John Wiley & Sons Inc (WLY) 2016 Q4 法說會逐字稿

Good morning and welcome to the Wiley's fourth-quarter earnings call. As a reminder this call is being recorded. At this time I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead, sir.

Thank you, Jim. Good morning and welcome to Wiley's fourth-quarter and FY16 earnings call.

Before we begin I'd like to just remind you that 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 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.

For those preferring to listen to the call over the phone but still want to view the slides we recommend that you click on the gears icon located on the lower portion of the left-hand side window and select live phone. This will eliminate any delays in viewing the slide transitions as well as remove any potential background noise if you prefer to ask a question. After the call a copy of the presentation and a playback of the webcast will be available on our Investor Relations page. I'll now turn the call over to Mark Allin, Wiley's President and CEO.

Thank you, Brian. Good morning. In addition to Brian I am joined by John Kritzmacher, CFO and Executive Vice President Technology and Operations. I'll speak to business performance and John will follow with an update on operations, balance sheet, and cash flow. We will both then take you through our outlook before I open it up for questions.

Please note that I'll be excluding the impact of foreign exchange and the transitional non-cash impact of shifting to time-based journal subscriptions when commenting on all variances. Foreign exchange was a significant headwind in FY2016. For the full year the unfavorable impact to revenue and EPS was approximately $61 million and $0.13, respectively. The impact moderated in the fourth quarter, however, with a $4 million revenue hit and a $0.01 EPS gain.

As anticipated, both revenue and adjusted EPS was flat on a constant currency basis and excluding the transitional impact of time-based earnings. As a reminder, Wiley transitioned from issue-based to time-based digital journal subscriptions for calendar year 2016 to simplify the contracting and administration of these agreements.

For the year, the adverse transitional impact of this change was $37 million of revenue, $32 million in operating income, and $0.42 of EPS. The change did not impact free cash flow. For the most part, I will be excluding this transitional impact in my discussion, referring to results on an operational basis.

It was a year of characterized by investments. We continue to invest in the digital transformation of our publishing business and in our new solutions businesses. We completed the first phase of our ERP deployment to enable improved efficiencies and cost savings.

And we commenced the transformation of our headquarters which will reduce our footprint and enable improved productivity. We outsourced our US distribution operation to Cengage Learning. And we completed the consolidation of our books business. In summary, we continued to make moves that will benefit us in the long run.

At the same time, our foundation remains strong. Our journals business, making up nearly 50% of our revenue, continues to show steady operational performance, up marginally for the year on an operational basis. This includes a $3 million trailing adverse impact from the 2014 Swets Agency bankruptcy.

Billings for calendar year 2016 renewals are showing 1% growth with 95% of business closed; while our society business had a small positive gain after a net loss last year. I'm proud to say that Wiley, one of the oldest publicly traded companies in the US, is now a digital business, with nearly two-thirds of revenue coming from digital products and services.

Finally, cash flow met expectations with cash from operations flat to prior year and free cash flow down, as anticipated, due to investment in the ERP deployment. Cash generation remains a long-term strength of the Company, and we will continue to return cash to shareholders in the form of dividends and share repurchases while retaining some flexibility for strategic acquisitions.

For the year, revenue growth on an operational basis was even with prior year, with steady growth in journals and double-digit growth in our solutions businesses offsetting a difficult year for education book publishing and more modest revenue declines in professional and research books. With revenue even from an operational standpoint, higher expense related to our ERP deployment, and continued investment in growing our solutions businesses, adjusted EPS was flat at $2.70. I will touch on segment performance later on in the presentation.

Much of the impact from the shift to time-based subscriptions came in the third quarter. For the fourth quarter it saw a remaining revenue impact of $8 million, operating income impact of $8 million, and adjusted EPS impact of $0.10. Again, all of this is transitional and does not affect free cash flow.

For the quarter, revenue grew 1% excluding the time-based shift and the impact of foreign exchange. 2% growth in journals and double digit growth in online program management, corporate learning and WileyPLUS offset declines in books, particularly textbooks. Adjusted EPS for the quarter was down 6% operationally due to technology expense and investment to achieve greater scale and strengthen our market positions in online program management, and corporate learning.

