Wiley Reports First Quarter 2018 Results

  Wiley Reports First Quarter 2018 Results

Business Wire

HOBOKEN, N.J. -- September 7, 2017

John Wiley & Sons, Inc. (NYSE:JWA)(NYSE:JWB), a global research and learning
company, today announced results for the first quarter ending July 31, 2017.

HIGHLIGHTS

  * Revenue increased 2% to $411 million; +1% at constant currency
  * Adjusted EPS increased 9% to $0.59 per share; -5% at constant currency
  * Operational excellence initiatives resulted in $29 million of
    restructuring and related charges, expected to yield $45 million in gross
    run-rate savings beginning in fiscal 2019
  * Free Cash Flow less Product Development spending improved by $48 million
  * Quarterly dividend increased for 24^th consecutive year to $0.32 per share

FINANCIAL SUMMARY

Unaudited ($millions except for EPS)
                                                                      Change
GAAP Measures              Q1 2018        Q1 2017        Change      
                                                                      Constant
                                                                      Currency
Revenue                    $411.4         $404.3         2%           1%
Operating Income           $14.5          $43.8          -67%
Diluted EPS                $0.16          $0.53          -70%
Cash from Operations       ($81.8)        ($136.7)       40%           
                                                                      Change
Non-GAAP Measures          Q1 2018        Q1 2017        Change      
                                                                      Constant
                                                                      Currency
Adjusted Operating         $43.8          $42.9          2%           -13%
Income
Adjusted EPS               $0.59          $0.54          9%           -5%
Free Cash Flow less
Product                    ($117.8)       ($165.5)       29%
Development Spending

  * Revenue increase was largely driven by the contribution from the Atypon
    acquisition, as print book declines in Publishing were offset by increases
    in Research and Solutions.
  * Adjusted Operating Income decline at constant currency was mainly due to
    $6 million in one-time credits in the prior year related to employee
    benefit plans. Cost of Sales and Operating and Administrative Costs were
    up 1% and 3% at constant currency, respectively. GAAP Operating Income
    additionally reflected $29.3 million in restructuring and related charges.
  * Adjusted EPS decline at constant currency was due to lower adjusted
    operating income. GAAP EPS also reflected restructuring and related
    charges as well as foreign exchange losses on intercompany transactions.
  * Free Cash Flow less Product Development Spending improvement was mainly
    due to the timing of cash collections and payments as anticipated in the
    fourth quarter 2017 report. Free cash flow is seasonally negative in the
    first half of Wiley’s fiscal year principally due to the timing of
    collections for journal subscriptions.
  * Return to Shareholders: During the quarter, Wiley repurchased 265,158
    shares for $14 million at an average cost of $52.86. Approximately 3.5
    million shares remain in the repurchase program. In June, Wiley increased
    its quarterly dividend by 3% to $0.32 per share, marking the 24th
    consecutive annual increase and raising the annualized dividend payout to
    $1.28 per share.

MANAGEMENT COMMENTARY

“We continue to make important progress in shifting our strategic focus to the
delivery of enhanced digital products and services for researchers, educators,
professionals, and higher education students around the globe,” said Matthew
Kissner, Interim CEO and Chairman. “We are realigning our cost base,
reallocating resources, reinvesting in specific growth areas, and focusing on
culture, productivity, and customer engagement – all of which should benefit
us in fiscal 2019 and beyond.”

FISCAL YEAR 2018 OUTLOOK
The Company reaffirms its fiscal 2018 guidance.
 
                                                  FY18 Expectation
Metric ($M)                     FY17 Actual      
                                                  (at constant currency)
Revenue                         $1,718.5          Approximately even
Adjusted Operating Income       $228.4            Approximately even
Adjusted EPS                    $3.01             Low-single digit % decline
Cash from Operations            $314.5            $350 million or higher
Capex                           $148.3            Slightly lower

Financial Tables: Please see accompanying tables for additional details on
financial performance. Please note that certain labels in the tables have
changed, including Author-Funded Access (now Open Access), Platform Services
(now Publishing Technology Services), Online Program Management (now Education
Services), and Unallocated Shared Services Costs (now Corporate Expenses).

