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Wiley Reports Third Quarter Fiscal Year 2016 Results

  • Revenue of $436 million, up 3% over prior year on a constant currency basis and excluding a $29 million transitional (non-cash) impact of shifting to time-based journal subscriptions
  • Journal revenue of $181 million, up 5% on a constant currency basis and excluding the transitional (non-cash) impact of shifting to time-based journal subscriptions
  • Adjusted EPS of $0.67, up 6% on a constant currency basis and excluding a $0.32 transitional (non-cash) impact of shifting to time-based journal subscriptions. GAAP EPS for the quarter was $0.61 compared to $0.72 reported in the prior year period
  • Revenue for the nine months essentially flat and adjusted EPS up 2% on a constant currency basis and excluding the impact of shifting to time-based journal subscriptions
  • Reaffirming full-year outlook of flat revenue and flat adjusted EPS, excluding the impact of foreign exchange and the shift to time-based journal subscriptions
Tuesday, March 8, 2016 8:00 am EST

Public Company Information:

NYSE:
JWA
NYSE:
JWB
"We are pleased with our solid progress this quarter"

HOBOKEN, N.J.--(BUSINESS WIRE)--John Wiley & Sons, Inc. (NYSE:JWa and JWb), a global provider of knowledge and learning solutions that improve outcomes in research, professional practice, and education, today announced the following results for the third quarter of fiscal year 2016:

             

% Change

$ millions     FY16     FY15     Excluding FX    

Including FX

Revenue:

   
Q3 $436.4 $465.9 (3%) (6%)
9 Months $1,292.7 $1,380.8 (2%) (6%)
 

Adjusted EPS:

Q3 $0.67 $0.99 (26%) (32%)
9 Months $2.04 $2.45 (11%) (17%)
 

GAAP EPS:

 

Q3 $0.61 $0.72 (15%)
9 Months $1.90 $2.18 (13%)

 

 

Note: Results include transitional impact of shift to time-based journal subscriptions ($29 million revenue and
$0.32 EPS). There is no cash impact from the change. Adjusted results exclude restructuring charges in the
current and prior year periods and a deferred tax benefit in the current year period. Please see the attached
financial schedules.

 

Management Commentary

“We are pleased with our solid progress this quarter,” said Mark Allin, President and CEO. “Operationally, our journals business achieved five percent revenue growth in the quarter, buoyed by a large backfile sale and steady subscription results. Our solutions businesses, including test preparation, corporate learning, and online program management, continued to post double-digit revenue growth rates. The Research segment was also lifted by strong digital book sales, while Education saw solid growth in the key areas of Custom Material and WileyPLUS Course Workflow.”

Fiscal Year 2016 Outlook

Wiley is reaffirming its fiscal year 2016 outlook of flat revenue and flat adjusted earnings per share (EPS) on a constant currency basis and excluding the adverse transitional impact of shifting to time-based journal subscriptions. As previously announced, Wiley is moving from issue-based journal subscriptions to time-based digital journal subscription agreements for calendar year 2016. The change will shift roughly $37 million of revenue and $0.40 of EPS from FY16 to FY17, with recurring effect annually thereafter. We previously estimated these impacts to be $35 million of revenue and $0.35 of EPS. The shift to time-based subscriptions will not impact cash flow for the year. Included in the FY16 EPS guidance is an incremental expense impact of more than $0.15 as compared to FY15 for the enterprise resource planning (ERP) and related systems implementations.

Foreign Exchange (FX)

Wiley generates 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. For fiscal year 2015, the weighted average rates for sterling and the euro were 1.60 and 1.25, respectively, on a US dollar equivalent basis. The weighted average rates for the first nine months of fiscal 2016 were 1.53 and 1.11, 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 restructuring charges and deferred tax benefits. 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.

