Q1 2025 John Wiley & Sons Inc Earnings Call
Brian Campbell: Good morning and welcome to Wiley's Q1 fiscal 2025 earnings call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wiley's vice president of Vester Relations Brian Campbell. Please go ahead.
Brian Campbell: Thank you, and hello everyone, I'm with Matt Kissner, Wiley's President in CEO, Christina Van Tassell, Executive Vice President in CFO, and Jay Flynn, Executive Vice President General Manager of Research and Learning.
Speaker Change: Note that our comments and responses reflect management's views as of today, and will include forward-looking statements.
Speaker Change: Actual results may differ materially from those statements. The company does not undertake any obligation to update them to reflect subsequent events or circumstances.
Speaker Change: Also, Wally provides non-get measures as a supplement to evaluate underlying operating profitability and performance trends.
Wally: These measures do not have standardized meanings prescribed by U.S. Gap, and therefore may not be comparable to similar measures used by their companies, nor should they be viewed as alternatives to measures under Gap.
Wally: On that's otherwise noted, we will refer to non-gap metrics on the call, and variances are on a year-of-year basis and will exclude held for sale assets and the impact of currency.
Wally: Additional information is included in our findings with the SEC. A copy of this presentation and the transcript will be available on our Investor Relations webpage and investors.wiley.com. I now turn the call over to Matt Kissner.
Matt Kissner: Thank you, Brian, and thank you everyone for joining us today.
Matt Kissner: At the end of last fiscal year, I said that we were seeing strong momentum in our businesses and value creation activities.
Matt Kissner: and that our culture had been reinvigorated by a much simpler and more efficient whiley. I said then that we look forward with renewed confidence and optimism.
Speaker Change: I'm pleased to report that all of this is playing out in our solid performance indicators, colleague engagement scores, and in our financial results.
Speaker Change: As I said in June, we have more work to do to realize our full potential, and that work will continue.
Speaker Change: But the leadership team and I are pleased with our momentum and progress as we enter the new fiscal year. Our Wiley colleagues around the world have done a terrific job getting our businesses on a successful track.
Speaker Change: I can't thank them enough for their hard work and dedication and their unwavering commitment to serving our customers with excellence.
Speaker Change: In July I was privileged to be named Wiley CEO after serving in an interim capacity since October. I seem no change in my approach.
Speaker Change: We will continue to be relentless in our execution as we publish more high-value content to meet global demand.
Speaker Change: Move decisively on AI growth opportunities, and derive operational improvements and rigor across the organization.
Speaker Change: I am grateful to our colleagues and stakeholders for the positive reception and support.
Speaker Change: and I want to thank the Wiley Board of Directors for their confidence and continued partnership.
Speaker Change: I'll start today with a quick reminder about our two businesses, review how we did against our objectives and discuss our Q1 performance notably the strong recovery in growth with seeing and research.
Speaker Change: I'll also say a few words about how we're thinking about the IP licensing opportunity for Gen AI training and development.
Speaker Change: Christina will walk through our segment performance, value creation activities and reinvestments, outlook and financial position. Jay will then join us for questions.
Speaker Change: As a reminder, Wiley is enabling the creation of new knowledge and its application in critical areas of the global knowledge economy, in science, medicine, technology and engineering, in business, economics and finance.
Speaker Change: Our High Quality Knowledge Content and Solutions remain as relevant as ever.
Speaker Change: Now that fiscal 24 is behind us, I just want to briefly level said and remind everyone what we have focused on.
Speaker Change: Exploding our health to sale or sold segment, we now organized into two operating segments, research and learning.
Speaker Change: The businesses complement one another with high value publishing and solutions in related markets and verticals.
Speaker Change: Our competitive advantage in both include our content libraries, brands, or the relationships, category leadership and reputation.
Speaker Change: In research, Wiley has one of the world's leading journal portfolios, and the industry's most widely used content platform.
Speaker Change: Research Publishing models include both read-only subscriptions, read-and-publish hybrid licenses for institutions and corporations, and author-funded open access where a peer-reviewed article is made freely available for a publishing fee.
Speaker Change: Research Solutions includes publishing and audience solutions for societies and corporations.
Speaker Change: The research segment has a large recurring revenue base that's 96% digital.
Speaker Change: Learning is academic publishing and chorusware for higher ed students and professional publishing and assessments for professionals.
Speaker Change: Learning, which is particularly strong across STEM and business categories, is seeing an accelerating shift to digital and institutional formats.
Speaker Change: As noted, learning content is increasingly valued for Gen AI training models.
Speaker Change: Let's talk about the quarter, as expected, was seeing a stroke recovery in growth in research, driven by favorable demand trends and execution.
Speaker Change: I can emphasize enough that great work our research team has done to get us back on track and delivering very solid results.
Speaker Change: Learning benefited from a second Gen.A.I. Content Rides project and delivered courseware growth in a seasonally light quarter.
Speaker Change: At the same time the learning team continues to drive margin expansion reflected in strong adjusted EBITDA growth this quarter.
Speaker Change: We've essentially executed our full value creation plan ahead of schedule.
Speaker Change: Just last week we closed off third and final divestiture, and during the quarter, actioned the remaining 40 million of the 130 million cost savings program.
Speaker Change: In June, we raised our dividend for the 31st consecutive year. Now many companies of any size can say something like that. We also increase share repurchases again this quarter.
Speaker Change: Finally, Wiley recently saw a mocked elevation in a colleague engagement and satisfaction scores, which are critical to our ongoing success.
Speaker Change: I just got back from a trip to Asia where I visited our offices in China and Japan.
Speaker Change: As with my early trip to India and Sri Lanka, I found our teams in Asia, re-energized and highly motivated by the many improvements we've made.
Speaker Change: Our colleagues across the globe are all aligned and rolling in the same direction.
Speaker Change: Let's talk about how we delivered on our T. Objectives this quarter. First, this to drive recovery and growth and research.
Speaker Change: We experienced an unprecedented year in fiscal 24, but remained fully confident and in a recovery. Given the essential nature of what we do, the enduring draw of a journal brands and the momentum we saw exiting the year.
Speaker Change: Now, I'm happy to say that our recovery is playing out as expected if not better, both at financial performance and leading indicators.
Speaker Change: Our second objective is to move decisively on near-term AI opportunities.
Speaker Change: We executed a second content rights project with a large tech company this quarter, with 17 of the 21 million total value recognized in the quarter.
Speaker Change: Nearly all of it is in learning. We are seeing interest from other large tech companies and R&D centric orbits.
Speaker Change: i
Speaker Change: Our third objective is to continue to drive performance and profit improvement through our value creation plan. As noted, we've closed all of our divestitures and actioned the 130 million cost savings program.
Speaker Change: Let me turn to our first quarter performance.
Speaker Change: Note I'll be excluding our health for sale or sold assets in my commentary, unless otherwise noted.
Speaker Change: As discussed, we're off to a good start with adjusted revenue up 6% to 390 million.
Speaker Change: Performance was driven by 3% growth and research and 14% growth in learning, notably the 17 million contribution from the content rights project, excluding the law J.I. contribution revenue rose to percent.
Speaker Change: Logested Eva Darrow's 22% to 73 million, driven by revenue performance and run-raid cost savings.
Speaker Change: These savings were partially offset by investments in marketing and technology.
Speaker Change: Our adjusted Eva Damage and for the quarter was 18.6% up from 16.3%.
Speaker Change: Adjusted EPS was up 74% due to higher adjusted operating income and a crude interest income from our researchers.
Speaker Change: A few words about our gap of fullness. The gap revenue decline was largely impacted by foregone revenue from sold businesses.
Speaker Change: While the Gap EPS-Los was primarily due to a Gap in Comptax Adjustment related to our University Services
Speaker Change: Our adjusted effective tax rate is not impacted.
Speaker Change: i
Speaker Change: Now, on to our scroll recovery and research. As a reminder, we saw our leading indicator's rise significantly in the back half of fiscal 24, giving us confidence heading into the first quarter.
