JOHN WILEY & SONS, INC. The information in our Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read together with our Consolidated Financial Statements and related notes set forth in Part II, Item 8, as well as the discussion included in Part I, Item 1, "Business," "Cautionary Notice Regarding Forward-Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995" and "Non-GAAP Financial Measures," along with Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K. All amounts and percentages are approximate due to rounding and all dollars are in thousands, except per share amounts or where otherwise noted. When we cross-reference to a "Note," we are referring to our "Notes to Consolidated Financial Statements," in Part II, Item 8, "Financial Statements and Supplementary Data" unless the context indicates otherwise.
Overview
Wiley is a global leader in scientific research and career-connected education, unlocking human potential by enabling discovery, powering education, and shaping workforces. For over 200 years, Wiley has fueled the world's knowledge ecosystem. Today, our high-impact content, platforms, and services help researchers, learners, institutions, and corporations achieve their goals in an ever-changing world. Wiley is a predominantly digital company with approximately 83% of revenue generated by digital products and tech-enabled services, and 58% of revenue is recurring which includes revenue that is contractually obligated or set to recur with a high degree of certainty for the year endedApril 30, 2022 .
We report financial information for the following segments, as well as a Corporate category, which includes certain costs that are not allocated to the reportable segments:
•
• Academic & Professional Learning
• Education Services Through theResearch Publishing & Platforms segment, we provide peer-reviewed STM publishing, content platforms, and related services to academic, corporate, and government customers, academic societies, and individual researchers. The Academic & Professional Learning segment providesEducation Publishing and Professional Learning content and courseware, training, and learning services, to students, professionals, and corporations. The Education Services segment provides University Services (online program management or OPM services) for academic institutions and Talent Development Services including placement and training for professionals and businesses. Wiley's business strategies are tightly aligned with accelerating growth trends, including open research, career-connected education, and talent development. Research strategies include driving publishing output to meet the global demand for peer-reviewed research and expanding platform and service offerings for corporations and societies. Education strategies include expanding online degree programs and driving online enrollment for university partners, scaling digital content and courseware, and expanding IT talent placement and reskilling programs for corporate partners. Wiley has operations inRussia consisting primarily of technology development resources. We have exercised contingency plans to minimize any disruption if we were to lose access to our staff. If that should occur, we believe it will not materially impact our overall operations. As ofApril 30, 2022 , the net assets of our Russian operations were not material to our overall financial position. We have customers inRussia , primarily for our Research offerings, which are not material to our overall financial results. We do not have operations inUkraine orBelarus , and the business conducted in those countries is also not material to our overall financial results.
Consolidated Results of Operations
FISCAL YEAR 2022 AS COMPARED TO FISCAL YEAR 2021 SUMMARY RESULTS
Revenue:
Revenue for the year ended
See the "Segment Operating Results" below for additional details on each segment's revenue and Adjusted EBITDA performance.
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Cost of Sales:
Cost of sales for the year endedApril 30, 2022 increased$75.3 million , or 12%, as compared with the prior year. On a constant currency basis, cost of sales increased 11% as compared with the prior year. This increase was primarily due to higher employee costs and, to a lesser extent, higher student acquisition costs in Education Services, increased royalty costs inResearch Publishing & Platforms, and increased print product costs in Academic & Professional Learning.
Operating and Administrative Expenses:
Operating and administrative expenses for the year endedApril 30, 2022 increased$56.9 million , or 6%, as compared with the prior year. On a constant currency basis, operating and administrative expenses increased 5% as compared with the prior year primarily reflecting higher editorial costs due to additional resources to support investments in growth, technology costs to support growth initiatives, higher advertising and marketing costs and, to a lesser extent, higher employee-related costs.
Restructuring and Related (Credits) Charges:
For the years endedApril 30, 2022 and 2021, we recorded pretax restructuring credits of$1.4 million and charges of$33.3 million , respectively primarily related to our Business Optimization Program. We anticipate$10.0 million in run rate savings from actions starting in fiscal year 2022. InNovember 2020 , in response to the COVID-19 pandemic and the Company's successful transition to a virtual work environment, we increased use of virtual work arrangements for postpandemic operations. As a result, we expanded the scope of the Business Optimization Program to include the exit of certain leased office space beginning in the third quarter of fiscal year 2021, and the reduction of our occupancy at other facilities. We are reducing our real estate square footage occupancy by approximately 12%. These actions resulted in a pretax restructuring charge of$18.3 million in the year endedApril 30, 2021 . In addition, we also incurred ongoing facility-related costs associated with certain properties that resulted in additional restructuring charges of$1.8 million and$3.7 million in the years endedApril 30, 2022 and 2021, respectively. These actions yielded annualized cost savings of approximately$8.0 million . We anticipate ongoing facility-related costs associated with certain properties to result in additional restructuring charges in future periods.
These (credits) charges are reflected in Restructuring and related (credits) charges in the Consolidated Statements of Income (Loss). See Note 7, "Restructuring and Related (Credits) Charges" for more details on these (credits) charges.
For the impact of our restructuring program on diluted earnings per share, see the section below, "Diluted Earnings per Share (EPS)."
InMay 2022 , the Company initiated a global program to restructure and align our cost base with current and anticipated future market conditions. This program will include the exit of certain leased office space beginning in the first quarter of fiscal year 2023 and the reduction of our occupancy at other facilities. In addition, the program will include severance related charges for the elimination of certain positions. These actions are estimated to result in an initial pretax restructuring charge of approximately$19.0 million to$21.0 million in the first quarter of fiscal year 2023.
These actions are anticipated to yield approximately
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Amortization of Intangible Assets:
Amortization of intangible assets was$84.8 million for the year endedApril 30, 2022 , an increase of$10.2 million , or 14%, as compared with the prior year. On a constant currency basis, amortization of intangible assets increased 13% as compared with the prior year primarily due to the intangibles acquired as part of the Hindawi acquisition completed in fiscal year 2021 and, to a lesser extent, other acquisitions completed in fiscal year 2022, partially offset by the completion of amortization of certain acquired intangible assets. See Note 4, "Acquisitions" for more details on our acquisitions.
Operating Income, Adjusted Operating Income (OI) and Adjusted EBITDA:
Operating income for the year endedApril 30, 2022 increased$33.8 million , or 18% as compared with the prior year on a reported and on a constant currency basis. The increase was primarily due to the increase in revenue and, to a lesser extent, lower restructuring charges, partially offset by an increase in cost of sales and operating and administrative expenses. Adjusted OI on a constant currency basis and excluding restructuring (credits) charges decreased 1% as compared with the prior year primarily due to an increase in cost of sales, operating and administrative expenses and, to a lesser extent, amortization of intangible assets, partially offset by higher revenues as described above.
Adjusted EBITDA on a constant currency basis and excluding restructuring (credits) charges, increased 3%, as compared with the prior year primarily due to revenue performance, partially offset by an increase in operating and administrative expenses, and cost of sales.
Adjusted OI
Below is a reconciliation of our consolidated US GAAP Operating Income to
Non-GAAP Adjusted OI:
Year Ended
April 30,
2022 2021
US GAAP Operating Income $ 219,276 $ 185,511
Adjustments:Restructuring and related (credits) charges (1,427 ) 33,310 Non-GAAP Adjusted OI
$ 217,849 $ 218,821 Adjusted EBITDA Below is a reconciliation of our consolidated US GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA: Year Ended April 30, 2022 2021 Net Income$ 148,309 $ 148,256 Interest expense 19,802 18,383 Provision for income taxes 61,352 27,656 Depreciation and amortization 215,170 200,189 Non-GAAP EBITDA 444,633 394,484
Restructuring and related (credits) charges (1,427 ) 33,310 Foreign exchange transaction losses
3,192 7,977
Gain on sale of certain assets (3,694 ) -
Other income, net (9,685 ) (16,761 )
Non-GAAP Adjusted EBITDA $ 433,019 $ 419,010
29
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Interest Expense:
Interest expense for the year endedApril 30, 2022 was$19.8 million compared with the prior year of$18.4 million . This increase was due to a higher average debt balance outstanding, which included borrowings for the funding of acquisitions and, to a lesser extent, higher weighted average effective interest rate.
Foreign Exchange Transaction Losses:
Foreign exchange transaction losses were$3.2 million for the year endedApril 30, 2022 and were primarily due to losses on our foreign currency denominated third-party and, to a lesser extent, intercompany accounts receivable and payable balances due to the impact of the change in average foreign exchange rates as compared to the US dollar. Foreign exchange transaction losses were$8.0 million for the year endedApril 30, 2021 and were due to the unfavorable impact of the changes in exchange rates on US dollar cash balances held in theUK to fund the acquisition of Hindawi and the net impact of changes in average foreign exchange rates as compared to the US dollar on our third-party accounts receivable and payable balances.
