Q3 2025 John Wiley & Sons Inc Earnings Call
[inaudible]
Speaker Change: Good morning and welcome to Wiley's Q3 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 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 obligation to update them to reflect subsequent events. Also, Wiley provides non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends.
Speaker Change: These measures do not have standardized meanings prescribed by US Gap, 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 gap. Unless otherwise noted, we will 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 transcripts will be available on our Investor Relations webpage at investors.wiley.com. I'll now turn the call over to Matthew 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 are 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.
Matt Kissner: For those who may be new to the story, Wiley delivers authoritative content and data-driven insights to institutions, corporations, researchers and learners.
Matt Kissner: Our extensive catalog includes some of the most valuable and important content in the world, essential in the advancement of science, technology, and medicine.
Matt Kissner: 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.
Matt Kissner: Let me acknowledge the economic uncertainty out there, ranging from consumer confidence and inflation, to tariffs, policy swings, and geopolitical unrest.
Matt Kissner: As a reminder, for over 200 years, Wiley has been a safe haven through many economic cycles and periods of disruption.
Matt Kissner: We demonstrated this resiliency during the Great Recession and the COVID pandemic. All publishing services, content and brands remain must have resources, and our markets continue to prosper.
Matt Kissner: Supporting this is a strong balance sheet and consistent cast generation over time as evidence by 31 consecutive years of dividend increases.
Matt Kissner: 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.
Matt Kissner: We recognize there's a wide mode business with essential, authoritative content and trusted brands.
Matt Kissner: We deliver resilient compounding growth in markets that remain stable even during economic downturns.
Matt Kissner: Approximately half of our revenues are occurring. In our research segment, this number is nearly 75 percent.
Matt Kissner: We are an early AI beneficiary with emerging long-term opportunities in the corporate sector, particularly in research and development.
Matt Kissner: Our financial characteristics are strong with healthy margins in cash generation, low leverage and ample liquidity.
Matt Kissner: and finally the leadership team at Wiley is aligned and committed to continuous improvement and value creation.
Matt Kissner: Let's talk about some of the favorable underlying trends we're seeing.
First.
Matt Kissner: Global R&D spend continues as the primary driver of research output, remaining strong in 2024 with growth of 8%. Growth projections for 2025 are similar.
Matt Kissner: Second, the demand to publish continues to increase, reflecting its vital importance to the leaders of researchers. Unidate research-autical submissions are up 18% with publishing output of 8%.
Matt Kissner: Third, our recurring revenue models demonstrate strong health with solid pricing power supported by consistently higher value.
Matt Kissner: Recurring revenue models include a subscription read-only and transformational read-and-publish agreements.
Matt Kissner: 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.
Matt Kissner: 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.
Matt Kissner: Our top tier quality and scale give us an opportunity to have pace the market over time.
Matt Kissner: Finally, Wiley's strategic position in AI development and application offers multiple advantages.
Matt Kissner: As previously discussed, our content serves as a foundation for training large language models.
Matt Kissner: and bringing to market vertical specific LLMs. Additionally, as a publisher, the nature of our work enables us to greatly benefit from AI productivity tools.
Matt Kissner: 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.
Matt Kissner: Learning was down due to challenging comparisons to prior year as discussed in our last earnings call.
Matt Kissner: and some softness in academic books. Chris will go into further detail on our segment performance.
Matt Kissner: Keith takeaways from the quarter include our calendar 25 journal subscription and TA renewal season is nearly 80% complete and we are seeing encouraging growth trends.
Matt Kissner: Open access continues to demonstrate rapid growth across our journal portfolio.
Matt Kissner: We expanded a corporate AI licensing agreement this quarter and continue to build a pipeline of vertical specific opportunities.
Matt Kissner: It's very early days in the development of this vertical specific market, but we're seeing considerable interest from leading research-intensive corporations.
Matt Kissner: 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 a prior year.
Matt Kissner: As we will discuss later, we see significant opportunities for continued margin improvement.
Matt Kissner: 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.
Matt Kissner: On to our results. Throughout my commentary, I'll exclude divested assets and currency impacts.
