John Wiley & Sons Inc (WLY) 2017 Q1 法說會逐字稿

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

Good morning, everyone, and welcome to Wiley's first-quarter 2017 earnings call. I want to remind you 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 who prefer 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 this presentation and a playback to 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, and good morning, everyone. In addition to Brian, I'm joined by John Kritzmacher, CFO and Executive Vice President, Technology and Operations. I will speak to business performance and John will follow with an update on operations, balance sheet, cash flow, and outlook. Note that I will be excluding the impact of foreign exchange when commenting on all variances unless I specify otherwise. Foreign exchange is shaping up to be a larger headwind than we expected, given the impact of the Brexit decision. For the quarter, the unfavorable impact to revenue and EPS was approximately $9 million and $0.01, respectively. Also included in results is the transitional non-cash impact of shifting to time-based journal subscriptions.

First-quarter results were mixed from a revenue standpoint, with 4% growth in journals, or 2% growth excluding the favorable time-based subscriptions impact, and double-digit growth across our solutions businesses, offset by 16% decline in overall book revenue. The decline in education was particularly noteworthy and I'll talk more about that later on in the presentation. Adjusted EPS declined 9% on a constant currency basis due to the revenue decline and higher technology costs, including investment in Wiley's ERP deployment and related systems. This was partially offset by favorable one-time items related to certain employee benefit plans.

We are very excited about the recent signing of an agreement to acquire Atypon. Atypon will be a tremendous addition to research business, a best-in-class fast publishing platform and service provider that hosts one-third of the world's English language journals. Atypon does two things. It provides a strong growth opportunity in the stable but slow growing research marketplace and it greatly accelerates our technology roadmap. I'll talk about this later on as well.

The journals business, our largest and most profitable business, remains on solid ground. With 98% of potential business closed, calendar year 2016 journal subscriptions are up 1%. In summary, we continue to be pleased with the performance of our journals and solutions businesses, but book markets remain challenged, primarily in education. As we discussed in June, our intent is to make our books business more focused while sustaining profitability by prioritizing our portfolio around high-value digital content. Structural improvements will enable us to achieve revenue and profitability improvements and we'll update you as we move forward in this process.

The table shows our first-quarter performance, with revenue down 2% and adjusted EPS down 9%. Again, journals and solutions performed reasonably well but our books businesses continue to suffer from broad market pressures, particularly in education. Results include the impact to the shift to time-based journal subscriptions, which was favorable to revenue by $4 million, to operating income by $3.6 million and adjusted EPS by $0.05. As a reminder, all of this is transitional is does not affect cash flow.

Now on to the research segment. Journal revenue growth of 4%, or 2% excluding the favorable impact of the shift to time-based earnings, was driven by 3% growth in journal subscriptions, or 1% excluding the time-based earnings shift and strong 39% growth in author-funded access. Calendar year 2016 billings are up 1%, with 98% of business closed. We saw a society journal net gain of $1.6 million, with the signing of three new society contracts with combined annual revenue of $2.9 million compared to the loss of four with combined annual revenue of $1.3 million. 13 society contracts were renewed with combined annual revenue of $13 million.

Research books and reverences declined 12% in the quarter, roughly in line with our expectations. That business often swings substantially from one quarter to the next. Adjusted contribution to profit, or adjusted CTP, was flat or down 6% excluding the time-based shift due to increased technology and other costs to support our society business.

Finally, we are pleased with the performance of our journal portfolio in the Thomson Reuters Journal Citation Report index for 2015. The index is an important barometer of journal influence across the research community. 26 of our journals were ranked first in their respective subject categories and the results speak to the distinguished quality of our journal brands and content.

In August we signed an agreement to acquire Atypon for $120 million in cash. Atypon provides a best-in-class publishing platform for societies and research publishers, enabling content hosting, presentation, management, and analytical reporting. It hosts 9,000 research journals, one-third of the world's English language journal output, 13 million articles and 1,800 websites. Other solutions include content eCommerce and licensing and website management. Atypon has over 200 of the world's leading societies and research publishers as customers.

