8-K
John Wiley & Sons, Inc. (WLY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
September 3, 2020
(Date of Report)
(Date of earliest event reported)
JOHN WILEY & SONS, INC.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
| 001-11507 | 13-5593032 |
|---|---|
| ---------------------------------------------------- | --------------------------------------------- |
| Commission File Number | IRS Employer Identification Number |
| 111 River Street, Hoboken New Jersey | 07030 |
| ---------------------------------------------------- | --------------------------------------------- |
| Address of principal executive offices | Zip Code |
| Registrant’s telephone number, including area code: | (201) 748-6000 |
| --------------------------------------------- |
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock, par value $1.00 per share | JW.A | New York Stock Exchange |
| Class B Common Stock, par value $1.00 per share | JW.B | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02: RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On September 3, 2020, John Wiley & Sons Inc., a New York corporation (the “Company”), issued a press release announcing the Company’s financial results for the first quarter fiscal year 2021. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
ITEM 7.01 REGULATION FD DISCLOSURE
On September 3, 2020, the Company held its first quarter fiscal 2021 earnings conference call. The Company is furnishing as Exhibit 99.2 to this Current Report on Form 8-K the presentation materials that were provided and discussed during the earnings conference call.
The information in these Items 2.02 and 7.01, including the exhibits hereto, (x) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and (y) shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the Company specifically states that the information or exhibits in this particular report are incorporated by reference). The furnishing of the information set forth in this report is not intended to, and does not, constitute a determination or admission as to the materiality or completeness of such information.
ITEM 9.01: FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
99.1 - Press release dated September 3, 2020 “Wiley Reports First Quarter Fiscal 2021 Results.”
99.2 - Presentation materials dated September 3, 2020.
104 - Cover Page Interactive Data File (embedded within the Inline XBRL document).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| JOHN WILEY & SONS, INC. | |
|---|---|
| Registrant | |
| By | /s/ Brian A. Napack |
| --- | --- |
| Brian A. Napack | |
| President and | |
| Chief Executive Officer | |
| By | /s/ John A. Kritzmacher |
| --- | --- |
| John A. Kritzmacher | |
| Executive Vice President, Chief Financial Officer, and Interim Chief Accounting Officer | |
| Dated: September 3, 2020 | |
| --- |
Wiley Reports First Quarter Fiscal 2021 Results
September 3, 2020 - Hoboken, NJ – John Wiley & Sons, Inc. (NYSE: JW-A and JW-B), a global leader in research and education, today announced results for the first quarter ended July 31, 2020.
SUMMARY
| • | GAAP Results: Revenue of $431 million (+2%)<br> and EPS of $0.29 (+$0.23) |
|---|---|
| • | Adjusted Results (at<br> constant currency): Revenue +2% to $431 million, EBITDA +42% to $82 million, and EPS +124% to $0.42 |
| --- | --- |
| • | Research Publishing & Platforms (at<br> constant currency): Revenue +6% and Adjusted EBITDA +19% |
| --- | --- |
| • | Shareholder Return: Wiley among select group<br> with 27 consecutive years of annual dividend increases |
| --- | --- |
MANAGEMENT COMMENTARY
“Wiley’s core strategies in open research and online education are paying off with unprecedented gains in Research article output and content consumption, strong online enrollment growth, and record new adoption of digital courseware,” said Brian Napack, President and CEO. “The Wiley team is executing well through the pandemic as we continue to take advantage of market-driven growth trends in Research and Education, while driving further efficiency gains across our business.”
FIRST QUARTER PERFORMANCE
| GAAP Measures<br> Unaudited (millions except for EPS) | Q1 2021 | Q1 2020 | Change | ||
|---|---|---|---|---|---|
| Revenue | 431.3 | $ | 423.5 | 2% | |
| Diluted EPS | 0.29 | $ | 0.06 | $ | 0.23 |
| Non-GAAP Measures | Q1 2021 | Q1 2020 | Change<br><br> <br>Constant Currency | ||
| Revenue | 431.3 | $ | 423.5 | 2% | |
| Adjusted EBITDA | 81.8 | $ | 57.5 | 42% | |
| Adjusted EPS | 0.42 | $ | 0.21 | 124% |
All values are in US Dollars.
