Wiley Reports Fourth Quarter and Fiscal Year 2019 Results

John Wiley & Sons, Inc. JWAJWB, a global research and education company, today announced results for the fourth quarter and fiscal year ended April 30, 2019.

FOURTH QUARTER 2019 HIGHLIGHTS

• GAAP results: Revenue of $491 million (+3%), Operating Income of $80 million (+10%), and EPS of $1.10 (+19%)
• Adjusted results excluding FX: Revenue +7%, Operating Income +14%, and EPS +19%
• Adjusted results excluding FX and impact from Learning House acquisition: Revenue +3%, Operating Income +17%, and EPS +26%
• Acquisition of Knewton on May 31 boosts competitive position in adaptive learning and affordable content

FISCAL YEAR 2019 HIGHLIGHTS

• GAAP results: Revenue of $1.8 billion (+0.2%), Operating Income of $224 million (-3%), and EPS of $2.91 (-12%)
• Adjusted results excluding FX: Revenue +2%, Operating Income -9%, and EPS -8%
• Adjusted results excluding FX and impact from Learning House acquisition: Revenue +0.4%, Operating Income -6%, and EPS -4%
• Acquisition of Learning House strengthens Wiley's leadership position in the rapidly-growing education services market for universities and corporations
• The Company's transformation to digital continues with digital products and tech-enabled services now accounting for 75% of total revenue

MANAGEMENT COMMENTARY

"We are pleased with the momentum that we're seeing across the Company," said Brian Napack, President and CEO. "We achieved our targets for revenue and earnings and are seeing good growth in strategic areas such as Research Open Access publishing, Education Services, Test Preparation and Certification, and corporate training. We also made two important acquisitions in education and began to see returns from our multi-year business optimization program. We are executing well and are energized by the results we are seeing from our strategic investments in the important markets we serve – research and education."

FINANCIAL SUMMARY

Wiley provides non-GAAP financial measures such as "Adjusted EPS," "Adjusted Operating Income," "Adjusted EBITDA," "Adjusted CTP," "Free Cash Flow less Product Development Spending," and results on a constant currency ("CC") basis to assess underlying business performance and trends. Management believes non-GAAP financial measures, which exclude the impact of restructuring charges and credits and other items, provide supplementary information to support analyzing operating results and earnings. See the reconciliations of non-GAAP financials and explanations of the uses of non-GAAP measures in the supplementary information accompanying this press release.

Fourth Quarter Results

The above includes the fourth quarter impact of the Learning House acquisition: +$18 million in revenue, -$2.8 million in operating income, and - $0.06 in EPS. Wiley recorded unfavorable foreign currency variances in the quarter of approximately $17 million in revenue, $5 million in operating income, and $0.07 in EPS.

• Revenue reflected growth in Research (0% reported, 4% CC) and Solutions (30% reported, 32% CC), partially offset by a decline in Publishing (-3% reported, -1% CC). Excluding Learning House, total revenue rose 3% on a constant currency basis.
  • Research (flat reported, +4% CC) was driven by Journal Subscriptions (0% reported, +5% CC) and Open Access (+13% reported, +19% CC).
  • Publishing (-3% reported, -1% CC) saw strong growth in Test Preparation and Certification (+35% reported, +37% CC) offset by declines in Education Publishing (-15% reported, -12% CC) and STM and Professional Publishing (-5% reported, -2% CC). Course Workflow/WileyPLUS rose 4%, or 5% at constant currency.
  • Solutions grew 30% on reported basis, or 32% at constant currency (excluding Learning House, Solutions rose 3%, or 5% CC). Growth in Education Services and Professional Assessment offset declines in Corporate Learning.
• GAAP Operating Income and Adjusted Operating Income growth mainly reflected increased revenues, and lower operating and administrative expenses.
  • Research CTP was essentially flat on a reported basis but grew 6% on an adjusted basis at constant currency, reflecting higher revenue at constant currency.
  • Publishing CTP rose 17% on a reported basis and 23% adjusted at constant currency mainly due to lower employment costs.
  • Solutions CTP declined 22% or 25% adjusted at constant currency due to the impact of the Learning House acquisition (-$3 million in non-cash amortization expense) and increased marketing costs to drive future enrollment growth.
  • Corporate Expenses declined 11%, or 5% adjusted at constant currency, primarily due to lower employment costs.
• GAAP EPS and Adjusted EPS reflected higher operating income.

Full Year Results

The above includes the half year impact of the Learning House acquisition: +$32 million in revenue, -$8 million in operating income, and -$0.15 in EPS. Wiley recorded unfavorable foreign currency variances in the year of approximately $35 million in revenue, $13 million in operating income, and $0.18 in EPS.

