John Wiley & Sons Inc (WLY) 2011 Q2 法說會逐字稿

Hello.

Welcome to the John Wiley & Sons quarterly earnings call.

As a reminder, all calls are on a listen-only mode and there will be times for Q&A at the end of the call.

(Operator Instructions) Before introducing Will Pesce, President and Chief Executive Officer, I would like to remind you that this call is being recorded and may include 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 obligations to update or revise forward-looking statements to reflect subsequent events or circumstances.

Mr.

Pesce, please go ahead.

Welcome to Wiley's second quarter conference call.

I'm with Steve Smith, Ellis Cousens and Brian Campbell.

In a moment, I'll ask steve to provide an overview of Wiley's second quarter and year-to-date performance.

After Steve completes his remarks, we will respond to your comments and questions.

As you know, in September we announced that Steve will succeed me as Wiley's President and CEO upon my retirement at the end of this fiscal year.

Steve has been responsible for Wiley's three global businesses since he was appointed to his current role as Executive Vice President and Chief Operating Officer in May of 2009.

In addition, we have developed and implemented succession plans for STMS, Professional/Trade and Higher Education.

Steve Miron is leading our STMS business, Mark Allin has resumed responsibility for Professional/Trade and Joe Heider will succeed Bonnie Lieberman at the end of this fiscal year.

This leadership development and succession process has been managed in the same way we approached everything we do at Wiley.

That is, the plans were developed collaboratively and various options were considered thoughtfully and then we focused intensively on execution.

I'm pleased to report that the transition to Wiley's next generation of leadership has been smooth and orderly.

I have collaborated with this team for many years.

I have been personally involved with their development as leaders.

I trust them and I believe in them.

With that as background, Steve will present our results.

Good morning.

At the midpoint in the year, Wiley's revenue growth is tracking closely to our expectations.

The range of revenue growth in the second quarter while slower than the start of the year is against the backdrop of a very strong second quarter in P/T last year due to the timing of a strong front list and year-on-year inventory ordering patterns at a major account.

STMS revenue growth in the quarter is in line with calendar journal revenue growth of 3%.

Higher Education growth was against the lift and is consistent with industry growth.

Overall a sluggish US economy continues to have an effect on retail sales especially across consumer categories in Professional/Trade.

In the second quarter, driven by the decline in P/T, revenue of $442 million increased modestly on a currency neutral basis by 1% but declined 1% including the unfavorable effects of foreign exchange.

Adjusted EPS of $0.88 per share rose 3% but declined 4% including the negative impact of currency and after adjusting for an impairment charge recorded in the same quarter of last year.

On a reported basis, EPS grew 22%.

For the six months, revenue of $850 million increased on a currency neutral basis by 5% or 2% including negative FX.

Adjusted EPS for the six months of $1.60 increased 20% excluding the impact of currency or 17% including it.

Top line results, lower interest expense and a lower effective tax rate were partially offset by higher technology investment.

EPS increased 29% on a reported basis.

On a comparable basis to our full year guidance, EPS growth after six months stands at 15%.

This excludes the GIT impairment charge last year, the tax benefit from the change in UK tax rates this year and the effects of foreign exchange.

Year-to-date gross profit as a revenue was 68.8%, on par with prior year.

Higher STMS journal royalties were partially offset by better margins in Higher Education fueled by increased sales of digital products and lower production costs.

Our currency neutral basis, year-to-date operating and administrative expenses increased 4% reflecting increases in technology expenses due to Online Wiley Library and increases in pension and health-related costs partially offset by lower journal shipping costs due to print reduction initiatives.

Free cash flow for the six months was $23 million favorable to prior year, reflecting combined effect of increased cash earnings, lower pension contributions and calender year growth in journal subscription receipts, partially offset by the timing of journal subscription cash collection.

Net debt, long-term debt less cash and cash equivalents was reduced from prior year by $247 million to $545 million.

Days sales outstanding improved by two days.

