Third Quarter Fiscal 2020

Third Quarter Fiscal 2020

Investor Update

Safe Harbor/Forward-Looking Statements

2

Cautionary Note Regarding Forward-Looking Statements

•

This following slides and related discussion contain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “will” and similar references to future periods.

•

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.

•

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. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

•

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 outlined in the “Risk Factors” section of our FY19 Annual Report for the fiscal year ended March 31, 2019 and the “Special Note Regarding Forward-Looking Statements” section of the same report.

•

Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made.

•

We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Financial Measures

•

To supplement the financial results presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”), we provide non-GAAP financial measures in this presentation, including Adjusted Revenue, Adjusted EBITDA, Adjusted Cash Revenue, Adjusted Cash EBITDA, Adjusted EBITDA less Prepub, and Adjusted Cash EBITDA less Prepub on a quarterly and year to date basis and Free Cash Flow and Levered Free Cash Flow on a year to date basis. See the Appendix for the definition of these measures, the rationale for their use, and a reconciliation to the most comparable GAAP measures.

•

This presentation may also contain discussions of gross sales measures by markets, which represent amounts invoiced to our customers.

Consequently, gross sales are before any adjustments for sales returns provision or revenue deferral. We believe this measure provides investors with a more comprehensive understanding of our underlying revenue results and trends by presenting amounts invoiced on a consistent basis. We may also discuss net sales which represents gross sales less actual returns of products.

Agenda

• Introduction

Richard Veith

SVP, Treasurer

• Business Update

Michael Hansen

Chief Executive Officer

• Financial Update

Bob Munro

Chief Financial Officer

Business Update

FY20 FY Outlook and YTD Overview

5

Full Year Outlook

Guidance unchanged : FY Adjusted Cash Revenue decline of mid-single digits; FY profit

expectations $305M+ underpinned by full year realized cost savings of $80M+.

FY20 YTD Overview :

Adjusted Cash Revenues $1,031M / -6% ; Adjusted cash EBITDA Less Prepub $214M / -2%

•

Solid Q3 – Adj’s cash revenues +1% ; business trajectory in line with FY outlook

•

Cash ELPP impact of YTD revenue decline mitigated by $53M / +8% reduction in costs

HE&S – HE nonprofit on track for full year underlying net sales to be down mid single digit

•

Channel shift & returns favorability drives 2H improvement ; Q3 u/l net sales up > 20%

•

Significant outperformance of industry peer group; Net sales down 5% over the last 12

months against a greater than10% decline for the industry

1

Cengage Unlimited (“CU”) – Strong momentum driving improved business profile

•

CU changed the trajectory of HE nonprofit – industry share up +1.8%

1

_{since 2018 launch}

•

1.3M CU subscriptions sold in current academic year to date saving students >$65M

• 900K CU subscription sold in period to end December, well over 2M since launch

•

Courseware activations up +14% vs FY19; Recurring Units

2

_{at 83% of sales}

Cengage continues to innovate quickly at scale to address broader industry challenges

•

CU e Textbooks launched January for Fall 2020 availability ; targets print focused / low

digital adoption segments of course materials market

Outlook: Q4 adjusted cash revenues for Cengage forecast down ~3%, excluding potential

risks associated with China ($10M revenues / $7M ELPP)

•

HE&S: Flat in Q4 with favorability in lower returns offsetting continued print decline

1 _{As measured by MPI data .}

2_{Recurring units include Rental, Core Digital & eBooks representing units sold each year of an adoption}

Amounts may not sum due to rounding.

$748

_$673

$160

_$156

$190

_$202

YTD FY19 YTD FY20

$1,031

$1,098

($67)

Learning

Gale

Int’l

$158

_$145

$41

_$39

$20

_$30

YTD FY19 YTD FY20

$219

_$214

($5)

YTD Adj. Cash EBITDA Less Prepub

YTD Adjusted Cash Revenue

6

• Unlimited access to more

than 14,000 eTextbooks,

Tutoring, Test Prep and

College Success/Career

Support

• $69.99 per semester

• Up to four print rentals, for

$7.99 each plus free

shipping

• Available August 2020

Cengage Unlimited – E Textbooks : Leveraging our

ability to innovate quickly at scale

7

2,605 2,968

YTD FY19 YTD FY20

+14%

Courseware Activations (Higher Ed)

(Thousands)

