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Barnes & Noble Education Reports Second Quarter Fiscal Year 2021 Financial Results

Company’s Flexible Solutions Help Schools and Students Adapt to Blended and Virtual Learning Environment

BASKING RIDGE, N.J.–(BUSINESS WIRE)–Barnes & Noble Education, Inc. (NYSE: BNED), a leading solutions provider for the education industry, today reported sales and earnings for the second quarter of fiscal year 2021, which ended on October 31, 2020.

BNED’s fiscal 2021 second quarter results were significantly impacted by the ongoing COVID-19 pandemic, as many schools continued to adjust their learning model and restrict on-campus activities in response to the pandemic. Fewer students returned to campus this fall, as many schools implemented a remote learning model and curtailed on-campus classes and activities. While many big-conferences resumed their sport activities, fan attendance at the games was either eliminated or severely restricted, which further impacted the Company’s high-margin general merchandise business. Additionally, sales were impacted by overall enrollment declines in higher education.

The COVID-19 impact on higher education remains a fluid situation and BNED remains committed to supporting its campus partners through its flexible offerings and ability to quickly pivot to ensure uninterrupted service as institutions manage the safety of their campuses and the Company manages the safety of its campus stores.

Financial highlights for the second quarter 2021:

• Consolidated second quarter sales of $595.5 million decreased 22.9%, as compared to the prior year period; year to date consolidated sales of $799.5 million decreased 26.8%, as compared to the prior year period.
• Consolidated second quarter GAAP net income of $7.5 million, compared to GAAP net income of $35.9 million in the prior year period; year to date GAAP net loss of $39.1 million, compared to GAAP net income of $3.8 million in the prior year period.
• Consolidated second quarter non-GAAP Adjusted Earnings of $11.1 million, compared to non-GAAP Adjusted Earnings of $37.8 million in the prior year period; year to date non-GAAP Adjusted Earnings of $(30.6) million, compared to non-GAAP Adjusted Earnings of $7.8 million in the prior year period.
• Consolidated second quarter non-GAAP Adjusted EBITDA of $24.5 million, compared to non-GAAP Adjusted EBITDA of $74.5 million in the prior year period; year to date non-GAAP Adjusted EBITDA loss of $13.5 million, compared to non-GAAP Adjusted EBITDA $49.4 million in the prior year period.

Operational highlights for the second quarter 2021:

• BNC First Day® year-over-year revenue increased 77%, benefitting from the accelerated move to digital courseware.
• Successfully launched BNC First Day Complete at twelve campuses for the Fall 2020 term. The Company expects to transition additional colleges and universities to the First Day Complete model for Spring 2021.
• Gained over 120,000 gross subscribers for the bartleby® suite of services year to date, with DSS revenue increasing 14%.
• Continued to drive bartleby growth through search engine optimization (SEO) and partnerships with Blackboard and VitalSource, demonstrating a strong channel for growth to supplement fewer in-person selling opportunities caused by the COVID-19 pandemic.
• Continued to attract new clients and generate new business growth, signing over $70 million in net new business to date this fiscal year and expanding BNED’s footprint by 47 BNC institutions and 31 K-12 schools.
• Continued development of the Company’s next generation eCommerce platform; expected phased roll-out throughout calendar year 2021 to grow high-margin general merchandise sales.

“Our teams continued to make tremendous progress in growing and enhancing our offerings and services this quarter, despite the many challenges presented by the ongoing COVID-19 pandemic. As students adjusted to a blended learning environment on campuses nationwide this fall, our flexible offerings ensured that students were equipped with their course materials regardless of whether their schools resumed classes on campus, remotely or adopted a hybrid learning model,” said Michael P. Huseby, Chief Executive Officer and Chairman, BNED. “Our bartleby direct-to-student offerings became increasingly relevant in this environment, providing students with the academic support they need. We continue to scale our bartleby solutions through our existing channels, such as in-store sales and SEO, in addition to leveraging new channels, such as our recently announced Blackboard Assist partnership, to ensure we are providing widespread access to digital learning support at a time when students need it most.”

“As anticipated, we experienced lower physical textbook revenues, as well as a substantial year over year decline in our higher margin general merchandise business this quarter due to the pandemic. In addition to fewer students on campus, our general merchandise business was impacted by the cancellation of many athletic and in-store social events,” continued Mr. Huseby. “We expect the impacts of COVID-19 to extend into the new year, and as such, we are continuing to manage expenses and liquidity prudently. Our current liquidity position remains strong despite the challenging climate. As students, faculty and institutions continue to adapt to an educational landscape that is changing each day, we remain well-positioned to provide invaluable services and support to ensure all of our customers have the tools they need for success.”

Second Quarter 2021 and Year to Date Results

Results for the 13 and 26 weeks of fiscal 2021 and fiscal 2020 are as follows:

$ in millions		13 and 26 Weeks Selected Data (unaudited)
		13 Weeks Q2 2021		13 Weeks Q2 2020		26 Weeks 2021		26 Weeks 2020
Total Sales		$595.5		$772.2		$799.5		$1,091.9
Net Income (Loss)		$7.5		$35.9		($39.1)		$3.8
Non-GAAP(1) Adjusted EBITDA		$24.5		$74.5		($13.5)		$49.4
Adjusted Earnings		$11.1		$37.8		($30.6)		$7.8

(1) These non-GAAP financial measures have been reconciled in the attached schedules to the most directly comparable GAAP measures as required under SEC rules regarding the use of non-GAAP financial measures.

The Company has three reportable segments: Retail, Wholesale and Digital Student Solutions (DSS). Unallocated shared-service costs, which include various corporate level expenses and other governance functions, continue to be presented as Corporate Services. All material intercompany accounts and transactions have been eliminated in consolidation.

Retail Segment Results

Retail sales in the second quarter decreased by $165.2 million, or 22.3%, as compared to the prior year period. Comparable store sales in the Retail segment decreased 28.1% for the quarter, inclusive of a 52% general merchandise comparable sales decline, primarily due to fewer students on campus, curtailed campus activities and significant restrictions on attendance at sporting events.

Retail non-GAAP Adjusted EBITDA for the quarter decreased by $44.2 million to $18.3 million, as compared to non-GAAP Adjusted EBITDA of $62.6 million in the prior year period. The decrease is primarily due to lower textbook sales and lower sales of higher-margin general merchandise products, partially offset by lower selling and administrative expenses.

Wholesale Segment Results

Wholesale sales of $36.4 million for the quarter decreased by $3.8 million, or 9.5%, as compared to $40.2 million in the prior year period. The decrease is primarily due to decreased gross sales, partially offset by lower returns and allowances, both impacted by the COVID-19 pandemic.

Wholesale non-GAAP Adjusted EBITDA for the quarter was $6.6 million, as compared to non-GAAP Adjusted EBITDA of $7.9 million in the prior year period. This decrease was primarily driven by lower sales and lower gross margins, partially offset by lower selling and administrative expenses.

DSS Segment Results

DSS sales of $5.9 million for the quarter increased by $0.7 million, or 14.0%, as compared to $5.2 million in the prior year period. The increase is primarily due to an increase in sales of bartleby subscriptions.

DSS non-GAAP Adjusted EBITDA was $0.7 million for the quarter, as compared to non-GAAP Adjusted EBITDA of $0.3 million in the prior year period, benefitting from the increase in bartleby subscriptions.

