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Wiley Reports Third Quarter Fiscal Year 2023 Results

03/09/2023

Wiley (NYSE: WLY), one of the world’s largest publishers and a global leader in scientific research and career-connected education, today announced results for the third quarter ended January 31, 2023.

  • GAAP Results: Revenue of $491 million (-5% vs. prior year), Operating loss of $67 million (-$113M vs. prior year), and EPS loss of $1.29 (-$1.92 vs. prior year). Losses primarily due to non-cash goodwill impairment in Education Services/University Services and restructuring charges
  • Adjusted Results at constant currency: Revenue of $491 million (-2% vs. prior year), Adjusted EBITDA of $98 million (-3% vs. prior year), and Adjusted EPS of $0.85 (-9% vs. prior year)
  • Fiscal 2023 Outlook: Reduced to reflect increased Academic headwinds and a publishing pause in a Hindawi special issues program
  • Accelerating wide-ranging simplification and optimization efforts to drive meaningful margin improvement

MANAGEMENT COMMENTARY

“Our third quarter results and revised full year outlook are clearly below our expectations,” said Brian Napack, President and CEO. “While our core business and markets are strong, we’ve been challenged this year by unpredictable market headwinds and an unplanned publishing pause at Hindawi. Looking ahead, we are now accelerating and expanding our work to create a more-focused Wiley that drives consistent growth with fewer moving parts and greater profitability.”

THIRD QUARTER PERFORMANCE

GAAP Measures

Unaudited ($millions except for EPS)

Q3 2023

Q3 2022

Change

 

 

Revenue

$491.4

$515.9

(5%)

 

Operating (Loss) Income

($67.1)

$46.0

#

 

Diluted EPS

($1.29)

$0.63

#

 

Non-GAAP Measures

Q3 2023

Q3 2022

Change

 

Change

C onstant Currency

Revenue

$491.4

$515.9

(5%)

(2%)

Adjusted EBITDA

$97.7

$99.8

(2%)

(3%)

Adjusted EPS

$0.85

$0.95

(11%)

(9%)

# Not meaningful

Please see attached financial tables for results for three-month and nine-month periods

Excluding acquisitions and currency impact, revenue was down 3% for the quarter

Unfavorable FX variance of $13 million in Revenue; favorable variance of $0.6 million in Adjusted EBITDA; unfavorable variance of $0.01 in Adjusted EPS

NEW SEGMENT REPORTING

Wiley has reorganized its Education lines of business into two new customer-centric segments. The Academic segment addresses the university customer group and includes Academic Publishing and University Services. The Talent segment addresses the corporate customer group and will be focused on delivering training, sourcing, and upskilling solutions. These new segments replace Academic & Professional Learning and Education Services. The Research segment and Corporate Expense category remain unchanged. Please see the attached financial schedules for more detail.

Revenue

  • Research was down 4% as reported, or down 2% at constant currency and excluding acquisitions, primarily due to a pause in the Hindawi special issues publishing program. The program was suspended temporarily due to the presence in certain special issues of compromised articles. As a result, Hindawi revenue declined $9 million vs. prior year, offsetting growth in other open access publishing programs.
  • Academic declined 11% as reported and 10% at constant currency and excluding acquisitions. Academic Publishing revenue performance primarily reflects print declines, offsetting growth in digital courseware. University Services was down due to continued online enrollment challenges and lower fee for service revenue.
  • Talent increased 13% as reported and 18% at constant currency with double-digit growth in placements and corporate training driving performance.

Adjusted EBITDA

  • Research EBITDA was down 7% at constant currency driven by revenue performance and technology investment.
  • Academic EBITDAdeclined 20% at constant currency primarily due to the revenue performance.
  • Talent EBITDA declined 2% at constant currency due to investments to drive scale in talent development (“Wiley Edge”) and increased inflationary impacts on placements.
  • Adjusted Corporate Expenses declined 26% at constant currency mainly due to lower incentive compensation accrual and reduced technology expenses.

EPS

  • GAAP EPS was a loss of $1.29 primarily due to non-cash impairment, restructuring and settlement charges in the quarter totalling $1.86.
    • Goodwill Impairment – Wiley recorded a non-cash goodwill impairment charge of $100 million, or $1.69 per share, for its Education Services and University Services businesses. This charge primarily reflected continued enrollment headwinds, a rising interest rate environment, and lower market multiples. Given Wiley’s segment realignment, the Company is required to test goodwill for impairment immediately before and after the realignment.
    • Restructuring and other charges – Wiley recorded restructuring charges of $9 million or $0.12 per share, primarily related to the closure of a tech development center in Russia. Wiley also recorded a legal settlement of $4 million or $0.05 per share related to consideration for a previous acquisition.
  • Adjusted EPS of $0.85was down 9% at constant currency primarily due to lower Adjusted Operating Income, higher interest expense and lower pension credits, partially offset by lower tax expense.

