Q3 2025 John Wiley & Sons Inc Earnings Call
[inaudible]
Speaker Change: Good morning and welcome to Wireless Q3 Cisco 2025 Ernie's call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wireless Vice President of Investor Relations, Brian Campbell, please go ahead.
Speaker Change: Thank you, and thank you all for joining us. On the call with me are Matt Kissner, Wiley's President and CEO , Christopher Caridi, in-term CFO , and Jay Flynn, Executive Vice President and 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. Actual results may differ materially from those statements.
Speaker Change: The company does not undertake any obligations to update them to reflect subsequent events. Also, Wiley provides non-get measures as a supplement to evaluate underlying operating profitability and performance trends.
Speaker Change: These measures do not have standardized meanings prescribed by USGAP, and therefore may not be comparable to similar measures used by other companies.
Speaker Change: Nor should they be viewed as alternatives to measures under-depth. Unless otherwise noted, we refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and will exclude divested assets and the impact of currency.
Speaker Change: Additional information is included in our filings with the SEC. A copy of this presentation and transcript will be available on our Investor Relations webpage at investors.wiley.com. I'll now turn the call over to Matt Kissner.
Matt Kissner: Thank you, Brian , and good morning, everyone. Thank you for joining our third quarter update.
Matt Kissner: We continue to capitalize on the increasing demand for scientific research and responsible AI development. We're executing well on our objectives of driving recovery and growth in research and material margin expansion overall.
Matt Kissner: And we remain on track to achieving our outlook for this year and next. In fact, we are raising our fiscal 26 margin target
Speaker Change: For those who may be new to the story, Wiley delivers authoritative content and data driven insights to institutions, corporations, researchers and learners.
Speaker Change: Our extensive catalog includes some of the most valuable and important content in the world, essential in the advancement of science, technology, and medicine.
Speaker Change: In the responsible development of AI and other machine learning applications and in future high value use cases supporting research and development such as science analytics and information services
Speaker Change: Let me acknowledge the economic uncertainty out there, ranging from consumer confidence and inflation to tariffs, policy swings, and geopolitical unrest.
Speaker Change: As a reminder, for over 200 years, Wiley has been a safe haven through many economic cycles and periods of disruption.
Speaker Change: We demonstrated this resiliency during the Great Recession and the COVID pandemic While publishing services, content and brands remain must have resources and our markets continue to prosper.
Speaker Change: Supporting this is a strong balance sheet and consistent cast generation over time as evidence by 31 consecutive years of dividend increases.
Speaker Change: What makes Wiley unique in compelling over the long term? As noted, our markets are robust and demand remains consistent directly correlated with increasing global R&D investment.
Speaker Change: We recognize there's a wide mode business with essential, authoritative content and trusted brands.
Speaker Change: We deliver resilient compounding growth in markets that remain stable, even during economic downturns.
Speaker Change: Approximately half of our revenues are occurring. In our research segment, this number is nearly 75 percent.
Speaker Change: We are an early AI beneficiary with emerging long-term opportunities in the corporate sector, particularly in research and development.
Speaker Change: Our financial characteristics are strong with healthy margins in cash generation, low leverage and ample liquidity.
Speaker Change: And finally, the leadership team at Wiley is aligned and committed to continuous improvement and value creation.
Speaker Change: Let's talk about some of the favorable underlying trends we're seeing. First, Global R&D We spend continues as the primary driver of research output, remaining strong in 2024 with growth of 8%.
Growth projections for 2025 are similar.
Speaker Change: Second, the demand to publish continues to increase, reflecting its vital importance to the leaders of researchers. Unigate research-autical submissions are up 18% with publishing output of 8%.
Speaker Change: Third are recurring revenue models demonstrate strong health with solid pricing power supported by consistently higher volume
Speaker Change: Recurring revenue models include a subscription read-only and transformational read and publish agreements.
Speaker Change: Fourth, quality and scale matter and Wiley excels in both areas. Quality has become more important than ever for researchers as they seek to publish entrusted, high impact journals.
Speaker Change: At the same time, scale has become more important, given the increasing complexity of this mixed model ecosystem, with customers ranging from individual researchers to national governments.
Speaker Change: Our top tier quality and scale give us an opportunity to have pace the market over time.
Speaker Change: Finally, Wiley's strategic position in AI development and application offers multiple advantages.
Speaker Change: As previously discussed, our content serves as a foundation for training large language models and bringing to market vertical specific LLMs.
