John Wiley & Sons Inc (WLY) 0 Q0 法說會逐字稿

Good morning, and welcome to the Wiley's Fourth Quarter and Fiscal Year 2017 Earnings Call.

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.

Good morning, everyone, and welcome to our fourth quarter and fiscal 2017 earnings call.

First, some housekeeping items to consider.

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 our filings with the SEC.

The company does not undertake any obligations to update or revise forward-looking statements to reflect any subsequent events or circumstances.

(Operator Instructions) After the call, a copy of this presentation and a playback of the webcast will be available on our Investor Relations page.

Presenting our results today will be Matthew Kissner, interim CEO and Chairman; and John Kritzmacher, CFO and Executive Vice President, Technology and Operations.

As announced back on May 8, Mark Allin, President and CEO, resigned from the company, and Wiley's Board of Directors is conducting a thorough search for his successor.

As a 14-year veteran of the board and its current Chairman, Matt will lead the company during this transition period, working closely with John and the rest of the executive team to execute on its long-term plans and achieve its short-term objectives.

I'll now turn the call over to Matthew Kissner, Wiley's interim CEO and Chairman.

Thank you, Brian, and good morning, everyone.

I'd like to take this opportunity to thank Mark Allin for his 20 years of service and dedication to Wiley and the enormous contributions he has made as the leader in different parts of the business.

From his time as Managing Director of the Asia-Pacific region to his role as head of the Professional Development segment and, of course, as President and CEO, Mark was always a driving force of change, championing acquisitions, divestitures and major internal improvements like our ERP in deployment and office transformation.

We wish him the very best.

A quick background on me.

I joined the Board of Directors in 2003 and was named Chairman in 2015.

During my Wiley tenure, I have had the privilege of chairing the Executive, Governance, Audits and Compensation Committees of the Board.

Prior to Wiley, I was an Executive Vice President and Group President at Pitney Bowes, and I have held a number of leadership positions in the financial services industry.

To say that I am deeply honored to be a part of Wiley is an understatement.

From our people to our lasting worldwide contributions to scientific, technical, medical and educational progress, to the opportunities to grow and thrive for another 200 years, it is truly something special.

John and I and the leadership team have been working very closely and diligently to execute on our strategic plans and operational excellence initiatives.

There are things to celebrate, things to reinvest in and things to improve.

The search for a permanent CEO is underway and is being managed by a search committee of the board.

Before jumping into results, note that I will be excluding the impact of foreign exchange when commenting on all variances.

Foreign exchange was a headwind yet again this year.

The unfavorable impact to revenue and EPS was approximately $43 million and $0.04, respectively.

As a reminder, the impact of foreign exchange on our EPS is somewhat naturally hedged by the global footprint of our operations, particularly in the U.K.

Revenue at constant currency declined 1% excluding the $34 million favorable impact of our shift to time-based journal subscriptions and the $19 million partial year impact from the Atypon acquisition.

Underlying revenue performance was driven by 14% growth from the Solutions segment and steady performance from Research, offset by a 7% decline in Publishing due to continued print book challenges.

If you include the subscription shift and contribution from Atypon, revenue for the year rose 2%.

Adjusted EPS for the year was up 1% excluding the favorable $0.38 impact from the shift to time-based subscriptions and the combined dilution of $0.08 coming from Atypon and Ranku, a small acquisition we made in the Online Program Management space.

This compares favorably to our guidance of a mid-single-digit decline.

Contributing to the results was $0.12 in tax benefits booked in the third quarter related to global tax planning and efficiency gains, both of which helped to offset a large high-margin backfile sale in the prior year and continued weakness in book publishing.

Including this subscription shift and the Atypon and Ranku dilution, adjusted EPS rose 13% for the year.

Importantly, we continue to make significant strides in our digital transformation.

68% of our revenue is now from digital sources, up from 63% last year.

This was the result of several factors, including the Atypon acquisition, strong growth in our Solutions businesses and continued declines in print book sales.

While both cash from operations and free cash flow were lower this year, much of the decline can be attributed to working capital timing, an unbudgeted $7 million contribution to our U.K. pension plan just before year-end, and the unusual product mix that occurred in the fourth quarter, notably that print book sales were much better than expected.