Speaker Change: That's because the attributes that make this business great haven't changed, research is tightly correlated with global R&D spend, which is ever increasing.
Speaker Change: Getting published is essential to a researcher's career, so demand is resilient. While he is one of the world's leading research publishers with a very large catalog of high-impact journals, which form a competitive mode.
Speaker Change: And finally the evolving open access publishing model allows more researchers around the world to publish and therefore expands our total addressable market.
Speaker Change: Our research team is making it happen.
Speaker Change: They're delivering better than expected numbers in submissions, output, and open access growth.
Speaker Change: We've increased the top of the funnel by significantly enhancing our marketing capabilities, streamlining our sales efforts, and increasing our editorial capacity.
Speaker Change: They've increased publishing output by investing in peer review and referring transfer.
Speaker Change: They're focused on the ride markets and investing in the ride turtle brands while continuing to optimize a turtle portfolio.
Edward: Edward just getting started. Here are some metrics to pay attention to.
Speaker Change: Global R&D spend is up around 8% since 2022 to an estimated 2.53 trillion dollars. This number is expected to continue to grow at 4 to 6% annually over the long term.
Speaker Change: Rolton R&D drives research submissions.
Speaker Change: Wiley is capitalizing on this trend, in Q1, submissions grew by 18%. We continue to operate more effectively and take advantage of favorable demand dynamics.
Speaker Change: T1 output growth, which is a lagging indicator flowing from submissions, was up a very solid 6%.
Speaker Change: As noted, we've seen normal healthy growth patterns return to the U.S. and Mia and Japan and strong demand continue in high growth markets like China and India.
Speaker Change: Per year ago we said that output would lag submissions by six to nine months and it's playing out as expected.
Speaker Change: Our lull to year institutional models, combining subscriptions and institutional open access, groomed nicely in the quarter, and gold open access continues to grow at double digit rates.
Speaker Change: We continue to build on our position as a top rank journal publisher with 22% of our listed journals receiving an increased impact factor in the annual journal citation reports.
Speaker Change: The reports of one of the most widely used sources of citation metrics to analyze the performance of peer-reviewed journals.
Speaker Change: While the drills make up nearly 11% of all citations in the JCR index
Speaker Change: Finally, our research end to end platform development is proceeding on plan, and we expect to fully launch it by the beginning of fiscal year 26
Speaker Change: We're very excited about what this platform will enable to stand up new content offerings and improve article referring transfer, reduce article turnaround times and cost per article, and detect research fraud through the use of AI.
Speaker Change: As always, there's more to be done, but a good start to the year for research and a confident outlook.
Speaker Change: I'd like to spend a few minutes discussing AI
Speaker Change: As a reminder, our high-quality content in science, learning, and innovation is foundational for training, and largely with your models and building applications.
Speaker Change: AI developers and R&D intensive corporates can use a tool to improve accuracy, safety and impact.
Speaker Change: Demand therefore remains robust.
Speaker Change: This quarter, as previously discussed, we executed a $21 million licensing project with a large tech company for previously published content. Our second such deal in consecutive quarters.
Speaker Change: 17 million of the 21 million was reported in Q1. The remain did to be realized during the year.
Speaker Change: Nearly all of it is in learning as LLM training demand is currently higher for book content than research journal content.
Speaker Change: The Emerging Demand for Research Content is more for LLM application development in specific disciplines and verticals.
Speaker Change: It's important to note that both of these projects involve back-list content in most cases three years or older.
Speaker Change: The contracts are of limited duration, with limited rights and use, notably model training purposes, they are non-exclusive, subject to extension and do not constrain us from pursuing further opportunities.
Speaker Change: These projects are incremental, they do not cannibalize a poor.
Speaker Change: We see the content licensing opportunity in two stages.
Speaker Change: The first as discussed is participating in the near-term development of foundational models.
Speaker Change: The second is in recurring licensing arrangements over the medium to long term, as these models and applications come online and as information centric corporates bring our content into their AI environments.
Speaker Change: Let me say a few words about how we're approaching AI from a licensing perspective.
Speaker Change: First
Speaker Change: Content licensing is not a new or AI-specific activity for us.
Speaker Change: It's really a quarter of a mission and part of our day-to-day work to maximize the reach, readership and revenue of our books and journals.
Speaker Change: We believe we have a responsibility to engage with AI developers.
Speaker Change: Our content is critical to ensuring scientific accuracy and impact and delivering optimal learning outcomes.
Speaker Change: Therefore, ALI models should be trained on high quality, authoritative content, like Wiles.
Speaker Change: At the same time, we're being very selective about choosing when and how to partner with AI companies.
Speaker Change: We are careful to pick the right ponderes, and to we've adhered to a strip set of principles around AI.
Speaker Change: The rights of authors and other copyright holders must be protected. Our job as a knowledge company is to ensure it.
Speaker Change: Copyright Halders should receive fear compensation for their intellectual property, consistent with contractual arrangements.
Speaker Change: All in, we aim to be the most trusted partner to authors, societies and associations.
Speaker Change: They will continue to be our North Star as we assess and execute on opportunities in this ever-changing digital landscape.
Wally: All to say, Wally remains highly valued and well positioned in the evolution of AI.
Wally: I'll pass the call over to Christina. Thank you, Matt. I'm pleased to start by saying that we've largely executed our multi-year value creation plan ahead of schedule.
Operator: as a reminder of this conference is being recorded.
Brian Campbell: At this time I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead. Please be used as of today and will include forward looking statements.
Christina: At this point, we've closed all the vestatures and action the $130 million run rate savings program, enabling us to reinvest while driving continued margin improvement.
Speaker Change: Just last week, we close on our final divested shirt cross knowledge.
Speaker Change: As we discussed previously, this is an immaterial transaction, but frees up capital and with their previous ambassadors allows us to focus on our core.
Speaker Change: This quarter, we action the remaining 40 million of the $139 savings plan.
Brian Campbell: Actual results made different materially from no statements. The company does not undertake any obligation to update them to reflect subsequent events or circumstances. Also, Wiley provides non-get measures as a supplement to evaluate underlying operating profitability and performance trends. These measures do not have standardized meanings prescribed by USGAP and therefore may not be comparable to similar measures used by their companies nor should they be viewed as alternatives to measures under gap. Unless otherwise noted, we will refer to non-get metrics on the call and variances are on a year-over-year basis and will exclude held for sale assets and the impact of currency.
Speaker Change: The FQ savings were largely in our corporate functions.
Speaker Change: Stepping back, we finished fiscal 24 with 90 million action and 60 million realized in year.
Speaker Change: With now action, the full 130 million and anticipate realizing 120 million of that by the end of fiscal 25. For an incremental in-year state and benefit of 60 million.
Speaker Change: As noted, around half of that total run rate savings is being reinvested.
Speaker Change: Let's talk about where we're investing.
Speaker Change: We're focused on driving incremental growth in research.
Speaker Change: Where we have clear competitive advantage and demand.
Brian Campbell: Additional information is included in our filings with the SEC, a copy of this presentation and the transcript will be available on our Investor Relations webpage and investors.wiley.com.
Speaker Change: This includes scaling our journal and portfolio and article transfer capabilities.
Speaker Change: Optimizing go-to-market to attract and retain authors and extending our flagship journal brands into additional verticals.
Matthew Kissner: I now turn the call over to Matt Kissner. Thank you, Brian and thank you everyone for joining us today. At the end of last fiscal year, I said that we were seeing strong momentum in our businesses and value creation activities. And that our culture had been reinvigorated by a much simpler and more efficient Wiley. I said then that we look forward with renewed confidence and optimism. I'm pleased to report that all of this is playing out in our solid performance indicators, colleague engagement scores and in our financial results.
Speaker Change: Second, we're investing in AI growth and productivity initiatives, including optimizing our content for a large language model deployment, incorporating AI into our publishing platforms and workflows, and investing in productivity tools for our colleagues.