Speaker Change: Additionally, as a publisher, the nature of our work enables us to greatly benefit from AI productivity tools.
Speaker Change: Let me shift gears and focus on our headlines for the quarter. Revenue growth was driven by mid-single-digit growth and research, including an expanded AI licensing project with an existing technology customer.
Speaker Change: Learning was down due to challenging comparisons to prior year as discussed in our last earnings call.
Speaker Change: and some softness and academic books. Chris will go into further detail on our segment performance.
Speaker Change: Key takeaways from the Porter include are Cala's 25 journal subscription and TA renewal season is nearly 80% complete and we are seeing encouraging growth trends.
Speaker Change: Open access continues to demonstrate rapid growth of course our journal portfolio.
Speaker Change: We expanded a corporate AI licensing agreement this quarter and continue to build a pipeline of vertical specific opportunities.
Speaker Change: It's very early days in the development of this vertical specific market, but we're seeing considerable interest from leading research intensive corporations.
Speaker Change: Margin Expansion remains a multi-year strategic focus, and I'm pleased to report 280 basis points of operating margin improvement and 50 basis points of adjusted EBITDA margin improvement over
Speaker Change: As we will discuss later, we see significant opportunities for continued margin improvement.
Speaker Change: Chris will talk to our Fiscal 25 Outlook and Fiscal 26 targets, but we see our EBITDA margin and EBS trending towards the high end of guidance, and we're raising next year's margin target.
Speaker Change: On to our results. Throughout my commentary, I'll exclude divested assets and currency impacts.
Speaker Change: Revenue was up 1%, driven by research growth of 5% off-setting and expected, 6% decline in learning.
Speaker Change: This year-over year swing stemmed from a $6 million licensing renewal in the prior year, and softness this quarter in academic books.
Adjusted EPS increased 39% due to higher adjusted operating income.
Speaker Change: and a lower adjusted effective tax rate. Our operating margin rose 280 basis points to 14.2 percent.
Speaker Change: Adjust an EBITDA group 4% reflecting revenue growth partially offset by investments in growth and productivity initiatives.
Speaker Change: Our adjusted EBITDA margin for the quarter was 23.2% up from 22.7%.
Speaker Change: Let's talk about how we're executing on our core objectives this year.
First, driving recovery and growth and research.
Speaker Change: Yet to date, this segment is up 3% with growth across all key areas, including our Recurri Revenue Models, Open Access Publishing Program, Licensing, and Solutions.
Speaker Change: Leading indicators continue to be favorable. The expansion of our advanced journal franchise has been a great success story.
This portfolio encompasses over 20 high-impact journal titles, of course disciplines.
Speaker Change: and we continually expand in critical areas such as life sciences, AI, and machine learning.
Speaker Change: Our multidisciplinary journal, Advanced Science, is delivering exceptional growth this year. While our newest titles, Advanced Intelligent Discovery and Advanced Robotics Research recently published their inaugural articles.
Speaker Change: We anticipate launching additional advanced journals in 2025 and 2026, and as a reminder, top general franchises, like advanced, are differentiators for large publishers.
Second, moving decisively on AI opportunities.
Speaker Change: Yet a date we've generated $30 million in licensing revenue relating to trading models and executed an early but important agreement for vertical specific models. This market is evolving and our pipeline remains very active.
Third, driving continued margin improvement.
Speaker Change: The Rune 9 months are adjusted operating margin increased 330 basis points to 13.30% and adjusted that even that has improved by 160 basis points to 22.3%
Speaker Change: Let me say a few words about the current US funding environment.
Speaker Change: We're keeping a close eye on the potential impact of US government actions on research funding.
Speaker Change: We don't anticipate any near-term impact on our research publishing programs. Given the exceptional volume in our article pipeline, the lead times associated with any potential impact
and the recurring nature of our multi-year agreements.
Speaker Change: Importantly, as I'll describe in a moment, US Federal funding only supports a small percentage of our research output.
Speaker Change: All of this is evident in today's confident reaffirmation of our fiscal 25 outlook and fiscal 26 targets including the margin improvement
Speaker Change: Moreover, it's too early to weigh any potential long-term impact given the high level of uncertainty.
Speaker Change: peer-reviewed research is how these advancements are communicated, evaluated and applied.
It is referred to as the Global Knowledge Ecosystem.
and Wiley stands at the center of it.
Historically, this industry has advanced in good times and bad.
