Good morning and welcome to Wiley's first quarter earnings call for fiscal year 2019. 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, sir.

Hello and welcome to Wiley's first 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 to 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. They 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. 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 page. I'll now turn the call over to Brian Napack, Wiley's President and CEO.

Good morning and thanks for joining us. As you know, I arrived at Wiley last December. I joined a company with a great legacy, a unique culture, strong assets, and enormous potential. Few companies have shown the staying power of Wiley over the generations and this is largely the result of a culture of adaptation, innovation, and dedication to a shared mission. In my first quarters, I've been focused on understanding this foundation while beginning to define a strategic direction that can carry Wiley well into the future. I will start off today by sharing some thoughts about where we are today and a bit about where we're going. More details will follow in future calls. As you know, Wiley is a central player in two critically important and highly dynamic markets, research and education. These two large markets are universally acknowledged to be the twin engines behind economic growth and human advancement. As such, investment in research and education continues to rise all over the world, delivering lots of opportunity to Wiley. At the same time, research and education are out of necessity undergoing fundamental transformation driven by innovation and enabled by technology. Frankly, the stakeholders in research and education need better solutions that deliver better outcomes, and this is demanding innovation throughout the value chain. Needles to say, such transformation makes life interesting to say the least for a 210-year-old player. Nonetheless, it is our job to deliver the content, tools, and services that our customers need to achieve the outcomes that they seek. Over the years, Wiley has built a leadership position in the traditional segments of these markets, which is journals and course content, and in new emerging segments such as research platforms and tech-enabled education services. Going forward, perhaps surprisingly, we see lots of opportunity…

Thank you, Brian. Revenue for the quarter was essentially flat on a U.S. GAAP basis or down 1% at constant currency. GAAP operating income and EPS rose significantly, primarily due to restructuring charges in the prior year totaling $26 million and restructuring credits in this quarter totaling $6 million. These credits reflect lower severance cost than originally estimated for our restructuring actions. Adjusted operating income and adjusted EPS declined 27% and 29% respectively, driven by investments in growth initiatives and technology. Also impacting EPS was a higher effective tax rate and a slightly higher share count. As Brian noted, our first quarter financial performance was consistent with our expectations. I'll be talking to segment results on a constant currency and adjusted basis, unless otherwise noted. Research revenue was flat overall, with Open Access up 22% and Atypon up 4%. Journal subscription renewals for the calendar year 2018 finished strong with growth of 2% and our society business continued its positive momentum. Adjusted CTP was down 13%, mainly due to investments in editorial and marketing capacity to expand research article publishing, particularly for China and India. Higher costs also reflected modestly higher investments in technology to better serve researchers and our subscribers. Publishing revenue declined 5%. STM and Professional publishing grew 3%, driven by strong gains in the business, finance, and professional education categories, but was offset by a 16% decrease in education publishing, mostly from continued print declines. Test preparation was flat and WileyPLUS was down in the seasonally not meaningful first quarter. As Brian noted earlier, the new release of WileyPLUS has received very favorable reviews so far and registrations are ahead of expectations. Looking ahead, we are preparing to launch new Inclusive Access and alternative rental models for education publishing in the spring semester. Adjusted CTP was down…

Thanks John. Fiscal 2019 is a year of investment in a foundation that will enable our strategy while improving and sustaining revenue growth over the longer term. We're investing in sales and marketing capabilities to generate organic growth, technology and product development initiatives, content management to publish more and be more effective and efficient at it, targeted hires, and China and India build-outs. We continue to anticipate flat revenue overall as modest growth in Research and Solutions is partially offset by modest declines in Publishing. Adjusted EPS is expected to be down mid-single-digits, primarily due to investments in growth and business optimization initiatives, while a decline in cash provided by operating activities is expected from anticipated operating performance and lower working capital gains. Finally, capital expenditures are expected to decline, although investments in product development and optimization initiatives are expected to grow. Included in these projections, the implementation of ASC 606 will move about $10 million of spending capital expenditures to cash from operations. Note that under ASC 606 new revenue recognition guidance, certain costs to fulfill contracts which were previously included in product development spending are now included in cash flow from operating activities. As you have heard, we believe that our markets are ripe with opportunity. We're moving aggressively after this opportunity, but we must invest to improve our agility and grow. So, what are the key takeaways from the quarter? Again, results were in line with expectations. We continue to see good underlying momentum in Research, including continued net society wins, Open Access growth, improved citation results, growth in article output, and growth in usage. We're seeing hybrid subscription and open access models continuing to materialize in parts of Europe and we're working closely with key stakeholders to ensure a healthy research ecosystem and our shared success.…

[Operator Instructions] We'll take our first question from Drew Crum with Stifel.

