Good morning and welcome to the Wiley’s First Quarter Earnings Call. As a reminder this conference is being recorded. At this time, I would like to introduce Wiley’s Vice President of Investor Relations, Brian Campbell. Please go ahead.

Good morning everyone, and welcome to Wiley’s first quarter of 2017 earnings call. I want to remind you that the call is being recorded and may include forward-looking statements. You shouldn’t rely on these statements, as actual results may differ materially and are subject to factors discussed in our 10-K and 10-Q filings with the SEC. The Company does not undertake any obligations to update or revise forward-looking statements to reflect subsequent events or circumstances. For those who prefer to listen to the call over the phone, but still want to view the slides, we recommend that you click on the Gears icon located on the lower portion of the left-hand side window and select Live Phone. This will eliminate any delays in viewing the slide transitions, as well as remove any potential background noise if you prefer to ask questions. After the call, a copy of this presentation and a playback of the webcast will be available on our Investor Relations page. I’ll now turn the call over to Mark Allin, Wiley’s President and CEO.

Thank you, Brian and good morning everyone. In addition to Brian, I am joined by John Kritzmacher, CFO and Executive Vice President, Technology & Operations. I will speak to business performance, and John will follow with an update on operations, balance sheets, cash flow and outlook. Note that I will be excluding the impacts of foreign exchange when commenting on all variances, unless I specify otherwise. Foreign exchange is shaping up to be a larger headwind than we expected, given the impact of the Brexit decision. For the quarter, the unfavourable impact to revenue and EPS was approximately $9 million and $0.01 respectively. Also included in the results is the transitional non-cash impact of shifting to time-based journal subscriptions. First quarter results were mixed from a revenue standpoint with 4% growth in journals or 2% growth excluding the favourable time-based subscriptions impact and double-digit growth across our Solutions businesses offset by a 16% decline in overall book revenue. The decline in education was particularly noteworthy and I’ll talk more about that later on in the presentation. Adjusted EPS declined 9% on a constant currency basis due to the revenue decline and higher technology costs, including investment in Wiley’s ERP deployment and related systems. This was partially offset by favorable one-time items related to certain employee benefit plans. We are very excited about the recent timings of an agreement to acquire Atypon. Atypon will be a tremendous addition to our research business, a best-in-class SaaS publishing platform and service provider that hosts one third of the world's English language journals. Atypon does two things. It provides a strong growth opportunity in the stable but slow growing research marketplace and it greatly accelerates our technology road map. I’ll talk about this later on as well. The Journal’s business, our largest and most…

Thank you, Mark. Adjusted shared services costs for the quarter were flat, with a $10 million increase in technology investments, mainly related to our ERP deployment, offset by an $8 million decline in other administration costs. The decline in other administration costs was primarily due to favorable onetime items related to changes in certain employee benefit plans. We expect technology spend, including our ERP investment, to moderate over the remainder of the fiscal year. Our full year technology expense will only increase by about 5% over prior year. The strength of our balance sheet continues to provide flexibility for investments, including acquisitions as well as the return of capital to investors. Our interest and acquisitions will continue to focus on opportunities to enhance our position in research publishing and advanced learning technology and services across research, professional development and higher education. Net debt-to-EBITDA on a trailing 12-month basis was 1.4 at the end of July compared to 1.2 at the end of the prior year period. As you may recall, our U.S. pension plan was frozen in 2013, and our Canada and U.K. plans were frozen in 2015. We recently launched a limited time voluntary lump-sum pension distribution program for terminated vested employees in the U.S. qualified plan. This action will reduce potential future volatility in our U.S. pension liability on favorable terms. Funding for the pension distribution will come directly from the U.S. pension plan assets, and there will be no impacts to Wiley's free cash flow. We expect to record a second quarter noncash settlement charge of approximately $8 million to $10 million related to the program. Free cash flow was a use of $165 million for the quarter compared to a use of $155 million in the prior year period. The variance is primarily due to lower…