Speaker Change: It's always risen above politics, it's been excluded from tariffs and trade wars and it's continued on even through conflict. It is an industry that is geographically well distributed and powered by many different funding sources.
Every region participates with remarkable balance as illustrated here.
Speaker Change: For context, China leads as the number one source of research output worldwide.
followed by the U.S., the U.K., Germany and Japan.
Speaker Change: Governments in these countries consider this positioning strategically important, contributing to Wiley's broad geographic diversification.
In terms of regional breakouts
Asia Pacific is responsible for around 45% of our article output.
AMEA around 30%.
North America, around 20%
and other makes up about 5%.
Thank you very much.
Speaker Change: As for the US, direct federal funding is only responsible for a single digit percentage of our total article output.
Speaker Change: Of course, we are fully confident that the US scientific, technical, and medical research will continue to receive federal support.
Speaker Change: given the essential role that research plays in U.S. economic growth, global competitiveness and societal well-being.
Where are we today?
Speaker Change: Matual markets have returned to steady growth supported by continued R&D investment and growth markets have seen some remarkable new developments.
Consider India's Innovative, One Nation, One Subscription Initiative.
Speaker Change: We recently executed this multi-year agreement, expanding access to over 6,000 Indian institutions and supporting 18 million researchers and students.
While this expansion increases profitable revenue for us in India,
It's significant significance beyond financial metrics.
Speaker Change: The agreement unifies the research ecosystem of the world's second most populated country.
And as our India country lead, Ritesh Kumar stated,
Speaker Change: It empowers Indian researchers to lead global scientific conversations and accelerate the country's research output. Our presence in India positions us well as these initiatives drives progress and growth in Indian research.
Speaker Change: Similarly in Brazil, we secured a new multi-year transformational agreement that expands access to over 430 research academic institutions reaching upwards of 6 million researchers.
Speaker Change: Both these landmark agreements serve strategic purposes that transcend immediate financial benefits. They expand access in emerging growth markets and deliver additional revenue streams.
Speaker Change: and ultimately enlarge both the scientific community and the global supply of quality research.
Speaker Change: Let's examine R&D and publication funding which shows similar geographic diversification.
Speaker Change: Our institutional models draw support from a diverse range of funding sources, including national governments such as our single licenses in Germany and India.
National Funding Bodies & Agencies
State Governments, Private Endowments, Foundations
Tuition Revenue and Corporations
Also, while many associate US R&D with federal government funding
Corporations fund 80% of total US R&D investment
This reality reveals one of the most promising long-term opportunities
Speaker Change: Currently, corporations represent a relatively small percentage of our overall revenue.
Speaker Change: However, we believe there is significant sustained value in integrating our content and data more deeply into the corporate research process.
Speaker Change: such as AI model enablement and providing data and analytics to support the research process.
Speaker Change: Taken together all these factors position research as both resilient and poised for continued expansion.
Speaker Change: To summarize, we continue to see growth this year in our recurring models and open access program
Speaker Change: Renewals and Leading Educators are favorable and give a strong visibility.
Speaker Change: Over the long term, our quality and scale will remain essential elements for attracting and retaining research authors and driving market share games.
Speaker Change: Let's now turn to AI growth, particularly the long-term corporate opportunity I mentioned earlier.
Speaker Change: This quarter we executed an expanded agreement for AI model training purposes and we're seeing promising developments in the broader vertical specific market.
Speaker Change: The agreement builds on the project announced in Q1 involving backlisted learning content for training large language models.
Speaker Change: This Q3 expansion incorporates back-list research content defined as previously published material older than three years.
Speaker Change: The $9 million agreement brings our total AI revenue this year to $30 million, following $23 million realized last year.
As a reminder, these phase one trading agreements are non-recurring.
Speaker Change: It's important to reemphasize that licensing represents a core business activity for Wiley
As we take on new AI-specific initiatives,
Speaker Change: Our guiding principles remain straightforward. We recognize our responsibility to engage with AI developers to secure scientific accuracy.
and deliver optimal learning outcomes.
Speaker Change: These models require training untrusted, authoritative content such as Wiley's
Speaker Change: While protecting the rights of authors and other copyright holders, a fundamental responsibility we embrace as a knowledge company.
Speaker Change: Beyond these large-scale training agreements, we're seeing encouraging demand from multinational R&D-centric companies, of course critical sectors, including healthcare
Bioformaceuticals and Industrial Chemistry
Speaker Change: Distinct from our LLM training agreements, these R&D intensive corporations are using AI-powered content and tools to speed up product development, identify breakthroughs, and reduce internal cycle times.
