CENGAGE LEARNING HOLDINGS II, Inc.

Third Quarter Report Three and Nine Months December 31, 2014

During the period covered by this report, Cengage Learning Holdings II, Inc. and its consolidated subsidiaries (the Company ) were not subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended. However, the Company does have an obligation to comply with the terms of its Shareholder Agreement, dated as of March 31, 2014 (the Shareholder Agreement ). The Shareholder Agreement includes references to certain provisions of the U.S. Securities and Exchange Commission s reporting requirements with modifications as agreed. The Company has complied with its obligations under the Shareholder Agreement and this report is made available pursuant to such obligations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify forward-looking statements because they contain words such as believe, expect, may, will, should, could, seek, intend, plan, estimate, project, foresee, likely, or anticipate or similar expressions that concern our strategies, objectives, plans, or goals. Although the forward-looking statements contained in this report reflect management s current beliefs based upon information currently available to management and upon assumptions which management believes to be reasonable, actual results may differ materially from those stated in or implied by these forward-looking statements. A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking statements, including the factors described in this quarterly report and those listed in the Risk Factors section of the Company s Transition Report for the nine months ended March 31, 2014. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. These risks and uncertainties include, without limitation: the impact of competition from established competitors and new businesses that have not traditionally participated in our markets, including the impact of new and enhanced product and service offerings and technology and competitors ability to adapt more quickly to new or emerging technologies and market conditions; the impact of used textbook and/or rental textbook programs and our ability to compete with them; the effect of increased accessibility of free or relatively inexpensive information and materials on pricing and demand for our products and services; the effect of changes in government programs and private lending practices relating to student aid and library funding; our ability to successfully implement our business strategy; the impact of technology developments and our ability to continue to make effective investments in our technology infrastructure; the seasonality of our business; our ability to adequately protect, maintain and enforce our intellectual property rights and proprietary rights and the adequacy of protections of our intellectual property under applicable laws; liabilities resulting from, and costs of defending against, litigation including intellectual property infringement claims; the impact of changes to laws and regulations applicable to us and our customers, including rules that could result in decreased programs offered by, and limit enrollments in, institutions of higher and continuing education including for-profit schools; our ability to attract and retain key authors, content providers and employees; our ability to maintain licensing agreements with third party content providers; failures or disruptions of our and our third party providers hosting facilities and electronic delivery systems for our products and services; our reliance on third party providers of outsourced services and any failure of such providers to provide services effectively on a timely basis; our ability to adequately manage and develop our operational and managerial systems and processes including our enterprise resource planning software;

changes in the availability and prices of paper and unanticipated increases in other operating costs; our ability to expand and conduct our operations outside the United States; the effect of fluctuations between foreign currencies and the United States dollar and our ability to effectively hedge foreign currency exposure; our ability to identify, complete and successfully integrate future acquisitions; adverse changes in domestic and global economic and political conditions, related availability of credit, government and private loans for students and consequential decline in consumer demand for our products; incurrence of impairment charges for goodwill and long-lived assets; the impact of business combinations in the markets in which we compete; our ability to react to changes in the economy or our industry; our debt agreements, which limit our flexibility in operating our business including, among other things, our ability under certain circumstances to engage in mergers or consolidations, sell assets and use the proceeds of such sale, pay distributions to our equity owners and/or buy back debt; potential security breaches involving our products and services or our customers credit and debit card and private data, which could subject us to material claims and costs and harm our reputation; changes in our credit ratings or macroeconomic conditions; and our ability to maintain effective internal controls over financial reporting. Although we have identified important risks and factors that could cause actual actions, events or results to differ materially from those described in or implied by our forward-looking statements, other factors and risks may cause actions, events or results to differ materially from those anticipated, estimated or intended. We cannot assure you that forwardlooking statements will prove to be accurate, as actual actions, results and future events could differ materially from those anticipated or implied by such statements. All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. These forward-looking statements are made as of the date of this report and, except as required by law, we undertake no obligation to update, amend, clarify or revise them to reflect new events or circumstances.

THIRD QUARTER REPORT THREE AND NINE MONTHS ENDED DECEMBER 31, 2014 TABLE OF CONTENTS Page No. Financial Statements (unaudited): Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of Comprehensive (Loss) Income 3 Condensed Consolidated Statements of Cash Flows 4 Notes to the Condensed Consolidated Financial Statements 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Quantitative and Qualitative Disclosures about Market Risk 31 Legal Proceedings 32 Computation of Ratio of Earnings to Fixed Charges 33

Condensed Consolidated Balance Sheets Successor December 31, March 31, 2014 2014 Assets Cash and cash equivalents $ 371.8 $ 118.4 Accounts receivable, net 182.7 163.0 Inventories 358.8 609.1 Deferred tax assets 0.5 0.6 Restricted cash 35.3 115.7 Prepaid expenses and other current assets 61.3 66.1 Total current assets 1,010.4 1,072.9 Property, equipment and capitalized software for internal use, net 213.4 218.7 Pre-publication costs, net 302.3 327.6 Author advances, net 29.5 19.2 Identifiable intangible assets, net 1,262.5 1,337.0 Goodwill 1,591.9 1,597.5 Deferred tax assets 12.9 0.3 Deferred financing costs 10.1 6.9 Other non-current assets 37.1 26.0 Total assets $ 4,470.1 $ 4,606.1 Liabilities and Stockholders' Equity Accounts payable and accrued expenses $ 358.5 $ 382.3 Deferred revenue 181.0 110.1 Current portion of long-term debt 18.5 15.8 Income taxes payable 7.6 1.9 Deferred tax liabilities 80.6 81.2 Other current liabilities 3.1 15.6 Total current liabilities 649.3 606.9 Long-term debt 2,007.0 1,725.5 Deferred tax liabilities 207.6 260.2 Other non-current liabilities 50.3 36.3 Total liabilities 2,914.2 2,628.9 Commitments and contingencies (Note 15) Common stock ($0.01 par value, 300 million shares authorized, 78 million shares issued and outstanding at December 31, 2014 and March 31, 2014) 0.8 0.8 Additional paid-in capital 1,679.2 1,976.4 Accumulated deficit (104.0) - Accumulated other comprehensive loss (20.1) - Total stockholders' equity 1,555.9 1,977.2 Total liabilities and stockholders' equity $ 4,470.1 $ 4,606.1 The accompanying notes are an integral part of these condensed consolidated financial statements. - 1 -

Condensed Consolidated Statements of Operations Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December 31, December 31, December 31, December 31, 2014 2013 2014 2013 Revenues $ 374.9 $ 414.6 $ 1,337.7 $ 1,406.1 Cost of revenues, excluding amortization of pre-publication costs and depreciation stated below 203.2 158.4 770.8 516.5 Amortization of pre-publication costs 38.9 39.0 130.6 147.2 Total cost of revenues, excluding depreciation stated below 242.1 197.4 901.4 663.7 Selling, general & administrative, excluding depreciation stated below 116.1 112.4 359.6 335.5 Operational restructuring charges (0.7) 1.5 0.3 4.8 Depreciation 22.3 17.4 65.9 50.4 Impairment of goodwill - - - (185.4) Amortization of identifiable intangible assets 22.5 40.4 67.9 121.3 Other (income) expense, net - (3.1) 0.9 (5.0) Total costs and expenses 402.3 366.0 1,396.0 985.3 Operating (loss) income (27.4) 48.6 (58.3) 420.8 Mark-to-market of derivative instruments - - - 12.6 Interest income - 0.2 0.3 0.5 Interest expense (33.5) - (97.8) (179.1) Reorganization items, net - (82.1) (0.5) (132.7) (Loss) income before taxes and equity losses of affiliates (60.9) (33.3) (156.3) 122.1 Benefit from income taxes 21.5 2.8 52.3 7.7 Equity losses of affiliates, net of taxes - (0.4) - (1.7) Net (loss) income $ (39.4) $ (30.9) $ (104.0) $ 128.1 The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 -

Condensed Consolidated Statements of Comprehensive (Loss) Income Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December 31, December 31, December 31, December 31, 2014 2013 2014 2013 Net (loss) income $ (39.4) $ (30.9) $ (104.0) $ 128.1 Other comprehensive income: Derivative instruments adjustments, net of tax benefit: Unrealized losses on derivative instruments reclassified into earnings - - - 6.0 Foreign currency translation adjustments (13.1) (1.1) (20.1) (4.0) Other comprehensive (loss) income (13.1) (1.1) (20.1) 2.0 Comprehensive (loss) income $ (52.5) $ (32.0) $ (124.1) $ 130.1 The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 -

CENGAGE LEARNING HOLDINGS II, Inc. Condensed Consolidated Statements of Cash Flows Successor Nine Months December 31, 2014 Predecessor Nine Months December 31, 2013 Cash Flows from Operating Activities Net (loss) income $ (104.0) $ 128.1 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Amortization of pre-publication costs 130.6 147.2 Depreciation 65.9 50.4 Impairment of goodwill - (185.4) Amortization of identifiable intangible assets 67.9 121.3 Amortization and write-off of debt discounts and deferred financing costs 2.2 53.4 Non-cash interest on derivative instruments - 10.6 Non-cash equity-based compensation expense 6.4 - Operational restructuring charges 0.3 4.8 Cash payments for operational restructuring charges (4.3) (8.1) Mark-to-market of derivative instruments - (12.6) Reorganization items, net 0.5 132.7 Gain on sale of property and equipment - (1.5) Cash payments for reorganization items, net (72.5) (66.7) (Benefit) provision for deferred taxes (65.3) 3.7 Equity losses of affiliates, net of taxes - 1.7 Changes in operating assets and liabilities, net of acquisitions 348.5 128.9 Other, net (0.2) (10.8) Net cash provided by operating activities 376.0 497.7 Cash Flows from Investing Activities Acquisitions of businesses and investments in equity method investees (12.3) - Proceeds from settlement of derivative instruments - 0.2 Payments on settlement of derivative instruments - (0.1) Additions to pre-publication costs (108.8) (111.6) Additions to property, equipment and capitalized software for internal use (61.3) (45.5) Proceeds from disposition of property, equipment and capitalized software for internal use - 10.1 Change in restricted cash 80.4 - Other, net - (1.4) Net cash used in investing activities (102.0) (148.3) Cash Flows from Financing Activities Proceeds from issuance of debt 297.0 - Repayments of long-term debt (13.9) (8.9) Repayments under the revolving credit facilities - (4.0) Proceeds from issuance of common stock 1.9 - Dividends (300.0) - Debt issuance costs and other financing fees (4.2) (0.1) Net cash used in financing activities (19.2) (13.0) Impact on Cash and Cash Equivalents from Changes in Foreign Currency (1.4) (1.3) Net Increase in Cash and Cash Equivalents 253.4 335.1 Cash and Cash Equivalents Beginning of period 118.4 417.5 End of period $ 371.8 $ 752.6 The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 -