Adjusted Results: The Company provides financial measures referred to as
“adjusted,” which  exclude unusual charges and credits as more fully described
in the attached financial schedules. For the first quarter ended July 31, the
Company excluded foreign exchange gains and losses on intercompany
transactions in deriving adjusted earnings in the current and prior year
periods. This change will also be reflected in subsequent periods. The Company
believes these gains and losses, which result from transactions associated
with tax planning efforts, do not reflect its underlying performance.

Foreign Exchange: Foreign exchange was beneficial to first quarter revenue and
EPS by $2.8 million and $0.07, respectively. If current rates hold, Wiley
expects to record a positive FY18 FX variance due to functional currency gains
related to calendar year 2017 journal subscriptions in the UK. Variances are
on a constant currency basis unless otherwise noted.

RESEARCH SEGMENT (SCIENTIFIC, TECHNICAL, MEDICAL, SCHOLARLY JOURNALS AND
SERVICES)

  * Revenue: $223.6 million (+8% GAAP; +6% constant currency). Growth was
    driven primarily by the contribution from the Atypon acquisition (+$8
    million, acquired October 2016) and higher Open Access revenues (+20%).
  * Adjusted Contribution to Profit: $66.3 million (0% constant currency).
    Performance reflected higher revenues offset primarily by Atypon expenses
    and higher royalty costs. GAAP Contribution to Profit: $61.5 million (2%)
    included restructuring charges of $4.8 million in the current year.
  * Calendar Year 2017 Journal Subscriptions: As of the end of July, calendar
    year 2017 Journal Subscriptions were up 0.3% on a constant currency basis
    with 98% of expected business contracted.
  * Society Publishing Partnerships: Nine new society contracts were signed in
    the quarter with combined annual revenue of $6.6 million; nineteen were
    renewed with combined annual revenue of $11.6 million; four were not
    renewed totaling $0.9M.

PUBLISHING SEGMENT (BOOKS, COURSEWARE, TEST PREPARATION)

  * Revenue: $131.3 million (-9% GAAP; -8% constant currency). Strong growth
    in Test Preparation and Certification (+20%) and Course Workflow (+40%)
    were not enough to offset market-driven declines and erosion of demand for
    print products in Education Publishing (-16% overall) and STM and
    Professional Publishing (-8% overall).
  * Adjusted Contribution to Profit: $15.9 million (-18% constant currency).
    Performance reflects lower revenues and the timing of development and
    licensing costs. GAAP Contribution to Profit of $5.0 million (-74%)
    included restructuring charges of $10.9 million in the current year.

SOLUTIONS SEGMENT (EDUCATION SERVICES, CORPORATE LEARNING, PROFESSIONAL
ASSESSMENT)

  * Revenue: $56.5 million (+9% GAAP and constant currency). Growth in
    Education Services (+14%) and Assessment (+10%) offset a 1% decline in
    Corporate Learning.
  * Adjusted Contribution to Profit: Increased to $0.8 million from $0.1
    million in the prior year. Improvement driven by revenue growth and
    increased operating efficiency. GAAP Contribution to Profit: -$2.0 million
    including restructuring charges of $2.8 million.
  * Education Services (formerly Online Program Management): In the quarter,
    Wiley signed one new partner (Winthrop University) and six new programs.
    One partner and five programs were retired. As of July 31, Wiley had 39
    university partners and 251 programs under contract.

EARNINGS CONFERENCE CALL

Scheduled for today, September 7 at 10:00 a.m. (ET). Access the webcast at
www.wiley.com> Investor Relations> Events and Presentations, or
http://www.wiley.com/WileyCDA/Section/id-370238.html. U.S. callers, please
dial 866-564-2842 and enter the participant code 2784819#. International
callers, please dial (323) 794-2130 and enter the participant code 2784819#.