Speaker Change: And although the individual opportunities are materially smaller and size, they represent a much larger addressable market, and the revenue is highly likely to be recurring.
Speaker Change: Enhanced support for corporate research initiatives represents phase two of our content licensing strategy, with a broad set of applications, of course, the many disciplines we support.
Speaker Change: These types of collaborations would extend beyond generating new licensing revenue streams to function as strategic partnerships enabling mutual learning about AI application development and its impact on improving research outcomes.
Speaker Change: The market will take time to fully develop, but we are encouraged by the early demand we're seeing.
Speaker Change: I'll now pass the call to Chris to take you through our year-to-date results, segment performance, outlook, and financial position.
Thank you, Matt. Good morning, everyone.
Speaker Change: Our results continue to align with expectations, reinforcing our confidence in achieving our fiscal 2025 outlook and fiscal 2026 targets, which I'll speak to shortly.
Turning to our year-to-date results
Speaker Change: Adjusted revenue grew 3%, driven by court growth and research and AI licensing.
Speaker Change: excluding one-time AI-related revenue, overall revenue grew 1%, with research increasing 2%.
Speaker Change: We continue to advance our margin expansion initiatives, resulting in significant improvements.
Speaker Change: Adjusted operating income up 38%, EPS up 43%, and EBITDA up 12%.
Are Adjusted Operating Margin, Improved by 330 Basis Points?
Speaker Change: to 13.3% and our adjusted EBITDA margin rose 160 basis points to 22.3%
Speaker Change: We continue to focus on optimizing our cost structure, more specifically right-sizing our technology costs and other corporate expenses.
Speaker Change: At the same time, we're transforming how we publish and work to drive greater operating efficiency.
We do anticipate restructuring charges from this activity
Speaker Change: Meanwhile, pre-cash flow shows strong recovery, and we remain on track to achieve 125 million in this gold 2025.
Turning to our research segment
Third quarter, a near-to-date revenue increased 5% and 3% respectively
Speaker Change: Q3 growth stem primarily from AI licensing in our open access programs.
Speaker Change: A reminder that ancillary products include print and other non-recurring items such as back files, article pay-per-view, digital archives, and title-by-title journal sales to libraries.
Speaker Change: One-time AI licensing projects for backlisted content worth approximately 10 million year-to-date also contributed to our year-to-date results.
excluding these AI projects. Research revenue is up 2% year to day.
Speaker Change: As Matt mentioned, we have completed nearly 80% of our calendar 2025 renewal season and see steady growth trends.
Speaker Change: The multi-year nature of these agreements means that around one-third of our library customers in consortia come up for renewal annually.
Speaker Change: We have successfully renewed major agreements in the UK, France and the US, while executing those new landmark deals in India and Brazil.
Speaker Change: This renewal season extends from early December through the end of April 2025.
Research Solutions that successfully returned to growth.
Speaker Change: with revenue increasing 6% in the quarter and 3% year-to-date driven by expanded content solutions and databases for societies, corporations and other publishers.
Speaker Change: Wiley's key differentiator continues to be our enduring success in partnering with societies and other professional organizations.
Speaker Change: Four of our key society health science partners have been with us for over 50 years.
Well, 45% have been with us for more than 20.
This remarkable retention rate demonstrates not only our shared success
but also highlights one of our most valuable assets.
Our Reputation [inaudible]
Speaker Change: Partnerships like these are becoming increasingly multi-dimensional with Wiley delivering the comprehensive suite of services from publishing and content platforms to marketing and recruitment.
Our IEEE partnership exemplifies this approach.
Speaker Change: as one of the world's largest societies responsible for a third of all technical literature in electrical engineering and computing.
Speaker Change: IEEE now benefits from Wiley's expanded role in managing their advertising sales and programs.
Speaker Change: This arrangement provides access to highly engaged audiences, through impactful advertising and digital content solutions.
Speaker Change: For Wiley, this partnership extends our participation in the engineering vertical, leveraging our unique access to one of the world's most valuable professional audiences.
Speaker Change: Adjusted EBITDA for research increased 12% for the quarter and 5% year-to-date, reflecting revenue growth and cost savings partially offset by investments in growth and productivity.
Speaker Change: Our Q3 margin improved by 180 basis points to 32.7%, while our year-to-date margin improved by 30 basis points to 31.1%.
