John Wiley & Sons, Inc. Class B 2027 Q1 Earnings Call

I am joined today by Matt Kissner, President and CEO, and Craig Albright, Executive Vice President and CFO. Our comments and responses reflect management 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. We will refer to non-GAAP metrics on the call, and variances are on a year-over-year basis and will exclude the impact of currency. Additional information is included in our filings with the SEC.

A copy of this presentation and transcript will be available at investors.wiley.com. I will turn the call over to Matt Kissner.

Thank you, Brian, and hello everyone. Welcome to our Q1 earnings call. If fiscal 2026 was our breakout, then this is the year we build on that momentum and scale our new revenue streams. Q1 played out as we expected. Strong momentum in our research and AI growth engines was offset by a prior year AI comparison, which we previously mentioned, and continued soft market conditions in learning. Recall that Q1 is our seasonally smallest period, so our year-over-year comparisons carry some noise. However, nothing in the quarter changes our full-year expectations, which Craig will cover shortly. Wiley's trusted content and intelligence are the foundation for the rapid advancement of science and innovation worldwide. As I have stated before, when it comes to high-stakes scientific research, AI will only live up to its promise if it is fueled by current, accurate, and trusted content and data.

Wiley has one of the most comprehensive and continuously growing content and data portfolios in the world. You saw that validated twice this quarter in ways I would not have anticipated a year ago. We were invited to be the sole scientific publisher to participate in the U.S. Department of Energy's Genesis Mission, and a founding data partner for CuspAI's Global Materials Foundry. In these endeavors, we stand alongside innovators like NVIDIA, AWS, Microsoft, and others. Behind those headlines, the commercial engine kept running. We signed new AI licensing agreements across multiple industries. I will walk you through the quarter and the momentum we are seeing in our growth engines, and Craig will take you through our financials and outlook. Let me start with the Q1 takeaways and a brief word on how our two growth engines work together.

Research is the foundation where our scale, brands, and society relationships enable us to generate proprietary content across a widening share of high-demand disciplines. AI and data analytics are built directly on top of that foundation, leveraging our content and data to create research tools for high-stakes R&D. The relationship runs both ways. Publishing fuels the AI and data analytics engine with a continuous flow of proprietary content, and AI powers the researcher productivity that increases the flow of publishing. That is the Wiley flywheel. A few highlights from the quarter. We delivered a 12% increase in research publishing, reflecting strong global demand to publish with submissions at record levels, the Emerald addition, and AI momentum all contributing. Learning, on the other hand, faced challenges from a prior year comparison, soft market conditions in professional, and a seasonally small quarter in academic.

We generated $14 million of AI revenue in the quarter, and our pipeline is expanding across models, channels, and verticals. We remain well on track to deliver our full-year AI revenue goals. Our Spectral Analysis API portfolio launched into the laboratory market. It is another milestone in our evolution towards an AI and data analytics company. I will explain this advance later in my remarks. We are integrating Emerald to extend our scale advantage in research and content advantage for AI and data analytics. As expected, the fit is strong on all three dimensions: financially, strategically, and culturally. Our teams are working very well together, and the integration is ahead of schedule. And we raised our dividend for the 33rd consecutive year, putting Wiley in rarefied company. Turning to the headline numbers, Craig will provide more detail, but performance this quarter was in line with our plan.

Two known factors drove the year-over-year revenue comparison. The $29 million of AI licensing revenue that landed in the prior year quarter and continued soft market conditions in learning, particularly professional. Neither changes how we see the full year. AI revenue was $14 million in the quarter, with a further $14 million already contracted across Q2 and Q3. Emerald contributed $13 million to the top line. On profitability, Adjusted EBITDA was down 4% on the year-over-year revenue performance. Adjusted EPS was down 10%, further impacted by higher net interest expense related to the Emerald acquisition. GAAP EPS was a loss of $0.23 compared to earnings of $0.22 in the prior year, largely due to restructuring charges and acquisition and integration costs. Let us discuss our continuing strong progress in research. Our key metric for research is publishing throughput.