Inventory decreased from a year ago as a result of higher bought volumes of P/T front list cooking books held in the prior year and lower Higher Education inventory due to the ongoing transition to digital product.

Now I would like to provide some information regarding the performance of Wiley's global businesses.

STMS revenue for the second quarter rose 3% on a currency neutral basis to $245 million but was down 2% as reported.

Higher journal revenue from production scheduling, moderate price increases, new businesses and increased advertising revenue was partially offset by lower journal reprint sales.

Book revenue on a currency neutral basis showed modest growth in the second quarter, reflecting higher online book sales and lower sales return.

Direct contribution profit for the quarter also increased 3% to $103 million on a currency neutral basis excluding the $11 million impairment charge in the prior year related to the GIT Verlag.

Increase reflects top line results and the effect of outsourcing initiatives in journal production.

Including the impairment charge, direct contribution to the profit for the quarter grew 16% on a currency neutral basis, direct contribution climbed to 4% on an as reported basis.

For the six months, STMS revenue increased 5% on a currency neutral basis to $474 million, but declined 1% including the adverse effect of foreign exchange.

Adjusted direct contribution to profit for the six months increased 6% on a currency neutral basis but decreased 2% to $197 million including FX.

Adjusted direct contribution to profit excludes asset impairment and restructuring charges of $11 million in the prior year.

It is still early in the calendar year 2011 journal subscription renewal process and we're working closely with our customers on a large number of significant license renewals.

To date, we have successfully negotiated approximately one-third of our full year, full [consortia] subscription and license revenue and early indicators are in line with our expectation that growth rates will be similar to those experienced in calendar year 2010.

We have completed negotiations with members of several large consortia customers such as NERL, the NorthEast Regional Library Consortium, CDL, California Digital Library, CAUL, the Consortium of Australian University Libraries, JANUL, Japanese Association of National University Libraries, and CALIS, the Consortium of Academic Libraries in China.

In aggregate, the value of these licenses is growing in line with our expectations.

By region we are experiencing higher growth rates of growth in Asia Pacific, especially in Australia and Japan where our customers are benefiting -- are experiencing the benefit of favorable FX rate.

While we expect negotiations to be protracted in some European countries, particularly in the UK with the addition of a major new society agreement has delayed the start with renewing negotiations with some customers.

In the Americas we expect to see continued migration of customers to a combined Wiley-Blackwell license and anticipate growth rates more or less consistent with prior year.

For the six months, STMS book sales are running 12% above prior year on a currency neutral basis including the benefit of significance of online book sales of Saudi Arabia consortium reported in the first quarter.

Print sales are holding up well across all regions.

In the second quarter, STMS signed new contracts with societies to publish 10 new journals including a five-year agreement to publish three journals on behalf of The Wildlife Society.

STMS renewed or extended contracts to publish further 10 journals while only one journal agreement with modest revenue was not renewed.

Wiley Library which launched on August 9 experienced significant increase over the prior year in the number of visits and downloads.

It has become the second most visited academic publisher website in the world.

Access to full-text HTML for month of September 2010 increased by 56% over prior year while access to full-text PDFs increased by 15% in the same period.

Market reaction has been very positive.

One librarian review said, "I think Wiley did an incredible job with the interface.

It looks great and offers a lot.

It is the best-looking interface I have seen in a long time." Wiley enabled free access to all health sciences journals for health workers in Pakistan in support of the flood relief effort.

The initiative, part of the Emergency Access Initiative from the National Library of Medicine, allows immediate online access for a set period following an incident.

In early 2010, Wiley participated in a similar effort in HAITI.

Second quarter Professional/Trade revenue declined 6% versus prior year currency neutral basis to $113 million.

Growth in business and professional education was offset by a strong cooking front list in the prior years, higher than planned returns and later publication of this year's front list.

Correspondingly, this had a negative impact on our consumer business.

Outside the US, the UK and Germany continue to grow nicely while sales of Australia were flat mainly due to softness at some retail accounts.