Gain on Sale of Certain Assets:
The gain on the sale of certain assets is due to the sale of our world languages product portfolio which was included in our Academic & Professional Learning segment and resulted in a pretax gain of approximately$3.7 million during the year endedApril 30, 2022 . Other Income, Net: Other income, net was$9.7 million for the year endedApril 30, 2022 , a decrease of$7.1 million , or 42%, as compared with the prior year. This decrease was primarily due to$3 million in donations and pledges made in the year endedApril 30, 2022 to humanitarian organizations to provide aid to those impacted by the crisis inUkraine .
Provision for Income Taxes:
Below is a reconciliation of our US GAAP Income Before Taxes to Non-GAAP
Adjusted Income Before Taxes:
Year Ended
April 30,
2022 2021
US GAAP Income Before Taxes $ 209,661 $ 175,912
Pretax Impact of Adjustments:
Restructuring and related (credits) charges (1,427 ) 33,310
Foreign exchange losses (gains) on intercompany transactions 1,513
(1,457 )
Amortization of acquired intangible assets 89,346 79,421
Gain on sale of certain assets (3,694 )
-
Non-GAAP Adjusted Income Before Taxes$ 295,399 $ 287,186 30 Index
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Below is a reconciliation of our US GAAP Income Tax Provision to Non-GAAP Adjusted Income Tax Provision, including our US GAAP Effective Tax Rate and our Non-GAAP Adjusted Effective Tax Rate:
Year Ended
April 30,
2022 2021
US GAAP Income Tax Provision $ 61,352 $ 27,656
Income Tax Impact of Adjustments (1):
Restructuring and related (credits) charges (260 ) 8,065
Foreign exchange losses (gains) on intercompany transactions 597
(363 )
Amortization of acquired intangible assets 20,816 18,511
Gain on sale of certain assets (922 )
-
Income Tax Adjustments:
Impact of increase in
(21,415 ) (3,511 )
Impact of US CARES Act(3) - 13,998
Impact of change in certain US state tax rates in 2021(2) - (3,225 ) Non-GAAP Adjusted Income Tax Provision$ 60,168
US GAAP Effective Tax Rate 29.3 % 15.7 % Non-GAAP Adjusted Effective Tax Rate 20.4 %
21.3 %
(1) For the year ended
from deferred taxes. For the year ended
million current tax impact from the US CARES Act noted below, substantially
all of the tax impact was from deferred taxes.
(2) These adjustments impacted deferred taxes in the years ended
and 2021.
(3) The tax impact was
deferred taxes in the year ended
The effective tax rate was 29.3% for the year endedApril 30, 2022 , compared to 15.7% for the year endedApril 30, 2021 . Our rate for the year endedApril 30, 2022 was increased by$21.4 million from an increase in theUK statutory rate during our three months endedJuly 31, 2021 . OnJune 10, 2021 , theUK increased its statutory corporate tax rate from 19% to 25% effectiveApril 2023 , resulting in this nonrecurring, noncash US GAAP deferred tax expense. The 15.7% tax expense rate for the year endedApril 30, 2021 benefitted by$14.0 million from the Coronavirus Aid Relief and Economic Security Act (the CARES Act) and certain regulations issued in lateJuly 2020 , which enabled us to carryback certain net operating losses (NOLs) to a year with a higher statutory tax rate. Excluding the expense from theUK rate change, the Non-GAAP Adjusted Effective Tax Rate for the year endedApril 30, 2022 was 20.4%. The Non-GAAP Adjusted Effective Tax Rate for the year endedApril 30, 2021 , excluding the impact of theUK statutory rate change, the CARES Act, and state tax expense from rate changes, was 21.3%. The Non-GAAP Adjusted Effective Tax Rate before these items decreased because the year endedApril 30, 2021 included US state tax expenses from our expanded presence from COVID-19 and employees working in additional locations.
Diluted Earnings Per Share (EPS):
Diluted earnings per share for the year endedApril 30, 2022 was$2.62 per share compared to$2.63 per share in the prior year. This decrease was due to a higher weighted average number of common shares outstanding in the year endedApril 30, 2022 as net income was flat compared to the year endedApril 30, 2021 . Net income was flat as higher operating income and, to a lesser extent, lower foreign exchange losses and the gain on sale of certain assets were offset by higher provision for income taxes and, to a lesser extent, lower other income, net. 31 Index
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Below is a reconciliation of our US GAAP EPS to Non-GAAP Adjusted EPS. The
amount of the pretax and the related income tax impact for the adjustments
included in the table below are presented in the section above, "Provision for
Income Taxes."
Year Ended
April 30,
2022 2021
US GAAP EPS $ 2.62 $ 2.63
Adjustments:
Restructuring and related (credits) charges (0.02 ) 0.44
Foreign exchange losses (gains) on intercompany transactions 0.02
(0.02 ) Amortization of acquired intangible assets 1.21
1.08
Gain on sale of certain assets (0.05 ) - Income tax adjustments 0.38 (0.13 ) Non-GAAP Adjusted EPS$ 4.16 $ 4.00 On a constant currency basis, Adjusted EPS increased 1% primarily due to a lower Non-GAAP Adjusted Effective Tax Rate, partially offset by lower Other income, net and, to a lesser extent, lower Adjusted OI.
SEGMENT OPERATING RESULTS:
Constant Currency
Year Ended % Change % Change
April 30, Favorable Favorable
RESEARCH PUBLISHING & PLATFORMS: 2022 2021 (Unfavorable) (Unfavorable)
Revenue:
Research Publishing $ 1,057,022 $ 972,512 9 % 8 %
Research Platforms 54,321 42,837 27 % 27 %
9 % 9 %
Cost of Sales 300,373 275,377 (9 )% (8 )%
Operating Expenses 468,012 429,916 (9 )% (9 )%
Amortization of Intangible Assets 47,731 37,033 (29 )% (28 )%
Restructuring Charges (Credits) (see Note 7) 238 (36 ) # #
Contribution to Profit 294,989 273,059 8 % 9 %
Restructuring Charges (Credits) (see Note 7) 238 (36 ) # #
Adjusted Contribution to Profit 295,227 273,023 8 % 9 %
Depreciation and Amortization 94,899 83,866 (13 )% (13 )%
Adjusted EBITDA $ 390,126 $ 356,889 9 % 10 %
Adjusted EBITDA Margin 35.1 % 35.1 %
# Not meaningful
Revenue:
Research Publishing & Platforms revenue for the year ended April 30, 2022
increased $96.0 million , or 9%, as compared with the prior year on a reported
and constant currency basis. Excluding revenue from acquisitions, organic
revenue increased 5% on a constant currency basis. This increase was primarily
due to an increase in publishing, corporate solutions and, to a lesser extent,
an increase in Research Platforms. Research Publishing has continued growth due
to Transformational Agreements (read and publish). Excluding the impact from
acquisitions, Open Access article output growth was approximately 27% for the
year ended April 30, 2022 as compared with the prior year.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 10% as compared with the
prior year. This increase was primarily due to higher revenue, partially offset
by higher editorial costs due to additional resources to support investments in
growth, which includes the impact of the acquisition of Hindawi and, to a lesser
extent, higher cost of sales including the incremental impact of acquisitions,
technology, and sales-related costs.
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Year Ended % Change Constant Currency
April 30, Favorable % Change Favorable
ACADEMIC & PROFESSIONAL LEARNING: 2022 2021 (Unfavorable) (Unfavorable)
Revenue:
Education Publishing(1) $ 349,992 $ 361,194 (3 )% (4 )%
Professional Learning 296,831 280,667 6 % 6 %
Total Academic & Professional Learning 646,823 641,861 1 % 1 %
Cost of Sales 180,328 174,950 (3 )% (3 )%
Operating Expenses 341,136 358,097 5 % 5 %
Amortization of Intangible Assets 13,442 16,451 18 % 18 %
Restructuring (Credits) Charges (see Note 7) (455 ) 3,503
# #
Contribution to Profit 112,372 88,860 26 % 26 %
Restructuring (Credits) Charges (see Note 7) (455 ) 3,503
# #
Adjusted Contribution to Profit 111,917 92,363 21 % 20 %
Depreciation and Amortization 69,561 71,997 3 % 3 %
Adjusted EBITDA $ 181,478 $ 164,360 10 % 10 %
Adjusted EBITDA Margin 28.1 % 25.6 %
# Not meaningful
(1) In
Professional Learning -
Development Services. As a result, the prior period results related to the
WileyNXT product offering have been included in Education Services - Talent
Development Services. The Revenue, Adjusted Contribution to Profit, and
Adjusted EBITDA for WileyNXT was
million, respectively, for the year ended April 30, 2021 . There were no
changes to our total consolidated financial results.
