Wiley Reports Third Quarter Fiscal Year 2017 Results

March 7, 2017 8:00 AM | 198 min read |

John Wiley & Sons, Inc. JWAJWB, a global research and learning company, today announced the following results for the third quarter of fiscal year 2017, ending January 31:

     

% Change

$ millions   FY17   FY16   Excluding FX   Including FX

Revenue:

 
Q3 $436.5 $436.4 3% 0%
Nine Months $1,266.3 $1,292.7 1% (2%)

GAAP EPS:

 

Q3 $0.82 $0.61 34%
Nine Months $1.15 $1.90 (39%)

Adjusted EPS:

Q3 $0.92 $0.67 37% 37%
Nine Months $2.18 $2.04 9% 7%
 

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

Management Commentary

"Results were mixed this quarter," said Mark Allin, Wiley's President and CEO. "Research revenue and earnings were fully in line with our expectations, with steady performance from journal subscriptions and double-digit growth from author-funded access. The Solutions business continued to post double-digit revenue growth and very strong profit improvement. We are encouraged by the momentum in the Online Program Management business, with four new partners and nineteen new programs. Publishing revenue showed a significant decline due to market weakness in Books and Reference Material, particularly print."

Fiscal Year 2017 Outlook

Wiley is reaffirming its fiscal year 2017 operational outlook of mid-single digit decline in adjusted EPS and lowering its operational revenue outlook from flat to a low-single digit decline due to further weakness in print book markets. Operationally speaking, revenue and adjusted EPS for the nine months were down 3% and 6%, respectively. Note, the adjusted full year outlook excludes foreign exchange, the favorable impact from shifting to time-based journal subscription agreements (+$34 million in revenue and +$0.38 in EPS), and the partial year revenue contribution (approximately +$20 million) and EPS dilution (approximately -$0.10) of recent acquisitions. Also note, the fiscal year 2017 impact of the shift to time-based journal agreements was projected to be +$37 million of revenue and +$0.42 of EPS; however, due to the prolonged weakness in the British Pound, the FY17 impact has lowered to+$34 million and +0.38 per share.

Foreign Exchange (FX)

Note that foreign exchange was adverse to third quarter revenue by $12.9 million, neutral to EPS and adverse to nine month revenue and adjusted EPS by $36.8 million and $0.05, respectively. Wiley generates approximately half of its revenue from outside the United States and is therefore exposed to foreign exchange rate fluctuations, particularly in relation to the euro and pound sterling. The weighted average rates for fiscal 2016 were 1.11 and 1.50, respectively. Throughout this report, references are made to variances "excluding foreign exchange" or "on a constant currency basis"; such amounts exclude both currency translation effects and transactional gains and losses.