Excluding acquisitions and currency impact, revenue declined 1% for the quarter. Wiley recorded an unfavorable FX variance of $2.4 million in revenue, $0.05 in Adjusted EPS, and favorable FX variance of $0.1 million in Adjusted EBITDA.
Revenue
| • | Research Publishing & Platforms rose 5% as reported and 6% at constant currency with growth in open access and content platforms driving results.Note, approximately $4 million, or 2% of first quarter Research Publishing revenue, reflected carryover due to COVID-related delays from the prior quarter. |
|---|
| • | Academic & Professional Learning declined<br> 12% as reported and at constant currency mainly due to continued market pressures on print books and adverse COVID-19 impacts on Professional Learning, particularly in-person corporate training. In Education Publishing, digital content and<br> courseware growth accelerated while print textbooks continued to decline sharply. |
|---|---|
| • | Education Services increased 29% as reported<br> and at constant currency, driven by the three-month inorganic contribution from mthree (+$12 million) and organic growth of 4% in Online<br> Program Management (OPM) services. |
| --- | --- |
Adjusted EBITDA
| • | Research Publishing & Platforms grew 19%<br> at constant currency, reflecting revenue growth and lower discretionary spending. |
|---|---|
| • | Academic & Professional Learning declined<br> 23% at constant currency, reflecting revenue performance, partly offset by lower discretionary spending. |
| --- | --- |
| • | Education Services grew from $0.4 million to<br> $8 million due to revenue growth and business optimization savings, notably improvement in student acquisition costs. Adjusted EBITDA margin for the quarter was 13%. |
| --- | --- |
| • | Corporate Expenses declined 19% to $34 million mainly due to lower employee-related costs and professional fees. |
| --- | --- |
EPS
| • | GAAP EPS of $0.29 compared to $0.06 in prior<br> year period primarily reflected growth in Operating Income. Restructuring charges of $0.03 were lower by $0.11 from prior year but offset by a deferred tax charge of $0.12 in the current period related to a UK statutory rate increase. |
|---|---|
| • | Adjusted EPS (+124%) primarily reflected Adjusted Operating Income growth. |
| --- | --- |
Balance Sheet and Liquidity
| • | Net debt-to-EBITDA ratio (trailing twelve<br> months) at quarter-end was 2.0 as compared to 1.7 at the end of the year-ago period. |
|---|---|
| • | Available liquidity was approximately $750<br> million at quarter-end, including $101 million of cash on hand and $650 million of undrawn debt facilities. |
| --- | --- |
Cash Flow and Return to Shareholders
| • | Net Cash Used in<br> Operating Activities was $121 million compared to $94 million in the prior year period, primarily driven by the timing of working capital. Note, Wiley’s consistent use of cash in the first half of the fiscal year is driven by the<br> timing of collections for annual journal subscriptions, which is concentrated in the third and fourth fiscal quarters. |
|---|---|
| • | Free Cash Flow less Product Development<br> Spending was a use of $145 million compared to a use of $125 million in the prior year. As a reminder, Wiley generated $173 million of Free Cash Flow in fiscal year 2020. |
| --- | --- |
| • | Quarterly dividend was raised for the 27^th^<br> consecutive year, declared on June 25, to $0.3425 per share on its Class A and Class B common stock. |
| --- | --- |
FISCAL YEAR 2021 OUTLOOK
Wiley cannot confidently project the forward-looking impact of the pandemic on its operating results and is therefore not providing a financial outlook for fiscal year 2021 at this time.
EARNINGS CONFERENCE CALL
Scheduled for today, September 3 at 10:00 a.m. (ET). Access the webcast on Wiley.com, at https://www.wiley.com/en-us/investors or directly at https://edge.media-server.com/mmc/p/wimivu3k. U.S. callers, please dial (844) 231-0103 and enter the participant code 8168499#. International callers, please dial (216) 562-0402 and enter the participant code 8168499#.