Direct contribution to profit fell 16% to $29 million for the second quarter, reflecting top line performance and lower margin due to sales channel mix.

For the six months P/T revenue was up 2% over the prior year period on a currency neutral basis.

Year-to-date direct contribution to profit of [$51] million was flat on currency neutral and reported basis reflecting the effect of the top line performance.

Strong performances outside the US, include the UK which was up 14% over the prior year, Germany up 29% and Asia up 19%.

These results helped to offset the shortfall of 1% in the US.

On a currency neutral basis, business program revenue advanced 4% in the quarter and 8% year-to-date with accounting and Pfeiffer training resources performing well.

Consumer declined 15% in the quarter taking the year-to-date decline to 10%, mainly as a result of lower sales of Cooking, For Dummies and travel books.

Education grew 13% in the quarter and 25% for the six months fueled by the best seller "Teach Like a Champion" by Doug Lemov.

Technology declined 13% during the quarter but grew 6% year-to-date against the strong prior year driven by strong software releases.

Architecture was down 8% in the quarter and down 4% year-to-date while psychology was flat in the quarter but up 8% year-to-date.

Sales of eBooks continue to surge more than doubling in the quarter and six months to $6 million and $10 million, respectively.

At this point virtually all our P/T front list is available in an eBook format and significant numbers of back list titles are being converted in time for the holiday season.

Global education continued a strong FY 2011 performance with solid results in the second quarter, FY having second quarter revenue of $84 million reflecting year-on-year growth of 8% excluding the effects of foreign currency.

Year-to-date revenue of $163 million is 10% ahead of prior year on a currency neutral basis.

Now, for the US, Higher Education year-to-date sales are running 5% ahead on a performance basis in Canada, 9% ahead in EMEA while Australian school sales are up 15% year-to-date.

The FY 2011 year-to-date growth has been achieved in nearly all subjects with particular strong growth in engineering, computer science, and the sciences.

Global billings of WileyPLUS of $22 million in the first half of the year reflect an annual growth of 9%.

Digital-only sales account for approximately 40% of total WileyPLUS sales.

Sales from WileyPLUS, eBooks, digital content sold directly to institutions, binder editions and custom publishing grew by 29% year-to-date and now represent 32% of global Higher Education sales.

In the second quarter we saw growth in a proprietary school market in both digital and print product.

Digital products and the textbook rental market continue to grow.

Gross profit margin improved by $12 million year-to-date excluding the effects of foreign currency with a gross margin of 68.3%, reflecting the improvement of 1.4 percentage points over prior year.

Increased volume, efficiency in manufacturing and higher digital-only revenue continue to drive the improvement.

Direct contribution to profit improved 14% from prior year to $32 million or 13% on a currency neutral basis due to top line growth and gross margin improvement, partially offset by increased headcount, pension and other benefit costs.

For the six months direct contribution to profit increased 19% on a currency neutral basis versus prior year.

Top line growth and improved gross margin from higher digital revenue drove the results.

On a currency neutral basis, engineering and computer science revenue increased 14%, science revenue was up 19%, business and accounting increased 5%, mathematics was up 4% while social science sales declined 3% against the same quarter prior year.

The most significant market trend this quarter was an increase in rental programs.

Estimates of the rented textbook share for the total course material market ranged from 15% to 30%.

At institutions that offered the rented textbook as an option, the focus is on the higher enrolled introductory courses that may use the book again, which is likely that industry growth metrics for 2010 include some one-time outlet from sales of the rental market.

We expect to learn more about the long-term impact and sustainability of the rental model as we move through the second semester [adoption] ordering period in Wiley's third quarter.

In conclusion our performance at mid-year is consistent with our expectations.

We remain focused on the importance of long-term relationships with our stakeholders and the needs of our ever-changing demands of our customers.

We continue to make progress in the transition to digital business models.

We are making significant investments in the future growth and success of our business while working to deliver on our financial commitments for the balance of fiscal year 2011.

Based on our mid-year results, market conditions are leading indicators.

