Q4 2024 John Wiley & Sons Inc Earnings Call
Good morning, and welcome to why at least Q4 fiscal 'twenty 'twenty four earnings call. As a reminder, this conference is being recorded at this time I'd like to introduce why at least Vice President of Investor Relations. Brian Campbell. Please go ahead. Thank.
Thank you and welcome everyone with me today are Matt kitchen, why these interim president and CEO.
Kristina Vantassel executive Vice President and CFO, and Jason <unk> Executive Vice President and General manager of research and learning.
Note that our comments and responses reflect management's views as of today and will include forward looking statements.
Actual results may differ materially from those statements.
The company does not undertake any obligation to update them to reflect subsequent events or circumstances.
Wiley provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends.
These measures do not have standardized meanings prescribed by U S. GAAP and therefore may not be comparable to similar measures used by other companies nor should they be viewed as alternatives to measures under GAAP.
Unless otherwise noted we will refer to non-GAAP metrics on the call and balances are on a year over year basis, and will exclude held for sale assets and the impact of currency.
Additional information is included in our filings with the SEC.
Copy of this presentation and transcript will be available on our Investor relations webpage at investors that Wiley Dot com.
Now I'll turn the call over to my kitchen.
Thank you, Brian and thank you everyone for joining us today.
What a difference a year makes today, we look forward with renewed confidence and optimism as a leaner and stronger wildly.
We are executing with much greater discipline and rigor, we have met and exceeded our stated commitments.
And we are seeing strong momentum in our businesses and value creation activities.
I'll start by reviewing how we did against our objectives and provide an update on the emerging and exciting Jan AI opportunities in front of us.
I'll walk through our fourth quarter and full year performance and then review our momentum heading into fiscal 'twenty five.
Kristina will walk through our value creation plan progress Reinvestments segment performance in fiscal 'twenty five outlook. After summarizing we'll open it up for questions <unk> will be joining us as well.
While he is enabling the creation of new knowledge and its application in critical areas of the global knowledge economy in Science Medicine technology, and engineering and business Economics and finance.
As our knowledge company Wily has played a foundational role in everything from the industrial Revolution to the information age.
Now widely is beginning to play a critical role in the rise of artificial intelligence and machine learning.
Our knowledge content tools and services remain as relevant as ever.
It's been a very eventful year for Wiley.
And I'm proud to say that we finished strong.
Research is seeing strong underlying momentum heading into fiscal 'twenty five after some unusual challenges to start the year.
Demand to publish and output are well ahead of expectations.
Learning continues to outperform driven by solid execution and favorable market conditions.
<unk> demand is accelerating.
We've already executed two content rights projects for large tech companies.
I'll talk more about this opportunity in a moment, we are piloting gen AI productivity tools across the organization. We are deploying it in a research publishing platform and using it to drive publishing efficiency and detect research integrity issues.
Today's wiley is about execution, blocking and tackling and creating meaningful shareholder value.
To that end, we have closed on the sale of two of our three divestitures and the third is in process.
We further accelerated our $130 million cost savings program with 70% of it now action and in year savings higher than anticipated.
Finally.
We increased share repurchases in the second half of fiscal 'twenty, four and rewarded shareholders with a dividend raise for the 30th consecutive year.
We have more work to do of course to realize our full potential and that work will never end.
We are going to continue to deliver cost savings and efficiency gains.
Speaker Change: Above and beyond the $130 million program.
As we drive toward further margin expansion beyond fiscal 'twenty six.
I am very pleased about our progress so far and very confident in our direction of travel.
Let's talk about how we delivered on our stated commitments.
When I stepped into the role right around mid year.
I said that we were going to be relentless in our execution and moved with certainty on our value plans operational improvements reorganize culture.
This is what we've done.
We delivered revenue at the higher end of our guidance as projected.
As widely as more predictable and focused with greater visibility and consistency.
All of US are proud to say that we exceeded our EBITDA and EPS guidance, even after revising them upward in Q3.
Today, Wiley is leaner more competitive and more efficient.
We set out to accelerate our restructuring plans and operating improvements over the back half of the year and we've done exactly that.
Last June Kristina projected to exit the year.
At or better than our fiscal 'twenty, three adjusted EBITDA margin, which was 23, 3%.
