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

Good morning, everyone, and welcome to our second quarter 2017 earnings call, which 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 filings with the SEC. The Company does not undertake any obligations to update or revise forward-looking statements to reflect any 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 a question. After the call, a copy of the presentation and a playback of the webcast will be available on our Investor Relations page. I’ll now turn the call over to Mark Allin, Wiley’s President and CEO.

Thank you, Brian and good morning everyone. Also joining us is 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 sheet, cash flow and outlook. Before jumping into results, I should note that we changed our reporting this quarter to reflect our new business structure. The three new reporting segments are as follows: research, which largely consists of journals and our new acquisition Atypon. Publishing, which largely consists of books and related products, such as Course Workflow and Online Test Preparation and Solutions, which consists of our online program management, professional assessment, and corporate learning businesses comprised primarily of the acquisitions and learning and professional development which we’ve made in the last five years. This move has allowed us to better focus our resources on our largest and most profitable business research. It allowed us to consolidate review and improve our book businesses under one global leader. And it has allowed us to invest in the growth opportunity in the solution space, while continuing to improve profitability over time. I will be excluding the impact of foreign exchange when commenting on all variances. Foreign exchange continues to be a headwind, particularly in light of the Brexit decision. For the quarter, the unfavorable impact to revenue and EPS was approximately $15 million and $0.04 respectively. For the six months, it was unfavorable by $24 million and $0.07 respectively. Now on to results. Second quarter performance was positive with revenue up 2% and EPS up 3%. Our research business nearly 50% of revenue, showed solid growth in subscriptions and Author-Funded Access. Solutions continue to post double-digit top line growth and so much improved profit contribution. Publishing revenue was down 5% this quarter with weakness in…

Thank you, Mark. Adjusted shared services costs for the quarter were up 10% with a $5.7 million increase in technology investment, mainly related to our ERP deployment more than offsetting operational savings and lower volumes and distribution. Higher finance related costs mainly reflects higher professional fees and the state sales tax settlement. We expect technology spend, including our ERP investment to moderate over the rest of the year and be up about 5% for the full-year. As a reminder, the expected benefits from the ERP deployment include improved efficiencies and cost savings in finance, technology, and other shared services functions. Looking more broadly, we continue taking actions to drive operational excellence and cost efficiencies across our business. Towards that end, we incurred $6.8 million in restructuring charges in the quarter. $5.9 million related to cost reduction initiatives across our shared services functions, most notably in our distribution and technology operations. Our balance sheet continues to provide us with capacity to prudently invest in our business, while also returning capital to shareholders. On a trailing 12 month basis, net debt to EBITDA was 1.9 at the end of October as compared to 1.5 at the end of the prior year period. As we anticipated, we recorded a noncash settlement charge of approximately $9 million in this quarter related to a limited time voluntary lump-sum pension distribution program for terminated vested employees in the U.S. This action allows us to avoid some potential future volatility in our pension liability on favorable terms. Funding for the pension distribution will come directly from the pension plan assets, so there is no impact to free cash flow. As a reminder, our U.S pension plan was frozen in 2013, our Canada and U.K plans were frozen in 2015. Free cash flow improved through the first six…

Thank you, John. In summary, there is much to be pleased about. Our Research business remains a source of strength with a significant market position and will only be enhanced by our Atypon acquisition and the subsequent transition to a world class publishing and services platform, as well as new leadership in the form of Judy Verses. The opportunity in this business has never been greater, given our market position, our advanced platform and the enduring value of our content, brands, author relationships and society partnerships. Our Solutions segment continues to post strong top line growth and improved its first half profit contribution from a loss of $1.5 million in the year-ago period to a gain of $6 million. We continue to be the cutting edge of learning, education and employment, enabling our customers and partners to tackle significant challenges in developing the next generation of skills. In our publishing segment, we feel positive about the STEM and Business Content Categories, Coursework and Online Test Preparation and Certification. Demand for our content remain solid and we will continue to develop the digital solutions our customers are looking for. That said, parts of publishing remain a significant challenge, particularly print books. Although we have offset that over time with portfolio adjustments, efficiency gains, and a migration to a more variable cost model, and we will do so going forward. As John said, we are reaffirming our operational outlook. Fiscal 2017 remains an investment year, but these investments will pay off over time. In the meantime, our Research business continues to outperform well, generating significant profit and cash, while offering plenty of opportunity for core and adjacent growth. Our growth engine in the Solutions segment continues to post double-digit gains. Our Digital Publishing Products and Services continue to perform well, but print declines more than offset this and we are rapidly evolving that business to a more flexible, digital state. Overall, we remain confident in our transformation to a digital business and in the strong improvements in our efficiency and effectiveness as an organization. And with that as background, we welcome your comments and questions.