Higher Ed – Unlimited drives improved business profile

Units by Product Type

(Higher Ed)

Note: Prior periods may differ from previously reported amounts due to product classification changes to conform to current year presentation

Other Print Transactional Print Rental (Recurring) Core Digital eBooks

79% Recurring

Other Print Transactional Print Rental (Recurring) Core Digital eBooks

83% Recurring

YTD FY19

YTD FY20

Cengage Unlimited

Subscriptions & Net Sales

YTD FY20 YTD FY19

+44%

Strong momentum in Unlimited drives digital progression:

•

Unlimited Subscriptions - strong growth in units and Net Sales

•

Total Recurring Units up +4% to 83% of the portfolio

•

Activations grew 14% - # students using courseware up +24%

over 2 years driven by Unlimited

~900K subscriptions YTD and over 2M since inception

8

FY20 Outlook

• Adj Cash Revenue – expected to be down around -5% on a consolidated basis

• Higher Ed - Unlimited drives further share gains & industry outperformance in a weaker market

• Higher Ed Non-Profit – FY20 net sales expected to be down around 5%

• Industry down > 10% based on MPI data ; Share gains of 1.6% based on 12 months to Dec 31

• Favorable product mix, channel shift and ordering/returns phasing benefit 2H of the year

• International flat for the year; School decline broadly in line with total Cengage

• Gale marginally down before China risk

• Cost actions drive Adjusted Cash EBITDA less Prepub to $305M+; Strong margin expansion 2%+

• ELC growth marginally higher, with benefits from CAPEX savings

• Simplification of operating model & strong cost discipline drive ~10% reduction in FY20 costs

• Key cost drivers: Elimination of FY19 one-time investments, Cengage 2.0, FY20 H2 restructuring

• China risk: $20M revenues in final 2 months; circa $10M revenue at risk, ELPP impact $7M

• Risk acute in Gale Institutional deals – school shut downs & travel restrictions impair ability to close

• Positive Levered Free Cash Flow on an operational basis

(1)

• Leverage ratio – 6.2x – 6.3x at March 31, 2020

(1)

Guidance unchanged : Structural cost savings deliver strong recovery in

Adjusted Cash ELPP to $305M+ on mid single digit revenue declines

Cengage & McGraw-Hill Merger

9

• Regulatory Process – Revised timeline covers all jurisdictions

• Parties extended “outside date” for approval to May 1 by mutual agreement

• Ongoing constructive dialogue with the Department of Justice

• Number of courses under review / workload drives timeline

• International processes on track - UK / Australia / New Zealand / Mexico

• Potential remedies – Course divestitures across Cengage & MHE anticipated

• Too early to quantify impact of divestments at this stage

• Actively engaged with prospective purchasers in parallel to regulatory process

• Post Merger Integration Planning – On track

• Financing amendment – To be aligned with revised regulatory timeline

• To be launched as close timeline and impact of course divestitures better understood

• Not expected to impact timing of closing of merger

Timeline to complete regulatory process reassessed –

working to anticipated close in mid 2020

Financial Update

Bob Munro

Q3 FY20 Cengage Financial Highlights

11

ADJUSTED

CASH

REVENUE

($M)

ADJUSTED

CASH

EBITDA

LESS

PREPUB

($M)

INTERNATIONAL

TOTAL

GALE

Note: Financial results based on constant currency. See Appendix for reconciliation to GAAP reporting measures. Amounts may not sum due to rounding.

LEARNING

-$27 -$8 Q3 FY19 Q3 FY20 +$19 $152 _$147 Q3 FY19 Q3 FY20 -$6 (-4%) $50 $49 Q3 FY19 Q3 FY20 -$2 (-4%) $258 $260 Q3 FY19 Q3 FY20 +$2 (+1%) $12 $11 Q3 FY20 Q3 FY19 -$1 -$13 $11 Q3 FY20 Q3 FY19 +$24 $56 $65 Q3 FY20 Q3 FY19 +$9 (+17%) $2 $8 Q3 FY19 Q3 FY20 +$5

YTD FY20 Cengage Financial Highlights

12

ADJUSTED

CASH

REVENUE

($M)

ADJUSTED

CASH

EBITDA

LESS

PREPUB

($M)

INTERNATIONAL

TOTAL

GALE

Note: Financial results based on constant currency. See Appendix for reconciliation to GAAP reporting measures. Amounts may not sum due to rounding.

