10-Q: Wiley Reports Q1 FY26 Results, Boosted by Divestitures

John Wiley & Sons, Inc. reported mixed first-quarter fiscal year 2026 results, with a net income turnaround and strong investing cash flow driven by divestitures, despite a slight revenue decline.

Summary

• Consolidated Revenue for the three months ended July 31, 2025, decreased by 2% to $396.8 million compared to $403.8 million in the prior year.
• Adjusted Revenue, excluding divested businesses, increased by 1% on a constant currency basis.
• Operating Income increased by 7% to $31.0 million, up from $29.0 million in the prior year.
• Net Income turned positive at $11.7 million, a significant improvement from a net loss of $(1.4) million in the prior year.
• Diluted Earnings per Share (EPS) was $0.22, compared to a diluted loss of $(0.03) per share in the prior year.
• Adjusted EPS increased by 2% to $0.49 on a constant currency basis.
• Net cash provided by investing activities was $98.9 million, a substantial increase from net cash used of $(23.8) million in the prior year, primarily due to proceeds from the sale of University Services.
• The Global Restructuring Program was further extended in Q4 FY2025, focusing on optimizing cost structure, technology, and corporate expenses, with anticipated annualized cost savings of approximately $105 million, mostly in fiscal year 2026.
• AI license revenue grew to $28.9 million in Q1 FY2026 from $17.2 million in the prior year, including $15.7 million from content licensed from other publishers.
• Research segment revenue increased by 5% on a constant currency basis, driven by AI license revenue and author-funded open access.
• Learning segment revenue decreased by 8% on a constant currency basis, primarily due to lower licensing revenue and market softness in Professional products.

Sentiment

Score: 6

Explanation: The sentiment is cautiously positive. While overall revenue declined and some adjusted metrics were down, the company achieved a net income turnaround, strong cash flow from divestitures, and significant growth in AI-related revenue. The ongoing restructuring program aims for substantial cost savings, indicating a proactive approach to improving future profitability. However, the decline in the Learning segment and the unquantified legal risk related to AI content introduce elements of uncertainty.

Positives

• Net income improved significantly to $11.7 million from a loss of $(1.4) million in the prior year, indicating a turnaround in profitability.
• Operating income increased by 7% to $31.0 million, demonstrating improved operational efficiency.
• Adjusted EPS grew by 2% to $0.49 on a constant currency basis, reflecting underlying business strength.
• Net cash provided by investing activities saw a substantial increase to $98.9 million, primarily from the $119.5 million cash proceeds from the sale of University Services assets.
• AI license revenue showed strong growth, increasing to $28.9 million from $17.2 million in the prior year, highlighting successful leveraging of AI technologies.
• The Research segment's revenue grew by 5% on a constant currency basis, driven by AI licensing and open access initiatives.
• The Global Restructuring Program is expected to yield approximately $105 million in annualized cost savings, with most realized in fiscal year 2026, enhancing future profitability.
• The company increased its quarterly dividend to shareholders to $1.42 per share annualized, up from $1.41 per share, and approved an additional $250 million share repurchase program.

Negatives

• Consolidated revenue decreased by 2% to $396.8 million, primarily due to the impact of divested businesses.
• Adjusted Operating Income decreased by 2% on a constant currency basis, and Adjusted EBITDA decreased by 3% on a constant currency basis, indicating some pressure on core profitability.
• The Learning segment's revenue declined by 8% on a constant currency basis, attributed to lower licensing revenue (including AI) and market-related softness in Professional products.
• Net foreign exchange transaction losses amounted to $(1.0) million, compared to gains of $0.2 million in the prior year, impacting overall profitability.
• The company recorded a net pretax loss of $(1.1) million on the sale of businesses, assets, and impairment charges, compared to a gain of $5.8 million in the prior year.

Risks

• The level of investment required in new technologies and products, particularly in AI, could impact financial performance.
• Fluctuations in journal subscriber renewal rates pose a risk to Research segment revenue.
• The financial stability and liquidity of journal subscription agents could affect cash collections.
• Consolidation among book wholesalers and retail accounts, along with the market position of key retailers, could impact the Learning segment.
• The seasonal nature of the educational business and the impact of the used book market present revenue volatility risks.
• Worldwide economic and political conditions could adversely affect global operations and demand for products and services.
• The ability to protect copyrights and other intellectual property worldwide is crucial for revenue generation.
• Challenges in successfully integrating acquired operations and realizing expected opportunities could hinder growth.
• Failure to realize anticipated operating savings from the multiyear Global Restructuring Program and completed dispositions could impact profitability.
• Cyber risk and the failure to maintain the integrity of operational or security systems, or those of third parties, could lead to significant disruptions and costs.
• The company has recorded significant goodwill and other identifiable intangible assets from acquisitions, and there is a risk that the full carrying value of these assets may not be realized.
• The ability to effectively leverage artificial intelligence technologies, including generative AI and large language models, in products and services is critical for future competitiveness.
• A class-action lawsuit against Anthropic, alleging use of copyrighted content (including Wiley's) to train AI models, poses an unquantified financial risk, with a settlement in principle reached but Wiley's portion unknown.

