• Revenue Growth: Up 3%, driven by learning growth of 7% and research growth of 1%.
• Adjusted EBITDA: Increased 14% to $106 million.
• Adjusted EBITDA Margin: 24.9%, up from 22.7% last year.
• Adjusted EPS: Up 36% due to higher adjusted operating income and accrued interest income.
• Research Revenue: Up 1% for the quarter, driven by gold open access and institutional models.
• Learning Revenue: Up 7%, with academic up 5% and professional up 11%.
• Free Cash Flow: Anticipated to be approximately $125 million, up from $114 million.
• Net Debt-to-EBITDA Ratio: 2.2 at the end of October.

• Warning! GuruFocus has detected 5 Warning Sign with EQGPF.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Revenue growth was driven primarily by the learning segment, which saw favorable market conditions across both academic and professional sectors.
• Margin expansion and EPS growth were notable this quarter, with adjusted EBITDA and adjusted EPS up 17% and 47%, respectively.
• The company is seeing AI-related tailwinds and has a healthy pipeline of pharma and other R&D-centric companies exploring content and data for AI applications.
• John Wiley & Sons Inc (NYSE:WLY) has successfully completed all divestitures, allowing for a more focused business strategy.
• The Indian government's approval of a One Nation One Subscription program is expected to significantly expand access to Wiley's journal content, potentially boosting subscription revenue.

Negative Points

• Research growth was modest, with a 1% increase, partially offset by a large year-on-year decline in legacy print and licensing revenue.
• The GAAP revenue decline was impacted by foregone revenue from sold businesses.
• The company anticipates an uneven second half, with Q3 expected to be challenged due to seasonal fluctuations and current year investments.
• Legacy revenue performance was uneven, largely due to unfavorable comparisons with a one-time backfile deal in the prior year.
• The corporate expenses were flat or slightly up year-to-date, with higher tech spending offsetting cost savings.

Q & A Highlights

Q: Can you elaborate on the momentum in the learning business and the sustainability of its growth? A: Jay Flynn, Executive Vice President and General Manager of Research, highlighted the strong performance in the learning segment, driven by growth in the zyBooks platform and recovery in the trade business. The team has adjusted the cost structure while driving top-line performance, and new content acquisition is a positive forward-looking indicator. AI revenue also provides additional tailwinds, contributing to a stable and growing learning business.

Q: What are the trends in article submissions and the potential impact of the new agreement in India? A: Jay Flynn noted that article submissions are growing faster in Asia, with Western markets recovering to mid-single-digit growth. The One Nation One Subscription agreement with India is expected to expand access to journal content significantly, potentially boosting subscription revenue. However, it's too early to quantify the impact. The agreement strengthens Wiley's partnerships with Indian institutions, enhancing opportunities in engineering, physics, and life sciences.

Q: Are there any plans for further cost reduction initiatives? A: Matthew Kissner, Interim President and CEO, emphasized that margin improvement is a continuous effort at Wiley. The focus is on technology and infrastructure modernization, with shared services being a potential area for cost savings. Specific numbers are not yet available, but the company is committed to ongoing margin improvement while reinvesting in core business growth.

Q: What is the update on collections from the sale of divested businesses? A: Christopher Caridi, Interim CFO, stated that Wiley anticipates receiving funds owed from divested businesses, particularly from the university services business. While the timing is uncertain, the company expects to secure some funds in the future, with the due date on the note being substantially in the future.

Q: What are the priorities for capital allocation going forward? A: Christopher Caridi explained that Wiley maintains a balanced approach to capital allocation, focusing on future growth opportunities and shareholder returns. Initially, cash inflows may be used to reduce debt, but the company is also evaluating opportunities for internal investments and shareholder returns.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.