ABOUT WILEY
Wiley drives the world forward with research and education. Through publishing, platforms and services, we help researchers, professionals, students, universities, and corporations to achieve their goals in an ever-changing world. And for more than 200 years, we have delivered consistent performance to all our stakeholders. The Company's website can be accessed at www.wiley.com.
NON-GAAP FINANCIAL MEASURES
Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “Adjusted Revenue,” “Adjusted Operating Income,” “Adjusted EBITDA,” “Adjusted CTP,” “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.
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 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; (x) the Company’s ability to realize operating savings over time and in fiscal year 2021 in connection with our multi-year Business Optimization 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.
Investor Contact:
Brian Campbell
201.748.6874
brian.campbell@wiley.com
Media Contact:
Katie Roberts
602.373.7233
karoberts@wiley.com
| JOHN WILEY & SONS, INC. | ||||||
|---|---|---|---|---|---|---|
| SUPPLEMENTARY INFORMATION^(1)(2)^ | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||
| (in thousands, except per share data) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| July 31, | ||||||
| 2020 | 2019 | |||||
| Revenue, net | $ | 431,326 | $ | 423,530 | ||
| Costs and expenses: | ||||||
| Cost of sales | 144,809 | 143,096 | ||||
| Operating and administrative expenses | 237,369 | 250,170 | ||||
| Restructuring and related charges | 2,218 | 10,735 | ||||
| Amortization of intangibles | 16,891 | 14,970 | ||||
| Total Costs and Expenses | 401,287 | 418,971 | ||||
| Operating Income | 30,039 | 4,559 | ||||
| As a % of revenue | 7.0 | % | 1.1 | % | ||
| Interest expense | (4,614 | ) | (6,077 | ) | ||
| Foreign exchange transaction (losses) gains | (82 | ) | 2,652 | |||
| Interest and other income | 4,391 | 2,833 | ||||
| Income Before Taxes | 29,734 | 3,967 | ||||
| Provision for income taxes | 13,400 | 343 | ||||
| Effective tax rate | 45.1 | % | 8.6 | % | ||
| Net Income | $ | 16,334 | $ | 3,624 | ||
| As a % of revenue | 3.8 | % | 0.9 | % | ||
| Weighed Average Number of Common Shares Outstanding | ||||||
| Basic | 55,912 | 56,536 | ||||
| Diluted | 56,193 | 56,905 | ||||
| Earnings Per Share | ||||||
| Basic | $ | 0.29 | $ | 0.06 | ||
| Diluted | $ | 0.29 | $ | 0.06 | ||
| Notes: | ||||||
| (1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to change prior<br> 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. |
| JOHN WILEY & SONS, INC. | |||||
|---|---|---|---|---|---|
| SUPPLEMENTARY INFORMATION (1) | |||||
| RECONCILIATION OF GAAP EPS to NON-GAAP ADJUSTED EPS - DILUTED | |||||
| (unaudited) | |||||
| 2019 | |||||
| GAAP Earnings Per Share - Diluted | 0.29 | $ | 0.06 | ||
| Adjustments: | |||||
| Restructuring and related charges (A) | 0.03 | 0.14 | |||
| Foreign exchange (gains) losses on intercompany transactions (A) | (0.02 | ) | 0.01 | ||
| Impact of increase in U.K. statutory rate on deferred tax balances in fiscal year 2021 (B) | 0.12 | - | |||
| Non-GAAP Adjusted Earnings Per Share - Diluted | 0.42 | $ | 0.21 | ||
| Notes: | |||||
| (A) The table below shows the net of tax impact of our adjustments to GAAP Earnings Per Share noted above. | |||||
| (amounts in millions) | 2020 | 2019 | |||
| Net of tax, charges related to the Business Optimization Program | 1.5 | $ | 8.1 | ||
| Net of tax, credits related to the Restructuring and Reinvestment Program | (0.0 | ) | $ | (0.1 | ) |
| Net of tax, foreign exchange transaction (gains) losses | (1.0 | ) | $ | 0.3 | |
| (B) During the first quarter of fiscal 2021, the U.K. officially enacted legislation that increased its statutory rate from 17% to 19%. This<br> resulted in a 6.7 million non-cash deferred tax expense from the re-measurement of the Company’s applicable U.K. net deferred tax liabilities. | |||||
| (1) See Explanation of Usage of Non-GAAP performance measures included in this supplementary information for additional details on the reasons why<br> 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 months ended July 31, 2020 is preliminary and subject<br> to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission. |
All values are in US Dollars.