Matt Kissner: Revenue was up 1%, driven by research growth of 5% offsetting and expected 6% decline in learning.
Matt Kissner: This year over year swing stemmed from a $6 million licensing renewal in the prior year and softness this quarter in academic books.
Matt Kissner: Ajusted EPS increased 39% due to higher adjusted operating income and a lower adjusted effective tax rate. Our operating margin rose 280 basis points to 14.2%.
Matt Kissner: Adjust an EBITDA Group 4% reflecting revenue growth partially offset by investments in growth and productivity initiatives.
Matt Kissner: Our adjusted EBITDA margin for the quota was 23.2% up from 22.7%.
Matt Kissner: Let's talk about how we're executing on our core objectives this year.
First, driving recovery and growth in research.
Matt Kissner: Yiddedate that segment is up 3% with growth across all key areas including our Recurrey Revenue models, Open Access Publishing Program, Licensing, and Solutions.
Matt Kissner: 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.
Matt Kissner: and we continually expand in critical areas such as life sciences, AI, and machine learning.
Matt Kissner: 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.
Matt Kissner: We anticipate launching additional advanced journals in 2025 and 2026, and as a reminder, top to your journal franchises, like advanced, are differentiators for large publishers.
Second, moving decisively on AI opportunities.
Matt Kissner: 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.
Matt Kissner: Through nine months our adjusted operating margin increased 330 basis points to 13.30% and adjusted the EBITDA has improved by 160 basis points to 22.3%
Matt Kissner: Let me say a few words about the current US funding environment.
Matt Kissner: We're keeping a close eye on the potential impact of US government actions on research funding.
Matt Kissner: 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.
Matt Kissner: Importantly, as I'll describe in a moment, US Federal funding only supports a small percentage of our research output.
Matt Kissner: All of this is evident in today's confident reaffirmation of our fiscal 25 outlook and fiscal 26 targets including the margin improvement.
Matt Kissner: Moreover, it's too early to weigh any potential long-term impact given the high level of uncertainty.
Matt Kissner: and the critical importance of scientific and technological activity in driving economic growth.
Matt Kissner: 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.
Matt Kissner: 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.
Matt Kissner: For context, China leads as the number one source of research output worldwide.
followed by the U.S., the U.K., Germany, and Japan.
Matt Kissner: 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.
Amia around 30% [inaudible]
North America, around 20%
and other makes up about 5%.
Matt Kissner: As for the US, direct federal funding is only responsible for a single digit percentage of our total article output.
Matt Kissner: Of course, we are fully confident that the U.S. scientific, technical, and medical research will continue to receive federal support.
Matt Kissner: given the essential role that research plays in US economic growth, global competitiveness, and societal well-being.
Where are we today?
Matt Kissner: Mitchell 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.
Matt Kissner: 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 extends beyond financial metrics.
Matt Kissner: The agreement unifies the research ecosystem of the world's second most populated country
and as our India country lead, Ritesh Kumar stated,
Matt Kissner: 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.
Matt Kissner: 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.
Matt Kissner: Both these landmark agreements serve strategic purposes that transcend immediate financial benefits.
Matt Kissner: they expand access in emerging growth markets and deliver additional revenue streams and ultimately enlarge both the scientific community and the global supply of quality research.
Matt Kissner: Let's examine R&D and publication funding, which shows similar geographic diversification.
Matt Kissner: 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 and Agencies
State Governments, Private Endowments, Foundations,
Tuition Revenue and Corporations
Matt Kissner: I'll emphasize again that nearly 75% of our research publishing revenue is recurring.
Also, while many associate US R&D with federal government funding,
Cooperations fund 80% of total US R&D investment.
This reality reveals one of the most promising long-term opportunities.
Matt Kissner: Currently, corporations represent a relatively small percentage of our overall revenue.
Matt Kissner: However, we believe there is significant sustained value in integrating our content and data more deeply into the corporate research process, such as AI model enablement and providing data and analytics to support the research process.
Matt Kissner: Taken together, all these factors position research as both resilient and poised for continued expansion.
Matt Kissner: To summarize, we continue to see growth this year in our recurring models and open access program.
