Good morning, and welcome to Wallace Q3 Fiscal 2025 Earnings Call. As a reminder, this conference is being recorded. At this time, I'd like to introduce Wallace Vice President of Investor Relations, Brian Campbell. Please go ahead.

Thank you, and thank you all for joining us. On the call with me are Matthew Kissner, Wiley's President and CEO, Christopher Caridi, Interim CFO, and Jay Flynn, Executive Vice President and General Manager of Research and Learning. Note that our comments and responses 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. 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 US 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 divested assets, and 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 webpage at investors.wiley.com. I'll now turn the call over to Matthew Kissner.

Thank you, Brian. And good morning, everyone. Thank you for joining our third quarter update. We continue to capitalize on the increasing demand for scientific research and responsible AI development. We are executing well on our objectives of driving recovery and growth in research, and material margin expansion overall. And we remain on track to achieving our outlook for this year and next. In fact, we are raising our fiscal 2026 margin target. For those who may be new to the story, Wiley delivers authoritative content and data-driven insights to institutions, corporations, researchers, and learners. Our extensive catalog includes some of the most valuable and important content in the world, essential in the advancement of science, technology, and medicine. In the responsible development of AI and other machine learning applications, and in future high-value use cases supporting research and development such as science analytics, and information services. Let me acknowledge the economic uncertainty out there. Ranging from consumer confidence and inflation to tariffs, policy swings, and geopolitical unrest. As a reminder, for over two hundred years, Wiley has been a safe haven through many economic cycles and periods of disruption. We demonstrated this resiliency during the Great Recession and the COVID Pandemic. All publishing services, content, and brands remain must-have resources, and our markets continue to prosper. Supporting this is our strong balance sheet and consistent cash generation over time as evidenced by thirty-one consecutive years of dividend increases. What makes Wiley unique and compelling over the long term? As noted, our markets are robust. And demand remains consistent directly correlated with increasing global R&D investment. We recognize there's a wide business with essential, authoritative content and trusted brands. We deliver resilient compounding growth in markets that remain stable. Even during economic downturns. Approximately half of our revenues are recurring.…

Thank you, Matt. Good morning, everyone. Our results continue to align with expectations. Reinforcing our confidence in achieving our fiscal 2025 outlook and fiscal 2026 targets. Which I'll speak to shortly. Turning to our year-to-date results, adjusted revenue grew three percent driven by core growth in research and AI licensing. Excluding one-time AI-related revenue, overall revenue grew one percent. With research increasing two percent. We continue to advance our margin expansion initiatives resulting in significant improvements. Adjusted operating income up thirty-eight percent EPS up forty-three percent, and EBITDA up twelve percent. Our adjusted operating margin improved by three thirty basis points to thirteen point three percent and our adjusted EBITDA margin rose one hundred and sixty basis points to twenty-two point three percent. We continue to focus on optimizing our cost structure more specifically rightsizing our technology costs and other corporate expenses. At the same time, we're transforming how we publish, and work to drive greater operating efficiency. We do anticipate restructuring charges from this activity. Meanwhile, free cash flow shows strong recovery. And we remain on track to achieve one hundred and twenty-five million in fiscal 2025. Turning to our research segment, third quarter and year-to-date revenue increased five percent and three percent respectively. Q3 growth stemmed primarily from AI licensing and our open access programs. For the nine-month period, research publishing growth reflected strong demand to publish and read. With double-digit growth and gold open access, and low single-digit growth in our recurring revenue models, offsetting softness in ancillary products. A reminder that ancillary products include print, and other nonrecurring items such as back files, article pay-per-view, digital archives, and title-by-title journal sales to libraries. One-time AI licensing projects for backlisted content worth approximately ten million dollars year-to-date also contributed to our year-to-date results. Excluding these AI projects,…

