UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from �� to .

Commission File Number: 001-34575

Cambium Learning Group, Inc.

(Exact name of registrant as specified in its charter)



Delaware		27-0587428
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

17855 Dallas Parkway, Suite 400, Dallas, Texas		75287
(Address of Principal Executive Offices)		(Zip Code)

~~Registrant’s~~Registrant's telephone number, including area code: (888) 399-1995

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of ~~“large~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting company,”" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	ý

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The number of shares of the ~~registrant’s~~registrant's common stock, $0.001 par value per share, outstanding as of ~~November~~August 1, ~~2017~~2018 was ~~46,669,877.~~47,257,146.

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~September~~June 30, ~~2016~~2017	3

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2018 (Unaudited) and December 31, ~~2016~~2017	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 and ~~September~~June 30, ~~2016~~2017	5

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	1718

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II	OTHER INFORMATION	3132

Item 1.	Legal Proceedings	3132

Item 1A.	Risk Factors	32

Item 6.	Exhibits	33

SIGNATURE PAGE		34

Item 1. Financial Statements.

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net revenues	$	43,523		$	42,113		$	119,855		$	114,871		$	40,996		$	40,362		$	77,603		$	76,332
Cost of revenues:
Cost of revenues	7,928			8,876			21,328			23,615			7,038			7,215			13,101			13,400
Amortization expense	4,676			4,780			13,094			12,905			4,043			4,328			7,947			8,418
Total cost of revenues	12,604			13,656			34,422			36,520			11,081			11,543			21,048			21,818
Research and development expense	3,352			3,301			9,744			9,440			3,893			3,294			7,619			6,392
Sales and marketing expense	12,771			12,152			37,871			36,309			12,717			12,190			25,520			25,100
General and administrative expense	5,565			5,872			15,565			15,976			6,135			4,900			11,416			9,783
Shipping and handling costs	414			380			727			760			186			195			307			313
Depreciation and amortization expense	670			875			2,020			2,572			718			669			1,435			1,350
Total costs and expenses	35,376			36,236			100,349			101,577			34,730			32,791			67,345			64,756
Income before interest and income taxes	8,147			5,877			19,506			13,294			6,266			7,571			10,258			11,576
Net interest expense	(1,271		)	(1,876		)	(3,834		)	(5,598		)	(927		)	(1,336		)	(1,757		)	(2,563		)
Other income (expense), net													118			(109		)	15			(217		)
Income before income taxes	6,876			4,001			15,672			7,696			5,457			6,126			8,516			8,796
Income tax expense	(399		)	(173		)	(873		)	(206		)	(1,022		)	(334		)	(1,474		)	(474		)
Net income	$	6,477		$	3,828		$	14,799		$	7,490		$	4,435		$	5,792		$	7,042		$	8,322
Other comprehensive income:
Amortization of net pension loss	23			38			69			112			35			23			71			46
Comprehensive income	$	6,500		$	3,866		$	14,868		$	7,602		$	4,470		$	5,815		$	7,113		$	8,368
Net income per common share:
Basic	$	0.14		$	0.08		$	0.32		$	0.16		$	0.09		$	0.13		$	0.15		$	0.18
Diluted	$	0.14		$	0.08		$	0.31		$	0.16		$	0.09		$	0.12		$	0.15		$	0.18
Average number of common shares and equivalents outstanding:
Basic	46,460			45,869			46,316			45,791			47,172			46,283			47,036			46,243
Diluted	47,629			47,285			47,522			47,157			48,385			47,476			48,250			47,460

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)


	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	12,093		$	4,930		$	4,680		$	8,493
Accounts receivable, net	30,689			13,378			13,277			12,937
Inventory	2,489			2,864			1,813			2,382
Restricted assets, current	978			988			961			961
Other current assets	11,512			11,235			9,731			11,193
Total current assets	57,761			33,395			30,462			35,966
Property, equipment and software at cost	64,365			62,885			62,966			65,250
Accumulated depreciation and amortization	(41,339		)	(39,378		)	(42,006		)	(43,164		)
Property, equipment and software, net	23,026			23,507			20,960			22,086
Goodwill	47,842			47,842			43,518			43,518
Other intangible assets, net	2,858			4,001			3,108			3,607
Pre-publication costs, net	17,805			17,397			17,986			17,758
Restricted assets, less current portion	1,512			2,278			839			1,293
Deferred tax assets							30,020			30,614
Other assets	4,171			3,520			3,372			3,712
Total assets	$	154,975		$	131,940		$	150,265		$	158,554
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	3,117		$	2,172		$	2,075		$	2,388
Accrued expenses	15,315			11,720			13,770			12,121
Revolving credit facility							10,000			—
Current portion of long-term debt	7,098			7,350			6,651			5,958
Deferred revenue, current	87,250			83,318			61,286			86,913
Total current liabilities	112,780			104,560			93,782			107,380
Long-term liabilities:
Long-term debt	62,593			67,130			38,477			41,841
Deferred revenue, less current portion	15,109			11,395			15,232			13,995
Other liabilities	9,480			10,117			9,257			9,630
Total long-term liabilities	87,182			88,642			62,966			65,466
Commitments and contingencies (See Note 12)
Commitments and contingencies (See Note 13)
Stockholders' equity (deficit):
Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at September 30, 2017 and December 31, 2016)	—			—
Common stock ($.001 par value, 150,000 shares authorized, 53,174 and 52,738 shares issued, and 46,641 and 46,206 shares outstanding at September 30, 2017 and December 31, 2016, respectively)	53			53
Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at June 30, 2018 and December 31, 2017)							—			—
Common stock ($.001 par value, 150,000 shares authorized, 53,789 and 53,333 shares issued, and 47,257 and 46,800 shares outstanding at June 30, 2018 and December 31, 2017, respectively)							54			53
Capital surplus	288,350			286,943			290,468			289,022
Accumulated deficit	(318,746		)	(333,545		)	(282,199		)	(288,490		)
Treasury stock at cost (6,532 shares at September 30, 2017 and December 31, 2016)	(12,784		)	(12,784		)
Treasury stock at cost (6,532 shares at June 30, 2018 and December 31, 2017)							(12,784		)	(12,784		)
Accumulated other comprehensive loss:
Pension and postretirement plans	(1,860		)	(1,929		)	(2,022		)	(2,093		)
Accumulated other comprehensive loss	(1,860		)	(1,929		)	(2,022		)	(2,093		)
Total stockholders' equity (deficit)	(44,987		)	(61,262		)	(6,483		)	(14,292		)
Total liabilities and stockholders' equity (deficit)	$	154,975		$	131,940		$	150,265		$	158,554

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2018			2017
Operating activities:
Net income	$	14,799		$	7,490		$	7,042		$	8,322
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense	15,114			15,477			9,382			9,768
Deferred income taxes							795			—
Amortization of note discount and deferred financing costs	607			834			271			408
Stock-based compensation and expense	641			681			479			424
Other	14			3			3			13
Changes in operating assets and liabilities:
Accounts receivable, net	(17,311		)	(14,850		)	(409		)	994
Inventory	375			1,583			578			29
Other current assets	(277		)	(2,215		)	908			2,540
Other assets	(786		)	200			251			(10		)
Restricted assets	776			846			454			540
Accounts payable	945			829			(313		)	280
Accrued expenses	3,595			(168		)	1,735			226
Deferred revenue	7,646			12,078			(24,814		)	(27,419		)
Other long-term liabilities	(568		)	(1,030		)	(302		)	(405		)
Net cash provided by operating activities	25,570			21,758
Net cash used in operating activities							(3,940		)	(4,290		)
Investing activities:
Expenditures for property, equipment, software and pre-publication costs	(13,912		)	(16,171		)	(7,988		)	(8,816		)
Net cash used in investing activities	(13,912		)	(16,171		)	(7,988		)	(8,816		)
Financing activities:
Repayment of debt	(5,261		)	(2,888		)	(2,853		)	(3,500		)
Borrowings under revolving credit facility	16,000			15,000			10,000			16,000
Payments of revolving credit facility	(16,000		)	(15,000		)
Proceeds from exercise of stock options	766			394			968			322
Net cash used in financing activities	(4,495		)	(2,494		)
Net cash provided by financing activities							8,115			12,822
Change in cash and cash equivalents	7,163			3,093			(3,813		)	(284		)
Cash and cash equivalents, beginning of period	4,930			8,645			8,493			4,930
Cash and cash equivalents, end of period	$	12,093		$	11,738		$	4,680		$	4,646

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Cambium Learning Group, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1 — Basis of Presentation

Presentation

The Condensed Consolidated Financial Statements include the accounts of Cambium Learning^® Group, Inc. and its subsidiaries (the ~~“Company”~~"Company") and are unaudited. The condensed consolidated balance sheet as of December 31, ~~2016~~2017 has been derived from audited financial statements. All intercompany transactions have been eliminated.

As permitted under the Securities and Exchange Commission ~~(“SEC”~~("SEC") requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ~~(“GAAP”~~("GAAP") have been omitted. The Company believes that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in the ~~Company’s~~Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017. Due to seasonality, the results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 are not necessarily indicative of the results to be expected for any future interim period or for the year ending December 31, ~~2017.~~2018.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Subsequent actual results may differ from those estimates.

As of January 1, 2018, the Company adopted Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, and accordingly presented the other components of net benefit costs separately from the service cost component and outside of operating profit, presented as "Other income (expense)" in the consolidated statement of operations. Prior period non-service components of pension and post-retirement costs of $0.1 million and $0.2 million for the three and six months ended June 30, 2017, respectively, were recast from "General and administration expense" to "Other income (expense)" on the Company's condensed consolidated statements of operations.

Nature of Operations

The Company is an award-winning educational technology solutions leader dedicated to helping all students reach their potential through individualized and differentiated instruction. Using a research-based, personalized approach, Cambium Learning Group delivers software as a service (SaaS) resources and instructional products that engage students and support teachers in fun, positive, safe and scalable environments. These solutions are provided through Learning A-Z^® (online differentiated instruction for elementary school reading, writing and science), ExploreLearning^® (online interactive math and science simulations and a math fact fluency solution), and Voyager Sopris Learning^® (blended solutions that accelerate struggling learners to achieve in literacy and math and professional development for teachers). Cambium Learning Group believes that every student has unlimited potential, that teachers matter, and that data, instruction, and practice are the keys to success in the classroom and beyond.

The Company has three reportable segments with separate management teams and infrastructures that offer various products and services. See Note 1415 – Segment Reporting for further information on the ~~Company’s~~Company's segment reporting structure.

Note 2 — Accounts Receivable

Accounts receivable are stated net of allowances for doubtful accounts and estimated sales returns. The allowance for doubtful accounts and estimated sales returns totaled ~~$0.2~~$0.1 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The allowance for doubtful accounts is based on a review of outstanding balances and historical collection experience. The reserve for sales returns is based on historical rates of return as well as other factors that in the ~~Company’s~~Company's judgment, could reasonably be expected to cause sales returns to differ from historical experience.

Note 3 — Stock-Based Compensation and Expense

Cambium Learning Group, Inc. 2009 Equity Incentive Plan

In 2009, the Company adopted the Cambium Learning Group, Inc. 2009 Equity Incentive Plan (“("Incentive ~~Plan”~~Plan"). Under the Incentive Plan, 5,000,000 shares of common stock were reserved for issuance of awards which may be granted in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units,

conversion stock options, conversion stock appreciation rights, and other stock or cash awards. The Incentive Plan is administered by the board of directors which has the authority to establish the terms and conditions of awards granted under the Incentive Plan.

Stock-Based Compensation and Expense

The following table presents stock-based compensation expense resulting from stock options that are recorded in the condensed consolidated statements of operations and comprehensive income for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Cost of revenues	$	14	$	15	$	41	$	44	$	10	$	14	$	23	$	27
Research and development expense	38		43		113		129		51		40		100		75
Sales and marketing expense	51		50		148		150		72		51		133		97
General and administrative expense	114		126		339		358		119		119		223		225
Total	$	217	$	234	$	641	$	681	$	252	$	224	$	479	$	424

~~2017~~2018 Grants

In the first quarter ~~2017,~~2018, the Company granted 250,000 options under the Incentive Plan with an exercise price of ~~$5.00.~~$9.16. The options vest in equal monthly installments on the last day of the month over a four-year period, with an initial vesting date of March 31, ~~2017.~~2018. As of ~~September~~June 30, ~~2017,~~2018, the Company had ~~2,355,937~~2,135,571 stock options outstanding.

Note 4 — Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and restricted stock awards using the treasury stock method. Weighted-average shares from common share equivalents in the amount of ~~692,509~~250,000 and ~~629,989~~258,315 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, and ~~534,726~~821,730 and ~~448,666~~718,211 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively, were excluded from the respective dilutive shares outstanding because their effect was anti-dilutive.

The following table presents the calculation of basic and diluted net income per share:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2017		2016		2017		2016		2018		2017		2018		2017
Numerator:
Net income	$	6,477	$	3,828	$	14,799	$	7,490	$	4,435	$	5,792	$	7,042	$	8,322
Denominator:
Basic:
Weighted-average common shares used in computing basic net income per share	46,460		45,869		46,316		45,791		47,172		46,283		47,036		46,243
Diluted:
Add weighted-average effect of dilutive securities:
Stock options and restricted stock awards	1,169		1,416		1,206		1,366		1,213		1,193		1,214		1,217
Weighted-average common shares used in computing diluted net income per share	47,629		47,285		47,522		47,157		48,385		47,476		48,250		47,460
Net income per common share:
Basic	$	0.14	$	0.08	$	0.32	$	0.16	$	0.09	$	0.13	$	0.15	$	0.18
Diluted	$	0.14	$	0.08	$	0.31	$	0.16	$	0.09	$	0.12	$	0.15	$	0.18

Note 5 — Revenue Recognition

On January 1, 2018, the Company adopted the new revenue guidance Revenue from Contracts with Customers ("ASC 606") and applied it to all contracts using the modified retrospective method. The Company recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company expects the impact of the adoption of ASC 606 to be immaterial to net income on an ongoing basis.

The cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard was as follows:



(in thousands)	As Reported December 31, 2017			Adjustments due to ASC 606			As Adjusted January 1, 2018
Accounts receivable	$	12,937		$	(69	)	$	12,868
Inventory	2,382			10			2,392
Other current assets	11,193			(554		)	10,639
Deferred tax assets	30,614			201			30,815

Accrued expenses	12,121			(85		)	12,036
Deferred revenue	86,913			424			87,337
Accumulated deficit	(288,490		)	(751		)	(289,241		)

Learning A-Z and ExploreLearning Segments

The Learning A-Z and ExploreLearning segments derive revenue from sales of online subscriptions to their literacy, math and science websites and related training and professional development. The subscription service represents two performance obligations: the obligation to provide access to the on-line educational content and functionality, and the stand-ready obligation to provide post-sale customer support. The stand-ready obligation may include customer support, online or on-site trainings, rostering or single sign-on support, or other technology or curriculum related inquiries. Typically, the subscriptions are for a twelve month period (although they can be for longer periods) and the revenue for both performance obligations is recognized ratably over the period the online access is available to the customer.

Voyager Sopris Learning Segment

Revenues for the Voyager Sopris Learning segment are derived from sales of literacy and math educational solutions and services to school districts. Sales include printed materials, subscription interactive web-based programs and online educational content, training and implementation services, and professional development. Revenue from the sale of printed materials is recognized when the product is received by the customer, as the Company typically has control of the shipping arrangements. Revenue for interactive web-based programs and online educational content, which may be sold separately or included with printed curriculum materials, is recognized ratably over the subscription or contractual period, typically a school year. The Company allocates a portion of the online subscription and printed material revenue to a stand-ready performance obligation which may include customer support, online or on-site trainings, rostering or single sign-on support or other technology or curriculum related inquiries. The stand-ready performance obligation is recognized ratably over the period the online access is available or the expected usage term of the printed material, typically over the school year.

Contracts to provide professional services such as training, implementation, and professional development are considered a single performance obligation and the related revenues are recognized as delivered.

For all reportable segments, the Company may enter into agreements to license or sell certain publishing rights and content. The Company recognizes the revenue from these agreements when either the license period, if applicable, has commenced or the transfer of content, if applicable, has occurred.

Costs to Acquire Contracts

Under the new revenue recognition standard, incremental costs incurred to obtain a contract, as well as costs to fulfill a contract, must be deferred and amortized over the expected period that the related performance obligation is satisfied. The Company has historically deferred costs incurred to obtain and fulfill contracts with a customer, including commissions paid to the Company's inside and field salesforce. The Company has elected to apply this standard to all contracts and did not elect the practical expedient to expense contract acquisition costs as incurred for contracts less than one year. The cumulative effect adjustment to "Other current assets" reflects the change to deferred costs commensurate with the related change in the deferred revenue balance.

The following table presents the Company's disaggregated revenue by segment and geography. See Note 15 – Segment Reporting for more information on the Company's reportable segments.



	Three Months Ended June 30, 2018
(in thousands)	Learning A-Z		ExploreLearning		Voyager Sopris Learning		Consolidated
United States	$	17,166	$	7,324	$	12,609	$	37,099
International	3,269		408		220		3,897
Total Revenue	$	20,435	$	7,732	$	12,829	$	40,996



	Three Months Ended June 30, 2017
(in thousands)	Learning A-Z		ExploreLearning		Voyager Sopris Learning		Consolidated
United States	$	15,979	$	6,355	$	14,560	$	36,894
International	2,671		380		417		3,468
Total Revenue	$	18,650	$	6,735	$	14,977	$	40,362



	Six Months Ended June 30, 2018
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Consolidated
United States	$	33,359	$	14,443	$	22,174	$	69,976
International	6,212		793		622		7,627
Total Revenue	$	39,571	$	15,236	$	22,796	$	77,603



	Six Months Ended June 30, 2017
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Consolidated
United States	$	31,557	$	12,774	$	24,977	$	69,308
International	5,278		739		1,007		7,024
Total Revenue	$	36,835	$	13,513	$	25,984	$	76,332

The Company elected to continue to record revenue net of applicable taxes on the related transactions.

Note 56 — Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market data

obtained from independent sources, while unobservable inputs reflect the ~~Company’s~~Company's market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant value drivers are observable.

Level 3 — Valuations derived from valuation techniques in which significant value drivers are unobservable.

Applicable guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

At ~~September~~June 30, ~~2017,~~2018, financial instruments include ~~$12.1~~$4.7 million of cash and cash equivalents, restricted assets of ~~$2.5~~$1.8 million, collateral investments of $1.1 million, revolving credit facility borrowings of $10.0 million, and Senior Secured Credit Facility term loans, net of discount and deferred financing costs, of $45.1 million. At December 31, 2017, financial instruments

include $8.5 million of cash and cash equivalents, restricted assets of $2.3 million, collateral investments of $1.1 million, and Senior Secured Credit Facility term loans, net of discount and deferred financing costs, of $69.7 million. At December 31, 2016, financial instruments include $4.9 million of cash and cash equivalents, restricted assets of $3.3 million, collateral investments of $1.1 million, and Senior Secured Credit Facility term loans, net of discount and deferred financing costs, of $74.5$47.8 million. The fair market values of cash equivalents, restricted assets, and collateral investments are equal to their carrying value, as these investments are recorded based on quoted market prices and/or other market data for the same or comparable instruments and transactions as of the end of the applicable reporting period. See Note 1314 – Debt for additional information regarding the ~~Company’s~~Company's term loans and Revolving Credit Facility.

At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the carrying value of the ~~Company’s~~Company's Senior Secured Credit Facility term loans and Revolving Credit Facility borrowings approximates the fair value, as the borrowings are tied to the London Interbank Offered Rate ~~(“LIBOR”~~("LIBOR") and are market sensitive.

Assets and liabilities measured at fair value on a recurring basis are as follows:


(in thousands)			Fair Value at Reporting Date Using								Fair Value at Reporting Date Using
Description	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Restricted Assets:
Money Market	$	2,490	$	2,490	$	—	$	—	$	1,800	$	1,800	$	—	$	—
Collateral Investments:
Money Market	908		908		—		—		910		910		—		—
Certificates of Deposit	226		226		—		—		226		226		—		—


(in thousands)			Fair Value at Reporting Date Using								Fair Value at Reporting Date Using
Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Restricted Assets:
Money Market	$	3,266	$	3,266	$	—	$	—	$	2,254	$	2,254	$	—	$	—
Collateral Investments:
Money Market	906		906		—		—		908		908		—		—
Certificates of Deposit	226		226		—		—		226		226		—		—


(in thousands)	Total Gains (Losses) for the Nine Months Ended September 30,				Total Gains (Losses) for the Six Months Ended June 30,
Description	2017		2016		2018		2017
Restricted Assets:
Money Market	$	—	$	—	$	—	$	—
Collateral Investments:
Money Market	—		—		—		—
Certificates of Deposit	—		—		—		—

Assets and liabilities measured at fair value on a non-recurring basis are listed below at their carrying values as of each reporting date:


(in thousands)			Fair Value at Reporting Date Using								Fair Value at Reporting Date Using
Description	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Goodwill	$	47,842	$	—	$	—	$	47,842	$	43,518	$	—	$	—	$	43,518
Property, equipment and software, net	23,026		—		—		23,026		20,960		—		—		20,960
Pre-publication costs, net	17,805		—		—		17,805		17,986		—		—		17,986
Other intangible assets, net	2,858		—		—		2,858		3,108		—		—		3,108


(in thousands)			Fair Value at Reporting Date Using								Fair Value at Reporting Date Using
Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Goodwill	$	47,842	$	—	$	—	$	47,842	$	43,518	$	—	$	—	$	43,518
Property, equipment and software, net	23,507		—		—		23,507		22,086		—		—		22,086
Pre-publication costs, net	17,397		—		—		17,397		17,758		—		—		17,758
Other intangible assets, net	4,001		—		—		4,001		3,607		—		—		3,607


(in thousands)	Total Gains (Losses) for the Nine Months Ended September 30,				Total Gains (Losses) for the Six Months Ended June 30,
Description	2017		2016		2018		2017
Goodwill	$	—	$	—	$	—	$	—
Property, equipment and software, net	—		—		—		—
Pre-publication costs, net	—		—		—		—
Other intangible assets, net	—		—		—		—

There were no significant remeasurements of these assets during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 or ~~2016.~~2017.

Note 67 — Other Current Assets

Other current assets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:

(in thousands) September 30, 2017 December 31, 2016
Deferred costs $ 9,089
$ 8,650
Prepaid expenses 2,405
1,533
Other 18
1,052
Other current assets $ 11,512
$ 11,235



(in thousands)	June 30, 2018		December 31, 2017
Deferred costs	$	6,426	$	9,246
Prepaid expenses	2,695		1,762
Other	610		185
Other current assets	$	9,731	$	11,193

Note 78 — Other Assets

Other assets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Deferred costs, less current portion	$	2,141	$	1,405	$	1,422	$	1,745
Collateral investments	1,134		1,132		1,136		1,134
Deferred financing costs – revolving credit facility	575		711		441		530
Other	321		272		373		303
Other assets	$	4,171	$	3,520	$	3,372	$	3,712

Deferred Financing Costs

Deferred financing costs relate to costs incurred with the issuance in December 2015 of the ~~Company’s~~Company's $30.0 million Revolving Credit Facility. See Note 1314 – Debt for additional information regarding the ~~Company’s~~Company's Revolving Credit Facility and the related deferred financing costs.

Collateral Investments

The Company maintains certificates of deposit to collateralize its outstanding letters of credit associated with ~~workers’~~workers' compensation activity. At ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had $0.2 million in certificates of deposit serving as collateral for its outstanding letters of credit.

Additionally, the Company maintains a money market fund investment to serve as collateral for a travel card program. The balance of the money market fund investment was $0.9 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Note 89 — Accrued Expenses

Accrued expenses at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Salaries, bonuses and benefits	$	10,401	$	7,820	$	8,869	$	8,550
Pension and post-retirement benefit plans	967		967		950		950
Accrued royalties	659		1,006		901		830
Other	3,288		1,927		3,050		1,791
Accrued expenses	$	15,315	$	11,720	$	13,770	$	12,121

Note 910 — Other Liabilities

Other liabilities at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Pension and post-retirement benefit plans, long-term portion	$	8,169	$	8,642	$	7,960	$	8,285
Deferred rent	559		688		535		587
Long-term income tax payable	465		454		481		470
Long-term deferred compensation	287		333		281		288
Other liabilities	$	9,480	$	10,117	$	9,257	$	9,630

Note 1011 — Pension Plan

The net pension costs of the ~~Company’s~~Company's defined benefit pension plan were comprised primarily of interest costs and totaled $0.1 million and ~~$0.3~~$0.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018 and ~~$0.1 million and $0.4 million for the three and nine months ended September 30, 2016, respectively.~~2017. The net pension costs included the amortization of accumulated net loss of ~~$23~~$29 thousand and ~~$69~~$57 thousand for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, and ~~$38~~$23 thousand and ~~$112~~$46 thousand for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively.

Note 1112 — Uncertain Tax Positions and Income Taxes

The Company recognizes the financial statement impact of a tax return position when it is more likely than not, based on technical merits, that the position will ultimately be sustained. For tax positions that meet this recognition threshold, the Company applies judgment, taking into account applicable tax laws, experience managing tax audits, and relevant GAAP, to determine the amount of tax benefits to recognize in its financial statements. For each position, the difference between the benefit realized on the ~~Company’s~~Company's tax return and the benefit reflected in its financial statements is recorded to Other Liabilities in the Condensed Consolidated Balance Sheets as an unrecognized tax benefit ~~(“UTB”~~("UTB"). The Company updates its UTBs at each financial statement date to reflect the impacts of audit settlements and other resolution of audit issues, expiration of statutes of limitation, developments in tax law, and ongoing discussions with tax authorities.

The balance of UTBs was ~~$5.9~~$2.6 million at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. Included in the balance of unrecognized tax benefits at ~~September~~June 30, ~~2017~~2018 are approximately $0.5 million of tax benefits that, if recognized, would affect the effective tax rate. The recognition of the remaining uncertain tax positions would not affect the effective tax rate, but would instead increase or would have increased available tax attributes. However, the recognition of the tax attribute would be offset by an increase in the deferred tax asset valuation allowance resulting in no net impact to the effective tax rate.

The Company recognizes interest accrued related to its UTBs and penalties as income tax expense. Related to the UTBs noted above, the Company recognized no penalties (gross) and an immaterial amount of interest during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. At ~~September~~June 30, 2018 and December 31, 2017, the Company had liabilities of $0.1 million for penalties (gross) and $0.1 million for interest (gross).

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. All U.S. tax years prior to 2008 related to the Voyager Learning Company acquired entities have been audited by the Internal Revenue Service. Cambium and its subsidiaries have been examined by the Internal Revenue Service through the end of 2006. The Company has been audited by the various state tax authorities through 2007.

Note 1213 — Commitments and Contingencies

Legal Proceedings

The Company is involved in various legal proceedings incidental to its business. Management believes that the outcome of these proceedings will not have a material adverse effect upon the ~~Company’s~~Company's consolidated operations or financial condition and the Company has recognized appropriate liabilities as necessary based on facts and circumstances known to management. The Company expenses legal costs related to legal contingencies as incurred.

~~Purchase Commitments~~

From time to time, the Company may enter into firm purchase commitments for printed inventory materials that the Company expects to use in the ordinary course of business. These commitments are typically for terms less than one year and require the Company to buy minimum quantities of materials with specific delivery dates at a fixed price over the term. These open purchase commitments totaled $0.1 million as of September 30, 2017.

Letters of Credit

The Company had letters of credit outstanding at ~~September~~June 30, ~~2017~~2018 in the amount of $0.4 million to support ~~credit collections and workers’~~workers' compensation activity. The Company maintains certificates of deposit of $0.2 million as collateral for the letters of credit. The Company also maintains a $0.9 million money market fund investment as collateral for a travel card program. The certificates of deposit and money market fund investment are included in Collateral Investments in Note 78 – Other Assets.

Note 1314 — Debt

Debt at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Senior secured credit facility term loans maturing December 10, 2020	$	70,889		$	76,150		$	45,647		$	48,500
Less: Unamortized discount	(663		)	(923		)	(281		)	(380		)
Less: Unamortized deferred financing costs	(535		)	(747		)	(238		)	(321		)
Term loans, net of discount and deferred costs	69,691			74,480			45,128			47,799
Less: Current portion of long-term debt	7,098			7,350			6,651			5,958
Long-term debt	$	62,593		$	67,130		$	38,477		$	41,841

The Company had outstanding borrowings under the Revolving Credit Facility of $10.0 million at June 30, 2018 and no outstanding borrowings under the Revolving Credit Facility at ~~September 30, 2017 and~~ December 31, ~~2016.~~2017.