Other

Expenses for Corporate Services, which includes unallocated shared-service costs, such as various corporate level expenses and other governance functions, were $5.5 million for the quarter as compared to $5.7 million in the prior period.

Intercompany gross margin eliminations of $4.4 million reflected in non-GAAP Adjusted EBITDA, compared to $9.3 million in the prior year period, are lower due to a decrease in inter-segment sales from Wholesale to Retail.

Additional Events

Pursuant to BNED’s cooperation agreement with Outerbridge, the Company nominated, and stockholders approved Zachary Levenick as an independent director at the Company’s 2020 Annual Meeting that was held on October 22, 2020.

Conference Call

A conference call with Barnes & Noble Education, Inc. senior management will be webcast at 8:30 a.m. Eastern Time on Tuesday, December 8, 2020 and can be accessed at the Barnes & Noble Education corporate website at investor.bned.com or www.bned.com.

Barnes & Noble Education expects to report fiscal 2021 third quarter results on or about March 4, 2021.

ABOUT BARNES & NOBLE EDUCATION, INC.

Barnes & Noble Education, Inc. (NYSE: BNED) is a leading solutions provider for the education industry, driving affordability, access and achievement at hundreds of academic institutions nationwide and ensuring millions of students are equipped for success in the classroom and beyond. Through its family of brands, BNED offers campus retail services and academic solutions, a digital direct-to-student learning ecosystem, wholesale capabilities and more. BNED is a company serving all who work to elevate their lives through education, supporting students, faculty and institutions as they make tomorrow a better, more inclusive and smarter world. For more information, visit www.bned.com.

Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and information relating to us and our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “will,” “forecasts,” “projections,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make, including any statements made in regards to our response to the COVID-19 pandemic. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others: risks associated with COVID-19 and the governmental responses to it, including its impact across our businesses on demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of our actions taken in response to these risks; general competitive conditions, including actions our competitors and content providers may take to grow their businesses; a decline in college enrollment or decreased funding available for students; decisions by colleges and universities to outsource their physical and/or online bookstore operations or change the operation of their bookstores; implementation of our digital strategy may not result in the expected growth in our digital sales and/or profitability; risk that digital sales growth does not exceed the rate of investment spend; the performance of our online, digital and other initiatives, integration of and deployment of, additional products and services including new digital channels, and enhancements to higher education digital products, and the inability to achieve the expected cost savings; the risk of price reduction or change in format of course materials by publishers, which could negatively impact revenues and margin; the general economic environment and consumer spending patterns; decreased consumer demand for our products, low growth or declining sales; the strategic objectives, successful integration, anticipated synergies, and/or other expected potential benefits of various acquisitions may not be fully realized or may take longer than expected; the integration of the operations of various acquisitions into our own may also increase the risk of our internal controls being found ineffective; changes to purchase or rental terms, payment terms, return policies, the discount or margin on products or other terms with our suppliers; our ability to successfully implement our strategic initiatives including our ability to identify, compete for and execute upon additional acquisitions and strategic investments; risks associated with operation or performance of MBS Textbook Exchange, LLC’s point-of-sales systems that are sold to college bookstore customers; technological changes; risks associated with counterfeit and piracy of digital and print materials; our international operations could result in additional risks; our ability to attract and retain employees; risks associated with data privacy, information security and intellectual property; trends and challenges to our business and in the locations in which we have stores; non-renewal of managed bookstore, physical and/or online store contracts and higher-than-anticipated store closings; disruptions to our information technology systems, infrastructure and data due to computer malware, viruses, hacking and phishing attacks, resulting in harm to our business and results of operations; disruption of or interference with third party web service providers and our own proprietary technology; work stoppages or increases in labor costs; possible increases in shipping rates or interruptions in shipping service; product shortages, including decreases in the used textbook inventory supply associated with the implementation of publishers’ digital offerings and direct to student textbook consignment rental programs, as well as the risks associated with the impacts that public health crises may have on the ability of our suppliers to manufacture or source products, particularly from outside of the United States; changes in domestic and international laws or regulations, including U.S. tax reform, changes in tax rates, laws and regulations, as well as related guidance; enactment of laws or changes in enforcement practices which may restrict or prohibit our use of texts, emails, interest based online advertising, recurring billing or similar marketing and sales activities; the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing; our ability to satisfy future capital and liquidity requirements; our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms; adverse results from litigation, governmental investigations, tax-related proceedings, or audits; changes in accounting standards; and the other risks and uncertainties detailed in the section titled “Risk Factors” in Part I – Item 1A in our Annual Report on Form 10-K for the year ended May 2, 2020. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this press release.

EXPLANATORY NOTE

We have three reportable segments: Retail, Wholesale and DSS as follows:

• The Retail Segment operates 1,439 college, university, and K-12 school bookstores, comprised of 768 physical bookstores and 671 virtual bookstores. Our bookstores typically operate under agreements with the college, university, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce sites which we operate and which offer students access to affordable course materials and affinity products, including emblematic apparel and gifts. The Retail Segment also offers inclusive access programs, in which course materials, including e-content, are offered at a reduced price through a course materials fee, and delivered to students on or before the first day of class. Additionally, the Retail Segment offers a suite of digital content and services to colleges and universities, including a variety of open educational resource-based courseware.
• The Wholesale Segment is comprised of our wholesale textbook business and is one of the largest textbook wholesalers in the country. The Wholesale Segment centrally sources, sells, and distributes new and used textbooks to approximately 3,400 physical bookstores (including our Retail Segment’s 768 physical bookstores) and sources and distributes new and used textbooks to our 671 virtual bookstores. Additionally, the Wholesale Segment sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to approximately 400 college bookstores.
• The Digital Student Solutions (“DSS”) Segment includes direct-to-student products and services to assist students to study more effectively and improve academic performance. The DSS Segment is comprised of the operations of Student Brands, LLC, a leading direct-to-student subscription-based writing services business, and bartleby®, a direct-to-student subscription-based offering providing textbook solutions, expert questions and answers, tutoring and test prep services.

Corporate Services represents unallocated shared-service costs which include corporate level expenses and other governance functions, including executive functions, such as accounting, legal, treasury, information technology, and human resources.

All material intercompany accounts and transactions have been eliminated in consolidation.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
	13 weeks ended								26 weeks ended
	October 31, 2020				October 26, 2019				October 31, 2020				October 26, 2019
Sales:
Product sales and other	$	551,832			$	718,543			$	745,042			$	1,020,770
Rental income	43,653				53,685				54,457				71,115
Total sales	595,485				772,228				799,499				1,091,885
Cost of sales:
Product and other cost of sales	452,475				553,070				618,240				791,401
Rental cost of sales	27,725				32,208				35,112				41,877
Total cost of sales	480,200				585,278				653,352				833,278
Gross profit	115,285				186,950				146,147				258,607
Selling and administrative expenses	91,972				113,404				162,015				211,095
Depreciation and amortization expense	13,193				15,546				27,256				31,425
Impairment loss (non-cash) (a)	—				—				—				433
Restructuring and other charges (a)	3,387				1,569				9,058				3,035
Operating income (loss)	6,733				56,431				(52,182)				12,619
Interest expense, net	912				1,446				3,565				3,978
Income before income taxes	5,821				54,985				(55,747)				8,641
Income tax (benefit) expense	(1,694)				19,054				(16,610)				4,865
Net income (loss)	$	7,515			$	35,931			$	(39,137)			$	3,776
Income (Loss) per common share:
Basic	$	0.15			$	0.75			$	(0.81)			$	0.08
Diluted	$	0.15			$	0.74			$	(0.81)			$	0.08
Weighted average common shares outstanding:
Basic	48,804				47,853				48,608				47,717
Diluted	49,428				48,758				48,608				48,412

(a)		For additional information, see Note (a) – (d) in the Non-GAAP disclosure information of this Press Release.

