Wiley Reports Fourth Quarter and Fiscal Year 2019 Results

Posted by Business Wire June 11, 2019

HOBOKEN, N.J.–(BUSINESS WIRE)–John Wiley & Sons, Inc. (NYSE:JWA)(NYSE:JWB), a global research and
education company, today announced results for the fourth quarter and
fiscal year ended April 30, 2019.

FOURTH QUARTER 2019 HIGHLIGHTS

  • GAAP results: Revenue of $491 million (+3%), Operating Income of $80
    million (+10%), and EPS of $1.10 (+19%)
  • Adjusted results excluding FX: Revenue +7%, Operating Income +14%, and
    EPS +19%
  • Adjusted results excluding FX and impact from Learning House
    acquisition: Revenue +3%, Operating Income +17%, and EPS +26%
  • Acquisition of Knewton on May 31 boosts competitive position in
    adaptive learning and affordable content

FISCAL YEAR 2019 HIGHLIGHTS

  • GAAP results: Revenue of $1.8 billion (+0.2%), Operating Income of
    $224 million (-3%), and EPS of $2.91 (-12%)
  • Adjusted results excluding FX: Revenue +2%, Operating Income -9%, and
    EPS -8%
  • Adjusted results excluding FX and impact from Learning House
    acquisition: Revenue +0.4%, Operating Income -6%, and EPS -4%
  • Acquisition of Learning House strengthens Wiley’s leadership position
    in the rapidly-growing education services market for universities and
    corporations
  • The Company’s transformation to digital continues with digital
    products and tech-enabled services now accounting for 75% of total
    revenue

MANAGEMENT COMMENTARY

“We are pleased with the momentum that we’re seeing across the Company,”
said Brian Napack, President and CEO. “We achieved our targets for
revenue and earnings and are seeing good growth in strategic areas such
as Research Open Access publishing, Education Services, Test Preparation
and Certification, and corporate training. We also made two important
acquisitions in education and began to see returns from our multi-year
business optimization program. We are executing well and are energized
by the results we are seeing from our strategic investments in the
important markets we serve – research and education.”

FINANCIAL SUMMARY

Wiley provides non-GAAP financial measures such as “Adjusted EPS,”
“Adjusted Operating Income,” “Adjusted EBITDA,” “Adjusted CTP,” “Free
Cash Flow less Product Development Spending,” and results on a constant
currency (“CC”) basis to assess underlying business performance and
trends. Management believes non-GAAP financial measures, which exclude
the impact of restructuring charges and credits and other items, provide
supplementary information to support analyzing operating results and
earnings. See the reconciliations of non-GAAP financials and
explanations of the uses of non-GAAP measures in the supplementary
information accompanying this press release.

Fourth Quarter Results

GAAP Measures

Unaudited ($millions except for EPS)

    Q4 2019   Q4 2018   Change
Revenue     $491.2   $477.3   3%
Operating Income $80.0 $72.7 10%
Diluted EPS     $1.10   $0.93   19%
Non-GAAP Measures     Q4 2019   Q4 2018   Change

CC

  Change

CC/ex-acquisitions

Revenue $491.2 $477.3 7%   3%
Adjusted Operating Income $79.6 $74.7 14% 17%
Adjusted EPS     $1.05   $0.94   19%   26%

The above includes the fourth quarter impact of the Learning House
acquisition: +$18 million in revenue, -$2.8 million in operating income,
and – $0.06 in EPS. Wiley recorded unfavorable foreign currency
variances in the quarter of approximately $17 million in revenue, $5
million in operating income, and $0.07 in EPS.

  • Revenue reflected growth in Research (0% reported, 4% CC) and
    Solutions (30% reported, 32% CC), partially offset by a decline in
    Publishing (-3% reported, -1% CC). Excluding Learning House, total
    revenue rose 3% on a constant currency basis.

