John Wiley & Sons, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2021, compared primarily with fiscal 2020. The request metadata references “2020 Q4,” but the supplied filing is the fiscal 2021 annual Form 10-K, filed July 6, 2021.
Business context
Wiley is a global research and education company with three reportable segments: Research Publishing & Platforms, Academic & Professional Learning, and Education Services. Approximately 82% of fiscal 2021 revenue came from digital products and services, and approximately 46% was generated outside the United States.
- Research Publishing & Platforms: Journals, open-access publishing, research platforms, and related services; 52% of consolidated revenue.
- Academic & Professional Learning: Education publishing, digital courseware, professional publishing, training, and learning services; 33% of consolidated revenue.
- Education Services: Online program management and mthree technology talent placement; 15% of consolidated revenue.
Financial performance and key metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $1,941.5 million | $1,831.5 million | +6%; +4% constant currency |
| Gross margin | Approximately 32.2% | Approximately 32.2% | Flat |
| Operating income (loss) | $185.5 million | $(54.3) million | Improved by $239.8 million |
| Net income (loss) | $148.3 million | $(74.3) million | Improved by $222.5 million |
| Diluted EPS | $2.63 | $(1.32) | Improved |
| Adjusted EBITDA | $419.0 million | $355.8 million | +18%; +16% constant currency |
| Adjusted EPS | $2.92 | $2.40 | +22%; +27% constant currency |
| Net cash from operating activities | $359.9 million | $288.4 million | +$71.5 million |
| Free cash flow less product development spending | $256.6 million | $173.2 million | +$83.3 million |
The reported improvement in operating and net income largely reflects the absence of the $202.3 million of goodwill and intangible-asset impairment charges recorded in fiscal 2020. Fiscal 2021 also included $33.3 million of restructuring charges, $74.7 million of intangible amortization, $18.4 million of interest expense, and $8.0 million of foreign-exchange transaction losses.
Segment results
| Segment | FY2021 revenue | Revenue change | Adjusted EBITDA | Margin |
|---|---|---|---|---|
| Research Publishing & Platforms | $1,015.3 million | +7% reported; +5% constant currency | $356.9 million | 35.1% |
| Academic & Professional Learning | $644.5 million | $(1)% reported; $(2)% constant currency | $163.7 million | 25.4% |
| Education Services | $281.6 million | +21% | $50.8 million | 18.0% |
- Research Publishing benefited from a 38% increase in open-access revenue and a 15% increase in article output, partly offset by lower traditional subscription revenue.
- Academic & Professional Learning was pressured by declines in professional learning, print books, and test preparation; digital content revenue increased 22% and digital courseware activations increased 23%.
- Education Services benefited from higher online enrollments, new student starts, OPM growth, and the mthree acquisition. Online enrollment increased 14% and new student starts increased 20%.
Liquidity, debt, capital allocation, and balance sheet
- Cash and cash equivalents were $93.8 million at April 30, 2021, compared with $202.5 million a year earlier; approximately 96% was held outside the United States.
- Total debt was $821.6 million, including $222.9 million of term-loan debt and $586.2 million drawn on the revolving facility. Approximately $664.8 million of unused borrowing capacity remained under the principal credit facilities.
- Wiley was in compliance with its consolidated leverage and interest-coverage covenants at year-end. The company states that operating cash flow, revolving facilities, and available debt financing should satisfy foreseeable needs.
- Net cash used in investing activities was $433.2 million, including $299.9 million for business acquisitions and $77.4 million for technology, property, and equipment.
- Capital expenditures were $103.4 million, including technology, property, and equipment additions and product development spending.
- The quarterly dividend increased to an annualized $1.37 per share. The company repurchased approximately 310,000 shares during fiscal 2021 and retained authorization for $200 million of additional repurchases plus 497,197 shares under a separate authorization.
- Contract liabilities were $545.4 million, primarily representing subscription revenue collected in advance. Negative working capital was $462.7 million, largely due to these advance customer collections.