Adjusted Results

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

Third Quarter Summary

  • Third quarter revenue was flat on a US GAAP basis at $436.5 million, and increased 3% excluding the adverse impact of foreign exchange. Higher revenue on a constant currency basis was primarily driven by the favorable impact of the shift to time-based subscriptions (+$29M), the contribution of the Atypon acquisition (+$8M) and growth in Solutions (+$7M), partially offset by a continued decline in Publishing (-$25M) and the impact of an unusually large backfile sale in the year-ago period (-$10M). Excluding the favorable subscription shift and the contribution from Atypon, revenue on a constant currency base was down 5% due to the prior year backfile sale and current period declines in book sales (-18%), which offset double-digit growth in Solutions (+14%). Nine month revenue was down 2% on a US GAAP basis to $1,266 million, but up 1% excluding the impact of currency.
  • Third quarter EPS increased 34% on a US GAAP basis to $0.82, or 37% on an adjusted basis to $0.92. Adjusted EPS excludes restructuring charges in the current quarter ($0.10) and prior year period ($0.16); and a deferred tax benefit in the prior year period related to a future tax rate reduction in the UK ($0.10). The increase in Adjusted EPS was mainly due to the favorable impact of the shift to time-based journal subscriptions (+$0.33) and one-time tax benefits (+$0.12), partially offset by the impact of lower revenue in Publishing, dilution from the Atypon and Ranku acquisitions (-$0.03), and the impact of an unusually large backfile sale in the year-ago period (-$0.10). Excluding the shift to time-based subscriptions and Atypon and Ranku dilution, third quarter adjusted EPS was down 5%. Nine month EPS was down 39% on a US GAAP basis to $1.15 primarily due to the second quarter $0.82 one-time tax charge. Nine month adjusted EPS at constant currency was up 9%.
  • Restructuring Activity: Wiley recorded a $9.1 million restructuring charge in the quarter primarily related to the consolidation of facilities and severance provisions related to additional efficiency gains.
  • Net Debt and Cash Position: Net debt (debt less cash and cash equivalents) at the end of January was $383.4 million compared to $428.9 million as of January 31, 2017. Cash and cash equivalents as of January 31, 2017 were $482.3 million.
  • Free Cash Flow less Composition Costs (note, this is identical to the free cash flow metric previously reported but with a modified label): Free Cash Flow less Composition Costs was $119.5 million for the first nine months compared to $18.9 million in the prior year primarily due to earlier journal cash collections (timing), but also lower tax payments and lower restructuring payments, partially offset by higher capital spending.
  • Share Repurchases: Wiley repurchased 255,200 shares this quarter at a cost of $14.1 million, an average of $55.14 per share. Over 4 million shares remain in the current authorized repurchase programs.

RESEARCH (JOURNALS AND ATYPON)

  • Revenue: Third quarter revenue of $205.8 million rose 12% on a US GAAP basis, or 17% on a constant currency basis. Constant currency performance was driven by the favorable impact of shifting to time-based journal subscriptions (+$29M), the contribution from the Atypon acquisition (+$8M), steady underlying performance from Journal Subscriptions, and double-digit growth in author funded access (+15%), which offset a decline in Licensing, Reprints, Backfiles, and Other (-14%), largely as a result of the large backfile sale in the prior year period. For the nine months, Research revenue was up 4% on a US GAAP basis but increased 8% at constant currency primarily due to the shift to time-based journal subscriptions (+$34M) and 4-month contribution from Atypon (+$10M).
  • Contribution to Profit: Third quarter contribution to profit (CTP) of $52.5 million was up 19% on a US GAAP basis or 17% on an adjusted basis primarily due to the shift to time-based journal subscriptions (+$25M CTP), which more than offset the large, high-margin backfile sale in the prior year period; costs associated with Atypon; higher technology costs; and other spending to support society journals. For the first nine months, contribution to profit was up 1% on a US GAAP basis, or 4% on an adjusted basis, including the benefit from the shift to time-based journal subscriptions ($29M).
  • Calendar Year 2017 Journal Subscriptions: As of the end of January, calendar year 2017 Journal Subscriptions were up 5% on a constant currency basis due to earlier renewals resulting from the introduction of database model subscriptions, which provided library-wide access for our largest customers (note, 87% of CY17 targeted business has been contracted). Wiley expects full year calendar year 2017 subscription growth to be about 1%.
  • Society Publishing Agreements: No new society contracts were signed in the three month period; 78 were renewed/extended with combined annual revenue of $57 million; and five contracts with annual revenue of $0.6 million were not renewed.

PUBLISHING (BOOKS, COURSE WORKFLOW, ONLINE TEST PREPARATION)

  • Revenue: Third quarter revenue declined 15% on a US GAAP basis to $171.4 million, or 13% at constant currency due to continued market pressure on Books and Reference Material (-18%). Constant currency growth in Online Test Preparation (+29%), Course Workflow (+7%) and Licensing and Other (+7%) was more than offset by a 27% decline in Education Books, which continue to be impacted by rental and other market forces, and a 12% decline in STM and Professional Books, which saw a continued decline in print revenue. Also note, Wiley recorded an unusually large STM online book sale (+$4 million) in the prior year period. For the nine months, Publishing revenue declined 13% on a US GAAP basis, or 11% at constant currency.
  • Contribution to Profit: Third quarter contribution to profit fell 18% on a US GAAP basis to $38.8 million, or 21% on an adjusted basis. Lower profit was primarily due to the Book revenue decline, partially offset by additional efficiency savings generated from the Company's restructuring program. For the nine months, contribution to profit on both a US GAAP and adjusted basis was down 15%.