In the research segment, fiscal year journal revenue was up marginally versus prior year with continued double-digit growth in author-funded access, partially offset by the trailing $3 million impact of the Swets Agency bankruptcy. Other journal revenue, which includes licensing, reprints and backfiles, was flat as two large backfile sales in consecutive years offset each other.

Calendar year 2016 journal subscription billings were up 1% as of the end of April, with 95% of targeted business closed. In terms of our society business, Wiley had an annualized revenue gain of $1 million by signing 6 new society contracts in the calendar year with combined annual revenue of $12 million versus 18 not being renewed worth $11 million in annual revenue. The $1 million revenue gain compares to an annualized revenue loss of $4 million in calendar year 2015. Additionally, calendar year 2016 includes renewals of 87 contracts with combined annual revenue of $54 million.

Research books and references revenue declined 1% with print declines offsetting strong digital book sales. As a reminder, we are integrating our various books businesses to achieve operating synergies and increase focus on areas of growth.

Finally, for the year, adjusted contribution to profit, or adjusted CTP, rose 2% on an operational basis driven by restructuring savings and product mix. For the quarter, research revenue and adjusted CTP were flat on an operational basis.

For the year, professional development revenue rose 2% primarily on the strength of our corporate learning and online test preparation businesses which saw growth of 31% and 18%, respectively. Corporate learning saw growth from new and existing corporate clients, notably in France and the US. We continue to feel very good about the market opportunity for workplace learning and our position in the space.

Our online test preparation and certification business also had an exceptional year of growth with CSA, CMA, CPA and GMAP products all contributing. Books revenue declined 4% from both market pressures and selective portfolio actions. As noted, we are combining the professional books business with our other books businesses to improve efficiencies and optimize the portfolio.

The assessment business rose 1% with solid post-hire assessment growth offsetting a managed decline in pre-hire assessment revenue following portfolio actions to optimize longer-term profitable growth. Finally, adjusted contribution to profit for this segment improved significantly, growing 84% or $34 million over prior year from a combination of restructuring savings and significant efficiency gains. For the quarter, professional development revenue and adjusted CTP were up 3% and 71%, respectively, excluding the impact of foreign exchange.

Education had a difficult year in a more challenging market environment, with revenue down 2% of constant currency. Textbooks were down 15% and custom materials were only up modestly, reflecting the impacts of rental, lower student enrollments and some channel disruption.

Digital course work flow for WileyPLUS growth of 10% was driven by solid performance in accounting and engineering programs. Online program management revenue grew 18%. Wiley added four net new programs this quarter for a total program count of 226, up from 200 programs at the end of last fiscal year. Our total partner count stands at 38 and we have a pipeline of partnership opportunities as we enter FY17.

For the year, the OPM business was dilutive to our earnings by $0.16. And while we expect that to improve considerably in FY17, we do not expect OPM to be accretive to earnings in the near term, as we continue to invest for revenue growth to achieve greater scale and long-term profitability.

Adjusted contribution to profit for education declined 17% for the year, reflecting lower print textbook revenue and long-term investments in new online programs. For the quarter, education revenue was up 1% and adjusted CTP improved 6%, both excluding the impact of foreign exchange. John will now take you through our financial position.

Thank you, Mark. Adjusted shared services costs for the year rose 6%, driven by a 13% increase in technology investment, primarily in our multi-year ERP deployment and IT infrastructure. ERP and related systems operating expense was approximately $22 million this year as compared to $9 million in the prior year, representing an EPS impact of $0.16 per share. In FY17, we expect ERP and related systems investment to increase by roughly another $0.05 per share and then lessen considerably in FY18.

Other administration costs rose 13% or $11 million. This was mostly due to discrete employment related costs and higher legal provisions. Those legal provisions were mostly recorded in the third quarter and related to certain copyright matters.

In the fourth quarter we completed the outsourcing of our US book distribution operation to Cengage, representing another important shift toward a more variable cost model for our print products. For the year, in the quarter, Wiley recorded restructuring charges of $29 million and $8 million, respectively. As anticipated, and noted on our last quarterly earnings call, most of the fourth-quarter charge related to real estate liabilities associated with the closure of our US distribution facility in Somerset, New Jersey.

