Q4 2023 John Wiley & Sons Inc. Earnings Call
As I mentioned, the revenue shortfall against expectations with substantial but reacted quickly and effectively we actions significant cost savings in year and these actions largely mitigated the impact on profitability.
<unk> landed in our original guidance range and EBITDA landed slightly below the range.
Free cash flow of $173 million was down by $50 million.
The difference between earnings and cash flow was largely a result of restructuring payments and higher interest expense Christina we'll talk about all of this in more detail.
I want to give you some context about researches performance this past year, which was atypical.
There were three primary short term drivers of the shortfall and they do not alter our confidence in the trajectory of the business. The most significant was our special issues publishing posit Hendawi, which we discussed in depth last quarter.
The second driver was article volume, which was lower than expected.
A third was the cyclical downturn in spending on advertising and other marketing services, which led to lower corporate solutions revenue.
I will now talk about the first two.
Throughout fiscal 'twenty, three both submissions and publishing output lagged, both our expectations and historical norms.
This was true across the industry <unk>.
Industry article volume declined in 18 of the top 20 geographic markets in calendar 'twenty two.
This unusual softness is attributed to two separate but related shorter term issues.
The first is the unwinding of the well documented COVID-19 bump up in research article submissions that occurred during the Covid years of 2020 and 2021.
And the second is the material loss in researcher productivity during those same years, which inevitably led to reduced output.
Essentially many researchers want unable to conduct new research during the lockdown. So they spent their time writing papers at the same time the world was urgently pushing to get new Covid research out. So there was an explosion of health science papers spurred on by the pandemic. The net result was that our article growth was 15% in 'twenty, one and seven <unk>.
Percent in 'twenty two.
The flip side of this pandemic benefit however was that new research projects were largely on hold in 2020, one due to Lockdowns and lab closures. So we saw the number of new research projects dropped off precipitously and this led to the decline in papers produced in 2022.
We are now seeing all of this unwind and expect to see more normalized output growth in the mid single digit range in fiscal 'twenty, four notably global R&D spending are underlying leading indicators remained strong and this inevitably leads to greater research article volume.
The publishing posit Hendawi was also a drag on performance in fiscal 'twenty three.
As discussed in Q3, we suspended the fast growing special issues program. After identifying a research integrity issue. This issue was the result of external misconduct by non wildly editors and reviewers essentially wildly decided to take a short term hit to preserve the integrity of our journals and the value of our highly respected wildly Brad.
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This industry wide issue has been widely reported on and we believe that we now have it fully remediated in widely.
Nonetheless in Q4, we retracted 1200 articles for a total of seven 700, and we closed four impacted journals. We also learned that 19 hendawi journals would be removed from the annual Clara Veidt web of Science index.
These journals were among more than 80 delisted from publishers across the industry.
Wiley has one of the highest ranked journal portfolios in the World. So we were obviously disappointed in this development.
The disruption that Hendawi was consequential in fiscal 'twenty, three reducing our revenue growth expectations by $30 million and this will spill over into fiscal 'twenty, four reducing our projected revenue by $30 million to $35 million.
This was a second half event in fiscal 'twenty three so most of the year on year comparative impact will be seen in each one of fiscal 'twenty four.
Fiscal 'twenty four will be a year of revitalization for hendawi with positive signs already emerging.
Now named a new leader of Hendawi and talented wildly veteran with deep expertise in the area.
We've restarted the special issues program, and we will be ramping it up throughout the year.
We're working through the large article backlog and we are executing our journal growth plans.
Italy, we expect a very strong showing for Hendawi N wildly overall when this year's journal impact factors or released in Q2.
It will take some time to see all the benefits, but the outlook beyond this year looks very good.
Yeah.
I said at the top that we're now taking decisive action to unlock value by focusing wildly and I want to say a few words about exactly what we are focusing on.
It's actually quite simple.
At its core Wiley is a knowledge company.
Our core strength is in the development of new knowledge and the delivery of solutions that help the world take full advantage of that new knowledge.
And this is what we will focus on going forward.
This means three things for Wiley.
One we will focus on research and publishing we're wildly as one of the world's leading sources of new knowledge in the form of science scholarship and thought leadership.
Two we will focus on our digital platforms and solutions, which deliver powerful capabilities that help people to use new knowledge to innovate and solve problems.
And three we will focus on critical in demand vertical markets, such as health Sciences material Science technology in business, we're widely as a global leader.
So wildly is all about knowledge creation and knowledge application in critical vertical markets.
This is a very large opportunity that I'm talking about and it's underpinned by strong durable market trends.