	13 weeks ended						26 weeks ended
	October 31, 2020			October 26, 2019			October 31, 2020			October 26, 2019
Percentage of sales:
Sales:
Product sales and other	92.7	%		93.0	%		93.2	%		93.5	%
Rental income	7.3	%		7.0	%		6.8	%		6.5	%
Total sales	100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales:
Product and other cost of sales (a)	82.0	%		77.0	%		83.0	%		77.5	%
Rental cost of sales (a)	63.5	%		60.0	%		64.5	%		58.9	%
Total cost of sales	80.6	%		75.8	%		81.7	%		76.3	%
Gross profit	19.4	%		24.2	%		18.3	%		23.7	%
Selling and administrative expenses	15.4	%		14.7	%		20.3	%		19.3	%
Depreciation and amortization expense	2.2	%		2.0	%		3.4	%		2.9	%
Impairment loss (non-cash)	—	%		—	%		—	%		—	%
Restructuring and other charges	0.6	%		0.2	%		1.1	%		0.3	%
Operating income (loss)	1.2	%		7.3	%		(6.5)	%		1.2	%
Interest expense, net	0.2	%		0.2	%		0.4	%		0.4	%
Income before income taxes	1.0	%		7.1	%		(6.9)	%		0.8	%
Income tax (benefit) expense	(0.3)	%		2.5	%		(2.1)	%		0.4	%
Net income (loss)	1.3	%		4.6	%		(4.8)	%		0.4	%

(a)

Represents the percentage these costs bear to the related sales, instead of total sales.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except per share data) (Unaudited)
	October 31, 2020				October 26, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	7,353			$	24,594
Receivables, net	167,493				162,538
Merchandise inventories, net	457,677				475,422
Textbook rental inventories	50,736				68,167
Prepaid expenses and other current assets	23,762				18,494
Total current assets	707,021				749,215
Property and equipment, net	93,130				105,156
Operating lease right-of-use assets	286,038				289,722
Intangible assets, net	166,140				184,188
Goodwill	4,700				4,700
Deferred tax assets, net	8,231				8,039
Other noncurrent assets	31,734				39,235
Total assets	$	1,296,994			$	1,380,255
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	314,042			$	387,704
Accrued liabilities	134,181				197,220
Current operating lease liabilities	121,518				107,721
Total current liabilities	569,741				692,645
Long-term operating lease liabilities	198,990				179,613
Other long-term liabilities	48,329				50,677
Long-term borrowings	99,500				—
Total liabilities	916,560				922,935
Commitments and contingencies	—				—
Stockholders’ equity:
Preferred stock, $0.01 par value; authorized, 5,000 shares; issued and outstanding, none	—				—
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 53,316 and 52,139 shares, respectively; outstanding, 49,064 and 48,298 shares, respectively	533				521
Additional paid-in-capital	735,647				730,501
Accumulated deficit	(321,964)				(240,801)
Treasury stock, at cost	(33,782)				(32,901)
Total stockholders’ equity	380,434				457,320
Total liabilities and stockholders’ equity	$	1,296,994			$	1,380,255

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Sales Information (Unaudited)
Total Sales
The components of the sales variances for the 13 and 26 week periods are as follows:
Dollars in millions		13 weeks ended										26 weeks ended
		October 31, 2020					October 26, 2019					October 31, 2020					October 26, 2019
Retail Sales
New stores (a)		$	27.6				$	39.3				$	35.4				$	46.7
Closed stores (a)		(16.4		)			(24.5		)			(21.9		)			(32.9		)
Comparable stores (b)		(196.5		)			(45.5		)			(302.7		)			(52.3		)
Textbook rental deferral		16.4					1.5					10.1					2.3
Service revenue (c)		1.0					(2.0		)			(3.7		)			(2.5		)
Other (d)		2.7					(10.9		)			1.7					(15.9		)
Retail Sales subtotal:		$	(165.2	)			$	(42.1	)			$	(281.1	)			$	(54.6	)
Wholesale Sales:		$	(3.8	)			$	(0.6	)			$	4.2				$	(18.3	)
DSS Sales		$	0.7				$	0.3				$	1.2				$	—
Eliminations (e)		$	(8.4	)			$	(0.1	)			$	(16.7	)			$	12.5
Total sales variance		$	(176.7	)			$	(42.5	)			$	(292.4	)			$	(60.4	)

(a)

The following is a store count summary for physical stores and virtual stores:

	13 weeks ended												26 weeks ended
	October 31, 2020						October 26, 2019						October 31, 2020						October 26, 2019
Number of Stores:	Physical Stores			Virtual Stores			Physical Stores			Virtual Stores			Physical Stores			Virtual Stores			Physical Stores			Virtual Stores
Number of stores at beginning of period	772			670			777			714			772			647			772			676
Stores opened	5			11			2			9			29			51			40			55
Stores closed	9			10			7			59			33			27			40			67
Number of stores at end of period	768			671			772			664			768			671			772			664

(b)		For Comparable Store Sales details, see below.
(c)		Service revenue includes brand partnerships, shipping and handling, and revenue from other programs.
(d)		Other includes inventory liquidation sales to third parties, marketplace sales and certain accounting adjusting items related to return reserves, and other deferred items.
(e)		Eliminates Wholesale sales and service fees to Retail and Retail commissions earned from Wholesale.

Comparable Sales – Retail Segment

Comparable store sales variances by category for the 13 and 26 week periods are as follows:

Dollars in millions		13 weeks ended														26 weeks ended
		October 31, 2020							October 26, 2019							October 31, 2020							October 26, 2019
Textbooks (Course Materials)		$	(101.6)			(19.0)	%		$	(43.9)			(7.7)	%		$	(112.5)			(17.5)	%		$	(55.4)			(8.0)	%
General Merchandise		(97.2)				(52.0)	%		(0.2)				(10.0)	%		(184.8)				(58.6)	%		5.7				1.9	%
Trade Books		(6.3)				(62.3)	%		(1.4)				(12.1)	%		(14.0)				(73.2)	%		(2.6)				(11.9)	%
Total Comparable Store Sales		$	(205.1)			(28.1)	%		$	(45.5)			(5.9)	%		$	(311.3)			(31.8)	%		$	(52.3)			(5.1)	%

