Wiley Reports First Quarter Fiscal 2021 Results  

Sept. 3, 2020 12:00 UTC

HOBOKEN, N.J.--(BUSINESS WIRE)-- John Wiley & Sons, Inc. (NYSE: JW-A and JW-B), a global leader in research and education, today announced results for the first quarter ended July 31, 2020.

SUMMARY

  • GAAP Results: Revenue of $431 million (+2%) and EPS of $0.29 (+$0.23)
  • Adjusted Results (at constant currency): Revenue +2% to $431 million, EBITDA +42% to $82 million, and EPS +124% to $0.42
  • Research Publishing & Platforms (at constant currency): Revenue +6% and Adjusted EBITDA +19%
  • Shareholder Return: Wiley among select group with 27 consecutive years of annual dividend increases

MANAGEMENT COMMENTARY

“Wiley’s core strategies in open research and online education are paying off with unprecedented gains in Research article output and content consumption, strong online enrollment growth, and record new adoption of digital courseware,” said Brian Napack, President and CEO. “The Wiley team is executing well through the pandemic as we continue to take advantage of market-driven growth trends in Research and Education, while driving further efficiency gains across our business.”

 

FIRST QUARTER PERFORMANCE

GAAP Measures

Unaudited ($millions except for EPS)

Q1 2021

Q1 2020

Change

Revenue

$431.3

$423.5

2%

Diluted EPS

$0.29

$0.06

$0.23

Non-GAAP Measures

Q1 2021

Q1 2020

Change

Constant Currency

Revenue

$431.3

$423.5

2%

Adjusted EBITDA

$81.8

$57.5

42%

Adjusted EPS

$0.42

$0.21

124%

Excluding acquisitions and currency impact, revenue declined 1% for the quarter. Wiley recorded an unfavorable FX variance of $2.4 million in revenue, $0.05 in Adjusted EPS, and favorable FX variance of $0.1 million in Adjusted EBITDA.

Revenue

  • Research Publishing & Platforms rose 5% as reported and 6% at constant currency with growth in open access and content platforms driving results. Note, approximately $4 million, or 2% of first quarter Research Publishing revenue, reflected carryover due to COVID-related delays from the prior quarter.
  • Academic & Professional Learning declined 12% as reported and at constant currency mainly due to continued market pressures on print books and adverse COVID-19 impacts on Professional Learning, particularly in-person corporate training. In Education Publishing, digital content and courseware growth accelerated while print textbooks continued to decline sharply.
  • Education Services increased 29% as reported and at constant currency, driven by the three-month inorganic contribution from mthree (+$12 million) and organic growth of 4% in Online Program Management (OPM) services.

Adjusted EBITDA

  • Research Publishing & Platforms grew 19% at constant currency, reflecting revenue growth and lower discretionary spending.
  • Academic & Professional Learning declined 23% at constant currency, reflecting revenue performance, partly offset by lower discretionary spending.
  • Education Services grew from $0.4 million to $8 million due to revenue growth and business optimization savings, notably improvement in student acquisition costs. Adjusted EBITDA margin for the quarter was 13%.
  • Corporate Expenses declined 19% to $34 million mainly due to lower employee-related costs and professional fees.

EPS

  • GAAP EPS of $0.29 compared to $0.06 in prior year period primarily reflected growth in Operating Income. Restructuring charges of $0.03 were lower by $0.11 from prior year but offset by a deferred tax charge of $0.12 in the current period related to a UK statutory rate increase.
  • Adjusted EPS (+124%) primarily reflected Adjusted Operating Income growth.

Balance Sheet and Liquidity

  • Net debt-to-EBITDA ratio (trailing twelve months) at quarter-end was 2.0 as compared to 1.7 at the end of the year-ago period.
  • Available liquidity was approximately $750 million at quarter-end, including $101 million of cash on hand and $650 million of undrawn debt facilities.