| JOHN WILEY & SONS, INC. | ||||||
|---|---|---|---|---|---|---|
| SUPPLEMENTARY INFORMATION ^(1)^ | ||||||
| RECONCILIATION OF GAAP NET INCOME to NON-GAAP EBITDA AND ADJUSTED EBITDA | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| July 31, | ||||||
| 2020 | 2019 | |||||
| Net Income | $ | 16,334 | $ | 3,624 | ||
| Interest expense | 4,614 | 6,077 | ||||
| Provision for income taxes | 13,400 | 343 | ||||
| Depreciation and amortization | 49,507 | 42,219 | ||||
| Non-GAAP EBITDA | 83,855 | 52,263 | ||||
| Restructuring and related charges | 2,218 | 10,735 | ||||
| Foreign exchange transaction losses (gains) | 82 | (2,652 | ) | |||
| Interest and other income | (4,391 | ) | (2,833 | ) | ||
| Non-GAAP Adjusted EBITDA | $ | 81,764 | $ | 57,513 | ||
| Adjusted EBITDA Margin | 19.0 | % | 13.6 | % | ||
| Notes: | ||||||
| (1) See Explanation of Usage of Non-GAAP performance measures included in this supplementary information for additional details on the reasons<br> 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 months ended July 31, 2020 is preliminary and<br> 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) | |||||||||||
| SEGMENT RESULTS | |||||||||||
| (in thousands) | |||||||||||
| (unaudited) | |||||||||||
| % Change | |||||||||||
| Favorable (Unfavorable) | |||||||||||
| 2019 | Reported | Constant<br><br> <br>Currency | |||||||||
| Research Publishing & Platforms: | |||||||||||
| Revenue, net | |||||||||||
| Research Publishing | 230,464 | $ | 219,927 | 5 | % | 5 | % | ||||
| Research Platforms | 10,346 | 9,448 | 10 | % | 10 | % | |||||
| Total Revenue, net | 240,810 | $ | 229,375 | 5 | % | 6 | % | ||||
| Contribution to Profit | 69,818 | $ | 55,646 | 25 | % | 26 | % | ||||
| Adjustments: | |||||||||||
| Restructuring (credits) charges | (197 | ) | 2,620 | ||||||||
| Non-GAAP Adjusted Contribution to Profit | 69,621 | $ | 58,266 | 19 | % | 20 | % | ||||
| Depreciation and amortization | 19,701 | 17,153 | |||||||||
| Non-GAAP Adjusted EBITDA | 89,322 | $ | 75,419 | 18 | % | 19 | % | ||||
| Adjusted EBITDA margin | 37.1 | % | 32.9 | % | |||||||
| Academic & Professional Learning: | |||||||||||
| Revenue, net | |||||||||||
| Education Publishing | 64,084 | $ | 65,523 | -2 | % | -2 | % | ||||
| Professional Learning | 62,829 | 79,335 | -21 | % | -20 | % | |||||
| Total Revenue, net | 126,913 | 144,858 | -12 | % | -12 | % | |||||
| Contribution to Profit | (380 | ) | $ | 4,911 | # | # | |||||
| Adjustments: | |||||||||||
| Restructuring charges | 33 | 2,805 | |||||||||
| Non-GAAP Adjusted Contribution to Profit | (347 | ) | $ | 7,716 | # | # | |||||
| Depreciation and amortization | 18,804 | 16,524 | |||||||||
| Non-GAAP Adjusted EBITDA | 18,457 | $ | 24,240 | -24 | % | -23 | % | ||||
| Adjusted EBITDA margin | 14.5 | % | 16.7 | % | |||||||
| Education Services: | |||||||||||
| Revenue, net | |||||||||||
| Education Services (2) | 50,262 | $ | 48,156 | 4 | % | 4 | % | ||||
| mthree (2) | 13,341 | 1,141 | # | # | |||||||
| Total Revenue, net | 63,603 | 49,297 | 29 | % | 29 | % | |||||
| Contribution to Profit | 558 | $ | (7,199 | ) | # | # | |||||
| Adjustments: | |||||||||||
| Restructuring charges | 139 | 2,089 | |||||||||
| Non-GAAP Adjusted Contribution to Profit | 697 | $ | (5,110 | ) | # | # | |||||
| Depreciation and amortization | 7,279 | 5,498 | |||||||||
| Non-GAAP Adjusted EBITDA | 7,976 | $ | 388 | # | # | ||||||
| Adjusted EBITDA margin | 12.5 | % | 0.8 | % | |||||||
| Corporate Expenses: | (39,957 | ) | $ | (48,799 | ) | 18 | % | 17 | % | ||
| Adjustments: | |||||||||||
| Restructuring charges | 2,243 | 3,221 | |||||||||
| Non-GAAP Adjusted Corporate Expenses | (37,714 | ) | $ | (45,578 | ) | 17 | % | 16 | % | ||
| Depreciation and amortization | 3,723 | 3,044 | |||||||||
| Non-GAAP Adjusted EBITDA | (33,991 | ) | $ | (42,534 | ) | 20 | % | 19 | % | ||
| Consolidated Results: | |||||||||||
| Revenue, net | 431,326 | $ | 423,530 | 2 | % | 2 | % | ||||
| Operating Income | 30,039 | $ | 4,559 | # | # | ||||||
| Adjustments: | |||||||||||
