WILEY JOHN SONS, INC. (107140) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

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Contact:
Brian Campbell, Investor Relations
201.748.6874
brian.campbell@wiley.com

Wiley Reports Second Quarter Fiscal 2019 Results
December 5, 2018 –
John Wiley & Sons, Inc. (NYSE: JW-A and JW-B), a global leader in research and education, today announced results for the second quarter ended October 31, 2018.

SECOND QUARTER 2019 HIGHLIGHTS
Reported results (GAAP):  Revenue of $449 million (-1% vs. prior year), Operating Income of $57 million (-29%), and EPS of $0.76 (-27%), with earnings performance impacted by $10 million in restructuring charges in the current quarter
Non-GAAP results (constant currency):  Revenue +1%, Adjusted Operating Income -10%, and Adjusted EPS -9%, with lower adjusted earnings performance primarily due to investments in growth initiatives, including publishing more in Research and driving enrollment growth in Education Services
Acquisition of The Learning House (completed on November 1) strengthens Wiley’s leadership in the rapidly-growing $10 billion education services market for universities and corporations
Full-year guidance reaffirmed (excluding Learning House acquisition)

FIRST HALF 2019 HIGHLIGHTS
Reported results (GAAP):  Revenue of $860 million (flat with prior year), Operating Income of $94 million (flat), and EPS of $1.21 (+1%), with earnings performance impacted by higher restructuring charges in prior year
Non-GAAP results (constant currency):  Revenue flat, Adjusted Operating Income -16%, and Adjusted EPS -17%, with lower adjusted earnings performance primarily due to investments in growth initiatives, including publishing more in Research and driving enrollment growth in Education Services
Calendar Year 2019 society journal publishing net wins +$3 million; Open Access growth +36%
New Education Services partnership agreements signed with Michigan State University, University of Glasgow, and University of Bath; long-term partnership extensions signed with Our Lady of the Lake University (TX) and Saint Mary’s University (MN)

MANAGEMENT COMMENTARY
“We continued to make good progress in the second quarter, with 3% constant currency growth in Research, fueled by double-digit growth in Open Access and Atypon, and 9% constant currency growth in our Solutions segment,” said Brian Napack, Wiley’s President and CEO.  “We are successfully signing high-profile university partners, winning new research publishing business and growing in important areas such as Open Access publishing, Corporate Learning, WileyPLUS, Test Prep, and Professional Assessment.  We are also making important progress on our operational effectiveness and cost reduction initiatives.  We are particularly excited about our acquisition of The Learning House, which strengthens our leadership position in a rapidly-growing $10 billion market for tech-enabled services that help universities and corporations deliver powerful, career-enhancing learning, and expands our education delivery offerings to include career-enhancing short courses, certification programs, and continuing education programs.”

FINANCIAL SUMMARY
Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “Adjusted Operating Income,” “Adjusted CTP,” “Free Cash Flow less Product Development Spending,” and results on a Constant Currency (or “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 certain other items, provide for a more 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 accompanying this press release.

Second Quarter Results

GAAP Measures
Unaudited ($millions except for EPS)
   
Q2 2019
     
Q2 2018
   
Change
   
Change
Constant Currency
 
Revenue
 
$
448.6
   
$
451.7
     
(-1
%)
   
1
%
Operating Income
 
$
57.5
   
$
80.8
     
(-29
%)
       
Diluted EPS
 
$
0.76
   
$
1.04
     
(-27
%)
       
Non-GAAP Measures
   
Q2 2019
     
Q2 2018
           
Change
Constant Currency
 
Adjusted Operating Income
 
$
67.5
   
$
79.4
             
(-10
%)
Adjusted EPS
 
$
0.89
   
$
1.03
             
(-9
%)

Wiley recorded foreign currency variances in the quarter of $8.7 million unfavorable in revenue, $3.9 million unfavorable in operating income, and $0.05 unfavorable in EPS.