Cash Flow and Return to Shareholders

  • Net Cash Used in Operating Activities was $121 million compared to $94 million in the prior year period, primarily driven by the timing of working capital. Note, Wiley’s consistent use of cash in the first half of the fiscal year is driven by the timing of collections for annual journal subscriptions, which is concentrated in the third and fourth fiscal quarters.
  • Free Cash Flow less Product Development Spending was a use of $145 million compared to a use of $125 million in the prior year. As a reminder, Wiley generated $173 million of Free Cash Flow in fiscal year 2020.
  • Quarterly dividend was raised for the 27th consecutive year, declared on June 25, to $0.3425 per share on its Class A and Class B common stock.

FISCAL YEAR 2021 OUTLOOK

Wiley cannot confidently project the forward-looking impact of the pandemic on its operating results and is therefore not providing a financial outlook for fiscal year 2021 at this time.

EARNINGS CONFERENCE CALL

Scheduled for today, September 3 at 10:00 a.m. (ET). Access the webcast on Wiley.com, at https://www.wiley.com/en-us/investors or directly at https://edge.media-server.com/mmc/p/wimivu3k. U.S. callers, please dial (844) 231-0103 and enter the participant code 8168499#. International callers, please dial (216) 562-0402 and enter the participant code 8168499#.

ABOUT WILEY

Wiley drives the world forward with research and education. Through publishing, platforms and services, we help researchers, professionals, students, universities, and corporations to achieve their goals in an ever-changing world. And for more than 200 years, we have delivered consistent performance to all our stakeholders. The Company's website can be accessed at www.wiley.com.

NON-GAAP FINANCIAL MEASURES

Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “Adjusted Revenue,” “Adjusted Operating Income,” “Adjusted EBITDA,” “Adjusted CTP,” “Free Cash Flow less Product Development Spending,” “organic revenue,” and results on a Constant Currency basis to assess underlying business performance and trends. Management believes non-GAAP financial measures, which exclude the impact of restructuring charges and credits and certain other items, and the impact of acquisitions provide a useful comparable basis to analyze operating results and earnings. See the reconciliations of non-GAAP financial measures and explanations of the uses of non-GAAP measures in the supplementary information.

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; (x) the Company’s ability to realize operating savings over time and in fiscal year 2021 in connection with our multi-year Business Optimization Program; (xi) the impact of COVID-19 on our operations, performance, and financial condition; and (xii) 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)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

         
   

Three Months Ended

   

July 31,

   

2020

 

2019

Revenue, net

 

$ 431,326

 

$ 423,530

Costs and expenses:

       

Cost of sales

 

144,809

 

143,096

Operating and administrative expenses

 

237,369

 

250,170

Restructuring and related charges

 

2,218

 

10,735

Amortization of intangibles

 

16,891

 

14,970

Total Costs and Expenses

 

401,287

 

418,971

         

Operating Income

 

30,039

 

4,559

As a % of revenue

 

7.0%

 

1.1%

         

Interest expense

 

(4,614)

 

(6,077)

Foreign exchange transaction (losses) gains

 

(82)

 

2,652

Interest and other income

 

4,391

 

2,833

Income Before Taxes

 

29,734

 

3,967

         

Provision for income taxes

 

13,400

 

343

Effective tax rate

 

45.1%

 

8.6%

Net Income

 

$ 16,334

 

$ 3,624

As a % of revenue

 

3.8%

 

0.9%

         

Weighed Average Number of Common Shares Outstanding

       

Basic

 

55,912

 

56,536

Diluted

 

56,193

 

56,905

         

Earnings Per Share

       

Basic

 

$ 0.29

 

$ 0.06

Diluted

 

$ 0.29

 

$ 0.06

         

Notes:

       

(1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

(2) All amounts are approximate due to rounding.