    • Research (flat reported, +4% CC) was driven by Journal
      Subscriptions (0% reported, +5% CC) and Open Access (+13%
      reported, +19% CC).
    • Publishing (-3% reported, -1% CC) saw strong growth in Test
      Preparation and Certification (+35% reported, +37% CC) offset by
      declines in Education Publishing (-15% reported, -12% CC) and STM
      and Professional Publishing (-5% reported, -2% CC). Course
      Workflow/WileyPLUS rose 4%, or 5% at constant currency.
    • Solutions grew 30% on reported basis, or 32% at constant
      currency (excluding Learning House, Solutions rose 3%, or 5% CC).
      Growth in Education Services and Professional Assessment offset
      declines in Corporate Learning.
  • GAAP Operating Income and Adjusted Operating Income
    growth mainly reflected increased revenues, and lower operating and
    administrative expenses.

    • Research CTP was essentially flat on a reported basis but
      grew 6% on an adjusted basis at constant currency, reflecting
      higher revenue at constant currency.
    • Publishing CTP rose 17% on a reported basis and 23%
      adjusted at constant currency mainly due to lower employment costs.
    • Solutions CTP declined 22% or 25% adjusted at constant
      currency due to the impact of the Learning House acquisition (-$3
      million in non-cash amortization expense) and increased marketing
      costs to drive future enrollment growth.
    • Corporate Expenses declined 11%, or 5% adjusted at constant
      currency, primarily due to lower employment costs.
  • GAAP EPS and Adjusted EPS reflected higher operating
    income.

Full Year Results

GAAP Measures

Unaudited ($millions except for EPS)

    FY 2019   FY 2018   Change
Revenue     $1,800.1   $1,796.1   0%
Operating Income $224.0 $231.5 (3%)
Diluted EPS $2.91 $3.32 (12%)
Cash Provided by Operating Activities     $250.8   $382.3   (34%)
Non-GAAP Measures     FY 2019   FY 2018       Change

CC

  Change

CC/ ex-acquisitions

Revenue $1,800.1 $1,796.1   2%   0%
Adjusted Operating Income $227.1 $263.6 (9%) (6%)
Adjusted EPS $2.96 $3.43 (8%) (4%)
Free Cash Flow less Product Development Spending     $149.2   $231.6   (36%)        

The above includes the half year impact of the Learning House
acquisition: +$32 million in revenue, -$8 million in operating income,
and -$0.15 in EPS. Wiley recorded unfavorable foreign currency
variances in the year of approximately $35 million in revenue, $13
million in operating income, and $0.18 in EPS.

  • Revenue reflected growth in Research (0% reported, +3% CC) and
    Solutions (+18% reported, +19% CC) offset by a decline in Publishing
    (-7% reported, -6% CC).

    • Research segment results were driven by
      growth in Open Access (+30% reported, +33% CC) and Atypon (+9%
      reported and CC). Journal Subscriptions declined 2% on a reported
      basis but were flat at constant currency.
    • Publishing segment performance primarily reflected declines
      in STM and Professional Publishing (-8% reported, -6% CC) and
      Education Publishing (-16% reported, -14% CC). Education
      Publishing now represents less than 9% of total Wiley revenue.
      These book revenue declines were partially offset by strong growth
      in Test Preparation and Certification (+14% reported, +15% CC) and
      higher revenue in WileyPLUS due largely to timing of revenue
      recognition changes (+7%).
    • Solutions segment growth included higher revenue in all
      three businesses: Education Services (+32%, or +6% excluding
      Learning House), Corporate Learning (+2% reported, +6% CC), and
      Professional Assessment (+8%).
  • GAAP Operating Income and Adjusted Operating Income
    decline mainly reflected revenue performance.