Revenue reflected steady momentum in Research (0% reported, +3% CC) and high single-digit growth in Solutions (+8%, +9% CC) offset by a decline in Publishing (-5%, -3% CC).
o
Research segment results were driven by double-digit growth in Open Access (+47%, 50% CC) and Atypon Publishing Technology Services (+17%).  Journal Subscriptions were flat at constant currency.
o
Publishing segment results reflected declines in Education Publishing (-10%, -8% CC) and STM and Professional Publishing (-6%, -5% CC), which offset higher revenue in WileyPLUS (+13%, +14% CC, mostly due to prior-year revenue deferrals for courses extending across two semesters) and growth in Test Preparation (+6%, +7% CC).
o
Solutions segment growth was driven by Corporate Learning (+24%, +28% CC) and Professional Assessment (+9%).  Education Services performance (0%, +1% CC) saw same-school growth (9%) offset by the termination of certain underperforming partnerships, as previously reported.
GAAP Operating Income decline reflected investment in growth initiatives and the timing of restructuring charges and credits ($10.0 million charge this period and a $1.4 million credit in prior year), as well as unfavorable foreign exchange impacts.  Adjusted Operating Income declined mainly due to investment in growth initiatives.
o
Research CTP declined 16% on a reported basis and 7% on an adjusted basis at constant currency, reflecting higher society publishing royalties and investments in editorial resources to support increased journal publishing, as well as investments in increased sales resources.
o
Publishing CTP declined 6% reported and 2% adjusted at constant currency due to lower revenue.
o
Solutions CTP declined 4% reported but rose 22% adjusted at constant currency due to revenue growth and efficiency gains, offsetting higher investment in Education Services to drive enrollment growth.
o
Corporate Expenses rose 24% on a reported basis due to restructuring charges, or 10% on an adjusted basis at constant currency, primarily due to costs associated with strategic planning.
GAAP EPS performance mainly reflected lower operating income.  Adjusted EPS declined primarily due to investments in growth initiatives.
Restructuring Charges:  Wiley recorded $10 million of restructuring charges in the quarter reflecting continued cost reduction actions across the business.  These actions will yield approximately $15 million in run rate savings commencing in the second half of fiscal 2020.  The charges are primarily related to severance costs.

First Half Results

GAAP Measures
Unaudited ($millions except for EPS)
   
1H 2019
     
1H 2018
   
Change
   
Change
“CC”
 
Revenue
 
$
859.5
   
$
863.2
     
0
%
   
0
%
Operating Income
 
$
93.6
   
$
93.4
     
0
%
       
Diluted EPS
 
$
1.21
   
$
1.20
     
1
%
       
Cash Used by Operating Activities
 
(121.1
)
 
(45.8
)
               
Non-GAAP Measures
   
1H 2019
     
1H 2018
   
Change
   
Change
“CC”
 
Adjusted Operating Income
 
$
97.5
   
$
121.3
             
(-16
%)
Adjusted EPS
 
$
1.31
   
$
1.62
             
(-17
%)
Free Cash Flow less Product Development Spending
 
(163.5
)
 
(117.2
)
   
(-40
%)
       

Wiley recorded foreign currency variances in the first six months of $6.3 million unfavorable in revenue, $4.4 million unfavorable in operating income, and $0.04 unfavorable in EPS

Revenue reflected steady performance in Research (0% reported, +1% CC) and growth in Solutions (+8%) offset by a decline in Publishing (-5%, -4% CC).
o
Research segment results were driven by double-digit growth in Open Access (+36%) and Atypon Publishing Technology Services (+10%), offsetting a decline in Journal Subscriptions, primarily related to timing of publications.
o
Publishing segment performance primarily reflected a decline in Education Publishing (-13% reported, -12% CC).  Education Publishing represents approximately 10% of total Wiley revenue.  Modest declines in STM and Professional Publishing (-2%, -1% CC) offset higher revenue in WileyPLUS (+10%, +11% CC), due in large part to revenue recognition timing, and growth in Test Preparation (+2% reported, +3% CC).
o
Solutions segment growth included higher revenue in all three businesses: Education Services (+5%), Corporate Learning (+13%), and Professional Assessment (+8%).
GAAP Operating Income largely reflected higher restructuring charges in prior year.  Adjusted Operating Income declined mainly due to investment in growth initiatives.
o
Research CTP declined 11% on a reported basis and 10% 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 investments in increased sales resources.
o
Publishing CTP rose 15% on a reported basis due to higher restructuring and impairment charges in the prior year period but declined 6% on an adjusted basis at constant currency due to lower revenue.
o
Solutions CTP grew 92% on a reported basis or 47% adjusted a constant currency due to higher revenue and efficiency gains, offsetting higher investment in Education Services to drive enrollment growth.
o
Corporate Expenses decreased 3% on a reported basis due to higher restructuring charges in the prior year period but increased 8% on an adjusted basis at constant currency primarily due to costs associated with strategic planning.
GAAP EPS largely reflected higher reported operating income and lower foreign exchange losses.  Adjusted EPS decline was primarily due to lower adjusted operating income.
Net Cash Used in Operating Activities was primarily due to timing swings in working capital including a delay in billings and subsequent collections for calendar year 2019 subscriptions and, to a lesser extent, higher payments for expenses.  Free Cash Flow less Product Development Spending performance was due to higher cash used in operating activities. Cash flow from operations is a use of cash in the first half of Wiley’s fiscal year principally due to the timing of collections for annual journal subscriptions.  Capital expenditures, including Technology, Property, and Equipment and Product Development Spending, declined $29 million to $42 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 from the adoption of ASC 606.
Shareholder Return: In June, Wiley raised its annual dividend for the 25th consecutive year to $0.33 per quarter (+3%).  In the half, the Company utilized $38 million of cash for dividends and approximately $25 million for share repurchases with an average per share cost of $58.79.

