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01/11 18:39
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite strong research publishing revenue and improved margins, negative factors such as declining learning and professional segment revenues, economic uncertainty, and AI revenue volatility counterbalance the positives. Increased share repurchases and dividends offer some support, but the overall sentiment remains neutral. Given the market cap, the stock is likely to see minimal movement over the next two weeks.
Research Publishing Revenue Growth 7% growth year-over-year, driven by worldwide demand to publish, read, and license. Volume remains at record levels worldwide.
AI Training Revenue Close to $100 million in less than 2 years, with $6 million realized in the quarter and $35 million year-to-date. Growth attributed to licensing projects for LLM training.
Adjusted Operating Margin Up 250 basis points to 18.8% year-over-year, reflecting cost base management, reduced corporate expenses, and disciplined capital allocation.
Share Repurchases Increased by 69% to $21 million in the quarter. Total shareholder returns through buybacks and dividends reached $73 million year-to-date.
Research EBITDA Margin Improved by 220 basis points to 33.5%, driven by record submissions, growth in recurring revenue models, and 28% growth in author-funded open access.
Learning Segment Revenue Declined by 11% year-over-year, impacted by Amazon inventory adjustments, softer consumer spending, and an 8% enrollment decline in computer science.
Professional Segment Revenue Declined by 16% year-over-year, driven by retail channel dynamics, particularly Amazon inventory adjustments, and softer consumer spending.
Free Cash Flow A use of $108 million, improved by 17% or $22 million year-over-year, due to journal subscription timing and lower CapEx.
Net Debt-to-EBITDA Improved to 2.0x on a trailing 12-month basis, down from 2.2x in the prior year, reflecting better leverage management.
AI Gateway: Launched as an interoperable content enrichment and delivery platform in partnership with AI ecosystem players like Anthropic and AWS.
Nexus content licensing service: Expanded to 30+ publisher partners, combining Wiley's content with partners' for licensing to AI model and application developers.
Research Exchange platform: 65% of journals are now live, incorporating AI to improve submission capture, automate processes, and enhance user experience.
Corporate R&D expansion: 8 corporate customers now subscribing to knowledge feeds, with strong interest across multiple verticals. Recent agreement with IQVIA to bundle clinical outcome content with clinical research capabilities.
Geographic expansion: Targeted growth in China, India, and Brazil, with double-digit submissions growth and nationwide agreements.
Cost management: Corporate expenses reduced by 18% this quarter, driven by targeted actions in technology, HR, and finance.
AI-driven productivity: Established an AI center of excellence to automate processes and improve efficiency, such as customer service transformation.
Technology transformation: Consolidating locations, rationalizing applications, and building an AI-enabled technology organization to reduce costs.
AI as a growth driver: Positioned as a leader in AI content licensing and partnerships, with $35 million in AI revenue year-to-date and strategic relationships with AWS, Anthropic, and others.
Shift to high-margin businesses: Focused on transitioning portfolio toward high-margin, high-ROIC business models, including digital products and AI-driven solutions.
Learning Segment Challenges: Declines in the Learning segment due to external factors such as Amazon's abrupt inventory management changes, soft consumer spending, and cyclical nature of professional books. Additionally, enrollment challenges in computer science (down 8%) and soft corporate spending have impacted revenue.
Retail Channel Dynamics: Amazon's inventory adjustments have created significant challenges in the professional and academic segments, particularly affecting print sales.
Consumer Spending: Soft consumer spending has negatively impacted professional books and assessments, which are cyclical and sensitive to economic conditions.
Enrollment Declines: Undergraduate computer science enrollment declined by 8%, impacting digital courseware revenue in the Learning segment.
Corporate Spending: Soft corporate spending and hiring have reduced demand for personality assessments and team development programs.
AI Revenue Volatility: AI licensing revenue is difficult to project and remains volatile, creating uncertainty in revenue forecasting.
Learning Revenue Decline: Learning revenue is expected to decline for the full year, despite mitigation efforts such as cost actions and digital product focus.
Economic Uncertainty: Macroeconomic factors, including soft consumer and corporate spending, are creating headwinds across multiple business segments.
Operational Cost Management: While cost management initiatives are underway, there is ongoing pressure to reduce costs further and improve margins.
Revenue Growth: Revenue growth is now expected to be in the low single digits, down from the prior range of low to mid-single digits. Research demand is tracking better than expected, but Learning will be down for the year. Second half declines in Learning are expected to moderate.
AI Revenue: AI revenue is expected to be moderately ahead of last year's $40 million.
Adjusted EBITDA Margin: Adjusted EBITDA margin is projected to be 25.5% to 26.5%, up from 24% last year.
Adjusted EPS: Adjusted EPS is expected to range from $3.90 to $4.35, up from $3.64 last year.
Free Cash Flow: Free cash flow is projected to be approximately $200 million, driven by EBITDA growth, lower interest payments, and favorable working capital.
CapEx: CapEx is expected to be comparable to last year's total of $77 million.
Quarterly Phasing: Q3 is anticipated to be lighter than typical due to the timing of AI project revenue, creating a year-over-year headwind of approximately $9 million in Research. Growth is weighted to Q4, driven by journal renewal timing and customer pipeline conversions in Research Solutions and Learning.
Dividends: Through the half, we've returned $73 million to shareholders in buybacks and dividends, and our current yield is around 3.9%.
Share Repurchases: We increased our share repurchases by 69% this quarter to $21 million. Through the half, we've returned $73 million to shareholders in buybacks and dividends. Share repurchases were up 69% to $21 million or $35 million year-to-date compared to $25 million in the prior year period.
Despite strong research publishing revenue and improved margins, negative factors such as declining learning and professional segment revenues, economic uncertainty, and AI revenue volatility counterbalance the positives. Increased share repurchases and dividends offer some support, but the overall sentiment remains neutral. Given the market cap, the stock is likely to see minimal movement over the next two weeks.
The earnings call presents mixed signals: revenue declined slightly, but research solutions revenue grew significantly. The partnership with Anthropic could enhance future growth, but its financial impact remains unclear. The Q&A indicates management's optimism, yet lacks detailed strategies for addressing specific declines. Strong fundamentals and improved financial metrics, like the debt ratio, offset some concerns. Market reaction is likely to remain neutral, with a market cap of $2.19 billion suggesting moderate volatility.
The earnings call highlights strong financial performance with a 31% increase in EPS and improved margins. Despite some risks like competitive pressures and regulatory issues, the company's strategic initiatives, including AI licensing and increased shareholder returns, are promising. The Q&A section revealed management's optimism about AI monetization and shareholder returns, although some responses were vague. The market cap suggests moderate volatility, and the overall sentiment is positive, expecting a stock price increase of 2% to 8%.
The earnings call reflects a positive sentiment due to strong financial performance, including a 39% increase in EPS, improved margins, and optimistic guidance. The company's strategic focus on AI and cost structure optimization, along with increased dividends and share repurchases, further bolster the outlook. Despite economic uncertainties and competitive pressures, the positive guidance and financial metrics suggest a stock price increase, especially given the company's market cap.
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