Thanks, John. In summary, performance in the quarter was mixed, but the fundamental drivers of Research and Solutions performance was solid. Journals had a good quarter and forward-looking metrics show continued steady growth ahead. Our Solutions businesses continued to post double-digit growth in a competitive marketplace. However, pressure on the Books business persists, and education performance was worse than expected, given the market dynamics mentioned earlier, while our other Books businesses were down over 11% collectively at constant currency. We are actively evolving those businesses and the overall Books portfolio to drive improved revenue performance and sustainable profitability. We are very excited by the prospect of adding Atypon to the research business and across Wiley. Atypon is transformative and immediately positions us as a technology leader in the industry. It adds significant innovation in development resources to the Wiley culture. It provides important opportunities for growth within and directly adjacent to our most profitable business. Wiley colleagues are thrilled with the addition, knowing full well the reputation Atypon has in the marketplace. As John discussed we are reaffirming our operational outlook. As was the case with fiscal 2016, fiscal 2017 remains an investment year, but we expect those investments to pay off and give us even stronger operational and financial foundations for the long term. To recap, we are pleased with the steady performance of our Journals business, the continued strong growth of our Solutions businesses, the progress of our ERP and office transformation and many other developments across Wiley. There are challenges to be sure, particularly in traditional Book publishing, but we are working through those and we'll keep you informed. Wiley colleagues remain energized by recent changes and by each other. In summary, Wiley continues to be well positioned for a long sustainable future, driving academic and professional impact as one of the world's leading knowledge and learning businesses. And with that as background, we welcome your comments and questions

Thank you. [Operator Instructions] Our first question comes from Drew Crum with Stifel.

Okay, thanks. Hi guys, good morning.

Good morning, Drew.

I wanted to ask about, Atypon first. Anyway to quantify revenue synergies that you're anticipating from this acquisition on a go-forward basis? And then the $0.15 of dilution that you're guiding to for fiscal 2017, it would look to be about $0.20 plus on annualized basis. What does the ramp to accretion look like for this asset, is this something that will ramp quickly, or is it something that you're going to continue to invest behind and will be more similar to the trajectory we've seen with Deltak? Thanks.

So Drew, first with respect to with revenue synergies, we wouldn’t say at this point that there are in the near-term relatively small revenue synergies as we look for as Mark described opportunities to generate new revenue based on new services. So I would say that part of our -- our cases is relatively small in near term, but we think are important prospects for the future. And we do believe that is an important part of the opportunity with Atypon, but it's a little bit further down the road for the creation and delivery of those and services. And then I would say with respect to dilution, the sweeping impacts inside of this year include and into next year include the cost of our transition from the existing Wiley Online Library platform onto the Literatum platform, and so the benefit to our earnings performance starts to make its way into our results inside of very back end of our fiscal 2018 more into fiscal 2019. And so to think about, think about benefits to our earnings happening in fiscal 2019 and beyond.

Got it. Okay. And then this is more of a big picture question, I think you know exiting fiscal 2016, you saw some improvement for the Books business overall and thought that you the rate of decline for that part of the business would decelerate. I know, it's just one quarter, but it seems the rate of decline accelerated, just how you are thinking about that business for that part of the business through the balance of fiscal 2017, do things get better, do they get worse, just wanted a little more color on that? Thanks.

Hi, Drew it’s Mark.

Hi, Mark.

So yes, the declines we've seen in -- in the last quarter and a little before that are greater probably than we expected them to be 6 months to 12 months ago. I think as I've touched on with respect particularly to education, there are some -- there are some platters, but much of which revolve around print inventory, the way the channel is evolving and student purchasing behavior particularly that the growth in -- in rental and some of the battles being fought around price. So I would say that it does, it does cause us to carefully evaluate the portfolio going forward across that Book business. And through the balance of the year at this point I think we expect declines to continue roughly in the range that they are now. We do need to see the education for selling season play out through that. And the performance of the digital businesses to grow out of our Book businesses, WileyPLUS the Test Preparation business, the Book business continue to be strong foundations and to have to have good growth characteristics. But as far as print is concerned, we have we do we do see the balance of the year looking somewhat like the previous 12 months we've experienced, and that's why we're evaluating the portfolio carefully.