LEARNING

$158 _$145 YTD FY20 YTD FY19 -$13 $748 $673

YTD FY19 YTD FY20

-$75 (-10%)

$160 $156

YTD FY19 YTD FY20

-$4 (-3%)

$1,098

$1,031

YTD FY19 YTD FY20

-$67 (-6%)

$41 $39

YTD FY19 YTD FY20 -$2

$219 _$214

YTD FY19 YTD FY20 -$5

(-2%)

$190 $202

YTD FY19 YTD FY20

+$12 (+6%)

$20 $30

YTD FY19 YTD FY20 +$10

YTD FY20 Financial Performance Summary

13

YTD Adjusted Cash Revenue of $1B (-$67M, -6%), Adjusted Cash EBITDA less Prepub of $214M (-$5M, -2%)

•

YTD declines in Adjusted Cash revenue and ELPP moderating – improving trajectory aligned with full year outlook

•

ELPP impact of YTD revenue declines largely mitigated by 8% reduction in costs YTD; Q3 actions accelerate run rate savings

Learning Adjusted Cash Revenue of $673M YTD (-$75M, -10%)

•

Total Higher Ed & Skills down -$67M, driven by HE-Nonprofit performance ( Industry weakness, adverse phasing)

•

HE Non profit net sales down 10% YTD ; FY20 decline to moderate to mid single digit, significantly outperforming industry

• Channel shift benefits and returns favorability drives Q3 / Q4 – Q3 underlying net sales up > 20%

•

School down -$8M YTD; Solid growth in K-8 outweighed by weakness in High School / Advanced Placement

• K-8: Achieved > 10% share in California social studies adoption

• School sales season largely complete – Q4 represents only 10+% of annual sales

International Adjusted Cash Revenue of $202M YTD (+$12M, +6%)

•

International Higher Ed up +4% YTD, driven by Europe, India and Latin America;

•

Australia K-12 up +14% YTD; YTD phasing Texas Reading export orders - reverses in Q4 for full year decline of ~$10M

•

ELT up +7% YTD, driven by China and Middle east markets ; On track for another year of mid single digit growth

Gale Adjusted Cash Revenue of $156M YTD (-$4M, -3%)

•

US decline driven by weak archive / e books sales (library budget pressures), moderated by strong subscription renewals

•

International marginally behind YTD (phasing) – Strong pipeline supports full year growth expectation before China risks

YTD FY20 Adjusted Cash Revenue Bridge

14

($M)

-$75

Gale

$1,098

-$4

Learning

International

YTD FY19 Adj

Cash Revenue

$12

YTD FY20 Adj

Cash Revenue

$1,031

-$27 YTD FY19 Adj. Cash Revenue -$8

School HED Price Impact -$17 HED Volume Timing / Print Attrition -$4 Other HED & Skills -$18 Accounting Adjustments YTD FY20 Adj. Cash Revenue

$748

$673

$152 _$144 YTD FY20 YTD FY19 -$8 (-5%)

School Adj. Cash Revenue

$596

$529

YTD FY19 YTD FY20

-$67 (-11%)

Total HE&S

1

_{Adj. Cash Revenue}

15

Learning Adjusted cash revenue declines moderating

over Q3 and Q4 driven by HE nonprofit

Other2

Standalone Print Transactional

Loose Leaf Bundle Bound Bundle Print Transactional Other Digital1 Bound Bundle Unlimited Print Rental eBooks eBooks

YTD FY19

Loose Leaf Bundle Standalone Other Digital1 Unlimited Print Rental Other2

YTD FY20

$849

$769

Gross sales of high return products down 21% YTD driving lower returns; Low return products represent 60% of YTD total

gross sales in FY20 up from 54% in FY19

• Strong adjusted revenue / net sales growth in Q3 and January 2020

• Returns in Q3 significantly down, tracking in line with expectations

• Shifting product / channel mix & leaner channel inventory underpins expectation of lower Q4 returns

Low Return Rate

High Return Rate

1_{Other digital includes legacy products that Cengage is sunsetting}

2_{Other gross sales is comprised primarily of School product, Ed2Go and Learning Objects}

46%

:

54%

40%

:

60%

$86 $106 Q3 FY20 Q3 FY19 +$19 (+23%)

HE&S Net Sales

$569 $520 YTD FY20 YTD FY19 -$49 (-9%)

$53M YTD costs savings

1

_{largely mitigate the $57M}

ELPP impact of adjusted cash revenue declines

16

$20

$21

$8

YTD FY19 Cash EBITDA Less Prepub YTD FY20 Cash EBITDA Less Prepub

-$57

Restructuring Initiatives All: Revenue

Flow Through FY19 Initiative Spend Prepub Savings

$5

Other Net Cost Reductions

$219

$214

($M)

Note: Financial results based on constant currency and on a cash basis. Amounts may not sum due to rounding. See Appendix for reconciliation to GAAP reporting measures.

