Wiley unveils Q4 and FY23 earnings

HOBOKEN, N.J.--(BUSINESS WIRE)-- Wiley (NYSE: WLY) today reported results for the fourth quarter and fiscal year ended April 30, 2023. The Company is announcing strategic actions that will focus Wiley on its leading global position in the development and application of new knowledge and drive greater profitability, growth, and value creation.

STRATEGIC FOCUS

• Go Forward: Focusing Wiley on its strongest and most profitable businesses and large market opportunities in Research and Learning.
• Portfolio Actions: Divesting non-core education businesses, including University Services (known as online program management), Wiley Edge (formerly Talent Development) and CrossKnowledge. These assets will be reported as "businesses held for sale" starting in Q1 2024. In Q4 2023, Wiley divested its test prep and Advancement Courses lines in Academic.
• Fiscal 2024 Transition Year: Streamlining organization and rightsizing cost structure to reflect these portfolio actions. The benefits of these actions will be realized in Fiscal 2025 and Fiscal 2026.

FOURTH QUARTER SUMMARY (results vs. prior year)

• GAAP Results: Revenue of $526 million (-4%), Operating income of $82 million (+41%), and EPS of $1.22 (+$0.46).
• Adjusted Results at Constant Currency: Revenue of $526 million (-2%), Adjusted EBITDA of $137 million (+23%), and Adjusted EPS of $1.45 (+32%).

FULL YEAR SUMMARY (results vs. prior year)

• GAAP Results: Revenue of $2,020 million (-3%), Operating income of $56 million (-$163 million), and EPS of $0.31 (-$2.31). GAAP earnings performance primarily due to $100 million ($1.77/share) of non-cash goodwill impairment in Education Services/University Services and restructuring charges totalling $49 million ($0.66/share).
• Adjusted Results at constant currency: Revenue of $2,020 million (0%), Adjusted EBITDA of $422 million (-2%), and Adjusted EPS of $3.84 (-8%).
• Cash from Operations of $277 million (-$62 million) and Free Cash Flow of$173 million (-$50 million) mainly due to higher restructuring payments and interest payments.

MANAGEMENT COMMENTARY

"Today we are announcing strategic actions that will make Wiley simpler, stronger, and more profitable by focusing on our long-standing position as a global leader in research, publishing and digital solutions that accelerate the creation and application of new knowledge," said Brian Napack, President and CEO. "Our goal, as always, is to maximize value creation for our shareholders and deliver impact for all our stakeholders. The actions that we are now taking will allow us to materially improve our performance and margins in Fiscal 2025 and 2026 and position us for sustained, profitable growth in the years ahead. We look forward to discussing this at our investor day later this year."

FINANCIAL PERFORMANCE

See accompanying financial tables for the Fourth Quarter and Fiscal Year 2023.

Research

• Fourth Quarter Revenue of $280 million was down 6%, or 5% at constant currency mainly due to the Hindawi publishing disruption and macroeconomic headwinds impacting our corporate offerings. As discussed in the third quarter, Hindawi's special issues program was suspended due to the presence in certain special issues of compromised articles. To date, Wiley has closed four Hindawi journals and retracted over 1,700 articles. Full Year Revenue of $1,080 millionwas down 3% as reported, or flat at constant currency.
• Fourth Quarter Adjusted EBITDA of $106 million was up 4% at constant currency on cost savings initiatives and lower employee costs. Full Year Adjusted EBITDA of $377 million was down 2% at constant currency mainly driven by investments to scale publishing and solutions partially offset by lower royalty costs largely due to the product mix. Full Year Adjusted EBITDA margin of 34.9% was in line with prior year.

Academic

• Fourth Quarter Revenue of $183 million was down 3%, or 2% at constant currency due to modest declines in both Academic Publishing and University Services. Full Year Revenue of $690 millionwas down 9% as reported, or down 7% at constant currency, with print declines in publishing partially offsetting growth in digital courseware and continued enrollment challenges and lower tuition share in services.
• Fourth Quarter Adjusted EBITDA of $55 million was up 30% at constant currency on restructuring savings. Full Year Adjusted EBITDA of $148 million was down 13% at constant currency driven primarily by revenue performance and higher distribution and technology costs. Full Year Adjusted EBITDA margin of 21.4% compared to 22.8% in the prior year.

Talent

• Fourth Quarter Revenue of $63 million was up 8%, or 12% at constant currency due to growth in placements and assessments. Full Year Revenue of $249 millionwas up 17% as reported, or 24% at constant currency with double-digit growth in placements and assessments (corporate training) driving performance.
• Fourth Quarter Adjusted EBITDA of $13 million was up 10% at constant currency mainly due to revenue performance and restructuring savings. Full Year Adjusted EBITDA of $52 million was up 18% at constant currency driven primarily by revenue performance partially offset by increased inflationary impacts on placements and investments to scale talent development. Full Year Adjusted EBITDA margin of 21.1% vs. 21.6% in prior year.