Also contributing to the free cash flow variance was $17 million in planned CapEx related to our office transformation.

It goes without saying that fiscal 2017 was an eventful year for the company.

Our Atypon acquisition in the second quarter of fiscal 2017 was an important step in advancing our digital capabilities.

We are migrating our online library to Atypon's Literatum platform which immediately accelerates our technology roadmap and provides considerable cost savings and efficiency gains.

Atypon also provides potential for new revenue opportunities as we continue to enhance and expand services for authors and society partners.

I have been having, what I call, brown bag lunch meetings with groups of Wiley colleagues to gauge their sentiment and get their insight.

I couldn't be more impressed with the talent we have in place at all levels.

We are getting better at change and that is not an easy transition.

We are becoming more efficient and productive, making more informed decisions, removing some of the bureaucracy and improving our speed to market and, finally, becoming sharper and more focused as an organization, which has led to our company-wide operational excellence initiative which John Kritzmacher is driving.

He will talk more about that later in the presentation.

To avoid repetition, I'll touch briefly on the next couple of slides.

For the year, revenue, adjusted operating income and adjusted EPS were up 2%, 7% and 13%, respectively.

Excluding the subscription shift and the impact of the Atypon and Ranku acquisitions as well as all adjusted outcharges, credits and settlements, the underlying performance for revenue was a decline of 1%.

Adjusted operating income declined 4%, while adjusted EPS rose 1%.

As noted, steady Research performance and strong Solutions growth were more than offset by the continuing market-driven decline in print book publishing.

Full year operating income performance was impacted by revenue performance and a large high-margin backfile sale in the prior year, while earnings performance was positively impacted by tax planning and efficiency gains.

The fourth quarter saw a significant increase in both revenue and earnings.

For the quarter, revenue, adjusted operating income and adjusted EPS were up 6%, 16% and 19%, respectively.

Excluding the impact of the Atypon and Ranku acquisitions as well as all adjusted outcharges, credits and settlements, revenue, adjusted operating income and adjusted EPS were up 4%, 21% and 24%, respectively.

Publishing drove results, although much of the growth within the quarter is due to favorable timing of orders and lower book returns.

Solutions continued to show double-digit top line growth and, finally, strong earnings performance in the quarter was the result of significant profit improvement in the Publishing and Solutions segment.

Moving next to our Research segment, which accounts for 50% of total Wiley revenue and 64% of total adjusted contribution to profit, or adjusted CTP.

Full year revenue increased 7%, primarily due to the shift to time-based subscriptions and the Atypon contribution.

Excluding those items, revenue was marginally higher with steady Journal subscription performance and strong growth at Author-Funded Access, partially offset by a large backfile sale in the prior year.

Calendar year 2017 subscription billings are up 1% with 97% of business closed, which is consistent with growth rates over the past few years.

Our Society Licensing business also remained steady.

We have renewed or extended 91 Society Publishing contracts in calendar year 2017 worth $67 million, and we are even in terms of contracts won and lost.

We continue to believe that Atypon will greatly enhance our Research business.

We are confident about our position in the academic research marketplace given our next generation Literatum platform and the technology leadership coming from Atypon.

As a reminder, Literatum is the most widely-used and fully-featured online publishing platform with the professional and scholarly publishing industry, hosting 1/3 of the world's English-language Journals.

Revenue for the quarter grew 3%, primarily due to the contribution from Atypon.

Research adjusted CTP was up 2% due to the favorable $29 million shift of gross profit related to time-based subscriptions which offset the Atypon investment of $4 million.

Excluding those items, adjusted CTP declined 8% for the year due to a high-margin $10 million backfile sale last year, investment in technology, increased article production and higher royalties related to our Society business.

For the quarter, adjusted CTP was down 3% due to investments related to Atypon.

Overall, we are pleased with the consistent performance in Research, our largest and most profitable segment, and we see considerable opportunity to enhance revenue and profit growth with targeted investment, operational excellence and our next-generation technology platform.

On to the Publishing segment, which accounts for 37% of total Wiley revenue and 32% of total adjusted CTP.

For the year, Publishing revenue declined 7%, with books declining 11% due to print weakness across most categories.

