John Wiley & Sons, Inc. (WLY) Earnings Call Transcript & Summary

Welcome to the John Wiley & Sons 2024 investor update. For those of you that may not know me, I'm Brian Campbell. I lead Investor Relations at Wiley. I'm pleased to kick off this event, which we hope will showcase our full confidence in our plans, our progress to date and where we're headed. Some housekeeping items first. A quick reminder that our comments reflect management's views as of today and include forward-looking statements. Reliance should not be placed on these statements as actual results may differ materially from them. The company does not undertake any obligation to update them to reflect subsequent events or circumstances. Also, we provide non-GAAP measures to evaluate underlying performance. They should not be viewed as alternatives under GAAP. Note, we'll be excluding the held-for-sale businesses from our financials, and so you will see terms like adjusted revenue. The exception to this is free cash flow. Please refer to Slide #3 for additional details. Okay. Let's turn to our agenda. Presenting today will be Matt Kissner, Wiley's Interim President and CEO. He'll take you through our focus and optimized strategy and our progress to date. Jay Flynn, our Head of Research and Learning, will discuss our businesses and markets; and our CFO, Christina Van Tassell, will take you through our financial targets and capital allocation. After the presentation, we'll open it up to Q&A. Please type your question into the Q&A text box at the bottom center of your screen and click Submit. An archive of this webcast and a copy of the presentation will be available on our website at investors.wiley.com. And with that, I'll pass it over to Matt.

Thank you, Brian, and thank you all for joining us. Our theme for today's Wiley is focus and optimize. We're going to focus on what we do best and where we have competitive moats. We're going to optimize our cost structure, how we operate and how we publish. So in the interest of focus and optimize, let's jump right in. Wiley is a knowledge company. We enable the creation and curation of knowledge and its application in science, learning and innovation. It's a very important statement. Wiley's content and solutions are high value, in demand and critical to knowledge economies. We're helping to power many critical and growing disciplines such as science and technology, medicine, business and finance, and engineering, and it's new knowledge, not derivative. In many cases, it's a must-have knowledge. It's also structured to be flexible and applicable in many different forms, and that is becoming increasingly important in an AI world, where high-quality curated and structured content is highly valued for model development. Our foundation remains strong. We're a top 3 player in a global ecosystem called Research Publishing with over 2,000 journals across all disciplines. Many of our journals are ranked at or near the top of their fields. Make no mistake, research is at the heart of our business and the foundation for our long-term success. We have the industry's leading research content delivery platform with 4.6 billion [indiscernible] a year. We host 50% of the world's English language journals. We serve over 10,000 research institutions, support over 600 society partners and our content is used by over 12 million researchers across the globe. And finally, we are one of the world's largest business publishers and one of its largest technology publishers. Turning to our financial attributes. Our balance sheet and cash generation remain foundational strengths. Over 80% of our revenue is from digital content and services and nearly half is recurring. And we're one of the few small-cap stocks that have increased their dividend for 30 years in a row. Wiley continues to drive real-world impact through our business activities. The work we do in powering research and learning supports multiple UN Sustainable Development Goals. We are intently focused on 3 of them: quality education, reducing inequities and climate action. We ourselves are committed to being carbon net-zero by 2040 as validated by the Science Based Targets initiative. We are making scientific, technical, medical and scholarly research more available to more people than ever before, and this research improves lives. We are actively expanding access to high-quality learning content and tools. And finally, the company continues to be recognized for a sustainability risk profile, achieving strong ratings and scores from MSCI, Sustainalytics, S&P, and ISS. I want to thank our colleagues across the globe for their work in enabling our continuous impact journey. Now let me talk about how we're organized. We have 2 operating segments: Research and Learning under one leader, Jay Flynn. The businesses complement one another in that they both deliver high-value content and services and serve similar knowledge verticals. The Research segment represents approximately 2/3 of Wiley's revenue and delivered a 35% EBITDA margin in fiscal '23. It has a large recurring revenue base that's 95% digital. Research consists of 2 businesses: Research Publishing, where we publish the latest scientific research in over 2,000 journals; and Research Solutions, which provides publishing and audience solutions to society partners and corporate customers. Research is the core driver of Wiley. Our Learning segment includes academic and professional publishing and assessments and represents 1/3 of our revenue. It delivered a 29% EBITDA margin in fiscal '23 with 55% of its revenue digital. Jay will speak to the businesses in more detail following me. Let me provide some personal observations on my first 90 days back at Wiley. I'm thrilled to be back here because Wiley is a terrific company. Yes, we're coming out of a difficult period but refocusing on our core presents a rich set of opportunities to build on. Our businesses are fundamentally strong, built on lasting relationships, whether with research institutions, academic societies or R&D-driven corporations. We have a unique right to win in research, driven by a wide moat built around the enduring draw of our journal brands and platforms and a strong position in learning built on our content library and franchises. Our markets are healthy. Global R&D spend is ever increasing, as is the demand for new knowledge in the verticals we serve. Very importantly, the name Wiley means something special to our customers. It's why we're entrusted by the most prestigious societies in the world, Nobel Prize-winning authors and major pharmaceutical companies. We have a terrific team. Our global colleagues are reinvigorated by our move to a simpler Wiley and are empowered now to identify incremental growth opportunities and better ways of working. And this is very personal. What we do is good for the world. Wiley colleagues are highly mission-driven, knowing that we are contributing to scientific and economic progress as well as the everyday progress of the individual. Yes, we have work in front of us. It's going to take some time to get us where we need to be. But I feel good and confident about our foundational strengths and direction of travel. Let's turn to our value creation plan. Myself, Jay, Christina and the rest of the Wiley leadership team are moving decisively to improve performance and profit. Let me make it clear, I am accountable for leading us through this transition and laying the foundation for the next CEO. I am not in a holding pattern. We are moving forward with conviction and executing on the plans in place. For example, we've made markedly good progress on our plans to become more research-centric. Jay will cover this in more depth shortly. We've reorganized into one market-facing team under Jay. That has allowed us to consolidate functions and improve our go-to-market. We've now announced the sale of 2 of our 3 divestitures and closed one of them. Our overarching goal is to free ourselves up to focus on the opportunities in our core businesses and restore a competitive cost structure. In that regard, we've moved aggressively on our cost base this past quarter. We're about halfway through our cost-savings program, and Christina will talk to this in her section. Before I talk about go-forward Wiley, I want to spend a few minutes to acknowledge the period we are in. Prior Wiley was a broad disparate portfolio, multiple assets with high operating complexity spread across multiple markets. We had limited operating leverage to scale our education and talent businesses. We were simply spread too thin and inefficient in terms of allocating our capital. And the result of this was unfortunately evident in our mixed revenue performance, declining margins and stock price underperformance over time. Today, we are very different. We are focused on our strongest and most profitable businesses in Research, where we have competitive moats and operating leverage. We will be relentless in our product and business model innovation around these moats. And of course, we are actioning towards materially improved margins and sustained operating efficiency. We have what we need to deliver healthy long-term growth and margin expansion, and we are moving forward. Let's talk about our key initiatives as we move forward. Jay will go into more detail but I'll quickly summarize. First, we are laser-focused on growing market share, particularly in Research Publishing. This is our core and where we can leverage our strengths to meet that strong global demand to both publish and consumer content. Next, we are leveraging our strength in Research Publishing to deliver Research Solutions growth. These strengths include our global researcher audience, society partnerships and corporate relationships. We are leveraging our high-impact content libraries for artificial intelligence and using AI and machine learning technologies to drive productivity gains in the creation of knowledge and in how we work. We are optimizing our business models around our in-demand content to increase customer value and author retention. We are deep into our journey of optimizing our content production to improve the author experience and reduce our cost per article. And finally, as you've already seen from the cost savings we've been delivering, we are obsessive about driving operating efficiency and deploying Lean principles. Now let me hand this over to Jay to take you a click deeper into what this means across our businesses, especially in Research.

