Good morning, and welcome to Wiley's Q4 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 Matt Kissner, Wiley's Interim President and CEO; Christina Van Tassell, Executive Vice President and CFO; and Jay Flynn, Executive Vice President and General Manager of Research & 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 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 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 held for sale 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 Matt Kissner.

Thank you, Brian, and thank you, everyone, for joining us today. What a difference a year makes. Today we look forward with renewed confidence and optimism as a leaner and stronger Wiley. We are executing with much greater discipline and rigor, we have met and exceeded our stated commitments, and we are seeing strong momentum in our businesses and value creation activities. I'll start by reviewing how we did against our objectives and provide an update on the emerging and exciting GenAI opportunities in front of us. I'll walk through our fourth quarter and full year performance and then review our momentum heading into fiscal '25. Christina will walk through our value creation plan progress, reinvestments, segment performance and fiscal '25 outlook. After summarizing, we'll open it up for questions. Jay Flynn will be joining us as well. Wiley is enabling the creation of new knowledge and its application in critical areas of the global knowledge economy in science, medicine, technology and engineering in business, economics and finance. As a knowledge company, Wiley has played a foundational role in everything from the Industrial Revolution to the Information Age. Now Wiley is beginning to play a critical role in the rise of artificial intelligence and machine learning. Our knowledge, content, tools, and services remain as relevant as ever. It's been a very eventful year for Wiley and I'm proud to say that we finished strong. Research is seeing strong underlying momentum heading into fiscal '25 after some unusual challenges to start the year. Demand to publish and output are well ahead of expectations. Learning continues to outperform, driven by solid execution and favorable market conditions. GenAI demand is accelerating. We've already executed two content rights projects for large tech companies. I'll talk more about this opportunity in a moment. We're piloting…

Thank you, Matt, and hello, everyone. I want to start by thanking our global colleagues for all they've done to get us here. We are a much stronger company than we were last June. At this time last year, we announced our value creation plan. I said then, we were about to embark on a clear and decisive plan to simplify our portfolio. This would enable us to focus on our most competitively advantaged businesses in order to drive consistent growth, while streamlining the organization, expanding profit margins and deploying our capital more efficiently. So, let's review our progress to-date. We reorganized the businesses from three disparate segments into one go-to-market Research and Learning team under Jay Flynn. This has been a great move for us, and we continue to advance commercial gains and unlock synergies from this important realignment. We've closed on the sale of both University Services and Wiley Edge. Total consideration for both is approximately $175 million, subject to adjustments. Our primary goal here was to free ourselves of these stressed non-core assets to focus on our profitable and cash-generative core. The remaining divestiture of CrossKnowledge is in process and is immaterial. We actioned $90 million of run rate savings in our $130 million savings plan, with $60 million of it being realized in-year. The remainder will be actioned in fiscal '25 ahead of schedule. The key drivers here are corporate overhead savings, business savings from the consolidation of various functions in our real estate footprint, as well as technology savings from the retirement of legacy systems and reduced hosting costs. During the year, we further consolidated our office footprint with two office closures and four reductions. Since March of 2020, we've reduced our global office footprint by around 40%. Also note, as part of our tech…

Thank you, Christina. Let me quickly summarize the key takeaways. As we put this very eventful year behind us, there is a renewed sense of confidence and optimism across our organization. We're meeting and exceeding our profit and performance objectives. We're moving decisively to uncover near-term opportunities. We're reinvesting where we have a unique right to win, and we're moving faster and making work life easier. We're seeing strong underlying momentum in Research and outperformance in Learning. GenAI momentum is accelerating with two executed content rights projects. We're seeing additional interest from other AI providers. We've made significant progress on our value creation plan, including divestitures and savings. We have more work in front of us, but we have made tremendous strides. We're confident in our fiscal '25 outlook for revenue growth and margin expansion. And we see expected continued margin and cash flow acceleration in fiscal '26 and beyond. I'll finish with our fiscal 2026 financial targets. On revenue, we anticipate low- to mid-single digit revenue growth, as our core drivers in Publishing and Solutions continue to benefit from ever-increasing demand and a strong competitive position. As with our fiscal '25 outlook, our '26 targets do not reflect any additional GenAI content licensing projects. Our adjusted EBITDA margin is expected to grow to 24% to 25%, driven by high-quality revenue growth and value creation plan savings. And free cash flow is expected to rise to $200 million, as CapEx returns to more normal levels and restructuring payments taper off. Beyond fiscal '26, we're focused on delivering strong, consistent revenue growth at or above market growth, continued margin expansion from greater publishing scale and delivery, leaner processes and operations and a more efficient infrastructure, and further free cash flow acceleration as cash earnings expand, cash flow conversion improves and CapEx normalizes. I want to thank all of you for joining today, and I want to thank our Wiley colleagues for their many achievements this year and their continuous drive and dedication. As I said last quarter, nothing unites us more than being on a winning team. I'll now open the floor to any comments and questions.