Revenue:
Academic & Professional Learning revenue increased$5.0 million , or 1%, as compared with the prior year on a reported and constant currency basis. This increase was primarily driven by strong recovery in Professional Learning from prior year COVID-19 lockdown impacts primarily due to an increase in corporate training and, to a lesser extent, an increase in professional publishing compared with the prior year. This more than offset a 4% decline inEducation Publishing due to lower US college enrollment and some easing of prior year COVID-19-related favorability for courseware and content and, to a lesser extent, test preparation. Adjusted EBITDA: On a constant currency basis, Adjusted EBITDA increased 10% as compared with the prior year. This increase was due to lower operating expenses and, to a lesser extent, higher revenues. This was partially offset by higher print product costs. 33 Index
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Constant Currency
Year Ended % Change % Change
April 30, Favorable Favorable
EDUCATION SERVICES: 2022 2021 (Unfavorable) (Unfavorable)
Revenue:
University Services(1) $ 226,131 $ 227,700 (1 )% (1 )%
Talent Development Services (2)(3) 98,631 56,591 74 % 72 %
Total Education Services Revenue 324,762 284,291 14 % 14 %
Cost of Sales 219,957 175,008 (26 )% (25 )%
Operating Expenses 77,853 67,594 (15 )% (15 )%
Amortization of Intangible Assets 23,663 21,201 (12 )% (11 )%
Restructuring Charges (see Note 7) 8 531 98 % 98 %
Contribution to Profit (Loss) 3,281 19,957 (84 )% (84 )%
Restructuring Charges (see Note 7) 8 531 98 % 98 %
Adjusted Contribution to Profit (Loss) 3,289 20,488
(84 )% (85 )%
Depreciation and Amortization 34,157 29,654 (15 )% (15 )%
Adjusted EBITDA $ 37,446 $ 50,142 (25 )% (26 )%
Adjusted EBITDA Margin 11.5 % 17.6 %
# Not meaningful
(1) University Services was previously referred to as Education Services OPM.
(2) Talent Development Services was previously referred to as mthree.
(3) In
Professional Learning -
Development Services. As a result, the prior period results related to the
WileyNXT product offering have been included in Education Services - Talent
Development Services. The Revenue, Adjusted Contribution to Profit, and
Adjusted EBITDA for WileyNXT was
million, respectively, for the year ended April 30, 2021 . There were no
changes to our total consolidated financial results.
Revenue:
Education Services revenue increased$40.5 million , or 14%, as compared with the prior year on a reported and a constant currency basis. Excluding revenue from acquisitions, organic revenue increased 12% on a constant currency basis. This increase was primarily due to an increase in placements inTalent Development Services, partially offset by a decrease in student enrollments in University Services. For the year endedApril 30, 2022 , University Services experienced an 8% decrease in online enrollment. For the year endedApril 30, 2022 , we delivered approximately 112% growth in IT talent placements in Talent Development Services.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA decreased 26% as compared with the prior year. This was due to an increase in employee related costs due to increased investments to accelerate growth in Talent Development Services and, to a lesser extent, higher student acquisition costs in University Services and sales related costs, partially offset by higher revenue.
CORPORATE EXPENSES:
Corporate expenses for the year endedApril 30, 2022 decreased$5.0 million , or 3%, as compared with the prior year. On a constant currency basis and excluding restructuring (credits) charges, these expenses increased 16% as compared with the prior year. This was primarily due to higher employee-related costs, marketing costs and, to a lesser extent, technology-related spending. 34
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FISCAL YEAR 2021 AS COMPARED TO FISCAL YEAR 2020 SUMMARY RESULTS
Revenue:
Revenue for the year endedApril 30, 2021 increased$110.0 million , or 6%, as compared with the prior year. This increase was mainly driven by the following factors:
• An increase in
contributions from Hindawi, which was acquired on
• An increase in Education Services, due to the contributions from mthree, which
was acquired in
These increases were partially offset by a decline in Academic & Professional Learning.
On a constant currency basis, revenue increased 4% as compared with the prior year. Excluding the inorganic impact of acquisitions, organic revenue on a constant currency basis increased 1%.
See the "Segment Operating Results" below for additional details on each segment's revenue and Adjusted EBITDA performance.
Cost of Sales:
Cost of sales for the year endedApril 30, 2021 increased$34.3 million , or 6%, as compared with the prior year. Gross margin was consistent with the prior year at approximately 32.2%. On a constant currency basis, cost of sales increased 4% as compared with the prior year. This increase was primarily due to the impact from the acquisition of mthree and, to a lesser extent, higher royalty costs. These factors were partially offset by lower marketing costs for our Education Services business.
Operating and Administrative Expenses:
Operating and administrative expenses for the year endedApril 30, 2021 increased$25.3 million , or 3%, as compared with the prior year. On a constant currency basis, operating and administrative expenses increased 1% as compared with the prior year primarily reflecting the impact of the acquisitions of Hindawi and mthree, higher technology related costs and, to a lesser extent, higher annual incentive compensation. These factors were partially offset by lower facilities and occupancy-related costs due to the real estate actions taken as part of our Business Optimization Program as described below, employee benefit and retirement related expenses, and to a lesser extent, COVID-19-related expense savings and other business optimization gains.
Restructuring and Related Charges:
Business Optimization Program
For the years ended
InNovember 2020 , in response to the COVID-19 pandemic and the Company's successful transition to a virtual work environment, we increased use of virtual work arrangements for postpandemic operations. As a result, we expanded the scope of the Business Optimization Program to include the exit of certain leased office space beginning in the third quarter of fiscal 2021, and the reduction of our occupancy at other facilities. We are reducing our real estate square footage occupancy by approximately 12%. These actions resulted in a pretax restructuring charge of$18.3 million in the three months endedJanuary 31, 2021 . In addition, we also incurred ongoing facility-related costs associated with certain properties that resulted in additional restructuring charges of$3.7 million in the year endedApril 30, 2021 .
We anticipated ongoing facility-related costs associated with certain properties to result in additional restructuring charges in future periods.
These charges are reflected in Restructuring and related (credits) charges in
the Consolidated Statements of Income (Loss). See Note 7, "Restructuring and
Related (Credits) Charges" for more details on these charges.
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Restructuring and Reinvestment Program
For the years endedApril 30, 2021 and 2020, we recorded pretax restructuring credits of$0.1 million and$0.2 million , respectively, related to this program. These credits are reflected in Restructuring and related charges in the Consolidated Statements of Income (Loss).
For the impact of our restructuring programs on diluted earnings per share, see the section below, "Diluted Earnings per Share (EPS)."
Amortization of Intangible Assets:
Amortization of intangible assets was$74.7 million for the year endedApril 30, 2021 , an increase of$12.2 million , or 20%, as compared with the prior year. On a constant currency basis, amortization of intangible assets increased 18% as compared with the prior year primarily due to the intangibles acquired as part of the Hindawi and mthree acquisitions completed in fiscal year 2021 and 2020, respectively. See Note 4, "Acquisitions" for more details on our acquisitions.
Operating Income (Loss), Adjusted Operating Income (OI), and Adjusted EBITDA:
Operating income for the year endedApril 30, 2021 was$185.5 million compared with the prior year operating loss of$54.3 million . The increase in operating income was primarily due to the prior year impairment of goodwill and intangibles assets of$202.3 million as described below and, to a lesser extent, an increase in revenue. This was partially offset by an increase in cost of sales and operating and administrative expenses and, to a lesser extent, an increase in amortization of intangible assets as described above.
Adjusted OI and Adjusted EBITDA on a constant currency basis and excluding restructuring charges and the impairment of goodwill and intangible assets increased 20% and 16% respectively, as compared with the prior year. The increase in Adjusted OI and Adjusted EBITDA was primarily due to revenue performance described above, partially offset by higher cost of sales and, to a lesser extent, an increase in operating and administrative expenses. In addition, the increase in Adjusted OI was partially offset by higher depreciation and amortization.
