John Wiley & Sons, Inc 10-Q for FY2024 Q2
John Wiley & Sons, Inc. (WLY)
10-Q
2023-12-07
For: 2023-10-31
View Original
Added on
April 10, 2026
About this 10-Q
John Wiley & Sons, Inc filed this 10-Q on December 7, 2023, covering the quarter ended October 31, 2023 (FY2024 Q2).
Headline figures
Quarter ended October 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $492.81M
- down 4.3% from $514.84M a year earlier
- Net loss
- $19.45M
- compared with net income of $38.19M a year earlier
- Diluted EPS
- -$0.35
- compared with $0.68 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended October 31, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from_____ to _____
Commission File No. 001-11507
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | Zip Code | |||||||
( | ||||||||
| Registrant’s telephone number, including area code | ||||||||
| Not Applicable | ||||||||
| Former name, former address and former fiscal year, if changed since last report | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Accelerated filer o | |||||
Non-accelerated filer o | |||||
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares outstanding of each of the Registrant’s classes of common stock as of November 30, 2023 were:
Class A, par value $1.00 – 45,847,042
Class B, par value $1.00 – 9,022,235
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
INDEX
| PART I - FINANCIAL INFORMATION | ||||||||
Item 5. | ||||||||
2
Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This report contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 concerning our business, consolidated financial condition and results of operations. The Securities and Exchange Commission (SEC) encourages companies to disclose forward-looking information so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding our fiscal year 2024 outlook, anticipated restructuring charges and savings, operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those described 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 our control, 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 our 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 our educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) our ability to protect our copyrights and other intellectual property worldwide; (ix) our ability to successfully integrate acquired operations and realize expected opportunities; (x) the ability to realize operating savings over time and in fiscal year 2024 in connection with our multiyear Global Restructuring Program and planned dispositions; (xi) the possibility that the divestitures will not be pursued, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to planned dispositions; (xii) cyber risk and the failure to maintain the integrity of our operational or security systems or infrastructure, or those of third parties with which we do business; (xiii) as a result of acquisitions, we have and may record a significant amount of goodwill and other identifiable intangible assets and we may never realize the full carrying value of these assets; .and (xiv) other factors detailed from time to time in our filings with the SEC. We undertake no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
Please refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K and as revised and updated by our Quarterly Reports on Form 10-Q for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial Measures:
We present financial information that conforms to Generally Accepted Accounting Principles in the United States of America (US GAAP). We also present financial information that does not conform to US GAAP, which we refer to as non-GAAP.
In this report, we may present the following non-GAAP performance measures:
•Adjusted Earnings Per Share (Adjusted EPS);
•Free Cash Flow less Product Development Spending;
•Adjusted Revenue;
•Adjusted Contribution to Profit and margin;
•Adjusted Operating Income and margin;
•Adjusted Income Before Taxes;
•Adjusted Income Tax Provision;
•Adjusted Effective Tax Rate;
•EBITDA (earnings before interest, taxes, depreciation and amortization), Adjusted EBITDA and margin;
•Organic revenue; and
•Results on a constant currency basis.
3
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 Revenue, 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, 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 fiscal year 2024 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.
4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – UNAUDITED
In thousands
| October 31, 2023 | April 30, 2023 | ||||||||||
| Assets: | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Current assets held-for-sale | |||||||||||
| Total current assets | |||||||||||
| Technology, property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other non-current assets | |||||||||||
| Non-current assets held-for-sale | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity: | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued royalties | |||||||||||
| Short-term portion of long-term debt | |||||||||||
| Contract liabilities | |||||||||||
| Accrued employment costs | |||||||||||
| Short-term portion of operating lease liabilities | |||||||||||
| Other accrued liabilities | |||||||||||
| Current liabilities held-for-sale | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Accrued pension liability | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Long-term liabilities held-for-sale | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 18) | |||||||||||
| Shareholders’ equity | |||||||||||
Preferred stock, $ | |||||||||||
Class A common stock, $ | |||||||||||
Class B common stock, $ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss, net of tax | ( | ( | |||||||||
Less treasury shares at cost (Class A – | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
5
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS) INCOME – UNAUDITED
Dollars in thousands except per share information
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue, net | $ | $ | $ | $ | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Operating and administrative expenses | |||||||||||||||||||||||
| Impairment of goodwill | |||||||||||||||||||||||
| Restructuring and related charges | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Total costs and expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Foreign exchange transaction (losses) gains | ( | ( | ( | ||||||||||||||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | ( | ( | |||||||||||||||||||||
| Other (expense) income, net | ( | ( | ( | ||||||||||||||||||||
| (Loss) income before taxes | ( | ( | |||||||||||||||||||||
| (Benefit) provision for income taxes | ( | ( | |||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| (Loss) earnings per share | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Weighted average number of common shares outstanding | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
6
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME – UNAUDITED
Dollars in thousands
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ( | |||||||||||||||||||
Unamortized retirement credits, net of tax (expense) of $( | |||||||||||||||||||||||
Unrealized (loss) gains on interest rate swaps, net of tax benefit (expense) of $ | ( | ||||||||||||||||||||||
| Total other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive (loss) income | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
7
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
Dollars in thousands
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Operating activities | |||||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||||||
| Impairment of goodwill | |||||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | |||||||||||
| Amortization of intangible assets | |||||||||||
| Amortization of product development assets | |||||||||||
| Depreciation and amortization of technology, property and equipment | |||||||||||
| Restructuring and related charges | |||||||||||
| Stock-based compensation expense | |||||||||||
| Employee retirement plan expense | |||||||||||
| Foreign exchange transaction losses | |||||||||||
| Gain on sale of certain assets | ( | ||||||||||
| Other noncash credits | ( | ( | |||||||||
| Net change in operating assets and liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Investing activities | |||||||||||
| Product development spending | ( | ( | |||||||||
| Additions to technology, property and equipment | ( | ( | |||||||||
| Businesses acquired in purchase transactions, net of cash acquired | ( | ( | |||||||||
| Proceeds related to the sale of a business | |||||||||||
| Acquisitions of publication rights and other | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Borrowings of long-term debt | |||||||||||
| Purchases of treasury shares | ( | ( | |||||||||
| Change in book overdrafts | ( | ( | |||||||||
| Cash dividends | ( | ( | |||||||||
| Impact of tax withholding on stock-based compensation and other | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Effects of exchange rate changes on cash, cash equivalents, and restricted cash | ( | ( | |||||||||
| Cash reconciliation: | |||||||||||
| Cash and cash equivalents | |||||||||||
| Restricted cash included in Prepaid expenses and other current assets | |||||||||||
| Balance at beginning of period | |||||||||||
| (Decrease)/increase for the period | ( | ||||||||||
| Cash and cash equivalents | |||||||||||
| Restricted cash included in Prepaid expenses and other current assets | |||||||||||
Balance at end of period (1) | $ | $ | |||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | $ | |||||||||
| Income taxes, net of refunds | $ | $ | |||||||||
| (1) | The balance as of October 31, 2023 includes held-for-sale cash, cash equivalents and restricted cash. See Note 3, "Acquisitions and Divestitures" for further details. | ||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
8
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – UNAUDITED
Dollars in thousands
| Class A common stock | Class B common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss, net of tax | Treasury stock | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at July 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Restricted shares issued under stock-based compensation plans | — | — | ( | ( | — | ||||||||||||||||||||||||||||||||||||
| Impact of tax withholding on stock-based compensation and other | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Class A common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Class B common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Common stock class conversions | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss, net of tax | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at October 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
| Class A common stock | Class B common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss, net of tax | Treasury stock | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at July 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Restricted shares issued under stock-based compensation plans | — | — | ( | — | |||||||||||||||||||||||||||||||||||||
| Impact of tax withholding on stock-based compensation and other | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Class A common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Class B common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Common stock class conversions | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss, net of tax | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||
| Balance at October 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
JOHN WILEY & SONS, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY – UNAUDITED
Dollars in thousands
| Class A common stock | Class B common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss, net of tax | Treasury stock | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Restricted shares issued under stock-based compensation plans | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||
| Impact of tax withholding on stock-based compensation and other | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Class A common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Class B common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Common stock class conversions | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss, net of tax | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at October 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
| Class A common stock | Class B common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss, net of tax | Treasury stock | Total shareholders' equity | |||||||||||||||||||||||||||||||||||
| Balance at April 30, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Restricted shares issued under stock-based compensation plans | — | — | ( | — | |||||||||||||||||||||||||||||||||||||
| Impact of tax withholding on stock-based compensation and other | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Class A common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Class B common stock dividends ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Common stock class conversions | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss, net of tax | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||
| Balance at October 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
9
JOHN WILEY & SONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Basis of Presentation
Throughout this report, when we refer to “Wiley,” the “Company,” “we,” “our,” or “us,” we are referring to John Wiley & Sons, Inc. and all our subsidiaries, except where the context indicates otherwise.
Our Unaudited Condensed Consolidated Financial Statements include all the accounts of the Company and our subsidiaries. We have eliminated all intercompany transactions and balances in consolidation. In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the Unaudited Condensed Consolidated Financial Condition, Results of Operations, Comprehensive (Loss) Income and Cash Flows for the periods presented. Operating results for the interim period are not necessarily indicative of the results expected for the full year. All amounts are presented in United States (US) dollars, unless otherwise specified. All amounts are in thousands, except per share amounts, and approximate due to rounding. These financial statements should be read in conjunction with the most recent audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2023 as filed with the SEC on June 26, 2023 (2023 Form 10-K).
Note 2 — Recent Accounting Standards
Recently Adopted Accounting Standards
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires that an acquirer recognize, and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 “Revenue from Contracts with Customers” (Topic 606) as if it had originated the contracts. Generally, this would result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements if the acquiree prepared financial statements in accordance with US GAAP. We adopted ASU 2021-08 on May 1, 2023. The standard is applied prospectively to business combinations occurring on or after the effective date of the amendments. The adoption did not have an impact on our consolidated financial statements at the time of adoption.
Recently Issued Accounting Standards
Segment Reporting - Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for our annual fiscal year 2025, and interim periods starting in fiscal year 2026. Early adoption is permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We are currently assessing the impact of the disclosure requirements on our consolidated financial statements.
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Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. We do not expect the amendments in this ASU to have a material impact to our disclosures in our consolidated financial statements.
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Note 3 — Acquisitions and Divestitures
Acquisitions
Pro forma financial information related to these acquisitions has not been provided as it is not material to our condensed consolidated results of operations.
Fiscal Year 2023
On November 1, 2022, we completed the acquisition of an immaterial business included in our Learning segment. The fair value of consideration transferred was $6.1 million, which included $5.2 million of cash at the acquisition date and $0.9 million to be paid after the acquisition date. The acquisition was accounted for using the acquisition method of accounting. We recorded the preliminary aggregate excess purchase price over identifiable net tangible and intangible assets acquired and liabilities assumed, which included a preliminary allocation of $3.9 million of goodwill allocated to the Learning segment and $3.7 million of intangible assets subject to amortization.
The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed was finalized during the three months ended October 31, 2023.
Divestitures
As part of our ongoing initiatives to simplify our portfolio to drive sustained performance improvement, we have completed one disposition as of October 31, 2023 and have committed to a plan to divest of additional businesses during fiscal year 2024.
Fiscal Year 2024
Completed Divestitures
On May 31, 2023, we completed the sale of our tuition manager business (Tuition Manager), which was included in our Held for Sale or Sold segment. The divestiture did not represent a strategic shift that would have a major effect on our consolidated results of operations, and therefore its results of operations were not reported as discontinued operations. The cash received net of transaction costs at the date of sale was $0.5 million, and $0.5 million of additional cash received after the date of sale. The pretax loss on sale was $1.5 million after accounting for the assets sold, liabilities transferred upon sale, and transaction costs is included in Impairment charge related to assets held-for-sale and loss on sale of a business in our Unaudited Condensed Consolidated Statement of Net (Loss) Income for the six months ended October 31, 2023. The carrying value of the net assets included in the pretax loss on sale was $2.5 million, including intangible assets of $1.0 million and no goodwill.
Assets and Liabilities Held-for-Sale
On June 1, 2023, Wiley’s Board of Directors approved a plan to divest certain businesses that we determined are non-core businesses. Those businesses are University Services, Wiley Edge, and CrossKnowledge. These dispositions are expected to be completed during fiscal year 2024. As a result, in the three months ended July 31, 2023 we reorganized our segments and our new structure consists of three reportable segments which includes Research (no change), Learning, and Held for Sale or Sold, as well as a Corporate expense category (no change). The operations of University Services, Wiley Edge, and CrossKnowledge are reported in the Held for Sale or Sold segment. See Note 10, “Segment Information” for more details regarding our reportable segments. See Note 12, "Goodwill and Intangible Assets" for more details on the interim goodwill impairment test and the impairment charges.
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In accordance with FASB Accounting Standards Codification (ASC) Topic 205, "Presentation of Financial Statements," we determined that the planned divestitures of University Services, Wiley Edge, and CrossKnowledge each do not represent a strategic shift that will have a major effect on our consolidated results of operations, and therefore their results of operations were not reported as discontinued operations. We applied the criteria in ASC 360-10-45-9, "Property, Plant and Equipment - Long-Lived Assets Classified as Held for Sale," to determine whether any of the aforementioned long-lived asset groups would be classified as held-for-sale. Criteria include management commitment to sell the disposal group in its present condition and the sale being deemed probable of being completed within one year. We concluded that all three businesses met all the requisite criteria as of June 1, 2023 and, therefore, starting in the three months ended July 31, 2023 we have reclassified the related assets and liabilities as held-for-sale on the Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023.
We measured each disposal group at the lower of carrying value or fair value less cost to sell. In the three and six months ended October 31, 2023, we recorded a held-for-sale pretax impairment charge of $51.9 million and $125.8 million, respectively, related to University Services and CrossKnowledge. The total impairment charge for University Services in the six months ended October 31, 2023 was $75.4 million, which includes $34.8 million in the three months ended October 31, 2023. The total impairment charge for CrossKnowledge in the six months ended October 31, 2023 was $50.4 million, which includes $17.1 million in the three months ended October 31, 2023. The additional impairment charges in the three months ended October 31, 2023 were due to subsequent changes in the fair value less cost to sell resulting from the continued progression of the selling processes and indications of changes in the expected consideration for the businesses, as well as changes in the carrying amounts of the disposal groups. The pretax impairment charges are reflected in Impairment charge related to assets held-for-sale and loss on sale of a business on the Unaudited Condensed Consolidated Statements of Net (Loss) Income. The impairments are included as a valuation allowance or contra-asset account within Current assets held-for-sale and Non-current assets held-for-sale on the Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023.
The major categories of assets and liabilities that have been classified as held-for-sale on the Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023 were as follows:
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| University Services | Cross Knowledge | Wiley Edge | Total | ||||||||||||||||||||
| Assets held-for-sale: | |||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||
Cash and cash equivalents (1) | $ | $ | $ | $ | |||||||||||||||||||
| Accounts receivable, net | |||||||||||||||||||||||
Prepaid expenses and other current assets (1) | |||||||||||||||||||||||
| Valuation allowance | ( | ( | |||||||||||||||||||||
| Total current assets held-for-sale | $ | $ | $ | $ | |||||||||||||||||||
| Technology, property and equipment, net | |||||||||||||||||||||||
| Intangible assets, net | |||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||||||||
| Other non-current assets | |||||||||||||||||||||||
| Valuation allowance | ( | ( | ( | ||||||||||||||||||||
| Total non-current assets held-for-sale | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities held-for-sale: | |||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||
| Accounts payable | $ | $ | $ | $ | |||||||||||||||||||
| Accrued royalties | |||||||||||||||||||||||
| Contract liabilities | |||||||||||||||||||||||
| Accrued employment costs | |||||||||||||||||||||||
| Short-term portion of operating lease liabilities | |||||||||||||||||||||||
| Other accrued liabilities | |||||||||||||||||||||||
| Total current liabilities held-for-sale | $ | $ | $ | $ | |||||||||||||||||||
| Accrued pension liability | |||||||||||||||||||||||
| Deferred income tax liabilities | |||||||||||||||||||||||
| Operating lease liabilities | |||||||||||||||||||||||
| Other long-term liabilities | |||||||||||||||||||||||
| Total long-term liabilities held-for-sale | $ | $ | $ | $ | |||||||||||||||||||
| (1) | The following table shows a reconciliation of our cash, cash equivalents, and restricted cash included in current assets held-for-sale in our Unaudited Condensed Consolidated Statement of Financial Position to our Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended October 31, 2023: | ||||
| Cash and cash equivalents | $ | ||||
| Restricted cash included in Prepaid expenses and other current assets | |||||
| Total cash, cash equivalents, and restricted cash per Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023 | |||||
| Cash and cash equivalents held-for-sale | |||||
| Restricted cash held-for-sale included in Prepaid expenses and other current assets | |||||
| Total cash, cash equivalents, and restricted cash held-for-sale as of October 31, 2023 | |||||
| Total cash, cash equivalents, and restricted cash per Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended October 31, 2023 | $ | ||||
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On November 13, 2023, we entered into a Membership Interest and Asset Purchase Agreement (Purchase Agreement) with Academic Partnerships LLC, a Delaware limited liability company (Academic Partnerships), and Education Services Upper Holdings Corp., a Delaware corporation (Upper Holdings), to sell our University Services business (the Business) to Academic Partnerships (the Transaction).
The purchase price for the Business includes total consideration of up to $150 million and a 10 % share in the acquiring company. The $150 million consideration includes $110 million subject to customary working capital adjustments, and up to $40 million in the form of an earnout based on revenue targets during each of the two fiscal years in the period from May 1, 2024 through April 30, 2026. The $110 million will be payable in cash and/or in the form of a promissory note based on the availability of proceeds from any third-party debt refinancing undertaken by Academic Partnerships prior to closing. The earnout will also be payable in cash, subject to certain exceptions in which it will be paid by increasing the principal under the promissory note.
The consummation of the Transaction is subject to customary conditions, including the expiration or termination of the waiting period applicable to the Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other conditions.
The results of University Services will continue to be reported in our operating results in the Held for Sale or Sold segment until the sale is finalized. We will enter into a transition services agreement to facilitate the transition of the divested business.
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Note 4 — Revenue Recognition, Contracts with Customers
Disaggregation of Revenue
In the three months ended July 31, 2023, we reorganized our segments. Our new segment structure consists of three reportable segments which includes (1) Research (no change), (2) Learning, (3) Held For Sale or Sold, as well as a Corporate expense category (no change), which includes certain costs that are not allocated to the reportable segments. Research includes reporting lines of Research Publishing and Research Solutions. Learning includes reporting lines of Academic and Professional. Held for Sale or Sold includes those non-core businesses which we have sold or announced we are divesting and include University Services, Wiley Edge, and CrossKnowledge. Prior period segment results have been revised to the new segment presentation. There were no changes to our consolidated financial results. See Note 10, “Segment Information,” for more details.
The following table presents our revenue from contracts with customers disaggregated by segment and product type.
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Research: | |||||||||||||||||||||||
| Research Publishing | $ | $ | $ | $ | |||||||||||||||||||
| Research Solutions | |||||||||||||||||||||||
| Total Research | |||||||||||||||||||||||
| Learning: | |||||||||||||||||||||||
| Academic | |||||||||||||||||||||||
| Professional | |||||||||||||||||||||||
| Total Learning | |||||||||||||||||||||||
| Held for Sale or Sold | |||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | |||||||||||||||||||
The following information describes our disaggregation of revenue by segment and product type. Overall, the majority of our revenue is recognized over time.
Research
Research customers include academic, corporate, government, and public libraries, funders of research, researchers, scientists, clinicians, engineers and technologists, scholarly and professional societies, and students and professors. Research products are sold and distributed globally through multiple channels, including research libraries and library consortia, independent subscription agents, direct sales to researchers and professional society members, and other customers. Publishing centers include Australia, China, Germany, India, the United Kingdom (UK), and the United States (US). The majority of revenue generated from Research products is recognized over time. Total Research revenue was $257.7 million and $515.5 million in the three and six months ended October 31, 2023, respectively.
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We disaggregated revenue by Research Publishing and Research Solutions to reflect the different type of products and services provided.
Research Publishing Products
Research Publishing products provide scientific, technical, medical, and scholarly journals, as well as related content and services, to academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. Research Publishing revenue was $219.7 million and $442.7 million in the three and six months ended October 31, 2023, respectively, and the majority is recognized over time.
In the three and six months ended October 31, 2023, Research Publishing products generated approximately 86 % and 87 %, respectively, of their revenue from contracts with their customers from Journal Subscriptions (pay to read), Open Access (pay to publish) and Transformational Agreements (read and publish), and the remainder from Licensing, Backfiles, and Other.
Research Solutions Products and Services
Research Solutions products and services include corporate and society service offerings such as advertising, spectroscopy software and spectral databases, job board software and career center services, publishing services such as editorial operations, production, copyediting, system support and consulting, and a journal submission and peer-review management system. In addition, Research Solutions includes Atypon platforms and services. Atypon is a publishing software and service provider that enables scholarly and professional societies and publishers to deliver, host, enhance, market, and manage their content on the web through the LiteratumTM platform. Research Solutions revenue was $37.9 million and $72.7 million in the three and six months ended October 31, 2023, respectively, and the majority is recognized over time.
In the three and six months ended October 31, 2023, Research Solutions products and services generated approximately 68 % and 66 %, respectively, of their revenue from contracts with their customers from corporate and society offerings and 32 % and 34 %, respectively, from Atypon platforms and services.
Learning
Learning customers include chain and online booksellers, libraries, colleges and universities, corporations, direct to consumer, web sites, and other online applications. Total Learning revenue was $148.9 million and $258.3 million in the three and six months ended October 31, 2023, respectively.
We disaggregated revenue by type of products provided. Learning products are Academic and Professional.
Academic
Academic products revenue was $89.1 million and $137.4 million in the three and six months ended October 31, 2023, respectively. Academic products and services including scientific, professional, and education print and digital books, and digital courseware to libraries, corporations, students, professionals, and researchers. Communities served include business, finance, accounting, management, leadership, technology, behavioral health, engineering/architecture, science and medicine, and education. Products are developed for worldwide distribution through multiple channels, including chain and online booksellers, libraries, colleges and universities, corporations, direct to consumer, websites, distributor networks and other online applications.
In the three and six months ended October 31, 2023, Academic products generated approximately 60 % and 65 %, respectively, of their revenue from contracts with their customers for print and digital publishing, which is recognized at a point in time. Digital Courseware products in the three and six months ended October 31, 2023 generate approximately 36 % and 28 %, respectively, of their revenue from contracts with their customers which is recognized over time. The remainder of their revenues were from Licensing and Other, which has a mix of revenue recognized at a point in time and over time.
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Professional
Professional products revenue was $59.8 million and $120.8 million in the three and six months ended October 31, 2023, respectively. Professional provides learning, development, publishing, and assessment services for businesses and professionals.
Our trade publishing produces professional books, which includes business and finance, technology, professional development for educators, test preparation books and other professional categories, as well as the For Dummies® brand. Products are sold to brick-and-mortar and online retailers, wholesalers who supply such bookstores, college bookstores, individual practitioners, corporations, and government agencies.
