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Wiley Reports Second Quarter Fiscal Year 2017 Results

  • Second quarter revenue of $426 million, up 2% over prior year on a constant currency basis (-2% US GAAP)
  • Second quarter journal subscription revenue up 3% on a constant currency basis (-2% US GAAP)
  • Second quarter adjusted EPS of $0.76, up 3% on a constant currency basis. Adjusted EPS excludes certain charges and credits further described below and in the attached financial schedules. EPS on a US GAAP basis was a loss of $0.20 including the previously announced one-time tax charge of $0.83 per share
  • First half revenue flat and adjusted EPS down 1% on a constant currency basis. On a US GAAP basis, revenue down 3% and EPS down 74% reflecting the tax charge
  • Reaffirming full-year outlook of flat revenue and mid single digit decline in adjusted EPS, excluding the impact of foreign exchange, the shift to time-based journal subscriptions and acquisitions
Wednesday, December 7, 2016 8:00 am EST

Public Company Information:

NYSE:
JWA
NYSE:
JWB
"We made solid progress in the quarter"

HOBOKEN, N.J.--(BUSINESS WIRE)--John Wiley & Sons, Inc. (NYSE:JWa and JWb), a global provider of knowledge and learning services primarily in areas of science, technology, medicine, mathematics/engineering, and business/finance today announced the following results for the second quarter of fiscal year 2017, ending October 31:

       

% Change

 
$ millions   FY17   FY16   Excluding FX  

Including FX

Revenue:

Q2 $425.6 $433.4 2% (2%)
Six Months $829.9 $856.3 0% (3%)
 

GAAP EPS:

 

Q2 ($0.20) $0.74 (127%)
Six Months $0.34 $1.29 (74%)
 

Adjusted EPS:

Q2 $0.76 $0.78 3% (3%)
Six Months $1.27 $1.36 (1%) (7%)

Adjusted results exclude tax charges and credits, pension settlement, and restructuring charges and credits as more fully described in the attached financial schedules.

New Segment Reporting
To reflect shifts in its management structure, Wiley has implemented a new reporting structure comprised of three reportable segments: Research (Journals and Atypon; 50% of total fiscal 2017 year-to-date revenue), Publishing (Books and related content, Course Workflow, and Test Preparation; 37% of total year-to-date revenue) and Solutions (Online Program Management, Corporate Learning, and Professional Assessment; 13% of total year-to-date revenue). Please see the attached financial schedules for more detail, including historical segment restatement for the past five quarters.

Management Commentary
“We made solid progress in the quarter,” said Mark Allin, Wiley’s President and CEO. “Research continued to deliver good performance through the quarter and the first half of the year, with steady growth from journal subscriptions and strong double-digit growth from author-funded access. Our Atypon acquisition, which closed in the last month of the quarter, will further enhance our Research capabilities with an industry-leading online library platform and expanded Research service offerings. In our other two segments, Solutions posted double-digit revenue growth through the first six months, while Publishing revenue continued to decline due to market weakness in print book publishing.”

Fiscal Year 2017 Outlook
Wiley reaffirms its fiscal year 2017 operational outlook of flat revenue and a mid-single digit decline in adjusted EPS excluding foreign exchange, the favorable impact from shifting to time-based journal subscription agreements (+$37 million in revenue and +$0.42 in EPS), and the partial year revenue contribution (approximately +$20 million) and EPS dilution (approximately -$0.15) of the Atypon and Ranku acquisitions. The acquisition-related dilution reflects the impacts of acquisition accounting, including amortization of acquired intangibles, as well as costs associated with initiating the migration of Wiley Online Library to Atypon’s Literatum platform.

Income Tax Judgement in Germany
As previously reported in a September 26, 2016 filing, Wiley received an unfavorable final judgement from the German Federal Fiscal Court, denying Wiley’s longstanding income tax appeal. As background, the finance court denied the argument that Wiley was entitled to claim additional tax depreciation deductions over 15 years related to a fiscal year 2003 reorganization of several German subsidiaries. No further appeals are available. As a result, the Company forfeited its approximate 57 million euro deposit and incurred a predominantly non-cash income tax charge of $48 million ($0.83 per share for the quarter, $0.82 for the six month period). This charge is included in the Company’s income tax expense for the second quarter and six month periods ending October 31, 2016.

Foreign Exchange (FX)
Note that foreign exchange was adverse to second quarter revenue and EPS by $15 million and $0.04 per share, respectively. Wiley generates approximately half of its revenue from outside the United States, and is therefore exposed to foreign exchange rate fluctuations, particularly in relation to the euro and pound sterling. The weighted average rates for fiscal 2016 were 1.11 and 1.50, respectively. Throughout this report, references are made to variances “excluding foreign exchange” or “on a constant currency basis”; such amounts exclude both currency translation effects and transactional gains and losses.

Adjusted Results
The Company provides financial measures referred to as “adjusted” contribution to profit and EPS, which exclude a previously announced tax charge; restructuring charges; a pension settlement charge related to voluntary lump sum buyouts; and certain deferred tax benefits as more fully described in the attached financial schedules. Variances to adjusted contribution to profit and EPS are on a constant currency basis unless otherwise noted. Management believes the exclusion of such items provides additional information to facilitate the analysis of results. These non-GAAP measures are not intended to replace the financial results reported in accordance with GAAP.

