
The significant danger I see is that if Cengage loses what it lost last quarter in cash, it will be underwater by about 60M dollars.
Would this stop vendor payments, like during the bankruptcy, or worse, would paychecks not clear?
We've also seen Cengage stock trading stop. Could it be that the limited cash is preventing investors from trading out? I don't know, but we could look into this.
QUICK FINAL THOUGHTS:
Again, I still need to do a complete analysis. As everyone knows, I've never used the word bankruptcy or out of business in all the time I've posted here.
If interest rates were low, I could see borrowing out.
If I were a betting person, I would expect to see at least one of the following by the end of the next quarter:
- Sale of a division. There have been rumors of spinning off ELT for years. I could see this happening if NG would allow it.
- Consolidation of locations. This is tricky, but Mason has been consolidating due to low-cost talent over the past few years. Could Boston be shuttered and operations moved to the Midwest?
Massachusetts has a high corporate tax rate. Ohio has none, but does have a gross receipts tax. This is something for the accountants to figure out, but it could work in Cengage's favor.
- Restructuring - This has already been going on at the corporate level. If Cengage is, indeed, purging the corporate roles, you can bet your last Cenmark that it will come after the Cenforce harder.
Dear Leader seems to love layoffs more than anything, so I would look at what divisions are losing money along with the realignments and try to make an educated guess.
Could someone share what positions at higher levels have been consolidated/eliminated?
Well, no one pays attention or even listens to that drivel these days so not a surprise that you didn't see it.
Your analysis is way more interesting than the report itself.
Greetings,
Has it just been posted? I haven't seen it, as hot yoga and belt shopping for Davos have occupied most of my time.
Not IPS but just looks like the slow trudge to irrelevant continues. It’s death by 1000 cuts.
Came here to post the same thing. IPS is our savior!