John Wiley & Sons, Inc.

Good morning and welcome to Wiley's first quarter fiscal year 2020 earnings call. As a reminder, this call is being recorded. At this time, I would like to introduce Wiley's vice president of investor relations, Brian Campbell. Please go ahead.

Hello, everyone, and welcome to Wiley's first quarter 2020 earnings update. With me in the room is Brian Napak, president and CEO, and John Kritzmacher, CFO in EVP operations. A few reminders to start. First, the call is being recorded and may include forward-looking statements. You shouldn't rely on these statements as actual results may differ materially and are subject to factors discussed in our SEC filings. The company does not undertake any obligations to update or revise forward-looking statements to reflect subsequent events or circumstances. Second, Wiley provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends. Non-GAAP metrics, which generally exclude items that impact comparability, comprise the following. Adjusted EPS, free cash flow less product development spending, adjusted operating income and margin, adjusted contribution to profit, adjusted EBITDA, and results on a constant currency basis and results excluding the impact of acquisitions. These performance measures do not have standardized meanings described by U.S. GAAP and therefore may not be comparable to the calculation of similar measures used by other companies. Thank you very much. For those who prefer to listen to the call over the phone but still want to view the slides, we recommend that you click on the Gears icon located in the lower portion of the left-hand side window and select Live Phone. This will eliminate any conflicts in viewing the slide transitions as well as remove any potential background noise if you prefer to ask a question. After the call, a copy of the presentation and a playback of the webcast will be available on our Industrial Relations webpage. I'll now turn the call over to Brian Apak, Wiley's President and CEO.