[Operator Instructions] Our first question will come from the line of Daniel Moore with CJS Securities. Please go ahead.

Good morning. Thanks for all the color, and thanks for taking the questions. Just updating my thoughts here. So, maybe to start, Matt and Christina, with Research, now that we're fully cycled past the headwinds and challenges at Hindawi as well as the COVID hangover, just talk about the momentum you're seeing in terms of article submissions? Clearly, 15% in the quarter is really strong. Where is that momentum coming from geographically as well as specific disciplines and just how sustainable is that type of growth in your mind?

Hi, Dan. It's Matt. And thanks for recognizing, that's a critical leading indicator, right, of the health of the Research franchise. As we have Jay with us, let me ask Jay, who's close to the market here to give you some color on that. Jay?

Hey, Dan, how are you. Thanks for the question. So, we are optimistic about the trends in article submissions. And just a reminder, those don't convert and correlate directly with revenue growth. We have multiple ways to monetize those submissions through our continued growth in subscriptions as well as our Hybrid Open Access business models and our Gold Open Access model. So, just specifically around sort of breakdown of geography, what we're seeing is a return to growth essentially globally. In article submissions, we still see very strong performance in China and in India. Those are still leading markets for growth for us. But encouragingly, the more mature markets, especially the United States and Europe, have also rebounded. And we saw that in the latter half of the year, particularly in Q4, and we're looking forward to that continuing. I think that's one of the reasons we feel very optimistic about our trajectory and the momentum that we've established in fiscal '24 heading into '25.

That's very helpful. Appreciate it, Jay. Switching gears a little bit, you've obviously talked a lot about the AI tools you're developing and implementing. Maybe just talk a little bit more -- take a step higher, just 30,000 feet. The changes you've made in terms of processes, procedures, since Hindawi and your confidence that we won't have additional similar issues going forward given the growing presence of fraudulent Research and, obviously, the scope of the opportunity that you're seeing in Gold road?

Sure. So, as Matt mentioned, and we read in the prepared remarks, through a list of tools that we already have in production, I have eight AI tools in production right now that are built off the data set that we acquired during the last couple of years that give us indications of where there might be, for example, papermill activity. It helps us verify who authors are. There's synthetic content detection, image manipulation detection, a whole set of tools. And I think the way Matt described it is accurate. We are a thought leader in the space based on hard won experience. We've announced already partnerships with one society and one publisher, the world's largest membership society in academics, and that's the IEEE, and another publisher Sage to pilot these tools on their systems, and we've got a lot of inbound interest as a result. I think as I've said before in my comments, this is an ecosystem challenge, and there's a mix of things happening between incentives, geographies and the tools that we need to shore up our own processes are deployed now. Matt mentioned progress we're making with our new platform development. I'll point to that as another example of the work that we feel good about heading into fiscal '25.

Yeah. Let me add a comment, Dan, just for color. This is a scaled business. We'll be presented with over 1 million articles for candidates for publication today. So, the investments we're making in infrastructure and AI are critical for enabling us to take advantage of economies of scale here.