SOLUTIONS (ONLINE PROGRAM MANAGEMENT, CORPORATE LEARNING AND ASSESSMENT)

  • Revenue: Third quarter revenue rose 14% on both a US GAAP and constant currency basis to $59.2 million. Growth at constant currency was driven by Online Program Management (+15%) and Corporate Learning (+20%). Professional Assessment grew 5%. For the nine months, Solutions revenue was up 13% on both a US GAAP and constant currency basis.
  • Contribution to Profit: Third quarter contribution to profit on a US GAAP basis rose 105% to $3.6 million, or 137% on an adjusted basis. Growth at constant currency was due to revenue growth and improved operating efficiency. For the nine months, Contribution to Profit on a US GAAP basis was $9.1 million, or $10.7 million on an adjusted basis, as compared to $0.2 million and $0.5 million, respectively, in the prior year period.
  • Online Program Management: Wiley signed four new partners in the quarter – George Mason (VA), Seton Hall (NJ), St. John's (NY), and Vlerick Business School (Belgium). One non-US partnership was cancelled. Wiley also signed 19 new programs in the quarter and discontinued six. As of January 31, 2017, Wiley had 40 university partners and 244 programs under contract, compared to 37 partners and 231 programs at the end of last quarter.

Earnings Conference Call

  • Scheduled for today, March 7, at 10:00 a.m. (ET)
  • 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 (800) 381-2652 and enter the participant code 9058430#.
  • International callers, please dial (719) 325-2190 and enter the participant code 9058430#.
  • 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 research and learning company. Through the Research segment, the Company provides scientific, technical, medical, and scholarly journals, as well as related content and services, for academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. The Publishing segment provides scientific (STM), professional development, and education books and related content, as well as test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers. In Solutions, Wiley provides online program management services for higher education institutions, and learning, development, and assessment services for businesses and professionals.

JOHN WILEY & SONS, INC.
UNAUDITED SUMMARY OF OPERATIONS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands, except per share amounts)
       
 

THIRD QUARTER ENDED JANUARY 31,

 
2017 2016 % Change
US GAAP Adjustments Adjusted US GAAP Adjustments Adjusted US GAAP Adjusted excl. FX
 
Revenue $ 436,456 - 436,456 436,393 - 436,393 0 % 3 %
 
Costs and Expenses
Cost of Sales 116,405 - 116,405 120,215 - 120,215 -3 % 0 %
Operating and Administrative 247,278 - 247,278 250,667 - 250,667 -1 % 2 %
Restructuring Charges (A) 9,118 (9,118 ) - 13,713 (13,713 ) -
Amortization of Intangibles 12,495   -   12,495   12,179   -   12,179   3 % 8 %
 
Total Costs and Expenses 385,296 (9,118 ) 376,178 396,774 (13,713 ) 383,061 -3 % 1 %
 
Operating Income 51,160 9,118 60,278 39,619 13,713 53,332 29 % 14 %
Operating Margin 11.7 % - 13.8 % 9.1 % - 12.2 %
 
Interest Expense (4,931 ) - (4,931 ) (4,590 ) - (4,590 ) 7 % 7 %
Foreign Exchange Gain 2,118 - 2,118 1,431 - 1,431
Interest Income and Other 637   -   637   786   -   786   -19 % -16 %
 
Income Before Taxes 48,984 9,118 58,102 37,246 13,713 50,959 32 % 14 %
 
Provision for Income Taxes (A) 1,565   3,359   4,924   1,728   10,000   11,728   -9 % -58 %
 
Net Income $ 47,419   5,759   53,178   35,518   3,713   39,231   34 % 35 %
 
 
Earnings Per Share- Diluted (A) $ 0.82 0.10 0.92 0.61 0.06 0.67 34 % 37 %
 
Average Shares - Diluted 58,012 58,012 58,012 58,204 58,204 58,204
 

NINE MONTHS ENDED JANUARY 31,

 
2017 2016 % Change
US GAAP Adjustments Adjusted US GAAP Adjustments Adjusted US GAAP Adjusted excl. FX
 
