John Wiley & Sons, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Wiley's third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, you will need to press star and the number one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to turn the call over to Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you. Hello, everyone. Welcome to Wiley's third quarter 2021 earnings update. With me are Brian Napak, President and Chief Executive Officer, and John Krutzmacher, Chief Financial Officer. Brian and John will make some formal comments, and then we'll open it up for questions. Just a few reminders to start. call is being recorded and may include forward-looking statements. You shouldn't rely on these statements as actual results may differ materially and are subject to factors discussed in our SEC filings. The company does not undertake any obligations to update or revise forward-looking statements to reflect subsequent events or circumstances. Also, we provide non-GAAP measures as a supplement to evaluate underlying operating profitability and performance trends. These measures do not have standardized meanings prescribed by U.S. GAAP and therefore may not be comparable to similar measures used by other companies, nor should they be viewed as alternatives to measures under GAAP. Unless otherwise noted, we will refer to non-GAAP metrics on the call and variances are on a year-over-year basis and will exclude the impact of currency. After the call, a copy of this presentation and a playback of the webcast will be available on our investor relations webpage. I'll now turn the call over to Wiley's President and CEO, Brian Napak.

Good morning, everyone. Thanks for joining us today. Wiley continued to deliver strong results in the third quarter based on a consistent execution of our customer-centric strategies in research and education. More than a year into the pandemic, it is clear that Wiley is very well positioned to help our core customers, researchers, and learners achieve their goals in a very different, and sometimes very challenging world. Learners have settled into online and hybrid education like never before, and Wiley has what they need to succeed on their personal career journeys. Researchers are conducting their work in increasingly virtual and open ways, and Wiley has what they need to get their discoveries out to the world as quickly as possible, where they can drive understanding and innovation. Without doubt, The COVID pandemic has demonstrated yet again the enduring strength of the research and education markets. The demand for high-quality, peer-reviewed research continues to grow, and the need has never been more urgent for affordable education that connects people directly to good jobs. Wiley is committed to making the overall knowledge ecosystem more productive. In all that we do, our goal is to increase the speed, volume, and impact of research and education. By succeeding at this, we will achieve our company's mission, which is to unlock human potential. Today, Wiley is a digital company that draws 83% of its revenue from digital products and services, which grew at 7% in total over the past 12 months. Overall, 55% of Wiley's revenue today is recurring. Our digital research content and platforms generate billions of user sessions each year. and our digital courseware and online degree programs support greater affordability and impact in education, and thus rapidly increasing unit volumes. Beyond revenue growth, our digital revenue streams deliver strong profitability based on attractive, sustainable business models. In the past year, we've seen an acceleration of three long-standing trends that define our market. The move toward open research and a more productive research ecosystem, the migration to online and hybrid education in university and corporate settings, and the increased adoption of digital tools and courseware needed to power online and hybrid education. Our strategies are organized around these trends, and they're paying off. We are capitalizing on the move to open research today. Under the pay to publish OA model, revenue is a direct function of price and quantity of articles published. we are achieving significant volume growth based upon the draw of our strong brands and the execution of our publishing strategies supported by the market's strong underlying article growth. Combined with strong pricing power, this volume growth is allowing us to achieve double-digit OA revenue growth. The recent acquisition of Hindali further strengthens our growth potential. I'll talk about this a bit later. The second positive trend, The growth of online degrees and hybrid education has accelerated significantly in the past year, helped along by the pandemic. Wiley has long been a gold standard strategic partner for universities, helping them to design and deliver effective degree programs. The demand for these services continues to rise as schools plan their increasingly digital futures. This has translated into double-digit growth in online enrollment and new student starts, both key indicators for future growth. The third trend toward digital curriculum reflects the maturation of online content and courseware as the preferred media for