Moving on to our balance sheet, we amended our revolving credit agreement in the second half of the year increasing its capacity to $1.1 billion and extending its term to March 2021. The facility will continue to be used for general corporate purposes including seasonal operating cash requirements and strategic acquisitions.

Net debt to EBITDA on a trailing 12-month basis was 0.7 at the end of April as compared to 0.8 at the end of last year. The strength of our balance sheet and cash flow continues to position us well for prudent investments in the execution of our strategies for long-term profitable growth.

As expected, cash from operations was flat to prior year at $350 million. Free cash flow was $219 million for the year as compared to $247 million in the prior year, driven by $25 million of incremental CapEx related to our ERP deployment and IT infrastructure.

The anticipated benefits from the ERP deployment include improved efficiencies and cost savings, particularly in shared service areas like finance and technology. As a reminder, we expect to see $25 million in OpEx savings in FY18 as we move to a more competitive cost structure enabled by our ERP investment.

Our headquarters office transformation got under way in the fourth quarter. We are constructing a more productive and collaborative work environment in support of our ongoing shift to digital knowledge and services. Our new design will also enable us to reduce our Hoboken office footprint by two floors, resulting in significant operating expense savings starting late in FY18.

Meanwhile, we deployed $70 million in the year to repurchase 1.4 million shares at an average per share cost of $48.86. 747,000 shares remain in the current share repurchase authorization. Last June, we raised our dividend for the 22nd consecutive year. The next annual dividend review will be conducted at our Board meeting next week. I'll now pass the call back to Mark.

Thank you, John. While our foundation remains strong, there is further work to be done as we transition the business to being a provider of digital products and services. Our journals business continues to provide for our long-term success as we benefit from a leading market position, expansion in global R&D spend, and growth in global content usage and authorship. But the market has also been limited over time due to prolonged budget constraints in a mature global market.

Going forward, we will invest in the platform and capabilities that will make our research content even more valuable to the millions of users who already access it. We will publish more material and continue to build authorship in developing countries and globally. We will launch new services that integrate our databases with analytic software, taking advantage of our position in scientific research.

At the same time, we aim to increase scale as a learning business to take advantage of the worldwide demand for high-level professional knowledge and skills, a result of knowledge-based economies continuing to evolve. We believe that our strong brand equity, combined with the favorable opportunities from the shift to online platform and a developing fragmented market, bode very well for us.

To that end, we will continue to invest in our current solutions businesses to exploit these opportunities and make smart acquisitions that will build scale and fill in gaps. However, our near-term leverage from revenue growth in the solutions businesses continues to be muted by our investment to achieve greater scale and long-term profitability in those businesses. While we will see substantial improvement in terms of their negative contribution in FY17 compared to FY16, they remain materially dilutive.

Sustained market declines are now evident in many of our book publishing markets and we are not immune. Our objective is to make our books business smaller as we focus our portfolio on high-value digital learning and reference content. We will review our portfolio and make the structural improvements necessary to achieve revenue and profitability goals, and we'll update you as we move forward in this process.

We will continue to move to a more variable cost structure, as you saw with the recent outsourcing of our US distribution operations to Cengage Learning. In short, we will do what it takes to mitigate the long-term book decline and optimize the portfolio for improved performance over time.

We will continue to focus on improving our overall cost structure. Our first order of business is to realize the targeted $25 million run rate savings from shared services in FY18, a result of competitive benchmarking enabled by our ERP investment. We remain on schedule to do that.

Additional long-term savings will come from a reduced footprint and floor consolidation enabled by our headquarters transformation. But there is more work to be done and we look forward to updating you on our progress. John will now take you through our fiscal year guidance.

Our outlook for FY17 is operationally for revenue to be flat and adjusted EPS to be down by mid single digits, excluding both foreign exchange and the favorable impact from shifting to time-based journal subscription agreements. Please note that the impact of the shift to time-based journal subscriptions will be additive to reported FY17 revenue and EPS by approximately $37 million and $0.42, respectively.

As you can see in this table, the operational revenue projection anticipates marginal growth in journals and double-digit growth in solutions, offset by further declines in book publishing. It is important to note that we recorded a $10 million backfile sale in the third quarter of FY16 and we do not anticipate another sale on this order of magnitude in FY17. Overall, this combination of revenue trends is expected to result in flat revenue performance for FY17.