Third Quarter Summary

  • Third quarter revenue declined 3% on a constant currency basis to $436.4 million but rose 3% excluding both currency and the shift to time-based journal subscriptions ($29 million transitional impact). Performance was driven by a $10 million journal backfile sale to a national consortium, and double-digit growth in Research Books and References (+13%), Author-Funded Access (+11%), Online Test Preparation (+69%), Online Program Management (+13%), and Custom Education Material (+20%). The positive performance offset an unfavorable reporting comparison with prior year for Corporate Learning (three months reported vs. five months in the year-ago period due to a prior year CrossKnowledge reporting lag, -$5 million) and a double-digit revenue decline in Education books (-12%). Nine month revenue of $1,293 million declined 2% on a constant currency basis but was essentially flat excluding currency impacts and the shift to time-based journal subscriptions.
  • Third quarter adjusted EPS declined 26% on a constant currency basis but rose 6% excluding both currency and the shift to time-based journal subscriptions ($0.32 transitional impact). Adjusted EPS excludes a $13.7 million restructuring charge in the quarter related to the restructuring of our books businesses, the outsourcing of US distribution operations, and the implementation of other shared services efficiency initiatives. It also excludes a deferred tax benefit (+$5.9 million) related to a future reduction in the UK income tax rate that was enacted in the quarter. Adjusted EPS performance was driven by revenue growth, including the high-margin backfile sale and restructuring savings, partially offset by an increase in technology expense related to our ERP implementation and other systems development, as well as higher legal provisions. Third quarter EPS on a US GAAP basis declined 15% to $0.61, including an adverse currency impact of $0.06. Nine month adjusted EPS declined 11% on a constant currency basis to $2.04, but was up 2% excluding both currency and the shift to time-based journal subscriptions. On a US GAAP basis, EPS for the nine months declined 13%, including an adverse currency impact of $0.14.
  • Free Cash Flow was $18.9 million for the first nine months of the year compared to $80.0 million in the prior year period. Lower cash from operations (-$38 million) reflected lower cash earnings and less favorable timing of cash collections. Higher capital spending (+$22 million) reflected investment in the ERP deployment and other systems, as well as the global headquarters office transformation.
  • Credit Facility: On March 1, Wiley amended its existing revolving credit agreement, increasing its capacity to $1.1 billion and extending the term by five years to March 2021. The proceeds of the amended facility will be used for general corporate purposes, including seasonal operating cash requirements and strategic acquisitions. At the end of January, Wiley’s net debt to EBITDA ratio was 1:1.
  • Share Repurchases: Wiley repurchased 347,961 shares this quarter at a cost of $15.0 million, an average of $43.11 per share. Approximately 963,000 shares remain in the current repurchase authorization.

RESEARCH

  • Revenue: Third quarter revenue of $224.7 million was down 5% on a constant currency basis but rose 7% excluding the $29 million transitional impact from the shift to time-based journal subscriptions. Steady performance in journal subscriptions (flat excluding impact of currency and the shift to time-based journal subscriptions) and double-digit growth in Licensing, Reprints, and Backfiles (+22%), Author-Funded Access (+11%), and Books and References (+13%) all contributed to revenue growth. Results included a large journal backfile sale ($10 million) to a national consortium. As background, a journal backfile sale provides perpetual access to a historical collection of Wiley journals. Digital Books also had a strong quarter (+84%), primarily due to a large digital book sale ($4 million) to another government sponsor. For the nine months, Research revenue was even compared to prior year at constant currency and excluding the impact of the shift to time-based journal subscriptions.
  • Transition to Time-Based Subscriptions: As previously announced, Wiley is transitioning from issue-based to time-based digital journal subscription agreements for calendar year 2016 in order to simplify the contracting and administration of such agreements. The change in subscriber agreements will shift roughly $37 million of revenue and $0.40 of EPS from FY16 to FY17, with recurring effect annually thereafter. We previously estimated these impacts to be $35 million of revenue and $0.35 of EPS. The shift to time-based subscriptions will not impact cash flow.
  • Calendar Year 2016 Journal Subscriptions: At the end of January, calendar year 2016 Journal Subscriptions were up 1% on a constant currency basis, with 79% of targeted business under contract for the 2016 calendar year.
  • Adjusted Contribution to Profit (CTP): Third quarter adjusted CTP of $57.4 million declined 17% on a constant currency basis but rose 18% excluding currency and the CTP margin impact from shifting to time-based journal subscriptions ($25 million). CTP growth was driven by revenue performance, including a high margin contribution from the $10 million journal backfile sale, as well as restructuring savings. Third quarter CTP on a US GAAP basis was $52.9 million compared to $67.7 million in the prior year period. For the nine months, adjusted CTP was down 9% at constant currency but up 2% excluding currency and the shift to time-based journal subscriptions.
  • Society Business: 56 society journals were renewed during the quarter, worth approximately $27.5 million in combined annual revenue, and six were not renewed, worth $4.8 million annually. For calendar year 2016 publishing contracts, society publishing wins vs. losses are modestly net positive.