Got it. And just one last question Mark related to education. Can you give us an update on your exposure to the -- excuse me for profit school operators.

It's pretty limited, pretty limited. So in our online program management business, we have no exposure. Now the for-profit schools have always been purchases of custom material, some of the declines we've seen that may be impacted by that but it's not a big part of that business and never has been.

Okay, thanks guys.

[Operator Instructions] Our next question comes from Daniel Moore from CJS Securities.

Good morning, thank you. Wanted to just follow up again on that theme and jump into one or two others. You know -- you I think you mentioned the education business North America down 17% year-to-date. You know for the industry that seems it would seem to me to go beyond just inventory and changes in buying patterns, and I guess what caught my eyes WileyPLUS and E-Books down as well. So, is there some other you know acceleration change that you're seeing, is there any timing you know as it relates to the start of the these academic years that you're seeing, any other color just around you know beyond just print, your exposure to the global hub [ph] secondary education business would be very helpful?

Sure. So as far as that the overall picture, you know we are continuing to see a transition overall in the industry from print to digital that has a number of knock-on effects. One is the shift in timing of ordering an adoption, which tends to come much closer to the beginning of the semester or in some cases just after. The digital adoption is uneven, if you notice this before across the higher end landscapes, though some institutions which are moving quickly either to institutionally purchase or to encourage adoption use of digital materials, whilst others club various reasons including academic freedom maybe more mixed in the face of which there is a flowing digital solutions. That coupled then with the disruption caused by rental and some of the impacts on price means you know this is continuing to evolve. We did though only one quarter and you know we’ll need to look at this some months out from now to see what the impact has been overall. But we do see a continued shift from print to digital that represents clear opportunities. The quarter for WileyPLUS is a very small one, and with order in shifting relating to the selling season, I think there's no conclusion to draw from that. So we continue to be confident that we have a good digital solution for the marketplace, and we just need to continue to monitor the trends of that quickly those are being adopted and what the impact on pricing in the evolution of business model will be.

That's helpful. And shifting gears, at upon the -- maybe just drill down a little bit more in terms of this very specific capabilities that they bring, that would have been more challenging for Wiley to develop in-house. And then you mentioned some significant cost savings as a result, potentially of the acquisition. Can you quantify, or give a little bit more specificity around that?

Yes, so I think, I'll take the first half and maybe John can talk a little bit about the cost savings. So to the Literatum platform which is at the heart of the Atypon business, really is the best-in-class platform. In terms of their capabilities, so one is the way that content is stored and tagged and deployed, which is at a very modular and granular level. I talked a bit about Atypon, journal book content, blogs, videos, etcetera that those can be rapidly deployed across platforms, across customers and across business model. That kind of flexibility is - - takes a long time to develop. Alongside that, the automation around website design, the development of user experiences, being able to quickly deploy web solutions in support of other society clients or to -- around a particular opportunity is considerable and is a big leap forward for us. And overall, this is -- the research industry and marketplace. Technology is driving discovery, it's driving innovation, it's driving access and it's improving author productivity. And by adding the Atypon capabilities into Wiley gives us considerable opportunities, as John said over time, to deploy those technologies to stay right at the cutting edge of what's happening in research.

And then to your question with regard to synergies, so our efforts begin to focus without upon closing again around October 1st to migrate Wiley online library onto the Literatum platform, we anticipate that the timing of that effort will have us migrating of our entire library on to Literatum platform for calendar year 2018, so around January of 2018 between now and then there's a substantial amount of incremental cost in migrating onto the Literatum platform while we continue to operate the Wiley online library platform, but then when we get to the other side, we’ll begin starting to realize annualized savings, it will be first in that, roughly in that last fiscal quarter of our fiscal 2018, so that the January upto April period. And then on an annualized basis, we are expecting to realize savings from the implementation that are on the order of $10 million per year. Putting that all together it's including you know the sort of linger -- any lingering amortization, is it fair to say you expect that to be accretive by fiscal 2019?