| Restructuring charges | 2,218 | 10,735 | |||||||||
| Non-GAAP Adjusted Operating Income | 32,257 | $ | 15,294 | # | # | ||||||
| Depreciation and amortization | 49,507 | 42,219 | |||||||||
| Non-GAAP Adjusted EBITDA | 81,764 | $ | 57,513 | 42 | % | 42 | % | ||||
| Adjusted EBITDA margin | 19.0 | % | 13.6 | % | |||||||
| (1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to change<br> prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission. | |||||||||||
| (2) In May 2020, we moved the IT bootcamp business acquired as part of The Learning House acquisition from Education Services to mthree. As a<br> result, the prior period revenue related to the IT bootcamp business has been included in mthree. There were no changes to our total Education Services or our consolidated financial results. The inorganic revenue from mthree in the<br> three months ended July 31, 2020 was 12.4 million. | |||||||||||
| # Not meaningful |
All values are in US Dollars.
| JOHN WILEY & SONS, INC. | ||||
|---|---|---|---|---|
| SUPPLEMENTARY INFORMATION ^(1)^ | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||
| (in thousands) | ||||
| (unaudited) | ||||
| July 31, | April 30, | |||
| 2020 | 2020 | |||
| Assets: | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | 101,385 | $ | 202,464 |
| Accounts receivable, net | 282,412 | 309,384 | ||
| Inventories, net | 45,051 | 43,614 | ||
| Prepaid expenses and other current assets | 59,155 | 59,465 | ||
| Total Current Assets | 488,003 | 614,927 | ||
| Product Development Assets, net | 52,088 | 53,643 | ||
| Royalty Advances, net | 28,682 | 36,710 | ||
| Technology, Property and Equipment, net | 295,457 | 298,005 | ||
| Intangible Assets, net | 829,231 | 807,405 | ||
| Goodwill | 1,133,610 | 1,116,790 | ||
| Operating Lease Right-of-Use Assets | 139,798 | 142,716 | ||
| Other Non-Current Assets | 102,077 | 98,598 | ||
| Total Assets | $ | 3,068,946 | $ | 3,168,794 |
| Liabilities and Shareholders' Equity: | ||||
| Current Liabilities | ||||
| Accounts payable | $ | 52,556 | $ | 93,691 |
| Accrued royalties | 82,691 | 87,408 | ||
| Short-term portion of long-term debt | 10,938 | 9,375 | ||
| Contract liabilities | 408,954 | 520,214 | ||
| Accrued employment costs | 70,211 | 108,448 | ||
| Accrued income taxes | 181 | 13,728 | ||
| Short-term portion of operating lease liabilities | 20,647 | 21,810 | ||
| Other accrued liabilities | 69,958 | 72,595 | ||
| Total Current Liabilities | 716,136 | 927,269 | ||
| Long-Term Debt | 835,763 | 765,650 | ||
| Accrued Pension Liability | 183,284 | 187,969 | ||
| Deferred Income Tax Liabilities | 124,184 | 119,127 | ||
| Operating Lease Liabilities | 156,644 | 159,782 | ||
| Other Long-Term Liabilities | 79,190 | 75,373 | ||
| Total Liabilities | 2,095,201 | 2,235,170 | ||
| Shareholders' Equity | 973,745 | 933,624 | ||
| Total Liabilities and Shareholders' Equity | $ | 3,068,946 | $ | 3,168,794 |
| (1) The supplementary information included in this press release for July 31, 2020 is preliminary and subject to change prior to the filing of<br> 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 FLOW | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| July 31, | ||||||
| 2020 | 2019 | |||||
| Operating Activities: | ||||||
| Net income | $ | 16,334 | $ | 3,624 | ||
| Amortization of intangibles | 16,891 | 14,970 | ||||
| Amortization of product development assets | 9,148 | 8,714 | ||||
| Depreciation and amortization of technology, property, and equipment | 23,468 | 18,535 | ||||
| Other non-cash charges and credits | 37,105 | 26,477 | ||||
| Net change in operating assets and liabilities | (223,729 | ) | (166,488 | ) | ||
| Net Cash Used In Operating Activities | (120,783 | ) | (94,168 | ) | ||
| Investing Activities: | ||||||
| Additions to technology, property, and equipment | (18,964 | ) | (24,202 | ) | ||
| Product development spending | (5,325 | ) | (6,211 | ) | ||
| Businesses acquired in purchase transactions, net of cash acquired | (136 | ) | (73,209 | ) | ||
| Acquisitions of publication rights and other | (3,855 | ) | (2,270 | ) | ||