Balance Sheet, Cash Flow, and Capital Allocation

  • Net Debt-to-EBITDA ratio (trailing twelve months) at quarter-end was 2.1 compared to 1.9 in the year-ago period, and 1.6 at year end (April 30).
  • Net Cash Provided by Operating Activities (YTD) was $54 million compared to $158 million in the prior year period. This is primarily due to working capital timing, lower cash earnings, and restructuring payments. Wiley expects working capital timing to largely resolve in the fourth quarter.
  • Free Cash Flow less Product Development Spending (YTD) was a use of $22 million vs. a source of $77 million in the prior year period, primarily due to working capital timing, lower cash earnings, and restructuring payments. Wiley expects working capital timing issues to largely resolve in the fourth quarter.
  • Share Repurchases:During the quarter, the Company utilized $6.5 million to repurchase approximately 158 thousand shares at an average cost per share of $41.14. Year to date, the Company spent $24 million on approximately 540 thousand shares. Wiley has $173 million remaining in its current authorization program.

FOREIGN EXCHANGE ADJUSTMENT

As a result of significant currency fluctuations, Wiley noted that Adjusted EBITDA in Research was being adversely impacted by Research royalty expenses denominated in GBP but derived from USD revenues in its UK subsidiary. The Company normalized for this FX impact, resulting in a constant currency Adjusted EBITDA benefit of $2 million this quarter. Note we have also amended our Q1 and Q2 Adjusted EBITDA (+$3 million each quarter, respectively) for Research and Wiley overall to reflect the benefit for those periods. In the prior fiscal year, this impact was not significant. The Company believes this change will more adequately reflect Wiley’s true operating performance.

FISCAL YEAR 2023 OUTLOOK

Wiley is reducing its financial outlook at constant currency:

  • Revenue: downward revision primarily due to increased Academic market headwinds and the publishing pause in Hindawi special issues.
  • Adjusted EBITDA and Adjusted EPS: downward revision due to lower projected revenue. Adjusted EPS further impacted by higher interest expense.
  • Free Cash Flow: downward revision due to lower projected cash earnings and higher restructuring payments, mainly related to the closing of Wiley’s Russia tech development center.

Metric

($millions, except EPS)

FY22 Actual*

 

FY23 Outlook*

Constant currency

Previous

FY23 Outlook*

Constant currency

Current

FX Impact**

FY23 Outlook^

YTD average rates

Current

Revenue

$2,083

$2,110 - $2,150

$2,065 - $2,090

($60)

$2,005 - $2,030

Adjusted EBITDA

$433

$425 - $450

$395- $410

Immaterial

$395- $410

Adjusted EPS

$4.16

$3.70 - $4.05

$3.30 - $3.55

Immaterial

$3.30 - $3.55

Free Cash Flow

$223

$210 - $235

$160 - $185

Immaterial

$160 - $185

*Based on Fiscal 2022 average rates of 1.15 euro and 1.36 British pound

**Variance between Fiscal 2022 average rates and YTD Fiscal 2023 average rates

^Fiscal 2023 outlook at average YTD rates: 1.04 euro and 1.20 British pound

Scheduled for today, March 9 at 10:00 am (ET). Access webcast at investors.wiley.com, or directly at https://events.q4inc.com/attendee/486910551. US callers, please dial (888) 210-3346 and enter code 2521217#. International callers, please dial (646) 960-0253 and enter the code 2521217#.

ABOUT WILEY

Wiley is one of the world’s largest publishers and a global leader in scientific research and career-connected education. Founded in 1807, Wiley enables discovery, powers education, and shapes workforces. Through its industry-leading content, digital platforms, and knowledge networks, the company delivers on its timeless mission to unlock human potential. Visit us at Wiley.com. Follow us on Facebook, Twitter, LinkedIn and Instagram.

NON-GAAP FINANCIAL MEASURES

Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “EBITDA,” “Adjusted EBITDA,” “Adjusted Contribution to Profit,” “Adjusted Income before Taxes,” “Adjusted Income Tax Provision,” “Adjusted Effective Tax Rate,” “Free Cash Flow less Product Development Spending,” “organic revenue,” and results on a Constant Currency basis to assess underlying business performance and trends. Management believes non-GAAP financial measures, which exclude the impact of restructuring charges and credits and certain other items, and the impact of acquisitions provide a useful comparable basis to analyze operating results and earnings. See the reconciliations of non-GAAP financial measures and explanations of the uses of non- GAAP measures in the supplementary information. We have not provided our 2023 outlook for the most directly comparable US GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with US GAAP.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company and are subject to change based on many important factors. Such factors include, but are not limited to: (i) the level of investment by Wiley 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 retailers; (vi) the seasonal nature of the Company's educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company's ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities; (x) the Company’s ability to realize operating savings over time and in fiscal year 2023 in connection with our multi-year Business Optimization Program and Fiscal Year 2023 Restructuring Program; (xi) the impact of COVID-19 on our operations, performance, and financial condition; and (xii) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