The society publishing market is sized at about $5 billion with approximately 4,000 societies. Publishing platform competitors include HighWire, Silverchair and Publishing Technology. Atypon operates under three- to five-year licensing contracts with customers. 2015 revenue was $31 million, with recent annual growth rates in double digits.

Why did we acquire Atypon? Two key reasons. First, it is a strong growth business. Atypon's industry-leading platform is designed for online publishing, website development, content targeting, rapid product creations, subscription modeling, eCommerce and analytics.

Atypon will allow us to deliver new technology enabled services to our existing society clients and potential new society clients, some who may already be Atypon customers. Our mission is to enable scientific and academic impact and to help our partners achieve their goals. Atypon gives us a platform to do this more effectively.

Secondly, and equally important, Atypon's Literatum platform accelerates our critical technology roadmap, with access to a best-in-class platform which will result in significant cost savings, reduced execution risk, and important upgrades to our legacy platform. Atypon has a proven track record for innovation, strategic account management and complex system integration, facilitating the growth and success of societies and content providers in the scholarly marketplace. For instance, the Literatum platform can classify and integrate any type of content, including journal and book content, blogs, news articles, videos, images, interactive data visualizations and then allow that content to be tagged, search, targeted, discounted, promoted, bundled, and sold across a variety of business models. In addition, it includes automated tools for website building and user experience design.

Lastly and very importantly, Atypon brings technology, talent and leadership which will strengthen and compliment our existing capabilities. We are pleased to welcome some impressive quality to Wiley. We couldn't be more excited about the prospect of a Wiley Atypon combination. Wiley is the largest society publisher in the world and one of the three largest journal publishers. Atypon is the leading publishing platform for independent societies and publishers. Atypon immediately addresses our platform needs and expands our potential customer base. In summary, Atypon represents an important step forward.

One final note. To ensure the security and privacy of its customers, which include some of our competitors, Atypon will be managed as a separate business unit inside of Wiley. The data and plans from each of Atypon's clients will remain sequestered and behind firewalls. Wiley colleagues will not have access to any of that data. Wiley will itself become an Atypon customer. The transaction, which is subject to standard pre-merger review with the US Federal Trade Commission and the US Department of Justice, is expected to close with an effective date of October 1.

For the quarter, professional development revenue declined 2%, with strong double-digit growth in corporate learning and online test preparations, offset by decline in books. Corporate learning continues to see growth for new and existing corporate clients, particularly in France and the US. Online test preparation and certification performance was driven by high demand professional programs, including ACT, CFA and CMA. Books revenue declined 10% due to weakness across multiple categories, notably technology, which benefited in the year-ago period from introduction of Windows 10. As noted, we continue to look for ways to improve efficiencies and optimize the portfolio by focusing on high value, widely recognized digital content.

The assessment business rose 2%, with solid post-hire assessment growth driving results. We are continuing on our path to integrate the post-hire business, formally integrate with the pre-hire business, formerly profiles, to drive business model alignment, channel focus and enable a richer offering to our customers based on our market-leading brands. Adjusted contribution to profit continued to make gains, up 7% from a combination of efficiency gains and restructuring savings. Finally, Wiley recently announced a publishing agreement with Amazon Web Services, or AWS, to introduce official study guide and learning tools for the AWS certification program. The AWS certification program recognizes IT professionals that possess the skills and technical knowledge necessary for designing, delivering, and maintaining applications and services on the AWS cloud.

Education had a very difficult quarter, with overall revenue down 14%, books revenue down 28%, and custom material down 15%. The core overall performance mirrors the performance of the US higher education publishing market, which is down 17% between January and July according to the Association of Academic Publishers. Declines in print are the major factor here, with market pressure particularly strong in June and July, which we believe to be driven by three factors.

First, rental is continuing to gain share. Second, retailers are tightening their inventory levels and fine tuning their inventory practices following high 2015/2016 returns. Finally, timing and visibility are impacted by the continuing shift to digital from print as digital purchases are transacted at or shortly after the semester begins. We're continuing to monitor these timing impacts as the fall selling season continues through to October. As noted earlier, we will continue to assess the portfolio and make necessary structural improvements.

