Good morning, and welcome to Wiley's First Quarter Fiscal 2026 Earnings Call. As a reminder, this conference is being recorded. After the speakers' remarks, we will conduct a question and answer session. At this time, I'd like to introduce Wiley's Vice President of Investor Relations, Brian Campbell. Please go ahead.

Hello, and thank you all for joining us. On the call with me are Matthew Kissner, President and CEO; Craig Albright, Executive Vice President and 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, John Wiley & Sons, Inc. 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'll 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 website at investors.wiley.com. I'll now turn the call over to Matthew Kissner.

Good morning, and welcome to our first quarter earnings update. I hope you had a nice and restful summer. Before we discuss our first quarter results, I'd like to reflect on the progress and leadership we are demonstrating in the world of AI. When we completed our first AI licensing project in January 2024, we believed that our active participation in the new emerging AI world would pay dividends by building our expertise and developing strategic relationships with major AI developers. And I will describe later in my remarks our early work here is opening up growth opportunities across our businesses and in the promising corporate R&D market. This quarter, we achieved a significant milestone by including content from other publishers in our latest licensing project, another demonstration of our leadership in this exciting new space. Our authoritative content, data, and service are increasingly in demand for the advancement of both AI science and AI learning. We're moving decisively. After all, our two centuries aren't about age; they're about our proven ability to anticipate and drive transformation. Let's talk about the quarter. Q1 is our seasonally smallest period, and there is noise in our year-over-year comparisons and margin mix, which Craig will discuss. Our overall performance, however, was in line with our expectations. We drove mid-single-digit growth in research through AI licensing and open access momentum and despite an unfavorable comp versus prior year. We executed a landmark $20 million AI licensing project this quarter for an existing foundational large language model customer, where for the first time we included content from our publishing partners. We also announced a key strategic partnership with Anthropic to accelerate AI across scholarly research by integrating institutional library subscriptions into Claude. All part of a pilot program designed to add value to our existing…

Thank you, Matt. Good morning, everyone. I'm honored to join John Wiley & Sons, Inc. at this pivotal moment in our transformation and excited to share our Q1 results with you. Nine weeks in, three things stand out to me about Wiley. First, our mission matters. Advancing science and learning globally. There's a real sense of pride and purpose here that moves us. Second, momentum is real. Two years of value creation through business simplification and improved cost structure are having an impact. And third, our moment is now. We're at the forefront of defining AI's role in science and learning. We have some early seeds on the ground, and this is just the beginning. Looking ahead, I'm focused on disciplined prioritization to drive organic growth while consistently expanding margins and cash flow. Our best days are ahead of us. Let's turn to Q1 results. Adjusted revenue grew 1% and adjusted EPS rose 2%, while adjusted EBITDA was down 3%. As Matt noted, the first quarter is our smallest from a seasonal perspective. Let me walk through the three key drivers of our EBITDA performance this quarter. First, strategic margin mix. Our landmark $20 million AI project included $16 million of Nexus partner content. This generated strong incremental revenue at 45% EBITDA margins, versus the approximately 75% we've been seeing on deals with our own content due to differences in partner royalties. This opportunity validates our strategy of leveraging our AI relationships to create opportunities for publisher partners while expanding our addressable market. It's important to note that Nexus is not a replacement for licensing our own content but additive. Second, timing impacts we expected. We lapped a $5 million journal renewal benefit from Q1 last year, and we had a temporary lift in corporate expenses from an investment in…

Thank you, Craig. Let me quickly recap our key takeaways and then open the floor to your questions. Q1 was noisy but in line with our overall expectations. We have strong confidence in Q2 and the rest of the year. AI is a transformative opportunity, and we're moving decisively to capitalize. We're now a recognized leader executing our own projects with multinational tech companies, but also on behalf of our publishing partners. We are strategically partnering with the world's foremost AI innovators to augment the researcher and learner experience. We are learning from them and them from us. As I've said many times before, continuous improvement is a way of life for us now. We continue to drive operational excellence through publishing transformation, AI innovation, investment discipline, and cost reduction. Finally, we are returning more capital to shareholders in the form of increased dividends and share repurchases. Our goal, of course, is to drive continuous value creation in the years to come. One final word: You may have seen news on an industry class action settlement involving pirated content and a key AI developer. We can't say much about it at this stage, but we consider it to be a pivotal win for the protection of intellectual property and copyright in a responsible AI world. It's a victory for innovation and the right to create, and therefore, a victory for the public at large. I want to thank all of you for joining us. As Craig noted, we will continue to work tirelessly to reward your trust and confidence. As always, I want to thank our 5,000 global colleagues for their pivotal work in making us a leader in both our core markets and in the burgeoning AI economy. I'll open the floor to questions.