Revenue $ 1,266,329 - 1,266,329 1,292,736 - 1,292,736 -2 % 1 %
 
Costs and Expenses
Cost of Sales 341,457 - 341,457 356,357 - 356,357 -4 % -1 %
Operating and Administrative (B) 729,775 (8,842 ) 720,933 733,503 - 733,503 -1 % 1 %
Restructuring Charges (A) 15,045 (15,045 ) - 20,832 (20,832 ) -
Amortization of Intangibles 37,321   -   37,321   37,251   -   37,251   0 % 5 %
 
Total Costs and Expenses 1,123,598 (23,887 ) 1,099,711 1,147,943 (20,832 ) 1,127,111 -2 % 0 %
 
Operating Income 142,731 23,887 166,618 144,793 20,832 165,625 -1 % 3 %
Operating Margin 11.3 % - 13.2 % 11.2 % - 12.8 %
 
Interest Expense (13,362 ) - (13,362 ) (12,487 ) - (12,487 ) 7 % 7 %
Foreign Exchange Gain 1,979 - 1,979 1,389 - 1,389
Interest Income and Other 1,365   -   1,365   2,094   -   2,094   -35 % -34 %
 
Income Before Taxes 132,713 23,887 156,600 135,789 20,832 156,621 -2 % 3 %
 
Provision for Income Taxes (C,D) 65,745   (36,244 ) 29,501   24,214   12,767   36,981   172 % -17 %
 
Net Income $ 66,968   60,131   127,099   111,575   8,065   119,640   -40 % 9 %
 
 
Earnings Per Share- Diluted $ 1.15 1.03 2.18 1.90 0.14 2.04 -39 % 9 %
 
Average Shares - Diluted 58,181 58,181 58,181 58,711 58,711 58,711
 
 
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, 2017 AND 2016
             
 

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

 
 
Third Quarter Ended Nine Months Ended
JANUARY 31, JANUARY 31,
2017 2016 2017 2016
 
US GAAP Earnings Per Share - Diluted $ 0.82 $ 0.61 $ 1.15 $ 1.90
Adjusted to exclude the following:
Restructuring Charges (A) 0.10 0.16 0.17 0.24
One-time - Pension Settlement (B) - - 0.09 -
Unfavorable Tax Settlement (C) - - 0.82 -
Deferred Income Tax Benefit on UK Rate Change (D) - (0.10 ) (0.04 ) (0.10 )
Adjusted Earnings Per Share - Diluted $ 0.92 $ 0.67 $ 2.18   $ 2.04  
 

NOTES TO UNAUDITED FINANCIAL STATEMENTS

 
Adjustments:
A Restructuring Charges: The adjusted results for the three and nine months ended January 31, 2017 exclude restructuring charges related to the Company's Restructuring and Reinvestment Program of $9.1 million or $0.10 per share, and $15.0 million or $0.17 per share, respectively. The adjusted results for the three and nine months ended January 31, 2016 exclude restructuring charges of $13.7 million or $0.16 per share and $20.8 million or $0.24 per share, respectively.
B

In fiscal year 2017, the Company announced a voluntary, limited-time opportunity for terminated vested employees who were participants in the U.S. defined benefit retirement plan to elect a single lump sum payment of accumulated benefits. The aggregate amount of payments made under this one time election was $28.3 million. The total charge, recorded in the second quarter of fiscal year 2017, including a prorata portion of the unamortized net actuarial loss was $8.8 million or $0.09 per share.

C

As previously disclosed and as reported in the Company's SEC filings, the Company was appealing an unfavorable tax ruling in Germany related to tax benefits obtained through an increase in the tax deductible basis of certain merged German subsidiaries. In September 2016, the German Federal Fiscal Court issued an unfavorable final judgement in Wiley's longstanding tax appeal. As a consequence, the Company reported a $47.5 million charge, or $0.82 per share in the second quarter of fiscal year 2017.

