10-Q: Wiley Reports Q3 Loss, But Adjusted Results Show Promise Amid Divestitures

Wiley's Q3 results reveal a net loss, but adjusted figures indicate underlying strength driven by strategic shifts and cost optimization efforts.

Summary

• John Wiley & Sons, Inc. reported a net loss for the third quarter, but adjusted results excluding divested businesses show revenue and profit growth.
• Consolidated revenue decreased by 12% to $404.6 million, primarily due to the impact of divested businesses.
• However, adjusted revenue, excluding the Held for Sale or Sold segment, increased by 1% on a constant currency basis.
• Operating income was $51.8 million, a significant improvement compared to the prior year's operating loss of $46.4 million.
• The company recognized an $81.7 million goodwill impairment charge in the prior year related to the Wiley Edge reporting unit.
• Adjusted operating income increased by 27% on a constant currency basis, driven by revenue growth and cost reductions.
• Adjusted EBITDA increased by 4% on a constant currency basis.
• Diluted loss per share was $(0.43), compared to $(2.08) in the prior year.
• Adjusted EPS increased by 39% on a constant currency basis to $0.84.
• The company is focusing on its strongest businesses in Research and Learning and streamlining its cost structure.
• Wiley completed the sale of University Services on January 1, 2024, Wiley Edge on May 31, 2024 (excluding India operations which sold on August 31, 2024), and CrossKnowledge on August 31, 2024.
• The company is implementing a Global Restructuring Program expected to yield annualized cost savings of approximately $90 million.

Sentiment

Score: 7

Explanation: While the headline numbers show a loss, the adjusted results and strategic initiatives suggest a positive outlook. The company is making progress in focusing on its core businesses and improving profitability.

Positives

• Adjusted revenue increased by 1% on a constant currency basis, indicating growth in core businesses.
• Adjusted operating income increased significantly, reflecting improved profitability.
• Adjusted EPS increased substantially, demonstrating improved earnings performance.
• The Global Restructuring Program is expected to generate significant cost savings.
• The company has completed strategic divestitures to focus on core areas.
• Open access article output growth was approximately 12% as compared with the prior year.

Negatives

• Consolidated revenue decreased by 12%, primarily due to the impact of divested businesses.
• The company reported a net loss for the quarter.
• The company recognized an $81.7 million goodwill impairment charge in the prior year related to the Wiley Edge reporting unit.

Risks

• The company's future performance depends on its ability to successfully execute its strategic plans and achieve cost savings.
• The company faces risks related to economic and political conditions, cyber security, and intellectual property protection.
• The company's reliance on journal subscription agents and key retailers exposes it to financial stability risks.
• The company's ability to leverage artificial intelligence technologies in its products and services.

Future Outlook

The company expects to yield annualized cost savings of approximately $90 million from the Global Restructuring Program, with approximately $80 million of that to be realized this fiscal year.

Industry Context

Wiley's strategies align with trends such as increasing global research and development spending, the transition to open research, and the application of new knowledge to solve real-world problems.

Stakeholder Impact

• Shareholders may benefit from improved profitability and strategic focus.
• Employees may be affected by restructuring and cost optimization efforts.
• Customers may benefit from enhanced products and services in core areas.

Next Steps

• Continue implementing the Global Restructuring Program to achieve cost savings.
• Focus on driving growth in Research and Learning segments.
• Optimize the cost structure, with particular emphasis on aligning technology costs and other corporate expenses.

Key Dates