Speaker Change: Third, we're monetizing our systems to improve speed and productivity. We've talked about two specific areas. Our research publishing platform and back office monetization.
Speaker Change: Let's turn on our research performance.
Speaker Change: Q1 revenue is up 3% due to strong demand and executioner resource publishing.
Speaker Change: Research Publishing delivered 4% top-line growth, driven by exceptional demand and gold, open access and steady growth in our combined institutional multi-year models.
Matthew Kissner: As I said in June, we have more work to do to realize our full potential and that work will continue. But the leadership team and I are pleased with our momentum and progress as we enter the new fiscal year. Our Wiley colleagues around the world have done a terrific job getting our businesses on a successful track.
Speaker Change: As a reminder, our institutional models include both subscriptions for research libraries, an institutional open access agreement with our library consortia.
Matthew Kissner: I can't thank them enough for their hard work and dedication and their unwavering commitment to serving our customers with excellence.
Speaker Change: We expect to remain in this mixed-model environment for a long time to come.
Speaker Change: We also continue to make good progress on our end-to-end research publishing platform. Reducing our publishing turnaround time this quarter and enabling the submission growth we've been seeing.
Speaker Change: Research Solutions with Dan Montesley, due to continued soft market conditions for recruiting, offsetting moderate growth in our publishing solutions business for societies.
Matthew Kissner: In July, I was privileged to be named Wiley CEO after serving in an interim capacity since October. I see no change in my approach. We will continue to be relentless in our execution as we publish more high value content to meet global demand, move decisively on AI growth opportunities and derive operational improvements and rigor across the organization.
Speaker Change: We're doing some very interesting things on the solution side, but they'll take a little time to materialize.
Speaker Change: For example, we're expanding the reach for a medical education program by nearly 3 million healthcare providers thanks to a new partnership.
Speaker Change: Wiley's Medical Education Program allows healthcare professionals to do their jobs better.
Speaker Change: Give them access to information on the latest scientific outcomes, diseases and treatments.
Matthew Kissner: I am grateful to our colleagues and stakeholders, for their positive reception and support. And I want to thank the Wiley Board of Directors for their confidence and continued audorship.
Speaker Change: The end goal is to improve patient outcomes.
Speaker Change: Another important opportunity for us is a spectral data.
Speaker Change: As a leading chemistry publisher, Wiley is one of the most comprehensive spectral database collections in the world.
Matthew Kissner: I'll start today with a quick reminder about our two businesses, review how we did against our objectives, and discuss our Q1 performance notably the strong recovery and growth we're seeing in research. I'll also say a few words about how we're thinking about the IP licensing opportunity for Gen AI training and development.
Wally: In late persons terms, Wally's special database libraries allow end users to identify molecules and molecular compounds based on the unique chemical signature.
Wally: While he has just released two new database collections using advanced AI techniques to significantly expand the number of compounds available for analysis from food-related compounds to industrial compounds.
Wally: The end goal here is to help scientists reach better conclusions faster.
Christina Tassell: Christina will walk through our segment performance, value creation activities and reinvestments, outlook, and financial position.
Speaker Change: Thank you, one. Adjusted EBITDA for research rose 1%, driven by revenue performance, offset by reinvestment in the growth and optimization issues I touched on earlier.
Matthew Kissner: Jay will then join us for questions. As a reminder, Wiley is enabling the creation of new knowledge and its application in critical areas of the global knowledge economy, in science, medicine, technology, and engineering, in business, economics, and finance. Our high quality, knowledge content, and solutions remain as relevant as ever.
Speaker Change: Our Q1 module is 29.3% compared to 29.8% in the prior period.
Speaker Change: In summary, we're confident in our continued growth recovery and in the investments we're making to ensure our long-term success.
Speaker Change: Let's talk about learning.
Speaker Change: Revenue Rose 14% in the Quarter, driven by the Gen A project and continued growth in academic, namely digital courseware.
Matthew Kissner: Now that fiscal 24 is behind us, I just want to briefly level said and remind everyone what we're focused on. Exploding our health to sale or sold segment, we're now organized into two operating segments, research and learning. The business complement one another with high value publishing and solutions in related markets and verticals. Our competitive advantage in both include our content libraries, brands, author relationships, category leadership, and reputation. In research, Wiley has one of the platforms.
Speaker Change: Excluded in the Gen A project, revenue declined 1% in the seasonings small quarter, mainly due to softness and professional publishing in assessments.
Speaker Change: As Matt noted, our backless content learning is in demand for training gen A and models, and what continue to take advantage of this opportunity.
Matt Kissner: We have two projects that are developed and continue to evaluate AA, licensing and opportunities that complement our business strategies.
Speaker Change: And the business itself, academics and online growth again, although Q1 is a small quarter for this business.
Speaker Change: Q2 is our largest, and that's only increased over time due to changing fault-wearing patterns and shifting business models.
Speaker Change: Our STEM digital course, where a product remains a consistent success story, with top-line growth about 30% again this quarter.
Matthew Kissner: Research publishing models include both read-only subscriptions, read and publish hybrid licenses for institutions and corporations, and author-funded open access where a peer-reviewed article is made freely available for a publishing fee. Research solutions includes publishing and audience solutions for societies and corporations. The research segment has a large recurring revenue base that's 96% digital. Learning is academic publishing in courseware for higher ed students and professional publishing and assessments for professionals. Learning, which is particularly strong across STEM and business categories, is seeing an accelerating shift to digital and institutional formats. As noted, learning content is increasingly valued for Gen-AI training models.
Speaker Change: We continue to see strong trends there in terms of winning new institutional agreements and expanding outward into new subject areas like data science.
Speaker Change: Institutions continue to gravitate towards inclusive access models, where the cost of digital course content is added to a student's tuition and fees.
Speaker Change: This remains a nice tail one for us. All to say, academic continues to benefit from favorable trends in sharp focus.
Speaker Change: Professional revenue rose 5% in the quarter, but is down excluding the Jenny Eye Project.
Speaker Change: The new authors and titles we signed up in the second half of last year will begin to benefit us later in this year, but then mostly in fiscal 26.
Speaker Change: Finally, assesses this down moderately this quarter due to moderately reduced corporate spending on training and development.
Speaker Change: Thank you, one. Adjust Ebed F. Learning was up 60% driven mainly by revenue performance.
Speaker Change: Our Q&A was 27.2% compared to 19.4% in the prior period.
Speaker Change: In summary, learning remains on track with expectations.
Matthew Kissner: Let's talk about the quarter as expected with seeing a strong recovery and growth in research driven by favorable demand trends and executions. I can't emphasize enough the great work our research team has done to get us back on track and delivering very solid results. Learning benefited from a second Gen AI content rights project and delivered coursework growth in a seasonally-like quarter. At the same time, the learning team continues to drive margin expansion reflected in strong adjusted EBITDA growth this quarter.
Speaker Change: Let me transform our segments to our corporate expenses.
Speaker Change: For the quarter, we saw a monitor over year increase, driven mainly by higher tech expenses related to our enterprise modernization investment and expense growth driven by inflation, moderately offsetting these CP savings.
Speaker Change: Important to note that corporate expenses here pertain or tour on allocating expenses only, and a price cost are not specifically assigned to a business unit.
Speaker Change: Moving on to our full year outlook, we are reaffirming our guidance.
Speaker Change: We will have more visibility in Q2 as we make our way through the all-important fall-to-master-in-learning and the early part of the calendar 25 library budget season in research.
Matthew Kissner: We've essentially executed our full value creation plan ahead of schedule. Just last week we closed our third and final divestiture and during the quarter action the remaining 40 million of the 130 million cost savings program. In June we raised our dividend for the 31st consecutive year. Not many companies of any size can say something like that. We also increased share repurchases again this quarter. Finally, Wiley recently saw a mocked elevation in our colleague engagement and satisfaction scores which are critical to our ongoing success.