[Operator Instructions] And we'll take our first question from Daniel Moore with CJS Securities.

Good morning.

Hi, Dan.

Hi, Dan.

First off, margins in the quarter overall were a little better than we had modeled. Wondering how would you describe your performance relative to internal expectations and I know you’re reaffirming, but has your confidence around fiscal '16 -- fiscal '17 guidance increased, decreased or kind of about where we were two, three months ago?

So, Dan, this is John. Good morning. I would say that our margin performance in the quarter was in line with our expected evolution of the year, and we continue to be very confident in our guidance for the year. And I'd also note that our guidance for the year is appropriate if you look at our results through the half on apples-to-apples basis with our guidance. So excluding the benefit that we have so far through the half from moving to time-based subscriptions and a partial offset of that from the dilutive impact of the Atypon acquisition. Through the half our revenue is down by about 1% and our EPS is down by about 4%. And again our guidance for the year was for revenue, excluding the items we noted to be flat and for earnings to be down at mid single-digit rates. So, our results through the half are very consistent with our expectations for the year. We are very comfortable with the progress we are making through the half, but our guidance is still appropriate for our performance through the half and what we see on the balance of the year.

Okay. And obviously Atypon some incremental dilution in the short-term. Is Atypon the lion share of that $0.15? I know you had one other small tuck-in Ranku as well.

That’s right. Ranku has a very modest impact. No material impact to revenue and a very modest impact with respect to dilution.

And in terms of FX, which is outside of the guide, given Brexit it is with your expectations for -- its kind of $0.03, $0.04 a share on a quarterly basis for the next couple of quarters. Do you expect similar impact from FX?

Yes, so through the half we’re at a revenue impacts of around $24 million and $0.05. On the balance of the year, we should expect to see on the back half something closer to for the full-year a $50 million of impact on FX overall. And the impact on -- from an earnings perspective approaching something like $0.15 for the year.

At today’s -- by current rate?

Yes, exactly, at current rate.

Got it. That's helpful. More interesting stuff. Nice acceleration in terms of online program management, 20% growth that type of growth sustainable over the next couple of quarters given the uptick in enrollments and separately I think you mentioned three partners did not renew. Maybe just a little detail on, is it -- is there more competition -- is there more competitors out there without getting too specific when you do lose a customer, maybe a little -- some detail there would be helpful?

Yes. Dan, its Mark. Hi. So, yes, the growth in the quarter was certainly positive. I think I’ve said a number of times that the key drivers in descending order for the growth of that business are more students on existing programs, developing new programs for existing partners, and thirdly developing strategically new partners, you can significantly accelerate the business. So enrollments in the full period is a critical period for us and a big driver of that, of that growth quarter-on-quarter. We continue to be focused on enrollment growth marketing and recruitment and for the Ranku acquisition. So we broadly expect that to continue without being specific about coming quarters, but certainly student recruitment and enrollment remains a significant driver and focus for our activity. As a strategic partner to universities, we engage with them both in developing and identifying new programs we can hopefully can be productive, but we will also partner with them to retire programs which we believe are less productive. So you can't read too much and that is not so much about competition, it's about us working with partners to optimize the portfolio programs they have, which we believe can be most productive and successful in the long-term.

Very good. And last thing, I will jump back in queue. Journals, up 3% constant currency for the quarter and now 4% year-to-date. Is there something timing related in that or its running a little ahead of the very low single-digit growth that that we had expected, I mean, what’s your outlook for the remainder of the year in the core Research Journals business?