Matt Kissner: Renewals and leading indicators are favorable and give a strong visibility.
Matt Kissner: Over the long term, our quality and scale will remain essential elements for attracting and retaining research authors and driving market share gains.
Matt Kissner: Let's now turn to AI growth, particularly the long-term corporate opportunity I mentioned earlier.
Matt Kissner: This quarter we executed an expanded agreement for AI model training purposes and we're seeing promising developments in the broader vertical specific market.
Matt Kissner: The agreement builds on the project announced in Q1 involving backlisted learning content for training large language models.
Matt Kissner: This Q3 expansion incorporates backlist research content defined as previously published material older than three years.
Matt Kissner: The $9M agreement brings our total AI revenue this year to $30M, following $23M realized last
As a reminder, these phase one trading agreements are non-recurring.
Matt Kissner: It's important to reemphasize that licensing represents a core business activity for Wiley.
As we take on new AI-specific initiatives
Matt Kissner: Our guiding principles remain straightforward. We recognize our responsibility to engage with AI developers to secure scientific accuracy.
and deliver optimal learning outcomes.
Matt Kissner: These models require training untrusted, authoritative content such as Wiley's, while protecting the rights of authors and other copyright holders, a fundamental responsibility we embrace as a knowledge company.
Matt Kissner: Beyond these large-scale training agreements, we're seeing encouraging demand from multinational R&D-centric companies, the course critical sectors including healthcare,
Bio pharmaceuticals and industrial chemistry.
Matt Kissner: 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
Matt Kissner: 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.
Matt Kissner: In-hand support for corporate research initiatives represents phase two of our content licensing strategy, with a broad set of applications across the many disciplines we support.
Matt Kissner: 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.
Matt Kissner: The market will take time to fully develop, but we are encouraged by the early demand we're seeing.
Matt Kissner: on 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.
Matt Kissner: 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 [inaudible]
Matt Kissner: Adjusted revenue grew 3% driven by core growth in research and AI licensing.
Matt Kissner: excluding one-time AI-related revenue, overall revenue grew 1%, with research increasing 2%.
Matt Kissner: We continue to advance our margin expansion initiatives, resulting in significant improvements.
Matt Kissner: Adjusted operating income of 38% EPS up 43% and EBITDA up 12%.
Are Adjusted Operating Margin, Improved by 330 Basis Points?
Matt Kissner: to 13.3% and our adjusted EBITDA margin rose 160 basis points to 22.3%
Matt Kissner: We continue to focus on optimizing our cost structure, more specifically right-sizing our technology costs and other corporate expenses.
Matt Kissner: at the same time, transforming how we publish and work to drive greater operating efficiency.
We do anticipate restructuring charges from this activity.
Matt Kissner: Meanwhile, free cash flow shows strong recovery, and we remain on track to achieve 125 million in fiscal 2025.
Turning to our research segment.
Third quarter, a near-to-date revenue increased 5% and 3% respectively.
Matt Kissner: Q3 growth stem primarily from AI licensing in our open access programs.
Matt Kissner: For the nine-month period, research publishing growth reflected strong demand to publish and read, with double digit growth and gold open access and low single digit growth in our recurring revenue models, offsetting softness and ancillary products.
Matt Kissner: A reminder that ancillary products include print and other non-recurring items such as backfiles, article pay-per-view, digital archives,
and Title by Title Journal Sales to Libraries.
Matt Kissner: 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-date.
Matt Kissner: As Matt mentioned, we have completed nearly 80% of our calendar 2025 renewal season and see steady growth trends.
Matt Kissner: The multi-year nature of these agreements means that around one-third of our library customers in consortia come up for renewal annually.
Matt Kissner: We have successfully renewed major agreements in the UK, France, and the US, while executing those new landmark deals in India and Brazil.
Matt Kissner: This renewal season extends from early December through the end of April 2025.
Research Solutions had successfully returned to growth.
Matt Kissner: 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.
Matt Kissner: Wiley's key differentiator continues to be our enduring success in partnering with societies and other professional organizations.
Matt Kissner: Four of our key society health science partners have been with us for over 50 years.
