John Wiley & Sons Inc (WLY) 2009 Q1 法說會逐字稿

Welcome to the John Wiley & Sons conference call.

Before introducing Will Pesce, President and Chief Executive Officer, I would like to remind you that this discussion will contain forward-looking statements.

You should not rely on such statements as actual results may differ materially, and are subject to factors that are discussed in detail in the company's 10-K and 10-Q filings with the SEC.

The company does not undertake any obligation to up days or revise forward-looking statements to reflect subsequent events or circumstances.

Mr.

Pesce, please go ahead.

Good afternoon.

Welcome to Wiley's first quarter conference call.

I'm with Ellis Cousins, I will provide an overview and then we will respond to your questions.

Fiscal year 2009 began as expected, STMS and higher education reported year-on-year revenue increases of 6%, including favorable foreign exchange of 1 to 2%.

As expected, professional trade was down from last year's strong first quarter by 3%, while 4% excluding the favorable effect of foreign exchange.

Based on these results, leading indicators and market conditions, we continue to expect fiscal year 2009 revenue growth to be in the mid single digits and EPS growth to be approximately 20% excluding one-time tax benefits.

Revenue of $402 million increased 3% from prior year or 2% excluding favorable foreign exchange.

EPS of $0.50 per share increased 19%, excluding a one-time tax benefit that was accretive to EPS in the first quarter of last year by $0.26 per share.

EPS increase was principally due to lower debt financing costs and insurance settlement, foreign exchange had an unfavorable effect on EPS of $0.03 per share.

We achieved an important milestone in June by migrating journal content, customers and access licenses from Blackwell Synergy platform to Wiley Interscience.

The migration included 29,000 customers over 2 million licenses, and nearly 2 million journal articles.

Beyond the online platform, major integration activities are tracking to plan.

We expect to complete substantially all Blackwell-related projects by fiscal year end.

We made significant progress implementing a new global organizational structure across Wiley's three core businesses to leverage our content, services and capabilities around the world.

More specifically, the goals we hope to achieve are to improve the deployment of human and financial resources, expand the sphere of influence of our colleagues by leveraging their capabilities beyond geographic boundaries, providing professional growth and development opportunities, and serve our customers, authors and partners better.

As a result of this new structure, the company's reporting global results for its three core businesses.

Blackwell is included in STMS.

Therefore it is no longer reported as a separate segment.

Prior year results have been restated for comparative purposes.

Gross profit as a percent of revenue of 68.3% was better than prior year, direct operating expenses for the three core businesses were only 2% higher than last year, excluding the unfavorable effect of foreign exchange.

Shared services expenses increased by 10%, excluding unfavorable foreign exchange.

Adjusted for foreign exchange and Blackwell-related net integration costs, shared services expenses increased 7% over last year's first quarter.

Free cash flow was $29 million better than prior year, reflecting the combined effect of higher cash collections related to institutional licenses, improved trade receivables, the timing of author and vendor payments, and a $12 million income tax refund.

Total debt decreased by approximately $200 million from a year ago while net debt was $134 million lower.

In June we conducted a town hall meeting for Hoboken-based colleagues and representatives from our distribution and customer service center in Somerset, New Jersey.

On a scale of 1 strongly disagree to 5 strongly agree, colleagues provided a rating of 4.216 effectiveness criteria.

Specific comments from colleagues include, and I quote, overall I thought it was an inspiring meeting and made me feel very lucky to be working for Wiley.

Another colleague wrote, I have been at companies that do not bother to have such a meeting so I know what it is like on the other side.

The meeting really makes employees feel valued and part of the company edition.

A recent addition to the Wiley commented great opportunity for this new employee to get a clear understanding of how Wiley really walks the talk and how John Wiley is different than other companies than simply talk.

I'd like to provide some highlights regarding our core businesses, global STMS revenue for the first quarter increased by 6% to $240 million or 5% excluding favorable foreign exchange.

