10-Q: Wiley Reports Q3 Loss Amid Restructuring and Divestitures, Adjusted Results Show Mixed Performance

Wiley reported a net loss for the third quarter, impacted by restructuring and divestiture activities, while adjusted results showed a slight revenue increase but a decrease in adjusted EPS.

Summary

• Wiley's third-quarter results show a net loss of $113.9 million, or $2.08 per share, compared to a loss of $71.5 million, or $1.29 per share, in the same period last year.
• The company's revenue decreased by 6% to $460.7 million, primarily due to divestitures and declines in held-for-sale businesses.
• Adjusted revenue, excluding the held-for-sale segment, increased by 1% to $402.5 million.
• The operating loss was $46.4 million, an improvement from the $67.1 million loss in the prior year, due to lower costs of sales and a lower goodwill impairment.
• Adjusted EBITDA increased by 1% to $91.5 million, while adjusted EPS decreased by 27% to $0.59.
• The company incurred a goodwill impairment charge of $81.7 million and losses on sale of businesses and impairment charges related to assets held-for-sale of $52.4 million.
• Restructuring charges totaled $14.8 million for the quarter.
• The company completed the sale of University Services on January 1, 2024, and signed an agreement to sell Wiley Edge on January 8, 2024.
• Wiley is undergoing a global restructuring program to align its cost base and focus on core growth areas, which is expected to yield annualized cost savings of approximately $65 million.

Sentiment

Score: 4

Explanation: The sentiment is negative due to the reported net loss and significant charges, but there are some positive aspects such as the adjusted revenue growth and restructuring efforts. The overall outlook is uncertain due to the ongoing divestitures and restructuring.

Positives

• Adjusted revenue, excluding the held-for-sale segment, increased by 1% to $402.5 million.
• The operating loss improved to $46.4 million from $67.1 million in the prior year.
• Adjusted EBITDA increased by 1% to $91.5 million.
• The company is actively restructuring to reduce costs and focus on core growth areas.
• Wiley has completed the sale of University Services and has an agreement to sell Wiley Edge.

Negatives

• The company reported a net loss of $113.9 million, or $2.08 per share.
• Overall revenue decreased by 6% to $460.7 million.
• Adjusted EPS decreased by 27% to $0.59.
• The company incurred significant charges, including a goodwill impairment of $81.7 million and losses on sale of businesses and impairment charges related to assets held-for-sale of $52.4 million.
• The company is experiencing declines in placement revenues and online enrollments in its held-for-sale businesses.

Risks

• The company faces risks related to the integration of acquired operations and the realization of expected opportunities.
• There are risks associated with the divestitures, including the possibility that they will not be pursued or that necessary approvals will not be obtained.
• The company is exposed to cyber risks and the failure to maintain the integrity of its operational or security systems.
• The company may not realize the full carrying value of goodwill and other intangible assets.
• The company is exposed to fluctuations in foreign exchange rates and interest rates.

Future Outlook

The company expects to complete the sale of Wiley Edge and CrossKnowledge by the first quarter of fiscal year 2025. The global restructuring program is expected to yield annualized cost savings of approximately $65 million, with approximately $35 million of that to be realized this fiscal year from actions taken starting in fiscal year 2024.

Management Comments

• Management is focused on simplifying the portfolio to drive sustained performance improvement.
• The company is focusing on its strongest and most profitable businesses and large market opportunities in Research and Learning.
• Management is streamlining the organization and rightsizing the cost structure to reflect portfolio actions.

Industry Context

The announcement reflects a broader trend in the education and publishing industries where companies are streamlining operations, divesting non-core assets, and focusing on digital and high-growth areas. The shift towards open access publishing and digital learning solutions is also evident in Wiley's strategic focus.

Comparison to Industry Standards

• Wiley's performance is mixed when compared to industry peers. While the company is showing progress in adjusted revenue and EBITDA in core segments, the significant losses and restructuring charges indicate challenges.
• Companies like Pearson and McGraw Hill have also been undergoing transformations, focusing on digital learning and streamlining their portfolios. Wiley's divestiture strategy is similar to these trends.
• The open access publishing growth is in line with industry trends, but the impact of the Hindawi disruption highlights the risks associated with rapid expansion in this area.
• Wiley's restructuring program is comparable to cost-cutting measures undertaken by other publishers to improve profitability.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders are impacted by the reported net loss and the decrease in adjusted EPS.
• Employees are affected by the ongoing restructuring program, which includes job eliminations.
• Customers may experience changes in service offerings due to the divestitures.
• Suppliers and partners may be impacted by the changes in the company's business strategy.

Next Steps

• Complete the sale of Wiley Edge and CrossKnowledge by the first quarter of fiscal year 2025.
• Continue to implement the global restructuring program to achieve cost savings.
• Focus on core growth areas in Research and Learning.
• Monitor the performance of the remaining businesses and adjust strategies as needed.

Key Dates

Keywords

restructuring, divestiture, goodwill impairment, adjusted EBITDA, adjusted EPS, revenue, operating loss, University Services, Wiley Edge, global restructuring program, open access, digital courseware