Second Quarter and First Half Summary

  • Second quarter revenue declined 2% on a US GAAP basis to $425.6 million, or rose 2% excluding the unfavorable impact of foreign exchange ($15 million). Higher revenue on a constant currency basis was driven by growth in Journal Revenue (+3%), Online Program Management (+21%), Corporate Learning (+16%), Online Test Preparation (+11%), and Course Workflow (+8%), along with a one-month results contribution from the Atypon acquisition (+$2.5 million), partially offset weakness in Books (-9%). The shift to time-based journal subscriptions in calendar year 2016 had no material impact on revenue growth in the second quarter. First half revenue declined 3% on a US GAAP basis to $829.9 million, and was flat excluding the impact of currency. For the six months, the shift to time-based journal subscriptions resulted in a favorable revenue impact of $4 million.
  • Second quarter EPS declined 127% on a US GAAP basis to a loss of $0.20, but rose 3% on an adjusted basis. Adjusted EPS excludes the unfavorable impact of foreign exchange ($0.04); an adverse income tax judgement in Germany ($0.83); a settlement charge related to a voluntary lump sum pension distribution program for terminated employees ($0.10); and restructuring charges in the current ($0.08) and prior year quarter ($0.04); partially offset by a deferred tax benefit related to a future tax rate reduction in the United Kingdom ($0.04). Adjusted EPS growth was mainly due to revenue performance and cost savings from restructuring initiatives, partially offset by an increase in technology spending. The shift to time-based journal subscriptions in calendar year 2016 had no material impact on earnings growth in the second quarter. First half EPS on a US GAAP basis declined 74% to $0.34. Adjusted EPS declined 1% to $1.27. Also note, for the first six months, the shift to time-based journal subscriptions resulted in a favorable earnings impact of approximately $0.05 per share.
  • Atypon acquisition: In October, Wiley closed its $120 million Atypon acquisition, which was first announced in August. Atypon is a publishing-software and service provider based in Santa Clara that enables scholarly societies and publishers to deliver, host, enhance, market, and manage their content on the web. Atypon’s Literatum platform hosts nearly 9,000 journals, 13 million journal articles, and more than 1,800 publication web sites for over 200 societies and publishers. Atypon generated over $31 million in calendar year 2015 revenue. The platform will replace the current Wiley Online Library platform in calendar year 2018.
  • Appointment of Judy Verses as Executive Vice President, Research: In October, Wiley announced the appointment of Judy Verses as Executive Vice President, Research. Judy was most recently President, Global Enterprise & Education at Rosetta Stone, a market leader in online language learning and literacy, where she had global responsibility for all institutional business, as well as product and business development, IT, and global communications. Previously, Judy had been President and Chief Client Officer at Blackboard, a leading supplier of educational enterprise software, overseeing global sales and marketing, and President and COO at Blackboard Learn.
  • Net Debt and Cash Position: Net debt (debt less cash and cash equivalents) at the end of October was $616.6 million, up from $580.8 million at the end of the prior year. The increase is mainly attributed to recent acquisitions. Cash and cash equivalents as of October 31, 2016 were $267.4 million.
  • Free Cash Flow was a use of $155.4 million for the first six months compared to a use of $192.7 million in the prior year period mainly due to earlier journal cash collections. Note that free cash flow is seasonally negative in the first half of Wiley’s fiscal year principally due to the timing of cash collections for annual journal subscriptions.
  • Share Repurchases: Wiley repurchased 193,955 shares this quarter at a cost of $10.0 million, an average of $51.56 per share. Over 4.3 million shares remain in the current authorized repurchase programs.

As noted, below are our redefined segments:

RESEARCH (JOURNALS AND ATYPON)

  • Revenue: Second quarter revenue of $206.0 million declined 1% on a US GAAP basis but rose 5% on a constant currency basis. Growth in constant currency was driven by a 3% rise in Journal Revenue, including 3% growth in Journal Subscriptions and 27% growth in Author-Funded Access, as well as a $2.5 million revenue contribution from the acquisition of Atypon in the last month of the quarter. For the first six months, Research revenue was flat on a US GAAP basis but grew 4% at constant currency, including in both cases the $4 million favorable impact from the shift to time-based journal subscriptions.
  • Contribution to Profit: Second quarter contribution to profit of $60.3 million was down 6% on a US GAAP basis but was essentially flat on an adjusted basis. Contributions from revenue growth were offset by costs associated with the Atypon acquisition, higher technology costs, and other spending to support society journals. For the first six months, contribution to profit was down 5% on a US GAAP basis, and 1% on an adjusted basis, including in both cases the $3.8 million favorable profit impact from the shift to time-based journal subscriptions.
  • Calendar Year 2016 Journal Subscriptions: As of the end of October, calendar year 2016 Journal Subscriptions increased 1% on a constant currency basis, with 99% of targeted business contracted for the 2016 calendar year.
  • Society Publishing Agreements: Two new society contracts were signed in the three month period ending October 2016 with combined annual revenue of $2.7 million; 12 were renewed with combined annual revenue of $7.9 million; and one with annual revenue of $1.6 million was not renewed.
  • Nobel Prize Winners: In October, Wiley announced that six Wiley authors have been honored with the 2016 Nobel Prize in their respective fields, including Professor Yoshinori Ohsumi, Tokyo Institute of Technology, Tokyo, Japan (Physiology or Medicine); Professors Jean-Pierre Sauvage, University of Strasbourg, France, Sir J. Fraser StoddartNorthwestern University, Evanston, IL, USA and Bernard “Ben” L. FeringaUniversity of Groningen, The Netherlands (Chemistry); and Professors Oliver Hart, Harvard University, Cambridge, MA, USA, and Bengt Holmström, Massachusetts Institute of Technology (MIT), Cambridge, MA, USA (Economic Sciences). Wiley has now published the works of over 470 Nobel Laureates.