Thank you, Brian, and thank you all for joining us today. I'm going to start with a brief refresher on the new segment definitions that we announced last quarter. Going forward, we will be reporting on the following three segments, research, publishing, and platforms, education, publishing, and professional learning, and education services. These segments align well with the way we manage the business and with our growth strategy. Research, publishing, and platforms, or research, is essentially unchanged from prior periods. It includes our research journal publishing, our author services and corporate services, and add upon our research platforms business. For context, this segment accounted for over half of Wiley's total revenue this quarter. The second segment, Education, Publishing, and Professional Learning, delivers educational products in the form of content and courseware, test prep programs, corporate training, and digital learning platforms for students, professionals, universities, and corporations. Within this segment, education publishing refers to our higher education and reference publishing and our test prep business. Professional learning refers to our professional development programs, corporate training services, and professional books, which are all focused on the development of skills and capabilities in corporate settings. Education publishing and professional learning accounted for around a third of total Wiley revenue in the quarter. We like the potential synergies and efficiencies enabled by this new alignment. Education Services is our third segment. It delivers tech-enabled services that help universities, corporations, and students to achieve important educational outcomes. This segment includes degree program management and credentialing services such as boot camps. Education Services accounted for 12% of revenue this quarter and is growing nicely. Please see the attached financial schedules for more financial detail regarding these segments and see our August 8th for historical segment restatements. With that context, I'll now give an overview of the key takeaways from our Q1 performance. Overall, performance was mixed in the quarter. Good revenue and EBITDA growth in research and education services offset a decline in education, publishing, and professional learning. I'll walk through the segment results shortly, but I'm generally pleased with the momentum that we saw in key areas of the business, including research publishing overall, We did see a substantial earnings decline year on year, but this was largely anticipated due to our investments in growth and efficiency initiatives across the company. We expect higher revenues for the remaining three quarters, with top-line growth every quarter compared to prior year and a significantly lower rate of decline in earnings than we saw in the first quarter. As such, we're confident that we will meet our full-year outlook. You will note that our outlook has been updated, but only to reflect the impact of our recent Zybox acquisition. Free cash flow performance for the quarter was favorable to prior year by $45 million, driven mostly by clearing out the Q4 backlog of journal subscription collections. John will talk more about this, but we anticipate fiscal year 20 free cash flow to be in the range of $210 to $230 million, up from $149 million in fiscal 19. We continue to make very good progress in implementing our strategy to lead in research and education while enhancing the efficiency and effectiveness of our organization. We'll highlight key elements of this progress below, and we're beginning to see early indicators of success across our businesses. Two notable steps forward in the first quarter were our acquisitions of Newton, which we spoke about last quarter, and now Zyante, a rapidly growing digital courseware business which we acquired for $56 million. Zyante, known in the market as Zybooks, has created a catalog of compelling and effective courses in fast-growing computer science and STEM disciplines and they are gaining very rapid adoption. We'll talk more about the strategic importance of these acquisitions a bit later. But first, I'll go into a bit more detail on the results. On the top line, Wiley's revenue grew 5% for the quarter. Thank you for joining us. Our research business had a positive quarter all around, with revenue up 3% and adjusted EBITDA up 5%. Open access publishing continues to show strong double-digit growth, and we continue to make great progress as a leader in research publishing. To date, we have signed five innovative mixed model publishing deals around the world. To remind you, mixed model is defined as a combination of traditional subscriptions and open access, or pay-to-publish models. These deals include Germany, Norway, the Netherlands, and Ohio and Virginia in the U.S. These are all good deals for both Wiley and for our customers. The common thread in all of them is the creation of new ways to help researchers publish and promote their work while being both scalable and economically beneficial to both sides. The agreement that we announced this quarter with both OhioLINK and Virginia's Academic Library Consortium represent open access solutions well-suited for the U.S. market. Notably, subscriptions continue to be the core model for these customers, with open access, or OA, being complementary and additive. It's important to note that mixed model deals like these are important alongside subscription models, but still remain a relatively small part of the global research publishing business. OA was 6% of our research revenue for fiscal 19, and is consistently growing at strong double-digit rates. Going forward, we expect a healthy mix of business models. Most importantly, Wiley is well positioned to take advantage of the opportunity to publish more through all our business models as global research output continues to increase. Without question, the secret to our long-term success in research is the strength of our journal publishing portfolio. Our global reach includes over 1,600 journal titles, including many of the research community's most highly respected brands. These high impact brands are where leading researchers go to publish their unique and valuable discoveries. Our market share of papers published continues to grow and in the latest annual Clarivate Journal citation reports is a strong 10% and we received a total of 26 number one rankings. Separately, we continue to add important and prestigious society partnerships. Quality matters to the research community and Wiley's portfolio of brands keeps getting stronger. Driven by this and by strong endemic growth in global R&D spending, demand to publish in our journals continues to rise, with article submissions growing at high single-digit rates, significantly above market growth. and our online library usage continues growing at strong double-digit rates, the latter being driven by significant usage growth in Asia. Finally, Adapon, our industry-leading research platform, continues its strong growth. Revenue is up 10% in the quarter and we continue to see good momentum in the pipeline. Moreover, user sessions were up 12% for the trailing 12-month period compared to prior year. for a total of 3.2 billion sessions. That's a huge number, and it reflects the kind of global impact that we're targeting at Wiley. So, overall, it was a good quarter for our research business. Let's move on to education, publishing, and professional learning. The education, publishing part of this segment had a difficult first quarter, with revenue down 10% due to softness in books and test prep. Thank you for joining us. For the full year, we are anticipating marginal revenue growth for the education, publishing, and professional learning segment, inclusive of the Newton and Zybooks contributions. At a more granular level, the decline in test prep revenue reflected lighter demand for our GMAT and CPA programs, while at the same time, we saw good momentum in our CFA and CMA programs, and also in the signing of 26 new university test prep partners. We continue to anticipate double-digit growth in test prep for the year. Despite this, our higher ed publishing business is actually seeing positive momentum in important areas. We've seen good user growth in digital courseware, and we've seen strong early momentum in inclusive access and rental programs, business models that ensure all students have access to our course materials at affordable prices. We are growing our front list in high-demand disciplines like STEM, computer science, and accounting, and we have significantly upgraded our learning technology platforms. We have strong publishing plans in place and believe that we are well on our way to returning our profitable higher education publishing business to growth. Notably, we recently signed up the prestigious American Society for Microbiology to a unique new partnership. Among other things, we'll be launching a new subscription service based on ASM's excellent content and built on our own Adapon platform. This exciting opportunity leverages Wiley's strength in both publishing and platforms. We see many more of these Cross-Wiley opportunities in the future. Our corporate training business continues to demonstrate solid momentum, growing nicely, and signing new training partners to market our professional development programs. In corporate e-learning, Cross Knowledge landed 13 new corporate learning clients this quarter, including BlackRock, and has a strong pipeline for the rest of the year. Wiley Education Services had a good first quarter, with both revenue and EBITDA up significantly. Backing out inorganic contributions from the Learning House acquisition, acquired in November of 2018, growth was about 9%. With the Learning House, revenue was up 69%. Adjusted EBITDA in Education Services rose $2 million, from a $2 million loss to a small profit of The result of added scale, organic revenue, and efficiency gains, including continuing benefit from the Learning House integration. We've always taken a measured, long-term approach to growing this business and feel very good about where we're headed. I'm pleased to see the revenue and EBITDA improvement in this quarter. I'm also pleased with our momentum in signing new partners and expanding programs at existing partners. We signed four new partnerships in the quarter, adding to our industry-leading university footprint. These included Eastern Oregon University and Babson College. We also announced new programs at Northern Illinois University and the University of Birmingham in the UK. I would like to talk a bit now about our two new EdTech acquisitions and how they directly support Wiley's strategy and our future success in education. You will recall that Wiley's goal in education is to lead in high-demand, career-focused disciplines such as STEM Business Finance & Accounting, and Computer Science. These are areas where the Wiley brand is strong, where demand is high due to continued job growth, and where effective digital courseware is absolutely essential to achieving learning outcomes. You will also recall that we are committed to delivering more affordable content solutions and business models that ensure every student can have access to our Wiley content to help them achieve their goals. So, Thank you for joining us. Over the past decade, Newton created one of the most advanced education platforms in the industry. The Newton engine is strongly additives to Wiley's EdTech arsenal and is broadly applicable across our entire education business. Using this platform, Newton today delivers a highly effective but low-cost courseware offering known as ALTA. ALTA courses have been proven to help students succeed in a wide array of large introductory courses in math, economics, statistics, and chemistry. Alta Courseware is currently in use by over 50,000 students, and this number is growing rapidly. On July 1st, we acquired Zybooks for $56 million. Like Newton, Zybooks provides truly innovative, high-impact digital courseware that meets the needs of today's students at a cost that is significantly lower than traditional textbooks. Its digital-first approach to publishing is Delivers engaging content in a package that works for today's students. Built on a unique platform and an innovative approach to teaching and learning, Zybooks drives higher learner engagement and persistence by delivering compelling, easy-to-consume content and hands-on learning. In use, it has been shown to be significantly more effective than traditional content, and it is taking off in the market, especially in the fast-growing computer market. Computing and STEM disciplines that Wiley is targeting. Since 2012, the company has served over 600,000 students at over 600 institutions. The rate of uptake and strong double-digit revenue growth speaks for itself. These two important acquisitions address all three pillars that I outlined earlier, high-demand career-focused disciplines, great ed tech, and affordable solutions. Newton & Zybooks are delivering solutions that the market is demanding and that are strongly additive to Wiley's plans in education. With that, I'll hand the call over to John to run you through the financials.