- AI Revenue Growth: Surpassed $42,000,000 in first three quarters, on track for $45-50 million annual target, with $7,000,000 from Q3 alone.
- Margin Expansion: Adjusted operating margin rose 280 basis points, adjusted EBITDA increased 250 basis points, and operating cash flow nearly doubled to $103,000,000.
- Research Publishing Momentum: Global output up 11%, revenue up 4% excluding AI, with visibility into strong journal renewals and market share gains.
- Shareholder Returns: Repurchases doubled to $70,000,000 year-to-date, supported by leverage reduction to 1.7x and free cash flow up $57,000,000 YoY.
- Strategic Partnerships: Launched $7,000,000 AI model training contract with a non-U.S. customer and a multiyear partnership with Virtusa for tech transformation.
Segment Performance
Research Publishing performance was impacted by $9,000,000 of AI revenue in the prior-year period, but absent AI revenues, the segment was up over 4%. The company's solid journal licensing renewals combined with continued submissions and output growth give them good visibility and confidence heading into fiscal 2027. Learning revenue was down 2% in the quarter, with a 5% decline in Professional offsetting 1% growth in Academic.
AI Revenue and Growth Prospects
The company is making significant strides in AI, with $7,000,000 of AI revenue realized in the quarter and $42,000,000 achieved so far this year, already surpassing last year's total. The company expects to deliver AI revenue of $45,000,000 to $50,000,000 this year and anticipates another big year for total AI revenue in fiscal 2027. As Matthew Kissner noted, the continued expansion of the global research ecosystem positions the business for continued success at the top of the market.
Valuation and Outlook
With a P/E Ratio of 11.75 and an EV/EBITDA of 7.86, the company's valuation appears reasonable, especially considering its strong ROIC of 11.77% and ROE of 12.9%. Analysts estimate next year's revenue growth at 2.3%, which, combined with the company's discipline in managing its portfolio and deploying capital on high-return investments, suggests a positive outlook. The company's strong cash flow and leverage are expected to lead to a return to shareholders in the near future, with a Dividend Yield of 4.08% and a Free Cash Flow Yield of 10.24%.