Thank you, Matt. Outside of the Q3 earnings call, this is the first time I'm speaking to many of you, so let me first introduce myself. I'm Jay Flynn and I run our combined Research and Learning business. I have 25 years of experience in the global research market, serving in various leadership roles with some of our research peers, notably RELX and Wolters Kluwer. I also spent 5 years at Cengage Learning, which gives me insight into the dynamics of our academic business as well. I've been at Wiley for 14 years, serving in various roles, including Chief Product Officer and Head of Research Publishing. For the past 2 years, I've been leading the Research division before that role expanded this past August to include our Learning business. I'm excited by where we're headed as a hyper-focused value-driven company locked into what we do best, publishing high-quality research and learning content and making it accessible, relevant and applicable to university researchers, governments and corporations around the world. Let me start with Wiley's unique attributes and a bit about who we serve. As Matt noted, we are a top 3 research publisher with one of the highest-impact journal portfolios in the world. The foundation of our competitive advantage is the enduring draw of 2,000 journal brands and the partnership ethos by which we manage our business. We're particularly strong in some of the most important knowledge verticals in chemistry, material science, oncology, engineering, technology and agriculture. These fields are powering massive socioeconomic trends, the shift to clean energy and battery science to reduce CO2 emissions, the rise of AI and automation, treatments for cancer, infectious diseases and food security. Every day, we are helping researchers and innovators, governments and industry solve the world's most important challenges. Moreover, we are the publishing and solutions partner of choice for academic societies around the world. And so we are closely associated with some of the most prominent names in science. These include the American Cancer Society and the American Heart Association, the New England Journal of Medicine and the largest engineering society in the world, the IEEE. We are entrusted by over 600 societies to help them achieve their missions. To sum up, I'm very confident in our position in the market, our reputation for excellence and our relationships with institutions and society. My presentation today is going to be largely focused on research, given the feedback we hear from you and the continuous need to educate around this unique market. But I'll start by saying a few words about learning. Learning provides content and tools to students and professionals. Overall, it's a steady, nicely profitable and cash-generative business, and we're going to continue to manage it that way. We have 2 reporting lines inside this segment, Academic and Professional. Our Academic team focuses on students and higher education. And here, we have 2 businesses: Courseware, where our STEM learning platforms reside; and our much larger Advanced Content business, which includes things like e-books, print books and reference and technical handbooks across higher education disciplines. It's also important to note, we do not compete in all subject areas. Our focus is very targeted at select STEM and business subjects where we know we can be a leader. On the digital side, Courseware is a growing market as students evolve from static print content to interactive and digital formats. Advanced content market projections are mixed, but both of these businesses tend to be countercyclical, so they fare better in challenging economies. And I believe they are stable contributors to Wiley's portfolio. On the Professional side, we also have 2 units: trade publishing, where we're a leader in business, finance and accounting, technology and professional education. This is also where our Dummies brand sits. Trade is a healthy market where we expect to see modest growth in targeted fields and it has some very interesting prospects. For example, in our technology portfolio, we have a great pipeline of 30 books for release over the next year in generative AI. And finally, Assessments, which is an industry leader in personality assessments and workplace team development. Assessments is a very consistent grower and it is a highly profitable business with a great leadership team. As Matt noted earlier, we are taking a focused and optimized approach to improve performance at Wiley. In recent years, in the Learning businesses, we have not been focused enough on the Publishing side, and as a result, we saw both topline and margin challenges. Today, this team believes that there is an opportunity in this business to drive more output in high-demand disciplines for example, in engineering, in leadership and in management. Another example is in computer science. We're already a leader in this market with our zyBooks product, and we have the infrastructure and relationships in place, so signing and publishing more titles is a credible and easy-to-understand strategy. There is also an opportunity, as Matt noted, for high-quality structured content to be used to train large language models and then fine-tune them for use in specific vertical markets. It's very early days here in terms of quantifying this opportunity, but it's something we're going to be looking really hard at. All of this is what Focus means in the Learning business. On the Optimize side, today, we are better at leveraging our library, corporate and society relationships and research to help develop and cross-sell learning content. It's early days here as well, but this felt to me like low-hanging fruit. And we're already seeing success by taking advantage of our research footprint and selling our digital books into research library customers. One point on optimization and this will come up again when we talk about research. We are also concentrating our resources on publishing more effectively, automating workflows and bringing down the cost to publish and go to market. Now on to our Research core, which, as Matt noted, makes up 2/3 of our revenue and drives most of our EBITDA and free cash flow. This is a business that generates 95% of its revenue from digital products and services. I'll start with an overview of our research publishing business. We and other publishers play the role of both gatekeeper and disseminator of high-quality research in the global knowledge ecosystem. The work that we and other research publishers do not only allows the ecosystem to function but is necessary