PUBLISHING (BOOKS, COURSE WORKFLOW, ONLINE TEST PREPARATION)

  • Revenue: Second quarter revenue declined 7% on a US GAAP basis to $163.3 million, or 5% at constant currency. Growth in Online Test Preparation (+11%), Course Workflow (+8%) and Licensing and Other (+20%) was more than offset by a 9% decline in Books and Reference Material revenue, with STM and Professional Books down 12% and Education Books down 5%. Digital revenue grew 7% in the quarter. For the six months, Publishing revenue declined 11% on a US GAAP basis, or 10% at constant currency.
  • Contribution to Profit: Second quarter contribution to profit rose 6% on a US GAAP basis to $36.5 million, or 8% at constant currency. Performance was primarily due to cost savings from restructuring and lower consumption of distribution, technology and facilities shared services. For the six months, contribution to profit on a US GAAP basis was down 13%, or 10% on an adjusted basis.
  • Dummies Birthday - In October, Wiley’s iconic dummies brand celebrated its 25th birthday. Over 250 million copies have been sold to-date.
  • Partnerships: In October, AuditFile, Inc. and Wiley jointly announced a new version of AuditFile’s award-winning audit automation software that features the full suite of 2017 Wiley Advantage Audit programs and planning documents for industry-specific audits, reviews and compilations. The new cloud-based, all-in-one audit program and automation solution empowers firms of all sizes to work more efficiently and effectively from any browser or device.

SOLUTIONS (ONLINE PROGRAM MANAGEMENT, CORPORATE LEARNING AND ASSESSMENT)

  • Revenue: Second quarter revenue rose 14% on both a US GAAP and constant currency basis to $56.3 million. Growth at constant currency was driven by Online Program Management (+21%) and Corporate Learning (+16%). Professional Assessment grew 2%. For the six months, Solutions revenue was up 13% on a US GAAP and constant currency basis.
  • Contribution to Profit: Second quarter contribution to profit on a US GAAP basis rose 120% to $5.4 million, or 129% on an adjusted basis. Performance was due to revenue growth and improved operating leverage. For the six months, Contribution to Profit on a US GAAP and constant currency basis was up $7 million.
  • Online Program Management: As of October 31, 2016, Wiley had 37 university partners and 231 programs under contract, compared to 37 partners and 232 programs at the end of last quarter. Wiley signed three new programs; four programs were not renewed.
  • Partnerships: CrossKnowledge is partnering with O’Reilly Media’s PubFactory to provide organizations with a curated solution to access the very best library of world class IT and business information published by Wiley brands and imprints. Used in combination with other CrossKnowledge learning formats, OpenBooks creates customized training paths and allows employees to search and instantly find relevant answers their technical or business questions.
  • Ranku acquisition: In September, Wiley acquired Ranku, a recruitment technology and predictive analytics software company for universities and community colleges, for an undisclosed amount. Ranku has been a partner to more than 1,000 online degree programs at the undergraduate and graduate level, providing advanced market research and recruitment capabilities.

Earnings Conference Call

  • Scheduled for today, December 7, at 10:00 a.m. (EDT)
  • Access the webcast at www.wiley.com > Investor Relations> Events and Presentations, or http://www.wiley.com/WileyCDA/Section/id-370238.html
  • U.S. callers, please dial (888) 438-5453 and enter the participant code 1291593#.
  • International callers, please dial (719) 457-2643 and enter the participant code 1291593#.
  • An archive of the webcast will be available for a period of up to 14 days

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This release contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company's educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company's ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities and (x) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

About Wiley
Wiley is a global provider of knowledge and learning services primarily in areas of science, technology, medicine, mathematics/engineering, and business/finance. Through the Research segment, the Company provides scientific, technical, medical, and scholarly journals, as well as related content and services, for academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. The Publishing segment provides scientific, professional development, and education books and related content, as well as test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers. In Solutions, Wiley provides online program management services for higher education institutions, and learning, development, and assessment services for businesses and professionals.

