Good day everyone and welcome to Wiley's Second Quarter Earnings Call for Fiscal Year 2019. As a reminder, this conference is being recorded. And now at this time, I would like to turn the call over to Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you, and welcome to Wiley's second 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. 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 webpage. I'll now turn the call over to Brian Napack, Wiley's President and CEO.

Hello everyone, and thanks for joining our call. With me as always is John Kritzmacher, our CFO and Executive Vice President of Operations. Let me start with a quick reminder about Wiley. Simply stated, Wiley is research and education. Our customers are the world’s researchers and learners and its universities and corporations, and our mission is to help them achieve their ambitious research and education focused goals. How do we do that? In many ways, but overall Wiley delivers the must have content platforms and tech-enabled services that fuel the global knowledge economy. More specifically in our research businesses, we publish, validate, and disseminate a major portion of the world's most important discoveries, and we host nearly half of the world's English language research through our publishing platforms. Our goal is to accelerate discovery and amplify the impact of research. In education, we power career enhancing degrees from top universities through our tech enabled education services, and we publish gold standard academic content and courseware that helps learners to succeed in school, pass high-stakes certification exams, and gain important skills throughout their careers. We also deliver award winning e-learning programs, platforms, and assessments that ensure major companies always have the skilled workforce they need to win in the global economy. The world invests in research and education because they are the twin engines that drive economic growth and human advancement. Wiley invests in research and education because we see lots of opportunity today and for the long term, and because our customers, researchers, learners, universities, and corporations depend on our great content platforms and services to succeed. Across our portfolio of high impact businesses, Wiley moves the needle for our customers while delivering a healthy balance of profitability, cash flow, and growth potential for our shareholders. I'll highlight four key…

Thank you, Brian. And good morning, everyone. As Brian noted, performance in the quarter was in line with our expectations for the quarter and for the full year. Revenue was down 1% on a U.S. GAAP basis, but up 1% at constant currency with 3% growth in research and 9% growth in solutions offsetting a 3% decline in publishing. GAAP operating income and EPS were down 29% and 27% respectively, primarily due to restructuring charges in this period totaling $10 million, and unfavorable foreign exchange impacts of $4 million. Adjusted operating income and adjusted EPS declined 10% and 9% respectively, driven by investments in editorial and sales resources to enable growth in research, and increased spending on marketing to accelerate enrollment growth in education services. The $10 million in restructuring charges in the quarter reflect continued cost reduction actions across the business. The charges are primarily related to severance. Savings from these actions will ramp up over time are primarily related to severance. Savings from these actions will ramp up over time and reach approximately $15 million in run rate savings in the second half of fiscal 2020. Through the first six months of the fiscal year, our finance results were again in line with our expectations. 1% revenue growth in research and 8% growth in solutions offset a 4% decline in Publishing. Overall, revenue growth in Research and Solutions have been steady and the decline in Publishing continued to be driven by lower demand for print textbooks. Total Wiley adjusted operating income and adjusted EPS were down 16% and 17% respectively. As previously noted, our business plan for fiscal 2019 included higher spending for editorial and sales resources in Research and increased marketing spending in Education Services. Although these investments will continue at pace, our plan for the second…

[Operator Instructions] And we'll first hear from Drew Crum of Stifel Nicolaus.

So, I want to ask about the Learning House acquisition, the $30 million that you're projecting for fiscal 2019 would seem to imply a slowdown relative to the $70 million that's forecasted for calendar 2018, which is up 17% year-on-year. So just want to understand kind of the dynamics behind what you're assuming in terms of contribution from that acquisition.

Drew, we're expecting operationally for the year that the Learning House performance is on the order of $70 million, that expectation is unchanged. What you're seeing in lower number for the back half of the year is really the impact of acquisition accounting, where we take a bit of a haircut under acquisition accounting for revenue that had been deferred in their business. So, that's really what you're seeing there, but the business has actually got operationally really strong momentum, continues to add really solid new partnerships, and we’re very excited about having them as part of the team.

And then shifting gears to Open Access, it's a part of the research business that continues to grow at a very high rate. How big do you envision that part of the business becoming as a percent of the total over the next couple of years, and related what does the margin profile look like on open access journals relative to the wholly owned or society journals that you're publishing?