Moreover, Wiley has sustainable defensible competitive advantage that will drive consistent growth and increasing profitability.
These advantages start with our branded content, most notably in the strong draw of our globally respected journal brands.
Why at least 2000 peer reviewed journals connect as deeply and defensively into the world's knowledge network.
<unk> industry, leading knowledge platforms include the world's number one research content delivery platform, which enjoys billions of user sessions a year.
Other examples include our research knowledge ups, our XI books, courseware, and our catalyst team effectiveness platform.
Together, our content and platform businesses form a virtuous circle of knowledge creation and knowledge application.
Our critical mass in key signs of verticals, such as climate science oncology and chemistry further accelerate our advantage for example, as we publish more top quality oncology research our brands grow stronger and we attract more oncology authors and practitioners as the volume grows our health science offerings.
Grow stronger.
A further network effect is created by wireless global roster of research academic and corporate partnerships.
We've rallied this network over the past few years to create new ways to generate value from and for the research ecosystem.
While these market position gives us direct access to one of the more valuable audiences in the world the global community of $15 million researchers and many millions of problem solvers that leverage their work.
As a central player in the ecosystem, we provide access to this network and accelerate the work of its participants.
We're moving swiftly to realize this powerful vision for Wiley and this will result in a more focused company with unique defensible assets sustainable untapped opportunity and significantly better financial characteristics.
We've now taken a very hard look at our portfolio and have now made some important choices about what is core to our future growth and profitability and what no longer fits with our long term strategy.
Specifically on the left side of this page you'll see that we will be divesting three substantial noncore businesses University services widely edge and cross knowledge going forward. These assets will be classified as held for sale.
Combined these assets held for sale generated $393 million or 19% of <unk> FY2023 revenue, but only 10% of our adjusted EBITDA.
The collective EBITDA margin of these assets was 10, 9%.
As a reminder, university services or OPM helps leading universities manage their online degree programs wildly edge also known as talent development works with global corporations to find train and place hard to find digital talent.
In cross knowledge provides digital professional development content platforms to major multinational corporations.
These businesses have wonderful colleagues strong client lists and good long term potential. Nonetheless, we've determined that they are non strategic to Wiley is knowledge company direction and that each of them will need more attention and investment then we are able to deliver.
Note that we also completed the divestiture of test prep in advancement courses in the fourth quarter. So they are listed here as well.
Now when you Peel those pieces away you can see on the right side of the page that the assets that make up the new Wylie generated $1 $6 billion of revenue.
Youll notice that focusing Wiley is greatly improving our margin profile.
These assets represented 81% of our reported fiscal 'twenty three revenue, but they generated 90% of our reported EBITDA.
New wireless EBITDA margin fiscal 'twenty, three would have been 23, 3% compared to 29% for widely before our portfolio moves and this was before we rightsize our cost base and eliminate stranded cost.
This work has begun and the benefits will begin to show up later in the year.
Going forward research will continue to be the primary driver of our growth profit and cash flow.
In fiscal 'twenty three research represented two thirds of new wireless ongoing revenue and it delivered a 35% EBITDA margin.
Its revenue is over 95% digital and it is largely recurring.
Going forward, our current reporting lines of research publishing and research solutions will remain unchanged.
Our new learning segment includes our gold standard education, and professional content courseware and platforms.
A third of new wireless fiscal 'twenty three revenue excluding the business as held for sale was generated by these learning lines.
Going forward the two reporting lines for learning will be academic, which is education publishing and professional which includes professional publishing and our team development or assessment business.
Collectively learning generates a strong EBITDA margin, we will begin reporting on this segment in Q1.
The new research and learning segments complement each other strategically and operationally, both develop and deliver high value content and content platforms and similar in demand verticals, and we anticipate capturing cost and revenue synergies as we move forward in fact portion of our academic titles are already authored by leading research.
<unk> from our research network.
To summarize we are deepen implementation of a three part program to unlock value for our shareholders.
One we are focusing wildly on the large sustainable opportunities in research publishing and the delivery of knowledge solutions.
In fiscal 'twenty, four we will be driving article volume, improving our publishing operations and driving scale and solutions too.
Two we're divesting several assets that we have determined are non core and that detract from our ability to win in our core focus areas.
We're not able to provide a precise timeline right now, but we are progressing at a promising pace.
And three we're streamlining our organization to support our new strategy and right sizing our cost base to reflect these changes.
We will see related restructuring charges in fiscal 'twenty four.
Fiscal 'twenty four will be a transition year as we move rapidly to implement this plan and we will update you on our progress as we make our way through the year.
I'll now turn it over to Kristina to discuss more details about our fiscal year 'twenty three performance and our outlook for 2004.
