• Revenue growth of 9% currency neutral (5% on a reported basis)
• Revenue growth by segment, excluding FX: STMS 7%, P/T 12%, HE 12%
• Operating income growth of 26% currency neutral (13% reported)
• Excluding a $0.07 per share non-cash tax benefit, EPS grew 40% on a currency neutral basis.
For the first quarter, revenue grew 5% to $408 million, or 9% on a currency neutral basis. Strong growth in Professional/Trade (P/T) and Higher Education (HE) drove top-line results, with mid-single digit revenue growth in STMS, excluding the unfavorable impact of foreign exchange.
Operating income grew 13% to $63 million, or 26% on a currency neutral basis. Growth was driven by strong top-line results and improved gross margin due to increased digital revenue.
Earnings per share (EPS) rose 60% in the quarter to $0.72, or 56% on a currency neutral basis, reflecting increased operating income, reduced interest expense, and a deferred tax benefit. In July, the UK enacted legislation to reduce corporate income tax rates by 1% to 27%, effective April 1, 2011. The Company reported a $4.2 million ($0.07 per share) non-cash deferred tax benefit from the rate reduction. The Company’s effective income tax rate excluding the UK tax benefit increased 2.5% to 30.1%. Excluding the deferred tax benefit and foreign exchange, EPS increased 40% in the quarter.
"We are pleased with our strong first quarter performance, as reflected in solid top-line growth and improved profitability," said William J. Pesce, President and CEO. "Our strategy of investing in 'must-have' content and enabling technology continues to yield positive results. During the past decade, technology investments have transformed our business by opening new distribution channels and revenue streams, which are enabled by innovative business models. Wiley is providing more access to more content by more people around the world than ever before in its 203-year history."
He continued, "In August, we launched Wiley Online Library to enhance discoverability, improve search, allow greater personalization, provide more services, and create new revenue streams. The transition to Wiley Online Library from Wiley InterScience, which was launched 11 years ago, was achieved successfully. In all of our businesses, we are experiencing growth in sales of digital content. We recently added Google to the extensive list of eBook channel partners. Margins in our Higher Education business continue to improve with the growth of WileyPLUS, digital content sales to institutions, customized offerings, and low-cost print products."
Mr. Pesce added, "We continue to implement carefully developed plans for the next generation of Wiley leadership. Effective August 1, 2010, Mark Allin succeeded Stephen Kippur as Senior Vice President, Professional/Trade. Mark joined Wiley with the acquisition of Capstone in 2000 and became Vice President and Managing Director, Wiley Asia in 2003. He has a distinguished track record in professional and educational publishing, having held senior positions at two large publishers prior to becoming co-founder of Capstone in 1996. His role as the leader of Wiley Asia provided him with valuable experience across all three Wiley businesses."
Mr. Pesce concluded: "Based on first quarter results, market conditions, and leading indicators, we reiterate our fiscal year 2011 guidance of mid-single-digit revenue growth on a currency neutral basis. Excluding the effect of foreign exchange and the UK deferred tax benefit, we continue to project EPS growth of approximately 10% from fiscal year 2010 adjusted EPS of $2.58. For comparative purposes, the full year weighted average foreign exchange rates reflected in Wiley’s income statement for fiscal year 2010 were approximately 1.60 Sterling and 1.40 Euro."
The foregoing and following references to "currency neutral basis"; "excluding foreign exchange"; and "performance basis" exclude the effect of foreign exchange transactions and translations.
SCIENTIFIC, TECHNICAL, MEDICAL, AND SCHOLARLY (STMS)
• Revenue +7% on a currency neutral basis;
• Contribution to profit +9% on a currency neutral basis;
• Wiley Online Library launched successfully in August;
• Major online book agreement with Saudi Arabian consortium;
• Wiley journals receive highest recognition for influence and impact.
For the first quarter, STMS revenue was flat at $229 million, or 7% higher on a currency neutral basis. Higher journal subscription revenue and sales of rights, licenses, and backfiles were offset by lower reprint and advertising revenue. As of July 31, calendar year 2010 subscription billings increased 3% on a currency neutral basis, which is consistent with our expectations.
