John Wiley & Sons, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2023, with comparisons to fiscal 2022 and fiscal 2021. The request metadata references “2022 Q4,” but the supplied filing is an annual Form 10-K for fiscal 2023.
Business context
Wiley is a global provider of scientific research publishing, academic and professional education, digital courseware, online university services, talent development, assessments, and corporate learning. Approximately 85% of fiscal 2023 revenue came from digital products and technology-enabled services, 57% was recurring, and 45% was generated outside the United States.
- Research: $1.080 billion of revenue, approximately 54% of consolidated revenue, and a 34.9% Adjusted EBITDA margin.
- Academic: $690.4 million of revenue, approximately 34% of consolidated revenue, and a 21.4% Adjusted EBITDA margin.
- Talent: $249.2 million of revenue, approximately 12% of consolidated revenue, and a 21.1% Adjusted EBITDA margin.
Financial performance and key metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $2,019.9 million | $2,082.9 million | Down 3%; flat at constant currency |
| Operating income | $55.9 million | $219.3 million | Down 75% |
| Net income | $17.2 million | $148.3 million | Down 88% |
| Diluted EPS | $0.31 | $2.62 | Down $2.31 |
| Adjusted EBITDA | $422.0 million | $433.0 million | Down 2% at constant currency |
| Adjusted EPS | $3.84 | $4.16 | Down 8% at constant currency |
| Operating cash flow | $277.1 million | $339.1 million | Down $62.0 million |
| Free cash flow less product development spending | $173.0 million | $223.2 million | Down $50.3 million |
US GAAP operating results were materially affected by a $99.8 million non-cash goodwill impairment, $49.4 million of restructuring and related charges, a $3.7 million legal settlement, and $4.6 million of accelerated amortization related to the discontinued mthree trademark. Adjusted operating income was $213.3 million versus $217.8 million in fiscal 2022.
The US GAAP effective tax rate was 47.9%, compared with 29.3% in fiscal 2022. The adjusted effective tax rate was 17.9%, compared with 20.4%.
Segment changes versus fiscal 2022
- Research: Revenue declined 3% reported but was flat at constant currency. Research Publishing declined 4% reported, while Research Solutions increased 4%. Adjusted EBITDA declined 3% reported to $377.0 million.
- Academic: Revenue declined 9% reported and 7% at constant currency to $690.4 million. Academic Publishing declined 9%, primarily from lower print demand; University Services declined 8%, reflecting enrollment challenges. Adjusted EBITDA declined 14% reported to $148.0 million.
- Talent: Revenue increased 17% reported and 24% at constant currency to $249.2 million, driven by higher Wiley Edge placements and assessments. Adjusted EBITDA increased 14% reported to $52.5 million, although the margin declined to 21.1% from 21.6%.
Wiley reorganized its Education operations into Academic and Talent segments during fiscal 2023. Prior-period segment results were revised for presentation, without changing consolidated results.
Liquidity, debt, and capital allocation
- Cash and cash equivalents were $106.7 million at April 30, 2023, of which approximately 98% was held outside the United States.
- Total debt was $748.3 million, including $191.8 million of term loan debt and $551.5 million drawn on the revolving credit facility.
- Approximately $749.5 million of unused borrowing capacity was available under the amended credit agreement and other facilities. Wiley was in compliance with its leverage and interest coverage covenants.
- The weighted average interest rate on total debt was 4.76% at year-end, versus 2.55% a year earlier. Interest expense increased to $37.7 million from $19.8 million.
- Debt maturities include approximately $709.0 million due in fiscal 2028 based on the contractual-obligations table.
- Cash dividends paid were $77.3 million, and share repurchases totaled $35.0 million. The remaining repurchase authorization was $162.5 million at April 30, 2023.
Outlook, management commentary, and unusual items
For fiscal 2024, Wiley plans to divest University Services, Wiley Edge, and CrossKnowledge and to report them as held for sale. Together with fiscal 2023 dispositions of the Efficient Learning test-preparation portfolio and advancement courses, these businesses represented approximately $393 million of fiscal 2023 revenue and $43 million of Adjusted EBITDA.
| Fiscal 2024 outlook, excluding divestitures | Guidance |
|---|---|
| Adjusted revenue | $1.580 billion to $1.630 billion |
| Adjusted EBITDA | $305 million to $330 million |
| Adjusted EPS | $2.05 to $2.40 |
| Research revenue | Approximately flat; approximately 3% growth excluding Hindawi |
| Learning revenue | Down low single digits |
| Adjusted EBITDA margin | 19% to 20%, versus 23.3% for fiscal 2023 go-forward comparisons |
- Management expects approximately $30 million of EBITDA pressure from resetting incentive compensation and approximately $20 million from wage inflation.
- Hindawi’s special-issues publishing pause is expected to reduce fiscal 2024 revenue by $30 million to $35 million and Adjusted EBITDA by $25 million to $30 million.
- Wiley expects additional restructuring actions in fiscal 2024, but the amount of related charges had not been determined. The company expects benefits from portfolio and cost actions primarily in fiscal 2025 and fiscal 2026.
- Wiley did not provide free-cash-flow guidance because of uncertainty regarding divestiture timing and restructuring payments.
- Wiley closed its Russian operations substantially by April 30, 2023, with formal legal-entity liquidation expected in fiscal 2024; the impact was not material to consolidated results.
- Hindawi-related research-integrity issues led to a temporary publishing pause, closure of four journals, and retraction of more than 1,700 articles.
Principal risks and contingencies
- Declining print demand, used and rental textbooks, enrollment pressure, pricing concessions, and concentration among retailers and subscription agents.
- Open-access mandates and changes in research-publishing models could pressure subscription revenue, although management expects the U.S. federal open-access guidance to have no material financial impact.
- Execution risk associated with divestitures, segment realignment, restructuring, outsourcing, and expected cost savings.
- Cybersecurity, data privacy, technology obsolescence, generative artificial intelligence, and ERP implementation risks.
- Foreign-exchange, interest-rate, inflation, geopolitical, tax, and pension funding exposure.
- Significant goodwill and intangible assets remained on the balance sheet: $1.204 billion of goodwill and $854.8 million of intangible assets at year-end. Further impairment is possible if forecasts or valuation assumptions deteriorate.
- Routine litigation was disclosed; management stated that pending matters were not expected to have a material effect. A $3.7 million acquisition-related litigation settlement was recorded in fiscal 2023.
Investor verification checklist
- Verify the fiscal 2024 divestiture perimeter, closing dates, purchase prices, stranded costs, and final held-for-sale accounting.
- Track Hindawi article volumes, journal closures, retractions, revenue recovery, and the expected $30 million to $35 million fiscal 2024 revenue impact.
- Reconcile Adjusted EBITDA and Adjusted EPS guidance to US GAAP results, including restructuring, impairment, tax, pension, and interest items.
- Monitor leverage, refinancing and debt-maturity exposure, particularly the large fiscal 2028 maturity and variable-rate borrowings.
- Assess whether the projected $70 million annualized restructuring savings are realized and whether additional charges exceed current expectations.
- Review University Services and other remaining goodwill for additional impairment risk, including sensitivity to enrollment, revenue growth, margins, discount rates, and valuation multiples.
- Confirm cash-flow conversion after divestitures, restructuring payments, dividends, share repurchases, and required pension contributions.