John Wiley & Sons, Inc. — Fiscal 2022 Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2022. The requested “2021 Q4” metadata does not match the annual filing period. Comparative figures are primarily for fiscal 2021.
Business context
Wiley is a global provider of scientific research publishing, digital education, professional learning, online program management, and talent development services. The company reports three segments: Research Publishing & Platforms, Academic & Professional Learning, and Education Services.
- Approximately 83% of fiscal 2022 revenue came from digital products and technology-enabled services, and approximately 58% was recurring.
- Approximately 47% of consolidated revenue was generated outside the United States.
- Research Publishing & Platforms represented approximately 53% of revenue; Academic & Professional Learning approximately 31%; and Education Services approximately 16%.
Financial performance and key metrics
| Metric | Fiscal 2022 | Fiscal 2021 | Change |
|---|---|---|---|
| Revenue | $2,082.9 million | $1,941.5 million | +7% |
| Operating income | $219.3 million | $185.5 million | +18% |
| Net income | $148.3 million | $148.3 million | Flat |
| Diluted EPS | $2.62 | $2.63 | Down $0.01 |
| Adjusted EBITDA | $433.0 million | $419.0 million | +3% |
| Adjusted EPS | $4.16 | $4.00 | +4% |
| Cash flow from operations | $339.1 million | $359.9 million | Down $20.8 million |
| Free cash flow less product development spending | $223.2 million | $256.6 million | Down $33.3 million |
Revenue growth included acquisitions and increased 5% organically on a constant-currency basis. Cost of sales increased 12% and operating and administrative expenses increased 6%, reflecting higher employee, technology, editorial, marketing, student acquisition, royalty, and print costs.
Operating margin was approximately 10.5% in fiscal 2022 versus 9.6% in fiscal 2021. Adjusted operating income was $217.8 million versus $218.8 million, indicating limited underlying margin expansion after excluding restructuring items. The GAAP effective tax rate increased to 29.3% from 15.7%, primarily due to a $21.4 million noncash deferred tax expense from the UK statutory tax-rate increase. Adjusted effective tax rate was 20.4% versus 21.3%.
Segment results
| Segment | Fiscal 2022 revenue | Revenue change | Adjusted EBITDA | Margin |
|---|---|---|---|---|
| Research Publishing & Platforms | $1,111.3 million | +9% | $390.1 million | 35.1% |
| Academic & Professional Learning | $646.8 million | +1% | $181.5 million | 28.1% |
| Education Services | $324.8 million | +14% | $37.4 million | 11.5% |
- Research Publishing & Platforms: Growth was driven by Research Publishing, transformational “read and publish” agreements, open access activity, corporate solutions, and Research Platforms. Organic constant-currency revenue growth was 5%; open-access article output increased approximately 27% excluding acquisitions.
- Academic & Professional Learning: Education Publishing declined 3% as lower US college enrollment and easing of prior-year COVID-related benefits offset a 6% increase in Professional Learning. Adjusted EBITDA increased 10% due mainly to lower operating expenses.
- Education Services: Talent Development Services revenue increased 74%, while University Services declined 1%. Online enrollment in University Services decreased 8%, while IT talent placements increased approximately 112%. Adjusted EBITDA declined 25% because of higher employee, student acquisition, and sales-related costs.
Liquidity, debt, and cash flow
- Cash and cash equivalents were $100.4 million at April 30, 2022, including approximately $93.2 million held outside the United States.
- Total debt was $787.0 million, down from $821.6 million. Debt consisted primarily of a $250 million term loan facility and a $1.25 billion revolving credit facility.
- Approximately $0.7 billion of borrowing capacity remained available under the credit facilities. Wiley was in compliance with its leverage and interest-coverage covenants.
- Cash used in investing activities was $194.0 million, including $75.7 million for business acquisitions and $88.8 million for technology, property, and equipment.
- Cash used in financing activities was $131.6 million, including $77.2 million of dividends, $30.0 million of treasury-share purchases, and net debt repayments.