PROFESSIONAL DEVELOPMENT

  • Revenue: Third quarter revenue declined 1% on a constant currency basis to $103.4 million primarily due to an unfavorable reporting comparison with the prior year, when Corporate Learning (CrossKnowledge) reported five months of results. Excluding the two additional months for Corporate Learning in the prior year period (-$5 million), Professional Development revenue grew 4%. Online Test Preparation had a very strong quarter (+69%), with performance driven by CFA, CMA, and CPAexcel® products. Book revenue was down 5%. For the nine months, Professional Development revenue grew 2% due to growth in Corporate Learning (+30%) and strong double-digit growth in Online Test Preparation (+38%), offsetting a decline in Books (-5%).
  • Adjusted Contribution to Profit (CTP): Adjusted CTP rose 47% on a constant currency basis to $18.4 million. Excluding the two extra months for Corporate Learning in the prior year period, Professional Development adjusted CTP grew 19%. Performance reflected efficiency gains and restructuring savings. Third quarter CTP on a US GAAP basis was $17.0 million compared to $9.3 million in the prior year period. Nine month adjusted CTP was up 89% over prior year on a constant currency basis.
  • CrossKnowledge/L’Oréal platform: In February, CrossKnowledge announced the launch of MySalon-Edu.com, an online platform that focuses on salon education, in conjunction with L’Oréal group. The e-cademy massive online open course (MOOC) was created for professional hairdressers and beauticians.

EDUCATION

  • Revenue: Third quarter revenue rose 1% on a constant currency basis to $108.3 million, with Custom Material (+20%), Online Program Management (+13%), and WileyPLUS Course Workflow (+6%) more than offsetting a decline in Print Textbooks (-16%). For the nine months, Education revenue declined 3% at constant currency to $291 million.
  • Adjusted Contribution to Profit (CTP): Third quarter adjusted CTP declined 7% on a constant currency basis to $24.3 million, reflecting continued investment in new programs for Online Program Management and lower Print Textbook revenue, partially offset by cost savings. Third quarter CTP on a US GAAP basis was $23.3 million compared to $26.7 million in the prior year period. For the nine months, Education CTP was down 16% at constant currency to $44.6 million, reflecting the Print Textbook revenue decline and investment in Online Program Management.
  • Online Program Management (formerly Deltak): Wiley added six degree programs and retired one non-revenue generating partner in the quarter. At the end of January, Wiley had 38 partners and 222 online degree programs under contract.

Earnings Conference Call

  • Scheduled for today, March 8, 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) 364-3108 and enter the participant code 8846731#.
  • International callers, please dial (719) 325-2354 and enter the participant code 8846731#.
  • 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 knowledge-enabled services that improve outcomes in areas of research, professional practice, and education. Through the Research segment, the Company provides digital and print scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising. The Professional Development segment provides digital and print books, online assessment and training services, and test preparation and certification. In Education, Wiley provides education solutions including online program management services for higher education institutions and course management tools for instructors and students, as well as print and digital content.

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

THIRD QUARTER ENDED JANUARY 31,

 
2016 2015 % Change  
US GAAP  

Adjustments
(A-B)

  Adjusted US GAAP

Adjustments
(A)

  Adjusted US GAAP

Adjusted
excl. FX

 
Revenue $ 436,393 - 436,393 465,905 - 465,905 -6 % -3 %
 
Costs and Expenses
Cost of Sales 120,226 - 120,226 124,245 - 124,245 -3 % 0 %
Operating and Administrative 250,656 - 250,656 250,479 - 250,479 0 % 3 %
Restructuring Charges (A) 13,713 (13,713 ) - 24,034 (24,034 ) -
Amortization of Intangibles 12,179   -   12,179   13,105   -   13,105   -7 % -4 %
 