(1)

Full year profit outlook maintained by continuous

strong cost discipline & 2H restructuring initiatives

17

FY18 ACT

FY19 ACT

_{➢ Q3 SG&A & Prepub down vs PY:}

• Cengage Unlimited and other

one-time initiative spend in

FY19 not repeated in FY20

• Operational savings driven by

transformation initiatives

➢ Full Year savings $80M+ / 10% of

FY19 cost base. Principal driver is

simplification of operating model ,

consistent with intent following

launch of Cengage Unlimited:

• Elimination of FY19 1x initiative

spend

• FY19 Cengage 2.0 operating

model implementation

• FY20 2H restructuring - fully

actioned; $18M incremental in

year savings; 2H cost of $14-18M

➢ Cost trajectory underpins margin

expansion targets / strong growth in

adjusted cash ELPP

TOTAL SPEND

(1)

_($M)

186

202

205

220

204

₁₉₇

214

207

203

191

₁₈₆

Q1

Q2

Q3

Q4

Full Year

812

828

1_{Includes SG&A and Prepub Additions on management reporting basis. See Appendix for reconciliation to GAAP reporting measure.}

Amounts may not sum due to rounding.

FY20 ACT

Summary of Cash Flows

18

1_{See Appendix for reconciliation to GAAP reporting measures}

2 _{Change in working capital excludes accrued interest payable which is included in net cash interest}

3_{Other operating costs include restructuring payments, non-core operating costs, difference between prepub and capex spend in ELC and GAAP CF, and FX} 4_{Share repurchases include common stock repurchases under the share repurchase program and for tax withholdings for net settlement of equity awards}

Amounts may not sum due to rounding.

•

Levered Free Cash Flow of -$31 million, lower vs PY driven primarily by merger related costs, the Boston office

buildout, and higher restructuring payments, partially offset by improvements in working capital

•

Dividend Equivalents Paid and Share Repurchase were in connection with delivery of shares under vested RSUs

and net settlement of equity based awards, respectively

$M

Dec YTD

FY20

Dec YTD

FY19

Change

Adjusted EBITDA Less Prepub

(1)

$

191

$

192

$

(1)

Less: Capex

(50)

(38)

(12)

Plus: Change in Working Capital

(2)

51

24

27

Less: Other Operating Costs

(3)

(38)

(17)

(21)

Less: Net Cash Merger Payments

(30)

-

(30)

Less: Other Investing Activities

(3)

(3)

(0)

Less: Tax & Other Financing Activities

(11)

(8)

(4)

Less: Net Cash Interest

(140)

(139)

(1)

Levered Free Cash Flow

(1)

$

(31)

$

11

$

(42)

Less: Dividend Equivalents Paid

(4)

(4)

1

Less: Share Repurchases

(4)

(2)

(3)

2

Less: Debt Repayment

(13)

(2)

(10)

Less: FX impact on cash and cash equivalents

(0)

(2)

2

Liquidity and Net Debt

19

1_{The available credit under the revolving credit facility is based on the ABL defined borrowing base and is subject to fluctuations each month based on eligible}

receivables, eligible inventories, cash on hand and letters of credit issued, with a maximum borrowing capacity of $250M.

2 _{The carrying value of Total Debt is presented net of the unamortized original issue discount and deferred financing costs of $25.7 million and $31.1 million as of}

December 31, 2019 and March 31, 2019, respectively.