Senior Secured Credit Facility

On December 10, 2015, Cambium Learning, Inc. (the ~~“Borrower”~~"Borrower"), a wholly-owned subsidiary of Cambium Learning Group, Inc., entered into a $135.0 million Senior Secured Credit Agreement (the ~~“Credit Agreement”~~"Credit Agreement") among the Borrower, the Company, Webster Bank, N.A., as Administrative Agent, L/C Issuer and a Lender, and the other Lenders party thereto, with Webster Bank, N.A., as Joint Lead Arranger, the Governor and Company of the Bank of Ireland, as Joint Lead Arranger and Syndication Agent, and Capital One National Association, and Babson Capital Finance, LLC, as Co-Documentation Agents (the ~~“Senior~~"Senior Secured Credit ~~Facility”~~Facility"). The Senior Secured Credit Facility consists of a term loan A which had an initial principal amount of $70.0 million (“("Term Loan A”A"), a term loan B which had an initial principal amount of $35.0 million (“("Term Loan B”B") and a $30.0 million revolving credit facility (the ~~“Revolving~~"Revolving Credit ~~Facility”~~Facility"), secured by a lien on substantially all assets and capital stock of the Company, the Borrower and the ~~Borrower’s~~Borrower's subsidiaries (collectively, the ~~“Loan Parties”~~"Loan Parties"). The Senior Secured Credit Facility matures on December 10, 2020. In 2017, the Company repaid the remaining principal amount outstanding of the Term Loan B.

Borrowings under the Senior Secured Credit Facility bear interest equal to either a Base Rate, as defined in the Credit Agreement, or ~~the~~ LIBOR ~~rate~~ (subject to a 1.0% floor), at the ~~Borrower’s~~Borrower's option, plus an applicable margin. The applicable margin for the Term Loan A and Revolving Credit Facility ranges between 2.75% and 3.50% for Base Rate loans and 3.75% and 4.50% for LIBOR loans. The applicable margin for the Term Loan A and Revolving Credit Facility is based on a leverage calculation. ~~The applicable margin for the Term Loan B is 4.25% for Base Rate loans and 5.25% for LIBOR loans.~~ As of ~~September~~June 30, ~~2017,~~2018, the lowest tier of the applicable margins were in effect, and the interest ~~rates~~rate for the Term Loan A ~~and Term Loan B were 5.01% and 6.51%, respectively.~~was 5.73%. Additionally, unused borrowing capacity under the Revolving Credit Facility is subject to a commitment fee of 0.5%. Interest is payable in arrears every three months or less, based on the selected LIBOR interest period.

The Credit Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on investments and dispositions, limitations on fundamental changes to the Loan Parties, a maximum consolidated net leverage ratio, and minimum fixed charge coverage ratio. Upon an event of default, and after any applicable cure period, the Administrative Agent can accelerate the maturity of the loan. Events of default include customary items, such as failure to pay principal and interest in a timely manner and breach of covenants. At ~~September~~June 30, ~~2017,~~2018, the Company was in compliance with all covenants related to the Senior Secured Credit Facility.

The principal balances of the Senior Secured Credit Facility were issued at a discount, representing fees paid to lenders, which are amortized over the life of the debt using the effective interest rate method. Unamortized discount at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$0.7~~$0.3 million and ~~$0.9~~$0.4 million, respectively.

The Company incurred debt issuance costs associated with the Senior Secured Credit Facility, which were deferred and are amortized over the term of the related debt using the effective interest method. Unamortized deferred financing costs related to ~~both~~the Term Loan A ~~and Term Loan B~~ totaled ~~$0.5~~$0.2 million at ~~September~~June 30, ~~2017~~2018 and ~~$0.7~~$0.3 million at December 31, ~~2016,~~2017, and are presented as a reduction to Long-term Debt in the Condensed Consolidated Balance Sheets. Unamortized deferred financing costs related to the Revolving Credit Facility totaled ~~$0.6~~$0.4 million at ~~September~~June 30, ~~2017~~2018 and ~~$0.7~~$0.5 million at December 31, ~~2016,~~2017, and are classified as Other Assets in the Condensed Consolidated Balance Sheets.

At ~~September~~June 30, ~~2017,~~2018, the Company had outstanding principal balances of ~~$61.3~~$45.6 million under Term Loan A, ~~$9.6~~$10.0 million ~~under Term Loan B, no~~ outstanding borrowings under the Revolving Credit Facility, and had ~~$29.8~~$19.8 million borrowing availability under the Revolving Credit Facility. During ~~October~~ 2017, the Company voluntarily prepaid the remaining ~~$9.6 million~~ principal amount outstanding on the Term Loan B of the Senior Secured Credit ~~Facility and expects to incur a loss on extinguishment of $0.2 million.~~Facility.

In February 2016, the Company paid $0.1 million to enter into interest rate cap agreements for approximately half of its outstanding Term Loan A and Term Loan B loans, less required amortization, for a three-year period. Under the interest rate cap agreements, the Company will receive payments for any period that the three-month LIBOR rate exceeds 2.5%.

Note 1415 — Segment Reporting

The Company operates in three reportable segments with separate management teams and infrastructures that offer various products and services.

Learning A-Z Segment

Learning A-Z is a literacy-focused PreK-6 educational provider of technology-enabled learning resources. Founded in 2002, Learning ~~A-Z’s~~A-Z's resources are now used by more than 57 million students in more than ~~175~~170 countries. Learning A-Z provides a blend of traditional teacher-led instruction with technology-enabled resources to make teaching more effective and efficient, practice more accessible and personalized, assessment more strategic and automated, and learning more informed and proactive. With a comprehensive and blended approach, Learning A-Z delivers the tools students need without limiting a ~~teacher’s~~teacher's ability to differentiate instruction as they see fit. Learning ~~A-Z’s~~A-Z's approach to literacy emphasizes knowledge and individual potential by recognizing that while reading and writing remain essential to attaining academic success, they are dynamic and dependent on real-world application and the incorporation of many other 21^st21st century skills. Students today must read and write well, and they must also be able to think critically and analyze what they learn, solve problems, innovate and apply creativity, utilize advancing technology, communicate effectively orally and in writing, and collaborate with their peers. With a robust library of incredibly effective and flexible curriculum resources, Learning A-Z provides the tools teachers need to deliver personalized instruction for a wide range of student needs.

Learning A-Z operates the following subscription-based websites: Reading A-Z^®, Raz-Kids^®, Headsprout^®, Science A-Z^®, Writing A-Z™, Vocabulary A-Z™, and ReadyTest A-Z™. These websites can be purchased stand-alone or in collections, for a comprehensive solution that provides online supplemental books, lessons, assessments and other instructional resources for individual classrooms, schools, and districts. Learning ~~A-Z’s~~A-Z's premier offering is an integration of teacher centric Reading A-Z with student centric Raz-Kids in a bundled product marketed as Raz-Plus™.

ExploreLearning Segment

ExploreLearning makes online solutions that help students succeed in math and science. ExploreLearning combines research-proven instructional methods with innovative technology to create new pathways for learning. Founded in 1999, ExploreLearning solutions are now used in every U.S. state and over 50 countries worldwide. ExploreLearning offers two products that supplement core instruction in the classroom: Gizmos^® for grades 3-12 and Reflex^® for grades 2-8. Gizmos is a library of over 400 inquiry-based math and science simulations that help students make connections and draw conclusions through interaction, visualization and ~~“what-if”~~"what-if" exploration. Reflex is a highly-effective, game-based math fact fluency system

that helps students of all ability levels succeed by continually adapting to ~~students’~~students' instructional needs and providing motivational rewards for their effort.

Voyager Sopris Learning Segment

Voyager Sopris Learning is a leading provider of technology, materials, and professional development for educators to ensure all students graduate prepared for college, career, and satisfaction in life after K-12. It has built a nearly 40-year legacy on research and data-based curriculum development, while remaining nimble and responsive to the shifts and changes required by new standards, more demanding and rigorous content, new and competitive technological capabilities, and the needs of educators today. On a daily basis, Voyager Sopris Learning listens to the challenges of teachers and students, and its products are designed to respond to the need for exciting intervention and supplemental curricula that engage students, while remaining 100% purpose- and data-driven in their delivery. Voyager Sopris Learning programs are steeped in research and evidence, but they are also built with a deep consideration and understanding of the realities and struggles of education today. The Voyager Sopris Learning segment also includes Kurzweil Education brand ~~solutions, which are now fully integrated within the Voyager Sopris Learning management structure.~~solutions.

Voyager Sopris Learning solutions include LANGUAGE!^® Live, Language Essentials for Teachers of Reading and Spelling (LETRS^®), Step Up to Writing^®, ~~Transmath~~TransMath^®, Vmath, Kurzweil 3000^®, and Velocity™, among other instructional resources.

Other

Other consists of unallocated shared services, such as accounting, legal, human resources and corporate related items, as well as depreciation and amortization expense, interest income and expense, and income taxes. The Company does not allocate any of these costs to its segments, and the chief operating decision maker evaluates performance of operating segments excluding these items.

The following tables present the net revenues, operating expenses, income from operations, and capital expenditures which are used by the ~~Company’s~~Company's chief operating decision maker to measure the ~~segments’~~segments' operating performance. The Company does not track assets directly by segment and the chief operating decision maker does not use assets to measure a ~~segment’s~~segment's operating performance, and therefore this information is not presented.

Three Months Ended September 30, 2017
(in thousands) Learning
A-Z Explore
Learning Voyager Sopris
Learning Other Consolidated
Net revenues $ 18,511
$ 7,139
$ 17,873
$ —
$ 43,523
Cost of revenues 888
980
6,060
—
7,928
Amortization expense —
—
—
4,676
4,676
Total cost of revenues 888
980
6,060
4,676
12,604
Other operating expenses 8,454
3,283
6,627
3,738
22,102
Depreciation and amortization expense —
—
—
670
670
Total costs and expenses 9,342
4,263
12,687
9,084
35,376
Income before interest and income taxes 9,169
2,876
5,186
(9,084 ) 8,147
Net interest expense —
—
—
(1,271 ) (1,271 )
Income tax expense —
—
—
(399 ) (399 )
Segment net income $ 9,169
$ 2,876
$ 5,186
$ (10,754 ) $ 6,477
Expenditures for property, equipment,
software and pre-publication costs $ 2,657
$ 869
$ 1,351
$ 219
$ 5,096


	Three Months Ended September 30, 2016												Three Months Ended June 30, 2018
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated			Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	16,518	$	6,129	$	19,466	$	—		$	42,113		$	20,435	$	7,732	$	12,829	$	—		$	40,996
Cost of revenues	583		912		7,381		—			8,876			1,263		999		4,776		—			7,038
Amortization expense	—		—		—		4,780			4,780			—		—		—		4,043			4,043
Total cost of revenues	583		912		7,381		4,780			13,656			1,263		999		4,776		4,043			11,081
Other operating expenses	8,113		2,931		6,754		3,907			21,705			9,284		3,957		5,116		4,574			22,931
Depreciation and amortization expense	—		—		—		875			875			—		—		—		718			718
Total costs and expenses	8,696		3,843		14,135		9,562			36,236			10,547		4,956		9,892		9,335			34,730
Income before interest and income taxes	7,822		2,286		5,331		(9,562		)	5,877			9,888		2,776		2,937		(9,335		)	6,266
Net interest expense	—		—		—		(1,876		)	(1,876		)	—		—		—		(927		)	(927		)
Other income (expense), net													—		—		—		118			118
Income tax expense	—		—		—		(173		)	(173		)	—		—		—		(1,022		)	(1,022		)
Segment net income	$	7,822	$	2,286	$	5,331	$	(11,611	)	$	3,828		$	9,888	$	2,776	$	2,937	$	(11,166	)	$	4,435
Expenditures for property, equipment, software and pre-publication costs	$	2,491	$	819	$	2,090	$	5		$	5,405		$	2,324	$	1,082	$	557	$	17		$	3,980


	Nine Months Ended September 30, 2017												Three Months Ended June 30, 2017
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated			Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	55,346	$	20,652	$	43,857	$	—		$	119,855		$	18,650	$	6,735	$	14,977	$	—		$	40,362
Cost of revenues	2,701		2,659		15,968		—			21,328			942		808		5,465		—			7,215
Amortization expense	—		—		—		13,094			13,094			—		—		—		4,328			4,328
Total cost of revenues	2,701		2,659		15,968		13,094			34,422			942		808		5,465		4,328			11,543
Other operating expenses	24,920		9,627		18,660		10,700			63,907			8,020		3,113		6,104		3,342			20,579
Depreciation and amortization expense	—		—		—		2,020			2,020			—		—		—		669			669
Total costs and expenses	27,621		12,286		34,628		25,814			100,349			8,962		3,921		11,569		8,339			32,791
Income before interest and income taxes	27,725		8,366		9,229		(25,814		)	19,506			9,688		2,814		3,408		(8,339		)	7,571
Net interest expense	—		—		—		(3,834		)	(3,834		)	—		—		—		(1,336		)	(1,336		)
Other income (expense), net													—		—		—		(109		)	(109		)
Income tax expense	—		—		—		(873		)	(873		)	—		—		—		(334		)	(334		)
Segment net income	$	27,725	$	8,366	$	9,229	$	(30,521	)	$	14,799		$	9,688	$	2,814	$	3,408	$	(10,118	)	$	5,792
Expenditures for property, equipment, software and pre-publication costs	$	6,848	$	2,517	$	4,275	$	272		$	13,912		$	2,089	$	798	$	1,361	$	36		$	4,284