Speaker Change: In summary, we are encouraged by our Q3 and your-to-date performance in research and continue to anticipate a strong finish to the year.
Let me now address our learning segment.
In addition to challenging your over-year comparisons,
We saw moderate softness in academic book sales.
While Q3 Revenue Decreased 6% [inaudible]
Year to date, revenue rose 4%
driven by expansion and professional content and AI licensing revenue.
Speaker Change: We continue to experience robust growth in signing new book titles across the science, technology, medicine and professional fields.
Additionally, our Z-Book STEM coursewear remains a strong growth driver.
Speaker Change: Adjusted Yvda for the learning segment, decreased 5% this quarter, reflecting revenue performance. Nevertheless, our margin expansion initiatives delivered 30 basis points of improvement, resulting in an adjusted Yvda margin of 35.4%.
Speaker Change: You're to date our margin for learning improved by over 400 basis points.
to 35.3 percent.
Speaker Change: In summary, the year-over-year softness and Q3 aligned with our expectations.
Speaker Change: We continue to secure new business in our core areas and enhance margins and engage in productive licensing discussions with AI developers.
Turning the corporate unallocated expenses [inaudible]
Speaker Change: Excluding DNA, expenses increased 9 percent, reflecting the timing of investments in enterprise modernization and consulting fees related to strategic initiatives, including re-engineering our cost structure.
Notably, our segment margins improved both this quarter and year-to-date [inaudible]
Partly resulting from our reduced corporate allocated expenses.
Speaker Change: This demonstrates our continued progress in right sizing our shared service costs and we have additional improvements planned
Let me now turn to our growth outlook.
Speaker Change: Are your-to-date execution, performance, and indicators remain solid, enabling us to reaffirm our outlook in the mid-to-high end of our projected ranges?
Speaker Change: As previously noted, we anticipate a strong Q4 for our research segment.
Speaker Change: driven by favorable journal renewals and demand to publish indicators, as well as accelerating growth in research solutions and favorable comparisons to prior year.
Speaker Change: These positive factors should more than offset the $23 million non-recurring AI deal recorded in Q4 a lot last year.
Speaker Change: Also, as mentioned earlier, we are reassessing our cost structure with additional expected savings expected in fiscal 26.
To summarize,
Speaker Change: We expect full year revenue to land near the midpoint of our 1.65 to 1.69 billion range.
for representing top-line growth for approximately 3%.
Our segment outlook aligns with expectations.
Speaker Change: with research revenue growing by low-to-mid single digits and learning by low single digits.
Speaker Change: Adjusted EBITDA is expected to land near the midpoint between 385 to 410 million translating to high single-digit growth.
Speaker Change: We anticipate our EBITDA margin to be at the high end of our 23-24% range.
Speaker Change: Adjusted EPS is expected to be at the high end of our $3.25 to $3.60 range.
Delivering strong double digit growth over last year's $2.78 Sons Inc
Speaker Change: Finally, free cash flow is expected to meet our guidance of approximately 125 million and improvement from 114 million in the prior year.
Speaker Change: While capital expenditures will come in lighter than initially projected, restructuring costs will be higher due to expanded cost reduction initiatives.
Speaker Change: Let's turn to the targets we first set down in January of 2024.
Speaker Change: Since that point, it's made decisive moves to improve our fundamentals and will continue to do so.
Speaker Change: Given our momentum in investments in research, our improved efficiency and additional cost savings, we are increasingly confident of our outlook for fiscal 26.
Speaker Change: One, we continue to see revenue growth in the low-to-mid single-digit range.
Speaker Change: 2. They're raising our margin target to be above 25% from the original 24 to 25% range.
Speaker Change: We will be more specific when we discuss our full year guidance in June .
Speaker Change: Three, we are reaffirming our free cash flow target of 200 million, up from 114 million fiscal 24 and 125 million projected for fiscal 25.
Speaker Change: Let me walk you through the basic components of that improvement.
Speaker Change: As is illustrated here, we anticipate strong EBITDA growth next year given our revenue and margin outlook, lower restructuring costs and improved working capital.
Speaker Change: Let me briefly conclude with our financial position and return to shareholders.
Speaker Change: Cash flow from operations and free cash flow year-to-date are much improved due to a mix of improved operating performance and working capital timing.
Free cash flow year-to-date has benefited from lower capex.