CATEGORY: ALL CORPORATE NEWS

CATEGORY: EARNINGS RELEASES

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)(2)

CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME

(Dollars in thousands, except per share information)

(unaudited)

 

Three Months Ended

Nine Months Ended

January 31,

January 31,

2023

2022

2023

2022

Revenue, net

$

491,368

 

$

515,884

 

$

1,493,773

 

$

1,537,275

 

Costs and expenses:
Cost of sales

 

174,051

 

 

172,916

 

 

518,384

 

 

513,654

 

Operating and administrative expenses

 

255,798

 

 

275,475

 

 

791,578

 

 

800,254

 

Impairment of goodwill (3)

 

99,800

 

 

-

 

 

99,800

 

 

-

 

Restructuring and related charges (credits)

 

8,807

 

 

448

 

 

45,204

 

 

(1,161

)

Amortization of intangible assets

 

19,968

 

 

21,056

 

 

65,389

 

 

63,683

 

Total costs and expenses

 

558,424

 

 

469,895

 

 

1,520,355

 

 

1,376,430

 

 
Operating (loss) income

 

(67,056

)

 

45,989

 

 

(26,582

)

 

160,845

 

As a % of revenue

 

-13.6

%

 

8.9

%

 

-1.8

%

 

10.5

%

 
Interest expense

 

(11,521

)

 

(5,103

)

 

(27,185

)

 

(14,739

)

Foreign exchange transaction gains (losses)

 

421

 

 

(488

)

 

283

 

 

(1,488

)

Gain on sale of certain assets

 

-

 

 

-

 

 

-

 

 

3,694

 

Other income, net

 

705

 

 

2,821

 

 

976

 

 

9,524

 

 
(Loss) income before taxes

 

(77,451

)

 

43,219

 

 

(52,508

)

 

157,836

 

 
(Benefit) provision for income taxes

 

(5,982

)

 

7,853

 

 

(1,397

)

 

52,673

 

Effective tax rate

 

7.7

%

 

18.2

%

 

2.7

%

 

33.4

%

Net (loss) income

$

(71,469

)

$

35,366

 

$

(51,111

)

$

105,163

 

As a % of revenue

 

-14.5

%

 

6.9

%

 

-3.4

%

 

6.8

%

 
(Loss) earnings per share
Basic

$

(1.29

)

$

0.63

 

$

(0.92

)

$

1.89

 

Diluted

$

(1.29

)

$

0.63

 

$

(0.92

)

$

1.86

 

 
Weighted average number of common shares outstanding
Basic

 

55,514

 

 

55,701

 

 

55,625

 

 

55,789

 

Diluted (4)

 

55,514

 

 

56,389

 

 

55,625

 

 

56,481

 

Notes:

(1) The supplementary information included in this press release for the three and nine months ended January 31, 2023 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) As previously announced, in the third quarter of fiscal year 2023 we have reorganized our Education lines of business into two new customer-centric segments. Our new segment reporting structure consists of three reportable segments which includes Research (no changes), Academic, and Talent, as well as a Corporate expense category (no change). As a result of this realignment, we were required to test goodwill for impairment immediately before and after the realignment. Prior to the realignment, we concluded that the fair value of the Education Services reporting unit was below its carrying value, which resulted in a pre-tax non-cash goodwill impairment of $31.0 million. After the realignment, we concluded that the fair value of the University Services reporting unit within the Academic segment was below its carrying value which resulted in an additional pre-tax non-cash goodwill impairment of $68.8 million.

 

(4) In calculating diluted net loss per common share for the three and nine months ended January 31, 2023 our diluted weighted average number of common shares outstanding excludes the effect of unvested restricted stock units and other stock awards as the effect was anti-dilutive. This occurs when a US GAAP net loss is reported and the effect of using dilutive shares is antidilutive.

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1) (2)

RECONCILIATION OF US GAAP MEASURES to NON-GAAP MEASURES

(unaudited)

 

Reconciliation of US GAAP EPS to Non-GAAP Adjusted EPS

Three Months Ended

Nine Months Ended

January 31,

January 31,

2023

2022

2023

2022

US GAAP (Loss) Earnings Per Share - Diluted

$

(1.29

)

$

0.63

 

$

(0.92

)

$

1.86

 

Adjustments:
Impairment of goodwill

 

1.69

 

 

-

 

 

1.69

 

 

-

 

Legal settlement (3)

 

0.05

 

 

-

 

 

0.05

 

 

-

 

Restructuring and related charges (credits)

 

0.12

 

 

0.01

 

 

0.60

 

 

(0.02

)

Foreign exchange (gains) losses on intercompany transactions

 

(0.03

)

 

0.01

 

 