Speaker Change: To refresh, we're projecting full-year revenue of 1.65 to 1.69 billion for a top-line growth rate of 2-4%.
Speaker Change: This is driven by an expectation of low to mid-single-digit growth in research and low-single-digit growth in learning.
Speaker Change: The two AI projects already executed, one in Q4 and one in the first half of this year, largely off that each other, near and near comparisons.
Speaker Change: adjusted EBITDA as expected to be at a range of 385 to 4 to 10 million for a growth of 4 to 11%.
Speaker Change: This reflects the margin target of 23 to 24 percent.
Speaker Change: Performance is expected to be driven by a combination of revenue growth and continue class savings, partially offset by investments in research, Jenny I, and Enterprise Monorization, as well as the impact of inflation on our expenses.
Matthew Kissner: I just got back from a trip to Asia where I visited our offices in China and Japan. As with my earlier trip to India and Sri Lanka, I found our teams in Asia re-energized and highly motivated by the many improvements we've made. Our colleagues across the globe are all aligned and rowing in the same direction.
Speaker Change: The Jesse DPS is expected to be in a range of 325-360 for a growth of 17-29%.
Speaker Change: The primary driver is a higher expected ingested operating income and a crude interesting income from the divestitures offset a higher interest in tax expense.
Matthew Kissner: Let's talk about how we delivered on our key objectives this quarter. First is to drive recovery and growth in research. We experienced an unprecedented year in fiscal 24 but remained fully confident in a recovery. Given the essential nature of what we do, the enduring draw of our journal brands and the momentum we saw exiting the year. I'm happy to say that our recovery is playing out as expected if not better, both in our financial performance and leading indicators.
Speaker Change: Free cash flows anticipated to be approximately 125 million out from 114 million.
Speaker Change: This is due to improved working capital and lower restructuring payments, offsetting higher capbacks and higher incentive compensation payments compared to the prior year period.
Speaker Change: Note that annual cash incentive payouts are made in Q1 for prior year's performance. Over 90% of our colleagues are in the annual incentive plan.
Speaker Change: But noted, although CapEx in the first quarter is tracking behind prior year, we anticipated to ramp up at the remaining three quarters of the year.
Speaker Change: As your reminder of a full-year capex projection is 139.
Matthew Kissner: Our second objective is to move decisively on near-term AI opportunities. We executed a second content rights project with a large tech company this quarter with 17 of the 21 million toning value recognized in the quarter. Nearly all of it is in other large tech companies and R&D-centric orbits.
Speaker Change: Let's turn our financial position.
Speaker Change: Free cash off for the quarter was a use of 107 million in line with the prior year period.
Speaker Change: As a reminder, free cash flow is historically a use of cash in Q1 and Q2 due to the timing of annual journal subscription receipts, which are concentrated in Q3 and Q4.
Speaker Change: Lower CapEx, due to timing was offset by hiring-centive compensation payments related to fiscal 24 performance.
Matthew Kissner: Our third objective is to continue to drive performance and profit improvement through our value creation plan. As noted, we've closed all of our divestitures and actioned the 130 million cost savings program.
Speaker Change: We pay out our annual incentive compensation to Q1 of the following year.
Speaker Change: For the quarter, we allocated 32 million towards dividends and sharing purchases, up from 29 million in the prior year.
Matthew Kissner: Let me turn to our first quarter performance. Note I'll be excluding our health for sale or sold assets in my commentary unless otherwise noted. As discussed, we're off to a good start with adjusted revenue up 6% to 390 million. Performance was driven by 3% growth in research and 14% growth in learning, notably the 17 million contribution from the Content Rights Project. Excluding the LAJI contribution, revenue rose 2%. Adjusted EBITDA rose 22% to 73 million driven by revenue performance and run rate cost savings.
Speaker Change: But we're 12 million of that was used to acquire 295,000 shares in an average cost per share of 42,34 cents.
Speaker Change: Our dividend payout is approximately 3%.
Matt Kissner: Finally, Net Dead to Ebeter Ratio was 2.0 at the end of July compared to 1.9 in the prior year period. And with that, I'll pass it back to Matt.
Christina: Thank you, Christina.
Matt Kissner: Let me summarise the key takeaways.
Matt Kissner: We're also a good start, but we're not declaring victory.
Matt Kissner: We have a lot more work to do to achieve our full potential.
Matt Kissner: Still, I'm encouraged by demand trends and other performance indicators.
Matt Kissner: Our alignment and execution as an organization and the material increase in colleague engagement.
Matthew Kissner: These savings were partially offset by investments in marketing and technology. Our adjusted EBITDA margin for the quarter was 18.6% up from 16.3%. Adjusted EPS was up 74%, due to higher adjusted operating income and accrued interest income from our divestitures.
Matt Kissner: We've turned the quarter on research, a business that has grown consistently over a very long period and remains and every expanding opportunity.
Matt Kissner: Our accelerating performance is not only market-driven, but a collective outcome of many months of hard work and transformation by the team.
Matthew Kissner: A few words about our GAAP performance. The GAAP revenue decline was largely impacted by foregone revenue from sold businesses. While the GAAP EPS loss was primarily due to a GAAP income tax adjustment related to our university services divestiture, our adjusted effective tax rate is not impacted.
Matt Kissner: We're publishing better, we're marketing better.
Matt Kissner: We're investing in the right areas, and it's paying off.
Matt Kissner: Separately, we're moving decisively, but judiciously, in responding to AI opportunities.
Matt Kissner: We're reinvesting where we have a unique right to win, which will benefit us in the years ahead.
Matt Kissner: We're awesome running.
Matthew Kissner: Now onto our strong recovery in research. As a reminder, we saw a leading indicator's rise significantly in the back half of fiscal 24, giving us confidence heading into the first quarter. That's because the attributes that make this business great haven't changed. Research is tightly correlated with global R&D spend, which is ever increasing. Getting published is essential to a researcher's career, so demand is resilient. Wiley is one of the world's leading research publishers, with a very large catalog of high-impact journals, which form a competitive mode.
Matt Kissner: We've largely executed our value creation plan ahead of schedule.
Matt Kissner: Importantly, our culture today is far more energized, motivated and engaged.
Matt Kissner: We can see that in our recent survey results, we're making decisions faster and moving with purpose.
Matt Kissner: We're focused on less but doing more. We're empowering colleagues to make decisions and unlock pockets of growth.
Matt Kissner: We continue to focus on rewarding you, our shareholders.
Matt Kissner: I hope you can see our steadfast commitment to value creation, and where we're focused, our executing, and our allocating capital.
Matthew Kissner: And finally, the evolving open access publishing model allows more researchers around the world to publish and therefore expands our total addressable market. Our research team is making it happen. They're delivering better than expected numbers in submissions, output, and open access growth. We've increased the top of the funnel by significantly enhancing our marketing capabilities, streamlining our sales efforts, and increasing our editorial capacity. They've increased publishing output by investing in peer review and referring transfer. They're focused on the right markets and investing in the right journal brands while continuing to optimize our journal portfolio.
Matt Kissner: And finally, we're confident in our fiscal 25-hour look for revenue growth and margin expansion and remain well on track to meet our fiscal 26 targets.
Speaker Change: Again, what a difference you make.
Speaker Change: I'll finish by thanking our Wiley colleagues for putting us in the position we're in. As I said before, nothing unites us more than being our winning team.
Speaker Change: I'll now open the Florida any comments and questions.
Speaker Change: i
Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in, would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Matthew Kissner: At what just getting started, here are some metrics to pay attention to. Global R&D spend is up around 8% since 2022 to an estimated $2.53 trillion. This number is expected to continue to grow at 4% to 6% annually over the long-term growth in R&D drives research submissions. Wiley is capitalizing on this trend in Q1. Submissions grew by 18%. We continue to operate more effectively and take advantage of favorable demand dynamics. Q1 output growth, which is a lagging indicator flowing from submissions, was up a very solid 6%.
