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$JW.A $JW.B said in Aug. 2016 it signed an agreement to acquire Atypon for $120MM in cash. Atypon hosts 9,000 research journals, one-third of the world's English language journal output, 13MM articles and 1,800 websites. Atypon has over 200 of the world's leading societies and research publishers as customers.
$JW.A stated that the Atypon acquisition was less dilutive than anticipated in FY17 with the dilution being just under $0.10 to the business base. The dilution is expected to remain the same in FY18. In FY19, the company expects the impact to turn neutral to positive.
$JW.A said the nature of the revenue and operating income benefit it is anticipating from FX during FY18 specifically has to do with the Journals business, the nature of the business being the subscriptions are paid in advance. In 2017, $JW.A will see the benefit of the dollar appreciating against the pound sterling in Journals revenue in the UK.
In 4Q17, $JW.A’s revenue from the Research segment grew 3%, constant currency, primarily due to the contribution from Atypon. The Publishing segment, which accounts for 37% of total revenue, saw a 7% growth in revenue, constant currency, with overall books up 6% and Education Books up 28%. Solutions revenue grew 14% constant currency.
During 4Q17, $JW.A continued to make significant strides in digital transformation. 68% of the company’s revenue is currently from digital sources, up from 63% last year. This was the result of several factors including the Atypon acquisition, strong growth in the Solutions business and continued declines in print book sales.
For FY18, $JW.A sees revenue and operating income at constant currency to be approximately even with FY17. For the year, adjusted EPS performance at constant currency is expected to be down low-single digits, while Cash from Operations touted to improve to $350MM or higher.
$JW.A $JW.B signed two new society contracts in 2Q17 with combined annual revenue of $2.7MM; 12 contracts were renewed with combined annual revenue of $7.9MM and one contract with annual revenue of $1.6MM was not renewed. Journal Subscriptions increased 1% on a constant currency basis, with 99% of targeted business contracted for 2016.
$JW.A $JW.B repurchased 193,955 shares for $10MM, with an average of $51.56 per share. The current authorized repurchase programs consists of over 4.3MM shares. Cash and cash equivalents were $267.4MM and free cash flow used was $155.4MM as of Oct. 31, 2016, mainly due to earlier journal cash collections.
$JW.A $JW.B expects the Atypon acquisition to further enhance its Research capabilities with an industry-leading online library platform and expanded Research service offerings. The company acquired Ranku, a recruitment technology and predictive analytics software company, in September. Judy Verses is newly appointed as EVP, Research, in October.
$JW.A $JW.B implemented a new reporting structure comprised of 3 reportable segments such as Research, which includes largely Journals & Atypon; Publishing, which includes Books and related content, Course Workflow and Test Preparation; and Solutions, which include Online Program Management, Corporate Learning and Professional Assessment.
$JW.A $JW.B expects FY17 revenue to be flat and adjusted EPS to decline mid single digit, excluding the impact of foreign exchange. In October, Wiley closed its $120MM Atypon acquisition, which was first announced in August. The platform will replace the current Wiley Online Library platform in 2018.
$JW.A $JW.B's Journals and Atypon revenue declined 1% on a GAAP basis and rose 5% on a constant currency basis to $206MM, driven by a 3% rise in Journal Revenue, including 3% growth in Journal Subscriptions and 27% growth in Author-Funded Access. Publishing revenue fell 7% on a GAAP basis to $163.3MM, or up 5% at constant currency.
$JW.A $JW.B posted a net loss of $11.45MM, or $0.20 per diluted share, compared to net income of $43.6MM, or $0.74 per diluted share in 1Q17. Revenue declined 2% on a GAAP basis and grew 2% on a constant currency basis to $425.6MM. Journal subscription revenue grew 3% on a constant currency basis and declined 2% on GAAP basis.
$JW.A $JW.B said Atypon is expected to increase FY17 sales by about $20MM, but be dilutive to EPS by roughly $0.15. The dilution is the result of a partial writedown of Atypon deferred revenue at closing in accordance with GAAP, amortization of acquired intangibles & incremental cost of transitioning Wiley Online Library to the Literatum platform.
With respect to organic investments, including its ERP and office transformation initiatives, $JW.A $JW.B expects full year 2017 technology, property and equipment investments to be approx. $115MM. The company expects composition spending to be roughly $50MM. In total, these investments will be higher than FY16 by about $30MM.