Total Costs and Expenses 396,774 (13,713 ) 383,061 411,863 (24,034 ) 387,829 -4 % 2 %
 
Operating Income 39,619 13,713 53,332 54,042 24,034 78,076 -27 % -27 %
Operating Margin 9.1 % 12.2 % 11.6 % 16.8 %
 
Interest Expense (4,590 ) - (4,590 ) (4,365 ) - (4,365 ) 5 % 5 %
Foreign Exchange Gain 1,431 - 1,431 2,783 - 2,783
Interest Income and Other 786   -   786   800   -   800   -2 % -2 %
 
Income Before Taxes 37,246 13,713 50,959 53,260 24,034 77,294 -30 % -28 %
 
Provision for Income Taxes (A-B) 1,728   10,000   11,728   10,712   7,678   18,390   -84 % -29 %
 
Net Income $ 35,518   3,713   39,231   42,548   16,356   58,904   -17 % -27 %
 
 
Earnings Per Share- Diluted (A-B) $ 0.61 0.06 0.67 0.72 0.28 0.99 -15 % -26 %
 
Average Shares - Diluted 58,204 58,204 58,204 59,343 59,343 59,343
 
 

NINE MONTHS ENDED JANUARY 31,

 
2016 2015 % Change  
US GAAP  

Adjustments
(A-B)

  Adjusted US GAAP

Adjustments
(A)

  Adjusted US GAAP

Adjusted
excl. FX

 
Revenue $ 1,292,736 - 1,292,736 1,380,794 - 1,380,794 -6 % -2 %
 
Costs and Expenses
Cost of Sales 356,719 - 356,719 382,839 - 382,839 -7 % -3 %
Operating and Administrative 733,141 - 733,141 755,541 - 755,541 -3 % 1 %
Restructuring Charges (Credits) (A) 20,832 (20,832 ) - 23,879 (23,879 ) -
Amortization of Intangibles 37,251   -   37,251   38,859   -   38,859   -4 % -1 %
 
Total Costs and Expenses 1,147,943 (20,832 ) 1,127,111 1,201,118 (23,879 ) 1,177,239 -4 % 0 %
 
Operating Income 144,793 20,832 165,625 179,676 23,879 203,555 -19 % -14 %
Operating Margin 11.2 % 12.8 % 13.0 % 14.7 %
 
Interest Expense (12,487 ) - (12,487 ) (13,015 ) - (13,015 ) -4 % -4 %
Foreign Exchange (Loss) Gain 1,389 - 1,389 2,828 - 2,828
Interest Income and Other 2,094   -   2,094   2,218   -   2,218   -6 % -6 %
 
Income Before Taxes 135,789 20,832 156,621 171,707 23,879 195,586 -21 % -14 %
 
Provision for Income Taxes (A-B) 24,214   12,767   36,981   41,736   7,654   49,390   -42 % -20 %
 
Net Income $ 111,575   8,065   119,640   129,971   16,225   146,196   -14 % -12 %
 
 
Earnings Per Share- Diluted (A-B) $ 1.90 0.14 2.04 2.18 0.27 2.45 -13 % -11 %
 
Average Shares - Diluted 58,711 58,711 58,711 59,632 59,632 59,632
 

See the accompanying Notes to Unaudited Financial Statements for a description of each Adjustment.

 
JOHN WILEY & SONS, INC.
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2016 AND 2015
       
 

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

 
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2016 2015 2016 2015
 
US GAAP Earnings Per Share - Diluted $ 0.61 $ 0.72 $ 1.90 $ 2.18
Adjusted to exclude the following:
Restructuring Charges (A) (0.16 ) (0.28 ) (0.24 ) (0.27 )
Deferred Income Tax Benefit on UK Rate Change (B) 0.10 0.10
 
Adjusted Earnings Per Share - Diluted $ 0.67   $ 0.99   $ 2.04   $ 2.45  
 
 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 

Adjustments:

a

 

Restructuring Charges: The adjusted results for the three and nine months ended
January 31, 2016 exclude restructuring charges related to the Company's
Restructuring and Reinvestment Program of $13.7 million or $0.16 per share, and
$20.8 million or $0.24 per share, respectively. The adjusted results for the three
and nine months ended January 31, 2015 exclude a restructuring charge of $24.0
million or $0.28 per share, and $23.9 or $0.27 per share, respectively.