0.01

 

 

-

 

Amortization of acquired intangible assets (4)

 

0.29

 

 

0.30

 

 

0.96

 

 

0.93

 

Gain on sale of certain assets (5)

 

-

 

 

-

 

 

-

 

 

(0.05

)

Income tax adjustments (6)

 

-

 

 

-

 

 

-

 

 

0.37

 

EPS impact of using weighted-average dilutive shares for adjusted EPS calculation (7)

 

0.02

 

 

-

 

 

0.01

 

 

-

 

Non-GAAP Adjusted Earnings Per Share - Diluted

$

0.85

 

$

0.95

 

$

2.40

 

$

3.09

 

 

Reconciliation of US GAAP (Loss) Income Before Taxes to Non-GAAP Adjusted Income Before Taxes

Three Months Ended

Nine Months Ended

(amounts in thousands)

January 31,

January 31,

2023

2022

2023

2022

US GAAP (Loss) Income Before Taxes

$

(77,451

)

$

43,219

 

$

(52,508

)

$

157,836

 

Pretax Impact of Adjustments:
Impairment of goodwill

 

99,800

 

 

-

 

 

99,800

 

 

-

 

Legal settlement (3)

 

3,671

 

 

-

 

 

3,671

 

 

-

 

Restructuring and related charges (credits)

 

8,807

 

 

448

 

 

45,204

 

 

(1,161

)

Foreign exchange (gains) losses on intercompany transactions

 

(2,414

)

 

722

 

 

906

 

 

494

 

Amortization of acquired intangible assets (4)

 

21,042

 

 

22,189

 

 

68,611

 

 

67,081

 

Gain on sale of certain assets (5)

 

-

 

 

-

 

 

-

 

 

(3,694

)

Non-GAAP Adjusted Income Before Taxes

$

53,455

 

$

66,578

 

$

165,684

 

$

220,556

 

 

Reconciliation of US GAAP Income Tax (Benefit) Provision to Non-GAAP Adjusted Income Tax Provision, including our US GAAP Effective Tax Rate and our Non-GAAP Adjusted Effective Tax Rate

 
US GAAP Income Tax (Benefit) Provision

$

(5,982

)

$

7,853

 

$

(1,397

)

$

52,673

 

Income Tax Impact of Adjustments (8)
Impairment of goodwill

 

4,857

 

 

-

 

 

4,857

 

 

-

 

Legal settlement (3)

 

716

 

 

-

 

 

716

 

 

-

 

Restructuring and related charges (credits)

 

2,221

 

 

114

 

 

11,159

 

 

(118

)

Foreign exchange (gains) losses on intercompany transactions

 

(596

)

 

239

 

 

274

 

 

258

 

Amortization of acquired intangible assets (4)

 

4,591

 

 

4,834

 

 

14,811

 

 

15,097

 

Gain on sale of certain assets (5)

 

-

 

 

-

 

 

-

 

 

(922

)

Income Tax Adjustments:
Impact of increase in UK statutory rate on deferred tax balances (6)

 

-

 

 

-

 

 

-

 

 

(20,726

)

Non-GAAP Adjusted Income Tax Provision

$

5,807

 

$

13,040

 

$

30,420

 

$

46,262

 

 
US GAAP Effective Tax Rate

 

7.7

%

 

18.2

%

 

2.7

%

 

33.4

%

Non-GAAP Adjusted Effective Tax Rate

 

10.9

%

 

19.6

%

 

18.4

%

 

21.0

%

Notes:

(1)

See Explanation of Usage of Non-GAAP Performance Measures included in this supplementary information for additional details on the reasons why management believes presentation of each non-GAAP performance measure provides useful information to investors. The supplementary information included in this press release for the three and nine months ended January 31, 2023 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)

In the three months ended January 31, 2023, we settled a litigation matter related to consideration for a previous acquisition for $3.7 million.

 

(4)

Reflects the amortization of intangible assets established on the opening balance sheet for an acquired business. This includes the amortization of intangible assets such as developed technology, customer relationships, tradenames, etc., which is reflected in the "Amortization of intangible assets" line in the Condensed Consolidated Statements of Net (Loss) Income. It also includes the amortization of acquired product development assets, which is reflected in Cost of sales in the Condensed Consolidated Statements of Net (Loss) Income.

 

(5)

The gain on sale of certain assets is due to the sale of our world languages product portfolio which was included in our Academic segment, and resulted in a pretax gain of approximately $3.7 million during the nine months ended January 31, 2022.

 

(6)

In the three months ended July 31, 2021, the UK enacted legislation that increased its statutory rate from 19% to 25% effective April 1, 2023. This resulted in a $20.7 million non-cash deferred tax expense from the re-measurement of the Company’s applicable UK net deferred tax liabilities during the three months ended July 31, 2021. These adjustments impacted deferred taxes.