D Deferred Income Tax Benefit on UK Rate Change: The adjusted results exclude deferred tax benefits of $2.6 million, or $0.04 per share, for the nine months ended January 31, 2017, and $5.9 million, or $0.10 per share for both the three and nine months ended January 31, 2016. The benefits in these periods are associated with changes in tax legislation enacted in the United Kingdom which reduced the U.K. corporate income tax rates. The benefits reflect the remeasurement of the Company's deferred tax balances to the new income tax rates and had no current cash tax impact. The fiscal year 2016 legislation reduced the U.K. income tax rates to 19% effective April 1, 2017 and 18% effective April 1, 2020, and the fiscal year 2017 legislation further reduced the April 1, 2020 statutory income tax rate to 17%.
 

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, 2017 AND 2016
(in thousands)
               
 

THIRD QUARTER ENDED JANUARY 31,

 
2017 2016 % Change
US GAAP   Adjustments (A,B)   Adjusted US GAAP   Adjustments (A,B)   Adjusted US GAAP   Adjusted excl. FX

Revenue

Research $ 205,769 - 205,769 183,568 - 183,568 12 % 17 %
Publishing 171,440 - 171,440 200,645 - 200,645 -15 % -13 %
Solutions 59,247 - 59,247 52,180 - 52,180 14 % 14 %
           
Total $ 436,456   -   436,456   436,393   -   436,393   0 % 3 %
 

Direct Contribution to Profit

Research $ 89,182 517 89,699 74,876 2,497 77,373 19 % 19 %
Publishing 78,444 1,027 79,471 92,602 4,121 96,723 -15 % -16 %
Solutions 12,427 1,095 13,522 9,995 245 10,240 24 % 32 %
           
Total $ 180,053   2,639   182,692   177,473   6,863   184,336   1 % 1 %
 

Contribution to Profit (After Allocated Shared Services

 

and Admin. Costs)

Research $ 52,508 517 53,025 43,944 2,497 46,441 19 % 17 %
Publishing 38,807 1,027 39,834 47,200 4,121 51,321 -18 % -21 %
Solutions 3,591 1,095 4,686 1,751 245 1,996 105 % 137 %
           
Total $ 94,906 2,639 97,545 92,895 6,863 99,758 2 % 0 %
 
Unallocated Shared Services and Admin. Costs (43,746 ) 6,479 (37,267 ) (53,276 ) 6,850 (46,426 ) -18 % -16 %
           
Operating Income $ 51,160   9,118   60,278   39,619   13,713   53,332   29 % 14 %
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (23,415 ) 5,185 (18,230 ) (22,430 ) 2,355 (20,075 ) 4 % -5 %
Technology and Content Management (62,464 ) (71 ) (62,535 ) (69,633 ) 2,670 (66,963 ) -10 % -5 %
Finance (11,163 ) 50 (11,113 ) (14,208 ) 2,740 (11,468 ) -21 % -1 %
Other Administration (31,851 ) 1,315   (30,536 ) (31,583 ) (915 ) (32,498 ) 1 % -4 %
Total $ (128,893 ) 6,479   (122,414 ) (137,854 ) 6,850   (131,004 ) -7 % -4 %
 
 

NINE MONTHS ENDED JANUARY 31,

 
2017 2016 % Change  
US GAAP Adjustments (A,B) Adjusted US GAAP Adjustments (A,B) Adjusted US GAAP Adjusted excl. FX

Revenue

Research $ 618,987 - 618,987 595,932 - 595,932 4 % 8 %
Publishing 479,701 - 479,701 548,656 - 548,656 -13 % -11 %
Solutions 167,641 - 167,641 148,148 - 148,148 13 % 13 %
           
Total $ 1,266,329   -   1,266,329   1,292,736   -   1,292,736   -2 % 1 %
 

Direct Contribution to Profit

Research $ 284,908 677 285,585 269,615 3,363 272,978 6 % 8 %
Publishing 214,454 1,596 216,050 242,620 4,380 247,000 -12 % -11 %
Solutions 34,862 1,619 36,481 24,854 385 25,239 40 % 44 %
           