We reiterate our fiscal year 2011 guidance of mid-single digit revenue growth on a currency neutral basis.

Excluding the effect of foreign exchange and the UK deferred tax benefit, we continue to project EPS growth of approximately 10% from fiscal year 2010 adjusted EPS of $2.58.

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

(Operator Instructions) First up is Drew Crum with Stifel Nicolaus.

Thanks.

Good morning everyone.

I have a number of questions on the Professional/Trade segment.

First, can you talk about the performance in the quarter given that you had a strong fiscal 2011 -- I'm sorry, 2010 performance which I would assume would make its way into the back list which I think is about two-thirds of your revenue?

And thus, with the positive commentary coming from your Investor's Day on the front list I would have thought that the growth would have been stronger in the quarter.

Can you just comment on that?

Drew, this is Steve.

So you are right the backlog accounts for about two-thirds of our revenue overall.

I think you are also aware that Professional/Trade is made up of about 75% revenues coming from Professional categories and the other 25% coming from consumer.

The profile of the consumer is slightly different overall.

On a quarter-by-quarter basis when we compare to the second quarter of fiscal year 2010, the big difference there is the very strong front list of consumer, particularly cooking titles in the second quarter of last year.

This year we have a strong cooking front list that will have an impact on the holiday season sales but the timing of those front list releases is slightly later, with more of that coming in the third quarter.

In addition, some of the front list that we sold in the second quarter of last year will continue to fuel back the sales this year during the holiday season, given that obviously, holiday season is a key time for cooking.

The other factor that has been played there, particularly in the sales of our consumer line relates to changing inventory patterns on some key accounts.

In the second quarter of fiscal year 2010, we saw a significant gearing up of inventory at some accounts.

This year the inventory that's out there in the channel reflects more normal patterns and we expect to see that to have an impact again on Q3.

Okay.

So, Steve, so I understand correctly, as far as retail inventories, are concerned, how would you describe them going into the quarter, are they up?

Down?

Flattish?

I think in your prepared remarks, you noted a weak retail market.

Is that more to the inventory or is it more on the consumption side of -- on the consumer?

So we watch on a weekly basis, we watched sell-through at all of our key channels and the overall news on sell-through was -- I think it is early in the holiday season is not discouraging and thoughts of the week after black Friday, we showed that there is some growth in sell-through for key retail channels.

The current inventory balance in the market is definitely lower than it was a year ago at some key accounts.

When we put two and two together, we think that has had an impact on our second quarter but doesn't change our view of the full year materially.

Fair enough.

One last question on Professional/Trade.

Your Investor Day, you guys talked about essentially sustaining the economics with the eBook, the digital format relative to the physical format.

Has that continued into the second quarter?

Are you seeing the same trends into the third quarter as well?

There are a couple of things going on there, Drew.

The growth in eBook sales as I mentioned in my remarks has been pretty phenomenal but it is coming off of a relatively low base.

I think I quoted $6 million for the second quarter and $10 million year-to-date, doubling versus the prior year.

We are seeing that sales of eBook are accretive to margins overall.

So on an inventory cost of sales basis, we see some improvement from that.

At the same time, we are investing in digitizing our back list and creating eBooks there and that had a short-term impact on some composition and amortization and just reflecting the cost of creating the eBook versions that we will fuel ongoing revenue growth for the rest of the year.

Got it.

Shifting gears to the scientific journals business, it looks like the impact from foreign currency was much more pronounced for this segment than the entire business.

Can you explain a what happened there?

I want to make sure I understand the commentary around the journal subscription renewals being up year-on-year comparable to what you saw in calendar 2010.

Would that be a 3% to 4% growth number?

Drew, this is Ellis.

I can handle those questions.

First on the exchange question, you're right.

We expect an exchange -- nearly all of that was coming out of the STMS business journals and otherwise.

As you know, that is our most global of businesses and we bill in multi-currency throughout the world based on where the customer resides.

It is not exactly entirely true in Asia but certainly throughout Europe and North America, that is the case.