In terms of profitability, we are projecting marginally lower operating income due to the continued book decline and investment and solutions growth, as well as further investment in our ERP and related systems. Adjusted EPS is expected to be adversely impacted by higher taxes and one or more interest rate hikes in the US.

Our FY17 effective tax rate will be in the range of 25% to 26%. The pressure from taxes and interest expense will push our adjusted EPS toward a mid single-digit decline.

We expect cash from operations to be flat again in FY17 and CapEx to increase by $30 million to $35 million, mostly due to our headquarters office transformation. As noted earlier, we're transforming our Hoboken office environment to be more open and collaborative, which should benefit us in terms of productivity and efficiency. Change will also allow us to return floor space to the landlord, resulting in long-term net savings. Note that two-thirds of the CapEx related to the headquarters investment will be incurred in FY17 and the remainder in FY18.

Beyond FY17, we expect earnings and cash flow to improve substantially over FY17 as operational improvement initiatives reach implementation and cost reductions are realized. However, our FY18 operating margin goal of 17% will push further out in time primarily due to the extended long-term decline in book revenue.

We expect to achieve an operating margin of 14% in FY17 and make significant progress in FY18. While we expect to reach an operating margin of 17% or greater over time, we are not providing further specifics as to when that goal will be achieved. I will now hand the call back to Mark.

In summary, we had a steady year overall as we made investments to benefit us over the long term. Our journals business continues to grow modestly while maintaining its strong margin profile. Our solutions businesses continue to achieve double-digit top-line growth but remain dilutive to earnings as we invest to achieve greater scale and long-term profitability. And our books businesses are declining by mid single digits.

Our outlook for FY17 is operationally for revenue to be flat and adjusted EPS to be down by mid single digits, excluding both foreign exchange and the favorable impact from shifting to time-based journal subscription agreements. In the near term, earnings gains from marginal revenue growth in journals and double-digit revenue growth in solutions are expected to be offset by further declines in books.

The long-term view shows substantial improvements in earnings and cash flow for FY18. We have work to do though. We will work to make the books business smaller but much improved, the solutions business significantly less dilutive, and the journals business optimized from a revenue and profit standpoint.

Our fundamentals remain largely unchanged. Our research business remains on a strong footing, delivering more access to more content than ever before. We will benefit from continued global investment in R&D and growth in content usage and authorship.

We will continue investing in the technology and capabilities which make our research content valuable for the millions who use it every year. We are investing in our solutions business to meet the fast-growing worldwide demand for high-level professional skills the world needs, with millions of learners now active on our online program, corporate learning, certification, and assessment platforms.

Wiley's trusted brand gives our customers the confidence they need to seek Wiley solutions for their career and professional development. Our book publishing businesses are evolving towards digital learning and reference and we will continue to make the structural improvements necessary for those businesses to contribute to our growth and profitability goals. These foundational strengths put us in a good position for a continued, sustainable future as one of the world's leading knowledge and learning businesses.

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

(Operator Instructions)

Well take our first question from Daniel Moore, CJS Securities.

Good morning. I'm going to bounce around a little bit. My apologies here. CapEx, you mentioned late in your prepared remarks, continues to increase. What should CapEx look like as we get out to FY18? And do you expect it to continue to step down thereafter or are we in a new normal level of higher investment?

We're expecting, as I said, CapEx to increase year over year by about $30 million to $35 million, with most of that being driven by our investment in our headquarters facility. That investment peaks and then makes its way down in FY18. As well, in 2018 we'll see somewhat lighter capital spending associated with our ERP implementation. So, we see FY17 as a peak, again about $30 million to $35 million higher than what we reported for FY16, and then it will start to come down from there.

Should 2018 be below 2016?

I'm not going to get that precise, Dan. It's two years out in time. It certainly will be coming down. And, yes, on balance, what you're going to see in 2018 is lower spending associated with headquarters and you're going to see lower spending associated with ERP, as compared to 2017. So, substantial tick down but I really can't be more precise than that at this point.

Okay. A lot of moving parts, so my apologies here. I think you mentioned your FY17 guidance implies organic growth and pretax operating income a slight decline. Is that not quite mid single digits? Maybe anymore precision or specificity you can help us with?