Total $ 534,224   3,892   538,116   537,089   8,128   545,217   -1 % 1 %
 

Contribution to Profit (After Allocated Shared Services

and Admin. Costs)

Research $ 173,235 677 173,912 171,357 3,363 174,720 1 % 4 %
Publishing 94,639 1,596 96,235 111,345 4,380 115,725 -15 % -15 %
Solutions 9,097 1,619 10,716 160 385 545
           
Total $ 276,971 3,892 280,863 282,862 8,128 290,990 -2 % 0 %
 
Unallocated Shared Services and Admin. Costs (134,240 ) 19,995 (114,245 ) (138,069 ) 12,704 (125,365 ) -3 % -5 %
           
Operating Income $ 142,731   23,887   166,618   144,793   20,832   165,625   -1 % 3 %
 

Total Shared Services and Admin. Costs by Function

Distribution and Operation Services $ (66,720 ) 9,781 (56,939 ) (64,259 ) 4,320 (59,939 ) 4 % -1 %
Technology and Content Management (201,420 ) 1,662 (199,758 ) (194,022 ) 3,443 (190,579 ) 4 % 7 %
Finance (34,318 ) (296 ) (34,614 ) (37,093 ) 2,315 (34,778 ) -7 % 2 %
One-time Pension Settlement (8,842 ) 8,842 - - - -
Other Administration (80,193 ) 6   (80,187 ) (96,922 ) 2,626   (94,296 ) -17 % -13 %
Total $ (391,493 ) 19,995   (371,498 ) (392,296 ) 12,704   (379,592 ) 0 % 0 %
 
(A) See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.
 
UNAUDITED ADJUSTED CONTRIBUTION TO PROFIT
INCLUDING ALLOCATED SHARED SERVICES AND ADMINISTRATIVE COSTS
             
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands)
         
 
Third Quarter Ended Nine Months Ended
January 31, January 31,
2017 2016 % Change % Change excl. FX 2017 2016 % Change % Change excl. FX
 
 

Research:

Direct Contribution to Profit $ 89,182 74,876 19 % 22 %

 

$

284,908 269,615 6 % 9 %
Restructuring Charges (A) 517   2,497   677   3,363  
Adjusted Direct Contribution to Profit 89,699 77,373 16 % 19 % 285,585 272,978 5 % 8 %
 
Allocated Shared Services and Admin. Costs: (36,674 ) (30,932 ) 19 % 21 % (111,673 ) (98,258 ) 14 % 16 %
Adjusted Contribution to Profit (after allocated $ 53,025   46,441   14 % 17 %

 

$

173,912   174,720   0 % 4 %
Shared Services and Admin. Costs)
 

Publishing:

Direct Contribution to Profit $ 78,444 92,602 -15 % -14 %

 

$

214,454 242,620 -12 % -10 %
Restructuring Charges (A) 1,027   4,121   1,596   4,380  
Adjusted Direct Contribution to Profit 79,471 96,723 -18 % -16 % 216,050 247,000 -13 % -11 %
 
Allocated Shared Services and Admin. Costs: (39,637 ) (45,402 ) -13 % -11 % (119,815 ) (131,275 ) -9 % -7 %
Adjusted Contribution to Profit (after allocated $ 39,834   51,321   -22 % -21 %

 

$

96,235   115,725   -17 % -15 %
Shared Services and Admin. Costs)
 

Solutions:

Direct Contribution to Profit $ 12,427 9,995 24 % 25 %

 

$

34,862 24,854 40 % 40 %
Restructuring Charges (A) 1,095   245   1,619   385  
Adjusted Direct Contribution to Profit 13,522 10,240 32 % 32 % 36,481 25,239 45 % 44 %
 
Allocated Shared Services and Admin. Costs: (8,836 ) (8,244 ) 7 % 7 % (25,765 ) (24,694 ) 4 % 4 %
Adjusted Contribution to Profit (after allocated $ 4,686   1,996   135 % 137 %