ABOUT WILEY

Wiley is a global research and learning company. Through the Research segment,
the Company provides scientific, technical, medical, and scholarly journals,
as well as related content and services, for academic, corporate, and
government libraries, learned societies, and individual researchers and other
professionals. The Publishing segment provides scientific (STM), professional
development, and education books and related content, as well as test
preparation services and course workflow tools, to libraries, corporations,
students, professionals, and researchers. In Solutions, Wiley provides online
program management services for higher education institutions, and learning,
development, and assessment services for businesses and professionals.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the
Company's operations, performance, and financial condition. Reliance should
not be placed on forward-looking statements, as actual results may differ
materially from those in any forward-looking statements. Any such
forward-looking statements are based upon a number of assumptions and
estimates that are inherently subject to uncertainties and contingencies, many
of which are beyond the control of the Company, and are subject to change
based on many important factors. Such factors include, but are not limited to
(i) the level of investment in new technologies and products; (ii) subscriber
renewal rates for the Company's journals; (iii) the financial stability and
liquidity of journal subscription agents; (iv) the consolidation of book
wholesalers and retail accounts; (v) the market position and financial
stability of key online retailers; (vi) the seasonal nature of the Company's
educational business and the impact of the used book market; (vii) worldwide
economic and political conditions; (viii) the Company's ability to protect its
copyrights and other intellectual property worldwide (ix) the ability of the
Company to successfully integrate acquired operations and realize expected
opportunities and (x) other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise any such forward-looking
statements to reflect subsequent events or circumstances.

JOHN WILEY & SONS, INC.
UNAUDITED SUMMARY OF OPERATIONS
FOR THE FIRST QUARTER ENDED
JULY 31, 2017 AND 2016
(in thousands, except per share amounts)
 
FIRST QUARTER ENDED JULY 31,
 
                     2017                                    2016                                    % Change
                     US GAAP     Adjustments   Adjusted      US GAAP     Adjustments   Adjusted      US       Adjusted
                                                                                                     GAAP     excl. FX
                                                                                      
Revenue            $ 411,444     -             411,444       404,285     -             404,285       2    %   1     %
                                                                                                               
Costs and
Expenses
Cost of Sales        114,788     -             114,788       113,478     -             113,478       1    %   1     %
Operating and
Administrative       243,808     (3,600   )    240,208       235,340                   235,340       4    %   3     %
(A)
Restructuring
(Credits)            25,729      (25,729  )    -             (920    )   920           -
Charges (A)
Amortization         12,619      -             12,619        12,573      -             12,573        0    %   3     %
of Intangibles
                                                                                                               
Total Costs          396,944     (29,329  )    367,615       360,471     920           361,391       10   %   3     %
and Expenses
                                                                                                               
Operating            14,500      29,329        43,829        43,814      (920     )    42,894        -67  %   -13   %
Income
Operating            3.5     %                 10.7    %     10.8    %                 10.6    %
Margin
                                                                                                               
Interest             (3,273  )   -             (3,273  )     (4,071  )   -             (4,071  )     -20  %   -20   %
Expense
Foreign
Exchange             (5,136  )   6,017         881           221         1,329         1,550
(Loss) Gain
(B)
Interest
Income and           5           -             5             377         -             377           -99  %   -99   %
Other
                                                                                                               
Income Before        6,096       35,346        41,442        40,341      409           40,750        -85  %   -12   %
Taxes
                                                                                                               
(Benefit)
Provision for        (3,140  )   10,627        7,487         9,327       (65      )    9,262         -134 %   -33   %
Income Taxes
(A,B)
                                                                                                               
Net Income         $ 9,236       24,719        33,955        31,014      474           31,488        -70  %   -6    %
                                                                                                               
                                                                                                               
Earnings Per
Share- Diluted     $ 0.16        0.43          0.59          0.53        0.01          0.54          -70  %   -5    %
(A)
                                                                                                               
Average Shares       57,709      57,709        57,709        58,176      58,176        58,176
- Diluted

(A,B) See the accompanying Notes to Unaudited Financial Statements for a
description of each adjustment.
 

 
JOHN WILEY & SONS, INC.
FOR THE FIRST QUARTER ENDED
JULY 31, 2017 AND 2016
 
RECONCILIATION OF US GAAP TO ADJUSTED EPS - DILUTED (UNAUDITED)
 
                                                      First Quarter Ended
                                                      July 31,
                                                      2017       2016
                                                                    
US GAAP Earnings Per Share - Diluted                  $ 0.16     $ 0.53
Adjusted to exclude the following:
Restructuring and Related Charges (Credits) (A)         0.35       (0.01)
FX Losses on Intercompany Transactions (B)              0.08       0.02
Adjusted Earnings Per Share - Diluted                 $ 0.59     $ 0.54
 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Adjustments:
      Adjusted results for the three months ended July 31, 2017 and 2016
      exclude restructuring and related charges (credits) associated with the
A     Company's Restructuring and Reinvestment Program of $29.3 million, or
      $0.35 per share, and $(0.9) million, or $(0.01) per share, respectively.
      The first quarter of fiscal year 2017 credit reflects the true-up of
      facility lease reserves.
      Adjusted results exclude foreign exchange gains and losses associated
B     with intercompany transactions. For the three months ended July 31, 2017
      and 2016, there were losses of $6.0 million, or $0.08 per share, and
      $1.3 million, or $0.02 per share, respectively.
 

