John Wiley & Sons, Inc.

Good morning, and welcome to Wiley's first quarter fiscal 2024 earnings call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you, and welcome everyone. With me today are Brian Napak, Wiley's President and CEO, and Christina Van Tassel, Executive Vice President and CFO. Note that our comments and responses to your questions reflect management's views as of today, and will include forward-looking statements. Actual results may differ materially from those statements. The company does not undertake any obligation to update them to reflect subsequent events or circumstances. Also, Wiley provides 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 held-for-sale assets and the impact of currency. Additional information is included in our filings of the SEC. A copy of this presentation and transcript will be available on our investor relations webpage at investors.wiley.com. I'll now turn the call over to Brian Napak.

Good morning, everyone. Thanks for joining. Last quarter, we announced some important actions that we're taking at Wiley to unlock value for our shareholders. These include divesting non-core assets to focus Wiley on its greatest strengths and its biggest opportunities so that we can deliver superior financial performance. Today's Wiley is a knowledge company, a global leader in the creation and distribution of new knowledge to solve real world problems. Speaking more practically, We're one of the world's leading publishers of top quality research, academic, and professional content. Complementing our role as a publisher, we're also a leading provider of digital solutions that power the knowledge ecosystem and that specifically help people to access new knowledge and use it to achieve their goals. Research is Wiley's largest and most profitable business, and it's at the core of our knowledge company strategy. The market for new research content grows consistently, And Wiley has one of the world's leading research journal portfolios and the industry's most widely used research content delivery platform. The company is fundamentally strong, maintaining a healthy balance sheet and delivering consistent cash generation. Today, over 80% of Wiley's revenue is digital and 50% of it is recurring. Our current dividend yield is 4%, and we have now delivered 30 consecutive years of dividend increases. There aren't too many companies that can say that. For over two centuries, Wiley has delivered new, high-impact knowledge to the world, and this legacy matters. The Wiley brand and our reputation help us to win and retain customers in all of our businesses. All this is to say that we are in a good position to transition to the future, to win in the market, and to drive increasing shareholder value. Q1 played out largely as expected. We saw year-on-year revenue and profit declines that reflect the publishing pause at Hindawi and the lingering effect of market headwinds in research's advertising and recruiting lines, and also in academic publishing. All of this offset our continuing strong growth in open access, assessments, and in Xibook's courseware. I'm pleased to report that we're seeing good underlying demand momentum in research, where publishing volume is improving across all regions as measured by increasing article submissions and publications. Further, We're seeing continuing gains in our journal impact factor scores, which are key to driving publishing demand, and continued strength in new partner signings. As you saw in our recent filing, we've now reorganized to reflect our new, more focused strategy. We reduced the number of business segments from three to two, research and learning. More on this later. We will also be temporarily reporting on our held-for-sale businesses as a third segment. We're working through the sale processes for University Services, Cross Knowledge, and Wiley Edge. We found a high level of buyer engagement, although the market remains challenging. Given the ongoing processes, we're not yet able to provide timing or expected proceeds. As you know, we are eager to complete these transactions so that we can reap the full benefits of simplification, including moving even more aggressively on our cost base. As we said in June, fiscal 24 is a transition year for Wiley. We're very confident in our direction, but it will take some time to see the results. The benefits are expected to materialize in the latter part of this year with full realization in fiscal 25 and 26. I'll now summarize our performance for the quarter. Christina will provide more detail in her remarks. I'll be excluding the held for sale businesses from my comments except where specified. As we expected, adjusted revenue was down 8% due to last year's Hindawi publishing pause, which impacted Q1 revenue performance by $19 million. Excluding this event, research publishing revenue in the quarter was up slightly, driven by strong double-digit growth in gold open access. The learning segment saw print declines in academic, offsetting growth in digital courseware. And our professional line was flat, with assessments growth of 12%, offsetting a 5% decline in publishing, which reflected a bestseller that we had in the prior year. GAAP EPS was a loss of $1.67, reflecting $103 million of impairment charges related to our held-for-sale university services and cross-knowledge assets. We also recorded a $12 million restructuring charge as we executed on targeted workforce reductions and real estate consolidation in advance of our divestitures. Adjusted EBITDA declined by 7 million, or 10%. Hindawi's EBITDA impact was $18 million, offsetting restructuring savings in learning and in corporate shared services. Adjusted EPS was down 37% due to higher interest expense and lower EBITDA. In the quarter, held for sale businesses collectively generated $84 million of revenue, down 10%, and adjusted EBITDA of $6 million, up from a $2 million loss the year before. As indicated, we're reporting on these businesses separately, and you can find this in the tables attached to our earnings release. Let me provide an update on research publishing, given its importance and the unusual near-term dynamics that have affected our year-on-year performance. First, I'll emphasize that