8-K: Wiley Exceeds Fiscal Year 2024 Earnings Guidance, Confident Outlook for 2025 Driven by GenAI Momentum

Wiley reports exceeding FY24 earnings guidance, driven by strong performance in Learning and Research, and provides a confident FY25 outlook with GenAI momentum.

Summary

• Wiley exceeded its FY24 adjusted EBITDA and adjusted EPS guidance, with adjusted revenue at the higher end of the range.
• The company completed a GenAI content rights project this quarter with a large tech company and has another project with a second large tech company to be realized in FY25.
• Wiley is advancing its Value Creation Plan, having closed two of three non-core divestitures and actioned $90 million of $130 million in run-rate cost savings.
• The FY25 growth outlook is driven by momentum in Research and Learning, along with accelerated cost savings.
• GAAP revenue for the full year was $1,873 million, down 7%, while adjusted revenue was $1,617 million, down 1% at constant currency.
• Full year adjusted EBITDA was $369 million, down 3% at constant currency, and adjusted EPS was $2.78, down 19%.
• Cash from operations was $208 million, and free cash flow was $114 million, both down year-over-year due to lower cash earnings and higher restructuring payments.
• For the fourth quarter, adjusted revenue was $441 million, up 4% at constant currency, adjusted EBITDA was $125 million, up 7%, and adjusted EPS was $1.21, up 2%.
• The Learning segment saw a 18% revenue increase in Q4, driven by a $23 million GenAI content rights project, while Research revenue was down 3% due to timing and declines in ancillary print and licensing revenue.
• Wiley expects FY25 adjusted revenue to be between $1,650 and $1,690 million, adjusted EBITDA between $385 and $410 million, and adjusted EPS between $3.25 and $3.60.

Sentiment

Score: 7

Explanation: The sentiment is positive due to exceeding earnings guidance, progress on strategic initiatives, and a confident outlook for FY25. However, there are some concerns about the year-over-year declines in GAAP results and free cash flow.

Positives

• Wiley exceeded its FY24 earnings guidance, demonstrating strong financial performance.
• The company is capitalizing on the GenAI trend with successful content rights projects.
• The Value Creation Plan is progressing well with divestitures and cost savings.
• The Learning segment showed strong growth, driven by digital content and GenAI projects.
• Wiley is returning cash to shareholders through increased share repurchases and dividends.
• The company has a confident outlook for FY25 with expected revenue and margin expansion.
• Research is showing strong leading indicators with 15% submissions growth and mid-single digit output growth in Q4.
• Wiley is on track with its Fiscal 2026 targets.

Negatives

• GAAP revenue, operating income, and EPS were down for both the quarter and the full year.
• Adjusted EPS for the full year was down 19%, impacted by lower adjusted operating income, higher interest and tax expenses, and higher pension expenses.
• Cash from operations and free cash flow were down year-over-year due to lower cash earnings and higher restructuring payments.
• Research revenue was down 3% in Q4 due to timing and declines in ancillary print and licensing revenue.
• Corporate expenses increased due to higher professional fees and incentive compensation.

Risks

• The company faces risks related to the level of investment in new technologies and products.
• Subscriber renewal rates for journals and the financial stability of journal subscription agents are potential risks.
• The consolidation of book wholesalers and retail accounts and the market position of key online retailers pose risks.
• Worldwide economic and political conditions could impact the company's performance.
• The company must protect its copyrights and intellectual property worldwide.
• There are risks associated with integrating acquired operations and realizing expected opportunities.
• The company faces cyber risks and the failure to maintain the integrity of its systems.
• The company may not realize the full carrying value of goodwill and other intangible assets.
• The company is subject to risks related to the divestitures not being pursued, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to planned dispositions.

Future Outlook

Wiley anticipates FY25 adjusted revenue between $1,650 and $1,690 million, adjusted EBITDA between $385 and $410 million, and adjusted EPS between $3.25 and $3.60. The company expects continued revenue, margin, and free cash flow acceleration in FY26 and beyond.

Management Comments

• We finished the year strong and head into Fiscal 2025 with full confidence in our Research trajectory, GenAI momentum, and profit and performance outlook, said Matthew Kissner, Interim President and CEO.
• We are seeing robust demand to publish and significant output acceleration in Research as well as continued outperformance in Learning.
• On top of this, we're seeing significant interest in leveraging our authoritative content to train AI and machine learning models.
• Finally, we've executed on our stated commitments with discipline and speed, enabling us to exceed our earnings guidance and accelerate our cost savings program, setting us up well for continued margin expansion and strong cash generation ahead.

Industry Context

The announcement highlights Wiley's strategic shift towards leveraging GenAI, aligning with the broader industry trend of integrating AI into content creation and delivery. The company's focus on digital content and open access also reflects the evolving landscape of academic publishing.

Comparison to Industry Standards

• Wiley's performance in the Learning segment, with a 18% revenue increase in Q4 driven by a GenAI content rights project, is notable compared to traditional academic publishers who may not have capitalized on this trend as quickly.
• The company's adjusted EBITDA margin of 28.3% in Q4, while an improvement, is still below some of the higher-margin tech companies in the education and research space, such as Elsevier or RELX, which have more established digital platforms.
• The divestiture of non-core assets and focus on cost savings is a common strategy among legacy publishers seeking to streamline operations and improve profitability, similar to moves made by Pearson in recent years.
• Wiley's investment in a new Research Publishing platform is comparable to other major publishers who are also modernizing their infrastructure to improve efficiency and author experience, such as Springer Nature's efforts to enhance their digital platforms.

Stakeholder Impact

• Shareholders will benefit from increased share repurchases and dividends.
• Employees may experience changes due to restructuring and office consolidations.
• Customers will benefit from improved digital content and services.
• Suppliers may be impacted by changes in the company's operations.
• Creditors will be impacted by the company's debt management and cash flow.

Next Steps

• Wiley will continue to execute its Value Creation Plan, including the divestiture of CrossKnowledge.
• The company will focus on reinvesting cost savings to scale and optimize Research, modernize infrastructure, and expand GenAI content licensing.
• Wiley will continue to develop its Research Publishing platform and migrate journals to end-to-end workflows.
• The company will monitor market conditions and adjust strategies as needed.

Key Dates

Keywords

GenAI, content rights, research, learning, divestitures, cost savings, adjusted EBITDA, adjusted EPS, revenue, publishing, open access, digital content, restructuring, free cash flow