FISCAL YEAR 2019 OUTLOOK
The Company reaffirms its fiscal 2019 guidance.

Metric ($M, except EPS)
 
FY18 Actual
 
FY19 Expectation
Constant Currency
Status
Revenue
 
$
1,796.1
 
Even with prior year
Reaffirmed
Adjusted EPS
 
$
3.43
 
Mid-single digit decline
Reaffirmed
Cash Provided by Operating Activities
 
$
381.8
 
High-single digit decline
Reaffirmed
Capital Expenditures
 
$
150.7
 
Lower
Reaffirmed

*Outlook excludes contributions from The Learning House acquisition (closed on November 1).  For fiscal 2019, we anticipate The Learning House to contribute approximately $30 million in Revenue and be dilutive to EPS by approximately $0.10.

Wiley anticipates low-single digit Revenue growth in Research and Solutions offset by a low-single digit Revenue decline in Publishing.
Adjusted EPS is expected to decline primarily due to increased investment in growth initiatives, including publishing more in Research and driving enrollment growth in Education Services
Cash Provided by Operating Activities reflects the impact of growth investments and substantially lower gains in working capital.  In addition, implementation of ASC 606 will move approximately $10 million of spending from Capital Expenditures to Cash from Operating Activities.
Capital Expenditures are expected to be lower by $30 million primarily due to the completion of the Company’s headquarters transformation.  In addition, implementation of ASC 606 will move approximately $10 million of spending from Capital Expenditures to Cash from Operating Activities.
Non-GAAP effective tax rate for the year is expected to be approximately 23-24%.

EARNINGS CONFERENCE CALL
Scheduled for today, December 5 at 10:00 a.m. (ET).  Access the webcast at https://edge.media-server.com/m6/p/mm9am8gc, or on Wiley.com at  https://www.wiley.com/en-us/investors.  U.S. callers, please dial 866-548-4713 and enter the participant code 3834926#.  International callers, please dial 866-548-4713 and enter the participant code 3834926#.

ABOUT WILEY
Wiley, a global research and education 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 2019 Outlook, 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) achievement of targeted run rate savings through restructuring actions; and (xi) 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
   
Six Months Ended
 
   
October 31,
   
October 31,
 
   
2018
   
2017 (4)
   
2018
   
2017 (4)
 
Revenue, net
 
$
448,622
   
$
451,731
   
$
859,523
   
$
863,175
 
Costs and expenses:
                               
  Cost of sales
   
120,157
     
119,865
     
234,548
     
234,653
 
  Operating and administrative expenses (4)
   
248,627
     
241,301
     
502,400
     
487,039
 
  Restructuring and related charges (credits)
   
9,996
     
(1,406
)
   
3,910
     
24,323
 
  Amortization of intangibles
   
12,367
     
11,183
     
25,050
     
23,802
 
Total Costs and Expenses
   
391,147
     
370,943
     
765,908
     
769,817
 
                                 
Operating Income
   
57,475
     
80,788
     
93,615
     
93,358
 
As a % of revenue
   
12.8
%
   
17.9
%
   
10.9
%
   
10.8
%
                                 
Interest expense
   
(3,608
)
   
(3,455
)
   