Well, I'll handle the projection for the business. Look, it's growing very rapidly. The market is in transition. It's unclear today exactly where we will settle in terms of the preference for researchers and others for the publishing model whether they're publishing Open Access or under a traditional free model of publishing supported by subscriptions. We see tremendous velocity, we see a lot of continued growth. We're not prepared to make a commitment about where we think it will wind up because there are some significant variables including again researcher demand, but also some of the larger initiatives going on to migrate to more blended models in certain regions of the world. So, we do see significant business. I'll let John speak to the margin issue.

So, Drew on the profit size of this business, I would say that we continue to believe that the profit in the journal publication, article called - research article publication part of our business is sustainable, our historical margins are sustainable. Demand is high. The opportunity for growth is high, key to the long-term performance in this business is driving operating efficiency around article publication, so you see prominent in our comments today that we are focusing resources on simplification, standardization, and automation of the processes around research article publication, and that will include heavy emphasis on how we make that process particularly efficient for Open Access, but we believe that the margins that we are in that business today and have traditionally earned in that business are sustainable in an Open Access environment.

And then John, the $10 million of restructuring charges you recognized in the fiscal second quarter, I assume that's all cash or the majority of that is cash, and what are you anticipating in the second half of fiscal 2019 in terms of [multiple speakers] charges?

So the charge, that -- the $10 million charge is essentially all severance and essentially all cash, will incur that expenditure over most - most likely over the coming three quarters or four quarters, but it's a relatively short period of time for that to roll-out.

Would you anticipate more restructuring charges in the second half?

We don't presently anticipate more restructuring charges in the second half,. We’re going to work our way through the business optimization initiatives. As I described and those may in some period of time give rise to further restructuring charges but we don't have anything slated for the second half of the year.

And then on the Solutions business, can you comment more on the flattish sales performance for Ed Services against the 9% same school growth that you recognized. Is that indicative of what you should expect to see for the business ex-Learning House of course through the balance of fiscal 2019 or do those converge over time?

So, as we noted in our comments through the 1% growth in the period reflects muted performance as a consequence of winding down a few partnerships that were in our line of sight and we have previously spoken to those in prior reports, underlying growth, if you will, ex those terminations is on the order of 10%, and we expect to deliver double-digit growth in Education Services business on a go-forward basis in combination with Learning House but I want to be clear that that's operational performance when I say double-digit growth in the combination that's not a comment about the step-up that we get from having an incremental part year effect of Learning House in our results. Operationally, that business is going to grow -- our business and Ed services are going to grow at double-digit rates.

And then just one last one for me, where do you see peak and trough leverage for the business over the next 12 months, and how do you see that influencing decisions around redeployment of cash flow?

We're making our way through our normal seasonal pattern, albeit I noted we're a little bit behind on general subscription collections, which will pick up in the next couple of months. But in terms of overall liquidity for the business, we have a lot of capacity on our revolver. Our $1.1 billion [ph]. We've got significant room there to take on some additional, if you will, bolt-on acquisitions. But we - absent some larger scale acquisitions, we expect to be able to manage liquidity well within the current revolving facility that we have, so nothing particularly unusual going on over the coming months.

[Operator Instructions] Next we'll hear from Dan Moore of CJS Securities.

It's Peter Lucas for Dan. Just a couple of questions on Learning House. Now that the acquisition is closed, can you tell us a bit about the potential revenue and your cost synergies between Learning House and your legacy online programming business?

The business is, as Brian described them are in many respects very complimentary. So, in terms of customers we serve, there is not much overlap. And so, we gained quite a bit of scale and diversity with the customer basis of the two different operations. One of the comments Brian noted is that Learning House serves the undergrad market far more than the Wiley does, so that's a significant complimentary piece in terms of our top line and creates new revenue opportunities for us with our university partners in that respect and they also have some new product offerings that we hope to begin to accelerate in the marketplace as well. So, there's lots of revenue potential from our customer reach and the power of the two organizations together. Cost synergies will come in the form of combining some of the operational activities such as student support, some of the marketing services, so we've already begun to interleave pieces of our organization to work as one online programs, business and we’ll gain more advantage from that over time. We're not banking on major cost savings between the two groups, but it's certainly the combination of their capabilities and Wiley’s capabilities gives us greater opportunity to scale within our current footprint.

And as far as, can you talk about market growth for short courses and learning boot camps over the past several years and who were the key competitors for Learning House in that space, and are - is Learning House taking share. And if so, from whom?