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)

RECONCILIATION OF GAAP EPS to NON-GAAP ADJUSTED EPS - DILUTED

(unaudited)

           
     

Three Months Ended

     

July 31,

     

2020

 

2019

GAAP Earnings Per Share - Diluted

 

$ 0.29

 

$ 0.06

Adjustments:

       
 

Restructuring and related charges (A)

 

0.03

 

0.14

 

Foreign exchange (gains) losses on intercompany transactions (A)

 

(0.02)

 

0.01

 

Impact of increase in U.K. statutory rate on deferred tax balances in fiscal year 2021 (B)

 

0.12

 

-

Non-GAAP Adjusted Earnings Per Share - Diluted

 

$ 0.42

 

$ 0.21

           

Notes:

 

 

 

 

 

(A)

The table below shows the net of tax impact of our adjustments to GAAP Earnings Per Share noted above.

     

Three Months Ended

     

July 31,

 

(amounts in millions)

 

2020

 

2019

 

Net of tax, charges related to the Business Optimization Program

 

$ 1.5

 

$ 8.1

 

Net of tax, credits related to the Restructuring and Reinvestment Program

 

$ (0.0)

 

$ (0.1)

 

Net of tax, foreign exchange transaction (gains) losses

 

$ (1.0)

 

$ 0.3

(B)

During the first quarter of fiscal 2021, the U.K. officially enacted legislation that increased its statutory rate from 17% to 19%. This resulted in a $6.7 million non-cash deferred tax expense from the re-measurement of the Company’s applicable U.K. net deferred tax liabilities.

(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 ended July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q 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)

           
     

Three Months Ended

     

July 31,

     

2020

 

2019

Net Income

 

$ 16,334

 

$ 3,624

 

Interest expense

 

4,614

 

6,077

 

Provision for income taxes

 

13,400

 

343

 

Depreciation and amortization

 

49,507

 

42,219

Non-GAAP EBITDA

 

83,855

 

52,263

 

Restructuring and related charges

 

2,218

 

10,735

 

Foreign exchange transaction losses (gains)

 

82

 

(2,652)

 

Interest and other income

 

(4,391)

 

(2,833)

Non-GAAP Adjusted EBITDA

 

$ 81,764

 

$ 57,513

 

Adjusted EBITDA Margin

 

19.0%

 

13.6%

           

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 ended July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)
SEGMENT RESULTS
(in thousands)
(unaudited)
                   
        Three Months Ended July 31,   % Change
                Favorable (Unfavorable)
       

2020

 

2019

  Reported Constant Currency
Research Publishing & Platforms:              
Revenue, net              
  Research Publishing  

$ 230,464

 

$ 219,927

 

5%

5%

  Research Platforms  

10,346

 

9,448

 

10%

10%

Total Revenue, net  

$ 240,810

 

$ 229,375

 

5%

6%

                   
Contribution to Profit  

$ 69,818

#

$ 55,646

 

25%

26%

  Adjustments:              
  Restructuring (credits) charges  

(197)

 

2,620

     
Non-GAAP Adjusted Contribution to Profit  

$ 69,621

 

$ 58,266

 

19%

20%

Depreciation and amortization  

19,701

 

17,153

     
Non-GAAP Adjusted EBITDA  

$ 89,322

 

$ 75,419

 

18%

19%

  Adjusted EBITDA margin  

37.1%

 

32.9%

     
                   
Academic & Professional Learning:              
Revenue, net              
  Education Publishing  

$ 64,084

 

$ 65,523

 

-2%

-2%

  Professional Learning  

62,829

 

79,335

 

-21%

-20%

Total Revenue, net  

126,913

 

144,858

 

-12%

-12%

                   
Contribution to Profit  

$ (380)

 

$ 4,911

  # #
  Adjustments:              
  Restructuring charges  

33

 

2,805

     
Non-GAAP Adjusted Contribution to Profit  

$ (347)

 

$ 7,716

  # #
Depreciation and amortization  

18,804

 

16,524

     
Non-GAAP Adjusted EBITDA  

$ 18,457

 

$ 24,240

 

-24%

-23%

  Adjusted EBITDA margin  

14.5%

 

16.7%

     
                   
Education Services:              
Revenue, net              
  Education Services (2)  

$ 50,262

 

$ 48,156

 