 

$

10,716   545  
Shared Services and Admin. Costs)
 
 
Total Adjusted Contribution to Profit (after $ 97,545 99,758 -2 % 0 %

 

$

280,863 290,990 -3 % 0 %
allocated Shared Services and Admin. Costs)
 

Unallocated Shared Services and Admin. Costs:

Unallocated Shared Services and Admin. Costs $ (43,746 ) (53,276 ) -18 % -15 %

 

$

(134,240 ) (138,069 ) -3 % 0 %
Restructuring Charges (A) 6,479 6,850 11,153 12,704
One-time - Pension Settlement (B) -   -   8,842   -  
Adjusted Unallocated Shared Services and Admin. Costs $ (37,267 ) (46,426 ) -20 % -16 %

 

$

(114,245 ) (125,365 ) -9 % -5 %
       
Adjusted Operating Income $ 60,278   53,332   13 % 14 %

 

$

166,618   165,625   1 % 3 %
 
(A) See the accompanying Notes to Unaudited Financial Statements for a description of the Adjustment.
               
JOHN WILEY & SONS, INC.
SEGMENT REVENUE by PRODUCT/SERVICE
FOR THE THIRD QUARTER AND NINE MONTHS ENDED
JANUARY 31, 2017 AND 2016
(in thousands)
                                 
Third Quarter Nine Months
Ended January 31, % of % Change Ended January 31, % of % Change
  2017   2016   Revenue   excl. FX   2017   2016   Revenue   excl. FX
 

RESEARCH

Journal Revenue
Journal Subscriptions $ 149,909 125,669 73% 23% $ 472,401 450,970 76% 9%
Author-Funded Access 6,915 6,429 3% 15% 21,851 18,301 4% 27%
Licensing, Reprints, Backfiles, and Other 40,983 51,470 20% -14% 114,295 126,661 18% -5%
Total Journal Revenue 197,807 183,568 96% 12% 608,547 595,932 98% 6%
 
Platform Services (Atypon) 7,962 - 4% 10,440 - 2%
 
                                     
  Total Revenue   $ 205,769 # 183,568   100%   17% $ 618,987   595,932   100%   8%
 

Publishing

STM and Professional Books $ 76,899 90,830 45% -12% $ 215,734 251,742 45% -12%
Education Books 50,343 69,502 29% -27% 162,669 203,333 34% -19%
Total Books and Reference Material 127,242 160,332 74% -18% 378,403 455,075 79% -15%
 
 
Course Workflow (WileyPLUS) 23,464 21,894 14% 7% 44,170 41,359 9% 7%
Online Test Preparation and Certification 8,508 6,627 5% 29% 25,585 21,472 5% 20%
Licensing, Distribution, Advertising and Other 12,226 11,792 7% 7% 31,543 30,750 7% 6%
                                     
  Total Revenue   $ 171,440   200,645   100%   -13% $ 479,701   548,656   100%   -11%
 

Solutions

 
Online Program Management 30,016 26,057 51% 15% 81,195 69,754 48% 16%
Professional Assessment 13,783 13,162 23% 5% 43,451 42,196 26% 3%
Corporate Learning 15,448 12,961 26% 20% 42,995 36,198 26% 19%
 
                                     
  Total Revenue   $ 59,247   52,180   100%   14% $ 167,641   148,148   100%   13%
           
Total $ 436,456 436,393 3% $ 1,266,329 1,292,736 1%
           
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FINANCIAL POSITION
(in thousands)
 
January 31, April 30,
2017 2016 2016
 
Current Assets
Cash & cash equivalents $ 482,321 535,859 363,806
Accounts receivable 220,845 235,806 167,638
Inventories 49,247 53,747 57,779
Prepaid and other 124,058 71,529 81,456
Total Current Assets 876,471 896,941 670,679
Product Development Assets 90,267 73,906 72,126
Technology, Property and Equipment 241,385 207,515 214,770
Intangible Assets 834,252 872,224 877,007
Goodwill 981,453 938,796 951,663
Income Tax Deposits - 59,591 62,912
Other Assets 79,210 65,435 71,939
Total Assets 3,103,038 3,114,408 2,921,096
 