Adjusted OI
Below is a reconciliation of our consolidated US GAAP Operating Income (Loss) to
Non-GAAP Adjusted OI:
Year Ended
April 30,
2021 2020
US GAAP Operating Income (Loss) $ 185,511 $ (54,287 ) Adjustments:
Restructuring and related charges 33,310 32,607 Impairment of goodwill - 110,000 Impairment of Blackwell trade name - 89,507 Impairment of developed technology intangible - 2,841 Non-GAAP Adjusted OI$ 218,821 $ 180,668 36 Index
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Adjusted EBITDA
Below is a reconciliation of our consolidated US GAAP Net Income (Loss) to Non-GAAP EBITDA and Adjusted EBITDA:
Year Ended
April 30,
2021 2020
Net Income (Loss) $ 148,256 $ (74,287 )
Interest expense 18,383 24,959
Provision for income taxes 27,656 11,195
Depreciation and amortization 200,189 175,127
Non-GAAP EBITDA 394,484 136,994
Impairment of goodwill and intangible assets - 202,348
Restructuring and related charges 33,310 32,607
Foreign exchange transaction losses (gains) 7,977 (2,773 )
Other income (16,761 ) (13,381 )
Non-GAAP Adjusted EBITDA $ 419,010 $ 355,795
Interest Expense:
Interest expense for the year ended April 30, 2021 was $18.4 million compared
with the prior year of $25.0 million . This decrease was due to a lower weighted
average effective borrowing rate, partially offset by higher average debt
balances outstanding, which included borrowings for the funding of acquisitions
in fiscal years 2021 and 2020.
Foreign Exchange Transaction (Losses) Gains:
Foreign exchange transaction losses were$8.0 million for the year endedApril 30, 2021 and were due to the unfavorable impact of the changes in exchange rates on US dollar cash balances held in theUK to fund the acquisition of Hindawi, and the net impact of changes in average foreign exchange rates as compared to the US dollar on our third-party accounts receivable and payable balances. Foreign exchange transaction gains were$2.8 million for the year endedApril 30, 2020 and were primarily due to the net impact of changes in average foreign exchange rates as compared to the US dollar on our third-party accounts receivable and payable balances.
Provision for Income Taxes:
Below is a reconciliation of our US GAAP Income (Loss) Before Taxes to Non-GAAP
Adjusted Income Before Taxes:
Year Ended
April 30,
2021 2020
US GAAP Income (Loss) Before Taxes $ 175,912 $ (63,092 )
Pretax Impact of Adjustments:
Restructuring and related charges 33,310 32,607
Foreign exchange (gains) losses on intercompany transactions (1,457 )
1,256
Amortization of acquired intangible assets 79,421
68,269
Impairment of goodwill -
110,000
Impairment of Blackwell trade name -
89,507
Impairment of developed technology intangible -
2,841
Non-GAAP Adjusted Income Before Taxes$ 287,186 $ 241,388 37 Index
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Below is a reconciliation of our US GAAP Income Tax Provision to Non-GAAP Adjusted Income Tax Provision, including our US GAAP Effective Tax Rate and our Non-GAAP Adjusted Effective Tax Rate:
Year Ended
April 30,
2021 2020
US GAAP Income Tax Provision $ 27,656 $ 11,195
Income Tax Impact of Adjustments(1):
Restructuring and related charges 8,065 7,949
Foreign exchange (gains) losses on intercompany transactions (363 )
242
Amortization of acquired intangible assets 18,511
16,820
Impairment of Blackwell trade name -
15,216
Impairment of developed technology intangible -
686
Income Tax Adjustments:
Impact of increase in
(3,511 ) -
Impact of US CARES Act(3) 13,998
-
Impact of change in certain US state tax rates in 2021 and
tax rates in
(3,225 ) 1,887
Non-GAAP Adjusted Income Tax Provision$ 61,131
US GAAP Effective Tax Rate 15.7 % (17.7 )% Non-GAAP Adjusted Effective Tax Rate 21.3 %
22.4 %
(1) For the year ended
impact from the US CARES Act noted below, substantially all of the tax impact
was from deferred taxes. For the year ended
was
(2) These adjustments impacted deferred taxes in the years ended
and 2020.
(3) The tax impact was
deferred taxes in the year ended
The effective tax rate was 15.7% for the year endedApril 30, 2021 , compared to a tax expense rate of 17.7% on a pretax loss for the year endedApril 30, 2020 . Our rate for the year endedApril 30, 2021 benefitted by$14.0 million from the CARES Act and certain regulations issued in lateJuly 2020 , which enabled us to carryback certain US net operating losses (NOLs), to fiscal 2015, a year with a higher US statutory rate, reducing our tax for the year endedApril 30, 2020 . We received a$20.7 million refund plus interest inFebruary 2021 . This benefit was partially offset by (a)$3.5 million from an increase in the officialUK statutory rate during our three months endedJuly 31, 2020 resulting in an increase in ourUK deferred tax liabilities and (b)$3.2 million from a noncash deferred state tax expense due to increasing our deferred tax liabilities in connection with our expanded presence in additional states resulting from COVID-19. As a result of COVID-19, we adjusted our policies to permit employees to work from home, resulting in an increased presence in many locations. The 17.7% tax expense rate on a pretax loss for the year endedApril 30, 2020 was primarily due to the$110.0 million non-deductible impairment of goodwill. Excluding the benefit from the CARES Act and expense from theUK rate change, the change in our state tax expense from our expanded presence and a lower tax benefit from our restructuring charges, foreign exchange gains and the amortization of acquired intangible assets, the Non-GAAP Adjusted Effective Tax Rate for the year endedApril 30, 2021 was 21.3%. The Non-GAAP Adjusted Effective Tax Rate for the year endedApril 30, 2020 , excluding the impact of the$110.0 million impairment of goodwill and other items included in the table above was 22.4%. The decrease in the Non-GAAP Adjusted Effective Tax Rate before these items was due to a more favorable mix of earnings for the year endedApril 30, 2021 . 38 Index
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Diluted Earnings (Loss) Per Share (EPS):
Diluted earnings per share for the year endedApril 30, 2021 was$2.63 per share compared with loss per share of$1.32 in the prior year. This increase was due to the higher operating income and, to a lesser extent, lower interest expense. These factors were partially offset by higher provision for income taxes and foreign exchange transaction losses for the year endedApril 30, 2021 as compared to gains for the year endedApril 30, 2020 . Below is a reconciliation of our US GAAP Earnings (Loss) Per Share to Non-GAAP Adjusted EPS. The amount of the pretax and the related income tax impact for the adjustments included in the table below are presented in the section above, "Provision for Income Taxes." Year Ended April 30, 2021 2020 US GAAP EARNINGS (LOSS) PER SHARE$ 2.63 $ (1.32 ) Adjustments: Restructuring and related charges 0.44
0.43
Foreign exchange (gains) losses on intercompany transactions (0.02 )
0.02
Amortization of acquired intangible assets 1.08 0.90 Income tax adjustments (0.13 ) (0.03 ) Impairment of goodwill - 1.94 Impairment of Blackwell trade name -
1.31
Impairment of developed technology intangible -
0.04
EPS impact of using weighted-average dilutive shares for adjusted EPS calculation(1) - 0.01 Non-GAAP Adjusted EPS$ 4.00 $ 3.30
(1) Represents the impact of using diluted weighted-average number of common
shares outstanding (56.7 million shares for the year ended
included in the Non-GAAP Adjusted EPS calculation in order to apply the
dilutive impact on adjusted net income due to the effect of unvested
restricted stock units and other stock awards. This impact occurs when a US
GAAP net loss is reported and the effect of using dilutive shares is
antidilutive.
On a constant currency basis, Adjusted EPS increased 25% primarily due to an increase in Adjusted CTP and, to a lesser extent, a lower Non-GAAP Adjusted Effective Tax Rate and a decrease in interest expense. These factors were partially offset by foreign exchange transaction losses for the year endedApril 30, 2021 as compared with gains for the year endedApril 30, 2020 . 39
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SEGMENT OPERATING RESULTS:
Year Ended % Change Constant Currency
April 30, Favorable % Change Favorable
RESEARCH PUBLISHING & PLATFORMS: 2021 2020 (Unfavorable) (Unfavorable)
Revenue:
Research Publishing $ 972,512 $ 908,952 7 % 5 %
Research Platforms 42,837 39,887 7 % 7 %
7 % 5 %
Cost of Sales 275,377 255,696 (8 )% (5 )%
Operating Expenses 429,916 398,514 (8 )% (6 )%
Amortization of Intangible Assets 37,033 29,276 (26 )% (24 )%
Impairment of Intangible Assets (see Note 11) - 92,348 100 % 100 %
Restructuring (Credits) Charges (see Note 7) (36 ) 3,886 # #
Contribution to Profit 273,059 169,119 61 % 60 %
Impairment of Intangible Assets (see Note 11) - 92,348 100 % 100 %
Restructuring (Credits) Charges (see Note 7) (36 ) 3,886 # #
Adjusted Contribution to Profit 273,023 265,353 3 % 2 %
Depreciation and Amortization 83,866 69,495 (21 )% (20 )%
Adjusted EBITDA $ 356,889 $ 334,848 7 % 6 %
Adjusted EBITDA Margin 35.1 % 35.3 %
# Not meaningful
Revenue:
Research Publishing & Platforms revenue for the year ended April 30, 2021
increased $66.5 million , or 7%, as compared with the prior year on a reported
basis. On a constant currency basis, revenue increased 5% as compared with the
prior year. Excluding revenue from acquisitions, organic revenue increased 3% on
a constant currency basis. This increase was primarily due to continued growth
in Open Access in Research Publishing due to continued growth in
transformational "read and publish" agreements. In fiscal year 2021, we
experienced a 15% increase in article output, which resulted in a 38% increase
in Open Access revenue as compared to prior year. This was partially offset by a
decline in subscriptions revenue partially attributable to those "read and
publish" agreements and, to a lesser extent, previously anticipated libraries
and academic budget challenges as a result of COVID-19.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased 6% as compared with the
prior year. This increase was primarily due to higher revenue, and
COVID-19-related expense savings. These factors were partially offset by higher
royalty costs, higher annual incentive compensation and employee related costs,
and to a lesser extent, the impact of the acquisition of Hindawi.