Very helpful, Matt, and certainly, Jay, the color. Obviously, great to hear the interest in AI and machine learning continues to grow. The $23 million deal this quarter, really encouraging, another $21 million deal in early fiscal '25. I know it's hard to size the opportunity, but when you think about it generally, has the lowest-hanging highest-revenue fruit kind of been picked, or do we think of these as relatively small toe-in-the-water type deals as you get your hands around the opportunity relative to what licensing could grow into over time?

A couple of thoughts, this is Matt, and then I'll ask Jay to comment also. We're at the beginning of a wave here, I think. And we're learning as we do this. We're approaching it very cautiously. Each deal is highly customized, but there is considerable interest. The question is, we want to pursue this on terms that are favorable to both us and the licensee. And so, we're very cautious about structuring these deals in the most effective way to protect our future rights, but still take advantage of the fact that the kind of content we have, which is fact-based, indexed, quality content is very appealing to these LLM model builders. And the other desire we have is to convert these future deals into more of a recurring revenue arrangement than a one-time revenue arrangement. So, I would say we're in the early days from a learning point of view, but there is considerable interest we're seeing. Let me ask Jay to add his comments.

Fully aligned with that. I think what we're seeing in the market is obviously interest from the big tech companies who are doing training. But as Matt noted, that -- and that opportunity is substantial, and we're encouraged by it. But as Matt noted, there are -- we're at the very beginning stages here of this revolution in information technology and information services. And we're well positioned, I think, to support the needs of various end markets who are building their own in-house tools to support, for example, drug discovery, in life sciences, in chemistry, in oil and gas, in computer science and engineering. We published some of the best material in the world on that. And so, one of the things we'll be focused on in fiscal '25 is the information needs of those end markets as well as the continued development, as I mentioned earlier, of tools to support our own internal quality processes and product development.

Perfect. Maybe switching gears a little bit, and this might be a little bit more Christina, but $90 million of the $130 million run rate cost savings now actions, I assume the remaining $40 million will fall in fiscal '25 or most of that. Is that fair?

Yeah. Hey, Dan. That's accurate. We'll have about $40 million action in '25, that's ahead of schedule, and we are feeling really good about the momentum off of that as well. About half of that is corporate and organizational optimization and about $40 million of that is tech reduction and strategic business decisions. And the last part of that is just business operation optimization. So, these are trends that we were able to accelerate. And as we got more focused on what we are really spending our time and energy on, we're able to really to execute that in a really effective way.

Very helpful. And then, of the -- I think you said $60 million was realized in fiscal '24. Is that right?

In-year, yes.

In-year. And so...

In-year, yeah.

So the -- in-year, okay. So, was half of that reinvested? In other words, I know half of the $130 million will be ultimately reinvested. But is that ratio, did that kind of hold in-year versus what's to come?

Approximately, yeah. Yes.

We're in the ballpark, so there's not...

Yeah, in the ballpark, yeah.

...like most of the reinvestment is still to come or anything like that? Okay.

Correct.

Very helpful. And then, the CapEx guide, $130 million this year, is that right?

That's right.

And it's still -- given the EBITDA guide, $125 million, I guess, what the punchline is $125 million of free cash this year seems potentially a little light to me, even with the elevated CapEx. Maybe just talk about your working capital assumptions and whether there could be a little bit of conservatism built in to that expectation?

Sure. We're still coming out of our transformation year. So, we've got a couple of things that we are grappling with in '25. One is the payment of our incentives from this fiscal '24, which is an elevated number, because if you recall, and we talked about a year or the year before, we had specifically reduced our incentive payments. So that's -- you'll see the last of that coming through in '25. That's about $30 million. And then, we've got, obviously, the elevated CapEx versus this year, and then a couple of other small things that are just -- that are impacting that. However, we are seeing momentum as we come out of all those things as we're executing on our strategy. And so, we're going to continue to monitor this. I also want to just mention, on the GenAI deal we talked about for the first half of fiscal '25, we are using a lot of those proceeds to redeploy back into the business, as Jay rightfully mentioned, because we really want to make sure that we're seizing this opportunity for not just GenAI, but also to drive harder on our Research opportunity and our Learning opportunity. So, those are the broad strokes of what you're seeing in free cash flow.