1. BASIS OF PRESENTATION Basis of Presentation CENGAGE LEARNING HOLDINGS II, Inc. Notes to the Condensed Consolidated Financial Statements Cengage Learning Holdings II, Inc. ( CL Holdings II, Inc. ), together with its consolidated subsidiaries, is hereinafter collectively referred to as Cengage Learning, or the Successor. Cengage Learning Holdings II, Inc. is the successor company to Cengage Learning Holdings II, L.P. ( CL Holdings II, L.P. ), together with its consolidated subsidiaries, collectively referred to as the Predecessor. The term Company (also referred to as us we and our ) used throughout these financial statements collectively refers to Cengage Learning Holdings II, L.P. for the Predecessor periods and Cengage Learning Holdings II, Inc. for the Successor periods. On July 2, 2013, CL Holdings II, L.P. and all of its domestic wholly-owned subsidiaries (collectively, the Debtors ) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code ( Chapter 11 ) in the Bankruptcy Court for the Eastern District of New York ( Bankruptcy Court ). Our non-u.s. subsidiaries were not part of the bankruptcy filing. On March 13, 2014, the Debtors received confirmation of their plan of reorganization ( Plan of Reorganization or the Plan ) from the Bankruptcy Court and emerged from bankruptcy proceedings as of the end of the day on March 31, 2014 (the Effective Date ). Prior to the Effective Date, the Debtors operated their businesses as debtorsin-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 and the orders of the Bankruptcy Court. Our non-u.s. subsidiaries continued to operate in the ordinary course of business during the post-petition period. Prior to July 2, 2013, the Predecessor was controlled by investment funds associated with or designated by Apax Partners, L.P. ( Apax ), together with OMERS Private Equity, Inc., hereinafter collectively referred to as the Predecessor Sponsors. Upon emergence from bankruptcy on March 31, 2014, we adopted fresh start accounting which resulted in the Company becoming a new entity for financial reporting purposes. The effects of the Plan of Reorganization and the application of fresh start accounting were reflected on our consolidated balance sheet as of March 31, 2014. As a result, the consolidated balance sheet on March 31, 2014 and the consolidated financial statements after March 31, 2014, including the three and nine months ended December 31, 2014, are not comparable to the consolidated financial statements prior to the Effective Date. The application of fresh start accounting had a material impact on the financial results for the three and nine months ended December 31, 2014 as well as the historical trends of our financial results. Our condensed consolidated financial statements and related footnotes are presented with a black line division, which delineates the lack of comparability between financial statements on or after March 31, 2014 for the Successor and dates prior for the Predecessor. We have prepared the accompanying condensed consolidated interim financial statements and accompanying footnotes (the Financial Statements ) in accordance with the accounting policies described in our Transition Report for the nine months ended March 31, 2014 (the 2014 Transition Report ). Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ) have been condensed or omitted. You should read these financial statements in conjunction with the consolidated financial statements included in the 2014 Transition Report. The condensed consolidated balance sheet as of March 31, 2014 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes required by GAAP. In the opinion of management, the Financial Statements include all adjustments (consisting of normal recurring adjustments) considered necessary by management to fairly state the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the three and nine months ended December 31, 2014 are not necessarily indicative of the results for the fiscal year ending March 31, 2015. Change of Fiscal Year End The Company changed its fiscal year end to March 31 from June 30 effective beginning with the period ended on March 31, 2014. The Company made this change to better align its financial reporting period, as well as its budgeting and planning process, with the seasonality of its business cycle. - 5 -

Notes to the Condensed Consolidated Financial Statements Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Although these estimates are based on management s best knowledge of current events and actions that we may undertake in the future, actual results could differ from those estimates. These estimates include, but are not limited to, reserves for sales returns and inventory obsolescence, the allowance for doubtful accounts, valuation allowances for deferred tax assets, operational restructuring and related charges, legal and tax contingencies, the determination of fair values related to fresh start accounting, purchase accounting and equity-based compensation, as well as future cash flows and fair values used in the assessment of the realizability of long-lived assets, goodwill and identifiable intangible assets. Seasonality and Comparability Our revenues, operating profit and operating cash flows are impacted by the inherent seasonality of our business, which is aligned with the academic calendar. This seasonality affects our working capital requirements and hence our overall financing needs. For example, we typically incur a net cash deficit from all of our activities in the first and fourth fiscal quarters of our new fiscal year which ends on March 31st. In addition, changes in our customers ordering patterns may impact the comparison of our results in a quarter with the same quarter of the previous year, specifically in cases where our customers may shift the timing of material orders for a number of reasons, including, but not limited to, changes in academic semester start dates or changes in inventory management practices. As we continue to migrate our product and service offerings toward hosted digital solutions that are delivered over a period of time, a larger proportion of our consolidated revenue will be recognized ratably over the applicable subscription period, with amounts billed in excess of revenues recognized reflected as deferred revenue. This represents a difference from traditional print products where revenue is typically recognized upon shipment of the materials to our customers. Consequently, at this time, reported revenues may not be comparable to prior periods as a growing proportion of our revenues are recognized over a period of time. The current portion of deferred revenue, which represents amounts billed in advance to our customers that will be recognized as revenue in subsequent periods as products and services are delivered to customers, was $181.0 million at December 31, 2014 and $110.1 million at March 31, 2014. New Accounting Standards and Accounting Changes In August 2014, the Financial Accounting Standards Board ("FASB") issued a new standard establishing management s responsibility to evaluate, at each annual and interim period, whether there is substantial doubt about an organization s ability to continue as a going concern within one year from the date financial statements are issued, and to provide related footnote disclosure. The new standard is effective for us for the fiscal year beginning April 1, 2016, with early adoption permitted. We are evaluating the impact that this new standard will have on disclosures within our Financial Statements. In June 2014, the FASB issued an update to its authoritative guidance on share-based compensation to address diversity in practice in accounting for awards linked to performance targets and how to account for share-based payment awards that require a specific performance target to be achieved for employees to become eligible to vest in the awards. The amendments require that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. A reporting entity should apply existing guidance as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target would not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the service has already been rendered. If it becomes probable that the performance target will be achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. We are evaluating the impact that this update will have on our consolidated financial position, results of operations and cash flows. - 6 -

Notes to the Condensed Consolidated Financial Statements In May 2014, the FASB issued an update to add Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The authoritative guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services through the application of the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The amendments in this update are to be applied on a retrospective basis, utilizing one of two different alternatives. The amendments in this update are effective for annual reporting periods beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018. Early application is permitted, with certain limitations. We are evaluating the impact of this update on our financial statements. In July 2013, the FASB issued a new standard for presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The new standard was effective for us for the fiscal year beginning April 1, 2014. The adoption of this guidance did not have a material impact on our financial statements. 2. REORGANIZATION ITEMS, NET Reorganization items, net consists of the following: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December 31, December 31, December 31, December 31, 2014 2013 2014 2013 Professional fees $ - $ (33.2) $ (0.5) $ (81.1) Accounts payable settlement gains - 0.5-0.5 Provision for estimated allowed claims - (49.4) - (52.1) Total reorganization items, net $ - $ (82.1) $ (0.5) $ (132.7) - 7 -

3. EQUITY-BASED COMPENSATION CENGAGE LEARNING HOLDINGS II, Inc. Notes to the Condensed Consolidated Financial Statements The following table summarizes the Company s equity-based compensation expense for the three and nine months ended December 31, 2014 and 2013: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December 31, December 31, December 31, December 31, 2014 2013 2014 2013 Incentive stock options $ 0.9 $ - $ 2.7 $ - Restricted stock units 1.3-3.7 - Stock-based compensation expense $ 2.2 $ - $ 6.4 $ - As of December 31, 2014, there was $36.8 million of total unrecognized compensation cost related to equity-based awards expected to be recognized over a weighted-average vesting period of 4.0 years. On December 17, 2014, we completed a leveraged recapitalization pursuant to which we paid a one-time cash dividend of approximately $3.85 per share to common shareholders of record on December 16, 2014. Upon distribution of a qualifying dividend by the Company, the 2014 Cengage Learning Equity Incentive Plan (the 2014 Equity Incentive Plan ) provides all holders of restricted stock units ( RSUs ) the rights to dividend equivalents payable in cash subject to the vesting terms of the underlying RSUs awarded. Accordingly, the Company accrued a $5.6 million dividend equivalent payable to holders of RSUs as of the date of record. The dividend equivalents were recorded as a reduction of additional paid-in capital as the Company did not have retained earnings at the time of the dividend and the related liability was included in other noncurrent liabilities as of December 31, 2014. The 2014 Equity Incentive Plan also required the Company to proportionally adjust the terms of the incentive stock options ( ISOs ) outstanding on the dividend payment date through a combination of a reduction in exercise price and an increase in the number of awards outstanding. The provision is intended to provide equitable treatment of outstanding ISOs and preserve the value of such awards as a result of the one-time cash dividend. In accordance with the provision, the exercise prices of outstanding ISOs were reduced by multiplying the exercise price by a factor representing the ratio of the fair value of our common stock immediately after the recapitalization, to the fair value of our common stock immediately prior to the recapitalization. The number of outstanding ISOs was increased by multiplying the number of awards by a factor representing the ratio of the fair value of our common stock immediately prior to the recapitalization, to the fair value of our common stock immediately after the recapitalization. This adjustment did not result in additional equity-based compensation expense in the period as the fair value of the outstanding ISOs immediately following the payment of the one-time cash dividend was equal to the fair value immediately prior to such distribution and the equitable treatment afforded the ISOs was established as a term of the awards when granted. A summary of the stock options outstanding and the activity for the nine months ended December 31, 2014, including the proportional adjustments, is presented in the table below: Weighted Incentive Stock Average Options Exercise Price Outstanding as of March 31, 2014 1,971,149 $ 25.00 Granted 221,925 25.00 Exercised - - Forfeitures and cancellations - - Proportional adjustment due to recapitalization 328,279 - Outstanding as of December 31, 2014 2,521,353 21.74 Similar to the proportional adjustment to the outstanding ISOs, as required by the 2014 Equity Incentive Plan, the maximum number of shares issuable under the plan was proportionally adjusted to reflect the one-time cash dividend. As a result, the remaining shares of common stock available for issuance under the 2014 Equity Incentive Plan increased from 990,390 to 1,138,643 immediately after the recapitalization. - 8 -