40Index
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Year Ended % Change Constant Currency
April 30, Favorable % Change Favorable
ACADEMIC & PROFESSIONAL LEARNING: 2021 2020 (Unfavorable) (Unfavorable)
Revenue:
Education Publishing(1) $ 361,194 $ 351,514 3 % 2 %
Professional Learning 280,667 298,601 (6 )% (8 )%Total Academic & Professional Learning 641,861 650,115
(1 )% (3 )%
Cost of Sales 174,950 178,721 2 % 4 %
Operating Expenses 358,097 369,230 3 % 4 %
Amortization of Intangible Assets 16,451 16,649 1 % 3 %
Restructuring Charges (see Note 7) 3,503 10,470 67 % 67 %
Contribution to Profit 88,860 75,045 18 % 16 %
Restructuring Charges (see Note 7) 3,503 10,470 67 % 67 %
Adjusted Contribution to Profit 92,363 85,515 8 % 6 %
Depreciation and Amortization 71,997 69,807 (3 )% (2 )%
Adjusted EBITDA $ 164,360 $ 155,322 6 % 4 %
Adjusted EBITDA Margin 25.6 % 23.9 %
# Not meaningful
(1) In
Professional Learning -
Development Services. As a result, the prior period results related to the
WileyNXT product offering have been included in Education Services - Talent
Development Services. The Revenue, Adjusted Contribution to Profit, and
Adjusted EBITDA for WileyNXT was
million, respectively, for the year ended
30, 2020. There were no changes to our total consolidated financial results.
Revenue: Academic & Professional Learning revenue decreased$8.3 million , or 1%, as compared with the prior year on a reported basis. On a constant currency basis, revenue decreased 3% as compared with the prior year. This decrease was primarily due to the COVID-19 impact on Professional Learning revenue due to the continued adverse impact on classroom dependent corporate training due to the continued office closures and cancellations of in-person engagements, and the decline in trade print book publishing, partially offset by growth in digital content. InEducation Publishing , growth in digital content and courseware offerings, which continued to benefit due to the COVID-19 driven shift to remote learning, were partially offset by declines in print textbooks and test preparation product offerings. In fiscal year 2021, digital content revenue increased 21% and digital courseware activations increased 23% as compared to prior year. Adjusted EBITDA: On a constant currency basis, Adjusted EBITDA increased 4% as compared with the prior year. This increase reflects business optimization gains and COVID-19-related expense savings, partially offset by lower revenues and, to a lesser extent, higher annual incentive compensation. 41
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Year Ended % Change Constant Currency
April 30, Favorable % Change Favorable
EDUCATION SERVICES: 2021 2020 (Unfavorable) (Unfavorable)
Revenue:
University Services(1) $ 227,700 $ 210,882 8 % 8 %
Talent Development Services(2)(3) 56,591 21,647 # #
Total Education Services Revenue 284,291 232,529 22 % 21 %
Cost of Sales 175,008 156,607 (12 )% (11 )%
Operating Expenses 67,594 64,124 (5 )% (5 )%
Amortization of Intangible Assets 21,201 16,511 (28 )% (28 )%
Impairment of Goodwill (see Note 11) - 110,000 100 % 100 %
Restructuring Charges (see Note 7) 531 3,671 86 % 86 %
Contribution to Profit (Loss) 19,957 (118,384 ) # #
Impairment of Goodwill (see Note 11) - 110,000 100 % 100 %
Restructuring Charges (see Note 7) 531 3,671 86 % 86 %
Adjusted Contribution to Profit (Loss) 20,488 (4,713 )
# #
Depreciation and Amortization 29,654 24,131 (23 )% (22 )%
Adjusted EBITDA $ 50,142 $ 19,418 # #
Adjusted EBITDA Margins 17.6 % 8.4 %
# Not meaningful
(1) University Services was previously referred to as Education Services OPM.
(2) Talent Development Services was previously referred to as mthree.
(3) In
Professional Learning -
Development Services. As a result, the prior period results related to the
WileyNXT product offering have been included in Education Services - Talent
Development Services. The Revenue, Adjusted Contribution to Profit, and
Adjusted EBITDA for WileyNXT was
million, respectively, for the year ended
30, 2020. There were no changes to our total consolidated financial results.
Revenue: Education Services revenue increased$51.8 million , or 22%, as compared with the prior year on a reported basis. On a constant currency basis, revenue increased 21% as compared with the prior year. Excluding revenue from our mthree acquisition, organic revenue increased 7% on a constant currency basis, mainly driven by an increase in enrollments and new student starts and, to a lesser extent, new university partnerships and programs in our OPM services. In fiscal year 2021, we experienced a 14% increase in online enrollment and a 20% increase in new student starts as compared to prior year.
Adjusted EBITDA:
On a constant currency basis, Adjusted EBITDA increased$30.7 million as compared with the prior year. This was due to higher revenue, lower marketing costs, and business optimization initiatives, including lower occupancy-related costs due to certain actions taken as part of our Business Optimization Program. These factors were partially offset by the impact from the acquisition of mthree.
CORPORATE EXPENSES:
Corporate Expenses for the year endedApril 30, 2021 increased$16.3 million , or 9%, as compared with the prior year. On a constant currency basis and excluding restructuring charges, these expenses increased 1% as compared with the prior year. This was primarily due to higher annual incentive compensation, partially offset by lower employee benefit and retirement related expenses and professional fees. 42 Index
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FISCAL YEAR 2023 OUTLOOK
• Revenue: The Company anticipates mid-single digit revenue growth at constant
currency driven by Research and Education Services.
• Earnings: Wiley expects gains from revenue growth to be offset by wage
inflation and growth investments in Research and
Adjusted EPS performance is expected to be adversely impacted by
non-operational items such as higher interest expense, higher tax expense, and
lower pension income. Wiley's adjusted effective tax rate is expected to be
22-23% in fiscal year 2023, up from 20% in fiscal year 2022. This is primarily
due to an anticipated less favorable mix of earnings by country and an increase
in the
non-recurring tax benefits.
• Free Cash Flow: Wiley expects positive cash earnings and lower incentive
payouts for fiscal year 2022 performance compared to prior year to be offset by
higher cash taxes, interest and capital expenditures (Fiscal year 2023 Outlook
of
• Foreign Exchange Impact: With Wiley generating 47% of its revenue from outside
the US, the Company's reported results are adversely impacted by a
strengthening US dollar, particularly in relation to the euro and the British
pound. Given volatility in exchange rates, there is now a material foreign
currency impact to our fiscal year 2023 outlook relative to our outlook at
constant currency.