Digital book revenue, which makes up approximately 24% of total book revenue, was a better story, rising modestly overall and growing 18% in Education, Course Workflow/WileyPLUS and Online Test Preparation continued to perform well for us, up 7% and 27% for the year, respectively.

They have been consistent bright spots.

Publishing ended the year stronger than expected.

In the fourth quarter, revenue rose 7% with overall books up 6% and Education books up 28%.

However, we do not expect this growth to continue as favorable timing and lower returns played a dominant role.

Finally, Online Test Preparation had an exceptional quarter, growing 52% over the prior year period.

We continue to work towards offsetting print revenue declines with cost improvements and focusing our efforts on growing our digital lines of businesses.

To that end, adjusted CTP for the year was flat, with savings from restructuring and efficiency gains offsetting lower revenue.

For the quarter, CTP rose 117%.

We are continuing our strategic work on the Publishing business, including portfolio reviews, workforce realignment and restructuring, and operational excellence initiatives.

In certain areas, we will explore new formats or promote digital-only.

In other areas, we will rationalize our portfolio.

Our approach is to continue to realign our cost structure to help mitigate the revenue decline, sharpen our focus on high-performing areas and digital opportunities and improve operating efficiency.

Solutions, which accounts for 13% of total Wiley revenue and 4% of total adjusted CTP had another good year from a growth perspective and showed significant profit improvement.

All 3 Solutions businesses reported solid growth, with Online Program Management, Corporate Learning and Professional Assessment up 16%, 20% and 5%, respectively.

Online Program Management signed 4 new University partners in the year and 24 net new programs for a total of 39 partners and 250 programs.

Our unique position as the top online program management provider, a leading academic research publisher and a premier provider of course material continues to benefit us as we had bigger partnerships and increased the number of programs per partner and students per program.

Corporate Learning continues to see double-digit growth from new and existing corporate clients across Europe and North America.

In April, CrossKnowledge was selected as one of the world's top 20 training outsource companies by trainingindustry.com.

Professional assessment remains a consistent, highly profitable growth area for us, up 5% for the year.

Adjusted CTP tripled to $17 million due to improved operating efficiencies, particularly in the Online Program Management business.

We expect this progress to continue.

For the quarter, revenue and adjusted CTP were up 14% and 27%, respectively.

I will now pass the call over to John, who will take you through our shared services costs, balance sheet, cash flow and outlook.

Thank you, Matt.

Overall, adjusted shared services costs were even with prior year.

Other administration costs declined 9%, primarily due to certain onetime employment costs and higher legal provisions in the prior year.

Distribution and operations costs declined 1%, primarily due to facilities consolidations.

These savings effectively offset a 5% increase in Technology and Content Management spending related to our ERP and other systems.

Operationally, we are making real progress in improving the effectiveness and efficiency of our shared services functions and we still have considerable opportunity ahead.

Our balance sheet continues to provide us with the capacity to invest in the business while also returning capital to shareholders.

Net debt at year-end was $307 million compared to $241 million in the prior year.

On a trailing 12-month basis, net debt-to-EBITDA was 0.8 compared to 0.7 at the end of the prior year.

Our lower cash position was due to the repayment of debt using proceeds from the repatriation of cash from some of our foreign entities.

During the fiscal year, we repatriated more than $500 million with effectively no incremental tax impact.

At year-end, outstanding debt was $365 million and our non-U.

S. cash balances were reduced to only $47 million.

As part of the repatriation activity, we realized a $60 million cash benefit on a hedge covering a pound sterling-denominated intercompany loan that originated a few months prior to Brexit.

The proceeds from that hedge were received in the fourth quarter of fiscal 2017 and are recorded on our cash flow statement under other investing and financing activities.

Our acquisition strategy remains targeted at adding businesses or capabilities in our core areas of expertise, particularly research and digital and online learning.

Atypon, which we acquired this year for approximately $120 million, is a good example of our focused interests.

That acquisition was carefully targeted and will be highly beneficial from both a technology roadmap and cost perspective.

It also opens doors for new Publishing services revenue streams.

Cash from operations was about $35 million lower than prior year, largely due to unfavorable working capital performance and an unbudgeted $7 million contribution to our U.K. pension just before year-end.

The adverse working capital performance included the unfavorable timing of end of the year payments in fiscal '17 as compared to fiscal '16.