The year on year growth was driven by books and journals.

Also contributing to the increase was a $6 million acquisition accounting adjustment that reduced revenue in the first quarter of the prior year.

Book revenue was particularly strong in Asia, Australia and Canada, reflecting the combined effect of Wiley's sales and marketing capabilities and Blackwell's book publishing programs.

The direct contribution to profit advanced 15% to $97 million, or 16% excluding the unfavorable effect of foreign exchange.

The increase reflected top line results, and the collection of a 2003 journal agent bankruptcy settlement of $2 million.

During the quarter, we signed new contracts with various societies to publish 17 new journals, renewed or extended contracts to publish 9 journals, and lost the contract to publish one title.

Key signings include one of the oldest journals in China.

Last but certainly not least, Wiley has been selected by a number of societies to launch new journals.

More than 900 of Wiley's 1400 journals are included many the Thomson ISI 2007 journal citation reports.

Many of your journals showed healthy increases in impact factors, which reflects the frequency that peer review journals are cited by researchers.

Journals published by Wiley are ranked number one in 31 categories.

STMS announced the winners of this year's Young Chemist Award at the opening ceremony of the 26th Chinese Chemical Congress.

The first polymer international IUPAC for creativity and applied polymer science or polymer technology was awarded at the World Polymer Congress in Taiwan.

This new award is for young researchers.

Global PT revenue for the first quarter was $102 million, a 3% decline from last year's strong first quarter or 4% decrease excluding favorable foreign exchange.

First quarter revenue exceeded our expectations.

Our revenue decrease in the US, including the effect of higher sales returns offset solid performances in Asia, Continental Europe, the Middle East and Africa.

The business and technology publishing programs as well as online advertising and services led by Frommers.com and WhatsOnWhen.com, exhibited strength, also affecting the comparison to last year was the termination of a publishing agreement in the culinary hospitality program.

Direct contribution to profit was $19 million compared to $26 million for the first quarter of last year, reflecting the top line results and higher operating expenses.

Expense growth reflected increases in advertising and marketing in anticipation of the strong front list as well as employment costs.

Highlights for the quarter include the continued growth of Frommers and the launch of private label travel destination for KLM Airlines with What's On When providing local events and city guide content for 85 global destinations serviced by KLM.

Additionally, PT generated a 12% increase in a number of book club, translation, and digital rights contracts signed, compared to the same quarter in the previous year.

Notable launches include a custom travel guide from MasterCard entitled Priceless China, which was distributed prior to the Olympics, and two custom guides printed for the US Olympic Committee.

Business titles include Accounting for Dummies, Fourth Edition, by John Tracy, and The Mary Kay Way, Timeless Principles from America's Greatest Woman Entrepreneur by Mary Kay Ash.

Leadership books include Transparency, how Leaders Create a Culture of Candor, by Warren Bennis, Daniel Komen and James O'Toole, and The Five Temptations of a CEO, 10th Anniversary Edition, by bestselling author, Patrick Lencioni.

In education, Wiley released Stand For the Best, the Inspirational Story of Tom Block, who resigned from a CEO position at H&R Block To teach mathematics at an intercity middle school.

During the quarter, we signed a multi-book deal with Jack [Bobel], one of our best selling authors in investing, we also signed a two-book deal with the Goldman Sachs Private Wealth Group and a four book agreement with the American Society For the Prevention of Cruelty To Animals, targeting children in the 9 to 12 age category.

Jossey-Bass signed a two book deal with Warren Bennis, the leadership guru and best-selling author.

In education, we signed books as part of separate new partnerships with Teach For America International Education Association.

Global higher education increased 6% to $59 million or 4% excluding favorable foreign exchange, higher education revenue excluding the Australian secondary school business grew 7%.

The results were driven by the continued success of Wiley plus revenue from acquired titles, and organic growth in science, mathematics engineering and the social sciences.