(6,404
)
   
(6,728
)
Foreign exchange transaction losses
   
(54
)
   
(416
)
   
(1,783
)
   
(5,552
)
Interest and other income (4)
   
2,509
     
2,559
     
4,975
     
4,494
 
Income Before Taxes
   
56,322
     
79,476
     
90,403
     
85,572
 
                                 
Provision for income taxes
   
12,538
     
19,428
     
20,324
     
16,288
 
Effective tax rate
   
22.3
%
   
24.4
%
   
22.5
%
   
19.0
%
Net Income
 
$
43,784
   
$
60,048
   
$
70,079
   
$
69,284
 
As a % of revenue
   
9.8
%
   
13.3
%
   
8.2
%
   
8.0
%
                                 
Weighted-Average Shares - Diluted
   
57,870
     
57,554
     
57,955
     
57,633
 
                                 
Earnings per share - Diluted
 
$
0.76
   
$
1.04
   
$
1.21
   
$
1.20
 
                                 
(1) The supplementary information included in this press release for the three and six months ended October 31, 2018 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.

                               
(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 Quarterly Report on Form 10-Q for further details.
 
                                 
(4) Due to the retrospective adoption of ASU 2017-07, total net benefits of $2.0 million and $3.9 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 and six months ended October 31, 2017, respectively. Total net benefits were $2.1 million and $4.5 million for the three and six months ended October 31, 2018, respectively.

 
 

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF GAAP EPS to NON-GAAP ADJUSTED EPS - DILUTED
(unaudited)
                         
   
Three Months Ended
   
Six Months Ended
 
   
October 31,
   
October 31,
 
   
2018
   
2017
   
2018
   
2017
 
 GAAP Earnings Per Share - Diluted
 
$
0.76
   
$
1.04
   
$
1.21
   
$
1.20
 
 Adjustments:
                               
 Restructuring and related charges (credits) (A)
   
0.13
     
(0.02
)
   
0.05
     
0.33
 
 Foreign exchange (gains) losses on intercompany transactions (B)
   
-
     
0.01
     
0.05
     
0.09
 
 Non-GAAP Adjusted Earnings Per Share - Diluted
 
$
0.89
   
$
1.03
   
$
1.31
   
$
1.62
 
                                 
 Notes:
                               
(A) Adjusted results exclude restructuring and related charges (credits) associated with the Company's Restructuring and Reinvestment Program. For the three months ended October 31, 2018 and 2017, there were charges of $10.0 million or $0.13 per share and credits of $1.4 million or $(0.02) per share, respectively. For the six months ended October 31, 2018 and 2017, there were charges of $3.9 million or $0.05 per share, and charges of $27.9 million or $0.33 per share, respectively.

 
(B) Adjusted results exclude foreign exchange (gains) losses associated with intercompany transactions. For the three months ended October 31, 2018 and 2017, there were gains of $0.2 million or no impact per share and losses of $0.3 million or $0.01 per share, respectively. For the six months ended October 31, 2018 and 2017, there were losses of $3.8 million or $0.05 per share, and losses of $6.3 million or $0.09 per share, respectively.

 
(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 and six months ended October 31, 2018 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 October 31,
   
% Change
 
   
2018
   
2017 (2)
   
Reported
   
Constant Currency
 
Research:
                       
Revenue, net
                       
Journal Subscriptions
 
$
163,751
   
$
170,163
     
-4
%
   
0
%
Open Access
   
13,780
     
9,350
     
47
%
   
50
%
Licensing, Reprints, Backfiles, and Other
   
41,749
     
41,329
     
1
%
   
2
%
Total Journal Revenue
   
219,280
     
220,842
     
-1
%
   
2
%
Publishing Technology Services (Atypon)
   
9,365
     
8,028
     
17
%
   
17
%
Total Revenue, net
 
$
228,645
   
$
228,870
     
0
%
   
3
%
                                 
Contribution to Profit (2)
 
$
58,907
   
$
70,146
     
-16
%
   
-11
%
Adjustments:
                               
Restructuring charges (credits)
   
2,282
     
(388
)
               
Non-GAAP Adjusted Contribution to Profit
 
$
61,189
   
$
69,758
     
-12
%
   
-7
%
                                 
Publishing:
                               