We delivered a Q4 margin of 28, 3% or.
Or 25, 6%, excluding the AI deal.
This is not a sustained exit rate heading into fiscal 'twenty five as seasonality played a role.
That said, we remain on track with our margin expansion targets in fiscal 'twenty five 'twenty six and we fully expect to deliver on these while reinvesting for sustained long term growth.
As discussed we have materially exceeded our in year cost savings goals. This year.
We originally projected $30 million and ended with $60 million of savings.
This is the result of relentless execution and the importance of hitting the ground running.
Free cash flow is a consistent strength of ours, and we delivered $114 million versus our projection of 100 million, mainly due to cash earnings outperformance.
As a reminder, we are in a muted two year period for cash flow due to restructuring and investment.
But we expect to be back in the $200 million range in fiscal 'twenty, six and see continuous upside from there.
Finally, the Wiley culture has been reinvigorated by the move to a much simpler and more efficient organization.
Everyone is in sync and rowing in the same direction, it's just a lot easier to get things done here.
Let's talk about the AI opportunity.
Wiley has become one of the early beneficiaries of Gen AI development are.
Our high quality content and science learning innovation is foundational for training and falling tooling large language models and applications.
La <unk> AI developers and R&D intensive corporates can use it to greatly improve the accuracy safety and impact of their models and shorten lead time to market.
Demand is therefore accelerating.
This quarter as previously discussed we executed a $23 million licensing project with a large tech company for our previously published learning content.
We are following that up with a $21 million project with another Tech company for a mix of learning and research content to be recognized in fiscal 'twenty five.
Both of these projects are of limited duration with limited rights and use in this case from model training purposes. They are nonexclusive subject to extension and do not constrain us from pursuing further opportunities.
We see the new AI business opportunity in two stages.
The first as discussed is content licensing or providing limited access to select content for the purposes of developing Gen AI models.
The opportunity is right here and now.
In addition to the two executed deals we are seeing significant interest from other LLM developers for increasingly specific and technical content.
This is precisely what wildly specializes in with over 200 years of history behind us.
It's still too early to size these opportunities, but we are seeing a growing interest while remaining prudent on the scope of the rights granted.
The second stage is developing new business models around content application that brings us ever closer to the customer these.
These include recurring licensing arrangements as these models evolve and as companies bring our content into the AI environments for example.
<unk> is a leading provider of scientific content, we can embed this content into gen AI applications for pharmaceutical companies healthcare providers chemical companies government agencies and many others.
Wiley is also a leading provider of business and economics content, which we can embed into applications with financial services providers.
These are just some examples of the opportunities ahead.
In addition to content licensing and application another very real Gen AI opportunity for us is in product and publishing innovation.
Through various AI based tools, we are transforming how we publish by shortening authoring time and effort, increasing editorial productivity and streamlining content workflow.
We have already deployed AI into our research platform using it to safeguard research integrity at the point of article submission.
In fact, we've introduced a new service that incorporate six distinct tools to identify potentially compromised content.
Including paper mill similarity detection.
Problematic phrase recognition.
Researcher identity verification.
And Jen AI content detection among others.
We're already piloting this service with key Society and publishing partners as the industry tackles. This issue head on.
Through our past experience, we have become a thought leader in this area and we are sharing our insights with others.
Finally, we're already deploying AI to materially improve office productivity and customer service as we begin to transform how we work.
And customer service for example, we're already seeing cost savings and reductions in handle time through the latest AI augmentation and automated processes.
To summarize while he is highly valued and well positioned in the evolution of AI.
We're closing deals developing additional opportunities and seeing both quality and efficiency gains today.
As I've said before we are confident that the advancement of these technologies will be a contributor to customer value productivity and growth in the years to come.
Let me briefly touch on our performance for the quarter Kristina will provide more detail.
As a reminder, we will be excluding our held for sale or sold assets in our commentary unless otherwise noted.
We finished strong due to our accelerated value creation plan savings and the $23 million Gen AI contents rights project and learning.
Adjusted revenue was up 4% to $441 million driven by growth in learning, including the Gen. AI content rights project academic continued to outperform as it has all year.
This was partially offset by timing and lower ancillary print and licensing revenue in research.
Adjusted EBITDA rose, 7% to $125 million from the combination of revenue growth and restructuring savings as I mentioned adjusted EBITDA margin for the quarter was 28, 3%.
