Good morning, and welcome to Wiley's Third Quarter Fiscal 2023 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. Joining me today are: Brian Napack, Wiley's President and CEO; and Christina Van Tassell, Executive Vice President, and CFO. A few notes to start. 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 the impact of currency. Additional information is included in our filings with the SEC. A copy of this presentation and transcript will be available on our Investor Relations web page at investors.wiley.com. I'll now turn the call over to Brian Napack.

Hello, everyone, and thanks for joining us. First, I'll state the obvious. Wiley's Q3 results and revised full year outlook are simply not what we expect to deliver to our shareholders. As you know, we've been navigating a mix of unpredictable macro and market-specific headwinds. High inflation, low consumer confidence, a tight job market and ongoing geopolitical disruption have all taken a toll. And in our markets, we've seen demand pressure in education, driven by lower consumer spending in university enrollment. Our results in Research were challenged unexpectedly this quarter by our decision to pause Publishing in a high-growth part of Hindawi, which I'll talk about later. All of these dynamics contributed to our revenue and earnings underperformance. Absent the pause in Hindawi, Wiley's core growth engines of Research and Talent remains strong. For the quarter, Research revenue, excluding Hindawi, was up 2.4%. Our strategies remain tightly aligned with the trends driving the knowledge economy, and we're making good progress in executing them. We continue to see good demand for our transformational publishing models and each quarter, we're adding dozens of corporate partners to our research solutions network. We're also seeing strong upsell demand from our existing solutions partners, validating the overall Research strategy. We will see this revenue opportunity begin to materialize in fiscal '24. Looking ahead, we're targeting substantial improvement in our performance and profit by reducing the drag of our own complexity and by improving our cost structure. We've made steady progress on simplification and optimization, including realigning our segments, restructuring parts of the organization, streamlining key processes and reducing real estate. The actions we've taken already this year will yield run rate savings of over $60 million annually and we're accelerating these efforts. We've talked in past calls about how a simpler Wiley is a better…

Thank you, Brian. We are obviously disappointed by our results this quarter and our revised outlook. It has been a highly unusual and unpredictable time for Wiley on several fronts, but we have a path forward, and we are moving with urgency and focus. Let's begin with our segment performance, starting with Research. Research Publishing revenue declined 3% this quarter, primarily due to the Hindawi special issues pause. As Brian noted, we continue to execute on our strategy to convert legacy read-only models to our transformational read and published models while building on our cascade strategy of finding rejected articles another more appropriate home within the Wiley portfolio. Research Solutions revenue rose 6% or 4% organically, driven by our platform services and science databases. We continue to make great progress here in expanding our partnership network, signing 77 society and corporate partners for services ranging from research consulting and production to delivery platforms, corporate events and education. An important note here, it does take time to onboard these partners. So in many cases, the revenue from these signings will not materialize until fiscal year '24. Solutions is a growth driver for us. And so in Q2, we increased our investment in the space. Adjusted EBITDA in Research declined 7%, primarily due to Hindawi revenue decline and investments to expand our editorial capabilities and scale our solutions offerings to meet partner demand. A quick note, the unusually strong currency fluctuations this year brought to light that our adjusted EBITDA in Research was being adversely impacted by royalty expenses denominated in British pounds, but derived from U.S. dollar revenue. We normalize for this FX impact, resulting in an adjusted EBITDA benefit of $2 million for this quarter. We also amended Q1 and Q2 adjusted EBITDA by $3 million each quarter. The currency…

Thanks, Christina. Let me quickly summarize the key takeaways for the quarter before we go on to Q&A. Above all, our Q3 results and full year outlook were below expectations and simply not good enough. Like many, we're facing strong and unusual market headwinds this year, and these unexpectedly increased in the quarter, especially in education. Add to this, the publishing pause in a high-growth program in Research and the result is a surprising and unsatisfactory quarter and lower expectations for the year. We're committed to meaningfully improving Wiley's performance and profitability and are both executing and accelerating our simplification and optimization plans. We'll provide more detail on this in June. And as always, Wiley's strong balance sheet and annual cash flow continue to allow us to reinvest in profitable growth while also rewarding long-term shareholders with dividends and share repurchases. All that said, we are very confident in Wiley's future. Our core growth engines are strong, our strategies remain well aligned with the long-term positive market trends and we continue to execute our strategic commitments. Today's unusual environment demands that we act decisively to fuel our best opportunities while also driving structural and operational improvements that ensure we grow more profitably. We expect to share meaningful progress in the quarters to come as we make our way to our October Investor Day. As always, I want to thank our colleagues around the world for their exceptional efforts and continued execution through this very challenging period. This global team's steadfast commitment to our mission, our customers and our colleagues is simply remarkable. This community is special, and I'm thankful to be part of it. With that, I'll now open the floor to any comments and questions.