Our expectation is, is as I said once we get out into fiscal 2019, that the acquisition should begin to contribute to our growth profitability performance. We've got some additional transition and through most of fiscal 2018 and then once we get across that based on the performance of that upon itself and the improved cost synergies, that will get out of the combination, we guess we're expecting out in fiscal 2019 we start to see the benefits of the acquisition.

Okay. And sorry for too many questions, one or two more I've got a lot of different topics on this particular quarter. Technology spend, you mentioned John, would only be up 5% year-over-year. Is the acquisition taking over some of the spending that you anticipated? I guess are there any opportunities that you are delaying or no longer focusing on in the near term that spend, level of spend is a little bit lower than I think we had anticipated?

No, I think we've been noting all along the way here for some time that we are driving toward more efficiency and improved resource allocation around their overall technology spend. The plan that we have for the year in the forecast I’ve just given you is consistent with what we have expected to do in our planning for fiscal 2017, just the timing of that planning from a seasonality perspective had us spending more in the first fiscal quarter and less across the way of the year. But in no way did we slow things down, nor did we set aside one opportunity to – to fund the acquisition. Our plans for technology improvements and our plans for technology costs improvements continue across the year.

Okay. And lastly, the German tax authority is there a specific reason why we're depositing cash along the way but not necessarily accruing the expense on the P&L? And you know any way to handicap the outcome at this stage?

Yes, so as I noted in my comments, this case goes back quite a while in time. The original step up to the asset base was back in 2003 when we did the combination of several years back now the German authorities contested our position on this. Our view all along has been that the technical marriage of our case store within the provisions of the law and that we expected to prevail in our case so that did not warrant us taking a charge, however the terms of Appeal in Germany are such that you are required to deposit the disputed funds until the case is finally resolved. So we were required to make the deposits. We did not and have not viewed it as appropriate to take a charge because we felt that our case would prevail.

Got it. Very helpful. Thank you, I’ll turn back in the queue for maybe one more.

Thanks Dan.

[Operator Instructions] Nick Dempsey from Barclays has our next question.

Hi, Yes good morning guys. I've got 3 questions. So the first one, you mentioned that college bookstores are more cautious with their buying this year at this stage because of the weak September selling season last year. And that's something that both Cengage and Pearson have mentioned. Are you confident that your returns picture will look much better this year than last year as a result of that earlier caution from those guys? And how are you setting your provisions for your returns? And then second question, in terms of the shift to digital causing a timing issue, and I've got the AAP market data in front of me. When I look at the growth sales line there, it's been roughly the same share of the year in each of the last 3 years in June, July, August and September, if I make sense. So are you saying that this is the kind of the first year that you're seeing a clear shift out of July into August and September, or are you saying something else? And then point 3, we're weak into September. I wonder what your sales teams might be seeing in terms of the first -- college enrolments and the demand that the campus bookstores are seeing at this early stage.

Okay. Thanks, Nick. So the first question around college bookstores and returns, all of this the picture still has to evolve. The channel one thing I didn't mention is the channel has seen a lot of consolidation over the past 12 months. So and M&A activity, so inventory has come together from different places and continues to be rationalized. So we need to see how that unfolds. Clearly the year ago period was particularly heavy in terms of returns, but we're not going to call that yet. The shift to digital in terms of timing, as the percentage of digital, I don't speak for the industry, continues to grow and digital sales continue to grow year-on-year, then the impact of the later ordering that tends to prevail on digital quarters will clearly have a greater impact overall. And that's continued to build over time, and we see the same things. So not one big shift is the continued growth in the [ph] digital market as a whole. And with regard to September, it's not done yet so I can't call that now.