Speaker Change: Year-to-date, we continue to return cash to shareholders with dividends and share repurchases totaling 93 million, up from 87 million in the prior year.
Approximately 35 million was used to acquire 784,000 shares.
Our current dividend yield is over 3.5%
Speaker Change: The more appropriate time to look at this number is when we report April , year end in June .
Last year, we disclosed a leverage ratio of 1.7 [inaudible]
With that, I'll pass it back to Matt.
Thank you, Chris.
One final mention before I summarize our key takeaways
Speaker Change: Yesterday we announced that Dr. Karen Madden has joined the Wiley Board of Directors.
Speaker Change: Dr. Madden is the Senior Vice President and Chief Technology Officer at Millipor Sigma.
Speaker Change: The US and Canada Life Science Business of Merck KGAA, wish he is responsible for shaping the technology roadmap and R&D strategy.
Speaker Change: Millipor Sigma develops products focused on scientific discovery, bio-manufacturing and testing services.
Speaker Change: As noted, Wiley's long-term strategy is increasingly focused on the corporate R&D value chain and Dr. Madden's wealth of knowledge and expertise in this area will be a tremendous addition.
Speaker Change: Okay, let's review our key takeaways before we move on to questions.
Speaker Change: In periods of economic uncertainty, Wiley has consistently served as a safe haven, delivering resilient compounding growth, of course economic cycles, and displaying geographic diversification, significant competitive advantages and strong financials.
Speaker Change: We will continue to move forward with operational discipline, fiscal prudence, and strategic foresight.
Speaker Change: We are an early beneficiary in AI development, evolving alongside our corporate partners.
Speaker Change: We continue to explore various content opportunities for training, inference and application with an encouraging pipeline.
Speaker Change: As emphasized, content licensing represents a core business activity for us, not merely an AI-specific initiative.
Speaker Change: Our execution remains strong with excellent organizational alignment yielding significant year-to-date improvements in both margins and cash flow.
Speaker Change: And we maintain full confidence in our outlook for Q4, Fiscal 25, and Fiscal 26, with margin upside and a reaffirmed free cash flow target of $200 million.
Speaker Change: I want to thank all of you for your interest and time today
Speaker Change: I also extend my sincere appreciation for our Wiley colleagues for their dedication and the hard work in bringing us to this point and positioning us for even greater success in the future.
I'll open the floor for questions.
Speaker Change: Your first question comes from the line of Daniel Moore, we'd see J.F. securities, please go ahead.
Daniel Moore: Yeah, thanks. Good morning, Matt. Good morning, Chris. Thanks for all the details and color.
Um, um,
Speaker Change: Great to see the progress, you know, an upward revision regarding the 26 margin target. Maybe to talk a little bit about the drivers, is it additional cost savings, incremental confidence on revenue, you know, AI expectations for incremental AI revenue, all the above, just
What's driving the upward vision there?
Speaker Change: Thanks Dan, and let me kick it off and then I'll turn it over to Chris, but it's really primarily driven by working on the cost structure.
And you know, it's really gratifying to see the
Chris: The ability to, with confidence, really talk about these improvements coming through in our guidance, but really, of course, the organization.
We've been hard at work at
Let's say rationalizing the structure and
Chris: and getting back to what we would consider competitive margin levels.
Chris: Let me turn it over to Chris, who can give you a little more insight into that. Yeah, thanks Matt.
Chris: Dan, the primary driver as Matt said is that we are rationalizing our cost structure largely in corporate shared services.
Chris: been signaling that we were focused on this area. We see that we will begin execution on that in the latter part of this year. You'll see the benefit next year. That's a hundred plus basis point improvement we expect as a result of the actions we're taking.
Chris: really helpful. We want to create sustainable value here in terms of what I would call permanent
to be showing really a continuous improvement mindset around margins.
Speaker Change: I think you just took the next question out of my mouth, you know, thinking about the longer-term opportunity, you know, what have you learned from, you know, competitors springer now that they're public, how do you compare and contrast your cost structure and how you think about the potential for, you know, more sustained margin upside going forward.
Speaker Change: Yeah, we did a lot of benchmarking, including, of course, competitors at Spring and Nature and
Speaker Change: You know, it did point us to looking at structural cost differences. Now, you do know that their mix of business is quite different from us. So they do. We do have more of a society business in our mix than they do.
Speaker Change: That is the royalty cost associated with it, but even when you're back out the royalty cost it points to us in the direction that we do have an opportunity to streamline our cost rupture, so...