(amounts in millions, except Adjusted EPS)
Fiscal Year
2023 Outlook Fiscal Year
Fiscal Year (1) 2023 Outlook
2022 Actual At constant (3)
Metric (1) currency FX Impact (2) At spot rates
$2,175 to $2,100 to
Revenue $2,083 $2,215 $(75) $2,140
Adjusted EBITDA $433 $425 to $450 $(25) $400 to $425
$3.40 to
Adjusted EPS $4.16 $3.70 to $4.05 $(0.30) $3.75
Free Cash Flow $223 $210 to $235 $(25) $185 to $210 (1) Based on fiscal year 2022 average rates of
(2) Variance between fiscal year 2022 average rates and spot rates as of
2022:
(3) Fiscal year 2023 outlook at spot rates as of
LIQUIDITY AND CAPITAL RESOURCES:
Principal Sources of Liquidity
We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be adequate to meet our operating, investing, and financing needs in the foreseeable future. There can be no assurance that continued or increased volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable in the future. We do not have any off-balance-sheet debt. We will continue to pursue attractive opportunities to add scale and provide enhanced technology-enabled services in research and online education. As ofApril 30, 2022 , we had cash and cash equivalents of$100.4 million , of which approximately$93.2 million , or 93%, was located outside the US. Maintenance of these cash and cash equivalent balances outside the US does not have a material impact on the liquidity or capital resources of our operations. Notwithstanding the Tax Cuts and Jobs Act of 2017 (the Tax Act), which generally eliminated federal income tax on future cash repatriation to the US, cash repatriation may be subject to state and local taxes or withholding or similar taxes. In addition, as a result of Brexit, certain tax benefits applicable to distributions from subsidiaries of ourUK companies were eliminated or reduced effectiveJanuary 1, 2021 . SinceApril 30, 2018 , we no longer intend to permanently reinvest earnings outside the US. We have a$2.7 million liability related to the estimated taxes that would be incurred upon repatriating certain non-US earnings. 43
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OnMay 30, 2019 , we entered into a credit agreement that amended and restated our existing revolving credit agreement, which was then amended onDecember 22, 2021 (collectively, the Amended and Restated RCA). See Note 14, "Debt and Available Credit Facilities" for more details on the amendment. The Amended and Restated RCA provides for senior unsecured credit facilities comprised of a (i) five-year revolving credit facility in an aggregate principal amount up to$1.25 billion , and (ii) a five-year term loan A facility consisting of$250 million . The agreement contains customary affirmative and negative covenants, including a financial covenant in the form of a consolidated net leverage ratio and consolidated interest coverage ratio.
As of
Contractual Obligations and Commercial Commitments
A summary of contractual obligations and commercial commitments, excluding unrecognized tax benefits further described in Note 13, "Income Taxes," of the Notes to Consolidated Financial Statements, as ofApril 30, 2022 is as follows: Payments Due by Period Within 2-3 4-5 After 5 Total Year 1 Years Years Years Total debt(1)$ 787.4 $ 18.8 $ 768.6 $ - $ - Interest on debt(2) 28.4 15.3 13.1 - - Non-cancellable leases 197.0 28.1 51.0 40.4 77.5 Minimum royalty obligations 444.1 108.6 163.3 102.1 70.1 Other operating commitments 68.0 41.4 26.4 0.2 - Total$ 1,524.9 $ 212.2 $ 1,022.4 $ 142.7 $ 147.6
(1) Total debt is exclusive of unamortized issuance costs of
(2) Interest on Debt includes the effect of our interest rate swap agreements and
the estimated future interest payments on our unhedged variable rate debt,
assuming that the interest rates as of
the maturity of the debt.
Analysis of Historical Cash Flow
The following table shows the changes in our Consolidated Statements of Cash
Flows:
Years Ended April 30,
2022 2021 2020
Net cash provided by operating activities $ 339,100 $ 359,923 $ 288,435
Net cash used in investing activities (194,024 ) (433,154 ) (346,670 )
Net cash (used in) provided by financing
activities (131,638 ) (47,086 ) 172,677
Effect of foreign currency exchange rate changes
on cash, cash equivalents, and restricted cash $ (7,070 ) $ 11,629 $ (4,943 ) Cash flow from operations is seasonally a use of cash in the first half of Wiley's fiscal year principally due to the timing of collections for annual journal subscriptions, which typically occurs in the beginning of the second half of our fiscal year.
Free cash flow less product development spending helps assess our ability, over the long term, to create value for our shareholders, as it represents cash available to repay debt, pay common dividends, and fund share repurchases, and acquisitions. Below are the details of Free cash flow less product development spending.
Free Cash Flow Less Product Development Spending:
Years Ended
2022 2021 2020
Net cash provided by operating activities $ 339,100 $ 359,923 $ 288,435
Less: Additions to technology, property and equipment (88,843 ) (77,407 ) (88,593 )
Less: Product development spending (27,015 )
(25,954 ) (26,608 )
Free cash flow less product development spending
44
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Net Cash Provided By Operating Activities
2022 compared to 2021
The following is a summary of the$20.8 million change in Net cash provided by operating activities for the year endedApril 30, 2022 as compared with the year endedApril 30, 2021 (amounts in millions).
Net cash provided by operating activities - Year ended
359.9
Net income adjusted for items to reconcile net income to net cash provided by operating activities, which would include such noncash items as depreciation and amortization and the change in deferred taxes
(16.3 )
Working capital changes:
Accounts payable and accrued royalties 47.5
Accounts receivable, net and contract liabilities (23.3 ) Changes in other assets and liabilities (28.7 ) Net cash provided by operating activities - Year endedApril 30, 2022 $
339.1
The favorable change in accounts payable and accrued royalties was due to the timing of payments.
The unfavorable change in accounts receivable, net and contract liabilities was primarily the result of sales growth, as well as the timing of billings and collections with customers.
The unfavorable changes in other assets and liabilities noted in the table above was primarily due to an increase in employee-related costs, including payments due to higher annual incentive compensation payments in fiscal year 2022, partially offset by a favorable change in income taxes, and a decrease in restructuring payments. Our negative working capital (current assets less current liabilities) was$418.6 million and$462.7 million as ofApril 30, 2022 andApril 30, 2021 , respectively. The primary driver of the negative working capital is the benefit realized from unearned contract liabilities related to subscriptions for which cash has been collected in advance. The contract liabilities will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as ofApril 30, 2022 and as ofApril 30, 2021 include contract liabilities of$538.1 million and$545.4 million , respectively, primarily related to deferred subscription revenue for which cash was collected in advance.
Cash collected in advance for subscriptions is used by us for a number of purposes, including funding operations, capital expenditures, acquisitions, debt repayments, dividend payments, and share repurchases.
2021 compared to 2020
The following is a summary of the$71.5 million change in Net cash provided by operating activities for the year endedApril 30, 2021 as compared with the year endedApril 30, 2020 (amounts in millions).
Net cash provided by operating activities - Year ended
288.4
Higher net income adjusted for items to reconcile net income to net cash provided by operating activities, which would include such noncash items as depreciation and amortization, impairment of goodwill and intangible assets in 2020, and the change in deferred taxes
88.9
Working capital changes: Accounts payable and accrued royalties (45.7 ) Other accrued liabilities 49.4 Inventories 10.6 Accounts receivable, net and contract liabilities
10.0
Changes in other assets and liabilities (41.7 ) Net cash provided by operating activities -Year endedApril 30, 2021 $
359.9
The changes in accounts payable and accrued royalties and accounts receivable, net of contract liabilities, were primarily due to timing. Change in inventories was primarily due to lower purchases and the lower cost of inventory. The change in other accrued liabilities noted in the table above was primarily due to an increase in annual incentive compensation and, to a lesser extent, an increase in employee-related costs, including the deferral of employer tax withholding payments in connection with the CARES Act in the year endedApril 30, 2021 . 45
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The change in other assets and liabilities noted in the table above was primarily due to an increase in cash used for prepayments, employee benefit and retirement-related costs, including retirement plan contributions, certain tax-related payments, and restructuring payments in the year endedApril 30, 2021 . Our negative working capital (current assets less current liabilities) was$462.7 million and$312.3 million as ofApril 30, 2021 andApril 30, 2020 , respectively. The primary driver of the negative working capital is the benefit realized from unearned contract liabilities related to subscriptions for which cash has been collected in advance. The contract liabilities will be recognized as income when the products are shipped or made available online to the customers over the term of the subscription. Current liabilities as ofApril 30, 2021 and as ofApril 30, 2020 include contract liabilities of$545.4 million and$520.2 million , respectively, primarily related to deferred subscription revenue for which cash was collected in advance. Cash collected in advance for subscriptions is used by us for a number of purposes, including funding operations, capital expenditures, acquisitions, debt repayments, dividend payments, and share repurchases. Due to the adverse impact of COVID-19 on the global economy during this period, we estimated that approximately$30 million of customer payments were delayed into fiscal year 2021. Our accounts receivable collections were in line with our expectations. Although, in certain situations, the timing of collections may be extended, we did not experience any material issues with customer collections. Many of our customers had been adversely impacted by COVID-19, and we expected some continued delays in payments due to widespread disruption and pervasive cash conservation behaviors in the face of uncertainty. We recorded provisions for bad debt where appropriate.
2022 Compared to 2021
Net cash used in investing activities in the year endedApril 30, 2022 was$194.0 million compared to$433.2 million in the prior year. The decrease in cash used in investing activities was due to a decrease of$224.2 million in cash used to acquire businesses. See Note 4, "Acquisitions" for more information related to the acquisitions that occurred in the years endedApril 30, 2022 and 2021. Additionally, cash outflows for the acquisitions of publication rights and other activities decreased$24.0 million . This was partially offset by an increase of$11.4 million for additions of technology, property, and equipment.