 

b

Deferred Income Tax Benefit on UK Rate Change: The adjusted results for the
three and nine months ended January 31, 2016 exclude deferred tax benefits of
$5.9 million, or $0.10 per share, associated with tax legislation enacted in the
third quarter of fiscal year 2016 in the United Kingdom that reduced the U.K.
corporate income tax rates by 2%. The benefits reflect the remeasurement of
the Company's deferred tax balances to the new income tax rates of 19%
effective April 1, 2017 and 18% 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 THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2016 AND 2015
(in thousands)
                       
 

THIRD QUARTER ENDED JANUARY 31,

 
2016 2015 % Change
US GAAP

Adjustments
(A)

  Adjusted US GAAP

Adjustments
(A)

  Adjusted US GAAP  

Adjusted
excl. FX

Revenue

Research $ 224,719 - 224,719 246,454 - 246,454 -9% -5%
Professional Development 103,399 - 103,399 108,587 - 108,587 -5% -1%
Education 108,275 - 108,275 110,864 - 110,864 -2% 1%
           
Total $ 436,393 - 436,393 465,905 - 465,905 -6% -3%
 

Direct Contribution to Profit

Research $ 92,730 4,461 97,191 109,453 4,507 113,960 -15% -11%
Professional Development 40,447 1,382 41,829 35,698 3,588 39,286 13% 10%
Education 44,397 1,020 45,417 46,800 1,033 47,833 -5% -1%
           
Total $ 177,574 6,863 184,437 191,951 9,128 201,079 -7% -5%
 

Contribution to Profit (After Allocated Shared Services and Admin. Costs)

 

Research $ 52,900 4,461 57,361 67,729 4,507 72,236 -22% -17%
Professional Development 17,014 1,382 18,396 9,307 3,588 12,895 83% 47%
Education 23,280 1,020 24,300 26,658 1,033 27,691 -13% -7%
           
Total $ 93,194 6,863 100,057 103,694 9,128 112,822 -10% -7%
 
Unallocated Shared Services and Admin. Costs (53,575) 6,850 (46,725) (49,652) 14,906 (34,746) 8% 37%
           
Operating Income $ 39,619 13,713 53,332 54,042 24,034 78,076 -27% -27%
 
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (23,232) 2,355 (20,877) (25,418) 4,052 (21,366) -9% 1%
Technology and Content Management (69,421) 2,670 (66,751) (62,607) 1,842 (60,765) 11% 12%
Finance (15,348) 2,740 (12,608) (13,155) 164 (12,991) 17% 0%
Other Administration (29,954) (915) (30,869) (36,729) 8,848 (27,881) -18% 14%
Total $ (137,955) 6,850 (131,105) (137,909) 14,906 (123,003) 0% 9%
 
 

NINE MONTHS ENDED JANUARY 31,

 
2016 2015 % Change
US GAAP

Adjustments
(A)

  Adjusted US GAAP

Adjustments
(A)

  Adjusted US GAAP  

Adjusted
excl. FX

Revenue

Research $ 700,497 - 700,497 766,149 - 766,149 -9% -4%
Professional Development 301,230 - 301,230 306,581 - 306,581 -2% 2%
Education 291,009 - 291,009 308,064 - 308,064 -6% -3%
           
Total $ 1,292,736 - 1,292,736 1,380,794 - 1,380,794 -6% -2%
 

Direct Contribution to Profit

Research $ 310,424 5,327 315,751 346,931 4,322 351,253 -11% -5%
Professional Development 123,225 1,587 124,812 106,207 3,833 110,040 16% 17%
Education 103,534 1,214 104,748 116,104 1,084 117,188 -11% -7%
           
Total $ 537,183 8,128 545,311 569,242 9,239 578,481 -6% -1%
 

Contribution to Profit (After Allocated Shared Services and Admin. Costs)

 

