Good morning and welcome to Wiley's Third Quarter Earnings Call for Fiscal Year 2019. 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, sir.

Thank you, and welcome to Wiley's third quarter fiscal 2019 earnings update. A few reminders to start, 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 SEC filings. The company does not undertake any obligations to update or revise forward-looking statements to reflect subsequent events or circumstances. Wiley provides non-GAAP measures as a means to evaluate underlying operating profitability and performance trends. Non-GAAP metrics which generally exclude items that impact comparability comprise the following: adjusted EPS, free cash flow less product development spending, adjusted operating income and margin, adjusted contribution of profit, and results on a constant currency basis. These performance measures do not have standardized meanings prescribed by U.S. GAAP, and therefore may not be comparable to the calculation of similar measures used by other companies. This should not be viewed as alternatives to measures under GAAP. Also note we abbreviate constant currency as CC. Please see the reconciliation and explanations of all non-GAAP financial measures presented in the supplementary information included in our press release. Important note all variances in this presentation exclude the impact of currency unless otherwise noted. 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 this presentation and a playback of the webcast will be available on our Investor Relations webpage. I'll now turn the call over to Brian Napack, Wiley's President and CEO.

Hello, everyone, and thanks for joining. With me as always is John Kritzmacher our CFO and EVP of Operations. At Wiley, we operate in a dynamic global economy. The world's many challenges demand more and better research, more and better education. New doors are opening for people who possess the right knowledge and the right skills, and new opportunities are opening for companies that can accelerate the generation and dissemination of new knowledge, and for those that can enable the acquisition of skills and knowledge through powerful affordable education, and that describes Wiley's domain. Said succinctly, we drive the world forward with research and education. We are where we need to be to have impact and to get rewarded for it, namely in research publishing and platforms, in education and professional publishing, in education services and delivery. We have a mix of cash generative and high growth businesses all with similar customers and ecosystems. We serve four important constituents: universities, corporations, researchers and learners. And we help them to achieve their all-important missions in research and education. We serve 6,000 institutions for education and professional content, 10,000 institutions for research content, 60 plus university partners for our degree program services, 600 scholarly and society partners, 1,000 corporate partners, and 2,500 partners in corporate training along with millions and millions of researchers and learners worldwide. We are building off a strong foundation. We are aligned as an organization around six constant imperatives; one, to lead our markets and innovate relentlessly. We recently accomplished both of these with the announcement of a groundbreaking partnership with Germany through Projekt DEAL, a consortium representing all 700 German academic institutions. We are the first and only publisher to fully align our interest with those of our customers in the dynamic research market. We have established…

Thank you, Brian, and good morning everyone. As a reminder, I'll be excluding foreign exchange impacts from all various discussions unless otherwise noted. As Brian commented earlier, favorable third quarter revenue performance in research, Atypon, test preparation, education services, corporate learning and professional assessment offset a higher rate of decline in book revenue. Total Wiley revenue was up 1% at constant currency, adjusted operating income was lower by $14 million or 21% and adjusted EPS was down $0.19 or 22%. These results include one full quarter of results for the Learning House acquisition which added revenue of $13 million but diluted operating income and EPS by $6 million and $0.11 respectively. Excluding the acquisition Wiley's overall revenue was down 2% adjusted operating income was lower by $8 million or 12% and adjusted EPS was lower by $0.08 or 9%. Adjusted operating income and adjusted EPS declines were primarily driven by lower publishing segment revenue, accompanied by increased spending on marketing and enrollment services to accelerate growth in education services. For the nine month period, revenue was even with prior year with 2% growth in research and 14% growth in solutions offsetting a 7% decline in publishing. Total Wiley adjusted operating income and adjusted EPS were both down 18% primarily due to lower publishing segment revenue accompanied by higher investment and editorial and sales resources and research and increased marketing and enrollment services spending and education services. Again Learning House was favorable to year-to-date revenue by $13 million and unfavorable to operating income and EPS by $6 million and $0.11 respectively. Excluding the acquisition, revenue was down 1% and adjusted operating income and adjusted EPS were down 15% and 14% respectively. As a reminder, our full-year outlook which excludes Learning House is for even revenue performance and a mid-single digit decline…