3 _{Adjusted Cash EBITDA less Prepub is based on constant currency. See Appendix for reconciliation to GAAP reporting measures.}

Existing Repurchase Capacity:

•

Debt – Current board authorization of up to $100M, no repurchases anticipated in Fiscal 2020

•

Equity – Precluded under the Merger Agreement

$M

December 31,

2019

March 31,

2019

Cash and Cash Equivalents

$

287.1

$

335.8

Available under Revolving Credit Facilities

(1)

94.8

103.9

Total Liquidity

$

381.9

$

439.7

Total Debt

(2)

$

2,244.5

$

2,252.0

Less: Cash and Cash Equivalents

(287.1)

(335.8)

Total Debt, net of Cash and Cash Equivalents

$

1,957.4

$

1,916.2

Last Twelve Months Adjusted Cash EBITDA less Prepub

(3)

$

282.3

$

287.0

Net Leverage Ratio

6.9x

6.7x

Q & A

21

Definitions: Non-GAAP Financial Measures

22

We believe that certain non-GAAP financial measures provide useful information for evaluating our business performance. These non-GAAP measures are on a constant currency basis whereby we convert current period and prior period amounts from local currency to U.S. dollars using standard internal currency exchange rates held constant for each year. As needed, we restate these non-GAAP measures for the prior period based on our internally-derived standard currency exchange rates used for the current period in order to remove the impact of foreign currency exchange fluctuation. We believe that these performance measures provide our management and investors with a meaningful basis for reviewing the results of our operations by eliminating the effects of financing decisions as well as excluding the impact of activities not related to our ongoing operations. However, these measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.

Financial Measure Description

Adjusted Revenue This measure is defined as revenues before the impact of changes in foreign currency exchange rates.

Adjusted EBITDA This measure is defined as net income (loss) before: (benefit from) provision for income taxes; interest expense, net; other (income) expense, net, in operating income (loss); amortization of identifiable intangible assets; depreciation; operational restructuring and other charges, net; amortization of prepublication costs; other income (expense), net, below operating income (loss); equity-based compensation expense; non-core other operating expenses; and merger-related costs. This measure also removes the impact of changes in foreign currency exchange rates on the items noted above.

Adjusted EBITDA less

Prepub This measure reflects Adjusted EBITDA less the impact of additions to prepublication costs (or “Prepub”) on an accrual basis, which are costs incurred prior to the publication date of a title or release date of a product and represent activities associated with product development including, but not limited to, editorial review and fact verification, graphic art design and layout and the process of conversion from print to digital media or within various formats of digital media. In addition, Prepub includes the cost to procure perpetual rights for the use of content which have been developed by third parties and are to be included in our products. Costs are capitalized when the title is expected to generate probable future economic benefits and are amortized upon publication of the title over its estimated useful life.

Adjusted Cash Revenue, Adjusted Cash EBITDA, Adjusted Cash EBITDA less Prepub

These measures remove the net impact of the deferral of revenue and the non-cash recognition of deferred revenue on sales of strategic digital products from the respective non-GAAP measures, as defined above. Adjusted Cash EBITDA and Adjusted Cash EBITDA less Prepub also remove the impact of the associated deferred costs on these strategic digital products. Full payment for strategic digital products is normally collected close to the time of sale whereas revenue from such arrangements is deferred and subsequently recognized ratably over the term of the customer contract.

Free Cash Flow This measure is defined as net cash provided by operating activities less additions to property, equipment and capitalized internal-use software and to prepublication costs.

Levered Free Cash Flow This measure is a management reporting view of cash flow defined as net cash provided including all operating, investing and interest activities.

Learning Sales by Key Product Types

23

1_{Other digital includes legacy products that Cengage is sunsetting}

2_{Other gross sales is comprised primarily of School product, Ed2Go and Learning Objects}

3 _{Adjustments are primarily related to Sales Returns Reserve (SRR), Deferred Revenue and Advanced Billings} 4_{See Appendix for reconciliation to GAAP reporting measures.}

Note, prior periods may differ from previously reported amounts due to product classification changes to conform to current year presentation. Amounts may not sum due to rounding.