	Nine Months Ended September 30, 2016												Six Months Ended June 30, 2018
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated			Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	48,127	$	17,492	$	49,252	$	—		$	114,871		$	39,571	$	15,236	$	22,796	$	—		$	77,603
Cost of revenues	1,801		2,711		19,103		—			23,615			2,295		2,022		8,784		—			13,101
Amortization expense	—		—		—		12,905			12,905			—		—		—		7,947			7,947
Total cost of revenues	1,801		2,711		19,103		12,905			36,520			2,295		2,022		8,784		7,947			21,048
Other operating expenses	22,379		8,387		20,419		11,300			62,485			18,499		7,867		10,222		8,274			44,862
Depreciation and amortization expense	—		—		—		2,572			2,572			—		—		—		1,435			1,435
Total costs and expenses	24,180		11,098		39,522		26,777			101,577			20,794		9,889		19,006		17,656			67,345
Income before interest and income taxes	23,947		6,394		9,730		(26,777		)	13,294			18,777		5,347		3,790		(17,656		)	10,258
Net interest expense	—		—		—		(5,598		)	(5,598		)	—		—		—		(1,757		)	(1,757		)
Other income (expense), net													—		—		—		15			15
Income tax expense	—		—		—		(206		)	(206		)	—		—		—		(1,474		)	(1,474		)
Segment net income	$	23,947	$	6,394	$	9,730	$	(32,581	)	$	7,490		$	18,777	$	5,347	$	3,790	$	(20,872	)	$	7,042
Expenditures for property, equipment, software and pre-publication costs	$	6,770	$	2,174	$	6,557	$	670		$	16,171		$	4,450	$	2,197	$	1,310	$	31		$	7,988



	Six Months Ended June 30, 2017
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	36,835	$	13,513	$	25,984	$	—		$	76,332
Cost of revenues	1,813		1,679		9,908		—			13,400
Amortization expense	—		—		—		8,418			8,418
Total cost of revenues	1,813		1,679		9,908		8,418			21,818
Other operating expenses	16,466		6,344		12,033		6,745			41,588
Depreciation and amortization expense	—		—		—		1,350			1,350
Total costs and expenses	18,279		8,023		21,941		16,513			64,756
Income before interest and income taxes	18,556		5,490		4,043		(16,513		)	11,576
Net interest expense	—		—		—		(2,563		)	(2,563		)
Other income (expense), net	—		—		—		(217		)	(217		)
Income tax expense	—		—		—		(474		)	(474		)
Segment net income	$	18,556	$	5,490	$	4,043	$	(19,767	)	$	8,322
Expenditures for property, equipment, software and pre-publication costs	$	4,191	$	1,648	$	2,924	$	53		$	8,816

~~Note 15 — Subsequent Events~~

~~In November 2017, the Company’s ExploreLearning segment acquired IS3D, LLC, developers of Cogent Education™~~ ~~Interactive Cases~~™ – dynamic online experiences that put students in the role of a science, technology, engineering and mathematics (STEM) professional tasked with solving a real-world problem. The Company expects to pay a total cash purchase price of $1.1 million, with $1.0 million paid at close and $0.1 million to be paid after a hold back period of approximately one year. Cogent’s award-winning ~~Interactive Cases~~ provide engaging and immersive contexts for learning difficult scientific concepts through authentic inquiry and problem solving. With initial availability expected by 2019, ExploreLearning plans to integrate Cogent Education resources into its ~~Gizmos~~ ~~product.~~

In November 2017, in response to the lower-than-expected performance at the Voyager Sopris Learning segment, management completed restructuring activities to reduce its cost structure, and expects to incur approximately $1.2 million of severance costs in the fourth quarter, in addition to the $0.3 million of severance costs incurred in the third quarter.

Item 2. ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations.

This section should be read in conjunction with the audited Consolidated Financial Statements of Cambium Learning Group, Inc. and its subsidiaries (the ~~“Company,” “we,” “us,”~~"Company," "we," "us," or ~~“our”~~"our") and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Cautionary Note Regarding Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, and which are based on beliefs, expectations, estimates, projections, forecasts, plans, anticipations, targets, outlooks, initiatives, visions, objectives, strategies, opportunities, drivers and intents of our management. Such statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including statements regarding our future financial condition, economic performance and results of operations, as well as our business strategy, objectives of management for future operations, and the information set forth under ~~“Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" are forward-looking statements.

Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements can, in some cases, be identified by, among other things, the use of forward-looking language, such as “believes,” “expects,” “estimates,” “projects,” “forecasts,” “plans,” “anticipates,” “targets,” “outlooks,” “initiatives,” “visions,” “objectives,” “strategies,” “opportunities,” “drivers,” “intends,” “scheduled"believes," "expects," "estimates," "projects," "forecasts," "plans," "anticipates," "targets," "outlooks," "initiatives," "visions," "objectives," "strategies," "opportunities," "drivers," "intends," "scheduled to,~~” “seeks,” “may,” “will,”~~" "seeks," "may," "will," or ~~“should,”~~"should," or the negative of those terms, or other variations of those terms or comparable language, or by discussions of strategy, plans, targets, models or intentions. Forward-looking statements speak only as of the date they are made, and except for our ongoing obligations under the federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements, as it is impossible for us to anticipate all factors that could affect our actual results. These risks and uncertainties include, but are not limited to, those described in ~~“Risk Factors”~~"Risk Factors" in Part II, Item 1A and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, and those described from time to time in our future reports filed with the SEC. Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the results of any revisions to the forward-looking statements made in this report.

Overview

Cambium Learning^® Group, Inc., a Delaware corporation, is an award-winning educational technology solutions leader dedicated to helping all students reach their potential through individualized and differentiated instruction. Using a research-based, personalized approach, Cambium Learning Group delivers software as a service (SaaS) resources and instructional products that engage students and support teachers in fun, positive, safe and scalable environments. These solutions are provided through Learning A-Z^® (online differentiated instruction for elementary school reading, writing and science), ExploreLearning^®(online interactive math and science simulations and a math fact fluency solution), and Voyager Sopris Learning^® (blended solutions that accelerate struggling learners to achieve in literacy and math and professional development for teachers). We believe that every student has unlimited potential, that teachers matter, and that data, instruction, and practice are the keys to success in the classroom and beyond.

During ~~2017,~~2018, our products have continued to receive awards and accolades from industry publications.

~~2017 REVERE~~2018 Tech & Learning's "Best of Show" Award ~~presented by the PreK-12 Learning Group of the Association of American Publishers~~at TCEA

In ~~March 2017, ExploreLearning received a 2017 REVERE Award for the~~February 2018, Tech & Learning named ExploreLearning's Gizmos^® ~~product~~as one of the "Best of Show" products at TCEA 2018. The judges during the conference identified the technology that "will have the most impact in the ~~“best supplemental resource~~classroom." All of the products were rated for ~~science” category.~~"quality and effectiveness, ease of use and creative use of technology." Gizmos is a library of interactive online simulations for math and science education in grades 3-12. ~~The REVERE Awards are presented by the PreK-12 Learning Group of the Association of American Publishers to identify and honor excellence in educational materials.~~

The 2324^rdth Annual Best Educational Software Awards ~~(“BESSIE”~~("BESSIE") presented by The ComputED Gazette

In April ~~2017,~~2018, Learning A-Z ~~ExploreLearning,~~ and ~~Kurzweil Education~~ExploreLearning each received BESSIE Awards. The BESSIE Awards target innovative and content-rich programs and websites that provide parents and teachers with technology to foster

educational excellence and are awarded to titles submitted by publishers worldwide. We won BESSIE Awards in the following categories:

Early Learning, Reading Website: Headsprout^® by Learning A-Z

Early Elementary, ~~Writing~~Science Website: ~~Writing A-Z™~~Science A-Z^® by Learning A-Z

Early Elementary, ~~Science Website: Science A-Z~~Reading Skills: Headsprout^® by Learning A-Z

Early Elementary, Critical Thinking Skills Website: Raz-Plus™ by Learning A-Z

Upper Elementary, ~~Science Website: Science A-Z~~ ~~by Learning A-Z~~

~~Upper Elementary, Test Skills Website: ReadyTest A-Z™~~ ~~by Learning A-Z~~

~~Upper Elementary, Critical Thinking Skills Website: Raz-Plus~~ ~~by Learning A-Z~~

~~Upper Elementary, Writing Website: Writing A-Z~~ ~~by Learning A-Z~~

~~Multilevel, Critical Thinking Skills Website: Raz-Plus~~ ~~by Learning A-Z~~

~~Multilevel, Elementary Science Website: Science A-Z~~ ~~by Learning A-Z~~

~~Teacher Tools, Reading Resource Website: Reading A-Z~~^®~~by Learning A-Z~~

~~Early Elementary,~~ Math Fluency Website: Reflex^® by ExploreLearning

Upper Elementary, Science & Literacy Website: Science A-Z^® by Learning A-Z

Upper Elementary, Writing Website: Writing A-Z by Learning A-Z

Upper Elementary, ELL Website: Raz-Plus by Learning A-Z

Multilevel, Math ~~and~~& Science Online Simulations: Gizmos by ExploreLearning

~~Upper Elementary, Literacy~~Teacher Tools, ELL Reading Website: ~~Kurzweil 3000~~Raz-Plus ELL Edition ^®by ~~Kurzweil Education~~Learning A-Z

~~2017~~2018 CODiE Awards

In ~~July 2017,~~June 2018, we received a ~~2017~~2018 CODiE Award for Best ~~Reading / English Language Arts~~Science Instructional Solution:~~Headsprout~~ Science A-Z by Learning A-Z, as well as a 2018 CODiE Award for Best Solution for Special Needs Students: Raz-Plusby Learning A-Z, representing the ~~6th~~7th consecutive year the Company has received at least one CODiE ~~award.~~Award. Since 1986, the Software and Information Industry Association (SIIA) CODiE Awards have recognized software and information companies for achievement and vision. It is the only peer-reviewed program in the content, education, and software industry.

Segment Information

We have three reportable segments with separate management teams and infrastructures that offer various products and services: Learning A-Z, ExploreLearning, and Voyager Sopris Learning. Segment results of operations also include Other, which consists of unallocated shared services, such as accounting, legal, human resources and corporate related items, as well as depreciation and amortization expense, interest income and expense, and income taxes. We do not allocate any of these costs to our segments, and our chief operating decision maker evaluates performance of operating segments excluding these items.

Learning A-Z Segment

Learning A-Z is a literacy-focused PreK-6 educational provider of technology-enabled learning resources. Founded in 2002, Learning ~~A-Z’s~~A-Z's resources are now used by more than 57 million students in more than ~~175~~170 countries. Learning A-Z provides a blend of traditional teacher-led instruction with technology-enabled resources to make teaching more effective and efficient, practice more accessible and personalized, assessment more strategic and automated, and learning more informed and proactive. With a comprehensive and blended approach, Learning A-Z delivers the tools students need without limiting a teacher's ability to differentiate instruction as they see fit. Learning ~~A-Z’s~~A-Z's approach to literacy emphasizes knowledge and individual potential by recognizing that while reading and writing remain essential to attaining academic success, they are dynamic and dependent on real-world application and the incorporation of many other 21^st21st century skills. Students today must read and write well, and they must also be able to think critically and analyze what they learn, solve problems, innovate and apply creativity, utilize advancing technology, communicate effectively orally and in writing, and collaborate with their peers. With a robust library of incredibly effective and flexible curriculum resources, Learning A-Z provides the tools teachers need to deliver personalized instruction for a wide range of student needs.

Learning A-Z operates the following subscription-based websites: Reading A-Z^®, Raz-Kids^®, Headsprout^®, Science A-Z^®, Writing A-Z™, Vocabulary A-Z™, and ReadyTest A-Z™. These websites can be purchased stand-alone or in collections, for a comprehensive solution that provides online supplemental books, lessons, assessments and other instructional resources for individual classrooms, schools, and districts. Learning A-Z's premier offering is an integration of teacher centric Reading A-Z with student centric Raz-Kids in a bundled product marketed as Raz-Plus™.

ExploreLearning Segment

ExploreLearning solutions are now used in every U.S. state and over 50 countries worldwide. ExploreLearning offers two products that supplement core instruction in the classroom: Gizmos^® for grades 3-12 and Reflex^® for grades 2-8. Gizmos is a library of over 400 inquiry-based math and science simulations that help students make connections and draw conclusions through interaction, visualization and ~~“what-if”~~"what-if" exploration. Reflex is a highly-effective, game-based math fact fluency system that helps students of all ability levels succeed by continually adapting to ~~students’~~students' instructional needs and providing motivational rewards for their effort.

Voyager Sopris Learning Segment

Voyager Sopris Learning solutions include LANGUAGE!^® Live, Language Essentials for Teachers of Reading and Spelling (LETRS^®), Step Up to Writing^®, ~~Transmath~~TransMath^®, Vmath, Kurzweil 3000^®,and Velocity™, among other instructional resources.

~~Acquisition~~Review of ~~IS3D, LLC~~Strategic Alternatives

~~In November 2017,~~The Company announced in May 2018 that it has initiated a review of strategic alternatives to maximize shareholder value. Such strategic alternatives could include a sale of the ~~Company’s ExploreLearning segment acquired Athens, Georgia-based startup IS3D, LLC, developers~~Company or a sale of ~~Cogent Education™~~ ~~Interactive Cases™ – dynamic online experiences~~a division or divisions thereof, a strategic merger, a business combination or continuing as a standalone entity executing on its business plan. The Company has engaged Macquarie Capital as financial advisor and Lowenstein Sandler LLP as legal advisor to assist in its review.

The Company has not set a definitive timetable for completion of its review of strategic alternatives, nor has it made any decisions related to any such strategic alternative at this time, and there can be no assurances that ~~put students~~the process will result in any transaction being announced or completed in the ~~role~~future. The Company does not intend to make any further announcements related to its review unless and until its Board of Directors has approved a ~~science, technology, engineering~~specific transaction or otherwise determined that further disclosure is appropriate.

Agreement to Acquire VKidz

On May 13, 2018, the Company entered into a definitive agreement to acquire VKIDZ Holdings Inc. ("VKidz"), an award winning Florida-based edtech company dedicated to helping deliver the best education to students using digital solutions. Organized in two business units, VKidz serves both school systems and ~~mathematics (STEM) professional tasked~~homeschooling families with ~~solving~~100% digital, 100% subscription, innovative, research-based educational products. The Company believes VKidz is an exceptional fit with its current operations because it will provide attractive cross selling opportunities and expand Cambium's total addressable market. The acquisition is another step in Cambium's strategy of being the leading provider of state of the art digital subscription solutions that make a ~~real-world problem.~~difference in the lives of students.

Under the terms of the agreement, the purchase price will include issuance of 6.7 million shares of Cambium Learning Group common stock to the sellers, plus payment of outstanding debt of VKidz on the consummation date of the transaction. In 2017, VKidz had Bookings of approximately $21.1 million and Cash Income of approximately $5.7 million. At June 30, 2018, VKidz had debt principal outstanding of $20.0 million and cash of $0.9 million. The Company expects ~~to pay a total cash purchase price of $1.1 million, with $1.0 million paid at close and $0.1 million~~the acquisition to be ~~paid~~immediately accretive.