Thank you, Chris. One final mention before I summarize our key takeaways. Yesterday, we announced that Doctor Karen Madden has joined the Wiley Board of Directors. Doctor Madden is the Senior Vice President and Chief Technology Officer at Millipore Sigma, the US and Canada life science business of Merck KGAA. Where she is responsible for shaping the technology roadmap and R&D strategy. Millipore Sigma develops products focused on scientific discovery, biomanufacturing, and testing services. As noted, Wiley's long-term strategy is increasingly focused on the corporate R&D value chain, and that Madden's wealth of knowledge and expertise in this area will be a tremendous addition. Okay. Let's review our key takeaways before we move on to questions. In periods of economic uncertainty, Wiley has consistently served as a safe haven delivering resilient compounding growth of course, economic cycles, and displaying geographic diversification significant competitive advantages, and strong financials. We will continue to move forward with operational discipline, fiscal prudence, and strategic foresight. We are an early beneficiary in AI development evolving alongside our corporate partners. We continue to explore various content opportunities for training, inference, and application. With an encouraging pipeline. As emphasized, content licensing represents a core business activity for us not merely an AI-specific initiative. Our execution remains strong with excellent organizational alignment yielding significant year-to-date improvements in both margins and cash flow and we maintain full confidence in our outlook for Q4 fiscal 2025 and fiscal 2026. With margin upside and a reaffirmed free cash flow target, of two hundred million dollars. I want to thank all of you for your interest and time today. I also extend my sincere appreciation for our Wiley colleagues. For their dedication and hard work in bringing us to this point and positioning us for even greater success in the future. I'll open the floor for questions.

Please press star then the number one on your telephone keypad. Your first question comes from the line of Daniel Moore with JR Securities. Please go ahead.

Yeah. Thanks. Good morning, Matt. Good morning, Chris. Thanks for all the details and color. Great to see the progress, you know, and upward revision regarding the 2026 margin target. Maybe just talk a little bit about the drivers. Is it additional cost savings? Incremental confidence on revenue, you know, AI, you know, expectations for incremental AI revenue, all the above, just what's driving the upward revision there.

Thanks, Dan. And, let me kick it off, and then I'll turn it over to Chris. But it's really primarily driven by working on the cost structure. And you know, it's really gratifying to see the ability to, with confidence, you know, really talk about these improvements coming through in our guidance. Really across the organization, we've been hard at work at let's say rationalizing the structure and getting back to what we would consider competitive margin levels. Let me turn it over to Chris who can give you a little more insight into that.

Yeah. Thanks, Matt. Dan, the primary driver, as Matt said, is that we are rationalizing our cost structure largely in corporate shared services. Been signaling that we were focused on this area. We see that we will begin execution on that in the latter part of this year, you'll see the benefit next year. That's a hundred plus basis point improvement we expect as a result of the actions we're taking.

Really helpful and yeah. We try again. Further. Go ahead.

You just real quick. You know, we want to create sustainable value here in terms of what I would call permanent margin improvement. So make these actions we're taking really count. So really, of course, the organization we're looking at the structure of footprint in certain places and really looking, you know, at getting excited at not only 2026, but even beyond to be showing really a continuous improvement mindset of around margins.

I think you just took the next question out of my mouth. You know, talking thinking about the longer-term opportunity, you know, what have you learned from, you know, competitors Springer, now that they're public, how do you compare and contrast your cost structure, and how do you think about the potential for, you know, more sustained margin upside going forward.

Yeah. We did a lot of benchmarking, including, of course, our competitors at Springer Nature and you know, it did point us to looking at structural cost differences. Now you do know that the mix of business is quite different from us. So they do we do have more of a society business in our mix than they do. So that has the royalty costs associated with it. But even when you back out the royalty cost, it points us in the direction that we do have an opportunity to streamline our cost structure. So you know, I think and we talked about this both you know, with the executive team and the board team here, and we are all looking at margin improvement as kind of a way of life. I think there is a lot of room for improvement there, but we want to do it in the right way, in a responsible way, and not interfere with the work we're doing on driving revenue growth.