Our assessments offering includes high-demand soft-skills training solutions that are delivered to organizational clients through online digital delivery platforms, either directly or through an authorized distributor network of independent consultants, trainers, and coaches.
In the three and six months ended October 31, 2023, Professional products generated approximately 56 % and 58 %, respectively, of their revenue from contracts with their customers for trade print and digital publishing, which is recognized at a point in time. Our assessments offering in the three and six months ended October 31, 2023 generates approximately 34 % and 32 %, respectively, of their revenue from contracts with their customers which has a mix of revenue recognized at a point in time and over time. The remainder of their revenues were from Licensing and Other, which has a mix of revenue recognized at a point in time and over time.
Held for Sale or Sold
Held for Sale or Sold revenue was $86.2 million and $170.1 million in the three and six months ended October 31, 2023, respectively. Offerings include University Services, Wiley Edge, and CrossKnowledge.
Our University Services business offers institutions and their students a rich portfolio of education technology and student and faculty support services, allowing the institutions to reach more students online with their own quality academic programs. University Services revenue is mainly recognized over time.
Wiley Edge sources, trains, and prepares aspiring students and professionals to meet the skill needs of today’s technology careers, and then places them with some of the world's largest financial institutions, technology companies, and government agencies. Wiley Edge also works with its clients to retrain and retain existing employees so they can continue to meet the changing demands of today’s technology landscape. Wiley Edge revenue is recognized at the point in time the services are provided to its customers.
CrossKnowledge services includes corporate learning online learning and training solutions for global corporations, universities, and small and medium-sized enterprises sold on a subscription or fee basis. CrossKnowledge revenue is recognized over time.
Held for Sale or Sold also includes the revenue associated with those businesses which have been sold which includes Wiley's Efficient Learning test prep portfolio business, and our advancement courses business which were both sold in fiscal year 2023, and our Tuition Manager business which was sold in the three months ended July 31, 2023.
Accounts Receivable, net and Contract Liability Balances
When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue when, or as, control of the products or services are transferred to the customer and all revenue recognition criteria have been met.
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The following table provides information about accounts receivable, net and contract liabilities from contracts with customers.
| October 31, 2023 | April 30, 2023 | Increase/ (Decrease) | |||||||||||||||
| Balances from contracts with customers: | |||||||||||||||||
| Accounts receivable, net | $ | $ | $ | ( | |||||||||||||
Contract liabilities (1) | ( | ||||||||||||||||
| Contract liabilities (included in Other long-term liabilities) | $ | $ | $ | ||||||||||||||
(1) | The sales return reserve recorded in Contract liabilities is $ | ||||
For the six months ended October 31, 2023, we estimate that we recognized revenue of approximately 74 % that was included in the current contract liability balance at April 30, 2023. For the six months ended October 31, 2022, we estimate that 73 % of revenue recognized was included in the current contract liability at April 30, 2022.
The decrease in contract liabilities excluding the sales return reserve, was primarily driven by revenue earned on journal subscription agreements, transformational agreements, and open access, partially offset by renewals of journal subscription agreements, transformational agreements, and open access. In addition, contract liabilities decreased due to the reclassification of the held-for-sale amounts to Current liabilities held-for-sale on the Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023.
Remaining Performance Obligations included in Contract Liability
As of October 31, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $255.4 million, which included the sales return reserve of $26.2 million. Excluding the sales return reserve, we expect that approximately $209.6 million will be recognized in the next twelve months with the remaining $19.6 million to be recognized thereafter.
Assets Recognized for the Costs to Fulfill a Contract
Costs to fulfill a contract are directly related to a contract that will be used to satisfy a performance obligation in the future and are expected to be recovered. These costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. These types of costs are incurred in the following product types, (1) Research Solutions services, which includes customer specific implementation costs per the terms of the contract and (2) University Services, which is included in the Held for Sale or Sold segment and includes customer specific costs to develop courses per the terms of the contract.
Our assets associated with incremental costs to fulfill a contract, were $10.4 million and $10.6 million at October 31, 2023 and April 30, 2023, respectively, and are included within Other non-current assets at April 30, 2023 and in both Other non-current assets and Non-current assets held-for-sale at October 31, 2023 on our Unaudited Condensed Consolidated Statements of Financial Position. We recorded amortization expense of $1.0 million and $2.7 million in the three and six months ended October 31, 2023, respectively, related to these assets within Cost of sales on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. We recorded amortization expense of $1.1 million and $2.3 million in the three and six months ended October 31, 2022, respectively, related to these assets within Cost of sales on our Unaudited Condensed Consolidated Statements of Net (Loss) Income.
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Note 5 — Operating Leases
We have contractual obligations as a lessee with respect to offices, warehouses and distribution centers, automobiles, and office equipment.
We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the lease standard and we perform the lease classification test as of the lease commencement date. Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
The present value of the lease payments is calculated using an incremental borrowing rate, which was determined based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use an unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate.
We recognize operating lease expense on a straight-line basis over the term of the lease. Lease payments may be fixed or variable. Only lease payments that are fixed, in-substance fixed or depend on a rate or index are included in determining the lease liability. Variable lease payments include payments made to the lessor for taxes, insurance and maintenance of the leased asset and are recognized as operating costs as incurred.
We apply certain practical expedients allowed by ASC 842, "Leases." Leases that are more than one year in duration are capitalized and recorded on our Unaudited Condensed Consolidated Statements of Financial Position. Leases with an initial term of 12 months or less are recognized as short term lease operating costs on a straight-line basis over the term. We have also elected to account for the lease and non-lease components as a single component. Some of our leases offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise.
For operating leases, the ROU assets and liabilities are presented on our Unaudited Condensed Consolidated Statement of Financial Position as follows:
| October 31, 2023 | April 30, 2023 | ||||||||||
| Operating lease ROU assets | $ | $ | |||||||||
| Short-term portion of operating lease liabilities | |||||||||||
| Operating lease liabilities, non-current | $ | $ | |||||||||
During the six months ended October 31, 2023, we added $0.5 million to the ROU assets and $0.5 million to the operating lease liabilities due to modifications to our existing operating leases.
As a result of the Global Restructuring Program, which included the exit of certain leased office space, we recorded restructuring and related charges. These charges included severance, impairment charges and acceleration of expense associated with certain operating lease ROU assets. See Note 9, “Restructuring and Related Charges” for more information on this program and the charges incurred.
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Our total net lease costs are as follows:
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
Total net lease cost (1) | $ | $ | $ | $ | |||||||||||||||||||
(1) | Total net lease cost does not include those costs and sublease income included in Restructuring and related charges on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. This includes those operating leases we had identified as part of our restructuring program that would be subleased. See Note 9, “Restructuring and Related Charges” for more information on this program. | ||||
Other supplemental information includes the following:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Weighted-average remaining contractual lease term (years) | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in our Unaudited Condensed Consolidated Statement of Financial Position as of October 31, 2023:
| Fiscal Year | Operating Lease Liabilities | |||||||
| 2024 (remaining 6 months) | $ | |||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Total future undiscounted minimum lease payments | ||||||||
| Less: Imputed interest | ||||||||
| Present value of minimum lease payments | ||||||||
| Less: Current portion | ||||||||
| Noncurrent portion | $ | |||||||
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Note 6 — Stock-Based Compensation
We have stock-based compensation plans under which employees may be granted performance-based stock awards, other restricted stock awards and options. We recognize the grant date fair value of stock-based compensation in net income on a straight-line basis, net of estimated forfeitures over the requisite service period. The measurement of performance for performance-based stock awards is based on actual financial results for targets established up to three years in advance, or less. For the three and six months ended October 31, 2023, we recognized stock-based compensation expense, on a pretax basis, of $6.5 million and $12.8 million, respectively. For the three and six months ended October 31, 2022, we recognized stock-based compensation expense, on a pretax basis, of $6.9 million and $14.0 million, respectively.
Performance-Based and Other Restricted Stock Activity
Under the terms of our long-term incentive plans, performance-based restricted unit awards are payable in restricted shares of our Class A Common Stock upon the achievement of certain three-year or less financial performance-based targets. During each three-year period or less, we adjust compensation expense based upon our best estimate of expected performance.
We may also grant individual restricted unit awards payable in restricted shares of our Class A Common Stock to key employees in connection with their employment.
The following table summarizes awards we granted to employees (shares in thousands):
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Restricted Stock: | |||||||||||
| Awards granted (shares) | |||||||||||
| Weighted average fair value of grant | $ | $ | |||||||||
Stock Option Activity
We granted 10,000 stock option awards during both the six months ended October 31, 2023 and 2022. Options are exercisable over a maximum period of ten years from the date of grant. These options generally vest 10 %, 20 %, 30 %, and 40 % on April 30, or on each anniversary date after the award is granted.
The following table provides the estimated weighted average fair value for options granted during the six months ended October 31, 2023 and 2022 using the Black-Scholes option-pricing model, and the significant weighted average assumptions used in their determination.
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Weighted average fair value of options on grant date | $ | $ | |||||||||
| Weighted average assumptions: | |||||||||||
| Expected life of options (years) | |||||||||||
| Risk-free interest rate | % | % | |||||||||
| Expected volatility | % | % | |||||||||
| Expected dividend yield | % | % | |||||||||
| Fair value of common stock on grant date | $ | $ | |||||||||
| Exercise price of stock option grant | $ | $ | |||||||||
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Interim President and CEO New Hire Equity Awards
On October 10, 2023, the Company named Mr. Matthew Kissner interim CEO and entered into an employment agreement (Employment Agreement) with him. Under the Employment Agreement, Mr. Kissner will be eligible to participate in the 2024 Executive Long-Term Incentive Plan (ELTIP), with a target long-term incentive equal to $1.8 million.
Note 7 — Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss by component, net of tax, for the three and six months ended October 31, 2023 and 2022 were as follows:
Foreign Currency Translation | Unamortized Retirement Costs | Interest Rate Swaps | Total | ||||||||||||||||||||
| Balance at July 31, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Total other comprehensive (loss) income | ( | ( | ( | ||||||||||||||||||||
| Balance at October 31, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Balance at April 30, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at October 31, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
Foreign Currency Translation | Unamortized Retirement Costs | Interest Rate Swaps | Total | ||||||||||||||||||||
| Balance at July 31, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ||||||||||||||||||||||
| Total other comprehensive (loss) income | ( | ( | |||||||||||||||||||||
| Balance at October 31, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Balance at April 30, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at October 31, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
During the three and six months ended October 31, 2023, pretax actuarial losses included in Unamortized Retirement Costs of approximately $2.0 million and $3.9 million, respectively, and in the three and six months ended October 31, 2022, of approximately $1.4 million and $2.9 million, respectively, were amortized from Accumulated other comprehensive loss and recognized as pension and post-retirement benefit expense primarily in Operating and administrative expenses and Other (expense) income, net on our Unaudited Condensed Consolidated Statements of Net (Loss) Income.
Our policy for releasing the income tax effects from accumulated other comprehensive (loss) income is to release when the corresponding pretax accumulated other comprehensive (loss) income items are reclassified to earnings.
23
Note 8 — Reconciliation of Weighted Average Shares Outstanding
Basic earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted earnings per share further includes any common shares available to be issued upon the exercise of unvested, outstanding restricted stock units and other stock awards if such inclusions would be dilutive. The shares associated with performance-based stock awards (PSU) are considered contingently issuable shares and are included in the diluted weighted average number of common shares outstanding when they have met the performance conditions, and when their effect is dilutive. We determine the potentially dilutive common shares for all awards using the treasury stock method.
A reconciliation of the shares used in the computation of (loss) earnings per share follows (shares in thousands):
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||
| Shares used for basic earnings per share | |||||||||||||||||||||||
| Dilutive effect of unvested restricted stock units and other stock awards | |||||||||||||||||||||||
| Shares used for diluted earnings per share | |||||||||||||||||||||||
| Antidilutive options to purchase Class A common shares, restricted shares, and contingently issuable restricted stock which are excluded from the table above | |||||||||||||||||||||||
In calculating diluted net loss per common share for the three and six months ended October 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 net loss is reported and the effect of using dilutive shares is antidilutive.
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Note 9 — Restructuring and Related Charges
Global Restructuring Program
In May 2022, the Company initiated a global program (Global Restructuring Program) to restructure and align our cost base with current and anticipated future market conditions, which was previously referred to as the Fiscal Year 2023 Restructuring Program. This program included severance related charges for the elimination of certain positions, the exit of certain leased office space, and the reduction of our occupancy at other facilities. Under this program, we reduced our real estate square footage occupancy by approximately 22 %.
In the three months ended July 31, 2023, we expanded the scope of the program to include those actions that will focus Wiley on its leading global position in the development and application of new knowledge and drive greater profitability, growth, and cash flow. We will focus on our strongest and most profitable businesses and large market opportunities in Research and Learning, as well as streamline our organization and rightsize our cost structure to reflect these portfolio actions. As part of the Global Restructuring Program, we are further reducing our real estate square footage occupancy by approximately 6 % due to actions taken in the six months ended October 31, 2023.
The following tables summarize the pretax restructuring and related charges related to the Global Restructuring Program:
| Three Months Ended October 31, | Six Months Ended October 31, | Total Charges Incurred to Date | |||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||
| Charges by Segment: | |||||||||||||||||||||||||||||
| Research | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Learning | |||||||||||||||||||||||||||||
| Held for Sale or Sold | |||||||||||||||||||||||||||||
| Corporate Expenses | |||||||||||||||||||||||||||||
| Total Restructuring and Related Charges | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Charges by Activity: | |||||||||||||||||||||||||||||
| Severance and termination benefits | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Impairment of operating lease ROU assets and property and equipment | |||||||||||||||||||||||||||||
| Acceleration of expense related to operating lease ROU assets and property and equipment | |||||||||||||||||||||||||||||
| Facility related charges, net | |||||||||||||||||||||||||||||
| Consulting costs | |||||||||||||||||||||||||||||
| Other activities | |||||||||||||||||||||||||||||
| Total Restructuring and Related Charges | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
We incurred severance related charges of $18.6 million and $24.6 million for the three and six months ended October 31, 2023, respectively, and $5.5 million and $17.6 million for the three and six months ended October 31, 2022, respectively, for certain employees affected by the reduction in force under this program who are entitled to severance payments and certain termination benefits.
The impairment charges of $1.6 million for the six months ended October 31, 2023 included the impairment of operating lease ROU assets of $1.2 million related to certain leases that will be subleased, and the related property and equipment of $0.4 million described further below. These charges were recorded in the Research segment. The impairment charges of $6.6 million and $12.7 million for the three and six months ended October 31, 2022, respectively, included the impairment of operating lease ROU assets of $4.7 million and $7.6 million, respectively, related to certain leases that will be subleased, and the related property and equipment of $1.9 million and $5.1 million, respectively described further below. In the three and six months ended October 31, 2022, these charges were recorded in Corporate Expenses.
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The acceleration of expense of $0.1 million and $0.5 million in the three and six months ended October 31, 2023, respectively, included the acceleration of rent expense associated with operating lease ROU assets related to certain leases that will be abandoned or terminated, and the related depreciation and amortization of property and equipment. The acceleration of expense of $1.8 million for the six months ended October 31, 2022 included the acceleration of rent expense associated with operating lease ROU assets of $0.9 million related to certain leases that will be abandoned or terminated, and the related depreciation and amortization of property and equipment of $0.9 million.
Due to the actions taken above, we tested the operating lease ROU assets and the related property and equipment for those being subleased for recoverability by comparing the carrying value of the asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset groups were below the carrying values. Therefore, there was an indication of impairment. We then determined the fair value of the asset groups by utilizing the present value of the estimated future cash flows attributable to the assets. The fair value of these operating lease ROU assets and the property and equipment immediately subsequent to the impairment was $0.9 million and $12.1 million in the six months ended October 31, 2023 and 2022, respectively, and were categorized as Level 3 within the FASB ASC Topic 820, “Fair Value Measurements” fair value hierarchy.
In addition, we incurred ongoing facility-related costs associated with certain properties that resulted in additional restructuring charges of $0.6 million and $1.4 million in the three and six months ended October 31, 2023, respectively, and $1.0 million and $2.7 million in the three and six months ended October 31, 2022, respectively.
We also incurred consulting costs of $4.0 million and $5.8 million in the three and six months ended October 31, 2023, respectively, and $0.4 1.5 million and $2.7 million in the three and six months ended October 31, 2023, respectively, and $0.2
The following table summarizes the activity for the Global Restructuring Program liability for the six months ended October 31, 2023:
| April 30, 2023 | Charges | Payments | Foreign Translation & Other Adjustments | October 31, 2023 | |||||||||||||||||||||||||
| Severance and termination benefits | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
| Consulting costs | ( | ( | |||||||||||||||||||||||||||
| Other activities | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||
Approximately $19.5 million of the restructuring liability for accrued severance and termination benefits is reflected in Accrued employment costs and approximately $0.5 million is reflected in Other long-term liabilities on our Unaudited Condensed Consolidated Statement of Financial Position. The liabilities for Consulting costs and Other activities are reflected in Other accrued liabilities on our Unaudited Condensed Consolidated Statement of Financial Position.
Business Optimization Program
For the three and six months ended October 31, 2023, we recorded pretax restructuring charges of $0.3 million and $0.7 million, respectively, related to this program. For the three and six months ended October 31, 2022, we recorded pretax restructuring charges of $0.3 million and $1.0 million, respectively, related to this program. We currently do not anticipate any further material charges related to the Business Optimization Program, except for ongoing facility related charges.
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Note 10 — Segment Information
On June 1, 2023, Wiley’s Board of Directors approved a plan to divest certain businesses that we determined are non-core businesses. Those businesses are University Services, Wiley Edge, and CrossKnowledge. These dispositions are expected to be completed during fiscal year 2024. As a result, in the three months ended July 31, 2023 we reorganized our segments and our new structure consists of three reportable segments which includes Research (no change), Learning, and Held for Sale or Sold, as well as a Corporate expense category (no change), which includes certain costs that are not allocated to the reportable segments. The operations of University Services, Wiley Edge, and CrossKnowledge are reported in the Held for Sale or Sold segment. Prior period segment results have been revised to the new segment presentation. There were no changes to our consolidated financial results.
•Research is unchanged and includes the reporting lines of Research Publishing and Research Solutions;
•Learning includes the Academic and Professional reporting lines and consists of publishing and related knowledge solutions;
•Held for Sale or Sold includes businesses held-for-sale including University Services, Wiley Edge, and CrossKnowledge, as well as those sold in fiscal year 2024 which includes Tuition Manager, and in fiscal year 2023 Test Prep and Advancement Courses.
We report our segment information in accordance with the provisions of ASC Topic 280, “Segment Reporting.” These segments reflect the way our chief operating decision maker evaluates our business performance and manages the operations. The performance metric used by our chief operating decision maker to evaluate performance of our reportable segments is Adjusted Contribution to Profit.
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Segment information is as follows:
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
| Research | $ | $ | $ | $ | |||||||||||||||||||
| Learning | |||||||||||||||||||||||
Held for Sale or Sold | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Adjusted Contribution to Profit: | |||||||||||||||||||||||
| Research | $ | $ | $ | $ | |||||||||||||||||||
| Learning | |||||||||||||||||||||||
Held for Sale or Sold | ( | ||||||||||||||||||||||
| Total adjusted contribution to profit | |||||||||||||||||||||||
| Adjusted corporate contribution to profit | ( | ( | ( | ( | |||||||||||||||||||
Less: Held for Sale or Sold Segment Adjusted Contribution to Profit (1) | ( | ( | ( | ||||||||||||||||||||
| Total adjusted operating income | $ | $ | $ | $ | |||||||||||||||||||
| Depreciation and Amortization: | |||||||||||||||||||||||
| Research | $ | $ | $ | $ | |||||||||||||||||||
| Learning | |||||||||||||||||||||||
Held for Sale or Sold (2) | |||||||||||||||||||||||
| Total depreciation and amortization | |||||||||||||||||||||||
| Corporate depreciation and amortization | |||||||||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | $ | |||||||||||||||||||
| (1) | Our Adjusted Operating Income excludes the impact of our Held for Sale or Sold Segment Adjusted Operating Income results. | ||||
(2) | We ceased to record depreciation and amortization of long-lived assets for these businesses as of the date the assets were classified as held-for-sale. 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 Held for Sale or Sold 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 $ | ||||
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The following table shows a reconciliation of our consolidated US GAAP Operating Income to Non-GAAP Adjusted Operating Income:
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| US GAAP Operating Income | $ | $ | $ | $ | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||
Restructuring and related charges (1) | |||||||||||||||||||||||
Impairment of goodwill (1) | |||||||||||||||||||||||
Accelerated amortization of an intangible asset (2) | |||||||||||||||||||||||
Held for Sale or Sold segment Adjusted Contribution to Profit (3) | ( | ( | ( | ||||||||||||||||||||
| Non-GAAP Adjusted Operating Income | $ | $ | $ | $ | |||||||||||||||||||
(1) | See Note 9, “Restructuring and Related Charges” and Note 12, “Goodwill and Intangible Assets” for these charges by segment. | ||||
| (2) | As described above, this accelerated amortization relates to the mthree trademark. | ||||
(3) | Our Adjusted Operating Income excludes the impact of our Held for Sale or Sold segment Adjusted Operating Income or Loss results. | ||||
See Note 4, “Revenue Recognition, Contracts with Customers,” for revenue from contracts with customers disaggregated by segment and product type for the three and six months ended October 31, 2023 and 2022.
Note 11 — Inventories
Inventories, net consisted of the following:
| October 31, 2023 | April 30, 2023 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Paper and other materials | |||||||||||
| Total inventories before estimated sales returns and LIFO reserve | $ | $ | |||||||||
| Inventory value of estimated sales returns | |||||||||||
| LIFO reserve | ( | ( | |||||||||
| Inventories, net | $ | $ | |||||||||
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Note 12 — Goodwill and Intangible Assets
Goodwill
The following table summarizes the activity in goodwill by segment as of October 31, 2023:
April 30, 2023 (1)(2) | Impairment | Foreign Translation Adjustment | October 31, 2023 | ||||||||||||||||||||
| Research | $ | $ | — | $ | ( | $ | |||||||||||||||||
| Learning | — | ||||||||||||||||||||||
| Total excluding Held for Sale or Sold segment | — | ( | |||||||||||||||||||||
| Held for Sale or Sold | ( | ( | |||||||||||||||||||||
| Total including Held for Sale or Sold segment | $ | $ | ( | $ | ( | $ | |||||||||||||||||
(1) | The Held for Sale or Sold goodwill balance as of April 30, 2023 includes a cumulative pretax noncash goodwill impairment of $ | ||||
(2) | In the three months ended July 31, 2023, we reorganized our segments and due to this realignment have reallocated goodwill. | ||||
Change in Segment Reporting Structure and New Reporting Units
In the three months ended July 31, 2023, we reorganized our segments. Our new segment reporting structure consists of three reportable segments which includes Research (no changes), Learning, and Held for Sale or Sold, as well as a Corporate expense category (no change), which includes certain costs that are not allocated to the reportable segments. See Note 10, “Segment Information,” for more details. The Learning reportable segment includes two reporting units, Academic and Professional. The Held for Sale or Sold reportable segment includes three reporting units, University Services, Wiley Edge and CrossKnowledge. No changes were made to the Research reportable segment.