The acquisition is expected to be consummated, subject to all applicable approvals, after completion of the Company's review of strategic alternatives and the Company has the right to terminate the agreement prior to consummation.

VKidz is currently owned by founder John Edelson and a ~~hold back period~~fund managed by Veronis Suhler Stevenson, which owns a majority of the equity interests of VSS-Cambium Holdings III, LLC, which holds approximately ~~one year. Cogent’s award-winning~~ ~~Interactive Cases~~ ~~provide engaging~~68% of the Company's outstanding stock. Therefore, the Company's Board of Directors formed a special committee of independent and ~~immersive contexts for learning difficult scientific concepts through authentic inquiry~~disinterested directors to analyze and ~~problem solving. With initial availability expected~~negotiate the transaction on behalf of the Company and deliver a recommendation to the Company's Board of Directors with respect to the transaction. The Company's special committee was advised by ~~2019, ExploreLearning plans to integrate Cogent Education resources into its~~ ~~Gizmos~~ ~~product.~~Needham & Company, LLC as financial advisor and Paul Hastings LLP as legal advisor.

Results of Operations

Bookings

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, consolidated Bookings increased ~~$0.2~~$4.1 million to ~~$127.4~~$53.0 million, compared to ~~$127.1~~$48.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. Bookings by segment for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and the percentage change from the same period of ~~2016~~2017 were as follows:

Learning A-Z: ~~$59.7~~$24.3 million, increased ~~8.9%~~12.6% in the first ~~nine~~six months of the year compared to the prior year period, continuing its historical growth performance.

ExploreLearning: ~~$22.5~~$10.0 million, increased ~~18.3%~~13.8% in the first ~~nine~~six months of the year compared to the prior year ~~period. This segment had double-digit growth~~period with continued strong momentum for ~~both~~ the Reflex math product and the Gizmos math and science simulations.

Voyager Sopris Learning: ~~$45.2~~$18.7 million, ~~decreased 15.2%~~increased 1.0% in the first ~~nine~~six months of the year compared to the prior year period. The Bookings ~~decline~~increase came primarily from the ~~segment’s legacy print and transactional~~segment's technology-enabled solutions, which are not the strategic focus of the segment, and were 21% lower than prior year. Bookings for the segment’s technology-enabled solutions declined 2%, falling short of Company expectations for growth this year with slow traction for the new ~~Velocity~~ ~~solution combined with an expected decline in many of the older technology offerings.~~

~~LANGUAGE!Live, the segment’s digital flagship solution for technology-enabled adolescent intervention, had strong growth of 23% year-to-date and 38% for the third quarter.~~

We continue to execute our strategy to shift resources to subscription and technology-enabled products, which generally have higher margins than print and transactional products. For the nine months ended September 30, 2017, technology-enabled products represented approximately 77% of Bookings versus 71% for the same period of 2016. For purposes of this metric, technology-enabled products are defined as those products that are sold primarily as a technology-based solution or that could be used solely via a digital platform. For the Voyager Sopris Learning segment, several products classified as technology-enabled include supplemental print materials.

~~Restructuring~~

~~In November 2017, in response~~increased 9% compared to the lower-than-expected performance at the Voyager Sopris Learning segment, we completed restructuring activities to reduce our cost structure. We expect full year restructuring costs to total $1.5 million, with severance expense of $0.3 million incurred in the third quarter and an additional $1.2 million expected in the fourth quarter, which will be excluded from Adjusted EBITDA and Cash Income. The 2017 restructuring activities are expected to result in approximately $3.1 million of annualized savings at the Voyager Sopris Learning segment. A leaner cost base and a flatter management structure will provide this segment with flexibility, allowing Voyager Sopris Learning time to complete its transformation as it generates profits from declining legacy products while gaining traction on the fewer, more impactful educational solutions that are expected to drive top-line growth and margin expansion over time.

During the third quarter of 2016, Voyager Sopris Learning incurred restructuring costs of $0.9 million, representing severance charges. These restructuring costs are excluded from Adjusted EBITDA and Cash Income. The Voyager Sopris Learning restructuring costs were recorded as follows: cost of revenues of $0.4 million, research and development expense of $0.3 million, sales and marketing expense of $0.2 million, and general and administrative expense of $45 thousand.prior year.

Three Months Ended ~~September~~June 30, ~~2017~~2018 Compared to the Three Months Ended ~~September~~June 30, ~~2016~~2017


	Three Months Ended										Year-Over-Year Change					Three Months Ended										Year-Over-Year Change
	September 30, 2017					September 30, 2016					Favorable/(Unfavorable)					June 30, 2018					June 30, 2017					Favorable/(Unfavorable)
(in thousands)	Amount			% of Net Revenues		Amount			% of Net Revenues		$			%		Amount			% of Net Revenues		Amount			% of Net Revenues		$			%
Net revenues:
Learning A-Z	$	18,511		42.5	%	$	16,518		39.2	%	$	1,993		12.1	%	$	20,435		49.8	%	$	18,650		46.2	%	$	1,785		9.6	%
ExploreLearning	7,139			16.4	%	6,129			14.6	%	1,010			16.5	%	7,732			18.9	%	6,735			16.7	%	997			14.8	%
Voyager Sopris Learning	17,873			41.1	%	19,466			46.2	%	(1,593		)	(8.2	)%	12,829			31.3	%	14,977			37.1	%	(2,148		)	(14.3	)%
Total net revenues	43,523			100.0	%	42,113			100.0	%	1,410			3.3	%	40,996			100.0	%	40,362			100.0	%	634			1.6	%
Cost of revenues:
Learning A-Z	888			2.0	%	583			1.4	%	(305		)	(52.3	)%	1,263			3.1	%	942			2.3	%	(321		)	(34.1	)%
ExploreLearning	980			2.3	%	912			2.2	%	(68		)	(7.5	)%	999			2.4	%	808			2.0	%	(191		)	(23.6	)%
Voyager Sopris Learning	6,060			13.9	%	7,381			17.5	%	1,321			17.9	%	4,776			11.6	%	5,465			13.5	%	689			12.6	%
Amortization expense	4,676			10.7	%	4,780			11.4	%	104			2.2	%	4,043			9.9	%	4,328			10.7	%	285			6.6	%
Total cost of revenues	12,604			29.0	%	13,656			32.4	%	1,052			7.7	%	11,081			27.0	%	11,543			28.6	%	462			4.0	%
Research and development expense	3,352			7.7	%	3,301			7.8	%	(51		)	(1.5	)%	3,893			9.5	%	3,294			8.2	%	(599		)	(18.2	)%
Sales and marketing expense	12,771			29.3	%	12,152			28.9	%	(619		)	(5.1	)%	12,717			31.0	%	12,190			30.2	%	(527		)	(4.3	)%
General and administrative expense	5,565			12.8	%	5,872			13.9	%	307			5.2	%	6,135			15.0	%	4,900			12.1	%	(1,235		)	(25.2	)%
Shipping and handling costs	414			1.0	%	380			0.9	%	(34		)	(8.9	)%	186			0.5	%	195			0.5	%	9			4.6	%
Depreciation and amortization expense	670			1.5	%	875			2.1	%	205			23.4	%	718			1.8	%	669			1.7	%	(49		)	(7.3	)%
Income before interest and income taxes	8,147			18.7	%	5,877			14.0	%	2,270			38.6	%	6,266			15.3	%	7,571			18.8	%	(1,305		)	(17.2	)%
Net interest expense	(1,271		)	(2.9	)%	(1,876		)	(4.5	)%	605			32.2	%	(927		)	(2.3	)%	(1,336		)	(3.3	)%	409			30.6	%
Other income (expense), net																118			0.3	%	(109		)	(0.3	)%	227			208.3	%
Income tax expense	(399		)	(0.9	)%	(173		)	(0.4	)%	(226		)	(130.6	)%	(1,022		)	(2.5	)%	(334		)	(0.8	)%	(688		)	(206.0	)%
Net income	$	6,477		14.9	%	$	3,828		9.1	%	$	2,649		69.2	%	$	4,435		10.8	%	$	5,792		14.4	%	$	(1,357	)	(23.4	)%

Net revenues

Net revenues increased during the three months ended ~~September~~June 30, ~~2017~~2018 by ~~3.3%~~1.6% to ~~$43.5~~$41.0 million, compared to ~~$42.1~~$40.4 million during the same period of ~~2016.~~2017. Increased net revenues in Learning A-Z and ExploreLearning offset lower net revenues in Voyager Sopris Learning. Net revenues by segment were as follows:

Learning ~~A-Z’s~~A-Z's net revenues were ~~$18.5~~$20.4 million, increasing ~~$2.0~~$1.8 million, or ~~12.1%~~9.6%, in the quarter ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The year-over-year ~~growth~~increase in ~~net revenues~~revenue is ~~the result of~~driven by Learning ~~A-Z’s continued trend of~~A-Z's ongoing strong Bookings ~~growth.~~trend.

~~ExploreLearning’s~~

ExploreLearning's net revenues were ~~$7.1~~$7.7 million, increasing $1.0 million, or ~~16.5%~~14.8%, during the quarter ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The increase in net revenues is due to ~~ExploreLearning’s~~ExploreLearning's continued strong Bookings performance.

Voyager Sopris ~~Learning’s~~Learning's net revenues were ~~$17.9~~$12.8 million, decreasing ~~$1.6~~$2.1 million, or ~~8.2%~~14.3%, during the quarter ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016. The year-over-year decline in~~2017. GAAP net revenues ~~is the result~~include a significant amount of ~~Voyager Sopris Learning’s Bookings decline.~~revenue recognition generated from prior period Bookings.

Cost of revenues

Cost of revenues primarily ~~include~~includes print and royalty costs, and expenses to purchase, handle and warehouse product, and to provide services and support to customers. Cost of revenues, excluding amortization, decreased ~~$0.9~~$0.2 million, or ~~10.7%~~2.5%, to ~~$7.9~~$7.0 million in the ~~third~~second quarter of ~~2017~~2018 compared to ~~$8.9~~$7.2 million in the same period of ~~2016.~~2017. Cost of revenues benefited year-over-year from the increasing contribution from higher-margin technology-enabled solutions. The Learning A-Z and ExploreLearning segments, which are delivered on-line and have no royalty costs, comprised ~~58.9%~~68.7% of net revenues in the ~~third~~second quarter of ~~2017~~2018 compared to ~~53.8%~~62.9% of net revenues in the ~~third~~second quarter of ~~2016.~~2017. Cost of revenues by segment were as follows:

Learning ~~A-Z’s~~A-Z's cost of revenues increased by $0.3 million, to ~~$0.9~~$1.3 million due to the higher volume of subscriptions as well as increased customer support initiatives.

~~ExploreLearning’s~~ExploreLearning's cost of revenues increased ~~slightly~~ by ~~$0.1~~$0.2 million to $1.0 million in the quarter ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The increased costs were related to implementation and training due to the segment's increased level of customer support.

Voyager Sopris ~~Learning’s~~Learning's cost of revenues decreased ~~$1.3~~$0.7 million or ~~17.9%~~12.6%, to ~~$6.1~~$4.8 million in the quarter ended ~~September~~June 30, ~~2017~~2018 compared to ~~$7.4~~$5.5 million in the ~~third~~second quarter of ~~2016.~~2017. The decrease in cost of revenues was due to the year-over-year decline in revenue, ~~the~~as well as cost ~~right-sizing activities completed~~savings from restructuring in ~~2016 and the third quarter 2016 restructuring costs of $0.4 million.~~late 2017.

Amortization expense in cost of revenues includes amortization for acquired pre-publication costs and technology, acquired publishing rights, and developed pre-publication and technology product development. Amortization expense was ~~$4.7~~$4.0 million in the ~~third~~second quarter of ~~2017,~~2018, a decrease of ~~$0.1~~$0.3 million compared to the same period of 2016. The change was due to a decrease in amortization of acquired publishing rights and curriculum of $0.3 million, partially offset by an increase in amortization of developed pre-publication and technology product development of $0.2 million.2017.

Research and development expense

Research and development expense includes costs to research, evaluate and develop educational products, net of capitalization. Research and development expense was ~~$3.4~~$3.9 million in the ~~third~~second quarter of ~~2017,~~2018, an increase of ~~$0.1~~$0.6 million compared to the same period of ~~2016.~~2017. The increase is due to planned investments to support growth initiatives at Learning A-Z and ExploreLearning. The increase for ExploreLearning includes $0.1 million of expense related to the ongoing integration of content from IS3D, LLC, which ~~were partially offset by decreases at Voyager Sopris Learning.~~was acquired in the fourth quarter of 2017.

Sales and marketing expense

Sales and marketing expense includes all costs to maintain our various sales channels, including the salaries and commissions paid to our sales force, and costs related to our advertising and marketing efforts. Sales and marketing expense for the ~~third~~second quarter of ~~2017~~2018 increased ~~$0.6~~$0.5 million to ~~$12.8~~$12.7 million compared to $12.2 million for the ~~third~~second quarter of ~~2016.~~2017. The increase is due to planned investments to support growth initiatives at Learning A-Z and ~~ExploreLearning.~~ExploreLearning, which were partially offset by decreases at Voyager Sopris Learning, including cost savings from the restructuring activities in late 2017.

General and administrative expense

General and administrative expenses in the ~~third~~second quarter of ~~2017~~2018 were ~~$5.6~~$6.1 million, ~~a decrease~~an increase of ~~$0.3~~$1.2 million, or ~~5.2%~~25.2%, from the ~~third~~second quarter of ~~2016,~~2017. The increase was driven by $1.1 million of Shared Services expenses incurred related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. and its review of strategic alternatives. The remaining increase was due to ~~partial write-off to bad debt expense of accounts receivable related to a large international reseller for~~growth commensurate with Bookings at Learning A-Z ~~during the third quarter of 2016. An additional $0.2 million of bad debt expense was recorded in the fourth quarter of 2016.~~

and ExploreLearning, partially offset by cost savings at Voyager Sopris Learning.

Shipping and handling costs

Shipping and handling costs for the quarter ended ~~September~~June 30, ~~2017 increased slightly to $0.4~~2018 were $0.2 million, ~~from~~consistent with the ~~third~~second quarter of ~~2016.~~2017.

Depreciation and amortization expense

Depreciation and amortization expense ~~decreased $0.2 million, or 23.4%, to~~was $0.7 million for the three months ended ~~September~~June 30, 2018, consistent with the same period of 2017.