Okay. So maybe just to jump back into the timing point. Wouldn’t we – I mean the shift to digital has been going on gradually, as you say. Wouldn't we have been seeing the percentage of the year that those three months, July, August, September represent of the year shifting more into August and September already and we haven't?

Potentially. I think that we have to see the whole year play out to decide what -- to be clear what the impact of that is. And I think that's true for the industry as a whole. It certainly is also true that the shift to rental is also pushing the time at which students are acquiring their textbooks later in the year as well. So they will tend to buy very early, but to rent at the last minute. And that's clearly an impact as well. So let's see the year unfold. And I think we'll all have a clear picture of where we are.

Great. Thank you.

Sure.

[Operator Instructions] And we do have some follow-up questions from Daniel Moore, CJS Securities.

Thank you again. Given good details, any more color you can provide around the current margin profile for Atypon, excluding the investment in transition costs, how that should impact Wiley's overall margin profile going forward?

Dan, recent performance for the business, we had said that calendar 2015 revenues were around $31 million for the standalone business. EBITDA performance on that business right around 20%. And we'll expect that the business grows, we'll expect that to grow into the mid-20s. So we think there's upward potential there with growth, but it's prior year performance from that 20% though from an EBITDA perspective.

Got it, very helpful. And obviously, you're going to sort of ringwall that business as you've got some customers or I should say competitors that are customers. You know just help us understand and how did you gain comfort that there wouldn't be any sort of lost potential lost share with moving it under the Wiley umbrella and maybe just talk about their competitive differentiation versus some of the comps that you mentioned like [indiscernible] and Publishing Tech and HighWire.

Yes. So firstly, I think the Atypon platform is clearly industry-leading, that kind of connects the first question to the second. But we've been very clear as we were on this call that the way that we're operating Atypon as a separate business unit within Wiley. That the controls we're putting in place, both in terms of data security and the operations of the business and access to information, are clearly understood by Atypon's customers. And they quickly and most if not all, have reacted positively to the acquisition, but it's clear to them how we're going to operate the business in their interest. And we take seriously the role that Atypon plays in providing high-quality services to the industry and we'll continue to maintain that and to establish high quality communications between Atypon and their customers and to ensure that they have, as they've always expected, clear transparency and understanding of the development of the technology road map and the evolution of the business.

That's helpful. And maybe just talk a little bit about their -- you said market leading, any sort of differentiators versus some of those other competitors, and whether you might have any market share data?

I don't have market share data at hand. I think the biggest driver of competitive advantage, which I touched on earlier, is the flexibility of the platform, the ability to deploy it across different business models and across different customers and opportunities quickly. The content tagging and deployment technology is pretty much the best around. And overall, the platform is stable. It delivers consistently. The performance is reliable. And it gives publishers what they need in terms of a forward road map and ongoing development to ensure that they're staying up to date.

Very helpful. Thanks for the color.

And we'll take another follow up question from Nick Dempsey from Barclays.

Yes, thanks, just one more. When you talked about battles being fought around price, do you mean the rival publishers are cutting their prices perhaps more than you might have expected 6 to 12 months ago? Or are you talking more about what's happening at the bookstore level?

No, I don't mean between publishers, Nick. And thank you for the question. I mean that the choices that I could use the word battle carefully, it's the choices that students have between renting, buying news, buying a digital course, buying an e-book. And as that goes – gets presented to students by bookstores, by online retailers, there's a huge amount of choice around price and obviously a lot more than we saw in case of just print textbook publishing. So similar to many other evolved digital consumer markets, there's a lot of variation in price, there are a lot of special offers and there are a lot of choices that students have.

All right, that's very clear. Thank you.

[Operator Instructions] And that does conclude our question and answer session today. Speakers, I'll turn the conference back to you for additional or closing remarks.

So thank you everybody for joining us on the call today, and we look forward to speaking with you again in December.