Speaker Change: You know, I think, and we've talked about this both, you know, with the executive team and the broader team here, and we are all looking at margin improvement as kind of a way of life. I think there is a
Speaker Change: A lot of work will end there, but we want to do it in the right way, in a responsible way and not in to feel with the work we're doing on driving revenue growth.
Speaker Change: I understand, very helpful, switching gears, the 9 million incremental AI revenue, just to confirm that the full 9 million fell in Q3 and that was in research as opposed to the prior agreements which go into learning, correct?
That's correct Dan, do you have that right?
Speaker Change: The, that's perfect. It's switching gears again in terms of learning. Obviously, you know, you had a tough confidence quarter. Just talk about the outlook over the next eight, 12 months plus, you know, both academic and professional sides of the business and your confidence and getting back to positive growth in fiscal 26. The, the, the, the, the.
Speaker Change: given some of the tougher comps you'll be up against, particularly in first half of the year.
Speaker Change: Well, let a Jay's on the call, so let him talk a little bit of how he's looking at the business outlook and then Chris can give you a sense of the numbers.
Thanks, Matt and Dan. Nice to hear from you again.
So,
Speaker Change: , , , , , , , , , , , , , ,
Speaker Change: We did indeed have a tough comp. I think it could be exclude the AI revenue though from the last quarter. We were only off about a point in terms of prior year. And that points to, you know, some timing in the business, a little bit of pressure in the retail channel.
and a-
Speaker Change: A specific assumption around enrollments in the fall and spring semesters that just proved a little ambitious in terms of where we wanted to be this year. But overall, I think the things I point to you that give us some optimism and really underpinned.
A.
Speaker Change: You know, the essence of what Mal is talking about what we're doing, I'd point to improve margin in learning in the quarter as a key driver of that overall margin makes improvement that we're looking at.
Thank you. Bye-bye.
Growth in our, in our Zeynbrook's business . .
Underline, Coursewear, and you know a real long-term
Speaker Change: opportunity and continued digital licensing and AI in that business that we're looking to capitalize on so
You know, just to reiterate...
You know,
Speaker Change: We think that improved cost discipline, efficiency measures, supporting higher margins, remain a key feature in the business, and that, you know, we've got a nice mix of products there
Speaker Change: In both the short and medium term, we're going to continue to do its job for us in the P&L and help support our overall guidance.
Speaker Change: Chris, you want to add anything? Yeah, if I could. I don't want to specifically get into projections into 26, but I'll just say relative to this Q4.
Chris: We do have a tough coming up. Obviously, last year we had a large Chen A.I. deal.
Chris: If we remove that deal, we would actually be talking about a very positive
Chris: Learning Growth in Q4. Instead, we only see it coming down in the low to mid-single
Chris: in Q4. And a lot of that is strength as Jay alluded to in course where it's a big [inaudible]
Chris: and it will have an impact there. And also there are other licensing deals that we anticipate will mitigate the, to some degree, the large deal that we had in the prior year.
Could that answer your question, Dan?
Chris: You know, some of the book signings, the author signings, etc. So should vote well for fiscal 26, maybe one more, you know, obviously bought back.
I think 35 million in a quarter, if you're looking at-
Chris: You know, given the guidance somewhere in the, you know, over the next call at five quarters you'll generate 335 million plus a revenue of cash for cash flow and that's
Chris: You know, obviously, pre-dividends but still significant opportunity and leverage keeps going lower. So just talk about capital allocation in your term, you know, stocks trade and sub 10 times earnings, how you thinking about buybacks versus
paying down debt and any other uses of...
of your cash flow. Thanks again for all the color.
Sure. Chris?
Chris: In the current year, we've been buying back at a higher rate than we had in the prior year.
Speaker Change: It's modest to some degree, but so is our cash flow improvement year-over-year.
Chris: As we expand into the next year we'll be taking a hard look at the pace of our share repurchases. There's no commitments at this point but obviously we'll have more free cash flow to make that assessment.
Anything else there?
I'm sorry. I'm sorry. I'm sorry. I'm sorry.
He turned up. Okay. I've already been prompted again.
Operator: Before going to the next question, again, if you would like to have a question, please press star one on your telephone keypad. Your next question comes from the line of Sammy Caffer with BNP Peruvos, please go ahead.
Thank you for that.
First one, you have a describe.
Sammy, you're breaking up
Can we better now?
A little, yeah, a little.