Adjusted Corporate Expenses (Adjusted EBITDA)

• Fourth Quarter Adjusted Corporate Expenses of $37 million declined 15% at constant currency due to lower employee costs. Full Year Adjusted Corporate Expenses of $155 million declined 8% at constant currency primarily due to lower employee related costs, including lower annual incentive compensation for fiscal year 2023.

EPS

• Fourth Quarter GAAP EPS of $1.22 compared to $0.76 in the prior year period mainly due to the earnings improvement and a gain from the sale of test prep and advancement courses. Full Year GAAP EPS was $0.31 compared to $2.62 in the prior year, primarily due to non-cash impairment and restructuring charges totalling $2.43 per share.In the third quarter,Wiley recorded a non-cash goodwill impairment charge of $100 million, or $1.77 per share, for its Education Services and University Services businesses. For the full year, Wiley recorded restructuring charges totalling $49 million, or $0.66 per share, related to targeted headcount reductions and real estate consolidation.
• Fourth Quarter Adjusted EPS of $1.45was up 32% at constant currency primarily due to higher Adjusted Operating Income mainly from restructuring savings. Full Year Adjusted EPS of $3.84was down 8% at constant currency primarily due to lower Adjusted Operating Income and higher interest expense.

Balance Sheet, Cash Flow, and Capital Allocation

• Net Debt-to-EBITDA Ratio (Trailing Twelve Months) at year end was 1.5x compared to 1.6x at prior year end.
• Net Cash Provided by Operating Activities (Full Year)was $277 million compared to $339 million in the prior year period. This is primarily due to higher restructuring payments (+$21 million), higher interest expense (+$18 million), and lower cash earnings. Free Cash Flow less Product Development Spending (Full Year)was $173 million compared to $223 million in the prior year period, primarily due to higher restructuring payments, higher interest payments, and lower cash earnings, offsetting lower capex.
• Returns to Shareholders: The Company raised its dividend for the 29^th consecutive year in Fiscal 2023. For the year, Wiley utilized $77 million for dividends and $35 million to repurchase 832,000 shares at an average cost per share of $42.07. This compares to 544,000 shares repurchased in the prior year. There were no material acquisitions in Fiscal 2023.

FISCAL YEAR 2024 TRANSITION YEAR OUTLOOK

Wiley's Fiscal 2024 outlook excludes businesses held for sale: University Services,Wiley Edge (Talent Development), and CrossKnowledge, as well as those businesses sold in Fiscal 2023 (test prep and advancement courses). These assets will be reported as businesses 'held for sale" starting in Q1 2024. Collectively, these businesses generated $393 million of revenue (19% of Wiley) and $43 million of Adjusted EBITDA (10% of Wiley) in Fiscal 2023.

Wiley's go-forward reporting structure will consist of two segments: (1) Research and (2) Learning. Research is unchanged with reporting lines of Research Publishing and Research Solutions. Learning will include reporting lines of Academic (education publishing) and Professional (professional publishing and assessments). Wiley will begin to report on this structure in the first quarter and provide two years of pro forma results for comparability.

*Wiley's Fiscal 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 2023: Test Prep and Advancement Courses.

Fiscal Year 2024 Transition Year Outlook

• Adjusted Revenue - primarily due to the Hindawi special issues publishing pause and continued softness in consumer and corporate spending. Note, this is a new metric defined as revenue adjusted to exclude businesses held for sale.
• Adjusted EBITDA - primarily due to projected revenue performance, notably Hindawi, and higher employee costs from the combination of an incentive compensation reset and wage inflation. From its portfolio and restructuring actions, the Company expects material performance and margin improvement in Fiscal 2025 and Fiscal 2026.
• Adjusted EPS - furtherimpacted by $0.42 of non-operational items including a higher tax rate (-$0.21/share), pension expense (-$0.11/share), and interest expense (-$0.10/share). Wiley's higher tax rate is primarily due to a less favorable mix of earnings by country and an increase in the UK statutory rate. Wiley froze its U.S. and U.K. pension programs in 2015, and they are approximately 90% funded.

Wiley is not providing a Free Cash Flow outlook due to the uncertainty around both the timing of divestitures and the size and scope of restructuring payments.

EARNINGS CONFERENCE CALL

Scheduled for today, June 15 at 10:00 am (ET). Access webcast at Investor Relations at investors.wiley.com, or directly at https://events.q4inc.com/attendee/368565267. 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 scientific research and career-connected education. Founded in 1807, Wiley enables discovery, powers education, and shapes workforces. Through its industry-leading content, digital platforms, and knowledge networks, the company delivers on its timeless mission to unlock human potential. Visit us at Wiley.com.