Dan, what we are saying for 2017 is that, excluding the impact of time-based earnings, the transition and what is in 2017 a favorable impact of time-based earnings, operationally we are anticipating that revenue will be flat and that our EPS will be down in the mid single-digit range, driven by a marginal decline in operating income which has pressures associated with it around the decline in books, and has some pressures associated with the incremental spending for one more year around our ERP and related systems implementation, and then dropping below operating income then, pressure from higher taxes -- we're expecting a tax rate in the zone of 25% to 26% for FY17 -- and what would likely be somewhat higher interest expense due to rate hikes in the US.

Okay. What is it that is driving the tax rate?

Dan, if I could, just to round that out, just keep in mind, on a reported basis, with the impact of time-based journal subscription agreements, we will report an increase in revenue year over year that will be, as a Company, in the low single digits, benefiting from $37 million of incremental revenue. And we also will see high single-digit increase in earnings, again with the benefit from the time-based journal agreements. But that comes with $0.42 of improvement around time-based earnings.

I just want to make sure people should expect that our reported revenue results and our reported earnings results will both show substantial gains when including the effect of those journal agreements.

Understood. I just wanted to isolate the operating income versus the EPS. Understood. And then the tax rate, you gave us good color there. Is it just simply a shift in geography where the income is coming from or are there other factors?

There are a couple of discrete items that have benefited our rate this year, relatively small items. And then there will be a bit of a shift in terms of our earnings from geography, but mostly a blend of those two effects.

Okay. One more and I'll jump back in queue. Fiscal Q4, if I look at operating and admin expense, jumped 5% year over year and increased 400 basis points as a percentage of revenue. I realize there's some accounting given the shift to time-based that probably impacted a bit in terms of the percentages. But what are the biggest drivers of that increase? Other admin -- if you look at shared service, other admin was up 30% year over year in Q4 and I'm just trying to figure out what's going on there.

Dan, most of what's driving that are things that fall into two categories -- some employment-related discrete items that occurred in the year that will not be repeating related to people leaving the Company that were not restructuring charges; and then we had also some legal provisions, I mentioned, that were principally in the third quarter related to copyright matters.

Okay, thank you. As I said I'll jump back in queue.

Moving on we'll take our next question from Drew Crum from Stifel.

Okay, thanks. Good morning, everyone. A couple questions. Let's start on education. Your print textbook business was down 23% in the quarter. I think you guys thought that the second half of FY16 might be a little bit better than the first half. Based on what you saw with the spring semester, what does that portend to for the fall semester as you look ahead?

And then my second question here is, in an effort to optimize the portfolio, which you made reference to, on the print side, how far along are you guys around consolidating the education book business? Thanks.

Thanks, Drew. Hi, it's Mark. In the second half of the year, we saw improvement in WileyPLUS revenue, validations and courses in business one. So I think the underlying trend, particularly in our quantitative subjects and accounting and engineering, was strong.

We do continue to see in the industry as a whole that the rate of take up of digital is very mixed between institutions, between courses and between instructors. And while print continues to be an option, there are a number of choices that students have, whether it's rental, used or buying a new textbook. That, combined with some channel consolidation led basically to oversupply in the market as a whole. So, whilst we had underlying improvement in the number of students using our courses, which you can see in the WileyPLUS number, we were hit by returns, as the industry was as a whole.

Print continues to be volatile, Drew. I can't look forward into September and say that I see those trends reversing significantly. But we certainly do see some calming down of the disruption in the channel, which we hope will flow through. And obviously as we continue to invest in digital, and to move as much of our business as possible to WileyPLUS, then that print impact will start to decline. But that's also over time, as well, rather than just looking forward to September.

In terms of consolidation, we are some way on, and we will certainly report back as we make more progress. Obviously the moving of our distribution to Cengage Learning was a step forward in switching to a variable cost base for that business. And we continue to look for efficiencies across our delivery, manufacture, distribution of print across all our book businesses, and education will benefit from that. But it's a work in progress and there will be more to report over time.

Okay. And then shifting gears, part of your intermediate term guidance included the solutions business comprising about 25% of your revenues. Just give us an update there and any thoughts on where you see that over the next couple of years, and how important acquisitions play a role in getting to that threshold.

Clearly, they do. We've said before the goals that we set were somewhat dependent on us continuing to make acquisitions to achieve scale and revenue growth in that business. So, I'd say two things, Drew.