Notes to the Condensed Consolidated Financial Statements 4. RESTRICTED CASH As of December 31, 2014, we held $35.3 million of cash in restricted escrow accounts classified as current assets. The uses of funds in these accounts are restricted for settlement of outstanding unresolved Chapter 11 claims and unpaid bankruptcy-related professional fees. During the three and nine months ended December 31, 2014, we withdrew $1.3 million and $80.4 million of funds, respectively, from restricted cash. Of these amounts, $1.3 million and $72.5 million, respectively, was paid to settle claims and bankruptcy-related professional fees. The remainder was a refund of cash used as collateral which was no longer required after our emergence from Chapter 11 proceedings. 5. INVENTORIES Inventories consisted of the following: Successor December 31, March 31, 2014 2014 Raw materials $ 2.1 $ 1.7 Work-in-progress - 0.1 Finished goods, net 356.7 607.3 Inventories $ 358.8 $ 609.1 In connection with fresh start accounting, finished goods inventory was adjusted to its fair value based on our estimate of its net realizable value. The adjustment resulted in a $440.3 million step-up to the carrying value of finished goods as of March 31, 2014. As of December 31, 2014, $198.1 million of the step-up remains and is included in the carrying value of the finished goods inventory balance. - 9 -

6. OTHER BALANCE SHEET ACCOUNTS CENGAGE LEARNING HOLDINGS II, Inc. Notes to the Condensed Consolidated Financial Statements The sales returns reserve and allowance for doubtful accounts were as follows: Successor December 31, March 31, 2014 2014 Sales returns reserve $ 195.9 $ 110.6 Allowance for doubtful accounts 4.4 - The provision for estimated sales returns is reflected as a reduction of revenue during the period in which the revenue is recognized. The increase in the sales returns reserve from March 31, 2014 reflects the seasonality of our business, as a higher proportion of our annual revenues is recognized during our fiscal second and third quarters due to sales in advance of the Fall and Spring school semesters. In connection with fresh start accounting, the allowance for doubtful accounts was eliminated on the Effective Date as the fair value of accounts receivable considered the net realizability of the amounts due. Accounts payable and accrued expenses consisted of the following: Successor December 31, March 31, 2014 2014 Accounts payable $ 68.7 $ 107.6 Accrued interest payable 0.4 - Accrued royalties 154.7 51.3 Accrued bonuses 29.0 59.8 Other accrued expenses 105.7 163.6 $ 358.5 $ 382.3 Royalty expense is recorded when revenue from the associated products or services is recognized. Accrued royalties increased from March 31, 2014 due to the seasonality of our business. As of December 31, 2014 and March 31, 2014, other accrued expenses included bankruptcy-related accruals of approximately $34.3 million and $97.0 million, respectively, for reinstated pre-petition liabilities at their estimated settlement amounts and bankruptcy-related professional fees. These amounts are expected to be satisfied with cash reserves in escrow accounts classified as restricted cash as of December 31, 2014. 7. LONG-LIVED ASSETS AND GOODWILL During the three months ended June 30, 2013, we finalized the calculation of the fair values of our identifiable intangible assets and pre-publication costs in connection with step two of a goodwill impairment test on our Domestic reporting unit s goodwill, which had been estimated during the three months ended March 31, 2013. Based on the final valuations, we reduced the previously estimated goodwill impairment charge that had been recorded in the three months ended March 31, 2013 by $185.4 million, which is reflected in our condensed consolidated statement of operations for the nine months ended December 31, 2013. - 10 -

Notes to the Condensed Consolidated Financial Statements Long-Lived Assets The Company s identifiable intangible assets were as follows: Successor Copyrights Customer Relationships Trademarks Total As of December 31, 2014 Identifiable intangible assets, gross $ 732.7 $ 367.2 $ 230.1 $ 1,330.0 Accumulated amortization (37.7) (18.3) (11.5) (67.5) Identifiable intangible assets, net $ 695.0 $ 348.9 $ 218.6 $ 1,262.5 Successor Copyrights Customer Relationships Trademarks Total As of March 31, 2014 Identifiable intangible assets, gross $ 737.0 $ 369.0 $ 231.0 $ 1,337.0 Accumulated amortization - - - - Identifiable intangible assets, net $ 737.0 $ 369.0 $ 231.0 $ 1,337.0 At December 31, 2014, estimated annual identifiable intangible amortization expense for each of the next five fiscal years is as follows: Years Ending March 31, Remainder of fiscal year 2015 $ 22.7 2016 90.7 2017 90.7 2018 90.7 2019 90.7 8. OPERATIONAL RESTRUCTURING CHARGES During the three months ended March 31, 2013, we initiated a company-wide operational restructuring plan designed to streamline operations under our new management team and optimize our cost structure. In connection with this plan, we recorded an additional $0.3 million of operational restructuring charges during the nine months ended December 31, 2014, within our Domestic segment. These charges were comprised of employee severance and other employee-related costs. The following provides a summary of the changes in accrued liabilities associated with this program during the nine months ended December 31, 2014: Severance and Related Costs Balance as of March 31, 2014 (Successor) $ 6.3 Additions 0.3 Cash payments (4.3) Balance as of December 31, 2014 (Sucecessor) $ 2.3 The remaining restructuring payments are expected to be completed by October 2015. - 11 -

Notes to the Condensed Consolidated Financial Statements 9. DEBT Our debt, related maturities and interest rates were as follows as of December 31, 2014 and March 31, 2014: Interest Rate at Successor Original Maturity December 31, 2014 March 31, 2014 December 31, 2014 March 31, 2014 Current portion: Term Loan 2020 7.00% 7.00% $ 20.5 $ 17.5 ABL Revolving Credit Facility 2019 - - - - Unamortized Term Loan discount (2.0) (1.7) Non-current portion: Term Loan 2020 7.00% 7.00% 2,015.6 1,732.5 Unamortized Term Loan discount (8.6) (7.0) Scheduled principal payments due on our debt as of December 31, 2014 for each of the years ended March 31 are as follows: Years Ending March 31, Remainder of FY 2015 2016 2017 2018 2019 Thereafter Total $ 5.1 $ 20.5 $ 20.5 $ 20.5 $ 20.5 $ 1,949.0 $ 2,036.1 Exit Financing Facilities Pursuant to the Plan of Reorganization, the Company was authorized to execute exit financing in the form of a senior secured credit facility and an asset based lending ( ABL ) revolving line of credit. The proceeds of the senior secured credit facility were used as a source of funds for distributions to first lien creditors. On March 31, 2014 (the Effective Date ) Cengage Learning Acquisitions Inc., a wholly-owned subsidiary of the Company, entered into a Senior Secured Term Loan Credit Agreement ( Term Loan ) that provided total aggregate commitments of $1,750 million and an ABL revolving credit facility agreement ( ABL Revolving Credit Facility ) that provided total aggregate commitments of $250 million. See the Company s 2014 Transition Report for additional information. Incremental Term Loan On December 17, 2014, the Company entered into Amendment No. 1 to its Term Loan ( Amendment No. 1 ) that provided incremental commitments of $300 million (the Incremental Term Loan ). The Incremental Term Loan was issued at a discount of 1.0%, or $3.0 million, and the net proceeds were used to fund nearly all of the payment of a one-time $300 million dividend to common shareholders. The Incremental Term Loan is subject to substantially the same terms and conditions, including applicable interest rate and maturity dates, as the existing Term Loan commitments. Amendment No. 1 provided for, among other things, a restricted payment, as defined, of $300 million and to hold the fiscal 2015 mandatory Excess Cash Flow prepayment percentage, as defined, at 25%. The Excess Cash Flow prepayment percentage will revert back to a tiered structure as determined by the Company s leverage ratio in fiscal year 2016 and thereafter. Concurrent with the amendment to the Term Loan, the Company amended its ABL Revolving Credit Facility to allow for the increase in outstanding indebtedness affected by Amendment No. 1. We accounted for Amendment No. 1 as a modification of our existing indebtedness with each lender in the original Term Loan syndicate. Senior Secured Term Loan The Term Loan borrowings, as amended, may be either Eurocurrency Rate Loans or Base Rate Loans at the Company s discretion. Eurocurrency Rate Loans bear interest at a rate per annum equal to the Adjusted Eurocurrency Rate for such Interest Period plus the Applicable Rate. The Eurocurrency Rate is the greater of (i) 1.0% or (ii) the product of the applicable LIBOR rate and the statutory reserve percentage. The Applicable Rate for Eurocurrency Rate Loans is 6.0% as of December 31, 2014. A Base Rate Loan bears interest at a rate per annum equal to the Base Rate plus the Applicable Rate. The Base - 12 -

Notes to the Condensed Consolidated Financial Statements Rate is the greatest of (i) the Federal Funds Rate plus 0.5%, (ii) the Prime Rate, or (iii) the Adjusted Eurocurrency Rate plus 1.0%. The Applicable Rate for Base Rate Loans is 5.0%. As of the December 31, 2014, the Company elected to carry the Term Loans as Eurocurrency Rate loans with an effective interest rate of 7.0%. The Term Loan, as amended, matures on the sixth anniversary of the Effective Date, or March 31, 2020. The Company is required to repay 0.25% of the original Term Loan principal amount and the Incremental Term Loan on the last business day of each quarter. In the three and nine months ended December 31, 2014, the Company made $5.1 million and $13.9 million, respectively, of scheduled quarterly principal payments in accordance with provisions of the amended Term Loan. ABL Revolving Credit Facility Borrowings under the ABL Revolving Credit Facility, as amended, are available for working capital purposes, capital expenditures, permitted acquisitions and general corporate purposes. The availability of credit under the ABL Revolving Credit Facility is limited by reference to a monthly borrowing base calculation (the Borrowing Base ) which equals the sum of (i) 65% of eligible receivables, plus (ii) 85% of orderly liquidation value of eligible inventory, plus (iii) 100% of eligible cash not to exceed $35.0 million at any time, less (iv) certain reserves, as defined in the agreement. As of December 31, 2014, the ABL Revolving Credit Facility had no outstanding borrowings and $6.2 million in issued and outstanding letters of credit. The Company s available Borrowing Base at December 31, 2014, which is based on the balance sheet at November 30, 2014, was $150.9 million, net of letters of credit. The Company paid an unused commitment fee of 0.50% for the three and nine months ended December 31, 2014. Going forward, the unused commitment fee will range between 0.375% and 0.50%, based upon the average facility usage for the most recently ended fiscal quarter. Outstanding letters of credit are also subject to a quarterly letter of credit participation fee which is 1.75% for the quarter ended December 31, 2014, and will vary between 1.75% and 2.25%, depending on the average daily availability, as defined. For the three and nine months ended December 31, 2014, the Company incurred approximately $0.3 million and $0.9 million of commitment fees and less than $0.1 million of letter of credit participation fees, respectively. 10. EQUITY On December 8, 2014, the Company s Board of Directors authorized management to execute a leveraged recapitalization in which the Company would enter into incremental commitments under the existing term loan facility of $300 million and use the proceeds plus balance sheet cash to pay a one-time cash dividend of up to $350 million. The Company closed the incremental term loan financing on December 17, 2014 and declared an aggregate $300 million dividend payable to all common shareholders of record at the close of business on December 16, 2014 (the Dividend Record Date ), which was subsequently paid on December 30, 2014. Based on the 77,999,981 shares of common stock outstanding on the Dividend Record Date, the dividend payment was approximately $3.85 per share. The dividend reduced additional paid-in capital as the Company did not have retained earnings at the time of the dividend. With the exception of this one-time cash dividend the Company has not historically declared any cash dividends and currently has no plans to pay additional cash dividends in the future. 11. INCOME TAXES The benefit from income taxes was $21.5 million and $2.8 million for the three months ended December 31, 2014 and 2013, respectively. The difference between the effective income tax rate and the United Stated Federal statutory rate for the three months ended December 31, 2013 is primarily attributable to forecasted losses in jurisdictions in which we operate for which no tax benefits were recognized and the impact of nondeductible bankruptcy-related costs. The benefit from income taxes was $52.3 million and $7.7 million for the nine months ended December 31, 2014 and 2013, respectively. We recorded a benefit from income taxes in the nine months ended December 31, 2013 despite having pre-tax income due to an adjustment to reduce our previously recorded goodwill impairment charge which represented a permanent tax difference for which income taxes were not provided. - 13 -