 

(7)

Represents the impact of using diluted weighted-average number of common shares outstanding (56.1 million shares and 56.3 million shares for the three and nine months ended January 31, 2023, respectively) included in the Non-GAAP Adjusted EPS calculation in order to apply the dilutive impact on adjusted net income due to the effect of unvested restricted stock units and other stock awards. This impact occurs when a US GAAP net loss is reported and the effect of using dilutive shares is antidilutive.

 

(8)

For the three months ended January 31, 2023, the tax impact was $4.0 million from current taxes and $7.8 million from deferred taxes. For the nine months ended January 31, 2023, the tax impact was $5.5 million from current taxes and $26.3 million from deferred taxes. For the three and nine months ended January 31, 2022, substantially all of the tax impact was from deferred taxes.

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF US GAAP NET (LOSS) INCOME TO NON-GAAP EBITDA AND ADJUSTED EBITDA
(unaudited)
 

Three Months Ended

Nine Months Ended

January 31,

January 31,

2023

2022

2023

2022

Net (Loss) Income

$

(71,469

)

$

35,366

 

$

(51,111

)

$

105,163

 

Interest expense

 

11,521

 

 

5,103

 

 

27,185

 

 

14,739

 

(Benefit) provision for income taxes

 

(5,982

)

 

7,853

 

 

(1,397

)

 

52,673

 

Depreciation and amortization

 

52,442

 

 

53,363

 

 

163,142

 

 

162,484

 

Non-GAAP EBITDA

 

(13,488

)

 

101,685

 

 

137,819

 

 

335,059

 

Impairment of goodwill

 

99,800

 

 

-

 

 

99,800

 

 

-

 

Legal settlement

 

3,671

 

 

-

 

 

3,671

 

 

-

 

Restructuring and related charges (credits)

 

8,807

 

 

448

 

 

45,204

 

 

(1,161

)

Foreign exchange transaction (gains) losses

 

(421

)

 

488

 

 

(283

)

 

1,488

 

Gain on sale of certain assets

 

-

 

 

-

 

 

-

 

 

(3,694

)

Other income, net

 

(705

)

 

(2,821

)

 

(976

)

 

(9,524

)

Non-GAAP Adjusted EBITDA

$

97,664

 

$

99,800

 

$

285,235

 

$

322,168

 

Adjusted EBITDA Margin

 

19.9

%

 

19.3

%

 

19.1

%

 

21.0

%

Notes:

(1) See Explanation of Usage of Non-GAAP Performance Measures included in this supplementary information for additional details on the reasons why management believes presentation of each non-GAAP performance measure provides useful information to investors. The supplementary information included in this press release for the three and nine months ended January 31, 2023 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) (2)(3)

SEGMENT RESULTS

(in thousands)

(unaudited)

 

% Change

Three Months Ended January 31,

Favorable (Unfavorable)

2023

2022 (3)

Reported

Constant

Currency

Research:
Revenue, net
Research Publishing (4)

$

213,720

 

$

224,553

 

-5%

-3%

Research Solutions (4)

 

39,880

 

 

38,788

 

3%

6%

Total Revenue, net

$

253,600

 

$

263,341

 

-4%

-1%

 
Contribution to Profit

$

56,860

 

$

62,165

 

-9%

-10%

Adjustments:
Restructuring charges

 

317

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

57,177

 

$

62,165

 

-8%

-9%

Depreciation and amortization

 

23,123

 

 

23,914

 

3%

1%

Non-GAAP Adjusted EBITDA

$

80,300

 

$

86,079

 

-7%

-7%

Adjusted EBITDA margin

 

31.7

%

 

32.7

%

 
Academic:
Revenue, net
Academic Publishing

$

128,564

 

$

143,583

 

-10%

-8%

University Services

 

48,951

 

 

55,435

 

-12%

-11%

Total Revenue, net

$

177,515

 

$

199,018

 

-11%

-9%

 
Contribution to Profit

$

(80,663

)

$

31,711

 

#

#

Adjustments:
Restructuring charges

 

1,851

 

 

261

 

#

#

Impairment of goodwill

 

99,800

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

20,988

 

$

31,972

 

-34%

-34%

Depreciation and amortization

 

19,922

 

 

19,693

 

-1%

-2%

Non-GAAP Adjusted EBITDA

$

40,910

 

$

51,665

 

-21%

-20%

Adjusted EBITDA margin

 

23.0

%

 

26.0

%

 
Talent:
Total Revenue, net

$

60,253

 

$

53,525

 

13%

18%

 
Contribution to Profit

$

5,243

 

$

5,717

 

-8%

-7%

Adjustments:
Restructuring charges (credits)

 

72

 

 

(41

)

#

#

Non-GAAP Adjusted Contribution to Profit

$

5,315

 

$

5,676

 

-6%

-5%

Depreciation and amortization

 

5,458

 

 

5,605

 