Online program management revenue grew 13%, due to the ramping up of recently signed programs. Wiley added 10 new programs this quarter and retired 4, for a total program count of 232. This is up from 210 programs at the end of Q1 2016. After the expiration of one partner, our total partner count now stands at 37 and our sales pipeline looks strong for the remainder of the FY17. Adjusted contribution to profit for education declined $7 million in the quarter, mainly reflecting the revenue decline. John will now take you through our financial position.

Thank you, Mark. Adjusted shared services cost for the quarter were flat, with a $10 million increase in technology investment, mainly related to our ERP deployment, offset by an $8 million decline in other administration costs. The decline in other administration cost was primarily due to favorable one-time items related to changes in certain employee benefit plans. We expect technology spend, including our ERP investment, to moderate over the remainder of the fiscal year. Our full-year technology expense will only increase by about 5% over prior year.

The strength of our balance sheet continues to provide flexibility for investments, including acquisitions as well as the return of capital to investors. Our interest in acquisitions will continue to focus on opportunities to enhance our position in research publishing and advanced learning technology and services across research, professional development, and higher education.

Net debt to EBITDA on a trailing 12-month basis was 1.4 at the end of July compared to 1.2 at the end of the prior-year period. As you may recall, our US pension plan was frozen in 2013 and our Canada and UK plans were frozen in 2015. We recently launched a limited time voluntary lump sum pension distribution program for terminated vested employees in the US qualified plan. This action will reduce potential future volatility in our US pension liability on favorable terms. Funding for the pension distribution will come directly from the US pension plan assets and there will be no impact to Wiley's free cash flow. We expect to record a second quarter non-cash settlement charge of approximately $8 million to $10 million related to the program.

Pre-cash flow was the use of $165 million for the quarter compared to a use of $155 million in the prior-year period. The variance is primarily due to lower cash earnings from operations and higher incentive payments. As a reminder, free cash flow is seasonably negative in the first two quarters of Wiley's fiscal year, principally due to the timing of annual journal subscription collections and the seasonality of our education business. With respect to organic investment, including our ERP and office transformation initiatives, we expect full-year 2017 technology, property, and equipment investment to be approximately $115 million. We expect composition spending to be roughly $50 million.

In the aggregate, these investments will be higher than FY16 by approximately $30 million. The anticipated benefits from the ERP deployment include improved efficiencies in cost savings, particularly in finance and technology. With regard to our headquarters office transformation, we are constructing a more productive and collaborative work environment in support of our ongoing shift to digital publishing and learning and services. Our new headquarters design will also enable us to reduce our Hoboken office footprint by two floors, resulting in significant operating expense savings starting in late FY18.

Meanwhile, we have an important update on our tax appeal in Germany. A hearing was conducted today in the German federal court. As a reminder, our appeal dates back to 2014 and is related to a 2003 merger of several German subsidiaries in to one operating entity. That combination enabled the Company to step up the tax deductible net asset basis of the merged subsidiaries to fair market value.

In May 2012, the German tax authorities filed a challenge to our tax position. Under the rules for appeal, Wiley has been required to make deposits totaling $62 million to date, including related interest. If Wiley is successful in defending its position, the tax deposits will be returned with 6% simple interest. If Wiley's tax position is denied, the deposited funds will not be returned and a related charge of approximately $60 million, predominantly non-cash, will be incurred. A final decision is expected over the coming weeks and no further appeals are available beyond these proceedings.

Finally, we deployed $11 million this quarter to repurchase over 221,000 shares at an average cost per share of $51.01. Authorization remains to repurchase another 4.5 million shares, including a new 4 million share authorization approved by Wiley's Board of Directors in June. Also in June, Wiley raised its dividend for the 23rd consecutive year, with a 3% increase resulting in a total annualized pay-out of $1.24 per share.