Thank you Brian .
Yes, we are embarking on a clear and decisive plan to simplify our portfolio.
This will enable us to focus on our most competitively advantaged businesses in order to drive consistent growth by streamlining the organization expanding profit margins and deploying our capital more efficiently.
We had execution teams managing on multiple fronts, and we're moving swiftly and with care.
We look forward to updating you on our progress to create significant value for our shareholders.
Let's turn now to our performance.
Brian walked you through our full year results I'll talk to the fourth quarter.
Revenue was down 2%, mainly due to a $13 million hit related to temporary disruption.
On the earnings front, adjusted EPS, and adjusted EBITDA were up 32, and 23%, respectively, driven by committed restructuring savings and prudent expense management.
As a reminder, the.
Actions, we took this year generated $35 million in your savings $18 million in the fourth quarter alone.
Our adjusted EBITDA margin for the quarter was 26% compared to 23% in the prior year.
Let's move now to our segments, where I'll touch on both the quarter and full year results.
Research publishing revenue declined 5% this quarter and 1% for the year.
Results were impacted by the Hendawi disruption and lower article volume as Brian discussed.
<unk> publishing revenue for the quarter was essentially flat and up modestly for the year.
As a reminder, we expect the Hendawi path to continue to weigh on our results in fiscal 'twenty, four but largely recover in fiscal 'twenty five.
We are executing well on our strategy to inherent legacy retail subscriptions to our multi year transformational read and published models.
We closed the year with 35, new transformational agreements for a total of 79, representing nearly 3000 institutions.
In the fourth quarter alone, we signed the University of California, They 10 academic alliance and National and regional agreements in India, Turkey and Thailand.
We continue to build out our Cascade strategy of finding initially rejected articles and another more appropriate home within wireless portfolio.
While it doesn't cover 70% of the articles that received mostly due to improper fit with the first submitted manuscript and the first journal to which it was submitted.
We work to find a match that we can transfer these quality articles to another journal within <unk> portfolio and we do this using intelligent process that leveraging AI enabled document classification.
One in five authors are now accepting our transfer offers and we expect to make steady progress here in fiscal 'twenty four and beyond.
Research solution revenue declined 2% this quarter due to market headwinds, notably lower corporate spend on marketing advertising and career centers.
This offset continued growth in platforms.
We recently announced an important new partnership with the society of automotive engineers, our SAE to build and manage a career center for professionals pursuant career involving electric and alternative fuel vehicles.
The partnership will offer 128000 professionals career advice and research tools and job matching powered by innovative AI technology.
The transition to electric vehicles is a big area for research and we are having a strong presence throughout.
For the year research solutions revenue was up 7% or 1% organically due to lower corporate spending.
We continue to make good progress in expanding our solutions partner Network planning 112 Society and corporate partners. This year for services ranging from open research consulting and production to content platform and corporate education.
Our upsell and cross sell momentum also remained strong.
18% of our solutions partner now subscribed to more than one wildly product or service, 5% subscribed to more than three.
This is a prospectively from 16% and 1% in the prior year.
Research solutions is well positioned for future growth.
Adjusted EBITDA in research this quarter rose, 4% due to expense management and lower incentive compensation.
Full year adjusted EBITDA declined 2%.
Our full year adjusted EBITDA margin of 34, 9% was in line with prior year.
Now onto academic.
Publishing revenue in the quarter was down slightly driven by declines in Frank course material offsetting modestly higher revenue and professional publishing.
Revenue was down 7% for the year.
Academic publishing continued to be impacted by the slowdown in consumer spending an unusually sharp inventory reductions at a key online retailer impacting both education and professional lines.
We believe this 23 inventory correction is now behind us.
University of services revenue declined 4% in the quarter and 8% for the year driven by ongoing enrollment headwinds and lower revenue sharing our long term renewals.
Enrollment remains a challenge throughout the industry.
This quarter, we ended Brandeis University in Massachusetts, as a new partner and did not renew three others due to either university of leadership changes or because we determined the potential is limited.
Adjusted EBITDA for academic this quarter was up 30%, mainly due to restructuring savings and expense management.
For the year it was down 13%.
Our fiscal 'twenty three adjusted EBIT margin was 21, 4% down from 22, 8% in the prior year period.
As discussed we are divesting University services and recently closed on the sale of test prep and advanced <unk> strategic Credentialing.
We will continue with our publishing businesses under the learning segment, and we see the long term potential and our unique competitive position for in demand categories like business and stem.
Our strong brand reputation for polishing excellence and our overall margin profile.
Let's turn now to talent.