Other income (expense)

Other income (expense) was $0.1 million for the quarter ended June 30, 2018, compared to $(0.1) million in the same period in 2017, ~~due~~and includes expense related to a ~~decrease~~frozen defined benefit pension plan of $(0.1) million in ~~amortization~~both periods. Pension expense in the second quarter of ~~acquired trade names~~2018 was offset by income resulting from the sale of excess state tax research and ~~customer lists.~~development credits of $0.2 million.

Net interest expense

Net interest expense decreased by ~~$0.6~~$0.4 million, or ~~32.2%~~30.6%, to ~~$1.3~~$0.9 million in the ~~third~~second quarter of ~~2017~~2018 compared to the same period in ~~2016~~2017 as a result of the scheduled debt amortization payments and voluntary prepayments made during ~~2016.~~2017.

Income tax expense

We recorded an income tax expense of ~~$0.4~~$1.0 million for the ~~third~~second quarter of 2018, an increase of $0.7 million compared to the same period of 2017. ~~We continue to maintain a~~In December 2017, we released most of the valuation allowance against our deferred tax ~~assets,~~assets. The release of the valuation allowance results in changes in our deferred taxes being included in income tax expense as opposed to prior year periods in which ~~eliminates any non-current tax benefit generated.~~changes in our deferred taxes were offset by corresponding changes in the valuation allowance.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017


	Nine Months Ended										Year Over Year Change					Six Months Ended										Year Over Year Change
	September 30, 2017					September 30, 2016					Favorable/(Unfavorable)					June 30, 2018					June 30, 2017					Favorable/(Unfavorable)
(in thousands)	Amount			% of Net Revenues		Amount			% of Net Revenues		$			%		Amount			% of Net Revenues		Amount			% of Net Revenues		$			%
Net revenues:
Learning A-Z	$	55,346		46.2	%	$	48,127		41.9	%	$	7,219		15.0	%	$	39,571		51.0	%	$	36,835		48.3	%	$	2,736		7.4	%
ExploreLearning	20,652			17.2	%	17,492			15.2	%	3,160			18.1	%	15,236			19.6	%	13,513			17.7	%	1,723			12.8	%
Voyager Sopris Learning	43,857			36.6	%	49,252			42.9	%	(5,395		)	(11.0	)%	22,796			29.4	%	25,984			34.0	%	(3,188		)	(12.3	)%
Total net revenues	119,855			100.0	%	114,871			100.0	%	4,984			4.3	%	77,603			100.0	%	76,332			100.0	%	1,271			1.7	%
Cost of revenues:
Learning A-Z	2,701			2.3	%	1,801			1.6	%	(900		)	(50.0	)%	2,295			3.0	%	1,813			2.4	%	(482		)	(26.6	)%
ExploreLearning	2,659			2.2	%	2,711			2.4	%	52			1.9	%	2,022			2.6	%	1,679			2.2	%	(343		)	(20.4	)%
Voyager Sopris Learning	15,968			13.3	%	19,103			16.6	%	3,135			16.4	%	8,784			11.3	%	9,908			13.0	%	1,124			11.3	%
Amortization expense	13,094			10.9	%	12,905			11.2	%	(189		)	(1.5	)%	7,947			10.2	%	8,418			11.0	%	471			5.6	%
Total cost of revenues	34,422			28.7	%	36,520			31.8	%	2,098			5.7	%	21,048			27.1	%	21,818			28.6	%	770			3.5	%
Research and development expense	9,744			8.1	%	9,440			8.2	%	(304		)	(3.2	)%	7,619			9.8	%	6,392			8.4	%	(1,227		)	(19.2	)%
Sales and marketing expense	37,871			31.6	%	36,309			31.6	%	(1,562		)	(4.3	)%	25,520			32.9	%	25,100			32.9	%	(420		)	(1.7	)%
General and administrative expense	15,565			13.0	%	15,976			13.9	%	411			2.6	%	11,416			14.7	%	9,783			12.8	%	(1,633		)	(16.7	)%
Shipping and handling costs	727			0.6	%	760			0.7	%	33			4.3	%	307			0.4	%	313			0.4	%	6			1.9	%
Depreciation and amortization expense	2,020			1.7	%	2,572			2.2	%	552			21.5	%	1,435			1.8	%	1,350			1.8	%	(85		)	(6.3	)%
Income before interest and income taxes	19,506			16.3	%	13,294			11.6	%	6,212			46.7	%	10,258			13.2	%	11,576			15.2	%	(1,318		)	(11.4	)%
Net interest expense	(3,834		)	(3.2	)%	(5,598		)	(4.9	)%	1,764			31.5	%	(1,757		)	(2.3	)%	(2,563		)	(3.4	)%	806			31.4	%
Other income (expense), net																15			—	%	(217		)	(0.3	)%	232			106.9	%
Income tax expense	(873		)	(0.7	)%	(206		)	(0.2	)%	(667		)	(323.8	)%	(1,474		)	(1.9	)%	(474		)	(0.6	)%	(1,000		)	(211.0	)%
Net income	$	14,799		12.3	%	$	7,490		6.5	%	$	7,309		97.6	%	$	7,042		9.1	%	$	8,322		10.9	%	$	(1,280	)	(15.4	)%

Net revenues

Net revenues increased during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 by ~~4.3%~~1.7% to ~~$119.9~~$77.6 million, compared to ~~$114.9~~$76.3 million during the same period of ~~2016.~~2017. Increased net revenues in Learning A-Z and ExploreLearning offset lower net revenues in Voyager Sopris Learning. Net revenues by segment were as follows:

Learning ~~A-Z’s~~A-Z's net revenues were ~~$55.3~~$39.6 million, increasing ~~$7.2~~$2.7 million, or ~~15.0%~~7.4%, in the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The year-over-year ~~growth~~increase in ~~net revenues~~revenue is ~~the result of~~driven by Learning ~~A-Z’s continued trend of~~A-Z's ongoing strong Bookings ~~growth.~~trend.

~~ExploreLearning’s~~ExploreLearning's net revenues were ~~$20.7~~$15.2 million, increasing ~~$3.2~~$1.7 million, or ~~18.1%~~12.8%, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The increase in net revenues is due to ~~ExploreLearning’s~~ExploreLearning's continued strong Bookings performance.

Voyager Sopris ~~Learning’s~~Learning's net revenues were ~~$43.9~~$22.8 million, decreasing ~~$5.4~~$3.2 million, or ~~11.0%~~12.3%, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016. The year-over-year decline~~2017. Although Bookings increased slightly in ~~revenues is~~ the ~~result of Voyager Sopris Learning’s Bookings decline. The decline in~~six months ended June 30, 2018, GAAP net revenues ~~was less than the Bookings decline~~include a significant amount of ~~15.2% due to the~~revenue recognition ofgenerated from prior period ~~Bookings for technology deliverables, which are recognized pro rata over the applicable subscription periods.~~Bookings.

Cost of revenues

Cost of revenues primarily ~~include~~includes print and royalty costs, and expenses to purchase, handle and warehouse product, and to provide services and support to customers. Cost of revenues, excluding amortization, decreased ~~$2.3~~$0.3 million, or ~~9.7%~~2.2%, to ~~$21.3~~$13.1 million in the first ~~nine months~~half of ~~2017~~2018 compared to ~~$23.6~~$13.4 million in the same period of ~~2016.~~2017. Cost of revenues benefited year-over-year from the increasing contribution from higher-margin technology-enabled solutions. The Learning A-Z and ExploreLearning segments, which are delivered on-line and have no royalty costs, comprised ~~63.4%~~70.6% of net revenues in the first ~~nine months~~half of ~~2017~~2018 compared to ~~57.1%~~66.0% of net revenues in the ~~same period~~first half of ~~2016.~~2017. Cost of revenues by segment were as follows:

Learning ~~A-Z’s~~A-Z's cost of revenues increased ~~$0.9~~by $0.5 million, to ~~$2.7~~$2.3 million, in the six months ended June 30, 2018 compared to $1.8 million in the same period of 2017 due to ~~the~~ higher volume of subscriptions ~~in addition to an increase in~~as well as increased customer support initiatives.

~~ExploreLearning’s~~ExploreLearning's cost of revenues ~~decreased slightly~~increased by $0.3 million to ~~$2.7~~$2.0 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to the same period of ~~2016.~~2017. The increased costs were related to implementation and training due to the segment's increased level of customer support.

Voyager Sopris ~~Learning’s~~Learning's cost of revenues decreased ~~$3.1~~$1.1 million or 11.3%, to ~~$16.0~~$8.8 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$19.1~~$9.9 million in the first ~~nine months~~half of ~~2016.~~2017. The decrease in cost of revenues was due to the year-over-year decline in revenue, ~~coupled with~~as well as cost savings from ~~careful expense management and the cost right-sizing activities completed~~restructuring in ~~2016.~~late 2017.

Amortization expense in cost of revenues includes amortization for acquired pre-publication costs and technology, acquired publishing rights, and developed pre-publication and technology product development. Amortization expense was ~~$13.1~~$7.9 million in the first ~~nine months~~half of ~~2017, an increase~~2018, a decrease of ~~$0.2~~$0.5 million compared to the same period of 2016. The change was due to an increase in amortization of developed pre-publication and technology product development of $1.2 million, partially offset by a decrease in amortization of acquired publishing rights and curriculum of $1.0 million.2017.

Research and development expense

Research and development expense includes costs to research, evaluate and develop educational products, net of capitalization. Research and development expense was ~~$9.7~~$7.6 million in the first ~~nine months~~half of ~~2017,~~2018, an increase of ~~$0.3~~$1.2 million compared to the same period of ~~2016.~~2017. The increase is due to planned investments to support growth initiatives at Learning A-Z and ExploreLearning. The increase for ExploreLearning ~~partially offset by decreases at Voyager Sopris Learning due~~includes $0.2 million of expense related to ~~planned reductions~~the ongoing integration of content from IS3D, LLC, which was acquired in ~~development in 2017 after~~ the ~~release~~fourth quarter of ~~the~~ ~~Velocity~~ ~~product in 2016.~~2017.

Sales and marketing expense

Sales and marketing expense includes all costs to maintain our various sales channels, including the salaries and commissions paid to our sales force, and costs related to our advertising and marketing efforts. Sales and marketing expense for the first ~~nine months~~half of ~~2017~~2018 increased ~~$1.6~~$0.4 million to ~~$37.9~~$25.5 million compared to ~~$36.3~~$25.1 million for the first ~~nine months~~half of ~~2016.~~2017. The increase is due to planned ~~increases~~investments to support growth initiatives at Learning A-Z ~~of $1.5 million~~ and ExploreLearning, ~~of $1.0 million,~~ which were partially offset by ~~a decrease of $0.9 million~~decreases at Voyager Sopris ~~Learning.~~Learning, including cost savings from the restructuring activities in late 2017.

General and administrative expense

General and administrative expenses in the first ~~nine months~~half of ~~2017~~2018 were ~~$15.6~~$11.4 million, ~~a decrease~~an increase of ~~$0.4~~$1.6 million, or ~~2.6%~~16.7%, from the same period of ~~2016, due primarily to bad debt expense in 2016~~2017. The increase was driven by $1.1 million of Shared Services expenses incurred related to ~~a large international reseller for~~the Company's definitive agreement to acquire VKIDZ Holdings Inc. and its review of strategic alternatives. The remaining increase was due to growth commensurate with Bookings at Learning ~~A-Z. An additional $0.2 million of bad debt expense was recorded in the fourth quarter of 2016. Cost~~A-Z and ExploreLearning, partially offset by cost savings at Voyager Sopris ~~Learning were offset by restructuring costs of $0.3 million during the third quarter of 2017.~~Learning.

Shipping and handling costs

Shipping and handling costs for the ~~nine~~six months ended ~~September~~June 30, ~~2017 decreased slightly to $0.7~~2018 were $0.3 million, ~~commensurate~~consistent with ~~lower print revenues.~~

the same period of 2017.

Depreciation and amortization expense

Depreciation and amortization expense ~~decreased $0.6 million, or 21.5%, to $2.0~~was $1.4 million for the ~~nine~~six months ended ~~September~~June 30, 2018, an increase of $0.1 million compared to the first half of 2017.

Other income (expense)

Other income (expense) was $15 thousand and $(0.2) million for the six months ended June 30, 2018 and June 30, 2017, ~~due~~respectively, and includes expense related to a ~~decrease~~frozen defined benefit pension plan of $(0.2) million in ~~amortization~~both periods. Pension expense in the first half of ~~acquired trade names~~2018 was offset by income resulting from the sale of excess state tax research and ~~customer lists.~~development credits of $0.2 million.

Net interest expense

Net interest expense decreased by ~~$1.8~~$0.8 million, or ~~31.5%~~31.4%, to ~~$3.8~~$1.8 million in the first ~~nine months~~half of ~~2017~~2018 compared to the same period in ~~2016~~2017 as a result of the scheduled debt amortization payments and voluntary prepayments made during ~~2016.~~2017.

Income tax expense

We recorded an income tax expense of ~~$0.9~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. We continue to maintain a~~2018. In December 2017, we released most of the valuation allowance against our deferred tax ~~assets,~~assets. The release of the valuation allowance results in changes in our deferred taxes being included in income tax expense as opposed to prior year periods in which ~~eliminates any non-current tax benefit generated.~~changes in our deferred taxes were offset by corresponding changes in the valuation allowance.

Liquidity and Capital Resources

Our primary sources of liquidity are cash balances, cash flow from operations, and the Revolving Credit Facility that we entered into in December ~~2015, as described below.~~2015. Sales seasonality attributable to the buying cycle of school districts, which generally starts at the beginning of each new school year in the fall, affects our operating cash flow. As a result of this inherent seasonality, we normally incur a net cash deficit from all of our activities in the first and second quarters of the year and we normally generate cash in the third and fourth quarters of the year. We expect borrowings under the Revolving Credit Facility to vary according to this seasonality, and accounts receivable balances are normally at their highest at the end of the third quarter. At ~~September~~June 30, ~~2017,~~2018, our cash balances were ~~$12.1~~$4.7 million, our net accounts receivable were ~~$30.7~~$13.3 million, ~~we had no outstanding~~our borrowings under the Revolving Credit Facility were $10.0 million, and we had ~~$29.8~~$19.8 million of availability under the Revolving Credit Facility.