So the effect of currency, I'll give you some numbers here, was 12.5 -- or $12.4 million negative in the quarter.

That's a bit less than what it was in the year.

So we are $27.7 million negative in foreign exchange over the six months.

So again, $12.4 million in the quarter.

The weakness in the dollar is beginning to temper -- I know that your comments, beginning to temper some of the effects of foreign exchange.

In fact, in Professional/Trade there is negligible foreign currency effects and in Higher Education, it's actually a positive effect coming from the school business in Australia, where the Australian dollar is strengthened against the US dollar.

It is a mixed bag in the effect that is coming out of the STMS business basically again from a distribution of customers and where those titles are published out of.

There is a pretty good balance of publishing location of titles in the UK and Germany, outside of the US.

So that's the key driver there.

In terms of the journals renewals process, our read is as of the end of November, obviously, we are in a couple of weeks in December as well but we have really good information throughout November as Steve said.

It is progressing well relative to prior year.

Remember, last year we had a pretty good year.

The problem year was 2009.

So 2010 was a good year.

We had everything teed up relatively early in the cycle that half began this year so we are in good shape other than one society journal that Steve did mention that will reflect some UK repricing.

But that's a minor point quite frankly.

It is a delay, it's not an issue from -- in terms of total realization of subscription revenue so feeling good about our progress.

We are up over prior year in November.

But it is, quite frankly, again, still early.

As Steve said we are about one-third of the way through, so still two-thirds yet to go.

Where we sit, it is a nice position to be in, so one-third done.

At this stage of the year and up over prior year up by a bit and having a good prognosis sustains for the rest of the year as well.

Okay.

Last question for me.

Can you offer some guidance concerning the various line items within shared services?

It has been pretty consistent at least on a percentage change basis for both the first and second quarters for the various items.

Should we expect that through the balance of fiscal 2011?

There will be a little bit of shifting in the balance of the year and I will talk to three pieces that relate to that.

The biggest being Online Library.

As Steve said and you recall from our previous conversation in the first quarter that Online Library launched in August.

Just to be clear.

Over the course of the development of Online Library which replaced InterScience, it was a combination of capitalizable cost.

Most of the development effort was able to be capitalized although a fair amount of it was expensed.

So I will just give you a rough feel.

Roughly about 30% or so on average of our effort in developing something like Online Library is expensed.

That is things like project management, planning or mapping out what deliverables are and business modeling and so forth.

Development effort is about 70% of the (inaudible) of the undertaking so that is capitalized.

So beginning in August or during the course of the first quarter, so late in the first quarter -- second quarter, rather, sorry -- we began to depreciate what we had capitalized in terms of cash investments over the prior two years or so in terms of developing Online Library.

So in the second half of the year, we will have a full year of depreciation plus some continuing ongoing investment in Online Library well.

Like this to say, and it is absolutely true.

They are not projects that have a beginning, middle and an end.

They do have a beginning, that's for sure.

The beginning of Online Library started by winding down InterScience.

The middle is a very large middle and there is not an end until there is a successor system being developed, i.e., Online Library replacing InterScience.

We continue to invest and develop new capabilities and deliverables in Online Library.

So that investment and roughly that's a split of 30/70 or so continues.

Having the system up -- the platform up, so to speak, there is continued investment to bring new opportunities to generate more society business, generate some online advertising opportunities, online books and other capabilities that continue to drive usage which then drives, as you probably know, journal licensing and renewals and title by title.

So clearly, we are driving towards supporting growth in both our online journals business but also our online book business and advertising as well.

That's one piece.

That is a long answer to that one piece.

The other two will be shorter.

But content technology is a continuing investment.

We continue to ramp that up.

That is something that continues to grow in terms of size of investment and support.

Not only the large assistance and applications products like Online Library and WileyPLUS but a whole range of other opportunities in our digital strategy to customers across all three businesses so there is continued investment there.

So that continues to ramp up and that is a good thing to say that all of our content is being -- is enabled from a digital perspective to serve up to customers in different business models to support our web development strategy.