Makes sense. And that does not include potential cash payments from dispositions, correct?

No. It does not.

Correct. Okay. And then lastly, you just talked about capital allocation. Obviously, you picked up the pace on buybacks, free cash flow. We'll pick up this year, but then should really accelerate in fiscal '26. And given the stickiness of your model, are you likely to be increasingly aggressive in terms of buying back shares, given the comfortable leverage or just talk about your priorities for capital allocation for the next 12, 24 months? And thanks for all the color.

Yeah, sure. So, we're going to continue to respond to opportunities for capital deployment and strategy as we go. You did see us increasing our share purchases and right fully so. And that was even doing this muted cash period. We're going to continue looking at different things as our free cash flow climbs back up towards our normal, I'll call it, steady state. And we do have a very intricate repurchase plan that will monitor our volatility in our stock price as we go and capitalize on that as we see what our capital deployment needs are versus the market. So, we feel really good about that actually, yeah.

Okay. Very good. Congrats on, obviously, all the progress this year, and look forward to catching up soon. Thanks again.

Thank you.

Thank you, Dan.

[Operator Instructions] And your next question will come from the line of Nick Dempsey with Barclays. Please go ahead.

Yeah. Good morning, guys. Just about the AI deals, I wonder if you can tell us, is it your book backlist content that is being digested absorbed rather than your journals? Sorry if I missed that. And the second question, in terms of how many other people out there who are interested in paying money for this, are we talking a handful more or could it be 10 plus?

It's Matt. I'll begin and then ask Jay to fill in any blanks I've left. So, it is book content at this point. And in terms of interest, obviously, it's a concentration of the tech companies can -- today, it's a concentration of tech companies who can afford to build the large language models, which are very expensive to develop. However, there are extensions of this as companies look to tailor these market -- these models to their particular markets. So, there are potential markets, for example, let's say, in pharmaceutical where a pharmaceutical company might want to augment the model with very specific training data that fits its particular market needs. So again, as I said, it's early days as this market is developing, but there will be, I believe, extensions as people look to augment the large language models. Jay, do you want to embellish on that?

Happy to add a little bit more color, Matt, but I think you nailed it. First of all, great question. And we're encouraged by the interest that we're seeing. We're getting inbound interest from a variety of sectors, as Matt described. And I just want to reiterate that this is something we're approaching on a deal-by-deal basis where we are in fundamentally, we are in the right business in many ways. And so, this is well-trodden ground for us in terms of negotiating these kinds of agreements, but AI is a new frontier, and the opportunities that AI presents us with, as Christina mentioned, that give us an opportunity to reinvest in our core as well as grow our own internal AI capabilities. So, I don't want to characterize in terms of numbers the size of the current interest. But as a high-quality information services provider in the disciplines that drive the global economy, we feel very well-positioned to be a provider of content, tools and services related to the AI opportunity.

Thanks. Can I just tack on a quick follow-up. Would you ever think of doing this with your journal content? Or is that more complicated by the monetization model for journals, relationship with authors, et cetera?

So, let me stress that these deals -- none of these deals are what I would characterize as simple, right? In the book world and the journal world and the database world, we were very clear that we have to exercise diligence and we have to be very clear on rights and things like that. What I will say is that there will be opportunities for us to explore licensing both Journal and book content. Journal content is increasingly relevant in the AI context for the markets that Matt just mentioned. And in the context of large corporate R&D, in the context of engineering and physics and medicine. And so, when those opportunities present themselves, we'll explore. A lot of these companies buy our content already. And so, one of the things they're certainly interested in and we're certainly interested in is talking to them about acquiring rights to use that content in ways that our integrated into their own AI programs. And of course, as I said before, we have opportunities to use AI to develop our own products and services there, too.

Thank you. That's very clear.

Thank you.

And there are no further questions at this time. I'll hand the call back over to Matt Kissner for any closing remarks.

Thank you for joining us -- joining the call today, and we look forward to sharing more progress on our Q1 earnings call in September. Thank you. Have a great day.

That will conclude today's meeting. Thank you all for joining. You may now disconnect.