As a reminder, this reporting segment will be discontinued after this quarter with two of the three businesses now held for sale, including talent development and cross knowledge.
We are retaining our assessments line and it will fall under our learning segment.
This afternoon's generated $73 million of revenue in fiscal 'twenty, three and has been a consistent performer for us.
The business provides team development tools that are delivered to employees through digital platforms and an authorized distributor network of independent trainers.
Companies continuously invest and team development in our assessment group is a gold standard provider with solid growth at attractive margins.
Talent revenue for the quarter was up 12% driven by placement growth and robust volume assessments.
We added one new multinational corporate clients this quarter, a large global bank for a total of 15, new clients for the year.
After the quarter closed we landed two large U S based companies and health care provider and a media company.
For the year talent revenue was up 24%, although we are beginning to see lower placements due to attack hiring contraction.
Adjusted EBITDA for the quarter was up 10% from higher revenue offset by inflationary pressure on placement costs.
Full year adjusted EBITDA rose 18%.
Our adjusted EBITDA margin was 21, 1% versus 21, 6% in the prior period.
Let's turn to cash flow and our continued solid financial position.
Free cash flow for the year was $173 million versus $223 million in the prior year with the variance driven by planned restructuring payments of $21 million higher interest payments of $18 million and lower cash earnings.
On capital allocation, Capex was $104 million $12 million lower than prior year and there were no material acquisitions. This year. We noted two small divestitures in Q4.
In the near term our priority is executing on our substantial change program, including working through the divestitures and structural improvements.
During this transition period that we will be very patient and thoughtful regarding acquisitions.
We spent $77 million on dividends and $35 million on share repurchases this year modestly higher than last year.
We purchased 832000 shares this year compared to 544022.
Our current dividend yield is over three 5%.
As a reminder, last June we raised our annual dividend for the 29th consecutive year, something we're very proud of.
I will provide an update on our near and long term capital allocation strategy when we get to October .
At year end, we had $107 million of cash on hand, and undrawn revolving credit of $749 million or.
Our total credit facility size remained at $1 5 billion.
Finally, net debt to EBITDA ratio was one five at the end of April compared to $1 six in the prior year.
I feel very good about our financial position and we'll continue to actively manage our debt profile.
Now onto our transition year outlook.
As you can imagine our visibility is temporarily eliminated as we process, our substantial strategic and structural improvements.
We have the divestitures stranded cost and related corporate efficiencies to work through.
That said, we feel it important to provide guidance based on what we know today.
We will provide updates as we gain visibility into the full impact of our changes.
This guidance will cover the new Wylie, meaning research and our newly defined learning segment.
And excludes the businesses held for sale.
Starting in Q1 these assets will be excluded from our adjusted results.
In fiscal 'twenty for research revenue is expected to be flat.
Backing out the Hendawi special issues publishing pause our base business is anticipated to grow 3% driven by open access and solutions.
We look forward to paying the special issues disruption behind us and getting back to overall research segment growth in fiscal 'twenty five.
And learning we.
We expect steady or market conditions and professional publishing than we saw in fiscal 'twenty three.
Enrollment in print demand remain constrained near term and higher education, offsetting a modest growth expectation in our professional lines.
Therefore, we are anticipating a low single digit decline in the lending segment.
Adjusted EBITDA, excluding the divestitures is anticipated to be in the range of $305 to $330 million down from $379 million in fiscal 'twenty three.
Our EBIT margin for our go forward businesses is projected to be 19% to 20% down from 23, 3% in fiscal 'twenty three.
This is a short term dip in this transition year.
We had the revenue issues I, just discussed and our employment costs have risen significantly year on year due to the combination of an incentive compensation reset and wage inflation.
While these compensation structure heavily utilized as variable incentive awards and since we did not meet most expectations. This year, our bonus accrual was down significantly.
And has been restored to target in fiscal 'twenty four as is customary and this is responsible for $30 million of EBIT impact.
Finally, we are implementing the business optimization program, we told you about last quarter and expanding its scope as we look towards a smaller portfolio.
The goal of the program is to drive operating efficiency and modernization, while reducing corporate overhead.
From this work we estimate our run rate savings of at least $100 million over the next three years.
We'll further detailed the scale and scope of this program in our October Investor Day.
I also want to emphasize that we expect to more than recover our fiscal 'twenty three margin of $23 three as we exit fiscal 'twenty four and progress from there.
Here too we will have more to share in October .
For now we're working through a very eventful fiscal 'twenty four.
On adjusted EPS, we are anticipating a range of $2 <unk> to $2 40 down from $3 48 this year.