Our full-year operational outlook remains unchanged, with full-year revenue flat and adjusted EPS down by mid-single digits. This operational outlook excludes the adverse impact of foreign exchange and the expected pension settlement charge, the favorable impact of shifting to time-based journal subscriptions and Atypon. Atypon is expected to increase FY17 revenue by approximately $20 million but be dilutive to EPS by roughly $0.15. The dilution is the result of a partial write-down of Atypon deferred revenue at closing in accordance with GAAP, the amortization of acquired intangibles and incremental cost of transitioning Wiley Online Library to the Literatum platform. That transition effort will begin upon closing and run through calendar year 2017.

Our operational performance continues to be driven by steady performance from journals and strong top-line growth from solutions, offset by continued declines in traditional book publishing and our multi-year investment in new systems. One final note, we will be revising our segment reporting next quarter. Our management structure has evolved with the consolidation of our books businesses. Going forward, our reporting will reflect three newly defined segments aligned to research journals, solutions, and the consolidated books businesses from our prior segments. Note that we will continue to supplement our segment results with revenue reporting at the product level. Now I'll turn the call back to Mark.

Thanks, John. In summary, performance in the quarter was mixed, but the fundamental drivers of research and solutions performance was solid. Journals had a good quarter and forward-looking metrics show continued steady growth ahead. Our solutions businesses continue to post double-digit growth in a competitive marketplace. However, pressure on the books business persists and education performance was worse than expected given the market dynamics noted earlier, while our other books businesses were down over 11% collectively at constant currency. We are actively evolving those businesses and the overall books portfolio to drive improved revenue performance and sustainable profitability.

We are very excited by the prospect of adding Atypon to the research business and across Wiley. Atypon is transformative and immediately positions us as the technology leader in the industry. It adds significant innovation and development resources to the Wiley culture. It provides important opportunities for growth within and directly adjacent to our most profitable business. Wiley colleagues are thrilled with the addition, knowing full well the reputation Atypon has in the marketplace.

As John discussed, we are reaffirming our operational outlook. As was the case with FY16, FY17 remains an investment year, but we expect those investments to pay off and give us even stronger operational and financial foundations for the long-term. To recap, we are pleased with the steady performance of our journals business, the continued strong growth of our solutions businesses, the progress of our ERP and office transformation and many other developments across Wiley. There are challenges, to be sure, particularly in traditional book publishing, but we are working through those and will keep you informed. Wiley colleagues remain energized by recent changes and by each other.

In summary, Wiley continues to be well positioned for a long, sustainable future, driving academic and professional impact as one of the world's leading knowledge and learning businesses. With that as background, we welcome your comments and questions.

(Operator Instructions)

Drew Crum, Stifel.

I wanted to ask about Atypon first. Any way to quantify revenue synergies that you are anticipating from this acquisition on a go-forward basis? The $0.15 of dilution that you are guiding for FY17, it would look to be $0.20-plus on annualized basis. What does the ramp to accretion look for this asset? Is this something that will ramp quickly or is it something you're going to continue to invest behind and it will be more similar to the trajectory we've seen with Deltak? Thanks.

Drew, first with respect to revenue synergies, we'd say at this point in time that there are in the near-term relatively small synergies as we look for, as Mark described, opportunities to generate new revenue based on new services. I would say that part of our case is relatively small in the near-term but we think there are important prospects for the future. We do believe that is an important opportunity with Atypon but it's a little bit further down the road for the creation and the delivery of those new services. I would say with respect to dilution, the (inaudible) impacts inside of this year include -- and into next year include the cost of our transition from the existing Wiley Online Library platform on to the Literatum platform, so the benefit for our earnings performance starts to make its way into our results inside of very back end of our FY18, more in to FY19. Think about benefit to our earnings happening in FY19 and beyond.

Got it. Okay. More of a big picture question, I think exiting FY16 you saw some improvement for the books business overall and thought that you -- the rate of decline for that part of the business would decelerate. I know it's just one quarter, but it seems the rate of decline accelerated. Just how you're thinking about that business, or that part of the business, through the balance of FY17. Should things get better? Do they get worse? Just want a little more color on that. Thanks.