Both 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.
Harp Reputation [inaudible]
Matt Kissner: 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.
R.I. Tripoli partnership exemplifies this approach.
Matt Kissner: as one of the world's largest societies responsible for a third of all technical literature in electrical engineering and computing. IEEE now benefits from Wiley's expanded role in managing their advertising sales and programs.
Matt Kissner: This arrangement provides access to highly engaged audiences through impactful advertising and digital content solutions.
Matt Kissner: 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.
Matt Kissner: Ajusted 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.
Matt Kissner: RQ3 margin improved by 180 basis points to 32.7%, while our year-to-date margin improved by 30 basis points to 31.1%.
Matt Kissner: In summary, we are encouraged by our Q3 in 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%, year-to-date revenue rose 4%.
driven by expansion and professional content and AI licensing revenue.
Matt Kissner: We continue to experience robust growth in signing new book titles across the science, technology, medicine, and professional fields.
Additionally, our Zeipook STEM coursewear remains a strong growth driver.
Matt Kissner: Ajusted Yvida for the learning segment, decreased 5% this quarter, reflecting revenue performance, nevertheless, our margin expansion initiatives deliver 30 basis points of improvement, resulting in an adjusted Yvida margin of 35.4%.
Matt Kissner: You're to date our margin for learning improved by over 400 basis points.
to 35.3 percent.
Matt Kissner: In summary, the year-over-year softness and Q3 aligned with our expectations.
Matt Kissner: We continue to secure new business in our core areas, enhance margins and engage in productive licensing discussions with AI developers.
Turning the corporate unallocated expenses.
Matt Kissner: These decreased 5% this quarter primarily due to lower depreciation and memorization.
Matt Kissner: Excluding DNA, expenses increased 9%, reflecting the timing of investments in enterprise modernization and consulting fees related to strategic initiatives, including re-engineering our cost structure.
Notepay
Our segment margins improved both this quarter and year to date.
Partly resulting from our reduced corporate allocated expenses.
Matt Kissner: 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.
Matt Kissner: 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?
Matt Kissner: As previously noted, we anticipate a strong Q4 for our research segment.
Matt Kissner: driven by favorable journal renewals and demand to publish indicators, as well as accelerating growth in research solutions and favorable comparisons to prior year.
Matt Kissner: These positive factors should more than offset the $23 million non-recurring AIDL recorded in Q4
Matt Kissner: Also, as mentioned earlier, we are re-assessing our cost structure with additional expected savings expected in fiscal 26.
to summarize .
Matt Kissner: We expect full year revenue to land near the midpoint of our 1.65 to 1.69 billion range.
representing top-line growth for approximately 3%.
or Segment Outlook aligns with expectations.
Matt Kissner: with research revenue growing by low to mid-single digits and learning by low single digits.
Matt Kissner: The adjusted EBITDA is expected to land near the midpoint between 385 to 410 million, translating to high single-digit growth.
Matt Kissner: We anticipate our EBITDA margin to be at the high end of our 23 to 24% range.
Matt Kissner: Adjust an 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 year's $2.78.
Matt Kissner: Finally, free cash flow is expected to meet our guidance of approximately 125 million and improvement from 114 million in the prior year.
Matt Kissner: While capital expenditures will come in lighter than initially projected, restructuring costs will be higher due to expanded cost reduction initiatives.
Matt Kissner: Let's turn to the targets we first set down in January of 2024.
Matt Kissner: Since that point, we've made decisive moves to improve our fundamentals and we'll continue to do so.
Matt Kissner: Given our momentum in investments in research, our improved efficiency and additional cost savings we are increasingly confident of our outlook for fiscal 26.
Matt Kissner: One, we continue to see revenue growth in the low-to-mid single-digit range.
Matt Kissner: 2. We are raising our margin target to be above 25% from the original 24-25% range.
Matt Kissner: We will be more specific when we discuss our full year guidance in June .
Matt Kissner: 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.
Matt Kissner: Let me walk you through the basic components of that improvement.
Matt Kissner: As is illustrated here, we anticipate strong EBITDA growth next year, given our revenue and margin outlook, lower restructuring costs, and improved working capital.
