Wiley Reports Third Quarter 2018 Results

• Third quarter revenue up 4% to $455.7 million, or down 1% at constant currency
• Third quarter GAAP EPS up 45% to $1.19 primarily due to impact of the US Tax Act; Adjusted EPS down 14% at constant currency
• Year-to-date revenue up 4% to $1,318.9 million, or up 1% at constant currency
• Year-to-date GAAP EPS $2.39 compared to $1.15 in prior year; Adjusted EPS at constant currency up 1%
• Cash Provided by Operations for the nine months of $190.1 million, down from $229.2 million due to the timing of calendar year 2018 journal renewals; Free Cash Flow less Product Development Spending of $80.7 million, down from $119.5 million
• Full year 2018 outlook reaffirmed

MANAGEMENT COMMENTARY
“We continue to see good momentum in the business, with steady year-to-date growth in Research, improved profitability in Solutions, and better-than-expected results in Publishing,” said Brian Napack, Wiley’s President and CEO. “We are realizing operating margin and earnings growth while also making great progress in how we operate, invest, and innovate, positioning us to drive more value from our existing businesses and exploit new market opportunities.”

FINANCIAL SUMMARY
Wiley provides non-GAAP financial measures such as “Adjusted EPS,” “Adjusted Operating Income,” “Adjusted CTP,” “Free Cash Flow less Product Development Spending,” 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, provide for a more comparable basis to analyze 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.

• Revenue performance was mixed with growth in Research (+9% reported, or +1% at constant currency) and Solutions (+5%, or +2% constant currency) offset by a decline in Publishing (-1%, or -3% at constant currency).
• GAAP Operating Income growth resulted from favorable foreign exchange, favorable timing of restructuring charges, and savings from operational excellence initiatives and restructuring. Adjusted Operating Income growth was mainly due to savings in technology and prior restructuring activities.
• US Tax Act: As a result of the US Tax Cuts and Jobs Act (“the Tax Act”) enacted on December 22, 2017, the Company recorded an estimated non-cash tax benefit of $25 million, or $0.43 per share. Going forward, since most of the Company’s pre-tax income is earned outside the U.S., Wiley anticipates a small, favorable impact to its effective tax rate and cash taxes.
• GAAP EPS growth reflected the estimated non-cash tax credit of $0.43 per share due to the Tax Act and the favorable impact of foreign exchange. Adjusted EPS decline was primarily due to favorable tax credits of $0.12 per share in the prior year period.

RESEARCH SEGMENT

CTP – Contribution to Profit.

• Revenue increase reflected growth in Journals (+9% reported, +1% constant currency) and Atypon (+4%).
• GAAP CTP increase was primarily a result of favorable foreign exchange. Adjusted CTP decline reflected higher royalty costs in licensed society publishing.

PUBLISHING SEGMENT

• Revenue growth in STM and Professional Publishing (+5% reported, +2% constant currency) was offset by declines in Educational Publishing (-4% reported, -6% constant currency). Course Workflow/WileyPLUS was down due to previously disclosed timing of revenue recognition, which reflects longer sales amortization for subscription periods extending across two semesters.
• GAAP CTP growth reflected favorable foreign exchange and the impact of restructuring credits and charges. Adjusted CTP growth was due to savings from operational excellence initiatives and prior restructuring activities.

SOLUTIONS SEGMENT

• Revenue increased 5% reported, or 2% at constant currency. Education Services (OPM) rose 7% (reported and at constant currency); Corporate Learning rose 7% reported, but declined 4% at constant currency; and Professional Assessment declined 4% reported, or declined 5% at constant currency.
• GAAP CTP growth reflected the timing of restructuring charges. Adjusted CTP growth was driven by increased operating efficiency and prior cost savings initiatives in our Education Services/OPM business.

NINE MONTH RESULTS

• Revenue growth for the nine months was driven primarily by Research (+9% reported, +4% constant currency), including $14 million due to the full-year contribution from Atypon (acquired October 2016), and Solutions (+5% reported, +4% constant currency), which offset a decline in Publishing (-3% reported, -4% constant currency).
• GAAP Operating Income growth was due to higher revenue, favorable foreign exchange, and a pension settlement in the prior year, which offset higher restructuring and related charges in the current year. Adjusted Operating Income growth was mainly due to higher revenue and savings from operational excellence initiatives and restructuring, notably in Technology, Operations, and in the Publishing and Solutions segments.
• GAAP EPS growth for the nine months reflected the current year impact of the Tax Act and favorable foreign exchange, as well as other charges in the prior year, including an unfavorable ruling in a Germany income tax dispute and a large pension settlement. This offset higher restructuring charges and foreign exchange losses associated with intercompany transactions in the current fiscal year. Adjusted EPS growth in the nine months was due to higher operating income, lower interest expense, and a higher effective tax rate resulting from larger tax credits in the prior year.
• Cash Provided by Operations and Free Cash Flow less Product Development Spending were both down $39 million, due to the timing of journal billings and cash collections. Capital expenditures, including Technology, Property, and Equipment (TP&E) and Product development spending, were essentially flat with prior year.
• Shareholder Return: Through nine months, Wiley utilized $55.1 million of cash for dividends and $29.3 million for share repurchases, compared to $53.6 million and $35.4 million in the prior year.

FISCAL YEAR 2018 OUTLOOK
The Company reaffirms its fiscal 2018 guidance:

_{If current rates were to hold through year-end, Wiley would record favorable foreign currency variances in the fiscal year of approximately $49 million in revenue, $27 million in operating income, and $0.34 in EPS due to changes in exchange rates and functional currency gains related to calendar year 2017 journal subscriptions in the UK.}

EARNINGS CONFERENCE CALL
Scheduled for today, March 6 at 10:00 a.m. (ET). Access the webcast on Wiley.com, or https://www.wiley.com/en-us/investors. U.S. callers, please dial (800) 239-9838 and enter the participant code 1581251#. International callers, please dial (323) 794-2551 and enter the participant code 1581251#.

ABOUT WILEY
Wiley, a global research and learning company, helps people and organizations develop the skills and knowledge they need to succeed. Our online scientific, technical, medical, and scholarly journals, combined with our digital learning, assessment and certification solutions help universities, academic societies, businesses, governments and individuals increase the academic and professional impact of their work. For more than 200 years, we have delivered consistent performance to 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 2018 Outlook, operations, performance, and financial condition and the Company’s anticipation of cash tax benefits from the Tax Act. 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.
Explanation of Usage of NON-GAAP Performance Measures

In this earnings release and supplemental information, management presents the following non-GAAP performance measures:

• Adjusted Earnings Per Share “Adjusted EPS”;

• Free Cash Flow less product development spending;

• Adjusted Operating Income and margin;

• Adjusted Contribution to Profit (“Adjusted CTP”) and margin; 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 to evaluate and calculate incentive compensation. Non-GAAP performance measures do not have standardized meanings prescribed by US 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 US GAAP.

The Company presents these non-GAAP performance measures in addition to 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 across accounting periods. The use of these non-GAAP performance measures provides 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 Operating Profit, Adjusted CTP 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 dividends and fund share repurchases and new 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 our non-GAAP performance measures are regarded as useful to our investors as supplemental to our 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.

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