In addition to lower projected EBITDA, we have 42 cents of non operational items weighing on EPS. Thanks.
They include 21, a tax impact related to a higher tax rate <unk>.
<unk> 11 of higher pension expense and 10 of higher interest expense.
Note that while these adjusted effective tax rate is expected to rise from 17, 9% this year to approximately 25% in fiscal 'twenty four.
This is primarily due to a less favorable mix of earnings by country and an increase in the UK statutory rate.
In terms of pension expense. It is important to note that our largest pension plans are in the UK and in U S and had been frozen since 2013 and are approximately 90% funded.
In terms of quarterly phasing this transition year for new Wiley, we anticipate being down on adjusted revenue and materially down on adjusted EBITDA for Q1, and Q2, largely due to the hand down year over year impact.
We expect significant improvement in the second half as comparable as improve and as cost savings begin to materialize.
We are not providing a free cash flow outlook at this time.
First as you know, we don't provide an adjusted free cash flow metric.
Given the uncertainty around timing as it relates to the divestitures and the amount of restructuring payments. There is no clear weighted guide that would be useful at this stage.
Before I hand, it back to Brian Let me quickly summarize.
We're divesting businesses that will allow us to focus on a more profitable and competitive core and drive margin expansion in fiscal 'twenty five in 'twenty and beyond.
We're right sizing our cost base and freeing ourselves of the efforts and cost attached to the held for sale businesses, which will result in material cost savings over a multiyear period.
And finally, we're driving operational excellence speed efficiency and cost synergies across research and learning.
And with that I'll pass the call back to Brian .
Thanks, Christina let's now talk a bit about our growth outlook as Christina noted where growth constrained in fiscal 'twenty four due to the special issues situation and the continued cyclical softness in print publishing.
Despite these short term issues, we're quite optimistic about growth as our core revenue drivers resume their more normal trajectories.
The research market remains consistently strong due to the ever increasing global R&D spend that drives demand for research publishing as such article volumes are now resuming their normal mid single digit growth patterns and as they do why we will get at least our share.
We will benefit from Hendawi has returned to strong growth as we ramp up its publishing program.
Our growing list of solutions partners will be another source of renewed growth.
We see them requiring more widely services as the OE transition continues.
And we have a deep pipeline of upsell opportunities.
The growing wildly network also bodes well for audience monetization.
It will benefit as corporate marketing spend bounces back and as our audience monetization offerings grow.
We continue to see increased corporate spending on professional development as workforces adapt to hybrid work models and changing skill sets.
We also expect our learning publishing lines to benefit from a recovery in consumer spending and enrollment after a rough 2023.
In short we feel very good about the growth profile of wildly as we move through fiscal 2000 and for the fiscal 'twenty five 'twenty six.
Before I close I want to say just a few words about generative AI a topic that I know is on everybody's minds.
Not surprisingly, we've been keeping our eye on Gi for awhile and ensured we believe that these technologies present far more opportunity than risk.
In all of its knowledge businesses wildly plays at the top of the quality permit the world relies on us for our topic specific journals titles and platforms that deliver reliable up to date high impact information.
Yes, generative AI can certainly create large volumes of derivative pretty good content.
But that will just make wildly as brands more valuable in our fresh impactful content, even more essential.
Moreover, we believe these technologies provide real opportunities to enhance both our competitive position and our profitability and we're working hard to enlist these powerful tools to improve content creation, our platforms and our production processes.
In one case, we're starting to use Gi to draft home more content for our courseware titles. This will significantly reduce costs in a very expensive part of the publishing process.
And another area, we're using AI based tools to screen for fraudulent Gi created content.
This is very timely given today's concerns about research integrity.
As with any new technology, we must be both visionary and vigilant, we must defend our IP against unauthorized use while ensuring our value proposition speaks for itself.
We must also watch for potential ethical issues, such as ensuring learning equity and academic integrity.
Even as we capitalize on its potential we will closely monitor the evolution of AI and plan for its impact.
We covered a lot of ground today. So let me quickly summarize the key messages before we open it up for Q&A.
We are taking significant strategic actions to sharpen wireless focus and unlock value.
We are leaning into our core strength as a global leader in knowledge creation.
In doing so we will focus more fully on the large opportunities in research publishing and knowledge solutions, leveraging our sustained competitive advantages.
We will now divest non core assets and education, making a stronger faster more focused and more profitable.
Through fiscal 'twenty, four we will be streamlining our organization and right sizing our cost structure to align with our more focused mandate.
24 will be a transition year as we work through these actions and as wireless core revenue drivers rebound.
