10-Q: Wiley Reports Mixed Q2 Results Amidst Divestitures and Restructuring

Wiley's second quarter results show a decline in revenue due to divestitures, but improved profitability driven by cost-cutting measures and growth in core segments.

Summary

• Wiley's Q2 2025 results show a 13% decrease in revenue to $426.6 million compared to the prior year, primarily due to the divestiture of non-core businesses.
• However, operating income increased by 39% to $64.1 million, and diluted earnings per share improved to $0.74, a significant turnaround from the prior year's loss.
• Excluding the divested businesses, adjusted revenue increased by 3% on a constant currency basis, and adjusted operating income rose by 32%.
• The company's restructuring program is expected to yield approximately $80 million in annualized cost savings, with $75 million expected to be realized this fiscal year.
• The Learning segment saw a revenue increase of 8%, while the Research segment experienced a more modest 2% growth.
• Wiley completed the sale of CrossKnowledge and Wiley Edge during the quarter, resulting in a net gain of $0.4 million from the sale of businesses and assets.
• The company's effective tax rate for the quarter was 17.3%, compared to 11.7% in the prior year, primarily due to US ordinary losses for which no tax benefit can be recognized.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While revenue declined due to divestitures, the company showed strong improvements in profitability and adjusted metrics, indicating a positive trajectory. The restructuring program and focus on core businesses are also viewed favorably.

Positives

• Operating income and earnings per share showed significant improvement compared to the prior year.
• Adjusted revenue and operating income, excluding divested businesses, demonstrated growth.
• The Learning segment showed strong revenue and EBITDA growth.
• The company is realizing cost savings from its restructuring program.
• The company successfully completed the divestiture of non-core businesses.

Negatives

• Consolidated revenue decreased by 13% due to divestitures.
• The Held for Sale or Sold segment experienced a significant revenue decline of 96% due to the sale of businesses.
• The company's effective tax rate increased to 17.3% due to US ordinary losses for which no tax benefit can be recognized.
• Net foreign exchange transaction losses were $3.3 million for the quarter.

Risks

• The company is exposed to fluctuations in foreign exchange rates, which can impact financial results.
• The company's reliance on journal subscription agents and book retailers exposes it to credit risk.
• The company's restructuring program may result in additional charges in future periods.
• The company's business is subject to seasonal fluctuations, particularly in the Learning segment.
• The company's ability to realize the full carrying value of goodwill and intangible assets is uncertain.

Future Outlook

The company anticipates ongoing severance related charges and facility-related costs associated with certain properties to result in additional restructuring charges in future periods. The company expects approximately $75 million in cost savings from its restructuring program this fiscal year.

Management Comments

• The company is focused on its leading global position in the development and application of new knowledge.
• The company is streamlining its organization and rightsizing its cost structure to reflect portfolio actions.
• The company is focusing on its strongest and most profitable businesses and large market opportunities in Research and Learning.

Industry Context

The results reflect the ongoing shift in the publishing industry towards digital content and open access models, as well as the need for companies to streamline operations and focus on core businesses. Wiley's divestitures and restructuring efforts are in line with these broader industry trends.

Comparison to Industry Standards

• Wiley's performance in the Research segment, with a 2% revenue increase, is comparable to other academic publishers who are seeing modest growth in traditional publishing while experiencing growth in open access.
• The Learning segment's 8% revenue growth is strong compared to other educational publishers, likely driven by the demand for digital courseware and professional development resources.
• The company's restructuring program and cost-cutting measures are similar to actions taken by other publishers to improve profitability in a changing market.
• The divestiture of non-core businesses is a common strategy among large publishers to focus on core competencies and improve financial performance.

Management Changes

Stakeholder Impact

• Shareholders will benefit from improved profitability and earnings per share.
• Employees may be affected by the ongoing restructuring program.
• Customers will continue to receive services from the company's core businesses.
• Suppliers may be impacted by changes in the company's operations.
• Creditors will be impacted by the company's debt management and financial performance.

Next Steps

• The company will continue to implement its restructuring program to achieve cost savings.
• The company will focus on growing its core businesses in Research and Learning.
• The company will continue to monitor and manage its exposure to market risks.

Key Dates

Keywords

Wiley, divestiture, restructuring, revenue, operating income, earnings per share, adjusted EBITDA, Learning segment, Research segment, cost savings, open access, digital content, journal subscriptions