Understood. Very helpful. Switching gears. The nine million incremental AI revenue just to confirm that the full nine million fell in Q3 and that was in research as opposed to the prior agreements which fell into learning. Correct?

That's correct, Dan. You have that right.

And that's perfect. It is switching gears again in terms of learning. Obviously, you know, you had a tough comp this quarter. Just talk about the outlook over the next, say, twelve months plus, you know, both academic and professional sides of the business and your confidence in getting back to positive growth in fiscal 2026 given, you know, some of the tougher comps you'll be up against particularly in the first half of the year.

Well, let Jay's on the call, so let him talk a little bit of kinda how he's looking at the business outlook and then Chris can give you a sense of the numbers.

Thanks, Matt and Dan. Yes. Nice to hear from you again. So, you know, we did indeed have a tough comp. I think if you exclude the AI revenue, though, from the last quarter, we were only off about a point in terms of prior year. And that points to, you know, some timing in the business a little bit of pressure in the retail channel. And a specific assumption around enrollments in the fall and spring semesters that just proved a little ambitious in terms of where we wanted to be this year. Right. Overall, I think, you know, the things I'd point to that give us some optimism and really underpinned, you know, the essence of what Matt was talking about and what we're doing, I'd point to improve margin and learning in the quarter as a key driver of that overall margin mix improvement that we're looking at. Growth in our ZIBooks business underlying courseware and, you know, a real long-term opportunity and continued digital licensing and AI in that business that we're looking to capitalize on. So, you know, just to reiterate, you know, we think that improved cost discipline, efficiency measures supporting higher margins, remain a key feature in the business, and that, you know, we've got a nice mix of products there that is in both the short and medium term, gonna continue to do its job for us in the P&L and help support our overall guidance.

Chris, you wanna add anything?

Yeah. If I could. I don't want to specifically get into projections into 2026, but I'll just say relative to this Q4, we do have a tough comp coming up. Obviously, last year, we had a large Gen AI deal. We, if we remove out that deal, we would actually be talking about a very positive learning growth in Q4. Instead, we only see it coming down in the low to mid-single digits in Q4. And a lot of that is strength as Jay alluded to in the courseware, it's a big quarter for courseware. And it'll have an impact there. And, also, there are other licensing deals that we anticipate will mitigate to some degree, the large deal that we had in the prior year.

Does that answer your question, Daniel?

It does. That's helpful. And you alluded to the strength in, you know, some of the off the book signings, the author signings, etcetera. It should bode well for fiscal 2026. Maybe one more. You know, obviously bought back I think, thirty-five million in the quarter. You're looking at, you know, given the guidance somewhere in the, you know, over the next, call it, five quarters, you'll generate three hundred and thirty-five million plus of revenue of cash free cash flow. And that's, you know, obviously, pre-dividends, but still, you know, significant opportunity and leverage keeps going lower. So just talk about capital allocation near term, you know, stocks trade in sub ten times earnings, how you're thinking about buybacks versus paying down debt and any other uses of your cash flow. Thanks again for all the color.

Sure. Chris? Yeah. In the current year, we've been buying back at a larger excuse me, a higher rate than we had in the prior year. It's modest to some degree, but so is our cash flow improvement. Year over year. As we expand into the next year, we'll be taking a hard look at the pace of our share repurchases. There's no commitments at this point, but obviously, we'll have more free cash flow to make that assessment.

Anything else, Dave?

Before going to the next question, again, if you would like to ask a question? Your next question comes from the line of Sami Casa with BNP Paribas. Please go ahead.

Thank you very. First one, you yes. Describe?

Sam, you're breaking up.

We better now?

No. No. Yeah. No. I hope you can yes. So you described how the US already accounted for twenty percent of your Arctic count.

You a little bit elaborate on your revenue exposure to US institutions and in particular to US medical libraries? Given all the talks around NIH trending. The second question I may could you give a few examples of deploying AI internally helps improve cost efficiency. And can we discuss whether thanks to AI and tools, productivity gains can help improve margins. We talking about AI driving ten bps, or are we talking about AI and automation driving a hundred bps or more?