Hi, Drew. It's Mark. Yes, the declines we've seen in the last quarter and a little before that are greater probably than we expected them to be 6 to 12 months ago. I think as I've touched on, with respect particularly to education, there are some factors, much of which revolve around print inventory, the way the channel is evolving and student purchasing behavior, particularly the growth in rental and some of the battles being fought around price.

I would say that it does cause us to carefully evaluate the portfolio going forward across that book business and through the balance of the year. At this point I think we expect declines to continue roughly in the range that they are now. We do need to see the education fall selling season play out through that. The performance of the digital business that grow out of our businesses, WileyPLUS, the test perpetration business, the e-book business continue to be strong foundations and to have good growth characteristics. But as far as print is concerned, we do see the balance of the year looking somewhat like the previous 12 months we've experienced and that's why we're evaluating the portfolio carefully.

Got it. One last question, Mark, related to education. Give us an update on your exposure to the profit -- excuse me, for-profit school operators.

It's pretty limited. Pretty limited. In our online program management business we have no exposure there. The for-profit schools have always been purchases of custom material. Some of the declines we've seen there may be impacted by that but it's not a big part of that business and never has been.

Okay. Thanks, guys.

(Operator Instructions)

Our next question comes from Daniel Moore from CJS Securities.

Good morning. Thank you. Wanted to just follow up again on that theme and jump in to one or two others. I think you mentioned the education business, North America down 17% year to date for the industry. That would seem to me to go beyond just inventory and changes in buying patterns.

I guess what caught my eye is WileyPLUS and e-books down as well. Is there some other acceleration change that you're seeing? Is there any timing as it relates to the start of these academic years that you're seeing? Any other color just around beyond just print, but your exposure to the global secondary education business would be very helpful.

Sure. As far as the overall picture, we are continuing to see a transition overall in the industry from print to digital. That has a number of knock-on effects. One is the shift in timing of ordering an adoption, which tends to come much closer to the beginning of the semester, or in some cases just after.

Digital adoption is uneven. We've noted this before across the higher-ed landscape. There are some institutions which are moving quickly over to institutionally purchased or to encourage adoption use of digital materials, whilst others, for various reasons, including academic freedom, may be more mixed in the pace of which they're deploying digital solutions. That coupled, then, with the disruption caused by rental and some of the impact on price means this is continuing to evolve. It is only one quarter and we'll need to look at this some months out from now to see what the impact has been overall.

We do see a continued shift from print to digital. That represents clear opportunities. The quarter for WileyPLUS is a very small one and with ordering shifting late in the selling season, I think that's no conclusion to draw from that. So we continue to be confident that we have a good digital solution for the marketplace and we just need to continue to monitor the trends of how quickly those are being adopted and what the impact on pricing and the evolution of the business model will be.

That's helpful. Shifting gears to Atypon, maybe just drill down a little bit more in terms of the very specific capabilities that they bring that would have been more challenging for Wiley to develop in-house. You mentioned some significant cost savings as a result potentially of the acquisition. Can you quantify or give a little bit more specificity around that?

Yes, I'll take the first part and maybe John can talk a little bit about the cost savings. The Literatum platform, which is the heart of the Atypon business, really is a best-in-class platform in terms of their capabilities. One is the way that content is stored and tagged and deployed, which is at a very modular and granular level. I talked a bit about being able to pull together journal book content, blogs, videos, et cetera, but those can be rapidly deployed across platforms, across customers and across business models. That kind of flexibility takes a long time to develop.

Alongside that, the automation around website design, the development of user experiences, being able to quickly deploy web solutions in support of either society clients or around a particular opportunity is considerable and is a big leap forward to us. Overall, the research industry and marketplace, technology is driving discovery. It's driving innovation. It's driving access and it's improving author productivity and by adding the Atypon capabilities in to Wiley gives us considerable opportunities, as John said, over time to deploy those technologies to stay right at the cutting edge of what's happening in research.