Comparable store sales includes sales from physical stores that have been open for an entire fiscal year period and virtual store sales for the period, does not include sales from closed stores for all periods presented, and digital agency sales are included on a gross basis. We believe the current comparable store sales calculation method reflects the manner in which management views comparable sales, as well as the seasonal nature of our business.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Non-GAAP Information (In thousands) (Unaudited)
Adjusted Earnings	13 weeks ended								26 weeks ended
	October 31, 2020				October 26, 2019				October 31, 2020				October 26, 2019
Net income (loss)	$	7,515			$	35,931			$	(39,137)			$	3,776
Reconciling items, after-tax (below)	3,560				1,903				8,496				3,983
Adjusted Earnings (Non-GAAP)	$	11,075			$	37,834			$	(30,641)			$	7,759
Reconciling items, pre-tax
Impairment loss (non-cash) (a)	$	—			$	—			$	—			$	433
Content amortization (non-cash) (b)	1,222				998				2,386				1,909
Restructuring and other charges (c)	3,387				1,569				9,058				3,035
Reconciling items, pre-tax	4,609				2,567				11,444				5,377
Less: Pro forma income tax impact (d)	1,049				664				2,948				1,394
Reconciling items, after-tax	$	3,560			$	1,903			$	8,496			$	3,983
Adjusted EBITDA	13 weeks ended								26 weeks ended
	October 31, 2020				October 26, 2019				October 31, 2020				October 26, 2019
Net income (loss)	$	7,515			$	35,931			$	(39,137)			$	3,776
Add:
Depreciation and amortization expense	13,193				15,546				27,256				31,425
Interest expense, net	912				1,446				3,565				3,978
Income tax (benefit) expense	(1,694)				19,054				(16,610)				4,865
Impairment loss (non-cash) (a)	—				—				—				433
Content amortization (non-cash) (b)	1,222				998				2,386				1,909
Restructuring and other charges (c)	3,387				1,569				9,058				3,035
Adjusted EBITDA (Non-GAAP)	$	24,535			$	74,544			$	(13,482)			$	49,421

(a)		During the 26 weeks ended October 26, 2019, we recognized an impairment loss (non-cash) of $433 in the Retail Segment related to net capitalized development costs for a project which are not recoverable.
(b)		Represents amortization of content development costs (non-cash) recorded in cost of goods sold in the consolidated financial statements.
(c)		During the 26 weeks ended October 31, 2020 and October 26, 2019, we recognized restructuring and other charges totaling $9,058 and $3,035, respectively, comprised primarily of severance and other employee termination and benefit costs associated with the elimination of various positions as part of cost reduction objectives, and professional service costs for restructuring, process improvements, and shareholder activist activities.
(d)		Represents the income tax effects of the non-GAAP items.

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Consolidated Non-GAAP Information (In thousands) (Unaudited)
Free Cash Flow (non-GAAP)		13 weeks ended								26 weeks ended
		October 31, 2020				October 26, 2019				October 31, 2020				October 26, 2019
Adjusted EBITDA (non-GAAP)		$	24,535			$	74,544			$	(13,482)			$	49,421
Less:
Capital expenditures (a)		9,142				10,946				16,197				19,255
Cash interest paid		1,240				2,419				3,200				4,029
Cash taxes paid (refund)		85				721				6,022				(5,877)
Free Cash Flow (non-GAAP)		$	14,068			$	60,458			$	(38,901)			$	32,014

(a)

Purchases of property and equipment are also referred to as capital expenditures. Our investing activities consist principally of capital expenditures for contractual capital investments associated with renewing existing contracts, new store construction, digital initiatives and enhancements to internal systems and our website. The following table provides the components of total purchases of property and equipment:

Capital Expenditures		13 weeks ended								26 weeks ended
		October 31, 2020				October 26, 2019				October 31, 2020				October 26, 2019
Physical store capital expenditures		$	2,825			$	4,599			$	5,962			$	8,117
Product and system development		2,901				4,102				5,226				7,444
Content development costs		1,752				1,548				2,828				2,233
Other		1,664				697				2,181				1,461
Total Capital Expenditures		$	9,142			$	10,946			$	16,197			$	19,255

BARNES & NOBLE EDUCATION, INC. AND SUBSIDIARIES Segment Information (In thousands, except percentages) (Unaudited)
Segment Information (a)	13 weeks ended						26 weeks ended
	October 31, 2020			October 26, 2019			October 31, 2020			October 26, 2019
Sales
Retail	$	576,514		$	741,769		$	735,290		$	1,016,425
Wholesale	36,387			40,210			116,681			112,519
DSS	5,947			5,215			11,819			10,589
Eliminations	(23,363)			(14,966)			(64,291)			(47,648)
Total	$	595,485		$	772,228		$	799,499		$	1,091,885
Gross profit
Retail (b)	$	95,704		$	161,150		$	112,049		$	223,473
Wholesale	10,714			12,535			27,471			27,453
DSS (b)	5,692			4,929			11,392			10,070
Eliminations	4,397			9,334			(2,379)			(480)
Total	$	116,507		$	187,948		$	148,533		$	260,516
Selling and administrative expenses
Retail	$	77,380		$	98,578		$	134,365		$	182,393
Wholesale	4,146			4,593			7,937			9,352
DSS	5,003			4,615			9,039			8,728
Corporate Services	5,501			5,668			10,745			10,675
Eliminations	(58)			(50)			(71)			(53)
Total	$	91,972		$	113,404		$	162,015		$	211,095
Adjusted EBITDA (Non-GAAP) (c)
Retail	$	18,324		$	62,572		$	(22,316)		$	41,080
Wholesale	6,568			7,942			19,534			18,101
DSS	689			314			2,353			1,342
Corporate Services	(5,501)			(5,668)			(10,745)			(10,675)
Eliminations	4,455			9,384			(2,308)			(427)
Total	$	24,535		$	74,544		$	(13,482)		$	49,421

(a)		See Explanatory Note in this Press Release for Segment descriptions.
(b)		For the 13 and 26 weeks ended October 31, 2020, the Retail Segment gross margin excludes $192 and $402, respectively of amortization expense (non-cash) related to content development costs. For the 13 and 26 weeks ended October 31, 2020, the DSS Segment gross margin excludes $1,030 and $1,984, respectively, of amortization expense (non-cash) related to content development costs.
		For the 13 and 26 weeks ended October 26, 2019, the Retail Segment gross margin excludes $210 and $394 respectively of amortization expense (non-cash) related to content development costs. For the 13 and 26 weeks ended October 26, 2019, the DSS Segment gross margin excludes $788 and $1,515, respectively, of amortization expense (non-cash) related to content development costs.
(c)		For additional information, see “Use of Non-GAAP Financial Information” in the Non-GAAP disclosure information of this Press Release.

Percentage of Segment Sales	13 weeks ended						26 weeks ended
	October 31, 2020			October 26, 2019			October 31, 2020			October 26, 2019
Gross margin
Retail	16.6	%		21.7	%		15.2	%		22.0	%
Wholesale	29.4	%		31.2	%		23.5	%		24.4	%
DSS	95.7	%		94.5	%		96.4	%		95.1	%
Elimination	(18.8	)%		(62.4	)%		3.7	%		1.0	%
Total gross margin	19.6	%		24.3	%		18.6	%		23.9	%
Selling and administrative expenses
Retail	13.4	%		13.3	%		18.3	%		17.9	%
Wholesale	11.4	%		11.4	%		6.8	%		8.3	%
DSS	84.1	%		88.5	%		76.5	%		82.4	%
Corporate Services	N/A			N/A			N/A			N/A
Elimination	N/A			N/A			N/A			N/A
Total selling and administrative expenses	15.4	%		14.7	%		20.3	%		19.3	%

Use of Non-GAAP Financial Information – Adjusted Earnings, Adjusted EBITDA and Free Cash Flow

To supplement the Company’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), in the Press Release attached hereto as Exhibit 99.1, the Company uses the non-GAAP financial measures of Adjusted Earnings (defined as net income adjusted for certain reconciling items), Adjusted EBITDA (defined by the Company as earnings before interest, taxes, depreciation and amortization, as adjusted for additional items subtracted from or added to net income) and Free Cash Flow (defined by the Company as Adjusted EBITDA less capital expenditures, cash interest and cash taxes).