   
JOHN WILEY & SONS, INC.
UNAUDITED SUMMARY OF OPERATIONS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
OCTOBER 31, 2016 AND 2015
(in thousands, except per share amounts)
               
 

SECOND QUARTER ENDED OCTOBER 31,

 
2016     2015   % Change

US GAAP

 

Adjustments
(A-D)

  Adjusted US GAAP  

Adjustments
(A)

  Adjusted US GAAP

Adjusted
excl. FX

 
Revenue $ 425,588 425,588 433,362 433,362 -2 % 2 %
 
Costs and Expenses
Cost of Sales 111,574 111,574 116,594 116,594 -4 % 0 %
Operating and Administrative (B) 247,270 (8,842 ) 238,428 240,136 240,136 3 % 2 %
Restructuring Charges (Credits) (A) 6,847 (6,847 ) - 3,694 (3,694 ) -
Amortization of Intangibles 12,253     12,253   12,673     12,673   -3 % 1 %
 
Total Costs and Expenses 377,944 (15,689 ) 362,255 373,097 (3,694 ) 369,403 1 % 1 %
 
Operating Income 47,644 15,689 63,333 60,265 3,694 63,959 -21 % 3 %
Operating Margin 11.2 % 14.9 % 13.9 % 14.8 %
 
Interest Expense (4,360 ) (4,360 ) (4,324 ) (4,324 ) 1 % 1 %
Foreign Exchange (Loss) Gain (360 ) (360 ) 38 38
Interest Income and Other 478     478   644     644   -26 % 36 %
 
Income Before Taxes 43,402 15,689 59,091 56,623 3,694 60,317 -23 % 3 %
 
Provision for Income Taxes (A-D) 54,853   (39,340 ) 15,513   13,023   1,348   14,371   321 % 12 %
 
Net Income $ (11,451 ) 55,029   43,578   43,600   2,346   45,946   -126 % 0 %
 
 
Earnings Per Share- Diluted (A-D) $ (0.20 ) 0.96 0.76 0.74 0.04 0.78 -127 % 3 %
 
Average Shares - Diluted 57,538 57,538 57,538 58,790 58,790 58,790
 
 

SIX MONTHS ENDED OCTOBER 31,

 
2016 2015   % Change
US GAAP  

Adjustments
(A-D)

  Adjusted US GAAP  

Adjustments
(A)

  Adjusted US GAAP

Adjusted
excl. FX

 
Revenue $ 829,873 829,873 856,343 856,343 -3 % 0 %
 
Costs and Expenses
Cost of Sales 225,052 225,052 236,142 236,142 -5 % -2 %
Operating and Administrative (B) 482,497 (8,842 ) 473,655 482,836 482,836 0 % 0 %
Restructuring Charges (Credits) (A) 5,927 (5,927 ) - 7,119 (7,119 ) -
Amortization of Intangibles 24,826     24,826   25,072     25,072   -1 % 3 %
 
Total Costs and Expenses 738,302 (14,769 ) 723,533 751,169 (7,119 ) 744,050 -2 % 0 %
 
Operating Income 91,571 14,769 106,340 105,174 7,119 112,293 -13 % -2 %
Operating Margin 11.0 % 12.8 % 12.3 % 13.1 %
 
Interest Expense (8,431 ) (8,431 ) (7,897 ) (7,897 ) 7 % 7 %
Foreign Exchange (Loss) Gain (139 ) (139 ) (42 ) (42 )
Interest Income and Other 728     728   1,308     1,308   -44 % 9 %
 
Income Before Taxes 83,729 14,769 98,498 98,543 7,119 105,662 -15 % -2 %
 
Provision for Income Taxes (A-D) 64,180   (39,603 ) 24,577   22,486   2,767   25,253   185 % 2 %
 
Net Income $ 19,549   54,372   73,921   76,057   4,352   80,409   -74 % -3 %
 
 
Earnings Per Share- Diluted (A-D) $ 0.34 0.93 1.27 1.29 0.07 1.36 -74 % -1 %
 
Average Shares - Diluted 58,259 58,259 58,259 59,090 59,090 59,090
 
 
See the accompanying Notes to Unaudited Financial Statements for a description of each Adjustment.
 
     
JOHN WILEY & SONS, INC.
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
OCTOBER 31, 2016 AND 2015
     
 

RECONCILIATION OF US GAAP TO ADJUSTED EPS - DILUTED (UNAUDITED)

 
 
Second Quarter Ended Six Months Ended
October 31, October 31,
2016 2015 2016 2015
 
US GAAP Earnings Per Share - Diluted $ (0.20 ) $ 0.74 $ 0.34 $ 1.29
Adjusted to exclude the following:
Restructuring Charges (A) 0.08 0.04 0.07 0.07
One-time - Pension Settlement (B) 0.10 0.09
Unfavorable Tax Settlement (C) 0.83 0.82
Deferred Income Tax Benefit on UK Rate Change (D) (0.04 ) (0.04 )
Adjusted Earnings Per Share - Diluted $ 0.76   $ 0.78 $ 1.27   $ 1.36
 
 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 
 
Adjustments:
A Restructuring Charges: The adjusted results for the three and six months ended October 31, 2016 exclude restructuring charges related to the Company's Restructuring and Reinvestment Program of $6.8 million or $0.08 per share, and $5.9 million or $0.07 per share, respectively. The adjusted results for the three and six months ended October 31, 2015 exclude restructuring charges of $3.7 million or $0.04 per share and $7.1 million or $0.07 per share, respectively.
 
B The Company announced a voluntary, limited-time opportunity for terminated vested employees who were participants in the U.S. defined benefit retirement plan to elect a single lump sum payment of accumulated benefits. The election period closed on August 29, 2016. The total charge including a prorata portion of the unamortized net actuarial loss was $8.8 million or $0.10 per share for the quarter, $0.09 per share for the six month period. The aggregate amount of payments under this one time election was $28.3 million, which was paid from Pension Plan assets in October 2016.
 