We also lagged on collections due to strong book sales in April.

Those impacts will unwind in fiscal 2018.

With regard to free cash flow, CapEx was higher by $17 million, driven by our headquarters office transformation.

As noted, we utilized $155 million in cash for acquisitions compared to $20 million in the prior year.

The Atypon acquisition at $120 million represents the majority of this investment.

We continue to return cash to shareholders in the form of share repurchases and dividends.

We repurchased nearly 1 million shares in fiscal 2017 and we raised our dividend for the 23rd straight year.

Our next annual dividend review will be conducted next week.

We've launched a number of investments and operational excellence initiatives that will reach across the entire organization.

These initiatives include targeted investment to improve revenue growth and achieve significant efficiency gains.

In Research, we are investing in additional journal publishing resources to increase our article output.

We are also investing in advanced digital journal production and workflow tools that will significantly improve our efficiency.

We expect to increase the article output worldwide, with particular emphasis on fast-growing markets in China and India.

We are also developing new services for academic societies and researchers using Atypon's capabilities.

Through these actions, we believe we can increase our sustainable revenue growth rate above 1% to 2% over time.

In our Solutions businesses, we will continue to focus on realizing profitable growth.

In addition to gaining scale on these businesses, we are driving process improvements and leveraging technology to achieve efficiency gains.

We will continue to invest in customer-facing technologies as well.

Among these investments, we expect to complete the migration of our Wiley online journal library to Literatum early in calendar 2018.

We expect considerable savings from deepening our proprietary online library platform at that time.

We're also developing a next-generation WileyPLUS product for introduction in the fall of 2018.

We are investing in process optimization and business systems, including our ERP deployment, for greatly improved efficiency across the enterprise.

We've already begun to make important strides toward operational excellence in our shared services functions, including IT and finance, and we are now gaining broader momentum across the business segments.

We are confident that our focus on operational excellence will yield better performance at lower costs over time.

As Matt discussed, the review of our Publishing business is still in process, but we continue to sharpen the portfolio and realign our costs.

Our Publishing segment will be restructured and refocused to improve digital capabilities for content production and alternative models for digital delivery and consumption.

Our operational excellence initiatives will result in restructuring charges, primarily severance costs, to be reflected in a first quarter charge of approximately $25 million.

These restructuring actions will yield run rate savings of approximately $45 million beginning in fiscal 2019, about half of that will be realized in this coming fiscal year and about half of the savings will be reinvested in the initiatives I just mentioned.

Looking ahead to fiscal 2018, we expect the business overall to be steady but still challenged by market conditions in books.

In terms of high-level trends, in constant currency terms, we expect revenue and operating income to be approximately even with fiscal 2017.

Adjusted EPS performance at constant currency is expected to be down low single digits mostly due to a $0.12 benefit in nonrecurring tax benefits realized in fiscal 2017.

I should note that at current exchange rates, we will see a positive FX year-over-year impact to our fiscal 2018 revenue and operating income of $25 million and $20 million, respectively.

The flow-through benefit to EPS would be about $0.25.

Underlying the overall revenue trend, we are expecting research revenue to grow at 1% to 2% and Solutions revenue to grow in the low teens.

Our Publishing segment revenue is expected to continue declining in the high-single-digit range.

As I noted earlier, tax from operations was down this year, mostly due to unfavorable working capital performance and a year-end pension contribution.

In fiscal 2018, we will turn that working capital performance back around, and we expect cash from operations to be approximately $350 million or higher, up from $315 million.

Capital expenditures are projected to be modestly lower than fiscal 2017.

Our ERP implementation will continue through the fiscal year-end as we implement order to cash functionality just for our Journals business.

As our headquarters renovation nears completion in the coming months, the decline in investment in our headquarters will be partly offset by investments in new products and technology.

For example, we are planning to launch our next-generation WileyPLUS platform in time for the fall 2018 semester.

We do still expect CapEx to decline in fiscal 2019, following this period of higher investment in our ERP and headquarters.

In summary, we expect steady underlying performance as we make substantial progress toward improving revenue growth and research and driving profitable growth in Solutions, sharpening our portfolio in Publishing and investing in operational excellence across the organization.