12. FAIR VALUE MEASUREMENTS Recurring Measurements CENGAGE LEARNING HOLDINGS II, Inc. Notes to the Condensed Consolidated Financial Statements As of December 31, 2014 and March 31, 2014, we had no assets and liabilities measured at fair value on a recurring basis. Non-Recurring Measurements Our non-financial assets and liabilities, which include goodwill, intangible assets, property and equipment and various liabilities, are not required to be measured at fair value on a recurring basis. However, if an impairment test is required, we evaluate the non-financial asset and liabilities for impairment. If impairment is determined to have occurred, the asset or liability is required to be recorded at its estimated fair value. Other Fair Value Disclosures In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require disclosures regarding the fair value of all of the Company s financial instruments. In connection with our adoption of fresh start accounting, the assets and liabilities of the Successor entity were recorded at their estimated fair values on the Effective Date. Accordingly, the carrying value of our long-term debt as of March 31, 2014 is equivalent to its fair value. The carrying value and estimated fair value of our long-term debt is as follows: Successor December 31, 2014 March 31, 2014 Fair Carrying Value Amount Carrying Amount Fair Value Term Loan (1) $ 2,025.5 $ 1,964.7 $ 1,741.3 $ 1,741.3 (1) The carrying amount for the Term Loan, which includes the Incremental Term Loan, is presented net of the unamortized original issue discount of $10.6 million and $8.75 million as of December 31, 2014 and March 31, 2014, respectively. The estimated fair value of our debt is based on information from a pricing service or broker quotes and may not represent prices on which such debt may be transacted. Therefore, the debt is classified as Level 3 in the fair value hierarchy. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated their fair values at December 31, 2014 and March 31, 2014 due to the short-term nature of these instruments. - 14 -

13. SUPPLEMENTAL CASH FLOW INFORMATION CENGAGE LEARNING HOLDINGS II, Inc. Notes to the Condensed Consolidated Financial Statements Details of Changes in operating assets and liabilities, net of acquisitions were: Successor Nine Months December 31, 2014 Predecessor Nine Months December 31, 2013 Accounts receivable, net $ (30.6) $ (28.9) Inventories (1) 248.2 13.8 Prepaid expenses and other current assets (3.9) (7.2) Author advances, net (10.5) (8.7) Accounts payable and accrued expenses 50.7 118.3 Accrued interest payable 0.4 37.5 Deferred revenue 83.0 34.8 Income taxes payable 14.0 (19.2) Other, net (2.8) (11.5) $ 348.5 $ 128.9 (1) The change in inventories during the nine months ended December 31, 2014 included a $242.3 million non-cash flow-through of the inventory step-up recorded on the Effective Date resulting from the adoption of fresh start accounting. Cash paid for interest and taxes was: Successor Predecessor Nine Months December 31, 2014 Nine Months December 31, 2013 Net cash interest paid $ 94.9 $ 77.7 Income taxes, net of refunds (2.4) 17.7 During the nine months ended December 31, 2014, we had $12.3 million of investing cash flows related to payments for acquisitions of businesses and investments in equity and cost method investees, which included payments for the acquisition of the remaining equity interests in National Geographic Society s School Publishing Unit of $6.5 million. 14. RELATED PARTY TRANSACTIONS Due to related party relationships, it is possible that the terms of the following transactions are not the same as those that would result from transactions among wholly unrelated parties. In the past, we, our Predecessor Sponsors, entities controlled by our Predecessor Sponsors and our affiliates acquired our outstanding debt, in privately negotiated or open market transactions, through the optional redemption and/or defeasance provisions of the applicable indenture, by tender or exchange offer or otherwise. Transactions with our Predecessor Sponsors We were party to advisory fee agreements with our Predecessor Sponsors (together, the Predecessor Advisory Fee Agreements ). Under these Predecessor Advisory Fee Agreements, we were obligated to pay an aggregate annual fee of $10.7 million, payable quarterly in advance on the first day of each quarter, in consideration for services to be provided. The advisory fees were included in selling, general & administrative, excluding depreciation in the Consolidated Statements of - 15 -

Notes to the Condensed Consolidated Financial Statements Operations. We were also obligated to pay associated out-of-pocket expenses incurred by our Predecessor Sponsors. On March 31, 2014, the Advisory Fee Agreements were terminated in connection with our emergence from Chapter 11 bankruptcy and the effect of our Plan. Our Predecessor Sponsors informed us that, during the year ended June 30, 2013, funds advised by Apax purchased a substantial amount of our outstanding indebtedness through open market transactions and that a significant majority of such purchases consisted of Predecessor s first lien debt. The following is a summary of our activity and balances with our Predecessor Sponsors, including interest expense and interest payable on debt purchased: Predecessor Three Months December 31, 2013 Nine Months December 31, 2013 Expenses $ 2.7 $ 31.8 On the Effective Date, the Predecessor Advisory Fee Agreements were terminated. Other Related Party Agreements We have a master services agreement currently in place with a former affiliate of the Predecessor, the terms of which were agreed upon at the time the Predecessor and the former affiliate were related parties. Under the master services agreement, we are to provide the former affiliate with various services including those relating to business and technology, content, customers and operations, management, fulfillment services, and business information support. The former affiliate provides us with certain real estate services. The Company s total revenues from the master services agreement were $21.9 million and $23.8 million for the nine months ended December 31, 2014 and 2013, respectively, and $5.4 million and $5.8 million for the three months ended December 31, 2014 and 2013, respectively. Expenses incurred under the agreement were not material to any of the periods presented. Outstanding receivables and payables with the former affiliate as of December 31, 2014 and March 31, 2014 were not material. 15. COMMITMENTS AND CONTINGENCIES Claims, Disputes and Legal and Regulatory Actions From time to time, we may become involved in various claims, disputes and legal or regulatory proceedings that arise in the ordinary course of business and are related to contractual and other obligations. We assess our potential contingent and other liabilities by analyzing our claims, disputes and legal and regulatory matters using available information, and develop our views on estimated losses in consultation with our legal and other advisors. We determine whether a loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. If the contingency is not probable or cannot be reasonably estimated, disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss may have been incurred. Adverse developments relating to claims, disputes and legal and regulatory proceeding in which we are or become involved could cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual. Should any of these matters result in a final adverse judgment, settlement or other final resolution involving material amounts, it could have a material adverse effect on our financial position, results of operations and cash flows. In October 2012, one of our vendors provided notice of a claim for amounts it asserts is owed under a contract with us. The vendor filed a proof of claim in the Chapter 11 proceedings in the amount of $235.4 million. In addition, the Company has identified potential exposures related to allegations made by photographers for breach of contracts and/or infringement of copyrights. In conjunction with the Chapter 11 filing and the claims reconciliation process, - 16 -

Notes to the Condensed Consolidated Financial Statements we have received a total of $15.5 million in proof of claims alleging that we exceeded the print run limitation or other restrictions in licenses granted to us to reproduce photographs in our products. The claims resolution process for the above matters may take considerable time to complete. In addition to the related exposure for such matters, we may identify other exposures for liabilities pertaining to services and goods received by the Predecessor prior to the petition date. Any probable incremental losses related to existing matters or probable losses related to currently unidentified matters would be recorded in the Successor financial statements. Prior to the consummation of the Plan, we recognized a provision for estimated allowed claims related to the items discussed above, as well as certain known potential settlement claim amounts and estimated damages for rejection of executory contracts totaling $67.6 million in the pre-emergence consolidated balance sheet. The Plan of Reorganization established a fixed settlement value for each of the various classes of pre-petition claims, including those for which the $67.6 million provision had been established on the Predecessor s pre-emergence balance sheet. As such, our obligations arising from these claims have been reduced as a result of their inclusion in the settlement values for each of these classes as recorded on the Effective Date. Based on a review of the information available at this time, we do not expect the total cost of resolving all other current claims, disputes and legal and regulatory proceedings will have a material adverse effect on our consolidated financial position, results of operations or cash flows. Warranties Under our standard terms and conditions of sale, we warrant ownership of and/or licensing rights to our products and may provide certain other warranties and indemnifications. We are not aware of any instances that would result in any material payments being made as a result of these warranties and indemnifications, and therefore, no reserve has been recorded in the Financial Statements. 16. SEGMENT INFORMATION We evaluate the performance of our consolidated operating group as one business unit. However, since our domestic and international operating segments have dissimilar long-term economic characteristics, we present two reportable business segments: Domestic - In the United States, Cengage Learning produces a variety of print and digital educational solutions and associated services for the two- and four-year college, research, career, school, and professional markets. International - Cengage Learning distributes educational solutions across all major academic disciplines, provides English-language teaching products and adapts United States resources for use in multiple countries and territories around the world. The accounting policies applied by the segments are the same as those applied by the Company. All transactions between reportable segments are eliminated upon consolidation. We disclose information about our reportable segments based on the measures we use in assessing the performance of those reportable segments. We use Adjusted Revenues which is defined as revenues before the impact of the deferred revenue reduction recorded on the Effective Date in connection with our adoption of fresh start accounting. We use Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures to measure the operating performance of our segments because we believe that these measures provide a meaningful basis for reviewing the results of our operations by eliminating the effects of financing and investing decisions, as well as excluding the impact of activities not related to our ongoing operating business. We use Post-Plate Adjusted EBITDA as a means to benchmark against our industry peers. Adjusted EBITDA is defined as Net income (loss) before: income (loss) from discontinued operations, net of tax; equity income (losses) of affiliates, net of taxes; benefit from (provision for) income taxes; reorganization items, net; interest expense, net; mark-to-market of derivative instruments; gain on early extinguishment of debt, net; gain on sale of businesses and other divestitures, net; other (income) expense, net; amortization and impairment of identifiable intangible assets; impairment of goodwill; depreciation; operational restructuring charges; the amortization of pre-publication costs, and the impact of fresh start accounting. Post-Plate Adjusted EBITDA reflects additions to pre- - 17 -