Research $ 185,568 5,327 190,895 217,906 4,322 222,228 -15% -9%
Professional Development 54,780 1,587 56,367 26,629 3,833 30,462 106% 89%
Education 43,347 1,214 44,561 55,083 1,084 56,167 -21% -16%
           
Total $ 283,695 8,128 291,823 299,618 9,239 308,857 -5% -1%
 
Unallocated Shared Services and Admin. Costs (138,902) 12,704 (126,198) (119,942) 14,640 (105,302) 16% 25%
           
Operating Income $ 144,793 20,832 165,625 179,676 23,879 203,555 -19% -14%
 
 
 
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (66,573) 4,320 (62,253) (72,342) 4,436 (67,906) -8% -4%
Technology and Content Management (193,388) 3,443 (189,945) (184,178) 1,285 (182,893) 5% 7%
Finance (39,415) 2,315 (37,100) (39,370) 71 (39,299) 0% -1%
Other Administration (93,014) 2,626 (90,388) (93,676) 8,848 (84,828) -1% 11%
Total $ (392,390) 12,704 (379,686) (389,566) 14,640 (374,926) 1% 5%
 
   

(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 certain decentralized business
functions (Sales Support, Marketing Services, etc.) into global shared service functions. These newly centralized service groups
enable 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 the shared service functions 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 THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2016 AND 2015
(in thousands)
                         
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2016 2015

%
Change

 

%
Change
excl. FX

2016 2015

%
Change

 

%
Change
excl. FX

 
 

Research:

Direct Contribution to Profit 92,730 109,453 -15 % -12 % 310,424 346,931 -11 % -6 %
Restructuring Charges (Credits) (A) 4,461   4,507   5,327   4,322  
Adjusted Direct Contribution to Profit 97,191 113,960 -15 % -11 % 315,751 351,253 -10 % -5 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (9,511 ) (10,722 ) -11 % -8 % (29,775 ) (34,141 ) -13 % -8 %
Technology and Content Management (23,365 ) (23,455 ) 0 % 1 % (73,170 ) (73,030 ) 0 % 3 %
Occupancy and Other (6,954 ) (7,547 ) -8 % -3 % (21,911 ) (21,854 ) 0 % 7 %
Adjusted Contribution to Profit (after allocated 57,361   72,236   -21 % -17 % 190,895   222,228   -14 % -9 %
Shared Services and Admin. Costs)
 

Professional Development:

Direct Contribution to Profit 40,447 35,698 13 % 17 % 123,225 106,207 16 % 19 %
Restructuring Charges (A) 1,382   3,588   1,587   3,833  
Adjusted Direct Contribution to Profit 41,829 39,286 6 % 10 % 124,812 110,040 13 % 17 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (7,164 ) (7,401 ) -3 % 0 % (20,820 ) (23,671 ) -12 % -9 %
Technology and Content Management (10,345 ) (12,496 ) -17 % -16 % (30,403 ) (35,668 ) -15 % -13 %
Occupancy and Other (5,924 ) (6,494 ) -9 % -4 % (17,222 ) (20,239 ) -15 % -10 %
Adjusted Contribution to Profit (after allocated 18,396   12,895   43 % 47 % 56,367   30,462   85 % 89 %
Shared Services and Admin. Costs)
 

Education:

Direct Contribution to Profit 44,397 46,800 -5 % -1 % 103,534 116,104 -11 % -7 %
Restructuring Charges (A) 1,020   1,033   1,214   1,084  
Adjusted Direct Contribution to Profit 45,417 47,833 -5 % -1 % 104,748 117,188 -11 % -7 %
 
Allocated Shared Services and Admin. Costs:
Distribution and Operation Services (4,111 ) (3,341 ) 23 % 29 % (11,276 ) (9,886 ) 14 % 20 %
Technology and Content Management (13,427 ) (13,111 ) 2 % 5 % (37,237 ) (40,647 ) -8 % -6 %
Occupancy and Other (3,579 ) (3,690 ) -3 % 0 % (11,674 ) (10,488 ) 11 % 14 %
Adjusted Contribution to Profit (after allocated 24,300   27,691   -12 % -7 % 44,561   56,167   -21 % -16 %
Shared Services and Admin. Costs)
 