Thank you. As a reminder to ask a question, please press our first question comes from Daniel Moore from CJS Securities. Please go ahead. Your line is open.

Thank you. Good morning. Thanks for taking the questions.

Good morning, Dan.

Clearly, a lot to unpack, Matt. Let me start with Anthropic. Can you just provide a little bit more color regarding the nature in terms of the agreement? Is it primarily providing your content into Claude, or is it more of a collaboration to bring kind of research-related tools as well as content to market?

Jay, do you want to comment on that?

Yeah. Happy to. Hi, Dan. Good morning. And, yeah, we're excited about the partnership with Anthropic and Claude. One of the things that's really important to us is to make sure that high-quality content gets included in the research tools and learning tools that are being used by students. And so we're focusing on an announcement in a couple of weeks that will talk about Claude institutional access and the ways that we're integrating our content with Anthropic's toolset into the student and researcher workflow, primarily in the academic market. Think about it this way. If you have a connector inside of one of your desktop AI tools, you want to be able to point that connector at high-quality information or high-quality services. You might want to connect it to your Gmail. You might want to connect it to Stripe for payments, things like that. And so what we're doing with Anthropic is allowing end users of the Claude tool to connect right into a Wiley vectorized database of high-quality information to support AI safety, the use of top-quality research material, and to support the student learning journey and the researchers. So it's a very cool first integration with a major tool provider, and we're excited about it.

Anything you can describe from a revenue model perspective?

Looking at it as primarily a way to underpin the value of our institutional library subscriptions and as a potential upsell vector.

Okay. That's helpful. Does the agreement change the way you plan to invest or pursue AI-related opportunities for growth at all? And do you expect development spending to increase, level off, taper off, you know, over the next year or two? No. Two discrete questions there.

Well, I'll defer to Craig and Matt on the capital questions, but let me just give you a moment on, you know, the vision for the space here. So imagine that the demand for top-quality content inside the AI workflow is very high, and we're seeing that not only in the academic sector but certainly in the corporate R&D markets, as Matt mentioned in the prepared remarks. So our view on this particular program is that it represents the first step of tighter content integration between what Wiley's doing from a content aggregation perspective with our Nexus platform or the provision of our own content, our own IP, and that of our society partners, into these tools. So I think the way I would characterize your question or maybe build on it is to say that we view the future of AI services as not just being model training, but also inference subscription in the corporate R&D market and integration with end-user tools. And so this represents the first of those projects. We have many more in the pipeline. They are comparatively inexpensive to implement. But as we've indicated, you know, we believe that to be an AI-forward company and a leader in our segment, we want to be first to market with these things, and we want to continue to push the momentum.

Yeah. Dan, let me give you his perspective, Steph. That's right, what Jay said. And let me build on and give you a perspective on how I think about it. This market is still rapidly evolving, and you saw me in my prepared remarks talk about a number of different opportunities. But the operating theory is that we believe in the future our content is going to be accessed by various AI tools perhaps as frequently as it's accessed by individuals. And so our goal here is to build those connections into those various tools as the market evolves. This is, you know, it's still early days in the formation of this market. And what we're trying to do is play and take advantage of multiple opportunities to learn and make our content as accessible as it can be to these various AI tools. I don't see a lot of internal capital expenditure in this area. But as we look at modernizing our technology stack, which we've talked about in the past as part of our cost reduction work, we are building it in a way that it is very accessible. But there's various industry standards we could go into separately that we're complying with to basically make our content easily accessible by these models. As opposed to, you know, I've seen some other companies and others kind of building their own AI tools. We're kind of tool agnostic. We want to play with all of the tools because we don't know who the winners are going to be.

No. That's definitely helpful. Switching gears, of the I think you said $16 million revenue related to Nexus this quarter. Just help me understand how much of that is Wiley's content versus outside content, if I'm phrasing the question correctly. I'm just trying to understand the nature of the agreements and margin differential, you know, for AI deals when it's your content versus partnering with others.