Speaker Change: We'll take our first question from Daniel Moore at CJS Securities.
Speaker Change: Thank you, good morning, Mac, morning, Christina, thanks for taking questions.
Mac: Hi Dan, you know.
Speaker Change: Start with obviously the momentum you were experiencing in terms of article submission.
Speaker Change: and we talk about that throughout the quarter in terms of cadence and so far into fiscal Q2 and how we should think about the potential organic growth and research revenue that that may translate to over the next several quarters.
Speaker Change: Yeah, let me begin and then I'll ask Jay to comment more specifically.
Speaker Change: But, you know, this is a business with long lead times, as we've talked about in the past, there's a publication cycle.
Matthew Kissner: As noted, we've seen normal healthy growth patterns return to the US, India and Japan, and strong demand continue in high growth markets like China and India. A year ago, we said that output would lag submissions by 6 to 9 months and it's playing out as expected. Our multi-year institutional models, combining subscriptions and institutional open access, grew nicely in the quarter, and gold open access continues to grow at double digit rates. We continue to build on our position as a top-ranked journal publisher with 22% of our listed journals receiving an increased impact factor in the annual journal citation reports. The reports are one of the most widely used sources of citation metrics to analyze the performance of peer-reviewed journals. Wiley journals make up nearly 11% of all citations in the JCR index.
Speaker Change: that, you know, it can take six to nine months for an article to actually be published and...
Jay: depending upon the...
Jay: Type of article, revenue recognized so...
Jay: What's really encouraging is where the signals we started to see in the fourth quarter and have continued into the first quarter of a very healthy pipeline.
Speaker Change: I'll let you comment a little more specifically on what it looks like for the rest of the year. Of course, hey, then thanks for your question.
Speaker Change: Campbell, thanks to Jess.
Speaker Change: Reiterate as we like to do when we talk about article submissions. The first is
Speaker Change: Remembering that not all articles submissions convert into public articles.
Speaker Change: There's a lot of variability in the mix. We have higher acceptance rates from certain institutions.
Speaker Change: from certain authors from certain geographies. So the mix of submissions determines long-term article output. But as we've seen in our reported metrics this quarter and...
Matthew Kissner: Finally, our research end-to-end platform development is proceeding on-plan, and we expect to fully launch it by the beginning of fiscal year 26. We're very excited about what this platform will enable to stand up new content offerings and improve article referring transfer, reduce article turnaround times and cost per article, and detect research fraud through the use of AI. As always, there's more to be done, but a good start to the year for research and a confident outlook.
Speaker Change: Last Quarter as well, we're seeing continued improvement, both top of the funnel and in terms of that translating into article volume output. We expect that to continue, we're pleased with the development of our submissions pipeline as usual.
Speaker Change: Not all that volume will turn into public articles, and as we talked about both in our investor day and in our last call, not all those articles convert one to one into incremental revenue growth. A lot of that volume supports our underlying subscription business, a lot of that volume supports our transitional agreement.
Matthew Kissner: I'd like to spend a few minutes discussing AI. As a reminder, our high quality content in science, learning, and innovation is foundational for training, large language models, and building applications. AI developers and R&D intensive corporates can use it to improve accuracy, safety, and impact. Demand therefore remains robust.
Speaker Change: You know, we're not gonna...
Speaker Change: Saving more about that except to say that we're...
Speaker Change: Feeling good about the quarter and feeling good about the long-term trajectory of both submissions and published articles. That's reflecting in our guidance and that's nice to see that research publishing business returning to 4% growth year over year. Yeah, let me in!
Matthew Kissner: This quarter, as previously discussed, we executed a $21 million licensing project with a large tech company for previously published content, our second such deal in consecutive quarters. $17 million of the $21 million was recorded in Q1, the remainder to be realized during the year. Nearly all of it is in learning as LLM training demand is currently higher for book content than research journal content. The emerging demand for research content is more for LLM application development in specific disciplines and verticals.
Speaker Change: You know, we're cautiously optimistic, let me say that about that because it's such an important leading indicator and you know, I was in China as I commented earlier some less month wanted to see what was going on on the ground.
Speaker Change: and just, you know, there's some real strength there to see our people, you know, working aggressively on the ground to build this business. So we are.
Speaker Change: We're, we are, as they said, we have a cautious optimism about about this.
Speaker Change: Very helpful and then shifting gears to AI.
Speaker Change: You know, are you in discussions currently regarding any further similar licensing agreements to the first two and and you know, can you just update us a little bit more a second, secondarily on your progress and potentially monetizing AI tools to drive more recurring revenue.
Matthew Kissner: It's important to note that both of these projects involve back-list content in most cases three years or older. The contracts are of limited duration with limited rights and use notably model training purposes. They are non-exclusive, subject to extension, and do not constrain us from pursuing further opportunities. These projects are incremental, they do not cannibalize our core.
Speaker Change: The second truth that you described.
Jay: Yes, sure. And again, I'll begin and then as Jay to get more specific.
Speaker Change: We are seeing a lot of interest, as you might expect, in a market that's also rapidly changing.
Speaker Change: You know, when we did our first AI deal late in fiscal year 24, the market was even a little different than it is now. But we are seeing a lot of interest.
Matthew Kissner: We see the content licensing opportunity in two stages. The first, as discussed, is participating in the near-term development of foundational models. The second is in recurring licensing arrangements over the medium to long term, as these models and applications come online and as information-centric corporates bring our content into their AI environments.
Speaker Change: Because of the quality of our content, it's accurate, it's curated, it's indexed, it's perfect for training these models. At the same time, we're being very selective.
Speaker Change: About the partnerships we want to pursue, because we want to only pursue partnerships that meet our standards and are compatible with our strategic objectives. And Jay now has a team dedicated to this.
Matthew Kissner: Let me say a few words about how we are approaching AI from a licensing perspective. First, content licensing is not a new or AI-specific activity for us. It's really core to our mission and part of our day-to-day work to maximize the reach, readership, and revenue of our books and journals. We believe we have a responsibility to engage with AI developers. Our content is critical to ensuring scientific accuracy and impact and delivering optimal learning outcomes.
Jay: and the benefit is one, we'll learn a lot and you know there will be future opportunities here as we work with these developing AI model builders.
Jayle: Jayle, you want to get a little more specific for then. Happy to. I think...
Speaker Change: First thing to say about this is the quality of our content and the quality of our...
Jayle: of our output is very attractive to AI model builders, as Matt said. It's also attractive to research intensive corporations and the application development.
Matthew Kissner: Therefore, AI models should be trained on high-quality, authoritative content like wildies. At the same time, we are being very selective about choosing when and how to partner with AI companies. We are careful to pick the right ponders and to adhere to a strict set of principles around AI. The rights of authors and other copyright holders must be protected. Our job as a knowledge company is to ensure it. Copyright holders should receive fair compensation for their intellectual property consistent with contractual arrangements. All in, we aim to be the most trusted partner to authors, societies, and associations.
Speaker Change: Companies that are looking to supply tools to end markets and so we're in discussions.
Speaker Change: Ah!
Speaker Change: With a variety of potential partners, we're very selective about who we work with and we want to make sure that we adhere to our licensing principles as we discussed in the presentation and our prepared remarks. It's really important that, while we...
Speaker Change: Continues to advocate for the rights of its authors and with our society partners and our other stakeholders.
Speaker Change: I'm personally focused on and that the team that we've stood up over the last.
Speaker Change: year has been focused on. It's really thinking about ways that Wiley can add recurring value and ongoing value to the research process in particular in areas like drug discovery, life science, healthcare.
Matthew Kissner: They will continue to be our North Star as we assess and execute on opportunities in this ever-changing digital landscape.
Matthew Kissner: All to say, while it remains highly valued and well-positioned in the evolution of AI, I'll pass the call over to Christina.
Speaker Change: Chemistry, material science, those areas were wildly very strong and where there's a need for the latest information to be amplified by the power of these tools and and those those opportunities.