Due to this realignment, we have reallocated goodwill to our reporting units on a relative fair value basis.
As a result of this realignment, we are required to test goodwill for impairment immediately before and after the realignment. Since there were no changes to the Research reportable segment, no impairment test of the Research segment goodwill was required.
We estimated the fair value of the reporting units using a weighting of fair values derived from an income and a market approach. Under the income approach, we determined the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on our best estimates of forecasted economic and market conditions over the period including growth rates, expected changes in operating cash flows and cash expenditures. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The market approach estimates fair value based on market multiples of current and forward 12-month revenue or EBITDA, as applicable, derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.
Goodwill Impairment Before Realignment
Prior to the realignment, we concluded that the fair value of the Academic Publishing, Talent Development (which includes Wiley Edge) and Professional Learning reporting units were above their carrying values. Therefore, there was no indication of impairment. The carrying value of the University Services reporting unit was above its fair value which resulted in a pretax non-cash goodwill impairment of $11.4 million. Such impairment reduced the goodwill of the University Services reporting unit to zero. This charge is reflected in Impairment of goodwill in the Unaudited Condensed Consolidated Statements of Net (Loss) Income.
University Services was adversely impacted by market conditions and headwinds for online degree programs, which lead to a decline in projected enrollments from existing partners, pricing pressures and revenue share concessions, and a decline in new partner additions over both the short-term and long-term which adversely impacted forecasted revenue growth and operating cash flows.
30
Prior to performing the goodwill impairment test for University Services, we also evaluated the recoverability of long-lived assets of the reporting unit. The carrying value of the long-lived assets that were tested for impairment was approximately $231.0 million. When indicators of impairment are present, we test definite lived and long-lived assets for recoverability by comparing the carrying value of an asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We considered the lower-than-expected revenue and forecasted operating cash flows over a sustained period of time, and downward revisions to our cash flow forecasts for this reporting unit to be indicators of impairment for their long-lived assets. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group of the University Services reporting unit exceeded the carrying value. Therefore, there was no impairment.
Goodwill Impairment After Realignment
After the realignment, we concluded that the fair value of the Academic, Professional, and Wiley Edge reporting units were above their carrying values. Therefore, there was no indication of impairment. As noted above, the goodwill of the University Services reporting unit was zero and no further testing of goodwill for impairment was required. The carrying value of the CrossKnowledge reporting unit was above its fair value which resulted in a pretax non-cash goodwill impairment of $15.3 million. This charge is reflected in Impairment of goodwill in the Unaudited Condensed Consolidated Statements of Net (Loss) Income.
CrossKnowledge was adversely impacted by a decline in the demand for its offerings, which have resulted in lower sales and a decline in average contract value, that adversely impacted forecasted revenue growth and operating cash flows.
Prior to performing the goodwill impairment test for CrossKnowledge, we also evaluated the recoverability of long-lived assets of the reporting unit. The carrying value of the long-lived assets that were tested for impairment was approximately $50.2 million. When indicators of impairment are present, we test definite lived and long-lived assets for recoverability by comparing the carrying value of an asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We considered the lower-than-expected revenue and forecasted operating cash flows over a sustained period of time, and downward revisions to our cash flow forecasts for this reporting unit to be indicators of impairment for their long-lived assets. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group of the CrossKnowledge reporting unit exceeded the carrying value. Therefore, there was no impairment.
Intangible Assets
Intangible assets, net were as follows:
| October 31, 2023 | April 30, 2023 ⁽¹⁾ | ||||||||||
| Intangible assets with definite lives, net: | |||||||||||
| Content and publishing rights | $ | $ | |||||||||
| Customer relationships | |||||||||||
| Developed technology | |||||||||||
| Brands and trademarks | |||||||||||
| Covenants not to compete | |||||||||||
| Total intangible assets with definite lives, net | |||||||||||
| Intangible assets with indefinite lives: | |||||||||||
| Brands and trademarks | |||||||||||
| Publishing rights | |||||||||||
| Total intangible assets with indefinite lives | |||||||||||
| Total intangible assets, net | $ | $ | |||||||||
(1) | The developed technology balance as of April 30, 2023 is presented net of accumulated impairments and write-offs of $ | ||||
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Note 13 — Income Taxes
Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate for the three and six months ended October 31, 2023, was 11.7 % and 13.2 %, compared with 21.0 % and 18.4 % for the three and six months ended October 31, 2022.
The effective tax rate for the three months ended October 31, 2023 was lower than the US statutory rate primarily due to the held-for-sale impairment described in Note 3, "Acquisitions and Divestitures," which resulted in a deferred tax benefit, the impact of US tax incentives and other discrete items offset by the mix of non-US income.
The effective tax rate for the six months ended October 31, 2023, was lower than the US statutory rate primarily due to the impairment of goodwill resulting from the segment realignment described in Note 12, "Goodwill and Intangible Assets," as well as the held-for-sale impairment described in Note 3, "Acquisitions and Divestitures," which resulted in a deferred tax benefit, the impact of US tax incentives and other discrete items offset by the mix of non-US income.
The effective tax rate for the three and six months ended October 31, 2023, was lower than the effective tax rate for the three and six months ended October 31, 2022, primarily due to the same factors described above. The impairment of goodwill resulting from the segment realignment described in Note 12, "Goodwill and Intangible Assets," results in a tax benefit of $2.7 million and the impairment charge related to assets held-for-sale and loss on sale of a business described in Note 3, "Acquisitions and Divestitures" results in a tax benefit of $19.2 million.
Each year we file many tax returns given the number of national, state, and local tax jurisdictions in which we operate. These tax returns are subject to examination by the tax authorities. As a result, there is an uncertainty in income taxes recognized in our financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the results of our operations.
Note 14 — Retirement Plans
The components of net pension expense (income) for our defined benefit plans were as follows:
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of prior service cost | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of net actuarial loss | |||||||||||||||||||||||
| Net pension expense (income) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
The service cost component of net pension expense (income) is reflected in Operating and administrative expenses on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. The other components of net pension expense (income) are reported separately from the service cost component and below Operating income. Such amounts are reflected in Other (expense) income, net on our Unaudited Condensed Consolidated Statements of Net (Loss) Income.
Employer defined benefit pension plan contributions were $3.6 million and $7.7 million for the three and six months ended October 31, 2023, respectively, and $3.5 million and $7.4 million for the three and six months ended October 31, 2022, respectively.
Defined Contribution Savings Plans
The expense for employer defined contribution savings plans was $6.7 million and $14.4 million for the three and six months ended October 31, 2023, respectively, and $6.8 million and $15.6 million for the three and six months ended October 31, 2022, respectively.
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Note 15 — Debt and Available Credit Facilities
Our total debt outstanding consisted of the amounts set forth in the following table:
| October 31, 2023 | April 30, 2023 | ||||||||||
Short-term portion of long-term debt (1) | $ | $ | |||||||||
Term loan A - Amended and Restated CA (2) | |||||||||||
| Revolving credit facility - Amended and Restated CA | |||||||||||
| Total long-term debt, less current portion | |||||||||||
| Total debt | $ | $ | |||||||||
(1) | Relates to our term loan A under the Amended and Restated CA. | ||||
(2) | Amounts are shown net of unamortized issuance costs of $ | ||||
Amended and Restated CA
On November 30, 2022, we entered into the second amendment to the Third Amended and Restated Credit Agreement (collectively, the Amended and Restated CA). The Amended and Restated CA as of November 30, 2022 provided for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.115 billion, which matures November 2027, (ii) a five-year term loan A facility consisting of $200 million, which matures November 2027, and (iii) $185 million aggregate principal amount revolving credit facility through May 2024.
Under the terms of the Amended and Restated CA, which can be drawn in multiple currencies, we have the option of borrowing at the following floating interest rates depending on the currency borrowed: (i) at a rate based on the US Secured Overnight Financing Rate (SOFR), the Sterling Overnight Index Average Rate (SONIA) or a EURIBOR-based rate, each rate plus an applicable margin ranging from 0.98 % to 1.50 %, depending on our consolidated net leverage ratio, as defined, or (ii) at the lender’s base rate plus an applicable margin ranging from zero to 0.50 %, depending on our consolidated net leverage ratio. With respect to SOFR loans, there is a SOFR adjustment of between 0.10 % and 0.25 % depending on the duration of the loan. The lender’s base rate is defined as the highest of (i) the US federal funds effective rate plus a 0.50 % margin, (ii) the Daily SOFR rate, as defined, plus a 1.00 % margin, or (iii) the Bank of America prime lending rate. In addition, we pay a facility fee for the Amended and Restated CA ranging from 0.15 % to 0.25 % depending on our consolidated net leverage ratio. We also have the option to request an increase in the revolving credit facility by an amount not to exceed $500 million, in minimum increments of $50 million, subject to the approval of the lenders.
The Amended and Restated CA contains certain customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio, which we were in compliance with as of October 31, 2023.
In the three months ended January 31, 2023, we incurred $4.5 million of costs related to the second amendment of the Amended and Restated CA which resulted in total costs capitalized of $5.8 million for the Amended and Restated CA. The amount related to the term loan A facility was $0.8 million, consisting of lender fees of $0.8 million recorded as a reduction to Long-term debt and non-lender fees of less than $0.1 million included in Other non-current assets on our Unaudited Condensed Consolidated Statement of Financial Position. The amount related to the revolving credit facility of which a portion matures in May 2024 and in November 2027 was $0.2 million and $4.8 million, respectively, all of which is included in Other non-current assets on our Unaudited Condensed Consolidated Statement of Financial Position.
We incurred a loss of $(0.2 ) million on the write-off of unamortized deferred costs in connection with the second amendment of the Amended and Restated CA which is reflected in Other (expense) income, net on our Unaudited Condensed Consolidated Statements of Net (Loss) Income for the three months ended January 31, 2023.
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The amortization expense of the costs incurred related to the Amended and Restated CA related to the lender and non-lender fees is recognized over a five-year term for credit commitments that mature in November 2027 and an 18-month term for credit commitments that mature in May 2024. Total amortization expense was $0.3 million and $0.6 million for the three and six months ended October 31, 2023, respectively, and is included in Interest expense on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. Total amortization expense was $0.3 million and $0.5 million for the three and six months ended October 31, 2022, respectively, and is included in Interest expense on our Unaudited Condensed Consolidated Statements of Net (Loss) Income.
As of October 31, 2023, we had approximately $552.7 million of unused borrowing capacity under our Amended and Restated CA and other facilities.
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Note 16 — Derivative Instruments and Hedging Activities
From time-to-time, we enter into forward exchange and interest rate swap contracts as a hedge against foreign currency asset and liability commitments, changes in interest rates and anticipated transaction exposures, including intercompany sales and purchases. All derivatives are recognized as assets or liabilities and measured at fair value. Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings. We do not use financial instruments for trading or speculative purposes.
Interest Rate Contracts
As of October 31, 2023, we had total debt outstanding of $942.6 million, net of unamortized issuance costs of $0.7 million of which $943.3 million are variable rate loans outstanding under the Amended and Restated CA, which approximated fair value.
The following table summarizes our interest rate swaps designated as cash flow hedges:
| Notional Amount | ||||||||||||||||||||
Hedged Item (1) | Date entered into | Nature of Swap | October 31, 2023 | April 30, 2023 | Fixed Interest Rate | Variable Interest Rate | ||||||||||||||
| Amended and Restated CA | March 15, 2023 | Pay fixed/receive variable | $ | $ | % | 1-month SOFR reset every month for a | ||||||||||||||
| Amended and Restated CA | March 14, 2023 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| Amended and Restated CA | March 13, 2023 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| Amended and Restated CA | December 13, 2022 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| Amended and Restated CA | June 16, 2022 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| Amended and Restated CA | April 6, 2022 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| Amended and Restated CA | April 12, 2021 | Pay fixed/receive variable | % | 1-month SOFR reset every month for a | ||||||||||||||||
| $ | $ | |||||||||||||||||||
(1) | On November 30, 2022, we entered into the Second Amendment to our Amended and Restated CA. Refer to Note 15, "Debt and Available Credit Facilities" for more information related to our Amended and Restated CA. | ||||
We record the fair value of our interest rate swaps on a recurring basis using Level 2 inputs of quoted prices for similar assets or liabilities in active markets. The fair value of the interest rate swaps as of October 31, 2023 was a deferred gain of $9.3 million. Based on the maturity dates of the contracts, $4.8 million of the deferred gain as of October 31, 2023 was recorded within Prepaid expenses and other current assets, and $4.5 million of the deferred gain was recorded within Other non-current assets.
The fair value of the interest rate swaps as of April 30, 2023 was a deferred loss of $(0.6 ) million and a deferred gain of $7.8 million. Based on the maturity dates of the contracts, the entire deferred loss as of April 30, 2023 was recorded within Other long-term liabilities, $6.4 million of the deferred gain was recorded within Prepaid expenses and other current assets, and $1.4 million was recorded within Other non-current assets.
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The pretax gains that were reclassified from Accumulated other comprehensive loss into Interest expense for the three and six months ended October 31, 2023 were $3.2 million and $6.1 million, respectively. The pretax gains that were reclassified from Accumulated other comprehensive loss into Interest expense for the three and six months ended October 31, 2022 were $0.7 million and $0.3 million, respectively.
Foreign Currency Contracts
We may enter into forward exchange contracts to manage our exposure on certain foreign currency denominated assets and liabilities. The forward exchange contracts are marked to market through Foreign exchange transaction (losses) gains on our Unaudited Condensed Consolidated Statements of Net (Loss) Income and carried at fair value on our Unaudited Condensed Consolidated Statements of Financial Position. Foreign currency denominated assets and liabilities are remeasured at spot rates in effect on the balance sheet date, with the effects of changes in spot rates reported in Foreign exchange transaction (losses) gains on our Unaudited Condensed Consolidated Statements of Net (Loss) Income.
As of October 31, 2023, and April 30, 2023, we did not maintain any open forward exchange contracts. In addition, we did not maintain any open forward contracts during the six months ended October 31, 2023 and 2022.
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Note 17 — Capital Stock and Changes in Capital Accounts
Share Repurchases
The following table summarizes the share repurchases of Class A and Class B Common Stock (shares in thousands):
| Three Months Ended October 31, | Six Months Ended October 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Shares repurchased - Class A | |||||||||||||||||||||||
| Shares repurchased - Class B | |||||||||||||||||||||||
| Average Price - Class A and Class B | $ | $ | $ | $ | |||||||||||||||||||
Dividends
The following table summarizes the cash dividends paid during the six months ended October 31, 2023:
| Date of Declaration by Board of Directors | Quarterly Cash Dividend | Total Dividend | Class of Common Stock | Dividend Paid Date | Shareholders of Record as of Date | |||||||||||||||||||||||||||
| June 26, 2023 | $ | $ | Class A and Class B | July 20, 2023 | July 6, 2023 | |||||||||||||||||||||||||||
| September 28, 2023 | $ | $ | Class A and Class B | October 25, 2023 | October 10, 2023 | |||||||||||||||||||||||||||
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Changes in Common Stock
The following is a summary of changes during the six months ended October 31, in shares of our common stock and common stock in treasury (shares in thousands):
| Changes in Common Stock A: | 2023 | 2022 | |||||||||
| Number of shares issued, beginning of year | |||||||||||
| Common stock class conversions | |||||||||||
| Number of shares issued, end of period | |||||||||||
| Changes in Common Stock A in treasury: | |||||||||||
| Number of shares held, beginning of year | |||||||||||
| Purchases of treasury shares | |||||||||||
| Restricted shares issued under stock-based compensation plans – non-PSU Awards | ( | ( | |||||||||
| Restricted shares issued under stock-based compensation plans – PSU Awards | ( | ( | |||||||||
| Shares issued to directors | ( | ( | |||||||||
| Shares withheld for taxes | |||||||||||
| Number of shares held, end of period | |||||||||||
| Number of Common Stock A outstanding, end of period | |||||||||||
| Changes in Common Stock B: | 2023 | 2022 | |||||||||
| Number of shares issued, beginning of year | |||||||||||
| Common stock class conversions | ( | ( | |||||||||
| Number of shares issued, end of period | |||||||||||
| Changes in Common Stock B in treasury: | |||||||||||
| Number of shares held, beginning of year | |||||||||||
| Purchases of treasury shares | |||||||||||
| Number of shares held, end of period | |||||||||||
| Number of Common Stock B outstanding, end of period | |||||||||||
Note 18 — Commitments and Contingencies
Legal Proceedings
We are involved in routine litigation in the ordinary course of our business. A provision for litigation is accrued when information available to us indicates that it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment may be required to determine both the probability and estimates of loss. When the amount of the loss can only be estimated within a range, the most likely outcome within that range is accrued. If no amount within the range is a better estimate than any other amount, the minimum amount within the range is accrued. When uncertainties exist related to the probable outcome of litigation and/or the amount or range of loss, we do not record a liability, but disclose facts related to the nature of the contingency and possible losses if management considers the information to be material. Reserves for legal defense costs are recognized when incurred. The accruals for loss contingencies and legal costs are reviewed regularly and may be adjusted to reflect updated information on the status of litigation and advice of legal counsel. In the opinion of management, the ultimate resolution of all pending litigation as of October 31, 2023, will not have a material effect on our consolidated financial condition or results of operations.
Non-Income Tax Matters
We conduct operations in many tax jurisdictions, and non-income-based taxes, such as sales, use, value-added, goods and services, and other taxes, are assessed on our operations in many jurisdictions. Although we are diligent in collecting and remitting such taxes, there is uncertainty as to the appropriate tax treatment of digital goods and services in many jurisdictions. No assessment has been made, and we have received no indication that an assessment will be made, with respect to such taxes. Therefore, no provisions have been recorded for uncertainties in sales, use, value-added, goods and services, or other indirect tax liabilities in the accompanying consolidated financial statements. Nonetheless, changes in law or interpretation may occur in the future, which may have a material effect on the consolidated results of operations or cash flows in the period in which a new determination is made.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read together with our Condensed Consolidated Financial Statements and related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2023 Form 10-K and our Consolidated Financial Statements and related notes set forth in Item 8 of Part II of our 2023 Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Statements “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Unaudited Condensed Consolidated Financial Statements,” unless the context indicates otherwise.
OVERVIEW
Wiley is a knowledge company and a global leader in research, publishing, and knowledge solutions. Dedicated to the creation and application of knowledge, Wiley serves the world’s researchers, learners, innovators, and leaders, helping them achieve their goals and solve the world's most important challenges. For more than two centuries, Wiley has been delivering on its timeless mission to unlock human potential. Wiley is a predominantly digital company with over 80% of Wiley's revenue for fiscal year 2023 generated by digital products excluding the Held for Sale or Sold segment revenue. For fiscal year 2023, 50% of revenue excluding the Held for Sale or Sold segment revenue is recurring which includes revenue that is contractually obligated or set to recur with a high degree of certainty.
On June 1, 2023, Wiley’s Board of Directors approved a plan to divest certain businesses that we determined are non-core businesses. Those businesses are University Services, Wiley Edge, and CrossKnowledge. These dispositions are expected to be completed during fiscal year 2024. As a result, in the three months ended July 31, 2023 we reorganized our segments and our new structure consists of three reportable segments which includes Research (no change), Learning, and Held for Sale or Sold, as well as a Corporate expense category (no change). The operations of University Services, Wiley Edge, and CrossKnowledge are reported in the Held for Sale or Sold segment. Prior period segment results have been revised to the new segment presentation. There were no changes to our consolidated financial results.
•Research is unchanged and includes the reporting lines of Research Publishing and Research Solutions;
•Learning includes the Academic and Professional reporting lines and consists of publishing and related knowledge solutions;
•Held for Sale or Sold includes businesses held-for-sale including University Services, Wiley Edge, and CrossKnowledge, as well as those sold in fiscal year 2024, which includes Tuition Manager, and in fiscal year 2023 Test Prep and Advancement Courses.
Through the Research segment, we provide peer-reviewed scientific, technical, and medical (STM) publishing, content platforms, and related services to academic, corporate, and government customers, academic societies, and individual researchers. The Learning segment provides scientific, professional, and education print and digital books, digital courseware to libraries, corporations, students, professionals, and researchers, as well as assessment services to businesses and professionals.
Wiley’s business strategies are tightly aligned with solid growth trends, including ever-increasing global R&D spend leading to consistent growth in scientific research output, the transition to open research, and the increasing application of new knowledge into solutions to solve real world problems. These strategies include driving publishing output to meet the global demand for peer-reviewed research and expanding platform and service offerings for corporations and societies. Learning strategies include scaling high-value digital content, courseware, and assessments.
On November 13, 2023, we entered into a Membership Interest and Asset Purchase Agreement (Purchase Agreement) with Academic Partnerships LLC, a Delaware limited liability company (Academic Partnerships), and Education Services Upper Holdings Corp., a Delaware corporation (Upper Holdings), to sell our University Services business (the Business) to Academic Partnerships (the Transaction). The purchase price for the Business includes total consideration of up to $150 million and a 10% share in the acquiring company. The $150 million consideration includes $110 million subject to customary working capital adjustments, and up to $40 million in the form of an earnout based on revenue targets during each of the two fiscal years in the period from May 1, 2024 through April 30, 2026. The $110 million will be payable in cash and/or in the form of a promissory note based on the availability of proceeds from any third-party debt refinancing undertaken by Academic Partnerships prior to closing. The earnout will also be payable in cash, subject to certain exceptions in which it will be paid by increasing the principal under the promissory note.
The consummation of the Transaction is subject to customary conditions, including the expiration or termination of the waiting period applicable to the Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other conditions.
The results of University Services will continue to be reported in our operating results in the Held for Sale or Sold segment until the sale is finalized. We will enter into a transition services agreement to facilitate the transition of the divested business.
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RESULTS OF OPERATIONS – THREE MONTHS ENDED OCTOBER 31, 2023
SECOND QUARTER SUMMARY
•US GAAP Results: Consolidated Revenue of $492.8 million (-4%, compared with the prior year), Operating Income of $46.2 million (-19%, compared with the prior year), and Diluted Loss per Share of $-0.35 (-$1.03, compared with the prior year). US GAAP results impacted by impairment charges of $51.9 million, related to our held-for-sale assets and restructuring charges totalling $25.1 million.
•Adjusted Results at Constant Currency (excluding Held for Sale or Sold segment results): Adjusted Revenue of $406.6 million (-2%, compared with the prior year), Adjusted EBITDA of $92.4 million (-13%, compared with the prior year), and Adjusted EPS of $0.73 (-25%, compared with the prior year).
CONSOLIDATED RESULTS OF OPERATIONS
Revenue:
Revenue for the three months ended October 31, 2023, decreased $22.0 million, or 4%, as compared with the prior year. On a constant currency basis, revenue decreased 6% as compared with the prior year. Excluding the revenues from the Held for Sale or Sold segment, Adjusted Revenue decreased 2% on a constant currency basis.
Adjusted Revenue
Below is a reconciliation of our consolidated US GAAP Revenue to Non-GAAP Adjusted Revenue:
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Revenue, net | $ | 492,808 | $ | 514,836 | |||||||
Less: Held for Sale or Sold segment (1) | (86,198) | (103,828) | |||||||||
Non-GAAP Adjusted Revenue, net | $ | 406,610 | $ | 411,008 | |||||||
(1) | Our Adjusted Revenue, net excludes the impact of our Held for Sale or Sold segment revenue. | ||||
See the “Segment Operating Results” below for additional details on each segment’s revenue and Adjusted EBITDA performance.
