Wiley (NYSE: WLY and WLYB), one of the world’s largest publishers and a global leader in research and learning, today reported results for the second quarter ended October 31, 2023.

• GAAP Results: Revenue of $493 million (-4%), Operating income of $46 million (-19%), and EPS loss of -$0.35 (-$1.03). GAAP earnings impacted by impairment charges of $52 million related to our held for sale or sold assets and restructuring charges totalling $25 million related to our value creation plan.
• Adjusted Results at Constant Currency (excluding Held for Sale or Sold segment results): Adjusted Revenue of $407 million (-2%), Adjusted EBITDA of $92 million (-13%), and Adjusted EPS of $0.73 (-25%).

VALUE CREATION PLAN PROGRESS

• Intensify focus on core of Research & Learning: Reorganized from three business units to one market-facing Research & Learning team under one leader to drive scale, synergies, and capital efficiency; consolidated global operations under one leader to improve operating efficiency.
• Divest non-core assets: Recently announced sale of University Services business for total consideration of up to $150 million and a 10% share in acquiring company.
• Rightsize and optimize: Recently executed on restructuring actions that will yield $65 million of run rate savings, with approximately $30 million of that to be realized this fiscal year and already reflected in the Company’s current guidance.

MANAGEMENT COMMENTARY

“Our second quarter and year-to-date overall performance was in line with our expectations as we execute on our value creation plan to make Wiley a stronger, leaner, and more profitable company focused on driving consistent growth in our core,” said Matthew Kissner, Interim President and CEO. “We expect year-over-year revenue improvement in the second half and expect to exit the year with a stronger margin profile. Fiscal 2025 and 2026 is where we will realize the full benefits of our current actions.”

FINANCIAL PERFORMANCE

See accompanying financial tables for the second quarter and year-to-date 2024. For GAAP purposes, Wiley’s reporting structure consists of three segments: (1) Research, (2) Learning, and (3) Held for Sale or Sold.

Research

• Revenue of $258 million was down 5%, or 7% at constant currency, mainly due to the Hindawi publishing pause (-$18 million) and a soft market for recruiting. This offset continued growth in our core open access publishing program. Excluding Hindawi, revenue was flat.
• Adjusted EBITDA of $82 million was down 17% at constant currency due to revenue performance, namely Hindawi. Adjusted EBITDA margin for the quarter was 31.6%. Excluding Hindawi, Adjusted EBITDA was down 4% primarily due to higher employee costs.

Learning

• Revenue of $149 million was up 7% as reported or 6% at constant currency due to growth in both Academic (driven by zyBooks digital courseware and inclusive access) and Professional (driven by improved channel environment and fewer returns).
• Adjusted EBITDA of $54 million was up 14% as reported or 13% at constant currency mainly due to revenue growth and restructuring savings. Adjusted EBITDA margin for the quarter was 36.2%.

Businesses Held for Sale or Sold (HFS)

• Revenue of $86 million was down 17% on a reported basis or 18% at constant currency mainly due to declines in Wiley Edge. Adjusted EBITDA of $19 million was up from $18 million in the prior year with restructuring savings offsetting revenue performance.
• Wiley announced the sale of University Services during the quarter with an anticipated close in early calendar 2024. For details on the transaction, please see Wiley's 8K filing.

Corporate Expenses (Adjusted EBITDA)

• Adjusted Corporate Expenses (Adjusted EBITDA) of $43 million was up 8% over prior year on a constant currency basis, driven by a lower incentive compensation accrual in the prior year and higher executive severance costs.

EPS

• GAAP EPS loss of $0.35 compared to +$0.68 in the prior year period due to impairment of held-for-sale assets totalling $52 million and restructuring charges totalling $25 million.
• Adjusted EPS excluding businesses held for sale or sold of $0.73 was down 25% primarily due to lower Adjusted Operating Income from lower revenue, and higher interest expense.