the research market remains robust, with ever-increasing global R&D spend driving higher research output, as always. We are confident and encouraged by the fundamental attributes of the business, which remain strong. At this point, the short-term COVID demand spike and snapback are mostly in the rearview mirror, and we're returning to consistent demand growth. Researchers around the world continue to submit their articles in increasing volumes to Wiley's peer-reviewed journals, and they do so because publishing in our journals drives their career success. A few things to note. First, Wiley's core publishing program is very healthy. As expected, we're seeing a rebound in publishing volume in the core Wiley portfolio, with article submissions now up 4% year on year, and article output, which naturally lags submissions, up by 2%. All subject areas are showing improvement. We're also seeing improvement across important geographies, including the U.S., the U.K., and Germany. As a reminder, research absent Hindawi is projected to grow 3% this year. Another important piece of data is that Wiley's gold open access revenue was up 36% this quarter ex-Hindawi. Gold OA is the pay-to-publish model through which research appears in OA-only journals. While Gold OA makes up about 10% of our research publishing revenue, it is our fastest growing area and we expect it to drive consistent growth in the years to come. We continue to benefit from the industry's mixed model environment. Subscriptions and pay-to-read models remain important across the industry, and this will continue for the foreseeable future. As a scaled player and market leader, Wiley prospers under all of these models. As you know, in fiscal 23, Hindawi generated approximately $55 million in revenue and $23 million in EBITDA. For this year, we project revenue to decline to $20 million, with a moderate loss in EBITDA. For fiscal 25, we expect to recover most of the revenue lost. And by fiscal 26, we expect to be ahead of where we were in fiscal 23. We continue to build on our position as a top-ranked journal publisher. Especially noteworthy is that we received good news this quarter when 112 out of 200 Hindawi journals were given their first journal impact factors. Additional 35 journals saw their impact factor scores increase. We're already seeing demand increase for these newly rated journals. We also saw exceptional scores for Wiley's key journals in China. These important developments speak to the growing quality and breadth of Wiley's publishing portfolio around the world and our long-term confidence. As indicated, we've now reorganized Wiley into two operating segments, down from three, reflecting our greater focus in a simplified structure. The two segments, research and learning, complement each other because they both deliver high-value content and solutions in related markets and serve similar verticals. The close alignment of our businesses will allow us to capture both revenue and cost synergies. The research segment remains our primary driver of growth, profit, and cash flow. In fiscal 23, research represented two-thirds of Wiley's ongoing revenue and delivered a 35% EBITDA margin. It has a large recurring revenue base that is 95% digital. There's no change to our reporting lines in research. Our new learning segment includes academic and professional publishing and platforms. About a third of Wiley's 23 adjusted revenue was generated by our learning lines. The two reporting lines under learning are academic, which is higher education publishing, and professional, which includes professional publishing and assessments. Learning delivered a 29% EBITDA margin in fiscal 23. Approximately 55% of its revenue is digital. While we'll be reporting on two segments, Wiley's market-facing efforts will now be managed as one team led by Jay Flynn. You will recall that we previously had three separate teams competing for investment in Mindshare. Now, as one Wiley, we'll better leverage our collective scale and strength in publishing and solutions. I'm fortunate to have a very talented and seasoned leadership team overall. Jay has been leading our research unit and has over 25 years of experience in the global research market and in digital publishing. He's been a needle moving leader at Wiley since 2010 and has driven the transformation of our research business into an engine of profitable growth and innovation. He's widely recognized as an industry leader. I'll point out a second change to our team structure. For the first time, we're creating a unified operations team, which you can see here is led by Matt Levy. This team is charged with overseeing operations and driving operating excellence and efficiency across Wiley. The operations group includes functions such as content operations, supply chain, program management, and customer service. Beyond the obvious efficiencies this consolidation enables, it's also driving greater speed and improved execution, one efficient infrastructure to support one market-facing team. Matt is a uniquely effective executive with decades of experience leading digital content and platform businesses in our industry. Before this, he was running our academic unit, where he was very effective in helping Wiley to adapt to consistent market changes while driving significant efficiency, and this allowed us to offset various revenue challenges. So, recapping the plan we laid out in June, we're now executing a three-part program to unlock value for our shareholders. First, we're focusing Wiley on publishing and the delivery of knowledge solutions in research and learning, areas where we have competitive advantage and scale. Second, we're simplifying Wiley by divesting three businesses that are not core to our new, more focused strategy. Third, we are streamlining and right-sizing Wiley to improve efficiency, speed, and execution, all of which will drive material performance and margin improvement. These actions are substantial, and realizing their benefits will not happen overnight. Nonetheless, we're moving swiftly and are already seeing positive early signs from our new focus in simplicity. I'll now turn it over to Christine to discuss segment performance, cost savings initiatives, and our outlook.