To answer your question with regard to synergies, so our efforts begin to focus with Atypon upon closing, again, around October 1 to migrate Wiley Online Library onto the Literatum platform. We anticipate that the timing of that effort will have us migrating our entire library onto the Literatum platform for calendar year 2018, so around January of 2018. Between now and then, there's a substantial amount of incremental costs in migrating on to the Literatum platform while we continue to operate the Wiley Online Library platform but then when we get to the other side, we'll begin starting to realize annualized savings, so it will be first in that -- roughly in that last fiscal quarter of our FY18, so the January out to April period. On an annualized basis, we're expecting to realize savings from the implementation that are on the order of $10 million per year.

Putting that all together, including the sort of any lingering amortization, is it fair to say you expect that to be accretive by FY19?

Our expectation is, is as I said, once we get out into FY19 that the acquisition should begin to contribute to our profitability performance. We've got some additional transition through most FY18 and then once we get across that, based on the performance of Atypon itself and the improved cost synergies that we'll get out of the combination, yes, we're expecting out in FY19 we start to see the benefits of the acquisition.

Okay. Sorry for too many questions, one or two more, I've got a lot of different topics on this particular quarter. Technology spend, you mentioned, John, would only be up 5% year over year. Is the acquisition taking over some of the expending that you anticipated? Are there any opportunities that you're delaying or no longer focusing on in the near term that spend, level of spend is a little bit lower than I think we d anticipated?

No, I think we've been noting along the way here for some time that we're driving toward more efficiency and improved resource allocation around our overall technology spend. The plan that we have for the year and the forecast I've just given you is consistent with what we have expected to do and are planning for FY17. Just the timing of that planning from a seasonality perspective had us spending more in the first fiscal quarter and less across the way of the year but in no way did we slow things down, nor did we set aside one opportunity to fund the acquisition. Our plans for technology improvements and our plans for technology cost improvements continue across the year.

Okay. Lastly, the German tax authority, is there a specific reason why we're depositing cash along the way but not necessarily accruing the expense on the P&L? Any way to handicap the outcome at this stage?

As I noted in my comments, this case goes back quite a while in time. The original step up to the asset basis was back in 2003 when we did the combination several years back now. The German authorities contested our position on this. Our view all along has been that the technical merits of our case were within the provisions of the law and that we expected to prevail in our case so that did not warrant us taking a charge. However, the terms of appeal in Germany are such that you are required to deposit the disputed funds until the case is finally resolved. We were required to make the deposits. We did not and have not viewed it as appropriate to take a charge because we felt that our case would prevail.

Got it. Very helpful, thank you. I'll jump back in queue for maybe one more.

(Operator Instructions)

Nick Dempsey from Barclays has our next question.

Good morning. I've got three questions. The first one, you mentioned the college bookstores are more cautious with their buying this year at this stage because of the weak September selling season last year, and that's something that both Cengage and Pearson have mentioned. Are you confident that your returns picture will look much better this year than last year as a result of that earlier caution from those guys? How are you setting your provisions for your returns?

Second question, in terms of the shift to digital causing a timing issue, I've got the AAP market data in front of me. When I look at the gross sales line there, it's been roughly the same share of the year in each of the last three years in June, July, August and September, if that makes sense. Are you saying this is the first year just seeing a clear shift out of July into August and September or are you saying something else? Point three, we're a week into September. I wonder what your sales teams might be seeing in terms of the first college enrollments and the demand the campus bookstores are seeing at this early stage?

Okay, thanks, Nick. The first question, around college bookstores and returns, all of it, the picture needs to evolve. The channel -- one thing I didn't mention is the channel has seen a lot of consolidation over the past 12 months and M&A activity though inventory has come together from different places and continues to be rationalized, so we need to see how that unfolds. Clearly, the year-ago period was particularly heavy in terms of returns, but we're not going to call that yet.