Yeah. Let me first of all, I want to reinforce the value of that deal strategically. Because, you know, we have our publishing solutions business where we serve an array of other mostly smaller. And what we've been able to demonstrate here is our ability to, leveraging our experience in AI, leveraging our technology, legal expertise, and the like, is include their content into our AI licensing strategy. Which makes the overall package much more attractive to AI developers because it includes a larger percentage of the content. So it is a foundational move. I'll let Craig I'll give Craig a little airtime. As the new guy to talk a little bit about the underlying answer your question a little more directly. Yeah.

Yeah. Thanks, Matt. And thanks, Dan, for the question. We're very excited about this deal. The $16 million that you referenced is the Nexus or partner-driven content within the total deal that we secured there. And the total deal size was on the order of $20 million, which reflects a blend of both Wiley content and Nexus content. And that was a portion of the total AI revenue we did for the quarter, which was in aggregate, $29 million. What's exciting about this deal is, as Matt said, is that it brings in the partner content in a very robust way, which we view as additive, not a substitution for Wiley content, but really a build on what we had been doing previously. So we're excited about how this opens up kind of a market adjacency for us. We'll continue to pursue the original type of Wiley content-driven training deals, as well as these new types of Nexus. And in this case, how you see they can blend together. So thanks for the question. A very exciting quarter for us in that respect.

Okay. That's helpful. Journal subscriptions, Matt, I think you said they were strong. Where are we for renewals in calendar 2025 at this stage?

Jay, do you want to take that on?

Yeah. Sure. So it's early days. Obviously, the renewal season for us is sort of coincident with back to school. And as the librarians come back on campus, we're beginning those negotiations. The outlook is fine. We've reaffirmed guidance and feel confident in the full-year outlook. So we'll get into more details sort of November, January time frame as we get more data on the renewals. But we haven't seen anything so far this year to give us concern for calendar '26. Yeah. And, you know, Dan, we had a good strong renewal season at the end of our fiscal 2025. That's when it concludes for us. So we're going into the year with the head of steam there.

Okay. Sticking with research and publishing revenue, you talked about this, but declined 1% in the quarter. I know you had a little bit of a tough comp, but, you know, article submissions have been up double digits for multiple quarters, and publication, you know, volume was up double digits, I think, this quarter. So just help me to understand the decline in revenue and when do we expect all those submissions to translate into a meaningful uptick.

Yeah. And, you know, I'll begin and then ask Jay to comment. But, you know, the first quarter is always a slow quarter for us. And it's really not indicative of how the year is going to turn out. We are looking at a year in which we're seeing our research growth really in line with the market, which is kind of in the 3% to 4% range. So we're confident in that, and that underlies the reaffirmation of our guidance. But, Jay, maybe you can talk a little bit about the seasonality of our business.

Maybe you know, compared to competitors? It's primarily the comp in Q1. Q1 is a smallest quarter for that for the business. And just to reiterate, I'm not seeing anything there that takes us off course from, you know, where we see the market performing and where we're guiding to. Submissions up 25% year on year and output growth 13%. Your question's fair, but I just want to reiterate that the two things that we always come back to here are, you know, the majority of our output is captured inside the recurring revenue models. What we call the transitional agreements are our standard library subscription agreements. And that underpins the value of that core engine of Wiley's financial stability. And that recurring revenue is undergirded by strong continued publishing growth. And then the second piece, we did see double-digit gold open access revenue growth again for the quarter. And we're continuing to be very confident about that. In July, we had a record month for open access submissions, and our advanced science revenues are up, you know, 50% year on year, as Matt said in his remarks. So, you know, I think all this just goes to continued confidence in the performance of that sector for us.

Yeah. There is a I mean, the problem with this quarter is the comparables can confuse the reality. There was a late billing last year that actually was collected in the first quarter, which when you back out of this, we actually are growing. So it makes again, because it's a small quarter, it can be easily distorted by one-time events.

That's helpful. I think you were in the prepared remarks, you mentioned $5 million. Is that the Yes. That's the Yeah. That's magnitude. That's right. So when we normalize that and in terms of our internal work, you know, we are seeing growth. But the key is, you know, it is a seasonal business because of these transformative agreements. They're all different. They all have different billing schemes. So again, it's you can't project what the year is going to look like just from the first quarter alone, but we're confident that we'll grow. You know, as we projected and achieved our numbers for the year.

Yep. That's helpful. Switching to learning and appreciate you taking all the questions. Beyond the tough AI comp, just maybe talk about what we saw in terms of, you know, declines in professional publishing and how long that's likely to persist in your confidence in the rest of the year.