Adjusted EPS rose, 2% to $1 21, with strong revenue performance, partially offset by tech write offs as part of legacy decommissioning.
Our Q4 GAAP results continued to be impacted by the divestitures and related activity as well as restructuring.
Onto our full year performance as a reminder, fiscal 'twenty four was a transitional year as we made the necessary moves to become a higher performing and more profitable wildly.
These structural changes and transition year dynamics were evident in our GAAP results shown here.
Ill be focusing on our adjusted results.
Full year adjusted revenue declined modestly to 161 7 billion.
Outperformance in learning was offset by a decline in research due to the Covid research lag and the effects of the Hendawi disruption.
Also note we had some currency favorability on revenue this year of about $11 million.
Adjusted EBITDA was down 3% to $369 million largely due to revenue performance.
Our adjusted EBITDA margin for the year was 22, 8%.
Adjusted EPS was down 19% due to a combination of lower operating income and higher interest and tax expense.
And as noted free cash flow of $114 million compared to $173 million in the prior year due to a combination of transition year factors, including lower cash earnings and restructuring plus higher interest.
As a reminder, we don't reported adjusted free cash flow metrics. So this number includes the held for sale assets.
Let's talk about our momentum heading into fiscal 'twenty five I'll start with research.
Submissions growth a critical leading demand indicators has risen to 15% on a trailing 12 month basis.
This is considerably higher than we expected and speaks to the global research and demand to publish be recognized and further ones career wildly enables all of this is a leading peer reviewed publisher.
Output growth has rapidly accelerated after a slow start we saw a marked improvement throughout the year without growing by mid single digits in Q4.
We're seeing solid growth patterns returned in the U S EMEA and Japan.
And we're seeing strong demand in the high growth markets like China and India.
In fiscal 'twenty five we expect to see continued mid single digit output growth and thats reflected in our revenue projections.
Third our institutional models are strong with steady growth expected.
As a reminder, these models which include both subscriptions for research libraries, and institutional open access agreements with consortia or single institutions are recurring in nature.
Fourth gold open access is expected to continue to deliver about 20% growth to refresh gold open access is our author funded OE model.
As always journal quality and impact of Paramount.
And we remain very well positioned as the best in class publisher with leading portfolios in chemistry materials Science energy oncology food science and many others.
Finally, the development of our research publishing platform is accelerating.
We recently successfully completed our first large scale journal migration and we're now expecting to have the platform fully deployed in fiscal 'twenty five earlier than we originally projected.
This platform will allow us to deliver incremental growth by standing up new content offerings, and improving article refer and transfer it should lead to a material reduction in turnaround times and cost per article and allow us to detect research integrity issues through the use of AI.
After some outliers this year, we're now seeing the obvious upside of a simpler wildly focused intently on its research core.
Let's now turn to our momentum and learning it was a consistently good year above and beyond the Gen AI deal.
Market conditions turned favorable, particularly in academic digital content and courseware undergrad enrollment increased for the first time since the pandemic.
Institutions gravitated towards inclusive access models, where the cost of digital course content is added to the students' tuition and fees.
And our stem courseware product continued to see strong growth in adoption and usage we.
We expect this positive momentum to continue.
I wanted to take a moment and commend the team this year for not only delivering better than expected revenue growth, but significant margin acceleration as well.
In professional we're seeing very good momentum in signing up new waters entitles, a result of simply focusing on this profitable business more than we have in the past.
Given the long lead time to publish we'll see the benefit of these signings beginning in fiscal 'twenty five.
Our assessments business grew modestly in fiscal 'twenty, four, but we expect better growth from the recent expansion of our sales partner network.
Finally, as noted we're going to continue to respond to and actively pursue opportunities for our learning content and Jen AI models.
In summary, we are pleased with our overall momentum heading into fiscal 'twenty five.
I'll turn it over to Christina.
Thank you, Matt and Hello, everyone.
I wanted to start by thanking our global colleagues for all they have done to get US here leering much stronger company than we were last June.
At this time last year, we announced our value creation plan.
I said, then we were about to embark 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 while streamlining the organization.
Expanding profit margins and deploying our capital more efficiently.
So let's review our progress to date.
