John Wiley & Sons, Inc. Announces Third Quarter Fiscal Year 2009 Results
- Significant unfavorable foreign exchange effect on revenue and EPS
- Third quarter EPS grows 20% on a currency neutral basis
- Reiterating full-year guidance of approximately 20% EPS growth on a currency neutral basis and excluding prior year unusual tax benefit
- Lowering full-year revenue guidance to low single digit growth on a currency neutral basis
John Wiley & Sons, Inc. (NYSE: JWa and JWb) today reported third quarter EPS growth of 20% on a currency neutral basis. The increase is a result of reduced incentive compensation accruals, lower interest expense, and prudent expense management. Including the negative impact of foreign exchange, adjusted earnings per diluted share (EPS) for the third quarter declined 15% from prior year to $0.57.
Third quarter revenue declined 2% after adjusting for an unfavorable $47 million foreign exchange impact. The decline on a currency neutral basis is primarily due to market conditions affecting the Professional/Trade business and processing delays in STMS related to journal subscription renewals, which will be resolved prior to fiscal year-end. Including the negative impact of foreign exchange, third quarter revenue decreased 13% to $374 million.
EPS of $1.74 for the first nine months of fiscal year 2009 as compared with adjusted EPS of $1.69 in the prior year period rose 21% on a currency neutral basis, or 3% including the negative impact of foreign exchange. Reported EPS on a US GAAP basis declined 13% due to an unusual tax benefit in the prior year and foreign exchange. Revenue for the first nine months advanced 2% over prior year, excluding $56 million of unfavorable foreign exchange. Including the negative effect of foreign exchange, year-to-date revenue of $1.2 billion declined 3% compared to prior year.
William J. Pesce, President and CEO said, "As anticipated earlier in the year, the unfavorable effect of foreign exchange on Wiley's revenue and earnings is significant and unprecedented. In addition, economic conditions have had an adverse effect on our Professional/Trade business, particularly in the US. While the results in Professional/Trade are disappointing, it is encouraging that we have increased market share in key publishing categories. Our global STMS and Higher Education businesses are performing well."
Mr. Pesce concluded: "With one quarter to go in fiscal year 2009, we are reaffirming full-year EPS guidance of approximately 20% growth on a currency neutral basis and excluding the unusual tax benefit reported in the prior year. We are reducing revenue guidance from mid single digit growth to low single digit growth on a currency neutral basis, principally due to market conditions affecting our Professional/Trade business. Foreign exchange will continue to have a significant adverse affect on Wiley’s revenue and EPS in the fourth quarter."
In the third quarter, the Company repurchased 471,600 shares of its common stock at a cost of approximately $16 million.
The foregoing and following references to "currency neutral basis" exclude the effect of both transaction and translation foreign exchange.
Scientific, Technical, Medical and Scholarly (STMS)
Revenue +2% and Contribution to Profit +2% on a currency neutral basis. Results affected by journal subscription renewal processing delays expected to be resolved prior to fiscal year-end.
Global STMS revenue for the third quarter declined 13% to $202 million mainly due to an unfavorable $35 million foreign exchange impact. On a currency neutral basis, revenue advanced 2%. Journal subscription revenue was on par with prior year, as revenue from new journals was partially offset by the aforementioned processing delays and lower backfile sales. STMS book sales improved in markets outside the US. Publishing areas that exhibited significant growth include the life sciences, professional, and the social sciences and humanities.
The journal subscription renewal delays were related to the consolidation of Wiley and Blackwell fulfillment systems and licensing practices, which is the last significant integration project and one of the most complex undertakings in the overall process. While the problems that caused the delays were substantially resolved by the end of the quarter, some of the processing backlog remained. Approximately $7 million of revenue on yet-to-be processed customer journal licenses will be earned in the fourth quarter. The delays also affected cash collections through January.