Revenue, net
                               
STM and Professional Publishing
 
$
66,902
   
$
71,460
     
-6
%
   
-5
%
Education Publishing
   
52,068
     
57,711
     
-10
%
   
-8
%
Course Workflow (WileyPLUS)
   
18,429
     
16,310
     
13
%
   
14
%
Test Preparation and Certification
   
8,377
     
7,919
     
6
%
   
7
%
Licensing, Distribution, Advertising and Other
   
11,723
     
11,585
     
1
%
   
2
%
Total Revenue, net
 
$
157,499
   
$
164,985
     
-5
%
   
-3
%
                                 
Contribution to Profit (2)
 
$
39,455
   
$
41,913
     
-6
%
   
-5
%
Adjustments:
                               
Restructuring charges
   
1,407
     
71
                 
Non-GAAP Adjusted Contribution to Profit
 
$
40,862
   
$
41,984
     
-3
%
   
-2
%
                                 
Solutions:
                               
Revenue, net
                               
Education Services (OPM)
 
$
29,877
   
$
29,737
     
0
%
   
1
%
Professional Assessment
   
17,268
     
15,821
     
9
%
   
9
%
Corporate Learning
   
15,333
     
12,318
     
24
%
   
28
%
Total Revenue, net
 
$
62,478
   
$
57,876
     
8
%
   
9
%
                                 
Contribution to Profit
 
$
7,049
   
$
7,309
     
-4
%
   
-4
%
Adjustments:
                               
Restructuring charges (credits)
   
1,097
     
(625
)
               
Non-GAAP Adjusted Contribution to Profit
 
$
8,146
   
$
6,684
     
22
%
   
22
%
                                 
Corporate Expenses (2):
 
$
(47,936
)
 
$
(38,580
)
   
24
%
   
25
%
Adjustments:
                               
Restructuring charges (credits)
   
5,210
     
(464
)
               
Non-GAAP Adjusted Corporate Expenses
 
$
(42,726
)
 
$
(39,044
)
   
9
%
   
10
%
                                 
Total Consolidated Revenue, net
 
$
448,622
   
$
451,731
     
-1
%
   
1
%
                                 
Consolidated Operating Income (2)
 
$
57,475
   
$
80,788
     
-29
%
   
-24
%
Adjustments:
                               
Restructuring charges (credits)
   
9,996
     
(1,406
)
               
Non-GAAP Adjusted Operating Income
 
$
67,471
   
$
79,382
     
-15
%
   
-10
%
As a % of revenue
   
15.0
%
   
17.6
%
               
                                 
(1) The supplementary information included in this press release for the three months ended October 31, 2018 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) Due to the retrospective adoption of ASU 2017-07, total net benefits of $2.0 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 October 31, 2017. The impact of the reclassification on Contribution to Profit by segment for the three months ended October 31, 2017 was $1.0 million in Research, $0.6 million in Publishing, and $0.4 million in Corporate Expenses.
 

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
SEGMENT RESULTS
(in thousands)
(unaudited)
                         
   
Six Months Ended October 31,
   
% Change
 
   
2018
   
2017 (2)
   
Reported
   
Constant Currency
 
Research:
                       
Revenue, net
                       
Journal Subscriptions
 
$
329,709
   
$
338,488
     
-3
%
   
-1
%
Open Access
   
24,723
     
18,153
     
36
%
   
36
%
Licensing, Reprints, Backfiles, and Other
   
81,237
     
79,559
     
2
%
   
2
%
Total Journal Revenue
   
435,669
     
436,200
     
0
%
   
1
%
Publishing Technology Services (Atypon)
   
17,968
     
16,297
     
10
%
   
10
%
Total Revenue, net
 
$
453,637
   
$
452,497
     
0
%
   
1
%
                                 
Contribution to Profit (2)
 
$
116,033
   
$
130,608
     
-11
%
   
-8
%
Adjustments:
                               
Restructuring charges
   
1,302
     
4,448
                 
Non-GAAP Adjusted Contribution to Profit
 
$
117,335
   
$
135,056
     
-13
%
   
-10
%
                                 
Publishing:
                               
Revenue, net
                               
STM and Professional Publishing
 
$
132,966
   
$
135,060
     
-2
%
   
-1
%
Education Publishing
   
90,299
     
103,447
     
-13
%
   
-12
%
Course Workflow (WileyPLUS)
   