Cost of Sales:
Cost of sales for the three months ended October 31, 2023, decreased $14.7 million, or 9%, as compared with the prior year. On a constant currency basis, cost of sales decreased 10% compared with the prior year. This was primarily due to lower employee costs related to the Wiley Edge business, and to a lesser extent, marketing costs for the University Services business. Excluding the cost of sales from the Held for Sale or Sold segment, cost of sales was flat on a constant currency basis.
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Operating and Administrative Expenses:
Operating and administrative expenses for the three months ended October 31, 2023, decreased $0.7 million, or was flat as compared with the prior year. On a constant currency basis, operating and administrative expenses decreased 2% as compared with the prior year primarily reflecting lower depreciation due to the cessation for held-for-sale assets, lower editorial costs, and a decrease in travel and entertainment, partially offset by the prior year reduction in our provision for credit losses, and higher employee incentive compensation. Excluding operating and administrative expenses from the Held for Sale or Sold segment, operating and administrative expenses increased 1% on a constant currency basis.
Restructuring and Related Charges:
Global Restructuring Program
In May 2022, the Company initiated a global program (Global Restructuring Program) to restructure and align our cost base with current and anticipated future market conditions, which was previously referred to as the Fiscal Year 2023 Restructuring Program. This program included severance related charges for the elimination of certain positions, the exit of certain leased office space, and the reduction of our occupancy at other facilities. Under this program, we reduced our real estate square footage occupancy by approximately 22%.
In the three months ended July 31, 2023, we expanded the scope of the program to include those actions that will focus Wiley on its leading global position in the development and application of new knowledge and drive greater profitability, growth, and cash flow. We will focus on our strongest and most profitable businesses and large market opportunities in Research and Learning, as well as streamline our organization and rightsize our cost structure to reflect these portfolio actions. As part of the Global Restructuring Program, we are further reducing our real estate square footage occupancy by approximately 6%.
Excluding actions related to the Held for Sale or Sold segment, we anticipate to yield annualized cost savings of approximately $65 million, with approximately $30 million of that to be realized this fiscal year from actions taken starting in fiscal year 2024.
For the three months ended October 31, 2023 and 2022, we recorded pretax restructuring charges of $24.8 million and $13.7 million, respectively, related to this program. This restructuring charge primarily reflects severance charges of $18.6 million for the elimination of certain positions.
We anticipate ongoing severance related charges and facility-related costs associated with certain properties to result in additional restructuring charges in future periods.
Business Optimization Program
For the three months ended October 31, 2023 and 2022, we recorded pretax restructuring charges of $0.3 million and $0.3 million, respectively, related to this program.
These charges are reflected in Restructuring and related charges on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. See Note 9, “Restructuring and Related Charges” for more details on the Global Restructuring Program charges.
For the impact of our restructuring programs on diluted (loss) earnings per share, see the section below, “Diluted (Loss) Earnings per Share (EPS).”
Amortization of Intangible Assets:
Amortization of intangible assets was $13.6 million for the three months ended October 31, 2023, a decrease of $6.5 million, or 33%, as compared with the prior year. On a constant currency basis, amortization of intangible assets decreased 34% as compared with the prior year primarily due to the cessation of amortization for held-for-sale assets and, to a lesser extent, the completion of amortization of certain acquired intangible assets. See Note 3, “Acquisitions and Divestitures” for more details on these held-for-sale assets.
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Operating Income, Adjusted Operating Income (OI) and Adjusted EBITDA:
Operating income for the three months ended October 31, 2023, decreased $11.2 million, or 19% as compared with the prior year on a reported and on a constant currency basis. The decrease was primarily due to a decrease in revenue and, to a lesser extent, an increase in restructuring charges, partially offset by lower cost of sales and, to a lesser extent, amortization of intangible assets, and operating and administrative expenses.
Adjusted OI and Adjusted EBITDA on a constant currency basis and excluding restructuring charges and the adjusted contribution to profit for the Held for Sale or Sold segment decreased 18% and 13%, respectively, as compared with the prior year. The decrease in Adjusted OI and Adjusted EBITDA was primarily due to lower Adjusted Revenue.
Adjusted OI
Below is a reconciliation of our consolidated US GAAP Operating Income to Non-GAAP Adjusted OI:
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Operating Income | $ | 46,245 | $ | 57,439 | |||||||
| Adjustments: | |||||||||||
| Restructuring and related charges | 25,102 | 13,956 | |||||||||
Held for Sale or Sold segment adjusted contribution to profit (1) | (19,100) | (6,862) | |||||||||
| Non-GAAP Adjusted OI | $ | 52,247 | $ | 64,533 | |||||||
(1) | Our Adjusted OI excludes the impact of our Held for Sale or Sold segment adjusted contribution to profit. | ||||
Adjusted EBITDA
Below is a reconciliation of our consolidated US GAAP Net (Loss) Income to Non-GAAP EBITDA and Adjusted EBITDA:
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Net (Loss) Income | $ | (19,445) | $ | 38,193 | |||||||
| Interest expense | 12,937 | 9,332 | |||||||||
(Benefit) provision for income taxes | (2,585) | 10,137 | |||||||||
| Depreciation and amortization | 40,174 | 52,421 | |||||||||
| Non-GAAP EBITDA | 31,081 | 110,083 | |||||||||
| Restructuring and related charges | 25,102 | 13,956 | |||||||||
Foreign exchange losses (gains), including the write off of certain cumulative translation adjustments | 2,357 | (478) | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 51,414 | — | |||||||||
Other expense, net | 1,567 | 255 | |||||||||
Held for Sale or Sold segment Adjusted EBITDA (1) | (19,100) | (18,089) | |||||||||
| Non-GAAP Adjusted EBITDA | $ | 92,421 | $ | 105,727 | |||||||
(1) | Our Non-GAAP Adjusted EBITDA excludes the Held for Sale or Sold segment Non-GAAP Adjusted EBITDA. | ||||
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Interest Expense:
Interest expense for the three months ended October 31, 2023, was $12.9 million compared with the prior year of $9.3 million. This increase was primarily due to a higher weighted average effective interest rate.
Foreign Exchange Transaction (Losses) Gains:
Foreign exchange transaction losses of $(2.4) million for the three months ended October 31, 2023 were primarily due to losses on our intercompany accounts receivable and payable balances, partially offset by gains on our foreign currency denominated third party accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the US dollar.
Foreign exchange transaction gains of $0.5 million for the three months ended October 31, 2022 were primarily due to gains on our foreign currency denominated third party accounts receivable and payable balances, partially offset by losses on our intercompany accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the US dollar.
Impairment Charge Related to Assets Held-For-Sale and Loss on Sale of a Business:
As part of our ongoing initiatives to simplify our portfolio and focus our attention on core growth areas, we are divesting non-core businesses including University Services, Wiley Edge, and CrossKnowledge. These dispositions are expected to be completed during fiscal year 2024. In addition, these three businesses met the held-for-sale criteria. We measured each disposal group at the lower of carrying value or fair value less cost to sell. In the three months ended October 31, 2023, we recorded a held-for-sale pretax impairment of $51.9 million which includes $34.8 million for University Services and $17.1 million for CrossKnowledge. The additional impairment charges in the three months ended October 31, 2023 were due to subsequent changes in the fair value less cost to sell resulting from the continued progression of the selling processes and indications of changes in the expected consideration for the businesses, as well as changes in the carrying amounts of the disposal groups. Additional impairment charges related to all of our assets held-for-sale could be identified as we continue with the disposition process until completion of such actions. As noted above, on November 13, 2023 we entered into an agreement to sell our University Services business.
In the three months ended October 31, 2023, there was a reduction in the pretax loss on the sale of our Tuition Manager business previously in our Held for Sale or Sold segment due to cash received after the closing of approximately $0.5 million.
(Benefit) Provision for Income Taxes:
Below is a reconciliation of our US GAAP (Loss) Income Before Taxes to Non-GAAP Adjusted Income Before Taxes:
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP (Loss) Income Before Taxes | $ | (22,030) | $ | 48,330 | |||||||
| Pretax Impact of Adjustments: | |||||||||||
| Restructuring and related charges | 25,102 | 13,956 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 3,223 | 2,654 | |||||||||
| Amortization of acquired intangible assets | 14,303 | 21,185 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 51,414 | — | |||||||||
Held for Sale or Sold segment Adjusted Income Before Taxes (1) | (19,099) | (13,230) | |||||||||
| Non-GAAP Adjusted Income Before Taxes | $ | 52,913 | $ | 72,895 | |||||||
| (1) | Our Adjusted Income Before Taxes excludes the Adjusted Income of our Held for Sale or Sold segment. | ||||
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Below is a reconciliation of our 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:
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Income Tax (Benefit) Provision | $ | (2,585) | $ | 10,137 | |||||||
Income Tax Impact of Adjustments (1): | |||||||||||
| Restructuring and related charges | 6,315 | 3,422 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 888 | 694 | |||||||||
| Amortization of acquired intangible assets | 3,645 | 4,388 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 8,542 | — | |||||||||
Held for Sale or Sold segment Adjusted Tax Provision (2) | (4,270) | (3,015) | |||||||||
| Non-GAAP Adjusted Income Tax Provision | $ | 12,535 | $ | 15,626 | |||||||
| US GAAP Effective Tax Rate | 11.7 | % | 21.0 | % | |||||||
| Non-GAAP Adjusted Effective Tax Rate | 23.7 | % | 21.4 | % | |||||||
(1) | For the three months ended October 31, 2023 and 2022, substantially all of the tax impact was from deferred taxes. | ||||
| (2) | Our Adjusted Income Tax Provision excludes the Adjusted Tax Provision of our Held for Sale or Sold segment. | ||||
Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The US GAAP effective tax rate for the three months ended October 31, 2023, was 11.7% compared to 21.0% for the three months ended October 31, 2022. The US GAAP effective tax rate for the three months ended October 31, 2023, was lower than the US GAAP effective tax rate for the three months ended October 31, 2022 primarily due to the held-for-sale impairment described in Note 3, "Acquisitions and Divestitures", which resulted in a deferred tax benefit, the impact of US tax incentives, and other discrete items offset by the mix of non-US income.
The Non-GAAP adjusted effective tax rate was 23.7% for the three months ended October 31, 2023, compared to 21.4% for the three months ended October 31, 2022. The increase in the Non-GAAP adjusted effective tax rate for the three months ended October 31, 2023, compared with the prior year ended October 31, 2022, was primarily due to the mix of non-US income offset by tax incentives in the US.
Diluted (Loss) Earnings per Share (EPS):
Diluted loss per share for the three months ended October 31, 2023 was $(0.35) per share compared with earnings per share of $0.68 per share for the three months ended October 31, 2022. This decrease was primarily due to the impairment charge related to assets held-for-sale in the three months ended October 31, 2023 and, to a lesser extent, lower operating income, partially offset by an income tax benefit in the three months ended October 31, 2023.
44
Below is a reconciliation of our US GAAP (Loss) Earnings per share to Non-GAAP Adjusted EPS. The amount of the pretax, and the related income tax impact for the adjustments included in the table below, are presented in the section above, “(Benefit) Provision for Income Taxes.”
| Three Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP (Loss) Earnings Per Share | $ | (0.35) | $ | 0.68 | |||||||
| Adjustments: | |||||||||||
| Restructuring and related charges | 0.34 | 0.19 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 0.04 | 0.03 | |||||||||
| Amortization of acquired intangible assets | 0.19 | 0.30 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 0.77 | — | |||||||||
Held for Sale or Sold segment Adjusted Net Income (1) | (0.27) | (0.18) | |||||||||
EPS impact of using weighted-average dilutive shares for adjusted EPS calculation (2) | 0.01 | — | |||||||||
| Non-GAAP Adjusted EPS | $ | 0.73 | $ | 1.02 | |||||||
| (1) | Our Adjusted EPS excludes the Adjusted Net Income of our Held for Sale or Sold segment. | ||||
(2) | Represents the impact of using diluted weighted-average number of common shares outstanding (55.6 million shares for the three months ended October 31, 2023) 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. | ||||
On a constant currency basis, Adjusted EPS decreased 25% primarily due to a decrease in Adjusted Operating Income and, to a lesser extent, higher interest expense.
45
SEGMENT OPERATING RESULTS
| RESEARCH | Three Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | ||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Research Publishing | $ | 219,743 | $ | 232,641 | (6) | % | (7) | % | |||||||||||||||
| Research Solutions | 37,927 | 38,718 | (2) | % | (3) | % | |||||||||||||||||
| Total Research Revenue | 257,670 | 271,359 | (5) | % | (7) | % | |||||||||||||||||
| Cost of Sales | 71,300 | 71,033 | 0 | % | 1 | % | |||||||||||||||||
| Operating Expenses | 116,228 | 114,252 | (2) | % | 1 | % | |||||||||||||||||
| Amortization of Intangible Assets | 11,286 | 11,616 | 3 | % | 5 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 4,755 | 1,179 | # | # | |||||||||||||||||||
| Contribution to Profit | 54,101 | 73,279 | (26) | % | (26) | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 4,755 | 1,179 | # | # | |||||||||||||||||||
| Adjusted Contribution to Profit | 58,856 | 74,458 | (21) | % | (21) | % | |||||||||||||||||
| Depreciation and amortization | 22,668 | 23,384 | 3 | % | 4 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 81,524 | $ | 97,842 | (17) | % | (17) | % | |||||||||||||||
| Adjusted EBITDA Margin | 31.6% | 36.1% | |||||||||||||||||||||
# Not meaningful
Revenue:
Research revenue for the three months ended October 31, 2023 decreased $13.7 million, or 5%, as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 7% as compared with the prior year primarily due to the carryover of the Hindawi publishing disruption experienced in fiscal year 2023. Additionally, to a lesser extent, revenues were unfavorably impacted by soft market conditions for our corporate recruitment offerings. These impacts were partially offset by continued growth in our core open access publishing program. Excluding Hindawi, Research revenue was flat. Hindawi’s special issues program was suspended in the third quarter of fiscal year 2023 due to the presence in certain special issues of compromised articles. As a result, Hindawi revenue for the three months ended October 31, 2023 decreased $18.1 million on a constant currency basis as compared with the prior year. For fiscal year 2024, we expect Hindawi revenue to decline $35 million to $40 million. In fiscal year 2025, we expect to begin to recover Hindawi revenue lost. Open access article output declined 40% as compared with the prior year. Excluding Hindawi, open access article output growth was approximately 19% for the three months ended October 31, 2023.
46
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA decreased 17% as compared with the prior year. This decrease was primarily due to revenue performance as cost of sales and operating expenses slightly declined. Excluding Hindawi, Adjusted EBITDA decreased 4% primarily due to higher employee costs. On a constant currency basis, Hindawi Adjusted EBITDA for the three months ended October 31, 2023 decreased $13.5 million as compared with the prior year.
| Three Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | |||||||||||||||||||||
| LEARNING: | 2023 | 2022 | |||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Academic | $ | 89,125 | $ | 82,256 | 8 | % | 8 | % | |||||||||||||||
| Professional | 59,815 | 57,393 | 4 | % | 3 | % | |||||||||||||||||
| Total Learning Revenue | 148,940 | 139,649 | 7 | % | 6 | % | |||||||||||||||||
| Cost of Sales | 35,617 | 34,768 | (2) | % | (1) | % | |||||||||||||||||
| Operating Expenses | 71,132 | 69,180 | (3) | % | (2) | % | |||||||||||||||||
| Amortization of Intangible Assets | 2,279 | 2,125 | (7) | % | (7) | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 5,859 | 3,664 | (60) | % | (60) | % | |||||||||||||||||
| Contribution to Profit | 34,053 | 29,912 | 14 | % | 14 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 5,859 | 3,664 | (60) | % | (60) | % | |||||||||||||||||
| Adjusted Contribution to Profit | 39,912 | 33,576 | 19 | % | 19 | % | |||||||||||||||||
| Depreciation and amortization | 13,974 | 13,900 | (1) | % | 0 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 53,886 | $ | 47,476 | 14 | % | 13 | % | |||||||||||||||
| Adjusted EBITDA Margin | 36.2% | 34.0% | |||||||||||||||||||||
Revenue:
Learning revenue increased $9.3 million, or 7%, as compared with the prior year on a reported basis. On a constant currency basis, revenue increased 6% as compared with the prior year. This was primarily due to an increase in Academic from growth in digital courseware, as well as print and digital sales. Professional increased due to higher publishing revenues due to an improved channel environment and lower returns. Revenues from assessments were flat compared with the prior year.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 13% as compared with the prior year. This increase was primarily due to revenue performance, partially offset by higher operating expenses due to the prior year reduction in our provision for credit losses. The increase in operating expenses was tempered by restructuring savings.
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| Three Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | |||||||||||||||||||||
| HELD FOR SALE OR SOLD: | 2023 | 2022 | |||||||||||||||||||||
| Total Held for Sale or Sold Revenue | $ | 86,198 | $ | 103,828 | (17) | % | (18) | % | |||||||||||||||
| Cost of Sales | 48,697 | 64,501 | 25 | % | 26 | % | |||||||||||||||||
| Operating Expenses | 18,401 | 26,096 | 29 | % | 32 | % | |||||||||||||||||
| Amortization of Intangible Assets | — | 6,369 | # | # | |||||||||||||||||||
| Restructuring Charges (see Note 9) | 2,022 | 281 | # | # | |||||||||||||||||||
| Contribution to Profit | 17,078 | 6,581 | # | # | |||||||||||||||||||
| Restructuring Charges (see Note 9) | 2,022 | 281 | # | # | |||||||||||||||||||
| Adjusted Contribution to Profit | 19,100 | 6,862 | # | # | |||||||||||||||||||
| Depreciation and amortization | — | 11,227 | # | # | |||||||||||||||||||
| Adjusted EBITDA | $ | 19,100 | $ | 18,089 | 6 | % | 4 | % | |||||||||||||||
| Adjusted EBITDA Margin | 22.2% | 17.4% | |||||||||||||||||||||
# Not meaningful
Revenue:
Revenue for Held for Sale or Sold decreased $17.6 million, or 17%, as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 18% as compared with the prior year. This was due to decrease in placement revenues, and to a lesser extent, the disposition of certain businesses in the fourth quarter of fiscal year 2023 and the first quarter of fiscal year 2024, and a decrease in University Services revenue due to lower enrollments. For the three months ended October 31, 2023, placements declined 40% and enrollments declined 3%.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 4% as compared with the prior year. This increase was primarily due to placement savings, and lower employment costs in University Services due to restructuring actions.
University Services Partners and Programs:
As of October 31, 2023, Wiley had 60 university partners under contract, compared to 69 as of October 31, 2022 within University Services.
CORPORATE EXPENSES:
Corporate expenses for the three months ended October 31, 2023 increased $6.7 million, or 13%, as compared with the prior year. On a constant currency basis, excluding restructuring charges, these expenses increased 6%. On a constant currency basis, Adjusted EBITDA loss increased 8% as compared with the prior year. This was primarily due to higher employee incentive compensation and, to a lesser extent, executive severance costs, partially offset by lower technology related costs.
48
RESULTS OF OPERATIONS – SIX MONTHS ENDED OCTOBER 31, 2023
SIX MONTHS SUMMARY
•US GAAP Results: Consolidated Revenue of $943.8 million (-6%, compared with the prior year), Operating Income of $29.9 million (-26%, compared with the prior year), and Diluted Loss per Share of $-2.02 (-2.38, compared with the prior year). US GAAP results impacted by charges totaling $154.0 million, including non-cash goodwill impairment and impairment of held-for-sale assets and loss on the sale of a business.
•Adjusted Results at Constant Currency (excluding Held for Sale or Sold segment results): Adjusted Revenue of $773.7 million (-5%, compared with the prior year), Adjusted EBITDA of $152.1 million (-12%, compared with the prior year), and Adjusted EPS of $0.99 (-30%, compared with the prior year).
CONSOLIDATED RESULTS OF OPERATIONS
Revenue:
Revenue for the six months ended October 31, 2023, decreased $58.6 million, or 6%, as compared with the prior year. On a constant currency basis, revenue decreased 7% as compared with the prior year. Excluding the revenues from the Held for Sale or Sold segment, Adjusted Revenue decreased 5% on a constant currency basis.
Adjusted Revenue
Below is a reconciliation of our consolidated US GAAP Revenue to Non-GAAP Adjusted Revenue:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Revenue, net | $ | 943,821 | $ | 1,002,405 | |||||||
Less: Held for Sale or Sold segment (1) | (170,087) | (196,837) | |||||||||
Non-GAAP Adjusted Revenue, net | $ | 773,734 | $ | 805,568 | |||||||
(1) | Our Adjusted Revenue, net excludes the impact of our Held for Sale or Sold segment revenue. | ||||
See the “Segment Operating Results” below for additional details on each segment’s revenue and Adjusted EBITDA performance.
Cost of Sales:
Cost of sales for the six months ended October 31, 2023, decreased $31.6 million, or 9%, as compared with the prior year. On a constant currency basis, cost of sales decreased 10% as compared with the prior year. This was primarily due to lower employee costs related to Wiley Edge and, to a lesser extent, marketing costs for the University Services business, both in the Held for Sale or Sold segment. Excluding the cost of sales from the Held for Sale or Sold segment, cost of sales decreased 3% on a constant currency basis, primarily due to a decrease in revenue.
49
Operating and Administrative Expenses:
Operating and administrative expenses for the six months ended October 31, 2023, decreased $27.7 million, or 5%, as compared with the prior year. On a constant currency basis, operating and administrative expenses decreased 6% as compared with the prior year primarily reflecting lower employee costs associated with recent restructuring actions, and to a lesser extent, lower depreciation due to the cessation of depreciation for held-for-sale assets, lower travel and entertainment costs, and professional fees. Excluding operating and administrative expenses from the Held for Sale or Sold segment, operating and administrative expenses decreased 3% on a constant currency basis.
Impairment of Goodwill:
We recorded an impairment of goodwill in the six months ended October 31, 2023 of $26.7 million. This charge is reflected in the Impairment of goodwill in the Condensed Consolidated Statements of Net (Loss) Income.
In accordance with applicable accounting standards, we were required to test goodwill for impairment immediately before and after our segment realignment. Prior to the realignment, we concluded that the fair value of the University Services reporting unit within the former Academic segment was below its carrying value, which resulted in a pretax non-cash goodwill impairment of $11.4 million in the six months ended October 31, 2023. University Services was adversely impacted by market conditions and headwinds for online degree programs, which lead to a decline in projected enrollments from existing partners, pricing pressures and revenue share concessions, and a decline in new partner additions over both the short-term and long-term which adversely impacted forecasted revenue growth and operating cash flows.
After the realignment, we concluded that the fair value of the CrossKnowledge reporting unit within the Held for Sale or Sold segment was below its carrying value, which resulted in a pretax non-cash goodwill impairment of $15.3 million in the six months ended October 31, 2023. CrossKnowledge was adversely impacted by a decline in the demand for its offerings, which have resulted in lower sales and a decline in average contract value, that adversely impacted forecasted revenue growth and operating cash flows.
See Note 12, "Goodwill and Intangible Assets" for details on these charges.