The last piece of it that is relatively -- there's a lot of other pieces but I'm pointing to the biggest three -- is on the customer data management, customer relationship management side.

We have talked to this in the past.

Much of what we do on the web, we have opportunities to better market merchandise and deliver content and products to -- and services to our customers on a more direct basis.

To be able to do that with a greater -- better outcomes and responsiveness, we need a better customer data management tools and those are things that we continue to invest in.

We had very little investment in that other than accumulating data, let's say, two or three years ago.

Today we are investing in tools that allow us to manage our relationships with customers more directly and sell some of those products more aggressively.

Those are just pointing to three things that are ramping up over the course of the year and off into the future.

As you know, some of those things we have certainly lots of revenue associated with Online Library.

We have significant revenue associated with some of the things we do in content technology and customer data management, customer relationship management.

The revenue tends to lag a bit because you need to develop the capability first to be able to essentially get the revenue benefits associated with that.

Okay.

Thanks guys.

(Operator Instructions) Next up is Dave Lewis with JPMorgan.

Go ahead please.

Hi guys.

Good morning.

I will continue with the STMS.

Just couple of quick questions there.

The usage trends you are seeing on Online Library, can you just comment on where they are coming at versus your expectations?

Dave, this is Steve.

So we anticipated Wiley Online Library because of certain functionality there that makes it so much more discoverable would drive rapid increases in usage.

We look very closely at usage data on a month-to-month basis.

I think I reported back at our Investors Conference, 300 million for text downloads per month.

I talked a little bit just now about some of the increases that we are seeing.

Of course, it is still pretty early days but as we look through October and November, we are actually pretty pleased at what we are seeing in terms of usage growth and we will be undertaking some marketing strategies really aimed at driving up usage.

Because we see in whatever licensing or pricing models that may evolve in the future, driving increased usage is robust.

Just a -- somewhat of a technical element associated with that, Dave, as well as that -- InterScience, the method by which Google used to index content, InterScience wasn't well suited to allowing Google, for example, to crawl through the InterScience to enable indexing of the content in the way that it was easily discoverable.

A lot of the reference into InterScience then and now Wiley Online Library now actually comes from outside of Online Library, so it comes from places like Google.

The ability to index the content, the fluidity of it -- allows Google to index our content much more readily.

It yielded in search results more readily so to speak.

So that in itself drives a significant amount of usage.

We would expect to see usage trends up related to the launch of Online Library irrespective of the quality of content, which continues to increase in terms of both scope and quality.

It is a number of dimensions driving in a very positive direction to drive usage overall.

Thanks.

Last one on STMS.

I believe the stat was 129 partners added between 2008 and 2010 and of course, you continue to add them each quarter.

But have those -- just so we can get a perspective on the timing of -- I know there's a lag between when they hit revenues but that was 129, what percentage roughly with -- are recognizing revenues right now or/and if not, what should the timing for that be?

Dave, this is Ellis again.

In terms of -- I will speak to the all of the amounts, I will give you as a general rule how that works.

Certainly contract with societies that are renewed, the revenue -- there is a continuum of revenue that continues within our existing licensing model and title by title basis.

In terms of signing up new society journals that were previously were published elsewhere, there is certainly a lead time associated with that, so there is a setup time.

Those negotiations run over the course of the year and they start at different points in time during the year.

However, they would not be reflected in our licensing until we are at the point of negotiation of a new license or in terms of aggregating or shifting the license out of the former publisher's license model or title by title into our own.

I can tell you that it is not the perfect process to do that, that customers do look at occassionally, total value of license.

That is part of the negotiation in terms of on an annual basis or in multi-year contracts over a period of time.

So it is simply not unplugged on December 31 and plug into Wiley on January 1.

There is no hard and fast rule.

Typically around those license negotiations, one would expect to see that which one negotiated over the course of the prior year would begin to factor into the current licenses.

so again, but It is not as perfect and simply [arithmetic] as that.

Great.