Total Adjusted Contribution to Profit (after 100,057 112,822 -11 % -7 % 291,823 308,857 -6 % -1 %
allocated Shared Services and Admin. Costs)
 

Unallocated Shared Services and Admin. Costs:

Unallocated Shared Services and Admin. Costs (53,575 ) (49,652 ) 8 % 10 % (138,902 ) (119,942 ) 16 % 20 %
Restructuring Charges (Credits) (A) 6,850   14,906   12,704   14,640  
Adjusted Unallocated Shared Services and Admin. Costs (46,725 ) (34,746 ) 34 % 37 % (126,198 ) (105,302 ) 20 % 25 %
       
Adjusted Operating Income 53,332   78,076   -32 % -27 % 165,625   203,555   -19 % -14 %
 
 
     

(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 certain decentralized business
functions (Sales Support, Marketing Services, etc.) into global shared service functions. These newly centralized service groups
enable 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 the shared service functions 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 THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2016 AND 2015
(in thousands)
                                                         

Third Quarter

        Nine Months        
Ended January 31, % of % Change Ended January 31, % of % Change
  2016   2015     Revenue     excl. FX   2016   2015     Revenue     excl. FX
   
 

RESEARCH

Journal Revenue
Journal Subscriptions $ 122,941 155,680 55% -19% $ 442,945 496,650 63% -6%
Author-Funded Access 6,427 6,064 3% 11% 18,299 16,560 3% 18%
Licensing, Reprints, Backfiles, and Other 51,310 44,063 23% 22% 127,107 136,617 18% -1%
Total Journal Revenue 180,678 205,807 80% -9% 588,351 649,827 84% -5%
 
Books and References:
Print Books 24,841 27,394 11% -6% 71,401 78,556 10% -5%
Digital Books 16,140 8,741 7% 84% 32,677 27,797 5% 21%
Licensing and Other 3,060 4,512 1% -10% 8,068 9,969 1% -4%
Total Books and References Revenue 44,041 40,647 20% 13% 112,146 116,322 16% 1%
 
                                                     
  Total Revenue         $ 224,719   246,454     100%     -5% $ 700,497   766,149     100%       -4%
 
 

PROFESSIONAL DEVELOPMENT

Knowledge Services:
Print Books $ 52,274 56,113 51% -5% $ 150,232 162,004 50% -5%
Digital Books 10,347 11,193 10% -6% 32,918 36,167 11% -7%
Online Test Preparation and Certification 6,808 4,030 7% 69% 20,983 15,230 7% 38%
Other Knowledge Service Revenue 7,849 8,165 8% -1% 18,754 20,478 6% -6%
77,278 79,501 75% -1% 222,887 233,879 74% -2%
 
Talent Solutions:
Assessment 13,160 12,891 13% 2% 42,145 41,200 14% 2%
Corporate Learning 12,961 16,195 13% -5% 36,198 31,502 12% 30%
26,121 29,086 25% -2% 78,343 72,702 26% 14%
                                                     
  Total Revenue         $ 103,399   108,587     100%     -1% $ 301,230   306,581     100%       2%
 
 

EDUCATION

Books:
Print Textbooks $ 31,100 40,473 29% -16% $ 96,703 126,708 33% -18%
Digital Books 11,001 11,042 10% 2% 25,644 25,246 8% 6%
42,101 51,515 39% -12% 122,347 151,954 42% -14%
 
Custom Material 16,300 13,625 15% 20% 51,333 49,597 18% 3%
 
Course Workflow (WileyPLUS) 21,900 20,841 20% 6% 41,366 40,555 14% 4%
 
Online Program Management (Deltak) 26,056 23,045 24% 13% 69,753 58,981 24% 18%
 
Other Education Revenue 1,919 1,838 2% 4% 6,211 6,977 2% -11%
                                                     
  Total Revenue         $ 108,275   110,864     100%     1% $ 291,009   308,064     100%       -3%
 

Note: Segment Revenue Categorization

 
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FINANCIAL POSITION
(in thousands)
           