Speaker Change: Yes, so you described how the US already accounted for 20% of your article count.
Operator: Can you elaborate a little bit on your revenue exposure to US institutions in particular to US medical libraries, given all the talks around NIH funding.
The second question I made.
Operator: Could you give a few examples of how Reploying AI internally helps improve cost efficiency?
Operator: Can you discuss whether thanks to AI and mission tools and productivity gains can help improve margins? Are we talking about AI driving 10 deeps? Are we talking about AI and automation driving 100 deeps or more?
Thank you for joining us today.
[inaudible]
I don't think we're going to get to- [inaudible]
I'm sorry, Sami, go ahead [inaudible]
Operator: And lastly, when I look at Alps severe or springer or e-former, their research business is going 4-5% organically. Do you think that research can accelerate towards 4-5?
Operator: in the short to medium term or other structural differences in exposure that perhaps may prevent that in the medium term. Thank you very much.
Speaker Change: Let me try to answer all of that and I'm going to ask Jay to step in at the right time. On the last question, you may have heard us on the prior call, talk about the fact that we have a lot of our research revenue back ended this year into the fourth quarter. You'll see that when we finish the year will be...
Speaker Change: Research for both rates will be much more at industry levels, so that's the answer to the last question. As you might imagine, we're monitoring the developments in the US very carefully.
Speaker Change: and, you know, when we look at the impact of some of the potential impact of some of the US funding actions
Speaker Change: You know, it really treats us back to a low single digit impact on us.
Speaker Change: And there are also, as you will know, many of these arrangements we have are in multi-year agreements and there are time-links.
Speaker Change: Right now, there were so many unknowns with how this is going to fall out in terms of policy changes and court challenges. So, we're very confident about...
Speaker Change: The, you know, the business given its geographical diversification I'll add on to that, so
Speaker Change: We're confident enough to reaffirm our guidance. So, but we are monitoring and taking you very seriously on the little question about the AI impact
Speaker Change: On kind of how we run the business, Jay and his team have some very, very exciting things underway and we don't translate it into a particular financial impact at this point but it's part of what's driving
Speaker Change: The overall margin improvement in the company that we're committing to with our increased margin guidance. But Jay, maybe touch on a couple of interesting areas where you're finding good success with AI.
Jay Flynn: Yeah, sure Matt and Tammy, thanks, thanks for the, thanks for the question and thanks for the interest of course.
Let me just...
Before I jump into AI, you asked about US [inaudible]
Speaker Change: Medical Library Exposure. I just want to reiterate one of the two things that Matt said.
You know, we...
Speaker Change: It's a single-digit number that's tied directly to federal funding and of course we anticipate...
Speaker Change: A strong year as Chris talked about as we put in our guidance, specifically with medical libraries.
Speaker Change: The relationships long term that we have with those customers and B, we feel good about the global nature of the business. So on that, let me just get to the AI.
Speaker Change: question a bit more. And as Matt points out, we are really, we feel like we are.
Speaker Change: Driving and embracing AI both in the innovation side of the business and in the cost saving side. You asked particularly about
Opportunities in cost, certainly workflow automation.
Document Review Research Integrity
Speaker Change: We've got a group set up internally called the magic lab that we point at this kind of work and they're working every day with folks inside the building and outside the building. We're bringing in experts to help us on this journey. But we feel really...
We feel very optimistic that-
Speaker Change: You know, two things. One, humans are going to stay at the center of the AI work in our sector because of the importance of human and expert overview and review of the processes.
Speaker Change: This is an area where we want to lead and we want to continue to invest. And so, you know, maybe as the key takeaway, I think, you know
Speaker Change: Our approach is ensuring that AI innovation is going to happen with integrity.
And we're going to balance
Speaker Change: and just a laser-like focus on both the top and the bottom line.
Thank you very much, very helpful. Thank you.
Thank you, Sammy.
Speaker Change: Again, if you would like to ask a question, press star 1 in your telephone keypad.
Speaker Change: If there are no other questions, I can wrap up.
Speaker Change: I will turn the call back over to Mr. Kissner for closing remarks.
Thank you.
Mr. Kissner: Well, thank you everyone. We appreciate you spending time with us. We appreciate your confidence. Again, I want to thank the Wiley colleagues around the world who have helped drive this terrific progress we're seeing and we look forward to catching up with all of you again in June when we talk about the close of the fiscal year. Have a great day. Have a great day.
Mr. Kissner: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
[music]