During October 2017, we voluntarily prepaid the remaining $9.6 million principal amount outstanding on the Term Loan B of the Senior Secured Credit Facility and expect to incur a loss on extinguishment of $0.2 million. In November 2017, we paid $1.0 million related to the acquisition of IS3D, LLC, developers of Cogent Education™ ~~Interactive Cases™, with an additional $0.1 million to be paid after a hold back period of approximately one year.~~

Based on current and anticipated levels of operating performance and cash flow from operations, combined with our existing cash balances and availability under the Revolving Credit Facility, we believe that we will be able to make required principal and interest payments on our debt and fund our working capital, operational and capital expenditure requirements for the next 12 months.

Senior Secured Credit Facility

On December 10, 2015, we entered into a $135.0 million Senior Secured Credit Agreement (the ~~“Credit Agreement”~~"Credit Agreement") which provided for a term loan A which had an initial principal amount of $70.0 million (“("Term Loan A”A"), a term loan B which had an initial principal amount of $35.0 million (“("Term Loan B”B"), and a $30.0 million revolving credit facility (the ~~“Revolving~~"Revolving Credit ~~Facility”~~Facility") (together, the ~~“Senior~~"Senior Secured Credit ~~Facility”~~Facility"), secured by a lien on substantially all of our assets. The Senior Secured Credit Facility matures on December 10, 2020. In 2017, we repaid the entire principal amount outstanding of the Term Loan B.

Borrowings under the Senior Secured Credit Facility bear interest equal to either a Base Rate, as defined in the Credit Agreement, or LIBOR (subject to a 1.0% floor), at our option, plus an applicable margin. The applicable margin for the Term Loan A and Revolving Credit Facility ranges between 2.75% and 3.50% for Base Rate loans and 3.75% and 4.50% for LIBOR loans. The applicable margin for the Term Loan A and Revolving Credit Facility is based on a leverage calculation. ~~The applicable margin for the Term Loan B is 4.25% for Base Rate loans and 5.25% for LIBOR loans.~~ As of ~~September~~June 30, ~~2017,~~2018, we qualified for the lowest applicable margin, and the interest rate for the Term Loan A was ~~5.01%, and the interest rate for the Term Loan B was 6.51%~~5.73%. Additionally, unused borrowing capacity under the Revolving Credit Facility is subject to a commitment fee of 0.5%. Interest is payable in arrears every three months or less, based on the selected LIBOR interest period.

The Credit Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on investments and dispositions, and limitations on fundamental changes. A maximum consolidated net leverage ratio and minimum fixed charge coverage ratio were effective beginning in the first quarter of 2016. Upon an event of default, and after any applicable cure period, the Administrative Agent could elect to accelerate the maturity of the loan. Events of default include customary items, such as failure to pay principal and interest in a timely manner and breach of covenants. At ~~September~~June 30, ~~2017,~~2018, the Company was in compliance with all covenants related to the Senior Secured Credit Facility.

Summary of Cash flows

Cash provided by (used in) our operating, investing and financing activities is summarized below:


	Nine Months Ended September 30,						Six Months Ended June 30,
(in thousands)	2017			2016			2018			2017
Operating activities	$	25,570		$	21,758		$	(3,940	)	$	(4,290	)
Investing activities	(13,912		)	(16,171		)	(7,988		)	(8,816		)
Financing activities	(4,495		)	(2,494		)	8,115			12,822

Operating activities. Cash ~~provided by~~used in operating activities was ~~$25.6~~$3.9 million and ~~$21.8~~$4.3 million for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, respectively. Cash flows from operating activities were impacted favorably during 2018 by higher Bookings and ~~2016, respectively. The increase in~~lower cash ~~provided~~interest payments of $0.3 million, partially offset by operations is due to the improved operational results, combined with improvements in cash usage in the first nine months of 2017, including incentive compensation payments that were $1.3 million lower than prior year, the return of ~~$1.0~~$0.7 million of cash from a certificate of deposit ~~and bond collateral during the nine months ended September 30, 2017, and cash interest payments that were $1.6 million lower than the nine months ended September 30, 2016.~~collateralizing a letter of credit in first half 2017.

Investing activities. Cash used in investing activities was related to capital expenditures, and was ~~$13.9~~$8.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$16.2~~$8.8 million during the same period of ~~2016,~~2017, declining by ~~$2.3~~$0.8 million, as a result of lower spend at the Voyager Sopris Learning segment. Capital expenditures in 2018 for the ExploreLearning segment ~~which had higher 2016 expenditures due~~include $0.6 million related to the ~~launch~~ongoing integration of content from IS3D, LLC, which was acquired in the ~~Velocity~~ ~~solution.~~fourth quarter of 2017.

Financing activities. Cash ~~used in~~provided by financing activities was ~~$4.5~~$8.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared to ~~$2.5~~$12.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. Cash inflows for the six months ended June 30, 2018 included borrowings under the Revolving Credit Facility of $10.0 million and $1.0 million of proceeds from the exercise of stock options. Cash outflows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 included scheduled principal payments on the Senior Secured Credit Facility of ~~$5.3~~$2.9 million. Cash inflows for the ~~nine~~six months ended ~~September~~June 30, 2017 included ~~$0.8~~borrowings under the Revolving Credit Facility of $16.0 million and $0.3 million of proceeds from the exercise of stock options. Financing outflows for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 included scheduled principal payments of the Senior Secured Credit Facility of ~~$2.9~~$3.5 million. Cash inflows for the nine months ended September 30, 2016 included $0.4 million of proceeds from the exercise of stock options. Borrowings and repayments under the Revolving Credit Facility netted to zero during the nine months ended September 30, 2017 and September 30, 2016.

Non-GAAP Measures

The Company uses the EBITDA, Adjusted EBITDA, and Cash Income non-GAAP financial measures to monitor and evaluate the operating performance of the Company and as a basis to set and measure progress towards performance targets.

EBITDA is earnings from operations before interest, income taxes, and depreciation and amortization.

Adjusted EBITDA is EBITDA excluding non-operational and non-cash items. Examples of items excluded from Adjusted EBITDA include stock-based compensation, merger, acquisition and disposition activities, certain impairment charges, and restructuring charges.

Cash Income reduces Adjusted EBITDA for capital expenditures and removes the timing differences for recognition of deferred revenues and related deferred costs.

EBITDA, Adjusted EBITDA, and Cash Income are not prepared in accordance with GAAP and may be different from similarly named, non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company believes these non-GAAP measures provide useful information to investors because they reflect the underlying performance of the ongoing operations of the Company and provide investors with a view of the ~~Company’s~~Company's operations from ~~management’s~~management's perspective. Adjusted EBITDA and Cash Income remove significant restructuring, non-operational, or certain non-cash items from earnings. The Company uses Adjusted EBITDA and Cash Income to monitor and evaluate the operating performance of the Company and as the basis to set and measure progress toward performance targets. Further, the Cash Income measure directly affects compensation for employees and executives. The Company generally uses these non-GAAP measures as measures of operating performance and not as measures of the ~~Company’s~~Company's liquidity. The ~~Company’s~~Company's presentation of EBITDA, Adjusted EBITDA, and Cash Income should not be construed as an indication that our future results will be unaffected by unusual, non-operational, or non-cash items.

Reconciliations of Operational and Non-GAAP Measures

Bookings is an internal, operational metric that measures the total dollar value of customer orders in a period, regardless of the timing of the related revenue recognition. We consider Bookings a leading indicator of revenues. Below are reconciliations of Bookings to Net Revenues and of Net Income to EBITDA, Adjusted EBITDA, and Cash Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:

Reconciliation of Bookings to Net Revenues


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2017			2016			2017			2016			2018			2017		2018			2017
Bookings	$	78,538		$	74,220		$	127,391		$	127,143		$	33,116		$	29,741	$	52,969		$	48,853
Change in deferred revenues	(35,065		)	(32,021		)	(7,646		)	(12,078		)	7,900			10,576		24,814			27,419
Other ^(a)	50			(86		)	110			(194		)	(20		)	45		(180		)	60
Net revenues	$	43,523		$	42,113		$	119,855		$	114,871		$	40,996		$	40,362	$	77,603		$	76,332

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	6,477		$	3,828		$	14,799		$	7,490		$	4,435		$	5,792		$	7,042		$	8,322
Reconciling items between net income and EBITDA:
Depreciation and amortization expense	5,346			5,655			15,114			15,477			4,761			4,997			9,382			9,768
Net interest expense	1,271			1,876			3,834			5,598			927			1,336			1,757			2,563
Income tax expense	399			173			873			206			1,022			334			1,474			474
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)	13,493			11,532			34,620			28,771			11,145			12,459			19,655			21,127
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Restructuring costs^(b)	281			930			281			930
Income from sale of excess state tax credits^(b)													(222		)	—			(222		)	—
Merger, acquisition and disposition activities^(c)	138			144			477			445			1,499			212			1,621			339
Stock-based compensation and expense^(d)	217			234			641			681			252			224			479			424
Adjusted EBITDA	14,129			12,840			36,019			30,827			12,674			12,895			21,533			21,890
Change in deferred revenues	35,065			32,021			7,646			12,078			(7,900		)	(10,576		)	(24,814		)	(27,419		)
Change in deferred costs	(3,906		)	(3,574		)	(1,175		)	(1,241		)	1,132			1,168			2,589			2,731
Capital expenditures	(5,096		)	(5,405		)	(13,912		)	(16,171		)	(3,980		)	(4,284		)	(7,988		)	(8,816		)
Cash income	$	40,192		$	35,882		$	28,578		$	25,493		$	1,926		$	(797	)	$	(8,680	)	$	(11,614	)

Reconciliation of Bookings to Net Revenues by Segment – ~~2017~~2018


	Three Months Ended September 30, 2017												Three Months Ended June 30, 2018
(in thousands)	Learning A-Z			ExploreLearning			Voyager Sopris Learning			Consolidated			Learning A-Z		ExploreLearning			Voyager Sopris Learning		Consolidated
Bookings	$	38,136		$	13,742		$	26,660		$	78,538		$	14,683	$	6,797		$	11,636	$	33,116
Change in deferred revenues	(19,625		)	(6,755		)	(8,685		)	(35,065		)	5,752		991			1,157		7,900
Other ^(a)	—			152			(102		)	50			—		(56		)	36		(20		)
Net revenues	$	18,511		$	7,139		$	17,873		$	43,523		$	20,435	$	7,732		$	12,829	$	40,996

Nine Months Ended September 30, 2017
(in thousands) Learning A-Z ExploreLearning Voyager Sopris
Learning Consolidated
Bookings $ 59,696
$ 22,506
$ 45,189
$ 127,391
Change in deferred revenues (4,350 ) (1,901 ) (1,395 ) (7,646 )
Other ^(a)
—
47
63
110
Net revenues $ 55,346
$ 20,652
$ 43,857
$ 119,855

~~Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – 2017~~

Three Months Ended September 30, 2017
(in thousands) Learning A-Z Explore
Learning Voyager Sopris
Learning Other Consolidated
Net income $ 9,169
$ 2,876
$ 5,186
$ (10,754 ) $ 6,477
Reconciling items between net income and EBITDA:
Depreciation and amortization expense —
—
—
5,346
5,346
Net interest expense —
—
—
1,271
1,271
Income tax expense —
—
—
399
399
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 9,169
2,876
5,186
(3,738 ) 13,493
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Restructuring costs^(b)
—
—
281
—
281
Merger, acquisition and disposition activities^(c)
—
—
—
138
138
Stock-based compensation and expense^(d)
53
30
67
67
217
Adjusted EBITDA 9,222
2,906
5,534
(3,533 ) 14,129
Change in deferred revenues 19,625
6,755
8,685
—
35,065
Change in deferred costs (1,585 ) (624 ) (1,697 ) —
(3,906 )
Capital expenditures - product development (2,020 ) (667 ) (1,150 ) —
(3,837 )
Capital expenditures - general expenditures (637 ) (202 ) (201 ) (219 ) (1,259 )
Cash income $ 24,605
$ 8,168
$ 11,171
$ (3,752 ) $ 40,192

Nine Months Ended September 30, 2017
(in thousands) Learning A-Z Explore
Learning Voyager Sopris
Learning Other Consolidated
Net income $ 27,725
$ 8,366
$ 9,229
$ (30,521 ) $ 14,799
Reconciling items between net income and EBITDA:
Depreciation and amortization expense —
—
—
15,114
15,114
Net interest expense —
—
—
3,834
3,834
Income tax expense —
—
—
873
873
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 27,725
8,366
9,229
(10,700 ) 34,620
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Restructuring costs^(b)
—
—
281
—
281
Merger, acquisition and disposition activities^(c)
—
—
—
477
477
Stock-based compensation and expense^(d)
153
84
212
192
641
Adjusted EBITDA 27,878
8,450
9,722
(10,031 ) 36,019
Change in deferred revenues 4,350
1,901
1,395
—
7,646
Change in deferred costs (423 ) (131 ) (621 ) —
(1,175 )
Capital expenditures - product development (5,818 ) (2,148 ) (3,959 ) —
(11,925 )
Capital expenditures - general expenditures (1,030 ) (369 ) (316 ) (272 ) (1,987 )
Cash income $ 24,957
$ 7,703
$ 6,221
$ (10,303 ) $ 28,578

~~Reconciliation of Bookings to Net Revenues by Segment – 2016~~

Three Months Ended September 30, 2016
(in thousands) Learning A-Z ExploreLearning Voyager Sopris
Learning Consolidated
Bookings $ 34,795
$ 11,663
$ 27,762
$ 74,220
Change in deferred revenues (18,258 ) (5,747 ) (8,016 ) (32,021 )
Other^(a)
(19 ) 213
(280 ) (86 )
Net revenues $ 16,518
$ 6,129
$ 19,466
$ 42,113


	Nine Months Ended September 30, 2016												Six Months Ended June 30, 2018
(in thousands)	Learning A-Z			ExploreLearning			Voyager Sopris Learning			Consolidated			Learning A-Z		ExploreLearning			Voyager Sopris Learning			Consolidated
Bookings	$	54,826		$	19,028		$	53,289		$	127,143		$	24,282	$	9,970		$	18,717		$	52,969
Change in deferred revenues	(6,610		)	(1,728		)	(3,740		)	(12,078		)	15,289		5,338			4,187			24,814
Other ^(a)	(89		)	192			(297		)	(194		)	—		(72		)	(108		)	(180		)
Net revenues	$	48,127		$	17,492		$	49,252		$	114,871		$	39,571	$	15,236		$	22,796		$	77,603