These non-GAAP financial measures are not intended as substitutes for and should not be considered superior to measures of financial performance prepared in accordance with GAAP. In addition, the Company’s use of these non-GAAP financial measures may be different from similarly named measures used by other companies, limiting their usefulness for comparison purposes.

The Company’s management reviews these non-GAAP financial measures as internal measures to evaluate the Company’s performance and manage the Company’s operations. The Company’s management believes that these measures are useful performance measures which are used by the Company to facilitate a comparison of on-going operating performance on a consistent basis from period-to-period. The Company’s management believes that these non-GAAP financial measures provide for a more complete understanding of factors and trends affecting the Company’s business than measures under GAAP can provide alone, as it excludes certain items that do not reflect the ordinary earnings of its operations. The Company’s Board of Directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance, for evaluating on a quarterly and annual basis actual results against such expectations, and as a measure for performance incentive plans. The Company’s management believes that the inclusion of Adjusted EBITDA and Adjusted Earnings results provides investors useful and important information regarding the Company’s operating results. The Company believes that Free Cash Flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements and assists investors in their understanding of the Company’s operating profitability and liquidity as the Company manages to the business to maximize margin and cashflow.

The non-GAAP measures included in the Press Release attached hereto as Exhibit 99.1 has been reconciled to the comparable GAAP measures as required under Securities and Exchange Commission (the “SEC”) rules regarding the use of non-GAAP financial measures. All of the items included in the reconciliations below are either (i) non-cash items or (ii) items that management does not consider in assessing the Company’s on-going operating performance. The Company urges investors to carefully review the GAAP financial information included as part of the Company’s Form 10-K dated May 2, 2020 filed with the SEC on July 14, 2020, which includes consolidated financial statements for each of the three years for the period ended May 2, 2020 (Fiscal 2020, Fiscal 2019, and Fiscal 2018) and the Company’s Quarterly Report on Form 10-Q for the period ended August 1, 2020 filed with the SEC on September 3, 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201208005268/en/

Media Contact:

Carolyn J. Brown

Senior Vice President

Corporate Communications & Public Affairs

(908) 991-2967

[email protected]

Investor Contact:

Andy Milevoj

Vice President

Corporate Finance & Investor Relations

(908) 991-2776

[email protected]

KEYWORDS: United States North America New Jersey

INDUSTRY KEYWORDS: University Other Retail Primary/Secondary Education Technology Specialty Other Technology Training Retail Other Education Continuing

MEDIA:

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Wiley Reports Second Quarter Fiscal 2021 Results

HOBOKEN, N.J.–(BUSINESS WIRE)–
John Wiley & Sons, Inc. (NYSE:JWA)(NYSE:JWB), a global leader in research and education, today announced results for the second quarter ended October 31, 2020.

SECOND QUARTER SUMMARY

• GAAP Results: Revenue of $491 million (+5%) and EPS of $1.22 (+54%)
• Adjusted Results (at constant currency): Revenue +4% to $491 million, EBITDA +7% to $120 million, and EPS +12% to $1.00
• Research Publishing & Platforms (at constant currency): Revenue +5% and Adjusted EBITDA +14% on strong double-digit growth in Open Access
• Academic & Professional Learning: Revenue for Education Publishing marginally ahead of prior year as accelerated growth in digital content and courseware more than offset decline in print books
• Education Services: Second Quarter and First Half Adjusted EBITDA margin of 21% and 17%, trending ahead of FY22 target of 15%

MANAGEMENT COMMENTARY

“Wiley’s consistent strategies in open research and online education continued to deliver strong returns with record research output and content consumption, robust online enrollment growth, and broad digital courseware adoption,” said Brian Napack, President and CEO. “The pandemic is accelerating important trends underlying our core strategies, including a global increase in the demand to publish and access high-quality research and a decisive shift to online learning and digital curriculums.”

SECOND QUARTER PERFORMANCE

GAAP Measures Unaudited ($millions except for EPS)	Q2 2021	Q2 2020	Change
Revenue	$491.0	$466.2	5%
Diluted EPS	$1.22	$0.79	54%
Non-GAAP Measures	Q2 2021	Q2 2020	Change Constant Currency
Revenue	$491.0	$466.2	4%
Adjusted EBITDA	$120.3	$110.0	7%
Adjusted EPS	$1.00	$0.85	12%

Excluding acquisitions and currency impact, revenue was flat for the quarter. Wiley recorded a favorable FX variance of $8 million in revenue, $0.05 in Adjusted EPS, and $2 million in Adjusted EBITDA.

Revenue

• Research Publishing & Platforms rose 7% as reported and 5% at constant currency with strong growth in open access and content platforms driving results.
• Academic & Professional Learning declined 4% as reported and 5% at constant currency mainly due to COVID-19 impact on Professional Learning (-11% reported, -13% constant currency), particularly trade books and in-person corporate training. Within Education Publishing (+1%, 0% constant currency), digital content and courseware growth accelerated, more than offsetting the decline in print textbooks, while test prep continued its sharp decline due to COVID-related exam cancellations.
• Education Services increased 28% as reported and 27% at constant currency, driven by the three-month inorganic contribution from mthree (+$13 million) and organic constant currency growth of 6% in Online Program Management (OPM) services.

Adjusted EBITDA

• Research Publishing & Platforms grew 14% at constant currency, reflecting revenue growth, operational efficiencies, and COVID-related expense savings.
• Academic & Professional Learning declined 10% at constant currency, reflecting revenue performance partly offset by business optimization gains and COVID-related expense savings.
• Education Services rose 94% at constant currency from $8 million to $15 million, driven by revenue growth and business optimization initiatives, notably sustained improvement in student acquisition costs. Adjusted EBITDA margin for the quarter was 21%, up from 14% in the prior year.
• Corporate Expenses rose 10% to $41 million mainly due to the timing of annual incentive costs.

EPS

• GAAP EPS of $1.22 compared to $0.79 in the prior year period and primarily reflected higher Operating Income, lower restructuring charges and interest expense, and a $0.25 discrete tax benefit. In connection with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Wiley elected to carry back its fiscal year 2020 U.S. loss for tax purposes to its fiscal year 2015, resulting in a $14 million GAAP tax benefit this quarter.
• Adjusted EPS of $1.00 compared to $0.85 in the prior year and was driven by improved Adjusted Operating Income. The $0.25 discrete tax benefit related to the CARES Act was excluded from Adjusted EPS.

Balance Sheet and Liquidity

• Net debt-to-EBITDA ratio (trailing twelve months) at quarter-end was 1.9 as compared to 1.8 at the end of the year-ago period.
• Available liquidity was approximately $740 million at quarter-end, including $86 million of cash on hand and $655 million of undrawn credit capacity.