One is, we are happy with the performance of those businesses. You can see we are continuing to report double-digit growth. We are confident in the market position that we're establishing, that Wiley is adding real value, both in the corporate learning talent business and in the education services online program business.

And we continue to actively lock for acquisitions that will fill gaps in that education to employment value chain, but we will do that with continued discipline and ensuring those are acquisitions which we know Wiley can add significant value to. So, we remain active but we do need, as you know, acquisitions to take us towards increasing the percentage of revenue that comes from solutions, and we continue to be active in pursuing those.

Okay. And just one last question, more housekeeping. John, can you remind us, just from a quarterly phase in perspective, when we'll see or what quarters we'll see the benefit or the reversal from the shift to the time-based journal subscription agreements, and maybe magnitude by quarter?

Sure. The benefit that will now come back will unwind principally in our first quarter and in our third quarter. The order of magnitude in the first quarter, you should expect, will be somewhere around 20%-ish of the unwinding, and most of the balance then occurring out inside of the third quarter.

Okay, thanks, guys.

(Operator Instructions)

Moving on, we'll take our next question from Ian Whittaker from Liberum.

Hi, two questions. First of all, just going back on your education business, and actually a comment to answer just in the previous question, one of your peers in US higher education has suggested that the issues you face may be cyclical, or the issues the industry faces may be cyclical, and it's all down to enrollment trends, and when these improve, that essentially the revenue should come back.

It sounds as though you're a little bit more structurally bearish than that. Would that be a fair assessment how much you think enrollments are actually part of the problem here and how much is it just that you think is changing student buying patterns?

And the second thing is there's been some proposals put by the European Union just in terms of scientific journals that open access, perhaps suggesting an accelerated push there. I just wondered if you had any thoughts on those proposals.

On the first point and I would say, yes, there are a number of factors that have impacted performance in the education segment, and certainly enrollments is one of those over the last two or three years. Those are numbers that are publicly available. You can see what the impact has been. And to the extent that those begin to unwind over time, then clearly there's a positive impact on the number of students taking courses and therefore having access to content and digital courses.

I think the additional color I was adding was that, as we continue to see business models evolve, as we continue to see students having choice around a number of different price points, and as we continue to see channel disruption, hopefully those are also relatively short-term disruptions but they are also contributing factors. And some of those are a little uncertain, more, I would say, over time as to how long it takes for those to unwind.

From the perspective of open access, I wouldn't comment publicly on policy. I would say for Wiley, open access has become an important part of our research business, both through offering open-access options in our traditional journal program and launching new open-access journals.

We continue to collaborate very closely with funding agencies, with government and higher education institutions around ensuring that authors have options, whether they want to go down the traditional publishing route or through gold or green open access. And we remain committed to open access being a viable business model for the industry, which I believe continues to evolve. But we do partner closely, as I said, both with government and with funding agencies in evolving that.

Could I just ask you a quick follow-up just on the first question? Just coming back to this whole issue of enrollment, obviously there's a lot of uncertainty. But just, again, is there any trends, data points, et cetera, that we should be looking for in terms of seeing how enrollment trends should go?

The point that's been made before is that it's related to the economy, although it looks maybe in recent years that relationship starts to break down. But is there anything such as that? Is there any data points in terms of the demographics coming from high school, anything that for us would be quite useful to look at in order to have a view on when the reversal of enrollments should, as it were, reverse out?

I think just to say again, I think it's a little too complex and wide ranging for me to comment on at this point. Clearly enrollments are impacted by demographics, by the strength of the economy, by demand for post-secondary education, and those are all variables and are all subject to political uncertainty and to economic uncertainty. So, I don't think at this point it's possible to really be precise or even specific about how those are going to evolve over time.

Okay. Thank you very much.

Moving on we'll take a follow-up from Daniel Moore from CJS Securities.

Thank you again for taking the time. At today's current exchange rates, FX rates, what would the likely impact be on revenue and EPS in FY17 relative to FY16?

Dan, at the current rates thankfully the impact would be much smaller than what we've seen in the last couple of years. At current rates we would expect to see still some revenue and EPS erosion, but the erosion would be more had on the order of about $10 million to revenue and about $0.04 to EPS, somewhere in that range.