3%

-1%

Non-GAAP Adjusted EBITDA

$

10,773

 

$

11,281

 

-5%

-2%

Adjusted EBITDA margin

 

17.9

%

 

21.1

%

 
Corporate Expenses:

$

(48,496

)

$

(53,604

)

10%

7%

Adjustments:
Restructuring charges

 

6,567

 

 

228

 

#

#

Legal settlement (5)

 

3,671

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

(38,258

)

$

(53,376

)

28%

26%

Depreciation and amortization

 

3,939

 

 

4,151

 

5%

0%

Non-GAAP Adjusted EBITDA

$

(34,319

)

$

(49,225

)

30%

28%

 
Consolidated Results:
Revenue, net

$

491,368

 

$

515,884

 

-5%

-2%

 
Operating (Loss) Income

$

(67,056

)

$

45,989

 

#

#

Adjustments:
Restructuring charges

 

8,807

 

 

448

 

#

#

Impairment of goodwill

 

99,800

 

 

-

 

#

#

Legal settlement (5)

 

3,671

 

 

-

 

#

#

Non-GAAP Adjusted Operating Income

$

45,222

 

$

46,437

 

-3%

-6%

Depreciation and amortization

 

52,442

 

 

53,363

 

2%

-1%

Non-GAAP Adjusted EBITDA

$

97,664

 

$

99,800

 

-2%

-3%

Adjusted EBITDA margin

 

19.9

%

 

19.3

%

Notes:

(1) The supplementary information included in this press release for the three and nine months ended January 31, 2023 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) During the three months ended January 31, 2023, we have reorganized our Education lines of business into two new customer-centric segments. The Academic segment addresses the university customer group and includes Academic Publishing and University Services. The Talent segment addresses the corporate customer group and will be focused on delivering training, sourcing, and upskilling solutions. Our new segment reporting structure consists of three reportable segments which includes Research (no changes), Academic, and Talent, as well as a Corporate expense category (no change), which includes certain costs that are not allocated to the reportable segments. Prior period segment results have been revised to the new segment presentation. There were no changes to our consolidated financial results.

 

(4) As previously announced in May 2022, our revenue by product type previously referred to as Research Platforms was changed to Research Solutions. Research Solutions includes infrastructure and publishing services that help societies and corporations thrive in a complex knowledge ecosystem. In addition to Platforms (Atypon), certain product offerings such as corporate sales which included the recent acquisitions of Madgex Holdings Limited (Madgex), and Bio-Rad Laboratories Inc.’s Informatics products (Informatics) that were previously included in Research Publishing moved to Research Solutions to align with our strategic focus. Research Solutions also includes product offerings related to certain recent acquisitions such as J&J, and EJP. Prior period results have been revised to the new presentation. There were no changes to the total Research segment or our consolidated financial results. The revenue was $24.3 million for the three months ended January 31, 2022, $68.4 million for the nine months ended January 30, 2022, $93.3 million for the year ended April 30, 2022, and $80.3 million for the year ended April 30, 2021.

 

(5) In the three months ended January 31, 2023, we settled a litigation matter related to consideration for a previous acquisition for $3.7 million.

 

(6) On January 1, 2020, Wiley acquired mthree, a talent placement provider that addresses the IT skills gap by finding, training, and placing job-ready technology talent in roles with leading corporations worldwide. Its results of operations are included in our Talent segment. In late May 2022, Wiley renamed the mthree talent development solution to Wiley Edge and discontinued use of the mthree trademark during the three months ended July 31, 2022. As a result of these actions, we determined that a revision of the useful life was warranted, and the intangible asset was fully amortized over its remaining useful life resulting in accelerated amortization expense of $4.6 million in the three months ended July 31, 2022.

#

Variance greater than 100%

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1) (2) (3)

SEGMENT RESULTS

(in thousands)

(unaudited)

% Change

Nine Months Ended January 31,

Favorable (Unfavorable)

2023

2022 (3)

Reported

Constant

Currency

Research:
Revenue, net
Research Publishing (4)

$

685,884

 

$

706,690

 

-3%

1%

Research Solutions (4)

 

113,988

 

 

106,561

 

7%

11%

Total Revenue, net

$

799,872

 

$

813,251

 

-2%

2%

 
Contribution to Profit

$

199,162

 

$

218,004

 

-9%

-8%

Adjustments:
Restructuring charges

 

1,577

 

 

238

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

200,739

 

$

218,242

 

-8%

-7%

Depreciation and amortization

 

70,308

 

 

71,140

 

1%

-2%

Non-GAAP Adjusted EBITDA

$

271,047

 

$

289,382

 

-6%

-5%

Adjusted EBITDA margin

 

33.9

%

 

35.6

%

 
Academic:
Revenue, net
Academic Publishing

$

354,728

 

$

400,740

 

-11%

-9%

University Services

 

152,892

 

 

169,002

 