| Net Cash Used in Investing Activities | (28,280 | ) | (105,892 | ) | ||
| Financing Activities: | ||||||
| Net debt borrowings | 67,356 | 253,848 | ||||
| Cash dividends | (19,261 | ) | (19,252 | ) | ||
| Purchase of treasury shares | - | (10,000 | ) | |||
| Other | (4,611 | ) | (11,263 | ) | ||
| Net Cash Provided By Financing Activities | 43,484 | 213,333 | ||||
| Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | 4,500 | (2,138 | ) | |||
| Change in Cash, Cash Equivalents and Restricted Cash for Period | (101,079 | ) | 11,135 | |||
| Cash, Cash Equivalents and Restricted Cash - Beginning | 203,047 | 93,548 | ||||
| Cash, Cash Equivalents and Restricted Cash - Ending | $ | 101,968 | 104,683 | |||
| CALCULATION OF NON-GAAP FREE CASH FLOW LESS PRODUCT DEVELOPMENT SPENDING | ||||||
| Three Months Ended | ||||||
| July 31, | ||||||
| 2020 | 2019 | |||||
| Net Cash Used In Operating Activities | $ | (120,783 | ) | $ | (94,168 | ) |
| Less: Additions to technology, property, and equipment | (18,964 | ) | (24,202 | ) | ||
| Less: Product development spending | (5,325 | ) | (6,211 | ) | ||
| Free Cash Flow less Product Development Spending | $ | (145,072 | ) | $ | (124,581 | ) |
| See Explanation of Usage of Non-GAAP Measures included in this supplemental information. | ||||||
| (1) The supplementary information included in this press release for the three months ended July 31, 2020 is preliminary and subject to<br> change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission. |
| 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 Revenue; |
| • Adjusted Operating Income and margin; |
| • Adjusted Contribution to Profit and margin; |
| • EBITDA and 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<br> well for internal reporting and forecasting purposes, when publicly providing its outlook, to evaluate the Company's performance and calculate incentive compensation. Non-GAAP performance measures do not have standardized meanings<br> prescribed by U.S. 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 U.S. GAAP. |
| The Company presents these non-GAAP performance measures in addition to U.S. GAAP financial results because it believes that these<br> 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<br> basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose. For example: |
| • Adjusted EPS, Adjusted Revenue, Adjusted Operating Income, Adjusted Contribution to Profit, Adjusted EBITDA and organic revenue provide a more comparable basis to analyze operating results<br> 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<br> stock dividends and fund share repurchases and acquisitions. |
| • Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure<br> our performance before 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, the Company has historically provided these or similar non-GAAP performance measures and understands that some investors and<br> financial analysts find this information helpful in analyzing the Company's operating margins, and net income and comparing the Company's financial performance to that of its peer companies and competitors. Based on interactions<br> with investors, we also believe that the Company's non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments<br> or our operating performance to our investors due to the comprehensive nature of our disclosures. |
Safe Harbor StatementThis presentation 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 many 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 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 2021 in connection with our multi-year Business Optimization 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. Non-GAAP MeasuresIn this presentation, management provides the following non-GAAP performance measures:Adjusted Earnings Per Share (“Adjusted EPS”);Free Cash Flow less Product Development Spending;Adjusted Revenue;Adjusted Operating Income and margin;Adjusted Contribution to Profit (“Adjusted CTP”) and margin;Adjusted EBITDA;Organic revenue; andResults on a constant currency (“CC”) basis.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 and are 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. Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency” “CC”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.