in order for innovation and discovery to thrive. Demand for our services is strong. Approximately every 30 seconds, an individual author or team of researchers entrust their work to us in the hope that we will publish it and get it out into the world. Once the manuscript is accepted, Wiley adds value in a number of ways. We work with the author to get any final changes made. We copy-edit, typeset and prepare the final version of record to the specifications of each journal. We then prepare the paper for publication, including adding metadata, structure and index it. And then finally, Wiley publishes the study in one of our 2,000 journals to make it discoverable around the world. It is important to emphasize that the publisher's essential role in this ecosystem does not change regardless of the business model we're publishing under. Another point is that our industry is highly correlated with trends in global research and development. Underlying global R&D spend is ever increasing and we do not expect this trend to abate. At the end of the day, we are talking about the development and competitive priorities of the world's largest national economies and corporations. Global R&D sits at $2.6 trillion today and is expected to continue to grow at 4% to 6% annually over the long term. Again, this is highly correlated to the specifics of our sector. Growth in R&D drives research submission. More submissions equals more output, which in turn, equals more revenue to Wiley. The Research Publishing market is expected to grow 2% to 4% through the fiscal '26 period and has a large TAM, particularly as we unlock more volume and government funding in an open science world. As noted, competition among nations and research institutions is fierce. China is now the #1 source of published research, the U.S. is #2, and the European Union is #3. On an individual basis, getting published is absolutely essential to a researcher's career. A researcher's publication history is used throughout the academic and reward system, including promotion, tenure, grants and recognition. Every year, you can be almost certain that each and every winner of the Nobel Prize is a published Wiley author. Now turning to our Solutions businesses, which we are breaking out here as Publishing and Audience Solutions. Publishing Solutions includes platforms, tools and services for societies and other publishers. This is where we have our Literatum content delivery platform and where we're helping our societies successfully navigate the transition to open research. It is a niche market which requires a tremendous amount of subject matter expertise and is growing nicely. Audience Solutions includes database subscriptions, advertising and recruiting platforms, largely for corporate clients. One of our strengths here is our access to a highly valuable audience of 12 million global researchers. These researchers are important buyers of chemicals, supplies, capital equipment and professional services. They are also thought leaders in their own right. So we do see this as an opportunity going forward. Audience Solutions is a large, fragmented market and growing at mid- to high single digits. So as before with our Learning business, I'll spend a moment to review our Focus and Optimize strategy for research. But first, let me step back and say that research is obviously going to benefit from the changes that we've made as an organization recently. It is no longer part of a collection of things, having to share capital, resources and executive bandwidth. Research is now clearly at the core of the company itself. I'd also like to comment on our near-term outlook in fiscal '24. As discussed previously, we've been weighed down by the research integrity issues we discovered in parts of the Hindawi publishing program. This has been a painful outlier for us and a very important learning. But demand across our portfolio remains strong and the market remains healthy. So we're sunsetting that brand, integrating what is still a high-quality journal portfolio into our own and leveraging Hindawi's top-notch infrastructure for our Open Access program while focusing on growing overall output through our entire journal portfolio. Now on to our key focus areas. First, we're focused on winning market share in Research Publishing. We are doing this by driving submissions, improving the author experience and investing in key disciplines and geographies. As the world's largest society publisher, we have a unique opportunity to win even more of that business and expand the relationships we already have. As with Learning, we are leaning into AI as an opportunity, both embedding our content libraries into large language models but also deploying AI and automation to improve how we work and how we publish. Again, it's very early days here but we're excited. Over the past few years, we have been focused on growing our solutions business that is built off our core Publishing business, and this will continue to be a key initiative for us. Our society partners see a strong need for us to provide the tools and the services they need to navigate the Open Access transition and to help them better network their audiences and connect them to critical opportunities. On the optimization side, we continue to streamline and simplify our business models and our publishing operations. Notably, we are deploying our next-generation submission and publishing platform to improve the author experience and lower unit costs. What I'd like to do now is provide a little context to each of these areas, so let's start with growing market share in Research Publishing. First, we need to drive submissions at the top of the publishing funnel, and I'm very pleased with our progress in this regard, particularly with the results we are seeing out of our new reorganized marketing function, making use of the latest marketing technology. Second, we need to convert submissions to articles. This means maintaining article quality, getting the right society partners on board, and building strong brands that are renowned for excellence, scientific progress and helping research authors successfully navigate the academic reward system. Third, it's about distribution and making articles discoverable to the widest possible audience under the right business models. Fourth, we have to deliver all of this in the most cost-effective way. We've made good progress recently in terms of not just our marketing efforts, but also in attracting new authors, realigning the publishing function and ensuring quality control and research integrity. We're encouraged by