2021 Compared to 2020
Net cash used in investing activities in the year endedApril 30, 2021 was$433.2 million compared to$346.7 million in the prior year. The increase in cash used in investing activities was due to an increase of$70.3 million in cash used to acquire businesses and, to a lesser extent, an increase of$28.0 million for the acquisition of publication rights and other activities. This was partially offset by a decrease of$11.2 million for additions of technology, property, and equipment. See Note 4, "Acquisitions," for further details of the acquisition activity in fiscal year 2021 and 2020.
2022 Compared to 2021
Net cash used in financing activities was$131.6 million in the year endedApril 30, 2022 compared to net cash used of$47.1 million in the year endedApril 30, 2021 . This change was primarily due to net debt repayments of$11.0 million in the year endedApril 30, 2022 compared with net debt borrowings of$30.7 million in the year endedApril 30, 2021 and, to a lesser extent, a$24.7 million change from book overdrafts, and a$14.2 million increase in cash used for purchases of treasury shares. 2021 Compared to 2020 Net cash used in financing activities was$47.1 million in the year endedApril 30, 2021 compared to net cash provided by financing activities of$172.7 million in the year endedApril 30, 2020 . This change was due to lower net borrowings of$273.1 million , which was primarily due to lower borrowings in the year endedApril 30, 2021 and, to a lesser extent, a reduction of$30.8 million for the purchase of treasury shares and an increase in cash provided by book overdrafts of$18.4 million compared to the prior year.
Dividends and Share Repurchases
In the year ended
46
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In the year ended
During the year endedApril 30, 2020 , our Board of Directors approved an additional share repurchase program of$200 million of Class A or B Common Stock. As ofApril 30, 2022 , we had authorization from our Board of Directors to purchase up to$197.5 million that was remaining under this program. During the year endedApril 30, 2022 , we purchased$2.5 million under this program. No share repurchases were made under this program during the years endedApril 30, 2021 and 2020.
The share repurchase program described above is in addition to the share
repurchase program approved by our Board of Directors during the year ended
The following table summarizes the shares repurchased of Class A and B Common
Stock (shares in thousands):
Years Ended April 30,
2022 2021 2020
Shares repurchased - Class A 542 308 1,080
Shares repurchased - Class B 2 2 2
Average Price - Class A and Class B
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS, ACCOUNTING GUIDANCE, AND DISCLOSURE REQUIREMENTS
We are subject to numerous recently issued statements of financial accounting standards, accounting guidance, and disclosure requirements. The information set forth in Part II, Item 8, "Financial Statements and Supplementary Data" in Note 2, "Summary of Significant Accounting Policies, Recently Issued and Recently Adopted Accounting Standards," of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K is incorporated by reference and describes these new accounting standards.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES:
The preparation of our Consolidated Financial Statements and related disclosures in conformity with US GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and revenue and expenses during the reporting period. These estimates include, among other items, sales return reserves, allocation of acquisition purchase price to assets acquired and liabilities assumed, goodwill and indefinite-lived intangible assets, intangible assets with definite lives and other long-lived assets, and retirement plans. We review these estimates and assumptions periodically using historical experience and other factors and reflect the effects of any revisions on the Consolidated Financial Statements in the period we determine any revisions to be necessary. Actual results could differ from those estimates, which could affect the reported results. In Part II, Item 8, "Financial Statements and Supplementary Data" in Note 2, "Summary of Significant Accounting Policies, Recently Issued and Recently Adopted Accounting Standards" of the Notes to Consolidated Financial Statements includes a summary of the significant accounting policies and methods used in preparation of our Consolidated Financial Statements. Set forth below is a discussion of our more critical accounting policies and methods.
Revenue Recognition:
In Part II, Item 8, "Financial Statements and Supplementary Data," see Note 3, "Revenue Recognition, Contracts with Customers," of the Notes to Consolidated Financial Statements for details of our revenue recognition policy.
Sales Return Reserves:
In Part II, Item 8, "Financial Statements and Supplementary Data," see Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards" in the section "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements for details of our sales return reserves.
A one percent change in the estimated sales return rate could affect net income
by approximately
47Index
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Allocation of Acquisition Purchase Price to Assets Acquired and Liabilities Assumed:
In connection with acquisitions, we allocate the cost of the acquisition to the assets acquired and the liabilities assumed based on the estimates of fair value for such items, including intangible assets. The excess of the purchase consideration over the fair value of assets acquired and liabilities assumed is recorded as goodwill. The determination of the acquisition date fair value of the assets acquired, and liabilities assumed, requires us to make significant estimates and assumptions, such as, if applicable, forecasted revenue growth rates and operating cash flows, royalty rates, customer attrition rates, obsolescence rates of developed technology, and discount rates. We may use a third-party valuation consultant to assist in the determination of such estimates. In Part II, Item 8, "Financial Statements and Supplementary Data," see Note 4, "Acquisitions," of the Notes to Consolidated Financial Statements for details of our acquisitions.
Goodwill is reviewed for possible impairment at least annually on a reporting unit level during the fourth quarter of each year. Our annual impairment assessment date isFebruary 1 . A review of goodwill may be initiated before or after conducting the annual analysis if events or changes in circumstances indicate the carrying value of goodwill may no longer be recoverable. A reporting unit is the operating segment unless, at businesses one level below that operating segment- the "component" level, discrete financial information is prepared and regularly reviewed by management, and the component has economic characteristics that are different from the economic characteristics of the other components of the operating segment, in which case the component is the reporting unit. As part of the annual impairment test, we may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In a qualitative assessment, we would consider the macroeconomic conditions, including any deterioration of general conditions and industry and market conditions, including any deterioration in the environment where the reporting unit operates, increased competition, changes in the products/services and regulatory and political developments, cost of doing business, overall financial performance, including any declining cash flows and performance in relation to planned revenues and earnings in past periods, other relevant reporting unit specific facts, such as changes in management or key personnel or pending litigation, and events affecting the reporting unit, including changes in the carrying value of net assets. If the results of our qualitative assessment indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we are required to perform a quantitative assessment to determine the fair value of the reporting unit. Alternatively, if an optional qualitative goodwill impairment assessment is not performed, we may perform a quantitative assessment. Under the quantitative assessment, we compare the fair value of each reporting unit to its carrying value, including the goodwill allocated to the reporting unit. If the fair value of the reporting unit exceeded its carrying value, there would be no indication of impairment. If the fair value of the reporting unit were less than the carrying value, an impairment charge would be recognized for the difference. We derive an estimate of fair values for each of our reporting units using a combination of an income approach and a market approach, each based on an applicable weighting. We assess the applicable weighting based on such factors as current market conditions and the quality and reliability of the data. Absent an indication of fair value from a potential buyer or similar specific transactions, we believe that the use of these methods provides a reasonable estimate of a reporting unit's fair value. Fair value computed by these methods is arrived at using a number of key assumptions including forecasted revenues and related growth rates, forecasted operating cash flows, the discount rate, and the selection of relevant market multiples of comparable publicly-traded companies with similar characteristics to the reporting unit. There are inherent uncertainties, however, related to these factors and to our judgment in applying them to this analysis. We believe that the combination of these methods provides a reasonable approach to estimate the fair value of our reporting units. Assumptions for sales, net earnings, and cash flows for each reporting unit were consistent among these methods.
Fiscal Year 2022 and 2021 Annual Goodwill Impairment Test
As ofFebruary 1, 2022 and 2021, we completed our annual goodwill impairment test for our reporting units. We concluded that the fair values of our reporting units were above their carrying values and, therefore, there was no indication of impairment. 48 Index
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Income Approach Used to Determine Fair Values
The income approach is based upon the present value of expected cash flows. Expected cash flows are converted to present value using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis. We use a discount rate that reflects a market-derived weighted average cost of capital. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit's expected long-term operating and cash flow performance. The projections are based upon our best estimates of forecasted economic and market conditions over the related period including growth rates, expected changes in forecasted operating cash flows, and cash expenditures. Other estimates and assumptions include terminal value long-term growth rates, provisions for income taxes, future capital expenditures, and changes in future cashless, debt-free working capital. Changes in any of these assumptions could materially impact the estimated fair value of our reporting units. Our forecasts take into account the near and long-term expected business performance, considering the long-term market conditions and business trends within the reporting units. For example, each reporting unit includes an assumption regarding any continued impact of COVID-19 from both a current and long-term perspective. However, changes in this assumption may impact our ability to recover the allocated goodwill in the future. For further discussion of the factors that could result in a change in our assumptions, see "Risk Factors" in this Annual Report on Form 10-K.