So as I mentioned earlier on, Dan, the -- we see around a 1% growth in core subscriptions for 2016. We are not seeing anything dramatically different, but remaining solid through 2017. Through this quarter we had some additional delayed payments for a -- from an international customer that had an impact on the -- on quarter performance. And obviously over the six-month that the added benefit of the shift to time-based earnings which is around $4 million in the six months to date. So underlying performance is in line with our expectations. There is a couple of one-offs in that, but we remain confident about solid projection going forward.

Very good. Thank you for the detail.

We will go next to Drew Crum with Stifel.

Okay, thanks. Good morning, everyone.

Good morning, Drew.

So just a follow-up on Dan's question with respect to online program management. It looks like the contribution to profit for the solutions businesses was up 129% on an adjusted basis. Can you address the performance of Deltak in the quarter? It looks like it was near breakeven in the fiscal first quarter. I know you guys have been saying, you expected it to be dilutive the numbers in fiscal '17. Are we nearing profitability for this business as your outlook changed?

So, good morning, Drew.

Good morning.

Our outlook for the year is still for Deltak to be about $0.10 dilutive for the year.

Okay.

Keep in mind within that dilution calculation we include the amortization and intangible, and we also include cost of capital for the acquisition. But we are seeing as planned steady improvement in the profitability of that business as we continue to manage the portfolio of partners and programs as we’ve talked about in the past, and we continue to drive efficiencies in that operations as we gain additional scale. So Ranku acquisition gives us some additional capabilities around efficiency in our marketing efforts that we also expect to contribute to improvements in profitability going forward. So we're marching at a steady pace toward profitability. We’re committed to continuing to improve the profitability of that business as we grow its base.

Got it. Okay. And then, Mark, just jumping over the Publishing segment, the education publishing line of fiscal 1Q sales down 24%, but only down 5% this quarter. I think you alluded to some change in ordering patterns that had an impact on performance, but it seems like this quarter which captures August was less bad relative to what you experienced in the fiscal first quarter. So just want to understand if anything else changed and again how that impacts, how you see the balance of the fiscal year for higher Ed?

Yes, thanks. Hi, Drew. So again, I think we said at the end of the first quarter it's hard to isolate a quarter with this business given the cyclical nature in the pattern of ordering. And we did note last quarter that we anticipated that some digital ordering which shift to later in the semester as students order pretty much as programs and courses are starting and that played out. So that would be the main driver of the kind of rebalancing between the two, but you do need to take the two quarters together to get a picture of underlying performance. And some of the other headwinds that are impacting the industry tied to inventory management, rental, channel consolidation, they do continue to drive overall negative performance as you’ve seen on a six month basis. So we’re continuing to grow digital revenue, but we do expect some of those negative trends to continue to play out for the foreseeable future.

Got it. Okay. And John, I apologize, if I missed today, I think you said that the backfile sale on a year-ago period fiscal 3Q is $10 million in revenue. Did you mentioned an EPS impact or if you didn’t, can you share one?

Sure. The flow through of the EPS is right around $0.12, $.13.

Okay. And then, just last question, you mentioned that earlier Journal Cash Collections impacting year-to-date free cash flow performance. Can you offer an update on your expectations for free cash flow for fiscal '17 and remind us how much cash is held offshore for the Company?

So with respect to the free cash flow outlook for the year, cash from ops we're still expecting will be roughly even with last year. And our overall level of investment between composition spending and [indiscernible] is going to be up about $30 million a year. It's just slightly higher. So we're still expecting to be in that zone with respect to free cash flow. And then with respect to our cash balances, on the order of about $235 million of our cash is held overseas, you know we held relatively little cash in the U.S. We balance our borrowings through the revolver that we have.

Got it. Okay. Thanks, guys.

Thank you.

Thank you.

Our next question we will go to Allen Klee with Sidoti.

Yes, hi.

Good morning, Allen.

Good morning.

Good morning.

For the Solutions segment, what factors do you point too for the improvement in the contribution margin?