Non-GAAP Financial Measures:
In addition to providing financial results in accordance with GAAP, the
Company has provided adjusted financial results that exclude the impact of
other nonrecurring items described in more detail throughout this press
release. These non-GAAP financial measures are labeled as "Adjusted" and are
used for evaluating the results of operations for internal purposes. These
non-GAAP measures are not intended to replace the presentation of financial
results in accordance with GAAP. Rather, the Company believes the exclusion of
such items provides additional information to investors to facilitate the
comparison of past and present operations. Unless otherwise noted, adjusted
amounts in the attached schedules include foreign exchange.
 

 
JOHN WILEY & SONS, INC.
UNAUDITED SEGMENT RESULTS
FOR THE FIRST QUARTER ENDED
JULY 31, 2017 AND 2016
(in thousands)
 
FIRST QUARTER ENDED JULY 31,
 
                    2017                                    2016                                    % Change       
                    US GAAP     Adjustments   Adjusted      US GAAP     Adjustments   Adjusted      US      Adjusted
                                (A)                                     (A)                         GAAP    excl. FX
Research                                                                                                   
Revenue
Journal           $ 168,325     -             168,325       162,684     -             162,684       3   %   0     %
Subscriptions
Open Access         8,803       -             8,803         7,513       -             7,513         17  %   20    %
Licensing,
Reprints,           38,230      -             38,230        37,026      -             37,026        3   %   6     %
Backfiles and
Other
Total Journal       215,358     -             215,358       207,223     -             207,223       4   %   2     %
Revenue
Publishing
Technology          8,269       -             8,269         -           -             -        
Services
(Atypon)
Total
Research            223,627     -             223,627       207,223     -             207,223       8   %   6     %
Revenue
Contribution        61,461      4,836         66,297        60,435      (69      )    60,366        2   %   0     %
to Profit
 
Publishing
Revenue
STM and
Professional      $ 63,600      -             63,600        70,697      -             70,697        -10 %   -8    %
Publishing
Education           45,736      -             45,736        54,861      -             54,861        -17 %   -16   %
Publishing
Course
Workflow            1,210       -             1,210         866         -             866           40  %   40    %
(WileyPLUS)
Test
Preparation         11,490      -             11,490        9,558       -             9,558         20  %   20    %
and
Certification
Licensing,
Distribution,       9,242       -             9,242         8,980       -             8,980         3   %   4     %
Advertising
and Other
Total
Publishing          131,278     -             131,278       144,962     -             144,962       -9  %   -8    %
Revenue
Contribution        5,009       10,854        15,863        19,320      353           19,673        -74 %   -18   %
to Profit
 
Solutions
Revenue
Education
Services
(Online           $ 26,337      -             26,337        23,172      -             23,172        14  %   14    %
Program
Management)
Professional        14,887      -             14,887        13,522      -             13,522        10  %   10    %
Assessment
Corporate           15,315                    15,315        15,406      -             15,406        -1  %   -1    %
Learning
Total
Solutions           56,539      -             56,539        52,100      -             52,100        9   %   9     %
Revenue
Contribution        (1,968  )   2,795         827           146         -             146           N/M     N/M
to Profit
                                                                                                             
                                                                                                             
Corporate           (50,002 )   10,844        (39,158 )     (36,087 )   (1,204   )    (37,291 )     39  %   6     %
Expenses
                                                                                       
Operating         $ 14,500      29,329        43,829        43,814      (920     )    42,894        -67 %   -13   %
Income

(A) See the accompanying Notes to Unaudited Financial Statements for a
description of the adjustment.
N/M- Not Meaningful
 

 
JOHN WILEY & SONS, INC.
UNAUDITED CONDENSED STATEMENTS OF FINANCIAL POSITION
(in thousands)
 
                                         July 31,                    April 30,
                                         2017          2016          2017
                                                                      
