8-K: Wiley Reports Solid Second Quarter Growth Driven by Learning and AI Licensing

Wiley's second quarter results show revenue growth in Learning and Research, alongside margin and EPS improvements, with AI licensing contributing to the positive performance.

Summary

• Wiley reported its second quarter fiscal year 2025 results, showing a revenue of $427 million compared to $493 million in the prior year, with the difference primarily due to divested businesses.
• Adjusted revenue, excluding divested businesses, was $423 million, a 3% increase year-over-year.
• The company's adjusted operating income rose by 32% to $69 million, and adjusted EBITDA increased by 14% to $106 million.
• Adjusted EPS was $0.97, a 36% increase at constant currency.
• Research revenue grew by 2% (1% at constant currency) to $262 million, driven by open access and institutional models, offsetting declines in legacy print and licensing.
• Learning revenue increased by 8% (5% at constant currency) to $162 million, with professional learning up 11% and academic learning up 5%, excluding a one-time AI licensing revenue of $4 million.
• The company reaffirmed its fiscal year 2025 outlook, projecting adjusted revenue between $1.65 billion and $1.69 billion, adjusted EBITDA between $385 million and $410 million, and adjusted EPS between $3.25 and $3.60.
• Free cash flow is expected to be approximately $125 million for the fiscal year.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong growth in key areas, successful divestitures, and strategic investments in AI. While there are some challenges, the overall tone is optimistic and indicates a company on a positive trajectory.

Positives

• The Learning segment showed strong growth, driven by both academic and professional sectors.
• The Research segment demonstrated resilience with growth in open access and institutional models.
• Wiley is seeing significant interest from tech companies for its content and data to train AI models.
• The company is experiencing strong margin improvement and EPS growth.
• Wiley has successfully completed all planned divestitures.
• The company has raised its dividend for the 31st consecutive year.
• Wiley is making strategic investments in AI and its publishing platform.

Negatives

• GAAP revenue decreased due to the sale of businesses.
• Net cash used in operating activities was $94 million, compared to $84 million in the prior year, due to higher incentive compensation payments and the impact of divested assets.
• Free cash flow less product development spending was a use of $130 million, compared to a use of $132 million in the prior year.
• The company's net debt-to-EBITDA ratio increased to 2.2 from 2.0 in the prior year.

Risks

• The company's performance is subject to various factors, including the level of investment in new technologies, subscriber renewal rates, and economic conditions.
• Wiley faces risks related to cyber security and the protection of its intellectual property.
• The company's ability to leverage AI technologies and integrate acquired operations is crucial for future success.
• The company's second half growth is expected to be uneven, with Q3 being challenged and Q4 elevated.

Future Outlook

Wiley is reaffirming its Fiscal 2025 growth outlook, expecting adjusted revenue between $1.65 billion and $1.69 billion, adjusted EBITDA between $385 million and $410 million, and adjusted EPS between $3.25 and $3.60. The company anticipates uneven growth in the second half of the year, with Q3 being challenged and Q4 elevated.

Management Comments

• Continuous improvement is a way of life for us now, and it's beginning to pay off in our quality growth and margin expansion, said Matthew Kissner, Wiley President and CEO.
• Learning has had a good year so far, both Academic and Professional, and Research delivered low-single digit growth with leading indicators and favorable comparisons signaling a better second half ahead.
• Additionally, we continue to see interest from tech companies and other corporate LLM developers for our high-value content and data to train and commercialize AI models.

Industry Context

Wiley's focus on AI licensing and digital content aligns with the broader industry trend of leveraging technology for growth and efficiency. The company's performance in open access publishing also reflects the increasing importance of this model in academic research.

Comparison to Industry Standards

• Wiley's adjusted EBITDA margin of 24.9% for the quarter is comparable to other large publishers, such as Elsevier and Springer Nature, which have also been focusing on digital growth and cost efficiencies.
• The company's 3% adjusted revenue growth is in line with the industry average, but its 36% adjusted EPS growth is significantly higher, indicating successful cost management and strategic divestitures.
• Wiley's investment in AI and its publishing platform is similar to other industry players who are also exploring new technologies to enhance their offerings and improve operational efficiency.
• The company's focus on open access publishing is consistent with the industry's move towards more accessible and transparent research.

Management Changes

Stakeholder Impact

• Shareholders will benefit from the company's improved profitability and dividend increases.
• Employees may experience changes due to the company's restructuring and focus on AI.
• Customers will benefit from the company's investments in its publishing platform and new AI-driven products.
• Suppliers may see changes in demand due to the company's divestitures and strategic shifts.

Next Steps

• The company will continue to focus on its Fiscal 2025 objectives, including driving growth in Research, capitalizing on AI opportunities, and improving profitability.
• Wiley will continue to reinvest in its Research segment and its publishing platform.
• The company will continue to build out its AI business development pipeline.
• Wiley will continue to monitor the CY25 journal renewal season.

Key Dates

Keywords

Wiley, Financial Results, Second Quarter, Learning, Research, AI Licensing, Adjusted EBITDA, Adjusted EPS, Divestitures, Open Access, Publishing, EBITDA, EPS