effective learning. This trend, which has been ongoing for years, has benefited from the strong acceleration of online education. Happily, the growth of digital content and courseware is outpacing the decline of print over the past fiscal year. It seems that the world has figured out that our digital courseware is simply a more effective product that can be delivered at a lower price than legacy print products. From Miley's point of view, products like our Zybooks win more adoptions and then gain significantly higher sell-through in each adoption by obsoleting substitutes such as OER, use books, and rentals. As you can see, our strategies are directly aligned with these core market trends, and we're confident in the direction that we're headed. The Wiley team delivered another strong quarter of execution and performance. Revenue was up 2%, adjusted EBITDA was up 7%, and adjusted EPS was up 6%. Our Q3 revenue performance was driven by research, with Hindali contributing $2 million in inorganic revenue and strong organic growth in education services. Solid adjusted EPS growth in the quarter was the result of top-line revenue performance, lower costs from business optimization, and COVID-related savings, offsetting 12 cents of dilution related to the Hindawi acquisition. Our GAAP EPS performance was impacted by a $21 million restructuring charge primarily related to the reduction of our real estate footprint as we shift to more of a hybrid working model across Wiley. For the first nine months of fiscal 21, revenue was up 3% over prior year to $1.4 billion. Adjusted EBITDA was up 16% to $309 million, and adjusted EPS was up 20% to $2.09. Free cash flow year-to-date was $80 million, or $74 million higher than prior year due to strong earnings performance and lower capex. our EBITDA margin for the nine-month period was 22% compared to 19% in the prior year. So, overall, we're pleased with where we are after three quarters. Now, let's take a look at our three segments. The key highlights for research publishing platforms include our strong ongoing publishing output, the strategic momentum in our platforms and our corporate offerings, and the acquisition of some dollars. Revenue was up 1% in the quarter and 4% year-to-date. Research-adjusted EBITDA was even with prior year as we targeted additional investment and improving our publishing infrastructure and workflows. Our research-adjusted EBITDA margin was, for the quarter, 34%. Fully in line with our expectations, we've seen modest COVID-related pressure on our calendar year 21 journal subscription renewals. This pressure was offset by continued double-digit growth in open access publishing and corporate solutions. Research platforms continue to perform well, with revenue up 4%. Research article output continues to grow nicely, up 17% year-to-date. And research consumption, meaning usage of the Wiley Online Library, was up over 20%. For context, our world-class Literana content platform has hosted over 4 billion user sessions in the past 12 months, and maintains a 99% client retention rate. Notably, our strategic read and publish agreements are succeeding, generating publishing volumes from these deals that are exceeding expectations. In the quarter, we signed a multi-year read and publish agreement with Italy, and we see a good pipeline ahead. We continue to see opportunities in Asia. We recently entered a 10-year strategic partnership with the Chinese Medical Association publishing house, one of China's leading health science publishers. We will be providing the online home for the entire CMA publishing portfolio, and we will also launch 10 co-published open access journals. This important deal leverages our global leadership in publishing and platforms and further extends Wiley's unmatched global network of societies, universities, and corporate partners. Wiley's expanding research platforms offering includes the hosting and management of career centers for our partners that help researchers and other job seekers connect with great jobs. In the quarter, we added the American College of Veterinary Internal Medicine and the American Anthropological Association, among others, to our growing list of career center clients. As you can tell, career advancement is a consistent theme across Wiley in both education and research. we are helping the research community to connect directly with their next jobs. In the final months of the year, we are focused on closing out calendar year 21 subscription renewals while continuing to advance our volume-based publishing strategies and, as always, improving our efficiency. For the nine months, research-adjusted EBITDA is up 11% for an EBITDA margin of 36%. although we anticipate a ramp-up of investment in Q4 related to enabling publishing growth and the integration of Hindawi. Now I want to give you some insight into this recent acquisition. Hindawi is one of the world's fastest-growing scientific research publishers and a true innovator in open access publishing. In fact, Hindawi was the first subscription publisher to convert its entire portfolio of journals to OA nearly 15 years ago. This addition augments our strategy in three very important ways. First, Endawi brings a fast-growing