•

Print / Core Digital gross sales reflect continuing shift in purchasing patterns driven and impact from channel ordering by penetration

of CU / digital

$M

GROSS SALES

NET SALES

Q3

Q3 YTD

Q3

Q3 YTD

FY20 B/(W) FY19 FY20 B/(W) FY19 B/(W) FY19 B/(W) FY19 PRINT TRANSACTIONAL $54.4 10% $163.9 (17%) 88% (15%) PRINT RENTAL $1.8 (31%) $15.5 (4%) (31%) (4%) TOTAL PRINT $56.2 8% $179.4 (16%) 72% (14%) BOUND BUNDLE $12.4 (27%) $50.4 (29%) (30%) (32%) LOOSE-LEAF BUNDLE $25.9 (19%) $90.0 (23%) (21%) (27%) STANDALONE $33.8 59% $113.3 (12%) 97% (12%) UNLIMITED $13.4 (19%) $126.6 35% 39% 44% CORE DIGITAL $85.5 (1%) $380.2 (7%) 24% (5%) OTHER DIGITAL(1) $2.7 (16%) $8.9 (30%) 6% (28%) EBOOKS $19.6 54% $47.7 10% 54% 10% OTHER(2) $4.8 (72%) $153.0 (9%) (76%) (9%) TOTAL $168.8 (2%) $769.3 (9%) 22% (7%) ADJUSTMENTS(3) $24.2 (20%) ($110.7) 9%

Non-GAAP Financial Measures

(1)

24

¹ Financial results based on constant currency. See Appendix for reconciliation to GAAP reporting measures.

$M Three Months Ended

December 31, B / (W)

Nine Months Ended

December 31, B / (W) 2019 2018 $ % 2019 2018 $ % Adjusted Revenue: Learning $ 193.0 $ 201.9 $ (8.9) -4.4% $ 658.5 $ 727.4 $ (68.9) -9.5% Gale 52.0 53.6 (1.6) -3.0% 144.7 153.0 (8.3) -5.4% International 64.9 55.5 9.4 16.9% 202.2 190.3 11.9 6.3% Total Adjusted Revenue $ 309.9 $ 311.0 $ (1.1) -0.4% $ 1,005.4 $ 1,070.7 $ (65.3) -6.1%

Adjusted EBITDA:

Learning 39.6 $ 30.6 $ 9.0 29.4% $ 161.5 $ 172.6 $ (11.1) -6.4% Gale 18.8 19.3 (0.5) -2.6% 42.3 49.5 (7.2) -14.5% International 11.9 6.9 5.0 72.5% 43.5 34.2 9.3 27.2% Total Adjusted EBITDA $ 70.3 $ 56.8 $ 13.5 23.8% $ 247.3 $ 256.3 $ (9.0) -3.5%

Prepub Additions:

Learning $ 9.0 $ 13.7 $ 4.7 34.3% $ 28.9 $ 34.5 $ 5.6 16.2% Gale 4.6 4.9 0.3 6.1% 14.6 15.5 0.9 5.8% International 4.2 4.5 0.3 6.7% 13.1 14.5 1.4 9.7% Total Prepub Additions $ 17.8 $ 23.1 $ 5.3 22.9% $ 56.6 $ 64.5 $ 7.9 12.2%

Adjusted EBITDA less Prepub:

Learning $ 30.6 $ 16.9 $ 13.7 81.1% $ 132.6 $ 138.1 $ (5.5) -4.0% Gale 14.2 14.4 (0.2) -1.4% 27.7 34.0 (6.3) -18.5% International 7.7 2.4 5.3 220.8% 30.4 19.7 10.7 54.3% Total Adjusted EBITDA less Prepub $ 52.5 $ 33.7 $ 18.8 55.8% $ 190.7 $ 191.8 $ (1.1) -0.6%

Non-GAAP Cash Financial Measures

(1)

25

1 _{Financial results based on constant currency. See Appendix for reconciliation to GAAP reporting measures.}

$M Three Months Ended

December 31, B / (W)

Nine Months Ended

December 31, B / (W)

2019 2018 $ % 2019 2018 $ %

Adjusted Cash Revenue:

Learning $ 146.6 $ 152.4 $ (5.8) -3.8% $ 673.3 $ 748.2 $ (74.9) -10.0% Gale 48.5 50.3 (1.8) -3.6% 155.6 159.9 (4.3) -2.7% International 64.9 55.5 9.4 16.9% 202.2 190.3 11.9 6.3% Total Adjusted Cash Revenue $ 260.0 $ 258.2 $ 1.8 0.7% $ 1,031.1 $ 1,098.4 $ (67.3) -6.1%

Adjusted Cash EBITDA:

Learning $ 1.2 $ (12.9) $ 14.1 109.3% $ 173.8 $ 192.5 $ (18.7) -9.7% Gale 15.6 16.4 (0.8) -4.9% 53.1 56.3 (3.2) -5.7% International 11.9 6.9 5.0 72.5% 43.5 34.2 9.3 27.2% Total Adjusted Cash EBITDA $ 28.7 $ 10.4 $ 18.3 176.0% $ 270.4 $ 283.0 $ (12.6) -4.5%