Matt Kissner: Let me briefly conclude with our financial position and return to shareholders.
Matt Kissner: 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.
Freakash Flow Year-to-Date has benefited from lower capex.
Matt Kissner: 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.
Her current dividend yield is over 3.5%.
Matt Kissner: Finally, our net debt to EBITDA ratio was 2.0 at the end of January compared to 1.9 in the prior year period.
Matt Kissner: 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.
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 U.S. and Canada Life Science Business of Merck KGAA, where she 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.
Speaker Change: 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 in time today.
Speaker Change: I also extend my sincere appreciation for our Wiley colleagues, for their dedication and 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: At this time, I would like to remind everyone in order to ask a question, please press start then the number one on your telephone keypad. We will pause for ages a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Daniel Moore, we'd see J.F. securities, please go ahead.
Daniel Moore: Yes, thanks. Good morning, Matt. Good morning, Chris. Thanks for all the details and the color.
Speaker Change: Great to see the progress, you know, an upward revision regarding the 26th margin target. Maybe just talk a little bit about the drivers, is it additional cost savings, incremental confidence on revenue, you know, AI expectations from incremental AI revenue, all the above just what's driving the upward revision there.
Speaker Change: Thanks Dan and let me kick it off and then I'll turn it over to Chris but it's it's really primarily driven by working on the cost structure.
and you know it's really gratifying to see the
Speaker Change: Ability with confidence, you know, 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
Speaker Change: and getting back to what we would consider competitive margin levels.
Speaker Change: Let me turn it over to Chris who can give you a little more insight into that. Yeah, thanks, Matt.
Speaker Change: Dan, the primary driver as Matt said is that we are rationalizing our cost structure largely in corporate shared services.
Speaker Change: has 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.
Speaker Change: 100 plus basis point improvement we expect as a result of the actions we're taking.
Speaker Change: really helpful. Yeah, we're trying to do it further. You know, just really quick, you know, we want to create sustainable value here in terms of what I would call permanent margin improvement.
Speaker Change: and really looking, you know, at that getting excited at not only 26 but even beyond.
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, talking 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 do you think about the potential for, you know, more sustained margin upside going forward?
Speaker Change: You know, it did point us to looking at structural cause differences. Now, you do know that the 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 back out the royalty cost it points at 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 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. Yeah.
Speaker Change: a lot of improvement there, but we want to do it in the right way in a responsible way and not interfere with the work we're doing on driving revenue growth.
Speaker Change: I understood, 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 challenge of learning, correct?
That's correct, and you have that right.
The, that's perfect.
Speaker Change: is 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 in your confidence and getting back to positive growth in fiscal 26.
Speaker Change: given some of the tougher comps you'll be up against, particularly in first half of the year.
Speaker Change: Well, let Jay's on the call, so let him talk a little bit of kind 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.
You know,
Speaker Change: We did indeed have a tough comp. I think if you exclude the AI revenue though from the last quarter, we were we were only off about a point in terms of prior year and [inaudible]
and that's...
points to
Hey!
Speaker Change: 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, you know, the. [inaudible]
Speaker Change: The things I'd point to you that give us some optimism and...
Really underpinned.
Speaker Change: Growth in our in our Z-books business underlying coursewear and you know a real long-term
Opportunity and Continued
Speaker Change: 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 we've got a nice mix of products there that is.
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, do 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 come coming up. Obviously last year we had a large Gen A ideal. We
Chris: If we remove out that deal, we would actually be talking about a very positive learning growth in Q4. Instead, we only see it coming down in the low to mid single digits.
Chris: in Q4. A lot of that is strength as Jay alluded to in the course where it's a big quarter for course where and it'll have an impact there.
Chris: and also there are other licensing deals that we anticipate will mitigate the...
Chris: to some degree the large deal that we had in the prior year.
Speaker Change: It does. That's a helpful and you alluded to the strength in
Speaker Change: you know, some of the book signings, the author signings, et cetera. So should the boat wealth fiscal 26 maybe one more, you know, obviously bought back.
I think 35 million in the quarter.