Markets around the world contributed to the growth, particularly North America, Asia and Australia.

Direct contribution to profit increased 5% to $19 million, reflecting a top line results and improved gross margin.

Wiley Plus continues to build momentum around the world, as reflected in the 43% growth in billings, and the number of registered users jumping 55% over the same quarter of last year.

Wiley Plus revenue is deferred and recognized over the course of one two semesters.

given the increased penetration of Wiley Plus, approximately $2 million of additional revenue was deferred this quarter compared to the first quarter of last year.

Excluding foreign exchange, the science program was up 8% over prior year, mathematics and statistics increased by 14%.

Business and accounting were flat with prior year reflecting some softness for accounting titles, which strengthened in August.

The social sciences performed well against prior year, engineering and computer science were up 19% over last year.

We acquired textbooks and learning materials from Sungate Learning which complements our programs and business in modern languages, a key part of the transaction is Contemporary Business, 12th Edition by Louis E.

Boone and David L.

Kurtz.

This market leading textbook provides us with a strong position in a large introduction to business course.

Annual revenue for the acquisition of the titles we acquired is $7 million.

Earlier in the year, we acquired a list of mathematics and statistics titles from Key College Publishing, the higher education business of California-based Key Curriculum Press.

The acquisition brings to Wiley award winning authors and educators and textbooks that will strengthen our current offerings and provide opportunities for growth.

Annual revenue is more than $1 million.

In July, Congress approved the Higher Education Reauthorization and College Opportunity Act which includes provisions requiring publishers to disclose certain course material information to faculty and offer unbundled course materials, a new Government Accountability Office study will be connect conducted in 2013 to review the costs and benefits of the textbook related provisions.

In addition, the act provides funding for up to ten institutions to experiment with textbook rental programs.

In closing, while a sluggish economy and volatile financial markets have certainly had an adverse effect on some of our markets, we started the year as expected.

The global organizational structure is in place, and we are beginning to realize the anticipated benefits.

The Blackwell integration continues and is on track to be essentially completed by the end of the fiscal year.

Our STMS colleagues continue to form new relationships with prestigious societies, while renewing existing agreements.

PT is outperforming its competitors and Wiley Plus is performing very well.

While certainly early in the year, so far so good.

During the balance of this fiscal year, we expect to benefit from strong front in professional trade and higher education, revenue from newly signed journals, publication schedules, and some recovery in corporate sales and STMS, the continued success of Wiley Plus in higher education, and cost savings resulting from the Blackwell Integration.

As stated previously, we reaffirm our guidance for fiscal year 2009.

With that as background, we welcome your comments and questions.

Thank you.

(OPERATOR INSTRUCTIONS).

we will pause for just a moment to assemble the queue.

We will take your first question from Dave Lewis with JPMorgan.

Hey, guys.

I was wondering if you could just break out operating costs, constant currency.

I'm not sure if I missed it or not.

I know that there was, you mentioned what Blackwell integration costs and related to that I guess just the second question is if you could just give a little more detail about the integration costs and how you think they're going to be broken up through the quarters or through the first half and the second half of the year, the fiscal year.

Thank you.

Okay.

Dave, this is Ellis.

In terms of the operating costs and administrative expenses, they were up as you see from the earnings release about 6.8%.

That's including the effects of exchange.

There was about just under $4 million worth of unfavorable foreign exchange translation.

Net of that, it was just under 5%, 4.9%.

In terms of the effect of the integration, there's about net $2 million of expense in the quarter.

So there was some savings and some additional expense.

Net of that was about $2 million.

We haven't provided specific guidance to your question about how it lays out over quarters.

What we have said thus far, and all I'm capable of saying until we are further into this to be that specific is that by the time we get to the end of the year as I have noted previously we will have over the course of the year positive integration savings net of all costs in the year and we will be completed substantially all of the acquisition integration-related activity.

Sorry.

By the time we exit the year.

That's as much as we are in a position to say now.

