Release Date: June 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- John Wiley & Sons Inc (WLY, Financial) exceeded their EBITDA and EPS guidance for Q4 fiscal 2024.
- The company executed two significant gen AI content rights projects, generating $23 million and $21 million respectively.
- Learning segment continues to outperform, driven by solid execution and favorable market conditions.
- The company has accelerated its $130 million cost-saving program, with 70% of it already actioned.
- John Wiley & Sons Inc (WLY) rewarded shareholders with a dividend raise for the 30th consecutive year.
Negative Points
- Full-year adjusted revenue declined modestly to $1.617 billion.
- Adjusted EPS was down 19% due to a combination of lower operating income and higher interest and tax expenses.
- Free cash flow decreased to $114 million from $173 million in the prior year.
- Research segment revenue was down 3% due to timing and declines in ancillary print and licensing revenue.
- The company is in a muted two-year period for cash flow due to restructuring and investment activities.
Q & A Highlights
Q: Can you discuss the momentum in article submissions and its sustainability?
A: (James Flynn, Executive Vice President, General Manager, Research & Learning) We are optimistic about the trends in article submissions, which have risen to 15% on a trailing 12-month basis. This growth is global, with strong performance in China and India, and a rebound in the US and Europe. This momentum is expected to continue into fiscal '25.
Q: How are you addressing the growing presence of fraudulent research with AI tools?
A: (James Flynn, Executive Vice President, General Manager, Research & Learning) We have eight AI tools in production to detect issues like paper mill activity, synthetic content, and image manipulation. We are partnering with societies and publishers to pilot these tools and are committed to improving our processes and infrastructure to maintain research integrity.
Q: Can you elaborate on the AI content deals and their future potential?
A: (Matt Kissner, Interim President & CEO) We are at the beginning of a wave with significant interest from tech companies. Each deal is highly customized, and we aim to convert future deals into recurring revenue arrangements. The potential extends to various sectors like pharmaceuticals and engineering, where specific training data is valuable.
Q: What is the status of your cost savings initiatives?
A: (Christina Van Tassell, CFO) We have actioned $90 million of our $130 million cost savings plan, with $60 million realized in fiscal '24. The remaining $40 million will be actioned in fiscal '25, ahead of schedule. These savings come from corporate overhead, tech reductions, and business operation optimizations.
Q: How do you plan to allocate capital in the next 12-24 months?
A: (Christina Van Tassell, CFO) We will continue to respond to opportunities for capital deployment, including share repurchases. As free cash flow improves, we will monitor stock price volatility and capitalize on it. Our focus will be on reinvesting in core areas and seizing opportunities in AI and learning.
Q: Are the AI content deals primarily for book content, and how many more deals are expected?
A: (Matt Kissner, Interim President & CEO) Yes, the current deals are for book content. Interest is primarily from tech companies, but there is potential in other sectors like pharmaceuticals. We are in the early stages, and the market is developing, so more deals are expected as companies look to augment large language models.
Q: Would you consider licensing journal content for AI purposes?
A: (James Flynn, Executive Vice President, General Manager, Research & Learning) Yes, there are opportunities to license both journal and book content. Journal content is increasingly relevant for AI applications in sectors like pharmaceuticals and engineering. We will explore these opportunities while ensuring diligence and clarity on rights.
Q: What are your working capital assumptions for fiscal '25?
A: (Christina Van Tassell, CFO) We expect to pay elevated incentive plan payments for fiscal '24, which will impact working capital. Additionally, higher CapEx and restructuring payments will affect free cash flow. However, we anticipate improved working capital and lower restructuring payments in fiscal '26.
Q: How do you see the AI opportunity evolving for Wiley?
A: (Matt Kissner, Interim President & CEO) We are confident that AI will be a significant contributor to customer value, productivity, and growth. We are closing deals, developing additional opportunities, and seeing quality and efficiency gains. The advancement of AI technologies will drive growth in the years to come.
Q: Can you provide more details on your fiscal '25 outlook?
A: (Christina Van Tassell, CFO) We project full-year revenue of $1.65 billion to $1.69 billion, driven by low to mid-single digit growth in research and low single digit growth in learning. Adjusted EBITDA is expected to be $385 million to $410 million, with a margin target of 23% to 24%. Free cash flow is anticipated to be approximately $125 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
