Introduction and History
John Wiley & Sons, Inc. (NYSE:WLY) is a venerable publishing and education technology company that has been at the forefront of enabling the creation and dissemination of knowledge for over two centuries. Rooted in a rich legacy, Wiley has evolved to become a global leader in research, learning, and professional development, serving a diverse array of customers ranging from academic institutions and corporations to individual learners and researchers.
Established in 1807, Wiley has a storied history that is deeply intertwined with the advancement of human knowledge. The company began as a small printing shop in Manhattan, founded by John Wiley, and gradually expanded its operations, establishing itself as a prominent publisher of scholarly journals, academic textbooks, and professional reference materials. Over the decades, Wiley has weathered numerous economic and technological disruptions, always emerging stronger and more adaptable.
In its early days, Wiley focused on publishing books and materials for the educational and professional markets. As the company grew, it diversified its offerings and expanded into new areas, particularly scientific, technical, and medical (STM) publishing. A significant milestone in Wiley's history was the acquisition of Blackwell Publishing in 2007, which substantially strengthened the company's position in the STM publishing market.
Business Segments
Today, Wiley operates through three core business segments: Research, Learning, and Held for Sale or Sold.
The Research segment encompasses Wiley's world-class portfolio of academic and scientific journals, as well as its suite of research solutions and services for institutions, societies, and individual researchers. This segment provides scientific, technical, medical, and scholarly journals, related content and services to academic, corporate, and government libraries, learned societies, and individual researchers and other professionals. Key products and services include Research Publishing, which offers journal subscriptions, open access, and transformational agreements, and Research Solutions, which provides corporate solutions such as job board software, career center services, marketing and education services, licensing, and databases.
The Learning segment focuses on the creation and distribution of educational content and digital learning tools for higher education, professional development, and corporate training. This segment provides scientific, professional, and education print and digital books, digital courseware to libraries, corporations, students, professionals, and researchers, as well as assessment services to businesses and professionals. Key offerings include Academic products (scientific, professional, and education books and digital courseware) and Professional services (learning, development, publishing, and assessment services for businesses and professionals, including the For Dummies brand).
The Held for Sale or Sold segment includes businesses that Wiley has determined are non-core and plans to divest, including University Services, Wiley Edge, and CrossKnowledge. In the first quarter of fiscal year 2025, Wiley completed the sales of University Services and Wiley Edge (excluding its India operations), and entered an agreement to sell CrossKnowledge, which closed on August 31, 2024.
Financials
Wiley's financial performance has been resilient, with the company consistently generating solid revenue and cash flow. In the fiscal year ended April 30, 2024, Wiley reported revenue of $1.87 billion and net income of -$200.32 million, which was impacted by significant one-time charges related to restructuring and asset impairments. The company's free cash flow for the year stood at $105.88 million, demonstrating its ability to generate healthy liquidity.
For the most recent quarter ended July 31, 2024, Wiley reported revenue of $403.81 million, a 10% decrease year-over-year, primarily due to the divestiture of the Held for Sale or Sold segment. Excluding this segment, Adjusted Revenue increased 6% year-over-year. Net income for the quarter was -$1.44 million, with operating cash flow of -$88.71 million and free cash flow of -$106.56 million.
The company's balance sheet reflects a prudent capital structure, with a debt-to-equity ratio of 1.31 as of April 30, 2024. Wiley's current ratio of 0.57 and quick ratio of 0.53 indicate a relatively strong liquidity position, although the company's working capital has been negative in recent years, reflecting the nature of its business model, which relies on upfront payments from customers.
Wiley's key financial ratios paint a mixed picture. The company's gross profit margin of 68.70% is robust, indicating strong pricing power and operational efficiency. However, its operating profit margin of 11.24% and net profit margin of -10.71% are relatively low, partly due to the impact of the aforementioned one-time charges. The company's return on assets and return on equity, at -4.13% and -14.27% respectively, are also subdued.
Liquidity
One of the standout aspects of Wiley's business is its strong international presence, with a significant portion of its revenue generated outside the United States. In the fiscal year 2024, the company derived approximately 55% of its revenue from international markets, reflecting the global nature of its operations and the growing demand for its products and services worldwide.
As of July 31, 2024, Wiley had cash and cash equivalents of $82.55 million. The company has a $1.11 billion revolving credit facility which matures in November 2027, of which $388.10 million was unused as of July 31, 2024. This provides Wiley with substantial financial flexibility to fund its operations and strategic initiatives.