• Revenue reflected growth in Research (0% reported, +3% CC) and Solutions (+18% reported, +19% CC) offset by a decline in Publishing (-7% reported, -6% CC).
  • Research segment results were driven by growth in Open Access (+30% reported, +33% CC) and Atypon (+9% reported and CC). Journal Subscriptions declined 2% on a reported basis but were flat at constant currency.
  • Publishing segment performance primarily reflected declines in STM and Professional Publishing (-8% reported, -6% CC) and Education Publishing (-16% reported, -14% CC). Education Publishing now represents less than 9% of total Wiley revenue. These book revenue declines were partially offset by strong growth in Test Preparation and Certification (+14% reported, +15% CC) and higher revenue in WileyPLUS due largely to timing of revenue recognition changes (+7%).
  • Solutions segment growth included higher revenue in all three businesses: Education Services (+32%, or +6% excluding Learning House), Corporate Learning (+2% reported, +6% CC), and Professional Assessment (+8%).
• GAAP Operating Income and Adjusted Operating Income decline mainly reflected revenue performance.
  • Research CTP declined 5% on a reported basis and 1% on an adjusted basis at constant currency. Performance reflected higher society publishing royalties and investments in editorial resources to support increased journal publishing, as well as higher investment in sales and marketing resources.
  • Publishing CTP declined 2% on a reported basis and 8% adjusted at constant currency, reflecting revenue performance.
  • Solutions CTP declined 32% on a reported basis and 39% adjusted at constant currency due to dilution from the Learning House acquisition (-$8 million, including $5 million of acquired intangibles amortization) and investment to drive future enrollment growth in Education Services.
  • Corporate Expenses decreased 8% on a reported basis due to lower restructuring charges and decreased 1% on an adjusted basis at constant currency.

• GAAP EPS largely reflected lower reported operating income in the current year and the initial benefit in the prior year from the US Tax Cuts and Jobs Act, partially offset by lower restructuring charges and foreign exchange losses in the year. Adjusted EPS declined primarily due to lower adjusted operating income.
• Net Cash Provided by Operating Activities declined by $131 million primarily due to lower earnings, including Learning House (-$24 million), timing-related changes in working capital performance, including unfavorable cash collections (-$57 million) and payables (-$26 million). Also contributing to lower cash provided by operations was, Learning House one-time closing costs (-$10 million), a tax-advantaged contribution to the US pension plan (-$10 million) and other working capital changes of (-$4 million). Approximately $35 million of cash collections for 2019 journal subscriptions collections was delayed into fiscal 2020.
• Free Cash Flow less Product Development Spending performance declined due to lower cash provided by operating activities, which was partially offset by reduced capital expenditures. Capital investment, which includes Technology, Property, and Equipment, and Product Development Spending, declined $49 million to $102 million due to the completion of Wiley's headquarters transformation, the May 2018 implementation of our ERP order-to-cash release for journal subscriptions and reporting changes related to the adoption of ASC 606.
• Financing Activities: On May 30, 2019, Wiley entered into a credit agreement that amended and restated the existing agreement. The credit agreement provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.25 billion, and (ii) a five-year term loan A facility consisting of $250 million.
• Shareholder Return: In fiscal 2019, Wiley raised its annual dividend for the 25^th consecutive year to $0.33 per quarter (+3%). For the year, the Company utilized approximately $76 million of cash for dividends and $60 million for share repurchases with an average per share cost of $50.35, including $25 million for share repurchases in the fourth quarter at an average per share cost of $44.83

FISCAL YEAR 2020 OUTLOOK

Going forward, Wiley will be aligning its reporting with its strategic focus areas – (1) Research Publishing and Platforms, which is identical to the current "Research" business; (2) Education and Professional Publishing, which consists of the current "Publishing" segment plus Corporate Learning and Professional Assessment sub-segments; and (3) Education Services, which is identical to our current "Education Services" sub-segment and consists of online program management (OPM) and other rapidly-growing services businesses.

• FY20 Adjusted EPS is expected to decline primarily due to non-cash amortization expense related to acquisitions and increased investment to grow and optimize Research and Education Services
• Forward-looking metrics include impact from Learning House and Knewton acquisitions
• FY20 numbers exclude Q1 2020 restructuring charge of approximately $15-20M
• FY20 Outlook and FY22 Target reflect FY19 average exchange rates

EARNINGS CONFERENCE CALL

• Scheduled for today, June 11 at 10:00 a.m. (ET). Access the webcast at wiley.com>Investor Relations> Events and Presentations, or https://www.wiley.com/en-us/investors. U.S. and Canada callers, please dial 888-254-3590 and enter the participant code 3028324#. International callers, please dial +1 856-344-9316 and enter the participant code 3028324#.

ABOUT WILEY

Wiley drives the world forward with research and education. Our scientific, technical, medical, and scholarly journals and our digital learning, certification, and student-lifecycle services and solutions help students, researchers, universities, corporations to achieve their goals in an ever-changing world. For more than 200 years, we have delivered consistent performance to all of our stakeholders. The Company's website can be accessed at www.wiley.com.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the Company's Fiscal Year 2020 Outlook, Fiscal Year 2022 Target, operations, performance, 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.

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