    • Research CTP declined 5% on a reported basis and 1% on an
      adjusted basis at constant currency. Performance reflected higher
      society publishing royalties and investments in editorial
      resources to support increased journal publishing, as well as
      higher investment in sales and marketing resources.
    • Publishing CTP declined 2% on a reported basis and 8%
      adjusted at constant currency, reflecting revenue performance.
    • Solutions CTP declined 32% on a reported basis and 39%
      adjusted at constant currency due to dilution from the Learning
      House acquisition (-$8 million, including $5 million of acquired
      intangibles amortization) and investment to drive future
      enrollment growth in Education Services.
    • Corporate Expenses decreased 8% on a reported basis due to
      lower restructuring charges and decreased 1% on an adjusted basis
      at constant currency.
  • GAAP EPS largely reflected lower reported operating income in
    the current year and the initial benefit in the prior year from the US
    Tax Cuts and Jobs Act, partially offset by lower restructuring charges
    and foreign exchange losses in the year. Adjusted EPS declined
    primarily due to lower adjusted operating income.
  • Net Cash Provided by Operating Activities declined by $131
    million primarily due to lower earnings, including Learning House
    (-$24 million), timing-related changes in working capital performance,
    including unfavorable cash collections (-$57 million) and payables
    (-$26 million). Also contributing to lower cash provided by operations
    was, Learning House one-time closing costs (-$10 million), a
    tax-advantaged contribution to the US pension plan (-$10 million) and
    other working capital changes of (-$4 million). Approximately $35
    million of cash collections for 2019 journal subscriptions collections
    was delayed into fiscal 2020.
  • Free Cash Flow less Product Development Spending performance
    declined due to lower cash provided by operating activities, which was
    partially offset by reduced capital expenditures. Capital investment,
    which includes Technology, Property, and Equipment, and Product
    Development Spending, declined $49 million to $102 million due to the
    completion of Wiley’s headquarters transformation, the May 2018
    implementation of our ERP order-to-cash release for journal
    subscriptions and reporting changes related to the adoption of ASC 606.
  • Financing Activities: On May 30, 2019, Wiley entered into
    a credit agreement that amended and restated the existing agreement.
    The credit agreement provides for senior unsecured credit facilities
    comprised of a (i) five-year revolving credit facility in an aggregate
    principal amount up to $1.25 billion, and (ii) a five-year term loan A
    facility consisting of $250 million.
  • Shareholder Return: In fiscal 2019, Wiley raised its annual
    dividend for the 25th consecutive year to $0.33 per quarter
    (+3%). For the year, the Company utilized approximately $76 million of
    cash for dividends and $60 million for share repurchases with an
    average per share cost of $50.35, including $25 million for share
    repurchases in the fourth quarter at an average per share cost of
    $44.83

FISCAL YEAR 2020 OUTLOOK

Going forward, Wiley will be aligning its reporting with its strategic
focus areas – (1) Research Publishing and Platforms, which is
identical to the current “Research” business; (2) Education and
Professional Publishing, which consists of the current “Publishing”
segment plus Corporate Learning and Professional Assessment
sub-segments; and (3) Education Services, which is identical to
our current “Education Services” sub-segment and consists of online
program management (OPM) and other rapidly-growing services businesses.

     

Item

 

FY19 Actual

 

FY20 Outlook

 

FY22 Target

Revenue   $1.80B   $1.84B-$1.87B   ~$2.0B
Research Publishing & Platforms   $937M   $950-$960M   ~$990M
Education & Professional Publishing   $705M   $690-$700M   ~$720M
Education Services   $158M   $200-$210M   ~$290M
Adjusted EBITDA   $388M   $360-$375M   ~$440M
Adjusted EPS   $2.96   $2.45-$2.55   ~$3.50
Free Cash Flow   $149M   $210-$230M   ~$250M
 
  • FY20 Adjusted EPS is expected to decline primarily due to non-cash
    amortization expense related to acquisitions and increased investment
    to grow and optimize Research and Education Services
  • Forward-looking metrics include impact from Learning House and
    Knewton acquisitions
  • FY20 numbers exclude Q1 2020 restructuring charge of
    approximately $15-20M
  • FY20 Outlook and FY22 Target reflect FY19 average exchange rates

