Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong recovery and growth in research driven by favorable demand trends and execution.
- Learning segment benefited from a second GenAI content rights project and delivered courseware growth.
- Executed full value creation plan ahead of schedule, including a $130 million cost savings program.
- Raised dividend for the 31st consecutive year and increased share repurchases.
- Significant increase in colleague engagement and satisfaction scores, indicating a positive work culture.
Negative Points
- GAAP revenue decline impacted by foregone revenue from sold businesses.
- GAAP EPS loss primarily due to a GAAP income tax adjustment related to a divestiture.
- Continued soft market conditions for recruiting in the research solutions segment.
- Professional publishing and assessment in the learning segment experienced softness.
- Higher tech expenses related to enterprise modernization investments and inflation-driven cost increases.
Q & A Highlights
Q: Can you discuss the momentum in article submissions and how it might translate to organic growth in research revenue over the next several quarters?
A: Matthew Kissner (Interim President, CEO, Director) - The publication cycle can take six to nine months, so the healthy pipeline signals we saw in Q4 and continued into Q1 are encouraging. Jay Flynn (EVP, General Manager - Research) - Not all submissions convert into published articles, but we are seeing continued improvement in both submissions and article volume output. This is reflected in our guidance, and we are optimistic about the long-term trajectory.
Q: Are you in discussions regarding further AI licensing agreements, and can you update us on monetizing AI tools for recurring revenue?
A: Matthew Kissner (Interim President, CEO, Director) - We are seeing a lot of interest due to the quality of our content, but we are selective about partnerships. Jay Flynn (EVP, General Manager - Research) - We are in discussions with various potential partners and focused on adding recurring value in areas like drug discovery and material science. We will update as these opportunities develop.
Q: How was the quarter relative to internal expectations from a profitability and expense perspective?
A: Christina Van Tassell (CFO, EVP) - Revenue was in line with expectations, but expenses had some timing issues and one-time items that will normalize throughout the year. We are reaffirming our guidance and expect a normalized rest of the year.
Q: Can you provide more details on the specific areas of expense increases?
A: Christina Van Tassell (CFO, EVP) - We have growth investments in research, inflationary cost increases, and investments in enterprise modernization programs. These are reflected in our corporate expenses.
Q: What are your priorities for investing excess cash flow given the current leverage?
A: Christina Van Tassell (CFO, EVP) - We are committed to our dividend program and share repurchase program. We are also looking at CapEx and market opportunities. Our long-term goal is to return to a steady state of at least $200 million in cash flow.
Q: Can you elaborate on the impact of AI on your business and future opportunities?
A: Matthew Kissner (Interim President, CEO, Director) - AI presents significant opportunities for content licensing and recurring revenue. We are focused on ensuring our content is used accurately and ethically in AI models. Jay Flynn (EVP, General Manager - Research) - We are exploring partnerships and opportunities in areas like healthcare and material science to leverage AI for better outcomes.
Q: How are you managing the transition and integration of divested businesses?
A: Christina Van Tassell (CFO, EVP) - We have closed all divestitures and are finalizing transition services agreements. This will allow us to focus on our core business and continuously improve our cost structure.
Q: What are the key drivers for your reaffirmed guidance for fiscal '25?
A: Christina Van Tassell (CFO, EVP) - Our guidance is driven by expected growth in research and learning, cost savings, and investments in AI and enterprise modernization. We are confident in our ability to achieve our fiscal '25 targets.
Q: How are you addressing the challenges and opportunities in the research segment?
A: Matthew Kissner (Interim President, CEO, Director) - We are seeing strong demand and execution in research publishing, with growth in gold open access and institutional models. We are also investing in our end-to-end research publishing platform to improve efficiency and output.
Q: What are your plans for future cost savings and margin improvement?
A: Matthew Kissner (Interim President, CEO, Director) - We are not done with cost savings. With our investments in modernizing technology infrastructure, we see continued margin improvement opportunities. We will continue to drive margin improvement trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