Speaker Change: you're looking at, you know, given the guidance somewhere in the, you know, over the next call at five quarters, you'll generate three hundred and thirty five million plus a revenue of cash for cashflow and that's
Speaker Change: 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 in sub-10 times earnings, how you thinking about buybacks versus...
Speaker Change: Paying down debt and any other uses of your cash flow. Thanks again for all the color.
Sure, yeah, D.
Chris: In the current year we've been buying back at a higher rate than we had in the prior year.
Chris: 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.
You know, the pace of our share repurchases.
Anything else dear?
He jumped up. Oh, good. I've already been prompted again.
Speaker Change: Before going to the next question, again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Sammy Cafford with BNP Perubos, please go ahead.
Thank you very much.
First one, you describe.
Samuel, 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.
Speaker Change: 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 may...
Speaker Change: Could you give a few examples of how re-ploying AI internally helps improve cost efficiency?
Speaker Change: and Jimmy Scott, whether thanks to AI and mission tools and productivity gains can help improve margins. Are we talking about AI driving 10 beeps? Are we talking about AI and automation driving 100 beeps or more?
Yeah, I don't think we're going to get to- [inaudible]
I'm sorry, Sammy, go ahead [inaudible]
Speaker Change: And lastly, when I look at Altsuvier or Springer or Informa, their research business is going 4-5% organically. Do you think that research can accelerate towards 4-5?
Speaker Change: 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, Jonathan. Yeah, let me.
Speaker Change: Let me try to answer all of that and I'm an S.G. to step in at the right time. I'm the last question.
Speaker Change: 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: All research growth rates will be much more at industry levels. So that's the answer to the last question. On the percentage, 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 U.S.
Speaker Change: You know, it really traces back to a low single digit impact on us.
and there are also, as you will know,
Speaker Change: Many of these arrangements we have are in multi-year agreements and there are time-links.
associated with the impact, and the fact is
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.
Speaker Change: We're confident enough to reaffirm our guidance, so what we are monitoring and taking it very seriously, on the middle 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, we don't, we don't
Speaker Change: We don't translate it into a particular financial impact at this point, but it's part of what's driving the overall margin improvement in the company.
Speaker Change: 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.
Peter Lukas, John Wiley, John Wiley, John Wiley, John
Jay Flynn: Yeah, sure, Matt, and Tammy, thanks for the question and thanks for the interest, of course.
Let me just...
Before I jump into AI, you asked about US.
Matt Kissner: Medical Library Exposure. I just want to reiterate one of the two things that Matt said.
You know, we...
Matt Kissner: We in the preparator marks talked about how 84% of our content comes from outside the United States and you know that that distribution of articles only [inaudible]
Matt Kissner: It's a single digit number that's tied directly to federal funding and of course we anticipate a strong year as Chris talked about as we put in our guidance, specifically with medical libraries.
Matt Kissner: I'll call correctly. There's about 120 academic medical centers in the United States. We have thousands of customers globally and so while of course we're monitoring what happens at those academic medical centers and those medical libraries, we feel good about. Thank you.
Matt Kissner: A, 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 pair it to the AI.
Thank you.
We feel like we are
Matt Kissner: Driving and embracing AI both in the innovation side of the business and in the cost saving side. You have particularly about
Matt Kissner: Opportunities in cost, certainly workflow automation, document review, research integrity, automation of content workflows in particular are areas where we're spending a lot of time. We've got a group set up internally called the Magic Lab that we've wiped out 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, um...
We feel very optimistic that
Matt Kissner: 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. And second, we feel like
Matt Kissner: This is an area where we want to lead and we want to continue to invest and so you know as a maybe as the the key takeaway. I mean I think you know.
Matt Kissner: Our approach is ensuring that AI innovation is going to happen with integrity.
and we're going to balance with you.
Matt Kissner: and just a laser-like focus on both the top and the bottom line.
[inaudible]
Thank you very much. Very helpful. Thank you.
Thank you, Sammy.
Speaker Change: Again, if you would like to ask a question, press star one 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.
Speaker Change: Well, thank you everyone. We appreciate your 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. Thank you.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.