- Research Revenue Growth Surged 7% with $5M AI Revenue and 28% Submissions Increase
- AI Licensing Momentum Reached ~$100M in <2 Years, Driving 220 Bps EBITDA Margin Improvement to 33.5%
- Learning Segment Decline Hit 11% Due to Amazon Inventory Shifts and Soft Consumer Spending
- Margin Expansion Grew 250 Bps to 18.8% with $73M Shareholder Returns (3.9% Yield)
- Free Cash Flow Improved 17% to -$108M, With $35M in Share Repurchases YTD
Segment Performance
The research segment's growth was driven by 28% growth in submissions and 12% growth in volume, with record levels of worldwide demand to publish, read, and license. The company executed another AI licensing project, bringing AI training revenue to nearly $100 million in less than two years. In contrast, the learning segment faced headwinds, including a significant change in inventory management from Amazon, soft consumer spending, and enrollment challenges in select disciplines.
Operational Initiatives
The company is driving three major initiatives: technology transformation, ongoing cost discipline, and AI-driven productivity. These efforts are expected to drive margin improvement as they scale across the organization. The company is also reorganizing its editorial focus toward higher-value authors and accelerating its shift toward digital products.
Outlook and Valuation
The company expects learning declines to moderate in the second half, but revenue is expected to be down for the full year. The company reaffirms guidance for adjusted EBITDA margin, adjusted EPS, and free cash flow, while narrowing its revenue outlook to the lower end of the range. With a P/E Ratio of 16.91 and an EV/EBITDA of 8.46, the stock appears reasonably valued. The dividend yield of 4.37% provides a relatively stable source of return. Analysts estimate next year's revenue growth at -0.5%, indicating a challenging environment, but the company's focus on high-margin, high-ROIC business models and cost discipline should help mitigate the impact.
Financial Position
Wiley's financial position remains strong, with free cash flow usage of $108 million, a 17% improvement from the prior year. The company continues to deploy capital strategically, including acquisitions and share repurchases, which were up 69% to $21 million or $35 million year-to-date. The Net Debt / EBITDA ratio of 2.9 indicates a manageable debt burden.