We reorganized the businesses from three desperate segment into one go to market research and learning team under J Flynn.
This has been a great move for us and we continue to advance commercial gains and unlock synergies from this important realignment.
We've closed on the sale of both University services and wildly edge.
James Flynn: Total consideration for both is approximately $175 million subject to adjustments.
Our primary goal here was to free ourselves at least stressed noncore assets to focus on our profitable and cash generative core.
The remaining divestiture cross knowledge is in process and is immaterial.
We actually had $90 million of run rate savings and our $130 million savings plan with $60 million of that being realized in year.
The remainder will be action in fiscal 'twenty five ahead of schedule.
The key drivers here are corporate overhead savings.
The savings from the consolidation of various functions in our real estate footprint.
As well as technology savings from the retirement of legacy systems and reduced hosting costs.
During the year, we further consolidated our office footprint with two office closures and for reductions.
Since March of 2020, we've reduced our global office footprint by around 40%.
Also note that.
As part of our tech consolidation and modernization, we brought our tech deck this quarter.
As a reminder.
Minor, we expect half of the $130 million of savings to flow through to margin and have to be reinvested.
This is reflected in our fiscal 'twenty five outlook and fiscal 'twenty six targets.
In addition, we will also be reinvesting a portion of the proceeds from our large content deals towards driving sustained profitable growth.
Let's talk about where are we investing.
Our primary objective is to drive additional growth in research, where we have strong competitive advantage and pent up demand.
This includes scaling our journal portfolio and referring transfer capabilities.
Extending our flagship journal brands into additional verticals and optimizing go to market to attract and retain authors.
It also includes expanding our editorial capacity and corporate research sales teams.
We will also invest in signing new in demand authors and titles on the learning side to better leverage the publishing infrastructure, we have in place.
Second.
We are investing in <unk> growth and productivity initiatives, including optimizing our content for LLM deployment.
Leveraging journey INR content enabled applications and developing new business models.
We are also investing in AI productivity tools for our colleagues.
We're modernizing our systems to improve speed decision, making and productivity.
We've talked about two specific areas here, our research publishing platform and our infrastructure modernization.
We are confident these initiatives will enhance revenue growth and margin acceleration beyond fiscal 'twenty six.
Got to meet the ever increasing demand to publish and take full advantage of the journey opportunity.
We also expect to lower our cost of published their workflow automation content reuse and the decommissioning of legacy systems.
Finally, we expect to deliver a superior author experience through faster turnaround times and article transfer, which we believe will give us competitive advantage in the marketplace.
Let's turn to our research performance in this unusual year.
We had the adverse impact in the Covid research lag.
As noted the Hendawi Journal portfolio is now integrated within the widely open access portfolio and the covered lag is fully behind us.
So I'll focus on the quarter.
Research revenue was down 3% due to timing and declines in our ancillary prints and licensing revenue.
The timing impact involved the portion of our journal revenue slipping into fiscal 'twenty five a fairly common occurrence stemming from the divergence of our fiscal year and the research library budget season.
We expect to recover this delayed revenue in Q1.
Research solutions had a down quarter due to soft market conditions for advertising and recruiting offsetting moderate growth in our publishing solutions business for societies.
We have good visibility based on customer contract signed in fiscal 'twenty, three and 'twenty four until we expect better performance in 'twenty five.
In Q4, adjusted EBIT After research declined 12% due to the unusual year over year incentive comp swing, which we've discussed all year.
Our Q4 margin was 34, 6%.
In summary, we feel good about our research heading into fiscal 'twenty five.
Strong publishing Kpis and trends are expected to deliver double digit revenue growth and gold open access steady growth at our multiyear institutional models and material improvement in our solutions.
Let's talk about learnings outperformance.
The team executed exceedingly well and driving both mid single digit growth and 600 basis points of margin expansion. This year, yet another outcome of a more focused wiley.
For the quarter academic revenue rose, 22% or 8%, excluding the journey ideal driven by continued strong growth in digital content, and courseware and rates and licensing.
Also according to industry data U S undergrad enrollment rose one 2% in the fall and two 5% in the spring say positive trend there after several years of decline.
Professional revenue rose, 13% in the quarter, but was down 5%, excluding the journey ideal.
Performance is driven by modestly lower backlist and frontline sales.
