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 firstname.lastname@example.org
Wiley Reports First Quarter 2018 Results
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