our submissions growth this year, which is much higher than we anticipated. Now, submissions are a leading indicator of demand, but it's important to note that not all submissions will convert directly into article output. That conversion depends on a number of factors, including acceptance rates in individual journals, overall manuscript quality, relevance, and geography, among others. Equally important to note is that not all output converts directly into incremental revenue for Wiley as some articles will flow through subscription journals and some will flow into gold Open Access journals. As discussed in Q2, there's also the time it takes to traverse the publishing pipeline, which is 6 to 9 months on average. This is why we've seen output lag behind this year. That said, submissions have been a positive metric in fiscal '24, and this positions us well for fiscal '25 and beyond. Now let's talk about business models. We continue to benefit from a mixed model publishing environment that includes subscriptions, a hybrid model or what we call institutionally funded Open Access, and a gold Open Access model. It's important to make clear that not one size fits all. Models vary by region and by institution. Subscriptions make up about 55% of Publishing revenue and remain the dominant model in the United States and Asia Pacific. Research libraries and researchers are dependent on read access to all the world's published articles. And remember that this is all digital revenue. Institutionally-funded OA, which combines read access and publishing services, makes up 22% of revenue and is the favorite model in Europe. These are similar to our subscription models and that both are centrally funded and under multiyear license. Researchers who work at these types of institutions can publish their articles in Open Access, which drives increased readership and citation. We are a market leader in these institutionally-funded OA models. Combined, subscriptions and institutionally-funded open access remain steady and foundational, as you can see from the chart on this page. Gold Open Access, which represents 11% of revenue, is our fastest-growing model with growth rates of over 20% annually. This is the author pays model that pertains to a subset of our total portfolio. Here, we are focused on building high-quality Open Access brands on our own and in partnership with leading societies and research institutions. An important takeaway is that the OA model allows more researchers around the world to publish and therefore expands our total addressable market. It serves those not affiliated with institutions, and it also serves those in underrepresented regions and disciplines and governments want to support it. For the foreseeable future, we will continue to operate in a mixed-model environment. Now on to the role that AI is playing in our Focus and Optimize strategy. We firmly believe that AI and machine learning present a great opportunity for Wiley, enabling both incremental growth and profit opportunities. I just want to give you a few examples. For over 40 years, Wiley has published the authoritative library of spectrometry data. In layman's terms, this data set allows a researcher to identify what it is that he or she has made in the lab. In November of last year, we upgraded this product using AI. This unlocks a whole host of use cases regarding previously unknown compounds and has applications ranging from drug discovery to engineering to security. As with our Learning business, Wiley's authoritative, structured and indexed journal content is a great fit for large language training and fine-tuning. And we're seeing strong demand for this today. We're interested in this, and we're also interested in how we provide our own fine-tuned models to end markets in the verticals where we are strongest. Today, we are actively building and deploying AI editing tools to accelerate article production and reduce unit costs through process automation in the value chain. And we have just launched an internal pilot of our AI-powered article-matching engine to improve article conversion rates, which we talked about earlier. We view this as having a high potential to enhance our refer and transfer process and give authors a better experience. It's an exciting area of innovation, and we believe we're both a beneficiary of this technology and a critical linchpin in its success. On to optimizing our publishing process. We're accelerating investments in our infrastructure to improve the author experience, increase throughput, publish faster and reduce costs. We are moving today from multiple disparate publishing platforms to one flagship submission and peer review experience for our authors. We recently migrated our first journals onto this platform that already features faster submission capabilities, improved peer review, Open Access transaction management and a streamlined content repository, which will allow us to reuse our content more efficiently. Ultimately, we are building a data platform here. where every transaction and every piece of content in the repository is available for us to see, trace and measure. This will make it easier for us to stand up new products and enhance the ones we already have. In terms of concrete benefits, we expect this next-generation platform to lead to a material reduction in article turnaround times and cost per article. We expect all these cost and efficiency improvements to lead to margin expansion beyond fiscal '26 as we will have the platform fully developed and deployed in that period. In closing, we're working through our transition year in Research as we recover from Hindawi and the COVID output lag we mentioned in Q1. In the medium term, through our fiscal '26 plan period, I feel exceptionally good about our focus, our markets and strategies and our team. Ultimately, it is our people that position us for further growth and continued success for all the same reasons we've already highlighted here. They manage the brands and the content. They support our partnerships with societies, researchers and libraries globally. And they have the expertise that has made us the market leader in Open Access. We're now in a position to provide the infrastructure to publish more and faster at lower costs. And we're in the disciplines that matter in a rapidly changing world. As Christina will talk about, we have the balance sheet and the cash flows to reinvest into our core. And beyond fiscal '26, we're going to continue to work hard in outpacing the market and expanding margins. And with that, I'm going to turn it over to Christina.