The actions we are taking now will provide strong benefits in fiscal 2019 and beyond.

As noted, we are confident we can improve top line growth in Research, which will have a meaningful impact on our overall performance.

Our Publishing segment will be restructured and refocused to improve digital capabilities for content production and alternative models for digital delivery and consumption.

We expect Solutions to continue to benefit from rapidly growing markets, targeted growth strategies and efficiency gains.

Across the business, we expect considerable savings from our operational excellence initiatives and workforce realignment.

Collectively, these efforts are expected to enable us to hold our operating expense relatively flat while returning to overall revenue growth.

This elevated period of capital spending on our ERP and headquarters will wind down resulting in significant free cash flow improvement over time.

Our online library migration to Literatum will conclude in 2018.

And finally, I would note that our balance sheet and cash flow generation provide a solid foundation for investment in our long-term success.

In short, through targeted reinvestment and an obsession with operational excellence, we expect to see meaningful and sustained improvement in operating income, EPS and cash flow starting in fiscal 2019.

In summary, fiscal 2017 was a challenging but productive year for Wiley.

Revenue growth remained constrained by the market decline in print books, but we have plans in place to achieve overall top line growth over time.

Our digital transformation is progressing nicely, with over 2/3 of our revenue coming from digital content and services.

Earnings performance for fiscal 2017 was better than expected but mostly due to successful tax planning and the timing of book sales at year-end.

Our outlook for fiscal year 2018 is steady, as modest revenue growth in Research and strong growth in Solutions will offset continued market challenges in books.

Our earnings performance will be limited by flat revenue and large onetime tax benefits realized in fiscal 2017.

Cash from operations and free cash flow are expected to improve considerably over 2017 as operating performance improves and capital expenditures moderate slightly.

Beyond fiscal 2018, we expect to see meaningful earnings and cash flow improvement as major investments such as our online library platform migration, ERP deployment and headquarters office transformation are completed and begin to provide important gains in quality, speed, agility and customer service.

And with that as background, we welcome your comments and questions.

(Operator Instructions) And we'll go to Daniel Moore with CJS Securities.

I wanted to -- a couple of quick ones, if I may.

I just want to clarify the guidance for fiscal '18.

The adjusted operating income flat, I'm assuming that's off the base of $228 million -- roughly $228 million excluding currency.

Is that correct?

Yes, that's our quarter results.

That's correct.

Yes.

And in the prepared remarks, you mentioned you're typically naturally hedged to some extent and yet at current FX rates, you could see a $25 million revenue benefit and a $20 million operating income benefit in fiscal '18.

And -- just wondering what the decoupling of that sort of typically naturally hedged, why that might be the case?

So that's a good question, Dan.

So the nature of the benefit we're anticipating from foreign exchange has specifically to do with our Journals business.

And the nature of that business being that subscriptions are paid in advance.

What we'll see in, actually, calendar 2017 is the benefit of the dollar appreciating against the pound sterling, making its way back into Journal revenues earned in our U.K. entity where the pound sterling is the functional currency.

So this impact that we're describing for the coming fiscal year has actually begun to realize part of itself in the tail-end of fiscal '17 and will carry through into next year, but it is the -- an element of the functional currency specific to earning U.S.-denominated Journal revenue in the U.K.

That's helpful.

I appreciate it.

And when you report adjusted for fiscal '18, will you actually back that out?

We will.

Okay.

And then last one, last -- housekeeping, I apologize.

But tax rate continues to come in lower.

What was the effective tax rate used for the $3 adjusted EPS this year?

And what do you expect for fiscal '18?

The effective tax rate for the year was about 18%, and for fiscal '18, we're expecting that the tax rate will be somewhere around 23% to 24%.

Got it.

Okay, more interesting topics.

Online Program Management, what was the contribution in '17, and what should the ramp look like, toward either breakeven or profitability in fiscal '18?

And even any comments you may have on fiscal '19?

Since we'd talk about the relatively recent acquisitions commonly, I'll speak to in both the OPM business as well as our e-learning business and CrossKnowledge.

We had said that for fiscal '17 that we expected the 2 combines to be dilutive to earnings by about $0.20, so they'd each be somewhere around $0.10.

We came in a little bit below that combined.

The dilution for '17 was $0.18.