Future Outlook

The company anticipates realizing substantially all of the $105 million in annualized cost savings from its Global Restructuring Program in fiscal year 2026. It continues to evaluate the full-year impact of the 'One Big Beautiful Bill Act' (OBBBA) but does not anticipate a material effect on consolidated financial statements for the year ended April 30, 2026. The company is also assessing the impact of new accounting standards related to credit losses and expense disaggregation, effective in fiscal years 2026 and 2028/2029, respectively.

Management Comments

• The plan is intended to provide officers and other key colleagues with additional incentive to promote the success of the Company, upon whose judgment, initiative, and efforts the Company depends for its growth and profitable conduct of its business.
• We believe that our operating cash flow, together with our revolving credit facilities and other available debt financing, will be adequate to meet our operating, investing, and financing needs in the next twelve months.
• The overall cash position of the Company reflects our durable business results and a global cash management strategy that considers liquidity management, economic factors, and tax considerations.

Industry Context

The company operates in a dynamic publishing and learning solutions industry, increasingly influenced by digital transformation and artificial intelligence. Its growth in AI license revenue and open access article output in the Research segment aligns with broader industry trends towards digital content and data monetization. However, the decline in the Learning segment's revenue, partly due to market softness, suggests challenges in traditional educational and professional publishing, potentially exacerbated by evolving learning models and competition. The ongoing restructuring program reflects a strategic effort to adapt to these shifts by optimizing cost structures and focusing on core profitable businesses.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• A class-action lawsuit was filed in August 2024 against Anthropic, alleging the use of copyrighted content, including Wiley's, to train its AI models. A settlement in principle was reached in August 2025, with preliminary details due September 5, 2025, and a hearing for preliminary approval on September 8, 2025. The company is currently unable to provide an estimate of its portion of the settlement.

Stakeholder Impact

• Shareholders: Benefit from increased diluted EPS, a higher annualized dividend, and an approved additional share repurchase program, indicating management's commitment to shareholder returns. However, the unquantified legal risk and Learning segment decline introduce uncertainty.
• Employees: The Global Restructuring Program involves severance-related charges for position eliminations, impacting some employees, but aims to optimize the cost structure for long-term company health.
• Customers: Continued focus on digital products, AI integration, and open access in Research aims to enhance value and accessibility. The decline in the Learning segment may indicate evolving customer needs or competitive pressures.
• Creditors: The company maintains compliance with financial covenants under its Amended and Restated Credit Agreement, and its liquidity position is deemed adequate, suggesting stability for creditors.

Next Steps

• Continue to realize annualized cost savings of approximately $105 million from the Global Restructuring Program in fiscal year 2026.
• Monitor and evaluate the full-year impact of the 'One Big Beautiful Bill Act' (OBBBA) on financial statements.
• Assess the impact of new accounting standards (ASU 2025-05 and ASU 2024-03) on consolidated financial statements.
• Submit preliminary settlement details for the Anthropic class-action lawsuit by September 5, 2025.
• Attend the hearing for preliminary approval of the Anthropic class-action lawsuit settlement on September 8, 2025.
• Continue to execute on the share repurchase program, with $43.4 million remaining under the previously approved program and an additional $250 million program approved.

Key Dates

Recommendation

The company is in a transitional phase, marked by strategic divestitures and an aggressive restructuring program aimed at improving profitability and focusing on core strengths. While the turnaround to net income and growth in AI-related revenue are positive signals, the overall revenue decline and weakness in the Learning segment, coupled with the unquantified legal exposure from the Anthropic lawsuit, create a mixed outlook. The increased dividend and new share repurchase program are supportive for shareholders, but the ongoing transformation and associated uncertainties warrant a 'hold' recommendation until there is clearer evidence of sustained growth in core segments and resolution of the legal matter.

Keywords

John Wiley & Sons, WLY, SEC Filing, 10-Q, Quarterly Report, Financial Results, Adjusted Revenue, Operating Income, EPS, EBITDA, Cash Flow, Restructuring, Divestitures, AI License Revenue, Research Publishing, Learning Solutions, Open Access, Share Repurchase, Dividends, Corporate Governance, Executive Compensation, Copyright, Artificial Intelligence, Legal Proceedings