To refresh <unk> content revenue is split evenly between academic and professional.
Adjusted EBITDA and learning for the quarter rose, 54%, mainly driven by revenue performance and cost savings.
Our Q4 adjusted EBIT margin was 43, 5%.
In summary, we feel good about learning.
Higher education market conditions are more favorable now than in recent past both in terms of enrollment and demand.
In professional we drove higher title and author signings, which will start to come online in fiscal 'twenty five and beyond.
And assessments, we expanded the number of sales agents by 19%, which gives us a good outlook for our personality assessment and team development products.
Okay, let's move from segments into corporate expenses.
For the year, we saw a 4% increase as expected in the corporate line to $163 million offsetting value creation plan savings.
The net increase was largely due to lower incentive accrual in the prior years due to underperformance.
Higher executive costs, this year related to severance and transition year consulting fees.
Let's turn now to our fiscal 'twenty five outlook.
Giving many indicators and favorable trends, we're projecting full year revenue.
$1 65 to $1 six 9 billion for topline growth of 2% to 4%.
This is driven by an expectation of low to mid single digit growth in research and low single digit growth in learning.
Two important things to note.
First our outlook includes the jet AI content deals with $23 million recognized in fiscal 'twenty, four and 'twenty 1 million recognized in fiscal 'twenty five.
It does not reflect additional content licensing deals for Gen AI models.
We will update our guidance during the year as additional deals materialize.
Adjusted EBITDA is expected to be in a range of $385 million to $410 million for a growth of 4% to 11%.
This reflects a margin target of 23% to 24%.
Performance is expected to be driven by a combination of revenue growth and continued cost savings, partially offset by reinvestment in research Gen AI and infrastructure modernization.
Adjusted EPS is expected to be in the range of $3 25 to.
To $3 60.
For growth of 17% to 29%.
The primary drivers of our higher expected adjusted operating income and accrued interest income from the divestitures offset a higher interest and tax expense.
Free cash flow is anticipated to be approximately $125 million up from $114 million.
This is due to improved working capital and lower restructuring payments offset a higher capex and higher incentive compensation payments compared to the abnormally low payouts in the prior year.
As noted we anticipate capex to be approximately $130 million compared to $93 million. This year due to near term infrastructure investments.
Sal Castro remained below historical norms in fiscal 'twenty five due to a combination of elevated capex and restructuring activities.
As a reminder, we expect to be at $200 million in fiscal 'twenty as cash earnings continued to improve capex normalizes and restructuring papers.
In terms of quarterly phasing the $21 million Gen AI content rights project in fiscal 'twenty five will be recognized in the first two quarters of this year.
Moving onto our financial position.
Free cash flow for the year of 149 was down $59 million as expected.
Lower adjusted EBITDA, higher restructuring and interest payments and lower incentive comp payments offset lower capex.
For the year, we allocated $122 million towards dividends and share repurchases of $10 million versus prior year.
45, nine of that was used to acquire one 3 million shares at an average cost per share of $34 71.
This compares to 832000 shares repurchased in the prior year period.
Our current dividend yield remains above three 5%.
Finally, net debt to EBITDA ratio was one seven at the end of April compared to $1 five in the prior year.
With that I'll pass it back over to Matt.
Thank you Christina.
Let me quickly summarize the key takeaways.
As we put this very eventful year behind US there is a renewed sense of confidence and optimism across our organization.
We're meeting and exceeding our profit and performance objectives were.
We're moving decisively to uncover near turnaround opportunities.
We are reinvesting where we have a unique right to win.
And we're moving faster and making work life easier.
We're seeing strong underlying momentum in research and outperformance in learning.
<unk> momentum is accelerating with two executed content rights projects, we're seeing additional interest from other AI providers.
We've made significant progress on our value creation plan, including divestitures as savings.
We have more work in front of us, but we have made tremendous strides.
We're confident in our fiscal 'twenty five outlook for revenue growth and margin expansion.
And we see expected continued margin and cash flow acceleration in fiscal 2006 and beyond.
I'll finish with our fiscal 2006 financial targets.
On revenue, we anticipate low to mid single digit revenue growth as a core drivers and publishing and solutions continue to benefit from ever increasing demand and a strong competitive position.
As with our fiscal 'twenty five outlook on 26 targets do not reflect any additional gen AI content licensing projects.