Thank you, Jay. Good morning, everyone. I'm Christina Van Tassell, and I've been Wiley's Chief Financial Officer since November of 2021. It has been an eventful period to say the least. We have made decisive moves this year towards a stronger and more profitable Wiley. I would describe where we are today as heavily into execution mode as we make major improvements across the organization. We have more work in front of us, of course, but I'm pleased with our progress so far. The value creation plan we announced in June is well underway. Over the past few months, we have delivered on key milestones in that plan. As Matt just discussed, we have reorganized our business into one go-to-market team for speed and agility. We also closed on the sale of University Services, and we've announced the sale of Wiley Edge. We've made good headway in our rightsizing optimization efforts. We have the foundation in place. We have a strong and value-driven company with profitable core businesses in healthy markets. Over 80% of our revenue is digital, and nearly half of our revenue is recurring. We have a solid balance sheet with strong cash generation. And last but certainly not least, we have a very skilled and focused team. Now it's all about execution, delivering consistent results and sharing our progress with all of you. We have good line of sight into our revenue and profit improvement outlook, and I'll walk you through those in detail right now. Let's first talk about our revenue outlook. Collectively, our market's over-the-plan horizon are expected to grow in the low to mid-single-digit range. In fiscal '24, as we talked about previously, we have been challenged by the Hindawi situation and the COVID research output lag. As of our Q2 earnings call in December, our fiscal '24 guidance calls for revenue to be flat to down low single digits as we work through these headwinds. In fiscal '25, we expect Publishing output to begin to recover in line with historical norms, and we expect better solutions growth as corporate spending rebounds. We expect improvements in Learning as we focus on publishing more in high-quality titles and in-demand topics, particularly in professional and see continued in-line growth in digital Courseware and Assessments. Overall, growth in fiscal '25 is expected to be in the low single digits. Finally, in fiscal '26, research output is expected to fully recover driven by strong Open Access growth and steady subscriptions and institutional OA performance. In Solutions, we expect good momentum as we continue to upsell our society partners. Learning will continue to see improved output from our anticipated title settings in fiscal '24 and '25. So put it all together and we anticipate growth in the low to mid-single-digit range in '26. Okay, let me take you through our progress on our cost-savings program. We have a total run-rate savings target of $130 million through fiscal '26. This number combines $100 million we've been talking about in the outer years, with a $30 million of in-year savings that we discussed in Q2. We are combining these together to make the program easier to follow as previously they were discussed separately. About half of the $130 million has been actioned so far. That's the result of our Q2 restructuring activity. The majority of the remaining $65 million will be actioned by the end of fiscal '25. So where are these savings coming from? The largest component is corporate rightsizing, giving our more focused portfolio and smaller revenue base. And here, we're going aggressively after stranded costs as we divest our noncore businesses. The second is optimizing our business operations with savings coming from streamlining our org structure, consolidation of functions, labor arbitrage and our reduced real estate footprint. We're also using AI here as a productivity enabler. Our third is technology savings, including courseware simplification, retirement of legacy systems and reduced hosting costs. We expect about half of the savings to flow through to margin and half to be reinvested. So where will we direct that investment? Well, it will go towards scaling our journal brands to meet global demand. It will also go towards expanding our editorial and marketing capabilities to drive output and attract and retain more authors. We are also modernizing our Research Publishing platform, as Jay mentioned. Payback for our platform investments here are in the form of publishing efficiency, lower technical debt and streamlined automated workflows. Finally, we plan to accelerate our Solutions business by leveraging our industry-leading content delivery platform and Research Publishing relationships. I also want to emphasize that we have increased rigor in our investment decision-making process and a simpler portfolio enables this. Our targeted reinvestment in areas of strength will help us drive continued growth and margin improvement long term. Now on to margins. We are targeting material margin expansion through fiscal '26 with an increase of 500 to 600 basis points. We expect to exit this fiscal year with a 23% adjusted EBITDA margin, up from 19% to 20% for the full year and expand from there. Our drivers over the period are straightforward. We have a much-improved margin mix coupled with material cost savings and operating improvements. Around half of the cost savings will be reinvested, as I just described. Even with that, we are targeting a 24% to 25% adjusted EBITDA margin in fiscal '26. And of course, we will continue to focus on margin expansion beyond the plan period. Cash generation remains a core Wiley strength. We are targeting material cash flow improvements over the time horizon. So let's start with fiscal '24. As we talked about previously, we expect cash flow to be lower this transition year than Wiley has historically delivered. This is due to a combination of lower cash earnings, increased restructuring costs and higher interest payments. So we're anticipating free cash flow to be approximately $100 million for the full year. In fiscal '25, we anticipate moderate free cash flow improvement as we move out of this transition year. We anticipate higher CapEx in fiscal '25 due to investment in our research, digital products and publishing platform and in modernizing our back office systems. In fiscal '26, we expect to deliver free cash flow of approximately $200 million as cash earnings improve, our CapEx spending returns move to a more steady state and our restructuring plans wind down. Our free cash flow conversion is expected to improve from 30% in fiscal '24 to 45% in fiscal '26. In terms of CapEx over the plan period, we're anticipating approximately $100 million this year, rising to $130 million in fiscal '25 and dropping back down to around $100 million in fiscal '26. Long term, our goal will be to deliver free cash flow of at least $200 million annually. As always, our balance sheet remains a strength and gives us both flexibility and capacity. At last fiscal year-end, we were at 1.5x in terms of net debt to EBITDA. I'm comfortable with this level, given our profile and visibility. That said, we're going to continue to manage down debt while balancing other capital priorities, culminating in a target below 1.4x in fiscal '26. As you know, our upfront cash proceeds from the divestitures were not material. We fully expect to collect the cash over time. We won't see a material cash benefit just yet. All right. Let's turn toward our capital allocation. Overall, we are focused on driving value through targeted investments in research and returning cash to shareholders in the form of dividends and share repurchases. On the M&A front, we've turned our attention to our value creation plan and divesting noncore assets. We haven't acquired anything of note since fiscal '22. In the future, we will be focused on high-return acquisitions and research, including content, tools, capabilities and platforms. In terms of CapEx, as I just mentioned, we are very focused on investing in research growth and optimization initiatives. Through the half, we did increase share repurchases, and we'll be evaluating them more closely as free cash flow improves. And of course, we continue to support a healthy dividend. We have a clear plan forward, focused where we have unique great win and strong profitability and operating leverage, optimize our cost structure and get leaner and more agile as an organization, be fanatical about execution and allocate capital judiciously. This plan gets us to a low single-digit revenue growth in fiscal '25, improving to a low to mid-single-digit revenue growth in fiscal '26. Margins increase to 23% to 24% in fiscal '25 and then 24% to 25% in fiscal '26. Free cash flow steps up to approximately $125 million in fiscal '25 and then approximately $200 million in fiscal '26. In summary, we are turning the page. We are aligned, we are invigorated and we are accelerating. We made good progress so far but there's still much work to be done. We'll be sharing our progress with you every quarter. And I'll finish by thanking you for your interest, your participation and your shared insights. I wish you all well, and I look forward to updating you again in our Q3 call in March. And with that, back to you, Matt.