- Contract liabilities were $538.1 million, primarily deferred subscription revenue collected in advance. The company states that operating cash flow, credit facilities, and other financing sources should meet foreseeable needs.
Material changes versus fiscal 2021
- Revenue increased $141.4 million, led by Research Publishing & Platforms and Talent Development Services.
- Operating income increased $33.8 million, aided by the absence of fiscal 2021 restructuring charges and continued revenue growth.
- Net income was essentially unchanged because higher operating income was offset by the higher tax provision and lower other income.
- Cash from operations declined $20.8 million, primarily because of employee-related payments and working-capital movements, despite favorable timing of accounts payable and royalties.
- Acquisition spending declined substantially from $299.9 million to $75.7 million. Fiscal 2022 acquisitions included XYZ Media, eJournalPress, J&J Editorial Services, and other smaller businesses.
- Foreign-currency translation produced a $71.6 million loss in accumulated other comprehensive income, compared with an $82.8 million gain in fiscal 2021.
- Wiley moved its WileyNXT offering from Academic & Professional Learning to Education Services; this changed segment presentation but did not affect consolidated results.
Guidance, outlook, risks, and unusual items
For fiscal 2023, management expects the following:
- Constant-currency revenue of $2.175 billion to $2.215 billion, representing mid-single-digit growth.
- Constant-currency adjusted EBITDA of $425 million to $450 million.
- Constant-currency adjusted EPS of $3.70 to $4.05; at spot rates as of June 10, 2022, the outlook was $3.40 to $3.75.
- Constant-currency free cash flow of $210 million to $235 million; at spot rates, $185 million to $210 million.
- Adjusted effective tax rate of approximately 22% to 23%, versus 20.4% in fiscal 2022.
Management expects wage inflation and growth investments to offset some revenue-related earnings gains. In May 2022, Wiley initiated another restructuring program, with estimated first-quarter fiscal 2023 pretax charges of $19 million to $21 million and expected run-rate savings of $30 million to $35 million.
- Key risks include COVID-19 effects, lower higher-education enrollment, used and rental textbook markets, digital pricing pressure, open-access regulatory changes, competition, technology failures and cybersecurity incidents, acquisitions and integration, restructuring execution, inflation, foreign exchange, interest rates, Brexit, geopolitical developments involving Russia and Ukraine, and customer or subscription-agent liquidity.
- Goodwill and intangible assets were substantial at April 30, 2022: goodwill was $1.302 billion and intangible assets were $931.4 million. No fiscal 2022 impairment was recorded, but future impairment charges could be material if forecasts, market multiples, or operating performance deteriorate.
- Other unusual fiscal 2022 items included a $3.7 million pretax gain on the sale of the world languages product portfolio, $3.0 million of donations and pledges related to the Ukraine crisis, and the $21.4 million noncash UK deferred-tax charge.
- The company reported routine litigation with no expected material effect, and management and KPMG concluded that internal control over financial reporting was effective as of April 30, 2022.
Important facts for investors to verify
- Reconcile reported revenue growth with organic and constant-currency growth, particularly the contribution from acquisitions.
- Assess whether Education Services can recover margins as Talent Development Services expands and University Services enrollment trends stabilize.
- Monitor debt reduction, variable-rate exposure, covenant headroom, and the impact of higher interest rates.
- Evaluate the sustainability of free cash flow after capital expenditures, product development spending, dividends, acquisitions, and restructuring payments.
- Review the assumptions supporting goodwill and intangible-asset valuations, especially in light of foreign-exchange pressure and Education Services performance.
- Track the fiscal 2023 restructuring charges and whether the projected $30 million to $35 million of run-rate savings are achieved.
- Verify the effect of open-access agreements, journal subscription renewals, customer concentration, and subscription-agent liquidity on recurring revenue.
- Consider the sensitivity of results to foreign exchange, as 47% of revenue is generated outside the United States and management identified a material fiscal 2023 currency headwind.