Christina Tassell: Thank you, Matt.
Christina Tassell: I'm pleased to start by saying that we've largely executed on a multi-year value creation plan ahead of schedule. At this point, we've closed all the vestitures and action the $130 million run rate savings program, enabling us to reinvest while driving continued margin improvements.
Speaker Change: Present themselves to us and we're evaluate them. So, you know, we'll have more to say as they develop when we have additional news to report, of course, we will do that.
Speaker Change: i
Christina Tassell: Just last week, we closed on our final divestiture cross-knowledge. As we discussed previously, this is an immaterial transaction, but freezed up capital and with our previous divestitures allows us to focus on our core. This quarter, we action the remaining 40 million of the $130 million savings plan. The execute savings were largely in our corporate functions. Stepping back, we finished fiscal 24 with 90 million action and 60 million realize in year. We've now action the full $130 million and anticipate realizing 120 million of that by the end of fiscal 25 for an incremental in-year savings benefit of 60 million. As noted, around half of that total run rate savings is being reinvested.
Speaker Change: Helpful Jay Saras just jumping off mute there.
Speaker Change: Switching gears, you know, the disconnect at least versus our estimates for this quarter in terms of maybe the share price moment this morning was on the expense side. You know, I guess first, how was the quarter relative to your internal expectations from a profitability and expense perspective in a second?
Speaker Change: You've got, obviously, 60 million of incremental savings.
Speaker Change: at your mark for fiscal 25, half of that reinvested, and yet overall op-acts, not really seeing the benefit at least in this quarter, so, you know...
Speaker Change: Were there any unusual incentives, comp or investment spend in fiscal Q1 and if not, maybe why aren't we seeing more of the benefit of that? Those are reduction initiatives, costs reduction initiatives on a net basis.
Christina Tassell: Let's talk about where we're investing. We're focused on driving incremental growth in research, where we have clear competitive advantage and demand. This includes scaling our journal portfolio and article transfer capabilities, optimizing go-to-market to attract and retain authors, and extending our flagship journal brands into additional verticals. Second, we're investing in AI growth and productivity initiatives, including optimizing our content for large language model deployment, incorporating AI into our publishing platforms and workflows, and investing in productivity tools for our colleagues. Third, we're mononizing our systems to improve speed and productivity.
Christina Tassell: We've talked about two specific areas. Our research publishing platform and back office modernization.
Speaker Change: I'll take that one day and hi. So from a revenue perspective that wasn't our revenue was in line with our expectations on the expense side and what you're calling out is just a little bit of
Speaker Change: Timing that we're seeing on a couple of things. One is we do have some one-time items that manifesting Q1 that will normalize throughout the rest of the year and that's costing us.
Speaker Change: A couple hundred basis points. You know, obviously, if you take Jen, Jen, I had that plus that and then we've got, you know, the investments that we're adding back that offset.
Speaker Change: RVCT savings, if you pull it all together and normalize, you're up about your up a couple hundred basis points.
Speaker Change: on the quarter, and for the rest of the year, we're seeing that normalized further. So we are seeing, we are, as I said earlier, we are reaffirming our guidance, so we are seeing a normalized rest of the year. It's a little bumpy and cute one in terms of the puts and takes.
Christina Tassell: Let's turn to our research performance. Q1 revenue is up 3% due to strong demand and executioner research publishing. Research publishing delivered 4% top-line growth driven by exceptional demand in gold, open access, and steady growth in our combined institutional multi-year models. As a reminder, our institutional models include both subscriptions for research libraries, and institutional open access agreements with our library consortia. We expect to remain in this mixed model environment for a long time to come.
Speaker Change: and anything specific in terms of where those areas be, be a corporate, be it incentives, investments for a gen AI, etc.
Speaker Change: Special Facility, and give us there.
Speaker Change #100: Yes, so a couple of things we don't give, but we don't give direct specificity on my NMS for competitive reasons, obviously on our investments, but we've talked to you about the character's, the characters as our investments.
Christina Tassell: We also continue to make good progress on our end-to-end research publishing platform, reducing our publishing trend around time this quarter, and enabling the submission growth we've been seeing. Research solutions with Dan, honestly, due to continued soft market additions for recruiting, offsetting moderate growth in our publishing solutions business for societies. We're doing some very interesting things on the solution side, but they'll take a little time to materialize. For example, we're expanding the reach for our medical education programs by nearly 3 million healthcare providers thanks to a new partnership. Wiley's medical education program allows healthcare professionals to do their jobs better, giving them access to information on the latest scientific outcomes, diseases, and treatments. The end goal is to improve patient outcomes.
Speaker Change #100: We've got growth investments within research. We also have obviously inflationary, I mentioned this in the prepare remarks.
Speaker Change #100: and Flatianary Cows increases that manifest in merit and other things in volume and in production.
Speaker Change #101: and then the other investments, obviously, this shows up in our corporate expenses, we've got the investments we're making in our enterprise modernization programs that will continue on for the next couple years.
Speaker Change #102: Got it. And just to confirm, if I have numbers right, if they have 60 million cost savings benefit in years that leave about 25-ish million for fiscal 26 and beyond.
Christina Tassell: Another important opportunity for us is in spectral data. As a leading chemistry publisher, Wiley is one of the most comprehensive spectral database collections in the world. In late-persons terms, Wiley's spectral database libraries allow end users to identify molecules and molecular compounds based on a unique chemical signature. While he has just released two new database collections using advanced AI techniques to significantly expand the number of compounds available for analysis from food-related compounds to industrial compounds.
Speaker Change #103: You know, just total savings. No, that's right. It's 10, it's 10 for next year. Yeah, yeah. Beyond fiscal 25.
Speaker Change #104: The answer is 25. Well, we'll continue to, and we'll continue to, and we'll, we haven't called 27 yet in terms of.
Speaker Change #105: What we're looking at, but we're continuing to look at the VCP, not just around rape, but what else we can start getting benefit from as things come online from the investments.
Christina Tassell: The end goal here is to help scientists reach better conclusions faster. In Q1, adjusted EBITF for research rose 1 percent, driven by revenue performance offset by reinvestment in the growth and optimization issues I touched on earlier. Our Q1 margin was 29.3 percent compared to 29.8 percent in the prior period.
Speaker Change #105: So it's a little too early to talk about that, but it'll be, it'll be certainly above that.
Speaker Change #105: of what is a noun. It's 10 million.
Speaker Change #106: and Criminal. Okay, go ahead, please. What's in now? It's a 10 million. So it's 120 this year, 130 next year of run right. Yeah, Dan, it's important to note that we don't think we've done here.
Speaker Change #107: Yes, we're done with this program, but particularly with the investment we're making and modernizing our technology infrastructure.
Christina Tassell: In summary, we're confident in our continued growth and recovery and in the investments we're making to ensure a long-term success.
Speaker Change #108: We see it continue to margin improvement. We haven't yet zeroed it on the numbers, but we're eager.
Christina Tassell: Let's talk about learning. Revenue rose 14 percent in the quarter, driven by the Gen A project and continued growth and academic, namely digital coursewear. Excluding the Gen A project, revenue declined 1 percent in a seasonally small quarter, mainly due to softness and professional publishing and assessments.
Speaker Change #108: to continue to drive the kind of margin improvement trend that you're seeing in our current guidance.
Speaker Change #109: Yeah, and you know, as we say, we just announced our final divestiture, we're just finalizing some of our...
Christina Tassell: As Matt noted, our backless content learning is in demand for trained Gen A models and want to continue to take advantage of this opportunity. We have two projects under our belt and continue to evaluate AI licensing opportunities that complement our business strategies. In the business itself, academics saw underlying growth again, although Q1 is our smallest quarter for this business. Q2 is our largest and has only increased over time due to changing fall ordering patterns and shifting business models.
Speaker Change #110: Transition Services Agreement, so I was going to be done by most of them somebody in the calendar, certainly all of them done by the end of the fiscal, and that gives us opportunity as well to continuously improve our post structure. So we're looking at that bitterly.