Notes to the Condensed Consolidated Financial Statements publication costs (or Plate ). Adjusted EBITDA less Capital Expenditures reflects additions to Plate and additions to property, plant and equipment and capitalized software for internal use. We include equity-based compensation, fees paid under Predecessor Advisory Fee Agreements and other corporaterelated expenses, such as fees paid to advisors in connection with the review and assessment of our capital structure, in a reporting line item referred to as Corporate and other. Select financial information for our segments is as follows: Successor Three Months December 31, 2014 Adjusted Revenues (1) Adjusted EBITDA Post-Plate Adjusted EBITDA Adjusted EBITDA less Capital Expenditures Domestic $ 314.5 $ 99.4 $ 67.6 $ 52.3 International 64.1 11.0 7.5 7.1 Segments total 378.6 110.4 75.1 59.4 Corporate and other - (5.2) (5.2) (5.2) Total $ 378.6 $ 105.2 $ 69.9 $ 54.2 Predecessor Three Months December 31, 2013 Adjusted Revenues (1) Adjusted EBITDA Post-Plate Adjusted EBITDA Adjusted EBITDA less Capital Expenditures Domestic $ 347.9 $ 132.1 $ 99.2 $ 84.5 International 66.7 11.7 7.9 7.4 Segments total 414.6 143.8 107.1 91.9 Corporate and other - - - - Total $ 414.6 $ 143.8 $ 107.1 $ 91.9 Successor Nine Months December 31, 2014 Adjusted Revenues (1) Adjusted EBITDA Post-Plate Adjusted EBITDA Adjusted EBITDA less Capital Expenditures Domestic $ 1,158.3 $ 448.8 $ 351.0 $ 291.3 International 210.2 42.1 31.1 29.5 Segments total 1,368.5 490.9 382.1 320.8 Corporate and other - (10.4) (10.4) (10.4) Total $ 1,368.5 $ 480.5 $ 371.7 $ 310.4 Predecessor Nine Months December 31, 2013 Adjusted Revenues (1) Adjusted EBITDA Post-Plate Adjusted EBITDA Adjusted EBITDA less Capital Expenditures Domestic $ 1,209.6 $ 527.4 $ 428.7 $ 385.1 International 196.5 29.8 16.9 15.0 Segments total 1,406.1 557.2 445.6 400.1 Corporate and other - (3.1) (3.1) (3.1) Total $ 1,406.1 $ 554.1 $ 442.5 $ 397.0 (1) Adjusted Revenues information is presented by country of origin. - 18 -

Notes to the Condensed Consolidated Financial Statements Segment Adjusted Revenues only include revenues from external customers. Total asset information by segment is not shown because it is not provided to or reviewed by our chief operating decision maker. The following table reconciles Adjusted Revenues to Revenues per the Condensed Consolidated Statements of Operations: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December December December December 31, 2014 31, 2013 31, 2014 31, 2013 Adjusted Revenues $ 378.6 $ 414.6 $ 1,368.5 $ 1,406.1 Impact of fresh start accounting (1) (3.7) - (30.8) - Revenues $ 374.9 $ 414.6 $ 1,337.7 $ 1,406.1 (1) The add-back of the impact of fresh start accounting includes the reduction in recognition of deferred revenue of $3.7 million and $30.8 million for the three and nine months ended December 31, 2014, respectively. The following table reconciles Adjusted EBITDA less Capital Expenditures, Post-Plate Adjusted EBITDA, and Adjusted EBITDA to (Loss) income before taxes and equity losses of affiliates per the Condensed Consolidated Statements of Operations: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December December December December 31, 2014 31, 2013 31, 2014 31, 2013 Adjusted EBITDA less Capital Expenditures $ 54.2 $ 91.9 $ 310.4 $ 397.0 Additions to property, equipment and capitalized software for internal use 15.7 15.2 61.3 45.5 Post-Plate Adjusted EBITDA $ 69.9 $ 107.1 $ 371.7 $ 442.5 Additions to pre-publication costs 35.3 36.7 108.8 111.6 Adjusted EBITDA $ 105.2 $ 143.8 $ 480.5 $ 554.1 Less: Impact of fresh start accounting (1) (49.6) - (273.2) - Amortization of pre-publication costs (38.9) (39.0) (130.6) (147.2) Restructuring charges 0.7 (1.5) (0.3) (4.8) Depreciation (22.3) (17.4) (65.9) (50.4) Impairment of goodwill - - - 185.4 Amortization of identifiable intangible assets (22.5) (40.4) (67.9) (121.3) Other income (expense), net - 3.1 (0.9) 5.0 Mark-to-market of derivative instruments - - - 12.6 Interest expense, net (33.5) 0.2 (97.5) (178.6) Reorganization items, net - (82.1) (0.5) (132.7) (Loss) income before taxes and equity losses of affiliates $ (60.9) $ (33.3) $ (156.3) $ 122.1 (1) The add-back of the impact of fresh start accounting includes the flow-through of the inventory step-up of $45.8 million and $242.3 million and reduction in deferred revenue of $3.7 million and $30.8 million for the three and nine months ended December 31, 2014, respectively. 17. SUBSEQUENT EVENTS There were no material subsequent events identified through February 17, 2015, the date these financial statements were issued. - 19 -

Management s Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management s Discussion and Analysis of Financial Condition and Results of Operations ( MD&A ) is intended to facilitate an understanding of the results of operations and financial condition of Cengage Learning Holdings II, Inc. and its consolidated subsidiaries. Cengage Learning Holdings II, Inc. ( CL Holdings II, Inc. ), together with its consolidated subsidiaries, is hereinafter collectively referred to as Cengage Learning, or the Successor. Cengage Learning Holdings II, Inc. is the successor company to Cengage Learning Holdings II, L.P. ( CL Holdings II, L.P. ), together with its consolidated subsidiaries, collectively referred to as the Predecessor. The term Company (also referred to as us, we and our ) used throughout this discussion collectively refers to Cengage Learning Holdings II, L.P. for the Predecessor periods and Cengage Learning Holdings II, Inc. for the Successor period. On July 2, 2013, CL Holdings II, L.P. and all of its domestic wholly-owned subsidiaries (collectively, the Debtors ) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code ( Chapter 11 ) in the Bankruptcy Court for the Eastern District of New York ( Bankruptcy Court ). Our non-u.s. subsidiaries were not part of the bankruptcy filing. On March 13, 2014, the Debtors received confirmation of the Plan of Reorganization from the Bankruptcy Court and emerged from bankruptcy proceedings as of the end of the day on March 31, 2014 (the Effective Date ). Prior to the Effective Date, the Debtors operated their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 and the orders of the Bankruptcy Court. Our non-u.s. subsidiaries continued to operate in the ordinary course of business during the post-petition period. Prior to July 2, 2013, the Predecessor was controlled by investment funds associated with or designated by Apax Partners, L.P. ( Apax ), together with OMERS Private Equity, Inc., hereinafter collectively referred to as the Predecessor Sponsors. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes ( Financial Statements ) and our Transition Report for the nine months ended March 31, 2014 (the 2014 Transition Report ). The following discussion and analysis of our financial condition and results of operations may contain forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Our future results and financial condition may differ materially from those we currently anticipate. See Special Note Regarding Forward-Looking Statements earlier in this report. In addition, we have presented certain risk factors relevant to the Company s business operations under the Risk Factors section in the 2014 Transition Report. The MD&A includes the following sections: Impact of our Adoption of Fresh Start Accounting on our Fiscal 2015 Financial Results Seasonality and Comparability Change of Fiscal Year End December 2014 Leveraged Recapitalization and Dividend Distribution Critical Accounting Policies Financial Performance o Executive Overview o Consolidated Results of Operations o Segment Operating Results o Liquidity and Capital Resources o Summary of Cash Flows o Reconciliations of Non-GAAP Financial Measures o New Accounting Standards and Accounting Changes The discussion in the Financial Performance section of our MD&A begins with an Executive Overview that summarizes our results of operations for the three and nine months ended December 31, 2014 compared to the three and nine months ended December 31, 2013, followed by a more detailed discussion of our Consolidated Results of Operations and Segment Operating Results. The discussion of our Consolidated Results of Operations includes a comprehensive analysis of our consolidated operating income (loss), with insights into significant changes in the components of our expenses. Our discussion of changes in expenses focuses primarily on changes in the nature of the underlying expenses, and not on the changes in each individual financial statement line item in our Consolidated Statements of Operations. We believe that this provides better insight into the trends impacting our business than changes in individual financial statement line items since certain expenses may be - 20 -

Management s Discussion and Analysis of Financial Condition and Results of Operations included in more than one line item. We also provide a discussion of significant non-operating income and expenses. We do not provide a separate analysis of changes in our consolidated revenues since these changes would be consistent with those discussed in the Segment Operating Results section. The discussion covering Segment Operating Results focuses primarily on Adjusted Revenues and Adjusted EBITDA, which are the key performance metrics for assessing our segment performance. Since we manage the business and make decisions about resource allocations by segment, we believe that this discussion provides useful insights into our operating results consistent with the way we monitor our operations. Additionally, our discussion may include gross sales measures by markets, which represents amounts invoiced to our customers before any adjustments for estimated sales returns or the deferral of revenue. We believe this measure provides investors with a more comprehensive understanding of our underlying revenue results and trends by presenting amounts invoiced on a consistent basis. We may also discuss digital product sales, which represents gross sales, less actual returns, of digital standalone products, including ebooks, and bundled print and digital products. To supplement our Financial Statements presented in accordance with accounting principles generally accepted in the United States of America ( GAAP ), we have presented certain non-gaap financial measures in addition to our GAAP results. We believe that these non-gaap financial measures provide useful information for evaluating our business performance. This information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-gaap financial measures may not be the same as similarly entitled measures reported by other companies. We present the following non-gaap measures in this report: Measure Adjusted Revenues Adjusted EBITDA Post-Plate Adjusted EBITDA Adjusted EBITDA less Capital Expenditures Definition This measure is defined as revenues before the impact of our adoption of fresh start accounting which resulted in the reduction of deferred revenue on the Effective Date and a reduction of revenue recognized subsequent to the Effective Date. This measure is defined as net income (loss) before: income (loss) from discontinued operations, net of tax; equity income (losses) of affiliates, net of taxes; benefit from (provision for) income taxes; reorganization items, net; interest expense, net; mark-to-market of derivative instruments; gain on early extinguishment of debt, net; gain on sale of businesses and other divestitures, net; other (income) expense, net; amortization and impairment of identifiable intangible assets; impairment of goodwill; depreciation; operational restructuring charges; amortization of pre-publication costs; and the impact of fresh start accounting. We use Post-Plate Adjusted EBITDA as a means to benchmark against our industry peers. This measure reflects Adjusted EBITDA less additions to pre-publication costs (or Plate ). Plate additions are costs incurred prior to the publication date of a title or release date of a product and represent activities associated with product development not limited to editorial review and fact verification, graphic art design and layout and the process of conversion from print to digital media or within various formats of digital media. In addition, pre-publication costs include the cost to procure perpetual rights for the use of content which have been developed by third parties and are to be included in our products. Costs are capitalized when the title is expected to generate probable future economic benefits and are amortized upon publication of the title over its estimated operating life cycle. This measure reflects Adjusted EBITDA less additions to Plate and additions to property, plant and equipment and capitalized software for internal use. - 21 -