Let me start with WileyPLUS guys. Can you give us a sense as to how broad the rollout is for the fall semester and when should we see a pickup in revenue for that line? I know there are some revenue recognition issues with WileyPLUS but should we see some impact in fiscal 2019?

So the implementation of the new next generation of WileyPLUS, as we said, begins in this semester. It's well underway. The registrations are favorable to our expectations. The number of courses that we're implementing is on the order of a dozen as the initial wave, and then we'll bring on several more courses for the spring semester. And we'll have the majority of our WileyPLUS offering on the platform by the following fall. We would expect to see improvement in WileyPLUS revenue be coming our way through our second and third quarter. So, more to come later, but we should see a pickup based on the new product as we make our way into the fall.

Okay. And John, did I hear you correctly on the journal subscription renewals up 2%, was that for calendar year 2018 or did I misheard that?

Yes, you heard it correctly. That was for calendar year 2018, which is essentially tied up now.

Okay. And maybe for you or Brian, how sustainable do you see that rate of growth? It's a pretty good number relative to where you've been the last couple of years.

I would say that we see demand for journals continuing to be steady. The mix of open access versus subscriptions was going to evolve a bit over time, but we don't see any material shifts there over the coming months. We feel pretty good about the strength of the market overall, and Brian spoke to that quite a bit.

Okay. And then maybe this last question and I'll jump back into the queue. Brian, you talked a lot about opportunity across the businesses to put continued investment in talent, technology, and infrastructure, and I think you characterized fiscal 2019 as a year of investment. At what point looking ahead do you see the investment spend slow and perhaps a pickup in revenue? I know it's a difficult question to answer, but just kind of curious as to what you see given that you've been with the Company now for nearly a year.

Sure. It's a good question. We certainly are investing for the future. We do see a lot of opportunity. We are dropping into place initiatives as quickly as we can to both solidify the core and to drive growth. It's difficult today to put out an expectation for when we'll see return on that investment. Obviously we'd love to provide as much guidance as we can, but we'll have to see as we go forward. I am confident that there is plenty of opportunity and that we're doing the right things to capture that opportunity. So, we'll have to see as we move forward.

Okay. Thanks guys.

Moving now, we'll take our next question from Dan Moore from CJS Securities.

It's Pete Lukas for Dan. Can you just update us on the opportunity around author-funded research and how significantly that has become as a percentage of journal revenues and the margin profile for that relative to the traditional journal model?

Sure. So, the Open Access revenue for Wiley still represents a relatively small portion of our journal revenue overall in the quarter. It was $11 million of revenue out of $225 million of revenue in the whole Research segment for us, $216 million in the segment excluding Atypon. So it's still a relatively small piece for us and it generated growth in the quarter of 22%. So, for the most part the opportunity is great to serve more researchers. There's lots of high-quality research out there that doesn't get published today or doesn't perhaps get published at Wiley that we can take advantage of by publishing in Open Access. So, we see this as an important piece of growth in the future, serving researchers more effectively to get their work published, having this as a complementary opportunity for growth growing at a high rate and still lots of room to grow a relatively small portion of our research journal revenue overall.

Helpful. Thanks. And then just regarding capital allocation, with your net leverage approaching zero here, I know you have increased the dividend, but just wondering your thoughts on other capital allocation ex-M&A, with shares having pulled back, does buybacks become more of a move-up on the list or anything else you're looking at there?

We're continuing to take an approach that's a bit balanced between return of cash to shareholders in the form of dividends or share buybacks and capacity available for acquisitions. Frankly, as we continue to work through our strategy, we see a number of places where we think acquisitions will be attractive to us in order to enhance our breadth of capabilities in adjacent spaces to the services that we offer today or to enhance our technological capabilities scale. Examples of places that are of great interest to us will include education services beyond the work that we do today in online programs but expanding our capacity there. There will be opportunities for us we believe as well in places like Corporate Learning. So, lots of interesting space for us from an acquisition perspective and an intent on our part to reserve some capacity of our cash generation to go after those growth opportunities.

