John Wiley & Sons, Inc. (NYSE:WLY) Q3 2024 Earnings Call Transcript

These efforts are paying off. For example, we recently launched an internal pilot of our AI-powered article matching engine to help authors get published faster and in the right journals. We have also learned valuable lessons about promoting research integrity from our Hindawi experience. Our teams are leveraging our data about bad actors and retracted papers. Such data is proving indispensable for training robust, accurate and efficient AI fraud detection models. Most notably, we’re focused on paper mill detection, where we’re aiming to identify even the most subtle indicators of fraudulent activity. As stated before, this is an industry-wide issue and a top priority for us and our solutions customers. So we’re taking the lead by both deploying these tools across our journal portfolio and bringing to market where they can be incorporated into our clients’ existing systems.

Thirdly, we’re using AI to drive business model innovation. As Jay mentioned, during our Investor Day, Wiley publishes a number of datasets that are directly loaded on to lab instruments to help determine the chemical structure of a sample. This proprietary library of mass spectrometry data has critical applications ranging from airport security and food analysis to drug discovery and biofuel generation. Our most recent product release uses AI to analyze not only known chemical compounds, but unknown compounds to predict among other things their safety utility and toxicity. This is just one example of many, where we’re using AI to innovate, transform content application and distribution models and bring Wiley’s products closer to the customer.

Finally, we’re deploying AI to improve colleague productivity, in areas like sales and marketing, editorial, content management and customer service. This will lead to further efficiency, faster time to market and improved customer response. In summary, we’re excited and confident in our position in this evolving new digital economy. With that, I’ll turn it over to Christina to discuss our progress, performance and outlook.

Christina Van Tassell: Thank you, Matt, and hello everyone. We’re closing in on the end of what has been a demanding, but pivotal year, and I couldn’t be prouder of how our global colleagues have responded to the changes and risen to the challenges. I feel very good about the progress we’ve made so far. Let’s start with our value creation plan. Over the past six months, we reorganized the businesses into one go-to-market Research and Learning team under Jay and consolidated functional areas. We are pleased for example with how the marketing reorg has improved our technical capabilities and simplified our focus, attracting more authors and submissions as evident in our 13% submissions growth year-to-date. As Matt noted, we’ve closed on the sale of University Services to academic partnerships and announced the sale of Wiley Edge to Inspire [ph] Capital.

We expect to close the Edge transaction in Q1. The remaining divestiture across knowledge is progressing, although the transaction is expected to be immaterial. We’re moving aggressively on our goals to focus and optimize. As you may recall, our multiyear run rate savings target is $130 million by fiscal ’26. We’ve accelerated our actions and now expect to realize more in-year savings than planned, $45 million, up from the $30 million we discussed last quarter. This means we’ve now actioned 60% or $80 million of the $130 million goal. The remainder is expected to be largely actioned in fiscal ’25. The three key areas of our multiyear savings plan include: Corporate savings and eliminating costs given our more focused portfolio; optimization with savings coming from our streamlined org structure, consolidated functions, labor arbitrage and reduced real estate footprint; and technology savings, as we simplify our platforms to retire legacy systems and reduce hosting costs.

As discussed in January, we expect half of the multiyear savings to flow through to margin and half to be reinvested in profitable growth and optimization initiatives. These include — our research journal brands to meet global demand, expanding our editorial and marketing capabilities to drive output and attract authors, expanding solutions offerings to win new partners and drive upsell, and modernizing our Research Publishing platform. Let’s turn to our research performance. Research Publishing returned to year-over-year growth this quarter and we continue to see good momentum in our key leading indicators. Of note excluding Hindawi, Research Publishing revenue was up 2% on the strength of gold open access and our institutional models, which include both read-only subscriptions and read and published transformational agreements.

Submissions were up 13% year-to-date, and output continues to improve as we work through the long lead time to convert a submitted article into a published one. These submission numbers point to good underlying progress in our author marketing efforts editorial commissioning and refer transfer activities. As we mentioned in our Investor Update, these article submissions power all of our journal business models including subscriptions, transformational agreements and gold open access. Conversion to revenue, therefore, depends on these business models, as well as other factors such as geography, acceptance rates in individual journals, and of course, overall manuscript quality. As Matt noted, we’re folding Hindawi into our existing journal portfolio.

Integrating Hindawi gives us an additional 270 OA journals of which 75% or 200 have impact factors, marking them as high quality. Also, we recently announced institutional open access agreements with several consortia around the world, including the University of California system in the U.S. and JISC in the U.K. These types of multiyear read and publish agreements as well as our traditional subscriptions are foundational to our large global customer base of leading universities, government institutions, and corporate customers. This quarter we saw over 30% growth in Gold OA excluding Hindawi. Gold OA our author paid model makes up about 11% of our Research Publishing revenue. It’s the fastest-growing area in our Research segment. Turning to Research Solutions.

Revenue declined 1% this quarter due to continued market softness in both advertising and our projects business in the health care sector. This decline in corporate revenue offset continued growth from our Publishing Solutions business, notably consulting and managed services for society partners. Adjusted EBITDA in research this quarter declined 2% mainly driven by higher editorial and marketing costs and the impact of Hindawi. Our Q3 adjusted EBITDA margin was 30.9% down from 31.7% in the prior period. So overall in research, we are seeing recovery as expected both in our year-over-year revenue performance and in our leading indicators. Let’s turn now to Learning. Our academic line continues to perform well up 5% in the quarter driven by double-digit growing digital courseware, digital content and licensing.