C As previously disclosed and as reported in the Company's SEC filings, the Company was appealing an unfavorable tax ruling in Germany related to tax benefits obtained through an increase in the tax deductible basis of certain merged German subsidiaries. In September, the German Federal Fiscal Court issued an unfavorable final judgement in Wiley's longstanding tax appeal. As a consequence, the Company recorded a $48 million charge, $0.83 per share in the quarter, $0.82 per share for the six month period.
 
D Deferred Income Tax Benefit on UK Rate Change: The adjusted results for the three and six months ended October 31, 2016 exclude deferred tax benefits of $2.6 million $0.04 per share, associated with tax legislation enacted in the second quarter of fiscal year 2017 in the United Kingdom that reduced the U.K. corporate income tax rates by 1 percentage point in 2020. The benefits reflect the remeasurement of the Company's deferred tax balances from 18% to the new income tax rate of 17% effective April 1, 2020 and had no current cash tax impact.
 

Non-GAAP Financial Measures:

In addition to providing financial results in accordance with GAAP, the Company has provided adjusted financial results that exclude the impact of other nonrecurring items described in more detail throughout this press release. These non-GAAP financial measures are labeled as "Adjusted" and are used for evaluating the results of operations for internal purposes. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company believes the exclusion of such items provides additional information to investors to facilitate the comparison of past and present operations. Unless otherwise noted, adjusted amounts in the attached schedules include foreign exchange.

 
JOHN WILEY & SONS, INC.
UNAUDITED SEGMENT RESULTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
OCTOBER 31, 2016 AND 2015
(in thousands)
                 
 

SECOND QUARTER ENDED OCTOBER 31,

 
2016 2015   % Change  
US GAAP  

Adjustments
(A-B)

  Adjusted US GAAP  

Adjustments
(A)

Adjusted US GAAP  

Adjusted
excl. FX

Revenue

Research $ 205,994 - 205,994 207,662 - 207,662 -1 % 5 %
Publishing 163,300 - 163,300 176,258 - 176,258 -7 % -5 %
Solutions 56,294 - 56,294 49,442 - 49,442 14 % 14 %
           
Total $ 425,588   -   425,588   433,362   -   433,362   -2 % 2 %
 

Direct Contribution to Profit

Research $ 100,227 229 100,456 98,790 496 99,286 1 % 6 %
Publishing 76,359 215 76,574 78,536 259 78,795 -3 % -1 %
Solutions 13,854 524 14,378 10,805 140 10,945 28 % 31 %
           
Total $ 190,440   968   191,408   188,131   895   189,026   1 % 5 %
 

Contribution to Profit (After Allocated Shared Services

and Admin. Costs)

Research $ 60,292 229 60,521 64,199 496 64,695 -6 % 0 %
Publishing 36,490 215 36,705 34,319 259 34,578 6 % 8 %
Solutions 5,359 524 5,883 2,434 140 2,574 120 % 129 %
           
Total $ 102,141 968 103,109 100,952 895 101,847 1 % 6 %
 
Unallocated Shared Services and Admin. Costs (54,497 ) 14,721 (39,776 ) (40,695 ) 2,799 (37,896 ) 34 % 10 %
           
Operating Income $ 47,644   15,689   63,333   60,257   3,694   63,951   -21 % 3 %
 
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (23,729 ) 4,583 (19,146 ) (21,293 ) 1,208 (20,085 ) 11 % 0 %
Technology and Content Management (68,582 ) 1,663 (66,919 ) (62,230 ) (379 ) (62,609 ) 10 % 9 %
Finance (11,751 ) (191 ) (11,942 ) (10,258 ) (496 ) (10,754 ) 15 % 13 %
One-time Pension Settlement (8,842 ) 8,842 - - - -
Other Administration (29,892 ) (176 ) (30,068 ) (34,093 ) 2,466   (31,627 ) -12 % -2 %
Total $ (142,796 ) 14,721   (128,075 ) (127,874 ) 2,799   (125,075 ) 12 % 5 %
 
 

SIX MONTHS ENDED OCTOBER 31,

 
2016 2015 % Change
US GAAP  

Adjustments
(A-B)

  Adjusted US GAAP  

Adjustments
(A)

Adjusted US GAAP

Adjusted
excl. FX

Revenue

Research $ 413,218 - 413,218 412,364 - 412,364 0 % 4 %
Publishing 308,261 - 308,261 348,011 - 348,011 -11 % -10 %
Solutions 108,394 - 108,394 95,968 - 95,968 13 % 13 %
           
Total $ 829,873   -   829,873   856,343   -   856,343   -3 % 0 %
 

Direct Contribution to Profit

Research $ 195,726 160 195,886 194,739 866 195,605 1 % 4 %
Publishing 136,010 569 136,579 150,018 259 150,277 -9 % -7 %
Solutions 22,435 524 22,959 14,859 140 14,999 51 % 52 %
           
Total $ 354,171   1,253   355,424   359,616   1,265   360,881   -2 % 1 %
 

Contribution to Profit (After Allocated Shared Services

and Admin. Costs)

Research $ 120,727 160 120,887 127,413 866 128,279 -5 % -1 %
Publishing 55,832 569 56,401 64,145 259 64,404 -13 % -10 %
Solutions 5,506 524 6,030 (1,591 ) 140 (1,451 ) 446 % 516 %
           