Direct contribution to profit for the third quarter fell 13% from prior year to $75 million. On an exchange neutral basis, contribution to profit advanced 2%. The increase on a performance basis reflects the top-line results, a $4 million prior year acquisition accounting adjustment, lower incentive compensation accruals and prudent expense management, partially offset by higher costs associated with new journals, a sales return adjustment of $3 million and the aforementioned delay in journal subscription renewals.
For the first nine months of fiscal year 2009, global STMS revenue was flat with prior year at $696 million, but advanced 6%, excluding unfavorable foreign exchange. Contributing to the year-over-year growth was a $17 million acquisition accounting adjustment related to the Blackwell acquisition that reduced revenue in the comparable prior year period, as well as increased journal revenue. All regions exhibited growth. Direct contribution to profit for the first nine months rose 4% to $277 million, or 10% excluding unfavorable foreign exchange. The increase reflects higher journal subscription revenue and prudent expense management, partially offset by editorial costs associated with new journals and the aforementioned delay in journal subscription renewals.
Society Journal Activity
- New signings: 3 journals in third quarter; 28 journals year-to-date
- Renewed/extended contracts: 57 journals in third quarter; 74 journals year-to-date
- Contracts not renewed: 3 journals in third quarter; 5 journals year-to-date
Key New Agreements
- The Institute of Development Studies at the University of Sussex, one of Europe's leading research institutions. The journal, IDS Bulletin, was previously self-published.
- The Economic Society of Australia for Economic Papers
- Asian Journal of Endoscopic Surgery
Key Journal Renewals
- Cancer and Cancer Cytopathology (American Cancer Society)
- British Journal of Dermatology and Clinical and Experimental Dermatology (British Association of Dermatologists)
- Allergy and Pediatric Allergy and Immunology (European Academy of Allergy and Clinical Immunology)
- Cytometry (International Society for the Advancement of Cytometry)
- Cancer Science (Japanese Cancer Association)
- European Journal of Clinical Investigation (European Society for Clinical Investigation)
- International Journal of Urology (Japanese Urological Association)
- Journal of the American Academy of Nurse Practitioners
- Disasters and Development Policy Review (Overseas Development Institute)
- Development and Change (Institute of Social Studies, The Hague)
- Journal of Urban Affairs (Urban Affairs Association)
Other agreements include a contract renewal with the IEEE (the Institute of Electrical and Electronics Engineers) to continue a book publishing arrangement and an agreement with the International Union of Crystallography to co-publish the International Tables for Crystallography.
WileyInterScience, which publishes over 1,400 journals, three million articles, and 6,000 online books and major reference works, recorded over 300 million total visits in calendar year 2008. Total visits and full-text downloads increased 7% and 5% over prior year, respectively.
In the third quarter, Wiley acquired the Arnold statistics book program from Hodder Education. The acquisition, which includes over 50 titles, complements areas of strength in Wiley’s statistics program, while providing growth opportunities.
Revenue -14% and Contribution to Profit -25% on currency neutral basis. Results attributed to economic conditions, particularly a very weak retail environment.
Global P/T revenue declined 19% to $100 million in the third quarter compared to $123 million in the prior year, or a 14% decrease, excluding unfavorable foreign exchange. The decline is attributed to a very weak retail environment, particularly in the US. Modest growth was recorded in Canada, Germany, and the UK.
Direct contribution to profit was $25 million compared to $38 million for the third quarter of last year, reflecting the revenue shortfall. The decline was partially mitigated by prudent expense management and lower accrued incentive compensation. Excluding unfavorable foreign exchange, direct contribution to profit declined 25% from the prior year.
For the first nine months, global P/T revenue declined 12% to $316 million, or a 10% decrease, excluding unfavorable foreign exchange. Year-to-date direct contribution to profit fell 26% to $77 million, or a 23% decrease on an exchange neutral basis. The decline is attributed to lower revenue, higher inventory provisions and a $2 million bad debt recovery in the prior year, partially offset by lower accrued incentive compensation and prudent expense management.