Great to briefly summarize, we're seeing favorable growth and momentum throughout our business, but it was offset by a difficult quarter for book publishing. The level of decline this quarter in book publishing is a bit of an anomaly and we expect the year to finish somewhat lower than expected. We are addressing these issues through focus, innovation, and optimization. We made a big move in Research by being the first publisher to partner with Germany on a mixed publishing model. We are seeing significant momentum in Education Services and our integration is on schedule, I'm very excited about what this combined team is already bringing us in terms of culture, its ability to innovate and its partners in programs. And our company business wide -- our company wide business optimization initiative is moving full steam ahead. It's an ambitious project with significant potential savings, more to come on that in June. With that as background, we welcome your questions and comments.

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

Okay, thanks. Good morning, guys. A lot of enthusiasm and optimism around this German National Consortium agreement that you signed, can you talk about what the impact will be to financials? And I guess maybe more longer term, you made a comment that you're seeing or anticipating more mixed in Open Access type model, and just want to understand what the implications for growth and the margin profile the Research biz will be given that dynamic? Thanks.

Good morning, Drew.

Good morning.

Thanks for your questions. So with respect to the agreement that we have reached with Projekt DEAL in Germany, we expect from the start that there will be a modest increase in our revenues there. And so, it is a near-term boost to our financial performance there in Germany from our subscriptions base, and it is importantly a platform for us to grow revenue based largely on output of -- the increased output of research articles in Germany. So, we believe it's a really solid platform for migrating our business there to Open Access and giving us a runway for continued growth in Germany. Looking more broadly across Open Access and its implications for our business longer term, there are a couple of things to think about. One is the margin profile of Open Access is just as strong as the subscription model. It's as you know, a strong margin business with favorable characteristics, including favorable cash flow characteristics. The opportunity continues to be around the globe to publish more. Keep in mind, as we commented in the script that the predominant model around the globe will continue to be subscription-based and we will see a rotation in the direction of Open Access over an extended period of time. So there will be a slow migration overall in that mix of business, but the margin characteristics are similar and very favorable.

And I'll just add that from a volume perspective, it's important to know that the volume of research that is published around the world every year is going up by mid single-digits consistently, and it's happening on a global basis. So when you think about our -- what John suggested about our -- the revenue implications, but also the margin implications as long as we continue to nurture and own the brands that people want to publish with, this is going to continue to be a very, very good business. Different regions and different territories quite literally have different needs. Different funding mechanisms, different abilities to organize, and that leads to a mixed model world where some prefer one model, some prefer another, and Germany happened to have a particular alignment around a model that worked for Germany due to the tight connection between the university infrastructure and the government infrastructure and funding. So they could do this, most places in the world couldn't do this, but they can do other things, and so we are -- we intend to work with the market as opposed to fight the market, and this deal is a testament to the fact that when you do so, you are rewarded. I know I spent time on the ancillary benefits of this deal, but you cannot underestimate that given the frustration that this market was showing for these leaders, these vocal leaders of the Open Access movement who have expressed extreme frustration that they are now partnering with us on these important initiatives, and in fact some of the lead negotiators of the deal are going to be leaders of our advisory board on our new journal. I can't overstate what a positive sign that is for the development of this marketplace.

Okay, very helpful. Thank you. And then maybe kind of sticking with research, you guys were pretty thorough around the discussion for the working capital shortfall and its impact on cash flow guidance for the year. Just curious as to how in anyway this impacts your view for calendar '19 journal subscriptions growth, it sounds like most of this will reverse in the fiscal fourth quarter of '19, but are there any implications or impact your view on calendar '19, as it relates to journals and the cash flow that you can generate in fiscal '20?