19,207
     
17,520
     
10
%
   
11
%
Test Preparation and Certification
   
19,783
     
19,409
     
2
%
   
3
%
Licensing, Distribution, Advertising and Other
   
20,165
     
20,827
     
-3
%
   
-3
%
Total Revenue, net
 
$
282,420
   
$
296,263
     
-5
%
   
-4
%
                                 
Contribution to Profit (2)
 
$
53,175
   
$
46,383
     
15
%
   
15
%
Adjustments:
                               
Restructuring charges
   
739
     
7,325
                 
Publishing brand impairment charge
   
-
     
3,600
                 
Non-GAAP Adjusted Contribution to Profit
 
$
53,914
   
$
57,308
     
-6
%
   
-6
%
                                 
Solutions:
                               
Revenue, net
                               
Education Services (OPM)
 
$
59,037
   
$
56,074
     
5
%
   
5
%
Professional Assessment
   
33,067
     
30,708
     
8
%
   
8
%
Corporate Learning
   
31,362
     
27,633
     
13
%
   
13
%
Total Revenue, net
 
$
123,466
   
$
114,415
     
8
%
   
8
%
                                 
Contribution to Profit
 
$
10,273
   
$
5,341
     
92
%
   
91
%
Adjustments:
                               
Restructuring charges
   
840
     
2,170
                 
Non-GAAP Adjusted Contribution to Profit
 
$
11,113
   
$
7,511
     
48
%
   
47
%
                                 
Corporate Expenses (2):
 
$
(85,866
)
 
$
(88,974
)
   
-3
%
   
-3
%
Adjustments:
                               
Restructuring charges
   
1,029
     
10,380
                 
Non-GAAP Adjusted Corporate Expenses
 
$
(84,837
)
 
$
(78,594
)
   
8
%
   
8
%
                                 
Total Consolidated Revenue, net
 
$
859,523
   
$
863,175
     
0
%
   
0
%
                                 
Consolidated Operating Income (2)
 
$
93,615
   
$
93,358
     
0
%
   
5
%
Adjustments:
                               
Restructuring charges
   
3,910
     
24,323
                 
Publishing brand impairment charge
   
-
     
3,600
                 
Non-GAAP Adjusted Operating Income
 
$
97,525
   
$
121,281
     
-20
%
   
-16
%
As a % of revenue
   
11.3
%
   
14.1
%
               
                                 
(1) The supplementary information included in this press release for the six months ended October 31, 2018 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) Due to the retrospective adoption of ASU 2017-07, total net benefits of $3.9 million related to defined benefit and other post-employment benefit plans were reclassified from Operating and Administrative Expenses to Interest and Other Income. The impact of the reclassification on Contribution to Profit by segment for the six months ended October 31, 2017 was $2.0 million in Research, $1.1 million in Publishing, and $0.8 million in Corporate Expenses.
 

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)(2)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
             
   
October 31,
   
April 30,
 
   
2018
   
2018
 
Current Assets
           
Cash and cash equivalents
 
$
115,603
   
$
169,773
 
Accounts receivable, net (2)
   
236,207
     
212,377
 
Inventories, net
   
35,084
     
39,489
 
Prepaid expenses and other current assets
   
61,973
     
58,332
 
Total Current Assets
   
448,867
     
479,971
 
Product Development Assets
   
64,716
     
78,814
 
Royalty Advances, net
   
15,331
     
37,058
 
Technology, Property and Equipment, net
   
286,308
     
289,934
 
Intangible Assets, net
   
787,629
     
848,071
 
Goodwill
   
986,248
     
1,019,801
 
Other Non-Current Assets
   
91,732
     
85,802
 
Total Assets
 
$
2,680,831
   
$
2,839,451
 
                 
Current Liabilities
               
Accounts payable
 
$
71,555
   
$
90,097
 
Accrued royalties
   
94,438
     
73,007
 
Contract liability (Deferred revenue) (2)
   