Restructuring and Related Charges:
Global Restructuring Program
For the six months ended October 31, 2023 and 2022, we recorded pretax restructuring charges of $36.5 million and $35.4 million, respectively, related to the Global Restructuring Program.
We anticipate ongoing severance related charges and facility-related costs associated with certain properties to result in additional restructuring charges in future periods.
Business Optimization Program
For the six months ended October 31, 2023 and 2022, we recorded pretax restructuring charges of $0.7 million and $1.0 million, respectively, related to this program.
These charges are reflected in Restructuring and related charges on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. See Note 9, “Restructuring and Related Charges” for more details on the Global Restructuring Program charges.
For the impact of our restructuring programs on diluted (loss) earnings per share, see the section below, “Diluted (Loss) Earnings per Share (EPS).”
50
Amortization of Intangible Assets:
Amortization of intangible assets was $29.2 million for the six months ended October 31, 2023, a decrease of $16.2 million, or 36%, as compared with the prior year. On a constant currency basis, amortization of intangible assets decreased 37% as compared with the prior year primarily due to the cessation of amortization for held-for-sale assets and. to a lesser extent, the prior year period including $4.6 million due to the acceleration of expense related to the discontinued use of the mthree trademark, and the completion of amortization of certain acquired intangible assets. See Note 3, “Acquisitions and Divestitures” for more details on these held-for-sale assets.
Operating Income, Adjusted Operating Income (OI) and Adjusted EBITDA:
Operating income for the six months ended October 31, 2023, decreased $10.6 million or 26% as compared with the prior year. On a constant currency basis, operating income decreased 27% as compared with prior year. The decline was primarily due to a decrease in revenue and, to a lesser extent, the impairment of goodwill. This was partially offset by the decrease in cost of sales, operating and administrative expenses and, to a lesser extent, the amortization of intangible assets as described above.
Adjusted OI and Adjusted EBITDA on a constant currency basis and excluding restructuring charges, impairment of goodwill, the accelerated amortization of an intangible asset, and the adjusted contribution to profit for the Held for Sale or Sold segment decreased 19% and 12%, respectively, as compared with the prior year. The decrease in Adjusted OI and Adjusted EBITDA was primarily due to lower revenues, partially offset by a lower operating and administrative expenses.
Adjusted OI
Below is a reconciliation of our consolidated US GAAP Operating Income to Non-GAAP Adjusted OI:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Operating Income | $ | 29,890 | $ | 40,474 | |||||||
| Adjustments: | |||||||||||
| Restructuring and related charges | 37,225 | 36,397 | |||||||||
| Impairment of goodwill | 26,695 | — | |||||||||
Accelerated amortization of an intangible asset (1) | — | 4,594 | |||||||||
Held for Sale or Sold segment adjusted contribution to profit (2) | (22,184) | 7,246 | |||||||||
| Non-GAAP Adjusted OI | $ | 71,626 | $ | 88,711 | |||||||
(1) | We determined that a revision of the useful life of the mthree trademark 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. | ||||
| (2) | Our Adjusted OI excludes the impact of our Held for Sale or Sold segment adjusted contribution to profit. | ||||
51
Adjusted EBITDA
Below is a reconciliation of our consolidated US GAAP Net (Loss) Income to Non-GAAP EBITDA and Adjusted EBITDA:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Net (Loss) Income | $ | (111,709) | $ | 20,358 | |||||||
| Interest expense | 24,271 | 15,664 | |||||||||
(Benefit) provision for income taxes | (17,044) | 4,585 | |||||||||
| Depreciation and amortization | 83,902 | 110,700 | |||||||||
| Non-GAAP EBITDA | (20,580) | 151,307 | |||||||||
| Impairment of goodwill | 26,695 | — | |||||||||
| Restructuring and related charges | 37,225 | 36,397 | |||||||||
| Foreign exchange losses, including the write off of certain cumulative translation adjustments | 3,977 | 138 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 127,343 | — | |||||||||
| Other expense (income), net | 3,052 | (271) | |||||||||
Held for Sale or Sold segment Adjusted EBITDA (1) | (25,621) | (15,654) | |||||||||
| Non-GAAP Adjusted EBITDA | $ | 152,091 | $ | 171,917 | |||||||
(1) | Our Non-GAAP Adjusted EBITDA excludes the Held for Sale or Sold segment Non-GAAP Adjusted EBITDA. | ||||
Interest Expense:
Interest expense for the six months ended October 31, 2023, was $24.3 million compared with the prior year of $15.7 million. This increase was primarily due to a higher weighted average effective interest rate.
Foreign Exchange Transaction (Losses):
Foreign exchange transaction losses of $(4.0) million for the six months ended October 31, 2023 were primarily due to losses on our intercompany accounts receivable and payable balances and, to a lesser extent, on our foreign currency denominated third party accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the US dollar. In fiscal year 2023, due to the closure of our operations in Russia, our Russian entity was deemed substantially liquidated. As a result, cumulative translation adjustments associated with that entity were recognized. In the six months ended October 31, 2023, we wrote off an additional $1.0 million in cumulative translation adjustments from our Russian entity.
Foreign exchange transaction losses of $(0.1) million for the six months ended October 31, 2022 were primarily due to losses on our intercompany accounts receivable and payable balances, offset by gains on our foreign currency denominated third party accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the US dollar.
Impairment Charge Related to Assets Held-For-Sale and Loss on Sale of a Business:
As part of our ongoing initiatives to simplify our portfolio and focus our attention on core growth areas, we are divesting non-core businesses including University Services, Wiley Edge, and CrossKnowledge. These dispositions are expected to be completed during fiscal year 2024. In addition, these three businesses met the held-for-sale criteria. We measured each disposal group at the lower of carrying value or fair value less cost to sell. We recorded a held-for-sale pretax impairment of $125.8 million which includes $75.4 million for University Services, and $50.4 million for CrossKnowledge during the six months ended October 31, 2023. As noted above, on November 13, 2023 we entered into an agreement to sell our University Services business.
52
The loss on sale of a business is due to the sale of our Tuition Manager business previously in our Held for Sale or Sold segment, which resulted in a pretax loss of approximately $1.5 million during the six months ended October 31, 2023.
(Benefit) Provision for Income Taxes:
Below is a reconciliation of our US GAAP (Loss) Income Before Taxes to Non-GAAP Adjusted Income Before Taxes:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP (Loss) Income Before Taxes | $ | (128,753) | $ | 24,943 | |||||||
| Pretax Impact of Adjustments: | |||||||||||
| Impairment of goodwill | 26,695 | — | |||||||||
| Restructuring and related charges | 37,225 | 36,397 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 3,217 | 3,320 | |||||||||
| Amortization of acquired intangible assets | 30,971 | 47,570 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 127,343 | — | |||||||||
Held for Sale or Sold segment Adjusted Income Before Taxes (1) | (24,133) | (5,636) | |||||||||
| Non-GAAP Adjusted Income Before Taxes | $ | 72,565 | $ | 106,594 | |||||||
| (1) | Our Adjusted Income Before Taxes excludes the Adjusted Income of our Held for Sale or Sold segment. | ||||
Below is a reconciliation of our 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:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP Income Tax (Benefit) Provision | $ | (17,044) | $ | 4,585 | |||||||
Income Tax Impact of Adjustments (1): | |||||||||||
| Impairment of goodwill | 2,697 | — | |||||||||
| Restructuring and related charges | 9,251 | 8,939 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 854 | 869 | |||||||||
| Amortization of acquired intangible assets | 7,517 | 10,220 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 19,203 | — | |||||||||
Held for Sale or Sold segment Adjusted Tax Provision (2) | (5,266) | (1,446) | |||||||||
| Non-GAAP Adjusted Income Tax Provision | $ | 17,212 | $ | 23,167 | |||||||
| US GAAP Effective Tax Rate | 13.2 | % | 18.4 | % | |||||||
| Non-GAAP Adjusted Effective Tax Rate | 23.7 | % | 21.7 | % | |||||||
(1) | For the six months ended October 31, 2023 and 2022, substantially all of the tax impact was from deferred taxes. | ||||
| (2) | Our Adjusted Income Tax Provision excludes the Adjusted Tax Provision of our Held for Sale or Sold segment. | ||||
53
Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The US GAAP effective tax rate for the six months ended October 31, 2023, was 13.2% compared to 18.4% for the six months ended October 31, 2022. The US GAAP effective tax rate for the six months ended October 31, 2023, was lower than the US GAAP effective tax rate for the six months ended October 31, 2022 primarily due to the tax benefit on impairment of goodwill resulting from the segment realignment described in Note 12, "Goodwill and Intangible Assets," as well as the held-for-sale impairment described in Note 3, "Acquisitions and Divestitures", which resulted in a deferred tax benefit, the impact of US tax incentives, and other discrete items offset by the mix of non-US income.
Excluding the $2.7 million tax benefit from the impairment of goodwill and $19.2 million tax benefit of the impairment charge related to assets held-for-sale and the loss on sale of a business, restructuring and other adjustments noted in the table above, the Non-GAAP adjusted effective tax rate was 23.7% for the six months ended October 31, 2023, compared to 21.7% for the six months ended October 31, 2022. The increase in the Non-GAAP adjusted effective tax rate for the six months ended October 31, 2023, compared with the prior year ended October 31, 2022, was primarily due to the mix of non-US income offset by tax incentives in the US.
Diluted (Loss) Earnings per Share (EPS):
Diluted loss for the six months ended October 31, 2023 was $(2.02) per share compared with earnings of $0.36 per share for the six months ended October 31, 2022. This decrease was primarily due to the impairment charge related to assets held-for-sale and a loss on the sale of a business in the six months ended October 31, 2023 and, to a lesser extent, lower operating income, and an increase in interest expense, partially offset by an income tax benefit in the six months ended October 31, 2023.
Below is a reconciliation of our US GAAP (Loss) Earnings Per Share to Non-GAAP Adjusted EPS. The amount of the pretax, and the related income tax impact for the adjustments included in the table below, are presented in the section above, “(Benefit) Provision for Income Taxes”.
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
US GAAP (Loss) Earnings Per Share | $ | (2.02) | $ | 0.36 | |||||||
| Adjustments: | |||||||||||
| Impairment of goodwill | 0.43 | — | |||||||||
| Restructuring and related charges | 0.50 | 0.49 | |||||||||
Foreign exchange losses on intercompany transactions, including the write off of certain cumulative translation adjustments | 0.04 | 0.04 | |||||||||
| Amortization of acquired intangible assets | 0.42 | 0.67 | |||||||||
| Impairment charge related to assets held-for-sale and loss on sale of a business | 1.94 | — | |||||||||
Held for Sale or Sold segment Adjusted Net Income (1) | (0.34) | (0.08) | |||||||||
EPS impact of using weighted-average dilutive shares for adjusted EPS calculation (2) | 0.02 | — | |||||||||
| Non-GAAP Adjusted EPS | $ | 0.99 | $ | 1.48 | |||||||
| (1) | Our Adjusted EPS excludes the Adjusted Net Income of our Held for Sale or Sold segment. | ||||
(2) | Represents the impact of using diluted weighted-average number of common shares outstanding (55.7 million shares for the six months ended October 31, 2023) 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. | ||||
On a constant currency basis, Adjusted EPS decreased 30% primarily due to a decrease in Adjusted Operating Income, and to a lesser extent, higher interest expense and lower pension income, partially offset by lower Adjusted Income Tax Provision.
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SEGMENT OPERATING RESULTS
| RESEARCH | Six Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | ||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Research Publishing | $ | 442,743 | $ | 472,164 | (6) | % | (7) | % | |||||||||||||||
| Research Solutions | 72,731 | 74,108 | (2) | % | (3) | % | |||||||||||||||||
| Total Research Revenue | 515,474 | 546,272 | (6) | % | (7) | % | |||||||||||||||||
| Cost of Sales | 141,567 | 142,302 | 1 | % | 2 | % | |||||||||||||||||
| Operating Expenses | 238,862 | 236,971 | (1) | % | 1 | % | |||||||||||||||||
| Amortization of Intangible Assets | 22,662 | 23,437 | 3 | % | 5 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 6,702 | 1,260 | # | # | |||||||||||||||||||
| Contribution to Profit | 105,681 | 142,302 | (26) | % | (26) | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 6,702 | 1,260 | # | # | |||||||||||||||||||
| Adjusted Contribution to Profit | 112,383 | 143,562 | (22) | % | (22) | % | |||||||||||||||||
| Depreciation and amortization | 45,880 | 47,185 | 3 | % | 4 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 158,263 | $ | 190,747 | (17) | % | (18) | % | |||||||||||||||
| Adjusted EBITDA Margin | 30.7% | 34.9% | |||||||||||||||||||||
# Not meaningful
Revenue:
Research revenue for the six months ended October 31, 2023 decreased $30.8 million, or 6%, as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 7% as compared with the prior year primarily due to the carryover of the Hindawi publishing disruption experienced in fiscal year 2023. Additionally, to a lesser extent, revenues were unfavorably impacted by soft market conditions for our corporate recruitment offerings. These impacts were partially offset by continued strong growth in our core open access publishing program. Excluding Hindawi, Research revenue was flat. Hindawi’s special issues program was suspended in the third quarter of fiscal year 2023 due to the presence in certain special issues of compromised articles. As a result, Hindawi revenue for the six months ended October 31, 2023 decreased $37.3 million on a constant currency basis as compared with the prior year. For fiscal year 2024, we expect Hindawi revenue to decline $35 million to $40 million. In fiscal year 2025, we expect to begin to recover Hindawi revenue lost. Open access article output declined 39% as compared with the prior year. Excluding Hindawi, open access article output growth was approximately 20% for the six months ended October 31, 2023.
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Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA decreased 18% as compared with the prior year. This decrease was primarily due to revenue performance as cost of sales and operating expenses declined. Excluding Hindawi, Adjusted EBITDA decreased 1%. On a constant currency basis, Hindawi Adjusted EBITDA for the six months ended October 31, 2023 decreased $31.5 million as compared with the prior year.
| Six Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | |||||||||||||||||||||
| LEARNING: | 2023 | 2022 | |||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Academic | $ | 137,417 | $ | 141,004 | (3) | % | (3) | % | |||||||||||||||
| Professional | 120,843 | 118,292 | 2 | % | 2 | % | |||||||||||||||||
| Total Learning Revenue | 258,260 | 259,296 | 0 | % | (1) | % | |||||||||||||||||
| Cost of Sales | 66,941 | 69,548 | 4 | % | 4 | % | |||||||||||||||||
| Operating Expenses | 139,233 | 148,045 | 6 | % | 7 | % | |||||||||||||||||
| Amortization of Intangible Assets | 4,548 | 4,386 | (4) | % | (4) | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 6,077 | 6,795 | 11 | % | 11 | % | |||||||||||||||||
| Contribution to Profit | 41,461 | 30,522 | 36 | % | 36 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 6,077 | 6,795 | 11 | % | 11 | % | |||||||||||||||||
| Adjusted Contribution to Profit | 47,538 | 37,317 | 27 | % | 28 | % | |||||||||||||||||
| Depreciation and amortization | 27,526 | 27,955 | 2 | % | 2 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 75,064 | $ | 65,272 | 15 | % | 15 | % | |||||||||||||||
| Adjusted EBITDA Margin | 29.1% | 25.2% | |||||||||||||||||||||
Revenue:
Learning revenue for the six months ended October 31, 2023 decreased $1.0 million, or was flat as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 1% as compared with the prior year. This was primarily due to a decrease in Academic print sales, partially offset by growth in digital courseware. Professional revenue increased primarily due to professional assessments.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 15% as compared with the prior year. This increase was primarily due to lower operating expenses, which resulted primarily from lower employee costs after recent restructuring actions and, to a lesser extent, a decrease in travel and entertainment, and the prior year reduction in our provision for credit losses.
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| Six Months Ended October 31, | % Change Favorable (Unfavorable) | Constant Currency % Change Favorable (Unfavorable) | |||||||||||||||||||||
| HELD FOR SALE OR SOLD: | 2023 | 2022 | |||||||||||||||||||||
| Total Held for Sale or Sold Revenue | $ | 170,087 | $ | 196,837 | (14) | % | (15) | % | |||||||||||||||
| Cost of Sales | 104,207 | 132,483 | 21 | % | 22 | % | |||||||||||||||||
| Operating Expenses | 41,693 | 58,717 | 29 | % | 30 | % | |||||||||||||||||
| Impairment of Goodwill (see Note 12) | 26,695 | — | # | # | |||||||||||||||||||
| Amortization of Intangible Assets | 2,003 | 17,477 | 89 | % | 88 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 4,645 | 3,773 | (23) | % | (23) | % | |||||||||||||||||
| Contribution to Profit | (9,156) | (15,613) | 41 | % | 39 | % | |||||||||||||||||
| Restructuring Charges (see Note 9) | 4,645 | 3,773 | (23) | % | (23) | % | |||||||||||||||||
| Impairment of Goodwill (see Note 12) | 26,695 | — | # | # | |||||||||||||||||||
| Accelerated Amortization of an Intangible Asset | — | 4,594 | # | # | |||||||||||||||||||
| Adjusted Contribution to Profit | 22,184 | (7,246) | # | # | |||||||||||||||||||
| Depreciation and amortization | 3,437 | 22,900 | 85 | % | 85 | % | |||||||||||||||||
| Adjusted EBITDA | $ | 25,621 | $ | 15,654 | 64 | % | 62 | % | |||||||||||||||
| Adjusted EBITDA Margin | 15.1% | 8.0% | |||||||||||||||||||||
# Not meaningful
Revenue:
Held for Sale or Sold revenue for the six months ended October 31, 2023 decreased $26.8 million, or 14%, as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 15% as compared with the prior year. This was due to declines in placement revenues, and, to a lesser extent, the disposition of certain businesses in the fourth quarter of fiscal year 2023 and the first quarter of fiscal year 2024. For the six months ended October 31, 2023, placements declined 40% and online enrollment declined 5%.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 62% as compared with the prior year. This increase was primarily due to lower cost of sales and operating expenses. These declines were largely resulting from restructuring actions in University Services, and lower placement costs.
CORPORATE EXPENSES:
Corporate expenses for the six months ended October 31, 2023 decreased $8.6 million, or 7%, as compared with the prior year. On a constant currency basis, excluding restructuring charges, these expenses decreased 5%. On a constant currency basis, Adjusted EBITDA decreased 4% as compared with the prior year. This was primarily due to lower technology and occupancy costs, partially offset by higher employee incentive compensation and, to a lesser extent, executive severance costs.
57
FISCAL YEAR 2024 TRANSITION YEAR OUTLOOK
Wiley is reaffirming its overall Fiscal 2024 outlook for Adjusted Revenue, Adjusted EBITDA, and Adjusted EPS.
(amounts in millions, except Adjusted EPS)
| Metric | Fiscal Year 2023 All Company | Fiscal Year 2023 Ex-Divestitures | Fiscal Year 2024 Outlook Ex-Divestitures | ||||||||||||||
Adjusted Revenue (1) | $2,020 | $1,627 | $1,580 to $1,630 | ||||||||||||||
| Research | $1,080 | Flat to low-single digit decline (+2% excluding Hindawi) | |||||||||||||||
| Learning | $547 | Flat to low-single digit increase | |||||||||||||||
Adjusted EBITDA (1) | $422 | $379 | $305 to $330 | ||||||||||||||
Adjusted EPS (1) | $3.84 | $3.48 | $2.05 to $2.40 | ||||||||||||||
| (1) | Wiley’s fiscal year 2024 outlook (Adjusted Revenue, Adjusted EBITDA, and Adjusted EPS) exclude businesses held-for-sale, including University Services, Wiley Edge (formerly Talent Development), and CrossKnowledge, as well as those sold in fiscal year 2023, Test Prep and Advancement Courses. | ||||
Fiscal Year 2024 Transition Year Outlook
•Adjusted Revenue – reaffirming overall Adjusted Revenue guidance with Research moderately below expectations due to the lag between submissions and publication and continued market softness in recruiting, and Learning ahead of expectations due to an improved environment for academic and professional publishing, driven by better execution in our channels and continued uptake of our inclusive access model and zyBooks courseware. We now expect Research growth excluding Hindawi of 2%, down from 3% originally. Note, Adjusted Revenue excludes businesses held for sale or sold.
•Adjusted EBITDA – reaffirming due to projected revenue performance, incentive compensation resetting, and wage inflation offsetting expected restructuring savings.
•Adjusted EPS – reaffirming due to lower adjusted operating income and higher interest expense.
The Company is not providing a Free Cash Flow outlook due to the uncertainty around the timing of divestitures and the size and scope of restructuring payments.
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LIQUIDITY AND CAPITAL RESOURCES
Principal Sources of Liquidity
We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be adequate to meet our operating, investing, and financing needs for at least the next twelve months. Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used to fund shareholder dividends. Other discretionary uses of cash flow include share repurchases and acquisitions to complement our portfolio of businesses. As necessary, we may supplement operating cash flow with debt to fund these activities. The overall cash position of the Company reflects our durable business results and a global cash management strategy that considers liquidity management, economic factors and tax considerations. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure to any financial institution.
As of October 31, 2023, we had cash and cash equivalents of $99.5 million, including cash and cash equivalents classified as held-for-sale of $16.3 million, of which approximately $97.3 million, or 98%, was located outside the US. Maintenance of these cash and cash equivalent balances outside the US does not have a material impact on the liquidity or capital resources of our operations. We intend to repatriate earnings from our non-US subsidiaries, and to the extent we repatriate these funds to the US, we will be required to pay income taxes in various US state and local jurisdictions and applicable non-US withholding or similar taxes in the periods in which such repatriation occurs. Accordingly, as of October 31, 2023, we have recorded a deferred tax liability of approximately $2.3 million related to the estimated taxes that would be incurred upon repatriating certain non-US earnings to the US.
On November 30, 2022, we entered into the second amendment to the Third Amended and Restated Credit Agreement (collectively, the Amended and Restated CA). See Note 15, “Debt and Available Credit Facilities” for more details on the amendment. The Amended and Restated CA provided for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to $1.115 billion, which matures November 2027, (ii) a five-year term loan A facility consisting of $200 million, which matures November 2027, and (iii) $185 million aggregate principal amount revolving credit facility through May 2024.
As of October 31, 2023, we had approximately $942.6 million of debt outstanding, net of unamortized issuance costs of $0.7 million, and approximately $552.7 million of unused borrowing capacity under our Amended and Restated CA and other facilities. Our Amended and Restated CA contains certain restrictive covenants related to our consolidated leverage ratio and interest coverage ratio, which we were in compliance with as of October 31, 2023.
Analysis of Historical Cash Flows
The following table shows the changes in our Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended October 31, 2023 and 2022.
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net cash used in operating activities | $ | (83,486) | $ | (76,196) | |||||||
| Net cash used in investing activities | (51,917) | (48,293) | |||||||||
| Net cash provided by financing activities | 129,702 | 151,603 | |||||||||
| Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash | $ | (1,943) | $ | (8,784) | |||||||
Cash flow from operations is seasonally a use of cash in the first half of Wiley’s fiscal year principally due to the timing of collections for annual journal subscriptions, which typically occurs in the beginning of the second half of our fiscal year.
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 dividends, and fund share repurchases, and acquisitions. Below are the details of Free cash flow less product development spending.