Yes. So, that's an early stage business for Learning House representing a reasonably small portion of their business. They're just scaling it now. There are a variety of competitors that provide these non-degree up skilling programs. They range from the boot camp community that include companies like general assembly and galvanized to online - to finishing schools like the Revature models where they are taking college graduates and upskilling them and trilogy which provide add on services to universities that allow them to again upskill students to provide - to give them jobs and pathways to direct jobs, there are a variety of players in this market. And so it's hard to put a single figure on it what we know as we see significant growth in all of these competitors they're starting to become scaled companies meaning companies that are approaching or above $100 million and we see a lot of momentum and enthusiasm in the area. We believe that there is significant synergy to be brought to the market by having a full range of offerings, so that we can go to university partners with both services that help them in their core degree programs and then help them provide the additional services or at least the students to help to provide to corporations entry level employees with the specific skills they need to succeed. So there's - and then on the corporate side we see the similar synergy of being able to bring to corporations fully skilled entry level employees whether they’d be directly out of school or via one of these non-degree programs that these companies like ours are providing. So we believe that that the connection between as I stated earlier between the supply side or university side and the demand side or corporate side is - presents a profound opportunity exact growth rate remains to be seen. What we know is that both sides are spending billions trying to solve this problem of an under skilled workforce. And we feel that that the range of alternatives we have is rather unique in helping to solve that problem.

And does the acquisition of Learning House signal a greater appetite for M&A and online program management, corporate learning or both and are you seeing opportunities, more opportunities come to market and any change you're seeing in those multiples for ones that are coming?

Very good question, I will say it, it clearly has signaled an increased interest in the space. We think that there's a lot of opportunity for growth and profitability in it. We will be opportunistic in our approach to M&A. We believe that there are assets on the market that would nicely complement our own, we're not going to overpay for them, we have seen a certainly a variety of assets come to market with varying degrees of success in achieving transaction, the multiples are all over the map ranging from multiples that Wiley will never pay down to assets that are having trouble moving because they're in parts of the market that are a little bit more speculative. So the market is quite active, we're looking at a variety of things but we're only going to do things that strategically make sense at a price point that makes sense. We believe that we have the skills, the assets and the available capital to grow dramatically organically. But of course with a - with our - we will - of course we will continue to evaluate opportunities as they come up.

And if I could Brian if I could just add, important to note that our interest in acquisition for growth, strategic acquisition for growth is not limited to the services side of our business, we are also very much interested in opportunities to gain further competitive advantage whether it would be scale or breadth of our reach our technology to enhance our research business. So don't take recent action around Learning House as we've shifted all of our focus in the services direction, we are - our strategy includes a broad look at opportunities for growth as well in the research business.

Last one for me, jumping to textbooks. Are you seeing the moderation in the rate of declines from the past few years and how much opportunity do you still have remaining to take out costs assuming volumes continue to decline?

I would certainly answer the same way I've answered this question before. I believe in the long-term - the long term potential in the courseware and content businesses aka the textbook business. The marketplace needs the content. There is no evidence that they are finding in scale alternatives attractive. The rate of decline varies, but varies by segment. We're seeing growth in digital pieces, we're seeing decline in print pieces and we have to acknowledge and be humble about the fact that we're not exactly sure where this is going to wind up, but we are confident in the long-term potential attractiveness of that business. And one also has to remember when you're looking at the textbook business that what's happening is we are migrating from high priced print products to much lower priced digital products where we had very little sell through of those print products due to used rental and other alternatives that students had to a digital world where students absolutely need and require the homework systems that come along with these products to succeed, but we're switching high price print products for low price digital products and so what we're really concerned about here is the long term earnings growth of that business. And we believe that there is significant potential there. In terms of increased efficiency in that business, we do believe that there remains a significant amount of inefficiency in the way we produce and bring content to market and we're going to continue to John's business optimization initiative to find those opportunities. We can't put a specific number on it but we're very optimistic that we will continue to preserve our margins in that business and that we will increase our production going forward.

[Operator Instructions] It appears there are no further questions at this time. I'd like to turn the conference back over to our presenters for any additional or closing comments.

Well, I just want to thank everyone for joining us today and we'll look forward to seeing you again in March.

Take care, everyone. Thank you. Bye

That does conclude today's conference. Thank you all for your participation. You may now disconnect.