John Wiley & Sons Inc. (JW.A) reported first-quarter fiscal 2015 adjusted earnings per share of 56 cents that topped the Zacks Consensus Estimate by a couple of cents while rising 10% year over year.
First-quarter results include one-month operational results from CrossKnowledge.
Revenues grew 7% (or 4% on a constant currency basis) year over year to $437.9 million and came ahead of the Zacks Consensus Estimate of $436 million. Growth at 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.
Adjusted operating profit came in at $49.5 million, up 10% year over year on a constant currency basis, whereas operating margin expanded 80 basis points to 11.3%.
Segment Details
Research: The division reported adjusted revenues of $254.9 million, which remained flat year over year. The quarter witnessed increases in journal subscription and digital books, run down by decline in other revenues (that includes corporate reprints, rights income, and advertising). The segment’s adjusted direct contribution to profit came in at $113.7 million, down 2% year over year (on a constant currency basis). After allocating shared services and administrative expenses, the division’s adjusted contribution was $69.7 million to profit, almost flat compared with prior year quarter.
Education: Revenues for the division grew 12% year over year to $90.7 million. The increase was driven by Deltak, online educational service provider, along with rise in sale of digital & print books. Adjusted direct contribution to profit came in at $28.2 million, up 17% (on a constant currency basis), whereas the division’s contribution was $8.7 million after allocating shared services and administrative expenses, up 58%.
Professional Development: Quarterly revenues grew 10% to $92.3 million, mainly due to contributions from acquisitions. The division contributed nearly $32.6 million to overall profits, up 8% (on a constant currency basis). Contribution to profit after allocating shared services and administrative expenses was $7.8 million, which more than doubled from the year-ago quarter.
Other Financial Details
The company, which competes with Reed Elsevier NV (ENL), Scholastic Corporation (SCHL) and William H. Sadlier, Inc. (SADL), reported cash and cash equivalents of $255.9 million, inventories of $74.6 million and long-term debt of $788 million along with shareholders’ equity of $1,208.3 million.
The company generated negative free cash flow of $123.3 million, as first quarter is traditionally weak due to timing of annual journal subscription cash collections.
Nevertheless, the company bought back 200,492 shares for $12.2 million in the quarter. More than 3 million shares still remain under its repurchase authorization. Moreover, in the quarter, the company raised its dividend by 16% to 29 cents per share.
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 expected earnings are inclusive of a 10 cents dilutive impact from the recent acquisitions. The Zacks Consensus Estimate stands at $3.33 per share.
Zacks Rank
The print media is struggling to keep up with the changing trends, while advertising faces major headwinds. Along with this, volatility in primary raw material prices poses a serious threat to the company’s bottom line. As a result, John Wiley is a Zacks Rank #4 (Sell) stock.
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