- On March 1st a new co-publishing agreement was signed with Meredith Corporation, under which Wiley will become the exclusive global book publisher for Meredith's Better Homes and Gardens brand. The partnership will encompass books published under other Meredith brands as well, including Family Circle, American Patchwork and Quilting, and Diabetic Living. In addition to publishing new books, Wiley will become the exclusive distributor of existing books in all channels worldwide, including the flagship Better Homes and Gardens New Cook Book and key titles in other categories, such as the New Garden Book and New Decorating Book. Wiley anticipates publishing approximately 20 titles per year as a result of this agreement. The first Better Homes and Gardens books to be published by Wiley will be released in spring 2009.
- An agreement was reached with the American Society for Healthcare Risk Management (ASHRM) to publish its quarterly journal in public health, the Journal of Healthcare Risk Management. ASHRM is a membership group of the American Hospital Association with more than 5,300 members representing healthcare, insurance, law, and related professions.
- Dummies.com was re-launched in November with new content for 18 topics and approximately 250 videos. Page views, visits, unique visitors, and newsletter subscriptions are all up double digits vs. prior year.
- An agreement was signed with a UK company, RoadTour, to create a location-based destination and events service for Satellite Navigation and Microsoft Mobile devices. The new service will provide customers with a wide selection of Frommer's points of interest (POIs) and Whatsonwhen events. All POIs and events are geo-coded to provide their exact location, allowing customers to be guided directly to a restaurant, attraction, or event.
- The January launch of the online Ernst & Young International GAAP 2009 will provide access to interpretation of the International Financial Reporting Standards.
Notable New Books
- Finance: Janet Tavekoli’s Dear Mr. Buffett, with full support of Warren Buffett; Paul Muolo's $700 Billion Bailout; and Barbara Weltman's J.K. Lasser Refund Builder
- Business: Blythe McGarvie's Shaking the Globe, which teaches managers and leaders how to stand out; Daniel Esty's and Andrew Winston's Green to Gold, which addresses environmental responsibility; Dave Hitz's How to Castrate A Bull: Unexpected Lessons on Risk, Growth and Success in Business; John R. Talbot's The Financial Epidemic That is Sweeping the Global Economy and How to Protect Yourself From It
- Psychology: John Sommers-Flanagan's and Rita Sommers-Flanagan's Clinical Interviewing
- Technology: Macs For Dummies, 10/e by Ed Baig; Photoshop Elements 7 For Dummies by Barbara Obermeier and Ted Padova; Digital Photography For Dummies DVD Bundle by Barbara Obermeier and Mark Justice Hinton; Blackberry Storm For Dummies by Robert Kao and Dante Sarigumba, which is the first book published about the new touch-screen Blackberry
- Consumer: Weight Watchers in 20 Minutes
- Architecture: Fundamentals of Building Construction, 5/e by Edward Allen
A total of 673 contracts were executed in the quarter by the global rights team, an increase of 9%.
Higher Education (HE)
Revenue +7% and Contribution to Profit +15% on currency neutral basis
Global HE revenue declined 2% to $72 million in the third quarter due to unfavorable foreign exchange. Revenue advanced 7% on a currency neutral basis, driven by strong growth in nearly every subject category, higher-than-expected revenue from recently-acquired textbooks, new editions, and the continued success of WileyPLUS. With the exception of Asia, which continues to be impacted by the devaluation of the Indian Rupee, all regions exhibited growth.
Direct contribution to profit rose 2% to $29 million, or 15% excluding unfavorable foreign exchange. The increase reflected top line results and product mix.
Year-to-date global HE revenue grew 4% to $196 million, or 8% excluding unfavorable foreign exchange. Direct contribution to profit for the nine-month period rose 7% to $69 million, or 13% on a currency neutral basis. The increase reflected top-line results, lower inventory provisions and product mix.