Speaker Change #111: Got it. And then I guess lastly, you know, Vesta before but just leverage, you know, around two times, but obviously cash flow is back in loaded, so we should start to fall again as we look to the back after the year. Just talking about your priorities for investing, you know, excess cash flow at this stage. Thank you.
Christina Tassell: Our STEM digital coursewear product remains a consistent success story, with top line growth above 30 percent again this quarter. We continue to see strong trends there in terms of winning new institutional agreements and expanding outward into new subject areas like data science. Institutions continue to gravitate towards inclusive access models, where the cost of digital course content is added to a student's tuition and fees. This remains a nice tail one for us.
Speaker Change #112: Yeah, sure.
Speaker Change #113: So we're always looking at, you know, obviously we have our very proud of our dividend program that's not going to change.
Speaker Change #113: We're always looking at our Sherry Purchase Program, and as I mentioned earlier, we're 25% up versus QI, but we're looking, you know, we're constantly looking at that.
Speaker Change #113: for the year and last year's reminder was up versus the year before.
Christina Tassell: All to say, academic continues to benefit from favorable trends and sharp focus. Professional revenue rose 5 percent in the quarter, but was down excluding the Gen A project. The new authors and titles we signed up in the second half of last year will begin to benefit us later in this year, but then mostly in fiscal 26. Finally, assessments this down modestly this quarter due to moderately reduced corporate spending on training and development. In Q1, adjust EBITF learning was up 60 percent driven mainly by revenue performance. Our Q1 margin was 27.2 percent compared to 19.4 percent in the prior year period.
Speaker Change #114: So we're looking at those opportunities as they come down and we're also obviously some other, you know, we've got our capex that we're constantly knowing that looking at it, that's the spend that is a $30 million increase over prior year.
Speaker Change #115: and they were always looking at an opportunity to use it in the marketplace, so that's where our capital location looks right now in terms of cash flow. And as I've talked about before, we are long-term looking to get back to our steady state of at least 200 million long return.
Speaker Change #115: and Beyond.
Speaker Change #116: Thank you for sharing this call.
Christina Tassell: In summary, learning remains on track with expectations.
Speaker Change #116: and that concludes our Q&A session. I will now turn the conference back over to Mr. Kissner for closing remarks.
Christina Tassell: Let me transform our segments to our corporate expenses. For the quarter, we saw a monocere of a year increase driven mainly by higher tech expenses related to our enterprise modernization investment and expense growth driven mindflation, moderately offsetting VCP savings.
Speaker Change #117: Thank you all for participating. We look forward to another update in December and look forward to continuing to share our progress with all of you. Thanks very much.
Speaker Change #118: and this concludes today's conference call. Thank you for your participation. You may now disconnect.
Christina Tassell: Important to note that corporate expenses here pertain to our unallocated expenses only, enterprise costs are not specifically assigned to a business unit.
Christina Tassell: Moving on to our full year outlook, we are reaffirming our guidance. We will have more visibility in Q2 as we make our way through the all important fall semester in learning and the early part of the calendar 25 library budget season in research. To refresh, we're projecting full year revenue of 1.65 to 1.69 billion for a top-line growth rate 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.
Christina Tassell: The two A.I, projects already executed, one in Q4 and one in the first half of this year largely offset each other near and near comparisons. Adjustment EBITDA is expected to be in a range of 3885 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 investments in research, Gen A.I., and enterprise modernization, as well as the impact of inflation on our expenses.
Christina Tassell: Adjustment EBITDA is expected to be in a range of 325 to 360 for a growth of 17 to 29%. The primary drivers are higher expected adjusted operating income and accrued interest income from the divestitures offsetting higher interest and tax expense. Free cash flow is anticipated to be approximately 125 million out from 114 million. This is due to improved working capital and lower restructuring payments offsetting higher cap acts and higher incentive compensation payments compared to the prior year period.
Christina Tassell: Note that annual cash incentive payouts are made in Q1 for prior year's performance. Over 90% of our colleagues are in the annual incentive plan. As noted, although CAPEX in the first quarter is tracking behind prior year, we anticipated to ramp up in the remaining three quarters of the year.
Christina Tassell: As a reminder, our full year CAPEX projection is 130 million.
Speaker Change #118: [inaudible]
Christina Tassell: Let's turn our financial position. Free cash flow for the quarter with a use of 177 million in line with the prior year period.
Christina Tassell: As a reminder, free cash flow is historically a use of cash in Q1 and Q2 due to the timing of annual journal subscription receipts which are concentrated in Q3 and Q4. Lower CAPEX due to timing was offset by higher incentive compensation payments related to fiscal 24 performance. We pay out our annual incentive compensation in Q1 of the following year.
Christina Tassell: For the quarter, we allocated 32 million towards dividends and cherry purchases up from 29 million in the prior year. Over 12 million of that was used to acquire 295,000 shares at an average cost per share of $42.34. Our dividend payout is approximately 3%.
Christina Tassell: Finally, net debt to EBIT ratio was 2.0 at the end of July compared to 1.9 in the prior year period.
Matthew Kissner: And with that, I'll pass it back to Matt. Thank you, Christina.
Matthew Kissner: Let me summarize the key take ways. We're off to a good start, but we're not declaring VIX- We have a lot more work to do to achieve our full potential. Still, I'm encouraged by demand trends and other performance indicators, our alignment and execution as an organization, and the material increase in colleague engagement. We've turned the quarter on research, a business that has grown consistently over a very long period and remains an ever-expanding opportunity.
Matthew Kissner: Our accelerating performance is not only market-driven, but a collective outcome of many months of hard work and transformation by the team. We're publishing better. We're marketing better. We're separately, we're moving decisively but judiciously in responding to AI opportunities. We're reinvesting where we have a unique right to win, which will benefit us in the years ahead. We're often running. We've largely executed our value creation plan ahead of schedule. Importantly, our culture today has far more energized, motivated, and engaged.
Matthew Kissner: We can see that in our recent survey results. We're making decisions faster and moving with purpose. We're focused on less but doing more. We're empowering colleagues to make decisions and unlock pockets of growth. We continue to focus on rewarding you, our shareholders. I hope you can see our steadfast commitment to value creation and where we're focused, how we're executing, and how we're allocating capital.
Matthew Kissner: And finally, we're confident in our fiscal 25 outlook for revenue growth and margin expansion and remain well on track to meet our fiscal 26 targets. Again, what a difference he makes.
Matthew Kissner: I'll finish by thanking our Wiley colleagues for putting us in the position we're in. As I said before, nothing unites us more than being on a winning team.
Matthew Kissner: I'll now open the floor to any comments and questions. Thank you.
Operator: We will now begin the question and answer session. If you have dialed in, I'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
Dan Moore: We'll take our first question from Daniel Moore at CJS Securities. Thank you. Good morning, Mack. Good morning, Christina. Thanks for taking questions. Hi, Dale. Yeah. Start with, obviously the momentum you were experiencing in terms of article submission.
Matthew Kissner: Let me talk about that throughout the quarter in terms of cadence and so far into fiscal Q2 and how we should think about the potential organic growth and research revenue that that may translate to over the next. Yeah, let me begin and then I'll ask Jay to comment more specifically, but you know this is a business with long lead times, as we've talked about in the past, there's a publication cycle that you know it can take six to nine months for an article to actually be published and depending upon the type of article revenue recognized.
Matthew Kissner: So what's really encouraging is the what are the signals we started to see in the fourth quarter and I've continued into the first quarter of you know a very healthy pipeline. I'll let Jay comment a little more specifically on what it looks like for the rest of the year. Sure, of course. Hey, then thanks for your question. So a couple of things to just reiterate as we like to do when we talk about article submissions.