[Operator Instructions]. We'll take our questions from Daniel Moore with CJS Securities.

A lot to unpack. I'm going to focus on Hindawi, one, and some of the cost restructuring and how that might drive a rebound in profitability, two. Starting with Hindawi, the $30 million revenue impact for fiscal '23, $25 million in EBITDA is very helpful. What would Hindawi revenue have been without the impact for the full year? In other words, what are special issue programs kind of as a percentage of Hindawi on a run rate basis today?

Yes. We were on track to achieve about $85 million in revenue with Hindawi. The special issue program is a significant part of the Hindawi program. It's been very successful for us and that represents over half of Hindawi's revenue for the year. So it's important to know that when we shut this down, which we did because we had to protect the integrity of our brands and need to get ahead of it, we were also putting the pause on a significant part of the program. Of course, only a small part of that was actually affected of the Hindawi program, but we needed to clamp down.

Makes sense. And then just of the $30 million and $25 million, maybe you gave it, I apologize, just trying to cut it up between Q3 and Q4. What was the impact on revenue and EBITDA in Q3? And then that can imply the remainder for Q4.

I can take that. The impact on Q3 was approximately $15 million. Yes.

$15 million revenue?

Yes, about half and half. Yes.

Got it. And about half and half the same for EBITDA?

Yes. Yes.

Perfect. Okay. So just talk, Brian, to the 2- to 3-year -- I guess, is there a time frame or a pathway to backfilling that, recognize that it might spill into '24. But has the 2- to 3-year revenue and EBITDA outlook for Hindawi been impaired in your view?

Well, I mean, look, the answer is we're still unpacking. And I'm not going to provide forward projections for Hindawi for the business overall. We'll be very happy to talk about all that in June. But this issue relates to the specific program. We put the fixes in place. We feel very good about what we've done. We are reopening the programs. And we are moving forward to clear the backlog and drive forward with our publishing program. As you know, the underlying trends in Open Access and in Research Publishing remained really strong due to consistent funding levels as we always say, and also due to the continuing growth in output in Research. There is no reason to believe that, that consistent demand will not translate into growth rates in Open Access consistent with what we've seen before. And as you know, Wiley continues to gain more than its share of -- due to our strong brands and are really successful and aggressive posture toward Open Access. So we expect to get back to that trajectory. But right now, I'm not going to talk about exactly the timing thereof, we happy to. But again, just to be clear, we've -- we stanch the problem. We shut down the program. We're now reopening again. So you can look at this as a temporary speed bump rather than anything that affects our long-term trajectory.

Very helpful. And then maybe, can you provide as it relates to -- I think last quarter was $50 million. In run rate cost savings, up to $60 million. Any more specificity in terms of the biggest buckets of those cost savings in personnel versus platforms? Just kind of how we break those up. And I'm assuming about half of the $60 million falls in '23 with the remainder in '24. Is that -- the '24 is that earmarked for profitability? You can see some of that being reinvested. Just trying to get a sense for how quickly we can rebound in terms of margins and profitability.

Sure. I'll take that one, Dan. Thanks. Yes, about approximately half of that restructuring is people-related costs, and the other half are things like real estate and other measures. And yes, for next year, $60 million run rate. We have $30 million this year. You're $30 million in the future. And we are in the process of -- in our planning and our guidance and all of that, looking at how much of that we do want to reinvest and how much we want to -- and obviously, when we're reinvesting, we're looking to -- we're looking to invest towards long-term margin accretion and also how much you want to actually drop in the short term.

Yes. And on top of that, I'll give a little bit more broad color. I did this pretty well in my prepared comments, but we are leaning in and accelerating our programs in both simplification and optimizations. We feel very confident and are seeing the evidence of the effectiveness of our strategies, and we're executing against them like we always said, but we're not comfortable with the way yet that we are converting that into cash and profitability. And so these programs are right now being accelerated, and we're looking forward to talking to you more about that in June as we flesh out those plans and lock in those, what's going to come in terms of savings and when, some of which, of course, will be in '24, but a lot of it will be in the longer term as we move forward.

[Operator Instructions]. And there are no further questions. I would like to turn the call back over to Mr. Napack.

All right. Look, thanks for joining the call today. I think it was a good call. We look forward to sharing Q4 and full year results in June and having a good, rich and robust discussion then. Until then, again, thank you very much for attending.

And that does conclude today's presentation. Thank you for your participation, and you may now disconnect.