Business Context and Reporting Period
John Wiley & Sons, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended January 31, 2024, representing fiscal 2024 third quarter and year-to-date results. Wiley operates primarily through Research and Learning, while non-core businesses are reported in Held for Sale or Sold. The filing’s reporting period differs from the request metadata labeled “2023 Q3.”
Wiley is predominantly digital, with more than 80% of fiscal 2023 revenue excluding Held for Sale or Sold generated from digital products. The company is executing a portfolio simplification program focused on Research and Learning.
Key Financial Metrics
| Metric | Three months ended January 31, 2024 | Prior year | Nine months ended January 31, 2024 | Prior year |
|---|---|---|---|---|
| Revenue | $460.7 million | $491.4 million | $1,404.5 million | $1,493.8 million |
| Operating loss | $46.4 million | $67.1 million | $16.5 million | $26.6 million |
| Net loss | $113.9 million | $71.5 million | $225.6 million | $51.1 million |
| Diluted loss per share | $2.08 loss | $1.29 loss | $4.10 loss | $0.92 loss |
| Adjusted revenue, excluding Held for Sale or Sold | $402.5 million | $396.8 million | $1,176.3 million | $1,202.4 million |
| Adjusted EBITDA, excluding Held for Sale or Sold | $91.5 million | $90.3 million | $243.6 million | $262.3 million |
| Operating cash flow | Not separately provided | Not separately provided | $24.4 million | $53.7 million |
Reported third-quarter revenue declined 6%, while adjusted revenue excluding divested and held-for-sale businesses increased 1% on a constant-currency basis. Nine-month adjusted revenue declined 3% on a constant-currency basis.
- Research third-quarter revenue increased 1% reported and was flat at constant currency; adjusted EBITDA declined 2% at constant currency, with pressure from Hindawi-related publishing disruption and corporate Research Solutions softness.
- Learning revenue increased 2% in the quarter and 1% for the nine months. Third-quarter adjusted EBITDA increased 15% at constant currency, supported by product mix and restructuring savings.
- Held for Sale or Sold revenue declined 38% in the quarter and 22% for the nine months, reflecting divestitures, lower University Services enrollments, and a 51% decline in placement revenue.
Cash Flow, Liquidity, Debt and Capital Allocation
- Cash, cash equivalents and restricted cash totaled $108.9 million at January 31, 2024, including $15.8 million attributable to held-for-sale businesses. Cash and cash equivalents on the balance sheet were $93.1 million excluding held-for-sale cash.
- Free cash flow less product development spending was negative $45.2 million for the nine months, compared with negative $21.7 million in the prior year. Investing cash uses included $57.3 million of capital expenditures and $12.3 million of product development spending.
- Total debt was $906.8 million, compared with $748.3 million at April 30, 2023. The weighted-average interest rate on total debt was 5.50% at January 31, 2024, versus 4.76% at fiscal year-end.
- Wiley reported approximately $587.4 million of unused borrowing capacity and compliance with its leverage and interest-coverage covenants. Management believes operating cash flow and available financing are adequate for at least the next twelve months.
- The company paid $57.9 million of dividends and repurchased $29.0 million of stock during the nine months. The quarterly dividend was $0.35 per share, and approximately $133.5 million remained available under repurchase authorization at January 31, 2024.
Material Changes Versus the Prior Comparable Period
- Reported net loss worsened substantially because of $179.7 million of losses on business sales and held-for-sale impairments, including a $101.4 million pretax loss on the University Services sale and $76.8 million of held-for-sale impairments.
- Wiley recorded $108.4 million of goodwill impairment for the nine months, including $81.7 million related to Wiley Edge, $15.3 million related to CrossKnowledge and $11.4 million related to University Services.
- Restructuring and related charges increased to $52.0 million for the nine months from $45.2 million. The company expects additional severance and facility-related charges.
- Interest expense increased to $37.6 million from $27.2 million for the nine months, primarily because of higher borrowing rates.
- Operating cash flow fell by $29.4 million, mainly because of lower earnings adjusted for noncash items and unfavorable working-capital changes involving receivables, contract liabilities, payables and royalties.
- Shareholders’ equity declined to $748.3 million from $1,045.0 million at April 30, 2023, primarily reflecting year-to-date comprehensive loss, dividends and share repurchases.
Guidance, Outlook, Commentary and Unusual Items
- The Global Restructuring Program is expected to generate approximately $65 million of annualized cost savings, excluding actions related to Held for Sale or Sold, with approximately $35 million expected to be realized in fiscal 2024 from actions initiated in fiscal 2024.
- University Services was sold on January 1, 2024 for consideration with a fair value of $122.6 million, consisting primarily of a $92.9 million seller note, contingent earnout consideration and a 10% equity investment. The seller note bears interest at 10%, increasing to 12% beginning January 1, 2026, and matures no later than January 1, 2031, subject to specified terms.
- Wiley entered into an agreement to sell Wiley Edge for consideration of up to $62.2 million, including $10.0 million cash, an $18.3 million loan note and an earnout of up to $33.9 million. Closing is expected in the first quarter of fiscal 2025.
- Wiley expects the Wiley Edge and CrossKnowledge dispositions to be completed by the first quarter of fiscal 2025. Additional impairment charges may arise before the dispositions are completed.
- Reported results were materially affected by noncash goodwill impairments, held-for-sale impairments, divestiture losses, restructuring charges and a $6.4 million impairment from discontinued use of certain capitalized software.
- Key risks include subscription renewal rates, the financial condition of subscription agents and customers, print-book returns, market and enrollment conditions, execution of divestitures, realization of restructuring savings, leverage and floating-rate debt, foreign exchange, cybersecurity, intellectual property protection and potential impairment of goodwill and intangible assets.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting. It also reported no material changes to previously disclosed risk factors and no significant legal-proceeding developments.
Most Important Facts for Investors to Verify
- Whether Wiley completes the Wiley Edge and CrossKnowledge sales on expected terms and by the stated fiscal 2025 timeline.
- The collectability, interest payments, earnout outcomes and valuation of consideration received for University Services.
- Progress toward the $65 million restructuring savings target and the amount and timing of remaining restructuring costs.
- Whether Research revenue and profitability recover from Hindawi-related disruption and whether Learning growth offsets ongoing declines in divested businesses.
- Liquidity, refinancing and covenant capacity as debt remains elevated and interest rates are higher.
- The sustainability of dividends and share repurchases in light of negative free cash flow less product development spending.
- Potential further impairments of held-for-sale assets, goodwill and intangible assets, together with the effect of divestitures on future revenue and profitability.