Sure Drew. So let me be clear, what we're experiencing is what I would consider to be somewhat typical pains around migration to a new ERP, the implementation of order to cash on our ERP implementation is a really large undertaking, and we ran into a couple of feature functionality challenges in the migration that took a little bit longer to address than we expected. That caused a little bit of lag in coding, which caused a little bit of lag in closing agreement. So we've got a timing issue around coding, closing those quotes with customers, and then collecting the cash. We're catching up. We've made really good progress and we've addressed the system's capability issues, we've made good progress in getting out quotes and signing on customers, and so we don't see an impact into our overall expectations for calendar year '19 subscription revenue. We're just operating at a little bit of a lag in terms of getting those subscriptions signed off and getting invoicing, and then following up with collections. We expect to be mostly, but not entirely caught up by the end of April, but again, we don't see it as impacting our calendar year '19 revenue.

Okay, perfect. And then just one numbers question and I'll jump back into the queue, I believe you guys were guiding $0.10 of dilution from Learning House previously, and the updated guidance is $0.15 for fiscal '19. Is there any change and how you're thinking about fiscal '20 and beyond, in terms of the ramp to breakeven for this acquisition?

There's certainly nothing different at all about our expectations around the ramp to improvement in EBITDA, principal change in expectations here is that we've got a slightly higher level of amortization of acquired intangibles than was anticipated in our previous view. So we're going to see a couple of cents call it $0.03 or so annual impact from that, but otherwise, it's more or less consistent with what we had anticipated previously, so no change in terms of economic performance going forward just a bit of an accounting impact on acquired intangibles.

Okay, okay. Thanks, guys.

Thank you.

Thank you.

Our next question comes from Dan Jacome with Sidoti & Company.

Good morning.

Good morning. How are you?

Good morning.

Not too bad, thanks for the time. So, staying on the Learning House, can you talk a little bit about the new regional partnerships that you were able to group into the quarter that's definitely encouraging, I'm just wondering how much of that if you can share with us was already in the pipeline of Learning House when you acquired it and how much was incremental, the only reason I am asking is, I am just curious about the lead time and how quickly can you bring new customers onto the combined platform?

Yes, I'll jump on that because I'm really enthusiastic significantly these partners in three buckets and most of them were not existing Learning House pipeline buckets. So one is the existing Learning House pipeline, two is the West Wiley Education Service pipeline and three are deals that were literally enabled because we put these two companies together. And I won't talk to specific deal by deal, but I will tell you that in a couple of these deals it was literally the capabilities that were enabled because the Learning House capabilities are complementary to the West capabilities, it was those capabilities that made some partners who were in the middle of decision-making process saying, oh I want to work with those guys. So it was very, very encouraging. So a couple of these spun up very, very quickly, usually these are long lead time sorts of deals as you know Academia moved slowly but even on a couple of the more high profile ones, say University of Kentucky, we are competing against the brand name provider that provider and providers that you would be familiar with and we are beating them, but not always beating them but were beating them quite frequently and not on the little schools but at a place like University of Kentucky. So we are very encouraged, now of course you know that once we sign them up it takes a little while to design the program to develop the curriculum, to attract the students and so forth, but we expect it to have a material impact in fiscal 2020.

Okay, that's terrific, very helpful. And then I wanted to ask you about the test prep, I know you mentioned you wanted to make some significant changes to the Publishing segment. Just wondering kind of what's going to be your longer-term outlook trajectory for the business? Are you satisfied with the investment you've made on it and all the heavy lifting has already been done or is it something that you would like to further invest capital to potentially make this a bigger part of your overall portfolio?

You're specifically speaking about Test Prep?

Yes, I know it's a small base but I'm definitely curious.