Cash Flow (Six Months)

• Net Cash Used in Operating Activities was $77 million compared to $100 million in the prior year period, primarily driven by improved earnings, partly offset by unfavorable timing of changes in working capital. Note, the Company’s use of cash in the first half of the fiscal year is driven by the timing of collections for annual journal subscriptions, which is concentrated in the third and fourth fiscal quarters.
• Free Cash Flow less Product Development Spending was a use of $124 million compared to a use of $156 million in the prior year, primarily reflecting the improvement in Net Cash Used in Operating Activities.

FISCAL YEAR 2021 OUTLOOK

Based on performance through the six months and leading indicators for the remainder of the year, Wiley is initiating annual guidance for fiscal year 2021. For Revenue, the Company anticipates low-single digit growth overall, which includes low-single digit growth in Research, a mid-single digit decline in Academic & Professional Learning, and double-digit growth in Education Services (mid-single digit growth on an organic basis). Projected performance ranges for consolidated Revenue, Adjusted EBITDA, Adjusted EPS and Free Cash Flow are as follows:

METRIC (in millions, except EPS)	FY20	FY21 OUTLOOK*
Revenue	$1,831	$1,865 – $1,885
Adjusted EBITDA	$356	$380 – $395
Adjusted EPS	$2.40	$2.50 – $2.70
Free Cash Flow	$173	$175 – $200

*Outlook reflects actual currency for results through Q2 and assumes current FX rates prevail for remainder of year.

EARNINGS CONFERENCE CALL

Scheduled for today, December 8 at 10:00 a.m. (ET). Access the webcast on Wiley.com, at https://www.wiley.com/en-us/investors or directly at https://edge.media-server.com/mmc/p/xdo3rqb2. U.S. callers, please dial (844) 231-0103 and enter the participant code 6272694#. International callers, please dial (216) 562-0402 and enter the participant code 6272694#.

ABOUT WILEY

Wiley drives the world forward with research and education. Through publishing, platforms and services, we help researchers, professionals, students, universities, and corporations to achieve their goals in an ever-changing world. And for more than 200 years, we have delivered consistent performance to all our stakeholders. The Company’s website can be accessed at www.wiley.com.

NON-GAAP FINANCIAL MEASURES

Wiley provides non-GAAP financial measures and performance results such as “Adjusted EPS,” “Adjusted Revenue,” “Adjusted Operating Income,” “Adjusted EBITDA,” “Adjusted CTP,” “Free Cash Flow less Product Development Spending,” “organic revenue,” and results on a Constant Currency basis to assess underlying business performance and trends. Management believesnon-GAAP financial measures, which exclude the impact of restructuring charges and credits and certain other items, and the impact of acquisitions provide a useful comparable basis to analyze operating results and earnings. See the reconciliations of non-GAAP financial measures and explanations of the uses of non-GAAP measures in the supplementary information.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements concerning the Company’s operations, performance, and financial condition. Reliance should not be placed on forward-looking statements, as actual results may differ materially from those in any forward-looking statements. Any such forward-looking statements are based upon a number of assumptions and estimates that are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company and are subject to change based on many important factors. Such factors include, but are not limited to: (i) the level of investment in new technologies and products; (ii) subscriber renewal rates for the Company’s journals; (iii) the financial stability and liquidity of journal subscription agents; (iv) the consolidation of book wholesalers and retail accounts; (v) the market position and financial stability of key online retailers; (vi) the seasonal nature of the Company’s educational business and the impact of the used book market; (vii) worldwide economic and political conditions; (viii) the Company’s ability to protect its copyrights and other intellectual property worldwide (ix) the ability of the Company to successfully integrate acquired operations and realize expected opportunities; (x) the Company’s ability to realize operating savings over time and in fiscal year 2021 in connection with our multi-year Business Optimization Program; (xi) the impact of COVID-19 on our operations, performance, and financial condition; and (xii) other factors detailed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements to reflect subsequent events or circumstances.

Category: Earnings Releases

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)(2)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2020		2019		2020		2019
Revenue, net		$ 491,011		$ 466,205		$ 922,337		$ 889,735
Costs and expenses:
Cost of sales		154,853		143,413		299,662		286,509
Operating and administrative expenses		247,167		240,380		484,536		490,550
Restructuring and related charges		1,920		4,001		4,138		14,736
Amortization of intangibles		17,166		15,020		34,057		29,990
Total Costs and Expenses		421,106		402,814		822,393		821,785
Operating Income		69,905		63,391		99,944		67,950
As a % of revenue		14.2%		13.6%		10.8%		7.6%
Interest expense		(4,461)		(6,787)		(9,075)		(12,864)
Foreign exchange transaction losses		(697)		(2,668)		(779)		(16)
Other income		3,766		2,537		8,157		5,370
Income Before Taxes		68,513		56,473		98,247		60,440
Provision for income taxes		81		11,783		13,481		12,126
Effective tax rate		0.1%		20.9%		13.7%		20.1%
Net Income		$ 68,432		$ 44,690		$ 84,766		$ 48,314
As a % of revenue		13.9%		9.6%		9.2%		5.4%
Weighed Average Number of Common Shares Outstanding
Basic		56,005		56,326		55,959		56,431
Diluted		56,165		56,664		56,182		56,791
Earnings Per Share
Basic		$ 1.22		$ 0.79		$ 1.51		$ 0.86
Diluted		$ 1.22		$ 0.79		$ 1.51		$ 0.85

Notes:
(1) The supplementary information included in this press release for the three and six months ended October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
(2) All amounts are approximate due to rounding.

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF GAAP EPS to NON-GAAP ADJUSTED EPS – DILUTED
(unaudited)
			Three Months Ended				Six Months Ended
			October 31,				October 31,
			2020		2019		2020		2019
GAAP Earnings Per Share – Diluted			$ 1.22		$ 0.79		$ 1.51		$ 0.85
Adjustments:
	Restructuring and related charges (A)		0.02		0.06		0.05		0.20
	Foreign exchange losses (gains) on intercompany transactions (A)		0.01		–		(0.02)		0.01
	Impact of increase in U.K. statutory rate on deferred tax balances (B)		–		–		0.12		–
	Impact of U.S. CARES Act (C)		(0.25)		–		(0.25)		–
Non-GAAP Adjusted Earnings Per Share – Diluted			$ 1.00		$ 0.85		$ 1.41		$ 1.06
Notes:
(A)	The table below shows the net of tax impact of our adjustments to GAAP Earnings Per Share noted above.
			Three Months Ended				Six Months Ended
			October 31,				October 31,
	(amounts in millions)		2020		2019		2020		2019
	Net of tax, charges related to the Business Optimization Program		$ 1.4		$ 2.8		$ 2.9		$ 11.1
	Net of tax, (credits) charges related to the Restructuring and Reinvestment Program		$ (0.2)		$ 0.3		$ (0.2)		$ 0.2
	Net of tax, foreign exchange transaction losses (gains)		$ 0.2		$ 0.5		$ (0.8)		$ 0.7
(B)	During the first quarter of fiscal 2021, the U.K. officially enacted legislation that increased its statutory rate from 17% to 19%. This resulted in a $6.7 million non-cash deferred tax expense from the re-measurement of the Company’s applicable U.K. net deferred tax liabilities.
(C)	In connection with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and certain regulations issued in late July 2020, the Company elected to carry back its fiscal year 2020 loss for tax purposes (“NOL”) to its fiscal year 2015 and claimed a $20.7 million refund. The NOL carryback to a year when our corporate tax rate was 35%, including certain related benefits, resulted in a $14 million tax benefit. We expect to receive the refund by the end of fiscal 2021.