Prepub Additions:

Learning $ 9.0 $ 13.7 $ 4.7 34.3% $ 28.9 $ 34.5 $ 5.6 16.2% Gale 4.6 4.9 0.3 6.1% 14.6 15.5 0.9 5.8% International 4.2 4.5 0.3 6.7% 13.1 14.5 1.4 9.7% Total Prepub Additions $ 17.8 $ 23.1 $ 5.3 22.9% $ 56.6 $ 64.5 $ 7.9 12.2%

Adjusted Cash EBITDA less Prepub:

Learning $ (7.8) $ (26.6) $ 18.8 70.7% $ 144.9 $ 158.0 $ (13.1) -8.3% Gale 11.0 11.5 (0.5) -4.3% 38.5 40.8 (2.3) -5.6% International 7.7 2.4 5.3 220.8% 30.4 19.7 10.7 54.3% Total Adjusted Cash EBITDA less Prepub $ 10.9 $ (12.7) $ 23.6 185.8% $ 213.8 $ 218.5 $ (4.7) -2.2%

Non-GAAP Cash Revenue Financial Measures

(1)

Proforma Adjusted cash revenues for the twelve months

ended December 31

26

1 _{Financial results based on constant currency. See Appendix for reconciliation to GAAP reporting measures.}

➢ Total Company revenues broadly

flat; Learning segment declined

YoY by -3%

➢ Excluding one time software

license sale in March 2019, Total

Company adjusted cash revenue

was down 1% and Learning

adjusted cash revenue was down

4%

➢ For the same period, MPI data

showed the industry down -11%

$M

_{Twelve Months Ended}

December 31,

B / (W)

2019

2018

$

%

Adjusted Cash Revenue:

Learning

$

879.0

$

904.8

$

(25.8)

-2.9%

Gale

218.8

225.7

(6.9)

-3.1%

International

291.9

261.1

30.8

11.8%

GAAP Results

Balance Sheet

Non-GAAP Reconciliations

(1)

29

1 _{Non-GAAP measures are on a constant currency basis, including additions to prepublication costs. Additions to prepublication costs are reported at actual rates}

in our statement of cash flows. FX impact due to the difference between actual rates and current year plan rates.

2_{Represents net impact of prior period accrued prepub costs paid in current period and current period accrued prepub additions.}

Amounts above may not sum due to rounding.

$M FY2020 FY2019 FY2018

Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 YTD

GAAP Revenue $ 283 $ 410 $ 309 $ 1,002 $ 288 $ 474 $ 311 $ 372 $ 1,445

Impact of foreign currency 1 2 1 4 (2) (1) 0 (0) (3)

Adjusted revenue 283 412 310 1,005 286 473 311 371 1,442 Change in deferred revenue (46) 122 (50) 26 (45) 126 (53) (13) 15

Adjusted cash revenue $ 237 $ 534 $ 260 $ 1,031 $ 241 $ 599 $ 258 $ 359 $ 1,457 Net (loss) income $ (66) $ 11 $ (67) $ (122) $ (69) $ 34 $ (47) $ (16) $ (97)

Impact of foreign currency 0 1 0 1 (0) (0) (0) (0) (1)

Equity-based compensation expense 1 1 3 5 2 2 2 2 8

Non-core other operating expenses 2 (2) 1 1 2 2 3 2 10

Merger-related costs 9 14 11 33 0 - 0 7 7

Amortization of pre-publication costs 24 38 27 88 25 38 26 20 110

Operational restructuring and other charges, net 5 2 16 22 4 1 3 9 18

Depreciation 16 16 17 48 17 18 17 24 76

Amortization of identifiable intangible assets 20 20 20 61 24 24 24 24 95

Other (income) expense, net (2) (1) 1 (1) (2) 0 (1) 1 (2)

Interest expense, net 44 44 42 129 42 43 43 43 172

(Benefit from) provision for income taxes (18) (2) 0 (19) (18) 10 (14) (5) (28)

Adjusted EBITDA 36 142 70 247 28 172 57 111 367

Additions to pre-publication costs 19 20 18 57 19 23 23 30 95

Adjusted EBITDA less Prepub 16 122 52 191 9 149 34 81 272

Change in deferred revenue and associated deferred costs (42) 106 (42) 23 (42) 115 (46) (12) 15