Yes we're optimistic, look the overall Test Prep market is a reasonably stable market. We have been growing very nicely due to the high quality of the products and the programs and what is - and what you're seeing now in our growth is a real enhancement in our ability to acquire and convert students at a very efficient rate. So we are very, very pleased, we don't think that there is anything organically major that we need to do to stay on the trajectory we're on, so all the blocking and tackling is in place, from an inorganic perspective we like the space a lot. We think we're very good at it and all the evidence would speak to that and it has a highly complementary relationship with our core education content businesses. Interestingly it is now also we are looking at synergies between our Test Prep businesses and our Education Service businesses, because of course degree programs oftentimes lead to a certification exam. So organically, we're pursuing all these things, would we look at inorganic opportunity? Absolutely, but it's a reasonably small sector, I wouldn't flag anything on the imminent horizon but we like the space, we think we're good at it and we would love to use our balance sheet to grow it. It's a nice space really.

Terrific, thanks a lot.

Our next question comes from Daniel Moore with CJS Securities.

Thank you, good morning. Start with the journals business, ex Open Access and ex currency down 1% year-over-year kind of for the quarter and the year, is that the new normal from your perspective, should we expect modest declines going forward and is that even the right way to think about it or do you just think of should we be thinking about it in conjunction with the traditional business and Open Access one bucket?

Good morning. Good question, Dan. So I would suggest that you start to think about our journals business of in the concept - in the space of total journal's revenue, so all-in including subscriptions, Open Access and then the licensing in advertising and other revenues that come off of that journals business. I do think he should think more collectively about it. The category itself of subscriptions on their own, we expect to be flattish and so probably more like flat than down a 1% but it's in that sort of flattish zone. We're seeing the growth as we commented earlier, really coming in Open Access opportunities and there are as we've said substantial opportunities for growth there, another thing that I should note is as we start to move into these mixed models, the lines between revenue for Open Access and revenue for subscription start to blur a little bit, so the distinction becomes less meaningful and so it's something for us to consider as we speak with investors going forward is how do we best describe that, but the boundaries won't be quite as clear. In combination, subscriptions revenue and open access revenue, we expect to see low single-digit gains each year

Helpful, okay. Shifting gears, if I look ex-Learning House, the OPM business revenue was up 3% year-over-year I think second quarter in a row of kind of modest growth, I guess what's keeping the overall from growing faster and profitability ex-Learning House I think was down maybe $2 million to $3 million year-over-year just any more color on that?

So Dan, we're seeing in the year-over-year comparison, we're seeing a bit of adverse impact from some of the partners that we rolled off at the end of last year. So we had a rotation or as you know around some of our partnerships not lining up with our expectations for growth and so some rolled off, that's really what's limiting the year-over-year comparison if you were to normalize for that, you'd see growth rates are in the higher single-digits for our higher ed services business and now of course you're seeing the add on effect of Learning House as part of the family. But if you were to do for something that looked like same-store sales if you will, you'd see growth rates that are in the higher single digits.

Yes, and we never want to be chasing every last student to put them into our programs and so there are those in the marketplace who are looking to max out enrollment for whatever reason, the problem by - with doing that is you wind up with underperformance for your partners because your retention of those students becomes less, becomes less attractive. So your retention rates, your graduation rates go down as do your margins because your customer acquisition cost go up, we expect this business to grow nicely and reasonably quickly in double-digits and you -- that's what we're pursuing but we are not maxing our growth, we're building a business here for the long run, so that we satisfy the needs and the missions of our partners and that's why they like us, because we're not playing just for us, we're playing it for the collective partnership and you hear that word come up a lot from us now as partnership it really is I think the secret. [Technical Difficulty] Hi, are we back on the call?

Yes, sir.

Okay, great. We left off I think we had answered, so responding to Dan's questions surrounding growth.

Yes, you dropped off responding to Dan.

Okay can we put Dan back in, if we could?

Yes, Dan if you could re-queue [Operator Instructions]

Operator?

Yes, sir. I am still showing Dan at the conference. Dan, if you could please re-signal [Operator Instructions]

All right, let's take the next call if we could.

Yes. The next question comes from Nick Dempsey with Barclays.