59
Free Cash Flow less Product Development Spending:
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net cash used in operating activities | $ | (83,486) | $ | (76,196) | |||||||
| Less: Additions to technology, property and equipment | (40,321) | (38,530) | |||||||||
| Less: Product development spending | (8,168) | (11,445) | |||||||||
| Free cash flow less product development spending | $ | (131,975) | $ | (126,171) | |||||||
Net Cash Used in Operating Activities
The following is a summary of the $7.3 million change in Net cash used in operating activities for the six months ended October 31, 2023 compared with the six months ended October 31, 2022 (amounts in millions).
Net cash used in operating activities – Six months ended October 31, 2022 | $ | (76.2) | |||
Net loss adjusted for items to reconcile net loss to net cash used in operating activities, which would include such noncash items as depreciation and amortization, impairment of goodwill, impairment charge related to assets held-for-sale and loss on sale of a business, restructuring charges, and the change in deferred taxes | (29.6) | ||||
| Working capital changes: | |||||
| Accounts receivable, net and contract liabilities | 11.9 | ||||
| Accounts payable and accrued royalties | (21.0) | ||||
| Changes in other assets and liabilities | 31.4 | ||||
Net cash used in operating activities – Six months ended October 31, 2023 | $ | (83.5) | |||
The favorable change in accounts receivable, net and contract liabilities was primarily due to lower revenue, and the timing of invoicing and collections with customers.
The unfavorable change in accounts payable and accrued royalties was primarily due to the timing of payments.
The favorable changes in other assets and liabilities noted in the table above was primarily due to a decrease in employee-related costs, including lower payments for annual incentive compensation in fiscal year 2024 related to the prior fiscal year, partially offset by an increase in restructuring payments.
Our negative working capital (current assets less current liabilities) was $184.7 million and $354.3 million as of October 31, 2023 and April 30, 2023, respectively. This $169.6 million change in negative working capital was primarily due to the seasonality of our business. The primary driver of the negative working capital is the benefit realized from unearned contract liabilities related to subscriptions for which cash has been collected in advance. The contract liabilities will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as of October 31, 2023 and as of April 30, 2023 includes $235.8 million and $504.7 million, respectively, primarily related to deferred subscription revenue for which cash was collected in advance.
Cash collected in advance for subscriptions is used by us for a number of purposes, including funding operations, capital expenditures, acquisitions, debt repayments, dividend payments, and share repurchases.
Net Cash Used In Investing Activities
Net cash used in investing activities for the six months ended October 31, 2023 was $51.9 million compared to $48.3 million in the prior year. The increase in cash used in investing activities was primarily due to an increase in cash used of $2.2 million for the acquisitions of publication rights; an increase of $1.8 million for additions of technology, property and equipment; and an increase of $1.4 million in cash used to acquire businesses, partially offset by a decrease of $3.3 million in cash used for product development spending.
60
Net Cash Provided By Financing Activities
Net cash provided by financing activities was $129.7 million for the six months ended October 31, 2023 compared to $151.6 million for the six months ended October 31, 2022. This decrease in cash provided by financing activities was primarily due to a decrease in net borrowings of long-term debt of $30.2 million and, to a lesser extent, $5.0 million increase in cash used to repurchase shares, partially offset by a $13.0 million change from book overdrafts.
In the six months ended October 31, 2023, we increased our quarterly dividend to shareholders to $1.40 per share annualized versus $1.39 per share annualized in the prior year.
The following table summarizes the shares repurchased of Class A and Class B Common Stock for the six months ended October 31, 2023 and 2022 (shares in thousands):
| Six Months Ended October 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Shares repurchased – Class A | 668 | 382 | |||||||||
| Shares repurchased – Class B | 1 | — | |||||||||
| Average price – Class A and Class B | $ | 33.64 | $ | 45.84 | |||||||
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk primarily related to interest rates, foreign exchange, and credit risk. It is our policy to monitor these exposures and to use derivative financial investments and/or insurance contracts from time to time to reduce fluctuations in earnings and cash flows when it is deemed appropriate to do so. We do not use derivative financial instruments for trading or speculative purposes.
Interest Rates
From time to time, we may use interest rate swaps, collars, or options to manage our exposure to fluctuations in interest rates. It is management’s intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.
The information set forth in Note 16, “Derivatives Instruments and Hedging Activities,” of the Notes to Unaudited Condensed Consolidated Financial Statements under the caption “Interest Rate Contracts,” is incorporated herein by reference.
On an annual basis, a hypothetical one percent change in interest rates for the $443.3 million of unhedged variable rate debt as of October 31, 2023 would affect net income and cash flow by approximately $3.4 million.
Foreign Exchange Rates
Fluctuations in the currencies of countries where we operate outside the US may have a significant impact on financial results. We are primarily exposed to movements in British pound sterling, euros, Canadian and Australian dollars, and certain currencies in Asia. The statements of financial position of non-US business units are translated into US dollars using period-end exchange rates for assets and liabilities and the statements of income are translated into US dollars using weighted-average exchange rates for revenues and expenses.
Our significant investments in non-US businesses are exposed to foreign currency risk. Adjustments resulting from translating assets and liabilities are reported as a separate component of Accumulated other comprehensive loss, net of tax within Shareholders’ Equity under the caption Foreign currency translation adjustment. During the three and six months ended October 31, 2023, we recorded foreign currency translation losses in Accumulated other comprehensive loss, net of tax of approximately $(33.9) million and $(22.7) million, respectively, primarily as a result of the fluctuations of the US dollar relative to the British pound sterling and, to a lesser extent the euro. During the three and six months ended October 31, 2022, we recorded foreign currency translation losses in Accumulated other comprehensive loss, net of tax of approximately $(36.1) million and $(55.9) million, respectively, primarily as a result of the fluctuations of the US dollar relative to the British pound sterling and, to a lesser extent the euro.
Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses on the Unaudited Condensed Consolidated Statements of Net (Loss) Income as incurred. Under certain circumstances, we may enter into derivative financial instruments in the form of foreign currency forward contracts to hedge against specific transactions, including intercompany purchases and loans.
The information set forth in Note 16, “Derivatives Instruments and Hedging Activities,” of the Notes to Unaudited Condensed Consolidated Financial Statements under the caption “Foreign Currency Contracts,” is incorporated herein by reference.
Sales Return Reserves
The estimated allowance for print book sales returns is based upon historical return patterns, as well as current market trends in the businesses in which we operate. In connection with the estimated sales return reserves, we also include a related increase to inventory and a reduction to accrued royalties as a result of the expected returns.
62
The reserves are reflected in the following accounts of our Unaudited Condensed Consolidated Statements of Financial Position:
| October 31, 2023 | April 30, 2023 | ||||||||||
| Increase in Inventories, net | $ | 7,603 | $ | 6,923 | |||||||
| Decrease in Accrued royalties | $ | (3,217) | $ | (3,240) | |||||||
| Increase in Contract liabilities | $ | 26,220 | $ | 24,582 | |||||||
| Print book sales return reserve net liability balance | $ | (15,400) | $ | (14,419) | |||||||
A one percent change in the estimated sales return rate could affect net income by approximately $0.6 million. A change in the pattern or trends in returns could affect the estimated allowance.
Customer Credit Risk
In the journal publishing business, subscriptions are primarily sourced through journal subscription agents who, acting as agents for library customers, facilitate ordering by consolidating the subscription orders/billings of each subscriber with various publishers. Cash is generally collected in advance from subscribers by the subscription agents and is principally remitted to us between the months of December and April. Although currently we have minimal credit risk exposure to these agents, future calendar-year subscription receipts from these agents are highly dependent on their financial condition and liquidity. Subscription agents account for approximately 15% of total annual consolidated revenue, and no one affiliated group of subscription agents accounts for more than 10% of total annual consolidated revenue.
Our book business is not dependent upon a single customer; however, the industry is concentrated in national, regional, and online bookstore chains. No single book customer accounts for more than 6% of total consolidated revenue and 20% of accounts receivable at October 31, 2023. The top 10 book customers account for approximately 12% of total consolidated revenue and approximately 46% of accounts receivable at October 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
The Company’s Chief Executive Officer and Chief Financial Officer, together with the Chief Accounting Officer and other members of the Company’s management, have conducted an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the quarter ended October 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
63
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no significant developments related to legal proceedings during the three months ended October 31, 2023. For information regarding legal proceedings, see our Annual Report on Form 10-K for the fiscal year ended April 30, 2023 Note 16, “Commitment and Contingencies”.
ITEM 1A. RISK FACTORS
See Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2023. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
During the three months ended October 31, 2023, we made the following purchases of Class A and Class B Common Stock under our publicly announced stock repurchase programs:
| Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as part of a Publicly Announced Program | Maximum Number of Shares that May be Purchased Under the Program | Maximum Dollar Value of Shares that May be Purchased Under Additional Plans or Programs (Dollars in millions) | |||||||||||||||||||||||||
| August 2023 | — | $ | — | — | — | $ | 152.5 | ||||||||||||||||||||||
| September 2023 | 156,956 | 36.95 | 156,956 | — | 146.7 | ||||||||||||||||||||||||
| October 2023 | 211,065 | 31.75 | 211,065 | — | 140.0 | ||||||||||||||||||||||||
| Total | 368,021 | $ | 33.97 | 368,021 | — | $ | 140.0 | ||||||||||||||||||||||
ITEM 5. OTHER INFORMATION
Directors and Executive Officers Trading Arrangements
During the period covered by this Quarterly Report on Form 10-Q, none of our directors or officers adopted terminated
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ITEM 6. EXHIBITS
| Material Contracts | |||||
Form of the Fiscal Year 2024 Executive Annual Incentive Plan ● | |||||
Form of the Fiscal Year 2024 Executive Long Term Incentive Plan ● | |||||
Restricted Share Unit Grant Agreement for Matthew Kissner under the Executive Long-Term Incentive Plan, Pursuant to the 2022 Omnibus Stock Plan and Long-Term Incentive Plan ● | |||||
Non-Qualified Premium Stock Option Grant Agreement, Pursuant to the 2022 Omnibus Stock Plan and Long-Term Incentive Plan ● | |||||
Performance Share Unit Grant Agreement under the Executive Long-Term Incentive Plan, under the Business Officer Equity Program, Pursuant to the 2022 Omnibus Stock Plan and Long-Term Incentive Plan ● | |||||
Executive Severance Plan (“ESP”), with an effective date of June 20, 2016, as amended September 22, 2023● | |||||
| Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||
Certification of Interim Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||
| Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||
Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||
| Inline XBRL | |||||
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | ||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | ||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | ||||
*Filed herewith
** Furnished herewith
● Indicates management compensatory plan, contract, or arrangement
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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/ Matthew S. Kissner | |||||||
Matthew S. Kissner | ||||||||
Interim President and Chief Executive Officer | ||||||||
| By | /s/ Christina Van Tassell | |||||||
| Christina Van Tassell | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| By | /s/ Christopher F. Caridi | |||||||
| Christopher F. Caridi | ||||||||
| Senior Vice President, Global Corporate Controller and Chief Accounting Officer | ||||||||
Dated: December 7, 2023 | ||||||||
66
FY2024
EXECUTIVE ANNUAL INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 2023
CONTENTS
| Section | Subject | Page | ||||||
| I. | Definitions | 2 | ||||||
II. | Plan Objectives | 3 | ||||||
| III. | Eligibility | 3 | ||||||
IV. | Performance Measurement | 3 | ||||||
V. | Performance Evaluation | 4 | ||||||
| VI. | Payouts | 5 | ||||||
| VII. | Administration and Other Matters | 5 | ||||||
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I.DEFINITIONS
Following are definitions for words and phrases used in this document. Unless the context clearly indicates otherwise, these words and phrases are considered to be defined terms and appear in this document in italicized print:
base salary A participant's annualized base salary as of July 1, 2023 (excluding any temporary pay reductions), or the date of hire or promotion into the plan, if later, adjusted for any amount of time the participant may not be in the plan for reasons of hire, death, disability, retirement and/or termination.
business criteria An indicator of business performance. . The following business criteria are used in this plan:
adjusted operating income Net revenue less cost of sales, amortization of intangibles and operating and administrative expenses, excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly.
adjusted revenue Gross annual revenue, net of provision for returns, cancellations, etc., excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly.
business transformation objectives Aggregate achievement of business objectives, defined for the fiscal year.
business unit A business or subsidiary of the Company.
Company John Wiley & Sons, Inc.
Executive Compensation and Development Committee (Committee) The committee of the Company's Board of Directors responsible for the review and approval of executive compensation.
financial goal A targeted level of attainment of a given business criteria.
financial results Actual achievement of Company financial goals for the plan year and the business financial results derived therefrom.
funding The percentage of financial results against financial goals deemed achieved for the Company, relative to the performance levels set, and achievement of the business transformation objectives defined for the year, used to determine the aggregate amount available for annual incentives to be allocated to participants under the plan.
objectives Assignment of strategic and measurable goals and objectives for each participant for the plan year, made by the President & CEO, and in the case of the President & CEO, the Committee. For participants who lead a business unit, objectives include achievement of business unit financial goals.
participant An employee of the Company selected to participate in the plan.
payout Actual gross dollar amount paid to a participant under the plan, if any, based on achievement of objectives within the context of business funding.
performance levels
threshold The minimum acceptable level of achievement of a financial goal in order to earn a payout, expressed as a percentage of target ( e.g., 95% of target).
target Achievement of the assigned financial goal-100%.
outstanding Superior achievement of a financial goal, earning the maximum payout, expressed as a percentage of target (e.g., 105% of target).
personal performance modifier The assessment of each participant’s objectives for the plan year, made by the President & CEO, and in the case of the President & CEO, the Committee, expressed as a percentage between 0 and 200%.
plan This FY 2024 Executive Annual Incentive Plan.
plan year The twelve-month period from May 1, 2023 to April 30, 2024, or a portion of this period, at the discretion of the Committee.
target incentive amount The amount that a participant is eligible to receive if financial goals are achieved at the target performance level and objectives are at 100%.
target incentive percent The percent applied to the participant's base salary to determine the target incentive amount for this plan.
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II.PLAN OBJECTIVES
The plan is intended to provide the officers and other key colleagues of the Company and of its subsidiaries, affiliates and certain joint venture companies, upon whose judgement, initiative and efforts the Company depends for its growth and for the profitable conduct of its business, with additional incentive to promote the success of the Company.
III.ELIGIBILITY
A participant is selected by the President & CEO and recommended for participation to the Committee, which has sole discretion for determining eligibility, from among those colleagues in key management positions deemed able to make the most significant contributions to the growth and profitability of the Company. The President and CEO of the Company is a participant. Designation of a participant eligible to receive an incentive hereunder for a particular plan year shall not require designation of such participant eligible to receive a payout in any subsequent plan year.
IV.PERFORMANCE MEASUREMENT
The plan uses two categories for performance measurement: Company financial performance and personal performance.
A.Financial Performance
1. The CEO recommends and the Committee adopts, in its sole discretion, financial goals and performance levels and business transformation objectives for the Company to be used in the plan year.
2. Each financial goal and aggregate business transformation objectives are assigned a weight, such that the sum of the weights of all financial goals and business transformation objectives equals 100%.
B.Personal Performance
1.Each participant’s objectives are determined at the beginning of the plan year by the participant and the President & CEO. The President & CEO’s objectives are determined by the President & CEO and the Committee.
2.Objectives may be revised during the plan year, as appropriate.
V.PERFORMANCE EVALUATION
A. Financial Performance
1.Actual financial results achieved by the Company will be determined at the end of the plan year, by comparing financial results with previously set financial goals. In addition, aggregate achievement of the business transformation objectives will be assessed by the Committee.
2.In determining the attainment of financial results, the impact of the following will be excluded from the financial results of any affected business unit:
a.asset write-downs
b.litigation or claim judgments or settlements
c.the effect of changes in tax law, accounting principles or methodology, or other laws or provisions affecting reported results
d.accruals for reorganization and restructuring programs
e.any non-recurring items as described in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to shareholders or other filings for the applicable year
f.acquisitions or divestitures
g.any non-required contributions to the Company pension plan
h.foreign exchange gains and losses
i.cash capital expenditures for facilities acquisition or construction
3.Funding
a.Funding under the plan is determined on a continuum, as follows:
1.For performance below the threshold level, the funding is zero.
2.For performance at the threshold level, the funding is 50%.
3.For performance between the threshold and target levels, the funding is between 50% and 100%, determined on a pro-rata basis.
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4.For performance at the target level, the funding is 100%.
5.For performance between the target and outstanding levels, the funding is between 100% and 150%, determined on a pro-rata basis.
6.For performance at or above the outstanding level, the funding is 150%.
b.In the case where the Company misses threshold performance for one or both financial goals, but achieves 90% of the Company’s full-year operating income target, a minimum funding of 25% will be available for payout under the plan.
B.Personal Performance
1.At the end of the plan year, each participant’s performance will be measured by achievement of his/her objectives, with a personal performance modifier in the range of 0-200%. This assessment will be made by the President & CEO, and in the case of the President & CEO, by the Committee. The personal performance modifier is multiplied by the funding to determine payout under the plan.
2.The Committee approves payouts made to all participants under the plan.
VI. PAYOUTS
A.Payouts will be made within 90 days after the end of the plan year.
B.In the event of a participant's death, disability, retirement or leave of absence prior to the payout for the plan year, the payout, if any, will be determined by the Committee. Any such payout will be calculated as noted in Section V.
C.A participant must be actively employed by the Company on the date of payout without having given notice or having been given notice of termination to be eligible for a payout for the plan year. Exceptions to this provision shall be made with the approval of the Committee, in its sole discretion.
D.A participant who is hired or promoted into an eligible position during the plan year may receive a prorated payout as determined by the Committee, in its sole discretion.
VII. ADMINISTRATION AND OTHER MATTERS
A.The plan will be administered by the Committee, which shall have authority in its sole discretion to interpret and administer this plan, including, without limitation, all questions regarding eligibility and status of any participant, and no participant shall have any right to receive a payout or payment of any kind whatsoever, except as determined by the Committee hereunder.
B.The Company will have no obligation to reserve or otherwise fund in advance any amount which may become payable under the plan.
C.In the event that the Company is required to file a restatement of its financial results due to fraud, gross negligence or intentional misconduct by one or more employees, and/or material non-compliance with Securities laws, the Company will require reimbursement of any annual incentive compensation awarded to all participants in the amount by which such compensation exceeded any lower payment that would have been made based on the restated financial results, for the fiscal year in which the restatement was required, to the full extent required or permitted by law.
If a participant is directly responsible for or involved in fraud, gross negligence or intentional misconduct that causes the Company to file a restatement of its financial results, the Company will require reimbursement of all annual incentive compensation awarded to such participant, for the fiscal year in which the restatement was required, to the full extent required or permitted by law.
The action permitted to be taken by the Company under this section (C) is in addition to, and not in lieu of, any and all other rights of the Company and/or the Committee under applicable law and shall apply notwithstanding anything to the contrary in this plan.
D.This plan may not be modified or amended except with the approval of the Committee.
E.In the event that any provision of this plan shall be considered illegal or invalid for any reason, such illegality and invalidity shall not affect the remaining provisions of the plan, but shall be fully severable, and the plan shall be construed and enforced as if such illegal or invalid provision had never been contained therein.
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JOHN WILEY & SONS, INC.
FY 2024 EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
May 1, 2023
CONTENTS
| Section | Subject | Page | ||||||
| I. | Definitions | 2 | ||||||
| II. | Plan Objectives | 3 | ||||||
| III. | Eligibility | 3 | ||||||
| IV. | Performance Targets and Measurement | 4 | ||||||
| V. | Performance Evaluation | 4 | ||||||
| VI. | Performance Share Unit Award Provisions | 5 | ||||||
| VII. | Restricted Share Units | 5 | ||||||
| VIII. | Payouts | 5 | ||||||
| IX. | Administration and Other Matters | 7 | ||||||
1
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless the context clearly indicates otherwise, these words and phrases are considered to be defined terms and appear in this document in italicized print:
business criteria An indicator of financial performance, consistent with Section 9.1 of the shareholder plan. The following business criteria are used in this plan:
adjusted revenue Gross annual revenue, net of provision for returns, cancellations, etc., excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly for each year of the plan period
adjusted EBITDA Adjusted operating income excluding depreciation expense and amortization of intangible and product development assets in the Company’s Summary of Operations, excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly, for for each year of the plan period
business unit The Company, a business or subsidiary of the Company, or a global unit of the Company.
Company John Wiley & Sons, Inc.
Executive Compensation and Development Committee (Committee) The committee of the Company’s Board of Directors responsible for the review and approval of executive compensation.
financial goal A targeted level of attainment of a given business criteria.
financial results The published, audited financial results of the Company.
participant An employee of the Company selected to participate in the plan.
performance levels
threshold The minimum acceptable level of achievement of a financial goal in order to earn a payout, expressed as a percentage of target e.g., 80% of target).
target range Achievement of the assigned financial goal within a range around 100%. For adjusted revenue, the target range is between 98% and 102% of the assigned financial goal. For adjusted EBITDA, the target range is between 96% and 104% of the assigned financial goal.
outstanding superior achievement of a financial goal, earning the maximum payout, expressed as a percentage of target (e.g., 120% of target).
performance share unit The contingent right given by the Company to a participant to receive a share of stock issued pursuant to this plan and the shareholder plan that is subject to forfeiture. In the shareholder plan, such stock is referred to as “Performance Awards.”
plan This FY 2024 Executive Long Term Incentive Plan.
plan-end adjusted performance share unit award The number of performance share units earned by a participant at the end of the plan period after adjustments, if any, are made, as set forth in Sections V and VIII.
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plan period The three year period from May 1, 2023 to April 30, 2026, or a portion of this period, at the discretion of the Committee.
restricted share unit The contingent right given by the Company to a participant to receive a share of stock issued pursuant to this plan and the shareholder plan that is subject to forfeiture. In the shareholder plan, such stock is referred to as “Restricted Stock Units.”
shareholder plan The John Wiley & Sons, Inc. 2022 Omnibus Stock Plan and Long-Term Incentive Plan.
stock Class A Common Stock (par value $1 per share) of the Company.
target award The targeted number of performance share units that a participant is eligible to receive if 100% of his/her applicable performance targets are achieved and the participant remains employed by the Company through the June 30, 2026 vesting date, except as otherwise provided in Section VIII.
II. PLAN OBJECTIVES
The plan is intended to provide the officers and other key colleagues of the Company and of its subsidiaries, affiliates and certain joint venture companies, upon whose judgment, initiative and efforts the Company depends for its growth and for the profitable conduct of its business, with additional incentive to promote the success of the Company.
III. ELIGIBILITY
A participant is selected by the President and CEO and recommended for participation to the Committee, which has sole discretion for determining eligibility, from among those colleagues in key management positions deemed able to make the most significant contributions to the growth and profitability of the Company. The President and CEO of the Company is a participant. Designation of a participant eligible to receive an incentive hereunder for a particular plan year shall not require designation of such participant eligible to receive a payout in any subsequent plan year.
IV. PERFORMANCE TARGETS AND MEASUREMENT
The President and CEO recommends and the Committee adopts, in its sole discretion, financial goals and performance levels for each participant to be used in the plan period.
A.Each financial goal is assigned a weight, such that the sum of the weights of all financial goals equals 100%.