We previously reaffirmed that we are on target to meet our overall guidance with respect to a total cost savings when we are completed with the acquisition.

Okay.

Great I will ask one more and probably jump back on.

The revenue guidance, the mid single digits that you have given, is that just remind me.

Is that constant currency and is that exclude acquisitions?

I mean is that a pure organic number or how should we think about that?

It is the reported revenue number that we will provide at the end of the year.

So it includes the effect of foreign exchange translation positive or negative and the addition of any small acquisitions such as the two that we will find with respect to a small acquisition and Key Press.

Okay.

Great.

Thanks.

Okay.

(OPERATOR INSTRUCTIONS).

We will take a follow up from Dave Lewis, JPMorgan.

Okay.

Ellis, can you give me, can you give us an update on the tax rate?

I though this is a regular question, but.

It is a good question.

As you can tell, there has been quite a bit of volatility over the last few years.

We are anticipating the full-year rate to be about 25 to 27%.

That includes what we have seen thus far in the first quarter.

There's a normal tax rate over the balance of the year.

We noted last year, there were changes in UK and Germany which affected the full year last year in Germany and beginning this year in the UK.

So, depending upon where our earnings and profits are, relative to the US, Germany and the UK and other jurisdictions, that's why I provide a range of 25 to 27%.

That's about as tight as I can get quite frankly given, kind of the difference in tax rates particularly the US being the highest tax rate and Germany and the UK being substantially lower.

Okay.

Great.

And then, Will, can you talk, elaborate a little more on the journal gains which continue to reflect the, one of the reasons for the acquisition itself.

I mean are those, is that purely taking market share?

Yes.

When I mentioned that we were able to sign new journal agreement, those are ones that neither Wiley nor Blackwell had before.

So I break out those that are entirely new to the combined entity if you will.

I also mention those as you know, there are many that are up for renewal in any given year.

So I mentioned the successful renewal of those.

By the way, on renewals, they may very well represent contracts that are expiring within the year but some times, we will talk to our society partners about renewing early, and extending the agreement, in fact increasingly we have been doing that as well.

And the one that we lost is one we were publishing before that a competitor took away from us.

As I stated in a previous calls, one of the, from where I sit, one of the most important early indicators of success if you will in terms of bringing these two companies together is to continue to have very healthy collaborative relationships with these societies.

And we are well into the integration period and we have been able to not only retain many of those relationships but add to them with very, very small number of defections and we won't take that for granted.

We are very pleased about that and we think as we move through the final stages of the integration and then ultimately launch a new online platform with further functionality and enhancements and those things, we will be in a very, very strong position to continue to sign on additional agreements as well as extend the ones we already have.

So I must say again that's a very, very positive early indicator.

You don't see the benefits of that in our earnings and revenue it is not immediate when you sign the contract, because you have to go through a transition period.

That's a future indicator if you will.

Can you also elaborate on the front list in P&T?

About the only thing I can say about that is I have been here for 18 years now and I have worked with my colleagues in PT over that period of time.

Obviously a lot more closely in my role as CEO over the last ten years and it is genuine enthusiasm for the depth in quality of this front list, and there's no science to that, right.

It starts with the process of identifying the right authors and the right markets and getting the manuscript in and sales and marketing and publicity efforts.

But again the early indicators, we're talking about the fall of front list here, the early indicators are really quite good.

We feel that it is a deep list.

We are publishing these books in a tough market,.

What we saw all know, those of you who who have followed the company.

If you have to pick a part of John Wiley that is somewhat more susceptible if you will to changes in the economic cycle than other parts of our business, it would be professional and trade business.

That's why I say that, trying to predict exactly how that list will do is never easy, but it is a strong list even though it is in a tough market, we feel pretty good about it.

And it is also why I kept saying as expected in the first quarter.

I realize year on year declines in any quarter do not look good.

But we were not at all surprised by that based on what we experienced the first quarter of last fiscal year.