-10%

-9%

Total Revenue, net

$

507,620

 

$

569,742

 

-11%

-9%

 
Contribution to Profit

$

(78,399

)

$

69,175

 

#

#

Adjustments:
Restructuring charges (credits)

 

10,091

 

 

(347

)

#

#

Impairment of goodwill

 

99,800

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

31,492

 

$

68,828

 

-54%

-52%

Depreciation and amortization

 

61,547

 

 

61,622

 

0%

-1%

Non-GAAP Adjusted EBITDA

$

93,039

 

$

130,450

 

-29%

-27%

Adjusted EBITDA margin

 

18.3

%

 

22.9

%

 
Talent:
Total Revenue, net

$

186,281

 

$

154,282

 

21%

28%

 
Contribution to Profit

$

17,888

 

$

16,370

 

9%

13%

Adjustments:
Restructuring charges

 

2,400

 

 

245

 

#

#

Accelerated amortization of an intangible asset (6)

 

4,594

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

24,882

 

$

16,615

 

50%

53%

Depreciation and amortization

 

14,688

 

 

17,304

 

15%

9%

Non-GAAP Adjusted EBITDA

$

39,570

 

$

33,919

 

17%

21%

Adjusted EBITDA margin

 

21.2

%

 

22.0

%

 
Corporate Expenses:

$

(165,233

)

$

(142,704

)

-16%

-20%

Adjustments:
Restructuring charges (credits)

 

31,136

 

 

(1,297

)

#

#

Legal settlement (5)

 

3,671

 

 

-

 

#

#

Non-GAAP Adjusted Contribution to Profit

$

(130,426

)

$

(144,001

)

9%

5%

Depreciation and amortization

 

12,005

 

 

12,418

 

3%

0%

Non-GAAP Adjusted EBITDA

$

(118,421

)

$

(131,583

)

10%

6%

 
Consolidated Results:
Revenue, net

$

1,493,773

 

$

1,537,275

 

-3%

1%

 
Operating (Loss) Income

$

(26,582

)

$

160,845

 

#

#

Adjustments:
Restructuring charges (credits)

 

45,204

 

 

(1,161

)

#

#

Impairment of goodwill

 

99,800

 

 

-

 

#

#

Legal settlement (5)

 

3,671

 

 

-

 

#

#

Accelerated amortization of an intangible asset (6)

 

4,594

 

 

-

 

#

#

Non-GAAP Adjusted Operating Income

$

126,687

 

$

159,684

 

-21%

-22%

Depreciation and amortization

 

158,548

 

 

162,484

 

2%

0%

Non-GAAP Adjusted EBITDA

$

285,235

 

$

322,168

 

-11%

-11%

Adjusted EBITDA margin

 

19.1

%

 

21.0

%

#

Variance greater than 100%

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands)

(unaudited)

 

January 31,

April 30,

2023

2022

Assets:
Current assets
Cash and cash equivalents

$

126,449

$

100,397

Accounts receivable, net

 

283,654

 

331,960

Inventories, net

 

33,167

 

36,585

Prepaid expenses and other current assets

 

87,896

 

81,924

Total current assets

 

531,166

 

550,866

 
Technology, property and equipment, net

 

248,298

 

271,572

Intangible assets, net

 

868,267

 

931,429

Goodwill

 

1,203,254

 

1,302,142

Operating lease right-of-use assets

 

94,672

 

111,719

Other non-current assets

 

204,598

 

193,967

Total assets

$

3,150,255

$

3,361,695

 
Liabilities and shareholders' equity:
Current liabilities
Accounts payable

$

32,384

$

77,438

Accrued royalties

 

154,227

 

101,596

Short-term portion of long-term debt

 

5,000

 

18,750

Contract liabilities

 

369,250

 

538,126

Accrued employment costs

 

81,106

 

117,121

Short-term portion of operating lease liabilities

 

20,055

 

20,576

Other accrued liabilities

 

98,947

 

95,812

Total current liabilities

 

760,969

 

969,419

Long-term debt

 

940,576

 

768,277

Accrued pension liability

 

78,283

 

78,622

Deferred income tax liabilities

 

144,602

 

180,065

Operating lease liabilities

 

119,803

 

132,541

Other long-term liabilities

 

79,122

 

90,502

Total liabilities

 

2,123,355

 

2,219,426

Shareholders' equity

 

1,026,900

 

1,142,269

Total liabilities and shareholders' equity

$

3,150,255

$

3,361,695

Notes:

(1) The supplementary information included in this press release for January 31, 2023 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.