- WileyPLUS 4.6 was released in December. This updated version facilitates creation and management of course assignments and provides enhanced diagnostic and reporting tools.
- WileyPLUS exhibited year-to-date global revenue growth of 41% over the comparable prior year period.
- The number of registered WileyPLUS users in the US jumped 38% year-to-date, with Asia (+156%), Australia (+79%) and Canada (+27%) also showing solid growth.
- At the end of the quarter, deferred revenue for WileyPLUS was $7 million compared to $5 million at the end of last year’s third quarter.
Acquisitions announced in the first quarter of fiscal year 2009 continued to exceed expectations, generating over $6 million of revenue in the first nine months of this fiscal year.
Key Titles Published
- Mathematics: Precalculus: A Prelude to Calculus, 1/e, by Sheldon Axler; Calculus: Early Transcendentals, 9/e, by Howard Anton, Irl C. Bivens, and Stephen Davis; Today's Mathematics: Concepts, Classroom Methods, and Instructional Activities, 12/e, by James W. Heddens, William R. Speer, and Daniel J. Brahier; Helping Children Learn Mathematics, 9/e, by Robert E. Reys, Diana V. Lambdin, and Mary M. Lindquist
- Physical and Life Sciences: How Things Work: The Physics of Everyday Life, 4/e, by Louis Bloomfield; Physics, 8/e, by John D. Cutnell and Kenneth W. Johnson; Visualizing Human Biology, 2/e, by Kathleen A. Ireland; Visualizing Earth Science, by Zeeya Meral and Brian J. Skinner: and Principles of Genetics, 5/e, by D. Peter Snustad and Michael J. Simmons. Business and Economics: Contemporary Business, 13/e, by Louis E. Boone and David L. Kurtz; Microeconomics: Theory and Applications, 10/e, by Edgar K. Browning and Mark A. Zupan; Accounting, 3/e, by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso; Project Management: A Managerial Approach, 7/e, by Jack R. Meredith and Samuel J. Mantel Jr; Management, 10/e, by John R. Schermerhorn
- Social Sciences: Human Geography, 9/e, by H. J. DeBlij; Psychology in Action, 9/e, by Karen Huffman
Wiley will hold a conference call today, Tuesday, March 10, 2009 at 2:30 p.m. (EDT) to discuss its financial results for the third quarter of fiscal year 2009.
- To participate in the conference call, please dial the following number approximately ten minutes prior to the 2:30 p.m. EDT starting time: (877) 741-4240
- International callers may participate by dialing: (719) 325-4773
- A replay of the call will be available from 5:30 p.m. (EDT) on Tuesday, March 10, through Tuesday, March 17 by dialing (888) 203-1112 or (719) 457-0820 and entering Passcode 6745496. A live audio webcast will be accessible at wiley.com> Investor Relations> Events and Presentations, or http://www.wiley.com/WileyCDA/Section/id-370238.html. A replay of the webcast will be accessible for 14 days afterwards.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This release contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company's educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company's ability to protect its copyrights and other intellectual property worldwide; (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities; and (x) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
Founded in 1807, John Wiley & Sons, Inc. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley and its acquired companies have published the works of more than 350 Nobel laureates in all categories: Literature, Economics, Physiology/Medicine, Physics, Chemistry, and Peace.
Our core businesses include scientific, technical, medical, and scholarly journals, encyclopedias, books and online products and services; professional/trade books, subscription products, training materials, and online applications and Web sites; and educational materials for undergraduate and graduate students and lifelong learners. Wiley’s global headquarters are located in Hoboken, New Jersey, with operations in the US, Europe, Asia, Canada, and Australia. The Company’s Web site can be accessed at http://www.wiley.com. The Company is listed on the New York Stock Exchange under the symbols JWa and JWb.
Investor Relations: http://www.wiley.com/WileyCDA/Section/id-370238.html