Our adjusted EBITDA margin is expected to grow to 24% to 25% driven by high quality revenue growth and value creation play of savings.
And free cash flow is expected to rise to $200 million as capex returns to more normal levels and restructuring payments taper off.
Beyond fiscal 'twenty six we're focused on delivering strong consistent revenue growth at or above market growth.
Continued margin expansion from greater publishing scale and delivery leaner processes and operations and a more efficient infrastructure.
And further free cash flow acceleration as cash earnings expand cash flow conversion improves and Capex normalizes.
I want to thank all of you for joining today.
And I want to thank our Wiley colleagues for their many achievements this year and the continuous drive and dedication.
As I said last quarter, nothing unites us more than being on a winning team.
I'll now open the Florida any comments and questions.
At this time, if you would like to ask a question simply press star followed by the number one on your telephone keypad again that is star one to ask a question. Our first question will come from the line of Daniel Moore with CJS Securities. Please go ahead.
Good morning, Thanks for all the color and thanks for taking the questions.
Just updating my thoughts here, so maybe start Matt Christina with research now that were fully cycled past the headwinds and challenges in <unk>.
As well as the Covid Hangover just talk about the momentum Youre seeing in terms of article submissions clearly 15% in the quarter is really strong.
Where's that momentum come sheet coming from geographically as well as.
Specific disciplines, and just how sustainable is that type of growth.
In your mind.
Hi, Dan its Matt.
Matt and thanks for recognizing that's a critical leading indicator right. If the health of the research franchise as we have J with US. Let me is Jay who's close to the market here to give you some color on that Jay.
Dan how are you. Thanks for the thanks for the question. So yes, we are optimistic about the.
The trends in article submissions and just a reminder of those those don't convert and correlate directly with revenue growth we have.
Multiple ways to monetize those submissions through our continued growth and subscriptions as well as our hybrid open access business models in our in our gold open access model. So.
Specifically around sort of breakdown of geography, what we're seeing is a return to growth essentially globally.
In an article submissions we.
Still see very strong performance and <unk>.
China and India.
Those are still leading markets for growth for us, but encouragingly the more mature markets.
Especially the United States and Europe have also rebounded.
And we saw that in the latter half of the year, particularly in Q4 and and.
We're looking forward to that continuing I think.
That's one of the reasons, we feel very optimistic about.
Our trajectory and the momentum that we've established in fiscal 'twenty four heading into 'twenty five.
That's very helpful. Appreciate it.
Switching gears, a little bit you, obviously talked a lot about the AI tools youre developing and implementing.
Maybe just talk a little bit more.
Take care.
A step higher just 30000 feet. The changes you've made in terms of processes procedures since <unk> and your confidence that we won't have additional similar issues going forward given the growing presence of fudge fraudulent research in and obviously the scope of the opportunity that youre seeing in Golar.
Gold Road.
Sure so.
As Matt mentioned and we rent in the prepared remarks through a list of tools that we already have in production I have eight.
Speaker Change: AI tools in production right now that are <unk>.
Built off the dataset that we acquired <unk>.
During the last couple of years that give us indications of where there might be for example paper mill activity. It helps us verify who authors are there synthetic content detection image manipulation detection, a whole set of tools and I think the way Matt described it is accurate we are a thought leader in this space based on hard won experience.
<unk>, we've announced already partnerships with <unk>.
<unk> Society, and one publisher of the world's largest membership society in academics.
And that's the eye Tripoli and another publisher Sage to pilot these tools on their systems and we've got a lot of inbound interest as a result, I think as I've said before.
My comments. This is an ecosystem challenge and there is a mix of things happening between incentives geographies.
And the tools that meet that we need to shore up our own processes are deployed now Matt mentioned progress, we're making with our new platform development I'll point to that is another example of the work that we feel good about heading into fiscal 'twenty five yes, let me add a comment.
And just for color you know this is a scale business will be presented with over $1 million.
Articles for our candidates for publication today, so the investments, we're making in infrastructure and AI are critical for enabling us to take advantage of economies of scale here.
Very helpful. Matt.
And certainly Jay the color.
Obviously, great to hear the interest in AI and machine learning continues to grow.
The $23 million deal this quarter.
Really encouraging another $21 million deal.