Business Review Brian Napack, President and CEO
Business Update – Advancing Through the Global Pandemic Remote work yielding productivity gains and high engagement: digital company, tech-enabled workflows Solid momentum in Research and Education Services Continued disruption to legacy print books and in-person training Favorable trends continue – demand for high-quality research, online education and digital courseware Optimization and cost savings initiatives accelerating Strong balance sheet and liquidity provide a foundation for continued investment in profitable growth
First Quarter 2021 Summary Revenue+2%*$431M Adj. EBITDA+42%* $82M Adj. EPS+124%*$0.42 Revenue performance driven by:Accelerating demand to publish peer-reviewed research and access it through our platformsIncreasing uptake of digital content and courseware Increasing demand for online education servicesAcademic & Professional Learning challenged by continued COVID-19 disruptionEarnings improvement driven by Research revenue, lower discretionary spend, and savings from restructuring *At constant currency. Revenue down 1% excluding acquisitions. GAAP EPS+$0.23$0.29
Publishing up 5% driven by robust open access growth and favorable timing (contracts delayed from Q4); article submissions and output up significantlySociety partnerships continue strong momentum; CY21 net wins up $11M Platforms up 10% reflecting new client launches and high retention; prominent partnership with AAAS (Science); Literatum platform usage all-time highEBITDA performance (37% margin) from revenue growth and expense management Research Publishing & PlatformsStrong momentum in Open Access, Platforms, and Partnerships Article Output +13% Revenue +6% $241M Adj. EBITDA+19%$89M Change at constant currency. Revenue +5% as reported. YoY +10% YoY Content Usage
Research Publishing & Platforms – Rest of Year Viewpoint Pricing pressure anticipated for Calendar Year ‘21 journal subscription renewals – university library budgets challenged by COVID; peak renewal season runs from Oct ‘20 to Jan ‘21; CY20 renewals locked through December ‘20Pricing pressure offset by continued double-digit open access growth – industry leader in OA and comprehensive publishing agreements; underlying demand accelerating; not funded by university libraries Strong society partnership net win position for CY21Continued platform revenue growth – long term contracts, high predictive revenue, and dominant market position; not funded by university librariesAccelerating workflow, publishing efficiency and cost base improvements
Inflection point for digital courseware and content; growth acceleratingPrint books and test prep affected by COVID-related store and testing center closingsCorporate training challenged by disruption to in-person training; post-pandemic recovery anticipatedEBITDA decline mainly from revenue performance, partly offset by lower discretionary spending Academic & Professional Learning Digital growth offset by COVID-related impact on print books and in-person training Revenue -12%$127M Adj. EBITDA-23%$18M Change at constant currency.Revenue at constant currency down 13% excluding acquisitions. Digital Courseware Revenue +88%* YoY +32% Digital Content Revenue YoY *part of this proforma
Academic & Professional Learning – Rest of Year Viewpoint Strong digital courseware growth to continue, partly offsetting overall enrollment challenges Print book declines to continue with diminishing impact to overall business Test prep and corporate training largely dependent on reopening of physical sites; this is accelerating virtual and blended training adoption; long term confidence in corporate e-learningNew business models and pricing initiatives acceleratingRapidly improving cost structure and workflows to improve efficiency and mitigate revenue impact