237,184
     
486,353
 
Accrued employment costs
   
69,792
     
116,179
 
Accrued income taxes
   
18,436
     
13,927
 
Other accrued liabilities
   
78,651
     
94,748
 
Total Current Liabilities
   
570,056
     
874,311
 
Long-Term Debt
   
537,306
     
360,000
 
Accrued Pension Liability
   
167,722
     
190,301
 
Deferred Income Tax Liabilities
   
140,338
     
143,518
 
Other Long-Term Liabilities
   
96,017
     
80,764
 
Total Liabilities
   
1,511,439
     
1,648,894
 
Shareholders' Equity
   
1,169,392
     
1,190,557
 
Total Liabilities and Shareholders' Equity
 
$
2,680,831
   
$
2,839,451
 
                 
(1) The supplementary information included in this press release for October 31, 2018 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) On May 1, 2018, we adopted Topic 606. The impact to the Condensed Consolidated Statements of Financial Position was not material by line item, except for the amount related to the discontinuance of netting down the accounts receivable and contract liability (deferred revenue) of $59.5 million as previously disclosed in our Fiscal Year 2018 Annual Report on Form 10-K. In addition, upon adoption we reclassified the sales return reserve to contract liability from accounts receivable of $28.3 million. As of October 31, 2018, the amount that would have been netted down from accounts receivable and deferred revenue prior to the adoption of Topic 606 would have been $5.8 million and the sales return reserve amount is $31.1 million. Refer to our upcoming Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2018 for further details.
 


JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
               
      
Six Months Ended
 
      
October 31,
 
     
2018
   
2017 (2)
 
Operating Activities:
           
Net income
 
$
70,079
   
$
69,284
 
Amortization of intangibles
   
25,050
     
23,802
 
Amortization of product development spending
   
20,093
     
20,246
 
Depreciation of technology, property, and equipment
   
35,845
     
34,775
 
Non-cash charges and credits
   
41,446
     
56,226
 
Net change in operating assets and liabilities
   
(313,610
)
   
(250,145
)
Net Cash Used In Operating Activities
   
(121,097
)
   
(45,812
)
                   
Investing Activities:
               
Additions to technology, property, and equipment
   
(34,560
)
   
(53,469
)
Product development spending
   
(7,815
)
   
(17,927
)
Acquisitions of publication rights and other
   
(2,795
)
   
(6,097
)
Net Cash Used in Investing Activities
   
(45,170
)
   
(77,493
)
                   
Financing Activities:
               
Net debt borrowings
   
179,275
     
196,589
 
Cash dividends
   
(38,033
)
   
(36,699
)
Purchase of treasury shares
   
(24,994
)
   
(29,257
)
Other
   
4,217
     
4,718
 
Net Cash Provided By Financing Activities
   
120,465
     
135,351
 
                   
Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
   
(8,368
)
   
2,855
 
                   
Change in Cash, Cash Equivalents and Restricted Cash for Period
   
(54,170
)
   
14,901
 
                   
Cash, Cash Equivalents and Restricted Cash - Beginning
   
170,257
     
58,516
 
Cash, Cash Equivalents and Restricted Cash - Ending
 
$
116,087
   
$
73,417
 
                   
CALCULATION OF NON-GAAP FREE CASH FLOW LESS PRODUCT DEVELOPMENT SPENDING
         
                   
      
Six Months Ended
 
      
October 31,
 
       
2018
     
2017
 
Net Cash Used In Operating Activities
 
$
(121,097
)
 
$
(45,812
)
Less:  Additions to technology, property, and equipment

   
(34,560
)
   
(53,469
)
Less:  Product development spending (3)

   
(7,815
)
   
(17,927
)
Free Cash Flow less Product Development Spending
 
$
(163,472
)
 
$
(117,208
)
                   
See Explanation of Usage of Non-GAAP Measures included in this supplemental information.

         
(1) The supplementary information included in this press release for the six months ended October 31, 2018 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) Due to the retrospective adoption of ASU 2016-18, we are now required to include restricted cash as part of the change in cash, cash equivalents and restricted cash. As a result, amounts which were previously classified as cash flows from operating activities have been reclassified as they are recognized in the total change in cash, cash equivalents and restricted cash. Restricted cash was $0.5 million as of October 31, 2018 and April 30, 2018 and is included in Prepaid and Other Current Assets.  

 
(3) Due to the adoption of Topic 606, certain costs to fulfill contracts, which were previously included in product development spending are now included in cash flow from operating activities.
 


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 ("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 Contribution to Profit 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.


The following information was filed by WILEY JOHN SONS, INC. on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0000107140-18-000046
  • Submitted to the SEC: Thursday, December 6, 2018 1:16:36 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Books Publishing Or Publishing And Printing