Much of the improvements across the teens is coming from levers that we’re getting through the growth of those businesses. And in particular I would say, among those businesses we're showing the most improvement in this particular period around scale and efficiency in the operations of the Deltak business, but each of them are growing. We are seeing high teens growth in cross dollars as well as in the Deltak business, and as we grow we expect more of those savings to flow through the earnings.

Okay.

And just to -- just to add to that, one of the thing we've noted in the past within our assessment business we've been working sort of systematically to get our post-hire business, the profiled international acquisition to an operating model which is more consistent with the pre-hire business, which was the Inscape acquisition, and we continued to make good progress towards that goal. So while its revenue, it's still flat to negative. We’re making gains and profitability given the business model we’re evolving towards.

Okay. Thank you. And then if you can just remind us for the ERP spend, what's the timing of -- if you can go through again what the cost, the timing and when you think that it's all live and any thoughts on how you can avoid potential disruptions or prevent disruptions related to it?

Sure. So we’ve spoken in the past about the ERP implementation that’s having a number of phases to it. The early phases of our ERP implementation are the financials, so record report capability prefer to pay functionality as well as collections. We first went live with the record-to-report and procure-to-pay functionality last November in North America and in August, so just a few months ago we brought up record-to-report and procure-to-pay as well as globally collect collections for all of our operation. So this is our first quarter reporting our financial results on our SAP implementation. Our next phases now are implementation of functionality around order to cash activities and we're beginning our next important phase of the ERP implementation focuses on order-to-cash functionality for our Research Journal business. Our implementation timeline takes us into next summer for that. We’ve set across fiscal '16 and across fiscal '17, so last year and this year that work would run Ron approximately $75 million in terms of total spending. It was about half of that being capital and about half of it being OpEx, the balance of the $75 million spend across the two years was slightly more heavily skewed toward fiscal '17, so about $4 million or $5 million more of the balance in this current year than in last year, but it's about $75 million CapEx and OpEx across the two periods. We are so progressing at that level of spending and then we do anticipate as I commented earlier that spending will begin to moderate as we get toward the latter half of fiscal '18. In terms of new disruption to operations, we're nothing our way now through another layer of detailed planning around our order to cash functionality for Journals, which as I said we're aiming toward next summer and up and running for the calendar year '18 subscription year. We are taking a close look at making sure that given the complexity of our environment we’ve got legacy systems that go back quite a bit in time and have complex automation built into them. We're going through very carefully around testing plans as well as change management employees to ensure they’re well-prepared for that transition and we of course won't flip that switch until we know we are well-prepared.

Okay. Thank you. And finally on the Publishing side, can you talk about what’s your thinking about for potentially rightsizing and continuing to kind of cut costs there, given the environment?

Yes, certainly. So again as we've talked about a couple of times we have some real digital strength in that business in Digital Reference, in Online Test Preparation, in Course Workflow. Most of those are particularly in scientific, technical, medical business and accounting categories, and we will continue to invest and grow those. And that will be the focus of our investment across the portfolio. In terms of operating the business we already realized considerable efficiency gains from moving our distribution to a variable cost model. We’ve consolidated our approach to content management into a single organization globally and we’re continuing to work towards greater simplification, greater standardization that enables us to be more flexible and how we deliver products and services, but is also supported by our ERP implementation. So focused on high value categories, continuing to realize operating efficiencies by combining those businesses together, and then standardize around ERP.

Thank you. Congrats on a good quarter.

Thanks, Allen.

Thank you.

[Operator Instructions] And for our next question we will go to Nick Dempsey with Barclays.

Yes, hi, guys. I’ve got three questions actually. First of all, you mentioned weak trends continuing in the college textbooks. When we listen to Pearson and Cengage that pointing to a better returns picture through October certainly and probably November, which gives them some more optimism when they’re looking at what their net revenue picture is going to be in calendar '17. I’m already hearing that from you. Is that a pattern that you guys are seeing? Second question just on -- you mentioned social sciences in terms of academic books are weak. Can you just dig down a bit more into that? Is it there are kind of small print run books sold to libraries and post-grad student? And why in particular in social sciences is that proving weak? Is that more of a focus on Journals or library budget squeezing out books? And then my third question, we heard from Barnes and Noble Education yesterday they expect another year of declines in full enrollment at U.S universities. Their comment seems to suggest [ph] those won't be too different to last year, would you agree with that kind of picture?

