CEO Interview: Cambium Learning Group, Inc. (ABCD) - Ronald Klausner
September 14, 2010 - The Wall Street Transcript has just published Education Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Ronald Klausner currently serves as the CEO of Cambium Learning Group, Inc. Mr. Klausner has served as President of Voyager Expanded Learning since 2005. Prior to that, Mr. Klausner served as President of ProQuest Information and Learning, a subsidiary of Voyager until it was sold in 2007. Mr. Klausner came to Voyager from D&B, formerly Dun & Bradstreet, a global business information and technology solutions provider, where he worked for 27 years. He most recently served as D&B's Senior Vice President, U.S. Sales. Previously Mr. Klausner led global data and operations, and customer service, providing business-to-business, credit, marketing and purchasing information in over 200 countries.
TWST: Please begin with a brief overview of the company, including some highlights from its history and a summary of its primary business lines?
Mr. Klausner: We're a company that has been grounded and focused on at-risk children. So when I say at-risk children, the 23 million or so English-language learners, special-education children and poor kids primarily. So the companies have been focused on that for many, many years. Voyager was formed in the mid-1990s by two entrepreneurs; they started with an after-school and summer school particular focus on enrichment programs for the population I just mentioned. Cambium (ABCD), which is probably known as much by the brand Sopris West, started a few decades ago. It is an author-based model. So when you think of author based, this is the body of a person, in many cases their life's work, where they've done a significant amount of research, significant amount of efficacy, and we come along and help them commercialize that particular body of work. The company is organized around three basic units today, so now I am kind of fast-forwarding to beyond the merger.
And essentially the principles we use, as far as how we were organized, is one, we should operate with speed and simplicity. People in my judgment want to know a few basic questions before you get into the higher-order kind of questions, if you want to follow or adhere to Maslow's hierarchy of thinking. But they want to know: Do I have a job? Who am I reporting to, and what are my roles and responsibilities? So we did that exceedingly fast, and we organized around these three units because we believed that placing the interest of customers first is our most critical value - I will talk about values a little later - and ultimately that's how we could best service and sell customers. So the three units are Voyager - and think of medical. And so if you had or you knew somebody who got a debilitating illness or disease, you probably would go to a specialist; you probably would expect that it's going to take some duration of time and be a very intense intervention. That's what Voyager does. These are the children that are significantly behind their grade level or their age in reading and math, and have a multitude of skill deficiencies. Voyager represents about 65% of our business.
TWST: Would you tell us about the strategy behind the Voyager merger? Where are you in the integration process? What value will this merger add for your shareholders?
Mr. Klausner: We had an investment thesis that we think is proving out that essentially while we focused on the similar addressable market, being these primarily 23 million at-risk children, we had a very complementary set of products. And so we looked at our products set and said, "It's interesting - where Cambium focuses, for example, in adolescent literacy on the most extreme children, meaning those that would start at about two percentile on the low end to about 15-20 percentile, Voyager's adolescent literacy capability went from 15 percentile to about 50 percentile." And so the product lines were extremely complementary, very little overlap. The customer set was extremely complementary; there were very few customers that overlapped and brought products for the same problem, and so we thought that was extremely beneficial. It's easier to sell if you have an existing relationship.
Cambium had a lot of small relationships. It's easier to be a strategic partner of a customer if you're a large provider, which Voyager was. So we thought that was positive. We loved the notion that Cambium had this author-based model - it gave us a suite of capabilities that was extremely complementary. And Voyager had invested quite a bit in technology and Cambium had not; again we thought that was very complementary. Clearly there was a strategic aspect of this buy or this merger. We had about 11 million in integration savings, of which we're on track to realize all of that - 51 million in combined EBITDA, high cash conversion. We are at a size where we're large enough to have resources but not that large to prevent us from being facile and agile. The final thing I'd say is that there are investors - I am not saying everybody - who do have a belief that doing good and doing well is something they want to invest in. You can make a difference, especially for these children who have the odds stacked against them, as well as get a good financial return.
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