So there was a tough kind of comparison period there, knowing what we knew coming out of the first quarter of last fiscal year in terms of market conditions, and knowing what we know about the balance of the year, in terms of the front list and hopefully market conditions improving a bit.

We are not expecting everything to get suddenly better.

But we do expect that the market will improve as we get deeper into the fiscal year.

So you put that all together and we certainly expect our PT business to perform much better in the balance of the year than it did in the first quarter.

Great.

I guess just a couple more for me.

Anything notable with Wiley Plus?

I know it is not a huge contributor though it is showing tremendous growth in higher but I mean is it better distribution or is there something behind that growth?

That sticks out.

Yeah, I think, I think a couple of things are happening here.

One is I want to be clear that the growth is happening around the world.

Obviously the greatest penetration is in the United States.

However we have a successful adoptions if you will of Wiley plus in many different parts of the world and the usage is increasing which means it is not only that students are gaining access to it, they are actually using it.

I don't mean to be glib about that.

One of the problems in this business in the past is even if a student bought a textbook you never really knew how they were using it.

You make assumptions about that but you never really knew.

With Wiley Plus, we have very direct feedback and usage data which indicates this is a very robust system that's creating quite a bit of satisfaction among both professors and students.

So we are very bullish about Wiley Plus.

We feel good about the fact it is penetrating markets around the world.

We feel good about the feedback we are getting from our customers, and we think this is admittedly an evolution, not a revolution.

It has been taking some time and it will take more time but what we are finding is that the markets we are serving in the states and abroad are beginning to accept more and more access to electronic materials for the education market.

As I said to many of you in the past, it is not about the technology.

It is about getting the human beings professors and students to use the technology, see the benefit of it and then adopt it more broadly.

We are beginning to see more of that with each passing day.

Great.

Last one, for me is did you guys split out interest expense in the interest expense and other net line or could you do that.

Yeah, I can do that, Dave.

What we have is interest expense, other income expense you have 7.8 or $7.9 million.

Interest expense was actually about $13 million.

Yes.

There was about interest income of about $800,000 and then we have the life insurance proceeds with the delta to get you to the 7.9.

Great.

So that will give the answer then, year on year the comparison is we are about something like $4.5 million lower in interest expense than the prior year first quarter, and I would say about half of it came from lower interest rates, and about half of it came from lower principle outstanding on average.

Great.

I'm sorry.

If I could just ask one more.

What are you guys modeling for FX this year on, you have talked about it on the top line, but on the operating line, are you changing how, the business in terms of, to the extent that you can to minimize the impact of the strengthening dollar?

In terms of foreign exchange translation effect on the business, it has been as the dollar weakens it has been positive on the top line, negative on expense.

We have a lot of expense dominated particularly in sterling but also in other currencies outside of dollars.

Typically on a net basis, depending on how quickly the dollar strengthens or weakens, by the time you get down to net income, it has been relatively neutral.

It was negative in this first quarter.

I think it is because of principally the Euro holding up, sterling weakening somewhat quickly.

So, kind of net-net, when you get to cash flow at the end of the day, which is what I look to, we are pretty much self-hedged within the context of our current operations and business, given the nature of our journals program globally and our book programs globally, and where our direct expense is distributed around the world.

So that is how I kind of look at it.

The top line will be affected and have some volatility related to exchange movements particularly against sterling and the Euro and the same holds true for expense but they typically net one another out, so by the time you get to the bottom line it is relatively close, plus or minus a small change, not enough to us going out and doing some significant wide reaching far-ranging foreign exchange management program.

Okay.

Great.

Thanks, guys.

You're welcome.

Our next question from Allen Zwickler with First Manhattan.

Hi, good day.

How are you guys?

Doing fine, Allen.

Just two totally unrelated questions.

One and I may have missed this because I am trying to multitask but it is my brain doesn't always work.