And as we look into fiscal '18, we're expecting that dilution to come down to something closer to $0.10 combined.

Got it, yes.

Very helpful.

And you touched upon the cost savings.

John, you mentioned maybe roughly half of the $45 million projected cost savings would be targeted for reinvestment.

So that does give us come color.

Just wanted -- getting a better sense of how much of that you are targeting to drop to the bottom line in '18 and '19?

So I think, Dan, you should think about this -- as we described, we're going to reinvest about half back into the businesses.

So I would say that the remainder of that, that we take through as savings, you have to be thinking of as also then offsetting costs of inflation and cost of compensation programs and so forth over a course in time.

So in terms of flowthrough reduction to our ongoing expense, I don't think you should be expecting reduction of it, you should be expecting to see is that we're essentially flattening -- as I described in some of my comments, flattening the progress of operating expense across the business.

Perfect.

Lastly, John, just any comments, update, et cetera, on timing expectations as far as the CEO search goes?

This is Matt, I'll comment on that.

As I'd mentioned in my prepared remarks, we have a board search committee, a subset of the board, managing the search.

We've -- we're working with a leading search firm in that regard.

We are under no time pressure here.

We're going to get this right and find the right individuals.

So we're going to take our time and do it in the usual thorough way that Wiley does things.

And we'll go next to Allen Klee from Sidoti.

You just answered that you thought that some of the growth areas would go to $0.10 diluted from $0.18 in last year.

A similar question on Atypon, of what that would go to in '18?

And then what the costs are also related to -- in '18 for the headquarter's transformation and operational excellence?

Sure.

So let me start with Atypon, then I'll go to the investment programs.

So Atypon turned out to be less dilutive in fiscal '17 than we initially anticipated.

Of course, we're still working our way through all the purchase accounting and so forth and some of the initial integration, but Atypon was just under $0.10 dilutive to the business -- $0.08 dilutive, actually, for the year.

And we're expecting its dilution in fiscal '18 will be about the same, and then in '19, we expect it to be neutral to positive.

'18 is a period where we completed, as I was describing earlier, the migration from our proprietary Wiley online library platform over to Literatum, and then that's a big part of the stepover for the acquisition and to be accretive to Wiley in the future.

So '19 is the point where we cross that period.

With respect to investment, the investment in headquarters in 2017 was mostly CapEx, not so much of an impact on OpEx.

The net impact to CapEx was about $17 million in the year.

And then we've got a follow-on spend.

The total spend on the facility is about $30 million, so the balance of that $30 million from $17 million will occur inside of our fiscal 2018.

Okay.

And then in terms of your Journal business, how do you think -- I'm sorry, your Research business, excluding Atypon, for everything else prior to that, how do you think about what the growth rate would be in '18?

And kind of how the transformation to the Atypon business -- maybe if you can explain a little of how you think that accelerates the growth longer-term?

All right, so a little bit of context.

So fiscal 2017, our Journals business, if you will, ex Atypon, just the quarter of Journals business and Research, from a revenue perspective, was marginally positive, as Matt noted in his commentary.

Underneath that, we pointed out a couple of times, it is important to note that in the prior year, fiscal '16, there was a very unusual $10 million backfile sale.

So we had a $10 million unfavorable comparison.

Otherwise we would've seen revenue growth in the Research business that'll lead something slightly north of 1%.

For the coming fiscal year, we're expecting to see, in the Research business, revenue growth that's in the 1% to 2% range, so we're anticipating some improvement in the course.

We no longer have the difficult comparison to a year with a large backfile sale on it, so we expect that this time around the growth that's naturally occurring in the business it will -- that it will flow through.

With respect to Atypon, it is complementary to our business, not only with respect to the capabilities that it brings to the delivery of our entire online library, but it also has tool sets that are particularly efficient with respect to billing websites, which is a common area for demand in supporting our Journals and our society partners.

We also -- our -- with Atypon building new capabilities that will provide services, researchers and size.

Among the important services, we're preparing to offer our services with respect to peer-review, that we believe will be highly attractive to researchers and will continue to draw researchers to Atypon and Wiley for their publishing needs and interests.

Okay.

And on the Books segment, you mentioned that due to some timing that it did a little better than expected.