(1) See Explanation of Usage of Non-GAAP performance measures included in this supplementary information for additional details on the reasons why management believes presentation of each non-GAAP performance measure provides useful information to investors. The supplementary information included in this press release for the three and six months ended October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
RECONCILIATION OF GAAP NET INCOME to NON-GAAP EBITDA AND ADJUSTED EBITDA
(unaudited)
			Three Months Ended				Six Months Ended
			October 31,				October 31,
			2020		2019		2020		2019
Net Income			$ 68,432		$ 44,690		$ 84,766		$ 48,314
	Interest expense		4,461		6,787		9,075		12,864
	Provision for income taxes		81		11,783		13,481		12,126
	Depreciation and amortization		48,430		42,638		97,937		84,857
Non-GAAP EBITDA			121,404		105,898		205,259		158,161
	Restructuring and related charges		1,920		4,001		4,138		14,736
	Foreign exchange transaction losses		697		2,668		779		16
	Other income		(3,766)		(2,537)		(8,157)		(5,370)
Non-GAAP Adjusted EBITDA			$ 120,255		$ 110,030		$ 202,019		$ 167,543
	Adjusted EBITDA Margin		24.5%		23.6%		21.9%		18.8%

Notes:
(1) See Explanation of Usage of Non-GAAP performance measures included in this supplementary information for additional details on the reasons why management believes presentation of each non-GAAP performance measure provides useful information to investors. The supplementary information included in this press release for the three and six months ended October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
SEGMENT RESULTS
(in thousands)
(unaudited)
						% Change
		Three Months Ended October 31,				Favorable (Unfavorable)
		2020		2019		Reported	Constant Currency
Research Publishing & Platforms:
Revenue, net
Research Publishing		$ 240,691		$ 225,085		7%	5%
Research Platforms		10,643		9,624		11%	11%
Total Revenue, net		$ 251,334		$ 234,709		7%	5%
Contribution to Profit		$ 74,088		$ 63,291		17%	15%
Adjustments:
Restructuring (credits) charges		(238)		726
Non-GAAP Adjusted Contribution to Profit		$ 73,850		$ 64,017		15%	14%
Depreciation and amortization		19,765		17,037
Non-GAAP Adjusted EBITDA		$ 93,615		$ 81,054		15%	14%
Adjusted EBITDA margin		37.2%		34.5%
Academic & Professional Learning:
Revenue, net
Education Publishing		$ 103,105		$ 101,741		1%	0%
Professional Learning		67,485		75,984		-11%	-13%
Total Revenue, net		$ 170,590		$ 177,725		-4%	-5%
Contribution to Profit		$ 29,878		$ 35,050		-15%	-17%
Adjustments:
Restructuring charges		1,541		800
Non-GAAP Adjusted Contribution to Profit		$ 31,419		$ 35,850		-12%	-15%
Depreciation and amortization		17,720		17,349
Non-GAAP Adjusted EBITDA		$ 49,139		$ 53,199		-8%	-10%
Adjusted EBITDA margin		28.8%		29.9%
Education Services:
Revenue, net
Education Services OPM (2)		$ 56,261		$ 52,781		7%	6%
mthree (2)		12,826		990		#	#
Total Revenue, net		$ 69,087		$ 53,771		28%	27%
Contribution to Profit		$ 7,425		$ 2,583		#	#
Adjustments:
Restructuring charges (credits)		84		(475)
Non-GAAP Adjusted Contribution to Profit		$ 7,509		$ 2,108		#	#
Depreciation and amortization		7,210		5,522
Non-GAAP Adjusted EBITDA		$ 14,719		$ 7,630		93%	94%
Adjusted EBITDA margin		21.3%		14.2%
Corporate Expenses:		$ (41,486)		$ (37,533)		-11%	-10%
Adjustments:
Restructuring charges		533		2,950
Non-GAAP Adjusted Corporate Expenses		$ (40,953)		$ (34,583)		-18%	-18%
Depreciation and amortization		3,735		2,730
Non-GAAP Adjusted EBITDA		$ (37,218)		$ (31,853)		-17%	-16%
Consolidated Results:
Revenue, net		$ 491,011		$ 466,205		5%	4%
Operating Income		$ 69,905		$ 63,391		10%	8%
Adjustments:
Restructuring charges		1,920		4,001
Non-GAAP Adjusted Operating Income		$ 71,825		$ 67,392		7%	4%
Depreciation and amortization		48,430		42,638
Non-GAAP Adjusted EBITDA		$ 120,255		$ 110,030		9%	7%
Adjusted EBITDA margin		24.5%		23.6%

(1) The supplementary information included in this press release for the three and six months ended October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.
(2) In May 2020, we moved the IT bootcamp business acquired as part of The Learning House acquisition from Education Services OPM to mthree. As a result, the prior period revenue related to the IT bootcamp business has been included in mthree. There were no changes to our total Education Services or our consolidated financial results. The inorganic revenue from mthree in the three and six months ended October 31, 2020 was $12.5 and $24.9 million, respectively.
#	Variance greater than 100%

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
SEGMENT RESULTS
(in thousands)
(unaudited)
						% Change
		Six Months Ended October 31,				Favorable (Unfavorable)
		2020		2019		Reported	Constant Currency
Research Publishing & Platforms:
Revenue, net
Research Publishing		$ 471,155		$ 445,012		6%	5%
Research Platforms		20,989		19,072		10%	10%
Total Revenue, net		$ 492,144		$ 464,084		6%	5%
Contribution to Profit		$ 143,906		$ 118,937		21%	20%
Adjustments:
Restructuring (credits) charges		(435)		3,346
Non-GAAP Adjusted Contribution to Profit		$ 143,471		$ 122,283		17%	16%
Depreciation and amortization		39,466		34,190
Non-GAAP Adjusted EBITDA		$ 182,937		$ 156,473		17%	16%
Adjusted EBITDA margin		37.2%		33.7%
Academic & Professional Learning:
Revenue, net
Education Publishing		$ 167,189		$ 167,264		0%	0%
Professional Learning		130,314		155,319		-16%	-17%
Total Revenue, net		$ 297,503		$ 322,583		-8%	-8%
Contribution to Profit		$ 29,498		$ 39,961		-26%	-28%
Adjustments:
Restructuring charges		1,574		3,605
Non-GAAP Adjusted Contribution to Profit		$ 31,072		$ 43,566		-29%	-30%
Depreciation and amortization		36,524		33,873
Non-GAAP Adjusted EBITDA		$ 67,596		$ 77,439		-13%	-14%
Adjusted EBITDA margin		22.7%		24.0%
Education Services:
Revenue, net
Education Services OPM(2)		$ 106,523		$ 100,937		6%	6%
mthree (2)		26,167		2,131		#	#
Total Revenue, net		$ 132,690		$ 103,068		29%	28%
Contribution to Profit		$ 7,983		$ (4,616)		#	#
Adjustments:
Restructuring charges		223		1,614
Non-GAAP Adjusted Contribution to Profit		$ 8,206		$ (3,002)		#	#
Depreciation and amortization		14,489		11,020
Non-GAAP Adjusted EBITDA		$ 22,695		$ 8,018		#	#
Adjusted EBITDA margin		17.1%		7.8%
Corporate Expenses:		$ (81,443)		$ (86,332)		6%	6%
Adjustments:
Restructuring charges		2,776		6,171
Non-GAAP Adjusted Corporate Expenses		$ (78,667)		$ (80,161)		2%	2%
Depreciation and amortization		7,458		5,774
Non-GAAP Adjusted EBITDA		$ (71,209)		$ (74,387)		4%	4%
Consolidated Results:
Revenue, net		$ 922,337		$ 889,735		4%	3%
Operating Income		$ 99,944		$ 67,950		47%	44%
Adjustments:
Restructuring charges		4,138		14,736
Non-GAAP Adjusted Operating Income		$ 104,082		$ 82,686		26%	24%
Depreciation and amortization		97,937		84,857
Non-GAAP Adjusted EBITDA		$ 202,019		$ 167,543		21%	19%
Adjusted EBITDA margin		21.9%		18.8%
# Variance greater than 100%