The deferred revenue year-over-year went down very sharply.

Was that just timing or did something change?

There's essentially that's, you know, the effect of the journals earnings over the course of the quarter.

I'm sorry.

I couldn't hear you.

It is the effect of the principally what sits in deferred revenue.

There is Wiley Plus revenue.

That's relatively small.

Okay.

Part of the total.

The principal change reflects, essentially the growth in the journal subscription business and the earnings of journal program.

That's principally, the journal license set up in there.

Okay.

So does that mean that the journal licenses were down year-over-year?

I mean I'm not sure what to read from that.

Yeah.

I mean if you look year-over-year, it is down, but from year end, is where the earnings let me, I don't have it.

I just want to, I don't know whether this is something that moves quarter quarter or just stuck out and I just didn't, you know, given that you consolidated, Blackwell I wondered if there was something going on there that I just wanted to be clear about.

No, on a year-over-year basis, the subscription revenue was up.

Right.

Right.

Right.

So that's a positive indicator.

Okay.

That's because the subscription, the rate of subscriptions are decreasing.

So it is a positive signal.

Yes.

And so I'm not quite sure of your question beyond that.

No.

Well, on the balance sheet you show that deferred revenues down significantly.

So I just wanted to understand why that would be.

That's my question if I wasn't clear.

Sequentially they're up.

I'm just saying year-over-year they're down.

If it is just timing it is fine.

It just seemed like a fairly significant number unless I'm not reading it right.

April to July or July to July?

Year-over-year they're up.

As I said I may be reading this wrong, but I'm looking at your release.

So perhaps, you know I didn't get a good copy of it and I apologize but it looked like the deferred revenue year-over-year was.

Year-over-year, July 2007 to 208,510.

July 2008 is 225,173.

Okay.

It is down from April which is the normal flow of the business.

But year-over-year revenues are up by about $17 million.

And the 315 number, what is that.

That's the year end.

That's sort of.

I'm sorry.

I just wasn't able to see the column.

That's seasonal then.

Right.

The normal flow of the journals business.

Okay.

These are calendar year subscriptions.

My apologies.

I wasn't quite sure.

No, you are not confused.

I'm confused.

That's okay.

What, the other question is to what extent do you get to the point where your debt balances get, in terms of the schedule.

Is there a schedule for the debt balances and at what point do you switch over to perhaps going back to a share repurchase program?

Is that worth talking about or is that out in the future.

It is out in the future but not that far out in the future.

Again it depends on how these will devote excess free cash flows we have already satisfied our normal operating cash requirements for product development spend, operating costs growth and capital spending the excess cash beyond that will be directed toward acquisitions, debt pay down, share repurchase and ordinary common dividends.

As you know, in the past, what now six quarters, we've been dedicated most of, not all, we made some small acquisitions, most of that free cash flow of paying down debt we will continue to do that pretty much in that mix and paying common dividends, so we're not back to share repurchase, we do still have an open share repurchase program, But your greatest option now is debt reduction and acquisitions that come along of reasonable size and paying dividends.

It will come a time hopefully in the next let's say couple of years within the next couple of years, not necessarily in a couple of years but within the next couple of years where our debt is low enough that we would feel, in the absence of sufficient opportunistic acquisitions, acquisitions coming along that it might be time to relook that prioritization and move some of that toward share repurchase.

Thank you.

(OPERATOR INSTRUCTIONS).

We will the take our next question from Avi Steiner with JPMorgan.

Thanks, guys.

If some of this was discussed already I apologize as well.

If you could talk about higher education landscape, what it looks like this year from your perspective in terms of enrollment and given the economic and student loan backdrop.

Secondly can you comment on maybe what the pricing environment looks like higher inside when there's an ability to increase prices.

Thirdly, if you can talk about piracy a little bit which is slowly coming up as a topic at least on the physical textbook side.

Thanks, guys.

All right.

This is Will responding.

