John Wiley & Sons, Inc.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wiley's third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Wiley's Vice President of Investor Relations, Brian Campbell, you may begin your conference.

Hello, everyone. A few reminders to start. The 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, while we provide non-GAAP measures, there's a supplement to evaluate underlying operating profitability and performance trends. These measures do not have standardized means described by U.S. GAAP and therefore cannot 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.

Hello, everyone, and thanks for joining our Q3 earnings call. Our exceptional team delivered another quarter of solid revenue growth, and we continue to track to our full-year guidance for revenue earnings and cash flow. Christina will talk more about the outlook later in our presentation. By the way, this is our first official Wiley earnings call together, and it's great to have Kristina as a partner. She's already having incredible impact on the company. I'll start today's call by saying we have, of course, been closely watching the devastating events in Ukraine. Wiley strongly condemns Russia's invasion of Ukraine, and we call for a ceasefire, an immediate return to peace. Further, we call for constructive engagement and dialogue to resolve this conflict and achieve lasting peace that serves all people. As a global company with significant operations across Europe, we have many colleagues, customers, partners, and loved ones directly or indirectly affected by this conflict. Our hearts are with them and all the people of Ukraine. We pledge to support humanitarian efforts in Ukraine and across Europe. On a happier note, this year marks Wiley's 215th anniversary. That's 215 years of unlocking human potential by advancing research and education, which we have proudly done through good times and bad, through the industrial revolution, the digital revolution, globalization, and numerous periods of disruption, including recently two global pandemics. We're immensely proud to be an important part of the ongoing American journey, and we'll be celebrating this milestone throughout the year. At Wiley's core, we're in the knowledge business, the creation, the dissemination, and the application of new information and new knowledge. We do our work through some scientific research and career-connected education. And in a world where new information is being created faster than ever, where new discoveries, insights, and innovations are the essential lifeblood of every career and every industry, knowledge is a pretty good business to be in. As a leader in the knowledge industry, Wiley does three things. We enable discovery through scientific research. We power career-connected education for learners and professionals. And we shape workforces for employers. Year in and year out, the world spends more on what Wiley does and with good reason. Research and education power the global knowledge economy. Wiley's tightly focused on two strategies that target the seismic trends driving the knowledge economy. First, we are leading the industry's transition to open research with our research publishing and research solutions. Our impact goal here is for more cutting-edge research to be available to more people faster so it can drive more innovation and advancement. Wiley's second strategy is to bridge the widening talent gap with career-connected education products and education services. Our impact goal here is to ensure that the massive global investment in education delivers a meaningful ROI for society in the form of career advancement and corporate strategic success. Simply stated, from our customer's point of view, Wiley helps the world's researchers and learners to succeed in their chosen fields. and we help universities and corporations to achieve their goals through research and education so they can win in the increasingly competitive global knowledge economy. While we achieve this impact through our portfolio of branded content platforms and services with 82% of our revenue tech-enabled, we offer everything to the world through our market-responsive business models. We deliver it all through an unmatched network of university and corporate partners And we succeed as a business through sharp execution. Wiley's consistent strategies in open research and career-connected education are paying off with solid revenue and EBITDA growth over the three-year period through the COVID lockdowns and year-to-date. Despite the significant transitions in our sector in a very unusual two-year period, we're expecting to generate over $400 million in EBITDA and over $200 million in cash flow this fiscal year while surpassing the $2 billion mark in revenue for the first time ever. All this shows that after 215 years, Wiley is foundationally strong and performing well. And we believe that our hard work and investment in innovation is setting us up for continued profitable success in the long term. As you know, Wiley drives positive real-world impact in everything we do, whether it's by delivering more research discoveries to the world or by unlocking the career potential of millions of learners and workers worldwide. As I've said before, the more researchers and learners that we help, the greater the societal impact. And as evident in our performance, positive impact is good for business. We are committed to continuous progress in ESG. For the second straight year, Wiley has been officially certified as carbon neutral. More significantly, we are actively working to lock in on our science-based targets, which will provide us with a clear route to sustainability by reducing our greenhouse gas emissions. We continue to drive improvement in our ESG ratings, the latest coming from S&P Corporate Sustainability Assessment, which saw our ESG score triple. It is now well above average for our industry. This comes after Sustainalytics ranked Wiley in the top fourth percentile for low ESG risk among 14,000 companies. In fact, we were named as one of the top rated ESG companies for 2022 by Sustainalytics with regional distinction. We still have a long way to go, but we're committed to meaningful progress. Okay, so let's talk about third quarter results. As a reminder, all variances exclude currency impact. Our team delivered overall revenue growth of 7% or 4% organic growth. Adjusted EBITDA and adjusted EPS were down 5% and 9%, mainly due to planned investments and higher technology costs in research and education services. Revenue was up 10% in research and 18% in ed services, while down 1% in APL. I'll review the specifics of our Q3 segment performance in the next few slides and then pass