Yes, good morning guys. So first question, I think the press is suggesting that the $10,000 cost published each year by German authors represent about 9% of your total published journal articles per year, you pointed to the rest of the world saying as a subscription model in journals. So how do you persuade -- how does that line going to stay flat, if you're essentially selling volume here while you're going to have fewer subscription articles and more Open Access articles as a result of the German deal? That's question one, second question on college textbooks, we've seen in the last three years a big swing out of December into January within your minus 21% for the quarter, was January notably better than November and December? Did you see that swing and maybe just have to sneak another one in there. Do you think the introduction of Cengage unlimited really for the past couple of quarters has impacted your growth rates?

So Nick, it's John, let me respond first to your question around the arrangement that we have with Projekt DEAL in Germany, you are correct that that marketplace represents approximately 10,000 articles published, it's actually just a small bit underneath that, that we publish in Germany each year. That actually represents a substantially smaller percentage of our overall publishing base than you referenced. It's more in the neighborhood of 5% than 9% or 10% of our overall publishing volume. Your question around how does that evolve over time, how does that provide the platform for growth with some articles being published open, it's really as we've been speaking earlier and a migration of a mixed model where the open portion of content will still be a relatively small percentage of what we publish overall including Open Access publishing already in our base and adding Germany to that and we don't see that small percentage of Open having that size of an impact on the overall value of the subscription access that we sell. So we believe it actually migrates smoothly over time and still provides in fact with increased article publishing, a platform for revenue growth and research publishing.

Yes, so adding to what John said. We published, but a small fraction of the articles that we receive we have very high rates of articles that just don't get into one of our journals, across our broad set of journals on a worldwide basis. The multiple and mix models allow us to publish more of that as we cascade those articles from a place that it is submitted originally, a journal that is submitted to another relevant potentially slightly lower tier journal that has different standards. We know that a large portion of the articles that we receive are high quality and publishable, we know this for a variety of reasons, not the least of which many if not most of these articles do wind up getting published elsewhere. So to the extent that we have multiple funding sources being subscription-oriented or content funds or funder provided publishing funds, we believe that ultimately the pie increases, it doesn't decrease and when you combine that with the overall growth in net article volume worldwide and our share enhancement, then you wind up having math that works and we've looked at this six ways in spending and are highly confident in that.

And then Nick, you asked about the textbook business and in particular if we saw anything that distinguished the month of January from what we had in the way of performance for the November and December periods. I don't think that there's much that's all that distinguishable about the month of January. There are different patterns in the ordering season we'll see print volume with a little bit more lead time going into the semester obviously than we would for lead time around digital purchases and we've commented on what we've seen, but there's nothing that we saw for example in the month of January on print that would cause us to think something different about the spring semester for print, you also asked about the performance relative to what do we think of Cengage Unlimited offering, do we think that that's eating into our share of - I will let Brian comment on that?

Yes. So Cengage Unlimited is a very interesting development. It's been an experiment, seems to be a pretty good uptake and the early stats actually reinforce our optimism in the business rather than any issues of share shift. You're - there is no evidence that professors or schools are choosing titles to adopt because of that meaning what content is prescribed by the university or the professor. But there is evidence that students want our content. The professors want to continue to use our meaning publisher content that professors would like to have content available to their students at lower cost and that students clearly prefer lower cost models. And so, all of our analysis of the Cengage Unlimited deal tells us that our variety of business models that we are coming to market with, a couple of which I highlighted on the call earlier and there are others Cengage Unlimited being one of them are part of the future plan. We don't see any adoption share shift happen because of this at least I haven't seen any evidence of it. What we do see is an optimism that the high quality published product that Wiley brings to market will continue to be of value to professors to students and to university. So we don't view it as a negative development. We view it as a positive development and anything that allows the normalization of price and value, one of the core tenets that I highlighted earlier is a good thing and this seems to be doing both of those things.

Thank you. That's very clear.

Thank you. This concludes today's question-and-answer session. I will now turn the conference back over to Mr. Brian Campbell.

Thank you everybody for joining us on the call. We will look forward to talking to you guys again in June. Thank you.