Current Assets
Cash and cash equivalents              $ 84,113        185,894       58,516
Accounts receivable                      198,576       213,968       188,679
Inventories                              47,892        54,822        47,852
Prepaid and other                        66,177        119,392       64,688
Total Current Assets                     396,758       574,076       359,735
Product Development Assets               68,773        39,239        70,955
Royalty Advances                         21,578        24,883        28,320
Technology, Property and                 265,291       214,740       252,488
Equipment
Intangible Assets                        833,676       831,249       828,099
Goodwill                                 996,000       916,690       982,101
Income Tax Deposits                      -             62,200        -
Other Assets                             85,028        80,185        84,519
Total Assets                             2,667,104     2,743,262     2,606,217
 
Current Liabilities
Accounts and royalties payable           141,034       138,397       139,206
Deferred revenue                         334,625       321,616       436,235
Accrued employment costs                 81,245        55,241        98,185
Accrued income taxes                     24,605        3,368         22,222
Accrued pension liability                5,820         5,467         5,776
Other accrued liabilities                83,509        69,042        86,232
Total Current Liabilities                670,838       593,131       787,856
Long-Term Debt                           551,645       653,000       365,000
Accrued Pension Liability                212,843       206,814       214,597
Deferred Income Tax Liabilities          150,425       191,388       160,491
Other Long-Term Liabilities              72,135        82,521        75,136
Shareholders' Equity                     1,009,218     1,016,408     1,003,137
Total Liabilities &                    $ 2,667,104     2,743,262     2,606,217
Shareholders' Equity
 

 
JOHN WILEY & SONS, INC.
UNAUDITED CONDENSED STATEMENTS OF FREE CASH FLOW
(in thousands)
 
                                                     Three Months Ended
                                                     July 31,
                                                     2017           2016
Operating Activities:
Net income                                         $ 9,236          31,014
Amortization of intangibles                          12,619         12,573
Amortization of product development spending         9,644          9,731
Depreciation of technology, property and             18,540         17,125
equipment
Non-cash charges and credits                         32,045         20,231
Net change in operating assets and liabilities       (163,915 )     (227,386 )
Cash Used for Operating Activities                   (81,831  )     (136,712 )
                                                                     
Investments in organic growth:
Additions to technology, property and                (30,111  )     (20,778  )
equipment
Product development spending                         (5,907   )     (7,989   )
Free Cash Flow less Product Development              (117,849 )     (165,479 )
Spending
                                                                     
Other Investing and Financing Activities:
Acquisitions, net of cash                            (4,413   )     (8,600   )
Net debt borrowings                                  185,964        47,993
Change in book overdrafts                            (13,977  )     (12,261  )
Cash dividends                                       (18,382  )     (17,914  )
Purchase of treasury shares                          (14,016  )     (11,289  )
Proceeds from exercise of stock options and          5,599          13,689    
other
Cash Provided by Investing and Financing             140,775        11,618
Activities
                                                                     
Effects of Exchange Rate Changes on Cash             2,671          (24,051  )
                                                                     
Increase (Decrease) in Cash and Cash               $ 25,597         (177,912 )
Equivalents for Period
 
 
RECONCILIATION TO GAAP PRESENTATION
 
Investing Activities:
Product development spending                       $ (5,907   )     (7,989   )
Additions to technology, property and                (30,111  )     (20,778  )
equipment
Acquisitions, net of cash                            (4,413   )     (8,600   )
Cash Used for Investing Activities                 $ (40,431  )     (37,367  )
                                                                     
Financing Activities:
Cash Provided by Investing and Financing           $ 140,775        11,618
Activities
Excluding:
Acquisitions, net of cash                            (4,413   )     (8,600   )
Cash Provided by Financing Activities              $ 145,188        20,218    
 

Free Cash Flow less Product Development Spending:
 
The Company provides financial measures referred to as “Free Cash Flow less
Product Development Spending.” Free Cash Flow less Product Development
Spending is defined as “cash flow from operating activities, less book
composition and other product development and capital spending.” Management
believes this metric provides additional information to investors to
facilitate the comparison of past and present results. This metric is also
used internally by management in evaluating results. This non-GAAP measure is
not intended to replace the financial results reported in accordance with US
Generally Accepted Accounting Principles.

View source version on businesswire.com:
http://www.businesswire.com/news/home/20170907005785/en/

Contact:

John Wiley & Sons, Inc.
Investor Relations
Brian Campbell, 201-748-6874
brian.campbell@wiley.com
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