Material changes versus the prior comparable period
- Revenue increased 6%, driven by Research Publishing & Platforms and Education Services, including contributions from Hindawi and mthree; organic constant-currency revenue increased 1%.
- Profitability improved substantially because fiscal 2020 included $110.0 million of Education Services goodwill impairment, $89.5 million of Blackwell trade-name impairment, and $2.8 million of developed-technology impairment.
- Adjusted Contribution to Profit increased to $218.8 million from $180.7 million; adjusted EBITDA margin was not directly provided on a consolidated basis, but adjusted EBITDA increased to $419.0 million.
- Operating cash flow increased 25% to $359.9 million, while acquisition spending increased to $299.9 million from $229.6 million.
- Hindawi was acquired on December 31, 2020 for approximately $300.1 million. It contributed $12.0 million of revenue and a $2.1 million operating loss during the post-acquisition period.
- The Business Optimization Program generated $33.4 million of fiscal 2021 restructuring charges. The company reduced real-estate occupancy by approximately 12% and expects approximately $9.0 million of run-rate savings in fiscal 2022, including approximately $8.0 million from real-estate actions.
Guidance, outlook, risks, and unusual items
For fiscal 2022, management expects revenue of $2.07 billion to $2.10 billion, adjusted EBITDA of $415 million to $435 million, adjusted EPS of $2.80 to $3.05, and free cash flow of $200 million to $220 million. Expected revenue growth is mid-to-high single digits in Research Publishing & Platforms, low single digits in Academic & Professional Learning, and low teens in Education Services. Management expects higher investments, travel and event costs, depreciation and amortization, and a 22%–23% effective tax rate to temper adjusted earnings growth.
- COVID-19 continued to affect print books, in-person training, test preparation, journal renewals, customer collections, and demand for early-career technology talent. The magnitude and duration of future effects remain uncertain.
- Open-access regulation and the transition from subscription models to publish-and-read arrangements may pressure traditional subscription revenue, although management views open access as a growth opportunity.
- Wiley has substantial goodwill and intangible assets: $1.304 billion of goodwill and $1.015 billion of intangible assets at year-end. Future underperformance or adverse market conditions could result in material impairment charges.
- Foreign exchange exposure is significant; approximately 27% of revenue was denominated in British pounds, 11% in euros, and 7% in other currencies. A 1% change in interest rates on $422.1 million of unhedged variable-rate debt would affect annual net income and cash flow by approximately $3.4 million.
- The company disclosed a technical dissolution of a UK entity holding approximately $188.8 million of net intercompany receivables. Management believes reinstatement is highly likely and expected by the second quarter of fiscal 2022; no material loss or liability was recorded.
- Subsequent to year-end, the UK corporate tax rate was increased from 19% to 25% effective April 2023. Wiley estimates a nonrecurring, noncash deferred-tax expense of approximately $20 million in the quarter ended July 31, 2021.
- Routine litigation is ongoing, but management believes its resolution will not materially affect financial condition or results of operations.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. Hindawi was excluded from management’s internal-control assessment because it represented less than 1% of total revenue and qualifying assets.
Important facts for investors to verify
- Reconcile reported earnings with adjusted EBITDA and adjusted EPS, particularly the effect of restructuring, amortization, foreign exchange, tax benefits, and prior-year impairments.
- Assess whether fiscal 2022 revenue growth and adjusted EBITDA guidance can be achieved while capital expenditures rise to $120 million–$130 million and pandemic-related savings reverse.
- Monitor leverage, refinancing and covenant compliance, particularly debt maturities of approximately $822.1 million through fiscal 2025 and variable-rate exposure.
- Evaluate the sustainability of open-access growth, subscription renewals, article volumes, and the associated economics of comprehensive agreements.
- Track Education Services enrollment, new student starts, mthree demand, and the integration and returns from Hindawi and other acquisitions.
- Review goodwill and intangible-asset sensitivity, pension funding requirements, sales-return reserves, customer credit losses, and the UK tax-rate impact.