Balance Sheet, Cash Flow, and Capital Allocation

• Net Debt-to-EBITDA Ratio (Trailing Twelve Months) at quarter end was 2.0x compared to 2.1x at prior year end.
• Net Cash Used in Operating Activities (Year-to-Date) was a use of $83 million compared to a use of $76 million in the prior year period due to lower cash earnings and higher restructuring payments partially offset by reduced incentive compensation. Note, Wiley’s regular use of cash in the first half of the fiscal year is driven by the timing of cash collections for annual journal subscriptions, which are concentrated in Q3 and Q4.
• Free Cash Flow less Product Development Spending (Year-to-Date) was a use of $132 million compared to a use of $126 million due to lower cash earnings and higher restructuring payments. Capex of $48 million was moderately below prior year. Note, Wiley does not provide an adjusted free cash flow metric; results include held for sale or sold businesses.
• Returns to Shareholders (Year-to-Date): In June, the Company raised its annual dividend for the 30^th consecutive year. Year-to-date, Wiley allocated $39 million toward dividends in line with prior year, and $23 million toward repurchasing 669,000 shares at an average cost per share of $33.64. This compares to 382,000 shares repurchased ($18 million) in the prior year period. The Company has $140 million remaining in its current share repurchase authorization program. There were no acquisitions of note in the quarter.

FISCAL YEAR 2024 TRANSITION YEAR OUTLOOK

Fiscal Year 2024 is a transition year for Wiley as it divests non-core assets and streamlines the organization. The Company is reaffirming its overall Fiscal 2024 outlook for Adjusted Revenue, Adjusted EBITDA, and Adjusted EPS.

*“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 2023: Test Prep and Advancement Courses.

Fiscal Year 2024 Transition Year Outlook

• Adjusted Revenue – reaffirming overall with Research moderately below expectations and Learning ahead of expectations. The Company now expects Research growth excluding Hindawi of 2%, down from 3% originally. Note, Adjusted Revenue excludes businesses held for sale or sold.
• Adjusted EBITDA – reaffirming with projected revenue performance, incentive compensation resetting, and wage inflation offsetting expected restructuring savings.
• Adjusted EPS – reaffirming due to projected adjusted operating income performance 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.

EARNINGS CONFERENCE CALL

Scheduled for today, December 6 at 10:00 am (ET). Access webcast at Investor Relations at investors.wiley.com, or directly at https://events.q4inc.com/attendee/108195967 U.S. callers, please dial (888) 210-3346 and enter the participant code 2521217#. International callers, please dial (646) 960-0253 and enter the participant code 2521217#.

ABOUT WILEY

Wiley is one of the world’s largest publishers and a global leader in research and learning. 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. Visit us at Wiley.com. Follow us on Facebook, Twitter, LinkedIn and Instagram.

NON-GAAP FINANCIAL MEASURES

Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “Adjusted Operating Income,” “Adjusted EBITDA,” “Adjusted CTP,” “Adjusted Income before Taxes,” “Adjusted Income Tax Provision,” “Adjusted Effective Income Tax Rate,” “Free Cash Flow less Product Development Spending,” “organic revenue,” “Adjusted Revenue,” and results on a Constant Currency basis to assess underlying business performance and trends. Management believes non-GAAP financial measures, which exclude the impact of restructuring charges and credits and certain other items, and the impact of acquisitions provide a useful comparable basis to analyze operating results and earnings. See the reconciliations of non-GAAP financial measures and explanations of the uses of non-GAAP measures in the supplementary information. We have not provided our 2024 outlook for the most directly comparable U.S. 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 U.S. GAAP.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company and are subject to change based on many important factors. Such factors include, but are not limited to: (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company's educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company's ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities; (x) the 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; and (xii) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

CATEGORY: EARNINGS RELEASES

JOHN WILEY & SONS, INC.

EXPLANATION OF USAGE OF NON-GAAP PERFORMANCE MEASURES

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

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

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

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

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

For example:

• Adjusted EPS, Adjusted Revenue, Adjusted Contribution to Profit, Adjusted Operating Income, Adjusted Income Before Taxes, Adjusted Income Tax Provision, Adjusted Effective Tax Rate, Adjusted EBITDA, and organic revenue (excluding acquisitions) provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.
• Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends, and fund share repurchases and acquisitions.
• Results on a constant currency basis remove distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance excluding the impact of foreign currency (or at constant currency), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.

In addition, we have historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing our operating margins and net income, and in comparing our financial performance to that of our peer companies and competitors. Based on interactions with investors, we also believe that our non-GAAP performance measures are regarded as useful to our investors as supplemental to our US GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures.

We have not provided our 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.

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