January 31, April 30,
2016 2015 2015
 
Current Assets
Cash & cash equivalents $ 535,859 260,215 457,441
Accounts receivable 242,390 220,311 147,183
Inventories 53,747 65,027 63,779
Prepaid and other 71,529 68,369 72,516
Total Current Assets 903,525 613,922 740,919
Product Development Assets 73,906 71,124 69,589
Technology, Property and Equipment 207,515 187,643 193,010
Intangible Assets 872,224 933,299 917,621
Goodwill 938,796 964,818 962,367
Income Tax Deposits 59,591 60,133 57,098
Other Assets 58,851 63,069 63,639
Total Assets 3,114,408 2,894,008 3,004,243
 
Current Liabilities
Short-term debt 150,000 100,000 100,000
Accounts and royalties payable 205,724 202,173 161,465
Deferred revenue 305,541 307,783 372,051
Accrued employment costs 82,400 79,063 93,922
Accrued income taxes 10,023 9,450 9,484
Accrued pension liability 4,590 4,567 4,594
Other accrued liabilities 68,658 61,025 62,167
Total Current Liabilities 826,936 764,061 803,683
Long-Term Debt 814,728 588,111 650,090
Accrued Pension Liability 185,976 144,818 209,727
Deferred Income Tax Liabilities 192,220 222,922 198,947
Other Long-Term Liabilities 78,465 89,016 86,756
Shareholders' Equity 1,016,083 1,085,080 1,055,040
Total Liabilities & Shareholders' Equity $ 3,114,408 2,894,008 3,004,243
 
 
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FREE CASH FLOW
(in thousands)
         
 
Nine Months Ended
January 31,
2016 2015
Operating Activities:
Net income $ 111,575 129,971
Amortization of intangibles 37,251 38,859
Amortization of composition costs 30,047 30,695
Depreciation of technology, property and equipment 50,820 46,225
Restructuring charges (credits) 20,832 23,879
Restructuring payments (24,809 ) (25,473 )
Deferred income tax benefit on UK rate change (5,859 ) -
Share-based compensation expense 12,292 11,778
Excess tax benefits from share-based compensation (517 ) (2,487 )
Royalty advances (79,026 ) (77,265 )
Earned royalty advances 71,761 77,755
Other non-cash charges and credits 15,492 30,407
Change in deferred revenue (57,959 ) (62,822 )
Net change in operating assets and liabilities (65,289 ) (67,371 )
Cash Provided by Operating Activities 116,611 154,151
 
Investments in organic growth:
Composition spending (28,627 ) (26,872 )
Additions to technology, property and equipment (69,048 ) (47,293 )
 
Free Cash Flow 18,936 79,986
 
Other Investing and Financing Activities:
Acquisitions, net of cash (17,972 ) (172,661 )
Escrowed proceeds from sale of consumer publishing programs - 1,100
Repayment of long-term debt (158,861 ) (550,083 )
Borrowings of long-term debt 323,500 435,700
Borrowings of short-term Debt 50,000 100,000
Change in book overdrafts (3,287 ) (8,742 )
Cash dividends (52,612 ) (51,491 )
Purchase of treasury shares (59,704 ) (61,981 )
Proceeds from exercise of stock options and other 556 24,492
Excess tax benefits from share-based compensation 517   2,487  
Cash Provided by (Used for) Investing and Financing Activities 82,137 (281,179 )
   
Effects of Exchange Rate Changes on Cash (22,655 ) (24,969 )
 
Increase (Decrease) in Cash and Cash Equivalents for Period $ 78,418   (226,162 )
 
 
 
RECONCILIATION TO GAAP PRESENTATION
 
Investing Activities:
Composition spending $ (28,627 ) (26,872 )
Additions to technology, property and equipment (69,048 ) (47,293 )
Acquisitions, net of cash (17,972 ) (172,661 )
Escrowed proceeds from sale of consumer publishing programs -   1,100  
Cash Used for Investing Activities $ (115,647 ) (245,726 )
 
Financing Activities:
Cash Used for Investing and Financing Activities $ 82,137 (281,179 )
Excluding:
Acquisitions, net of cash (17,972 ) (172,661 )
Escrowed proceeds from sale of consumer publishing programs -   1,100  
Cash Provided by (Used For) Financing Activities $ 100,109   (109,618 )
 
 

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.

 

Contact:

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