it to Christina to review our results through nine months. Let me start by commenting briefly on current geopolitical and economic conditions. With regard to Ukraine, both Russia and Ukraine are small markets for us, so we do not expect to see any material revenue impact. Wiley does have a technology development center in Russia, one of several around the world, and we have solid contingency plans in place for this location, as in all locations, to ensure business continuity. We're confident in those plans, but continue to monitor this very uncertain situation, and we will adapt as circumstances change. As you would expect, this terrible situation is weighing on all our colleagues and is getting a lot of management attention right now. From an economic point of view, there's a renewed focus on inflation and the supply chain dynamics that have been prevalent through the pandemic. Christina is following these topics very closely. We do not foresee any material impact from these factors to affect our fiscal 22 results, and we're watching for inflationary pressure on wages, print publishing, and other costs as we look to next year. While supply chain management has presented some challenges for us, none have been material, and our largely digital nature means that any issues are limited. As a reminder, physical products make up only about 18% of our revenue. Further, our operations and production teams have done an outstanding job of minimizing any disruption through the pandemic. As you would expect, another issue we are watching closely right now is the great resignation. Like all companies, Wiley has seen a modest elevation in our turnover recently, but nothing that raises any major issues. At the same time, we're winning great new talent with critical skill sets, and we continue to see very high engagement overall. We remain highly attuned to how our colleagues are doing, both personally and professionally, particularly after a very trying two-year period. Significantly, they consistently report being highly motivated by our purpose and our important work. As I said at the beginning of the pandemic in the spring of 2020, Wiley has successfully navigated periods of uncertainty for 200 years and will continue to do so. From a segment performance perspective, research continues to deliver consistent revenue and profit growth, with revenue up 10% or 5% on an organic basis and adjusted EBITDA up 4% for a Q3 EBITDA margin of 33%. Our performance continues to be driven by solid growth in OA publishing, corporate solutions, and research platforms. To refresh, there are two complementary parts of this business. Research publishing, which is migrating to OA, and research solutions, in which we deliver best-in-breed infrastructure and publishing services to help other players in the ecosystem, such as publishers, societies, associations, and corporations, to thrive in the increasingly complex knowledge ecosystem. On the publishing side, Wiley has been unlocking the ever-increasing demand for peer-reviewed research by moving our journal portfolio toward open access. In 2019, as you may recall, we saw what the market wanted in OA, and we jumped in the driver's seat. Ever since, we've delivered above-market growth in the new P times Q economy, where revenue is a direct function of the number of articles published and the price we charge. The future looks very good for both volume and pricing, based upon the long-term underlying market growth and our ability to win based on the enduring value of our journal brands. Our broad collection of high-quality brands provides both the flywheel to drive demand and the moat to defend the Wiley system. During the quarter, momentum continued to accelerate for our transformational read and publish models with major signings in the U.S. These included the California Library Consortium, the Carolina Consortium, the Big Ten Alliance, and the Department of Energy, as well as consortia in Denmark, Israel, Japan, the Republic of Korea, and Slovenia. These multi-year agreements provide access to all of Wiley's journals for an annual fee while granting researchers at these institutions the ability to publish with Wiley. To date, we've signed 25 major transformational agreements worldwide, and we expect this momentum to continue. These agreements will continue to replace our legacy read-only deals. it is important to know from a reporting perspective that the hybrid nature of these agreements is increasingly blurring the line between business models and revenue lines and for this reason we will no longer separate out open access revenue growth rates or oa share of revenue a research article output is up nine percent year to date including the addition of handawi but down on an organic basis from last year's unprecedented COVID surge, which saw a 16% increase in output as millions of researchers focused on documenting their research. The overall trend line, however, continues to be positive, with two-year average output growth of 6% per year. OA article output is up 25% year-to-date on an organic basis. On the research solutions front, Wiley is enabling the complex OA transition for the rest of the research ecosystem. We're helping societies and publishers by delivering critical platforms and services that enable content delivery, production, transaction processing, and audience monetization. The transition to OA is highly complex. It's costly and fraught with risk. Wiley's scaled capabilities ensure that our partners survive and thrive. We recently made three small but strategic acquisitions to round out our end-to-end solutions in this area. They include J&J Editorial, Knowledge Unlatched, and eJournal Press. Together, they will allow us to deliver a full range of capabilities to our partners and clients, including copy editing and payment services as well as journal workflow technologies. Strong momentum continues for our corporate solutions lines, with revenue up 11% in the quarter, 19% year to date. Wiley's value proposition here continues to expand. Our platform enables corporations to reach 15 million researchers and leverage 179 million monthly impressions. Our knowledge hubs allow consumer product companies like Procter & Gamble to engage and activate our valuable audiences. and our career centers help pharmaceutical companies like Pfizer to fill their critical skill and talent gaps. In summary, we continue to see strong momentum across research, and this is reflected in our current operating performance and in the success of our strategic initiatives, which are delivering even greater opportunity for Wiley going forward. APL revenue declined 1% this quarter, with education publishing down 2% and professional learning