Matthew Kissner: The first is remembering that not all article submissions convert into published articles. There's a lot of variability in the mix, right? We have higher acceptance rates from certain institutions, from certain authors, from certain geographies. So the mix of submissions determines long term article output, but as we've seen in our reported metrics, this quarter and last quarter as well, we're seeing continued improvement both top of the funnel and in terms of that translating into article volume output.
Matthew Kissner: We expect that to continue. We're pleased with the development of our submissions pipeline as usual, but not all that volume will turn into published articles. And as we talked about both in our investor day and in our last call, not all those articles convert one to one into incremental revenue growth. A lot of that volume supports our underlying subscription business. A lot of that volume supports our transitional agreement. So, you know, we're not going to say anything more about that except to say that we're feeling good about the quarter and feeling good about the long term trajectory of both submissions and published articles.
Matthew Kissner: That's reflected in our guidance and that's nice to see the research publishing business returning to 4% growth year over year. Yeah, let me add, you know, we're cautiously optimistic. Let me say that about that because it's such an important leading indicator. And, you know, I was in China as I commented earlier last month and wanted to see what was going on on the ground. And just, you know, there's some real strength there to see our people, you know, working aggressively on the ground to build this business. So, we're, we're, we're, as they said, we have a cautious optimism about this. Very helpful.
Matthew Kissner: And then shifting gears to AI. You know, are you in discussions currently regarding any further similar licensing agreements to the first two? And, you know, can you just update us a little bit more secondarily on your progress and potentially monetizing AI tools to drive more recurring revenue. The second phase that you described. Yes, sure, and again, I'll begin and then ask Jay to get more specific, but we are seeing a lot of interest, as you might expect, in a market that's also rapidly changing, when we did our first AI deal late in fiscal year 24, the market was even a little different than than it is now.
Matthew Kissner: But we are seeing a lot of interest because of the quality of our content. It's accurate, it's curated, it's indexed, it's perfect for training these models. At the same time, we're being very selective about the partnerships we want to pursue, because we want to only pursue partnerships that meet our standards and are compatible with our strategic objectives. And Jay now has a team dedicated to this, and the benefit is one we're learning a lot, and there will be future opportunities here as we work with these developing AI model builders.
Matthew Kissner: Jay, do you want to get a little more specific for Dan? Happy to. I think first thing to say about this is the quality of our content, the quality of our output is very attractive to AI model builders, as Matt said. It's also attractive to research intensive corporations and the application development companies that are looking to supply tools to end markets. And so we're in discussions with a variety of potential partners.
Matthew Kissner: We're very selective about who we work with, and we want to make sure that we adhere to our licensing principles as we discussed in the presentation in our prepared remarks. It's really important that Wiley continues to advocate for the rights of its authors and with our society partners and and our other stakeholders. The thing that I'm personally focused on and that the team that we've stood up over the last year has been focused on is really thinking about ways that Wiley can add recurring value and ongoing value to the research process in particular in areas like drug discovery, life science, healthcare, chemistry, material science.
Matthew Kissner: Those areas where Wiley is very strong and where there's a need for the latest information to be amplified by the power of these tools. And those opportunities present themselves to us and we're evaluating them. So you'll have more to say as they develop, when we have additional news to report, of course, we will do that. Helpful Jay, sorry, I was just jumping off mute there.
Christina Tassell: Switching gears, you know, the disconnect at least versus our estimates for this quarter and in terms of maybe the share price note this morning was on the expense side. You know, I guess first how was the quarter relative to your internal expectations from a profitability and expense perspective and then second, you know, you've got obviously 60 million of incremental savings at your mark for fiscal 25, half of that reinvested, and yet overall op-ex, you know, not really seeing the benefit, at least in this quarter.
Christina Tassell: So, you know, were there any unusual incentive comp or investments spend in fiscal Q1, and if not, maybe why aren't we seeing, you know, more of the benefit of that, those reduction initiatives cost reduction initiatives on a net basis. Sure, I'll take that one, Dan. Hi. So, from a revenue perspective that wasn't, our revenue was in line with our expectations on the expense side and what you're calling out is just a little bit of timing that we're seeing on a couple of things.
Christina Tassell: One is, we do have, you know, we do have some one time items that manifest in Q1 that will normalize throughout the rest of the year, and that's costing us a couple hundred basis points. You know, obviously if you take Jenny out of that plus that, and then we've got, you know, the investments that we're adding back that offset our VCP savings, if you pull that all together and normalize, you know, you're up about, you're up a couple hundred basis points on the quarter, and for the rest of the year, we're seeing that normalize further.
Christina Tassell: So, we are seeing, we are, as I said earlier, we are reaffirming our guidance and we are seeing a normalized rest of the year. It's just a little, it's a little bumpy in Q1 in terms of the puts and takes. And anything specific in terms of where those areas would be, be it corporate, be it incentive investments for Jenny, I, you know, et cetera, any any specificity can give us there. Yeah, so so a couple things we don't give, but we don't give direct specificity on mine ends for competitive reasons, obviously, on our investments, but yet we've talked to you about the, you know, the characters characters are investments.
Christina Tassell: We've got growth investments within research. We also have obviously inflationary, I mentioned this in the prepared remarks, our inflationary cost increases that manifest in merit and other things and in volume and our in production. And then the other investments, obviously, this shows up in our corporate expenses. We've got the investments we're making in our enterprise monetization programs that we'll continue on for the next couple of years. Got it. And just to confirm, if I have the numbers right, if they have 60 million cost savings benefit in years that leave about 25 ish million for fiscal 26 and beyond, you know, just core, just total savings.
Christina Tassell: No, it's 10 and it's 10 for next year. Yeah, yeah, beyond fiscal 25 beyond fiscal 25. We'll continue to, I mean, what can we, we haven't called 27 yet in terms of what we're, what we're looking at, but we're continuing to look at the DCP not just run rate, but what else we can, we can start getting benefit from as things come online from our investments. So it's a little too early to talk about that, but it'll be, it'll be certainly above that.
Christina Tassell: Of what's announced, it's 10 million incremental. Okay. Got it. Please. What's announced is 10 million. So it's 120 this year, 130 next year, run rate. Yeah. Dan, it's important to note that we don't think we're done here. Yes, we're done with this program, but particularly with the investment we're making in modernizing our technology infrastructure. We see it continue to margin improvement. We haven't yet, you know, zeroed in on the numbers, but we're eager, to continue to drive the kind of margin improvement trend that you're seeing in our current guidance.
Christina Tassell: As we said, we just announced our final divestiture. We're just finalizing some of our transition services agreements. Those will be done by most of them done by the end of the calendar, certainly all them done by the end of the fiscal. And that gives us opportunity as well to continuously improve our cost structure. So we're looking at that iteratively. Got it.
Christina Tassell: And then I guess lastly, you know, if I asked it before, but just leverage, yeah, around two times. But obviously cash flow is back and loaded. So we should start to fall again as we look to the back half of the year. Just talk about your priorities for investing, you know, excess cash flow at this stage. Thank you. Yeah, sure. So we're always looking at, you know, obviously we have our, we're very proud of our dividend program that's that's not going to change.
Christina Tassell: We're always looking at our sharing purchase program. And as I mentioned earlier, we're 25% up versus QI, but we're looking, you know, we're constantly looking at that for the year and last year's reminder was up versus the year before. So we're looking at those opportunities as they come down. And we're also, you know, obviously some other use of, you know, we've got our catbacks that we're constantly looking at. And if that's a spend that is a $30 million increase over prior year.
Christina Tassell: And they're always looking at an opportunity is in the marketplace. So that's, that's where our capital allocation looks right now in terms of cash flow. And we know as, as I talked about before, we are long term looking to get back to our, our steady state of at least 200 million longer term. And beyond. Appreciate the color. Thank you.
Matthew Kissner: And that concludes our Q&A session.
Matthew Kissner: I will now turn the conference back over to Mr. Kissner for closing remarks. Thank you all for participating. We look forward to another update in December. And look forward to continuing to share our progress with all of you. Thanks very much.
Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.
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