4%

4%

  mthree (2)  

13,341

 

1,141

  # #
Total Revenue, net  

63,603

 

49,297

 

29%

29%

                   
Contribution to Profit  

$ 558

 

$ (7,199)

  # #
  Adjustments:              
  Restructuring charges  

139

 

2,089

     
Non-GAAP Adjusted Contribution to Profit  

$ 697

 

$ (5,110)

  # #
Depreciation and amortization  

7,279

 

5,498

     
Non-GAAP Adjusted EBITDA  

$ 7,976

 

$ 388

  # #
  Adjusted EBITDA margin  

12.5%

 

0.8%

     
                   
Corporate Expenses:  

$ (39,957)

 

$ (48,799)

 

18%

17%

  Adjustments:              
  Restructuring charges  

2,243

 

3,221

     
Non-GAAP Adjusted Corporate Expenses  

$ (37,714)

 

$ (45,578)

 

17%

16%

Depreciation and amortization  

3,723

 

3,044

     
Non-GAAP Adjusted EBITDA  

$ (33,991)

 

$ (42,534)

 

20%

19%

                   
Consolidated Results:              
Revenue, net  

$ 431,326

 

$ 423,530

 

2%

2%

                   
Operating Income  

$ 30,039

 

$ 4,559

  # #
  Adjustments:              
  Restructuring charges  

2,218

 

10,735

     
Non-GAAP Adjusted Operating Income  

$ 32,257

 

$ 15,294

  # #
Depreciation and amortization  

49,507

 

42,219

     
Non-GAAP Adjusted EBITDA  

$ 81,764

 

$ 57,513

 

42%

42%

  Adjusted EBITDA margin  

19.0%

 

13.6%

     
                   
(1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
(2) In May 2020, we moved the IT bootcamp business acquired as part of The Learning House acquisition from Education Services to mthree. As a result, the prior period revenue related to the IT bootcamp business has been included in mthree. There were no changes to our total Education Services or our consolidated financial results. The inorganic revenue from mthree in the three months ended July 31, 2020 was $12.4 million.
 

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
           
      July 31,   April 30,
     

2020

 

2020

Assets:          
Current Assets          
  Cash and cash equivalents  

$ 101,385

 

$ 202,464

  Accounts receivable, net  

282,412

 

309,384

  Inventories, net  

45,051

 

43,614

  Prepaid expenses and other current assets  

59,155

 

59,465

  Total Current Assets  

488,003

 

614,927

           
Product Development Assets, net  

52,088

 

53,643

Royalty Advances, net  

28,682

 

36,710

Technology, Property and Equipment, net  

295,457

 

298,005

Intangible Assets, net  

829,231

 

807,405

Goodwill    

1,133,610

 

1,116,790

Operating Lease Right-of-Use Assets  

139,798

 

142,716

Other Non-Current Assets  

102,077

 

98,598

  Total Assets  

$ 3,068,946

 

$ 3,168,794

           
Liabilities and Shareholders' Equity:        
Current Liabilities        
  Accounts payable  

$ 52,556

 

$ 93,691

  Accrued royalties  

82,691

 

87,408

  Short-term portion of long-term debt  

10,938

 

9,375

  Contract liabilities  

408,954

 

520,214

  Accrued employment costs  

70,211

 

108,448

  Accrued income taxes  

181

 

13,728

  Short-term portion of operating lease liabilities  

20,647

 

21,810

  Other accrued liabilities  

69,958

 

72,595

  Total Current Liabilities  

716,136

 

927,269

Long-Term Debt  

835,763

 

765,650

Accrued Pension Liability  

183,284

 

187,969

Deferred Income Tax Liabilities  

124,184

 

119,127

Operating Lease Liabilities  

156,644

 

159,782

Other Long-Term Liabilities  

79,190

 

75,373

  Total Liabilities  

2,095,201

 

2,235,170

Shareholders' Equity  

973,745

 

933,624

  Total Liabilities and Shareholders' Equity  

$ 3,068,946

 