Strong demand to publish remains undiminished worldwide, with submissions up 31% and output up 8%, demonstrating both continued growth and a clear focus on quality. This is evident across both rapidly growing and mature markets. We successfully closed our calendar 2026 journal renewal season with customer retention remaining above 99%. On expanding our journal portfolio and leading brands, we launched two new Advanced journals, "Advanced Immunology" and "Advanced Brain," and published the first papers in "Advanced Computing" and "Advanced Oncology." As a reminder, our Advanced portfolio is accelerating as a global top-tier brand across disciplines, with more than 30 journal titles and revenue of $70 million growing at strong double digits. Also, in the recent Industry Citation Index, released annually, 15 Wiley journals were ranked number 1 in their respective categories, with 248 of our journals achieving top 10 rankings.

Wiley now accounts for over 10% of all citations in the index. This is an important quality signal, and quality is what deepens our competitive moat. On driving publishing efficiency and margin expansion, we increased our research Adjusted EBITDA margin by 130 basis points to 29.6% through the addition of Emerald and cost savings initiatives. We now have 1,600 journals migrated to our Research Exchange publishing platform. On leveraging our IP and relationships for AI and data analytics growth, our clinical outcome assessments growth engine is rapidly expanding. This portfolio grew from $6 million in fiscal 2025 to $11 million last year, and we see a strong trajectory ahead. Q1 revenue rose by more than threefold, thanks to Wiley's leading differentiated position. As a reminder, clinical outcome assessments are peer-reviewed instruments that are used in clinical trials to measure the impact of treatment from the patient's perspective.

They've been developed carefully, tested across patient groups, and proven to measure what they claim to measure. Choosing the correct instrument early, licensing it properly, and implementing it effectively can be the difference between a multimillion-dollar trial that succeeds and one that stalls, and that makes them essential R&D infrastructure. This is where we come in. We own and license a broad and growing portfolio of these instruments across disease areas and alongside full implementation services. An important milestone, as I mentioned, is that we launched our transformative Spectral Analysis APIs for the corporate and academic laboratory markets, delivering the industry's most trusted gold-standard chemical reference data directly into automated laboratory software pipelines. For corporate R&D labs, this will replace slow manual analysis with embedded real-time spectral intelligence.

Said one industry newsletter, "The launch of the Spectral Analysis API portfolio is the clearest signal yet of Wiley's evolution from a legacy publisher into a modern data and technology company." Let's consider why the research engine remains robust. Publishing is the key metric of academic progress, shaping employment, promotions, prestige, and grant acquisition. The need to publish continues to rise alongside global R&D investment and is now further accelerated by AI advancements. Looking at research across the rest of the year, six reinforcing drivers continue to give us confidence. First, our publishing pipeline is robust and our scale advantage is widening. With submissions outpacing an already strong market and researcher productivity set to rise further with AI. Large-scale, high-quality publishers like Wiley have a structural advantage, and our Q1 KPIs say that is continuing. Second, we concluded a solid calendar 2026 renewal season with strong customer retention.

Third, open access growth continues to compound at double digits, driven by the must-have dynamics of publishing worldwide and our journal brand expansion. In fact, we closed July with record gold open access output. Fourth, Emerald is off to a fast start, giving us strong confidence in the combination going forward. Fifth, our clinical outcome assessments pipeline of pharma companies is multiplying. Our IQVIA go-to-market partnership is scaling, and we continue to activate new in-demand instruments to further bolster our leadership position. Separately, our OpenEvidence partnership is deepening, with additional content now under agreement. Finally, we're seeing nice and early momentum in audience monetization. As discussed, we are transitioning this business from traditional advertising to an audience analytics platform underpinned by modern ad tech, AI-enabled product development, and verified research professional audiences.

The healthcare advertising market is large and expanding, and our edge is the combination we already hold: proprietary content, deep society relationships, and an emerging corporate customer base in healthcare and the audiences that come with them. Our digital research content and platforms generate billions of user sessions each year. We recently rolled out new sophisticated ad tech for contextual targeting, along with improved outcomes reporting and agentic tools for audience engagement. The early results are promising with good growth in Q1 billings. Now on to our AI and data analytics growth engine, the second turn of the flywheel. As a reminder, we took total AI revenue from $23 million in fiscal 2024 to $40 million in fiscal 2025 and $49 million in fiscal 2026.