The shift to digital in terms of timing adds to percentage of digital, I'd speak for the industry, continues to grow. Digital sales continue to grow year on year, then the impact of the later ordering that tends to prevail and digital courses will clearly have a greater impact overall and that's continued to build over time and we see the same thing. So not one big shift it's a continued growth (technical difficulty) market as a whole. With regard to September, it's not done yet so I can't call that now.

Maybe just to jump back in to the timing point, wouldn't we have -- the shift to digital has been going on gradual, as you say. Wouldn't we be seeing the percentage of the year that those three months, July, August, September, represent of the year shifting more into August and September already and we have?

Potentially. I think that we have to see the whole year play out to decide what -- to be clear what the impact of that is and I think that's true for the industry as a whole. It certainly is also true that the shift to rental is also pushing the time at which students are acquiring their textbooks later in the year as well. They would tend to buy very early but to rent at the last minute and that's clearly an impact as well. So let's see the year unfold. I think we'll have a clearer picture of where we are.

Great. Thank you.

(Operator Instructions)

We do have some followup questions from Daniel Moore, CJS Securities.

Thank you again. Given good details. Anymore color you can provide around the current margin profile for Atypon excluding the investment and transition costs, how that should impact Wiley's overall margin profile going forward?

Recent performance for the business, we had said that calendar 2015 revenues were around $31 million for the stand-alone business, EBITDA performance on that business right around 20%. We'll expect that as the business grows, we'll expect that to grow in to the mid 20%s. We think there's upward potential there with growth but it's prior-year performance from that 20% from an EBITDA perspective.

Got it. Very helpful. Obviously, you're going to sort of ring-wall that business as you've got some customers -- or I should say competitors that are customers. Just help us understand, how did you gain comfort that there wouldn't be any sort of potential lost share with moving under the Wiley umbrella and maybe just talk about their competitive differentiation versus some of the comps that you mentioned like (inaudible), Publishing Tech and HighWire?

Firstly, I think the Atypon platform is clearly industry leading. That's connects the first question to the second. We've been very clear, as we were on this call, that the way that we're operating, Atypon is a separate business unit within Wiley, that the controls we're putting in place both in terms of data security and the operations of the business and access to information are clearly understood by Atypon's customers and they quickly, and most if not all, have reacted positively to the acquisition. It's clear to them how we're going to operate the business in their interests.

We take seriously the role that Atypon plays in providing high-quality services to the industry and we'll continue to maintain that and to establish high-quality communications between Atypon and their customers and to ensure they have, as they've always expected, clear transparency and understanding of the development of the technology roadmap and the evolution of the business.

That's helpful. Maybe just talk a little bit about their -- you said market leading, any differentiators verses some of those other competitors, whether you might have any market share data?

I don't have market share data to hand. I think the biggest driver of competitive advantage, which I touched on earlier, is the flexibility of the platform, the ability to deploy it across different business models and across different customers and opportunities quickly. The content tagging and deployment technology is pretty much the best around. Overall, the platform is stable. It delivers consistently, the performance is reliable and it gives publishers what they need in terms of a forward roadmap and ongoing development to insure they're staying up to date.

Very helpful. Thanks for the color.

We'll take another followup question from Nick Dempsey from Barclays.

Thanks. Just one more. You talked about battles being fought around price. Do you mean the rival publishers are cutting their prices perhaps more than you might have expected 6 to 12 months ago, or are you talking more about what's happening at the bookstore level?

No, I don't mean between publishers. Thank you for the question. I mean at the choices that -- I would use the word battle carefully. It's the choices that students have between renting, buying used, buying a digital course, buying an e-book. As that does get presented to students by bookstores, by online retailers, there's a huge amount of choice around price and obviously a lot more than we saw in the days of just print textbook publishing.

It's similar to many other evolved digital consumer markets. There's a lot of variation in price. There are a lot of special offers. There are a lot of choices that students have.

All right, that's very clear. Thank you.

(Operator Instructions)

That does conclude our question-and-answer session today. Speakers, I'll turn the conference back to you for additional or closing remarks.

Thank you, everybody, for joining us on the call today and we look forward to speaking with you again in December.

That does conclude our conference call today. Thank you all for your participation.