Thanks Ellis.

Switching to Higher Education, just a couple of ones here and I'll hop off and probably jump back on.

I believe in the press release, you said that digital-only represented 48% of revenues for WileyPLUS moving up.

From what I think was in the 35% range last quarter.

What drove that?

Or the increased use of the digital-only versus the packaged buy which had been the trend in previous years.

And then the second half of the question with regards to WileyPLUS is believe you have a new version rolling out in calendar 2011, where you will be able to circumvent the sale through the professor directly to students.

How big of a catalyst do you think that is going to be towards driving the business?

Thank you.

Dave, let me take the first of those.

I actually referenced to growth in digital-only as being approximately 40%.

We are not at 48% at this point.

Nevertheless, (inaudible) I think it is against prior year.

There are a number of things that may be fueling the move to digital-only which frankly, we welcome.

It has always been our strategy that as we drive the benefits of WileyPLUS for our customers, that one of the things -- which is whether a student buys a new next book, a rented textbook or buys a used textbook, we still have an opportunity to sell a student something, where the professor is using WileyPLUS within the course.

Our validation rights which we report on periodical Lee have grown from the mid-60s to 75%.

The other thing that's really an encouraging sign for us, frankly, is that all of the WileyPLUS (inaudible) now have validation rates which we record on periodically have grown from mid-60% last year to about 75%.

So that's three out of four students who are buying our WileyPLUS registration code are activating that registration and using it.

That is a strong sign of our student engagement and the real pull of WileyPLUS for both teachers and students.

We would expect that percentage of digital-only to continue to move forward in years ahead and that would be consistent with our strategy because we believe there is a lot of value in that digital version.

Dave, with respect to 5.0, we are working towards a schedule that has us launching 5.0 in for academic year 2011.

That's a goal that we are working towards and so we are still anticipating that.

But there is not certainty with respect to that yet.

So that is our goal.

With respect to what that will bring us from -- to address your question about bypassing the professor.

I think something like that -- direct to students.

I think maybe an extrapolation of what I'll describe is it would allow for WileyPLUS on a stand-alone basis which would allow students to use it irrespective or not whether a professor adopts it and it is can be used across classroom, or professors or however one wants to describe it.

At the end of the day the principal driver is going to be a professor adopting WileyPLUS and requiring it within a classroom and students therefore using it and finding the benefits associated with it and moving on from there.

So it would provide for an opportunity for stand-alone usage.

But I wouldn't overplay that quite frankly at this stage.

It may provide for further opportunities down the road with respect to how we market merchandise and use WileyPLUS.

But at this stage it is tempered expectations around that.

Thank you.

(Operator Instructions) We do have one more coming up from Dave Lewis.

Please Go Ahead.

Okay.

Didn't expect to be back so soon.

Ellis, can you please give us guidance on tax rate?

I think it was a little bit lower than I had expected during the quarter.

Yes, it is a correct observation.

We were -- as you know, I think over the course of the year and guidance early in the year, we talked about a tax rate around 30% or so.

I think we will be close to that, maybe a bit under that.

I will say that the tax rate in the second half of the year will be higher than it was in the first half of the year, particularly looking at year-on-year the tax rate effect last year.

There was an unusual item in the second half of the year having to do with -- I won't get into the details of it but a true-up with respect to our wheel.

Tax deductions with [WEIHL] which a UK tax credit that we've talked about in the past.

So there was a benefit last year that won't repeat this year.

I expect over the course of the year we should end up roughly what the full year projection was, maybe a little under that 29.5% or so.

Depends on the mix of earnings inside and outside of the States.

More heavily inside the States, higher tax rate.

More outside the States, lower tax rate.

Thanks Ellis.

A follow-up related to cash flow and priorities and expectations for this year.

Is there anything you are trending ahead of last year at this pace?

Obviously, second half is a bigger cash flow portion of the year for you guys.

Curious is there a possibility we can see share repurchase in the second half?

Very good question, Dave.