Education Services organic growth of 4% from higher enrollment and new program launches; revenue growth constrained by portfolio optimizationTwo full-service partners signed this quarter – University of New Haven (CT) and Carlow University (PA); additional universities signed for unbundled servicesmthree inorganic contribution of $12M for the quarter; demand for IT talent more stable so far than initially anticipated Profitable growth strategy working; Adjusted EBITDA margin of 13%, reflecting business process optimization Education ServicesAccelerating interest from universities; profitable growth strategy yielding strong margin gains Revenue +29%$64M Adj. EBITDA+$8M$8M Change at constant currency.Revenue at constant currency up 4% excluding mthree acquisition (+$12M) Enrollments +9% Q1’21 67 University Partners Total
Education Services – Rest of Year Viewpoint Enrollment momentum and solid pipeline of university partnerships and programsExisting partners seeking online expansion opportunitiesUnbundled services facing some near-term pressure due to university financial pressureSteady placement opportunities for IT talentContinued progress in improving student acquisition costs and overall efficiency Continued EBITDA margin rate improvement on path to mid-teens target
Financial Review John Kritzmacher, Executive Vice President & CFO
Cash Flow, Balance Sheet, and Return to Shareholders Free Cash Flow: lower by $20M primarily due to timing of working capital activity. Free Cash Flow historically a use in first half of fiscal year due to timing of journal subscriptions collections. $173M of Free Cash Flow generated in fiscal year 2020Modest Leverage: Net Debt / EBITDA at 2.0 (ttm) Ample Liquidity: $750M including $101M cash on hand and $650M of undrawn debt facilities Targeted Investment: focused on the development of tech-enabled services and platforms, and workflow and process redesign. Opportunistic on M&A front to add scale or capabilities in key strategic areas Select Group of Dividend Growers: dividend raised in June; Wiley among a highly select group of S&P 400 midcap companies with 25+ years of consecutive increases Free Cash Flow Q120 Q121 Change ($125M) ($145M) ($20M) Dividend 27 YearsConsecutive annual increases 4% YieldCurrent as of Sept 2
Expense Management Discretionary spending controlsTemporary senior executive and BOD compensation reductions Reorganization and Restructuring $15M charge in Q4/ $30M in run rate savings expectedFurther cost structure initiatives anticipated in fiscal year 2021 Real Estate Optimization Effective remote work environment enabling reduced office footprint and lease savingsSuccess in sub-leasing our remaining distribution facility to printers Process Re-engineering & Automation Investment in Research infrastructure to further reduce cycle time and cost per article, enabling scale efficiencies and cascade strategyInvestment in ecommerce and DTC platforms to take advantage of digital-only environmentReduction in print across our businessesOptimization of student acquisition and marketing cost in Ed Services Offshoring and Outsourcing IT back office services consolidation improved data management, workflow, and reduced labor costRetirement of legacy systems Cost Measures and Business Optimization
Summary Solid momentum in Research and Education Services Continued disruption to legacy print books and in-person training Favorable trends continue – demand for high-quality research, online education and digital courseware Optimization and cost savings initiatives accelerating Strong balance sheet and liquidity provide a foundation for continued investment in profitable growth Research and Education markets are strong and our strategies are working
Thank you for joining usEarnings material and events calendar at https://www.wiley.com/en-us/investorsQ2 2021 Earnings Call – DecemberContact us for follow-up at: brian.campbell@wiley.com+1(201) 748-6874
APPENDIX