Wiley will exit 2020 for more focused and more profitable and we expect material performance gains in margin acceleration in fiscal 'twenty five in fiscal 2006.
As always wildly strong balance sheet and cash flow will allow us to reinvest in the company walk while rewarding long term shareholders with dividends and share repurchases.
We'll be working through the changes throughout the year and look forward to sharing updates with you as we go along the way.
At our October Investor Day, we will share more detail on our new wildly strategy and on our multi year business optimization program. We will also deliver three year financial targets.
This is a big moment for wildly and we are very excited about what's ahead.
As always I want to thank our colleagues for their passion and their support and for all they do to drive impact for researchers and learners worldwide.
Also want to thank all of you for joining us on the next phase of wireless journey, which begins today.
We've been at this for over two centuries, and our next phase looks very promising.
We will now open the Florida comments and questions.
To ask a question please press star one.
First question is from Daniel Moore of CJS Securities. Please go ahead. Your line is open.
Thank you, Brian Christina for all color and as you said at the outset lots of unpack So I've got a number of questions.
I'll start with Hendawi, just if you could give the specific revenue and EBITDA contribution or loss embedded in your fiscal 'twenty four guide how much of a year over year decline in EBITDA on an adjusted basis as Hendawi driven.
Hey, Dan it's Christine here I'll take that one and so for fiscal year 2004.
We are expected to decline year on year about $30 million to $35 million in revenue, which dropped about 20% to $25 million on the EBITDA.
The EBITDA lower 25 $20 million to $25 million versus fiscal 'twenty three correct.
Got it.
Very helpful more important there.
Let's talk a little bit about the revenue opportunity and margin profile longer term relative to your initial expectations for that business and just help us understand your confidence why the issues experienced year to date won't recur.
Yes.
As the seminal question Dan.
Thanks for it.
So.
Our position.
<unk> was certainly affected last year, our financial performance was certainly affected significantly.
Pack if you unpack the issue, it's very easy to see that this is a one time short term issue.
Bad Actor's got involved.
Wiley led to the fore and we publicly took control of the situation teaching the industry what to do based upon it it had a significant impact on our revenue and we are slowly.
Ramping up the program again to make sure that we do it prudently because at the end of the day. We are brands were the widely brand and where our journal brands and we must make sure that we do.
We always do.
What is necessary to ensure that.
Okay, not as creators and then ask consumers have trust in those brands. So thats a little rhetoric, but it is really what we believe now as we look forward.
They're our open access businesses are have been growing very quickly they're growing very quickly now.
And they are accelerating through the year when we look at look into last year, we know about.
As I discussed earlier about these short term declines we saw an article volumes that were due to the Covid thing unwinding.
And as we've come out of that what we've seen throughout the year is an acceleration in our OE.
Output. So for example is across last year our.
OE output across the company was I think 6%.
And it grew by the fourth quarter to 11% and we expect it to go up from there on pure gold output is growing even faster.
So we're seeing that acceleration, we're seeing the signs.
That we are on the right track.
As you know we've committed very heavily to the open access movement, we're leading it and we're going to benefit from it across Wiley.
Our expectation for <unk>.
It was a couple of fold one it was it would accelerate our position in that market, which it has.
And then it will provide significant growth, which it has and will provide the ability to provide significant cascade across our across our portfolio that we can find homes for the for the many hundreds of thousands of articles that we get every year that are not published.
Our expectations are the same going forward, we expect that over the next 12 months to 18 months, we will be fully ramping back up so by 'twenty. Five we are we're back on course with our volume growth and it should drop to the bottom line at or close to the margin very healthy margin that it always has.
Across all of our open access, but certainly across the Hendawi.
The hendawi.
We asset so relative to our initial expectations. This acquisition has outperformed.
If you just look aside for a minute against the very short term thing that happened to us.
But we're going to lead our lead the industry out of it and we feel very very good about the future of our overall open access program.
And then I was going to jump back in I, just want to correct myself on the EBIT year on year and $25 million to $30 million between 'twenty three 'twenty four.
And what is the EBITDA loss, then implied for fiscal 'twenty four.
The EBIT.
The EBITDA loss.
Not the delta, but the actual impact the negative impact of EBITDA on the overall for Hendawi in 'twenty four.
Okay, well, we'll get back to you on the details behind that but for now.
Brian you by saying that our revenue will be down.
Yes.
Yes, yes.
Yes.
Got it.
Okay sticking with research just pretty healthy growth obviously.
3% projected X hendawi in terms of the P times Q model is there any way.
As OE and mixed model become a bigger piece.
To think about the relative mix of P times Q embedded in that guidance.