Yeah. I don't think we're gonna get to I'm sorry, Sammy. Go ahead.

And lastly, when I look at Elsevier or Springer or Informa, their research business is growing four percent to five percent organically. Do you think that research can accelerate towards four, five English short to medium term or the structural differences in exposure that perhaps may prevent that in the medium term. Thank you very much, Chen.

Yeah. Let me try to answer all of that, and I'm gonna ask Jay to step in at the right time. On the last question, you may have heard us on the prior call talk about the fact that we have a lot of our research revenue back-ended this year. Into the fourth quarter. You'll see that when we finish the year, we'll be research growth rates will be much more at industry levels. So that's the answer to the last question. On the percentage of we'll as you might imagine, we're monitoring the developments in the US are very carefully. And you know, when we look at the impact of some of the potential impact of some of the US funding actions, it really traces back to a low single-digit impact on us. And there are also, as you all know, many of these arrangements we have are in multiyear agreements. And there are time lags associated with the impact. And the fact is, right now, there are so many unknowns with how this is going to fall out in terms of policy changes and court challenges. So we're very confident about the business given its geographical diversification, I'll add on to that. So we're confident and confident enough to reaffirm our guidance. So but we are monitoring it and taking it very seriously. On the middle question about the AI impact, on kinda how we run the business, Jay and his team have some very, very exciting things underway. And we don't translate it into a particular financial impact at this point, but it's part of what's driving the overall margin improvement in the company. That we're committing to with our increased margin guidance. But, Jay, maybe touch on a couple of interesting areas where you're finding good with AI.

Yeah. Sure, Matt. And, Sami, thanks for the question. And thanks for the interest, of course. Let me just before I jump into AI, you asked about US medical library exposure. I just want to reiterate one of the two things that Matt said. You know, we in the prepared remarks, talked about how eighty-four percent of our content comes from outside the United States. And you know, that distribution of articles only it's a single-digit number. The tied directly to federal funding. And, of course, we anticipate a strong year, as Chris talked about, as we put in our guidance. Specifically with medical libraries, if I recall correctly, there's about a hundred and twenty academic medical centers in the United States. We have thousands of customers globally. And so while of course, we're monitoring what happens at those academic medical centers and those medical libraries. We feel good about a, the relationships long term that we have with those customers, and b, we feel good about the global nature of the business. So on that, no. Let me just pivot to the question a bit more. And as Matt points out, we are really we feel like we are driving and embracing AI both in the innovation side of the business and in the cost savings side. And you asked particularly about opportunities in cost. Certainly workflow automation document review, research integrity, automation of content workflows in particular are areas where we're spending a lot of time. We've got a group set up internally called the Magic Lab that we point at this kind of work, and they're working every day with folks inside the building and outside the building. We're bringing in experts to help us on this journey. But we feel really we feel very optimistic that, you know, two things. One, humans are gonna stay at the center of the AI work in our sector. Because of the importance of human and expert overview and review of the processes, and second, we feel like this is an area where we want to lead, and we want to continue to invest. And so you know, as a maybe as the key takeaway, Sami, I think, you know, our approach is ensuring that AI innovation is gonna happen with integrity, and we're gonna balance technology process with ethical stewardship, author engagement, and just a laser-like focus on both the top and the bottom line.

Thank you very much. Very helpful. Thank you.

Thank you, Sammy.

Again, if you would like.

If there are no other questions, operator, I can wrap up.

I will turn the call back over to Mister Kissner for closing remarks.

Thank you. Well, thank you, everyone. We appreciate you spending time with us. We appreciate your confidence. Again, I want to thank the Wiley colleagues around the world who have helped drive this terrific progress we're seeing, and we look forward to catching up with all of you again in June when we talk about the close of the fiscal year. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.