In early 'twenty fiscal 'twenty five I know, it's hard to size the opportunity, but when you think about it generally.
How has the lowest hanging highest revenue fruit kind of been picked.
Do we think of these as relatively small toe in the water type deals.
Now as you get your hands around the opportunity relative to what licensing could grow into over time.
A couple of thoughts.
This is Matt and then I'll ask Jay to comment also.
We're at the beginning of a wave here I think and we're learning as we do this we're approaching it very cautiously each.
Each deal is highly customized but there is considerable interest.
The question is we want to pursue this on terms that are favorable to both us and the licensee and so we're very cautious about structuring these deals in the most effective way to protect our.
Our future rights, but still take advantage of the fact that the kind of content, we have which as you know.
Fact, based indexed quality content is very appealing to these model builders.
And the other desire we have is to convert these future deals into more of a recurring revenue arrangement that a one time revenue arrangements. So I would say we're in the early days from a learning point of view, but there is considerable interest we're seeing.
Let me ask Jay to add his comments.
Fully aligned with that I think.
What we're seeing in the market is obviously interest from.
The Big Tech companies, who are doing training.
Yes.
As Matt noted that.
And that opportunity is substantial and where we're encouraged by it but as Matt noted there are at the very beginning stages here.
This revolution and information technology, and information services, and we're well positioned I think to support the needs of various end markets, who are building their own in house tools to support for example, drug discovery and life Sciences, and chemistry, and oil and gas and.
Computer Science and engineering week, we published some of the best material in the world on that and so one of the things we'll be focused on in fiscal 'twenty. Five is the information needs of those end markets as well as.
That continued development as I mentioned earlier of tools to support our own internal quality processes and product development.
Perfect.
Maybe switching gears, a little bit and this might be a little bit more christina, but 90% of the $130 million run rate.
Cost savings now actions.
I assume the remaining $40 million will fall in fiscal 'twenty, five or most of that is that fair.
Yeah, Hey, Dan.
Accurate.
We'll have about 40 million accident and twenty-five that's ahead of schedule and we are feeling really good about and mentum off of that as well you know about half of that and is cooperating and organizational optimization.
And about 40 of that is in tech reductions and strategic decisions in the last part of that is just in our business operation optimization. So these are trends that we are in that.
We were able to accelerate.
And really as we got more focused on what we are really spending our time and energy on we're able to relate to to execute that in a really effective way.
Very helpful and then.
Of the.
I think you said $60 million.
Was realized in fiscal 'twenty four is that right.
And yes, yes.
And year.
And so the.
In year, Okay. So that.
Was half of that reinvested in other words I know half of the 130 will be ultimately reinvested, but.
Is that ratio does that kind of hold in year versus what's to come.
Approximately yeah, yes when.
We're in the ballpark so does not.
Investment is still to come or anything like that okay.
Very helpful. And then the Capex guide of $130 million. This year is that right.
That's right.
And.
It's still given that the EBITDA guide.
125 million I guess, what I'm. The punch line is 125 million of free cash this year it seems potentially a little light to me even with the elevated capex.
Maybe just talk about your working capital assumptions and whether there could be a little bit of conservatism built in.
To that expectation.
Sure we felt like we are.
Coming out of our.
Out of our <unk>.
Transformation year. So we've got a couple of things that we are.
Grappling within 25, one is is the payment of our incentives.
Our next fiscal 'twenty, four which is an elevated number because if you recall and we talked about all year the year before we had.
<unk> reduced our incentive payments work.
The last of that coming through in 'twenty, five and that's about $30 million and then we've got obviously the elevated capex versus this year.
And then and then a couple of other small things that are just that are impacting that however, we are seeing we are seeing momentum.
As we come out of it.
Out of all of those things are executing on our strategy and so we're going to continue my continuing to monitor this I also want to just.
And on the Ginnie idea, we talked that for the first half of fiscal 'twenty. Five we are using a lot of that a lot of those proceeds to redeploy back into the business as Jay rightfully mentioned, because they really want to make sure that we're seizing this opportunity not just NII, but also to drive harder on our research opportunity and are learning opportunity. So.
Does it does it have that brought to us what you are seeing in free cash flow.
Makes sense and that does not include potential cash.
Payments from <unk>.
Dispositions correct.