flat. Adjusted EBITDA rose 4% due to cost savings initiatives, for a Q3 EBITDA margin of 30%. This is up from 29% in the prior year period. Overall, while APL revenue declined modestly this quarter, year-to-date revenue growth of 3% is tracking to our full-year outlook. We continue to drive margin improvement overall, and we feel very good about the consistent demand and long-term prospects for digital career-connected education for both students and for professionals. Within the segment, education publishing performance was driven by lower year-on-year enrollment in the U.S. and unfavorable comparisons to last year's unusual COVID bump. For the quarter, we saw continued growth in digital content, in ZyBooks and in alpha courseware, offset by declines in printed course material and test prep products. Let me say a few words about the current unusual phase in the university content market. In 2020 and the first half of 2021, COVID drove record numbers of students into digital programs and settings where our digital content and courseware were simply essential. More recently, there has been a natural return to earth of digital enrollment numbers, made worse by a very strong economy. Post-secondary education has always been counter-cyclical, and this year some students have predictably chosen to defer school to pursue career opportunities. Consequently, undergraduate numbers are down, a down over 6% since the fall of 2019. That's a million less students in the U.S. system. All this naturally affects our EdPub revenue, which is down 2% year-to-date, modestly off what we expected. As you will see in a moment, we are seeing similar enrollment-driven effects in our university services business. That said, we remain quite confident in the long-term global trends in postsecondary education, along with the opportunities for a winning content and courseware to return to growth as we emerge from this unusual period. In our professional learning lines of business, revenue was flat year over year due to the easing of the pandemic-related tailwinds that we saw last year for professional books, including our dummies products. On the positive side, the strong recovery and corporate soft skills training programs continued for both virtual and in-person delivery, with growth up 18% in the quarter and 28% year-to-date. On the education services side, we saw revenue growth of 18% for the quarter, driven by strong growth in corporate services. Here, talent development revenue rose 112% as demand continued to accelerate for our tech talent development programs. This offset a 3% decline for university services, mainly due to this year's unusual cyclical U.S. university enrollment declines. As expected, growth investments resulted in an adjusted EBITDA decline of 14%. For the quarter, our adjusted EBITDA margin was 13%. On the corporate side, we're rapidly signing new clients, upselling existing clients, and expanding into new verticals. The five multinational clients we signed this quarter include top financial services firms and a leading global technology company. And the pipeline remains very strong. We also grew tech placements 122% with our existing client base of Fortune 100 customers. We continue to make very good progress in our strategy to upsell additional tech training services to our expanding network of corporate clients. For example, one of our key global clients has recently agreed to an upskill tech program involving hundreds of employees, and other clients are exploring the same. On the university side, online enrollment in our programs has slowed compared to last year's unprecedented COVID surge, up 3% year to date, but down modestly for the quarter. For context, if you look at it over a two-year period, our online enrollment CAGR is around 7%. So what's happening in online degrees? First, as I said above, we're coming down from the unusual COVID bump that drove students to flow into online programs. Second, as things began to return to normal in the second half of 2021, the Delta and Omicron variants significantly disrupted both student demand and school admission processes. And third, as I noted, potential students are now faced with a very strong economy that is luring them away from school and into work. Again, though, we remain confident in the underlying trends in online post-secondary education despite the near-term challenges presented by these unique market conditions. While these high-impact services continue to be in demand, in this quarter we signed a large top 25 institution with new two multi-year partnerships and added 22 new degree programs, and we're seeing continued interest from potential new partners. We're also seeing very good momentum in Australia, one of our newer markets, where our work with La Trobe University is now delivering over a dozen degree programs along with innovative certifications in short course programs in areas like cybersecurity and artificial intelligence. These shorter, career-connected programs are great examples of the education that today's career-focused students want right now worldwide. The single biggest challenge facing universities is student acquisition. As they fight for survival in an increasingly competitive market, schools must attract and enroll students, which is increasingly costly and very complex. Wiley's impressive capability in this area is a key source of differentiation, and it includes digital marketing and end-to-end student enrollment services. This past quarter, we augmented Wiley's core value proposition by adding XYZ Media to the Wiley family, which we acquired for $45 million. XYZ is a market leader in student marketing. They generate over 140,000 highly qualified student leads per year for universities. Beyond this, they are quite profitable. We know the XYZ team very well because we've been a major client of theirs for years. This enhanced capability is already generating new students for our client programs, improving client success, accelerating new program launches, and enhancing new partner acquisition prospects. For its full year, December 2021, XYZ generated approximately $15 million in revenue and $3 million in EBITDA. In summary, education service continues to grow, continues to accelerate in corporate services as we sign major new clients and deliver record placements. In university services, we have new enrollment challenges to work through, but we remain confident in our long-term ability to drive both growth and profit while helping our partners to deliver career-connected online degrees and credentialing programs that the market is demanding. I'll now pass it over to Christina to take you through our year-to-date results, full-year outlook, and our financial position.