John Wiley Beats Q2 Earnings on Acquisitions, Restructuring

John Wiley & Sons Inc. (JW.A) reported second-quarter fiscal 2015 adjusted earnings per share of 90 cents that topped the Zacks Consensus Estimate by a couple of cents while rising 7% year over year (up 8% on constant currency basis).

Revenues grew 6% (6% on a constant currency basis) year over year to $477 million and were ahead of the Zacks Consensus Estimate of $475 million. Growth at the Education segment along with several acquisitions, including CrossKnowledge and Talent Solutions, in the Professional Development segment, aided by a consistent improvement in journal revenues, led to the top-line increase.

With the decline in print media, John Wiley has been shifting its focus to become a more digital services oriented company. In the quarter, digital services contributed 60% to total revenues, as against 53% in the last quarter.

Adjusted operating profit came in at $76 million, up from $70.3 million in the year-ago quarter, whereas adjusted operating margin expanded 30 basis points to 15.9%.

Segment Details (Constant Currency Basis)

Research: The division reported revenues of $264.8 million, up 5% year over year, driven by increase in journal subscription. The segment’s adjusted direct contribution to profit was $121.6 million, up 5% year over year. After allocating shared services and administrative expenses, the division’s adjusted contribution to profit was $78.8 million, up 9% from the prior-year quarter.

Education: Adjusted revenues for the division grew 3% year over year (on a constant currency basis) to $106.5 million. The increase was driven by Deltak, online educational service provider, along with rise in WileyPLUS Workflow Solutions, offsetting decline in sale of print books. Adjusted direct contribution to profit was $40.2 million, almost flat, whereas the division’s contribution to profit was $19.5 million after allocating shared services and administrative expenses, down 11%.

Professional Development: Quarterly revenues grew 14% to $105.7 million, mainly due to contributions from acquisitions. The division contributed nearly $36.8 million to overall profits, down 1%. Contribution to profit after allocating shared services and administrative expenses was $9.7 million, up 2% from the year-ago quarter.

Other Financial Details

The company, which competes with Reed Elsevier NV (ENL), Scholastic Corp. (SCHL) and The New York Times Co. (NYT), reported cash and cash equivalents of $198.9 million, inventories of $70.9 million and long-term debt of $749.5 million along with shareholders’ equity of $1,162.4 million.

The company generated negative free cash flow of $141 million, as first half is traditionally weak due annual journal subscription cash collections.

Nevertheless, the company bought back 532,010 shares for $29.4 million in the quarter bringing the total count for the first half to 732,502 for $41.5 million. More than 2.5 million shares are still available under its repurchase authorization. Moreover, for the first half, the company paid $76 million in dividends.

Fiscal 2015 Outlook

John Wiley reiterated its fiscal 2015 outlook. The company is looking at a mid-single-digit revenue growth for the fiscal and expects earnings to be in the range of $3.25–$3.35. The Zacks Consensus Estimate stands at $3.30 per share.

John Wiley currently is a Zacks Rank #3 (Hold) stock.

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