John Wiley & Sons Inc. (NYSE:JW.B) Q4 2016 Earnings Conference Call - Final Transcript

Jun 14, 2016 • 10:00 am ET

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John Wiley & Sons Inc. (NYSE:JW.B) Q4 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning and welcome to the Wiley's Fourth Quarter Earnings Call. As a reminder this call is being recorded. At this time I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead, sir.

Executive
Brian Campbell

Thank you, Jim. Good morning and welcome to Wiley's fourth quarter and FY16 earnings call. (Forward-looking cautionary statements) For those preferring to listen to the call over the phone, but still want to view the slides we recommend you click on the gears icon located on the lower portion of the left-hand side window and select live phone. This will eliminate any delays 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 Investor Relations page.

I'll now turn the call over to Mark Allin, Wiley's President and CEO.

Executive
Mark Allin

Thank you, Brian. Good morning. In addition to Brian, I am joined by John Kritzmacher, CFO and Executive Vice President Technology and Operations. I'll speak to business performance and John will follow with an update on operations, balance sheet, and cash flow. We will both then take you through our outlook before I open it up for questions.

Please note that I'll be excluding the impact of foreign exchange and the transitional non-cash impact of shifting to time-based journal subscriptions when commenting on all variances. Foreign exchange was a significant headwind in fiscal 2016. For the full year the unfavorable impact to revenue and EPS was approximately $61 million and $0.13, respectively. The impact moderated in the fourth quarter however, with a $4 million revenue hit and a $0.01 EPS gain.

As anticipated, both revenue and adjusted EPS was flat on a constant currency basis and excluding the transitional impact of time-based earnings. As a reminder, Wiley transitioned from issue-based to time-based digital journal subscriptions for calendar year 2016 to simplify the contracting and administration of these agreements.

For the year, the adverse transitional impact of this change was $37 million of revenue, $32 million in operating income, and $0.42 of EPS. The change did not impact free cash flow. For the most part, I will be excluding this transitional impact in my discussion, referring to results on an operational basis.

It was a year characterized by investments. We continue to invest in the digital transformation of our publishing business and in our new solutions businesses.

We completed the first phase of our ERP deployment to enable improved efficiencies and cost savings. And we commenced the transformation of our headquarters which will reduce our footprint and enable improved productivity. We outsourced our US distribution operation to Cengage Learning. And we completed the consolidation of our books businesses. In summary, we continued to make moves that will benefit us in the long run.

At the same time, our foundation remains strong. Our journals business, making up nearly 50% of our revenue, continues to show steady operational