Great, thanks. And last one for me, you covered a lot in the prepared remarks, very helpful, thank you for that, but looking at the Solutions business and specifically online program management, should we think about low to mid single-digit growth as likely the new norm or do you think you can reaccelerate growth beyond that in the next few quarters? And if so, just remind us again quickly of the levers that you would pull for that.

We view that there is significant opportunity in the OPM space. We have spent the last couple of years establishing a business that has a rock-solid foundation that we can use to grow. As we've done so, we've pruned our portfolio while adding some terrific partners that we view as significant growth. I don't think low to mid single-digits is an expectation. I think you can expect significantly higher growth than that. I'm not going to say specifically, set a specific number expectation, but I think you should view this as a fundamental driver of growth for the Company in the years to come. The levers that we will pull to do that in addition to the building of the foundation is of course the signing of new schools, but more important than that is the expansion of the programs within schools and the students within programs. As we get more and more efficient at acquiring students and matriculating them through the student lifecycle, the learning lifecycle, we will increasingly lean on that lever, a lean on the growth. We prefer a land-and-expand approach where we sign up really good partners and we grow them, like the ones I had discussed in the prepared remarks, over time. In addition, we unlike many of the other players in this space have a very varied and flexible portfolio of products and services that we can bring to bear in these accounts. And so, we will complement our full-service models with more tailored packages of products and services that help them meet their needs. And so, the answer is, we have many levers that we can pull. What we would prefer to do of course is to have rather than just continually expand willy-nilly the school and university footprint, we'd rather make those universities that we have more profitable, and that comes through the efficient acquisition of students, through the retention of those students. And by ensuring that those students have successful career outcomes at the end, we wind up making our school partners the places to go and the places to attend, thus sort of continuing a virtuous cycle of building brands and leveraging those brands.

Very helpful. Thank you very much.

Moving on, we'll take our next question from Nick Dempsey from Barclays.

Just a couple of questions on education publishing, so Cengage just pointed to gaining share in adoptions in I guess the adoption season from March through to June-July, and Pearson is very comfortable with its held adoptions with faculty. Does it feel like everyone else is losing share to those larger players this year, if that data that is presented is true, and I guess I'm looking at your minus 16% growth here, or does everyone measure things just a little bit differently when they are talking about textbook adoption?

The answer is varied. Certainly we all do talk about our businesses differently and we don't all compete against each other in the same places, in the same courses. We do not feel like we are losing share. As we migrated through the print to digital, what you're seeing is a transition to be sure, and that's reflected in some of the numbers, but on an adoption by adoption basis we feel very good about our adoption share, about the quality of our courseware that is leading to those adoptions, and we don't believe we are losing to anyone. When Cengage talks about its growth in adoptions, it's probably talking about its new business model that it is putting out which put in an extremely aggressive price point I think in order to get institutional sales, but there is very little evidence that that is translating into student purchases and student adoptions. So, yes, I think everybody talks about this stuff differently and we feel very good about our market position and the competitive performance of our titles.

Thank you. Can I just follow-up with another one there? I know it's too early to talk about the purchasing of textbooks in September of course, but I wonder whether you can comment about your conversations with campus bookstores ahead of this rough season, and specifically whether they are planning for year-on-year declines in spending overall in September.

The answer is that we are obviously in touch with the campus bookstores, who play a lesser and lesser role in the distribution of course materials. There is no anticipation of a tink in the demand curve that we had not seen before. They are continually trying to get more efficient about how they purchase and sell through their inventory, and they are frankly, the campus bookstores are trying to figure out a reason for existence in a world where more of our product is digital and all of the competitors in this space are selling more directly to students or through online retailers. So, from our perspective, the main thing we want to do is maintain efficient selling and sell-through through those partner retailers, so that we don't have surprises from a returns perspective which has caught us in the past, and so we're keeping our eye on that and keeping our eye on the health and well-being of our major retail partners. And I think that's the main thing that we need to focus on.

At this time, that will conclude our question-and-answer session. I'd like to turn it back over to Brian Napack for any additional or closing remarks.

Thank you, and thank you for joining us on the call today. We look forward to updating you again in December.