Total $ 182,065 1,253 183,318 189,967 1,265 191,232 -4 % 0 %
 
Unallocated Shared Services and Admin. Costs (90,494 ) 13,516 (76,978 ) (84,793 ) 5,854 (78,939 ) 7 % 2 %
           
Operating Income $ 91,571   14,769   106,340   105,174   7,119   112,293   -13 % -2 %
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (43,305 ) 4,596 (38,709 ) (41,829 ) 1,965 (39,864 ) 4 % 1 %
Technology and Content Management (138,956 ) 1,733 (137,223 ) (124,389 ) 773 (123,616 ) 12 % 13 %
Finance (23,155 ) (346 ) (23,501 ) (22,885 ) (425 ) (23,310 ) 1 % 3 %
One-time Pension Settlement (8,842 ) 8,842 - - - -
Other Administration (48,342 ) (1,309 ) (49,651 ) (65,339 ) 3,541   (61,798 ) -26 % -17 %
Total $ (262,600 ) 13,516   (249,084 ) (254,442 ) 5,854   (248,588 ) 3 % 3 %
 

(A) See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.

Note: As part of Wiley’s Restructuring and Reinvestment Program, the Company consolidated its Marketing Services functions into a single global shared service function. This newly centralized service group enables significant cost reduction opportunities, including efficiencies gained from standardized technology and centralized management. The cost of these functions were previously reported as direct operating expenses in each business segment but are now reported within Shared Services and Administrative Costs and then allocated to each business segment above. Prior year amounts have been restated to reflect the same reporting methodology.
 
     
UNAUDITED ADJUSTED CONTRIBUTION TO PROFIT
INCLUDING ALLOCATED SHARED SERVICES AND ADMINISTRATIVE COSTS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
OCTOBER 31, 2016 AND 2015
(in thousands)
                         
 
Second Quarter Ended Six Months Ended
October 31, October 31,
2016   2015  

%
Change

% Change
excl. FX

2016   2015  

%
Change

%
Change
excl. FX

 
 

Research:

Direct Contribution to Profit $ 100,227 98,790 1 % 7 %

 

$

195,726 194,739 1 % 4 %
Restructuring Charges (Credits) (A) 229   496   160   866  
Adjusted Direct Contribution to Profit 100,456 99,286 1 % 6 % 195,886 195,605 0 % 4 %
 
Allocated Shared Services and Admin. Costs: (39,935 ) (34,591 ) 15 % 18 % (74,999 ) (67,326 ) 11 % 14 %
Adjusted Contribution to Profit (after allocated $ 60,521   64,695   -6 % 0 %

 

$

120,887   128,279   -6 % -1 %
Shared Services and Admin. Costs)
 

Publishing:

Direct Contribution to Profit $ 76,359 78,536 -3 % -1 %

 

$

136,010 150,018 -9 % -8 %
Restructuring Charges (A) 215   259   569   259  
Adjusted Direct Contribution to Profit 76,574 78,795 -3 % -1 % 136,579 150,277 -9 % -7 %
 
Allocated Shared Services and Admin. Costs: (39,869 ) (44,217 ) -10 % -8 % (80,178 ) (85,873 ) -7 % -5 %
Adjusted Contribution to Profit (after allocated $ 36,705   34,578   6 % 8 %

 

$

56,401   64,404   -12 % -10 %
Shared Services and Admin. Costs)
 

Solutions:

Direct Contribution to Profit $ 13,854 10,805 28 % 28 %

 

$

22,435 14,859 51 % 50 %
Restructuring Charges (A) 524   140   524   140  
Adjusted Direct Contribution to Profit 14,378 10,945 31 % 31 % 22,959 14,999 53 % 52 %
 
Allocated Shared Services and Admin. Costs: (8,495 ) (8,371 ) 1 % 1 % (16,929 ) (16,450 ) 3 % 2 %
Adjusted Contribution to Profit (after allocated $ 5,883   2,574   129 % 129 %

 

$

6,030   (1,451 ) 516 % 516 %
Shared Services and Admin. Costs)
 
Total Adjusted Contribution to Profit (after $ 103,109 101,847 1 % 6 %

 

$

183,318 191,232 -4 % 0 %
allocated Shared Services and Admin. Costs)
 

Unallocated Shared Services and Admin. Costs:

Unallocated Shared Services and Admin. Costs $ (54,497 ) (40,695 ) 34 % 38 %

 

$

(90,494 ) (84,793 ) 7 % 10 %
Restructuring Charges (Credits) (A) 5,879 2,799 4,674 5,854
One-time - Pension Settlement (B) 8,842   -   8,842    
Adjusted Unallocated Shared Services and Admin. Costs $ (39,776 ) (37,896 ) 5 % 10 %

 

$

(76,978 ) (78,939 ) -2 % 2 %
       
Adjusted Operating Income $ 63,333   63,951   -1 % 3 %

 

$

106,340   112,293   -5 % -2 %
 
 
 
(A) See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.
 
Note: As part of Wiley’s Restructuring and Reinvestment Program, the Company consolidated its Marketing Services functions into a single global shared service function. This newly centralized service group enables significant cost reduction opportunities, including efficiencies gained from standardized technology and centralized management. The cost of these functions were previously reported as direct operating expenses in each business segment but are now reported within Shared Services and Administrative Costs and then allocated to each business segment above. Prior year amounts have been restated to reflect the same reporting methodology.
 