portfolio of over 200 open access journals that complements Wiley's journal portfolio extremely well. By expanding our portfolio in strategic disciplines, we can seamlessly provide a high-quality publishing home for more of the articles that are submitted to Wiley, growing our output and increasing author satisfaction. As an early leader in open access, Hindawi has built an innovative publishing platform and a publishing process that is highly efficient and very user-friendly. This has helped them to grow fast and profitably. When combined with Wiley's strong platforms and services, the Hindawi platform and their approach will enhance the efficiency, the productivity, and the customer satisfaction of the publishing process across Wiley. Kindawi provides its platform services to other publishers who are adapting to the OA transition. This can represent a real struggle for survival for many publishers and societies. So the third way that Kindawi augments our strategy is by enhancing Wiley's research platforms business by increasing the breadth of the offerings that we can provide to our market-leading network of societies and publishing partners. We're very excited about joining forces with the excellent team at Hotendawi and leveraging all that they bring to the wildest. Third quarter highlights for academic and professional learning include continued strong digital growth in education publishing and an improving outlook for professional learning as it rebounds from COVID, along with the overall margin gain from optimizations. Revenue was down 4% for the quarter due to declines in printed course material, continued exam cancellations in test prep, and a delayed purchasing pattern for digital products when compared to print. The print decline offset 11% growth in digital content, including 45% growth in Xibook's courseware. Digital courseware activations were up over 20% in the quarter and year-to-date. Activations are a key performance metric for us, and I'm pleased to report that our core WileyPlus platform recorded 1 million activations recently for the first time in its history, and Zybooks has now surpassed 325,000 users at over 900 universities. Professional learning saw significant improvement this quarter. Results for trade publishing with growth in title output and e-book sales Our Dummies franchise continued to be a bright spot with double-digit revenue growth driven by timely publishing of new titles on hot topics such as stock investing and remote learning. We also saw positive developments in corporate learning with significant upsell growth at existing clients and a strong shift to virtual delivery and corporate training. This is a very positive development for this increasingly digital business. Adjusted EBITDA for the quarter rose 2% for an EBITDA margin of 29%. Year-to-date, revenue and adjusted EBITDA were down 7% and 8%, mainly due to COVID-related challenges. In the fourth quarter, we will continue to execute on our strategy to grow digital content and courseware with, as always, a particular focus on high-demand career disciplines. Education services had a strong third quarter with double-digit growth in online enrollment strong organic revenue growth and margins, and the addition of new degree programs and university partnerships. Revenue rose 24% or 13% organically, driven by 15% growth in student enrollment. New student enrollment in our existing programs grew 29%, an important leading indicator of future revenue growth. We signed full-service partnerships with Tel Aviv University in Israel, Lebanon American University in Lebanon, and in the U.S., New Mexico Highlands University and Spring Hill College. We also added a partnership with New York University for unbundled services. Wiley will support undergraduate, graduate, and doctoral online programs at these schools in a variety of high-demand disciplines like healthcare and computer science. Our focus on driving strong, profitable growth continues to bear fruit with an adjusted EBITDA margin of 19%. This achievement coupled with accelerating revenue momentum reflects our focus on building a strong growth business for the long term. We are doing it through our broad partner reach and our relentless focus on excellent outcomes through the student journey, free application all the way through graduation and in fact, career success. Wiley's M3, Our last-mile training service is gaining momentum as corporate demand for tech talent returns to strength. As a reminder, M3 addresses one of the global economy's greatest needs by finding, training, and placing job-ready tech talent with leading corporations. Placement growth is accelerating as companies continue to wrestle with the dearth of IT and digital skills in the workforce. We signed three new corporate clients this quarter, including two very important Fortune 500 companies, and we see a growing pipeline ahead as companies plan for the post-COVID economy. In the fourth quarter in education services, we anticipate strong online enrollment growth to continue and the demand for online programs to remain high. So, across Wiley, our global team delivered another strong quarter of execution, efficiency, and momentum. I'll now pass the call over to John.