Yes, as you know we've been discussing for a while as we move through these transformative transformative agreements are transitional agreements we have.
We stopped discussing them as individual items I will say that if you.
You were to separate it out now is around 33% 34%.
Maybe a little bit less than that.
But but it's growing significantly we made a bet.
On.
On the P times Q model that has played out.
So as we've moved from more traditional subscription or Remodels to the P times Q model, we've certainly seen a direct correlation in the math play out about our assumptions there so.
So.
How should we.
I'm not sure I'm, 100% getting at your question, Dan If you want to clarify if I missed something.
Yes.
It's obviously, a volume driven model to some extent and just kind of getting a sense of pricing relative to that the volume growth relative to relative to relative.
Relative to both parts of it.
So if you if you simplify the world into a binary between subscription and OE or P times Q.
I would say a couple of things one is it's all driven by volume ultimately because the value of our subscription models are both about the volume of product, we put in there and the quality of our brands that sort of the equation and the same is true on the other side.
On the P times Q side, if we have the brands we have the pricing power. If we have the brands we get the volume if we get the volume and we have pricing power. The future is bright because I will say that we as you would expect we model this out at the beginning.
With multiple scenarios to see whether we can be bold enough to make the commitment we have.
And we have been at or above our expected case, all the way through since we began this four years ago.
So good pricing power on the side of it that way and I'll say.
Yes, I'll just leave it at that.
Makes perfect sense.
Gears in terms of the divestments understand timing is very much out of your control and hopefully there'll be patients there but.
Are the expectations that these would be sold as a package or individually.
Any way to sort of put a maybe even large guardrails around what your expectations would look like from a proceeds perspective, yes.
Yes, we won't be commenting on proceeds today.
We are making a strategic decision here not a financial one.
And we're not so as we as we look forward what I will say is we are proceeding as rapidly as the markets will allow and in some cases, we're proceeding very rapidly.
These are very high quality assets with lots of potential in parts of the market.
That should do very well in the long run and we in each of them have assets that are considered gold standards. So we expect a very healthy market for them, having said that.
It's a very odd time to be coming to market and so we have to be patient in how we how we look at it.
Valuations in the space are not what they once were and we have to be reasonable in our expectations. So I don't want to set expectations too high having said that to repeat what I said a minute ago. These are great assets and we expect significant interest and in fact, we've already seen significant interest in them not.
Not just in the past years, but actually.
We've got plenty of and we've had plenty of inbound even without this call and I expect we'll get more from here on it.
Makes sense.
You also asked another question you also asked another question, which was package or individually.
The answer is.
If I were betting man I would say we are selling it individually, but they are fantastic assets and for investors, who understand deeply understand this space. They will recognize that these are terrific assets and there could be.
Our package package sale.
But I'm not going to make it at this point in time.
Sure sure.
Shifting to back to the core or whats the remaining businesses the learning business academic and professional publishing had been under some pressure obviously cyclical here.
But some longer term pressures on print.
The shift to digital is well documented.
Looking out beyond this year is there.
Inflection and I understand that the synergies between that and the research business, obviously, but is there an inflection to positive growth kind of over the next 123 years that you see and what would drive that.
Yes so.
Specifically with regard to the last question I don't want to set outsize expectations.
Guarding those businesses, what I'll say is that there are significant pockets of growth within our academic excuse me within our learning business, we've seen our platform our digital platform businesses, such as ibooks relative extremely fast rate the digital products do very well.
And as we look to to the professional lines.
The.
Traditional publishing part of it what we always call our trade business tends to.
It tends to go up and down based upon the trends in publishing which are.
From a demand driven but a very solid business I don't expect lots of growth out of it for sure but it is a very solid business and on the on the professional.
On the assessment or team development business.
Terrific business with lots of growth and great profitability characteristics.
The only thing that we would say I would say in addition about growth itself is that.
<unk> is.
<unk> has continued to be an issue it will continue to be issue, but overall it contributes to a very solid base that is very profitable and very compatible with the rest of the businesses. The choices. We're making today are about aligning businesses, where we are strong we have proven assets and brands, where we have the compatibility and can draw.
<unk> synergies to reduce redundancy and duplication, where we can.
Where we can.
Where we can where we can win and where that can benefit wildly financially. So while we're not looking at that overall segment as a as a.
Profound growth driver it has very attractive financial characteristics from a profitability perspective, and so as such with its compatibility and synergy it fits very well with the overall.
With the overall portfolio and I think youll see increasing synergies over time.
Indeed, no doubt.
Christina just Dan I also want to stress that what we saw last year was.
Market related headwinds related more to consumer demand than to structural changes in the business. We've continued to see unit volumes.