Management s Discussion and Analysis of Financial Condition and Results of Operations We believe that these performance measures provide our management and investors a meaningful basis for reviewing the results of our operations by eliminating the effects of financing decisions as well as excluding the impact of activities not related to our ongoing operations. See Reconciliations of Non-GAAP Financial Measures for reconciliations to the most directly comparable financial measures prepared in accordance with GAAP. Impact of our Adoption of Fresh Start Accounting on Fiscal Year 2015 Financial Results In connection with our adoption of fresh start accounting, the financial results for fiscal year 2015 have been, and will continue to be impacted. As of March 31, 2014, the Company recognized the assets and liabilities of the Successor at their respective fair values, resulting in material adjustments to inventory; pre-publication costs; property, equipment and capitalized software for internal use; intangible assets; goodwill; deferred taxes; and deferred revenue. Certain of these adjustments had a material impact on our consolidated and segment results, primarily revenues, cost of revenues, and operating income (loss) for the three and nine months ended December 31, 2014. We recorded a reduction in deferred revenue of $33.3 million on March 31, 2014 to adjust our obligation to its fair value. The reduction of deferred revenue is negatively impacting our revenue performance over approximately four quarters following emergence. The impact of the reduction in deferred revenue on revenues for the three and nine months ended December 31, 2014 is presented in the table below: Successor Three Months December 31, 2014 Nine Months December 31, 2014 Increase/(Decrease) Increase/(Decrease) Domestic International Consolidated Domestic International Consolidated Revenues $ (3.7) $ - $ (3.7) $ (28.1) $ (2.7) $ (30.8) We recorded a step-up to inventory of $440.3 million on March 31, 2014 to reflect such inventory at its fair value. The step-up is flowing through our results of operations within cost of revenues over approximately six quarters following emergence. The impact of the inventory step-up flow-through on cost of revenues for the three and nine months ended December 31, 2014 is presented in the table below: Successor Three Months December 31, 2014 Nine Months December 31, 2014 Increase/(Decrease) Increase/(Decrease) Domestic International Consolidated Domestic International Consolidated Cost of Revenues $ 42.3 $ 3.5 $ 45.8 $ 197.2 $ 45.1 $ 242.3 In addition, a decrease in identifiable intangible assets of $925.6 million was recorded to adjust their respective book values to fair value on March 31, 2014. As a result of this adjustment, we anticipate amortization of identifiable intangible assets of $90.7 million in fiscal year 2015, which is a decrease of $70.8 million from the comparative twelve-month period. The impact of the decrease in identifiable intangible assets on the related amortization for the three and nine months ended December 31, 2014 is presented in the table below: Successor Three Months Nine Months December 31, 2014 December 31, 2014 Increase/(Decrease) Increase/(Decrease) Amortization of identifiable intangible assets $ (17.9) $ (53.4) We excluded the impact of fresh start accounting from our Adjusted Revenues and Adjusted EBITDA Non-GAAP measures in our discussion of the performance of our operating segments. See Reconciliations of Non-GAAP Financial - 22 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Measures for the total impact of fresh start accounting excluded in our reconciliation of Adjusted Revenues to Revenues and Adjusted EBITDA, Post-Plate Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures to Net income (loss). Seasonality and Comparability Our revenues, operating profit and operating cash flows are impacted by the inherent seasonality of our business, which is aligned with the academic calendar. This seasonality affects our working capital requirements and hence our overall financing needs. For example, we typically incur a net cash deficit from all of the activities in our first and fourth fiscal quarters of our new fiscal year which ends on March 31st. In addition, changes in our customers ordering patterns may impact the comparison of our results in a quarter with the same quarter of the previous year, specifically in cases where our customers may shift the timing of material orders for a number of reasons, including, but not limited to, changes in academic semester start dates or changes in inventory management practices. As we continue to migrate our product and service offerings toward hosted digital solutions that are delivered over a period of time, a larger proportion of our consolidated revenue will be recognized ratably over the applicable subscription period, with amounts billed in excess of revenues recognized reflected as deferred revenue. This represents a difference from traditional print products where revenue is typically recognized upon shipment of the materials to our customers. Consequently, at this time, reported revenues may not be comparable to prior periods as a growing proportion of our revenues are recognized in subsequent periods. The current portion of deferred revenue, which represents amounts billed in advance to our customers that will be recognized as revenue in subsequent periods as products and services are delivered to customers, increased to $181.0 million at December 31, 2014 from $110.1 million at March 31, 2014, reflecting the impact of digital products sold during our fall selling season. Change of Fiscal Year End The Company changed its fiscal year end to March 31 from June 30 effective beginning with the period ended on March 31, 2014. The Company made this change to better align its financial reporting period, as well as its budgeting and planning process, with the seasonality of its business cycle. December 2014 Leveraged Recapitalization and Dividend Distribution On December 8, 2014, the Company s Board of Directors authorized management to execute a leveraged recapitalization in which the Company would enter into incremental commitments under the existing term loan facility of $300 million and use the proceeds plus balance sheet cash to pay a one-time cash dividend of up to $350 million. The Company closed the incremental term loan financing on December 17, 2014 and declared an aggregate $300 million dividend payable to all common shareholders of record at the close of business on December 16, 2014 (the Dividend Record Date ) and paid on December 30, 2014. Based on the 77,999,981 shares of common stock outstanding on the Dividend Record Date, the dividend payment was approximately $3.85 per share. The dividend reduced additional paid-in capital as the Company did not have retained earnings. With the exception of the one-time dividend the Company has not historically declared any cash dividends and currently has no plans to pay additional cash dividends in the future. Critical Accounting Policies There were no significant changes to our critical accounting policies during the three and nine months ended December 31, 2014. For further information on our critical accounting policies, refer to our 2014 Transition Report. - 23 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Financial Performance Executive Overview The following section summarizes certain highlights in our results of operations for the three and nine months ended December 31, 2014 compared to the three and nine months ended December 31, 2013: Revenues for the three months ended December 31, 2014 decreased by $39.7 million, or 9.6%, to $374.9 million. The decrease was primarily due to lower Adjusted Revenues and the $3.7 million impact from fresh start accounting. Adjusted Revenues, which excludes the impact from fresh start accounting, for the three months ended December 31, 2014 decreased by $36.0 million, or 8.7%, to $378.6 million. The decrease was primarily due to a decrease in the Domestic segment driven by declines in print-only product. Revenues for the nine months ended December 31, 2014 decreased by $68.4 million, or 4.9%, to $1,337.7 million. The decrease was primarily due to lower Adjusted Revenues and the $30.8 million impact from fresh start accounting. Adjusted Revenues for the nine months ended December 31, 2014 decreased by $37.6 million, or 2.7%, to $1,368.5 million. The decrease was primarily due to a decrease in Domestic revenue partially offset by adjustments to our sales returns provision in the comparative prior period as well as higher sales in our International segment. Operating loss for the three months ended December 31, 2014 was $27.4 million compared to operating income of $48.6 million for the nine months ended December 31, 2013. The decrease was primarily due to the impact of lower Revenues and our adoption of fresh start accounting of $35.2 million. Adjusted EBITDA, which excludes the impact from fresh start accounting, for the three months ended December 31, 2014 decreased by $38.6 million, or 26.9%, to $105.2 million, primarily due to the contribution from lower Adjusted Revenues and higher professional fees, a portion of which relates to the December 2014 leveraged recapitalization and related one-time dividend. Operating loss for the nine months ended December 31, 2014 was $58.3 million compared with operating income of $420.8 million for the nine months ended December 31, 2013. The decrease was primarily due to an adjustment related to goodwill impairment of $185.4 million in the corresponding period of the prior year and the impact of our adoption of fresh start accounting of $230.7 million. Adjusted EBITDA for the nine months ended December 31, 2014 decreased by $73.6 million, or 13.3%, to $480.5 million, primarily due to the contribution from lower Adjusted Revenues, higher employee-related costs, higher outside service cost, a portion of which relates to our digital initiative as well as the December 2014 leveraged recapitalization and related one-time dividend. In addition, in the comparable nine months ended December 31, 2013, we recorded a contingency accrual release associated with the acquisition of National Geographic Society s School Publishing Unit ( NGSP ). Net loss for the three months ended December 31, 2014 increased by $8.5 million, or 27.5%, to $39.4 million, reflecting the decrease in operating income and increased interest expense, partially offset by a higher benefit from income tax and lower reorganization items, net. Net loss for the nine months ended December 31, 2014 was $104.0 million compared to net income of $128.1 million for the nine months ended December 31, 2013, reflecting the decrease in operating income, the absence of income from the mark-to-market of derivative instruments, partially offset by a higher benefit from income taxes, lower interest expense and lower reorganization items, net. Net cash provided by operating activities for the nine months ended December 31, 2014 decreased by $121.7 million, primarily due to lower Adjusted EBITDA, an increase in cash payments for reorganization items which were funded from restricted cash in the current period, and a decrease in favorable working capital movements after excluding the impact of fresh start accounting. - 24 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Results of Operations The Three and Nine Months December 31, 2014 Compared with December 31, 2013 Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December 31, December 31, Percentage December 31, December 31, 2014 2013 Change Change 2014 2013 Change Percentage Change Revenues $ 374.9 $ 414.6 $ (39.7) -9.6% $ 1,337.7 $ 1,406.1 $ (68.4) -4.9% Operating (loss) income $ (27.4) $ 48.6 $ (76.0) N/M $ (58.3) $ 420.8 $ (479.1) N/M Mark-to-market of derivative instruments - - - N/M - 12.6 (12.6) -100.0% Interest income - 0.2 (0.2) -100.0% 0.3 0.5 (0.2) -40.0% Interest expense (33.5) - (33.5) N/M (97.8) (179.1) 81.3-45.4% Reorganization items, net - (82.1) 82.1-100.0% (0.5) (132.7) 132.2-99.6% Benefit from income taxes 21.5 2.8 18.7 N/M 52.3 7.7 44.6 N/M Equity losses of affiliates, net of taxes - (0.4) 0.4-100.0% - (1.7) 1.7-100.0% Net (loss) income $ (39.4) $ (30.9) $ (8.5) 27.5% $ (104.0) $ 128.1 $ (232.1) N/M Adjusted Revenues (1) $ 378.6 $ 414.6 $ (36.0) -8.7% $ 1,368.5 $ 1,406.1 $ (37.6) -2.7% Adjusted EBITDA $ 105.2 $ 143.8 $ (38.6) -26.8% $ 480.5 $ 554.1 $ (73.6) -13.3% Adjusted EBITDA Margin (2) 27.8% 34.7% -6.9% 35.1% 39.4% -4.3% Post-Plate Adjusted EBITDA (3) $ 69.9 $ 107.1 $ (37.2) -34.7% $ 371.7 $ 442.5 $ (70.8) -16.0% Adjusted EBITDA less Capital Expenditures (4) $ 54.2 $ 91.9 $ (37.7) -41.0% $ 310.4 $ 397.0 $ (86.6) -21.8% (1) Adjusted Revenues excludes the impact of the reduction in deferred revenue on the Emergence Date due to the adoption of fresh start accounting. (2) Adjusted EBITDA margin is determined by dividing Adjusted EBITDA by Adjusted Revenues. (3) Post-Plate Adjusted EBITDA reflects the impact of cash spent for additions to pre-publication costs. (4) Adjusted EBITDA less Capital Expenditures reflects the impact of cash spent for additions to pre-publication costs and the impact of cash spent for additions to property, plant and equipment and capitalized software for internal use. N/M = Not meaningful The Three Months December 31, 2014 Compared with December 31, 2013 Operating loss was $27.4 million for the three months ended December 31, 2014 compared to operating income of $48.6 million for the three months ended December 31, 2013, primarily due to: the contribution from $36.0 million in lower Adjusted Revenues. The decrease in Adjusted Revenues is due to the decline in sales of our print-only product, a portion of which shifted to sales of digital products and services which are recognized in subsequent periods as delivery occurs, the net impact of our adoption of fresh start accounting of $35.2 million, which included an offsetting reduction of amortization of identifiable intangible assets of $17.9 million, and $6.6 million in higher outside service cost related to professional fees incurred primarily in connection with the leveraged recapitalization and related one-time dividend in December 2014. Interest expense, net increased by $33.7 million to $33.5 million for the three months ended December 31, 2014, primarily due to the absence of recording contractual interest expense during the Company s post-petition Chapter 11 period during the three months ended December 31, 2013. Reorganization items, net was zero and $82.1 million for the three months ended December 31, 2014 and 2013, respectively. The costs for reorganization items incurred during the prior period consisted primarily of professional fees associated with our Chapter 11 reorganization efforts and a provision for our estimate of allowed Chapter 11 claims. - 25 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Benefit from income taxes of $21.5 million was recorded for the three months ended December 31, 2014 compared to a benefit from income taxes of $2.8 million for the three months ended December 31, 2013. The effective income tax rate difference is primarily attributable to forecasted losses in jurisdictions in which we operate for which no tax benefits were recognized and the impact of nondeductible bankruptcy-related costs accrued in the three month period ended December 31, 2013. The Nine Months December 31, 2014 Compared with December 31, 2013 Operating loss was $58.3 million for the nine months ended December 31, 2014 compared to operating income of $420.8 million for the nine months ended December 31, 2013, primarily due to: the net impact of our adoption of fresh start accounting of $230.7 million, which included an offsetting reduction of amortization of identifiable intangible assets of $53.4 million, the $185.4 million adjustment recorded in the nine months ended December 31, 2013 to reduce a previously recorded interim goodwill impairment charge, the contribution from $37.6 million in lower Adjusted Revenues. The decrease in Adjusted Revenues is due to the decline in sales of our print-only product, a portion of which shifted to sales of digital products and services which are recognized in subsequent periods as delivery occurs, $26.3 million in higher employee-related costs, primarily due to higher severance cost, higher incentive compensation expense and the absence of expense related to equity-based compensation in the corresponding period of the prior year, and $16.7 million higher outside service cost related to professional fees incurred in connection with the relocation of our corporate headquarters, the leveraged recapitalization and related one-time dividend in December 2014, and technology resources to support our digital products. partially offset by: $16.6 million in lower amortization of pre-publication costs, primarily due to a comparatively higher rate of amortization in the corresponding period of the prior year attributable to lower-than-expected revenues, and our efforts to reduce pre-publication spending through further title rationalization. Mark-to-market of derivative instruments was zero and $12.6 million for the nine months ended December 31, 2014 and 2013, respectively. We had no interest rate swaps outstanding during the nine months ended December 31, 2014, as all previously outstanding interest rate swaps expired on June 30, 2013. Interest expense, net decreased by $81.1 million, or 45.4%, to $97.5 million for the nine months ended December 31, 2014, primarily due to the reduction in our outstanding indebtedness in connection with our emergence from Chapter 11 on March 31, 2014 and the absence of interest expense related to interest rate swaps, partially offset by the absence of recording contractual interest expense during the Company s post-petition Chapter 11 period during the six months ended December 31, 2013. Reorganization items, net was $0.5 million for the nine months ended December 31, 2014, compared to $132.7 million for the nine months ended December 31, 2013. The costs for reorganization items incurred during the current period consisted of professional fees associated with our Chapter 11 reorganization efforts while the comparative period in the prior year consisted primarily of professional fees as well as a provision for our estimate of allowed Chapter 11 claims. The reduction in the nine months ended December 31, 2014 was due to our emergence from Chapter 11 on March 31, 2014. Benefit from income taxes of $52.3 million was recorded for the nine months ended December 31, 2014 compared to benefit from income taxes of $7.7 million for the nine months ended December 31, 2013. We recorded a benefit from income taxes in the nine months ended December 31, 2013 on pre-tax income of $122.1 million as the adjustment to reduce previously recorded goodwill impairment represented a permanent tax difference for which income taxes were not provided. - 26 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Segment Operating Results The Three and Nine Months December 31, 2014 Compared with December 31, 2013 Successor Predecessor Successor Predecessor Three Months December 31, 2014 Three Months December 31, 2013 Change Percentage Change Nine Months December 31, 2014 Nine Months December 31, 2013 Change Percentage Change Adjusted Revenues (1) Domestic $ 314.5 $ 347.9 $ (33.4) -9.6% $ 1,158.3 $ 1,209.6 $ (51.3) -4.2% International 64.1 66.7 (2.6) -3.9% 210.2 196.5 13.7 7.0% Total $ 378.6 $ 414.6 $ (36.0) -8.7% $ 1,368.5 $ 1,406.1 $ (37.6) -2.7% Adjusted EBITDA (2) Domestic $ 99.4 $ 132.1 $ (32.7) -24.8% $ 448.8 $ 527.4 $ (78.6) -14.9% International 11.0 11.7 (0.7) -6.0% 42.1 29.8 12.3 41.3% Adjusted EBITDA Margin (3) Domestic 31.6% 38.0% -6.4% 38.7% 43.6% -4.9% International 17.2% 17.5% -0.4% 20.0% 15.2% 4.9% Post-Plate Adjusted EBITDA (4) Domestic $ 67.6 $ 99.2 $ (31.6) -31.9% $ 351.0 $ 428.7 $ (77.7) -18.1% International 7.5 7.9 (0.4) -5.1% 31.1 16.9 14.2 84.0% Adjusted EBITDA less Capital Expenditures (5) Domestic $ 52.3 $ 84.5 $ (32.2) -38.1% $ 291.3 $ 385.1 $ (93.8) -24.4% International 7.1 7.4 (0.3) -4.1% 29.5 15.0 14.5 96.7% (1) (2) (3) (4) (5) Adjusted Revenues excludes the impact of the reduction in deferred revenue on the Emergence Date due to the adoption of fresh start accounting. The aggregate of our two segments Adjusted EBITDA does not equal our total Adjusted EBITDA because our segment profit measure of Adjusted EBITDA excludes equity-based compensation, fees paid to Predecessor Sponsors under advisory fee agreements and other corporate-related expenses, which are included in a reporting line item referred to as Corporate and other. Adjusted EBITDA margin is determined by dividing Adjusted EBITDA by Adjusted Revenues for each segment. Post-Plate Adjusted EBITDA reflects the impact of cash spent for additions to pre-publication costs. Adjusted EBITDA less Capital Expenditures reflects the impact of cash spent for additions to pre-publication costs and the impact of cash spent for additions to property, plant and equipment and capitalized software for internal use. The Three Months December 31, 2014 Compared with December 31, 2013 Domestic Adjusted Revenues for the three months ended December 31, 2014, decreased by $33.4 million, or 9.6%, primarily driven by declines in sales of print-only product, partially offset by growth in Higher Ed digital product revenues, which reflects the continued migration from print to digital products. For the quarter, our digital product sales grew 15.9%, a portion of which has been deferred and will be recognized in future periods. International Adjusted Revenues for the three months ended December 31, 2014 decreased by $2.6 million, or 3.9%. International Adjusted Revenues increased $0.9 million, or 1.3%, in constant dollars, reflecting higher sales in all product groups, particularly School and English Language Training. Domestic Adjusted EBITDA for the three months ended December 31, 2014 decreased by $32.7 million, or 24.8%, to $99.4 million. The decrease was primarily due to the lower contribution from Adjusted Revenues and higher professional fees, primarily related to the December 2014 leveraged recapitalization and related one-time dividend. International Adjusted EBITDA for the three months ended December 31, 2014 decreased by $0.7 million to $11.0 million, primarily due to the contribution from lower Adjusted Revenues and higher employee-related cost. - 27 -