No that's not correct, Okay, and then lastly.
You talked about capital allocation, obviously, you picked up the pace on buybacks you know free cash flow.
We'll pick up this year, but then should really accelerate in fiscal 'twenty six and given the stickiness of your model are you likely to be increased.
Increasingly aggressive in terms of buying back shares given the comfortable leverage or.
Can you just talk about your priorities for capital allocation for the next 12 to 24 months and thanks for all the color.
Yeah, Yeah sure. So you know we're going to continue to respond to opportunities.
For capital planning and strategy I think you did see us increasing our share purchases purchasers and rightfully so.
And that was even doing less immediate cash period, where we're going to continue looking at different things as our free cash flow climbs back up towards our normal I'll call it steady state.
We do have a very.
Gary a intricate purchase plan it will monitor our volatility in our stock price as we go and capitalize capitalize on that as we as we see them.
See what are our capital appointment needs are versus the market.
So we feel really.
Really good about that actually yeah.
Okay. The.
Very good congrats on obviously all the progress this year.
And look.
We look forward to catching up soon thanks again.
Thank you thank you Dan.
Again for any questions Press star one on your telephone keypad and our next question will come from the line of Nick Dempsey with Barclays. Please go ahead.
Yes. Good morning, guys just about the AI deals I Wonder if you can tell US is it your book backlist content that is being digested absorbed rather than New York journals, I'm, sorry, if I missed that and the second question in terms of how many other people.
Out there who are interested in paying money for this are we talking a handful more or could it be 10 plus.
It's Matt I'll begin and then ask Jay to fill in any blanks I've left so it's it is book content at this point.
And.
The in terms of interest.
You know obviously, it's it's a concentration of.
The tech companies Kendall today, its a concentration of the tech companies, who can afford to build the large language models, which are very expensive to develop however.
There are extensions of this as <unk>.
Please look to tailor these market these models to their particular markets.
So there is a potential markets for example, let's say in pharmaceutical where a pharmaceutical company might want it.
Augment the model with very specific training data that fits its particular market needs. So.
Again as I said, it's early days as this market is developing but there will be I believe extensions as people look to augment the large language models, Jay do you want to embellish on that.
Happy to add a little bit more color, Matt, but I think you know that.
First of all Great question, and where we're encouraged by the interest that we're seeing where we're getting inbound interest.
From a variety of sectors as as Matt described and I just want to reiterate that this is something we're approaching on a deal by deal basis, where.
We are in fundamentally we are in.
The writes business in many ways and so this is well trodden ground for us in terms of.
Negotiating these kinds of agreements, but AI is a new frontier and and the opportunities that AI presents us with.
As as Kristina mentioned that gives us an opportunity to reinvest in our core as well as grow our own internal AI capabilities. So I don't want to characterize it.
In terms of numbers.
The size of of the current interest, but as a high quality information services provider in the disciplines that drive.
Speaker Change: The global economy, we feel very well positioned.
To be a provider of content.
<unk> and services related.
To the opportunity.
Thanks can I just tack on a quick follow up would you ever think of doing this with your journal content or is that more complicated by the monetization model for journals relationship with authors et cetera.
So.
Let me stress that these deals none of these deals are what I would characterize as simple IV and are in the book World and the journal World in the database World We were.
Very clear that we have to exercise diligence and we have to we have to be very clear on on rights and things like that what what I will say is that there will be opportunities for us to <unk>.
Explore licensing both journal and book content.
<unk> content is.
Increasingly relevant and me in the context for the markets at that Matt just mentioned.
In the context of.
Large corporate R&D in the context of.
Sure.
Engineering and physics.
<unk>.
And so.
When those opportunities present themselves, we will explore a lot of these companies by our content already.
And so one of the things, they're certainly interested in and we're certainly interested in us talking to them about acquiring rights to use that content in ways.
That.
Our.
Integrated into their own AI programs and of course as I said before we have opportunities to use AI to develop our own products and services there too.
Thank you that's very clear.
Thank you.
Okay.
And there are no further questions at this time I'll hand, the call back over to Matt Kissner for any closing remarks.
Thank you for joining us joining the call today, and we look forward to sharing more more progress on our Q1 earnings call in September. Thank you have a great day.
That will conclude today's meeting. Thank you all for joining you may now disconnect.
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