Book revenue on a currency neutral basis grew 22%, reflecting a new online book license with a consortium in Saudi Arabia and growth in other publishing income. Book revenue increased in all regions on a performance basis.
Direct contribution to profit was flat at $94 million, but up 9% on a currency neutral basis, reflecting top-line results and gross margin improvement related to eBook revenue, partially offset by increased editorial costs associated with society journals.
Wiley Online Library
Wiley Online Library, one of the world's broadest and deepest multidisciplinary collections of online resources, covering life, health, and physical sciences; the social sciences; and the humanities, was launched successfully in August. Built on the latest technology and designed with extensive input from scholars around the world, Wiley Online Library delivers seamless integrated access to over four million articles from 1,500 journals, 9,000 books, and hundreds of reference works, laboratory protocols, and databases. Key features and enhancements include:
• Revenue opportunities, including new applications and business models, online advertising, deeper market penetration, and individual sales/pay-per-view
• An easy-to-use interface providing intuitive navigation and fast access to online content;
• Research tools to enable the discovery of available resources and help pinpoint information;
• Personalization options to keep up-to-date on the latest research with content alerts and RSS feeds and the ability to store key publications and articles for future reference;
• Customizable product home pages that allow journal and society communities to highlight key features and share news and information;
• Access icons that identify the content available to customers through institutional licenses, society membership, and author-funded Online Open publication, as well as freely available content.
• 13 new society journals signed
• 15 renewals/extensions
• One journal not renewed
Key New Contracts:
• Eleven journals on behalf of the British Psychological Society (BPS). The BPS is the second largest psychological society in the world with approximately 50,000 members. The journals were previously self-published.
• Acta Obstetricia et Gynecologica on behalf of the Nordisk Förening för Obstetrikoch Gynekologi, a federation of five national societies of obstetricians and gynaecologists in Denmark, Norway, Finland, Iceland, and Sweden.
• Journal of the European Economic Association on behalf of the European Economic Association (EEA). The EEA is the third highest profile economic society in the world, thereby strengthening Wiley’s position as the world’s leading publisher of society journals in this field.
A publishing agreement was signed for a joint venture with the Society of Chemical Industry to launch a new electronic journal entitled, Greenhouse Gases: Science and Technology.
• eBook sales nearly doubled over prior year, excluding a large, one-time online book license with a consortium in Saudi Arabia.
• Online advertising sales, which is a key feature of Wiley Online Library, continued to gain traction.
• A pilot project was launched with Scivee, a leading video platform solutions provider to the STM market, to create synchronized video presentations by Wiley authors. The primary objective of this pilot is to test the impact of new media on article usage.
In the first quarter, Wiley announced that two-thirds of its journals have an Impact Factor according to the recently released Thomson ISI® 2009 Journal Citation Reports, a leading evaluator of journal influence and impact. Impact Factor is a score reflecting the frequency that peer-reviewed journals are cited by researchers. Wiley has a higher percentage of its journals with an Impact Factor than any other major publisher.
• Of these ranked journals, nearly a quarter are in the top ten in one or more subject categories, while two-thirds are in the top half. Fifty-one new Wiley journals were added to the listing for 2009.
• Wiley has thirty-six #1 rankings.
o Physical Sciences and Chemistry: four #1 rankings, including Mass Spectrometry Reviews for the 11th consecutive year and Advanced Synthesis and Catalysis for its 7th year.
o Life Sciences: nine #1 rankings, including five newcomers and four repeats from last year: Aging Cell, Global Ecology and Biogeography, Human Brain Mapping and Journal of Avian Biology.
o Social Sciences and Humanities: thirteen #1 rankings, including: Child Development (#1 for the fifth consecutive year), Econometrica, Industrial Relations, and Journal of Computer-Mediated Communication. Seventy-five Wiley journals are ranked in the top ten of their respective categories.
o Health Sciences: ten #1 rankings and an additional fifty in the top ten. The journal CA – A Cancer Journal for Clinicians, published on behalf of The American Cancer Society, was awarded the highest Impact Factor among all medical journals.