Hold up.
The issue is as been inventory channel it overtime, but.
We saw consumer demand issues, we saw some enrollment issues and we all know consumer demand ebbs and flows. We all know enrollment has ebbed in the last couple of years, we expect it to return to growth.
One of the things just as we talked about on the research side. Some of the things that were going on demand wise are really about profound structural changes in the market. They would just about the ebbs and flows of that.
Understood Christy.
Kristina I just wanted to clarify one or two things that I heard.
Think I heard 23% plus EBITDA margin kind of entering fiscal 'twenty five we expect to get back to that level on a run rate basis as I hear that correctly.
Yes.
Yes, okay.
As we exit 'twenty three 'twenty four yes, yes, yes.
Yes.
300, 2020, 2025 years, we're going to be.
Interestingly five.
Yes, yes, yes.
That makes sense and <unk>.
You mentioned $100 million in cost savings over a three year period I believe is that incremental to the 60 plus that we've been talking about.
Or is that.
Included in that.
It is incremental to the 60% that we've talked about previously and that is our best thinking as we sit today.
It's over we are doing our best to operate as much as we can but as you know with divestitures you can't really predict the timing, but we are we aren't aggressively against our infrastructure and we're going to give you some updates as we get them.
Quarter, two Investor day, Yes, Dan we have a.
Broad program outlined.
To identify the opportunities that will result from the new focusing the alignment.
And the.
Slimming down the organization.
It'll take us a little bit of time for us to work through it but as we work toward our October Investor Day, we will get significant clarity on it and expect to be given a much more clarity not just on the program at the time, but on our growth and profit trajectories in the future I misspoke a minute ago. So I want to clarify I jumped in to clarify.
But I said the wrong thing as we go through fiscal 'twenty four we will be we.
We will be gaining steam.
We go on our way to fiscal 'twenty five.
I said 23 on that list.
No worries that's great last one for me I appreciate the patience.
And I understand this year is a very challenging year from a cash flow perspective or at least from a clarity perspective, given all the moving pieces.
But just.
Thinking about the algorithm or the core.
If the new base of adjusted net income is.
130 million this.
This year backing into that based on your EPS Guide.
And hopefully growing significantly thereafter as you just described how do we think about free cash flow conversion kind of beyond 'twenty four.
And looking beyond the divestments.
Our priorities for capital allocation is M&A is still part of the mix or is it more likely to be internal investments in the grid more aggressively returning cash to shareholders. I know there was a lot for the last question, but I appreciate it.
On jumbo, let's turn that yeah. So look.
Our business as we have decided to focus and prudent.
Well it has and you can see it Dan already with just what we've shared our.
Cash flow characteristics will be increasing not decreasing.
The business we are in our more profitable you can see it in our EBITDA, even though we're not providing cash flow characteristics. So on a on a go forward basis, our conversion should be significantly significantly good proportion to our EM.
Proportional to our revenue growth.
As we as we go forward so I feel very good about it.
Most we will most certainly.
We will certainly be gaining steam as we go through this year and into next year. So as we think about capital and capital allocation priorities are clear, we're focusing on our research and publishing businesses and in the knowledge solutions business, our platforms businesses that support and extend those businesses in our market position. In addition, we are.
Focusing on the vertical markets, where we have strength and will continue to invest in those so with those as our priorities. We don't expect to be particularly active this year.
<unk> will be extremely cautious this year from from an acquisition perspective.
But we will keep our eyes out and we will align our investments against those priorities.
As we go forward.
And just to add to that Dan.
We just made some really important decision because we talked about today and so it takes some time to work through the detail and also our use of proceeds but we are going to evaluate all our options and depending what Brian has mentioned also there also keeping an eye out for our debt structure.
In light of.
The macro environment. We also always look at our share repurchases all of those take time as a reminder, about half of our cash flow is dedicated to dividends and buybacks.
Very good. Thank you again for taking the questions and color.
Great well look I want to thank you all.
Are there any other questions.
There are no further questions at this time.
Okay with no and I want to thank everybody for joining today, it's been a big call for US we're looking forward to the year to come as we gain more clarity and more momentum around our new strategy.
I definitely want to rethink our colleagues worldwide for their continued support and passion.
In this journey.
We're committed to unlocking even potential and now we have a more clear focused aligned strategy that would go forward into the future and generate unlock value for our shareholders and all of our stakeholders. Thanks very much we look forward to sharing results in Q1 and updates and September look forward to seeing you all at our.
Our Investor day in October .
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Thanks.
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Yeah.
Yeah.
Thanks.
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Okay.