Growth Strategy
Wiley's growth strategy has been multi-pronged, focusing on both organic initiatives and strategic acquisitions. The company has been investing heavily in digital transformation, leveraging cutting-edge technologies to enhance its content delivery, workflow automation, and data-driven decision-making. Additionally, Wiley has been actively pursuing acquisition opportunities to expand its portfolio of high-quality intellectual property and gain access to new markets and customer segments.
One notable development in Wiley's recent history was the divestiture of several non-core businesses, including University Services, Wiley Edge, and CrossKnowledge. These strategic moves have allowed the company to streamline its operations, focus on its core strengths, and unlock additional resources for reinvestment in key growth areas.
Future Outlook
Looking ahead, Wiley's management has outlined a clear vision for the company's future, emphasizing the continued expansion of its digital offerings, the exploration of emerging technologies like artificial intelligence, and the strengthening of its position as a trusted partner to the global research and education communities. For the full fiscal year 2025, Wiley is reaffirming its guidance of revenue between $1.65 billion to $1.69 billion, representing 2% to 4% growth, adjusted EBITDA of $385 million to $410 million, representing 4% to 11% growth, adjusted EPS of $3.25 to $3.60, representing 17% to 29% growth, and free cash flow of approximately $125 million.
The revenue growth is expected to be driven by low to mid-single digit growth in the research segment and low single digit growth in the learning segment. The adjusted EBITDA margin is expected to be in the range of 23% to 24%. The adjusted EPS growth is expected to be driven by higher adjusted operating income and accrued interest income from divestitures, offsetting higher interest and tax expense.
However, Wiley is not without its challenges. The company operates in a highly competitive environment, facing intense rivalry from other academic and professional publishers, as well as the growing influence of open-access initiatives and disruptive digital platforms. Additionally, the company is exposed to risks associated with currency fluctuations, changes in customer preferences, and potential disruptions in its supply chain and distribution networks.
Despite these headwinds, Wiley's rich heritage, diverse portfolio of high-quality intellectual property, and commitment to innovation position the company as a vital player in the global knowledge economy. As the world continues to demand ever-increasing access to authoritative and impactful content, Wiley's role as a trusted partner to researchers, educators, and professionals is likely to become even more crucial in the years to come.
Digital Transformation
The rise of digital technologies and the shift towards open access publishing have presented significant challenges to the traditional publishing industry, forcing Wiley to adapt and evolve its business model. In response, the company has made strategic investments in digital platforms and solutions, while also streamlining its operations to enhance efficiency and profitability. This digital transformation has been successful, with over 83% of Wiley's revenue for the year ended April 30, 2024, generated by digital products and services.
Industry Trends
The global research and development (R&D) spend is estimated to have increased around 8% since 2022 to $2.53 trillion, and is expected to continue growing at 4-6% annually over the long-term. This trend is expected to drive demand for Wiley's research publishing and solutions, providing a tailwind for the company's growth prospects.
Segment Performance
In the first quarter of fiscal year 2025, the Research segment reported revenue of $265.31 million, a 3% increase compared to the prior year period on a constant currency basis. Adjusted Operating Income was $55.22 million, a 3% increase compared to the prior year, and Adjusted EBITDA margin was 29.3%.
The Learning segment reported revenue of $124.31 million, a 14% increase compared to the prior year period on a constant currency basis, primarily due to a $16 million content rights project for training generative AI large language models. Adjusted Operating Income was $22.50 million, and Adjusted EBITDA margin was 27.2%.
The Held for Sale or Sold segment reported revenue of $14.19 million, an 83% decrease compared to the prior year period on a constant currency basis, due to the divestitures. Adjusted Operating Income was $2.52 million, and Adjusted EBITDA margin was 17.8%.
Conclusion
Throughout its long history, Wiley has consistently demonstrated its ability to adapt and innovate, leveraging its strong brands, extensive content libraries, and deep author relationships to maintain its position as a leading player in the global knowledge economy. The company's unwavering commitment to serving the evolving needs of its customers and partners has been a key factor in its long-term success, enabling it to navigate through various industry disruptions and economic challenges.
With its strategic focus on digital transformation, strong market position in research and learning, and ongoing efforts to streamline its portfolio and operations, Wiley is well-positioned to capitalize on the growing demand for high-quality content and solutions in the global knowledge economy. As the company continues to execute its growth strategy and adapt to changing market dynamics, it remains a compelling player in the publishing and education technology sector.