• Revenue +12% on a currency neutral basis;
• Contribution to profit +33% on a currency neutral basis;
• Strong growth in all regions;
• eBook revenue doubled over prior year;
• eBook channel partners include Amazon, Apple, Barnes & Noble, Borders, CourseSmart, Google, and many others.
P/T revenue grew 11% to $100 million in the first quarter, or 12% on a currency neutral basis. Sales growth was strong in all regions, with the Americas up 10%, EMEA up 35%, and Asia-Pacific up 14%, on a currency neutral basis.
Direct contribution to profit rose 32% to $22 million for the quarter, or 33% on a currency neutral basis. Results were driven by top line growth, product mix, and higher-margin eBook sales, partially offset by increased employment costs.
Categories (currency neutral)
• Business advanced 13% in the quarter, with sales strong through all channels and in all regions. eBook sales were strong.
• Consumer declined 7% in the quarter against a strong prior year.
• Technology was up 31% in the quarter due to the success of books related to MS Office 2010 and the iPad, as well as global growth across the professional and certification lines.
• Education grew 37% in the quarter, fueled by the best seller Teach Like a Champion by Doug Lemov.
• Architecture was flat compared to prior year.
• Psychology grew 13% in the quarter.
• eBook sales doubled this quarter to nearly $4 million.
• Wiley has agreements with several eBook channel partners, including Amazon (Kindle), Apple (iPad), Barnes & Noble (Nook), Borders (Kobo), CourseSmart, Google, and many others.
• Approximately 2,000 eBooks are already available through the Apple iBook store. Over 9,000 Wiley books are available on Amazon’s Kindle store, which can also be read on the iPad.
• In June, Wiley signed an eBook agreement with Google.
Other Digital Initiatives/Products
• LPI Online (Leadership Practice Inventory), a comprehensive suite of online leadership tools, including assessment instruments typically administered by human resource professionals, launched ten new feature enhancements and implemented a new, more streamlined user registration process. The number of registered users doubled quarter-over-quarter to 110,000.
• Frommers Unlimited launched a private-label travel section for AARP (our first delivery from the new application called Online Delivery Framework) that included 100 destination guides with custom overviews. Also launched this quarter was a new Alitalia destination guide service covering 45 of its key routes in English and Italian.
• In June, Wiley announced a partnership with RSMeans, a division of Reed Construction Group, to become its exclusive publisher and distributor of professional reference books. In addition to managing the current reference collection, Wiley and RSMeans will launch a branded series of new reference books over the next several years, primarily targeting the commercial and residential construction markets, in both print and digital formats.
• Business and Finance: Marketing Lessons from the Grateful Dead: What Every Business Can Learn from the Most Iconic Band in History by David Meerman Scott and Brian Halligan; Business Model Generation: A Handbook for Visionaries, Game-Changers and Challengers by Alexander Osterwalder; Valuation 5e, a book published with McKinsey; Little Book of Bull Moves by Peter Schiff; and Coherent Stress Testing by Riccardo Rebonato
• Consumer: Good Stuff Cookbook by Spike Mendelsohn, former “Food Network Top Chef” contestant; You Can Can, a Better Homes and Gardens book; Dora and Diego Let’s Cook, a Nickelodeon book; and nine Essentials For Dummies books, including Algebra I, Pre-Algebra, and Grammar
• Technology: iPad For Dummies by Ed Baig and Bob LeVitus, and MS Office For Dummies DVD and Office For Dummies author profile videos
• Psychology: Handbook of Social Psychology eMRW, the foremost reference that academics, researchers and graduate students rely on for current, well-researched, and thorough information covering the field of social psychology
HIGHER EDUCATION (HE)
• Revenue +12% on currency neutral basis
• Contribution to profit +24% on a currency neutral basis
• Sales driven by strong frontlist, digital sales, and increased enrollment
• Revenue from eBooks, digital content sold directly to institutions, binder editions, and custom publishing grew by 33% and represented 21% of the global HE business during the quarter
• WileyPLUS billings grew 13% over prior year to $12 million, while billings outside the US increased to 18% of global WileyPLUS billings
• Reflecting the benefit of increased sales of digital products, gross margin improved as a percentage of revenue by 2.7 percentage points to 69.5%
First quarter HE revenue grew 14% to $79 million, or 12% on a currency neutral basis. Strong growth occurred in every region and nearly every subject category. Contributing to the results were a strong frontlist, increased enrollment, and revenue from eBooks, digital content sold directly to institutions, binder editions, and custom publishing.