Thanks, Christina. So we feel confident about our progress, our plans and our people. We are now a research-centric company, aligning our resources and capital to where we have a lasting competitive advantage and strong incremental margins. We're taking action to drive market share, attract new authors and article submissions and strengthen our brands and partnerships. We will do this while maintaining the quality and impact that Wiley is famous for. AI and machine learning are attractive opportunities. We will look to embed our content into AI models. Wiley's content is highly conducive to large language models and training engines. Internally, we will deploy the technology to improve publishing speed, quality and volume. And finally, we are heavily focused on improving our operating and publishing efficiency. That concludes our presentation. I want to thank all of you for listening, and we'll open the floor to questions. As Brian noted, please drop your questions into the Q&A box at the bottom of your screen and click Submit. We're going to take a short pause to reset things, and we look forward to answering your questions when we come back.

Welcome back. Thank you again for joining us today. We'd love to now spend some time answering your questions. There's a question box on your screen. Please type them in. Brian Campbell is going to act as moderator today, so I'm going to turn it over to Brian for the first question.

Thank you, Matt. Our first question comes in from Dan Moore. Dan has covered Wiley for over 10 years. So thanks for the question, Dan. So probably one for you, Jay. Regarding Hindawi, recognizing you are sunsetting the brand, reminds us of the current expectations for revenue and EBITDA for the business in '24. What's the expectation for '25 and what should be the scope of the recovery like that thereafter?