B.Each financial goal is assigned performance levels (threshold, target and outstanding).
V. PERFORMANCE EVALUATION
A.Financial Results
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1.At the end of the plan period, financial results are compared with financial goals to determine the payout for each participant.
2.In determining the attainment of financial goals, the impact of any of the events (a) through (o) listed in Section 9.1.(b) of the shareholder plan will be excluded from the financial results.
3.Award Determination
Achievement of threshold performance of at least one financial goal is necessary for a participant to receive a payout.
The unweighted payout factor for each financial goal is determined as follows:
oFor performance below the threshold level, the payout factor is zero.
oFor performance at the threshold level, the payout factor is 50%.
oFor performance between the threshold and target range levels, the payout factor is between 50% and 85% for adjusted revenue, and between 50% and 88% for adjusted EBITDA, determined on a pro-rata basis.
oFor performance at the target range level, the payout factor is 100%.
oFor performance between the target range and outstanding levels, the payout factor is between 130% and 200% for adjusted revenue, and between 125% 1 and 200% for adjusted EBITDA, , determined on a pro-rata basis.
oFor performance at or above the outstanding level, the payout factor is 200%.
A participant’s plan-end adjusted performance share unit award is determined as follows:
oEach financial goal’s unweighted payout factor determined above times the weighting of that financial goal equals the weighted payout factor for that financial goal
oThe sum of the weighted payout factors for the financial goals equals the payout factor for that business unit.
oThe participant’s target award times the business unit payout factor equals the participant’s total plan-end adjusted performance share unit award.
o The Committee may, in its sole discretion, reduce a participant’s payout to any level it deems appropriate.
VI. PERFORMANCE SHARE UNIT AWARD PROVISIONS
The plan-end adjusted performance share unit award will be compared to the target award, and the appropriate amount of performance share units will be awarded or forfeited, as required, to bring the performance share unit award to the number of shares designated as the plan-end adjusted performance share unit award.
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VII. RESTRICTED SHARE UNITS
The participant may be granted restricted share units pursuant to the shareholder plan at the beginning of the plan period, representing another incentive vehicle by which the participant is able to share in the long-term growth of the Company. The terms and conditions of the restricted share unit award are contained in the shareholder plan and in the restricted share unit award grant agreement.
VIII. PAYOUTS
A.Normal Payout. Plan-end adjusted performance share units awards will be made within 2-1/2 months after the end of the plan period.
B.Resignation or Termination with Cause. Except as otherwise provided in this Section VIII or in a written agreement approved by the Committee, a participant who resigns, or whose employment is terminated by the Company, with Cause before the award is vested, will forfeit the right to receive an award.
C.Death or Disability. Solely to the extent provided by the Committee in the award summary or in a written agreement, in the event of a participant’s death or disability while in employment prior to the end of the plan period, the participant (or, in the event of death, his or her estate) will receive a prorated plan-end adjusted performance share unit award which shall be paid out in shares based upon actual performance upon the conclusion of the plan period, within 2-1/2 months after the end of the plan period. “Disability” for this purpose will be determined by the Committee under a definition permitted under Code Section 409A.
D.Retirement or Termination without Cause. Except as otherwise provided in this Section VIII or in a written agreement approved by the Committee, in the event of a participant’s retirement as that term is defined in the shareholder plan, or if a participant’s employment is terminated by the Company without Cause, prior to the end of the plan period, and the participant has been an active participant in the performance period for at least one (1) year or more, the participant will receive a prorated plan-end adjusted performance share unit award (as determined by the Committee) which shall be paid out in shares based upon actual performance upon the conclusion of the plan period, within 2-1/2 months after the end of the plan period.
E.Change of Control. In the event of a Change of Control, as that term is defined in the shareholder plan, in cases where:
the acquiring company is not publicly traded, or
where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
participant’s employment is terminated due to a "without cause termination" or "constructive discharge" within twenty-four months following a change of control, all then outstanding “target” performance share units shall immediately become fully vested, and all plan-end adjusted performance share unit awards that are not yet vested shall immediately become fully vested.
5
F.Performance Share Units Earned for Completed Plan Periods. In the event of the participant’s death, Disability, or retirement as that term is defined in the shareholder plan or performance share unit grant agreement, following the end of the plan period but prior to full vesting of the plan-end adjusted performance share unit awards, such performance share units shall immediately become fully vested.
G.Change in Position. A participant who is hired or promoted into an eligible position during the plan period may receive a prorated plan-end adjusted performance share unit award as determined by the Committee, in its sole discretion.
IX. ADMINISTRATION AND OTHER MATTERS
A.The plan will be administered by the Committee, which shall have authority in its sole discretion to interpret and administer this plan, including, without limitation, all questions regarding eligibility and status of any participant, and no participant shall have any right to receive a payout or payment of any kind whatsoever, except as determined by the Committee hereunder.
B.The Company will have no obligation to reserve or otherwise fund in advance any amount which may become payable under the plan.
C.In the event that the Company is required to file a restatement of its financial results due to fraud, gross negligence or intentional misconduct by one or more employees and/or material non-compliance with Securities laws, the Company will cancel the unvested performance share units previously granted to all participants in the amount by which such shares exceeded any lower number of shares that would have been earned based on the restated financial results, for the plan cycle in which the restatement was required, and if applicable, any gain associated with the award for that plan cycle will be repaid to the Company by the participant in the amount by which such gain exceeded any lower gain that would have been made based on the restated financial results, to the full extent required or permitted by law. This provision extends beyond the clawback requirements under Sarbanes-Oxley that are limited to our Chief Executive Officer and Chief Financial Officer.
If a participant is directly responsible for or involved in fraud, gross negligence or intentional misconduct that causes the Company to file a restatement of its financial results, the Company will cancel the unvested performance share units previously granted to such participant, for the plan cycle in which the restatement was required, and if applicable, any gain associated with the award for that plan cycle will be repaid to the Company by the participant, to the full extent required or permitted by law.
The action permitted to be taken by the Company under this section (c) is in addition to, and not in lieu of, any and all other rights of the Company and/or the Committee under applicable law and shall apply notwithstanding anything to the contrary in this plan.
D.This plan may not be modified or amended except with the approval of the Committee, in accordance with the provisions of the shareholder plan.
6
E.In the event of a conflict between the provisions of this plan and the provisions of the shareholder plan, the provisions of the shareholder plan shall apply.
F.In the event that any provision of this plan shall be considered illegal or invalid for any reason, such illegality and invalidity shall not affect the remaining provisions of the plan, but shall be fully severable, and the plan shall be construed and enforced as if such illegal or invalid provision had never been contained therein.
G.No awards of any type under this plan shall be considered as compensation for purposes of defining compensation for retirement, savings or supplemental executive retirement plans, statutory indemnity or any other benefit.
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RESTRICTED SHARE UNIT GRANT AGREEMENT
UNDER THE EXECUTIVE LONG-TERM INCENTIVE PLAN,
PURSUANT TO THE 2022 OMNIBUS STOCK PLAN AND LONG-TERM INCENTIVE PLAN
TO: <<Participant>>
To recognize and reward your contribution toward the long-term success of John Wiley & Sons, Inc. (Company), you have been granted this restricted share unit award (Award) under the Executive Long-Term Incentive Plan or the Business Officer Equity Program (together herein defined as Program), pursuant to the Company’s 2022 Omnibus Stock Plan and Long-Term Incentive Plan (Plan). The Award represents the right to receive shares of the Company’s Class A Common Stock (Shares) that are subject to the vesting conditions set forth in this agreement (Agreement).
The details of your Award are summarized below:
Grant ID: <<Grant ID>>
Grant Date: <<Grant Date>>
Number of Restricted Share Units: <<Number of RSUs>>
Vesting Schedule: 25% on April 30, 2024, 25% on April 30, 2025, 25% on April 30, 2026, and 25% on April 30, 2027 except as otherwise provided in Section 2.
The terms of the Award are as set forth in this Agreement and in the Plan, a copy of which is available on the UBS One Source Website. The Plan is incorporated into this Agreement by reference, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
1.Issuance of Shares and Shareholder Rights. You shall not have any right in, to, or with respect to any of the Shares (including any voting rights or rights with respect to dividends paid on the Common Stock) issuable under the Award until the Award is settled by the issuance of such Shares to you. The restricted share units shall vest in accordance with the above Vesting Schedule. One Share shall be issuable for each restricted share unit that vests on such vesting date subject to the terms and provisions of the Plan and this Agreement. On or promptly following those dates, the Company shall transfer such Shares to you upon satisfaction of any required minimum tax withholding obligations. Following settlement of the Award, and upon satisfaction of all minimum tax withholding obligations, you become a shareholder of record, and shall receive voting rights and rights with respect to dividends paid thereafter on the Shares awarded.
2.Termination of Employment.
a.Resignation or Termination with Cause. Except as otherwise provided in this Section or in a written agreement approved by the Executive Compensation and Development Committee (Committee), if you resign, or if your employment is terminated by the Company with Cause before the Award vests, you shall forfeit the right to receive an Award.
b.Termination without Cause or Constructive Discharge. If your employment is terminated by the Company without Cause or Constructive Discharge before the Award vests, your Award shall continue to vest as provided in the above Vesting Schedule.
c.Death or Disability. In the event of your death or Disability while in employment prior to the vesting of the Shares, all unvested Shares shall immediately become fully vested and
payable to you (or, in the event of your death, your estate). “Disability” for this purpose shall be determined by the Committee pursuant to Section 22(e) (3) of the Code.
d.Change in Control. In the event of a Change in Control, as that term is defined in the Plan, in cases where:
i.the acquiring company is not publicly traded, or
ii.where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
iii.your employment is terminated due to a without Cause termination or Constructive Discharge within twenty-four (24) months following a Change in Control where the awards were assumed or replaced,
all unvested Shares granted pursuant to this Agreement shall immediately become fully vested and settled through the issuance of Shares promptly following such event.
Cause is defined as: (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) your gross negligence in the performance of your material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.
Constructive Discharge is defined as: (A) any material reduction of your base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.
3.Restrictions. Except as otherwise provided for in this Agreement or in the Plan, the restricted share units or rights granted hereunder may not be sold, pledged or otherwise transferred.
4.Non-Compete, Non-Solicitation
a.During your employment with the Company, you have and will become familiar with the Company’s trade secrets, information related to the operations, products and services of the Company, and with other Confidential Information concerning the Company, its subsidiaries, affiliates, and companies acquired by the Company. Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any Competing Business.
A “Competing Business” is any person or entity that (i) conducts or is planning to conduct a business similar to and/or in competition with any Company business unit to which you rendered services during the two year period prior to the date at issue or (ii) creates, develops, distributes, produces, offers for sale or sells a product or service that can be used as a substitute for, or is generally intended to satisfy the same customer needs for, any one or more products or services created, developed, distributed, produced or offered for sale or sold by the Company business unit to which you rendered services during the two year period prior to the date at issue. In the event that you have an enterprise role at the Company, you will be deemed to render services to all Company business units.
b.During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any affiliate to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee thereof, (ii) solicit, induce, recruit or hire any person who was an employee of the Company or any affiliate at any time during your employment with the Company, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any affiliate to cease doing business with the Company or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and the Company or any affiliate (including, without limitation, making any negative statements or communications about the Company or its affiliates).
c.Forfeiture of Awards. By accepting the Award, you expressly agree and acknowledge that the forfeiture provisions will apply if the Committee determines, in its sole judgment, that you have engaged in an act that violates paragraph (a) and/or (b). In such a determination, your outstanding Restricted Share Units will immediately be rescinded, and you will forfeit any rights you have with respect to these Restricted Share Units as of the date of the Committee’s determination. In addition, you hereby agree and promise immediately to deliver to the Company an amount equal to the value of any Restricted Share Units you received under this Award during the period beginning twelve (12) months prior to your Termination of Employment and ending on the date of the Committee’s determination.
5.Taxes.
a.Generally. You are ultimately liable and responsible for all taxes owed in connection with the Award and dividend payments arising from this Award, regardless of any action the Company or UBS takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor UBS makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares issuable pursuant to the Award. The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability. The Company may refuse to issue any Shares to you until you satisfy the tax withholding obligation. For purposes hereof, “UBS” includes the Plan third party administrator and any successor thereto.
b.Payment of Withholding Taxes. Prior to each vesting date in connection with the Award that results in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any social tax obligation, you must arrange for the satisfaction of the minimum amount of such tax withholding obligation, as required, in a manner acceptable to the Company. You are responsible for obtaining professional advice as appropriate. Prior to the vesting dates in connection with the Award, you shall be notified by UBS of any minimum tax withholding obligation. You have the option of satisfying your minimum tax withholding obligation in one of two ways:
i.By Surrendering Shares. Unless you choose to satisfy the minimum tax withholding obligation by some other means in accordance with clause (ii) below, your acceptance of this Award constitutes your instruction and authorization to the Company and UBS to withhold a whole number of Shares from those Shares issuable to you as the Company and UBS determine to be appropriate to satisfy your minimum tax withholding obligation on each vesting date.
ii.By Check (U.S. participants only), Wire Transfer or Other Means. You may elect to satisfy your minimum tax withholding obligation by remitting to UBS as instructed an amount that the Company and UBS determine is sufficient to satisfy the minimum tax withholding obligation.
6.Plan Information. You agree to receive stockholder information, including copies of any annual report, proxy statement and other periodic reports, from the Investor Relations section of http://www.wiley.com. You acknowledge that copies of the Plan and stockholder information are available upon written or telephonic request to the Corporate Secretary.
7.Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Agreement and accepting the Award, you acknowledge that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Award is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award shall be settled, shall be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of this Award on an ongoing basis is an extraordinary item which is outside the scope of your terms of employment or your employment contract, if any; (f) the Award is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) the future value of the Common Stock subject to the Award is unknown and cannot be predicted with certainty, (h) neither the Plan, the Award nor the issuance of the Shares confers upon you any right to continue in the employ of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the right of the Company or any Subsidiary to terminate your employment or other relationship with the Company or any Subsidiary, as the case may be, at any time.
8.Acceptance and Acknowledgment. I accept and agree to the terms of the restricted share unit Award described in this Agreement and in the Plan, acknowledge receipt of a copy of this Agreement and the Plan, and acknowledge that I have read them carefully and that I fully understand their contents.
NON-QUALIFIED PREMIUM STOCK OPTION GRANT AGREEMENT
PURSUANT TO THE 2022 OMNIBUS STOCK PLAN AND LONG-TERM INCENTIVE PLAN
TO: <<Participant>>
To recognize and reward your contribution toward the long-term success of John Wiley & Sons, Inc. (Company), and in consideration of the services to be rendered by you to the Company, you have been granted this extraordinary non-qualified premium stock option award (Option), pursuant to the Company’s 2022 Omnibus Stock Plan and Long-Term Incentive Plan (Plan). The Option represents the right for you to purchase from the Company shares of the Company’s $1 par value Class A Common Stock (Shares) at the Grant Price noted below, subject to the vesting conditions set forth in this agreement (Agreement). The Option is intended to be a non-qualified Stock Option and not an incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code.
The details of your Option are summarized below:
Grant ID: <<Grant ID>>
Grant Date: <<Grant Date>>
Number of Non-Qualified Premium Stock Options: <<Number of Options>>
Grant Price: $35
The Options will become vested and exercisable according to the following schedule: 10% on <<Vest Date 1>>, 20% on <<Vest Date 2>>, 30% on <<Vest Date 2>> and 40% on <<Vest Date 2>>, except as otherwise provided in Section 2.
Expiration Date: <<Expiration Date>>
The terms of this Option are as set forth in this Agreement and in the Plan, a copy of which is available on the UBS One Source Website. The Plan is incorporated into this Agreement by reference, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern. The express terms contained in this Agreement exclusively govern the vesting schedule and conditions for this Option and this Option is expressly limited to the vesting term and schedule contained in this Agreement which supersedes any additional, different or contrary terms that may be contained in any employment letter, employment agreement or addendum.
1.Issuance of Shares and Shareholder Rights. You shall not have any right in, to, or with respect to any of the Shares (including any voting rights or rights with respect to dividends paid on the Common Stock) issuable under this Agreement until you exercise a vested Option and purchase the Shares and such Shares are settled by issuance to you. The Option shall vest in accordance with the above Vesting Schedule. One Share shall be issuable for each Option you exercise, subject to the terms and provisions of the Plan and this Agreement. On or promptly following the date you elect to exercise the Option, the Company shall transfer such Shares to you upon satisfaction of any required minimum tax withholding obligations. Following settlement of the Option, and upon satisfaction of all minimum tax withholding obligations, you become a shareholder of record, and shall receive voting rights and rights with respect to dividends paid thereafter on the Shares purchased.
2.Termination of Employment.
a.Retirement, Resignation or Termination with or without Cause or Constructive Discharge. Except as otherwise expressly provided in this Section, or in a written agreement approved by the Executive Compensation and Development Committee (Committee), vested Options may be exercised and Shares may be purchased only while you are employed by the Company, or with respect only to vested Options, within 90 days after your retirement, resignation, or termination without Cause or Constructive Discharge. If your employment is terminated by the Company with Cause, vested Options shall be forfeited and cancelled and may not be exercised after the notice of termination.
All unvested Options shall be forfeited and cancelled upon your retirement, resignation, or termination with or without Cause or Constructive Discharge.
All unvested Options shall be forfeited and cancelled upon your retirement, resignation, or termination with or without Cause or Constructive Discharge.
b.Death or Disability. In the event of your death or Disability while in employment prior to the vesting of the Option, all unvested Options shall immediately become fully vested and may be exercised by you (or, in the event of your death, your estate) for up to 12 months following the date of death or Disability. “Disability” for this purpose shall be determined by the Committee pursuant to Section 22(e) (3) of the Code.
c.Change in Control. In the event of a Change in Control, as that term is defined in the Plan, in cases where:
i.the acquiring company is not publicly traded, or
ii.where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
iii.your employment is terminated due to a without Cause termination or Constructive Discharge within twenty-four (24) months following a Change in Control where the awards were assumed or replaced,
all unvested Options granted pursuant to this Agreement shall immediately become fully vested and may be exercised for up to 90 days.
Cause is defined as: (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) your gross negligence in the performance of your material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.
Constructive Discharge is defined as: (A) any material reduction of your base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.
Retirement is defined as a participant’s retirement after attaining a minimum of age 55 with 10 or more years of continuous employment with the Company, or any Subsidiary or Affiliate.
3.Restrictions. Except as otherwise provided for in this Agreement or in the Plan, Option granted hereunder may not be sold, pledged or otherwise transferred.
4.Non-Compete, Non-Solicitation
a.During your employment with the Company, you have and will become familiar with the Company’s trade secrets, information related to the operations, products and services of the Company, and with other Confidential Information concerning the Company, its subsidiaries, affiliates, and companies acquired by the Company. Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any Competing Business.
A “Competing Business” is any person or entity that (i) conducts or is planning to conduct a business similar to and/or in competition with any Company business unit to which you rendered services during the two year period prior to the date at issue or (ii) creates, develops, distributes, produces, offers for sale or sells a product or service that can be used as a substitute for, or is generally intended to satisfy the same customer needs for, any one or more products or services created, developed, distributed, produced or offered for sale or sold by the Company business unit to which you rendered services during the two year period prior to the date at issue. In the event that you have an enterprise role at the Company, you will be deemed to render services to all Company business units.
b.During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any affiliate to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee thereof, (ii) solicit, induce, recruit or hire any person who was an employee of the Company or any affiliate at any time during your employment with the Company, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any affiliate to cease doing business with the Company or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and the Company or any affiliate (including, without limitation, making any negative statements or communications about the Company or its affiliates).
c.Forfeiture of Awards. By accepting the Option, you expressly agree and acknowledge that the forfeiture provisions will apply if the Committee determines, in its sole judgment, that you have engaged in an act that violates paragraph (a) and/or (b). In such a determination, your outstanding Options will immediately be rescinded, and you will forfeit any rights you have with respect to these Options as of the date of the Committee’s determination. In addition, you hereby agree and promise immediately to deliver to the Company, an amount equal to the value of any Options you received under this award during the period beginning twelve (12) months prior to your Termination of Employment and ending on the date of the Committee’s determination.
5.Taxes.
a.Generally. You are ultimately liable and responsible for all taxes owed in connection with the Option, regardless of any action the Company or UBS takes with respect to any tax withholding obligations that arise in connection with the Option. Neither the Company nor UBS makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Option or the subsequent sale of Shares issuable pursuant to the Option. The Company does not commit and is under no obligation to structure the Option to reduce or eliminate your tax liability. The Company may refuse to issue any Shares to you until you satisfy the tax withholding obligation. For purposes hereof, “UBS” includes the Plan third party administrator and any successor thereto.
b.Payment of Withholding Taxes. Prior to purchase of the Option in connection with the award that results in any domestic or foreign tax withholding obligation, whether
national, federal, state or local, including any social tax obligation, you must arrange for the satisfaction of the minimum amount of such tax withholding obligation, as required, in a manner acceptable to the Company. You are responsible for obtaining professional advice as appropriate. You shall be notified by UBS of any minimum tax withholding obligation. You have the option of satisfying your minimum tax withholding obligation in one of two ways:
i.By Surrendering Shares. Unless you choose to satisfy the minimum tax withholding obligation by some other means in accordance with clause (ii) below, your acceptance of this Option constitutes your instruction and authorization to the Company and UBS to withhold a whole number of Shares from those Shares issuable to you as the Company and UBS determine to be appropriate to satisfy your minimum tax withholding obligation upon purchase of the Options pursuant to this award.
ii.By Check (U.S. participants only), Wire Transfer or Other Means. You may elect to satisfy your minimum tax withholding obligation by remitting to UBS as instructed an amount that the Company and UBS determine is sufficient to satisfy the minimum tax withholding obligation.
6.Plan Information. You agree to receive stockholder information, including copies of any annual report, proxy statement and other periodic reports, from the Investor Relations section of http://www.wiley.com. You acknowledge that copies of the Plan and stockholder information are available upon written or telephonic request to the Corporate Secretary.
7.Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Agreement and accepting the Option, you acknowledge that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Option is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award shall be settled, shall be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of this Option on an ongoing basis is an extraordinary item which is outside the scope of your terms of employment or your employment contract, if any; (f) the Option is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) the future value of the Common Stock subject to the Option is unknown and cannot be predicted with certainty, (h) neither the Plan, the Option nor the issuance of the Shares confers upon you any right to continue in the employ of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the right of the Company or any Subsidiary to terminate your employment or other relationship with the Company or any Subsidiary, as the case may be, at any time.
8.Acceptance and Acknowledgment. I accept and agree to the terms of the Option described in this Agreement and in the Plan, acknowledge receipt of a copy of this Agreement and the Plan, and acknowledge that I have read them carefully and that I fully understand their contents.
PERFORMANCE SHARE UNIT GRANT AGREEMENT
UNDER THE EXECUTIVE LONG-TERM INCENTIVE PLAN,
UNDER THE BUSINESS OFFICER EQUITY PROGRAM
PURSUANT TO THE 2022 OMNIBUS STOCK PLAN AND LONG-TERM INCENTIVE PLAN
TO: <<Participant>>
To recognize and reward your contribution toward the long-term success of John Wiley & Sons, Inc. (Wiley or Company), you have been granted this performance share unit award (Award) under the Executive Long-Term Incentive Plan or the Business Officer Equity Program (together herein defined as Program), pursuant to the Company’s 2022 Omnibus Stock Plan and Long-Term Incentive Plan (Plan). The Award represents the right to receive shares of the Company’s Class A Common Stock (Shares) that are subject to achievement of the performance criteria and of the vesting conditions set forth in this agreement (Agreement).