Current Liabilities
Short-term debt - 150,000 -
Accounts and royalties payable 210,853 205,724 166,222
Deferred revenue 403,269 305,541 426,489
Accrued employment costs 83,276 82,400 97,902
Accrued income taxes 9,084 10,023 9,450
Accrued pension liability 5,458 4,590 5,492
Other accrued liabilities 78,094 68,658 76,252
Total Current Liabilities 790,034 826,936 781,807
Long-Term Debt 865,700 814,728 605,007
Accrued Pension Liability 178,023 185,976 224,170
Deferred Income Tax Liabilities 182,571 192,220 189,868
Other Long-Term Liabilities 75,250 78,465 83,138
Shareholders' Equity 1,011,460 1,016,083 1,037,106
Total Liabilities & Shareholders' Equity $ 3,103,038 3,114,408 2,921,096
 
JOHN WILEY & SONS, INC.
UNAUDITED STATEMENTS OF FREE CASH FLOW *
(in thousands)
         
 
Nine Months Ended
January 31,
2017 2016
Operating Activities:
Net income $ 66,968 111,575
Amortization of intangibles 37,321 37,251
Amortization of composition costs 29,502 30,047
Depreciation of technology, property and equipment 50,520 50,820
Restructuring charges 15,045 20,832
Restructuring payments (15,740 ) (24,809 )
Deferred tax benefit on UK Corporate Income Tax Rate Change (2,575 ) (5,859 )
Unfavorable Tax Settlement 47,531 -
One-time pension settlement 8,842 -
Share-based compensation expense 10,187 12,292
Excess tax benefits from share-based compensation (227 ) (517 )
Royalty advances (79,804 ) (79,026 )
Earned royalty advances 77,554 71,761
Other non-cash charges and credits 26,096 15,492
Change in deferred revenue (7,733 ) (57,959 )
Net change in operating assets and liabilities (34,335 ) (65,289 )
Cash Provided by Operating Activities 229,152 116,611
 
Investments in organic growth:
Additions to technology, property and equipment (82,257 ) (69,048 )
Composition spending (27,369 ) (28,627 )
 
* Free Cash Flow less Composition Spending 119,526 18,936
 
Other Investing and Financing Activities:
Acquisitions, net of cash (152,110 ) (17,972 )
Repayment of long-term debt (340,207 ) (158,861 )
Borrowings of short-term debt - 50,000
Borrowings of long-term debt 600,900 323,500
Change in book overdrafts (8,866 ) (3,287 )
Cash dividends (53,638 ) (52,612 )
Purchase of treasury shares (35,362 ) (59,704 )
Proceeds from exercise of stock options and other 16,444 556
Excess tax benefits from share-based compensation 227   517  
Cash Provided by Investing and Financing Activities 27,388 82,137
 
Effects of Exchange Rate Changes on Cash (28,399 ) (22,655 )
 
Increase in Cash and Cash Equivalents for Period $ 118,515   78,418  
 
RECONCILIATION TO GAAP PRESENTATION
 
Investing Activities:
Additions to technology, property and equipment $ (82,257 ) (69,048 )
Composition spending (27,369 ) (28,627 )
Acquisitions, net of cash (152,110 ) (17,972 )
Cash Used for Investing Activities $ (261,736 ) (115,647 )
 
Financing Activities:
Cash Used for Investing and Financing Activities $ 27,388 82,137
Excluding:
Acquisitions, net of cash (152,110 ) (17,972 )
Cash Provided by Financing Activities $ 179,498   100,109  

Free Cash Flow less Composition Spending:

 
The Company provides financial measures referred to as "Free Cash Flow less Composition Spending". Free Cash Flow less Composition Spending is defined as "cash flow from operating activities, less composition and other capital spending". Management believes this metric provides additional information to investors to facilitate the comparison of past and present results. This metric is also used internally by management in evaluating results. This non-GAAP measure is not intended to replace the financial results reported in accordance with US Generally Accepted Accounting Principles.

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