Soft higher education markets, tight library budgets, and sluggish global retail channels, resulted in a disappointing second quarter at John Wiley. For the period ended October 31, revenue fell 3%, to $431.8 million, and operating income declined 13%, to $62.9 million. CEO Steven Smith said in prepared remarks that, due to what Wiley sees as permanent changes in some consumer behavior, it is preparing a restructuring program that will "better align" its costs "with current and expected market conditions as they impact our traditional print business."
The restructuring, Smith added, will "result in substantial operating expense reductions from a combination of lower cost of procurement related to outside vendor services, cost of sales improvements and direct expense savings globally." More details about the changes will be released in March, after Wiley completes its operating plan for fiscal 2014.
Results in the most recent quarter were affected by a number of changes to Wiley’s product mix, including acqusitions, the sale of its travel assets to Google, and a one-time impairment charge of $16 million associated with the sale or discontinuation of assets in in consumer segment. In addition to the sale of Frommer’s to Google, Wiley sold about 1,500 cookbook and reference titles to Houghton Mifflin Harcourt for $11 million just after the close of the quarter. Wiley said it is still looking to sell its remaining consumer publishing businesses in pets, crafts, nautical and general interest, but if a sale is "not feasible" it will "discontinue" publishing in those programs.
With the sale of its consumer assets and purchases that include Inscape and, more recently, Efficient Learning Systems, Wiley has changed the name of the group with these assets from professional/trade to professional development. The group, will focus, the company said, "on content and workflow solutions for professionals in business, finance, accounting, talent management, leadership, technology, behavioral health, engineering/architecture and professional education."
Sales in the quarter in the segment fell 8% to $101 million, or 7% excluding revenue from the recently divested travel program. Results reflected continued softness in global retail channels for what Wiley called its "legacy print business," in particular its consumer unit, where sales were off approximately 32% for the quarter. In addition, weakness in technology and business print publishing was offset by online assessment revenue, driven by the fiscal year 2012 acquisition of Inscape. Approximately $2 million of revenue was delayed until November, due to distribution interruptions caused by Hurricane Sandy, Wiley said.
In its largest business, sales in the Scientific, Technical, Medical, Scholarly group dipped 0.5% to $249.8 million. Sales in the global education unit fell 6%, to $80.6 million.
When combined with acquisitions, divestitures and performance year-to-date, Wiley is lowering its sales and earnings forecast for fiscal 2013. Revenue is projected to grow by low-single digits--including the estimated revenue addition of $39 million from the Deltak and ELS acquisitions and estimated revenue loss of $35 million associated with the divested business--down from a mid-single digit growth. Earnings per share is expected to be $2.95 to $3.05 compared to original estimates of $3.50 to $3.55 per share.