Segment Reporting

6 Months Ended

Jun. 30, 2018

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 resources are now used by more than 7 million students in more than 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 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 21st 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 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" 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' 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.

Voyager Sopris Learning solutions include LANGUAGE!^® Live, Language Essentials for Teachers of Reading and Spelling (LETRS^®), Step Up to Writing^®, 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 chief operating decision maker to measure the 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 operating performance, and therefore this information is not presented.



	Three Months Ended June 30, 2018
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	20,435	$	7,732	$	12,829	$	—		$	40,996
Cost of revenues	1,263		999		4,776		—			7,038
Amortization expense	—		—		—		4,043			4,043
Total cost of revenues	1,263		999		4,776		4,043			11,081
Other operating expenses	9,284		3,957		5,116		4,574			22,931
Depreciation and amortization expense	—		—		—		718			718
Total costs and expenses	10,547		4,956		9,892		9,335			34,730
Income before interest and income taxes	9,888		2,776		2,937		(9,335		)	6,266
Net interest expense	—		—		—		(927		)	(927		)
Other income (expense), net	—		—		—		118			118
Income tax expense	—		—		—		(1,022		)	(1,022		)
Segment net income	$	9,888	$	2,776	$	2,937	$	(11,166	)	$	4,435
Expenditures for property, equipment, software and pre-publication costs	$	2,324	$	1,082	$	557	$	17		$	3,980



	Three Months Ended June 30, 2017
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	18,650	$	6,735	$	14,977	$	—		$	40,362
Cost of revenues	942		808		5,465		—			7,215
Amortization expense	—		—		—		4,328			4,328
Total cost of revenues	942		808		5,465		4,328			11,543
Other operating expenses	8,020		3,113		6,104		3,342			20,579
Depreciation and amortization expense	—		—		—		669			669
Total costs and expenses	8,962		3,921		11,569		8,339			32,791
Income before interest and income taxes	9,688		2,814		3,408		(8,339		)	7,571
Net interest expense	—		—		—		(1,336		)	(1,336		)
Other income (expense), net	—		—		—		(109		)	(109		)
Income tax expense	—		—		—		(334		)	(334		)
Segment net income	$	9,688	$	2,814	$	3,408	$	(10,118	)	$	5,792
Expenditures for property, equipment, software and pre-publication costs	$	2,089	$	798	$	1,361	$	36		$	4,284



	Six Months Ended June 30, 2018
(in thousands)	Learning A-Z		Explore Learning		Voyager Sopris Learning		Other			Consolidated
Net revenues	$	39,571	$	15,236	$	22,796	$	—		$	77,603
Cost of revenues	2,295		2,022		8,784		—			13,101
Amortization expense	—		—		—		7,947			7,947
Total cost of revenues	2,295		2,022		8,784		7,947			21,048
Other operating expenses	18,499		7,867		10,222		8,274			44,862
Depreciation and amortization expense	—		—		—		1,435			1,435
Total costs and expenses	20,794		9,889		19,006		17,656			67,345
Income before interest and income taxes	18,777		5,347		3,790		(17,656		)	10,258
Net interest expense	—		—		—		(1,757		)	(1,757		)
Other income (expense), net	—		—		—		15			15
Income tax expense	—		—		—		(1,474		)	(1,474		)
Segment net income	$	18,777	$	5,347	$	3,790	$	(20,872	)	$	7,042
Expenditures for property, equipment, software and pre-publication costs	$	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

CAMBIUM LEARNING GROUP, INC. 10-Q