Got it, that's helpful. And then if this is in your slide and I missed it I apologize, how much of the decline in print book revenue is embedded in the FY17, or contemplated in the FY17 revenue guidance?

We continue to anticipate, across book publishing, a decline in revenue that's in the mid single-digit rate. I think it's in the table that we used on the 2017 outlook there.

But not continued teens declines? It's more of a moderation, if you will?

I would just point out, Dan, that overall in our publishing business, it's mixed. We didn't see declines in the mid teens across all of our publishing business. In fact, we were substantially flatter in the research publishing business, research book publishing business, and the professional development book publishing business. Where we saw steep declines, really, was around higher education.

Okay. And I know Mark mentioned twice that online program management would not be as dilutive in 2017. What was the dilution to EPS in 2016 and how much of a delta should we expect in 2017?

The OPM business was $0.16 dilutive to our earnings in FY16, and we're anticipating that will improve to around $0.10 dilutive in FY17.

Got it. A couple more and I'll let you go. The $25 million cost savings, previously I think you've said half in 2017, half in 2018. Do you still expect to get half in 2017?

Yes, we do.

Okay. So, your guidance, no change there.

Yes. And it's inclusive of those savings. We've got other things that are driving pressure on operating income, as we noted, including the rate of change inside of the publishing business, as well as incremental spending on ERP and systems in the year.

Okay. Two more and I'll be done. Buybacks, just in terms of capital allocation, stocks pulling back here, and we still think long-term free cash flow is somewhere well north of $4 a share. Do you expect to be more aggressive in terms of returning cash to shareholders or opportunistic?

I wouldn't suggest that we're going to be any more or less aggressive. We still see our stock at these trading prices being a great buy for our shareholders, and we continue to plan to repurchase shares. But in terms of momentum, I wouldn't call it a shift in momentum right now. Spend a little bit more on shares in FY16 than we did in FY15, and we continue to believe it's an important way to return cash to shareholders.

Okay. Last question is philosophical. Going back historically, you always gave not precise but a range of earnings guidance, more hard-and-fast goal posts. A year-and-a-half ago you gave FY18 outlook of 17% operating margin.

Now things are a little bit fuzzier in terms of guidance and we don't really have a time frame around those goals. Is it simply the change in the speed of the decline in print that makes it difficult? Or is there other factors that have driven the change in philosophy and your approach to guidance and setting more defined goals, if you will, that shareholders can look to?

Fair questions, Dan. Our practice that's been established for a long period of time has been to provide guidance on an annual basis and, generally speaking, actually not to provide guidance beyond the coming year. That, we've maintained. And I think we've been very transparent in terms of the completeness of that information that we've been sharing around the business.

And then we, back in the beginning of our FY14 -- so September of 2013 from a calendar perspective -- we set goals for 2017, three-year goals around the evolution of the business and those goals included expectations to evolve our business to more solutions, to get solutions to be about 25% of our revenue. Those acquisitions would enable us to get to revenue growth in the mid single digits and then that would help propel us to operating income of 17% or greater. Underlying those goals was an expectation back in September of 2013 that we would see more stability inside of book publishing than we have seen over that period of time and then we've talked about still believing that the 17% goal or greater is entirely achievable but would push out in time.

What's in the information we've shared today that caused us to push that out further in time is we are seeing a sustained rate of decline, and we saw a higher rate of decline in higher ed that has become more challenging for us, and we are preparing to again address that. But the biggest change is what's happening in books. And, frankly, the pressure we saw on books in our FY16 was greater than we anticipated.

So, we are reluctant to start putting out a 17% or greater operating margin goal at a specific point in time. We've put it out there and then its pushed out in time. So, from a credibility perspective we're acknowledging that we can't call it at a specific point in time. We can call that we're going to get there but we prefer not to say when and instead to focus on our normal one-year guidance, executing that well, and giving you as much insight as we can as to trends in the business, but not putting another stake in the ground over time.

Understood. I appreciate the color.

(Operator Instructions)

At this time it appears there are no further questions. I'd like to hand the conference back over to Mark for any additional or closing remarks.

We thank you for joining us on the call today and look forward to speaking with you again in September.

Thank you. That will conclude today's conference. We thank everyone for their participation.