 
JOHN WILEY & SONS, INC.
SEGMENT REVENUE by PRODUCT/SERVICE
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
OCTOBER 31, 2016 AND 2015
(in thousands)
                                                       
  Second Quarter       Six Months        
Ended October 31, % of % Change Ended October 31, % of % Change
    2016     2015     Revenue   excl. FX   2016     2015     Revenue     excl. FX
       
 

RESEARCH

Journal Revenue
Journal Subscriptions $ 159,726 163,678 78 % 3 % $ 322,410 325,301 78 % 3 %
Author-Funded Access 7,423 6,180 4 % 27 % 14,936 11,872 4 % 33 %
Licensing, Reprints, Backfiles, and Other   36,367 37,804 18 % 1 % 73,394 75,191 18 % 2 %
Total Journal Revenue 203,516 207,662 99 % 3 % 410,740 412,364 99 % 4 %
 
Platform Services (Atypon) 2,478 - 1 % 2,478 - 1 %
 
                                                     
  Total Revenue     $   205,994  

 

207,662     100 %     5 % $ 413,218     412,364     100 %     4 %
 
 

Publishing

STM and Professional Books $ 68,130 80,208 42 % -12 % $ 138,835 160,912 45 % -11 %
Education Books   57,472 61,858 35 % -5 % 112,326 133,662 36 % -15 %
Total Books and Reference Material 125,602 142,066 77 % -9 % 251,161 294,574 81 % -13 %
 
 
Course Workflow (WileyPLUS) 19,840 18,446 12 % 8 % 20,706 19,466 7 % 6 %
Online Test Preparation and Certification 7,521 6,786 5 % 11 % 17,077 14,845 6 % 16 %
Licensing, Distribution, Advertising and Other 10,337 8,960 6 % 20 % 19,317 19,126 6 % 5 %
                                                     
  Total Revenue     $   163,300     176,258     100 %     -5 % $ 308,261     348,011     100 %     -10 %
 
 

Solutions

 
Online Program Management 28,007 23,149 50 % 21 % 51,179 43,697 47 % 17 %
Professional Assessment 16,146 15,805 29 % 2 % 29,668 29,034 27 % 2 %
Corporate Learning 12,141 10,488 22 % 16 % 27,547 23,237 25 % 19 %
 
                                                     
  Total Revenue     $   56,294     49,442     100 %     14 % $ 108,394     95,968     100 %     13 %
 
 
 
             
Total $   425,588 433,362 2 % $ 829,873 856,343 0 %
 
 
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FINANCIAL POSITION
(in thousands)
       
October 31, April 30,
2016 2015 2016
 
Current Assets
Cash & cash equivalents $ 267,410 308,235 363,806
Accounts receivable 212,590 183,447 167,638
Inventories 51,779 58,154 57,779
Prepaid and other 147,753 68,951 81,456
Total Current Assets 679,532 618,787 670,679
Product Development Assets 48,927 55,432 72,126
Technology, Property and Equipment 248,281 205,362 214,770
Intangible Assets 822,962 915,174 877,007
Goodwill 974,068 965,571 951,663
Income Tax Deposits - 59,810 62,912
Other Assets 79,684 62,691 71,939
Total Assets 2,853,454 2,882,827 2,921,096
 
Current Liabilities
Short-Term Debt - 150,000 -
Accounts and royalties payable 158,985 161,282 166,222
Deferred revenue 223,307 150,716 426,489
Accrued employment costs 69,072 61,790 97,902
Accrued income taxes 8,515 9,654 9,450
Accrued pension liability 5,459 4,602 5,492
Other accrued liabilities 77,484 55,355 76,252
Total Current Liabilities 542,822 593,399 781,807
Long-Term Debt 883,992 739,051 605,007
Accrued Pension Liability 181,735 196,094 224,170
Deferred Income Tax Liabilities 191,729 203,499 189,868
Other Long-Term Liabilities 71,675 83,111 83,138
Shareholders' Equity 981,501 1,067,673 1,037,106
Total Liabilities & Shareholders' Equity $ 2,853,454 2,882,827 2,921,096
 
 
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FREE CASH FLOW
(in thousands)
       
 
Six Months Ended
July 31,
2016 2015
Operating Activities:
Net income $ 19,549 76,057
Amortization of intangibles 24,826 25,072
Amortization of composition costs 18,701 19,967
Depreciation of technology, property and equipment 34,092 32,820
Restructuring charges (credits) 5,927 7,119
Restructuring payments (10,770 ) (18,339 )
Deferred tax benefit on UK Corporate Income Tax Rate Change (2,575 )
Unfavorable Tax Settlement 47,531
One-time pension settlement 8,842
Share-based compensation expense 4,907 8,112
Excess tax benefits from share-based compensation (187 ) (527 )
Royalty advances (46,070 ) (45,553 )
Earned royalty advances 64,321 60,163
Other non-cash charges and credits 31,157 18,115
Change in deferred revenue (199,419 ) (225,115 )
Net change in operating assets and liabilities (86,926 ) (84,410 )
Cash Used for Operating Activities (86,094 ) (126,519 )
 