SUPPLEMENTARY INFORMATION (1)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Nine Months Ended

January 31,

2023

2022

Operating activities:
Net (loss) income

$

(51,111

)

$

105,163

 

Impairment of goodwill

 

99,800

 

 

-

 

Amortization of intangible assets

 

65,389

 

 

63,683

 

Amortization of product development assets

 

25,175

 

 

26,662

 

Depreciation and amortization of technology, property, and equipment

 

72,578

 

 

72,139

 

Other noncash charges

 

71,660

 

 

69,347

 

Net change in operating assets and liabilities

 

(229,773

)

 

(178,510

)

Net cash provided by operating activities

 

53,718

 

 

158,484

 

 
Investing activities:
Additions to technology, property, and equipment

 

(57,616

)

 

(60,668

)

Product development spending

 

(17,763

)

 

(20,388

)

Businesses acquired in purchase transactions, net of cash acquired

 

(5,792

)

 

(70,620

)

Proceeds related to the sale of certain assets

 

40

 

 

3,375

 

Acquisitions of publication rights and other

 

1,059

 

 

(3,750

)

Net cash used in investing activities

 

(80,072

)

 

(152,051

)

 
Financing activities:
Net debt borrowings

 

162,303

 

 

105,334

 

Cash dividends

 

(58,067

)

 

(57,900

)

Purchases of treasury shares

 

(24,000

)

 

(24,867

)

Other

 

(24,952

)

 

(9,468

)

Net cash provided by financing activities

 

55,284

 

 

13,099

 

 
Effects of exchange rate changes on cash, cash equivalents and restricted cash

 

(2,670

)

 

(3,875

)

 
Change in cash, cash equivalents and restricted cash for period

 

26,260

 

 

15,657

 

 
Cash, cash equivalents and restricted cash - beginning

 

100,727

 

 

94,359

 

Cash, cash equivalents and restricted cash - ending

$

126,987

 

$

110,016

 

 

CALCULATION OF NON-GAAP FREE CASH FLOW LESS PRODUCT DEVELOPMENT SPENDING (2)

 

Nine Months Ended

January 31,

2023

2022

Net cash provided by operating activities

$

53,718

 

$

158,484

 

Less: Additions to technology, property, and equipment

 

(57,616

)

 

(60,668

)

Less: Product development spending

 

(17,763

)

 

(20,388

)

Free cash flow less product development spending

$

(21,661

)

$

77,428

 

Notes:

(1) The supplementary information included in this press release for the nine months ended January 31, 2023 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) See Explanation of Usage of Non-GAAP Performance Measures included in this supplemental information.

JOHN WILEY & SONS, INC.
EXPLANATION OF USAGE OF NON-GAAP PERFORMANCE MEASURES

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

  • Adjusted Earnings Per Share (Adjusted EPS);
  • Free Cash Flow less Product Development Spending;
  • Adjusted Contribution to Profit and margin;
  • Adjusted Operating Income and margin;
  • Adjusted Income Before Taxes;
  • Adjusted Income Tax Provision;
  • Adjusted Effective Tax Rate;
  • EBITDA, Adjusted EBITDA and margin;
  • Organic revenue; and
  • Results on a constant currency basis.

Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well as for internal reporting and forecasting purposes, when publicly providing our outlook, to evaluate our performance and calculate incentive compensation.

We present these non-GAAP performance measures in addition to US GAAP financial results because we believe that these non-GAAP performance measures provide useful information to certain investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose.

The performance metric used by our chief operating decision maker to evaluate performance of our reportable segments is Adjusted Contribution to Profit. We present both Adjusted Contribution to Profit and Adjusted EBITDA for each of our reportable segments as we believe Adjusted EBITDA provides additional useful information to certain investors and financial analysts for operational trends and comparisons over time. It removes the impact of depreciation and amortization expense, as well as presents a consistent basis to evaluate operating profitability and compare our financial performance to that of our peer companies and competitors.

For example:

  • Adjusted EPS, Adjusted Contribution to Profit, Adjusted Operating Income, Adjusted Income Before Taxes, Adjusted Income Tax Provision, Adjusted Effective Tax Rate, Adjusted EBITDA and organic revenue (excluding acquisitions) provide a more comparable basis to analyze operating results and earnings, and are measures commonly used by shareholders to measure our performance.
  • Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends, and fund share repurchases and acquisitions.
  • Results on a constant currency basis remove distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance excluding 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, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins and net income, and in comparing our financial performance to that of our 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 US 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.

We have not provided our 2023 outlook for the most directly comparable US GAAP financial measures, as they are not available without unreasonable effort due to the high variability, complexity, and low visibility with respect to certain items, including restructuring charges and credits, gains and losses on foreign currency, and other gains and losses. These items are uncertain, depend on various factors, and could be material to our consolidated results computed in accordance with US GAAP.

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 adjusted metrics have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, US GAAP information. It does not purport to represent any similarly titled US GAAP information and is not an indicator of our performance under US GAAP. Non-GAAP financial metrics that we present may not be comparable with similarly titled measures used by others. Investors are cautioned against placing undue reliance on these non-GAAP measures.

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

Source: John Wiley and Sons

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