Could you maybe elaborate on that?

And then, kind of just maybe a little, but also on the strategic review and what -- how that could maybe make things looks different in the future?

So -- sure.

We've noted the number of times in prior calls, and I would note again, when we think about the Publishing business and its performance, as the Publishing business principally being our -- the center of our Books business, that really need to look at that business over a period of time, typically look at trends over a couple of quarters or a year to really see how things unfold because events that occur just before and just prior to quarter-end could have a significant impact.

Events in particular being significant, orders happening during the quarter.

We saw a number of orders come in, in the fourth quarter that were unusual, not sort of the typical ebb and flow, some transactions that we'd been working on for some time around book sales, for example.

So we thought the quarter was lumpy, and it was particularly positive by comparison to prior periods.

We also saw lower returns in the period, and returns have an important impact on performance the from revenue from quarter-to-quarter.

So timing around orders favored the fourth quarter for us.

Timing around returns similarly seem to favor the quarter, and we suggest that you look for the trends and the performance of that business over a longer period of time.

For the year, our Publishing segment's revenue was down 7%.

And as we said, you should anticipate high-single-digit revenue decline in that segment for the coming period.

That's what we're projecting.

In terms of the strategic work going on, over time, the profile of that business will change.

You'll see much stronger digital presence and we're building our digital capabilities in that regard as well as a more cost-effective infrastructure.

And then for your Testing business, that had very strong growth.

Could you kind of go into what was behind that?

And kind of your outlook there?

So I would say the overall rate of growth for the Test Prep business, which includes a number of finance disciplines, it continues to be steady.

Nothing any particular events that were unique to this quarter that caused it to be higher, but the growth rates that we're seeing in the 25% to 30% kind of range have been pretty consistent for this business and we expect that to continue going forward.

(Operator Instructions) And we'll go back to Daniel Moore from CJS Securities.

Just 1 or 2 follow-ups.

In regards to the strategic review, I'm hearing more on this call about sort of fixing the businesses rather than divestments or potential partnerships.

Has there been any change in your view or outlook?

Or is that still very much in flux?

So Dan, I would say that what we've discussed in the past has been the need for us to take a careful review of the portfolio inside of our Publishing business, given what we've seen as a pretty steady pace of decline, and determine if, in fact, there are other opportunities to leverage those assets with partners or perhaps they'd be of more value to others.

And so we've been working on that review.

But all along, I think we've been reasonably clear that the intellectual property that we have in that part of the business and the skill sets that we have publishing those disciplines are really valuable, and as we've worked our way through the review, and we're continuing to do that, we're finding that there are significant opportunities to continue to realize value with that portfolio.

To be successful in the publishing space, we need to introduce new capabilities around digital content production and delivery that will enable us to deliver content in different formats, not just books but really with an emphasis on digital consumption.

And so we're working on plans to do that.

But we believe, certainly in the near term, that there's still a lot of value in those assets, and that, frankly, we can do a better job realizing the value of those assets by focusing in particular on our digital capabilities.

Very helpful.

And lastly, the cadence of guidance, down high single digits as far as print publishing is concerned.

Last couple of years, we've seen a bigger drop from the beginning of the year, or at least this past year certainly, followed by a little bit more of an offset as returns normalize.

Do you think that's the new normal?

Or is that just reading too much into it?

Appreciate the color.

Dan, I would again suggest that we not read too much in the individual quarters, given how things may flow from and slip, if you will, forward or backward from one quarter to the next one when it comes to the Publishing business.

I'd look, again, over the longer-term trends, and I wouldn't begin to try to predict seasonality.

There are other events aside from what might be normal seasonality in this business, such as consolidation among retailers and their efforts to effectively manage their inventory.

We saw some destocking happening during the past fiscal year that caused swings in revenue.

So there are so many variables to drive it.

I think you really have to sort of smooth it out over a period of time in terms of guiding your expectations for what will continue to be a decline in that business, hopefully one that moderates a bit, but we still see a decline there.

At this time, we will turn the conference back over to Matthew Kissner for any additional or closing remarks.

Well, we thank you for joining us on the call today and look forward to speaking with you again on the first quarter call in September.

Thank you, everyone.

Thank you.

That does conclude today's conference.

Thank you for your participation.