Investments in organic growth:
Composition spending (16,604 ) (20,033 )
Additions to technology, property and equipment (52,728 ) (46,177 )
 
Free Cash Flow (155,426 ) (192,729 )
 
Other Investing and Financing Activities:
Acquisitions, net of cash (135,753 ) (16,681 )
Repayment of long-term debt (201,415 ) (112,641 )
Borrowings of short-term debt - 50,000
Borrowings of long-term debt 480,400 201,600
Change in book overdrafts (5,861 ) 285
Cash dividends (35,883 ) (35,166 )
Purchase of treasury shares (21,289 ) (44,703 )
Proceeds from exercise of stock options and other 15,703 465
Excess tax benefits from share-based compensation 187   527  
Cash Provided by Investing and Financing Activities 96,089 43,686
   
Effects of Exchange Rate Changes on Cash (37,059 ) (163 )
 
Decrease in Cash and Cash Equivalents for Period $ (96,396 ) (149,206 )
 
 
 
RECONCILIATION TO GAAP PRESENTATION
 
Investing Activities:
Composition spending $ (16,604 ) (20,033 )
Additions to technology, property and equipment (52,728 ) (46,177 )
Acquisitions, net of cash (135,753 ) (16,681 )
Cash Used for Investing Activities $ (205,085 ) (82,891 )
 
Financing Activities:
Cash Used for Investing and Financing Activities $ 96,089 43,686
Excluding:
Acquisitions, net of cash (135,753 ) (16,681 )
Cash Provided by Financing Activities $ 231,842   60,367  
 

 

Note: The Company’s management evaluates performance using free cash flow. The Company believes free cash flow provides a meaningful and comparable measure of performance. Since free cash flow is not a measure calculated in accordance with GAAP, it should not be considered as a substitute for other GAAP measures, including cash used for or provided by operating activities, investing activities and financing activities, as an indicator of performance.
 
                         
JOHN WILEY & SONS, INC.
SEGMENT RESTATEMENT
 
 
Fiscal Year 2016 Fiscal Year 2017
(Amounts in Millions) (Amounts in Millions)
 

First Quarter
Ended July
31, 2015

Second Quarter
Ended October
31, 2015

Third Quarter
Ended January
31, 2016

Fourth Quarter
Ended April 30,
2016

For the Twelve
Months Ended
April 30, 2016

First Quarter
Ended July
31, 2016

Research:
Revenue:
Journal Subscriptions $ 161.6 $ 163.7 $ 125.7 $ 171.3 $ 622.3 $ 162.7
Author-Funded Access 5.7 6.2 6.4 7.4 25.7 7.5
Licensing, Reprints, Backfiles, and Other 37.4 37.8 51.5 52.1 178.8 37.0
Total Journal Revenue 204.7 207.7 183.6 230.8 826.8 207.2
 
Platform Services ( Atypon) - - - - - -
                           
Total Revenue $ 204.7 $ 207.7 $ 183.6 $ 230.8 $ 826.8 $ 207.2
 
                           
Contribution to Profit $ 63.2         $ 64.2       $ 43.9         $ 80.8   $ 252.1   $ 60.4  
 
 
Publishing:
Revenue:
STM and Professional Publishing $ 80.7 $ 80.2 $ 90.8 $ 79.2 $ 330.9 $ 70.7
Education Publishing   71.8           61.9         69.7           26.6     230.0     54.9  
Total Books and Reference Material 152.5 142.1 160.5 105.8 560.9 125.6
 
Course Workflow (WileyPLUS) 1.0 18.4 21.9 17.2 58.5 0.9
Online Test Preparation and Certification 8.1 6.8 6.6 6.6 28.1 9.6
Licensing, Distribution, and Other 10.2 9.0 11.8 17.3 48.3 9.0
                           
Total Revenue $ 171.7 $ 176.3 $ 200.8 $ 146.9 $ 695.8 $ 145.1
 
                           
Contribution to Profit $ 29.8         $ 34.3       $ 47.3         $ 14.5   $ 125.9   $ 19.3  
 
 
Solutions:
Revenue:
Online Program Management $ 20.6 $ 23.1 $ 26.0 $ 26.7 $ 96.4 $ 23.2
Professional Assessment 13.2 15.8 13.2 15.2 57.4 13.5
Corporate Learning 12.7 10.5 13.0 14.5 50.7 15.4
                           
Total Revenue 46.5 49.4 52.2 56.4 204.5 52.1
 
                           
Contribution to Profit (Loss) $ (4.0 )       $ 2.4       $ 1.8         $ 4.1   $ 4.3   $ 0.1  
 
 
Consolidated:                            
Total Revenue $ 422.9         $ 433.4       $ 436.6         $ 434.1   $ 1,727.1   $ 404.4  
 
 
                           
Contribution to Profit $ 89.0 $ 100.9 $ 93.0 $ 99.4 $ 382.3 $ 79.8
 
Unallocated Shared Services (44.1 ) (40.6 ) (53.4 ) (56.1 ) (194.2 ) (36.0 )
                           
Consolidated Operating Income $ 44.9         $ 60.3       $ 39.6         $ 43.3   $ 188.1   $ 43.8  
 

Contact:

Investor:
John Wiley & Sons, Inc.
Brian Campbell, 201-748-6874
VP, Investor Relations
brian.campbell@wiley.com