The details of your Award are summarized below:
Grant ID: <<Grant ID>>
Grant Date: <<Grant Date>>
Target Number of Performance Share Units: <<Number of RPSUs>>
Performance Period: Fiscal Years 2024-2026 (May 1, 2023-April 30, 2026)
Vesting Date: 100% on June 30, 2026, except as otherwise provided in Section 3.
The terms of the Award are as set forth in this Agreement and in the Plan, a copy of which is available on the UBS One Source Website. The Plan is incorporated into this Agreement by reference, which means that this Agreement is limited by and subject to the express terms and provisions of the Plan. In the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
1.Performance Criteria. The Performance Period for this Award is three (3) fiscal years covering three years of cumulative financial performance. Company Adjusted Revenue (weighted at 50%) and Company Adjusted EBITDA (weighted at 50%) are the financial performance measures used for this Performance Period. The non-achievement of the threshold performance level for one of the financial criteria does not preclude a payout for that other financial criterion.
Adjusted Revenue Gross annual Revenue, net of provision for returns, cancellations, etc., excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly for each year of the Performance Period.
Adjusted EBITDA Adjusted operating income excluding depreciation expense and amortization of intangible and product development assets in the Company’s Summary of Operations, excluding businesses held for sale, calculated consistently with the Company’s adjusted results reported publicly, for each year of the Performance Period.
The following table outlines the cumulative financial performance measures for this Performance Period.
| Performance Level for | Payout Range for Such Goal | ||||
| <Threshold | No performance share units are earned | ||||
| Threshold | 50% of the Target Number of performance share units are earned | ||||
| >Threshold and <Target Range | between 50% and 85% for Adjusted Revenue, and between 50% and 88% for adjusted EBITDA of the Target Number of performance share units are earned, equally weighted, on a pro-rata basis | ||||
| Target Range | the Target Number of performance share units are earned for achievement between +/- 2% of the Target Amount for Adjusted Revenue and +/- 4% of the Target Amount for Adjusted EBITDA | ||||
| >Target Range and <Outstanding | between 130% and 200% for Adjusted Revenue, and between 125% and 200% for Adjusted EBITDA of the Target Number of performance share units are earned, equally weighted, on a pro-rata basis | ||||
| Outstanding or above | 200% of the Target Number of performance share units are earned | ||||
Discretion: Regardless of any provision of the Plan to the contrary, the Committee will not exercise its discretion to adjust any award downward below the amount that would otherwise be payable except in extraordinary circumstances.
2.Issuance of Shares and Shareholder Rights. Following the Performance Period, any performance share units earned for the Performance Period remain subject to vesting as described herein. You shall not have any right in, to, or with respect to any of the Shares (including any voting rights or rights with respect to dividends paid on the Common Stock) issuable under the Award until the Award is settled by the issuance of such Shares to you. One Share shall be issuable for each performance share unit that vests on such vesting date subject to the terms and provisions of the Plan and this Agreement. On or promptly following that date, the Company shall transfer such Shares to you upon satisfaction of any required minimum tax withholding obligations. No fractional shares shall be issued under this Agreement. Following settlement of the Award, and upon satisfaction of all minimum tax withholding obligations, you become a shareholder of record, and shall receive voting rights and rights with respect to dividends paid thereafter on the Shares awarded.
3.Termination of Employment.
a.Resignation or Termination with Cause. Except as otherwise provided in this Section or in a written agreement approved by the Executive Compensation and Development Committee (Committee), if you resign, or if your employment is terminated by the Company with Cause before the Award is vested, you shall forfeit the right to receive an Award (whether or not the performance criteria have been met).
b.Retirement, Termination without Cause. If you Retire, or if your employment is terminated by the Company without Cause, and you have been an active participant in the Performance Period for at least one (1) year or more, you shall receive a prorated Award, which shall be paid out in Shares based upon actual performance upon the conclusion of the Performance Period.
c.Death or Disability. In the event of your death or Disability while in employment prior to the end of the Performance Period, you (or, in the event of your death, your estate) shall receive a prorated Award which shall be paid out in Shares based upon actual performance upon the conclusion of the Performance Period. In the event of your death or Disability following the end of the Performance Period but prior to full vesting of the Shares, you (or, in the event of your death, your estate) shall receive an Award which shall be paid out in Shares based upon actual performance upon the conclusion of the Performance Period. “Disability” for this purpose shall be determined by the Committee pursuant to Section 22(e) (3) of the Code.
d.Change in Control. In the event of a Change in Control, as that term is defined in the Plan, in cases where:
i.the acquiring company is not publicly traded, or
ii.where the acquiring company is publicly traded and the company does not assume or replace the outstanding equity, or
iii.your employment is terminated due to a without Cause termination or Constructive Discharge within twenty-four (24) months following a change in control where the awards were assumed or replaced,
the target Award (determined as if performance were at the target level) granted pursuant to this Agreement shall immediately become fully vested, and all Shares granted pursuant to this Agreement that are earned but unvested shall immediately become fully vested and settled through the issuance of Shares promptly following such event.
Cause is defined as: (A) your refusal or willful and continued failure to substantially perform your material duties to the best of your ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) your gross negligence in the performance of your material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) your conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; or (E) your material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions.
Constructive Discharge is defined as: (A) any material reduction of your base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, your duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of your primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for you.
Retirement is defined as a participant’s retirement after attaining a minimum of age 55 with 10 or more years of continuous employment with the Company, or any Subsidiary or Affiliate.
4.Restrictions. Except as otherwise provided for in this Agreement or in the Plan, the performance share units or rights granted hereunder may not be sold, pledged or otherwise transferred.
5.Non-Compete, Non-Solicitation
a.During your employment with the Company, you have and will become familiar with the Company’s trade secrets, information related to the operations, products and services of the Company, and with other Confidential Information concerning the Company, its subsidiaries, affiliates, and companies acquired by the Company. Therefore, during your employment period and for a period of one year thereafter, you agree that you shall not
directly or indirectly own any interest in, manage, control, participate in, consult with, or render services for any Competing Business.
A “Competing Business” is any person or entity that (i) conducts or is planning to conduct a business similar to and/or in competition with any Company business unit to which you rendered services during the two year period prior to the date at issue or (ii) creates, develops, distributes, produces, offers for sale or sells a product or service that can be used as a substitute for, or is generally intended to satisfy the same customer needs for, any one or more products or services created, developed, distributed, produced or offered for sale or sold by the Company business unit to which you rendered services during the two year period prior to the date at issue. In the event that you have an enterprise role at the Company, you will be deemed to render services to all Company business units.
b.During your employment and for a period of one year thereafter, you agree that you shall not directly, or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any affiliate to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company or any affiliate and any employee thereof, (ii) solicit, induce, recruit or hire any person who was an employee of the Company or any affiliate at any time during your employment with the Company, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company or any affiliate to cease doing business with the Company or such affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or business relation and the Company or any affiliate (including, without limitation, making any negative statements or communications about the Company or its affiliates).
c.Forfeiture of Awards. By accepting the Award, you expressly agree and acknowledge that the forfeiture provisions will apply if the Committee determines, in its sole judgment, that you have engaged in an act that violates paragraph (a) and/or (b). In such a determination, your outstanding Performance Share Units will immediately be rescinded, and you will forfeit any rights you have with respect to these Performance Share Units as of the date of the Committee’s determination. In addition, you hereby agree and promise immediately to deliver to the Company an amount equal to the value of any Performance Share Units you received under this Award during the period beginning twelve (12) months prior to your Termination of Employment and ending on the date of the Committee’s determination.
6.Clawback. In the event that the Company is required to file a restatement of its financial results due to fraud, gross negligence or intentional misconduct by one or more employees and/or material non-compliance with Securities laws, the Company shall cancel the unvested performance share units previously granted to you in the amount by which such performance share units exceed any lower number of performance share units that would have been earned based on the restated financial results, for the performance period in which the restatement was required, and if applicable, any gain associated with the Award for that performance period shall be repaid to the Company by you in the amount by which such gain exceeds any lower gain that would have been made based on the restated financial results, to the full extent required or permitted by law.
If you are directly responsible for or involved in fraud, gross negligence or intentional misconduct that causes the Company to file a restatement of its financial results, the Company shall cancel the unvested performance share units previously granted to you, for the performance period in which the restatement was required, and if applicable, any gain associated with the Award for that performance period shall be repaid to the Company by you, to the full extent required or permitted by law.
This Section 6 shall be deemed to be automatically revised if the Company amends its clawback policy, and such amended clawback policy shall apply in lieu hereof.
7.Taxes.
a.Generally. You are ultimately liable and responsible for all taxes owed in connection with the Award and dividend payments arising from this Award, regardless of any action the Company or UBS takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor UBS makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares issuable pursuant to the Award. The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability. The Company may refuse to issue any Shares to you until you satisfy the tax withholding obligation. For purposes hereof, “UBS” includes the Plan third party administrator and any successor thereto.
b.Payment of Withholding Taxes. Prior to each vesting date in connection with the Award that results in any domestic or foreign tax withholding obligation, whether national, federal, state or local, including any social tax obligation, you must arrange for the satisfaction of the minimum amount of such tax withholding obligation, as required, in a manner acceptable to the Company. You are responsible for obtaining professional advice as appropriate. Prior to the vesting dates in connection with the Award, you shall be notified by UBS of any minimum tax withholding obligation. You have the option of satisfying your minimum tax withholding obligation in one of two ways:
i.By Surrendering Shares. Unless you choose to satisfy the minimum tax withholding obligation by some other means in accordance with clause (ii) below, your acceptance of this Award constitutes your instruction and authorization to the Company and UBS to withhold a whole number of Shares from those Shares issuable to you as the Company and UBS determine to be appropriate to satisfy your minimum tax withholding obligation on each vesting date.
ii.By Check (U.S. participants only), Wire Transfer or Other Means. You may elect to satisfy your minimum tax withholding obligation by remitting to UBS as instructed an amount that the Company and UBS determine is sufficient to satisfy the minimum tax withholding obligation.
8.Plan Information. You acknowledge that you have received the Fiscal Year 202342026 (May 1, 2023-April 30, 2026) performance criteria and the Program summary from the Company, and you agree to receive stockholder information, including copies of any annual report, proxy statement and other periodic reports, from the Investor Relations section of http://www.wiley.com. You acknowledge that copies of the Plan and stockholder information are available upon written or telephonic request to the Corporate Secretary.
9.Limitation on Rights; No Right to Future Grants; Extraordinary Item. By entering into this Agreement and accepting the Award, you acknowledge that: (a) the Plan is discretionary and may be modified, suspended or terminated by the Company at any time as provided in the Plan; (b) the grant of the Award is a one-time benefit and does not create any contractual or other right to receive future grants of awards or benefits in lieu of awards; (c) all determinations with respect to any such future grants, including, but not limited to, the times when awards shall be granted, the number of shares subject to each award, the award price, if any, and the time or times when each award shall be settled, shall be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of this Award on an ongoing basis is an extraordinary item which is outside the scope of your terms of employment or your employment contract, if any; (f) the Award is not part of normal or expected compensation for any purpose, including without limitation for calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) the future value of the Common Stock subject to the Award is unknown and cannot be predicted with certainty, (h) neither the Plan, the Award nor the issuance of the Shares confers upon you any right to continue in the employ of (or any other relationship with) the Company or any Subsidiary, nor do they limit in any respect the
right of the Company or any Subsidiary to terminate your employment or other relationship with the Company or any Subsidiary, as the case may be, at any time.
10.Acceptance and Acknowledgment. I accept and agree to the terms of the Performance Share Unit Award described in this Agreement and in the Plan, acknowledge receipt of a copy of this Agreement, the Plan and the applicable Program Summary, and acknowledge that I have read them carefully and that I fully understand their contents.
Executive Severance Plan (“ESP”)
Plan Administration:
•For Chief Executive Officer (CEO) and Executive and Senior Vice Presidents reporting to the CEO – By the Executive Compensation and Development Committee (“Committee”)
•For Covered Participants not reporting to the CEO – By the Executive Vice President and Chief People Officer (CPO) and the CEO
Effective Date: June 20, 2016, revised September 22, 2023
Covered Participants (“Executive”): U.S-based Executives (as set out below) who do not have employment agreements, subject to approval by the Committee, or in the case of Tier III by the CPO and the CEO
•Tier I Executive –Chief Executive Officer (CEO)
•Tier II Executive–Executive Vice Presidents (EVPs)
•Tier III Executive –Senior Vice Presidents (SVPs), Group Vice Presidents (GVPs) and Corporate Vice Presidents (CVPs)
Severance Trigger: Involuntary termination without “Cause,” whether or not in connection with a change in control (“CIC”)1, and for Tiers I and II, “constructive discharge.” Involuntary termination means any termination of employment of an Executive initiated by the Company because the Company determines in its sole discretion to eliminate or otherwise restructure the Executive’s position and such termination is (a) not for Cause as defined herein; or (b) due to the sale of a facility, division, or subsidiary and the Executive is not offered Substantially Equivalent Employment by the purchaser.
If in connection with a CIC, “constructive discharge” also applies to Tier III.
1 For purposes of this Executive Severance Plan, “Change in Control” is used as defined in the 2022 Omnibus Stock and Long-Term Incentive Plan.
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Definition of Cause: (A)Executive’s refusal or willful and continued failure to substantially perform Executive’s material duties to the best of Executive’s ability (for reasons other than death or disability), in any such case after written notice thereof and your failure to remedy such refusal or failure; (B) Executive’s gross negligence in the performance of Executive’s material duties; (C) any act of fraud, misappropriation, material dishonesty, embezzlement, willful misconduct or similar conduct; (D) Executive’s conviction of or plea of guilty or nolo contendere to a felony or any crime involving moral turpitude; (E) Executive’s engagement in conduct that brings or is reasonably likely to bring the Company negative publicity or into public disgrace, embarrassment or disrepute; or (F) Executive’s material and willful violation of any of the Company’s reasonable rules, regulations, policies, directions and restrictions. | ||
Definition of Constructive Discharge: (A)any material reduction of Executive’s base salary or total compensation opportunity other than a general reduction in base salary and/or total compensation opportunity that affects all substantially similar executives in substantially the same proportion; (B) a material and adverse change to, or a material reduction of, Executive’s duties and responsibilities to the Company (other than temporarily while you are physically or mentally incapacitated, or as required by applicable law); or (C) the relocation of Executive’s primary office to any location more than fifty (50) miles from the Company’s principal executive offices, resulting in a materially longer commute for Executive. An Executive cannot terminate their employment based on Constructive Discharge unless they have provided written notice to the Company of the existence of the circumstances providing grounds for termination based on Constructive Discharge within 30 days of the initial existence of such grounds and the Company has had at least 30 days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate their employment based on Constructive Discharge within 60 days after the first occurrence of the applicable grounds, then the Executive will be deemed to have waived their right to terminate their employment based on Constructive Discharge.
Definition of Substantially Equivalent Employment: means, as compared to Executive’s employment with the Company, employment offered with (a) the same or greater rate of base pay or salary, (b) the same or less than a 50% change in job role and responsibilities, (c) equivalent or higher bonus opportunity as the bonus opportunity for the year preceding the year in which the termination occurs, (d) an
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opportunity to participate in a benefits plan; and (e) a principal work location that is no more than fifty (50) miles from Executive’s principal work location immediately prior to termination. If the Executive is terminated for "Cause" as defined herein, the Executive will not be eligible to receive Severance Pay or Benefits.
Severance Benefits Absent a CIC: In the event a participant is involuntarily terminated without “cause,” or “constructively discharged” if a Tier I or II participant, the following benefits would be provided:
•Cash Severance–To be paid in a lump sum:
•Tier I – 24 months of base salary
•Tier II – One month of base salary for each year of employment, subject to a minimum of 12 months and a maximum of 18 months
•Tier III – One month of base salary for each year of employment, subject to a minimum of 6 months and a maximum of 12 months
•Pro Rata Bonus – If Executive is active for more than 9 months of the fiscal year, they would be entitled to a pro rata bonus based on actual performance and paid at the normal time
•Equity Treatment– For time-based awards, forfeiture per the award agreements; for performance share units (“PSUs”), prorated award based on actual performance and paid at the normal time
•Benefits Continuation– Continued health insurance for the number of months of the cash severance period, but not to exceed the 18-month COBRA period
•Premiums paid will be treated as taxable income; coverage ceases upon availability of coverage from new employment
Regardless of the amount of Executive’s severance, such severance benefits will be reduced by:
(a)The amount of any other severance or termination payments (if any) payable by the Company to the Executive under an employment contract or other arrangement on account of their employment with the Company; and
(b)Any payments required to be paid by the Company to the Executive under any local, federal or state law, including without limitation the Worker Adjustment retraining Notification Act of 1988, as amended, and statutory severance.
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Severance Benefits in Connection With a CIC: In the event a participant is involuntarily terminated without “cause” or “constructively discharged” within 24 months of a CIC, the following benefits would be provided:
•Cash Severance–The maximum severance amount for each tier absent a CIC calculated including current target bonus (disregarding for this purpose any reduction that forms the basis for a constructive discharge event) and paid in a lump sum
•Pro-Rata Bonus–Pro rata bonus based on target and paid with cash severance
•Benefits Continuation–Same as absent a CIC
•Equity Treatment–Full acceleration of all unvested awards with PSUs vested at target
•Excise Tax Treatment–If severance payments and benefits result in an “excess parachute payment” triggering excise tax, “best net” treatment would apply, under which the parachute payment is either cut back to a level that does not trigger excise tax or the payment is made in full, depending on which approach delivers the highest after-tax value to the Executive.
Conditions to Severance: As follows:
•Signature and non-revocation of a release and waiver of claims in a form provided by the Company
•Compliance with restrictive covenants (see below)
Conditions of Ineligibility
The following circumstances will make an Executive ineligible for severance pay and benefits, as determined in the sole discretion of the Committee:
(a)you cease to be an eligible colleague/Executive, before the date the Company designates as your Separation Date;
(b)you fail to remain employed through your Separation Date (e.g., you die, retire, quit, resign or otherwise abandon your job on or before your Separation Date), unless the Company approves in writing such earlier termination of employment;
(c)the Company terminates you for any reason other than a termination in connection with the Plan;
(d)the Company offers you a position of comparable duties and pay within fifty (50) miles of your current job location in connection with
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or following your Separation Date, regardless of whether you accept the position;
(e)the Company offers you a position that results in a total cash compensation reduction of fifteen percent (15%) or less in connection with or following your Separation Date, regardless of whether you accept the position;
(f)your employment with the Company ends because of a sale of all or a portion of the Company, and you are offered a position of comparable responsibility and pay within fifty (50) miles of your current job location by the purchaser (or an affiliate) of the business sold, regardless of whether you accept the position;
(g)you fail to satisfy any transition assistance requests of the Company to the Company's satisfaction, such as locating files, returning Company equipment and property, preparing accounting records and/or repaying amounts you owe any vendor or contractor of the Company; or
(h)the Plan is terminated.
Restrictive Covenants: As follows:
•Non-Competition –For 12 months following date of termination absent a CIC
•Non-Solicitation (Customers and Employees) –For 12 months following date of termination
•Non-Disclosure –Perpetual
•Non-Disparagement –Perpetual
Notice Period for Benefit Changes: The Committee,in the case of the CEO and executives reporting to the CEO, and the CPO and CEO in the case of other executives, has authority to make changes to the provisions of the ESP; however, the ESP cannot be amended in a manner that would materially adversely affect in any way the amount, timing or circumstances of payment without the consent of an affected participant, unless required by law or on at least one year advance written notice. Additionally, once a participant is chosen to participate in the ESP, he/she can be removed from participation only on at least one year written notice.
Dispute Resolution: Any dispute, controversy or claim arising out of or related to this ESP shall be submitted to and decided by binding arbitration. Each party shall bear their own attorney’s fees incurred in connection with any dispute.
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Amendment and Termination: The Company reserves the right to amend or terminate this ESP at any time, by providing at least 90 days advance written notice to each Executive.
Section 409A: The ESP is intended to comply with Section 409A of the Code or an exemption thereunder and shall be construed and administered in accordance with Section 409A of the Code. Notwithstanding any other provision of the ESP, payments provided under the ESP may only be made upon an event and in a manner that complies with Section 409A of the Code or an applicable exemption. Any payments under the ESP that may be excluded from Section 409A of the Code either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A of the Code to the maximum extent possible. For purposes of Section 409A of the Code, each installment payment provided under the ESP shall be treated as a separate payment. Any payments to be made under the ESP upon a termination of employment shall only be made upon a "separation from service" under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under the ESP comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by a Participant on account of non-compliance with Section 409A of the Code.
Notwithstanding any other provision of the ESP, if any payment or benefit provided to a Participant in connection with his or her Qualifying Termination is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code and the Participant is determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i) of the Code, then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Qualifying Termination or, if earlier, on the Participant's death (the "Specified Employee Payment Date"). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Participant in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule. Notwithstanding any other provision of the ESP, if any payment or benefit is conditioned on the Participant's execution of a Separation Agreement and Release, the first payment shall include all amounts that would otherwise have been paid to the Participant during the period beginning on the date of the Qualifying Termination and ending on the payment date if no delay had been imposed.
At-Will Employment. The ESP does not alter the status of each Executive as an at-will employee of the Company. Nothing contained herein shall be deemed to give any Executive the right to remain employed by the Company or to interfere with the rights of the Company to terminate the employment of any Executive at any time, with or without Cause.
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Successors. The ESP will be binding upon any successor to the Company, its assets, its businesses or its interest, in the same manner and to the same extent that the Company would be obligated under the ESP if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by the ESP, the Company shall require any successor to the Company to expressly and unconditionally assume the ESP in writing and honor the obligations of the Company hereunder, in the same manner and to the same extent that the Company would be required to perform if no succession had taken place. All payments and benefits that become due to a Participant under the ESP will inure to the benefit of his or her heirs, assigns, designees, or legal representatives.
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Exhibit 31.1
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew S. Kissner, certify that:
1.I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclose controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Matthew S. Kissner | |||||||
| Matthew S. Kissner | ||||||||
| Interim President and Chief Executive Officer | ||||||||
Dated: December 7, 2023 | ||||||||
Exhibit 31.2
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christina Van Tassell, certify that:
1.I have reviewed this quarterly report on Form 10-Q of John Wiley & Sons, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Christina Van Tassell | |||||||
| Christina Van Tassell | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
Dated: December 7, 2023 | ||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-Q for the period ended October 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew S. Kissner, Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Matthew S. Kissner | |||||||
| Matthew S. Kissner | ||||||||
| Interim President and Chief Executive Officer | ||||||||
Dated: December 7, 2023 | ||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of John Wiley & Sons, Inc. (the “Company”) on Form 10-Q for the period ended October 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christina Van Tassell, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Christina Van Tassell | |||||||
| Christina Van Tassell | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
Dated: December 7, 2023 | ||||||||