Hi, Nick. Its Mark. Thank you. So just to take those in order, as far the college textbook market goes, I would say again that the factors that impacted the earlier part of the year and in our first quarter, so you noted returns in inventory management, channel consolidation, rental pricing options and so on. Those -- for us, those played out in the first quarter and the balancing of that with slightly lower returns, but certainly growth in digital within the second quarter. But I wouldn't say at this point that I would -- I could confidently say that if you project that forward that those headwinds will significantly moderate. Now I think that's still a level of uncertainty around how student buying is going to play out, about where is rental going to settle down as a percentage of the market, how we will see that the channel continue to evolve in terms of consolidation and ownership. So certainly some shift between our first and second quarter taken on a year-to-date basis and extrapolating out I think would be premature at this point. Social science -- the decline in social science, there is a number of factors. There the most significant at any one time is the balance of front list. So where we’re publishing in any particular quarter and it was relatively light in social sciences. That said, university budgets, library budgets which as you know are relatively constrained tend to flow to Journal subscription products first. And then within book products primarily to higher demand must have content in science and technical subjects, but nevertheless we’ve seen good performance from core franchises and reference projects in social science. It is not a huge part of the program. And as far as foreign [ph] enrollments go based on the data we have and it's not complete at this point, I would more or less agree with Barnes and Noble's view that we’re not seeing anything radically different than we see recently.

That’s very helpful. Thank you.

We will go next to Ciaran Donnelly with Liberum.

Hi, gents. Just a couple of questions from myself. Just picking up from a point on the Barnes and Noble's call yesterday, they stated that rentals continue to be the students first choice when it comes to textbooks and you’ve also alluded to yourself as headwinds. But I was just wondering if you can give us some detail on how that’s impacting your current model and what habitations [ph] you could implement to counteract this negative trend?

Hi, this is Mark. So, yes, I mean, rental is at somewhere around 30% of the market at this point. So it's not a majority, but it may be the largest single category of student purchasing around Print. And I believe that that will continue. So our focus is on creating value for students and teachers through our digital workflow solutions. So the more of our business that migrates rapidly to WileyPLUS and to E-Text and Digital Custom than the lesser that rental becomes an impact. While students continue to see print as an option then rental will continue to be a disruptive, but our focus is on providing the kind of digital solutions that the teachers and students need, then we’re pleased to see that that piece of the business is still growing.

And just a very quick second one from me, just with respect to the Barnes and Noble price matching policy, can you just clarify for us that 100% of the cost of the scheme has been borne by the retailer and they’re not passing any of that onto the publishers like yourself?

I wouldn't comment on that at this point. That’s a commercial relationship, but thanks for the question.

All right. Thank you.

We will go next to Sami Kassab with Exane.

Good morning, gentlemen. Thank you for taking my two questions. First one, the 30% you just mentioned in terms of rentals as a share of the market, is that in volumes of unit or is that in dollar terms please? And secondly, you guided for a composition costs of $50 million this year. If not mistaken that’s quite an increase from the $37 million you reported last year. So what’s driving the increase in your comp costs please? Thank you.

I will take the first. Thank you for the questions. The 30%, those are industry figures based on units.

Thank you.

Sami, its John. The increase in composition cost year-over-year is really not an operational difference. We have migrated part of our prior investments in the Solutions businesses from what has previously been categorized as PPNE [ph] into the composition category. So most of that increase is not operational, it’s a classification chain. But our overall assessment in composition, if you will, from an operational perspective is not materially changed.

Okay. Thank you very much.

And that does conclude today's question-and-answer session. At this time, I'll turn the conference back to Mr. Mark Allin for any additional remarks.

So thank you everybody for joining us on the call today and we look forward to speaking with you again at our January Investor Day.

This does conclude today’s conference. Thank you for your participation. You may now disconnect.