Great. Thanks, Brian. Thanks, Dan, as well for the question. Appreciate it. As a reminder, we guided in Q2 to $20 million -- $15 million to $20 million of topline revenue at Hindawi in this fiscal year. That's going to drag on profitability modestly, and then we expect this to start to recover in '25. And beyond '25, '26, what I expect to see out of this business -- sorry, through '25 and '26, what I expect to see out of this business is it's going to perform like the rest of our gold Open Access portfolio. So referring back to the presentation, we talk about a gold Open Access mix, a hybrid or institutionally-funded Open Access mix and then subscriptions. That gold number grows at about 20%, 22% a year, and we expect the portfolio of Hindawi journals, which is a really good portfolio for us, to grow at about that pace in '25 and beyond.

Great. Let's see. Next question is from Benjamin Alexander, Alexander Capital Management. Can you please elaborate on share repurchase criteria? Do you plan on being opportunistic with it? And if so, add value -- yes. So just can you -- do you plan on being opportunistic?

Sure, thanks for the question. So we're happy with our share repurchase program. So far through the first half of the year, we are slightly ahead of where we were last year, and that's being opportunistic. We're constantly reevaluating that. As you know, this is a transition year so we're being very mindful of our cash, but we are taking advantage where we can, and we continue to do that and we will do that going forward.

Great. Okay. Next question is from Brendan McCarthy from Sidoti. Even though the efforts are focused on the reorg and streamlining efforts on Research and Learning, can you talk about M&A strategy, if any? Looks to me like free cash flow generation can support inorganic growth.

Great question. And let me be clear, right now, our focus is on focusing and optimizing. And as you see, we're starting to deliver and also putting these divestitures behind us, and we're on track to do that also. We've spent some time looking at our experience with acquisitions to learn what acquisitions work and where to stay away from, if you will. And it's clear to us that acquisitions that are really close to our core franchise, meaning building around that wonderful research franchise, those are the ones that are very successful. So right now, we don't have any acquisition plans, let me make that clear. But if we were going to look at the organic growth, it would certainly be around the research engine and around the value chain in research. So it would be other areas to add value that complement our Publishing footprint.

Just to add there, we would also be very, very prescriptive on our financial fundamentals as we would look at these deals as well.