Direct contribution to profit improved 26% from prior year to $32 million, or 24% on a currency neutral basis. Top-line growth and improved gross margin from higher digital revenue drove the results.
Global Revenue (currency neutral)
• Americas grew 14% to $60 million
• EMEA rose 12% to $5 million
• Asia-Pacific advanced 5% to $14 million
Sales Results by Subject (currency neutral)
• Engineering and Computer Science revenue increased 31%. Growth was driven primarily by Callister: Materials Science 8e, Rainer: Intro to IS 3e, Montgomery: Applied Statistics 5e, and Horstmann: Big Java 4e and Java for Everyone 1e.
• Science revenue increased 20%. Books driving growth include Halliday: Physics 9e, Solomons: Organic Chemistry 10e, Grosvenor: Visualizing Nutrition 1e, and Karp: Cell and Molecular Biology 6e.
• Business and Accounting revenue was flat compared to a strong quarter in the prior year. Weygandt: Financial Accounting 7e and Managerial Accounting 5e, Schermerhorn: Organizational Behaviour 11e, and Boone: Contemporary Business 13e Update contributed to the results.
• Social Science revenue increased 18%. Key books include deBlij: Regions 14e, Gisslen: Cooking 7e, Comer: Psychology 1e, and Strahler: Physical Geography 5e.
• Mathematics revenue was up slightly. Results were driven by Hughes Hallet: Applied Calculus 4e and Mann: Statistics 7e.
• Microsoft Online Academic Course (MOAC) revenue increased 28%, attributable to growth in the Windows Server books.
• Global billings of WileyPLUS grew 13% to $12 million.
• Digital-only billings (not packaged with a print textbook) grew 26% to $4 million.
• Billings of WileyPLUS outside the US were $2 million, or 18% of global WileyPLUS billings.
• Deferred WileyPLUS revenue as of July 31 was $12 million, compared with $11 million a year ago.
The Company provides income measures referred to as adjusted EPS, which, exclude certain items, Management believes the exclusion of such items provides additional information to facilitate the analysis of results. These non-GAAP measures are not intended to replace the financial results reported in accordance with GAAP.
Wiley will hold a conference call today, September 9 at 10:00 am (EDT) to discuss its financial results for the first quarter of fiscal year 2011.
To participate in the conference call, please dial the following number approximately ten minutes prior to the 10:00 am start time: (866) 551-3680 and enter the participant code 2849236#. International callers, please dial the following number approximately ten minutes prior to the 10:00 am start time: (212) 401-6760 and enter the participant code 2849236#.
You may also listen to a live audio webcast of the call by accessing online.
A replay of the conference call will be available through September 16, 2010 and may be accessed by calling (866) 551-4520 and entering pin code 265956#. Additionally, an archive of the webcast will be available at 1:30 pm on Thursday, September 9 for a period of up to 14 days.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This release contains certain forward-looking statements concerning the Company's operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change based on many important factors. Such factors include, but are not limited to (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company's journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company's educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company's ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities and (x) other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.
Founded in 1807, John Wiley & Sons, Inc. (wiley.com) has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley and its acquired companies have published the works of more than 400 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace.
Our core businesses publish scientific, technical, medical, and scholarly journals, encyclopedias, books, and online products and services; professional/trade books, subscription products, training materials, and online applications and Web sites; and educational materials for undergraduate and graduate students and lifelong learners. Wiley's global headquarters are located in Hoboken, New Jersey, with operations in the U.S., Europe, Asia, Canada, and Australia. The Company is listed on the New York Stock Exchange under the symbols JWa and JWb.