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – ~~2016~~2018


	Three Months Ended September 30, 2016															Three Months Ended June 30, 2018
(in thousands)	Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated			Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated
Net income	$	7,822		$	2,286		$	5,331		$	(11,611	)	$	3,828		$	9,888		$	2,776		$	2,937		$	(11,166	)	$	4,435
Reconciling items between net income and EBITDA:
Depreciation and amortization expense	—			—			—			5,655			5,655			—			—			—			4,761			4,761
Net interest expense	—			—			—			1,876			1,876			—			—			—			927			927
Income tax expense	—			—			—			173			173			—			—			—			1,022			1,022
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)	7,822			2,286			5,331			(3,907		)	11,532			9,888			2,776			2,937			(4,456		)	11,145
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Restructuring costs^(b)	—			—			930			—			930
Income from sale of excess state tax credits^(b)																—			—			—			(222		)	(222		)
Merger, acquisition and disposition activities^(c)	—			—			—			144			144			—			—			—			1,499			1,499
Stock-based compensation and expense^(d)	55			32			73			74			234			70			55			59			68			252
Adjusted EBITDA	7,877			2,318			6,334			(3,689		)	12,840			9,958			2,831			2,996			(3,111		)	12,674
Change in deferred revenues	18,258			5,747			8,016			—			32,021			(5,752		)	(991		)	(1,157		)	—			(7,900		)
Change in deferred costs	(1,863		)	(678		)	(1,033		)	—			(3,574		)	597			282			253			—			1,132
Capital expenditures - product development	(2,004		)	(692		)	(1,917		)	—			(4,613		)	(2,006		)	(1,017		)	(548		)	—			(3,571		)
Capital expenditures - general expenditures	(487		)	(127		)	(173		)	(5		)	(792		)	(318		)	(65		)	(9		)	(17		)	(409		)
Cash income	$	21,781		$	6,568		$	11,227		$	(3,694	)	$	35,882		$	2,479		$	1,040		$	1,535		$	(3,128	)	$	1,926


	Nine Months Ended September 30, 2016															Six Months Ended June 30, 2018
(in thousands)	Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated			Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated
Net income	$	23,947		$	6,394		$	9,730		$	(32,581	)	$	7,490		$	18,777		$	5,347		$	3,790		$	(20,872	)	$	7,042
Reconciling items between net income and EBITDA:
Depreciation and amortization expense	—			—			—			15,477			15,477			—			—			—			9,382			9,382
Net interest expense	—			—			—			5,598			5,598			—			—			—			1,757			1,757
Income tax expense	—			—			—			206			206			—			—			—			1,474			1,474
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)	23,947			6,394			9,730			(11,300		)	28,771			18,777			5,347			3,790			(8,259		)	19,655
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Restructuring costs^(b)	—			—			930			—			930
Income from sale of excess state tax credits^(b)																—			—			—			(222		)	(222		)
Merger, acquisition and disposition activities^(c)	—			—			—			445			445			—			—			—			1,621			1,621
Stock-based compensation and expense^(d)	167			92			214			208			681			127			100			118			134			479
Adjusted EBITDA	24,114			6,486			10,874			(10,647		)	30,827			18,904			5,447			3,908			(6,726		)	21,533
Change in deferred revenues	6,610			1,728			3,740			—			12,078			(15,289		)	(5,338		)	(4,187		)	—			(24,814		)
Change in deferred costs	(506		)	(319		)	(416		)	—			(1,241		)	1,292			657			640			—			2,589
Capital expenditures - product development	(5,818		)	(1,824		)	(6,101		)	—			(13,743		)	(3,874		)	(2,036		)	(1,195		)	—			(7,105		)
Capital expenditures - general expenditures	(952		)	(350		)	(456		)	(670		)	(2,428		)	(576		)	(161		)	(115		)	(31		)	(883		)
Cash income	$	23,448		$	5,721		$	7,641		$	(11,317	)	$	25,493		$	457		$	(1,431	)	$	(949	)	$	(6,757	)	$	(8,680	)

Reconciliation of Bookings to Net Revenues by Segment – 2017



	Three Months Ended June 30, 2017
(in thousands)	Learning A-Z			ExploreLearning			Voyager Sopris Learning		Consolidated
Bookings	$	11,661		$	5,888		$	12,192	$	29,741
Change in deferred revenues	6,990			873			2,713		10,576
Other^(a)	(1		)	(26		)	72		45
Net revenues	$	18,650		$	6,735		$	14,977	$	40,362



	Six Months Ended June 30, 2017
(in thousands)	Learning A-Z		ExploreLearning			Voyager Sopris Learning		Consolidated
Bookings	$	21,560	$	8,764		$	18,529	$	48,853
Change in deferred revenues	15,275		4,854			7,290		27,419
Other ^(a)	—		(105		)	165		60
Net revenues	$	36,835	$	13,513		$	25,984	$	76,332

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Cash Income by Segment – 2017



	Three Months Ended June 30, 2017
(in thousands)	Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated
Net income	$	9,688		$	2,814		$	3,408		$	(10,118	)	$	5,792
Reconciling items between net income and EBITDA:
Depreciation and amortization expense	—			—			—			4,997			4,997
Net interest expense	—			—			—			1,336			1,336
Income tax expense	—			—			—			334			334
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)	9,688			2,814			3,408			(3,451		)	12,459
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Merger, acquisition and disposition activities^(c)	—			—			—			212			212
Stock-based compensation and expense^(d)	53			30			75			66			224
Adjusted EBITDA	9,741			2,844			3,483			(3,173		)	12,895
Change in deferred revenues	(6,990		)	(873		)	(2,713		)	—			(10,576		)
Change in deferred costs	547			104			517			—			1,168
Capital expenditures - product development	(1,869		)	(721		)	(1,316		)	—			(3,906		)
Capital expenditures - general expenditures	(220		)	(77		)	(45		)	(36		)	(378		)
Cash income	$	1,209		$	1,277		$	(74	)	$	(3,209	)	$	(797	)



	Six Months Ended June 30, 2017
(in thousands)	Learning A-Z			Explore Learning			Voyager Sopris Learning			Other			Consolidated
Net income	$	18,556		$	5,490		$	4,043		$	(19,767	)	$	8,322
Reconciling items between net income and EBITDA:
Depreciation and amortization expense	—			—			—			9,768			9,768
Net interest expense	—			—			—			2,563			2,563
Income tax expense	—			—			—			474			474
Income from operations before interest, income taxes, and depreciation and amortization (EBITDA)	18,556			5,490			4,043			(6,962		)	21,127
Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:
Merger, acquisition and disposition activities^(c)	—			—			—			339			339
Stock-based compensation and expense^(d)	100			54			145			125			424
Adjusted EBITDA	18,656			5,544			4,188			(6,498		)	21,890
Change in deferred revenues	(15,275		)	(4,854		)	(7,290		)	—			(27,419		)
Change in deferred costs	1,162			493			1,076			—			2,731
Capital expenditures - product development	(3,798		)	(1,481		)	(2,809		)	—			(8,088		)
Capital expenditures - general expenditures	(393		)	(167		)	(115		)	(53		)	(728		)
Cash income	$	352		$	(465	)	$	(4,950	)	$	(6,551	)	$	(11,614	)

Footnotes

(a)

In the reconciliations of Bookings to Net Revenues, Other comprises timing differences between the invoicing of a transaction, which generates Bookings, and its recognition as either net revenues or deferred revenues. The most common reasons for these timing differences include product that is shipped from our warehouse and invoiced but not recognized as revenues until physical delivery, ~~due to shipping terms,~~ adjustments to the allowance for estimated sales returns, and revenue under contract that is earned and recognized in one period but invoiced in a subsequent period.


(b)	~~Restructuring costs are related to severance charges in~~In the ~~Company’s Voyager Sopris Learning segment in the third~~second quarter of ~~2016~~2018, we recorded other income resulting from the sale of excess state research and ~~2017, as part of efforts to reduce the cost structure of this segment.~~development tax credits.


(c)	Costs are related to merger and acquisition activities including due diligence and other non-operational charges such as pension. The second quarter of 2018 includes $1.1 million of expenses incurred related to the Company's definitive agreement to acquire VKIDZ Holdings Inc. and its review of strategic alternatives.


(d)	Stock-based compensation and expense is related to our outstanding ~~options and restricted stock awards.~~options.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of ~~September~~June 30, ~~2017~~2018 that have or are reasonably likely to have a current or future material effect on the ~~Company’s~~Company's financial condition, changes in financial condition, revenues, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

This item is not required for a smaller reporting company.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our condensed consolidated financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. We included in our Form 10-K for the year ended December 31, ~~2016~~2017 a discussion of our critical accounting policies that are particularly important to the portrayal of our financial condition and results of operations and that require the use of our ~~management’s~~management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We have made no material changes to any of the critical accounting policies discussed in our ~~2016~~2017 Form 10-K through ~~September~~June 30, ~~2017.~~2018 other than the adoption of the provisions of Revenue from Contracts with Customers (Topic 606)("ASC 606"). Refer to Note 5 – Revenue Recognition for a description of the impact of the adoption on the Company's financial statements and accounting policies.

Recently Issued Financial Accounting Standards

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new revenue guidance defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The guidance requires improved disclosures to help users of the financial statements better understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 allows for either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The original effective date was for annual periods beginning after December 15, 2016. On July 9, 2015, the FASB elected to defer the effective date of the new revenue recognition standard by one year, for annual periods beginning after December 15, 2017. The Company expects to adopt this guidance using the modified retrospective approach on January 1, 2018. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and cannot reliably estimate the potential impact of adopting the new standard. However, the Company has concluded that revenue recognition for its most significant revenue stream—subscription-based educational technology solutions—will not change under the new accounting standard and will continue to be recognized pro rata over the subscription period.

~~In February 2016, the FASB issued ASU~~ No. 2016-02, Leases (ASU 2016-02). The guidance in ASU 2016-02 requires entities to record the assets and liabilities created by leases greater than one year. This ASU is effective for interim periods and fiscal years beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.

In March 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The guidance simplifies the accounting for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill as the second step of the goodwill impairment evaluation. Companies are instead required to recognize goodwill impairment based on the excess of the reporting unit's carrying value compared to its fair value. This ASU is effective in 2020 for calendar year entities, and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.

Recently Adopted Financial Accounting Standards

In ~~July 2015,~~May 2014, the FASB issued ASU No. ~~2015-11,~~2014-09, ~~Simplifying~~Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASC 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the ~~Measurement of Inventory~~ ~~(ASU 2015-11). ASU 2015-11 requires~~consideration to which an entity expects to ~~measure inventory~~be entitled for those goods or services. The new revenue guidance defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the ~~scope~~revenue recognition process than are required under existing GAAP. The guidance requires improved disclosures to help users of the ~~update at~~financial statements better understand the ~~lower~~nature, amount, timing and uncertainty of ~~cost~~revenue and net realizable value. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. This ASU is effective for interim periods and fiscal years beginning after December 15, 2016.cash flows arising from contracts with customers. The Company adopted ~~ASU 2015-11 in~~this guidance using the ~~first quarter~~modified retrospective approach on January 1, 2018. See Note 5 – Revenue Recognition for additional information regarding the Company's adoption of ~~2017 with no material impact to~~ the ~~financial statements.~~new revenue guidance.

In March ~~2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation—Stock Compensation, Improvements to Employee Share-Based Payment Accounting~~ (ASU 2016-09). The guidance simplifies certain aspects of accounting for stock-based accounting. ASU 2016-09 is effective for interim periods and fiscal years beginning after December 15, 2016. The Company prospectively adopted ASU 2016-09 in the first quarter of 2017 and has elected to account for forfeitures as they occur. There was no material impact to the Company’s consolidated financial position, results of operations, equity, or cash flows.

~~In May~~ 2017, the FASB issued ASU No. ~~2017-09,~~2017-07, ~~Compensation—Stock Compensation~~Compensation-Retirement Benefits (Topic ~~718) Scope~~715), Improving the Presentation of ~~Modification Accounting~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ~~(ASU 2017-09)~~The standard requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations (included in "Other income (expense)" in the consolidated Statement of Operations). The ~~ASU provides guidance on the various types~~Company retrospectively adopted this standard as of ~~changes which would trigger modification accounting for share-based payment awards. ASU 2017-09 is effective for annual periods beginning after December 15, 2017,~~January 1, 2018, and ~~interim periods within those annual periods.~~all applicable amounts included in this filing have been recast accordingly. The Company ~~has early adopted ASU 2017-09~~used the practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the ~~third quarter of 2017 with no material impact to~~prior comparative periods as the ~~financial statements.~~estimation basis for applying the retrospective presentation requirements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the ~~Company’s~~Company's disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act")) pursuant to Rule 13a-15 of the Exchange Act as of the end of the period covered by this report. The ~~Company’s~~Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is communicated to management, including the Chief Executive Officer, Chief Financial Officer and its Board of Directors to allow timely decisions regarding required disclosure.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the ~~Company’s~~Company's disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2018.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, ~~“Item~~"Item 1A. Risk Factors,”" in the ~~Company’s~~Company's Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, as such factors could materially affect the ~~Company’s~~Company's business, financial condition, or future results. In the three months ended ~~September~~June 30, ~~2017,~~2018, there were no material changes to the risk factors disclosed in the ~~Company’s 2016~~Company's 2017 Annual Report on Form 10-K. The risks described in the Annual Report on Form 10-K are not the only risks the Company faces. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impact on the ~~Company’s~~Company's business, financial condition, or results of operations.

Item 6. Exhibits.

The following exhibits are filed as part of this report.



Exhibit Number		Description

~~10.1~~		~~Amendment No. 1 to Office Lease Agreement, dated October 4, 2017, between PAR Capital-Briargrove, LLC and Cambium Learning, Inc.~~

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.ins		XBRL Instance Document.

101.def		XBRL Taxonomy Extension Definition Linkbase Document.

101.sch		XBRL Taxonomy Extension Schema Document.

101.cal		XBRL Taxonomy Extension Calculation Linkbase Document.

101.lab		XBRL Taxonomy Extension Label Linkbase Document.

101.pre		XBRL Taxonomy Extension Presentation Linkbase Document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned duly authorized officer of the registrant.



				CAMBIUM LEARNING GROUP, INC.

Date: ~~November~~August 13, ~~2017~~2018				/s/ Barbara Benson
				Barbara Benson,
				Chief Financial Officer (Principal Financial Officer)