Market Approach Used to Determine Fair Values
The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit's operating performance (the Guideline Public Company Method). These multiples are derived from comparable publicly-traded companies with similar investment characteristics to the reporting unit, and such comparable data are reviewed and updated as needed annually. We believe that this approach is appropriate because it provides a fair value estimate using multiples from entities with operations and economic characteristics comparable to our reporting units and Wiley. The key estimates and assumptions that are used to determine fair value under this market approach include current and forward 12-month revenue and EBITDA results, as applicable, and the selection of the relevant multiples to be applied. Under the Guideline Public Company Method, a control premium, or an amount that a buyer is usually willing to pay over the current market price of a publicly traded company is considered, and applied to the calculated equity values to adjust the public trading value upward for a 100% ownership interest, where applicable. In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units' fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent comparable market transactions. If the implied control premium is not reasonable in light of these recent transactions, we will reevaluate our fair value estimates of the reporting units by adjusting the discount rates and/or other assumptions. If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (such as a sustained decrease in the price of our common stock, a decline in current market multiples, a significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, heightened competition, strategic decisions made in response to economic or competitive conditions, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of), we may be required to record impairment charges in future periods. Any impairment charges that we may take in the future could be material to our consolidated results of operations and financial condition.
Fiscal Year 2020 Annual Goodwill Impairment Test
As ofFebruary 1, 2020 , we completed our annual goodwill impairment test for our reporting units. We concluded that the fair values of ourResearch Publishing & Platforms and Academic & Professional Learning reporting units were above their carrying values and, therefore, there was no indication of impairment. 49
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During our annual goodwill impairment test initiated onFebruary 1, 2020 , we identified indicators that the goodwill of the Education Services business was impaired due to underperformance, as compared with our acquisition case projections for revenue growth and operating cash flow. Subsequently, during the fourth quarter of fiscal year 2020, we determined that our updated revenue and operating cash flow projections would be further impacted by anticipated near-term headwinds due to COVID-19, including adverse impacts on new student starts and student reenrollment. Therefore, we updated the impairment test as ofMarch 31, 2020 to reflect this change in circumstances. As a result, we concluded that the carrying value was above the fair value, resulting in a noncash goodwill impairment of$110.0 million . This charge is reflected in Impairment of goodwill and intangible assets in the Consolidated Statements of Income (Loss).
The material assumptions underlying the estimate of the fair value of the Education Services reporting unit included the following:
• Future cash flow assumptions - the projections for future cash flows utilized
in the model were derived from historical experience and assumptions regarding
future growth and profitability of the reporting unit. These projections are
consistent with our operating budget and strategic plan. We applied a
compounded annual growth rate of approximately 6.8% for forecasted sales in our
projected cash flows through fiscal year 2028. Beyond the forecasted period, a
terminal value was determined using a perpetuity growth rate of 3.0% to reflect
our estimate of stable and perpetual growth.
• Weighted average cost of capital (WACC) - the WACC is the rate used to discount
the reporting unit's estimated future cash flows. The WACC is calculated based
on a proportionate weighting of the cost of debt and equity. The cost of equity
is based on a capital asset pricing model and includes a company-specific risk
premium to capture the perceived risks and uncertainties associated with the
reporting unit's projected cash flows. The cost of debt component is calculated
based on the after-tax cost of debt of Moody's Baa-rated corporate bonds. The
cost of debt and equity is weighted based on the debt to market capitalization
ratio of publicly traded companies with similarities to the Education Services
reporting unit. The WACC applied to the Education Services reporting unit was
11.0%.
• Valuation Multiples - for the Guideline Public Company Method, we applied
relevant current and forward 12-month revenue multiples based on an evaluation
of multiples of publicly-traded companies with similarities to the Education
Services reporting unit. The multiples applied ranged from 1.3 to 1.4x revenue.
• Equal weighting was applied to the income and market approach when determining
the overall fair value calculation for the Education Services reporting unit.
The following hypothetical changes in the valuation of the Education Services reporting unit would have impacted the goodwill impairment as follows:
• A hypothetical 1% increase to revenue growth and EBITDA margins would have
reduced the impairment charge by approximately
• A hypothetical 1% decrease to revenue growth and EBITDA margins would have
increased the impairment charge by approximately
• A hypothetical change to the weightings by applying a weighting of 25% to the
income approach and 75% to the market approach would have increased the
impairment charge by approximately
Prior to performing the goodwill impairment test for Education Services, we also evaluated the recoverability of long-lived assets of the reporting unit. The carrying value of the long-lived assets that were tested for impairment was$434.0 million . When indicators of impairment are present, we test definite lived and long-lived assets for recoverability by comparing the carrying value of an asset group to an estimate of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We considered the lower-than-expected revenue and operating cash flows over a sustained period of time and downward revisions to our cash flow forecasts for this reporting unit to be indicators of impairment for their long-lived assets. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group of the Education Services reporting unit exceeded the carrying value. Therefore, there was no impairment.
Fiscal Year 2022 and 2021 Annual Indefinite-lived Intangible Impairment Test
We also review our indefinite-lived intangible assets for impairment annually, which consists of brands and trademarks and certain acquired publishing rights. As ofFebruary 1, 2022 and 2021, we completed our annual impairment test related to the indefinite-lived intangible assets. We concluded that the fair values of these indefinite-lived intangible assets were above their carrying values and, therefore, there was no indication of impairment. We estimate the fair value of these assets using a relief from royalty method under an income approach. The key assumptions for this method are revenue projections, a royalty rate as determined by management in consultation with valuation experts, and a discount rate. 50
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Fiscal Year 2020 Annual Indefinite-lived Intangible Impairment Test
We recorded a pretax noncash impairment charge of$89.5 million for our Blackwell trademark, which was acquired in 2007 and carried as an indefinite-lived intangible asset primarily related to ourResearch Publishing & Platforms segment. The impairment reflected our decision to simplify Wiley's brand portfolio and unify our research journal content under one Wiley brand, which sharply limited the use of the Blackwell trade name. This impairment resulted in writing off substantially all of the carrying value of the intangible trademark asset. This charge is reflected in Impairment of goodwill and intangible assets in the Consolidated Statements of Income (Loss). The resulting noncash impairment charge is entirely unrelated to COVID-19 or the expected future financial performance of theResearch Publishing & Platforms segment. See Note 11, "Goodwill and Intangible Assets," of the Notes to Consolidated Financial Statements for details of our goodwill and indefinite-lived intangible balances, and the review performed in the year endedApril 30, 2022 and other related information.
Intangible Assets with Definite Lives and Other Long-Lived Assets:
See Note 2, "Summary of Significant Accounting Policies, Recently Issued, and Recently Adopted Accounting Standards," in the section "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements for details of definite lived intangible assets and other long-lived assets.
Retirement Plans:
We provide defined benefit pension plans for certain employees worldwide. Our Board of Directors approved amendments to the US,Canada , andUK defined benefit plans that froze the future accumulation of benefits effectiveJune 30, 2013 ,December 31, 2015 , andApril 30, 2015 , respectively. Under the amendments, no new employees will be permitted to enter these plans and no additional benefits for current participants for future services will be accrued after the effective dates of the amendments. The accounting for benefit plans is highly dependent on assumptions concerning the outcome of future events and circumstances, including discount rates, long-term return rates on pension plan assets, healthcare cost trends, compensation increases, and other factors. In determining such assumptions, we consult with outside actuaries and other advisors. The discount rates for the US,Canada , andUK pension plans are based on the derivation of a single-equivalent discount rate using a standard spot rate curve and the timing of expected benefit payments as of the balance sheet date. The spot rate curves are based upon portfolios of corporate bonds rated at Aa or above by a respected rating agency. The discount rate forGermany is based on the expected benefit payments for the sample mixed population plan. The expected long-term rates of return on pension plan assets are estimated using forecasted returns for equities and bonds applied to each plan's target asset allocation. The expected long-term rates are then compared to the historic investment performance of the plan assets and established by asset class, including an anticipated inflation rate. The expected long-term rates are then compared to the historic investment performance of the plan assets as well as future expectations, and estimated through consultation with investment advisors and actuaries. Salary growth and healthcare cost trend assumptions are based on our historical experience and future outlook. While we believe that the assumptions used in these calculations are reasonable, differences in actual experience or changes in assumptions could materially affect the expense and liabilities related to our defined benefit pension plans. A hypothetical one percent increase in the discount rate would increase net income and decrease the accrued pension liability by approximately$0.9 million and$111.0 million , respectively. A one percent decrease in the discount rate would increase net income and increase the accrued pension liability by approximately$0.4 million and$133.8 million , respectively. A one percent change in the expected long-term rate of return would affect net income by approximately$5.9 million . 51
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