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John Wiley (JW.A) Stock Gains on Q1 Earnings & Sales Beat

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Shares of John Wiley & Sons, Inc. increased 5.1% during the trading session on Sep 3, thanks to robust first-quarter fiscal 2021 results. Both sales and earnings beat the Zacks Consensus Estimate and grew year over year. We note that the company’s core strategies in open research and online education are boding well with solid gains in Research article output and content consumption. Robust online-enrollment growth and record new adoption of digital courseware also remain tailwinds. The company is benefiting from the market growth trends in Research and Education.

Management did not provide an outlook for fiscal 2021, as it is unable to confidently forecast COVID-19’s impacts on its results. The pandemic has impacted certain traditional revenue sources of the company like physical books and in-person training. However, the company has been taking initiatives to offset the impacts of the economic downturn. Management is also optimistic about momentum in Education and Research, which is likely to continue ahead.

In June, management entered into a 10-year extension of the Cochrane Library partnership. It has also expanded its partnership with AAAS, the American Association for the Advancement of Science. Going forward, John Wiley is eager to add scale and enhance tech-enabled products and services across research and online education. Currently, John Wiley is largely in the work-from-home mode. Nonetheless, it has partly opened a few offices across the world.

Q1 in Detail

John Wiley’s adjusted earnings of 42 cents per share significantly outshone the Zacks Consensus Estimate of 6 cents and increased from 21 cents earned in the year-ago quarter. Also, at constant currency (cc), the metric jumped 124%. Robust revenues, particularly in research, coupled with lower discretionary spending and restructuring savings aided the bottom line.

John Wiley Sons, Inc. Price, Consensus and EPS Surprise

John Wiley  Sons, Inc. Price, Consensus and EPS Surprise

John Wiley Sons, Inc. price-consensus-eps-surprise-chart | John Wiley Sons, Inc. Quote

Revenues of $431.3 million edged up 1.8% year over year (up 2% at cc) and surpassed the Zacks Consensus Estimate of $423.3 million. Excluding acquisitions and currency impact, the metric dipped 1%. Revenue growth at the Research Publishing & Platforms and Education Services segments drove quarterly revenues. This was somewhat offset by decline at the Academic & Professional Learning segment.

Further, the company reported adjusted operating income of $32.3 million that significantly increased from $15.3 million in the year-ago quarter. Also, adjusted EBITDA increased 42.3% year over year to $81.8 million.

Segmental Details

The Research Publishing & Platforms segment consists of Research Publishing and Research Platforms businesses. In fiscal first quarter, revenues grew 5% year over year (6% at cc) to $240.8 million, backed by growth in open-access and content platforms. About $4 million, or 2% of the Research Publishing revenues in the quarter reflected carryover owing to the pandemic-related delays from the previous quarter. Research Publishing increased 3% while Research Platforms grew 10%. The segment’s adjusted contribution to profit increased 19% to $69.6 million.

The Academic & Professional Learning segment includes the Education Publishing and Professional Learning businesses. Revenues in the segment declined 12% both on a reported and cc basis to $126.9 million on persistent market pressure on print books and unfavorable COVID-19 impacts on Professional Learning, mainly in-person corporate training. In Education Publishing, printed textbooks fell sharply while digital content and courseware growth accelerated. The segment’s adjusted contribution was a loss of $0.3 million in the quarter under review. The segment had reported adjusted contribution to profit of $7.7 million in the year-ago period.

The Education Services segment revenues increased 29% both on a reported and cc basis to $63.6 million. The upside was backed by gains from the mthree buyout and a 4% organic improvement in Online Program Management services. Also, the segment’s adjusted contribution to profit came in at $0.7 million against a loss of $5.1 million.

Other Financial Update

John Wiley ended the quarter with cash and cash equivalents of $101.4 million, long-term debt of $835.8 million and total shareholders’ equity of $973.7 million.

This Zacks Rank #4 (Sell) company used $120.8 million of cash from operating activities during the first three months of fiscal 2021. Further, it provided negative free cash flow (net of Product Development Spending) of $145.1 million during the fiscal first quarter. Capital expenditures, including technology, property, equipment and product development costs were $24 million in the reported quarter. For fiscal 2021, capital expenditures are projected at roughly $100 million.

In June, management modestly raised its quarterly dividend for the 27th straight year to $0.3425 per share. The company’s current dividend yield is above 4%. Owing to the economic downturn, the company refrained from buying back shares, and anticipates resuming share repurchases as the economy recovers.

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