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
		October 31,		April 30,
		2020		2020
Assets:
Current Assets
Cash and cash equivalents		$ 86,063		$ 202,464
Accounts receivable, net		273,264		309,384
Inventories, net		42,169		43,614
Prepaid expenses and other current assets		75,801		59,465
Total Current Assets		477,297		614,927
Product Development Assets, net		48,944		53,643
Royalty Advances, net		18,276		36,710
Technology, Property and Equipment, net		290,071		298,005
Intangible Assets, net		819,834		807,405
Goodwill		1,126,904		1,116,790
Operating Lease Right-of-Use Assets		137,095		142,716
Other Non-Current Assets		101,984		98,598
Total Assets		$ 3,020,405		$ 3,168,794
Liabilities and Shareholders’ Equity:
Current Liabilities
Accounts payable		$ 54,911		$ 93,691
Accrued royalties		94,390		87,408
Short-term portion of long-term debt		12,500		9,375
Contract liabilities		285,176		520,214
Accrued employment costs		88,761		108,448
Accrued income taxes		1,901		13,728
Short-term portion of operating lease liabilities		20,071		21,810
Other accrued liabilities		77,026		72,595
Total Current Liabilities		634,736		927,269
Long-Term Debt		825,243		765,650
Accrued Pension Liability		173,084		187,969
Deferred Income Tax Liabilities		131,026		119,127
Operating Lease Liabilities		153,355		159,782
Other Long-Term Liabilities		82,748		75,373
Total Liabilities		2,000,192		2,235,170
Shareholders’ Equity		1,020,213		933,624
Total Liabilities and Shareholders’ Equity		$ 3,020,405		$ 3,168,794

(1) The supplementary information included in this press release for October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.
SUPPLEMENTARY INFORMATION (1)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
		Six Months Ended
		October 31,
		2020		2019
Operating Activities:
Net income		$ 84,766		$ 48,314
Amortization of intangibles		34,057		29,990
Amortization of product development assets		17,448		17,616
Depreciation and amortization of technology, property, and equipment		46,432		37,251
Other non-cash charges and credits		72,521		59,302
Net change in operating assets and liabilities		(331,846)		(291,994)
Net Cash Used In Operating Activities		(76,622)		(99,521)
Investing Activities:
Additions to technology, property, and equipment		(36,430)		(44,531)
Product development spending		(10,999)		(11,686)
Businesses acquired in purchase transactions, net of cash acquired		(229)		(74,169)
Acquisitions of publication rights and other		(14,021)		(4,045)
Net Cash Used in Investing Activities		(61,679)		(134,431)
Financing Activities:
Net debt borrowings		59,590		317,471
Cash dividends		(38,480)		(38,486)
Purchase of treasury shares		–		(25,000)
Other		(2,511)		(4,718)
Net Cash Provided By Financing Activities		18,599		249,267
Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		3,301		(461)
Change in Cash, Cash Equivalents and Restricted Cash for Period		(116,401)		14,854
Cash, Cash Equivalents and Restricted Cash – Beginning		203,047		93,548
Cash, Cash Equivalents and Restricted Cash – Ending		$ 86,646		$ 108,402
CALCULATION OF NON-GAAP FREE CASH FLOW LESS PRODUCT DEVELOPMENT SPENDING
		Six Months Ended
		October 31,
		2020		2019
Net Cash Used In Operating Activities		$ (76,622)		$ (99,521)
Less: additions to technology, property, and equipment		(36,430)		(44,531)
Less: product development spending		(10,999)		(11,686)
Free Cash Flow less Product Development Spending		$ (124,051)		$ (155,738)
See Explanation of Usage of Non-GAAP Measures included in this supplemental information.
(1) The supplementary information included in this press release for the six months ended October 31, 2020 is preliminary and subject to change prior to the filing of our upcoming Quarterly Report on Form 10-Q with the Securities and Exchange Commission.

JOHN WILEY & SONS, INC.

Explanation of Usage of NON-GAAP Performance Measures

In this earnings release and supplemental information, management may present the following non-GAAP performance measures:

• Adjusted Earnings Per Share (“Adjusted EPS”);
• Free Cash Flow less Product Development Spending;
• Adjusted Revenue;
• Adjusted Operating Income and margin;
• Adjusted Contribution to Profit and margin;
• EBITDA, Adjusted EBITDA and margin;
• Organic revenue; and
• Results on a constant currency basis.

Management uses these non-GAAP performance measures as supplemental indicators of our operating performance and financial position as well for internal reporting and forecasting purposes, when publicly providing its outlook, to evaluate the Company’s performance and calculate incentive compensation. Non-GAAP 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 and should not be viewed as alternatives to measures of financial results under U.S. GAAP.

The Company presents these non-GAAP performance measures in addition to U.S. GAAP financial results because it believes that these non-GAAP performance measures provide useful information to investors and financial analysts for operational trends and comparisons over time. The use of these non-GAAP performance measures may also provide a consistent basis to evaluate operating profitability and performance trends by excluding items that we do not consider to be controllable activities for this purpose. For example:

• Adjusted EPS, Adjusted Revenue, Adjusted Operating Income, Adjusted Contribution to Profit, Adjusted EBITDA and organic revenue provide a more comparable basis to analyze operating results and earnings and are measures commonly used by shareholders to measure our performance.
• Free Cash Flow less Product Development Spending helps assess our ability, over the long term, to create value for our shareholders as it represents cash available to repay debt, pay common stock dividends and fund share repurchases and acquisitions.
• Results on a constant currency basis removes distortion from the effects of foreign currency movements to provide better comparability of our business trends from period to period. We measure our performance before the impact of foreign currency (or at “constant currency”), which means that we apply the same foreign currency exchange rates for the current and equivalent prior period.

In addition, the Company has historically provided these or similar non-GAAP performance measures and understand that some investors and financial analysts find this information helpful in analyzing the Company’s operating margins, and net income and comparing the Company’s financial performance to that of its peer companies and competitors. Based on interactions with investors, we also believe that the Company’s non-GAAP performance measures are regarded as useful to our investors as supplemental to our U.S. GAAP financial results, and that there is no confusion regarding the adjustments or our operating performance to our investors due to the comprehensive nature of our disclosures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201208005442/en/

Investors:

Brian Campbell

201.748.6874

[email protected]

Media:

Katie Roberts

602.373.7233

[email protected]

KEYWORDS: New Jersey United States North America

INDUSTRY KEYWORDS: Education Other Education Primary/Secondary

MEDIA:

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