Management s Discussion and Analysis of Financial Condition and Results of Operations The Nine Months December 31, 2014 Compared with December 31, 2013 Domestic Adjusted Revenues for the nine months ended December 31, 2014 decreased by $51.3 million, or 4.2%, primarily driven by declines in sales of print-only product, offset by growth in sales of Higher Ed digital product sales and National Geographic school product, as well as an the impact from a $11.6 million incremental sales return provision recorded during the nine months ended December 31, 2013. For the nine months ended December 31, 2014, our digital product sales grew 9.5%, a portion of which has been deferred and will be recognized in future periods. International Adjusted Revenues for the nine months ended December 31, 2014 increased by $13.7 million, or 7.0%. International Adjusted Revenues increased $15.8 million, or 8.0%, in constant dollars, driven by higher revenue from School, English Language Training, and Research products, partially offset by lower revenue in the higher education market. The international higher education market was negatively impacted by the effect of price floor implementation. Domestic Adjusted EBITDA for the nine months ended December 31, 2014 decreased by $78.6 million, or 14.9%, to $448.8 million. The decrease was primarily due to the contribution from lower Adjusted Revenues, $18.0 million of higher employee-related costs, primarily due to higher incentive compensation expense and higher severance cost, $16.1 million of higher outside service cost and the absence of a $7.4 million contingency accrual release associated with the acquisition of National Geographic Society s School Publishing Unit in the comparative prior period. These decreases were offset by $6.8 million lower selling costs, primarily associated with a third party distribution agreement. International Adjusted EBITDA for the nine months ended December 31, 2014 increased by $12.3 million, or 41.3%, to $42.1 million, primarily due to the contribution from higher Adjusted Revenues and $4.3 million of favorable foreign currency translation, partially offset by a higher employee-related expense. Liquidity and Capital Resources Successor December 31, March 31, 2014 2014 Cash and cash equivalents $ 371.8 $ 118.4 Current portion of long-term debt 18.5 15.8 Revolving credit facility - - Long-term debt 2,007.0 1,725.5 Our principal sources of liquidity have historically been cash flows from operations and borrowings under our revolving credit facilities. Since our cash flows from operations are impacted by the inherent seasonality of our business whereby we typically generate operating cash during the second and third quarters of our new fiscal year and utilize cash for operating activities throughout the first and fourth quarters of our new fiscal year, the borrowings under our revolving credit facility may vary accordingly. Our principal uses of cash are to fund operating costs and capital expenditures, including investments in product and technology offerings, and the payment of interest and principal on our outstanding debt. We expect our cash flows from operations, combined with availability under our revolving credit facility, to provide sufficient liquidity to fund our current obligations, debt service requirements, projected working capital requirements, restructuring obligations, and capital spending over the next twelve months. Additionally, we continue to make payments from restricted cash related to the settlement of outstanding unresolved Chapter 11 claims and bankruptcy-related professional fees. Amounts in escrow accounts included in restricted cash as of December 31, 2014 are expected to be sufficient to satisfy the remaining disbursements related to Chapter 11 claims and other bankruptcy-related costs. - 28 -