The environment for higher ed in terms of demographics, enrollment patterns, the areas in which we publish is pretty good.

In the past at least when there have within tough economic cycles, it is actually in the positive for higher ed for all of those reasons.

We are not seeing a material difference from that pattern this time around.

So I would say in the enrollment front that's pretty good.

There has been a lot of talk about student loans and difficulty gaining access to student loans and I suspect as a matter of degree if you will, in this environment, it has been a bit more difficult.

My experience frankly at Wiley as well as the work I do on a volunteer basis for some higher ed institutions is that those places are able to get loans for their students.

It may take a little bit more time, but that is certainly not having a negative effect on enrollments.

In terms of the pricing environment, I have been connected to higher ed business for my entire career at Wylie, which is 18 years, and it has always been a somewhat price sensitive market and that has been probably as price sensitive in the last three to four years.

I have often said and I feel very strongly about this, it is really never about price alone.

It is all price relative to value and what I mean by that is there are certain areas that we publish, and there are books, that maybe on the higher end of the price range where students are continuing to buy them, and continue them, and then they retain them after the course, because frankly, they have no chance to get through the course without it.

So there's value there.

On the other hand, there could be some books that are half the price of some of the ones I just referred to and they may not do well because either the professor does not integrate the textbook into the course, so the student doesn't see the value, so it is always relative to the value that you're delivering.

But I think it's fair to say, it's always been price sensitive, and even more so over the last three to four years.

And part of that is linked what you in terms of piracy in the past, the metaphor I used is a leak in the boat.

The leak in the boat in the past has been used books and unauthorized copies of books, where literally students or groups of students would buy the book, go to a copy machine, make a copy and return the book.

We have been dealing with that as I said for a really long time.

With a whole host of online sellers as well as this growing issue of reimportation.

That being students from other parts of the world who have access to books at lower prices than in some other parts of the world, reimporting them back in and selling them for a profit.

I think the internet has certainly enabled that to happen more easily than it would in the past.

That is not a new phenomenon for us to deal with, but it certainly has accelerated over the last three years or so.

The way we are combating that is primarily with the products and services like Wiley Plus.

The reason call after call after call I keep emphasizing the performance of Wiley Plus is as I have said before I do think it will be an important part of our future.

I'm not suggesting that students will not gain access to print on paper textbooks in future but I do think what you are seeing is slow admittedly but steady acceptance of online delivery of instructional materials.

We are genuinely excited about that.

We think ultimately those are robust if you will in terms of the used book market, in terms of price value.

In terms of piracy just about every different way you can think about it.

And for those of you who may be new to the call, I want to say in terms of the economics of that business and my emphasis here on price value is that we are beginning to prove is that you can sell a service and I quote a service because it is more than words on a screen with Wiley Plus, that we can sell it for less than a traditional textbook package and we really do believe that we can generate more value for the student, not only because the price is lower but because of the interactivity, the ability to customize material for the students' particular learning needs, the ability to provide resources to professors for assessment, and so on and so forth.

So, we are very excited about it.

It is a lower priced product, which is again robust in this market, but you also get the benefit for shareholders and a company like ours lower working capital, higher cash returns on investment since you don't have the inventory sitting in the warehouse, and you don't have the returns that you obviously have in that print-on-paper textbook business.

So, it is a, it is a tough environment.

I would have to say in recent months we are seeing some up tick in that market that a year ago we didn't experience.

The student loan situation, I don't think this is as bad as some people wrote about, piracy is a growing effect, but the strategies against that having to do with technology-related products, I think is beginning to work.

I appreciate the color and response.

Thank you.

You're welcome.

And there are no further questions at this time.

I would like to turn the conference back over to you, Mr.

Pesce for any additional or closing remarks.

Thank you very much for your continued interest and support.

We look forward to speaking with you again in December when we will report our second quarter results.

Thank you very much.

That will conclude today's conference call.

We appreciate your participation.

Have a good day.