In terms of the cash flow, first half, second half as you correctly note, we are at the front end of our journals' renewal process and therefore, cash collecting associated with our journal business.

Obviously there is lots of other cash that comes out of the other parts of the businesses forms a base of cash with a more cyclical elements associated with cash has to do with the journal subscription renewals.

In about a week or two, we begin to get significant cash in from the agent side of that.

So these are customers who pay through agents rather than directly through Wiley.

That cash will begin to ramp up very significantly through the second half of December into January and February.

The pattern of that should follow our success with respect with to journal renewals.

We've talked to some growth in that commensurate with the prior year growth.

One would expect growth in cash associated with that as well.

I do see positive effects on cash year-over-year, second half to second half.

How we deploy that cash is the crux of your question, having to do with the distributions of that among opportunities like share repurchases, acquisitions, I will extend that into that, dividend policy and practice.

We look at all of those things as we've discussed in the past.

We certainly talked about an approval of a share repurchase program by the Board.

The last time we spoke I think was at the time that was the last time we spoke -- by the time we got that approval and got into it, I think to note is that it is only about five weeks of open window when a Company or at least this Company can't because of our policy in terms of open and close windows around closing out a quarter and the period in which we must be quiet and silent when we announce earnings like we do today and a couple of days as we settle in.

The FDC provides a certain grade of guidance.

What that yields to us is about five weeks per quarter, it varies a little bit based upon whether it's around the end of the year or three quarters before that.

So then we have five weeks and we got a late start because when the discussions we have with our Board.

Our Board meeting occur after these earnings calls.

So even though the window might be open, we're not ready to jump into it -- through it so to speak.

The expectation is certainly that given the timing of windows opening and closing, there would be greater opportunity at least to engage in share repurchase.

Certainly cash is not a hold back as we have discussed before in the last few quarters at least is that we are comfortable with our levels of debt and our borrowings.

Our marginal cost of borrowing is quite low.

Certainly paying down debt further is still an option but other opportunities outside of paying down debt have begun to look quite attractive.

Acquisitions to the extent we can make those happen so to speak would be certainly our first line in terms of use of excess cash, share repurchase and dividend policy and practice being in the mix as well.

As you've all -- as I have noted, I think you have correctly taken on board allowing that cash to accumulate on a balance sheet.

It is not something we look favorably towards.

Certainly mobilizing cash to a physical location in the United States where we can use it, it's certainly something that affects the timing of the use of cash.

But that has more to do with a reduction in debt than it does have to do with share repurchase, dividend policy or acquisition.

So not sure if -- hopefully, I answered your question in all of that.

Absolutely.

Thanks Ellis.

And then the final one for me is I'm wondering if you give us your thoughts on Higher Education outlook for calendar 2011?

If it can sustain the momentum we have seen based on the trends that you are seeing globally?

David, it is Steve.

Looking at where we stand today, obviously we've come up to really good growth years in that segment.

We, at this point, don't have a really clear handle on how much of this year's growth was fueled by gearing up in rental programs and obviously we also don't know at this point what is going to happen with regards to the broader economy and employment which has been a big driver of enrollment growth over the last two years.

Our expectations are that probably the growth will not be at the same level it has been in the last two years.

But we are still looking very closely at that and in order to make sure that we adjust our expectations accordingly .

That's great.

Thanks Steve.

Ladies and gentlemen, that was our final question.

I will turn the call back to Mr.

Pesce for closing remarks.

Please go ahead, sir.

In closing, I want to reiterate that Wiley's financial results for the first half of the year are as we expected.

We are keenly focused on calendar year 2011 journal license renewals and STMS, the holiday season in Professional/Trade and the second semester in Higher Education.

These are the major drivers of our top line performance for the balance of this fiscal year.

If we achieve our full year revenue guidance, we will meet or exceed our full year EPS guidance.

We are looking forward to speaking with you again in March.

Best wishes to you, your family and friends for a happy, healthy, and peaceful holiday season.

Thank you.

Thank you very much.

This conference is now concluded.