Yeah. I mean, we got our eye on professional. And it's been a slow summer. It seems to be for the industry. I don't know if this is a leading indicator of some economic issues. But based on because we know, our title output is strong. But our ordering patterns are not what they should be in the quarter. So I wouldn't call it, you know, a red alert yet. But we got our eyes on it because it may be an indicator of a broader economic slowdown hitting consumers. That's about the only business we have that's directly exposed to kind of consumer economics if you think about it. So we're watching it closely, but it's not just us. It seems to be, you know, just slower ordering patterns. The rest of the business is in professional, and I'll let Jay in learning. Are holding up pretty well. It's early for obviously, the courseware business because that's that season really is happening now as people go back to school. But, Jay, any color you want to add for Dan?

On professional, no. I think you covered it. The retail channels did not meet our expectations in the quarter, and I think that's a thing we're going to keep an eye on as Matt says. For the rest of the business, in assessments, we saw nice strong growth underpinned by product innovation, as Matt described. We're really excited about Worksmart, and we're really excited about the way that business has come out of the gate in the first quarter. Enrollments seem to be holding steady, and we'll have a lot more to say about that as we get through back-to-school season in our learning business. And, you know, the AI potential in the advanced content book list is really strong. And then when you talk about licensing revenue in both the inference models and in the training models, we feel really good about that high-quality list of STEM books as being a major source of value for both institutional library customers and corporate R&D customers. So feeling good on all those three fronts for sure.

Okay. And on the one-time cost $4 million, is that in terms of corporate that sort of nonrecurring as we look into the balance of the year? Did I hear that right?

Yep. Dan, you heard that right. We did see in the quarter kind of a short-term one-time lift in corporate expenses. It was really the completion of several strategic consulting projects that we've been investing in to better position the company for execution and growth going forward. These are now completed. So we don't expect those kind of impacts hitting us going forward. We do expect to start to see more of the savings that have been driven from the back part of last year and the beginning part of this year's action starting to flow through as we move forward into the second quarter and throughout the rest of the year as well.

Great. One or two more. The higher Nexus-related revenue, does that have any meaningful impact on your kind of fiscal 2026 margin outlook? Or is it relatively de minimis given the size of, you know, of the overall revenue and cash flow?

Yeah. Hey, Dan. It's Craig. I would say, probably de minimis in impact. We've talked about the size. We've talked about the margin. This was an additive element into our program, but we're still focused on the profitability of the core business and the ongoing margin expansion, and all of that remains on track as we were expecting and planning. So, you know, I would think of this as additive in terms of revenue and gross profit, but very de minimis in terms of the margin impact.

Okay. And lastly, you know, as we speak, I think the stock's down six, seven, 8% trading at a little over six times EBITDA and, you know, less than 10 times free cash. So obviously, we've been buying back stock, but and, you know, the board raised the authorization. Just maybe talk about your relative priorities for capital allocation, how aggressive we might be with the buyback? And thanks again for all the color.

Thanks, Dan. Yeah. Speaking to capital allocation, I think what you'll continue to see from John Wiley & Sons, Inc. is just a very disciplined approach to how we think about our capital allocation and return of value to shareholders. We have an ongoing commitment to our dividends, which we've talked about, and we continue to maintain a very high dividend yield as a form of evidencing that. We've also been active in our share buybacks, increasing our share buybacks in the quarter modestly in terms of year over year, but with a deliberate intention to be active when the prices are attractive. And we have to say we're very happy with the opportunity right now for us to be able to continue that program. And on that note, received a vote of support from the board in terms of the share authorization program, which was an increase in terms of the prior share authorization program we had as well. So our priorities are really to continue to support shareholder returns through the dividend program, through the buybacks, continue to pay down debt when it and where it makes sense to improve the strength of the balance sheet. And obviously, to continue to look for high-value opportunities to drive organic development of research and learning solutions, especially when it's around authoritative content and data-driven insights. So we're balanced in the way that we approach that, and we're opportunistic looking for the highest returns that we can on that, of the capital that we have available to us.

Understood. Again, thank you for the color.

Thanks, Dan.

We have no further questions in queue. I'd like to turn the call back over to Mr. Matthew Kissner for any closing remarks.

Well, thank you for joining us. We look forward to sharing more on our Q2 earnings call in December. We'll see you then. Have a good fall.

This concludes today's conference call. Thank you for your participation. You may now disconnect.