Adjusted Cash EBITDA less Prepub $ (25) $ 228 $ 11 $ 214 $ (33) $ 264 $ (13) $ 69 $ 287

Additions to pre-publication costs at FY20 Plan rates and on an accrual basis (from above) $ 19 $ 20 $ 18 $ 57 $ 19 $ 23 $ 23 $ 30 $ 95

FX impact (0) (0) (0) (0) 0 0 0 0 0

Net change in accrued Prepub Activity(3) 5 1 1 7 6 (1) (1) (3) 1

Additions to pre-publication costs at actual rates and on a cash basis $ 24 $ 21 $ 19 $ 63 $ 24 $ 22 $ 22 $ 27 $ 96

Total Spend Reconciliation

30

1_{Non-GAAP measures are on a constant currency basis, including additions to prepublication costs. Additions to prepublication costs are reported at actual rates and on}

a cash basis in our statement of cash flows. FX impact due to the difference between actual rates and current year plan rates.

2 _{Starting in FY20, merger-related costs are disclosed in a separate statement line within the Condensed Consolidated Statement of Operations; therefore no longer}

included in SG&A.

3_{In accordance with GAAP, cost of revenues includes the costs associated with directly supporting product delivery and customer support, including costs of those}

functions such as editorial, production, customer service, technical product support and distribution functions. For internal management reporting, these are referred to as indirect cost of revenues and are all included in operating expenses.

Amounts above may not sum due to rounding.

$M

Q1

Q2

Q3

Q1

Q2

Q3

Q4

Prepub Additions

(1)

$

19

$

20

$

18

$

19

$

23

$

23

$

30

SG&A

(1)

177

171

168

186

191

184

172

Total Spend - Management Reporting

$

197

$

191

$

186

$

204

$

214

$

207

$

203

SG&A - Management Reporting

(1)

$

177

$

171

$

168

$

186

$

191

$

184

$

172

Equity-based comp & Non-core operating

3

(1)

4

5

4

5

4

Merger-related costs

-

-

-

0

-

0

7

Indirect cost of revenue

(2)

(72)

(74)

(70)

(75)

(78)

(77)

(70)

Impact of foreign currency

(0)

(1)

(1)

1

0

(0)

0

SG&A - GAAP Basis

$

108

$

95

$

101

$

117

$

117

$

113

$

113

Summary of Cash Flows

31

1 _{See Appendix for definition of this non-GAAP reporting measure.}

$M

Change

2019

2018

$

Summary of cash flows:

Net cash provided by operating activities

$

93.2

$

123.9

$

(30.7)

Net cash used in investing activities

(123.8)

(112.7)

(11.1)

Net cash used in financing activities

(17.9)

(10.2)

(7.7)

Impact on cash and cash equivalents from changes in foreign currency

(0.2)

(1.7)

1.5

Net Decrease in Cash and Cash Equivalents

$

(48.7)

$

(0.7)

$

(48.0)

Free cash flow calculation:

Net cash provided by operating activities

$

93.2

$

123.9

$

(30.7)

Additions to property, equipment and internal-use software

(57.6)

(41.1)

(16.5)

Additions to pre-publication costs

(63.4)

(68.9)

5.5

Free Cash Flow

(1)

$

(27.8)

$

13.9

$

(41.7)

Other investing activities

(2.8)

(2.7)

(0.1)

Levered Free Cash Flow

(1)

$

(30.6)

$

11.2

$

(41.8)

Nine Months Ended

December 31,

Changing dynamics in Higher Ed sales patterns

32

1H FY20 Net Sales CU Gross Sales 1H FY19

Net Sales Other Core Digital Gross Sales

Core Digital Actual Returns

Print Gross

Sales Print Actual Returns

1H HED Sales

Bridge

2H Improvement:

In line with full year

consolidated adjusted

cash revenue decline of

mid-single digits

FY19

Net Sales CU Gross Sales Other Core Digital Gross Sales

Core Digital Actual Returns

Print Gross

Sales Print Actual Returns Net SalesFY20

Full Year HED

Sales Bridge

CU growth continued

YoY benefit in returns to help offset sales declines

Print returns are favorable from lower 1H sales and favorability vs high returns PY