Management s Discussion and Analysis of Financial Condition and Results of Operations Summary of Cash Flows The following table sets forth our cash flows from operating, investing and financing activities: Successor Predecessor Nine Months December 31, 2014 Nine Months December 31, 2013 Change Percentage Change Net cash provided by operating activities $ 376.0 $ 497.7 $ (121.7) -24.5% Net cash used in investing activities (102.0) (148.3) 46.3-31.2% Net cash used in financing activities (19.2) (13.0) (6.2) 47.7% Impact on cash and cash equivalents from changes in foreign currency (1.4) (1.3) (0.1) 7.7% Net increase in cash and cash equivalents $ 253.4 $ 335.1 $ (81.7) -24.4% Operating activities. Net cash provided by operating activities for the nine months ended December 31, 2014 decreased by $121.7 million, primarily due to lower Adjusted EBITDA, an increase in cash paid for reorganization items, and increased use of cash for net working capital. Cash paid for reorganization items is funded from restricted cash, which is reflected as an investing activity. The increased use of cash for net working capital was driven by higher payments made during the current period for prior year incentive compensation and timely payments of vendors in the current year relative to the comparable period during our Chapter 11 proceedings. Investing activities. Net cash used in investing activities for the nine months ended December 31, 2014 decreased by $46.3 million. The decrease was primarily driven by the withdrawal of $80.4 million from our restricted cash escrow accounts primarily used for the satisfaction of reorganization items including bankruptcy-related claims and professional fees, which are reflected in operating activities as described above. The inflow from restricted cash was partially offset by an increase in capital expenditures of $13.0 million, primarily due to higher investment in our digital products, a portion of which was accelerated from the second half of the year, and payments of $12.3 million for the acquisition of the remaining equity interests in NGSP as well as investments in equity method investees. The nine months ended December 31, 2013 also included $10.1 million of proceeds from our disposition of two properties located in Belmont, CA. Financing activities. Net cash used in financing activities for the nine months ended December 31, 2014 increased by $6.2 million. Included in the nine months ended December 31, 2014 is the cash flow impact from our December 2014 leveraged recapitalization and related one-time dividend, scheduled quarterly principal repayments of $13.9 million on our Term Loan and Incremental Term Loan offset by $1.9 million of proceeds related to the issuance and sale of common stock pursuant to the Company s 2014 Equity Purchase Plan. The leveraged recapitalization included issuance of debt for net proceeds of $297.0 million, the use of cash to pay a $300.0 million dividend and the use of cash of $4.2 million for debt issuance costs. Included in the nine months ended December 31, 2013 was $8.9 million of principal payments on our Predecessor term loans and incremental term loans and repayments of $4.0 million under our Predecessor revolving credit facilities. - 29 -

Reconciliations of Non-GAAP Financial Measures CENGAGE LEARNING HOLDINGS II, Inc. Management s Discussion and Analysis of Financial Condition and Results of Operations The following table reconciles Adjusted Revenues to Revenues: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December December December December 31, 2014 31, 2013 31, 2014 31, 2013 Adjusted Revenues $ 378.6 $ 414.6 $ 1,368.5 $ 1,406.1 Impact of fresh start accounting (1) (3.7) - (30.8) - Revenues $ 374.9 $ 414.6 $ 1,337.7 $ 1,406.1 (1) The add-back of the impact of fresh start accounting includes the reduction in recognition of deferred revenue of $3.7 million and $30.8 million for the three and nine months ended December 31, 2014, respectively. The following table reconciles Adjusted EBITDA less Capital Expenditures, Post-Plate Adjusted EBITDA, and Adjusted EBITDA to Net (loss) income: Successor Predecessor Successor Predecessor Three Months Three Months Nine Months Nine Months December December December December 31, 2014 31, 2013 31, 2014 31, 2013 Adjusted EBITDA less Capital Expenditures $ 54.2 $ 91.9 $ 310.4 $ 397.0 Additions to property, equipment and capitalized software for internal use 15.7 15.2 61.3 45.5 Post-Plate Adjusted EBITDA $ 69.9 $ 107.1 $ 371.7 $ 442.5 Additions to pre-publication costs 35.3 36.7 108.8 111.6 Adjusted EBITDA $ 105.2 $ 143.8 $ 480.5 $ 554.1 Less: Impact of fresh start accounting (1) (49.6) - (273.2) - Amortization of pre-publication costs (38.9) (39.0) (130.6) (147.2) Restructuring charges 0.7 (1.5) (0.3) (4.8) Depreciation (22.3) (17.4) (65.9) (50.4) Impairment of goodwill - - - 185.4 Amortization of identifiable intangible assets (22.5) (40.4) (67.9) (121.3) Other income, net - 3.1 (0.9) 5.0 Mark-to-market of derivative instruments - - - 12.6 Interest expense, net (33.5) 0.2 (97.5) (178.6) Benefit from income taxes 21.5 2.8 52.3 7.7 Equity losses of affiliates, net of taxes - (0.4) - (1.7) Reorganization items, net - (82.1) (0.5) (132.7) Net (loss) income $ (39.4) $ (30.9) $ (104.0) $ 128.1 (1) The add-back of the impact of fresh start accounting includes the flow-through of the inventory step-up of $45.8 million and $242.3 million and reduction in deferred revenue of $3.7 million and $30.8 million for the three and nine months ended December 31, 2014, respectively. New Accounting Standards and Accounting Changes See Note 1 Basis of Presentation to our Financial Statements for a description of new accounting standards and accounting changes. - 30 -

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At December 31, 2014, we had $2,036.1 million in outstanding variable rate debt at face value. Financial instruments, including interest rate swap agreements, have historically been used to manage interest rate exposures on our variable rate debt; however, as of December 31, 2014 and March 31, 2014, we have no interest rate swaps outstanding. See Note 15 Financial Instruments in our 2014 Transition Report for a detailed description of derivative instruments we entered into to hedge the variable interest rate component of certain of our Predecessor indebtedness. The current effective interest rate for our variable rate borrowing arrangements is based on a contractual minimum base interest rate, or floor, of 1.0% plus the applicable margin that currently exceeds the applicable market rate, plus the applicable margin. Accordingly, our variable rate debt is only sensitive to future increases in the applicable interest rate once it exceeds this contractual floor. - 31 -

LEGAL PROCEEDINGS From time to time we may become involved in various claims, disputes and legal or regulatory proceedings that arise in the ordinary course of business and/or may be related to contractual or other obligations of ours. We assess our potential contingent and other liabilities by analyzing our claims, disputes and legal and regulatory matters using available information. We also develop our views on estimated losses, if any, in consultation with our legal and other advisors. We determine whether a loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. If the contingency is not probable or cannot be reasonably estimated, disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss may have been incurred by us. Adverse developments relating to claims, disputes and legal and regulatory proceedings in which we are or become involved could cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual. Should any of these matters result in a final adverse judgment, settlement or other final resolution involving material amounts, it could have a material adverse effect on our financial condition, results of operations and/or cash flows. Based on a review of the information available at this time, we do not expect that the total cost of resolving current claims, disputes and legal regulatory proceedings will have a material adverse effect on our consolidated financial condition, results of operations or cash flows. For additional information, see Note 15, Commitments and Contingencies. - 32 -

Computation of Ratio of Earnings to Fixed Charges Successor Predecessor (in millions, except for Ratio of earning to fixed charges) Nine Months December 31, 2014 Nine Months December 31, 2013 Fixed Charges Interest expense $ 97.8 $ 179.1 Portion of rental expense which represents interest factor (1) 7.1 7.2 Total fixed charges $ 104.9 $ 186.3 Earnings available for fixed charges (Loss) earnings (2) $ (156.3) $ 122.1 Add fixed charges (3) 104.9 186.3 Total (loss) earnings available for fixed charges $ (51.4) $ 308.4 Ratio of earnings to fixed charges (4) - 1.7 (1) The interest factor of rental expense is estimated to be one-third of total rental expense for the period. (2) (Loss) earnings were comprised of (loss) income before taxes and equity losses of affiliates. (Loss) earnings for the nine months ended December 31, 2014 included the impact of fresh start accounting of approximately $230.7 million. Earnings for the nine months ended December 31, 2013 included $185.4 million of income related to the adjustment of the interim goodwill impairment charge recorded in the nine months ended March 31, 2013. (3) Fixed charges included: interest expense, amortization of debt issuance costs and original issuance discount as well as the portion of rental expense that management believes is representative of the interest factor. (4) Our earnings in accordance with the SEC definition under Item 503 of Regulation S-K were inadequate to cover fixed charges for the nine months ended December 31, 2014 by $51.4 million. - 33 -