Great. Another question in from Dan Moore. Focusing on the sale of University Services, is it your expectation that the sellers know you issued but will remain outstanding for the 3-year period? Or would you expect academic partnerships to secure financing to make the initial $110 million cash payment over the next few quarters?

Yes, so we are working closely with our buyers and they are actually in the process of working on the refinancing. So we don't have any information just yet, but we are staying close with them. But we do expect to be repaid and be repaid as soon as possible.

Great. Good. So the next question from Jason Wulff over at Eagle Asset Management. Longer term, do you see free cash flow conversion levels improving back toward the historic levels above 50%?

Great question. So we are -- as you know, this is a transition year as I talked about in my prepared remarks, and we're working back towards a sustained and increased conversion. So we do anticipate us coming up, you saw us coming up to 45% in fiscal year '26. And we're working towards even accelerating that further. And so we are optimistic that we can get there. Based on what you've seen today, you've seen our plans and we are seeing upside as we go -- as we continue down the line.

Great, good. So next question. International revenue is currently around 50%. How do you think about the growth opportunities in China, India, other developing markets versus the U.S.? And how do you see that revenue mix maybe evolve them over time? Jay, maybe for you.

Sure, great. International revenue has always been a core part of the research story. And just to concretize that a little bit for everybody, when we think about Research as being 2/3 of Wiley's top line, about 2/3 of Wiley's Research business revenue comes from either APAC or EMEA. So it's about 1/3 U.S., 1/3 Europe and 1/3 APAC. As we talked about in our last earnings call, and it's a really important point to make here again today, we feel great about what we're seeing out of growth markets like China, growth markets like India. We've got great long-term deals secured in Korea and Japan. And the Open Access movement adds incremental revenue in those parts of our portfolio. We've got great journal brands in place in China. We started, Brian, I think, 24 high-impact journals over the last 3 years in China through our institutional partnerships. We've got people on the ground. We've got the right footprint. That being said, that's an opportunity for us to grow. I don't think it's going to impact overall revenue mix materially. We expect that to stay around the same with our Learning business being primarily a U.S.-based business and with 1/3 of that stable research core coming out of the U.S. as well.

Great. Thanks, Jay. So next question, I'm actually going to go back to one of Dan Moore's because I missed part of it, which is how do you ensure that we don't have Hindawi-like experiences as you further leverage and implement AI and machine learning...

Great. I'll just jump in and take that, Dan. First of all, I want to talk about what we found and the actions that we took. Clearly, where -- it was a painful moment for us, the retractions at Hindawi and the paper mills there. But what I'm really proud of is the way the team responded. So we've made a management change. We have integrated AI tools and human editorial processes. We totally redid our business processes for Hindawi, and we shut down the loopholes associated with the paper mill that was running there. But more importantly than that, when we look to sunset the Hindawi brand, when we look to the future with that portfolio, we've integrated it into our larger Wiley journal portfolio. So this is a program with journals that have been run very successfully as part of Wiley's Research business for the last 30, 40 years. And we feel very good about leadership, operational controls, business process changes. AI does present an opportunity for us here in a couple of different areas. Number one in the larger area of research manipulation or results manipulation. We've got AI checkers in place on things like image manipulation. We've got AI in place on identity check and things like that. But it's also really good at detecting synthetic content or content that's been generated by AI itself, so use AI to catch AI. And we're in the process of integrating those kind of tools into our next-generation publishing platform that I talked about earlier in the presentation. So AI is a big part of the story there, but business process change, leadership change, shutting down the loopholes, it's all part of the toolkit that we use today as we continue to go on this journey of solving research integrity as an industry.

Great. Matt, this is one probably for you. Would you say you have everything you need to deliver the value creation or do you need to go out and get something more?

We don't need to go outside to deliver the value creation plan. We are already tracking well, as Christina noted in her remarks, about halfway through the plan, and we have a really strong program going forward to deliver the balance of those savings. Now I do see in the -- over the long run, there will be opportunities to add to growth through M&A. But again, that's not our focus right now. Our focus is on executing and delivering the plans that we have in place.

And Christina, this one looks to be for you. Is a 24% to 25% margin the end goal or do you think there will be opportunity beyond fiscal '26?

Sure. Great question. We have plans in place, and we feel good about those plans for hitting our planned targets during the planning period, so we feel really good about that. We also feel good about what's beyond '26. So what you've heard today from particularly Jay and myself about the reinvestment we are doing in our research platforms, for example, that's going to drive a lot of cost per -- to drive that cost down. It's also going to help us with our end-to-end customer experience, which is going to be more efficient. We also have, with our simplified portfolio, as we talked about all day here, that really does help us drive efficiency across the organization. And being focused in that way, we do believe we'll garner dividends in the future via our margin.

Great. How about this one? What are the specific growth opportunities in Learning? What areas would you be focused on more than others?