$ 3,168,794

           
(1) The supplementary information included in this press release for July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
 

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
           
      Three Months Ended
      July 31,
     

2020

 

2019

Operating Activities:        
  Net income  

$ 16,334

 

$ 3,624

  Amortization of intangibles  

16,891

 

14,970

  Amortization of product development assets  

9,148

 

8,714

  Depreciation and amortization of technology, property, and equipment  

23,468

 

18,535

  Other non-cash charges and credits  

37,105

 

26,477

  Net change in operating assets and liabilities  

(223,729)

 

(166,488)

  Net Cash Used In Operating Activities  

(120,783)

 

(94,168)

           
Investing Activities:        
  Additions to technology, property, and equipment  

(18,964)

 

(24,202)

  Product development spending  

(5,325)

 

(6,211)

  Businesses acquired in purchase transactions, net of cash acquired  

(136)

 

(73,209)

  Acquisitions of publication rights and other  

(3,855)

 

(2,270)

  Net Cash Used in Investing Activities  

(28,280)

 

(105,892)

           
Financing Activities:        
  Net debt borrowings  

67,356

 

253,848

  Cash dividends  

(19,261)

 

(19,252)

  Purchase of treasury shares  

-

 

(10,000)

  Other  

(4,611)

 

(11,263)

  Net Cash Provided By Financing Activities  

43,484

 

213,333

           
Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash  

4,500

 

(2,138)

           
Change in Cash, Cash Equivalents and Restricted Cash for Period  

(101,079)

 

11,135

           
Cash, Cash Equivalents and Restricted Cash - Beginning  

203,047

 

93,548

Cash, Cash Equivalents and Restricted Cash - Ending  

$ 101,968

 

104,683

           
CALCULATION OF NON-GAAP FREE CASH FLOW LESS PRODUCT DEVELOPMENT SPENDING
           
      Three Months Ended
      July 31,
     

2020

 

2019

Net Cash Used In Operating Activities  

$ (120,783)

 

$ (94,168)

Less: Additions to technology, property, and equipment  

(18,964)

 

(24,202)

Less: Product development spending  

(5,325)

 

(6,211)

Free Cash Flow less Product Development Spending  

$ (145,072)

 

$ (124,581)

           
See Explanation of Usage of Non-GAAP Measures included in this supplemental information.
(1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
 

JOHN WILEY & SONS, INC.

Explanation of Usage of NON-GAAP Performance Measures
 
In this earnings release and supplemental information, management may present the following non-GAAP performance measures:
  • · Adjusted Earnings Per Share "(Adjusted EPS)";
  • · Free Cash Flow less Product Development Spending;
  • · Adjusted Revenue;
  • · Adjusted Operating Income and margin;
  • · Adjusted Contribution to Profit and margin;
  • · EBITDA and Adjusted EBITDA and margin;
  • · Organic revenue; and
  • · Results on a constant currency basis.
 
Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well for internal reporting and forecasting purposes, when publicly providing its outlook, to evaluate the Company's performance and calculate incentive compensation. Non-GAAP performance measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial results under U.S. GAAP.
The Company presents these non-GAAP performance measures in addition to U.S. GAAP financial results because it believes that these non-GAAP performance measures provide useful information to certain investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose. For example:
  • Adjusted EPS, Adjusted Revenue, Adjusted Operating Income, Adjusted Contribution to Profit, Adjusted EBITDA and organic revenue provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.
  • Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and acquisitions.
  • Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.
In addition, the Company has historically provided these or similar non-GAAP performance measures and understands that some investors and financial analysts find this information helpful in analyzing the Company's operating margins, and net income and comparing the Company's financial performance to that of its peer companies and competitors. Based on interactions with investors, we also believe that the Company's non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200903005297/en/

Contacts

Investor:
Brian Campbell
201.748.6874
brian.campbell@wiley.com

Media:
Katie Roberts
602.373.7233
karoberts@wiley.com

 

Source: John Wiley and Sons

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