EARNINGS CONFERENCE CALL

  • Scheduled for today, June 11 at 10:00 a.m. (ET). Access the webcast at
    wiley.com>Investor Relations> Events and Presentations, or https://www.wiley.com/en-us/investors.
    U.S. and Canada callers, please dial 888-254-3590 and enter the
    participant code 3028324#. International callers, please dial +1
    856-344-9316 and enter the participant code 3028324#.

ABOUT WILEY

Wiley drives the world forward with research and education. Our
scientific, technical, medical, and scholarly journals and our digital
learning, certification, and student-lifecycle services and solutions
help students, researchers, universities, corporations to achieve their
goals in an ever-changing world. For more than 200 years, we have
delivered consistent performance to all of our stakeholders. The
Company’s website can be accessed at www.wiley.com.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the
Company’s Fiscal Year 2020 Outlook, Fiscal Year 2022 Target, operations,
performance, 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.
SUPPLEMENTARY INFORMATION (1)(2)(3)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
       
Three Months Ended Year Ended
April 30, April 30,
2019 2018 (4)(5) 2019 2018 (4)(5)
Revenue, net $ 491,179 $ 477,253 $ 1,800,069 $ 1,796,103
Costs and expenses:
Cost of sales (5) 150,528 136,579 554,722 531,024
Operating and administrative expenses (4)(5) 246,234 253,665 963,582 956,822
Restructuring and related (credits) charges (444) 2,035 3,118 28,566
Amortization of intangibles   14,833   12,265   54,658   48,230
Total Costs and Expenses   411,151   404,544   1,576,080   1,564,642
 
Operating Income 80,028 72,709 223,989 231,461
As a % of revenue 16.3% 15.2% 12.4% 12.9%
 
Interest expense (4,371) (3,251) (16,121) (13,274)
Foreign exchange transaction losses (1,708) (1,235) (6,016) (12,819)
Interest and other income (4)   3,383   1,869   11,100   8,563
Income Before Taxes 77,332 70,092 212,952 213,931
 
Provision for income taxes 14,090 16,032 44,689 21,745
Effective tax rate   18.2%   22.9%   21.0%   10.2%
Net Income $ 63,242 $ 54,060 $ 168,263 $ 192,186
As a % of revenue 12.9% 11.3% 9.3% 10.7%
 
Weighted-Average Shares – Diluted 57,341 58,090 57,840 57,888
       
Earnings per share – Diluted $ 1.10 $ 0.93 $ 2.91 $ 3.32
(1) The supplementary information included in this press release for
the three months and year ended April 30, 2019 is preliminary and
subject to change prior to the filing of our upcoming Annual Report
on Form 10-K with the Securities and Exchange Commission. We
completed the acquisition of The Learning House on November 1, 2018
and, as a result, we have included the results of Learning House in
our consolidated financial results for fiscal year 2019 as of that
date. Learning House’s revenue and operating (loss) included in our
Solutions segment results for the three months ended April 30, 2019
was $18.1 million and $(2.8) million, respectively. Learning House’s
revenue and operating (loss) included in our Solutions segment
results for the year ended April 30, 2019 was $31.5 million and
$(8.0) million, respectively.
(2) All amounts are approximate due to rounding.
(3) On May 1, 2018, we adopted the U.S. accounting standard
regarding revenue recognition (“Topic 606,” or “ASC 606”). The
adoption of Topic 606 did not have a material impact to our
consolidated results of operations. Refer to our upcoming Annual
Report on Form 10-K for further details.
(4) Due to the retrospective adoption of ASU 2017-07, total net
benefits of $2.1 million and $8.1 million related to defined benefit
and other post-employment benefit plans were reclassified from
operating and administrative expenses to interest and other income
for the three months and year ended April 30, 2018, respectively.
Total net benefits were $2.1 million and $8.8 million for the three
months and year ended April 30, 2019, respectively.
(5) In connection with the acquisition of The Learning House on
November 1, 2018, we changed our accounting policy for certain
advertising and marketing costs related to the Education Services
business. Under the new accounting policy, these costs are included
in cost of sales whereas they were previously included in operating
and administrative expenses on the Condensed Consolidated Statements
of Income. The amount reclassified for the three months and year
ended April 30, 2018 was $11.1 million and $45.8 million,
respectively. This reclassification had no impact on revenue, net,
operating income, net income, or earnings per share.
       
JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF GAAP EPS to NON-GAAP ADJUSTED EPS – DILUTED
(unaudited)
 
Three Months Ended Year Ended
April 30, April 30,
2019 2018 2019 2018
GAAP Earnings Per Share – Diluted $ 1.10 $ 0.93 $ 2.91 $ 3.32
Adjustments:
Restructuring and related charges (A) – 0.02 0.04 0.39
Foreign exchange (gains) losses on intercompany transactions (B) – (0.01) 0.06 0.15
Impact of Tax Cuts and Jobs Act (C) – – – (0.43)
Impact of reduction in certain U.S. state tax rates in 2019 (D)   (0.05)   –   (0.05)   –
Non-GAAP Adjusted Earnings Per Share – Diluted $ 1.05 $ 0.94 $ 2.96 $ 3.43
 
Notes:                
(A) Adjusted results exclude restructuring and related (credits) charges
associated with our Restructuring and Reinvestment Program. For the
three months ended April 30, 2019 and 2018, there were credits of
$0.4 million, or no impact per share and charges of $2.0 million or
$0.02 per share, respectively. For the year ended April 30, 2019 and
2018, there were charges of $3.1 million or $0.04 per share, and
charges of $28.6 million or $0.39 per share, respectively.
(B) Adjusted results exclude foreign exchange (gains) and losses
associated with intercompany transactions. For the three months
ended April 30, 2019 and 2018, there were losses of $0.2 million or
no impact per share and gains of $0.9 million or $(0.01) per share,
respectively. For the year ended April 30, 2019 and 2018, there were
losses of $4.2 million or $0.06 per share, and losses of $10.7
million or $0.15 per share, respectively.
(C) In connection with the Tax Cuts and Jobs Act enacted on December 22,
2017, for the three months ended April 30, 2018, we recorded an
income tax provision of $0.1 million, or no impact per share. We did
not record an income tax provision for the three months ended April
30, 2019. For the year ended April 30, 2019 and 2018, we recorded an
income tax provision of $0.2 million, or no impact per share, and an
income tax provision of $25.1 million, or $(0.43) per share,
respectively.
(D) In connection with the reduction in certain U.S. state tax
apportionment factors in 2019, for the three months and year ended
April 30, 2019, we recorded an income tax benefit of $2.9 million,
or $(0.05) per share.
(1) See Explanation of Usage of Non-GAAP performance measures
included in this supplementary information for additional details on
the reasons why management believes presentation of each non-GAAP
performance measure provides useful information to investors. The
supplementary information included in this press release for the
three months and year ended April 30, 2019 is preliminary and
subject to change prior to the filing of our upcoming Annual Report
on Form 10-K with the Securities and Exchange Commission.
 
JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF GAAP NET INCOME to NON-GAAP EBITDA AND ADJUSTED
EBITDA
(unaudited)
 
 
Year Ended
April 30,
2019
Net Income $ 168,263
Interest expense 16,121
Provision for income taxes 44,689
Depreciation and amortization   161,155
Non-GAAP EBITDA 390,228
Restructuring and related (credits) charges 3,118
Foreign exchange transaction losses 6,016
Interest and other income   (11,100)
Non-GAAP Adjusted EBITDA

$

388,262

 
Notes:    
(1) See Explanation of Usage of Non-GAAP performance measures
included in this supplementary information for additional details on
the reasons why management believes presentation of each non-GAAP
performance measure provides useful information to investors. The
supplementary information included in this press release for the
three months and year ended April 30, 2019 is preliminary and
subject to change prior to the filing of our upcoming Annual Report
on Form 10-K with the Securities and Exchange Commission.
           
JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
SEGMENT RESULTS
(in thousands)
(unaudited)
   
Three Months Ended April 30, % Change
2019   2018 (2) Reported  

Constant
Currency

Research:
Revenue, net
Journal Subscriptions $ 179,055 $ 178,910 0% 5%
Open Access 15,754 13,939 13% 19%
Licensing, Reprints, Backfiles, and Other   53,578   57,212 -6% -2%
Total Journal Revenue 248,387 250,061 -1% 4%
Publishing Technology Services (Atypon)   8,936   8,348 7% 7%
Total Revenue, net $ 257,323 $ 258,409 0% 4%
 
Contribution to Profit (2) $ 82,310 $ 82,465 0% 6%
Adjustments:
Restructuring (credits) charges   (120)   119
Non-GAAP Adjusted Contribution to Profit $ 82,190 $ 82,584 0% 6%
 
Publishing:
Revenue, net
STM and Professional Publishing $ 68,154 $ 71,480 -5% -2%
Education Publishing 29,843 35,285 -15% -12%
Courseware (WileyPLUS) 21,343 20,549 4% 5%
Test Preparation and Certification 11,263 8,367 35% 37%
Licensing, Distribution, Advertising and Other   15,534   15,460 0% 3%
Total Revenue, net $ 146,137 $ 151,141 -3% -1%
 
Contribution to Profit (2) $ 32,020 $ 27,361 17% 21%
Adjustments:
Restructuring credits   (85)   (490)
Non-GAAP Adjusted Contribution to Profit $ 31,935 $ 26,871 19% 23%
 
Solutions:
Revenue, net
Education Services $ 52,305 $ 30,815 70% 70%
Professional Assessment 18,222 17,158 6% 6%
Corporate Learning   17,192   19,730 -13% -5%
Total Revenue, net $ 87,719 $ 67,703 30% 32%
 
Contribution to Profit $ 8,121 $ 10,355 -22% -23%
Adjustments:
Restructuring (credits) charges   (36)   248
Non-GAAP Adjusted Contribution to Profit $ 8,085 $ 10,603 -24% -25%
 
Corporate Expenses (2): $ (42,423) $ (47,472) -11% -9%
Adjustments:
Restructuring (credits) charges   (203)   2,158
Non-GAAP Adjusted Corporate Expenses $ (42,626) $ (45,314) -6% -5%
   
Total Consolidated Revenue, net $ 491,179 $ 477,253 3% 7%
 
Consolidated Operating Income (2) $ 80,028 $ 72,709 10% 17%
Adjustments:
Restructuring (credits) charges   (444)   2,035
Non-GAAP Adjusted Operating Income $ 79,584 $ 74,744 6% 14%
As a % of revenue 16.2% 15.7%
(1) The supplementary information included in this press release for
the three months ended April 30, 2019 is preliminary and subject to
change prior to the filing of our upcoming Annual Report on Form
10-K with the Securities and Exchange Commission.
(2) Due to the retrospective adoption of ASU 2017-07, total net
benefits of $2.1 million related to defined benefit and other
post-employment benefit plans were reclassified from operating and
administrative expenses to interest and other income for the three
months ended April 30, 2018. The impact of the reclassification on
contribution to profit by segment for the three months ended April
30, 2018 was $1.1 million in Research, $0.6 million in Publishing,
and $0.4 million in Corporate Expenses.

Contacts

Brian Campbell, Investor Relations
201.748.6874
[email protected]

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